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EXHIBIT 10.1

 

EMPLOYMENT, NON-COMPETITION

AND PROPRIETARY RIGHTS AGREEMENT

 

THIS EMPLOYMENT NON-COMPETITION AND PROPRIETARY RIGHTS AGREEMENT (the “Agreement”) is made as of this 28th day of November, 2011, by and between Vitacost.Com, Inc., a Delaware corporation (the “Company”), and Nachiket Desai (the “Employee”).

 

RECITALS:

 

A.           The Company is engaged in the sale of nutritional supplements, vitamins, and other healthcare products;

 

B.           The Company desires to employ the Employee and Employee desires to be employed by the Company as its Chief Information Officer (Exempt-Professional), subject to the terms, conditions and covenants hereinafter set forth; and

 

C.           As a condition of the Company employing the Employee, Employee has agreed not to divulge to the public the Company’s confidential information, not to solicit the Company’s vendors, customers or employees and not to compete with the Company, all upon the terms and conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the foregoing and the agreements, covenants and conditions set forth herein, the Employee and the Company hereby agree as follows:

 

ARTICLE I

 

EMPLOYMENT

 

1.1           Employment.  The Company hereby employs, engages and hires Employee, and Employee hereby accepts employment, as its Chief Information Officer upon the terms and conditions set forth in this Agreement.  Employee is employed as and as such reports to the Company’s Chief Executive Officer, Jeffrey Horowitz. Employee’s responsibilities are outlined on the attached Exhibit A.

 

1.2           Activities and Duties During Employment.  Employee represents and warrants to the Company that Employee is free to accept employment with the Company and that Employee has no prior or other commitments or obligations of any kind to anyone else which would hinder or interfere with the acceptance and performance of the obligations under this Agreement.

 

Employee accepts the employment described in Article I of this Agreement and agrees to devote his exclusive full time and efforts to the faithful and diligent performance of the services described herein, including the performance of such other services and responsibilities as the Company may, from time to time, stipulate.  Notwithstanding the foregoing, Employee may:  (i) serve on the board of directors of other entities or serve in any capacity with any hobby, avocation, civic, educational, religious, professional or charitable activity or organization provided that such service does not materially interfere or conflict with his duties hereunder; and (ii) make and manage personal investments of his choice.  Employee shall comply with and be bound by the Company’s operating policies, procedures and practices in effect from time to time during the terms of his employment.

 

  

  

  

 

ARTICLE II

 

TERM

 

2.1           Term.  The term of employment under this Agreement shall be one (1) year, commencing as of the date of the Agreement (such term of employment, as it may be extended or terminated, is herein referred to as the “Employment Term”), which Employment Term shall automatically renew for additional one (1) year periods unless terminated by Employee or the Company by written notice not less than thirty (30) days prior to expiration of the then-current term.

 

2.2           Termination.  The Employment Term and Employment of Employee may be terminated as follows:

 

(a)           Automatically, without the action of either party, upon the death of the Employee.

 

(b)           By either party upon the Total Disability of the Employee.  The Employee shall be considered to have a Total Disability for purposes of this Agreement if he is unable by reason of accident or illness or mental disability to substantially perform his employment duties, and is expected to be in such condition for periods totaling six (6) months (whether or not consecutive), during any period of twelve (12) consecutive months.  The determination of whether a Total Disability has occurred shall be based on the determination of a physician selected by the Company.  Nothing herein shall limit the Employee’s right to receive any payments to which Employee may be entitled under any disability or employee benefit plan of the Company or under any disability or insurance policy or plan.  During a period of Total Disability prior to termination hereunder, Employee shall continue to receive his full compensation (including base salary and bonus) and benefits.

 

(c)           By the Employee upon thirty (30) days’ written notice to the Company.

 

(d)           By the Company “Without Cause,” and without notice which shall mean a termination of the Employee’s employment by the Company other than pursuant to the provisions of Section 2.2(a), Section 2.2(b) and Section 2.2(e) hereof.

 

(e)           By the Company for “Cause” (as defined below).

 

(f)           By the Employee with Good Reason (as defined in Section 2.7(b) of this Agreement).”

 

2.3           Cessation of Rights and Obligations:  Survival of Certain Provisions.  On the date of expiration or earlier termination of the Employment Term for any reason, all of the respective rights, duties, obligations and covenants of the parties, as set forth herein, shall except as specifically provided herein to the contrary, cease and become of no further force or effect as of the date of said termination, and shall only survive as expressly provided for herein.

 

  

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2.4           Cessation of Compensation.  In lieu of any severance under any severance plan that the Company may then have in effect, and subject to:  (i) the receipt of a full and unconditional release from Employee; and (ii) any amounts owed by the Employee to the Company under any contract, agreement or loan document entered into after the date hereof (including, but not limited to, loans made by the Company to the Employee), the Company shall pay to the Employee, and the Employee shall be entitled to receive, the following amounts within thirty (30) days of the date of termination of his employment in full satisfaction of any obligation to Employee for termination of this Agreement:

 

(a)           Voluntary Termination/Termination For Cause/Expiration of Term.  Upon:  (i) termination of the Employee’s employment pursuant to Sections 2.2(c) or (e); or (ii) the expiration of the Employment Term because the Employee elects not to extend the Employment Term, Employee shall be entitled to receive his base salary, bonus, benefits and expense reimbursements solely through the date of termination.

 

(b)           Death or Total Disability.  Upon the termination of the Employment Term by reason of the death or Total Disability of the Employee, the Employee (or, in the case of death, his estate) shall be entitled to receive in a lump sum his base salary through the date of death plus ninety (90) days, or date of determination of Total Disability plus one hundred eighty (180) days (which shall include any of his unused vacation pay), unpaid bonus (if any) based on the portion of the calendar year through the date the Employment Term ends hereunder based on the annual bonus, if any, paid in the immediately preceding calendar year and expense reimbursement through the date of death or Total Disability.

 

(c)           Without Cause.  If Employee’s employment is terminated Without Cause, Employee will be entitled to receive payment of severance benefits equal to amount to six (6) months’ Base Salary (subject to any applicable tax withholding) plus the portion of Employee's bonus earned if any based on the percentage of the calendar year through the date of termination of employment, multiplied by the bonus earned by the Employee in the immediate preceding calendar year. .  Payment will be made in a lump sum not more than thirty (30) days following the date of termination.

 

Provided that Employee makes a timely election to continue coverage under the Company’s group health plans pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), health insurance benefits with the same coverage (subject to Company’s right to change coverage as set forth in the last sentence of this Section) provided to Employee prior to the termination (e.g. medical, dental, optical, mental health) will be provided at the Company’s cost price to the Employee at the expense of the Employee for eighteen (18) months following the termination date, but not longer than until Employee is covered by comparable health insurance benefits from another employer or is otherwise ineligible for COBRA continuation coverage.  Nothing in this Section 2.4(c) shall restrict the ability of the Company or its successor from changing some or all of the terms of such health insurance benefits, the cost to participants or other features of such benefits; provided, however, that all similarly situated participants are treated the same.

 

2.5           Business Expenses.

 

(a)           Reimbursement.  The Company shall reimburse the Employee for all reasonable, ordinary, and necessary business expenses incurred by his in connection with the performance of his duties hereunder, including, but not limited to, ordinary and necessary travel expenses and entertainment expenses.  The reimbursement of business expenses will be governed by the policies for the Company and the terms otherwise set forth herein.

