THIRD RESTATED AND AMENDED
REVOLVING CREDIT AND SECURITY AGREEMENT
AMONG
BANK BOSTON, N.A. (F/K/A THE
FIRST NATIONAL BANK OF BOSTON),
IBJ SCHRODER BANK & TRUST COMPANY,
SANWA BUSINESS CREDIT CORPORATION,
LASALLE BUSINESS CREDIT, INC.
BANK LEUMI TRUST COMPANY OF NEW YORK,
THE DIME SAVINGS BANK OF NEW YORK, FSB
THE FIRST NATIONAL BANK OF MARYLAND,
KEY CORPORATE CAPITAL, INC.,
ALLOU HEALTH & BEAUTY CARE, INC.
AND
ALLOU DISTRIBUTORS, INC.
Dated: October 22, 1997
TABLE OF CONTENTS
-----------------
SECTION 1. DEFINITIONS,
SECTION 2. BORROWER'S LOAN ACCOUNT; REVOLVING LOANS.
2.1 Loans
2.2 Loan Account
2.3 Payment
2.4 Letters of Credit
2.5 Interest on Revolving Loans
2.6 Eurodollar Interest Rate Option
2.7 Overadvances
2.8 Fees
SECTION 3. REPRESENTATIONS AND WARRANTIES
3.1 Organization and Qualification
3.2 Corporate Authority
3.3 Valid Obligations
3.4 Approvals
3.5 Title to Properties; Absence of Liens
3.6 Compliance
3.7 Financial Statements
3.8 Solvency
3.9 Events of Default
3.10 Taxes
3.11 Litigation
3.12 Margin Rules
3.13 Restrictions on the Borrowers
3.14 ERISA
3.15 Intellectual Property; Tradenames
3.16 Environmental and Regulatory Compliance
3.17 Employment Contracts
SECTION 4. CONDITIONS OF LOANS
4.1 Conditions of Initial Loans
4.2 Conditions to all Revolving Loans
4.3 Conditions to Restatement and Amendment
4.4 Heter Iska
(i)
SECTION 5. COVENANTS.
5.1 Financial Reporting
5.2 Conduct of Business
5.3 Maintenance and Insurance
5.4 Taxes
5.5 Limitation of Indebtedness
5.6 Guaranties
5.7 Restrictions on Liens
5.8 Merger, Acquisitions and Purchase and Sale of Assets
5.9 Investments and Loans
5.10 Capital Expenditures
5.11 Sale of Notes
5.12 Dividends, etc.
5.13 ERISA Compliance
5.14 Pension Plans
5.15 Notification of Default
5.16 Notification of Material Litigation
5.17 Notification of Material Adverse Change
5.18 Inspection by the Agent
5.19 Maintenance of Books and Records
5.20 Use of Proceeds
5.21 Transactions with Affiliates
5.22 Environmental Regulations
5.23 Fiscal Year
5.24 Loss or Depreciation of Collateral
5.25 Consolidated Tangible Net Worth
5.26 Interest Coverage
5.27 Leverage
5.28 Joint and Several Liability
5.29 Interest Rate Protection
SECTION 6 SECURITY.
6.1 Security Interest
6.2 No Other Liens
6.3 Location of Records and Collateral
6.4 Status of Collateral
6.5 Name Change
6.6 Collection of Accounts Receivable
SECTION 7. EVENTS OF DEFAULT; ACCELERATION
(ii)
SECTION 8. SET OFF; PARTICIPATIONS
SECTION 9. CONCERNING THE AGENT AND THE BANKS
9.1 Appointment and Authorization
9.2 Agent and Affiliates
9.3 Future Advances
9.4 Payments
9.5 Interest, Fees and Other Payments
9.6 Action by Agent
9.7 Consultation with Experts
9.8 Liability of Agent
9.9 Indemnification
9.10 Independent Credit Decision
9.11 Consents of All Lenders
9.12 Successor Agent
9.13 Agent's Minimum Revolving Credit Commitment
SECTION 10. MISCELLANEOUS
10.1 Written Notices
10.2 Term of Agreement
10.3 No Waivers
10.4 Further Assurances
10.5 Governing Law
10.6 Payments in Immediately Available Funds
10.7 Expenses, Taxes and Indemnification
10.8 Amendments, Waivers, Etc.
10.9 Binding Effect of Agreement
10.10 Computation of Interest and Fees
10.11 Entire Agreement
10.12 Waiver of Jury Trial
10.13 Captions
10.14 Counterparts
10.15 Severability
EXHIBIT A Third Restated and Amended Revolving Credit Note
EXHIBIT B Disclosure Schedule
EXHIBIT C Existing Indebtedness
EXHIBIT D Third Restated and Amended Closing Certificate
(iii)
EXHIBIT E Certificate of Chief Financial Officer
(iv)
THIRD RESTATED AND AMENDED
REVOLVING CREDIT AND SECURITY AGREEMENT
THIS THIRD RESTATED AND AMENDED REVOLVING CREDIT AND SECURITY
AGREEMENT is made as of October 22, 1997, among ALLOU HEALTH & BEAUTY CARE, INC.
(the "Parent"), a Delaware corporation having its principal place of business
and a chief executive office at 50 Emjay Boulevard, Brentwood, New York 11717;
ALLOU DISTRIBUTORS, INC. ("Distributors"), a New York corporation having its
principal place of business and chief executive office at 50 Emjay Boulevard,
Brentwood, New York 11717; BANKBOSTON, N.A. (F/K/A THE FIRST NATIONAL BANK OF
BOSTON) ("BKB"), a national bank with its head office at 100 Federal Street,
Boston, Massachusetts 02110; IBJ SCHRODER BANK & TRUST COMPANY ("IBJS"), One
State Street, Attention: Middle Market Division, New York, New York 10004; SANWA
BUSINESS CREDIT CORPORATION ("SBC"), 500 Glenpointe Center W., Teaneck, NJ
07666; LASALLE BUSINESS CREDIT, INC. ("LBC"), 477 Madison Avenue, 20th Floor,
New York, New York, 10022; BANK LEUMI TRUST COMPANY OF NEW YORK ("BLT"), 562
Fifth Avenue, New York, New York, 10036; THE FIRST NATIONAL BANK OF MARYLAND
("FNBMD"), 25 South Charles Street, Baltimore, MD 21201; THE DIME SAVINGS BANK
OF NEW YORK, FSB ("DSB"), 1180 Avenue of the Americas, Fifth Floor, New York, NY
10036; KEY CORPORATE CAPITAL, INC. ("KCC"); and BKB as agent for the Lenders
(the "Agent"). The Parent and Distributors are hereafter referred to
individually as a "Borrower" and collectively (also with Subsidiaries executing
and delivering the Subsidiary Tie-In Agreement from time to time) as the
"Borrowers". BKB, IBJS, SBC, BLT, FNBMD, DSB and KCC are hereafter referred to
collectively as the "Lenders".
Reference is made to the following facts:
A. The Borrowers and certain of the Lenders have previously executed
and delivered that certain Revolving Credit and Security Agreement, dated
December 10, 1991 (the "Original Loan Agreement"), as amended and restated by
that certain Second Restated and Amended Revolving Credit and Security
Agreement, dated as of June 6, 1996, as further amended as of June 28, 1996,
October 15, 1996, December 6, 1996, February 14, 1997, May, 1997, July 1, 1997
and August 14, 1997 (as so amended, the "Prior Loan Agreement");
B. The Borrowers have requested that the Prior Loan Agreement be
further amended to increase the Maximum Amount hereunder to $145,000,000, to
reflect the inclusion of FNBMD, DSB and KCC among the Lenders, to extend the
Maturity Date, and to make certain other changes; and
C. The Borrowers and the Lenders have deemed it advisable to
consolidate all of the prior amendments to the Prior Loan Agreement, and the
amendments to be effected hereby, by restating and amending the Prior Loan
Agreement as set forth in this Third
Restated and Amended Revolving Credit and Security Agreement (hereinafter, as
previously amended, and as amended hereby, the "Loan Agreement" or this
"Agreement").
SECTION 1. DEFINITIONS. As used herein, the following terms shall
have the following meanings:
1.1 "Account" and "Account Receivable" include all rights to payment
for goods sold or leased or for services rendered, all sums of money or other
proceeds due or becoming due thereon, all instruments pertaining thereto, all
guaranties and security therefor, and all goods giving rise thereto and the
rights pertaining to such goods, including the right of stoppage in transit, and
all related insurance.
1.2 "Affiliate" means, with reference to any Person, (i) any
director, officer or employee of that Person, (ii) any other Person controlling,
controlled by or under direct or indirect common control of that Person, (iii)
any other Person directly or indirectly holding 5% or more of any class of the
capital stock or other equity interests (including options, warrants,
convertible securities and similar rights) of that Person and (iv) any other
Person 5% or more of any class of whose capital stock or other equity interests
(including options, warrants, convertible securities and similar rights) is held
directly or indirectly by that Person. For purposes of Sections 3.14, 5.13 and
5.14 hereof, "Affiliate" shall mean, within the meaning of Section 414(b), (c),
(m) or (o) of the Code, (i) any member of a controlled group of corporations
which includes any of the Borrowers, (ii) any trade or business, whether or not
incorporated, under common control with any of the Borrowers, (iii) any member
of an affiliated service group which includes any of the Borrowers, and (iv) any
member of a group including any of the Borrowers treated as a single employer by
regulation.
1.3 "Agent" shall mean BKB acting in the capacity of agent for the
Lenders under this Agreement, and includes (where the context so admits) any
other Person or Persons succeeding to the functions of the Agent hereunder.
1.4 "Base Accounts" shall mean the aggregate Accounts Receivable of
the Borrowers as to which the Agent has a perfected first security interest as
agent for and on behalf of the Lenders and the Borrowers have furnished to the
Agent information as required by Section 5.1 (viii) and (ix). If and when a Base
Account exists by virtue of constituting proceeds of Base Inventory, the
Inventory giving rise to the Base Account automatically loses its status as Base
Inventory.
1.5 "Base Inventory" shall mean Inventory (other than "California
Base Inventory" as defined below) consisting solely of national brand name
products, as to which any of the Borrowers has acquired title, the Agent has
acquired a perfected first security interest as agent for and on behalf of the
Lenders and the Borrowers have furnished to the Agent information as required by
Section 5.1 (viii) and (ix), but shall not include any Inventory consisting of
Allou
2
label goods, or any goods, merchandise or other personal property owned by any
other Person and held by any of the Borrowers on consignment or otherwise.
Inventory immediately loses the status of Base Inventory if and when one of the
Borrowers sells it, otherwise passes title thereto or consumes it or the Agent
releases or transfers its security interest therein.
1.6 "Base Rate" shall mean the greater of (i) that rate of interest
announced from time to time by BKB at its head office as its Base Rate, and (ii)
the rate of interest equal to the sum of (A) 150 basis points and (B) the rate
of interest equal to the average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers (the "Overnight Rates"), as published by the Federal Reserve Bank
of New York or, if the overnight Rates are not so published for any day, the
average of the quotations for the Overnight Rates received by the Agent from
three federal funds brokers of recognized standing selected by the Agent, as the
same may be changed from time to time.
1.7 "Borrowers" or "Borrower" shall mean the Parent and Distributors
jointly and severally, and on a consolidated and individual basis as the context
may require in the sole judgment of the Agent, with any Subsidiary either
executing and delivering to the Lenders and the Agent a Subsidiary Tie-In
Agreement pursuant to the terms of Section 4.1.1 hereof or hereafter becoming a
party to such Subsidiary Tie-In Agreement.
1.8 "Borrowers' Accountants" shall mean independent certified public
accountants reasonably acceptable to the Agent. The Agent hereby acknowledges
that the Borrowers' Accountants currently may include Mayer Rispler and Company.
1.9 "Borrowing Base" shall mean an amount equal to the sum of (w) the
Borrowing Base Percentage of the Net Outstanding Amount of Base Accounts, (x)
the Borrowing Base Percentage of the Net Security Value of Base Inventory, (y)
55% of the Eligible Documentary Letters of Credit (Base Inventory), and (z) 50%
of the Eligible Documentary Letters of Credit (California Base Inventory)
(provided that for purposes of clauses (x), (y) and (z) of this Section, the
aggregate amount determined by such percentage shall not exceed $80,000,000).
Whenever the Borrowing Base is used as a measure of loans it shall be computed
as of, and the loans referred to shall be those reflected in the Loan Account
at, the time in question.
1.10 "Borrowing Base Percentage of the Net Outstanding Amount of Base
Accounts" shall mean (i) 85% of the Net Outstanding Amount of Base Accounts with
respect to Base Accounts other than California Base Accounts, and (ii) 75% of
the Net Outstanding Amount of Base Accounts with respect to California Base
Accounts; provided, however, in the event that, and for so long as, the
percentage of the Borrowers' Base Accounts remaining past due for more than
thirty (30) days from their original due date exceeds fifteen (15) percent of
the Borrowers' Base Accounts, the Borrowing Base Percentage of the Net
Outstanding Amount of Base Accounts with respect to Base Accounts other than
California Base Accounts shall be reduced from 85% to 80%.
3
1.11 "Borrowing Base Percentage of the Net Security Value of Base
Inventory" shall mean (i) 60% of the Net Security Value of Base Inventory with
respect to Base Inventory, and (ii) 50% of the Net Security Value of Base
Inventory with respect to California Base Inventory.
1.12 "Business" shall mean the assets of and the existing business
now operated by the Borrowers as wholesale distributor of brand name and private
label health and beauty aid products, cosmetics and fragrances, non-narcotic
prescription drugs, non-perishable sundries consisting of items typically sold
in pharmacies or convenience stores, and non-perishable packaged food items, and
as manufacturer of brand name and private label health and beauty aid products,
cosmetics and fragrances.
1.13 "Business Day" shall mean any day other than a Saturday, Sunday
or Jewish Holiday, on which the head office of the Agent is open for
transactions of all of its normal and customary business, it being recognized
that a Business Day relating to interest calculated or a portion of the Loan
payable by reference to the Eurodollar Rate shall be any such day, other than a
Saturday, Sunday or Jewish Holiday, on which dealings are carried on in the
Eurodollar interbank market and dollar settlements of such dealings may be
effected in New York, New York.
1.14 "California Base Accounts" shall mean Base Accounts of any of
the Borrowers who have informed the Agent that its principal place of business
is located in Saugus, California. California Base Accounts shall exclude any
Accounts that do not constitute typical trade accounts in the ordinary course of
the Borrowers' business, including among such Accounts to be so excluded
Accounts due from "Foothill Capital" and "Byron Moldo."
1.15 "California Base Inventory" shall mean Inventory consisting
solely of raw materials, generic chemicals and finished goods, as to which any
of the Borrowers, who have informed the Agent that its principal place of
business is in Saugus, California, has acquired title which are located at such
Borrowers' facilities in Saugus, California, and as to which the Agent has
acquired a perfected first security interest as Agent for and on behalf of the
Lenders and the Borrowers have furnished to the Agent information as required by
Section 5.1(viii) and (ix), but shall not include any Inventory consisting of
work-in-process, bottles, packaging and discontinued goods, or any goods,
merchandise or other personal property owned by any other Persons and held by
any of such Borrowers on consignment or otherwise. Inventory immediately loses
the status of California Base Inventory if and when one of the Borrowers sells
it, or otherwise passes title thereto or consumes it or the Agent releases or
transfers its security interests therein.
1.16 "Capital Expenditures" shall mean any expenditure for fixed
assets, leasehold improvements, capital leases under GAAP, installment purchases
of machinery and equipment, acquisitions of real estate and other similar
expenditures including expenditures in the construction in progress account of
the Borrowers.
4
1.17 "Cash Equivalents" shall mean for the Borrowers on a
consolidated basis the aggregate amount of cash and cash equivalents, as
determined in accordance with GAAP, plus the then Net Outstanding Amount of Base
Accounts.
1.18 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.19 "Collateral" shall mean any and all real and personal property
of the Borrowers, whether tangible or intangible, in which the Agent now has, is
granted by this Agreement or otherwise, or hereafter acquires a security
interest or any other lien (including, without limitation, by way of mortgage,
pledge or assignment) to secure the Obligations.
1.20 "Commitment Percentage" shall mean in relation to each Lender
the percentage set forth opposite its name below:
Lender Percentage
------ ----------
BKB 24.1379310%
SBC 24.1379310%
IBJS 10.3448276%
LBC 12.0689655%
BLT 5.1724138%
FNBMD 10.3448276%
DSB 6.8965517%
KCC 6.8965517%
100%
1.21 "Consolidated Tangible Net Worth" shall mean the amount which is
equal to the consolidated net worth of the Borrowers, computed in accordance
with GAAP and with Inventory and cost of goods sold determined on the average
cost basis consistent with the method of inventory valuation used in the
preparation of the Initial Financial Statement, minus (i) to the extent not
otherwise approved in advance by the Agent, any write-up in the book value of
any asset of the Borrowers or any Subsidiary resulting from revaluation thereof
after the date of the Initial Financial Statement, (ii) the book value, net of
applicable reserves, of all intangible assets of the Borrowers and any
Subsidiaries, including, without limitation, goodwill, trademarks, trade names,
copyrights, patents and any similar rights, and unamortized debt discount and
expense, (iii) the value, if any, attributable to any capital stock of the
Borrowers or any Subsidiary held in treasury, (iv) the value, if any,
attributable to any notes or subscriptions receivable due from stockholders in
respect of capital stock, and (v) intercompany accounts with Subsidiaries and
Affiliates (including receivables due from any Subsidiaries and Affiliates).
1.22 "Credit Notes" shall have the meanings set forth in Section 2.1
hereof.
5
1.23 "Current Assets" shall mean the current assets of the Borrowers
as determined in accordance with GAAP.
1.24 "Current Liabilities" shall mean the aggregate amount of
Indebtedness of the Borrowers which may properly be classified as current
liabilities in accordance with GAAP and in any event including, without
limitation, the portion of any direct or indirect Indebtedness and other
liabilities of the Borrowers which are payable on demand, within one year from
the creation thereof or within one year from the date as of which any such
calculation of Current Liabilities is made.
1.25 "Disclosure Letter" shall mean that certain letter of even date
herewith from the Borrowers to the Agent and the Lenders disclosing information
as contemplated by the terms of this Agreement.
1.26 "EBIT" for any period shall mean an amount equal to Net Income
for such period, (a) plus the following, to the extent deducted in computing
such Net Income: (i) interest on Indebtedness for borrowed money and (ii) taxes;
and (b) minus, to the extent added in computing such Net Income, all
extraordinary items net of any tax effect caused by such items (to the extent
not already reflected in clause (a)(ii) above).
1.27 "Eligible Documentary Letters of Credit (Base Inventory)" shall
mean documentary Letters of Credit issued by the Agent solely to the extent such
Letters of Credit are issued for the importation or other purchase of finished
goods Inventory that would otherwise constitute Base Inventory at such time as
the Agent acquires a perfected first security interest therein, provided that
such Inventory is not otherwise included in the Borrowing Base.
