UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 8-K
 
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of report (Date of earliest event reported):   June 27, 2012
 
Integrated BioPharma, Inc.
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
(State or Other Jurisdiction of Incorporation)
 
 
  000-28876     22-2407475
 (Commission File Number)    (IRS Employer Identification No.)
 
225 Long Avenue  
Hillside, New Jersey          07205
(Address of Principal Executive Offices)         (Zip Code)
                                                   
(973) 926-0816
(Registrant’s Telephone Number, Including Area Code)
 

(Former Name or Former Address, if Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
 
o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 

 
 
 
ITEM 1.01.
ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

SENIOR CREDIT FACILITY

On June 27, 2012, Integrated BioPharma, Inc. (the “ Company ”), InB:Manhattan Drug Company, Inc. (“ MDC ”), Agrolabs, Inc., IHT Health Products, Inc., IHT Properties Corp. (“ IHT ”) and Vitamin Factory, Inc. (collectively, the “ Borrowers ”) entered into a Revolving Credit, Term Loan and Security Agreement (the “ Loan Agreement ”) with PNC Bank, National Association as agent and lender (“ PNC Bank ”) and the other lenders party thereto.

The Loan Agreement provides for a  total of $11,727,000 in senior secured financing (the “ Senior Credit Facility ”) as follows: (i) discretionary advances (“ Revolving Advances ”) based on eligible accounts receivable and eligible inventory in the maximum amount of $8,000,000 (the “ Revolving Credit Facility ”) and (ii) a term loan in the amount of $3,727,000 (the “ Term Loan ”). The Senior Credit Facility is secured by all assets of the Borrowers, including, without limitation, machinery and equipment, real estate owned by IHT, and common stock of iBio, Inc. (the “ iBio Stock ”) owned by the Company. Revolving Advances bear interest at PNC’s Base Rate or the Eurodollar Rate, at Borrowers’ option, plus 2.75%. The Term Loan bears interest at PNC’s Base Rate or the Eurodollar Rate, at Borrowers’ option, plus 3.25%.  Upon and after the occurrence of any event of default under the Loan Agreement, and during the continuation thereof, interest shall be payable at the interest rate then applicable plus 2%.  The Senior Credit Facility matures on June 27, 2017 (the “ Senior Maturity Date ”).

The Company borrowed an initial Revolving Advance of approximately $2,679,000, and the proceeds of this initial Revolving Advance, combined with the proceeds of the Term Loan and the CD Notes (as defined below) provided aggregate cash of $8,120,000.  The proceeds of the Senior Credit Facility and the CD Notes, together with the Company’s cash provided from its operating activities, was used to (i) repay in full the Company’s 8% Senior Secured Notes in the aggregate original principal amount of $7,000,000 (collectively, the “ Imperium Notes ”) issued by the Company to Imperium Master Fund Ltd. (“ IMF ”) and three other parties (collectively, “ Imperium Parties ”) under the Amended and Restated Securities Purchase Agreement, dated as of February 21, 2008 (the “ Imperium SPA ”), by and among the Company and IMF, (ii) to pay IMF, in its capacity as collateral agent for the Imperium Parties, (A) the 11.5% premium ($805,000), which was payable at the maturity of the Imperium Notes on November 15, 2009, (B) the $1,000,000 forbearance fee payable under the Forbearance Agreement, dated as of October 4, 2008, by and among the Company and IMF, in its capacity as collateral agent for the Imperium Parties,  (C) $45,000, representing accrued interest in respect of the Imperium Notes, and (D) $87,500, representing fees and expenses owed by the Company to the Imperium Parties under the terms of the Imperium SPA.

The principal balance of the Revolving Advances is payable on the Senior Maturity Date, subject to acceleration upon the occurrence of any event of default under the Loan Agreement or earlier termination of the Loan Agreement pursuant to the terms thereof.  The Term Loan shall be repaid in sixty (60) consecutive monthly installments of principal, the first fifty nine (59) of which shall be in the amount of $44,369, commencing on the first business day of August, 2012, and continuing on the first business day of each month thereafter, with a final payment of any unpaid balance of principal and interest payable on the first business day of July, 2017. The foregoing is subject to customary mandatory prepayment provisions and acceleration upon the occurrence of any event of default under the Loan Agreement or earlier termination of the Loan Agreement pursuant to the terms thereof.

The Loan Agreement contains customary mandatory prepayment provisions, including, without limitation, the requirement that if the market price per share of the iBio Stock falls below a certain amount, the Company must sell the iBio Stock and use the proceeds to repay the Term Loan.  The Loan Agreement also contains customary representations and warranties, covenants and events of default, including, without limitation, (i) a fixed charge coverage ratio maintenance requirement and (ii) an event of default tied to any change of control as defined in the Loan Agreement.
 
 
 
 
 

 

 
Interest in respect of the Senior Credit Facility is payable in arrears on the first day of each month with respect to Revolving Advances or the Term Loan bearing interest at PNC Bank’s Base Rate, and at the end of each interest period with respect to Revolving Advances or the Term Loan bearing interest at the  Eurodollar Rate.

In connection with the Senior Credit Facility, each of E. Gerald Kay, an officer, director and stockholder of the Company, and Carl DeSantis, a director and stockholder of the Company (collectively, the “ Guarantors ”), entered into Continuing Limited Guarantees (collectively, the “ Individual Guarantees ”) with PNC Bank whereby each Guarantor irrevocably and unconditionally guarantees the full, prompt and unconditional payment, when due, whether by acceleration or otherwise, of any and all obligations of the Borrowers under the Loan Agreement and the other loan documents. The liability of each Guarantor under his respective Individual Guarantee is limited to a maximum of $1,000,000. The Individual Guarantees will automatically terminate upon the satisfaction of certain conditions set forth in the Loan Agreement.

Also, in connection with the Senior Credit Facility, PNC Bank and CD Financial (defined below) entered into the Intercreditor and Subordination Agreement (the “ Intercreditor Agreement ”), which was acknowledged by the Borrowers, pursuant to which, among other things, (a) the lien of CD Financial on assets of the Borrowers is subordinated to the lien of PNC Bank on such assets during the effectiveness of the Senior Credit Facility, and (b) priorities for payment of the Company's debt (as described in this Form 8-K) are established.

In addition, in connection with the Senior Credit Facility, the following loan documents were executed: (i) the Company has entered into a Stock Pledge Agreement with PNC Bank, pursuant to which the Company pledged to PNC Bank the iBio Stock; (ii) IHT has entered into a Mortgage and Security Agreement with PNC Bank; and (iii) the Borrowers have entered into an Environmental Indemnity Agreement with PNC Bank.

CD FINANCIAL REFINANCING

On June 27, 2012, the Company also entered into an Amended and Restated Securities Purchase Agreement (the “ CD SPA ”) with CD Financial, LLC (“ CD Financial ”), which amends and restates the Securities Purchase Agreement, dated as of February 21, 2008, between the Company and CD Financial, pursuant to which the Company issued to CD Financial a 9.5% Convertible Senior Secured Note in the original principal amount of $4,500,000 (the “ Original CD Note ”).  Pursuant to the CD SPA,  the Company issued to CD Financial (i) the Amended and Restated Convertible Promissory Note in the original principal amount of $5,350,000 (the “ CD Convertible Note ”) and (ii) the Promissory Note in the original principal amount of $1,714,000 (the “ Liquidity Note ”, and collectively with the CD Convertible Note, the “ CD Notes ”). The CD Notes mature on July 7, 2017.

The proceeds of the CD Notes were used to refinance (a) the Original CD Note, (b) the Promissory Note, dated as of November 24, 2009, made by MDC in favor of CD Financial,  in the original principal amount of $300,000, which Promissory Note was assigned by MDC to the Company, and (c) other expenses owed to CD Financial by the Company in the aggregate amount of approximately $180,000.
 
 
 
 

 
 
 
The CD Notes are secured by all assets of the Borrowers, including, without limitation, machinery and equipment, real estate owned by IHT, and common stock of iBio, Inc owned by the Company. The CD Notes bear interest at an annual rate of 6% and have a default rate of 10%.
 
The CD Convertible Note is convertible at the option of CD Financial into common stock of the Company at a conversion price of $0.65 per share, subject to customary adjustments.
 
Pursuant to the terms of the Loan Agreement and the Intercreditor Agreement, during the effectiveness of the Senior Credit Facility, (i) the principal of the CD Convertible Note may not be repaid, (ii) the principal of the Liquidity Note may only be repaid if certain conditions under the Loan Agreement are satisfied, and (iii) interest in respect of the CD Notes may only be paid if certain conditions under the Intercreditor Agreement are satisfied.

The CD SPA contains customary contains customary representations and warranties, covenants and events of default, including, without limitation, an event of default tied to any change of control as defined in the CD SPA.

In connection with the CD SPA, the Borrowers entered into an Amended and Restated Security Agreement and Amended and Restated Subsidiary Guaranty.

VITAMIN NOTE
 
On June 27, 2012, MDC and the Company entered into a promissory note with Vitamin Realty Associates, LLC (“ Vitamin ”) in the principal amount of approximately $686,000 (the “ Vitamin Note ”). The principal amount of the Vitamin Note represents the aggregate amount of unpaid, past due rent owing by MDC under the Lease Agreement, dated as of January 10, 1997, between MDC, as lessor, and Vitamin, as landlord, pertaining to the real property located at 225 Long Avenue, Hillside, New Jersey.  The Vitamin Note matures on July 7, 2017 and accrues interest at an annual rate of 4% per annum. Interest in respect of the Vitamin Note is payable on the first business day of each calendar month.  Pursuant to the terms of the Loan Agreement, during the effectiveness of the Senior Credit Facility, the Vitamin Note may only be repaid or prepaid if certain conditions set forth in the Loan Agreement are satisfied.
 
The foregoing description of each of the Loan Agreement, the Guarantees, the Stock Pledge Agreement, the Mortgage and Security Agreement, the Environmental Indemnity Agreement, the Intercreditor Agreement, the CD SPA, the CD Notes, the Amended and Restated Security Agreement, the Amended and Restated Subsidiary Guarantee, and the Vitamin Note, is qualified in its entirety by reference to the full text of such instruments and agreements, copies of each of which are attached hereto as exhibits, and each of which is incorporated herein in its entirety by reference.
 

ITEM 1.02.
TERMINATION OF MATERIAL DEFINITIVE AGREEMENT.

As of June 27, 2012, in connection with entry into the Loan Agreement as described in Item 1.01 above, the Company repaid in full the Imperium Notes and other obligations owed by the Company to the Imperium Parties, as more fully described in Item 1.01. As of such date (i) the Imperium SPA and all related documents were terminated, (ii) the lien or security interest in favor of IMF, in its capacity as collateral agent for the Imperium Parties, was terminated, and (iii) all obligations of the Company to the Imperium Parties under the Imperium SPA and all related documents were satisfied in full.

ITEM 2.03                      CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.

The information set forth in Item 1.01 is incorporated herein by reference.
 
 

 
 
 

 

ITEM 9.01.                     FINANCIAL STATEMENTS AND EXHIBITS
 
(d)            Exhibits .
 
Exhibit No.
Description
10.1
Revolving Credit, Term Loan and Security Agreement, dated as of June 27, 2012, by and among Integrated BioPharma, Inc., InB:Manhattan Drug Company, Inc., Agrolabs, Inc., IHT Health Products, Inc., IHT Properties Corp. and Vitamin Factory, Inc. and PNC Bank, National Association.
10.2
Term Note, dated as of June 27, 2012, by and among Integrated BioPharma, Inc., InB:Manhattan Drug Company, Inc., Agrolabs, Inc., IHT Health Products, Inc., IHT Properties Corp. and Vitamin Factory, Inc. and PNC Bank, National Association, in the original principal amount of $3,727,000.
10.3
Revolving Credit Note, dated as of June 27, 2012, by and among Integrated BioPharma, Inc., InB:Manhattan Drug Company, Inc., Agrolabs, Inc., IHT Health Products, Inc., IHT Properties Corp. and Vitamin Factory, Inc. and PNC Bank, National Association, in the original principal amount of $8,000,000.
10.4
Continuing Limited Guaranty, dated as of June 27, 2012, made by Carl DeSantis, in favor of PNC Bank, National Association.
10.5
Continuing Limited Guaranty, dated as of June 27, 2012, made by E. Gerald Kay, in favor of PNC Bank, National Association.
10.6
Stock Pledge Agreement, dated as of June 27, 2012, between Integrated BioPharma, Inc. and PNC Bank, National Association.
10.7
Intercreditor and Subordination Agreement, dated as of June 27, 2012, between CD Financial, LLC and PNC Bank, National Association, and acknowledged by Integrated BioPharma, Inc., InB:Manhattan Drug Company, Inc., Agrolabs, Inc., IHT Health Products, Inc., IHT Properties Corp. and Vitamin Factory, Inc.
10.8
Mortgage and Security Agreement, dated as of June 27, 2012, by IHT Properties, Inc. in favor of PNC Bank, National Association
10.9
Environmental Indemnity Agreement, dated as of June 27, 2012, by and among Integrated BioPharma, Inc., InB:Manhattan Drug Company, Inc., Agrolabs, Inc., IHT Health Products, Inc., IHT Properties Corp. and Vitamin Factory, Inc. and PNC Bank, National Association
10.10
Amended and Restated Securities Purchase Agreement, dated as of June 27, 2012, by and among Integrated Biopharma, Inc., and CD Financial, LLC.
10.11
Amended and Restated Security Agreement, dated as of June 27, 2012, by and between Integrated Biopharma, Inc., and CD Financial, LLC.
10.12
Amended and Restated Subsidiary Guarantee, dated as of June 27, 2012, by and among Integrated Biopharma, Inc., InB:Manhattan Drug Company, Inc., Agrolabs, Inc., IHT Health Products, Inc., IHT Properties Corp. and Vitamin Factory, Inc. and CD Financial, LLC.
10.13
Amended and Restated Convertible Secured Promissory Note, dated as of June 27, 2012, by Integrated BioPharma, Inc. and payable to the order of CD Financial, LLC, in the original principal amount of $5,350,000.
10.14
Promissory Note, dated as of June 27, 2012, by Integrated BioPharma, Inc. and payable to the order of CD Financial, LLC, in the original principal amount of $1,714,000.
10.15
Promissory Note, dated as of June 27, 2012, by InB:Manhattan Drug Company and Integrated BioPharma, Inc., and payable to the order of Vitamin Realty Associates, LLC, in the original principal amount of $685,985.61.
99.1
Press Release.
 
 
 
 
 

 
 

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
 

 
 

 
    INTEGRATED BIOPHARMA, INC.
   
 Date:  June 29, 2012        By: /s/ Dina L. Masi
    Dina L. Masi
    Chief Financial Officer
 
 
Exhibit 10.1
 

 

 
 
REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT

 

PNC BANK, NATIONAL ASSOCIATION
(AS LENDER AND AS AGENT)

 

WITH

INTEGRATED BIOPHARMA, INC.,
InB:MANHATTAN DRUG COMPANY, INC.,
AGROLABS, INC.,
IHT HEALTH PRODUCTS, INC.,
IHT PROPERTIES CORP.

AND

VITAMIN FACTORY, INC.
(BORROWERS)

 

June 27, 2012


 
 

 

 
 
TABLE OF CONTENTS
 
Page
 
ARTICLE I. DEFINITIONS
1
1.1
Accounting Terms
1
1.2
General Terms
1
1.3
Uniform Commercial Code Terms
11
1.4
Certain Matters of Construction
11

ARTICLE II. ADVANCES, PAYMENTS
12
2.1
Revolving Advances.
12
2.2
Procedure for Revolving Advances Borrowing.
12
2.3
Disbursement of Advance Proceeds
13
2.4
Term Loan
13
2.5
Maximum Advances
13
2.6
Repayment of Loans.
13
2.7
Repayment of Excess Revolving Advances
13
2.8
Statement of Account
13
2.9
Letters of Credit
13
2.10
Issuance of Letters of Credit.
13
2.11
Requirements For Issuance of Letters of Credit.
14
2.12
Disbursements, Reimbursement.
14
2.13
Repayment of Participation Advances.
14
2.14
Documentation
14
2.15
Determination to Honor Drawing Request
14
2.16
Nature of Participation and Reimbursement Obligations
15
2.17
Indemnity
15
2.18
Liability for Acts and Omissions
15
2.19
Additional Payments
16
2.20
Manner of Borrowing and Payment.
16
2.21
Mandatory Prepayments.
16
2.22
Use of Proceeds.
16
2.23
Defaulting Lender.
17
 
ARTICLE III. INTEREST AND FEES
17
3.1
Interest
17
3.2
Letter of Credit Fees.
17
3.3
Closing Fee and Facility Fee.
17
3.4
Collateral Evaluation Fee and Collateral Monitoring Fee.
17
3.5
Computation of Interest and Fees
18
3.6
Maximum Charges
18
3.7
Increased Costs
18
3.8
Basis For Determining Interest Rate Inadequate or Unfair.
18
3.9
Capital Adequacy.
18
3.10
Gross Up for Taxes
18
3.11
Withholding Tax Exemption.
18
 
i
 
 
 
 

 
 
TABLE OF CONTENTS (CONT'D)
 
Page
 
ARTICLE IV. COLLATERAL:  GENERAL TERMS
19
4.1
Security Interest in the Collateral
19
4.2
Perfection of Security Interest
19
4.3
Disposition of Collateral
19
4.4
Preservation of Collateral
19
4.5
Ownership of Collateral.
19
4.6
Defense of Agent’s and Lenders’ Interests
19
4.7
Books and Records
20
4.8
Financial Disclosure
20
4.9
Compliance with Laws
20
4.10
Inspection of Premises
20
4.11
Insurance
20
4.12
Failure to Pay Insurance
20
4.13
Payment of Taxes
20
4.14
Payment of Leasehold Obligations
20
4.15
Receivables.
20
4.16
Inventory
21
4.17
Maintenance of Equipment
21
4.18
Exculpation of Liability
21
4.19
Environmental Matters.
21
4.20
Uniform Commercial Code Financing Statements
22
4.21
Termination of Guaranty
22
4.22
Repayment of Equity Infusion Amount.
22

ARTICLE V. REPRESENTATIONS AND WARRANTIES
22
5.1
Authority
22
5.2
Formation and Qualification.
23
5.3
Survival of Representations and Warranties
23
5.4
Tax Returns
23
5.5
Financial Statements
23
5.6
Entity Names
23
5.7
O.S.H.A. and Environmental Compliance.
23
5.8
Solvency; No Litigation, Violation, Indebtedness or Default.
23
5.9
Patents, Trademarks, Copyrights and Licenses
24
5.10
Licenses and Permits
24
5.11
Default of Indebtedness
24
5.12
No Default
24
5.13
No Burdensome Restrictions
24
5.14
No Labor Disputes
24
5.15
Margin Regulations
24
5.16
Investment Company Act
24
5.17
Disclosure
24
5.18
Delivery of Subordinated Loan Documentation
24
5.19
Swaps
24
5.23
INTENTIONALLY OMITTED
24
5.24
Anti-Terrorism Laws.
24
5.25
Trading with the Enemy
25
 
ii
 
 
 
 

 
 
 
TABLE OF CONTENTS (CONT'D)
 
Page

 
ARTICLE VI.  AFFIRMATIVE COVENANTS
25
6.1
Payment of Fees
25
6.2
Conduct of Business and Maintenance of Existence and Assets
25
6.3
Violations
25
6.4
Government Receivables
25
6.5
Financial Covenants.
25
6.6
Execution of Supplemental Instruments
25
6.7
Payment of Indebtedness
25
6.8
Standards of Financial Statements
25
6.9
Sale of iBio Stock
25

ARTICLE VII. NEGATIVE COVENANTS
25
7.1
Merger, Consolidation, Acquisition and Sale of Assets.
25
7.2
Creation of Liens
26
7.3
Guarantees
26
7.4
Investments
26
7.5
Loans
27
7.6
Capital Expenditures
27
7.7
Dividends
27
7.8
Indebtedness
27
7.9
Nature of Business
27
7.10
Transactions with Affiliates
27
7.11
Leases
27
7.12
Subsidiaries.
28
7.13
Fiscal Year and Accounting Changes
28
7.14
Pledge of Credit
28
7.15
Amendment of Articles of Incorporation, By-Laws/Certificate of Formation, Operating Agreement
28
7.16
Compliance with ERISA
28
7.17
Prepayment of Indebtedness
28
7.18
Anti-Terrorism Laws
28
7.19
Membership/Partnership Interests
28
7.20
Trading with the Enemy Act
28
7.21
Subordinated Debt
28
7.22
Other Agreements
28
7.23
Payments of EGK Debt
28
7.24
Payments of Past Due Rent
28

ARTICLE VIII. CONDITIONS PRECEDENT
28
8.1
Conditions to Initial Advances
28
8.2
Conditions to Each Advance
30
 
iii
 
 
 
 

 
 
TABLE OF CONTENTS (CONT'D)
 
Page

 
ARTICLE IX.INFORMATION AS TO BORROWERS
30
9.1
Disclosure of Material Matters
30
9.2
Schedules
31
9.3
Environmental Reports
31
9.4
Litigation
31
9.5
Material Occurrences
31
9.6
Government Receivables
31
9.7
Annual Financial Statements
31
9.8
Monthly Financial Statements
31
9.9
Other Reports
31
9.10
Additional Information
31
9.11
Projected Operating Budget
31
9.12
Variances From Operating Budget
31
9.13
Notice of Suits, Adverse Events
31
9.14
ERISA Notices and Requests
31
9.15
Additional Documents
31

ARTICLE X.  EVENTS OF DEFAULT
32
10.1
Nonpayment
32
10.2
Breach of Representation
32
10.3
Financial Information
32
10.4
Judicial Actions
32
10.5
Noncompliance
32
10.6
Judgments
32
10.7
Subsidiary Bankruptcy
32
10.8
Inability to Pay
32
10.9
Subsidiary Bankruptcy
32
10.10
Material Adverse Effect
32
10.11
Lien Priority
32
10.12
Subordinated Loan Default
32
10.13
Cross Default
32
10.14
Breach of Guaranty
32
10.15
Change of Control
32
10.16
Invalidity
32
10.17
Licenses
32
10.18
Seizures
32
10.19
Operations
32
10.20
Pension Benefit Plans
32

ARTICLE XI. LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT
33
11.1
Rights and Remedies.
33
11.2
Agent’s Discretion
33
11.3
Setoff
33
11.4
Rights and Remedies not Exclusive
33
11.5
Allocation of Payments After Event of Default
33
11.6
Miscellaneous
34
 
iv
 
 
 
 

 
 
TABLE OF CONTENTS (CONT'D)
 
Page

 
ARTICLE XII. WAIVERS AND JUDICIAL PROCEEDINGS
34
12.1
Waiver of Notice
34
12.2
Delay
34
12.3
Jury Waiver
34

ARTICLE XIII. EFFECTIVE DATE AND TERMINATION
34
13.1
Term
34
13.2
Termination
34

ARTICLE XIV.  REGARDING AGENT
34
14.1
Appointment
34
14.2
Nature of Duties
34
14.3
Lack of Reliance on Agent and Resignation
35
14.4
Certain Rights of Agent
35
14.5
Reliance
35
14.6
Notice of Default
35
14.7
Indemnification
35
14.8
Agent in its Individual Capacity
35
14.9
Delivery of Documents
35
14.10
Borrowers’ Undertaking to Agent
35
14.11
No Reliance on Agent’s Customer Identification Program
35
14.12
Other Agreements
35

ARTICLE XV. BORROWING AGENCY
35
15.1
Borrowing Agency Provisions.
35
15.2
Waiver of Subrogation
36

ARTICLE XVI.  MISCELLANEOUS
36
16.1
Governing Law
36
16.2
Entire Understanding.
36
16.3
Successors and Assigns; Participations; New Lenders.
37
16.4
Application of Payments
37
16.5
Indemnity
38
16.6
Notice
38
16.7
Survival
39
16.8
Severability
39
16.9
Expenses
39
16.10
Injunctive Relief
39
16.11
Consequential Damages
39
16.12
Captions
39
16.13
Counterparts; Facsimile Signatures
39
16.14
Construction
39
16.15
Confidentiality; Sharing Information
39
16.16
Publicity
39
16.17
Certifications From Banks and Participants; US PATRIOT ACT
39

v
 

 
 
 

 
 
 
TABLE OF CONTENTS (CONT'D)
 
Page
 

List Of Exhibits And Schedules
 
Exhibits
 
   
Exhibit 1.2
Form of Borrowing Base Certificate
Exhibit 2.1(a)
Form of Revolving Credit Note
Exhibit 2.4
Form of Term Note
Exhibit 8.1(k)
Form of Financial Condition Certificate
Exhibit 11.6-A
Tax Collector Letter
Exhibit 11.6-B
Power of Attorney
Exhibit 16.3
Form of Commitment Transfer Supplement

Schedules
 
   
Schedule 1.2
Permitted Encumbrances
Schedule 4.5
Equipment and Inventory Locations
Schedule 4.15(h)
Deposit and Investment Accounts/Terminated Accounts
Schedule 4.19
Real Property
Schedule 5.2(a)
States of Qualification and Good Standing
Schedule 5.2(b)
Subsidiaries
Schedule 5.4
Federal Tax Identification Number
Schedule 5.6
Prior Names
Schedule 5.8(b)
Litigation
Schedule 5.8(d)
Plans
Schedule 5.9
Intellectual Property
Schedule 5.10
Licenses and Permits
Schedule 5.14
Labor Disputes
Schedule 7.3
Guarantees
Schedule 7.4
Investments
Schedule 7.8
Indebtedness
 

vi 

 
 

 

REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT

Revolving Credit, Term Loan and Security Agreement dated June 27, 2012 among INTEGRATED BIOPHARMA, INC., a corporation organized under the laws of the State of Delaware (“Integrated”), InB:MANHATTAN DRUG COMPANY, INC., a corporation organized under the laws of the State of New York (”MD”), AGROLABS, INC., a corporation organized under the laws of the State of New Jersey (“AL”), IHT HEALTH PRODUCTS, INC., a corporation organized under the laws of the State of Delaware (“IHT”), IHT PROPERTIES CORP., a corporation organized under the laws of the State of Delaware (“IHTP”), and VITAMIN FACTORY, INC. (also known as The Vitamin Factory), a corporation organized under the laws of the State of Delaware (“Vitamin”) (Integrated, MD, AL, IHT, IHTP and Vitamin, each a “Borrower”, and collectively “Borrowers”), the financial institutions which are now or which hereafter become a party hereto (collectively, the “Lenders” and individually a “Lender”) and PNC BANK, NATIONAL ASSOCIATION (“PNC”), as agent for Lenders (PNC, in such capacity, the “Agent”).
 
IN CONSIDERATION of the mutual covenants and undertakings herein contained, Borrowers, Lenders and Agent hereby agree as follows:
 
ARTICLE I.  
DEFINITIONS
 
1.1   Accounting Terms .  As used in this Agreement, the Other Documents or any certificate, report or other document made or delivered pursuant to this Agreement, accounting terms not defined in Section 1.2 or elsewhere in this Agreement and accounting terms partly defined in Section 1.2 to the extent not defined, shall have the respective meanings given to them under GAAP; provided, however, whenever such accounting terms are used for the purposes of determining compliance with financial covenants in this Agreement, such accounting terms shall be defined in accordance with GAAP as applied in preparation of Integrated’s audited financial statements for the fiscal year ended June 30, 2011.
 
1.2   General Terms .  For purposes of this Agreement the following terms shall have the following meanings:
 
Accountants ” shall have the meaning set forth in Section 9.7 hereof.
 
Advance Rates ” shall mean, collectively, the Receivables Advance Rate and the Inventory Advance Rate.
 
Advances ” shall mean and include the Revolving Advances and Letters of Credit as well as the Term Loan.
 
Affiliate ” of any Person shall mean (a) any Person which, directly or indirectly, is in Control of, is Controlled by, or is under common control with such Person, or (b) any Person who is a director, managing member, general partner or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in clause (a) above.  For purposes of this definition, ”Control” of a Person shall mean the power, direct or indirect, (x) to vote 5% or more of the Equity Interests having ordinary voting power for the election of directors of such Person or other Persons performing similar functions for any such Person, or (y) to direct or cause the direction of the management and policies of such Person whether by ownership of Equity Interests, contract or otherwise.  “Controlling” and “Controlled” have meanings correlative thereto.
 
Agent ” shall have the meaning set forth in the preamble to this Agreement and shall include its successors and assigns.
 
Agent Advances ” shall have the meaning set forth in Section 16.2(b) hereof.
 
Agreement ” shall mean this Revolving Credit, Term Loan and Security Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time.
 
AL ” means AGROLABS, INC., a corporation organized under the laws of the State of New Jersey.
 
Alternate Base Rate ” shall mean, for any day, a rate per annum equal to the higher of (i) the Base Rate in effect on such day, (ii) the Federal Funds Open Rate in effect on such day plus 1/2 of 1% and (iii) the Daily LIBOR Rate plus 1%.  For purposes of this definition, “Daily LIBOR Rate” shall mean, for any day, the rate per annum determined by Agent by dividing (x) the Published Rate by (y) a number equal to 1.00 minus the percentage prescribed by the Federal Reserve for determining the maximum reserve requirements with respect to any eurocurrency funding by banks on such day.  For the purposes of this definition, “Published Rate” shall mean the rate of interest published each Business Day in The Wall Street Journal “Money Rates” listing under the caption “London Interbank Offered Rates” for a one month period (or, if no such rate is published therein for any reason, then the Published Rate shall be the eurodollar rate for a one month period as published in another publication determined by Agent).
 
Anti-Terrorism Laws ” shall mean any Applicable Laws relating to terrorism or money laundering, including Executive Order No. 13224, the USA PATRIOT Act, the Applicable Laws comprising or implementing the Bank Secrecy Act, and the Applicable Laws administered by the United States Treasury Department’s Office of Foreign Asset Control (as any of the foregoing Applicable Laws may from time to time be amended, renewed, extended, or replaced).
 
Applicable Law ” shall mean all laws, rules and regulations applicable to the Person, conduct, transaction, covenant, Other Document or contract in question, including all applicable common law and equitable principles; all provisions of all applicable state, federal and foreign constitutions, statutes, rules, regulations, treaties, directives and orders of any Governmental Body, and all orders, judgments and decrees of all courts and arbitrators.
 
Assignment of Rents, Leases and Profits ” shall mean that certain Assignment of Rents, Leases and Profits executed by IHTP in favor of the Agent for the benefit of the Lenders dated the date hereof with regard to the Mortgaged Premises, together with all extensions, renewals, amendments, supplements, modifications, substitutions and replacements thereto and thereof.
 
Authority ” shall have the meaning set forth in Section 4.19(d).
 
Base Rate ” shall mean the base commercial lending rate of PNC as publicly announced to be in effect from time to time, such rate to be adjusted automatically, without notice, on the effective date of any change in such rate.  This rate of interest is determined from time to time by PNC as a means of pricing some loans to its customers and is neither tied to any external rate of interest or index nor does it necessarily reflect the lowest rate of interest actually charged by PNC to any particular class or category of customers of PNC.
 
Blocked Accounts ” shall have the meaning set forth in Section 4.15(h).
 
Blocked Account Bank ” shall have the meaning set forth in Section 4.15(h).
 
Blocked Person ” shall have the meaning set forth in Section 5.24(b) hereof.
 
Borrower ” or “ Borrowers ” shall have the meaning set forth in the preamble to this Agreement and shall extend to all permitted successors and assigns of such Persons.
 
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Borrowers on a Consolidated Basis ” shall mean the consolidation in accordance with GAAP of the accounts or other items of the Borrowers and their respective Subsidiaries.
 
Borrowers’ Account ” shall have the meaning set forth in Section 2.8.
 
Borrowing Agent ” shall mean Integrated.
 
Borrowing Base Certificate ” shall mean a certificate in substantially the form of Exhibit 1.2 duly executed by the President, Chief Financial Officer or Controller of the Borrowing Agent and delivered to the Agent, appropriately completed, by which such officer shall certify to Agent the Formula Amount and calculation thereof as of the date of such certificate.
 
Business Day ” shall mean any day other than Saturday or Sunday or a legal holiday on which commercial banks are authorized or required by law to be closed for business in East Brunswick, New Jersey and, if the applicable Business Day relates to any Eurodollar Rate Loans, such day must also be a day on which dealings are carried on in the London interbank market.
 
Capital Expenditures ” shall mean expenditures made or liabilities incurred for the acquisition of any fixed assets or improvements, replacements, substitutions or additions thereto which have a useful life of more than one year, including the total principal portion of Capitalized Lease Obligations, which, in accordance with GAAP, would be classified as capital expenditures.
 
Capitalized Lease Obligation ” shall mean any Indebtedness of any Borrower represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.
 
Cash Equivalents ” shall have meaning set forth in Section 7.4(a)(iv) herein.
 
CD ” shall mean Carl DeSantis, residing at 5907 N. Ocean Boulevard, Ocean Ridge, Florida  33435-5245.
 
 
CD Financial ” shall mean CD Financial, LLC, a Florida limited liability company.
 
CERCLA ” shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq.
 
Change of Control ” shall mean the occurrence of any event (whether in one or more transactions) which results in a transfer of control of the Borrowing Agent to a Person who is not an Original Owner of Borrowing Agent.  For purposes of this definition, “control of the Borrowing Agent” shall mean the power, direct or indirect to vote 50% or more of the Equity Interests having ordinary voting power for the election of directors (or the individuals performing similar functions) of the Borrowing Agent.
 
 “ Charges ” shall mean all taxes, charges, fees, imposts, levies or other assessments, related to all net income, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation and property taxes, custom duties, fees, assessments, liens, claims and charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts, imposed by any taxing or other authority, domestic or foreign (including the Pension Benefit Guaranty Corporation or any environmental agency or superfund), upon the Collateral, any Borrower or any of its Subsidiaries.
 
Closing Date ” shall mean June 27, 2012.
 
Code ” shall mean the Internal Revenue Code of 1986, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect.
 
Collateral ” shall mean and include:
 
(a)           all Receivables;
 
(b)           all Equipment;
 
(c)           all General Intangibles;
 
(d)           all Inventory;
 
(e)           all Investment Property;
 
(f)           Subsidiary Stock;
 
(g)           all of each Borrower’s right, title and interest in and to, whether now owned or hereafter acquired and wherever located, (i) its respective goods and other property including, but not limited to, all merchandise returned or rejected by Customers, relating to or securing any of the Receivables; (ii) all of each Borrower’s rights as a consignor, a consignee, an unpaid vendor, mechanic, artisan, or other lienor, including stoppage in transit, setoff, detinue, replevin, reclamation and repurchase; (iii) all additional amounts due to any Borrower from any Customer relating to the Receivables; (iv) other property, including warranty claims, relating to any goods securing the Obligations; (v) all of each Borrower’s contract rights, rights of payment which have been earned under a contract right, instruments (including promissory notes), documents, chattel paper (including electronic chattel paper), warehouse receipts, deposit accounts, letters of credit and money; (vi) all commercial tort claims (whether now existing or hereafter arising); (vii) if and when obtained by any Borrower, all real and personal property of third parties in which such Borrower has been granted a lien or security interest as security for the payment or enforcement of Receivables; (viii) all letter of credit rights (whether or not the respective letter of credit is evidenced by a writing); (ix) all supporting obligations; and (x) any other goods, personal property or real property now owned or hereafter acquired in which any Borrower has expressly granted a security interest or may in the future grant a security interest to Agent hereunder, or in any amendment or supplement hereto or thereto, or under any other agreement between Agent and any Borrower;
 
(h)           all of each Borrower’s ledger sheets, ledger cards, files, correspondence, records, books of account, business papers, computers, computer software (owned by any Borrower or in which it has an interest), computer programs, tapes, disks and documents relating to Collateral described in clauses (a), (b), (c), (d), (e), (f) or (g) of this Paragraph; and
 
(i)           all proceeds and products of the Collateral described in clauses (a), (b), (c), (d), (e), (f), (g) and (h) in whatever form, including, but not limited to:  cash, deposit accounts (whether or not comprised solely of proceeds), certificates of deposit, insurance proceeds (including hazard, flood and credit insurance), negotiable instruments and other instruments for the payment of money, chattel paper, security agreements, documents, eminent domain proceeds, condemnation proceeds and tort claim proceeds.
 
Commitment Percentage ” of any Lender shall mean the percentage set forth below such Lender’s name on the signature page hereof as same may be adjusted upon any assignment by a Lender pursuant to Section 16.3(c) or (d) hereof.
 
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Commitment Transfer Supplement ” shall mean a document in the form of Exhibit 16.3 hereto, properly completed and otherwise in form and substance satisfactory to Agent by which the Purchasing Lender purchases and assumes a portion of the obligation of Lenders to make Advances under this Agreement.
 
Compliance Certificate ” shall mean a compliance certificate to be signed by the Chief Financial Officer or Controller of Borrowing Agent, which shall state that, based on an examination sufficient to permit such officer to make an informed statement, no Default or Event of Default exists, or if such is not the case, specifying such Default or Event of Default, its nature, when it occurred, whether it is continuing and the steps being taken by Borrowers with respect to such default and, such certificate shall have appended thereto calculations which set forth Borrowers’ compliance with the requirements or restrictions imposed by Sections 6.5, 7.4, 7.5, 7.6, 7.7, 7.8, 7.10 and 7.11.
 
Consents ” shall mean all filings and all licenses, permits, consents, approvals, authorizations, qualifications and orders of Governmental Bodies and other third parties, domestic or foreign, necessary to carry on any Borrower’s business or necessary (including to avoid a conflict or breach under any agreement, instrument, other document, license, permit or other authorization) for the execution, delivery or performance of this Agreement, the Other Documents or the Subordinated Loan Documentation, including any Consents required under all applicable federal, state or other Applicable Law.
 
Consigned Inventory ” shall mean Inventory of any Borrower that is in the possession of another Person on a consignment, sale or return, or other basis that does not constitute a final sale and acceptance of such Inventory.
 
Contract Rate ” shall mean, as applicable, the Revolving Interest Rate or the Term Loan Rate.
 
Controlled Group ” shall mean, at any time, each Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control and all other entities which, together with any Borrower, are treated as a single employer under Section 414 of the Code.
 
Customer ” shall mean and include the account debtor with respect to any Receivable and/or the prospective purchaser of goods, services or both with respect to any contract or contract right, and/or any party who enters into or proposes to enter into any contract or other arrangement with any Borrower, pursuant to which such Borrower is to deliver any personal property or perform any services.
 
Customs ” shall have the meaning set forth in Section 2.11(b) hereof.
 
Default ” shall mean an event, circumstance or condition which, with the giving of notice or passage of time or both, would constitute an Event of Default.
 
Default Rate ” shall have the meaning set forth in Section 3.1 hereof.
 
Defaulting Lender ” shall have the meaning set forth in Section 2.23(a) hereof.
 
Depository Accounts ” shall have the meaning set forth in Section 4.15(h) hereof.
 
Designated Lender ” shall have the meaning set forth in Section 16.2(b) hereof.
 
Dividend Payments ” shall have the meaning set forth in Section 7.7 hereof.
 
Dollar ” and the sign “ $ ” shall mean lawful money of the United States of America.
 
Domestic Rate Loan ” shall mean any Advance that bears interest based upon the Alternate Base Rate.
 
Drawing Date ” shall have the meaning set forth in Section 2.12(b) hereof.
 
Early Termination Date ” shall have the meaning set forth in Section 13.1 hereof.
 
Earnings Before Interest and Taxes ” shall mean for any period the sum of (i) net income (or loss) of Borrowers on a Consolidated Basis for such period (excluding extraordinary gains and losses), plus (ii) all interest expense of Borrowers on a Consolidated Basis for such period, plus (iii) all charges against income of Borrowers on a Consolidated Basis for such period for federal, state and local taxes actually paid.
 
EBITDA ” shall mean for the Borrowers on a Consolidated Basis for any period the sum of (i) Earnings Before Interest and Taxes for such period plus (ii) depreciation expenses for such period, plus (iii) amortization expenses for such period, plus (iv) any and all other non-cash expenses incurred during such period, plus (v) the Transactions Costs paid during such period up to the maximum amount of $250,000, plus (vi) all cash severance payments paid to any employee during such period.
 
EGK ” shall mean E. Gerald Kay, residing at 703 Peachtree Lane, Franklin Lakes, New Jersey  07417.
 
EGK Debt ” shall mean all indebtedness, obligations and liabilities of the Borrowing Agent to EGK under the EGK Note.
 
EGK Note ” means that certain Promissory Note dated June 27, 2012 made by the Borrowing Agent to EKG in the original principal amount of $27,716.27, as amended, restated, supplemented or modified from time to time.
 
Eligible Inventory ” shall mean and include Inventory, including work in process, with respect to each Borrower, valued at the lower of cost or market value, determined on a first-in-first-out basis, which is not, in Agent’s reasonable opinion, obsolete, slow moving or unmerchantable and which Agent, in its reasonable discretion, shall not deem ineligible Inventory, based on such considerations as Agent may from time to time deem reasonably appropriate including whether the Inventory is subject to a perfected, first priority security interest in favor of Agent and no other Lien (other than a Permitted Encumbrance).  In addition, Inventory shall not be Eligible Inventory if it (i) does not conform to all standards imposed by any Governmental Body which has regulatory authority over such goods or the use or sale thereof, (ii) except as provided in the next sentence, is in transit, (iii) is located outside the continental United States or at a location that is not otherwise in compliance with this Agreement, (iv) constitutes Consigned Inventory, (v) is the subject of an Intellectual Property Claim; (vi) is subject to a License Agreement or other agreement that limits, conditions or restricts any Borrower’s or Agent’s right to sell or otherwise dispose of such Inventory, unless (A) Agent is a party to a Licensor/Agent Agreement with the Licensor under such License Agreement or (B) otherwise the Agent is satisfied that it may sell or otherwise dispose of such Inventory without (x) infringing the rights of such Licensor, (y) violating such License Agreement or any contract with such Licensor, or (z) incurring any liability with respect to payment of royalties other than royalties incurred pursuant to sale of such Inventory under such License Agreement; or (vii) is situated at a location not owned by a Borrower unless the owner or occupier of such location has executed in favor of Agent a Lien Waiver Agreement.  Eligible Inventory shall include all Inventory in-transit for which title has passed to a Borrower, which is insured to the full value thereof and for which, if requested by Agent, Agent shall have in its possession (a) all negotiable bills of lading properly endorsed and (b) all non-negotiable bills of lading issued in Agent’s name.  Eligible Inventory shall not include Inventory being acquired pursuant to a trade Letter of Credit to the extent such trade Letter of Credit remains outstanding.
 
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Eligible Receivables ” shall mean and include with respect to each Borrower, each Receivable of such Borrower arising in the Ordinary Course of Business and which Agent, in its reasonable credit judgment, shall deem to be an Eligible Receivable, based on such considerations as Agent may from time to time deem reasonably appropriate.  A Receivable shall not be deemed eligible unless such Receivable is subject to Agent’s first priority perfected security interest and no other Lien (other than Permitted Encumbrances), and is evidenced by an invoice or other documentary evidence reasonably satisfactory to Agent.  In addition, no Receivable shall be an Eligible Receivable if:
 
(a)           it arises out of a sale made by any Borrower to an Affiliate of any Borrower or to a Person controlled by an Affiliate of any Borrower;
 
(b)           it is due or unpaid (i) more than sixty (60) days after the original due date and/or (ii) more than ninety (90) days after the original invoice date;
 
(c)           fifty percent (50%) or more of the Receivables from such Customer are not deemed Eligible Receivables hereunder.  Such percentage may, in Agent’s reasonable discretion, be increased or decreased from time to time;
 
(d)           any covenant, representation or warranty contained in this Agreement with respect to such Receivable has been breached;
 
(e)           the Customer shall (i) apply for, suffer, or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or call a meeting of its creditors, (ii) admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business, (iii) make a general assignment for the benefit of creditors, (iv) commence a voluntary case under any state or federal bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is filed against it in any involuntary case under such bankruptcy laws, or (viii) take any action for the purpose of effecting any of the foregoing;
 
(f)           the sale is to a Customer (other than Herbalife and its Subsidiaries) outside the continental United States of America or Canada, unless the sale is on letter of credit, guaranty or acceptance terms, in each case acceptable to Agent in its reasonable discretion;
 
(g)           the sale to the Customer is on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment or any other repurchase or return basis or is evidenced by chattel paper;
 
(h)           Agent believes, in its reasonable judgment, that collection of such Receivable is insecure or that such Receivable may not be paid by reason of the Customer’s financial inability to pay;
 
(i)           the Customer is the United States of America, any state or any department, agency or instrumentality of any of them, unless the applicable Borrower assigns its right to payment of such Receivable to Agent pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with other applicable statutes or ordinances;
 
(j)           the goods giving rise to such Receivable have not been delivered to and accepted by the Customer or the services giving rise to such Receivable have not been performed by the applicable Borrower and accepted so as to cause the Receivables to be payable by the Customer or the Receivable otherwise does not represent a final sale;
 
(k)           the Receivables of the Customer exceed a credit limit for such Customer determined by Agent, in its reasonable discretion, to the extent such Receivable exceeds such limit and Agent has given the Borrowing Agent at least 10 days notice prior to establishing such credit limit;
 
(l)           the Receivable is subject to any offset, deduction, defense, dispute, or counterclaim, but only to the extent of any such offset, deduction, defense, dispute or counterclaim; or the Customer is also a creditor or supplier of a Borrower, but only to the extent of the indebtedness owed to such Customer; or the Receivable is contingent in any respect or for any reason;
 
(m)           the applicable Borrower has made any agreement with any Customer for any deduction therefrom, except for discounts or allowances made in the Ordinary Course of Business for prompt payment;
 
(n)           any return, rejection or repossession of the merchandise has occurred or the rendition of services has been disputed, but only to the extent of any such dispute;
 
(o)           such Receivable is not payable to a Borrower; or
 
(p)           such Receivable is not otherwise satisfactory to Agent as determined in good faith by Agent in the exercise of its discretion in a reasonable manner.
 
Environmental Complaint ” shall have the meaning set forth in Section 4.19(d) hereof.
 
Environmental Indemnity Agreement ” shall mean that certain Environmental Indemnity Agreement executed by the Borrowers in favor of the Agent for the benefit of the Lenders dated the date hereof with regard to the Mortgaged Premises, together with all extensions, renewals, amendments, supplements, modifications, substitutions and replacements thereto and thereof.
 
Environmental Laws ” shall mean all federal, state and local environmental, land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances and codes relating to the protection of the environment and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Substances and the rules, regulations, policies, guidelines, interpretations, decisions, orders and directives of federal, state and local governmental agencies and authorities with respect thereto.
 
Equipment ” shall mean and include as to each Borrower all of such Borrower’s goods (other than Inventory) whether now owned or hereafter acquired and wherever located including all equipment, machinery, apparatus, motor vehicles, fittings, furniture, furnishings, fixtures, parts, accessories and all replacements and substitutions therefor or accessions thereto.
 
Equity Infusion Amount ” shall mean $1,714,000.
 
Equity Interests ” of any Person shall mean any and all shares, rights to purchase, options, warrants, general, limited or limited liability partnership interests, member interests, participation or other equivalents of or interest in (regardless of how designated) equity of such Person, whether voting or nonvoting, including common stock, preferred stock, convertible securities or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act).
 
ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and the rules and regulations promulgated thereunder.
 
Eurodollar Rate ” shall mean for any Eurodollar Rate Loan for the then current Interest Period relating thereto the interest rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by Agent by dividing (i) the rate which appears on the Bloomberg Page BBAM1 (or on such other substitute Bloomberg page that displays rates at which US dollar deposits are offered by leading banks in the London interbank deposit market), or the rate which is quoted by another source selected by Agent which has been approved by the British Bankers’ Association as an authorized information vendor for the purpose of displaying rates at which US dollar deposits are offered by leading banks in the London interbank deposit market (an “Alternative Source”), at approximately 11:00 a.m., London time two (2) Business Days prior to the first day of such Interest Period (or if there shall at any time, for any reason, no longer exist a Bloomberg Page BBAM1 (or any substitute page) or any Alternate Source, a comparable replacement rate determined by the Agent at such time (which determination shall be conclusive absent manifest error)) for an amount comparable to such Eurodollar Rate Loan and having a borrowing date and a maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus the Reserve Percentage.
 
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The Eurodollar Rate shall be adjusted with respect to any Eurodollar Rate Loan that is outstanding on the effective date of any change in the Reserve Percentage as of such effective date.  The Agent shall give prompt notice to the Borrowing Agent of the Eurodollar Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.
 
Eurodollar Rate Loan ” shall mean any Loan at any time that bears interest based on the Eurodollar Rate.
 
Event of Default ” shall have the meaning set forth in Article X hereof.
 
Excess Cash Flow ” for any fiscal period shall mean an amount equal to (i) EBITDA of Borrowers on a Consolidated Basis for such fiscal period, minus (b) the sum of (i) the aggregate amount of all principal and interest payments due and/or made with regard to all Funded Debt of the Borrowers on a Consolidated Basis for such fiscal period, plus (ii) all principal and interest payments due and/or made with respect to all Revolving Advances and the Term Loan for such fiscal period, plus (iii) all Unfinanced Capital Expenditures made by Borrowers on a Consolidated Basis during such fiscal period, plus (iv) the aggregate amount of dividends, distributions and management fees paid by the Borrowers on a Consolidated Basis for such fiscal period, plus (v) all taxes actually paid in cash by Borrowers on a Consolidated Basis during such fiscal period, plus (vi) all payments made with respect to all Subordinated Loan Documentation by the Borrowers during such fiscal period.
 
Exchange Act ” shall have the mean the Securities Exchange Act of 1934, as amended.
 
Executive Order No. 13224 ” shall mean the Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.
 
Federal Funds Effective Rate ” for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed and rounded upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the “Federal Funds Effective Rate” as of the date of this Agreement; provided, if such Federal Reserve Bank (or its successor) does not announce such rate on any day, the “Federal Funds Effective Rate” for such day shall be the Federal Funds Effective Rate for the last day on which such rate was announced.
 
Federal Funds Open Rate ” for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed) which is the daily federal funds open rate as quoted by ICAP North America, Inc. (or any successor) as set forth on the Bloomberg Screen BTMM for that day opposite the caption “OPEN” (or on such other substitute Bloomberg Screen that displays such rate), or as set forth on such other recognized electronic source used for the purpose of displaying such rate as selected by PNC (an “Alternate Source”) (or if such rate for such day does not appear on the Bloomberg Screen BTMM (or any substitute screen) or on any Alternate Source, or if there shall at any time, for any reason, no longer exist a Bloomberg Screen BTMM (or any substitute screen) or any Alternate Source, a comparable replacement rate determined by the PNC at such time (which determination shall be conclusive absent manifest error); provided however, that if such day is not a Business Day, the Federal Funds Open Rate for such day shall be the “open” rate on the immediately preceding Business Day.  If and when the Federal Funds Open Rate changes, the rate of interest with respect to any advance to which the Federal Funds Open Rate applies will change automatically without notice to the Borrowers, effective on the date of any such change.
 
Fiscal Year ” means the fiscal year of each Borrower ending on June 30 th of each calendar year.
 
Fixed Charge Coverage Ratio ” shall mean and include, with respect to any fiscal period, the ratio of (a) EBITDA, minus Unfinanced Capital Expenditures made during such period to (b) the sum of (i) the aggregate amount of all principal and interest payments made with regard to all Funded Debt of the Borrowers during such period including, but not limited to, any and all past due rent, plus (ii) the aggregate amount of cash dividends and cash distributions made by the Borrowers during such period (specifically excluding any and all cash dividends and cash distributions made between Borrowers and/or between Borrowers and their respective Subsidiaries), plus (iii) all taxes actually paid in cash by the Borrowers during such period, plus (iv) the aggregate amount of dividends and/or distributions made to any Borrower during such period by any Person that such Borrower is part of as a joint venture as permitted herein.  Notwithstanding anything to the contrary herein, any income of the Borrowers derived from writing-off any past due accounts payable shall be excluded from this definition of Fixed Charge Coverage Ratio.
 
Foreign Subsidiary ” of any Person, shall mean any Subsidiary of such Person that is not organized or incorporated in the United States or any State, the District of Columbia or any territory thereof.
 
Formula Amount ” shall have the meaning set forth in Section 2.1(a).
 
Funded Debt ” shall mean, with respect to any Person, without duplication, all Indebtedness for borrowed money evidenced by notes, bonds, debentures, or similar evidences of Indebtedness that by its terms matures more than one year from, or is directly or indirectly renewable or extendible at such Person’s option under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one year from the date of creation thereof, and specifically including Capitalized Lease Obligations, current maturities of long-term debt, revolving credit and short term debt extendible beyond one year at the option of the debtor, and also including, in the case of the Borrowers, the Obligations and, without duplication, Indebtedness consisting of guaranties of Funded Debt of other Persons.
 
GAAP ” shall mean generally accepted accounting principles in the United States of America in effect from time to time.
 
General Intangibles ” shall mean and include as to each Borrower all of such Borrower’s general intangibles, whether now owned or hereafter acquired, including all payment intangibles, all choses in action, causes of action, corporate or other business records, inventions, designs, patents, patent applications, equipment formulations, manufacturing procedures, quality control procedures, trademarks, trademark applications, service marks, trade secrets, goodwill, copyrights, design rights, software, computer information, source codes, codes, records and updates, registrations, licenses, franchises, customer lists, tax refunds, tax refund claims, computer programs, all claims under guaranties, security interests or other security held by or granted to such Borrower to secure payment of any of the Receivables by a Customer (other than to the extent covered by Receivables) all rights of indemnification and all other intangible property of every kind and nature (other than Receivables).
 
Governmental Acts ” shall have the meaning set forth in Section 2.17.
 
Governmental Body ” shall mean any nation or government, any state or other political subdivision thereof or any entity, authority, agency, division or department exercising the legislative, judicial, regulatory or administrative functions of or pertaining to a government.
 
Guarantor ” shall mean, collectively, the Limited Guarantors and any other Person who may hereafter guarantee payment or performance of the whole or any part of the Obligations and “Guarantors” means collectively all such Persons.
 
Guaranty ” shall mean any guaranty of the obligations of Borrowers executed by a Guarantor in favor of Agent for its benefit and for the ratable benefit of Lenders, in form and substance satisfactory to the Agent.
 
Hazardous Discharge ” shall have the meaning set forth in Section 4.19(d) hereof.
 
Hazardous Substance ” shall mean, without limitation, any flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or related materials as defined in CERCLA, the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of the New York State Environmental Conservation Law or any other applicable Environmental Law and in the regulations adopted pursuant thereto.
 
Hazardous Wastes ” shall mean all waste materials subject to regulation under CERCLA, RCRA or applicable state law, and any other applicable Federal and state laws now in force or hereafter enacted relating to hazardous waste disposal.
 
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Hedge Liabilities ” shall have the meaning provided in the definition of “Lender-Provided Interest Rate Hedge”.
 
Hedge Obligations ” of any Person shall mean all obligations and liabilities of such Person under any Interest Rate Hedge.
 
Herbalife ” shall mean Herbalife International of America, Inc., a California corporation.
 
Herbalife Foreign Subsidiary Sublimit ” shall mean $1,000,000.
 
iBio ” shall mean iBio, Inc., a Delaware corporation.
 
iBio Stock ” shall mean common shares of iBio.
 
IHT ” means IHT Health Products, Inc., a corporation organized under the laws of the State of Delaware.
 
IHTP ” means IHT Properties Corp., a corporation organized under the laws of the State of Delaware.
 
Imperium Debt ” means all Indebtedness, obligations and liabilities of the Borrowers and certain of their Subsidiaries under the (a) Amended and Restated Securities Purchase Agreement, dated as of February 21, 2008, by and between Imperium Master Fund, Ltd. , the other investors party thereto and Integrated, (b) Amended and Restated Security Agreement, dated as of February 21, 2008, by Integrated, certain of its Subsidiaries party thereto and Imperium Advisers, LLC, as collateral agent, and (c) all guarantees executed and delivered by certain Subsidiaries of Integrated in favor of such collateral agent, and (d) all other documents and agreements executed and delivered by the Borrowers and any of their Subsidiaries in connection therewith, including any forbearance agreement, in each case as amended, amended and restated, supplemented or otherwise modified.
 
Indebtedness ” of a Person at a particular date shall mean, without duplications, all obligations of such Person which in accordance with GAAP would be classified upon a balance sheet as liabilities (except capital stock and surplus earned or otherwise) and in any event, without limitation by reason of enumeration, shall include all indebtedness, debt and other similar monetary obligations of such Person whether direct or guaranteed, and all premiums, if any, due at the required prepayment dates of such indebtedness, and  all indebtedness secured by a Lien on assets owned by such Person, whether or not such indebtedness actually shall have been created, assumed or incurred by such Person including, but not limited to, (a) all obligations of such Person which, in accordance with GAAP, would be classified upon a balance sheet as liabilities (except capital stock and surplus earned or otherwise), (b) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (c) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (d) all obligations of such Person upon which interest charges are customarily paid, (e) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (f) all obligations of such Person in respect of the deferred purchase price of property or services, (g) all indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (h) all guarantees by such Person of indebtedness of others, (i) all Capitalized Lease Obligations of such Person, (j) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, (k) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances, and (l) all obligations of such Person in respect of any earn-out obligation.  Any indebtedness of such Person resulting from the acquisition by such Person of any assets subject to any Lien shall be deemed, for the purposes hereof, to be the equivalent of the creation, assumption and incurring of the indebtedness secured thereby, whether or not actually so created, assumed or incurred.
 
 “ Intellectual Property ” shall mean property constituting under any Applicable Law a patent, patent application, copyright, trademark, service mark, trade name, mask work, trade secret or license or other right to use any of the foregoing.
 
Intellectual Property Claim ” shall mean the assertion by any Person of a claim (whether asserted in writing, by action, suit or proceeding or otherwise) that any Borrower’s ownership, use, marketing, sale or distribution of any Inventory, Equipment, Intellectual Property or other property or asset is violative of any ownership of or right to use any Intellectual Property of such Person.
 
Interest Period ” shall mean the period provided for any Eurodollar Rate Loan pursuant to Section 2.2(b).
 
Interest Rate Hedge ” shall mean an interest rate exchange, collar, cap, swap, adjustable strike cap, adjustable strike corridor or similar agreements entered into by any Borrower or its Subsidiaries in order to provide protection to, or minimize the impact upon, such Borrower, any Guarantor and/or their respective Subsidiaries of increasing floating rates of interest applicable to Indebtedness.
 
Inventory ” shall mean and include as to each Borrower all of such Borrower’s now owned or hereafter acquired inventory, goods, merchandise and other personal property, wherever located, to be furnished under any consignment arrangement, contract of service or held for sale or lease, all raw materials, work in process, finished goods and materials and supplies of any kind, nature or description which are or might be used or consumed in such Borrower’s business or used in selling or furnishing such goods, merchandise and other personal property, and all documents of title or other documents representing them.
 
Inventory Advance Rate ” shall have the meaning set forth in Section 2.1(a)(y)(ii) hereof.
 
Inventory Sublimit ” shall mean $4,000,000.
 
Investment Property ” shall mean and include as to each Borrower, all investment property, including all of such Borrower’s now owned or hereafter acquired securities (whether certificated or uncertificated), securities entitlements, securities accounts, commodities contracts and commodities accounts.
 
Issuer ” shall mean any Person who issues a Letter of Credit and/or accepts a draft pursuant to the terms hereof.
 
Leasehold Interests ” shall mean all of each Borrower’s right, title and interest in and to the premises identified on Schedule 4.19 hereto or which is hereafter leased by any Borrower.
 
Lender ” and “ Lenders ” shall have the meaning ascribed to such term in the preamble to this Agreement and shall include each Person which becomes a transferee, successor or assign of any Lender.
 
Lender-Provided Interest Rate Hedge ” shall mean an Interest Rate Hedge which is provided by any Lender and with respect to which the Agent confirms meets the following requirements: such Interest Rate Hedge (i) is documented in a standard International Swap Dealer Association Agreement, (ii) provides for the method of calculating the reimbursable amount of the provider’s credit exposure in a reasonable and customary manner, and (iii) is entered into for hedging (rather than speculative) purposes.  The liabilities of any Borrower to the provider of any Lender-Provided Interest Rate Hedge (the “Hedge Liabilities”) shall be “Obligations” hereunder, guaranteed obligations under the Guaranty and otherwise treated as Obligations for purposes of each of the Other Documents.  The Liens securing the Hedge Liabilities shall be pari passu with the Liens securing all other Obligations under this Agreement and the Other Documents.
 
Letter of Credit Fees ” shall have the meaning set forth in Section 3.2.
 
Letter of Credit Borrowing ” shall have the meaning set forth in Section 2.12(d).
 
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Letter of Credit Sublimit ” shall mean $1,000,000.
 
Letters of Credit ” shall have the meaning set forth in Section 2.9.
 
License Agreement ” shall mean any agreement between any Borrower and a Licensor pursuant to which such Borrower is authorized to use any Intellectual Property in connection with the manufacturing, marketing, sale or other distribution of any Inventory of such Borrower or otherwise in connection with such Borrower’s business operations.
 
Licensor ” shall mean any Person from whom any Borrower obtains the right to use (whether on an exclusive or non-exclusive basis) any Intellectual Property in connection with such Borrower’s manufacture, marketing, sale or other distribution of any Inventory or otherwise in connection with such Borrower’s business operations.
 
Licensor/Agent Agreement ” shall mean an agreement between Agent and a Licensor, in form and content reasonably satisfactory to Agent, by which Agent is given the unqualified right, vis-a-vis such Licensor, to enforce Agent’s Liens with respect to and to dispose of any Borrower’s Inventory with the benefit of any Intellectual Property applicable thereto, irrespective of such Borrower’s default under any License Agreement with such Licensor.
 
Lien ” shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, security interest, lien (whether statutory or otherwise), charge, claim or encumbrance, or other security agreement held or asserted in respect of any asset of any kind or nature whatsoever including any conditional sale, capital lease or other title retention agreement, any lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction.
 
Lien Waiver Agreement ” shall mean an agreement which is executed in favor of Agent by a Person who owns or occupies premises at which any Collateral may be located from time to time and by which such Person shall waive any Lien that such Person may ever have with respect to any of the Collateral and shall authorize Agent from time to time to enter upon the premises to inspect or remove the Collateral from such premises or to use such premises to store or dispose of such Inventory.
 
Limited Guarantors ” shall mean, collectively, EGK and CD.
 
Loans ” means, collectively, the Revolving Advances and the Term Loan.
 
Material Adverse Effect ” shall mean a material adverse effect on (a) the condition (financial or otherwise), results of operations, assets, business, or properties of the Borrowers (taken as a whole), (b) any Borrower’s ability to duly and punctually pay or perform the Obligations in accordance with the terms thereof, (c) the value of the Collateral, or Agent’s Liens on the Collateral or the priority of any such Lien or (d) the practical realization of the benefits of Agent’s and each Lender’s rights and remedies under this Agreement and the Other Documents.
 
Maximum Face Amount ” shall mean, with respect to any outstanding Letter of Credit, the face amount of such Letter of Credit including all automatic increases provided for in such Letter of Credit, whether or not any such automatic increase has become effective.
 
Maximum Loan Amount ” shall mean $11,727,000 minus repayments under the Term Loan, provided , however , for calculation of the Maximum Loan Amount in Section 13.1 herein the Maximum Loan Amount shall mean $11,727,000.
 
Maximum Revolving Advance Amount ” shall mean $8,000,000.
 
Maximum Term Loan Amount ” shall mean $3,727,000.
 
Maximum Undrawn Amount ” shall mean with respect to any outstanding Letter of Credit, the amount of such Letter of Credit that is or may become available to be drawn, including all automatic increases provided for in such Letter of Credit, whether or not any such automatic increase has become effective.
 
MD ” means InB:Manhattan Drug Company, Inc., a corporation organized under the laws of the State of New York.
 
Modified Commitment Transfer Supplement ” shall have the meaning set forth in Section 16.3(d).
 
Mortgage ” shall mean that certain Mortgage and Security Agreement executed by IHTP in favor of the Agent for the benefit of the Lenders dated the date hereof with regard to the Mortgaged Premises, together with all extensions, renewals, amendments, supplements, modifications, substitutions and replacements thereto and thereof.
 
Mortgaged Premises ” shall mean that certain real property located at 201 Route 22 West, Hillside, New Jersey.
 
Multiemployer Plan ” shall mean a “multiemployer plan” as defined in Sections 3(37) and 4001(a)(3) of ERISA.
 
Multiple Employer Plan ” shall mean a Plan which has two or more contributing sponsors (including any Borrower or any member of the Controlled Group) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.
 
Note ” shall mean, collectively, the Term Note and the Revolving Credit Note.
 
Obligations ” shall mean and include any and all loans, advances, debts, liabilities, obligations, covenants and duties owing by any Borrower to Lenders or Agent or to any other direct or indirect subsidiary or affiliate of Agent or any Lender of any kind or nature, present or future (including any interest or other amounts accruing thereon after maturity, or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to any Borrower, whether or not a claim for post-filing or post-petition interest or other amounts is allowed in such proceeding), whether or not evidenced by any note, guaranty or other instrument, whether arising under any agreement, instrument or document, (including this Agreement and the Other Documents) whether or not for the payment of money, whether arising by reason of an extension of credit, opening of a letter of credit, loan, equipment lease or guarantee, under any interest or currency swap, future, option or other similar agreement, or in any other manner, whether arising out of overdrafts or deposit or other accounts or electronic funds transfers (whether through automated clearing houses or otherwise) or out of the Agent’s or any Lenders non-receipt of or inability to collect funds or otherwise not being made whole in connection with depository transfer check or other similar arrangements, whether direct or indirect (including those acquired by assignment or participation), absolute or contingent, joint or several, due or to become due, now existing or hereafter arising, contractual or tortious, liquidated or unliquidated, regardless of how such indebtedness or liabilities arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument, including, but not limited to, any and all of any Borrower’s Indebtedness and/or liabilities under this Agreement, the Other Documents or under any other agreement between Agent or Lenders and any Borrower and any amendments, extensions, renewals or increases and all costs and expenses of Agent and any Lender incurred in the documentation, negotiation, modification, enforcement, collection or otherwise in connection with any of the foregoing, including but not limited to reasonable attorneys’ fees and expenses and all obligations of any Borrower to Agent or Lenders to perform acts or refrain from taking any action.
 
Ordinary Course of Business ” shall mean with respect to the Borrowers on a consolidated basis, the ordinary course of the Borrowers’ business, which is the manufacturing, distributing, marketing and sale of vitamins, nutritional supplements, herbal products, food products and fine natural chemicals and other similar products, and activities necessary or advisable to conduct the foregoing.
 
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Original Owners ” shall mean, collectively, with regard to Integrated, Carl DeSantis, CD Financial, LLC, E. Gerry Kay, Christina Kay, Riva Sheppard and any of their respective lineal descendants and/or trusts or other entities established for estate planning purposes, to whom or which an Equity Interest in Integrated is transferred so long as the transferor of such Equity Interest (which shall be an Original Owner) retains voting control in respect thereof.
 
Other Documents ” shall mean, collectively, the Mortgage, the Note, the Assignment of Rents, Leases and Profits, the Environmental Indemnity Agreement, any Guaranty, the Stock Pledge Agreement, the Subordination Agreement, any Lender-Provided Interest Rate Hedge and any and all other agreements, instruments and documents, including guaranties, pledges, powers of attorney, consents, interest or currency swap agreements or other similar agreements and writings, any Letters of Credit (including applications for such Letters of Credit and related reimbursement agreements), and any control agreements now or hereafter executed by any Borrower or any Guarantor and/or delivered to Agent or any Lender in respect of the transactions contemplated by this Agreement.
 
Out-of-Formula Loans ” shall have the meaning set forth in Section 16.2(b).
 
Parent ” of any Person shall mean a corporation or other entity owning, directly or indirectly at least 50% of the shares of stock or other ownership interests having ordinary voting power to elect a majority of the directors of the Person, or other Persons performing similar functions for any such Person.
 
Participant ” shall mean each Person who shall be granted the right by any Lender to participate in any of the Advances and who shall have entered into a participation agreement in form and substance satisfactory to such Lender.
 
Participation Advance ” shall have the meaning set forth in Section 2.12(d).
 
Participation Commitment ” shall mean each Lender’s obligation to buy a participation of the Letters of Credit issued hereunder.
 
Payee ” shall have the meaning set forth in Section 3.10.
 
Payment Office ” shall mean initially Two Tower Center Boulevard, East Brunswick, New Jersey 08816; thereafter, such other office of Agent, if any, which it may designate by notice to Borrowing Agent and to each Lender to be the Payment Office.
 
PBGC ” shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor.
 
Pension Benefit Plan ” shall mean at any time any employee pension benefit plan (including a Multiple Employer Plan, but not a Multiemployer Plan) which is covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained by any member of the Controlled Group for employees of any member of the Controlled Group; or (ii) has at any time within the preceding five years been maintained by any entity which was at such time a member of the Controlled Group for employees of any entity which was at such time a member of the Controlled Group.
 
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Permitted Encumbrances ” shall mean:
 
(a)           Liens in favor of Agent for the benefit of Agent and Lenders and any UCC financing statements filed by or on behalf of the Agent or any of the Lenders;
 
(b)           Liens for taxes, assessments or other governmental charges not delinquent or being Properly Contested;
 
(c)           Liens disclosed in the financial statements referred to in Section 5.5, the existence of which Agent has consented to in writing;
 
(d)           deposits or pledges to secure obligations under worker’s compensation, social security or similar laws or regulations, or under unemployment insurance;
 
(e)           deposits or pledges to secure bids, tenders, contracts (other than contracts for the payment of money), leases, statutory obligations, surety, performance and appeal bonds and other obligations of like nature arising in the Ordinary Course of Business;
 
(f)           Liens arising by virtue of the rendition, entry or issuance against any Borrower or any Subsidiary, or any property of any Borrower or any Subsidiary, of any judgment, writ, order, or decree for so long as each such Lien (x) is in existence for less than 30 consecutive days after it first arises or is being Properly Contested and (y) is at all times junior in priority to any Liens in favor of Agent;
 
(g)           carriers’, warehousemen’s, mechanics’, workers’, materialmen’s or other like Liens arising in the Ordinary Course of Business with respect to obligations which are not due or which are being Properly Contested;
 
(h)           Liens placed upon fixed assets hereafter acquired to secure a portion of the purchase price thereof, provided that (x) any such lien shall not encumber any other property of any Borrower and (y) the aggregate amount of Indebtedness secured by such Liens incurred as a result of such purchases during any fiscal year shall not exceed the amount provided for in Section 7.6;
 
(i)           easements, servitudes, covenants, conditions, reservations, rights-of-way, restrictions, encroachments, encumbrances and other minor defects or irregularities in title, or other similar encumbrances, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of any Borrower;
 
(j)           Liens disclosed on Schedule 1.2; provided that such Liens shall secure only those obligations which they secure on the Closing Date (and extensions, renewals and refinancings of such obligations permitted by Section 7.8) and shall not subsequently apply to any other property or assets of any Borrower;
 
(k)           purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases or consignments; provided such Liens extend solely to the assets subject to such operating leases or consignments and are permitted herein;
 
(l)           licenses, sublicenses, leases or subleases, as licensor, sublicensor, lessor or sublessor, with respect to any property of any Borrower or any of its Subsidiaries, including intellectual property, entered into in the ordinary course of business and not interfering in any respect with the ordinary conduct of or materially detracting from the value of the business of any Borrower or any Subsidiary;
 
(m)           any interest or title of a lessor, lessee, licensor, licensee, sublicense or sublessor or sublessee under any lease, license, sublicense or sublease entered into by any Borrower or any other Subsidiary in the ordinary course of its business which are permitted hereunder and covering only the assets so leased, licensed, sublicensed or subleased;
 
(n)           ground leases in respect of real property on which facilities owned or leased by any Borrower or any of its Subsidiaries are located;
 
(o)           any zoning law reserved to or vested in any governmental office or agency to control or regulate the use of any real property;
 
(p)           Liens described on the title policy delivered in connection with the Mortgage which are acceptable to the Agent;
 
(q)            Liens of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection;
 
(r)             customary rights of set off, bankers’ Lien, refund or charge back under deposit agreements, statutory or common law of banks or other financial institutions where any Borrower or any of its Subsidiaries maintains deposits in the ordinary course of business;
 
(s)            Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;
 
(t)             Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by any Borrower or any of its Subsidiaries in the ordinary course of business in accordance with the past practices of such Person which are permitted by the terms set forth herein;
 
(u)           Liens granted by Borrowers and its Subsidiaries pursuant to the Subordinated Loan Documentation as collateral security for the Subordinated Debt and any UCC financing statements filed by or on behalf of the Subordinated Lender (in its individual or collateral agent capacity) in connection with the Subordinated Loan Documentation; and
 
(v)           any Lien which is being Properly Contested by the applicable Borrower as permitted herein for a period not to exceed 60 days, so long as such Lien is being Properly Contested.
 
Person ” shall mean any individual, sole proprietorship, partnership, corporation, business trust, joint stock company, trust, unincorporated organization, association, limited liability company, limited liability partnership, institution, public benefit corporation, joint venture, entity or Governmental Body (whether federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof).
 
Plan ” shall mean any employee benefit plan within the meaning of Section 3(3) of ERISA (including a Pension Benefit Plan), maintained for employees of any Borrower or any member of the Controlled Group or any such Plan to which any Borrower or any member of the Controlled Group is required to contribute on behalf of any of its employees.
 
PNC ” shall have the meaning set forth in the preamble to this Agreement and shall extend to all of its successors and assigns.
 
Properly Contested ” shall mean, in the case of any Indebtedness or Lien, as applicable, of any Person (including any taxes) that is not paid as and when due or payable by reason of such Person’s bona fide dispute concerning its liability to pay same or concerning the amount thereof, (i) such Indebtedness or Lien, as applicable, is being properly contested in good faith by appropriate proceedings promptly instituted and diligently conducted; (ii) such Person has established appropriate reserves as shall be required in conformity with GAAP; (iii) the non-payment of such Indebtedness will not have a Material Adverse Effect and will not result in the forfeiture of any assets of such Person; (iv) no Lien is imposed upon any of such Person’s assets with respect to such Indebtedness unless such Lien is at all times junior and subordinate in priority to the Liens in favor of the Agent (except only with respect to property taxes that have priority as a matter of applicable state law) and enforcement of such Lien is stayed during the period prior to the final resolution or disposition of such dispute; (v) if such Indebtedness or Lien, as applicable, results from, or is determined by the entry, rendition or issuance against a Person or any of its assets of a judgment, writ, order or decree, enforcement of such judgment, writ, order or decree is stayed pending a timely appeal or other judicial review; and (vi) if such contest is abandoned, settled or determined adversely (in whole or in part) to such Person, such Person forthwith pays such Indebtedness and all penalties, interest and other amounts due in connection therewith.
 
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Purchasing CLO ” shall have the meaning set forth in Section 16.3(d) hereof.
 
Purchasing Lender ” shall have the meaning set forth in Section 16.3(c) hereof.
 
RCRA ” shall mean the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., as same may be amended from time to time.
 
Real Property ” shall mean all of each Borrower’s right, title and interest in and to the owned and leased premises identified on Schedule 4.19 hereto or which is hereafter owned or leased by any Borrower.
 
Receivables ” shall mean and include, as to each Borrower, all of such Borrower’s accounts, contract rights, instruments (including those evidencing indebtedness owed to such Borrower by its Affiliates), documents, chattel paper (including electronic chattel paper), general intangibles relating to accounts, drafts and acceptances, credit card receivables and all other forms of obligations owing to such Borrower arising out of or in connection with the sale or lease of Inventory or the rendition of services, all supporting obligations, guarantees and other security therefor, whether secured or unsecured, now existing or hereafter created, and whether or not specifically sold or assigned to Agent hereunder.
 
Receivables Advance Rate ” shall have the meaning set forth in Section 2.1(a)(y)(i) hereof.
 
Register ” shall have the meaning set forth in Section 16.3(e).
 
Reimbursement Obligation ” shall have the meaning set forth in Section 2.12(b)hereof.
 
Release ” shall have the meaning set forth in Section 5.7(c)(i) hereof.
 
Remaining Obligations ” shall mean, at any time, contingent indemnification Obligations.
 
Reportable Event ” shall mean a reportable event described in Section 4043(c) of ERISA or the regulations promulgated thereunder, other than an event for which the thirty (30) day notice period has not been waived.
 
Required Lenders ” shall mean Lenders holding at least fifty one percent (51%) of the Advances and, if no Advances are outstanding, shall mean Lenders holding fifty one percent (51%) of the Commitment Percentages; provided , however , if there are fewer than three (3) Lenders, Required Lenders shall mean all Lenders.
 
Reserve Percentage ” shall mean as of any day the maximum percentage in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including supplemental, marginal and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as “Eurocurrency Liabilities”.
 
Revolving Advances ” shall mean Advances made other than Letters of Credit and the Term Loan.
 
Revolving Credit Note ” shall mean the promissory note referred to in Section 2.1(a) hereof.
 
Revolving Interest Rate ” shall mean an interest rate per annum equal to (a) the Alternate Base Rate with respect to Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus two and three quarters of one percent (2.75%) with respect to Eurodollar Rate Loans.
 
SEC ” shall mean the Securities and Exchange Commission or any successor thereto.
 
Securities Act ” shall mean the Securities Act of 1933, as amended.
 
Settlement Date ” shall mean the Closing Date and thereafter Wednesday or Thursday of each week or more frequently if Agent deems appropriate unless such day is not a Business Day in which case it shall be the next succeeding Business Day.
 
Stock Pledge Agreement ” shall mean that certain Stock Pledge Agreement executed by Integrated in favor of the Agent with regard to the stock of iBio, as the same may be amended, restated, supplemented or otherwise modified from time to time.
 
 “ Subordinated Debt ” means all Indebtedness, obligations and liabilities of the Borrowers and its Subsidiaries to the Subordinated Lender under the Subordinated Loan Documentation.
 
Subordinated Debt Documents ” means, collectively, (a) the Subordinated Liquidity Note, (b) the Subordinated Securities Note, (c) the Subordinated Purchase Agreement, (d) the Subordinated Security Agreement, (e) the Subordinated Subsidiary Guarantee, and (f) any other agreement executed by any Borrower in favor of the Subordinated Lender (either individually or as collateral agent) in connection with any of the foregoing Subordinated Debt Documents, in each case with respect to each of the foregoing, as the same may be amended, restated, supplemented or otherwise modified from time to time.
 
Subordinated Lender ” means CD Financial.
 
Subordinated Loan Documentation ” means, collectively, (a) the Subordination Agreement, (b) the Subordinated Debt Documents, and (c) all other documents executed and delivered by any Borrower and Agent in connection therewith (other than this Agreement and the Other Documents), as each of the foregoing may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
Subordinated Liquidity Note ” means the Promissory Note, dated the date hereof, made by the Borrower Agent and payable to the order of the Subordinated Lender in the original principal amount of $1,714,000, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
Subordinated Securities Note ” means the Amended and Restated Convertible Secured Promissory Note, dated the date hereof, made by the Borrower Agent and payable to the order of the Subordinated Lender in the original principal amount of $5,350,000, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
Subordinated Purchase Agreement ” means the Amended and Restated Securities Purchase Agreement, dated as of the date hereof, by and between the Borrowing Agent and the Subordinated Lender, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
Subordinated Security Agreement ” means the Amended and Restated Security Agreement, dated as of the date hereof, by and among the Borrowing Agent, MD, AL, IHT, IHTP and Vitamin and the Subordinated Lender, as collateral agent (or any successor collateral agent), as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
Subordinated Subsidiary Guarantee ” means the Amended and Restated Subsidiary Guarantee, dated as of the date hereof, by and among MD, AL, IHT, IHTP and Vitamin and the Subordinated Lender, as collateral agent (or any successor collateral agent), as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
Subordination Agreement ” shall mean that certain Subordination Agreement dated the date hereof by and among the Agent, Integrated and the Subordinated Lender.
 
 
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Subsidiary ” of any Person shall mean a corporation or other entity of whose Equity Interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the directors of such corporation, or other Persons performing similar functions for such entity, are owned, directly or indirectly, by such Person.  Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrowers.
 
Subsidiary Stock ” shall mean all of the issued and outstanding Equity Interests of any Subsidiary owned by any Borrower (not to exceed 65% of the Equity Interests of any Foreign Subsidiary).
 
Term ” shall have the meaning set forth in Section 13.1 hereof.
 
Term Loan ” shall mean a term loan made by Agent pursuant to Section 2.4 hereof.
 
Term Loan Rate ” shall mean an interest rate per annum equal to (a) the sum of the Alternate Base Rate plus one half of one percent (0.50%) with respect to Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus three and one quarter of one percent (3.25%) with respect to Eurodollar Rate Loans.
 
Term Note ” shall mean the promissory note described in Section 2.4 hereof.
 
Termination Date ” shall mean June 27, 2017 or such other date as the Lenders may agree in writing to extend the Termination Date until, without there being any obligation on the part of the Lenders to extend the Termination Date.
 
Termination Event ” shall mean (i) a Reportable Event with respect to any Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower or any member of the Controlled Group from a Plan or Multiemployer Plan during a plan year in which such entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to terminate a Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any event or condition (a) which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer Plan, or (b) that may result in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of any Borrower or any member of the Controlled Group from a Multiemployer Plan.
 
 “ Toxic Substance ” shall mean and include any material present on the Real Property or the Leasehold Interests which has been shown to have significant adverse effect on human health or which is subject to regulation under the Toxic Substances Control Act (TSCA), 15 U.S.C. §§ 2601 et seq., applicable state law, or any other applicable Federal or state laws now in force or hereafter enacted relating to toxic substances.  “Toxic Substance” includes but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.
 
Trading with the Enemy Act ” shall mean the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any enabling legislation or executive order relating thereto.
 
Transaction Costs ” shall mean the fees, costs, expenses and charges payable by the Borrowers on or before the Closing Date in connection with the transactions contemplated by the Other Documents and the Subordinated Loan Documentation.
 
Transactions ” shall have the meaning set forth in Section 5.5 hereof.
 
Transferee ” shall have the meaning set forth in Section 16.3(d) hereof.
 
Undrawn Availability ” at a particular date shall mean an amount equal to (a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving Advance Amount, minus (b) the sum of (i) the outstanding amount of Advances (other than the Term Loan) plus (ii) all amounts due and owing to any Borrower’s trade creditors which have been unpaid for more than 60 days after the due date therefore (other than trade payables being contested or disputed by such Borrower in good faith), plus (iii) fees and expenses for which Borrowers are liable but which have not been paid or charged to Borrowers’ Account.
 
Unfinanced Capital Expenditures ” shall mean all Capital Expenditures of Borrower other than those made utilizing financing provided by the applicable seller or third party lenders.  For the avoidance of doubt, Capital Expenditures made by a Borrower utilizing Revolving Advances shall be deemed Unfinanced Capital Expenditures.
 
Uniform Commercial Code ” shall have the meaning set forth in Section 1.3 hereof.
 
USA PATRIOT Act ” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.
 
Vitamin ” shall mean Vitamin Factory, Inc. (also known as The Vitamin Factory), a corporation organized under the laws of the State of Delaware.
 
Vitamin Lease ” shall mean that certain Lease Agreement by and between MD, as lessee, and Vitamin Realty Associates LLC, as lessor, dated January 10, 1997 with regard to the property located at 225 Long Avenue, Building 15, Hillside, New Jersey  07205, as amended, restated, extended, replaced and/or modified from time to time.
 
Vitamin Note ” shall mean that certain Promissory Note dated June 27, 2012 made by the Borrowing Agent and MD to Vitamin Realty Associates, L.L.C. in the original principal amount of $685,985.61 with regard to past due rent owing under the Vitamin Lease, as amended, restated, supplemented or modified from time to time.
 
Week ” shall mean the time period commencing with the opening of business on a Wednesday and ending on the end of business the following Tuesday.
 
1.3   Uniform Commercial Code Terms .  All terms used herein and defined in the Uniform Commercial Code as adopted in the State of New York from time to time (the “Uniform Commercial Code”) shall have the meaning given therein unless otherwise defined herein.  Without limiting the foregoing, the terms “accounts”, “chattel paper”, “commercial tort claims”, “instruments”, “general intangibles”, “goods”, “payment intangibles”, “proceeds”, “supporting obligations”, “securities”, “investment property”, “documents”, “deposit accounts”, “software”, “letter of credit rights”, “inventory”, “equipment” and “fixtures”, as and when used in the description of Collateral shall have the meanings given to such terms in Articles 8 or 9 of the Uniform Commercial Code.  To the extent the definition of any category or type of collateral is expanded by any amendment, modification or revision to the Uniform Commercial Code, such expanded definition will apply automatically as of the date of such amendment, modification or revision.
 
1.4   Certain Matters of Construction .  The terms “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision.  All references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement.  Any pronoun used shall be deemed to cover all genders.  Wherever appropriate in the context, terms used herein in the singular also include the plural and vice versa.  All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations.  Unless otherwise provided, all references to any instruments or agreements to which Agent is a party, including references to any of the Other Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof.  All references herein to the time of day shall mean the time in New York, New York.  Unless otherwise provided, all financial calculations shall be performed with Inventory valued on a first-in, first-out basis.  Whenever the words “including” or “include” shall be used, such words shall be understood to mean “including, without limitation” or “include, without limitation”.  A Default or Event of Default shall be deemed to exist at all times during the period commencing on the date that such Default or Event of Default occurs to the date on which such Default or Event of Default is waived in writing pursuant to this Agreement or, in the case of a Default, is cured within any period of cure expressly provided for in this Agreement; and an Event of Default shall “continue” or be “continuing” until such Event of Default has been waived in writing by the Required Lenders.  Any Lien referred to in this Agreement or any of the Other Documents as having been created in favor of Agent, any agreement entered into by Agent pursuant to this Agreement or any of the Other Documents, any payment made by or to or funds received by Agent pursuant to or as contemplated by this Agreement or any of the Other Documents, or any act taken or omitted to be taken by Agent, shall, unless otherwise expressly provided, be created, entered into, made or received, or taken or omitted, for the benefit or account of Agent and Lenders. Wherever the phrase “to the best of Borrowers’ knowledge” or words of similar import relating to the knowledge or the awareness of any Borrower are used in this Agreement or Other Documents, such phrase shall mean and refer to (i) the actual knowledge of a senior officer of any Borrower or (ii) the knowledge that a senior officer would have obtained if he had engaged in good faith and diligent performance of his duties, including the making of such reasonably specific inquiries as may be necessary of the employees or agents of such Borrower and a good faith attempt to ascertain the existence or accuracy of the matter to which such phrase relates.  All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or otherwise within the limitations of, another covenant shall not avoid the occurrence of a default if such action is taken or condition exists.  In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect the incorrectness of a breach of a representation or warranty hereunder.
 
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ARTICLE II.  
ADVANCES, PAYMENTS
 
2.1   Revolving Advances.
 
(a)   Amount of Revolving Advances.  Subject to the terms and conditions set forth in this Agreement including Section 2.1(b), each Lender, severally and not jointly, will make Revolving Advances to Borrowers in aggregate amounts outstanding at any time equal to such Lender’s Commitment Percentage of the lesser of (x) the Maximum Revolving Advance Amount less the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit or (y) an amount equal to the sum of:
 
(i)   up to 85%, subject to the provisions of Section 2.1(b) hereof (“Receivables Advance Rate”), of Eligible Receivables, plus
 
(ii)   up to the lesser of (A) 65%, subject to the provisions of Section 2.1(b) hereof, of the value of the Eligible Inventory (“Inventory Advance Rate” and together with the Receivables Advance Rate, collectively, the “Advance Rates”), (B) 85% of the appraised net orderly liquidation value of Eligible Inventory (as evidenced by the most recent Inventory appraisal reasonably satisfactory to Agent in its sole discretion exercised in good faith) and (C) the Inventory Sublimit in the aggregate at any one time (“ Inventory Advance Rate ” and together with the Receivables Advance Rate, collectively, the “ Advance Rates ”), minus
 
(iii)    the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit, minus
 
(iv)   such reserves as Agent may reasonably deem proper and necessary from time to time.
 
The amount derived from the sum of (x) Sections 2.1(a)(y)(i) and (ii) minus (y) Section 2.1 (a)(y)(iii) and (iv) at any time and from time to time shall be referred to as the “Formula Amount”.  The Revolving Advances shall be evidenced by one or more secured promissory notes (collectively, the “Revolving Credit Note”) substantially in the form attached hereto as Exhibit 2.1(a).  Notwithstanding anything to the contrary herein, for purposes of determining Section 2.1(a)(y)(i), the maximum amount that can be included in such determination with respect to Eligible Receivables arising from Foreign Subsidiaries of Herbalife shall not exceed the Herbalife Foreign Subsidiary Sublimit at any time.
 
(b)   Discretionary Rights.  The Advance Rates may be increased or decreased by Agent at any time and from time to time in the exercise of its reasonable discretion.  Each Borrower consents to any such increases or decreases and acknowledges that decreasing the Advance Rates or increasing or imposing reserves may limit or restrict Advances (other than the Term Loan) requested by Borrowing Agent.  The rights of Agent under this subsection are subject to the provisions of Section 16.2(b).
 
2.2   Procedure for Revolving Advances Borrowing.
 
(a)   Borrowing Agent on behalf of any Borrower may notify Agent prior to 1:00 p.m. on a Business Day of a Borrower’s request to incur, on that day, a Revolving Advance hereunder.  Should any amount required to be paid as interest hereunder, or as fees or other charges under this Agreement or any other agreement with Agent or Lenders, or with respect to any other Obligation, become due, same shall be deemed a request for a Revolving Advance maintained as a Domestic Rate Loan as of the date such payment is due, in the amount required to pay in full such interest, fee, charge or Obligation under this Agreement or any other agreement with Agent or Lenders, and such request shall be irrevocable.
 
(b)    Notwithstanding the provisions of subsection (a) above, in the event any Borrower desires to obtain a Eurodollar Rate Loan, Borrowing Agent shall give Agent written notice by no later than 1:00 p.m. on the day which is three (3) Business Days prior to the date such Eurodollar Rate Loan is to be borrowed, specifying (i) the date of the proposed borrowing (which shall be a Business Day), (ii) the type of borrowing and the amount on the date of such Advance to be borrowed, which amount shall be in an aggregate principal amount that is not less than $100,000 and integral multiples of $50,000 in excess thereof, and (iii) the duration of the first Interest Period therefor.  Interest Periods for Eurodollar Rate Loans shall be for one, two or three months; provided, if an Interest Period would end on a day that is not a Business Day, it shall end on the next succeeding Business Day unless such day falls in the next succeeding calendar month in which case the Interest Period shall end on the next preceding Business Day.  No Eurodollar Rate Loan shall be made available to any Borrower during the continuance of a Default or an Event of Default.  After giving effect to each requested Eurodollar Rate Loan, including those which are converted from a Domestic Rate Loan under Section 2.2(d), there shall not be outstanding more than five (5) Eurodollar Rate Loans, in the aggregate.
 
(c)    Each Interest Period of a Eurodollar Rate Loan shall commence on the date such Eurodollar Rate Loan is made and shall end on such date as Borrowing Agent may elect as set forth in subsection (b)(iii) above provided that the exact length of each Interest Period shall be determined in accordance with the practice of the interbank market for offshore Dollar deposits and no Interest Period shall end after the last day of the Term.
 
Borrowing Agent shall elect the initial Interest Period applicable to a Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to Section 2.2(b) or by its notice of conversion given to Agent pursuant to Section 2.2(d), as the case may be.  Borrowing Agent shall elect the duration of each succeeding Interest Period by giving irrevocable written notice to Agent of such duration not later than 1:00 p.m. on the day which is three (3) Business Days prior to the last day of the then current Interest Period applicable to such Eurodollar Rate Loan.  If Agent does not receive timely notice of the Interest Period elected by Borrowing Agent, Borrowing Agent shall be deemed to have elected to convert to a Domestic Rate Loan subject to Section 2.2(d) hereinbelow.
 
