SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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) December 10, 1996.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-8801 NY 11-2578230
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
400 Rabro Drive East, Hauppauge, New York 11788
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 582-5900
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
Item 5. Other Events.
Effective as of December 10, 1996, Graham-Field Health Products, Inc., a
Delaware corporation (the "Company"), and certain of its subsidiaries, including
Everest & Jennings, Inc. (collectively, the "Borrowers"), entered into a
syndicated three-year senior secured revolving credit facility (the "Credit
Facility") for up to $55 million of borrowings, including letters of credit and
banker's acceptances, arranged by IBJ Schroder Bank & Trust Company (the
"Bank"), as agent. Under the terms of the Revolving Credit and Security
Agreement dated as of December 10, 1996 (the "Credit Agreement"), borrowings
will, at the Company's option, bear interest at the Bank's prime rate or 2.25%
above LIBOR. The proceeds from the Credit Facility will be used to (i) refinance
certain existing indebtedness of the Company, including the indebtedness (x)
under the terms of the Note and Warrant Agreement dated as of March 12, 1992, as
amended, with John Hancock Mutual Life Insurance Company, and (y) to Chase
Manhattan Bank, and (ii) provide for the nationwide roll-out of the Graham-Field
Express program and for the ongoing working capital needs of the Company. The
credit facility is secured by the Borrowers' receivables, inventory and proceeds
thereof.
The Credit Agreement contains certain customary terms and provisions,
including limitations with respect to the incurrence of additional debt, liens,
transactions with affiliates, consolidations, mergers and acquisitions, sales of
assets, dividends and other distributions (other than the payment of dividends
to BIL (Far East Holdings) Limited in accordance with the terms of the Company's
Series B and Series C Cumulative Convertible Preferred Stock). In addition, the
Credit Agreement contains certain financial covenants, which become effective as
of the end of the fiscal quarter ending June 30, 1997, including a cash flow
coverage and leverage ratio, and an earnings before interest and taxes covenant.
The text of the Credit Agreement is included as Exhibit 10 to this Current
Report on Form 8-K.
- 2 -
<PAGE>
Item 7. Financial Statements, Pro-Forma Financial Information and Exhibits.
(c) Exhibits:
10 Revolving Credit and Security Agreement dated as of December
10, 1996 (the "Revolving Credit Agreement"), by and among IBJ
Schroder Bank & Trust Company (as lender and as agent),
Graham-Field Health Products, Inc., Graham-Field, Inc.,
Graham-Field Express, Inc., Graham-Field Temco, Inc.,
Graham-Field Distribution, Inc., Graham-Field Bandage, Inc.
Graham-Field Express (Puerto Rico), Inc., and Everest &
Jennings, Inc.*
99(a) Press Release dated December 12, 1996.
- ----------
* The Company shall furnish all omitted schedules and exhibits to the Revolving
Credit Agreement, upon the request of the Securities and Exchange Commission.
- 3 -
<PAGE>
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 hereunto duly authorized.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
Date: December 20, 1996 By: /s/Richard S. Kolodny
---------------------
Name: Richard S. Kolodny
Title: Vice President, General
Counsel and Secretary
- 4 -
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
10 Revolving Credit and Security Agreement dated as of __
December 10, 1996 (the "Revolving Credit Agreement"),
by and among IBJ Schroder Bank & Trust Company (as
lender and as agent), Graham-Field Health Products,
Inc., Graham-Field, Inc., Graham-Field Express, Inc.,
Graham-Field Temco, Inc., Graham-Field Distribution,
Inc., Graham-Field Bandage, Inc. Graham-Field Express
(Puerto Rico), Inc., and Everest & Jennings, Inc.*
99(a) Press Release dated December 12, 1996. __
- --------
* The Company shall furnish all omitted schedules and exhibits to the Revolving
Credit Agreement, upon the request of the Securities and Exchange Commission.
REVOLVING CREDIT
AND
SECURITY AGREEMENT
IBJ SCHRODER BANK & TRUST COMPANY
(AS LENDER AND AS AGENT)
WITH
GRAHAM-FIELD HEALTH PRODUCTS, INC.
GRAHAM-FIELD, INC.
GRAHAM-FIELD EXPRESS, INC.
GRAHAM-FIELD TEMCO, INC.
GRAHAM-FIELD DISTRIBUTION, INC.
GRAHAM-FIELD BANDAGE, INC.
GRAHAM-FIELD EXPRESS (PUERTO RICO), INC.
AND
EVEREST & JENNINGS, INC.
(BORROWERS)
December 10, 1996
<PAGE>
TABLE OF CONTENTS
I. DEFINITIONS.......................................................... 1
1.1. Accounting Terms............................................ 1
1.2. General Terms............................................... 1
1.3. Uniform Commercial Code Terms............................... 19
1.4. Certain Matters of Construction............................. 19
II. ADVANCES, PAYMENTS................................................... 19
2.1. (a) Revolving Advances................................... 19
(b) Discretionary Rights................................. 20
2.2. Procedure for Revolving Advances Borrowing.................. 20
2.3. Disbursement of Advance Proceeds............................ 22
2.4. Use of Proceeds............................................. 23
2.5. Maximum Advances............................................ 23
2.6. Repayment of Advances....................................... 23
2.7. Repayment of Excess Advances................................ 24
2.8. Statement of Account........................................ 24
2.9. Letters of Credit and Acceptances........................... 24
2.10. Issuance of Letters of Credit; Creation of
Acceptances................................................. 24
2.11. Requirements For Issuance of Letters of Credit and
Acceptances................................................. 26
2.12. Additional Payments......................................... 28
2.13. Manner of Borrowing and Payment............................. 28
2.14. Defaulting Lender........................................... 30
2.15. Foreign Exchange Contracts.................................. 31
2.16. Air Releases and Steamship Guarantees....................... 32
III. INTEREST AND FEES.................................................... 32
3.1. Interest.................................................... 32
3.2. Letter of Credit and Acceptance Fees........................ 33
3.3. Fee Letter.................................................. 34
3.4. Facility Fee................................................ 34
3.5. Computation of Interest and Fees............................ 34
3.6. Maximum Charges............................................. 34
3.7. Increased Costs............................................. 34
3.8. Basis For Determining Interest Rate Inadequate or
Unfair...................................................... 35
3.9. Capital Adequacy............................................ 36
IV. COLLATERAL: GENERAL TERMS........................................... 37
4.1. Security Interest in the Collateral......................... 37
4.2. Perfection of Security Interest............................. 37
4.3. Disposition of Collateral................................... 37
4.4. Preservation of Collateral.................................. 38
4.5. Ownership of Collateral..................................... 38
4.6. Defense of Agent's and Lenders' Interests................... 38
4.7. Books and Records........................................... 39
4.8. Financial Disclosure........................................ 39
4.9. Compliance with Laws........................................ 40
4.10. Inspection of Premises...................................... 40
4.11. Insurance................................................... 40
-i-
<PAGE>
4.12. Failure to Pay Insurance.................................... 41
4.13. Payment of Taxes............................................ 41
4.14. Payment of Leasehold Obligations............................ 42
4.15. Receivables................................................. 42
(a) Nature of Receivables................................ 42
(b) Solvency of Customers................................ 42
(c) Locations of Borrower................................ 42
(d) Collection of Receivables............................ 43
(e) Notification of Assignment of Receivables............ 43
(f) Power of Agent to Act on Borrowers' Behalf........... 43
(g) No Liability......................................... 44
(h) Establishment of a Lockbox Account, Dominion
Account.............................................. 44
(i) Adjustments.......................................... 45
4.16. Inventory................................................... 45
4.17. Maintenance of Equipment.................................... 45
4.18. Exculpation of Liability.................................... 45
4.19. Environmental Matters....................................... 45
4.20. Financing Statements........................................ 48
V. REPRESENTATIONS AND WARRANTIES....................................... 48
5.1. Authority................................................... 48
5.2. Formation and Qualification................................. 48
5.3. Survival of Representations and Warranties.................. 48
5.4. Tax Returns................................................. 49
5.5. Intentionally Omitted....................................... 49
5.6. Corporate Name.............................................. 49
5.7. Environmental Compliance.................................... 49
5.8. Solvency; No Litigation, Violation, Indebtedness
or Default.................................................. 50
5.9. Patents, Trademarks, Copyrights and Licenses................ 51
5.10. Licenses and Permits........................................ 52
5.11. Default of Indebtedness..................................... 52
5.12. No Default.................................................. 52
5.13. No Burdensome Restrictions.................................. 52
5.14. No Labor Disputes........................................... 52
5.15. Margin Regulations.......................................... 52
5.16. Investment Company Act...................................... 53
5.17. Disclosure.................................................. 53
5.18. Delivery of Merger Agreement and the Stockholders
Agreement................................................... 53
5.19. Swaps....................................................... 53
5.20. Conflicting Agreements...................................... 53
5.21. Application of Certain Laws and Regulations................. 53
5.22. Business and Property of Borrowers.......................... 53
VI. AFFIRMATIVE COVENANTS................................................ 54
6.1. Payment of Fees............................................. 54
6.2. Conduct of Business and Maintenance of Existence
and Assets.................................................. 54
6.3. Violations.................................................. 54
6.4. Government Receivables...................................... 54
6.5. FDA Products................................................ 55
6.6. Cash Flow Coverage Ratio.................................... 55
6.9. Execution of Supplemental Instruments....................... 55
-ii-
<PAGE>
6.10. Payment of Indebtedness..................................... 56
6.11. Standards of Financial Statements........................... 56
6.12. Exercise of Rights.......................................... 56
VII. NEGATIVE COVENANTS................................................... 56
7.1. Merger, Consolidation, Acquisition and Sale of
Assets...................................................... 56
7.2. Creation of Liens........................................... 58
7.3. Guarantees.................................................. 58
7.4. Investments................................................. 58
7.5. Loans....................................................... 58
7.6. Intentionally Omitted....................................... 59
7.7. Dividends................................................... 59
7.8. Indebtedness................................................ 59
7.9. Nature of Business.......................................... 60
7.10. Transactions with Affiliates................................ 60
7.11. Intentionally Omitted....................................... 60
7.12. Subsidiaries................................................ 60
7.13. Fiscal Year and Accounting Changes.......................... 60
7.14. Pledge of Credit............................................ 60
7.15. Amendment of Articles of Incorporation, By-Laws............. 61
7.16. Compliance with ERISA....................................... 61
7.17. Prepayment of Indebtedness.................................. 61
7.18. Subordinated Note........................................... 61
7.19. Other Agreements............................................ 62
VIII. CONDITIONS PRECEDENT................................................. 62
8.1. Conditions to Initial Advances.............................. 62
(a) Note................................................. 62
(b) Filings, Registrations and Recordings................ 62
(c) Corporate Proceedings of Borrowers................... 62
(d) Incumbency Certificates of Borrowers................. 62
(e) Certificates......................................... 62
(f) Good Standing Certificates........................... 63
(g) Legal Opinion........................................ 63
(h) No Litigation........................................ 63
(i) Financial Condition Certificate...................... 63
(j) Collateral Examination............................... 63
(k) Fees................................................. 63
(l) Intentionally Omitted................................ 63
(m) Merger Documents and Stockholder Agreement........... 63
(n) Subordination Agreements............................. 64
(o) Capital Restructuring................................ 64
(p) Insurance............................................ 64
(q) Payment Instructions................................. 64
(r) Blocked Accounts..................................... 64
(s) Consents............................................. 64
(t) No Adverse Material Change........................... 64
(u) Leasehold Agreements................................. 65
(v) Subordinated Note.................................... 65
(w) Guarantees and Other Documents....................... 65
(x) Contract Review...................................... 65
(y) Closing Certificate.................................. 65
(aa) Indebtedness........................................... 65
(ab) BIL Indemnity.......................................... 65
-iii-
<PAGE>
(ac) Other................................................ 65
8.2. Conditions to Each Advance.................................. 65
(a) Representations and Warranties....................... 66
(b) No Default........................................... 66
(c) Maximum Advances..................................... 66
IX. INFORMATION AS TO BORROWER........................................... 66
9.1. Disclosure of Material Matters.............................. 66
9.2. Schedules................................................... 66
9.3. Environmental Reports....................................... 67
9.4. Litigation.................................................. 67
9.5. Material Occurrences........................................ 67
9.6. Government Receivables...................................... 67
9.7. Annual Financial Statements................................. 68
9.8. Quarterly Financial Statements.............................. 68
9.9. Monthly Financial Statements................................ 69
9.10. Other Reports............................................... 69
9.11. Additional Information...................................... 69
9.12. Projected Operating Budget.................................. 69
9.13. Variances From Operating Budget............................. 70
9.14. Notice of Suits, Adverse Events............................. 70
9.15. ERISA Notices and Requests.................................. 70
9.16. Additional Documents........................................ 71
X. EVENTS OF DEFAULT.................................................... 71
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT........................... 74
11.1. Rights and Remedies......................................... 74
11.2. Agent's Discretion.......................................... 75
11.3. Setoff...................................................... 75
11.4. Rights and Remedies not Exclusive........................... 75
XII. WAIVERS AND JUDICIAL PROCEEDINGS..................................... 75
12.1. Waiver of Notice............................................ 76
12.2. Delay....................................................... 76
12.3. Jury Waiver................................................. 76
XIII. EFFECTIVE DATE AND TERMINATION....................................... 76
13.1. Term........................................................ 76
13.2. Termination................................................. 76
XIV. REGARDING AGENT...................................................... 77
14.1. Appointment................................................. 77
14.2. Nature of Duties............................................ 77
14.3. Lack of Reliance on Agent and Resignation................... 78
14.4. Certain Rights of Agent..................................... 79
14.5. Reliance.................................................... 79
14.6. Notice of Default........................................... 79
14.7. Indemnification............................................. 79
14.8. Agent in its Individual Capacity............................ 80
14.9. Delivery of Documents....................................... 80
14.10. Borrowers' Undertaking to Agent............................. 80
XV. BORROWING AGENCY..................................................... 80
15.1. Borrowing Agency Provisions................................. 80
-iv-
<PAGE>
15.2. Waiver of Subrogation....................................... 81
XVI. MISCELLANEOUS........................................................ 81
16.1. Governing Law............................................... 81
16.2. Entire Understanding........................................ 82
16.3. Successors and Assigns; Participations; New
Lenders..................................................... 83
16.4. Application of Payments..................................... 85
16.5. Indemnity................................................... 85
16.6. Notice...................................................... 86
16.7. Survival.................................................... 87
16.8. Severability................................................ 87
16.9. Expenses.................................................... 87
16.10. Injunctive Relief........................................... 87
16.11. Consequential Damages....................................... 87
16.12. Captions.................................................... 87
16.13. Counterparts; Telecopied Signatures......................... 88
16.14. Construction................................................ 88
16.15. Confidentiality............................................. 88
16.16. Publicity................................................... 88
-v-
<PAGE>
List of Exhibits and Schedules
Exhibits
Exhibit 2.1(a) Revolving Credit Notes
Exhibit 2.10 Acceptance
Exhibit 6.4 Form of Assignment of Claims
Exhibit 8.1(g)(i) Legal Opinion of Milbank, Tweed, Hadley &
McCloy
Exhibit 8.1(g)(ii) Legal Opinion of Stikeman, Elliot
Exhibit 8.1(g)(iii) Legal Opinion of Fiddler, Gonzalez &
Rodriguez
Exhibit 8.1(i) Financial Condition Certificate
Exhibit 8.1(ab) BIL Assignment
Exhibit 15.3 Commitment Transfer Supplement
Schedules
Schedule 1.2 Permitted Encumbrances
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.15(c) Location of Executive Offices
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 5.7 Environmental
Schedule 5.8(b) Litigation
Schedule 5.8(d) Plans
Schedule 5.9 Intellectual Property, Challenges
Schedule 5.10 Licenses and Permits
Schedule 5.14 Labor Disputes
Schedule 7.3 Guarantees
<PAGE>
REVOLVING CREDIT
AND
SECURITY AGREEMENT
Revolving Credit and Security Agreement dated as of December 10, 1996
among GRAHAM-FIELD HEALTH PRODUCTS, INC., a corporation organized under the laws
of the State of Delaware ("Holdings"), GRAHAM-FIELD, INC., a corporation
organized under the laws of the State of New York ("Field"), GRAHAM-FIELD
EXPRESS, INC., a corporation organized under the laws of the State of Delaware
("Express"), GRAHAM-FIELD TEMCO, INC., a corporation organized under the laws of
the State of New Jersey ("Temco"), GRAHAM-FIELD DISTRIBUTION, INC., a
corporation organized under the laws of the State of Missouri ("Distribution"),
GRAHAM-FIELD BANDAGE, INC., a corporation organized under the laws of the State
of Rhode Island ("Bandage"), GRAHAM-FIELD EXPRESS (PUERTO RICO), INC., a
corporation organized under the laws of the State of Delaware ("GFPR") and
EVEREST & JENNINGS, INC., a corporation organized under the laws of the State of
California ("E & J"), (Holdings, Field, Express, Temco, Distribution, Bandage,
GFPR and E & J, 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 IBJ SCHRODER BANK
& TRUST COMPANY, a New York banking corporation ("IBJS"), as agent for Lenders
(IBJS, in such capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, Borrowers, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, the Notes, 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 the
audited financial statements of Holdings for the fiscal year ended December 31,
1995.