 

  

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(b)           Accounting.  The Employee shall provide the Company with an accounting of his expenses, which accounting shall clearly reflect which expenses were incurred for proper business purposes in accordance with the policies adopted by the Company and as such are reimbursable by the Company.  The Employee shall provide the Company with such other supporting documentation and other substantiation of reimbursable expenses as will conform to Internal Revenue Service or other requirements.  All such reimbursements shall be payable by the Company to the Employee within a reasonable time after receipt by the Company of appropriate documentation therefore.

 

2.6           Definitions.  For purposes of this Agreement, the following definitions will apply:

 

(a)           “Cause” for Employee’s termination will exist if the Company terminates Employee’s employment for any of the following reasons: (i) Employee willfully fails to substantially perform his duties hereunder (other than any such failure due to his physical or mental illness), and such willful failure is not remedied within forty five (45) days after written notice from the Company’s Chief Executive Officer, which written notice shall state that failure to remedy such conduct may results in an involuntary termination for Cause; (ii) Employee engages in willful and serious misconduct (including, but not limited to, an act of fraud or embezzlement) that has caused or is reasonably expected to result in material injury to the Company or any of its Affiliates; (iii) Employee is convicted of or enters a plea of guilty or nolo contendere to a:  (A) crime that materially adversely affects his ability to perform his duties on behalf of the Company; or (B)  felony; (iv) Employee engages in alcohol or substance abuse which adversely affects his ability to perform his duties; or (v) Employee willfully breaches any of his obligations hereunder or under any other agreement between herself and the Company, and such willful breach is not remedied within forty five (45) after written notice from the Company’s Chief Executive Officer, which written notice shall state that failure to remedy such conduct may result in an involuntary termination for Cause.

 

(b)           “Good Reason” for Employee’s termination of employment will be deemed to exist if any of the following occurs: (i) a material diminution in the Employee’s base compensation; (ii) a material diminution in the Employee’s authority, duties, or responsibilities; (iii) a material change in the executive level of the party  to whom the Employee is required to report; (iv) a material change in the geographic location at which the Employee must perform the services under this Agreement; or (v) any other action or inaction that constitutes a material breach by the Company of this Agreement or any other agreement between the Company and the Employee.  For purposes of these Agreements, Good Reason shall not be deemed to exist unless the Employee’s termination of employment for Good Reason occurs within one (1) year following the initial existence of one of the conditions specified in clauses (i) through (v) above, the Employee provides the Company with written notice of the existence of such condition within 90 days after the initial existence of the condition, and the Company fails to remedy the condition within 30 days after its receipt of such notice.”

 

(c)           “Change in Control” means any of the following:

 

(i)   The acquisition by any person of Beneficial Ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of more than fifty percent (50%) of either (A) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”) (the foregoing Beneficial Ownership hereinafter being referred to as a "Controlling Interest"); provided, however, that for purposes of this definition, the following acquisitions shall not constitute or result in a Change of Control: (x) any acquisition by the Company; (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary of the Company; or (z) any acquisition by any corporation pursuant to a transaction which complies with clauses (A) and (B) of subsection (iii) below; or

 

  

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(ii)   During any period of two (2) consecutive years (not including any period prior to the Commencement Date) individuals who constitute the Company’s board of directors on the Commencement Date (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Company’s board of directors; provided, however, that any individual becoming a director subsequent to the Commencement Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Company’s board of directors; or

 

(iii)   Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each a “Business Combination”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, and (B) at least a majority of the members of the Board of Directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Company’s board of directors, providing for such Business Combination; or approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

 

  

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2.7           Change in Control of the Company.  If the Employee’s employment is terminated by the Company Without Cause pursuant to Section 2.2(d) hereof or by the Employee for Good Reason pursuant to Section 2.2(f) hereof, in either case during the twelve (12) month period immediately following the Change in Control, then in lieu of any amounts otherwise payable under Section 2.4(c) hereof, the Employee shall be entitled to the following:

 

 (i)           payment of (a) any accrued yet unpaid base salary through the date of termination, (b) any accrued yet unpaid bonus payable on account of any calendar year ending prior to the year in which the termination occurs, (c) benefits through the date of termination, (d) reimbursement of reimbursable expenses incurred prior to the date of termination, and (e) any vacation pay on account of unused vacation accruing prior to the date of termination; and

 

(ii)           a severance amount equal to 6 months at his then current base salary, which severance amount shall be paid in a lump sum within ten days following the termination of employment (subject to applicable withholding and employment taxes)

 

2.8           Compensation.  During Employee’s employment, the Company shall pay Employee such salary, bonus and other benefits and awards as set forth on Exhibit B.

 

2.9           Payment.  Except as otherwise provided herein, all compensation shall be payable in intervals in accordance with the general payroll payment practice of the Company.  The compensation shall be subject to such withholdings and deductions by the Company as are required by law.

 

2.10           Vacation.  The Employee shall be entitled to receive personal time off (“PTO”) as outlined in the company’s Employee Handbook. Any PTO time not taken during each year of the Employment Term shall carry over to the next year subject to a maximum amount of hours. See employee manual for specific details on the companies PTO policy

 

2.11           Relocation.  To assist the Employee in meeting the extraordinary expense of moving and relocation and as a further inducement to accept employment, the Company shall pay the Employee Twenty Five Thousand Dollars ($25,000) net of taxes.  In addition, the Company will reimburse Employee for travel between the Employee’s home and any of the Company’s locations, not to exceed Five Thousand Dollars ($5,000) monthly, for the first three months of the Employee’s employment with the Company.  In consideration for this sum, Employee agrees to remain in the employ of the Company for a period of twelve (12) months.  In the event that the Employee does not remain in the employ of the Company as a full-time employee for the full twelve-month period, the Employee will repay such relocation expenses, provided however, that the Company will prorate, on a monthly basis, the amount for repayment so that each month during with the Employee remained employed by the Company, the amount for repayment is reduced by one-twelfth (1/12) of the total reimbursement.  The Company, in its sole discretion, may waive such repayment if the Employee is separated for reason beyond the Employee’s control.

 

  

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2.12           Other Benefits.  Employee shall be entitled to participate in any retirement, pension, profit-sharing, stock option, health plan, insurance, disability income, incentive compensation and welfare or any other benefit plan or plans of the Company which may now or hereafter be in effect and for which the Employee is eligible or for which all senior executives in general are eligible.  Notwithstanding the forgoing, the Company shall be under no obligation to institute or continue the existence of any such benefit plan.