(d)    Provided that no Event of Default shall have occurred and be continuing, Borrowing Agent may, on the last Business Day of the then current Interest Period applicable to any outstanding Eurodollar Rate Loan, or on any Business Day with respect to Domestic Rate Loans, convert any such loan into a loan of another type in the same aggregate principal amount provided that any conversion of a Eurodollar Rate Loan shall be made only on the last Business Day of the then current Interest Period applicable to such Eurodollar Rate Loan.  If Borrowing Agent desires to convert a loan, Borrowing Agent shall give Agent written notice by no later than 1:00 p.m. (i) on the day which is three (3) Business Days’ prior to the date on which such conversion is to occur with respect to a conversion from a Domestic Rate Loan to a Eurodollar Rate Loan, or (ii) on the day which is one (1) Business Day prior to the date on which such conversion is to occur with respect to a conversion from a Eurodollar Rate Loan to a Domestic Rate Loan, specifying, in each case, the date of such conversion, the loans to be converted and if the conversion is from a Domestic Rate Loan to any other type of loan, the duration of the first Interest Period therefor.
 
(e)    At its option and upon written notice given prior to 1:00 p.m. (New York time) at least three (3) Business Days’ prior to the date of such prepayment, any Borrower may, without premium or penalty unless otherwise set forth herein, prepay the Eurodollar Rate Loans in whole at any time or in part from time to time with accrued interest on the principal being prepaid to the date of such repayment.  Such Borrower shall specify the date of prepayment of Advances which are Eurodollar Rate Loans and the amount of such prepayment.  In the event that any prepayment of a Eurodollar Rate Loan is required or permitted on a date other than the last Business Day of the then current Interest Period with respect thereto, such Borrower shall indemnify Agent and Lenders therefor in accordance with Section 2.2(f) hereof.  At their option and upon written notice given prior to 1:00 p.m. (New York time) at least one (1) Business Days’ prior to the date of such prepayment, the Borrowers may, without premium or penalty unless otherwise set forth herein, prepay the Domestic Rate Loans in whole at any time or in part from time to time with accrued interest on the principal being prepaid to the date of such repayment, subject to amounts that may be owing under Section 13.1 .
 
(f)    Each Borrower shall indemnify Agent and Lenders and hold Agent and Lenders harmless from and against any and all losses or expenses that Agent and Lenders sustain or incur as a consequence of any prepayment, conversion of or any default by any Borrower in the payment of the principal of or interest on any Eurodollar Rate Loan or failure by any Borrower to complete a borrowing of, a prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof has been given, including, but not limited to, any interest payable by Agent or Lenders to lenders of funds obtained by it in order to make or maintain its Eurodollar Rate Loans hereunder.  A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by Agent or any Lender to Borrowing Agent shall be conclusive absent manifest error.
 
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(g)    Notwithstanding any other provision hereof, if any Applicable Law, or any change therein or in the interpretation or application thereof, shall make it unlawful for any Lender (for purposes of this subsection (g), the term “Lender” shall include any Lender and the office or branch where any Lender or any corporation or bank controlling such Lender makes or maintains any Eurodollar Rate Loans) to make or maintain its Eurodollar Rate Loans, the obligation of Lenders to make Eurodollar Rate Loans hereunder shall forthwith be cancelled and Borrowers shall, if any affected Eurodollar Rate Loans are then outstanding, promptly upon request from Agent, either pay all such affected Eurodollar Rate Loans or convert such affected Eurodollar Rate Loans into loans of another type.  If any such payment or conversion of any Eurodollar Rate Loan is made on a day that is not the last day of the Interest Period applicable to such Eurodollar Rate Loan, Borrowers shall pay Agent, upon Agent’s request, such amount or amounts as may be necessary to compensate Lenders for any loss or expense sustained or incurred by Lenders in respect of such Eurodollar Rate Loan as a result of such payment or conversion, including (but not limited to) any interest or other amounts payable by Lenders to lenders of funds obtained by Lenders in order to make or maintain such Eurodollar Rate Loan.  A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by Lenders to Borrowing Agent shall be conclusive absent manifest error.
 
2.3   Disbursement of Advance Proceeds .  All Advances shall be disbursed from whichever office or other place Agent may designate from time to time and, together with any and all other Obligations of Borrowers to Agent or Lenders, shall be charged to Borrowers’ Account on Agent’s books.  During the Term, Borrowers may use the Revolving Advances by borrowing, prepaying and reborrowing, all in accordance with the terms and conditions hereof.  The proceeds of each Revolving Advance requested by Borrowing Agent on behalf of any Borrower or deemed to have been requested by any Borrower under Section 2.2(a) hereof shall, with respect to requested Revolving Advances to the extent Lenders make such Revolving Advances, be made available to the applicable Borrower on the day so requested by way of credit to such Borrower’s operating account at PNC, or such other bank as Borrowing Agent may designate following notification to Agent, in immediately available federal funds or other immediately available funds or, with respect to Revolving Advances deemed to have been requested by any Borrower, be disbursed to Agent to be applied to the outstanding Obligations giving rise to such deemed request.
 
2.4   Term Loan .  Subject to the terms and conditions of this Agreement, each Lender, severally and not jointly, will make a Term Loan to Borrowers in the sum equal to such Lender’s Commitment Percentage of the Maximum Term Loan Amount on the Closing Date.  The Term Loan shall be advanced on the Closing Date and shall be, with respect to principal, payable as follows, subject to acceleration upon the occurrence of an Event of Default under this Agreement or termination of this Agreement: sixty (60) consecutive monthly principal installments, the first fifty nine (59) of which shall be in the amount of $44,369.05 commencing on the first Business Day of August, 2012, and continuing on the first Business Day of each month thereafter, with a final payment of any unpaid balance of principal and interest payable on the first Business Day of July, 2017, all as more particularly described in this Agreement, and subject to mandatory prepayment and acceleration upon the occurrence of an Event of Default under this Agreement, on the Termination Date and/or earlier termination of the Loan Agreement pursuant to the terms thereof.  The Term Loan shall be evidenced by one or more secured promissory notes (collectively, the “Term Note”) in substantially the form attached hereto as Exhibit 2.4.  The Term Loan may consist of Domestic Rate Loans or Eurodollar Rate Loans, or a combination thereof, as Borrowing Agent may request.  In the event that Borrowers desire to obtain or extend a Eurodollar Rate Loan or to convert a Domestic Rate Loan to a Eurodollar Rate Loan, Borrowing Agent shall comply with the notification requirements set forth in Sections 2.2(b) and (d) and the provisions of Sections 2.2(b) through (g) shall apply.
 
2.5   Maximum Advances .  The aggregate balance of Revolving Advances outstanding at any time shall not exceed the lesser of (a) the Maximum Revolving Advance Amount or (b) the Formula Amount less, in each case, the aggregate Maximum Undrawn Amount of all issued and outstanding Letters of Credit.
 
2.6   Repayment of Loans.
 
(a)   The Revolving Advances shall be due and payable in full on the last day of the Term subject to earlier prepayment as herein provided.  The Term Loan shall be due and payable as provided in Section 2.4 hereof and in the Term Note, subject to mandatory prepayments as herein provided and earlier prepayment as herein provided.
 
(b)   Each Borrower recognizes that the amounts evidenced by checks, notes, drafts or any other items of payment relating to and/or proceeds of Collateral may not be collectible by Agent on the date received.  In consideration of Agent’s agreement to conditionally credit Borrowers’ Account as of the next Business Day following the Agent’s receipt of those items of payment, each Borrower agrees that, in computing the charges under this Agreement, all items of payment shall be deemed applied by Agent on account of the Obligations one (1) Business Day after (i) the Business Day Agent receives such payments via wire transfer or electronic depository check or (ii) in the case of payments received by Agent in any other form, the Business Day such payment constitutes good funds in Agent’s account.  Agent is not, however, required to credit Borrowers’ Account for the amount of any item of payment which is unsatisfactory to Agent and Agent may charge Borrowers’ Account for the amount of any item of payment which is returned to Agent unpaid.
 
(c)   All payments of principal, interest and other amounts payable hereunder, or under any of the Other Documents shall be made to Agent at the Payment Office not later than 1:00 P.M. (New York time) on the due date therefor in lawful money of the United States of America in federal funds or other funds immediately available to Agent.  Agent shall have the right to effectuate payment on any and all Obligations due and owing hereunder by charging Borrowers’ Account or by making Advances as provided in Section 2.2 hereof.
 
(d)   Borrowers shall pay principal, interest, and all other amounts payable hereunder, or under any related agreement, without any deduction whatsoever, including, but not limited to, any deduction for any setoff or counterclaim, subject to Section 3.11 herein.
 
2.7   Repayment of Excess Revolving Advances .  The aggregate balance of Revolving Advances outstanding at any time in excess of the maximum amount of Revolving Advances permitted hereunder shall be immediately due and payable without the necessity of any demand, at the Payment Office, whether or not a Default or Event of Default has occurred.
 
2.8   Statement of Account .  Agent shall maintain, in accordance with its customary procedures, a loan account (“ Borrowers’ Account ”) in the name of Borrowers in which shall be recorded the date and amount of each Advance made by Agent and the date and amount of each payment in respect thereof; provided, however, the failure by Agent to record the date and amount of any Advance shall not adversely affect Agent or any Lender.  Each month, Agent shall send to Borrowing Agent a statement showing the accounting for the Advances made, payments made or credited in respect thereof, and other transactions between Agent and Borrowers during such month.  The monthly statements shall be deemed correct and binding upon Borrowers in the absence of manifest error and shall constitute an account stated between Lenders and Borrowers unless Agent receives a written statement of Borrowing Agent’s specific exceptions thereto within thirty (30) days after such statement is received by Borrowing Agent.  The records of Agent with respect to the loan account shall be conclusive evidence absent manifest error of the amounts of Advances and other charges thereto and of payments applicable thereto.
 
2.9   Letters of Credit .  Subject to the terms and conditions hereof, Agent shall issue or cause the issuance of standby and/or trade letters of credit (“Letters of Credit”) for the account of any Borrower; provided, however, that Agent will not be required to issue or cause to be issued any Letters of Credit to the extent that the issuance thereof would then cause the sum of (i) the outstanding Revolving Advances plus (ii) the Maximum Undrawn Amount of all outstanding Letters of Credit to exceed the lesser of (x) the Maximum Revolving Advance Amount or (y) the Formula Amount.  The Maximum Undrawn Amount of outstanding Letters of Credit shall not exceed in the aggregate at any time the Letter of Credit Sublimit.  All disbursements or payments related to Letters of Credit shall be deemed to be Domestic Rate Loans consisting of Revolving Advances and shall bear interest at the applicable Contract Rate for Domestic Rate Loans; Letters of Credit that have not been drawn upon shall not bear interest.
 
2.10   Issuance of Letters of Credit.
 
(a)   Borrowing Agent, on behalf of Borrowers, may request Agent to issue or cause the issuance of a Letter of Credit by delivering to Agent at the Payment Office, prior to 10:00 a.m. (New York time), at least five (5)  Business Days’ (or such shorter period of time as Agent may agree in its sole discretion) prior to the proposed date of issuance, Agent’s form of Letter of Credit Application (the “ Letter of Credit Application ”) completed to the reasonable satisfaction of Agent; and, such other certificates, documents and other papers and information as Agent may reasonably request.  Borrowing Agent, on behalf of Borrowers, also has the right to give instructions and make agreements with respect to any application, any applicable letter of credit and security agreement, any applicable letter of credit reimbursement agreement and/or any other applicable agreement, any letter of credit and the disposition of documents, disposition of any unutilized funds, and to agree with Agent upon any amendment, extension or renewal of any Letter of Credit.
 
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(b)   Each Letter of Credit shall, among other things, (i) provide for the payment of sight drafts, other written demands for payment, or acceptances of usance drafts when presented for honor thereunder in accordance with the terms thereof and when accompanied by the documents described therein and (ii) have an expiry date not later than twenty-four (24) months after such Letter of Credit’s date of issuance and in no event later than the last day of the Term.  Each standby Letter of Credit shall be subject either to the Uniform Customs and Practice for Documentary Credits as  most recently published by the International Chamber of Commerce at the time a Letter of Credit is issued (the “ UCP ”) or the International Standby Practices (ISP98 International Chamber of Commerce Publication Number 590) (the “ISP98 Rules”), and any subsequent revision thereof at the time a standby Letter of Credit is issued, as determined by Agent, and each trade Letter of Credit shall be subject to the UCP.
 
(c)   Agent shall use its reasonable efforts to notify Lenders of the request by Borrowing Agent for a Letter of Credit hereunder.
 
2.11   Requirements For Issuance of Letters of Credit.
 
(a)   Borrowing Agent shall authorize and direct any Issuer to name the applicable Borrower as the “Applicant” or “Account Party” of each Letter of Credit.  If Agent is not the Issuer of any Letter of Credit, Borrowing Agent shall authorize and direct the Issuer to deliver to Agent all instruments, documents, and other writings and property received by the Issuer pursuant to the Letter of Credit and to accept and rely upon Agent’s instructions and agreements with respect to all matters arising in connection with the Letter of Credit, the application therefor or any acceptance therefor.
 
(b)   In connection with all Letters of Credit issued or caused to be issued by Agent under this Agreement, each Borrower hereby appoints Agent, or its designee, as its attorney, with full power and authority if an Event of Default shall have occurred, (i) to sign and/or endorse such Borrower’s name upon any warehouse or other receipts, letter of credit applications and acceptances, (ii) to sign such Borrower’s name on bills of lading; (iii) to clear Inventory through the United States of America Customs Department (“ Customs ”) in the name of such Borrower or Agent or Agent’s designee, and to sign and deliver to Customs officials powers of attorney in the name of such Borrower for such purpose; and (iv) to complete in such Borrower’s name or Agent’s, or in the name of Agent’s designee, any order, sale or transaction, obtain the necessary documents in connection therewith, and collect the proceeds thereof.  Neither Agent nor its attorneys will be liable for any acts or omissions nor for any error of judgment or mistakes of fact or law, except for Agent’s or its attorney’s willful misconduct.  This power, being coupled with an interest, is irrevocable as long as any Letters of Credit remain outstanding.
 
2.12   Disbursements, Reimbursement.
 
(a)   Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from Agent a participation in such Letter of Credit and each drawing thereunder in an amount equal to such Lender’s Commitment Percentage of the Maximum Face Amount of such Letter of Credit and the amount of such drawing, respectively.
 
(b)   In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, Agent will promptly notify Borrowing Agent.  Provided that Borrowing Agent shall have received such notice, the Borrowers shall reimburse (such obligation to reimburse Agent shall sometimes be referred to as a “ Reimbursement Obligation ”) Agent prior to 12:00 Noon, New York time on each date that an amount is paid by Agent under any Letter of Credit (each such date, a “ Drawing Date ”) in an amount equal to the amount so paid by Agent.  In the event Borrowers fail to reimburse Agent for the full amount of any drawing under any Letter of Credit by 12:00 Noon, New York time, on the Drawing Date, Agent will promptly notify each Lender thereof, and Borrowers shall be deemed to have requested that a Revolving Advance maintained as a Domestic Rate Loan be made by the Lenders to be disbursed on the Drawing Date under such Letter of Credit, subject to the amount of the unutilized portion of the lesser of Maximum Revolving Advance Amount or the Formula Amount and subject to Section 8.2 hereof.  Any notice given by Agent pursuant to this Section 2.12(b) may be oral if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.
 
(c)   Each Lender shall upon any notice pursuant to Section 2.12(b) make available to Agent an amount in immediately available funds equal to its Commitment Percentage of the amount of the drawing, whereupon the participating Lenders shall (subject to Section 2.12(d)) each be deemed to have made a Revolving Advance maintained as a Domestic Rate Loan to Borrowers in that amount.  If any Lender so notified fails to make available to Agent the amount of such Lender’s Commitment Percentage of such amount by no later than 2:00 p.m., New York time on the Drawing Date, then interest shall accrue on such Lender’s obligation to make such payment, from the Drawing Date to the date on which such Lender makes such payment (i) at a rate per annum equal to the Federal Funds Effective Rate during the first three days following the Drawing Date and (ii) at a rate per annum equal to the rate applicable to Revolving Advances maintained as a Domestic Rate Loans on and after the fourth day following the Drawing Date.  Agent will promptly give notice of the occurrence of the Drawing Date, but failure of Agent to give any such notice on the Drawing Date or in sufficient time to enable any Lender to effect such payment on such date shall not relieve such Lender from its obligation under this Section 2.12(c), provided that such Lender shall not be obligated to pay interest as provided in Section 2.12(c) (i) and (ii) above until and commencing from the date of receipt of notice from Agent of a drawing.
 
(d)   With respect to any unreimbursed drawing that is not converted into a Revolving Advance maintained as a Domestic Rate Loan to Borrowers in whole or in part as contemplated by Section 2.12(b), because of Borrowers’ failure to satisfy the conditions set forth in Section 8.2 (other than any notice requirements) or for any other reason, Borrowers shall be deemed to have incurred from Agent a borrowing (each a “ Letter of Credit Borrowing ”) in the amount of such drawing. Such Letter of Credit Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the rate per annum applicable to a Revolving Advance maintained as a Domestic Rate Loan.  Each Lender’s payment to Agent pursuant to Section 2.12(c) shall be deemed to be a payment in respect of its participation in such Letter of Credit Borrowing and shall constitute a “Participation Advance” from such Lender in satisfaction of its Participation Commitment under this Section 2.12.
 
(e)   Each Lender’s Participation Commitment shall continue until the last to occur of any of the following events:  (x) Agent ceases to be obligated to issue or cause to be issued Letters of Credit hereunder; (y) no Letter of Credit issued or created hereunder remains outstanding and uncancelled and (z) all Persons (other than the Borrowers) have been fully reimbursed for all payments made under or relating to Letters of Credit.
 
2.13   Repayment of Participation Advances.
 
(a)   Upon (and only upon) receipt by Agent for its account of immediately available funds from Borrowers (i) in reimbursement of any payment made by the Agent under the Letter of Credit with respect to which any Lender has made a Participation Advance to Agent, or (ii) in payment of interest on such a payment made by Agent under such a Letter of Credit, Agent will pay to each Lender, in the same funds as those received by Agent, the amount of such Lender’s Commitment Percentage of such funds, except Agent shall retain the amount of the Commitment Percentage of such funds of any Lender that did not make a Participation Advance in respect of such payment by Agent.
 
(b)   If Agent is required at any time to return to any Borrower, or to a trustee, receiver, liquidator, custodian, or any official in any insolvency proceeding, any portion of the payments made by Borrowers to Agent pursuant to Section 2.13(a) in reimbursement of a payment made under the Letter of Credit or interest or fee thereon, each Lender shall, on demand of Agent, forthwith return to Agent the amount of its Commitment Percentage of any amounts so returned by Agent plus interest at the Federal Funds Effective Rate.
 
2.14   Documentation .  Each Borrower agrees to be bound by the terms of the Letter of Credit Application and by Agent’s reasonable interpretations of any Letter of Credit issued on behalf of such Borrower and by Agent’s written regulations and customary practices relating to letters of credit, though Agent’s interpretations may be different from such Borrower’s own.  In the event of a conflict between the Letter of Credit Application and this Agreement, this Agreement shall govern.  It is understood and agreed that, except in the case of gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment), Agent shall not be liable for any error, negligence and/or mistakes, whether of omission or commission, in following the Borrowing Agent’s or any Borrower’s instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto.
 
2.15   Determination to Honor Drawing Request .  In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, Agent shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit and that any other drawing condition appearing on the face of such Letter of Credit has been satisfied in the manner so set forth.
 
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2.16   Nature of Participation and Reimbursement Obligations .  Each Lender’s obligation in accordance with this Agreement to make the Revolving Advances or Participation Advances as a result of a drawing under a Letter of Credit, and the obligations of Borrowers to reimburse Agent upon a draw under a Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Section 2.16 under all circumstances, including the following circumstances:
 
(i)   any set-off, counterclaim, recoupment, defense or other right which such Lender may have against Agent, any Borrower or any other Person for any reason whatsoever;
 
(ii)   the failure of any Borrower or any other Person to comply, in connection with a Letter of Credit Borrowing, with the conditions set forth in this Agreement for the making of a Revolving Advance, it being acknowledged that such conditions are not required for the making of a Letter of Credit Borrowing and the obligation of the Lenders to make Participation Advances under Section 2.12;
 
(iii)   any lack of validity or enforceability of any Letter of Credit;
 
(iv)   any claim of breach of warranty that might be made by Borrower or any Lender against the beneficiary of a Letter of Credit, or the existence of any claim, set-off, recoupment, counterclaim, cross-claim, defense or other right which any Borrower or any Lender may have at any time against a beneficiary, any successor beneficiary or any transferee of any Letter of Credit or the proceeds thereof (or any Persons for whom any such transferee may be acting), Agent or any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between any Borrower or any Subsidiaries of such Borrower and the beneficiary for which any Letter of Credit was procured);
 
(v)   the lack of power or authority of any signer of (or any defect in or forgery of any signature or endorsement on) or the form of or lack of validity, sufficiency, accuracy, enforceability or genuineness of any draft, demand, instrument, certificate or other document presented under or in connection with any Letter of Credit, or any fraud or alleged fraud in connection with any Letter of Credit, or the transport of any property or provisions of services relating to a Letter of Credit, in each case even if Agent or any of Agent’s Affiliates has been notified thereof;
 
(vi)   payment by Agent under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit;
 
(vii)   the solvency of, or any acts or omissions by, any beneficiary of any Letter of Credit, or any other Person having a role in any transaction or obligation relating to a Letter of Credit, or the existence, nature, quality, quantity, condition, value or other characteristic of any property or services relating to a Letter of Credit;
 
(viii)   any failure by the Agent or any of Agent’s Affiliates to issue any Letter of Credit in the form requested by Borrowing Agent, unless the Agent has received written notice from Borrowing Agent of such failure within three (3) Business Days after the Agent shall have furnished Borrowing Agent a copy of such Letter of Credit and such error is material and no drawing has been made thereon prior to receipt of such notice;
 
(ix)   any Material Adverse Effect on any Borrower or any Guarantor;
 
(x)   any breach of this Agreement or any Other Document by any party thereto;
 
(xi)   the occurrence or continuance of an insolvency proceeding with respect to any Borrower or any Guarantor;
 
(xii)   the fact that a Default or Event of Default shall have occurred and be continuing;
 
(xiii)   the fact that the Term shall have expired or this Agreement or the Obligations hereunder shall have been terminated; and
 
(xiv)   any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.
 
2.17   Indemnity .  In addition to amounts payable as provided in Section 16.5, each Borrower hereby agrees to protect, indemnify, pay and save harmless Agent and any of Agent’s Affiliates that have issued a Letter of Credit from and against any and all claims, demands, liabilities, damages, taxes, penalties, interest, judgments, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of outside counsel and allocated costs of internal counsel) which the Agent or any of Agent’s Affiliates may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit, other than as a result of (a) the gross negligence or willful misconduct of the Agent as determined by a final and non-appealable judgment of a court of competent jurisdiction or (b) the wrongful dishonor by the Agent or any of Agent’s Affiliates of a proper demand for payment made under any Letter of Credit, except if such dishonor resulted from any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Body (all such acts or omissions herein called “Governmental Acts”).
 
2.18   Liability for Acts and Omissions .  As between Borrowers and Agent and Lenders, each Borrower assumes all risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit.  In furtherance and not in limitation of the respective foregoing, Agent shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged (even if Agent shall have been notified thereof); (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) the failure of the beneficiary of any such Letter of Credit, or any other party to which such Letter of Credit may be transferred, to comply fully with any conditions required in order to draw upon such Letter of Credit or any other claim of any Borrower against any beneficiary of such Letter of Credit, or any such transferee, or any dispute between or among any Borrower and any beneficiary of any Letter of Credit or any such transferee; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, facsimile, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of Agent, including any governmental acts, and none of the above shall affect or impair, or prevent the vesting of, any of Agent’s rights or powers hereunder. Nothing in the preceding sentence shall relieve Agent from liability for Agent’s gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment) in connection with actions or omissions described in such clauses (i) through (viii) of such sentence.  In no event shall Agent or Agent’s Affiliates be liable to any Borrower for any indirect, consequential, incidental, punitive, exemplary or special damages or expenses (including without limitation attorneys’ fees), or for any damages resulting from any change in the value of any property relating to a Letter of Credit.
 
Without limiting the generality of the foregoing, Agent and each of its Affiliates (i) may rely on any oral or other communication believed in good faith by Agent or  such Affiliate to have been authorized or given by or on behalf of the applicant for a Letter of Credit, (ii) may honor any presentation if the documents presented appear on their face substantially to comply with the terms and conditions of the relevant Letter of Credit; (iii) may honor a previously dishonored presentation under a Letter of Credit, whether such dishonor was pursuant to a court order, to settle or compromise any claim of wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the same extent as if such presentation had initially been honored, together with any interest paid by Agent or its Affiliates; (iv) may honor any drawing that is payable upon presentation of a statement advising negotiation or payment, upon receipt of such statement (even if such statement indicates that a draft or other document is being delivered separately), and shall not be liable for any failure of any such draft or other document to arrive, or to conform in any way with the relevant Letter of Credit; (v) may pay any paying or negotiating bank claiming that it rightfully honored under the laws or practices of the place where such bank is located; and (vi) may settle or adjust any claim or demand made on Agent or its Affiliate in any way related to any order issued at the applicant’s request to an air carrier, a letter of guarantee or of indemnity issued to a carrier or any similar document (each an “Order”) and honor any drawing in connection with any Letter of Credit that is the subject of such Order, notwithstanding that any drafts or other documents presented in connection with such Letter of Credit fail to conform in any way with such Letter of Credit.
 
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In furtherance and extension and not in limitation of the specific provisions set forth above, any action taken or omitted by Agent under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith and without gross negligence and without willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment), shall not put Agent under any resulting liability to any Borrower or any Lender.
 
2.19   Additional Payments .  Any sums expended by Agent or any Lender due to any Borrower’s failure to perform or comply with its obligations under this Agreement or any Other Document including any Borrower’s obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to Borrowers’ Account as a Revolving Advance and added to the Obligations.
 
2.20   Manner of Borrowing and Payment.
 
(a)   Each borrowing of Revolving Advances shall be advanced according to the applicable Commitment Percentages of Lenders.  The Term Loan shall be advanced according to the applicable Commitment Percentages of Lenders.
 
(b)   Each payment (including each prepayment) by any Borrower on account of the principal of and interest on the Revolving Advances, shall be applied to the Revolving Advances pro rata according to the applicable Commitment Percentages of Lenders.  Each payment (including each prepayment) by any Borrower on account of the principal of and interest on the Term Note, shall be made from or to, or applied to that portion of the Term Loan evidenced by the Term Note pro rata according to the Commitment Percentages of Lenders.  Except as expressly provided herein, all payments (including prepayments) to be made by any Borrower on account of principal, interest and fees shall be made without set off or counterclaim and shall be made to Agent on behalf of the Lenders to the Payment Office, in each case on or prior to 1:00 P.M., New York time, in Dollars and in immediately available funds.
 
(c)   (i) Notwithstanding anything to the contrary contained in Sections 2.20(a) and (b) hereof, commencing with the first Business Day following the Closing Date, each borrowing of Revolving Advances shall be advanced by Agent and each payment by any Borrower on account of Revolving Advances shall be applied first to those Revolving Advances advanced by Agent.  On or before 1:00 P.M., New York time, on each Settlement Date commencing with the first Settlement Date following the Closing Date, Agent and Lenders shall make certain payments as follows: (I) if the aggregate amount of new Revolving Advances made by Agent during the preceding Week (if any) exceeds the aggregate amount of repayments applied to outstanding Revolving Advances during such preceding Week, then each Lender shall provide Agent with funds in an amount equal to its applicable Commitment Percentage of the difference between (w) such Revolving Advances and (x) such repayments and (II) if the aggregate amount of repayments applied to outstanding Revolving Advances during such Week exceeds the aggregate amount of new Revolving Advances made during such Week, then Agent shall provide each Lender with funds in an amount equal to its applicable Commitment Percentage of the difference between (y) such repayments and (z) such Revolving Advances.
 
(ii)           Each Lender shall be entitled to earn interest at the applicable Contract Rate on outstanding Advances which it has funded.
 
(iii)           Promptly following each Settlement Date, Agent shall submit to each Lender a certificate with respect to payments received and Advances made during the Week immediately preceding such Settlement Date.  Such certificate of Agent shall be conclusive in the absence of manifest error.
 
(d)   If any Lender or Participant (a “ benefited Lender ”) shall at any time receive any payment of all or part of its Advances, or interest thereon, or receive any Collateral in respect thereof (whether voluntarily or involuntarily or by set-off) in a greater proportion than any such payment to and Collateral received by any other Lender, if any, in respect of such other Lender’s Advances, or interest thereon, and such greater proportionate payment or receipt of Collateral is not expressly permitted hereunder, such benefited Lender shall purchase for cash from the other Lenders a participation in such portion of each such other Lender’s Advances, or shall provide such other Lender with the benefits of any such Collateral, or the proceeds thereof, as shall be necessary to cause such benefited Lender to share the excess payment or benefits of such Collateral or proceeds ratably with each of the other Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.  Each Lender so purchasing a portion of another Lender’s Advances may exercise all rights of payment (including rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion.
 
(e)   Unless Agent shall have been notified by telephone, confirmed in writing, by any Lender that such Lender will not make the amount which would constitute its applicable Commitment Percentage of the Advances available to Agent, Agent may (but shall not be obligated to) assume that such Lender shall make such amount available to Agent on the next Settlement Date and, in reliance upon such assumption, make available to Borrowers a corresponding amount.  Agent will promptly notify Borrowing Agent of its receipt of any such notice from a Lender.  If such amount is made available to Agent on a date after such next Settlement Date, such Lender shall pay to Agent on demand an amount equal to the product of (i) the daily average Federal Funds Rate (computed on the basis of a year of 360 days) during such period as quoted by Agent, times (ii) such amount, times (iii) the number of days from and including such Settlement Date to the date on which such amount becomes immediately available to Agent.  A certificate of Agent submitted to any Lender with respect to any amounts owing under this paragraph (e) shall be conclusive, in the absence of manifest error.  If such amount is not in fact made available to Agent by such Lender within three (3) Business Days after such Settlement Date, Agent shall be entitled to recover such an amount, with interest thereon at the rate per annum then applicable to such Revolving Advances hereunder, on demand from Borrowers; provided, however, that Agent’s right to such recovery shall not prejudice or otherwise adversely affect Borrowers’ rights (if any) against such Lender.
 
2.21   Mandatory Prepayments.
 
(a)   Subject to Section 4.3 hereof, when any Borrower sells or otherwise disposes of any Collateral other than Inventory in the Ordinary Course of Business, Borrowers shall repay the Advances in an amount equal to the net proceeds of such sale (i.e., gross proceeds less the reasonable costs of such sales or other dispositions), such repayments to be made promptly but in no event more than one (1) Business Day following receipt of such net proceeds, and until the date of payment, such proceeds shall be held in trust for Agent.  The foregoing shall not be deemed to be implied consent to any such sale otherwise prohibited by the terms and conditions hereof.  Such repayments shall be applied (y) first, to the outstanding principal installments of the Term Loan in the inverse order of the maturities thereof, and (z) second, to the remaining Revolving Advances in such order as Agent may determine, subject to Borrowers’ ability to reborrow Revolving Advances in accordance with the terms hereof.
 
(b)   The Borrowers shall prepay the outstanding amount of the Advances in an amount equal to fifty percent (50%) of Excess Cash Flow for each fiscal year commencing with the fiscal year ending June 30, 2013, payable upon delivery of the financial statements to Agent referred to in and required by Section 9.7 for such fiscal year but in any event not later than one hundred twenty (120) days after the end of each such fiscal year, which amount shall be applied ratably to the outstanding principal installments of the Term Loan in the inverse order of the maturities thereof until the aggregate amount of payments made with regard to the Term Loan pursuant to Sections 2.4 and 2.21 herein equals $1,000,000.  In the event that the financial statement is not so delivered, then a calculation based upon estimated amounts shall be made by Agent upon which calculation Borrowers shall make the prepayment required by this Section 2.21(b), subject to adjustment when the financial statement is delivered to Agent as required hereby.  The calculation made by Agent shall not be deemed a waiver of any rights Agent or Lenders may have as a result of the failure by Borrowers to deliver such financial statement.
 
(c)   Any prepayments of the Term Loan pursuant to this Section 2.21 shall not require any payments or premiums under Section 13.1 unless all Obligations are prepaid in full at such time at which point Section 13.1 shall be applicable to such prepayment of the Term Loan.
 
2.22   Use of Proceeds.
 
(a)   Borrowers shall apply the proceeds of Advances to (i) repay all the Imperium Debt, (ii) pay fees and expenses relating to this transaction, and (iii) provide for its working capital needs and reimburse drawings under Letters of Credit.
 
(b)   Without limiting the generality of Section 2.22(a) above, neither the Borrowers, the Guarantors nor any other Person which may in the future become party to this Agreement or the Other Documents as a Borrower or Guarantor, intends to use nor shall they use any portion of the proceeds of the Advances, directly or indirectly, for any purpose in violation of the Trading with the Enemy Act.
 
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2.23   Defaulting Lender.
 
(a)   Notwithstanding anything to the contrary contained herein, in the event any Lender (x) has refused (which refusal constitutes a breach by such Lender of its obligations under this Agreement) to make available its portion of any Advance or (y) notifies Agent and Borrowing Agent that it does not intend to make available its portion of any Advance (if the actual refusal would constitute a breach by such Lender of its obligations under this Agreement) (each, a “ Lender Default ”), all rights and obligations hereunder of such Lender (a “ Defaulting Lender ”) as to which a Lender Default is in effect and of the other parties hereto shall be modified to the extent of the express provisions of this Section 2.23 while such Lender Default remains in effect.
 
(b)   Advances shall be incurred pro rata from Lenders (the “Non-Defaulting Lenders”) which are not Defaulting Lenders based on their respective Commitment Percentages, and no Commitment Percentage of any Lender or any pro rata share of any Advances required to be advanced by any Lender shall be increased as a result of such Lender Default.  Amounts received in respect of principal of any type of Advances shall be applied to reduce the applicable Advances of each Lender (other than any Defaulting Lender) pro rata based on the aggregate of the outstanding Advances of that type of all Lenders at the time of such application; provided, that, Agent shall not be obligated to transfer to a Defaulting Lender any payments received by Agent for the Defaulting Lender’s benefit, nor shall a Defaulting Lender be entitled to the sharing of any payments hereunder (including any principal, interest or fees).  Amounts payable to a Defaulting Lender shall instead be paid to or retained by Agent.  Agent may hold and, in its discretion, re-lend to a Borrower the amount of such payments received or retained by it for the account of such Defaulting Lender.
 
(c)   A Defaulting Lender shall not be entitled to give instructions to Agent or to approve, disapprove, consent to or vote on any matters relating to this Agreement and the Other Documents.  All amendments, waivers and other modifications of this Agreement and the Other Documents may be made without regard to a Defaulting Lender and, for purposes of the definition of “Required Lenders”, a Defaulting Lender shall be deemed not to be a Lender and not to have either Advances outstanding or a Commitment Percentage.
 
(d)   Other than as expressly set forth in this Section 2.23, the rights and obligations of a Defaulting Lender (including the obligation to indemnify Agent) and the other parties hereto shall remain unchanged.  Nothing in this Section 2.23 shall be deemed to release any Defaulting Lender from its obligations under this Agreement and the Other Documents, shall alter such obligations, shall operate as a waiver of any default by such Defaulting Lender hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender may have against any Defaulting Lender as a result of any default by such Defaulting Lender hereunder.
 
(e)   In the event a Defaulting Lender retroactively cures to the satisfaction of Agent the breach which caused a Lender to become a Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall be treated as a Lender under this Agreement.
 
ARTICLE III.  
INTEREST AND FEES
 
3.1   Interest .  Interest on Loans shall be payable in arrears on the first day of each month with respect to Domestic Rate Loans and, with respect to Eurodollar Rate Loans, at the end of each Interest Period or, for Eurodollar Rate Loans with an Interest Period in excess of three months, at the earlier of (a) each three months from the commencement of such Eurodollar Rate Loan or (b) the end of the Interest Period.  Interest charges shall be computed on the actual principal amount of Loans outstanding during the month at a rate per annum equal to (i) with respect to Revolving Advances, the applicable Revolving Interest Rate and (ii) with respect to the Term Loan, the applicable Term Loan Rate (as applicable, the “Contract Rate”).  Whenever, subsequent to the date of this Agreement, the Alternate Base Rate is increased or decreased, the applicable Contract Rate for Domestic Rate Loans shall be similarly changed without notice or demand of any kind by an amount equal to the amount of such change in the Alternate Base Rate during the time such change or changes remain in effect.  The Eurodollar Rate shall be adjusted with respect to Eurodollar Rate Loans without notice or demand of any kind on the effective date of any change in the Reserve Percentage as of such effective date.  Upon and after the occurrence of an Event of Default, and during the continuation thereof, at the option of Agent or at the direction of Required Lenders, the Obligations shall bear interest at the applicable Contract Rate plus two percent (2%) per annum (the “Default Rate”).
 
3.2   Letter of Credit Fees.
 
(a)   Borrowers shall pay (x) to Agent, for the ratable benefit of Lenders, fees for each Letter of Credit for the period from and excluding the date of issuance of same to and including the date of expiration or termination, equal to the average daily face amount of each outstanding Letter of Credit multiplied by two and three quarters of one percent (2.75%) per annum, such fees to be calculated on the basis of a 360-day year for the actual number of days elapsed and to be payable quarterly in arrears on the first Business Day of each calendar quarter and on the last day of the Term, and (y) to the Issuer, a fronting fee of one quarter of one percent (0.25%) per annum of the face amount of each Letter of Credit issued which is a one-time payment payable upon the issuance of such Letter of Credit, together with any and all administrative, issuance, amendment, payment and negotiation charges with respect to Letters of Credit and all fees and expenses as agreed upon by the Issuer and the Borrowing Agent in connection with any Letter of Credit, including in connection with the opening, amendment or renewal of any such Letter of Credit and any acceptances created thereunder and shall reimburse Agent for any and all fees and expenses, if any, paid by Agent to the Issuer (all of the foregoing fees, the “Letter of Credit Fees”).  All such charges shall be deemed earned in full on the date when the same are due and payable hereunder and shall not be subject to rebate or pro-ration upon the termination of this Agreement for any reason.  Any such charge in effect at the time of a particular transaction shall be the charge for that transaction, notwithstanding any subsequent change in the Issuer’s prevailing charges for that type of transaction.  All Letter of Credit Fees payable hereunder shall be deemed earned in full on the date when the same are due and payable hereunder and shall not be subject to rebate or pro-ration upon the termination of this Agreement for any reason.  Upon and after the occurrence of an Event of Default, and during the continuation thereof, at the option of Agent or at the direction of Required Lenders, the Letter of Credit Fees described in clause (x) of this Section 3.2(a) shall be increased by an additional two percent (2%) per annum.
 
At any time following the occurrence and during the continuance of a Default and/or an Event of Default, on demand, Borrowers will cause cash to be deposited and maintained in an account with Agent, as cash collateral, in an amount equal to one hundred and five percent (105%) of the Maximum Undrawn Amount of all outstanding Letters of Credit, and each Borrower hereby irrevocably authorizes Agent, in its discretion, on such Borrower’s behalf and in such Borrower’s name, to open such an account and to make and maintain deposits therein, or in an account opened by such Borrower, in the amounts required to be made by such Borrower, out of the proceeds of Receivables or other Collateral or out of any other funds of such Borrower coming into any Lender’s possession at any time.  Agent will invest such cash collateral (less applicable reserves) in such short-term money-market items as to which Agent and such Borrower mutually agree and the net return on such investments shall be credited to such account and constitute additional cash collateral.  No Borrower may withdraw amounts credited to any such account except upon the occurrence of all of the following: (x) payment and performance in full of all Obligations, (y) expiration of all Letters of Credit and (z) termination of this Agreement.
 
3.3   Closing Fee and Facility Fee.
 
(a)     Closing Fee .  Upon the execution of this Agreement, Borrowers shall pay to Agent for the ratable benefit of Lenders a closing fee of $87,952.50 less that portion of the deposit fee of $30,000 and that portion of the commitment fee of $50,000 heretofore paid by Borrowers to Agent remaining after application of such fee to out of pocket expenses incurred by Lenders.
 
(b)     Facility Fee .  If, for any calendar quarter during the Term, the average daily unpaid balance of the Revolving Advances and undrawn amount of any outstanding Letters of Credit for each day of such calendar quarter (the “Average Daily Unpaid Balance”) does not equal the Maximum Revolving Advance Amount, then Borrowers shall pay to Agent for the ratable benefit of Lenders a fee at a rate equal to three eighths of one percent (0.375%) per annum on the amount by which the Maximum Revolving Advance Amount exceeds such Average Daily Unpaid Balance.  Such fee shall be payable to Agent in arrears on the first day of each calendar quarter with respect to the previous calendar quarter.
 
3.4   Collateral Evaluation Fee and Collateral Monitoring Fee.
 
(a)   Collateral Evaluation Fee .  Borrowers shall pay Agent a collateral evaluation fee equal to $1,250 per month commencing on the first day of the month following the Closing Date and on the first day of each month thereafter during the Term.  The collateral evaluation fee shall be deemed earned in full on the date when same is due and payable hereunder and shall not be subject to rebate or proration upon termination of this Agreement for any reason.
 
(b)     Collateral Monitoring Fee .  Borrowers shall pay to Agent on the first day of each month following any month in which Agent performs any collateral monitoring - namely any field examination, collateral analysis or other business analysis, the need for which is to be determined by Agent and which monitoring is undertaken by Agent or for Agent’s benefit - a collateral monitoring fee in an amount equal to $850 per day for each person employed to perform such monitoring, plus all costs and disbursements incurred by Agent in the performance of such examination or analysis.
 
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3.5   Computation of Interest and Fees .  Interest and fees hereunder shall be computed on the basis of a year of 360 days and for the actual number of days elapsed.  If any payment to be made hereunder becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day and interest thereon shall be payable at the applicable Contract Rate for Domestic Rate Loans during such extension.
 
3.6   Maximum Charges .  In no event whatsoever shall interest and other charges charged hereunder exceed the highest rate permissible under law. In the event interest and other charges as computed hereunder would otherwise exceed the highest rate permitted under law, such excess amount shall be first applied to any unpaid principal balance owed by Borrowers, and if the then remaining excess amount is greater than the previously unpaid principal balance, Lenders shall promptly refund such excess amount to Borrowers and the provisions hereof shall be deemed amended to provide for such permissible rate.
 
3.7   Increased Costs .  In the event that any Applicable Law, or any change therein or in the interpretation or application thereof, or compliance by any Lender (for purposes of this Section 3.7, the term “Lender” shall include Agent or any Lender and any corporation or bank controlling Agent or any Lender) and the office or branch where Agent or any Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any request or directive (whether or not having the force of law) from any central bank or other financial, monetary or other authority after the Closing Date, shall:
 
(a)   subject Agent or any Lender to any tax of any kind whatsoever with respect to this Agreement or any Other Document or change the basis of taxation of payments to Agent or any Lender of principal, fees, interest or any other amount payable hereunder or under any Other Documents (except for changes in the rate of tax on the overall net income of Agent or any Lender by the United States of America, or by jurisdiction in which it maintains its principal office or in which its applicable lending office is located, or by the jurisdiction under the laws of which Agent or Lender is organized);
 
(b)   impose, modify or hold applicable any reserve, special deposit, assessment or similar requirement against assets held by, or deposits in or for the account of, advances or loans by, or other credit extended by, any office of Agent or any Lender, including pursuant to Regulation D of the Board of Governors of the Federal Reserve System; or
 
(c)   impose on Agent or any Lender or the London interbank Eurodollar market any other condition with respect to this Agreement or any Other Document;
 
and the result of any of the foregoing is to increase the cost to Agent or any Lender of making, renewing or maintaining its Advances hereunder by an amount that Agent or such Lender deems to be material or to reduce the amount of any payment (whether of principal, interest or otherwise) in respect of any of the Advances by an amount that Agent or such Lender deems to be material, then, in any case Borrowers shall promptly pay Agent or such Lender, upon its demand, such additional amount as will compensate Agent or such Lender, as the case may be, for such additional cost or such reduction, as the case may be, provided that the foregoing shall not apply to increased costs which are reflected in the Eurodollar Rate, as the case may be.  Agent or such Lender, as the case may be, shall certify the amount of such additional cost or reduced amount to Borrowing Agent, and such certification shall be conclusive absent manifest error.
 
3.8   Basis For Determining Interest Rate Inadequate or Unfair .
 
  In the event that Agent or any Lender shall have determined that after the Closing Date:
 
(a)   reasonable means do not exist for ascertaining the Eurodollar Rate applicable pursuant to Section 2.2 hereof for any applicable Interest Period; or
 
(b)   Dollar deposits in the relevant amount and for the relevant maturity are not available in the London interbank Eurodollar market, with respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan, or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan,
 
then Agent shall give Borrowing Agent prompt written or telephonic notice of such determination.  If such notice is given, (i) any such requested Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrowing Agent shall notify Agent no later than 1:00 p.m. (New York City time) two (2) Business Days prior to the date of such proposed borrowing, that its request for such borrowing shall be cancelled or made as an unaffected type of Eurodollar Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have been converted to an affected type of Eurodollar Rate Loan shall be continued as or converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent, no later than 1:00 p.m. (New York City time) two (2) Business Days prior to the proposed conversion, shall be maintained as an unaffected type of Eurodollar Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans shall be converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent, no later than 1:00 p.m. (New York City time) two (2) Business Days prior to the last Business Day of the then current Interest Period applicable to such affected Eurodollar Rate Loan, shall be converted into an unaffected type of Eurodollar Rate Loan, on the last Business Day of the then current Interest Period for such affected Eurodollar Rate Loans.  Until such notice has been withdrawn, Lenders shall have no obligation to make an affected type of Eurodollar Rate Loan or maintain outstanding affected Eurodollar Rate Loans and no Borrower shall have the right to convert a Domestic Rate Loan or an unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar Rate Loan.
 
3.9   Capital Adequacy.
 
(a)   In the event that Agent or any Lender shall have determined that, on or after the Closing Date, any Applicable Law or guideline regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Body, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Agent or any Lender (for purposes of this Section 3.9, the term “Lender” shall include Agent or any Lender and any corporation or bank controlling Agent or any Lender) and the office or branch where Agent or any Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency after the Closing Date, has or would have the effect of reducing the rate of return on Agent or any Lender’s capital as a consequence of its obligations hereunder to a level below that which Agent or such Lender could have achieved but for such adoption, change or compliance (taking into consideration Agent’s and each Lender’s policies with respect to capital adequacy) by an amount deemed by Agent or any Lender to be material, then, from time to time, Borrowers shall pay upon demand to Agent or such Lender such additional amount or amounts as will compensate Agent or such Lender for such reduction.  In determining such amount or amounts, Agent or such Lender may use any reasonable averaging or attribution methods.  The protection of this Section 3.9 shall be available to Agent and each Lender regardless of any possible contention of invalidity or inapplicability with respect to the Applicable Law or condition.
 
(b)   A certificate of Agent or such Lender setting forth such amount or amounts as shall be necessary to compensate Agent or such Lender, as the case may be, with respect to Section 3.9(a) hereof when delivered to Borrowing Agent shall be conclusive absent manifest error.
 
3.10   Gross Up for Taxes .  If any Borrower shall be required by Applicable Law to withhold or deduct any taxes from or in respect of any sum payable under this Agreement or any of the Other Documents to Agent, or any Lender, assignee of any Lender, or Participant (each, individually, a “Payee” and collectively, the “Payees”), (a) the sum payable to such Payee or Payees, as the case may be, shall be increased as may be necessary so that, after making all required withholding or deductions, the applicable Payee or Payees receives an amount equal to the sum it would have received had no such withholding or deductions been made (the “Gross-Up Payment”), (b) such Borrower shall make such withholding or deductions, and (c) such Borrower shall pay the full amount withheld or deducted to the relevant taxation authority or other authority in accordance with Applicable Law.  Notwithstanding the foregoing, no Borrower shall be obligated to make any portion of the Gross-Up Payment that is attributable to any withholding or deductions that would not have been paid or claimed had the applicable Payee or Payees properly claimed a complete exemption with respect thereto pursuant to Section 3.11 hereof.
 
3.11   Withholding Tax Exemption.
 
(a)   Each Payee that is not incorporated under the Laws of the United States of America or a state thereof (and, upon the written request of Agent, each other Payee) agrees that it will deliver to Borrowing Agent and Agent two (2) duly completed appropriate valid Withholding Certificates (as defined under §1.1441-1(c)(16) of the Income Tax Regulations (“ Regulations ”)) certifying its status (i.e., U.S. or foreign person) and, if appropriate, making a claim of reduced, or exemption from, U.S. withholding tax on the basis of an income tax treaty or an exemption provided by the Code.  The term “Withholding Certificate” means a Form W-9; a Form W-8BEN; a Form W-8ECI; a Form W-8IMY and the related statements and certifications as required under §1.1441-1(e)(2) and/or (3) of the Regulations; a statement described in §1.871-14(c)(2)(v) of the Regulations; or any other certificates under the Code or Regulations that certify or establish the status of a payee or beneficial owner as a U.S. or foreign person.
 
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(b)   Each Payee required to deliver to Borrowing Agent and Agent a valid Withholding Certificate pursuant to Section 3.11(a) hereof shall deliver such valid Withholding Certificate as follows:  (A) each Payee which is a party hereto on the Closing Date shall deliver such valid Withholding Certificate at least five (5) Business Days prior to the first date on which any interest or fees are payable by any Borrower hereunder for the account of such Payee; (B) each Payee shall deliver such valid Withholding Certificate at least five (5) Business Days before the effective date of such assignment or participation (unless Agent in its sole discretion shall permit such Payee to deliver such Withholding Certificate less than five (5) Business Days before such date in which case it shall be due on the date specified by Agent).  Each Payee which so delivers a valid Withholding Certificate further undertakes to deliver to Borrowing Agent and Agent two (2) additional copies of such Withholding Certificate (or a successor form) on or before the date that such Withholding Certificate expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent Withholding Certificate so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by Borrowing Agent or Agent.
 
(c)   Notwithstanding the submission of a Withholding Certificate claiming a reduced rate of or exemption from U.S. withholding tax required under Section 3.11(b) hereof, Agent shall be entitled to withhold United States federal income taxes at the applicable withholding rate if in its reasonable judgment it is required to do so under the due diligence requirements imposed upon a withholding agent under §1.1441-7(b) of the Regulations.  Further, Agent is indemnified under §1.1461-1(e) of the Regulations against any claims and demands of any Payee for the amount of any tax it deducts and withholds in accordance with regulations under §1441 of the Code.
 
ARTICLE IV.  
COLLATERAL:  GENERAL TERMS
 
4.1   Security Interest in the Collateral .  To secure the prompt payment and performance to Agent and each Lender of the Obligations, each Borrower hereby assigns, pledges and grants to Agent for its benefit and for the ratable benefit of each Lender a continuing security interest in and to and Lien on all of its Collateral, whether now owned or existing or hereafter acquired or arising and wheresoever located, as well as a security interest in the Mortgaged Premises as evidenced by the Mortgage and all other related collateral documents.  Each Borrower shall mark its books and records as may be necessary or appropriate to evidence, protect and perfect Agent’s security interest in the Collateral and shall cause its financial statements to reflect such security interest.  Each Borrower shall promptly provide Agent with written notice of all commercial tort claims in excess of $100,000.00, such notice to contain the case title together with the applicable court and a brief description of the claim(s).  Upon delivery of each such notice, such Borrower shall be deemed to hereby grant to Agent a security interest and lien in and to such commercial tort claims and all proceeds thereof.
 
4.2   Perfection of Security Interest .  Each Borrower shall take all action that may be necessary or desirable in Agent’s reasonable discretion, or that Agent may reasonably request, so as at all times to maintain the validity, perfection, enforceability and priority of Agent’s security interest in and Lien on the Collateral or to enable Agent to protect, exercise or enforce its rights hereunder and in the Collateral, including, but not limited to, if reasonably requested by Agent (i) promptly discharging all Liens other than Permitted Encumbrances, (ii) obtaining Lien Waiver Agreements, (iii) delivering to Agent, endorsed or accompanied by such instruments of assignment as Agent may reasonably specify, and stamping or marking, in such manner as Agent may reasonably specify, any and all chattel paper, instruments, letters of credits and advices thereof and documents evidencing or forming a part of the Collateral, (iv) entering into warehousing, lockbox and other custodial arrangements reasonably satisfactory to Agent, and (v) executing and delivering financing statements, control agreements, instruments of pledge, mortgages, notices and assignments, in each case in form and substance reasonably satisfactory to Agent, relating to the creation, validity, perfection, maintenance or continuation of Agent’s security interest and Lien under the Uniform Commercial Code or other Applicable Law in the Collateral.  By its signature hereto, each Borrower hereby authorizes Agent to file against such Borrower, one or more financing, continuation or amendment statements pursuant to the Uniform Commercial Code in form and substance reasonably satisfactory to Agent (which statements may have a description of collateral which is broader than that set forth herein).  All charges, expenses and fees Agent may incur in doing any of the foregoing, and any local taxes relating thereto, shall be charged to Borrowers’ Account as a Revolving Advance of a Domestic Rate Loan and added to the Obligations, or, at Agent’s option, shall be paid to Agent for its benefit and for the ratable benefit of Lenders immediately upon demand.
 
4.3   Disposition of Collateral .  Each Borrower will safeguard and protect all Collateral for Agent’s general account and make no disposition thereof whether by sale, lease or otherwise except (a) the sale of Inventory in the Ordinary Course of Business and (b) the disposition or transfer of Equipment in the Ordinary Course of Business during any fiscal year having an aggregate fair market value of not more than $250,000 and/or not more than $100,000 for any individual disposition, which amounts the Borrowers are not required to remit to the Agent to be applied pursuant to Section 2.21 herein so long as such proceeds of any such disposition are used to acquire replacement Equipment which is subject to Agent’s first priority security interest within ninety (90) days after such disposition.
 
4.4   Preservation of Collateral .  Following the occurrence of a Default or Event of Default, in addition to the rights and remedies set forth in Section 11.1 hereof, Agent: (a) may at any time take such steps as Agent deems necessary to protect Agent’s interest in and to preserve the Collateral, including the hiring of such security guards or the placing of other security protection measures as Agent may deem appropriate; (b) may employ and maintain at any of any Borrower’s premises a custodian who shall have full authority to do all acts necessary to protect Agent’s interests in the Collateral; (c) may lease warehouse facilities to which Agent may move all or part of the Collateral; (d) may use any Borrower’s owned or leased lifts, hoists, trucks and other facilities or equipment for handling or removing the Collateral; and (e) shall have, and is hereby granted, a right of ingress and egress to the places where the Collateral is located, and may proceed over and through any of Borrower’s owned or leased property.  Each Borrower shall cooperate fully with all of Agent’s efforts to preserve the Collateral and will take such actions to preserve the Collateral as Agent may direct.  All of Agent’s expenses of preserving the Collateral, including any expenses relating to the bonding of a custodian, shall be charged to Borrowers’ Account as a Revolving Advance maintained as a Domestic Rate Loan and added to the Obligations.
 
4.5   Ownership of Collateral.
 
(a)   With respect to the Collateral, at the time the Collateral becomes subject to Agent’s security interest:  (i) each Borrower shall be the sole owner of and fully authorized and able to sell, transfer, pledge and/or grant a first priority security interest in each and every item of the its respective Collateral to Agent; and, except for Permitted Encumbrances the Collateral shall be free and clear of all Liens and encumbrances whatsoever; (ii) each document and agreement executed by each Borrower or delivered to Agent or any Lender in connection with this Agreement shall be true and correct in all respects; (iii) all signatures and endorsements of each Borrower that appear on such documents and agreements shall be genuine and each Borrower shall have full capacity to execute same; and (iv) each Borrower’s Equipment and Inventory shall be located as set forth on Schedule 4.5 and shall not be removed from such location(s) without the prior written consent of Agent except with respect to the sale or consignment of Inventory in the Ordinary Course of Business and of Equipment to the extent permitted in Section 4.3 hereof.
 
(b)    (i) There is no location at which any Borrower has any Inventory (except for Inventory in transit or on consignment) other than those locations listed on Schedule 4.5; (ii) Schedule 4.5 hereto contains a correct and complete list, as of the Closing Date, of the legal names and addresses of each warehouse at which Inventory of any Borrower is stored;  none of the receipts received by any Borrower from any warehouse states that the goods covered thereby are to be delivered to bearer or to the order of a named Person or to a named Person and such named Person’s assigns;  (iii) Schedule 4.5 hereto sets forth a correct and complete list as of the Closing Date of (A) each place of business of each Borrower and (B) the chief executive office of each Borrower; and (iv) Schedule 4.5 hereto sets forth a correct and complete list as of the Closing Date of the location, by state and street address, of all Real Property owned or leased by each Borrower, together with the names and addresses of any landlords.
 
4.6   Defense of Agent’s and Lenders’ Interests .  Until (a) payment and performance in full of all of the Obligations (other than Remaining Obligations) and (b) termination of this Agreement, Agent’s interests in the Collateral shall continue in full force and effect.  During such period no Borrower shall, without Agent’s prior written consent, pledge, sell (except Inventory in the Ordinary Course of Business and Equipment to the extent permitted in Section 4.3 hereof), assign, transfer, create or suffer to exist a Lien upon or encumber or allow or suffer to be encumbered in any way except for Permitted Encumbrances, any part of the Collateral, except as may be otherwise permitted herein.  Each Borrower shall defend Agent’s interests in the Collateral against any and all Persons whatsoever.  At any time after the occurrence and during the continuance of any Default and/or Event of Default, Agent shall have the right to take possession of the indicia of the Collateral and the Collateral in whatever physical form contained, including:  labels, stationery, documents, instruments and advertising materials.  If Agent exercises this right to take possession of the Collateral, Borrowers shall, upon demand, assemble it in the best manner possible and make it available to Agent at a place reasonably convenient to Agent.  In addition, with respect to all Collateral, at any time after the occurrence and during the continuance of any Default and/or Event of Default, Agent and Lenders shall be entitled to all of the rights and remedies set forth herein and further provided by the Uniform Commercial Code or other Applicable Law.  At any time after the occurrence and during the continuance of any Default or Event of Default, each Borrower shall, and Agent may, at its option, instruct all suppliers, carriers, forwarders, warehousers or others receiving or holding cash, checks, Inventory, documents or instruments in which Agent holds a security interest to deliver same to Agent and/or subject to Agent’s order and if they shall come into any Borrower’s possession, they, and each of them, shall be held by such Borrower in trust as Agent’s trustee, and such Borrower will immediately deliver them to Agent in their original form together with any necessary endorsement.
 
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4.7   Books and Records .  Each Borrower shall (a) keep proper books of record and account in which full, true and correct entries will be made of all dealings or transactions of or in relation to its business and affairs; (b) set up on its books accruals with respect to all taxes, assessments, charges, levies and claims; and (c) on a reasonably current basis set up on its books, from its earnings, allowances against doubtful Receivables, advances and investments and all other proper accruals (including by reason of enumeration, accruals for premiums, if any, due on required payments and accruals for depreciation, obsolescence, or amortization of properties), which should be set aside from such earnings in connection with its business.  All determinations pursuant to this subsection shall be made in accordance with, or as required by, GAAP consistently applied in the opinion of such independent public accountant as shall then be regularly engaged by Borrowers.
 
4.8   Financial Disclosure .  Each Borrower hereby irrevocably authorizes and directs all accountants and auditors employed by such Borrower at any time during the Term to exhibit and deliver to Agent and each Lender copies of any of such Borrower’s financial statements, trial balances or other accounting records of any sort in the accountant’s or auditor’s possession, and to disclose to Agent and each Lender any information such accountants may have concerning such Borrower’s financial status and business operations.  Each Borrower hereby authorizes all Governmental Bodies to furnish to Agent and each Lender copies of reports or examinations relating to such Borrower, whether made by such Borrower or otherwise; however, Agent and each Lender will attempt to obtain such information or materials directly from such Borrower prior to obtaining such information or materials from such accountants or Governmental Bodies.
 
4.9   Compliance with Laws .  Each Borrower shall comply in all material respects with all Applicable Laws with respect to the Collateral or any part thereof or to the operation of such Borrower’s business the non-compliance with which could reasonably be expected to have a Material Adverse Effect.  Each Borrower may, however, contest or dispute any Applicable Laws in any reasonable manner, provided that any related Lien is inchoate or stayed and sufficient reserves are established to the reasonable satisfaction of Agent to protect Agent’s Lien on or security interest in the Collateral.  The assets of Borrowers at all times shall be maintained in accordance with the requirements of all insurance carriers which provide insurance with respect to the assets of Borrowers so that such insurance shall remain in full force and effect.
 
4.10   Inspection of Premises .  At all reasonable times, during normal business hours and upon twenty four (24) hours prior notice (provide no such notice is required if a Default and/or Event of Default has occurred and is continuing), Agent and each Lender shall have full access to and the right to audit, check, inspect and make abstracts and copies from each Borrower’s books, records, audits, correspondence and all other papers relating to the Collateral and the operation of each Borrower’s business during normal business hours.  Agent, any Lender and their agents may enter upon any premises of any Borrower at any time during business hours and at any other reasonable time, and from time to time, for the purpose of inspecting the Collateral and any and all records pertaining thereto and the operation of such Borrower’s business.  The Agent shall perform field examinations with regard to the Collateral once each fiscal quarter at the sole cost and expense of the Borrowers, provided , however , upon the occurrence and continuance of a Default and/or Event of Default, the Agent shall be permitted to perform field examinations at any time at the sole cost and expense of the Borrowers.  The Agent shall perform in its sole discretion appraisals with regard to all Collateral including, but not limited to, all Equipment and the Mortgaged Premises, provided , however , the Borrowers shall pay solely for one appraisal per fiscal year so long as no Default and/or Event of Default has occurred and is continuing.
 
4.11   Insurance .  The assets and properties of each Borrower at all times shall be maintained in accordance with the requirements of all insurance carriers which provide insurance with respect to the assets and properties of such Borrower so that such insurance shall remain in full force and effect.  Each Borrower shall bear the full risk of any loss of any nature whatsoever with respect to the Collateral.  At each Borrower’s own cost and expense in amounts and with carriers reasonably acceptable to Agent, each Borrower shall (a) keep all its insurable properties and properties in which such Borrower has an interest insured against the hazards of fire, flood, sprinkler leakage, those hazards covered by extended coverage insurance and such other hazards, and maintain business interruption insurance, and for such amounts, in each case as is customary maintained by companies engaged in businesses similar to such Borrower’s operating in the same or similar locations including business interruption insurance; (b) maintain a bond in such amounts as is customary in the case of companies engaged in businesses similar to such Borrower insuring against larceny, embezzlement or other criminal misappropriation of insured’s officers and employees who may either singly or jointly with others at any time have access to the assets or funds of such Borrower either directly or through authority to draw upon such funds or to direct generally the disposition of such assets, as is customarily maintained by companies engaged in businesses similar to Borrowers operating in the same or similar locations including business interruption insurance; (c) maintain public and product liability insurance against claims for personal injury, death or property damage suffered by others, as is customarily maintained by companies engaged in businesses similar to Borrowers operating in the same or similar locations including business interruption insurance; (d) maintain all such worker’s compensation or similar insurance as may be required under the laws of any state or jurisdiction in which such Borrower is engaged in business, as is customarily maintained by companies engaged in businesses similar to Borrowers operating in the same or similar locations including business interruption insurance; (e) furnish Agent with (i) copies of all policies and evidence of the maintenance of such policies by the renewal thereof at least thirty (30) days before any expiration date, and (ii) appropriate loss payable endorsements in form and substance reasonably satisfactory to Agent, naming Agent as a additional insured, mortgagee and lender loss payee as its interests may appear with respect to all insurance coverage referred to in clauses (a) and (c) above, and providing (A) that all proceeds thereunder shall be payable to Agent, (B) no such insurance shall be affected by any act or neglect of the insured or owner of the property described in such policy, and (C) that such policy and loss payable clauses may not be cancelled, amended or terminated unless at least thirty (30) days’ prior written notice is given to Agent.  In the event of any loss thereunder, the carriers named therein hereby are directed by Agent and the applicable Borrower to make payment for such loss to Agent and not to such Borrower and Agent jointly.  If any insurance losses are paid by check, draft or other instrument payable to any Borrower and Agent jointly, Agent may endorse such Borrower’s name thereon and do such other things as Agent may deem advisable to reduce the same to cash.  Agent is hereby authorized to adjust and compromise claims under insurance coverage referred to in clauses (a) and (b) above.  All loss recoveries received by Agent upon any such insurance may be applied to the Obligations, in such order as Agent in its sole discretion shall determine.  Any surplus shall be paid by Agent to Borrowers or applied as may be otherwise required by law.  Any deficiency thereon shall be paid by Borrowers to Agent, on demand.  Anything hereinabove to the contrary notwithstanding, and subject to the fulfillment of the conditions set forth below, Agent shall remit to Borrowing Agent insurance proceeds received by Agent during any calendar year under insurance policies procured and maintained by Borrowers which insure Borrowers’ insurable properties to the extent such insurance proceeds do not exceed $250,000 in the aggregate during such calendar year or $100,000 per occurrence.  In the event the amount of insurance proceeds received by Agent for any occurrence exceeds $100,000, then Agent shall not be obligated to remit the insurance proceeds to Borrowing Agent unless Borrowing Agent shall provide Agent with evidence reasonably satisfactory to Agent that the insurance proceeds will be used by Borrowers to repair, replace or restore the insured property which was the subject of the insurable loss.  In the event Borrowing Agent has previously received (or, after giving effect to any remittance by Agent to Borrowing Agent would receive) insurance proceeds which equal or exceed $250,000 in the aggregate during the calendar year in question, then Agent may, in its sole discretion, either remit the insurance proceeds to Borrowing Agent upon Borrowing Agent providing Agent with evidence reasonably satisfactory to Agent that the insurance proceeds will be used by Borrowers to repair, replace or restore the insured property which was the subject of the insurable loss, or apply the proceeds to the Obligations, as aforesaid.  The agreement of Agent to remit insurance proceeds in the manner above provided shall be subject in each instance to satisfaction of each of the following conditions: (x) no Event of Default or Default shall then have occurred, and (y) Borrowers shall use such insurance proceeds to repair, replace or restore the insurable property which was the subject of the insurable loss and for no other purpose.
 
4.12   Failure to Pay Insurance .  If any Borrower fails to obtain insurance as hereinabove provided, or to keep the same in force, Agent, if Agent so elects, may obtain such insurance and pay the premium therefor on behalf of such Borrower, and charge Borrowers’ Account therefor as a Revolving Advance of a Domestic Rate Loan and such expenses so paid shall be part of the Obligations.
 
4.13   Payment of Taxes .  Each Borrower will pay, when due, all taxes, assessments and other Charges lawfully levied or assessed upon such Borrower or any of the Collateral including real and personal property taxes, assessments and charges and all franchise, income, employment, social security benefits, withholding, and sales taxes, except for those taxes, assessments or Charges that the applicable Borrower has Properly Contested.  Unless the same are being Properly Contested by the Borrower(s), if any tax by any Governmental Body is or may be imposed on or as a result of any transaction between any Borrower and Agent or any Lender which Agent or any Lender may be required to withhold or pay or if any taxes, assessments, or other Charges remain unpaid after the date fixed for their payment, or if any claim shall be made which, in Agent’s or any Lender’s opinion, may possibly create a valid Lien on the Collateral, Agent may without notice to Borrowers pay the taxes, assessments or other Charges and each Borrower hereby indemnifies and holds Agent and each Lender harmless in respect thereof.  Agent will not pay any such taxes, assessments or Charges to the extent that any applicable Borrower has Properly Contested those taxes, assessments or Charges.  The amount of any payment by Agent under this Section 4.13 shall be charged to Borrowers’ Account as a Revolving Advance maintained as a Domestic Rate Loan and added to the Obligations and, until Borrowers shall furnish Agent with an indemnity therefor (or supply Agent with evidence satisfactory to Agent that due provision for the payment thereof has been made), Agent may hold without interest any balance standing to Borrowers’ credit and Agent shall retain its security interest in and Lien on any and all Collateral held by Agent.
 
4.14   Payment of Leasehold Obligations .  Each Borrower shall at all times pay, when and as due, its rental obligations under all leases under which it is a tenant, and shall otherwise comply, in all material respects, with all other terms of such leases and keep them in full force and effect and, at Agent’s request will provide evidence of having done so.
 
4.15   Receivables.
 
(a)   Nature of Receivables .  Each of the Receivables shall be a bona fide and valid account representing a bona fide indebtedness incurred by the Customer therein named, for a fixed sum as set forth in the invoice relating thereto (provided immaterial or unintentional invoice errors shall not be deemed to be a breach hereof) with respect to an absolute sale or lease and delivery of goods upon stated terms of a Borrower, or work, labor or services theretofore rendered by a Borrower as of the date each Receivable is created.  Same shall be due and owing in accordance with the applicable Borrower’s standard terms of sale without dispute, setoff or counterclaim except as may be stated on the accounts receivable schedules delivered by Borrowers to Agent.
 
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(b)   Solvency of Customers .  Each Customer, to the best of each Borrower’s knowledge, as of the date each Receivable is created, is and will be solvent and able to pay all Receivables on which the Customer is obligated in full when due or with respect to such Customers of any Borrower who are not solvent such Borrower has set up on its books and in its financial records bad debt reserves adequate to cover such Receivables.
 
(c)   Location of Borrowers .  Each Borrower’s chief executive office is located at 225 Long Avenue, Building 15, P.O. Box 278, Hillside, New Jersey  07205.  Until written notice is given to Agent by Borrowing Agent of any other office at which any Borrower keeps its records pertaining to Receivables, all such records shall be kept at such executive office.
 
(d)   Collection of Receivables .  Until any Borrower’s authority to do so is terminated by Agent by notice to Borrowing Agent (which notice Agent may give at any time following the occurrence of an Event of Default or a Default or when Agent in its sole discretion deems it to be in Lenders’ best interest to do so), each Borrower will, at such Borrower’s sole cost and expense, but on Agent’s behalf and for Agent’s account, collect as Agent’s property and in trust for Agent all amounts received on Receivables, and shall not commingle such collections with any Borrower’s funds or use the same except to pay Obligations.  Each Borrower shall deposit in the Blocked Account or, upon request by Agent, deliver to Agent, in original form and on the date of receipt thereof, all checks, drafts, notes, money orders, acceptances, cash and other evidences of Indebtedness.
 
(e)   Notification of Assignment of Receivables .  At any time following the occurrence of an Event of Default or a Default, Agent shall have the right to send notice of the assignment of, and Agent’s security interest in and Lien on, the Receivables to any and all Customers or any third party holding or otherwise concerned with any of the Collateral.  Thereafter, Agent shall have the sole right to collect the Receivables, take possession of the Collateral, or both.  Agent’s actual reasonable collection expenses, including, but not limited to, stationery and postage, telephone and telegraph, secretarial and clerical expenses and the salaries of any collection personnel used for collection, may be charged to Borrowers’ Account and added to the Obligations.
 
(f)   Power of Agent to Act on Borrowers’ Behalf .  Agent shall have the right, at any time that a Default and/or Event of Default has occurred and is continuing, to receive, endorse, assign and/or deliver in the name of Agent or any Borrower any and all checks, drafts and other instruments for the payment of money relating to the Receivables, and each Borrower hereby waives notice of presentment, protest and non-payment of any instrument so endorsed.  Each Borrower hereby constitutes Agent or Agent’s designee as such Borrower’s attorney with power (i) to, at any time that a Default and/or Event of Default has occurred and is continuing, endorse such Borrower’s name upon any notes, acceptances, checks, drafts, money orders or other evidences of payment or Collateral; (ii) to, at any time that a Default and/or Event of Default has occurred and is continuing, sign such Borrower’s name on any invoice or bill of lading relating to any of the Receivables, drafts against Customers, assignments and verifications of Receivables; (iii) to send verifications of Receivables to any Customer; (iv) to sign such Borrower’s name on all financing statements or any other documents or instruments deemed necessary or appropriate by Agent to preserve, protect, or perfect Agent’s interest in the Collateral and to file same; (v) to, at any time that a Default and/or Event of Default has occurred and is continuing, demand payment of the Receivables; (vi) to, at any time that a Default and/or Event of Default has occurred and is continuing, enforce payment of the Receivables by legal proceedings or otherwise; (vii) to, at any time that a Default and/or Event of Default has occurred and is continuing, exercise all of such Borrower’s rights and remedies with respect to the collection of the Receivables and any other Collateral; (viii) to, at any time that a Default and/or Event of Default has occurred and is continuing, settle, adjust, compromise, extend or renew the Receivables; (ix) to, at any time that a Default and/or Event of Default has occurred and is continuing, settle, adjust or compromise any legal proceedings brought to collect Receivables; (x) to, at any time that a Default and/or Event of Default has occurred and is continuing, prepare, file and sign such Borrower’s name on a proof of claim in bankruptcy or similar document against any Customer; (xi) to, at any time that a Default and/or Event of Default has occurred and is continuing, prepare, file and sign such Borrower’s name on any notice of Lien, assignment or satisfaction of Lien or similar document in connection with the Receivables; and (xii) to do all other acts and things necessary to carry out this Agreement.  All acts of said attorney or designee are hereby ratified and approved, and said attorney or designee shall not be liable for any acts of omission or commission nor for any error of judgment or mistake of fact or of law, unless done maliciously or with gross (not mere) negligence (as determined by a court of competent jurisdiction in a final non-appealable judgment); this power being coupled with an interest is irrevocable while any of the Obligations remain unpaid.  Agent shall have the right at any time following the occurrence of an Event of Default or Default, to change the address for delivery of mail addressed to any Borrower to such address as Agent may designate and to receive, open and dispose of all mail addressed to any Borrower.
 
(g)   No Liability .  Neither Agent nor any Lender shall, under any circumstances or in any event whatsoever, have any liability for any error or omission or delay of any kind occurring in the settlement, collection or payment of any of the Receivables or any instrument received in payment thereof, or for any damage resulting therefrom.  Following the occurrence and during the continuance of an Event of Default or Default, Agent may, without notice or consent from any Borrower, sue upon or otherwise collect, extend the time of payment of, compromise or settle for cash, credit or upon any terms any of the Receivables or any other securities, instruments or insurance applicable thereto and/or release any obligor thereof.  Agent is authorized and empowered to accept following the occurrence and during the continuance of an Event of Default or Default the return of the goods represented by any of the Receivables, without notice to or consent by any Borrower, all without discharging or in any way affecting any Borrower’s liability hereunder.
 
(h)   Establishment of a Lockbox Account, Dominion Account .  All proceeds of Collateral shall be deposited by Borrowers into either (i) a lockbox account, dominion account or such other “blocked account” (“ Blocked Accounts ”) established at a bank or banks (each such bank, a “ Blocked Account Bank ”) pursuant to an arrangement with such Blocked Account Bank as may be selected by Borrowing Agent and be acceptable to Agent or (ii) depository accounts (“ Depository Accounts ”) established at the Agent for the deposit of such proceeds.  Each applicable Borrower, Agent and each Blocked Account Bank shall enter into a deposit account control agreement in form and substance satisfactory to Agent directing such Blocked Account Bank to transfer such funds so deposited to Agent, either to any account maintained by Agent at said Blocked Account Bank or by wire transfer to appropriate account(s) of Agent.  All funds deposited in such Blocked Accounts shall immediately become the property of Agent and Borrowing Agent shall obtain the agreement by such Blocked Account Bank to waive any offset rights against the funds so deposited.  Neither Agent nor any Lender assumes any responsibility for such blocked account arrangement, including any claim of accord and satisfaction or release with respect to deposits accepted by any Blocked Account Bank thereunder.  All deposit accounts and investment accounts of each Borrower and its Subsidiaries as of the Closing Date are set forth on Schedule 4.15(h); and no Borrower or any Subsidiary shall open and maintain any new deposit accounts and investment accounts without providing prior written notice to the Agent along with a revised Schedule 4.15(h).  The Agent hereby agrees that it shall not institute or otherwise require a control agreement and/or blocked account agreement with regard to any employee payroll account maintained by any Borrower unless a Default and/or Event of Default has occurred and is continuing.  The Borrowers shall terminate the accounts listed on Schedule 4.15(h) and specified as “Accounts to be Terminated” within thirty (30) days of the Closing Date unless otherwise agreed to in writing by this Agent based on its reasonable discretion.
 
(i)   Adjustments .  No Borrower will, without Agent’s consent (which consent shall not be unreasonably withheld), compromise or adjust any material amount of the Receivables (or extend the time for payment thereof) or accept any material returns of merchandise or grant any additional discounts, allowances or credits thereon except for those compromises, adjustments, returns, discounts, credits and allowances as customary in the ordinary course of business of such Borrower.
 
4.16   Inventory .  To the extent Inventory held for sale or lease has been produced by any Borrower, it has been and will be produced by such Borrower in accordance with the Federal Fair Labor Standards Act of 1938, as amended, and all rules, regulations and orders thereunder.
 
4.17   Maintenance of Equipment .  The Equipment shall be maintained in good operating condition and repair (reasonable wear and tear excepted) and all necessary replacements of and repairs thereto shall be made so that the value and operating efficiency of the Equipment shall be maintained and preserved.  No Borrower shall use or operate the Equipment in violation of any applicable law, statute, ordinance, code, rule or regulation.  Each Borrower shall have the right to sell Equipment to the extent set forth in Section 4.3 hereof.
 
4.18   Exculpation of Liability .  Nothing herein contained shall be construed to constitute Agent or any Lender as any Borrower’s agent for any purpose whatsoever, nor shall Agent or any Lender be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located and regardless of the cause thereof.  Neither Agent nor any Lender, whether by anything herein or in any assignment or otherwise, assume any of any Borrower’s obligations under any contract or agreement assigned to Agent or such Lender, and neither Agent nor any Lender shall be responsible in any way for the performance by any Borrower of any of the terms and conditions thereof.
 
4.19   Environmental Matters.
 
(a)   Borrowers shall ensure that its owned Real Property and all its operations and businesses conducted on such Real Property remains in compliance in all material respects with all applicable Environmental Laws and they shall not place or permit to be placed any Hazardous Substances on such Real Property except as permitted by Applicable Law or appropriate governmental authorities or except for such non-compliance which would not have a Material Adverse Effect.
 
(b)   Borrowers shall establish and maintain a system to assure and monitor continued compliance with all applicable Environmental Laws which system shall include periodic reviews of such compliance.
 
(c)   Borrowers shall (i) employ in connection with the Borrowers’ use of its owned Real Property appropriate technology necessary to maintain compliance with any applicable Environmental Laws and (ii) dispose of any and all Hazardous Waste generated at the Real Property only at facilities and with carriers that maintain valid permits under RCRA and any other applicable Environmental Laws.  Borrowers shall use their best efforts to obtain certificates of disposal, such as hazardous waste manifest receipts, from all treatment, transport, storage or disposal facilities or operators employed by Borrowers in connection with the transport or disposal of any Hazardous Waste generated at its owned Real Property or generated by it on any Real Property.
 
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(d)   In the event any Borrower obtains, gives or receives notice of any Release or threat of Release of a reportable quantity of any Hazardous Substances at its owned Real Property (any such event being hereinafter referred to as a “ Hazardous Discharge ”) or receives any notice of violation, request for information or notification that it is potentially responsible for investigation or cleanup of environmental conditions at its owned Real Property, demand letter or complaint, order, citation, or other written notice with regard to any Hazardous Discharge or violation of Environmental Laws affecting its owned Real Property or any Borrower’s interest therein (any of the foregoing is referred to herein as an “ Environmental Complaint ”) from any Person, including any state agency responsible in whole or in part for environmental matters in the state in which its owned Real Property is located or the United States Environmental Protection Agency (any such person or entity hereinafter the “ Authority ”), then Borrowing Agent shall, within ten (10) Business Days, give written notice of same to Agent detailing facts and circumstances of which any Borrower is aware giving rise to the Hazardous Discharge or Environmental Complaint.  Such information is to be provided to allow Agent to protect its security interest in and Lien on its owned Real Property and the Collateral and is not intended to create nor shall it create any obligation upon Agent or any Lender with respect thereto.
 
(e)   To the extent that any Borrower shall have received the same, Borrowing Agent shall promptly forward to Agent copies of any request for information, notification of potential liability, demand letter relating to potential responsibility with respect to the investigation or cleanup of Hazardous Substances at any other site owned, operated or used by any Borrower to dispose of Hazardous Substances and shall continue to forward copies of correspondence between any Borrower and the Authority regarding such claims to Agent until the claim is settled.  Borrowing Agent shall promptly forward to Agent copies of all documents and reports concerning a Hazardous Discharge at its owned Real Property that any Borrower is required to file under any applicable Environmental Laws.  Such information is to be provided solely to allow Agent to protect Agent’s security interest in and Lien on its owned Real Property and the Collateral.
 
(f)   Borrowers shall respond promptly to any Hazardous Discharge or Environmental Complaint and take all necessary action in order to safeguard the health of any Person and to avoid subjecting the Collateral or its owned Real Property to any Lien (other than Permitted Encumbrances).  If any Borrower shall fail to respond promptly to any Hazardous Discharge or Environmental Complaint or any Borrower shall fail to comply with any of the requirements of any Environmental Laws, Agent on behalf of Lenders may, but without the obligation to do so, for the sole purpose of protecting Agent’s interest in the Collateral:  (A) give such notices or (B) enter onto its owned Real Property (or authorize third parties to enter onto its owned Real Property) and take such actions as Agent (or such third parties as directed by Agent) deem reasonably necessary or advisable, to clean up, remove, mitigate or otherwise deal with any such Hazardous Discharge or Environmental Complaint.  All reasonable costs and expenses incurred by Agent and Lenders (or such third parties) in the exercise of any such rights, including any sums paid in connection with any judicial or administrative investigation or proceedings, fines and penalties, together with interest thereon from the date expended at the Default Rate for Domestic Rate Loans constituting Revolving Advances shall be paid upon demand by Borrowers, and until paid shall be added to and become a part of the Obligations secured by the Liens created by the terms of this Agreement or any other agreement between Agent, any Lender and any Borrower.
 
(g)   Promptly upon the written request of Agent from time to time, Borrowers shall provide Agent, at Borrowers’ expense, with an environmental site assessment or environmental audit report prepared by an environmental engineering firm acceptable in the reasonable opinion of Agent, to assess with a reasonable degree of certainty the existence of such Hazardous Discharge and the potential costs in connection with abatement, cleanup and removal of such Hazardous Substances found on, under, at or within its owned Real Property.  Any report or investigation of such Hazardous Discharge proposed and acceptable to an appropriate Authority that is charged to oversee the clean-up of such Hazardous Discharge shall be acceptable to Agent.  If such estimates, individually or in the aggregate, exceed $100,000, Agent shall have the right to require Borrowers to post a bond, letter of credit or other security reasonably satisfactory to Agent to secure payment of these costs and expenses.
 
(h)   Borrowers shall defend and indemnify Agent and Lenders and hold Agent, Lenders and their respective employees, agents, directors and officers harmless from and against all loss, liability, damage and expense, claims, costs, fines and penalties, including attorney’s fees, suffered or incurred by Agent or Lenders under or on account of any Environmental Laws, including the assertion of any Lien thereunder, with respect to any Hazardous Discharge, the presence of any Hazardous Substances affecting its owned Real Property, whether or not the same originates or emerges from its owned Real Property or any contiguous real estate, including any loss of value of its owned Real Property as a result of the foregoing except to the extent such loss, liability, damage and expense is attributable to any Hazardous Discharge resulting from actions on the part of Agent or any Lender.  Borrowers’ obligations under this Section 4.19 shall arise upon the discovery of the presence of any Hazardous Substances at its owned Real Property, whether or not any federal, state, or local environmental agency has taken or threatened any action in connection with the presence of any Hazardous Substances.  Borrowers’ obligation and the indemnifications hereunder shall survive the termination of this Agreement.
 
(i)   For purposes of Section 4.19 and 5.7, all references to Real Property shall be deemed to include all of each Borrower’s right, title and interest in and to its owned premises.
 
4.20   Uniform Commercial Code Financing Statements .  Except as respects the Uniform Commercial Code financing statements filed by Agent and the Uniform Commercial Code financing statements described on Schedule 1.2, no Uniform Commercial Code   financing statement or any other Lien documentation covering any of the Collateral or any proceeds thereof is on file in any public office.
 
4.21   Termination of Guaranty .  The Agent on behalf of the Lenders hereby agrees that each Guaranty executed by EGK and CD dated the date hereof, respectively, shall terminate upon (i) the repayment or prepayment of the principal amount of the Term Loan in an amount of not less than $1,000,000, (ii) receipt and satisfactory review by the Agent of the Borrowers’ annual financial statements deliverable pursuant to Section 9.7 herein for the fiscal year ending June 30, 2013 which shall reflect, among other things, a calculation of EBITDA of the Borrowers of not less than $1,500,000 for such fiscal period, and (iii) receipt by the Agent of evidence that no Default and/or Event of Default shall have occurred and be continuing at such time.  Upon such termination, each Limited Guarantor shall be automatically released from all obligations under the respective Guaranty without any additional consent from or action by any Lender or Agent.
 
4.22   Repayment of Equity Infusion Amount.   The Borrowing Agent is hereby permitted to repay to the Guarantors the Equity Infusion Amount upon (i) the repayment or prepayment of the principal amount of the Term Loan in an amount of not less than $1,000,000, (ii) receipt and satisfactory review by the Agent of the Borrowers’ annual financial statements deliverable pursuant to Section 9.7 herein for the fiscal year ending June 30, 2013 which shall reflect, among other things, a calculation of EBITDA of the Borrowers of not less than $1,500,000 for such fiscal period, (iii) receipt by the Agent of evidence that no Default and/or Event of Default shall have occurred and be continuing at such time, (iv) receipt by the Agent of evidence that the Borrowers have an Undrawn Availability of not less than $1,750,000 prior to and immediately after giving effect to any such repayment of the Equity Infusion Amount, and (v) receipt by the Agent of evidence that the aggregate amount of any such repayment of the Equity Infusion Amount, in full or in part, does not exceed an amount equal to fifty percent (50%) of Excess Cash Flow of the Borrowers for such fiscal year.
 
ARTICLE V.  
REPRESENTATIONS AND WARRANTIES
 
Each Borrower represents and warrants as follows:
 
5.1   Authority .  Each Borrower has full power, authority and legal right to enter into this Agreement and the Other Documents to which it is a party and to perform all its respective Obligations hereunder and thereunder.  This Agreement, the Subordination Agreement and the Other Documents have been duly executed and delivered by each Borrower that is a party thereto, and this Agreement, the Subordination Agreement and the Other Documents to which it is a party constitute the legal, valid and binding obligation of such Borrower enforceable in accordance with their terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject to general principles of equity.  The execution, delivery and performance of this Agreement and of the Other Documents to which such Borrower is a party (i) are within such Borrower’s corporate/limited liability company powers, (ii) have been duly authorized by all necessary corporate/company action, (iii) are not in contravention of law applicable to the Borrowers, except to the extent that such contravention could not reasonably be expected to  have a Material Adverse Effect, (iv) are not in contravention of the terms of such Borrower’s by-laws, certificate of incorporation/operating agreement, certificate of formation or other applicable documents relating to such Borrower’s formation or to the conduct of such Borrower’s business (except to the extent that such contravention could not reasonably be expected to have a Material Adverse Effect), (v) are not in contravention of the terms of or of any material agreement or undertaking to which such Borrower is a party or by which such Borrower is bound including the Subordinated Loan Documentation, except to the extent that such contravention could not reasonably be expected to have a Material Adverse Effect, (b) will not conflict with or violate any law or regulation, or any judgment, order or decree of any Governmental Body, except to the extent that such conflict or violation could not reasonably be expected to have a Material Adverse Effect, (c) will not require the Consent of any Governmental Body or any other Person, except those Consents which will have been duly obtained, made or compiled and which are in full force and effect or when the failure of which to be so made, obtained or delivered could not reasonably be expected to have a Material Adverse Effect and except for filings and recordings and control agreements entered into with respect to the Collateral to be made, or otherwise delivered to Agent for filing and/or recordation, as of the Closing Date or as of a post-closing date, as applicable, and (d) will not conflict with, nor result in any breach in any of the provisions of or constitute a default under or result in the creation of any Lien except Permitted Encumbrances upon any asset of such Borrower under the provisions of any agreement, charter document, instrument, by-law, operating agreement or other instrument to which such Borrower is a party or by which it or its property is a party or by which it may be bound including under the provisions of the Subordinated Loan Documentation, except to the extent that such conflict, breach or default could not reasonably be expected to have a Material Adverse Effect.
 
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5.2   Formation and Qualification.
 
(a)   As of the Closing Date, each Borrower is duly incorporated or formed, as the case may be, and in good standing under the laws of the state listed on Schedule 5.2(a) and is qualified to do business and is in good standing in the states listed on Schedule 5.2(a) which constitute all states in which qualification and good standing are necessary for such Borrower to conduct its business and own its property and where the failure to so qualify could reasonably be expected to have a Material Adverse Effect on such Borrower.  As of the Closing Date, each Borrower has delivered to Agent true and complete copies of its certificate of incorporation and by-laws or certificate of formation and operating agreement, as applicable, and will promptly notify Agent of any amendment or changes thereto.
 
(b)   As of the Closing Date, the only Subsidiaries of each Borrower are listed on Schedule 5.2(b).
 
(c)   As of the date of the delivery of each Revised Schedule 5.2(a) (as defined below) on a quarterly basis pursuant to the last sentence of this Subsection 5.2(c), each Borrower is duly incorporated or formed, as the case may be, and in good standing under the laws of the state listed on such Revised Schedule 5.2(a) and is qualified to do business and is in good standing in the states listed on such Revised 5.2(a) which constitute all states in which qualification and good standing are necessary for such Borrower to conduct its business and own its property and where the failure to so qualify could reasonably be expected to have a Material Adverse Effect on such Borrower.  As of the date of the delivery of each Revised Schedule 5.2(a) on a quarterly basis pursuant to the last sentence of this Subsection 5.2(c), each Borrower has delivered to Agent true and complete copies of its certificate of incorporation and by-laws or certificate of formation and operating agreement, as applicable, and will promptly notify Agent of any amendment or changes thereto.  Any changes to Schedule 5.2(a) after the Closing Date shall be provided to the Agent by the Borrowers on a quarterly basis at the end of each fiscal quarter (each such Schedule 5.2(a) as so changed and delivered is referred to herein as a “ Revised Schedule 5.2(a) ”).
 
5.3   Survival of Representations and Warranties .  All representations and warranties of such Borrower contained in this Agreement and the Other Documents executed on the date hereof shall be true and correct at the time of such Borrower’s execution of this Agreement, and shall survive the execution, delivery and acceptance thereof by the parties thereto and the closing of the transactions described therein or related thereto.
 
5.4   Tax Returns .  Each Borrower’s federal tax identification number is set forth on Schedule 5.4.  Each Borrower has filed all federal, state and local tax returns and other reports each is required by law to file and has paid all taxes, assessments, fees and other governmental charges that are due and payable, except for those taxes, assessments, fees and other governmental charges that the applicable Borrower has Properly Contested.  Federal, state and local income tax returns of each Borrower have been filed with the appropriate taxing authority or closed by applicable statute for all fiscal years prior to and including the fiscal year ending June 30, 2011.  The provision for taxes on the books of each Borrower is adequate for all years not closed by applicable statutes, and for its current fiscal year, and no Borrower has any knowledge of any deficiency or additional assessment in connection therewith not provided for on its books.
 