1.2. General Terms. For purposes of this Agreement the following terms
shall have the following meanings:
"Acceptances" shall mean any existing and future drafts which
involve any Borrower or beneficiary under a Letter of Credit as drawer that are
processed and accepted for payment by Agent or other accepting bank in its
absolute discretion.
<PAGE>
"Accountants" shall have the meaning set forth in Section 9.7
hereof.
"Advances" shall mean and include the Revolving Advances,
Letters of Credit, Acceptances and the Foreign Exchange Obligations.
"Advance Rates" shall have the meaning set forth in Section
2.1(a) hereof.
"Affiliate" of any Person shall mean (a) any other Person
(other than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with such Person, or (b) any other
Person who is a director or executive officer (as defined in Rule 3b-7
promulgated under the Securities Exchange Act of 1934) (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 20% or more of the securities having
ordinary voting power for the election of directors of such Person, or (y) to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Agent" shall have the meaning set forth in the preamble to
this Agreement and shall include its successors and assigns.
"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 and (ii) the
Federal Funds Rate in effect on such day plus 1/2 of 1%.
"Authority" shall have the meaning set forth in Section
4.19(d).
"Banker's Acceptance Rate" shall mean with respect to any
Acceptance hereunder, a discount charge (calculated with respect to the face
amount of such Acceptance on the basis of a 360-day year for the number of days
from the date such Acceptance is accepted by Agent (the "Acceptance Date") to
its maturity date) at a rate per annum equal to the sum of (a) the discount rate
in the New York banker's acceptance market on the Acceptance Date as determined
by the accepting bank in its sole discretion, plus (b) one and one-half percent
(1.50%).
"Base Rate" shall mean the base commercial lending rate of IBJS
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 IBJS 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 IBJS to any particular class or category of
customers of IBJS.
-2-
<PAGE>
"BIL" shall mean BIL (Far East Holdings) Limited, a Hong Kong
corporation, and shall include, where applicable, its Affiliates.
"Blocked Accounts" shall have the meaning set forth in Section
4.15(h).
"Borrower" or "Borrowers" shall have the meaning set forth in
the preamble to this Agreement and shall extend to all successors and assigns of
such Persons.
"Borrowers on a Consolidated Basis" shall mean the
consolidation in accordance with GAAP of the accounts or other items of Holdings
and its Subsidiaries.
"Borrowers' Account" shall have the meaning set forth in
Section 2.8.
"Borrowing Agent" shall mean Field.
"Business Day" shall mean with respect to Eurodollar Rate
Loans, any day on which commercial banks are open for domestic and international
business, including dealings in Dollar deposits in London, England and New York,
New York and with respect to all other matters, any day other than a day on
which commercial banks in New York are authorized or required by law to close.
"Cash Flow" for any period, shall mean the sum of (i) EBITDA
minus (ii) the sum of (a) capital expenditures paid by Borrowers on a
Consolidated Basis during such period plus (b) taxes paid and taxes required to
be paid (subject to any and all applicable extensions) by Borrowers on a
Consolidated Basis during such period plus (c) cash dividends paid by Borrowers
on a Consolidated Basis during such period.
"Cash Flow Coverage Ratio" shall mean, for any period, the
ratio of (a) Cash Flow during such period to (b) Total Debt Payments during such
period.
"CERCLA" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. ss.ss.9601 et seq.
"Change of Control" shall mean (a) the occurrence of any event
(whether in one or more transactions) which results in a transfer of control of
any Borrower to a Person who is not an Original Owner or (b) any merger or
consolidation of or with any Borrower with a Person who is not a Borrower or any
direct or indirect Subsidiary of a Borrower or sale of all or substantially all
of the property or assets of any Borrower other than to a Borrower or any direct
or indirect Subsidiary of a Borrower or as permitted pursuant to Section 7.1
hereof. For purposes of this definition, (i) "control of Borrower" shall mean
the power, direct or indirect (x) to vote 50% or more of the securities having
ordinary voting power for the election of directors of any Borrower
-3-
<PAGE>
or (y) to direct or cause the direction of the management and policies of any
Borrower by contract or otherwise and (ii) the definition of "Borrower" shall
include E & J Canada and E & J International.
"Change of Ownership" shall mean the occurrence of one or more
of the following events:
(a) the direct or indirect sale, lease, exchange or other
transfer of all or substantially all of the assets of Holdings to any Person or
entity or group of Persons or entities acting in concert as a partnership or
other group (a "Group of Persons") other than a Person described in clause (a)
of the definition of Affiliate;
(b) the consummation of any consolidation or merger of Holdings
with or into another corporation with the effect that the stockholders of
Holdings immediately prior to the date of the consolidation or merger hold
immediately after such merger or consolidation less than 51% of the combined
voting power of the outstanding voting securities of the surviving entity of
such merger, or the corporation resulting from such consolidation, ordinarily
having the right to vote in the election of directors (apart from rights
accruing under special circumstances) immediately after such merger or
consolidation;
(c) the stockholders of Holdings shall approve any plan or
proposal for the liquidation or dissolution of Holdings;
(d) a Person or Group of Persons (other than BIL in accordance
with the terms and provisions of the Stockholders Agreement) acting in concert
as a partnership, limited partnership, syndicate or other group shall, as a
result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise, have become the direct or indirect beneficial
owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended) of securities of Holdings representing more than 15% of the
combined voting power of the then outstanding securities of Holdings ordinarily
(and apart from rights accruing under special circumstances) having the right to
vote in the election of the directors; or
(e) a Person or Group of Persons, together with any Affiliates
thereof, shall succeed in having a sufficient number of its nominees elected to
the Board of Directors of Holdings such that such nominees, when added to any
existing directors remaining on the Board of Directors of Holdings after such
election who are Affiliates of such Person or Group of Persons, will constitute
a majority of the Board of Directors of Holdings. For purposes of this
subsection (e), the nominees of BIL to be elected to the Board of Directors of
Holdings pursuant to the terms of the Stockholders Agreement shall be included
in the determination of the existing directors.
-4-
<PAGE>
"Charges" shall mean all taxes, charges, fees, imposts, levies
or other assessments, including, without limitation, 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, without limitation, the Pension Benefit Guaranty
Corporation or any environmental agency or superfund), upon the Collateral, any
Borrower or any of its Affiliates.
"Closing Date" shall mean December 10, 1996 or such other date
as may be agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time and the regulations promulgated thereunder.
"Collateral" shall mean and include:
(a) all Receivables;
(b) all General Intangibles;
(c) all Inventory;
(d) all of each Borrower's right, title and interest in
and to (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 this Agreement; (v) all of each Borrower's contract rights,
rights of payment which have been earned under a contract right, instruments,
documents, chattel paper, warehouse receipts, deposit accounts, money and
securities; (vi) 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; and
(vii) 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 entered into in connection herewith or therewith;
-5-
<PAGE>
(e) 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 (a), (b), (c) or (d)
of this Paragraph; and
(f) all proceeds and products of (a), (b), (c), (d) and
(e) 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(b) hereof.
"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.
"Consents" shall mean all filings and all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and other third parties, domestic or foreign, necessary to carry on
any Borrower's business, including, without limitation, any Consents required
under all applicable federal, state or other applicable law.
"Controlled Group" shall mean all members of a controlled group
of corporations and all trades or businesses (whether or not incorporated) under
common control 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.
"Default" shall mean an event 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.
-6-
<PAGE>
"Defaulting Lender" shall have the meaning set forth in Section
2.14(a) hereof.
"Depository Accounts" shall have the meaning set forth in
Section 4.15(h) hereof.
"Documents" shall have the meaning set forth in Section 8.1(c)
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.
"E & J Acquisition" shall mean E & J Acquisition Corp., a
Delaware corporation wholly owned by Holdings.
"E & J Canada" shall mean Everest & Jennings Canadian Limited,
a corporation amalgamated under the laws of Ontario.
"E & J International" shall mean Everest & Jennings
International Ltd., a Delaware corporation.
"E & J Mexico" shall mean Everest & Jennings de Mexico S.A. de
C.V., a corporation organized under the laws of Mexico.
"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 incurred.
"EBITDA" shall mean for any period the sum of (i) Earnings
Before Interest and Taxes for such period plus (ii) depreciation expenses of
Borrowers on a Consolidated Basis for such period, plus (iii) amortization
expenses of Borrowers on a Consolidated Basis for such period.
"Eligible Inventory" shall mean and include Inventory
consisting of raw materials and finished goods, but excluding work in process,
with respect to each Borrower, valued at the lower of cost or market value,
determined on a standard cost method for manufactured goods and on the average
cost method for other Inventory (each of which approximates actual cost on the
first-in, first-out method), which is not, in Agent's reasonable opinion,
obsolete, slow moving or unmerchantable taking into account such Borrower's
customary past practices and which Agent, in its reasonable discretion, shall
not deem ineligible Inventory, based
-7-
<PAGE>
on such considerations as Agent may from time to time deem reasonably
appropriate including, without limitation, whether the Inventory is subject to a
perfected, first priority security interest in favor of Agent and whether the
Inventory conforms to all material standards imposed by any governmental agency,
division or department thereof which has regulatory authority over such goods or
the use or sale thereof. Eligible Inventory shall include all Inventory
in-transit from overseas for which title has passed to a Borrower, which is
insured to the full value thereof and for which 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 Receivables" shall mean and include with respect to
each Borrower, each Receivable of such Borrower arising in the ordinary course
of such Borrower's 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 due from any
Customer 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 other than arms length sales to Affiliates of BIL (except Affiliates of
BIL to whom the Subordinated Note is assigned or negotiated) which otherwise
meet the eligibility criteria for Eligible Receivables;
(b) it is due or unpaid more than (i) ninety (90) days after
the original due date or (ii) one hundred and twenty (120) 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
the Required Lenders' 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 materially breached and the
breach is continuing;
(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),
-8-
<PAGE>
(v) be adjudicated 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 outside the continental United
States of America, Canada or Puerto Rico unless the sale is on letter of credit,
guaranty or acceptance terms, in each case acceptable to Agent in its sole
discretion;
(g) the sale to the Customer is on a bill-and-hold, guaranteed
sale, sale-and-return (where any Borrower is obligated to repurchase any
Inventory sold by it to its Customer), sale on approval, consignment or any
other repurchase or return basis or is evidenced by chattel paper;
(h) Intentionally Omitted;
(i) such Customer is the United States of America, any state or
any department, agency or instrumentality of any of them, unless 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
shipped and delivered to and accepted by such Customer or the services giving
rise to such Receivable have not been performed by the applicable Borrower and
accepted by the Customer or the Receivable otherwise does not represent a final
sale;
(k) Intentionally Omitted;
(l) the Receivable is subject to any offset, deduction,
defense, dispute, or counterclaim, the Customer is also a creditor or supplier
of a Borrower or the Receivable is contingent in any respect or for any reason,
provided, however, the portion of each Receivable that would otherwise be deemed
an Eligible Receivable and which is not subject to offset, deduction, defense,
dispute, counterclaim or contingency shall be an Eligible Receivable;
(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, all of which discounts or
allowances are reflected in the calculation of the face value of each respective
invoice related thereto;
(n) shipment of the merchandise or the rendition of services
has not been completed;
-9-
<PAGE>
(o) any return, rejection or repossession of the merchandise
has occurred;
(p) such Receivable is not payable to a Borrower; or
(q) 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 Laws" shall mean all federal, state and local
environmental 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 Hazardous Wastes and the rules, regulations, 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, without limitation, all equipment,
machinery, apparatus, motor vehicles, fittings, furniture, furnishings,
fixtures, parts, accessories and all replacements and substitutions therefor or
accessions thereto.
"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 Loan" shall mean an Advance at any time that
bears interest based on the Eurodollar Rate.
"Eurodollar Rate" shall mean for any Eurodollar Rate Loan for
the then current Interest Period relating thereto the rate per annum (such
Eurodollar Rate to be adjusted to the next higher 1/100 of one (1%) percent)
equal to the quotient of (a) LIBOR, divided by (b) a number equal to 1.00 minus
the aggregate of the rates (expressed as a decimal) of reserve requirements
current on the day that is two Business Days prior to the beginning of the
Interest Period (including without limitation basic, supplemental, marginal and
emergency reserves) under any regulation promulgated by the Board of Governors
of the Federal Reserve System (or any other governmental authority having
jurisdiction over IBJS) as in effect from time to time, dealing with reserve
requirements prescribed for Eurocurrency funding including any reserve
requirements with respect to "Eurocurrency liabilities" under Regulation D of
the Board of Governors of the Federal Reserve System.
"Event of Default" shall mean the occurrence of any of the
events set forth in Article X hereof.
-10-
<PAGE>
"FDA" shall mean the Food and Drug Administration and any
successor thereto.
"Federal Funds Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or if such rate is not so published for
any day which is a Business Day, the average of quotations for such day on such
transactions received by IBJS from three Federal funds brokers of recognized
standing selected by IBJS.
"Fee Letter" shall mean the fee letter dated the Closing Date
between Borrowers and IBJS.
"Foreign Exchange Contracts" shall have the meaning set forth
in Section 2.15 hereof.
"Foreign Exchange Obligations" shall have the meaning set forth
in Section 2.15 hereof.
"Formula Amount" shall have the meaning set forth in Section
2.1(a).
"FX Reserve" shall have the meaning set forth in Section 2.15
hereof.
"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, that portion of such Borrower's general intangibles, whether now owned
or hereafter acquired, consisting of all (a) choses in action and causes of
action (as same relate to the Collateral), (b) customer lists, tax refunds and
tax refund claims, (c) computer programs, corporate or other records relating to
the Collateral, (d) claims under guaranties relating to any Receivables, (e)
security interests or other security held by or granted to such Borrower to
secure payment of any of the Receivables by a Customer and (f) rights of
indemnification (as same relate to the Collateral).
"Governmental Body" shall mean any nation or government, any
state or other political subdivision thereof or any entity exercising the
legislative, judicial, regulatory or administrative functions of or pertaining
to a government.
"Graham-Field Express Companies" shall mean companies and/or
businesses substantially similar to Express and GFPR which provide next-day and
same-day service of incontinence products and durable medical products and other
medical products generally supplied by Field.
-11-
<PAGE>
"Guarantor" shall mean E & J Canada 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.
"Guarantor Security Agreement" shall mean the Security
Agreement executed by each Guarantor in favor of Agent securing the Guaranty of
such Guarantor.
"Guaranty" shall mean the guaranty of the obligations of
Borrowers executed by each Guarantor in favor of Agent for the ratable benefit
of Lenders.
"Hazardous Discharge" shall have the meaning set forth in
Section 4.19(d) hereof.
"Hazardous Substance" shall have the meaning set forth in
CERCLA or any other similar and applicable state Environmental Law and in the
regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials (including
medical waste) subject to regulation under RCRA or similar and applicable state
law, and any other applicable Federal and state laws.
"Indebtedness" of a Person at a particular date shall mean 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. 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.
"Interest Period" shall mean the period provided for any
Eurodollar Rate Loan pursuant to Section 2.2(b).
"Inventory" shall mean and include as to each Borrower all of
such Borrower's now owned or hereafter acquired goods, merchandise and other
personal property (other than Equipment), wherever located, to be furnished
under any 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.
-12-
<PAGE>
"Inventory Advance Rate" shall have the meaning set forth in
Section 2.1(a)(y)(ii) hereof.
"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 in accordance with the
provisions of this Agreement.
"Letter of Credit and Acceptance Fees" shall have the meaning
set forth in Section 3.2.
"Letters of Credit" shall have the meaning set forth in Section
2.9 and shall include the Reimbursement LCs.
"Leverage Ratio" means for Borrowers on a Consolidated Basis,
the ratio of (a) total liabilities (determined in accordance with GAAP) of
Borrowers on a Consolidated Basis minus the outstanding principal balance of the
Subordinated Debt (excluding accrued interest) to (b) all amounts which would be
included under shareholders' equity on a balance sheet of Borrowers on a
Consolidated Basis (determined in accordance with GAAP) as at such date plus the
outstanding principal balance of the Subordinated Debt (excluding accrued
interest).
