Amended and Restated Promissory Note dated January 19, 2006

$1,000,000.00	January 19, 2016, to be effective as of
	December 31, 2015
	(“Effective Date”)

 

 

 

 

 

 

 

 

 

 

(d)           All financial information relating to Borrower which has been or may hereafter be delivered by Borrower or on its behalf to Lender is true and correct and Borrower’s financial statements have been prepared in accordance with generally acceptable accounting principles consistently applied (except in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments).  Borrower has no material obligations or liabilities of any kind not disclosed in that financial information, and there has been no material adverse change in the financial condition of Borrower nor has Borrower suffered any damage, destruction or loss which has adversely affected its business or assets since the submission of the most recent financial information to Lender.

(e)           There does not exist any Event of Default under this Note or any default or violation by Borrower of or under any of the terms, conditions or obligations of:  (i) its organizational documents; (ii) any indenture, mortgage, deed of trust, franchise, permit, contract, agreement, or other instrument to which it is a party or by which it is bound that is material to Borrower; or (iii) any law, ordinance, regulation, ruling, order, injunction, decree, condition or other requirement applicable to or imposed upon it by any law, the action of any court or any governmental authority or agency that could reasonably be expected to have a material adverse effect on Borrower (on a consolidated basis); and the consummation of the transactions set forth herein will not result in any such default or violation or Event of Default.

(f)           Borrower has good and marketable title to the assets reflected on the most recent financial statements provided to Lender, free and clear of all liens and encumbrances, except for the following (“Permitted Liens”):  (i) current taxes and assessments not yet due and payable, (ii) liens to Amerisourcebergen Drug Corporation which are subordinated to the liens to Lender pursuant to a lien subordination agreement acceptable to Lender, (iii) liens to Smart Fill Management Group, Inc. which are junior to the liens to Lender, (iv) liens to Wells Fargo Bank, N.A. on specific equipment, and (v) liens to The Mission Bank on specific equipment.

(g)           None of the Loan Documents contains any untrue statement of material fact or omits a material fact necessary in order to make the statements contained in this Note or the Loan Documents not misleading.  There is no fact known to Borrower which materially adversely affects or, so far as Borrower can now reasonably foresee, could reasonably be expected to materially adversely affect the business, assets, operations,  condition (financial or otherwise) or results of operation of Borrower (on a consolidated basis) and which has not otherwise been fully set forth in this Note.

5.           Financial Information.  Borrower shall maintain books and records in accordance with generally accepted accounting principles consistently applied (“GAAP”), except in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments, and shall give representatives of the Lender access thereto at all reasonable times, including permission to examine, copy and make abstracts from any of such books and records and such other information as the Lender may from time to time reasonably request, and Borrower will make available to the Lender for examination copies of any reports, statements and returns which Borrower may make to or file with any federal, state or local governmental department, bureau or agency. Borrower shall deliver the following to Lender during the entire time during which any amount is due under this Note:

(a)           As soon as practicable after the end of each calendar month in each year, beginning March 31, 2015, and in any event within thirty  (30) days after the end of each calendar month, an internally prepared balance sheet of Borrower as of the end of such month, and statements of cash flows, shareholders' equity of Borrower for such month and income statements, certified as complete and correct by the principal financial officer of Borrower, subject to changes resulting from year-end adjustments;

 

(b)           As soon as practicable after the end of each calendar quarter beginning March 31, 2015, and in any event within forty five  (45) days after the end of each calendar quarter, a consolidated balance sheet of Borrower as of the end of such quarter, and consolidated statements of cash flows, shareholders’ equity of Borrower  for such quarter, certified as complete and correct by the principal financial officer of Borrower, subject to changes resulting from year-end adjustments; provided, however, that Borrower may deliver its Form 10-Q filed with the SEC at the time required herein to satisfy this requirement.

 

(c)           As soon as practicable after the end of each fiscal year, beginning with the fiscal year ending December 31, 2014, and in any event within one hundred twenty (120) days after the end of each fiscal year, audited financial statements of Borrower, including, a balance sheet of Borrower as of the end of such year, and statements of cash flows, owners' equity of Borrower for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and accompanied by an audit report of independent certified public accountants, selected by Borrower and reasonably satisfactory to Lender, which report and opinion shall be prepared in accordance with generally accepted auditing standards; provided, however, that Borrower may deliver its Form 10-K filed with the SEC at the time required herein to satisfy this requirement.

