**EXHIBIT 11.1**

 

**EXECUTION COPY**

 

**AMENDED AND RESTATED LOAN**

 

**AND SECURITY AGREEMENT**

 

**BY AND BETWEEN**

 

**TECHNOLOGY FLAVORS & FRAGRANCES, INC.**

 

**AND**

 

**WELLS FARGO CREDIT, INC.**

 

**as of April 25, 2002**

 

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**TABLE OF CONTENTS**

 
| ARTICLE I Definitions                                                   |
|-------------------------------------------------------------------------|
|                                                                    | Section  1.1 | Definitions |
|                                                                    | Section  1.2 | Cross  References |
|                                                                    |   |   |
| ARTICLE II Amount and Terms of the Credit  Facility                     |
|                                                                    | Section  2.1 | Revolving  Advances |
|                                                                    | Section  2.2 | Interest;  Default Interest; Usury |
|                                                                    | Section  2.3 | Fees |
|                                                                    | Section  2.4 | Computation  of Interest and Fees; When Interest Due and Payable |
|                                                                    | Section  2.5 | Capital  Adequacy |
|                                                                    | Section  2.6 | Voluntary  Prepayment; Increase or Reduction of the Maximum Line; Termination of the  Credit Facility by the Borrower |
|                                                                    | Section  2.7 | Termination  Fees and Line Reduction Fees |
|                                                                    | Section  2.8 | Mandatory  Prepayment; Repayment |
|                                                                    | Section  2.9 | Payment |
|                                                                    | Section  2.10 | Payment  on Non–Banking Days |
|                                                                    | Section  2.11 | Use  of Proceeds |
|                                                                    | Section  2.12 | Liability  Records |
|                                                                    |   |   |
| ARTICLE III Security Interest; Occupancy;  Setoff; Collection Mechanics |
|                                                                    | Section  3.1 | Grant  of Security Interest |
|                                                                    | Section  3.2 | Assignment  of Insurance |
|                                                                    | Section  3.3 | Occupancy |
|                                                                    | Section  3.4 | License |
|                                                                    | Section  3.5 | Financing  Statements |
|                                                                    | Section  3.6 | Setoff |
|                                                                    | Section  3.7 | Collection  Mechanics |
|                                                                    |   |   |
| ARTICLE IV Conditions of Lending                                        |
|                                                                    | Section  4.1 | Conditions  Precedent to the Initial Revolving Advance |
|                                                                    | Section  4.2 | Conditions  Precedent to All Advances |
|                                                                    |   |   |
| ARTICLE V Representations and Warranties                                |
|                                                                    | Section  5.1 | Corporate  Existence and Power; Name; Chief Executive Office; Inventory and Equipment  Locations; Tax Identification Number |
|                                                                    | Section  5.2 | Authorization  of Borrowing; No Conflict as to Law or Agreements |
|                                                                    | Section  5.3 | Legal  Agreements |
|                                                                    | Section  5.4 | Subsidiaries |
|                                                                    | Section  5.5 | Financial  Condition; No Adverse Change |
|                                                                    | Section  5.6 | Litigation |

 

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|                                                 | Section  5.7  | Regulation  U                                                  |
|------------------------------------------------------|---------------|----------------------------------------------------------------|
|                                                 | Section  5.8  | Taxes                                                          |
|                                                 | Section  5.9  | Titles  and Liens                                              |
|                                                 | Section  5.10 | Plans                                                          |
|                                                 | Section  5.11 | Default                                                        |
|                                                 | Section  5.12 | Environmental  Matters                                         |
|                                                 | Section  5.13 | Submissions  to Lender                                         |
|                                                 | Section  5.14 | Financing  Statements                                          |
|                                                 | Section  5.15 | Rights  to Payment                                             |
|                                                 | Section  5.16 | Financial  Solvency                                            |
|                                                 |          |                                                           |
| ARTICLE VI Borrower’s Affirmative Covenants     |
|                                                 | Section  6.1  | Reporting  Requirements                                        |
|                                                 | Section  6.2  | Books  and Records; Inspection and Examination                 |
|                                                 | Section  6.3  | Account  Verification                                          |
|                                                 | Section  6.4  | Compliance  with Laws                                          |
|                                                 | Section  6.5  | Payment  of Taxes and Other Claims                             |
|                                                 | Section  6.6  | Maintenance  of Properties                                     |
|                                                 | Section  6.7  | Insurance                                                      |
|                                                 | Section  6.8  | Preservation  of Existence                                     |
|                                                 | Section  6.9  | Delivery  of Instruments, etc.                                 |
|                                                 | Section  6.10 | Collateral  Account                                            |
|                                                 | Section  6.11 | Performance  by the Lender                                     |
|                                                 | Section  6.12 | Financial  Covenants                                           |
|                                                 |          |                                                           |
| ARTICLE VII Negative Covenants                       |
|                                                 | Section  7.1  | Liens                                                          |
|                                                 | Section  7.2  | Indebtedness                                                   |
|                                                 | Section  7.3  | Guaranties                                                     |
|                                                 | Section  7.4  | Investments  and Subsidiaries                                  |
|                                                 | Section  7.5  | Dividends;  Restricted Payments and Redemptions                |
|                                                 | Section  7.6  | Sale  or Transfer of Assets; Suspension of Business Operations |
|                                                 | Section  7.7  | Consolidation  and Merger; Asset Acquisitions                  |
|                                                 | Section  7.8  | Sale  and Leaseback                                            |
|                                                 | Section  7.9  | Restrictions  on Nature of Business                            |
|                                                 | Section  7.10 | Accounting                                                     |
|                                                 | Section  7.11 | Discounts,  etc.                                               |
|                                                 | Section  7.12 | Defined  Benefit Pension Plans                                 |
|                                                 | Section  7.13 | Other  Defaults                                                |
|                                                 | Section  7.14 | Place  of Business; Name                                       |
|                                                 | Section  7.15 | Organizational  Documents                                      |
|                                                 |          |                                                           |
| ARTICLE  VIII Events of Default, Rights and Remedies |
|                                                 | Section  8.1  | Events  of Default                                             |
|                                                 | Section  8.2  | Rights  and Remedies                                           |
|                                                 | Section  8.3  | Certain  Notices                                               |

 

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| ARTICLE IX Miscellaneous |
|--------------------------|
|                     | Section  9.1 | No  Waiver; Cumulative Remedies |
|                     | Section  9.2 | Amendments,  Etc. |
|                     | Section  9.3 | Addresses  for Notices, Etc. |
|                     | Section  9.4 | Further  Documents |
|                     | Section  9.5 | Collateral |
|                     | Section  9.6 | Costs  and Expenses |
|                     | Section  9.7 | Indemnity |
|                     | Section  9.8 | Participants |
|                     | Section  9.9 | Execution  in Counterparts |
|                     | Section  9.10 | Binding  Effect; Assignment; Complete Agreement; Exchanging Information |
|                     | Section  9.11 | Severability  of Provisions |
|                     | Section  9.12 | Headings |
|                     | Section  9.13 | Governing  Law; Jurisdiction, Venue; Waiver of Jury Trial |
|                     | Section  9.14 | No  Novation |

 
| **Exhibits**   |   |                                                                            |
|----------------|--------|---------------------------------------------------------------------------------|
|           |   |                                                                            |
| Exhibit  A     | -      | Form  of Promissory Note                                                        |
| Exhibit B      | -      | Compliance Certificate                                                          |
| Exhibit C      | -      | Form of Confirmation of Request for  Borrowing                                  |
|           |   |                                                                            |
| **Schedules**  |   |                                                                            |
|           |   |                                                                            |
| Schedule 5.1   | -      | Corporate  Name, Chief Executive Office, Business Records, Collateral Locations |
| Schedule 5.4   | -      | Subsidiaries                                                                    |
| Schedule 5.6   | -      | Litigation                                                                      |
| Schedule  5.12 | -      | Environmental  Matters                                                          |
| Schedule 7.1   | -      | Mortgage,  Liens, and Security Interests                                        |
| Schedule 7.2   | -      | Indebtedness                                                                    |
| Schedule 7.3   | -      | Contingent  Liabilities                                                         |

 

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**AMENDED AND RESTATEDLOAN AND SECURITY AGREEMENT,** dated as of April 25,2002, between **TECHNOLOGY FLAVORS & FRAGRANCES, INC.**, a Delawarecorporation (the “Borrower”), and **WELLS FARGO CREDIT, INC.** (the “Lender”).

 

**WHEREAS**,the Borrower and the Lender, as assignee of Foothill Capital Corporation, areparties to a certain Loan and Security Agreement, dated as of June 29, 1999 (asamended through the date hereof, the “Original Loan Agreement); and

 

**WHEREAS**,effective as of the Effective Date, as hereinafter defined, the Borrower andthe Lender desire to amend and restate the Original Loan Agreement in itsentirety, in the form of this Amended and Restated Loan and Security Agreement;

 

**NOW, THEREFORE**,in consideration of the mutual promises contained herein, and for other goodand valuable consideration, the receipt and sufficiency of which are herebyacknowledged, the Borrower and the Lender hereby agree as follows:

 

ARTICLE I   Definitions

 

Section 1.1             Definitions.  For all purposes of this Agreement, exceptas otherwise expressly provided or unless the context otherwise requires:

 

(a)           theterms defined in this Article have the meanings assigned to them in thisArticle, and include the plural as well as the singular; and

 

(b)           allaccounting terms not otherwise defined herein have the meanings assigned tothem in accordance with GAAP.

 

**Accounts**meansall of the Borrower’s accounts, as such term is defined in the UCC, includingwithout limitation the aggregate unpaid obligations of customers and otheraccount debtors of the Borrower arising from the sale or lease of goods orrendition of services by the Borrower on an open account or deferred paymentbasis.

 

**Adjusted Cash Flow**means, as to the Borrower and its consolidated subsidiaries, with respect tothe fiscal year ended on December 31, 2001, Cash Flow on a consolidated basis for such period minusone-time, non-recurring charges, severance charges and other cash charges andcosts related to the Borrower’s Comprehensive Restructuring and Cost ReductionProgram, as set forth in that certain informational package dated September 17,2001, prepared by the Borrower and delivered by it to the Lender on or aboutsuch date.

 

**Advance**meansa Revolving Advance.

 

**Affiliate orAffiliates**means any Person controlled by, controlling or under common control with theBorrower, including (without limitation) any Subsidiary of the Borrower. Forpurposes of this definition, **control**,****when used with respect toany specified Person, means the power to direct the management and policies ofsuch Person, directly or indirectly, whether through the ownership of votingsecurities, by contract or otherwise.

 

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**Agreement**meansthis Amended and Restated Loan and Security Agreement.

 

**Banking Day**meansa day other than a Saturday, Sunday or other day on which banks are generallynot open for business in Minneapolis, Minnesota or New York, New York.

 

**Base Rate**meansthe rate of interest publicly announced from time to time by Wells Fargo Bank,N.A. as its base rate****or,if such bank ceases to announce a rate so designated, any similar successorrate designated by the Lender.

 

**Bonds**meansthose certain Variable Rate Demand Industrial Development Revenue Bonds, Series2002 (Federally Taxable) (Technology Flavors & Fragrances, Inc. Project),issued by the Town of Babylon Industrial Development Agency, in the aggregateprincipal amount of $2,200,000.

 

**Bond Documents**means,collectively (i) the Indenture of Trust dated as of January 1, 2002 between theTown of Babylon Industrial Development Agency and The Bank of New York, astrustee, pursuant to which the Bonds were issued and (ii) all otherinstruments, documents and agreements executed or delivered in connection withthe Bonds.

 

**Borrowing****Base**means,at any time, the lesser of:

 

(a)           theMaximum Line; or

 

(b)           thesum of eighty-five percent (85%) of Eligible Accounts, other than Eligible CanadianAccounts, plus

 

(i)                                     thelesser of (A) fifty-seven percent (57%) of Eligible Canadian Accounts or (B) $750,000, plus

 

(ii)                                  thelesser of (A) fifty-five percent (55%) of Eligible Inventory or (B) $2,000,000, minus

 

(iii)                               suchreserves against such categories of risk as the Lender may elect to establishor revise, from time to time, in the exercise of its commercially reasonablejudgment.

 

**Capital Expenditures**means as to any Person, with respect to any period of determination, theaggregate of all expenditures (whether paid in cash or accrued as liabilities and including expenditures for capitalizedlease obligations) made by such Person during such period that are required byGAAP, consistently applied, to be included in or reflected by the property, plantand equipment or similar fixed asset accounts (or intangible accounts subjectto amortization) on the balance sheet of such Person.

 

**Cash Flow**means as to any Person, with respect to any period of determination, the netincome after taxes of such Person for such period, calculated in accordancewith GAAP, consistently applied, plus depreciation and amortizationexpenses of such Person for such period (to the extent the same are deductedfrom net revenues in determining Net Income for such period) minus theaggregate amount of all payments of principal made during such period with 

 

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respect to indebtedness whichmatured during such period, minus the aggregate amount of all dividendsand other similar distributions made in cash to the holders of the equityinterests of such Person during such period, minus the aggregate amountof non-financed Capital Expenditures made by such Person during such period.

 

**Collateral**meansall of the Borrower’s personal property, whether now in existence or hereaftercreated, acquired or arising, whether tangible, intangible or mixed, includingwithout limitation all of the Borrower’s Equipment, General Intangibles,Inventory, Investment Property, Receivables, all sums on deposit in anyCollateral Account, and any items in any Lockbox; together with (i) allsubstitutions and replacements for and products of any of the foregoing; (ii)proceeds of any and all of the foregoing; (iii) in the case of all tangiblegoods, all accessions; (iv) all accessories, attachments, parts, equipment andrepairs now or hereafter attached or affixed to or used in connection with anytangible goods; and (v) all warehouse receipts, bills of lading and otherdocuments of title now or hereafter covering such goods.

 

**Collateral Account**meansa cash collateral account under the exclusive dominion and control of theLender, maintained at a financial institution reasonably acceptable to theLender.

 

**Commitment**means the Lender’s commitment to make Advancesto or for the Borrower’s account pursuant to Article II.

 

**Credit Facility**meansthe revolving credit facility being made available to the Borrower by theLender pursuant to Article II.

 

**Debt**ofany Person means all items of indebtedness or liability which in accordancewith GAAP would be included in determining total liabilities as shown on theliabilities side of a balance sheet ofthat Person as at the date as of which Debt is to be determined. For purposesof determining a Person’s aggregate Debt at any time, Debt shall also includethe aggregate payments required to be made by such Person at any time under anylease that is considered a capitalized lease under GAAP.