"LIBOR" shall mean for any Eurodollar Rate Loan for the then
current Interest Period relating thereto, the rate per annum quoted by Agent to
Borrowers two (2) Business Days prior to the first day of such Interest Period
as the rate available to Agent in the interbank market for offshore Dollar
deposits in immediately available funds for a period equal to such Interest
Period and in an amount equal to the amount of such Eurodollar Rate Loan.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including, without limitation, any
conditional sale 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.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the condition, operations, assets, business or prospects of the Borrowers
on a Consolidated Basis taken as a whole, (b) the Borrowers' ability (taken as a
whole) to pay the Obligations in accordance with the terms thereof, (c) the
value of the Collateral, Agent's Liens on the Collateral or the priority of any
such Lien or (d) the practical realization of the benefits of Agent's or any
Lender's rights and remedies under this Agreement or the Other Documents or with
respect to any Collateral.
-13-
<PAGE>
"Maximum Foreign Exchange Facility" shall have the meaning set
forth in Section 2.15 hereof.
"Maximum Revolving Advance Amount" shall mean $55,000,000.
"Merger Agreement" shall mean the Amended and Restated
Agreement and Plan of Merger dated as of September 3, 1996 and amended as of
October 1, 1996 among Holdings, E & J Acquisition, BIL and E & J as in effect as
of the date hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Sections 3(37) and 4001(a)(3) of ERISA.
"Notes" shall mean collectively, the Revolving Credit Notes.
"Obligations" shall mean and include any and all of each
Borrower's Indebtedness and/or liabilities to Agent or Lenders of every kind,
nature and description, direct or indirect, secured or unsecured, joint,
several, joint and several, absolute or contingent, due or to become due, now
existing or hereafter arising, contractual or tortious, liquidated or
unliquidated under this Agreement or the Other Documents and all obligations of
any Borrower to Agent or Lenders to perform acts or refrain from taking any
action under this Agreement or the Other Documents.
"Original Owners" shall mean (i) with respect to Field,
Express, E & J International and GFPR, Holdings, (ii) with respect to Temco,
Distribution and Bandage, Field, (iii) with respect to E & J, E & J
International and (iv) with respect to E & J Canada, The Jennings Investment
Company, a California
corporation.
"Other Documents" shall mean the Notes, the Questionnaire, the
Guaranty, the Guarantor Security Agreement and any and all other agreements,
instruments and documents, including, without limitation, guaranties, pledges,
powers of attorney, consents, and all other writings heretofore, now or
hereafter executed by any Borrower or Guarantor and/or delivered to Agent or any
Lender in respect of the transactions contemplated by 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.
"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.
-14-
<PAGE>
"Payment Office" shall mean initially One State Street, New
York, New York 10004; 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.
"Permitted Encumbrances" shall mean (a) Liens in favor of Agent
for the benefit of Agent and Lenders; (b) Liens for taxes, assessments or other
governmental charges in excess of $250,000 in the aggregate which are not
delinquent or are being contested in good faith and by appropriate proceedings
and with respect to which proper reserves have been taken by Borrowers;
provided, that, such Liens in excess of $250,000 in the aggregate shall have no
effect on the priority of the Liens in favor of Agent or the value of the assets
in which Agent has such a Lien and a stay of enforcement of any such Lien shall
be in effect; (c) Liens on the Real Property securing Indebtedness permitted
under Sections 7.8(v) and (vi) hereof; (d) deposits or pledges to secure
obligations under worker's compensation, social security or similar laws, 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 and appeal bonds and other obligations of like nature
arising in the ordinary course of any Borrower's business; (f) judgment Liens
that have been stayed or bonded or which in the aggregate do not exceed
$2,000,000 and which are being contested in good faith and mechanics', workers',
materialmen's or other like Liens arising in the ordinary course of any
Borrower's business with respect to obligations which are not due or which are
being contested in good faith by the applicable Borrower; (g) Liens placed upon
fixed assets hereafter acquired to secure a portion of the purchase price
thereof, provided that any such lien shall not encumber any other property of
the Borrowers; (h) Liens for taxes, assessments or other governmental charges in
amount equal to or less than $250,000 in the aggregate which are not delinquent
or are being contested in good faith and by appropriate proceedings and with
respect to which proper reserves have been taken by Borrowers; (i) judgment
Liens arising out of Permitted Litigation to the extent BIL fulfills its
indemnification obligations with respect to the applicable Permitted Litigation
pursuant to the Stockholders Agreement within forty (40) days from the date such
judgment Lien is filed and with respect to which proper reserves have been taken
by Borrowers; and (j) Liens disclosed on Schedule 1.2.
"Permitted Litigation" shall mean the litigation proceedings
set forth on Schedule II to the Stockholders Agreement.
"Person" shall mean any individual, sole proprietorship,
partnership, corporation, business trust, joint stock company, trust,
unincorporated organization, association, limited liability company,
institution, public benefit corporation, joint venture, entity or government
(whether Federal, state,
-15-
<PAGE>
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, maintained for employees of Borrowers 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.
"Proxy" shall mean the Joint Proxy Statement/ Prospectus of
Holdings and E & J dated October 22, 1996.
"Purchasing Lender" shall have the meaning set forth in Section
16.3 hereof.
"Questionnaire" shall mean the Documentation Information
Questionnaire and the responses thereto provided by Borrowers and delivered to
Agent.
"RCRA" shall mean the Resource Conservation and Recovery Act,
42 U.S.C. ss.ss. 6901 et seq., as same may be amended from time to time.
"Real Property" shall mean all of each Borrower's and E & J
Canada's right, title and interest in and to the owned and leased premises
identified on Schedule 4.19 hereto.
"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, general intangibles relating to accounts, drafts and acceptances,
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
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.
"Reimbursement LCs" shall mean the Letters of Credit issued by
Agent on the Closing Date to (a) Hong Kong and Shanghai Banking Corporation
Limited in the face amount of $6,000,000, (b) Chase Manhattan Bank in the face
amount of $11,460,981.06 and (c) The Bank of Nova Scotia in the face amount of
$91,828.00 (Canadian).
"Release" shall have the meaning set forth in Section 5.7(c)(i)
hereof.
"Reportable Event" shall mean a reportable event described in
Section 4043(b) of ERISA or the regulations promulgated thereunder.
-16-
<PAGE>
"Required Lenders" shall mean (i) initially, Lenders holding at
least sixty-six percent (66%) of the Advances as of the most recent Settlement
Date and, if no Advances are outstanding, shall mean Lenders holding sixty-six
percent (66%) of the Commitment Percentages and (ii) at such time as the
commitment of IBJS to fund Advances is reduced to $17,500,000, Lenders holding
at least fifty-one percent (51%) of the Advances as of the most recent
Settlement Date and, if no Advances are outstanding, shall mean Lenders holding
fifty-one percent (51%) of the Commitment Percentages.
"Revolving Advances" shall mean Advances made other than
Letters of Credit, Acceptances and Foreign Exchange Obligations.
"Revolving Credit Notes" shall mean, collectively, the
promissory notes 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 one-quarter (2.25%) percent with
respect to Eurodollar Rate Loans.
"Settlement Date" shall mean the Closing Date and thereafter
Wednesday of each week unless such day is not a Business Day in which case it
shall be the next succeeding Business Day.
"Stockholders Agreement" shall mean the Amended and Restated
Stockholder Agreement by and among BIL, Holdings and Irwin Selinger dated as of
September 3, 1996, as amended on September 19, 1996.
"Stock Purchase Agreement" shall mean the Stock Purchase
Agreement between Antonio R. Gaitan Razura and E & J International dated
November 22, 1996.
"Subordinated Debt" shall mean any Borrower's Indebtedness to
any Person subordinated to the repayment of the Obligations on terms and
conditions reasonably acceptable to Agent provided such Indebtedness is
permitted under this Agreement.
"Subordinated Debt Payments" shall mean and include all cash
actually expended to make payments of principal and interest on the Subordinated
Debt.
"Subordinated Note" shall mean the subordinated promissory note
issued by Holdings in favor of BIL dated December 10, 1996 in the principal sum
of $4,000,000.
"Subordination Agreement" shall mean the Subordination
Agreement dated December 10, 1996 among Agent, Holdings and BIL.
-17-
<PAGE>
"Subsidiary" shall mean a corporation or other entity whose
shares of stock or other ownership interests having ordinary voting power (other
than stock or other ownership 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.
"Term" shall have the meaning set forth in Section 13.1 hereof.
"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.
"Total Debt Payments" shall mean and include all cash actually
expended by Borrowers on a Consolidated Basis to make (a) required principal and
interest payments on any Advances hereunder, plus, (b) without duplication,
payments for all fees, commissions and charges set forth herein and in the Fee
Letter and with respect to any Advances plus (c), capitalized lease payments,
plus, (d) payments with respect to any other Indebtedness for borrowed money.
"Transactions" shall mean the transactions contemplated under
this Agreement and the Merger Agreement.
"Transferee" shall have the meaning set forth in Section
16.3(b) 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 plus (ii) all amounts due and owing to Borrowers' trade creditors which
are sixty (60) or more days past due, plus (iii) fees and expenses for which
Borrowers are liable but which have not been paid or charged to Borrowers'
Account.
"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.
-18-
<PAGE>
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 shall have
the meaning given therein unless otherwise defined herein.
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. 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, without limitation, references to any of the Other Documents, shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
II. ADVANCES, PAYMENTS.
2.1. (a) Revolving Advances. Subject to the terms and conditions set
forth in this Agreement, 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 sum of (i) the aggregate amount of outstanding
Letters of Credit and Acceptances and (ii) the FX Reserve 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) 60%, subject to the provisions of
Section 2.1(b) hereof ("Inventory Advance Rate"), of the value
of the Eligible Inventory (the Receivables Advance Rate and the
Inventory Advance Rate shall be referred to collectively, as
the "Advance Rates") or (B) $25,000,000 in the aggregate at any
one time, minus
(iii) the aggregate amount of outstanding Letters of Credit and
Acceptances, minus
(iv) the FX Reserve, minus
(v) such reserves as determined in good faith by Agent from
time to time in the exercise of its discretion in a reasonable
manner, including, without limitation, reserves for Liens
permitted under subparagraphs (h) and (i) under the definition
of Permitted Encumbrances.
-19-
<PAGE>
The amount derived from the sum of (x) Sections 2.1(a)(y)(i) and (ii)
minus (y) Sections 2.1 (a)(y)(iv) and (v) at any time and from time to time
shall be referred to as the "Formula Amount". The Revolving Advances shall be
evidenced by the secured promissory notes ("Revolving Credit Notes")
substantially in the form attached hereto as Exhibit 2.1(a).
At such time as (i) the Receivables and Inventory of E & J Canada are subject to
a first priority perfected security interest in favor of Agent and (ii) the
eligibility criteria set forth in this Agreement are met (it being deemed for
purposes of this determination that E & J Canada is a "Borrower"), the
determination of the Formula Amount shall include the Eligible Receivables and
Eligible Inventory of E & J Canada.
(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 for reasons such as an increase in dilution with respect
to the Receivables. Each Borrower consents to any such increases or decreases
and acknowledges that decreasing the Advance Rates or increasing the reserves
may limit or restrict Advances requested by Borrowing Agent. Agent shall give
Borrowing Agent five (5) days prior written notice of its intention to decrease
the Advance Rates.
2.2. Procedure for Revolving Advances Borrowing.
(a) Borrowing Agent on behalf of any Borrower may notify Agent
prior to 11:00 a.m. on a Business Day of a Borrower's request to incur, on that
day, a Domestic Rate Loan consisting of 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 Document, or with respect to any other
Obligation, become due, same shall be deemed a request for a Revolving Advance
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 Document
with Agent or Lenders, and such request shall be irrevocable.
(b) Notwithstanding the provisions of (a) above, in the event
any Borrower desires to obtain a Eurodollar Rate Loan, Borrowing Agent shall
give Agent at least three (3) Business Days' prior written notice, 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 the face amount of $500,000 or a whole multiple of
$100,000 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. No Eurodollar Rate Loan shall be made available to Borrower during
the continuance of a Default or an Event of Default.
(c) Each Interest Period of a Eurodollar Rate Loan shall
commence on the date such Eurodollar Rate Loan is made and shall end on the last
Business Day of the Interest Period as
-20-
<PAGE>
Borrowing Agent may elect as set forth in (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 less than 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,
Borrowers shall be deemed to have elected to convert to a Domestic Rate Loan
subject to Section 2.2(d) herein below.
(d) Provided that no Event of Default shall have occurred and
be continuing, any Borrower 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
a Borrower desires to convert a loan, Borrowing Agent shall give Agent not less
than three (3) Business Days' prior written notice to convert from a Domestic
Rate Loan to a Eurodollar Rate Loan or one (1) Business Day's prior written
notice to convert from a Eurodollar Rate Loan to a Domestic Rate Loan,
specifying 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. After giving effect to each such
conversion, there shall not be outstanding more than five (5) Eurodollar Rate
Loans, in the aggregate.
(e) At its option and upon three (3) Business Days' prior
written notice, any Borrower may prepay the Eurodollar Rate Loans in whole at
any time or in part from time to time, without premium or penalty, but 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.
(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 may sustain or incur as a
-21-
<PAGE>
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.
(g) Notwithstanding any other provision hereof, if any
applicable law, treaty, regulation or directive, 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 on the last Business
Day of the then current Interest Period for such affected Eurodollar Rate Loans,
or such earlier date as required by such applicable law, treaty, regulation or
directive or in the interpretation or application thereof. 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 Borrowers or deemed to have been
requested by Borrowers 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 IBJS, or
-22-
<PAGE>
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. Use of Proceeds. Borrowers shall apply the proceeds of Advances to
(i) repay certain existing indebtedness, (ii) pay fees and expenses relating to
the Transactions, (iii) to provide for their working capital needs and (iv) to
make acquisitions permitted hereunder of Graham-Field Express Companies.
2.5. Maximum Advances. The aggregate balance of Advances outstanding at
any time shall not exceed the lesser of (a) Maximum Revolving Advance Amount,
less the aggregate amount of outstanding Letters of Credit and Acceptances or
(b) the Formula Amount, less outstanding Letters of Credit and Acceptances.
2.6. Repayment of Advances.
(a) The Advances shall be due and payable in full on the last
day of the Term subject to 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 Business Day on which Agent receives 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 the Business Day Agent receives such payments via wire
transfer or electronic depository check. Agent is not, however, required to
credit Borrowers' Account for the amount of any item of payment which is
reasonably 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 Other Document, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
-23-
<PAGE>
2.7. Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of 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
Lenders 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
Lenders and Borrowers, during such month and such other related information as
Borrowers may reasonably request. 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 Borrowers' 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 and Acceptances. Subject to the terms and
conditions hereof, Agent shall (a) issue or cause the issuance of Letters of
Credit ("Letters of Credit") on behalf of any Borrower or (b) accept, or cause
to be accepted, drafts under such Letters of Credit or otherwise
("Acceptances"); provided, however, that Agent will not be required to issue or
cause to be issued any Letters of Credit or accept or cause to be accepted any
Acceptances to the extent that the face amount of such Letters of Credit and
Acceptances would then cause the sum of (i) the outstanding Revolving Advances
plus (ii) outstanding Letters of Credit plus (iii) outstanding Acceptances to
exceed the lesser of (x) the Maximum Revolving Advance Amount or (y) the Formula
Amount. The maximum amount of outstanding Letters of Credit shall not exceed
$10,000,000 in the aggregate at any time plus the undrawn amount of the
Reimbursement LCs. The maximum amount of outstanding Acceptances shall not
exceed $15,000,000 in the aggregate at any time. 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 Revolving
Interest 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; Creation of Acceptances.
(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, Agent's form of
-24-
<PAGE>
Letter of Credit Application (the "Letter of Credit Application") completed to
the 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, waiver of discrepancies, and to
agree with Agent upon any amendment, extension or renewal of any Letter of
Credit.
(b) Each Letter of Credit shall, among other things, (i)
provide for the payment of sight drafts or acceptance 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 six (6) months after such Letter of Credit's date of issuance and in
no event later than the last day of the Term. Each Letter of Credit shall be
subject to the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500, and any
amendments or revision thereof adhered to by the issuer and, to the extent not
inconsistent therewith, the laws of the State of New York.