5.5   Financial Statements .            The unaudited consolidated balance sheets of the Borrowing Agent and its Subsidiaries as of April 30, 2012, and the related statements of income, changes in stockholder’s equity, and changes in cash flow for the period ended on such date, copies of which have been delivered to Agent, have been prepared in accordance with GAAP, consistently applied (except for changes in application in which such accountants concur) and present fairly the financial position of the Borrowing Agent and its Subsidiaries at such date and the results of their operations for such period.  As of the Closing Date, since April 30, 2012 there has been no change in the condition, financial or otherwise, of the Borrowing Agent and its Subsidiaries as shown on the consolidated balance sheet as of such date and no change in the aggregate value of machinery, equipment and Real Property owned by the Borrowing Agent and its Subsidiaries, except changes in the Ordinary Course of Business, none of which individually or in the aggregate has been materially adverse.
 
5.6   Entity Names .  No Borrower has been known by any other corporate name in the past five years and does not sell Inventory under any other name except as set forth on Schedule 5.6.  As of the Closing Date, no Borrower been the surviving corporation/company of a merger or consolidation or acquired all or substantially all of the assets of any Person during the preceding five (5) years.
 
5.7   O.S.H.A. and Environmental Compliance.
 
(a)   Each Borrower has duly complied in all material respects with, and its facilities, business, assets, property, owned Real Property and Equipment are in compliance in all material respects with, the provisions of the Federal Occupational Safety and Health Act, the Environmental Protection Act (“CERCLA”), RCRA and all other Environmental Laws except where failure to so comply would not have a Material Adverse Effect; there have been no outstanding citations, notices or orders of non-compliance issued to any Borrower or relating to its business, assets, property or Equipment under any such laws, rules or regulations, except where such non-compliance would not have a Material Adverse Effect.
 
(b)   Each Borrower has been issued all required federal, state and local licenses, certificates or permits relating to all applicable Environmental Laws, except for those that have not been issued which would not have a Material Adverse Effect.
 
(c)   Except as set forth in the Phase I Report (or defined in the Environmental Indemnity Agreement), (i) There are no visible signs of releases, spills, discharges, leaks or disposal (collectively referred to as “ Releases ”) of Hazardous Substances at, upon, under or within any Real Property owned by any Borrower; (ii) there are no underground storage tanks or polychlorinated biphenyls on any Real Property owned by any Borrower; (iii) the Real Property owned by any Borrower has not ever been used as a treatment, storage or disposal facility of Hazardous Waste; and (iv) no Hazardous Substances are present on any Real Property owned by any Borrower, excepting such quantities as are handled in accordance with all applicable manufacturer’s instructions and governmental regulations and in proper storage containers and as are necessary for the operation of the commercial business of any Borrower, except for any of the foregoing which would not have a Material Adverse Effect.
 
5.8   Solvency; No Litigation, Violation, Indebtedness or Default.
 
(a)   Borrowing Agent and its Subsidiaries (on a consolidated basis) are solvent, able to pay its debts as they mature, has capital sufficient to carry on its business and all businesses in which it is about to engage, and (i) as of the Closing Date, the fair present saleable value of its assets, calculated on a going concern basis, is in excess of the amount of its liabilities and (ii) subsequent to the Closing Date, the fair saleable value of its assets (calculated on a going concern basis) will be in excess of the amount of its liabilities.
 
(b)   Except as disclosed in Schedule 5.8(b), no Borrower has (i) any pending or, to the knowledge of each Borrower, threatened litigation, arbitration, actions or proceedings against or affecting any Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect, and (ii) any liabilities or indebtedness for borrowed money other than the Obligations, except as set forth on the financial statements delivered to the Agent from time to time and the Indebtedness permitted pursuant to Section 7.8 herein.
 
(c)   No Borrower is in violation of any applicable statute, law, rule, regulation or ordinance in any respect which could reasonably be expected to have a Material Adverse Effect, nor is any Borrower in violation of any order of any court, Governmental Body or arbitration board or tribunal.
 
(d)   No Borrower nor any member of the Controlled Group maintains or contributes to any Pension Benefit Plan other than (i) as of the Closing Date, those listed on Schedule 5.8(d) hereto and (ii) thereafter, as permitted under this Agreement.  (i) No Pension Benefit Plan has incurred any “accumulated funding deficiency,” as defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether or not waived, and each Borrower and each member of the Controlled Group has met all applicable minimum funding requirements under Section 302 of ERISA in respect of each Pension Benefit Plan; (ii) each Pension Benefit Plan which is intended to be a qualified plan under Section 401(a) of the Code as currently in effect has been determined by the Internal Revenue Service to be qualified under Section 401(a) of the Code and the trust related thereto is exempt from federal income tax under Section 501(a) of the Code; (iii) neither any Borrower nor any member of the Controlled Group has incurred any liability to the PBGC other than for the payment of premiums, and there are no premium payments which have become due which are unpaid; (iv) no Pension Benefit Plan has been terminated by the plan administrator thereof nor by the PBGC, and there is no occurrence which would cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Pension Benefit Plan; (v) at this time, the current value of the assets of each Pension Benefit Plan exceeds the present value of the accrued benefits and other liabilities of such Pension Benefit Plan and neither any Borrower nor any member of the Controlled Group knows of any facts or circumstances which would materially change the value of such assets and accrued benefits and other liabilities; (vi) neither any Borrower nor any member of the Controlled Group has breached any of the responsibilities, obligations or duties imposed on it by ERISA with respect to any Pension Benefit Plan; (vii) neither any Borrower nor any member of a Controlled Group has incurred any liability for any excise tax arising under Section 4972 or 4980B of the Code, and no fact exists which could give rise to any such liability; (viii) neither any Borrower nor any member of the Controlled Group nor, to the knowledge of the Borrowers, any fiduciary of, nor to the knowledge of the Borrowers, any trustee to, any Pension Benefit Plan, has engaged in a “prohibited transaction” described in Section 406 of the ERISA or Section 4975 of the Code nor taken any action which would constitute or result in a Termination Event with respect to any such Pension Benefit Plan which is subject to ERISA; (ix) each Borrower and each member of the Controlled Group has made all contributions due and payable with respect to each Pension Benefit Plan; (x) there exists no event described in Section 4043(b) of ERISA, for which the thirty (30) day notice period has not been waived; (xi) neither any Borrower nor any member of the Controlled Group has any fiduciary responsibility for investments with respect to any plan existing for the benefit of persons other than employees or former employees of any Borrower and any member of the Controlled Group; (xii) neither any Borrower nor any member of the Controlled Group maintains or contributes to any Pension Benefit Plan which provides health, accident or life insurance benefits to former employees, their spouses or dependents, other than in accordance with Section 4980B of the Code; (xiii) neither any Borrower nor any member of the Controlled Group has withdrawn, completely or partially, from any Multiemployer Plan so as to incur liability under the Title IV of ERISA and there exists no fact which would reasonably be expected to result in any such liability; and (xiv) to the knowledge of the Borrowers, no Pension Benefit Plan fiduciary (as defined in Section 3(21) of ERISA) has any liability for breach of fiduciary duty or for any failure in connection with the administration or investment of the assets of a Pension Benefit Plan.
 
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5.9   Patents, Trademarks, Copyrights and Licenses .  All patents, patent applications, trademarks, trademark applications, service marks, service mark applications, copyrights, copyright applications, design rights, tradenames, assumed names, trade secrets and licenses owned or utilized by any Borrower as of the Closing Date are set forth on Schedule 5.9 and are valid and have been duly registered or filed with all appropriate Governmental Bodies and constitute all of the intellectual property rights which are necessary for the operation of its business. Each Borrower owns or has the lawful right to use all patents, patent applications, trademarks, trademark applications, service marks, service mark applications, copyrights, copyright applications, design rights, tradenames, assumed names, trade secrets and licenses necessary for the conduct of its business, without conflict with any rights of others.  Except as set forth in Schedule 5.9 hereof, as of the Closing Date, there is no written objection to or pending challenge to the validity of any such patent, trademark, copyright, design rights, tradename, trade secret or license and no Borrower is aware of any grounds for any challenge which could reasonably be expected to have a Material Adverse Effect.  Each patent, patent application, patent license, trademark, trademark application, trademark license, service mark, service mark application, service mark license, design rights, copyright, copyright application and copyright license owned or held by any Borrower which is necessary for the conduct of its business and all trade secrets used by any Borrower which are necessary for the conduct of its business consist of original material or property developed by such Borrower or was lawfully acquired by such Borrower from the proper and lawful owner thereof, except for the failure to so develop or acquire which could not reasonably be expected to have a Material Adverse Effect.  Each of such items owned by Borrower has been maintained so as to preserve the value thereof from the date of creation or acquisition thereof, except where the failure to so maintain could not reasonably be expected to have a Material Adverse Effect.  With respect to all software used by any Borrower, such Borrower is in possession of all source and object codes related to each piece of software or is the beneficiary of a source code escrow agreement, except where the failure to so possess which could not reasonably be expected to have a Material Adverse Effect.
 
5.10   Licenses and Permits .  Except as set forth in Schedule 5.10, each Borrower (a) is in compliance with and (b) has procured and is now in possession of, all material licenses or permits required by any applicable federal, state, provincial or local law, rule or regulation for the operation of its business in each jurisdiction wherein it is now conducting or proposes to conduct business and, in the case of clause (a) above, where the failure to be so in compliance could have a Material Adverse Effect and, in the case of clause (b) above, where the failure to procure such licenses or permits could have a Material Adverse Effect.
 
5.11   Default of Indebtedness .  No Borrower is in default in the payment of the principal of or interest on any Indebtedness in excess of $250,000 (specifically excluding any agreements with or amounts payable to any trade vendors) or under any instrument or agreement under or subject to which any Indebtedness has been issued and no event has occurred and is continuing under the provisions of any such instrument or agreement which with or without the lapse of time or the giving of notice, or both, constitutes or would constitute an event of default thereunder.
 
5.12   No Default .  No Borrower is in default in the payment or performance of any of its contractual obligations for which such default could reasonably be expected to have a Material Adverse Effect and no Default has occurred for which such default could reasonably be expected to have a Material Adverse Effect.
 
5.13   No Burdensome Restrictions .  No Borrower is party to any contract or agreement the performance of which could have a Material Adverse Effect.  As of the Closing Date, each Borrower has heretofore delivered to Agent true and complete copies of all material contracts to which it is a party or to which it or any of its properties is subject.  No Borrower has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien which is not a Permitted Encumbrance.
 
5.14   No Labor Disputes .  No Borrower is involved in any labor union dispute; there are no strikes or walkouts or union organization of any Borrower’s employees (to the Borrower’s knowledge) threatened or in existence and no labor union contract is scheduled to expire during the Term other than as set forth on Schedule 5.14 hereto.
 
5.15   Margin Regulations .  No Borrower is engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the purpose of “purchasing” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect.  No part of the proceeds of any Advance will be used for “purchasing” or “carrying” “margin stock” as defined in Regulation U of such Board of Governors.
 
5.16   Investment Company Act .  No Borrower is an “investment company” registered or required to be registered under the Investment Company Act of 1940, as amended, nor is it controlled by such a company.
 
5.17   Disclosure .  No representation or warranty made by any Borrower in this Agreement or the Subordinated Loan Documentation, or in any financial statement, report, certificate or any other document furnished in connection herewith or therewith contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading.  There is no fact known to any Borrower or which reasonably should be known to such Borrower which such Borrower has not disclosed to Agent in writing with respect to the transactions contemplated by the Subordinated Loan Documentation or this Agreement which could reasonably be expected to have a Material Adverse Effect.
 
5.18   Delivery of Subordinated Loan Documentation .  Agent has received complete copies of the Subordinated Loan Documentation (including all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto, if any) and all amendments thereto, waivers relating thereto and other side letters or agreements affecting the terms thereof.  None of such documents and agreements has been amended or supplemented, nor have any of the provisions thereof been waived, except pursuant to a written agreement or instrument which has heretofore been delivered to Agent.
 
5.19   Swaps .  No Borrower is a party to, nor will it be a party to, any swap agreement whereby such Borrower has agreed or will agree to swap interest rates or currencies unless same provides that damages upon termination following an event of default thereunder are payable on an unlimited “two-way basis” without regard to fault on the part of either party.
 
5.20            Conflicting Agreements .  No provision of any mortgage, indenture, contract, agreement, judgment, decree or order binding on any Borrower or affecting the Collateral conflicts with, or requires any Consent which has not already been obtained to, or would in any way prevent the execution, delivery or performance of, the terms of this Agreement or the Other Documents to which it is a party, in each case which could reasonably be expected to have a Material Adverse Effect.
 
5.21            Application of Certain Laws and Regulations .  Neither any Borrower nor any Subsidiary of any Borrower is subject to any law, statute, rule or regulation which regulates the incurrence of any Indebtedness, including laws, statutes, rules or regulations relative to common or interstate carriers or to the sale of electricity, gas, steam, water, telephone, telegraph or other public utility services.
 
5.22            Business and Property of Borrowers .  Upon and after the Closing Date, Borrowers do not propose to engage in any business other than the manufacturing, distributing, marketing and sale of vitamins, nutritional supplements, herbal products, food products and fine natural chemicals and other similar products, and activities necessary or advisable to conduct the foregoing.  On the Closing Date, each Borrower will own all the property and possess all of the rights and Consents necessary for the conduct of the business of such Borrower as of the Closing Date.
 
5.23   INTENTIONALLY OMITTED .
 
5.24   Anti-Terrorism Laws.
 
(a)   General .  Neither any Borrower nor any Subsidiary nor, to the knowledge of the Borrowers, any Affiliate of any Borrower is in violation of any Anti-Terrorism Law or engages in or conspires to engage in any transaction  that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.
 
(b)   Executive Order No. 13224 .  Neither any Borrower nor any Subsidiary nor, to the knowledge of the Borrowers, any Affiliate of any Borrower or their respective agents acting or benefiting in any capacity in connection with the Advances or other transactions hereunder, is any of the following (each a “ Blocked Person ”):
 
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(i)   a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;
 
(ii)   a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;
 
(iii)   a Person or entity with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;
 
(iv)   a Person or entity that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order No. 13224;
 
(v)   a Person or entity that is named as a “specially designated national” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list, or
 
(vi)   a Person or entity who is affiliated or associated with a Person or entity listed above.
 
Neither any Borrower nor to the knowledge of any Borrower, any of its agents acting in any capacity in connection with the Advances or other transactions hereunder (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property  blocked  pursuant to the Executive Order No. 13224.
 
5.25   Trading with the Enemy .  No Borrower has engaged, nor does it intend to engage, in any business or activity prohibited by the Trading with the Enemy Act.
 
ARTICLE VI.  
AFFIRMATIVE COVENANTS
 
Each Borrower shall, until payment in full of the Obligations (other than the Remaining Obligations) and termination of this Agreement, unless Agent consents in writing otherwise:
 
6.1   Payment of Fees .  Pay to Agent on demand all usual and customary fees and expenses which Agent incurs in connection with (a) the forwarding of Advance proceeds and (b) the establishment and maintenance of any Blocked Accounts or Depository Accounts as provided for in Section 4.15(h).  Agent may, without making demand, charge Borrowers’ Account for all such fees and expenses.
 
6.2   Conduct of Business and Maintenance of Existence and Assets .  (a) Conduct continuously and operate actively its business according to good business practices and maintain all of its properties useful or necessary in its business in good working order and condition (reasonable wear and tear excepted and except as may be disposed of in accordance with the terms of this Agreement), including all licenses, patents, copyrights, design rights, tradenames, trade secrets and trademarks and take all actions necessary to enforce and protect the validity of any intellectual property right or other right included in the Collateral that is useful for the ongoing operation of its business except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; (b) keep in full force and effect its existence and comply in all material respects with the laws and regulations governing the conduct of its business where the failure to do so could reasonably be expected to have a Material Adverse Effect; and (c) make all such reports and pay all such franchise and other taxes and license fees and do all such other acts and things as may be lawfully required to maintain its rights, licenses, leases, powers and franchises under the laws of the United States or any political subdivision thereof where the failure to do so could reasonably be expected to have a Material Adverse Effect.
 
6.3   Violations .  Promptly notify Agent in writing of any violation of any law, statute, regulation or ordinance of any Governmental Body, or of any agency thereof, applicable to any Borrower which could reasonably be expected to have a Material Adverse Effect.
 
6.4   Government Receivables .  Take all steps necessary to protect Agent’s interest in the Collateral under the Federal Assignment of Claims Act (to the extent such Receivable is included in the borrowing base hereunder), the Uniform Commercial Code and all other applicable state or local statutes or ordinances and deliver to Agent appropriately endorsed, any instrument or chattel paper connected with any Receivable arising out of contracts between any Borrower and the United States, any state or any department, agency or instrumentality of any of them.
 
6.5   Financial Covenants.
 
(a)   Fixed Charge Coverage Ratio.  Cause to be maintained at all times a Fixed Charge Coverage Ratio of not less than 1.05 to 1.00, tested quarterly on a rolling four (4) quarter basis commencing with the fiscal quarter ending on September 30, 2012.
 
6.6   Execution of Supplemental Instruments .  Promptly execute and deliver to Agent from time to time, upon demand, such supplemental agreements, statements, assignments and transfers, or instructions or documents relating to the Collateral, and such other instruments in each case as Agent may reasonably request, in order that the full intent of this Agreement may be carried into effect.
 
6.7   Payment of Indebtedness .  Pay, discharge or otherwise satisfy at or before maturity (subject, where applicable, to specified grace periods and, in the case of the trade payables, to normal payment practices) all its obligations and liabilities of whatever nature, except when the failure to do so could not reasonably be expected to have a Material Adverse Effect or when the amount or validity thereof is currently being contested in good faith by appropriate proceedings and each Borrower shall have provided for such reserves as Agent may reasonably deem proper and necessary, subject at all times to any applicable subordination arrangement in favor of Agent and Lenders.
 
6.8   Standards of Financial Statements .  Cause all financial statements referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12 and 9.13 as to which GAAP is applicable to be complete and correct in all material respects (subject, in the case of interim financial statements, to normal year-end audit adjustments) and to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as concurred in by such reporting accountants or officer, as the case may be, and disclosed therein).
 
6.9   Sale of iBio Stock .  Sell all iBio Stock pledged in favor of the Agent for the benefit of the Lenders pursuant to the Stock Pledge Agreement at any time that the average daily closing trading price per share of such iBio Stock is less than $0.88 per share for a period of fifteen (15) consecutive trading days on the applicable exchange and utilize all proceeds from such sale to prepay the outstanding balance of the Term Loan at such time.
 
ARTICLE VII.  
NEGATIVE COVENANTS.
 
No Borrower shall, until satisfaction in full of the Obligations (other than the Remaining Obligations) and termination of this Agreement, unless Agent consents in writing otherwise:
 
7.1   Merger, Consolidation, Acquisition and Sale of Assets.
 
(a)   Enter into any merger, consolidation or other reorganization with or into any other Person or acquire all or a substantial portion of the assets or Equity Interests of any Person or permit any other Person to consolidate with or merge with it, except that:
 
(i)   any Borrower may merge, consolidate or reorganize with or into the Borrowing Agent; provided that the Borrowing Agent is the continuing or surviving Person;
 
(ii)   any Borrower (other than Borrowing Agent) may merge, consolidate or reorganize with or into any other Borrower (other than Borrowing Agent); provided that a Borrower is the continuing or surviving Person;
 
(iii)   any Borrower may transfer all or substantially all of its assets or its Equity to any other Borrower; provided that if the Borrowing Agent is a party to such transactions, the transferee thereof must be the Borrowing Agent; and
 
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(iv)   any Borrower may merger, consolidate or reorganize with or into any Person that such Borrower is part of as a joint venture as permitted in Section 7.12 herein, provided , however , (i) such Person has an EBITDA of greater than zero immediately prior to such merger, consolidation or reorganization, tested on a trailing twelve month basis, (ii) the Agent and its counsel has reviewed to its satisfaction any and all due diligence requested by the Agent in its sole discretion and there shall be no existing Liens, judgments, litigation, bankruptcies and/or outstanding taxes payable with regard to such Person and its assets which are not permitted by the terms herein, (iii) a Borrower is the continuing or surviving Person, (iv) the Borrowers will be in pro forma compliance with all terms and conditions set forth herein immediately preceding and after giving affect to such merger, consolidation or reorganization and (v) no Default and/or Event of Default shall exist immediately preceding and/or after giving affect to such merger, consolidation or reorganization.
 
(b)   Sell, lease, transfer or otherwise dispose (“Dispose” or “Disposition”) of any of its properties or assets, except :
 
(i)   Dispositions of Inventory and Equipment to the extent expressly permitted by Section 4.3;
 
(ii)   any other sales or Dispositions expressly permitted by this Agreement,
 
(iii)   Dispositions of assets to any other Borrower;
 
(iv)   sales, transfers, dispositions, write-offs, or discounting of any accounts receivable, including its Receivables, in connection with the compromise, settlement or collection thereof, in each case in the Ordinary Course of Business;
 
(v)   Dispositions consisting of dividends and other distributions permitted by Section 7.7;
 
(vi)   mergers and consolidations permitted by Section 7.1(a);
 
(vii)   Dispositions consisting of advances, loans or extensions of credit permitted by Section 7.5;
 
(viii)   lease, sublease, license (on a non-exclusive basis with respect to intellectual property or on an exclusive basis in the ordinary course of business consistent with past practice) or sublicense (on a non-exclusive basis with respect to intellectual property or on an exclusive basis in the ordinary course of business with past practice) or real or personal property that do not, individually or in the aggregate (x) interfere in any material respect with the business of the Borrower or any of its Subsidiaries or (y) materially impair the value of the property subject thereto;
 
(ix)   the lapse of immaterial intellectual property of any Borrower that is no longer useful in the business of the Borrower;
 
(x)   the termination, surrender or sublease of a real estate lease of any Borrower in the ordinary course of business;
 
(xi)   Disposition and transfer of cash and Cash Equivalents in the ordinary course of business except as otherwise prohibited herein;
 
(xii)   Dispositions of investments consented to by the Agent in writing (which consent shall not be unreasonably withheld or delayed) in joint ventures permitted pursuant to the terms herein to the extent required by customary buy/sell arrangements between the joint venture parties as set forth in applicable joint venture agreements and similar binding agreements;
 
(xiii)   Dispositions permitted by Sections 7.4(h), (i), (j) and (k) herein; and
 
(xiv)           Dispositions of iBio Stock so long as the net proceeds of such disposition are applied to repay the outstanding balance of the Term Loan in an amount up to One Million and 00/100 Dollars ($1,000,000) with all remaining proceeds to be applied to repay all other outstanding Revolving Advances and then to all other outstanding Obligations owing to the Lenders.
 
7.2   Creation of Liens .  Create or suffer to exist any Lien or transfer upon or against any of its property or assets now owned or hereafter acquired, except Permitted Encumbrances.
 
7.3   Guarantees .  Become liable upon the obligations or liabilities of any Person by assumption, endorsement or guaranty thereof or otherwise (other than to Lenders) except (a) as disclosed on Schedule 7.3, (b) the endorsement of checks in the Ordinary Course of Business, (c) deposits described in clauses (d) and (e) of the definition of the term “Permitted Encumbrances”, and (d) guarantees of Borrowers (other than the Borrowing Agent) under the Subordinated Loan Documentation.
 
7.4   Investments .  Purchase or acquire obligations or Equity Interests of, or any other interest in, any Person, except:
 
(a)                      (i) obligations issued or guaranteed by the United States of America or any agency thereof,
 
(ii)   commercial paper with maturities of not more than 180 days and a published rating of not less than A-1 or P-1 (or the equivalent rating),
 
(iii)   certificates of time deposit and bankers’ acceptances having maturities of not more than 180 days and repurchase agreements backed by United States government securities of a commercial bank if (y) such bank has a combined capital and surplus of at least $500,000,000, or (z) its debt obligations, or those of a holding company of which it is a Subsidiary, are rated not less than A (or the equivalent rating) by a nationally recognized investment rating agency, and
 
(iv)   U.S. money market funds that invest solely in obligations issued or guaranteed by the United States of America or an agency thereof (collectively, all of the foregoing referred to in this clause (a) shall be “ Cash Equivalents ”);
 
(b)   those as set forth on Schedule 7.4;
 
(c)   all the Equity Interests held in each of its Subsidiaries and/or other Borrowers;
 
(d)   notes payable or securities issued by Customers and suppliers received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;
 
(e)   assumptions, endorsements or guaranties permitted by Section 7.3;
 
(f)   mergers and consolidations and Dispositions permitted by Section 7.1;
 
(g)   promissory notes and other non-cash consideration, in each case received in connection with any Disposition made in compliance with this Agreement;
 
(h)   on or after December 31, 2012, other purchases or acquisitions of any Equity Interests of any Person to form, or contributions to, joint venture arrangements with Revolving Advances in an aggregate amount so invested not to exceed $250,000 outstanding at any time, provided, however, (i) no Default and/or Event of Default has occurred and is continuing prior to and immediately after making such purchase or acquisition , and (ii) the Borrowers provide to the Agent evidence that the Borrowers have and will have an Undrawn Availability of not less than $1,750,000 prior to and immediately after making such purchase or acquisition;
 
(i)   other purchases or acquisitions of any Equity Interests of any Person to form, or contributions to, joint venture arrangements which are not financed with Advances in an aggregate amount so invested not to exceed $500,000 outstanding at any time;
 
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(j)   Dividend Payments permitted by Section 7.7; and
 
(k)   Dividends and distributions of capital stock of a Subsidiary to its equity holder(s).
 
7.5   Loans .  Make advances, loans or extensions of credit to any Person, including any Parent, Subsidiary or Affiliate except with respect to (a) the extension of commercial trade credit in connection with the sale of Inventory in the Ordinary Course of Business; (b) loans to its employees in the Ordinary Course of Business not to exceed the aggregate amount of $100,000 at any time outstanding; (c) intercompany advances, loans and extensions of credit by and between Borrowers; and (d) other extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business.
 
7.6   Capital Expenditures .  Contract for, purchase or make any expenditure or commitments for Capital Expenditures in any fiscal year in an aggregate amount for all Borrowers in excess of $500,000, tested annually.
 
7.7   Dividends .  Declare, pay or make any dividend or distribution on any shares of the common stock or preferred stock of any Borrower (other than dividends or distributions payable in its stock, or split-ups or reclassifications of its stock) or apply any of its funds, property or assets to the purchase, redemption or other retirement of any common or preferred stock, or of any options to purchase or acquire any such shares of common or preferred stock of any Borrower (collectively, “Dividend Payments”), except any Borrower is permitted to declare, pay or make dividends or distributions on any shares of the common stock or preferred stock (i) to other Borrowers, (ii) up to the maximum aggregate amount of $100,000 for all Borrowers collectively during any fiscal year so long as no Default and/or Event of Default shall exist immediately prior to making and/or after giving affect to such dividend and/or distribution or (iii) upon receipt of the Agent’s written consent from time to time which may be withheld for any reason in its sole discretion.
 
7.8   Indebtedness .  Create, incur, assume or suffer to exist any Indebtedness (exclusive of trade debt) except:
 
(a)   Indebtedness to any of the Lenders and to Agent and to any of their affiliates;
 
(b)   Indebtedness incurred for Capital Expenditures permitted under Section 7.6 hereof;
 
(c)   Indebtedness under the Subordinated Loan Documentation;
 
(d)   Indebtedness created under this Agreement and the Other Documents;
 
(e)   Indebtedness existing on the date hereof and set forth in Schedule 7.8 and any extensions, renewals, replacements and refinancings of any such Indebtedness;
 
(f)   Indebtedness by and between Borrowers;
 
(g)   Indebtedness of any Borrower owed to any Person providing workers’ compensation, health, disability or other employee benefits or property, casualty or liability insurance, pursuant to reimbursement or indemnification obligations to such Person, in each case incurred in the ordinary course of business and so long as such Indebtedness could not reasonably be expected to have a Material Adverse Effect;
 
(h)   Indebtedness of any Borrower in respect of performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations, in each case provided in the ordinary course of business and so long as such Indebtedness could not reasonably be expected to have a Material Adverse Effect;
 
(i)   Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business and other Indebtedness in respect of obligations of any Borrower under any agreement or arrangement to provide cash management services, including treasury, depository, overdraft, return items, purchasing card, travel and entertainment card, credit or debit card, electronic funds transfer, automated clearing house transfers of funds and other cash management arrangements in the ordinary course of business;
 
(j)   Indebtedness of the Borrowers resulting from the endorsements of instruments for deposit or collection in the Ordinary Course of Business;
 
(k)   Indebtedness constituting assumptions, endorsements or guaranties permitted by Section 7.3;
 
(l)   Indebtedness consisting of insurance premiums;
 
(m)   Indebtedness permitted by Section 7.5;
 
(n)   Indebtedness permitted by Section 7.6;
 
(o)   Indebtedness constituting wages, credit card payments, accounts payable and similar day-to-day expenses of the Borrowers in the Ordinary Course of Business;
 
(p)   Indebtedness permitted by Section 7.11;
 
(q)   Indebtedness permitted by Section 7.23; and
 
(r)   Indebtedness permitted by Section 7.24.
 
7.9   Nature of Business .  Substantially change the nature of the business in which it is presently engaged, nor except as specifically permitted hereby or hereunder, purchase or invest, directly or indirectly, in any assets or property other than in the Ordinary Course of Business for assets or property which are useful in, necessary for and are to be used in its business as presently conducted.
 
7.10   Transactions with Affiliates .  Directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property to, or otherwise enter into any transaction or deal with, any Affiliate, except (a) transactions disclosed to the Agent, which are in the Ordinary Course of Business, on an arm’s-length basis on terms and conditions no less favorable than terms and conditions which would have been obtainable from a Person other than an Affiliate; (b) transactions contemplated by this Agreement and the Other Documents; (c) loans and advances permitted by Section 7.5; (d) the payment of reasonable fees to directors of any Borrower, and compensation and employee benefit arrangements paid to, and indemnities provided for the benefit of, directors, officers or employees of the Borrowers in the ordinary course of business; (e) any issuances of securities or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment agreements, stock options and stock ownership plans approved by a Borrower’s board of directors; (f) any transactions between or among the Borrower and one or more of its Subsidiaries permitted hereunder; (g) any Dividend Payment permitted by Section 7.7; (h) the Subordinated Debt and any payments in respect thereof permitted hereunder; (i) the EGK Debt; (j) the Vitamin Lease and the transactions contemplated thereunder; (k) the payment of wages, benefits and similar amounts in the Ordinary Course of Business by the Borrowers to their principals, directors, officers and employees; (l) that certain Lease Agreement by and between AL, as lessee, and Vitamin Realty Associates LLC, as lessor, dated January 5, 2012 with regard to the property located at 225 Long Avenue, Building 15, Hillside, New Jersey  07205, as amended, restated, extended, replaced and/or modified from time to time, and the transactions contemplated thereby; (m) advances or contributions to its Subsidiaries for the purpose of funding organizational and administrative expense not to exceed $25,000 in the aggregate in any fiscal year; and (n) the payments and transactions contemplated by Section 7.24 herein.
 
7.11   Leases .  Enter as lessee into any lease arrangement for real or personal property (unless capitalized and permitted under Section 7.6 hereof) if after giving effect thereto, aggregate annual rental payments for all leased property would exceed $750,000 in any one fiscal year in the aggregate for all Borrowers.
 
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7.12   Subsidiaries .
 
(a)   Form any Subsidiary not listed on Schedule 5.2(b) attached hereto unless (i) such Subsidiary expressly joins in this Agreement as a borrower and becomes jointly and severally liable for the obligations of Borrowers hereunder, under the Note, and under any other agreement between any Borrower and Lenders, (ii) Agent consents to such in writing and (iii) Agent shall have received all documents, including legal opinions, it may reasonably require to establish compliance with each of the foregoing conditions.
 
(b)   Enter into any partnership, joint venture or similar arrangement, except for joint ventures entered into pursuant to Subsections 7.4 (h) and (i) herein.
 
7.13   Fiscal Year and Accounting Changes .  Change its fiscal year from June 30 th or make any significant change (i) in accounting treatment and reporting practices except as required by GAAP or (ii) in tax reporting treatment except as required by law.
 
7.14   Pledge of Credit .  Now or hereafter pledge Agent’s or any Lender’s credit on any purchases or for any purpose whatsoever or use any portion of any Advance in or for any business other than as permitted by Section 2.22 herein or unless otherwise permitted hereunder or as consented to by the Agent in writing.
 
7.15   Amendment of Articles of Incorporation, By-Laws/Certificate of Formation, Operating Agreement .  Amend, modify or waive any material term or material provision of its Articles of Incorporation or By-Laws or Certificate of Formation or Operating Agreement, as applicable, unless required by law.
 
7.16   Compliance with ERISA .  (i) (x) Maintain, or permit any member of the Controlled Group to maintain, or (y) become obligated to contribute, or permit any member of the Controlled Group to become obligated to contribute, to any Pension Benefit Plan, other than those Pension Benefit Plans disclosed on Schedule 5.8(d) or any other Pension Benefit Plan for which Agent has provided its prior written consent, (ii) engage, or permit any member of the Controlled Group to engage, in any non-exempt “prohibited transaction”, as that term is defined in section 406 of ERISA and Section 4975 of the Code, (iii) incur, or permit any member of the Controlled Group to incur, any “accumulated funding deficiency”, as that term is defined in Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any member of the Controlled Group to terminate, any Pension Benefit Plan where such event could result in any liability of any Borrower or any member of the Controlled Group or the imposition of a lien on the property of any Borrower or any member of the Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any member of the Controlled Group to assume, any obligation to contribute to any Multiemployer Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any member of the Controlled Group to incur, any withdrawal liability to any Multiemployer Plan; (vii) fail promptly to notify Agent of the occurrence of any Termination Event, (viii) fail to comply, or permit a member of the Controlled Group to fail to comply, with the requirements of ERISA or the Code or other Applicable Laws in respect of any Pension Benefit Plan, (ix) fail to meet, or permit any member of the Controlled Group to fail to meet, all minimum funding requirements under ERISA or the Code or postpone or delay or allow any member of the Controlled Group to postpone or delay any funding requirement with respect of any Pension Benefit Plan.
 
7.17   Prepayment of Indebtedness .  Except as permitted pursuant to Section 7.21 hereof, at any time, directly or indirectly, prepay any Indebtedness (other than to any of the Lenders, to Agent or any of their Affiliates), or repurchase, redeem, retire or otherwise acquire any Indebtedness of any Borrower, except:
 
(a)   payment or repayment or prepayment of the EGK Debt as permitted by Section 7.23 herein;
 
(b)   payment or repayment or prepayment of Indebtedness as permitted by Section 7.24 herein;
 
(c)   payment or repayment or prepayment of Indebtedness under this Agreement or any Other Documents; and
 
(d)   payment, repayment or prepayment of secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness.
 
7.18   Anti-Terrorism Laws .  No Borrower shall, until satisfaction in full of the Obligations (other than Remaining Obligations) and termination of this Agreement, nor shall it permit any Affiliate (which for the purposes of this Section 7.18 only, shall not include any shareholder that is not an Original Owner and any Person owned in whole or in part by any Original Owner which is not a “Borrower” hereunder or a Subsidiary of any Borrower) or agent to:
 
(a)   Conduct any business or engage in any transaction or dealing with any Blocked Person, including the making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person.
 
(b)   Deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order No. 13224.
 
(c)   Engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in the Executive Order No. 13224, the USA PATRIOT Act or any other Anti-Terrorism Law.  Borrower shall deliver to Lenders any certification or other evidence requested from time to time by any Lender in its sole discretion, confirming Borrower’s compliance with this Section.
 
7.19   Membership/Partnership Interests .  Unless consented to by Agent in writing, elect to treat or permit any of its Subsidiaries to (x) treat its limited liability company membership interests or partnership interests, as the case may be, as securities as contemplated by the definition of “security” in Section 8-102(15) and by Section 8-103 of Article 8 of Uniform Commercial Code or (y) certificate its limited liability company membership interests or partnership interests, as the case may be.
 
7.20   Trading with the Enemy Act .  Engage in any business or activity in violation of the Trading with the Enemy Act.
 
7.21   Subordinated Debt .  At any time, directly or indirectly, pay, prepay, repurchase, redeem, retire or otherwise acquire, or make any payment on account of any principal of, interest on or premium payable in connection with the repayment or redemption of the Subordinated Debt, except as expressly permitted in the Subordination Agreement, or as permitted by Section 4.22.
 
7.22   Other Agreements .  Enter into any material amendment, waiver or modification of the Subordinated Loan Documentation or any related agreements (other than this Agreement and any Other Document which is not included in the definition of Subordinated Loan Documentation), except to the extent permitted by the Subordination Agreement.
 
7.23   Payments of EGK Debt .  Make any payments, prepayments or repayments of principal and interest on the EGK Debt unless (i) no Default and/or Event of Default has occurred and is continuing prior to and immediately after making such payment, prepayment or repayment, (ii) the Borrowers provide to the Agent reasonable evidence that the Borrowers are and will be in compliance on a pro forma basis with the Fixed Charge Coverage Ratio set forth in Section 6.5(a) herein, as of the end of the then most recently completed fiscal quarter, prior to and immediately after making such payment, prepayment or repayment, and (iii)  the Borrowers provide to the Agent evidence that the Borrowers have and will have an Undrawn Availability of not less than $1,000,000 prior to and immediately after making such payment, prepayment or repayment.
 
7.24   Payments of Past Due Rent .  Make any payments, prepayments or repayments for any past due rent payable to Vitamin Realty Associates, L.L.C. with regard to the property located at 225 Long Avenue, Building 15, P.O. Box 278, Hillside, New Jersey  07205 (such past due rent as evidenced by the Vitamin Note) unless (i) no Default and/or Event of Default has occurred and is continuing prior to and immediately after making such payment, prepayment or repayment, (ii) the Borrowers provide to the Agent reasonable evidence that the Borrowers are and will be in compliance on a pro forma basis with the Fixed Charge Coverage Ratio set forth in Section 6.5(a) herein, as of the end of the then most recently completed fiscal quarter, prior to and immediately after making such payment, prepayment or repayment, and (iii)  the Borrowers provide to the Agent evidence that the Borrowers have and will have an Undrawn Availability of not less than $1,000,000 prior to and immediately after making such payment, prepayment or repayment.
 
ARTICLE VIII.  
CONDITIONS PRECEDENT
 
8.1   Conditions to Initial Advances .  The agreement of Lenders to make the initial Advances requested to be made on the Closing Date is subject to the satisfaction, or waiver by Agent, immediately prior to or concurrently with the making of such Advances, of the following conditions precedent:
 
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(a)   Note .  Agent shall have received the Note duly executed and delivered by an authorized officer of each Borrower;
 
(b)   Filings, Registrations and Recordings .  Each document (including any Uniform Commercial Code financing statement) required by this Agreement, any related agreement or under law or reasonably requested by the Agent to be filed, registered or recorded in order to create, in favor of Agent, a perfected security interest in or lien upon the Collateral shall have been properly filed, registered or recorded in each jurisdiction in which the filing, registration or recordation thereof is so required  or requested, and Agent shall have received an acknowledgment copy, or other evidence satisfactory to it, of each such filing, registration or recordation and satisfactory evidence of the payment of any necessary fee, tax or expense relating thereto;
 
(c)     Corporate/Company Proceedings of Borrowers .  Agent shall have received a copy of the resolutions in form and substance reasonably satisfactory to Agent, of the Board of Directors of each Borrower authorizing (i) the execution, delivery and performance of this Agreement, the Notes, the Mortgage, any related agreements, the Other Documents and the Subordinated Loan Documentation in each case to the extent such Borrower is a party thereto and (ii) the granting by each Borrower of the security interests in and liens upon the Collateral in each case certified by the Secretary or an Assistant Secretary of each Borrower as of the Closing Date; and, such certificate shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded as of the date of such certificate;
 
(d)   Incumbency Certificates of Borrowers .  Agent shall have received a certificate of the Secretary or an Assistant Secretary of each Borrower, dated the Closing Date, as to the incumbency and signature of the officers of each Borrower executing this Agreement, the Other Documents, any certificate or other documents to be delivered by it pursuant hereto, together with evidence of the incumbency of such Secretary or Assistant Secretary;
 
(e)     Fictitious, Assumed or Alternate Names .  Agent shall have received certified copies of any fictitious, assumed or alternate names of the Borrowers;
 
(f)   ERISA Compliance .  Agent shall have received in form and substance satisfactory to Agent evidence that Borrowers are in compliance with ERISA as required in Section 7.16 herein along with a certificate from Borrowing Agent delineating all existing pension and/or profit sharing plans, if any;
 
(g)   Certificates .  Agent shall have received a copy of the Articles or Certificate of Incorporation/Formation of each Borrower, and all amendments thereto, certified by the Secretary of State or other appropriate official of its jurisdiction of incorporation/Formation together with copies of the By-Laws of each Borrower and all agreements of each Borrower’s shareholders certified as accurate and complete by the Secretary of each Borrower;
 
(h)   Good Standing Certificates .  Agent shall have received good standing certificates for each Borrower dated not more than 30 days prior to the Closing Date, issued by the Secretary of State or other appropriate official of each Borrower’s jurisdiction of incorporation/formation and each jurisdiction where the conduct of each Borrower’s business activities or the ownership of its properties necessitates qualification;
 
(i)   Legal Opinion .  Agent shall have received the executed legal opinion of Herrick, Feinstein LLP in form and substance satisfactory to Agent which shall cover such matters incident to the transactions contemplated by this Agreement and the Other Documents, as Agent may reasonably require and each Borrower hereby authorizes and directs such counsel to deliver such opinions to Agent and Lenders; provided , however , the executed legal opinion with regard to CD shall be provided only by Muller & Lebensburger, P.A.;
 
(j)   No Litigation .  (i) No litigation, investigation or proceeding before or by any arbitrator or Governmental Body shall be continuing or threatened against any Borrower or against the officers or directors of any Borrower (A) in connection with this Agreement, the Other Documents, the Subordinated Loan Documents or any of the transactions contemplated thereby and which, in the reasonable opinion of Agent, is deemed material or (B) which could, in the reasonable opinion of Agent, have a Material Adverse Effect; and (ii) no injunction, writ, restraining order or other order of any nature materially adverse to any Borrower or the conduct of its business or inconsistent with the due consummation of the Transactions shall have been issued by any Governmental Body.  Agent shall have received a summary of all existing litigation regarding the Borrowers;
 
(k)   Financial Condition Certificates .  Agent shall have received an executed Financial Condition Certificate in the form of Exhibit 8.1(k).
 
(l)   Collateral Examination .  Agent shall have completed Collateral examinations and received appraisals, the results of which shall be reasonably satisfactory in form and substance to Lenders, of the Receivables, Inventory, General Intangibles, Real Property, Leasehold Interest and Equipment of each Borrower and all books and records in connection therewith;
 
(m)   Fees .  Agent shall have received all fees payable to Agent and Lenders on or prior to the Closing Date hereunder, including pursuant to Article III hereof;
 
(n)   Financial Statements .  Agent shall have received a copy of the Borrowing Agent’s most recent internally prepared interim consolidated financial statements as of April 30, 2012 evidencing that the Borrowing Agent and its Subsidiaries are tracking to plan, the most recent federal and state tax returns of the Borrowing Agent and the Borrowing Agent’s most recent fiscal year end audited financial statements;
 
(o)     Subordinated Loan Documents .  Agent shall have received final executed copies of the Subordinated Loan Documentation, and all related agreements, documents and instruments as in effect on the Closing Date all of which shall be satisfactory in form and substance to Agent and the transactions contemplated by such documentation shall be consummated prior to;
 
(p)     Other Documents .  Agent shall have received the executed Other Documents, all in form and substance satisfactory to Agent;
 
(q)   Insurance .  Agent shall have received in form and substance reasonably satisfactory to Agent, certified copies of Borrowers’ casualty insurance policies, together with loss payable endorsements on Agent’s standard form of loss payee endorsement naming Agent as lender loss payee and mortgagee, and certified copies of Borrowers’ liability insurance policies, together with endorsements naming Agent as an additional insured;
 
(r)     Leasehold Agreements .  Agent shall have received landlord, mortgagee or warehouseman agreements reasonably satisfactory to Agent with respect to all premises leased by Borrowers at which Inventory and books and records are located;
 
(s)     Environmental Reports .  Agent shall have received all environmental studies and reports prepared by independent environmental engineering firms with respect to all Real Property owned or leased by any Borrower;
 
(t)   Payment Instructions .  Agent shall have received written instructions from Borrowing Agent directing the application of proceeds of the initial Advances made pursuant to this Agreement;
 
(u)   Blocked Accounts .  Agent shall have received duly executed agreements establishing the Blocked Accounts or Depository Accounts with financial institutions reasonably acceptable to Agent for the collection or servicing of the Receivables and proceeds of the Collateral;
 
(v)   Consents .  Agent shall have received any and all Consents necessary to permit the effectuation of the transactions contemplated by this Agreement and the Other Documents; and, Agent shall have received such Consents and waivers of such third parties as might assert claims with respect to the Collateral, as Agent and its counsel shall deem reasonably necessary;
 
(w)   No Adverse Material Change .  (i) Since April 30, 2012, there shall not have occurred any event, condition or state of facts which could reasonably be expected to have a Material Adverse Effect and (ii) no representations made or information supplied to Agent or Lenders shall have been proven to be inaccurate or misleading in any material respect;
 
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(x)   Intellectual Property .  Agent shall have received a list of intellectual property of the Borrowers including trademarks and trademark applications, patents and patent applications, copyrights and copyright applications, together with a search/abstract relating to the same;
 
(y)     Mortgaged Premises .  Agent shall have received in form and substance reasonably satisfactory to Agent for the Mortgaged Premises (i) an executed Mortgage, Assignment of Rents, Leases and Profits and Environmental Indemnity Agreement, (ii) affidavit of title, (iii) survey certified to Agent, Wilentz, Goldman & Spitzer and the title company, (iv) appraisal in form, substance and amount reasonably satisfactory to the Agent, and (v) flood hazard certification (life of the loan) and flood insurance, if necessary;
 
(z)     Contract Review .  Agent shall have received copies of all material contracts of Borrowers including, without limitation, leases, union contracts, labor contracts, vendor supply contracts, management agreements, option agreements, warrant agreements, royalty agreements, member agreements, purchase agreements, warranty agreements, employment agreements, license agreements and distributorship agreements and such contracts and agreements shall be satisfactory in all reasonable respects to Agent;
 
(aa)     Operating Accounts .  Agent shall have received evidence that the Borrowers have established and is maintaining operating accounts and demand depository accounts with the Agent;
 
(bb)     Searches .  Agent shall have received UCC searches, Federal and State Litigation searches, Upper Court and Local Judgment searches, franchise tax searches, bankruptcy searches, Federal and State Tax Lien searches and any other Lien searches run against the names of the Borrowers and Guarantors as well as any previous, alternate and fictitious names, and against the names of all entities which were acquired by or merged into the Borrowers, or orders of applicable bankruptcy courts reflecting lien releases (as applicable), showing no existing security interests in or Liens on the Collateral other than Permitted Encumbrances and other Liens permitted by the Agent;
 
(cc)     Borrowing Base .  Agent shall have received a Borrowing Base Certificate from Borrowers evidencing that the Borrowers will have a minimum aggregate Undrawn Availability of at least $1,000,000 at closing (after all fees and expenses and subtraction of trade payables 60 days or more past due);
 
(dd)     Review of Records .  Agent shall have reviewed to its reasonable satisfaction all of Borrowers’ books and records;
 
(ee)   Field Audit .  Agent shall complete an asset based field audit as well as a pre-fund examination, both to the satisfaction of the Agent;
 
(ff)     Capital and Legal Structure .  Agent shall have reviewed to its satisfaction the capital and legal structure of the Borrowers;
 
(gg)   Trade References .  Receipt and satisfactory review by Agent of trade references with regard to the Borrowers;
 
(hh)   Shareholder Debt .  Delivery to Agent of all documentation evidencing existing Indebtedness payable by any Borrower to any shareholder and/or officer of any Borrower;
 
(ii)   Equity Infusion .  Delivery to Agent of evidence that the shareholders of Integrated have infused at least the Equity Infusion Amount into Integrated;
 
(jj)   CD Financial .  Delivery to Agent of all documentation evidencing the Indebtedness owing to CD Financial;
 
(kk)   Compliance with Laws .  Agent shall be reasonably satisfied that each Borrower is in compliance with all pertinent federal, state, local or territorial regulations, including those with respect to the Federal Occupational Safety and Health Act, the Environmental Protection Act, ERISA and the Trading with the Enemy Act; and
 
(ll)      Other .  All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the Transactions shall be satisfactory in form and substance to Agent and its counsel.
 
8.2   Conditions to Each Advance .  The agreement of Lenders to make any Advance requested to be made on any date (including the initial Advance), is subject to the satisfaction of the following conditions precedent as of the date such Advance is made:
 
(a)   Representations and Warranties .  Each of the representations and warranties made by any Borrower set forth in or pursuant to this Agreement or any of the Other Documents and any related agreements to which it is a party, and each of the representations and warranties contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement or any of the Other Documents or any related agreement shall be true and correct in all material respects on and as of such date as if made on and as of such date, except to the extent that such representation and warranty specifically refers to an earlier date, in which case such representation and warranty shall be true and correct on and as of such earlier date, and except that for purposes of this Section 8.2 , the representations and warranties set forth in the first sentence in Section 5.5 shall be deemed to refer to the most recent statements furnished pursuant to Sections 9.7 ;
 
(b)   No Default .  No Event of Default or Default shall have occurred and be continuing on such date, or would exist after giving effect to the Advances requested to be made, on such date; provided, however that Agent, in its sole discretion, may continue to make Advances notwithstanding the existence of an Event of Default or Default and that any Advances so made shall not be deemed a waiver of any such Event of Default or Default; and
 
(c)   Maximum Advances .  In the case of any type of Advance requested to be made, after giving effect thereto, the aggregate amount of such type of Advance shall not exceed the maximum amount of such type of Advance permitted under this Agreement.
 
Each request for an Advance by any Borrower hereunder shall constitute a representation and warranty by each Borrower as of the date of such Advance that the conditions contained in this subsection shall have been satisfied.
 
ARTICLE IX.  
INFORMATION AS TO BORROWERS
 
Each Borrower shall, or (except with respect to Section 9.11) shall cause Borrowing Agent on its behalf to, until satisfaction in full of the Obligations (other than the Remaining Obligations) and the termination of this Agreement, unless Agent consents in writing otherwise:
 
9.1   Disclosure of Material Matters .  Promptly upon learning thereof, report to Agent all matters materially affecting the value, enforceability or collectibility of any portion of the Collateral, including any Borrower’s reclamation or repossession of, or the return to any Borrower of, a material amount of goods or claims or disputes asserted by any Customer or other obligor.
 
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9.2   Schedules .  Deliver to Agent on or before the twentieth (20 th ) day of each month as and for the prior month (a) accounts receivable ageings inclusive of reconciliations to the general ledger, (b) accounts payable schedules inclusive of reconciliations to the general ledger, (c) Inventory reports and (d) a Borrowing Base Certificate in form and substance satisfactory to Agent (which shall be calculated as of the last day of the prior month and which shall not be binding upon Agent or restrictive of Agent’s rights under this Agreement).  In addition, each Borrower will deliver to Agent at such intervals as Agent may require:  (i) confirmatory assignment schedules, (ii) copies of Customer’s invoices, (iii) evidence of shipment or delivery, and (iv) such further schedules, documents and/or information regarding the Collateral as Agent may require including trial balances and test verifications.  Agent shall have the right to confirm and verify all Receivables by any manner and through any medium it considers advisable and do whatever it may deem reasonably necessary to protect its interests hereunder.  The items to be provided under this Section are to be in form satisfactory to Agent and executed by each Borrower and delivered to Agent from time to time solely for Agent’s convenience in maintaining records of the Collateral, and any Borrower’s failure to deliver any of such items to Agent shall not affect, terminate, modify or otherwise limit Agent’s Lien with respect to the Collateral.
 
9.3   Environmental Reports .  Furnish Agent, on a quarterly basis and concurrently with the delivery of the financial statements referred to in Sections 9.7 and 9.8 (solely with the monthly statements delivered at the end of each fiscal quarter), with a Compliance Certificate signed by an authorized officer of Borrowing Agent stating, to the best of his/her knowledge in its capacity as such authorized officer, that each Borrower is in compliance in all material respects with all federal, state and local Environmental Laws.  To the extent any Borrower is not in compliance with the foregoing laws, the certificate shall set forth with specificity all areas of non-compliance and the proposed action such Borrower will implement in order to achieve full compliance.
 
9.4   Litigation .  Promptly notify Agent in writing of any claim, litigation, suit or administrative proceeding affecting any Borrower or (to Borrower’s knowledge) any Guarantor, whether or not the claim is covered by insurance, and of any litigation, suit or administrative proceeding, which in any such case affects the Collateral or which could reasonably be expected to have a Material Adverse Effect.
 
9.5   Material Occurrences .  Promptly notify Agent in writing upon the occurrence of (a) any Event of Default or Default; (b) any event of default under the Subordinated Loan Documentation; (c) any event which with the giving of notice or lapse of time, or both, would constitute an event of default under the Subordinated Loan Documentation; (d) any event, development or circumstance whereby any financial statements or other reports furnished to Agent fail in any material respect to present fairly, in accordance with GAAP consistently applied, the financial condition or operating results of any Borrower as of the date of such statements; (e) any accumulated retirement plan funding deficiency which, if such deficiency continued for two plan years and was not corrected as provided in Section 4971 of the Code, could subject any Borrower to a tax imposed by Section 4971 of the Code; (f) each and every default by any Borrower which might result in the acceleration of the maturity of any Indebtedness in excess of $250,000, including the names and addresses of the holders of such Indebtedness with respect to which there is a default existing or with respect to which the maturity has been or could be accelerated, and the amount of such Indebtedness; and (g) any other development in the business or affairs of any Borrower, which could reasonably be expected to have a Material Adverse Effect; in each case describing the nature thereof and the action Borrowers propose to take with respect thereto.
 
9.6   Government Receivables .  Notify Agent promptly if any of its Receivables arise out of contracts between any Borrower and the United States, any state, or any department, agency or instrumentality of any of them.
 
9.7   Annual Financial Statements .  Furnish Agent within one hundred twenty (120) days after the end of each fiscal year of Borrowing Agent and its Subsidiaries (which shall include all Borrowers), financial statements of Borrowing Agent and its Subsidiaries (which shall include all Borrowers) on a consolidating and consolidated basis including, but not limited to, statements of income and stockholders’ equity and cash flow from the beginning of the current fiscal year to the end of such fiscal year and the balance sheet as at the end of such fiscal year, all prepared in accordance with GAAP applied on a basis consistent with prior practices, and in reasonable detail and, in the case of the consolidated financial statements, reported upon without qualification by an independent certified public accounting firm selected by Borrowing Agent and reasonably satisfactory to Agent (the “Accountants”), provided, however, the Accountants shall not report on the consolidating statements.  In addition, the reports delivered pursuant to this Section 9.7 shall be accompanied by a Compliance Certificate.
 
9.8   Monthly Financial Statements .  Furnish Agent within thirty (30) days after the end of each month, an unaudited balance sheet of Borrowing Agent and its Subsidiaries (which shall include all Borrowers) on a consolidated basis and unaudited statements of income and stockholders’ equity and cash flow of Borrowing Agent and its Subsidiaries (which shall include all Borrowers) on a consolidated basis reflecting results of operations from the beginning of the fiscal year to the end of such month and for such month, prepared by management on a basis consistent with prior practices and complete and correct in all material respects, subject to normal and recurring year end adjustments that individually and in the aggregate are not material to Borrowers’ business.  Each report provided at the end of any fiscal quarter of the Borrowing Agent shall be accompanied by a Compliance Certificate.
 
9.9   Other Reports .  Furnish Agent promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by Integrated with the Securities and Exchange Commission.
 
9.10   Additional Information .  Furnish Agent with such additional information as Agent shall reasonably request in order to enable Agent to determine whether the terms, covenants, provisions and conditions of this Agreement and the Note have been complied with by Borrowers including, without the necessity of any request by Agent, (a) copies of all environmental audits and reviews, (b) at least thirty (30) days prior thereto, notice of any Borrower’s opening of any new office or place of business or any Borrower’s closing of any existing office or place of business, and (c) promptly upon any Borrower’s learning thereof, notice of any labor union dispute to which any Borrower may become a party, any strikes or walkouts relating to any of its plants or other facilities, and the expiration of any labor union contract to which any Borrower is a party or by which any Borrower is bound.
 
9.11   Projected Operating Budget .  Furnish Agent, no later than thirty (30) days after the beginning of each Borrower’s fiscal years commencing with fiscal year starting on July 1, 2012, a month by month projected operating budget and cash flow of Borrowers on a consolidated and consolidating basis for such fiscal year (including an income statement for each month and a balance sheet as at the end of the last month in each fiscal quarter), such projections to be accompanied by a certificate signed by the President or Chief Financial Officer of the Borrowing Agent to the effect that such projections have been prepared on the basis of sound financial planning practice consistent with past budgets and financial statements and that such officer has no reason to question the reasonableness of any material assumptions on which such projections were prepared (provided, however, the month by month projected operating budget and cash flow of Borrowers for the fiscal year starting on July 1, 2012 shall be furnished to the Agent by not later than September 1, 2012 unless the Agent agrees in writing to further extend such delivery date).
 
9.12   Variances From Operating Budget .  Furnish Agent, concurrently with the delivery of the financial statements referred to in Section 9.7 and each monthly report, a written report summarizing all material variances from budgets submitted by Borrowers pursuant to Section 9.11 and a discussion and analysis by management with respect to such variances.
 
9.13   Notice of Suits, Adverse Events .  Furnish Agent with prompt written notice of (i) any lapse or other termination of any Consent issued to any Borrower by any Governmental Body or any other Person that is material to the operation of any Borrower’s business, (ii) any refusal by any Governmental Body or any other Person to renew or extend any such Consent; and (iii) copies of any periodic or special reports filed by any Borrower with any Governmental Body or Person, if such reports indicate any material change in the business, operations, affairs or condition of any Borrower, or if copies thereof are requested by Lender, and (iv) copies of any material notices and other communications from any Governmental Body or Person which specifically relate to any Borrower.
 
9.14   ERISA Notices and Requests .  Furnish Agent with immediate written notice in the event that (i) any Borrower or any member of the Controlled Group knows or has reason to know that a Termination Event has occurred, together with a written statement describing such Termination Event and the action, if any, which such Borrower or any member of the Controlled Group has taken, is taking, or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, Department of Labor or PBGC with respect thereto, (ii) any  Borrower or any member of the Controlled Group knows or has reason to know that a prohibited transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has occurred together with a written statement describing such transaction and the action which such Borrower or any member of the Controlled Group has taken, is taking or proposes to take with respect thereto, (iii) a funding waiver request has been filed with respect to any Pension Benefit Plan together with all communications received by any Borrower or any member of the Controlled Group with respect to such request, (iv) any increase in the benefits of any existing Pension Benefit Plan or the establishment of any new Pension Benefit Plan or the commencement of contributions to any Pension Benefit Plan to which any Borrower or any member of the Controlled Group was not previously contributing shall occur, (v) any Borrower or any member of the Controlled Group shall receive from the PBGC a notice of intention to terminate a Pension Benefit Plan or to have a trustee appointed to administer a Pension Benefit Plan, together with copies of each such notice, (vi) any Borrower or any member of the Controlled Group shall receive any favorable or unfavorable determination letter from the Internal Revenue Service regarding the qualification of a Pension Benefit Plan under Section 401(a) of the Code, together with copies of each such letter; (vii) any Borrower or any member of the Controlled Group shall receive a notice regarding the imposition of withdrawal liability, together with copies of each such notice; (viii) any Borrower or any member of the Controlled Group shall fail to make a required installment or any other required payment under Section 412 of the Code on or before the due date for such installment or payment; or (ix) any Borrower or any member of the Controlled Group knows that (a) a Multiemployer Plan has been terminated, (b) the administrator or plan sponsor of a Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan.
 
9.15   Additional Documents .  Execute and deliver to Agent, upon request, such documents and agreements as Agent may, from time to time, reasonably request to carry out the purposes, terms or conditions of this Agreement.
 
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ARTICLE X.  
EVENTS OF DEFAULT
 
The occurrence of any one or more of the following events shall constitute an “ Event of Default ”:
 
10.1   Nonpayment .  Failure by any Borrower to pay any principal or interest on the Obligations when due, whether at maturity or by reason of acceleration pursuant to the terms of this Agreement or by notice of intention to prepay, or by required prepayment or failure to pay any other liabilities or make any other payment, fee or charge provided for herein when due or in any Other Document;
 
10.2   Breach of Representation .  Any representation or warranty made or deemed made by any Borrower or any Guarantor in this Agreement (to the extent it is a party), any Other Document to which it is a party or any related agreement (to the extent it is a party) or in any certificate, document or financial or other statement (to the extent it is a party) furnished at any time by such Person in connection herewith or therewith shall prove to have been misleading in any material respect on the date when made or deemed to have been made;
 
10.3   Financial Information .  Failure by any Borrower to (i)(x) furnish financial information when due, or (y) when requested which is unremedied for a period of fifteen (15) days of such request; (ii) permit the inspection of its books or records in accordance with the terms of this Agreement; (iii) comply with Article VII herein; or (iv) comply with Section 6.5(a) herein;
 
10.4   Judicial Actions .  Issuance of a notice of Lien, levy, assessment, injunction or attachment against any Borrower’s Inventory or Receivables or against a material portion of any Borrower’s other property which is not stayed or lifted within forty-five (45) days except as otherwise permitted herein;
 
10.5   Noncompliance .  (i) Except as otherwise provided for in Sections 10.1, 10.2, 10.3 and 10.5(v), failure or neglect of any Borrower to perform, keep or observe any term, provision, condition, covenant herein contained which has not been cured within fifteen (15) days after the occurrence thereof, (ii) except as otherwise provided for in Sections 10.1, 10.2 and 10.3, the occurrence of any “event of default” (as defined in the Mortgage), which event of default continues beyond any period of grace therein provided, (iii) except as otherwise provided for in Sections 10.1, 10.2 and 10.3, the failure or neglect of any Borrower to perform, keep or observe any term, provision, conditions, covenant contained in any Other Document or any other agreement (other than this Agreement, the Subordination Loan Documentation and the Mortgage), now or hereafter entered into between any Borrower and Agent or any Lender in connection with this Agreement, (iv) failure or neglect of any Guarantor to perform, keep or observe any term, provision, condition, covenant contained in the Guaranty or any other agreement or arrangement hereafter entered into between any Guarantor and Agent or any Lender in connection with this Agreement, or (v) failure or neglect of any Borrower to perform, keep or observe any term, provision, condition or covenant, contained in Sections 4.6, 4.7, 4.9, 6.1, 6.3, 6.4, 9.4 or 9.6 hereof which is not cured within ten (10) days from the occurrence of such failure or neglect;
 
10.6   Judgments .  Any judgment or judgments are rendered against any Borrower for an aggregate amount in excess of $250,000 or against all Borrowers for an aggregate amount in excess of $250,000 which (a) is not covered by insurance in its entirety or (b) if not covered by insurance in its entirety (i) is not contested in good faith by the Borrowers, (ii) the Borrowers do not establish reserves satisfactory to the Agent with regard thereto, and (iii) is not within forty (40) days of such rendering or filing either satisfied, stayed or discharged of record;
 
10.7   Subsidiary Bankruptcy .  Any Borrower or any Guarantor shall (i) apply for, consent to or suffer the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or similar fiduciary of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of creditors, (iii) commence a voluntary case under any state or federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vi) acquiesce to, or fail to have dismissed, within forty-five (45) days, any petition filed against it in any involuntary case under such bankruptcy laws,  or (vii) take any action for the purpose of effecting any of the foregoing;
 
10.8   Inability to Pay .  Any Borrower or any Guarantor shall admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business;
 
10.9   Subsidiary Bankruptcy .  Any Subsidiary of any Borrower shall (i) apply for, consent to or suffer the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or similar fiduciary of itself or of all or a substantial part of its property, (ii) admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business, (iii) make a general assignment for the benefit of creditors, (iv) commence a voluntary case under any state or federal bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vii) acquiesce to, or fail to have dismissed, within forty-five (45) days, any petition filed against it in any involuntary case under such bankruptcy laws, or (viii) take any action for the purpose of effecting any of the foregoing;
 
10.10   Material Adverse Effect .  Any change in any Borrower’s or any Guarantor’s results of operations or condition (financial or otherwise) which in Agent’s reasonable opinion has a Material Adverse Effect;
 
10.11   Lien Priority .  Any Lien created hereunder or provided for hereby or under any related agreement for any reason ceases to be or is not a valid and perfected Lien having a first priority interest unless otherwise permitted by the terms set forth herein;
 
10.12   Subordinated Loan Default .  An event of default has occurred under the Subordinated Loan Documentation, which default shall not have been cured or waived within any applicable grace period;
 
10.13   Cross Default .  A default of the obligations of any Borrower under any other agreement (other than this Agreement, the Other Documents and the Subordinated Loan Documentation) to which it is a party shall occur which could reasonably be expected to  have a Material Adverse Effect, which default is not cured within any applicable grace period;
 
10.14   Breach of Guaranty .  Termination or breach of any Guaranty or similar agreement executed and delivered by any Guarantor to Agent in connection with the Obligations of any Borrower, or if any Guarantor attempts to terminate, challenges the validity of, or its liability under, any such Guaranty or similar agreement unless otherwise permitted pursuant to Section 4.21 herein;
 
10.15   Change of Control .  Any Change of Control shall occur;
 
10.16   Invalidity .  Any material provision of this Agreement or any Other Document shall, for any reason, cease to be valid and binding on Borrower or any Guarantor (to the extent it is a party thereto), or any Borrower or any Guarantor (to the extent it is a party thereto) shall so claim in writing to Agent or any Lender; unless this Agreement or any Other Document is permitted to be terminated by the terms hereof or thereof;
 
10.17   Licenses .   (i) Any Governmental Body shall (A) revoke, terminate, suspend or adversely modify any license, permit, patent trademark or tradename of any Borrower, the continuation of which is material to the continuation of any Borrower’s business, or (B) commence proceedings to suspend, revoke, terminate or adversely modify any such license, permit, trademark, tradename or patent and such proceedings shall not be dismissed or discharged within sixty (60) days, or (C) schedule or conduct a hearing on the renewal of any license, permit, trademark, tradename or patent necessary for the continuation of any Borrower’s business and the staff of such Governmental Body issues a report recommending the termination, revocation, suspension or material, adverse modification of such license, permit, trademark, tradename or patent and such proceeding, suspension, revocation, termination or modification would reasonably be expected to have a Material Adverse Effect; (ii) any agreement which is necessary or material to the operation of any Borrower’s business shall be revoked or terminated and not replaced by a substitute acceptable to Agent within thirty (30) days after the date of such revocation or termination, and such revocation or termination and non-replacement would reasonably be expected to have a Material Adverse Effect;
 
10.18   Seizures .  Any portion of the Collateral shall be seized or taken by a Governmental Body, or any Borrower or the title and rights of any Borrower, shall have become the subject matter of claim, litigation, suit or other proceeding which might, in the opinion of Agent, upon final determination, result in impairment or loss of the security provided by this Agreement or the Other Documents which could reasonably be expected to  have a Material Adverse Effect;
 
10.19   Operations .  The operations of any Borrower’s manufacturing facility are interrupted at any time for more than forty-five (45) consecutive days, unless such Borrower shall (i) be entitled to receive for such period of interruption, proceeds of business interruption insurance sufficient to assure that its per diem cash needs during such period is at least equal to its average per diem cash needs for the consecutive three month period immediately preceding the initial date of interruption and (ii) receive such proceeds in the amount described in clause (i) preceding not later than thirty (30) days following the initial date of any such interruption; provided, however, that notwithstanding the provisions of clauses (i) and (ii) of this section, an Event of Default shall be deemed to have occurred if such Borrower shall be receiving the proceeds of business interruption insurance for a period of thirty (30) consecutive days; or
 
10.20   Pension Benefit Plans .  An event or condition specified in Sections 7.16 or 9.15 hereof shall occur or exist with respect to any Pension Benefit Plan and, as a result of such event or condition, together with all other such events or conditions, any Borrower or any member of the Controlled Group shall incur, or in the opinion of Agent be reasonably likely to incur, a liability to a Pension Benefit Plan or the PBGC (or both) which, in the reasonable judgment of Agent, would have a Material Adverse Effect.
 
 
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ARTICLE XI.  
LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT
 
11.1   Rights and Remedies.
 
(a)   Upon the occurrence and during the continuance of (i) an Event of Default pursuant to Section 10.7 all Obligations shall be immediately due and payable and this Agreement and the obligation of Lenders to make Advances shall be deemed terminated; and, (ii) any of the other Events of Default and at any time thereafter (such default not having previously been cured), at the option of Required Lenders all Obligations shall be immediately due and payable and Lenders shall have the right to terminate this Agreement and to terminate the obligation of Lenders to make Advances and (iii) a filing of a petition against any Borrower in any involuntary case under any state or federal bankruptcy laws, all Obligations shall be immediately due and payable and the obligation of Lenders to make Advances hereunder shall be terminated other than as may be required by an appropriate order of the bankruptcy court having jurisdiction over such Borrower.  Upon the occurrence of any Event of Default, Agent shall have the right to exercise any and all rights and remedies provided for herein, under the Other Documents, under the Uniform Commercial Code and at law or equity generally, including the right to foreclose the security interests granted herein and to realize upon any Collateral by any available judicial procedure and/or to take possession of and sell any or all of the Collateral with or without judicial process.  Agent may enter any of any Borrower’s premises or other premises without legal process and without incurring liability to any Borrower therefor, and Agent may thereupon, or at any time thereafter, in its discretion without notice or demand, take the Collateral and remove the same to such place as Agent may deem advisable and Agent may require Borrowers to make the Collateral available to Agent at a convenient place.  With or without having the Collateral at the time or place of sale, Agent may sell the Collateral, or any part thereof, at public or private sale, at any time or place, in one or more sales, at such price or prices, and upon such terms, either for cash, credit or future delivery, as Agent may elect.  Except as to that part of the Collateral which is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Agent shall give Borrowers reasonable notification of such sale or sales, it being agreed that in all events written notice mailed to Borrowing Agent at least ten (10) days prior to such sale or sales is reasonable notification.  At any public sale Agent or any Lender may bid for and become the purchaser, and Agent, any Lender or any other purchaser at any such sale thereafter shall hold the Collateral sold absolutely free from any claim or right of whatsoever kind, including any equity of redemption and all such claims, rights and equities are hereby expressly waived and released by each Borrower.  In connection with the exercise of the foregoing remedies, including the sale of Inventory, Agent is granted a perpetual nonrevocable, royalty free, nonexclusive license and Agent is granted permission to use all of each Borrower’s (a) trademarks, trade styles, trade names, patents, patent applications, copyrights, service marks, licenses, franchises and other proprietary rights which are used or useful in connection with Inventory for the purpose of marketing, advertising for sale and selling or otherwise disposing of such Inventory and (b) Equipment for the purpose of completing the manufacture of unfinished goods.  The cash proceeds realized from the sale of any Collateral shall be applied to the Obligations in the order set forth in Section 11.5 hereof.  Noncash proceeds will only be applied to the Obligations as they are converted into cash.  If any deficiency shall arise, Borrowers shall remain liable to Agent and Lenders therefor.
 
(b)   To the extent that Applicable Law imposes duties on the Agent to exercise remedies in a commercially reasonable manner, each Borrower acknowledges and agrees that it is not commercially unreasonable for the Agent (i) to fail to incur expenses reasonably deemed significant by the Agent to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against Customers or other Persons obligated on Collateral or to remove Liens on or any adverse claims against Collateral, (iv) to exercise collection remedies against Customers and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other Persons, whether or not in the same business as any Borrower, for expressions of interest in acquiring all or any portion of such Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (xi) to purchase insurance or credit enhancements to insure the Agent against risks of loss, collection or disposition of Collateral or to provide to the Agent a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by the Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist the Agent in the collection or disposition of any of the Collateral.  Each Borrower acknowledges that the purpose of this Section 11.1(b) is to provide non-exhaustive indications of what actions or omissions by the Agent would not be commercially unreasonable in the Agent’s exercise of remedies against the Collateral and that other actions or omissions by the Agent shall not be deemed commercially unreasonable solely on account of not being indicated in this Section 11.1(b).  Without limitation upon the foregoing, nothing contained in this Section 11.1(b) shall be construed to grant any rights to any Borrower or to impose any duties on Agent that would not have been granted or imposed by this Agreement or by Applicable Law in the absence of this Section 11.1(b).
 
11.2   Agent’s Discretion .  Agent shall have the right in its sole discretion to determine which rights, Liens, security interests or remedies Agent may at any time pursue, relinquish, subordinate, or modify or to take any other action with respect thereto and such determination will not in any way modify or affect any of Agent’s or Lenders’ rights hereunder.
 
11.3   Setoff .  Subject to Section 14.12, in addition to any other rights which Agent or any Lender may have under Applicable Law, upon the occurrence of an Event of Default hereunder, Agent and such Lender shall have a right, immediately and without notice of any kind, to apply any Borrower’s property held by Agent and such Lender to reduce the Obligations.
 
11.4   Rights and Remedies not Exclusive .  The enumeration of the foregoing rights and remedies is not intended to be exhaustive and the exercise of any rights or remedy shall not preclude the exercise of any other right or remedies provided for herein or otherwise provided by law, all of which shall be cumulative and not alternative.
 
11.5   Allocation of Payments After Event of Default .  Notwithstanding any other provisions of this Agreement to the contrary, after the occurrence and during the continuance of an Event of Default, all amounts collected or received by the Agent on account of the Obligations or any other amounts outstanding under any of the Other Documents or in respect of the Collateral may, at Agent’s discretion, be paid over or delivered as follows:
 
FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees) of the Agent in connection with enforcing its rights and the rights of the Lenders under this Agreement and the Other Documents and any protective advances made by the Agent with respect to the Collateral under or pursuant to the terms of this Agreement;
 
SECOND, to payment of any fees owed to the Agent;
 
THIRD, to the payment of all reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees) of each of the Lenders to the extent owing to such Lender pursuant to the terms of this Agreement;
 
FOURTH, to the payment of all of the Obligations consisting of accrued fees and interest;
 
FIFTH, to the payment of the outstanding principal amount of the Obligations (including the payment or cash collateralization of any outstanding Letters of Credit);
 
SIXTH, to all other Obligations and other obligations which shall have become due and payable under the Other Documents or otherwise and not repaid pursuant to clauses “FIRST” through “FIFTH” above; and
 
SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully entitled to receive such surplus.
 
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In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; (ii) each of the Lenders shall receive (so long as it is not a Defaulting Lender) an amount equal to its pro rata share (based on the proportion that the then outstanding Advances held by such Lender bears to the aggregate then outstanding Advances) of amounts available to be applied pursuant to clauses “FOURTH”, “FIFTH” and “SIXTH” above; and (iii) to the extent that any amounts available for distribution pursuant to clause “FIFTH” above are attributable to the issued but undrawn amount of outstanding Letters of Credit, such amounts shall be held by the Agent in a cash collateral account and applied (A) first, to reimburse the Issuer from time to time for any drawings under such Letters of Credit and (B) then, following the expiration of all Letters of Credit, to all other obligations of the types described in clauses “FIFTH” and “SIXTH” above in the manner provided in this Section 11.5.
 
11.6   Miscellaneous .  Each of the Agent and each Lender agrees that it will hold, and will not use or otherwise deliver to any third party, (i) any of the letters, forms of which are attached hereto as Exhibit 11.6-A, which were executed and delivered by the applicable Borrower(s), or (ii) any of the powers of attorney, forms of which are attached hereto as Exhibit 11.6-B, which were executed and delivered by the Borrowers in connection herewith, until and unless an Event of Default has occurred and is continuing].
 

 
ARTICLE XII.  
WAIVERS AND JUDICIAL PROCEEDINGS
 
12.1   Waiver of Notice .  Each Borrower hereby waives notice of non-payment of any of the Receivables, demand, presentment, protest and notice thereof with respect to any and all instruments, notice of acceptance hereof, notice of loans or advances made, credit extended, Collateral received or delivered, or any other action taken in reliance hereon, and all other demands and notices of any description, except such as are expressly provided for herein.
 
12.2   Delay .  No delay or omission on Agent’s or any Lender’s part in exercising any right, remedy or option shall operate as a waiver of such or any other right, remedy or option or of any Default or Event of Default.
 
12.3   Jury Waiver .  EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
 
ARTICLE XIII.  
EFFECTIVE DATE AND TERMINATION
 
13.1   Term .  This Agreement, which shall inure to the benefit of and shall be binding upon the respective successors and permitted assigns of each Borrower, Agent and each Lender, shall become effective on the date hereof and shall continue in full force and effect until the Termination Date (the “Term”) unless sooner terminated as herein provided.  Borrowers may terminate this Agreement at any time upon ninety (90) days’ prior written notice upon payment in full of the Obligations.  In the event the Obligations are prepaid in full prior to the last day of the Term (the date of such prepayment hereinafter referred to as the “Early Termination Date”), Borrowers shall pay to Agent for the benefit of Lenders an early termination fee in an amount equal to (x) two percent (2.00%) of the Maximum Loan Amount if the Early Termination Date occurs on or after the Closing Date to and including the date immediately preceding the first anniversary of the Closing Date, (y) one percent (1.00%) of the Maximum Loan Amount if the Early Termination Date occurs on or after the first anniversary of the Closing Date to and including the date immediately preceding the second anniversary of the Closing Date, and (z) one half of one percent (0.50%) of the Maximum Loan Amount  if the Early Termination Date occurs on or after the second anniversary of the Closing Date to and including the date immediately preceding the third anniversary of the Closing Date.
 
13.2   Termination .  The termination of this Agreement shall not affect any Borrower’s, Agent’s or any Lender’s rights, or any of the Obligations having their inception prior to the effective date of such termination, and the provisions hereof shall continue to be fully operative until all transactions entered into, rights or interests created or Obligations (other than the Remaining Obligations) have been fully and indefeasibly paid, disposed of, concluded or liquidated.  The security interests, Liens and rights granted to Agent and Lenders hereunder and the financing statements filed hereunder shall continue in full force and effect, notwithstanding the termination of this Agreement or the fact that Borrowers’ Account may from time to time be temporarily in a zero or credit position, until all of the Obligations (other than the Remaining Obligations) of each Borrower have been indefeasibly paid in full and performed in full after the termination of this Agreement or each Borrower has furnished Agent and Lenders with an indemnification reasonably satisfactory to Agent and Lenders with respect thereto.  Accordingly, each Borrower waives any rights which it may have under the Uniform Commercial Code to demand the filing of termination statements with respect to the Collateral, and Agent shall not be required to send such termination statements to each Borrower, or to file them with any filing office, unless and until this Agreement shall have been terminated in accordance with its terms and all Obligations (other than the Remaining Obligations) have been indefeasibly paid in full in immediately available funds.  All representations, warranties, covenants, waivers and agreements contained herein shall survive termination hereof until all Obligations (other than the Remaining Obligations) are indefeasibly paid in full in immediately available funds and performed in full.
 
ARTICLE XIV.  
REGARDING AGENT
 
14.1   Appointment .  Each Lender hereby designates PNC to act as Agent for such Lender under this Agreement and the Other Documents.  Each Lender hereby irrevocably authorizes Agent to take such action on its behalf under the provisions of this Agreement and the Other Documents and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto and Agent shall hold all Collateral, payments of principal and interest, fees (except the fees set forth in Sections 3.3(a) and 3.4), charges and collections (without giving effect to any collection days) received pursuant to this Agreement, for the ratable benefit of Lenders.  Agent may perform any of its duties hereunder by or through its agents or employees.  As to any matters not expressly provided for by this Agreement (including collection of the Note) Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding; provided, however, that Agent shall not be required to take any action which exposes Agent to liability or which is contrary to this Agreement or the Other Documents or Applicable Law unless Agent is furnished with an indemnification reasonably satisfactory to Agent with respect thereto.
 
14.2   Nature of Duties .  Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the Other Documents.  Neither Agent nor any of its officers, directors, employees or agents shall be (i) liable for any action taken or omitted by them as such hereunder or in connection herewith, unless caused by their gross (not mere) negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment), or (ii) responsible in any manner for any recitals, statements, representations or warranties made by any Borrower or any officer thereof contained in this Agreement, or in any of the Other Documents or in any certificate, report, statement or other document referred to or provided for in, or received by Agent under or in connection with, this Agreement or any of the Other Documents or for the value, validity, effectiveness, genuineness, due execution, enforceability or sufficiency of this Agreement, or any of the Other Documents or for any failure of any Borrower to perform its obligations hereunder.  Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any of the Other Documents, or to inspect the properties, books or records of any Borrower.  The duties of Agent as respects the Advances to Borrowers shall be mechanical and administrative in nature; Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender; and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon Agent any obligations in respect of this Agreement except as expressly set forth herein.
 
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14.3   Lack of Reliance on Agent and Resignation .  Independently and without reliance upon Agent or any other Lender, each Lender has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of each Borrower and each Guarantor in connection with the making and the continuance of the Advances hereunder and the taking or not taking of any action in connection herewith, and (ii) its own appraisal of the creditworthiness of each Borrower and each Guarantor.  Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before making of the Advances or at any time or times thereafter except as shall be provided by any Borrower pursuant to the terms hereof.  Agent shall not be responsible to any Lender for any recitals, statements, information, representations or warranties herein or in any agreement, document, certificate or a statement delivered in connection with or for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any Other Document, or of the financial condition of any Borrower or any Guarantor, or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement, the Note, the Other Documents or the financial condition of any Borrower, or the existence of any Event of Default or any Default.
 
Agent may resign on sixty (60) days’ written notice to each of Lenders and Borrowing Agent and upon such resignation, the Required Lenders will promptly designate a successor Agent reasonably satisfactory to Borrowers.
 
Any such successor Agent shall succeed to the rights, powers and duties of Agent, and the term “Agent” shall mean such successor agent effective upon its appointment, and the former Agent’s rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent.  After any Agent’s resignation as Agent, the provisions of this Article XIV shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement.
 
14.4   Certain Rights of Agent .  If Agent shall request instructions from Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any Other Document, Agent shall be entitled to refrain from such act or taking such action unless and until Agent shall have received instructions from the Required Lenders; and Agent shall not incur liability to any Person by reason of so refraining.  Without limiting the foregoing, Lenders shall not have any right of action whatsoever against Agent as a result of its acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders.
 
14.5   Reliance .  Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, order or other document or telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person or entity, and, with respect to all legal matters pertaining to this Agreement and the Other Documents and its duties hereunder, upon advice of counsel selected by it.  Agent may employ agents and attorneys-in-fact and shall not be liable for the default or misconduct of any such agents or attorneys-in-fact selected by Agent with reasonable care.
 
14.6   Notice of Default .  Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder or under the Other Documents, unless Agent has received notice from a Lender or Borrowing Agent referring to this Agreement or the Other Documents, describing such Default or Event of Default and stating that such notice is a “notice of default”.  In the event that Agent receives such a notice, Agent shall give notice thereof to Lenders.  Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided, that, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of Lenders.
 
14.7   Indemnification .  To the extent Agent is not reimbursed and indemnified by Borrowers, each Lender will reimburse and indemnify Agent in proportion to its respective portion of the Advances (or, if no Advances are outstanding, according to its Commitment Percentage), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Agent in performing its duties hereunder, or in any way relating to or arising out of this Agreement or any Other Document; provided that, Lenders shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent’s gross (not mere) negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment).
 
14.8   Agent in its Individual Capacity .  With respect to the obligation of Agent to lend under this Agreement, the Advances made by it shall have the same rights and powers hereunder as any other Lender and as if it were not performing the duties as Agent specified herein; and the term “Lender” or any similar term shall, unless the context clearly otherwise indicates, include Agent in its individual capacity as a Lender.  Agent may engage in business with any Borrower as if it were not performing the duties specified herein, and may accept fees and other consideration from any Borrower for services in connection with this Agreement or otherwise without having to account for the same to Lenders.
 
14.9   Delivery of Documents .  To the extent Agent receives financial statements required under Sections 9.7, 9.8, 9.9, 9.12 and 9.13 or Borrowing Base Certificates from any Borrower pursuant to the terms of this Agreement which any Borrower is not obligated to deliver to each Lender, Agent will promptly furnish such documents and information to Lenders.
 
14.10   Borrowers’ Undertaking to Agent
 
.  Without prejudice to their respective obligations to Lenders under the other provisions of this Agreement, each Borrower hereby undertakes with Agent to pay to Agent from time to time on demand all amounts from time to time due and payable by it for the account of Agent or Lenders or any of them pursuant to this Agreement to the extent not already paid.  Any payment made pursuant to any such demand shall pro tanto satisfy the relevant Borrower’s obligations to make payments for the account of Lenders or the relevant one or more of them pursuant to this Agreement.
 
14.11   No Reliance on Agent’s Customer Identification Program
 
.  Each Lender acknowledges and agrees that neither such Lender, nor any of its Affiliates, participants or assignees, may rely on the Agent to carry out such Lender’s, Affiliate’s, participant’s or assignee’s customer identification program, or other obligations required or imposed under or pursuant to the USA PATRIOT Act or the regulations thereunder, including the regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the “CIP Regulations”), or any other Anti-Terrorism Law, including any programs involving any of the following items relating to or in connection with any Borrower, its Affiliates or its agents, this Agreement, the Other Documents or the transactions hereunder or contemplated hereby: (1) any identity verification procedures, (2) any record-keeping, (3) comparisons with government lists, (4) customer notices or (5) other procedures required under the CIP Regulations or such other laws.
 
14.12   Other Agreements .  Each of the Lenders agrees that it shall not, without the express consent of Agent, and that it shall, to the extent it is lawfully entitled to do so, upon the request of Agent, set off against the Obligations, any amounts owing by such Lender to any Borrower or any deposit accounts of any Borrower now or hereafter maintained with such Lender.  Anything in this Agreement to the contrary notwithstanding, each of the Lenders further agrees that it shall not, unless specifically requested to do so by Agent, take any action to protect or enforce its rights arising out of this Agreement or the Other Documents, it being the intent of Lenders that any such action to protect or enforce rights under this Agreement and the Other Documents shall be taken in concert and at the direction or with the consent of Agent or Required Lenders.
 
ARTICLE XV.  
BORROWING AGENCY
 
15.1   Borrowing Agency Provisions.
 
(a)   Each Borrower hereby irrevocably designates Borrowing Agent to be its attorney and agent and in such capacity to borrow, sign and endorse notes, and execute and deliver all instruments, documents, writings and further assurances now or hereafter required hereunder, on behalf of such Borrower or Borrowers, and hereby authorizes Agent to pay over or credit all loan proceeds hereunder in accordance with the request of Borrowing Agent.
 
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(b)   The handling of this credit facility as a co-borrowing facility with a borrowing agent in the manner set forth in this Agreement is solely as an accommodation to Borrowers and at their request.  Neither Agent nor any Lender shall incur liability to Borrowers as a result thereof.  To induce Agent and Lenders to do so and in consideration thereof, each Borrower hereby indemnifies Agent and each Lender and holds Agent and each Lender harmless from and against any and all liabilities, expenses, losses, damages and claims of damage or injury asserted against Agent or any Lender by any Person arising from or incurred by reason of the handling of the financing arrangements of Borrowers as provided herein, reliance by Agent or any Lender on any request or instruction from Borrowing Agent or any other action taken by Agent or any Lender with respect to this Section 15.1 except due to willful misconduct or gross (not mere) negligence by the indemnified party (as determined by a court of competent jurisdiction in a final and non-appealable judgment).
 
(c)   All Obligations shall be joint and several, and each Borrower shall make payment upon the maturity of the Obligations by acceleration or otherwise, and such obligation and liability on the part of each Borrower shall in no way be affected by any extensions, renewals and forbearance granted to Agent or any Lender to any Borrower, failure of Agent or any Lender to give any Borrower notice of borrowing or any other notice, any failure of Agent or any Lender to pursue or preserve its rights against any Borrower, the release by Agent or any Lender of any Collateral now or thereafter acquired from any Borrower, and such agreement by each Borrower to pay upon any notice issued pursuant thereto is unconditional and unaffected by prior recourse by Agent or any Lender to the other Borrowers or any Collateral for such Borrower’s Obligations or the lack thereof.  Each Borrower waives all suretyship defenses.
 
15.2   Waiver of Subrogation .  Each Borrower expressly waives any and all rights of subrogation, reimbursement, indemnity, exoneration, contribution of any other claim which such Borrower may now or hereafter have against the other Borrowers or other Person directly or contingently liable for the Obligations hereunder, or against or with respect to the other Borrowers’ property (including, without limitation, any property which is Collateral for the Obligations), arising from the existence or performance of this Agreement, until termination of this Agreement and repayment in full of the Obligations.
 
ARTICLE XVI.  
MISCELLANEOUS
 
16.1   Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of New York applied to contracts to be performed wholly within the State of New York.  Any judicial proceeding brought by or against any Borrower with respect to any of the Obligations, this Agreement, the Other Documents or any related agreement may be brought in any court of competent jurisdiction in the State of New York, United States of America, and, by execution and delivery of this Agreement, each Borrower accepts for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement.  Each Borrower hereby waives personal service of any and all process upon it and consents that all such service of process may be made by registered mail (return receipt requested) directed to Borrowing Agent at its address set forth in Section 16.6 and service so made shall be deemed completed five (5) days after the same shall have been so deposited in the mails of the United States of America, or, at the Agent’s option, by service upon Borrowing Agent which each Borrower irrevocably appoints as such Borrower’s Agent for the purpose of accepting service within the State of New York.  Nothing herein shall affect the right to serve process in any manner permitted by law or shall limit the right of Agent or any Lender to bring proceedings against any Borrower in the courts of any other jurisdiction.  Each Borrower waives, to the fullest extent permitted by applicable, any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.  Each Borrower waives, to the fullest extent permitted by applicable, the right to remove any judicial proceeding brought against such Borrower in any state court to any federal court.  Any judicial proceeding by any Borrower against Agent or any Lender involving, directly or indirectly, any matter or claim in any way arising out of, related to or connected with this Agreement or any related agreement, shall be brought only in a federal or state court located in the County of New York, State of New York.
 
16.2   Entire Understanding.
 
(a)   This Agreement and the documents executed concurrently herewith contain the entire understanding between each Borrower, Agent and each Lender and supersedes all prior agreements and understandings, if any, relating to the subject matter hereof.  Any promises, representations, warranties or guarantees not herein contained and hereinafter made shall have no force and effect unless in writing, signed by each Borrower’s, Agent’s and each Lender’s respective officers.  Neither this Agreement nor any portion or provisions hereof may be changed, modified, amended, waived, supplemented, discharged, cancelled or terminated orally or by any course of dealing, or in any manner other than by an agreement in writing, signed by the party to be charged.  Each Borrower acknowledges that it has been advised by counsel in connection with the execution of this Agreement and Other Documents and is not relying upon oral representations or statements inconsistent with the terms and provisions of this Agreement.
 
(b)   The Required Lenders, Agent with the consent in writing of the Required Lenders, and Borrowers may, subject to the provisions of this Section 16.2 (b), from time to time enter into written supplemental agreements to this Agreement or the Other Documents executed by Borrowers, for the purpose of adding or deleting any provisions or otherwise changing, varying or waiving in any manner the rights of Lenders, Agent or Borrowers thereunder or the conditions, provisions or terms thereof or waiving any Event of Default thereunder, but only to the extent specified in such written agreements; provided, however, that no such supplemental agreement shall, without the consent of all Lenders:
 
(i)   increase the Commitment Percentage, the maximum dollar commitment of any Lender or the Maximum Loan Amount.
 