 

**Default**meansan event that, with giving of notice or passage of time or both, would constitutean Event of Default.

 

**Default Period**meansany period of time beginning on the date on which a Default or Event of Defaulthas occurred and ending on the date such Default or Event of Default has beencured, or on the date the Lenderwaives in writing such Default or Event of Default, as the case may be.

 

**Default Rate**means,an annual rate equal to three percent (3%) over the Revolving Floating Rate,which rate shall change when and as the Revolving Floating Rate changes.

 

**Effective Date**means the date when all of the conditions precedent contained in Section 4.1 hereof shall have occurred.

 

**Eligible Accounts**means all unpaid Accounts, net of any credits, except the following shall notin any event be deemed Eligible Accounts:

 

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(i)            Thatportion of Accounts owed by account debtors located in the United States thatis unpaid 120 days or more after the invoice date; and that portion ofAccounts owed by account debtors located outside the United States that isunpaid 150 days or more after the invoice date;

 

(ii)           Thatportion of Accounts that is disputed or subject to a claim of offset or acontra account;

 

(iii)          Thatportion of Accounts not yet earned by the final delivery of goods or renditionof services, as applicable, by the Borrower to the customer;

 

(iv)          Accountsowed by any unit of government, whether foreign or domestic (provided, however,that there shall be included in Eligible Accounts that portion of Accounts owedby such units of government for which the Borrower has provided evidencesatisfactory to the Lender that (A) the Lender has a first priorityperfected security interest and (B) such Accounts may be enforced by theLender directly against such unit of government under all applicable laws);

 

(v)           Accountsowed by an account debtor located outside the United States and Canada whichare not (A) backed by a bank letter of credit naming the Lender asbeneficiary or assigned to the Lender, in the Lender’s possession andacceptable to the Lender in all respects, in its sole discretion, exercised ina commercially reasonable manner or (B) covered by a foreign receivablesinsurance policy acceptable to the Lender in its sole discretion, exercised ina commercially reasonable manner;

 

(vi)          Accountsowed by an account debtor that is insolvent, the subject of bankruptcyproceedings or has gone out of business;

 

(vii)         Accountsowed by a shareholder, Subsidiary, Affiliate, officer or employee of theBorrower;

 

(viii)        Accountsnot subject to a duly perfected security interest in the Lender’s favor orwhich are subject to any lien, security interest or claim in favor of anyPerson other than the Lender including without limitation any payment orperformance bond;

 

(ix)           Thatportion of Accounts that has been restructured, extended, amended or modified; provided,however, that such portion of Accounts may be deemed Eligible Accountsto the extent that Lender has expressly consented thereto in writing;

 

(x)            Thatportion of Accounts that constitutes advertising, finance charges, servicecharges or sales or excise taxes;

 

(xi)           Accountsowed by an account debtor, regardless of whether otherwise eligible, if fiftypercent (50%) or more of the total amount due under Accounts from such debtoris ineligible under clauses (i), (ii) or (ix) above; and

 

(xii)          Accounts,or portions thereof, otherwise deemed ineligible by the Lender in its solediscretion, exercised in a commercially reasonable manner.

 

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**Eligible CanadianAccount**means any Eligible Account which is due andowing by a Person located in Canada.

 

**Eligible Inventory**meansall Inventory valued at the lowest of (a) the Borrower’s net purchase cost ornet manufacturing cost, (b) the lowest bulk market price, (c) the Borrower’slowest bulk selling price, minus estimated expenses for completion anddisposal, and minus an allowance for normal profit margin for bulk sales, (d)any ceiling prices which may be established by any law, or (e) prevailingmarket value.  Eligible Inventory shallexclude any Inventory which consists of (i) any goods located in California,Canada, Chile, or otherwise located outside of the United States, goods storedat a location owned or leased by a vendor of the Borrower, any goods designatedas “Orbitz” inventory, and any goods designated for a customer whose accountreceivable is ineligible, (ii) any goods located outside of a State in whichthe Lender has properly perfected its security interest by filing, free andclear of all other Liens, (iii) any goods not in the actual possession of, orin transit to or from, the Borrower or any goods in the possession of a bailee,warehouseman, consignee or similar Person, (iv) all work-in-process, (v) anygoods the sale or other disposition of which has given rise to a Receivable,(vi) any goods which the Lender determines in its reasonable discretion at anytime and in good faith are defective, unmerchantable or obsolete, (vii) anygoods which are not covered by insurance and (viii) any goods which the Lenderin its reasonable discretion has deemed to be ineligible because the Lenderotherwise considers the collateral value thereof to be impaired or its abilityto realize such value to be insecure.

 

**Environmental Laws** has the meaning specified in Section 5.12.

 

**Equipment** means all of the Borrower’s equipment, assuch term is defined in the UCC, whether now owned or hereafter acquired,including but not limited to all present and future machinery, vehicles,furniture, fixtures, manufacturing equipment, shop equipment, office andrecordkeeping equipment, parts, tools, supplies, and including specifically(without limitation) the goods described in any equipment schedule or listherewith or hereafter furnished to the Lender by the Borrower.

 

**ERISA** means the Employee Retirement Income SecurityAct of 1974, as amended.

 

**Event of Default** has the meaning specified inSection 8.1.

 

**Excess Availability** means the amount, as determined by theLender, calculated at any time, equal to the Borrowing Base minus theamount of all then outstanding and unpaid Obligations.

 

**GAAP** means generally accepted accountingprinciples, applied on a basis consistent with the accounting practices appliedin the financial statements described in Section 5.5**,**except for any change inaccounting practices to the extent that, due to a promulgation of the FinancialAccounting Standards Board changing or implementing any new accountingstandard, the Borrower either (i) is required to implement such change, or (ii)for future periods will be required to and for the current period may inaccordance with generally accepted accounting principles implement such change,for its financial statements to be in conformity with generally acceptedaccounting principles (any such change is herein referred to as a “RequiredGAAP 

 

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Change”), providedthat(1) the Borrower shall fully disclose in such financial statements anysuch Required GAAP Change and the effects of the Required GAAP Change on the Borrower’sincome, retained earnings or other accounts, as applicable, and (2) theBorrower’s financial covenants set forth in Section 6.12 shall be adjusted asnecessary to reflect the effects of such Required GAAP Change.

 

**General Intangibles**means all of the Borrower’s general intangibles, as such term is defined in theUCC, whether now owned or hereafter acquired, including (without limitation)all present and future patents, patent applications, copyrights, trademarks,trade names, trade secrets, customer or supplier lists and contracts, manuals,operating instructions, permits, franchises, the right to use the Borrower’sname, and the goodwill of the Borrower’s business.

 

**Guarantors** means TFF Canada, Technology Flavors &Fragrances, S.A., a corporation organized under the laws of Chile, and anyother Person that guarantees, orotherwise agrees to be liable for, the payment and performance of theObligations.

 

**Hazardous Substance** has the meaning given in Section 5.12.

 

**Inventory**meansall of the Borrower’s inventory, as such term is defined in the UCC, whethernow owned or hereafter acquired, whether consisting of whole goods, spare partsor components, supplies or materials, whether acquired, held or furnished forsale, for lease or under service contracts or for manufacture or processing,and wherever located.

 

**Investment Property**meansall of the Borrower’s investment property, as such term is defined in the UCC,whether now owned or hereafter acquired, including but not limited to allsecurities, security entitlements, securities accounts, commodity contracts,commodity accounts, stocks, bonds, mutual fund shares, money market shares andU.S. Government securities.

 

**Loan Documents**means this Agreement, the Note and the Security Documents, as each may beamended, modified, supplemented or restated from time to time.

 

**Lockbox** has the meaning given in the LockboxAgreement.

 

**Lockbox Agreement**meansthe Lockbox Agreement by and among the Borrower, Fleet Bank, and the Lender, orany other agreement among the Borrower, the Lender and a bank or otherfinancial institution, reasonably acceptable to the Lender, to which theBorrower instructs its customers to remit payments on Accounts.

 

**Material AdverseChange**means a material adverse change in thebusiness, operations, properties, condition (financial or otherwise) orprospects of the Borrower and its consolidated subsidiaries, taken as a whole.

 

**Material AdverseEffect** means the occurrence of any fact or event whichhas had, or is reasonably likely to have, a material adverse effect on (i) thebusiness, operations, properties, condition (financial or otherwise) orprospects of the Borrower and its consolidated subsidiaries, taken as a whole,(ii) the rights and remedies of the Lender under this Agreement or any otherLoan Document or (iii) the Lender’s ability to realize on the Collateral.

 

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**Maturity Date** means March 31, 2007.

 

**Maximum Line**means$3,000,000, unless such amount shall have been increased or reduced pursuant toSection 2.6, in which event it means the amount to which such amount shallhave been increased or reduced, as the case may be.

 

**Mortgage**has the meaning specified in the Reimbursement Agreement.

 

**Net Income**means as to any Person, with respect to any period of determination, the netincome after taxes of such Person for such period, calculated in accordancewith GAAP, consistently applied.

 

**Note** means the Revolving Note.

 

**Obligations**meansthe Note and each and every other debt, liability and obligation of every typeand description which the Borrower may now or at any time hereafter owe to theLender, whether such debt, liability or obligation now exists or is hereaftercreated or incurred, whether it arises in a transaction involving the Lenderalone or in a transaction involving other creditors of the Borrower, andwhether it is direct or indirect, due or to become due, absolute or contingent,primary or secondary, liquidated or unliquidated, or sole, joint, several orjoint and several, and including specifically, but not limited to, allindebtedness of the Borrower arising under this Agreement, the Note or anyother loan or credit agreement or guaranty between the Borrower and the Lender,whether now in effect or hereafter entered into.

 

**Permitted Lien**hasthe meaning given in Section 7.1.

 

**Person**meansany individual, corporation, partnership, joint venture, limited liabilitycompany, association, joint–stock company, trust, unincorporated organization or government or any agency or politicalsubdivision thereof.

 

**Plan**meansan employee benefit plan orother plan maintained for the Borrower’s employees and covered by Title IVof ERISA.

 

**Premises**meansall premises where the Borrower conducts its business and has any rights ofpossession, including (without limitation) the premises legally described inthe Mortgage.

 

**Projections**means a forecast of the Borrower’s financial performance and results ofoperations for a referenced fiscal year, prepared on a quarter-to-quarter andyear-to-date basis, in accordance with reasonable assumptions and historicalpractices, certified by the chief financial officer of the Borrower, and shallinclude a projected balance sheet and income statement for each referencedfiscal year, prepared on the aforedescribed basis.

 

**Receivables**means each and every right of the Borrower to the payment of money, whethersuch right to payment now exists or hereafter arises, whether such right topayment arises out of a sale, lease or other disposition of goods or otherproperty, out of a rendering of services, out of a loan, out of the overpaymentof taxes or other liabilities, or otherwise arises under any contract oragreement, whether such right to payment is created, generated or earned 

 

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by the Borrower or by someother person who subsequently transfers such person’s interest to the Borrower,whether such right to payment is or is not already earned by performance, andhowsoever such right to payment may be evidenced, together with all otherrights and interests (including all liens and security interests) which theBorrower may at any time have by law or agreement against any account debtor orother obligor obligated to make any such payment or against any property of suchaccount debtor or other obligor; all including but not limited to all presentand future accounts, contract rights, loans and obligations receivable, chattelpapers, bonds, notes and other debt instruments, tax refunds and rights topayment in the nature of general intangibles.

 

**ReimbursementAgreement** means that certain Reimbursement Agreementbetween the Lender and the Borrower, dated as of January 1, 2002, as the samemay be amended, modified, supplemented or restated from time to time.

 

**Reportable Event**shall have the meaning assigned to that term in Title IV of ERISA.

 

**Revolving Advance**hasthe meaning given in Section 2.1.

 

**Revolving FloatingRate** means an annual rate equal to the sum of the BaseRate plus one-quarter of one percent (.25%), which annual rate shall changewhen and as the Base Rate changes.

 

**Revolving Note**meansthe Borrower’s promissory note in the original principal amount of $3,000,000,dated as of the Effective Date, and payable to the order of the Lender, insubstantially the form of Exhibit A hereto.

 

**Security Documents**meansthis Agreement, the Lockbox Agreement, and any other document delivered to theLender from time to time to secure the Obligations, as the same may hereafterbe amended, modified supplemented or restated from time to time.

 

**Security Interest**has the meaning given in Section 3.1.

 

**Subsidiary**means any corporation of which more than 50% of the outstanding shares ofcapital stock having general voting power under ordinary circumstances to electa majority of the board of directors of such corporation, irrespective ofwhether or not at the time stock of any other class or classes shall have ormight have voting power by reason of the happening of any contingency, is atthe time directly or indirectly owned by the Borrower, by the Borrower and oneor more other Subsidiaries, or by one or more other Subsidiaries.

 

**Tangible Net Worth**means as to any Person, as of any date of determination, the net worth of suchPerson, calculated in accordance with GAAP, consistently applied, minusall of the assets of such Person which would be classified as intangibleassets, in accordance with GAAP, consistently applied, including withoutlimitation prepaid expenses and intercompany loans and advances.

 

**TFF Canada**means Technology Flavors & Fragrances, Inc., a corporation organized underthe laws of Ontario, Canada, and its successors and assigns.

 

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**Termination Date**means the earliest of (i) the Maturity Date, (ii) the date the Borrowerterminates the Credit Facility, or (iii) the date the Lender demands payment ofthe Obligations after an Event of Default pursuant to Section 8.2.

 

**UCC**means the Uniform Commercial Code as in effect from time to time in the stateof New York or in any other state whose laws are held to govern this Agreementor any portion hereof.

 

Section 1.2             CrossReferences. All references in this Agreement to Articles, Sections and subsections,shall be to Articles, Sections and subsections of this Agreement unless otherwiseexplicitly specified.

 

ARTICLE II     Amount and Terms of the Credit Facility

 

Section 2.1             RevolvingAdvances. on the terms and subject to the conditions herein set forth, tomake advances to the Borrower from time to time from and after the EffectiveDate to, but excluding, the Termination Date (the “Revolving Advances”). TheLender shall have no obligation to make a Revolving Advance if, after givingeffect to such requested Revolving Advance, the sum of the outstanding andunpaid Revolving Advances would exceed the Borrowing Base. The Borrower’sobligation to pay the Revolving Advances shall be evidenced by the RevolvingNote and shall be secured by the Collateral as provided in Article III.Within the limits set forth in this Section 2.1, the Borrower may borrow,prepay and reborrow Revolving Advances. The Borrower agrees to comply with thefollowing procedures in requesting Revolving Advances under thisSection 2.1:

 

(a)           TheBorrower shall make each request for a Revolving Advance to the Lender before11:00 a.m. (New York City time) of the day of the requested Revolving Advance.Requests may be made in writing or by telephone, specifying the date of therequested Revolving Advance and the amount thereof. Each request shall be madeby (i) any officer of the Borrower; or (ii) any person designated as theBorrower’s agent by any officer of the Borrower in a writing delivered to theLender.

 

(b)           Uponfulfillment of the applicable conditions set forth in Article IV, theLender shall disburse the proceeds of the requested Revolving Advance bycrediting the same to the Borrower’s demand deposit account maintained withFleet Bank unless the Lender and the Borrower shall agree in writing to anothermanner of disbursement. The Lender will use reasonable efforts to disburse theproceeds of each Revolving Advance not later than 3:00 p.m. on the day suchRevolving Advance was requested.  Uponthe Lender’s request, the Borrower shall promptly confirm each telephonic requestfor a Revolving Advance by executing and delivering a confirmation certificateto the Lender in the form attached as Exhibit C hereto.  The Borrower shall repay all Advances evenif the Lender does not receive such confirmation and even if the person requestingan Advance was not in fact authorized to do so. Any request for an Advance,whether written or telephonic, shall be deemed to be a representation by theBorrower that the conditions set forth in Section 4.2 have been satisfiedas of the time of the request.

 

Section 2.2            Interest; Default Interest; Usury.

 

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(a)           Interestshall accrue on each Revolving Advance from the date of such Advance at theRevolving Floating Rate, and shall be due and payable in arrears on the firstday of each month, commencing with the first month following such Advance, andon the Termination Date.

 

(b)           DefaultInterest Rate.****At any time during any Default Period, in the Lender’s solediscretion and without waiving any of its other rights and remedies, the principalof the Advances outstanding from time to time shall bear interest at theDefault Rate, effective for any periods designated by the Lender from time totime during that Default Period.

 

(c)           Usury.In any event no rate change shall be put into effect which would result in arate greater than the highest rate permitted by law. Notwithstanding anythingto the contrary contained in any Loan Document, all agreements which either noware or which shall become agreements between the Borrower and the Lender are herebylimited so that in no contingency or event whatsoever shall the total liabilityfor payments in the nature of interest, additional interest and other chargesexceed the applicable limits imposed by any applicable usury laws. If anypayments in the nature of interest, additional interest and other charges madeunder any Loan Document are held to be in excess of the limits imposed by anyapplicable usury laws, it is agreed that any such amount held to be in excessshall be considered payment of principal hereunder, and the indebtednessevidenced hereby shall be reduced by such amount so that the total liabilityfor payments in the nature of interest, additional interest and other chargesshall not exceed the applicable limits imposed by any applicable usury laws, incompliance with the desires of the Borrower and the Lender. This provisionshall never be superseded or waived and shall control every other provision ofthe Loan Documents and all agreements between the Borrower and the Lender, ortheir successors and assigns.

 

Section 2.3             Fees.

 

(a)           RestructuringFee. ** **In consideration of the Lender’swillingness to amend and restate the Original Loan Agreement in its entirety,the Borrower hereby agrees to pay the Lender a fully earned and non-refundable restructuringfee of $17,500, due and payable upon the execution of this Agreement.

 

(b)           UnusedLine Fee.** **For the purposes ofthis Section 2.3(b), Unused Amount means, on any day of determination, anamount equal to the Maximum Line in effect on such day, minus the aggregateamount of Revolving Advances outstanding at the end of such day.  The Borrower agrees to pay to the Lender anunused line fee at the rate of one-quarter of one percent (.25%) per annum onthe average daily Unused Amount from the Effective Date to and including theTermination Date, due and payable monthly in arrears on the first day of eachmonth, commencing May 1, 2002, and on the Termination Date.

 

(c)           FacilityFee.  The Borrower agrees to pay tothe Lender on the Effective Date, and on each yearly anniversary thereafterprior to the Termination Date, a fully 

 

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earned andnon-refundable facility fee in an amount equal to the product of .005 and theamount of the Maximum Line then in effect.

 

(d)           AuditFees. ** **The Borrower hereby agrees to paythe Lender, on demand, audit fees in connection with any audits or inspectionsconducted by or at the direction of the Lender of any Collateral or theBorrower’s operations or business at the rates established generally from timeto time by the Lender as its usual and customary audit fees, together with allactual out-of-pocket costs and expenses incurred in conducting any such auditor inspection; provided, however, that except during Default Periods,the Borrower shall not have to reimburse the Lender for such audit fees to theextent they exceed $10,000 in the aggregate for any consecutive period of 365days, commencing with the Effective Date.

 

(e)           MonitoringFees.  The Borrower hereby agrees topay the Lender a collateral monitoring fee of $750 per month from the EffectiveDate through and including the Termination Date, due and payable monthly inarrears on the first day of each month, commencing May 1, 2002, and on theTermination Date; provided, however, that the Borrower shall notbe required to pay the Lender the collateral monitoring fee for any month inwhich the amount of Revolving Advances outstanding on each day of such monthwas $0.

 

Section 2.4             Computation of Interest and Fees;When Interest Due and Payable.  Interest accruing on the outstandingprincipal balance of the Advances and fees hereunder outstanding from time totime shall be computed on the basis of actual number of days elapsed in a yearof 360 days. Interest shall be payable in arrears on the first day of eachmonth and on the Termination Date.

 

Section 2.5             Capital Adequacy.  If any Related Lender determines in goodfaith at any time that its Return has been reduced as a result of any RuleChange, such Related Lender may require the Borrower to pay it the amountnecessary to restore its Return to what it would have been had there been noRule Change. For purposes of this Section 2.5:

 

(a)           “CapitalAdequacy Rule” means any law, rule, regulation, guideline, directive, requirementor request regarding capital adequacy, or the interpretation or administrationthereof by any governmental or regulatory authority, central bank or comparableagency, whether or not having the force of law, that applies to any RelatedLender. Such rules include rules requiring financial institutions to maintaintotal capital in amounts based upon percentages of outstanding loans, bindingloan commitments and letters of credit.

 

(b)           “Return,”for any period, means the return as determined by such Related Lender on theAdvances based upon its total capital requirements and a reasonable attributionformula that takes account of the Capital Adequacy Rules then in effect. Returnmay be calculated for each calendar quarter and for the shorter period betweenthe end of a calendar quarter and the date of termination in whole of thisAgreement.

 

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(c)           “RuleChange”  means any change in any CapitalAdequacy Rule occurring after the date of this Agreement, but the term does notinclude any changes in applicable requirements that at the Effective Date arescheduled to take place under the existing Capital Adequacy Rules or anyincreases in the capital that any Related Lender is required to maintain to theextent that the increases are required due to a regulatory authority’sassessment of the financial condition of such Related Lender.

 

(d)           “RelatedLender” means the Lender, any parent corporation of the Lender  and any assignee of any interest of theLender hereunder.

 

Certificatesof any Related Lender sent to the Borrower from time to time claimingcompensation under this Section 2.5, stating the reason therefor and settingforth in reasonable detail the calculation of the additional amount or amountsto be paid to the Related Lender hereunder to restore its Return shall beconclusive absent manifest error. In determining such amounts, the RelatedLender may use any reasonable averaging and attribution methods.

 

Section 2.6             Voluntary Prepayment; Increase orReduction of the Maximum Line; Termination of the Credit Facility by theBorrower. Except as otherwise provided herein, the Borrower may prepay theRevolving Advances in whole at any time or from time to time in part, provided,however, that no reduction of the Maximum Line shall be deemed to haveoccurred solely because the outstanding principal balance of the RevolvingLoans may be reduced from time to time, by prepayment or otherwise, to zero, orbecause a credit balance may exist from time to time in the Borrower’sfavor.  The Borrower may elect toincrease the Maximum Line to $4,000,000, at any time during the periodcommencing on January 1, 2003, and ending on June 30, 2004, so long as (i) theBorrower gives the Lender at least 60 days prior written notice of suchelection, and (ii) the Borrower delivers to the Lender an amended and restatedrevolving note, in the form of Exhibit A hereto, in the principal amount of$4,000,000 duly executed and all blank spaces appropriately filled in, provided,however, that if an Event of Default shall have occurred and iscontinuing on the date on which the notice described in clause (i) hereof shallhave been given, the Borrower shall have no right to make such election, andany such notice shall be null and void and of no force or effect.  The Borrower may terminate the CreditFacility or reduce the Maximum Line at any time so long as (i) the Borrowergives the Lender at least 60 days prior written notice and (ii) the Borrower paysthe Lender the applicable termination or line reduction fees in accordance withSection 2.7.  If the Borrower reducesthe Maximum Line to zero, all Obligations shall be immediately due andpayable.  Upon termination of the CreditFacility, payment and performance of all Obligations, and the receipt by theLender from the Borrower of a release on terms satisfactory to the Lender, theLender shall promptly release or terminate the Security Interest and theSecurity Documents by instruments satisfactory to the Borrower or otherwiserequired by law.

 

Section 2.7             Termination Fees and LineReduction Fees.  If the Credit Facility is terminated by the Borrower for anyreason as of a date other than the Maturity Date, or if the Borrower reducesthe Maximum Line to an amount less than $1,500,000 (whether in a singlereduction or pursuant to a series of reductions), the Borrower shall pay to theLender a fee in an amount equal to a percentage of the Maximum Line (or apercentage of the reduction below $1,500,000, as the case may be) as follows:  (i) three percent (3%), if such terminationor reduction occurs during or at the end of the period from January 14, 2002through and including 

 

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January 13, 2003, (ii) twopercent (2%), if such termination or reduction occurs during or at the end ofthe period from January 14, 2003 through and including January 13, 2004, (iii)one percent (1%), if such termination or reduction occurs during or at the endof the period from January 14, 2004 through and including January 13, 2005,(iv) one-half of one percent (.50%), if such termination or reduction occursduring or at the end of the period from January 14, 2005 through and includingJanuary 13, 2006, and (v) zero percent (-0%-), if such termination or reductionoccurs at any time on or after January 14, 2006.

 

Section 2.8             Mandatory Prepayment;Repayment.  Without notice ordemand, in the event that the outstanding principal balance of the RevolvingAdvances shall at any time exceed the Borrowing Base, then, in such event,unless the Lender shall have otherwise agreed in writing, the Borrower shallimmediately prepay the Revolving Advances to the extent necessary to eliminatesuch excess. Any payment received by the Lender under this Section 2.8 or underSection 2.6 may be applied to the Obligations, in such order and in suchamounts as the Lender, in its discretion, may from time to time determine.  On the Termination Date, all outstandingObligations shall be due and payable in full.

 

Section 2.9             Payment.  Any payments of principal, interest, fees orany other amounts payable hereunder or under any other Loan Document shall bemade prior to 12:00 noon New York time on the due date thereof in immediatelyavailable funds.  For purposes ofdetermining the balance of the Advances outstanding, the Lender will credit(conditional upon final collection) all such payments to the Borrower’s accountupon receipt by the Lender of good funds in dollars of the United States ofAmerica in the Lender’s account; provided, however, that forpurposes of computing interest on the Obligations, the Lender will credit(conditional upon final collection) all such payments to the Borrower’s accounttwo (2) Banking Days after receipt by the Lender of such immediately availablefunds in dollars of the United States of America in the Lender’s account.  Any amount received by the Lender after12:00 noon New York time on any Banking Day shall be deemed received on thenext Banking Day.  The Lender may holdall payments not constituting immediately available funds for two (2)additional days before applying them to the Obligations. Notwithstandinganything in Section 2.1, the Borrower hereby authorizes the Lender, in itsdiscretion at any time or from time to time, without the Borrower’s request andeven if the conditions set forth in Section 4.2 would not be satisfied, to makean Advance in an amount equal to the portion of the Obligations from time totime due and payable and amounts required to be paid to the Lender for depositin an account designated by the Lender. Any sums expended by the Lender due to the Borrower’s failure to performor comply with its obligations under this Agreement or any other Loan Document,including, but not limited to the payment of taxes, Liens, insurance premiumsor leasehold obligations, shall be charged to the Borrower’s account as anAdvance and added to the Obligations; provided, that the Lender shallhave no obligation to make such payment and shall not by so doing be deemed tohave assumed any obligation or liability of the Borrower.

 

Section 2.10           Payment on Non–Banking Days.  Whenever any payment to be made hereundershall be stated to be due on a day which is not a Banking Day, such payment maybe made on the next succeeding Banking Day, and such extension of time shall insuch case be included in the computation of interest on the Advances or thefees hereunder, as the case may be.

 

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Section 2.11           Use of Proceeds.  The Borrower shall use the proceeds of Advancesonly for ordinary working capital purposes and for other purposes allowed underthis Agreement.

 

Section 2.12           Liability Records.  The Lender may maintain from time to time,at its discretion, liability records as to the Obligations. In the absence of manifesterror, all entries made on any such record shall be presumed correct until theBorrower establishes the contrary. Upon the Lender’s demand, the Borrower willadmit and certify in writing the exact principal balance of the Obligationsthat the Borrower then asserts to be outstanding. Any billing statement oraccounting rendered by the Lender shall be conclusive and fully binding on theBorrower unless the Borrower gives the Lender specific written notice ofexception within 30 days after receipt.

 

ARTICLE III     Security Interest; Occupancy; Setoff; Collection Mechanics

 

Section 3.1             Grant of Security Interest.  The Borrower confirms and re-affirms itsgrant to the Lender, pursuant to the Original Loan Agreement, of a continuinglien on and security interest (collectively the “Security Interest”) in theCollateral, as security for the payment and performance of the Obligations,which Security Interest continues to be a perfected Security Interest of firstpriority, subject only to Permitted Liens. In furtherance thereof, the Borrower hereby pledges, assigns and grantsto the Lender a Security Interest in the Collateral, as security for thepayment and performance of the Obligations.

 

Section 3.2             Assignment of Insurance.  As additional security for the payment andperformance of the Obligations, the Borrower hereby assigns to the Lender anyand all monies (including, without limitation, proceeds of insurance andrefunds of unearned premiums) due or to become due under, and all other rightsof the Borrower with respect to, any and all policies of insurance now or atany time hereafter covering the Collateral or any evidence thereof or anybusiness records or valuable papers pertaining thereto, and the Borrower herebydirects the issuer of any such policy to pay all such monies directly to theLender. At any time, whether or not a Default Period then exists, the Lendermay (but need not), in the Lender’s name or in the Borrower’s name, execute anddeliver proof of claim, receive all such monies, endorse checks and otherinstruments representing payment of such monies, and adjust, litigate,compromise or release any claim against the issuer of any such policy.

 

Section 3.3             Occupancy.

 

(a)           TheBorrower hereby irrevocably grants to the Lender the right to take possessionof the Premises at any time after the occurrence and during the continuance ofan Event of Default.

 

(b)           TheLender may use the Premises only to hold, process, manufacture, sell, use,store, liquidate, realize upon or otherwise dispose of goods that areCollateral and for other purposes that the Lender may in good faith deem to berelated or incidental purposes.

 

(c)           TheLender’s right to hold the Premises shall cease and terminate upon the earliestof (i) the waiver by the Lender of, or the cure of, the applicable Event ofDefault, (ii) payment in full and discharge of all Obligations and terminationof the Commitment, 

 

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and (iii)final sale or disposition of all goods constituting Collateral and delivery ofall such goods to purchasers.

 

(d)           TheLender shall not be obligated to pay or account for any rent or othercompensation for the possession, occupancy or use of any of the Premises;provided, however, that if the Lender does pay or account for any rent or othercompensation for the possession, occupancy or use of any of the Premises, theBorrower shall reimburse the Lender promptly for the full amount thereof. Inaddition, the Borrower will pay, or reimburse the Lender for, all taxes, fees,duties, imposts, charges and expenses at any time incurred by or imposed uponthe Lender by reason of the execution, delivery, existence, recordation,performance or enforcement of this Agreement or the provisions of this Section3.3.

 

Section 3.4             License.  The Borrower hereby grants to the Lender anon-exclusive, worldwide and royalty-free license to use or otherwise exploitall trademarks, franchises, trade names, copyrights and patents of the Borrowerfor the purpose of selling, leasing or otherwise disposing of any or allCollateral at any time after and during the continuation of an Event ofDefault.

 

Section 3.5             Financing Statements.  The Borrower hereby authorizes the Lender tofile without the Borrower’s signature any and all financing statements in eachjurisdiction that the Lender determines to be necessary to perfect the Lender’sSecurity Interest in the Collateral. For this purpose, the Borrower warrants and represents that its exactlegal name is Technology Flavors & Fragrances, Inc., that it isincorporated under the laws of the state of Delaware, that its Federal TaxIdentification No. is 11 - 3199437, and that its chief executive headquartersis located at 10 Edison Street East, Amityville, New York 11701.

 

Section 3.6             Setoff.  The Borrower agrees that at any time afterand during the continuation of an Event of Default, the Lender may, at its solediscretion and without demand and without notice to anyone, setoff anyliability owed to the Borrower by the Lender, whether or not due, against anyObligation, whether or not due. In addition, each other Person holding aparticipating interest in any Obligations shall have the right to appropriateor setoff any deposit or other liability then owed by such Person to theBorrower, whether or not due, and apply the same to the payment of saidparticipating interest, as fully as if such Person had lent directly to theBorrower the amount of such participating interest.

 

Section 3.7             Collection Mechanics.  The Borrower shall establish and maintain aLockbox in its name and at its expense with a bank or other financialinstitution reasonably acceptable to the Lender.  The Borrower shall: (i) indicate on all of its invoices thatfunds should be delivered to and deposited to the Lockbox; (ii) direct all ofits account debtors to deposit any and all payments, remittances, checks,collections and proceeds of Accounts and other Collateral into the Lockbox;(iii) irrevocably authorize and direct any bank or other financial institutionwhich maintains the Lockbox or otherwise maintains the Borrower’s initialreceipt of cash, checks and other items to promptly transfer all availablefunds to the bank account maintained with such bank or other financialinstitution by the Lender; and (iv) advise such bank or other financialinstitution of the Lender’s security interest in such funds. The Borrower shallpromptly cause to be deposited into the Collateral Account all proceeds ofCollateral received by the 

 

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Borrower, provided, however,that proceeds of Accounts that are remitted by customers of the Borrowerlocated in Canada to a Lockbox maintained by the Lender with Bank of NovaScotia may be deposited by the Borrower into its own operating account, so longas no Default or Event of Default has occurred and is continuing.  In addition to the foregoing, the Borrowershall cause TFF Canada to deposit in the Lockbox maintained by the Lender withthe Bank of Nova Scotia, on Monday of each week, a check in the amount of theaggregate payments, remittances,checks, collections and other proceeds received by TFF Canada during theimmediately preceding week in respect of its accounts (as defined in theUCC).  Each bank or other financialinstitution at which a Lockbox is established shall enter into a writtenagreement with the Lender, or among the Borrower, the Lender and such bank, inform and substance satisfactory to the Lender, providing that all cash, checksand items received or deposited in the Lockbox are the property of the Lender,that the depository bank has no lien upon, or right of set off against, theLockbox or any cash, checks, items, wires or other funds from time to time ondeposit therein, except as otherwise provided in such agreement, and that automatically,on a daily basis the depository bank will wire, or otherwise transfer, inimmediately available funds, all funds received or deposited into the Lockboxto such bank account as the Lender may from time to time designate for suchpurpose.  The Borrower hereby confirmsand agrees that all amounts deposited in the Lockbox and any other fundsreceived and collected by the Lender whether as proceeds of Inventory or othercollateral or otherwise, shall be the property of the Lender.

 

ARTICLE IV     Conditions of Lending

 

Section 4.1             Conditions Precedent to theInitial Revolving Advance.  The Lender’s obligation to make the initialRevolving Advance hereunder shall be subject to the condition precedent thatthe Lender shall have received all of the following, each in form and substancesatisfactory to the Lender:

 

(a)           ThisAgreement, properly executed by the Borrower.

 

(b)           TheNote, properly executed by the Borrower.

 

(c)           Aconfirmation, in writing, signed by each Guarantor, pursuant to which suchGuarantor confirms the continuing effectiveness of the instrument of guarantyexecuted in favor of the Lender by such Guarantor.

 

(d)           Astamped acknowledgement copy of an “in lieu” financing statement recorded withthe Secretary of State of Delaware, reflecting the Borrower as debtor and theLender as secured party.

 

(e)           Acertificate of the Borrower’s Secretary or Assistant Secretary certifying as to(i) the resolutions of the Borrower’s directors and, if required, shareholders,authorizing the execution, delivery and performance of this Agreement, (ii) theBorrower’s articles of incorporation and bylaws, and (iii) the signatures ofthe Borrower’s officers or agents authorized to execute and deliver thisAgreement, and other instruments, agreements and certificates, includingAdvance requests, on the Borrower’s behalf.

 

(f)            Acurrent certificate issued by the Secretary of State of Delaware, certifyingthat the Borrower is in good standing in the State of Delaware.

 

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(g)           Evidencethat the Borrower is duly licensed or qualified to transact business in alljurisdictions where the character of the property owned or leased or the natureof the business transacted by it makes such licensing or qualificationnecessary.

 

(h)           Acertificate of an officer of the Borrower confirming, on behalf of theBorrower, the representations and warranties set forth in Article V.

 

(i)            Anopinion of counsel to the Borrower, addressed to the Lender.

 

(j)            Paymentof the fees and commissions due through the date of the initial Advance underSection 2.3 and expenses incurred by the Lender through such date andrequired to be paid by the Borrower under Section 9.6, including all legalexpenses incurred through the date of this Agreement.

 

(k)           Suchother documents as the Lender in its sole discretion, exercised in acommercially reasonable manner, may require.

 

Section 4.2             Conditions Precedent to AllAdvances. The Lender’s obligation to make each Advance shall be subject to thefurther conditions precedent that on such date:

 

(a)           therepresentations and warranties contained in Article V are correct on andas of the date of such Advance as though made on and as of such date, except tothe extent that such representations and warranties relate solely to an earlierdate; and

 

(b)           noevent has occurred and is continuing, or would result from such Advance whichconstitutes a Default or an Event of Default.

 

ARTICLE V    Representations and Warranties

 

The Borrowerrepresents and warrants to the Lender as follows:

 

Section 5.1             Corporate Existence and Power;Name; Chief Executive Office; Inventory and Equipment Locations; TaxIdentification Number.  The Borrower is a corporation, dulyorganized, validly existing and in good standing under the laws of the State ofDelaware and is duly licensed or qualified to transact business in alljurisdictions where the character of the property owned or leased or the natureof the business transacted by it makes such licensing or qualificationnecessary, except where the failure to be so licensed or qualified to transactbusiness would not have a Material Adverse Effect. The Borrower has allrequisite power and authority, corporate or otherwise, to conduct its business,to own its properties and to execute and deliver, and to perform all of itsobligations under, the Loan Documents. During its existence, the Borrower hasdone business solely under the names set forth in Schedule 5.1 hereto. TheBorrower’s chief executive office and principal place of business is located atthe address set forth in Schedule 5.1 hereto, and all of the Borrower’s recordsrelating to its business or the Collateral are kept at that location. AllInventory and Equipment is located at that location or at one of the otherlocations set forth in Schedule 5.1 hereto. The Borrower’s tax identificationnumber is correctly set forth in Section 3.5 hereto.

 

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Section 5.2             Authorization of Borrowing; NoConflict as to Law or Agreements.  The execution, delivery and performance bythe Borrower of the Loan Documents and the borrowings from time to timehereunder have been duly authorized by all necessary corporate action and donot and will not (i) require any consent or approval of the Borrower’s stockholders;(ii) require any authorization, consent or approval by, or registration,declaration or filing with, or notice to, any governmental department,commission, board, bureau, agency or instrumentality, domestic or foreign, orany third party, except such authorization, consent, approval, registration,declaration, filing or notice as has been obtained, accomplished or given priorto the date hereof; (iii) violate any provision of any law, rule or regulation(including, without limitation, Regulation X of the Board of Governors ofthe Federal Reserve System) or of any order, writ, injunction or decreepresently in effect having applicability to the Borrower or of the Borrower’sarticles of incorporation or bylaws; (iv) result in a breach of or constitute adefault under any indenture or loan or credit agreement or any other materialagreement, lease or instrument to which the Borrower is a party or by which itor its properties may be bound or affected, which default or breach would havea Material Adverse Effect; or (v) result in, or require, the creation orimposition of any mortgage, deed of trust, pledge, lien, security interest orother charge or encumbrance of any nature (other than the Security Interest)upon or with respect to any of the properties now owned or hereafter acquiredby the Borrower.

 

Section 5.3             Legal Agreements.  This Agreement constitutes and, upon dueexecution by the Borrower, the other Loan Documents will constitute the legal,valid and binding obligations of the Borrower, enforceable against the Borrowerin accordance with their respective terms

.

Section5.4             Subsidiaries.  Except as set forth in Schedule 5.4 hereto,the Borrower has no Subsidiaries.

 

Section5.5             Financial Condition; No AdverseChange. The Borrower has heretofore furnished to the Lender its auditedfinancial statements for its fiscal year ended December 31, 2000, and itsunaudited financial statements for the fiscal year-to-date period endedNovember 30, 2001, and those statements fairly present, in all materialrespects, the Borrower’s financial condition on the dates thereof and theresults of its operations and cash flows for the periods then ended and wereprepared in accordance with GAAP. Since the date of the Borrower’s most recentfinancial statements, there has been no Material Adverse Change, other thansuch charges to the Borrower’s operations with respect to its fiscal year endedDecember 31, 2001 as have been previously disclosed to the Lender in writing onor about March 4, 2002.

 

Section5.6             Litigation.  Except as set forth in Schedule 5.6 hereto,there are no actions, suits or proceedings pending or, to the Borrower’sknowledge, threatened against or affecting the Borrower or any of itsAffiliates or the properties of the Borrower or any of its Affiliates beforeany court or governmental department, commission, board, bureau, agency orinstrumentality, domestic or foreign, which, if determined adversely to theBorrower or any of its Affiliates, would have a Material Adverse Effect.

 

Section 5.7             Regulation U.  The Borrower is not engaged in the businessof extending credit for the purpose of purchasing or carrying margin stock(within the meaning of Regulation U of the Board of Governors of the FederalReserve System), and no part of the proceeds of any 

 

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Advance will be used topurchase or carry any margin stock or to extend credit to others for thepurpose of purchasing or carrying any margin stock.

 

Section 5.8             Taxes.  The Borrower and its Affiliates have paid orcaused to be paid to the proper authorities when due all federal, state andlocal taxes required to be withheld by each of them. The Borrower and itsAffiliates have filed all federal, state and local tax returns which to theknowledge of the officers of the Borrower or any Affiliate, as the case may be,are required to be filed, and the Borrower and its Affiliates have paid orcaused to be paid to the respective taxing authorities all taxes as shown onsaid returns or on any assessment received by any of them to the extent suchtaxes have become due and the failure to pay such taxes would result in apenalty or cause interest to accrue in respect thereof.

 

Section 5.9             Titles and Liens.  The Borrower has good and absolute title toall Collateral described in the collateral reports provided to the Lender andall other Collateral, properties and assets reflected in the latest financialstatements referred to in Section 5.5 and all proceeds thereof, free andclear of all mortgages, security interests, liens and encumbrances, except forPermitted Liens. No financing statement naming the Borrower as debtor is onfile in any office except to perfect only Permitted Liens.

 

Section 5.10           Plans.  Except as disclosed to the Lender in writingprior to the date hereof, neither the Borrower nor any of its Affiliatesmaintains or has maintained any Plan. Neither the Borrower nor any Affiliatehas received any notice or has any knowledge to the effect that it is not infull compliance with any of the requirements of ERISA. No Reportable Event orother fact or circumstance which may have an adverse effect on the Plans taxqualified status exists in connection with any Plan. Neither the Borrower norany of its Affiliates has:

 

(a)           Anyaccumulated funding deficiency within the meaning of ERISA; or

 

(b)           Anyliability or knows of any fact or circumstances which could result in anyliability to the Pension Benefit Guaranty Corporation, the Internal RevenueService, the Department of Labor or any participant in connection with any Plan(other than accrued benefits which or which may become payable to participantsor beneficiaries of any such Plan).

 

Section 5.11           Default.  The Borrower is in compliance with allprovisions of all material agreements, instruments, decrees and orders to whichit is a party or by which it or its property is bound or affected, the breachor default of which would be reasonably likely to have a Material AdverseEffect.

 

Section 5.12           Environmental Matters.

 

(a)           Definitions.As used in this Agreement, the following terms shall have the followingmeanings:

 

(i)            “EnvironmentalLaw” means any federal, state, local or other governmental statute, regulation,law or ordinance dealing with the protection of human health and theenvironment.

 

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(ii)           “HazardousSubstances” means pollutants, contaminants, hazardous substances, hazardouswastes, petroleum and fractions thereof, and all other chemicals, wastes,substances and materials listed in, regulated by or identified in anyEnvironmental Law.

 

(b)           Tothe Borrower’s best knowledge, there are not present in, on or under thePremises any Hazardous Substances in such form or quantity as to create anyliability or obligation for either the Borrower or the Lender under the commonlaw of any applicable jurisdiction or under any applicable Environmental Law,and no Hazardous Substances have ever been stored, buried, spilled, leaked,discharged, emitted or released in, on or under the Premises in such a way asto create any such liability.

 

(c)           Tothe Borrower’s best knowledge, the Borrower has not disposed of HazardousSubstances in such a manner as to create any liability under any applicableEnvironmental Law, other than liabilities which do not exceed an amount greaterthan $50,000 in the aggregate.

 

(d)           Exceptas otherwise set forth in Schedule 5.12 hereto, there are not and there neverhave been any requests, claims, notices, investigations, demands,administrative proceedings, hearings or litigation, relating in any way to thePremises or the Borrower, alleging liability under, violation of, ornoncompliance with any Environmental Law or any license, permit or otherauthorization issued pursuant thereto, other than such requests, claims, notices,investigations, demands, administrative proceedings, hearings and litigationthat, in the aggregate, might result in liability to the Borrower of not morethan $50,000.  To the Borrower’s bestknowledge, except as set forth in Schedule 5.12 hereto, no such matter isthreatened or impending.

 

(e)           Tothe Borrower’s best knowledge, except as set forth in Schedule 5.12 hereto, theBorrower’s businesses are and have in the past always been conducted in allmaterial respects in accordance with all applicable Environmental Laws and alllicenses, permits and other authorizations required pursuant to any applicableEnvironmental Law and necessary for the lawful and efficient operation of suchbusinesses are in the Borrower’s possession and are in full force and effect.No permit required to be maintained by the Borrower under any Environmental Lawis scheduled to expire within 12 months and there is no threat that any suchpermit will be withdrawn, terminated, limited or materially changed.

 

(f)            Tothe Borrower’s best knowledge, the Premises are not and never have been listedon the National Priorities List, the Comprehensive Environmental Response,Compensation and Liability Information System or any similar federal, state orlocal list, schedule, log, inventory or database.

 

(g)           TheBorrower has delivered to the Lender all environmental assessments, audits,reports, permits, licenses and other documents describing or relating in anyway to the Premises or Borrower’s businesses.

 

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Section 5.13           Submissions to Lender.  All financial and other information providedto the Lender by or on behalf of the Borrower in connection with the Borrower’srequest for the credit facilities contemplated hereby is true and correct in allmaterial respects and, as to projections, valuations or proforma financialstatements, present a good faith opinion as to such projections, valuations andproforma condition and results.

 

Section 5.14           Financing Statements.  The Borrower has heretofore provided to theLender signed financing statements sufficient to perfect the Security Interestand the other security interests created by the Security Documents, to theextent such security interests are capable of being perfected by filingfinancing statements. None of the Collateral or other collateral covered by theSecurity Documents is or will become a fixture on real estate, unless asufficient fixture filing is in effect with respect thereto.

 

Section 5.15           Rights to Payment.  Each Eligible Account and, to the best ofthe Borrower’s knowledge, each other right to payment and each instrument,document, chattel paper and other agreement constituting or evidencingCollateral or other collateral covered by the Security Documents is (or, in thecase of all future Collateral or such other collateral, will be when arising orissued) the valid, genuine and legally enforceable obligation, subject to nodefense, setoff or counterclaim, of the account debtor or other obligor namedtherein or in the Borrower’s records pertaining thereto as being obligated topay such obligation (other than merchandise disputes in the ordinary course ofbusiness which have been disclosed in writing to the Lender).

 

Section 5.16           Financial Solvency.  Both before and after giving effect to thetransactions contemplated under this Agreement and the making of each Advance,none of the Borrower or its Affiliates:

 

(a)           wasor will be insolvent, as that term is used and defined in Section 101(32) ofthe United States Bankruptcy Code and Section 2 of the Uniform FraudulentTransfer Act;

 

(b)           hasunreasonably small capital or is engaged or about to engage in a business or atransaction for which any remaining assets of the Borrower or such Affiliateare unreasonably small;

 

(c)           byexecuting, delivering or performing its obligations under the Loan Documents orother documents to which it is a party or by taking any action with respectthereto, intends to, nor believes that it will, incur debts beyond its abilityto pay them as they mature;

 

(d)           byexecuting, delivering or performing its obligations under the Loan Documents orother documents to which it is a party or by taking any action with respectthereto, intends to hinder, delay or defraud either its present or futurecreditors; and

 

(e)           atthis time contemplates filing a petition in bankruptcy or for an arrangement orreorganization or similar proceeding under any law any jurisdiction, nor, tothe best knowledge of the Borrower, is the subject of any actual, pending orthreatened bankruptcy, insolvency or similar proceedings under any law of anyjurisdiction.

 

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ARTICLE VI     Borrower’s Affirmative Covenants

 

So long as theObligations shall remain unpaid, or the Credit Facility shall remainoutstanding, the Borrower will comply with the following requirements, unlessthe Lender shall otherwise consent in writing:

 

Section 6.1             Reporting Requirements.  The Borrower will deliver, or cause to bedelivered, to the Lender each of the following, which shall be in form anddetail acceptable to the Lender:

 

(a)           within105 days after the end of each fiscal year of the Borrower, a copy of theBorrower’s Annual Report and Form 10-KSB or Form 10-K, as the case may be, forsuch year prepared by independent certified public accountants reasonablyacceptable to the Lender.  In the eventthat the Borrower fails to remain a public company or is not required to filean Annual Report or Form 10-K SB or Form 10-K, the Borrower shall provide tothe Lender as soon as available, and in any event within 105 days after the endof each fiscal year of the Borrower, the Borrower’s audited financialstatements with the opinion of independent certified public accountantsselected by the Borrower and reasonably acceptable to the Lender, which annualfinancial statements shall include the Borrower’s balance sheet as at the endof such fiscal year and the related statements of the Borrower’s income,retained earnings and cash flows for the fiscal year then ended, prepared on aconsolidated and consolidating basis, all in reasonable detail, in accordancewith GAAP, together with (i) copies of all management letters prepared by suchaccountants; and (ii) a certificate of the Borrower’s chief financial officerstating that such financial statements have been prepared in accordance withGAAP and whether or not such officer has knowledge of the occurrence of anyDefault or Event of Default hereunder and, if so, stating in reasonable detailthe facts with respect thereto;

 

(b)           Within45 days after the end of each of the Borrower’s first three (3) fiscal quartersin each fiscal year, copies of the Borrower’s Quarterly Report on Form 10-QSBor 10-Q, as the case may be.  In theevent that the Borrower fails to remain a public company or is not required tofile a Quarterly Report on Form 10-Q SB or Form 10-Q, the Borrower shallprovide to the Lender unaudited financial statements, including a balance sheetand related profit and loss statements, for such fiscal quarter then ended andfor the cumulative period of the fiscal year since the first day of such fiscalyear, prepared by Borrower’s Chief Financial Officer on a consolidated andconsolidating basis, all in reasonable detail, in accordance with GAAP, subjectto year end audit adjustments;

 

(c)           assoon as available and in any event within 45 days after the end of eachmonth (other than the month of January in each year), an unaudited internalbalance sheet and a statement of income of the Borrower as at the end of andfor such month (provided, however, that the balance sheet andstatement of income for the month of February in each year shall includecombined financial information for the months of January and February in suchyear) and for the year to date period then ended, prepared on a consolidatedand consolidating basis, in reasonable detail and stating in comparative formthe figures for the corresponding date and periods in the previous year, allprepared in accordance with GAAP, subject to year-end audit adjustments; and accompaniedby a 

 

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certificate ofthe Borrower’s chief financial officer, substantially in the form of Exhibit Bhereto stating (i) that such financial statements have been prepared inaccordance with GAAP, subject to year-end audit adjustments, (ii) whether ornot such officer has knowledge of the occurrence of any Default or Event ofDefault hereunder not theretofore reported and remedied and, if so, stating inreasonable detail the facts with respect thereto, and (iii) all relevant factsin reasonable detail to evidence, and the computations as to, whether or notthe Borrower is in compliance with the requirements set forth in Section 6.12;

 

(d)           (i)on each date on which a Revolving Advance is made hereunder, with respect tothe period beginning on and including the date on which the immediatelypreceding Revolving Advance was made and ending on but not including the dateof the current Revolving Advance, or more frequently if the Lender so requires,a sales report, cash receipts report, copies of validated bank deposit slips,and copies of proof of delivery of all goods, the invoice in respect of thesale of which exceeds $25,000, and (ii) within 15 days after the end of eachmonth, or more frequently if the Lender so requires, agings of the Borrower’saccounts receivable and its accounts payable, in reasonable detail, aninventory certification report, a calculation of the Borrower’s Accounts,Eligible Accounts and Eligible Canadian Accounts, Accounts that are ineligible,a reconciliation of all Accounts for such month, Inventory and EligibleInventory, a report of accounts receivable and accounts payable concentrationsand delinquencies and a report of the outstanding balances of all EligibleAccounts and Eligible Canadian Accounts, with a corresponding listing of theA.C.I. limit established for the account debtor obligated on such EligibleAccounts and Eligible Canadian Accounts;

 

(e)           nolater than the last day of each fiscal year of the Borrower, beginning with thefiscal year ending in December 2002, the Projections for the following fiscalyear, together with such supporting schedules and information as the Lender mayin its reasonable discretion require;

 

(f)            immediatelyafter the commencement thereof, notice in writing of all litigation and of allproceedings before any governmental or regulatory agency affecting theBorrower;

 

(g)           aspromptly as practicable (but in any event not later than five Business Days)after an officer of the Borrower obtains knowledge of the occurrence of anybreach, default or event of default under any Security Document or any eventwhich constitutes a Default or Event of Default hereunder, notice of suchoccurrence, together with a detailed statement by a responsible officer of theBorrower of the steps being taken by the Borrower to cure the effect of suchbreach, default or event;

 

(h)           assoon as possible and in any event within 30 days after the Borrower knowsor has reason to know that any Reportable Event with respect to any Plan hasoccurred, the statement of the Borrower’s chief financial officer setting forthdetails as to such Reportable Event and the action which the Borrower proposesto take with respect thereto, together with a copy of the notice of suchReportable Event to the Pension Benefit Guaranty Corporation;

 

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(i)            assoon as possible, and in any event within 10 days after the Borrower fails tomake any quarterly contribution required with respect to any Plan under Section412(m) of the Internal Revenue Code of 1986, as amended, the statement of theBorrower’s chief financial officer setting forth details as to such failure andthe action which the Borrower proposes to take with respect thereto, togetherwith a copy of any notice of such failure required to be provided to thePension Benefit Guaranty Corporation;

 

(j)            promptlyupon knowledge thereof, notice of (i) any disputes or claims by the Borrower’scustomers; (ii) the issuance by the Borrower of any credit memos; (iii) anygoods returned to or recovered by the Borrower (but only to the extent that anysuch dispute, claim or credit memo exceeds $25,000, individually, or the valueof such returned or recovered goods exceeds $25,000, individually) and (iv) anychange in the persons constituting the Borrower’s officers and directors;

 

(k)           promptlyupon knowledge thereof, notice of any material loss of or material damage toany Collateral or other collateral covered by the Security Documents or of anysubstantial adverse change in any Collateral or such other collateral or theprospect of payment thereof;

 

(l)            promptlyupon their distribution, copies of all financial statements, reports and proxystatements which the Borrower shall have sent to its stockholders;

 

(m)          promptlyafter the sending or filing thereof, copies of all regular and periodic reportswhich the Borrower shall file with the Securities and Exchange Commission orany national securities exchange, unless the Borrower is otherwise required todisclose same to the Lender pursuant to another subsection of this Section 6.1;

 

(n)           promptlyupon knowledge thereof, notice of the Borrower’s violation of any law, rule orregulation, the non-compliance with which has had, or would be reasonablylikely to have, a Material Adverse Effect, unless the Borrower is otherwiserequired to disclose same to the Lender pursuant to another subsection of thisSection 6.1; and

 

(o)           fromtime to time, with reasonable promptness, any and all receivables schedules,collection reports, deposit records and on a quarterly basis, within 30 daysafter the end of each calendar quarter, copies of invoices to account debtors,shipment documents and delivery receipts for goods sold, and such othermaterial, reports, records or information as the Lender may reasonably request.

 

Section6.2             Books and Records; Inspection andExamination. The Borrower will keep accurate books of record and account for itselfpertaining to the Collateral and pertaining to the Borrower’s business andfinancial condition and such other matters as the Lender may from time to timereasonably request in which fairly stated and complete entries will be made inaccordance with GAAP and, upon the Lender’s reasonable request, will permit anyofficer, employee, attorney or accountant for the Lender to audit, review, makeextracts from or copy any and all corporate and financial books and records ofthe Borrower at all times during ordinary business 

 

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hours, to send and discuss withaccount debtors and other obligors requests for verification of amounts owed tothe Borrower, and to discuss the Borrower’s affairs with any of its directors,officers, employees or agents. The Borrower will permit the Lender, or itsemployees, accountants, attorneys or agents, to examine and inspect anyCollateral, other collateral covered by the Security Documents or any otherproperty of the Borrower at any time during ordinary business hours.

 

Section 6.3             Account Verification.  The Lender may at any time and from time totime send or require the Borrower to send requests for verification of accountsor notices of assignment to account debtors and other obligors. The Lender mayalso at any time and from time to time telephone account debtors and otherobligors to verify accounts.

 

Section 6.4             Compliance with Laws.

 

(a)           TheBorrower will (i) comply with the requirements of applicable laws andregulations, the non-compliance with which would have, or be reasonably likelyto have, a Material Adverse Effect, and (ii) use and keep the Collateral, andrequire that others use and keep the Collateral, only for lawful purposes,without violation of any federal, state or local law, statute or ordinance.

 

(b)           Withoutlimiting the foregoing undertakings, the Borrower specifically agrees that itwill comply with all applicable Environmental Laws and obtain and comply withall permits, licenses and similar approvals required by any Environmental Laws,and will not generate, use, transport, treat, store or dispose of any HazardousSubstances in such a manner as to create any liability or obligation under thecommon law of any jurisdiction or any Environmental Law.

 

Section 6.5             Payment of Taxes and Other Claims.  The Borrower will pay or discharge, when due,(a) all taxes, assessments and governmental charges levied or imposed upon itor upon its income or profits, upon any properties belonging to it (including,without limitation, the Collateral) or upon or against the creation, perfectionor continuance of the Security Interest, prior to the date on which penaltiesattach thereto, (b) all federal, state and local taxes required to be withheldby it, and (c) all lawful claims for labor, materials and supplies which, ifunpaid, might by law become a lien or charge upon any properties of theBorrower; provided, that the Borrower shall not be required to pay any suchtax, assessment, charge or claim whose amount, applicability or validity isbeing contested in good faith by appropriate proceedings and for which properreserves have been made.

 

Section 6.6             Maintenanceof Properties.

 

(a)           TheBorrower will keep and maintain the Collateral, the other collateral covered bythe Security Documents and all of its other properties necessary or useful inits business in good condition, repair and working order (normal wear and tearexcepted) and will from time to time replace or repair any worn, defective orbroken parts; provided, however, that nothing in this Section 6.6 shallprevent the Borrower from discontinuing the operation and maintenance of any ofits properties if such discontinuance is, in the 

 

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Lender’sreasonable judgment, desirable in the conduct of the Borrower’s business andnot disadvantageous in any material respect to the Lender.

 

(b)           TheBorrower will defend the Collateral against all claims or demands of allpersons (other than the Lender) claiming the Collateral or any interesttherein.

 

(c)           TheBorrower will keep all Collateral and other collateral covered by the SecurityDocuments free and clear of all security interests, liens and encumbrancesexcept Permitted Liens.

 

Section 6.7             Insurance.  The Borrower will obtain and at all timesmaintain insurance with insurers determined by the Borrower, in its reasonablebusiness judgment, to be responsible and reputable, in such amounts and againstsuch risks as may from time to time be required by the Lender in itscommercially reasonable judgment, but in all events in such amounts and againstsuch risks as is usually carried by companies engaged in similar business andowning similar properties in the same general areas in which the Borroweroperates. Without limiting the generality of the foregoing, the Borrower willat all times keep all tangible Collateral insured against risks of fire(including so-called extended coverage), theft, collision (for Collateralconsisting of motor vehicles) and such other risks and in such amounts as theLender may in its commercially reasonable judgment, request, with any losspayable to the Lender to the extent of its interest, and all policies of suchinsurance shall contain a lender’s loss payable endorsement for the Lender’sbenefit acceptable to the Lender. All policies of liability insurance requiredhereunder shall name the Lender as an additional insured.

 

Section 6.8             Preservation of Existence.  The Borrower will preserve and maintain itscorporate existence and all of its rights, privileges and franchises necessaryor desirable (in the Borrower’s commercially reasonable judgment) in the normalconduct of its business.

 

Section 6.9             Delivery of Instruments, etc.  Upon request by the Lender, the Borrowerwill promptly deliver to the Lender in pledge all instruments, documents andchattel papers constituting Collateral, duly endorsed or assigned by theBorrower.

 

Section 6.10           Collateral Account.

 

(a)           If,notwithstanding the instructions to debtors to make payments to the Lockbox,the Borrower receives any payments on Receivables, the Borrower shall depositsuch payments into the Collateral Account. Until so deposited, the Borrowershall hold all such payments in trust for and as the property of the Lender andshall not commingle such payments with any of its other funds or property.

 

(b)           Amountsdeposited in the Collateral Account shall not bear interest and shall not besubject to withdrawal by the Borrower, except after full payment and dischargeof all Obligations.

 

(c)           Alldeposits in the Collateral Account shall constitute proceeds of Collateral andshall not constitute payment of the Obligations. The Lender from time to timeat its discretion may, after allowing two Banking Days, apply deposited fundsin the Collateral Account to the payment of the Obligations, in any order ormanner of 

 

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applicationsatisfactory to the Lender, by transferring such funds to the Lender’s generalaccount.

 

(d)           Allitems deposited in the Collateral Account shall be subject to final payment. Ifany such item is returned uncollected, the Borrower will immediately pay theLender, or, for items deposited in the Collateral Account, the bank maintainingsuch account, the amount of that item, or such bank at its discretion maycharge any uncollected item to the Borrower’s commercial account or otheraccount. The Borrower shall be liable as an endorser on all items deposited inthe Collateral Account, whether or not in fact endorsed by the Borrower.

 

Section 6.11           Performance by the Lender.  If the Borrower at any time fails to performor observe any of the foregoing covenants contained in this Article VI orelsewhere herein, and if such failure shall continue for a period of fifteen(15) calendar days after the Lender gives the Borrower written notice thereof(or in the case of the agreements contained in Sections 6.5, 6.7 and 6.10,immediately upon the occurrence of such failure, without notice or lapse oftime), the Lender may, but need not, perform or observe such covenant on behalfand in the name, place and stead of the Borrower (or, at the Lender’s option,in the Lender’s name) and may, but need not, take any and all other actionswhich the Lender may reasonably deem necessary to cure or correct such failure(including, without limitation, the payment of taxes, the satisfaction of securityinterests, liens or encumbrances, the performance of obligations owed toaccount debtors or other obligors, the procurement and maintenance ofinsurance, the execution of assignments, security agreements and financingstatements, and the endorsement of instruments); and the Borrower shallthereupon pay to the Lender on demand the amount of all monies expended and allcosts and expenses (including reasonable attorneys  fees and legal expenses) incurred by the Lender in connectionwith or as a result of the performance or observance of such agreements or thetaking of such action by the Lender, together with interest thereon from thedate expended or incurred at the Revolving Floating Rate. To facilitate theLender’s performance or observance of such covenants of the Borrower, theBorrower hereby irrevocably appoints the Lender, or the Lender’s delegate,acting alone, as the Borrower’s attorney in fact (which appointment is coupledwith an interest) with the right (but not the duty) from time to time tocreate, prepare, complete, execute, deliver, endorse or file in the name and onbehalf of the Borrower any and all instruments, documents, assignments,security agreements, financing statements, applications for insurance and otheragreements and writings required to be obtained, executed, delivered orendorsed by the Borrower under this Section 6.11.

 

Section 6.12           Financial Covenants.  Borrower shall at all times maintaincompliance with the financial covenants set forth below:

 

(a)           CapitalExpenditures.  The Borrower shallnot make or incur, or contract to make or incur, Capital Expenditures, otherthan Capital Expenditures made in connection with the Project (as defined inthe Reimbursement Agreement) and financed with the proceeds of the Bonds (asdefined in the Reimbursement Agreement), during or at the end of any period setforth below, in an aggregate amount greater than the amount set forth beloweach such period:  

 

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|   | **Measuring Period**                                                                      |   | **Maximum Capital  Expenditures** |    |
|--------|-------------------------------------------------------------------------------------------|--------|-----------------------------------|---------|
|   |                                                                                      |   |                              |    |
| (i)    | January 1, 2002 through and including  December 31, 2002                                  |   | $                                 | 400,000 |   |
| (ii)   | January 1, 2003 through and including  December 31, 2003, and each fiscal year thereafter |   | $                                 | 500,000 |   |

 

(b)           TangibleNet Worth.  The Borrower and itsconsolidated subsidiaries shall maintain at all times a Tangible Net Worth, ona consolidated basis, of not less than $3,200,000.

 

(c)           NetIncome.  The Borrower and itsconsolidated subsidiaries shall have Net Income, on a consolidated basis, forthe first three fiscal months of each fiscal year, the first six fiscal monthsof each fiscal year, the first nine fiscal months of each fiscal year, and thetwelve fiscal months of each fiscal year, commencing with the first threefiscal months ending in March 2002, of not less than (or not worse than, in thecase of negative Net Income) an amount equal to the product of (i) theprojected Net Income for such period, as reflected in the Projections for thefiscal year during which such period occurs, multiplied by (ii) 0.33.

 

(d)           AdjustedCash Flow.  The Company and itsconsolidated subsidiaries shall have Adjusted Cash Flow, on a consolidatedbasis, for the fiscal year ended on December 31, 2001 of at least $1.00.

 

(e)           CashFlow.  The Company and itsconsolidated subsidiaries shall have Cash Flow on a consolidated basis for eachfiscal year, commencing with the fiscal year ending in December 2002, of atleast $1.00.

 

ARTICLE VII     Negative Covenants

 

So long as theObligations shall remain unpaid, or the Credit Facility shall remainoutstanding, the Borrower agrees that, without the Lender’s prior writtenconsent:

 

Section 7.1             Liens.  The Borrower will not create, incur orsuffer to exist any mortgage, deed of trust, pledge, lien, security interest,assignment or transfer upon or of any of its assets, now owned or hereafteracquired, to secure any indebtedness; excluding, however, fromthe operation of the foregoing, the following (collectively, “PermittedLiens”):

 

(a)           inthe case of any of the Borrower’s property which is not Collateral or othercollateral described in the Security Documents, covenants, restrictions,rights, easements and minor irregularities in title which do not materiallyinterfere with the Borrower’s business or operations as presently conducted;

 

(b)           TheMortgage, and the liens, security interests and assignments in existence on thedate hereof and listed in Schedule 7.1 hereto;

 

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(c)           theSecurity Interest and liens and security interests created by the SecurityDocuments; and

 

(d)           subjectto the limitations on Capital Expenditures set forth under Section 6.12 (a),purchase money security interests relating to the acquisition of machinery andequipment of the Borrower not exceeding $100,000 in the aggregate during anyfiscal year,****so long as (i)  noDefault Period is then in existence and none would exist immediately after suchacquisition and (ii) such security interests extend only to the machinery andequipment so acquired.

 

Section 7.2             Indebtedness.  The Borrower will not incur, create, assumeor permit to exist any indebtedness or liability on account of deposits oradvances or any indebtedness for borrowed money or letters of credit issued onthe Borrower’s behalf, or any other indebtedness or liability evidenced bynotes, bonds, debentures or similar obligations, except:

 

(a)           indebtednessarising hereunder, under the Bond Documents and under the ReimbursementAgreement;

 

(b)           indebtednessof the Borrower in existence on the date hereof and listed in Schedule 7.2hereto;

 

(c)           indebtednesssecured by liens permitted in accordance with Section 7.1; and

 

(d)           unsecuredindebtedness not to exceed $50,000 in the aggregate outstanding at any onetime.

 

Section 7.3             Guaranties.  The Borrower will not assume, guarantee,endorse or otherwise become directly or contingently liable in connection withany obligations of any other Person, except:

 

(a)           theendorsement of negotiable instruments by the Borrower for deposit or collectionor similar transactions in the ordinary course of business;

 

(b)           guaranties,endorsements and other direct or contingent liabilities in connection with theobligations of other Persons (collectively “contingent liabilities”), inexistence on the date hereof and listed in Schedule 7.3 hereto; and

 

(c)           contingentliabilities not listed on Schedule 7.3 hereto, not to exceed $50,000 in theaggregate outstanding at any one time.

 

Section 7.4             Investments and Subsidiaries.

 

(a)           TheBorrower will not purchase or hold beneficially any stock or other securitiesor evidences of indebtedness of, make or permit to exist any loans or advancesto, or make any investment or acquire any interest whatsoever in, any otherPerson, including specifically but without limitation any partnership or jointventure, except:

 

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(i)            sharesof stock issued to it by its Subsidiaries;

 

(ii)           investmentsin direct obligations of the United States of America or any agency orinstrumentality thereof whose obligations constitute full faith and creditobligations of the United States of America having a maturity of one year orless, commercial paper issued by U.S. corporations rated  A-1 or A-2 by Standard & PoorsCorporation or P-1 or P-2  by Moody sInvestors Service or certificates of deposit or bankers acceptances having amaturity of one year or less issued by members of the Federal Reserve Systemhaving deposits in excess of $100,000,000 (which certificates of deposit orbankers  acceptances are fully insuredby the Federal Deposit Insurance Corporation); and

 

(iii)          otherinvestments not to exceed $50,000 in the aggregate outstanding at any one time;and

 

(b)           TheBorrower will not create or permit to exist any Subsidiary, other than theSubsidiaries in existence on the date hereof and listed in Schedule 5.4.

 

Section 7.5             Dividends;Restricted Payments and Redemptions.  The Borrower will not declare or pay anydividends (other than dividends payable solely in stock of the Borrower) on anyclass of its capital stock or make any payment on account of the purchase,redemption or other retirement of any shares of such capital stock or make anydistribution in respect thereof, either directly or indirectly, provided,however, that the Borrower may purchase or redeem shares of its capitalstock in amounts not to exceed $650,000 in the aggregate, so long as: (a) noEvent of Default shall have occurred and be continuing at the time of, orimmediately after giving effect to, any such purchase or redemption and (b)Excess Availability immediately before and immediately after giving effect toany such purchase or redemption shall be at least $500,000.

 

Section 7.6             Saleor Transfer of Assets; Suspension of Business Operations.  The Borrower will not sell, lease, assign,transfer or otherwise dispose of (i) the stock of any Subsidiary, (ii) all or asubstantial part of its assets, or (iii) any Collateral or any interest therein(whether in one transaction or in a series of transactions) to any other Personother than the sale of Inventory in the ordinary course of business and willnot liquidate, dissolve or suspend business operations. The Borrower will notin any manner transfer any property without prior or present receipt of fulland adequate consideration.

 

Section 7.7             Consolidation and Merger; AssetAcquisitions. The Borrower will not consolidate with or merge into any Person, orpermit any other Person to merge into it, or acquire (in a transactionanalogous in purpose or effect to a consolidation or merger) all orsubstantially all the assets of any other Person, provided, however,that on not less than thirty (30) days prior written notice to the Lender, theBorrower may merge or consolidate with, or effect a similar businesscombination with, Belmay Holding Corporation, a New York corporation, so longas the terms and conditions thereof are reasonably satisfactory to the Lender,and, in the event that the Borrower ceases to exist as a separate legal entityas a result of any such business combination, then, in such event, theObligations shall have been assumed in writing on terms and by a Person, ineach case, reasonably satisfactory to the Lender.

 

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Section 7.8             Saleand Leaseback. The Borrower will not enter into any arrangement, directly orindirectly, with any other Person whereby the Borrower shall sell or transferany real or personal property, whether now owned or hereafter acquired, andthen or thereafter rent or lease as lessee such property or any part thereof orany other property which the Borrower intends to use for substantially the samepurpose or purposes as the property being sold or transferred.

 

Section7.9             Restrictions on Nature of Business.  The Borrower will not engage in any line of businessmaterially different from that presently engaged in by the Borrower and willnot purchase, lease or otherwise acquire assets not related to its business.

 

Section 7.10           Accounting.  The Borrower will not adopt any materialchange in accounting principles other than as required by GAAP. The Borrowerwill not have a fiscal year that ends on a date other than December 31 of eachyear.

 

Section 7.11           Discounts, etc.  The Borrower will not, after notice from theLender, grant any discount, credit or allowance to any customer of the Borroweror accept any return of goods sold, or at any time (whether before or afternotice from the Lender) modify, amend, subordinate, cancel or terminate theobligation of any account debtor or other obligor of the Borrower.

 

Section 7.12           Defined Benefit Pension Plans.  The Borrower will not adopt, create, assumeor become a party to any defined benefit pension plan, unless disclosed to theLender pursuant to Section 5.10.

 

Section 7.13           Other Defaults.  The Borrower will not permit any breach,default or event of default to occur under any material note, loan agreement,indenture, lease, mortgage, contract for deed, security agreement or othercontractual obligation binding upon the Borrower.

 

Section 7.14           Place of Business; Name.  The Borrower will not transfer its chiefexecutive office or principal place of business, or move, relocate, close orsell any business location without giving Lender at least 30 days prior writtennotice. The Borrower will not permit any tangible Collateral or any recordspertaining to the Collateral to be located in any state or area in which, inthe event of such location, a financing statement covering such Collateralwould be required to be, but has not in fact been, filed in order to perfectthe Security Interest. The Borrower will not change its name without givingLender at least 30 days prior written notice.

 

Section 7.15           Organizational Documents.  The Borrower will not amend its certificateof incorporation, articles of incorporation or bylaws in any matter that isadverse to the Lender.

 

ARTICLE VIII     Eventsof Default, Rights and Remedies

 

Section 8.1             Events of Default.  Event of Default, wherever used herein,means any one of the following events:

 

(a)           TheBorrower shall fail to pay any principal of any Advance when and as the sameshall become due and payable;

 

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(b)           TheBorrower shall fail to pay any interest on any Advance, or shall fail to payany fees, commissions, costs or expenses required to be paid by the Borrowerunder this Agreement, in each case when and as the same shall become due andpayable;

 

(c)           TheBorrower shall fail to observe or perform any covenant, condition or agreementcontained in (i) Section 6.12 hereof or (ii) any section of this Agreementother than Section 6.12, or contained in any other Loan Document, and in thecase of this clause (ii) such failure shall continue without cure for a periodof ten (10) days or more, in the case of Section 6.1 (b), fifteen (15) days ormore, in the case of Section 6.1 (a), or twenty (20) days or more, in all othercases;

 

(d)           Anyrepresentation or warranty made by the Borrower in this Agreement, or by theBorrower (or any of its officers) in any agreement, certificate, instrument orfinancial statement or other statement contemplated by or made or deliveredpursuant to or in connection with this Agreement, shall prove to have beenincorrect in any material respect when made;

 

(e)           TheBorrower or any Guarantor shall be or become insolvent, or admit in writing itsinability to pay its debts as they mature, or make an assignment for thebenefit of its creditors; or the Borrower or any Guarantor shall apply for orconsent to the appointment of any receiver, trustee, or similar officer for itor for all or any substantial part of its property; or such receiver, trusteeor similar officer shall be appointed without the application or consent of theBorrower or such Guarantor, as the case may be; or the Borrower or any Guarantorshall institute (by petition, application, answer, consent or otherwise) anybankruptcy, insolvency, reorganization, arrangement, readjustment of debt,dissolution, liquidation or similar proceeding relating to it under the laws ofany jurisdiction; or any such proceeding shall be instituted (by petition,application or otherwise) against the Borrower or any such Guarantor;

 

(f)            Anyjudgment, writ, warrant of attachment or execution or similar process shall beissued or levied against a substantial part of the property of the Borrower orany Guarantor;

 

(g)           Therendering against the Borrower of a final judgment, decree or order for thepayment of money in excess of $50,000;

 

(h)           An“Event of Default”, as such term is defined in the Reimbursement Agreement,shall have occurred and be continuing;

 

(i)            Adefault shall have occurred and be continuing under any bond, debenture, noteor other evidence of indebtedness of the Borrower in excess of $50,000  owed to any Person other than the Lender, orunder any agreement, indenture or other instrument under which any suchevidence of indebtedness has been issued or by which it is governed, and suchdefault shall continue beyond any applicable grace period;

 

(j)            AnyReportable Event, which the Lender determines in good faith is reasonablylikely to constitute grounds for the termination of any Plan or for theappointment by the appropriate United States District Court of a trustee toadminister any

 

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Plan, shallhave occurred and be continuing 30 days after written notice to sucheffect shall have been given to the Borrower by the Lender; or a trustee shallhave been appointed by an appropriate United States District Court toadminister any Plan; or the Pension Benefit Guaranty Corporation shall haveinstituted proceedings to terminate any Plan or to appoint a trustee toadminister any Plan; or the Borrower shall have filed for a distresstermination of any Plan under Title IV of ERISA; or the Borrower shall have failedto make any quarterly contribution required with respect to any Plan underSection 412(m) of the Internal Revenue Code of 1986, as amended, which theLender determines in good faith may by itself, or in combination with any suchfailures that the Lender may determine are likely to occur in the future,result in the imposition of a lien on the Borrower’s assets in favor of thePlan;

 

(k)           TheBorrower shall liquidate, dissolve, terminate or suspend its businessoperations or otherwise fail to operate its business in the ordinary course, orsell all or substantially all of its assets, without the Lender’s prior writtenconsent; or

 

(l)            AnyGuarantor shall repudiate, purport to revoke or fail to perform any suchGuarantor’s obligations under such instrument of guaranty executed by suchGuarantor in favor of the Lender.

 

Section 8.2             Rights and Remedies.  If an Event of Default shall occur and becontinuing, the Lender may notify any account debtor or other person obligatedto pay the amount due on any Account that such right to payment has beenassigned or transferred to the Lender for security and shall be paid directlyto the Lender. The Borrower will join in giving such notice if the Lender sorequests. At any time after the Borrower or the Lender gives such notice to anaccount debtor or other obligor, the Lender may, but need not, in the Lender’sname or in the Borrower’s name, (i) demand, sue for, collect or receive anymoney or property at any time payable or receivable on account of, or securing,any such right to payment, or grant any extension to, make any compromise orsettlement with or otherwise agree to waive, modify, amend or change theobligations (including collateral obligations) of any such account debtor orother obligor and (ii) as the Borrower’s agent and attorney-in-fact, notify theUnited States Postal Service to change the address for delivery of theBorrower’s mail to any address designated by the Lender, otherwise interceptthe Borrower’s mail, and receive, open and dispose of the Borrower’s mail,applying all Collateral as permitted under this Agreement and holding all othermail for the Borrower’s account or forwarding such mail to the Borrower’s lastknown address.  In addition, if an Eventof Default shall occur and be continuing, the Lender may exercise any or all ofthe following rights and remedies:

 

(a)           theLender may, by notice to the Borrower, declare the Commitment to be terminated,whereupon the same shall forthwith terminate;

 

(b)           theLender may, by notice to the Borrower, declare the Obligations to be forthwithdue and payable, whereupon all Obligations shall become and be forthwith dueand payable, without presentment, notice of dishonor, protest or further noticeof any kind, all of which the Borrower hereby expressly waives;

 

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(c)           theLender may, without notice to the Borrower and without further action, applyany and all money owing by the Lender to the Borrower to the payment of theObligations;

 

(d)           theLender may exercise and enforce any and all rights and remedies available upondefault to a secured party under the UCC, including, without limitation, theright to take possession of Collateral, or any evidence thereof, proceedingwithout judicial process or by judicial process (without a prior hearing ornotice thereof, which, to the extent permitted by law, the Borrower herebyexpressly waives) and the right to sell, lease or otherwise dispose of any orall of the Collateral, and, in connection therewith, the Borrower will ondemand assemble the Collateral and make it available to the Lender at a placeto be designated by the Lender which is reasonably convenient to both parties;

 

(e)           theLender may exercise and enforce its rights and remedies under the LoanDocuments; and

 

(f)            theLender may exercise any other rights and remedies available to it by law oragreement.

 

Notwithstandingthe foregoing, upon the occurrence of an Event of Default described insubsections (e) or (k) of Section 8.1, the Obligations shall be immediately dueand payable automatically without presentment, demand, protest or notice of anykind.

 

Section 8.3             Certain Notices.  If notice to the Borrower of any intendeddisposition of Collateral or any other intended action is required by law in aparticular instance, such notice shall be deemed commercially reasonable ifgiven (in the manner specified in Section 9.3) at least ten calendar daysbefore the date of intended disposition or other action.

 

ARTICLEIX     Miscellaneous

 

Section 9.1             NoWaiver; Cumulative Remedies.  No failure or delay by the Lender inexercising any right, power or remedy under the Loan Documents shall operate asa waiver thereof; nor shall any single or partial exercise of any such right,power or remedy preclude any other or further exercise thereof or the exerciseof any other right, power or remedy under the Loan Documents. The remediesprovided in the Loan Documents are cumulative and not exclusive of any remediesprovided by law.

 

Section 9.2             Amendments, Etc.  No amendment, modification, termination orwaiver of any provision of any Loan Document or consent to any departure by theBorrower therefrom or any release of a Security Interest shall be effectiveunless the same shall be in writing and signed by the Lender, and then suchwaiver or consent shall be effective only in the specific instance and for thespecific purpose for which given. No notice to or demand on the Borrower in anycase shall entitle the Borrower to any other or further notice or demand insimilar or other circumstances.

 

Section 9.3             Addressesfor Notices, Etc.  Except as otherwise expressly provided herein, all notices,requests, demands and other communications provided for under the LoanDocuments shall be in writing and shall be (a) personally delivered, (b) sentby first class United

 

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States mail, (c) sent byovernight courier of national reputation, or (d) transmitted by telecopy, ineach case addressed or telecopied to the party to whom notice is being given atits address or telecopier number as set forth below:

 
| If to the  Borrower: |
|----------------------|
|                 |   |   |
|                 | Technology  Flavors & Fragrances, Inc. |
|                 | 10 Edison  Street East |
|                 | Amityville,  New York 11701 |
|                 | Fax No: | 631 842-4254 |
|                 | Attention: | Joseph Gemmo |
|                 |   |
| If to the  Lender:   |
|                 |   |   |
|                 | Wells Fargo  Credit, Inc. |
|                 | 119 West  40th Street |
|                 | New York,  New York 10018 |
|                 | Fax No: | 646 728-3279 |
|                 | Attention: | Richard Orr |

 

or, as to each party, at suchother address or telecopier number as may hereafter be designated by such partyin a written notice to the other party complying as to delivery with the termsof this Section. All such notices, requests, demands and other communicationsshall be deemed to have been given on (a) the date received if personallydelivered, (b) the date which is three (3) days after the date when depositedin the mail if delivered by mail, (c) the date which is one (1) Banking Dayafter the date sent if sent by overnight courier, or (d) the date oftransmission if delivered by telecopy, except that notices or requests to theLender pursuant to any of the provisions of Article II shall not beeffective until received by the Lender.

 

Section9.4             Further Documents.  The Borrower will from time to time executeand deliver or endorse any and all instruments, documents, conveyances,assignments, security agreements, financing statements and other agreements andwritings that the Lender may reasonably request in order to secure, protect,perfect or enforce the Security Interest or the Lender’s rights under the LoanDocuments (but any failure to request or assure that the Borrower executes,delivers or endorses any such item shall not affect or impair the validity,sufficiency or enforceability of the Loan Documents and the Security Interest,regardless of whether any such item was or was not executed, delivered orendorsed in a similar context or on a prior occasion).

 

Section 9.5             Collateral.  This Agreement does not contemplate a saleof accounts, contract rights or chattel paper, and, as provided by law, theBorrower is entitled to any surplus and shall remain liable for any deficiency.The Lender’s duty of care with respect to Collateral in its possession (asimposed by law) shall be deemed fulfilled if it exercises reasonable care inphysically keeping such Collateral, or in the case of Collateral in the custodyor possession of a bailee or other third person, exercises reasonable care inthe selection of the bailee or other third person, and the Lender need nototherwise preserve, protect, insure or care for any Collateral. The Lendershall not be obligated to preserve any rights the Borrower may have againstprior

 

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parties, to realize on theCollateral at all or in any particular manner or order or to apply any cash proceedsof the Collateral in any particular order of application.

 

Section 9.6             Costs and Expenses.  The Borrower agrees to pay on demand allout-of-pocket costs and expenses, including (without limitation) reasonableattorneys  fees, incurred by the Lenderin connection with the Obligations, this Agreement, the Loan Documents, and anyother document or agreement related hereto or thereto, and the transactionscontemplated hereby, including without limitation all such costs, expenses andfees incurred in connection with the negotiation, preparation, execution,amendment, administration, performance, collection and enforcement of theObligations and all such documents and agreements and the creation, perfection,protection, satisfaction, foreclosure or enforcement of the Security Interest.

 

Section 9.7             Indemnity.  In addition to the payment of expensespursuant to Section 9.6, the Borrower agrees to indemnify, defend and holdharmless the Lender, and any of its participants, parent corporations,subsidiary corporations, affiliated corporations, successor corporations, andall present and future officers, directors, employees, attorneys and agents ofthe foregoing (the “Indemnitees”) from and against any of the following(collectively,  Indemnified Liabilities):

 

(i)            anyand all transfer taxes, documentary taxes, assessments or charges made by anygovernmental authority by reason of the execution and delivery of the LoanDocuments or the making of the Advances;

 

(ii)           anyclaims, loss or damage to which any Indemnitee may be subjected if anyrepresentation or warranty contained in Section 5.12 proves to be incorrect inany respect or as a result of any violation of the covenant contained inSection 6.4(b); and

 

(iii)          anyand all other liabilities, losses, damages, penalties, judgments, suits,claims, costs and expenses of any kind or nature whatsoever (including, withoutlimitation, the reasonable fees and disbursements of counsel) in connectionwith the foregoing and any other investigative, administrative or judicialproceedings, whether or not such Indemnitee shall be designated a partythereto, which may be imposed on, incurred by or asserted against any suchIndemnitee, in any manner related to or arising out of or in connection withthe making of the Advances and the Loan Documents or the use or intended use ofthe proceeds of the Advances, provided, that the Borrower shallnot be obligated to indemnify an Indemnitee for any such liabilities, losses,damages, penalties, judgments, suits, claims, costs and expenses to the extentcaused by the Lender’s or the Indemnitee’s gross negligence or willfulmisconduct.

 

If anyinvestigative, judicial or administrative proceeding arising from any of theforegoing is brought against any Indemnitee, upon such Indemnitee’s request,the Borrower, or counsel designated by the Borrower and satisfactory to theIndemnitee, will resist and defend such action, suit or proceeding to theextent and in the manner directed by the Indemnitee, at the Borrower’s solecosts and expense. The Indemnitee shall have the right to employ its owncounsel in any such action, suit or proceeding, but the fees and expenses ofsuch counsel shall be at the expense of such Indemnitee; provided, however,that, if the defendants in any such action include both the Indemnitee and theBorrower and the Indemnitee shall have reasonably concluded that there may bereasonable defenses available to it which are different from or

 

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additional to those available tothe Borrower or if the interests of the Indemnitee reasonably may be deemed toconflict with the interests of the Borrower, the Indemnitee shall have theright to select a separate counsel and to assume such legal defenses andotherwise to participate in the defense of such action, with the expenses andfees of such separate counsel and other expenses related to such participationto be reimbursed by the Borrower as incurred. The Borrower shall not, in the defense of any such claim or litigation,shall, except with the consent of each Indemnitee, consent to entry of anyjudgment or enter into any settlement that does not include as an unconditionalterm thereof the giving by the claimant or plaintiff to such Indemnitee of arelease from all liability in respect to such claim or litigation.  Each Indemnitee will use its best efforts tocooperate in the defense of any such action, suit or proceeding. If theforegoing undertaking to indemnify, defend and hold harmless may be held to beunenforceable because it violates any law or public policy, the Borrower shallnevertheless make the maximum contribution to the payment and satisfaction ofeach of the Indemnified Liabilities which is permissible under applicable law.The Borrower’s obligation under this Section 9.7 shall survive the terminationof this Agreement and the discharge of the Borrower’s other obligationshereunder.

 

Section 9.8             Participants.  The Lender may, at its own expense, at anytime and from time to time, sell participations in all or a portion of itsrights and obligations under this Agreement, the other Loan Documents and theSecurity Documents, provided that (i) the Borrower’s obligations under thisAgreement and the other Loan Documents shall remain unchanged, (ii) the Lendershall remain solely responsible to the Borrower for the performance of suchobligations, and (iii) the Borrower shall continue to deal solely and directlywith the Lender in connection with the Lender’s rights and obligations underthis Agreement, the other Loan Documents and the Security Documents.

 

Section 9.9             Execution in Counterparts.This Agreement and other Loan Documents may be executed in any number ofcounterparts, each of which when so executed and delivered shall be deemed tobe an original and all of which counterparts, taken together, shall constitutebut one and the same instrument.

 

Section 9.10           Binding Effect; Assignment; CompleteAgreement; Exchanging Information.  The Loan Documents shall be binding upon andinure to the benefit of the Borrower and the Lender and their respectivesuccessors and assigns, except that the Borrower shall not have the right toassign its rights thereunder or any interest therein without the Lender’s priorwritten consent. This Agreement, together with the Loan Documents, comprisesthe complete and integrated agreement of the parties on the subject matterhereof and supersedes all prior agreements, written or oral, on the subjectmatter hereof. Without limiting the Lender’s right to share informationregarding the Borrower and its Affiliates with the Lender’s participants,accountants, lawyers and other advisors, the Lender, Wells Fargo Bank, N.A.,and all direct and indirect subsidiaries of Wells Fargo Bank, N.A., mayexchange any and all information they may have in their possession regardingthe Borrower and its Affiliates, and the Borrower waives any right ofconfidentiality it may have with respect to such exchange of suchinformation.  Except for the foregoingsharing of information with the Lender’s participants, accountants, lawyers andother advisors, and the exchange of information among the Lender, Wells FargoBank, N.A., and the direct and indirect subsidiaries of Wells Fargo Bank, N.A.in connection with the evaluation of this Agreement and the transactions contemplatedhereby, the

 

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Lender agrees to usecommercially reasonable efforts to keep confidential the various written andoral information and material regarding the assets, liabilities, business,prospects, projections and financial condition of the Borrower and theGuarantor which is non-public, confidential or proprietary in nature and willnot disclose any such information or material to any third party without thespecific prior written consent of the Borrower, except that the Lender maydisclose such information without the Borrower’s or any Guarantor’s consent:(a) to Persons employed or engaged by the Lender in evaluating, approving,structuring or administering the Advances or this Agreement; (b) to anyassignee or participant or potential assignee or participant of Lender; (c) asrequired or requested by any governmental authority or reasonably believed bythe Lender to be compelled by any court decree, subpoena or other legal oradministrative order or process; (d) as, on the advice of the Lender’s counsel,is required by law; (e) in connection with the exercise of any right or remedyunder the Loan Documents or in connection with any suit, action or proceedingto which the Lender is a party; or (f) which ceases to be non-public,confidential or proprietary through no fault of the Lender.

 

Section 9.11           Severability of Provisions.  Any provision of this Agreement which isprohibited or unenforceable shall be ineffective to the extent of such prohibitionor unenforceability without invalidating the remaining provisions hereof.

 

Section 9.12           Headings.  Article and Section headings in thisAgreement are included herein for convenience of reference only and shall notconstitute a part of this Agreement for any other purpose.

 

Section 9.13           GoverningLaw; Jurisdiction, Venue; Waiver of Jury Trial.  This Agreement shall be governed by andconstrued in accordance with the substantive laws of (other than the conflictsof law provisions of) the State of New York. Each of the parties hereto hereby (i) consents to the personaljurisdiction of the state and federal courts located in the State of New Yorkin connection with any controversy related to this Agreement; (ii) waives anyargument that venue in any such forum is not convenient, (iii) agrees that anylitigation initiated by the Lender or the Borrower in connection with thisAgreement or the other Loan Documents shall be venued in either the SupremeCourt of New York County, New York, or the United States District Court,Southern District of New York; and (iv) agrees that a final judgment in anysuch suit, action or proceeding shall be conclusive and may be enforced inother jurisdictions by suit on the judgment or in any other manner provided bylaw. **THE PARTIESWAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON ORPERTAINING TO THIS AGREEMENT.**

 

Section 9.14           NoNovation.  On the Effective Date, this Agreement shallamend, restate and supercede the Original Loan Agreement in its entirety; provided,however, that nothing contained herein shall be deemed to constitute anovation of the obligations, liabilities and indebtedness owing by the Borrowerto the Lender under the Original Loan Agreement, and the Borrower confirms andreaffirms its continuing liability for the payment and performance of all suchobligations, liabilities and indebtedness, in accordance with the  terms of this Agreement.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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**IN WITNESS WHEREOF**,the parties hereto have caused this Agreement to be executed by theirrespective officers thereunto duly authorized as of the date first abovewritten.

 
|   | TECHNOLOGY FLAVORS &   FRAGRANCES, INC. |
|--------|---------------------------------------------|
|   |                                        |
|   | By:                                         |   |
|   | Name:                                       |
|   | Title:                                      |
|   |                                        |
|   | WELLS FARGO  CREDIT, INC.                   |
|   |                                        |
|   | By:                                         |   |
|   | Name:                                       |
|   | Title:                                      |

 

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**EXECUTION COPY**

 

**REVOLVINGNOTE**

 
| $3,000,000.00 | As of April    , 2002 |
|---------------|--------------------------------------|

 

FOR VALUERECEIVED, **TECHNOLOGYFLAVORS & FRAGRANCES, INC.,**a Delaware corporation (“Borrower”) **HEREBYPROMISES TO PAY** on the Termination Date under the Loan Agreement(defined below), to the order of **WELLS FARGO CREDIT, INC.** (the “Lender”), atits office located at 119 West 40th Street, New York, New York 10018-2500, inlawful money of the United States of America and in immediately availablefunds, the principal sum of **THREE MILLION DOLLARS ($3,000,000.00)**or,if less, the aggregate unpaid principal amount of all Advances made by theLender to the Borrower pursuant to the Loan Agreement.

 

The Borrowerfurther agrees to pay interest at said office, in like money, on the unpaidprincipal amount hereunder from time to time on the dates and at the ratespecified in the Loan Agreement.  Theprincipal hereof and interest accruing thereon shall be due and payable asprovided in the Loan Agreement.  ThisRevolving Note may be prepaid only in accordance with the Loan Agreement.

 

This RevolvingNote is secured by and is entitled to the benefits of the liens and securityinterests granted by the Loan Agreement and the other Loan Documents (asdefined in the Loan Agreement).

 

The Borrowerhereby waives presentment, demand, notice of dishonor, protest and all otherdemands and notices in connection with the delivery, acceptance, performance,default or enforcement of this Revolving Note or the Loan Agreement.

 

If any paymenton this Revolving Note becomes due and payable on a day other than a BankingDay, the due date thereof shall be extended to the next succeeding Banking Day,and with respect to payments of principal, interest thereon shall be payable atthe then applicable rate during such extension.

 

This RevolvingNote is the “Revolving Note” referred to in the Amended and Restated Loan andSecurity Agreement dated as of even date herewith between the Borrower and theLender (as the same may be amended, modified, supplemented or restated fromtime to time, the “Loan Agreement”). Capitalized terms used herein shall have the meanings assigned theretoin the Loan Agreement, unless otherwise defined herein.

 

This RevolvingNote evidences the Advances made under the Loan Agreement by the Lender to theBorrower and is subject to, and entitled to, all provisions and benefitsthereof, including, without limitation, the provisions of the Loan Agreementwhich permit, in certain circumstances, the Lender to accelerate this RevolvingNote.

 

This RevolvingNote shall be governed by, construed and enforced in accordance with the lawsof the State of New York, without regard to conflict of laws principles.

 

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The Borrowerhereby agrees to pay all costs of collection, including attorneys’ fees andlegal expenses in the event this Revolving Note is not paid when due, whetheror not legal proceedings are commenced

 

In the eventthat, prior to the date hereof, one or more promissory notes (collectively, the“Original Notes”) were issued pursuant to the Loan and Security Agreement,dated as of June 29, 1999 (the “Original Agreement”), between the Borrower andthe Lender (as assignee of Fleet Capital Corporation), to evidence anyindebtedness, obligations or liabilities of the Borrower under the OriginalAgreement, then this Revolving Note shall consolidate, amend, restate andsupercede all such Original Notes; provided, however, thatnothing contained herein shall be deemed to constitute a novation of anyindebtedness, obligations or liabilities of the Borrower under any of theOriginal Notes and the Borrower confirms and reaffirms its continuing liabilityfor the payment and performance of all such indebtedness, obligations andliabilities, in accordance with the terms of this Revolving Note.

 
|   | **TECHNOLOGY FLAVORS &  FRAGRANCES, INC.**  |
|--------|------------------------------------------------------|
|   |                                                 |
|   | By:                                                  |   |
|   | Name:                                                |
|   | Title:                                               |

 

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**EXHIBITB**

 

**FORMOF COMPLIANCE CERTIFICATE**

 
| To       |   | Wells Fargo  Credit, Inc.                                                                                                                                                                                                                                                                                              |
|----------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |   | 119 West  40th Street                                                                                                                                                                                                                                                                                                  |
|     |   | New York,  New York 10018                                                                                                                                                                                                                                                                                              |
|     |   |                                                                                                                                                                                                                                                                                                                   |
| Date:    |   |                  , 200                                                                                                                                                                                                       |
|     |   |                                                                                                                                                                                                                                                                                                                   |
| Subject: |   |                                                   Financial Statements |

 

In accordancewith Section 6.1(c) of the Amended and Restated Loan and Security Agreement,dated as of April       , 2002, betweenTechnology Flavors & Fragrances, Inc., a Delaware corporation (“Borrower”),and Wells Fargo Credit, Inc. (the “Loan Agreement”), attached are the financialstatements of Borrower as of and for the year-to-date period ended                  (the “CurrentFinancials”).  All terms used in thiscertificate have the meanings given in the Loan Agreement.

 

I herebycertify that the Current Financials have been prepared in accordance with GAAP,subject to year-end audit adjustments, and fairly present Borrower’s financialcondition and the results of its operations as of the date thereof.

 

[I herebyfurther certify that I have no knowledge of the occurrence of any Default orEvent of Default under the Loan Agreement not heretofore reported andremedied.]

 

I herebyfurther certify that I have knowledge of the occurrence of a Default or anEvent of Default under the Loan Agreement and attached hereto is a statement ofthe facts with respect thereto.]

 

I herebyfurther certify that the attached sheet(s) set forth all relevant facts toevidence, and my computations as to, whether or not Borrower is in compliancewith the requirements set forth in Section 6.12 of the Loan Agreement.

 
|   | **TECHNOLOGY FLAVORS &  FRAGRANCES, INC.**  |
|--------|------------------------------------------------------|
|   |                                                 |
|   |                                                 |
|   | By:                                                  |   |
|   | Name:                                                |
|   | Title:                                               | Chief  Financial Officer |
|        |                                                      |  |  |

 

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**EXHIBITC**

 

**FORM OF CONFIRMATIONOF REQUEST FOR BORROWING**

 

Wells Fargo Credit, Inc.

119 West 40th Street

New York, New York 10018

 
| Re: | Confirmation  of Borrowing Request |
|-----|------------------------------------|

 

Ladies and Gentlemen:

 

This is toconfirm our authorization to you, made on               , 20      bytelephone, to make an Advance on              , 20      in the sum of $                    , under the Amended andRestated Loan and Security Agreement dated as of April           , 2002 between the undersigned andyou.

 
|   |   | Very truly  yours,                               |
|--------|--------|--------------------------------------------------|
|   |   |                                             |
|   |   | TECHNOLOGY  FLAVORS & FRAGRANCES, INC.  |
|   |   |                                             |
|   |   |                                             |
|   |   | By:                                              |   |   |
|   |   |                                             | Authorized Officer |   |

 

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