SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): April 7, 1999
BRADLEY PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-18881 22-2581418
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
383 Route 46 West, Fairfield, New Jersey 07004
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (973) 882-1505
Item 1. Changes in Control of Registrant
Not Applicable
Item 2. Acquisition or Disposal of Assets
Not Applicable
Item 3. Bankruptcy or Receivership
Not Applicable
Item 4. Changes in Registrant's Certifying Accountant
Not Applicable
Item 5. Other Events
On April 7, 1999, we entered into a loan agreement with LaSalle
Business Credit, Inc. that is comprised of a $5 million revolving asset-based
credit facility and a $2.5 million acquisition note for future product
acquisitions. In order to close this new loan agreement with LaSalle, we paid in
full the outstanding loan balance and early termination penalties to The CIT
Group/Credit Finance, Inc. of approximately $1.6 million, using a portion of the
availability from the new revolving credit facility. Advances under this new
revolving credit facility are calculated pursuant to a formula which is based on
our then "eligible" accounts receivable and inventory levels. Advances under the
$2.5 million acquisition note are pursuant to our finding a potential
acquisition and to receiving LaSalle's final approval. This new loan agreement
has an initial term of three years, requires an annual facility fee, and is
subject to an unused credit line percentage fee. Interest accrues on amounts
outstanding under this new loan agreement at the rate equal to the prime rate of
interest, announced from time to time, by LaSalle National Bank plus 1% for the
revolving credit facility and plus 2% for the amount outstanding for the
acquisition note. Our obligations under this new loan have been collateralized
by our grant to LaSalle of a lien upon, and the pledge of a security interest
in, all of our inventory, accounts receivable, intangible assets and other
assets. This lien is identical to our prior lien with CIT. This new loan
agreement contains certain covenants and restrictions. A copy of the agreement
is attached as an exhibit to this Form 8-K.
Item 6. Resignation of Registrant's Directors
Not Applicable
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired.
Not Applicable
(b) Pro forma financial information
Not Applicable
(c) Exhibits
10 - Loan and Security Agreement dated April 7, 1999 between the Company
and La Salle Business Credit, Inc. - page 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BRADLEY PHARMACEUTICALS, INC.
By: /s/ Daniel Glassman
------------------------------
Daniel Glassman, Chairman
and CEO
Dated: April 15, 1999
3 of 54
EXHIBIT 10
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made as of this 7th
day of April, 1999, by and among LASALLE BUSINESS CREDIT, INC., a Delaware
corporation ("LaSalle"), with its principal office at 135 South LaSalle Street,
Chicago, Illinois 60603, the financial institutions which from time to time
become a party hereto (collectively, the "Lenders" and individually, a
"Lender"), LaSalle as agent for Lenders (in such capacity, "Agent") and BRADLEY
PHARMACEUTICALS, INC., a Delaware corporation ("Bradley"), with its principal
office at 383 Route 46W, Fairfield, New Jersey 07004 and DOAK DERMATOLOGICS,
INC., a New York corporation, with its principal office at 383 Route 46W,
Fairfield, New Jersey 07004 ("Doak" and together with Bradley, each a "Borrower"
and jointly and severally, "Borrowers").
WITNESSETH:
WHEREAS, from time to time Borrowers may request Agent and
Lenders to make loans and advances to and extend certain credit accommodations
to Borrowers, and the parties wish to provide for the terms and conditions upon
which such loans, advances and credit accommodations shall be made;
NOW, THEREFORE, in consideration of any loans, advances and
credit accommodations (including any loans by renewal or extension) hereafter
made to Borrowers by Agent and the Lenders, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
Borrowers, the parties agree as follows:
1. DEFINITIONS
(a) General Definitions
"Account Debtor" shall mean the Person who is obligated on or under an
Account.
"Accounts" shall mean all of each Borrower's presently existing and
hereafter arising accounts, accounts receivable, contract rights, instruments,
documents, chattel paper, and all other forms of obligations owing to such
Borrower arising out of the sale or lease of goods or the rendition of services
by such Borrower, whether or not earned by performance, and any and all credit
insurance, guarantees, letters of credit and other security therefor, as well as
all merchandise returned to or reclaimed by Borrowers, and all products and
proceeds of the foregoing.
"Accounts Trial Balance" shall have the meaning specified in paragraph
11(d) hereof.
"Acquisition Loans" shall have the meaning specified in paragraph 3 hereof.
"Acquisition Loan Commitment" shall mean the sum of $2,500,000.
"Acquisition Note" shall mean the promissory note in the original principal
amount of $2,500,000, executed by Borrowers to the order of Agent, for its
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benefit and for the benefit of Lenders, dated the Closing Date, together with
all replacements and substitutions thereof.
"Affiliate" means any Person (other than Agent, any Lender or Berlex
Laboratories, Inc.): (a) directly or indirectly controlling, controlled by, or
under common control with any Borrower; (b) directly or indirectly owning or
holding five percent (5%) or more of any equity interest in any Borrower; or (c)
five percent (5%) or more of whose voting stock or other equity interest having
ordinary voting power for the election of directors or the power to direct or
cause the direction of management, is directly or indirectly owned or held by
any Borrower; or (d) which has a senior executive officer who is also a senior
executive officer of any Borrower. For purposes of this definition, "control"
(including with correlative meanings, the terms "controlling", "controlled by"
and "under common control with") means the possession directly or indirectly of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or other equity
interest, or by contract or otherwise.
"Agent" shall have the meaning specified in the introductory paragraph
hereof.
"Bank" shall mean LaSalle National Bank, Chicago, Illinois.
"Benefit Plan" shall mean an employee pension benefit plan of Borrowers or
an ERISA Affiliate, as defined in Section 3(2) of ERISA, which is subject to
Title IV of ERISA.
"Borrowers" shall have the meaning specified in the introductory paragraph
hereof.
"Borrowing Agent" shall mean Bradley.
"Borrowing Base" shall have the meaning specified in paragraph 2(b)(A)
hereof.
"Bradley" shall mean Bradley Pharmaceuticals, Inc.
"Business Day" shall mean any day other than a Saturday, Sunday, or such
other day as banks in Illinois are authorized or required to be closed for
business.
"Capital Adequacy Charge" shall have the meaning specified in paragraph
5(i) hereof.
"Capital Adequacy Demand" shall have the meaning specified in paragraph
5(i) hereof.
"Capital Expenditures" shall mean, with respect to any period, the
aggregate of all expenditures, excluding expenditures made in connection with
the acquisition of New Trademarks (whether paid in cash or accrued as
liabilities and including expenditures for capitalized lease obligations), by
Borrowers during such period that are required by GAAP to be included in or
reflected by the property, plant or equipment or similar fixed asset accounts
(or in intangible accounts subject to amortization) in the balance sheet of
Borrowers on a consolidated basis.
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"Change of Control" shall mean (a) the occurrence of any event (whether in
one or more transactions) which results in a transfer of control of Borrowers or
(b) any merger or consolidation of or with any Borrower or the sale of all or
substantially all of the property or assets of such Borrower. For purposes of
this definition, "control of Borrowers" shall mean the power, direct or indirect
to direct or cause the direction of the management and policies of any Borrower
by contract or otherwise.
"Chargeback Credit Reserve" shall mean, at any one time, an amount equal to
such percentage of Borrowers' aggregate outstanding accounts receivable at such
time as Agent deems reasonably appropriate and necessary to take into account
chargebacks and rebates.
"Chattel Paper" shall mean a writing or writings which evidence both a
monetary obligation and a security interest in or a lease of specific goods.
"Closing Date" shall mean the date upon which the initial Loan is made.
"Closing Document List" shall have the meaning specified in paragraph 15
hereof.
"Collateral" shall mean all of the personal property of Borrowers described
in paragraph 7 hereof, all of the real property of Borrowers described in the
Mortgages and all other real or personal property of any Obligor or any other
Person now or hereafter pledged to Agent, for its benefit and for the ratable
benefit of Lenders, to secure, either directly or indirectly, repayment of any
of the Liabilities.
"Commitment Percentage" of any Lender shall mean the percentage set forth
below such Lender's name on the signature page hereof as same may be adjusted
upon any assignment by a Lender pursuant to paragraph 25 hereof.
"Commitment Transfer Supplement" shall mean a document in the form of
Exhibit 25(b) attached hereto and made part hereof, properly completed and
otherwise in form and substance satisfactory to Agent by which the Purchasing
Lender purchases and assumes a portion of the obligation of Lenders to make
Loans under this Agreement.
"Debt Service Coverage Ratio" shall mean, with respect to any applicable
fiscal period, the following for Borrowers on a consolidated basis, the ratio of
(A) EBITDA, minus taxes and interest expense deducted from net income for such
period minus non-financed Capital Expenditures and any non-financed expenditure
incurred in connection with the acquisition of New Trademarks made during such
period, to (B) current principal maturities of long term debt and capitalized
leases paid or scheduled to be paid during such period, plus any prepayments of
indebtedness owed to any Person (except trade payables and revolving loans) and
paid during such period.
"Default" shall mean any event, condition or default which with the giving
of notice, the lapse of time or both would be an Event of Default.
"Defaulting Lender" shall have the meaning specified in paragraph 6(g)
hereof.
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"Documents" shall have the meaning set forth in the UCC.
"EBITDA" shall mean, with respect to any applicable fiscal period, the
following for Bradley and its Subsidiaries on a consolidated basis, each
calculated for such period: net income before taxes for such period (excluding
pre-tax gains or losses on the sale of assets (other than the sales of Inventory
in the ordinary course of business) and excluding other pre-tax extraordinary
gains or losses) plus interest expense, depreciation, amortization and other
non-cash charges deducted in determining net income for such period, minus
interest income calculated in determining net income for such period.
"Eligible Account" shall mean an Account owing to any Borrower which is
acceptable to Agent in its sole discretion for lending purposes. Agent shall, in
general, consider an Account to be an Eligible Account if it meets, and so long
as it continues to meet, the following requirements:
(i) it is genuine and in all respects is what it purports to be;
(ii) it is owned by such Borrower and such Borrower has the right to
subject it to a security interest in favor of Agent;
(iii) it arises from (A) the performance of services by such Borrower and
such services have been fully performed and acknowledged and accepted by the
Account Debtor thereunder and such Account Debtor has not refused to accept any
of such services; or (B) the sale or lease of Goods by such Borrower, and such
Goods have been completed in accordance with the Account Debtor's specifications
(if any) and delivered to and accepted by the Account Debtor, such Account
Debtor has not refused to accept and has not returned or offered to return any
of the Goods which are the subject of such Account, and such Borrower has
possession of, or has delivered to Agent at Agent's request, shipping and
delivery receipts evidencing delivery of such Goods;
(iv) it is either (x) evidenced by an invoice rendered to the Account
Debtor thereunder, is due and payable within ninety (90) days after the stated
due date thereof and does not remain unpaid more than one hundred and twenty
(120) days past the stated invoice date thereof; provided, however, that if more
than fifty percent (50%) of the aggregate dollar amount of invoices owing by a
particular Account Debtor remain unpaid for more than one hundred and twenty
(120) days past the respective invoice dates thereof, then all Accounts owing to
such Borrower by that Account Debtor shall be deemed ineligible.
(v) it is not subject to any prior assignment, claim, lien, security
interest or encumbrance whatsoever, other than Permitted Liens;
(vi) it is a valid, legally enforceable and unconditional obligation of the
Account Debtor thereunder to the extent that it is not subject to setoff,
counterclaim, credit including, without limitation, allowance or adjustment by
such Account Debtor, or to any claim by such Account Debtor denying liability
thereunder in whole or in part;
(vii) it does not arise out of a contract or order which fails in any
material respect to comply with the requirements of applicable law;
(viii) the Account Debtor thereunder is not a director, officer, employee
or agent of such Borrower, or a Subsidiary, Parent or Affiliate of such
Borrower;
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(ix) it is not an Account with respect to which the Account Debtor is the
United States of America or any department, agency or instrumentality thereof,
unless such Borrower assigns its right to payment of such Account to Agent
pursuant to, and in full compliance with, the Assignment of Claims Act of 1940,
as amended;
(x) it is not an Account with respect to which the Account Debtor is
located in a state which requires such Borrower, as a precondition to commencing
or maintaining an action in the courts of that state, either to (A) receive a
certificate of authority to do business and be in good standing in such state,
or (B) file a notice of business activities report or similar report with such
state's taxing authority, unless (x) such Borrower has taken one of the actions
described in clauses (A) or (B), (y) the failure to take one of the actions
described in either clause (A) or (B) may be cured retroactively by such
Borrower at its election, or (z) such Borrower has proven, to Agent's
satisfaction, that it is exempt from any such requirements under any such
state's laws;
(xi) it is an Account which arises out of a sale made in the ordinary
course of such Borrower's business;
(xii) the Account Debtor is a resident or citizen of, and is located within
(A) the United States of America, (B) Canada; provided, however, that the
aggregate sum of all Accounts related to such Account Debtors may not exceed
$10,000, (C) Puerto Rico or (D) such other country, provided that a Letter of
Credit has been issued with respect to the Account related to such Account
Debtor;
(xiii) it is not an Account with respect to which the Account Debtor's
obligation to pay is conditional upon the Account Debtor's approval of the Goods
or services or is otherwise subject to any repurchase obligation or return
right, as with sales made on a bill-and-hold, guaranteed sale, sale on approval,
sale or return or consignment basis;
(xiv) it is not an Account (A) with respect to which any representation or
warranty contained in this Agreement is untrue or (B) which violates any of the
covenants of Borrowers contained in this Agreement;
(xv) it is not an Account which, when added to a particular Account
Debtor's other indebtedness to Borrowers, exceeds the lesser of (A) twenty
percent (20%) of the aggregate of Borrowers' Accounts or (B) a credit limit
determined by Agent in its reasonable credit judgment for that Account Debtor,
provided, however, that Accounts excluded from Eligible Accounts solely by
reason of this subparagraph (xv) shall be Eligible Accounts to the extent of
such credit limit;
(xvi) it is not an Account with respect to which the prospect of payment or
performance by the Account Debtor is or will be impaired, as determined by Agent
in its sole reasonable discretion;
(xvii) it is not an Account arising from progress billings, invoices for
deposits, samples or tooling;
(xviii) it is not an Account with respect to which the sale is on an
installment basis, lease or other extended payment basis; and
(xix) it is not that portion of an Account representing late fees, service
charges or interest.
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"Eligible Inventory" shall mean that portion of each Borrower's Inventory
of finished goods held for sale by such Borrower, normally and currently
saleable in the ordinary course of such Borrower's business, and which at all
times pertinent hereto is of good and merchantable quality, free from defects,
as to which Agent, for its benefit and for the ratable benefit of Lenders has a
perfected first priority security interest, and which is located at the
locations set forth in Exhibit A of this Agreement, as that Exhibit may, from
time to time, be amended or supplemented in accordance with the terms of this
Agreement, and as to which such Borrower has satisfied all terms, conditions,
warranties and representations of this Agreement and the Other Agreements; but
Eligible Inventory shall not include any of the following: (a) catalogs and
other promotional materials of any kind; (b) raw materials or work in process;
(c) non-saleable returned items; (d) damaged, defective or recalled items; (e)
obsolete items; (f) items used as demonstrators, prototypes or salesmen's
samples; (g) items of Inventory which have been consigned to any Borrower or as
to which a Person claims a security interest, prior assignment claim or
encumbrance whatsoever other than a Permitted Lien; (h) items of Inventory which
have been consigned by any Borrower to a consignee; (i) packing and shipping
materials; (j) Inventory located on premises leased by any Borrower from a
landlord with whom Agent has not entered into a landlord's waiver on terms
satisfactory to Agent; (k) Inventory located at a warehouse premises with
respect to which Agent has not received (1) a bailee letter, acceptable in all
respects to Agent, executed by the bailee of such warehouse or (2) evidence
satisfactory in all respects to Agent of such bailee's receipt of a bailee
letter acceptable in all respects to Agent; (l) Inventory which in the
reasonable judgment of Agent is considered to be slow moving or otherwise not
merchantable; (m) Inventory consisting of prescription drugs in excess of an
aggregate value of $750,000; and (n) any Inventory that Agent has determined is
not acceptable due to age, type, category or quantity including, without
limitation, on any date, all prescription drugs with an expiration date of less
than six (6) months from such date;
"Equipment" shall mean the machinery and equipment of Borrowers, including
without limitation processing equipment, data processing and computer equipment
with software and peripheral equipment, and all engineering, processing and
manufacturing equipment, office machinery, furniture, materials handling
equipment, tools, molds, dies, attachments, accessories, automotive equipment,
trailers, trucks, motor vehicles, tanks, cylinders and other equipment of every
kind and nature, and fixtures, all whether now owned or hereafter acquired, and
wheresoever situated, together with all additions and accessions thereto,
replacements therefor, all parts therefor, and all manuals, drawings,
instructions, warranties, and rights with respect thereto, and all products and
proceeds of the foregoing, and condemnation awards and insurance proceeds with
respect thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and all references to sections thereof shall include such sections and
any predecessor and successor provisions thereto.