(c) Agent shall have absolute discretion whether to accept any
draft. Without in any way limiting Agent's absolute discretion whether to accept
any draft, Borrowing Agent will not present for acceptance any draft, and Agent
will generally not accept any drafts (i) that arise out of transactions
involving the sale of goods by any Borrower not in the ordinary course of its
business, (ii) that involve a sale to an Affiliate of any Borrower other than
arms-length sales to Affiliates of BIL (except Affiliates of BIL to whom the
Subordinated Note is assigned or negotiated), (iii) that involve any purchase
for which Agent has not received all related documents, instruments and forms
requested by Agent, (iv) for which Agent is unable to locate a purchaser in the
ordinary course of business on standard terms, or (v) that is not eligible for
discounting with Federal Reserve Banks pursuant to paragraph 7 of Section 13 of
the Federal Reserve Act, as amended.
(d) Subject to terms set by Agent from time to time in its
discretion with respect to the acceptance of drafts generally, Borrowing Agent
on behalf of any Borrower may request Acceptances on any Business Day, by
delivering to Agent a request for an Acceptance in substantially the form of
Exhibit 2.10 and, upon demand, copies of all invoices, delivery receipts and
related documents relating to that request that Agent might require. Provided
that the request for Acceptance is received prior to 10:30 a.m. and approved by
Agent, Agent shall make the net proceeds of the Acceptance available to the
applicable Borrower by crediting the net amount of the Acceptance in lawful
money of the United States and in immediately available funds to the Borrowers'
Account. The net amount of the Acceptance shall be calculated by discounting the
Acceptance at the Banker's Acceptance Rate for the
-25-
<PAGE>
applicable maturity period upon the creation by Agent of an Acceptance.
(e) Borrowers shall pay to Agent the amount of any Acceptance
on or before its maturity date. In addition, Agent is hereby irrevocably
authorized, in its sole discretion, to make Revolving Advances from time to
time, or to charge any account of Borrowers, to pay any Acceptance for which
payment is due, or at any time after the occurrence of an Event of Default to
fund cash collateral for any outstanding Acceptance.
(f) Each Acceptance shall be payable in Dollars to the order of
Agent, shall be dated the date of its presentment to Agent for acceptance and
shall be in the face amount of $1,000,000 or a whole multiple of $500,000 in
excess thereof. The maturity of each Acceptance shall be in any 30 day increment
equal to or greater than 30 and less than or equal to 180 days, or if such day
is not a Business Day on the next succeeding Business Day, and, in any event, no
later than the day preceding the expiration of the Term. Other than the maturity
requirements, the balance of this Section 2.10 will apply to Acceptances created
under Letters of Credit.
(g) Agent shall use its reasonable efforts to notify Lenders of
the request by Borrowing Agent for a Letter of Credit or an Acceptance
hereunder.
2.11. Requirements For Issuance of Letters of Credit and
Acceptances.
(a) In connection with the issuance of any Letter of Credit or
Acceptance, Borrowers shall indemnify, save and hold Agent, each Lender, each
issuer and each accepting bank harmless from any loss, cost, expense or
liability, including, without limitation, payments made by Agent, any Lender,
any issuer or any accepting bank and expenses and reasonable attorneys' fees
incurred by Agent or any Lender arising out of, or in connection with, any
Letter of Credit or Acceptance to be issued or created for any Borrower.
Borrowers shall be bound by Agent's or any issuing or accepting bank's
regulations and good faith interpretations of any Letter of Credit or Acceptance
issued or created for Borrowers' Account, although this interpretation may be
different from its own; and, neither Agent nor any Lender, the bank which opened
the Letter of Credit or accepted a draft, nor any of its correspondents shall be
liable for any error, negligence, or mistakes, whether of omission or
commission, in following Borrowing Agent's or any Borrower's instructions or
those contained in any Letter of Credit, Acceptance or of any modifications,
amendments or supplements thereto or in issuing or paying any Letter of Credit
or Acceptance, except for Agent's or any Lender's or bank's or such
correspondents' willful misconduct or gross (not mere) negligence.
(b) Borrowing Agent shall authorize and direct any bank which
issues a Letter of Credit to name the applicable Borrower as the "Applicant" or
"Account Party" therein and to
-26-
<PAGE>
deliver to Agent all instruments, documents, and other writings and property
received by the bank pursuant to the Letter of Credit or any Acceptance related
thereto 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.
(c) In connection with all Letters of Credit and Acceptances
issued or caused to be issued or created by Agent under this Agreement, each
Borrower hereby appoints Agent, or its designee, as its attorney, with full
power and authority, (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 or Acceptances remain outstanding.
(d) Each Lender shall to the extent of the percentage amount
equal to the product of such Lender's Commitment Percentage times the aggregate
amount of all unreimbursed reimbursement obligations arising from disbursements
made or obligations incurred with respect to the Letters of Credit or
Acceptances be deemed to have irrevocably purchased an undivided participation
in each such unreimbursed reimbursement obligation. In the event that at the
time a disbursement is made the unpaid balance of Revolving Advances exceeds or
would exceed, with the making of such disbursement, the lesser of the Maximum
Revolving Advance Amount or the Formula Amount, and such disbursement is not
reimbursed by Borrowers within two (2) Business Days, Agent shall promptly
notify each Lender and upon Agent's demand each Lender shall pay to Agent such
Lender's proportionate share of such unreimbursed disbursement together with
such Lender's proportionate share of Agent's unreimbursed costs and expenses
relating to such unreimbursed disbursement. Upon receipt by Agent of a repayment
from any Borrower of any amount disbursed by Agent for which Agent had already
been reimbursed by Lenders, Agent shall deliver to each Lender that Lender's pro
rata share of such repayment. Each Lender's participation commitment shall
continue until the last to occur of any of the following events: (A) Agent
ceases to be obligated to issue or cause to be issued Letters of Credit or
create Acceptances hereunder; (B) no Letter of Credit or Acceptance issued or
created hereunder remains outstanding and uncancelled or (C) all Persons (other
than the applicable Borrower) have been
-27-
<PAGE>
fully reimbursed for all payments made under or relating to Letters of Credit
and Acceptances.
2.12. 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, without limitation, 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. Agent shall endeavor to notify Borrowing Agent before charging
Borrowers' Account for such payment, but Agent shall not be liable to Borrowing
Agent or Borrowers if it fails to provide such notice and the failure to give
such notice shall not affect Agent's or any Lender's rights under this Agreement
or any Other Document.
2.13. Manner of Borrowing and Payment.
(a) Each borrowing of Revolving Advances shall be advanced
according to the applicable Commitment Percentages of Lenders.
(b) Each payment (including each prepayment) by Borrowers 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. Except as expressly provided herein, all
payments (including prepayments) to be made by 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 2.13(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.
-28-
<PAGE>
(ii) Each Lender shall be entitled to earn interest at
the applicable Revolving Interest 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 "benefitted 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 benefitted
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 benefitted Lender to share the excess payment or
benefits of such Collateral or proceeds ratably with each of Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefitted 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, without
limitation, 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 Borrowers 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
-29-
<PAGE>
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.
2.14. 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 either Agent or 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 2.14 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 pro rata based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that, the aggregate amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage
of all Advances then outstanding.
(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 Advances outstanding.
(d) Other than as expressly set forth in this Section 2.14, 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 2.14 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
-30-
<PAGE>
Lender as a result of any default by such Defaulting Lender hereunder.
(e) In the event a Defaulting Lender retroactively cures to the
reasonable satisfaction of Agent and Borrowing 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.
2.15. Foreign Exchange Contracts.
(a) Subject to the terms and conditions hereof, Borrowing
Agent, on behalf of any Borrower, may, from time to time, request and Agent may,
in its sole discretion, purchase or arrange for the purchase of foreign currency
for delivery immediately or at some future date (the contracts for such
purchases being hereinafter referred to as "Foreign Exchange Contracts");
provided, however, that the aggregate outstanding face amount of all Foreign
Exchange Contracts ("Foreign Exchange Obligations") shall at no time exceed
$1,500,000 ("Maximum Foreign Exchange Facility"); further provided, however,
that Agent will not be required to enter into or arrange for Foreign Exchange
Contracts to the extent that such Foreign Exchange Contract would expire after
the last day of the Term. All Foreign Exchange Contracts entered into by Agent
upon Borrowing Agent's request shall be for Borrowers' exclusive account and
Borrowers will reimburse Agent for all costs, expenses, service charges, fees
and commissions incurred in connection therewith (including the cost of
purchasing the foreign currency). All amounts payable by Borrowers under this
Section 2.15 may be charged to Borrowers' Account. If, as of a date on which
foreign currency is to be delivered, Borrowing Agent has not instructed Agent as
to where such currency is to be transferred or if on such date Borrowers are in
default under this Agreement, Agent may, in its discretion, sell or arrange for
the sale of the foreign currency to any third party and charge Borrowers'
Account for the difference between the cost quoted to Borrowing Agent for
purchasing the foreign currency and the price Agent (or its nominee) obtains in
selling the foreign currency. Agent (or its nominee) shall not hold the foreign
currency beyond the designated delivery date. Borrowers acknowledge and agree
that the cost of purchasing foreign currency from Agent may be greater than
Agent's cost. Borrowers shall indemnify and hold Agent harmless from all losses,
liabilities and expenses (including attorneys' fees) incurred by Agent as a
result of or arising from any foreign currency transaction that Agent institutes
at Borrowing Agent's request. Borrowers shall be bound by the regulations and
rules of Agent and of any bank or other financial institution through which
Agent purchases Foreign Exchange Contracts and Borrowers agree that neither
Agent nor any bank or its correspondents which purchase Foreign Exchange
Contracts shall be liable for any error, negligence and/or mistake, whether of
omission or commission, in purchasing or failing to purchase Foreign Exchange
Contracts. Agent may from time to time establish such reserves (the "FX
Reserve") against availability under Section 2.1(a)(y) in connection with the
purchase of Foreign Exchange Contracts as Agent
-31-
<PAGE>
deems appropriate. The FX Reserve shall mean an amount initially equal to
fifteen percent (15%) of the amount of Foreign Exchange Contracts outstanding
from time to time, which amount may, in the exercise by Agent of its sole
discretion (and without any obligation to do so), be (i) decreased at any time
or from time to time or (ii) increased at any time or from time to time by an
amount equal to the difference between exchange exposure of Agent under the
Foreign Exchange Contracts and the amount of the FX Reserve in existence at such
time.
(b) Each Lender shall to the extent of the percentage amount
equal to the product of such Lender's Commitment Percentage times the aggregate
amount of all unreimbursed reimbursement obligations arising from disbursements
made or obligations incurred with respect to the Foreign Exchange Obligations be
deemed to have irrevocably purchased an undivided participation in each such
unreimbursed reimbursement obligation. In the event that at the time a
disbursement is made the unpaid balance of Revolving Advances exceeds or would
exceed, with the making of such disbursement, the lesser of the Maximum
Revolving Advance Amount or the Formula Amount, and such disbursement is not
reimbursed by Borrowers within two (2) Business Days, Agent shall promptly
notify each Lender and upon Agent's demand each Lender shall pay to Agent such
Lender's proportionate share of such unreimbursed disbursement together with
such Lender's proportionate share of Agent's unreimbursed costs and expenses
relating to such unreimbursed disbursement. Upon receipt by Agent of a repayment
from any Borrower of any amount disbursed by Agent for which Agent had already
been reimbursed by Lenders, Agent shall deliver to each Lender that Lender's pro
rata share of such repayment. Each Lender's participation commitment shall
continue until the last to occur of any of the following events: (A) Agent
ceases to be obligated to purchase or arrange for the purchase of Foreign
Exchange Contract hereunder; (B) no Foreign Exchange Obligation hereunder
remains outstanding or (C) all Persons (other than the applicable Borrower) have
been fully reimbursed for all payments made under or relating to Foreign
Exchange Obligations.
2.16. Air Releases and Steamship Guarantees. Subject to the terms and
conditions hereof, Agent shall issue or cause the issuance of air releases and
steamship guarantees on behalf of any Borrower. Borrowing Agent, on behalf of
Borrowers, may request Agent to issue or cause the issuance of air releases and
steamship guarantees by delivering to Agent at the Payment Office such
certificates, documents and other papers and information as Agent may request.
In addition, for the purposes of Sections 1.2, 2.1, 2.5, 2.9, 2.11 and 3.2
(excluding 3.2(a)(x)), the definition of "Letters of Credit" shall include all
air releases and steamship guarantees issued or caused to be issued by Agent.
III. INTEREST AND FEES.
3.1. Interest. Interest on Revolving Advances shall be payable in
arrears on the first Business Day of each month with
-32-
<PAGE>
respect to Domestic Rate Loans and, with respect to Eurodollar Rate Loans, on
the last Business Day of each Interest Period. Interest charges shall be
computed on the actual principal amount of Advances of each type outstanding
during the month at a rate per annum equal to, with respect to Revolving
Advances, the applicable Revolving Interest Rate. Whenever, subsequent to the
date of this Agreement, the Alternate Base Rate is increased or decreased, the
Revolving Interest 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. Upon the occurrence of an Event of Default, and during the
continuation thereof, the Obligations shall bear interest at the applicable
Revolving Interest Rate plus two (2%) percent per annum (the "Default Rate").
3.2. Letter of Credit and Acceptance Fees.
(a) Borrowers shall pay (x) to Agent, for the benefit of
Lenders, fees for each Letter of Credit for the period from and including 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 one and one-half percent (1.50%) 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 monthly in arrears on the first day of each month and on the
last day of the Term and (y) to the issuing bank any and all fees and expenses
as agreed upon by such issuing bank and the Borrowing Agent in connection with
any Letter of Credit (the fees for which have been disclosed to Borrowers)
including, without limitation, 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 any issuer of any such Letter of Credit (all of the foregoing fees, the
"Letter of Credit and Acceptance 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
Bank's prevailing charges for that type of transaction. All Letter of Credit and
Acceptance 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 proration upon the termination of this Agreement for any reason.
(b) Upon the occurrence of an Event of Default, and during the
continuation thereof, upon the request of Required Lenders, 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
outstanding Letters of Credit and Acceptances, 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
-33-
<PAGE>
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 payment and performance in full of all Obligations and termination of this
Agreement.
3.3. Fee Letter. Borrowers shall pay Agent the fees set forth in the
Fee Letter on the terms, and at such times, as referred to therein.
3.4. Facility Fee. If, for any quarter during the Term, the average
daily unpaid balance of the Advances for each day of such quarter 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 one-quarter of one percent
(.25%) 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 Business Day of each month during the Term commencing
January 1, 1997 and on the last day of the Term.
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
Revolving Interest Rate 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, treaty or
governmental regulation, 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, shall:
-34-
<PAGE>
(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 jurisdiction in which it maintains its principal office);
(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 (without limitation) 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 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 shall certify the
amount of such additional cost or reduced amount to Borrowers, 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:
(a) reasonable means do not exist for ascertaining the
Eurodollar Rate for any 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, telephonic or telegraphic
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 10:00 a.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
-35-
<PAGE>
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 10:00 a.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 10:00 a.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. Agent shall use its reasonable
efforts to send copies of any notice sent to Borrowing Agent under this Section
3.8 to Lenders.
3.9. Capital Adequacy.
(a) In the event that Agent or any Lender shall have determined
that any applicable law, rule, regulation or guideline regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, 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, 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 (without duplication of amounts payable under
Section 3.7 hereof) 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,
regulation or condition.
(b) A certificate of Agent or such Lender setting forth such
amount or amounts as shall be necessary to compensate
-36-
<PAGE>
Agent or such Lender with respect to Section 3.9(a) hereof when delivered to
Borrowers shall be conclusive absent manifest error.
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 the ratable benefit of each
Lender a continuing security interest in and to all of its Collateral, whether
now owned or existing or hereafter acquired or arising and wheresoever located.
Each Borrower shall mark its books and records as may be necessary or
appropriate to evidence, protect and perfect Agent's security interest and shall
cause its financial statements to reflect such security interest.
4.2. Perfection of Security Interest. Each Borrower shall take all
action that may be necessary or reasonably desirable, 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 the Collateral or to
enable Agent to protect, exercise or enforce its rights hereunder and in the
Collateral, including, but not limited to, (i) immediately discharging all Liens
other than Permitted Encumbrances, (ii) obtaining landlords' or mortgagees' lien
waivers, (iii) delivering to Agent, endorsed or accompanied by such instruments
of assignment as Agent may specify, and stamping or marking, in such manner as
Agent may 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, instruments of pledge, mortgages, notices and assignments,
in each case in form and substance satisfactory to Agent, relating to the
creation, validity, perfection, maintenance or continuation of Agent's security
interest under the Uniform Commercial Code or other applicable law. Agent is
hereby authorized to file financing statements signed by Agent instead of
Borrowers in accordance with Section 9-402(2) of Uniform Commercial Code as
adopted in the State of New York. 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 and added to the
Obligations, or, at Agent's option, shall be paid to Agent 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, (b) any sales or dispositions otherwise
permitted hereunder and (c) upon prior written notice to Agent, sales of
Receivables which are not Eligible Receivables provided that (i) the proceeds of
such sale are equal to or greater than an amount equal to the Receivables
Advance Rate multiplied by the amount of
-37-
<PAGE>
such Receivables and (ii) such proceeds are remitted to Agent to be credited to
the Borrowers' Account.