1.28 "Eligible Documentary Letters of Credit (California Base
Inventory)" shall mean documentary Letters of Credit issued by the Agent solely
to the extent such Letters of Credit are issued for the importation or other
purchase of finished goods Inventory that would otherwise constitute California
Base Inventory at such time as the Agent acquires a perfected first security
interest therein, provided that such Inventory is not otherwise included in the
Borrowing Base.
1.29 "Encumbrances" shall have the meaning set forth in Section 5.7
hereof.
1.30 "ERISA" shall have the meaning set forth in Section 3.14 hereof.
1.31 "Eurodollar Rate" means, with respect to any Interest Period, in
the case of any Euroloan Rate Amount, the annual rate of interest determined by
the Agent, at or before 11:00 a.m. (Boston time) (or as soon thereafter as
practicable) on the second Business Day prior to the first day of such Interest
Period, to be the annual rate of interest at which deposits of U.S. dollars are
offered to the Agent by prime banks in whatever Eurodollar interbank market may
be selected by the Agent in its sole discretion, acting in good faith, at or
about the time of
6
determination and in accordance with the usual practice in such market for
delivery on the first day of such Interest Period in immediately available funds
and having a maturity equal to such Interest Period in an amount equal (as
nearly as may be) to such Euroloan Rate Amount. Each such determination by the
Agent shall be conclusive absent manifest computational error.
1.32 "Euroloan Rate" shall have the meaning set forth in Section
2.6(i) hereof.
1.33 "Euroloan Rate Amount" means, in relation to any Interest
Period, any portions of the principal amount of any Revolving Loans on which the
Borrowers elect pursuant to Section 2.6(i) hereof to pay interest at a rate
determined by reference to the Euroloan Rate.
1.34 "Event of Default" shall have the meaning set forth in Section
7.1 hereof.
1.35 "GAAP" shall mean generally accepted accounting principles
consistently applied.
1.36 "Guarantors" shall have the meaning set forth in Section 4.3
hereof.
1.37 "Guaranties" shall have the meaning set forth in Section 4.3
hereof.
1.38 "Indebtedness" with respect to any Person shall mean and
include, without duplication, (i) all items which, in accordance with GAAP,
would be included as a liability on the balance sheet of such Person, but
excluding anything in the nature of capital stock, surplus capital and retained
earnings, (ii) the face amount of all banker's acceptances and of all letters of
credit issued by any bank for the account of such Person and all drafts drawn
thereunder, (iii) the total amount of all indebtedness secured by any
Encumbrances to which any property or asset of such Person is subject, whether
or not the indebtedness secured thereby shall have been assumed, and (iv) the
total amount of all indebtedness and obligations of others which such Person has
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business), discounted with recourse or agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire,
including, without limitation, any agreement (a) to advance or supply funds to
such other Person to maintain working capital, equity capital, net worth or
solvency, or (b) otherwise to assure or hold harmless such other Person against
loss in respect of its obligations.
1.39 "Initial Financial Statement" shall have the meaning set forth
in Section 3.7 hereof.
1.40 "Insolvent" or "Insolvency" shall mean that there shall have
occurred one or more of the following events with respect to a Person:
dissolution; termination of existence; insolvency within the meaning of the
United States Bankruptcy Code or other applicable statute; such Person's
inability to pay its debts as they come due; appointment of a receiver of any
part of the property of, execution of a trust mortgage or an assignment for the
benefit of
7
creditors by, or the filing of a petition in bankruptcy or the commencement of
any proceedings under any bankruptcy or insolvency laws, or any laws relating to
the relief of debtors, readjustment of indebtedness or reorganization of
debtors, or the offering of a plan to creditors for composition or extension,
except for any such involuntary proceeding commenced against such Person which
is dismissed within 60 days after the commencement thereof without the entry of
an order for relief or the appointment of a trustee.
1.41 "Interest Period" means, any period relating to a Euroloan Rate
Amount, the commencement and duration of which shall be determined in accordance
with Section 2.6 hereof.
1.42 "Inventory" shall mean goods, merchandise and other personal
property, now owned or hereafter acquired by any of the Borrowers, which are
held for sale or lease or are furnished or to be furnished under a contract of
service or are raw materials, work in process or materials used or consumed or
to be used or consumed in the business of any of the Borrowers.
1.43 "Jewish Holiday" shall mean any of the Jewish holidays specified
on Exhibit B.
1.44 "Leases" shall mean any agreement granting any of the Borrowers
the right to occupy space in a structure or real estate for any period of time
or any capital lease or other lease of or agreement to use personal property
including, but not limited to, machinery, equipment, furniture and fixtures,
whether evidenced by written or oral lease, contract, sales agreement or other
agreement no matter how characterized.
1.45 "Lease Financing Facility" shall mean the Master Lease Finance
Agreement dated as of April 24, 1996, and Equipment Schedule No. 1 thereto,
between Distributors and BancBoston Leasing Inc., related lease documents and
the transactions contemplated thereby.
1.46 "Letters of Credit" shall mean letters of credit issued at sight
or at time (including documentary bankers acceptances) in the form customarily
issued by the Agent as standby or documentary or commercial letters of credit,
issued by the Agent at the request of any of the Borrowers and for the account
of any of the Borrowers.
1.47 "Loan" and "Loans" shall mean the Revolving Loans, as defined in
Section 2.1.
1.48 "Loan Account" shall mean the account on the books of the Agent
in which will be recorded Revolving Loans, including Overadvances, if any, made
by each of the Lenders to the Borrowers pursuant to this Agreement, payments
made on such Loans and Overadvances, if any, and other appropriate debits and
credits as provided by this Agreement.
8
1.49 "Loan Documents" shall mean this Loan Agreement and any other
documents, instruments or agreements executed and delivered in connection with
or as contemplated by this Loan Agreement.
1.50 "Machinery and Equipment" shall mean any tangible personal
property which is not Inventory.
1.51 "Maturity Date" shall mean the earlier of (a) the third
anniversary of the date hereof, or, in the event that such date is not a
Business Day, the Maturity Date shall mean the first Business Day immediately
following the third anniversary of the date hereof, or (b) as such Maturity Date
may be otherwise accelerated under the terms of Section 7.1 hereof.
1.52 "Maximum Amount" shall mean $145,000,000.00.
1.53 "Net Income" shall mean the consolidated gross revenues of the
Borrowers, for the period in question, less all expenses and other proper
charges (including taxes on income), all determined in accordance with GAAP, and
with inventory and cost of goods sold determined on the average cost basis
consistent with the method of inventory valuation used in the preparation of the
Initial Financial Statement, but in any event , excluding from Net Income: (i)
any gain or loss arising from any write-up of assets, except the extent
inclusion thereof shall be approved in writing by the Agent; (ii) earnings of
any Subsidiary (other than a Borrower), or of any business entity (other than a
Subsidiary) in which any of the Borrowers has an ownership interest, except to
the extent such net earnings shall have actually been received by the Borrowers
in the form of cash distributions; (iii) any gains or losses on the sale or
other disposition of investments or fixed or capital assets, any taxes on any
such excluded gains, and tax deductions or credits on account of any such
excluded losses (iv) the proceeds of any life insurance policy; (v) any deferred
or other credit representing any excess of the equity of any Subsidiary at the
date of acquisition thereof over the amount invested in such Subsidiary; and
(vi) any reversal of any contingency reserve, except to the extent that
provision for such contingency reserve shall be made from income arising during
such period; and (vii) except to the extent already deducted from gross revenues
in the calculation of Net Income, all salaries, bonuses, dividends or any other
payments or compensation of any kind paid or distributed to any employees and/or
Affiliates of the Borrowers.
1.54 "Net Outstanding Amount of Base Accounts" shall mean the net
amount of Base Accounts (including, without limitation, California Base
Accounts) outstanding after (a) eliminating from the aggregate amount of
outstanding Base Accounts such Accounts, past due under the original terms of
sale or unpaid more than 60 days after original due date or, if subject to
specific dating programs approved by the Agent, eliminating from the aggregate
amount of outstanding Base Accounts such Accounts more than 150 days after the
original invoice date; and (b) deducting from the aggregate face amount of the
remaining Base Accounts (i) Accounts owing from Affiliates; (ii) all Accounts
owing from any account debtor in the event that 20% or more of the Accounts due
from such account debtor to any of the Borrower are more than 30 days past
9
due after the original due date, if subject to specific dating programs approved
by the Agent, more than 120 days after the original invoice date; and (iii) all
payments, adjustments, and credits applicable thereto and all amounts due
thereon considered by the Agent to be difficult to collect or uncollectible by
reason of return, rejection, repossession, loss or damage of or to the
merchandise giving rise thereto, a merchandise or other dispute, insolvency of
the account debtor or any other reason; all as determined by the Agent in its
discretion, which determination shall be final and binding upon the Borrowers
absent manifest error.
1.55 "Net Security Value of Base Inventory" shall mean the net value
of Base Inventory and California Base Inventory, calculated at the lesser of
fair market value or cost determined on the average cost basis consistent with
the method of inventory valuation used in the preparation of the Initial
Financial Statement, after subtracting the value of any Base Inventory and
California Base Inventory which is damaged or defective and after taking into
account charges and liens, other than those of the Agent, of all kinds against
the Base Inventory and California Base Inventory, changes in the market value
thereof, and transportation, processing and other handling charges affecting the
value thereof, all as determined by the Agent in its sole and unrestricted
discretion, which determination shall be final and binding upon the Borrowers
absent manifest computational error.
1.56 "Obligations" shall mean any and all obligations of any of the
Borrowers to the Agent or to any of the Lenders of every kind and description,
direct or indirect, absolute or contingent, primary or secondary, due or to
become due, now existing or hereafter arising, regardless of how they arise or
by what agreement or instrument they may be evidenced or whether evidenced by
any agreement or instrument, and includes obligations to perform acts and to
refrain from acting as well as obligations to pay money.
1.57 "Operating Cash Flow" shall mean for any fiscal period an amount
equal to (i) Net Income for such period, (ii) plus interest, taxes and all
depreciation, amortization and other non-cash charges taken in accordance with
GAAP and deducted in computing Net Income for such period, (iii) minus taxes
actually paid during such period and, (iv) minus Capital Expenditures made
during such period (excluding Capital Expenditures financed by any third party
which is not one of the Lenders).
1.58 "Overadvance" and "Overadvances" shall have the meanings set
forth in Section 2.7 hereof.
1.59 "Parent" shall mean Allou Health & Beauty Care, Inc., a Delaware
corporation of which Distributors is a wholly-owned subsidiary.
1.60 "Pension Plan" and "Pension Plans" shall have the meanings set
forth in Section 3.14 hereof.
10
1.61 "Person" includes an individual, a company, a corporation, an
association, a partnership, a limited liability company, a joint venture, an
unincorporated trade or business enterprise, a trust, an estate, or a government
(national, regional or local) or an agency, instrumentality or official thereof.
1.62 "PBGC" shall have the meaning set forth in Section 3.14 hereof.
1.63 "Plan" and "Plans" shall have the meaning set forth in Section
3.14 hereof.
1.64 "Pledge Agreement" shall have the meaning set forth in Section
4.1.1 hereof.
1.65 "Prohibited Transactions" shall have the meaning set forth in
Section 3.14 hereof.
1.66 "Reserve Charge" means, for each day on which any Euroloan Rate
Amount is outstanding, a reserve charge in an amount equal to the product of:
(i) the outstanding principal amount of the Euroloan Rate Amount;
multiplied by
(ii)(a) the Eurodollar Rate (expressed as a decimal) divided by one
minus the Reserve Rate, minus
(b) the Eurodollar Rate (expressed as a decimal); multiplied by
(iii) 1/360.
1.67 "Reserve Rate" means the rate in effect from time to time,
expressed as a decimal, at which each Lender would be required to maintain
reserves under Regulation D of the Board of Governors of the Federal Reserve
System (or any successor or similar regulation relating to such reserve
requirements) against its respective Commitment Percentage of "Eurocurrency
Liabilities" (as such term is used in such Regulation D) if such liabilities
were outstanding.
1.68 "Revolving Credit Commitment" shall mean, in relation to each of
the Lenders, the maximum amount of Revolving Loans that such Lender shall be
committed to make to the Borrowers upon the terms and subject to the conditions
contained in this Agreement, which amount shall be equal to the product of the
Maximum Amount times such Lender's Commitment Percentage (i.e. for BKB:
$145,000,000 x 24.1379310% = $35,000,000; for SBC: $145,000,000 x 24.1379310% =
$35,000,000; for IBJS: $145,000,000 x 10.3448276% = $15,000,000; for LBC:
$145,000,000 x 12.0689655% = $17,500,000; for BLT: $145,000,000 x 5.1724138% =
$7,500,000; for FNBMD: $145,000,000 x 10.3448276% = $15,000,000; for DSB:
$145,000,000 x 6.8965517 = $10,000,000; and for KCC: $145,000,000 x 6.8965517% =
$10,000,000).
11
1.69 "Revolving Loan" shall have the meaning set forth in Section 2.1
hereof.
1.70 "Subsidiary" shall mean, with reference to any Person, any
corporation, association, joint stock company, business trust or other similar
organization of whose total capital stock or voting stock such Person directly
or indirectly owns or controls more than 50% thereof or any partnership or other
entity in which such Person directly or indirectly has more than a 50% interest
or which is controlled directly or indirectly by such Person.
1.71 "Subsidiary Tie-In Agreement" shall mean the Subsidiary Tie-In
Agreement, as originally executed and delivered on December 10, 1991 and as
amended from time to time, referred to in Section 4.1.1 hereof. Such Subsidiary
Tie-In Agreement may be amended from time to time to add additional Borrowers or
otherwise.
1.72 "Total Interest" shall mean for any fiscal period an aggregate
amount equal to all expenses incurred, accrued or actually paid by any of the
Borrowers constituting interest expense, as determined in accordance with GAAP,
plus payments included in any rental payments under equipment leases (including
the Lease Financing Facility ) constituting implicit interest payments not
otherwise included in such interest expense under GAAP.
1.73 "Total Liabilities" shall mean all of the liabilities of the
Borrowers as determined in accordance with GAAP.
1.74 "Working Capital" shall mean an amount for the Borrowers,
determined in accordance with GAAP, equal to the excess of Current Assets over
Current Liabilities.
For purposes of this Agreement, except as otherwise expressly provided herein or
unless the context otherwise requires:
(i) references to any Person defined in this Section 1
refer to such Person and its successor in title and assigns or (as
the case may be) his successors, assigns, heirs, executors,
administrators and other legal representatives;
(ii) references to this Agreement refer to such document as
originally executed, or if subsequently varied or supplemented from
time to time, as so varied or supplemented and in effect at that
relevant time of reference thereof;
(iii) words importing the singular only shall include the
plural and vice versa, and words importing the masculine gender shall
include the feminine gender and vice versa, and all references to
dollars shall be to United States Dollars; and
(iv) accounting terms not otherwise defined in this
Agreement or any of the other documents, instruments or agreements
executed and delivered in connection
12
herewith or contemplated hereby shall have the meanings assigned to
them in accordance with GAAP.
SECTION 2. BORROWERS' LOAN ACCOUNT; REVOLVING LOANS.
2.1 Loans. Upon the terms and subject to the conditions of this
Agreement, and in reliance upon the representations, warranties and covenants of
the Borrowers made herein, each of the Lenders severally agrees to make loans
(including Overadvances as defined in and made available in accordance with the
terms of Section 2.7 hereof) ("Revolving Loans") to the Borrowers at the
Borrowers' request from time to time, from and after the date hereof and prior
to the Maturity Date up to a maximum aggregate principal amount outstanding
(after giving effect to all amounts requested) at any one time equal to such
Lender's Revolving Credit Commitment; provided that the aggregate principal
amount of Revolving Loans outstanding at any time (excluding Overadvances) plus
the aggregate face amount of Letters of Credit outstanding at such time shall
not exceed the lesser of (i) the Maximum Amount and (ii) the Borrowing Base at
such time, and provided, further, that at the time the Borrowers request a
Revolving Loan and after giving effect to the making thereof there has not
occurred and is not continuing an Event of Default or any event which, with the
giving of notice or the passage of time, or both, would constitute an Event of
Default. The Revolving Loans shall be made pro rata in accordance with each
Lender's Commitment Percentage in accordance with the terms of this Agreement,
including, without limitation Section 9 hereof. Except as otherwise permitted
under Section 2.7 hereof for certain Overadvances, the Borrowers jointly and
severally agree that it shall be a payment Event of Default under Section 7.1(i)
hereof, without notice or demand of any kind, if at any time the aggregate debit
balance of the Loan Account plus the aggregate face amount of Letters of Credit
outstanding at such time shall exceed the lesser of (i) the Maximum Amount and
(ii) the Borrowing Base, unless the Borrowers shall, upon demand by the Agent,
promptly pay cash to the Agent to be credited to the Loan Account in such amount
as shall be necessary to eliminate the excess. All requests for Revolving Loans
shall be in such form and shall be made in such manner as is consistent with the
Agent's customary practices. The Revolving Loans shall be evidenced by Third
Restated and Amended Revolving Credit Notes (collectively, the "Credit Notes")
in the form of Exhibit A attached hereto.
2.2 Loan Account. The Agent shall enter Revolving Loans as debits in
the Loan Account for each of the Lenders. The Agent shall also record in the
Loan Account all payments made by the Borrowers on account of Revolving Loans
(including Overadvances), and may also record therein, in accordance with
customary accounting practices, other debits and credits, including customary
banking charges and all interest, fees, charges and expenses chargeable to the
Borrowers under this Agreement. The debit balance of the Loan Account shall
reflect the aggregate amount of the Borrowers' Obligations to the Lenders from
time to time by reason of Revolving Loans (including Overadvances) and other
appropriate charges hereunder. At least once each month the Agent shall render a
statement of account showing as of its date the debit balance of the Loan
Account for each of the Lenders and in the aggregate which, unless within thirty
(30) days of such date notice to the contrary is received by the Agent from the
Borrowers
13
or any Lender, shall be considered correct and accepted by the Borrowers and the
Lenders and conclusively binding upon them absent manifest error.
2.3 Payment. Subject to the terms of Section 2.6 and 2.8.3 hereof the
Borrowers may prepay outstanding Revolving Loans (including Overadvances) and
the Obligations evidenced by the Credit Notes in whole or in part at any time
without premium or penalty. Amounts so paid and other amounts may be borrowed
and reborrowed from time to time as provided in Section 2.1. On the Maturity
Date, the Borrowers shall repay to the Agent all outstanding Revolving Loans
(including Overadvances) and the Credit Notes, together with all unpaid interest
thereon and all fees and other amounts due hereunder. All of the other
indebtedness evidenced by the Credit Notes, shall, if not sooner paid, also be
absolutely due and payable on the Maturity Date. In the case of any partial
payment of the Credit Notes, the total amount of such partial payment shall be
allocable among the Credit Notes, subject to adjustment as provided in Section
9.4 hereof, pro rata in accordance with the Commitment Percentage of each of the
Lenders.