 

ARTICLE III

 

CONFIDENTIALITY, NON-SOLICITATION, NON-COMPETE

AND QUIT CLAIM AGREEMENT

 

3.1           Non-Disclosure of Confidential Information.  Employee hereby acknowledges and agrees that, as of a result of the employment hereunder, Employee will acquire, develop, and use information that is not generally known to the public or to the Company’s industry, including but not limited to, certain records, phone locations, documentation, software programs, price lists, customer lists, contract prices for the Company’s services, business plans and prospects of the Company, equipment configurations, ledgers and general information, employee records, mailing lists, manufacturing techniques, product formulations, accounts receivable and payable ledgers, financial and other records of the Company or its affiliates, and other  similar matters, as well as any information disclosed to the Company by any third party under which the Company has a confidentiality obligation to the third party (all such information pertaining to the Company, its affiliates or disclosed to Company under confidentiality from third parties being hereinafter referred to as “Confidential Information”).  Employee further acknowledges and agrees that the Confidential Information is of great value to the Company and its affiliates and that the restrictions and agreements contained in this Agreement are reasonably necessary to protect the Confidential Information and the goodwill of the Company.  Accordingly, Employee hereby agrees that:

 

(a)           Employee will not, while employed by the Company or for two years thereafter, directly or indirectly, except in connection with Employee’s performance of the duties under this Agreement, or as otherwise authorized in writing by the Company for the benefit of the Company or its “Affiliates” (as hereinafter defined), divulge to any person, firm, corporation, limited liability company, or organization, other than the Company or its Affiliates (hereinafter referred to as “Third Parties”), or use or cause or authorize any Third Parties to use, the Confidential Information, except as required by law; and

 

(b)           Upon the termination of Employee’s employment for any reason whatsoever, Employee shall deliver or cause to be delivered to the Company any and all Confidential Information, including drawings, notebooks, notes, records, keys, disks data and other documents and materials belonging to the Company or its Affiliates which is in his possession or under his control relating to the Company or its Affiliates or abstracts therefrom, regardless of the medium upon which it is stored, and will deliver to the Company upon such termination of employment any other property of the Company or its Affiliates which is in his possession or control.

 

  

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3.2           Non-Solicitation Covenant.  Employee hereby covenants and agrees that while employed by the Company and for a period of two (2) years following the termination of the Employee’s employment with the Company for any reason, Employee shall not:  (i) directly or indirectly, endeavor to entice away from the Company or its Affiliates any person, firm, corporation, limited liability company or other entity that was a customer of the Company at any time while Employee was an employee of the Company or its Affiliates or who is a “prospective vendor or customer” of the Company; or (ii) induce, attempt to induce or hire any employee (or any person who was an employee during the year preceding the date of any solicitation) of the Company or its Affiliates to leave the employ of the Company or its Affiliates or to otherwise perform services directly or indirectly for others, or in any way interfere with the relationship between any such employee and the Company or its Affiliates.  For purposes hereof, “prospective vendor or customer” shall mean any person or entity which has been solicited for business by Employee or any officer or other employee of the Company or its Affiliates at any time during Employee’s employment.

 

3.3           Non-Competition Covenant.  Employee acknowledges that the covenants set forth in this Section 3.3 are reasonable.  Employee also acknowledges that the enforcement of the covenants set forth in this Section 3.3 will not preclude Employee from being gainfully employed in such manner and to the extent as to provide a standard of living for herself, the members of his family and the others dependent upon him of at least the level to which he and they have become accustomed and may expect.  Employee hereby agrees that he shall not, during his employment and for a period of one (1) year after the end of his employment directly or indirectly, engage in any proprietorship, partnership, firms trust, company, limited liability company or other entity, other than the Company (whether as owner, partner, trustee, beneficiary, stockholder, member, officer, director, employee, independent contractor, agent, servant, consultant, manager, lessor, lessee, or otherwise) that competes with the Company in the Business of the Company in the Restricted Territory (as defined herein), other than acquiring an ownership interest in a company listed on a recognized Stock exchange in an amount which does not exceed five percent (5%) of the outstanding Stock of such corporation.  For purposes of this Agreement:  (i) the term “Business of the Company” shall include all business activities and ventures related to the sale of nutritional supplements, online and/or mail order sales vitamins and other healthcare products in which the Company is engaged, and all other businesses in which the Company subsequently is engaged in prior to, and on the date of, termination of Employee’s employment; and (ii) the term “Restricted Territory” means any state in the United States of America.

 

3.4           Remedies.

 

(a)           Injunctive Relief.  Employee expressly acknowledges and agrees that a violation of any of the provisions of Sections 3.1, 3.2 or 3.3 could cause immediate and irreparable harm, loss and damage to the Company not adequately compensable by a monetary award.  Employee further acknowledges and agrees that the time periods and territorial areas provided for herein are reasonable in order to adequately protect the Business of the Company, the enjoyment of the Confidential Information and the goodwill of the Company.  Without limiting any of the other remedies available to the Company at law or in equity, or the Company’s right or ability to collect money damages, Employee agrees that any actual or threatened violation of any of the provisions of Sections 3.1, 3.2, or 3.3 may be immediately restrained or enjoined by any court of competent jurisdiction, injunction may be issued in any court of competent jurisdiction, without notice and without bond.  Notwithstanding anything to the contrary contained in this Agreement, the provisions of this Article III shall survive the termination of Employee’s employment.

 

  

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(b)           Enforcement:  It is the desire of the parties that the provisions of Sections 3.1, 3.2, or 3.3 be enforced to the fullest extent permissible under the laws and public policies in each jurisdiction in which enforcement might be sought.  Accordingly, if any particular portion of Sections 3.1, 3.2 or 3.3 shall ever be adjudicated as invalid or unenforceable, or if the application thereof to any party or circumstance shall be adjudicated to be prohibited by or invalidated by such laws or public policies, such section or sections shall be:  (i) deemed amended to delete there from such portions so adjudicated; or (ii) modified as determined appropriate by such a court, such deletions or modifications to apply only with respect to the operation of such section or sections in the particular jurisdictions so adjudicating on the parties and under the circumstances as to which so adjudicated.

 

(c)           Legal Fees.  In any action to enforce the terms of this Agreement, the prevailing party shall be entitled to reimbursement from the other party of reasonable legal fees and costs.

 

3.5           Company.  All references to the Company in this Article III shall include “Affiliates” of the Company, as that term is construed under Rule 405 of the Securities Act of 1933, as amended.  Company acknowledges that, as of the date of this Agreement, the only Affiliate is Nutraceutical Sciences Institute.

 

ARTICLE IV

 

MISCELLANEOUS

 

4.1           Notices.  All notices or other communications required or permitted hereunder shall be in writing addressed to the last known address of the Party entitled to notice and shall be deemed given, delivered and received:  (a) when delivered, if delivered personally; (b) four (4) days after mailing, when sent by registered or certified mail, return receipt requested and postage prepaid; (c) one (1) business day after delivery to a private courier service, when delivered to a private courier service providing documented overnight service; and (d) on the date of delivery if delivered by telecopy, receipt confirmed, provided that a confirmation copy is sent on the next business day by first class mail, postage prepaid, in each case addressed as follows:

 

	
To Employee at:

	 	
The address set forth on the signature page hereof.

	
 

	 	  
	
To Company at:

	 	
Vitacost.com Inc.

5400 Broken Sound Blvd NW

Suite 500

Boca Raton, FL 33487

Attention:    Mary Marbach

Telephone:  561-982-4180

E-Mail:          Mary.Marbach@vitacost.com

Any party may change its address for purposes of this paragraph by giving the other party written notice of the new address in the manner set forth above.

 

  

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4.2           Entire Agreement; Amendments, Etc.  This Agreement contains the entire agreement and understanding of the parties hereto, and supersedes all prior agreements and understandings relating to the subject matter hereof.  No modification, amendment, waiver or alteration of this Agreement or any provision or term hereof shall in any event be effective unless the same shall be in writing, executed by both parties hereto, and any waiver so given shall be effective only in the specific instance and for the specific purpose for which given.