"ERISA Affiliate" shall mean any member of a controlled group of entities
as determined under Section 414(b),(c),(m), or (o) of the IRC, of which
Borrowers are members.
"Event of Default" shall have the meaning specified in paragraph 16 hereof.
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"Excess Availability" shall mean, as of any date of determination by Agent,
the excess, if any, of (i) the Borrowing Base over (ii) the outstanding
Revolving Loans and Letter of Credit Obligations, in each case as of the close
of business on such date. For purposes of calculating Excess Availability of
Borrowers and the amount of the Borrowing Base relating thereto, Agent may, in
the exercise of its sole discretion, establish a reserve in an aggregate amount
based on Borrowers' outstanding trade payables which are not current or which
are past due in any material respect, as of such date of determination, to the
extent thereof.
"Excess Cash Flow" for any Fiscal Year of Borrowers shall mean an amount
equal to (a) the net income of Borrowers on a consolidated basis for such Fiscal
Year minus (b) non-cash extraordinary gains and losses plus (c) depreciation and
amortization which were deducted in determining net income for such Fiscal Year
plus (d) long term debt incurred for Capital Expenditures and expenditures made
in connection with the acquisition of New Trademarks made during such period
minus (e) Capital Expenditures made during such Fiscal Year minus (f) scheduled
payments of principal.
"Exhibit A" shall mean the exhibit entitled Exhibit A Business and
Collateral Locations which is attached hereto and made a part hereof.
"Financial Statements Reserve" shall mean $250,000, until such date on
which Agent shall have received the audited financial statements of Borrowers on
a consolidated basis for the Fiscal Year ending December 31, 1998 and such
financial statements do not contain any materially adverse adjustments from the
audited draft financial statements delivered to Agent prior to the Closing Date
and $0 at all times thereafter.
"Fiscal Year" shall mean with respect to Borrowers, the twelve (12) month
accounting period of Borrowers commencing January 1st of each calendar year and
ending December 31st of such calendar year.
"GAAP" shall mean generally accepted accounting principles and policies in
the United States as in effect from time to time.
"General Intangibles" shall mean all of each Borrower's present and future
general intangibles and other personal property, any and all rights of each
Borrower to all choses or things in action, tax refund claims, credits, claims,
claims against carriers and shippers, guarantee claims, contract rights,
security interests, security rights and any rights to indemnification, demands,
goodwill, licenses, franchise agreements, subscription costs, patents, patent
applications, trade names, trademarks, trademark applications, copyrights,
registrations, rights to royalties, blueprints, drawings, customer lists,
purchase orders, computer programs, computer discs, computer tapes, literature,
reports, catalogs, methods, sales literature, video tapes, confidential
information and trade secrets, consulting agreements, employment agreements,
leasehold interests in real and personal property, insurance policies, deposits
with insurers relating to worker's compensation liabilities, deposit accounts
and tax refunds, other than Equipment, Inventory, Investment Property and
Accounts, as well as each Borrower's books and records relating to any of the
foregoing, and all products and proceeds of the foregoing.
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"Goods" shall mean all of each Borrower's things which are moveable at the
time the security interest attaches or which are fixtures.
"Guarantors" shall mean Bradley Pharmaceuticals Overseas, Ltd., Bradley
Pharmaceuticals (Canada) Inc. and any other Person which executes and becomes
obligated under a Guaranty.
"Guaranty" shall mean, individually and collectively, the guaranty of the
Liabilities of Borrowers executed by the Guarantors.
"Indemnified Party" shall have the meaning specified in paragraph 18
hereof.
"Instruments" shall mean a negotiable instrument or a certificated security
or any other writing which evidences a right to the payment of money.
"Interest Coverage Ratio" shall mean, with respect to any period, the ratio
of (A) EBITDA for such period to (B) interest expense of Borrowers on a
consolidated basis for such period.
"Inventory" shall mean all present and future inventory in which each
Borrower has any interest, including, but not limited to, goods held by such
Borrower for sale or lease or to be furnished under a contract of service and
all of each Borrower's present and future raw materials, work in process,
finished goods, supplies and packing and shipping materials, wherever located,
and any documents of title representing any of the above.
"Investment Property" shall have the meaning set forth in the UCC, and if
not so defined, shall mean and include all of each Borrower's now owned or
hereafter acquired securities, whether certificated or uncertificated,
securities entitlements, securities accounts, commodity and futures contracts
and commodity and futures accounts.
"IRC" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
"Kind" shall mean, with respect to any Loan, whether such Loan is a
Revolving Loan or an Acquisition Loan.
"Lender Default" shall have the meaning set forth in paragraph 6(g) hereof.
"Letters of Credit" shall mean those stand-by letters of credit issued for
Borrowers' account in accordance with the terms of paragraph 4 hereof.
"Letter of Credit Obligations" shall mean, as of any date of determination,
the sum of (i) the aggregate undrawn amount of all Letters of Credit and (ii)
the aggregate unreimbursed amount of all drawn Letters of Credit.
"Liabilities" shall mean any and all obligations, liabilities and
indebtedness of Borrowers to Agent and/or Lenders or to any parent, affiliate or
subsidiary of Agent or any Lender of any and every kind and nature, howsoever
created, arising or evidenced and
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howsoever owned, held or acquired, whether now
or hereafter existing, whether now due or to become due, whether primary,
secondary, direct, indirect, absolute, contingent or otherwise (including,
without limitation, obligations of performance), whether several, joint or joint
and several, and whether arising or existing under written or oral agreement or
by operation of law.
"Loan" or "Loans" shall mean any and all Revolving Loans and Acquisition
Loans made by Agent and Lenders to Borrowers and all other loans, advances and
financial accommodations made by Agent and Lenders to or on behalf of Borrowers
hereunder.
"Lock Box" and "Blocked Account" shall have the meanings specified in
paragraph 10 hereof.
"Material Adverse Effect" shall mean with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, occurrence or occurrences, whether or not related, a
material adverse change in, or a material adverse effect upon, any of the
business, property assets, operations, condition (financial or otherwise) or
prospects of Borrowers.
"Mortgage" shall mean each mortgage or deed of trust executed by Borrowers
in favor of Agent to secure the Liabilities.
"Multiemployer Plan" shall mean a plan described in Section 4001(a)(3) of
ERISA which covers employees of Borrowers or any ERISA Affiliate.
"New Trademarks" shall have the meaning specified in paragraph 3 hereof.
"Non-Defaulting Lender" shall have the meaning specified in paragraph 6(h).
"Note" shall mean the Revolving Note or the Acquisition Note.
"Obligor" shall mean, Borrowers and each Person who is or shall become
primarily or secondarily liable for any of the Liabilities (including, without
limitation any person who provides security to Agent for any Liability),
provided, however, that such term shall not include any Account Debtor.
"Old Trademarks" shall have the meaning specified in paragraph 3 hereof.
"Other Agreements" shall mean all agreements, instruments and documents
including, without limitation, guaranties, mortgages, trust deeds, pledges,
powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements and all other writings heretofore, now
or from time to time hereafter executed by or on behalf of Borrowers or any
other Person and delivered to Agent or any Lender or to any parent, affiliate or
subsidiary of Agent or any Lender in connection with the Liabilities or the
transactions contemplated hereby.
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"Parent" shall mean any Person now or at any time or times hereafter owning
or controlling (alone or with any other Person) at least a majority of the
issued and outstanding stock of any Borrower or any Subsidiary.
"Participant" shall mean each Person who shall be granted the right by any
Lender to participate in any of the Loans.
"Permitted Liens" shall mean (i) statutory liens of landlords, carriers,
warehousemen, mechanics, materialmen or suppliers incurred in the ordinary
course of business and securing amounts not yet due or declared to be due by the
claimant thereunder, (ii) liens or security interests in favor of Agent, for its
benefit and for the ratable benefit of the Lenders, (iii) zoning restrictions
and easements, rights of way, licenses, covenants and other restrictions
affecting the use of real property that do not individually or in the aggregate
have a Material Adverse Effect on any Borrower's ability to use such real
property for its intended purpose in connection with such Borrower's business,
(iv) liens securing the payment of taxes or other governmental charges not yet
delinquent or being contested in good faith and by appropriate proceedings, (v)
liens incurred or deposits made in the ordinary course of any Borrower's
business in connection with capitalized leases or purchase money security
interests for purchase of, and applying only to, Equipment included in the
permitted borrowings under paragraph 13(q) or permitted as Capital Expenditures
under paragraph 14(m), the documents relating to such liens to be in form and
substance acceptable to Agent, (vi) liens securing indebtedness owing by any
Subsidiary to Borrowers to the extent such indebtedness is permitted under
paragraph 13(q), or to any other Subsidiary of Borrowers, (vii) deposits to
secure performance of bids, trade contracts, leases and statutory obligations
(to the extent not excepted elsewhere herein); (viii) liens specifically
permitted by Agent in writing as set forth on Schedule 1(a) attached hereto;
(ix) any lien arising out of the refinancing, extension, renewal or refunding of
any indebtedness secured by an lien permitted by any of the foregoing sections
(v) through (viii) inclusive provided that (a) such indebtedness is not secured
by any additional assets, and (b) the amount of such indebtedness is not
increased; (x) pledges or deposits in connection with worker's compensation,
unemployment insurance and other social security legislation; (xi) grants of
security and rights of setoff in deposit accounts, securities and other
properties held at banks or financial institutions to secure the payment or
reimbursement under overdraft, acceptance and other facilities, and (xii) rights
of setoff, banker's lien and other similar rights arising solely by operation of
law.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor
agency.
"Person" shall mean any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or foreign or United States
government (whether federal, state, county, city, municipal or otherwise),
including, without limitation, any instrumentality, division, agency, body or
department thereof.
"Prescription Drug Reserve" shall mean $150,000, until such date on which
Agent shall have received a summary report regarding the expiration dates of all
prescription drug Inventory of Borrowers and $0 at all times thereafter.
10
"Prime Rate" shall mean the publicly announced prime rate of the Bank, in
effect from time to time. The Prime Rate is not intended to be the lowest or
most favorable rate of the Bank in effect at any time.
"Purchasing Lender" shall have the meaning specified in paragraph 25(b)
hereof.
"Required Lenders" shall mean Lenders holding at least sixty-six and two
thirds percent (66 2/3%) of the Loans.
"Revolving Loans" shall have the meaning specified in paragraph 2 hereof.
"Revolving Loan Commitment" shall mean the sum of $5,000,000.
"Revolving Note" shall mean the promissory note in the original principal
amount of $5,000,000, executed by Borrowers to the order of Agent, for its
benefit and for the benefit of Lenders, dated as of the Closing Date, together
with all replacements and substitutions thereof.
"Subsidiary" shall mean any corporation of which more than fifty percent
(50%) of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether
at the time stock of any other class of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned by any Borrower or by any partnership or joint
venture of which more than fifty percent (50%) of the outstanding equity
interests are at the time, directly or indirectly, owned by any Borrower.
"Tangible Net Worth" shall mean shareholders' equity of Bradley and its
Subsidiaries on a consolidated basis (including retained earnings) less the book
value of all intangible assets (other than the book value of New Trademarks
approved by Agent) and less prepaid expenses, determined by Agent on a
consistent basis, plus the amount of any debt subordinated to Agent for the
benefit of Lenders on terms and conditions acceptable to Agent in its sole
judgment, all as determined in accordance with GAAP, consistently applied.
"Term" shall have the meaning specified in paragraph 12 hereof.
"Total Credit Facility" shall mean the sum of $7,500,000.
"Trademarks" shall mean, collectively, the New Trademarks and the Old
Trademarks.
"Transferee" shall have the meaning set forth in paragraph 25(a) hereof.
"UCC" shall mean the Uniform Commercial Code as in effect on the date
hereof in the State of Illinois, as amended from time to time, and any successor
statute.
"Week" shall mean the time period commencing on a Sunday and ending on the
following Saturday.
11
"Year 2000 Problem" shall mean any significant risk that computer hardware
or software used in Borrowers' business or operations will not, in the case of
dates or time periods occurring after December 31, 1999, function at least as
effectively as in the case of dates or time periods occurring prior to January
1, 2000.
(b) Accounting Terms and Definitions. Unless otherwise defined or specified
herein, all accounting terms used in this Agreement shall be construed in
accordance with GAAP, applied on a basis consistent in all material respects
with the financial statements delivered by Borrowers to Agent on or before the
Closing Date. All accounting determinations for purposes of determining
compliance with the financial covenants contained in paragraph 16(m) shall be
made in accordance with GAAP as in effect on the Closing Date and applied on a
basis consistent in all material respects with the audited financial statements
delivered to Agent by Borrowers on or before the Closing Date. The financial
statements required to be delivered hereunder from and after the Closing Date,
and all financial records, shall be maintained in accordance with GAAP. If GAAP
shall change from the basis used in preparing the audited financial statements
delivered to Agent by Borrowers on or before the Closing Date, the certificates
required to be delivered pursuant to paragraph 13 demonstrating compliance with
the covenants contained herein shall include, at the election of Borrowers or
upon the request of Agent, calculations setting forth the adjustments necessary
to demonstrate how Borrowers are in compliance with the financial covenants
based upon GAAP as in effect on the Closing Date.
2. REVOLVING LOANS. Subject to the terms and conditions of this Agreement
and the Other Agreements, during the Term, absent the existence of an Event of
Default:
(a) Revolving Loan Commitment. Each Lender, severally and not jointly,
shall make such revolving loans and advances (the "Revolving Loans") to
Borrowers in aggregate amounts outstanding at any time equal to such Lender's
Commitment Percentage to Borrowers, as Borrowing Agent shall from time to time
request, in accordance with the terms of paragraph 2(b) hereof. The aggregate
unpaid principal amount of all Revolving Loans outstanding at any one time made
to Borrowers shall not exceed the lesser of (A) the Borrowing Base and (B) the
Revolving Loan Commitment, in each case minus the outstanding Letter of Credit
Obligations. All Revolving Loans shall be repaid in full upon the earlier to
occur of (i) the end of the Term and (ii) the acceleration of the Liabilities
pursuant to paragraph 17 of this Agreement. If at any time the outstanding
principal balance of the Revolving Loans made to Borrowers exceeds (A) the
Borrowing Base or (B) the Revolving Loan Commitment, in each case less the
outstanding Letter of Credit Obligations, Borrowers shall immediately, and
without the necessity of a demand by Agent, pay to Agent such amount as may be
necessary to eliminate such excess, and Agent shall apply such payment pro rata
according to the Commitment Percentage of each Lender against the outstanding
principal balance of the Revolving Loans. In addition, if at any time the sum of
(i) the outstanding principal balance of the Loans and (ii) the outstanding
Letter of Credit Obligations exceeds the Total Credit Facility, Borrowers shall
immediately and without the necessity of a demand by Agent pay to Agent such
amount as may be necessary to eliminate such excess, and Agent shall apply such
payment against the outstanding principal balance of the Loans in such order as
Agent shall determine in its sole discretion. Each Borrower hereby authorizes
Agent to charge any of Borrowers' accounts to make any payments of principal or
interest required by this Agreement. All Revolving Loans shall, in Agent's sole
discretion, be evidenced by one or more promissory notes in form and substance
12
satisfactory to Agent. However, if such Revolving Loans are not so evidenced,
such Revolving Loans may be evidenced solely by entries upon the books and
records maintained by Agent.
(b) Borrowing Limits. Each Lender, severally and not jointly shall make
Revolving Loans to Borrowers up to the lesser of clause (A) and (B) below, the
amount calculated pursuant to clause (A) below being the "Borrowing Base":
A. an amount equal to the sum of: (i) up to eighty percent (80%) of
the face amount of Eligible Accounts, plus (ii) the lesser of (x) up to
sixty percent (60%) of the value of Eligible Inventory, calculated on the
basis of the lower of cost or market value on a first-in, first-out basis,
and (y) One Million Dollars ($1,000,000); in each case less such reserves
as Agent elects to establish from time to time in the exercise of its sole
discretion including, without limitation, the Chargeback Credit Reserve,
the Financial Statements Reserve and the Prescription Drug Reserve, minus
the outstanding aggregate face amount of all Letter of Credit Obligations;
or
B. the Revolving Loan Commitment, minus the outstanding aggregate face
amount of all Letter of Credit Obligations.
3. ACQUISITION LOANS. So long as (i) no Default or Event of Default has
occurred and is continuing under this Agreement and (ii) Agent shall have
received the audited financial statements of Borrowers on a consolidated basis
for the Fiscal Year ending December 31, 1998 and such financial statements do
not contain any materially adverse adjustments from the audited draft financial
statements delivered to Agent prior to the Closing Date, Agent and Lenders agree
to make available a line of credit of up to Two Million Five Hundred Thousand
Dollars ($2,500,000) for financing (a) any Borrower's acquisitions of new
pharmaceutical brands ("New Trademarks") and (b) payments not yet made in
connection with any Borrower's prior acquisition of the trademarks set forth on
Exhibit B ("Old Trademarks") up to a maximum amount equal to $1,400,000,
(collectively the "Acquisition Loans"). Funding of the Acquisition Loans shall
be subject to the fulfillment of all conditions precedent to any Loan under
paragraph 15(b) hereof and specifically to any Acquisition Loan in connection
with a New Trademark under subclause 15(b)(iv) hereof. Acquisition Loans (i) may
not be reborrowed after principal repayments, (ii) shall amortize on the basis
of a forty-eight (48) month schedule and (iii) shall be payable in equal monthly
installments commencing on the first day of the month next succeeding the month
in which such Acquisition Loan is made and on the corresponding day of the month
each month thereafter with the balance payable on the expiration of the Term.