2.4 Letters of Credit. Upon the terms and subject to the conditions
of this Agreement, and in reliance upon the representations, warranties and
covenants of the Borrowers made herein, the Agent agrees to issue, as agent for
and under the joint responsibilities of the Lenders, to the extent permitted by
law or the Uniform Customs Practices of the International Chamber of Commerce
governing Letters of Credit (Publication No. 500 or any successor thereto),
Letters of Credit upon the application of the Borrowers during the period from
the date hereof to the Maturity Date; provided that the aggregate principal
amount of Letters of Credit outstanding for the account of the Borrowers at any
time shall not (i) exceed $15,000,000, or (ii) cause the aggregate debit balance
in the Loan Account at such time plus the aggregate face amount of Letters of
Credit then outstanding to exceed the lesser of (y) the Maximum Amount or (z)
the Borrowing Base; and provided, further that at the time the Borrowers request
the issuance of a Letter of Credit and after giving effect to the issuance
thereof, there has not occurred and is not continuing any Event of Default or
any event which, with the giving of notice or the passage of time, or both,
would constitute an Event of Default. All Letters of Credit shall expire not
later than the Maturity Date. Without limiting the foregoing, if any Letter of
Credit would by its terms expire after the Maturity Date, the Borrowers shall,
on the Maturity Date, cause another letter of credit issued by another bank to
be substituted therefor or cause another bank satisfactory to the Agent to
indemnify the Agent for the benefit of the Lenders to its satisfaction against
any and all liabilities and obligations in respect to such Letter of Credit and,
in such event, this Agreement shall continue in full force and effect until all
of the Obligations under any such Letters of Credit have been paid in full to
the Agent for the account of the Lenders.
Amounts drawn under the Letters of Credit shall become immediately
due and payable, jointly and severally, by the Borrowers to the Agent and, if
not paid in accordance with the terms of any such Letter of Credit, shall be
added to the Loan Account as Revolving Loans as of the date funds are advanced
under such Letter of Credit and shall be immediately due and payable upon the
maturity of the Credit Notes.
14
In order to evidence such Letters of Credit, each of the Borrowers
shall enter into, with the Agent, such agreements and execute such instruments
and documents as the Agent customarily requires in like transactions, including,
but not limited to, a letter of credit application and agreement. The Borrowers
hereby acknowledge and agree that each of their presidents, vice presidents and
chief financial officers is authorized to sign applications for the issuance of
Letters of Credit and that the execution and submission thereof to the Agent by
any such officer for the account of any of the Borrowers shall be for the
benefit and liability hereunder of each of the Borrowers.
2.5 Interest on Revolving Loans. Subject to the terms of Section 2.6
and Section 2.7 hereof, the Revolving Loans shall bear interest at a rate per
annum equal to .375% above the Base Rate in effect from time to time; provided
that if any Loan or any portion thereof is not paid when due, so long as any
overdue amount remains unpaid, then the unpaid balance of such Loan shall bear
interest, in lieu of interest otherwise payable, to the extent permitted by law,
compounded monthly at an interest rate equal to 4% above the Base Rate in effect
from time to time after such Loan or any portion thereof becomes overdue.
Interest on Loans based on the Base Rate shall be payable, jointly and
severally, by the Borrowers to the Agent monthly in arrears on the first
Business Day of each month. Any change in the Base Rate shall result in a change
on the same day in the rate of interest to accrue from and after such day on the
unpaid balance of principal of the Loans. Interest accruing on the unpaid
balance of Loans from time to time shall be calculated on the basis of a 360-day
year for the actual number of days elapsed.
2.6 Eurodollar Interest Rate Option.
(i) At the option of the Borrowers, so long as no Event of Default
has occurred and is then continuing and no event which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default has
occurred and is then continuing, the Borrowers may elect from time to time prior
to three months before the Maturity Date to have all or a portion of the unpaid
principal amount of any Revolving Loan bear interest during any particular
Interest Period at the Euroloan Rate (as hereinafter defined); provided that:
(i) the number of any such portions with respect to which such an election has
been made remaining outstanding at any point in time does not exceed three, and
(ii) any such portion of any Revolving Credit Loan shall be in an amount not
less than $5,000,000 or some greater integral multiple of $500,000 with respect
to any single Interest Period. Any election by the Borrowers to have interest
calculated at the Euroloan Rate shall be made by notice (which shall be
irrevocable) to the Agent at least three (3) Business Days prior to the first
day of the proposed Interest Period, specifying the Euroloan Rate Amount and the
duration of the proposed Interest Period (which must be for one, two or three
full months). Any such election of a Euroloan Rate shall lapse at the end of the
expiring Interest Period unless extended by a further election notice as
hereinbefore provided. Each Euroloan Rate Amount shall bear interest during each
Interest Period relating thereto at an annual rate (the "Euroloan Rate") equal
to the Eurodollar Rate plus 2.00%. Interest on each Euroloan Rate Amount shall
be payable on the last day of each Interest Period relating thereto.
15
(ii) The Borrowers shall jointly and severally pay to the Agent the
Reserve Charge, if any, with respect to Euroloan Rate Amounts of the Revolving
Loans outstanding from time to time on the dates interest is payable on such
Euroloan Rate Amounts.
(iii) The Agent shall forthwith upon determining any Euroloan Rate
provide notice thereof to the Borrowers and the Lenders. Each such notice shall
be conclusive and binding upon the Borrowers absent manifest computational
error.
(iv) If, with respect to any Interest Period, the Agent is unable to
determine the Euroloan Rate relating thereto, or adverse or unusual conditions
in or changes in applicable law relating to the applicable Eurodollar interbank
market make it illegal or, in the reasonable judgment of the Agent,
impracticable, to fund therein the Euroloan Rate Amount or make the projected
Euroloan Rate unreflective of the actual costs of funds therefor to the Agent or
any Lender, or if it shall become unlawful for the Agent or any Lender to charge
interest on the Loan on a Euroloan Rate basis, then in any of the foregoing
events the Agent shall so notify the Borrowers and interest will be calculated
and payable in respect of such projected Interest Period (and thereafter for so
long as the conditions referred to in this sentence shall continue) by reference
to the Base Rate in accordance with Section 2.5 hereof.
(v) No Interest Period may be selected by the Borrowers for any
Euroloan Rate Amount which ends beyond the Maturity Date. If any Interest Period
would otherwise end on a day which is not a Business Day for Euroloan Rate
purposes, that Interest Period shall end on the Business Day next preceding or
next succeeding such day as determined by the Agent in accordance with its usual
practices and notified to the Borrowers at the beginning of such Interest
Period.
(vi) If for any reason any payment or prepayment of principal of a
Euroloan Rate Amount is made on any day prior to the last day of an Interest
Period, then the Borrowers shall reimburse the Agent, on behalf of the Lenders,
for the loss, if any, computed pursuant to the following formula:
L = (R-T) x P x D + RC
--------------
360
L = amount of loss to be reimbursed to the Agent
(for the account of the Lenders).
R = the Euroloan Rate at the time of the payment.
T = effective interest rate in which United States
Treasury bills maturing on the last day of the
then current Interest Period and in the same
amount as the
16
unpaid principal amount of the Loan can be purchased
by the Agent on the day of such payment of principal.
D = the number of days remaining in the Interest Period
as of the date of such payment.
P = the amount of principal paid.
RC = the Reserve Charge due through the date of payment.
The Borrowers shall pay to the Agent (for the account of the Lenders) the amount
of loss, computed in accordance with the foregoing formula, upon presentation by
the Agent of a statement setting forth the Agent's calculation of the amount of
such loss, which notice shall be conclusive and binding upon the Borrowers
absent manifest computational error.
2.7 Overadvances.
(i) The Borrowers may request of the Agent in writing from time to
time that the Lenders make loans to the Borrowers at a time, or the Agent may
permit loans, when the debit balance in the Loan Account plus the aggregate face
amount of Letters of Credit outstanding exceeds the Borrowing Base or which
loans will cause the debit balance in the Loan Account plus the aggregate face
amount of Letters of Credit outstanding to exceed the Borrowing Base. Any such
written notice from the Borrowers to the Agent as contemplated by the
immediately preceding sentence shall set forth the dollar amount of such
contemplated overadvance, and, such notice shall be provided to the Agent at
least five (5) Business Days prior to the Borrower's intended borrowing creating
such overadvance. The Agent, as agent for and on behalf of the Lenders, shall
consider any such request and may determine to make such loan or loans in its
sole and unrestricted discretion, subject to clause (ii) of this Section 2.7.
Any such overadvances shall be made for the debit account of each of the Lenders
and the Lenders shall reimburse the Agent for the making of any such loan as
though such loan were a Loan duly made in accordance with the terms of this
Agreement (any such loan or loans being herein referred to individually as an
"Overadvance" and collectively as "Overadvances"). The Agent shall enter such
Overadvances, along with all interest, expenses and charges relating thereto, as
debits in the Loan Account. All Overadvances shall bear interest at a rate per
annum equal to 2.00% above the Base Rate in effect from time to time provided
that if any Overadvance or any portion thereof is not paid when due, then the
unpaid balance of such overadvance shall bear interest, in lieu of interest
otherwise payable, to the extent permitted by law, compounded monthly at an
interest rate equal to 4% above the Base Rate in effect from time to time after
such overadvance or any portion thereof becomes overdue. Interest on
Overadvances shall be payable, jointly and severally, by the Borrowers to the
Agent for the account of the Lenders monthly in arrears on the first Business
Day of each month. Any change in the Base Rate shall result in a change on the
same day in the rate of interest to accrue from and after such date on the
unpaid balance of principal of any
17
Overadvance. Interest accruing on the unpaid balance of overadvances from time
to time shall be calculated on the basis of a 360-day year for the actual number
of days elapsed.
(ii) Although it will be within the discretion of the Agent to
approve or reject requests from the Borrowers for Overadvances under this
Agreement, and Overadvances shall otherwise only be permitted as contemplated
hereby, in no event shall: (a) the aggregate amount of Overadvances pursuant to
Section 2.7(i) at any one time outstanding exceed the maximum aggregate amount
of $15,000,000; (b) the debit balance in the Loan Account at any one time
outstanding exceed the Maximum Amount minus the aggregate face amount of Letters
of Credit outstanding; and (c) any Overadvance be made at such time as there
exists an Event of Default or an event that with the passage of time, the giving
of notice, or both, will become an Event of Default. In addition, the Borrowers
hereby jointly and severally covenant and agree to cause there to be outstanding
no Overadvances for thirty consecutive days during the period from May 1 through
August 31 of each year prior to the Maturity Date. Failure of the Borrowers to
maintain any of the foregoing conditions, covenants or agreements shall
constitute a payment Event of Default pursuant to Section 7.1(i), and shall be
deemed to be a failure to perform an obligation hereunder.
2.8 Fees.
2.8.1 The Borrowers shall pay to the Agent for the benefit of the
Lenders pro rata in proportion to their respective Commitment Percentages a
commitment fee, computed on the average daily debit balance in the Loan Account
for the prior month and payable monthly in arrears on the first Business Day of
each month, equal to (a) from the date hereof through September 30, 1998, 0.125%
per annum, and (b) from October 1, 1998 through the Maturity Date, 0.250% per
annum of the excess of (i) the Maximum Amount over (ii) the principal amount of
Revolving Loans outstanding from time to time.
2.8.2 The Borrowers shall pay to the Agent for the benefit of the
Lenders in proportion to their respective Commitment Percentages for issuance of
each Letter of Credit a fee quarterly in arrears that is either (i) a fee equal
to the greater of 1 1/2% per annum of the face amount of each standby Letter of
Credit or such minimum fee for each such Letter of Credit as may be generally in
effect from time to time, or (ii) a fee equal to the greater of 1/4% of the face
amount of each sight documentary Letter of Credit or such minimum fee for each
such Letter of Credit as may be generally in effect from time to time, or (iii)
a fee equal to the greater of 1 1/2% per annum of the face amount of each time
documentary Letter of Credit or such minimum fee for each such Letter of Credit
as may be generally in effect from time to time; plus such fees and charges as
are customarily charged by the Agent.
2.8.3 If prepayment and termination of the Revolving Loans, the
Credit Notes and this Agreement are made, utilizing any funds for such
prepayment other than funds internally generated by the operation of the
Business prior to such prepayment and termination (and other than in the event
the Agent requests that the Borrowers make any such prepayment to any of the
18
Lenders), on or prior to (i) the first anniversary of the date hereof, the
Borrowers shall pay to the Agent for the account of the Lenders (pro rata in
proportion to their respective Commitment Percentages) 1% of the Maximum Amount;
and (ii) the second anniversary of the date hereof, the Borrowers shall pay to
the Agent for the account of the Lenders (pro rata in proportion to their
respective Commitment Percentages) 1/2 of 1% of the Maximum Amount.
2.8.4 Simultaneously with the execution and delivery hereof, the
Borrowers shall pay to the Agent for the account of BKB, IBJS, SBC, LBC and BLT,
as the Lenders under the Prior Loan Agreement (pro rata in proportion to their
respective Commitment Percentages) an amendment fee of $50,000 in the aggregate.
2.8.5 The Borrowers shall pay to the Agent any and all charges
customarily made by the Agent against Borrowers.
2.8.6 If after the date hereof, the Agent or any of the Lenders
shall have determined that the adoption of any applicable law, rule, regulation,
guideline, directive or request (whether or not having the force of law)
regarding capital requirements for banks or bank holding companies, 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 the Agent or any of
the Lenders with any of the foregoing effective after the date hereof, imposes
or increases a requirement by the Agent or any of the Lenders to allocate
capital resources to the Lenders' commitment to make Loans or issue and maintain
Letters of Credit hereunder which has or would have the effect of reducing the
return on the Agent's or such Lender's capital to a level below that which the
Agent or such Lender could have achieved (taking into consideration the Agent's
or such Lender's then existing policies with respect to capital adequacy and
assuming full utilization of the Agent's or such Lender's capital) but for such
adoption, change or compliance by any amount deemed by the Agent to be material,
then: (i) the Agent shall promptly after its determination of such occurrence
give notice thereof to the Borrowers; and (ii) the Borrowers shall pay to the
Agent, for the benefit of such Lender bearing such reduced return as an
additional fee from time to time within thirty (30) days after the Borrowers
receive written notice thereof such amount as the Agent or such Lender certifies
to be the amount that will compensate it for such reduction. A certificate of
the Agent or such Lender claiming compensation under this Section shall be
conclusive absent manifest computational error. Such certificate shall set forth
in reasonable detail the nature of the occurrence giving rise to such
compensation, the additional amount or amounts to be paid to it hereunder and
the method by which such amounts were determined. In determining such amount,
the Agent and each Lender may use any reasonable averaging and attribution
methods. In lieu of the payments provided for in clause (ii) of this Section,
the Borrowers may, within 120 days of the Agent's notice pursuant to clause (i)
of this Section, prepay such Lender all Obligations then accruing to such Lender
and terminate all of such Lender's rights and obligations pursuant to this
Agreement without payment of any fee pursuant to Section 2.8.3 hereof, if
applicable, on account of such prepayment. In the event of any such prepayment,
the Maximum Amount shall be reduced by the amount of such Lender's Revolving
Credit Commitment or an
19
additional bank satisfactory to the Borrowers and the Agents may be included as
a Lender hereunder.
2.8.7 Anything hereinbefore to the contrary notwithstanding, if
any future applicable law or any future amendment to any present applicable law
(which expression, as used in this Agreement, includes statutes and rules and
regulations thereunder and interpretations thereof by any competent court or by
any governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time heretofore or
hereafter made upon or otherwise issued to the Agent or any Lender by any
central bank or other fiscal, monetary or other authority, whether or not having
the force of law) becoming effective after the date hereof shall (i) subject the
Agent or any Lender to any tax, levy, impost, duty, charge, fee, deduction or
withholding of any nature with respect to this Agreement, the Maximum Amount of
the Revolving Loans or the payment to the Agent or such Lender of any amounts
due to it hereunder, or (ii) materially change the basis of taxation of payments
to the Agent or such Lender of the principal or the interest on or any other
amounts payable to the Agent or such Lender hereunder, or (iii) impose or
increase or render applicable any special or supplemental special deposit or
reserve or similar requirements or assessment against assets held by, or
deposits in or for the account of, or any liabilities of, or loans by an office
of the Agent or any Lender in respect of the transactions contemplated herein,
or (iv) impose on the Agent or any Lender any other conditions or requirements
with respect to this Agreement, the Maximum Amount or any Loan, and the result
of any of the foregoing is (A) to increase the cost to the Agent or such Lender
of making, funding or maintaining all or any part of the Loans, or (B) to reduce
the amount of principal, interest or other amount payable to the Agent or such
Lender hereunder, or (C) to require the Agent or such Lender to make any payment
or to forego any interest or other sum payable hereunder, the amount of which
payment or foregoing interest or other sum is calculated by reference to the
gross amount of any sum receivable or deemed received by the Agent or such
Lender from the Borrowers hereunder, then, and in each such case not otherwise
provided for hereunder, the Borrowers will, within thirty (30) days after
receipt of written notice from the Agent accompanied by calculations thereof in
reasonable detail, pay to the Agent or such Lender such additional amounts as
will be sufficient to compensate the Agent or such Lender for such additional
cost, reduction, payment or foregoing interest or other sum, provided that the
foregoing provisions of this sentence shall not apply in the case of any
additional cost, reduction, payment or foregoing interest or other sum resulting
from any taxes charged upon or by reference to the overall net income, profits
or gains of the Agent or any Lender.
2.8.8 The Borrowers authorize the Agent to charge to the Loan
Account or to any deposit account which any of the Borrowers may maintain with
the Agent or any Lender the interest, fees, charges, taxes and expenses provided
for in this Agreement or any other document executed or delivered in connection
herewith and any payments due to the Agent in respect of Letters of Credit.
20
SECTION 3. REPRESENTATIONS AND WARRANTIES.
Each of the Borrowers jointly and severally represents, warrants and
covenants, as to itself and as to each of the other Borrowers, individually and
on a consolidated basis as the context may require, to the Agent and the Lenders
as follows:
3.1 Organization and Qualification. Each of the Borrowers (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of its incorporation as indicated on Exhibit B attached hereto;
(ii) has all requisite corporate power and authority to own its property and
conduct its business as now conducted and as presently contemplated; (iii) is
duly qualified and in good standing in each jurisdiction (which jurisdictions
are listed on Exhibit B attached hereto) where the nature of its properties or
its business (present or proposed) requires such qualification, except where the
failure to do so would not have a material adverse effect on the business,
properties or condition (financial or otherwise) of such Borrower individually
or all of the Borrowers taken as a whole; and (iv) has no Subsidiaries other
than those listed in the Disclosure Letter.
3.2 Corporate Authority. The execution, delivery and performance of
this Agreement and the Credit Notes and the transactions and other documents
contemplated hereby and thereby (including the granting of the security interest
hereunder) are within each Borrower's corporate authority, have been authorized
by all necessary corporate proceedings on the part of each Borrower, and do not
and will not contravene any provision of law, or any provision of each
Borrower's charter document or its by-laws, or contravene any provisions of, or
constitute an Event of Default hereunder or a default under, or an event which
with the lapse of time or the giving of notice, or both, would constitute an
Event of Default hereunder or a default under any other material agreement,
instrument, judgment, order, decree, permit, license or undertaking binding upon
or applicable to the Borrowers or any of their properties, or result in the
creation, other than in favor of the Agent, of any mortgage, pledge, security
interest, lien, encumbrance or charge upon any of the properties or assets of
the Borrowers.