4.4. Preservation of Collateral. In addition to the rights and remedies
set forth in Section 11.1 hereof, Agent, upon the occurrence of an Event of
Default and during the continuation thereof: (a) may at any time take such steps
as Agent reasonably 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 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 Borrower's owned or leased property. Each Borrower shall cooperate
fully with all of Agent's reasonable efforts to preserve the Collateral and will
take such actions to preserve the Collateral as Agent may reasonably 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 and added to the Obligations.
4.5. Ownership of Collateral. With respect to the Collateral, at the
time the Collateral becomes subject to Agent's security interest: (a) 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 its respective Collateral to Agent; and, except for Permitted
Encumbrances the Collateral shall be free and clear of all Liens and
encumbrances whatsoever; (b) 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; (c) 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 (d) each
Borrower's Inventory shall be located as set forth on Schedule 4.5 and shall not
be removed from such location(s) except to another of such locations without the
prior written consent of Agent except with respect to the sale of Inventory in
the ordinary course of business.
4.6. Defense of Agent's and Lenders' Interests. Until (a) payment and
performance in full of all of the 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),
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. Each Borrower shall
-38-
<PAGE>
defend Agent's interests in the Collateral against any and all Persons
whatsoever. Upon the occurrence of an Event of Default and during the
continuation thereof, Agent shall have the right to take possession of the
indicia of the Collateral and the Collateral in whatever physical form
contained, including without limitation: 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, 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. Each
Borrower shall, and Agent may, at its option, instruct all suppliers, carriers,
forwarders, warehouses 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.
4.7. Books and Records. Each Borrower shall, consistent with its past
practices, (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 without limitation 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
the 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; provided, however, that a
failure of such accountants and auditors to deliver such documents shall not
constitute a Default or Event of Default so long as no Borrower has acted or
failed to act in such a way as to attempt to influence such accountants or
auditors not to deliver such documents. Each Borrower hereby authorizes all
federal, state and municipal
-39-
<PAGE>
authorities 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 such authorities.
4.9. Compliance with Laws. Each Borrower shall comply with all acts,
rules, regulations and orders of any legislative, administrative or judicial
body or official applicable to its respective 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 on such Borrower. The
Collateral at all times shall be maintained in accordance with the requirements
of all insurance carriers which provide insurance with respect to the Collateral
so that such insurance shall remain in full force and effect.
4.10. Inspection of Premises. At all reasonable times Agent 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.
Agent and its agents may enter upon any Borrower's premises 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; provided, however, so long as no
Event of Default has occurred, Agent shall give Borrowers reasonable notice
prior to entering any Borrower's premises. Any Lender, at its own cost and
expense, may accompany Agent on any such inspection of the premises.
4.11. Insurance. 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 acceptable to Agent, each Borrower
shall (a) (i) to the extent available on commercially reasonable terms for all
of its properties other than the Inventory and (ii) for all Inventory, keep all
its insurable properties and properties in which each 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 for such
amounts, as is customary in the case of companies engaged in businesses similar
to such Borrower's including, without limitation, 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; (c) maintain public and product liability insurance against claims for
personal injury, death or property damage suffered by others; (d) maintain all
such worker's
-40-
<PAGE>
compensation or similar insurance as may be required under the laws of any state
or jurisdiction in which Borrower is engaged in business; (e) furnish Agent with
(i) copies of all policies and evidence of the maintenance of such policies by
the renewal thereof at least five (5) days before any expiration date, and (ii)
appropriate loss payable endorsements in form and substance reasonably
satisfactory to Agent, naming Agent as a co-insured and 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 with respect to claims relating to the Collateral.
To the extent the outstanding Advances exceed the lesser of the Maximum
Revolving Advance Amount or the Formula Amount, all loss recoveries with respect
to the Collateral 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. In the event the outstanding Advances do not exceed the lesser
of the Maximum Revolving Advance Amount or the Formula Amount, the loss
recoveries shall be remitted to Borrowers or applied as may be otherwise
required by law.
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, upon notice to Borrowers, obtain such insurance and pay the
premium therefor for Borrowers' Account, and charge Borrowers' Account therefor
and such expenses so paid shall be part of the Obligations.
4.13. Payment of Taxes. Each Borrower will pay, when due (subject to
applicable extensions), all taxes, assessments and other Charges lawfully levied
or assessed upon such Borrower or any of the Collateral including, without
limitation, real and personal property taxes, assessments and charges and all
franchise, income, employment, social security benefits, withholding, and sales
taxes unless Borrowers are contesting such taxes, assessments or other Charges
in good faith and Borrowers have established adequate reserves on their books
and records and such items constitute a Permitted Encumbrance. If any tax by any
governmental authority 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
-41-
<PAGE>
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 upon 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; provided, however, Agent
shall not pay such taxes, assessments or other Charges if Borrowers shall have
notified Agent that Borrowers are contesting such taxes, assessments or other
Charges in good faith and for which Borrowers have established adequate reserves
on their books and records so long as such items constitute a Permitted
Encumbrance. The amount of any payment by Agent under this Section 4.13 shall be
charged to Borrowers' Account as a Revolving Advance 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
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.
(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, to the best
of such Borrower's knowledge, 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) Locations of Borrower. Each Borrower's chief executive
office is located at the addresses set forth on Schedule 4.15(c) hereto. Until
written notice is given to Agent by Borrowing Agent of any other office at which
any Borrower keeps its
-42-
<PAGE>
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 (which notice Agent may give at any time
following the occurrence of an Event of Default and during the continuation
thereof 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 forthwith deliver to Agent, or deposit
in the Blocked Account, 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 and during the continuation
thereof, Agent shall have the right to send notice of the assignment of, and
Agent's security interest in, 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 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 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 endorse such Borrower's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
Collateral; (ii) to 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 demand payment of the Receivables; (vi) to enforce payment of the
Receivables by legal proceedings or otherwise; (vii) to exercise all of
Borrowers' rights and remedies with respect to the collection of the Receivables
and any other Collateral; (viii) to settle, adjust, compromise, extend or renew
the Receivables; (ix) to settle, adjust or compromise any legal proceedings
brought to collect Receivables; (x) to prepare, file and sign such Borrower's
-43-
<PAGE>
name on a proof of claim in bankruptcy or similar document against any Customer;
(xi) to 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. Agent shall only exercise the powers conferred by this Section
with respect to clauses (v) through (xi) following the occurrence of an Event of
Default and during the continuation thereof. 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; 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 and during the continuance of an Event of 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, except for Agent's or such Lender's willful
misconduct or gross (not mere) negligence. Agent may, upon the occurrence of an
Event of Default and during the continuation thereof, 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 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 a lockbox account,
dominion account or such other "blocked account" ("Blocked Accounts") as Agent
may require pursuant to an arrangement with such bank as may be selected by
Borrowers and be acceptable to Agent. Borrowers shall issue to any such bank, an
irrevocable letter of instruction directing said bank to transfer such funds so
deposited to Agent, either to any account maintained by Agent at said bank or by
wire transfer to appropriate account(s) of Agent. All funds deposited in such
"blocked account" shall immediately become the property of Agent and Borrower
shall obtain the agreement by such 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 without limitation, any claim of
accord and satisfaction or release with respect to deposits accepted by any bank
thereunder. Alternatively, Agent may establish depository accounts
-44-
<PAGE>
("Depository Accounts") in the name of Agent at a bank or banks for the deposit
of such funds and Borrowers shall deposit all proceeds of Collateral or cause
same to be deposited, in kind, in such Depository Accounts of Agent in lieu of
depositing same to the Blocked Accounts.
(i) Adjustments. No Borrower will, without Agent's consent,
compromise or adjust any Receivables (or extend the time for payment thereof) or
accept any returns of merchandise or grant any additional discounts, allowances
or credits thereon except for those compromises, adjustments, returns,
discounts, credits and allowances as are customary in the business of 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. Borrowers shall maintain the Equipment
in good operating condition and repair (reasonable wear and tear excepted). No
Borrower shall use or operate the Equipment in violation of any law, statute,
ordinance, code, rule or regulation if such violation could reasonably be
expected to have a Material Adverse Effect.
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
except for their willful misconduct or gross (not mere) negligence. Neither
Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assumes 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 such Borrower of any of the terms
and conditions thereof.
4.19. Environmental Matters. (a) Borrowers shall ensure that the Real
Property remains in material compliance with all Environmental Laws and they
shall not place or permit to be placed any Hazardous Substances on any Real
Property except as not prohibited by applicable law or appropriate governmental
authorities or where the placement could not reasonably be expected to have a
Material Adverse Effect.
(b) Borrowers shall continue to comply materially with all
applicable Environmental Laws.
(c) Intentionally Omitted.
(d) In the event any Borrower obtains, gives or receives notice
of any Release or threat of Release of a reportable
-45-
<PAGE>
quantity of any Hazardous Substances at the 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 the Real
Property, demand letter or complaint, order, citation, or other written notice
with regard to any Hazardous Discharge or violation of Environmental Laws
affecting the 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 the Real Property is located or the
United States Environmental Protection Agency (any such person or entity
hereinafter the "Authority"), then Borrowing Agent shall, within fifteen (15)
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 the Real Property and is not
intended to create nor shall it create any obligation upon Agent or any Lender
with respect thereto.
(e) Borrowers 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. Borrowers shall promptly forward to Agent
copies of all documents and reports concerning a Hazardous Discharge at the Real
Property that any Borrower is required to file under any Environmental Laws.
Such information is to be provided solely to allow Agent to protect Agent's
security interest in the 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 Real Property
to any Lien.
(g) If Agent reasonably believes that the Real Property has
been contaminated by Borrowers, upon Agent's request, 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 a Hazardous Discharge and the potential
costs in connection with abatement, cleanup and removal of any Hazardous
Substances found on, under, at or within the Real Property.
(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,
-46-
<PAGE>
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, without limitation, the assertion of any Lien
thereunder, with respect to any Hazardous Discharge, the presence of any
Hazardous Substances affecting the Real Property and/or the Collateral, whether
or not the same originates or emerges from the Real Property and/or the
Collateral or any contiguous real estate, 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 the Real Property and/or the Collateral,
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.
For purposes of this Section 4.19(h) only, the following terms
shall have the following meanings:
"Environmental Laws" shall mean all federal, state and local
environmental, land use, zoning, health, medical, 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.
"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 (including
medical waste) 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.
"Toxic Substance" shall mean and include any material 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.
ss.ss. 2601 et seq., applicable state law, or any other applicable Federal or
state laws now in force or
-47-
<PAGE>
hereafter enacted relating to toxic substances. "Toxic Substance" includes but
is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based
paints.
(i) For purposes of Sections 4.19 and 5.7, all references to
Real Property shall be deemed to include all of Borrowers' right, title and
interest in and to its owned and leased premises.
4.20. Financing Statements. Except as respects the financing statements
filed by Agent and the financing statements described on Schedule 1.2, no
financing statement covering any of the Collateral or any proceeds thereof is on
file in any public office.
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 and to perform all its
respective Obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and of the Other Documents (a) are within such
Borrower's corporate powers, have been duly authorized, are not in contravention
of law or the terms of such Borrower's by-laws, certificate of incorporation or
other applicable documents relating to such Borrower's formation or to the
conduct of such Borrower's business or of any material agreement or undertaking
to which such Borrower is a party or by which such Borrower is bound, and (b)
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, or other instrument to
which such Borrower or its property is a party or by which it may be bound.
5.2. Formation and Qualification. (a) Each Borrower is duly
incorporated 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. Each Borrower has delivered to Agent true and
complete copies of its certificate of incorporation and by-laws and will
promptly notify Agent of any amendment or changes thereto.
(b) The only Subsidiaries of each Borrower are listed on
Schedule 5.2(b).
5.3. Survival of Representations and Warranties. All representations
and warranties of each Borrower contained in this
-48-
<PAGE>
Agreement and the Other Documents shall be true at the time of such Borrower's
execution of this Agreement and the Other Documents, 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, subject to permissible extensions,
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 such taxes and charges that
are being contested in good faith and for which proper reserves have been taken
provided that Borrowers give Agent notice that such taxes are being contested.
The provision for taxes on the books of each Borrower are adequate for all years
not closed by applicable statutes, and for its current fiscal year, and no
Borrower has knowledge of any deficiency or additional assessment in connection
therewith not provided for on its books.
5.5. Intentionally Omitted.
5.6. Corporate Name. 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, nor has any Borrower been the surviving
corporation 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. Environmental Compliance.
Except as set forth on Schedule 5.7 hereof:
(a) Each Borrower has duly complied with, and its business,
Real Property and Equipment are in compliance in all material respects with all
Environmental Laws; there have been no outstanding citations, notices or orders
of non-compliance issued to any Borrower or relating to its business, Real
Property or Equipment under any such laws, rules or regulations.
(b) Each Borrower has been issued all required federal, state
and local licenses, certificates or permits relating to all applicable
Environmental Laws except where the failure to obtain such licenses,
certificates or permits would not have a Material Adverse Effect.
(c) (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 or any premises
leased by any Borrower; (ii) neither the Real Property nor any premises leased
by any Borrower has ever been used as a RCRA treatment, storage or disposal
facility of Hazardous Waste; and (iii) no Hazardous Substances are present on
the Real Property that are likely to require remediation.
-49-
<PAGE>
5.8. Solvency; No Litigation, Violation, Indebtedness or Default.
(a) After giving effect to the Transactions, Borrowers will be
solvent, able to pay their debts as they mature, have capital sufficient to
carry on their business and all businesses in which they are about to engage,
and (i) as of the Closing Date, the fair present saleable value of their assets,
calculated on a going concern basis, is in excess of the amount of their
liabilities and (ii) subsequent to the Closing Date, the fair saleable value of
their assets (calculated on a going concern basis) will be in excess of the
amount of their liabilities.
(b) Except for (x) Permitted Litigation, (y) the "Class Action"
described on page 62 of the Proxy and (z) the lawsuit filed by Minnesota Mining
and Manufacturing against Holdings on May 21, 1996, no Borrower has (i) any
pending or, to its knowledge, threatened litigation, arbitration, actions or
proceedings which could reasonably be expected to have a Material Adverse
Effect, other than as set forth on Schedule 5.8(b) hereof, or (ii) any
liabilities or indebtedness for borrowed money other than the Obligations.
(c) No Borrower is in violation of any applicable statute,
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 authority or arbitration board or tribunal which could
reasonably be expected to have a Material Adverse Effect.
(d) No Borrower nor any member of the Controlled Group
maintains or contributes to any Plan other than those listed on Schedule 5.8(d)
hereto. Except as set forth in Schedule 5.8(d), (i) no single employer 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 Plan, (ii)
each 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) no
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 Plan subject to Title
IV of ERISA has been terminated by the plan administrator thereof nor by the
PBGC, and to the best knowledge of Borrowers, there is no occurrence which would
cause the PBGC to institute proceedings under Title IV of ERISA to terminate any
Plan, (v) at this time, the current value of the assets of each Plan subject to
Title IV of ERISA exceeds the present value of the accrued benefits and other
liabilities of such Plan and no Borrower nor any member of the Controlled Group
knows of any facts or circumstances which would materially change the
-50-
<PAGE>
value of such assets and accrued benefits and other liabilities, (vi) to the
best knowledge of Borrowers, no Borrower or any member of the Controlled Group
has breached any of the responsibilities, obligations or duties imposed on it by
ERISA with respect to any Plan, (vii) to the best knowledge of Borrowers, no
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) to the best knowledge of
Borrowers, no Borrower nor any member of the Controlled Group nor any fiduciary
of, nor any trustee to, any 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 reasonably be anticipated to result in a
Termination Event with respect to any such 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 Plan, (x) there exists no event described
in Section 4043(b) of ERISA, for which the thirty (30) day notice period
contained in 29 CFR ss.2615.3 has not been waived, (xi) no 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, and (xii) no Borrower nor any member of the Controlled Group has
withdrawn, completely or partially, from any Multiemployer Plan so as to incur
liability under the Multiemployer Pension Plan Amendments Act of 1980.