 

4.3           Benefit.  This Agreement shall be binding upon, and inure to the benefit of,  and shall be enforceable by, the heirs, successors, legal representatives and permitted assignees of Employee and the successors, assignees and transferees of the Company.  This Agreement or any right or interest hereunder may not be assigned by Employee without the prior written consent of the Company.

 

4.4           No Waiver.  No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder or pursuant hereto shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or pursuant thereto.

 

4.5           Severability.  Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law but, if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provision of this Agreement.  If any part of any covenant is unenforceable or the making of any covenant hereunder is unenforceable, the parties hereto agree, and it is their desire, that the court shall substitute a judicially enforceable limitation in its place, and that as so modified this Agreement, as so modified, shall be binding upon the parties as if originally set forth herein.

 

4.6           Compliance and Headings.  Time is of the essence of this Agreement.  The headings in this Agreement are intended to be for convenience and reference only, and shall not define or limit the scope, extent or intent or otherwise affect the meaning of any portion hereof.

 

4.7           Arbitration.  If there is any dispute between the parties concerning any matter relating to this Agreement, the exclusive basis for adjudication of this Agreement (except with respect to the performance of the covenants and obligations as set forth in Article III above) shall be by arbitration as detailed herein.  Either party may submit the dispute to binding arbitration.  Any such arbitration proceeding will be conducted in Palm Beach, Florida and except as otherwise provided in this Agreement, will be conducted under the auspices of JAMS/Mediation, Inc., in accordance with the then current Commercial Arbitration Rules of the American Arbitration Association.  The arbitrator shall allow such discovery as the arbitrator determines appropriate under the circumstances.  The arbitrator shall determine which party, if either, prevailed and shall award the prevailing party its costs.  Each party will bear its respective attorneys’ fees.  The award and decision of the arbitrator shall be conclusive and binding on all parties to this Agreement and judgment on the award may be entered in any court of competent jurisdiction.  The parties acknowledge and agree that any arbitration award may be enforced against either or both of them in a court of competent jurisdiction and each waives any right to contest the validity or enforceability of such award.  The parties further agree to be bound by the provisions of any statute of limitations which would be applicable in a court of law to the controversy or claim which is the subject of any arbitration proceeding initiated under the Agreement.  The parties further agree that they are entitled in any arbitration proceeding to the entry of an order, by a court of competent jurisdiction pursuant to an opinion of the arbitrator, for specific performance of any of the requirements of this Agreement.

 

  

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In any action to enforce any of the provisions of Article III hereof, the action shall be litigated in the state or federal courts situated in Palm Beach County, to which jurisdiction and venue all parties consent.  Each party hereby waives its right to trial by jury with respect to such action and agrees that the prevailing party such action shall be entitled to reimbursement from the other party of its legal fees and costs incurred in connection with such actions.  Company shall be entitled to injunctive relief, without the necessity of posting bond to remedy any breach of any of the terms of Article III of this Agreement by Employee.

 

4.8           Governing Law.  The parties agree that this Agreement shall be governed by, interpreted and construed in accordance with the laws of the State of Florida.

 

4.9           Counterparts.  This Agreement may be executed in one or more counterparts, whether by original, photocopy, facsimile or e-mail attachment in PDF format, each of which will be deemed an original and all of which together will constitute one and the same instrument.

 

4.10           Recitals.  The Recitals set forth above are hereby incorporated in and made a part of this Agreement by this reference.

 

4.11           Indemnification.  The Company shall indemnify and hold Employee harmless to the fullest extent permitted by law and under the Articles and bylaws of the Company as, to and from any and all costs, expenses (including reasonable attorneys’ fees, which shall be paid in advance by the Company, subject to recoupment in accordance with applicable law) or damages incurred by Employee as a result of any claim, suit, action or judgment arising out of the activities of the Company or its Affiliates or the Employee’s activities as an employee, officer or director of the Company or any related company; provided, however that the Employee shall not be entitled to indemnification hereunder to the extent the damages are the result of actions or omissions which have been finally adjudicated by a court of competent jurisdiction to constitute gross negligence or willful or intentional misconduct by the Employee.  This provision shall survive the termination of this Agreement.

 

4.12           Survival.  Employee’s obligations under Article III hereof shall survive any termination of this Agreement.

 

  

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COMPANY:

	 	 	 
EMPLOYEE:

	 
	 	 	 	 	 
	 
Vitacost.com, Inc.

	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 
By:

	
/s/ Jeffrey J. Horowitz

	 	 	
/s/ Nachiket Desai

	 
	 	
 
Jeffrey J. Horowitz

	 	 	
 
Nachiket Desai

	 
	 	
 
Chief Executive Officer

	 	 	
 

	 
	 	 	 	 	 	 
	 	 	 	 	 
Employee Owned Inventions:

	 
none

 

  

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Exhibit A

 

As may be determined by Company.

 

  

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Exhibit B

 

Salary as of November 28, 2011 is $250,000 per annum ($4,807.70 per week).

 

Performance based bonus equal to 50% of base salary in 2012.

 

A recommendation will be made to the Board of Directors to grant you 250,000 incentive stock options which shall vest over 5 years at 20% per year.  Such grant shall only be made upon the approval of such grant by our Board of Directors.

 

  

14EXECUTION VERSION

SECOND AMENDMENT

TO LOAN AND SECURITY AGREEMENT

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT dated as of November 21, 2011 (this “Amendment”), is among P&F INDUSTRIES, INC., a Delaware corporation (“P&F”), FLORIDA PNEUMATIC MANUFACTURING CORPORATION, a Florida corporation (“Florida Pneumatic”), HY-TECH MACHINE, INC., a Delaware corporation (“Hy-Tech”), and NATIONWIDE INDUSTRIES, INC., a Florida corporation (“Nationwide”, and together with P&F, Florida Pneumatic and Hy-Tech, collectively, “Borrowers” and each, a “Borrower”), CONTINENTAL TOOL GROUP, INC., a Delaware corporation (“Continental”), COUNTRYWIDE HARDWARE, INC., a Delaware corporation (“Countrywide”), EMBASSY INDUSTRIES, INC., a New York corporation (“Embassy”), GREEN MANUFACTURING, INC., a Delaware corporation (“Green”), PACIFIC STAIR PRODUCTS, INC., a Delaware corporation (“Pacific”), WILP HOLDINGS, INC., a Delaware corporation (“WILP”), and WOODMARK INTERNATIONAL, L.P., a Delaware limited partnership (“Woodmark”, and together with Continental, Countrywide, Embassy, Green, Pacific and WILP, collectively, “Guarantors” and each, a “Guarantor”), CAPITAL ONE LEVERAGE FINANCE CORPORATION, a Delaware corporation, as agent for the Lenders (“Agent”), and each of the Lenders party hereto.

RECITALS:

A.           Borrowers, Guarantors, the lenders from time to time party thereto (collectively, the “Lenders”) and Agent have entered into a Loan and Security Agreement dated as of October 25, 2010 (as amended by the First Amendment to Loan and Security Agreement dated as of September 21, 2011, the “Loan Agreement”).  Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Loan Agreement.

 

B.           Borrowers have requested that Agent and the Lenders amend certain provisions of the Loan Agreement.

 

C.           Subject to the terms and conditions set forth below, Agent and the Lenders party hereto are willing to so amend the Loan Agreement.