 

(d)           As soon as practicable after the end of each calendar month in each year, beginning January 31, 2016, and in any event within thirty  (30) days after the end of each calendar month, a report on the status of the licenses held by HEALTHWAREHOUSE.COM, INC. or any other Borrower, showing each state in which licenses are held and the status of the licenses, i.e., active, inactive, suspended, notifications received, etc.

(e)           With reasonable promptness, such other data and information as from time to time may be reasonably requested by Lender.

 

 

 

 

 

 

 

 

 

 

 

6.            Affirmative Covenants.  Borrower agrees that from the date of execution of this Note until this Note is repaid in full Borrower will:

(a)           Pay and discharge when due all indebtedness and all taxes, assessments, charges, levies and other liabilities imposed upon Borrower, its income, profits, property or business, except those which currently are being contested in good faith by appropriate proceedings and for which Borrower shall have set aside adequate reserves or made other adequate provision with respect thereto acceptable to the Lender in its reasonable discretion.

(b)           Do all things necessary to (i) maintain, renew and keep in full force and effect its organizational existence and all rights, permits and franchises necessary to enable it to continue its business as currently conducted; (ii) continue in operation in substantially the same manner as at present; (iii) keep its properties in good operating condition and repair (normal wear and tear excepted); and (iv) make all necessary and proper repairs, renewals, replacements, additions and improvements thereto.

(c)           Maintain, with insurers reasonably satisfactory to Lender, insurance with respect to its property and business against such casualties and contingencies, of such types and in such amounts,  as is customary for established companies engaged in the same or similar business and similarly situated.

(d)           Comply in all material respects with all laws applicable to Borrower and to the operation of its business (including without limitation any statute, ordinance, rule or regulation relating to employment practices, pension benefits or environmental, occupational and health standards and controls).

7.  Negative Covenants.  Borrower agrees that from the date of execution of this Note until this Note is repaid in full Borrower will not, without the Lender’s prior written consent:

(a)           Create, incur, assume or suffer to exist any indebtedness for borrowed money other than:  (i) this Note; (ii) open account trade debt incurred in the ordinary course of business and not past due; (iii) existing indebtedness secured by the Permitted Liens; and (iv) indebtedness in respect of purchase money financings of equipment in an amount not in excess of $250,000.00 in the aggregate outstanding.

(b)            Create, assume, incur or permit to exist any mortgage, pledge, encumbrance, security interest, lien or charge of any kind upon any of its property, now owned or hereafter acquired, or acquire or agree to acquire any kind of property subject to any conditional sales or other title retention agreement, except for Permitted Liens and liens securing purchase money indebtedness permitted pursuant to Section 7(a) above, with the liens limited to the equipment purchased.

(c)           Guarantee, endorse or become contingently liable for the obligations of any person, firm, corporation or other entity, except in connection with the endorsement and deposit of checks in the ordinary course of business for collection.

(d)           Purchase or hold beneficially any stock, other securities or evidences of indebtedness of, or make or have outstanding, any loans or advances to, or otherwise extend credit to, or make any investment or acquire any interest whatsoever in, any other person, firm, corporation or other entity; provided, however, that Borrower may do so with regards to any Borrower.

(e)           Liquidate or dissolve, or merge or consolidate with or into any person, firm, corporation or other entity, or sell, lease, transfer or otherwise dispose of all or any substantial part of its property, assets, operations or business, whether now owned or hereafter acquired.

(f)           Make or permit any change (i) in its form of organization or (ii) in the nature of its business as carried on as of the date hereof.

(g)           Declare or pay any dividends on or make any distribution with respect to any class of its equity or ownership interest, or purchase, redeem, retire or otherwise acquire any of its equity.

(h)           Make acquisitions of all or substantially all of the property or assets of any person, firm, corporation or other entity.