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 are
valid and have been duly registered or filed with all appropriate governmental
authorities except where the failure to register or file would not have a
Material Adverse Effect. Borrowers on a Consolidated Basis own all of the
intellectual property rights which are reasonably necessary for the operation of
their business; there is no objection to or pending challenge to the validity of
any such material patent, trademark, copyright, design right, tradename, trade
secret or license and no Borrower is aware of any grounds for any challenge,
except as set forth in Schedule 5.9 hereto. Each patent, patent application,
patent license, trademark, trademark application, trademark license, service
mark, service mark application, service mark license, design right, copyright,
copyright application and copyright license owned or held by any Borrower and
all trade secrets used by any Borrower consist of original material or property
developed by such Borrower or was lawfully acquired by such Borrower from the
proper and lawful owner thereof. Each of such items has been maintained so as to
preserve the value thereof from the date of creation or acquisition thereof
except where failure to preserve such items could not reasonably be expected to
have a Material Adverse Effect. Upon the request of Agent, Borrowers will
provide Agent with all reasonable information regarding such items, including,
without
-51-
<PAGE>
limitation, registration and application numbers. With respect to all software
specifically designed for and used by any Borrower which would be useful to
Agent in realizing upon or collecting the Collateral, such Borrower is in
possession of all material source and object codes related to each piece of
software or is the beneficiary of a source code escrow agreement.
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 or regulation for the operation of its business in each
jurisdiction wherein it is now conducting or proposes to conduct business except
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 or under any instrument or
agreement under or subject to which any Indebtedness has been issued and, to the
best of such Borrower's knowledge, no event has occurred 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 which 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 reasonably be expected to have a
Material Adverse Effect. 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 dispute
which could reasonably be expected to have a Material Adverse Effect; there are
no strikes or walkouts or union organization of any Borrower's employees
threatened or in existence and no material labor 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 or
Regulation G 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.
-52-
<PAGE>
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, in the Merger Agreement, in the Stockholders Agreement or in any
financial statement, report, certificate or any other document furnished to the
Agent in connection herewith or therewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to Borrowers
or which reasonably should be known to Borrowers which Borrowers have not
disclosed to Agent in writing with respect to the transactions contemplated by
the Merger Agreement, the Stockholders Agreement or this Agreement which could
reasonably be expected to have a Material Adverse Effect.
5.18. Delivery of Merger Agreement and the Stockholders Agreement.
Agent has received complete copies of the Merger Agreement and the Stockholders
Agreement (including in each case 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. To the best of Borrowers' knowledge, 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.
5.21. Application of Certain Laws and Regulations. No Borrower nor any
Affiliate of any Borrower is subject to any statute, rule or regulation which
regulates the incurrence of any Indebtedness, including without limitation,
statutes 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
manufacturing and distributing medical products
-53-
<PAGE>
and supplies (including, without limitation, wheelchairs, hospital beds and
rehabilitation products) and activities necessary 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,
except to the extent the failure to own such property or possess such rights and
Consents could reasonably be expected to have a Material Adverse Effect.
VI. AFFIRMATIVE COVENANTS.
Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
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)
Consistent with past practices, 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, without limitation, 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 where
the failure to do so could 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 or
other applicable state or local
-54-
<PAGE>
statutes or ordinances (including utilizing the forms substantially in the form
of Exhibit 6.4 (as same may be revised by Agent from time to time)) 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. FDA Products. Upon Agent's request, deliver to Agent written
evidence satisfactory to Agent that it is purchasing only products approved by
the FDA to the extent subject to or regulated by the FDA from such suppliers
that are approved by the FDA.
6.6. Cash Flow Coverage Ratio. Cause to be maintained a Cash Flow
Coverage Ratio for Borrowers on a Consolidated Basis:
(a) of not less than 1.15 to 1.00 at the end of the fiscal
quarter ending June 30, 1997 for the immediately preceding three (3) month
period;
(b) of not less than 1.20 to 1.00 at the end of the fiscal
quarter ending September 30, 1997 for the immediately preceding six (6) month
period;
(c) of not less than 1.25 to 1.00 at the end of the fiscal
quarter ending December 31, 1997 for the immediately preceding nine (9) month
period; and
(d) of not less than 1.25 to 1.00 at the end of the fiscal
quarter ending March 31, 1998, and at the end of each fiscal quarter thereafter,
in each case with respect to the four (4) fiscal quarters then ended.
6.7. Earnings Before Interest and Taxes.
(a) Cause Earnings Before Interest and Taxes to be equal to or
greater than $1,500,000 for each fiscal quarter commencing with the fiscal
quarter ending June 30, 1997; and
(b) Cause Earnings Before Interest and Taxes to be equal to or
greater than $7,500,000 at the end of the fiscal quarter ending March 31, 1998,
and at the end of each fiscal quarter thereafter, in each case with respect to
the four (4) fiscal quarters then ended.
6.8. Leverage Ratio. Cause the Leverage Ratio to be not greater than
1.5 to 1.0 at the end of each fiscal quarter commencing with the fiscal quarter
ending June 30, 1997.
6.9. Execution of Supplemental Instruments. 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 as Agent may reasonably request, in order
that the full intent of this Agreement may be carried into effect.
-55-
<PAGE>
6.10. Payment of Indebtedness. Subject to Section 7.18 hereof, 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 such 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 Lenders.
6.11. Standards of Financial Statements. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and 9.14 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).
6.12. Exercise of Rights. Enforce all of its rights under the Merger
Agreement and the Stockholders Agreement executed in connection therewith
including, but not limited to, all indemnification rights and pursue all
remedies available to it with diligence and in good faith in connection with the
enforcement of any such rights.
VII. NEGATIVE COVENANTS.
No Borrower shall, and no Borrower shall permit any Guarantor to, until
satisfaction in full of the Obligations and termination of this Agreement:
7.1. Merger, Consolidation, Acquisition and Sale of Assets.
(a) Enter into any merger, consolidation or other
reorganization with or into any other Person other than a Borrower or acquire
all or a substantial portion of the assets or stock of any Person other than a
Borrower or permit any other Person other than a Borrower to consolidate with or
merge with it; provided, however, (x) that any Borrower can merge with or into,
or can acquire all or a substantial portion of the assets or stock of, any
Person if (i) prior to such merger or acquisition, no Default or Event of
Default has occurred or will exist after giving effect to such merger or
acquisition (for purposes of determining compliance with Sections 6.6, 6.7 and
6.8 hereof, the covenants set forth in such sections shall be tested on a pro
forma basis as if such acquisition had already occurred during the applicable
fiscal period end immediately before the acquisition occurred), (ii) such Person
conducts substantially the same business as such Borrower, (iii) such Borrower
controls the merged or acquired Person and the
-56-
<PAGE>
surviving Person becomes a Borrower hereunder or a Guarantor and (iv) the price
paid by such Borrower for such merger or acquisition is paid in either the stock
of such Borrower and/or Indebtedness for borrowed money otherwise permitted
under this Agreement or from the proceeds of any sale of additional equity
interests permitted hereunder in any Borrower and (y) Borrowers may acquire
additional Graham-Field Express Companies provided that (i) prior to such
acquisition and after giving effect to such acquisition, no Default or Event of
Default has occurred (for purposes of determining compliance with Sections 6.6,
6.7 and 6.8 hereof, the covenants set forth in such sections shall be tested on
a pro forma basis as if such acquisition had already occurred during the
applicable fiscal period end immediately before the acquisition occurred) and
(ii) after giving effect to such acquisition, Borrowers have Undrawn
Availability of at least $6,000,000.
(b) Without the prior written consent of Required Lenders
(which consent shall not be unreasonably withheld), sell, lease, transfer or
otherwise dispose of any of its properties or assets, except in the ordinary
course of its business; provided, however, each Borrower may sell, lease,
transfer or otherwise dispose of its assets so long as the following conditions
are met: (i) no Event of Default has occurred and is continuing prior to such
disposition, or will exist after giving effect to such disposition (for purposes
of determining compliance with Sections 6.6, 6.7 and 6.8 hereof, the covenants
set forth in such sections shall be tested on a pro forma basis as if such
disposition had already occurred during the applicable fiscal period end
immediately before the disposition occurred), (ii) the assets being sold are
sold at their fair market value and not less than their book value, (iii) the
disposition has been approved by the Board of Directors of the applicable
Borrower, (iv) (a) if the assets being sold are Collateral, the dispositions are
for cash and the total consideration for all such dispositions of Borrowers does
not exceed $1,000,000 in the aggregate, (b) if the assets being sold are not
Collateral and are used in the ordinary course in any Borrower's business, the
dispositions are for cash or cash equivalents and the total consideration for
all such dispositions of Borrowers does not exceed $5,000,000 in the aggregate
and (c) if the assets being sold are not Collateral and are no longer used in
the ordinary course in any Borrower's business, then there is no limitation on
the maximum amount of total consideration for all such dispositions and (v) the
cash proceeds of any disposition are remitted to Agent to be applied to the
Obligations in such order as Agent may in its sole discretion determine and, if
the proceeds of any disposition are not in cash, then as such proceeds are
converted to cash, such cash is delivered to Agent to be applied to the
Obligations in such order as Agent may in its sole discretion determine.
(c) Except as set forth in Section 7.7 hereof, issue, sell,
transfer or otherwise dispose of, or make an equity offering for the sale of,
any stock of any of the Borrowers, provided, however (i) Holdings may issue,
sell, transfer or otherwise dispose of the common stock of Express and may make
an
-57-
<PAGE>
equity offering of additional shares of its own common stock and (ii) Express
may issue additional shares of common stock and make an equity offering of its
own common stock, if in each case set forth in clauses (i) and (ii) above, after
giving effect to such issuance and related sale, disposition or offering, as
respects Holdings no Change of Control has occurred and as respects Express,
Holdings or any Subsidiary of Holdings owns at least fifty-one percent (51%) of
the outstanding stock of Express, and, if an Event of Default has occurred and
is continuing, the proceeds of such sale, disposition or offering are remitted
to Agent to be applied to the Obligations in such order as Agent may in its sole
discretion determine.
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 of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders)
except (a) as disclosed on Schedule 7.3 and (b) the endorsement of checks in the
ordinary course of business.
7.4. Investments. Purchase or acquire obligations or stock of, or any
other interest in, any Person utilizing Advances under this Agreement, except
(a) obligations issued or guaranteed by the United States of America or any
agency thereof, (b) commercial paper with maturities of not more than 180 days
and a published rating of not less than A-1 by Standard & Poor's Rating Group or
P-1 by Moody's Investors Services Inc. (or the equivalent rating), (c)
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 (i) such bank has a combined capital and
surplus of at least $500,000,000, or (ii) 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, (d) U.S.
money market funds that invest solely in obligations issued or guaranteed by the
United States of America or an agency thereof and (e) except as permitted in
Section 7.1.
7.5. Loans. Make advances, loans or extensions of credit in excess of
$750,000 in the aggregate for all Borrowers to any Person, including without
limitation, any Parent, Subsidiary or Affiliate, provided, however, Borrowers
may make additional loans of up to $2,000,000 in the aggregate to Irwin Selinger
so long as (i) no Event of Default has occurred and is continuing prior to and
after giving effect to making such loan (for purposes of determining compliance
with Sections 6.6, 6.7 and 6.8 hereof, the covenants set forth in such sections
shall be tested on a pro forma basis as if such loans had been made during the
applicable fiscal period end immediately before the loans had been made), (ii)
after giving effect to making such loan, Borrowers have Undrawn
-58-
<PAGE>
Availability of at least $6,000,000 and (iii) loans to Irwin Selinger may not
exceed $2,000,000.
7.6. Intentionally Omitted.
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
(except for the purchase of the approximately 20% equity interest of E & J
Mexico described in Section 7.8(vii)), or of any options to purchase or acquire
any such shares of common or preferred stock of any Borrower except that so long
as (a) a notice of termination with regard to this Agreement shall not be
outstanding, (b) no Event of Default or Default shall have occurred and be
continuing or would exist after giving effect to the payment of the dividend set
forth below (for purposes of determining compliance with Sections 6.6, 6.7 and
6.8 hereof, the covenants set forth in such sections shall be tested on a pro
forma basis as if such dividends had been paid during the applicable fiscal
period end immediately before the dividends had been paid), and (c) the purpose
for such purchase, redemption or dividend shall be as set forth in writing to
Agent at least ten (10) days prior to such purchase, redemption or dividend and
any such purchase, redemption or dividend to a Borrower shall in fact be used
for such purpose, Borrowers shall be permitted to pay cash dividends in any
fiscal year up to the greater of (i) the amount of dividends due BIL in any
fiscal year, as specified in Annex D and Annex E to the Proxy or (ii) 12.5% of
net income of Borrowers on a Consolidated Basis, provided, however, that after
giving effect to the payment of such dividends there shall not exist any Event
of Default or Default.
7.8. Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) of Borrower except Indebtedness in favor
of reputable financial institutions on terms and conditions reasonably
satisfactory to Agent in respect of (i) Indebtedness to Lenders, (ii)
Indebtedness incurred for capital expenditures and capitalized leases, (iii)
Indebtedness due under the Subordinated Note or other Subordinated Debt, (iv)
Indebtedness incurred in connection with the financing of the expansion of E & J
Canada's existing facility provided that (a) such Indebtedness does not exceed
$5,000,000 in the aggregate and (b) Agent has received mortgagee waivers from
the Persons providing such financing on terms and conditions reasonably
satisfactory to Agent, (v) in addition to Indebtedness permitted under clause
(iv) hereof, Indebtedness incurred with respect to real estate financing of
Borrowers provided that (a) such Indebtedness does not exceed $10,000,000 in the
aggregate for all Borrowers and (b) Agent has received mortgagee waivers from
the Persons providing such financing on terms and conditions reasonably
satisfactory to Agent, (vi) senior unsecured debt not to exceed $30,000,000 in
the aggregate at any time, and Subordinated Debt, in each case so long as no
Default or Event of Default has occurred and is continuing or
-59-
<PAGE>
would exist after giving effect to the incurrence of any such Indebtedness (for
purposes of determining compliance with Sections 6.6, 6.7 and 6.8 hereof, the
covenants set forth in such sections shall be tested on a pro forma basis as if
such Indebtedness had been incurred during the applicable fiscal period end
immediately before the Indebtedness had been incurred) and (vii) Indebtedness
not to exceed the amount set forth in the Stock Purchase Agreement owing by E &
J International to Antonio R. Gaitan Razuro pursuant to the terms of the Stock
Purchase Agreement.
7.9. Nature of Business. Substantially change the nature of the
business in which it is presently engaged or, except as specifically permitted
hereby, 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 deal with, any Affiliate, except transactions disclosed in the
ordinary course of business, on an arm's-length basis on terms no less favorable
than terms which would have been obtainable from a Person other than an
Affiliate.
7.11. Intentionally Omitted.
7.12. Subsidiaries.
(a) (i) Form or acquire any Subsidiary after the Closing Date
or (ii) permit any Subsidiary in existence on the Closing Date other than a
Borrower, Guarantor or E & J Mexico to conduct any business, unless, in either
case, such existing Subsidiary becomes a Guarantor and executes a Guarantor
Security Agreement in favor of Agent granting Agent a first priority security
interest in its assets or any newly formed or acquired subsidiary becomes a
Borrower hereunder.
(b) Enter into any partnership, joint venture or similar
arrangement except upon the prior written consent of Required Lenders, which
consent shall not be unreasonably withheld or delayed.
7.13. Fiscal Year and Accounting Changes. Change its fiscal year end
from December 31 or make any 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
-60-
<PAGE>
such Borrower's business as conducted on the date of this Agreement.
7.15. Amendment of Articles of Incorporation, By-Laws. Except for any
amendment increasing its amount of authorized capital stock, amend, modify or
waive any material term or provision of its Articles of Incorporation or By-Laws
unless required by law.
7.16. Compliance with ERISA. (i) (x) Without prompt notice to Lender,
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 Plan, other than those Plans disclosed on
Schedule 5.8(d), (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 Plan
where such event could result in any material 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) without prior notice, 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
substantially, with the requirements of ERISA or the Code or other applicable
laws in respect of any 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 Plan subject to
Title IV of ERISA.
7.17. Prepayment of Indebtedness. Except as permitted pursuant to
Section 7.18 hereof, at any time, directly or indirectly, prepay any
Indebtedness (other than to Lenders), or repurchase, redeem, retire or otherwise
acquire any Indebtedness of any Borrower.
7.18. Subordinated Note. 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 (x) the Subordinated Note, except as expressly
permitted in the Subordination Agreement, or (y) any other Subordinated Debt
except in accordance with the subordination provisions governing such
Subordinated Debt.
-61-
<PAGE>
7.19. Other Agreements. Enter into any material amendment, waiver or
modification of the Merger Agreement, Stockholders Agreement or any related
agreements.
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 Lenders, immediately prior to or concurrently with
the making of such Advances, of the following conditions precedent:
(a) Notes. Agent shall have received the Notes duly executed
and delivered by an authorized officer of each Borrower;
(b) Filings, Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code financing statement)
required by this Agreement, any related agreement or under law or reasonably
requested by 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 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 Other
Documents and any related agreements (collectively the "Documents") 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, 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) Certificates. Agent shall have received a copy of the
Articles or Certificate of Incorporation of each Borrower, and all amendments
thereto, certified by the Secretary of State or other appropriate official of
its jurisdiction of incorporation
-62-
<PAGE>
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;
(f) Good Standing Certificates. Agent shall have received good
standing certificates for each Borrower dated not more than thirty days prior to
the Closing Date, issued by the Secretary of State or other appropriate official
of each Borrower's jurisdiction of incorporation and each jurisdiction where the
conduct of each Borrower's business activities or the ownership of its
properties necessitates qualification;
(g) Legal Opinion. Agent shall have received the executed legal
opinions of (i) Milbank, Tweed, Hadley & McCloy, (ii) Stikeman, Elliot and (iii)
Fiddler, Gonzalez & Rodriguez, each substantially in the form of Exhibit
8.1(g)(i), (ii), and (iii), respectively which shall cover such matters incident
to the transactions contemplated by this Agreement, the Notes, the Guaranty, the
Guaranty Security Agreement and related agreements as Agent may reasonably
require and each Borrower hereby authorizes and directs such counsel to deliver
such opinions to Agent and Lenders;
(h) No Litigation. Except for the litigation proceedings
referenced in Section 5.8(b) hereof, (i) no litigation, investigation or
proceeding before or by any arbitrator or Governmental Body shall be continuing
or, to the best of any Borrower's knowledge, threatened against any Borrower or
against the officers or directors of any Borrower in connection with the Other
Documents or any of the transactions contemplated thereby which could, in the
reasonable opinion of Required Lenders, have a Material Adverse Effect; and (ii)
no injunction, writ, restraining order or other order of any nature materially
adverse to Borrower or the conduct of its business or inconsistent with the due
consummation of the Transactions shall have been issued by any Governmental
Body;
(i) Financial Condition Certificate. Agent shall have received
an executed Financial Condition Certificate in the form of Exhibit 8.1(i).
(j) Collateral Examination. Agent shall have completed
Collateral examinations, the results of which shall be satisfactory in form and
substance to Lenders, of the Receivables, Inventory and General Intangibles of
each Borrower and all books and records in connection therewith;
(k) Fees. Agent shall have received all fees payable to Agent
and Lenders on or prior to the Closing Date pursuant to Article III hereof;
(l) Intentionally Omitted;
(m) Merger Documents and Stockholder Agreement. Agent shall
have received final executed copies of the Merger
-63-
<PAGE>
Agreement and the Stockholders Agreement and all related agreements, documents
and instruments as in effect on the Closing Date and the transactions
contemplated by such documentation shall be consummated without waiver of any
conditions precedent prior to the making of the initial Advance including,
without limitation, the receipt by Borrowers of a cash capital contribution in
the sum of not less than $34,700,000 from BIL;
(n) Subordination Agreements. Agent shall have entered into a
Subordination Agreement with Holdings and BIL which shall set forth the basis
upon which the "Subordinated Noteholder" may receive, and Holdings may make,
payments under the Subordinated Note, which basis shall be satisfactory in form
and substance to Lenders in their sole discretion;
(o) Capital Restructuring. The applicable Borrowers shall have
completed the capital restructuring as set forth in the Proxy;
(p) 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 loss payee, and certified copies
of Borrowers' liability insurance policies, together with endorsements naming
Agent as a co-insured all as required by Section 4.11 hereof;
(q) Payment Instructions. Agent shall have received written
instructions from Borrowers directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(r) Blocked Accounts. Agent shall have received duly executed
agreements establishing the Blocked Accounts or Depository Accounts with
financial institutions acceptable to Agent for the collection or servicing of
the Receivables and proceeds of the Collateral;
(s) 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 reasonably deem necessary;
(t) No Adverse Material Change. (i) (x) for all Borrowers other
than E & J, since December 31, 1995, and (y) for E & J, measured against all
information received by Agent in writing prior to November 5, 1996, 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 Lenders shall have been proven to be inaccurate or
misleading in any material respect when made or supplied;
-64-
<PAGE>
(u) Leasehold Agreements. Agent shall have received landlord
agreements reasonably satisfactory to Agent with respect to all premises leased
by Borrowers at which Inventory is located;
(v) Subordinated Note. Agent shall have received a copy of the
Subordinated Note which shall contain such terms and provisions including,
without limitation, subordination terms, reasonably satisfactory to Agent;
(w) Guarantees and Other Documents. Agent shall have received
(i) the executed Guarantee(s), (ii) the executed Guarantor Security
Agreement(s), and (iii) the executed Other Documents, all in form and substance
reasonably satisfactory to Agent;
(x) Contract Review. Agent shall have reviewed all material
contracts of Borrowers including, without limitation, leases, union contracts,
labor contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be reasonably satisfactory in
all respects to Agent;
(y) Closing Certificate. Agent shall have received a closing
certificate signed by the Chief Financial Officer of each Borrower dated as of
the date hereof, stating that (i) all representations and warranties set forth
in this Agreement and the Other Documents are true and correct on and as of such
date, (ii) Borrowers are on such date in compliance with all the terms and
provisions set forth in this Agreement and the Other Documents and (iii) on such
date no Default or Event of Default has occurred or is continuing;
(z) Undrawn Availability. Immediately after giving effect to
the initial Advances hereunder, Borrowers shall have Undrawn Availability of at
least $8,000,000;
(aa) Indebtedness. All outstanding Indebtedness owed by any
Borrower or Holdings to John Hancock Mutual Life Insurance Company and Hong Kong
and Shanghai Banking Corporation Limited shall have been satisfied;
(ab) BIL Indemnity. Agent shall have received an assignment of
BIL's indemnity under the Stockholders Agreement substantially in the form of
Exhibit 8.1(ab); and
(ac) Other. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
Transactions shall be reasonably satisfactory in form and substance to Agent,
Lenders and their counsel.
8.2. Conditions to Each Advance. The agreement of Lenders to make any
Advance requested to be made on any date (including, without limitation, the
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
-65-
<PAGE>
(a) Representations and Warranties. Each of the representations
and warranties made by any Borrower in or pursuant to this Agreement 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 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;
(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 and, in the case of the initial
Advance, after giving effect to the consummation of the transactions
contemplated by the Merger Agreement; provided, however that Agent 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 Advances requested to
be made, after giving effect thereto, the aggregate Advances shall not exceed
the maximum amount of Advances permitted under Section 2.1 hereof.
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.
IX. INFORMATION AS TO BORROWERS.
Borrowers shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
9.1. Disclosure of Material Matters. Promptly after learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral including, without limitation,
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.
9.2. Schedules. Deliver to Agent on or before the twentieth (20th) day
of each month as and for the prior month (a) accounts receivable ageings, (b)
accounts payable schedules and (c) Inventory reports. In addition, each Borrower
will deliver to Agent at such intervals as Agent may reasonably 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,
without limitation, 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 reason-
-66-
<PAGE>
ably 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, concurrently with the
delivery of the financial statements referred to in Section 9.7, with a
certificate signed by an authorized senior officer of each Borrower stating, to
the best of his knowledge, that each Borrower is in compliance in all material
respects with all federal, state and local laws relating to environmental
protection and control and occupational safety and health. To the extent any
Borrower is not in compliance in all material respects 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 litigation,
suit or administrative proceeding affecting any Borrower, whether or not the
claim is covered by insurance, and of any suit or administrative proceeding,
which in any such case 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 Note; (c) any event which with the giving of notice or
lapse of time, or both, would constitute an event of default under the
Subordinated Note; (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, 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 of
America, any state, or any department, agency or instrumentality of any of them.
-67-
<PAGE>
9.7. Annual Financial Statements. Furnish Agent within ninety (90) days
after the end of each fiscal year of Borrowers, financial statements of
Borrowers on a 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 reported upon
without qualification by an independent certified public accounting firm
selected by Borrowers and reasonably satisfactory to Agent (the "Accountants").
The report of the Accountants shall be accompanied by a statement of the
Accountants certifying that (i) they have caused the Loan Agreement to be
reviewed, (ii) in making the examination upon which such report was based either
no information came to their attention which to their knowledge constituted an
Event of Default or a Default under this Agreement or any related agreement or,
if such information came to their attention, specifying any such Default or
Event of Default, its nature, when it occurred and whether it is continuing, and
such report shall contain or have appended thereto calculations which set forth
Borrowers' compliance with the requirements or restrictions imposed by Sections
6.6, 6.7 and 6.8 hereof. In addition, the reports shall be accompanied by a
certificate of each Borrower's Chief Financial Officer which shall state that,
based on an examination sufficient to permit him 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 Borrower with respect to such event, and
such certificate shall have appended thereto calculations which set forth
Borrowers' compliance with the requirements or restrictions imposed by Sections
6.6, 6.7 and 6.8 hereof. If the Securities and Exchange Commission grants
Borrowers an extension period for delivering its annual financial statements,
then the time period for Borrowers to deliver the statements required to be
delivered under this Section 9.7 shall be extended for the lesser of (x) such
extension period or (y) twenty (20) days. Upon Agent's request, the aforesaid
financial statements shall separate the results of operations of E&J and its
consolidated subsidiaries from the operations of Holdings and its other
consolidated subsidiaries.
9.8. Quarterly Financial Statements. Furnish Agent within forty-five
(45) days after the end of each fiscal quarter, an unaudited balance sheet of
Borrowers on a Consolidated Basis and unaudited statements of income and
stockholders' equity and cash flow of Borrowers reflecting results of operations
from the beginning of the fiscal year to the end of such quarter and for such
quarter, prepared on a basis consistent with prior practices and complete and
correct in all material respects, subject to normal year end adjustments. The
reports shall be accompanied by a certificate signed by the Chief Financial
Officer of each Borrower, which shall state that, based on an examination
sufficient to permit him 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
-68-
<PAGE>
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 6.6, 6.7 and 6.8 hereof. If the Securities and Exchange Commission
grants Borrowers an extension period for delivering its quarterly financial
statements, then the time period for Borrowers to deliver the statements
required to be delivered under this Section 9.8 shall be extended for the lesser
of (x) such extension period or (y) fifteen (15) days. Upon Agent's request, the
aforesaid financial statements shall separate the results of operations of E&J
and its consolidated subsidiaries from the operations of Holdings and its other
consolidated subsidiaries.
9.9. Monthly Financial Statements. Furnish Agent within thirty (30)
days after the end of each month, an unaudited balance sheet of Borrowers on a
Consolidated Basis and unaudited statements of income and stockholders' equity
and cash flow of 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 on a basis consistent with prior practices and complete
and correct in all material respects, subject to normal year end adjustments.
9.10. Other Reports. Furnish Agent as soon as available, but in any
event within ten (10) days after the issuance thereof, with (i) copies of such
proxy statements, financial statements, reports and returns as each Borrower
shall send to its stockholders and (ii) copies of all regular, periodic and
special reports or registration statements which any Borrower or Holdings files
with the Securities and Exchange Commission or any governmental authority which
may be substituted therefor, or any national securities exchange.
9.11. 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 Notes have been complied with by Borrowers including, without
limitation and 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 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 contract to which
any Borrower is a party or by which any Borrower is bound.
9.12. Projected Operating Budget. Furnish Agent, no later than thirty
(30) days prior to the beginning of each Borrower's fiscal years commencing with
fiscal year 1998, a month by month projected operating budget and cash flow of
Borrowers on a Consolidated Basis for such fiscal year (including an income
-69-
<PAGE>
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 each Borrower 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.
9.13. Variances From Operating Budget. Furnish Agent, concurrently with
the delivery of the financial statements referred to in Section 9.7 and each
quarterly report, a written report summarizing all material variances from
budgets submitted by Borrowers pursuant to Section 9.12 and a discussion and
analysis by management with respect to such variances.
9.14. Notice of Suits, Adverse Events. Furnish Agent with prompt 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 and that could reasonably be expected to have a Material
Adverse Effect, (ii) any refusal by any Governmental Body or any other Person to
renew or extend any such Consent and where such refusal could reasonably be
expected to have a Material Adverse Effect; (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 that could reasonably be expected to
have a Material Adverse Effect in the business, operations, affairs or condition
of any Borrower, or if copies thereof are requested by Agent, and (iv) copies of
any material notices and other communications from any Governmental Body or
Person (including, without limitation, the FDA) which specifically relate to any
Borrower and that could reasonably be expected to have a Material Adverse
Effect.
9.15. ERISA Notices and Requests. Furnish Agent with prompt 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 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 material non-exempt 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 Plan together with all communications received by any Borrower or
any member of the Controlled Group with respect to such request, (iv) any
material increase in the benefits of any existing Plan or the
-70-
<PAGE>
establishment of any new Plan or the commencement of contributions to any 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 Plan or to have
a trustee appointed to administer a Plan, together with copies of each such
notice, (vi) any Borrower or any member of the Controlled Group shall receive a
notice regarding the imposition of material withdrawal liability, together with
copies of each such notice; (vii) 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; (viii) any Borrower or any member of the Controlled Group knows that
(a) a Multiemployer Plan to which any Borrower or a member of the Controlled
Group contributes has been terminated, (b) any Borrower has knowledge that the
administrator or plan sponsor of a Multiemployer Plan intends to terminate a
Multiemployer Plan, or (c) the PBGC has instituted or any Borrower or any member
of the Controlled Group has reason to know that the PBGC has cause to institute
proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan to
which any Borrower or a member of the Controlled Group contributes.