 

In furtherance of the foregoing, the parties agree as follows:

Section 1.            AMENDMENTS.  Subject to the covenants, terms and conditions set forth herein and in reliance upon the representations and warranties set forth herein, the Loan Agreement is amended as follows:

(a)          The following new definitions are inserted in Section 1.1 in the appropriate alphabetical positions therein:

Base Rate Capex Loan: a Capex Loan that bears interest based on the Base Rate.

Capex Loan: a term loan made pursuant to Section 2.2B.

  

 

  

Capex Loan Commitment: for any Lender, its obligation to make Capex Loans up to the maximum principal amount shown on Schedule 1.1, or as hereafter determined pursuant to each Assignment and Acceptance to which it is a party.  “Capex Loan Commitments” means the aggregate amount of such commitments of all Lenders in an aggregate amount up to $2,500,000.

Capex Loan Note: a promissory note to be executed by Borrowers in favor of a Lender in form and substance reasonably satisfactory to such Lender, which shall be in the amount of such Lender’s Capex Loan Commitment and shall evidence the Capex Loans made by such Lender.

Capex Loan Termination Date:  the earliest to occur of (a) October 25, 2013; (b) the date on which Borrowers terminate the Revolver Commitments pursuant to Section 2.1.4; and (c) the date on which the Capex Loan Commitments are terminated pursuant to Section 11.2.

LIBOR Capex Loan:  a Capex Loan that bears interest based on LIBOR.

Second Amendment Effective Date:  November 21, 2011.

(b)          The existing definitions of “Applicable Margin,” “Commitment,” “Excess Cash Flow”, “Fixed Charges”, “ “LIBOR Loan,” “Loan,” “Mortgage,” “Notes,” “Permitted Asset Disposition”, “Pro Rata” and “Required Lenders,” in Section 1.1 are deleted in their entirety and the following definitions are inserted in lieu thereof:

Applicable Margin: (a) with respect to Term Loans, (i) 4.75% with respect to Base Rate Term Loans and (ii) 5.75% with respect to LIBOR Term Loans; (b) with respect to Capex Loans, (i) 2.50% with respect to Base Rate Capex Loans and (ii) 3.50% with respect to LIBOR Capex Loans; and (c) with respect to Revolver Loans, the margin set forth below, as determined by the Leverage Ratio for the Measurement Period ending as of the most recently ended month:

 

	
Level

	 	
Leverage Ratio

	 	
Base Rate

Revolver

Loans

	 	 	
LIBOR

Revolver

Loans

	 
	
I

	 	
> 6.00 to 1.00

	 	 	3.00	%	 	 	4.00	%
	
II

	 	
> 5.00 to 1.00 and < 6.00 to 1.00

	 	 	2.75	%	 	 	3.75	%
	
III

	 	
> 4.00 to 1.00 and < 5.00 to 1.00

	 	 	2.50	%	 	 	3.50	%
	
IV

	 	
< 4.00 to 1.00

	 	 	2.25	%	 	 	3.25	%

Until Agent receives a Compliance Certificate for the month ended March 31, 2011 margins shall be determined as if Level IV were applicable. Thereafter, the margins shall be subject to increase or decrease upon receipt by Agent pursuant to Section 10.1.2 of the financial statements and corresponding Compliance Certificate for the last month, which change shall be effective on the first day of the calendar month following receipt; provided that commencing with the Second Amendment Effective Date, the margins shall be determined as set forth below and be subject to increase or decrease upon receipt by Agent pursuant to Section 10.1.2 of the financial statements and corresponding Compliance Certificate for the last month, which change shall be effective on the first day of the calendar month following receipt; provided, however, that Level V shall not apply at any time prior to Agent’s receipt pursuant to Section 10.1.2 of the financial statements and corresponding Compliance Certificate for the Fiscal Year ending December 31, 2011:

  

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Level

	 	
Leverage Ratio

	 	
Base Rate

Revolver

Loans

	 	 	
LIBOR

Revolver

Loans

	 
	
I

	 	
> 5.00 to 1.00

	 	 	2.50	%	 	 	3.50	%
	
II

	 	
> 4.00 to 1.00 and < 5.00 to 1.00

	 	 	2.25	%	 	 	3.25	%
	
III

	 	
> 3.00 to 1.00 and< 4.00 to 1.00

	 	 	2.00	%	 	 	3.00	%
	
IV

	 	
> 2.15 to 1.00 and < 3.00 to 1.00

	 	 	1.75	%	 	 	2.75	%
	
V

	 	
< 2.15 to 1.00

	 	 	1.50	%	 	 	2.50	%

 

  If, by the first day of a month, any financial statements and Compliance Certificate due in the preceding month have not been received, then, at the option of Agent or Required Lenders, the margins shall be determined as if Level I were applicable, from such day until the first day of the calendar month following actual receipt.

 

Commitment: for any Lender, the aggregate amount of such Lender’s Revolver Commitment, Term Loan Commitment and Capex Loan Commitment.  “Commitments” means the aggregate amount of all Revolver Commitments, Term Loan Commitments and Capex Loan Commitments.

 

Excess Cash Flow: (without duplication), with respect to P&F and its Subsidiaries on a consolidated basis for any Fiscal Year ending after the Closing Date, Adjusted EBITDA for such period, minus (a) all payments with respect to Capital Expenditures (except those financed with Borrowed Money other than Revolver Loans)  made during such period, minus (b) all Interest Expense and all fees for the use of money or the availability of money, including commitment, facility and like fees and charges upon Debt paid or payable on a non-duplicative basis during such period, minus (c) all tax liabilities paid or accrued during such period on a non-duplicative basis, minus (d) all principal amounts of Debt (other than (i) prepayments of Revolver Loans pursuant to Section 5.2 to the extent the Revolver Commitments are not permanently reduced by a corresponding amount pursuant to Section 2.1.4 and (ii) the prepayment in full of the principal amount of the Hy-Tech Seller Debt) paid or payable during such period.

 

Fixed Charges: the sum of interest expense (other than payment-in-kind), principal payments made on Borrowed Money (other than (i) prepayments of Revolver Loans pursuant to Section 5.2 to the extent the Revolver Commitments are not permanently reduced by a corresponding amount pursuant to Section 2.1.4 and (ii) the prepayment in full of the principal amount of the Hy-Tech Seller Debt), and Distributions made

 

LIBOR Loan: each set of LIBOR Revolver Loans, LIBOR Term Loans or LIBOR Capex Loans having a common length and commencement of Interest Period.

 

Loan: a Revolver Loan, Term Loan or Capex Loan.

 

Mortgage: each mortgage, deed of trust or deed to secure debt (in each case, as amended, modified, supplemented or restated) pursuant to which an Obligor grants to Agent, for the benefit of Secured Parties, Liens upon the Real Estate owned by such Obligor, as security for the Obligations

 

Notes: each Revolver Note, Term Note, Capex Loan Note or other promissory note executed by an Obligor to evidence any Obligations.