8.           Financial Covenants.  Borrower agrees that until this Note is repaid in full, Borrower will comply with the following financial covenant (“Financial Covenant”):

(a)          Borrower will not permit its Adjusted EBITDAS at the end of each fiscal quarter to be less than the following:

Fiscal Quarter Ending                                                Minimum Adjusted EBITDAS

December 31, 2015                                                      $(100,000)

March 31, 2016                                                            $(125,000)

For the purpose of this Section 8, Adjusted EBITDAS shall be defined as Net Income before interest expense, taxes, and non-cash expenses including depreciation and amortization and all stock based compensation expense.

 

 

 

 

 

 

 

 

 

 

9.           Events of Default.  The following events shall constitute events of default under this Note (each, an “Event of Default”):

(i)           Borrower fails to make any payment of principal and/or interest when and as the same shall become due and payable and such amount remains unpaid five (5) days thereafter;

(ii)          any representation or warranty made by Borrower herein or in any of the other Loan Documents is incorrect in any material respect when made or reaffirmed;

(iii)         the filing by or against Borrower of any proceeding in bankruptcy, reorganization, debt adjustment or receivership, or any assignment by Borrower for the benefit of creditors; provided, that any involuntary bankruptcy filed against Borrower shall not be an Event of Default unless such involuntary bankruptcy case is not dismissed within 60 days.

(iv)         Borrower fails to observe or perform any covenant, undertaking or agreement set forth herein or in any of the other Loan Documents and such failure is not remedied within 10 days;

(v)          Borrower defaults under any other debt, liability or obligation to the Lender, or fails to pay or to otherwise observe and perform any obligations imposed upon Borrower under any indebtedness in excess of $100,000.00 (“Material Indebtedness”), if such default shall continue for more than the period of grace, if any, specified therein;

(vi)         if any other Event of Default (said term being defined in this Note as it is defined in the Loan Documents) should occur and shall continue for more than the period of grace, if any specified therein;

(vii)        any event occurs which could reasonably be expected to have a material adverse effect on the Collateral or on Borrower's financial condition, operations, assets or prospects;

(viii)       the entry of any judgment or lien against Borrower by or in favor of any third person in excess of $10,000.00 which judgment or lien is not satisfied, discharged or bonded off or the subject of an appeal filed by Borrower in connection with same within thirty (30) days from the date of entry of said judgment or lien and/or which is not otherwise stayed; and

(ix)          Borrower shall transfer assets to others (excluding any Borrower) for less than fair value or in other than the ordinary course of business, without Lender’s prior written consent.

10.           Remedies.  Upon the occurrence of an Event of Default, in addition to any other action permitted to be taken by Lender hereunder or under any other of the Loan Documents:  (a) at the option of Lender for so long as any Event of Default shall continue to exist, the unpaid principal balance of this Note shall, for the period beginning with the date of the occurrence of the Event of Default and continuing for so long as any Event of Default exists, bear interest at a rate (the “Default Rate”) equal to five percent (5.0%) per annum above the otherwise applicable interest rate; and (b) Lender may, at its option, and regardless of whether Lender shall have exercised the option provided for in clause (a) of this paragraph, declare the entire unpaid principal balance of this Note and all accrued but unpaid interest hereon any other sums then payable in accordance with this Note to be immediately due and payable, whereupon all such sums shall be immediately due and payable and shall thereafter bear interest at the Default Rate and Lender shall have the remedies of a secured party under the laws of the State of Ohio with respect to all property mortgaged or pledged as security for this Note and all of the rights and remedies available under the Loan Documents.  No delay or omission on the Lender’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 Lender’s action or inaction impair any such right or power.  All remedies provided for herein upon any default by Borrower shall be cumulative and not exclusive.

Borrower hereby agrees that:  (a) in addition to any other right, after any Event of Default, Borrower will pay to Lender upon demand any and all reasonable costs, expenses and fees, including without limitation reasonable attorneys’ fees incurred before or after suit is commenced in enforcing payment hereof; (b) Borrower waives all setoffs and any and all applicable exemption rights; and (c) the acceptance by Lender of any late payment or other performance which does not strictly comply with the terms of this Note or of any Loan Document shall not be deemed to be a waiver of any rights of Lender arising as a result of such failure to comply.