(ii)   extend the maturity of any Note or the due date for any amount payable hereunder, or decrease the rate of interest or reduce any fee payable by Borrowers to Lenders pursuant to this Agreement.
 
(iii)   alter the definition of the term Required Lenders or alter, amend or modify this Section 16.2(b).
 
(iv)   release any Collateral during any calendar year (other than in accordance with the provisions of this Agreement) having an aggregate value in excess of $1,000,000.
 
(v)   change the rights and duties of Agent.
 
(vi)   permit any Revolving Advance to be made if after giving effect thereto the total of Revolving Advances outstanding hereunder would exceed the Formula Amount for more than sixty (60) consecutive Business Days or exceed one hundred and ten percent (110%) of the Formula Amount.
 
(vii)   increase the Advance Rates above the Advance Rates in effect on the Closing Date.
 
(viii)   release any Guarantor under the Guaranty unless otherwise permitted pursuant to Section 4.21 herein.
 
Any such supplemental agreement shall apply equally to each Lender and shall be binding upon Borrowers, Lenders and Agent and all future holders of the Obligations.  In the case of any waiver, Borrowers, Agent and Lenders shall be restored to their former positions and rights, and any Event of Default waived shall be deemed to be cured and not continuing, but no waiver of a specific Event of Default shall extend to any subsequent Event of Default (whether or not the subsequent Event of Default is the same as the Event of Default which was waived), or impair any right consequent thereon.
 
In the event that Agent requests the consent of a Lender pursuant to this Section 16.2 and such consent is denied, then PNC may, at its option, require such Lender to assign its interest in the Advances to PNC or to another Lender or to any other Person designated by the Agent (the “Designated Lender”), for a price equal to (i) the then outstanding principal amount thereof plus (ii) accrued and unpaid interest and fees due such Lender, which interest and fees shall be paid when collected from Borrowers.  In the event PNC elects to require any Lender to assign its interest to PNC or to the Designated Lender, PNC will so notify such Lender in writing within forty five (45) days following such Lender’s denial, and such Lender will assign its interest to PNC or the Designated Lender no later than five (5) days following receipt of such notice pursuant to a Commitment Transfer Supplement executed by such Lender, PNC or the Designated Lender, as appropriate, and Agent.
 
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Notwithstanding (a) the existence of a Default or an Event of Default, (b) that any of the other applicable conditions precedent set forth in Section 8.2 hereof have not been satisfied or (c) any other provision of this Agreement, Agent may at its discretion and without the consent of the Required Lenders, voluntarily permit the sum of the outstanding Revolving Advances and the Maximum Undrawn Amount at any time to exceed the Formula Amount by up to ten percent (10%) of the Formula Amount for up to sixty (60) consecutive Business Days (the “ Out-of-Formula Loans ”); provided, that, such outstanding Advances do not exceed the Maximum Revolving Advance Amount.  If Agent is willing in its sole and absolute discretion to make such Out-of-Formula Loans, such Out-of-Formula Loans shall be payable on demand and shall bear interest at the Default Rate for Revolving Advances consisting of Domestic Rate Loans; provided that, if Lenders do make Out-of-Formula Loans, neither Agent nor Lenders shall be deemed thereby to have changed the limits of Section 2.1(a).  For purposes of this paragraph, the discretion granted to Agent hereunder shall not preclude involuntary overadvances that may result from time to time due to the fact that the Formula Amount was unintentionally exceeded for any reason, including, but not limited to, Collateral previously deemed to be either “Eligible Receivables” or “Eligible Inventory”, as applicable, becomes ineligible, collections of Receivables applied to reduce outstanding Revolving Advances are thereafter returned for insufficient funds or overadvances are made to protect or preserve the Collateral.  In the event Agent involuntarily permits the outstanding Revolving Advances to exceed the Formula Amount by more than ten percent (10%), Agent shall use its efforts to have Borrowers decrease such excess in as expeditious a manner as is practicable under the circumstances and not inconsistent with the reason for such excess.  Revolving Advances made after Agent has determined the existence of involuntary overadvances shall be deemed to be involuntary overadvances and shall be decreased in accordance with the preceding sentence.
 
In addition to (and not in substitution of) the discretionary Revolving Advances permitted above in this Section 16.2, the Agent is hereby authorized by Borrowers and the Lenders, from time to time in the Agent’s sole discretion, (A) after the occurrence and during the continuation of a Default or an Event of Default, or (B) at any time that any of the other applicable conditions precedent set forth in Section 8.2 hereof have not been satisfied, to make Revolving Advances to Borrowers on behalf of the Lenders which the Agent, in its reasonable business judgment, deems necessary or desirable (a) to preserve or protect the Collateral, or any portion thereof, (b) to enhance the likelihood of, or maximize the amount of, repayment of the Advances and other Obligations, or (c) to pay any other amount chargeable to Borrowers pursuant to the terms of this Agreement; provided, that at any time after giving effect to any such Revolving Advances the outstanding Revolving Advances do not exceed one hundred and ten percent (110%) of the Formula Amount.
 
16.3   Successors and Assigns; Participations; New Lenders.
 
(a)   This Agreement shall be binding upon and inure to the benefit of Borrowers, Agent, each Lender, all future holders of the Obligations and their respective successors and permitted assigns, except that no Borrower may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of Agent and each Lender.
 
(b)   Each Borrower acknowledges that in the regular course of commercial banking business one or more Lenders may at any time and from time to time sell participating interests in the Advances to other financial institutions (each such transferee or purchaser of a participating interest, a “Participant”) so long as the Borrowing Agent consents to each such Participant, which consent shall not be unreasonably withheld.  Each Participant may exercise all rights of payment (including rights of set-off) with respect to the portion of such Advances held by it or other Obligations payable hereunder as fully as if such Participant were the direct holder thereof provided that Borrowers shall not be required to pay to any Participant more than the amount which it would have been required to pay to Lender which granted an interest in its Advances or other Obligations payable hereunder to such Participant had such Lender retained such interest in the Advances hereunder or other Obligations payable hereunder and in no event shall Borrowers be required to pay any such amount arising from the same circumstances and with respect to the same Advances or other Obligations payable hereunder to both such Lender and such Participant.  Each Borrower hereby grants to any Participant a continuing security interest in any deposits, moneys or other property actually or constructively held by such Participant as security for the Participant’s interest in the Advances.
 
Any Lender, with the consents of Agent and Borrowing Agent which shall not be unreasonably withheld or delayed, may sell, assign or transfer all or any part of its rights and obligations under or relating to Revolving Advances and/or the Term Loan under this Agreement and the Other Documents to one or more additional banks or financial institutions and one or more additional banks or financial institutions may commit to make Advances hereunder (each a “Purchasing Lender”), in minimum amounts of not less than $1,000,000, pursuant to a Commitment Transfer Supplement, executed by a Purchasing Lender, the transferor Lender, and Agent and delivered to Agent for recording.  Upon such execution, delivery, acceptance and recording, from and after the transfer effective date determined pursuant to such Commitment Transfer Supplement, (i) Purchasing Lender thereunder shall be a party hereto and, to the extent provided in such Commitment Transfer Supplement, have the rights and obligations of a Lender thereunder with a Commitment Percentage as set forth therein, and (ii) the transferor Lender thereunder shall, to the extent provided in such Commitment Transfer Supplement, be released from its obligations under this Agreement, the Commitment Transfer Supplement creating a novation for that purpose.  Such Commitment Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender and the resulting adjustment of the Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Agreement and the Other Documents.  Each Borrower hereby consents to the addition of such Purchasing Lender and the resulting adjustment of the Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Agreement and the Other Documents.  Borrowers shall execute and deliver such further documents and do such further acts and things in order to effectuate the foregoing.  Notwithstanding anything to the contrary herein, any and all assignments and/or transfers from any Lender to any Purchasing Lender shall be consummated in a manner so that each such Purchasing Lender shall own the same Commitment Percentage of each Loan.
 
(c)   Any Lender, with the consent of Agent which shall not be unreasonably withheld or delayed, may directly or indirectly sell, assign or transfer all or any portion of its rights and obligations under or relating to Revolving Advances and/or the Term Loan under this Agreement and the Other Documents to an entity, whether a corporation, partnership, trust, limited liability company or other entity that (i) is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and (ii) is administered, serviced or managed by the assigning Lender or an Affiliate of such Lender (a “Purchasing CLO” and together with each Participant and Purchasing Lender, each a “Transferee” and collectively the “Transferees”), pursuant to a Commitment Transfer Supplement modified as appropriate to reflect the interest being assigned (“Modified Commitment Transfer Supplement”), executed by any intermediate purchaser, the Purchasing CLO, the transferor Lender, and Agent as appropriate and delivered to Agent for recording.  Upon such execution and delivery, from and after the transfer effective date determined pursuant to such Modified Commitment Transfer Supplement, (i) Purchasing CLO thereunder shall be a party hereto and, to the extent provided in such Modified Commitment Transfer Supplement, have the rights and obligations of a Lender thereunder and (ii) the transferor Lender thereunder shall, to the extent provided in such Modified Commitment Transfer Supplement, be released from its obligations under this Agreement, the Modified Commitment Transfer Supplement creating a novation for that purpose.  Such Modified Commitment Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing CLO.  Each Borrower hereby consents to the addition of such Purchasing CLO.  Borrowers shall execute and deliver such further documents and do such further acts and things in order to effectuate the foregoing.
 
(d)   Agent shall maintain at its address a copy of each Commitment Transfer Supplement and Modified Commitment Transfer Supplement delivered to it and a register (the “Register”) for the recordation of the names and addresses of each Lender and the outstanding principal, accrued and unpaid interest and other fees due hereunder.  The entries in the Register shall be conclusive, in the absence of manifest error, and each Borrower, Agent and Lenders may treat each Person whose name is recorded in the Register as the owner of the Advance recorded therein for the purposes of this Agreement.  The Register shall be available for inspection by Borrowing Agent or any Lender at any reasonable time and from time to time upon reasonable prior notice.  Agent shall receive a fee in the amount of $3,500 payable by the applicable Purchasing Lender and/or Purchasing CLO upon the effective date of each transfer or assignment (other than to an intermediate purchaser) to such Purchasing Lender and/or Purchasing CLO.
 
(e)   Each Borrower authorizes each Lender to disclose to any Transferee and any prospective Transferee any and all financial information in such Lender’s possession concerning such Borrower which has been delivered to such Lender by or on behalf of such Borrower pursuant to this Agreement or in connection with such Lender’s credit evaluation of such Borrower.
 
16.4   Application of Payments .  Agent shall have the continuing and exclusive right to apply or reverse and re-apply any payment and any and all proceeds of Collateral to any portion of the Obligations.  To the extent that any Borrower makes a payment or Agent or any Lender receives any payment or proceeds of the Collateral for any Borrower’s benefit, which are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or any other party under any bankruptcy law, common law or equitable cause, then, to such extent, the Obligations or part thereof intended to be satisfied shall be revived and continue as if such payment or proceeds had not been received by Agent or such Lender.
 
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16.5   Indemnity .  Each Borrower shall indemnify Agent, each Lender and each of their respective officers, directors, Affiliates, attorneys, employees and agents from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including fees and disbursements of counsel) which may be imposed on, incurred by, or asserted against Agent or any Lender in any claim, litigation, proceeding or investigation instituted or conducted by any Governmental Body or instrumentality or any other Person with respect to any aspect of, or any transaction contemplated by, or referred to in, or any matter related to, this Agreement or the Other Documents, whether or not Agent or any Lender is a party thereto, except to the extent that any of the foregoing arises out of the willful misconduct or gross negligence of the party being indemnified (as determined by a court of competent jurisdiction in a final and non-appealable judgment).  Without limiting the generality of the foregoing, this indemnity shall extend to any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever (including fees and disbursements of counsel) asserted against or incurred by any of the indemnitees described above in this Section 16.5 by any Person under any Environmental Laws or similar laws by reason of any Borrower’s or any other Person’s failure to comply with laws applicable to solid or hazardous waste materials, including Hazardous Substances and Hazardous Waste, or other Toxic Substances.  Additionally, if any taxes (excluding taxes imposed upon or measured solely by the net income of Agent and Lenders, but including any intangibles taxes, stamp tax, recording tax or franchise tax) shall be payable by Agent, Lenders or Borrowers on account of the execution or delivery of this Agreement, or the execution, delivery, issuance or recording of any of the Other Documents, or the creation or repayment of any of the Obligations hereunder, by reason of any Applicable Law now or hereafter in effect, Borrowers will pay (or will promptly reimburse Agent and Lenders for payment of) all such taxes, including interest and penalties thereon, and will indemnify and hold the indemnitees described above in this Section 16.5 harmless from and against all liability in connection therewith.
 
16.6   Notice .  Any notice or request hereunder may be given to Borrowing Agent or any Borrower or to Agent or any Lender at their respective addresses set forth below or at such other address as may hereafter be specified in a notice designated as a notice of change of address under this Section.  Any notice, request, demand, direction or other communication (for purposes of this Section 16.6 only, a “Notice”) to be given to or made upon any party hereto under any provision of this Loan Agreement shall be given or made by telephone or in writing (which includes by means of electronic transmission (i.e., “e-mail”) or facsimile transmission or by setting forth such Notice on a site on the World Wide Web (a “Website Posting”) if Notice of such Website Posting (including the information necessary to access such site) has previously been delivered to the applicable parties hereto by another means set forth in this Section 16.6) in accordance with this Section 16.6.  Any such Notice must be delivered to the applicable parties hereto at the addresses and numbers set forth under their respective names on Section 16.6 hereof or in accordance with any subsequent unrevoked Notice from any such party that is given in accordance with this Section 16.6.  Any Notice shall be effective:
 
(a)   In the case of hand-delivery, when delivered;
 
(b)   If given by mail, four days after such Notice is deposited with the United States Postal Service, with first-class postage prepaid, return receipt requested;
 
(c)   In the case of a telephonic Notice, when a party is contacted by telephone, if delivery of such telephonic Notice is confirmed no later than the next Business Day by hand delivery, a facsimile or electronic transmission, a Website Posting or an overnight courier delivery of a confirmatory Notice (received at or before noon on such next Business Day);
 
(d)   In the case of a facsimile transmission, when sent to the applicable party’s facsimile machine’s telephone number, if the party sending such Notice receives confirmation of the delivery thereof from its own facsimile machine;
 
(e)   In the case of electronic transmission, when actually received;
 
(f)   In the case of a Website Posting, upon delivery of a Notice of such posting (including the information necessary to access such site) by another means set forth in this Section 16.6; and
 
(g)   If given by any other means (including by overnight courier), when actually received.
 
Any Lender giving a Notice to Borrowing Agent or any Borrower shall concurrently send a copy thereof to the Agent, and the Agent shall promptly notify the other Lenders of its receipt of such Notice.
 
(A)           If to Agent or PNC at:
 
PNC Bank, National Association
340 Madison Avenue
New York, New York  10173
Attention:  Joanne Fu, Relationship Manager
Telephone:  (212) 752-6360
Facsimile:  (212) 303-0060

with a copy to:

PNC Bank, National Association
PNC Agency Services
PNC Firstside Center
500 First Avenue, 4th Floor
Pittsburgh, Pennsylvania 15219
Attention:  Lisa Pierce
Telephone:  (412) 762-6442
Facsimile:  (412) 762-8672

with an additional copy to:

Wilentz, Goldman & Spitzer
90 Woodbridge Center Drive
Woodbridge, NJ   07095
Attn: Stuart A. Hoberman, Esq.
Telephone:  (732) 855-6052
Facsimile:  (732) 726-6518

(B)           If to a Lender other than Agent, as specified on the signature pages hereof.
 
38
 
 
 

 

 
(C)           If to Borrowing Agent or any Borrower:

Integrated BioPharma, Inc.
225 Long Avenue
P.O. Box 278
Hillside, New Jersey  07205
Attention:  Chief Executive Officer and Chief Financial Officer
Telephone:  (973) 926-0816
Facsimile:  (973) 926-1735

with a copy to:

Herrick, Feinstein LLP
2 Park Avenue
New York, New York  10016
Attention:  Eric A. Stabler, Esq.
Telephone:  (212) 592-5982
Facsimile:  (212) 545-3317

16.7   Survival .  The obligations of Borrowers under Sections 2.2(f), 3.7, 3.8, 3.9, 4.19(h), and 16.5 and the obligations of Lenders under Section 14.7, shall survive termination of this Agreement and the Other Documents and payment in full of the Obligations.
 
16.8   Severability .  If any part of this Agreement is contrary to, prohibited by, or deemed invalid under Applicable Laws, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given effect so far as possible.
 
16.9   Expenses .  All costs and expenses including reasonable attorneys’ fees (including the allocated costs of in house counsel) and disbursements incurred by Agent on its behalf or on behalf of Lenders (a) in all efforts made to enforce payment of any Obligation or effect collection of any Collateral, or (b) in connection with the entering into, modification, amendment, administration and enforcement of this Agreement, the Subordination Agreement or any consents or waivers hereunder or thereunder and all related agreements, documents and instruments, or (c) in instituting, maintaining, preserving, enforcing and foreclosing on Agent’s security interest in or Lien on any of the Collateral, or maintaining, preserving or enforcing any of Agent’s or any Lender’s rights hereunder, under the Subordination Agreement and under all related agreements, documents and instruments, whether through judicial proceedings or otherwise, or (d) in defending or prosecuting any actions or proceedings arising out of or relating to Agent’s or any Lender’s transactions with any Borrower, any Guarantor or any Subordinated Lender or (e) in connection with any advice given to Agent or any Lender with respect to its rights and obligations under this Agreement, the Subordination Agreement and all related agreements, documents and instruments, may be charged to Borrowers’ Account and shall be part of the Obligations.
 
16.10   Injunctive Relief .  Each Borrower recognizes that, in the event any Borrower fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, or threatens to fail to perform, observe or discharge such obligations or liabilities, any remedy at law may prove to be inadequate relief to Lenders; therefore, Agent, if Agent so requests, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving that actual damages are not an adequate remedy.
 
16.11   Consequential Damages .  Neither Agent nor any Lender, nor any agent or attorney for any of them, shall be liable to any Borrower or any Guarantor (or any Affiliate of any such Person) for indirect, punitive, exemplary or consequential damages arising from any breach of contract, tort or other wrong relating to the establishment, administration or collection of the Obligations or as a result of any transaction contemplated under this Agreement or any Other Document.
 
16.12   Captions .  The captions at various places in this Agreement are intended for convenience only and do not constitute and shall not be interpreted as part of this Agreement.
 
16.13   Counterparts; Facsimile Signatures .  This Agreement may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement.  Any signature delivered by a party by facsimile transmission shall be deemed to be an original signature hereto.
 
16.14   Construction .  The parties acknowledge that each party and its counsel have reviewed this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments, schedules or exhibits thereto.
 
16.15   Confidentiality; Sharing Information .  Agent, each Lender and each Transferee shall hold all non-public information obtained by Agent, such Lender or such Transferee pursuant to the requirements of this Agreement in accordance with Agent’s, such Lender’s and such Transferee’s customary procedures for handling confidential information of this nature; provided, however, Agent, each Lender and each Transferee may disclose such confidential information (a) to its examiners, Affiliates, outside auditors, counsel and other professional advisors (it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential), (b) to Agent, any Lender or to any prospective Transferees (it being understood that the prospective Transferees to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential), and (c) as required or requested by any Governmental Body or representative thereof or pursuant to legal process; provided, further that (i) unless specifically prohibited by Applicable Law, Agent, each Lender and each Transferee shall use its reasonable best efforts prior to disclosure thereof, to notify the applicable Borrower of the applicable request for disclosure of such non-public information (A) by a Governmental Body or representative thereof (other than any such request in connection with an examination of the financial condition of a Lender or a Transferee by such Governmental Body) or (B) pursuant to legal process and (ii) in no event shall Agent, any Lender or any Transferee be obligated to return any materials furnished by any Borrower other than those documents and instruments in possession of Agent or any Lender in order to perfect its Lien on the Collateral once the Obligations have been paid in full and this Agreement has been terminated.  Each Borrower acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to such Borrower or one or more of its Affiliates (in connection with this Agreement or otherwise) by any Lender or by one or more Subsidiaries or Affiliates of such Lender and each Borrower hereby authorizes each Lender to share any information delivered to such Lender by such Borrower and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of such Lender, it being understood that any such Subsidiary or Affiliate of any Lender receiving such information shall be bound by the provisions of this Section 16.15 as if it were a Lender hereunder.  Such authorization shall survive the repayment of the other Obligations and the termination of this Agreement.
 
16.16   Publicity .  Subject to the satisfactory review of the Borrowers, each Borrower and each Lender hereby authorizes Agent to make appropriate announcements of the financial arrangement entered into among Borrowers, Agent and Lenders, including announcements which are commonly known as tombstones, in such publications and to such selected parties as Agent shall in its sole and absolute discretion deem appropriate; provided , however , that no such announcements may be made without the prior written consent of the Borrowing Agent.
 
16.17   Certifications From Banks and Participants; US PATRIOT ACT .  Each Lender or assignee or participant of a Lender that is not incorporated under the Laws of the United States of America or a state thereof (and is not excepted from the certification requirement contained in Section 313 of the USA PATRIOT Act and the applicable regulations because it is both (i) an affiliate of a depository institution or foreign bank that maintains a physical presence in the United States or foreign country, and (ii) subject to supervision by a banking authority regulating such affiliated depository institution or foreign bank) shall deliver to the Agent the certification, or, if applicable, recertification, certifying that such Lender is not a “shell” and certifying to other matters as required by Section 313 of the USA PATRIOT Act and the applicable regulations: (1) within 10 days after the Closing Date, and (2) as such other times as are required under the USA PATRIOT Act.
 
Each of the parties has signed this Agreement as of the day and year first above written.
 
[SIGNATURE PAGES TO FOLLOW]
 
39
 
 

 
 
 
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement the day and year first above mentioned.
 
ATTEST:
INTEGRATED BIOPHARMA.INC.
   
By:
  /s/ Dina L. Masi  
By:
  /s/ E. Gerald Kay  
Name:  DINA L. MASI
Name:  E. GERALD KAY
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
InB:MANHATTAN DRUG COMPANY, INC.
   
By:
  /s/ Dina L. Masi  
By:
  /s/ Riva Sheppard  
Name:  DINA L. MASI
Name:  RIVA SHEPPARD
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
AGROLABS, INC.
   
By:
  /s/ Dina L. Masi  
By:
  /s/ Christina Kay  
Name:  DINA L. MASI
Name:  CHRISTINA KAY
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
IHT HEALTH PRODUCTS, INC.
   
By:
  /s/ Dina L. Masi  
By:
  /s/ Christina Kay  
Name:  DINA L. MASI
Name:  CHRISTINA KAY
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
IHT PROPERTIES CORP.
   
By:
  /s/ Dina L. Masi  
By:
  /s/ Riva Sheppard  
Name:  DINA L. MASI
Name:  RIVA SHEPPARD
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
VITAMIN FACTORY, INC.
 
(also known as The Vitamin Factory)
   
By:
  /s/ Dina L. Masi  
By:
  /s/ E. Gerald Kay  
Name:  DINA L. MASI
Name:  E. GERALD KAY
Title:  Secretary
Title:  President and Chief Executive Officer

40
 
 
 

 

 
 
PNC BANK, NATIONAL ASSOCIATION,
 
As Lender and as Agent
   
     
By:
  /s/ Brian Conway  
 
Name:  BRIAN CONWAY
 
Title:  Vice President
   
 
340 Madison Avenue
 
New York, New York 10173
   
 
Commitment Percentage:  100%
 
 
 
41
Exhibit 10.2

TERM NOTE
PNC Bank, National Association
 

 
 $3,727,000  June 27, 2012
   Woodbridge, New Jersey
 


This Term Note (this “Note”) is executed and delivered under and pursuant to the terms of that certain Revolving Credit, Term Loan and Security Agreement dated as of the date hereof (as amended, supplemented, restated or modified from time to time, the “Loan Agreement”) by and among INTEGRATED BIOPHARMA, INC. , a corporation organized under the laws of the State of Delaware (“Integrated”), InB:MANHATTAN DRUG COMPANY, INC ., a corporation organized under the laws of the State of New York (”MD ”), AGROLABS, INC. , a corporation organized under the laws of the State of New Jersey (“AL”), IHT HEALTH PRODUCTS, INC. , a corporation organized under the laws of the State of Delaware (IHT”), VITAMIN FACTORY, INC. , a corporation organized under the laws of the State of Delaware (“Vitamin”) and IHT PROPERTIES CORP., a corporation organized under the laws of the State of Delaware (“IHTP) (Integrated, MD, AL, IHT, Vitamin and IHTP each a “Borrower”, and collectively “Borrowers”) and PNC BANK, NATIONAL ASSOCIATION, a national banking association organized under the laws of the United States of America (“PNC”), the various financial institutions named therein or which hereafter become a party thereto (together with PNC collectively, “Lenders”), and PNC as agent for Lenders (in such capacity, “Agent”).  Capitalized terms not otherwise defined herein shall have the meanings provided in the Loan Agreement.

FOR VALUE RECEIVED, Borrower hereby promise to pay to the order of PNC, at the office of Agent located at PNC Bank Center, Two Tower Center, East Brunswick, New Jersey 08816, or at such other place as Agent may from time to time designate to Borrower in writing:

(i)  the principal sum of THREE MILLION SEVEN HUNDRED TWENTY SEVEN THOUSAND DOLLARS AND 00/100 ($3,727,000) shall be paid in sixty (60) consecutive monthly principal installments, the first fifty nine (59) of which shall be in the amount of $44,369.05 commencing on the first Business Day of August, 2012, and continuing on the first Business Day of each month thereafter, with a final payment of any unpaid balance of principal and interest payable on the first Business Day of July, 2017, all as more particularly described in the Loan Agreement, and subject to mandatory prepayment and acceleration upon the occurrence of an Event of Default under the Loan Agreement or earlier termination of the Loan Agreement pursuant to the terms thereof; and

(ii) interest on the principal amount of this Note from time to time outstanding until such principal amount is paid in full at the Term Loan Rate in accordance with the provisions of the Loan Agreement.  In no event, however, shall interest exceed the maximum interest rate permitted by law.  Upon and after the occurrence of an Event of Default, and during the
 
1
 
 
 

 

 
continuation thereof, interest shall be payable at the Default Rate in accordance with the Loan Agreement;

(iii) notwithstanding anything to the contrary herein, in the Loan Agreement and/or in any Other Document, all outstanding principal and interest hereunder is due and payable on the Termination Date.

This Note is a “Term Note” referred to in the Loan Agreement and is secured, inter alia , by the Liens granted pursuant to the Loan Agreement and the Other Documents, is entitled to the benefits of the Loan Agreement and the Other Documents and is subject to all of the agreements, terms and conditions therein contained.

This Note is subject to mandatory prepayment, and may be voluntarily prepaid, in whole or in part, in each case on the terms and conditions set forth in the Loan Agreement.

If an Event of Default under Section 10.7 or 10.8 of the Loan Agreement shall occur and be continuing, then this Note shall immediately become due and payable, without notice, together with reasonable attorneys’ fees if the collection hereof is placed in the hands of an attorney to obtain or enforce payment hereof.  If any other Event of Default shall occur and be continuing under the Loan Agreement or any of the Other Documents, which is not cured within any applicable grace period, then this Note may, as provided in the Loan Agreement, be declared to be immediately due and payable, without notice, together with reasonable attorneys’ fees, if the collection hereof is placed in the hands of an attorney to obtain or enforce payment hereof.

Lenders may at any time pledge or assign all or any portion of their rights under the Loan Agreement or the Other Documents (including any portion of this Note) to any of the twelve (12) Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341.  No such pledge or assignment or enforcement thereof shall release Lenders from their obligations under the Loan Agreement or any of the Other Documents.

This Note shall be construed and enforced in accordance with the laws of the State of New York.

The Obligations evidenced by this Note are the same Obligations set forth in Section 2.4 of the Loan Agreement.

Borrowers expressly waive any presentment, demand, protest, notice of protest, or notice of any kind except as expressly provided in the Loan Agreement.


REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
 

2
 
 
 
 
 

 
 
 
ATTEST:
INTEGRATED BIOPHARMA.INC.
   
By:
/s/ Dina L. Masi  
By:
/s/ E. Gerald Kay  
Name:  DINA L. MASI
Name:  E. GERALD KAY
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
InB:MANHATTAN DRUG COMPANY, INC.
   
By:
/s/ Dina L. Masi  
By:
 /s/ Riva Sheppard   
Name:  DINA L. MASI
Name:  RIVA SHEPPARD
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
AGROLABS, INC.
   
By:
 /s/ Dina L. Masi  
By:
/s/ Christina Kay  
Name:  DINA L. MASI
Name:  CHRISTINA KAY
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
IHT HEALTH PRODUCTS, INC.
   
By:
 /s/ Dina L. Masi  
By:
/s/ Christina Kay   
Name:  DINA L. MASI
Name:  CHRISTINA KAY
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
VITAMIN FACTORY, INC.
   
By:
/s/ Dina L. Masi  
By:
/s/ E. Gerald Kay  
Name:  DINA L. MASI
Name:  E. GERALD KAY
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
IHT PROPERTIES CORP.
   
By:
/s/ Dina L. Masi  
By:
 /s/ Riva Sheppard   
Name:  DINA L. MASI
Name:  RIVA SHEPPARD
Title:  Secretary
Title:  President and Chief Executive Officer

3
Exhibit 10.3
 


 

REVOLVING CREDIT NOTE
PNC Bank, National Association
 
 
 $8,000,000    June 27, 2012
   Woodbridge, N.J.
 
 
This Revolving Credit Note (this “Note”) is executed and delivered under and pursuant to the terms of that certain Revolving Credit, Term Loan and Security Agreement dated as of the date hereof (as amended, restated, supplemented or modified from time to time, the “Loan Agreement”) by and among INTEGRATED BIOPHARMA, INC. , a corporation organized under the laws of the State of Delaware (“Integrated”), InB:MANHATTAN DRUG COMPANY, INC. ,   a corporation organized under the laws of the State of New York (”MD ”), AGROLABS, INC. , a corporation organized under the laws of the State of New Jersey (“AL”), IHT HEALTH PRODUCTS, INC. , a corporation organized under the laws of the State of Delaware (IHT”), VITAMIN FACTORY, INC. , a corporation organized under the laws of the State of Delaware (“Vitamin”), IHT PROPERTIES CORP. a corporation organized under the laws of the State   of Delaware (“IHTP”) (Integrated, MD, AL, IHT, Vitamin and IHTP each a “Borrower”, and collectively “Borrowers”), and PNC BANK, NATIONAL ASSOCIATION (“PNC”), the various financial institutions named therein or which hereafter become a party thereto (together with PNC collectively, “Lenders”) and PNC as agent for Lenders (in such capacity, “Agent”).  Capitalized terms not otherwise defined herein shall have the meanings provided in the Loan Agreement.

FOR VALUE RECEIVED, the Borrower hereby promises to pay to the order of PNC, at the office of Agent located at PNC Bank Center, Two Tower Center, East Brunswick, New Jersey 08816 or at such other place as Agent may from time to time designate to Borrower in writing:

(i) the principal sum of EIGHT MILLION AND 00/100 DOLLARS ($8,000,000) or, if different from such amount, the unpaid principal balance of the Revolving Advances as may be due and owing to PNC under the Loan Agreement, payable in accordance with the provisions of the Loan Agreement, subject to acceleration upon the occurrence of an Event of Default under the Loan Agreement or earlier termination of the Loan Agreement pursuant to the terms thereof; and

(ii) interest on the principal amount of this Note from time to time outstanding until such principal amount is paid in full at the applicable Revolving Interest Rate in accordance with the provisions of the Loan Agreement.  In no event, however, shall interest exceed the maximum interest rate permitted by law.  Upon and after the occurrence of an Event of Default, and during the continuation thereof, interest shall be payable at the Default Rate in accordance with the Loan Agreement; and
 
1
 
 
 
 

 

 
(iii) notwithstanding anything to the contrary herein, in the Loan Agreement and/or in any Other Document, all outstanding principal and interest hereunder is due and payable on the Termination Date.

This Note is a “Revolving Credit Note” referred to in the Loan Agreement and is secured, inter alia , by the Liens granted pursuant to the Loan Agreement and the Other Documents, is entitled to the benefits of the Loan Agreement and the Other Documents and is subject to all of the agreements, terms and conditions therein contained.

This Note is subject to mandatory prepayment, and may be voluntarily prepaid, in whole or in part, in each case, on the terms and conditions set forth in the Loan Agreement.

If an Event of Default under Section 10.7 or 10.8 of the Loan Agreement shall occur and be continuing, then this Note shall immediately become due and payable, without notice, together with reasonable attorneys’ fees if the collection hereof is placed in the hands of an attorney to obtain or enforce payment hereof.  If any other Event of Default shall occur and be continuing under the Loan Agreement or any of the Other Documents, which is not cured within any applicable grace period, then this Note may, as provided in the Loan Agreement, be declared to be immediately due and payable, without notice, together with reasonable attorneys’ fees, if the collection hereof is placed in the hands of an attorney to obtain or enforce payment hereof.

Lenders may at any time pledge or assign all or any portion of their rights under the Loan Agreement and the Other Documents (including any portion of this Note) to any of the twelve (12) Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341.  No such pledge or assignment or enforcement thereof shall release Lenders from their obligations under the Loan Agreement or any of the Other Documents.

This Note shall be construed and enforced in accordance with the laws of the State of New York.

Borrowers expressly waive any presentment, demand, protest, notice of protest, or notice of any kind except as expressly provided in the Loan Agreement.




REMAINDER OF THIS PAGE LEFT BLANK
SIGNATURE PAGES TO FOLLOW

 
2
 
 
 
 

 
 
 
 
ATTEST:
INTEGRATED BIOPHARMA.INC.
   
By:
/s/ Dina L. Masi  
By:
/s/ E. Gerald Kay  
Name:  DINA L. MASI
Name:  E. GERALD KAY
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
InB:MANHATTAN DRUG COMPANY, INC.
   
By:
/s/ Dina L. Masi  
By:
/s/ Riva Sheppard  
Name:  DINA L. MASI
Name:  RIVA SHEPPARD
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
AGROLABS, INC.
   
By:
/s/ Dina L. Masi  
By:
/s/ Christina Kay  
Name:  DINA L. MASI
Name:  CHRISTINA KAY
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
IHT HEALTH PRODUCTS, INC.
   
By:
/s/ Dina L. Masi  
By:
/s/ Christina Kay  
Name:  DINA L. MASI
Name:  CHRISTINA KAY
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
VITAMIN FACTORY, INC.
   
By:
/s/ Dina L. Masi  
By:
/s/ E. Gerald Kay  
Name:  DINA L. MASI
Name:  E. GERALD KAY
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
IHT PROPERTIES CORP.
   
By:
/s/ Dina L. Masi  
By:
/s/ Riva Sheppard  
Name:  DINA L. MASI
Name:  RIVA SHEPPARD
Title:  Secretary
Title:  President and Chief Executive Officer

3

 
Exhibit 10.4
 


 
CONTINUING LIMITED GUARANTY

 
 
THIS CONTINUING LIMITED GUARANTY (this “Guaranty”) dated as of June 27, 2012 made by CARL DeSANTIS (the “Guarantor”), in favor of PNC BANK, NATIONAL ASSOCIATION, a National Banking Association organized under the laws of the United States of America, having an office located at PNC Bank Center, Two Tower Center Boulevard, East Brunswick, New Jersey  08816, as Agent for the Lenders, (the “Bank”).

W I T N E S S E T H :

WHEREAS, pursuant to a certain Revolving Credit, Term Loan and Security Agreement (as it may be amended, supplemented, replaced or restated from time to time, the “Loan Agreement”) dated the date hereof by and among INTEGRATED BIOPHARMA, INC., InB:MANHATTAN DRUG COMPANY, INC., AGROLABS, INC., IHT HEALTH PRODUCTS, INC., VITAMIN FACTORY, INC., IHT PROPERTIES CORP. , (collectively, “the “Borrower”), the Bank, the various financial institutions named therein or which hereafter become a party thereto (together with the Bank collectively, “Lenders”) and the Bank as agent for Lenders (in such capacity, “Agent”), the Lenders have agreed to make certain loans to the Borrower; and

WHEREAS, the Borrower and the Lenders agree that in order to secure said loans, the applicable parties shall execute the Loan Agreement and all of the Other Documents (as such term is defined in the Loan Agreement) to the extent that it is a party thereto including, but not limited to this Guaranty (to the extent that it is a party thereto) and agree to the terms and conditions set forth herein or set forth elsewhere in the Loan Agreement and the Other Documents to the extent it is a party thereto; and

WHEREAS, as a condition precedent to the making of the loans by the Lenders to the Borrower, the Guarantor has agreed to guaranty to the Lenders repayment of the Obligations (as defined below) in accordance with and subject to the provisions of this Guaranty; and

WHEREAS, the Guarantor derives a benefit from the Lenders’ extension of credit to the Borrower pursuant to the Loan Agreement.

NOW, THEREFORE, in consideration of the premises and in order to induce the Lenders to make and/or continue to make the Loans and Advances (as each such term is defined in the Loan Agreement), the Guarantor hereby agrees with the Lenders as follows:

1.   In consideration of the Loans and Advances made pursuant to the terms of the Loan Agreement and the Other Documents, and to enable the Loans and Advances to be maintained or obtained by the Borrower under the terms of the Loan Agreement and the Other Documents, the Guarantor hereby irrevocably and unconditionally guarantees the full, prompt and unconditional payment, when due, whether by acceleration or otherwise, of any and all Obligations (as defined in the Loan Agreement) ,  together with interest thereon and all attorneys’ fees, costs and expenses of collection incurred by the Bank or Lenders in enforcing any of their rights under the Loan Agreement, the Other Document or this Guaranty (the “Obligations of the Borrower” or “Obligations”).  Notwithstanding any other provision of this Guaranty, the Guarantor shall only be liable hereunder for the Obligations up to a maximum aggregate amount of One Million and 00/100 Dollars ($1,000,000).

2.   This Guaranty shall extend to and cover every extension or renewal of, and every obligation accepted in substitution for, any Obligations of the Borrower, which extensions, renewals or substitutions are herein consented and agreed to, and the Guarantor shall be bound hereby irrespective of the existence, value or condition of any collateral the Agent may at any time hold or the validity, irregularity or enforceability of any instrument, writing or arrangement relating to any such Obligations of the Borrower or collateral and irrespective of any present or future law or order of any government (whether of right or in fact) or of any agency thereof, purporting to reduce, amend or otherwise affect any Obligations of the Borrower or to vary the terms of payment of the Obligations.
 
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3.   The Guarantor hereby waives notice of acceptance of this Guaranty and also waives diligence, presentment, demand, protest and notice of dishonor of any obligations evidenced by a note or otherwise, and notice of any other kind whatsoever.

4.   The Guarantor hereby assents to all terms and agreements made by the Borrower, or any other obligor under the Loan Documents with respect to the Loans and/or Advances, with the Lenders.

5.   The Guarantor hereby consents and agrees that the Lenders may, without prejudice to any claim against the Guarantor hereunder, at any time, or from time to time, in the Lenders’ reasonable discretion and in accordance with the terms of the Loan Agreement and the Other Documents, and without notice to the Guarantor: (a) renew, extend or change the time of payment and the manner, place or terms of payment of any Obligations of the Borrower; (b) exchange, release or surrender all or any collateral which the Lenders may at any time hold as security for the Obligations of the Borrower, or the obligations of the Guarantor independently hereunder; (c) waive, release or subordinate any security interest, in whole or in part, now or hereafter held as security for any of the Obligations of the Borrower, or the obligations of the Guarantor hereunder; (d) sell and cause the Lenders, or any of them, to purchase any collateral in which the Lenders have a security interest at any public or private sale or at any broker’s board, crediting net proceeds upon any obligation secured thereby; (e) settle or compromise, with the Borrower or with any other obligor with respect to the Loans and/or Advances, any Obligations of the Borrower; (f) subordinate the payment of any Obligations of the Borrower or obligations of any other person or entity to the payment of any other debt which may be owing to the Lenders; or (g) apply any sums by whomsoever paid or whosoever realized to any Obligations of the Borrower.

6.   This Guaranty is a continuing guaranty and nothing shall terminate, discharge or satisfy the liability of the Guarantor hereunder until the Obligations of the Borrower shall have been indefeasibly paid in full, subject, however, to Section 23 below.

7.   The Agent may, in its reasonable discretion, exercise any right or remedy which the Lenders have under this Guaranty, the Loan Agreement, the Other Documents, or by law (such rights and remedies being cumulative and not alternative or exclusive) without pursuing or exhausting any right or remedy which the Lenders have against the Borrower or any other person or entity or which the Lenders have with respect to any collateral or any other guaranty of any or all of such Obligations.  The Lenders need not join the Borrower or any other person or entity as a party in any action brought to enforce the provisions hereof; and the Lenders may exercise any right or remedy which they have under this Guaranty without regard to any actions or omissions of the Borrower or any other person or entity.

8.   No delay on the Lenders’ part in exercising any right hereunder or in taking any action to collect or enforce payment of any Obligations of the Borrower, either as against the Borrower or any other person or entity, shall operate as a waiver of any such right or in any manner prejudice the Lenders’ rights against the Guarantor.

9.   The Guarantor agrees that, if any of the Obligations of the Borrower are not paid when due after giving effect to any applicable grace and/or notice period set forth in the Loan Agreement and such Event of Default is continuing, the Guarantor will, without demand upon or notice to the Guarantor but subject to the limitations set forth in Section 1 herein, forthwith satisfy such Obligations, or if the maturity of any Obligations of the Borrower hereby guaranteed is accelerated, by bankruptcy or otherwise as against the Borrower, such maturity shall also be deemed accelerated for the purposes of this Guaranty and without demand upon or notice to the Guarantor, and the Lenders may collect from the Guarantor the total amount hereby guaranteed, subject to the limitations set forth in Section 1 herein.

10.   As security for the performance of the Guarantor’s obligations hereunder, the Guarantor: (a) hereby acknowledges the assignment, pledge and grant by the Borrower to the Agent and Lenders, pursuant to the Loan Agreement, of a continuing security interest in and to all of the Collateral (as that term is defined in the Loan Agreement); and (b) grants the Lenders a right of setoff against all monies, deposits, instruments or other property of any kind, without limitation, owned by the Guarantor or in which the Guarantor has a joint or contingent interest and which now or any time hereafter are in the possession or control of the Lender or in transit by mail or carrier to or from the Lender or in possession of any third person acting on the Lender’s behalf for any reason whatsoever.
 
 
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11.   The Guarantor shall not exercise any rights it has acquired by way of subrogation under this Guaranty or otherwise, unless and until all of the Obligations of the Borrower have been paid in full.  If any payment is made to the Guarantor on account of such subrogation rights when any of the obligations of the Borrower are not paid in full, each and every amount so paid will forthwith be turned over to the Agent to be credited and applied upon any of the Obligations of the Borrower whether matured or unmatured.  Any and all present and future debts and obligations of the Borrower to the Guarantor are hereby waived and postponed in favor of and subordinated to the full payment and performance of all Obligations of the Borrower to the Lenders.

12.   This Guaranty shall continue to be effective or reinstated, as the case may be, if at any time payment of any of the Obligations of the Borrower, or any part thereof, is rescinded or must otherwise be returned by the Lenders upon the insolvency or bankruptcy of the Borrower, or otherwise, as though such payment had not been made.

13.   The release by the Lenders of any other guarantor, or settlement with such other guarantor or the revocation or impairment of such guaranty, shall not operate to prejudice the Lenders’ rights against the Guarantor hereunder.

14.   No waiver of any of the Lenders’ rights hereunder and no modification or amendment of this Guaranty, shall be deemed to be made by the Lenders unless the same shall be in writing, duly signed on behalf of the Lenders by a duly authorized officer and the Guarantor, and each such waiver, if any, shall apply only with respect to the specific instance involved, and shall in no way impair the rights or the obliga­tions of the Guarantor to the Lenders in any other respect at any other time.

15.   Notwithstanding anything herein to the contrary, until such time as the Obligations have indefeasibly been repaid in full, the Guarantor hereby irrevocably waives and covenants not to assert any and all legal and equitable rights to recover from the Borrower (i) any sums paid by the Guarantor under the terms of this Guaranty including, without limitation, all rights of subrogation and all other rights that would result in the Guarantor being deemed a creditor of the Borrower under the Federal Bankruptcy Code, and any other law, and (ii) any and all claims the Guarantor has or may have against the Borrower which are not related to or arising from or in connection with this Guaranty, or other documents delivered in connection with the Obligations, that do or would result in the Guarantor being deemed a creditor of the Borrower under the Federal Bankruptcy Code or any other law.

16.   The Lenders shall be under no duty or obligation to the Guarantor or anyone else to, nor shall the Lenders have any liability whatsoever to the Guarantor or anyone else for failing to: (i) preserve, protect or marshal any collateral it may hold as security for the Obligations of the Borrower, or the obligations of the Guarantor hereunder; (ii) preserve or protect the rights of the Borrower or any other obligor with respect to the Obligations against any person claiming an interest in any collateral the Lenders may hold as security for the Obligations of the Borrower, or the obligations of the Guarantor hereunder; (iii) realize upon any collateral the Lenders may hold as security for the Obligations of the Borrower, or the obligations of the Guarantor hereunder; in any particular order or manner or seek repayment of the Obligations from any particular source; or (iv) permit any substitution or exchange of all or any part of any collateral the Lenders may hold as security for the Obligations of the Borrower, or the obligations of the Guarantor hereunder; or release any part of any said collateral from any lien, even if that substitution or release would leave the Lenders adequately secured.

17.   All notices, requests and other communications pursuant to this Guaranty shall be in writing, to be delivered in the same manner as notices are to be given under the Loan Agreement, addressed to the Agent at its office located at PNC Bank Center, Two Tower Center, East Brunswick, New Jersey 08816, Attention:  Joanne Fu, Relationship Manager or to the Guarantor at c/o CD Financial, LLC, 3299 NW Second Avenue, Boca Raton, Florida 33431, or at such other address as either may give notice to the other as herein provided.  Any notice, request or communication hereunder shall be deemed to have been given when delivered.
 
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18.   The words importing the singular number mean and include the plural number and vice versa, and words of the masculine gender mean and include correlative words of the feminine and/or neuter gender and vice versa.

19.   This Guaranty shall be construed in accordance with and governed by the laws of the State of New York.

20.   This Guaranty shall be binding upon the Guarantor, as well as his heirs, beneficiaries, legal representatives, successors and/or assigns and inure to the benefit of the Lenders and the Lenders’ successors and permitted assigns as provided in Section 16.3 of the Loan Agreement.

21.   THE GUARANTOR AND THE BANK EACH HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, OF ANY FEDERAL COURT LOCATED IN THE STATE OF NEW YORK IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE OBLIGATION.  THE GUARANTOR HEREBY WAIVES TO THE EXTENT PERMITTED BY APPLICABLE LAW THE DEFENSES OF FORUM NON CONVENIENS AND IMPROPER VENUE.

22.   THE GUARANTOR AND THE BANK EACH EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LITIGATION RELATING TO, IN CONNECTION WITH, OR ARISING OUT OF THIS GUARANTY OR ANY OTHER DOCUMENT DELIVERED IN CONNECTION WITH ANY OF THE OBLIGATIONS.

23.  This Guaranty shall terminate at the earlier of (x) at such time as all Obligations are fully and indefeasibly paid in full to the Lenders or otherwise satisfied in full and (y) the date that each of the following has occurred: (i) the repayment or prepayment of the principal amount of the Term Loan in an amount of not less than $1,000,000, (ii) receipt and satisfactory review by the Agent of the Borrowers’ annual financial statements deliverable pursuant to Section 9.7 of the Loan Agreement for the fiscal year ending June 30, 2013 which shall reflect, among other things, a calculation of EBITDA (as such term is defined in the Loan Agreement) of the Borrowers of not less than $1,500,000 for such fiscal period, and (iii) receipt by the Agent of evidence that no Default and/or Event of Default shall have occurred and be continuing at such time.  Upon such termination, the Guarantor shall be released from all obligations under this Guaranty without any additional consent or action from any Lender or the Agent.


IN WITNESS WHEREOF, the Guarantor has executed this Guaranty this 27 th day of June, 2012.


WITNESS:
 

 
 /s/ William H. Milmoe    /s/ Carl DeSantis
  Name:  William H. Milmoe     Name:  CARL DeSANTIS
 
 
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STATE OF FLORIDA         :                                             
        : SS.
COUNTY OF PALM BEACH                   :


BE IT REMEMBERED, that on this 26th day of June, 2012 before me, the subscriber, a Notary Public of Florida, personally appeared CARL DeSANTIS who, I am satisfied, is the person named in and who executed the within Guaranty, and thereupon he acknowledged that he signed, sealed and delivered the same as his act and deed, for the uses and purposes therein expressed.

/s/ Maritza F. Benitez
Maritza F. Benitez
Notary Public of Florida
 
 
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Exhibit 10.5

CONTINUING LIMITED GUARANTY

 
 
THIS CONTINUING LIMITED GUARANTY (this “Guaranty”) dated June 27th, 2012 made by E. GERALD KAY (the “Guarantor”), in favor of PNC BANK, NATIONAL ASSOCIATION, a National Banking Association organized under the laws of the United States of America, having an office located at PNC Bank Center, Two Tower Center Boulevard, East Brunswick, New Jersey  08816, as Agent for the Lenders, (the “Bank”).

W I T N E S S E T H :

WHEREAS, pursuant to a certain Revolving Credit, Term Loan and Security Agreement (as it may be amended, supplemented, replaced or restated from time to time, the “Loan Agreement”) dated the date hereof by and among INTEGRATED BIOPHARMA, INC., InB:MANHATTAN DRUG COMPANY, INC., AGROLABS, INC., IHT HEALTH PRODUCTS, INC., VITAMIN FACTORY, INC., IHT PROPERTIES CORP. , (collectively, “the “Borrower”), the Bank, the various financial institutions named therein or which hereafter become a party thereto (together with the Bank collectively, “Lenders”) and the Bank as agent for Lenders (in such capacity, “Agent”), the Lenders have agreed to make certain loans to the Borrower; and

WHEREAS, the Borrower and the Lenders agree that in order to secure said loans, the applicable parties shall execute the Loan Agreement and all of the Other Documents (as such term is defined in the Loan Agreement) to the extent it is a party thereto including, but not limited to this Guaranty (to the extent that it is a party thereto) and agree to the terms and conditions set forth herein or set forth elsewhere in the Loan Agreement and the Other Documents to the extent it is a party thereto; and

WHEREAS, as a condition precedent to the making of the loans by the Lenders to the Borrower, the Guarantor has agreed to guaranty to the Lenders repayment of the Obligations (as defined below) in accordance with and subject to the provisions of this Guaranty; and

WHEREAS, the Guarantor derives a benefit from the Lenders’ extension of credit to the Borrower pursuant to the Loan Agreement.

NOW, THEREFORE, in consideration of the premises and in order to induce the Lenders to make and/or continue to make the Loans and Advances (as each such term is defined in the Loan Agreement), the Guarantor hereby agrees with the Lenders as follows:

1.   In consideration of the Loans and Advances made pursuant to the terms of the Loan Agreement and the Other Documents, and to enable the Loans and Advances to be maintained or obtained by the Borrower under the terms of the Loan Agreement and the Other Documents, the Guarantor hereby irrevocably and unconditionally guarantees the full, prompt and unconditional payment, when due, whether by acceleration or otherwise, of any and all Obligations (as defined in the Loan Agreement) , together with interest thereon and all attorneys’ fees, costs and expenses of collection incurred by the Bank or Lenders in enforcing any of their rights under the Loan Agreement, the Other Document or this Guaranty (the “Obligations of the Borrower” or “Obligations”).  Notwithstanding any other provision of this Guaranty, the Guarantor shall only be liable hereunder for the Obligations up to a maximum aggregate amount of One Million and 00/100 Dollars ($1,000,000).

2.   This Guaranty shall extend to and cover every extension or renewal of, and every obligation accepted in substitution for, any Obligations of the Borrower, which extensions, renewals or substitutions are herein consented and agreed to, and the Guarantor shall be bound hereby irrespective of the existence, value or condition of any collateral the Agent may at any time hold or the validity, irregularity or enforceability of any instrument, writing or arrangement relating to any such Obligations of the Borrower or collateral and irrespective of any present or future law or order of any government (whether of right or in fact) or of any agency thereof, purporting to reduce, amend or otherwise affect any Obligations of the Borrower or to vary the terms of payment of the Obligations.
 
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3.   The Guarantor hereby waives notice of acceptance of this Guaranty and also waives diligence, presentment, demand, protest and notice of dishonor of any obligations evidenced by a note or otherwise, and notice of any other kind whatsoever.

4.   The Guarantor hereby assents to all terms and agreements made by the Borrower, or any other obligor under the Loan Documents with respect to the Loans and/or Advances, with the Lenders.

5.   The Guarantor hereby consents and agrees that the Lenders may, without prejudice to any claim against the Guarantor hereunder, at any time, or from time to time, in the Lenders’ reasonable discretion and in accordance with the terms of the Loan Agreement and the Other Documents, and without notice to the Guarantor: (a) renew, extend or change the time of payment and the manner, place or terms of payment of any Obligations of the Borrower; (b) exchange, release or surrender all or any collateral which the Lenders may at any time hold as security for the Obligations of the Borrower, or the obligations of the Guarantor independently hereunder; (c) waive, release or subordinate any security interest, in whole or in part, now or hereafter held as security for any of the Obligations of the Borrower, or the obligations of the Guarantor hereunder; (d) sell and cause the Lenders, or any of them, to purchase any collateral in which the Lenders have a security interest at any public or private sale or at any broker’s board, crediting net proceeds upon any obligation secured thereby; (e) settle or compromise, with the Borrower or with any other obligor with respect to the Loans and/or Advances, any Obligations of the Borrower; (f) subordinate the payment of any Obligations of the Borrower or obligations of any other person or entity to the payment of any other debt which may be owing to the Lenders; or (g) apply any sums by whomsoever paid or whosoever realized to any Obligations of the Borrower.

6.   This Guaranty is a continuing guaranty and nothing shall terminate, discharge or satisfy the liability of the Guarantor hereunder until the Obligations of the Borrower shall have been indefeasibly paid in full, subject, however, to Section 23 below.

7.   The Agent may, in its reasonable discretion, exercise any right or remedy which the Lenders have under this Guaranty, the Loan Agreement, the Other Documents, or by law (such rights and remedies being cumulative and not alternative or exclusive) without pursuing or exhausting any right or remedy which the Lenders have against the Borrower or any other person or entity or which the Lenders have with respect to any collateral or any other guaranty of any or all of such Obligations.  The Lenders need not join the Borrower or any other person or entity as a party in any action brought to enforce the provisions hereof; and the Lenders may exercise any right or remedy which they have under this Guaranty without regard to any actions or omissions of the Borrower or any other person or entity.

8.   No delay on the Lenders’ part in exercising any right hereunder or in taking any action to collect or enforce payment of any Obligations of the Borrower, either as against the Borrower or any other person or entity, shall operate as a waiver of any such right or in any manner prejudice the Lenders’ rights against the Guarantor.

9.   The Guarantor agrees that, if any of the Obligations of the Borrower are not paid when due after giving effect to any applicable grace and/or notice period set forth in the Loan Agreement and such Event of Default is continuing, the Guarantor will, without demand upon or notice to the Guarantor but subject to the limitations set forth in Section 1 herein, forthwith satisfy such Obligations, or if the maturity of any Obligations of the Borrower hereby guaranteed is accelerated, by bankruptcy or otherwise as against the Borrower, such maturity shall also be deemed accelerated for the purposes of this Guaranty and without demand upon or notice to the Guarantor, and the Lenders may collect from the Guarantor the total amount hereby guaranteed, subject to the limitations set forth in Section 1 herein.

10.   As security for the performance of the Guarantor’s obligations hereunder, the Guarantor: (a) hereby acknowledges the assignment, pledge and grant by the Borrower to the Agent and Lenders, pursuant to the Loan Agreement, of a continuing security interest in and to all of the Collateral (as that term is defined in the Loan Agreement); and (b) grants the Lenders a right of setoff against all monies, deposits, instruments or other property of any kind, without limitation, owned by the Guarantor or in which the Guarantor has a joint or contingent interest and which now or any time hereafter are in the possession or control of the Lender or in transit by mail or carrier to or from the Lender or in possession of any third person acting on the Lender’s behalf for any reason whatsoever.
 
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11.   The Guarantor shall not exercise any rights it has acquired by way of subrogation under this Guaranty or otherwise, unless and until all of the Obligations of the Borrower have been paid in full.  If any payment is made to the Guarantor on account of such subrogation rights when any of the obligations of the Borrower are not paid in full, each and every amount so paid will forthwith be turned over to the Agent to be credited and applied upon any of the Obligations of the Borrower whether matured or unmatured.  Any and all present and future debts and obligations of the Borrower to the Guarantor are hereby waived and postponed in favor of and subordinated to the full payment and performance of all Obligations of the Borrower to the Lenders.

12.   This Guaranty shall continue to be effective or reinstated, as the case may be, if at any time payment of any of the Obligations of the Borrower, or any part thereof, is rescinded or must otherwise be returned by the Lenders upon the insolvency or bankruptcy of the Borrower, or otherwise, as though such payment had not been made.

13.   The release by the Lenders of any other guarantor, or settlement with such other guarantor or the revocation or impairment of such guaranty, shall not operate to prejudice the Lenders’ rights against the Guarantor hereunder.

14.   No waiver of any of the Lenders’ rights hereunder and no modification or amendment of this Guaranty, shall be deemed to be made by the Lenders unless the same shall be in writing, duly signed on behalf of the Lenders by a duly authorized officer and the Guarantor, and each such waiver, if any, shall apply only with respect to the specific instance involved, and shall in no way impair the rights or the obliga­tions of the Guarantor to the Lenders in any other respect at any other time.

15.   Notwithstanding anything herein to the contrary, until such time as the Obligations have indefeasibly been repaid in full, the Guarantor hereby irrevocably waives and covenants not to assert any and all legal and equitable rights to recover from the Borrower (i) any sums paid by the Guarantor under the terms of this Guaranty including, without limitation, all rights of subrogation and all other rights that would result in the Guarantor being deemed a creditor of the Borrower under the Federal Bankruptcy Code, and any other law, and (ii) any and all claims the Guarantor has or may have against the Borrower which are not related to or arising from or in connection with this Guaranty, or other documents delivered in connection with the Obligations, that do or would result in the Guarantor being deemed a creditor of the Borrower under the Federal Bankruptcy Code or any other law.

16.   The Lenders shall be under no duty or obligation to the Guarantor or anyone else to, nor shall the Lenders have any liability whatsoever to the Guarantor or anyone else for failing to: (i) preserve, protect or marshal any collateral it may hold as security for the Obligations of the Borrower, or the obligations of the Guarantor hereunder; (ii) preserve or protect the rights of the Borrower or any other obligor with respect to the Obligations against any person claiming an interest in any collateral the Lenders may hold as security for the Obligations of the Borrower, or the obligations of the Guarantor hereunder; (iii) realize upon any collateral the Lenders may hold as security for the Obligations of the Borrower, or the obligations of the Guarantor hereunder; in any particular order or manner or seek repayment of the Obligations from any particular source; or (iv) permit any substitution or exchange of all or any part of any collateral the Lenders may hold as security for the Obligations of the Borrower, or the obligations of the Guarantor hereunder; or release any part of any said collateral from any lien, even if that substitution or release would leave the Lenders adequately secured.
 
 
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17.   All notices, requests and other communications pursuant to this Guaranty shall be in writing, to be delivered in the same manner as notices are to be given under the Loan Agreement, addressed to the Agent at its office located at 340 Madison Avenue, New York, New York  10173, Attention:  Joanne Fu, Relationship Manager, to the Guarantor at c/o Integrated BioPharma, Inc., 225 Long Avenue, Hillside, NJ 07205, or at such other address as either may give notice to the other as herein provided.  Any notice, request or communication hereunder shall be deemed to have been given when delivered.

18.   The words importing the singular number mean and include the plural number and vice versa, and words of the masculine gender mean and include correlative words of the feminine and/or neuter gender and vice versa.

19.   This Guaranty shall be construed in accordance with and governed by the laws of the State of New York.

20.   This Guaranty shall be binding upon the Guarantor, as well as his heirs, beneficiaries, legal representatives, successors and/or assigns and inure to the benefit of the Lenders and the Lenders’ successors and permitted assigns as provided in Section 16.3 of the Loan Agreement.

21.   THE GUARANTOR AND THE BANK EACH HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, OF ANY FEDERAL COURT LOCATED IN THE STATE OF NEW YORK IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE OBLIGATION.  THE GUARANTOR HEREBY WAIVES TO THE EXTENT PERMITTED BY APPLICABLE LAW THE DEFENSES OF FORUM NON CONVENIENS AND IMPROPER VENUE.

22.   THE GUARANTOR AND THE BANK EACH EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LITIGATION RELATING TO, IN CONNECTION WITH, OR ARISING OUT OF THIS GUARANTY OR ANY OTHER DOCUMENT DELIVERED IN CONNECTION WITH ANY OF THE OBLIGATIONS.

23.   This Guaranty shall terminate at the earlier of (x) at such time as all Obligations are fully and indefeasibly paid in full to the Lenders or otherwise satisfied in full and (y) the date that each of the following has occurred: (i) the repayment or prepayment of the principal amount of the Term Loan in an amount of not less than $1,000,000, (ii) receipt and satisfactory review by the Agent of the Borrowers’ annual financial statements deliverable pursuant to Section 9.7 of the Loan Agreement for the fiscal year ending June 30, 2013 which shall reflect, among other things, a calculation of EBITDA (as such term is defined in the Loan Agreement) of the Borrowers of not less than $1,500,000 for such fiscal period, and (iii) receipt by the Agent of evidence that no Default and/or Event of Default shall have occurred and be continuing at such time.  Upon such termination, the Guarantor shall be released from all obligations under this Guaranty without any additional consent or action from any Lender or the Agent.


IN WITNESS WHEREOF, the Guarantor has executed this Guaranty this 27th day of June , 2012.
 
WITNESS:
 

 
 /s/ Dina L. Masi   /s/ E. Gerald Kay
  Name:  DINA L. MASI     Name:  E. GERALD KAY
 
 
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STATE OF NEW JERSEY:                                             
        : SS.
COUNTY OF UNION:


BE IT REMEMBERED, that on this 26th day of June, 2012 before me, the subscriber, a Notary Public of New Jersey, personally appeared E. GERALD KAY, who, I am satisfied, is the person named in and who executed the within Guaranty, and thereupon he acknowledged that he signed, sealed and delivered the same as his act and deed, for the uses and purposes therein expressed.
 
 
   
   
     
By:
/s/ Mireille M. Antinozzi  
  Mireille M. Antinozzi
   Notary Public
 
(Print Name and Title)
 

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Exhibit 10.6

STOCK PLEDGE AGREEMENT

THIS STOCK PLEDGE AGREEMENT ("Pledge Agreement") made this 27th day of June, 2012 by and between INTEGRATED BIOPHARMA, INC., a Delaware corporation having an address at 225 Long Avenue, Building 15, P.O. Box 278, Hillside, New Jersey  07025 (the “Pledgor”), and PNC BANK, NATIONAL ASSOCIATION , as Agent for the Lenders, having an office at Two Tower Center Boulevard, East Brunswick, New Jersey 08816 (the “Bank” and “Pledgeholder”):

WHEREAS , to induce the Bank to extend a certain credit facility in the aggregate principal amount of $11,727,000 (as may be increased from time to time, the “Loan”) in favor of the Pledgor and certain other borrowing entities (collectively, the “Borrowers”) as evidenced by a certain Revolving Credit Note dated the date hereof executed by the Borrowers in favor of the Bank in the amount of $8,000,000 (as may be amended, restated, modified, replaced, extended and/or increased from time to time, the “Revolving Note”) and a certain Term Note dated the date hereof executed by the Borrowers in favor of the Bank in the amount of $3,727,000 (as may be amended, restated, modified, replaced, extended and/or increased from time to time, the “Term Note” and collectively with the Revolving Note and all other promissory notes executed from time to time with regard thereto, the “Note”), and in accordance with the terms of a certain Revolving Credit, Term Loan and Security Agreement of even date herewith by and among the Borrowers, the Bank, certain other financial institutions (collectively with the Bank, the “Lenders”) and the Bank as Agent for the Lenders (as may be amended, restated, modified and/or replaced from time to time, the “Loan Agreement”), the Pledgor has agreed to secure the Obligations (as defined in the Loan Agreement) in part by the pledge of certain stock of iBio, Inc., a corporation of the State of Delaware, (as described in Schedule A annexed hereto, the “Stock”) in accordance with the terms hereof, said Stock to be held in trust by the Pledgeholder.

IT IS, THEREFORE, AGREED:

1.   Pledge .  In consideration of the credit facilities granted by the Pledgeholder to the Pledgor and for other good and valuable consideration, receipt of which is acknowledged, the Pledgor, as security for the Loans, hereby grants to the Pledgeholder a security interest in, and assigns and pledges to Pledgeholder, the Stock, as more specifically set forth on Schedule A annexed hereto, whether or not said Stock is represented by certificates.  The stock certificates representing ownership of said Stock have simultaneously been delivered to the Pledgeholder, duly endorsed in blank.  The Pledgor appoints the Pledgeholder its attorney to arrange for the transfer of the Stock to the name of the Pledgeholder.  The Pledgeholder shall hold the pledged Stock as security for the Obligations of the Pledgor for the benefit of the Pledgeholder, and shall not encumber or dispose of the shares except in accordance with the provisions of this Pledge Agreement.

Pledgor covenants and agrees that it will maintain and preserve the lien of the pledge and security interest hereunder as a first lien on the Stock, and will defend the interest of Pledgeholder therein against the claims and demands of all persons who may claim the same.

Pledgeholder acknowledges and agrees that this Pledge Agreement constitutes written notification to Pledgeholder of: (i) the pledge, transfer and assignment to Pledgeholder of, and Pledgeholder’s interest in, the Stock; and (ii) the transfer by Pledgor to Pledgeholder of a security interest in the Stock.

2.   Appointment of Pledgeholder .  The Pledgor hereby designates the Pledgeholder to act as Pledgor's agent and for Pledgor's benefit in accordance with the terms hereof and the Pledgeholder hereby accepts said designation and agrees to act as the Pledgor's agent and for Pledgor's benefit in accordance with the terms hereof.  The Pledgor hereby authorizes the Pledgeholder to:  (a) exercise such powers and perform such duties for the benefit of the Pledgeholder under the provisions of this Pledge Agreement; and (b) exercise all remedies available to the Pledgeholder under this Pledge Agreement including, without limitation, the right to foreclose or otherwise realize upon the Stock.  The Pledgeholder may perform any of its duties hereunder by or through its agents or employees.  This Section 2 is subject to the specific terms and conditions set forth herein, in the Loan Agreement and the Other Documents with regard to the Pledgeholder’s ability to exercise such rights and remedies subject to the occurrence and continuance of a Default and/or an Event of Default.

3.   Voting Rights .  During the term of this pledge, and so long as no Default or Event of Default exists under the Loan Agreement, this Pledge Agreement or any Other Document, the Pledgor shall have the right to vote the pledged shares on all corporate questions, and the Pledgeholder shall execute due and timely proxies in favor of the Pledgor to this end.
 
 
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4.   Representations .  The Pledgor warrants and represents that (a) the Pledgor owns the Stock, and (b) there are no restrictions upon the transfer of any of the Stock and the Pledgor has the right to transfer such Stock free of any encumbrances other than Permitted Encumbrances and without obtaining the consents of the others except as otherwise specifically set forth on the certificates.

5.   Covenant .  Pledgor shall immediately upon the execution of this Pledge Agreement make appropriate
entries on the books of the companies represented by the Stock to reflect the security interest of the Pledgeholder in the Stock.

6.   Adjustments .  In the event that, during the term of this pledge, any share dividend, reclassification, readjustment, or other change is declared or made in the structure of the companies represented by the Stock, all new, substituted, and additional shares, or other securities, issued by reason of any such change shall be held by the Pledgeholder under the terms of this Pledge Agreement in the same manner as the Stock originally pledged hereunder.

7.   Warrants and Rights .  In the event that during the term of this pledge, subscription warrants or any other rights or options shall be issued in connection with the Stock, such warrants, rights and options shall be immediately assigned by the Pledgeholder to the Pledgor, and if exercised by the Pledgor all new shares or other securities so acquired by the Pledgor shall be immediately assigned to the Pledgeholder to be held under the terms of this Pledge Agreement in the same manner as the Stock originally pledged hereunder.  Notwithstanding anything contained herein, provided no Default and/or Event of Default has occurred and is continuing under the Loan Agreement, this Pledge Agreement or any Other Document, the Pledgor shall be entitled to all cash dividends, interest and other cash distributions made in connection with the securities pledged hereunder.

8.   Payment of Loan .  Upon payment in full of the Obligations, the Pledgeholder shall transfer to the Pledgor all the Stock and all rights received by the Pledgeholder as a result of its record ownership thereof.

9.   Default .  In the event that the Pledgor defaults in the performance of any of the terms of this Pledge Agreement, the Loan Agreement, any Other Document and/or the Obligations, the Pledgeholder shall have the rights and remedies provided in the Loan Agreement, the Other Documents and the Uniform Commercial Code in force in the State of New York and in this connection the Pledgeholder may, without liability for any diminution in price which may have occurred, sell all the Stock in such manner and for such price as the Pledgeholder may reasonably determine.  At any bona fide public sale the Pledgeholder shall be free to purchase all or any part of the pledged shares.  Out of the proceeds of any sale the Pledgeholder may retain an amount equal to the Obligations then due on the Loan, plus the amount of the expenses of the sale, and shall pay any balance of such proceeds to the Pledgor.

10.   Enforcement of Stock Pledge Agreement .  The Pledgeholder may, in its sole discretion, exercise any right or remedy which the Pledgeholder has under this Pledge Agreement or by law (such rights and remedies being cumulative and not alternative or exclusive) without pursuing or exhausting any right or remedy the Pledgeholder has against the Borrowers or any other person or entity, or which the Pledgeholder has with respect to any collateral for any or all of the Obligations of the Borrowers. The Pledgeholder need not join any Pledgor or the Borrowers or any other person or entity as a party in any action brought to enforce the provisions hereof; and the Pledgeholder may exercise any right or remedy which it has under this Pledge Agreement without regard to any actions or omissions of the Borrowers or any other person or entity.  In the event of a Default and/or an Event of under this Pledge Agreement, the Loan Agreement and/or any Other Document and the continuance thereof, after expiration of any applicable grace period therein provided, the Pledgeholder shall be entitled to immediately enforce the obligations of Pledgor hereunder.

11.   Stock Pledge Agreement Not Affected . Subject to any rights of Borrowers under the Loan Agreement and the Other Documents (including, without limitation, any rights to agree or consent to any changes, amendments or modifications to any of the Obligations, the Loan Agreement, any Other Document or any other agreement executed in connection therewith), the Pledgor hereby consents and agrees that, at any time, and from time to time, without notice to the Pledgor:

(i)            the time, manner, place and/or terms of payment of any of the Obligations may be extended or modified;

(ii)            any collateral, or any other pledge agreement, for any of the Obligations may be exchanged, released, surrendered, or otherwise disposed of;

(iii)           any action may be taken under or in respect of any agreements, notes or documents pursuant to which any of the Obligations arise, in the exercise of any remedy, power or privilege therein contained or otherwise with respect thereto, or such remedy, power or privilege may be waived, omitted, or not enforced;

(iv)           the time for the Borrowers’ performance of or compliance with any term, covenant or agreement on its part to be performed or observed under any agreements, notes or documents pursuant to which any of the Obligations arise may be extended, or such performance or compliance may be waived, or failure in or departure from such performance or compliance may be consented to;

(v)            the Loan Agreement and/or any Other Document, or any term thereof, may be amended or modified in any respect (including, without limitation the interest rate);

(vi)            the liability of the Borrowers, or any Pledgor hereunder may be released, settled or compromised; and

(vii)         monies received from the Borrowers or others, or from collateral held for the Obligations, may be applied by the Pledgeholder against other indebtedness owed by the Borrowers to the Bank, as the Pledgeholder in its sole discretion determines; all in such manner and upon such terms as the Pledgeholder deems proper, without notice to or further assents from the Pledgor, and all without affecting this Pledge Agreement or the obligations of the Pledgor hereunder, which shall continue in full   force and effect until the Obligations and all obligations of the Pledgor hereunder shall have been fully   paid and performed.
 
 
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12.   Notice of Acceptance .  Pledgor hereby waives notice of acceptance of this Pledge Agreement, presentment and demand for payment, notice of dishonor, protest and notice of protest or non-compliance with the terms and provisions of the Note, the Loan Agreement and/or any Other Document.  No act or omission of any kind in the premises shall in any way affect or impair this Pledge Agreement.

13.   Marshalling of Assets .  Pledgor hereby waives any right or claim of right to cause a marshalling of the Borrower's assets or to cause Pledgeholder to proceed against any of the security held by the Pledgeholder before proceeding against any Pledgor, or to proceed against any Pledgor in any particular order, and Pledgor hereby waives any requirement that Pledgeholder shall institute any action or proceedings at law or in equity against Borrower, or anyone else, with respect to the Note, the Loan Agreement and/or any Other Document or with respect to any other security held by Pledgeholder, as a condition precedent to bringing an action against the Pledgor upon this Pledge Agreement.

14.   Subordination and Subrogation .  Subject to the terms and conditions of the Loan Agreement and the Other Documents (including but not limited to Section 7.5 of the Loan Agreement), in the event any Borrower or any successor thereto subsequent shall hereafter become indebted to the Pledgor, the amount of each sum and of such indebtedness shall at all times be subordinate as to lien, time of payment, and in all other respects, to the   amounts owing to the Pledgeholder under the Note, the Loan Agreement and/or any Other Document, and Pledgor shall not be entitled to enforce or receive payment thereof until all Obligations have been paid. Nothing herein contained is intended or shall be construed to give to Pledgor any right of subrogation in or under the Note, the Loan Agreement and/or any Other Document or any right to participate in any way therein, or in the right, title or interest of Pledgeholder in any collateral, notwithstanding any payments made by Pledgor under this Pledge Agreement, all rights of subrogation and participation being hereby expressly waived and released until all Obligations have been paid in full.

15.   No Waiver; Delay .  No delay on the part of the Pledgeholder in exercising any of its rights, powers or privileges or partial or single exercise thereof under this Pledge Agreement, the Loan Agreement and/or any Other Document shall operate as a waiver of any such privileges, powers or rights. No waiver of any of its rights hereunder, and no modification or amendment of this Pledge Agreement, shall be deemed to be made by Pledgeholder unless the same shall be in writing, duly signed on behalf of Pledgeholder by a duly authorized officer, and each such waiver, if any, shall apply only with respect to the specific instance involved, and shall in no way impair the rights of Pledgeholder or the obligations of the Pledgor to Pledgeholder in any other respect at any other time.

16.   Definitions .  The terms used herein and not otherwise defined or modified herein shall have the meanings ascribed to them in the Loan Agreement.  The terms used herein and not otherwise defined or modified herein or defined in the Loan Agreement shall have the meanings ascribed to them by the Uniform Commercial Code as enacted in New York.
 
 
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17.   Governing Law .  The Pledgor and Pledgeholder elect that the laws of New York shall govern the construction of this Pledge Agreement and the rights, remedies, warranties, representations, covenants, and provisions hereof without regard to the principles of conflict of laws other than Section 5-1401 of the New York General Obligations Law.

IN WITNESS WHEREOF, the parties have hereunto executed this Pledge Agreement the day and year first above mentioned.
 
 
 
ATTEST:
INTEGRATED BIOPHARMA, INC.
   
By:
/s/ Dina L. Masi  
By:
/s/ E. Gerald Kay  
Name:  DINA L. MASI
Name:  E. GERALD KAY
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
 
 
 
 
PNC BANK, NATIONAL ASSOCIATION,
 
As Agent for Lenders
   
     
By:
/s/ Brian Conway  
 
Name:  BRIAN CONWAY
 
Title:  Vice President
   
   
   
   
   
 
 
 
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Schedule A


PLEDGED STOCK


Name of Company
Pledgor
Certificate No.
No. of Shares
Voting         Non-Voting
iBio, Inc.
Pledgor
2198
323,820
0
iBio, Inc.
Pledgor
2199
942,886
0

 
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Exhibit 10.7
INTERCREDITOR AND SUBORDINATION AGREEMENT

THIS INTERCREDITOR AND SUBORDINATION AGREEMENT (this “Subordination Agreement”) is made as of the 27 th day of June, 2012 by and between PNC BANK, NATIONAL ASSOCIATION , as Agent for Lenders (the "Bank”) and CD Financial, LLC, a Florida limited liability company having its principal place of business at 3299 NW Second Avenue, Boca Raton, Florida 33431 (the “Junior Creditor”), and is acknowledged by Integrated BioPharma, Inc., a Delaware corporation, InB:Manhattan Drug Company, Inc., a New York corporation, AgroLabs, Inc., a New Jersey corporation, IHT Health Products, Inc., a Delaware corporation, Vitamin Factory, Inc., a Delaware corporation, and IHT Properties Corp., a Delaware corporation (collectively, the “Borrower”).

WHEREAS, Junior Creditor has extended credit to Integrated BioPharma, Inc. under the Subordinated Loan Documentation, as such term is defined in the Loan Agreement (as hereinafter defined), and in conjunction therewith have obtained a security interest in and lien on all of the assets of the Borrower; and

WHEREAS , the Bank and the Lenders are entering into that certain Revolving Credit, Term Loan and Security Agreement dated June 26, 2012   with the Borrower, under which Bank and other lenders have made, and may make revolving loans and advances, a term loan, or other financial accommodations to Borrower and in conjunction therewith the Bank as Agent for Lenders will obtain a security interest in and lien upon all of the assets of Borrower; and

WHEREAS , it is a condition precedent to the Bank and other lenders extending financial accommodations to Borrower that the Junior Creditor enter into this Intercreditor and Subordination Agreement so as to set forth the priorities of their respective liens on the assets of Borrower and the indebtedness of Borrower to the Junior Creditor and the Bank.

NOW THEREFORE , for valuable consideration, receipt of which is hereby acknowledged, and in consideration of the loans, advances, discounts, renewals or extensions of credit now or hereafter made by the Bank to or for the account of the Borrower, the Junior Creditor and the Bank agree as follows:

1.   The term “Subordinated Indebtedness” shall mean all indebtedness, obligations and liabilities of every nature of the Borrower and of Borrower’s subsidiaries to the Junior Creditor arising under the Subordinated Loan Documentation (including, but not limited to, the Subordinated Liquidity Note, the Subordinated Securities Note and the Subordinated Subsidiary Guarantee, as such terms are defined in the Loan Agreement), whether now existing or hereafter arising or incurred, absolute or contingent, direct or indirect, secured or unsecured, liquidated or unliquidated, due or not due, joint or several, and however arising, whether created directly or acquired by assignment or incurred by the Borrower as principal, maker, surety, endorser, guarantor or otherwise, together with all extensions, renewals or modifications thereof and any attorneys’ fees incurred in connection therewith.  The Junior Creditor represents and warrants that the Subordinated Indebtedness is the sum of $7,064,000 evidenced by the Subordinated Liquidity Note and the Subordinated Securities Note.  The Junior Creditor shall not amend or modify the Subordinated Liquidity Note and/or the Subordinated Securities Note without the prior written consent of the Bank.  The Junior Creditor covenants that it shall not enter into, or be the beneficiary of, any other arrangements or agreements regarding any additional Subordinated Indebtedness.  The term “Collateral” shall mean all real and personal property and other tangible and intangible and other assets of Borrower in which either the Junior Creditor or the Bank has a security interest or lien.  “Security Agreement” means the security agreement or other security instrument by the Borrower in favor of the Junior Creditor and the Bank.

2.   The term "Senior Indebtedness" shall mean all Obligations (as such term is defined in the Loan Agreement) of every kind, nature and description of the Borrower to or with the Bank and/or the Lenders (as such term is defined in the Loan Agreement), or with an affiliate of the Bank or Lenders, whether or not arising out of or under that certain Revolving Credit, Term Loan and Security Agreement dated June 26, 2012 (as it has been, is being and may further be amended, modified, extended, supplemented, replaced or restated from time to time, the "Loan Agreement") by and among the Borrower, the Bank, the other Lenders, and the Bank as Agent for the Lenders, including, without limitation, principal, interest, charges, expenses, attorneys' fees, and whether secured or unsecured, direct or indirect, absolute or contingent, joint and/or several, due or to become due, liquidated or unliquidated, now existing or hereafter contracted (including, without limitation any participation or interest of the Bank, or any affiliate of the Bank in any obligation of the Borrower to others) acquired outright, conditionally or as collateral security from another, and whether incurred by the Borrower as principal, surety, endorser, guarantor, accommodation party or otherwise, together with any extensions, renewals or modifications thereof.
 
 
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3.   The Junior Creditor hereby subordinates, to the extent and in the manner set forth herein, all Subordinated Indebtedness howsoever evidenced and whether now existing or hereafter incurred to all Senior Indebtedness until all the Senior Indebtedness (other than the Remaining Obligations) shall be fully paid and satisfied.  The Junior Creditor and the Borrower covenant and agree that the Subordinated Indebtedness shall be junior in right of repayment or payment to the prior repayment in full of all Senior Indebtedness to the extent and in the manner set forth herein.  The Junior Creditor and the Borrower further covenant and agree that until all of the Senior Indebtedness (other than the Remaining Obligations) have been fully paid and satisfied, no payment of principal and/or interest on account of the Subordinated Indebtedness, or guaranty of any nature, shall be made or given, by or on behalf of the Borrower, nor be demanded, accepted, received or applied by the Junior Creditors for or on account of the Subordinated Indebtedness except (A) when (i) no Default and/or Event of Default has occurred and is continuing prior to and after making such payment, (ii) the Borrower provides to the Bank evidence that the Borrower is and will be in pro forma compliance with the Fixed Charge Coverage Ratio (as of the then most recently completed fiscal quarter) set forth in Section 6.5 of the Loan Agreement prior to and immediately after making such payment, and (iii) the Borrower provides to the Bank evidence that the Borrower has and will have Undrawn Availability of not less than $1,000,000 prior to and after making such payment, then the Borrower may pay and the Junior Creditor shall have the right to receive cash interest and any and all accrued and unpaid interest, except to the extent that Borrower is otherwise limited or restricted from making such payments under the Loan Agreement and (B) the Borrower may pay and the Junior Creditor shall have the right to receive payments of principal solely with regard to the Subordinated Liquidity Note upon (i) the repayment or prepayment of the principal amount of the Term Loan in an amount of not less than $1,000,000, (ii) receipt and satisfactory review by the Bank of the Borrower’s annual financial statements deliverable pursuant to Section 9.7 of the Loan Agreement for the fiscal year ending June 30, 2013 which shall reflect, among other things, a calculation of EBITDA of the Borrower of not less than $1,500,000 for such fiscal period, (iii) receipt by the Bank of evidence that no Default and/or Event of Default shall have occurred and be continuing at such time, (iv) receipt by the Bank of evidence that the Borrower has an Undrawn Availability of not less than $1,750,000 prior to and immediately after giving effect to any such payment of principal with regard to the Subordinated Liquidity Note, and (v) receipt by the Bank of evidence that the aggregate amount of any such payment of principal with regard to the Subordinated Liquidity Note, in full or in part, does not exceed an amount equal to fifty percent (50%) of Excess Cash Flow of the Borrower for such fiscal year.

4.   Notwithstanding the terms of any Security Agreement heretofore or hereafter entered into between the Junior Creditor or the Bank, and the Borrower, or the date of the filing of any financing statements heretofore or hereafter filed by the Junior Creditor or the Bank against Borrower, or any other action by the Junior Creditor or the Bank with regard to perfection of a security interest or lien, any security interest, lien, claim or right now or hereafter asserted by the Junior Creditor with respect to the Collateral shall be subject, junior and subordinate in all respects to the security interest, lien, claim or right now or hereafter asserted by the Bank with respect thereto.  As between the Bank and the Junior Creditor, the first priority of the Bank’s security interest in the Collateral shall not be affected by any failure to perfect any security interest or any lapse in perfection thereof.

5.   The Junior Creditor covenants to the Bank that the Subordinated Indebtedness now existing or hereafter arising shall not be assigned to any other person, firm or corporation unless said person, firm or corporation executes a subordination agreement substantially in the form of this Subordination Agreement.

6.   The Junior Creditor covenants to the Bank to not take any action which interferes with the Bank’s exercise of its superior security interest in, or lien on, the Collateral.   The Junior Creditor hereby waives any right to challenge the actions of the Bank in liquidating the Collateral whether such challenge is in the form of attacking manner of liquidation, timing of liquidation or otherwise.  The Junior Creditor and the Bank waive their right to require a marshalling of assets.

7.   So long as any Senior Indebtedness shall remain unpaid, the Junior Creditor shall forthwith deliver to the Bank any payment or collateral security or the proceeds thereof received by the Junior Creditor in violation of the terms of this Subordination Agreement, in precisely the form received (except for endorsement by the appropriate Junior Creditor) for application on account of the Senior Indebtedness and, until so delivered, the same shall be held in trust by the Junior Creditor as the property of the Bank.
 
 
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8.   In order to carry out the terms and the intent of this Subordination Agreement more effectively, the Junior Creditor and Bank agree to do all reasonable acts and execute all further instruments reasonably necessary or convenient to preserve for the Bank and the Junior Creditor the benefit of this Subordination Agreement.

9.   The Junior Creditor agrees that this Subordination Agreement shall constitute a continuing agreement of subordination and no action which the Bank, any other Lender or the Borrower may take or refrain from taking with respect to the Senior Indebtedness, or any note or notes representing the same, or any collateral therefor, including a waiver or release thereof, or any agreement or agreements in connection therewith, shall affect this Subordination Agreement or the obligations of the Junior Creditor hereunder until the complete repayment and satisfaction of the Senior Indebtedness (other than the Remaining Obligations).

10.   No waiver shall be deemed to be made by the Bank of any of its rights hereunder unless the same shall be in writing and any waiver granted by the Bank shall be a waiver only with respect to the specific instance involved and it shall in no way impair the Bank’s rights or the Junior Creditor's obligations to the Bank in any other respect or at any other time.

11.   The Junior Creditor agrees that the Junior Creditor shall take no steps, directly or indirectly, to enforce or seek to enforce any of its rights with respect to the Subordinated Indebtedness or any collateral security therefor, nor shall the Junior Creditor directly or indirectly take any action that shall interfere in any nature whatsoever with the rights of the Bank with respect to the Bank’s senior interests, whether by virtue of this Subordination Agreement or otherwise, except that the Junior Creditor shall have the right to take action or institute proceedings with respect to the Subordinated Indebtedness or any collateral security at any time after one hundred fifty (150) days (the “Standstill Period”) after the receipt by Bank of a notice from the Junior Creditor setting forth an event of default under the Subordinated Loan Documentation, provided that as of the expiration of the Standstill Period (such date being referred to as the “Collateral Enforcement Date”), such event of default remains uncured and is continuing; and so long as the Senior Indebtedness remains outstanding, the Junior Creditor agrees that any proceeds which it receives with respect to any collateral security shall be held by the Junior Creditor in trust for the Bank, and shall be promptly remitted to the Bank for application to the Senior Indebtedness, and in the event that the Bank institutes any action or proceedings with respect to any collateral security after the commencement by the Junior Creditor of any action or proceeding against the collateral security, the Junior Creditor shall desist from such enforcement efforts against such collateral security promptly upon being advised in writing by the Bank of the commencement of foreclosure or other enforcement efforts by the Bank against such collateral security..

12.   The Junior Creditor and the Borrower agree to make proper notations in their respective books, records or other statements which evidence or record any Subordinated Indebtedness, specifically indicating that the Subordinated Indebtedness is subject to this Agreement.

13.   The Bank and the Junior Creditor (each a “Secured Creditor”) shall (a) give the other written notice of: (i) sending any written notice to the Borrower of an event of default of the Subordinated Indebtedness or Senior Indebtedness, as applicable, which has not been waived or cured; (ii) any demand of payment of any of the Subordinated Indebtedness or the Senior Indebtedness, as applicable, (iii) any commencement of a foreclosure or other lien enforcement proceeding by the Junior Creditor or the Bank against the Borrower or any collateral security, in each case concurrently with the sending of such notice to the Borrower, and (iv) provide to the other Secured Creditor a copy of any written notice received by such Secured Creditor from a landlord or other third party of a default by Borrower under any lease or other agreement of the Borrower with such third party promptly after the receipt thereof by such Secured Creditor; provided that   the failure of either Secured Creditor to send any such notices or provide such copy, as the case may be, shall not create a cause of action against such Secured Creditor or create any claim against it or effect the relative rights, duties or priorities established by this Subordination Agreement.  The failure by either Secured Creditor to send a copy of any such notice to the other shall not affect the validity of such notice as against Borrower. Borrower hereby authorizes and consents to each Secured Creditor sending to the other such notices or any other information with respect thereto.

14.   All notices, requests and other communications pursuant to this Subordination Agreement shall be in writing, either by letter (delivered by hand or sent certified mail, return receipt requested) or facsimile (sending confirmed) or by overnight delivery addressed to the Bank at PNC Business Credit, 340 Madison Avenue, 11 th Floor, New York, New York  10173, Attention: Brian Conway, Vice President, or to Borrower at its principal place of business as described in the Loan Agreement, Attention: Chief Executive Officer and Chief Financial Officer, or to the Junior Creditor, Attention: William H. Milmoe at its address stated above, or such other address as any party may give notice to the others as herein provided.  Any notice, request or communication hereunder shall be deemed to have been given two days after being deposited in the mails, postage prepaid, or in the case of hand delivery, when delivered, or in the case of overnight delivery, the next Business Day, or in the case of telegraphic notice, upon delivery to the telegraph company, addressed as aforesaid except where otherwise provided in Subordination Agreement, provided, however, that notice of a change of address, as hereinabove provided, shall be deemed to have been given only when actually received by the party to which it is addressed.
 
 
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15.   This Subordination Agreement is solely for the benefit of the Bank, the Lenders and the Junior Creditor and their respective successors, designees or assigns.

16.   All capitalized terms not specifically defined herein shall have the meaning ascribed to them in the Loan Agreement.

17.   THE BANK, JUNIOR CREDITOR AND THE BORROWER EXPRESSLY WAIVE TO THE EXTENT PERMITTED BY APPLICABLE LAW THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SUBORDINATION AGREEMENT OR THE ACTIONS OF THE BANK OR THE JUNIOR CREDITOR IN THE ENFORCEMENT HEREOF.  THIS WAIVER IS MADE KNOWINGLY AND IN CONSIDERATION OF THE LOANS BEING MADE BY THE BANK TO THE BORROWER.

18.   THIS SUBORDINATION AGREEMENT HAS BEEN EXECUTED AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. THE PARTIES HERETO CONSENT TO THE JURISDICTION OF THE FEDERAL AND STATE COURTS LOCATED IN NEW YORK IN CONNECTION WITH THE MATTER ARISING HEREUNDER.

(Next Page is the Signature Page)
 
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          IN WITNESS WHEREOF, the parties hereto have caused this Subordination Agreement to be executed this 27 th   day of June, 2012.
 
 
 
 
CD FINANCIAL, LLC
   As holder of the Subordinated Liquidity Note and the
   Subordinated Securities Note
   
     
By:
/s/ William H. Milmoe  
 
Name: William H. Milmoe
 
Title:  Manager
 
 
 
PNC BANK, NATIONAL ASSOCIATION
   
 
   
By:
/s Brian Conway  
 
Name:  BRIAN CONWAY
 
Title:  Vice President
 
The Borrower acknowledges and agrees to the terms of this Subordination Agreement on this 27th  day of June, 2012.
 