  

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Permitted Asset Disposition: an Asset Disposition that is (a) a sale of Inventory in the Ordinary Course of Business; (b) as long as no Default or Event of Default exists and all Net Proceeds are remitted to Agent, a disposition of Equipment that, in the aggregate during any 12 month period, has a fair market or book value (whichever is more) of $100,000 or less, provided that any disposition of Equipment related to a Capex Loan shall be in the form of an arms-length sale of such Equipment for cash; (c) as long as no Default or Event of Default exists and all Net Proceeds are remitted to Agent, a disposition of Inventory that is obsolete, unmerchantable or otherwise unsalable in the Ordinary Course of Business; (d) termination of a lease of real or personal Property that is not necessary for the Ordinary Course of Business, could not reasonably be expected to have a Material Adverse Effect and does not result from an Obligor’s default; (e) a disposition, liquidation or dissolution of any Immaterial Subsidiary; (f) approved in writing by Agent and Required Lenders or (g) the sale and/or issuance of Equity Interests to the extent not constituting a Change of Control.

 

Pro Rata: with respect to any Lender, a percentage (carried out to the ninth decimal place) determined (a) while Revolver Commitments and Capex Loan Commitments are outstanding, by dividing the amount of such Lender’s Revolver Commitment, Capex Loan Commitment and Term Loan by the aggregate amount of all Revolver Commitments, Capex Loan Commitments and Term Loans; and (b) at any other time, by dividing the amount of such Lender’s Loans and LC Obligations by the aggregate amount of all outstanding Loans and LC Obligations.

 

Required Lenders: Lenders (subject to Section 4.2) having (a) Revolver Commitments, Capex Loan Commitments and Term Loans in excess of 50% of the aggregate Revolver Commitments, Capex Loan Commitments and Term Loans; and (b) if the Revolver Commitments and Capex Loan Commitments have terminated, Loans in excess of 50% of all outstanding Loans.

 

(c)           The following Section 2.2B is inserted in the appropriate numerical position therein:

2.2B.    Capex Loan Commitment.

 

2.2B.1    Capex Loans.  Each Lender agrees, severally on a Pro Rata basis up to its Capex Loan Commitment, on the terms set forth herein, to make one or more Capex Loans to Borrowers from time to time through the earlier of April 25, 2013 or the Capex Loan Termination Date as requested by Borrowers in the manner set forth in Section 2.2B.2.  No repayment in respect of any Capex Loan may be reborrowed.  Each Lender will make Capex Loans only if each of the following conditions is satisfied:

 

(a)           Borrowers shall have provided evidence to Agent, in form and substance reasonably satisfactory to Agent, that Borrowers will use the proceeds of each requested Capex Loan to purchase, or reimburse Borrowers in connection with the purchase of, new production, used or refurbished Equipment (i) used in such Borrowers’ business operations, (ii) to be located at locations in compliance with this Agreement, and (iii) subject to no Liens other than those in favor of Agent and, when such Capex Loan is made, other Permitted Liens permitted hereunder pursuant to Section 10.2.2(c), (d), (f), and (i); provided that (A) any used or refurbished Equipment is subject to an appraisal in form and substance (and by an appraiser) reasonably satisfactory to Agent; and (B) any Capex Loans made to reimburse Borrowers shall be made within 30 days of Borrowers’ purchase.

  

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(b)           Agent shall have received true copies of the invoice(s) from the seller of the Equipment evidencing the cost of the Equipment Borrowers propose to purchase or for which Borrowers are requesting reimbursement with the proceeds of each Capex Loan, and such invoice(s) disclose(s) that the original principal amount of such requested Capex Loan does not exceed  (i) in the case of new Equipment, 75% of the cost of such Equipment, or (ii) in the case of used or refurbished Equipment, 75% of the NOLV of the appraised value of such Equipment, in each case, exclusive of transportation, installation, taxes, software, perishable tooling and other “soft” costs (as determined by Agent in its reasonable discretion) pertaining thereto;

 

(c)           Agent shall have received, in form and substance reasonably satisfactory to Agent, evidence of insurance covering such Equipment as to which Agent is loss payee pursuant to a Lenders Loss Payable Endorsement acceptable to Agent;

 

(d)           the requested Capex Loan is in a minimum original principal amount of $250,000;

 

(e)           the principal amount of the requested Capex Loan, together with the original principal amounts of all other outstanding Capex Loans does not exceed the Capex Commitments;

 

(f)           unless waived by Lenders, the requested Capex Loan would be the only Capex Loan funded by Lenders during Borrowers’ then existing fiscal quarter;

 

(g)           Borrowers shall have delivered or caused to be delivered to Agent and each Lender any and all documents, agreements and instruments deemed reasonably necessary by Agent or any Lender in connection with the making of such Capex Loan.  The proceeds of the Capex Loans shall be used solely for the purposes specified in this Section 2.2B.

 

2.2B.2    Manner of Borrowing and Funding Capex Loans.  A request for a Capex Loan shall be made in the following manner:  Borrower Agent shall give Agent notice (in form reasonably satisfactory to Agent) of its intention to borrow a Capex Loan, in which Borrower Agent shall specify the amount of the proposed borrowing (consistent with Section 2.2B.1) and the proposed borrowing date, which shall be a Business Day, no later than 12:00 p.m. (New York time) on the date (a) two (2) Business Days prior to the requested funding date, in the case of Base Rate Loans, and (b) four (4) Business Days prior to the requested funding date, in the case of LIBOR Loans.  In addition, Borrowers shall also comply with the requirements of Section 2.2B.1 with respect to such Capex Loan.  Each Lender shall timely honor its Capex Loan Commitment on the terms set forth in Section 4.1.2.

  

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2.2B.3    Repayment of Capex Loans.  The principal amount of each Capex Loan shall be repaid in consecutive equal monthly installments of 1/60th of the original principal amount thereof, commencing on the first day of the month following the month in which such Capex Loan is made and the first day of each month thereafter until the Capex Loan Termination Date.  On the Capex Loan Termination Date, all principal, interest and other amounts owing with respect to each Capex Loan shall be due and payable in full.  Each installment shall be paid to Agent for the Pro Rata benefit of Lenders.  Payments made with respect to a Capex Loan may not be reborrowed. Borrowers may, at their option from time to time, prepay any Capex Loan selected by Borrowers, in whole or in part, which prepayment must be at least $50,000, plus any increment of $50,000 in excess thereof.  Borrowers shall give written notice to Agent of an intended prepayment of a Capex Loan, which notice shall specify the amount of the prepayment, shall be irrevocable once given, shall be given at least 10 Business Days prior to the end of a month and shall be effective as of the first day of the next month.  All prepayments shall be applied to such Capex Loan in inverse order of maturity.

 

(d)           The existing Section 4.3 of the Loan Agreement is deleted in its entirety and the following is inserted in lieu thereof:

 

4.3           Number and Amount of LIBOR Loans; Determination of Rate.  Each Borrowing of LIBOR Loans when made shall be in a minimum amount of $250,000, plus any increment of $100,000 in excess thereof.  No more than 7 Borrowings of LIBOR Loans may be outstanding at any time, and all LIBOR Loans having the same length and beginning date of their Interest Periods shall be aggregated together and considered one Borrowing for this purpose.  The aggregate dollar amount of LIBOR Loans may not comprise more than 80% of the outstanding dollar amount of all Revolver Loans plus 100% of the outstanding dollar amount of all Term Loans plus 100% of the outstanding dollar amount of all Capex Loans minus any scheduled principal payments of the Term Loans to be made pursuant to Section 5.3.1 minus any scheduled principal payments of the Capex Loans to be made pursuant to Section 2.2B.3 during Interest Periods for all LIBOR Loans.  Upon determining LIBOR for any Interest Period requested by Borrowers, Agent shall promptly notify Borrowers thereof by telephone or electronically and, if requested by Borrowers, shall confirm any telephonic notice in writing.