11.           Waivers.  Borrower, and any endorsers and guarantors hereof, and all others who may become liable for all or any part of the indebtedness evidenced by this Note, severally waive diligence, presentment for payment, protests, notice of dishonor and of nonpayment and protest, and do hereby consent to any number of forbearances, renewals or extensions of the time of payment hereof, releases or substitutions of all or any part of the security for the payment hereof or release of any party liable for this obligation and waive all defenses based upon suretyship or impairment of collateral.  Any such extension or release may be made without notice to any of said parties and without discharging their liability. Borrower hereby waives all relief from any and all appraisement or exemption laws now in force or hereafter enacted.

12.           Release.  Borrower hereby releases and/or forever discharges Lender, including its members, managers, employees, agents, attorneys, officers, directors, representatives and affiliates (collectively “Lender Parties”), from any and all claims, demands, actions, causes of action, liabilities, losses or costs, whether known or unknown, which they have, may have, claim to have or allege to have against Lender Parties as of the Execution Date, which relate to this Note or the terms of this Note, or any instrument executed prior to the date of this Note including the Loan Documents, and/or any other actions taken or not taken by the Lender Parties in connection with the Obligations prior to the date this Note is executed.

 

 

 

 

 

 

 

 

 

 

 

If any provision of this Note is found to be invalid by a court, all the other provisions of this Note will remain in full force and effect.  In no event shall the interest rate charged on this Note exceed the maximum rate of interest permitted under applicable state and/or federal usury laws.  Any payment of interest that would be deemed unlawful under applicable laws for any reason shall be deemed received on account of, and will automatically be applied to reduce, the principal sum outstanding and any other sums (other than interest) due and payable to Lender under this Note, and the provisions hereof shall be deemed amended to provide for the highest rate of interest permitted under applicable law.

Borrower agrees that there are no conditions or understandings which are not expressed in this Note and the documents referred to herein.  No modification, amendment or waiver of, or consent to any departure by Borrower from, any provision of this Note will be effective unless made in a writing signed by the Lender and Borrower and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.

Any and all references in this Note to any other document or documents shall be references to such other document or documents as the same may from time to time be modified, amended, renewed, consolidated or extended.

The term “Borrower” as used herein shall include the undersigned and its successors and assigns; provided, however, that Borrower may not assign its obligations hereunder and Lender may assign this Note at any time (i) to a person or entity related to Lender; (ii) with the prior written consent of Borrower, as long as no Event of Default exists and (iii) without the consent of Borrower if any Event of Default exists, but with prior written notice to Borrower (unless Lender is prohibited by law from sending such notice).  If there is more than one Borrower hereunder, their obligations shall be joint and several.

14.           Jurisdiction. This Note shall be governed by Ohio law.  Borrower hereby submits to personal jurisdiction in the federal and state courts in Hamilton County, Ohio; waives any and all personal rights under the laws of any state or country to object to jurisdiction within the State of Ohio for the purposes of litigation to enforce this Note, or any other Loan Document; and consents to be sued in the federal and state courts in Hamilton County, Ohio. Nothing contained in this Note, however, shall prevent Lender from bringing any action or exercising any rights under this Note within any other state or country.  Borrower agrees that service of process may be made, and personal jurisdiction over Borrower obtained, by serving a copy of the Summons and Complaint upon Borrower at its address set forth in this Note in accordance with the applicable laws of the State of Ohio.

15.           WAIVER OF JURY TRIAL.  BORROWER HEREBY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE.

16.           CONFESSION OF JUDGMENT.  Borrower authorizes any attorney to appear in any court of record in or of the State of Ohio, after this Note becomes due and payable, whether by its terms or upon default, to waive service of process and enter judgment by confession against Borrower in favor of the Lender or any holder hereof for the outstanding principal of and accrued but unpaid interest on this Note, plus all costs of collection, including, without limitation, court costs and reasonable attorney’s fees, and thereby to waive and release all errors in the proceedings and judgment, and all rights of appeal from such judgment and stay of execution.  Stay of execution and all exemptions are hereby waived.  Borrower also agrees that the attorney acting for Borrower as set forth in this paragraph may be compensated by Lender for such services, and Borrower waives any conflict of interest caused by such representation and compensation arrangement.  If an obligation is referred to an attorney for collection, and the payment is obtained without the entry of a judgment, the obligors will pay to Lender its attorneys' fees.

 

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