 
INTEGRATED BIOPHARMA.INC.
   
     
By:
/s/ E. Gerald Kay  
 
Name:  E. GERALD KAY
 
Title:  President and Chief Executive Officer
 
 
 
InB:MANHATTAN DRUG COMPANY, INC.
   
 
   
By:
/s/ Riva Sheppard  
 
Name:  RIVA SHEPPARD
 
Title:  President and Chief Executive Officer
 
 
 
AGROLABS, INC.
   
     
By:
/s/ Christina Kay  
 
Name:  CHRISTINA KAY
 
Title:  President and Chief Executive Officer
 
 
 
IHT HEALTH PRODUCTS, INC.
   
     
By:
/s/ Christina Kay  
 
Name:  CHRISTINA KAY
 
Title:  President and Chief Executive Officer
 
 
 
VITAMIN FACTORY, INC.
   
     
By:
/s/ E. Gerald Kay  
 
Name:  E. GERALD KAY
 
Title:  President and Chief Executive Officer
 
 
  IHT PROPERTIES CORP.
   
 
   
By:
/s/ Riva Sheppard  
 
Name:  RIVA SHEPPARD
 
Title:  President and Chief Executive Officer

6


 
 
Exhibit 10.8
 
 
  Mortgage and Security Agreement  
 


THIS MORTGAGE AND SECURITY AGREEMENT (this “Mortgage” ) is made as of the 27th day of June, 2012, by IHT PROPERTIES CORP., a Delaware corporation (the “Mortgagor” ), with an address at 225 Long Avenue, Building 15, P.O. Box 278, Hillside, New Jersey  07205 in favor of PNC BANK, NATIONAL ASSOCIATION as Agent for the Lenders (the “Mortgagee” ), with an address at Two Tower Center Boulevard, East Brunswick, New Jersey  08816.

WHEREAS, the Mortgagor is the owner of a certain tract or parcel of land described in Exhibit A attached hereto and made a part hereof, together with the improvements now or hereafter erected thereon; and

WHEREAS, pursuant to a certain Revolving Credit, Term Loan and Security Agreement by and among the Mortgagor, INTEGRATED BIOPHARMA, INC., a corporation organized under the laws of the State of Delaware (“Integrated”), InB:MANHATTAN DRUG COMPANY, INC., a corporation organized under the laws of the State of New York (”MD ”), AGROLABS, INC., a corporation organized under the laws of the State of New Jersey (“AL”), IHT HEALTH PRODUCTS, INC., a corporation organized under the laws of the State of Delaware (“IHT”), VITAMIN FACTORY, INC., a corporation organized under the laws of the State of Delaware (“Vitamin” and collectively with the Mortgagor, Integrated, MD, AL and IHT, the “Borrower”), the Mortgagee, the other financial institutions named therein (collectively with the Mortgagee, the “Lenders”), and the Mortgagee as Agent for the Lenders (Mortgagee in such capacity, the “Agent”) dated the date hereof (as may be amended, modified, restated, replaced, increased and/or extended from time to time, the “ Loan Agreement ”), the Borrower has borrowed from the Lenders certain loans in the aggregate original principal amount of $11,727,000 (as such amount may be increased and/or decreased from time to time, the “Loan” ) as evidenced by a certain Revolving Credit Note dated the date hereof executed by the Borrower in favor of the Agent for the benefit of the Lenders in the amount of $8,000,000 (as may be amended, restated, modified, replaced, extended and/or increased from time to time, the “Revolving Note”) and a certain Term Note dated the date hereof executed by the Borrower in favor of the Agent for the benefit of the Lenders in the amount of $3,727,000 (as may be amended, restated, modified, replaced, extended and/or increased from time to time, the “Term Note” and collectively with the Revolving Note and collectively with any and all other notes that may be delivered from time to time in connection with any obligation of the Borrower to the Lenders, as all may be amended, modified, restated, replaced, increased and/or extended from time to time, the “ Note ”), which Loan Agreement and Note are incorporated herein by reference and made a part hereof;

WHEREAS, capitalized terms used herein, but not defined herein, shall have the meanings given to them in the Loan Agreement.

NOW, THEREFORE , for the purpose of securing the payment and performance of the following obligations (collectively called the “Obligations” ):

(A)           The Loan, the Note and any and all other loans, advances, debts, liabilities, obligations, covenants and duties owing by any Borrower to Lenders or Agent or to any other direct or indirect subsidiary or affiliate of Agent or any Lender of any kind or nature, present or future (including any interest or other amounts accruing thereon after maturity, or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to any Borrower, whether or not a claim for post-filing or post-petition interest or other amounts is allowed in such proceeding), whether or not evidenced by any note, guaranty or other instrument, whether arising under any agreement, instrument or document, (including this Mortgage, the Loan Agreement and the Other Documents) whether or not for the payment of money, whether arising by reason of an extension of credit, opening of a letter of credit, loan, equipment lease or guarantee, under any interest or currency swap, future, option or other similar agreement, or in any other manner, whether arising out of overdrafts or deposit or other accounts or electronic funds transfers (whether through automated clearing houses or otherwise) or out of the Agent’s or any Lenders non-receipt of or inability to collect funds or otherwise not being made whole in connection with depository transfer check or other similar arrangements, whether direct or indirect (including those acquired by assignment or participation), absolute or contingent, joint or several, due or to become due, now existing or hereafter arising, contractual or tortious, liquidated or unliquidated, regardless of how such indebtedness or liabilities arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument, including, but not limited to, any and all of any Borrower’s Indebtedness and/or liabilities under this Mortgage, the Loan Agreement, the Other Documents or under any other agreement between Agent or Lenders and any Borrower and any amendments, extensions, renewals or increases and all costs and expenses of Agent and any Lender incurred in the documentation, negotiation, modification, enforcement, collection or otherwise in connection with any of the foregoing, including but not limited to reasonable attorneys’ fees and expenses and all obligations of any Borrower to Agent or Lenders to perform acts or refrain from taking any action .
 

 
 
 

 
 
(B)           Any sums advanced by the Mortgagee or which may otherwise become due pursuant to the provisions of the Note or this Mortgage or the Other Documents or pursuant to any other document or instrument at any time delivered to the Mortgagee to evidence or secure any of the Obligations or which otherwise relate to any of the Obligations (as the same may be amended, supplemented or replaced from time to time, the “Loan Documents” ).

The Mortgagor, for good and valuable consideration, receipt of which is hereby acknowledged, and intending to be legally bound hereby, does hereby give, grant, bargain, sell, convey, assign, transfer, mortgage, hypothecate, pledge, set over and confirm unto the Mortgagee and does agree that the Mortgagee shall have a security interest in the following described property, all accessions and additions thereto, all substitutions therefor and replacements and proceeds thereof, and all reversions and remainders of such property now owned or held or hereafter acquired (the “Property” ), to wit:

(a)           All of the Mortgagor’s estate in the premises described in Exhibit A, together with all of the easements, rights of way, privileges, liberties, hereditaments, gores, streets, alleys, passages, ways, waters, watercourses, rights and appurtenances thereunto belonging or appertaining, and all of the Mortgagor’s estate, right, title, interest, claim and demand therein and in the public streets and ways adjacent thereto, either in law or in equity (the “Land” );

(b)           All the buildings, structures and improvements of every kind and description now or hereafter erected or placed on the Land, and all facilities, fixtures, machinery, apparatus, appliances, installations, machinery and equipment, including all building materials to be incorporated into such buildings, all electrical equipment necessary for the operation of such buildings and heating, air conditioning and plumbing equipment now or hereafter attached to, located in or used in connection with those buildings, structures or other improvements (the “Improvements” );

(c)           All rents, issues and profits arising or issuing from the Land and the Improvements (the “Rents” ) including the Rents arising or issuing from all leases, licenses, subleases or any other use or occupancy agreement now or hereafter entered into covering all or any part of the Land and Improvements (the “Leases” ), all of which Leases and Rents are hereby assigned to the Mortgagee by the Mortgagor.  The foregoing assignment shall be an absolute assignment of all of the Mortgagor’s entire interest in the Rents.  The foregoing assignment shall also include all fees, charges, accounts or other payments for the use or occupancy of rooms and other public facilities in hotels, motels, or other lodging properties, and all cash or securities deposited under Leases to secure performance of lessees of their obligations thereunder, whether such cash or securities are to be held until the expiration of the terms of such leases or applied to one or more installments of rent coming due prior to the expiration of such terms.  The foregoing assignment extends to Rents arising both before and after the commencement by or against the Mortgagor of any case or proceeding under any Federal or State bankruptcy, insolvency or similar law, and is intended as an absolute assignment and not merely the granting of a security interest.  The Mortgagor, however, shall have a license to collect, retain and use the Rents so long as no Event of Default shall have occurred and be continuing or shall exist.  The Mortgagor will execute and deliver to the Mortgagee, on demand, such additional assignments and instruments as the Mortgagee may require to confirm, maintain and continue the assignment of Rents hereunder;
 
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(d)           All proceeds of the conversion, voluntary or involuntary, of any of the foregoing into cash or liquidated claims; and

(e)             Without limiting any of the other provisions of this Mortgage, the Mortgagor, as debtor, expressly grants unto the Mortgagee, as secured party, a security interest in all personal property of the Mortgagor, including the following, all whether now owned or hereafter acquired or arising and wherever located:  (i) accounts (including health-care-insurance receivables and credit card receivables); (ii) securities entitlements, securities accounts, commodity accounts, commodity contracts and investment property; (iii) deposit accounts; (iv) instruments (including promissory notes); (v) documents (including warehouse receipts); (vi) chattel paper (including electronic chattel paper and tangible chattel paper); (vii)   inventory, including raw materials, work in process, or materials used or consumed in Mortgagor’s business, items held for sale or lease or furnished or to be furnished under contracts of service, sale or lease, goods that are returned, reclaimed or   repossessed; (viii) goods of every nature, including stock-in-trade, goods on consignment, standing timber that is to be cut and removed under a conveyance or contract for sale, the unborn young of animals, crops grown, growing, or to be grown, manufactured homes, computer programs embedded in such goods and farm products; (ix) equipment, including machinery, vehicles and furniture; (x) fixtures; (xi) agricultural liens; (xii) as-extracted collateral; (xiii) letter of credit rights; (xiv) general intangibles, of every kind and description, including payment intangibles, software, computer information, source codes, object codes, records and data, all existing and future customer lists, choses in action, claims (including claims for indemnification or breach of warranty), books, records, patents and patent applications, copyrights, trademarks, tradenames, tradestyles, trademark applications, goodwill, blueprints, drawings, designs and plans, trade secrets, contracts, licenses, license agreements, formulae, tax and any other types of refunds, returned and unearned insurance premiums, rights and claims under insurance policies; (xv) all supporting obligations of all of the foregoing property; (xvi) all property of the Mortgagor now or hereafter in the Mortgagee’s possession or in transit to or from, or under the custody or control of, the Mortgagee or any affiliate thereof; (xvii) all cash and cash equivalents thereof; and (xviii) all cash and noncash proceeds (including insurance proceeds) of all of the foregoing property, all products thereof and all additions and accessions thereto, substitutions therefor and replacements thereof. The Mortgagor will execute and deliver to the Mortgagee on demand such financing statements and other instruments as the Mortgagee may require in order to perfect, protect and maintain such security interest under the Uniform Commercial Code (“UCC”) on the aforesaid collateral.

To have and to hold the same unto the Mortgagee, its successors and assigns, forever.

Provided, however, that if the Mortgagor and the other Borrowers shall pay to the Mortgagee the Obligations indefeasibly in full (other than the Remaining Obligations), then, upon the termination of all obligations, duties and commitments of the Mortgagor under the Obligations and this Mortgage (other than the Remaining Obligations), and subject to the provisions of the paragraph entitled “Survival; Successors and Assigns”, the estate hereby granted and conveyed shall become null and void.
 
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1.             Representations and Warranties .   The Mortgagor represents and warrants to the Mortgagee that (i) the Mortgagor has good and marketable title to an estate in fee simple absolute in the Land and Improvements and has all right, title and interest in all other property constituting a part of the Property, in each case free and clear of all liens and encumbrances, except as may otherwise be set forth on Exhibit B hereto and those liens and encumbrances permitted by the Loan Agreement and (ii) its name, type of organization, jurisdiction of organization and chief executive office are true and complete as set forth in the heading of this Mortgage.  This Mortgage is a valid and enforceable first lien on the Property (except as set forth on Exhibit B) and the Mortgagee shall, subject to the Mortgagor’s right of possession prior to an Event of Default, quietly enjoy and possess the Property.  The Mortgagor shall preserve such title as it warrants herein and the validity and priority of the lien hereof and shall forever warrant and defend the same to the Mortgagee against the claims of all persons.

2.             Affirmative Covenants .   Until all of the Obligations (other than Remaining Obligations) shall have been fully paid, satisfied and discharged the Mortgagor shall:

(a)            Payment and Performance of Obligations .  Pay or cause to be paid and perform all Obligations when due as provided in the Loan Documents.

(b)            Legal Requirements .  Promptly comply with and conform to all present and future laws, statutes, codes, ordinances, orders and regulations and all covenants, restrictions and conditions which may be applicable to the Mortgagor or to any of the Property, except to the extent that such failure to so comply and/or conform would not have a Material Adverse Effect (the “Legal Requirements” ).

(c)            Impositions .  Before interest or penalties are due thereon and otherwise when due, the Mortgagor shall pay all taxes of every kind and nature, all charges for any easement or agreement maintained for the benefit of any of the Property, all general and special assessments (including any condominium or planned unit development assessments, if any), levies, permits, inspection and license fees, all water and sewer rents and charges, and all other charges and liens, whether of a like or different nature, imposed upon or assessed against the Mortgagor or any of the Property (the “Impositions” ) except which are being Properly Contested or unless otherwise not required to so pay pursuant to the Loan Agreement.  Within thirty (30) days after the payment of any Imposition, the Mortgagor shall deliver to the Mortgagee written evidence acceptable to the Mortgagee of such payment.  The Mortgagor’s obligations to pay the Impositions shall survive the Mortgagee’s taking title to (and possession of)  the Property through foreclosure, deed-in-lieu or otherwise, as well as the termination of the Mortgage including, without limitation, by merger into a deed, unless title is transferred to a party other than Mortgagee via foreclosure or acquired by PNC on its own separate form the transaction evidenced by the Loans (“Termination Event”), provided, however, that any Impositions imposed for any period from and after the Termination Event, neither the Mortgagor nor any Borrower nor any Guarantor will be liable or responsible for such Impositions.

(d)            Maintenance of Security .  Use, and permit others to use, the Land and Improvements only for its present use or as otherwise permitted in the Loan Agreement or the Other Documents or such other uses as permitted by applicable Legal Requirements and approved in writing by the Mortgagee which shall not be unreasonably withheld.  The Mortgagor shall keep the Land and Improvements in good condition and order and in a rentable and tenantable state of repair, subject to ordinary wear and tear, and will make or cause to be made, as and when necessary, all repairs, renewals, and replacements, structural and nonstructural, exterior and interior, foreseen and unforeseen, ordinary and extraordinary, provided, however, that no structural repairs, renewals or replacements shall be made without the Mortgagee’s prior written consent unless any such repair, renewal or replacement would not have a Material Adverse Effect on the Land and Improvements.  The Mortgagor shall not remove except in the Ordinary Course of Business or demolish the Land and Improvements nor commit or suffer waste with respect thereto, nor permit the Land and Improvements to become deserted or abandoned unless otherwise permitted by the Loan Agreement.  The Mortgagor covenants and agrees not to take or permit any action with respect to the Land and Improvements which will in any manner impair the security of this Mortgage or the use of the Land and Improvements as set forth in the Loan Documents, except as permitted in the Loan Agreement.
 
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3.             Leases .   The Mortgagor shall not (a) execute an assignment or pledge of the Rents or the Leases other than in favor of the Mortgagee; (b) accept any prepayment of an installment of any Rents prior to the due date of such installment, except with respect to leases between the Borrowers; or (c) enter into or amend any of the terms of any of the Leases without the Mortgagee’s prior written consent, except with respect to leases between the Borrowers.  Any or all leases or subleases of all or any part of the Land shall be subject in all respects to the Mortgagee’s prior written consent, shall be subordinated to this Mortgage and to the Mortgagee’s rights and, together with any and all rents, issues or profits relating thereto, shall be assigned at the time of execution to the Mortgagee as additional collateral security for the Obligations, all in such form, substance and detail as is satisfactory to the Mortgagee in its sole discretion.  Mortgagee hereby consents to all leases or subleases with any Borrower.

4.             Due on Sale Clause .   Except as may otherwise be permitted by the Loan Agreement or any Other Document, the Mortgagor shall not sell, convey or otherwise transfer any interest in the Property (whether voluntarily or by operation of law), or agree to do so, without the Mortgagee’s prior written consent, including (a) any sale, conveyance, assignment, or other transfer of (including installment land sale contracts), or the grant of a security interest in, all or any part of the legal or equitable title to the Property, except as otherwise permitted hereunder; (b) any lease of all of the Property, except with respect to leases between the Borrowers; or (c) any sale, conveyance, encumbrance, assignment, or other transfer of, or the grant of a security interest in, any share of stock of the Mortgagor, if a corporation or any partnership interest in the Mortgagor, if a partnership, or any membership interest, if a limited liability entity, except in favor of the Mortgagee.  Any default under this Section shall cause an immediate acceleration of the Obligations without any demand by the Mortgagee.

5.             Insurance .   The Mortgagor shall keep the Land and Improvements continuously insured, in an amount not less than the cost to replace the Land and Improvements or an amount not less than eighty percent (80%) of the full insurable value of the Land and Improvements, whichever is greater, covering such risks and in such amounts and with such deductibles as are satisfactory to the Mortgagee and its counsel including, without limitation, insurance against loss or damage by fire, with extended coverage and against other hazards as the Mortgagee may from time to time require.  With respect to any property under construction or reconstruction, the Mortgagor shall maintain builder’s risk insurance.  The Mortgagor shall also maintain comprehensive general public liability insurance, in an amount of not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) general aggregate per location, which includes contractual liability insurance for the Mortgagor’s obligations under the Leases, and worker’s compensation insurance.  All property and builder’s risk insurance shall include protection for continuation of income for a period of twelve (12) months, in the event of any damage caused by the perils referred to above.  All policies, including policies for any amounts carried in excess of the required minimum and policies not specifically required by the Mortgagee, shall be with an insurance company or companies satisfactory to the Mortgagee, shall be in form satisfactory to the Mortgagee, shall meet all coinsurance requirements of the Mortgagee, shall be maintained in full force and effect, shall be assigned to the Mortgagee, with premiums prepaid, as collateral security for payment of the Obligations, shall be endorsed with a standard mortgagee clause in favor of the Mortgagee and shall provide for at least thirty (30) days notice of cancellation to the Mortgagee.  Such insurance shall also name the Mortgagee as an additional insured, lender loss payee and mortgagee under the comprehensive general public liability and property insurance policies and the Mortgagor shall also deliver to the Mortgagee a copy of the replacement cost coverage endorsement.  If the Land and Improvements is located in an area which has been identified by any governmental agency, authority or body as a flood hazard area or the like, then the Mortgagor shall maintain a flood insurance policy covering the Land and Improvements in an amount not less than the original principal amount of the Loan or the maximum limit of coverage available under the federal program, whichever amount is less.
 
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6.             Rights of Mortgagee to Insurance Proceeds .   In the event of loss, the Mortgagee shall have the exclusive right to adjust, collect and compromise all insurance claims, and the Mortgagor shall not adjust, collect or compromise any claims under said policies without the Mortgagee’s prior written consent.  Each insurer is hereby authorized and directed to make payment under said policies, including return of unearned premiums, directly to the Mortgagee instead of to the Mortgagor and the Mortgagee jointly, and the Mortgagor appoints the Mortgagee as the Mortgagor’s attorney-in-fact to endorse any draft therefor.  All insurance proceeds may, at the Mortgagee’s sole option, be applied to all or any part of the Obligations and in any order (notwithstanding that such Obligations may not then otherwise be due and payable) or to the repair and restoration of any of the Property under such terms and conditions as the Mortgagee may impose, unless otherwise provided under the Loan Agreement.

7.             Installments for Insurance, Taxes and Other Charges . Upon the Mortgagee’s request upon the occurrence and during the continuance of a Default and/or an Event of Default, the Mortgagor shall pay to the Mortgagee monthly, an amount equal to one-twelfth (1/12) of the annual premiums for the insurance policies referred to hereinabove and the annual Impositions and any other item which at any time may be or become a lien upon the Land and Improvements (the “Escrow Charges” ).  The amounts so paid shall be used in payment of the Escrow Charges so long as no Event of Default shall have occurred.  No amount so paid to the Mortgagee shall be deemed to be trust funds, nor shall any sums paid bear interest.  The Mortgagee shall have no obligation to pay any insurance premium or Imposition if at any time the funds being held by the Mortgagee for such premium or Imposition are insufficient to make such payments.  If, at any time, the funds being held by the Mortgagee for any insurance premium or Imposition are exhausted, or if the Mortgagee determines, in its sole discretion, that such funds will be insufficient to pay in full any insurance premium or Imposition when due, the Mortgagor shall promptly pay to the Mortgagee, upon demand, an amount which the Mortgagee shall estimate as sufficient to make up the deficiency. Upon the occurrence of an Event of Default, the Mortgagee shall have the right, at its election, to apply any amount so held against the Obligations due and payable in such order as the Mortgagee may deem fit, and the Mortgagor hereby grants to the Mortgagee a lien upon and security interest in such amounts for such purpose.

8.             Condemnation .   The Mortgagor, promptly upon obtaining knowledge of the institution of any proceedings for the condemnation or taking by eminent domain of any of the Property (specifically excluding clause (e) of the definition of Property) , shall notify the Mortgagee of the pendency of such proceedings.  The Mortgagee may participate in any such proceedings and the Mortgagor shall deliver to the Mortgagee all instruments requested by it to permit such participation.  Any award or compensation for property taken or for damage to property not taken, whether as a result of such proceedings or in lieu thereof, is hereby assigned to and shall be received and collected directly by the Mortgagee, and any award or compensation shall be applied, at the Mortgagee’s option, to any part of the Obligations and in any order (notwithstanding that any of such Obligations may not then be due and payable) or to the repair and restoration of any of the Property under such terms and conditions as the Mortgagee may impose, subject to the terms of the Loan Agreement.

9.             Environmental Matters .   (a)  For purposes of this Section 9, the term “Environmental Laws” shall mean all federal, state and local laws, regulations and orders, whether now or in the future enacted or issued, pertaining to the protection of land, water, air, health, safety or the environment.  The term “Regulated Substances” shall mean all substances regulated by Environmental Laws, or which are known or considered to be harmful to the health or safety of persons, or the presence of which may require investigation, notification or remediation under the Environmental Laws.  The term “Contamination” shall mean the discharge, release, emission, disposal or escape of any Regulated Substances into the environment.
 
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(b)           The Mortgagor represents and warrants to Mortgagor’s knowledge (i) except as provided in the last sentence in clause (c) below, that no Contamination is present at, on or under the Land and Improvements and that no Contamination is being or has been emitted onto any surrounding property; (ii) all operations and activities on the Land and Improvements have been and are being conducted in accordance with all applicable Environmental Laws, in all material respects and the Mortgagor has all permits and licenses required under the applicable Environmental Laws except for those that have not been issued which would not have a Material Adverse Effect; (iii) except as disclosed in the Phase I Report (as defined in the Environmental Indemnity Agreement dated the date hereof), no underground or aboveground storage tanks are or have been located on or under the Property; and (iv) no legal or administrative proceeding is pending or, to the Mortgagor’s knowledge, is threatened relating to any environmental condition, operation or activity on the Land and Improvements, or any violation or alleged violation of applicable Environmental Laws.  These representations and warranties shall be true as of the date hereof, and shall be deemed to be continuing representations and warranties which must remain true, correct and accurate during the entire duration of the term of this Mortgage.

(c)           The Mortgagor shall ensure, at its sole cost and expense, that the Land and Improvements and the conduct of all operations and activities thereon comply and continue to comply in all material respects with all applicable Environmental Laws except for such non-compliance which would not have a Material Adverse Effect.  The Mortgagor shall notify the Mortgagee promptly and in reasonable detail in the event that the Mortgagor becomes aware of any violation of any Environmental Laws, the presence or release of any Contamination with respect to the Land and Improvements, or any governmental or third party claims relating to the environmental condition of the Land and Improvements or the conduct of operations or activities thereon.  The Mortgagor also agrees not to permit or allow the presence of Regulated Substances on any part of the Land and Improvements other than (i) those which are used in the ordinary course of the Mortgagor’s business, but only to the extent they are in all cases used in a manner which complies in all material respects with all Environmental Laws; and (ii) those Regulated Substances which are naturally occurring on the Land and Improvements.  The Mortgagor agrees not to cause, allow or permit the presence of any Contamination on the Land and Improvements.  Notwithstanding anything to the contrary in this Mortgage, the Mortgagor is permitted to use and maintain on the Land and/or Improvements any substances of kinds and in amounts ordinarily and customarily used or stored in similar properties for the purposes of cleaning or other maintenance or operations and otherwise in compliance in all material respects with all applicable Environmental Laws (as such term is defined in the Loan Agreement).

(d)           The Mortgagee shall not be liable for, and the Mortgagor shall indemnify, defend and hold the Mortgagee and the Indemnified Parties (as hereinafter defined) and all of their respective successors and assigns harmless from and against all losses, costs, liabilities, damages, fines, claims, penalties and expenses (including reasonable attorneys’, consultants’ and contractors’ fees, costs incurred in the investigation, defense and settlement of claims, as well as costs incurred in connection with the investigation, remediation or monitoring of any Regulated Substances or Contamination) that the Mortgagee or any Indemnified Party may suffer or incur (including as holder of the Mortgage, as mortgagee in possession or as successor in interest to the Mortgagor as owner of the Property by virtue of a foreclosure or acceptance of a deed in lieu of foreclosure) as a result of or in connection with (i) any Environmental Laws (including the assertion that any lien existing or arising pursuant to any Environmental Laws takes priority over the lien of the Mortgage); (ii) the breach of any representation, warranty, covenant or undertaking by the Mortgagor in this Section 9; (iii) the presence on or the migration of any Contamination or Regulated Substances on, under or through the Land and/or Improvements; or (iv) any litigation or claim by the government or by any third party in connection with the environmental condition of the Land and/or Improvements or the presence or migration of any Regulated Substances or Contamination on, under, to or from the Land and/or Improvements, except to the extent any of the foregoing arises out of the gross negligence or willful misconduct of Indemnified Party.
 
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(e)           Upon the Mortgagee’s reasonable request, the Mortgagor shall execute and deliver an Environmental Indemnity Agreement satisfactory in form and substance to the Mortgagee, to more fully reflect the Mortgagor’s representations, warranties, covenants and indemnities with respect to the Environmental Laws.

10.             Inspection of Property .   The Mortgagee shall have the right to enter the Property at any reasonable business hour for the purpose of inspecting the order, condition and repair of the buildings and improvements erected thereon, as well as the conduct of operations and activities on the Property.  The Mortgagee may enter the Property (and cause the Mortgagee’s employees, agents and consultants to enter the Property), upon prior written notice to the Mortgagor, to conduct any and all environmental testing deemed appropriate by the Mortgagee in its sole discretion.  The environmental testing shall be accomplished by whatever means the Mortgagee, in good faith, may deem reasonably appropriate, including the taking of soil samples and the installation of ground water monitoring wells or other intrusive environmental tests.  The Mortgagor shall provide the Mortgagee (and the Mortgagee’s employees, agents and consultants) reasonable rights of access to the Property as well as such information about the Property and the past or present conduct of operations and activities thereon as the Mortgagee shall reasonably request.

11.             Events of Default .   The occurrence of any one or more of the following events shall constitute an “Event of Default” hereunder:  (a) any Event of Default (as defined in any of the Obligations); (b) except as otherwise provided in this Section 11, any default under any of the Obligations that does not have a defined set of “Events of Default” and the lapse of any notice or cure period provided in such Obligations with respect to such default; (c) demand by the Mortgagee under any of the Obligations that have a demand feature (unless a grace period is set forth in the Loan Agreement or any Other Document at which point such grace period shall be applicable herein); (d) the Mortgagor's failure to perform any of its obligations under this Mortgage or under any Environmental Indemnity Agreement executed and delivered pursuant to Section 9(e); (e) falsity, inaccuracy or breach by the Mortgagor in any material respect of any written warranty, representation or statement made or furnished to the Mortgagee by or on behalf of the Mortgagor in connection with the Loan Agreement, this Mortgage, the Other Documents and/or the transactions evidenced thereby; (f) an uninsured material loss, theft, damage, or destruction to any of theLand, Improvements, Rents and Leases, or any lien against or the making of any levy, seizure or attachment of or on the Land, Improvements, Rents and Leases which is not stayed or lifted within forty-five (45) days; (g) the Mortgagee's failure to have a mortgage lien on the Property with the priority required under Section 1 unless the Mortgagee voluntary discharges this Mortgage; (h) any indication or evidence received by the Mortgagee that the Mortgagor may have directly or indirectly been engaged in any type of activity which, in the Mortgagee’s reasonable discretion, might result in the forfeiture of any Property of the Mortgagor to any governmental entity, federal, state or local; (i) foreclosure proceedings are instituted against the Property upon any other lien or claim, whether alleged to be superior or junior to the lien of this Mortgage; (j) the failure by the Mortgagor to pay any Impositions to the extent required under Section 2(c) which are not paid within fifteen (15) days, or to maintain in full force and effect any insurance required under Section 5.
 
 
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12.             Rights and Remedies of Mortgagee .   If an Event of Default occurs and is continuing, the Mortgagee may, at its option and without demand, notice or delay, do one or more of the following:

(a)           The Mortgagee may declare the entire unpaid principal balance of the Obligations, together with all interest thereon, to be due and payable immediately.

(b)           The Mortgagee may (i) institute and maintain an action of mortgage foreclosure against the Property and the interests of the Mortgagor therein, (ii) institute and maintain an action on any instruments evidencing the Obligations or any portion thereof, and (iii) take such other action at law or in equity for the enforcement of any of the Loan Documents as the law may allow, and in each such action the Mortgagee shall be entitled to all costs of suit and attorneys’ fees.

(c)           The Mortgagee may, in its sole and absolute discretion:  (i) collect any or all of the Rents, including any Rents past due and unpaid, (ii) perform any obligation or exercise any right or remedy of the Mortgagor under any Lease, or (iii) enforce any obligation of any tenant of any of the Property.  The Mortgagee may exercise any right under this subsection (c), whether or not the Mortgagee shall have entered into possession of any of the Property, and nothing herein contained shall be construed as constituting the Mortgagee a “mortgagee in possession”, unless the Mortgagee shall have entered into and shall continue to be in actual possession of the Property.  The Mortgagor hereby authorizes and directs each and every present and future tenant of any of the Property to pay all Rents directly to the Mortgagee and to perform all other obligations of that tenant for the direct benefit of the Mortgagee, as if the Mortgagee were the landlord under the Lease with that tenant, immediately upon receipt of a demand by the Mortgagee to make such payment or perform such obligations.  The Mortgagor hereby waives any right, claim or demand it may now or hereafter have against any such tenant by reason of such payment of Rents or performance of obligations to the Mortgagee, and any such payment or performance to the Mortgagee shall discharge the obligations of the tenant to make such payment or performance to the Mortgagor.

(d)           The Mortgagee shall have the right, in connection with the exercise of its remedies hereunder, to the appointment of a receiver to take possession and control of the Property or to collect the Rents, without notice and without regard to the adequacy of the Property to secure the Obligations.  The Mortgagee or a receiver, while in possession of the Property, shall have the right to make repairs and to make improvements necessary or advisable in its or his opinion to preserve the Property, or to make and keep them rentable to the best advantage, and the Mortgagee may advance moneys to a receiver for such purposes.  Any moneys so expended or advanced by the Mortgagee or by a receiver shall be added to and become a part of the Obligations secured by this Mortgage.

13.             Application of Proceeds .   The Mortgagee shall apply the proceeds of any foreclosure sale of, or other disposition or realization upon, or Rents or profits from, the Property to satisfy the Obligations in such order as set forth in Section 11.5 of the Loan Agreement.

14.             Mortgagee’s Right to Protect Security .   Subject to the terms of, or except as may otherwise be provided in the Loan Agreement or any Other Documents, the Mortgagee is hereby authorized to do any one or more of the following, irrespective of whether an Event of Default has occurred: (a) appear in and defend any action or proceeding purporting to affect the security hereof or the Mortgagee’s rights or powers hereunder with regard to the Property; (b) purchase such insurance policies covering the Property as it may elect if the Mortgagor fails to maintain the insurance coverage required hereunder; and (c) take such action as the Mortgagee may determine to pay, perform or comply with any Impositions or Legal Requirements, to cure any Events of Default that have occurred and are continuing and to protect its security in the Property.
 
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15.             Appointment of Mortgagee as Attorney-in-Fact .   The Mortgagee, or any of its officers, is hereby irrevocably appointed attorney-in-fact for the Mortgagor (without requiring any of them to act as such), such appointment being coupled with an interest, to do any or all of the following:  (a) collect the Rents after the occurrence of and during the continuance of an Event of Default; (b) settle for, collect and receive any awards payable under Section 8 from the authorities making the same; and (c) execute, deliver and file, at Mortgagor's sole cost and expense such financing, continuation or amendment statements and other instruments as the Mortgagee may require in order to perfect, protect and maintain its security interest under the UCC on any portion of the Property.

16.             Certain Waivers . The Mortgagor hereby waives and releases all benefit that might accrue to the Mortgagor by virtue of any present or future law exempting the Property, or any part of the proceeds arising from any sale thereof, from attachment, levy or sale on execution, or providing for any stay of execution, exemption from civil process or extension of time for payment or any rights of marshalling in the event of any sale hereunder of the Property, and, unless specifically required herein, all notices of the Mortgagor’s default or of the Mortgagee’s election to exercise, or the Mortgagee’s actual exercise of any option under this Mortgage or any other Loan Document.

17.             No Merger .   There shall be no merger of the interest or estate created by this Mortgage with any other interest or estate in the Property at any time held by or for the benefit of the Mortgagee or any subsidiary or affiliate in any capacity, without the express prior written consent of the Mortgagee.

18.             Mortgage Secures Future Advances .   This Mortgage is given for the purpose of creating a lien on real property in order to secure not only existing Obligations, but also future advances constituting Obligations, whether such advances are obligatory or to be made at the option of the Mortgagee, or otherwise, and whether made before or after a Default or Event of Default or maturity or other similar events, to the same extent as if such future advances were made on the date of the execution hereof, although there may be no advance made at the time of the execution hereof and although there may be no indebtedness outstanding at the time any advance is made.  The types of future advances secured by and having priority under this Mortgage shall include, without limitation, (i) advances and readvances of principal under the Note or other Loan Documents and (ii) disbursements and other advances for the payment of taxes, assessments, maintenance charges, insurance premiums or costs relating to the Property, for the discharge of liens having priority over the lien of this Mortgage, for the curing of waste of the Property and for the payment of service charges and expenses incurred by reason of default and including late charges, attorneys’ fees and court costs, together with interest thereon.  The lien of this Mortgage, as to third persons with or without actual knowledge thereof, shall be valid as to all such indebtedness and future advances, from the date of recordation, to the extent permitted by the laws of the State of New Jersey.  The total amount of the indebtedness secured by this Mortgage may decrease or increase from time to time, but the total unpaid principal balance at any one time shall not exceed the maximum principal amount of the Obligations.

19.             Notices . All notices, demands, requests, consents, approvals and other communications required or permitted hereunder ( “Notices” ) must be in writing and will be effective upon receipt.  Notices may be given in any manner to which the parties may separately agree, including electronic mail.  Without limiting the foregoing, first-class mail, facsimile transmission and commercial courier service are hereby agreed to as acceptable methods for giving Notices.  Regardless of the manner in which provided, Notices may be sent to a party’s address as set forth above or to such other address as any party may give to the other for such purpose in accordance with this section.

20.             Further Acts.   By its signature hereon, the Mortgagor hereby irrevocably authorizes the Mortgagee to execute (on behalf of the Mortgagor) and file against the Mortgagor one or more financing, continuation or amendment statements pursuant to the UCC in form satisfactory to the Mortgagee, and the Mortgagor will pay the cost of preparing and filing the same in all jurisdictions in which such filing is deemed by the Mortgagee to be necessary or desirable in order to perfect, preserve and protect its security interests.  If required by the Mortgagee, the Mortgagor will execute all documentation necessary for the Mortgagee to obtain and maintain perfection of its security interests in the Property.   The Mortgagor will, at the cost of the Mortgagor, and without expense to the Mortgagee, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers and assurances as the Mortgagee shall, from time to time, reasonably require for the better assuring, conveying, assigning, transferring or confirming unto the Mortgagee the property and rights hereby mortgaged, or which Mortgagor may be or may hereafter become bound to convey or assign to the Mortgagee, or for carrying out the intent of or facilitating the performance of the terms of this Mortgage or for filing, registering or recording this Mortgage.  The Mortgagor grants to the Mortgagee an irrevocable power of attorney coupled with an interest for the purpose of exercising and perfecting any and all rights and remedies available to the Mortgagee under the Note, this Mortgage, the other Loan Documents, at law or in equity, including, without limitation, the rights and remedies described in this paragraph.
 
 
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21.             Changes in the Laws Regarding Taxation.   If any law is enacted or adopted or amended after the date of this Mortgage which deducts the Obligations from the value of the Property for the purpose of taxation or which imposes a tax, either directly or indirectly, on the Mortgagor or the Mortgagee’s interest in the Property, the Mortgagor will pay such tax, with interest and penalties thereon, if any unless Properly Contested. If the Mortgagee determines that the payment of such tax or interest and penalties by the Mortgagor would be unlawful or taxable to the Mortgagee or unenforceable or provide the basis for a defense of usury, then the Mortgagee shall have the option, by written notice of not less than ninety (90) days, to declare the entire Obligations immediately due and payable.

22.             Documentary Stamps.   Subject to the terms of the Loan Agreement, if at any time the United States of America, any State thereof or any subdivision of any such State shall require revenue or other stamps to be affixed to the Note or this Mortgage, or impose any other tax or charge on the same, the Mortgagor will pay for the same, with interest and penalties thereon, if any, unless Properly Contested.

23.             Preservation of Rights .   No delay or omission on the Mortgagee’s part to exercise any right or power arising hereunder will impair any such right or power or be considered a waiver of any such right or power, nor will the Mortgagee’s action or inaction impair any such right or power.  The Mortgagee’s rights and remedies hereunder are cumulative and not exclusive of any other rights or remedies which the Mortgagee may have under other agreements, at law or in equity.

24.             Illegality .   If any provision contained in this Mortgage should be invalid, illegal or unenforceable in any respect, it shall not affect or impair the validity, legality and enforceability of the remaining provisions of this Mortgage.

25.             Changes in Writing .   No modification, amendment or waiver of, or consent to any departure by the Mortgagor from, any provision of this Mortgage will be effective unless made in a writing signed by the Mortgagee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.  No notice to or demand on the Mortgagor will entitle the Mortgagor to any other or further notice or demand in the same, similar or other circumstance.

26.             Entire Agreement .   This Mortgage (including the documents and instruments referred to herein) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, between the Mortgagor and the Mortgagee with respect to the subject matter hereof; provided, however, that in the event that any provisions of this Mortgage and the Loan Agreement conflict, the terms of this Mortgage shall control, except to the extent that any provision hereof is subject to or modified by or conditioned on or by the Loan Agreement or any of the terms of the Loan Agreement.
 
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27.             Survival; Successors and Assigns . This Mortgage will be binding upon and inure to the benefit of the Mortgagor and the Mortgagee and their respective heirs, executors, administrators, successors and assigns; provided , however , that the Mortgagor may not assign this Mortgage in whole or in part without the Mortgagee’s prior written consent and the Mortgagee at any time may assign this Mortgage in whole or in part subject to Section 16.3 of the Loan Agreement; and provided , further , that the rights and benefits under the Paragraphs entitled “Environmental Matters”, “Inspection of Property” and “Indemnity” shall also inure to the benefit of any persons or entities who acquire title or ownership of the Property from or through the Mortgagee or through action of the Mortgagee (including a foreclosure, sheriff’s or judicial sale).  The provisions of Paragraphs entitled “Environmental Matters”, “Inspection of Property” and “Indemnity” shall survive the termination, satisfaction or release of this Mortgage, the foreclosure of this Mortgage or the delivery of a deed in lieu of foreclosure.

28.             Interpretation .   In this Mortgage, unless the Mortgagee and the Mortgagor otherwise agree in writing, the singular includes the plural and the plural the singular; words importing any gender include the other genders; references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute referred to; the word “or” shall be deemed to include “and/or”, the words “including”, “includes” and “include” shall be deemed to be followed by the words “without limitation”; references to articles, sections (or subdivisions of sections) or exhibits are to those of this Mortgage; and references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications to such instruments, but only to the extent such amendments and other modifications are not prohibited by the terms of this Mortgage.  Section headings in this Mortgage are included for convenience of reference only and shall not constitute a part of this Mortgage for any other purpose.

29.             Indemnity .   The Mortgagor agrees to indemnify each of the Mortgagee, each legal entity, if any, who controls, is controlled by or is under common control with the Mortgagee and each of their respective directors, officers, employees and agents (the “Indemnified Parties” ), and to hold each Indemnified Party harmless from and against, any and all claims, damages, losses, liabilities and expenses (including all fees and charges of internal or external counsel with whom any Indemnified Party may consult and all expenses of litigation and preparation therefor) which any Indemnified Party may incur, or which may be asserted against any Indemnified Party by any person, entity or governmental authority (including any person or entity claiming derivatively on behalf of the Mortgagor), in connection with or arising out of or relating to the matters referred to in this Mortgage, whether (a) arising from or incurred in connection with any breach of a representation, warranty or covenant by the Mortgagor, or (b) arising out of or resulting from any suit, action, claim, proceeding or governmental investigation, pending or threatened, whether based on statute, regulation or order, or tort, or contract or otherwise, before any court or governmental authority; provided , however , that the foregoing indemnity agreement shall not apply to any claims, damages, losses, liabilities and expenses solely attributable to an Indemnified Party’s gross negligence or willful misconduct.  The indemnity agreement contained in this Section shall survive the termination of this Mortgage, payment of any Obligations and assignment of any rights hereunder.  The Mortgagor may participate at its expense in the defense of any such action or claim.

30.             Governing Law and Jurisdiction .   This Mortgage has been delivered to and accepted by the Mortgagee and will be deemed to be made in the State where the Mortgagee’s office indicated above is located.   This Mortgage will be interpreted and the rights and liabilities of the parties hereto determined in accordance with the laws of the State of new york , excluding its conflict of laws rules (other than section 5-1401 of the new york general obligations law), except that the laws of the State of New jersey shall govern the creation, perfection and foreclosure of the liens created hereunder on the Property or any interest therein. The Mortgagor hereby irrevocably consents to the exclusive jurisdiction of any state or federal court for the county or judicial district where the Mortgagee’s office indicated above is located; provided that nothing contained in this Mortgage will prevent the Mortgagee from bringing any action, enforcing any award or judgment or exercising any rights against the Mortgagor individually, against any security or against any property of the Mortgagor within any other county, state or other foreign or domestic jurisdiction.  The Mortgagee and the Mortgagor agree that the venue provided above is the most convenient forum for both the Mortgagee and the Mortgagor.  The Mortgagor waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Mortgage.
 
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31.             Change in Name or Locations .   The Mortgagor hereby agrees that if the location of any of the fixtures change from the Land or its chief executive office, or if the Mortgagor changes its name, its type of organization, its state of organization (if Mortgagor is a registered organization), its principal residence (if Mortgagor is an individual), its chief executive office (if Mortgagor is a general partnership or non-registered organization) or establishes a name in which it may do business that is not the current name of the Mortgagor, the Mortgagor will promptly notify the Mortgagee in writing of the additions or changes.

32.             WAIVER OF JURY TRIAL .    THE MORTGAGOR AND MORTGAGEE EACH IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS MORTGAGE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS MORTGAGE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS.  THE MORTGAGOR AND MORTGAGEE EACH ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.

33.             Loan Subject to Modification .   This Mortgage secures a loan which by its terms is subject to modification as defined in N.J.S.A. 46:9-8.1.

35.            TRUE AND CORRECT COPY .  THE MORTGAGOR ACKNOWLEDGES THAT THE MORTGAGOR HAS RECEIVED, WITHOUT CHARGE, A TRUE AND CORRECT COPY OF THIS MORTGAGE.

WITNESS the due execution hereof as a document under seal, as of the date first written above, with the intent to be legally bound hereby.
 
 
 
ATTEST:
IHT PROPERTIES CORP.
   
By:
/s/ Dina L. Masi  
By:
/s/ Riva Sheppard  
Name:  DINA L. MASI
Name:  RIVA SHEPPARD
Title:  Secretary
Title:  President and Chief Executive Officer
 
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ACKNOWLEDGMENTS


STATE OF NEW JERSEY                                                                )
                         )           ss:
COUNTY OF UNION                                                                        )

On this, the 26th day of June, 2012, before me, the subscriber, personally appeared RIVA SHEPPARD , who I am satisfied is the person who executed the foregoing instrument as the President and Chief Executive Officer of   IHT PROPERTIES CORP. , a Delaware corporation, the entity named in the foregoing instrument, and who acknowledged that he/she, in such capacity, being authorized to do so, executed the foregoing instrument as such entity’s voluntary act and deed for the purposes therein contained by signing on behalf of said limited liability company.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.
 
   
   
     
By:
/s/ Mireille M. Antinozzi  
  Mireille M. Antinozzi
   Notary Public
 
(Print Name and Title)
 
 
 

 
 
 

 
 
 
EXHIBITS


A.           Legal Description

B.           Permitted Encumbrances
 
 
 
 

 
 
EXHIBIT A
LEGAL DESCRIPTION
 

ALL that certain lot, parcel or tract of land, situate and lying in the Township of Hillside, County of Union, State of New Jersey, being known and designated as Lot 47 in Block 1108 on the tax map of the Township of Hillside and being more particularly described as follows:

BEGINNING at a point formed by the intersection of the northeasterly side of New Jersey State Highway Route 22 (width varies), and the dividing line between Block 1108, Lot 47 and Block 1108, Lot 57, said point being distance 163.17 feet measured northwesterly along said Route 22, from the intersection of the said northeasterly line of Route 22 and the northwesterly line of Harding Terrace (50'wide); thence

(1)  
along said northeasterly line of Route 22, North 65 degrees 58 minutes 00 seconds West, a distance of 103.25 feet to a point of curvature; thence
 
(2)  
continuing along said northeasterly line of Route 22 on a curve to the right, having an arc distance of 172.12 feet, a radius of 1,108.78 feet, a central angle of 8 degrees 53 minutes 39 seconds and being subtended by a chord which bears North 61 degrees 31 minutes 11 seconds West, 171.95 feet to a point on the dividing line between Block 1108, Lot 47 and Block 1108, Lot 46; thence
 
(3)  
along said dividing line, North 42 degrees 44 minutes 00 seconds East, a distance of 150.00 feet to a point; thence
 
(4)  
still along said fine, North 55 degrees 15 minutes 56 seconds West, a distance of 29.92 feet to a point on the dividing line between Block 1108, Lot 47 and Block 1108, Lot 45; thence
 
(5)  
continuing along said dividing line, North 42 degrees 44 minutes 00 seconds East, a distance of 114.81 feet to a point of cusp on the southerly line of Hillside Avenue (60' wide); thence
 
(6)  
along said southerly line of Hillside Avenue in a easterly direction on a curve to the left, having an arc distance of 86.82 feet, a radius of 288.00 feet, a central angle of 17 degrees 16 minutes 20 seconds and being subtended by a chord which bears South 89 degrees 12 minutes 40 seconds East, 86.49 feet to a point of cusp on the dividing line between Block 1108, Lot 47 and Block 1108, Lot 48; thence;
 
(7)  
along said dividing line, South 34 degrees 22 minutes 00 seconds West, a distance of 84.19 feet to a corner in the dividing line; thence
 
(8)  
continuing along said dividing line, South 55 degrees 38 minutes 00 seconds East, a distance of 42.75 feet to another corning in said dividing line; thence
 
(9)  
still along said dividing line, North 34 degrees 22 minutes 00 seconds East, a distance of 63.74 feet to a point on the dividing line between Block 1108, Lot 47 and Block 1108, Lot 49; thence
 
(10)  
along said dividing line, South 55 degrees 38 minutes 00 seconds East, a distance of 95.00 feet to a corner in said dividing line; thence
 
(11)  
still along said dividing line, North 34 degrees 22 minutes 00 seconds East, a distance of 5.20 feet to the dividing line between Block 1108, Lot 47 and Block 1108, Lot 50; thence
 
(12)  
along said dividing line, South 55 degrees 35 minutes 30 seconds East, a distance of 54.75 feet to a point on the dividing line between Block 1108, Lot 47 and Block 1108, Lot 51; thence
 
(13)  
running South 34 degrees 29 minutes 30 seconds West, a distance of 59.96 feet to a point; thence
 
(14)  
running North 55 degrees 38 minutes 00 seconds West, a distance of 0.34 feet to a point; thence
 
(15)  
running South 34 degrees 23 minutes 30 seconds West, a distance of 198.62 feet to the place of BEGINNING.
 
 
 
 
 

 

 
EXHIBIT B
(Permitted Encumbrances)


1.
Slope and Drainage Rights contained in Deed Book 1363, Page 24, and Deed Book 1370, Page 246.

2.
Agreement as contained in item 3 of Deed Book 1632, Page 361.

3.
Terms and Conditions contained in Deed Book 1693, Page 348.

4.
Terms and Conditions contained in Deed Book 1754, Page 93.

5.
Driveway Rights and Privileges contained in Deed Book 2789, Page 112.

6.
Restrictions contained in Deed Book 467, Page 599.

7.
Slope Rights contained in Deed Book 1219, Page 162.

8.
Any other exceptions from coverage reflected in that certain Loan Policy issued, or to be issued, by Acquired Title Services (File No.: ACQ-008258-12), as agent for Chicago Title Insurance Company.
 
 
 
 

 

 
MORTGAGE AND SECURITY AGREEMENT

________________________________________________



IHT PROPERTIES CORP.,

          Mortgagor

AND

PNC BANK, NATIONAL ASSOCIATION, as Agent

          Mortgagee

________________________________________________

Return to:

Wilentz, Goldman & Spitzer P.A.
90 Woodbridge Center Drive
Woodbridge, New Jersey  07095
Attn:  Stuart A. Hoberman, Esq.
 
Exhibit 10.9

 

 
  Environmental Indemnity Agreement  
 


THIS ENVIRONMENTAL INDEMNITY AGREEMENT (the “Agreement” ) is made as of the 27th   day of June, 2012, by INTEGRATED BIOPHARMA, INC. , a corporation of the State of Delaware ( Integrated ), InB: MANHATTAN DRUG COMPANY, INC. ,   a corporation of the State of New York (“MD”), AGROLABS, INC. ,   a corporation of the State of New Jersey (“AL”), IHT HEALTH PRODUCTS, INC. ,   a corporation of the State of Delaware (“IHT”), VITAMIN FACTORY, INC. ,   a corporation of the State of Delaware (“Vitamin”), IHT PROPERTIES CORP. , a corporation of the State of Delaware (“IHTP” and collectively with Integrated, MD, AL, IHT and Vitamins, the “Borrower” and the “Indemnitor”), each with an address at 225 Long Avenue, Building 15, P.O. Box 278, Hillside, New Jersey  07205,  in favor of PNC BANK, NATIONAL ASSOCIATION , as Agent for Lenders (the “Bank” ), with an address at Two Tower Center Boulevard, East Brunswick, New Jersey  08816.


A.           Pursuant to a certain Revolving Credit, Term Loan and Security Agreement by and among the Borrower, the Bank, the other financial institutions named therein (collectively with the Bank, the “Lenders”), and the Bank as Agent for the Lenders (Bank in such capacity, the “Agent”) dated the date hereof (as may be amended, modified, restated, replaced, increased and/or extended from time to time, the “ Loan Agreement ”), the Borrower has borrowed from the Lenders certain loans in the original principal amount of $11,727,000 (as such amount may be increased and/or decreased from time to time, the “Loan” ) as evidenced by a certain Revolving Credit Note dated the date hereof executed by the Borrower in favor of the Agent for the benefit of the Lenders in the amount of $8,000,000 (as may be amended, restated, modified, replaced, extended and/or increased from time to time, the “Revolving Note”) and a certain Term Note dated the date hereof executed by the Borrower in favor of the Agent for the benefit of the Lenders in the amount of $3,727,000 (as may be amended, restated, modified, replaced, extended and/or increased from time to time, the “Term Note” and collectively with the Revolving Note and collectively with any and all other notes that may be delivered from time to time in connection with any obligation of the Borrower to the Lenders, as all may be amended, modified, restated, replaced, increased and/or extended from time to time, the “ Note ”) (the Loan Agreement, the Note and any mortgage, deed of trust, deed to secure debt and all of such related agreements, and all other documents evidencing, securing or guaranteeing payment of any obligations to the Lenders, as any of the same may be amended, modified, supplemented, replaced or refinanced from time to time, are hereinafter collectively referred to as the “Loan Documents” ), which Loan Documents are incorporated herein by reference and made a part hereof; and

B.           The obligations under the Loan Documents are secured by, among other things, a certain Mortgage and Security Agreement executed by IHTP in favor of the Bank dated the date hereof (as the same may be amended, modified, restated, replaced and/or refinanced from time to time, the “Mortgage” ) against certain premises described in Exhibit A attached hereto (the “Property” ), and recorded or to be recorded in the real estate records of the County or Counties in New Jersey where the Premises are located; and

C.           To induce the Bank to agree to make the Loan, the Indemnitor has agreed to enter into this Agreement.

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Indemnitor hereby covenants, warrants, represents and agrees as follows:

1.             Bank Rights Under the Agreement .   The Bank’s rights and remedies under this Agreement shall be in addition to all rights and remedies of the Bank under the Mortgage, the Loan Agreement, the Note and any guaranty or guarantees (whether of payment or performance) given to the Bank in connection with the Loan and under any Loan Document.  Payments, if any, by the Indemnitor as required under this Agreement shall not reduce the Indemnitor’s obligations and liabilities under any of the Loan Documents.  Any default by the Indemnitor under this Agreement (including any breach of any representation or warranty made by the Indemnitor) shall, at the Bank’s option, constitute a default and an Event of Default ( “Event of Default” ) under the Loan Agreement, the Note, the Mortgage and/or any of the other Loan Documents after the expiration of any applicable cure period.
 
 
 
 

 
 

 
2.             Definitions .   For purposes of this Agreement, the following terms shall have the following meanings:

(a)            “Environmental Laws” means all federal, state or commonwealth and local laws, regulations, statutes, codes, rules, resolutions, directives, orders, executive orders, consent orders, guidance from regulatory agencies, policy statements, judicial decrees, standards, permits, licenses and ordinances, or any judicial or administrative interpretation of any of the foregoing, pertaining to the protection of land, water, air, health, safety or the environment, whether now or in the future enacted, promulgated or issued, including the laws of the state where the Mortgage is or is to be recorded;

(b)            “Regulated Substances” includes any substances, chemicals, materials or elements that are prohibited, limited or regulated by the Environmental Laws, or any other substances, chemicals, materials or elements that are defined as “hazardous” or “toxic,” or otherwise regulated, under the Environmental Laws, or that are known or considered to be harmful to the health or safety of occupants or users of the Property.  The term Regulated Substances shall also include any substance, chemical, material or element (i) defined as a “hazardous substance” under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ( “CERCLA” ) (42 U.S.C. §§ 9601, et seq .), as amended by the Superfund Amendments and Reauthorization Act of 1986, and as further amended from time to time, and regulations promulgated thereunder; (ii) defined as a “regulated substance” within the meaning of Subtitle I of the Resource Conservation and Recovery Act (42 U.S.C. §§ 6991-6991i), and regulations promulgated thereunder; (iii) designated as a “hazardous substance” pursuant to Section 311 of the Clean Water Act (33 U.S.C. § 1321), or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. § 1317); (iv) defined as “hazardous”, “toxic”, or otherwise regulated, under any Environmental Laws adopted by the state in which the Property is located, or its agencies or political subdivisions; (v) which is petroleum, petroleum products or derivatives or constituents thereof; (vi) which is asbestos or asbestos-containing materials; (vii) the presence of which requires notification, investigation or remediation under any Environmental Laws or common law; (viii) the presence of which on the Property causes or threatens to cause a nuisance upon the Property or to adjacent properties or poses or threatens to pose a hazard to the health or safety of persons on or about the Property; (ix) the presence of which on adjacent properties would constitute a trespass by the Indemnitor; (x) which is urea formaldehyde foam insulation or urea formaldehyde foam insulation-containing materials; (xi) which is lead base paint or lead base paint-containing materials; (xii) which are polychlorinated biphenyls or polychlorinated biphenyl-containing materials; (xiii) which is radon or radon-containing or producing materials; or (xiv) which by any laws of any governmental authority requires special handling in its collection, storage, treatment, or disposal; and

(c)            “Contamination” means the seeping, spilling, leaking, pumping, pouring, emitting, using, emptying, discharging, injecting, escaping, leaching, dumping, disposing, releasing or the presence of Regulated Substances at, under or upon the Property or into the environment, or arising from the Property or migrating to or from the Property, which may require notification, treatment, response or removal action or remediation under any Environmental Laws.

(D)            “Phase I” or “Phase I Report” means that certain Phase 1 Environmental Site Assessment Report For Tax Block 1108, Lot 43, 201 Route 22, Hillside, New Jersey, prepared for Integrated BioPharma, Inc. prepared by Langan Engineering & Environmental Services, dated May 7, 2012.
 
 
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3.             Representations and Warranties .   The Indemnitor hereby represents and warrants that to the best of the Indemnitor’s knowledge, after due inquiry and investigation, except as is otherwise set forth on Schedule I attached hereto and the Phase I and except as provided in the last sentence of Section 4 herein:

(a)           no Contamination is present at, on or under the Property and no Contamination is being emitted from the Property onto any surrounding or adjacent areas;

(b)           all activities and operations at the Property have been and are being conducted in compliance with all applicable Environmental Laws, and the Indemnitor has obtained all permits, licenses, consents and approvals required under the Environmental Laws for the conduct of operations and activities at the Property, and all such permits, licenses, consents and approvals are in full force and effect;

(c)           the Property has never been used to generate, manufacture, refine, transport, handle, transfer, produce, treat, store, dispose of or process any Regulated Substances, except in compliance with all applicable Environmental Laws and in such a manner that no Contamination has been released on or under the Property;

(d)           no underground or aboveground storage tanks subject to regulation under any Environmental Laws are or have been located on or under the Property;

(e)           no measurable levels of radon or radon containing or producing products are present in the existing structures on the Property.  If at any time during the term of the Loan, measurable amounts of radon are detected in any structures on the Property, the Indemnitor hereby agrees, at its sole expense, to take all actions necessary to reduce such radon gas to acceptable levels;

(f)           no civil, administrative or criminal proceeding is pending or, to the knowledge of Indemnitor, threatened against the Indemnitor relating to the condition of or activities at the Property, nor has any notice of any violation or potential liability under any Environmental Laws been received, nor has the Indemnitor reason to believe such notice will be received or proceedings initiated, nor has the Indemnitor entered into any consent, decree or judicial order or settlement affecting the Property, nor has the Indemnitor or the Property been the subject of any other administrative or judicial order or decree;

(g)           the Property is not listed or proposed for listing on the National Priorities List pursuant to Section 9605 of CERCLA, or on the Comprehensive Environmental Response, Compensation and Liability Information System or on any similar state or local list of environmentally problematic/regulated sites;

(h)           no portion of the Property constitutes wetland or other “water of the United States”, flood plain or flood hazard area, or coastal zone, as defined by the applicable Environmental Laws;

(i)           no lien has been attached to any revenues or any real or personal property owned by the Indemnitor and located in the state where the Property is located, including the Property, for damages or cleanup, response or removal costs, under any Environmental Laws, or arising from an intentional or unintentional act or omission in violation thereof by the Indemnitor, or any previous owner or operator of the Property;

(j)           no Contamination has been discharged or emitted from the Property into waters on, under or adjacent to the Property, or onto lands from which Regulated Substances might seep, flow or drain into such waters;

(k)           no report, analysis, study or other document prepared by or for any person exists identifying that any Contamination has been, or currently is, located upon or under the Property;
 
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(l)           neither the transaction contemplated by the Loan Documents nor any other transaction involving the sale, transfer or exchange of the Property will trigger or has triggered any obligation under the Environmental Laws to make a filing, provide a deed notice, provide disclosure or take any other action, or in the event that any such transaction-triggered obligation does arise or has arisen under any Environmental Laws, all such actions required thereby have been taken;

(m)           the execution, delivery and performance by the Indemnitor of this Agreement does not and will not contravene any (i) law or governmental rule, regulation or order which is applicable to the Indemnitor and no authorization, approval or other action by, and no notice to or filing with, any governmental entity is required for the due execution, delivery and performance by the Indemnitor of this Agreement, or (ii) contractual restriction which is binding upon or which affects the Indemnitor, and does not and will not result in or require the creation of any lien, security interest or other charge or encumbrance upon or with respect to any property of the Indemnitor other than Permitted Encumbrances; and

(n)           this agreement is a legal, valid and binding obligation of the Indemnitor, enforceable against the Indemnitor in accordance with its terms.

4.             Environmental Covenants .   The Indemnitor hereby covenants and agrees as follows:

(a)           to cause all activities at the Property during the term of the Loan to be conducted in compliance with all applicable Environmental Laws;

(b)           to provide the Bank with copies of all:  (i) correspondence, notices of violation, summons, orders, complaints or other documents received by the Indemnitor, its lessees, sublessees, occupants or assigns, pertaining to compliance with any Environmental Laws from the date hereof; (ii) reports of previous environmental investigations undertaken at the Property which the Indemnitor knows of, or has or can obtain possession; (iii) licenses, certificates and permits required by the Environmental Laws; (iv) a description of the operations and processes of the Indemnitor; and (v) any other information that the Bank may reasonably request;

(c)           not to generate, manufacture, refine, transport, transfer, produce, store, use, process, treat, dispose of, handle, or in any manner deal with, any Regulated Substances on any part of the Property, nor permit others to engage in any such activity on the Property, except for (i) those Regulated Substances which are used or present in the ordinary course of the Indemnitor’s business in compliance with all applicable Environmental Laws, and except as disclosed on Schedule I attached hereto or in the Phase I, and have not been released into the environment in such a manner as to constitute Contamination hereunder; and (ii) those Regulated Substances which are naturally occurring on the Property, but only in such naturally occurring form;

(d)           not to cause or permit, as a result of any intentional or unintentional act or omission on the part of the Indemnitor or any tenant, subtenant, occupant or assigns, the presence of Regulated Substances or Contamination on the Property, except for (i) those Regulated Substances which are used or present in the ordinary course of the Indemnitor’s business in compliance with all applicable Environmental Laws, are listed on Schedule I attached hereto or in the Phase I, and have not been released into the environment in such a manner as to constitute Contamination hereunder, and (ii) those Regulated Substances which are naturally occurring on the Property, but only in such naturally occurring form;

(e)           to give notice and a full description to the Bank within three (3) Business Days upon the Indemnitor’s acquiring knowledge of (i) any and all enforcement, clean-up, removal or other regulatory actions threatened, instituted or completed by any governmental authority with respect to the Indemnitor or the Property; (ii) all claims made or threatened by any third party against the Indemnitor or the Property relating to damage, contribution, compensation, loss or injury resulting from any Regulated Substances or Contamination; (iii) any complaint made or threatened by any third party against the Indemnitor or the Property relating to damage, contribution, compensation, loss or injury resulting from any Regulated Substances or Contamination; (iv) the presence of any Contamination on, under, from or affecting the Property; (v) Indemnitor’s violation of any Environmental Laws; (vi) the imposition, attachment or recording of any lien or encumbrance under applicable Environmental Laws against the Property and/or any personal or other real property owned by Indemnitor; and (vii) the inability to obtain or renew any Environmental Permit or a notice from a governmental authority that it has revoked or suspended, or otherwise intends to revoke or suspend, whether in whole or in part, any permit for the Property, which permit relates, in any way, to any Environmental Law;
 
 
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(f)           to timely comply with any Environmental Laws requiring the removal, treatment, storage, processing, handling, transportation or disposal of such Regulated Substances or Contamination and provide the Bank with satisfactory evidence of such compliance;

(g)           to conduct and complete all investigations, studies, sampling and testing, as well as all remedial, removal and other actions necessary to clean up and remove all Contamination on, under, from or affecting the Property, all in accordance with the Environmental Laws; and

(h)           to continue to have all necessary licenses, certificates and permits required under the Environmental Laws relating to the Indemnitor and its Property, facilities, assets and business.

Notwithstanding anything to the contrary herein, the Indemnitor is permitted to use and maintain on the Property any substances of kinds and in amounts ordinarily and customarily used or stored in similar properties for the purposes of cleaning or other maintenance or operations and otherwise in compliance in all material respects with all applicable Environmental Laws.

5.            Bank’s Right to Conduct an Investigation .

(a)           The Bank may, at any time and at its sole discretion, commission an investigation into the presence of Regulated Substances or Contamination on, from or affecting the Property, or the compliance with Environmental Laws at, or relating to, the Property.  Such an investigation performed by the Bank shall be at the Indemnitor’s expense if the performance of the investigation is commenced (i) upon the occurrence of a default hereunder or of a default or “Event of Default” under the Loan Agreement, the Note, the Mortgage or any other Loan Document; or (ii) because the Bank has a reasonable belief that the Indemnitor has violated any provision of this Agreement (including any representation, warranty or covenant).  All other investigations performed by the Bank shall be at the Bank’s expense.  In connection with any such investigation, the Indemnitor, its tenants, subtenants, occupants and assigns, shall comply with all reasonable requests for information made by the Bank or its agents and the Indemnitor represents and warrants that all responses to any such requests for information will be correct and complete.  Upon three (3) Business Days notice by the Bank to the Indemnitor, the Indemnitor shall provide the Bank and its agents with rights of access to all areas of the Property and permit the Bank and its agents to perform testing (including any invasive testing) necessary or appropriate, in the Bank’s reasonable judgment, to perform such investigation.

(b)           The Bank is under no duty, however, to conduct such investigations of the Property and any such investigations by the Bank shall be solely for the purposes of protecting the Bank’s security interest in the Property and preserving its rights under the Loan Documents.  No site visit, observation, or testing by the Bank shall constitute a waiver of any default of the Indemnitor or be characterized as a representation regarding the presence or absence of Regulated Substances or Contamination at the Property.  The Bank owes no duty of care to protect the Indemnitor or any third party from the presence of Regulated Substances, Contamination or any other adverse condition affecting the Property nor shall the Bank be obligated to disclose to the Indemnitor or any third party any report or findings made in connection with any investigation done on behalf of the Bank.
 
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6.            Indemnification .

(a)           The Indemnitor covenants and agrees, at its sole cost and expense, to indemnify, defend, protect, save and hold harmless the Bank (including the Bank as holder of the Mortgage, as mortgagee in possession, or as successor in interest to the Indemnitor as owner of the Property by virtue of a foreclosure or acceptance of a deed in lieu of foreclosure) and all of its officers, directors, employees and agents, any participant in the Loan, and their respective successors and assigns, against and from any and all Environmental Damages (as defined in subsection (b) below), which may at any time be imposed upon, threatened against, incurred by or asserted or awarded against the Bank (whether before or after the release, satisfaction or extinguishment of the Mortgage) and arising from or out of:

(i)           the Indemnitor’s failure to comply with any of the provisions of this Agreement, including the Indemnitor’s breach of any covenant, representation or warranty contained in this Agreement; or

(ii)           any Contamination, or threatened release of any Regulated Substances or Contamination, on, in, under, affecting or migrating or threatening to migrate to or from all or any portion of the Property, any surrounding areas or other property or any persons; or

(iii)           any violation of, or noncompliance with, or alleged violation of, or noncompliance with, Environmental Laws (and/or any permit relating to any Environmental Laws) by the Property or the Indemnitor, including, without limitation, costs and fees of lawyers, environmental consultants and the like incurred to remove any environmentally related lien imposed upon the Property; or

(iv)           the willful misconduct, error or omission or negligent act or omission of the Indemnitor; or

(v)           any judgment, lien, order, complaint, notice, citation, action, proceeding or investigation pending or threatened by or before any governmental authority or any private party litigant, including any environmental regulatory body, or before any court of law (including any private civil litigation) with respect to the Indemnitor’s business, assets, property or facilities, or the Property, in connection with any Regulated Substances, Contamination or any Environmental Laws (including the assertion that any lien existing or arising pursuant to any Environmental Laws takes priority over the lien of the Mortgage); or

(vi)           the enforcement of this Agreement or the assertion by the Indemnitor of any defense to its obligations hereunder.

The Indemnitor’s indemnification obligations set forth in this Section 6 shall be in effect and enforceable regardless of whether any such indemnification obligations arise before or after foreclosure of the Mortgage or other taking of title to all or any portion of the Property by the Bank or any affiliate of the Bank, and whether the underlying basis of any claim arose from events prior to the Indemnitor acquiring ownership of the Property.

(b)           For the purposes of this Agreement, “Environmental Damages” shall mean all claims, judgments, damages, losses, penalties, fines, liabilities (including strict liability), encumbrances, liens, costs and expenses of investigation and defense of any claim, whether or not such claim is ultimately defeated, and of any good faith settlement, of whatever kind or nature, contingent or otherwise, matured or unmatured, foreseeable or unforeseeable, including reasonable attorneys’ fees and disbursements and consultants’ fees, any of which are incurred at any time, and including:

(i)           damages for personal injury, or injury to property or natural resources, occurring upon or off of the Property, including lost profits, consequential damages, punitive damages, the cost of demolition and rebuilding of any improvements on real property, interest and penalties;
 
 
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(ii)           fees incurred for the services of attorneys, consultants, contractors, experts, laboratories and all other costs and expenses incurred in connection with investigation, remediation or post-remediation monitoring, operation and maintenance, of any Regulated Substances or Contamination or violation of any Environmental Laws including the preparation of any feasibility studies or reports or the performance of any cleanup, remediation, removal, response, abatement, contaminant, closure, restoration, treatment, investigation work or monitoring work required by any Environmental Laws, or reasonably necessary to make full economic use of the Property or any other property or otherwise expended in connection with such conditions, including any and all Corrective Work under Section 7, and further including any attorneys’ fees, costs and expenses incurred in enforcing this Agreement or collecting any sums due hereunder;

(iii)           any additional costs required to take necessary precautions to protect against a release of Regulated Substances or Contamination on, in, under or affecting the Property into the air, any body of water, any other public domain or any surrounding or adjoining areas;

(iv)           any costs incurred to comply, in connection with all or any portion of the Property or any area surrounding or adjoining the Property, with all Environmental Laws;

(v)           liability to any third persons or governmental agency for costs expended in connection with the items referenced in clause (ii) above; and

(vi)           diminution in the value of the Property, and damages for the loss of business and restriction on the use or adverse impact on the marketing of rentable or usable space or of any amenity of the Property.

(c)           Promptly after the receipt by the Bank of written notice of any demand or claim or the commencement of any action, suit or proceeding concerning the Indemnitor or the Bank in connection with the Property, the Bank shall endeavor to notify the Indemnitor thereof in writing.  The failure by the Bank promptly to give such notice shall not relieve the Indemnitor of any liability to the Bank hereunder.

7.            Indemnitor’s Obligation to Perform Corrective Work .

(a)           The Indemnitor shall have the obligation to promptly commence and perform any corrective work required to address any Environmental Damages, including any actions required by the Indemnitor under Section 6 ( “Corrective Work” ) after the occurrence of any of the following:  (i) the Indemnitor obtains actual knowledge of any Contamination on, in, under, affecting, or migrating to or from the Property or any surrounding areas; or (ii) an event occurs for which the Bank can seek indemnification from the Indemnitor pursuant to Section 6.
(b)           The Indemnitor shall provide to the Bank written notification at least twenty (20) days prior to the commencement of any such Corrective Work, and shall give the Bank a monthly report, during the performance of such Corrective Work, on the Indemnitor’s progress with respect thereto, and shall promptly give the Bank such other information with respect thereto as the Bank shall reasonably request.  Such written notice shall contain the name of the person or entity performing such Corrective Work and shall be accompanied by:  (i) written evidence, satisfactory in form and content to the Bank, showing that such person or entity is fully insured against any and all injury and damages caused by or resulting from the performance of such Corrective Work; and (ii) copies of the plans for such Corrective Work, approved in writing by the appropriate governmental authorities.

(c)           Any Corrective Work conducted by the Indemnitor shall be diligently performed and shall comply with all Environmental Laws and all other applicable laws to correct, contain, clean up, treat, remove, resolve, dispose of or minimize the impact of all Regulated Substances or Contamination.
 
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(d)           Any failure by the Bank to object to any actions taken by the Indemnitor shall not be construed to be an approval by the Bank of such actions.  This Agreement shall not be construed as creating any obligation for the Bank to initiate any contests or to perform or review the Indemnitor’s or any other party’s performance of, any Corrective Work, or disburse any funds for any contests or the performance of any Corrective Work.

8.             Bank’s Right to Select Engineers, Consultants and Attorneys .   Without limiting the other provisions hereof, in the event any claim (whether or not a judicial or administrative action is involved) is asserted against the Bank with respect to Regulated Substances, Environmental Laws or Contamination, the Bank shall have the right to select the engineers, other consultants and attorneys for the Bank’s defense or guidance, determine the appropriate legal strategy for such defense, and compromise or settle such claim, all in the Bank’s sole discretion, and the Indemnitor shall be liable to the Bank in accordance with the terms hereof for liabilities, costs and expenses incurred by the Bank in this regard.

9.             Indemnitor’s Obligation to Deliver Property .   The Indemnitor agrees that, in the event the Mortgage is foreclosed (whether judicially or by power of sale) or the Indemnitor tenders a deed in lieu of foreclosure, the Indemnitor shall deliver the Property to the Bank free of any and all Regulated Substances, (except for (a) those Regulated Substances which are used or present in the ordinary course of the Indemnitor’s business in compliance with all Environmental Laws, are listed on Schedule I hereto and have not been released into the environment in such a manner as to constitute Contamination hereunder, and (b) those Regulated Substances which are naturally occurring on the Property, but only in such naturally occurring form) or Contamination in a condition such that the Property conforms with all Environmental Laws and such that no remedial or removal action will be required with respect to the Property.  The Indemnitor’s obligations as set forth in this Section are strictly for the benefit of the Bank and any successors and assigns of the Bank as holder of any portion of the Loan and shall not in any way impair or affect the Bank’s right to foreclose against the Property.

10.             Bank’s Right to Cure .   In addition to the other remedies provided to the Bank in the Mortgage and the other Loan Documents, should the Indemnitor fail to abide by any provisions of this Agreement, the Bank may, should it elect to do so, perform any Corrective Work and any other such actions as it, in its sole discretion, deems necessary to repair and remedy any damage to the Property caused by Regulated Substances or Contamination or any such Corrective Work.  In such event, all funds expended by the Bank in connection with the performance of any Corrective Work, including all attorneys’ fees, engineering fees, consultant fees and similar charges, shall become a part of the obligation secured by the Mortgage and shall be due and payable by the Indemnitor on demand.  Each disbursement made by the Bank pursuant to this provision shall bear interest at the lower of the Default Rate (as defined in the Loan Agreement) or the highest rate allowable under applicable laws from the date the Indemnitor shall have received written notice that the funds have been advanced by the Bank until paid in full.

11.             Scope of Liability .   The liability under this Agreement shall in no way be limited or impaired by (a) any extension of time for performance required by any of the Loan Documents; (b) any sale, assignment or foreclosure of the Loan Agreement, the Note or Mortgage, the acceptance of a deed in lieu of foreclosure or trustee’s sale, or any sale or transfer of all or part of the Property; (c) the discharge of the Loan Agreement, the Note or the reconveyance or release of the Mortgage; (d) any exculpatory provisions in any of the Loan Documents limiting the Bank’s recourse; (e) the accuracy or inaccuracy of the representations and warranties made by the Indemnitor, or any other obligor under any of the Loan Documents; (f) the release of the Indemnitor or any guarantor or any other person from performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law, the Bank’s voluntary act or otherwise; (g) the release or substitution, in whole or in part, of any security for the Loan Agreement, the Note or other obligations; or (h) the Bank’s failure to record the Mortgage or file any UCC financing statements (or the Bank’s improper recording or filing of any thereof) or to otherwise perfect, protect, secure or insure any security interest or lien given as security for the Loan Agreement, the Note or other obligations; and, in any such case, whether with or without notice to the Indemnitor or any guarantor or other person or entity and with or without consideration.
 
 
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12.             Notices .   All notices, demands, requests, consents, approvals and other communications required or permitted hereunder ( “Notices” ) must be in writing and will be effective upon receipt.  Notices may be given in any manner to which the parties may separately agree, including electronic mail.  Without limiting the foregoing, first class mail, facsimile transmission and commercial courier service are hereby agreed to as acceptable methods for giving Notices.  Regardless of the manner in which provided, Notices may be sent to a party’s address as set forth above or to such other address any party may give to the other for such purpose in accordance with this section.

13.             Preservation of Rights .                                              No delay or omission on the Bank’s part to exercise any right or power arising hereunder will impair any such right or power or be considered a waiver of any such right or power, nor will the Bank’s action or inaction impair any such right or power.  The Bank’s rights and remedies hereunder are cumulative and not exclusive of any other rights or remedies which the Bank may have under other agreements, at law or in equity.  Any representations, warranties, covenants or indemnification liabilities for breach thereof contained in this Agreement shall not be affected by any knowledge of, or investigations performed by, the Bank.  Any one or more persons or entities comprising the Indemnitor, or any other party liable upon or in respect of this Agreement or the Loan, may be released without affecting the liability of any party not so released.

14.             Illegality .   If any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, it shall not affect or impair the validity, legality and enforceability of the remaining provisions of this Agreement.

15.             Changes in Writing .   No modification, amendment or waiver of, or consent to any departure by the Indemnitor from, any provision of this Agreement will be effective unless made in a writing signed by the Bank and Indemnitors, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.  No notice to or demand on the Indemnitor will entitle the Indemnitor to any other or further notice or demand in the same, similar or other circumstance.

16.             Successors and Assigns; Survival .   This Agreement will be binding upon the Indemnitor and its heirs, administrators, successors and assigns, and will inure to the benefit of the Bank and its successors and assigns as well as any persons or entities who acquire title to or ownership of the Property from, or through action by, the Bank (including at a foreclosure, sheriff’s or judicial sale); provided , however , that the Indemnitor may not assign this Agreement in whole or in part without the Bank’s prior written consent and the Bank at any time may assign this Agreement in whole or in part, subject to Section 16.3 of the Loan Agreement.  The Indemnitor’s obligations under this Agreement shall survive any judicial foreclosure, foreclosure by power of sale, deed in lieu of foreclosure, transfer of the Property by the Indemnitor or the Bank and payment of the Loan in full.

17.             Interpretation .   In this Agreement, unless the Bank and the Indemnitor otherwise agree in writing, the singular includes the plural and the plural the singular; words importing any gender include the other genders; references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute referred to; the word “or” shall be deemed to include “and/or”, the words “including”, “includes” and “include” shall be deemed to be followed by the words “without limitation”; references to articles, sections (or subdivisions of sections) or exhibits are to those of this Agreement; and references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications to such instruments, but only to the extent such amendments and other modifications are not prohibited by the terms of this Agreement.  Section headings in this Agreement are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.  If this Agreement is executed by more than one party as Indemnitor, the obligations of such persons or entities will be joint and several.
 
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18.             Governing Law and Jurisdiction .   This Agreement has been delivered to and accepted by the Bank and will be deemed to be made in the State of New York.   This Agreement will be interpreted and the rights and liabilities of the parties hereto determined in accordance with the laws of the State of New York.   The Indemnitor and the Bank hereby irrevocably consent to the exclusive jurisdiction of any state or federal court in the county or judicial district in New York County, State of New York; provided that nothing contained in this Agreement will prevent the Bank from bringing any action, enforcing any award or judgment or exercising any rights against the Indemnitor individually, against any security or against any property of the Indemnitor within any other county, state or other foreign or domestic jurisdiction.  The Bank and the Indemnitor agree that the venue provided above is the most convenient forum for both the Bank and the Indemnitor.  The Indemnitor and Bank waive any objection to venue and any objection based on a more convenient forum in any action instituted under this Agreement.

19.             Further Assurances .  Indemnitor will, at the cost of Indemnitor, upon the Bank’s request, execute, acknowledge and deliver to the Bank such further documents and statements and do or cause to be done such acts or things as the Bank may deem necessary or appropriate to effect the transactions contemplated hereby or to confirm the assumption of and agreement to pay, perform and discharge the liabilities and obligations hereby assumed and agreed to be paid, performed or discharged, or intended so to be.

20.             WAIVER OF JURY TRIAL .    THE INDEMNITOR IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS.  THE INDEMNITOR AND BANK ACKNOWLEDGE THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.

21.  If any provisions of this Agreement and the Loan Agreement conflict, the terms of this Agreement shall control.
 
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The Indemnitor acknowledges that it has read and understood all the provisions of this Agreement, including the waiver of jury trial, and has been advised by counsel as necessary or appropriate.


 

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES TO FOLLOW
 
 
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WITNESS the due execution hereof as a document under seal, as of the date first written above, with the intent to be legally bound hereby.
 
 
 
ATTEST:
INTEGRATED BIOPHARMA.INC.
   
By:
/s/ Dina L. Masi  
By:
/s/ E. Gerald Kay  
Name:  DINA L. MASI
Name:  E. GERALD KAY
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
InB:MANHATTAN DRUG COMPANY, INC.
   
By:
/s/ Dina L. Masi  
By:
/s/ Riva Sheppard  
Name:  DINA L. MASI
Name:  RIVA SHEPPARD
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
AGROLABS, INC.
   
By:
/s/ Dina L. Masi  
By:
/s/ Christina Kay  
Name:  DINA L. MASI
Name:  CHRISTINA KAY
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
IHT HEALTH PRODUCTS, INC.
   
By:
/s/ Dina L. Masi  
By:
/s/ Christina Kay  
Name:  DINA L. MASI
Name:  CHRISTINA KAY
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
VITAMIN FACTORY, INC.
   
By:
/s/ Dina L. Masi  
By:
/s/ Riva Sheppard  
Name:  DINA L. MASI
Name:  RIVA SHEPPARD
Title:  Secretary
Title:  President and Chief Executive Officer
 
 
ATTEST:
IHT PROPERTIES, CORP.
   
By:
/s/ Dina L. Masi  
By:
/s/ E. Gerald Kay  
Name:  DINA L. MASI
Name:  E. GERALD KAY
Title:  Secretary
Title:  President and Chief Executive Officer

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EXHIBIT A
Legal Description

 
ALL that certain lot, parcel or tract of land, situate and lying in the Township of Hillside, County of Union, State of New Jersey, being known and designated as Lot 47 in Block 1108 on the tax map of the Township of Hillside and being more particularly described as follows:

BEGINNING at a point formed by the intersection of the northeasterly side of New Jersey State Highway Route 22 (width varies), and the dividing line between Block 1108, Lot 47 and Block 1108, Lot 57, said point being distance 163.17 feet measured northwesterly along said Route 22, from the intersection of the said northeasterly line of Route 22 and the northwesterly line of Harding Terrace (50'wide); thence

(1)  
along said northeasterly line of Route 22, North 65 degrees 58 minutes 00 seconds West, a distance of 103.25 feet to a point of curvature; thence
 
(2)  
continuing along said northeasterly line of Route 22 on a curve to the right, having an arc distance of 172.12 feet, a radius of 1,108.78 feet, a central angle of 8 degrees 53 minutes 39 seconds and being subtended by a chord which bears North 61 degrees 31 minutes 11 seconds West, 171.95 feet to a point on the dividing line between Block 1108, Lot 47 and Block 1108, Lot 46; thence
 
(3)  
along said dividing line, North 42 degrees 44 minutes 00 seconds East, a distance of 150.00 feet to a point; thence
 
(4)  
still along said fine, North 55 degrees 15 minutes 56 seconds West, a distance of 29.92 feet to a point on the dividing line between Block 1108, Lot 47 and Block 1108, Lot 45; thence
 
(5)  
continuing along said dividing line, North 42 degrees 44 minutes 00 seconds East, a distance of 114.81 feet to a point of cusp on the southerly line of Hillside Avenue (60' wide); thence
 
(6)  
along said southerly line of Hillside Avenue in a easterly direction on a curve to the left, having an arc distance of 86.82 feet, a radius of 288.00 feet, a central angle of 17 degrees 16 minutes 20 seconds and being subtended by a chord which bears South 89 degrees 12 minutes 40 seconds East, 86.49 feet to a point of cusp on the dividing line between Block 1108, Lot 47 and Block 1108, Lot 48; thence;
 
(7)  
along said dividing line, South 34 degrees 22 minutes 00 seconds West, a distance of 84.19 feet to a corner in the dividing line; thence
 
(8)  
continuing along said dividing line, South 55 degrees 38 minutes 00 seconds East, a distance of 42.75 feet to another corning in said dividing line; thence
 
(9)  
still along said dividing line, North 34 degrees 22 minutes 00 seconds East, a distance of 63.74 feet to a point on the dividing line between Block 1108, Lot 47 and Block 1108, Lot 49; thence
 
(10)  
along said dividing line, South 55 degrees 38 minutes 00 seconds East, a distance of 95.00 feet to a corner in said dividing line; thence
 
(11)  
still along said dividing line, North 34 degrees 22 minutes 00 seconds East, a distance of 5.20 feet to the dividing line between Block 1108, Lot 47 and Block 1108, Lot 50; thence
 
(12)  
along said dividing line, South 55 degrees 35 minutes 30 seconds East, a distance of 54.75 feet to a point on the dividing line between Block 1108, Lot 47 and Block 1108, Lot 51; thence
 
(13)  
running South 34 degrees 29 minutes 30 seconds West, a distance of 59.96 feet to a point; thence
 
(14)  
running North 55 degrees 38 minutes 00 seconds West, a distance of 0.34 feet to a point; thence
 
(15)  
running South 34 degrees 23 minutes 30 seconds West, a distance of 198.62 feet to the place of BEGINNING.
 
 
 
 
 
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SCHEDULE I
List of Exceptions
 
 
Any matters or exceptions set forth in the Phase I, if any.
 
 
 
 
14
Exhibit 10.10
 
 
AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT
 
This AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT, dated as of June 27, 2012, is by and between INTEGRATED BIOPHARMA, INC., a Delaware corporation (the “ Company ”), and CD FINANCIAL, LLC, a Florida limited liability company (the “ Investor ” or “ CD Financial ”).
 
PRELIMINARY STATEMENT:
 
A.   The Company and the Investor entered into that certain Securities Purchase Agreement, dated as of February 21, 2008 (the “ Original Purchase Agreement ”), pursuant to which, on February 21, 2008 (the “ Original Closing Date ”), the Company sold to the Investor, and the Investor purchased from the Company, the following: (i) a 9.5% Convertible Senior Secured Note having a principal amount of four million five hundred thousand and 00/100 dollars ($4,500,000) (the “ 2008 Note ”), and (ii) 3,000 shares of the Company’s Series C Convertible Preferred Stock, having a stated value of $1,000 per share (the “ Series C Preferred Stock ”), which series was designated pursuant to the Company’s Certificate of Designation of Series C Convertible Preferred Stock, dated as of February 21, 2008 (the “Certificate of Designation ”).
 
B.   The obligations of the Company under the Original Purchase Agreement are: (i) secured by certain collateral pursuant to that certain Security Agreement, dated as of February 21, 2008 (the “ Original Security Agreement ”), by and among the Company, certain of the direct or indirect subsidiaries of the Company party thereto, and the Investor, in its capacity as collateral agent for the benefit of the Investor, as the holder of the 2008 Note; and (ii) guaranteed by certain subsidiaries of the Company party thereto pursuant to that certain Subsidiary Guarantee, dated as of February 21, 2008 (the “ Original Subsidiary Guarantee ”, and together with the Original Security Agreement and the additional Transaction Documents (as defined in the Original Purchase Agreement), the “ Original Transaction Documents ”), by and among such subsidiaries and the Investor, in its capacity as collateral agent.
 
C.   The Investor converted all of its shares of Series C Preferred Stock for shares of Common Stock (as defined below) pursuant to and in accordance with the terms of the Certificate of Designation.
 
D.   INB:Manhattan Drug Company, Inc., a New York corporation and Subsidiary of the Company (formerly known as Manhattan Drug Company, Inc.) (“ MDC ”), borrowed three hundred thousand and 00/100 dollars ($300,000.00) from the Investor pursuant to that certain 5.0% Promissory Note issued on November 24, 2009 (the “ MDC Note ”), made by MDC and payable to the order of the Investor.
 
E.   MDC, the Company and the Investor entered into that certain Assignment and Assumption Agreement, dated as of June 27, 2012, pursuant to which the Company assumed all of MDC’s right, title, interest and obligations in, to and under the MDC Note (the MDC Note as so assigned, “ Assigned MDC Note ”).
 
F.   As of (and including) the date immediately preceding the date hereof: (i) accrued and unpaid interest under the 2008 Note in the amount of $357,437.49 is outstanding; (ii) accrued and unpaid interest under the Assigned MDC Note in the amount of $12,328.71 is outstanding; and (iii) fees and other amounts in the amount of $180,233.80 is outstanding under the Original Transaction Documents (collectively, the “ Outstanding Interest/Fee Amounts ”).
 
 
 
 

 
 
G.   Various “Events of Default” (as such term is defined in each of the 2008 Note and the Assigned MDC Note, as applicable) under each of the 2008 Note and the Assigned MDC Note have occurred and are continuing (collectively, the “ Specified Defaults ”), and the Company has requested that the Investor waive all of the Specified Defaults.
 
H.   The Investor is willing to consolidate the entire outstanding principal amount owing under the 2008 Note, the entire outstanding principal amount owing under the Assigned MDC Note and the Outstanding Interest/Fee Amounts (collectively, the “ Consolidated Amount ”) into one promissory note.  In furtherance of the foregoing, the Investor and the Company desire to amend and restate the 2008 Note and the Assigned MDC Note, which amended and restated 2008 Note and Assigned MDC Note shall be in the form of the Consolidated Note (as defined below) attached hereto as Exhibit A , (i) to consolidate the 2008 Note and the Assigned MDC Note and the Consolidated Amount into one promissory note, (ii) to delete the conversion feature set forth in Section 5 of the 2008 Note  as it applies to interest that may accrue from and after the date of the Second Closing and (iii) to amend certain provisions of the 2008 Note and the Assigned MDC Note, all on and subject to the terms and conditions set forth herein.
 
I.   The Investor has further agreed to waive the Specified Defaults, all on and subject to the terms and conditions set forth herein.
 
J.   The Company has requested that CD Financial make an infusion of cash/equity to the Company in the aggregate amount of $1,714,000 (the “ Liquidity Amount ”), and CD Financial has agreed to make such cash/equity infusion, on and subject to the terms set forth herein and in the Liquidity Note (defined below).
 
K.   The sale of the Notes (as defined below) by the Company to Investor, and any issuance of additional Securities will be effected in reliance upon the exemption from securities registration afforded by the provisions of Regulation D (“ Regulation D ”), as promulgated by the Securities and Exchange Commission (the “ Commission ”) under the Securities Act (as defined below).
 
