Document:

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Exhibit

10.29

 

LOAN AND SECURITY

AGREEMENT

 

by and between

 

CONGRESS FINANCIAL

CORPORATION

as Lender

 

and

 

IVC INDUSTRIES, INC.

as Borrower

 

Dated: October 16, 2000

 

 

 

TABLE OF CONTENTS

 

	

   

  	

   

  	

   

  	

  Page

  
	

  SECTION 1.

  	

  DEFINITIONS

  	

   

  	

  1

  
	

   

  	

   

  	

   

  	

   

  
	

  SECTION 2.

  	

  CREDIT FACILITIES

  	

   

  	

  23

  
	

   

  	

  2.1

  	

  Revolving Loans

  	

   

  	

  23

  
	

   

  	

  2.2

  	

  Letter of Credit Accommodations

  	

   

  	

  24

  
	

   

  	

  2.3

  	

  Term Loan

  	

   

  	

  26

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  SECTION 3

  	

  INTEREST AND FEES

  	

   

  	

  27

  
	

   

  	

  3.1

  	

  Interest

  	

   

  	

  27

  
	

   

  	

  3.2

  	

  Unused Line Fee

  	

   

  	

  28

  
	

   

  	

  3.3

  	

  Fees

  	

   

  	

  28

  
	

   

  	

  3.4

  	

  Changes in Laws and Increased Costs of

  Loans

  	

   

  	

  28

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

  SECTION 4.

  	

  CONDITIONS PRECEDENT

  	

   

  	

  29

  
	

   

  	

  4.1

  	

  Conditions

  Precedent to Initial Loans and Letter of Credit Accommodations

  	

   

  	

  29

  
	

   

  	

  4.2

  	

  Conditions

  Precedent to All Loans and Letter of Credit Accommodations 

  	

   

  	

  31

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  SECTION 5.

  	

  GRANT OF SECURITY INTEREST

  	

   

  	

  32

  
	

   

  	

   

  	

   

  
	

  SECTION 6.

  	

  COLLECTION AND ADMINISTRATION

  	

   

  	

  33

  
	

   

  	

  6.1

  	

  Borrower’s Loan Account

  	

   

  	

  33

  
	

   

  	

  6.2

  	

  Statements

  	

   

  	

  33

  
	

   

  	

  6.3

  	

  Collection of Accounts

  	

   

  	

  34

  
	

   

  	

  6.4

  	

  Payments

  	

   

  	

  35

  
	

   

  	

  6.5

  	

  Payment Indemnity. 

  	

   

  	

  36

  
	

   

  	

  6.6

  	

  Authorization to Make Loans

  	

   

  	

  36

  
	

   

  	

  6.7

  	

  Use of Proceeds

  	

   

  	

  37

  
	

   

  	

   

  	

   

  
	

  SECTION 7.

  	

  COLLATERAL REPORTING AND COVENANTS

  	

   

  	

  37

  
	

   

  	

  7.1

  	

  Collateral Reporting

  	

   

  	

  37

  
	

   

  	

  7.2

  	

  Accounts Covenants

  	

   

  	

  38

  
	

   

  	

  7.3

  	

  Inventory Covenants

  	

   

  	

  40

  
	

   

  	

  7.4

  	

  Equipment

  and Real Property Covenants

  	

   

  	

  41

  
	

   

  	

  7.5

  	

  Power of Attorney

  	

   

  	

  41

  
	

   

  	

  7.6

  	

  Right to Cure

  	

   

  	

  42

  
	

   

  	

  7.7

  	

  Access to Premises

  	

   

  	

  42

  
	

   

  	

   

  	

   

  
	

  SECTION 8.

  	

  REPRESENTATIONS AND WARRANTIES

  	

   

  	

  43

  
	

   

  	

  8.1

  	

  Corporate Existence, Power and Authority; Subsidiaries

  	

   

  	

  43

  
	

   

  	

  8.2

  	

  Financial Statements; No Material Adverse Change

  	

   

  	

  44

  
	

   

  	

  8.3

  	

  Chief Executive Office; Collateral Locations

  	

   

  	

  44

  
							

 

(i)

 

	

   

  	

  8.4

  	

  Priority of Liens; Title to Properties

  	

   

  	

  44

  
	

   

  	

  8.5

  	

  Tax Returns

  	

   

  	

  44

  
	

   

  	

  8.6

  	

  Litigation

  	

   

  	

  44

  
	

   

  	

  8.7

  	

  Compliance with Other Agreements and

  Applicable Laws

  	

   

  	

  45

  
	

   

  	

  8.8

  	

  Environmental Compliance

  	

   

  	

  45

  
	

   

  	

  8.9

  	

  Employee Benefits

  	

   

  	

  45

  
	

   

  	

  8.10

  	

  Bank Accounts

  	

   

  	

  47

  
	

   

  	

  8.11

  	

  Intellectual Property

  	

   

  	

  47

  
	

   

  	

  8.12

  	

  Capitalization

  	

   

  	

  47

  
	

   

  	

  8.13

  	

  Labor Disputes

  	

   

  	

  48

  
	

   

  	

  8.14

  	

  Corporate Name; Prior Transactions

  	

   

  	

  48

  
	

   

  	

  8.15

  	

  Restrictions on Subsidiaries

  	

   

  	

  48

  
	

   

  	

  8.16

  	

  Material Contracts

  	

   

  	

  48

  
	

   

  	

  8.17

  	

  Payable Practices

  	

   

  	

  49

  
	

   

  	

  8.18

  	

  Accuracy and Completeness of Information

  	

   

  	

  49

  
	

   

  	

  8.19

  	

  Survival of Warranties; Cumulative

  	

   

  	

  49

  
	

   

  	

   

  	

   

  
	

  SECTION 9.

  	

  AFFIRMATIVE AND NEGATIVE COVENANTS

  	

   

  	

  49

  
	

   

  	

  9.1

  	

  Maintenance of Existence

  	

   

  	

  49

  
	

   

  	

  9.2

  	

  New Collateral Locations

  	

   

  	

  49

  
	

   

  	

  9.3

  	

  Compliance with Laws, Regulations, Etc

  	

   

  	

  50

  
	

   

  	

  9.4

  	

  Payment of Taxes and Claims

  	

   

  	

  51

  
	

   

  	

  9.5

  	

  Insurance

  	

   

  	

  51

  
	

   

  	

  9.6

  	

  Financial Statements and Other Information

  	

   

  	

  53

  
	

   

  	

  9.7

  	

  Sale of Assets, Consolidation, Merger,

  Dissolution, Etc

  	

   

  	

  54

  
	

   

  	

  9.8

  	

  Encumbrances

  	

   

  	

  56

  
	

   

  	

  9.9

  	

  Indebtedness

  	

   

  	

  57

  
	

   

  	

  9.10

  	

  Loans, Investments, Guarantees, Etc

  	

   

  	

  60

  
	

   

  	

  9.11

  	

  Dividends and Redemptions

  	

   

  	

  61

  
	

   

  	

  9.12

  	

  Transactions with Affiliates

  	

   

  	

  61

  
	

   

  	

  9.13

  	

  Additional Bank Accounts

  	

   

  	

  61

  
	

   

  	

  9.14

  	

  Compliance with ERISA  

  	

   

  	

  62

  
	

   

  	

  9.15

  	

  End of Fiscal Years; Fiscal Quarters

  	

   

  	

  62

  
	

   

  	

  9.16

  	

  Change in Business

  	

   

  	

  62

  
	

   

  	

  9.17

  	

  Limitation of Restrictions Affecting Subsidiaries

  	

   

  	

  62

  
	

   

  	

  9.18

  	

  Adjusted Tangible Net Worth

  	

   

  	

  63

  
	

   

  	

  9.19

  	

  Real Property Collateral

  	

   

  	

  63

  
	

   

  	

  9.20

  	

  Costs and Expenses

  	

   

  	

  63

  
	

   

  	

  9.21

  	

  Further Assurances

  	

   

  	

  65

  
	

   

  	

   

  	

   

  
	

  SECTION 10.

  	

  EVENTS OF DEFAULT AND REMEDIES

  	

   

  	

  65

  
	

   

  	

  10.1

  	

  Events

  of Default

  	

   

  	

  65

  
	

   

  	

  10.2

  	

  Remedies

  	

   

  	

  68

  
	

   

  	

   

  	

   

  
	

  SECTION 11. 

  	

  JURY TRIAL WAIVER; OTHER WAIVERSAND

  CONSENTS; GOVERNING LAW

  	

   

  	

  70

  
	

   

  	

  11.1

  	

  Governing

  Law; Choice of Forum; Service of Process; Jury

  	

   

  	

   

  
	

   

  	

  Trial

  Waiver 

  	

   

  	

  70

  

 

(ii)

 

	

   

  	

  11.2

  	

  Waiver

  of Notices

  	

   

  	

  71

  
	

   

  	

  11.3

  	

  Amendments and Waivers

  	

   

  	

  71

  
	

   

  	

  11.4

  	

  Waiver of Counterclaims

  	

   

  	

  71

  
	

   

  	

  11.5

  	

  Indemnification

  	

   

  	

  72

  
	

   

  	

  11.6

  	

  Currency Indemnity

  	

   

  	

  72

  
	

   

  	

   

  	

   

  	

   

  
	

  SECTION 12.

  	

  TERM OF AGREEMENT; MISCELLANEOUS

  	

   

  	

  72

  
	

   

  	

  12.1

  	

  Term

  	

   

  	

  72

  
	

   

  	

  12.2

  	

  Interpretative Provisions

  	

   

  	

  74

  
	

   

  	

  12.3

  	

  Notices

  	

   

  	

  75

  
	

   

  	

  12.4

  	

  Partial Invalidity

  	

   

  	

  75

  
	

   

  	

  12.5

  	

  Successors

  	

   

  	

  76

  
	

   

  	

  12.6

  	

  Confidentiality

  	

   

  	

  76

  
	

   

  	

  12.7

  	

  Entire Agreement

  	

   

  	

  77

  
						

 

(iii)

 

INDEX TO

EXHIBITS AND SCHEDULES

 

	

  Exhibit A

  	

   

  	

  Information Certificate

  
	

   

  	

   

  	

   

  
	

  Exhibit B

  	

   

  	

  Compliance Certificate

  
	

   

  	

   

  	

   

  
	

  Schedule 1.67

  	

   

  	

  Permitted Holders

  
	

   

  	

   

  	

   

  
	

  Schedule 6.6

  	

   

  	

  Persons Authorized to Request Loans

  
	

   

  	

   

  	

   

  
	

  Schedule 8.4

  	

   

  	

  Existing Liens

  
	

   

  	

   

  	

   

  
	

  Schedule 8.8

  	

   

  	

  Environmental Matters

  
	

   

  	

   

  	

   

  
	

  Schedule 8.10

  	

   

  	

  Bank Accounts

  
	

   

  	

   

  	

   

  
	

  Schedule 8.11

  	

   

  	

  Licensed Intellectual Property

  
	

   

  	

   

  	

   

  
	

  Schedule 8.13

  	

   

  	

  Labor Matters

  
	

   

  	

   

  	

   

  
	

  Schedule 8.16

  	

   

  	

  Material Contracts

  
	

   

  	

   

  	

   

  
	

  Schedule 9.8(f)

  	

   

  	

  Freehold, New Jersey Fixed Rate Bond

  Collateral

  
	

   

  	

   

  	

   

  
	

  Schedule 9.9(h)

  	

   

  	

  Vitamin Specialties Lease Obligations

  
	

   

  	

   

  	

   

  
	

  Schedule 9.9(i)

  	

   

  	

  Existing Indebtedness

  
	

   

  	

   

  	

   

  
	

  Schedule 9.10

  	

   

  	

  Existing Loans, Advances and Guarantees

  
	

   

  	

   

  	

   

  
	

  Schedule 9.12

  	

   

  	

  Permitted Consulting Fees

  

 

(i)

 

LOAN AND SECURITY

AGREEMENT

 

This Loan and Security Agreement dated

October 16, 2000 is entered into by and between Congress Financial Corporation,

a Delaware corporation (“Lender”) and IVC Industries, Inc., a Delaware

corporation (“Borrower”).

 

W I T N E S S E T H:

 

WHEREAS, Borrower has requested that Lender

enter into certain financing arrangements with Borrower pursuant to which

Lender may make loans and provide other financial accommodations to Borrower;

and

 

WHEREAS, Lender is willing to make such loans

and provide such financial accommodations on the terms and conditions set forth

herein;

 

NOW, THEREFORE, in consideration of the

mutual conditions and agreements set forth herein, and for other good and

valuable consideration, the receipt and sufficiency of which is hereby

acknowledged, the parties hereto agree as follows:

 

SECTION 1. DEFINITIONS

 

For purposes of this Agreement, the following

terms shall have the respective meanings given to them below:

 

1.1 “Accounts” shall mean all present and

future rights of Borrower and Guarantor to payment for goods sold or leased or

for services rendered, whether or not evidenced by instruments or chattel

paper, and whether or not earned by performance.

 

1.2 “Adjusted Eurodollar Rate” shall mean,

with respect to each Interest Period for any Eurodollar Rate Loan, the rate per

annum (rounded upwards, if necessary, to the next one-sixteenth (1/16) of one

(1%) percent) determined by dividing (a) the Eurodollar Rate for such Interest

Period by (b) a percentage equal to: (i) one (1) minus (ii) the Reserve

Percentage. For purposes hereof, “Reserve Percentage” shall mean the reserve

percentage, expressed as a decimal, prescribed by any United States or foreign

banking authority for determining the reserve requirement which is or would be

applicable to deposits of United States dollars in a non-United States or an

international banking office of Reference Bank used to fund a Eurodollar Rate

Loan or any Eurodollar Rate Loan made with the proceeds of such deposit,

whether or not the Reference Bank actually holds or has made any such deposits

or loans. The Adjusted Eurodollar Rate shall be adjusted on and as of the

effective day of any change in the Reserve Percentage.

 

 

 

1.3 “Adjusted Tangible Net Worth” shall mean

as to any Person, at any time, in accordance with GAAP (except as otherwise

specifically set forth below), on a consolidated basis for such Person and its

Subsidiaries (if any), the amount equal to the difference between: (a) the

aggregate net book value of all assets of such Person and its Subsidiaries

(excluding the value of patents, trademarks, tradenames, copyrights, licenses,

goodwill, leasehold improvements, prepaid assets and other intangible assets),

calculating the book value of inventory for this purpose on a

first-in-first-out basis, after deducting from such book values all appropriate

reserves in accordance with GAAP (including all reserves for doubtful

receivables, obsolescence, depreciation and amortization) and (b) the aggregate

amount of the Indebtedness and other liabilities of such Person and its

Subsidiaries (including tax and other proper accruals).

 

1.4 “Affiliate” shall mean, with respect to a

specified Person, any other Person (a) which directly or indirectly through one

or more intermediaries controls, or is controlled by, or is under common

control with, such specified person; (b) which beneficially owns or holds five

(5%) percent or more of any class of the Voting Stock or other equity interest

of such specified person; or (c) of which five (5%) percent or more of the

Voting Stock or other equity interest is beneficially owned or held by such

specified person or a Subsidiary of such specified person. For purposes of this

definition, “control” (including, with correlative meanings, the terms “controlling”,

“controlled by” and “under common control with”) when used with respect to any

specified person shall mean the possession, directly or indirectly, of the

power to direct or cause the direction of the management and policies of such

person, whether through the ownership of Voting Stock, by agreement or

otherwise.

 

1.5 “Blocked Accounts” shall have the meaning

set forth in Section 6.3 hereof.

 

1.6 “Borrowing Base” shall mean, at any time,

the amount equal to: (a) eighty-five (85%) percent of the Net Amount of

Eligible Accounts of Borrower and Guarantor, plus (b) the lesser of: (i) sixty

(60%) percent of the Value of Eligible Inventory consisting of finished goods

and Bulk Inventory and raw materials for such finished goods and Bulk

Inventory, (ii) eighty-five (85%) percent of the Net Recovery Percentage with

respect to Eligible Inventory consisting of finished goods and Bulk Inventory

and raw materials for such finished goods and Bulk Inventory or (iii)

$16,000,000, less (c) any Reserves.

 

1.7 “Bulk Inventory” shall mean Inventory in

the form of tablets, capsules, soft gelatins or any other single dosage

vitamin, diet supplements and/or over-the-counter non-drug products in barrels,

bags, boxes or other appropriate container to be sold as is, to be repackaged

or to be converted to finished goods.

 

1.8 “Business Day” shall mean any day other

than a Saturday, Sunday, or other day on which commercial banks are authorized

or required to close under the laws of the State of New York or the State of

North Carolina, and a day on which the Reference Bank and Lender are open for

the transaction of business, except that if a determination of a Business Day

shall relate to any Eurodollar Rate Loans, the term Business Day shall also

exclude any day on which banks are 

 

 

2

 

closed for dealings in dollar deposits in the London interbank market

or other applicable Eurodollar Rate market.

 

1.9 “Canadian Dollars” and “C$” shall each

mean the lawful currency of Canada.

 

1.10 “Canadian Pension Plan” shall mean any

plan, program or arrangement that is a pension plan for the purposes of any

applicable pension benefits legislation or any tax laws of Canada or a Province

thereof, whether or not registered under any such laws, which is maintained or

contributed to by, or to which there is or may be an obligation to contribute

by, Borrower or Guarantor in respect of any Person’s employment in Canada with

Borrower or Guarantor.

 

1.11 “Capital Leases” shall mean, as applied

to any Person, any lease of (or any agreement conveying the right to use) any

property (whether real, personal or mixed) by such Person as lessee which in

accordance with GAAP, is required to be reflected as a liability on the balance

sheet of such Person.

 

1.12 “Capital Stock” shall mean, with respect

to any Person, any and all shares, interests, participations or other

equivalents (however designated) of such Person’s capital stock, partnership

interests or limited liability company interests at any time outstanding, and

any and all rights, warrants or options exchangeable for or convertible into

such capital stock or other interests (but excluding any debt security that is

exchangeable for or convertible into such capital stock).

 

1.13 “Cash Equivalents” shall mean, at any

time, (a) any evidence of Indebtedness with a maturity date of one hundred

eighty (180) days or less issued or directly and fully guaranteed or insured by

the United States of America of any agency or instrumentality thereof;

provided, that, the full faith and credit of the United States of America is

pledged in support thereof; (b) certificates of deposit or bankers’ acceptances

with a maturity of one hundred eighty (180) days or less of any financial

institution that is a member of the Federal Reserve System having combined

capital and surplus and undivided profits of not less than $250,000,000; (c)

commercial paper (including variable rate demand notes) with a maturity of one

hundred eighty (180) days or less issued by a corporation (except an Affiliate

of Borrower) organized under the laws of any State of the United States of

America or the District of Columbia and rated at least A-1 by Standard &

Poor’s Ratings Service, a division of The McGraw-Hill Companies, Inc. or at

least P-1 by Moody’s Investors Service, Inc.; (d) repurchase obligations with a

term of not more than thirty (30) days for underlying securities of the types

described in clause (a) above entered into with any financial institution

having combined capital and surplus and undivided profits of not less than

$250,000,000; (e) repurchase agreements and reverse repurchase agreements

relating to marketable direct obligations issued or unconditionally guaranteed

by the United States of America or issued by any governmental agency thereof

and backed by the full faith and credit to the United States of America, in

each case maturing within one hundred eighty (180) days or less from the date

of acquisition; provided, that, the terms of such agreements comply

 

3

 

with the guidelines set forth in the Federal Financial Agreements of

Depository Institutions with Securities Dealers and Others, as adopted by the

Comptroller of the Currency on October 31, 1985; and (f) investments in money

market funds and mutual funds which invest substantially all of their assets in

securities of the types described in clauses (a) through (e) above.

 

1.14 “Change of Control” shall mean (a) the

transfer (in one transaction or a series of transactions) of all or substantially

all of the assets of Borrower or Guarantor to any Person or group (as such term

is used in Section 13(d)(3) of the Exchange Act); (b) the liquidation or

dissolution of Borrower or Guarantor or the adoption of a plan by the

stockholders of Borrower or Guarantor relating to the dissolution or

liquidation of Borrower or Guarantor; (c) the acquisition by any Person or

group (as such term is used in Section 13(d)(3) of the Exchange Act), except

for one or more Permitted Holders, of beneficial ownership, directly or

indirectly, of fifty (50%) percent or more of the voting power of the total

outstanding Voting Stock of Borrower or the Board of Directors of Borrower; (d)

during any period of two (2) consecutive years, individuals who at the

beginning of such period constituted the Board of Directors of Borrower

(together with any new directors who have been appointed by any Permitted

Holder, or whose nomination for election by the stockholders of Borrower, as

the case may be, was approved by a vote of at least sixty-six and two-thirds

(66 2/3%) percent of the directors then still in office who were either

directors at the beginning of such period or whose election or nomination for

election was previously so approved) cease for any reason to constitute a majority

of the Board of Directors of Borrower then still in office; (e) the failure of

the Permitted Holders to own more than fifty (50%) percent of the voting power

of the total outstanding Voting Stock of Borrower or (f) the failure of

Borrower to own one hundred (100%) percent of the voting power of the total

outstanding Voting Stock of Guarantor.

 

1.15 “Code” shall mean the Internal Revenue

Code of 1986, as the same now exists or may from time to time hereafter be

amended, modified, recodified or supplemented, together, with all rules and

regulations thereunder or related thereto.

 

1.16 “Collateral” shall have the meaning set

forth in Section 5 hereof.

 

1.17 “Collateral Access Agreement” shall mean

an agreement in writing, in form and substance satisfactory to Lender, from any

lessor of premises to Borrower or Guarantor, or any other person to whom any

Collateral (including Inventory, Equipment, bills of lading or other documents

of title) is consigned or who has custody, control or possession of any such Collateral

or is otherwise the owner or operator of any premises on which any of such

Collateral is located, pursuant to which such lessor, consignee or other

person, inter alia, acknowledges the first priority security interest of Lender

in such Collateral, agrees to waive any and all claims such lessor, consignee

or other person may, at any time, have against such Collateral, whether for

processing, storage or otherwise, and agrees to permit Lender access to, and

the right to remain on, the premises of such lessor, consignee or other person

so as to exercise Lender’s rights and remedies and otherwise deal with such

Collateral and in the case of any person who at any time has custody, control

or possession of any bills of lading or other documents of title, agrees to

 

4

 

hold such bills of lading or other documents as bailee for Lender and

to follow all instructions of Lender with respect thereto.

 

1.18 “Consolidated Pre-Tax Net Income” shall

mean, with respect to any Person for any period, the aggregate of the net

income (loss) of such Person and its Subsidiaries, on a consolidated basis, for

such period (excluding to the extent included therein any extraordinary and/or

unusual or non-recurring gains) after deducting all charges which should be

deducted before arriving at the net income (loss) for such period and, without

duplication, before deducting the Provision for Taxes for such period, all as

determined in accordance with GAAP, provided, that, (a) the net income of any

Person that is not a wholly-owned Subsidiary or that is accounted for by the

equity method of accounting shall be included only to the extent of the amount

of dividends or distributions paid or payable to such Person or wholly-owned

Subsidiary of such Person; (b) except to the extent included pursuant to the

foregoing clause, the net income of any Person accrued prior to the date it

becomes a wholly-owned Subsidiary of such Person or is merged into or

consolidated with such Person or any of its wholly-owned Subsidiaries or that

Person’s assets are acquired by such Person or by its wholly-owned Subsidiaries

shall be excluded; and (c) the net income (if positive) of any wholly-owned

Subsidiary to the extent that the declaration or payment of dividends or

similar distributions by such wholly-owned Subsidiary to such Person or to any

other wholly-owned Subsidiary of such Person is not at the time permitted by

operation of the terms of its charter or any agreement, instrument, judgment,

decree, order, statute, rule or governmental regulation applicable to such

wholly-owned Subsidiary shall be excluded. For the purposes of this definition,

net income excludes any gain together with any related Provision for Taxes for

such gain realized upon the sale or other disposition of any assets that are

not sold in the ordinary course of business (including, without limitation,

dispositions pursuant to sale and leaseback transactions) or of any Capital

Stock of such Person or Subsidiary of such Person and any net income realized

or loss incurred as a result of changes in accounting principles or in the

application thereof to such Person.

 

1.19 “Currency Exchange Convention” shall

mean, in the calculation of the US Dollar Equivalent, a procedure used by

Lender to value in US Dollars (i) the obligations or assets of Borrower or

Guarantor that are originally measured in Canadian Dollars and (ii) any other

amount expressed in Canadian Dollars or any other currency, other than US

Dollars, in each case by using the spot price for the purchase of US Dollars

with Canadian Dollars (or such other currency) provided to Lender by the

Reference Bank (or such other bank as Lender may specify for such purpose) for

the immediately preceding Business Day.

 

1.20 “Dilution” shall mean, for any period,

the fraction, expressed as a percentage, the numerator of which is the

aggregate amount of non-cash reductions in the Accounts of Borrower or

Guarantor for such period and the denominator of which is the aggregate dollar

amount of the sales of Borrower and Guarantor for such period.

 

5

 

1.21 “Dilution Reserve” shall mean a Reserve

in amounts established by Lender in good faith to reflect that Dilution with

respect to any category of Eligible Accounts as calculated by Lender for any

period is or is reasonably anticipated to be greater than five (5%) percent.

 

1.22 “Eligible Accounts” shall mean Accounts

created by Borrower or Guarantor which are and continue to be acceptable to

Lender in good faith based on the criteria set forth below. In general,

Accounts shall be Eligible Accounts if:

 

(a) such Accounts arise from the actual and

bona fide sale and delivery of goods by Borrower or Guarantor or rendition of

services by Borrower or Guarantor in the ordinary course of its business which

transactions are completed in accordance with the terms and provisions

contained in any documents related thereto;

 

(b) such Accounts are not unpaid more than

the ninety (90) days after the date of the original invoice for them;

 

(c) such Accounts comply with the terms and

conditions contained in Section 7.2(c) of this Agreement;

 

(d) such Accounts do not arise from sales on

consignment, guaranteed sale, sale and return, sale on approval, or other terms

under which payment by the account debtor may be conditional or contingent; 

 

(e) the chief executive office of the account

debtor with respect to such Accounts is located in the United States of America

or Canada (provided, that, at any time promptly upon Lender’s request, Borrower

or Guarantor shall execute and deliver, or cause to be executed and delivered,

such other agreements, documents and instruments as may be required by Lender

to perfect the security interests of Lender in those Accounts of an account

debtor with its chief executive office or principal place of business in Canada

in accordance with the applicable laws of the Province of Canada in which such

chief executive office or principal place of business is located and take or

cause to be taken such other and further actions as Lender may request to

enable Lender as secured party with respect thereto to collect such Accounts

under the applicable Federal or Provincial laws of Canada) or, at Lender’s

option, if the chief executive office and principal place of business of the

account debtor with respect to such Accounts is located other than in the

United States of America or Canada, then if either: (i) the account debtor has

delivered to Borrower or Guarantor (as the case may be) an irrevocable letter

of credit issued or confirmed by a bank satisfactory to Lender and payable only

in the United States of America and in U.S. Dollars, sufficient to cover such

Account, in form and substance satisfactory to Lender and if required by

Lender, the original of such letter of credit has been delivered to Lender or

Lender’s agent and the issuer thereof notified of the assignment of the

proceeds of such letter of credit to Lender, or (ii) such Account is subject to

credit insurance payable to Lender issued by an insurer and on terms and in an

amount acceptable to Lender, or (iii) such Account is otherwise

 

6

 

acceptable in all respects to Lender (subject to such lending formula

with respect thereto as Lender may determine);

 

(f) such Accounts do not consist of progress

billings (such that the obligation of the account debtors with respect to such

Accounts is conditioned upon the satisfactory completion by Borrower or

Guarantor, as the case may be, of any further performance under the agreement

giving rise thereto), bill and hold invoices or retainage invoices, except as

to bill and hold invoices, if Lender shall have received an agreement in

writing from the account debtor, in form and substance satisfactory to Lender,

confirming the unconditional obligation of the account debtor to take the goods

related thereto and pay such invoice;

 

(g) the account debtor with respect to such

Accounts (i) has not asserted a counterclaim, defense or dispute and (ii) does

not have, and does not engage in transactions which may give rise to any right

of setoff or recoupment against such Accounts, other than (A) pursuant to the

agreement of Borrower with such account debtor as in effect on the date hereof

arising in the ordinary course of the business of Borrower and (B) pursuant to

the agreement of Borrower with such account debtor arising after the date

hereof, to the extent Borrower has obtained the prior written consent of Lender

to such agreement (but the portion of the Accounts of such account debtor in

excess of the amount at any time and from time to time owed by Borrower or

Guarantor, as the case may be, to such account debtor or claimed owed by such

account debtor may be deemed Eligible Accounts);

 

(h) there are no facts, events or occurrences

which would impair the validity, enforceability or collectability of such

Accounts or reduce the amount payable or delay payment thereunder (other than

setoffs in the ordinary course of business otherwise permitted hereunder);

 

(i) such Accounts are subject to the first

priority, valid and perfected security interest of Lender and any goods giving

rise thereto are not, and were not at the time of the sale thereof, subject to

any liens except those permitted in this Agreement;

 

(j) neither the account debtor nor any

officer or employee of the account debtor with respect to such Accounts is an

officer, employee, agent or other Affiliate of Borrower or Guarantor;

 

(k) if (i) the account debtor is the United

States of America or any state or local governmental entity, or any department,

agency or instrumentality thereof, then Borrower or Guarantor, as the case may

be, has assigned its rights to payment of such Account to Lender pursuant to

and in accordance with the Assignment of Claims Act of 1940, as amended, or

pursuant to any similar state or local law, regulation or requirement or (ii)

the account debtor is Her Majesty in right of Canada or any provincial or local

governmental entity, or any ministry, Borrower or Guarantor, as the case may

be, has assigned its rights to payment of such Account to Lender pursuant to

and in accordance with the Financial Administration Act, R.S.C. 185, C.F-11, as

amended, or any similar applicable provincial or local law, regulation or

requirement;

 

7

 

(l) there are no proceedings or actions known

to Borrower or Guarantor which are threatened or pending against the account

debtors with respect to such Accounts which might result in any material

adverse change in any such account debtor’s financial condition;

 

(m) such Accounts are not owed by an account

debtor who has Accounts unpaid more than ninety (90) days after the original

invoice date for them which constitute more than fifty (50%) percent of the

total Accounts of such account debtor;

 

(n) such Accounts are not evidenced by or

arising under any instrument or chattel paper;

 

(o) the account debtor is not located in a

state requiring the filing of a Notice of Business Activities Report or

substantially similar report in order to permit Borrower or Guarantor, as the

case may be, to seek judicial enforcement in such State of payment of such

Account, unless Borrower or Guarantor, as the case may be, has qualified to do

business in such state or has filed a Notice of Business Activities Report or

equivalent report for the then current year or such failure to file and

inability to seek judicial enforcement is capable of being remedied without any

material delay or material cost, as determined by Lender in good faith;

 

(p) such Accounts are owed by account debtors

whose total indebtedness to Borrower or Guarantor (as the case may be) does not

exceed the credit limit with respect to such account debtors as determined by

Borrower or Guarantor (as the case may be) from time to time and as is

reasonably acceptable to Lender (but the portion of the Accounts not in excess

of such credit limit may be deemed Eligible Accounts); and

 

(q) such Accounts are owed by account debtors

deemed creditworthy at all times by Borrower or Guarantor, as the case may be,

consistent with its current practice and who are reasonably acceptable to

Lender.