3.3 Valid Obligations. This Agreement and all of its terms and
provisions (including the security interest granted hereunder) are, and the
Obligations of the Borrowers under each of the Credit Notes, when each Credit
Note is duly executed and delivered for value, will be, legal, valid and binding
Obligations of each of the Borrowers enforceable in accordance with their terms,
subject to bankruptcy, insolvency and similar laws affecting creditors' rights
in general and the availability of equitable remedies.
3.4 Approvals. The execution, delivery and performance of this
Agreement and the Credit Notes and the transactions and other documents
contemplated hereby and thereby do not require any approval or consent of, or
filing or registration with, any governmental or other agency or authority or
any other Person, except as disclosed on Exhibit B attached hereto.
21
3.5 Title to Properties; Absence of Liens. As of the date of this
Agreement, the Borrowers have good and marketable title to all of their
respective properties, assets and rights of every name and nature now purported
to be owned by it, including without limitation the Collateral, the Business and
the properties, assets and rights reflected in the Initial Financial Statement,
in each case free from all liens, charges and encumbrances whatsoever except as
set forth in the Disclosure Letter. All real property owned or leased by the
Borrowers is described in Exhibit B.
3.6 Compliance. The Borrowers have all necessary permits, approvals,
authorizations, consents, licenses, franchises, registrations and other rights
and privileges (including patents, trademarks, trade names and copyrights) to
allow them to own and operate their business without any violation of law or the
rights of others; and the Borrowers are duly authorized, qualified and licensed
under and in compliance with all applicable laws, regulations, authorizations
and orders of public authorities.
3.7 Financial Statements. The Borrowers have furnished to the Agent
the audited consolidated and unaudited consolidating balance sheet and statement
of income of the Business as at March 31, 1997 and December 31, 1996 and for the
12 month and 9 month periods, respectively, then ended separating out the Parent
and its Subsidiaries on the one hand from Distributors and its Subsidiaries on
the other hand (the "Initial Financial Statement"), which was prepared in
accordance with GAAP, certified (as to the audited statements) by Mayer Rispler
and Company and fairly presents the financial position of the Business with
respect to its assets and liabilities as at the close of business on such dates
and the results of operations for the 12 month and 9 month periods,
respectively, then ended. The Borrowers have also furnished to the Agent
projections, dated on or about July, 1997, of the Borrowers' future results of
operations on a consolidated basis for five fiscal years, which represent the
Borrowers' good faith estimates as of the date thereof and as of the date hereof
based upon the assumptions stated therein which assumptions the Borrowers
believe were and continue to be fair, reasonable and proper in light of current
and reasonably foreseeable business conditions. At the date hereof, none of the
Borrowers have any Indebtedness or other liabilities, debts or obligations,
whether accrued, absolute, contingent or otherwise, and whether due or to become
due, including, but not limited to, liabilities or obligations on account of
taxes or other governmental charges, that are not set forth on Exhibit C
attached hereto. Since the Initial Financial Statement there have been no
changes in the assets, liabilities, financial condition or business of the
Borrowers or the Business the effect of which has, individually or in the
aggregate, been materially adverse, except as set forth on Exhibit B attached
hereto.
3.8 Solvency. Each of the Borrowers has and, after giving effect to
the Loans, will have, assets (both tangible and intangible) having a fair
saleable value in excess of the amount required to pay the probable liability on
its then-existing debts (whether matured or unmatured, liquidated or
unliquidated, fixed or contingent); each of the Borrowers has and will have
access to adequate capital for the conduct of its business and the discharge of
its debts incurred in connection therewith as such debts mature; none of the
Borrowers was Insolvent immediately
22
prior to the consummation of the Loans and immediately after giving effect
thereto none of the Borrowers will be Insolvent.
3.9 Events of Default. As of the date of this Agreement, no Event of
Default exists, and no event or condition exists which with the passage of time
or the giving of notice, or both, would constitute an Event of Default.
3.10 Taxes. Each of the Borrowers and each of their respective
Subsidiaries, if any, has filed all federal, state and other tax returns
required to be filed, and all taxes, assessments and other such governmental
charges due from such Person have been fully paid, except those being contested
in good faith legal proceedings and with respect to which adequate reserves have
been established, are being maintained and are fully reflected in such Person's
financial statements. Neither any Borrower nor any Subsidiary has executed any
waiver that would have the effect of extending the applicable statute of
limitations in respect of tax liabilities. Each of the Borrowers and each of
their respective Subsidiaries, if any, has established on its books reserves
adequate for the payment of all federal, state and other tax liabilities.
3.11 Litigation. Except as set forth on Exhibit B attached hereto,
there is no litigation, proceeding or governmental investigation, administrative
or judicial, pending or threatened against the Borrowers, any Subsidiary or the
Business which, if decided adversely to any of Borrowers or a Subsidiary might
have a materially adverse effect on the business, properties or condition
(whether financial or otherwise) of such Person individually, the Borrowers
taken as a whole, Subsidiaries or the Business or on the ability of such Person
or Persons to perform its or their obligations hereunder, under the Credit Notes
or under any other agreement or document contemplated hereby.
3.12 Margin Rules. No portion of any Loan is to be used for the
purpose of purchasing or carrying any "margin security" or "margin stock" as
such terms are used in Regulations G, T, U or X of the Board of Governors of the
Federal Reserve System.
3.13 Restrictions on the Borrowers. None of the Borrowers is party to
or bound by any contract, agreement or instrument, or subject to any charter or
other corporate restriction, materially and adversely affecting its business,
property, assets, operations or conditions, financial or otherwise.
3.14 ERISA. (i) Each "Employee Pension Benefit Plan" (as such term is
defined in Section 3 of the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder ("ERISA")) now or heretofore
maintained by any of the Borrowers or any Affiliate (individually the "Pension
Plan" and collectively the "Pension Plans") and any "Employee Welfare Benefit
Plan" (as such term is defined in Section 3 of ERISA) now or heretofore
maintained by any of the Borrowers or any Affiliate (individually the "Plan" and
collectively the "Plans") is listed on Exhibit B attached hereto and is in
substantial compliance with ERISA (to the extent that ERISA is applicable); (ii)
except as set forth on Exhibit B attached
23
hereto, there are no benefits vested under any Pension Plan; (iii) no Pension
Plan, Plan or trust created thereunder, no trustee thereof, no administrator or
fiduciary (other than an unrelated third party administrator or fiduciary)
thereof, and neither any of the Borrowers nor any Affiliate has engaged in a
"Prohibited Transaction" (as such term is defined in Section 406 of ERISA and
Section 4975 of the Code ("Prohibited Transaction")) which would subject any
such Pension Plan, Plan, trust created thereunder, trustee, administrator or
fiduciary thereof or any of the Borrowers or any Affiliate or any party dealing
with any such Pension Plan, Plan or trust to a material tax or penalty on a
"Prohibited Transaction" imposed under Section 4975 of the Code or Section 502
of ERISA; (iv) no Pension Plan or trust created thereunder has been the subject
of a Reportable Event (as such term is defined in Section 4043 of ERISA),
including, without limitation, the termination of any Pension Plan or trust, (v)
if and to the extent that either any of the Borrowers or any Affiliate is a
party to a multi-employer Plan (as defined in Section 4001 of ERISA), then
neither any such Borrower nor any Affiliate has incurred withdrawal liability,
within the meaning of Section 4201 of ERISA, with respect to any such
multi-employer Plan and neither any of the Borrowers nor any Affiliate has any
knowledge that any such multi-employer plan to which such Borrower or any
Affiliate thereof is required to contribute is in reorganization or is insolvent
pursuant to Section 4241 or 4245 of ERISA; (vi) no Pension Plan which is not a
multi-employer Plan is insolvent or in reorganization; (vii) neither any of the
Borrowers nor any Affiliate has ceased operations at a facility with the result
that such Borrower or any Affiliate thereof is to be treated as a substantial
employer as provided in Section 4062(e) of ERISA, or has withdrawn from a
Pension Plan with respect to which it was a "substantial employer"; (viii)
neither any of the Borrowers nor any Affiliate and no Pension Plan or trust
created thereunder has incurred any "accumulated funding deficiency" (as such
term is defined in Section 412 of the Code and Section 302 of ERISA) whether or
not waived, since the effective date of ERISA; (ix) no condition exists which
presents a material risk to any of the Borrowers or any Affiliate of incurring a
liability to or on account of a Pension Plan or Plan pursuant to any of the
foregoing sections of the Code and ERISA; (x) the aggregate current value of all
assets of each Pension Plan which is a single-employer plan (i.e., a plan which
is not referred to in clause (v) hereof), based upon actuarial assumptions, each
of which is reasonable (taking into account the experience of the plans and
reasonable expectations), is at least equal to the aggregate current value of
all accrued benefits under such Pension Plan, and each such Pension Plan is
fully funded on a termination basis; and (xi) no Pension Plan and neither any of
the Borrowers nor any Affiliate has incurred any liability to the Pension
Benefit Guaranty Corporation or any governmental authority succeeding to any and
all of the functions of said corporation (the "PBGC") over and above premiums
required by law.
3.15 Intellectual Property; Tradenames. All (i) patents and patent
applications in any country or jurisdiction and (ii) trademarks and service
marks and United States, state and foreign registrations thereof and
applications therefor in which any of the Borrowers has an ownership interest
are listed on Exhibit B attached hereto. All tradenames of the Borrowers are
listed in the Disclosure Letter.
3.16 Environmental and Regulatory Compliance. As to each of the real
properties owned or leased by any of the Borrowers or any of their Subsidiaries,
all as described on Exhibit
24
B, each such property is presently in compliance in all material respects with
and has in full force and effect all material permits or approvals required by
all applicable building, zoning, anti-pollution, hazardous substance, hazardous
material, oil, environmental, health, safety or other laws, ordinances or
regulations and the Borrowers have not received notification that any of the
foregoing properties is in violation of any of the foregoing provisions, except
for any non-compliance with respect to or lack of possession of the foregoing
which does not have or will not have a material adverse effect on the business
or properties of the Borrowers. Except as set forth on Exhibit B, none of the
Borrowers has ever generated, stored, or disposed of any hazardous substances,
hazardous materials, or oil on any of such properties or any portion thereof and
none of the Borrowers is aware of the presence, generation, storage or disposal
of such substances on any of such properties or any portion thereof by any of
the Borrowers or any prior owner or prior occupant or prior user thereof or by
anyone else, nor is any of the Borrowers aware of any spill or release of a
hazardous or toxic waste, substance or constituent, or other substance, into the
environment on or, from any of such properties. Except as set forth on Exhibit
B, no inquiry, notice or threat to give notice by any governmental authority has
been received by any of the Borrowers with respect to the generation, storage or
disposal or release or threat of release thereof, or with respect to any
violation of any federal, state or local environmental, health or safety statute
or regulation. Except as set forth on Exhibit B, no underground storage tanks or
surface impoundments are on any of the properties owned or leased by any of the
Borrowers. For the purposes of this Section, (i) "hazardous substances" shall
mean "hazardous substances" as defined in the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 U.S.C. ss.9601, et
seq., and regulations thereunder or under the provisions of any other applicable
state, county or municipal law, ordinance, rule or regulation, (ii) "hazardous
material" and "oil" shall mean "hazardous material" and "oil", respectively, as
defined in the Massachusetts Oil and Hazardous Material Release Prevention and
Response Act, as amended, M.G.L. Chapter 21E, and regulations thereunder or
under the provisions of any other applicable state, county or municipal law,
ordinance, rule or regulation, and (iii) "release" or "threat of release" shall
mean such terms as they are defined in any of the foregoing laws, ordinances,
rules or regulations, as applicable.
3.17 Employment Contracts. Set forth on Exhibit B is a list of all
written and oral employment and similar contracts, agreements and understandings
between any of the Borrowers and any of their employees and/or Affiliates
currently binding upon any of the Borrowers, copies or summaries of which have
been provided to the Agent prior to the date hereof (other than contracts,
agreements and understandings between any of the Borrowers and its employees who
are not Affiliates, whose employment was entered into in the ordinary course of
business, whose employment is terminable at will by either party and who is not
entitled to any special bonus or other compensation measured or determined by or
directly contingent upon the economic performance of the Borrowers individually
or taken as a whole).
25
SECTION 4. CONDITIONS OF LOANS.
4.1 Conditions of Initial Loans, The obligations of the Lenders to
make the initial Revolving Loan under the Original Loan Agreement were subject
to the fulfillment on or prior to the date thereof of the following conditions
precedent:
4.1.1 Receipt by the Agent of the following documents,
certificates and opinions in form and substance satisfactory to the Agent and
duly executed and delivered by the parties thereto:
(a) This Agreement;
(b) The Credit Notes, each substantially in the form of Exhibit
A thereto;
(c) Subsidiary Tie-In Agreement from Subsidiaries of
Distributors listed on the Disclosure Letter ("Subsidiary
Tie-In Agreement");
(d) Joint and Several Guaranties from Victor Jacobs, Herman
Jacobs and Jacob Jacobs, guarantying the Obligations
incurred by the Borrowers with respect to any Overadvance
pursuant to Section 2.7 hereof;
(e) Pledge from the Parent of all of the issued and outstanding
capital stock of Distributors to secure the Obligations
hereunder (the "Pledge Agreement");
(f) Pledge from Distributors of all of the issued and
outstanding capital stock of the Subsidiaries of
Distributors executing and delivering the Subsidiary Tie-In
Agreement to secure the Obligations;
(g) UCC-11 Search Reports;
(h) UCC-1 Financing Statements;
(i) Personal financial statements of Victor Jacobs, Herman
Jacobs and Jacob Jacobs (also known as Victor Jacobowitz,
Herman Jacobowitz and Jacob Jacobowitz);
(j) A certified copy of resolutions of each of the Borrowers'
Boards of Directors evidencing the due authorization,
execution and delivery of this Agreement, the documents
referred to herein and the transactions contemplated hereby
to which each is a party;
(k) Certificates as of the date hereof signed by the Secretary
of each of the Borrowers regarding the incumbency and true
signature of the officers
26
authorized to sign the documents referred to in this Section
4.1.1 and all other documents and instruments related to the
Loans and the transactions contemplated hereby;
(1) Certificates of insurance or insurance binders evidencing
compliance with Section 5.3 hereof;
(m) A favorable legal opinion addressed to the Agent and each of
the Lenders from Parker Chapin Flattau and Klimpl, LLP,
counsel to the Borrowers, Victor Jacobs, Herman Jacobs and
Jacob Jacobs;
(n) Certifications from governmental officials evidencing the
legal existence and corporate and tax good standing of each
of the Borrowers as of the most recent practicable date;
(o) Certified copies of each of the Borrowers' Certificate of
Incorporation and Bylaws;
(p) Closing Certificate executed by the chief financial officer
of each of the Borrowers substantially in the form of
Exhibit D thereto;
(q) Waiver from each of the Borrowers' landlords in form
satisfactory to the Agent;
(r) Payout Letters from The Bank of New York and any other
financial institutions currently lending to the Borrowers
which were listed on Exhibit B thereto, and delivery of
discharges, releases and terminations of all existing liens
of any nature on the Collateral, except such liens as were
expressly permitted by the terms of the Original Loan
Agreement; and
(s) Borrowing Base Certificate.
4.1.2 The representations and warranties contained in Section 3
shall be true and accurate in all material respects on and as of the date of the
initial Revolving Loan, the Borrowers shall have performed and complied in all
material respects with all covenants and conditions required in this Agreement
to be performed or complied with by them prior to the making of such Loan, and
no event shall have occurred and be continuing and no condition shall exist, or
would result from the Loans to be made on the date hereof or the transactions
contemplated hereby, which would constitute, or with the passage of time or the
giving of notice, or both, would constitute, an Event of Default.
27
4.1.3 The Borrowers shall have provided the Agent with such
additional instruments, certificates, opinions and other documents as the Agent
or its counsel shall reasonably request.
4.1.4 There shall not have been any material adverse change in
any of the Borrowers' business, properties or condition (financial or
otherwise).
4.1.5 The Borrowers shall have reimbursed the Agent for all of
the fees and disbursements of legal counsel to the Agent, which shall have been
incurred by the Agent in connection with the preparation, negotiation, execution
and delivery of this Agreement and the closing of the transactions contemplated
hereby.
4.2 Conditions to all Revolving Loans. The obligation of the Lenders
to make any Revolving Loan under this Agreement is subject to the fulfillment to
the satisfaction of the Agent immediately prior to or contemporaneously with
such Revolving Loan of each of the following conditions:
4.2.1 The representations and warranties contained in this
Agreement or otherwise made in writing by or on behalf of the Borrowers pursuant
hereto or in connection with the transactions contemplated hereby shall be true
and correct in all material respects at the time of each such Revolving Loan
(except for representations and warranties limited as to time or with respect to
a specific event, which representations and warranties shall continue to be
limited to such time or event) with and without giving effect to the Revolving
Loans to be made at such time and the application of the proceeds thereof. The
Agent may without waiving this condition consider it fulfilled, and a
representation by each of the Borrowers to such effect made, if no written
notice to the contrary, dated the date of such Revolving Loan, is received from
the Borrowers. In the event that the Borrowers submit a written notice as
contemplated by the preceding sentence, the conditions set forth in this Section
4.2.1 will be considered fulfilled if such notice specifies in reasonable detail
the exceptions to the representations and warranties as of the date of such
Revolving Loan, the exceptions as stated in such notice are satisfactory to the
Agent and the Agent so notifies the Borrowers.
4.2.2 At the time of each such Revolving Loan:
(a) the Borrowers shall have performed and complied in all
material respects with all agreements and conditions
contained in this Agreement required to be performed or
complied with by it prior to or at such time;
(b) no condition or event that constitutes an Event of Default
or that, after notice or lapse of time or both, would
constitute an Event of Default shall have occurred and be
continuing; and
28
(c) there shall have been no material adverse change in the
condition (financial or otherwise), business or properties
of any of the Borrowers since December 31, 1996.
4.3 Conditions to Restatement and Amendment. The willingness of the
Lenders to enter into this Loan Agreement is subject to the receipt by the Agent
and certain of the Lenders, as specified below, of the following in form and
substance satisfactory to the Agent and such Lenders:
(a) Each of the Lenders shall have received a Credit Note
substantially in the form of Exhibit A to this Agreement signed by
the Borrowers;
(b) The Agent shall have received amendments to and/or
restatements of the Subsidiary Tie-In Agreement and the Pledge
Agreement.
(c) The Agent shall have received the Restated and Amended
Limited Guaranties of even date herewith, from Victor Jacobs, Herman
Jacobs and Jacob Jacobs (collectively the "Guarantors") (the
"Guaranties").