L.   The Company’s Obligations (as defined below) will be guaranteed by each of the Subsidiary Guarantors (as defined below) pursuant to the Subsidiary Guarantee (as defined below) and secured by the assets of the Company and the Subsidiary Guarantors (as defined below) pursuant to the Security Agreement (as defined below).
 
M.   The Investor and the Company desire to amend and restate the Original Purchase Agreement in its entirety (i) to provide for the issuance of the Consolidated Note, (ii) to provide for the issuance of the Liquidity Note and (iii) to amend certain other provisions of the Original Purchase Agreement as provided below, on and subject to the terms and conditions set forth herein.
 
NOW THEREFORE, in consideration of the mutual promises made herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Investor and the Company hereby agree as follows:
 
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1.   TERMINOLOGY AND USAGE .
 
1.1   Definitions .  When used herein, the terms below shall have the respective meanings indicated:
 
Affiliate ” means, as to any Person (the “ subject Person ”), any other Person that directly or indirectly through one or more intermediaries controls or is controlled by, or is under direct or indirect common control with, the subject Person. For the purposes of this definition, “ control ” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, through representation on such Person’s board of directors or other management committee or group, by contract or otherwise.
 
Agreement ” means this Amended and Restated Securities Purchase Agreement, dated as of June 27, 2012, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
AL Lease ” has the meaning specified in Schedule 4.30 .
 
Anti-Terrorism Laws ” shall mean any Applicable Laws relating to terrorism or money laundering, including Executive Order No. 13224, the USA PATRIOT Act, the Applicable Laws comprising or implementing the Bank Secrecy Act, and the Applicable Laws administered by the United States Treasury Department’s Office of Foreign Asset Control (as any of the foregoing Applicable Laws may from time to time be amended, renewed, extended, or replaced).
 
Applicable Law ” shall mean all laws, rules and regulations applicable to the Person, conduct, transaction, covenant, or contract in question, including all applicable common law and equitable principles; all provisions of all applicable state, federal and foreign constitutions, statutes, rules, regulations, treaties, directives and orders of any Governmental Authority, and all orders, judgments and decrees of all courts and arbitrators.
 
Assigned MDC Note ” has the meaning specified in the recitals of this Agreement.
 
Blocked Person ” means any of the following:
 
(i)   a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;
 
(ii)   a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;
 
(iii)   a Person or entity with which Investor is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;
 
(iv)   a Person or entity that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order No. 13224;
 
(v)   a Person or entity that is named as a “specially designated national” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list, or
 
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(vi)   a Person or entity who is affiliated or associated with a Person or entity listed above.
 
Board of Directors ” means the Company’s board of directors.
 
Business Day ” means any day other than a Saturday, a Sunday or a day on which commercial banks in the City of New York are required or authorized by law to be closed.
 
Capital Expenditures ” shall mean expenditures made or liabilities incurred for the acquisition of any fixed assets or improvements, replacements, substitutions or additions thereto which have a useful life of more than one year, including the total principal portion of Capitalized Lease Obligations, which, in accordance with GAAP, would be classified as capital expenditures.
 
Capitalized Lease Obligation ” means any Debt of a Person represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.
 
CD Financial ” has the meaning set forth in the introductory paragraph hereof.
 
Certificate of Designation ” has the meaning specified in the recitals of this Agreement.
 
Change of Control ” means the occurrence of any event (whether in one or more transactions) which results in a transfer of control of the Company to a Person who is not an Original Owner.  For purposes of this definition, “control of the Company” shall mean the power, direct or indirect to vote 50% or more of the Equity Interests having ordinary voting power for the election of directors (or the individuals performing similar functions) of the Company.
 
Code ” shall mean the Internal Revenue Code of 1986, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect.
 
Collateral Agent ” means CD Financial, LLC in its capacity as collateral agent under the Security Agreement and the other applicable Transaction Documents, together with its successors in such capacity.
 
Commission ” has the meaning specified in the recitals to this Agreement.
 
Common Stock ” means the common stock of the Company.
 
Company Subsidiary ” means a Subsidiary of the Company.
 
Consolidated Amount ” has the meaning specified in the recitals of this Agreement.
 
Consolidated Note ” means that certain Amended and Restated Convertible Secured Promissory Note, dated June 27, 2012, made by the Company to CD Financial in the original principal amount of $5,350,000, in the form of Exhibit A hereto, as the same may be amended, restated, supplemented or modified from time to time.
 
Controlled Group ” shall mean, at any time, each Loan Party and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control and all other entities which, together with any Loan Party, are treated as a single employer under Section 414 of the Code.
 
 
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Customer ” shall mean and include the account debtor with respect to any Receivable and/or the prospective purchaser of goods, services or both with respect to any contract or contract right, and/or any party who enters into or proposes to enter into any contract or other arrangement with any Loan Party, pursuant to which such Loan Party is to deliver any personal property or perform any services.
 
Debt ” of a Person at a particular date means, without duplications, all obligations of such Person which in accordance with GAAP would be classified upon a balance sheet as liabilities (except capital stock and surplus earned or otherwise) and in any event, without limitation by reason of enumeration, shall include all indebtedness, debt and other similar monetary obligations of such Person whether direct or guaranteed, and all premiums, if any, due at the required prepayment dates of such indebtedness, and  all indebtedness secured by a Lien on assets owned by such Person, whether or not such indebtedness actually shall have been created, assumed or incurred by such Person including, but not limited to, (a) all obligations of such Person which, in accordance with GAAP, would be classified upon a balance sheet as liabilities (except capital stock and surplus earned or otherwise), (b) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (c) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (d) all obligations of such Person upon which interest charges are customarily paid, (e) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (f) all obligations of such Person in respect of the deferred purchase price of property or services, (g) all indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the indebtedness secured thereby has been assumed, (h) all guarantees by such Person of indebtedness of others, (i) all Capitalized Lease Obligations of such Person, (j) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, (k) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances, and (l) all obligations of such Person in respect of any earn-out obligation.  Any indebtedness of such Person resulting from the acquisition by such Person of any assets subject to any Lien shall be deemed, for the purposes hereof, to be the equivalent of the creation, assumption and incurring of the indebtedness secured thereby, whether or not actually so created, assumed or incurred.
 
Default ” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.
 
Discharge of the Senior Obligations ” means (a) indefeasible payment and performance in full of the Senior Obligations (other than the Remaining Obligations (as defined in the Senior Loan Agreement), (b) termination or expiration of all commitments of the Senior Lender or Senior Agent to extend credit under the Senior Loan Documents, (c) termination, cancellation or cash collateralization (in an amount and pursuant to arrangements reasonably satisfactory to the Senior Agent) of all letters of credit issued under the Senior Loan Documents, (c) termination or cash collateralization (in an amount reasonably satisfactory to the Senior Agent) of any Interest Rate Hedge (as defined in the Senior Loan Agreement) and the indefeasible payment in full of all obligations in respect thereof.
 
Disclosed Liabilities ” means, collectively, (a) the Imperium Debt (as defined in the Senior Loan Agreement (which will be paid off with the proceeds of the Senior Financing)), (b) liabilities in respect of the Senior Financing, (c) liabilities in respect of the Obligations, (d) liabilities disclosed in unaudited financial statements (including the notes thereon) as of and for the period ending April 30, 2012 delivered to the Investor heretofore, (e) liabilities in respect of any indebtedness permitted to be incurred hereby, and (f) liabilities disclosed in the SEC Documents filed prior hereto.
 
 
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Dispose or Disposition   has the meaning specified in Section 1.1(b) of Schedule 5.4 hereto.
 
Dividend Payments ” has the meaning specified in Section 1.7 of Schedule 5.4 hereto.
 
Earnings Before Interest and Taxes ” shall mean for any period the sum of (i) net income (or loss) of the Loan Parties on a Consolidated Basis for such period (excluding extraordinary gains and losses), plus (ii) all interest expense of the Loan Parties on a Consolidated Basis for such period, plus (iii) all charges against income of the Loan Parties on a Consolidated Basis for such period for federal, state and local taxes actually paid.
 
EBITDA ” shall mean for the Loan Parties on a Consolidated Basis for any period the sum of (i) Earnings Before Interest and Taxes for such period plus (ii) depreciation expenses for such period, plus (iii) amortization expenses for such period, plus (iv) any and all other non-cash expenses incurred during such period, plus (v) the Transactions Costs paid during such period up to the maximum amount of $250,000, plus (vi) all cash severance payments paid to any employee during such period.
 
Effective Date ” means June 27, 2012.
 
EGK Debt ” shall mean all indebtedness, obligations and liabilities of the Company to E. Gerald Kay under the EGK Note.
 
EGK Note ” means that certain Promissory Note dated June 27, 2012 made by the Company to E. Gerald Kay in the original principal amount of $27,716.27, as the same may amended, restated, supplemented or modified from time to time.
 
Embargoed Person ” has the meaning specified in Section 4.29 .
 
Environmental Law ” means any federal, state, provincial, local or foreign law, statute, code or ordinance, principle of common law, rule or regulation, as well as any permit, order, decree, judgment or injunction issued, promulgated, approved or entered thereunder, relating to pollution or the protection, cleanup or restoration of the environment or natural resources, or to the public health or safety, or otherwise governing the generation, use, handling, collection, treatment, storage, transportation, recovery, recycling, discharge or disposal of hazardous materials.
 
Equipment ” shall mean and include as to each Loan Party all of such Loan Party’s goods (other than Inventory) whether now owned or hereafter acquired and wherever located including all equipment, machinery, apparatus, motor vehicles, fittings, furniture, furnishings, fixtures, parts, accessories and all replacements and substitutions therefor or accessions thereto.
 
Equity Interests ” of any Person shall mean any and all shares, rights to purchase, options, warrants, general, limited or limited liability partnership interests, member interests, participation or other equivalents of or interest in (regardless of how designated) equity of such Person, whether voting or nonvoting, including common stock, preferred stock, convertible securities or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Commission under the Exchange Act).
 
ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder.
 
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Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
 
Event of Default ” means the occurrence of any of the following events:
 
(a)   the Company fails to make any payment of principal or interest on any of the Notes as and when due, and such payment remains unpaid for three (3) Business Days following such due date, subject, however, to Section 2(h) of each Note; or
 
(b)   a Liquidation Event occurs; or
 
(c)   the Senior Obligations have been accelerated pursuant to the terms of the Senior Loan Documents due to the occurrence of any “default” or “event of default” under the Senior Loan Documents after giving effect to any applicable grace period and/or notice period provided therein; or
 
(d)   any material provision of this Agreement or any other Transaction Document shall at any time for any reason be declared to be null and void, or the validity or enforceability thereof shall be contested by any Loan Party (to the extent it is a party thereto), or a proceeding shall be commenced by any Loan Party, or by any Governmental Authority having jurisdiction over any Loan Party, seeking to establish the invalidity or unenforceability thereof, or any Loan Party shall deny that such Loan Party has any liability or obligation purported to be created under any of the Transaction Documents to which it is a party; or
 
(e)   any Lien created under the Security Agreement or provided for thereby for any reason ceases to be or is not a valid and perfected Lien on any material Collateral described in the Security Agreement having the priority purported to be created thereby, unless otherwise permitted by the terms set forth herein or therein; or
 
(f)   the Company shall fail to observe or perform any covenant, condition or agreement contained in Section 5.12 ; or
 
(g)   the Company shall fail to observe or perform any covenant, condition or agreement contained in Section 1.22 of Schedule 5.4 hereto; or
 
(h)   at any time after the Senior Discharge Date, any Specified Event shall occur or exist.
 
GAAP ” means generally accepted accounting principles, applied on a consistent basis, as set forth in (a) opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants, (b) statements of the Financial Accounting Standards Board and (c) interpretations of the Commission and the staff of the Commission.  Accounting principles are applied on a “consistent basis” when the accounting principles applied in a current period are comparable in all material respects to those accounting principles applied in a preceding period.
 
Governmental Authority ” means any nation or government, any state, provincial or political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including, without limitation, any stock exchange, securities market or self-regulatory organization.
 
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Governmental Requirement ” means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, license or other directive or requirement of any federal, state, county, municipal, parish, provincial or other Governmental Authority or any department, commission, board, court, agency or any other instrumentality of any of them.
 
Holder ” shall mean (a) initially, the Investor; provided that such Investor holds a Note and (b) any other Person that subsequently holds a Note by way of assignment or transfer by the assignor Holder thereof in accordance with the provisions hereof and thereof.
 
Holder Party ” has the meaning specified in Section 5.10 .
 
Imperium Debt ” means all indebtedness, obligations and liabilities of the Company and the applicable Company Subsidiaries under (a) the Amended and Restated Securities Purchase Agreement, dated as of February 21, 2008, by and between Imperium Master Fund, Ltd., the other investors party thereto and the Company, (b) the Amended and Restated Security Agreement, dated as of February 21, 2008, by the Company, certain of its Subsidiaries party thereto and Imperium Advisers, LLC, as collateral agent, (c) all guarantees executed and delivered by certain Company Subsidiaries of the Company in favor of such collateral agent, and (d) all other documents and agreements executed and delivered by the Company and any of its Company Subsidiaries in connection therewith, including any forbearance agreement, as amended, amended and restated, supplemented or otherwise modified.
 
 “ Intellectual Property ” means any U.S. or foreign patents, patent rights, patent applications, trademarks, trade names, service marks, brand names, logos and other trade designations (including unregistered names and marks), trademark and service mark registrations and applications, copyrights and copyright registrations and applications, inventions, invention disclosures, protected formulae, formulations, processes, methods, trade secrets, computer software, computer programs and source codes, manufacturing research and similar technical information, engineering know how, customer and supplier information, assembly and test data drawings or royalty rights.
 
Inventory ” shall mean and include as to each Loan Party all of such Loan Party’s now owned or hereafter acquired inventory, goods, merchandise and other personal property, wherever located, to be furnished under any consignment arrangement, contract of service or held for sale or lease, all raw materials, work in process, finished goods and materials and supplies of any kind, nature or description which are or might be used or consumed in such Loan Party’s business or used in selling or furnishing such goods, merchandise and other personal property, and all documents of title or other documents representing them.
 
Investor ” has the meaning set forth in the introductory paragraph hereof.
 
“Lien ” means, with respect to any Property, any mortgage, deed of trust, pledge, hypothecation, assignment, security interest, lien (whether statutory or otherwise), charge, claim or encumbrance, or other security agreement held or asserted in respect of any asset of any kind or nature whatsoever including any conditional sale, capital lease or other title retention agreement, any lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction.
 
Liquidity Amount has the meaning set forth in the recitals to this Agreement.
 
Liquidity Note ” means that certain Promissory Note dated June 27, 2012, made by the Company to CD Financial in the original principal amount of the Liquidity Amount, in the form of Exhibit B hereto, as the same may amended, restated, supplemented or modified from time to time.
 
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Liquidation Event ” means any Loan Party shall (i) apply for, consent to or suffer the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or similar fiduciary of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of creditors, (iii) commence a voluntary case under any state or federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to take advantage of any other law providing for the relief of debtors, (vi) acquiesce to, or fail to have dismissed, within forty-five (45) days, any petition filed against it in any involuntary case under such bankruptcy laws,  or (vii) take any action for the purpose of effecting any of the foregoing.
 
Loan Parties ” means, collectively, the Company and the Subsidiary Guarantors.
 
Loan Parties on a Consolidated Basis ” shall mean the consolidation in accordance with GAAP of the accounts or other items of the Loan Parties and their respective Subsidiaries.
 
Losses ” has the meaning specified in Section 5.12(c) .
 
Material Adverse Effect ” means an effect that is material and adverse to (i) the consolidated business, properties, assets, operations, results of operations, and financial condition of the Company and the Subsidiary Guarantors, taken as a whole, (ii) the ability of the Company or any other Loan Party to perform its obligations under this Agreement or the other Transaction Documents to which it is a party or (iii) the rights and benefits to which the Collateral Agent and each Holder is entitled under this Agreement and the other Transaction Documents.
 
Material Contracts ” means, as to the Company and the Company Subsidiaries, any agreement required pursuant to Item 601 of Regulation S-B or Item 601 of Regulation S-K, as applicable, promulgated under the Securities Act to be filed as an exhibit to any report, schedule, registration statement or definitive proxy statement filed or required to be filed by the Company with the Commission under the Exchange Act or any rule or regulation promulgated thereunder, and any and all amendments, modifications, supplements, renewals or restatements thereof.
 
Material Debt ” means Debt (other than the Obligations) of any one or more of the Company and the other Loan Parties in an aggregate principal amount exceeding $250,000.
 
MDC ” has the meaning specified in the recitals of this Agreement.
 
MDC Note ” has the meaning specified in the recitals of this Agreement.
 
Multiemployer Plan ” shall mean a “multiemployer plan” as defined in Sections 3(37) and 4001(a)(3) of ERISA.
 
Multiple Employer Plan ” shall mean a Plan which has two or more contributing sponsors (including any Loan Party or any member of the Controlled Group) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.
 
Notes ” means, collectively, (a) the Consolidated Note and (b) the Liquidity Note.
 
Obligations ” shall mean (a) obligations of the Company and the other Loan Parties from time to time arising under or in respect of the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Notes, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, and (ii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Company and the other Loan Parties under this Agreement and the other Transaction Documents, and (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Company and the other Loan Parties under or pursuant to this Agreement and the other Loan Transaction.
 
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Ordinary Course of Business ” shall mean with respect to the Loan Parties on a Consolidated Basis, the ordinary course of the Loan Parties’ business, which is the manufacturing, distributing, marketing and sale of vitamins, nutritional supplements, herbal products, food products and fine natural chemicals and other similar products, and activities necessary or advisable to conduct the foregoing.
 
Organizational Documents ” means, with respect to an entity, the documents by which such entity was organized (such as a certificate of incorporation, certificate of limited partnership or articles of organization, and including, without limitation, any certificates of designation for preferred stock or other forms of preferred equity) and which relate to the internal governance of such entity (such as bylaws, a partnership agreement or an operating, limited liability or members agreement).
 
Original Closing Date ” has the meaning specified in the recitals of this Agreement.
 
Original Notes ” means, collectively, the 2008 Note and the Assigned MDC Note.
 
Original Owners ” means, collectively, with regard to the Company, Carl DeSantis, the Investor, E. Gerry Kay, Christina Kay, Riva Sheppard and any of their respective lineal descendants and/or trusts or other entities established for estate planning purposes, to whom or which an Equity Interest in the Company is transferred so long as the transferor of such Equity Interest (which shall be an Original Owner) retains voting control in respect thereof.
 
Original Security Agreement ” has the meaning specified in the recitals of this Agreement.
 
Original Transaction Documents ” has the meaning specified in the recitals of this Agreement.
 
Outstanding Interest/Fee Amounts ” has the meaning specified in the recitals of this Agreement.
 
Parent ” of any Person shall mean a corporation or other entity owning, directly or indirectly at least 50% of the shares of stock or other ownership interests having ordinary voting power to elect a majority of the directors of the Person, or other Persons performing similar functions for any such Person.
 
PBGC ” shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor.
 
Pension Benefit Plan ” shall mean at any time any employee pension benefit plan (including a Multiple Employer Plan, but not a Multiemployer Plan) which is covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained by any member of the Controlled Group for employees of any member of the Controlled Group; or (ii) has at any time within the preceding five years been maintained by any entity which was at such time a member of the Controlled Group for employees of any entity which was at such time a member of the Controlled Group.
 
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Pension Plan ” means an employee benefit plan (as defined in ERISA) maintained by the Company for employees of the Company or any of its Affiliates.
 
Permitted Debt ” means each of the following:
 
(a)   (i) the Obligations; and (ii) any other Debt to the Investor and/or the Collateral Agent and/or any of their respective affiliates;
 
(b)   Debt incurred for Capital Expenditures permitted under Section 1.6 of Schedule 5.4 ;
 
(c)   the Senior Obligations and all Debt under the Senior Loan Documents;
 
(d)   Debt created under this Agreement and the other Transaction Documents;
 
(e)   Debt existing on the date hereof and set forth in Schedule I and any extensions, renewals, replacements and refinancings of any such Debt;
 
(f)   Debt by and between any of the Loan Parties;
 
(g)   Debt of any Loan Party owed to any Person providing workers’ compensation, health, disability or other employee benefits or property, casualty or liability insurance, pursuant to reimbursement or indemnification obligations to such Person, in each case incurred in the ordinary course of business and so long as such Debt could not reasonably be expected to have a Material Adverse Effect;
 
(h)   Debt of any Loan Party in respect of performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations, in each case provided in the ordinary course of business and so long as such Debt could not reasonably be expected to have a Material Adverse Effect;
 
(i)   Debt arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business and other Debt in respect of obligations of any Loan Party under any agreement or arrangement to provide cash management services, including treasury, depository, overdraft, return items, purchasing card, travel and entertainment card, credit or debit card, electronic funds transfer, automated clearing house transfers of funds and other cash management arrangements in the ordinary course of business;
 
(j)   Debt of the Loan Parties resulting from the endorsements of instruments for deposit or collection in the Ordinary Course of Business;
 
(k)   Debt constituting assumptions, endorsements or guaranties permitted by Section 1.3 of Schedule 5.4 ;
 
(l)   Debt consisting of insurance premiums;
 
(m)   Debt permitted by Section 1.5 of Schedule 5.4 ;
 
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(n)   Debt permitted by Section 1.6 of Schedule 5.4 ;
 
(o)   Debt constituting wages, credit card payments, accounts payable and similar day-to-day expenses of the Loan Parties in the Ordinary Course of Business;
 
(p)   Debt permitted by Section 1.11 of Schedule 5.4 ;
 
(q)   Debt permitted by Section 1.23 of Schedule 5.4 ; and
 
(r)   Debt permitted by Section 1.24 of Schedule 5.4 .
 
 “ Permitted Liens ” means each of the following:
 
(a)           Liens in favor of Investor and/or the Collateral Agent;
 
(b)           Liens for taxes, assessments or other governmental charges not delinquent or being Properly Contested;
 
(c)           Liens disclosed in the financial statements referred to in Section 2.3(e) , the existence of which Investor has consented to in writing;
 
(d)           deposits or pledges to secure obligations under worker’s compensation, social security or similar laws or regulations, or under unemployment insurance;
 
(e)           deposits or pledges to secure bids, tenders, contracts (other than contracts for the payment of money), leases, statutory obligations, surety, performance and appeal bonds and other obligations of like nature arising in the Ordinary Course of Business;
 
(f)           Liens arising by virtue of the rendition, entry or issuance against any Loan Party or any Subsidiary, or any property of any Loan Party or any Subsidiary, of any judgment, writ, order, or decree for so long as each such Lien (x) is in existence for less than 30 consecutive days after it first arises or is being Properly Contested and (y) is at all times junior in priority to any Liens in favor of Investor;
 
(g)           carriers’, warehousemen’s, mechanics’, workers’, materialmen’s or other like Liens arising in the Ordinary Course of Business with respect to obligations which are not due or which are being Properly Contested;
 
(h)           Liens placed upon fixed assets hereafter acquired to secure a portion of the purchase price thereof, provided that (x) any such lien shall not encumber any other property of Loan Party and (y) the aggregate amount of Debt secured by such Liens incurred as a result of such purchases during any fiscal year shall not exceed the amount provided for in Section 1.6 of Schedule 5.4 ;
 
(i)           easements, servitudes, covenants, conditions, reservations, rights-of-way, restrictions, encroachments, encumbrances and other minor defects or irregularities in title, or other similar encumbrances, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of a Loan Party;
 
(j)           Liens disclosed on Schedule II ;
 
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(k)           purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases or consignments; provided such Liens extend solely to the assets subject to such operating leases or consignments and are permitted herein;
 
(l)           licenses, sublicenses, leases or subleases, as licensor, sublicensor, lessor or sublessor, with respect to any property of any Loan Party or any of its Subsidiaries, including intellectual property, entered into in the ordinary course of business and not interfering in any respect with the ordinary conduct of or materially detracting from the value of the business of any Loan Party or any Subsidiary;
 
(m)           any interest or title of a lessor, lessee, licensor, licensee, sublicense or sublessor or sublessee under any lease, license, sublicense or sublease entered into by any Loan Party or any other Subsidiary in the ordinary course of its business which are permitted hereunder and covering only the assets so leased, licensed, sublicensed or subleased;
 
(n)           ground leases in respect of real property on which facilities owned or leased by any Loan Party or any of its Subsidiaries are located;
 
(o)           any zoning law reserved to or vested in any governmental office or agency to control or regulate the use of any real property;
 
(p)           Liens described on the title policy delivered in connection with the Mortgage (as defined in the Senior Loan Agreement) delivered in connection with the Senior Financing which are acceptable to the Investor;
 
(q)           Liens of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection;
 
(r)           customary rights of set off, bankers’ Lien, refund or charge back under deposit agreements, statutory or common law of banks or other financial institutions where any Loan Party or any of its Subsidiaries maintains deposits in the ordinary course of business;
 
(s)            Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;
 
(t)           Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by any Loan Party or any of its Subsidiaries in the ordinary course of business in accordance with the past practices of such Person which are permitted by the terms set forth herein;
 
(u)           Liens granted by the Loan Parties pursuant to the Senior Loan Documents as collateral security for the Senior Obligations; and
 
(v)           any Lien which is being Properly Contested by the applicable Loan Party as permitted herein for a period not to exceed 60 days, so long as such Lien is being Properly Contested.
 
  Person ” shall mean any individual, sole proprietorship, partnership, corporation, business trust, joint stock company, trust, unincorporated organization, association, limited liability company, limited liability partnership, institution, public benefit corporation, joint venture, entity or Governmental Authority (whether federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof).
 
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Plan ” shall mean any employee benefit plan within the meaning of Section 3(3) of ERISA (including a Pension Benefit Plan), maintained for employees of any Loan Party or any member of the Controlled Group or any such Plan to which any Loan Party or any member of the Controlled Group is required to contribute on behalf of any of its employees.
 
Properly Contested ” shall mean, in the case of any Debt or Lien, as applicable, of any Person (including any taxes) that is not paid as and when due or payable by reason of such Person’s bona fide dispute concerning its liability to pay same or concerning the amount thereof, (i) such Debt or Lien, as applicable, is being properly contested in good faith by appropriate proceedings promptly instituted and diligently conducted; (ii) such Person has established appropriate reserves as shall be required in conformity with GAAP; (iii) the non-payment of such Debt will not have a Material Adverse Effect and will not result in the forfeiture of any assets of such Person; (iv) no Lien is imposed upon any of such Person’s assets with respect to such Debt unless such Lien is at all times junior and subordinate in priority to the Liens in favor of the Holder (except only with respect to property taxes that have priority as a matter of applicable state law) and enforcement of such Lien is stayed during the period prior to the final resolution or disposition of such dispute; (v) if such Debt or Lien, as applicable, results from, or is determined by the entry, rendition or issuance against a Person or any of its assets of a judgment, writ, order or decree, enforcement of such judgment, writ, order or decree is stayed pending a timely appeal or other judicial review; and (vi) if such contest is abandoned, settled or determined adversely (in whole or in part) to such Person, such Person forthwith pays such Debt and all penalties, interest and other amounts due in connection therewith.
 
Property” means property and/or assets of all kinds, whether real, personal or mixed, tangible or intangible (including, without limitation, all rights relating thereto).
 
Receivables ” shall mean and include, as to each Loan Party, all of such Loan Party’s accounts, contract rights, instruments (including those evidencing indebtedness owed to such Loan Party by its Affiliates), documents, chattel paper (including electronic chattel paper), general intangibles relating to accounts, drafts and acceptances, credit card receivables and all other forms of obligations owing to such Loan Party arising out of or in connection with the sale or lease of Inventory or the rendition of services, all supporting obligations, guarantees and other security therefor, whether secured or unsecured, now existing or hereafter created, and whether or not specifically sold or assigned to Investor hereunder.
 
Registrable Securities ” has the meaning specified in Section 5.12(a) .
 
Regulation D ” has the meaning specified in the recitals of this Agreement.
 
Released Debtors ” has the meaning specified in Section 6.14 .
 
Reportable Event ” shall mean a reportable event described in Section 4043(c) of ERISA or the regulations promulgated thereunder, other than an event for which the thirty (30) day notice period has not been waived.
 
Rule 144 ” means Rule 144 under the Securities Act or any successor provision.
 
SEC Documents ” means all reports, schedules, registration statements and definitive proxy statements filed by the Company with the Commission.
 
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Second Closing ” has the meaning specified in Section 2.2(b) .
 
Second Purchase Price ” has the meaning specified in Section 2.2(iii) .
 
Secured Parties ” means, collectively, each Holder and the Collateral Agent.
 
Securities ” means, collectively, (a) each Note and (b) any shares of Common Stock issuable under the Consolidated Note.
 
Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
 
“Security Agreement ” means that certain Amended and Restated Security Agreement, dated as of the date hereof, by and among the Company, each Subsidiary of the Company that is a party thereto from time to time, and the Collateral Agent, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
Senior Agent ” means PNC Bank, National Association, in its capacity as agent under the Senior Loan Agreement, or any of its successors or assignees in such capacity as agent thereunder.
 
Senior Discharge Date ” means the first date on which (a) the Discharge of the Senior Obligations shall have occurred and (b) the Senior Agent has delivered a written notice to the Collateral Agent stating that the event described in clause (a) above in this definition has occurred to the satisfaction of the Senior Agent.
 
Senior Financing ” means the credit facilities and other financial accommodations as provided in the Senior Loan Documents.
 
Senior Lenders ” has the meaning set forth in the definition of Senior Loan Agreement.
 
Senior Loan Agreement ” means that certain Revolving Credit, Term Loan and Security Agreement, dated as of June 27, 2012, by and among (i) the Company, (ii) MDC, (iii) AgroLabs, Inc., a New Jersey corporation, (iv) IHT Health Products, Inc., a Delaware corporation, (v) IHT Properties Corp., a Delaware corporation, (vi) Vitamin Factory, Inc., a Delaware corporation, (vii) the lenders party thereto from time to time (the “ Senior Lenders ”), and (viii) the Senior Agent for the Senior lenders, as such Revolving Credit, Term Loan and Security Agreement may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
Senior Loan Documents ” means, collectively, the Senior Loan Agreement and the Other Documents (as defined in the Senior Loan Agreement).
 
“Senior Obligations ” means the “Obligations” (as defined in the Senior Loan Agreement).
 
Series C Preferred Stock ” has the meaning specified in the recitals of this Agreement.
 
Specified Defaults ” has the meaning specified in the recitals of this Agreement.
 
Specified Event ” means any of the following events:
 
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(a)   any representation or warranty made by any Loan Party in any of the Transaction Documents shall prove to be incorrect or misleading in any material respect as of the date such representation or warranty was made; or
 
(b)   the Company shall fail to observe or perform any covenant, condition or agreement contained in Section 5.4 , and such failure shall continue unremedied for a period of five (5) Business Days after the earlier of (x) the Company becoming aware of such failure or (y) notice thereof from the Collateral Agent to the Company; or
 
(c)   the Company or any other Subsidiary Guarantor shall fail to observe or perform any covenant, condition or agreement contained in any Transactions Document to which it is a party (other than (i) those specified in clause (a) of the definition of “Event of Default” or (ii) those specified in clauses (a) or (b) above in this definition of “Specified Events”), and such failure shall continue unremedied for a period of thirty (30) days after the earlier of (x) the Company becoming aware of such failure or (y) notice thereof from the Collateral Agent to the Company; or
 
(d)   the Company or any other Loan Party shall (A) fail to pay any principal or interest, regardless of amount, due in respect of any Material Debt, when and as the same shall become due and payable beyond any applicable grace period, or (B) fail to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Material Debt if the effect of any failure referred to in this clause (B) is to cause, or to permit the holder or holders of such Material Debt or a trustee or other representative on its or their behalf  to cause, such Material Debt to become due prior to its stated maturity or become subject to a mandatory offer to purchase by the obligor; or
 
(e)   any Change of Control shall occur.
 
Subordination Agreement ” means that certain Intercreditor and Subordination Agreement, dated as of the Effective Date, by and among the Collateral Agent, the Senior Agent,  the Company and the Company Subsidiaries party thereto from time to time, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
Subsidiary ” means, with respect to any Person, any corporation or other entity of which at least a majority of the outstanding shares of stock or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors (or Persons performing similar functions) of such corporation or entity (regardless of whether or not at the time, in the case of a corporation, 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) is at the time directly or indirectly owned or controlled by such Person or one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries.  Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Company.
 
Subsidiary Guarantee ” means that certain Amended and Restated Subsidiary Guarantee Agreement, dated as of the date hereof, by and among each of the Subsidiaries of the Company party thereto from time to time and the Collateral Agent, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
Subsidiary Guarantor ” means each Company Subsidiary that is a party to the Subsidiary Guarantee.
 
Termination Date ” means the date when all of the Obligations have been paid in full.
 
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Termination Event ” shall mean (i) a Reportable Event with respect to any Plan or Multiemployer Plan; (ii) the withdrawal of any Loan Party or any member of the Controlled Group from a Plan or Multiemployer Plan during a plan year in which such entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to terminate a Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any event or condition (a) which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer Plan, or (b) that may result in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of any Loan Party or any member of the Controlled Group from a Multiemployer Plan.
 
Trading with the Enemy Act ” shall mean the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any enabling legislation or executive order relating thereto.
 
Transaction Costs ” shall mean the fees, costs, expenses and charges payable by the Loan Parties on or before the date of the Second Closing in connection with the transactions contemplated by the Senior Loan Documents and the Transaction Documents.
 
Transaction Documents ” means (i) this Agreement, (ii) each Note and the other Securities, (iii) the Subsidiary Guarantee, (iv) the Security Agreement, (v) the Subordination Agreement and (vi) all other agreements, documents and other instruments executed and delivered by or on behalf of the Company and/or any other Loan Party in favor of the Collateral Agent or the Holder on or after the Effective Date in connection with this Agreement or the Security Agreement (excluding the Senior Loan Documents (other than the Subordination Agreement).
 
Transfer Agent ” has the meaning set forth in Section 3.5 .
 
Vitamin Lease ” shall mean that certain Lease Agreement by and between InB:Manhattan Drug Company, Inc., as lessee, and Vitamin Realty Associates, LLC, as lessor, dated January 10, 1997 with regard to the property located at 225 Long Avenue, Building 15, Hillside, New Jersey  07205, as the same may be amended, restated, extended, replaced and/or modified from time to time.
 
Vitamin Note ” shall mean that certain Promissory Note dated June 27, 2012 made by the Company and InB:Manhattan Drug Company, Inc. to Vitamin Realty Associates, LLC in the original principal amount of $685,985.61 with regard to past due rent owing under the Vitamin Lease, as the same may be amended, restated, supplemented or modified from time to time.
 
1.2   Other Definitional Provisions .  The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to have the same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits, Annexes and Schedules shall be construed to refer to Articles and Sections of, and Exhibits, Annexes and Schedules to, this Agreement, (e) any reference in any definition to the phrase “at any time” or “for any period” shall refer to the same time or period for all calculations or determinations within such definition, and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
 
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2.   PURCHASE AND SALE OF THE NOTES .
 
2.1   Original Closing .  The parties hereto acknowledge that on the Original Closing Date, the Company sold to the Investor and the Investor purchased the 2008 Note and 3,000 shares of Series C Preferred Stock for an aggregate purchase price of $7,500,000.
 
2.2   Second Closing .
 
(a)   On the Effective Date:
 
(i)   the Company shall issue to the Investor, and the Investor shall accept from the Company, the Consolidated Note;
 
(ii)   the Company shall issue to the Investor, and the Investor shall accept from the Company, the Liquidity Note for an aggregate purchase price equal to the Liquidity Amount (the “ Second Purchase Price ”); and
 
(iii)   the Investor shall return to the Company the original, executed copies of each of the 2008 Note and Assigned MDC Note.
 
(b)   The closing (the “ Second Closing ”) of the transactions contemplated herein shall occur at the offices of Herrick, Feinstein LLP, 2 Park Avenue, New York, New York 10016 (or such other offices as the parties hereto may mutually agree).
 
2.3   Conditions to the Investor’s Obligations at the Second Closing .  The Investor’s obligations to effect the Second Closing are conditioned upon the fulfillment and satisfaction (or waiver by the Investor in its sole and absolute discretion) of each of the following conditions precedent:
 
(a)   the representations and warranties of the Company set forth in this Agreement and in the other Transaction Documents shall be true and correct in all material respects as of such date as if made on such date (except that to the extent that any such representation or warranty relates to a particular date, such representation or warranty shall be true and correct in all material respects as of that particular date);
 
(b)   (1) each Loan Party shall have delivered to the Investor and the Collateral Agent a certificate, signed by the Secretary of such Loan Party, certifying true, complete and accurate copies of (i) the Organizational Documents of such Loan Party, each as amended to and including the Effective Date, and (ii) the resolutions passed by the board of directors or similar governing body of each Loan Party authorizing the execution, delivery and performance of the Transaction Documents to which such Loan Party is a party; and (2) the Company shall have delivered to the Investor and the Collateral Agent a true and correct copay of each Organizational Document of each Subsidiary of the Company that is not a Loan Party;
 
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(c)   the Company shall have delivered, or caused to be delivered, to the Investor executed originals of (i) each Note and (ii) the signature pages of each Loan Party to each of the other Transaction Documents to which such Loan Party is a party;
 
(d)   the satisfaction (or waiver) of the closing conditions set forth in the Senior Loan Agreement and the initial funding thereunder shall have occurred contemporaneously with the Second Closing;
 
(e)   the Company shall have delivered to the Investor the Company’s unaudited financial statements for the month ending April 30, 2012;
 
(f)   since April 30, 2012, there shall have occurred no material adverse change in the Company’s and its Subsidiaries’ consolidated business or financial condition;
 
(g)   there shall be no injunction, restraining order or decree of any nature of any court or Governmental Authority of competent jurisdiction that is in effect that restrains or prohibits the consummation of the transactions contemplated hereby and by the other Transaction Documents;
 
(h)   UCC financing statements in appropriate form for filing under the UCC, filings and such other documents under applicable law in each jurisdiction as may be necessary or appropriate or, in the opinion of the Investor, desirable to perfect the Liens created, or purported to be created, by the applicable Transaction Documents;
 
(i)   the Company shall have delivered to the Investor copies of all Senior Loan Documents executed and delivered in connection with the closing of the Senior Financing;
 
(j)   the Company shall have delivered to Investor a copy of a payoff letter from the holders of the Imperium Debt stating the Imperium Debt as of the date of such letter and that all Liens held by the holders of the Imperium Debt on the assets of the Company and the applicable Company Subsidiaries will terminate upon the payment of such payoff amount, and upon payment of such payoff amount, the Company shall be authorized to file UCC termination statements terminating the UCC financing statements filed by the holders of the Imperium Debt against the Company and the applicable Company Subsidiaries; and
 
(k)   the expenses payable by the Company to the initial Holder and the Collateral Agent described in Section 6.10 shall have been paid to the initial Holder and the Collateral Agent, as applicable.
 
2.4   Conditions to the Company’s Obligations at the Second Closing .  The obligation of the Company to effect the Second Closing is conditioned upon the fulfillment and satisfaction (or waiver by the Company in its sole and absolute discretion) of each of the following conditions precedent:
 
(a)   the representations and warranties of the Investor set forth in this Agreement and in the other Transaction Documents to which it is a party shall be true and correct in all material respects as of such date as if made on such date (except that to the extent that any such representation or warranty relates to a particular date, such representation or warranty shall be true and correct in all material respects as of that date);
 
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(b)   there shall be no injunction, restraining order or decree of any nature of any court or Governmental Authority of competent jurisdiction that is in effect that restrains or prohibits the consummation of the transactions contemplated hereby and by the other Transaction Documents;
 
(c)   each of the Investor and the Collateral Agent shall have executed each Transaction Document to which it is a party and shall have delivered the same to the Company;
 
(d)   the satisfaction (or waiver) of the closing conditions set forth in the Senior Loan Agreement and the initial funding thereunder shall have occurred contemporaneously with the closing hereof;
 
(e)   the Investor shall have delivered to the Company the original copies of the 2008 Note and the MDC Note; and
 
(f)   the Investor shall have transferred (by wire or otherwise) to the account of the Company as designated by the Company, in immediately available funds, an amount equal to the Second Purchase Price, net, to the extent agreed to by the parties, of any amount required to payoff Imperium Debt owing to the JED Family Trust.
 
2.5   Use of Proceeds of Liquidity Note .  The parties agree that (i) a portion of the principal amount of the Liquidity Note shall be used to pay in full the Imperium Debt (as defined in the Senior Loan Agreement) owing to the JED Family Trust under the note(s) held by the JED Family Trust issued under the securities purchase agreement referred to in the definition of “Imperium Debt” and (ii) the remaining portion shall be used by the Company for working capital purposes.
 
3.   REPRESENTATIONS AND WARRANTIES OF THE INVESTOR .
 
The Investor hereby represents and warrants to the Company that as of the Effective Date:
 
3.1   Authorization; Enforceability .  The Investor is duly and validly organized, validly existing and in good standing under the laws of the State of Florida with the limited liability company power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party.  This Agreement constitutes, and upon execution and delivery thereof, each other Transaction Document to which the Investor is a party will constitute, the Investor’s valid and legally binding obligation, enforceable in accordance with its terms, subject to (a) applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws of general application relating to or affecting the enforcement of creditors’ rights generally and (b) general principles of equity.
 
3.2   Accredited Investor .  The Investor (i) is an “accredited investor” as that term is defined in Rule 501 of Regulation D as promulgated by the Commission under the Securities Act, (ii) was not formed or organized for the specific purpose of making an investment in the Company, and (iii) is acquiring the Securities solely for its own account and not with a present view to the public resale or distribution of all or any part thereof, except pursuant to sales that are registered under, or exempt from the registration requirements of, the Securities Act and/or sales registered under the Securities Act; provided , however , that in making such representation, the Investor does not agree to hold the Securities for any minimum or specific term and reserves the right to sell, transfer or otherwise dispose of the Securities at any time in accordance with the provisions of this Agreement and with federal and state securities laws applicable to such sale, transfer or disposition.  The Investor can bear the economic risk of a total loss of its investment in the Securities and has such knowledge and experience in business and financial matters so as to enable it to understand the risks of and form an investment decision with respect to its investment in the Securities.
 
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3.3   Information .  The Company has, prior to the Effective Date, provided the Investor with information regarding the business, operations and financial condition of the Company and has, prior to the Effective Date, granted to the Investor the opportunity to ask questions of and receive answers from representatives of the Company, its officers, directors, employees and agents concerning the Company in order for the Investor to make an informed decision with respect to its investment in the Securities. Neither such information nor any other investigation conducted by the Investor or any of its representatives shall modify, amend or otherwise affect the Investor’s right to rely on the Company’s representations and warranties contained in this Agreement.
 
3.4   Limitations on Disposition .  The Investor acknowledges that the Securities have not been and are not being registered under the Securities Act and may not be transferred or resold without registration under the Securities Act or unless pursuant to an exemption therefrom.
 
3.5   Legend .  The Investor understands that the Securities may bear at issuance a restrictive legend in substantially the following form:
 
“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws, and may not be offered for sale or sold unless a registration statement under the Securities Act and applicable state securities laws shall have become effective with respect thereto, or an exemption from registration under the Securities Act and applicable state securities laws is available in connection with such offer or sale.  These securities and the securities issuable hereunder (i) may be pledged or hypothecated in connection with a bona fide margin account or other financing secured by such securities or (ii) may be transferred or assigned to an affiliate of the holder hereof without the necessity of an opinion of counsel or the consent of the issuer hereof.”
 
Notwithstanding the foregoing, it is agreed that, as long as (A) the resale or transfer (including, without limitation, a pledge) of any of the Securities is registered pursuant to an effective registration statement, (B) such Securities have been sold pursuant to Rule 144, subject to receipt by the Company of customary documentation reasonably acceptable to the Company in connection therewith, or (C) such Securities are eligible for resale under Rule 144(k) or any successor provision, such Securities shall be issued without any legend or other restrictive language and, with respect to Securities upon which such legend is stamped, the Company shall issue new certificates without such legend to the holder upon request.  The Company shall execute and deliver written instructions to the transfer agent for its Common Stock (the “ Transfer Agent ”) as may be necessary to satisfy any request by a Holder for removal of such legends no later than the close of business on the fifth (5th) Business Day (the “Initial Deadline”) following the receipt of a written request from a Holder to the extent such legends may be removed in accordance with this Section 3.5 or, if such period of time is not sufficient for the Company to so execute and deliver and the Company is using diligent efforts to complete such task, then such Initial Deadline shall be automatically extend for a period of time that is reasonably necessary to complete such task.
 
3.6   Reliance on Exemptions .  The Investor understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of U.S. federal and state securities laws and that the Company is relying upon the truth and accuracy of the representations and warranties of the Investor set forth in this Section 3 in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Securities.  The Investor acknowledges that it did not purchase the Securities based upon any advertisement in any publication of general circulation.  The Investor is relying on the representations, acknowledgements and agreements made by the Company in Section 4 and elsewhere in this Agreement in making investing, trading and/or other decisions concerning the Company’s securities.
 
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3.7   Fees .  The Investor has not agreed to pay any compensation or other fee, cost or related expenditure to any underwriter, broker, agent or other representative in connection with the transactions contemplated hereby.
 
3.8   No Conflicts .  The execution and performance of this Agreement and the other Transaction Documents to which the Investor is a party do not conflict in any material respect with any agreement to which the Investor is a party or is bound, any court order or judgment applicable to the Investor, or the Organizational Documents of the Investor.
 
3.9   No Governmental Review .  The Investor understands that no U.S. federal or state agency or any other Governmental Authority has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of an investment in the Securities nor have such authorities passed upon the accuracy of any information provided to the Investor or made any findings or determinations as to the merits of the offering of the Securities.
 
4.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY .
 
The Company hereby represents and warrants to each Holder that as of the Effective Date:
 
4.1   Organization, Good Standing and Qualification .  Each Loan Party is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, formation or organization, as the case may be, and has all requisite power and authority to carry on its business as now conducted.   Each Loan Party is duly qualified to transact business and is in good standing in each jurisdiction in which it conducts business except where the failure so to qualify has not had or would not reasonably be expected to have a Material Adverse Effect.
 
4.2   Authorization; Consents .  Each Loan Party has the requisite corporate, partnership, limited liability company or other power and authority to enter into and perform its obligations under the Transaction Documents, including, without limitation, the issuance and (if applicable) sale of the Securities to Investor in accordance with the terms hereof and thereof.  All corporate action on the part of each Loan Party necessary for the authorization, execution and delivery and performance by such Loan Party of each Transaction Document to which it is a party have been duly authorized by all necessary organizational action on the part of such Loan Party and, if required, all stockholders’ or other equity holders’ actions on the part of such Loan Party and no further consent or authorization of any Person, including, without limitation, any of the Company’s directors or shareholders or any Governmental Authority (other than such approval as may be required under the Securities Act and applicable state laws in respect of any registration of the Common Shares issuable upon conversion of the Consolidated Note), is required under any Organizational Document, Material Contract, or applicable Governmental Requirement, except (i) such as have been obtained or made and are in full force and effect and (ii) filings and registrations and entering into of control agreements necessary to perfect the Liens created under the applicable Transaction Documents.  Each Transaction Document to which it is a party have been duly executed and delivered by each Loan Party.  The Board of Directors has determined that the issuance and sale of the Securities and the consummation of the transactions contemplated hereby, and by the other Transaction Documents to which the Company is a party, are in the best interests of the Company.  The board of directors of each Subsidiary Guarantor has determined that the consummation of the transactions contemplated by the Transaction Document to which such Subsidiary Guarantor is a party is in the best interests of such Loan Party.
 
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4.3   Enforcement .  This Agreement has been duly executed and delivered by the Company and constitutes, and each other Transaction Document to which the Company is to be a party, when executed and delivered by the Company, will constitute, a legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and similar laws of general application relating to or affecting the rights and remedies of creditors and by general principles of equity. Each Transaction Document to which each Subsidiary Guarantor is to be a party, when executed and delivered by such Subsidiary Guarantor, will constitute a legal, valid and binding obligation of such Subsidiary Guarantor, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization and similar laws of general application relating to or affecting the rights and remedies of creditors and by general principles of equity.
 
4.4   Disclosed Liabilities; Agreements; Financial Statements; Other Information .
 
(a)   The Company is subject to the reporting requirements of the Exchange Act and, except as described on Schedule 4.4 , the Company has filed with the Commission all SEC Documents that the Company was required to file with the Commission on or after December 31, 2011.
 
(b)   The Company is not aware of any event occurring or expected to occur on or prior to the Second Closing (other than the transactions effected hereby and by the Senior Loan Documents) that would require the filing of, or with respect to which the Company intends to file, a Form 8-K after the Second Closing.
 
(c)   Each SEC Document filed on or after December 31, 2011, as of the date of the filing thereof with the Commission (or if amended or superseded by a filing prior to the Effective Date, then on the date of such amending or superseding filing), complied in all material respects with the requirements of the Securities Act or Exchange Act, as applicable, and, as of the date of such filing (or if amended or superseded by a filing prior to the Effective Date, then on the date of such filing), such SEC Document (including all exhibits and schedules thereto and documents incorporated by reference therein) did not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.   All documents required to be filed as exhibits to the SEC Documents filed on or after December 31, 2011 have been filed as required.
 
(d)   Except as set forth in the Disclosure Liabilities, the Company has no liabilities, contingent or otherwise, other than liabilities incurred in the ordinary course of business which, individually or in the aggregate, are not material to the consolidated business or financial condition of the Company and the Company Subsidiaries.
 
(e)   As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission with respect thereto.  Such financial statements have been prepared in accordance with GAAP consistently applied at the times and during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end adjustments).
 
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(f)   The Company will prepare the financial statements to be included in any reports, schedules, registration statements and definitive proxy statements that the Company is required to file or files with the Commission after the Effective Date in accordance with GAAP (except in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements).
 
4.5   Subsidiaries .
 
(a)   The capitalization of the Company, including its authorized capital stock, the number of shares issued and outstanding, the number of shares issuable and reserved for issuance pursuant to the Company’s stock option plans and agreements, the number of shares issuable and reserved for issuance pursuant to securities (other than the Securities) payable in, exercisable for, or convertible into or exchangeable for any shares of Common Stock is set forth on Schedule 4.5(a) .  All outstanding shares of capital stock of the Company have been, or upon issuance will be, validly issued, fully paid and non-assessable.
 
(b)   All of the Company Subsidiaries are disclosed on Schedule 4.5(b) .  Each of the Company Subsidiaries that is indicated as being “active” on Schedule 4.5(b) operates the business set forth opposite its name on Schedule 4.5(b) .  None of the Company Subsidiaries that is indicated as being “inactive” on Schedule 4.5(b) has any assets or operations of any kind other than immaterial assets.  Except as disclosed on Schedule 4.5(b) , (i) the Company or a wholly-owned Company Subsidiary owns all of the capital stock of each Company Subsidiary, which capital stock is validly issued, fully paid and non-assessable and (ii) no shares of the capital stock of the Company or any Company Subsidiary are subject to preemptive rights or any other similar rights of the shareholders of the Company or any such Company Subsidiary or any Liens created by or through the Company or any such Company Subsidiary.
 
(c)   Except as disclosed on Schedule 4.5(c) or as contemplated herein, there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exercisable or exchangeable for, any shares of capital stock of the Company or any Company Subsidiary, or arrangements by which the Company or any Company Subsidiary is or may become bound to issue additional shares of capital stock of the Company or any Company Subsidiary (whether pursuant to anti-dilution, “reset” or other similar provisions).
 
4.6   Due Authorization; Valid Issuance .  The Securities are duly authorized and, when issued, sold and delivered in accordance with the terms of this Agreement, will be duly and validly issued, free and clear of any Liens imposed by or through the Company.  Assuming the accuracy of the Investor’s representations contained herein, the issuance and sale of the Securities under this Agreement will be effected in compliance with all applicable federal and state securities laws.
 
4.7   [Intentionally Omitted.]
 
4.8   No Conflict .
 
(a)   After giving effect to the waiver of the Specified Defaults pursuant to the terms of Section 6.13 , neither the Company nor any Subsidiary Guarantor is (i) in violation of or in default (and no event has occurred which, with notice or lapse of time or both, would constitute a default) under any provision of any instrument or contract to which it is a party or by which it or any of its Property is bound, or (ii) in violation of any provision of any Governmental Requirement applicable to the Company or any Subsidiary Guarantor, except, in each case with respect to clauses (i) and (ii) immediately above, for any violation or default that has not had or would not reasonably be expected to have a Material Adverse Effect.
 
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(b)   The execution and delivery by each Loan Party of each Transaction Document to which it is a party, and the performance by such Loan Party of its obligations thereunder do not and will not: (i) violate any of the provisions of any Organizational Documents of such Loan Party; (ii) violate any judgment, decree, order or award of any court, governmental body or arbitrator or any law, rule or regulation applicable to or binding upon such Loan Party or any of such Loan Party’s property or to which such Loan Party or any of such Loan Party’s property is subject, except to the extent such violation that has not had or would not reasonably be expected to have a Material Adverse Effect; (iii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, or other instrument to which such Loan Party is a party or by which any property or asset of such Loan Party is bound or affected, except to the extent such conflict, default or rights that has not had or would not reasonably be expected to have a Material Adverse Effect; or (iv) trigger any preemptive or anti-dilution rights (including, without limitation, pursuant to any “reset” or similar provisions) or rights of first refusal or first offer, or any other rights that would allow or permit the holders of the Company’s securities or any other Person to purchase shares of Common Stock or other securities of the Company or any Company Subsidiary (whether pursuant to a shareholder rights plan provision or otherwise).
 
4.9   Financial Condition; Taxes; Litigation .
 
(a)   The financial condition of the Company and Company Subsidiaries, on a consolidated basis, is, in all material respects, as described in the financial statements contained in (i) the most recent Form 10-K and (ii) Form 10-Q for each of the three fiscal quarters occurring after June 30, 2011, in each case, which have been filed with the Commission, except for changes in the ordinary course of business and normal year-end adjustments that are not, in the aggregate, materially adverse to the consolidated business or financial condition of the Company and the Company Subsidiaries, on a consolidated basis.
 
(b)   There has been no: (i) material adverse change to the business, operations, properties, financial condition, prospects or results of operations of the Company and the Company Subsidiaries (taken as a whole) since April 30, 2012; or (ii) change by the Company in its accounting principles, policies and methods except as required by changes in GAAP.
 
(c)   Each of the Company and each Subsidiary Guarantor has prepared in good faith and duly and timely filed all tax returns or extensions required to be filed by it and such returns or extensions are complete and accurate in all material respects and each of the Company and Subsidiary Guarantor has paid all taxes required to have been paid by it, except for taxes which it reasonably disputes in good faith or the failure of which to pay has not had or would not reasonably be expected to have a Material Adverse Effect.
 
(d)   Except as set forth on Schedule 4.9 and except for sales tax audits undertaken by state taxing authorities in the ordinary course of business, neither the Company nor any Subsidiary Guarantor is the subject of any pending or, to the Company’s knowledge, threatened inquiry, investigation or administrative or legal proceeding by any Governmental Authority which would reasonably be expected to have a Material Adverse Effect.
 
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(e)   Except as set forth on Schedule 4.9 , there is no material claim, litigation or administrative proceeding pending, or, to the Company’s knowledge, threatened or contemplated, against the Company or any Subsidiary Guarantor which would reasonably be expected to have a Material Adverse Effect.   Except as set forth on Schedule 4.9, neither the Company nor any Company Subsidiary is a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or Governmental Authority which would reasonably be expected to have a Material Adverse Effect.
 
4.10   Manipulation of Price .  The Company has not, and to its knowledge no one acting on its behalf has, taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities.
 
4.11   Intellectual Property .
 
(a)   Each Loan Party owns, free and clear of claims or rights of any other Person, other than Permitted Liens, with full right to use, sell, license, sublicense, dispose of, and bring actions for infringement of, or, to the knowledge of the Company, has acquired licenses or other rights to use, all Intellectual Property necessary for the conduct of its business as presently conducted (other than with respect to software which is generally commercially available and not used or incorporated into any of the Loan Party’s products and open source software which may be subject to one or more “general public” licenses) and except for those the failure to own or license that has not had or would not reasonably be expected to have a Material Adverse Effect. All works that constitute Intellectual Property that are used or incorporated into the Company’s or any other Loan Party’s services, products or services or products actively under development and which is material and proprietary to the Company or such Loan Party was developed by or for the Company or a Loan Party by the current or former employees, consultants or independent contractors of the Company or a Loan Party or purchased or licensed by the Company or a Loan Party.
 
(b)   The business of each of each Loan Party as presently conducted and the production, marketing, licensing, use and servicing of any products or services of each Loan Party do not, to the knowledge of the Company, infringe or conflict with any patent, trademark, copyright, or trade secret rights of any third parties or any other Intellectual Property of any third parties in any material respect, except for such infringements and conflicts that has not had or would not reasonably be expected to have a Material Adverse Effect..
 
(c)   Neither the Company nor any other Loan Party has received written notice from any third party asserting that any Intellectual Property owned or licensed by the Company or any other Loan Party, or which the Company or any other Loan Party otherwise has the right to use, is invalid or unenforceable by the Company or such other Loan Party and, to the Company’s knowledge, there is no valid basis for any such claim (whether or not pending or threatened).
 
(d)   No claim is pending or, to the Company’s knowledge, threatened against the Company or other Loan Party, nor has the Company or any other Loan Party received any written notice or other written claim from any Person, asserting that the Company’s or any other Loan Party’s present or contemplated activities infringe or may infringe any Intellectual Property of such Person which would reasonably be expected to have a Material Adverse Effect, and the Company is not aware of any infringement by any other Person of any rights of the Company or any other Loan Party under any Intellectual Property Rights which would reasonably be expected to have a Material Adverse Effect.
 
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(e)   To the knowledge of the Company, all licenses or other agreements under which the Company or any other Loan Party is granted Intellectual Property (excluding licenses to use software utilized in the Company’s or such other Loan Party’s internal operations and which is generally commercially available) that are necessary for the operation of their respective business are in full force and effect except for those that would not reasonably be expected to have a Material Adverse Effect and, to the Company’s knowledge, there is no default by any party thereto, except for such default that has not had or would not reasonably be expected to have a Material Adverse Effect.
 
(f)   To the knowledge of the Company, all material licenses or other agreements under which the Company or any Company Subsidiary has currently granted (as licensor) rights to Intellectual Property to others (including all end-user agreements) are in full force and effect, there has been no default by the Company or any Company Subsidiary thereunder, except for such default that has not had or would not reasonably be expected to have a Material Adverse Effect, and, to the Company’s knowledge, there is no default of any provision thereof relating to Intellectual Property by any other party thereto, except for such default that has not had or would not reasonably be expected to have a Material Adverse Effect.
 
(g)   Each of the Company and the Company Subsidiaries has taken all steps required in accordance with commercially reasonable business practice to establish and preserve its ownership in its owned Intellectual Property and to keep confidential all material technical information developed by or belonging to the Company or such Company Subsidiary which has not been patented or copyrighted.  To the Company’s knowledge, neither the Company nor any Company Subsidiary is making any unlawful use of any Intellectual Property of any other Person including, without limitation, any former employer of any past or present employees of the Company or any Company Subsidiary.  To the Company’s knowledge, neither the Company, nor any Company Subsidiary nor any of their respective employees has any agreements or arrangements with former employers of such employees relating to any Intellectual Property of such employers, which materially interfere or conflict with the performance of such employee’s duties for the Company or any Company Subsidiary or result in any former employers of such employees having any rights in, or claims on, the Company’s or any Company Subsidiary’s Intellectual Property.  Each current employee of each of the Company and Company Subsidiaries who has access to material Intellectual Property has executed agreements regarding confidentiality, proprietary information and assignment of inventions and copyrights to the Company or such Company Subsidiary, as the case may be, each independent contractor or consultant of each of the Company and Company Subsidiaries has executed agreements regarding confidentiality and proprietary information, and neither the Company nor any Company Subsidiary has received written notice that any employee, consultant or independent contractor is in violation of any agreement or in breach of any agreement or arrangement with former or present employers relating to proprietary information or assignment of inventions.  Without limiting the foregoing: (i) each of the Company and Company Subsidiaries has taken reasonable security measures to guard against unauthorized disclosure or use of any of its Intellectual Property that is confidential or proprietary; and (ii) the Company has no reason to believe that any Person (including, without limitation, any former employee or consultant of the Company or any Company Subsidiary) has unauthorized possession of any of its Intellectual Property, or any part thereof, or that any Person has obtained unauthorized access to any of its Intellectual Property.  Each of the Company and each of the Company Subsidiaries has complied in all material respects with its respective obligations pursuant to all agreements relating to Intellectual Property rights that are the subject of licenses granted by third parties, except for any non-compliance that has not had or would not reasonably be expected to have a Material Adverse Effect.
 
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4.12   Registration Rights; Rights of Participation .  Except as set forth on Schedule 4.12 and except as provided in Section 5.12 , (i) the Company has not granted or agreed to grant to any Person any rights (including “piggy-back” registration rights) to have any securities of the Company registered with the Commission or any other Governmental Authority and (ii) no Person, including, but not limited to, current or former shareholders of the Company, underwriters, brokers, agents or other third parties, has any right of first refusal, preemptive right, right of participation, anti-dilutive right or any similar right to participate in, or to receive securities or other assets of the Company solely as a result of the transactions contemplated by this Agreement or the other Transaction Documents.
 
4.13    [Intentionally Omitted] .
 
4.14   Fees .  The Company is not obligated to pay any brokers, finders or financial advisory fees or commissions to any underwriter, broker, agent or other representative in connection with the transactions contemplated hereby.  The Company will indemnify and hold harmless each Holder from and against any claim by any Person alleging that such Holder is obligated to pay any such compensation, fee, cost or related expenditure in connection with the transactions contemplated hereby.
 
4.15   Foreign Corrupt Practices .  Neither the Company, any Company Subsidiary nor, to the knowledge of the Company, any director, officer, agent, employee or other Person acting on behalf of the Company or any Company Subsidiary, has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity, (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee, or (iii) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
 
4.16   Key Employees .  Except as set forth on Schedule 4.16 , the “executive officers” (as defined in Rule 501(f) of the Securities Act) of the Company (each, a “ Key Employee ”) is currently serving in the capacity described in the most recent SEC Documents.
 
4.17   Labor Matters .  Neither the Company nor any of the Company Subsidiaries is involved in any material labor dispute with any union organization of such entity’s employees; there are no strikes or walkouts of the Company or any Company Subsidiary’s employees in existence or, the knowledge of the Company, threatened.  Each of the Company and Company Subsidiaries has complied in all material respects with all applicable federal and state equal opportunity and other laws related to employment.
 
4.18   Environment .  Neither the Company nor any Company Subsidiary has any liabilities under any Environmental Law, nor, to the Company's knowledge, do any factors exist that are reasonably likely to give rise to any such liability, affecting any of the properties owned or leased by the Company or any Company Subsidiary, in each case other than liabilities that have not had and would not reasonably be expected to have a Material Adverse Effect.  Neither the Company nor any Company Subsidiary has violated any Environmental Law applicable to it now or previously in effect, other than any violation that has not had and would not reasonably be expected to have a Material Adverse Effect.
 
4.19   ERISA .  Neither the Company nor any Company Subsidiary maintains or contributes to, or has any obligation under, any Pension Plan.  The Company and the Company Subsidiaries are in compliance in all material respects with the presently applicable provisions of ERISA and the United States Internal Revenue Code of 1986, as amended, with respect to each Pension Plan (if any) except in any such case for any such matters that, individually or in the aggregate, have not had, and would not reasonably be expected to have, a Material Adverse Effect.
 
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4.20   Insurance .  The Company maintains insurance for itself and each Company Subsidiary in such amounts and covering such losses and risks as are reasonably sufficient and customary in the businesses in which the Company and each such Company Subsidiary are engaged.  As of the Effective Date, no notice of cancellation has been received for any of such policies and the Company is in compliance in all material respects with all of the terms and conditions thereof.  The Company has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue to conduct its business as currently conducted without a significant increase in cost.  Without limiting the generality of the foregoing, the Company maintains director’s and officer’s insurance in an amount not less than $7,500,000.
 
4.21   Property .  Each of the Company and Company Subsidiaries has good and marketable title to all real and personal Property owned by it, in each case free and clear of all Liens, other than the Permitted Liens.  Any Property held under material lease by the Company or a Company Subsidiary is held by it under valid, subsisting and enforceable leases with such exceptions as are not material and do not materially interfere with the use made or proposed to be made of such Property by the Company or such Company Subsidiary.
 
4.22   Regulatory Permits .  Each of the Company and Company Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct its business, except where the failure to have any such certificate, authorization or permit would not have a Material Adverse Effect, and, to the knowledge of the Company, neither the Company nor any Company Subsidiary has received any written notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.
 
4.23   Investment Company .  Neither the Company nor any Company Subsidiary is and, after giving effect to the offering and sale of the Securities and the application of the proceeds thereof, will become an “investment company” or an “affiliated person” of an investment company, within the meaning of the Investment Company Act of 1940, as amended.
 
4.24   U.S. Real Property Holding Corporation .  The Company is not, nor has ever been, a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended.
 
4.25   Off Balance Sheet Arrangements .  There is no transaction, arrangement, or other relationship between the Company and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its Exchange Act filings and is not so disclosed or that otherwise would be reasonably likely to have a Material Adverse Effect.
 
4.26   Money Laundering .  The operations of the Company and the Company Subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder, and no action, suit or proceeding by or before any Governmental Authority involving the Company or any of the Company Subsidiaries with respect to such Governmental Requirements is pending or, to the knowledge of the Company, threatened.
 
4.27   Transfer Taxes .  No stock transfer or other taxes (other than income taxes) are required to be paid in connection with the issuance of any of the Securities on the Effective Date.
 
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4.28   Sarbanes-Oxley Act; Internal Controls and Procedures .  To the Company’s knowledge, the Company is in material compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002, as amended, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the Effective Date.  The Company maintains internal accounting controls, policies and procedures, and such books and records as are reasonably designed to provide reasonable assurance that (i) all transactions to which the Company or any Company Subsidiary is a party or by which its properties are bound are effected by a duly authorized employee or agent of the Company, supervised by and acting within the scope of the authority granted by the Company’s senior management, (ii) the recorded accounting of the Company’s consolidated assets is compared with existing assets at regular intervals and (iii) all transactions to which the Company or any Company Subsidiary is a party, or by which its properties are bound, are recorded (and such records maintained) in accordance with all Governmental Requirements and as may be necessary or appropriate to ensure that the financial statements of the Company are prepared in accordance with GAAP.
 
4.29   Embargoed Person .  None of the funds or other assets of the Company or any Company Subsidiary shall constitute property of, or shall be beneficially owned, directly or indirectly, by any Person subject to trade restrictions under United States law, including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq., the Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated under any such United States laws (each, an “ Embargoed Person ”), with the result that the investments evidenced by the Securities are or would be in violation of any Governmental Requirements.  To the knowledge of the Company, no Embargoed Person has any interest of any nature whatsoever in the Company or any Company Subsidiary with the result that the investments evidenced by the Securities are or would be in violation of any Governmental Requirements.  None of the funds or other assets of the Company or any Company Subsidiary have been derived from any unlawful activity with the result that the investments evidenced by the Securities are or would be in violation of any Governmental Requirements in any material respect.
 
4.30   Transactions with Interested Persons .  No officer, director or employee of the Company or any Company Subsidiary is or has made any arrangements with the Company or any Company Subsidiary to become a party to any transaction with the Company or any Company Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, except for the following (i) the Transaction Documents and the transactions therein and as provided therein; (ii) the promissory notes and agreements as set forth on Schedule 4.30 and the transactions contemplated thereunder; (iii) the transactions as disclosed in the SEC Documents; and (iv) the transactions and agreements described in clauses (a) through and including (o) in Section 1.10 of Schedule 5.4 .
 
4.31   Customers and Suppliers .  The relationships of each of the Company and Company Subsidiaries with its customers and suppliers are maintained on commercially reasonable terms, except for those that would not have a Material Adverse Effect.  To the Company’s knowledge, no customer or supplier of the Company or a Company Subsidiary has any plan or intention to terminate its agreement with the Company or such Company Subsidiary, which termination would reasonably be expected to have a Material Adverse Effect.
 
4.32   Accountants .  The Company’s accountants, who the Company expects will render their opinion with respect to the financial statements to be included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2012, are, to the Company’s knowledge, independent accountants as required by the Securities Act.
 
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4.33   Solvency .  (i) The fair saleable value of the Company and the Company Subsidiaries (on a consolidated basis) assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing Debt; and (ii) the expected cash flows of the Company for future periods, together with the proceeds the Company would receive upon liquidation of its assets and the proceeds from expected debt or equity offerings, after taking into account all anticipated uses of such amounts, would be sufficient to pay all Debt when such Debt is required to be paid.  The Company has no knowledge of any facts or circumstances which lead it to believe that it will be required to file for reorganization or liquidation under bankruptcy or reorganization laws of any jurisdiction, and has no present intention to so file.
 
4.34   Disclosure .  The representations, warranties and written statements made by the Company contained in this Agreement and the other Transaction Documents and in the certificates, exhibits and schedules delivered by the Company to the Investor pursuant to this Agreement and the other Transaction Documents, taken as a whole, do not contain, when furnished, any untrue statement of a material fact, and do not, when taken as a whole, omit to state a material fact required to be stated therein or necessary in order to make such representations, warranties or statements not misleading in light of the circumstances under which they were made; and, to the extent that any such information constitutes projections, budgets, estimates or other forward looking statements, such projections, budgets, estimates or other forward looking statements were prepared in good faith on the basis of assumptions believed by the Company to be reasonable at the time such projections, budgets, estimates or other forward looking statements were furnished (it being understood that projections, budgets, estimates or other forward looking statements by their nature are inherently uncertain, that no assurances can be given that projections, budgets, estimates or other forward looking statements will be realized, and that actual results in fact may differ materially from any projections, budgets, estimates or other forward looking statements provided to the Investor).
 
5.   COVENANTS AND AGREEMENTS .
 
5.1   Filings and Public Disclosure by the Company .  The Company shall:
 
(a)   file a Form D with respect to the Securities issued at the Second Closing as and when required under Regulation D and provide a copy thereof to Investor promptly after such filing;
 
(b)   at or prior to the Second Closing, take such action as the Company reasonably determines upon the advice of counsel is necessary to qualify the Securities for sale under applicable state or “blue sky” laws or obtain an exemption therefrom, and shall promptly provide evidence of any such action to Investor at Investor’s request; and
 
(c)   (iii)           promptly after the Effective Date, (i) first , issue a press release disclosing the material terms of this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby, and (ii) thereafter or contemporaneously with the issue of such press release, file with the Commission a Current Report on Form 8-K disclosing the material terms of and including as exhibits this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby; provided , however , that Investor shall have a reasonable opportunity to review and comment on any such press release or Form 8-K prior to the issuance or filing thereof.
 
5.2   [ Intentionally Omitted .]
 
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5.3   Certain Affirmative Covenants of the Company .  The Company agrees that, during the period beginning on the Effective Date and ending on the Termination Date, the Company shall, and shall cause each other Loan Party to:
 
(a)   Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, qualifications, franchises, governmental authorizations, licenses and permits material to the conduct of its business, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where the failure to do so, individually or in the aggregate, does not, or could not reasonably be expected to, result in a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted hereunder.
 
(b)   Comply with all Governmental Requirements applicable to the operation of its business, except for instances of non-compliance that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
 
(c)   Comply with all agreements, documents and instruments binding on it or affecting its Properties or business, including, without limitation, all Material Contracts, except for instances of non-compliance that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
 
(d)   In the case of the Company, provide each Holder with copies of all materials sent to the Company’s shareholders at the same time or otherwise promptly after such materials are delivered to such shareholders.
 
(e)   In the case of the Company, timely file with the Commission all reports required to be filed pursuant to the Exchange Act and refrain from terminating its status as an issuer required by the Exchange Act to file reports thereunder even if the Exchange Act or the rules and regulations thereunder would permit such termination (and otherwise make and keep public information available, as those terms are understood and defined in Rule 144).
 
(f)    [Intentionally Omitted].
 
(g)   Maintain commercially reasonable insurance coverage (including D&O insurance) for each of the Company and Company Subsidiaries.
 
(h)   With respect to (x) any Person that becomes a Subsidiary after the Effective Date or (y) any Subsidiary that is in existence as of the Effective Date but is not a Subsidiary Guarantor, if such Subsidiary is required to become a “Borrower” under the Senior Loan Agreement at any time prior to the Senior Discharge Date, then the Company shall, at the Company’s sole expense, promptly (but in any event, within ten (10) days (or such longer period as Collateral Agent shall agree in writing in its sole discretion)) after such Subsidiary becomes a “Borrower”, do the following:
 
(i)   notify the Holders of such event;
 
(ii)   the Company shall cause such Subsidiary to execute and deliver to the Collateral Agent (x) a Joinder Agreement (as defined in the Subsidiary Guarantee) to the Subsidiary Guarantee and a (y) a Joinder Agreement (as defined in the Security Agreement) to the Security Agreement;
 
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(iii)   the Borrower shall (x) execute and deliver, or cause to be executed and delivered, to the Collateral Agent such amendments or supplements to the Security Agreement or such other documents, and take or cause to be taken, such actions, in each case as the Collateral Agent shall deem necessary or advisable to grant to the Collateral Agent for the benefit of the Secured Parties a Lien on the assets of such Subsidiary and (y) take all actions as the Collateral Agent shall deem necessary or advisable to cause such Lien to be duly perfected to the extent required by the Security Agreement in accordance with all applicable Governmental Requirements; and
 
(iv)   the Company shall execute and deliver, or cause to be executed and delivered, all such documents, instruments, agreements and certificates similar to those described in Sections 2.3(b) and 2.3(h) , as reasonably requested by the Collateral Agent.
 
5.4   Certain Negative Covenants of the Company .  The Company agrees that, during the period beginning on the Effective Date and ending on the Termination Date, the Company shall comply with the covenants set forth in Schedule 5.4 attached hereto.
 
5.5    [Intentionally Omitted.]
 
5.6    [Intentionally Omitted.]
 
5.7    [Intentionally Omitted.]
 
5.8   Use of Holder’s Name .  Except as may be required by applicable law and/or this Agreement, the Company shall not use, directly or indirectly, any Holder’s name or the name of any of its Affiliates in any advertisement, announcement, press release or other similar communication unless it has received the prior written consent of such Holder for the specific use contemplated or as otherwise required by applicable law or regulation.
 
5.9   Disclosure of Non-Public Information . The Company agrees that it will not at any time following the Effective Date disclose material non-public information to any Holder without first obtaining such Holder’s prior written consent confirming that such Holder is willing to receive material non-public information at such time.
 
5.10   Indemnification of Holders .   The Company will indemnify and hold each Holder and its directors, managers, officers, shareholders, members, partners, employees and agents (each, a “ Holder Party ”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Holder Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or by the Company or any other Loan Party in the other Transaction Documents or (b) any action instituted against a Holder, or any of its Affiliates, by any shareholder of the Company who is not an Affiliate of such Holder, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Holder’s representation, warranties or covenants under the Transaction Documents or any agreements or understandings such Holder may have with any such shareholder or any violations by such Holder or any such Affiliate of state or federal securities laws or any conduct by such Holder or any such Affiliate which constitutes wrongful actions or omissions, fraud, gross negligence, willful misconduct or malfeasance).  If any action shall be brought against any Holder Party in respect of which indemnity may be sought pursuant to this Agreement, such Holder Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing.  Any Holder Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Holder Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time following such Holder Party’s written request that it do so, to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of such separate counsel, a material conflict on any material issue between the position of the Company and the position of such Holder Party.  The Company will not be liable to any Holder Party under this Agreement (i) for any settlement by a Holder Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (ii) to the extent, but only to the extent, that a loss, claim, damage or liability is attributable to such Holder Party’s wrongful actions or omissions, or gross negligence or willful misconduct, fraud or malfeasance, or to such Holder Party’s breach of any of the representations, warranties, covenants or agreements made by such Holder Party in this Agreement or in the other Transaction Documents.
 
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5.11   Limitations on Disposition by Holder .  Each Holder agrees that no Holder shall sell, transfer, assign or dispose of any Securities, unless:
 
(a)   there is then in effect an effective registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or
 
(b)   such Holder has notified the Company in writing of any such proposed disposition, and furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such Securities under the Securities Act; provided , however , that no such opinion of counsel will be required (i) if the sale, transfer, assignment or disposition is made to an Affiliate of such Holder, (ii) if the sale, transfer, assignment or disposition is made pursuant to Rule 144 and such Holder provides the Company with evidence reasonably satisfactory to the Company that the proposed transaction satisfies the requirements of Rule 144, (iii) if such Securities are eligible for resale under Rule 144(k) or any successor provision or (iv) if in connection with a bona fide pledge or hypothecation of any Securities under a margin arrangement with a broker-dealer or other financial institution or the sale of any such Securities by such broker-dealer or other financial institution following such Holder’s default under such margin arrangement.
 
5.12   Registration Rights .
 
(a)   Upon the Company becoming eligible to file a Registration Statement on Form S-3 under the Securities Act, the Company shall, upon sixty (60) days written notice from the Investor, use its commercially reasonable efforts to file with the SEC a Form S-3 Registration Statement providing for an offering of all shares of Common Stock of the Company issuable upon the conversion of the Consolidated Note (the “ Registrable Securities ”).  The Company shall use its commercially reasonable efforts to cause the SEC to declare such Form S-3 Registration Statement effective as soon as practicable thereafter.   The Company shall use its commercially reasonable efforts to keep such Form S-3 Registration Statement continuously effective until the earlier of (i) two years after such Form S-3 Registration Statement has been declared effective and (ii) the date on which all Registrable Securities included in such Form S-3 Registration Statement have been sold in accordance with the plan and method of distribution disclosed in the prospectus included in such Form S-3 Registration Statement, or otherwise.
 
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(b)   Notwithstanding anything to the contrary contained in this Agreement, the Company shall be entitled, from time to time, by providing written notice to the Investor, that in the good faith judgment of the Company’s board of directors it would be detrimental to the Company and its stockholders for such Form S-3 Registration Statement to either become effective or remain effective for as long as such Form S-3 Registration Statement otherwise would be required to remain effective, because such action would (a) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (b) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (c) render the Company unable to comply with requirements under the Securities Act or Exchange Act, to (i) defer taking action with respect to a notice by the Investor to file a registration statement hereunder and/or (ii) require the Investor to suspend the use of the prospectus for sales of Registrable Securities under any such registration statement, in each case for a reasonable period of time not to exceed 90 days in succession or 180 days in the aggregate in any 12 month period.
 
(c)   The Company agrees to indemnify and hold harmless, to the fullest extent permitted by law, the Investor and its Affiliates and their respective officers, directors, employees, managers, partners and agents and each Person who controls (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) the Investor or such other indemnified Person from and against all losses, claims, damages, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys’ fees and expenses) (collectively, the “ Losses ”) caused by, resulting from or relating to any untrue statement (or alleged untrue statement) of a material fact contained in any Form S-3 Registration Statement, prospectus or preliminary prospectus or any amendment or supplement thereto or any omission (or alleged omission) of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as the same are caused by any information furnished in writing to the Company by the Investor expressly for use therein.
 
(d)   In connection with any Form S-3 Registration Statement, the Investor will furnish to the Company, in writing, information regarding the Investor’s ownership of Registrable Securities and its intended method of distribution thereof and, to the extent permitted by law, shall, indemnify the Company, its Affiliates and their respective directors, officers, managers, employees and agents and each Person who controls (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) the Company or such other indemnified Person against all Losses caused by any untrue statement of material fact contained in the Form S-3 Registration Statement, prospectus or preliminary prospectus or any amendment or supplement thereto or any omission of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, but only to the extent that such untrue statement or omission is caused by and contained in such information so furnished in writing by the Investor expressly for use therein.
 
6.   MISCELLANEOUS .
 
6.1   Survival; Severability .  The representations, warranties, covenants and indemnities made by the parties herein and in the other Transaction Documents shall survive the Effective Date notwithstanding any due diligence investigation made by or on behalf of the party seeking to rely thereon.   In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that in such case the parties shall negotiate in good faith to replace such provision with a new provision which is not illegal, unenforceable or void, as long as such new provision does not materially change the economic benefits of this Agreement to the parties.
 
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6.2   Successors and Assigns .  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon each of the parties and their respective (as applicable) successors, permitted assigns, executors, administrators, personal representatives, heirs and legatees.  Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto and their respective (as applicable) successors, permitted assigns, executors, administrators, personal representatives, heirs and legatees, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.  The Holder may assign its rights and obligations hereunder in connection with any private sale or transfer of the Securities that is permitted hereunder, as long as, as a condition precedent to such transfer, (i) the transferee executes an acknowledgment agreeing to be bound by the applicable provisions of this Agreement, in which case the term “Holder” shall be deemed to refer to such transferee as though such transferee were an original signatory hereto, and such assignment complies with applicable Governmental Requirements and (ii) the Company shall have consented to such assignment (which consent shall not be unreasonably withheld).  The Company may not assign its rights or obligations under this Agreement.
 
6.3   No Reliance .
 
(a)   The Company hereto acknowledges that: (i) it has such knowledge in business and financial matters as to be fully capable of evaluating this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby; (ii) it is not relying on any advice or representation of any Holder or the Collateral Agent in connection with entering into this Agreement, the other Transaction Documents or such transactions (other than the representations made in this Agreement or the other Transaction Documents); (iii) it has not received from any Holder or the Collateral Agent any assurance or guarantee as to the merits (whether legal, regulatory, tax, financial or otherwise) of entering into this Agreement or the other Transaction Documents or the performance of its obligations hereunder and thereunder; and (iv) it has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisors to the extent that it has deemed necessary, and has entered into this Agreement and the other Transaction Documents based on its own independent judgment and, if applicable, on the advice of such advisors, and not on any view (whether written or oral) expressed by any Holder or the Collateral Agent.
 
(b)   The Holder acknowledges that: (i) it has such knowledge in business and financial matters as to be fully capable of evaluating this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby; (ii) it is not relying on any advice or representation of the Company or any Company Subsidiary in connection with entering into this Agreement, the other Transaction Documents or such transactions (other than the representations made in this Agreement or the other Transaction Documents); (iii) it has not received from the Company or any Company Subsidiary any assurance or guarantee as to the merits (whether legal, regulatory, tax, financial or otherwise) of entering into this Agreement or the other Transaction Documents or the performance of its obligations hereunder and thereunder; and (iv) it has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisors to the extent that it has deemed necessary, and has entered into this Agreement and the other Transaction Documents based on its own independent judgment and, if applicable, on the advice of such advisors, and not on any view (whether written or oral) expressed by the Company or any Company Subsidiary.
 
6.4   Independent Nature of Holders’ Obligations and Rights .  The obligations of each Holder hereunder are several and not joint with the obligations of the other Holders hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder.  The Company acknowledges and agrees that nothing contained herein or in any other Transaction Document, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of entity, or a “group” as described in Section 13(d) of the Exchange Act, or create a presumption that the Holders are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement.  Each Holder acknowledges and agrees that it has been represented by its own separate counsel in connection with the transactions contemplated hereby, shall be entitled to protect and enforce its rights, including, without limitation, rights arising out of this Agreement or the other Transaction Documents, individually, and shall not be required to join any other Holder as an additional party in any proceeding for such purpose.
 
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6.5   Injunctive Relief .  The Company acknowledges and agrees that a breach by it of its obligations hereunder will cause irreparable harm to each Holder and that the remedy or remedies at law for any such breach will be inadequate and agrees, in the event of any such breach, in addition to all other available remedies, such Holder shall be entitled to an injunction restraining any breach and requiring immediate and specific performance of such obligations without the necessity of showing economic loss or the posting of any bond.
 
6.6   Governing Law; Jurisdiction; Waiver of Jury Trial .
 
(a)   This Agreement shall be governed by and construed under the laws of the State of New York applicable to contracts made and to be performed entirely within the State of New York.
 
(b)   Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in the City and County of New York of the State of New York for the adjudication of any dispute hereunder or any other Transaction Document or in connection herewith or therewith or with any transaction contemplated hereby or thereby, and hereby irrevocably waives, to the extent permitted by applicable law, and agrees not to assert, to the extent permitted by applicable law, in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives, the extent permitted by applicable law, personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.
 
(c)   EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES AND AGREES THAT ANY DISPUTE OR CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.  EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.6(c) .
 
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6.7   Counterparts; Facsimile .  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.  Any executed signature page delivered by facsimile or e-mail transmission shall be binding to the same extent as an original executed signature page, with regard to any agreement subject to the terms hereof or any amendment thereto.
 
6.8   Headings .  The headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
 
6.9   Notices .  Any notice, demand or request required or permitted to be given by the Company or the Holder pursuant to the terms of this Agreement shall be in writing and shall be deemed delivered (i) when delivered personally or by verifiable facsimile transmission, unless such delivery is made on a day that is not a Business Day, in which case such delivery will be deemed to be made on the next succeeding Business Day, (ii) on the next Business Day after timely delivery to an overnight courier and (iii) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid), addressed as set forth on Schedule 6.9 .  Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto.
 
6.10   Expenses .  The Company shall reimburse the Holder and the Collateral Agent for all costs and expenses that each of them incurs in connection with the negotiation, execution, and delivery of this Agreement or the other Transaction Documents.  The Company and each Holder and the Collateral Agent shall pay all costs and expenses that it incurs in connection with the performance of this Agreement or the other Transaction Documents.
 
6.11   Entire Agreement; Amendments .
 
(a)   This Agreement and the other Transaction Documents constitute the entire agreement between the parties hereto with regard to the subject matter hereof and thereof, superseding all prior agreements or understandings, whether written or oral, between or among the parties.
 
(b)   Neither this Agreement nor any term hereof may be amended except pursuant to a written instrument executed by the Company and by the Holders holding a majority of the outstanding principal of the Notes.  Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
 
6.12   Effect of this Agreement on the Original Purchase Agreement .  This Agreement shall be deemed to amend and restate and supercede the Original Purchase Agreement in its entirety.  Each of the parties hereto confirm that the amendment and restatement of the Original Purchase Agreement pursuant to this Agreement shall not constitute a novation of the Original Purchase Agreement.  Notwithstanding the foregoing, the parties hereto acknowledge and agree that each of the representations and warranties and covenants made by the Investor set forth in Sections 3.2, 3.3, 3.4, 3.5, 3.6 and 5.11 of the Original Purchase Agreement (collectively, the “ Original Sections ”) shall continue to survive and remain in effect and that the corresponding Sections contained in this Agreement shall be deemed to be in addition to but not in substitution of the Original Sections.
 
6.13   Waiver of Specified Defaults .  The Investor hereby waives the Specified Defaults.
 
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6.14   Release and Terminations .
 
(a)   Each of the Investor, in its capacity as collateral agent, and the Investor (as holder of the 2008 Note), hereby, effective as of the date hereof:
 
(i)   releases each of the entities and Subsidiaries of the Company identified on Schedule 6.14 (collectively, the “ Released Debtors ”) (x) from each of the Original Security Agreement, the Original Subsidiary Guarantee and any other Original Transaction Documents to which such Released Debtor was a party and (y) from any and all of their respective obligations thereunder; and
 
(ii)   confirms that each of the Released Debtors shall have no obligations to the Investor, as collateral agent, or any holder of the Notes (including the Investor) hereunder or under the Security Agreement or the Subsidiary Guarantee.
 
(b)   The Investor and the Collateral Agent or its designee hereby agree to promptly file termination statements terminating all UCC financing statements filed in connection with the Original Security Agreement against each of the Released Debtors and, upon request of the Company, executed and deliver such documents and instruments acknowledging the release of the Released Debtors and all items of “Collateral” (as defined in the Original Security Agreement) owned by any of the Released Debtors.
 
6.15   Subordination Agreement .  The parties hereto acknowledge and agree that the terms of this Agreement are subject to the terms of the Subordination Agreement.  In the event of any conflict between the terms of the Subordination Agreement and the terms of this Agreement, the terms of the Subordination Agreement shall govern.
 
[SIGNATURE PAGES TO FOLLOW]
 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
 

 

 
COMPANY:
 
       
 
INTEGRATED BIOPHARMA, INC.
 
       
 
By:
/s/ E. Gerald Kay  
   
Name:  E. Gerald Kay
 
   
Title:  President
 
 
 
 
INVESTOR:
 
       
 
CD FINANCIAL, LLC
 
       
 
By:
/s/ Wiliam H. Milmoe  
   
Name:  William H. Milmoe    
 
   
Title:  President
 

 
 
 
[Signature Page to Amended and Restated Securities Purchase Agreement]
 
 
 
 
 

 
 
EXHIBIT A
 
FORM OF CONSOLIDATED NOTE
 
 
INTEGRATED BIOPHARMA, INC.
 
AMENDED AND RESTATED CONVERTIBLE SECURED PROMISSORY NOTE
 
THIS AMENDED AND RESTATED CONVERTIBLE SECURED PROMISSORY NOTE DOES NOT REQUIRE PHYSICAL SURRENDER HEREOF IN ORDER TO EFFECT A PARTIAL PAYMENT HEREOF.  ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT SHOWN BELOW.
 
$5,350,000.00
Issue Date:  June 27, 2012
New York, New York
 
FOR VALUE RECEIVED, INTEGRATED BIOPHARMA, INC., a Delaware corporation (the “Company”), hereby promises to pay to the order of CD FINANCIAL, LLC, a Florida limited liability company, or its permitted successors or assigns (the “ Holder ”), in lawful money of the United States of America and in immediately available funds, the principal sum of FIVE MILLION THREE HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($5,350,000.00), or, if less, the aggregate unpaid principal amount of this Note, which principal amount shall be due and payable in such amounts and on such dates as are set forth below.  The Company further promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the interest rates, and on the dates, specified below.
 
This Note is the “Consolidated Note” referred to in and is executed and delivered pursuant to and in connection with the Amended and Restated Securities Purchase Agreement, dated as of June 27, 2012, by and between the Company and the Holder (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ Securities Purchase Agreement ”).
 
This Note amends and restates in its entirety the Original Notes referred to in the Securities Purchase Agreement.
 
The Company’s obligations under this Note, including, without limitation, its obligation to make payments of principal and interest hereon, are (i) guaranteed by certain of the Company’s Subsidiaries pursuant to the Subsidiary Guarantee and (ii) secured by certain of the assets  of the Company and certain of the Company’s Subsidiaries pursuant to the Security Agreement.
 
The following terms shall apply to this Note:
 
1.   DEFINITIONS .
 
(a)   Defined Terms .  When used herein, the terms below shall have the respective meanings indicated:
 
Acceleration Notice ” has the meaning set forth in Section 4   of this Note.
 
Accumulated Unpaid Interest Amounts ” ha s the meaning set forth in Section 2(b) of this Note.
 
 
 
 

 
 
Company ” has the meaning set forth in the first paragraph of this Note.
 
Conversion Price ” means $0.65 (as appropriately adjusted for stock splits, stock dividends, issuances below the Conversion Price and similar events).
 
Default Interest Rate ” means ten percent (10.0%) per annum.
 
Holder ” has the meaning set forth in the first paragraph of this Note.
 
Interest ” has the meaning set forth in Section 2(a) of this Note.
 
Interest Payment Date ” means (a) the first Business Day of each calendar month and (b) the Maturity Date.
 
Issue Date ” means the date of this Note as set forth on the first page of this Note.
 
Maturity Date ” means July 7, 2017.
 
Note ” means this Amended and Restated Convertible Secured Promissory Note, dated June 27, 2012, by the Company and payable to the order of the Holder, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
Prepayment Date ” has the meaning set forth in Section 5 of this Note.
 
Prepayment Notice ” has the meaning set forth in Section 5 of this Note.
 
Securities Purchase Agreement ” has the meaning set forth in the preamble of this Note.
 
(b)   Terms Defined in Securities Purchase Agreement .  Any capitalized term used but not defined herein has the meaning specified in the Securities Purchase Agreement.
 
(c)   Usage .  Section 1.2 of the Securities Purchase Agreement shall apply herein, and is incorporated herein by reference, mutatis mutandis , as if a part hereof.
 
2.   INTEREST; PAYMENT OF INTEREST AND PRINCIPAL; CALCULATION .
 
(a)   Interest .  Subject to Section 2(d) of this Note, the unpaid principal amount of this Note shall bear interest from and including the Issue Date until the principal amount of this Note is paid in full (“ Interest ”) at a rate per annum equal to six percent (6.0%).
 
(b)   Interest Payments .  The Company shall make payments of accrued Interest hereunder on each Interest Payment Date, commencing with the first Interest Payment Date occurring after the Issue Date; provided that no such payment shall be required to be made by the Company on such Interest Payment Date if the Company, in making such payment, would violate terms of the Subordination Agreement.   To the extent that any Interest payment is not so made on any Interest Payment Date pursuant to the first sentence of this Section 2(b) as a result of the operation of the proviso in such sentence (the amount of such unpaid Interest is referred to, collectively, as the “ Accumulated Unpaid Interest Amounts ”), then such failure to make such payment on such Interest Payment Date shall not constitute an Event of Default.
 
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(c)   Payment on Maturity.   The outstanding principal amount of this Note shall be due and payable on the Maturity Date, together with all accrued and unpaid Interest thereon, all unpaid Accumulated Unpaid Interest Amounts and all other amounts due under this Note.
 
(d)   Default Interest .  Any amount of principal, (subject to the last sentence in this Section 2(d) ) Interest, or Accumulated Unpaid Interest Amounts that is not paid as and when due in accordance with this Note shall bear interest at the Default Interest Rate, compounded monthly, until paid in full, and such interest accrued at the Default Interest Rate shall be payable on demand.   For avoidance of doubt, it is understood and agreed that if the Company does not make a monthly Interest payment on any Interest Payment Date pursuant to Section 2(b) of this Note solely as a result of the operation of the proviso in the first sentence of Section 2(b) of this Note, then, for purposes of the first sentence of this Section 2(d) , the amount of the Interest payment that was not so made on such Interest Payment Date shall not bear interest at the Default Interest Rate; provided , however , that if any Accumulated Unpaid Interest Amounts are not paid when due in accordance with Section 2(c) of this Note, then such Accumulated Unpaid Interest Amounts shall bear interest at the Default Interest Rate in accordance with the first sentence of this Section 2(d) .
 
(e)   Payments of Accumulated Unpaid Interest Amounts .  To the extent that there is any Accumulated Unpaid Interest Amounts that remains unpaid, the Company shall pay to the Holder, within five (5) Business Days after demand by Holder, the Accumulated Unpaid Interest Amounts, without premium or penalty; provided , however , that the Company shall not be required to make such payment to the extent that the Company, in making such payment, would violate the terms of the Subordination Agreement (and, in which case, for purposes of the proviso in the second sentence of Section 2(d) of this Note, such Accumulated Unpaid Interest Amounts shall not be deemed due after such demand so made).
 
(f)   Payment in Cash .  All payments of principal, Interest, default interest (if any), and Accumulated Unpaid Interest Amounts hereunder shall be paid in cash by wire transfer of immediately available funds to the account of the Holder as designated by the Holder to the Company in writing from time to time.  All payments (including prepayments) to be made by the Company on account of principal, Interest, default interest (if any), fees and other amounts owing hereunder shall be made without set off or counterclaim.
 
(g)   Calculation of Interest .   Any Interest and default interest (if any) payable hereunder shall be computed on the basis of a 360-day year and calculated using the actual number of days elapsed.
 
(h)   Failure to Make Payments .  If the Company does not make any payment of principal, interest or other amounts hereunder when due because such payment, if made, would violate  the terms of the Subordination Agreement, then the failure by the Company to make such payment shall not constitute an Event of Default.
 
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3.   CONVERSION .
 
(a)   Generally .  All or any portion of the outstanding principal amount of this Note may, at any time on or prior to or after the Maturity Date and in the Holder’s sole discretion, be converted into shares of Common Stock at the Conversion Price in effect at such time. For avoidance of doubt, any Accumulated Unpaid Interest Amounts shall not constitute principal hereunder.
 
(b)   Mechanics of Conversion .  The Holder may, at its option, upon written notice, as provided in Section 6(b) , to the Company given at any time and from time to time prior to the payment or prepayment of this Note, convert all or any portion of the principal balance of this Note into shares of Common Stock based on the Conversion Price.  Upon any conversion of this Note: (i) such principal amount converted shall become fully paid and satisfied, (ii) the Holder shall surrender and deliver this Note, duly endorsed, to the Company or such other address which the Company shall designate against delivery of the certificates representing the new securities of the Company, (iii) the Company shall promptly deliver a duly executed replacement Note to the Holder in a principal amount equal to the principal amount, if any, that remains outstanding after any such conversion; and (iv) in exchange for all or any portion of the surrendered Note described in the immediately preceding clause (i) or (ii) of this Section 3(b) , the Company shall deliver to the Holder certificates representing such number of shares of Common Stock to which the Holder is entitled to receive based on its conversion of the Note in accordance with the calculation of the Conversion Price, which certificates shall bear such legends as are required under applicable state and federal securities laws and as specified in the Securities Purchase Agreement.  In no event shall any accrued Interest (including default interest (if any)) and Accumulated Unpaid Interest Amounts hereunder be subject to the conversion provisions set forth in this Section 3 .
 
(c)            Issue Taxes .  The Company shall pay any and all issue and other taxes that may be payable with respect to any issue or delivery of shares of Common Stock on conversion of this Note pursuant hereto; provided, however , that the Holder shall not be obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with any such conversion.
 
(d)            Elimination of Fractional Interests .  No fractional shares of Common Stock shall be issued upon conversion of this Note, nor shall the Company be required to pay cash in lieu of fractional interests, it being the intent of the parties that all fractional interests shall be eliminated and that all issuances of Common Stock shall be rounded up to the nearest whole share of Common Stock.
 
4.   EVENTS OF DEFAULT; REMEDIES .
 
If an Event of Default occurs and is continuing, the Holder shall have the right, upon written notice to the Company (an “ Acceleration Notice ”), to take either or both of the following actions, at the same or different times (i) declare all unpaid principal hereof, any accrued and unpaid Interest (including default interest (if any)) thereon, all Accumulated Unpaid Interest Amounts (including any default interest (if any) thereon), and any other amounts owing hereunder due and payable on the date specified in such Acceleration Notice, without presentment, demand, protest or any other notice of any kind, all of which are hereby waived by the Company, anything contained herein to the contrary notwithstanding; provided such date of payment must be at least two (2) Business Days following the date on which the Acceleration Notice is delivered to the Company, and/or (ii) exercise any rights and remedies under this Note or as permitted by law and/or in equity; and in the case of any event described in clause (b) of the definition of “Event of Default”, all unpaid principal hereof, any accrued and unpaid Interest (including default interest (if any)) thereon, all Accumulated Unpaid Interest Amounts (including any default interest (if any) thereon), and any other amounts owing hereunder shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company, anything contained herein to the contrary notwithstanding; provided , however , that the Company shall only make such payment(s) if and only to the extent that such payment(s) would not violate the terms of the Subordination Agreement.
 
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5.   PREPAYMENTS .
 
Prepayment of Principal .  The Company shall have the right at any time and from time to time to prepay the outstanding principal amount of this Note, without premium or penalty, upon not less than five (5) days’ prior written notice to the Holder (a “ Prepayment Notice ”).  In order to effectuate such prepayment, the Company shall be obligated to pay the Holder an amount equal to the amounts described in the Prepayment Notice in same day funds on the payment date (the “ Prepayment Date ”)   specified in the Prepayment Notice; provided   such date must be at least five (5) days following the date on which the Prepayment Notice is delivered to the Holder; provided , further , however , that the Company may only make such prepayment to the extent that the Company, in making such prepayment, would not violate the terms of the Subordination Agreement.  All such principal prepayments shall be applied to the outstanding principal amount of this Note.  Any prepayment shall be accompanied by payment of accrued interest on the amount so prepaid.  Notwithstanding the foregoing, if the Holder delivers an Acceleration Notice at any time prior to the Prepayment Date, then the provisions of Section 4 shall apply and control.
 
6.   MISCELLANEOUS .
 
(a)   Failure to Exercise Rights not Waiver .  No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude any other or further exercise thereof.   All rights and remedies of the Holder hereunder are cumulative and not exclusive of any rights or remedies otherwise available. In the event that the Company does not pay any amount under this Note when such amount becomes due, the Company shall bear all costs incurred by the Holder in collecting such amount, including without limitation reasonable legal fees and expenses.
 
(b)   Notices . Any notice, demand or request required or permitted to be given by the Company or the Holder pursuant to the terms of this Note shall be in writing and shall be deemed delivered (i) when delivered personally or by verifiable facsimile transmission, unless such delivery is made on a day that is not a Business Day, in which case such delivery will be deemed to be made on the next succeeding Business Day, (ii) on the next Business Day after timely delivery to an overnight courier and (iii) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid), addressed as set forth in the Securities Purchase Agreement, or as shall be designated by the Company or the Holder in writing to the other party hereto in accordance this Section 6(b) .
 
(c)   Amendments and Waivers .  No amendment or modification to this Note may be made or given except pursuant to a written instrument executed by the Company and the Holder.  No waiver of any provision of this Note may be made except pursuant to a written instrument executed by the party against whom such waiver is sought to be enforced.  Any waiver given pursuant hereto shall be effective only in the specific instance and for the specific purpose for which given.
 
 
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(d)   Transfer of Note .  The Holder may sell, transfer or otherwise dispose of all or any part of this Note (including without limitation pursuant to a pledge) to any Person as long as such sale, transfer or disposition is in compliance with applicable Governmental Requirements, and is otherwise made in accordance with the applicable provisions of the Securities Purchase Agreement.  From and after the date of any such sale, transfer or disposition, the transferee hereof shall be deemed to be the holder of a Note in the principal amount acquired by such transferee, and the Company shall, as promptly as practicable, issue and deliver to such transferee a new Note identical in all respects to this Note, in the name of such transferee, against surrender of this Note or as otherwise specified in Section 6(e)   of this Note.  The Company shall be entitled to treat the original Holder as the holder of this entire Note unless and until it receives written notice of the sale, transfer or disposition hereof.
 
(e)   Lost or Stolen Note .  Upon receipt by the Company of evidence of the loss, theft, destruction or mutilation of this Note, and (in the case of loss, theft or destruction) of indemnity or security reasonably satisfactory to the Company, and upon surrender and cancellation of the Note, if mutilated, the Company shall execute and deliver to the Holder a new Note identical in all respects to this Note.
 
(f)   Governing Law .  This Note shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within the State of New York.
 
(g)   Successors and Assigns .  The terms and conditions of this Note shall inure to the benefit of and be binding upon the Company and the Holder and their respective successors (whether by merger or otherwise) and permitted assigns.   The Company may not assign its rights or obligations under this Note except as specifically required or permitted pursuant to the terms hereof or the Securities Purchase Agreement.
 
(h)   Usury .  This Note is subject to the express condition that at no time shall the Company be obligated or required to pay interest hereunder at a rate which could subject the Holder to either civil or criminal liability as a result of being in excess of the maximum interest rate which the Company is permitted by applicable law to contract or agree to pay.  If by the terms of this Note, the Company is at any time required or obligated to pay interest hereunder at a rate in excess of such maximum rate, the rate of interest under this Note shall be deemed to be immediately reduced to such maximum rate and the interest payable shall be computed at such maximum rate and all prior interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of the principal balance of this Note.
 
(i)   WAIVER OF JURY TRIAL .  THE COMPANY HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY.
 
(j)   Severability .  Any provision of this Note held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
 
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(k)   Restatement of Original Notes .  This Note shall amend, restate and replaces each of the Original Notes; provided , however , that the execution and delivery of this Note shall not in any circumstance be deemed to have terminated, extinguished or discharged any of the Company’s indebtedness under the Original Notes, all of which indebtedness shall continue under and be governed by this Note.   This Note is a replacement, amendment and restatement of the Original Notes and IS NOT A NOVATION.
 
(l)   Subordination Agreement .  This Note shall be subject to the terms of the Subordination Agreement.
 

 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
 
 
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IN WITNESS WHEREOF, the Company has caused this Note to be signed in its name by its duly authorized officer on the date first above written.
 
 
INTEGRATED BIOPHARMA, INC.  
   
     
By:
/s/ E. Gerald Kay  
 
Name:  E. Gerald Kay
 
Title:  President
 
 
 
 

 

 
 [Signature Page to Amended and Restated Convertible Secured Promissory Note]


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EXHIBIT B
 
FORM OF LIQUIDITY NOTE

 
 
INTEGRATED BIOPHARMA, INC.
 
PROMISSORY NOTE
 
THIS PROMISSORY NOTE DOES NOT REQUIRE PHYSICAL SURRENDER HEREOF IN ORDER TO EFFECT A PARTIAL PAYMENT HEREOF.  ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT SHOWN BELOW.
 
$1,714,000.00
Issue Date:  June 27, 2012
New York, New York
   
 
FOR VALUE RECEIVED, INTEGRATED BIOPHARMA, INC., a Delaware corporation (the “ Company ”), hereby promises to pay to the order of CD FINANCIAL, LLC, a Florida limited liability company, or its permitted successors or assigns (the “ Holder ”), in lawful money of the United States of America and in immediately available funds, the principal sum of ONE MILLION SEVEN HUNDRED FOURTEEN THOUSAND AND 00/100 DOLLARS ($1,714,000.00), or, if less, the aggregate unpaid principal amount of this Note, which principal amount shall be due and payable in such amounts and on such dates as are set forth below.  The Company further promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the interest rates, and on the dates, specified below.
 
This Note is the “Liquidity Note” referred to in and is executed and delivered pursuant to and in connection with the Amended and Restated Securities Purchase Agreement, dated as of June 27, 2012, by and between the Company and the Holder (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ Securities Purchase Agreement ”).
 
The Company’s obligations under this Note, including, without limitation, its obligation to make payments of principal and interest hereon, are (i) guaranteed by certain of the Company’s Subsidiaries pursuant to the Subsidiary Guarantee and (ii) secured by certain of the assets of the Company and certain of the Company’s Subsidiaries pursuant to the Security Agreement.
 
The following terms shall apply to this Note:
 
1.   DEFINITIONS.
 
(a)   Defined Terms .  When used herein, the terms below shall have the respective meanings indicated:
 
Acceleration Notice ” has the meaning set forth in Section 4   of this Note.
 
Accumulated Unpaid Interest Amounts ” has the meaning set forth in Section 2(b) of this Note.
 
Company ” has the meaning set forth in the first paragraph of this Note.
 
 
 
 

 
 
Default Interest Rate ” means ten percent (10.0%) per annum.
 
Holder ” has the meaning set forth in the first paragraph of this Note.
 
Interest ” has the meaning set forth in Section 2(a) of this Note.
 
Interest Payment Date ” means (a) the first Business Day of each calendar month and (b) the Maturity Date.
 
Issue Date ” means the date of this Note as set forth on the first page of this Note.
 
Maturity Date ” means July 7, 2017.
 
Note ” means this Promissory Note, dated June 27, 2012, by the Company and payable to the order of the Holder, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
Prepayment Date ” has the meaning set forth in Section 5 of this Note.
 
Prepayment Notice ” has the meaning set forth in Section 5 of this Note.
 
Securities Purchase Agreement ” has the meaning set forth in the preamble of this Note.
 
(b)   Terms Defined in Securities Purchase Agreement .  Any capitalized term used but not defined herein has the meaning specified in the Securities Purchase Agreement.
 
(c)   Usage .  Section 1.2 of the Securities Purchase Agreement shall apply herein, and is incorporated herein by reference, mutatis mutandis , as if a part hereof.
 
2.   INTEREST; PAYMENT OF INTEREST AND PRINCIPAL; CALCULATION.
 
(a)   Interest .  Subject to Section 2(d) of this Note, the unpaid principal amount of this Note shall bear interest from and including the Issue Date until the principal amount of this Note is paid in full (“ Interest ”) at a rate per annum equal to six percent (6.0%).
 
(b)   Interest Payments .  The Company shall make payments of accrued Interest hereunder on each Interest Payment Date, commencing with the first Interest Payment Date occurring after the Issue Date; provided that no such payment shall be required to be made by the Company on such Interest Payment Date if the Company, in making such payment, would violate terms of the Subordination Agreement.   To the extent that any Interest payment is not so made on any Interest Payment Date pursuant to the first sentence of this Section 2(b) as a result of the operation of the proviso in such sentence (the amount of such unpaid Interest is referred to, collectively, as the “ Accumulated Unpaid Interest Amounts ”), then such failure to make such payment on such Interest Payment Date shall not constitute an Event of Default.
 
(c)   Payments on Maturity.
 
(i)   The outstanding principal amount of this Note shall be due and payable on the Maturity Date, together with all accrued and unpaid Interest thereon, all unpaid Accumulated Unpaid Interest Amounts and all other amounts due under this Note.
 
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(ii)   Notwithstanding anything to the contrary contained in this Note, but in all events subject to Section 2(h) of this Note, to the extent that any payments of principal by the Company may be made prior to the Maturity Date without violating the terms of the Subordination Agreement, the outstanding principal amount of this Note shall be payable within ten (10) Business Days after demand by Holder.
 
(d)   Default Interest .  Any amount of principal, (subject to the last sentence in this Section 2(d) ) Interest, or Accumulated Unpaid Interest Amounts that is not paid as and when due in accordance with this Note shall bear interest at the Default Interest Rate, compounded monthly, until paid in full, and such interest accrued at the Default Interest Rate shall be payable on demand.   For avoidance of doubt, it is understood and agreed that if the Company does not make a monthly Interest payment on any Interest Payment Date pursuant to Section 2(b) of this Note solely as a result of the operation of the proviso in the first sentence of Section 2(b) of this Note, then, for purposes of the first sentence of this Section 2(d) , the amount of the Interest payment that was not so made on such Interest Payment Date shall not bear interest at the Default Interest Rate; provided , however , that if any Accumulated Unpaid Interest Amounts are not paid when due in accordance with Section 2(c) of this Note, then such Accumulated Unpaid Interest Amounts shall bear interest at the Default Interest Rate in accordance with the first sentence of this Section 2(d) .
 
(e)   Payments of Accumulated Unpaid Interest Amounts .  To the extent that there is any Accumulated Unpaid Interest Amounts that remains unpaid, the Company shall pay to the Holder, within five (5) Business Days after demand by Holder, the Accumulated Unpaid Interest Amounts, without premium or penalty; provided , however , that the Company shall not be required to make such payment to the extent that the Company, in making such payment, would violate the terms of the Subordination Agreement (and, in which case, for purposes of the proviso in the second sentence of Section 2(d) of this Note, such Accumulated Unpaid Interest Amounts shall not be deemed due after such demand so made).
 
(f)   Payment in Cash .  All payments of principal, Interest, default interest (if any), and Accumulated Unpaid Interest Amounts hereunder shall be paid in cash by wire transfer of immediately available funds to the account of the Holder as designated by the Holder to the Company in writing from time to time.  All payments (including prepayments) to be made by the Company on account of principal, Interest, default interest (if any), fees and other amounts owing hereunder shall be made without set off or counterclaim.
 
(g)   Calculation of Interest .   Any Interest and default interest (if any) payable hereunder shall be computed on the basis of a 360-day year and calculated using the actual number of days elapsed.
 
(h)   Failure to Make Payments .  If the Company does not make any payment of principal, interest or other amounts hereunder when due because such payment, if made, would violate the terms of the Subordination Agreement, then the failure by the Company to make such payment shall not constitute an Event of Default.
 
3.   [INTENTIONALLY OMITTED].
 
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4.   EVENTS OF DEFAULT; REMEDIES.
 
If an Event of Default occurs and is continuing, the Holder shall have the right, upon written notice to the Company (an “ Acceleration Notice ”), to take either or both of the following actions, at the same or different times (i) declare all unpaid principal hereof, any accrued and unpaid Interest (including default interest (if any)) thereon, all Accumulated Unpaid Interest Amounts (including any default interest (if any) thereon), and any other amounts owing hereunder due and payable on the date specified in such Acceleration Notice, without presentment, demand, protest or any other notice of any kind, all of which are hereby waived by the Company, anything contained herein to the contrary notwithstanding; provided such date of payment must be at least two (2) Business Days following the date on which the Acceleration Notice is delivered to the Company, and/or (ii) exercise any rights and remedies under this Note or as permitted by law and/or in equity; and in the case of any event described in clause (b) of the definition of “Event of Default”, all unpaid principal hereof, any accrued and unpaid Interest (including default interest (if any)) thereon, all Accumulated Unpaid Interest Amounts (including any default interest (if any) thereon), and any other amounts owing hereunder shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company, anything contained herein to the contrary notwithstanding; provided , however , that the Company shall only make such payment(s) if and only to the extent that such payment(s) would not violate the terms of the Subordination Agreement.
 
5.   PREPAYMENTS.
 
The Company shall have the right at any time and from time to time to prepay the outstanding principal amount of this Note, without premium or penalty, upon not less than five (5) days’ prior written notice to the Holder (a “ Prepayment Notice ”).  In order to effectuate such prepayment, the Company shall be obligated to pay the Holder an amount equal to the amounts described in the Prepayment Notice in same day funds on the payment date (the “ Prepayment Date ”)   specified in the Prepayment Notice; provided   such date must be at least five (5) days following the date on which the Prepayment Notice is delivered to the Holder; provided , further , however , that the Company may only make such prepayment to the extent that the Company, in making such prepayment, would not violate the terms of the Subordination Agreement.  All such principal prepayments shall be applied to the outstanding principal amount of this Note.  Any prepayment shall be accompanied by payment of accrued interest on the amount so prepaid.  Notwithstanding the foregoing, if the Holder delivers an Acceleration Notice at any time prior to the Prepayment Date, then the provisions of Section 4 shall apply and control.
 
6.   MISCELLANEOUS.
 
(a)   Failure to Exercise Rights not Waiver .  No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude any other or further exercise thereof.   All rights and remedies of the Holder hereunder are cumulative and not exclusive of any rights or remedies otherwise available. In the event that the Company does not pay any amount under this Note when such amount becomes due, the Company shall bear all costs incurred by the Holder in collecting such amount, including without limitation reasonable legal fees and expenses.
 
(b)   Notices . Any notice, demand or request required or permitted to be given by the Company or the Holder pursuant to the terms of this Note shall be in writing and shall be deemed delivered (i) when delivered personally or by verifiable facsimile transmission, unless such delivery is made on a day that is not a Business Day, in which case such delivery will be deemed to be made on the next succeeding Business Day, (ii) on the next Business Day after timely delivery to an overnight courier and (iii) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid), addressed as set forth in the Securities Purchase Agreement, or as shall be designated by the Company or the Holder in writing to the other party hereto in accordance this Section 6(b) .
 
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(c)   Amendments and Waivers .  No amendment or modification to this Note may be made or given except pursuant to a written instrument executed by the Company and the Holder.  No waiver of any provision of this Note may be made except pursuant to a written instrument executed by the party against whom such waiver is sought to be enforced.  Any waiver given pursuant hereto shall be effective only in the specific instance and for the specific purpose for which given.
 
(d)   Transfer of Note .  The Holder may sell, transfer or otherwise dispose of all or any part of this Note (including without limitation pursuant to a pledge) to any Person as long as such sale, transfer or disposition is in compliance with applicable Governmental Requirements, and is otherwise made in accordance with the applicable provisions of the Securities Purchase Agreement.  From and after the date of any such sale, transfer or disposition, the transferee hereof shall be deemed to be the holder of a Note in the principal amount acquired by such transferee, and the Company shall, as promptly as practicable, issue and deliver to such transferee a new Note identical in all respects to this Note, in the name of such transferee, against surrender of this Note or as otherwise specified in Section 6(e)   of this Note.  The Company shall be entitled to treat the original Holder as the holder of this entire Note unless and until it receives written notice of the sale, transfer or disposition hereof.
 
(e)   Lost or Stolen Note .  Upon receipt by the Company of evidence of the loss, theft, destruction or mutilation of this Note, and (in the case of loss, theft or destruction) of indemnity or security reasonably satisfactory to the Company, and upon surrender and cancellation of the Note, if mutilated, the Company shall execute and deliver to the Holder a new Note identical in all respects to this Note.
 
(f)   Governing Law .  This Note shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within the State of New York.
 
(g)   Successors and Assigns .  The terms and conditions of this Note shall inure to the benefit of and be binding upon the Company and the Holder and their respective successors (whether by merger or otherwise) and permitted assigns.   The Company may not assign its rights or obligations under this Note except as specifically required or permitted pursuant to the terms hereof or the Securities Purchase Agreement.
 
(h)   Usury .  This Note is subject to the express condition that at no time shall the Company be obligated or required to pay interest hereunder at a rate which could subject the Holder to either civil or criminal liability as a result of being in excess of the maximum interest rate which the Company is permitted by applicable law to contract or agree to pay.  If by the terms of this Note, the Company is at any time required or obligated to pay interest hereunder at a rate in excess of such maximum rate, the rate of interest under this Note shall be deemed to be immediately reduced to such maximum rate and the interest payable shall be computed at such maximum rate and all prior interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of the principal balance of this Note.
 
5
 
 
 

 
 
(i)   WAIVER OF JURY TRIAL .  THE COMPANY HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY.
 
(j)   Severability .  Any provision of this Note held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
 
(k)   Subordination Agreement.   This Note shall be subject to the terms of the Subordination Agreement.
 
 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
 
 
 
 
6
 
 
 

 
 
 
IN WITNESS WHEREOF, the Company has caused this Note to be signed in its name by its duly authorized officer on the date first above written.
 
 
INTEGRATED BIOPHARMA, INC.  
   
     
By:
/s/ E. Gerald Kay  
 
Name:  E. Gerald Kay
 
Title:  President
 
 
 
 
[Signature Pa ge to Promissory Note]
 
 
 
 
7
 
 
 

 
 
SCHEDULE I
 
PERMITTED DEBT
 

 
1.  Senior Obligations.

2.  Debt under the EGK Note.

3.  Debt under the Vitamin Note.
 
 
 
 
 

 
 

SCHEDULE II
 
PERMITTED LIENS
 
1.
UCC-1 Financing Statement filed by or on behalf of CD Financial, LLC, dated February 22, 2008.
Filing No.  2459996-2
Debtors :  AgroLabs, Inc. and The Organic Beverage Company
Jurisdiction :  New Jersey Department of Treasury - Commercial Recording

2.
UCC-1 Financing Statement filed by or on behalf of CD Financial, LLC, dated February 22, 2008.
Filing No .  20080644243
Debtors :  Integrated BioPharma, Inc., Scientific Sports Nutrition, Inc., Vitamin Factory,
Inc., IHT Health Products, Inc., IHT Properties Corp.
Jurisdiction :  Delaware Secretary of State

3.
UCC-1 Financing Statement filed by or on behalf of CD Financial, LLC, dated February 22, 2008.
Filing No .  200802220142387
Debtors :  InB:Manhattan Drug Company, Inc.
Jurisdiction :  New York Department of State
 
4.
UCC-1 Financing Statements filed by or on behalf of PNC Bank, National Association, pursuant to the Senior Loan Documents.
 
5.
UCC Financing Statements filed by or on behalf of the Investor or the Collateral Agent pursuant to the Transaction Documents.
 
 
 
 
 

 
 
SCHEDULE 4.4
 
FILINGS
 

 
No disclosures.
 
 
 
 
 

 
 
 

SCHEDULE 4.5(a)
 
CAPITALIZATION
 


               
 
Integrated BioPharma, Inc.
       
Stock Ownership Table
Kays and Carl
61.47%
    12,956,962
INBP Shares outstanding
6/22/2012
   
    21,080,174
         
         
       
 Voting Share
       
 Ownership
Name of Beneficial Owner
       
         
E.Gerald Kay
Shares
 
25%
     5,212,556
Carl DeSantis, including CD Financial LLC
Shares
 
21%
     4,466,511
 
See summary to right
   
Riva Sheppard
Shares
 
5%
     1,123,467
Christina Kay
Shares
 
5%
     1,123,467
Robert Kay
Shares
 
5%
     1,030,961
Dina L. Masi
Shares
 
0%
          97,200
Robert Canarick
Shares
 
0%
          59,233
William Milmoe
Shares
 
0%
          88,667
D. DeSantis
Shares
 
2%
        500,000
         
Total as a group
   
65%
    13,702,062
Public Float
   
35%
     7,378,112
Total Shares outstanding
   
100%
    21,080,174
 
 
 
 
 
 
 

 
 
SCHEDULE 4.5(b)
 
SUBSIDIARIES
 

Name of Subsidiary
Type and Jurisdiction of organization
Status (Active/Inactive)
AgroLabs, Inc.
New Jersey corporation
Active
IHT Health Products, Inc.
Delaware corporation
Active
IHT Properties Corp.
Delaware corporation
Active
InB:Manhattan Drug Company, Inc.
New York corporation
Active
Vitamin Factory, Inc.
Delaware corporation
Active
Connaught Press, Inc.
New Jersey corporation
Inactive
Designer Nutrition Laboratories, Inc.
New Jersey corporation
Inactive
Gero Industries, Inc.
New Jersey corporation
Inactive
InB:Paxis Pharmaceuticals, Inc.
Delaware corporation
Inactive
Scientific Sports Nutrition, Inc.
Delaware corporation
Inactive
The Organic Beverage Company
New Jersey corporation
Inactive

 
 
 
 
 

 
 

SCHEDULE 4.5(b)
 
WARRANTS; ETC.
 

1.  
Warrant to Purchase Common Stock of Integrated BioPharma, Inc., issued on October 14, 2008 by Integrated BioPharma, Inc. in favor of Imperium Master Fund, Ltd., Warrant No. 1, for the right to purchase up to 166,050 shares of common stock of Integrated BioPharma, Inc.;

2.  
Warrant to Purchase Common Stock of Integrated BioPharma, Inc., issued on October 14, 2008 by Integrated BioPharma, Inc. in favor of JED Family Trust, Warrant No. 2, for the right to purchase up to 71,450 shares of common stock of Integrated BioPharma, Inc.;

3.  
Warrant to Purchase Common Stock of Integrated BioPharma, Inc., issued on October 14, 2008 by Integrated BioPharma, Inc. in favor of John Michaelson, Warrant No. 3, for the right to purchase up to 53,550 shares of common stock of Integrated BioPharma, Inc.;

4.  
Warrant to Purchase Common Stock of Integrated BioPharma, Inc., issued on October 14, 2008 by Integrated BioPharma, Inc. in favor of Mark Ain, Warrant No. 4, for the right to purchase up to 8,950 shares of common stock of Integrated BioPharma, Inc.;

5.  
Warrant to Purchase Common Stock of Integrated BioPharma, Inc., issued on October 14, 2008 by Integrated BioPharma, Inc. in favor of Kevin Smith, Warrant No. 5, for the right to purchase up to 100,000 shares of common stock of Integrated BioPharma, Inc.; and

6.  
Warrant to Purchase Common Stock of Integrated BioPharma, Inc., issued on October 14, 2008 by Integrated BioPharma, Inc. in favor of Robert Silverstein, Warrant No. 6, for the right to purchase up to 100,000 shares of common stock of Integrated BioPharma, Inc.
 
 
 
 
 

 
 
 
SCHEDULE 4.9
 
LEGAL PROCEEDINGS
 

(i) InB:Manhattan Drug Company, Inc. is a  named defendant in a lawsuit filed against Herbalife LTD. (Elizabeth Farrington v. Herbalife International, et al., Los Angeles Superior Court Case Number BC 472590).
 
(ii)  Unisource Worldwide, Inc v. AgroLabs, Inc., Superior Court of New Jersey, Law Division - Union County, Docket No. DC-007381-12, Filed May 8, 2012.
 
(iii)  On May 15, 2012, Cedarburg Pharmaceuticals, Inc. (“Cedarburg”) sent Integrated BioPharma, Inc. a letter (the “Demand Letter”) setting forth a demand for indemnification under the Stock Purchase Agreement, dated March 17, 2009 (the “Cedarburg SPA”), by and among Cedarburg, InB: Hauser Pharmaceutical Services, Inc., InB: Paxis Pharmaceuticals, Inc. and Integrated BioPharma, Inc. In the Demand Letter, Cedarburg demands payment by Integrated BioPharma, Inc. of $600,000 in respect of the Integrated BioPharma, Inc.’s indemnification obligations under the Cedarburg SPA.  In addition, in the Demand Letter, Cedarburg informed Integrated BioPharma, Inc. that there are also environmental issues pending which may lead to additional costs to Cedarburg which will likely be in excess of $300,000.  Integrated BioPharma, Inc. is currently contesting its liability with respect to these claims.    
 
(iv)  On February 13, 2009, judgment in the amount of $26,066.45 was entered against The Organic Beverage Company in favor of RTC (RTC v. The Organic Beverage Company, Superior Court of New Jersey, Union County, Law Division, Docket No. L-000560-09).

 
(v)  On February 19, 1993, a judgment in the amount of $23,090.65 (plus attorneys’ fees in the amount of $3,846.94) was entered against Manhattan Drug Company in favor of GE Capital Corporation.  Integrated BioPharma, Inc. believes that this judgment has been satisfied. (Manhattan Drug Company, Inc. v. RCA Business Telephone Systems and General Electric Capital Corporation, Superior Court of New Jersey, Law Division -Union County, Docket No. UNN-L-7058-91)
 
(vi)  On July 20, 1995, a judgment in the amount of $1,611.90 was entered against Manhattan Drug Co. in favor of Charles M. Forman.  Integrated BioPharma, Inc. believes that this judgment has been satisfied. 
 
 
 
 
 

 
 
 
SCHEDULE 4.12
 

 
REGISTRATION RIGHTS
 

1.  Registration rights granted by the Company to Imperium Master Fund, Ltd., John Michaelson, JED Family Trust and Mark Ain, pursuant to that certain Registrations Rights Agreement, dated October 14, 2008, filed as Exhibit 10.2 to the form 8K filed with the Securities Exchange Commission on October 20, 2008.
 
 
 
 
 
 

 
 
 
SCHEDULE 4.16
 

 
KEY EMPLOYEES
 


E. Gerald Kay -- President and Chief Executive Officer

Dina L. Masi  - Chief Financial Officer, Senior Vice President and Secretary

Riva Sheppard -- Executive Vice President

Christina Kay -- Executive Vice President
 
 
 
 
 

 
 
SCHEDULE 4.30
 

 
AFFILIATE TRANSACTIONS
 
 
 
1.  EGK Note and the transactions thereunder.  The principal amount of the EGK Note represents the aggregate amount of all out-of-pocket expenses which E. Gerald Kay has incurred to date in connection with the performance of his duties as an officer of Integrated BioPharma, Inc. and which have not yet been reimbursed by Integrated BioPharma, Inc..

2.  Vitamin Note and the transactions thereunder.  The principal amount of the Vitamin Note represents the aggregate amount of unpaid, past due rent owing by InB:Manhattan Drug Company, Inc. (formerly known as Manhattan Drug Company) under the Vitamin Lease.

3.  Vitamin Lease and the transactions thereunder.

4.  Lease Agreement by and between AgroLabs, Inc., as lessee, and Vitamin Realty Associates, LLC, as lessor, dated January 5, 2012 with regard to the property located at 225 Long Avenue, Building 15, Hillside, New Jersey  07205 ( as amended, restated, extended, replaced and/or modified from time to time, the “ AL Lease ”), and the transactions thereunder.
 
 
 
 
 

 
 
SCHEDULE 5.4
 

 
NEGATIVE COVENANTS
 
The Company agrees that, during the period beginning on the Effective Date and ending on the Termination Date, the Company shall not, and shall cause each other Loan Party not to:
 
1.1   Merger, Consolidation, Acquisition and Sale of Assets .
 
(a)   Enter into any merger, consolidation or other reorganization with or into any other Person or acquire all or a substantial portion of the assets or Equity Interests of any Person or permit any other Person to consolidate with or merge with it, except that:
 
(i)   any Loan Party may merge, consolidate or reorganize with or into the Company; provided that the Company is the continuing or surviving Person;
 
(ii)   any Loan Party (other than the Company) may merge, consolidate or reorganize with or into any other Loan Party (other than the Company); provided that a Loan Party is the continuing or surviving Person;
 
(iii)   any Loan Party may transfer all or substantially all of its assets or its Equity Interests to any other Loan Party; provided that if the Company is a party to such transactions, the transferee thereof must be the Company; and
 
(iv)   any Loan Party may merge, consolidate or reorganize with or into any Person that such Loan Party is part of as a joint venture as permitted in Section 1.12 of this Schedule 5.4 herein, provided , however , (i) such Person has an EBITDA of greater than zero immediately prior to such merger, consolidation or reorganization, tested on a trailing twelve month basis, (ii) the Investor and its counsel has reviewed to its satisfaction any and all due diligence requested by the Investor in its sole discretion and there shall be no existing Liens, judgments, litigation, bankruptcies and/or outstanding taxes payable with regard to such Person and its assets which are not permitted by the terms herein, (iii) a Loan Party is the continuing or surviving Person, (iv) the Loan Parties will be in pro forma compliance with all terms and conditions set forth herein immediately preceding and after giving effect to such merger, consolidation or reorganization and (v) no Default and/or Event of Default shall exist immediately preceding and/or after giving effect to such merger, consolidation or reorganization.
 
(b)   Sell, lease, transfer or otherwise dispose (“ Dispose ” or “ Disposition ”) of any of its properties or assets, except:
 
(i)   (A) the sale of Inventory in the Ordinary Course of Business and (B) the disposition or transfer of Equipment in the Ordinary Course of Business during any fiscal year having an aggregate fair market value of not more than $250,000,
 
(ii)   any other sales or Dispositions expressly permitted by this Agreement,
 
(iii)   Dispositions of assets to any other Loan Party;
 
 
Sch. 5.4-1
 
 
 

 
 
(iv)   sales, transfers, dispositions, write-offs, or discounting of any accounts receivable, including its Receivables, in connection with the compromise, settlement or collection thereof, in each case in the Ordinary Course of Business;
 
(v)   Dispositions consisting of dividends and other distributions permitted by Section 1.7 of this Schedule 5.4 ;
 
(vi)   mergers and consolidations permitted by Section 1.1(a) of this Schedule 5.4 ;
 
(vii)   Dispositions consisting of advances, loans or extensions of credit permitted by Section 1.5 of this Schedule 5.4 ;
 
(viii)   lease, sublease, license (on a non-exclusive basis with respect to intellectual property or on an exclusive basis in the ordinary course of business consistent with past practice) or sublicense (on a non-exclusive basis with respect to intellectual property or on an exclusive basis in the ordinary course of business with past practice) or real or personal property that do not, individually or in the aggregate (x) interfere in any material respect with the business of any Loan Party or any of its Subsidiaries or (y) materially impair the value of the property subject thereto;
 
(ix)   the lapse of immaterial intellectual property of any Loan Party that is no longer useful in the business of such Loan Party;
 
(x)   the termination, surrender or sublease of a real estate lease of any Loan Party in the ordinary course of business;
 
(xi)   Disposition and transfer of cash and Cash Equivalents in the ordinary course of business except as otherwise prohibited herein;
 
(xii)   Dispositions of investments consented to by the Investor in writing (which consent shall not be unreasonably withheld or delayed) in joint ventures permitted pursuant to the terms herein to the extent required by customary buy/sell arrangements between the joint venture parties as set forth in applicable joint venture agreements and similar binding agreements;
 
(xiii)   Dispositions permitted by Sections 1.4(i) , 1.4(j) and 1.4(k) of this Schedule 5.4 ;
 
(xiv)           Dispositions of iBio Stock so long as the net proceeds of such disposition are applied as follows: first , to repay, pay or prepay the Senior Obligations pursuant to the Senior Loan Agreement; and second , to repay, pay or prepay interest and/or principal of the Note; and
 
(xv)           Disposition constituting advances and contributions permitted by clause (o) in Section 1.10 of this Schedule 5.4 .
 
1.2   Creation of Liens .  Create or suffer to exist any Lien or transfer upon or against any of its property or assets now owned or hereafter acquired, except Permitted Liens.
 
1.3   Guarantees .  Become liable upon the obligations or liabilities of any Person by assumption, endorsement or guaranty thereof or otherwise (other than to Investor), except (a) the Vitamin Note, (b) the endorsement of checks in the Ordinary Course of Business, (c) deposits described in clauses (d) and (e) of the definition of the term “Permitted Liens”, and (d) the Subsidiary Guaranty and any other guarantees of the Loan Parties (other than the Company) under the Transaction Documents.
 
Sch. 5.4-2
 
 
 

 
 
1.4   Investments .  Purchase or acquire obligations or Equity Interests of, or any other interest in, any Person, except:
 
(a)                      (i) obligations issued or guaranteed by the United States of America or any agency thereof,
 
(ii)   commercial paper with maturities of not more than 180 days and a published rating of not less than A-1 or P-1 (or the equivalent rating),
 
(iii)   certificates of time deposit and bankers’ acceptances having maturities of not more than 180 days and repurchase agreements backed by United States government securities of a commercial bank if (y) such bank has a combined capital and surplus of at least $500,000,000, or (z) its debt obligations, or those of a holding company of which it is a Subsidiary, are rated not less than A (or the equivalent rating) by a nationally recognized investment rating agency, and
 
(iv)   U.S. money market funds that invest solely in obligations issued or guaranteed by the United States of America or an agency thereof (collectively, all of the foregoing referred to in this clause (a) shall be “ Cash Equivalents ”);
 
(b)   [Intentionally Omitted];
 
(c)   all the Equity Interests held in each of its Subsidiaries and/or other Loan Parties;
 
(d)   notes payable or securities issued by Customers and suppliers received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;
 
(e)   assumptions, endorsements or guaranties permitted by Section 1.3 of this Schedule 5.4 ;
 
(f)   mergers and consolidations and Dispositions permitted by Section 1.1 of this Schedule 5.4 ;
 
(g)   promissory notes and other non-cash consideration, in each case received in connection with any Disposition made in compliance with this Agreement;
 
(h)   [Intentionally Omitted];
 
(i)   purchases or acquisitions of any Equity Interests of any Person to form, or contributions to, joint venture arrangements in an aggregate amount so invested not to exceed $750,000 outstanding at any time;
 
(j)   Dividend Payments permitted by Section 1.7 of this Schedule 5.4 ; and
 
(k)   Dividends and distributions of capital stock of a Subsidiary to its equity holder(s).
 
Sch. 5.4-3
 
 
 

 
 
1.5   Loans .  Make advances, loans or extensions of credit to any Person, including any Parent, Subsidiary or Affiliate except with respect to (a) the extension of commercial trade credit in connection with the sale of Inventory in the Ordinary Course of Business; (b) loans to its employees in the Ordinary Course of Business not to exceed the aggregate amount of $100,000 at any time outstanding; (c) intercompany advances, loans and extensions of credit by and between Loan Parties; (d) advances and contributions permitted by clause (o) in Section 1.10 of this Schedule 5.4 ; and (d) other extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business.
 
1.6   Capital Expenditures .  Contract for, purchase or make any expenditure or commitments for Capital Expenditures in any fiscal year in an aggregate amount for all Loan Parties in excess of $500,000, tested annually.
 
1.7   Dividends .  Declare, pay or make any dividend or distribution on any shares of the common stock or preferred stock of any Loan Party (other than dividends or distributions payable in its stock, or split-ups or reclassifications of its stock) or apply any of its funds, property or assets to the purchase, redemption or other retirement of any common or preferred stock, or of any options to purchase or acquire any such shares of common or preferred stock of any Loan Party (collectively, “Dividend Payments”), except any Loan Party is permitted to declare, pay or make dividends or distributions on any shares of the common stock or preferred stock (i) to other Loan Parties, (ii) up to the maximum aggregate amount of $100,000 for all Loan Parties collectively during any fiscal year so long as no Default and/or Event of Default shall exist immediately prior to making and/or after giving affect to such dividend and/or distribution or (iii) upon receipt of the Investor’s written consent from time to time which may be withheld for any reason in its sole discretion.
 
1.8   Indebtedness .  Create, incur, assume or suffer to exist any Debt (exclusive of trade debt) except Permitted Debt.
 
1.9   Nature of Business .  Substantially change the nature of the business in which it is presently engaged, nor except as specifically permitted hereby or hereunder, purchase or invest, directly or indirectly, in any assets or property other than in the Ordinary Course of Business for assets or property which are useful in, necessary for and are to be used in its business as presently conducted.
 
1.10   Transactions with Affiliates .  Directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property to, or otherwise enter into any transaction or deal with, any Affiliate, except (a) transactions disclosed to the Investor, which are in the Ordinary Course of Business, on an arm’s-length basis on terms and conditions no less favorable than terms and conditions which would have been obtainable from a Person other than an Affiliate; (b) transactions contemplated by this Agreement and the other Transaction Documents; (c) loans and advances permitted by Section 1.5 of this Schedule 5.4 ; (d) the payment of reasonable fees to directors of any Loan Party, and compensation and employee benefit arrangements paid to, and indemnities provided for the benefit of, directors, officers or employees of the Loan Parties in the ordinary course of business; (e) any issuances of securities or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment agreements, stock options and stock ownership plans approved by a Loan Party’s board of directors; (f) any transactions between or among a Loan Party and one or more of its Subsidiaries permitted hereunder; (g) any Dividend Payment permitted by Section 1.7 of this Schedule 5.4 ; (h) the Senior Obligations and any payments in respect thereof; (i) the EGK Debt; (j) the Vitamin Lease and the transactions contemplated thereunder; (k) the payment of wages, benefits and similar amounts in the Ordinary Course of Business by the Loan Parties to their principals, directors, officers and employees; (l) the payments and transactions contemplated by Section 1.24 of this Schedule 5.4 ; (m) the Vitamin Note; (n) the AL Lease; and (o) advances or contributions to its Subsidiaries (other than Loan Parties) for the purpose of funding organizational and administrative expense not to exceed $25,000 in the aggregate in any fiscal year.
 
Sch. 5.4-4
 
 
 

 
 
1.11   Leases .  Enter as lessee into any lease arrangement for real or personal property (unless capitalized and permitted under Section 1.6 of this Schedule 5.4 ) if after giving effect thereto, aggregate annual rental payments for all leased property would exceed $750,000 in any one fiscal year in the aggregate for all Loan Parties.
 
1.12   Subsidiaries .
 
(a)   Form any Subsidiary not listed on Schedule 4.5(b) unless (i) such Subsidiary expressly joins in this Agreement as a borrower and becomes jointly and severally liable for the obligations of Loan Parties hereunder, under the Note, and under any other agreement between any Loan Party and Investor, (ii) Investor consents to such in writing and (iii) Investor shall have received all documents, including legal opinions, it may reasonably require to establish compliance with each of the foregoing conditions.
 
(b)   Enter into any partnership, joint venture or similar arrangement, except for joint ventures entered into pursuant to Section 1.4(i) of this Schedule 5.4 .
 
1.13   Fiscal Year and Accounting Changes .  Change its fiscal year from June 30 th or make any significant change (i) in accounting treatment and reporting practices except as required by GAAP or (ii) in tax reporting treatment except as required by law.
 
1.14   [ Intentionally Omitted .]
 
 
1.15   Amendment of Articles of Incorporation, By-Laws/Certificate of Formation, Operating Agreement or Senior Loan Documents .  Amend, modify or waive any material term or material provision of its Articles of Incorporation or By-Laws or Certificate of Formation or Operating Agreement, as applicable, unless required by law.
 
1.16   Compliance with ERISA .  (i) (x) Maintain, or permit any member of the Controlled Group to maintain, or (y) become obligated to contribute, or permit any member of the Controlled Group to become obligated to contribute, to any Pension Benefit Plan, (ii) engage, or permit any member of the Controlled Group to engage, in any non-exemp t “prohibited transaction”, as that term is defined in Section 406 of ERISA and Section 4975 of the Code, (iii) incur, or permit any member of the Controlled Group to incur, any “accumulated funding deficiency”, as that term is defined in Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any member of the Controlled Group to terminate, any Pension Benefit Plan where such event could result in any liability of any Loan Party or any member of the Controlled Group or the imposition of a lien on the property of any Loan Party or any member of the Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any member of the Controlled Group to assume, any obligation to contribute to any Multiemployer Plan, (vi) incur, or permit any member of the Controlled Group to incur, any withdrawal liability to any Multiemployer Plan; (vii) fail promptly to notify Investor of the occurrence of any Termination Event, (viii) fail to comply, or permit a member of the Controlled Group to fail to comply, with the requirements of ERISA or the Code or other Applicable Laws in respect of any Pension Benefit Plan, (ix) fail to meet, or permit any member of the Controlled Group to fail to meet, all minimum funding requirements under ERISA or the Code or postpone or delay or allow any member of the Controlled Group to postpone or delay any funding requirement with respect of any Pension Benefit Plan.
 
Sch. 5.4-5
 
 
 

 
 
1.17   Prepayment of Indebtedness .  At any time, directly or indirectly, prepay any Debt (other than to any of Investor or any of its Affiliates), or repurchase, redeem, retire or otherwise acquire any Debt of any Loan Party, except:
 
(a)   payment or repayment or prepayment of the EGK Debt as permitted by Section 1.23 of this Schedule 5.4 ;
 
(b)   payment or repayment or prepayment of Debt as permitted by Section 1.24 of this Schedule 5.4 ;
 
(c)   payment or repayment or prepayment of the Senior Obligations;
 
(d)   payment or repayment or prepayment of the Obligations and all Debt under this Agreement and the other Transaction Documents; and
 
(e)   payment, repayment or prepayment of secured Debt that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Debt.
 
1.18   Anti-Terrorism Laws .  No Loan Party shall, until satisfaction in full of the Obligations and termination of this Agreement, nor shall it permit any Affiliate (which for the purposes of this Section 1.18 of this Schedule 5.4 only, shall not include any shareholder that is not an Original Owner and any Person owned in whole or in part by any Original Owner which is not a “Loan Party” hereunder or a Subsidiary of any Loan Party) or agent to:
 
(a)   Conduct any business or engage in any transaction or dealing with any Blocked Person, including the making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person.
 
(b)   Deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order No. 13224.
 
(c)   Engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in the Executive Order No. 13224, the USA PATRIOT Act or any other Anti-Terrorism Law.  The Company shall deliver to Investor any certification or other evidence requested from time to time by any Investor in its sole discretion, confirming Loan Party’s compliance with this this Section 1.18 of this Schedule 5.4 .
 
1.19   Membership/Partnership Interests .  Unless consented to by Investor in writing, elect to treat or permit any of its Subsidiaries to (x) treat its limited liability company membership interests or partnership interests, as the case may be, as securities as contemplated by the definition of “security” in Section 8-102(15) and by Section 8-103 of Article 8 of Uniform Commercial Code or (y) certificate its limited liability company membership interests or partnership interests, as the case may be.
 
1.20   Trading with the Enemy Act .  Engage in any business or activity in violation of the Trading with the Enemy Act.
 
1.21   [ Intentionally Omitted .]
 
1.22   Other Agreements .  Enter into any material amendment, waiver or modification of the Senior Loan Documents or any related agreements (other than the Transaction Documents), except to the extent permitted by the Subordination Agreement, but only to the extent that such material amendment, waiver or modification does not (i)  increase the “Maximum Revolving Advance Amount” or the “Maximum Term Loan Amount” (as each such term is defined in the Senior Loan Agreement), (ii) create any new term loan or revolving loan or credit facility thereunder, or (iii) adversely affect the rights of any Holder to receive interest payments under the Note.
 
Sch. 5.4-6
 
 
 

 
 
1.23   Payments of EGK Deb t .  Make any payments, prepayments or repayments of principal and interest on the EGK Debt; provided , however , that the applicable Loan Party may make such payments, prepayments or repayments so long as no Default and/or Event of Default has occurred and is continuing prior to and immediately after making such payment, prepayment or repayment.
 
1.24   Payments of Past Due Rent .  Make any payments, prepayments or repayments for any past due rent payable to Vitamin Realty Associates, LLC with regard to the property located at 225 Long Avenue, Building 15, P.O. Box 278, Hillside, New Jersey  07205 (such past due rent as evidenced by the Vitamin Note), including payments under the Vitamin Note; provided , however , that the applicable Loan Party may make such payments, prepayments or repayments so long as no Default and/or Event of Default has occurred and is continuing prior to and immediately after making such payment, prepayment or repayment.
 
 
Sch. 5.4-7
 
 
 

 
 



SCHEDULE 6.9
 
NOTICES
 
If to the Company :
 
Integrated BioPharma, Inc.
225 Long Avenue
Hillside, New Jersey  07205
Attention:  Chief Executive Officer and Chief Financial Officer
Tel. No.:  973- 926-0816
Fax No:  973- 926-1735
 
with a copy (which shall not constitute notice) to:
 
Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
Attention:  Eric A. Stabler, Esq.
Telephone No.:  212-592-5982
Fax No.:  212-545-3317
 
 
If to the Holder :
 
CD Financial, LLC
3299 NW Second Avenue
Boca Raton, Florida  33431
Attention:  William H. Milmoe
Tel. No.:  561-278-1169
Fax No.:  561-278-6930
 
with a copy (which shall not constitute notice) to:
 
Muller & Lebensburger
7385 Galloway Road
Suite 200
Miami, Florida  33173
Attention:  Charles E. Muller II, Esq.
Tel. No.:  305-670-6770
Fax No.:  305-670-6769
 
 
 
 
 

 
 

SCHEDULE 6.14
 
RELEASED DEBTORS
 
InB:Paxis Pharmaceuticals, Inc., a Delaware corporation
 
Scientific Sports Nutrition, Inc., a Delaware corporation
 
The Organic Beverage Company, a New Jersey corporation



 
Exhibit 10.11
 
AMENDED AND RESTATED SECURITY AGREEMENT
 
This AMENDED AND RESTATED SECURITY AGREEMENT, dated as of June 27, 2012, is by and among Integrated BioPharma, Inc., a Delaware corporation (the “ Company ”), each of the Subsidiaries of the Company party hereto from time to time, whether as an original signatory hereto or as an Additional Debtor (as defined in Section 4.5 below) (such Subsidiaries, the “ Subsidiary Debtors ” and, collectively with the Company, the “ Debtors ”), and CD Financial, LLC, a Florida limited liability company, in its capacity as collateral agent (in such capacity, together with its successors in such capacity, the “ Collateral Agent ”), for the benefit of the Secured Parties (as defined in the Securities Purchase Agreement referred to below).
 
W I T N E S S E T H:
 
WHEREAS, reference is made to the Amended and Restated Securities Purchase Agreement, dated as of the date hereof (as amended, restated, modified or supplemented from time to time, the “ Securities Purchase Agreement ”), by and between the Company and CD Financial, LLC, a Florida limited liability company (the “ Investor ”), which amended and restated the Securities Purchase Agreement, dated as of February 21, 2008, by and between the Company and Investor in its entirety (as amended, supplemented or otherwise modified from time to time to but excluding the date hereof, the   Original SPA ”);
 
WHEREAS, reference is made to the Security Agreement, dated as of February 21, 2008 (as amended, supplemented or otherwise modified from time to time to but excluding the date hereof, the Original Security Agreement ”), by and among the Company, certain Subsidiaries of the Company party thereto, and the Collateral Agent;
 
WHEREAS, the Debtors and the Collateral Agent have agreed to amend and restate the Original Security Agreement in its entirety as set forth herein;
 
WHEREAS, reference is made to Sections 17.9 and 17.10 below; and
 
WHEREAS, the Company and each Debtor that is a Subsidiary of the Company will directly or indirectly benefit from the extension of credit to the Company represented by the issuance of the Notes and the other transactions contemplated by the Securities Purchase Agreement.
 
NOW, THEREFORE, in consideration of the agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
 
1.  
DEFINITIONS.
 
(a)   Terms Defined in the Uniform Commercial Code .  Terms used herein that are defined in Article 9 of the UCC but not otherwise defined in this Agreement (such as “ account ”, “ chattel paper ”, “ commercial tort claim ”, “ deposit account ”, “ document ”, “ equipment ”, “ fixtures ”, “ general intangibles ”, “ goods ”, “ instruments ”, “ inventory ”, “ investment property ”, “ letter-of-credit rights ”, “ payment intangibles ”, “ proceeds ” and “ supporting obligations ”) shall have the respective meanings given such terms in Article 9 of the UCC. It is the intent of the parties that defined terms in the UCC should be construed in their broadest sense so that the term “ Collateral ” will be construed in its broadest sense.  Accordingly if there are, from time to time, changes to the defined terms in the UCC that broaden the definitions, they are incorporated herein and if existing definitions in the UCC are broader than the amended definitions, the existing ones will be controlling.
 
 
 
 

 
 
(b)   Defined Terms .  The following terms shall apply to this Agreement:
 
Agreement ” means this Amended and Restated Security Agreement, dated as of the date hereof, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
CD Financial, LLC ” means CD Financial, LLC, a Florida limited liability company.
 
Collateral ” means, with respect to each Debtor, all present and after-acquired personal property of such Debtor, including the following personal property presently owned or hereafter acquired by such Debtor, wherever situated, and all additions and accessions thereto and all substitutions and replacements thereof, and all proceeds, products and accounts thereof, including, without limitation, all proceeds from the sale or transfer of the Collateral and of insurance covering the same and of any tort claims in connection therewith, and all dividends, interest, cash, notes, securities, equity interest or other property at any time and from time to time acquired, receivable or otherwise distributed in respect of, or in exchange for, any or all of the Pledged Securities:
 
(i)   All goods, including, without limitation, (A) all machinery, equipment, computers, motor vehicles, trucks, tanks, boats, ships, appliances, furniture, special and general tools, fixtures, test and quality control devices and other equipment of every kind and nature and wherever situated, together with all documents of title and documents representing the same, all additions and accessions thereto, replacements therefore, all parts therefore, and all substitutes for any of the foregoing and all other items used and useful in connection with such Debtor’s businesses and all improvements thereto; and (B) all inventory;
 
(ii)   All contract rights and other general intangibles, including, without limitation, all partnership interests, membership interests, stock or other securities, rights under any of the Organizational Documents of such Debtor, agreements related to the Pledged Securities, licenses, distribution and other agreements, computer software (whether “off-the-shelf”, licensed from any third party or developed by such Debtor), computer software development rights, leases, franchises, customer lists, quality control procedures, grants and rights, goodwill, trademarks, service marks, trade styles, trade names, patents, patent applications, copyrights, Intellectual Property and income tax refunds;
 
(iii)   All accounts, together with all instruments, all documents of title representing any of the foregoing, all rights in any merchandising, goods, equipment, motor vehicles and trucks which any of the same may represent, and all right, title, security and guaranties with respect to each account, including any right of stoppage in transit;
 
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(iv)   All documents, letter-of-credit rights, instruments and chattel paper;
 
(v)   All commercial tort claims;
 
(vi)   All deposit accounts and all cash (whether or not deposited in such deposit accounts);
 
(vii)   All investment property;
 
(viii)   All supporting obligations;
 
(ix)   All files, records, books of account, business papers, and computer programs; and
 
(x)   All products and proceeds of all of the foregoing Collateral set forth in clauses (i)-(ix) above.
 
Notwithstanding anything to the contrary contained above in this definition of “Collateral”, the term “Collateral” shall not include any Excluded Property
 
Company ” has the meaning set forth in the introductory paragraph hereto.
 
Collateral Agent Parties ” has the meaning set forth in Section 15.3 .
 
Excluded Property ” means:
 
(a)   all rights, title and interest of each Debtor in, to and under any of the agreements identified in Schedule I hereto; and
 
(b)   any Equity Interests of a Foreign Subsidiary; provided that this clause (b) shall not apply to voting stock of any Foreign Subsidiary representing 65% of the total voting power of all outstanding voting stock of such Foreign Subsidiary;
 
provided , however , that Excluded Property shall not include any Proceeds, substitutions or replacements of any Excluded Property referred to in clause (a) or (b) (unless such Proceeds, substitutions or replacements would constitute Excluded Property referred to in clause (a) or (b)).
 
Foreign Subsidiary ” of any Person , shall mean any Subsidiary of such Person that is not organized or incorporated in the United States of America or any state, the District of Columbia or any territory thereof.
 
Indemnitees ” has the meaning set forth in Section 16 .
 
Intellectual Property ” means, with respect to each Debtor, the collective reference to all existing rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, (i) all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof, and all applications in connection therewith; (ii) all letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof, and all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof; (iii) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade dress, service marks, logos, domain names and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state thereof or any other country or any political subdivision thereof, or otherwise, and all common law rights related thereto; (iv) all trade secrets arising under the laws of the United States, any other country or any political subdivision thereof; (v) all rights to obtain any reissues, renewals or extensions of the foregoing; (vi) all licenses for any of the foregoing, and (vii) all causes of action for infringement of the foregoing.
 
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Original Security Agreement” has the meaning set forth in the Recitals hereto.
 
Pledged Securities ” means, with respect to each Debtor, all investment property and general intangibles respecting ownership and/or other equity interests in each Subsidiary of such Debtor, including, without limitation, the shares of capital stock and the other equity interests in any Person, and any other shares of capital stock and/or other equity interests of any other Subsidiary of any Debtor obtained in the future, in each case, all certificates representing such shares and/or equity interests and, in each case, all rights, options, warrants, stock, other securities and/or equity interests that may hereafter be received, receivable or distributed in respect of, or exchanged for, any of the foregoing, and all rights arising under or in connection with the foregoing, including, but not limited to, all dividends, interest and cash.
 
 “ Securities Purchase Agreement” has the meaning set forth in the Recitals.
 
“Security Interest” has the meaning set forth in Section 2 .
 
UCC ” means the Uniform Commercial Code as in effect from time to time in the State of New York; provided , however , that, at any time, if by reason of mandatory provisions of law, any or all of the perfection or priority of the Collateral Agent’s security interest in any item or portion of the Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term “ UCC ” shall mean the Uniform Commercial Code as in effect, at such time, in such other jurisdiction for purposes of the provisions hereof relating to such perfection or priority and for purposes of definitions relating to such provisions.
 
(c)   Terms Defined in the Securities Purchase Agreement .  Any capitalized term used but not defined herein has the meaning specified in the Securities Purchase Agreement.
 
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(d)   Usage .  Section 1.2 of the Securities Purchase Agreement shall apply herein, and is incorporated herein by reference, mutatis mutandis , as if a part hereof.
 
2.  
GRANT OF SECURITY INTEREST.
 
As an inducement for the Secured Parties to enter into the transactions contemplated by the Securities Purchase Agreement and to secure the complete and timely payment, performance and discharge in full, as the case may be, of all of the Obligations, each Debtor hereby unconditionally and (subject to Section 12 ) irrevocably pledges, grants and hypothecates to the Collateral Agent, for the benefit of each Secured Party pari passu with each of the other Secured Parties, a continuing security interest in and to, a lien upon and a right of set off against all of its respective right, title and interest of whatsoever kind and nature in and to, the Collateral (the “ Security Interest ”).
 
Notwithstanding the foregoing, nothing herein shall be deemed to constitute a pledge, grant, hypothecation or assignment of any asset which, in the event of a pledge, grant, hypothecation or assignment, becomes void by operation of applicable law or a pledge, grant, hypothecation or assignment of which is otherwise prohibited by applicable law (in each case to the extent that such applicable law is not overridden by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable law); provided , however , that to the extent permitted by applicable law, this Agreement shall create a valid security interest in such asset and, to the extent permitted by applicable law, this Agreement shall create a valid security interest in the proceeds of such asset.
 
3.  
DELIVERY OF CERTAIN COLLATERAL.
 
Subject to Section 17.11 , each Debtor shall deliver or cause to be delivered to the Collateral Agent, for the benefit of the Secured Parties (a) any and all certificates and other instruments representing or evidencing the Pledged Securities; and (b) any and all certificates and other instruments or documents representing any of the other Collateral, in each case, together with all necessary endorsements.  The Debtors are, contemporaneously with the execution hereof, delivering to the Collateral Agent a true and correct copy of each Organizational Document governing of each Debtor and their respective Subsidiaries.
 
4.  
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE DEBTORS.
 
A.   Each Debtor represents and warrants to, and covenants and agrees with, the Collateral Agent, for the benefit of the Secured Parties, as follows:
 
4.1.   Debtor Information .  As of the Effective Date, all of the information set forth on Schedule II   is true, correct and complete in all respects.  No Debtor shall change its name, type of organization, jurisdiction of organization, organizational identification number (if it has one), legal or corporate structure, or identity, or add any new fictitious name unless it provides at least thirty (30) days’ prior written notice to the Collateral Agent of such change and, at the time of such written notification, such Debtor provides any financing statements necessary to perfect and continue perfected the perfected Security Interest granted and evidenced by this Agreement.
 
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4.2.   Validity, Perfection and Maintenance of Security Interests .
 
(a)   This Agreement creates in favor of the Collateral Agent for the benefit of the Secured Parties a valid security interest in the Collateral, securing the payment and performance of the Obligations.  Upon filing of UCC-1 financing statements with the secretary of state’s office of the state in which such Debtor is organized, and payment of the applicable filing fees, all security interests created hereunder in any Collateral owned by such Debtor which may be perfected by filing UCC-1 financing statements shall have been duly perfected.
 
(b)   Each Debtor hereby authorizes the Secured Parties, or any of them, to file UCC financing statements and any other financing statements or other similar filings under the UCC with respect to the Security Interest with the proper filing and recording agencies in any jurisdiction deemed proper by them.  The Debtors shall, at the Debtors’ sole cost and expense, promptly execute and/or deliver to the Collateral Agent such further deeds, mortgages, assignments, security agreements, financing statements or other instruments, documents, certificates and assurances and take such further action as the Collateral Agent may from time to time reasonably request and may in its reasonable discretion deem necessary to perfect, protect or enforce its security interest in the Collateral including, without limitation, if applicable, the execution and delivery of a separate security agreement and assignment with respect to the Debtors’ Intellectual Property in which the Collateral Agent for the benefit of the Secured Parties have been granted a security interest hereunder, substantially in a form reasonably acceptable to the Collateral Agent.
 
(c)   The Debtors shall at all times maintain the Security Interest provided for hereunder as valid and perfected security interests in the Collateral in favor of the Collateral Agent for the benefit of the Secured Parties until this Agreement and the Security Interest hereunder shall be terminated pursuant to Section 12 .  The Debtors hereby agree to defend the same against the claims of any and all Persons.  The Debtors shall obtain and furnish to the Secured Parties from time to time, upon reasonable demand, such releases and/or subordinations of claims and Liens which may be required to maintain the priority of the Security Interest hereunder.
 
4.3.   Collateral .
 
(a)   Each Debtor is the sole owner of the Collateral owned by it (except for non-exclusive licenses granted by any Debtor in the ordinary course of business), free and clear of any Liens (other than Permitted Liens), and is fully authorized to grant the Security Interest.
 
(b)   The Debtors shall keep and preserve their equipment, inventory and other tangible Collateral in good condition, repair and order, ordinary wear and tear excepted, and except where failure to do so, individually or in the aggregate, does not and could not reasonably be expected to result in a Material Adverse Effect.  Each Debtor shall take all steps reasonably necessary to diligently pursue and seek to preserve, enforce and collect any rights, claims, causes of action and accounts receivable in respect of the Collateral consistent with past practices.
 
(c)   The Debtors shall not operate or locate any such Collateral (or cause to be operated or located) in any area excluded from insurance coverage.
 
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(d)   The Debtors shall not transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose of any of the Collateral except as otherwise permitted or required under the Securities Purchase Agreement or any other Transaction Document.
 
(e)   So long as this Agreement shall be in effect, the Debtors shall not execute and shall not knowingly permit to be on file in any applicable governmental filing or recording office or agency any UCC financing statement or other similar document or instrument (except (i) to the extent filed or recorded in favor of the Collateral Agent for the benefit of the Secured Parties pursuant to the terms of this Agreement, (ii) to the extent filed or recorded in favor of the Senior Agent or any Senior Lenders pursuant to or in connection with the Senior Loan Documents, and (iii) filed in respect of any Permitted Liens).
 
(f)   As of the Effective Date, the capital stock and other equity interests listed on Schedule III represent all of the capital stock and other equity interests of the Company Subsidiaries, and represent all capital stock and other equity interests owned, directly or indirectly, by the applicable Debtor.  All of the Pledged Securities are validly issued, fully paid and nonassessable, and each Debtor is the legal and beneficial owner of the Pledged Securities owned by it, free and clear of any Lien except for Permitted Liens.  The ownership and other equity interests in partnerships and limited liability companies (if any) included in the Pledged Securities by their express terms do not provide that they are securities governed by Article 8 of the UCC and are not held in a securities account or by any financial intermediary.  Each Debtor shall vote the Pledged Securities owned by it to comply with the applicable covenants and agreements set forth herein and the other Transaction Documents applicable to it.
 
(g)   Such Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the Secured Parties promptly, in sufficient detail, of any substantial and material change in the Collateral, and of the occurrence of any event which would have a material adverse effect on the value of the Collateral or on the Collateral Agent’s Security Interest therein.  Upon not less than five (5) Business Days’ prior notice, each Debtor shall permit the Secured Parties and their representatives and agents to inspect the Collateral at any time during normal business hours, and to make copies of records pertaining to the Collateral as may be requested by a Secured Party from time to time, all at the expense of the Collateral Agent and the Secured Parties.
 
4.4.   Insurance .
 
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(a)   The assets and properties of each Debtor at all times shall be maintained in accordance with the requirements of all insurance carriers which provide insurance with respect to the assets and properties of such Debtor so that such insurance shall remain in full force and effect.  Each Debtor shall bear the full risk of any loss of any nature whatsoever with respect to the Collateral.  At each Borrower’s own cost and expense in amounts and with carriers reasonably acceptable to the Collateral Agent, each Debtor shall (a) keep all its insurable properties and properties in which such Debtor has an interest insured against the hazards of fire, flood, sprinkler leakage, those hazards covered by extended coverage insurance and such other hazards, and maintain business interruption insurance, and for such amounts, in each case as is customary maintained by companies engaged in businesses similar to such Debtor’s operating in the same or similar locations including business interruption insurance; (b) maintain a bond in such amounts as is customary in the case of companies engaged in businesses similar to such Debtor insuring against larceny, embezzlement or other criminal misappropriation of insured’s officers and employees who may either singly or jointly with others at any time have access to the assets or funds of such Debtor either directly or through authority to draw upon such funds or to direct generally the disposition of such assets, as is customarily maintained by companies engaged in businesses similar to the Debtors operating in the same or similar locations including business interruption insurance; (c) maintain public and product liability insurance against claims for personal injury, death or property damage suffered by others, as is customarily maintained by companies engaged in businesses similar to the Debtors operating in the same or similar locations including business interruption insurance; (d) maintain all such worker’s compensation or similar insurance as may be required under the laws of any state or jurisdiction in which such Debtor is engaged in business, as is customarily maintained by companies engaged in businesses similar to Debtor s operating in the same or similar locations including business interruption insurance; (e) furnish the Collateral Agent with (i) copies of all policies and evidence of the maintenance of such policies by the renewal thereof at least thirty (30) days before any expiration date, and (ii) appropriate loss payable endorsements in form and substance reasonably satisfactory to the Collateral Agent, naming the Collateral Agent as an additional insured, mortgagee and lender loss payee as its interests may appear with respect to all insurance coverage referred to in clauses (a) and (c) above, and providing (A) that all proceeds thereunder shall be payable to the Collateral Agent, (B) no such insurance shall be affected by any act or neglect of the insured or owner of the property described in such policy, and (C) that such policy and loss payable clauses may not be cancelled, amended or terminated unless at least thirty (30) days’ prior written notice is given to the Collateral Agent.  In the event of any loss thereunder, the carriers named therein hereby are directed by the Collateral Agent and the applicable Debtor to make payment for such loss to the Collateral Agent and not to such Debtor and the Collateral Agent jointly.  If any insurance losses are paid by check, draft or other instrument payable to any Debtor and the Collateral Agent jointly, the Collateral Agent may endorse such Debtor’s name thereon and do such other things as the Collateral Agent may deem advisable to reduce the same to cash.  All loss recoveries received by the Collateral Agent upon any such insurance may be applied to the Obligations, in such order as the Collateral Agent in its sole discretion shall determine.  Any surplus shall be paid by the Collateral Agent to the Debtors or applied as may be otherwise required by law.  Any deficiency thereon shall be paid by the Debtors to the Collateral Agent, on demand.
 
(b)   Anything hereinabove in Section 4.4(a) to the contrary notwithstanding and subject to the fulfillment of the conditions set forth below, the Collateral Agent shall remit to the Company insurance proceeds received by the Collateral Agent during any calendar year under insurance policies procured and maintained by the Debtors which insure the Debtors’ insurable properties to the extent such insurance proceeds do not exceed $250,000 in the aggregate during such calendar year or $100,000 per occurrence.  In the event the amount of insurance proceeds received by the Collateral Agent for any occurrence exceeds $100,000, then the Collateral Agent shall not be obligated to remit the insurance proceeds to the Company unless the Company shall provide the Collateral Agent with evidence reasonably satisfactory to the Collateral Agent that the insurance proceeds will be used by the Debtors to repair, replace or restore the insured property which was the subject of the insurable loss.  In the event the Debtors has previously received (or, after giving effect to any remittance by the Collateral Agent to Borrowing Agent would receive) insurance proceeds which equal or exceed $250,000 in the aggregate during the calendar year in question, then the Collateral Agent may, in its sole discretion, either remit the insurance proceeds to Borrowing Agent upon Borrowing Agent providing the Collateral Agent with evidence reasonably satisfactory to the Collateral Agent that the insurance proceeds will be used by the Debtors to repair, replace or restore the insured property which was the subject of the insurable loss, or apply the proceeds to the Obligations, as aforesaid.  The agreement of the Collateral Agent to remit insurance proceeds in the manner above provided shall be subject in each instance to satisfaction of each of the following conditions: (x) no Event of Default shall then have occurred, and (y) the Debtors shall use such insurance proceeds to repair, replace or restore the insurable property which was the subject of the insurable loss and for no other purpose.
 
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(c)   The parties hereto agree and acknowledge that all of Section 4.4(b) shall only apply at any time after the Senior Discharge Date.
 
4.5.   Additional Debtors .  From time to time subsequent to the date hereof, pursuant to Section 5.3(h) of the Securities Purchase Agreement, each Subsidiary of the Company may become a party hereto as an additional Debtor (each, an “ Additional Debtor ,” and collectively, the “ Additional Debtors ”), by executing a joinder agreement substantially in the form of Exhibit A attached hereto (each, a “ Joinder Agreement ”).  Upon delivery of a Joinder Agreement to the Collateral Agent, notice of which is hereby waived by the Debtors, each Additional Debtor shall be a Debtor hereunder and shall be as fully a party hereto as if such Additional Debtor were an original signatory hereto.
 
4.6.   Existence .  Such Debtor will do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, qualifications, franchises, governmental authorizations, licenses and permits material to the conduct of its business, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where the failure to do so, individually or in the aggregate, does not, and could not reasonably be expected to result in a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under the Securities Purchase Agreement.
 
B.           Each Debtor represents and warrants to the Collateral Agent, for the benefit of the Secured Parties, as follows
 
4.7.   Good Standing; Due Authorization, Enforceability .
 
(a)   Such Debtor is duly organized, validly existing and in good standing in the jurisdiction of its formation and has the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Such Debtor is duly qualified to do business and is in good standing as a foreign corporation or limited liability company in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, have a Material Adverse Effect.
 
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(b)   Such Debtor has the requisite corporate, partnership, limited liability company or other power and authority to enter into and consummate the transactions required to be consummated by it as contemplated by this Agreement, and otherwise to carry out its obligations hereunder.  The execution, delivery and performance by such Debtor of this Agreement and the consummation by it of the transactions required to be consummated by it as contemplated hereby have been duly authorized by all necessary organizational action on the part of such Debtor and no further action, consent or authorization of such Debtor, or its board of directors (or Persons performing similar functions), shareholders or members, or to its knowledge, any Governmental Authority, or by any other Person or entity is required in connection therewith, except (i) such as have been obtained or made and are in full force and effect and (ii) filings and registrations and entering into of control agreements necessary to perfect the Liens created hereunder.
 
(c)   This Agreement has been duly executed and delivered by such Debtor.  This Agreement constitutes a legal, valid and binding obligation of such Debtor, enforceable against such Debtor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and similar laws of general application relating to or affecting the rights and remedies of creditors and by general principles of equity.
 
4.8.   Approvals .  The execution and delivery by such Debtor of this Agreement and each other Transaction Documents to which it is a party, and the performance by such Guarantor of its obligations hereunder and thereunder do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority or any other Person, except (i) such as have been obtained or made and are in full force and effect and (ii) filings and registrations and the entering into of control agreements necessary to perfect the Liens created under the applicable Transaction Documents.
 
4.9.   No Conflicts .  The execution, delivery and performance of this Agreement by such Debtor and the performance by such Debtor of its obligations hereunder do not and will not: (i) violate or conflict with any of the provisions of any Organizational Documents of such Debtor; (ii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree, award, or other restriction of any court, governmental body or arbitrator or any law, rule or regulation applicable to or binding upon such Debtor (including Federal and state securities laws and regulations), or to which such Debtor or any of such Debtor’s property is subject, except to the extent such violation does not, or would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect; or (iii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, adverse amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, indenture, credit facility, debt instrument or other instrument to which such Debtor is a party or by which any property or asset of such Debtor is bound or affected, except to the extent such conflict, default or termination does not, or would not reasonably be expected, individually or in the aggregate, result in a Material Adverse Effect.
 
4.10.   Disclosure .  The representations, warranties and written statements made by the Debtors contained in this Agreement and the other Transaction Documents and in the certificates, exhibits and schedules delivered by the Debtors to the Secured Parties pursuant to this Agreement and the other Transaction Documents, taken as a whole, do not contain, when furnished, any untrue statement of a material fact, and do not, when taken as a whole, omit to state a material fact required to be stated therein or necessary in order to make such representations, warranties or statements not misleading in light of the circumstances under which they were made; and, to the extent that any such information constitutes projections, budgets, estimates or other forward looking statements, such projections, budgets, estimates or other forward looking statements were prepared in good faith on the basis of assumptions believed by the Company to be reasonable at the time such projections, budgets, estimates or other forward looking statements were furnished (it being understood that projections, budgets, estimates or other forward looking statements by their nature are inherently uncertain, that no assurances can be given that projections, budgets, estimates or other forward looking statements will be realized, and that actual results in fact may differ materially from any projections, budgets, estimates or other forward looking statements provided to the Secured Parties).
 
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5.  
DUTY TO HOLD IN TRUST.
 
5.1.   Cash and Payment Obligations .  Upon the occurrence and during the continuation of an Event of Default, if requested to do so by the Collateral Agent in writing, each Debtor shall, upon receipt of any revenue, income, dividend, interest or other sums subject to the Security Interest, whether payable pursuant to any Note or otherwise, or of any check, draft, note, trade acceptance or other instrument evidencing an obligation to pay any such sum, hold the same in trust for and on behalf of and for the benefit of the Secured Parties, and shall forthwith endorse and transfer any such sums or instruments, or both (to the extent permitted by law), to the Collateral Agent for distribution to the Secured Parties on a pro rata basis for application to the satisfaction of the Obligations.
 
5.2.   Securities and Other Assets .  If a Debtor shall become entitled to receive or shall receive any securities,  certificates or instruments (including, without limitation, shares of Pledged Securities or instruments representing Pledged Securities acquired after the date hereof, or any options, warrants, or other similar property or certificates representing a dividend or any distribution in connection with any recapitalization, reclassification or increase or reduction of capital, or issued in connection with any reorganization of any of its Subsidiaries) in respect of the Pledged Securities (whether as an addition to, in substitution of, or in exchange for, such Pledged Securities or otherwise), such Debtor agrees to (i) accept the same as the agent of the Secured Parties; (ii) hold the same in trust on behalf of and for the benefit of the Secured Parties; and (iii) deliver any and all certificates or instruments evidencing the same to the Collateral Agent, for the benefit of the Secured Parties, on or before the close of business on the fifth (5th) Business Day following the receipt thereof by such Debtor, in the exact form received together with all requisite necessary endorsements, to be held by the Collateral Agent subject to the terms of this Agreement as Collateral.
 
6.  
RIGHTS AND REMEDIES UPON DEFAULT.
 
6.1.   Scope of Rights and Remedies .  Upon the occurrence and during the continuation of any Event of Default, the Collateral Agent, for the benefit of the Secured Parties, acting through any agent appointed by it for such purpose, shall have the right to exercise all of the remedies conferred hereunder and under the other Transaction Documents, and the Collateral Agent, for the benefit of the Secured Parties, shall have all the rights and remedies of a secured party under the UCC.  Without limiting any of the foregoing, upon the occurrence and during the continuance of any Event of Default, the Collateral Agent shall have the following rights and powers:
 
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(a)   The Collateral Agent shall have the right to take possession of the Collateral and, for that purpose, enter, with the aid and assistance of any Person, any premises where the Collateral, or any part thereof, is or may be placed and remove the same, and the Debtors shall assemble the Collateral and make it available to the Collateral Agent at places which the Collateral Agent shall reasonably select, whether at the Debtors’ premises or elsewhere, and make available to the Collateral Agent, without rent, all of the Debtors’ premises and facilities for the purpose of the Collateral Agent taking possession of, removing or putting the Collateral in saleable or disposable form.
 
(b)   Upon reasonable notice to the Debtors by the Collateral Agent, all rights of the Debtors to exercise the voting and other consensual rights which it would otherwise be entitled to exercise and all rights of the Debtors to receive the dividends and interest which it would otherwise be authorized to receive and retain, shall cease.  Upon such reasonable notice, the Collateral Agent shall have the right to receive any interest, cash dividends or other payments on the Collateral and, at the option of the Collateral Agent, to exercise in the Collateral Agent’s discretion all voting rights pertaining thereto.  Without limiting the generality of the foregoing, the Collateral Agent shall have the right (but not the obligation) to exercise all rights with respect to the Collateral as if it were the sole and absolute owner thereof, including, without limitation, to vote and/or to exchange, at its sole discretion, any or all of the Collateral in connection with a merger, reorganization, consolidation, recapitalization or other readjustment concerning or involving the Collateral or a Debtor or any of its Subsidiaries.
 
(c)   The Collateral Agent shall have the right to operate the business of the Debtors using the Collateral and shall have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the Collateral, at public or private sale or otherwise, either with or without special conditions or stipulations, for cash or on credit or for future delivery, in such parcel or parcels and at such time or times and at such place or places, and upon such terms and conditions as the Collateral Agent may deem commercially reasonable, all without (except as shall be required by applicable statute and cannot be waived) advertisement or demand upon or notice to the Debtors or right of redemption of the Debtors, which are hereby expressly waived.  Upon each such sale, lease, assignment or other transfer of Collateral, the Collateral Agent may, unless prohibited by applicable law which cannot be waived, purchase all or any part of the Collateral being sold, free from and discharged of all trusts, claims, right of redemption and equities of any Debtor, which are hereby waived and released.
 
(d)   The Collateral Agent shall have the right (but not the obligation) to notify any account debtors and any obligors under instruments or accounts to make payments directly to the Collateral Agent and to enforce the Debtors’ rights against such account debtors and obligors.
 
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(e)   The Collateral Agent may (but is not obligated to) direct any financial intermediary or any other Person holding any investment property to transfer the same to the Collateral Agent or its designee.
 
(f)   The Collateral Agent may (but is not obligated to) transfer any or all Intellectual Property registered in the name of any Debtor at the United States Patent and Trademark Office and/or Copyright Office into the name of the Collateral Agent or any designee or any purchaser of any Collateral.
 
6.2.   Disposition of Collateral .  The Collateral Agent may comply with any applicable law in connection with a disposition of Collateral and such compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.  The Collateral Agent may sell the Collateral without giving any warranties and may specifically disclaim such warranties.  If the Collateral Agent sells any of the Collateral on credit, the Debtors will only be credited with payments actually made by the purchaser.  In addition, each Debtor waives any and all rights that it may have to a judicial hearing in advance of the enforcement of any of the Collateral Agent’s rights and remedies hereunder, including, without limitation, its right following and during the continuation of an Event of Default to take immediate possession of the Collateral and to exercise its rights and remedies with respect thereto.
 
6.3.   License to Use Intellectual Property .  For the purpose of enabling the Collateral Agent to further exercise rights and remedies under this Section 6 or elsewhere provided by agreement or applicable law, each Debtor hereby grants to the Collateral Agent an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to such Debtor) to use, license or sublicense following and during the continuation of  an Event of Default, any Intellectual Property now owned or hereafter acquired by such Debtor, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof.
 
7.  
APPLICATIONS OF PROCEEDS.
 
The proceeds of any such sale, lease or other disposition of the Collateral resulting from the exercise of rights and remedies pursuant to Section 6 shall be applied first , to the expenses of retaking, holding, storing, processing and preparing for sale, selling and the like (including, without limitation, any taxes, fees and other costs incurred in connection therewith) of the Collateral, to the reasonable attorneys’ fees and expenses incurred by the Collateral Agent and Secured Parties in enforcing their rights hereunder and in connection with collecting, storing and disposing of the Collateral, and then to satisfaction of the Obligations pro rata among the Secured Parties, and to the payment of any other amounts required by applicable law, after which the Secured Parties shall pay to the Debtors any surplus proceeds.  If, upon the sale, license or other disposition of the Collateral, the proceeds thereof are insufficient to pay all amounts to which the Secured Parties are legally entitled, the Debtors will be liable for the deficiency, together with interest thereon, at an interest rate equal to the Default Interest Rate, and the reasonable fees of any attorneys employed by the Collateral Agent and the Secured Parties to collect such deficiency.  To the extent permitted by applicable law, each Debtor waives all claims, damages and demands against the Collateral Agent and the Secured Parties arising out of the repossession, removal, retention or sale of the Collateral, unless due solely to the gross negligence or willful misconduct of the Collateral Agent or the Secured Parties as determined by a final judgment (not subject to further appeal) of a court of competent jurisdiction.
 
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8.  
SECURITIES LAW PROVISION.
 
Each Debtor recognizes that the Collateral Agent may be limited in its ability to effect a sale to the public of all or part of the Pledged Securities by reason of certain prohibitions in the Securities Act or other federal or state securities laws (collectively, the “ Securities Laws ”), and may be compelled to resort to one or more sales to a restricted group of purchasers who may be required to agree to acquire the Pledged Securities for their own account, for investment and not with a view to the distribution or resale thereof.  Each Debtor agrees that sales so made may be at prices and on terms less favorable than if the Pledged Securities were sold to the public, and that the Secured Parties have no obligation to delay the sale of any Pledged Securities for the period of time necessary to register the Pledged Securities for sale to the public under the Securities Laws.  Each Debtor shall cooperate with the Collateral Agent in its attempt to satisfy any requirements under the Securities Laws (including, without limitation, registration thereunder if requested by the Collateral Agent) applicable to the sale of the Pledged Securities by the Collateral Agent at any time after the occurrence and during the continuance of an Event of Default.
 
9.  
COSTS AND EXPENSES.
 
Each Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses incurred in connection with any filing required hereunder, including, without limitation, any financing statements pursuant to the UCC, continuation statements, partial releases and/or termination statements related thereto or any expenses of any searches reasonably required by the Secured Parties.  The Debtors will also, upon demand, pay to the Collateral Agent, for the benefit of the Secured Parties, the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which the Collateral Agent may incur in connection with (i) the enforcement of this Agreement or any other Transaction Document; or (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral.  Until so paid, any fees payable hereunder shall be added to the amount payable under the Notes and shall bear interest at the Default Interest Rate.  The Debtors shall also pay all other claims and charges which might prejudice, imperil or otherwise affect the Collateral or the Security Interest therein, except for claims and/or charges that are being contested in food faith or with respect to which the failure to make payment does not have a Material Adverse Effect.
 
10.  
RESPONSIBILITY FOR COLLATERAL.
 
The Debtors assume all liabilities and responsibility in connection with all Collateral, and the Obligations shall in no way be affected or diminished by reason of the loss, destruction, damage or theft of any of the Collateral or its unavailability for any reason.  The Collateral Agent agrees to act in accordance with commercially reasonable standards and the UCC.  Without limiting the generality of the foregoing, (a) no Secured Party (i) has any duty (either before or after an Event of Default) to collect any amounts in respect of the Collateral or to preserve any rights relating to the Collateral, or (ii) has any obligation to clean-up or otherwise prepare the Collateral for sale; and (b) each Debtor shall remain obligated and liable under each contract or agreement included in the Collateral to be observed or performed by such Debtor thereunder. No Secured Party shall have any obligation or liability under any such contract or agreement by reason of or arising out of this Agreement or the receipt by any Secured Party of any payment relating to any of the Collateral, nor shall any Secured Party be obligated in any manner to perform any of the obligations of any Debtor under or pursuant to any such contract or agreement, to make inquiry as to the nature or sufficiency of any payment received by any Secured Party in respect of the Collateral or as to the sufficiency of any performance by any party under any such contract or agreement, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to any Secured Party or to which it may be entitled at any time or times.
 
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11.  
SECURITY INTEREST ABSOLUTE.
 
All rights of the Secured Parties and all obligations of the Debtors hereunder, shall be absolute and unconditional, irrespective of: (a) any lack of validity or enforceability of any of the Transaction Documents; (b) any change in the time, manner or place of payment or performance of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of any of the Transaction Documents (other than any agreement signed by the Collateral Agent for the benefit of the Secured Parties specifically releasing such obligations); (c) any exchange, release or nonperfection of any of the Collateral, or any release or amendment or waiver of or consent to departure from any other collateral for, or any guaranty, or any other security, for all or any of the Obligations; (d) any action by any of the Secured Parties to obtain, adjust, settle and cancel in its sole discretion any insurance claims or matters made or arising in connection with the Collateral; or (e) any other circumstance which might otherwise constitute any legal or equitable defense available to a Debtor, or a discharge of all or any part of the Security Interest granted hereby (other than payment in full of the Obligations).  Until the Obligations shall have been paid and performed in full, the rights of the Secured Parties shall continue even if the Obligations are barred for any reason, including, without limitation, the running of the statute of limitations or bankruptcy.  Each Debtor expressly waives presentment, protest, notice of protest, demand, notice of nonpayment and demand for performance.  In the event that at any time any transfer of any Collateral or any payment received by the Collateral Agent for the benefit of any Secured Party hereunder shall be deemed by final order of a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under the bankruptcy or insolvency laws of the United States, or shall be deemed to be otherwise due to any party other than the Secured Parties, then, in any such event, each Debtor’s obligations hereunder shall survive cancellation of this Agreement, and shall not be discharged or satisfied by any prior payment thereof and/or cancellation of this Agreement, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof.  Each Debtor waives all right to require any Secured Party to proceed against any other Person or to apply any Collateral which the Collateral Agent or any Secured Parties may hold at any time, or to marshal assets, or to pursue any other remedy.  Each Debtor waives any defense arising by reason of the application of the statute of limitations to any obligation secured hereby.
 
12.  
TERM OF AGREEMENT.
 
This Agreement and the Security Interest shall terminate on the date on which all Obligations have been indefeasibly paid or satisfied in full; provided , however , that all indemnities of the Debtors contained in Section 16 shall survive and remain operative and in full force and effect regardless of the termination of this Agreement.
 
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13.  
POWER OF ATTORNEY.
 