9.16. 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.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
10.1. 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 or in any Other Document when due;
10.2. any representation or warranty made or deemed made by any
Borrower in this Agreement or any related agreement or in any certificate,
document or financial or other statement furnished at any time 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. failure by any Borrower to (i) furnish to Agent financial
information when due or within twenty (20) days of when requested, or (ii)
permit the inspection of its books or records;
10.4. issuance of a notice of Lien, levy, assessment, injunction or
attachment (other than a Permitted Encumbrance) against a material portion of
any Borrower's property which is not stayed or lifted within thirty (30) days;
-71-
<PAGE>
10.5. failure or neglect of any Borrower to perform, keep or observe
any term, provision, condition, covenant herein contained, or contained in any
Other Document except for a failure or neglect of Borrower to perform, keep or
observe any term, provision, condition or covenant, contained in Sections 4.6,
4.7, 4.9, 4.11, 6.1, 6.3, 6.4, 9.4 or 9.6 hereof which is cured within the
earlier of thirty (30) days from the occurrence of such failure or neglect or
twenty (20) days from the date Borrowing Agent is notified by Agent of the
occurrence of such failure or neglect;
10.6. any judgment is rendered or judgment liens filed against
Borrowers for an amount in excess of $2,000,000 in the aggregate which within
forty (40) days of such rendering or filing is not either satisfied, stayed or
discharged of record; provided, however, that if any judgment is rendered or any
judgment lien is filed against Borrowers relating to any Permitted Litigation,
such rendering or filing shall not constitute an Event of Default to the extent
BIL fulfills its indemnification obligations under Article VI of the
Stockholders Agreement with respect to the applicable Permitted Litigation
pursuant to the Stockholders Agreement within forty (40) days from the date such
judgment Lien is filed;
10.7. 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) 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 thirty (30) 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. any Borrower 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. 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) 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 thirty (30) 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;
-72-
<PAGE>
10.10. any change in any Borrower's condition or affairs (financial or
otherwise) which in the unanimous opinion of Lenders has a Material Adverse
Effect;
10.11. 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;
10.12. an event of default has occurred under the Subordinated Note;
10.13. a default of the obligations of any Borrower under any other
agreement for borrowed money to which it is a party shall occur which is not
cured within any applicable grace period and which in the reasonable opinion of
Required Lenders has a Material Adverse Effect;
10.14. termination or breach of any Guaranty or Guarantor Security
Agreement or similar agreement executed and delivered 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
Guarantor Security Agreement or similar agreement;
10.15. should any Guarantor default in its obligations under any
Guaranty Agreement or any Guarantor Security Agreement or if any proceeding
shall be brought to challenge, or any Guarantor otherwise challenges, the
validity, binding effect of any Guaranty or any Guarantor Security Agreement, or
should any Guarantor breach any representation, warranty or covenant contained
in any Guaranty Agreement or any Guarantor Security Agreement or should any
Guaranty Agreement or Guarantor Security Agreement cease to be a valid, binding
and enforceable obligation;
10.16. any Change of Ownership or Change of Control shall occur;
10.17. any material provision of this Agreement shall, for any reason,
cease to be valid and binding on any Borrower, or any Borrower shall so claim in
writing to Agent;
10.18. (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 the
business of Borrowers on a Consolidated Basis, or (b) schedule or conduct a
hearing on the renewal of any such 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; (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 reasonably acceptable to Agent
within thirty (30) days after the date of such revocation or
-73-
<PAGE>
termination, and such revocation or termination and non-replacement would
reasonably be expected to have a Material Adverse Effect;
10.19. 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 or
any Original Owner which is the owner of any material portion of the Collateral
shall have become the subject matter of litigation which might, in the
reasonable opinion of Agent, upon final determination, result in impairment or
loss of the security provided by this Agreement or the Other Documents;
10.20. the operations of Distribution's facility in St. Louis, Missouri
are interrupted for any period of 30 consecutive days and such interruption has
a Material Adverse Effect; or
10.21. an event or condition specified in Sections 7.16 or 9.15 hereof
shall occur or exist with respect to any 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 Plan or the PBGC (or both) which,
in the reasonable judgment of Agent, would have a Material Adverse Effect.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1. Rights and Remedies. Upon the occurrence 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,
the 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 other rights and remedies provided for
herein, under the Uniform Commercial Code and at law or equity generally,
including, without limitation, 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 the Borrowers' 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
-74-
<PAGE>
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 the Borrowing Agent at least five
(5) 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 such right and equity are hereby
expressly waived and released by each Borrower. In connection with the exercise
of the foregoing remedies, Agent is granted permission to use all of each
Borrower's trademarks, trade styles, trade names, patents, patent applications,
licenses, franchises and other proprietary rights which are used in connection
with (a) Inventory for the purpose of disposing of such Inventory and (b)
Equipment for the purpose of completing the manufacture of unfinished goods. The
proceeds realized from the sale of any Collateral shall be applied as follows:
first, to the reasonable costs, expenses and attorneys' fees and expenses
incurred by Agent for collection and for acquisition, completion, protection,
removal, storage, sale and delivery of the Collateral; second, to interest due
upon any of the Obligations; and, third, to the principal of the Obligations. If
any deficiency shall arise, Borrowers shall remain liable to Agent and Lenders
therefor.
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. 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 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 right or remedy shall not preclude the exercise of any other right or
remedy provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
-75-
<PAGE>
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.
12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
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.
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 December 10, 1999 (the "Term")
unless sooner terminated as herein provided. Borrowers may terminate this
Agreement at any time upon thirty (30) 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 pro rata benefit of Lenders (based on their Commitment Percentages) an early
termination fee in an amount equal to $825,000 if the Early Termination Date
occurs on or after the Closing Date to and including June 10, 1998.
13.2. Termination. The termination of the 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
-76-
<PAGE>
or interests created or Obligations have been fully 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 of each Borrower have been paid or
performed in full after the termination of this Agreement or each Borrower has
furnished Agent and Lenders with an indemnification satisfactory to Agent and
Lenders with respect thereto. Accordingly, each Borrower waives any rights which
it may have under Section 9-404(1) of 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 paid in full in
immediately available funds. All representations, warranties, covenants, waivers
and agreements contained herein shall survive termination hereof until all
Obligations are paid or performed in full and all commitments to make Advances
hereunder have terminated.
XIV. REGARDING AGENT.
14.1. Appointment. Each Lender hereby designates IBJS 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 the Fee
Letter, Section 3.2(a)(y) and Section 3.2(b)), 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 without limitation, collection of the Notes) 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
(or all Lenders if required by Section 16.2(b)), 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
-77-
<PAGE>
and the Other Documents. Neither Agent nor any of its officers, directors,
employees or agents shall be 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. 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.
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 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. 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. Neither Agent nor any of
its officers, directors, employees or agents shall be responsible to any Lender
for any recitals, statements, information, representations or warranties herein,
in any of the Other Documents or in any agreement, report, 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 for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any of the Other Documents or for any failure
of any Borrower to perform its obligations hereunder 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 Notes, 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
provided that in no event shall the Agent resign until a successor Agent is
appointed.
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
-78-
<PAGE>
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 a
Borrower 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,
-79-
<PAGE>
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.
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 (other than fees for entering into an amendment or waiver
hereunder) or otherwise without having to account for the same to Lenders.
14.9. Delivery of Documents. To the extent Agent receives documents and
information, including, without limitation, any notices from any Borrower
pursuant to the terms of this Agreement, Agent will use its best efforts to
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.
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.
(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
-80-
<PAGE>
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 as a
co-borrowing facility with a borrowing agent in the manner set forth in this
Agreement, 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.
(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.
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.
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 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
-81-
<PAGE>
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 Agent's and/or any Lender'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 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. 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 City
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 of 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 of any Lender.
(ii) extend the maturity of any of the Notes or the due
date for any amount payable hereunder, or decrease the rate
-82-
<PAGE>
of interest or reduce any fee or principal amounts 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 $500,000.
(v) increase the Maximum Revolving Advance Amount.
(vi) change the rights and duties of Agent.
(vii) permit any Advance to be made if after giving
effect thereto the total of 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.
(viii) release any Borrower or Guarantor.
(ix) increase Advance Rates above the Advance Rates in
effect on the Closing Date.
In all other respects the Agent is authorized to take such actions or fail to
take such actions if the Agent, in its reasonable discretion, deems such to be
advisable and in the best interest of Lenders, including, but not limited to,
the making of an overadvance unless it is specifically instructed to the
contrary by Required Lenders.
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.
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 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
-83-
<PAGE>
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 "Transferee"). Each Transferee may exercise all rights
of payment (excluding 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
Transferee were the direct holder thereof provided that Borrowers shall not be
required to pay to any Transferee 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 Transferee 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 Transferee. Each Borrower hereby
grants to any Transferee a continuing security interest in any deposits, moneys
or other property actually or constructively held by such Transferee as security
for the Transferee's interest in the Advances.
(c) Any Lender may with the consent of Agent and Borrowing
Agent, which consent shall not be unreasonably withheld or delayed, sell, assign
or transfer all or any part of its rights 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
$5,000,000, pursuant to a Commitment Transfer Supplement, executed by a
Purchasing Lender, the transferor Lender, Borrowing Agent and Agent and
delivered to Agent for recording; provided, however, that after any transfer of
less than all of its rights under this Agreement and the Other Documents, the
transferor Lender retains a commitment to fund at least $7,500,000 of the
Advances; provided, further, Borrowing Agent's consent under this section
16.3(c) shall not be required if an Event of Default has occurred and is
continuing at the time of such sale, assignment or transfer. 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. Borrowers hereby consent to the addition
of such Purchasing Lender and the resulting adjustment of the Commitment
Percentages arising from the purchase by such Purchasing Lender of
-84-
<PAGE>
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 reasonably requested in
order to effectuate the foregoing.
(d) Agent shall maintain at its address a copy of each
Commitment Transfer Supplement delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Advances owing to each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and Borrowers, 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 Borrowers 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 $2,500 payable by the applicable transferor Lender or Purchasing
Lender (as they shall agree between themselves) upon the effective date of each
transfer or assignment to such Purchasing Lender.
(e) Borrowers authorize each Lender to disclose to any
Transferee or Purchasing Lender and any prospective Transferee or Purchasing
Lender any and all financial or other information in such Lender's possession
concerning Borrowers which has been delivered to such Lender by or on behalf of
Borrowers pursuant to this Agreement or in connection with such Lender's credit
evaluation of Borrowers.
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.
16.5. Indemnity. Each Borrower shall indemnify Agent, each Lender and
each of their respective officers, directors, Affiliates, 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, without limitation, reasonable fees and
disbursements of counsel) which may be imposed on, incurred by, or asserted
against Agent or any Lender in any litigation, proceeding or investigation
instituted or conducted by any governmental agency 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
-85-
<PAGE>
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
(not mere) negligence of the party being indemnified.
16.6. Notice. Any notice or request hereunder may be given to 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 or request
hereunder shall be given by registered or certified mail, return receipt
requested, hand delivery, overnight mail or facsimile transmission (confirmed by
mail). Notices and requests shall be, in the case of those by hand delivery,
deemed to have been given when delivered to any officer of the party to whom it
is addressed, in the case of those by mail or overnight mail, deemed to have
been given when deposited in the mail or with the overnight mail carrier, and,
in the case of a telecopy, when confirmed.
(A) If to Agent or
IBJS at: IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: James M. Steffy
Telephone: (212) 858-2094
Telecopier: (212) 858-2151
with a copy to: Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118-0075
Attention: Steven J. Seif, Esq.
Telephone: (212) 736-1000
Telecopier: (212) 594-7167
(B) If to a Lender other than Agent, as specified on the signature
pages hereof
(C) If to Borrowing Agent
or any Borrower, at: Graham-Field Health Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Attention: Gary M. Jacobs, Vice
President Finance
Telephone: (516) 582-5900
Telecopier: (516) 582-5608
with a copy to: Graham-Field Health Products, Inc.
400 Rabro Drive East
Hauppauge, New York 11788
Attention: Richard S. Kolodny, Esq.
Vice President and
General Counsel
Telephone: (516) 582-5900
Telecopier: (516) 582-5608
-86-
<PAGE>
16.7. Survival. The obligations of Borrowers under Sections 2.2(f),
3.7, 3.8, 3.9, 4.19(h), 14.7, 16.5 and 16.9 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 or regulations, 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, without limitation,
reasonable attorneys' fees and disbursements incurred by Agent, Agent on behalf
of Lenders, and 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 or any consents or waivers hereunder 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, 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, or (e) in connection
with any advice given to Agent or any Lender with respect to its rights and
obligations under this Agreement and all related agreements, may be charged to
Borrowers' Account and shall be part of the Obligations; provided, however, the
fees and disbursements of any Lender's attorney (other than Agent's) arising
under subsections (a), (b) or (e) under this section shall not be charged to
Borrowers' Account and shall not 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, 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 for
consequential or punitive damages arising from any breach of contract, tort or
other wrong relating to the establishment, administration or collection of the
Obligations or otherwise relating to this Agreement, the Other Documents and the
transactions contemplated hereby or thereby (including, without limitation, the
use of proceeds of any Advance and making of or failure to make any Advance).
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.
-87-
<PAGE>
16.13. Counterparts; Telecopied 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. 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, (b) to Agent, any Lender or to any prospective Transferees and
Purchasing Lenders, 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 or court order, Agent, each
Lender and each Transferee shall use its best efforts prior to disclosure
thereof, to notify 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.
16.16. Publicity. Each Borrower hereby authorizes Agent and Lenders to
make appropriate announcements of the financial arrangement entered into among
Borrowers, Agent and Lenders, including, without limitation, announcements which
are commonly known as tombstones, in such publications and to such selected
parties as Agent or Lenders shall in their sole and absolute discretion deem
appropriate subject to prior review by Borrowing Agent of such announcement.
-88-
<PAGE>
Each of the parties has signed this Agreement as of the day and year
first above written.
GRAHAM-FIELD HEALTH PRODUCTS, INC.
By: /s/ Irwin Selinger
--------------------------------
Irwin Selinger
Chief Executive Officer
ATTEST:
/s/ Richard Kolodny
- -----------------------------
Richard Kolodny, Secretary
of the foregoing corporation
GRAHAM-FIELD, INC.
GRAHAM-FIELD EXPRESS, INC.
GRAHAM-FIELD TEMCO, INC.
GRAHAM-FIELD DISTRIBUTION, INC.
GRAHAM-FIELD BANDAGE, INC.
GRAHAM-FIELD EXPRESS (PUERTO RICO), INC.
EVEREST & JENNINGS, INC.
By: /s/ Gary M. Jacobs
-------------------------------------
Gary M. Jacobs, Vice President of
Finance of each of the foregoing
corporations
ATTEST:
/s/ Richard Kolodny
- -----------------------------
Richard Kolodny, Secretary
of each of the foregoing
corporations
IBJ SCHRODER BANK & TRUST COMPANY, as
Lender and as Agent
By: /s/ Brian MacConnell
-------------------------------------
Brian MacConnell, Vice President
One State Street
New York, New York 10004
Commitment Percentage: 54.54546%
-89-
<PAGE>
NATIONAL CITY COMMERCIAL FINANCE, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
1965 East Sixth Street, Suite 400
Cleveland, Ohio 44114
Commitment Percentage: 22.72727%
BTM CAPITAL CORPORATION
By:_______________________________
Name:_____________________________
Title:____________________________
125 Summer Street, Fourth Floor
Boston, Massachusetts 02110
Commitment Percentage: 22.72727%
-90-
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of December, 1996, before me personally came Irwin
Selinger, to me known, who, being by me duly sworn, did depose and say that he
is the Chief Executive Officer of Graham-Field Health Products, Inc., the
corporation described in and which executed the foregoing instrument; and that
he signed his name thereto by order of the board of directors of such
corporation.
______________________________
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of December, 1996, before me personally came Gary M.
Jacobs, to me known, who, being by me duly sworn, did depose and say that he is
the Vice President of Finance of each of Graham-Field, Inc., Graham-Field
Express, Inc., Graham-Field Temco, Inc., Graham-Field Distribution, Inc.,
Graham-Field Bandage, Inc., Graham-Field Express (Puerto Rico), Inc. and Everest
& Jennings, Inc., the corporations described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the board of
directors of each corporation.
______________________________
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of December, 1996, before me personally came Brian
MacConnell, to me known, who, being by me duly sworn, did depose and say that he
is the Vice President of IBJ Schroder Bank & Trust Company, the banking
corporation described in and which executed the foregoing instrument and that he
signed his name thereto by on behalf of said corporation.
______________________________
NOTARY PUBLIC
-91-
<PAGE>
STATE OF __________)
) ss.
COUNTY OF _________)
On this _____ day of December, 1996, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of National City Commercial
Finance, Inc., the corporation described in and which executed the foregoing
instrument and that he signed his name thereto by order of the board of
directors of said corporation.
______________________________
NOTARY PUBLIC
STATE OF __________)
) ss.
COUNTY OF _________)
On this _____ day of December, 1996, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of BTM Capital Corporation, the
corporation described in and which executed the foregoing instrument and that he
signed his name thereto by order of the board of directors of said corporation.
______________________________
NOTARY PUBLIC
-92-
FOR IMMEDIATE RELEASE Contacts: Richard S. Kolodny
Vice President,
GRAHAM-FIELD HEALTH PRODUCTS, INC. General Counsel
400 RABRO DRIVE EAST Gary M. Jacobs
Vice President, Finance
HAUPPAUGE, NEW YORK 11788 Chief Financial Officer
(516) 582-5900
GRAHAM-FIELD HEALTH PRODUCTS, INC.
ENTERS INTO SENIOR REVOLVING CREDIT FACILITY
WITH IBJ SCHRODER BANK & TRUST COMPANY
HAUPPAUGE, NEW YORK, December 20, 1996--Graham-Field Health Products, Inc.
(NYSE-GFI), a manufacturer and supplier of healthcare products, announced that
it has entered into a syndicated three-year senior secured revolving credit
facility for up to $55 million of borrowings, including letters of credit and
bankers' acceptances, arranged by IBJ Schroder Bank & Trust Company, as agent.
Under the terms of the credit facility, borrowings will bear interest at the
bank's prime rate or 2.25% above LIBOR. The credit facility will refinance
certain existing indebtedness of the Company, including the indebtedness under
the John Hancock Guaranteed Senior Notes and to Chase Manhattan Bank, and
provide for the nationwide roll-out of the Graham-Field Express program, and for
the ongoing working capital needs of the Company. The credit facility is secured
by the receivables and inventory of the Company.
Irwin Selinger, Chairman of the Board and Chief Executive Officer, stated that
"the new credit facility was entered into in connection with the Company's
recently completed acquisition of
<PAGE>
Everest & Jennings International Ltd. on November 27, 1996, and will enable the
Company to grow its existing revenue base, as well as expand the Graham-Field
Express program to other locations throughout the United States."
Graham-Field manufactures, markets and distributes more than 23,000 healthcare
products for hospital, physician and home use to approximately 16,000 home
healthcare, physician, hospital supply and pharmaceutical distributors,
retailers and wholesalers.
- 2 -