(d) The Agent shall have received certified copies of
resolutions of each Borrower's respective Boards of Directors, each
Borrower's charters and by-laws, and a list of each Borrower's
corporate officers with specimen signatures, in sufficient numbers
for itself and each of the Lenders, such resolutions evidencing the
due authorization of this Agreement and the entering into of the
transactions contemplated hereby;
(e) The Agent shall have received a favorable legal opinion
addressed to the Agent and each of the Lenders from Parker Chapin
Flattau & Klimpl, LLP, counsel to the Borrowers, in sufficient
quantities for itself and each of the other Lenders;
(f) The Agent shall have received certifications from
governmental officials evidencing the legal existence and corporate
good standing of each of the Borrowers as of the most recent
practicable date;
(g) The Agent shall have received a Third Restated and
Amended Closing Certificate executed by the Chief Financial Officer
of each of the Borrowers substantially in the form of Exhibit D
hereto, in sufficient numbers for itself and each of the other
Lenders;
(h) the Borrowers shall have provided to the Agent
certification from governmental officials evidencing the tax good
standing of each of the Borrowers in the State of New York and, to
the extent incorporated or qualified to do business therein,
California; and
29
(i) The Borrowers shall have provided the Agent with such
additional instruments, certificates and other documents as the Agent
shall reasonably request;
4.4 Heter Iska. This Agreement is being entered into by BLT in
accordance with BLT's heter iska.
SECTION 5. COVENANTS.
During the term of this Agreement and so long as any Indebtedness of
the Borrowers in respect of any Loan or any Obligation remains outstanding:
5.1 Financial Reporting. The Borrowers shall furnish to the Agent in
sufficient copies for distribution to each of the Lenders:
(i) as soon as available to the Borrowers, but in any event
within 90 days after each fiscal year-end, consolidated and
consolidating balance sheets of the Borrowers separating out the
Parent and its Subsidiaries on the one hand from Distributors and its
Subsidiaries on the other hand, as at the end of, and related
consolidated and consolidating statements of income, retained
earnings and cash flow for, such year prepared in accordance with
GAAP and, in the case of such consolidated statements, certified by
the Borrowers' Accountants; and concurrently with such financial
statements, a written statement by the Borrowers' Accountants that,
in the making of the audit necessary for their report and opinion
upon such financial statements, they have obtained no knowledge of
any Event of Default, or knowledge of any event which, with the
passage of time, the giving of notice, or both, will constitute such
Event of Default, or, if in the opinion of such accountant such Event
of Default or event exists, they shall disclose in such written
statement the nature and status thereof;
(ii) as soon as available to the Borrowers, but in any
event within 45 days after the end of each fiscal quarter of the
Borrowers consolidated and consolidating balance sheets of the
Borrowers separating out the Parent and its Subsidiaries on the one
hand from Distributors and its Subsidiaries on the other hand, as at
the end of, and related consolidated and consolidating statements of
income, retained earnings and cash flow for, the portion of the year
then ended, for the fiscal quarter then ended and for the twelve
months then ended, prepared in accordance with GAAP and, in the case
of such consolidated statements, certified by the principal financial
officer of each of the Borrowers;
(iii) promptly as they become available, a copy of each
report (including any so-called management letters) submitted to any
of the Borrowers or any Subsidiary by independent certified public
accountants in connection with each annual audit of the books of such
Borrower or such Subsidiary by such accountants or in connection with
any
30
interim audit thereof pertaining to any phase of the business of the
Borrowers or any Subsidiary;
(iv) promptly as they become available, copies of all such
financial statements, proxy material and reports as any of the
Borrowers or any Subsidiaries shall send to or make available to
stockholders or holders of any Indebtedness of any of the Borrowers
or any Subsidiaries or shall file with the United States Securities
and Exchange Commission, or announcements made to the general public
by any of the Borrowers or any Subsidiary;
(v) from time to time, such other financial data and
information about any of the Borrowers, any Subsidiaries and the
Collateral as the Agent may reasonably request;
(vi) concurrently with each delivery of financial
statements pursuant to clause (i) and clause (ii) of this Section
5.1, a report in substantially the form of Exhibit E hereto signed on
behalf of the Borrowers by the chief financial officer of each of the
Borrowers;
(vii) within 60 days prior to the beginning of each fiscal
year, consolidated and consolidating projections for the Borrowers
separating out the Parent and its Subsidiaries on the one hand from
Distributors and its Subsidiaries on the other hand, for the next
three fiscal years beginning with such fiscal year, including
projected balance sheets, income statements, cash flow statements and
such other statements as the Agent may reasonably request and in form
and substance satisfactory to the Agent, all prepared on a basis
consistent with the financial statements required by clause (i);
(viii) as soon as available to the Borrowers, reports (in
form satisfactory to the Agent) of the value of the Borrowing Base
including without limitation (a) Account Receivable reports daily
within one Business Day; (b) Inventory reports monthly within fifteen
(15) Business Days of the end of each calendar month (provided,
however, such reports shall be provided semi-monthly as of the first
and fifteenth of each month within fifteen days of each such date
during any period in which any Overadvance remains outstanding); and
(c) Account Receivable aging reports monthly within fifteen days of
the end of each month; and
(ix) for the purposes of computing the Borrowing Base,
information adequate to identify Inventory and Accounts Receivable at
times and in form and substance as may be requested by the Agent, and
if requested by the Agent, accompanied by pledges or designations of
Inventory and agings or assignments of Accounts in form and substance
satisfactory to the Agent, which assignments shall give Agent full
power to collect, compromise or otherwise deal with the assigned
Accounts as the sole owner thereof on behalf of the Lenders; and
31
(x) quarterly reports of sales and gross profits on a
divisional basis for the immediate preceding quarter by the thirtieth
day of the calendar month following the end of such quarter.
5.2 Conduct of Business. Each of the Borrowers hereby covenants and
agrees, jointly and severally, for itself individually and on behalf of all of
the Borrowers individually and taken as a whole, that it and they will:
(i) duly observe and comply in all material respects with
all applicable laws and all requirements of any governmental
authorities relative to its corporate existence, rights and
franchises, to the conduct of its business and to its property and
assets; and will maintain and keep in full force and effect all
licenses and permits necessary to the proper conduct of its business,
except where the failure to do so would not have a material adverse
effect on the business, properties or condition (financial or
otherwise) of the Borrowers and any Subsidiaries, individually or
taken as a whole; and
(ii) maintain its and their corporate existence and
existing corporate structure, and remain or engage in substantially
the same business as the Business and in no unrelated business,
except that the Borrowers may, upon notice to the Agent, withdraw
from any business activity which their respective Boards of Directors
deem unprofitable or unsound.
5.3 Maintenance and Insurance. The Borrowers will maintain and keep
their properties in good repair, working order and condition, and from time to
time make all needful and proper repairs, renewals, replacements, additions and
improvements thereto so that their business may be properly and advantageously
conducted at all time. The Borrowers at all times will maintain insurance, in
such amounts (including, without limitation, so-called "all-risk" coverage at
replacement value and "broad form" liability coverage), against such hazards and
liabilities and for such purposes as the Agent shall determine is reasonable to
insure the value of the Collateral and as is customary in the industry for
companies of established reputation engaged in the same or similar businesses
and owning or operating similar properties. The Agent, as agent for and on
behalf of the Lenders, shall be named as loss payee and additional insured and
shall be given 30 days advance notice of any cancellation of or failure to renew
insurance. If the Borrowers fail to provide or cause to be provided such
insurance, the Agent, in its sole discretion, may provide such insurance and
charge the cost to the Loan Account or to any of the Borrowers' deposit accounts
with any of the Lenders. Any payment not recovered from the Borrowers shall bear
interest at the then rate of interest under the Credit Notes from such time as
the Agent incurs such expense. Neither the Agent nor the Lenders shall, by the
fact of the Agent's approving, disapproving, accepting, obtaining or failing to
obtain any such insurance, incur any liability for the form or legal sufficiency
of insurance contracts, solvency of insurance companies or payment of lawsuits,
and the Borrowers hereby expressly assume full joint and several responsibility
therefor and liability, if any, thereunder.
32
5.4 Taxes. The Borrowers will pay or cause to be paid all taxes,
assessments or governmental charges on or against any of them, or their
properties prior to such taxes becoming delinquent; except for any tax,
assessment or charge (other than any charge for environmental cleanup costs
referred to in Section 5.22) which is being contested in good faith by proper
legal proceedings and with respect to which adequate reserves have been
established and are being maintained.
5.5 Limitation of Indebtedness. None of the Borrowers will create,
incur, assume or suffer to exist, or in any manner become or be liable directly
or indirectly with respect to, any Indebtedness except: (i) the Obligations;
(ii) Indebtedness existing on the date of this Agreement and set forth on
Exhibit C hereto; (iii) Indebtedness for the purchase price of capital assets
incurred in the ordinary course of business, to the extent such purchase is
permitted by Section 5.10; (iv) Indebtedness for taxes, assessments or
governmental charges to the extent that payment therefor shall at the time not
be required to be made in accordance with Section 5.4; and (v) Indebtedness on
open account for the purchase price of services, materials and supplies incurred
by any of the Borrowers in the ordinary course of business (not as a result of
borrowing), so long as all of such open account Indebtedness shall be promptly
paid and discharged when due or in conformity with customary trade terms and
practices, except for any such open account Indebtedness which is being
contested in good faith by the Borrowers, as to which adequate reserves required
by GAAP have been established and are being maintained and as to which no
encumbrance has been placed on any property of any of the Borrowers.
5.6 Guaranties. None of the Borrowers shall become or be liable by
way of guaranty, surety or other arrangement for the Indebtedness or obligations
of any nature or kind of any other Person (including any Subsidiary), except for
endorsement of instruments for collection in the ordinary course of business.
5.7 Restrictions on Liens. None of the Borrowers will create, incur,
assume or suffer to exist any mortgage, pledge, security interest, lien or other
charge or encumbrance including the lien or retained security title of a
conditional vendor ("Encumbrances") upon or with respect to any property or
assets, real or personal, of any such Persons, or assign or otherwise convey any
right to receive income, except:
(i) Encumbrances existing on the date of this Agreement and
set forth in the Disclosure Letter, including liens in connection
with the Lease Financing Facility; or
(ii) liens for taxes, fees, assessments and other
governmental charges to the extent that payment of the same is not
required in accordance with the provisions of Section 5.4; or
(iii) Encumbrances in favor of the Agent; or
33
(iv) Encumbrances securing Indebtedness for the purchase
price of capital assets to the extent such Indebtedness is permitted
by Section 5.5 (iii), provided that (a) each such Encumbrance is
given solely to secure the purchase price of such property, does not
extend to any other property and is given at the time of acquisition
of the property, and (b) the Indebtedness secured thereby does not
exceed the lesser of the cost of such property or its fair market
value at the time of acquisition; or
(v) liens of mechanics, laborers, materialmen, carriers and
warehousemen arising by operation of law to secure payment for labor,
materials, supplies or services incurred in the ordinary course of
the Borrowers' business, but only if the payment thereof is not at
the time required and such liens do not, individually or in the
aggregate, materially detract from the value or limit the use of any
property subject thereto; or
(vi) deposits made in the ordinary course of the Borrowers'
business in connection with workmen's compensation, unemployment
insurance, social security and other similar laws.
5.8 Merger, Acquisitions and Purchase and Sale of Assets. None of the
Borrowers will consolidate or merge with or into any other corporation or other
entity, will acquire the assets or stock of any entity nor will sell, lease,
transfer or otherwise dispose of any portion of its assets other than in the
ordinary course of business.
5.9 Investments and Loans. None of the Borrowers will make or have
outstanding at any time any investments in or loans to any other Person
(including any Subsidiary other than one of the Borrowers), whether by way of
advance, guaranty, extension of credit, capital contribution, purchase of
stocks, notes, bonds or other securities or evidences of Indebtedness, or
acquisition of limited or general partnership interests, other than: (i) in
direct obligations of the United States of America, maturing within one year of
their issuance; (ii) in time certificates of deposit or repurchase agreements,
maturing within one year of their issuance, from banks in the United States
having capital, surplus and undivided profits in excess of $200,000,000; (iii)
in short term commercial paper with the highest rating by Moody's or Standard
and Poor's rating services and issued by corporations headquartered in the
United States, in currency of the United States of America; (iv) stock of
Subsidiaries owned on the date hereof as set forth in the Disclosure Letter; and
(v) other short term loans to any other Person (subject to the terms of Section
5.21 hereof) in aggregate principal amount not in excess of $250,000 at any one
time outstanding.
5.10 Capital Expenditures.
(a) The Borrowers shall not make any Capital Expenditures in excess
of $2,000,000 in the aggregate during any fiscal year period of the Borrowers
from and after the date hereof, commencing with the yearly period beginning on
October 1, 1997: (i) except with the prior
34
written consent of the Agent, and (ii) other than up to $2,010,500 in Capital
Expenditures contemplated by the Lease Financing Facility.
(b) Notwithstanding any other provisions in connection with the Lease
Financing Facility, the Agent and the Lenders acknowledge and agree that both
the Agent and the Lenders have no security interest, and hereby release any
security interest that may have been held, in the property described in the
Lease Financing Facility.
5.11 Sale of Notes. The Borrowers shall not sell, discount or dispose
of any note, instrument, account, or other obligation owing to the Borrowers,
except to the Agent.
5.12 Dividends, etc.
(a) None of the Borrowers shall pay, make or declare any cash or
property dividend or distribution to any Person who holds an equity interest in
any of the Borrowers, whether evidenced by a security or not, other than (i)
regular compensation and bonuses paid to employees of the Borrowers in the
ordinary course of business consistent with past practices, and (ii) dividends
payable solely in common stock of any of the Borrowers.
(b) None of the Borrowers will purchase, redeem, retire or otherwise
acquire for value any of their capital stock, whether now or hereafter
outstanding, or any options, warrants or similar rights to purchase such stock
or any security convertible into or exchangeable for such stock.
5.13 ERISA Compliance. None of the Borrowers and their Affiliates, if
any, no Pension Plan, Plan or trust created thereunder, and no trustee,
administrator or fiduciary thereof shall engage in any Prohibited Transaction;
none of the Borrowers and their Affiliates and no Pension Plan or trust created
thereunder shall incur any "accumulated funding deficiency" (as defined in
Section 412 of the Code and Section 302 of ERISA) whether or not waived, or
shall fail to satisfy any additional funding requirements set forth in Section
412 of the Code and Section 302 of ERISA; none of the Borrowers and their
Affiliates, no trustee thereof and no administrator or fiduciary thereof shall
terminate any Pension Plan in a manner which could result in the imposition of a
lien on any property of any of the Borrowers or any of their Affiliates; and
each Plan and Pension Plan shall comply in all material respects with ERISA.
5.14 Pension Plans.
(a) With respect to any Pension Plan, the Borrowers shall, or shall
cause their Affiliates to:
(i) fund on a timely basis each Pension Plan as required by
the provisions of Section 412 of the Code and Section 302
of ERISA;
35
(ii) cause each Pension Plan to pay all benefits when due
in accordance with applicable law; and
(iii) furnish to the Agent (A) written notice of the
occurrence of a Reportable Event (as such term is defined
in Section 4043 of ERISA), given within thirty (30) days
after any of the Borrowers or any Affiliate knows or has
reason to know that a Reportable Event has occurred with
respect to a Pension Plan; (B) a copy of any request or
waiver of the funding standards or an extension of the
amortization periods required under Section 412 of the Code
and Section 302 of ERISA, such copy to be furnished no
later than the date of submission of the request to the
Department of Labor or to the Internal Revenue Service (the
"IRS"), as the case may be; (C) a copy of any notice of
intent to terminate any Pension Plan such copy to be
furnished no later than the date of submission to the PBGC
or, if earlier, the date on which those participating in
the Pension Plan are notified of the intended termination;
and (D) notice that any of the Borrowers or any Affiliate,
will or may incur any liability to or on account of a
Pension Plan under Section 4062, 4063, 4064, 4201 or 4204
of ERISA, such notice to be given within ten (10) days
after any of the Borrowers or any Affiliate knows or has
reason to know thereof. Any notice to be provided to the
Agent under this Section shall include a certificate of the
chief financial officer of the Borrower giving such notice
setting forth details as to such occurrence and the action,
if any, which such Borrower or the Affiliate is required or
proposes to take, together with any notices required or
proposed to be filed with or by such Borrower, any
Affiliate, the PBGC, the IRS, the trustee or the plan
administrator with respect hereto.
(b) The Borrowers shall furnish to the Agent, no later than fifteen
(15) days after the date of filing, a copy of the annual report of each Pension
Plan or Plan (Form 5500 or comparable form) required to be filed with the IRS
and/or the Department of Labor.
(c) Promptly after the adoption of any Plan or Pension Plan subject
to ERISA, or of any amendment to any Pension Plan which results in a significant
underfunding within the meaning of Section 401(a)(29) of the Code and Section
307 of ERISA, the Borrowers shall notify the Agent of such adoption and of the
vesting and funding schedules and other principal provisions thereof.
5.15 Notification of Default. Upon becoming aware of the existence of
any condition or event which would cause an Event of Default, or any condition
or event which would upon notice or passage of time, or both, constitute an
Event of Default, the Borrowers shall promptly give the Agent written notice
thereof specifying the nature and duration thereof and the action being or
proposed to be taken with respect thereto.
5.16 Notification of Material Litigation, The Borrowers will promptly
notify the Agent in writing of any litigation or of any investigative
proceedings of a governmental agency or
36
authority commenced or threatened against it or any of their respective
Subsidiaries which would or might be materially adverse to the business or the
financial condition of any of the Borrowers or the Business.
5.17 Notification of Material Adverse Change. The Borrowers will
notify the Agent of any occurrence, condition or event affecting any of the
Borrower or any Subsidiary which might constitute a material adverse change in
or which might have a material adverse effect on the Collateral, the Business or
the business, properties or condition (financial or otherwise) of any of the
Borrowers.
5.18 Inspection by the Agent. The Borrowers will permit the Agent or
its designees, at any reasonable time during normal business hours and from time
to time, to visit and inspect the properties of the Borrowers and their
Subsidiaries, if any, to examine and make copies of and take abstracts from the
books and records of the Borrowers and any Subsidiaries and to discuss the
affairs, finances and accounts of the Borrowers and any Subsidiaries with
appropriate officers. Without in any way limiting the foregoing, the Borrowers
understand that the Agent intends to conduct field audits of the Borrowers at
least three (3) times per year. The Borrowers shall also permit the Agent to
arrange for verification of Accounts Receivable, under reasonable procedures,
directly with account debtors or by other methods.
5.19 Maintenance of Books and Records. The Borrowers and their
Subsidiaries, if any, will keep adequate books and records of account in which
true and complete entries will be made reflecting all of their business and
financial transactions, and such entries will be made in accordance with GAAP
and applicable law including, without limitation, laws with respect to
questionable, improper or corrupt payments.
5.20 Use of Proceeds. The Borrowers will use the proceeds of the
Loans solely for the working capital needs of the Borrowers.
5.21 Transactions with Affiliates. The Borrowers will not, and will
not permit their Subsidiaries, if any, to, directly or indirectly enter into any
purchase, sale, lease or other transaction with any Affiliate except in the
ordinary course of business on terms that are no less favorable to the Borrowers
than those which might be obtained at the time in a comparable arm's length
transaction with any Person who is not an Affiliate, other than loans to
employees of the Borrowers (other than the Guarantors) not exceeding in
aggregate principal amount $200,000 at any one time outstanding.