Notwithstanding anything hereinabove to the contrary, the entire unpaid
principal balance of Acquisition Loans and any accrued and unpaid interest
thereon, shall be immediately
13
due and payable upon the earlier to occur of (i)
the last day of the Term and (ii) the acceleration of the Liabilities pursuant
to paragraph 17 of this Agreement.
(a) Mandatory Prepayments. If any Borrower sells any Trademarks, or if any
Borrower sells any real property subject to a Mortgage or if any of the
Collateral is damaged, destroyed or taken by condemnation, Borrowers shall pay
to Agent, for its benefit and for the ratable benefit of Lender, unless
otherwise specifically provided herein or otherwise agreed to by Agent, as and
when received by Borrowers and as a mandatory prepayment of the Acquisition
Loans to be applied against the last maturing installments of principal thereof,
in the inverse order thereof (or, at Agent's option, such of the other
Liabilities of Borrowers as Agent may elect), a sum equal to the proceeds (net
of reasonable expenses incurred directly in connection with any such sale)
received by Borrowers from (i) such sale or (ii) such damage, destruction or
condemnation, provided, however, that without Agent's consent, unless and until
an Event of Default has occurred and is continuing:
(i) Trademarks may be sold or otherwise disposed of by Borrowers and
the proceeds thereof may be retained by Borrowers, so long as the fair
market value of any such Trademarks sold or otherwise disposed of, in the
aggregate, during any twelve-month period is less than $500,000; and
(ii) proceeds of Collateral arising from the damage, destruction or
condemnation thereof may be retained by Borrowers and used by Borrowers to
repair, restore or replace such Collateral, as the case may be, so long as
the fair market value of any such Collateral damaged, destroyed or
condemned in any single incident is less than $150,000, and the fair market
value, in the aggregate, of all such Collateral owned by Borrowers and
damaged, destroyed or condemned during any twelve-month period is less than
$300,000.
(b) Excess Cash Flow Recapture. Borrowers shall, each Fiscal Year, prepay
to Agent, for its benefit and for the ratable benefit of Lenders, the
outstanding amount of the Acquisition Loans in an amount equal to the lesser of
(i) $250,000 or (ii) twenty-five percent (25%) of Excess Cash Flow for the
immediately preceding Fiscal Year commencing with the Fiscal Year ending
December 31, 1999, payable upon delivery of the annual financial statements to
Agent referred to in and required by paragraph 11(e) for the applicable Fiscal
Year but in no event later than ninety (90) days after the end of such Fiscal
Year. Such payments shall be applied to the outstanding principal installments
on the Acquisition Loans until paid in full in the inverse order of maturities
thereof, which payments may not be reborrowed under the Acquisition Loans, and
then, to the remaining Liabilities in such order as Agent may determine subject
to Borrowers' ability to reborrow Revolving Loans in accordance with the terms
hereof. In the event that the annual financial statements referred to and
required by paragraph 11(e) are not timely delivered, then a calculation based
upon estimated amounts shall be made by Agent upon which calculation Borrowers
shall make the prepayment required by this paragraph 3(b), subject to
adjustment, as applicable, when the annual financial statements are delivered to
Agent as required hereby. The calculation made by Agent shall not be deemed a
waiver of any rights Agent or any Lender may have as a result of the failure of
Borrowers to deliver such financial statements.
14
4. LETTERS OF CREDIT. Subject to the terms and conditions of this
Agreement, and the Other Agreements, during the Term, Agent and Lenders shall,
absent the existence of an Event of Default, from time to time cause the
issuance of and co-sign for, upon Borrowing Agent's request, Letters of Credit,
provided that the aggregate undrawn amount of all such Letters of Credit shall
at no time exceed Five Hundred Thousand Dollars ($500,000), and provided further
that no Letter of Credit shall have an expiry date (i) more than 365 days from
the date of issuance or (ii) beyond five (5) days prior to the expiration of the
Term. Borrowers' reimbursement obligation in respect of the Letters of Credit
shall automatically reduce, dollar for dollar, the amount which Borrowers may
borrow based upon the Revolving Loan Commitment and the Borrowing Base. Any
payment made by Agent or any Lender to any Person on account of any Letter of
Credit shall constitute a Revolving Loan hereunder. At no time shall the
aggregate sum of direct Revolving Loans by Agent and Lenders to Borrowers plus
the contingent liability of Agent and Lenders under the outstanding Letters of
Credit be in excess of the Revolving Loan Commitment or the Borrowing Base.
5. INTEREST, FEES AND CHARGES.
(a) Rates of Interest. Interest accrued on all Loans shall be due on the
earliest of (i) the first day of each month (for the immediately preceding
month), computed through the last calendar day of the preceding month, (ii) the
occurrence of an Event of Default in consequence of which Required Lenders elect
to accelerate the maturity and payment of the Liabilities, or (iii) termination
of this Agreement pursuant to paragraph 12 hereof. Except as otherwise provided
in paragraph 5(c) hereof, interest shall accrue on: (1) the unpaid principal
balance of the Acquisition Loans made to Borrowers outstanding at the end of
each day at a fluctuating rate per annum equal to two per cent (2%) above the
Prime Rate and (2) the principal amount of the Revolving Loans made to Borrowers
outstanding at the end of each day at a fluctuating rate per annum equal to one
per cent (1%) above the Prime Rate. The rate of interest payable on the Loans
shall increase or decrease by an amount equal to any increase or decrease in the
Prime Rate, effective as of the opening of business on the day that any such
change in the Prime Rate occurs. Upon and after the occurrence of an Event of
Default, and during the continuation thereof, the principal amount of all Loans
shall bear interest on demand at a rate per annum equal to (a) with respect to
the Acquisition Loans, the rate of interest then in effect under paragraph
5(a)(1) plus two percent (2%) and (b) with respect to Revolving Loans, the rate
of interest then in effect under paragraph 5(a)(2) plus two percent (2%).
(b) Computation of Interest and Fees. Interest and collection charges
hereunder shall be calculated daily and shall be computed on the actual number
of days elapsed over a year consisting of three hundred and sixty (360) days.
For the purpose of computing interest hereunder, all items of payment received
by Agent shall be deemed applied by Agent on account of the Liabilities (subject
to final payment of such items) on the second Business Day after receipt by
Agent of good funds in Agent's account located in Chicago, Illinois.
(c) Maximum Interest. It is the intent of the parties that the rate of
interest and the other charges to Borrowers under this Agreement shall be
lawful; therefore, if for any reason the interest or other charges payable under
this Agreement are found by a court of competent jurisdiction, in a final
determination, to exceed the limit which Agent may lawfully charge Borrowers,
then the obligation to pay interest and other charges shall automatically be
reduced to
15
such limit and, if any amount in excess of such limit shall have been
paid, then such amount shall be refunded to Borrowers.
(d) Letter of Credit Fees. Borrowers shall remit to Agent a Letter of
Credit fee equal to one percent (1%) per annum on the aggregate undrawn face
amount of all outstanding Letters of Credit issued for the account of Borrowers,
which fee shall be payable monthly in arrears on each day that interest is
payable hereunder. Borrowers shall also pay on demand the normal and customary
administrative charges for issuance, amendment, negotiation, renewal or
extension of any Letter of Credit imposed by the bank issuing such Letter of
Credit. Upon the occurrence and during the continuance of an Event of Default,
all Letter of Credit fees shall be payable on demand at a rate equal to two
percent (2%) per annum on the aggregate undrawn face amount thereof.
(e) Closing Fee. Borrowers shall pay to Agent for its own account a closing
fee of Thirty Seven Thousand Five Hundred Dollars ($37,500), which shall be
fully earned, nonrefundable and due on the Closing Date.
(f) Unused Line Fee. Borrowers shall pay to Agent for the ratable benefit
of Lenders at the end of each month, in arrears, an Unused Line Fee equal to one
quarter of one percent (.25%) per annum on the daily average amount by which the
sum of $3,000,000 exceeds the outstanding principal balance of the Revolving
Loans plus the outstanding Letter of Credit Obligations; provided, however, that
if the average outstanding principal balance of the Revolving Loans plus the
outstanding Letter of Credit Obligations should at any time exceed the sum of
Three Million and 00/100 Dollars ($3,000,000) for a period of sixty (60)
consecutive days, then the Unused Line Fee shall, as of such time and at all
times thereafter, be equal to one quarter of one percent (.25%) per annum of the
daily average amount by which the Revolving Loan Commitment exceeds the
outstanding principal balance of the Revolving Loans plus the outstanding Letter
of Credit Obligations. The Unused Line Fee shall accrue from the Closing Date
until the last day of the Term.
(g) Collateral Management Fee. Borrowers shall pay to Agent for its own
account at the end of each quarter, in arrears, a collateral management fee of
$2,000 commencing on the Closing Date and each anniversary thereafter which each
such annual fee shall be deemed fully earned as of the Closing Date and every
anniversary respectively thereafter.
(h) Acquisition Line Fee. Borrowers shall pay to Agent for the ratable
benefit of Lenders on the draw down date of any Acquisition Loan an acquisition
line fee equal to one quarter of one percent (.25%) of the face amount of such
Acquisition Loan.
(i) Capital Adequacy Charge. If Agent or any Lender shall have determined
that the adoption of any law, rule or regulation regarding capital adequacy, or
any change therein or in the interpretation or application thereof, or
compliance by Agent or any Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any central bank
or governmental authority enacted after the Closing Date, does or shall have the
effect of reducing the rate of return on Agent's or any Lender's capital as a
consequence of its obligations hereunder to a level below that which Agent could
have achieved but for such adoption, change or compliance (taking into
consideration Agent's or such Lender's policies with respect to capital
16
adequacy) by a material amount, then from time to time, after submission by
Agent to Borrowers of a written demand therefor ("Capital Adequacy Demand")
together with the certificate described below, Borrowers shall pay to Agent or
such Lender such additional amount or amounts ("Capital Adequacy Charge") as
will compensate Agent or such Lender for such reduction, such Capital Adequacy
Demand to be made with reasonable promptness following such determination. A
certificate of Agent claiming entitlement to payment as set forth above shall be
conclusive in the absence of manifest error. Such certificate shall set forth
the nature of the occurrence giving rise to such reduction, the amount of the
Capital Adequacy Charge to be paid to Agent or such Lender, and the method by
which such amount was determined. In determining such amount, Agent or such
Lender may use any reasonable averaging and attribution method, applied on a
non-discriminatory basis.
6. LOAN ADMINISTRATION.
(a) Loan Requests.
(1) A request for a Revolving Loan shall be made or shall be deemed to
be made, each in the following manner: (i) Borrowing Agent shall give Agent
same day notice, no later than 12:00 p.m. (Chicago time) of such day, of
its intention to borrow, a Revolving Loan, in which notice Borrowing Agent
shall specify the amount of the proposed borrowing and the proposed
borrowing date, provided, however, that no such request may be made at a
time when there exists a Default or an Event of Default; and (ii) the
coming due of any amount required to be paid under this Agreement or any
Note, whether on account of interest or for any other Liability, shall be
deemed irrevocably to be a request for a Revolving Loan on the due date
thereof in the amount required to pay such interest or other Liability. As
an accommodation to Borrowers, Agent may permit telephone requests for
Revolving Loans and electronic transmittal of instructions, authorizations,
agreements or reports to Agent by Borrowing Agent. Unless Borrowing Agent
specifically directs Agent in writing not to accept or act upon telephonic
or electronic communications from Borrowers, neither Agent nor any Lender
shall have any liability to Borrowers for any loss or damage suffered by
Borrowers as a result of Agent's honoring of any requests, execution of any
instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and purporting to have
been sent to Agent by Borrowing Agent and Agent shall have no duty to
verify the origin of any such communication or the authority of the Person
sending it. Each notice of borrowing shall be irrevocable by and binding on
Borrowers.
(2) All requests for Acquisition Loans must be received by Agent no
later than 12:00 p.m. (Chicago time), five (5) Business Days prior to the
date on which such Acquisition Loans are required. Agent shall receive from
Borrowing Agent, a copy of the purchase agreement and copies of any other
documentation, in detail satisfactory to Agent in its sole discretion,
relating to the acquisition of New Trademarks or payment of outstanding
indebtedness with respect to Old Trademarks, as the case may be, in
connection with which the proceeds of the Acquisition Loans will be used.
The request for an Acquisition Loan shall be in writing substantially in
the form of Exhibit 6(a)(2) attached hereto which specifies: (1) the
proposed date of funding (which shall be a Business Day); (2) that no
Default or Event of Default has occurred and is continuing; and (3) payment
instructions for the funding of the Acquisition Loan.
17
(b) Disbursement. Borrowers hereby irrevocably authorize Agent to disburse
the proceeds of each Revolving Loan requested by Borrowing Agent, or deemed to
be requested by Borrowing Agent by way of direct payment of the relevant
interest or other Liability. Each borrowing of the Loans shall be advanced
according to the Commitment Percentages of the Lenders.
(c) Payment. Each payment (including each prepayment) by Borrowers on
account of the principal of and interest on the Revolving Note and Acquisition
Note shall be applied to the Revolving Loans and Acquisition Loans,
respectively, pro rata according to the Commitment Percentages of the Lenders.
Except as expressly provided herein, all payments (including prepayments) to be
made by Borrowers on account of principal, interest and fees shall be made
without set-off or counterclaim and shall be made to Agent on behalf of the
Lenders to the Payment Office, in each case on or prior to 1:00 P.M. (Chicago
time), in Dollars and in immediately available funds.
(d) (i) Notwithstanding anything to the contrary contained in Sections (b),
(c) and (d) hereof, commencing with the first Business Day following the Closing
Date, each borrowing of Revolving Loans shall be advanced by Agent and each
payment by Borrowers on account of Revolving Loans shall be applied first to
those Revolving Loans made by Agent. On or before 1:00 P.M. (Chicago time) on
each Settlement Date commencing with the first Settlement Date following the
Closing Date, Agent and Lenders shall make certain payments as follows: (I) if
the aggregate amount of new Revolving Loans made by Agent during the preceding
Week exceeds the aggregate amount of repayments applied to outstanding Revolving
Loans during such preceding Week, then each Lender shall provide Agent with
funds in an amount equal to its Commitment Percentage of the difference between
(w) such Revolving Loans and (x) such repayments and (II) if the aggregate
amount of repayments applied to outstanding Revolving Loans during such Week
exceeds the aggregate amount of new Revolving Loans made during such Week, then
Agent shall provide each Lender with its Commitment Percentage of the difference
between (y) such repayments and (z) such Revolving Loans.
(ii) Each Lender shall be entitled to earn interest at the interest rate
provided in paragraph 5(a) on outstanding Loans which it has funded.
(iii) Promptly following each Settlement Date, Agent shall submit to each
Lender a certificate with respect to payments received and Loans made during the
Week immediately preceding such Settlement Date. Such certificate of Agent shall
be conclusive in the absence of manifest error.
(e) If any Lender or Participant (a "benefited Lender") shall at any time
receive any payment of all or part of its Loans, or interest thereon, or receive
any Collateral in respect thereof (whether voluntarily or involuntarily or by
set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender's Loans,
or interest thereon, and such greater proportionate payment or receipt of
Collateral is not expressly permitted hereunder, such benefited Lender shall
purchase for cash from the other Lenders such portion of each such other
Lender's Loans, or shall provide such other Lender with the benefits of any such
Collateral, or the proceeds thereof, as shall be necessary to cause such
benefited Lender to share the excess payment or benefits of such
18
Collateral or
proceeds ratably with each of the Lenders; provided, however, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
benefited Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. Each
Lender so purchasing a portion of another Lender's Loans may exercise all rights
of payment (including, without limitation, rights of set-off) with respect to
such portion as fully as if such Lender were the direct holder of such portion.
(f) Unless Agent shall have been notified by telephone, confirmed in
writing, by any Lender that such Lender will not make the amount which would
constitute its Commitment Percentage of the Loans available to Agent, Agent may
(but shall not be obligated to) assume that such Lender shall make such amount
available to Agent and, in reliance upon such assumption, make available to
Borrowers a corresponding amount. Agent will promptly notify Borrowing Agent of
its receipt of any such notice from a Lender. If such amount is made available
to Agent on a date after a Settlement Date, such Lender shall pay to Agent on
demand an amount equal to the product of (i) the daily average federal funds
rate (computed on the basis of a year of 360 days) during such period as quoted
by Agent, times (ii) such amount, times (iii) the number of days from and
including such Settlement Date to the date on which such amount becomes
immediately available to Agent. A certificate of Agent submitted to any Lender
with respect to any amounts owing under this paragraph (g) shall be conclusive,
in the absence of manifest error. If such amount is not in fact made available
to Agent by such Lender within three (3) Business Days after such Settlement
Date, Agent shall be entitled to recover such an amount, with interest thereon
at the rate per annum then applicable to Revolving Loans hereunder, on demand
from Borrowers; provided, however, that Agent's right to such recovery shall not
prejudice or otherwise adversely affect Borrowers' rights (if any) against such
Lender.
(g) Notwithstanding anything to the contrary contained herein, in the event
any Lender (x) has refused (which refusal constitutes a breach by such Lender of
its obligations under this Agreement) to make available its Commitment
Percentage of any Loan or (y) notifies either Agent or Borrowers that it does
not intend to make available its Commitment Percentage of any Loan (if the
actual refusal would constitute a breach by such Lender of its obligations under
this Agreement) (each, a "Lender Default"), all rights and obligations hereunder
of such Lender (a "Defaulting Lender") as to which a Lender Default is in effect
and of the other parties hereto shall be modified to the extent of the express
provisions of this paragraph 6(g) while such Lender Default remains in effect.
(h) Loans shall be allocated pro rata among Lenders (the "Non-Defaulting
Lenders") which are not Defaulting Lenders in accordance with their respective
Commitment Percentages, and no Commitment Percentage of any Lender or any pro
rata share of any Loans required to be advanced by any Lender shall be increased
as a result of such Lender Default. Amounts received in respect of principal of
Loans shall be applied to reduce Loans of each Lender pro rata based on the
aggregate of the outstanding Loans of all Lenders at the time of such
application; provided, that, such amount shall not be applied to any Loans of a
Defaulting Lender at any time when, and to the extent that, the aggregate amount
of Loans of any Lender that is not a Defaulting Lender exceeds such Lender's
Commitment Percentage of all Loans then outstanding.
19
(i) A Defaulting Lender shall not be entitled to give instructions to Agent
or to approve, disapprove, consent to or vote on any matters relating to this
Agreement or the Other Agreements. All amendments, waivers and other
modifications of this Agreement and the Other Agreement may be made without
regard to a Defaulting Lender and, solely for purposes of the definition of
"Required Lenders", a Defaulting Lender shall be deemed not to be a Lender and
not to have Loans outstanding.
(j) Other than as expressly set forth in this paragraph 6(j), the rights
and obligations of a Defaulting Lender (including the obligation to indemnify
Agent) and the other parties hereto shall remain unchanged. Nothing in this
paragraph 6(j) shall be deemed to release any Defaulting Lender from its
obligations under this Agreement or the Other Agreements, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which Borrowers, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.
(k) In the event a Defaulting Lender retroactively cures, to the
satisfaction of Agent, the breach which caused such Lender to become a
Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting Lender
and shall be treated as a Lender under this Agreement.
7. GRANT OF SECURITY INTEREST TO AGENT. As security for the payment of all
Loans now or in the future made by Agent and Lenders to Borrowers hereunder and
for the payment or other satisfaction of all other Liabilities, Borrowers hereby
assign and grant to Agent, for its benefit and for the ratable benefit of
Lenders, a continuing security interest in the following property of Borrowers,
whether now or hereafter owned, existing, acquired or arising and wherever now
or hereafter located: (a) all Accounts (whether or not Eligible Accounts) and
all Goods whose sale, lease or other disposition by any Borrower has given rise
to Accounts and have been returned to or repossessed or stopped in transit by
such Borrower; (b) all Chattel Paper, Instruments, Documents and General
Intangibles (including, without limitation, all patents, patent applications,
trademarks, trademark applications, tradenames, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, tax refund
claims, claims against carriers and shippers, guarantee claims, contracts
rights, security interests, security deposits and any rights to
indemnification); (c) all Inventory (whether or not Eligible Inventory); (d) all
Goods (other than Inventory) including, without limitation, Equipment, vehicles
and fixtures; (e) all deposits and cash and any other property of Borrowers now
or hereafter in the possession, custody or control of Agent, any Lender or any
agent or any parent, affiliate or subsidiary of Agent or such Lender or any
participant with Agent or such Lender in the Loans for any purpose (whether for
safekeeping, deposit, collection, custody, pledge, transmission or otherwise);
(f) all Investment Property and (g) all additions and accessions to,
substitutions for, and replacements, products and proceeds of the foregoing
property, including, without limitation, proceeds of all insurance policies
insuring the foregoing property, and all of each Borrower's books and records
relating to any of the foregoing and to such Borrower's business.
8. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.
Borrowers shall, at Agent's request, at any time and from time to time, execute
and deliver to Agent such financing statements, documents and other agreements
and instruments (and pay the cost of filing or recording the same in all public
offices
20
deemed reasonably necessary or desirable by Agent) and do such other
acts and things as Agent may deem necessary or desirable in order to establish
and maintain a valid, attached and perfected security interest in the Collateral
in favor of Agent, for its benefit and for the ratable benefit of Lenders (free
and clear of all other liens, claims and rights of third parties whatsoever,
whether voluntarily or involuntarily created, except Permitted Liens) to secure
payment of the Liabilities, and in order to facilitate the collection of the
Collateral. Each Borrower irrevocably hereby makes, constitutes and appoints
Agent (and all Persons designated by Agent for that purpose) as such Borrower's
true and lawful attorney and agent-in-fact to execute such financing statements,
documents and other agreements and instruments and do such other acts and things
as may be necessary to preserve and perfect Agent's security interest in the
Collateral. Borrowers further agree that a carbon, photographic, photostatic or
other reproduction of this Agreement or of a financing statement shall be
sufficient as a financing statement.
9. POSSESSION OF COLLATERAL AND RELATED MATTERS. Until an Event of Default
has occurred, each Borrower shall have the right, except as otherwise provided
in this Agreement, in the ordinary course of such Borrower's business, to (a)
sell, lease or furnish under contracts of service any of such Borrower's
Inventory normally held by such Borrower for any such purpose, and (b) use and
consume any raw materials, work in process or other materials normally held by
such Borrower for such purpose, provided, however, that a sale in the ordinary
course of business shall not include any transfer or sale in satisfaction,
partial or complete, of a debt owed by such Borrower.
10. COLLECTIONS.
(a) Establishment of Lockbox and Blocked Account. Borrowers shall direct
all of their Account Debtors to make all payments on the Accounts directly to a
post office box ("Lock Box") with a financial institution acceptable to, and in
the name and under exclusive control of Agent. Borrowers shall establish an
account ("Blocked Account") in Agent's name for the benefit of Borrowers with a
financial institution acceptable to Agent, into which all payments received in
the Lock Box shall be deposited, and into which Borrowers will immediately
deposit all payments made for Inventory or services sold, leased or rendered by
Borrowers and received by Borrowers in the identical form in which such payments
were made, whether by cash or check. If Borrowers, any Affiliate or Subsidiary
of Borrowers, or any shareholder, officer, director, employee or agent of
Borrowers or any Affiliate or Subsidiary, or any other Person acting for or in
concert with Borrowers shall receive any monies, checks, notes, drafts or other
payments relating to or as proceeds of Accounts or other Collateral, Borrowers
and each such Person shall receive all such items in trust for, and as the sole
and exclusive property of, Agent, for its benefit and for the ratable benefit of
Lenders and, immediately upon receipt thereof, shall remit the same (or cause
the same to be remitted) in kind to the Blocked Account. Each financial
institution with which a Lock Box or Blocked Account is established shall
acknowledge and agree, in a manner satisfactory to Agent, for its benefit and
for the ratable benefit of Lenders, that the amounts on deposit in such Lock Box
and such Blocked Account are the sole and exclusive property of Agent, that such
financial institution has no right to setoff against such Lock Box or Blocked
Account or against any other account maintained by such financial institution
into which the contents of such Blocked Account are transferred, and that such
financial institution shall wire, or otherwise transfer in immediately available
funds in a manner satisfactory to Agent, funds deposited in the Blocked Account
on a daily basis as such funds are collected.
21
Borrowers agree that all payments
made to the Blocked Account established by Borrowers or otherwise received by
Agent, whether in respect of the Accounts of Borrowers or as proceeds of other
Collateral of Borrowers or otherwise, will be applied on account of the
Liabilities of Borrowers in accordance with the terms of this Agreement.
Borrowers agree to pay all fees, costs and expenses which Borrowers incur in
connection with opening and maintaining a Lock Box and Blocked Account. All of
such fees, costs and expenses which remain unpaid by Borrowers pursuant to any
Lock Box or Blocked Account Agreement with Borrowers, to the extent same shall
have been paid by Agent hereunder, shall constitute Revolving Loans hereunder,
shall be payable to Agent, for its benefit and for the ratable benefit of
Lenders by Borrowers upon demand, and, until paid, shall bear interest at the
highest rate then applicable to Revolving Loans hereunder. All checks, drafts,
instruments and other items of payment or proceeds of Collateral delivered to
Agent in kind shall be endorsed by Borrowers to Agent, and, if that endorsement
of any such item shall not be made for any reason, Agent is hereby irrevocably
authorized to endorse the same on Borrowers' behalf. For the purpose of this
paragraph, each Borrower irrevocably hereby makes, constitutes and appoints
Agent (and all Persons designated by Agent for that purpose) as such Borrower's
true and lawful attorney and agent-in-fact (i) to endorse such Borrower's name
upon said items of payment and/or proceeds of Collateral of such Borrower and
upon any Chattel Paper, document, instrument, invoice or similar document or
agreement relating to any Account of such Borrower or goods pertaining thereto;
(ii) to take control in any manner of any item of payment or proceeds thereof;
(iii) to have access to any lock box or postal box into which any of such
Borrower's mail is deposited; and (iv) open and process all mail addressed to
such Borrower and deposited therein, provided, however, that Agent shall not
exercise any such powers described in clauses (i), (ii) and (iv) unless and
until an Event of Default has occurred.
(b) Collection of Accounts. Agent may, at any time and from time to time
after the occurrence of an Event of Default, whether before or after
notification to any Account Debtor and whether before or after the maturity of
any of the Liabilities, (i) enforce collection of any of any Borrower's Accounts
or contract rights by suit or otherwise; (ii) exercise all of any Borrower's
rights and remedies with respect to proceedings brought to collect any Accounts;
(iii) surrender, release or exchange all or any part of any Accounts of any
Borrower, or compromise or extend or renew for any period (whether or not longer
than the original period) any indebtedness thereunder; (iv) sell or assign any
Account of any Borrower upon such terms, for such amount and at such time or
times as Agent deems advisable; (v) prepare, file and sign any Borrower's name
on any proof of claim in bankruptcy or other similar document against any
Account Debtor indebted on an Account of any Borrower; and (vi) do all other
acts and things which are necessary, in Agent's sole discretion, to fulfill any
Borrower's obligations under this Agreement and to allow Agent to collect the
Accounts. In addition to any other provision hereof, Agent may at any time on or
after the occurrence of an Event of Default, at such Borrower's expense, notify
any parties obligated on any of the Accounts of such Borrower to make payment
directly to Agent of any amounts due or to become due thereunder.
(c) Application of Proceeds. Agent shall, within two (2) Business Day after
receipt by Agent at its office in Chicago, Illinois of cash or other immediately
available funds from collections of items of payment and proceeds of any
Collateral, apply the whole or any part of such collections or proceeds against
the Liabilities in such order as Agent shall determine in its sole discretion.
22
(d) Acceptance of Assignment. In its sole credit judgment, without waiving
or releasing any obligation, liability or duty of Borrowers under this Agreement
or the Other Agreements or any Event of Default, at any time or times hereafter,
Agent may (but shall not be obligated to) pay, acquire or accept an assignment
of any security interest, lien, encumbrance or claim asserted by any Person in,
upon or against the Collateral. All sums paid by Agent in respect thereof and
all costs, fees and expenses (including without limitation reasonable attorney
fees, all court costs and all other charges relating thereto) incurred by Agent
shall constitute Revolving Loans, payable by Borrowers to Agent on demand and,
until paid, shall bear interest at the highest rate then applicable to Revolving
Loans hereunder.
(e) Delivery of Documents and Investments. Immediately upon any Borrower's
receipt of any portion of the Collateral evidenced by an agreement, Instrument
or Document including, without limitation, any Chattel Paper, such Borrower
shall deliver the original thereof to Agent together with an appropriate
endorsement or other specific evidence of assignment thereof to Agent (in form
and substance acceptable to Agent). If an endorsement or assignment of any such
items shall not be made for any reason, Agent is hereby irrevocably authorized,
as such Borrower's attorney and agent-in-fact, to endorse or assign the same on
such Borrower's behalf.
11. SCHEDULES AND REPORTS. Borrowers shall furnish or cause to be furnished
to Agent the following:
(a) Borrowers shall provide Agent with a written report reflecting the
activity of Borrowers with respect to Accounts on a daily basis and Inventory on
a monthly basis (subject to Agent, in its sole discretion, determining that such
reports be provided on a more frequent basis) for the immediately preceding day
or month, as applicable. Such reports shall be in a form and with such
specificity as is satisfactory to Agent and shall contain such additional
information as Agent may reasonably require concerning Accounts and Inventory
included, described or referred to in such daily report and any other documents
in connection therewith requested by Agent, including without limitation but
only if specifically requested by Agent, copies of all invoices prepared in
connection with such Accounts.
(b) Borrowing Agent shall provide Agent with an executed daily loan report
and certificate in Agent's then current form on each day in which Borrowing
Agent requests a Revolving Loan.
(c) As soon as practicable and in any event within forty-five (45) days
following the end of each fiscal quarter or calendar month, as applicable, (i)
statements of cash flow of Bradley and its Subsidiaries on a consolidated basis
for the period from the beginning of the then current Fiscal Year of Borrowers
to the end of such fiscal quarter, (ii) statements of income of Bradley and its
Subsidiaries on a consolidated basis as of the end of each calendar month,
notwithstanding anything to the contrary above, such monthly statements of
income for the calendar months January and February shall be delivered within
sixty (60) days following the end of each such respective months, and (iii) with
respect to such statements of income and balance sheets, in comparative form,
figures for the corresponding periods in the preceding Fiscal Year of Bradley
and its Subsidiaries, all in reasonable detail and certified by the chief
financial officer of Borrowing Agent that such statements fairly present the
financial condition of
23
Bradley and its Subsidiaries on a consolidated basis in
accordance with GAAP, subject to changes resulting from normal year-end
adjustments and the absence of footnotes, together with detailed computations of
any Borrower's compliance with the covenants set forth in this Agreement.
(d) In addition to any other reports, as soon as practicable and in any
event on the Closing Date and the days specified below, and more frequently if
requested by Agent, within fifteen (15) days after the end of each month after
the Closing Date, (i) a borrowing base certificate for such month, in form and
substance satisfactory to Agent, (ii) a detailed aged trial balance of
Borrowers' Accounts ("Accounts Trial Balance") in form and substance
satisfactory to Agent in its sole discretion, including, without limitation, the
names and addresses of all Account Debtors of Borrowers, (iii) a summary and
detail of accounts payable (such Accounts and accounts payable divided into such
time intervals as Agent may require in its sole discretion), including a listing
of any held checks, (iv) the general ledger inventory account balance (which
shall be delivered within (i) sixty (60) days after the end of each January and
February after the Closing Date and (ii) forty five (45) days after the end of
each other calendar month after the Closing Date), a perpetual inventory report
and Agent's standard form of Inventory report then in effect, for each Borrower
by each category of Inventory, together with a description of the monthly change
in each category of Inventory, in each case, for the month (or other applicable
period) immediately preceding; (v) such additional schedules, certificates,
reports and information with respect to the Collateral as Agent may from time to
time require; and (vi) an assignment of any or all items of Collateral to Agent.
Agent, through its officers, employees or agents, shall have the right, at any
time and from time to time in Agent's name, in the name of a nominee of Agent or
in any Borrower's name, to verify the validity, amount or any other matter
relating to any of such Borrower's Accounts, by mail, telephone, telegraph or
otherwise. Borrowers shall reimburse Agent, on demand, for all reasonable costs,
fees and expenses incurred by Agent in this regard. Borrowers shall immediately
notify Agent of any event causing loss or depreciation in value of any
Borrower's Inventory (other than normal depreciation occurring in the ordinary
course of business).
(e) As soon as practicable and in any event within ninety (90) days after
the end of each Fiscal Year commencing with Fiscal Year 1998 of Borrowers (i)
statements of income of Bradley and its Subsidiaries on a consolidated basis for
such Fiscal Year, and a balance sheet of Bradley and its Subsidiaries on a
consolidated basis as of the end of such Fiscal Year, and (ii) statements of
cash flow of Bradley and its Subsidiaries on a consolidated basis for such
Fiscal Year, all setting forth in comparative form, corresponding figures for
the period covered by the preceding annual audit and as of the end of the
preceding Fiscal Year, such statements to be presented in accordance with the
normal method of accounting of Bradley and its Subsidiaries for Inventory and
(if Bradley and its Subsidiaries use the LIFO method) on a pre-tax FIFO basis,
all in reasonable detail and in scope in accordance with audits performed for
Bradley and its Subsidiaries in prior years and examined and reported on by
independent certified public accountants of recognized national standing
selected by Borrowing Agent and satisfactory to Agent, whose opinion shall be
unqualified and shall be in scope in accordance with audits performed for
Bradley and its Subsidiaries in prior years, in form and substance satisfactory
to Agent.
(f) As soon as practicable and in any event not later than thirty (30) days
after the beginning of each Fiscal Year of Borrowers, (i) projected balance
sheets for Bradley and its Subsidiaries on a consolidated basis for each of the
twelve (12) months during such Fiscal Year and (ii) statements of income and
cash flow for Bradley and its Subsidiaries on a consolidated basis for each of
the four (4) quarters during such Fiscal Year, which shall include the
assumptions used therein, together with appropriate supporting details as
requested by Agent.
24
(g) As soon as practicable and in any event within ten (10) days of
delivery to any Borrower, a copy of any letter issued by such Borrower's
independent public accountants or other management consultants with respect to
such Borrower's financial or accounting systems or controls, including all
so-called "management letters".
(h) In conjunction with the delivery of the annual presentation of
projections or budgets referred to in subparagraph (f) above and the audited
financial statements referred to in subparagraph (e) above, a letter signed by
the president or a vice president of Borrowing Agent and by the treasurer or
chief financial officer of Borrowing Agent, describing, comparing and analyzing,
in detail, all changes and developments between the anticipated financial
results included in such projections or budgets and the historical financial
statements of Borrowers.
(i) As soon as practicable, copies of any and all proxy statements,
financial statements and reports which any Borrower sends to its shareholders
and holders of its Indebtedness and copies of any and all periodic special
reports as well as registration statements which such Borrower files with the
Securities and Exchange Commission.
(j) With reasonable promptness, such other business or financial data,
reports, appraisals and projections as Agent may reasonably request.
All financial statements delivered to Agent pursuant to the requirements of
this paragraph (except where otherwise expressly indicated) shall be prepared in
accordance with GAAP as provided in this Agreement. Together with each delivery
of financial statements required by subparagraphs (c) and (e) above, Borrowing
Agent shall deliver to Agent an officer's certificate stating that (1) whether
any Event of Default or Default exists, specifying the nature thereof, the
period of existence thereof and what action Borrowers propose to take with
respect thereto, (2) no condition exists which would have or could reasonably be
expected to have a Material Adverse Effect, including without limitation with
respect to environmental laws, or results of operations of Borrowers or, if any
such condition exists specifying the nature thereof and what action Borrowers
have taken or propose to take with respect thereto, (3) all insurance premiums
then due have been paid, (4) all taxes then due have been paid or, for those
taxes which have not been paid, a statement of the taxes not paid and a
description of Borrowers rationale therefor, (5) no litigation, investigation or
proceeding, or injunction, writ or restraining order is pending or threatened,
and (6) stating whether or not Borrowers are in compliance with the
representations, warranties and covenants in this Agreement, including a
calculation of financial covenants in the schedule attached to such officer's
certificate in form satisfactory to Agent. Together with each delivery of annual
financial statements required by paragraph (e) above, Borrowing Agent shall
deliver to Agent a certificate of the accountants who performed the audit in
connection with such statements stating that in making the audit necessary to
the issuance of a report on such financial statements, they have obtained no
knowledge of any Event of Default, or, if such accountants have obtained
knowledge of an Event
25
of Default, specifying the nature and period of existence
thereof.
(k) All schedules, certificates, reports and assignments and other items
delivered by Borrowing Agent to Agent hereunder shall be executed by an
authorized representative of Borrowing Agent and shall be in such form and
contain such information as Agent shall reasonably request. Borrowers shall
deliver from time to time such other schedules and reports pertaining to the
Collateral of Borrowers as Agent may reasonably request.
12. TERM.
(a) This Agreement shall be in effect from the date hereof until April 6,
2002 (the "Term") unless the due date of the Liabilities is accelerated pursuant
to paragraph 16 hereof, in which case this Agreement shall terminate on the date
thereafter that the Liabilities are paid in full, provided, however, that the
security interests and liens created under this Agreement and the Other
Agreements shall survive such termination until the date upon which payment and
satisfaction in full of the Liabilities shall have occurred. At such time as
Borrowers have repaid all of the Liabilities and this Agreement has terminated,
Borrowers shall deliver to Agent a release, in form and substance reasonably
satisfactory to Agent, of all obligations and liabilities of Agent, Lenders and
their officers, directors, employees, agents, parents, subsidiaries and
affiliates to Borrowers, and if any Borrower is obtaining new financing from
another lender, Borrowers shall deliver such lender's indemnification of Agent
and each Lender, in form and substance satisfactory to Agent, for checks which
Agent has credited to Borrowers' account, but which subsequently are dishonored
for any reason.
(b) If, for any reason, this Agreement is terminated prior to the end of
the Term including, in the sole discretion of Agent, if an effective termination
results from Borrowers prepaying all or substantially all of the Liabilities,
Borrowers agree to pay to Agent, for its benefit and for the ratable benefit of
Lenders, as a prepayment fee, in addition to the payment of all other
Liabilities owing by Borrowers, an amount equal to: (i) two percent (2.00%) of
an amount equal to the Revolving Loan Commitment plus the outstanding balance of
the Acquisition Loans if this Agreement is terminated during the first year of
the Term; (ii) one percent (1%) of an amount equal to the Revolving Loan
Commitment plus the outstanding balance of the Acquisition Loans if this
Agreement is terminated during the second year of the Term and (iii) one-half of
one percent (.50%) of an amount equal to the Revolving Loan Commitment plus the
outstanding balance of the Acquisition Loans if terminated at any time during
the third year of the Term prior to the last day of the Term. In light of the
extreme difficulty or accurately calculating actual damages arising out of any
early termination, Agent, Lenders and Borrowers have agreed that the prepayment
fee provided for above is a reasonable estimate of actual damages that would be
incurred.
13. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby makes the
following representations, warranties and covenants:
(a) (i) The balance sheets of Bradley and its Subsidiaries as of December
31, 1998 and the related statements of income, changes in stockholders equity
and changes in financial position for the period ended on such date, have been
provided in
26
accordance with GAAP, and present fairly the financial position of
Bradley and its Subsidiaries on a consolidated basis at such dates and the
results of Borrowers' operations for such period. Since the date of the
financial statements of Bradley and its Subsidiaries delivered to Agent most
recently prior to the date of this Agreement, no event or condition has occurred
which has had, or is reasonably likely to have, a Material Adverse Effect;
(ii) Borrowing Agent has furnished to Agent, (i) balance sheets, income
statements and cash flow projections of Bradley and its Subsidiaries on a
consolidated basis for the period beginning January 1, 1999 and ending December
31, 2004, and (ii) balance sheets, income statements and cash flow projections
of Bradley and its Subsidiaries on a consolidated basis reflected monthly for
the next twelve (12) months as set forth on Exhibit 13(a)(ii) attached hereto
and made a part hereof. The financial statements described in clauses (i) and
(ii) of the first sentence of this paragraph reflect, as of the Closing Date,
the reasonable estimates of Borrowers of the information projected therein,
based on the assumptions accompanying such projections.
(b) the office where such Borrower keeps its books, records and accounts
(or copies thereof) concerning the Collateral, such Borrower's principal place
of business and all of such Borrower's other places of business, locations of
Collateral and post office boxes are as set forth in Exhibit A; such Borrower
shall promptly (but in no event less than ten (10) days prior thereto) advise
Agent in writing of the proposed opening of any new place of business, the
closing of any existing place of business, any change in the location of such
Borrower's books, records and accounts (or copies thereof) or the opening or
closing of any post office box of such Borrower;
(c) the Collateral, including without limitation the Equipment (except any
part thereof which prior to the date of this Agreement such Borrower shall have
advised Agent in writing consists of Collateral normally used in more than one
state) is and shall be kept, or, in the case of vehicles, based, only at the
addresses set forth on the first page of this Agreement or on Exhibit A, and at
other locations within the continental United States of which Agent has been
advised by such Borrower in writing;
(d) such Borrower shall give thirty (30) days prior written notice to Agent
of any use of any such Goods in any state or county other than a state or county
in which such Borrower has previously advised Agent such Goods shall be used,
and such Goods shall not, unless Agent shall otherwise consent in writing, be
used outside of the continental United States and such Borrower shall execute
and deliver to Agent such financing statements, documents and other agreements
and instruments and do such other acts and things as Agent may deem necessary in
order to establish and maintain a valid, attached and perfected security
interest with respect to such Goods in favor of Agent for its benefit and for
the ratable benefit of Lenders;
(e) no security agreement, financing statement or analogous instrument
exists or shall exist with respect to any of the Collateral other than any
security agreement, financing statement or analogous instrument evidencing
Permitted Liens;
(f) each Account or item of Inventory which such Borrower shall, expressly
or by implication, request Agent to classify as an Eligible Account or as
Eligible Inventory,
27
respectively, shall, as of the time when such request is
made, conform in all respects to the requirements of such classification as set
forth in the respective definitions of Eligible Account and Eligible Inventory
and as otherwise established by Agent from time to time, and such Borrower shall
promptly notify Agent in writing if any such Eligible Account or Eligible
Inventory shall subsequently become ineligible;
(g) such Borrower is and shall at all times during the Term be the lawful
owner of all Collateral now purportedly owned or hereafter purportedly acquired
by such Borrower, free from all liens, claims, security interests and
encumbrances whatsoever, whether voluntarily or involuntarily created and
whether or not perfected, other than the Permitted Liens;
(h) such Borrower has the right and power and is duly authorized and
empowered to enter into, execute and deliver this Agreement and the Other
Agreements and perform its obligations hereunder and thereunder; such Borrower's
execution, delivery and performance of this Agreement and the Other Agreements
does not and shall not conflict with the provisions of any statute, regulation,
ordinance or rule of law, or any agreement, contract or other document which may
now or hereafter be binding on such Borrower, and such Borrower's execution,
delivery and performance of this Agreement and the Other Agreements shall not
result in the imposition of any lien or other encumbrance upon any of such
Borrower's property under any existing indenture, mortgage, deed of trust, loan
or credit agreement or other agreement or instrument by which such Borrower or
any of its property may be bound or affected;
(i) there are no actions or proceedings which are pending or, to the best
of such Borrower's knowledge, threatened against such Borrower which are
reasonably likely to have a Material Adverse Effect and such Borrower shall,
promptly upon becoming aware of any such pending or threatened action or
proceeding, give written notice thereof to Agent;
(j) such Borrower has obtained all licenses, authorizations, approvals and
permits, the lack of which would have a material adverse effect on the operation
of its business, and such Borrower is and shall remain in compliance in all
material respects with all applicable federal, state, local and foreign
statutes, orders, regulations, rules and ordinances (including, without
limitation, statutes, orders, regulations, rules and ordinances relating to
taxes, employer and employee contributions and similar items, securities,
employee retirement and welfare benefits, employee health and safety or
environmental matters), the failure to comply with which would be reasonably
likely to have a Material Adverse Effect on its business, property, assets,
operations or condition, financial or otherwise;
(k) all written information now, heretofore or hereafter furnished by such
Borrower to Agent is and shall be true and correct in all material respects as
of the date with respect to which such information was or is furnished (except
for financial projections, which have been prepared in good faith based upon
reasonable assumptions);
(l) such Borrower is not conducting, permitting or suffering to be
conducted, nor shall it conduct, permit or suffer to be conducted, any
activities pursuant to or in connection with which any of the Collateral is now,
or will (while any Liabilities remain outstanding) be owned by any Affiliate;
28
(m) other than Doak Pharmacal Co., such Borrower's name has always been as
set forth on the first page of this Agreement and such Borrower uses no
tradenames or division names in the operation of its business, except as
otherwise disclosed in Schedule 13(m); such Borrower shall notify Agent in
writing within ten (10) days of the change of its name or the use of any
tradenames or division names not previously disclosed to Agent in writing;
(n) with respect to such Borrower's Equipment: (i) such Borrower has good
and indefeasible and marketable title to and ownership of all Equipment; (ii)
such Borrower shall keep and maintain the Equipment in good operating condition
and repair and shall make all necessary replacements thereof and renewals
thereto so that the value and operating efficiency thereof shall at all times be
preserved and maintained, ordinary wear and tear excepted; (iii) such Borrower
shall not permit any such items to become a fixture to real estate or an
accession to other personal property; (iv) from time to time such Borrower may
sell, exchange or otherwise dispose of obsolete, unused or worn out Equipment,
but only to the extent provided in paragraph 3(a)(i) hereof; and (v) such
Borrower, immediately on demand by Agent, shall deliver to Agent any and all
evidence of ownership of, including, without limitation, certificates of title
and applications of title to, any of the Equipment;
(o) this Agreement and the Other Agreements to which such Borrower is a
party are the legal, valid and binding obligations of such Borrower and are
enforceable against such Borrower in accordance with their respective terms,
except to the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the rights of creditors generally;
(p) such Borrower is solvent, is able to pay its debts as they become due
and has capital sufficient to carry on its business, now owns property having a
value both at fair valuation and at present fair saleable value greater than the
amount required to pay its debts, and will not be rendered insolvent by the
execution and delivery of this Agreement or any of the Other Agreements or by
completion of the transactions contemplated hereunder or thereunder;
(q) such Borrower is not now obligated, whether directly or indirectly, for
any loans or other indebtedness for borrowed money other than (i) the
Liabilities; (ii) indebtedness disclosed to Agent on Schedule 13(q); (iii)
unsecured indebtedness to trade creditors arising in the ordinary course of such
Borrower's business; and (iv) unsecured indebtedness arising from the
endorsement of drafts and other instruments for collection, in the ordinary
course of such Borrower's business;
(r) such Borrower does not own any margin securities, and none of the
proceeds of the Loans hereunder shall be used for the purpose of purchasing or
carrying any margin securities or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase any margin securities or
for any other purpose not permitted by Regulation U of the Board of Governors of
the Federal Reserve System as in effect from time to time;
(s) except as otherwise disclosed on Schedule 13(s), such Borrower has no
Parents, Subsidiaries or divisions, nor is such Borrower engaged in any joint
venture or
29
partnership with any other Person; no Subsidiary or division of such
Borrower engages in any business, owns any assets or owes any liabilities;
(t) such Borrower is duly organized and in good standing in its state of
organization and such Borrower is duly qualified and in good standing in all
states (other than the state of Tennessee for the first fifteen (15) days
following the Closing Date) where the nature and extent of the business
transacted by it or the ownership of its assets makes such qualification
necessary, except for such other states in which the failure to so qualify would
not have a Material Adverse Effect and such Borrower has delivered to Agent true
and complete copies of its Certificate of Incorporation and By-Laws as in effect
on the Closing Date;
(u) such Borrower is not in default under any material contract, lease or
commitment to which it is a party or by which it is bound, nor does such
Borrower know of any dispute regarding any contract, lease or commitment which
is material to the continued financial success and well-being of Borrowers;
(v) there are no controversies pending or threatened between such Borrower
and any of its employees, other than employee grievances arising in the ordinary
course of business which are not, in the aggregate, material to the continued
financial success and well-being of such Borrower, and such Borrower is in
compliance in all material respects with all federal and state laws respecting
employment and employment terms, conditions and practices, except where the
failure to so comply would not have a Material Adverse Effect;
(w) such Borrower possesses, and shall continue to possess, adequate
licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, tradestyles and tradenames to continue to conduct its
business as heretofore conducted by it;
(x) such Borrower has full power, authority and legal right to enter into
this Agreement and the Other Agreements and perform all Liabilities hereunder
and thereunder; the execution, delivery and performance hereof and of the Other
Agreements are within such Borrower's powers, have been duly authorized, are not
in contravention of any law or the terms of such Borrower's certificate of
incorporation, by-laws or other applicable documents relating to such Borrower's
organization or to the conduct of such Borrower's business or of any material
agreement or undertaking to which such Borrower is a party or by which such
Borrower is bound;
(y) the proceeds of the Loans shall be used for general working capital
purposes and for the purposes stated in paragraph 3 hereof;
(z) except as set forth on Schedule 13(z), no Benefit Plan is in violation
in any material respect of any of the provisions of ERISA or any of the
qualification requirements of Section 401(a) of the IRC within the immediately
preceding five year period; no Prohibited Transaction or Reportable Event has
occurred with respect to any Benefit Plan, no Benefit Plan has been the subject
of a waiver of the minimum funding standard under Section 412 of the IRC, no
Benefit Plan has experienced an accumulated funding deficiency under Section 412
of the IRC, no lien has been imposed upon the such Borrower or any ERISA
Affiliate of such Borrower under Section 412(n) of the IRC, no Benefit Plan has
been amended in such a way that the
30
security requirements of Section 401(a)(29)
of the IRC apply; no notice of intent to terminate a Benefit Plan has been
distributed to affected parties or filed with the PBGC under Section 4041 of
ERISA, and no Benefit Plan has been terminated under Section 4041(e) of ERISA;
the PBGC has not instituted proceedings to terminate, or appoint a trustee to
administer, a Benefit Plan and no event has occurred or condition exists which
might constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Benefit Plan; neither such
Borrower nor any ERISA Affiliate of such Borrower would be liable for any amount
in the aggregate for any amount in excess of [$5,000] pursuant to Sections 4062,
4063 or 4064 of ERISA if all Benefit Plans terminated as of the most recent
valuation dates of such Benefit Plans; neither such Borrower nor any ERISA
Affiliate of such Borrower maintains any employee welfare benefit plan, as
defined in Section 3(1) of ERISA, which provides any benefits to an employee or
the employee's dependents with respect to claims incurred after the employee
separates from service other than is required by applicable law; and neither
such Borrower nor any ERISA Affiliate of such Borrower has incurred or expects
to incur any withdrawal liability to any Multiemployer Plan; and
(aa) all of such Borrower's Inventory is and shall remain in compliance in
all material respects with all applicable federal, state, local and foreign
statutes, orders, regulations, rules and ordinances including, without
limitation, all statutes, orders, regulations, rules and ordinances issued by
the United States Food and Drug Administration.
Each Borrower represents, warrants and covenants to Agent and each Lender
that all representations, warranties and covenants of such Borrower contained in
this Agreement (whether appearing in paragraphs 13 or 14 hereof or elsewhere)
shall be true at the time such Borrower's execution of this Agreement, shall
survive the execution, delivery and acceptance hereof by the parties hereto and
the closing of the transactions described herein or related hereto, shall remain
true until the repayment in full of all of the Liabilities and termination of
this Agreement, and shall be remade by such Borrower at the time each Loan is
made and each Letter of Credit is issued pursuant to this Agreement.
14. COVENANTS. Until payment or satisfaction in full of all Liabilities and
termination of this Agreement, unless Borrowers obtain Agent's prior written
consent waiving or modifying any of Borrowers' covenants hereunder in any
specific instance, each Borrower agrees as follows:
(a) such Borrower shall at all times keep accurate and complete books,
records and accounts with respect to all of such Borrower's business activities,
in accordance with sound accounting practices and generally accepted accounting
principles consistently applied, and shall keep such books, records and
accounts, and any copies thereof, only at the addresses indicated for such
purpose on Exhibit A;
(b) Agent, or any Persons designated by it, shall have the right, at any
time, in the exercise of its commercially reasonable credit judgment, to call at
such Borrower's places of business at any reasonable times, and, without
hindrance or delay, to inspect the Collateral and to inspect, audit, check and
make extracts from such Borrower's books, records, journals, orders, receipts
and any correspondence and other data relating to such Borrower's business, the
Collateral or any transactions between the parties hereto, and shall have the
right to make such
31
verification concerning such Borrower's business as Agent may
consider reasonable under the circumstances up to four (4) times per Fiscal Year
unless there shall have occurred and is continuing any Default or Event of
Default, in which case, Agent shall have unlimited access to such Borrower's
place of business. Such Borrower shall furnish to Agent such information
relevant to Agent's rights under this Agreement as Agent shall at any time and
from time to time reasonably request. Such Borrower authorizes Agent to discuss
the affairs, finances and business of such Borrower with any officers or
directors of such Borrower or any Affiliate, or with those employees of such
Borrower with whom Agent has determined in its commercially reasonable judgment
to be necessary or desirable to converse, and to discuss the financial condition
of such Borrower with such Borrower's independent public accountants. Any such
discussions shall be without liability to Agent or to such accountants. Such
Borrower shall pay to or reimburse Agent for all reasonable fees, costs, and
out-of-pocket expenses incurred by Agent in the exercise of its rights hereunder
(in addition to the fees payable by such Borrower pursuant to paragraph 5(g)
hereof in connection with Agent's examination of such Borrower's books and
records and Collateral) and all of such costs, fees and expenses shall
constitute Revolving Loans hereunder, shall be payable on demand and, until
paid, shall bear interest at the highest rate then applicable to Loans
hereunder;
(c) (i) such Borrower shall keep the Collateral properly housed and shall
keep the Collateral insured against such risks and in such amounts as are
customarily insured against by Persons engaged in businesses similar to that of
such Borrower with such companies, in such amounts and under policies in such
form as shall be reasonably satisfactory to Agent. Originals or certified copies
of such policies of insurance have been or shall be delivered to Agent on the
Closing Date, together with evidence of payment of all premiums therefor, and
shall contain an endorsement, in form and substance acceptable to Agent, showing
loss under such insurance policies payable to Agent. Such endorsement, or an
independent instrument furnished to Agent, shall provide that the insurance
company shall give Agent at least thirty (30) days written notice before any
such policy of insurance is altered or cancelled and that no act, whether
willful or negligent, or default of Borrowers or any other Person shall affect
the right of Agent to recover under such policy of insurance in case of loss or
damage. Such Borrower hereby directs all insurers under such policies of
insurance to pay all proceeds payable thereunder directly to Agent, for its
benefit and for the ratable benefit of Lenders. Such Borrower irrevocably,
makes, constitutes and appoints Agent (and all officers, employees or agents
designated by Agent) as such Borrower's true and lawful attorney (and
agent-in-fact) for the purpose of making, settling and adjusting claims under
such policies of insurance, endorsing the name of such Borrower on any check,
draft, instrument or other item of payment for the proceeds of such policies of
insurance and making all determinations and decisions with respect to such
policies of insurance, provided, however, that Agent shall exercise such rights
only upon the occurrence of an Event of Default;
(ii) such Borrower shall maintain, at its expense, such public liability
and third party property damage insurance as is customary for Persons engaged in
businesses similar to that of such Borrower with such companies and in such
amounts, with such deductibles and under policies in such form as shall be
reasonably satisfactory to Agent and originals or certified copies of such
policies have been or shall be delivered to Agent on the Closing Date, together
with evidence of payment of all premiums therefor; each such policy shall
contain an endorsement showing Agent as additional insured thereunder and
providing that the
32
insurance company shall give Agent at least thirty (30) days
written notice before any such policy shall be altered or cancelled; and
(iii) if such Borrower at any time or times hereafter shall fail to obtain
or maintain any of the policies of insurance required above or to pay any
premium in whole or in part relating thereto, then Agent, without waiving or
releasing any obligation or default by such Borrower hereunder, may (but shall
be under no obligation to) obtain and maintain such policies of insurance and
pay such premiums and take such other actions with respect thereto as Agent
deems advisable. All sums disbursed by Agent in connection with any such
actions, including, without limitation, court costs, expenses, other charges
relating thereto and reasonable attorneys' fees, shall constitute Revolving
Loans hereunder and, until paid, shall bear interest at the highest rate then
applicable to Revolving Loans hereunder;
(d) such Borrower shall not use the Collateral, or any part thereof, in any
unlawful business or for any unlawful purpose or use or maintain any of the
Collateral in any manner that does or could result in material damage to the
environment or a violation of any applicable environmental laws, rules or
regulations; such Borrower shall keep the Collateral in good condition, repair
and order, ordinary wear and tear excepted; such Borrower shall not permit the
Collateral, or any part thereof, to be levied upon under execution, attachment,
distraint or other legal process; such Borrower shall not sell, lease, grant a
security interest in or otherwise dispose of any of the Collateral except as
expressly permitted by this Agreement; and such Borrower shall not secrete or
abandon any of the Collateral, or remove or permit removal of any of the
Collateral from any of the locations listed on Exhibit A or in any written
notice to Agent pursuant to paragraph 13 hereof, except for the removal of
Inventory sold in the ordinary course of such Borrower's business as permitted
herein;
(e) all monies and other property obtained by such Borrower from Agent
pursuant to this Agreement will be used solely for the purposes set forth
herein;
(f) such Borrower shall, at the request of Agent, indicate on its records
concerning the Collateral a notation, in form satisfactory to Agent, of the
security interest of Agent hereunder, and such Borrower shall not maintain
duplicates or copies of such records at any address other than such Borrower's
principal place of business set forth on the first page of this Agreement;
provided, however, that such Borrower, in the ordinary course of its business,
may furnish copies of such records to its accountants, attorneys and other
agents or advisors as it may determine to be necessary or desirable, in the
exercise of its commercially reasonable judgment;
(g) such Borrower shall file all required tax returns and pay all of its
taxes when due, including, without limitation, taxes imposed by federal, state
or municipal agencies, and shall cause any liens for taxes to be promptly
released; provided, that such Borrower shall have the right to contest the
payment of such taxes in good faith by appropriate proceedings so long as (i)
the amount so contested is shown on such Borrower's financial statements, (ii)
the contesting of any such payment does not give rise to a lien for taxes, (iii)
upon the occurrence of an Event of Default, such Borrower keeps on deposit with
Agent (such deposit to be held without interest) an amount of money which, in
the sole judgment of Agent, is sufficient to pay such taxes and any interest or
penalties that may accrue thereon, and (iv) if such Borrower fails to prosecute
such contest with reasonable diligence, Agent may apply the money so deposited
in
33
payment of such taxes. If such Borrower fails to pay any such taxes and in
the absence of any such contest by such Borrower, Agent may (but shall be under
no obligation to) advance and pay any sums required to pay any such taxes and/or
to secure the release of any lien therefor, and any sums so advanced by Agent
shall constitute Revolving Loans hereunder, shall be payable by such Borrower to
Agent on demand, and, until paid, shall bear interest at the highest rate then
applicable to Revolving Loans hereunder;
(h) such Borrower shall not (i) incur, create, assume or suffer to exist
any indebtedness other than (A) indebtedness arising under this Agreement, (B)
unsecured indebtedness owing in the ordinary course of business to trade
suppliers, and (C) any other indebtedness described in paragraph 13(q)(ii)
hereof; or (ii) assume, guarantee or endorse, or otherwise become liable in
connection with, the obligations of any Person, except by endorsement of
instruments for deposit or collection or similar transactions in the ordinary
course of business;
(i) such Borrower shall not enter into any merger or consolidation, or
sell, lease or otherwise dispose of all or substantially all of its assets; such
Borrower shall not create any new Subsidiary or Affiliate or issue any shares
of, or warrants or other rights to receive or purchase any shares of, any class
of its stock except to the extent that such Borrower may issue shares of, or
warrants or other rights to receive or purchase shares of, any class of its
stock to (a) each of its existing shareholders on a pro rata basis and (b) to
any new shareholder; provided, however, that such issuance does not cause a
Change of Control and prior to any such issuance Borrower shall have provided
Agent with substantiation to Agent's satisfaction that no Change of Control will
occur; such Borrower shall not enter into any transaction outside the ordinary
course of such Borrower's business;
(j) such Borrower shall not (i) except as expressly permitted in this
subparagraph (j), declare or pay any dividend or other distribution (whether in
cash or in kind) on, purchase, redeem or retire any shares of any class of its
stock, or make any payment on account of, or set apart assets for the
repurchase, redemption, defeasance or retirement of, any class of its stock to
the extent that any such payment, disbursement or distribution ("Distribution")
shall exceed $500,000 in the aggregate; provided, however, that no single
Distribution in excess of $100,000 and no Distribution which would result in the
aggregate of all such Distributions exceeding $200,000 may be made if (A) after
giving effect to any such Distribution (1) Excess Availability of Borrowers is
less than Five Hundred Thousand Dollars ($500,000) or (2) the financial
projections of Bradley and its Subsidiaries on a consolidated basis do not
reflect adequate Excess Availability of Borrowers over the sixty (60) day period
following such Distribution as determined by Agent in its sole judgment or (B)
at the time of such Distribution, an Event of Default has occurred and is then
continuing; (ii) make any optional payment or prepayment on or redemption
(including without limitation by making payments to a sinking fund or analogous
fund) or repurchase of any indebtedness for borrowed money other than
indebtedness pursuant to this Agreement;
(k) such Borrower shall not make any investment in any Person, whether in
cash, securities or other property of any kind, other than direct obligations of
the United States;
34
(l) such Borrower shall not amend its organizational documents or change
its Fiscal Year;
(m) Borrowers shall not make payments exceeding $300,000 to any Affiliate
in any one Fiscal Year with respect to Borrowers' lease of the real property
located at 383 Route 46 West, Fairfield, New Jersey 07004.
(n) Borrowers shall maintain and keep in full force and effect each of the
financial covenants set forth below. The calculation and determination of each
such financial covenant, and all accounting terms contained therein, shall be so
calculated and construed in accordance with GAAP, applied on a basis consistent
with the financial statements of Borrowers on a consolidated basis delivered on
or before the Closing Date:
(i) Consolidated Tangible Net Worth. Bradley and its Subsidiaries, on
a consolidated basis, shall maintain as of the end of (A) the fiscal
quarter ending December 31, 1998 (the "base quarter") a Tangible Net Worth
of not less than negative Sixty Thousand Dollars ($-60,000) and (B) each
fiscal quarter thereafter (each a "current quarter"), a Tangible Net Worth
of not less than the sum of (1) negative Sixty Thousand Dollars ($-60,000)
and (2) an aggregate amount equal to eighty percent (80%) of the net income
after taxes of Bradley and its Subsidiaries, on a consolidated basis, for
each fiscal quarter commencing with the base quarter through and including
the then current quarter, provided, however, that such aggregate amount
shall not be reduced by the amount of any net loss before taxes of Bradley
and its Subsidiaries, on a consolidated basis, for any preceding fiscal
quarter.
(ii) Consolidated Interest Coverage Ratio. Bradley and its
Subsidiaries on a consolidated basis, shall maintain as of the end of each
fiscal quarter an Interest Coverage Ratio of not less than 2.50 to 1.00
calculated on a rolling twelve-month basis for each twelve-month period
ending on the last day of each such fiscal quarter, provided that the
applicable period being tested on the fiscal quarter ending (i) June 30,
1999 will be the six month period ending on such date and (ii) September
30, 1999 will be the nine month period ending on such date.
(iii) Consolidated Debt Service Coverage Ratio. Bradley and its
Subsidiaries, on a consolidated basis, shall maintain as of the end of each
fiscal quarter a Debt Service Coverage Ratio of not less than 1.25 to 1.00,
calculated on a rolling twelve-month basis, for each twelve-month period
ending on the last day of each such fiscal quarter, provided that the
applicable period being tested on the fiscal quarter ending (i) June 30,
1999 will be the six month period ending on such date and (ii) September
30, 1999 will be the nine month period ending on such date.
(iv) Capital Expenditures. Bradley and its Subsidiaries on a
consolidated basis shall not make Capital Expenditures of an aggregate
amount of more than One Hundred Fifty Thousand Dollars ($150,000) during
any Fiscal Year.
(v) Trademark Acquisition Expenditures. Bradley and its Subsidiaries
on a consolidated basis shall not make expenditures in connection with the
acquisition of New Trademarks of an aggregate amount of more than Three
Hundred Thousand Dollars ($300,000)
35
during any Fiscal Year; provided,
however, that no acquisition of New Trademarks may be made if (i) after
giving effect to any such acquisition of New Trademarks (A) Excess
Availability of Borrowers is less than Five Hundred Thousand Dollars
($500,000) or (B) the financial projections of Bradley and its Subsidiaries
on a consolidated basis do not reflect adequate Excess Availability of
Borrowers over the sixty (60) day period following such Distribution as
determined by Agent in its sole judgment or (ii) at the time of any such
acquisition of New Trademarks, an Event of Default has occurred and is then
continuing.
(vi) Minimum EBITDA. Bradley and its Subsidiaries, on a consolidated
basis, shall maintain EBITDA of not less than the amounts shown opposite
such fiscal quarter calculated on a rolling twelve-month basis, for each
twelve-month period ending on the last day of each such fiscal quarter,
provided that the applicable period being tested on the fiscal quarter
ending (i) June 30, 1999 will be the six month period ending on such date
and (ii) September 30, 1999 will be the nine month period ending on such
date:
Fiscal Quarter Ending Minimum EBITDA
6/30/99 $1,070,000
9/30/99 $1,300,000
12/31/99 $2,600,000
3/31/00 $3,130,000
6/30/00 $3,250,000
9/30/00 $3,400,000
12/31/00 $3,750,000
3/31/01 and as at the end of 70% of the cash flow
projections of
Bradley and its
Subsidiaries on a
each fiscal quarter
thereafter consoli-
dated basis
(o) Borrowers shall reimburse Agent for all costs and expenses including,
without limitation, legal expenses and reasonable attorneys' fees (both in-house
and outside counsel), incurred by Agent in connection with the documentation and
consummation of this transaction and any other transactions between Borrowers
and Agent, including, without limitation, UCC and other public record searches,
lien filings, Federal Express or similar express or messenger delivery,
appraisal costs, surveys, title insurance and environmental audit or review
costs, and in seeking to collect, protect or enforce any rights in or to the
Collateral or incurred by Agent in seeking to collect any Liabilities and to
administer and enforce any of Agent's rights under this Agreement. Borrowers
shall also pay all normal service charges with respect to accounts maintained by
Agent for the benefit of Borrowers. All such costs, expenses and charges shall
constitute Revolving Loans hereunder, shall be payable by Borrowers to Agent on
demand, and, until paid, shall bear interest at the highest rate then applicable
to Revolving Loans hereunder;
36
(p) Borrowers shall promptly notify Agent in writing of the occurrence of a
Default or an Event of Default; and
(q) Borrowers shall take all action necessary to assure that its computer
based systems are able to effectively process data, including dates, on and
after January 1, 2000. Borrowers shall promptly notify Agent in writing of any
Year 2000 Problem and, at the request of Agent, Borrowers shall provide the
Agent with assurance reasonably acceptable to Agent of Borrowers' year 2000
capability.
15. CONDITIONS PRECEDENT.
(a) The obligation of Agent and each Lender to fund the initial Revolving
Loan and to cause the issuance of the initial Letter of Credit on the Closing
Date, is subject to the satisfaction or waiver on or before the Closing Date of
the following conditions precedent:
(i) Agent shall have received each of the agreements, opinions,
reports, approvals, consents, certificates and other documents set forth on
the closing document list attached hereto as Schedule A (the "Closing
Document List").
(ii) Since September 30, 1998, no event shall have occurred which has
had or could reasonably be expected to have a Material Adverse Effect, as
determined by Agent in its sole discretion.
(iii) Agent shall have received payment in full of all fees and
expenses payable to it by Borrowers on or before the Closing Date.
(iv) Agent shall have determined that immediately after giving effect
to (A) the making of the initial Loans requested to be made on the Closing
Date, (B) the issuance of the initial Letter of Credit, if any, requested
to be made on the Closing Date and (C) the payment or reimbursement by
Borrowers of Agent for all closing costs and expenses incurred in
connection with the transactions contemplated hereby, on a pro forma basis
the Excess Availability of Borrowers shall not be less than Five Hundred
Thousand Dollars ($500,000), exclusive of the Financial Statements Reserve.
(v) Agent shall have received a certificate from Borrowing Agent's
chief executive officer or chief financial officer, pursuant to which such
officer shall certify that in calculating the Excess Availability described
in clause (iv) above, the outstanding trade payables of Borrowers are
current and not past due in any material respect.
(vi) The Obligors shall have executed and delivered to Agent all
documents which Agent determines are reasonably necessary to consummate the
transactions contemplated hereby.
(vii) Agent shall have received duly executed agreements, including,
without limitation, a Lockbox and Blocked Account agreement among Borrowers
and Agent, establishing the Lock Box and Blocked Accounts with financial
institutions acceptable to Agent for the collection or servicing of the
Accounts and proceeds of the Collateral.
(viii) Agent shall have completed Collateral examinations and received
appraisals, the results of which shall be satisfactory in form and
substance to the Agent, of the
37
Accounts, Inventory, General Intangibles
including, without limitation, the Trademarks, and Equipment of Borrowers
and all books and records in connection therewith.
(ix) Agent shall have received and be satisfied with the audited draft
of the financial statements of Borrowers on a consolidated basis for the
Fiscal Year ended December 31, 1998.
(x) There shall exist no default in any obligations or in compliance
with any applicable legal requirement of Borrowers (other than those
disclosed to Agent in writing on or prior to the date hereof).
(xi) Agent shall be satisfied with its due diligence review of the
business and financial affairs of Borrowers and their management and their
pre-closing audit of Borrowers.
(xii) Agent shall have received the executed legal opinion of
Greenbaum, Rowe, Smith, Ravin, Davis & Himmel LLP in form and substance
satisfactory to Agent which shall cover such matters incident to the
transactions contemplated by this Agreement, the Note, and related
agreements as Agent may reasonably require (including, without limitation,
enforceability and perfection issues) and Borrowers hereby authorizes and
directs such counsel to deliver such opinions to Agent and Lenders.
(xiii) Agent shall have received landlord, mortgagee or warehouseman
agreements satisfactory to Agent with respect to all premises leased by
Borrowers or any of its customers at which books and records, Inventory and
Equipment are located.
(xiv) Agent shall have received in form and substance satisfactory to
Agent, certified copies of Borrowers' casualty insurance policies, together
with loss payable endorsements on Agent's standard form of loss payee
endorsement naming Agent as loss payee, and certified copies of Borrowers'
liability insurance policies, together with endorsements naming Agent as a
co-insured.
(xv) Each document (including, without limitation, any UCC financing
statement) required by this Agreement, any Other Agreement or under law or
reasonably requested by the Agent to be filed, registered or recorded in
order to create, in favor of Agent, a perfected security interest in or
lien upon the Collateral shall have been properly filed, registered or
recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested, and Agent shall have
received an acknowledgment copy, or other evidence satisfactory to it, of
each such filing, registration or recordation and satisfactory evidence of
the payment of any necessary fee, tax or expense relating thereto.
(xvi) No litigation, investigation or proceeding before or by any
arbitrator or governmental body shall be continuing or threatened against
any Borrower or against the officers or directors of any Borrower (A) in
connection with this Agreement or the Other Agreements or any of the
transactions contemplated thereby and which, in the reasonable opinion of
Agent, is deemed material or (B) which if adversely determined, could, in
the reasonable opinion of Agent, have a Material Adverse Effect on
Borrowers; and no injunction, writ, restraining order or other order of any
nature materially adverse to any Borrower or the conduct of its business or
inconsistent with the due consummation of the transactions contemplated by
this Agreement or the Other Agreements shall have been issued by any
governmental body.
38
(xvii) Agent shall have received all environmental studies and reports
prepared by independent environmental engineering firms of all real
property owned or leased by Borrowers.
(xviii) Agent shall have reviewed all material contracts of each
Borrower including, without limitation, leases, purchase agreements, union
contracts, labor contracts, vendor supply contracts, license agreements and
distributorship agreements and such contracts and agreements shall be
satisfactory in all respects to Agent.
(xix) Borrowers shall be in compliance with all applicable laws and
regulations including, without limitation EPA, FIRREA, ERIS, HACCP and OSHA
rules and regulations.
(xx) No Default or Event of Default shall exist.
(xxi) All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement shall be satisfactory in form and substance
to Agent, Lenders and their counsel.
(xxii) Agent shall be satisfied with the capital structure of the
Borrowers (which shall include, among other things, a minimum Tangible Net
Worth of negative Sixty Thousand Dollars ($-60,000) after giving effect to
the Loans to be made on the Closing Date).
(xxiii) Agent shall be satisfied that the resolution reached by
Borrowers with respect to the accounts receivable which are owing and past
due from Walgreen Drug shall not result in a Material Adverse Effect on
Borrowers.
(b) After the Closing Date, the obligation of Agent or any Lender to make
any requested Loan is subject to the satisfaction of the conditions precedent
set forth below. Each such request shall constitute a representation and
warranty that such conditions are satisfied:
(i) All representations and warranties contained in this Agreement and
the Other Agreements shall be true and correct on and as of the date of
such request, as if then made, other than representations and warranties
that relate solely to an earlier date.
(ii) No Default or Event of Default shall have occurred, or would
result from the making of the requested Loan, which has not been waived.
(iii) Since the Closing Date, no event has occurred which has had or
could reasonably be expected to have a Material Adverse Effect.
(iv) In addition to the foregoing, with respect to any Acquisition
Loan in connection with a New Trademark:
(A) Agent shall have given written approval of any Borrower's
acquisition of the New Trademark;
(B) Agent shall have received evidence in form and substance
satisfactory to Agent and its counsel, including, without limitation,
intellectual property searches conducted with the United States
Trademark and Patent Office, that such Borrower is the sole and
exclusive owner of the entire and unencumbered right, title and
interest in and to the New Trademark; and
39
(C) Agent shall have received an executed Trademark Assignment of
Security with respect to the New Trademark and such other documents
and instruments as requested by Agent in order to perfect Agent's
first priority security interest in the New Trademark including,
without limitation, an amendment to the Trademark Collateral Security
Agreement dated the date hereof between Borrowers and Agent and
executed UCC financing statements, each in form and substance
satisfactory to Agent and its counsel.
16. DEFAULT. The occurrence of any one or more of the following events
shall constitute an "Event of Default" hereunder:
(a) the failure of any Obligor to pay when due, declared due, or demanded
by Agent in accordance with the terms hereof, any of the Liabilities;
(b) the failure of any Obligor to perform, keep or observe any of the
covenants, conditions, promises, agreements or obligations of such Obligor under
this Agreement or any of the Other Agreements;
(c) (i) the making or furnishing by any Obligor to Agent of any
representation, warranty, certificate, schedule, report or other communication
within or in connection with this Agreement or the Other Agreements or in
connection with any other agreement between such Obligor and Agent, which is
untrue or misleading in any respect, or (ii) the failure of any Obligor to
perform, keep or observe any of the covenants, conditions, promises, agreements
of such Obligor under any other agreement with any Person if such failure has or
is reasonably likely to have a Material Adverse Effect;
(d) the creation (whether voluntary or involuntary) of, or any attempt to
create, any lien or other encumbrance upon any of the Collateral, other than the
Permitted Liens, or the making or any attempt to make any levy, seizure or
attachment thereof;
(e) the commencement of any proceedings (i) in bankruptcy by or against any
Obligor, (ii) for the liquidation or reorganization of any Obligor, (iii)
alleging that such Obligor is insolvent or unable to pay its debts as they
mature, or (iv) for the readjustment or arrangement of any Obligor's debts,
whether under the United States Bankruptcy Code or under any other law, whether
state or federal, now or hereafter existing for the relief of debtors, or the
commencement of any analogous statutory or non-statutory proceedings involving
any Obligor; provided, however, that if such commencement of proceedings against
such Obligor is involuntary, such action shall not constitute an Event of
Default unless such proceedings are not dismissed within forty-five (45) days
after the commencement of such proceedings;
(f) the appointment of a receiver or trustee for any Obligor, for any of
the Collateral or for any substantial part of any Obligor's assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation or a partnership; provided, however, that if such appointment or
commencement of proceedings against such Obligor is involuntary, such action
shall not constitute an Event of Default unless such appointment is not revoked
or such proceedings are not dismissed within forty-five (45) days after the
commencement of such proceedings;
40
(g) the entry of any judgment or order in excess of $50,000 against any
Obligor which remains unsatisfied or undischarged and in effect for thirty (30)
days after such entry without a stay of enforcement or execution;
(h) the occurrence of an event of default under, or the revocation or
termination of, any agreement, instrument or document executed and delivered by
any Person to Agent, for its benefit and for the ratable benefit of Lenders,
pursuant to which such Person has guaranteed to Agent the payment of all or any
of the Liabilities or has granted Agent, for its benefit and for the ratable
benefit of Lenders, a security interest in or lien upon some or all of such
Person's real and/or personal property to secure the payment of all or any of
the Liabilities;
(i) the occurrence of an event of default under any other agreement or
instrument evidencing indebtedness for borrowed money executed or delivered by
any Borrower or pursuant to which agreement or instrument such Borrower or its
properties is or may be bound;
(j) the occurrence of any event or condition which has or is reasonably
likely to have a Material Adverse Effect;
(k) the occurrence of a Change of Control;
(l) if any Reportable Event shall have occurred or any Benefit Plan shall
be terminated within the meaning of Title IV of ERISA, or a trustee shall be
appointed by the appropriate United States District Court to administer any
Benefit Plan, the PBGC shall institute proceedings to terminate any Benefit
Plan, or there shall be a withdrawal from any Multiemployer Plan, and there
shall be a Material Adverse Effect in the case of any event described in this
paragraph 16(l); or
(m) the occurrence of any event specified in any Borrower's certificate of
incorporation or by-laws that may result in such Borrower's dissolution or
liquidation or such Borrower shall file a certificate of dissolution or shall be
liquidated, dissolved or wound-up or shall commence or have commenced against it
any action or proceeding for dissolution, winding up or liquidation.
Notwithstanding anything contained in this paragraph 16 or contained in any
other provision of this Agreement or the Other Agreements to the contrary, in
the event of the institution of any proceeding described in paragraph 16(e)
hereof against Borrowers, Agent and Lenders shall not be obligated to make
advances to Borrowers during the thirty (30) day grace period provided in
paragraph 16(e).
17. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in paragraph 16(e)
hereof, all of the Liabilities shall immediately and automatically become due
and payable, without notice of any kind. Upon the occurrence of any other Event
of Default, all of the Liabilities may, at the option of Required Lenders, and
without demand, notice or legal process of any kind, be declared, and
immediately shall become, due and payable.
41
(b) Upon the occurrence of an Event of Default, Agent may exercise from
time to time any rights and remedies available to it under UCC any other
applicable law in addition to, and not in lieu of, any rights and remedies
expressly granted in this Agreement or in any of the Other Agreements and all of
Agent's rights and remedies shall be cumulative and non-exclusive to the extent
permitted by law. In particular, but not by way of limitation of the foregoing,
Agent may, without notice, demand or legal process of any kind, take possession
of any or all of the Collateral (in addition to Collateral of which it already
has possession), wherever it may be found, and for that purpose may pursue the
same wherever it may be found, and may enter into any of Borrowers' premises
where any of the Collateral may be, and search for, take possession of, remove,
keep and store any of the Collateral until the same shall be sold or otherwise
disposed of, and Agent shall have the right to store the same at any of
Borrowers' premises without cost to Agent. At Agent's request, Borrowers shall,
at Borrowers' expense, assemble the Collateral and make it available to Agent at
one or more places to be designated by Agent and reasonably convenient to Agent
and Borrowers. Borrowers recognize that if Borrowers fail to perform, observe or
discharge any of its Liabilities under this Agreement or the Other Agreements,
no remedy at law will provide adequate relief to Agent or Lenders, and Borrowers
agree that Agent or Lenders shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages. Any notification of intended disposition of any of the Collateral
required by law will be deemed reasonably and properly given if given at least
ten (10) calendar days before such disposition. Any proceeds of any disposition
by Agent of any of the Collateral may be applied by Agent to the payment of
expenses in connection with the Collateral including, without limitation, legal
expenses and reasonable attorneys' fees (both in-house and outside counsel) and
any balance of such proceeds may be applied by Agent toward the payment of such
of the Liabilities, and in such order of application, as Agent may from time to
time elect.
18. INDEMNIFICATION. Each Borrower agrees to defend (with counsel
reasonably satisfactory to Agent), protect, indemnify and hold harmless Agent
and each Lender, each affiliate or subsidiary of Agent or such Lender, and each
of their respective officers, directors, employees, attorneys and agents (each
an "Indemnified Party") from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature (including, without limitation, the
disbursements and the reasonable fees of counsel for each Indemnified Party in
connection with any investigative, administrative or judicial proceeding,
whether or not the Indemnified Party shall be designated a party thereto), which
may be imposed on, incurred by, or asserted against, any Indemnified Party
(whether direct, indirect or consequential and whether based on any federal,
state or local laws or regulations including, without limitation, securities,
environmental and commercial laws and regulations, under common law or in
equity, or based on contract or otherwise) in any manner relating to or arising
out of this Agreement or any Other Agreement, or any act, event or transaction
related or attendant thereto, the making and the management of the Loans or any
letters of credit or the use or intended use of the proceeds of the Loans or any
letters of credit; provided, however, that such Borrower shall not have any
obligation hereunder to any Indemnified Party with respect to matters caused by
or resulting from the willful misconduct or gross negligence of such Indemnified
Party. To the extent that the undertaking to indemnify set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, Borrowers shall satisfy such undertaking to the maximum extent
permitted by applicable law. Any liability, obligation, loss, damage, penalty,
cost or expense covered by
42
this indemnity shall be paid to each Indemnified
Party on demand, and, failing prompt payment, shall, together with interest
thereon at the highest rate then applicable to Revolving Loans hereunder from
the date incurred by each Indemnified Party until paid by Borrowers, be added to
the Liabilities of Borrowers and be secured by the Collateral. The provisions of
this paragraph 18 shall survive the satisfaction and payment of the other
Liabilities and the termination of this Agreement.
19. BORROWING AGENCY PROVISIONS.
(a) Each Borrower hereby irrevocably designates Borrowing Agent to be its
attorney and agent and in such capacity to borrow, sign and endorse notes, and
execute and deliver all instruments, documents, writings and further assurances
now or hereafter required hereunder, on behalf of such Borrower or Borrowers,
and hereby authorizes Agent and Lenders to pay over or credit all loan proceeds
hereunder in accordance with the request of Borrowing Agent.
(b) The handling of this credit facility as a co-borrowing facility with a
borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to Borrowers and at their request. Agent and Lender shall not
incur liability to Borrowers as a result thereof. To induce Agent and Lenders to
do so and in consideration thereof, each Borrower hereby indemnifies Agent and
each Lender and holds Agent and each Lender harmless from and against any and
all liabilities, expenses, losses, damages and claims of damage or injury
asserted against Agent or any Lender by any Person arising from or incurred by
reason of the handling of the financing arrangements of Borrowers as provided
herein, reliance by Agent and Lenders on any request or instruction from
Borrowing Agent or any other action taken by Agent and Lenders with respect to
this paragraph 19 except due to willful misconduct or gross (not mere)
negligence by the indemnified party.