Each Debtor authorizes the Collateral Agent, and does hereby make, constitute and appoint the Collateral Agent and its officers, agents, successors or assigns with full power of substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in the name of the Collateral Agent or such Debtor, to, after the occurrence and during the continuance of an Event of Default, (i) endorse any note, checks, drafts, money orders or other instruments of payment (including payments payable under or in respect of any policy of insurance) in respect of the Collateral that may come into possession of the Secured Parties; (ii) sign and endorse any financing statement pursuant to the UCC or any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with accounts, and other documents relating to the Collateral; (iii) pay or discharge taxes, Liens (other than Permitted Liens), or other encumbrances at any time levied or placed on or threatened against the Collateral; (iv) demand, collect, receipt for, compromise, settle and sue for monies due in respect of the Collateral; (v) transfer any Intellectual Property or provide licenses respecting any Intellectual Property; and (vi) generally, at the option of the Collateral Agent, and at the expense of the Debtors, at any time, or from time to time, execute and deliver any and all documents and instruments and do all acts and things which the Collateral Agent deems necessary to protect, preserve and realize upon the Collateral and the Security Interest granted therein in order to effect the intent of this Agreement and the other Transaction Documents all as fully and effectually as the Debtors might or could do.  Each Debtor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue of the foregoing sentence.  This power of attorney is coupled with an interest and shall be irrevocable for the term of this Agreement and thereafter as long as any of the Obligations shall be outstanding.  Without limiting the generality of the foregoing, after the occurrence and during the continuance of an Event of Default, the Collateral Agent is specifically authorized to execute and file any applications for or instruments of transfer and assignment of any patents, trademarks, copyrights or other Intellectual Property with the United States Patent and Trademark Office and the United States Copyright Office. This power of attorney is coupled with an interest and shall be irrevocable for the term of this Agreement and thereafter as long as any of the Obligations shall remain unpaid in full.
 
14.  
OTHER SECURITY.
 
To the extent that the Obligations are now or hereafter secured by property of Debtor other than the Collateral or by the guarantee, endorsement or property of any other Person (other than any Loan Party), then the Collateral Agent shall have the right, in its sole discretion, to pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any way modifying or affecting any of the Secured Parties’ rights and remedies hereunder. Notwithstanding the foregoing in this Section 14 to the contrary, in no event shall the Collateral Agent or any Secured Party be entitled to a mortgage or deed of trust on any real or leasehold property of any Debtor.
 
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15.  
COLLATERAL AGENT.
 
15.1.   Appointment, Resignation and Removal .  The Secured Parties hereby appoint CD Financial, LLC, as  to act as the Collateral Agent for purposes of exercising any and all rights and remedies of the Secured Parties hereunder and under any other Transaction Document to which the Collateral Agent is a party. Any Person serving as the Collateral Agent may resign as Collateral Agent hereunder and thereunder at any time by giving written notice thereof to each Holder and the Debtors, and such resignation shall become effective upon the effectiveness of the appointment of a successor agent in accordance with Section 15.2 .  Any Person serving as Collateral Agent may be removed at any time or from time to time by the affirmative vote of the Holders holding a majority of the outstanding principal of the Notes, and such removal shall become effective upon the effectiveness of the appointment of a successor agent in accordance with Section 15.2 .
 
15.2.   Successor Agent .  Upon the resignation or removal of a Collateral Agent, a successor agent may (or, in the case of removal, shall) be appointed by the Holders holding a majority of the outstanding principal of the Notes, and such appointment shall become effective upon (x) such successor agent accepting such appointment in writing and (y) the Debtors reasonably approving such appointment (which approval shall not be unreasonably withheld or delayed).  If no successor agent shall have been so appointed by the Holders within thirty (30) days after receipt of a resignation notice from the Collateral Agent, then the Collateral Agent shall have the right to appoint a successor agent in its sole and absolute discretion, and any successor agent to be so appointed must be approved by the Debtors (which approval shall not be unreasonably withheld or delayed), and such successor agent shall commence serving as the Collateral Agent hereunder and under any other Transaction Document to which the Collateral Agent is a party,  upon (x) such successor agent’s acceptance of such appointment in writing and (y) the Debtors’ approval.
 
15.3.   Exculpation; Limitation and Delegation of Duties .  Neither the Collateral Agent nor any of its directors, officers, partners, agents, representatives, advisors or employees (collectively, the “ Collateral Agent Parties ”) shall be liable to any Holder for any action taken or omitted to be taken by any of them hereunder and under any other Transaction Document to which the Collateral Agent is a party, except for their own gross negligence or willful misconduct.  None of Collateral Agent Parties shall be responsible for, or have any duty to ascertain the veracity, performance or satisfaction of, any representation, warranty, covenant, agreement or condition made or contained in this Agreement or any other Transaction Document.  The Collateral Agent may undertake any of its duties as Collateral Agent hereunder and under any other Transaction Document to which the Collateral Agent is a party by or through employees, agents and attorneys-in-fact and shall not be liable to any Holder for the negligence or misconduct of any such agents or attorneys-in-fact selected in good faith by the Collateral Agent.
 
15.4.   Indemnification by Holders .  The Holders hereby indemnify each of the Collateral Agent Parties for any losses, obligations, damages, penalties, actions, judgments, suits, costs, expenses, disbursements and other liabilities of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Collateral Agent in any way relating to or arising out of the Collateral Agent’s performance of its obligations under this Agreement or under any other Transaction Document to which the Collateral Agent is a party, except for (i) those costs that are actually reimbursed by the Debtors under this Agreement or any other applicable Transaction Document; and (ii) liabilities directly attributable to the gross negligence or willful misconduct of any Collateral Agent Party.  The payment of any indemnification obligation hereunder shall be made by each Holder on a pro rata basis, based on the principal amount of the Note(s) then owned by such Holder as compared to the aggregate principal amount of the Notes then outstanding.
 
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16.  
INDEMNIFICATION.
 
The Debtors shall jointly and severally indemnify, reimburse and hold harmless the  Secured Parties and their respective partners, members, shareholders, officers, directors, employees and agents (collectively, “ Indemnitees ”) from and against any and all losses, claims, liabilities, damages, penalties, suits, costs and expenses, of any kind or nature, (including fees relating to the cost of investigating and defending any of the foregoing) imposed on, incurred by or asserted against such Indemnitee in any way related to or arising from or alleged to arise from this Agreement or the Collateral, except any such losses, claims, liabilities, damages, penalties, suits, costs and expenses which result from the gross negligence or willful misconduct of such Indemnitee as determined by a final, nonappealable decision of a court of competent jurisdiction.  This indemnification provision is in addition to, and not in limitation of, any other indemnification provision in the other Transaction Documents.
 
17.  
MISCELLANEOUS.
 
17.1.   Severability .  In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided , however , that in such case the parties hereto shall negotiate in good faith to replace such provision with a new provision which is not illegal, unenforceable or void, as long as such new provision does not materially change the economic benefits of this Agreement to the parties hereto.
 
17.2.   Successors and Assigns .  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties hereto.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.  A Holder may assign its rights hereunder in connection with any private sale or transfer of its Note(s) in accordance with, and subject to the terms of, the Securities Purchase Agreement, as long as, as a condition precedent to such transfer, the transferee executes an acknowledgment agreeing to be bound by the applicable provisions of this Agreement, in which case the term “Secured Party” shall be deemed to refer to such transferee as though such transferee were an original signatory hereto. No Debtor may assign its rights or obligations under this Agreement.
 
17.3.   Injunctive Relief .  Each Debtor acknowledges and agrees that a breach by it of its obligations hereunder will cause irreparable harm to each Secured Party and that the remedy or remedies at law for any such breach will be inadequate and agrees, in the event of any such breach, in addition to all other available remedies, such Secured Party shall be entitled to an injunction restraining any breach and requiring immediate and specific performance of such obligations without the necessity of showing economic loss or the posting of any bond.
 
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17.4.   Governing Law; Jurisdiction .  This Agreement shall be governed by and construed under the laws of the State of New York applicable to contracts made and to be performed entirely within the State of New York.  Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in the City and County of New York for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby and hereby irrevocably waives, to the extent permitted by applicable law, and agrees, to the extent permitted by applicable law,  not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives, to the extent permitted by applicable law, personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.
 
17.5.   Counterparts .  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.  Any executed signature page delivered by facsimile or e-mail transmission shall be binding to the same extent as an original executed signature page, with regard to any agreement subject to the terms hereof or any amendment thereto.
 
17.6.   Headings .  The headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
 
17.7.   Notices .  Any notice, demand or request required or permitted to be given by any Debtor, Collateral Agent or a Holder pursuant to the terms of this Agreement shall be in writing and shall be deemed delivered (i) when delivered personally or by verifiable facsimile transmission, unless such delivery is made on a day that is not a Business Day, in which case such delivery will be deemed to be made on the next succeeding Business Day; (ii) on the next Business Day after timely delivery to an overnight courier; and (iii) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid), addressed as follows:
 
 
If to any Debtor:
   
 
Integrated BioPharma, Inc.
225 Long Avenue
Hillside, New Jersey 07205
Attn: Chief Executive Officer and Chief Financial Officer
Tel: 973-926-0816
Fax: 973-926-1735
   
 
With a copy (which shall not constitute notice) to:
   
 
Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
Attn: Eric A. Stabler, Esq.
Tel:  212-592-5982
Fax: 212-545-3317
   
 
If to the Collateral Agent or any Secured Party :
   
 
CD Financial, LLC
3299 NW Second Avenue
Boca Raton, Florida 33431
Attn:  William H. Milmoe, Manager
Tel:  561-278-1169
Fax:  561-278-6930
   
 
With a copy (which shall not constitute notice) to:
   
 
 
Muller & Lebensburger
7385 Galloway Road
Suite 200
Miami, Florida  33173
Attention:  Charles E. Muller II, Esq.
Tel. No.:  305-670-6770
Fax No.:  305-670-6769
 
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or as shall otherwise be designated by such party in writing to the other parties hereto in accordance with this Section 17.7 .
 
17.8.   Entire Agreement; Amendments .  This Agreement and the other Transaction Documents constitute the entire agreement between the parties hereto with regard to the subject matter hereof and thereof, superseding all prior agreements or understandings, whether written or oral, between or among the parties hereto.  No (i) amendment to this Agreement or (ii) waiver of any agreement or other obligation of a Debtor under this Agreement may be made or given except pursuant to a written instrument executed by the Debtors, the Collateral Agent and the Holders holding a majority of the outstanding principal of the Notes.  Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
 
17.9.   Acknowledgement and Reaffirmation; Amendment and Restatement .
 
(a)   Each Debtor hereby acknowledges and confirms that pursuant to the Original Security Agreement it granted to the Collateral Agent for the benefit of the Secured Parties (as defined in the Original Security Agreement) a lien on and security interest in the “Collateral” (as defined in the Original Security Agreement) to secure the “Obligations” (as defined in the Original Security Agreement) (herein referred to as the “ Original Obligations ”), and hereby reaffirms such grant of a lien on and security interest in such Collateral to the Collateral Agent for the benefit of the Secured Parties.
 
(b)   This Agreement shall amend and restate the Original Security Agreement; provided , however , that the execution and delivery of this Agreement shall not in any circumstance be deemed to have terminated, extinguished or discharged the grant of the security interest to the Collateral Agent for the benefit of the Secured Parties by the Debtors (other than the Released Debtors) in respect of the Original Obligations (defined above in Section 17.9(a) ) under the Original Security Agreement.
 
17.10.   Subordination Agreement .  The parties hereto acknowledge and agree that (i) the Liens and security interest granted to the Collateral Agent pursuant hereto and (ii) the Security Interest and the terms of this Agreement in each case are subject to the terms of the Subordination Agreement.   In the event of any conflict between the terms of the Subordination Agreement and the terms of this Agreement, the terms of the Subordination Agreement shall govern.
 
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17.11.   Second Priority Nature of Liens
 
.  Notwithstanding anything herein to the contrary, prior to the Discharge of Senior Obligations, (i) the requirements of this Agreement to endorse, sign or deliver Collateral to the Collateral Agent shall be deemed satisfied by endorsement, assignment or delivery of such Collateral to the Senior Agent and (ii) any endorsement, assignment or delivery to the Senior Agent shall be deemed an endorsement, assignment or delivery to the Collateral Agent for all purposes hereunder.
 
[SIGNATURE PAGES FOLLOW]
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
 
  DEBTORS:
   
 
INTEGRATED BIOPHARMA.INC.
   
     
By:
 /s/ E. Gerald Kay  
 
Name:  E. Gerald Kay
 
Title:  President
 
 
 
AGROLABS, INC.
   
 
   
By:
 /s/ Christina Kay  
 
Name:  Christina Kay
 
Title:  President
 
 
 
IHT HEALTH PRODUCTS, INC.
   
     
By:
 /s/ Christina Kay  
 
Name:  Christina Kay
 
Title:  President
 
 
 
IHT PROPERTIES CORP.
   
     
By:
 /s/ Riva Sheppard  
 
Name: Riva Sheppard    
 
Title:  President
 
 
  INB:MANHATTAN DRUG COMPANY, INC.
   
 
   
By:
 /s/ Riva Sheppard  
 
Name:  Riva Sheppard    
 
Title:  President
 
 
VITAMIN FACTORY, INC.  
   
     
By:
 /s/ E. Gerald Kay  
 
Name:  E. Gerald Kay
 
Title:  President
 

[Signature Page to Amended and Restated Security Agreement]
 
 
 
 
 

 
 
 
  COLLATERAL AGENT:
   
 
CD FINANCIAL, LLC
   
     
By:
 /s/ William H. Milmoe  
 
Name:  William H. Milmoe
 
Title:  Manager
 
 

AGREED TO AND ACCEPTED  
as of the date above first written by:  
 
 
HOLDER:  
   
CD FINANCIAL, LLC  
     
 
   
By:  /s/ William H. Milmoe        
   Name:  William H. Milmoe        
   Title: Manager        
 
 
 
 
 







[Signature Page to Amended and Restated Security Agreement]
 
 
 
 
 
 

 
 
 
 
SCHEDULE I

EXCLUDED PROPERTY
 
1.  
Any development and/or supply agreement or similar agreement by and between any Debtor and any Herbalife Entity (defined below).
 
Herbalife Entity ” means any of the following: (i) Herbalife International of America, Inc.; (ii) Herbalife International (Thailand), Inc.; (iii) Herbalife International Luxembourg S.ar.1.; (iv) Herbalife International South Africa Ltd; (v) Herbalife Korea Co. Ltd.; and (vi) any affiliates of any of the foregoing.
 
 
 
 
 
 

 
 
 
SCHEDULE II

CERTAIN INFORMATION FOR EACH DEBTOR
 
 
Legal Name of Debtor and any fictitious names
Type of organization
Jurisdiction of organization
Organizational Identification Number
Integrated BioPharma, Inc.
corporation
Delaware
2538924
AgroLabs, Inc.
corporation
New Jersey
0100529400
IHT Health Products, Inc.
corporation
Delaware
3275322
IHT Properties Corp.
corporation
Delaware
3289320
Vitamin Factory, Inc.
corporation
Delaware
0945245
InB:Manhattan Drug Company, Inc.
corporation
New York
n/a

 
 
 
 
 

 
 

SCHEDULE III

CAPITAL STOCK OF THE COMPANY SUBSIDIARIES AND OTHER EQUITY INTERESTS
 
 
InB:Manhattan Drug Company, Inc.
 
1,000 Common Shares
AgroLabs, Inc.
 
100 Common Shares
IHT Health Products, Inc.
 
100 Common Shares
Vitamin Factory, Inc.
 
100 Common Shares
IHT Properties Corp.
 
100 Common Shares
The Organic Beverage Company
 
100 Common Shares
Gero Industries, Inc.
 
100 Common Shares
Scientific Sports Nutrition, Inc.
 
100 Common Shares
InB:Paxis Pharmaceuticals, Inc.
 
1,500 Common Shares
Designer Nutrition Laboratories, Inc.
 
50 Common Shares
Connaught Press, Inc.
 
100 Common Shares

 
 
 

 

Annex A
 
FORM OF JOINDER AGREEMENT
 
[Name and address of Additional Debtor]
 
[Date]
 
CD Financial, LLC, as Collateral Agent
      under the Security Agreement referred to below
3299 NW Second Avenue
Boca Raton, Florida 33431
Attn:  William H. Milmoe, Manager

Ladies and Gentlemen:

Reference is made to Amended and Restated Security Agreement, dated as of June 27, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the “ Security Agreement ;” capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Security Agreement), by and among Integrated BioPharma, Inc., a Delaware corporation (the “ Company ”), certain Subsidiaries of the Company party thereto, and CD Financial, LLC, a Florida limited liability company, in its capacity as collateral agent for the benefit of the Secured Parties (in such capacity, the “ Collateral Agent ”).
 
The Security Agreement was executed and delivered in connection with that certain Amended and Restated Securities Purchase Agreement, dated as of June 27, 2012 (as amended, restated, supplemented or otherwise modified from time to time), by and between the Company and CD Financial, LLC, a Florida limited liability company, as the initial Investor (as defined therein).
 
This Joinder Agreement supplements the Security Agreement and is delivered by the undersigned, [________________] (the “ Additional Debtor ”), pursuant to Section 4.5 of the Security Agreement.  The Additional Debtor hereby agrees to be bound as a Debtor party to the Security Agreement by all of the terms, covenants and conditions set forth in the Security Agreement to the same extent that it would have been bound if it had been a signatory to the Security Agreement on the date of the Security Agreement.  Without limiting the generality of the foregoing, the Additional Debtor hereby grants and pledges to the Collateral Agent on behalf of the Secured Parties, as collateral security for the full and prompt payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Obligations, a Lien on and security interest in, all of its right, title and interest in, to and under the Collateral and expressly assumes all obligations and liabilities of a Debtor thereunder.  The Additional Debtor hereby makes each of the representations and warranties and agrees to each of the covenants applicable to the Debtors contained in the Security Agreement.
 
Annexed hereto as Annex I are supplements to each of the schedules to the Security Agreement with respect to the Additional Debtor.  Such supplements shall be deemed to be part of the Security Agreement.
 
 
 
 

 
 
This Joinder Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page of this Joinder Agreement or any amendments, waivers, consents or supplements hereto by facsimile or telefax shall be effective as delivery of a manually executed counterpart thereof.
 
THIS JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF, OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
 
[Remainder of page intentionally left blank.  Signature pages follow.]
 
 
 
 

 
 
IN WITNESS WHEREOF, the Additional Debtor has caused this Joinder Agreement to be executed and delivered by its duly authorized officer as of the date first above written.
 

  ADDITIONAL DEBTOR:
   
 
[INSERT NAME OF ADDITIONAL DEBTOR]
   
     
By:
   
 
Name:  
 
Title:  

 
AGREED TO AND ACCEPTED  
as of the date above first written by:  
 
 
COLLATERAL AGENT:  
   
CD FINANCIAL, LLC  
     
 
   
By:          
   Name:        
   Title:        
 

[Annex I to be attached]
 

Exhibit 10.12
AMENDED AND RESTATED SUBSIDIARY GUARANTEE
 
This AMENDED AND RESTATED SUBSIDIARY GUARANTEE, dated as of June 27, 2012 (as amended, restated, modified or supplemented from time to time, this “ Guarantee ”), is by each of the Subsidiaries (as defined in the Securities Purchase Agreement referred to below) of Integrated BioPharma, Inc., a Delaware cor poration (the “ Company ”) party hereto from time to time, whether as an original signatory hereto or as an Additional Guarantor (as defined in Section 4.2 below) (such Subsidiaries are collectively referred to herein as the “ Guarantors ”),   and CD Financial, LLC, in its capacity as collateral agent (in such capacity, together with its successors in such capacity, the “ Collateral Agent ”), for the benefit of the Secured Parties (as defined in the Securities Purchase Agreement referred to below).
 
W I T N E S S E T H:
 
WHEREAS, reference is made to the Amended and Restated Securities Purchase Agreement, dated as of the date hereof (as amended, restated, modified or supplemented from time to time, the “ Securities Purchase Agreement ”), by and between the Company and CD Financial, LLC, a Florida limited liability company (the “ Investor ”), which amended and restated the Securities Purchase Agreement, dated as of February 21, 2008, by and between the Company and Investor in its entirety (as amended, supplemented or otherwise modified from time to time to but excluding the date hereof, the   Original SPA ”);
 
WHEREAS, reference is made to the Subsidiary Guarantee, dated as of February 21, 2008 (as amended, supplemented or otherwise modified from time to time to but excluding the date hereof, the “Original Guarantee” ), by and among certain Subsidiaries of the Company party thereto and the Collateral Agent;
 
WHEREAS, capitalized terms used herein, and not otherwise defined herein, shall have the meanings set forth in the Securities Purchase Agreement;
 
WHEREAS, the Guarantors and the Collateral Agent have agreed to amend and restate the Original Guarantee in its entirety, as set forth herein;
 
WHEREAS, reference is made to Sections 5.10 and 5.11 below; and
 
WHEREAS, each Guarantor, as a Subsidiary of the Company, will directly or indirectly benefit from the extension of credit to the Company represented by the issuance of the Notes and the other transactions contemplated by the Transaction Documents.
 
NOW, THEREFORE, in consideration of the agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
 
 
 
 

 
 
1.   GUARANTEE .
 
1.1   Guarantee of Obligations .
 
(a)   Each Guarantor hereby, jointly and severally, unconditionally and irrevocably, guarantees to each Secured Party and its lawful successors, endorsees, transferees and assigns, the prompt and complete payment by the Company and each other Guarantor when due (whether at the stated maturity, by acceleration or otherwise) of all the Obligations (as defined in the Securities Purchase Agreement), together with all reasonable attorneys, disbursements and other costs and expenses of collection incurred by the Collateral Agent and the other Secured Parties in enforcing any of such Obligations and/or this Guarantee (collectively, as used herein, the “ Obligations ”).  This Guarantee shall remain in full force and effect until all the Obligations and the obligations of each Guarantor under this Guarantee shall have been satisfied by payment in full.  Each Guarantor shall be regarded, and shall be in the same position, as principal debtor with respect to the Obligations.
 
(b)   Anything herein or in any other Transaction Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Transaction Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws, including laws relating to the insolvency of debtors, fraudulent conveyance or transfer or laws affecting the rights of creditors generally (after giving effect to the right of contribution established in Section 1.3 ).
 
1.2   Guarantee Absolute and Unconditional .  Each Guarantor understands and agrees that this Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity or enforceability of any of the Transaction Documents, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Secured Parties, (b) any defense, set-off or counterclaim (other than a defense of payment or performance or fraud or misconduct by the Secured Parties) which may at any time be available to or be asserted by the Company or any other Person against any of the Secured Parties, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Company or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Company for the Obligations, or of such Guarantor under this Guarantee, in bankruptcy or in any other instance.
 
1.3   Right of Contribution . Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment.  Each Guarantor’s right of contribution shall be subject to the terms and conditions of Section 1.4 . The provisions of this Section 1.3 shall in no respect limit the obligations and liabilities of any Guarantor to the Secured Parties, and each Guarantor shall remain liable to the Secured Parties for the full amount guaranteed by such Guarantor hereunder.
 
1.4   No Subrogation .  Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by the Secured Parties, no Guarantor shall be entitled to be subrogated to any of the rights of the Secured Parties against the Company or any other Guarantor or any collateral security or guarantee or right of offset held by the Secured Parties for the payment of the Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Company or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Secured Parties by the Company and the Guarantors on account of the Obligations are paid in full.  If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the benefit of the Secured Parties, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Collateral Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Collateral Agent, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Secured Parties may determine.
 
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1.5   Modification of Guaranteed Obligations . Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Obligations made by the Secured Parties may be rescinded by the Secured Parties and any of the Obligations continued, and the Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Secured Parties, and the Transaction Documents may be amended, modified, supplemented or terminated, in whole or in part, as the Secured Parties may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Secured Parties for the payment of the Obligations may be sold, exchanged, waived, surrendered or released.  The Secured Parties shall have no obligation to protect, secure, perfect or insure any Lien at any time held by them as security for the Obligations or for this Guarantee or any property subject thereto.
 
1.6   Waiver .  Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Secured Parties upon the guarantees contained in this Section 1 or acceptance of the guarantees contained in this Section 1 .  The Obligations shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantees contained in this Section 1 .  All dealings between the Company and any of the Guarantors, on the one hand, and the Secured Parties, on the other hand, shall be conclusively presumed to have been had or consummated in reliance upon the guarantees contained in this Section 1 .  Each Guarantor waives, to the extent permitted by law, diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Company or any of the Guarantors with respect to the Obligations.
 
1.7   Enforcement of Guarantee .
 
(a)   When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, the Collateral Agent, acting on behalf of each Secured Party, may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as the Collateral Agent, acting on behalf of the Secured Parties, may have against the Company, any other Guarantor or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Collateral Agent, acting on behalf of the Secured Parties, to make any such demand, to pursue such other rights or remedies or to collect any payments from the Company, any other Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Company, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Secured Parties against any Guarantor. For the purposes hereof, “ demand ” shall include the commencement and continuance of any legal proceedings.
 
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(b)   Expenses; Indemnification .
 
(i)   Each Guarantor agrees to pay, or reimburse the collateral Agent acting on behalf of the Secured Parties, all of the Collateral Agent’s reasonable costs and expenses incurred in collecting against such Guarantor under this Guarantee or otherwise enforcing or preserving any rights under this Guarantee and the other Transaction Documents to which such Guarantor is a party, including, without limitation, the reasonable fees and disbursements of counsel to the Collateral Agent.
 
(ii)   Each Guarantor agrees to pay, and to save the Secured Parties harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the enforcement, performance and administration of this Guarantee; provided that no Guarantor shall be liable to any Secured Party for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, claims, suits, litigations, disputes, investigations, inquiries or proceedings, costs, expenses or disbursements that are found by a final and non-appealable judgment of a court of competent jurisdiction to have resulted solely and directly from such Secured Party’s gross negligence or willful misconduct.
 
1.8   Right to Set-Off .  Subject to the Subordination Agreement, each Guarantor hereby irrevocably authorizes the Collateral Agent, acting on behalf of the Secured Parties, at any time and from time to time while an Event of Default shall have occurred and be continuing, without notice to such Guarantor or any other Guarantor, any such notice being expressly waived by each Guarantor, to set-off and appropriate and apply any and all deposits, credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by a Secured Party to or for the credit or the account of such Guarantor, or any part thereof in such amounts as the Collateral Agent may elect, against and on account of the obligations and liabilities of such Guarantor to the Secured Parties hereunder in any currency arising hereunder or under the Security Agreement as the Collateral Agent may elect, whether or not a Secured Party has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured.  The Collateral Agent shall notify such Guarantor promptly of any such set-off and the application made by the Collateral Agent of the proceeds thereof, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Secured Party under this Section 1.8 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Collateral Agent, acting on behalf of the Secured Parties, may have.
 
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1.9   Payments .  In addition to the terms of the guaranty set forth in Section 1.1 , and in no manner imposing any limitation on such terms, it is expressly understood and agreed that, if, at any time, any of the Obligations are declared to be immediately due and payable by a Guarantor, then the Guarantors shall, upon ten (10) Business Days’ notice, pay to the Collateral Agent, acting on behalf of the Secured Parties, the entire amount of such Obligations as has been declared due and payable to the Secured Parties.  Payment by the Guarantors shall be made to the Collateral Agent in immediately available Federal funds to an account designated by the Collateral Agent or at the address set forth herein for the giving of notice to the Collateral Agent or at any other address that may be specified in writing from time to time by the Collateral Agent, and shall be credited and applied to the Obligations.
 
1.10   Release . Subject to Section 2 , each Guarantor will be released from all liability hereunder concurrently with the repayment in full of the Obligations.  No payment made by the Company, any of the Guarantors, any other guarantor or any other Person or received or collected by the Secured Parties or the Collateral Agent from the Company, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations (other than any payment made by such Guarantor in respect of the Obligations or any payment received or collected from such Guarantor in respect of the Obligations) shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment, remain liable for the Obligations up to the maximum liability of such Guarantor hereunder until the Obligations are paid in full.
 
2.   REINSTATEMENT .
 
The guarantees contained in Section 1 shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Secured Parties or the Collateral Agent upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made.
 
3.   REPRESENTATIONS AND WARRANTIES .
 
Each Guarantor hereby represents and warrants to the Secured Parties as of the date hereof as follows:
 
3.1   Good Standing; Due Authorization; Enforceability .
 
(a)   Such Guarantor is duly organized, validly existing and in good standing in the jurisdiction of its formation and has the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Such Guarantor is duly qualified to do business and is in good standing as a foreign corporation or limited liability company in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, have a Material Adverse Effect.
 
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(b)   Such Guarantor has the requisite corporate, partnership, limited liability company or other power and authority to enter into and consummate the transactions required to be consummated by it as contemplated by this Guarantee and the other Transaction Documents to which it is a party, and otherwise to carry out its obligations hereunder and thereunder.  The execution, delivery and performance by such Guarantor of this Guarantee and each other Transaction Documents to which it is a party and the consummation by it of the transactions required to be consummated by it as contemplated hereby and thereby have been duly authorized by all necessary organizational action on the part of such Guarantor and no further action, consent or authorization of such Guarantor, or its board of directors (or Persons performing similar functions), shareholders or members, or to its knowledge, any Governmental Authority, or by any other Person or entity is required in connection therewith, except (i) such as have been obtained or made and are in full force and effect and (ii) filings and registrations and entering into of control agreements necessary to perfect the Liens created under the applicable Transaction Documents.
 
(c)   This Guarantee has been duly executed and delivered by such Guarantor.  This Guarantee constitutes, and each other Transaction Document to which such Guarantor is to be a party, when executed and delivered by such Guarantor, will constitute, a legal, valid and binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and similar laws of general application relating to or affecting the rights and remedies of creditors and by general principles of equity.
 
3.2   No Conflicts . The execution, delivery and performance of this Guarantee and each other Transaction Document to which it is a party, by such Guarantor and the performance by such Guarantor of its obligations hereunder and thereunder do not and will not: (i) violate or conflict with any of the provisions of any Organizational Documents of such Guarantor; (ii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree, award, or other restriction of any court, governmental body or arbitrator or any law, rule or regulation applicable to or binding upon such Guarantor (including Federal and state securities laws and regulations), or to which such Guarantor or any of such Guarantor’s property is subject, except to the extent such violation does not, or would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect; or (iii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, adverse amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, indenture, credit facility, debt instrument or other instrument to which such Guarantor is a party or by which any property or asset of such Guarantor is bound or affected, except to the extent such conflict, default or termination does not, or would not reasonably be expected, individually or in the aggregate, result in a Material Adverse Effect.
 
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3.3   Approvals .  The execution and delivery by such Guarantor of this Guarantee and each other Transaction Documents to which it is a party, and the performance by such Guarantor of its obligations hereunder and thereunder do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority or any other Person, except (i) such as have been obtained or made and are in full force and effect and (ii) filings and registrations and the entering into of control agreements necessary to perfect the Liens created under the applicable Transaction Documents.
 
3.4   Securities Purchase Agreement . The representations and warranties of the Company set forth in the Securities Purchase Agreement as they relate to such Guarantor, each of which is hereby incorporated herein by reference, are true and correct as of the date hereof, and the Secured Parties shall be entitled to rely on each of them as if they were fully set forth herein, provided , that each reference in each such representation and warranty to the Company’s knowledge shall, for the purposes of this Section 3.4 , be deemed to be a reference to such Guarantor’s knowledge.
 
3.5   Independence of Parties .  The Secured Parties have no fiduciary relationship with or duty to such Guarantor arising out of or in connection with this Guarantee or any of the other Transaction Documents; the relationship between the Guarantors, on the one hand, and the Secured Parties, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and no joint venture is created hereby or by the other Transaction Documents or otherwise exists by virtue of the transactions contemplated hereby among the Guarantors and the Secured Parties.
 
3.6   Counsel .  Such Guarantor has been advised by counsel in the negotiation, execution and delivery of this Guarantee and the other Transaction Documents to which it is a party.
 
4.   COVENANTS .
 
4.1   Further Assurances .  Each Guarantor covenants and agrees with the Collateral Agent, on behalf of each Secured Party, that, from and after the date of this Guarantee until the Obligations shall have been paid in full, such Guarantor shall (i) take, and/or shall refrain from taking, as the case may be, such commercially reasonable action that is necessary to be taken or not taken, as the case may be, so that no Event of Default is caused by the failure to take such action or to refrain from taking such action by such Guarantor and (ii) execute and deliver to the Collateral Agent, from time to time, any additional instruments or documents which are reasonably necessary to cause this Guarantee to be, become or remain valid and effective in accordance with its terms.
 
4.2   Additional Guarantors .  From time to time subsequent to the date hereof, pursuant to Section 5.3(h) of the Securities Purchase Agreement, each Subsidiary of the Company may become a party hereto as an additional Guarantor (each, an “ Additional Guarantor ,” and collectively, the “ Additional Guarantors ”), by executing a joinder agreement substantially in the form of Exhibit A attached hereto (each, a “ Joinder Agreement ”).  Upon delivery of a Joinder Agreement to the Collateral Agent, notice of which is hereby waived by the Guarantors, each Additional Guarantor shall be a Guarantor hereunder and shall be as fully a party hereto as if such Additional Guarantor were an original signatory hereto.
 
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4.3   Existence .  Each Guarantor will do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, qualifications, franchises, governmental authorizations, licenses and permits material to the conduct of its business, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under the Securities Purchase Agreement.
 
5.   MISCELLANEOUS .
 
5.1   Severability .  In the event that any provision of this Guarantee becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Guarantee shall continue in full force and effect without said provision; provided that in such case the parties hereto shall negotiate in good faith to replace such provision with a new provision which is not illegal, unenforceable or void, as long as such new provision does not materially change the economic benefits of this Guarantee to the parties hereto.
 
5.2   Successors and Assigns .  The terms and conditions of this Guarantee shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties hereto.  Nothing in this Guarantee, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Guarantee, except as expressly provided in this Guarantee.  A Holder may assign its rights hereunder in connection with any private sale or transfer of its Note(s) in accordance with the terms of the Securities Purchase Agreement, as long as, as a condition precedent to such transfer, the transferee executes an acknowledgment agreeing to be bound by the applicable provisions of this Guarantee, in which case the term “Secured Party” shall be deemed to refer to such transferee as though such transferee were an original signatory hereto.  No Guarantor may assign its rights or obligations under this Guarantee.
 
5.3   Injunctive Relief .  Each Guarantor acknowledges and agrees that a breach by it of its obligations hereunder will cause irreparable harm to each Secured Party and that the remedy or remedies at law for any such breach will be inadequate and agrees, in the event of any such breach, in addition to all other available remedies, the Collateral Agent, acting on behalf of the Secured Parties, shall be entitled to an injunction restraining any breach and requiring immediate and specific performance of such obligations without the necessity of showing economic loss or the posting of any bond.
 
5.4   Governing Law; Jurisdiction .  This Guarantee shall be governed by and construed under the laws of the State of New York applicable to contracts made and to be performed entirely within the State of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City and County of New York for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Guarantee and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.
 
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5.5   Counterparts .  This Guarantee may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.  Any executed signature page delivered by facsimile or e-mail transmission shall be binding to the same extent as an original executed signature page, with regard to any agreement subject to the terms hereof or any amendment thereto.
 
5.6   Headings .  The headings used in this Guarantee are used for convenience only and are not to be considered in construing or interpreting this Guarantee.
 
5.7   Notices .  Any notice, demand or request required or permitted to be given by a Guarantor, the Collateral Agent or a Secured Party pursuant to the terms of this Guarantee shall be in writing and shall be deemed delivered (i) when delivered personally or by verifiable facsimile transmission, unless such delivery is made on a day that is not a Business Day, in which case such delivery will be deemed to be made on the next succeeding Business Day, (ii) on the next Business Day after timely delivery to an overnight courier and (iii) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid), addressed as follows:
 
If to a   Guarantor :

c/o Integrated BioPharma, Inc.
225 Long Avenue
Hillside, New Jersey 07205
Attn: Chief Executive Officer and Chief Financial Officer
Tel No.:  973-926-0816
Fax No.:  973-926-1735

With a copy (which shall not constitute notice) to:

Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
Attn: Eric A. Stabler, Esq.
Tel No.:   212-592-5982
Fax No.:  212-545-3317

If to the   Collateral Agent :

CD Financial, LLC
3299 NW Second Avenue
Boca Raton, Florida 33431
Attn:  William H. Milmoe, Manager
Tel No.:  561-278-1169
Fax No.:  561-278-6930

With a copy (which shall not constitute notice) to:

Muller & Lebensburger
7385 Galloway Road
Suite 200
Miami, Florida  33173
Attention:  Charles E. Muller II, Esq.
Tel. No.:   305-670-6770
Fax No.:   305-670-6769
 
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and if to any Secured Party, to such address for such party as shall appear on the signature page of the Securities Purchase Agreement executed by such party, or, as to any Guarantor, the Collateral Agent or any Secured Party, as shall be designated by such party in writing to the other parties hereto in accordance with this Section 5.7 .

5.8   Entire Agreement; Amendments .  This Guarantee and the other Transaction Documents constitute the entire agreement between the parties hereto with regard to the subject matter hereof and thereof, superseding all prior agreements or understandings, whether written or oral, between or among the parties hereto.  No (i) amendment to this Guarantee or (ii) waiver of any agreement or other obligation of the Guarantors under this Guarantee may be made or given except pursuant to a written instrument executed by the Guarantors, the Collateral Agent and the Secured Parties holding a majority of the outstanding principal of the Notes.  Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
 
5.9   Terms Generally .  Section 1.2 of the Securities Purchase Agreement shall apply herein, and is incorporated herein by reference, mutatis mutandis , as if a part hereof.
 
5.10   Amendment and Restatement .
 
(a)   Each Guarantor hereby consents to, and expressly acknowledges: (A) the amendment and restatement of the Original SPA, as such amendment and restatement is set forth in the Securities Purchase Agreement; and (B) the terms of the Securities Purchase Agreement.
 
(b)   This Guarantee shall amend and restate the Original Guarantee in its entirety; provided , however , this Guarantee shall not in any circumstance be deemed to have terminated, extinguished or discharged the obligations and liabilities of each of the Guarantors (other than Released Debtors) under the Original Guarantee, or be deemed to constitute a novation of any such obligations and liabilities, and such obligations, liabilities and grant shall continue under, and shall be governed by, this Guarantee.
 
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5.11   Subordination Agreement .  The parties hereto acknowledge and agree that the terms of this Guarantee are subject to the terms of the Subordination Agreement.  In the event of any conflict between the terms of the Subordination Agreement and the terms of this Guarantee, the terms of the Subordination Agreement shall govern.
 
 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOW]
 
 
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IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly executed and delivered as of the date first above written.
 
  GUARANTORS:
   
 
AGROLABS, INC.
   
     
By:
 /s/ Christina Kay  
 
Name:  Christina Kay
 
Title:  President
 
 
 
IHT HEALTH PRODUCTS, INC.
   
     
By:
 /s/ Christina Kay  
 
Name:  Christina Kay
 
Title:  President
 
 
 
IHT PROPERTIES CORP.
   
     
By:
 /s/ Riva Sheppard  
 
Name: Riva Sheppard
 
Title:  President
 
 
  INB:MANHATTAN DRUG COMPANY, INC.
   
 
   
By:
  /s/ Riva Sheppard  
 
Name:  Riva Sheppard
 
Title:  President
 
 
VITAMIN FACTORY, INC.  
   
     
By:
/s/ E. Gerald Kay  
 
Name:  E. Gerald Kay
 
Title:  President
 
 
 
[Signature page to Amended and Restated Subsidiary Guarantee]
 
 
 
 
 
 

 
 
  COLLATERAL AGENT:
   
 
CD FINANCIAL, LLC
   
     
By:
 /s/ William H. Milmoe  
 
Name:  William H. Milmoe
 
Title:  Manager
 
 

AGREED TO AND ACCEPTED  
as of the date above first written by:  
 
 
HOLDER:  
   
CD FINANCIAL, LLC  
     
 
   
By:   /s/ William H. Milmoe        
   Name:  William H. Milmoe        
   Title:  Manager        
 
 
 
 
 
 
 
 [Signature Page to Amended and Restated Subsidiary Guarantee]
 
 
 
 
 
 

 
 
 
Annex A
 
FORM OF JOINDER AGREEMENT
 
[Name and address of Additional Guarantor]
 
[Date]
 
CD Financial, LLC, as Collateral Agent
 
      under the Guarantee referred to below
 
3299 NW Second Avenue
 
Boca Raton, Florida 33431
 
Attn:  William H. Milmoe, Manager
 
Ladies and Gentlemen:
 
Reference is made to Amended and Restated Subsidiary Guarantee, dated as of June 27, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the “ Guarantee ;” capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Guarantee), by and among certain Subsidiaries of Integrated BioPharma, Inc., a Delaware corporation (the “ Company ”) party thereto, and CD Financial, LLC, a Florida limited liability company, in its capacity as collateral agent for the benefit of the Secured Parties (in such capacity, the “ Collateral Agent ”).
 
The Guarantee was executed and delivered in connection with that certain Amended and Restated Securities Purchase Agreement, dated as of June 27, 2012 (as amended, restated, supplemented or otherwise modified from time to time), by and between the Company and CD Financial, LLC, a Florida limited liability company, as the initial Investor (as defined therein).
 
This Joinder Agreement supplements the Guarantee and is delivered by the undersigned, [________________] (the “ Additional Guarantor ”), pursuant to Section 4.2 of the Guarantee.  The Additional Guarantor hereby agrees to be bound as a Guarantor party to the Guarantee by all of the terms, covenants and conditions set forth in the Guarantee to the same extent that it would have been bound if it had been a signatory to the Guarantee on the date of the Guarantee.  Without limiting the generality of the foregoing, the Additional Guarantor hereby expressly assumes all obligations and liabilities of a Guarantor thereunder.  The Additional Guarantor hereby makes each of the representations and warranties and agrees to each of the covenants applicable to the Guarantors contained in the Guarantee.
 
This Joinder Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same agreement.  Delivery of an executed counterpart of a signature page of this Joinder Agreement or any amendments, waivers, consents or supplements hereto by facsimile or telefax shall be effective as delivery of a manually executed counterpart thereof.
 
 
 
 
 

 
 
 
THIS JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF, OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
 
[Remainder of page intentionally left blank.  Signature pages follow.]
 
 
 
 
 
 

 
 
 
IN WITNESS WHEREOF, the Additional Guarantor has caused this Joinder Agreement to be executed and delivered by its duly authorized officer as of the date first above written.
 
  ADDITIONAL GUARANTOR:
   
 
[INSERT NAME OF ADDITIONAL GUARANTOR]
   
     
By:
   
 
Name:  
 
Title:  

 
AGREED TO AND ACCEPTED  
as of the date above first written by:  
 
 
COLLATERAL AGENT:  
   
CD FINANCIAL, LLC  
     
 
   
By:          
   Name:        
   Title:        
 
 
 
 

Exhibit 10.14
INTEGRATED BIOPHARMA, INC.
 
PROMISSORY NOTE
 
THIS PROMISSORY NOTE DOES NOT REQUIRE PHYSICAL SURRENDER HEREOF IN ORDER TO EFFECT A PARTIAL PAYMENT HEREOF.  ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT SHOWN BELOW.
 
$1,714,000.00
Issue Date:  June 27, 2012
New York, New York
   
 
FOR VALUE RECEIVED, INTEGRATED BIOPHARMA, INC., a Delaware corporation (the “ Company ”), hereby promises to pay to the order of CD FINANCIAL, LLC, a Florida limited liability company, or its permitted successors or assigns (the “ Holder ”), in lawful money of the United States of America and in immediately available funds, the principal sum of ONE MILLION SEVEN HUNDRED FOURTEEN THOUSAND AND 00/100 DOLLARS ($1,714,000.00), or, if less, the aggregate unpaid principal amount of this Note, which principal amount shall be due and payable in such amounts and on such dates as are set forth below.  The Company further promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the interest rates, and on the dates, specified below.
 
This Note is the “Liquidity Note” referred to in and is executed and delivered pursuant to and in connection with the Amended and Restated Securities Purchase Agreement, dated as of June 27, 2012, by and between the Company and the Holder (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ Securities Purchase Agreement ”).
 
The Company’s obligations under this Note, including, without limitation, its obligation to make payments of principal and interest hereon, are (i) guaranteed by certain of the Company’s Subsidiaries pursuant to the Subsidiary Guarantee and (ii) secured by certain of the assets of the Company and certain of the Company’s Subsidiaries pursuant to the Security Agreement.
 
The following terms shall apply to this Note:
 
1.   DEFINITIONS.
 
(a)   Defined Terms .  When used herein, the terms below shall have the respective meanings indicated:
 
Acceleration Notice ” has the meaning set forth in Section 4   of this Note.
 
Accumulated Unpaid Interest Amounts ” has the meaning set forth in Section 2(b) of this Note.
 
Company ” has the meaning set forth in the first paragraph of this Note.
 
 
 
 

 
 
Default Interest Rate ” means ten percent (10.0%) per annum.
 
Holder ” has the meaning set forth in the first paragraph of this Note.
 
Interest ” has the meaning set forth in Section 2(a) of this Note.
 
Interest Payment Date ” means (a) the first Business Day of each calendar month and (b) the Maturity Date.
 
Issue Date ” means the date of this Note as set forth on the first page of this Note.
 
Maturity Date ” means July 7, 2017.
 
Note ” means this Promissory Note, dated June 27, 2012, by the Company and payable to the order of the Holder, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
Prepayment Date ” has the meaning set forth in Section 5 of this Note.
 
Prepayment Notice ” has the meaning set forth in Section 5 of this Note.
 
Securities Purchase Agreement ” has the meaning set forth in the preamble of this Note.
 
(b)   Terms Defined in Securities Purchase Agreement .  Any capitalized term used but not defined herein has the meaning specified in the Securities Purchase Agreement.
 
(c)   Usage .  Section 1.2 of the Securities Purchase Agreement shall apply herein, and is incorporated herein by reference, mutatis mutandis , as if a part hereof.
 
2.   INTEREST; PAYMENT OF INTEREST AND PRINCIPAL; CALCULATION.
 
(a)   Interest .  Subject to Section 2(d) of this Note, the unpaid principal amount of this Note shall bear interest from and including the Issue Date until the principal amount of this Note is paid in full (“ Interest ”) at a rate per annum equal to six percent (6.0%).
 
(b)   Interest Payments .  The Company shall make payments of accrued Interest hereunder on each Interest Payment Date, commencing with the first Interest Payment Date occurring after the Issue Date; provided that no such payment shall be required to be made by the Company on such Interest Payment Date if the Company, in making such payment, would violate terms of the Subordination Agreement.   To the extent that any Interest payment is not so made on any Interest Payment Date pursuant to the first sentence of this Section 2(b) as a result of the operation of the proviso in such sentence (the amount of such unpaid Interest is referred to, collectively, as the “ Accumulated Unpaid Interest Amounts ”), then such failure to make such payment on such Interest Payment Date shall not constitute an Event of Default.
 
(c)   Payments on Maturity.
 
(i)   The outstanding principal amount of this Note shall be due and payable on the Maturity Date, together with all accrued and unpaid Interest thereon, all unpaid Accumulated Unpaid Interest Amounts and all other amounts due under this Note.
 
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(ii)   Notwithstanding anything to the contrary contained in this Note, but in all events subject to Section 2(h) of this Note, to the extent that any payments of principal by the Company may be made prior to the Maturity Date without violating the terms of the Subordination Agreement, the outstanding principal amount of this Note shall be payable within ten (10) Business Days after demand by Holder.
 
(d)   Default Interest .  Any amount of principal, (subject to the last sentence in this Section 2(d) ) Interest, or Accumulated Unpaid Interest Amounts that is not paid as and when due in accordance with this Note shall bear interest at the Default Interest Rate, compounded monthly, until paid in full, and such interest accrued at the Default Interest Rate shall be payable on demand.   For avoidance of doubt, it is understood and agreed that if the Company does not make a monthly Interest payment on any Interest Payment Date pursuant to Section 2(b) of this Note solely as a result of the operation of the proviso in the first sentence of Section 2(b) of this Note, then, for purposes of the first sentence of this Section 2(d) , the amount of the Interest payment that was not so made on such Interest Payment Date shall not bear interest at the Default Interest Rate; provided , however , that if any Accumulated Unpaid Interest Amounts are not paid when due in accordance with Section 2(c) of this Note, then such Accumulated Unpaid Interest Amounts shall bear interest at the Default Interest Rate in accordance with the first sentence of this Section 2(d) .
 
(e)   Payments of Accumulated Unpaid Interest Amounts .  To the extent that there is any Accumulated Unpaid Interest Amounts that remains unpaid, the Company shall pay to the Holder, within five (5) Business Days after demand by Holder, the Accumulated Unpaid Interest Amounts, without premium or penalty; provided , however , that the Company shall not be required to make such payment to the extent that the Company, in making such payment, would violate the terms of the Subordination Agreement (and, in which case, for purposes of the proviso in the second sentence of Section 2(d) of this Note, such Accumulated Unpaid Interest Amounts shall not be deemed due after such demand so made).
 
(f)   Payment in Cash .  All payments of principal, Interest, default interest (if any), and Accumulated Unpaid Interest Amounts hereunder shall be paid in cash by wire transfer of immediately available funds to the account of the Holder as designated by the Holder to the Company in writing from time to time.  All payments (including prepayments) to be made by the Company on account of principal, Interest, default interest (if any), fees and other amounts owing hereunder shall be made without set off or counterclaim.
 
(g)   Calculation of Interest .   Any Interest and default interest (if any) payable hereunder shall be computed on the basis of a 360-day year and calculated using the actual number of days elapsed.
 
(h)   Failure to Make Payments .  If the Company does not make any payment of principal, interest or other amounts hereunder when due because such payment, if made, would violate the terms of the Subordination Agreement, then the failure by the Company to make such payment shall not constitute an Event of Default.
 
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3.   [INTENTIONALLY OMITTED].
 
4.   EVENTS OF DEFAULT; REMEDIES.
 
If an Event of Default occurs and is continuing, the Holder shall have the right, upon written notice to the Company (an “ Acceleration Notice ”), to take either or both of the following actions, at the same or different times (i) declare all unpaid principal hereof, any accrued and unpaid Interest (including default interest (if any)) thereon, all Accumulated Unpaid Interest Amounts (including any default interest (if any) thereon), and any other amounts owing hereunder due and payable on the date specified in such Acceleration Notice, without presentment, demand, protest or any other notice of any kind, all of which are hereby waived by the Company, anything contained herein to the contrary notwithstanding; provided such date of payment must be at least two (2) Business Days following the date on which the Acceleration Notice is delivered to the Company, and/or (ii) exercise any rights and remedies under this Note or as permitted by law and/or in equity; and in the case of any event described in clause (b) of the definition of “Event of Default”, all unpaid principal hereof, any accrued and unpaid Interest (including default interest (if any)) thereon, all Accumulated Unpaid Interest Amounts (including any default interest (if any) thereon), and any other amounts owing hereunder shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company, anything contained herein to the contrary notwithstanding; provided , however , that the Company shall only make such payment(s) if and only to the extent that such payment(s) would not violate the terms of the Subordination Agreement.
 
5.   PREPAYMENTS.
 
The Company shall have the right at any time and from time to time to prepay the outstanding principal amount of this Note, without premium or penalty, upon not less than five (5) days’ prior written notice to the Holder (a “ Prepayment Notice ”).  In order to effectuate such prepayment, the Company shall be obligated to pay the Holder an amount equal to the amounts described in the Prepayment Notice in same day funds on the payment date (the “ Prepayment Date ”)   specified in the Prepayment Notice; provided   such date must be at least five (5) days following the date on which the Prepayment Notice is delivered to the Holder; provided , further , however , that the Company may only make such prepayment to the extent that the Company, in making such prepayment, would not violate the terms of the Subordination Agreement.  All such principal prepayments shall be applied to the outstanding principal amount of this Note.  Any prepayment shall be accompanied by payment of accrued interest on the amount so prepaid.  Notwithstanding the foregoing, if the Holder delivers an Acceleration Notice at any time prior to the Prepayment Date, then the provisions of Section 4 shall apply and control.
 
6.   MISCELLANEOUS.
 
(a)   Failure to Exercise Rights not Waiver .  No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude any other or further exercise thereof.   All rights and remedies of the Holder hereunder are cumulative and not exclusive of any rights or remedies otherwise available. In the event that the Company does not pay any amount under this Note when such amount becomes due, the Company shall bear all costs incurred by the Holder in collecting such amount, including without limitation reasonable legal fees and expenses.
 
(b)   Notices . Any notice, demand or request required or permitted to be given by the Company or the Holder pursuant to the terms of this Note shall be in writing and shall be deemed delivered (i) when delivered personally or by verifiable facsimile transmission, unless such delivery is made on a day that is not a Business Day, in which case such delivery will be deemed to be made on the next succeeding Business Day, (ii) on the next Business Day after timely delivery to an overnight courier and (iii) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid), addressed as set forth in the Securities Purchase Agreement, or as shall be designated by the Company or the Holder in writing to the other party hereto in accordance this Section 6(b) .
 
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(c)   Amendments and Waivers .  No amendment or modification to this Note may be made or given except pursuant to a written instrument executed by the Company and the Holder.  No waiver of any provision of this Note may be made except pursuant to a written instrument executed by the party against whom such waiver is sought to be enforced.  Any waiver given pursuant hereto shall be effective only in the specific instance and for the specific purpose for which given.
 
(d)   Transfer of Note .  The Holder may sell, transfer or otherwise dispose of all or any part of this Note (including without limitation pursuant to a pledge) to any Person as long as such sale, transfer or disposition is in compliance with applicable Governmental Requirements, and is otherwise made in accordance with the applicable provisions of the Securities Purchase Agreement.  From and after the date of any such sale, transfer or disposition, the transferee hereof shall be deemed to be the holder of a Note in the principal amount acquired by such transferee, and the Company shall, as promptly as practicable, issue and deliver to such transferee a new Note identical in all respects to this Note, in the name of such transferee, against surrender of this Note or as otherwise specified in Section 6(e)   of this Note.  The Company shall be entitled to treat the original Holder as the holder of this entire Note unless and until it receives written notice of the sale, transfer or disposition hereof.
 
(e)   Lost or Stolen Note .  Upon receipt by the Company of evidence of the loss, theft, destruction or mutilation of this Note, and (in the case of loss, theft or destruction) of indemnity or security reasonably satisfactory to the Company, and upon surrender and cancellation of the Note, if mutilated, the Company shall execute and deliver to the Holder a new Note identical in all respects to this Note.
 
(f)   Governing Law .  This Note shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within the State of New York.
 
(g)   Successors and Assigns .  The terms and conditions of this Note shall inure to the benefit of and be binding upon the Company and the Holder and their respective successors (whether by merger or otherwise) and permitted assigns.   The Company may not assign its rights or obligations under this Note except as specifically required or permitted pursuant to the terms hereof or the Securities Purchase Agreement.
 
(h)   Usury .  This Note is subject to the express condition that at no time shall the Company be obligated or required to pay interest hereunder at a rate which could subject the Holder to either civil or criminal liability as a result of being in excess of the maximum interest rate which the Company is permitted by applicable law to contract or agree to pay.  If by the terms of this Note, the Company is at any time required or obligated to pay interest hereunder at a rate in excess of such maximum rate, the rate of interest under this Note shall be deemed to be immediately reduced to such maximum rate and the interest payable shall be computed at such maximum rate and all prior interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of the principal balance of this Note.
 
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(i)   WAIVER OF JURY TRIAL .  THE COMPANY HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY.
 
(j)   Severability .  Any provision of this Note held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
 
(k)   Subordination Agreement.   This Note shall be subject to the terms of the Subordination Agreement.
 
 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
 
 
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IN WITNESS WHEREOF, the Company has caused this Note to be signed in its name by its duly authorized officer on the date first above written.
 
 
 
INTEGRATED BIOPHARMA.INC.
   
     
By:
  /s/ E. Gerald Kay  
 
Name:  E. GERALD KAY
 
Title:  President and Chief Executive Officer
 
 
 
 
[Signature Pa ge to Promissory Note]
 
 
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Exhibit 10.13
 
INTEGRATED BIOPHARMA, INC.
 
AMENDED AND RESTATED CONVERTIBLE SECURED PROMISSORY NOTE
 
THIS AMENDED AND RESTATED CONVERTIBLE SECURED PROMISSORY NOTE DOES NOT REQUIRE PHYSICAL SURRENDER HEREOF IN ORDER TO EFFECT A PARTIAL PAYMENT HEREOF.  ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT SHOWN BELOW.
 
$5,350,000.00
Issue Date:  June 27, 2012
New York, New York
 
FOR VALUE RECEIVED, INTEGRATED BIOPHARMA, INC., a Delaware corporation (the “Company”), hereby promises to pay to the order of CD FINANCIAL, LLC, a Florida limited liability company, or its permitted successors or assigns (the “ Holder ”), in lawful money of the United States of America and in immediately available funds, the principal sum of FIVE MILLION THREE HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($5,350,000.00), or, if less, the aggregate unpaid principal amount of this Note, which principal amount shall be due and payable in such amounts and on such dates as are set forth below.  The Company further promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the interest rates, and on the dates, specified below.
 
This Note is the “Consolidated Note” referred to in and is executed and delivered pursuant to and in connection with the Amended and Restated Securities Purchase Agreement, dated as of June 27, 2012, by and between the Company and the Holder (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ Securities Purchase Agreement ”).
 
This Note amends and restates in its entirety the Original Notes referred to in the Securities Purchase Agreement.
 
The Company’s obligations under this Note, including, without limitation, its obligation to make payments of principal and interest hereon, are (i) guaranteed by certain of the Company’s Subsidiaries pursuant to the Subsidiary Guarantee and (ii) secured by certain of the assets  of the Company and certain of the Company’s Subsidiaries pursuant to the Security Agreement.
 
The following terms shall apply to this Note:
 
1.   DEFINITIONS .
 
(a)   Defined Terms .  When used herein, the terms below shall have the respective meanings indicated:
 
Acceleration Notice ” has the meaning set forth in Section 4   of this Note.
 
Accumulated Unpaid Interest Amounts ” ha s the meaning set forth in Section 2(b) of this Note.
 
 
 
 

 
 
Company ” has the meaning set forth in the first paragraph of this Note.
 
Conversion Price ” means $0.65 (as appropriately adjusted for stock splits, stock dividends, issuances below the Conversion Price and similar events).
 
Default Interest Rate ” means ten percent (10.0%) per annum.
 
Holder ” has the meaning set forth in the first paragraph of this Note.
 
Interest ” has the meaning set forth in Section 2(a) of this Note.
 
Interest Payment Date ” means (a) the first Business Day of each calendar month and (b) the Maturity Date.
 
Issue Date ” means the date of this Note as set forth on the first page of this Note.
 
Maturity Date ” means July 7, 2017.
 
Note ” means this Amended and Restated Convertible Secured Promissory Note, dated June 27, 2012, by the Company and payable to the order of the Holder, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
Prepayment Date ” has the meaning set forth in Section 5 of this Note.
 
Prepayment Notice ” has the meaning set forth in Section 5 of this Note.
 
Securities Purchase Agreement ” has the meaning set forth in the preamble of this Note.
 
(b)   Terms Defined in Securities Purchase Agreement .  Any capitalized term used but not defined herein has the meaning specified in the Securities Purchase Agreement.
 
(c)   Usage .  Section 1.2 of the Securities Purchase Agreement shall apply herein, and is incorporated herein by reference, mutatis mutandis , as if a part hereof.
 
2.   INTEREST; PAYMENT OF INTEREST AND PRINCIPAL; CALCULATION .
 
(a)   Interest .  Subject to Section 2(d) of this Note, the unpaid principal amount of this Note shall bear interest from and including the Issue Date until the principal amount of this Note is paid in full (“ Interest ”) at a rate per annum equal to six percent (6.0%).
 
(b)   Interest Payments .  The Company shall make payments of accrued Interest hereunder on each Interest Payment Date, commencing with the first Interest Payment Date occurring after the Issue Date; provided that no such payment shall be required to be made by the Company on such Interest Payment Date if the Company, in making such payment, would violate terms of the Subordination Agreement.   To the extent that any Interest payment is not so made on any Interest Payment Date pursuant to the first sentence of this Section 2(b) as a result of the operation of the proviso in such sentence (the amount of such unpaid Interest is referred to, collectively, as the “ Accumulated Unpaid Interest Amounts ”), then such failure to make such payment on such Interest Payment Date shall not constitute an Event of Default.
 
 
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(c)   Payment on Maturity.   The outstanding principal amount of this Note shall be due and payable on the Maturity Date, together with all accrued and unpaid Interest thereon, all unpaid Accumulated Unpaid Interest Amounts and all other amounts due under this Note.
 
(d)   Default Interest .  Any amount of principal, (subject to the last sentence in this Section 2(d) ) Interest, or Accumulated Unpaid Interest Amounts that is not paid as and when due in accordance with this Note shall bear interest at the Default Interest Rate, compounded monthly, until paid in full, and such interest accrued at the Default Interest Rate shall be payable on demand.   For avoidance of doubt, it is understood and agreed that if the Company does not make a monthly Interest payment on any Interest Payment Date pursuant to Section 2(b) of this Note solely as a result of the operation of the proviso in the first sentence of Section 2(b) of this Note, then, for purposes of the first sentence of this Section 2(d) , the amount of the Interest payment that was not so made on such Interest Payment Date shall not bear interest at the Default Interest Rate; provided , however , that if any Accumulated Unpaid Interest Amounts are not paid when due in accordance with Section 2(c) of this Note, then such Accumulated Unpaid Interest Amounts shall bear interest at the Default Interest Rate in accordance with the first sentence of this Section 2(d) .
 
(e)   Payments of Accumulated Unpaid Interest Amounts .  To the extent that there is any Accumulated Unpaid Interest Amounts that remains unpaid, the Company shall pay to the Holder, within five (5) Business Days after demand by Holder, the Accumulated Unpaid Interest Amounts, without premium or penalty; provided , however , that the Company shall not be required to make such payment to the extent that the Company, in making such payment, would violate the terms of the Subordination Agreement (and, in which case, for purposes of the proviso in the second sentence of Section 2(d) of this Note, such Accumulated Unpaid Interest Amounts shall not be deemed due after such demand so made).
 
(f)   Payment in Cash .  All payments of principal, Interest, default interest (if any), and Accumulated Unpaid Interest Amounts hereunder shall be paid in cash by wire transfer of immediately available funds to the account of the Holder as designated by the Holder to the Company in writing from time to time.  All payments (including prepayments) to be made by the Company on account of principal, Interest, default interest (if any), fees and other amounts owing hereunder shall be made without set off or counterclaim.
 
(g)   Calculation of Interest .   Any Interest and default interest (if any) payable hereunder shall be computed on the basis of a 360-day year and calculated using the actual number of days elapsed.
 
(h)   Failure to Make Payments .  If the Company does not make any payment of principal, interest or other amounts hereunder when due because such payment, if made, would violate  the terms of the Subordination Agreement, then the failure by the Company to make such payment shall not constitute an Event of Default.
 
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3.   CONVERSION .
 
(a)   Generally .  All or any portion of the outstanding principal amount of this Note may, at any time on or prior to or after the Maturity Date and in the Holder’s sole discretion, be converted into shares of Common Stock at the Conversion Price in effect at such time. For avoidance of doubt, any Accumulated Unpaid Interest Amounts shall not constitute principal hereunder.
 
(b)   Mechanics of Conversion .  The Holder may, at its option, upon written notice, as provided in Section 6(b) , to the Company given at any time and from time to time prior to the payment or prepayment of this Note, convert all or any portion of the principal balance of this Note into shares of Common Stock based on the Conversion Price.  Upon any conversion of this Note: (i) such principal amount converted shall become fully paid and satisfied, (ii) the Holder shall surrender and deliver this Note, duly endorsed, to the Company or such other address which the Company shall designate against delivery of the certificates representing the new securities of the Company, (iii) the Company shall promptly deliver a duly executed replacement Note to the Holder in a principal amount equal to the principal amount, if any, that remains outstanding after any such conversion; and (iv) in exchange for all or any portion of the surrendered Note described in the immediately preceding clause (i) or (ii) of this Section 3(b) , the Company shall deliver to the Holder certificates representing such number of shares of Common Stock to which the Holder is entitled to receive based on its conversion of the Note in accordance with the calculation of the Conversion Price, which certificates shall bear such legends as are required under applicable state and federal securities laws and as specified in the Securities Purchase Agreement.  In no event shall any accrued Interest (including default interest (if any)) and Accumulated Unpaid Interest Amounts hereunder be subject to the conversion provisions set forth in this Section 3 .
 
(c)            Issue Taxes .  The Company shall pay any and all issue and other taxes that may be payable with respect to any issue or delivery of shares of Common Stock on conversion of this Note pursuant hereto; provided, however , that the Holder shall not be obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with any such conversion.
 
(d)            Elimination of Fractional Interests .  No fractional shares of Common Stock shall be issued upon conversion of this Note, nor shall the Company be required to pay cash in lieu of fractional interests, it being the intent of the parties that all fractional interests shall be eliminated and that all issuances of Common Stock shall be rounded up to the nearest whole share of Common Stock.
 
4.   EVENTS OF DEFAULT; REMEDIES .
 
If an Event of Default occurs and is continuing, the Holder shall have the right, upon written notice to the Company (an “ Acceleration Notice ”), to take either or both of the following actions, at the same or different times (i) declare all unpaid principal hereof, any accrued and unpaid Interest (including default interest (if any)) thereon, all Accumulated Unpaid Interest Amounts (including any default interest (if any) thereon), and any other amounts owing hereunder due and payable on the date specified in such Acceleration Notice, without presentment, demand, protest or any other notice of any kind, all of which are hereby waived by the Company, anything contained herein to the contrary notwithstanding; provided such date of payment must be at least two (2) Business Days following the date on which the Acceleration Notice is delivered to the Company, and/or (ii) exercise any rights and remedies under this Note or as permitted by law and/or in equity; and in the case of any event described in clause (b) of the definition of “Event of Default”, all unpaid principal hereof, any accrued and unpaid Interest (including default interest (if any)) thereon, all Accumulated Unpaid Interest Amounts (including any default interest (if any) thereon), and any other amounts owing hereunder shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company, anything contained herein to the contrary notwithstanding; provided , however , that the Company shall only make such payment(s) if and only to the extent that such payment(s) would not violate the terms of the Subordination Agreement.
 
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5.   PREPAYMENTS .
 
Prepayment of Principal .  The Company shall have the right at any time and from time to time to prepay the outstanding principal amount of this Note, without premium or penalty, upon not less than five (5) days’ prior written notice to the Holder (a “ Prepayment Notice ”).  In order to effectuate such prepayment, the Company shall be obligated to pay the Holder an amount equal to the amounts described in the Prepayment Notice in same day funds on the payment date (the “ Prepayment Date ”)   specified in the Prepayment Notice; provided   such date must be at least five (5) days following the date on which the Prepayment Notice is delivered to the Holder; provided , further , however , that the Company may only make such prepayment to the extent that the Company, in making such prepayment, would not violate the terms of the Subordination Agreement.  All such principal prepayments shall be applied to the outstanding principal amount of this Note.  Any prepayment shall be accompanied by payment of accrued interest on the amount so prepaid.  Notwithstanding the foregoing, if the Holder delivers an Acceleration Notice at any time prior to the Prepayment Date, then the provisions of Section 4 shall apply and control.
 
6.   MISCELLANEOUS .
 
(a)   Failure to Exercise Rights not Waiver .  No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude any other or further exercise thereof.   All rights and remedies of the Holder hereunder are cumulative and not exclusive of any rights or remedies otherwise available. In the event that the Company does not pay any amount under this Note when such amount becomes due, the Company shall bear all costs incurred by the Holder in collecting such amount, including without limitation reasonable legal fees and expenses.
 
(b)   Notices . Any notice, demand or request required or permitted to be given by the Company or the Holder pursuant to the terms of this Note shall be in writing and shall be deemed delivered (i) when delivered personally or by verifiable facsimile transmission, unless such delivery is made on a day that is not a Business Day, in which case such delivery will be deemed to be made on the next succeeding Business Day, (ii) on the next Business Day after timely delivery to an overnight courier and (iii) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid), addressed as set forth in the Securities Purchase Agreement, or as shall be designated by the Company or the Holder in writing to the other party hereto in accordance this Section 6(b) .
 
(c)   Amendments and Waivers .  No amendment or modification to this Note may be made or given except pursuant to a written instrument executed by the Company and the Holder.  No waiver of any provision of this Note may be made except pursuant to a written instrument executed by the party against whom such waiver is sought to be enforced.  Any waiver given pursuant hereto shall be effective only in the specific instance and for the specific purpose for which given.
 
(d)   Transfer of Note .  The Holder may sell, transfer or otherwise dispose of all or any part of this Note (including without limitation pursuant to a pledge) to any Person as long as such sale, transfer or disposition is in compliance with applicable Governmental Requirements, and is otherwise made in accordance with the applicable provisions of the Securities Purchase Agreement.  From and after the date of any such sale, transfer or disposition, the transferee hereof shall be deemed to be the holder of a Note in the principal amount acquired by such transferee, and the Company shall, as promptly as practicable, issue and deliver to such transferee a new Note identical in all respects to this Note, in the name of such transferee, against surrender of this Note or as otherwise specified in Section 6(e)   of this Note.  The Company shall be entitled to treat the original Holder as the holder of this entire Note unless and until it receives written notice of the sale, transfer or disposition hereof.
 
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(e)   Lost or Stolen Note .  Upon receipt by the Company of evidence of the loss, theft, destruction or mutilation of this Note, and (in the case of loss, theft or destruction) of indemnity or security reasonably satisfactory to the Company, and upon surrender and cancellation of the Note, if mutilated, the Company shall execute and deliver to the Holder a new Note identical in all respects to this Note.
 
(f)   Governing Law .  This Note shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within the State of New York.
 
(g)   Successors and Assigns .  The terms and conditions of this Note shall inure to the benefit of and be binding upon the Company and the Holder and their respective successors (whether by merger or otherwise) and permitted assigns.   The Company may not assign its rights or obligations under this Note except as specifically required or permitted pursuant to the terms hereof or the Securities Purchase Agreement.
 
(h)   Usury .  This Note is subject to the express condition that at no time shall the Company be obligated or required to pay interest hereunder at a rate which could subject the Holder to either civil or criminal liability as a result of being in excess of the maximum interest rate which the Company is permitted by applicable law to contract or agree to pay.  If by the terms of this Note, the Company is at any time required or obligated to pay interest hereunder at a rate in excess of such maximum rate, the rate of interest under this Note shall be deemed to be immediately reduced to such maximum rate and the interest payable shall be computed at such maximum rate and all prior interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of the principal balance of this Note.
 
(i)   WAIVER OF JURY TRIAL .  THE COMPANY HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY.
 
(j)   Severability .  Any provision of this Note held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
 
(k)   Restatement of Original Notes .  This Note shall amend, restate and replaces each of the Original Notes; provided , however , that the execution and delivery of this Note shall not in any circumstance be deemed to have terminated, extinguished or discharged any of the Company’s indebtedness under the Original Notes, all of which indebtedness shall continue under and be governed by this Note.   This Note is a replacement, amendment and restatement of the Original Notes and IS NOT A NOVATION.
 
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(l)   Subordination Agreement .  This Note shall be subject to the terms of the Subordination Agreement.
 

 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
 
 
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IN WITNESS WHEREOF, the Company has caused this Note to be signed in its name by its duly authorized officer on the date first above written.
 
 
INTEGRATED BIOPHARMA.INC.
   
     
By:
  /s/ E. Gerald Kay  
 
Name:  E. GERALD KAY
 
Title:  President and Chief Executive Officer
 
 

 

 
 [Signature Page to Amended and Restated Convertible Secured Promissory Note]

 
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Exhibit 10.15
PROMISSORY NOTE
 
 
  $685,985.61   Issue Date: June 27, 2012
    New York, New York
 
                                                                                           
 
FOR VALUE RECEIVED , INB:MANHATTAN DRUG COMPANY, INC., a New York corporation (“ MDC ”), and INTEGRATED BIOPHARMA, INC., a Delaware corporation (“ Integrated ”) (MDC and Integrated are jointly and severally referred to herein as the “ Company ”), hereby, jointly and severally, promise to pay to the order of VITAMIN REALTY ASSOCIATES, LLC, a New Jersey limited liability company (the “ Holder ”), in lawful money of the United States of America and in immediately available funds, the principal amount of SIX MILLION EIGHT-FIVE THOUSAND NINE HUNDRED EIGHTY-FIVE DOLLARS AND SIXTY-ONE CENTS ($685,985.61) or, if less, the aggregate unpaid principal amount of this Note, which principal amount shall be due and payable in such amounts and on such dates as are set forth below.  The Company further promises to pay interest on the unpaid principal amount hereof, from the date hereof until paid in full, at the interest rates, and on the dates, specified below.
 
 
The principal amount of this Note represents the aggregate amount of unpaid, past due rent owing by MDC (formerly known as Manhattan Drug Company) under the Lease Agreement, dated as of January 10, 1997, between the Holder, as lessor, and MDC (as the same may be amended, amended and restated, supplemented or otherwise modified from time to time), pertaining to the real property located at 225 Long Avenue, Hillside, New Jersey.
 
 
The following terms shall apply to this Note:
 
1.   DEFINITIONS .
 
(a)   Defined Terms .  When used herein, the terms below shall have the respective meanings indicated:
 
Acceleration Notice ” has the meaning set forth in Section 3 of this Note.
 
Accumulated Unpaid Interest Amounts ” has the meaning set forth in Section 2(b) of this Note.
 
Business Day ” means any day other than Saturday or Sunday or a legal holiday on which commercial banks are authorized or required by law to be closed for business in the State of New Jersey.
 
CD Financial ” means CD Financial, LLC, a Florida limited liability company.
 
CD Purchase Agreement ” means certain Amended and Restated Securities Purchase Agreement, dated as of June 27, 2012, by and between the Company and CD Financial, as investor and holder (and any of its successors and assigns), as such Amended and Restated Securities Purchase Agreement may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
CD Obligations ” means the “Obligations” (as such term is defined in the CD Purchase Agreement).
 
 
 
 

 
 
 “ Change of Control ” means (i) the sale, conveyance or disposition of all or substantially all of the assets of the Company to any Person; (ii) the consolidation, merger or other business combination of the Company with or into any other Person (other than a wholly-owned subsidiary provided the Company is the surviving entity); or (iii) the acquisition after the Issue Date of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission or any successor thereto thereunder as in effect on the date hereof) other than the Original Owners, of equity interests representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding equity interests of the Company.
 
Company ” has the meaning set forth in the first paragraph of this Note.
 
Default Interest Rate ” means six percent (6.0%) per annum.
 
Event of Default ” means the occurrence of any of the following events:
 
(i)   a Change of Control occurs;
 
(ii)   a Liquidation Event occurs;
 
(iii)   the Company fails to make any payment of principal or interest on this Note as and when due, and such payment remains unpaid for three (3) Business Days following such due date, subject, however, to Section 2(i) of this Note;
 
(iv)   other than a breach described in clause (iii) immediately above, the Company breaches any material term or condition of this Note and such breach continues for a period of ten (10) Business Days following written notice thereof from the Holder; or
 
(v)   any Material Debt shall have been accelerated due to the occurrence of any event of default under the applicable, related documents and such acceleration has not been rescinded, annulled or otherwise cured within ten (10) Business Days of such acceleration.
 
Holder ” has the meaning set forth in the first paragraph of this Note.
 
Interest ” has the meaning set forth in Section 2(a) of this Note.
 
Interest Payment Date ” means (a) the first Business Day of each calendar month and (b) the Maturity Date.
 
Issue Date ” means the date of this Note as set forth on the first page of this Note.
 
Lien ” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, claim, charge, assignment or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.
 
Liquidation Event ” means where (i) the Company shall make a general assignment for the benefit of creditors or consent to the appointment of a receiver, liquidator, custodian, or similar official of all or substantially all of its properties, or any such official is placed in control of such properties, or the Company shall commence any action or proceeding or take advantage of or file under any federal or state insolvency statute, including, without limitation, the United States Bankruptcy Code, seeking to have an order for relief entered with respect to it or seeking adjudication as a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution, administration, a voluntary arrangement, or other relief with respect to it or its debts; or (ii) there shall be commenced against the Company any action or proceeding of the nature referred to in clause (i) immediately above or seeking issuance of a warrant of attachment, execution, distraint, or similar process against all or any substantial part of its property, which results in the entry of an order for relief which remains undismissed, undischarged or unbonded for a period of sixty (60) days; or (iii) there is initiated the dissolution or other winding up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy proceedings; or (iv) there is initiated any assignment for the benefit of creditors or any marshalling of the material assets or material liabilities of the Company; or (v) the Company shall become unable, admit in writing its inability or fail generally to pay its debts as they become due.
 
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Material Debt ” means, collectively, (a) the Senior Obligations and (b) the CD Obligations.
 
Maturity Date ” means July 7, 2017.
 
 “ Note ” means this Promissory Note, made by the Company and payable to the order of the Holder, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
Original Owners ” has the meaning set forth in the Senior Loan Agreement (regardless of whether or not such Senior Loan Agreement is in full force and effect).
 
Payment Covenant ” means, (a) so long as the Senior Loan Agreement is in force and effect, the provisions of Section 7.24 (“Payments of Past Due Rent”) of the Senior Loan Agreement, and (b) so long as the CD Purchase Agreement is in force and effect, the provisions of Section 1.24 (“Payments of Past Due Rent”) of Schedule 5.4 of the CD Purchase Agreement.
 
Person ” means any individual, sole proprietorship, partnership, corporation, business trust, joint stock company, trust, unincorporated organization, association, limited liability company, limited liability partnership, institution, public benefit corporation, joint venture, entity or governmental body (whether federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof).
 
Senior Loan Agreement ” means that certain Revolving Credit, Term Loan and Security Agreement, dated as of June 27, 2012, by and among (i) the Company, (ii) InB:Manhattan Drug Company, Inc., a New York corporation, (iii) AgroLabs, Inc., a New Jersey, (iv) IHT Health Products, Inc., a Delaware corporation, (v) IHT Properties, Corp., a Delaware corporation, (vi) Vitamin Factory, Inc., a Delaware corporation, (vii) the lenders party thereto from time to time. and (viii) PNC Bank, National Association, in its capacity as agent under the Senior Loan Agreement (or any of its successors or assignees in such capacity as agent thereunder) for such lenders, as such Revolving Credit, Term Loan and Security Agreement may be amended, amended and restated, supplemented or otherwise modified from time to time.
 
Senior Obligations ” means the “Obligations” (as such term is defined in the Senior Loan Agreement).
 
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2.   INTEREST; PAYMENT OF INTEREST AND PRINCIPAL; CALCULATION .
 
(a)   Interest .  Subject to Section 2(d) of this Note, the unpaid principal amount of this Note shall bear interest from and including the Issue Date until the principal amount of this Note is paid in full (“ Interest ”) at a rate per annum equal to four percent (4.0%).
 
(b)   Interest Payments .  The Company shall make payments of accrued Interest hereunder on each Interest Payment Date, commencing with the first Interest Payment Date occurring after the Issue Date; provided that no such payment shall be required to be made by the Company on such Interest Payment Date if the Company, in making such payment, would violate the Payment Covenant.  To the extent that that any Interest payment is not so made on any Interest Payment Date pursuant to the first sentence of this Section 2(b) as a result of the operation of the proviso in such sentence (the amount of such unpaid Interest is referred to, collectively, as the “ Accumulated Unpaid Interest Amounts ”), then such failure to make such payment on such Interest Payment Date shall not constitute an Event of Default.
 
(c)   Payment on Maturity.   The outstanding principal amount of this Note shall be due and payable on the Maturity Date, together with all accrued and unpaid Interest thereon, all unpaid Accumulated Unpaid Interest Amounts and all other amounts due under this Note.
 
(d)   Default Interest .  Any amount of principal, (subject to the last sentence in this Section 2(d) ) Interest, or Accumulated Unpaid Interest Amounts that is not paid as and when due in accordance with this Note shall bear interest at the Default Interest Rate, com pounded monthly, until paid in full, and such interest accrued at the Default Interest Rate shall be payable on demand.  For avoidance of doubt, it is understood and agreed that if the Company does not make a monthly Interest payment on any Interest Payment Date pursuant to Section2(b) of this Note solely as a result of the operation of the proviso in the first sentence of Section 2(b) of this Note, then, for purposes of the first sentence in this Section 2(d) , the amount of the Interest payment that was not so made on such Interest Payment Date shall not bear interest at the Default Interest Rate; provided , however , that if any Accumulated Unpaid Interest Amounts are not paid when due in accordance with Section 2(c) of this Note, then such Accumulated Unpaid Interest Amounts shall bear interest at the Default Interest Rate in accordance with the first sentence of this Section 2(d) .
 
(e)   Prepayment of Principal .  The Company may prepay the outstanding principal amount of this Note, in whole or in part, at any time or from time to time, without premium or penalty; provided , however , that the Company may only make such prepayment to the extent that the Company, in making such prepayment, would not violate the Payment Covenant.  All such prepayments shall be applied to the outstanding principal amount of this Note.  Any prepayment shall be accompanied by payment of accrued interest on the amount so prepaid.
 
(f)   Payments of Accumulated Unpaid Interest Amounts .  To the extent that there is any Accumulated Unpaid Interest Amounts that remains unpaid, the Company may pay to the Holder, at any time and from time to time, the Accumulated Unpaid Interest Amounts, in whole or in part, without premium or penalty; provided , however , that the Company may only make such payment to the extent that the Company, in making such payment, would not violate the Payment Covenant.
 
(g)   Payment in Cash .  All payments of principal, Interest, default interest (if any), and Accumulated Unpaid Interest Amounts hereunder shall be paid in cash by wire transfer of immediately available funds to the account of the Holder as designated by the Holder to the Company in writing from time to time.  All payments (including prepayments) to be made by the Company on account of principal, Interest, default interest (if any), fees and other amounts owing hereunder shall be made without set off or counterclaim.
 
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(h)   Calculation of Interest . Any Interest and default interest (if any) payable hereunder shall be computed on the basis of a 360-day year and calculated using the actual number of days elapsed.
 
(i)   Failure to Make Payments .  If the Company does not make any payment of principal, interest or other amounts hereunder when due because such payment, if made, would violate the Payment Covenant, then the failure by the Company to make such payment shall not constitute an Event of Default.
 
3.   EVENTS OF DEFAULT .
 
If an Event of Default (other than any event described in clause (ii) of the definition of Event of Default) occurs and is continuing, the Holder shall have the right, upon written notice to the Company (an “ Acceleration Notice ”), to take either or both of the following actions, at the same or different times (i) declare all unpaid principal hereof, any accrued and unpaid Interest (including default interest (if any)) thereon, all Accumulated Unpaid Interest Amounts (including any default interest (if any) thereon), and any other amounts owing hereunder due and payable on the date specified in such Acceleration Notice, without presentment, demand, protest or any other notice of any kind, all of which are hereby waived by the Company, anything contained herein to the contrary notwithstanding; provided such date of payment must be at least two (2) Business Days following the date on which the Acceleration Notice is delivered to the Company, and/or (ii) exercise any rights and remedies under this Note or as permitted by law and/or in equity; and in the case of any event described in clause (ii) of the definition of Event of Default, all unpaid principal hereof, any accrued and unpaid Interest (including default interest (if any)) thereon, all Accumulated Unpaid Interest Amounts (including any default interest (if any) thereon), and any other amounts owing hereunder shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company, anything contained herein to the contrary notwithstanding; provided , however , that the Company shall only make such payment(s) if and only to the extent that such payment(s) would not violate the Payment Covenant.
 
5.            MISCELLANEOUS .

(a)   Failure to Exercise Rights not Waiver .  No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude any other or further exercise thereof. All rights and remedies of the Holder hereunder are cumulative and not exclusive of any rights or remedies otherwise available.  In the event that the Company does not pay any amount under this Note when such amount becomes due, the Company shall bear all costs incurred by the Holder in collecting such amount, including without limitation reasonable legal fees and expenses.
 
(b)   Notices .  Any notice, demand or request required or permitted to be given by the Company or the Holder pursuant to the terms of this Note shall be in writing and shall be deemed delivered (i) when delivered personally or by verifiable facsimile transmission, unless such delivery is made on a day that is not a Business Day, in which case such delivery will be deemed to be made on the next succeeding Business Day, (ii) on the next Business Day after timely delivery to an overnight courier and (iii) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid), addressed as follows:
 
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If to the Company:
 
InB:Manhattan Drug Company, Inc.
Integrated BioPharma, Inc.
225 Long Avenue
Hillside, New Jersey 07205
Attn: Chief Executive Officer and Chief Financial Officer
Tel: (973) 926-0816
Fax: (973) 926-1735
 
If to the Holder:
 
Vitamin Realty Associates, LLC
225 Long Avenue
Hillside, New Jersey 07205
Attention: Christina Kay
Tel: (973) 926-0663
Fax: (973) 926-1735
 
or as shall be designated by the Company or the Holder in writing to the other party hereto in accordance this Section 5(b) .

(c)   Amendments and Waivers .  No amendment or modification to this Note may be made or given except pursuant to a written instrument executed by the Company and the Holder.  No waiver of any provision of this Note may be made except pursuant to a written instrument executed by the party against whom such waiver is sought to be enforced.  Any waiver given pursuant hereto shall be effective only in the specific instance and for the specific purpose for which given.
 
(d)   Lost or Stolen Note .  Upon receipt by the Company of evidence of the loss, theft, destruction or mutilation of this Note, and (in the case of loss, theft or destruction) of indemnity or security reasonably satisfactory to the Company, and upon surrender and cancellation of the Note, if mutilated, the Company shall execute and deliver to the Holder a new Note identical in all respects to this Note.
 
(e)   Governing Law .  This Note shall be governed by and construed in accordance with the laws of the State of New York (without regard to conflicts of laws principles thereof, other than Section 5-1401 of the New York General Obligations Law) applicable to contracts made and to be performed entirely within the State of New York.
 
(f)   Successors and Assigns .  The terms and conditions of this Note shall inure to the benefit of and be binding upon the Company and the Holder and their respective successors (whether by merger or otherwise), assigns, executors, administrators, personal representatives, heirs and legatees.
 
(g)   Transfer of Note .
 
(i)   The Company may not sell, transfer or otherwise dispose of all or any part of this Note (including without limitation pursuant to a pledge) to any Person without the prior written consent of the Holder (and any attempted sale, transfer or other disposition without such consent shall be null and void).
 
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(ii)   The Holder may not sell, transfer or otherwise dispose of all or any part of this Note (including without limitation pursuant to a pledge) to any Person without the prior written consent of the Company (and any attempted sale, transfer or other disposition without such consent shall be null and void).   From and after the date of any such permitted sale, transfer or disposition, the transferee hereof shall be deemed to be the holder of a Note in the principal amount acquired by such transferee, and the Company shall, as promptly as practicable, issue and deliver to such transferee a new Note identical in all respects to this Note, in the name of such transferee, against surrender of this Note or as otherwise specified in Section 5(d) of this Note.
 
(h)   Usury .  This Note is subject to the express condition that at no time shall the Company be obligated or required to pay interest hereunder at a rate which could subject the Holder to either civil or criminal liability as a result of being in excess of the maximum interest rate which the Company is permitted by applicable law to contract or agree to pay.  If by the terms of this Note, the Company is at any time required or obligated to pay interest hereunder at a rate in excess of such maximum rate, the rate of interest under this Note shall be deemed to be immediately reduced to such maximum rate and the interest payable shall be computed at such maximum rate and all prior interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of the principal balance of this Note.
 
(i)   Expenses .  The Company shall pay to the Holder, on demand, all reasonable costs and expenses (including reasonable attorneys’ fees and expenses) incurred to collect any debt evidenced hereby.
 
(j)   Certain Waivers .  The Company hereby waives demand, presentment, protest and notice of non-payment, dishonor, and protest.
 
(k)   WAIVER OF JURY TRIAL .  THE COMPANY HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY.
 
(l)   Severability .  Any provision of this Note held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
 
(m)   Joint and Several Obligations .  The obligations of each Company hereunder are joint and several obligations.
 
[SIGNATURE PAGE FOLLOWS]
 
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IN WITNESS WHEREOF, the Company has caused this Note to be signed in its name by its duly authorized officer on the date first above written.
 
 
INB:MANHATTAN DRUG COMPANY, INC.
   
     
By:
   
 
Name:  
 
Title:  
 
 
 
INTEGRATED BIOPHARMA.INC.
   
     
By:
   
 
Name:  
 
Title:  
 











[Signature Page to Promissory Note (Vitamin Realty)]
 
Exhibit 99.1
 
 

NEWS RELEASE for June 29, 2012

Contact:                      Dina Masi, CFO
Integrated BioPharma, Inc                                                      
888-319-6962
investors@ibiopharma.com                                                       

INTEGRATED BIOPHARMA ANNOUNCES CLOSING OF
$11.7 MILLION REVOLVING CREDIT FACILITY AND REFINANCING OF SUBORDINATED DEBT

HILLSIDE, NEW JERSEY (June 29, 2012) - Integrated BioPharma, Inc. (OTC BB: INBP) announced today the closing of a new five year $11.7 million revolving credit and term facility with PNC Bank, National Association on June 27, 2012  and the refinancing of INBP’s subordinated debt.

The PNC Bank credit facility consists of a $8,000,000 revolving line of credit and a $3,727,000 term loan, secured by all assets of INBP and its active subsidiaries. INBP borrowed an initial revolving advance of approximately $2,679,000. Revolving credit line advances bear interest at PNC’s Base Rate or the Eurodollar Rate, at INBP’s option, plus 2.75%. The term loan bears interest at PNC’s Base Rate or the Eurodollar Rate, at INBP’s option, plus 3.25%.

INBP also announced today that on June 27, 2012 it completed a refinancing of its defaulted subordinated convertible note in the original principal amount of $4,500,000 held by CD Financial, LLC, an affiliate of two of INBP’s directors, and a second promissory note in the original principal amount of $300,000 held by CD Financial, LLC. As part of this refinancing, INBP issued to CD Financial, LLC two promissory notes, in the original principal amounts of $5,300,000 and $1,714,000. The notes are also secured by all assets of INBP and its active subsidiaries, bear a per annum interest rate of 6% and mature on July 7, 2017. The lien of CD Financial and its payment rights in respect of the notes are subordinated to PNC Bank.  The $5,300,000 promissory note is convertible at the option of CD Financial, LLC into common stock of INBP at a conversion price of $0.65 per share, subject to customary adjustments.

The proceeds of the initial PNC Bank advances and the refinancing of INBP’s subordinated convertible debt with CD Financial, LLC provided INBP with the capital necessary to repay its defaulted notes payable in the aggregate original principal amount of $7,000,000 held by Imperium Master Fund, LTD and three other parties (the “Imperium Parties”), a $1,000,000 forbearance fee under the Forbearance Agreement, dated as of October 14, 2012, as well as interest and expenses owed to the Imperium Parties and $805,000 representing an 11.5% premium owed on the original maturity date of the defaulted notes payable, November 15, 2009.
 
 
 
 

 

 
E. Gerald Kay, Chief Executive Officer, stated, “We are delighted to establish this relationship with PNC Bank which has allowed us to strengthen our financial condition and facilitate the growth of core business focused now in the manufacturing of tablets and capsules of nutritional supplements and the sale and distribution and sale of our branded liquid nutraceutical products.  The credit facility provides us with a flexible economic tool to assist us in managing our cash flows and to help us mitigate potential cash flow impediments to our planned growth."

About Integrated BioPharma Inc. (INBP)

Integrated BioPharma, Inc. is engaged primarily in manufacturing, distributing, marketing and sales of vitamins, nutritional supplements and herbal products. Further information is available at www.integratedbiopharma.com .

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, as well as assumptions, that, if they never materialize or prove incorrect, could cause the results of INBP to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements generally are identified by the words “expects,” “anticipates,” believes,” intends,” “estimates,” “should,” “would,” “strategy,” “plan” and similar expressions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The risks, uncertainties and assumptions include developments in the market and related products and services and other risks and uncertainties described in the section entitled “Risk Factors” in INBP’s most recent Annual Report on Form 10-K. Accordingly, INBP cannot give assurance that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on the results of operations or financial condition of INBP.