5.22 Environmental Regulations.
(a) The Borrowers will, and will cause their Subsidiaries, if any,
to, comply in all material respects with all applicable laws and regulations
relating to pollution control, hazardous materials and hazardous wastes in all
jurisdictions in which any of them operates now or in the future, and the
Borrowers will, and will cause their Subsidiaries, if any, to, comply in all
37
material respects with all such laws and regulations that may in the future be
applicable to the Business, the Borrowers, the Subsidiaries and their properties
and assets.
(b) If any of the Borrowers shall (i) receive notice that any
violation of any federal, state or local environmental law or regulation may
have been committed or is about to be committed by a Borrower or any of its
Subsidiaries, (ii) receive notice that any administrative or judicial complaint
or order has been filed or is about to be filed against a Borrower or any of its
Subsidiaries alleging a violation of any federal, state or local environmental
law or regulation or requiring a Borrower or such Subsidiary to take any action
in connection with the release of toxic or hazardous wastes or materials into
the environment or (iii) receive any notice from a federal, state, or local
governmental agency or private party alleging that a Borrower or any of its
Subsidiaries may be liable or responsible for any costs associated with a
response to or cleanup of a release of hazardous wastes or materials into the
environment or any damages caused thereby, the Borrowers shall provide the Agent
with a copy of such notice within five (5) business days after a Borrower's
receipt thereof. Within fifteen (15) business days after a Borrower has learned
of the enactment or promulgation of any federal, state or local environmental
law/or regulation which may result in any material adverse change in the
business, properties or condition (financial or otherwise) of any of the
Borrowers, the Borrowers shall provide the Agent with notice thereof.
(c) From and after the Agent's request, not later than thirty (30)
days following the end of each calendar quarter, the Borrowers shall deliver to
the Agent a written report, in a form and with such specificity as is
satisfactory to the Agent, describing the Borrowers' actions taken during such
calendar quarter to assure their compliance with this Section and all applicable
environmental laws and regulations (including the receipt of any notice that any
administrative or judicial complaint or order has been filed or is about to be
filed against any of the Borrowers, regardless of whether such notice is
required to be delivered by the Borrowers pursuant to subparagraph (b) above) as
well as the status of any pending environmental matters described in Exhibit B
attached hereto.
5.23 Fiscal Year. The Borrower and their Subsidiaries, if any, shall
have fiscal years ending on March 31 of each year and shall not change such
fiscal years without the prior written consent of the Agent.
5.24 Loss or Depreciation of Collateral. In the event that any of the
following events alone or in the aggregate has an adverse impact on the
Borrowers in excess of $100,000, the Borrowers shall notify the Agent
immediately of the occurrence of each of the following events: (i) loss or
depreciation in value of Base Inventory and the amount of the loss or
depreciation; (ii) rejection, return, repossession or loss of any goods giving
rise to any Base Account; (iii) damage to any such goods; (iv) any request by an
account debtor for credit or adjustment of an Account; (v) any adjustment by any
of the Borrowers on the amount owing on an account; (vi) any merchandise or
other dispute; (vii) any other event affecting Base Inventory or Base Accounts
or the value or amount thereof. All loss or depreciation in value of Base
Inventory shall be
38
immediately reflected in the Net Security Value of Base Inventory, and all
payments on Base Accounts and all adjustments and credits with respect thereto,
whether unilateral, negotiated or otherwise, shall be immediately reflected in
the Net Outstanding Amount of Base Accounts.
5.25 Consolidated Tangible Net Worth. The Borrowers will maintain
Consolidated Tangible Net Worth of not less than $41,700,000 plus one-half of
the Net Income (greater than zero) of the Borrowers for each calendar quarter
ending after March 31, 1997, plus 75% of all additional capital paid into the
Borrowers on account of any sale of capital stock or the exercise of any option
or warrant or otherwise.
5.26 Interest Coverage. The Borrowers will not permit their
respective ratios of Operating Cash Flow divided by Total Interest at the end of
each calendar quarter following the date hereof for the period of four
consecutive calendar quarters then ending to be less than 1.50 to 1.
5.27 Leverage. The Borrowers will not permit the ratio of Total
Liabilities divided by Consolidated Tangible Net Worth as of the end of each
fiscal quarter to be more than 3.00 to 1.
5.28 Joint and Several Liability. Each of the Borrowers shall be
jointly and severally liable for all Obligations and any other liability or
obligations of any of the Borrowers to the Agent or the Lenders under this
agreement. The Agent may, on behalf of the Lenders, pursue any remedies at law
or in equity, or exercise or enforce any rights hereunder against any of the
Borrowers or any group of the Borrowers in its unrestricted discretion without
any obligation to pursue any other remedies or rights against any of the other
Borrowers.
5.29 Interest Rate Protection. The Borrowers at their option may
maintain in effect interest rate protection arrangements, in form and in
substance satisfactory to the Agent and with a counterparty satisfactory to the
Agent, at all times from the date hereof to the Maturity Date, or such earlier
date upon which the Loan and this Agreement are terminated. The Borrowers shall
not, without approval from the Agent, modify, terminate or transfer such
arrangements during such period.
SECTION 6. SECURITY.
6.1 Security Interest. As security for the payment and performance of
all Obligations (including without limitation the Loans, other advances and
Letters of Credit), the Agent, as agent for and on behalf of the Lenders, shall
have and each of the Borrowers hereby grants to the Agent, as agent for and on
behalf of the Lenders, a continuing security interest in all personal property
and fixtures of the Borrowers of every kind and description, tangible or
intangible, whether now or hereafter existing, whether now owned or hereafter
acquired, and wherever located, including, but not limited to the following: all
Inventory of the Borrowers; all furniture, fixtures and similar property of the
Borrowers; all Machinery and Equipment of the Borrowers; all accounts of the
Borrowers; all contract rights of the Borrowers; all other rights of the
39
Borrowers to the payment of money, including without limitation amounts due from
Affiliates, tax refunds, and insurance proceeds; all interest of the Borrowers
in goods as to which an Account shall have arisen; all files, records (including
without limitation computer programs, tapes and related electronic data
processing software) and writings of the Borrowers or in which any of the
Borrowers has an interest in any way relating to the foregoing property; all
goods, instruments, documents of title, policies and certificates of insurance,
securities, chattel paper, deposits, cash or other property owned by any of the
Borrowers or in which any of the Borrowers has an interest which are now or may
hereafter be in the possession of the Agent or any of the Lenders or as to which
the Agent or any of the Lenders may now or hereafter control possession by
documents of title or otherwise; all general intangibles of the Borrower
(including without limitation all patents, trademarks, trade names, service
marks, copyrights and applications for any of the foregoing; all rights to use
patents, trademarks, trade names, service marks and copyrights of any Person;
and any rights of the Borrowers to retrieval from third parties of
electronically processed and recorded information pertaining to any of the types
of collateral referred to in this Section 6.1); any other property of the
Borrowers, real or personal, tangible or intangible, in which the Agent or any
of the Lenders now has or hereafter acquires a security interest or which is now
or may hereafter be in the possession of the Agent or any of the Lenders; any
sums at any time credited by or due from the Agent or any of the Lenders to any
of the Borrowers, including deposits; and proceeds and products of and
accessions to all of the foregoing.
6.2 No Other Liens. None of the Borrowers shall sell, assign,
transfer, set over to, or grant a security interest to any Person in or
otherwise encumber the property and sums described in Section 6.1, except (i) in
favor of the Agent or as otherwise specifically permitted in Section 5.7 of this
Agreement, and (ii) the sale of Inventory and obsolete machinery and equipment
in the ordinary course of business consistent with past practices.
6.3 Location of Records and Collateral. The Borrowers shall give the
Agent written notice of each location at which Collateral is now or hereafter
kept and of each office of the Borrowers at which the records of the Borrowers
pertaining to Accounts Receivable and contract rights are kept. Except as such
notice is given or as is otherwise set forth on Exhibit B, all Collateral is and
shall be kept, and all records of the Borrowers pertaining to Accounts
Receivable and contract rights are and shall be kept, at the Borrowers'
addresses as they appear at the beginning of this Agreement.
6.4 Status of Collateral. At the time any Account, Inventory or other
property of the Borrowers becomes subject to a security interest in favor of the
Agent hereunder, one of the Borrowers shall be the lawful owner thereof and
shall have good right to pledge, sell, assign, transfer or grant a security
interest in the same to the Agent. Each such Account shall be a valid Account
representing indebtedness incurred by the account debtor for goods held subject
to delivery instructions or theretofore shipped or delivered pursuant to a
contract of sale or for services theretofore performed by a Borrower in the
ordinary course of the Borrowers' business; there shall be no setoffs or
counterclaims against the Account; no agreement under which any goods may be
returned shall have been made with the account debtor except in the ordinary
40
course of business and consistent with the Borrowers' past practices; and no
agreement under which any discount may be claimed shall have been made with the
account debtor unless written notice has theretofore been or is concurrently
given to the Agent.
6.5 Name Change. The Borrowers shall give the Agent thirty (30) days
prior written notice of any change in the name or corporate form of any of the
Borrowers or in the name under which the Business is transacted.
6.6 Collection of Accounts Receivable.
(a) Subject to the terms of Section 6.6(b), until the Agent requests
that debtors on Accounts Receivable be notified of the Agent's security
interest, the Borrower shall continue to collect them. Subject to the terms of
Section 6.6(b) until the making of such a request, the Borrowers shall hold
proceeds received from collection as trustee for the Agent and the Lenders
without commingling the same with other funds of the Borrowers and shall turn
the same over to the Agent, as agent for and on behalf of the Lenders, or to
such bank as may be approved by the Agent, immediately upon receipt in the
identical form received. The Borrowers shall, at the request of the Agent
(following the occurrence and during the continuation of an Event of Default),
notify the Account debtors of the security interest of the Agent in any Account
and that payment thereof is to be made directly to the Agent, and the Agent may
itself at anytime (following the occurrence and during the continuation of an
Event of Default), without notice to or demand upon the Borrowers, so notify
account debtors. The making of such a request or the giving of any such
notification shall not affect the duties of the Borrowers described above or in
Section 6.6(b) with respect to proceeds of collection of Accounts Receivable
received by the Borrowers.
(b) The Borrowers hereby acknowledge that the Agent has requested and
hereby Borrowers notify their account debtors to pay all Accounts directly into
a so called "lock box" maintained with the Agent for application as provided in
Section 6.6(c). This request and the giving of any such notification shall not
affect the duties of the Borrowers described above in Section 6.6(a) or this
Section 6.6(b) with respect to proceeds of collection of Accounts Receivable
received by the Borrowers.
(c) The Agent shall credit the proceeds of collection of Accounts
Receivable received by the Agent to the Loan Account in respect of outstanding
Loans and other amounts due, such credits to be entered as of the second
Business Day after receipt thereof by the Agent. Such credits shall be
conditional upon final payment in cash or solvent credits of the items giving
rise to them. If any item is not so paid, the Agent, in its discretion, whether
or not the item is returned, may either reverse any credit given for the item or
charge the amount of the item against the deposits or other sums which may be
due to the Borrowers from the Agent or any Lender. Upon elimination of any debit
balance of the Loan Account, proceeds of collection and other receipts may then,
except as otherwise provided in Section 7.3, be credited to any deposit
41
account which any of the Borrowers may maintain with the Agent or, if there is
no such account, held pending instructions from the Borrowers.
SECTION 7. EVENTS OF DEFAULT; ACCELERATION.
7.1 Any or all of the Obligations of the Borrowers to the Agent and
the Lenders shall, at the option of those Lenders whose Commitment Percentages
equal in the aggregate 60% or more of the Commitment Percentages held by all the
Lenders and automatically upon the occurrence of any of the events of default
described in clauses (vi) or (vii) below, and notwithstanding the provisions of
an instrument evidencing an Obligation, be immediately due and payable without
notice or demand upon the occurrence and continuation of any of the following
events of default (individually, an "Event of Default"): (i) default in the
payment or performance, when due or payable, of any Obligation (other than
Obligations for which notice and an opportunity to cure are provided in Section
7.1(iv) hereof) by the Borrowers or by any endorser, guarantor or surety for any
Obligation, or of any payment Obligation under any Letter of Credit application
or Letter of Credit issued by the Agent; (ii) the making by the Borrowers of any
misrepresentation to the Agent and the Lenders contained in this Agreement or
otherwise, whether or not for the purpose of obtaining credit or an extension of
credit; (iii) failure by the Borrower to comply in every material respect or
maintain material compliance with any covenant set forth in Section 5 hereof
(other than Sections 5.1, 5.2, 5.3 (other than the failure to maintain insurance
as required by Section 5.3 or the termination, lapse or expiration of any
insurance policy required by Section 5.3 during any grace period), 5.4, 5.5,
5.6, 5.9, 5.13, 5.14, 5.15, 5.16, 5.17, 5.19, 5.21 and 5.22); (iv) the
Borrowers' failure to comply in every material respect or maintain material
compliance with any one or more of the covenants set forth in Sections 5.1, 5.2,
5.3 (other than the failure to maintain insurance as required by Section 5.3 or
unless any insurance policy required by Section 5.3 will lapse, terminate or
expire during any grace period), 5.4, 5.5, 5.6, 5.9, 5.13, 5.14, 5.15, 5.16,
5.17, 5.19, 5.21 and 5.22 which failure to comply shall continue uncured ten
Business Days after the officers of any of the Borrowers have knowledge or the
Borrowers receive written notice from the Agent of such failure; (v) issuance of
an injunction or attachment for an aggregate amount in excess of $250,000,
against property of any of the Borrowers or any endorser, guarantor or surety
for any Obligation which is not dismissed or bonded, to the satisfaction of the
Agent, within sixty (60) days after issuance; (vi) calling of a meeting of
creditors, appointment of a committee of creditors or liquidating agents or
offering of a composition or extension to creditors by, for or with the consent
or acquiescence of any of the Borrowers or any endorser, guarantor or surety for
an Obligation; (vii) Insolvency of any of the Borrowers or any endorser,
guarantor or surety for any Obligation; (viii) the occurrence of any material
default under any agreement, note or other instrument evidencing or relating to
any obligation of any of the Borrowers to any other Person or entity for the
payment of money; or (ix) any money judgment or judgments aggregating in excess
of $750,000 are entered against any of the Borrowers or any endorser, guarantor
or surety of any Obligation which is not dismissed within sixty (60) days; (x)
Victor Jacobs, Herman Jacobs and Jacob Jacobs no longer owning in the aggregate
on a fully diluted basis capital stock of the Parent entitling them to vote
greater than 50% of the votes attributable to the issued and outstanding voting
42
securities of the Parent, or any two of them no longer being actively involved
in the management of the Borrowers because of death, disability or any other
reason, or any one of them terminating his obligations under, and in accordance
with the terms of, the Guaranty executed and delivered by him as contemplated by
Section 4.3 hereof; or (xi) the occurrence of any material change in the
condition or affairs (financial or otherwise) of the Borrowers or any endorser,
guarantor or surety for any Obligation which causes the Agent in its reasonable
judgment to deem itself and the Lenders insecure.
7.2 The term "obligation of any of the Borrowers to any other Person
or entity" as used in Section 7.1 includes the liabilities and obligations of
the Borrowers to any other Person or entity to the same extent as if the
definition of "Obligations" set forth in Section 1 were recited here with "Agent
and the Lenders" changed to "any other Person or entity."
7.3 Upon the occurrence of any Event of Default and at any time
thereafter (such default not having been cured), the Agent shall have the right
to take immediate possession of the Collateral, and for that purpose the Agent
may, so far as the Borrowers can give authority therefor enter upon any premises
on which Collateral may be situated and remove the same therefrom. The Borrowers
waive demand and notice with respect to and assent to any repossession of
Collateral. The Agent may dispose of Collateral in any order and in any manner
it chooses and may refrain from the sale of any real property, held as
Collateral, until the sale of personal property. Except for Collateral which is
perishable or threatens to decline speedily in value or which is of a type
customarily sold on a recognized market, the Agent shall give to the Borrowers
at least ten (10) Business Days' prior written notice of the time and place of
any public sale of Collateral or of the time after which any private sale or any
other intended disposition is to be made. The residue of any proceeds of
collection or sale, after satisfying all Obligations in such order of preference
as the Agent may determine and making proper allowance for interest on
Obligations not then due, shall be credited to any deposit account which any of
the Borrowers may maintain with the Agent, or, if there is no such account, held
pending instructions from the Borrowers. The Borrowers shall remain liable for
any deficiency.
7.4 The Agent may at any time in its sole discretion (whether or not
an Event of Default has occurred) transfer any securities or other property
constituting Collateral into its own name or that of its nominee and receive the
income thereon and hold the same as security for Obligations or apply it on
principal or interest due on Obligations. Insofar as Collateral shall consist of
Accounts or instruments, the Agent may, without notice to or demand on the
Borrowers, demand and collect such Collateral as the Agent may determine,
whether or not Obligations are then due and whether or not an Event of Default
has occurred, and for the purpose of realizing the Agent's rights therein as
Agent for and on behalf of the Lenders, the Agent may receive, open and dispose
of mail addressed to a Borrower and endorse notes, checks, drafts, money orders,
documents of title or other evidences of payment, shipment or storage or any
form of Collateral on behalf of and in the name of any of the Borrowers. The
powers conferred on the Agent by this Section are solely to protect the interest
of the Agent and the Lenders and shall not impose any duties on the Agent to
exercise any powers.
43
7.5 In addition to all other rights and remedies provided hereunder
or by law, the Agent and the Lenders shall have in any jurisdiction where
enforcement hereof is sought the rights and remedies of a secured party under
the Uniform Commercial Code of Massachusetts.
SECTION 8. SET OFF; PARTICIPATIONS. Regardless of the adequacy of
Collateral:
8.1 Any deposits or other sums at any time credited by or due from
the Agent or any Lender to any of the Borrowers may at any time be applied to or
set off against any Obligation on which any Borrower is primarily liable and may
at or after the maturity thereof be applied to or set off against Obligations on
which a Borrower is secondarily liable.
8.2 The Borrowers invite any bank or other financing institution
which may consider investing or participating in the Loans (each such financing
institution being referred to in this Section as a "Participant") to rely upon
all of the representations, warranties, covenant and other provisions of this
Agreement, the Credit Notes and the other agreements, instruments and documents
referred to herein or contemplated hereby in making such investment or
participation and agree that its becoming a Participant in the Loans shall
constitute an acceptance of such offer and shall make the Participant a creditor
of the Borrowers. Any bank or other financing institution investing in the Loans
so as to become one of the Lenders shall be required to have a Revolving Credit
Commitment of at least $5,000,000.
8.3 Any deposits or other sums which at any time may be credited to
any of the Borrowers by or due to it from any Participant may at any time be
applied to or set off by such Participant against the then outstanding
indebtedness of the Borrowers hereunder.
SECTION 9. CONCERNING THE AGENT AND THE BANKS.
9.1 Appointment and Authorization. Each of the Lenders hereby
appoints BKB, acting through its head office, to serve as Agent under this
Agreement and under other documents, instruments and agreements executed and
delivered in connection with the transactions contemplated by this Agreement and
irrevocably authorizes the Agent to take such action as agent on such Lender's
behalf under this Agreement and such other documents, instruments and agreements
and to exercise such powers and to perform such duties under this Agreement and
such other documents, instruments and agreements as are delegated to the Agent
by the terms hereof or thereof, together with all such powers as are reasonably
incidental thereto.