(c) All Liabilities shall be joint and several, and each Borrower shall
make payment upon the maturity of the Liabilities, by acceleration or otherwise,
and such obligation and liability on the part of each Borrower shall in no way
be affected by any extensions, renewals and forbearance granted to Agent and
Lenders to any Borrower, failure of Agent or any Lender to give any Borrower
notice of borrowing or any other notice, any failure of Agent or any Lender to
pursue or preserve its rights against any Borrower, the release by Agent or any
Lender of any Collateral now or thereafter acquired from any Borrower, and such
agreement by each Borrower to pay upon any notice issued pursuant thereto is
unconditional and unaffected by prior recourse by Agent and Lenders to the other
Borrower or any Collateral for such Borrower's Liabilities or the lack thereof.
(d) Waiver of Subrogation. Each Borrower expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution of
any other claim which such Borrower may now or hereafter have against the other
Borrower or other Person directly or contingently liable for the Liabilities
hereunder, or against or with respect to the other Borrower's property
(including, without limitation, any property which is Collateral for the
43
Liabilities), arising from the existence or performance of this Agreement, until
all Liabilities have been paid in full and the irrevocable termination of this
Agreement.
20. REGARDING AGENT.
(a) Appointment. Each Lender hereby designates LaSalle to act as Agent for
such Lender under this Agreement and the Other Agreements. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Agreements and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in
subparagraphs 5(e), and 5(g)), charges and collections (without giving effect to
any collection days) received pursuant to this Agreement, for the ratable
benefit of Lenders. Agent may perform any of its duties hereunder by or through
its agents or employees. As to any matters not expressly provided for by this
Agreement, Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding; provided, however,
that Agent shall not be required to take any action which exposes Agent to
liability or which is contrary to this Agreement or the Other Agreements or
applicable law unless Agent is furnished with an indemnification reasonably
satisfactory to Agent with respect thereto.
(b) Nature of Duties. Agent shall have no duties or responsibilities except
those expressly set forth in this Agreement and the Other Agreements. Neither
Agent nor any of its officers, directors, employees or agents shall be (i)
liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by Borrowers or any officer
thereof contained in this Agreement, or in any Other Agreement or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any Other
Agreement or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement, or any Other Agreement or for any failure of
Borrowers to perform their obligation hereunder. Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any Other Agreement, or to inspect the properties, books or records
of Borrowers. The duties of Agent as respects the Loans to Borrowers shall be
mechanical and administrative in nature; Agent shall not have by reason of this
Agreement a fiduciary relationship in respect of any Lender; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon Agent any obligations in respect of this Agreement except as
expressly set forth herein.
(c) Lack of Reliance on Agent and Resignation.
(i) Independently and without reliance upon Agent or any other Lender,
each Lender has made and shall continue to make (A) its own independent
investigation of the financial condition and affairs of Borrowers in
connection with the making and the
44
continuance of the Loans hereunder and
the taking or not taking of any action in connection herewith, and (B) its
own appraisal of the creditworthiness of Borrowers. Agent shall have no
duty or responsibility, either initially or on a continuing basis, to
provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before making of the Loans or
at any time or times thereafter except as shall be provided by Borrowers
pursuant to the terms hereof. Agent shall not be responsible to any Lender
for any recitals, statements, information, representations or warranties
herein or in any agreement, document, certificate or a statement delivered
in connection with or for the execution, effectiveness, genuineness,
validity, enforceability, collectability or sufficiency of this Agreement
or any Other Agreement, or of the financial condition of Borrowers, or be
required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement,
the Notes, the Other Agreements or the financial condition of Borrowers, or
the existence of any Event of Default or any Default.
(ii) Agent may resign on sixty (60) days' written notice to each of
Lenders and Borrowers and upon such resignation, the Required Lenders will
promptly designate a successor Agent reasonably satisfactory to Borrowers.
(iii) Any such successor Agent shall succeed to the rights, powers and
duties of Agent, and the term "Agent" shall mean such successor agent
effective upon its appointment, and the former Agent's rights, powers and
duties as Agent shall be terminated, without any other or further act or
deed on the part of such former Agent. After any Agent's resignation as
Agent, the provisions of this paragraph 18, shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent under
this Agreement.
(d) Certain Rights of Agent. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Agreement, Agent shall be entitled
to refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
45
(e) Reliance. Agent shall be entitled to rely, and shall be fully protected
in relying, upon any note, writing, resolution, notice, statement, certificate,
telex, teletype or telecopier message, cablegram, order or other document or
telephone message believed by it to be genuine and correct and to have been
signed, sent or made by the proper person or entity, and, with respect to all
legal matters pertaining to this Agreement and the Other Agreements and its
duties hereunder, upon advice of counsel selected by it. Agent may employ agents
and attorneys-in-fact and shall not be liable for the default or misconduct of
any such agents or attorneys-in-fact selected by Agent with reasonable care. (f)
Notice of Default. Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder or under the Other
Agreements, unless Agent has received notice from a Lender or Borrowers
referring to this Agreement or the Other Agreements, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that Agent receives such a notice, Agent shall give notice thereof to
Lenders. Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Lenders; provided, that,
unless and until Agent shall have received such directions, Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of Lenders.
(g) Indemnification. To the extent Agent is not reimbursed and indemnified
by Borrowers, each Lender will reimburse and indemnify Agent in proportion to
its respective portion of the Loans (or, if no Loans are outstanding, according
to its Commitment Percentage), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against Agent in performing its duties hereunder, or
in any way relating to or arising out of this Agreement or any Other Agreement;
provided that, Lenders shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from Agent's gross (not mere) negligence or
willful misconduct.
(h) Agent in its Individual Capacity. With respect to the obligation of
Agent to lend under this Agreement, the Loans made by it shall have the same
rights and powers hereunder as any other Lender and as if it were not performing
the duties as Agent specified herein; and the term "Lender" or any similar term
shall, unless the context clearly otherwise indicates, include Agent in its
individual capacity as a Lender. Agent may engage in business with Borrowers as
if it were not performing the duties specified herein, and may accept fees and
other consideration from Borrowers for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.
(i) Delivery of Documents. To the extent Agent receives documents and
information from Borrowers pursuant to the terms of this Agreement, Agent will
promptly furnish such documents and information to Lenders.
(j) Borrowers' Undertaking to Agent. Without prejudice to their respective
obligations to the Lenders under the other provisions of this Agreement,
Borrowers hereby undertake with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or the Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy Borrowers' obligations to make payments for the account of the Lenders
or the relevant one or more of them pursuant to this Agreement.
21. NOTICES. All written notices and other written communications with
respect to this Agreement shall be sent by ordinary, certified or overnight
mail, by telecopy or delivered in person, and in the case of Agent shall be sent
to it at LaSalle Business Credit, Inc., 477 Madison Avenue, New York, New York
10022, Attention: District Credit Manager, and in the case of Borrowers shall be
sent to Borrowing Agent at its principal place of business as set forth on the
first page of this Agreement, and in the case of any Lender shall be sent to
such Lender at its address set forth on the signature page hereto or in a
Commitment Transfer Supplement or at such other address as may be designated by
any party from time to time in a notice complying as to delivery with the terms
of this paragraph to the other parties. Any notice, if mailed and
46
properly
addressed with postage prepaid, shall be deemed given when received; any notice,
if transmitted by telecopy, shall be deemed given when transmitted, provided
receipt is confirmed.
22. CHOICE OF GOVERNING LAW AND CONSTRUCTION. This Agreement and the Other
Agreements are submitted by Borrowers to Agent for Agent's and acceptance or
rejection at Agent's principal place of business as an offer by Borrowers to
borrow monies from Agent and Lenders now and from time to time hereafter, and
shall not be binding upon Agent or any Lender or become effective until accepted
by Agent on behalf of Lenders, in writing, at said place of business. If so
accepted by Agent on behalf of Lenders, this Agreement and the Other Agreements
shall be deemed to have been made at said place of business. THIS AGREEMENT AND
THE OTHER AGREEMENTS SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF
THE STATE OF ILLINOIS AS TO INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION,
EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING, WITHOUT LIMITATION, THE LEGALITY
OF THE INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY
INTERESTS IN THE COLLATERAL, WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS
OF THE RELEVANT JURISDICTION. If any provision of this Agreement shall be held
to be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or remaining provisions of this
Agreement.
23. FORUM SELECTION AND SERVICE OF PROCESS. To induce Agent on behalf of
Lenders to accept this Agreement, each Borrower irrevocably agrees that, subject
to Agent's sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY,
MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE
OTHER AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS
WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. EACH BORROWER HEREBY CONSENTS AND
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN
SAID CITY AND STATE. Each Borrower hereby irrevocably appoints and designates
the Secretary of State of Illinois, whose address is Springfield, Illinois (or
any other person having and maintaining a place of business in such state whom
such Borrower may from time to time hereafter designate upon ten (10) days
written notice to Agent and who Agent has agreed in writing in its sole
discretion is satisfactory and who has executed an agreement in form and
substance satisfactory to Agent agreeing to act as such attorney and agent), as
such Borrower's true and lawful attorney and duly authorized agent for
acceptance of service of legal process. Each Borrower agrees that service of
such process upon such person shall constitute personal service of such process
upon such Borrower. EACH BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST SUCH BORROWER BY
AGENT OR ANY LENDER IN ACCORDANCE WITH THIS PARAGRAPH.
24. MODIFICATION AND BENEFIT OF AGREEMENT.
(a) This Agreement and the Other Agreements may not be modified, altered or
amended except by an agreement in writing signed by Borrowers, Agent and
Required
47
Lenders as provided in paragraph (b) below. No Borrower may sell,
assign or transfer this Agreement, or the Other Agreements or any portion
thereof including, without limitation, such Borrower's rights, titles, interest,
remedies, powers or duties thereunder.
(b) The Required Lenders, Agent with the consent in writing of the Required
Lenders, and Borrowers may, subject to the provisions of this paragraph 24(b),
from time to time enter into written supplemental agreements to this Agreement,
the Notes or the Other Agreements executed by Borrowers, for the purpose of
adding or deleting any provisions or otherwise changing, varying or waiving in
any manner the rights of Lenders, Agent or Borrowers thereunder or the
conditions, provisions or terms thereof of waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall, without the
consent of all the Lenders:
(i) increase the Commitment Percentage of any Lender.
(ii) extend the maturity of any Note or the due date for any amount
payable hereunder, or decrease the rate of interest or reduce any fee
payable by Borrowers to Lenders pursuant to this Agreement.
(iii) alter the definition of the term Required Lenders or alter,
amend or modify this paragraph 24(b).
(iv) release any Collateral during any calendar year having an
aggregate value in excess of $50,000.
(v) change the rights and duties of Agent.
Any such supplemental agreement shall apply equally to each of the Lenders and
shall be binding upon Borrowers, the Lenders and Agent and all future holders of
the Liabilities. In the case of any waiver, Borrowers, Agent and Lenders shall
be restored to their former positions and rights, and any Event of Default
waived shall be deemed to be cured and not continuing, but no waiver of a
specific Event of Default shall extend to any subsequent Event of Default
(whether or not the subsequent Event of Default is the same as the Event of
Default which was waived), or impair any right consequent thereon.
25. PARTICIPATIONS AND ASSIGNMENT.
(a) Borrowers acknowledge that in the regular course of commercial banking
business one or more Lenders may at any time and from time to time sell
participating interests in the Loans to other financial institutions (each such
transferee or purchaser of a participating interest, a "Transferee"). Each
Transferee may exercise all rights of payment (including without limitation
rights of set-off) with respect to the portion of such Loans held by it or other
Liabilities payable hereunder as fully as if such Transferee were the direct
holder thereof provided that Borrowers shall not be required to pay to any
Transferee more than the amount which it would have been required to pay to the
Lender which granted an interest in its Loans or other Liabilities payable
hereunder to such Transferee had such Lender retained such interest in the Loans
hereunder or other Liabilities payable hereunder and in no event shall Borrowers
be required to pay any such amount arising from the same circumstances and with
respect to the same Loans or other Liabilities payable hereunder to both such
Lender and such Transferee. Borrowers hereby grant to any Transferee a
continuing security interest in any deposits, moneys
48
or other property actually
or constructively held by such Transferee as security for the Transferee's
interest in the Loans.
(b) Any Lender may with the consent of Agent which shall not be
unreasonably withheld or delayed sell, assign or transfer all or any part of its
rights under this Agreement and the Other Agreements to one or more additional
banks or financial institutions and one or more additional banks or financial
institutions may commit to make Loans hereunder (each a "Purchasing Lender"), in
minimum amounts of not less than $2,000,000, pursuant to a Commitment Transfer
Supplement, executed by a Purchasing Lender, the transferor Lender, and Agent
and delivered to Agent for recording. Upon such execution, delivery, acceptance
and recording, from and after the transfer effective date determined pursuant to
such Commitment Transfer Supplement, (i) a Purchasing Lender thereunder shall be
a party hereto and, to the extent provided in such Commitment Transfer
Supplement, have the rights and obligations of a Lender hereunder with a
Commitment Percentage as set forth therein, and (ii) the transferor Lender
thereunder shall, to the extent provided in such Commitment Transfer Supplement,
be released from its obligations under this Agreement, the Commitment Transfer
Supplement creating a novation for that purpose. Such Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of the Commitment Percentages arising from the purchase by
such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Agreements. Borrowers
hereby consent to the addition of such Purchasing Lender and the resulting
adjustment of the Commitment Percentages arising from the purchase by such
Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this er such further documents and do such further acts
and things in order to effectuate the foregoing.
(c) Agent shall maintain at its address a copy of each Commitment Transfer
Supplement delivered to it and a register (the "Register") for the recordation
of the names and addresses of the Loans owing to each Lender from time to time.
The entries in the Register shall be conclusive, in the absence of manifest
error, and Borrowers, Agent and Lenders may treat each Person whose name is
recorded in the Register as the owner of the Loans recorded therein for the
purposes of this Agreement. The Register shall be available for inspection by
Borrowers or any Lender at any reasonable time and from time to time upon
reasonable prior notice. Agent shall receive a fee in the amount of $25,000
payable by the Purchasing Lender upon the transfer or assignment to such
Purchasing Lender.
(d) Borrowers authorize each Lender to disclose to any Transferee or
Purchasing Lender and any prospective Transferee or Purchasing Lender any and
all financial information in such Lender's possession concerning Borrowers which
has been delivered to such Lender by or on behalf of Borrowers pursuant to this
Agreement or in connection with such Lender's credit evaluation of Borrowers.
26. HEADINGS OF SUBDIVISIONS. The headings of subdivisions in this
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Agreement.
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27. POWER OF ATTORNEY. Each Borrower acknowledges and agrees that its
appointment of Agent as its attorney-in-fact and agent for the purposes
specified in this Agreement is an appointment coupled with an interest and shall
be irrevocable until all of the Liabilities are paid in full and this Agreement
is terminated.
28. WAIVER OF JURY TRIAL; OTHER WAIVERS; CONFIDENTIALITY.
(a) AGENT, EACH LENDER AND EACH BORROWER HEREBY WAIVE ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO
THIS AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL,
ANY ALLEGED TORTIOUS CONDUCT OF BORROWERS, AGENT OR LENDERS OR WHICH, IN ANY
WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP AMONG
BORROWERS, AGENT AND/OR LENDERS IN NO EVENT SHALL AGENT OR ANY LENDER BE LIABLE
FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
(b) EACH BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY
KIND PRIOR TO THE EXERCISE BY AGENT OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF
BORROWERS WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.
(c) Each Borrower hereby waives demand, presentment, protest and notice of
nonpayment, and further waives the benefit of all valuation, appraisal and
exemption laws.
(d) Agent's or any Lender's failure, at any time or times hereafter, to
require strict performance by any Borrower of any provision of this Agreement or
any of the Other Agreements shall not waive, affect or diminish any right of
Agent or any Lender, thereafter to demand strict compliance and performance
therewith. Any suspension or waiver by Agent or any Lender, of an Event of
Default under this Agreement or any default under any of the Other Agreements
shall not suspend, waive or affect any other Event of Default under this
Agreement or any other default under any of the Other Agreements, whether the
same is prior or subsequent thereto and whether of the same or of a different
kind or character. No delay on the part of Agent or any Lender in the exercise
of any right or remedy under this Agreement or any Other Agreement shall
preclude other or further exercise thereof or the exercise of any right or
remedy. None of the undertakings, agreements, warranties, covenants and
representations of any Borrower contained in this Agreement or any of the Other
Agreements and no Event of Default under this Agreement or default under any of
the Other Agreements shall be deemed to have been suspended or waived by Agent
or any Lender unless such suspension or waiver is in writing in compliance with
Paragraph 24(b) hereof.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the 7th day of April, 1999.
LASALLE BUSINESS CREDIT, INC.,
as a Lender and as Agent
Commitment Percentage: 100%
By: /s/ Mary Ellen Nixon-Moore
Name: Mary Ellen Nixon-Moore
Title: Vice President
BRADLEY PHARMACEUTICALS, INC.
By: /s/ Daniel Glassman
Name: Daniel Glassman
Title: Chairman & CEO
DOAK DERMATOLOGICS, INC.
By: /s/ Daniel Glassman
Name: Daniel Glassman
Title: Chairman & CEO
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