 

General criteria for Eligible Accounts may be established and revised

by Lender in good faith from time to time as to any type or category of

Accounts after notice to Borrower based on an event, condition or other

circumstance arising after the date hereof, or existing on the date hereof to

the extent Lender has no written notice thereof from Borrower, which adversely

affects or could reasonably be expected to adversely affect such type or

category of Accounts in the good faith determination of Lender. Any Accounts

which are not Eligible Accounts shall nevertheless be part of the Collateral.

 

1.23 “Eligible Inventory” shall mean

Inventory consisting of finished goods held for resale in the ordinary course

of the business of Borrower and Guarantor, Bulk Inventory of Borrower and

Guarantor and raw materials for such finished goods and Bulk Inventory, in each

case which are acceptable to Lender in good faith based on the criteria set

forth below. In

 

8

 

general, Eligible Inventory shall not include (a) work-in-process; (b)

components which are not part of finished goods; (c) spare parts for equipment;

(d) packaging and shipping materials; (e) supplies used or consumed in

Borrower’s or Guarantor’s business; (f) Inventory at premises other than those

owned and controlled by Borrower or Guarantor, except that any Inventory which

would otherwise be deemed Eligible Inventory at locations in the United States

of America or Canada which are not owned and operated by Borrower or Guarantor

may nevertheless be considered Eligible Inventory: (i) as to locations which

are leased by Borrower or Guarantor if Lender shall have received a Collateral

Access Agreement from the owner and lessor of such location, duly authorized,

executed and delivered by such owner and lessor, except that notwithstanding

that Lender shall not have received such an agreement for a particular leased

location, Lender will consider Inventory at such leased location which would

otherwise be Eligible Inventory to be Eligible Inventory provided, that, (A)

Lender may, at any time, establish such Reserves as Lender may determine in

good faith in respect of amounts at any time payable by Borrower to the owner

or lessor of such location, without limiting any other rights and remedies of

Lender under this Agreement or under the other Financing Agreements with

respect to the establishment of Reserves or otherwise, and (B) the Reserves

established pursuant to clause (f)(i)(A) hereof shall not exceed at any time

the aggregate of amounts payable to such owners and lessons for the next three

(3) months from any such time and including amounts if any, then outstanding

and unpaid owed by Borrower to such owners and lessons, provided, that, such

limitation on the amount of the Reserves pursuant to this Section shall only

apply so long as: (1) no Event of Default, or act, condition or event which

with notice or passage of time or both would constitute an Event of Default

shall exist or have occurred and be continuing, (2) neither Borrower, Guarantor

nor Lender shall have received notice of any default or event of default by the

lessee under the lease with respect to such location and (3) Lender shall have

received evidence, in form and substance satisfactory to Lender, that Borrower

has not granted to the owner and lessor a security interest or lien upon any

assets of Borrower and (ii) as to locations owned and operated by a third person,

if Lender shall have received a Collateral Access Agreement from such owner and

operator with respect to such location, duly authorized, executed and delivered

by such owner and operator, except that notwithstanding that Lender shall not

have received such an agreement as to a particular third party location, Lender

may consider Inventory at such location which would otherwise be Eligible

Inventory to be Eligible Inventory provided, that, Lender may, at any time,

establish such Reserves as Lender may determine in good faith in respect of

amounts at any time payable by Borrower to such third party, without limiting

any other rights or remedies of Lender under this Agreement or under the other

Financing Agreements with respect to the establishment of Reserves or otherwise

(provided, that, the Reserves established pursuant to clause (f)(ii) shall not

exceed at any time the aggregate of amounts payable to such third person for

the next three (3) months from any such time and including amounts if any, then

outstanding and unpaid owed by Borrower to such third person, provided, that,

such limitation on the amount of the Reserves pursuant to this Section shall

only apply so long as: (A) no Event of Default, or act, condition or event

which with notice or passage of time or both would constitute an Event of

Default, shall exist or have occurred and be continuing, (B) neither Borrower,

Guarantor nor Lender shall have received notice of any default or event of

default by Borrower or Guarantor under its arrangements with such third

 

9

 

person and (C) Lender shall have received evidence, in form and

substance satisfactory to Lender, that Borrower has not granted to such third

person a security interest or lien upon any assets of Borrower), and, in

addition, if required by Lender: (A) UCC-1 financing statements (or PPSA

financing statements or the equivalent in Canada) between the owner and

operator, as consignee or bailee and Borrower or Guarantor (as the case may be),

as consignor or bailer, in form and substance satisfactory to Lender, which are

duly assigned to Lender and (B) a written notice to any lender to the owner and

operator of the first priority security interest in such Inventory of Lender;

(g) Inventory subject to a security interest or lien in favor of any person

other than Lender except those permitted in this Agreement; (h) bill and hold

goods; (i) unserviceable, obsolete or slow moving Inventory; (j) Inventory

which is not subject to the first priority, valid and perfected security

interest and lien of Lender; (k) damaged and/or defective Inventory; (l)

returned Inventory which is not held for resale in the ordinary course of

business; (m) Inventory purchased or sold on consignment; (n) Inventory held after

the applicable expiration date; (o) samples; (p) Inventory the use of which by

Borrower or Guarantor, as the case may be, or the manufacture or sale thereof

by Borrower or Guarantor, as the case may be, involves the use by Borrower or

Guarantor of any Intellectual Property owned by any other Person, unless

Borrower or Guarantor, as the case may be, has the right to use such

Intellectual Property for such purposes pursuant to an agreement listed on

Schedule 8.11 hereto, provided, that, (i) such agreement is in full force and

effect and constitutes the legal, valid, binding and enforceable obligations of

the parties thereto, (ii) no default or event of default exists or has occurred

thereunder and is continuing, and (iii) no party thereto has sent any notice of

default or its intention to terminate or not renew such agreement (unless such

notice has been rescinded); and (q) Inventory which may become subject to the

claims of a supplier pursuant to Section 81.1 of the Bankruptcy and Insolvency

Act (Canada), R.S.C. 1985, C.B-3, as amended, or any applicable provincial laws

granting revendication or similar rights to unpaid suppliers. General criteria

for Eligible Inventory may be established and revised by Lender in good faith

from time to time as to any type or category of Inventory after notice to

Borrower based on an event, condition or other circumstance arising after the

date hereof, or existing on the date hereof to

the extent Lender has no written notice thereof from Borrower, which

adversely affects or could reasonably be expected to adversely affect such type

or category of Inventory in the good faith determination of Lender. Any

Inventory which is not Eligible Inventory shall nevertheless be part of the

Collateral.

 

1.24 “Environmental Laws” shall mean all

foreign, Federal, State, Provincial and local laws (including common law),

legislation, rules, codes, licenses, permits (including any conditions imposed

therein), injunctions or agreements between Borrower and any Governmental

Authority, (a) relating to the protection, preservation or restoration of the

environment (including air, water, surface water, ground water, drinking water,

drinking water supply, surface land, subsurface land, plant and animal life or

any other natural resource), or to human health or safety, (b) relating to the

exposure to, or the use, storage, recycling, treatment, generation,

manufacture, processing, distribution, transportation, handling, labeling,

production, release or disposal, or threatened release, of Hazardous Materials,

or (c) relating to all laws with regard to recordkeeping, notification,

disclosure and reporting requirements respecting Hazardous

 

10

 

Materials. The term “Environmental Laws” includes (i) the Federal Comprehensive

Environmental Response, Compensation and Liability Act of 1980, the Federal

Superfund Amendments and Reauthorization Act, the Federal Water Pollution

Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act,

the Federal Resource Conservation and Recovery Act of 1976 (including the

Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal

Act and the Federal Toxic Substances Control Act, the Federal Insecticide,

Fungicide and Rodenticide Act, and the Federal Safe Drinking Water Act of 1974,

and (ii) other laws that may impose liability or obligations for injuries or

damages due to, or as a result of, the presence of or exposure to any Hazardous

Materials.

 

1.25 “Equipment” shall mean all of Borrower’s

and Guarantor’s now owned and hereafter acquired equipment, machinery,

computers and computer hardware and software (whether owned or licensed),

vehicles, tools, furniture, fixtures, all attachments, accessions and property

now or hereafter affixed thereto or used in connection therewith, and

substitutions and replacements thereof, wherever located.

 

1.26 “ERISA” shall mean the United States

Employee Retirement Income Security Act of 1974, together with all rules and

regulations thereunder or related thereto.

 

1.27 “ERISA Affiliate” shall mean any person

required to be aggregated with Borrower or any of its Subsidiaries under

Sections 414(b), 414(c), 414(m) or 414(o) of the Code.

 

1.28 “ERISA Event” shall mean (a) any

“reportable event”, as defined in Section 4043 of ERISA or the regulations

issued thereunder, with respect to a Plan; (b) the adoption of any amendment to

a Plan that would require the provision of security pursuant to Section

401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect

to any Plan of an “accumulated funding deficiency” (as defined in Section 412

of the Code or Section 302 of ERISA), whether or not waived; (d) the filing

pursuant to Section 412 of the Code or Section 303(d) of ERISA of an

application for a waiver of the minimum funding standard with respect to any

Plan; (e) the occurrence of a “prohibited transaction” with respect to which

Borrower or any of its Subsidiaries is a “disqualified person” (within the

meaning of Section 4975 of the Code) or with respect to which Borrower or any

of its Subsidiaries could otherwise be liable; (f) a complete or partial

withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or

a cessation of operations which is treated as such a withdrawal or notification

that a Multiemployer Plan is in reorganization; (g) the filing of a notice of

intent to terminate, the treatment of a Plan amendment as a termination under

Section 4041 or 4041A of ERISA, or the commencement of proceedings by the

Pension Benefit Guaranty Corporation to terminate a Plan or Multiemployer Plan;

(h) an event or condition which might reasonably be expected to constitute

grounds under Section 4042 of ERISA for the termination of, or the appointment

of a trustee to administer, any Plan or Multiemployer Plan; (i) the imposition

of any liability under Title IV of ERISA, other than the Pension Benefit

Guaranty Corporation premiums due but not delinquent under Section 4007 of

ERISA, upon Borrower or any ERISA Affiliate; and (j) any other event or condition

with respect to a Plan or Multiemployer Plan or any Plan subject to Title

 

11

 

IV of ERISA maintained, or contributed to, by any ERISA Affiliate that

could reasonably be expected to result in liability of Borrower.

 

1.29 “Eurodollar Rate” shall mean with

respect to the Interest Period for a Eurodollar Rate Loan, the interest rate

per annum equal to the arithmetic average of the rates of interest per annum

(rounded upwards, if necessary, to the next one-sixteenth (1/16) of one (1%)

percent) at which Reference Bank is offered deposits of United States dollars

in the London interbank market (or other Eurodollar Rate market selected by

Borrower and approved by Lender) on or about 9:00 a.m. (New York time) two (2)

Business Days prior to the commencement of such Interest Period in amounts

substantially equal to the principal amount of the Eurodollar Rate Loans

requested by and available to Borrower in accordance with this Agreement, with

a maturity of comparable duration to the Interest Period selected by Borrower.

 

1.30 “Eurodollar Rate Loans” shall mean any

Loans or portion thereof on which interest is payable based on the Adjusted

Eurodollar Rate in accordance with the terms hereof.

 

1.31 “Event of Default” shall mean the

occurrence or existence of any event or condition described in Section 10.1

hereof.

 

1.32 “Excess Availability” shall mean the

amount, as determined by Lender in accordance with the terms hereof, calculated

at any time, equal to: (a) the lesser of: (i) the Borrowing Base and (ii) the

Revolving Loan Limit, minus (b) the sum of: (i) the amount of all then

outstanding and unpaid Obligations (but not including for this purpose the then

outstanding principal amount of the Term Loan), plus (ii) the aggregate amount

of all then outstanding and unpaid trade payables and other obligations of

Borrower which are more than sixty (60) days past due as of such time, plus

(iii) the amount of checks issued by Borrower to pay trade payables and other

obligations which are more than sixty (60) days past due as of such time, but

not yet sent and the book overdraft of Borrower.

 

1.33 “Exchange Act” shall mean the Securities

Exchange Act of 1934, together with all rules and regulations thereunder or

related thereto.

 

1.34 “Fee Letter” shall mean the letter

agreement, dated on or about the date hereof, by and among Borrower and Lender,

setting forth certain fees payable by Borrower to Lender, as the same now

exists or may hereafter be amended, modified, supplemented, extended, renewed,

restated or replaced from time to time.

 

1.35 “Financing Agreements” shall mean,

collectively, this Agreement and all notes, guarantees, security agreements and

other agreements, documents and instruments now or at any time hereafter executed

and/or delivered by Borrower or any Obligor in connection with this Agreement.

 

12

 

1.36 “Fixed Rate NJEDA Bond Agreements” shall

mean collectively, the following (as the same now exist or may hereafter be

amended, modified, supplemented, extended, renewed, restated or replaced): (a)

the Trust Indenture, dated as of December 1, 1991, between the Fixed Rate NJEDA

Bond Trustee and the NJEDA; (b) the Loan Agreement, dated as of December 1,

1991, between Hidel Partners and the NJEDA; (c) the Reimbursement Agreement,

dated as of December 1, 1991, by and among Hidel Partners, Borrower and Banque

Nationale de Paris, Houston Agency; and as amended pursuant to the Modification

Agreement, dated as of November 1, 1999, by and among Banque Nationale de

Paris, Houston Agency, the Fixed Rate NJEDA Bond Trustee and the NJEDA; (d)

Mortgage and Security Agreement, dated as of December 1, 1991, from Hidel

Partners, as mortgagor to the NJEDA and Banque Nationale de Paris, Houston

Agency, as mortgagees, with respect to the Real Property located in Freehold,

New Jersey described as Lot 8, Block 78 in the Freehold Township Tax Map); (e)

the Mortgage and Security Agreement, dated as of December 1, 1991, from Hidel

Partners, as mortgagor to the NJEDA and Banque Nationale de Paris, Houston

Agency, as mortgagees with respect to the Real Property located in Freehold,

New Jersey described as Lot 8.01, Block 78 in the Freehold Township Tax Map;

(f) the Assumption and Ratification Agreement, dated May 3, 1995, by and among

Borrower, Banque Nationale de Paris, Houston Agency, the NJEDA and the Fixed

Rate NJEDA Bond Trustee; and (g) all agreements, documents and instruments at

any time executed and/or delivered by Borrower or Guarantor in connection with

any of the foregoing.

 

1.37 “Fixed Rate NJEDA Bond Letter of Credit”

shall mean letter of credit no. 10183 dated December 27, 1991, issued by Banque

Nationale de Paris, Houston Agency for the account of Borrower payable to the

Fixed Rate NJEDA Bond Trustee, as beneficiary, in the amount of up to

$5,825,400, as adjusted from time to time in accordance with the terms thereof,

as the same now exists or may hereafter be amended, modified, supplemented,

extended, renewed, restated or replaced.

 

1.38 “Fixed Rate NJEDA Bonds” shall mean,

collectively, New Jersey Economic Development Bonds (Composite Issue) Series

1991 F, issued by the NJEDA subject to the Fixed Rate NJEDA Bond Agreements in

the original principal amount of $5,600,000, as the same now exist or may

hereafter be amended, modified, supplemented, extended, renewed, restated or

replaced.

 

1.39 “Fixed Rate NJEDA Bond Trustee” shall

mean First Union National Bank (formerly First Fidelity Bank, New Jersey), in

its capacity as trustee for the holders of the Fixed Rate NJEDA Bonds, and any

successor, replacement or additional trustee, and their respective successors

and assigns.

 

1.40 “Floating Rate NJEDA Bond Agreements”

shall mean collectively, the following (as the same now exist or may hereafter

be amended, modified, supplemented, extended, renewed, restated or replaced):

(a) the Bond Agreement, dated as of October 1, 1995, between the NJEDA and

Borrower; (b) the Trust Indenture, dated as of October 1, 1995, between the

NJEDA and the Floating Rate NJEDA Bond Trustee; and (c) all agreements,

documents and instruments at any

 

13

 

time executed and/or delivered by Borrower or Guarantor in connection

with any of the foregoing.

 

1.41 “Floating Rate NJEDA Bond Letter of

Credit” shall mean the letter of credit originally issued as no. PC 801162 (and

now referred to as P263431), dated April 30, 1996, issued by The Chase

Manhattan Bank for the account of Borrower payable to the Floating Rate NJEDA

Bond Trustee, as beneficiary, in the amount of up to $5,106,850 (for which the

current amount is $2,155,577.13), as adjusted from time to time in accordance

with the terms thereof, as the same now exists or may hereafter be amended,

modified, supplemented, extended, renewed, restated or replaced.

 

1.42 “Floating Rate NJEDA Bonds” shall mean,

collectively, Economic Development Bonds (International Vitamin Corporation

Project) Series 1995 issued by the NJEDA subject to the Floating Rate NJEDA

Bond Agreements in the original principal amount of $5,000,000, as the same now

exist or may hereafter be amended, modified, supplemented, extended, renewed,

restated or replaced.

 

1.43 “Floating Rate NJEDA Bonds Trustee”

shall mean First Union National Bank (formerly First Fidelity Bank, New

Jersey), in its capacity as trustee pursuant to the Floating Rate NJEDA Bond

Agreements for the holders of the Floating Rate NJEDA Bonds, and any successor,

replacement or additional trustee, and their respective successors and assigns.

 

1.44 “GAAP” shall mean generally accepted

accounting principles in the United States of America as in effect from time to

time as set forth in the opinions and pronouncements of the Accounting

Principles Board and the American Institute of Certified Public Accountants and

the statements and pronouncements of the Financial Accounting Standards Board

which are applicable to the circumstances as of the date of determination

consistently applied, except that, for purposes of Section 9.18 hereof, GAAP

shall be determined on the basis of such principles in effect on the date

hereof and consistent with those used in the preparation of the most recent

audited financial statements delivered to Lender prior to the date hereof.

 

1.45 “Governmental Authority” shall mean any

nation or government, any state, province, or other political subdivision

thereof, any central bank (or similar monetary or regulatory authority)

thereof, any entity exercising executive, legislative, regulatory or

administrative functions of or pertaining to government, and any corporation or

other entity owned or controlled, through stock or capital ownership or

otherwise, by any of the foregoing.

 

1.46 “Guarantor” shall mean Hall Laboratories

Ltd., a corporation organized under the laws of the Province of Yukon, Canada

and its successors and assigns.

 

1.47 “Hazardous Materials” shall mean

substances included within the definitions of “hazardous substances”,

“hazardous materials”, “toxic substances”, or “solid waste” in the

Comprehensive Environmental Response Compensation and Liability Act of 1980 (42

U.S.C.

 

14

 

Section 9601 et seq.), as amended by Superfund Amendments and

Reauthorization Act of 1986 (Pub. L. 99-499 100 Stat. 1613), the Resource

Conservation and Recovery Act of 1976 (42 U.S.C. Section 1801 et seq.), and in

the regulations promulgated pursuant to such laws, all as amended, and in any

event shall include medical wastes, infectious wastes, asbestos, paint

containing lead, and urea formaldehyde.

 

1.48 “Indebtedness” shall mean, with respect

to any Person, any liability, whether or not contingent, (a) in respect of

borrowed money (whether or not the recourse of the lender is to the whole of

the assets of such Person or only to a portion thereof) or evidenced by bonds,

notes, debentures or similar instruments; (b) representing the balance deferred

and unpaid of the purchase price of any property or services (except any such

balance that constitutes an account payable to a trade creditor (whether or not

an Affiliate) created, incurred, assumed or guaranteed by such Person in the

ordinary course of business of such Person in connection with obtaining goods,

materials or services that is not overdue by more than ninety (90) days, unless

the trade payable is being contested in good faith); (c) all obligations as

lessee under leases which have been, or should be, in accordance with GAAP

recorded as Capital Leases; (d) any contractual obligation, contingent or

otherwise, of such Person to pay or be liable for the payment of any

indebtedness described in this definition of another Person, including, without

limitation, any such indebtedness, directly or indirectly guaranteed, or any

agreement to purchase, repurchase, or otherwise acquire such indebtedness, obligation

or liability or any security therefore, or to provide funds for the payment or

discharge thereof, or to maintain solvency, assets, level of income, or other

financial condition; (e) all obligations with respect to redeemable stock and

redemption or repurchase obligations under any Capital Stock or other equity

securities issued by such Person; (f) all reimbursement obligations and other

liabilities of such Person with respect to surety bonds (whether bid,

performance or otherwise), letters of credit, banker’s acceptances or similar

documents or instruments issued for such Person’s account; and (g) all

indebtedness of such Person in respect of indebtedness of another Person for

borrowed money or indebtedness of another Person otherwise described in this

definition which is secured by any consensual lien, security interest,

collateral assignment, conditional sale, mortgage, deed of trust, or other

encumbrance on any asset of such Person, whether or not such obligations,

liabilities or indebtedness are assumed by or are a personal liability of such

Person, all as of such time.

 

1.49 “Information Certificate” shall mean the

Information Certificate of Borrower constituting Exhibit A hereto containing

material information with respect to Borrower, its business and assets provided

by or on behalf of Borrower to Lender in connection with the preparation of

this Agreement and the other Financing Agreements and the financing

arrangements provided for herein.

 

1.50 “Intellectual Property” shall mean

Borrower’s and Guarantor’s now owned and hereafter arising or acquired:

patents, patent rights, patent applications, copyrights, works which are the

subject matter of copyrights, copyright registrations, trademarks, trade names,

trade styles, trademark and service mark applications, and licenses and rights

to use any of the foregoing; all extensions, renewals, reissues, divisions,

continuations, and continuations-in-part

 

15

 

of any of the foregoing; all rights to sue for past, present and future

infringement of any of the foregoing; inventions, trade secrets, formulae,

processes, compounds, drawings, designs, blueprints, surveys, reports, manuals,

and operating standards; goodwill; customer and other lists in whatever form

maintained; and trade secret rights, copyright rights, rights in works of

authorship, and contract rights relating to computer software programs, in

whatever form created or maintained.

 

1.51 “Interest Period” shall mean for any

Eurodollar Rate Loan, a period of approximately one (1), two (2), or three (3)

months duration as Borrower may elect, the exact duration to be determined in

accordance with the customary practice in the applicable Eurodollar Rate

market; provided, that, Borrower may not elect an Interest Period which will

end after the last day of the then-current term of this Agreement.

 

1.52 “Interest Rate” shall mean:

 

(a) Subject to clauses (b) and (c) below, (i)

as to Revolving Loans which are Prime Rate Loans, a rate equal to

three-quarters (3/4%) percent per annum in excess of the Prime Rate and as to

Revolving Loans which are Eurodollar Rate Loans, a rate equal to two and three

quarters (2 3/4 %) percent per annum in excess of the Adjusted Eurodollar Rate

(based on the Adjusted Eurodollar Rate applicable for the Interest Period

selected by Borrower as in effect three (3) Business Days after the date of

receipt by Lender of the request of Borrower for such Eurodollar Rate Loans in

accordance with the terms hereof, whether such rate is higher or lower than any

rate previously quoted to Borrower) and (ii) as to the portion of the Term Loan

which may be Prime Rate Loans, a rate equal to one (1%) percent per annum in

excess of the Prime Rate and as to the portion of the Term Loan which maybe

Eurodollar Rate Loans, three (3%) percent per annum in excess of the Adjusted

Eurodollar Rate (calculated as described in clause (a)(i) above)

 

(b) Notwithstanding anything to the contrary

set forth in clause (a) above, (i) the Interest Rate shall mean, as to Revolving

Loans which are Prime Rate Loans, a rate equal to one-half (1/2%) percent per

annum in excess of the Prime Rate and as to Revolving Loans which are

Eurodollar Rate Loans, a rate equal to two and one-half (2 1/2 %) percent per

annum in excess of the Adjusted Eurodollar Rate (calculated as described in

clause (a)(i) above) and (ii) as to the portion of the Term Loan which may be

Prime Rate Loans, a rate equal to three-quarters (3/4%) percent per annum in

excess of the Prime Rate and as to the portion of the Term Loan which may be

Eurodollar Rate Loans, two and three-quarters (2 3/4%) percent per annum in

excess of the Adjusted Eurodollar Rate (calculated as described in clause

(a)(i) above), in each case, effective as of the first day of the month after

each of the following conditions is satisfied as determined by Lender in good

faith: (i) the Consolidated Pre-Tax Net Income of Borrower for the fiscal year

ending on July 31, 2001 calculated based on the audited financial statements of

Borrower and its Subsidiaries for such fiscal year delivered to Lender,

together with the unqualified opinion of the independent certified accountants,

in accordance with Section 9.6 hereof, shall be not less than $4,000,000 and

(ii) no Event of Default, or act, condition or event which with notice or

passage

 

16

 

of time or both would constitute an Event of Default, shall exist or

have occurred and be continuing.

 

(c) Notwithstanding anything to the contrary

contained in clause (a) or clause (b) above, the Interest Rate shall mean, at

Lender’s option, as to Prime Rate Loans, a rate equal to three (3%) percent per

annum in excess of the Prime Rate, and as to Eurodollar Rate Loans, the rate of

five (5%) percent per annum in excess of the Adjusted Eurodollar Rate, without

notice (i) for the period (A) from and after the date of termination or

non-renewal hereof until Lender has received full and final payment of all

Obligations (notwithstanding entry of a judgement against Borrower) and (B)

from and after the date of the occurrence of an Event of Default for so long as

such Event of Default continuing, and (ii) on Loans to Borrower at any time

outstanding in excess of the Borrowing Base or the Revolving Loan Limit

(whether or not such excess(es) arise or are made with or without Lender’s

knowledge or consent and whether made before or after an Event of Default).

 

1.53 “Inventory” shall mean all of Borrower’s

and Guarantor’s now owned and hereafter existing or acquired raw materials,

work in process, finished goods and all other inventory of whatsoever kind or

nature, wherever located.

 

1.54 “Letter of Credit Accommodations” shall

mean the letters of credit, merchandise purchase or other guaranties which are

from time to time either (a) issued or opened by Lender for the account of

Borrower, Guarantor or any other Obligor or (b) with respect to which Lender

has agreed to indemnify the issuer or guaranteed to the issuer the performance

by Borrower or Guarantor of its obligations to such issuer (including the

Floating Rate NJEDA Bond Letter of Credit).

 

1.55 “Loans” shall mean the Revolving Loans

and the Term Loan.

 

1.56 “Material Adverse Effect” shall mean a

material adverse effect on (a) the financial condition, business, performance,

operations or prospects of Borrower or Guarantor; (b) the legality, validity or

enforceability of this Agreement or any of the other Financing Agreements; (c

the legality, validity, enforceability, perfection or priority of the security

interests and liens of Lender upon the Collateral; (d) the Collateral or the

value of the Collateral; (e) the ability of Borrower or Guarantor to repay the

Obligations or of Borrower or Guarantor to perform its or their obligations

under this Agreement or any of the other Financing Agreements; or (f) the

ability of Lender to enforce the Obligations or realize upon the Collateral or

otherwise with respect to the rights and remedies of Lender under this

Agreement or any of the other Financing Agreements.

 

1.57 “Material Contract” shall mean (a) any

contract or other agreement (other than the Financing Agreements), written or

oral, of Borrower or Guarantor involving monetary liability of or to any Person

in an amount in excess of $500,000 in any fiscal year in the case of Borrower,

or $100,000 in any fiscal year in the case of Guarantor, and (b) any other

written contract or other

 

17

 

written agreement (other than the Financing Agreements), to which

Borrower or Guarantor is a party as to which the breach, nonperformance,

cancellation or failure to renew by any party thereto would have a material

adverse effect on the business, assets, condition (financial or otherwise) or

results of operations of Borrower or Guarantor or the validity or

enforceability of this Agreement, any of the other Financing Agreements, or any

of the rights and remedies of Lender hereunder or thereunder.

 

1.58 “Maximum Credit” shall mean the amount

of $30,500,000.

 

1.59 “Mortgage” shall mean the Mortgage,

Security Agreement and Assignment of Leases and Rents, to be executed by

Borrower in favor of Lender with respect to the undeveloped, vacant land of

Hidel Partners and Borrower located on Oakerson Road adjacent to the facility

used by Borrower at 500 Halls Mill Road, Freehold, New Jersey (referred to as

Lot 8, Block 78 on the Freehold TownshipTax Map) and related assets, as the

same may hereafter exist and be amended, modified, supplemented, extended,

renewed, restated or replaced.

 

1.60 “Multiemployer Plan” shall mean a

“multi-employer plan” as defined in Section 4001(a)(3) of ERISA which is or was

at any time during the current year or the immediately preceding six (6) years

contributed to by Borrower or any ERISA Affiliate.

 

1.61 “Net Amount of Eligible Accounts” shall

mean the US Dollar Equivalent of the gross amount of Eligible Accounts less (a)

sales, excise, goods and services taxes or other value added taxes or similar

taxes included in the amount thereof and (b) returns, discounts, claims,

credits and allowances of any nature at any time issued, owing, granted,

outstanding, available or claimed with respect thereto.

 

1.62 “Net Recovery Percentage” shall mean the

fraction, expressed as a percentage, (a) the numerator of which is the amount

equal to the amount of the recovery in respect of the Inventory at such time on

an orderly liquidation value basis (after conversion of Bulk Inventory to

finished goods) as set forth in the most recent acceptable appraisal of

Inventory received by Lender in accordance with Section 7.3, net of operating

expenses, liquidation expenses and commissions, and (b) the denominator of

which is the original cost of the aggregate amount of the Inventory subject to

such appraisal.

 

1.63 “NJEDA” shall mean the New Jersey

Economic Development Authority, a public body corporate and politic

constituting an instrumentality of the State of New Jersey, and its successors

and assigns.

 

1.64 “Obligations” shall mean any and all

Revolving Loans, the Term Loan, Letter of Credit Accommodations and all other

obligations, liabilities and indebtedness of every kind, nature and description

owing by Borrower or Guarantor to Lender and/or its affiliates, including

principal, interest, charges, fees, costs and expenses, however evidenced,

whether as principal, surety, endorser, guarantor or otherwise, whether arising

under this Agreement or otherwise,

 

18

 

whether now existing or hereafter arising, whether arising before,

during or after the initial or any renewal term of this Agreement or after the

commencement of any case or proceeding with respect to Borrower or Guarantor

under the United States Bankruptcy Code, the Bankruptcy and Insolvency Act

(Canada), the Companies’ Creditors Arrangement Act (Canada) or any similar

statute (including the payment of interest and other amounts which would accrue

and become due but for the commencement of such case, whether or not such

amounts are allowed or allowable in whole or in part in such case or

proceeding), whether direct or indirect, absolute or contingent, joint or

several, due or not due, primary or secondary, liquidated or unliquidated,

secured or unsecured, and however acquired by Lender.

 

1.65 “Obligor” shall mean any guarantor,

endorser, acceptor, surety or other person liable on or with respect to the

Obligations (including Guarantor) or who is the owner of any property which is

security for the Obligations, other than Borrower.

 

1.66 “Payment Account” shall have the meaning

set forth in Section 6.3 hereof.

 

1.67 “Permitted Holders” shall mean the

persons listed on Schedule 1.67 hereto and their respective successors and

assigns and including as to any Permitted Holder which is an individual, the

heirs, executors, administrators, testamentary trustees, legatees or

beneficiaries of such individual or trust or custodian ship, to the extent that

the beneficiaries includes such individual or his or her spouse and former

spouse and former spouse and ancestors or lineal descendants (by blood or

adoption).

 

1.68 “Person” or “person” shall mean any

individual, sole proprietorship, partnership, corporation (including any

corporation which elects subchapter S status under the Code), limited liability

company, limited liability partnership, business trust, unincorporated association,

joint stock corporation, trust, joint venture or other entity or any government

or any agency or instrumentality or political subdivision thereof.

 

1.69 “Plan” means an employee benefit plan

(as defined in Section 3(3) of ERISA) which Borrower sponsors, maintains, or to

which it makes, is making, or is obligated to make contributions, or in the

case of a Multiemployer Plan has made contributions at any time during the

immediately preceding six (6) plan years.

 

1.70 “PPSA” shall mean the Personal Property

Security Act as in effect in the Province of Ontario, the Civil Code of Quebec

as in effect in the Province of Quebec, or any other Canadian Federal or

Provincial statute pertaining to the granting, perfecting, ranking or priority

of security interests, liens or hypothecs on personal property (i.e. movable

property), and any successor statutes, together with any regulations

thereunder, in each case as in effect from time to time.

 

1.71 “Priority Payables” shall mean, at any

time, the full amount of the liabilities at such time which have a trust

imposed to provide for payment or a security interest, lien or charge ranking

or capable of ranking senior to or pari passu with security interests, liens or

charges

 

19

 

securing the Obligations on any of the Collateral under Federal,

Provincial, State, county, district, municipal, or local law including, but not

limited to, claims for unremitted and/or accelerated rents, taxes, wages,

employee withholdings or deductions and vacation pay, workers’ compensation

obligations, government royalties or pension fund obligations, together with

the aggregate value, determined in accordance with GAAP, of all Eligible

Inventory which Lender, in good faith, considers may be or may become subject

to a right of a supplier to recover possession thereof under any Federal or

Provincial law, where such supplier’s right may have priority over the security

interests, liens or charges securing the Obligations including, without limitation,

Eligible Inventory subject to a right of a supplier to repossess goods pursuant

to Section 81.1 of the Bankruptcy and Insolvency Act (Canada) or any applicable

provincial laws granting revendication or similar rights to unpaid suppliers.

 

1.72 “Prime Rate” shall mean the rate from

time to time publicly announced by First Union National Bank, or its

successors, as its prime rate, whether or not such announced rate is the best

rate available at such bank.

 

1.73 “Prime Rate Loans” shall mean any Loans

or portion thereof on which interest is payable based on the Prime Rate in

accordance with the terms thereof.

 

1.74 “Real Property” shall mean all now owned

and hereafter acquired real property of Borrower, including leasehold

interests, together with all buildings, structures, and other improvements

located thereon and all licenses, easements and appurtenances relating thereto,

wherever located.

 

1.75 “Receivables” shall mean: (a) all

Accounts; (b) all amounts at any time payable to Borrower in respect of the

sale or other disposition by Borrower of any Account or other obligation for

the payment of money; (c) all interest, fees, late charges, penalties,

collection fees and other amounts due or to become due or otherwise payable in

connection with any Account; (d all letters of credit, indemnities, guarantees,

security or other deposits and proceeds thereof issued payable to Borrower or

otherwise in favor of or delivered to Borrower in connection with any Account;

or (e) all other contract rights, chattel paper, instruments, notes, general

intangibles and other forms of obligations owing to Borrower, whether from the

sale and lease of goods or other property, licensing of any property (including

Intellectual Property or other general intangibles), rendition of services or

from loans or advances by Borrower or to or for the benefit of any third person

(including loans or advances to any Affiliates or Subsidiaries of Borrower) or

otherwise associated with any Accounts, Inventory or general intangibles of

Borrower (including, without limitation, choses in action, causes of action,

tax refunds, tax refund claims, any funds which may become payable to Borrower

in connection with the termination of any Plan or other employee benefit plan

and any other amounts payable to Borrower from any Plan or other employee

benefit plan, rights and claims against carriers and shippers, rights to

indemnification, business interruption insurance and proceeds thereof, casualty

or any similar types of insurance and any proceeds thereof and proceeds of

insurance covering the lives of employees on which Borrower is beneficiary).

 

20

 

1.76 “Records” shall mean all of Borrower’s

present and future books of account of every kind or nature, purchase and sale

agreements, invoices, ledger cards, bills of lading and other shipping

evidence, statements, correspondence, memoranda, credit files and other data

relating to the Collateral or any account debtor, together with the tapes,

disks, diskettes and other data and software storage media and devices, file

cabinets or containers in or on which the foregoing are stored (including any

rights of Borrower with respect to the foregoing maintained with or by any

other person).

 

1.77 “Reference Bank” shall mean First Union

National Bank, or such other bank as Lender may from time to time designate

after notice to Borrower.

 

1.78 “Renewal Date” shall the meaning set

forth in Section 12.1 hereof.

 

1.79 “Reserves” shall mean as of any date of

determination, such amounts as Lender may from time to time establish and

revise in good faith reducing the amount of Revolving Loans and Letter of

Credit Accommodations which would otherwise be available to Borrower under the

lending formula(s) provided for herein: (a) to reflect events, conditions,

contingencies or risks which, as determined by Lender in good faith, adversely

affect, or would have a reasonable likelihood of adversely affecting, either

(i) the Collateral or any other property which is security for the Obligations

or its value, (ii) the assets or business of Borrower or any Obligor or (iii)

the security interests and other rights of Lender in the Collateral (including

the enforceability, perfection and priority thereof) or (b) after notice to

Borrower, to reflect Lender’s good faith belief that any collateral report or

financial information furnished by or on behalf of Borrower or any Obligor to

Lender is or may have been incomplete, inaccurate or misleading in any material

respect or (c) to reflect Priority Payables or (d) to reflect the Dilution

Reserve or (e) to reflect outstanding Letter of Credit Accommodations as

provided in Section 2.2 hereof or (f) in respect of any state of facts which

Lender determines in good faith constitutes an Event of Default or may, with

notice or passage of time or both, constitute an Event of Default. Without

limiting the generality of the foregoing Reserves may be established for

contract allowances, volume rebates and promotional accrual accounting funds.

To the extent Lender may revise the lending formulas used to determine the

Borrowing Base or establish new criteria or revise existing criteria for

Eligible Accounts or Eligible Inventory so as to address any circumstances,

condition, event or contingency in an manner satisfactory to Lender, Lender

shall not establish a Reserve for the same purpose. The amount of any Reserve

established by Lender shall have a reasonable relationship to the event,

condition or other matter which is the basis for such reserve as determined by

Lender in good faith.

 

1.80 “Revolving Loan Limit” shall mean, at

any time, the amount equal to the Maximum Credit minus the then outstanding

principal amount of the Term Loan.

 

21

 

1.81 “Revolving Loans” shall mean the loans

now or hereafter made by Lender to or for the benefit of Borrower on a

revolving basis (involving advances, repayments and readvances) as set forth in

Section 2.1 hereof.

 

1.82 “Subsidiary” or “subsidiary” shall mean,

with respect to any Person, any corporation, limited liability company, limited

liability partnership or other limited or general partnership, trust,

association or other business entity of which an aggregate of at least a

majority of the outstanding Capital Stock or other interests entitled to vote

in the election of the board of directors of such corporation (irrespective of

whether, at the time, Capital Stock of any other class or classes of such

corporation shall have or might have voting power by reason of the happening of

any contingency), managers, trustees or other controlling persons, or an

equivalent controlling interest therein, of such Person is, at the time,

directly or indirectly, owned by such Person and/or one or more subsidiaries of

such Person.

 

1.83 “Term Loan” shall mean the term loan

made by Lender to Borrower as provided for in Section 2.3 hereof.

 

1.84 “US Dollar Equivalent” shall mean at any

time (a) as to any amount denominated in US Dollars, the amount thereof at such

time, and (b) as to any amount denominated in Canadian Dollars or any other

currency, the equivalent amount in US Dollars calculated by Lender at such time

using the Currency Exchange Convention in effect on the Business Day of

determination.

 

1.85 “US Dollars”, “US$” and “$” shall each mean

the lawful currency of the United States of America.

 

1.86 “Value” shall mean the US Dollar

Equivalent, as determined by Lender in good faith, with respect to Inventory,

the lower of (a) cost computed on a first-in first-out basis in accordance with

GAAP or (b) market value, provided, that, for purposes of the calculation of

the Borrowing Base, the Value of Inventory shall not include (i) the portion of

the Value equal to the profit earned by any Affiliate on the sale thereof to

Borrower or Guarantor (and including any sale by Borrower to Guarantor) or (ii)

write-ups in value with respect to currency exchange rates.

 

1.87 “Voting Stock” shall mean with respect

to any Person, (a) one (1) or more classes of Capital Stock of such Person

having general voting powers to elect at least a majority of the board of

directors, managers or trustees of such Person, irrespective of whether at the

time Capital Stock of any other class or classes have or might have voting

power by reason of the happening of any contingency, and (b) any Capital Stock

of such Person convertible or exchangeable without restriction at the option of

the holder thereof into Capital Stock of such Person described in clause (a) of

this definition.

 

22

 

SECTION 2. CREDIT FACILITIES

 

2.1 Revolving Loans.

 

(a  

Subject to and upon the terms and conditions contained herein, Lender

agrees to make Revolving Loans to Borrower from time to time in amounts

requested by Borrower up to the amount equal to the lesser of: (i) the

Borrowing Base or (ii) the Revolving Loan Limit.

 

(b  

Lender may, in its discretion, from time to time, upon not less than

five (5) Business Days’ prior notice to Borrower, (i) reduce the lending

formula with respect to Eligible Accounts to the extent that Lender determines

in good faith that the general creditworthiness of account debtors has

declined, or (ii) reduce the lending formula(s) with respect to Eligible

Inventory to the extent that Lender determines that: (A) the turnover of the

Inventory for any twelve (12) consecutive month period as of the end of any

month as calculated by Lender is more than two (2) times for such twelve (12)

consecutive month period; or (B) the liquidation value of the Eligible

Inventory, or any category thereof, has decreased, or (C) the mix of the

Inventory has changed such that the percentages of the Inventory consisting of

Bulk Inventory, raw materials and finished goods, in each case relative to the

total amount of Inventory, has changed by more than ten (10%) percent of the

percentage of total Inventory for such category as set forth in the appraisal

by Hilco Appraisal Services LLC of the Inventory dated August, 2000. The amount

of any decrease in the lending formulas shall have a reasonable relationship to

the event, condition or circumstance which is the basis for such decrease as

determined by Lender in good faith. In determining whether to reduce the

lending formula(s), Lender may consider events, conditions, contingencies or

risks which are also considered in determining Eligible Accounts, Eligible

Inventory or in establishing Reserves.

 

(c  

Except in Lender’s discretion, (i) the aggregate amount of the Revolving

Loans outstanding at any time shall not exceed the Revolving Loan Limit and

(ii) the aggregate amount of the Loans and the Letter of Credit Accommodations

outstanding at any time shall not exceed the Maximum Credit. In the event that

the outstanding amount of any component of the Loans, or the aggregate amount

of the outstanding Loans and Letter of Credit Accommodations, exceed the

Borrowing Base, the Revolving Loan Limit, the sublimits for Letter of Credit

Accommodations set forth in Section 2.2(e) or the Maximum Credit, as

applicable, such event shall not limit, waive or otherwise affect any rights of

Lender in that circumstance or on any future occasions and Borrower shall,

within five (5) Business Days after demand by Lender, which may be made at any

time or from time to time, immediately repay to Lender the entire amount of any

such excess(es) for which payment is demanded.

 

23

 

2.2 Letter of Credit Accommodations.

 

(a  

Subject to and upon the terms and conditions contained herein, at the

request of Borrower, Lender agrees to provide or arrange for Letter of Credit

Accommodations for the account of Borrower containing terms and conditions

acceptable to Lender and the issuer thereof. Any payments made by Lender to any

issuer thereof and/or related parties in connection with the Letter of Credit

Accommodations shall constitute additional Revolving Loans to Borrower pursuant

to this Section 2.

 

(b  

In addition to any charges, fees or expenses charged by any bank or

issuer in connection with the Letter of Credit Accommodations, Borrower shall

pay to Lender a letter of credit fee at a rate equal to one and one-quarter (1

1/4%) percent per annum on the daily outstanding balance of the Letter of

Credit Accommodations for the immediately preceding month (or part thereof),

payable in arrears as of the first day of each succeeding month, except that

Borrower shall pay to Lender such letter of credit fee, at Lender’s option,

upon notice to Borrower, at a rate equal to three and one-quarter (3 1/4%)

percent per annum on such daily outstanding balance for: (i) the period from

and after the date of termination or non-renewal hereof until Lender has

received full and final payment of all Obligations (notwithstanding entry of a

judgment against Borrower) and (ii) the period from and after the date of the occurrence

of an Event of Default for so long as such Event of Default is continuing as

determined by Lender. Such letter of credit fee shall be calculated on the

basis of a three hundred sixty (360) day year and actual days elapsed and the

obligation of Borrower to pay such fee shall survive the termination or

non-renewal of this Agreement.

 

(c  

Borrower shall give Lender two (2) Business Days’ prior written of

Borrower’s request for the issuance of a Letter of Credit Accommodation. Such

notice shall be irrevocable and shall specify the original face amount of the

Letter of Credit Accommodation requested, the effective date (which date shall

be a Business Day) of issuance of such requested Letter of Credit

Accommodation, whether such Letter of Credit Accommodations may be drawn in a

single or in partial draws, the date on which such requested Letter of Credit

Accommodation is to expire (which date shall be a Business Day), the purpose

for which such Letter of Credit Accommodation is to be issued, and the beneficiary

of the requested Letter of Credit Accommodation. Borrower shall attach to such

notice the proposed form of the Letter of Credit Accommodation.

 

(d  

In addition to being subject to the satisfaction of the applicable

conditions precedent contained in Section 4 hereof and the other terms and

conditions contained herein, no Letter of Credit Accommodations shall be

available unless each of the following conditions precedent have been satisfied

in a manner satisfactory to Lender: (i) Borrower shall have delivered to the

proposed issuer of such Letter of Credit Accommodation at such times and in

such manner as such proposed issuer may require, an application in form and

substance satisfactory to such proposed issuer and Lender for the issuance of

the Letter of Credit Accommodation and such other documents as may be required

pursuant to the terms thereof, and

 

24

 

the form and terms of the proposed Letter of Credit Accommodation shall

be satisfactory to Lender and such proposed issuer, (ii) as of the date of

issuance, no order of any court, arbitrator or other Governmental Authority

shall purport by its terms to enjoin or restrain money center banks generally

from issuing letters of credit of the type and in the amount of the proposed

Letter of Credit Accommodation, and no law, rule or regulation applicable to

money center banks generally and no request or directive (whether or not having

the force of law) from any Governmental Authority with jurisdiction over money

center banks generally shall prohibit, or request that the proposed issuer of

such Letter of Credit Accommodation refrain from, the issuance of letters of

credit generally or the issuance of such Letters of Credit Accommodation; and

(iii) the Excess Availability, prior to giving effect to any Reserves with

respect to such Letter of Credit Accommodations, on the date of the proposed

issuance of any Letter of Credit Accommodations, shall be equal to or greater

than one hundred (100%) percent of the face amount thereof and all other

commitments and obligations made or incurred by Lender with respect thereto.

Effective on the issuance of each Letter of Credit Accommodation, a Reserve

shall be established in the applicable amount set forth in Section 2.2(d)(iii).

 

(e  

Except in Lender’s discretion, the amount of all outstanding Letter of

Credit Accommodations and all other commitments and obligations made or

incurred by Lender in connection therewith shall not at any time exceed

$2,500,000. At any time an Event of Default exists or has occurred and is

continuing, upon Lender’s request, Borrower will either furnish cash collateral

to secure the reimbursement obligations to the issuer in connection with any

Letter of Credit Accommodations or furnish cash collateral to Lender for the

Letter of Credit Accommodations.

 

(f  

Borrower shall indemnify and hold Lender harmless from and against any

and all losses, claims, damages, liabilities, costs and expenses which Lender

may suffer or incur in connection with any Letter of Credit Accommodations and

any documents, drafts or acceptances relating thereto, including any losses,

claims, damages, liabilities, costs and expenses due to any action taken by any

issuer or correspondent with respect to any Letter of Credit Accommodation.

Borrower assumes all risks with respect to the acts or omissions of the drawer

under or beneficiary of any Letter of Credit Accommodation and for such

purposes the drawer or beneficiary shall be deemed Borrower’s agent. Borrower

assumes all risks for, and agrees to pay, all foreign, Federal, State and local

taxes, duties and levies relating to any goods subject to any Letter of Credit

Accommodations or any documents, drafts or acceptances thereunder. Borrower

hereby releases and holds Lender harmless from and against any acts, waivers,

errors, delays or omissions, whether caused by Borrower, by any issuer or

correspondent or otherwise with respect to or relating to any Letter of Credit

Accommodation, except for the gross negligence or wilful misconduct of Lender

as determined pursuant to a final, non-appealable order of a court of competent

jurisdiction. The provisions of this Section 2.2(e) shall survive the payment

of Obligations and the termination or non-renewal of this Agreement.

 

(g  

In connection with Inventory purchased pursuant to Letter of Credit

Accommodations, Borrower will, at Lender’s request, instruct all suppliers,

carriers, forwarders,

 

25

 

customs brokers, warehouses or others receiving or holding cash,

checks, Inventory, documents or instruments in which Lender holds a security

interest to deliver them to Lender and/or subject to Lender’s order, and if

they shall come into Borrower’s possession, to deliver them, upon Lender’s request,

to Lender in their original form. Borrower shall also, at Lender’s request,

designate Lender as the consignee on all bills of lading and other negotiable

and non-negotiable documents.

 

(h  

Borrower hereby irrevocably authorizes and directs any issuer of a

Letter of Credit Accommodation to name Borrower as the account party therein

and to deliver to Lender all instruments, documents and other writings and

property received by issuer pursuant to the Letter of Credit Accommodations and

to accept and rely upon Lender’s instructions and agreements with respect to

all matters arising in connection with the Letter of Credit Accommodations or

the applications therefor. Nothing contained herein shall be deemed or

construed to grant Borrower any right or authority to pledge the credit of

Lender in any manner. Lender shall have no liability of any kind with respect

to any Letter of Credit Accommodation provided by an issuer other than Lender

unless Lender has duly executed and delivered to such issuer the application or

a guarantee or indemnification in writing with respect to such Letter of Credit

Accommodation. Borrower shall be bound by any interpretation made in good faith

by Lender, or any other issuer or correspondent under or in connection with any

Letter of Credit Accommodation or any documents, drafts or acceptances

thereunder, notwithstanding that such interpretation may be inconsistent with

any instructions of Borrower. Lender shall have the sole and exclusive right

and authority to, and Borrower shall not: (i) at any time an Event of Default

exists or has occurred and is continuing, (A) approve or resolve any questions

of non-compliance of documents, (B) give any instructions as to acceptance or

rejection of any documents or goods or (C) execute any and all applications for

steamship or airway guaranties, indemnities or delivery orders, and (ii) at all

times, (A) grant any extensions of the maturity of, time of payment for, or

time of presentation of, any drafts, acceptances, or documents, and (B) agree

to any amendments, renewals, extensions, modifications, changes or

cancellations of any of the terms or conditions of any of the applications,

Letter of Credit Accommodations, or documents, drafts or acceptances thereunder

or any letters of credit included in the Collateral. Lender may, after notice

to Borrower, take such actions either in its own name or in Borrower’s name.

 

(i  

Any rights, remedies, duties or obligations granted or undertaken by

Borrower to any issuer or correspondent in any application for any Letter of

Credit Accommodation, or any other agreement in favor of any issuer or

correspondent relating to any Letter of Credit Accommodation, shall be deemed

to have been granted or undertaken by Borrower to Lender. Any duties or

obligations undertaken by Lender to any issuer or correspondent in any

application for any Letter of Credit Accommodation, or any other agreement by

Lender in favor of any issuer or correspondent relating to any Letter of Credit

Accommodation, shall be deemed to have been undertaken by Borrower to Lender

and to apply in all respects to Borrower.

 

2.3  Term Loan. Lender is

making a Term Loan to Borrower in the original principal amount of $5,500,000.

The Term Loan is (a) evidenced by a Term Promissory Note in such

 

26

 

original principal amount duly executed and delivered by Borrower to

Lender concurrently herewith; (b) to be repaid, together with interest and

other amounts, in accordance with this Agreement, the Term Promissory Note, and

the other Financing Agreements and (c) secured by all of the Collateral.

 

SECTION 3. INTEREST AND FEES

 

3.1

Interest.

 

(a  

Borrower shall pay to Lender interest on the outstanding principal

amount of the Loans at the Interest Rate. All interest accruing hereunder on

and after the date of any Event of Default or termination or non-renewal hereof

shall be payable on demand.

 

(b  

Borrower may from time to time request Eurodollar Rate Loans or that

Prime Rate Loans be converted to Eurodollar Rate Loans or that any existing

Eurodollar Rate Loans continue for an additional Interest Period. Such request

from Borrower shall specify the amount of the Eurodollar Rate Loans or the

amount of the Eurodollar Rate Loan or the amount of the Prime Rate Loans to be converted

or Eurodollar Rate Loans to be continued (subject to the limits set forth

below) and the Interest Period to be applicable to such Eurodollar Rate Loans.

Subject to the terms and conditions contained herein, three (3) Business Days

after receipt by Lender of such a request from Borrower, such Eurodollar Rate

Loans shall be made or Prime Rate Loans shall be converted to Eurodollar Rate

Loans or such Eurodollar Rate Loans shall continue, as the case may be,

provided, that, (i) no Event of Default shall exist or have occurred and be

continuing, (ii) no party hereto shall have sent any notice of termination or

non-renewal of this Agreement, (iii) Borrower shall have complied with such

customary procedures as are established by Lender and specified by Lender to

Borrower from time to time for requests by Borrower for Eurodollar Rate Loans,

(iv) no more than six (6) Interest Periods may be in effect at any one time,

(v) the aggregate amount of the Eurodollar Rate Loans must be in an amount not

less than $5,000,000 or an integral multiple of $500,000 in excess thereof,

(vi) the maximum amount of the Eurodollar Rate Loans at any time requested by

Borrower shall not exceed the amount equal to (A) the principal amount of the

Term Loan which it is anticipated will be outstanding as of the last day of the

applicable Interest Period plus (B) eighty (80%) percent of the lowest

principal amount of the Revolving Loans which it is anticipated will be

outstanding during the applicable Interest Period, in each case as determined

by Lender (but with no obligation of Lender to make such Loans), and (vii)

Lender shall have determined that the Interest Period or Adjusted Eurodollar

Rate is available to Lender through the Reference Bank and can be readily

determined as of the date of the request for such Eurodollar Rate Loan by

Borrower.  Any request by Borrower for

Eurodollar Rate Loans or to convert Prime Rate Loans to Eurodollar Rate Loans

or to continue any existing Eurodollar Rate Loans shall be irrevocable.  Notwithstanding anything to the contrary

contained herein., Lender and Reference Bank shall not be required to purchase

United States Dollar deposits in the London interbank market or other

applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions

hereof

 

27

 

shall be deemed to apply as if Lender and Reference Bank had purchased

such deposits to fund the Eurodollar Rate Loans.

 

(c  

Any Eurodollar Rate Loans shall automatically convert to Prime Rate

Loans upon the last day of the applicable Interest Period, unless Lender has

received and approved a request to continue such Eurodollar Rate Loan at least

three (3) Business Days prior to such last day in accordance with the terms

hereof. Any Eurodollar Rate Loans shall, at Lender’s option, upon notice by

Lender to Borrower, convert to Prime Rate Loans in the event that this

Agreement shall terminate or not be renewed. Borrower shall pay to Lender, upon

demand by Lender (or Lender may, at its option, charge any loan account of

Borrower) any amounts required to compensate Lender, the Reference Bank or any

participant with Lender for any loss (including loss of profits), cost or

expense incurred by such person, as a result of the conversion of Eurodollar

Rate Loans to Prime Rate Loans pursuant to any of the foregoing.

 

(d  

Interest shall be payable by Borrower to Lender monthly in arrears not

later than the first day of each calendar month and shall be calculated on the

basis of a three hundred sixty (360) day year and actual days elapsed. The

interest rate on non-contingent Obligations (other than Eurodollar Rate Loans)

shall increase or decrease by an amount equal to each increase or decrease in

the Prime Rate effective on the first day of the month after any change in such

Prime Rate is announced based on the Prime Rate in effect on the last day of

the month in which any such change occurs. In no event shall charges

constituting interest payable by Borrower to Lender exceed the maximum amount

or the rate permitted under any applicable law or regulation, and if any such

part or provision of this Agreement is in contravention of any such law or

regulation, such part or provision shall be deemed amended to conform thereto.

 

3.2  Unused Line Fee.

Borrower shall pay to Lender monthly an unused line fee at a rate equal to

one-half (1/2%) percent per annum calculated upon the amount by which the

Revolving Loan Limit exceeds the average daily principal balance of the

outstanding Revolving Loans and Letter of Credit Accommodations during the

immediately preceding month (or part thereof) while this Agreement is in effect

and for so long thereafter as any of the Obligations are outstanding, which fee

shall be payable on the first day of each month in arrears.

 

3.3  Fees. Borrower

agrees to pay to Lender the fees and other amounts set forth in the Fee Letter

in the amounts and at the times specified therein.

 

3.4  Changes

in Laws and Increased Costs of Loans.

 

(a  

Notwithstanding anything to the contrary contained herein, all

Eurodollar Rate Loans shall, upon notice by Lender to Borrower, convert to

Prime Rate Loans in the event that (i) any change in applicable law or

regulation (or the interpretation or administration thereof) shall either (A)

make it unlawful for Lender, Reference Bank or any participant with Lender to

make or maintain Eurodollar Rate Loans or to comply with the terms hereof in

connection with the Eurodollar Rate Loans, or (B) shall result in the increase

in the costs to Lender, Reference Bank or any participant of making or

maintaining any Eurodollar Rate Loans by an amount deemed by

 

28

 

Lender to be material, or (C) reduce the amounts received or receivable

by Lender in respect thereof, by an amount deemed by Lender to be material or

(ii) the cost to Lender, Reference Bank or any participant of making or

maintaining any Eurodollar Rate Loans shall otherwise increase by an amount

deemed by Lender to be material. Borrower shall pay to Lender, upon demand by

Lender (or Lender may, at its option, charge any loan account of Borrower) any

amounts required to compensate Lender, the Reference Bank or any participant

with Lender for any loss (including loss of profits), cost or expense incurred

by such person as a result of the foregoing, including, without limitation, any

such loss, cost or expense incurred by reason of the liquidation or

reemployment of deposits or other funds acquired by such person to make or

maintain the Eurodollar Rate Loans or any portion thereof. A certificate of

Lender setting forth the basis for the determination of such amount necessary

to compensate Lender as aforesaid shall be delivered to Borrower and shall be

conclusive, absent manifest error.

 

(b  

If any payments or prepayments in respect of the Eurodollar Rate Loans

are received by Lender other than on the last day of the applicable Interest

Period (whether pursuant to acceleration, upon maturity or otherwise),

including any payments pursuant to the application of collections under Section

6.3 or any other payments made with the proceeds of Collateral, Borrower shall

pay to Lender upon demand by Lender (or Lender may, at its option, charge any

loan account of Borrower) any amounts required to compensate Lender, the

Reference Bank or any participant with Lender for any additional loss

(including loss of profits), cost or expense incurred by such person as a

result of such prepayment or payment, including, without limitation, any loss,

cost or expense incurred by reason of the liquidation or reemployment of

deposits or other funds acquired by such person to make or maintain such

Eurodollar Rate Loans or any portion thereof.

 

SECTION 4. CONDITIONS PRECEDENT

 

4.1  Conditions

Precedent to Initial Loans and Letter of Credit Accommodations. Each of the

following is a condition precedent to Lender making the initial Loans and

providing the initial Letter of Credit Accommodations hereunder:

 

(a  

Lender shall have received, in form and substance satisfactory to

Lender, all releases, terminations and such other documents as Lender may

request to evidence and effectuate the termination by Canadian Imperial Bank of

Commerce of its financing arrangements with Guarantor, and the termination by

The Chase Manhattan Bank and Citizens Business Credit Company of their

financing arrangements with Borrower and the termination and release by it and

them of any interest in and to any assets and properties of Borrower, Guarantor

and any other Obligor, duly authorized, executed and delivered by each of them,

including, but not limited to, UCC and PPSA termination statements for all UCC

and PPSA financing statements previously filed by it or any of them or their

predecessors, as secured party and Borrower or any Obligor, as debtor;

 

29

 

(b  

all requisite corporate action and proceedings in connection with this

Agreement and the other Financing Agreements shall be satisfactory in form and

substance to Lender, and Lender shall have received all information and copies

of all documents, including records of requisite corporate action and

proceedings which Lender may have requested in connection therewith, such

documents where requested by Lender or its counsel to be certified by

appropriate corporate officers or Governmental Authority;

 

(c  

no material adverse change shall have occurred in the asset or business

of Borrower or any Obligor since the date of Lender’s latest field examination

and no change or event shall have occurred which would impair the ability of Borrower

or any Obligor to perform its obligations hereunder or under any of the other

Financing Agreements to which it is a party or of Lender to enforce the

Obligations or realize upon the Collateral;

 

(d  

Lender shall have completed a field review of the Records and such other

information with respect to the Collateral as Lender may require to determine

the amount of Revolving Loans available to Borrower (including, without

limitation, current perpetual inventory records and/or roll-forwards of

Accounts and Inventory through the date of closing and test counts of the

Inventory in a manner satisfactory to Lender, together with such supporting

documentation as may be necessary or appropriate, and other documents and

information that will enable Lender to accurately identify and verify the

Collateral), the results of which each case shall be satisfactory to Lender,

not more than three (3) Business Days prior to the date hereof;

 

(e  

Lender shall have received, in form and substance satisfactory to

Lender, all consents, waivers, acknowledgments and other agreements from third

persons which Lender may deem necessary or, in Lender’s good faith

determination, desirable in order to permit, protect and perfect its security

interests in and liens upon the Collateral or to effectuate the provisions or

purposes of this Agreement and the other Financing Agreements, including,

without limitation, (i Collateral Access Agreements by owners and lessors of

leased premises of Borrower and Guarantor and by warehouses at which Collateral

is located and (ii) the agreement of the issuer of the Fixed Rate NJEDA Bond

Letter of Credit to act on behalf of, and pursuant to the direction of, the

Lender with respect to the Fixed Rate NJEDA Bond Agreements;

 

(f  

the Excess Availability as determined by Lender, as of the date hereof,

shall be not less than $1,500,000 after giving effect to the initial Loans made

or to be made and Letter of Credit Accommodations issued or to be issued in

connection with the initial transactions hereunder;

 

(g  

Lender shall have received, in form and substance satisfactory to

Lender, all agreements with the depository banks and Borrower and Guarantor

with respect to the Blocked Accounts as Lender may require pursuant to Section

6.3 hereof, duly authorized, executed and delivered by such depository banks

and Borrower and Guarantor;

 

30

 

(h  

Lender shall have received evidence, in form and substance satisfactory

to Lender, that Lender has a valid perfected first priority security interest

in all of the Collateral;

 

(i  

Lender shall have received and reviewed UCC and PPSA search results for

all jurisdictions in which assets of Borrower and Guarantor are located, which

search results shall be in form and substance satisfactory to Lender;

 

(j  

Lender shall have received evidence of insurance and loss payee

endorsements required hereunder and under the other Financing Agreements, in

form and substance satisfactory to Lender, and certificates of insurance

policies and/or endorsements naming Lender as loss payee as its interests may

appear;

 

(k  

Lender shall have received, in form and substance satisfactory to

Lender, such opinion letters of counsel to Borrower with respect to the

Financing Agreements and such other matters as Lender may request; and

 

(l  

the other Financing Agreements and all instruments and documents

hereunder and thereunder shall have been duly executed and delivered to Lender,

in form and substance satisfactory to Lender.

 

4.2  Conditions

Precedent to All Loans and Letter of Credit Accommodations. Each of the

following is an additional condition precedent to Lender making Loans and/or

providing Letter of Credit Accommodations to Borrower, including the initial

Loans and Letter of Credit Accommodations and any future Loans and Letter of

Credit Accommodations:

 

(a  

all representations and warranties contained herein and in the other

Financing Agreements shall be true and correct in all material respects with

the same effect as though such representations and warranties had been made on

and as of the date of the making of each such Loan or providing each such

Letter of Credit Accommodation and after giving effect thereto, except to the

extent that such representations and warranties expressly relate solely to an

earlier date (in which case such representations and warranties shall have been

true and accurate on and as of such earlier date);

 

(b  

no law, regulation, order, judgment or decree of any Governmental

Authority shall exist, and no action, suit, investigation, litigation or

proceeding shall be pending or threatened in any court or before any arbitrator

or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or

otherwise affect (A) the making of the Loans or providing the Letter of Credit

Accommodations, or (B) the consummation of the transactions contemplated

pursuant to the terms hereof or the other Financing Agreements or (ii) has or

could reasonably be expected to have a Material Adverse Effect;

 

(c  

no requirement of the Minister of National Revenue for payment pursuant

to Section 224, or any successor section, of the Income Tax Act (Canada) or

Section 317, or any

 

31

 

successor section of the Excise Act (Canada) or any comparable

provision of similar legislation shall have been received by Lender or any

other Person in respect of Borrower or Guarantor or otherwise issued in respect

of Borrower or Guarantor; and

 

(d  

no Event of Default and no act, condition or event which, with notice or

passage of time or both, would constitute an Event of Default, shall exist or

have occurred and be continuing on and as of the date of the making of such

Loan or providing each such Letter of Credit Accommodation and after giving

effect thereto.

 

SECTION 5. GRANT OF SECURITY INTEREST

 

5.1 

To secure payment and performance of all Obligations, Borrower hereby

grants to Lender a continuing security interest in, a lien upon, and a right of

set off against, and hereby assigns to Lender as security, the following

property and interests in property of Borrower, whether now owned or hereafter

acquired or existing, and wherever located (together with all other collateral

security for the Obligations at any time granted to or held or acquired by

Lender, collectively, the “Collateral”):

 

(a Receivables;

 

(b  

all other present and future general intangibles (including Intellectual

Property and existing and future leasehold interests in equipment, chattel

paper, documents, instruments, investment property (including securities,

whether certificated or uncertificated, securities accounts, security

entitlements, commodity contracts or commodity accounts), letters of credit,

bankers’ acceptances and guaranties;

 

(c  

all present and future monies, securities and other investment property,

credit balances, deposits, deposit accounts and other property of Borrower now

or hereafter held or received by or in transit to Lender or its Affiliates or

at any other depository or other institution from or for the account of

Borrower, whether for safekeeping, pledge, custody, transmission, collection or

otherwise, and all present and future liens, security interests, rights,

remedies, title and interest in, to and in respect of Receivables and other

Collateral, including (i) rights and remedies under or relating to guaranties,

contracts of suretyship, letters of credit and credit and other insurance

related to the Collateral, (ii) rights of stoppage in transit, replevin,

repossession, reclamation and other rights and remedies of an unpaid vendor,

lien or secured party, (iii) goods described in invoices, documents, contracts

or instruments with respect to, or otherwise representing or evidencing,

Receivables or other Collateral, including returned, repossessed and reclaimed goods,

and (iv) deposits by and property of account debtors or other persons securing

the obligations of account debtors;

 

(d) Inventory;

 

32

 

(e) Equipment;

 

(f) Records; and

 

(g) 

all products and proceeds of the foregoing, in any form, including

insurance proceeds and all claims against third parties for loss or damage to

or destruction of any or all of the foregoing.

 

5.2 

Notwithstanding anything to the contrary set forth in Section 5.1 above,

the types or items of Collateral described in such Section shall not include

any rights or interests in any contract, lease, permit, license, charter or

license agreement covering real or personal property, as such, if under the

terms of such contract, lease, permit, license, charter or license agreement,

or applicable law with respect thereto, the valid grant of a security interest

or lien therein to Lender is prohibited and such prohibition has not been or is

not waived or the consent of the other party to such contract, lease, permit,

license, charter or license agreement has not been or is not otherwise obtained

or under applicable law such prohibition cannot be waived; provided, that, the

foregoing exclusion shall in no way be construed (a) to apply if any such prohibition

is unenforceable under Section 9-318 of the UCC or other applicable law or (b)

so as to limit, impair or otherwise affect Lender’s unconditional continuing

security interests in and liens upon any rights or interests of Borrower in or

to monies due or to become due under any such contract, lease, permit, license,

charter or license agreement (including any Receivables).

 

SECTION 6. COLLECTION AND ADMINISTRATION

 

6.1  Borrower’s Loan

Account. Lender shall maintain one or more loan account(s) on its books in

which shall be recorded (a) all Loans, Letter of Credit Accommodations and

other Obligations and the Collateral, (b) all payments made by or on behalf of

Borrower and (c) all other appropriate debits and credits as provided in this

Agreement, including fees, charges, costs, expenses and interest. All entries

in the loan account(s) shall be made in accordance with Lender’s customary

practices as in effect from time to time.

 

6.2  Statements. Lender

shall render to Borrower each month a statement setting forth the balance in

the Borrower’s loan account(s) maintained by Lender for Borrower pursuant to

the provisions of this Agreement, including principal, interest, fees, costs

and expenses. Each such statement shall be subject to subsequent adjustment by

Lender but shall, absent manifest errors or omissions, be considered correct

and deemed accepted by Borrower and conclusively binding upon Borrower as an

account stated except to the extent that Lender receives a written notice from

Borrower of any specific exceptions of Borrower thereto within thirty (30) days

after the date such statement has been mailed by Lender. Until such time as

Lender shall have rendered to Borrower a written statement as provided above,

the balance in Borrower’s loan account(s) shall be presumptive (but rebuttable)

evidence of the amounts due and owing to Lender by Borrower.

 

33

 

6.3 Collection of Accounts.

 

(a) 

Borrower shall, and shall cause Guarantor to, establish and maintain, at

their expense, blocked accounts or lockboxes and related blocked accounts (in

either case, “Blocked Accounts”), as Lender may specify, with such banks as are

acceptable to Lender into which each Borrower and Guarantor shall promptly

deposit and direct its account debtors to directly remit all payments on

Receivables and all payments constituting proceeds of Inventory or other

Collateral in the identical form in which such payments are made, whether by

cash, check or other manner. The banks at which the Blocked Accounts are

established shall enter into an agreement, in form and substance satisfactory

to Lender, providing that all items received or deposited in the Blocked

Accounts are the property of Lender, that the depository bank has no lien upon,

or right to setoff against, the Blocked Accounts, the items received for

deposit therein, or the funds from time to time on deposit therein and that the

depository bank will wire, or otherwise transfer, in immediately available

funds, on a daily basis, all funds received or deposited into the Blocked

Accounts to such bank account of Lender as Lender may from time to time

designate for such purpose (“Payment Account”). With respect to the Blocked

Accounts of Guarantor, the depository banks at which such Blocked Accounts are

maintained shall transfer the funds on deposit in such Blocked Accounts to such

operating bank account of Guarantor as Borrower may specify in writing to

Lender until such time as Lender shall notify the depository bank otherwise.

Upon notice from Lender at any time, the depository banks at which such Blocked

Accounts of Guarantor are maintained shall transfer all funds received or

deposited into such Blocked Accounts to the Payment Account. Borrower agrees

that all payments made to the Blocked Accounts or other funds received and

collected by Lender (except that as to the Blocked Accounts of Guarantor, only

after Lender has notified the depository account of which to such Blocked

Accounts are maintained to transfer funds therein to the Payment Account),

whether in respect of the Receivables, as proceeds of Inventory or other

Collateral or otherwise shall be treated as payments to Lender in respect of

the Obligations and therefore shall constitute the property of Lender to the

extent of the then outstanding Obligations.

 

(b) 

For purposes of calculating the amount of the Loans available to

Borrower, such payments will be applied (conditional upon final collection) to

the Obligations on the Business Day of receipt by Lender of immediately

available funds in the Payment Account provided such payments and notice

thereof are received in accordance with Lender’s usual and customary practices

as in effect from time to time and within sufficient time to credit Borrower’s

loan account on such day, and if not, then on the next Business Day. For the

purposes of calculating interest on the Obligations, such payments or other

funds received will be applied (conditional upon final collection) to the

Obligations one (1) Business Day following the date of receipt of immediately

available funds by Lender in the Payment Account provided such payments or

other funds and notice thereof are received in accordance with Lender’s usual

and customary practices as in effect from time to time and within sufficient

time to credit Borrower’s loan account on such day, and if not, then on the

next Business Day.

 

34

 

(c) 

Borrower and all of its directors, employees, agents, Subsidiaries or

other Affiliates shall, acting as trustee for Lender, receive, as the property

of Lender, any monies, checks, notes, drafts or any other payment relating to

and/or proceeds of Accounts or other Collateral which come into their

possession or under their control and immediately upon receipt thereof, shall

deposit or cause the same to be deposited in the Blocked Accounts, or remit the

same or cause the same to be remitted, in kind, to Lender. In no event shall

the same be commingled with Borrower’s own funds. Borrower agrees to reimburse

Lender on demand for any amounts owed or paid by Lender to any bank at which a

Blocked Account is established or any other bank or person involved in the

transfer of funds to or from the Blocked Accounts arising out of Lender’s

payments to or indemnification of such bank or person. The obligation of

Borrower to reimburse Lender for such amounts pursuant to this Section 6.3

shall survive the termination or non-renewal of this Agreement.

 

6.4  Payments.4 Payments.

All Obligations shall be payable to the Payment Account as provided in Section

6.3 or such other place as Lender may designate from time to time. Lender shall

apply payments received or collected from Borrower or for the account of

Borrower (including the monetary proceeds of collections or of realization upon

any Collateral) as follows: first, to pay any fees, indemnities or expense

reimbursements then due to Lender from Borrower; second, to pay interest due in

respect of any Loans; third, to pay principal due in respect of the Loans;

fourth, to pay or prepay any other Obligations whether or not then due, in such

order and manner as Lender determines. Notwithstanding anything to the contrary

contained in this Agreement, unless so directed by Borrower, or unless an Event

of Default shall exist or have occurred and be continuing, Lender shall not

apply any payments which it receives to any Eurodollar Rate Loans, except (a)

on the expiration date of the Interest Period applicable to any such Eurodollar

Rate Loans, or (b) in the event that there are no outstanding Prime Rate Loans.

To the extent Lender receives any payments or collections in respect of the

Obligations in a currency other than US Dollars, Lender may, at its option (but

is not obligated to), convert such other currency to US Dollars, pursuant to

the Currency Exchange Convention on such date and in such market as Lender may

select (regardless as to whether such rate is the best available rate).

Borrower shall pay the costs of such conversion (or Lender may, at its option,

charge such costs to the loan account of Borrower maintained by Lender).

Payments and collections received in any currency other than the currency in

which any outstanding Obligations are denominated will be accepted and/or

applied at the discretion of Lender. At Lender’s option, all principal,

interest, fees, costs, expenses and other charges provided for in this

Agreement or the other Financing Agreements may be charged directly to the loan

account(s) of Borrower. If after receipt of any payment of, or proceeds of

Collateral applied to the payment of, any of the Obligations, Lender is

required to surrender or return such payment or proceeds to any Person for any

reason, then the Obligations intended to be satisfied by such payment or

proceeds shall be reinstated and continue and this Agreement shall continue in

full force and effect as if such payment or proceeds had not been received by

Lender. Borrower shall be liable to pay to Lender, and does hereby indemnify

and hold Lender harmless for the amount of any payments or proceeds surrendered

or returned. This Section 6.4 shall remain effective notwithstanding any

contrary action which may be taken by

 

35

 

Lender in reliance upon such payment or proceeds. This Section 6.4

shall survive the payment of the Obligations and the termination or non-renewal

of this Agreement.

 

6.5 Payment Indemnity.

 

(a) 

If Borrower or Guarantor shall be required by law to deduct or withhold

any and all present or future taxes, levies, imposts, deductions, charges or withholdings,

and all liabilities with respect thereto (excluding, in the case of Lender,

such taxes as are imposed on or measured by Lender’s net income by any

jurisdiction or any political subdivision thereof) from or in respect of any

sum payable hereunder under or under any of the other Financing Agreements to

Lender, then:

 

(i) 

the sum payable shall be increased as necessary so that after making all

required deductions and withholdings (including deductions and withholdings

applicable to additional sums payable under this Section) Lender receives an

amount equal to the sum it would have received had no such deductions or

withholdings been made;

 

(ii) Borrower or Guarantor shall make such

deductions and withholdings;

 

(iii) Borrower or Guarantor shall pay the

full amount deducted or withheld to the relevant taxing authority or other

authority in accordance with applicable law; and

 

(iv) Borrower or Guarantor shall also pay to

Lender, at the time interest is paid, all additional amounts which Lender

specifies as necessary to preserve the after-tax yield Lender would have

received if such taxes or other amounts had not been imposed.

 

(b) 

Within thirty (30) days after the date of any payment by Borrower or

Guarantor of and all present or future taxes, levies, imposts, deductions,

charges or withholdings, and all liabilities with respect thereto. Upon

Lender’s request, Borrower or Guarantor shall furnish to Lender the original or

a certified copy of a receipt evidencing payment thereof, or other evidence of

payment satisfactory to Lender.

 

6.6  Authorization

to Make Loans. Lender is authorized to make the Loans and provide the

Letter of Credit Accommodations based upon telephonic or other instructions

received from anyone purporting to be an authorized person listed on Schedule

6.6 hereto or, at the discretion of Lender, if such Loans are necessary to

satisfy any Obligations, provided that, so long as no Event of Default, or act,

condition or event which with notice or passage of time or both would

constitute an Event of Default shall exist or have occurred, Lender shall give

notice to Borrower of any such Loans made in excess of $100,000 in any one

case. All requests for Loans or Letter of Credit Accommodations hereunder shall

specify the date on which the requested advance is to be made or Letter of

Credit Accommodations established (which day shall be a Business Day) and the

amount of the requested Loan. Requests received after 11:00 a.m., New York City

time on any day shall be deemed to have been made as of the opening of business

on the immediately

 

36

 

following Business Day. All Loans and Letter of Credit Accommodations

under this Agreement shall be conclusively presumed to have been made to, and

at the request of and for the benefit of, Borrower when deposited to the credit

of Borrower or otherwise disbursed or established in accordance with the

instructions of Borrower or in accordance with the terms and conditions of this

Agreement.

 

6.7  Use of Proceeds.

Borrower shall use the initial proceeds of the Loans provided by Lender to

Borrower hereunder only for: (a) payments to each of the persons listed in the

disbursement direction letter furnished by Borrower to Lender on or about the

date hereof and (b) costs, expenses and fees in connection with the

preparation, negotiation, execution and delivery of this Agreement and the

other Financing Agreements. All other Loans made or Letter of Credit

Accommodations provided by Lender to Borrower pursuant to the provisions hereof

shall be used by Borrower only for general operating, working capital and other

proper corporate purposes of Borrower not otherwise prohibited by the terms

hereof. None of the proceeds will be used, directly or indirectly, for the

purpose of purchasing or carrying any margin security or for the purposes of

reducing or retiring any indebtedness which was originally incurred to purchase

or carry any margin security or for any other purpose which might cause any of

the Loans to be considered a “purpose credit” within the meaning of Regulation

U of the Board of Governors of the Federal Reserve System, as amended.

 

SECTION 7. COLLATERAL REPORTING AND COVENANTS

 

7.1 Collateral Reporting.

 

(a) 

Borrower shall provide Lender with the following documents in a form

satisfactory to Lender:

 

(i) 

on a regular basis as required by Lender, a schedule of sales made,

credits issued and cash received;

 

(ii) on a monthly basis or more frequently as

Lender may request (but in no event more frequently than weekly so long as no

Event of Default exists or has occurred), (A) perpetual inventory reports, (B)

inventory reports by location and category, (C) agings of accounts payable (and

including information indicating the status of payments to owners and lessors

of the leased premises of Borrower), (D) agings of accounts receivable

(together with a reconciliation to the previous month’s aging and general

ledger) and (E) the cash balances of Guarantor in the Blocked Accounts and in

any other deposit or investment accounts of Guarantor;

 

(iii) upon Lender’s request, (A) copies of

customer statements and credit memos, remittance advices and reports, and

copies of deposit slips and bank statements, (B) copies of shipping and

delivery documents, and (C) copies of purchase orders, invoices and delivery

documents for Inventory and Equipment acquired by Borrower;

 

37

 

(iv) such other reports as to the Collateral

as Lender shall request from time to time; and

 

(b) 

If any of Borrower’s records or reports of the Collateral are prepared

or maintained by an accounting service, contractor, shipper or other agent,

Borrower hereby irrevocably authorizes such service, contractor, shipper or

agent to deliver upon Lender’s request such records, reports, and related

documents to Lender and at any time that an Event of Default exists or has

occurred and is continuing, to follow Lender’s instructions with respect to

further services.

 

(c) 

All of the documents, reports and schedules provided by Borrower to

Lender hereunder for Receivables (including Receivables of Guarantor) payable

in any currency other than US Dollars and Inventory (including Inventory of

Guarantor) located outside the United States of America shall set forth the US

Dollar Equivalent for the amount of the Receivables and Value of the Inventory

included in any such documents, reports or schedules. For purposes hereof,

Lender may, at its option, provide to Borrower, at least five (5) Business Days

prior to the date any such documents, reports or schedules are required to be

provided by Borrower to Lender hereunder, the exchange rates required to set

forth the US Dollar Equivalent in such documents, reports and schedules and in

the event Lender shall fail to do so, Borrower shall use such rates of exchange

with respect to the applicable currencies as Borrower uses for such purpose in

the ordinary course of business consistent with current practices as of the

date hereof and shall identify such rates of exchange in any such documents,

reports and schedules.

 

7.2 Accounts Covenants.

 

(a) 

Borrower shall notify Lender promptly of: (i) any material delay in

Borrower’s performance of any of its obligations to any account debtor or the

assertion of any claims, offsets, defenses or counterclaims by any account

debtor involving amounts in excess of $75,000, or any disputes with account

debtors involving amounts in excess of $75,000, or any settlement, adjustment

or compromise thereof, (ii) all material adverse information known to Borrower

or Guarantor relating to the financial condition of any account debtor (except

to the extent Borrower or Guarantor, as the case may be, is expressly

prohibited from disclosing such information to Lender pursuant to a written

agreement between Borrower or Guarantor and such account debtor which is valid

and binding upon Borrower and Guarantor at the time that it obtains such

information) and (iii) any event or circumstance which, to Borrower’s knowledge

would cause Lender to consider any then existing Accounts as no longer

constituting Eligible Accounts. No credit, discount, allowance or extension or

agreement for any of the foregoing shall be granted to any account debtor

without Lender’s consent, except in the ordinary course of Borrower’s business

in accordance with practices and policies previously disclosed in writing to

Lender. So long as no Event of Default exists or has occurred and is

continuing, Borrower shall settle, adjust or compromise any claim, offset,

counterclaim or dispute with any account debtor. At any time that an Event of

Default exists or has occurred and is continuing, Lender shall, at its

 

38

 

option upon notice to Borrower, have the exclusive right to settle,

adjust or compromise any claim, offset, counterclaim or dispute with account

debtors or grant any credits, discounts or allowances (provided, that Lender

shall only be required to send a single notice to Borrower of Lender’s election

to exercise such option).

 

(b) 

Without limiting the obligation of Borrower to deliver any other

information to Lender, Borrower shall promptly report to Lender any return of

Inventory by any one account debtor if the Inventory so returned in such case

has a value in excess of $50,000. At any time that Inventory is returned,

reclaimed or repossessed, the Account (or portion thereof) which arose from the

sale of such returned, reclaimed or repossessed Inventory shall not be deemed

an Eligible Account. In the event any account debtor returns Inventory when an

Event of Default exists or has occurred and is continuing, Borrower shall, upon

Lender’s request, (i) hold the returned Inventory in trust for Lender, (ii)

segregate all returned Inventory from all of its other property, (iii) dispose

of the returned Inventory solely according to Lender’s instructions, and (iv)

not issue any credits, discounts or allowances with respect thereto without

Lender’s prior written consent.

 

(c) 

With respect to each Account: (i) the amounts shown on any invoice

delivered to Lender or schedule thereof delivered to Lender shall be true and

complete, (ii) no payments shall be made thereon except payments immediately

delivered to Lender pursuant to the terms of this Agreement, (iii) no credit,

discount, allowance or extension or agreement for any of the foregoing shall be

granted to any account debtor except as reported to Lender in accordance with

this Agreement and except for credits, discounts, allowances or extensions made

or given in the ordinary course of Borrower’s business in accordance with

practices and policies previously disclosed to Lender, (iv) there shall be no

setoffs, deductions, contras, defenses, counterclaims or disputes existing or

asserted with respect thereto except as reported to Lender in accordance with

the terms of this Agreement and except in the ordinary course of Borrower’s

business, (v) none of the transactions giving rise thereto will violate any

applicable Federal, State, Provincial or local laws or regulations, all

documentation relating thereto will be legally sufficient under such laws and

regulations and all such documentation will be legally enforceable in

accordance with its terms.

 

(d) 

Lender shall have the right at any time or times, in Lender’s name or in

the name of a nominee of Lender, to verify the validity, amount or any other

matter relating to any Account or other Collateral, by mail, telephone,

facsimile transmission or otherwise.

 

(e) 

Borrower shall deliver or cause to be delivered to Lender, with

appropriate endorsement and assignment, with full recourse to Borrower, all

chattel paper and instruments which Borrower now owns or may at any time

acquire immediately upon Borrower’s receipt thereof, except as Lender may

otherwise agree.

 

(f) 

Lender may, at any time or times that an Event of Default exists or has

occurred and is continuing, (i) notify any or all account debtors that the

Accounts have been assigned to

 

39

 

Lender and that Lender has a security interest therein and Lender may

direct any or all accounts debtors to make payment of Accounts directly to

Lender, (ii) extend the time of payment of, compromise, settle or adjust for

cash, credit, return of merchandise or otherwise, and upon any terms or

conditions, any and all Accounts or other obligations included in the

Collateral and thereby discharge or release the account debtor or any other

party or parties in any way liable for payment thereof without affecting any of

the Obligations, (iii) demand, collect or enforce payment of any Accounts or

such other obligations, but without any duty to do so, and Lender shall not be

liable for its failure to collect or enforce the payment thereof nor for the

negligence of its agents or attorneys with respect thereto and (iv) take

whatever other action Lender may deem necessary or desirable for the protection

of its interests. At any time that an Event of Default exists or has occurred

and is continuing, at Lender’s request, all invoices and statements sent to any

account debtor shall state that the Accounts and such other obligations have

been assigned to Lender and are payable directly and only to Lender and

Borrower shall deliver to Lender such originals of documents evidencing the

sale and delivery of goods or the performance of services giving rise to any

Accounts as Lender may require.

 

7.3  Inventory

Covenants.

With respect to the Inventory: (a) Borrower shall at all times maintain

inventory records reasonably satisfactory to Lender, keeping correct and

accurate records itemizing and describing the kind, type, quality and quantity

of Inventory, and Borrower’s cost therefor; (b) Borrower shall conduct a

physical count of the Inventory either through periodic cycle counts or

otherwise at least once each year, but at any time or times as Lender may request

on or after an Event of Default, and promptly following such physical inventory

(whether pursuant to periodic cycle counting or otherwise) shall supply Lender

with a report in the form and with such specificity as may be reasonably

satisfactory to Lender concerning such physical count; (c) Borrower shall not

remove any Inventory from the locations set forth or permitted herein, without

the prior written consent of Lender, except for sales of Inventory in the

ordinary course of Borrower’s business and except to move Inventory directly

from one location set forth or permitted herein to another such location and

except for Inventory shipped from the manufacturer thereof to Borrower which is

in transit to the locations set forth or permitted herein; (d) upon Lender’s

request, Borrower shall, at its expense, no more than four (4) times in any

twelve (12) month period, but at any time or times as Lender may request on or

after an Event of Default, deliver or cause to be delivered to Lender written

appraisals as to the Inventory in form, scope and methodology acceptable to

Lender and by an appraiser acceptable to Lender, addressed to Lender and upon

which Lender is expressly permitted to rely; (e) Borrower shall produce, use,

store and maintain the Inventory with all reasonable care and caution and in

accordance with the requirements of the insurance maintained by Borrower with

respect thereto, and in conformity with applicable laws (including the

requirements of the Federal Fair Labor Standards Act of 1938, as amended, the

Federal Food, Drug and Cosmetic Act, the Dietary Supplemental Health Education

Act, and all rules, regulations and orders related to any of the foregoing);

(f) Borrower assumes all responsibility and liability arising from or relating

to the production, use, sale or other disposition of the Inventory; (g)

Borrower shall not sell Inventory to any customer on approval, or any other

basis which entitles the customer to return or may obligate Borrower to

repurchase such Inventory except to the extent required by

 

40

 

applicable law or in accordance with the current policy of Borrower

allowing returns in the ordinary course of business; (h) Borrower shall keep

the Inventory in good and marketable condition; and (i) Borrower shall not,

without prior written notice to Lender, acquire or accept any Inventory on

consignment or approval.

 

7.4  Equipment

and Real Property Covenants. With respect to the Equipment and Real

Property: (a) upon Lender’s request, Borrower shall, at its expense, no more

than once in any twelve (12) month period, but at any time or times as Lender

may request on or after an Event of Default, deliver or cause to be delivered

to Lender written appraisals as to the Equipment and/or the Real Property in

form, scope and methodology acceptable to Lender and by an appraiser acceptable

to Lender, addressed to Lender and upon which Lender is expressly permitted to

rely; (b) Borrower shall keep the Equipment in good order, repair, running and

marketable condition (ordinary wear and tear excepted); (c) Borrower shall use

the Equipment and Real Property with all reasonable care and caution and in

accordance with the requirement of the insurance maintained by Borrower with

the respect thereto and in conformity with all applicable laws; (d) the

Equipment is and shall be used in Borrower’s business and not for personal,

family, household or farming use; (e) Borrower shall not remove any Equipment

from the locations set forth or permitted herein, except to the extent

necessary to have any Equipment repaired or maintained in the ordinary course

of the business of Borrower or to move Equipment directly from one location set

forth or permitted herein to another such location and except for the movement

of motor vehicles used by or for the benefit of Borrower in the ordinary course

of business; (f) the Equipment is now and shall remain personal property and

Borrower shall not permit any of the Equipment to be or become a part of or

affixed to real property; and (g) Borrower assumes all responsibility and

liability arising from the use of the Equipment and Real Property.

 

7.5  Power of

Attorney. Borrower hereby irrevocably designates and appoints Lender (and

all persons designated by Lender) as Borrower’s true and lawful

attorney-in-fact, and authorizes Lender, in Borrower’s or Lender’s name, to:

(a) at any time an Event of Default exists or has occurred and is continuing

(after a single notice to Borrower of Lender’s intention to exercise its rights

under this Section 7.5(a)), (i) demand payment on Receivables or other

Collateral, (ii) enforce payment of Receivables by legal proceedings or

otherwise, (iii) exercise all of Borrower’s rights and remedies to collect any

Receivable or other Collateral, (iv) sell or assign any Receivable upon such

terms, for such amount and at such time or times as the Lender deems advisable,

(v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and

release any Receivable, (vii) prepare, file and sign Borrower’s name on any

proof of claim in bankruptcy or other similar document against an account

debtor or other obligor in respect of any Receivables or other Collateral,

(viii) notify the post office authorities to change the address for delivery of

remittances from account debtors or other obligors in respect of Receivables or

other proceeds of Collateral to an address designated by Lender, and open and

dispose of all mail addressed to Borrower and handle and store all mail

relating to the Collateral; and (ix) do all acts and things which are

necessary, in Lender’s determination, to fulfill Borrower’s obligations under

this Agreement and the other Financing Agreements and (b) at any time to (i)

take control in any

 

41

 

manner of any item of payment in respect of Receivables or constituting

Collateral or otherwise received in or for deposit in the Blocked Accounts or

otherwise received by Lender, (ii) have access to any lockbox or postal box

into which remittances from account debtors or other obligors in respect of

Receivables or other proceeds of Collateral are sent or received, (iii) endorse

Borrower’s name upon any items of payment in respect of Receivables or

constituting Collateral or otherwise received by Lender and deposit the same in

Lender’s account for application to the Obligations, (iv) endorse Borrower’s

name upon any chattel paper, document, instrument, invoice, or similar document

or agreement relating to any Receivable or any goods pertaining thereto or any

other Collateral, including any warehouse or other receipts, or bills of lading

and other negotiable or non-negotiable documents, (v) clear Inventory the

purchase of which was financed with Letter of Credit Accommodations through

U.S. Customs in Borrower’s name, Lender’s name or the name of Lender’s

designee, and to sign and deliver to customs officials powers of attorney in

Borrower’s name for such purpose, and to complete in Borrower’s or Lender’s

name, any order, sale or transaction, obtain the necessary documents in

connection therewith and collect the proceeds thereof, (vi) sign Borrower’s

name on any verification of Receivables and notices thereof to account debtors

or other obligors in respect thereof and (vii) execute in Borrower’s name and

file any UCC and PPSA financing statements or amendments thereto. Borrower

hereby releases Lender and its officers, employees and designees from any

liabilities arising from any act or acts under this power of attorney and in

furtherance thereof, whether of omission or commission, except as a result of

Lender’s own gross negligence or wilful misconduct as determined pursuant to a

final order of a court of competent jurisdiction which is non-appealable

(except if Lender does not appeal such order).

 

7.6  Right to Cure.

Lender may, at its option, (a) upon notice to Borrower, cure any default by

Borrower under any material agreement with a third party which affects the

Collateral, its value or the ability of Lender to collect, sell or otherwise

dispose of the Collateral or the rights and remedies of Lender therein or the

ability of Borrower to perform its obligations under the other Financing

Agreements, (b) pay or bond on appeal any judgment entered against Borrower,

(c) discharge taxes, liens, security interests or other encumbrances at any

time levied on or existing with respect to the Collateral and (d) pay any

amount, incur any expense or perform any act which, in Lender’s judgment, is

necessary or appropriate to preserve, protect, insure or maintain the

Collateral and the rights of Lender with respect thereto. Lender may add any

amounts so expended to the Obligations and charge Borrower’s account therefor,

such amounts to be repayable by Borrower within five (5) Business Days after

demand. Lender shall be under no obligation to effect such cure, payment or

bonding and shall not, by doing so, be deemed to have assumed any obligation or

liability of Borrower. Any payment made or other action taken by Lender under

this Section shall be without prejudice to any right to assert an Event of

Default hereunder and to proceed accordingly.

 

7.7  Access to

Premises. From time to time as requested by Lender, at the reasonable cost

and expense of Borrower, (a) Lender or its designee shall have complete access

to all of Borrower’s premises during normal business hours and after not less

than three (3) Business Days’ prior notice to Borrower, or at any time and

without notice to Borrower if an Event of

 

42

 

Default exists or has occurred and is continuing, for the purposes of

inspecting, verifying and auditing the Collateral and all of Borrower’s books

and records, including the Records, and (b) Borrower shall promptly furnish to

Lender such copies of such books and records or extracts there from as Lender

may request, and (c) Lender or its designee may use during normal business

hours such of Borrower’s personnel, equipment, supplies and premises as may be

reasonably necessary for the foregoing and if an Event of Default exists or has

occurred and is continuing for the collection of Accounts and realization of

other Collateral.

 

SECTION 8. REPRESENTATIONS

AND WARRANTIES

 

Borrower hereby represents and warrants to

Lender the following (which shall survive the execution and delivery of this Agreement),

the truth and accuracy of which are a continuing condition of the making of

Loans and providing Letter of Credit Accommodations by Lender to Borrower:

 

8.1  Corporate

Existence, Power and Authority; Subsidiaries. Borrower is a corporation

duly organized and in good standing under the laws of its state of

incorporation and is duly qualified as a foreign corporation and in good

standing in all states or other jurisdictions where the nature and extent of

the business transacted by it or the ownership of assets makes such

qualification necessary, except for those jurisdictions in which the failure to

so qualify would not have a material adverse effect on Borrower’s financial

condition, results of operation or business or the rights of Lender in or to

any of the Collateral. The execution, delivery and performance of this

Agreement, the other Financing Agreements and the transactions contemplated

hereunder and thereunder are all within Borrower’s corporate powers, have been

duly authorized and are not in contravention of law or the terms of Borrower’s

certificate of incorporation, by-laws, or other organizational documentation,

or any indenture, agreement or undertaking to which Borrower is a party or by

which Borrower or its property are bound. This Agreement and the other

Financing Agreements constitute legal, valid and binding obligations of

Borrower enforceable in accordance with their respective terms. Borrower does

not have any Subsidiaries except as set forth on the Information Certificate.

Hidel Partners was a New Jersey general partnership. Borrower purchased all of

the partnership interests of Hidel Partners pursuant to the Contract for the

Sale/Purchase of Partnership Interests of Hidel Partners, a New Jersey

Partnership dated November 28, 1994. Hidel Partners is not engaged in any

business or commercial activity and does not own or hold any material assets or

properties other than an interest in the real property and related assets used

by Borrower located at 500 Halls Mill Road, Freehold New Jersey 07728, and

including the vacant undeveloped land (referred to as Lot 8, Block 78 in the

Freehold Township Tax Map) to be subject to the Mortgage adjacent thereto.

International Vitamin Overseas Corp. is not engaged in any business or

commercial activity (other than to the extent required to maintain its

corporate existence under applicable law) and does not own or hold any material

assets or properties.

 

43

 

8.2  Financial

Statements; No Material Adverse Change. All financial statements relating

to Borrower which have been or may hereafter be delivered by Borrower to Lender

have been prepared in accordance with GAAP and fairly present the financial

condition and the results of operation of Borrower as at the dates and for the

periods set forth therein. Except as disclosed in any interim financial

statements furnished by Borrower to Lender prior to the date of this Agreement,

there has been no material adverse change in the assets, liabilities,

properties and condition, financial or otherwise, of Borrower, since the date

of the most recent audited financial statements furnished by Borrower to Lender

prior to the date of this Agreement.

 

8.3  Chief Executive

Office; Collateral Locations. The chief executive office of Borrower and

Borrower’s Records concerning Accounts are located only at the address set

forth on the signature page hereto and its only other places of business and

the only other locations of Collateral, if any, are the addresses set forth in

the Information Certificate, subject to the right of Borrower to establish new

locations in accordance with Section 9.2 below. The Information Certificate

correctly identifies any of such locations which are not owned by Borrower and

sets forth the owners and/or operators thereof.

 

8.4  Priority of Liens;

Title to Properties. The security interests and liens granted to Lender under

this Agreement and the other Financing Agreements constitute valid and

perfected first priority liens and security interests in and upon the

Collateral subject only to the liens indicated on Schedule 8.4 hereto and the

other liens permitted under Section 9.8 hereof. Borrower has good and

marketable title to all of its properties and assets subject to no liens,

mortgages, pledges, security interests, encumbrances or charges of any kind,

except those granted to Lender and such others as are specifically listed on

Schedule 8.4 hereto or permitted under Section 9.8 hereof.

 

8.5  Tax Returns.

Borrower has filed, or caused to be filed, in a timely manner all tax returns,

reports and declarations which are required to be filed by it. All information

in such tax returns, reports and declarations is complete and accurate in all

material respects. Borrower has paid or caused to be paid all taxes due and

payable or claimed due and payable in any assessment received by it, except

taxes the validity of which are being contested in good faith by appropriate

proceedings diligently pursued and available to Borrower and with respect to

which adequate reserves have been set aside on its books. Adequate provision

has been made for the payment of all accrued and unpaid Federal, State,

Provincial, county, local, foreign and other taxes whether or not yet due and

payable and whether or not disputed.

 

8.6  Litigation. Except

as set forth on the Information Certificate, there is no present investigation

by any Governmental Authority pending, or to the best of Borrower’s knowledge

threatened, against or affecting Borrower, its assets or business and there is

no action, suit, proceeding or claim by any Person pending, or to the best of

Borrower’s knowledge threatened, against Borrower or its assets or goodwill, or

against or affecting any transactions contemplated by this Agreement, which if

adversely determined against Borrower would have a Material Adverse Effect.

 

44

 

8.7  Compliance

with Other Agreements and Applicable Laws. Borrower is not in default in

any material respect under, or in violation in any material respect of any of

the terms of, any agreement, contract, instrument, lease or other commitment to

which it is a party or by which it or any of its assets are bound and Borrower

is in compliance in all material respects with all applicable provisions of laws,

rules, regulations, licenses, permits, approvals and orders of any foreign,

Federal, State or local Governmental Authority.

 

8.8 Environmental Compliance.

 

(a) 

Except as set forth on Schedule 8.8 hereto, Borrower and any Subsidiary

have not generated, used, stored, treated, transported, manufactured, handled,

produced or disposed of any Hazardous Materials, on or off its premises

(whether or not owned by it) in any manner which at any time constitutes a

violation of any applicable Environmental Law or any applicable license,

permit, certificate, approval or similar authorization thereunder and the

operations of Borrower and any Subsidiary complies in all material respects

with all applicable Environmental Laws and all licenses, permits, certificates,

approvals and similar authorizations thereunder.

 

(b) 

Except as set forth on Schedule 8.8 hereto, there has been no

investigation, proceeding, complaint, order, directive, claim, citation or

notice by any Governmental Authority or any other person nor is any pending or

to the best of Borrower’s knowledge threatened, with respect to any

non-compliance with or violation of the requirements of any Environmental Law

by Borrower and any Subsidiary or the release, spill or discharge, threatened

or actual, of any Hazardous Material or the generation, use, storage,

treatment, transportation, manufacture, handling, production or disposal of any

Hazardous Materials or any other environmental, health or safety matter, which

affects Borrower or its business, operations or assets or any properties at

which Borrower has transported, stored or disposed of any Hazardous Materials.

 

(c) 

Borrower and its Subsidiaries have no material liability (contingent or

otherwise) in connection with a release, spill or discharge, threatened or

actual, of any Hazardous Materials or the generation, use, storage, treatment,

transportation, manufacture, handling, production or disposal of any Hazardous

Materials.

 

(d) 

Borrower and its Subsidiaries have all licenses, permits, certificates,

approvals or similar authorizations required to be obtained or filed in

connection with the operations of Borrower under any Environmental Law and all

of such licenses, permits, certificates, approvals or similar authorizations

are valid and in full force and effect.

 

8.9 Employee Benefits.

 

(a) 

Each Plan is in compliance with the applicable provisions of ERISA, the

Code and other federal or state law. Each Plan which is intended to qualify

under Section 401(a) of the Code has received a favorable determination letter

from the Internal Revenue Service and to the

 

45

 

best of Borrower’s knowledge, nothing has occurred which would cause

the loss of such qualification. Borrower and its ERISA Affiliates have made all

required contributions to any Plan subject to Section 412 of the Code, and no

application for a funding waiver or an extension of any amortization period

pursuant to Section 412 of the Code has been made with respect to any Plan.

 

(b) 

There are no pending or to the best of Borrower’s knowledge, threatened

claims, actions or lawsuits, or action by any Governmental Authority, with

respect to any Plan. There has been no prohibited transaction or violation of

the fiduciary responsibility rules with respect to any Plan.

 

(c) 

(i) No ERISA Event has occurred or is reasonably expected to occur; (ii)

the current value of each Plan’s assets (determined in accordance with the

assumptions used for funding such Plan pursuant to Section 412 of the Code)

exceed such Plan’s liabilities under Section 400(a)(16) of ERISA; (iii)

Borrower and its ERISA Affiliates have not incurred and do not reasonably

expect to incur, any liability under Title IV of ERISA with respect to any Plan

(other than premiums due and not delinquent under Section 4007 of ERISA); (iv)

Borrower and its ERISA Affiliates have not incurred and do not reasonably

expect to incur, any liability (and no event has occurred which, with the

giving of notice under Section 4219 of ERISA, would result in such liability)

under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and

(v) Borrower and its ERISA Affiliates have not engaged in a transaction that

could be subject to Section 4069 or 4212(c) of ERISA.

 

(d) 

With respect to any Canadian Pension Plan, if and to the extent that any

such Canadian Pension Plan exists or has not been terminated, (i) the Canadian

Pension Plan is duly registered under all applicable Federal and Provincial

pension benefits legislation, (ii) all obligations of Borrower or Guarantor

(including fiduciary, funding, investment and administration obligations)

required to be performed in connection with the Canadian Pension Plan or the

funding agreements therefor have been performed in a timely fashion and there

are no outstanding disputes concerning the assets held pursuant to any such

funding agreement, (iii) all contributions or premiums required to be made by

Borrower or Guarantor to the Canadian Pension Plans have been made in a timely

fashion in accordance with the terms of the Canadian Pension Plans and

applicable laws and regulations, (iv) all employee contributions to the

Canadian Pension Plan required to be made by way of authorized payroll

deduction have been properly withheld by Borrower or Guarantor and fully paid into

the Canadian Pension Plan in a timely fashion, (v) all reports and disclosures

relating to the Canadian Pension Plan required by any applicable laws or

regulations have been filed or distributed in a timely fashion, (vi) there have

been no improper withdrawals, or applications of, the assets of any Canadian

Pension Plan, (vii) no amount is owing by any Canadian Pension Plan under the

Income Tax Act (Canada) or any provincial taxation statute, (viii) the Canadian

Pension Plan is fully funded both on an ongoing basis and on a solvency basis

(using actuarial assumptions and methods which are consistent with the

valuations last filed with the applicable governmental authorities and which

are consistent with generally accepted actuarial principles) and (ix) to the

best of the knowledge

 

46

 

of Borrower, no Canadian Pension Plan is the subject of an

investigation, any other proceeding, an action or a claim and there exists no

state of facts which after notice or lapse of time or both could reasonably be

expected to give rise to any such proceeding, action or claim.

 

8.10 Bank

Accounts. All of the deposit accounts, investment accounts or other

accounts in the name of or used by Borrower maintained at any bank or other

financial institution are set forth on Schedule 8.10 hereto, subject to the

right of Borrower to establish new accounts in accordance with Section 9.13

below.

 

8.11 Intellectual Property. Borrower owns or licenses

or otherwise has the right to use all Intellectual Property necessary for the

operation of its business as presently conducted or proposed to be conducted.

As of the date hereof, Borrower does not have any Intellectual Property

registered, or subject to pending applications, in the United States Patent and

Trademark Office or any similar office or agency in the United States, any

State thereof, any political subdivision thereof or in any other country, other

than those described in Schedule 8.11 hereto and has not granted any licenses

with respect thereto other than as set forth in Schedule 8.11 hereto. Except to

the extent set forth on Schedule 8.11 hereto, no event has occurred which

permits or would permit after notice or passage of time or both, the

revocation, suspension or termination of such rights. To the best of Borrower’s

knowledge, no slogan or other advertising device, product, process, method,

substance or other Intellectual Property or goods bearing or using any

Intellectual Property presently contemplated to be sold by or employed by

Borrower infringes any patent, trademark, servicemark, tradename, copyright,

license or other Intellectual Property owned by any other Person presently and

except as set forth on Schedule 8.11 hereto, no claim or litigation is pending

or threatened against or affecting Borrower contesting its right to sell or use

any such Intellectual Property. Schedule 8.11 sets forth all of the agreements

or other arrangements of Borrower pursuant to which Borrower has a license or

other right to use any trademarks, logos, designs, representations or other

Intellectual Property owned by another person as in effect on the date hereof

and the dates of the expiration of such agreements or other arrangements of

Borrower as in effect on the date hereof. No trademark, servicemark or other

Intellectual Property at any time used by Borrower which is owned by another

person, or owned by Borrower subject to any security interest, lien, collateral

assignment, pledge or other encumbrance in favor of any person other than

Lender, is affixed to any Eligible Inventory, except to the extent permitted

under the term of the license agreements listed on Schedule 8.11 hereto.

 

8.12 Capitalization.

 

(a) 

The persons that directly and beneficially own ten (10%) percent or more

of the issued and outstanding shares of Capital Stock of Borrower consisting of

common stock are indicated in the Information Certificate, and in each case all

of such shares have been duly authorized and are fully paid and non-assessable,

free and clear of all claims, liens, pledges and encumbrances of any kind,

except as disclosed in writing to Lender or as otherwise required by applicable

law.

 

47

 

(b) 

Borrower is solvent and will continue to be solvent after the creation of

the Obligations, the security interests of Lender and the other transaction

contemplated hereunder, is able to pay its debts as they mature and has (and

has reason to believe it will continue to have) sufficient capital (and not

unreasonably small capital) to carry on its business and all businesses in

which it is about to engage. The assets and properties of Borrower at a fair

valuation and at their present salable value are, and will be, greater than the

Indebtedness of Borrower, and including subordinated and contingent liabilities

computed at the amount which, to the best of Borrower’s knowledge, represents

an amount which can reasonably be expected to become an actual or mature

liability.

 

8.13 Labor Disputes.

 

(a) 

Set forth on Schedule 8.13 hereto is a list (including dates of

termination) of all collective bargaining or similar agreements between or

applicable to Borrower and any union, labor organization or other bargaining

agent in respect of the employees of Borrower on the date hereof.

 

(b) 

There is (i) no significant unfair labor practice complaint pending

against Borrower or, to the best of Borrower’s knowledge, threatened against

it, before the National Labor Relations Board, and no significant grievance or

significant arbitration proceeding arising out of or under any collective

bargaining agreement is pending on the date hereof against Borrower or, to best

of Borrower’s knowledge, threatened against it, and (ii) no significant strike,

labor dispute, slowdown or stoppage is pending against Borrower or, to the best

of Borrower’s knowledge, threatened against Borrower.

 

8.14 Corporate Name; Prior Transactions. Borrower has not,

during the past five years, been known by or used by any other corporate or

fictitious name or been a party to any merger or consolidation, or acquired all

or substantially all of the assets of any Person, or acquired any of its

property or assets out of the ordinary course of business, except as set forth

in the Information Certificate.

 

8.15 Restrictions on Subsidiaries. Except for

restrictions contained in this Agreement or any other agreement with respect to

Indebtedness of Borrower permitted hereunder as in effect on the date hereof,

there are no contractual or consensual restrictions on Borrower or any of its

Subsidiaries which prohibit or otherwise restrict (a) the transfer of cash or

other assets (i) between Borrower and any of its Subsidiaries or (ii) between

any Subsidiaries of Borrower or (b) the ability of Borrower or any of its

Subsidiaries to incur Indebtedness or grant security interests to Lender in the

Collateral.

 

8.16 Material Contracts. Schedule 8.16 hereto sets

forth all Material Contracts to which Borrower is a party or is bound as of the

date hereof. Borrower has delivered to Lender true, correct and complete copies

of such Material Contracts as Lender has requested on or before the

 

48

 

date hereof. Borrower is not in breach of or in default of or under any

Material Contract and has not received any notice of the intention of any other

party thereto to terminate any Material Contract.

 

8.17 Payable Practices. Borrower has not made any

material change in the historical accounts payable practices from those in

effect immediately prior to the date hereof.

 

8.18 Accuracy and Completeness of Information. All

information furnished by or on behalf of Borrower in writing to Lender in

connection with this Agreement or any of the other Financing Agreements or any

transaction contemplated hereby or thereby, including all information on the

Information Certificate is true and correct in all material respects on the

date as of which such information is dated or certified and does not omit any

material fact necessary in order to make such information not misleading. No event

or circumstance has occurred which has had or could reasonably be expected to

have a Material Adverse Effect, which has not been fully and accurately

disclosed to Lender in writing.

 

8.19 Survival of Warranties; Cumulative. All

representations and warranties contained in this Agreement or any of the other

Financing Agreements shall survive the execution and delivery of this Agreement

and shall be deemed to have been made again to Lender on the date of each

additional borrowing or other credit accommodation hereunder and shall be

conclusively presumed to have been relied on by Lender regardless of any

investigation made or information possessed by Lender. The representations and

warranties set forth herein shall be cumulative and in addition to any other

written representations or warranties which Borrower shall now or hereafter

give, or cause to be given, to Lender.

 

SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS

 

9.1  Maintenance

of Existence. Borrower shall at all times preserve, renew and keep in full,

force and effect its corporate existence and rights and franchises with respect

thereto and maintain in full force and effect all permits, licenses,

trademarks, tradenames, approvals, authorizations, leases and contracts

necessary to carry on the business as presently or proposed to be conducted.

Borrower shall give Lender thirty (30) days prior written notice of any

proposed change in its corporate name, which notice shall set forth the new

name and Borrower shall deliver to Lender a copy of the amendment to the

Certificate of Incorporation of Borrower providing for the name change

certified by the Secretary of State of the jurisdiction of incorporation of

Borrower as soon as it is available.

 

9.2  New

Collateral Locations. Borrower may open any new location within the

continental United States or Canada provided Borrower (a) gives Lender thirty

(30) days prior written notice of the intended opening of any such new location

and (b) executes and delivers, or causes to be executed and delivered, to

Lender such agreements, documents, and instruments as

 

 

49

 

Lender may deem reasonably necessary or desirable to protect its

interests in the Collateral at such location, including UCC financing

statements and PPSA financing statements.

 

9.3  Compliance with Laws, Regulations, Etc.

 

(a) 

Borrower shall, and shall cause any Subsidiary to, at all times, comply

in all material respects with all applicable laws, rules, regulations,

licenses, permits, approvals and orders applicable to it and duly observe all

applicable requirements of any Federal, State or local Governmental Authority,

including to the extent applicable ERISA, the Code, the Occupational Safety and

Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as

amended, the Food, Drug and Cosmetic Act, the Dietary Supplemental Health

Education Act, and all applicable statutes, rules, regulations, orders, permits

and stipulations relating to employee health and safety and including all

applicable Environmental Laws.

 

(b) 

Borrower shall establish and maintain, at its expense, a system to

assure and monitor its continued compliance with all applicable Environmental

Laws in all of its operations, which system shall include annual reviews of

such compliance by employees or agents of Borrower who are familiar with the

requirements of the applicable Environmental Laws. Subject to, and without

waiving any and/or all of Borrower’s rights and protections under any and all

applicable privileges recognized by law, including the attorney-client

privilege, the attorney work product privilege and the privilege of self

critical analysis, copies of all environmental surveys, audits, assessments,

feasibility studies and results of remedial investigations shall be promptly

furnished, or caused to be furnished, by Borrower to Lender. Borrower shall

take prompt and appropriate action to respond to any non-compliance with any of

the Environmental Laws and shall regularly report to Lender on such response.

 

(c) 

Borrower shall give both oral and written notice to Lender as soon as

possible upon Borrower’s receipt of any notice of, or Borrower’s otherwise

obtaining knowledge of, (i) the occurrence of any event involving the release,

spill or discharge, of any Hazardous Material which may be in violation of any

applicable Environmental Laws or (ii) any investigation, proceeding, complaint,

order, directive, claims, citation or notice with respect to: (A) any

non-compliance with or violation of any applicable Environmental Law by Borrower

or (B) the release, spill or discharge, of any Hazardous Material or (C) the

generation, use, storage, treatment, transportation, manufacture, handling,

production or disposal of any Hazardous Materials or (D) any other

environmental, health or safety matter, which affects Borrower or its business,

operations or assets or any properties at which Borrower transported, stored or

disposed of any Hazardous Materials.

 

50

 

(d) Without limiting the generality of the

foregoing, whenever Lender reasonably determines that there is non-compliance,

or any condition which requires any action by or on behalf of Borrower in order

to avoid any material non-compliance, with any applicable Environmental Law,

Borrower shall, at Lender’s request and Borrower’s expense: (i) cause an

independent environmental engineer 

acceptable to Lender to conduct such tests of the site where Borrower’s

non-compliance or alleged non-compliance with such applicable Environmental

Laws has occurred as to such non-compliance and prepare and deliver to Lender a

report as to such non-compliance setting forth the results of such tests, a

proposed plan for responding to any environmental problems described therein,

and an estimate of the costs thereof and (ii) provide to Lender such other

information from time to time with respect thereto as Lender may in good faith

request.

 

(e) Borrower shall indemnify and hold

harmless Lender, its directors, officers, employees, agents, invitees,

representatives, successors and assigns, from and against any and all losses,

claims, damages, liabilities, costs, and expenses (including attorneys’ fees

and legal expenses) directly or indirectly arising out of or attributable to

the use, generation, manufacture, reproduction, storage, release, threatened

release, spill, discharge, disposal or presence of a Hazardous Material,

including the costs of any required or necessary repair, cleanup or other

remedial work with respect to any property of Borrower and the preparation and

implementation of any losure, remedial or other required plans. All

representations, warranties, covenants and indemnifications in this Section 9.3

shall survive the payment of the Obligations and the termination or non-renewal

of this Agreement.

 

9.4 Payment of Taxes and Claims. Borrower shall,

and shall cause any Subsidiary to, duly pay and discharge all taxes,

assessments, contributions and governmental charges upon or against it or its

properties or assets, except for taxes the validity of which are being

contested in good faith by appropriate proceedings diligently pursued and

available to Borrower or such Subsidiary, as the case may be, and with respect

to which adequate reserves have been set aside on its books. Borrower shall be

liable for any tax or penalties imposed on Lender as a result of the financing

arrangements provided for herein and Borrower agrees to indemnify and hold

Lender harmless with respect to the foregoing, and to repay to Lender on demand

the amount thereof, and until paid by Borrower such amount shall be added and

deemed part of the Loans, provided, that, nothing contained herein shall be

construed to require Borrower to pay any income or franchise taxes attributable

to the income of Lender from any amounts charged or paid hereunder to Lender.

The foregoing indemnity shall survive the payment of the Obligations and the

termination or non-renewal of this Agreement.

 

9.5 Insurance. Borrower shall, and shall cause any

Subsidiary to, at all times, maintain with financially sound and reputable

insurers insurance with respect to the Collateral against loss or damage and

all other insurance of the kinds and in the amounts customarily insured against

or carried by corporations of established reputation engaged in the same or

similar businesses and  similarly

situated. Said policies of insurance shall be satisfactory to Lender as to

form, amount and insurer. Borrower shall furnish certificates, policies or

endorsements to Lender as Lender

 

51

 

shall require as proof of such insurance, and, if Borrower fails to do

so, Lender is authorized, but not required, to obtain such insurance at the

expense of Borrower. All policies shall provide for at least thirty (30) days

prior written notice to Lender of any cancellation or reduction of coverage and

that Lender may act as attorney for Borrower in obtaining, and at any time an

Event of Default exists or has occurred and is continuing, adjusting, settling,

amending and canceling such insurance. Borrower shall cause Lender to be named

as a loss payee and an additional insured (but without any liability for any

premiums) under such insurance policies and Borrower shall obtain

non-contributory lender’s loss payable endorsements to all insurance policies

in form and substance satisfactory to Lender. Such lender’s loss payable

endorsements shall specify that the proceeds of such insurance shall be payable

to Lender as its interests may appear and further specify that Lender shall be

paid regardless of any act or omission by Borrower or any of its Affiliates. At

its option, Lender may apply any insurance proceeds received by Lender at any

time to the cost of repairs or replacement of Collateral and/or to payment of

the Obligations, whether or not then due, in any order and in such manner as

Lender may determine or hold such proceeds as cash collateral for the

Obligations.

 

52

 

9.6 Financial Statements and Other

Information.

 

(a) Borrower shall, and shall cause any

Subsidiary to, keep proper books and records in which true and complete entries

shall be made of all dealings or transactions of or in relation to the

Collateral and the business of Borrower and its Subsidiaries in accordance with

GAAP. Borrower shall promptly furnish to Lender all such financial and other

information as Lender shall reasonably request relating to the Collateral and

the assets, business and operations of Borrower. Without limiting the

foregoing, Borrower shall furnish or cause to be furnished to Lender, the

following: (i) within thirty (30) days after the end of each fiscal month,

monthly unaudited consolidated financial statements, and unaudited

consolidating financial statements (including in each case balance sheets,

statements of income and loss, statements of cash flow, and statements of

shareholders’ equity), all in reasonable detail, fairly presenting the

financial position and the results of the operations of Borrower and its

Subsidiaries as of the end of and through such fiscal month, certified to be

correct by the chief financial officer of Borrower, subject to normal year-end

adjustments and accompanied by a compliance certificate substantially in the

form of Exhibit B hereto, along with a schedule in form reasonably satisfactory

to Lender of the calculations used in determining, as of the end of such month,

whether Borrower was in compliance with the covenant set forth in Section 9.18

of this Agreement for such month and (ii) within ninety (90) days after the end

of each fiscal year, audited consolidated financial statements and audited

consolidating financial statements of Borrower and its Subsidiaries (including

in each case balance sheets, statements of income and loss, statements of cash

flow and statements of shareholders’ equity), and the accompanying notes

thereto, all in reasonable detail, fairly presenting the financial position and

the results of the operations of Borrower and its Subsidiaries as of the end of

and for such fiscal year, together with the unqualified opinion of independent

certified public accountants, which accountants shall be an independent

accounting firm selected by Borrower and reasonably acceptable to Lender, that

such financial statements have been prepared in accordance with GAAP, and

present fairly the results of operations and financial condition of Borrower

and its Subsidiaries as of the end of and for the fiscal year then ended.

 

(b) Borrower shall promptly notify Lender in

writing of the details of (i) any loss, damage, investigation, action, suit,

proceeding or claim relating to the Collateral or any other property which is

security for the Obligations or which would result in any material adverse

change in Borrower’s business, properties, assets, goodwill or condition,

financial or otherwise, (ii) any Material Contract of Borrower being terminated

or amended or any new Material Contract entered into (in which event Borrower

shall provide Lender with a copy of such Material Contract), (iii) any order,

judgment or decree in excess of $250,000 shall have been entered against

Borrower or any of its properties or assets, (iv) any notification of violation

of laws or regulations received by Borrower from any Governmental Authority,

(v) any notification of legal action commenced against Borrower (other than

from a Governmental Authority) alleging violation of any laws or regulations

involving an amount in excess of $250,000, (vi) any ERISA Event, and (vii) the

occurrence of any Event of Default or act, condition or event which,

 

53

 

with notice or the passage of time or giving of notice or both, would

constitute an Event of Default.

 

(c) Borrower shall promptly after the sending

or filing thereof furnish or cause to be furnished to Lender copies of all reports

which Borrower sends to its stockholders generally and copies of all reports

and registration statements which Borrower files with the Securities and

Exchange Commission, any national securities exchange or the National

Association of Securities Dealers, Inc.

 

(d) Borrower shall furnish or cause to be

furnished to Lender such budgets, forecasts, projections and other information

respecting the Collateral and the business of Borrower, as Lender may, from

time to time, reasonably request. The foregoing shall not be construed to

require that Borrower provide to Lender information with respect to the

business of Persons that are not Affiliates if doing so would result in a

breach of a written confidentially agreement between Borrower and such person

then in effect, which is valid and binding upon Borrower, provided, that, if

such information may be disclosed to Lender with the consent of such third

party or subject to Lender agreeing to keep such information confidential or

subject to any other conditions, Borrower shall provide such information to

Lender upon obtaining such consent or fulfilling such condition. Lender is

hereby authorized to deliver a copy of any financial statement or any other

information relating to the business of Borrower to any court or other

Governmental Authority or, subject to Section 12.6 hereof, to any participant

or assignee or prospective participant or assignee. Borrower hereby irrevocably

authorizes and directs all accountants or auditors to deliver to Lender, at

Borrower’s expense, copies of the financial statements of Borrower and any

reports or management letters prepared by such accountants or auditors on

behalf of Borrower and to disclose to Lender such information as they may have

regarding the business of Borrower. Any documents, schedules, invoices or other

papers delivered to Lender may be destroyed or otherwise disposed of by Lender

one (1) year after the same are delivered to Lender, except as otherwise

designated by Borrower to Lender in writing.

 

9.7 Sale

of Assets, Consolidation, Merger, Dissolution, Etc. Borrower shall not, and

shall not permit any Subsidiary to, directly or indirectly,

 

(a) merge into or with or consolidate with or

amalgamate with any other Person or permit any other Person to merge into or

with or consolidate with it; or

 

(b) sell, assign, lease, transfer, abandon or

otherwise dispose of any Capital Stock or Indebtedness to any other Person or

any of its assets to any other Person, except for

 

(i) sales of Inventory in the ordinary course

of business,

 

(ii) the disposition of worn-out or obsolete

Equipment so long as (A) any proceeds are paid to Lender and (B) such sales do

not involve Equipment having an aggregate fair market value in excess of

$150,000 for all such Equipment disposed of in any fiscal year of Borrower,

 

54

 

(iii) the issuance and sale by Borrower of

Capital Stock of Borrower after the date hereof; provided, that, (A) Lender

shall have received not less than ten (10) Business Days prior written notice

of such issuance and sale by Borrower, which notice shall specify the parties

to whom such shares are to be sold, the terms of such sale, the total amount

which it is anticipated will be realized from the issuance and sale of such stock

and the net cash proceeds which it is anticipated will be received by Borrower

from such sale, (B) Borrower shall not be required to pay any cash dividends or

repurchase or redeem such Capital Stock or make any other payments in respect

thereof, (C) the terms of such Capital Stock, and the terms and conditions of

the purchase and sale thereof, shall not include any terms that include any

limitation on the right of Borrower to request or receive Loans or Letter of

Credit Accommodations or the right of Borrower to amend or modify any of the

terms and conditions of this Agreement or any of the other Financing Agreements

or otherwise in any way relate to or affect the arrangements of Borrower with

Lender or are more restrictive or burdensome to Borrower than the terms of any

Capital Stock in effect on the date hereof, and (D) as of the date of such

issuance and sale and after giving effect thereto, no Event of Default or act,

condition or event which with notice or passage of time or both would

constitute an Event of Default shall exist or have occurred,

 

(iv) the issuance of Capital Stock of

Borrower consisting of common stock (or options or warrants to purchase such

common stock) pursuant to a stock option plan or 401(k) plan of Borrower for

the benefit of its employees, directors and consultants as compensation or

otherwise, provided, that, in no event shall Borrower be required to issue, or

shall Borrower issue, Capital Stock pursuant to such stock option plan or

401(k) plan which would result in a Change of Control or other Event of Default

and; or

 

(v) the sale by Borrower of the Real Property

consisting of vacant land currently owned by Borrower to be subject to the

Mortgage which land is adjacent to the facility of Borrower in Freehold, New

Jersey (referred to as Lot 8, Block 78 on the Freehold Township Tax Map),

provided, that, (A) as to such sale each of the following conditions is

satisfied as determined by Lender: (1) Lender shall have received not less than

ten (10) days’ prior written notice of the proposed sale by Borrower of such

land, which notice shall specify the parties to such sale, the purchase price

and manner of payment thereof and such other information with respect thereto

as Lender may request, (2) not less than eighty (80%) percent of the consideration

received from such sale shall be in the form of cash received by Borrower on

the effective date of the transfer of the title to such Real Property, (3) the

total amount of the consideration payable to Borrower in cash or other

immediately available funds in consideration of such sale at the time of the

transfer of title thereof shall be in an amount not less than the amount equal

to eighty (80%) percent of the fair market value of such Real Property as set

forth in the appraisal thereof currently being conducted on behalf of Lender by

Daley-Hodkin, Inc. (4) all proceeds from such sale shall be paid directly by

the purchaser to Lender, (5) if no Event of Default or act, condition or event

which with notice or passage of time or both would constitute an Event of

Default shall exist or have occurred, twenty-five (25%) percent of the net cash

proceeds from such sale shall

 

55

 

be applied to the installments of principal in respect of the Term Loan

in the inverse order of maturity as a mandatory prepayment thereof and the

remaining balance shall be applied to the Revolving Loans, and if an Event of

Default or act, condition or event which with notice or passage of time or both

would constitute an Event of Default, shall exist or have occurred, such

proceeds shall be applied to the Obligations in such order and manner as Lender

may determine, (6) such sale shall be on commercially reasonable terms in a

bona fide arms’ length transaction with a person that is not an Affiliate, (7)

as of the date of such sale and after giving effect thereto, no Event of

Default or act, condition or event which with notice or passage of time or both

would constitute an Event of Default shall exist or have occurred and (B) so long

as each of the conditions set forth in clause (A) are satisfied as determined

by Lender, Lender shall, upon Borrower’s request and at Borrower’s expense,

execute and deliver to Borrower a discharge and satisfaction of the Mortgage

with respect to such Real Property, in form and substance satisfactory to

Lender, such discharge and satisfaction to be effective only upon the

consummation of such sale and the satisfaction of each of the conditions set

forth in clause (A) above; or

 

(c) wind up, liquidate or dissolve; or

 

(d) agree to do any of the foregoing.

 

9.8 Encumbrances.

Borrower shall not, and shall permit any Subsidiary to, create, incur, assume

or suffer to exist any security interest, mortgage, pledge, lien, charge or

other encumbrance of any nature whatsoever on any of its assets or properties,

including the Collateral, except: (a) the security interests and liens of

Lender; (b) liens securing the payment of taxes, either not yet overdue or the

validity of which are being contested in good faith by appropriate proceedings

diligently pursued and available to Borrower or such Subsidiary, as the case

may be and with respect to which adequate reserves have been set aside on its

books; (c) non-consensual statutory liens (other than liens securing the payment

of taxes) arising in the ordinary course of Borrower’s or such Subsidiary’s

business to the extent: (i) such liens secure Indebtedness which is not overdue

or (ii) such liens secure Indebtedness relating to claims or liabilities which

are fully insured and being defended at the sole cost and expense and at the

sole risk of the insurer or being contested in good faith by appropriate

proceedings diligently pursued and available to Borrower or such Subsidiary, in

each case prior to the commencement of foreclosure or other similar proceedings

and with respect to which adequate reserves have been set aside on its books;

(d) zoning restrictions, easements, licenses, covenants and other restrictions

affecting the use of Real Property which do not interfere in any material

respect with the use of such Real Property or ordinary conduct of the business

of Borrower or such Subsidiary as presently conducted thereon or materially

impair the value of the Real Property which may be subject thereto; (e)

purchase money security interests in Equipment (including Capital Leases) and

purchase money mortgages on Real Property to secure Indebtedness permitted

under Section 9.9(b) hereof; (f) the mortgage and lien upon, and security

interest in, the Real Property of Borrower located in Freehold, New Jersey

described on Scheduled 9.8(f) hereof pursuant to the Fixed Rate NJEDA Bond

Agreements as in effect on the date hereof to secure the contingent

reimbursement

 

56

 

obligations of Borrower to Banque Nationale de Paris, Houston Agency as

the issuer of Fixed Rate NJEDA Bond Letter of Credit and the NJEDA pursuant to

such agreements to the extent permitted under Section 9.9 and (f) the security

interests and liens set forth on Schedule 8.4 hereto.

 

9.9 Indebtedness.

Borrower shall not, and shall not permit any Subsidiary to, incur, create,

assume, become or be liable in any manner with respect to, or permit to exist,

any Indebtedness, except:

 

(a) the Obligations;

 

(b) purchase money Indebtedness (including

Capital Leases) arising after the date hereof to the extent secured by purchase

money security interests in Equipment (including Capital Leases) and purchase

money mortgages on real estate not to exceed $250,000 in the aggregate at any

time outstanding so long as such security interests and mortgages do not apply

to any property of Borrower other than the Equipment or real estate so

acquired, and the Indebtedness secured thereby does not exceed the cost of the

Equipment or real estate so acquired, as the case may be;

 

(c) Indebtedness of Borrower under interest

swap agreements, interest rate cap agreements, interest rate collar agreements,

interest rate exchange agreements and similar contractual agreements entered

into for the purpose of protecting a Person against fluctuations in interest

rates; provided, that, such arrangements are with banks or other financial

institutions that have combined capital and surplus and undivided profits of

not less than $250,000,000 and are not for speculative purposes and such

Indebtedness shall be unsecured;

 

(d) Indebtedness of Borrower evidenced by or

arising under the Fixed Rate NJEDA Bond Agreements as in effect to the date

hereof; provided, that:

 

(i) the aggregate amount required to be paid

by Borrower pursuant to such Fixed Rate NJEDA Bond Agreements shall not exceed

$3,425,000, less the aggregate amount of all repayments, repurchases or

redemption, whether optional or mandatory in respect thereof, plus interest

thereon at the rate provided for in the Fixed Rate NJEDA Bonds as in effect on

the date hereof,

 

(ii) such Indebtedness is not secured by any

assets or properties of any Borrower other than the Real Property and related

assets described on Schedule 9.8(f) hereof pursuant to the Fixed Rate NJEDA

Bond Agreements as in effect on the date hereof,

 

(iii) Borrower shall not, directly or

indirectly, make any payments in respect of such Indebtedness, except, that,

Borrower may make regularly scheduled payments when due in accordance with the

terms of the Fixed Rate NJEDA Bond Agreements as in effect on the date hereof,

 

57

 

(iv) Borrower shall not, directly or

indirectly, (A) amend, modify, alter or change any terms of such Indebtedness

or any of the Fixed Rate NJEDA Bond Agreements, except that Borrower may, after

prior written notice to Lender, amend, modify, alter or change the terms

thereof so as to extend the maturity thereof or defer the timing of any

payments in respect thereof, or to forgive or cancel any portion of such

Indebtedness other than pursuant to payments thereof, or to reduce the interest

rate or any fees in connection therewith, or (B) redeem, entire, defease,

purchase or otherwise acquire such Indebtedness, or set aside or otherwise

deposit or invest any sums for such purpose, and

 

(v) Borrower shall furnish to Lender all

notices, demands or other materials concerning such Indebtedness either

received by Borrower or on its behalf, promptly after receipt thereof, or sent

by Borrower or on its behalf, concurrently with the sending thereof, as the

case may be;

 

(e) Indebtedness of Borrower evidenced by or

arising under the Floating Rate NJEDA Bond Agreements as in effect on the date

thereof; provided, that:

 

(i) the aggregate amount required to be paid

by Borrower pursuant to the Floating Rate NJEDA Bond Agreements shall not

exceed $2,120,000, less the aggregate amount of all repayments, repurchases or

redemptions, whether optional or mandatory in respect thereof, plus interest

thereon at the rate provided for in the Floating Rate NJEDA Bonds as in effect

on the date hereof;

 

(ii) such Indebtedness is not secured by any

assets or properties of Borrower,

 

(iii) Borrower shall not, directly or

indirectly, make any payments in respect of such Indebtedness, except, that,

such Indebtedness may be paid pursuant to draws under the Floating Rate NJEDA

Bond Letter of Credit (and the amount which may be drawn under such letter of

credit as of the date hereof is $2,155,577.13) and no payment shall be made by

Borrower to reimburse the issuer thereof, except after prior written notice and

with the prior written consent of Lender and then only to the extent Lender has

not made such payments to the issuer on behalf of Borrower;

 

(iv) Borrower shall not, directly or

indirectly, (A) amend, modify, alter or change any terms of such Indebtedness

or any of the Floating Rate NJEDA Bond Agreements except, that Borrower may,

after prior written notice to Lender, amend, modify, alter or change the terms

thereof so as to extend the maturity thereof or defer the timing of any

payments in respect thereof, or to forgive or cancel any portion of such

indebtedness other than pursuant to payments thereof, or to reduce the interest

rate or any fees in connection therewith, or (B) redeem, retire, defease,

purchase or otherwise acquire such Indebtedness, or set aside or otherwise

deposit or invest any sums for such purpose and,

 

58

 

(v) Borrower shall furnish to Lender all

notices, demands or other materials concerning such Indebtedness either

received by Borrower or on its behalf, promptly after receipt thereof, or sent

by Borrower or on its behalf, concurrently with the sending thereof, as the

case may be;

 

(f) Indebtedness of Guarantor to Borrower

arising pursuant to loans by Borrower to Guarantor permitted under Section 9.10

below;

 

(g) the Indebtedness of Borrower to Chase

Manhattan Bank consisting of the contingent reimbursements obligations to Chase

Manhattan Bank in the event of draw under the Floating Rate NJEDA Bond Letter

of Credit, provided, that, (i) in no event shall the amount of such contingent

reimbursement obligation exceed $2,155,577.13, as reduced by any principal

payments (whether as sinking fund payments or otherwise) in respect of the

Floating Rate NJEDA Bonds, (ii) the Floating Rate NJEDA Bond Letter of Credit

and such reimbursement obligations shall terminate and be cancelled and

Borrower shall have no other or further obligations to Chase Manhattan Bank in

respect thereof on and after January 15, 2001, (iii) such obligations of

Borrower to Chase Manhattan Bank shall be unsecured, (iv) Borrower shall not

make any payments in respect of such Indebtedness except with the prior written

consent of Lender, (v) Borrower shall not, directly or indirectly, (A) amend,

modify, alter or change any terms of such Indebtedness or any agreement related

thereto or (B) redeem, retire, defease, purchase or otherwise acquire such

Indebtedness, or set aside or otherwise deposit or invest any sums for such

purpose and (vi) Borrower shall furnish to Lender all notices, demands or other

materials concerning such Indebtedness either received by Borrower or on its

behalf, promptly after receipt thereof, or sent by Borrower or on its behalf,

concurrently with the sending thereof, as the case may be;

 

(h) the contingent obligations of Borrower to

certain landlords arising under leases of retail stores by Vitamin Specialties

Corp., for which Archon Vitamin Corp. is primarily liable pursuant to the

purchase by Archon Vitamin Corp. of the Capital Stock of Vitamin Specialties

Corp. from Borrower as described on Schedule 9.9(h) hereto;

 

(i) the Indebtedness set forth on Schedule

9.9(i) hereto; provided, that, (i) Borrower may only make regularly scheduled

payments of principal and interest in respect of such Indebtedness in

accordance with the terms of the agreement or instrument evidencing or giving

rise to such Indebtedness as in effect on the date hereof, (ii) Borrower shall

not, directly or indirectly, (A) amend, modify, alter or change the terms of

such Indebtedness or any agreement, document or instrument related thereto as

in effect on the date hereof except, that, Borrower may, after prior written

notice to Lender, amend, modify, alter or change the terms thereof so as to

extend the maturity thereof, or defer the timing of any payments in respect

thereof, or to forgive or cancel any portion of such Indebtedness (other than

pursuant to payments thereof), or to reduce the interest rate or any fees in

connection therewith, or (B) redeem, retire, defease, purchase or otherwise

acquire such Indebtedness, or set aside or otherwise deposit or invest any sums

for such purpose, and (iii) Borrower shall furnish to Lender all notices or

demands in connection with such Indebtedness either received by Borrower or on

its behalf, promptly after

 

59

 

the receipt thereof, or sent by Borrower or on its behalf, concurrently

with the sending thereof, as the case may be.

 

9.10 Loans, Investments, Guarantees, Etc. Borrower shall not, and

shall not permit any Subsidiary to, directly or indirectly, make any loans or

advance money or property to any person, or invest in (by capital contribution,

dividend or otherwise) or purchase or repurchase the Capital Stock or

Indebtedness or all or a substantial part of the assets or property of any

person, or guarantee, assume, endorse, or otherwise become responsible for

(directly or indirectly) the Indebtedness, performance, obligations or

dividends of any Person, or form or acquire any Subsidiaries, or agree to do

any of the foregoing, except:

 

(a) the endorsement of instruments for

collection or deposit in the ordinary course of business;

 

(b) investments in cash or Cash Equivalents,

provided, that, (i) no Revolving Loans are then outstanding and (ii) as to any

of the foregoing, unless waived in writing by Lender, Borrower shall take such

actions as are deemed necessary by Lender to perfect the security interest of

Lender in such investments;

 

(c) the existing equity investments of

Borrower as of the date hereof in its Subsidiaries, provided, that, Borrower

shall have no obligation to make any other investment in, or loans to, or other

payments in respect of, any such Subsidiaries;

 

(d) guarantees by any Subsidiaries of

Borrower of the Obligations in favor of Lender;

 

(e) stock or obligations issued to Borrower

by any Person (or the representative of such Person) in respect of Indebtedness

of such Person owing to Borrower in connection with the insolvency, bankruptcy,

receivership or reorganization of such Person or a composition or readjustment

of the debts of such Person; provided, that, the original of any such stock or

instrument evidencing such obligations shall be promptly delivered to Lender,

upon Lender’s request, together with such stock power, assignment or

endorsement by Borrower as Lender may request;

 

(f) obligations or account debtors to

Borrower arising from Accounts which are past due evidenced by a promissory

note made by such account debtor payable to Borrower; provided, that, promptly

upon the receipt of the original of any such promissory note by Borrower, such

promissory note shall be endorsed to the order of Lender by Borrower and

promptly delivered to Lender as so endorsed;

 

(g) loans by Borrower to Guarantor after the

date hereof, provided, that, (i) the aggregate amount of all such loans at any

time outstanding shall not exceed $250,000, (ii) as of the date of any such

loan and after giving effect thereto, Excess Availability shall be not less

than

 

60

 

$1,500,000, and (iii) as of the date of any such loan and after giving

effect thereto, no Event of Default, shall exist or have occurred;

 

(h) purchases by Borrower of its Capital

Stock from time to time substantially contemporaneously with the giving of such

shares to employees to the extent necessary to match contributions by such

employees to the 401(k) plan maintained by Borrower in accordance with the

terms of such plan as in effect on the date hereof;

 

(i) the loans, advances and guarantees set

forth on Schedule 9.10 hereto; provided, that, as to such loans, advances and

guarantees, (i) Borrower shall not, directly or indirectly, (A) amend, modify,

alter or change the terms of such loans, advances or guarantees or any

agreement, document or instrument related thereto, or (B) as to such

guarantees, redeem, retire, defease, purchase or otherwise acquire the

obligations arising pursuant to such guarantees, or set aside or otherwise

deposit or invest any sums for such purpose, and (ii) Borrower shall furnish to

Lender all notices or demands in connection with such loans, advances or

guarantees or other Indebtedness subject to such guarantees either received by

Borrower or on its behalf, promptly after the receipt thereof, or sent by

Borrower or on its behalf, concurrently with the sending thereof, as the case

may be.

 

9.11 Dividends and Redemptions. Borrower shall not,

directly or indirectly, declare or pay any dividends on account of any shares

of class of capital stock of Borrower now or hereafter outstanding, or set

aside or otherwise deposit or invest any sums for such purpose, or redeem,

retire, defease, purchase or otherwise acquire any shares of any class of capital

stock (or set aside or otherwise deposit or invest any sums for such purpose)

for any consideration other than common stock or apply or set apart any sum, or

make any other distribution (by reduction of capital or otherwise) in respect

of any such shares or agree to do any of the foregoing.

 

9.12 Transactions with Affiliates. Borrower

shall not, directly or indirectly, (a) purchase, acquire or lease any property

from, or sell, transfer or lease any property to, any officer, director, agent

or other person affiliated with Borrower, except in the ordinary course of and

pursuant to the reasonable requirements of Borrower’s business and upon fair

and reasonable terms no less favorable to the Borrower than Borrower would

obtain in a comparable arm’s length transaction with an unaffiliated person or

(b) make any payments of management, consulting or other fees for management or

similar services, or of any Indebtedness owing to any officer, employee,

shareholder, director or other Affiliate of Borrower except (i) reasonable

compensation to officers, employees and directors for services rendered to

Borrower in the ordinary course of business and (ii) as set forth on Schedule

9.12 hereto.

 

9.13 Additional Bank Accounts. Borrower shall

not, directly or indirectly, open, establish or maintain any deposit account,

investment account or any other account with any bank or other financial

institution, other than the Blocked Accounts and the accounts set forth in

Schedule 8.10 hereto, except: (a) as to any new or additional Blocked Accounts

and other such new or additional accounts which contain any Collateral or

proceeds thereof, with the prior

 

61

 

written consent of Lender and subject to such conditions thereto as

Lender may establish and (b) as to any accounts used by Borrower to make

payments of payroll, taxes or other obligations to third parties, after prior

written notice to Lender.

 

9.14 Compliance with ERISA. Borrower shall and shall

cause each of its ERISA Affiliates to: (a) maintain each Plan in compliance in

all material respects with the applicable provisions of ERISA, the Code and

other Federal and State law; (b) cause each Plan which is qualified under

Section 401(a) of the Code to maintain such qualification; (c) not terminate

any of such Plans so as to incur any liability to the Pension Benefit Guaranty

Corporation; (d) not allow or suffer to exist any prohibited transaction

involving any of such Plans or any trust created thereunder which would subject

Borrower or such ERISA Affiliate to a tax or penalty or other liability on

prohibited transactions imposed under Section 4975 of the Code or ERISA; (e)

make all required contributions to any Plan which it is obligated to pay under

Section 302 of ERISA, Section 412 of the Code or the terms of such Plan; (f)

not allow or suffer to exist any accumulated funding deficiency, whether or not

waived, with respect to any such Plan; or (g) allow or suffer to exist any

occurrence of a reportable event or any other event or condition which presents

a material risk of termination by the Pension Benefit Guaranty Corporation of

any such Plan that is a single employer plan, which termination could result in

any liability to the Pension Benefit Guaranty Corporation.

 

9.15 End of Fiscal Years; Fiscal Quarters. Borrower shall,

for financial reporting purposes, cause its, and each of its Subsidiaries’ (a)

fiscal years to end on July 31 of each year and (b) fiscal quarters to end on

July 31, October 31, January 31 and April 30 of each year except that Borrower

may change its fiscal year with prior written consent of Lender.

 

9.16 Change in Business.

 

(a) Borrower shall not engage in any business

other than the business of Borrower on the date hereof and any business

reasonably related, ancillary or complimentary to the business in which

Borrower is engaged on the date hereof;

 

(b) Borrower shall not, directly or

indirectly, suffer or permit Hidel Partners or International Vitamin Overseas

Corp. to engage in any business or commercial activity (other than to the

extent required to maintain its corporate existence under applicable law) or to

own or hold any material assets of properties, other than in the case of Hidel

Partners to the extent of its interest in the real property and related assets

used by Borrower located at 500 Halls Mill Road, Freehold, New Jersey 07723

(and including the vacant undeveloped and adjacent thereto to be subject to the

Mortgage) and the sale thereof to the extent permitted hereunder. Borrower is

and at all times shall be the sole partner of Hidel Partners.

 

9.17 Limitation of Restrictions Affecting

Subsidiaries. Borrower shall not, directly, or indirectly, create or otherwise

cause or suffer to exist any encumbrance or restriction which prohibits or

limits the ability of any Subsidiary of Borrower to (a) pay dividends or make

other

 

62

 

distributions or pay any Indebtedness owed to Borrower or any

Subsidiary of Borrower; (b) make loans or advances to Borrower or any

Subsidiary of Borrower, (c) transfer any of its properties or assets to

Borrower or any Subsidiary of Borrower; or (d) create, incur, assume or suffer

to exist any lien upon any of its property, assets or revenues, whether now

owned or hereafter acquired, other than encumbrances and restrictions arising

under (i) applicable law, (ii) this Agreement, (iii) customary provisions

restricting subletting or assignment of any lease governing a leasehold

interest of Borrower or any of its Subsidiaries, (iv) customary restrictions on

dispositions of real property interests found in reciprocal easement agreements

of Borrower or its Subsidiary, (v) any agreement relating to permitted

Indebtedness incurred by a Subsidiary of Borrower prior to the date on which

such Subsidiary was acquired by Borrower and outstanding on such acquisition

date, and (vi) the extension or continuation of contractual obligations in

existence on the date hereof; provided, that, any such encumbrances or

restrictions contained in such extension or continuation are no less favorable

to Lender than those encumbrances and restrictions under or pursuant to the

contractual obligations so extended or continued.

 

9.18 Adjusted Tangible Net Worth. Borrower shall,

at all times, maintain Adjusted Tangible Net Worth of not less than

$10,000,000.

 

9.19 Real Property Collateral. In addition to any

other agreements, documents or instruments at any time to be delivered by

Borrower to Lender, as soon as possible, but in any event prior to January 31,

2001, Borrower shall deliver or cause to be delivered to the following, each in

form and substance satisfactory to Lender:

 

(a) the Mortgage, duly authorized, executed

and delivered by Hidel Partners and Borrower;

 

(b) environmental audits of the Real Property

to be subject to the Mortgage conducted by an independent environmental

engineering firm acceptable to Lender, and in form, scope and methodology

satisfactory to Lender, confirming (i) Borrower is in compliance with all

material applicable Environmental Laws and (ii) the absence of any material

environmental problems;

 

(c) a valid and effective title insurance

policy with respect to the Real Property to be subject to the Mortgage issued

by a company and agent acceptable to Lender (i) insuring the priority, amount

and sufficiency of the Mortgage, (ii) insuring against matters that would be

disclosed by surveys and (iii) containing any legally available endorsements,

assurances or affirmative coverage requested by Lender for protection of its

interests;

 

(d) evidence that Lender has a first priority

mortgage and lien upon, and security interest in, the Real Property and related

assets of Hidel Partners and Borrower to be subject to the Mortgage;

 

63

 

(e) a written appraisal as to the Real

Property of Hidel Partners and Borrower to be subject to the Mortgage, at the

expense of Borrower, by an appraiser acceptable to Lender, addressed to Lender

and on which Lender is expressly permitted to rely, in form, scope and methodology

satisfactory to Lender;

 

(f) an executed original of the release and

discharge of the existing Mortgage and Security Agreement by Hidel Partners in

favor of NJEDA and the issuer of the Fixed Rate NJEDA Bond Letter of Credit in

form acceptable for recording with the applicable recording office, with

respect to the Real Property and related assets to be subject to the Mortgage,

duly authorized, executed and delivered by the NJEDA and such issuer; and

 

(g) a current ALTA certified survey with

respect to the Real Property of Hidel Partners and Borrower to be subject to

the Mortgage by acceptable registered land surveyors certified by such surveyor

to Lender and the title insurance company indicating length and bearing of

exterior boundary lines, measurements of the distance between buildings and

boundary lines, locations of fences, drives, utility and other easements,

encroachments, any existing building, ingress and egress, and such other items

as Lender requires and with a legal description.

 

9.20 Costs and Expenses. Borrower shall pay to Lender on

demand all costs, expenses, filing fees and taxes paid or payable in connection

with the preparation, negotiation, execution, delivery, recording,

administration, collection, liquidation, enforcement and defense of the

Obligations, Lender’s rights in the Collateral, this Agreement, the other

Financing Agreements and all other documents related hereto or thereto,

including any amendments, supplements or consents which may hereafter be

contemplated (whether or not executed) or entered into in respect hereof and

thereof, including: (a) all costs and expenses of filing or recording

(including UCC financing statements, PPSA financing statements, filing taxes

and fees, documentary taxes, intangibles taxes and mortgage recording taxes and

fees, if applicable); (b) costs and expenses and fees for insurance premiums,

environmental audits, surveys, assessments, engineering reports and

inspections, appraisal fees and search fees, costs and expenses of remitting

loan proceeds, collecting checks and other items of payment, and establishing

and maintaining the Blocked Accounts, together with Lender’s customary charges

and fees with respect thereto; (c) charges, fees or expenses charged by any

bank or issuer in connection with the Letter of Credit Accommodations; (d)

costs and expenses of preserving and protecting the Collateral; (e) costs and

expenses paid or incurred in connection with obtaining payment of the

Obligations, enforcing the security interests and liens of Lender, selling or

otherwise realizing upon the Collateral, and otherwise enforcing the provisions

of this Agreement and the other Financing Agreements or defending any claims

made or threatened against Lender arising out of the transactions contemplated

hereby and thereby (including preparations for and consultations concerning any

such matters); (f) any goods and services taxes or other value added taxes

incurred by Lender; (g) all out-of-pocket expenses and costs heretofore and

from time to time hereafter incurred by Lender during the course of periodic

field examinations of the Collateral and Borrower’s operations, plus a per diem

charge at the rate of $750 per person per day for

 

64

 

Lender’s examiners in the field and office; and (h) the fees and

disbursements of counsel (including legal assistants) to Lender in connection

with any of the foregoing.

 

9.21 65. At the request of

Lender at any time and from time to time, Borrower shall, at its expense, duly

execute and deliver, or cause to be duly executed and delivered, such further

agreements, documents and instruments, and do or cause to be done such further

acts as may be necessary or proper to evidence, perfect, maintain and enforce

the security interests and the priority thereof in the Collateral and to

otherwise effectuate the provisions or purposes of this Agreement or any of the

other Financing Agreements. Lender may at any time and from time to time

request a certificate from an officer of Borrower representing that all

conditions precedent to the making of Loans and providing Letter of Credit

Accommodations contained herein are satisfied. In the event of such request by

Lender, Lender may, at its option, cease to make any further Loans or provide

any further Letter of Credit Accommodations until Lender has received such

certificate and, in addition, Lender has determined that such conditions are

satisfied. Where permitted by law, Borrower hereby authorizes Lender to execute

and file one or more UCC financing statements and PPSA financing statements

signed only by Lender.

 

SECTION 10. EVENTS OF DEFAULT AND REMEDIES

 

10.1 Events of Default. The occurrence or existence of any

one or more of the following events are referred to herein individually as an

“Event of Default”, and collectively as “Events of Default”:

 

(a) 

(i)  Borrower fails to pay any of

the Obligations when due or (ii) Borrower fails to perform any of the covenants

contained in Sections 9.3, 9.4, 9.6, 9.13, 9.14, 9.15, 9.16, 9.17, 9.19, 9.20

or 9.21 of this Agreement and such failure shall continue for ten (10) Business

Days, provided, that, in each case, such ten (10) Business Day period shall not

apply in the case of any failure to observe any such covenant which is not

capable of being cured at all or within such ten (10) Business Day period or

which has been the subject of a prior failure within a six (6) month period or

(iii) Borrower fails to perform, or otherwise breaches or violates, any of the

terms, covenants, conditions or provisions contained in this Agreement or any

of the other Financing Agreements, other than those described in Sections

10.1(a)(i) and 10.1(a)(ii) above;

 

(b) any representation, warranty or statement

of fact made by Borrower or any Obligor to Lender in this Agreement, the other

Financing Agreements or any other agreement, schedule, confirmatory assignment

or otherwise shall when made or deemed made be false or misleading in any

material respect;

 

(c) any Obligor revokes, terminates or fails

to perform any of the terms, covenants, conditions or provisions of any

guarantee, endorsement or other agreement of such party in favor of Lender;

 

65

 

(d) any judgment for the payment of money is

rendered against Borrower or any Obligor in excess of $100,000 in any one case

or in excess of $250,000 in the aggregate and shall remain undischarged or

unvacated for a period in excess of forty-five (45) days (except if Borrower or

such Obligor has promptly appealed such judgment and execution is at all times

effectively stayed during such appeal) or execution shall at any time not be

effectively stayed, or any judgment other than for the payment of money, or

injunction, attachment, garnishment or execution is rendered against Borrower

or any Obligor or any of their assets (except as to a garnishment as to assets

in Canada, any garnishment order entered merely upon the commencement of a

legal action against Borrower or Guarantor in Canada where all amounts subject

to such garnishment are paid to the court and not the garnishee, only if an

appropriate motion or other action required by the applicable court to dismiss

such garnishment is not brought within ten (10) Business Days after the date of

the effectiveness of the garnishment and only if such garnishment is not

dismissed within twenty (20) Business Days);

 

(e) Borrower or any Obligor dissolves or

suspends or discontinues doing business;

 

(f) Borrower or any Obligor becomes insolvent

(however defined or evidenced), makes an assignment for the benefit of

creditors, makes or sends notice of a bulk transfer or calls a meeting of its

creditors or principal creditors in connection with a moratorium or adjustment

of the obligations of Borrower to such creditors;

 

(g) a case or proceeding under the bankruptcy

laws of the United States of America now or hereafter in effect, or a petition,

case, application or proceeding under any bankruptcy or insolvency laws of

Canada (including the Bankruptcy and Insolvency Act (Canada) and the Companies’

Creditors Arrangement Act (Canada)) or any similar law now or hereafter in

effect in any jurisdiction or under any insolvency, arrangements,

reorganization, moratorium, receivership, readjustment of debt, dissolution or

liquidation law or statute of any jurisdiction now or hereafter in effect

(whether at law or in equity) is filed against Borrower or any Obligor or all

or any part of its properties and such petition or application is not dismissed

within thirty (30) days after the date of its filing or Borrower or any Obligor

shall file any answer admitting or not contesting such petition or application

or indicates its consent to, acquiescence in or approval of, any such action or

proceeding or the relief requested is granted sooner;

 

(h) a case or proceeding under the bankruptcy

laws of the United States of America now or hereafter in effect, or a petition,

case, application or proceeding under any bankruptcy or insolvency laws of

Canada (including the Bankruptcy and Insolvency Act (Canada)) and the

Companies’ Creditors Arrangement Act (Canada) or any similar law now or

hereafter in effect in any jurisdiction or under any insolvency, arrangement,

reorganization, moratorium, receivership, readjustment of debt, dissolution or

liquidation law or statute of any jurisdiction now or hereafter in effect

(whether at a law or equity) is filed, taken or commenced after the date hereof

by Borrower or any Obligor or for all or any part of its property, including,

without limitation, if Borrower or any Obligor shall: (i) apply for, request or

consent to the appointment of a receiver, administrative receiver, receiver and

manager, examiner, judicial custodian, trustee, liquidator official manager,

administrator or other controller or any other similar official of it or of all

or a

 

66

 

substantial part of its property and assets, (ii) be unable, or admit

in writing its inability, to pay its debts as they become due, or commit any

other act of bankruptcy, (iii) make a general assignment for the benefit of

creditors, (iv) file a voluntary petition or assignment in bankruptcy or a

proposal seeking a reorganization, compromise, moratorium or arrangement with

its creditors, (v) take advantage of any insolvency or other similar law

pertaining to arrangements, moratoriums, compromises or reorganizations, or

admit the material allegations of a petition or application filed in respect of

it in any bankruptcy, reorganization or insolvency proceeding, or (vi) take any

corporate action for the purpose of effecting any of the foregoing;

 

(i) any default by Borrower or any Obligor

under any agreement, document or instrument relating to any Indebtedness for

borrowed money owing to any person other than Lender, (and including any of the

Fixed Rate NJEDA Bond Agreements or any of the Floating Rate NJEDA Bond

Agreements), or any Capital Lease, contingent Indebtedness in connection with

any guarantee, letter of credit, indemnity or similar type of instrument in

favor of any person other than Lender in any case in an amount in excess of

$200,000, which default continues for more than the applicable cure period, if

any, with respect thereto, or any default by Borrower or any Obligor under any

material contract, lease, license or other obligation to any person other than

Lender, which default continues for more than the applicable cure period, if

any, with respect thereto;

 

(j) an ERISA Event shall occur which results

in or could reasonably be expected to result in liability of Borrower or any

Obligor in an aggregate amount in excess of $200,000;

 

(k) any Change of Control;

 

(l) the indictment by any Governmental

Authority, or as Lender may reasonably and in good faith determine, the

threatened indictment by any Governmental Authority of Borrower or any Obligor

of which Borrower or any Obligor or Lender receives notice, in either case, as

to which there is a reasonable possibility of an adverse determination, in the

good faith determination of Lender, under any criminal statute, or commencement

or threatened commencement of criminal or civil proceedings against Borrower or

any Obligor, pursuant to which statute or proceedings the penalties or remedies

sought or available include forfeiture of (i) any of the Collateral or (ii) any

other property of Borrower which is necessary or material to the conduct of its

business;

 

(m) there shall be a material adverse change

in the business or assets of Borrower or any Obligor after the date hereof; or

 

(n) there shall be an event of default under

any of the other Financing Agreements.

 

67

 

10.2 Remedies.

 

(a) At any time an Event of Default exists or

has occurred and is continuing, Lender shall have all rights and remedies

provided in this Agreement, the other Financing Agreements, the PPSA, the UCC

and other applicable law, all of which rights and remedies may be exercised

without notice to or consent by Borrower or any Obligor, except as such notice

or consent is expressly provided for hereunder or required by applicable law.

All rights, remedies and powers granted to Lender hereunder, under any of the

other Financing Agreements, PPSA, the UCC or other applicable law, are

cumulative, not exclusive and enforceable, in Lender’s discretion,

alternatively, successively, or concurrently on any one or more occasions, and

shall include, without limitation, the right to apply to a court of equity for

an injunction to restrain a breach or threatened breach by Borrower or any

Obligor of this Agreement or any of the other Financing Agreements. Lender may,

at any time or times, proceed directly against Borrower or any Obligor to

collect the Obligations without prior recourse to the Collateral.

 

(b) Without limiting the foregoing, at any

time an Event of Default exists or has occurred and is continuing, Lender may,

in its discretion and without limitation, (i) accelerate the payment of all

Obligations and demand immediate payment thereof to Lender (provided, that,

upon the occurrence of any Event of Default described in Sections 10.1(g) and

10.1(h), all Obligations shall automatically become immediately due and

payable), (ii) with or without judicial process or the aid or assistance of

others, enter upon any premises on or in which any of the Collateral may be

located and take possession of the Collateral or complete processing,

manufacturing and repair of all or any portion of the Collateral, (iii) require

Borrower, at Borrower’s expense, to assemble and make available to Lender any

part or all of the Collateral at any place and time designated by Lender, (iv)

collect, foreclose, receive, appropriate, setoff and realize upon any and all

Collateral, (v) remove any or all of the Collateral from any premises on or in

which the same may be located for the purpose of effecting the sale,

foreclosure or other disposition thereof or for any other purpose, (vi) sell,

lease, transfer, assign, deliver or otherwise dispose of any and all Collateral

(including entering into contracts with respect thereto, public or private

sales at any exchange, broker’s board, at any office of Lender or elsewhere) at

such prices or terms as Lender may deem reasonable, for cash, upon credit or

for future delivery, with the Lender having the right to purchase the whole or

any part of the Collateral at any such public sale, all of the foregoing being

free from any right or equity of redemption of Borrower, which right or equity

of redemption is hereby expressly waived and released by Borrower and/or (vii)

terminate this Agreement. If any of the Collateral is sold or leased by Lender

upon credit terms or for future delivery, the Obligations shall not be reduced

as a result thereof until payment therefor is finally collected by Lender. If

notice of disposition of Collateral is required by law, ten (10) days prior

notice by Lender to Borrower designating the time and place of any public sale

or the time after which any private sale or other intended disposition of

Collateral is to be made, shall be deemed to be reasonable notice thereof and

Borrower waives any other notice. In the event Lender institutes an action to

recover any Collateral or seeks recovery of any Collateral by way of

prejudgment remedy, Borrower waives the posting of any bond which might

otherwise be required.

 

68

 

(c) For the purpose of enabling Lender to

exercise the rights and remedies hereunder, Borrower hereby grants to Lender,

to the extent assignable, an irrevocable, non-exclusive license (exercisable

without payment of royalty or other compensation to Borrower) to use, assign,

license or sublicense any of the trademarks, service-marks, trade names,

business names, trade styles, designs, logos and other source of business

identifiers and other Intellectual Property and general intangibles now owned

or hereafter acquired by Borrower, wherever the same maybe located, including

in such license reasonable access to all media in which any of the licensed

items may be recorded or stored and to all computer programs used for the

compilation or printout thereof.

 

(d) Lender may apply the cash proceeds of

Collateral actually received by Lender from any sale, lease, foreclosure or

other disposition of the Collateral to payment of the Obligations, in whole or

in part and in such order as Lender may elect, whether or not then due. Borrower

shall remain liable to Lender for the payment of any deficiency with interest

at the highest rate provided for herein and all costs and expenses of

collection or enforcement, including attorneys’ fees and legal expenses.

 

(e) Lender may appoint, remove and reappoint

any person or persons, including an employee or agent of Lender, to be a

receiver (the “Receiver”) which term shall include a receiver and manager of,

or agent for, all or part of the Collateral. Any such Receiver shall, as far as

concerns responsibility for his acts, be deemed to be the agent of Borrower and

Guarantor and not of Lender, and Lender shall not in any way be responsible for

any misconduct, negligence or non-feasance of such Receiver, its employees or

agents. Except as otherwise directed by Lender, all money shall be received in

trust for and paid to Lender. Such Receiver shall have all of the powers and

rights of Lender described in this Agreement. Lender may, either directly or

through its agents or nominees, exercise any or all powers and rights of a

Receiver.

 

(f) On and after an Event of Default and for

so long as the same is continuing, Borrowers shall pay all costs, charges and

expenses incurred by Lender or any Receiver or any nominee or agent of Lender,

whether directly or for services rendered (including, without limitation,

solicitor’s costs on a solicitor and his own client basis, auditor’s costs,

other legal expenses and Receiver remuneration) in enforcing this Agreement or

any of the other Financing Agreement and in enforcing or collecting Obligations

and all such expenses together with any money owing as a result of any

borrowing permitted hereby shall be a charge on the proceeds of realization and

shall be secured hereby.

 

(g) Without limiting the foregoing, upon the

occurrence of an Event of Default or an event which with notice or passage of

time or both would constitute an Event of Default, Lender may, at its option,

without notice, (i) cease making Loans or arranging for Letter of Credit

Accommodations or reduce the lending formulas or amounts of Revolving Loans and

Letter of Credit Accommodations available to Borrower and/or (ii) terminate any

provision of this Agreement providing for any future Loans or Letter of Credit

Accommodations to be made by Lender to Borrower.

 

69

 

SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS

AND CONSENTS; GOVERNING LAW

 

11.1 Governing Law; Choice of Forum; Service

of Process; Jury Trial Waiver.

 

(a) The validity,

interpretation and enforcement of this Agreement and the other Financing

Agreements (except to the extent otherwise provided in the Mortgage) and any

dispute arising out of the relationship between the parties hereto, whether in

contract, tort, equity or otherwise, shall be governed by the laws of the State

of New York (without giving effect to principles of conflicts of law).

 

(b) Borrower and Lender

irrevocably consent and submit to the non-exclusive jurisdiction of the Supreme

Court of the State of New York in New York County and the United States

District Court for the Southern District of New York and waive any objection

based on venue or forum non conveniens with respect to any action instituted

therein arising under this Agreement or any of the other Financing Agreements

or in any way connected with or related or incidental to the dealings of the

parties hereto in respect of this Agreement or any of the other Financing

Agreements or the transactions related hereto or thereto, in each case whether

now existing or hereafter arising, and whether in contract, tort, equity or

otherwise, and agree that any dispute with respect to any such matters shall be

heard only in the courts described above (except that Lender shall have the

right to bring any action or proceeding against Borrower or its property in the

courts of any other jurisdiction which Lender deems necessary or appropriate in

order to realize on the Collateral or to otherwise enforce its rights against

Borrower or its property).

 

(c) Borrower hereby waives

personal service of any and all process upon it and consents that all such

service of process may be made by certified mail (return receipt requested)

directed to its address set forth on the signature pages hereof and service so

made shall be deemed to be completed five (5) Business Days after the same

shall have been so deposited in the U.S. mails as evidenced by the official

postage date affixed thereto, or, at Lender’s option, by service upon Borrower

in compliance with any other manner of service provided for under the rules of

the court of the jurisdiction in which the action is commenced. Within thirty

(30) days after such service, Borrower shall appear in answer to such process,

failing which Borrower shall be deemed in default and judgment may be entered

by Lender against Borrower for the amount of the claim and other relief

requested.

 

(d) BORROWER AND LENDER

EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR

CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING

AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE

DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER

FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE

WHETHER NOW

 

70

 

EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR

OTHERWISE. BORROWER AND LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH

CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL

WITHOUT A JURY AND THAT BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF

A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF

THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

(e) Lender shall not have

any liability to Borrower (whether in tort, contract, equity or otherwise) for

losses suffered by Borrower in connection with, arising out of, or in any way

related to the transactions or relationships contemplated by this Agreement, or

any act, omission or event occurring in connection herewith, unless it is

determined by a final non-appealable order of a court of competent jurisdiction

binding on Lender (provided that such order need not be non-appealable if

Lender elects not to exercise its right to appeal such order), that the losses

were the result of acts or omissions constituting gross negligence or willful

misconduct. In any such litigation, Lender shall be entitled to the benefit of

the rebuttable presumption that it acted in good faith and with the exercise of

ordinary care in the performance by it of the terms of this Agreement.

 

11.2 Waiver of Notices. Borrower hereby expressly waives

demand, presentment, protest and notice of protest and notice of dishonor with

respect to any and all instruments and chattel paper, included in or evidencing

any of the Obligations or the Collateral, and any and all other demands and

notices of any kind or nature whatsoever with respect to the Obligations, the

Collateral and this Agreement, except such as are expressly provided for

herein. No notice to or demand on Borrower which Lender may elect to give shall

entitle Borrower to any other or further notice or demand in the same, similar

or other circumstances.

 

11.3 Amendments and Waivers. Neither this Agreement nor

any provision hereof shall be amended, modified, waived or discharged orally or

by course of conduct, but only by a written agreement signed by an authorized

officer of Lender, and as to amendments, as also signed by an authorized

officer of Borrower. Lender shall not, by any act, delay, omission or otherwise

be deemed to have expressly or impliedly waived any of its rights, powers

and/or remedies unless such waiver shall be in writing and signed by an

authorized officer of Lender. Any such waiver shall be enforceable only to the

extent specifically set forth therein. A waiver by Lender of any right, power

and/or remedy on any one occasion shall not be construed as a bar to or waiver

of any such right, power and/or remedy which Lender would otherwise have on any

future occasion, whether similar in kind or otherwise.

 

11.4 Waiver of Counterclaims. Borrower waives all

rights to interpose any claims, deductions, setoffs or counterclaims of any

nature (other then compulsory counterclaims) in any action or proceeding with

respect to this Agreement, the Obligations, the Collateral or any matter

arising therefrom or relating hereto or thereto.

 

71

 

11.5 Indemnification. Borrower shall indemnify and hold

Lender, and its directors, agents, employees and counsel, harmless from and

against any and all losses, claims, damages, liabilities, costs or expenses

imposed on, incurred by or asserted against any of them in connection with any

litigation, investigation, claim or proceeding commenced or threatened related

to the negotiation, preparation, execution, delivery, enforcement, performance

or administration of this Agreement, any other Financing Agreements, or any

undertaking or proceeding related to any of the transactions contemplated

hereby or any act, omission, event or transaction related or attendant thereto,

including amounts paid in settlement, court costs, and the fees and expenses of

counsel. To the extent that the undertaking to indemnify, pay and hold harmless

set forth in this Section may be unenforceable because it violates any law or

public policy, Borrower shall pay the maximum portion which it is permitted to

pay under applicable law to Lender in satisfaction of indemnified matters under

this Section. The foregoing indemnity shall survive the payment of the

Obligations and the termination or non-renewal of this Agreement.

 

11.6 Currency Indemnity. If, for the purposes of

obtaining judgment in any court in any jurisdiction with respect to this

Agreement or any of the other Financing Agreements, it becomes necessary to

convert into the currency of such jurisdiction (the “Judgment Currency”) any

amount due under this Agreement or under any of the other Financing Agreements

in any currency other than the Judgment Currency (the “Currency Due”), then

conversion shall be made pursuant to the Currency Exchange Convention at which

Lender is able, on the relevant date, to purchase the Currency Due with the

Judgment Currency prevailing on the Business Day before the day on which

judgment is given. In the event that there is a change in the rate pursuant to

the Currency Exchange Convention prevailing between the Business Day before the

day on which the judgment is given and the date of receipt by Lender of the

amount due, Borrower will, on the date of receipt by Lender, pay such

additional amounts, if any, or be entitled to receive reimbursement of such

amount, if any, as may be necessary to ensure that the amount received by

Lender on such date is the amount in the Judgment Currency which when converted

at the rate of exchange prevailing on the date of receipt by Lender is the

amount then due under this Agreement or such other of the Financing Agreements

in the Currency Due. If the amount of the Currency Due which Lender is able to

purchase is less than the amount of the Currency Due originally due to it,

Borrower shall indemnify and save Lender harmless from and against loss or

damage arising as a result of such deficiency. The indemnity contained herein

shall constitute an obligation separate and independent from the other

obligations contained in this Agreement and the other Financing Agreements,

shall give rise to a separate and independent cause of action, shall apply

irrespective of any indulgence granted by Lender from time to time and shall

continue in full force and effect notwithstanding any judgment or order for a

liquidated sum in respect of an amount due under this Agreement or any of the

other Financing Agreements or under any judgment or order. 

 

SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS

 

12.1 Term.

 

72

 

(a) This Agreement and the

other  Financing  Agreements 

shall become  effective as of the

date set forth on the first page hereof and shall continue in full force and

effect for a term ending on the date three (3) years from the date hereof (the

“Renewal Date”), and from year to year thereafter, unless sooner terminated

pursuant to the terms hereof. Lender or Borrower may terminate this Agreement

and the other Financing Agreements effective on the Renewal Date or on the

anniversary of the Renewal Date in any year by giving to the other party at

least ninety (90) days prior written notice; provided, that, this Agreement and

all other Financing Agreements must be terminated simultaneously. Upon the

effective date of termination or non-renewal of the Financing Agreements,

Borrower shall pay to Lender, in full, all outstanding and unpaid Obligations

and shall furnish cash collateral to Lender in such amounts as Lender determines

are reasonably necessary to secure Lender from loss, cost, damage or expense,

including attorneys’ fees and legal expenses, in connection with any contingent

Obligations, including issued and outstanding Letter of Credit Accommodations

and checks or other payments provisionally credited to the Obligations and/or

as to which Lender has not yet received final and indefeasible payment. Such

payments in respect of the Obligations and cash collateral shall be remitted by

wire transfer in Federal funds to such bank account of Lender, as Lender may,

in its discretion, designate in writing to Borrower for such purpose. Interest

shall be due until and including the next business day, if the amounts so paid

by Borrower to the bank account designated by Lender are received in such bank

account later than 12:00 noon, New York City time.

 

(b) No termination of this

Agreement or the other Financing Agreements shall relieve or discharge Borrower

of its respective duties, obligations and covenants under this Agreement or the

other Financing Agreements until all Obligations have been fully and finally

discharged and paid, and Lender’s continuing security interest in the

Collateral and the rights and remedies of Lender hereunder, under the other

Financing Agreements and applicable law, shall remain in effect until all such

Obligations have been fully and finally discharged and paid.

 

(c) If for any reason this

Agreement is terminated prior to the end of the then current term or renewal

term of this Agreement, in view of the impracticality and extreme difficulty of

ascertaining actual damages and by mutual agreement of the parties as to a

reasonable calculation of Lender’s lost profits as a result thereof, Borrower

agrees to pay to Lender, upon the effective date of such termination, an early

termination fee in the amount set forth below if such termination is effective

in the period indicated:

 

	

  Amount

  	

   

  	

  Period

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  (i)    

  three (3%) percent of the Maximum Credit

  	

   

  	

  From the date hereof to and including the

  first anniversary of the date hereof

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  (ii)   

  two (2%) percent of the Maximum Credit

  	

   

  	

  From the first anniversary of the date

  hereof to and including the second anniversary of the date hereof

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  (iii)   

  one (1%) of the Maximum Credit

  	

   

  	

  From the second anniversary of the date

  hereof to and including the date immediately prior to the third anniversary

  of the date hereof, or if 

  	

   

  
	

   

  	

   

  	

   

  	

   

  

 

73

 

	

   

  	

   

  	

  the term of this Agreement is extended, at

  any time prior to the end of the then current term.

  	

   

  

 

Such early termination fee shall be presumed to be the amount of

damages sustained by Lender as a result of such early termination and Borrower

agrees that it is reasonable under the circumstances currently existing.

 

(d) Notwithstanding

anything to the contrary contained in Section 12.1(c), in the event of the

termination of this Agreement by Borrower prior to the end of the then current

term or renewal term of this Agreement and the full and final repayment of all

of the Obligations and the receipt by Lender of cash collateral all as provided

in Section 12.1(a) above prior to the end of such term, Borrower shall not be

required to pay to Lender an early termination fee if such payments are made to

Lender with the initial proceeds of a revolving credit facility provided by

First Union National Bank to Borrower.

 

12.2    Interpretative

Provisions.

 

(a) All terms used herein

which are defined in Article 1 or Article 9 of the Uniform Commercial Code

shall have the meanings given therein unless otherwise defined in this

Agreement.

 

(b) All references to the

plural herein shall also mean the singular and to the singular shall also mean

the plural unless the context otherwise requires.

 

(c) All references to

Borrower and Lender pursuant to the definitions set forth in the recitals

hereto, or to any other person herein, shall include their respective

successors and assigns.

 

(d) The words “hereof”,

“herein”, “hereunder”, “this Agreement” and words of similar import when used

in this Agreement shall refer to this Agreement as a whole and not any

particular provision of this Agreement and as this Agreement now exists or may

hereafter be amended, modified, supplemented, extended, renewed, restated or

replaced.

 

(e) The word “including”

when used in this Agreement shall mean “including, without limitation”.

 

(f) An Event of Default

shall exist or continue or be continuing until such Event of Default is waived

in accordance with Section 11.3 or is cured in a manner satisfactory to Lender,

if such Event of Default is capable of being cured as determined by Lender.

 

74

 

(g) Any accounting term

used in this Agreement shall have, unless otherwise specifically provided

herein, the meaning customarily given in accordance with GAAP, and all

financial computations hereunder shall be computed unless otherwise

specifically provided herein, in accordance with GAAP as consistently applied

and using the same method for inventory valuation as used in the preparation of

the financial statements of Borrower most recently received by Lender prior to

the date hereof.

 

(h) In the computation of

periods of time from a specified date to a later specified date, the word

“from” means “from and including”, the words “to” and “until” each mean “to but

excluding” and the word “through” means “to and including”.

 

(i) Unless otherwise

expressly provided herein, (i) references herein to any agreement, document or

instrument shall be deemed to include all subsequent amendments, modifications,

supplements, extensions, renewals, restatements or replacements with respect

thereto, but only to the extent the same are not prohibited by the terms hereof

or of any other Financing Agreement, and (ii) references to any statute or

regulation are to be construed as including all statutory and regulatory

provisions consolidating, amending, replacing, recodifying or supplementing the

statute or regulation.

 

(j) The captions and

headings of this Agreement are for convenience of reference only and shall not

affect the interpretation of this Agreement.

 

(k) This Agreement and

other Financing Agreements may use several different limitations, tests or

measurements to regulate the same or similar matters. All such limitations,

tests and measurements are cumulative and shall each be performed in accordance

with their terms.

 

(l) This Agreement and the

other Financing Agreements are the result of negotiations among and have been

reviewed by counsel to Lender and the other parties, and are the products of

all parties. Accordingly, this Agreement and the other Financing Agreements

shall not be construed against Lender merely because of Lender’s involvement in

their preparation.

 

12.3 Notices. All notices, requests and demands

hereunder shall be in writing and (a) made to Lender at its address set forth

below and to Borrower at its chief executive office set forth below, or to such

other address as either party may designate by written notice to the other in

accordance with this provision, and (b) deemed to have been given or made: if

delivered in person, immediately upon delivery; if by telex, telegram or

facsimile transmission, immediately upon sending and upon confirmation of

receipt; if by nationally recognized overnight courier service with

instructions to deliver the next Business Day, one (1) Business Day after

sending; and if by certified mail, return receipt requested, five (5) Business

Days after mailing.

 

12.4 Partial Invalidity. If any provision of this

Agreement is held to be invalid or unenforceable, such invalidity or

unenforceability shall not invalidate this Agreement as a whole, but this

Agreement shall be construed as though it did not contain the particular

provision held to

 

75

 

be invalid or unenforceable and the rights and obligations of the

parties shall be construed and enforced only to such extent as shall be

permitted by applicable law.

 

12.5 Successors.  This Agreement,  the other Financing Agreements and any other document referred to

herein or therein shall be binding upon and inure to the benefit of and be

enforceable by Lender,  Borrower and

their respective successors and assigns, except that Borrower may not assign

its rights under this Agreement, the other Financing Agreements and any other

document referred to herein or therein without the prior written consent of

Lender. Lender may, after notice to Borrower, assign its rights and delegate

its obligations under this Agreement and the other Financing Agreements and

further may assign, or sell participations in, all or any part of the Loans,

the Letter of Credit Accommodations or any other interest herein to another

financial institution or other person, in which event, the assignee or

participant shall have, to the extent of such assignment or participation, the

same rights and benefits as it would have if it were the Lender hereunder,

except as otherwise provided by the terms of such assignment or participation.

 

12.6 Confidentiality.

 

(a) Lender shall use all

reasonable efforts to keep confidential, in accordance with its customary

procedures for handling confidential information and safe and sound lending

practices, any non-public information supplied to it by Borrower pursuant to

this Agreement,  provided, that, nothing

contained herein shall limit the disclosure of any such information: (i) to the

extent required by statute, rule, regulation, subpoena or court order (after

reasonable notice to Borrower to the extent permitted under applicable law or

regulation as determined by Lender in good faith), (ii) to bank examiners and

other regulators, auditors and/or accountants, (iii) in connection with any

litigation to which Lender is a party, (iv) to any assignee or participant (or

prospective assignee or participant) so long as such assignee or participant

(or prospective assignee or participant) shall have first agreed to treat such

information as confidential in accordance with this Section 12.6, or (v) to

counsel for Lender or any participant or assignee (or prospective participant or

assignee).

 

(b) In no event shall this

Section 12.6 or any other provision of this Agreement or applicable law be

deemed: (i) to apply to or restrict 

disclosure of information that has been or is made public by Borrower or

becomes generally available to the public other than as a result of a

disclosure in violation hereof, (ii) to apply to or restrict disclosure of

information that was or becomes available to Lender on a non-confidential basis

from a person other than Borrower, (iii) require Lender to return any materials

furnished by Borrower to Lender or (iv) prevent Lender from responding to

routine informational requests in accordance with the Code of Ethics for the

Exchange of Credit Information promulgated by The Robert Morris Associates or

other applicable industry standards relating to the exchange of credit

information. The obligations of Lender under this Section 12.6 shall supersede

and replace the obligations of Lender under any confidentiality letter signed

prior to the date hereof.

 

76

 

12.7 Entire Agreement. This Agreement, the other Financing

Agreements, any supplements hereto or thereto, and any instruments or documents

delivered or to be delivered in connection herewith or therewith represents the

entire agreement and understanding concerning the subject matter hereof and

thereof between the parties hereto, and supersede all other prior agreements,

understandings, negotiations and discussions, representations, warranties,

commitments, proposals, offers and contracts concerning the subject matter

hereof, whether oral or written. In the event of any inconsistency between the

terms of this Agreement and any schedule or exhibit hereto, the terms of this

Agreement shall govern.

 

[REMAINDER OF PAGE INTENTIONALLY

LEFT BLANK]

 

77

 

IN WITNESS WHEREOF, Lender

and Borrower have caused these presents to be duly executed as of the day and

year first above written.

 

	

   

  	

   

  
	

  LENDER

  	

  BORROWER

  
	

   

  	

   

  
	

  CONGRESS FINANCIAL CORPORATION

  	

  IVC INDUSTRIES, INC.

  
	

   

  	

   

  
	

  By: 

  	

  /s/ David Weinstein

  	

   

  	

  By:

  	

  /s/ E. Joseph Edell

  	

   

  
	

   

  	

   

  
	

  Title: 

  	

  Senior Vice President

  	

   

  	

  Title: 

  	

  Chief Executive Officer

  	

   

  
	

   

  	

   

  
	

  Address:

  	

   

  	

  Chief Executive Office:

  	

   

  
	

   

  	

   

  
	

  1133 Avenue of the Americas

  	

  500 Halls Mills Road

  
	

  New York, New York 10036

  	

  Freehold, New Jersey 07728

  
	

   

  	

   

  
											

 

78

 

SCHEDULE 1.34

TO LOAN AND SECURITY

AGREEMENT

 

EXISTING LETTERS OF CREDIT

 

1. Banque Nationale De Paris, Houston Agency, Irrevocable Letter of

Credit No. 10183 dated December 27, 1991 issued in favor of First Fidelity Bank

National Association (now know as First Union National Bank), as Trustee under

the Trust Indenture dated as of December 1, 1991 between New Jersey Economic

Development Authority (“NJEDA”) and Trustee.

 

2. The Chase Manhattan Bank Irrevocable Letter of Credit No. PC801162

dated April 30, 1996 issued in favor of First Union National Bank (formerly

known as First Fidelity Bank National Association), as Trustee for the benefit

of bondholders under the Indenture of Trust dated as of October 1, 1995 between

New Jersey Economic Development Authority (“NJEDA”) and Trustee.

 

79

 

SCHEDULE 8.4

TO LOAN AND SECURITY

AGREEMENT

 

EXISTING LIENS

 

Lienholder

	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  1

  	

  Sanwa Business Credit

  Corporation 

  One South Wacker 

  37th Floor 

  Chicago, IL 60606

  	

   

  	

  Lien on specific equipment consisting of

  1997 Kometsu Forklift, 1998 Kometsu Forklift and related parts evidenced by

  financing statements bearing filing nos. 416881, 416882 and 429506 filed with

  the Oregon Secretary of State

  
	

   

  	

   

  	

   

  	

   

  
	

  2.

  	

  Dime Commercial Corp. 

  1180 Avenue of the Americas 

  New York, NY  10036

  	

   

  	

  Lien on specific equipment as described on

  Exhibit 1 to this Schedule 8.4

  
	

   

  	

   

  	

   

  	

   

  
	

  3.

  	

  General Electric Capital 

  Co. 1961 Hirst Drive 

  Moberly, MO  65270

  	

   

  	

  Lien with respect to specific equipment

  evidenced by financing statement bearing filing no. 1886354

  
	

   

  	

   

  	

   

  	

   

  
	

  4.

  	

  Trinity Capital Corporation 

  475 Sansome Street - 19th Floor 

  San Francisco, CA  94111

  	

   

  	

  Lien on specific equipment as described on

  Exhibit 2 to this Schedule 8.4

  
	

   

  	

   

  	

   

  	

   

  
	

  5.

  	

  Leasing Partners, Inc. 

  20,000 Horizon Way 

  Suite 850 

  Mr. Laurel, NJ 08054

  	

   

  	

  Lien on specific equipment as described on

  Exhibit 3 to this Schedule 8.4

  
	

   

  	

   

  	

   

  	

   

  
	

  6.

  	

  AOE Ricoh, Inc. 

  14 Madison Road 

  Fairfield, NJ  07004

  	

   

  	

  Lien on specific equipment described on

  Exhibit 4 to this Schedule 8.4

  
	

   

  	

   

  	

   

  	

   

  

 

80

 

SCHEDULE 8.8

TO LOAN AND SECURITY

AGREEMENT

 

ENVIRONMENTAL MATTERS

 

Property Location:           Halls Mill Road

                                                                                                                Freehold, New Jersey

 

                                                                                                                Designated on the Municipal Tax Map

of Howell Township as Block 169, Lot 4 and on the Municipal Tax Map of Freehold

Township as Block 78, Lots 8 and 8.01.

 

                                                                                                                (Hereinafter in this Schedule 8.8

referred to as “the Property”)

 

Current Property Owner: Hidel Partners/IVC Industries, Inc.

 

ISRA Case Nos. 86614, 87380 and 87384

 

ISRA Triggering Events:

 

                                                (1) October 1986 - Sale and

transfer of Property from Cooper Development Company to Cooper Technicon, Inc.

(subsequently transferred to a related party known as Technicon Instruments

Corporation).

 

                (2) May 1987 - Sale and transfer of Property

from Technicon Instruments Corporation to Hidel Partners.

 

As set forth above,  since 1986

and continuing to the present,  the

Property has been and is currently the subject of an on-going remedial  environmental  action and investigation 

(“Remedial  Action”) conducted

under the oversight of the New Jersey Department of Environmental Production

(“NJDEP”) and in accordance with the requirements, rules and regulations of the

Industrial Site Recovery Act (“ISRA”)(previously known as “ECRA”), N.J.S.A.

13:1K-6 et seq. The Remedial Action resulted from those transactions set forth

above, which operated as a “triggering event” under ISRA. Cooper Development Company

(“Cooper”), a prior owner and operator of the Property, is the party fully

responsible for the Remedial Action, as well as any and all liabilities under

ISRA relating thereto, including without limitation any and all costs, expenses

and liabilities relating to the implementation of the Remedial Action. Cooper

is a New Jersey corporation with its principal place of business located at

1132 Mark Avenue, Carpinteria, California 93013. The Remedial Action, as well

as the liabilities and obligations of Cooper with respect thereto, is governed

by the terms and conditions of NJDEP Administrative Consent Orders (“ACOs”)

under the above referenced ISRA case numbers, copies of which have been

provided to Lender. In addition to Cooper’s liability under the ACOs, Technicon

Instrument Corporation and Cooper Technicon, Inc. further guarantee performance

of and under the ACOs. Moreover, as further security for the performance of its

obligations under the ACOs, Cooper

 

81

 

has provided NJDEP with financial assurances in the form of a surety

bond or letter of credit in the amount of $1,000,000, as required by the

express terms and conditions of the ACOs.

 

                The Remedial Action is currently being

implemented on behalf of Cooper by O’Brien & Gere Engineers, Inc. The

Remedial Action focuses mainly on groundwater contamination. IVC’s involvement

in the Remedial Action has been limited solely to providing Cooper with access

to the Property for performance of the Remedial Action pursuant to the terms

and conditions of a Site Access Agreement between IVC and Cooper dated as of

December 19, 1996, and amended by a Supplemental Agreement between IVC and

Cooper dated December 1, 1999 (“Site Access Agreements”). Lender has been

provided with copies of the Site Access Agreements.

 

                Based solely upon the representations of

Cooper by and through it consultants O’Brien & Gere Engineers, Inc., the

Remedial Action is presently limited to groundwater monitoring, and Cooper

anticipates obtaining a “No Further Action Letter” from NJDEP within the next

year. We neither render nor make any representation, warranty and/or opinion as

to the accuracy of such representations by Cooper and/or O’Brien & Gere

Engineers, Inc.

 

                 O’Brien & Gere Engineers, Inc. is located at Raritan Plaza I,

Edison, New Jersey 08837 and can be reached by telephone and fax at (732)

225-7380 and (732) 255-7931, respectively. Scott Stoldt is the Project Manager

for this matter at O’Brien & Gere Engineers, Inc.

 

82

 

SCHEDULE 8.13

TO LOAN AND SECURITY

AGREEMENT

 

LABOR MATTERS

 

None

 

83

 

SCHEDULE 8.16

TO LOAN AND SECURITY

AGREEMENT

 

MATERIAL CONTRACTS

 

	

  1.

  	

   

  	

  Manufacturing and Supply Agreement between

  IVC Industries, Inc. and Eckerd Corporation, effective February 1, 1999.

  
	

   

  	

   

  	

   

  
	

  2.

  	

   

  	

  Agreement between IVC Industries, Inc. and

  Roundy’s, Inc., effective January 1, 1999.

  
	

   

  	

   

  	

   

  
	

  3.

  	

   

  	

  Supply Agreement between IVC Industries,

  Inc. and Pathmark Stores, Inc. dated August 24, 1998, as Amended August 7,

  2000.

  
	

   

  	

   

  	

   

  
	

  4.

  	

   

  	

  Supply, Marketing and Sales Agreement

  between IVC Industries, Inc. and PlanetRx, Inc., effective July 22, 1999.

  
	

   

  	

   

  	

   

  
	

  5.

  	

   

  	

  Agreement between IVC Industries, Inc. and

  Kerr Drug, Inc. dated November 24, 1999.

  
	

   

  	

   

  	

   

  
	

  6.

  	

   

  	

  Agreement between IVC Industries, Inc. and

  Kinney Drugs, Inc., effective September 1, 1999, as Amended April 4, 2000.

  
	

   

  	

   

  	

   

  
	

  7.

  	

   

  	

  Sales Purchase Agreement between Nash

  Harmon and IVC Industries, Inc., effective July 20, 2000.

  
	

   

  	

   

  	

   

  
	

  8.

  	

   

  	

  Private Label License Agreement between IVC

  Industries, Inc. and Bruno’s, Inc., dated February 2, 2000.

  
	

   

  	

   

  	

   

  
	

  9.

  	

   

  	

  Wholesale Private Label Agreement between

  IVC Industries, Inc. and Costco Whole Corporation and the Price Company,

  dated March 1, 2000.

  
	

   

  	

   

  	

   

  
	

  10.

  	

   

  	

  Direct Purchase Vitamin Agreement between

  Ames Merchandising Corporation and IVC Industries, Inc., effective January 1,

  1999.

  
	

   

  	

   

  	

   

  
	

  11.

  	

   

  	

  Lease Agreement dated 9/28/98 between IVC

  Industries, Inc. and Davis Business Center for leased premises located at

  3580 N.E. Broadway, Portland, Oregon.

  
	

   

  	

   

  	

   

  
	

  12.

  	

   

  	

  Renewal Lease dated June 18, 1999 between

  Diversified Management Inc. and Hall Laboratories Ltd. for Canadian facility.

  
	

   

  	

   

  	

   

  
	

  13.

  	

   

  	

  IVC Industries, Inc. 1995 Stock Option Plan

  (as amended 11/11/99).

  
	

   

  	

   

  	

   

  
	

  14.

  	

   

  	

  IVC Industries, Inc. Non-Employee

  Director’s Stock Option Plan (as amended

  
	

   

  	

   

  	

   

  

 

84

 

	

   

  	

   

  	

  5/15/00).

  
	

   

  	

   

  	

   

  
	

  15.

  	

   

  	

  Mutual Non-Disclosure Agreement dated

  October 1, 1999 by and between NaPro BioTherapeutics, Inc. and Intergel, a

  Division of IVC Industries, Inc.

  
	

   

  	

   

  	

   

  
	

  16.

  	

   

  	

  Bilateral Confidentiality Disclosure

  Agreement dated July 26, 1999 by and between Abbott Laboratories and

  Intergel, a Division of IVC Industries, Inc.

  
	

   

  	

   

  	

   

  
	

  17.

  	

   

  	

  Confidentiality Agreement dated May 11,

  2000 by and between Kali Laboratories, Inc. and Intergel, a Division of IVC

  Industries, Inc.

  
	

   

  	

   

  	

   

  
	

  18.

  	

   

  	

  Confidential Information Agreement dated

  February 3, 2000 by and between Biogenics, Inc. d/b/a E’Ola International and

  Intergel, a Division of IVC Industries, Inc.

  
	

   

  	

   

  	

   

  
	

  19.

  	

   

  	

  Employment Agreement dated as of August 1,

  2000 by and between IVC Industries, Inc. and Thomas E. Bocchino, Chief

  Financial Officer.

  
	

   

  	

   

  	

   

  
	

  20.

  	

   

  	

  Employment Agreement dated April 12, 2000

  by and between IVC Industries, Inc. and William Lederman, Chief Operating

  Officer.

  
	

   

  	

   

  	

   

  
	

  21.

  	

   

  	

  Employment Agreement dated April 12, 2000

  by and between IVC Industries, Inc. and Michael Durso, Senior Vice President,

  Sales and Marketing.

  
	

   

  	

   

  	

   

  
	

  22.

  	

   

  	

  Lease Agreement dated July 29, 1998 by and

  between 569 Halls Mill Road, L.L.C. and IVC Industries Inc. for the premises

  located at 569 Halls Mill Road, Freehold, New Jersey.

  
	

   

  	

   

  	

   

  
	

  23.

  	

   

  	

  Lease Amendment dated October 26, 1996 by

  and between 569 Halls Mill Road, L.L.C. and IVC Industries, Inc. for the

  premises located at 569 Halls Mill Road, Freehold, New Jersey.

  
	

   

  	

   

  	

   

  
	

  24.

  	

   

  	

  Severance, Consulting and Non-Competition

  Agreement dated March 1, 1999 by and between I. Alan Hirschfeld and IVC

  Industries, Inc.

  
	

   

  	

   

  	

   

  
	

  25.

  	

   

  	

  Development Agreement dated August 3, 1998

  by and between Block Drug Company, Inc. and Intergel, a Division of IVC

  Industries, Inc.

  
	

   

  	

   

  	

   

  
	

  26.

  	

   

  	

  Agreement for the Purchase and Sale of the

  Stock of Vitamin Specialties Corp. dated July 13, 1999 by and between IVC

  Industries, Inc. and Archon Vitamin Corporation.

  
	

   

  	

   

  	

   

  
	

  27.

  	

   

  	

  IVC Industries, Inc. Employee 401(k) Profit

  Sharing Plan effective April 1, 1997 (as amended).

  
	

   

  	

   

  	

   

  
	

  28.

  	

   

  	

  Employment Agreement between Andrew M.

  Pinkowski and IVC Industries, Inc. dated April 30, 1996 and Amendment to

  Employment Agreement dated February 1, 1998.

  
	

   

  	

   

  	

   

  

 

85

 

	

  29.

  	

   

  	

  Equipment Lease dated as of October 6, 1999

  by and between IVC Industries, Inc. and Trinity Capital Corporation.

  
	

   

  	

   

  	

   

  
	

  30.

  	

   

  	

  Brokerage Agreement dated January 3, 1995

  by and between Anderson Chamberlain, Inc. and Hall Laboratories, Inc. (now

  known as f IVC Industries, Inc.).

  
	

   

  	

   

  	

   

  
	

  31.

  	

   

  	

  Sub-Vendor Import and Supply Agreement

  dated October 21, 1998 by and between IVC Industries, Inc. and Costco

  Companies, Inc.

  
	

   

  	

   

  	

   

  
	

  32.

  	

   

  	

  Equipment Lease Agreement dated August 24,

  1998 by and between IVC Industries, Inc. and Dime Commercial Corp.

  
	

   

  	

   

  	

   

  
	

  33.

  	

   

  	

  Equipment Lease Agreement by and between

  IVC Industries and General Electric Capital Corp.

  
	

   

  	

   

  	

   

  
	

  34.

  	

   

  	

  1998 Equipment Lease Agreement by and

  between Sanwa Business Credit Corp.and IVC Industries, Inc.

  
	

   

  	

   

  	

   

  
	

  35.

  	

   

  	

  Equipment Lease Agreement (no. 6781317-001)

  dated December 4, 1998 by and between IVC Industries, Inc. and AOE Ricoh,

  Inc.

  
	

   

  	

   

  	

   

  
	

  36.

  	

   

  	

  Equipment Lease Agreement (no. 0026857-001)

  dated October 6, 1999 by and between IVC Industries, Inc. and Trinity Capital

  Corporation.

  
	

   

  	

   

  	

   

  
	

  37.

  	

   

  	

  Equipment Lease Agreement dated October 4,

  1999 by and between IVC Industries, Inc. and Leasing Partner, Inc.

  
	

   

  	

   

  	

   

  
	

  38.

  	

   

  	

  Sublease Agreement dated February 22, 1994

  by and between Pioneer Pharmaceuticals, Inc. (now known as Essex Chemical

  Corp.) and International Vitamin Corporation (now known as IVC Industries,

  Inc.) for the premises located at 191 40th Street, Irvington, New Jersey.

  
	

   

  	

   

  	

   

  
	

  39.

  	

   

  	

  Lease Agreement dated December 1, 1986 by

  and between Pioneer Pharmaceuticals, Inc. and Bernard and Zelda Levere for

  the premises located at 191 40th Street, Irvington, New Jersey.

  
	

   

  	

   

  	

   

  
	

  40.

  	

   

  	

  Sublease Agreement dated June 29, 1993 (as

  amended by Addendum dated June 30, 1993) by and between Pioneer Pharmaceuticals,

  Inc. (now known as Essex Chemical Corp.) and International Vitamin

  Corporation (now known as IVC Industries, Inc.) for the premises located at

  209 40th Street, Irvington, New Jersey.

  

 

86

 

SCHEDULE 9.9(i)

TO LOAN AND SECURITY

AGREEMENT

 

EXISTING INDEBTEDNESS AS

OF 10/13/00

 

	

  Creditor

  	

   

  	

   

  	

  Amount

  	

   

  
	

  1.

  	

   

  	

  Dime Savings-Equipment

  Leases 

  Final Payment Due 8/05

  	

   

  	

  $670,734

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  2.

  	

   

  	

  Capital Lease Payable 

  569 Halls Mill Road

  Freehold, New Jersey 

  Payable to 569 Halls Mill Road LLC

  Final Payment Due 7/1/08

  	

   

  	

  $3,099,501

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  3.

  	

   

  	

  Citicorp

  450 Mamaroneck Ave.

  Harrison NY 10528

  Final Payment Due 3/8/03

  	

   

  	

  $18,356

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  4.

  	

   

  	

  General Electric Capital Co.

  1010 Thomas Edison Blvd. SW

  Cedar Rapids, Iowa 52404

  Final Payment Due 6/1/04

  	

   

  	

  $140,579

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  5.

  	

   

  	

  Trinity Capital Corporation

  475 Sansome Street

  19th Floor San Francisco, CA 94111

  Final Payment Due 11/15/04

  	

   

  	

  $62,328

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  6.

  	

   

  	

  GE Capital-Colonial Pacific Leasing

  13010 SW 68th Parkway

  Portland, OR. 97223

  Final Payment Due 4/15/05

  	

   

  	

  $65,270

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  7.

  	

   

  	

  Trade Payables

  Ninety (90) Days Past Due

  	

   

  	

  $1,049,266.02

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (See Attached Exhibit 1)

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Under Vendor Payment Plans

  	

   

  	

  $(1,934,548.36

  	

  )

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  8. 

  	

   

  	

  Non-Trade Payable Ninety

  (90) Days Past Due 

  	

   

  	

  $243,375.53 

  	

   

  
	

   

  	

   

  	

  (See Attached Exhibit 2)

  	

   

  	

   

  	

   

  
								

 

87

 

SCHEDULE 9.10

TO LOAN AND SECURITY

AGREEMENT

 

EXISTING LOANS, ADVANCES

AND GUARANTEES

 

	

  Name of Employee

  	

   

  	

  Amount

  	

   

  	

  Interest Rate

  	

   

  	

  Maturity Date

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  1. E. Joseph Edell

  	

   

  	

  $393,242

  	

   

  	

  5.93% as of 10/1/00

  	

   

  	

  7/31/05

  	

   

  
	

  CEO

  	

   

  	

  as of 9/30/001

  	

   

  	

  compounded monthly

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  2. I. Alan Hirschfeld

  	

   

  	

  $148,784

  	

   

  	

  5.0% as of 2/1/99

  	

   

  	

  3/1/03 (1st installment)

  	

   

  
	

  (Prior CFO resigned

  	

   

  	

   

  	

   

  	

  compounded monthly

  	

   

  	

   

  	

   

  
	

  as of 3/1/99)

  	

   

  	

   

  	

   

  	

  as of 7/31/99

  	

   

  	

  3/1/04 (2nd installment)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  3/1/05 (3rd installment)

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  

 

(**Note - Loan terms for I. Alan Hirschfeld

are pursuant to the Severance, Consulting and Non-Competition Agreement dated

March 1, 1999, between I. Alan Hirschfeld and IVC Industries, Inc., a copy of

which has been provided to the Lender.)

 

1  Please be advised that this

figure represents the outstanding loan balance due IVC from E. Joseph Edell

reduced by the outstanding loan balance due Beverlee Edell from IVC. (EJ Edell

loan balance $780,808 less BEdell loan balance $307,566 equals $393,242)

 

 

88Amendment No. 3 to LASA [3/10/98]

Exhibit

10.30

 

AMENDMENT

NO. 1 TO LOAN AND SECURITY AGREEMENT

 

 

            AMENDMENT, dated June 13, 2001, by and

between IVC INDUSTRIES, INC., a Delaware corporation (“Borrower”), and CONGRESS

FINANCIAL CORPORATION, a Delaware corporation (“Lender”).

 

 

W  I  T  N  E  S  S  E

T  H :

 

 

                WHEREAS,

Lender and Borrower have entered into financing arrangements pursuant to which

Lender may make loans and advances and provide other financial accommodations

to Borrower as set forth in the Loan and Security Agreement, dated October 16,

2000, between Lender and Borrower (as amended hereby and as the same may

hereafter be further amended, modified, supplemented, extended, renewed,

restated or replaced, the “Loan Agreement”, and together with all agreements,

documents and instruments at any time executed and/or delivered in connection

therewith or related thereto, as from time to time amended and supplemented,

collectively, the “Financing Agreements”).

 

                WHEREAS,

Borrower has requested certain amendments to the Loan Agreement and Lender is

willing to agree to such amendments, subject to the terms and condi­tions

contained herein.

 

                WHEREAS,

by this Amendment No. 1, Lender and Borrower desire and intend to evidence such

amendments.

 

                NOW

THEREFORE, in consideration of the foregoing and the mutual agreements and

covenants contained herein, the parties hereto agree as follows:

 

1.                                         Definitions.

 

	

  (a)

  	

   

  	

  Additional Definitions. As used herein, the term

  “Amendment No. 1” shall mean this Amendment No. 1 to Loan and Security

  Agreement by and among Lender, Borrower, Guarantor and International Vitamin

  Overseas Sales Corp., as the same now exists or may hereafter be amended,

  modified, supplemented, extended, renewed, restated or replaced, and the Loan

  Agreement and the other Financing Agreements are hereby amended to include,

  in addition and not in limitation, such definition.

  

 

 

1

 

	

  (b)

  	

   

  	

  Interpretation.  For purposes of this Amendment No. 1, unless otherwise defined

  herein, all terms used herein, including, but not limited to, those terms

  used and/or defined in the recitals above, shall have the respective meanings

  assigned to such terms in the Loan Agreement.

  

 

2.                                         Eurodollar Rate Loans.

Notwithstanding any provision of the Loan Agreement or any of the other

Financing Agreements to the contrary, from and after June 1, 2001:

 

	

  (a)

  	

   

  	

  Borrower shall not request and

  Lender shall not make any Eurodollar Rate Loans, except that any Eurodollar

  Rate Loans outstanding as of May 31, 2001 shall continue to be treated as

  Eurodollar Rate Loans until the end of the Interest Period currently in

  effect for such Eurodollar Rate Loans;

  
	

   

  	

   

  	

   

  
	

  (b)

  	

   

  	

  the Interest Rate in respect

  of all Loans made on or after such date shall be the Interest Rate applicable

  to Prime Rate Loans; and

  
	

   

  	

   

  	

   

  
	

  (c)

  	

   

  	

  Borrower shall not request

  that any Prime Rate Loans be converted to Eurodollar Rate Loans and Lender

  shall not be obligated to convert any such Prime Rate Loans to Eurodollar

  Rate Loans.

  

 

3.                                       Borrowing Base.  Section 1.6 of the Loan Agreement is hereby amended by adding the

following new sentence at the end thereof:

 

                                                                “Notwithstanding

anything to the contrary contained in this Agreement or any of the other

Financing Agreements, commencing on May 1, 2001 and effective on the first day

of each and every month thereafter, the percentage set forth in clause (b)(i)

above shall be reduced by one (1%) percent, so that effective on May 1, 2001

such percentage in clause (b)(i) shall automatically and without further action

be reduced from sixty (60%) percent to fifty-nine (59%) percent and such

percentage shall thereafter continue to be so reduced by one (1%) percent as of

the first day of each month thereafter. 

In the event that the percentage set forth in clause (b)(ii) is

applicable or the percentage applicable to Eligible Inventory is otherwise

reduced pursuant to Section 2.1(b) hereof, on and after any date that such

other or reduced percentage may be applicable, such percentage shall be further

reduced by one (1%) percent effective on the first day of each and every month

thereafter automatically and without further action in the same manner as the

percentage set forth in clause (b)(i) is to be reduced.  Notwithstanding anything to the contrary

contained in this Agreement or in any of the other Financing Agreements, on

each date when any such reduction to such percentages 

 

 

2

 

as set forth above becomes

effective, Borrower agrees absolutely and unconditionally to automatically and

without notice or demand make a payment in respect of the Revolving Loans in an

amount equal to the excess, if any, of the aggregate amount of the Revolving

Loans outstanding on such date over the amount equal to the lesser of the

Borrowing Base or the Revolving Loan Limit as set forth in Section 2.1(a) as so

reduced in immediately available funds. “

 

4.                                       Interest Rate.  Section 1.52 of the Loan Agreement is hereby deleted in its

entirety and the following substituted therefor:

 

                                                                “1.52

“Interest Rate” shall mean, from and after May 1, 2001:

 

                                                                (a)  Subject to clause (b) below, as to Prime

Rate Loans, a rate equal to three (3%) percent per annum in excess of the Prime

Rate.

 

                                                                (b)

Notwithstanding anything to the contrary contained in clause (a) above, the

Interest Rate shall mean, at Lender’s option, as to Prime Rate Loans, a rate

equal to five (5%) percent per annum in excess of the Prime Rate (i) for the

period (A) from and after the date of termination or non-renewal hereof until

Lender has received full and final payment of all Obligations (notwithstanding

entry of a judgement against Borrower) and (B) from and after the date of the

occurrence of an Event of Default for so long as such Event of Default

continuing, and (ii) on Loans to Borrower at any time outstanding in excess

of the Borrowing Base or the Revolving Loan Limit (whether or not such

excess(es) arise or are made with or without Lender’s knowledge or consent and

whether made before or after an Event of Default).”

 

5.                                       Letter of Credit Accommodations.  Section 2.2(b) is hereby deleted in its entirety and the

following substituted therefor:

 

                                                                “(b)  In addition to any charges, fees or expenses

charged by any bank or issuer in connection with the Letter of Credit

Accommodations, on and after May 1, 2001, Borrower shall pay to Lender a letter

of credit fee at a rate equal to three and one-quarter (3 1/4%) percent per

annum on the daily outstanding balance of the Letter of Credit Accommodations

for the immediately preceding month (or part thereof), payable in arrears as of

the first day of each succeeding month, except that Borrower shall pay to

Lender such letter of credit fee, at Lender’s option, upon notice to Borrower,

at a rate equal to five and one-quarter (5 1/4%) percent per annum on such

daily outstanding balance for: (i) the period from and after the date of

termination or non-renewal hereof until Lender has received full and final

payment of all Obligations (notwithstanding entry of a judgment against

Borrower) and (ii) the period from and after the date of the occurrence of an

Event of Default for so long as such Event of Default is continuing as

determined by Lender.  Such letter of

credit fee shall be calculated on the basis of a three 

 

 

3

 

hundred sixty (360) day year and

actual days elapsed and the obligation of Borrower to pay such fee shall

survive the termination or non-renewal of this Agreement.”

 

6.                                       Special Availability Reserve.  Section 2 of the Loan Agreement is hereby amended by adding the

following new Section 2.4 thereto:

 

                                                                “2.4 Special

Availability Reserve.  Without

limiting any other rights or remedies of Lender under this Agreement or any of

the other Financing Agreements with respect to the establishment of Reserves or

otherwise, Lender may on the date hereof establish a special Reserve

permanently reducing the amount of Loans and Letter of Credit Accommodations

otherwise available to Borrower in an amount equal to $500,000 (the “Special

Availability Reserve”).  The term

“Reserves” as used herein shall include, without limitation, the Special

Availability Reserve.”

 

7.                                       Inventory Appraisals.  Section 7.3(d) of the Loan Agreement is hereby deleted in its

entirety and the following substituted therefor:

 

                                                                “(d)

Borrower shall, at its expense, on or before the date which is sixty (60) days

from the date of Amendment No. 1 and thereafter on or before the date which is

the last day of each succeeding three (3) month period, but at any time or

times as Lender may request on or after an Event of Default, deliver or cause

to be delivered to Lender written appraisals as to the Inventory in form, scope

and methodology acceptable to Lender and by an appraiser acceptable to Lender,

addressed to Lender and upon which Lender is expressly permitted to rely;”

 

8.                                       Equipment and Real Property

Appraisals.  Section 7.4(a) of the Loan Agreement is

hereby deleted in its entirety and the following is substituted therefor:

 

                                                                “(a)

(i) upon Lender’s request, Borrower shall, at its expense, no more than once in

any twelve (12) month period, but at any time or times as Lender may request on

or after an Event of Default, deliver or cause to be delivered to Lender

written appraisals as to the Equipment and/or the Real Property in form, scope

and methodology acceptable to Lender and by an appraiser acceptable to Lender,

addressed to Lender and upon which Lender is expressly permitted to rely and

(ii) in addition, and without limitation, to the appraisals required to be

delivered to Lender pursuant to clause (i) above, Borrower shall, at its

expense, on or before the date which is sixty (60) days from the date of

Amendment No. 1, deliver or cause to be delivered to Lender written appraisals

as to the Equipment and/or the Real Property in form, scope and methodology

acceptable to Lender and by an appraiser acceptable to Lender, addressed to

Lender and upon which Lender is expressly permitted to rely;”

 

 

4

 

9.                                       Adjusted Tangible Net Worth.  Section 9.18 is hereby deleted in its entirety and the following

substituted therefor:

 

                                                                “9.18 Adjusted

Tangible Net Worth.  Borrower shall

maintain Adjusted Tangible Net Worth of not less than the respective amount set

forth below at all times during each period indicated:

 

 

 

 

	

   

  	

   

  	

  Minimum Adjusted

  Tangible Net Worth

  	

   

  
	

  Month

  	

   

  	

   

  
	

  From

  May 31, 2001 through and including July 31, 2001

  	

   

  	

  $6,200,000

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  From

  August 1, 2001 through and including September 30, 2001

  	

   

  	

  $5,400,000

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  From

  October 1, 2001 through and including January 31, 2002

  	

   

  	

  $5,100,000

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  From

  February 1, 2002 and for each month thereafter

  	

   

  	

  $5,000,000”

  	

   

  
	

   

  	

   

  	

   

  

 

10.                               Real Property Collateral.  The first sentence of Section 9.19 of the Loan Agreement is

hereby amended by deleting the reference to “January 31, 2001” and substituting

“June 30, 2001” therefor.

 

11.                               Affirmative and Negative

Covenants.  Section 9 of the Loan Agreement is hereby

amended by adding the following new Section 9.22 thereto:

 

                                                         “9.22 Turnaround

Consultant.  On or before May 31,

2001, Borrower shall retain a consultant acceptable to Lender on terms

acceptable to Lender as to matters specified by Lender, including, but not

limited to, the evaluation of Borrower and the formulation of a strategy for

enhancing the business performance of Borrower.”

 

12.                               Default Waiver.

 

                                                                              (a)     Subject to the terms and conditions set

forth herein, Lender hereby waives the Event of Default arising under Section

10.1(a) of the Loan Agreement as a result of the failure of Borrower to

maintain the Adjusted Tangible Net Worth as required under Section 9.18 of the 

 

 

5

 

                                                         Loan

Agreement through the date immediately prior to the effectiveness of Amendment

No. 1.

 

                                                                              (b)     Lender has not waived, is not by this

Amendment No. 1 waiving, and has no intention of waiving any Event of Default

which have or may have occurred on or prior to the date hereof, whether or not

continuing on the date hereof, or which may occur after the date hereof

(whether the same or similar to the Event of Default referred to above or

otherwise) and Lender specifically reserves all of the rights and remedies

available to Lender as a result of any such Events of Default pursuant to the

Loan Agreement, the other Financing Agreements, applicable law or otherwise, other

than the Event of Default specifically referred to in Section 11(a) above.  The foregoing waiver shall not be construed

as a bar to or a waiver of any other or further Event of Default on any future

occasion, whether similar in kind or otherwise and shall not constitute a

waiver, express or implied, of any of the rights and remedies of Lender arising

under the terms of the Loan Agreement or any other Financing Agreements on any

future occasion or otherwise.

 

13.                               Extension of Time for Delivery

of Certain Post-Closing Items.  Section 1(e) of

the letter agreement with respect to Certain Post-Closing Items, dated October

16, 2000, between Lender and Borrower is hereby amended by deleting the

reference to “November 15, 2000” and substituting “June 30, 2001” therefor.

 

14.                               Termination of Special Reserve

Agreement.  The Special Reserve Agreement, dated October

16, 2000, by and between Borrower and Lender is hereby terminated and shall be

of no further force and effect.

 

15.                               Amendment Fee.  In consideration of the amendments set forth herein, Lender has

charged the account of Borrower maintained by Lender, an amendment fee in the

aggregate amount of $50,000 which fee was fully earned as of May 1, 2001 and

shall constitute part of the Obligations.

 

16.                               Additional Representations,

Warranties and Covenants.  Borrower

represents, warrants and covenants with and to Lender as follows, which

representations, warranties and covenants are continuing and shall survive the

execution and delivery hereof, and the truth and accuracy of, or compliance

with each, together with the representations, warranties and covenants in the

other Financing Agreements, being a continuing condition of the making of Loans

by Lender to Borrower:

 

                                                                              (a)     no Event of Default exists or has occurred as

of the date of this Amendment No. 1 (after giving effect to the amendments to

the 

 

 

6

 

                                                         Financing

Agreements and waivers made by this Amendment No. 1); and

 

                                                                              (b)     this Amendment No. 1 has been duly executed

and delivered by each of Borrower, Guarantor and International Vitamin Overseas

Sales Corp. and is in full force and effect as of the date hereof and the

agreements and obligations of each of Borrower, Guarantor and International

Vitamin Overseas Sales Corp. contained herein constitute legal, valid and

binding obligations of each of Borrower, Guarantor and International Vitamin

Overseas Sales Corp. enforceable against each of them in accordance with their

respective terms.

 

17.                               Conditions Precedent.  The effectiveness of the amendments and consents contained herein

shall be subject to the satisfaction of each of the following, in a manner

satisfactory to Lender and its counsel:

 

                                                                              (a)     Lender shall have received this Amendment

No. 1 duly authorized, executed and delivered by the parties hereto; and

 

                                                                              (b)     no Event of Default, or event, act or

condition which with notice or passage of time or both would constitute an

Event of Default, shall exist or have occurred (after giving effect to the

amendments to the Financing Agreements and waivers made by this Amendment No.

1).

 

18.                               Effect of this Amendment.  Except as expressly set forth herein, no other amendments,

consents, changes, modifications or waivers to the Financing Agreements are

intended or implied, and in all other respects the Financing Agreements are

hereby specifically ratified, restated and confirmed by all parties hereto as

of the effective date hereof and Borrower shall not be entitled to any other or

further amendment, consent or waiver by virtue of the provisions of this

Amendment No. 1 or with respect to the subject matter of this Amendment No.

1.  To the extent of conflict between

the terms of this Amendment No. 1 and the other Financing Agreements, the terms

of this Amendment No. 1 shall control. 

The Loan Agreement and this Amendment No. 1 shall be read and construed

as one agreement.

 

19.                               Further Assurances.  The parties hereto shall execute and deliver such additional

documents and take such additional action as may be necessary or desirable to

effectuate the provisions and purposes of this Amendment No. 1.

 

20.                               Governing Law.  The validity, interpretation and enforcement of this Amendment

No. 1 and the other Financing Agreements and any dispute arising out of the

relationship between the parties hereto whether in contract, tort, equity or

otherwise, shall be governed 

 

 

7

 

               by the internal laws of the State

of New York (without giving effect to principles of conflicts of laws).

 

21.                               Binding Effect.  This Amendment No. 1 shall be binding upon and inure to the

benefit of each of the parties hereto and their respective successors and

assigns.

 

22.                               Headings.  The headings listed herein are for convenience only and do not

constitute matters to be construed in interpreting this Amendment No. 1.

 

23.                               Counterparts.  This Amendment No. 1 may be executed in any number of

counterparts, but all of such counterparts shall together constitute but one

and the same agreement.  In making proof

of this Amendment No. 1, it shall not be necessary to produce or account for

more than one counterpart thereof signed by each of the parties hereto.  Delivery of an executed counterpart of this

Amendment No. 1 by telefacsimile shall have the same force and effect as

delivery of an original executed counterpart of this Amendment No. 1.  Any party delivering an executed counterpart

of this Amendment No. 1 by telefacsimile also shall deliver an original

executed counterpart of this Amendment No. 1, but the failure to deliver an

original executed counterpart shall not affect the validity, enforceability,

and binding effect of this Amendment No. 1 as to such party or any other party.

 

 

8

 

               IN

WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly

executed and delivered by their authorized officers as of the day and year

first above written.

 

	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Very truly yours,

  	 

	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	 

	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  CONGRESS FINANCIAL CORPORATION

  	 

	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  By: 

  	

  /s/ Thomas Martin

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

  Title: 

  	

  Assistant Vice President

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  AGREED:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  IVC INDUSTRIES, INC.

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  By:

  	

   /s/ E. Joseph Edell

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Title: 

  	

  Chief Executive Officer

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  HALL LABORATORIES LTD.

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  By: 

  	

  /s/ William Lederman

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Title: 

  	

  President

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  INTERNATIONAL VITAMIN OVERSEAS  SALES

  CORP.

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  By: 

  	

  /s/ E. Joseph Edell

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Title: 

  	

  President

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
													

 

 

9

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