9.2 Agent and Affiliates. BKB shall have the same rights and powers
under this Agreement and documents, instruments and agreements executed and
delivered in connection with the transactions contemplated by this Agreement as
each other Lender and may exercise or refrain from exercising the same as though
it were not the Agent, and BKB and its Affiliates may accept deposits from, lend
money to, and generally engage in any kind of business with the Borrowers or any
Affiliate of the Borrowers as if it were not the Agent hereunder and under such
other documents, instruments or agreements. Except as otherwise provided by the
terms of this
44
Agreement, nothing herein shall prohibit any of the Lenders from accepting
deposits from, lending money to or generally engaging in any kind of business
with the Borrowers or any Affiliate of the Borrowers.
9.3 Future Advances.
(a) In order to more conveniently administer the Loans, each Lender
does hereby authorize the Agent and BKB to make all Loans and advances, subject
to the terms and conditions of this Agreement and not to exceed in the aggregate
the sum of all of the Lenders' Revolving Credit Commitments, to the Borrowers,
which are requested by the Borrowers during any Business Day. Without in any
manner altering the extent to which the Lenders have any obligation or
commitment to the Borrowers to make Revolving Loans hereunder, including,
without limitation, pursuant to Sections 2.1 and 4.2 hereof, each Lender does
hereby further irrevocably agree, subject to the terms of Section 9.3(b),
whether or not this Agreement has been terminated, an Event of Default has
occurred, the Agent has accelerated the Obligations or the Agent is proceeding
to liquidate the Collateral, to transfer to the Agent by 2:00 p.m. on the last
Business Day of each calendar week sufficient immediately available federal
funds to reimburse BKB for its respective Commitment Percentage of all Loans and
other advances (not to exceed each Lender's Revolving Credit Commitment) made
through the close of business on the last Business Day of the immediately
preceding calendar week after taking into account payments received by the Agent
and applied to the Loan Account under Section 9.4 hereof.
(b) Notwithstanding the terms of Section 9.3(a), at such time as (i)
the Lenders have exercised their option pursuant to Section 7.1 to cause all of
the Obligations to be immediately due and payable and there is then no
irrevocable prior commitment to fund any additional Loans or other advances
hereunder, or (ii) there has occurred and is continuing the occurrence of an
Event of Default with respect to any of the Borrowers under clause (i) or (vii)
of Section 7.1, each of the Lenders shall be obligated to fund additional Loans
or other advances hereunder in accordance with the terms of Section 9.3(a)
solely upon the written consent or approval of those Lenders whose Commitment
Percentages equal in the aggregate 60% or more of the Commitment Percentages
held by all the Lenders. In no event shall a Lender be required to advance any
amount in excess of its Commitment Percentage of the Maximum Amount.
(c) Funds provided by the Agent as payment upon a sight or time draft
presented to the Agent under a Letter of Credit issued pursuant to the terms of
Section 2.4 hereof, and any payments made by the Agent on behalf of the
Borrowers, including, without limitation, pursuant to the terms of Section 5.3
hereof, shall constitute Loans or other advances initially made by the Agent at
such time as such funds are actually provided, or such payments are made, by the
Agent. All Loans and other advances made by the Agent on behalf of any Lender
shall be, for purposes of interest income and other charges, considered loans
from such Lender to the Borrowers and reflected in the Loan Account at such time
as the Agent receives from such Lender funds as provided in this Section 9.3,
and prior to such time such Loans and advances shall be considered, for purposes
of interest income and other charges, loans from BKB and so reflected
45
in the Loan Account. For purposes of accruing interest, Loans from each Lender
shall be considered to be Loans from such Lender until such time as such Lender
receives from the Agent funds repaying such Loans as reflected in the Loan
Account. In addition, any collection of Collateral, including, but not limited
to, any collections of Accounts shall be applied to reduce any debit balance in
the Loan Account so that the debit balance of the Loan Account equals each
Lender's respective Commitment Percentages. The Agent may at any time upon
notice to any Lender (i) refuse to make Loans and advances on behalf of such
Lender unless such Lender shall have provided to the Agent immediately available
federal funds sufficient to cause the Loan Account to equal and reflect such
Lender's respective Commitment Percentage; (ii) require such Lender to fund such
Loans and advances before making such Loans and advances to the Borrowers
requesting the same; or (iii) require that such Lender immediately transfer to
the Agent prior to the time such funds would otherwise be required hereunder
immediately available federal funds sufficient to cause the Loan Account to
equal each Lender's respective Commitment Percentage (it being acknowledged,
however, that the Agent will attempt to require any Lender to fund its share of
any Loan or advance prior to the time such funding would otherwise be required
hereunder to the extent such share exceeds $100,000, provided that the foregoing
shall in no way diminish the Agent's rights under clauses (i) through (iii),
inclusive, of this sentence, which rights it may exercise in its sole
discretion). Notwithstanding the provisions hereof, the obligations to make
Loans and advances under the terms of this Agreement shall be the several and
not joint obligation of each Lender, and any advances made by the Agent on
behalf of a Lender are strictly for the administrative convenience of the
parties and shall in no way diminish such Lender's liability to the Agent,
subject to the terms of Section 9.3(b), to repay the Agent for such Loans and
advances.
9.4 Payments. All payments and prepayments of principal of Loans or
other advances received by the Agent shall be paid promptly to each of the
Lenders pro rata in accordance with their respective Commitment Percentages. All
such payments from the Borrowers or as proceeds of Collateral received by the
Agent shall be held in trust for the benefit of the Lenders. As each such
payment is received by the Agent, the Agent shall promptly charge or credit each
of the Lenders to the extent necessary to ensure that as between them, each of
the Lenders holds its respective Commitment Percentage of outstanding Loans or
other advances, based on the then unpaid aggregate principal amounts of the
Loans or other advances outstanding.
9.5 Interest, Fees and Other Payments. (i) All payments of interest
received by the Agent in respect of Loans or other advances, except as otherwise
provided by the terms of this Agreement, and all other fees and premiums
received by the Agent hereunder or in respect of Loans or other advances shall
be shared by the Lenders pro rata in accordance with their respective Commitment
Percentages. (ii) All payments received by the Agent pursuant to Section 10.7 of
this Agreement shall be applied by the Agent to reimburse each Lender, on
account of the tax, charge or expense in respect of which such payment is made.
9.6 Action by Agent.
46
(i) The obligations of the Agent hereunder are only those
expressly set forth herein. The Agent shall have no duty to exercise
any right, power or remedy hereunder or under any other document,
instrument or agreement executed and delivered in connection with or
as contemplated by this Agreement or to take any affirmative action
hereunder or thereunder.
(ii) The Agent shall keep the Loan Account and other
records of the Loans, other advances and payments hereunder, shall
give and receive notices and other communications to be given or
received by the Agent hereunder on behalf of the Banks, and shall
provide to the Lenders notices it receives from the Borrowers
pursuant to Sections 2.6, 5.15, 5.16 and 5.17 hereof.
(iii) Upon the occurrence and during the continuation of an
Event of Default, the Agent and those Lenders whose Commitment
Percentages equal in the aggregate 60% or more of the Commitment
Percentages held by all the Lenders may exercise their option on
behalf of the Lenders pursuant to Section 7.1 hereof to declare all
Obligations immediately due and payable, and the Agent may exercise
its option to take such action as may appear necessary or desirable
to collect the Obligations and enforce the rights and remedies of the
Agent or the Lenders with respect to the Collateral.
(iv) Whether or not an Event of Default shall have
occurred, the Agent may from time to time exercise the rights of the
Agent and Lenders hereunder or under the other documents, instrument
or agreements executed or delivered in connection with or as
contemplated by this Agreement as it may deem necessary or desirable
to protect the Collateral and the interests of the Agent and the
Lenders therein.
9.7 Consultation with Experts. The Agent shall be entitled to retain
and consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable to the Lenders for any action taken,
omitted to be taken or suffered in good faith by it in accordance with the
advice of such counsel, accountants or experts. The Agent may employ agents and
attorneys-in-fact and shall not be liable to the Lenders for the default or
misconduct of any such agents or attorneys.
9.8 Liability of Agent. The Agent shall exercise the same care to
protect the interests of each Lender as it does to protect its own interests, so
that so long as the Agent exercises such care it shall not be under any
liability to any Lender, except for the Agent's gross negligence or willful
misconduct with respect to anything it may do or refrain from doing. Subject to
the immediately proceeding sentence, neither the Agent nor any of its directors,
officers, agents or employees shall be liable for any action taken or not taken
by it in connection herewith in its capacity as Agent. Without limiting the
generality of the foregoing, neither the Agent nor any of its directors,
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into or verify: (i) any statement, warranty representation
made in connection with this Agreement or any other document, instrument or
agreement executed and delivered in connection
47
with the transactions contemplated by this Agreement; (ii) the performance or
observance of any of the covenants or agreements of the Borrowers; (iii) the
satisfaction of any condition specified in Sections 4.1, 4.2 or 4.3 hereof,
except receipt of items required to be delivered to the Agent; (iv) the
validity, effectiveness, enforceability or genuineness of this Agreement, the
Credit Notes or any other document, instrument or agreement executed and
delivered in connection with or as contemplated by this Agreement; or (v) the
existence, value, collectibility or adequacy of the Collateral or any part
thereof or the validity, effectiveness, perfection or relative priority of the
liens and security interests of the Lenders (through the Agent) therein. The
Agent shall not incur any liability by acting in reliance upon any notice,
consent, certificate, statement or other writing (which may be a bank wire,
telex or similar writing) believed by it to be genuine or to be signed by the
proper party or parties.
9.9 Indemnification. Each Lender agrees to indemnify the Agent (to
the extent the Agent is not reimbursed by the Borrowers), ratably in accordance
with its Commitment Percentage, from and against any cost, expense (including
reasonable attorneys' fees and disbursements), claim, demand, action, loss or
liability which the Agent may suffer or incur in connection with this Agreement
or any document, instrument or agreement executed and delivered in connection
with or as contemplated by this Agreement, or any action taken or omitted by the
Agent hereunder or thereunder, or the Agent's relationship with the Borrowers
hereunder, including, without limitation, the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers and duties hereunder and of taking or
refraining from taking any action hereunder, except for any such cost, expense,
claim, demand, action, loss or liability arising out of the Agent's gross
negligence or willful misconduct. No payment by any Lender under this Section
shall in any way relieve the Borrowers of their Obligations under this Agreement
with respect to the amounts so paid by any Lender, and the Lenders shall be
subrogated to the rights of the Agent, if any, in respect thereto.
9.10 Independent Credit Decision. Each of the Lenders represents and
warrants to the Agent that it has, independently and without reliance upon the
Agent or any other Lender and based on the financial statements referred to in
Section 3.7 and such other documents and information as it has deemed
appropriate, made its own independent credit analysis and decision to enter into
this Agreement. Each of the Lenders acknowledges that it has not relied upon any
representation by the Agent and that the Agent shall not be responsible for any
statements in or omissions from any documents or information concerning the
Borrowers, this Agreement, the Credit Notes or any other document or instrument
executed and delivered in connection with or as contemplated by this Agreement
or the Original Loan Agreement. Each of the Lenders acknowledges that it will,
independently and without reliance upon the Agent or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decision in taking or not taking action under
this Agreement.
9.11 Consents of All Lenders. Under any circumstances where the
consent, waiver, approval or similar decision of all of the Lenders must be
requested by the Borrowers under the terms of this Agreement, in the event that
BKB, acting on its own account and not as Agent, has
48
given any such consent, waiver, approval or otherwise, each of the other Lenders
hereby agrees with BKB, and the Borrowers, for the benefit of the Borrowers,
that any such consent, waiver, approval or otherwise will not be unreasonably
withheld or delayed by such Lender.
9.12 Successor Agent. BKB, or any successor Agent, may resign as
Agent at any time by giving written notice thereof to the Lenders and the
Borrowers, or may be removed with or without cause upon at least 30 days prior
written notice by and from Lenders whose Commitment Percentages equal in the
aggregate at least 67% of the Commitment Percentages of all of the Lenders
(including the Agent). Upon any such resignation, the Lenders shall have the
right to appoint a successor Agent, and upon any such removal, such removal
shall be of no force or effect until a successor Agent has been appointed by
Lenders other than the Agent then being removed whose Commitment Percentages
equal in the aggregate greater than 50% of the Commitment Percentages held by
all Lenders other than the Agent then being removed, and such successor Agent
has accepted such appointment. In the event of such a resignation, if no
successor Agent shall have been so appointed by the Lenders, and shall have
accepted such appointment, within 30 days after the retiring Agent's giving of
notice of resignation, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent, which shall be a commercial bank (or Affiliate
thereof) or savings and loan association organized under the laws of the United
States of America or any State thereof or under the laws of another country
which is doing business in the United States of America or any State thereof and
having a combined capital, surplus and undivided profits of at least
$200,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from all further duties and
obligations under this Agreement. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement.
9.13 Agent's Minimum Revolving Credit Commitment. BKB agrees with,
and solely for the benefit of, the Lenders that for so long as it continues as
Agent hereunder it shall maintain a Revolving Credit Commitment hereunder of at
least $10,000,000.
SECTION 10. MISCELLANEOUS.
10.1 Written Notices. Any notices, expressly required by this
Agreement to be in writing, to any party hereto shall be deemed to have been
given when delivered by hand, when sent by confirmed telecopier, one (1)
Business Day after it is delivered to any overnight delivery service freight
pre-paid or five (5) Business Days after deposit in the United States mails,
postage prepaid, certified mail, return receipt requested and addressed to such
party at its address given at the beginning of this Agreement or at any other
address specified in writing. Written notices to the Borrowers shall be sent to
the attention of David Shamilzadeh, Director and Chief Financial Officer, or to
such other officer as may be designated by the Borrowers, with a courtesy copy
to Henry I. Rothman, Esquire, Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue
of the
49
Americas, New York, New York 10036. Written notices to the Agent or the Lenders
shall be sent to them as follows:
(i) if to BKB or the Agent, to it at
100 Federal Street
Boston, Massachusetts 02110
Attn: Brent E. Shay, Director
(ii) if to IBJS, to it at
One State Street, 9th Floor
New York, New York 10004
Attn: Merily McLaughlin, Vice President
(iii) if to SBC, to it at
500 Glenpointe Center
W. Teaneck, New Jersey 07666
Attn: Mr. Philip Carfora
(iv) if to LBC, to it at 477 Madison Avenue, 20th Floor,
New York, New York 10022
Attn: Lawrence P. Garni
(v) if to BLT to it at 562 Fifth Avenue New York, New York
10036
Attn: Paul Tine, Vice President
(vi) if to FNBMD, to it at
25 South Charles Street
Baltimore, MD 21201
Attn: John T. Penny
(vii) if to DSB, to it at
1180 Avenue of the Americas
Fifth Floor
New York, NY 10036
Attn: James A. Fisher
(viii) if to KCC, to it at Structural Finance Group One Canal
Plaza, 6th Floor Portland, ME 04101
Attn: Harold H. Henderson, Vice-President
50
or such other officer as may be designated by the Agent or the Lenders. Any
notice, unless otherwise specified, may be given orally or in writing.
10.2 Term of Agreement. This Agreement shall continue in force and
effect so long as any commitment, any portion of the Loans or any Obligation of
the Borrowers for any interest, fee, charge or expense shall be outstanding.
10.3 No Waivers. No failure or delay by the Agent or any Lender in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided are cumulative and not exclusive of any
rights or remedies otherwise provided by law.
10.4 Further Assurances. The Borrowers shall do, make, execute and
deliver all such additional and further acts, things, assurances, and
instruments as the Agent or any Lender may reasonably require more completely to
vest in and assure to the Agent and the Lenders their rights hereunder and under
the Credit Notes, in the Collateral and to carry into effect the provisions and
intent of this Agreement and the Credit Notes.
10.5 Governing Law. This Agreement and the Credit Notes shall be
deemed to be contracts made under seal and shall be construed in accordance with
and governed by the laws of the Commonwealth of Massachusetts (without regard to
conflicts of laws rules). Any legal action or proceeding arising out of or
relating to this Agreement or any Obligation may be instituted in the courts of
the Commonwealth of Massachusetts or of the United States of America for the
District of Massachusetts, and the Borrowers hereby irrevocably submit to the
jurisdiction of each such court in any such action or proceeding; provided,
however, that the foregoing shall not limit the Agent's or any Lender's rights
to bring any legal action or proceeding in any other appropriate jurisdiction in
which event the laws of the Commonwealth of Massachusetts shall apply
notwithstanding any rules regarding conflicts of laws to the contrary.
10.6 Payments in Immediately Available Funds. All payments required
of the Borrowers hereunder or under the Credit Notes shall be made in lawful
money of the United States of America in federal or other funds immediately
available to the recipient thereof at the prescribed place of payment.
10.7 Expenses, Taxes and Indemnification.
(a) The Borrowers will pay all taxes (other than taxes on the income
of the Agent or any Lender), charges and expenses of every kind or description,
including without limitation reasonable attorneys' fees and expenses, and fees
and expenses related to commercial finance examinations (consistent with the
Agent's current practices from time to time of passing such expenses on to
borrowers), reasonably incurred or expended by the Agent or any Lender in
connection with or in any way related to the Agent's or such Lender's
relationship with the
51
Borrowers, whether hereunder or otherwise, including, without limitation, those
incurred or expended in connection with the preparation, execution, delivery,
interpretation or amendment of this Agreement, the Credit Notes and any related
agreement, instrument or document, the making of the Loans, the supervision,
protection and collection of and realization upon any Collateral, and the
protection or enforcement of the Agent's and such Lender's rights hereunder. The
Borrowers authorize the Agent to charge the Loan Account or any deposit account
which any of the Borrowers may maintain with any Lender for any of the
foregoing.
(b) The Borrowers shall jointly and severally absolutely and
unconditionally indemnify and hold the Agent and each Lender harmless against
any and all claims, demands, suits, actions, causes of action, damages, losses,
settlement payments, obligations, costs, expenses and all other liabilities
whatsoever which shall at any time or times be incurred or sustained by the
Agent or such Lender or by any of their shareholders, directors, officers,
employees, subsidiaries, affiliates or agents on account of, or in relation to,
or in any way in connection with, any of the arrangements or transactions
contemplated by, associated with or ancillary to either this Agreement or any of
the other documents executed or delivered in connection herewith, whether or not
all or any of the transactions contemplated by, associated with or ancillary to
this Agreement or any of such documents are ultimately consummated, except those
resulting from the gross negligence or willful misconduct of the Agent or any
Lender.