 

(e)           The existing Section 5.3.2 of the Loan Agreement is deleted in its entirety and the following is inserted in lieu thereof:

 

5.3.2           Mandatory Prepayments.

 

(a)           Within ten days after delivery to Agent of Borrowers’ audited annual financial statements for a Fiscal Year ending on or after December 31, 2011, Borrowers shall (i) deliver to Agent a written calculation of Excess Cash Flow for such Fiscal Year, certified by a Senior Officer of Borrower Agent, and (ii) prepay, in an amount equal to 25% of such Excess Cash Flow, and apply same to the Term Loans until paid in full and then Capex Loans ;

 

(b)           Concurrently with any Asset Disposition of Real Estate, Borrowers shall prepay, in an amount equal to the Net Proceeds of such disposition, the Term Loans until paid in full and then Capex Loans;

 

(c)           Concurrently with the receipt of any proceeds of insurance or condemnation awards paid in respect of any Real Estate, Borrowers shall prepay, in an amount equal to such proceeds, the Term Loans until paid in full and then Capex Loans, subject in each case to Section 8.6.2;

 

(d)           Concurrently with any issuance of Equity Interests by a Borrower (other than in connection with compensation or benefits  paid or provided to employees, officers or directors), Borrowers shall prepay, in an amount equal to the net proceeds of such issuance, the Term Loans until paid in full and then Capex Loans; and

  

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(e)           On the Commitment Termination Date, Borrowers shall prepay all Term Loans and Capex Loans (unless sooner repaid hereunder).

 

(f)           The existing Section 8.4.2 is deleted in its entirety and the following is inserted in lieu thereof:

 

8.4.2       Dispositions of Equipment.  No Borrower shall sell, lease or otherwise dispose of any Equipment, without the prior written consent of Agent, other than (a) a Permitted Asset Disposition; or (b) replacement of Equipment that is worn, damaged or obsolete with Equipment of like function and value, if the replacement Equipment is acquired substantially contemporaneously with such disposition and is free of Liens other than Permitted Liens (other than a Purchase Money Lien with respect to Equipment related to a Capex Loan).

 

(g)           The existing Section 8.6.2 is deleted in its entirety and the following is inserted in lieu thereof:

 

8.6.2           Insurance of Collateral; Condemnation Proceeds.  (a)     Each Borrower shall maintain insurance with respect to the Collateral, covering casualty, hazard, theft, malicious mischief, flood and other risks, in amounts, with endorsements and with insurers (with a Best’s Financial Strength Rating of at least A_ VII, unless otherwise approved by Agent) reasonably satisfactory to Agent.  All proceeds under each policy shall be payable to Agent.  From time to time upon request, Borrowers shall deliver to Agent the originals or certified copies of its insurance policies and updated flood plain searches.  Unless Agent shall agree otherwise, each policy shall include reasonably satisfactory endorsements (i) showing Agent as loss payee; (ii) requiring 30 days prior written notice to Agent in the event of cancellation of the policy for any reason whatsoever; and (iii) specifying that the interest of Agent shall not be impaired or invalidated by any act or neglect of any Borrower or the owner of the Property, nor by the occupation of the premises for purposes more hazardous than are permitted by the policy.  If any Borrower fails to provide and pay for any insurance, Agent may, at its option, but shall not be required to, procure the insurance and charge Borrowers therefor.  Each Borrower agrees to deliver to Agent, promptly as rendered, copies of all reports made to insurance companies.  While no Event of Default exists, Borrowers may settle, adjust or compromise any insurance claim, as long as the proceeds are delivered to Agent (and with respect to Real Estate and Equipment related to a Capex Loan, the terms and amount are reasonably satisfactory to Agent).  If an Event of Default exists, only Agent shall be authorized to settle, adjust and compromise such claims.

 

(b)         Any proceeds of insurance (other than proceeds from workers’ compensation, D&O, employee practice insurance or life insurance as to which an Obligor is not the beneficiary) and any awards arising from condemnation of any Collateral shall be paid to Agent.  Subject to Section 8.6.2(c), any such proceeds or awards that relate to (i) Inventory or Equipment other than Equipment related to a Capex Loan  shall be applied to payment of the Revolver Loans, and then to any other Obligations outstanding, other than Term Loans and Capex Loans, (ii) Real Estate shall be applied first to Term Loans, then to Capex Loans or Revolver Loans (in Agent’s reasonable discretion) and then to other Obligations, (iii) Equipment related to a Capex Loan shall be applied to payment of such Capex Loan then to other Capex Loans or Revolver Loans (in Agent’s reasonable discretion) and then to other Obligations, other than Term Loans and (iv) life insurance shall be applied to payment of the Revolver Loans, and then to any other Obligations outstanding, other than Term Loans and Capex Loans.

  

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(c)          Any insurance proceeds or condemnation awards relating to any loss or destruction of Real Estate or Equipment may be used by the Borrowers (1) with the consent of the Agent or (2) if requested by Borrowers in writing within 90 days after Agent’s receipt of such proceeds, to repair or replace such Real Estate or Equipment (and until so used, the proceeds shall be held by Agent as Cash Collateral); provided that, in the case of this clause (2), as long as (i) no Default or Event of Default exists; (ii) such repair or replacement is promptly undertaken and concluded, in accordance with plans or proposed applications reasonably satisfactory to Agent; (iii) replacement buildings are constructed on the sites of the original casualties or other locations in compliance with this Agreement and are of comparable size, quality and utility to the destroyed buildings or replacement Equipment is of comparable type, quality and utility to and of equal or greater value than the damaged Equipment; (iv) the repaired or replaced Property is free of Liens, other than Permitted Liens that are not Purchase Money Liens; (v) Borrowers comply with disbursement procedures for such repair or replacement as Agent may reasonably require; and (vi) the aggregate amount of such proceeds or awards from any single casualty or condemnation does not exceed $500,000 in the case of Equipment and $2,000,000 in the case of Real Estate; provided that, any proceeds of Equipment related to a Capex Loan may not be so used unless at the time of proposed use of such proceeds, all of the applicable conditions for making a Capex Loan would be met (other than the limitation set forth in Section 2.2B.1(d), (e) or (f) or elsewhere in this Agreement, but solely with respect to this clause (c)).

 

(h)           The existing Section 10.2.3 is deleted in its entirety and the following is inserted in lieu thereof:

10.2.3    Capital Expenditures.  Make Capital Expenditures in excess of, in the aggregate during any Fiscal Year, the amount set forth below opposite such Fiscal Year:

 

	
Fiscal Year

	 	
Amount

	 
	
2010

	 	$	500,000	 
	
2011

	 	$	1,400,000	 
	
2012 and thereafter

	 	$	2,500,000	 

; provided, however, that if the amount of Capital Expenditures permitted to be made in any Fiscal Year exceeds the amount actually made, up to 100% of such excess may be carried forward to the next Fiscal Year.

(i)           The existing Section 14.1.1(c)(iii) is deleted in its entirety and the following is inserted in lieu thereof:

(iii) extend the Revolver Termination Date, Term Loan Maturity Date or Capex Loan Termination Date.

  

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(j)           The existing Schedule 1.1 is deleted in its entirety and Schedule 1.1 attached hereto is inserted in lieu thereof.

The amendments to the Loan Agreement are limited to the extent specifically set forth above and no other terms, covenants or provisions of the Loan Agreement are intended to be affected hereby.

Section 2.           CONDITIONS PRECEDENT.  The parties hereto agree that the amendments set forth in Section 1 above shall not be effective until the satisfaction of each of the following conditions precedent:

(a)           Documentation.  Agent shall have received (i) a counterpart of this Amendment, duly executed and delivered by Borrowers, Guarantors and all of the Lenders then party to the Loan Agreement, (ii) duly executed mortgage modifications or amendments, title policy updates and title endorsements with respect to each Mortgage relating to property in Florida and legal opinions with respect to Obligors organized under the laws of Florida regarding the Mortgages as supplemented by such mortgage modifications, in each case, as Agent may reasonably require, (iii) a resolution from the Board of Directors of Borrowers authorizing this Amendment and the transactions contemplated hereby, (iv) a legal opinion in form and substance reasonably satisfactory to Agent from counsel to the Obligors and (v) such other documents and certificates as Agent or its counsel may reasonably request relating to the organization, existence and good standing of Obligors, the authorization of this Amendment and any other legal matters relating to any Obligor or the transactions contemplated hereby.

(b)           Fees and Expenses. All fees and expenses of counsel to Agent estimated to date shall have been paid in full (without prejudice to final settling of accounts for such fees and expenses).

Section 3.            REPRESENTATIONS AND WARRANTIES.

(a)          In order to induce Agent and the Lenders to enter into this Amendment, each Borrower represents and warrants to Agent and the Lenders as follows:

(i)           The representations and warranties made by such Borrower in Section 9 of the Loan Agreement are true and correct on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date in which case such representations and warranties are true and correct on and as of such earlier date.

(ii)          Since December 31, 2010, no act, event, condition or circumstance has occurred or arisen which, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect.

(iii)         No Default or Event of Default has occurred and is continuing or will exist after giving effect to this Amendment.

(b)           In order to induce Agent and the Lenders to enter into this Amendment, each Borrower and each Guarantor represents and warrants to Agent and the Lenders that this Amendment has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation.

  

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Section 4.            MISCELLANEOUS

(a)           Ratification and Confirmation of Loan Documents.  Each Borrower and each Guarantor hereby consents, acknowledges and agrees to the amendments set forth herein and hereby confirms and ratifies in all respects the Loan Documents to which such Person is a party (including without limitation, with respect to each Guarantor, the continuation of its payment and performance obligations under the guaranties set forth in Section 15 of the Loan Agreement upon and after the effectiveness of the amendments contemplated hereby and, with respect to each Borrower and each Guarantor, the continuation and extension of the liens granted under the Loan Agreement and Security Documents to secure the Obligations).

(b)           Fees and Expenses.  Borrowers shall pay on demand all reasonable costs and expenses of Agent in connection with the preparation, reproduction, execution, and delivery of this Amendment and any other documents prepared in connection herewith, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for Agent.

(c)           Headings.  Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.

(d)           Governing Law; Waiver of Jury Trial.  This Amendment shall be governed by and construed in accordance with the laws of the State of New York, and shall be further subject to the provisions of Sections 14.13, 14.14 and 14.15 of the Loan Agreement.

(e)           Counterparts.  This Amendment may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page of this Amendment by facsimile or electronic transmission (including .pdf file) shall be effective as delivery of a manually executed counterpart hereof.

(f)           Entire Agreement.  This Amendment, together with all the Loan Documents (collectively, the “Relevant Documents”), sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relating to such subject matter.  No promise, condition, representation or warranty, express or implied, not set forth in the Relevant Documents shall bind any party hereto, and no such party has relied on any such promise, condition, representation or warranty.  Each of the parties hereto acknowledges that, except as otherwise expressly stated in the Relevant Documents, no representations, warranties or commitments, express or implied, have been made by any party to the other.  None of the terms or conditions of this Amendment may be changed, modified, waived or canceled orally or otherwise except in a writing signed by Agent for such purpose.

(g)          Enforceability.  Should any one or more of the provisions of this Amendment be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto.

(h)          Successors and Assigns.  This Amendment shall be binding upon and inure to the benefit of each Borrower, each Guarantor, Agent, each Lender and their respective successors and assigns (subject to Section 13 of the Loan Agreement).

  

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[Remainder of Page Intentionally Left Blank; Signature Pages Follow]

  

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The following parties have caused this Second Amendment to Loan and Security Agreement to be executed as of the date first written above.

	  	
BORROWERS:

	  	  
	  	
P&F INDUSTRIES, INC.

	  	
FLORIDA PNEUMATIC MANUFACTURING

	  	
CORPORATION

	  	
HY-TECH MACHINE, INC.

	  	
NATIONWIDE INDUSTRIES, INC.

	  	  
	  	
By:

	
/s/ Joseph A. Molino, Jr.

	  
	  	
Name:

	
Joseph A. Molino, Jr.

	  
	  	
Title:

	
Vice President

	  
	  	  	  	  
	  	
GUARANTORS:

	  	  
	  	
CONTINENTAL TOOL GROUP, INC.

	  	
COUNTRYWIDE HARDWARE, INC.

	  	
EMBASSY INDUSTRIES, INC.

	  	
GREEN MANUFACTURING, INC.

	  	
PACIFIC STAIR PRODUCTS, INC.

	  	
WILP HOLDINGS, INC.

	  	  
	  	
By:

	
/s/ Joseph A. Molino, Jr.

	  
	  	
Name:

	
Joseph A. Molino, Jr.

	  
	  	
Title:

	
Vice President

	  
	  	  	  	  
	  	
WOODMARK INTERNATIONAL, L.P.

	  	  
	  	
By:

	
Countrywide Hardware, Inc.

	  	  	
By:

	
/s/ Joseph A. Molino, Jr.

	  
	  	  	
Name:

	
Joseph A. Molino, Jr.

	  
	  	  	
Title:

	
Vice President

	  

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT

Signature Page

  

 

  

	  	
AGENT AND LENDERS:

	  	  
	  	
CAPITAL ONE LEVERAGE FINANCE

CORPORATION, as Agent and Lender

	  	  
	  	
By:

	
/s/ Julianne Low

	  	
Name:

	
Julianne Low

	  	
Title:

	
Vice President

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT

Signature Page

  

 

  

SCHEDULE 1.1

to

Loan and Security Agreement

COMMITMENTS OF LENDERS

 

	
Lender

	 	
Revolver 

Commitment

	 	 	
Term Loan

Commitment

	 	 	
Capex Loan

Commitment

	 	 	
Total 

Commitments

	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
Capital One Leverage Finance Corporation

	 	$	15,910,000.00	 	 	$	6,090,000.00	 	 	$	2,500,000.00	 	 	$	24,500,000.00	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Total

	 	$	15,910,000.00	 	 	$	6,090,000.00	 	 	$	2,500,000.00	 	 	$	24,500,000.00

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00196-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00196-of-00352.parquet"}]]