10.8 Amendments, Waivers, etc. Except as otherwise expressly provided
in this Agreement or any of the Loan Documents:
(a) each of this Agreement or the Loan Documents may be
modified, amended or supplemented in any respect whatever only with
the prior written consent or approval of Distributors and the Agent,
unless otherwise provided in this Section 10.8;
(b) the waiver of the performance or observance by the
Borrowers of any of their covenants, agreements or obligations under
any of this Agreement or the Loan Documents (other than those arising
pursuant to Sections 5.5, 5.10, 5.25, 5.26, 5.27, 5.28 and 7.1(x)
hereof) shall require the written consent of the Agent only;
(c) the following shall require the written consent of
those Lenders whose Commitment Percentages equal in the aggregate 60%
or more of the Commitment Percentages held by all of the Lenders:
(i) waiver of the performance or
observance by the Borrowers of any of their
covenants, agreements or obligations arising
pursuant to Sections 5.5, 5.10, 5.25, 5.26, 5.27,
5.28 and 7.1(x) hereof;
(ii) any increase in the percentage
"75%" set forth in Section 1.10 relating to
California Base Accounts up to the then
applicable percentage applicable to the Net
Outstanding Amount of Base Accounts
52
with respect to Base Accounts other than
California Base Accounts, and any increase in the
percentage 50% set forth in Section 1.11 relating
to California Base Inventory up to the then
applicable percentage applicable to Base
Inventory;
(d) the following changes shall require the written
consent, agreement or approval of all of the Lenders:
(i) any increase in the percentage
"75%" set forth in Section 1.10 relating to
California Base Accounts if and to the extent
such percentage would exceed the then applicable
percentage for the Net Outstanding Amount of Base
Accounts other than California Base Accounts, and
any increase in the percentage "50%" set forth in
Section 1.11 relating to California Base
Inventory if and to the extent such percentage
would exceed the then applicable percentage for
the Base Inventory;
(ii) any other increase in the
percentages set forth in Sections 1.10 and 1.11
not specifically addressed above in this Section
10.8;
(iii) any increase in the Maximum
Amount, extension or postponement of the Maturity
Date or forgiveness of any of the Obligations;
(iv)any decrease in the interest rates
prescribed in this Agreement or the Credit Notes
or in the fees prescribed herein;
(v) any change in the Commitment
Percentage of any of the Lenders (other than as a
result of any assignment or participation of a
Lender's interest hereunder permitted by the
terms of this Agreement) or of all of the
Revolving Credit Commitments in the aggregate;
(vi) any release or subordination of,
or grant of parity of lien regarding, Collateral
with a fair liquidation value of more than
$1,000,000 in the aggregate; any increase in the
dollar amount set forth in Section 1.9; any
subordination of or grant of parity regarding
payment priority; or the release of any of the
Guaranties;
(vii) any change in the terms of
Section 2.7, other than a change consisting
solely of the reduction of the maximum aggregate
amount of Overadvances set forth in Section
2.7(ii)(a); and
(viii) any change in or waiver of the
terms of this Section 10.8 or of the Commitment
Percentage required for action by the Lenders in
Sections 7.1, 9.3(b) or 9.6(iii).
53
The Agent shall, solely for the benefit of the Lenders, provide
promptly to each of the Lenders a copy of each such written consent or approval
arising in accordance with the terms of clauses (a), (b) or (c) of this Section
10.8. Notwithstanding the foregoing, the terms of Section 9 (other than Section
9.13) hereof may be modified, amended or supplemented without the consent or
approval of any of the Borrowers upon the prior written consent or approval of
Lenders whose Commitment Percentages equal in the aggregate 67% or more, and the
terms of Section 9.13 hereof may be modified, amended or supplemented without
the consent or approval of any of the Borrowers upon the prior written consent
or approval of BKB and of Lenders (including BKB) whose Commitment Percentages
equal in the aggregate 67% or more.
10.9 Binding Effect of Agreement. This Agreement shall be binding
upon and inure to the benefit of the Borrowers, the Agent and the Lenders and
their respective successors and assigns. The Agent and each of the Lenders may
sell, assign or otherwise transfer all or any portion of its right, title and
interest in, and its Obligations under, this Agreement and the Loans made and to
be made hereunder, or grant participations in its right, title and interest
herein and therein. The Borrowers may not assign or transfer their rights or
obligations hereunder.
10.10 Computation of Interest and Fees. Interest, fees and charges
shall be computed daily on the basis of a year of 360 days and paid for the
actual number of days for which due. If the due date for any payment of
principal is extended by operation of law, interest shall be payable for such
extended time. If any payment required by this Agreement becomes due on a day
that is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension shall be included in computing interest in
connection with such payment.
10.11 Entire Agreement. This Agreement, including the exhibits
hereto, sets forth the entire agreement and understanding of the parties hereto
in respect of the subject matter contained herein, and supersedes all prior
agreements, promises, covenants, arrangements, communications, representations,
warranties, whether oral or written, by any officer, employee or representative
of any party hereto.
10.12 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS HEREBY IRREVOCABLY
WAIVES TRIAL BY JURY IN ANY JURISDICTION AND IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE OBLIGATIONS, OR ANY
INSTRUMENT OR DOCUMENT DELIVERED PURSUANT HERETO OR THERETO, OR ANY CLAIM OR
DISPUTE HOWSOEVER ARISING, BETWEEN ANY OF THE BORROWERS, THE AGENT AND ANY OF
THE LENDERS. THIS WAIVER OF JURY TRIAL SHALL BE EFFECTIVE FOR EACH AND EVERY
DOCUMENT EXECUTED BY ANY OF THE BORROWERS, THE AGENT OR ANY OF THE LENDERS AND
DELIVERED TO THE AGENT, ANY LENDER OR ANY OF THE BORROWERS, AS THE CASE MAY BE,
WHETHER OR NOT SUCH DOCUMENT SHALL CONTAIN A WAIVER OF JURY TRIAL. EACH OF THE
BORROWERS FURTHER ACKNOWLEDGES THAT ALL DOCUMENTS DELIVERED BY THE AGENT, ANY
LENDER OR ANY OF THE BORROWERS ARE SUBJECT TO THIS WAVIER OF JURY TRIAL AS TO
ANY ACTION THAT MAY BE BROUGHT AS TO ANY OF SUCH DOCUMENTS, INSTRUMENTS OR
LETTERS OR THE LIKE. EACH OF THE
54
BORROWERS FURTHER CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY
MADE.
10.13 Captions. The captions for the sections of this Agreement are
for ease of reference only and are not an integral part of this Agreement.
10.14 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures hereto and thereto were
upon the same instrument.
10.15 Severability. The provisions of this Agreement are severable,
and if any of these provisions shall be held by any court of competent
jurisdiction to be unenforceable, such holdings shall not affect or impair any
other provision hereof.
[Signatures appear on next page.]
55
WITNESS the execution hereof under seal on the day and year first above written.
ALLOU HEALTH & BEAUTY CARE, INC.
By: /s/
--------------------------------------
Title:
ALLOU DISTRIBUTORS, INC.
By: /s/
--------------------------------------
Title:
BANKBOSTON, N.A.
By: /s/
--------------------------------------
Title:
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/
--------------------------------------
Title:
SANWA BUSINESS CREDIT CORPORATION
By: /s/
--------------------------------------
Title:
LASALLE BUSINESS CREDIT, INC.
By: /s/
--------------------------------------
BANK LEUMI TRUST COMPANY OF NEW YORK
By: /s/
--------------------------------------
Title:
THE DIME SAVINGS BANK OF NEW YORK, FSB
By: /s/
--------------------------------------
Title:
(Signatures continued on next page)
56
THE FIRST NATIONAL BANK OF MARYLAND
By: /s/
--------------------------------------
Title:
KEY CORPORATE CAPITAL, INC.
By: /s/
--------------------------------------
Title:
57
EXHIBIT A
---------
Third Restated and Amended Revolving Credit Note
------------------------------------------------
$[Maximum Amount x Lender's Boston, Massachusetts
Commitment Percentage] August __, 1997
FOR VALUE RECEIVED, the undersigned hereby absolutely and
unconditionally, jointly and severally, promise to pay to [a Lender] (the
"Lender"), or order, on the Maturity Date, the principal amount of [Maximum
Amount x Lender's Commitment Percentage] Dollars ($________________) or, if
less, the aggregate unpaid principal amount of all Revolving Loans and other
advances made by the Lender to the Borrowers pursuant to the Agreement (as
hereinafter defined) and noted on the records of the Agent in accordance with
the terms of the Agreement, together with interest (computed on the basis of the
actual number of days elapsed over a 360-day year) on the unpaid principal
amount hereof until paid in full at the times and rates set forth in the
Agreement referred to below.
All payments under this Note shall be made at the head office of the
Agent at 100 Federal Street, Boston, Massachusetts 02110 (or at such other place
as the Agent may designate from time to time in writing) in lawful money of the
United States of America in federal or other immediately available funds. The
Borrowers may prepay this Note in whole or in part at any time subject to the
terms and conditions set forth in the Agreement. Amounts so paid and other
amounts may be borrowed and reborrowed by the Borrowers hereunder from time to
time as provided in the Agreement.
This Note is issued pursuant to, is entitled to the benefits of, and
is subject to the provisions of a certain Third Restated and Amended Revolving
Credit and Security Agreement of even date herewith among the undersigned, the
Lender, [additional Lenders] and BankBoston, N.A. as Agent (herein, as the same
may from time to time be amended or extended, referred to as the "Agreement"),
but neither this reference to the Agreement nor any provision thereof shall
affect or impair the absolute and unconditional joint and several obligation of
each of the undersigned makers of this Note to pay the principal of and interest
on this Note as herein provided. All capitalized terms used herein shall have
the meanings set forth herein or in the Agreement.
Upon an Event of Default, the aggregate unpaid balance of principal
plus accrued interest may become or may be declared to be due and payable in the
manner and with the effect provided in the Agreement.
Except as may otherwise be provided in the Agreement, each of the
undersigned makers of this Note, hereby waives presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.
WITNESS the execution of this Note under seal on the date written above.
ALLOU DISTRIBUTORS, INC.
By:
--------------------------------------
Title:
ALLOU HEALTH & BEAUTY CARE, INC.
By:
--------------------------------------
Title:
EXHIBIT B
---------
DISCLOSURE SCHEDULE
This Disclosure Schedule amends and supplements the information which
has been previously disclosed to the Lenders under the Loan Agreement.
1. Schedule 3.5(b) of the Loan Agreement is hereby amended to
read in its entirety as follows:
Real Property Owned or Leased By Borrower:
------------------------------------------
Ownership of Real Estate:
-------------------------
The Borrowers do not own any real property.
Leasehold Interest in Real Property:
------------------------------------
A. Distributors is obligated under a real property
operating lease agreement dated March 4, 1980 between Distributors
and Pueblo Supermarkets, Inc., which lease has been assigned by
Pueblo Supermarkets Inc. to Brentwood Distribution Co. and by
amendment dated December 8, 1993 is expiring in 2005, relating to
certain real property constituting a warehouse and offices located in
Brentwood New York. The minimum annual rentals, including additional
payments for real estate taxes and certain expenses, are as follows:
1997 $577,500
1998 $577,500
1999 $577,500
2000 $577,500
2001 $630,000
2002 $630,000
2003 $630,000
2004 $630,000
2005 $630,000
B. Lease dated as of October, 1996 between TMC Properties,
Inc., as lessor, and Allou Personal Care Corporation, as lessee. The
minimum monthly rental is $25,000.
2. Schedule 3.11 of the Loan Agreement is hereby amended to
read in its entirety as follows:
Schedule 3.11
-------------
Pending or Threatened Litigation or Proceedings:
------------------------------------------------
None
3. Schedule 3.17 of the Loan Agreement is hereby amended to
read in its entirety as follows:
Employment Contracts:
1. Employment Contract, dated as of January 24,
1989, between Allou Health & Beauty Care, Inc. and Victor
Jacobs.
2. Employment Contract, dated as of January 24,
1989, between Allou Health & Beauty Care, Inc. and Herman
Jacobs.
3. Employment Contract, dated as of January 24,
1989, between Allou Health & Beauty Care, Inc. and Jack
Jacobs.
4. Employment Contract, dated as of April 1,
1994, between Allou Health & Beauty Care, Inc. and Robert
Crivell.
5. Employment Contract, dated as of April 1,
1994 between Allou Health & Beauty Care, Inc. and Steven
Friedman.
6. Oral "at will" employment agreements in the
ordinary course of business.
4. Schedule 4.1.1(r) of the Loan Agreement is hereby amended to read
in its entirety as follows:
Schedule 4.1.1(r)
-----------------
Financial Institutions Currently Lending to Borrowers:
------------------------------------------------------
a. BankBoston, N.A.
b. IBJ Schroder Bank & Trust Company
c. Sanwa Business Credit Corporation
d. LaSalle Business Credit, Inc.
e. Bank Leumi Trust Company of New York
f. The First National Bank of Maryland
g. The Dime Savings Bank of New York, FSB
h. Key Corporate Capital, Inc.
6. Schedule 6.3 of the Loan Agreement is hereby amended to
read in its entirety as follows:
Schedule 6.3
------------
Additional Collateral Location:
-------------------------------
1. Sole Collateral Location of Collateral owned by
Russ Kalvin Personal Care Corp. and Stanford Personal Care
Manufacturing, Inc.:
25644 Springbook Avenue, No. 6
Saugus, California 91350
2. Sole Collateral Location of Collateral owned by
all of the other Borrowers:
50 Emjay Boulevard
Brentwood, NY 11717
EXHIBIT C
---------
EXISTING INDEBTEDNESS
Indebtedness or Other Liabilities, Debts or Obligations:
- --------------------------------------------------------
Distributors is obligated under a real property operating lease
agreement expiring in 2005. The minimum annual rentals, including additional
payments for real estate taxes and certain expenses, are as follows:
1996 $577,500
1997 $577,500
1998 $577,500
1999 $577,500
2000 $577,500
2001 $630,000
2002 $630,000
2003 $630,000
2004 $630,000
2005 $630,000
In connection with the acquisition of M. Sobol, Inc. on April 1,
1993, the Parent owes Simon Mandell $750,000 as of April 1, 1994, with a balance
outstanding of $270,000 as of October, 1997.
1. Schedule 3.5(b) of the Subsidiary Tie-In Agreement is
hereby amended to read in its entirety as follows:
Schedule 3.5(b)
---------------
Real Property Owned or Leased by Borrowers:
- -------------------------------------------
Ownership of Real Estate:
- -------------------------
The Borrowers do not own any real property.
Leasehold Interest in Real Property:
- ------------------------------------
None
EXHIBIT D
---------
THIRD RESTATED AND AMENDED CLOSING CERTIFICATE
This Closing Certificate is delivered pursuant to Section 4.3 of the
Third Restated and Amended Revolving Credit and Security Agreement of even date
herewith (the "Agreement") among the undersigned and certain of their
Affiliates, (collectively, the "Borrowers"), IBJ Schroder Bank & Trust Company,
Sanwa Business Credit, LaSalle Business Credit, Inc., The First National Bank of
Maryland, The Dime Savings Bank of New York, FSB, Key Corporate Capital, Inc.,
Bank Leumi Trust Company of New York, BankBoston, N.A. (f/k/a The First National
Bank of Boston) (collectively, the "Lenders") and BankBoston, N.A. as Agent for
the Lenders. All capitalized terms shall have the meanings set forth in the
Agreement.
The undersigned does hereby certify as follows:
1. I am the officer in charge of financial affairs of the undersigned
on behalf of whom I have executed this Certificate below.
2. I have reviewed the Agreement, and to the best of my knowledge
each representation contained in the Agreement is true and correct in all
material respects as of the date hereof.
3. To the best of my knowledge, the Borrowers have performed,
satisfied, or complied in all material respects with all covenants, warranties
and representations and conditions to be performed, satisfied or complied with
by it under the Agreement on or before the date hereof, and to the best of my
knowledge no event has occurred and is continuing and no condition exists which
constitutes, or with the passage of time or the giving of notice, or both, would
constitute an Event of Default.
4. I have reviewed the books and records of the Borrowers and their
business and the financial statements and projections of the Borrowers' business
furnished to the Agent; and I have consulted with counsel for the Borrowers as
to the meaning of terms used in this Certificate. Based upon the foregoing, the
Borrowers have and, after giving effect to any borrowings under the Agreement on
the date hereof, will have tangible and intangible assets having a present fair
saleable value in excess of the amount required to pay the probable liability on
their then-existing debts (whether matured or unmatured, liquidated or
unliquidated, fixed or contingent); the Borrowers have and will have access to
adequate capital for the conduct of their business and the discharge of their
debts incurred in connection therewith as such debts mature; none of the
Borrowers is Insolvent; and, immediately after giving effect to the borrowings
under the Agreement on the date hereof, none of the Borrowers will be Insolvent.
5. There has not been any material adverse chance in the business of
the Borrowers since the date of the Initial Financial Statement, including,
without limitation, any material adverse change from the business plan of the
Borrowers as previously presented to the Agent.
WITNESS the execution of this Certificate as of this __th day of
____________, 1997.
[EACH BORROWER]
By:
--------------------------------------
Title:
EXHIBIT E
---------
CERTIFICATE OF CHIEF FINANCIAL OFFICERS
(Pursuant to Section 5.1(vi) of the Third Restated and Amended
Revolving Credit and Security Agreement dated August ___, 1997.)
[Certificate for each Borrower](the "Borrower") HEREBY CERTIFIES
THAT:
This Report is furnished pursuant to Section 5.1(vi) of the Third
Restated and Amended Revolving Credit and Security Agreement dated August ___,
1997 among the Borrowers, IBJ Schroder Bank & Trust Company, Sanwa Business
Credit, Bank Leumi Trust Company of New York, The First National Bank of
Maryland, The Dime Savings Bank, [Additional Lender], BankBoston, N.A. (f/k/a
The First National Bank of Boston) (collectively, the "Lenders") and BankBoston,
N.A. as Agent for the Lenders (the "Agreement"). Unless otherwise defined
herein, the terms used in this Report and Schedule 1 hereto have the meanings
described in the Agreement.
As required by Section 5.1(i) or (ii) of the Agreement, financial
statements of the Borrowers and any Subsidiaries for the (year) (quarter) ended
_________, 19__ (the "Financial Statements") prepared in accordance with GAAP
(subject, in the case of quarterly statements, to year-end audit adjustments)
accompany this Report. The Financial Statements present fairly the consolidated
financial position of the Borrowers and any Subsidiaries as at the date thereof
and the consolidated results of operations of the Borrowers and any Subsidiaries
for the period covered thereby.
Schedule 1 attached hereto sets forth financial data and computations
evidencing the Borrowers' compliance with the covenants of the Agreement set
forth in Sections 5.25 through 5.28, inclusive, all of which data and
computations, to the best of the knowledge and belief of the chief financial
officers ("Chief Financial Officers") executing and delivering this Report on
behalf of the Borrowers, are true, complete and correct.
The activities of the Borrowers and any Subsidiaries during the
period covered by the Financial Statements have been reviewed by the Chief
Financial Officers and by employees or agents under their immediate supervision.
Based on such review, to the best knowledge and belief of the Chief Financial
Officers, during the period covered by the Financial Statements, and as of the
date of this Report, (a) the Borrowers have, or have caused to have, kept,
observed, performed and fulfilled in all material respects each and every
covenant and condition of the Agreement (except to the extent waived by the
Agent or the Lenders, as the case may be, and noted on Schedule 1 attached
hereto) and the Credit Notes, and (b) no Event of Default and no event which
with notice or lapse of time, or both, would become an Event of Default, has
occurred or is occurring.
Witness my hand this ______ day of _____________199__.
[Each Borrower]
By:
--------------------------------------
Title: