Exhibit 10.4
------------
LOAN AND SECURITY AGREEMENT
among
X.X. XXXXX DRUG COMPANY,
as a Borrower
GENERAL DRUG COMPANY,
as a Borrower
SBS PHARMACEUTICALS, INC.,
as a Borrower
and
XXXXX XXXXXXXX COMPANY, INC.,
as a Borrower
and
LASALLE BUSINESS CREDIT, INC.,
as a Lender and Agent
XXXXXX FINANCIAL, INC.,
as a Lender
and
AMERICAN NATIONAL BANK & TRUST COMPANY OF CHICAGO,
as a Lender
Dated: October 3, 1997
TABLE OF CONTENTS
Page
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DEFINITIONS............................................................. 1
LOANS...................................................................13
FEES AND CHARGES........................................................15
GRANT OF SECURITY INTEREST TO LASALLE...................................15
PRESERVATION OF COLLATERAL AND PERFECTION OF
SECURITY INTERESTS THEREIN.........................................16
POSSESSION OF COLLATERAL AND RELATED MATTERS............................16
COLLECTIONS.............................................................17
SCHEDULES AND REPORTS...................................................19
TERMINATION.............................................................21
REPRESENTATIONS, WARRANTIES AND COVENANTS...............................21
ADDITIONAL COVENANTS OF BORROWERS.......................................27
DEFAULT.................................................................33
REMEDIES UPON AN EVENT OF DEFAULT.......................................35
INDEMNIFICATION.........................................................36
NOTICE..................................................................36
CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION..................37
INTENTIONALLY OMITTED...................................................38
HEADINGS OF SUBDIVISIONS................................................38
POWER OF ATTORNEY.......................................................38
WAIVER..................................................................38
INCOME TAXATION.........................................................39
Exhibit A - Special Provisions
Exhibit B - Business and Collateral Locations
Exhibit C - Letter of Credit (None)
Exhibit D - Assignment and Acceptance
Exhibit E - Officer's Certificate
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") made this 3rd day of
October, 1997 by and among LASALLE BUSINESS CREDIT, INC., a Delaware corporation
(in its individual capacity, ("LaSalle"), with an office at 000 Xxxxx XxXxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, for itself, as a Lender, and as Agent for all
Lenders that are now or hereafter parties to this Agreement, XXXXXX FINANCIAL,
INC., a Delaware corporation (in its individual capacity, "Xxxxxx"), with an
office at 000 Xxxx Xxxxxx Xxxxxx Xxxxxxx, Xxxxxxxx 00000, as a Lender, AMERICAN
NATIONAL BANK & TRUST COMPANY OF CHICAGO, a national banking association (in its
individual capacity, "ANB"), with an office at Xxx Xxxxx XxXxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxx 00000, as a Lender, X.X. XXXXX DRUG COMPANY, a Missouri
corporation ("CDS"), with its chief executive offices and principal place of
business at 0000 Xxxxx 00xx Xxxxxxx, Xx. Xxxxxx, Xxxxxxxx 00000, as a Borrower,
GENERAL DRUG COMPANY, an Illinois corporation ("GDC"), with an office at 000
Xxxxx Xxxxxxxxx, Xxxxxxx, Xxxxxxxx 00000, as a Borrower, SBS PHARMACEUTICALS,
INC., a Delaware corporation ("SBS"), with an office at 000 Xxxxx Xxxxxxxxx,
Xxxxxxx, Xxxxxxxx 00000, as a Borrower, and XXXXX XXXXXXXX COMPANY, INC., a
Delaware corporation ("JBC"), with an office at 000 Xxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, as a Borrower.
WITNESSETH:
WHEREAS, Borrowers may, from time to time, request Loans (as defined
herein) from Lenders, and the parties wish to provide for the terms and
conditions upon which such Loans, if made by Lenders, shall be made;
NOW, THEREFORE, in consideration of any Loan (including any Loan by renewal
or extension) heretofore or hereafter made to Borrowers by 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) "Account," "Account Debtor," "Chattel Paper," "Documents,"
"Equipment," "General Intangibles," "Goods," "Instruments," and "Inventory,"
shall have the respective meanings assigned to such terms, as of the date of
this Agreement, in the Illinois Uniform Commercial Code.
(b) "Acquisition" shall mean the acquisition of all of the issued and
outstanding partnership interests of Xxxxxx Investor Group L.P. and the capital
stock of G.D. Holdings of Delaware, Inc. by CDS pursuant to the Acquisition
Agreement.
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(c) "Acquisition Agreement" shall mean the Acquisition Agreement by and
among CDS, G.D. Holdings of Delaware, Inc., Xxxxxx Investor Group L.P. and
certain partners of Xxxxxx Investor Group L.P. dated as of September 11, 1997.
(d) "Additional Payment Period" shall mean as to any Indemnitee, the period
from the earliest date as of which more than fifty percent (50%) of the interest
on such Indemnitee's ESOP Term Note is included in such Indemnitee's Federal
Gross Income as a result of one or more Gross-Up Events or, in the event that a
Gross-Up Event occurs as a result of a change in the Code, the effective date of
such change, until payment in full of such Indemnitee's ESOP Term Note, together
with accrued interest thereon.
(e) "Affiliate" shall mean any Person directly or indirectly controlling,
controlled by or under common control with a Borrower.
(f) "Agent" shall mean LaSalle or its successor appointed pursuant to
Paragraph 18 of Exhibit A, acting in its capacity as agent for, and on behalf of
all Lenders.
(g) "Benefit Plan" shall mean any "employee benefit plan", as defined in
Section 3(3) of ERISA, which a Borrower or any of its Subsidiaries maintains,
contributes to or has an obligation to contribute to on behalf of participants
who are or were employed by any of them, or with respect to which a Borrower or
any Subsidiary may incur any liability.
(h) "Blocked Account" shall have the meaning specified in Paragraph 7
hereof.
(i) "Business Day" shall mean any day other than a Saturday, a Sunday or
(i) with respect to all notices, determinations, fundings and payments in
connection with LIBOR Rate Loans, any date that banks in London or Chicago are
required or permitted to close, and (ii) with respect to all other matters, any
day that banks in the Chicago area are required or permitted to close.
(j) "Capital Expenditures" shall mean, with respect to any period, the
aggregate of all expenditures (whether paid in cash or accrued as liabilities
and including expenditures for capitalized lease obligations) by Borrowers
during such period that are required by generally accepted accounting principles
to be included in or reflected by property, plant or equipment or similar fixed
asset accounts in the consolidated balance sheet of CDS.
(k) "Change of Law" shall mean with respect to any Indemnitee, any
amendment to the Code or other statute enacted by the Congress of the United
States of America, or any temporary, proposed or final regulation promulgated by
the Treasury Department which, in the opinion of counsel for such Indemnitee,
(i) reduces any Tax Allowance allowable to, or (ii) imposes any federal tax
(including, but not limited to, preference or excise taxes) upon, extends any
such tax to or otherwise increases the liability for any such tax of the
Indemnitee by reason of owning, acquiring or disposing of obligations
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the interest on which is partially exempt from federal income taxation under
Section 133 of the Code or any similar or successor provision; provided, that a
Change of Law shall not include any change in the Statutory Exclusion.
(1) "Code" shall mean the Internal Revenue Code of 1986, as amended, or any
successor federal tax code, and any reference to any statutory provision shall
be deemed to be a reference to any successor provision or provisions.
(m) "Collateral" shall mean all of the property of Borrowers described in
Paragraph 4 hereof, together with all other property of any Obligor or any other
Person now or hereafter pledged to Agent, for the benefit of Agent and Lenders,
or any Lender to secure, either directly or indirectly, repayment of any of the
Liabilities.
(n) "Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with a Borrower, are treated as a single employer
under Section 414 of the Code.
(o) "Debt Service Coverage Ratio" shall mean, with respect to any period,
the ratio of (i) CDS's consolidated net income after taxes for such period
(excluding after tax gains or losses on the sale of assets (other than the sale
of Inventory in the ordinary course of business) and excluding other after tax
extraordinary gains or losses), plus depreciation and amortization deducted in
determining net income for such period, minus Capital Expenditures for such
period not financed, minus any dividends paid or accrued and withdrawals paid or
accrued to shareholders or other Affiliates of CDS for such period which were
not calculated in determining net Income after taxes, to (ii) current principal
maturities of long term debt and capitalized leases paid, or scheduled to be
paid during such period, plus any prepayments on indebtedness owed to any Person
(except trade payables and revolving loans to Lenders) paid during such period.
Debt Service Coverage Ratio shall be calculated in accordance with generally
accepted accounting principles on an after tax FIFO basis.
(p) "Eligible Account" shall mean, with respect to a Borrower, an Account
owing to such Borrower which is acceptable to Agent in its sole reasonable
discretion for lending purposes. Without limiting the generality of the
foregoing, Agent shall consider an Account of a Borrower 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 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 or assign it to Agent;
(iii) it arises from (A) the performance of services by such Borrower
and such services have been fully and properly performed; or (B) the sale
or lease of Goods by such Borrower, and such Goods have been completed in
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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, or has not
refused to accept any of the services, 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 evidenced by an invoice rendered to the Account Debtor
thereunder which does not remain unpaid for more than ninety (90) days after the
invoice date; provided, that for up to One Million Dollars ($1,000,000) of
Accounts in the aggregate at any time, it may be evidenced by an invoice
rendered to the Account Debtor thereunder which is due and payable more than
thirty (30) days after invoice date and does not remain unpaid more than one
hundred twenty (120) days from the original date of invoice or more than thirty
(30) days after the due date of the invoice; provided further, however, that if
more than twenty-five percent (25%) of the aggregate dollar amount of invoices
owing by a particular Account Debtor (fifty percent (50%) for governmental
entities provided for in subparagraph (ix) hereafter which have total Accounts
owing to Borrower in excess of One Thousand Dollars ($1,000)) is ineligible
under the foregoing criteria, then all Accounts owing 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, and is not subject to setoff, counterclaim,
credit, 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 a Borrower, or a Subsidiary, Parent or Affiliate, unless
the Account arises out of a transaction permitted by Paragraph 10(l) hereof and
is otherwise an Eligible Account;
(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;
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(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, the United States of America or, is a resident or citizen of and located
in a foreign country; provided, that in the latter case, the Account shall be
supported by an irrevocable letter of credit in form, substance and with a
financial institution acceptable to Agent and properly assigned to Agent;
(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, as with sales
made on a xxxx-and-hold, guaranteed sale, sale on approval, sale or return
(except pursuant to such Borrower's return policy attached hereto as Schedule 1
(p)(xiii)) 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 such Borrower contained in this Agreement;
(xv) it is not an Account which, when added to a particular Account
Debtor's other indebtedness to such Borrower, exceeds ten percent (10%) of the
aggregate of such Borrower's Accounts or such other credit limit determined by
Agent in its sole reasonable discretion for that Account Debtor (except that
Accounts excluded from Eligible Accounts solely by reason of this Paragraph
1(p)(xv) hereof shall be Eligible Accounts to the extent of such credit limit);
and
(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 judgment.
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(q) "Eligible Inventory" shall mean, with respect to a Borrower, Inventory
of such Borrower which is acceptable to Agent in its sole reasonable judgment
for lending purposes. Without limiting the generality of the foregoing, Agent
shall consider Inventory of a Borrower to be Eligible Inventory if it meets, and
so long as it continues to meet, the following requirements:
(i) it is owned by such Borrower and such Borrower has the right to
subject it to a security interest in favor of Agent;
(ii) it is located on the premises listed on Exhibit B or is situated
at another location previously approved by Agent in writing, which approval
shall not be unreasonably withheld, accompanied by a Landlord's or
Mortgagee's waiver, as applicable, in form and substance reasonably
acceptable to Agent, and is not in transit;
(iii) it is not subject to any prior assignment, claim, lien,
security interest or encumbrance whatsoever, other than Permitted Liens;
(iv) if held for sale or lease or furnishing under contracts of
service, it is (except as Agent may otherwise consent in writing) new and
unused and free from defects which would, in Agent's sole reasonable
judgment, materially adversely affect its market value;
(v) it is not stored with a bailee, consignee, supplier,
warehouseman, processor or similar party unless Agent has given its prior
written approval and such Borrower has caused any such bailee, consignee,
supplier, warehouseman, processor or similar party to issue and deliver to
Agent, in form and substance acceptable to Agent, such UCC financing
statements, warehouse receipts, waivers and other documents as Agent shall
require;
(vi) Agent has determined in accordance with Agent's customary
business practices that it is not unmerchantable due to age, type, category
or quantity; and
(vii) it is not Inventory (A) with respect to which any of the
representations and warranties contained in this Agreement are untrue or
(B) which violates any of the covenants of Borrower contained in this
Agreement.
(r) "Employment Agreements" shall mean the Employment Agreement dated as of
July 1, 1997 between CDS and Xxx Xxxxx, as amended by an amendment dated as of
September 29, 1997, the Employment Agreement dated as of March 1, 1997 between
CDS and Xxxxxx Xxxxxxx, as amended by an amendment dated as of September 29,
1997, the Employment Agreement dated as of September 1, 1995 between CDS and
Xxxxxx X. Xxxxxx, as amended by an amendment dated as of September 29, 1997, the
Employment Agreement dated as of March 1, 1997 between CDS and Xxxxxx Xxxxxxxxx,
as amended by an
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amendment dated as of September 29, 1997, the Employment Agreement dated as of
October 3, 1997 between JBC and Xxxxxxx Xxxxxxxx and the Employment Agreement
dated as of October 3, 1997 between GDC and Xxxxxx Xxxxxx, as each such
agreement is in effect on the date hereof.
(s) "Equipment Term Note" shall mean a term note of CDS, substantially in
the form of Schedule l(s) attached hereto, issued in favor of each Lender in an
amount equal to such Lender's Pro Rata Share multiplied by the original
principal amount of the term loan described in paragraph 1(c)(ii) of Exhibit A
as each such term note may hereafter be amended, modified, supplemented,
substituted or restated.
(t) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor provisions.
(u) "ESOP" shall mean the X.X. Xxxxx Drug Company Employee Stock Ownership
Plan and the trust forming a part thereof, and its successors.
(v) "ESOP Stock Purchase Agreement" shall mean the ESOP Stock Purchase
Agreement effective as of December 31, 1991, between the ESOP and the Xxxx X.
Xxx Trust, R. Xxxxxxx Xxx Trust, and their respective trustees and
beneficiaries, as the same may be amended from time to time, and the stock
purchase made thereunder.
(w) "ESOP Term Note" shall mean a term note of CDS, substantially in the
form of Schedule 1(w) attached hereto, issued in favor of each Lender in an
amount equal to such Lender's Pro Rata Share multiplied by the original
principal amount of the term loan described in Paragraph 1 (c)(1) of Exhibit A
as each such term note may hereafter be amended, modified, supplemented,
substituted or restated.
(x) "Event of Default" shall have the meaning specified in Paragraph 12
hereof.
(y) "Exhibit A" shall mean the exhibit entitled Exhibit A - Special
Provisions, which is attached hereto and made a part hereof.
(z) "Exhibit B" shall mean the exhibit entitled Exhibit B - Business and
Collateral Locations, which is attached hereto and made a part hereof.
(aa) "Exhibit C" shall mean the exhibit entitled Exhibit C - Letters of
Credit, which is attached hereto and made a part hereof.
(bb) "Exhibit D" shall mean the exhibit entitled Exhibit D - Assignment and
Assumption Agreement, which is attached hereto and made a part hereof.
(cc) "Exhibit E" shall mean the exhibit entitled Exhibit E - Compliance
Certificate, which is attached hereto and made a part hereof.
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(dd) "Federal Gross Income" shall mean gross income for federal tax
purposes.
(ee) "Gross-Up Event" shall mean, with respect to any Indemnitee, a payment
of tax or estimated tax by such Indemnitee, a reduction of such Indemnitee's net
operating loss, an offset against any tax refund or other amount otherwise due
such Indemnitee or a utilization of an amount otherwise available to such
Indemnitee as a credit against tax caused by an inclusion in such Indemnitee's
Federal Gross Income of more than fifty percent (50%) of the Interest received
or accrued by such Indemnitee with respect to such Indemnitee's ESOP Term Note
as a result of any of the events set forth below:
(i) the failure by such Indemnitee to receive a Qualifying Opinion
of Counsel, requested pursuant to Paragraph 21(f), within forty-five (45)
days after the receipt by CDS of such request therefor;
(ii) the issuance of an IRS Notice to such Indemnitee, provided that
CDS shall have had the opportunity to exercise any applicable rights of
contest with respect thereto granted to it under Paragraph 21(d); or
(iii) the occurrence of a final and unappealable decision, judgment,
decree or other order by the Tax Court or by any other court of competent
jurisdiction with respect to such Indemnitee or any other Indemnitee,
provided that CDS shall have had the opportunity to exercise any applicable
rights of contest granted to it under Paragraph 21 (d); or
(iv) the execution of a closing agreement by such Indemnitee under
Section 7121 of the Code to which CDS has consented.
(ff) "Indemnified Party" shall have the meaning specified in Paragraph 14
hereof.
(gg) "Indemnitee" shall mean each Lender and its successors and assigns,
including any assignee, participant or other transferee of any Indemnitee's
interest under this Agreement (whether or not (i) the Indemnitee has an Interest
in an ESOP Term Note at the time amounts are payable to such Indemnitee
hereunder, or (ii) the Indemnitee is a disqualified person with respect to the
ESOP within the meaning of Section 4975(E) (2) of the Code) and any affiliated
group (within the meaning of Section 1504 or the Code) of which any Indemnitee
is a member; provided, that for purposes of a Gross-Up Event, the term
"Indemnitee" shall not include any transferee that (A) is not described, and is
not a member of an affiliated group which includes a holder of an interest in an
ESOP Term Note that is described in Section 133(a)(1), (2), (3) or (4) of the
Code or (B) acquires an interest in an ESOP Term Note less than the full
remaining term of such ESOP Term Note.
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(hh) "Indemnitee's Note" shall mean, with respect to any Indemnitee, the
ESOP Term Note (or any participation in such ESOP Term Note) held by such
Indemnitee at any time.
(ii) "Interest Coverage Ratio" shall mean, with respect to any period, the
ratio of (i) CDS's consolidated net income after taxes for such period
(excluding after tax gains or losses on the sale of assets (other than the sale
of Inventory in the ordinary course of business) and excluding other after tax
extraordinary gains or losses), plus interest, taxes, depreciation and
amortization deducted in determining net income for such period, minus interest
income added in determining net income for such period, and minus Capital
Expenditures for such period not financed, minus dividends paid or accrued and
withdrawals paid or accrued to shareholders or other Affiliates of CDS, to (ii)
interest expense on indebtedness deducted in determining net income for such
period. Interest Coverage Ratio shall be calculated in accordance with generally
accepted accounting principles on a FIFO basis.
(jj) "IPO" shall mean an initial public stock offering of the capital stock
of CDS in connection with which CDS receives net cash proceeds of at least
Thirty Million Dollars ($30,000,000).
(kk) "IRS Notice" means, with respect to any Indemnitee, a revenue agent's
report or notice of proposed adjustment or a notice of deficiency issued by the
Internal Revenue Service to such Indemnitee with respect to the inclusion in
Federal Gross Income of more than fifty percent (50%) of the interest on such
Indemnitee's ESOP Term Note.
(ll) "L/C Bank" shall mean LaSalle National Bank or any other bank selected
by CDS and acceptable to Agent for issuance of Letters of Credit.
(mm) "Letters of Credit" shall mean any standby letters of credit which are
now or hereafter at any time issued by L/C Bank at the request of and for the
account of Borrower pursuant to the terms of Paragraph (2) of Exhibit A and
which have not expired or been canceled or terminated. The Letters of Credit
shall include the letters of credit described on Exhibit C.
(nn) "Lenders" shall mean LaSalle, Heller, ANB and any other Person that
becomes, a Lender hereunder pursuant to the terms hereof.
(oo) "Lending Rate", as to any Indemnitee, shall mean the rate of interest
applicable to the Prime Rate Loans made pursuant to Paragraph 1 (a) of Exhibit
A.
(pp) "Liabilities" shall mean any and all obligations, liabilities and
indebtedness of each Borrower 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 howsoever owned, held or acquired,
whether now or hereafter existing, whether now due or to become due, whether
primary, secondary, direct, indirect,
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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.
(qq) "LIBOR Rate Loans" shall mean the Loans bearing interest at the rates
set forth in Paragraph 4(b) of Exhibit A hereto.
(rr) "Loan" or "Loans" shall mean all advances made by or on behalf of
Lenders to a Borrower pursuant to Paragraph 2 hereof and all other loans,
advances and financial accommodations made by or on behalf or to or on behalf of
a Borrower hereunder
(ss) "Loan Limit" shall have the meaning specified in Paragraph 1 of
Exhibit A.
(tt) "Lock Box" shall have the meaning specified in Paragraph 7 hereof.
(uu) "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 and their subsidiaries taken as a whole.
(vv) "Maximum Lawful Rate" shall mean the maximum nonusurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received with respect to this Agreement, the ESOP
Term Notes, the Equipment Term Notes, the Real Estate Term Notes or any other
amounts, if any, due to a Lender under laws applicable to such Lender.
(ww) "Maximum Loan Amount" shall mean, with respect to any Lender, the
maximum amount of Loans which such Lender has agreed to make and Letters of
Credit with respect to which Lender has agreed to participate on an aggregate
basis, pursuant to the terms and conditions of this Agreement, to make available
to Borrowers, as set forth on the signature page hereto or in an Assignment and
Acceptance Agreement executed by such Lender.
(xx) "Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001 (a)(3) of ERISA, as to which a Borrower or any other member of its
Controlled Group has or may incur any liability.
(yy) "Net Worth" shall have the meaning specified in Paragraph 11(o)
hereof.
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(zz) "Obligor" shall mean each Borrower and each Person who is or shall
become primarily or secondarily liable for any of the Liabilities.
(aaa) "Original Term" shall have the meaning specified in Paragraph 9
hereof.
(bbb) "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 a Borrower 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.
(ccc) "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 CDS or any Subsidiary.
(ddd) "PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
(eee) "Pension plan" shall mean at any time an employee pension benefit
plan that is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and is either (i) maintained by a member
of the Controlled Group for employees of a member of the Controlled Group or
(ii) maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five (5) plan years made
contributions.
(fff) "Permitted Liens" shall mean (i) statutory liens of landlord's,
carriers, warehousemen, mechanics, materialmen or suppliers incurred in the
ordinary course of business and securing amounts not yet past due or declared to
be due by the claimant thereunder, (ii) liens or security interests in favor of
Agent, (iii) zoning restrictions and easements, 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 a 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, (v) liens incurred or deposits made in the ordinary course
of a Borrower's business in connection with worker's compensation, unemployment
insurance, social security and other like laws, (vi) liens 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
10(q)(iv) or permitted as capital expenditures under, Paragraph 13 of Exhibit A,
the
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documents relating to such liens to be in form and substance reasonably
acceptable to Agent, and (vii) liens as set forth on Schedule 1(fff)(vii)
attached hereto.
(ggg) "Person" shall mean any individual, sole proprietorship,
partnership, 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.
(hhh) "Prime Rate Loans" shall mean the Loans bearing interest at the
rates set forth in Paragraph 4(a) of Exhibit A hereto.
(iii) "Pro Rata Share" shall mean at any time, with respect to any Lender,
a fraction (expressed as a percentage in no more than four (4) decimal places),
the numerator of which shall be the Maximum Loan Amount of such Lender at such
time and the denominator of which shall be the aggregate amount of the Maximum
Loan Amounts of all Lenders at such time.
(jjj) Intentionally Omitted.
(kkk) "Qualified Plan" shall mean any Plan that is intended to be
qualified under Section 401(a) of the Code.
(111) "Qualifying Opinion of Counsel" shall mean a written opinion of
recognized tax counsel, selected by CDS and reasonably satisfactory to the
Indemnitee requesting such opinion, to the effect that while the issue is not
free from doubt, if a court were presented with the issue, it probably would
hold that at least fifty percent (50%) of each payment of interest on such
Indemnitee's ESOP Term Note is excludable from such Indemnitee's Federal Gross
Income during the applicable period under Paragraph 21(f).
(mmm) "Real Estate Term Note" shall mean a term note of CDS or GDC, as
applicable, substantially in the form of Schedule l(mmm) attached hereto, issued
in favor of each Lender in an amount equal to such Lender's Pro Rata Share
multiplied by the original principal amount of the term loans described in
paragraph l(c)(iii) of Exhibit A as each term note may hereafter be amended,
modified, supplemented, substituted or restated.
(nnn) "Renewal Term" shall have the meaning specified in Paragraph 9
hereof.
(ooo) "Reportable Event" shall mean an event described in Section 4043(b)
of ERISA and the regulations thereunder.
(ppp) "Requisite Lenders" shall mean at any time Lenders having, in the
aggregate, Pro Rata Shares of at least sixty-six percent (66%) at such time.
12
(qqq) "Retiree Health Plan" shall mean an "employee welfare benefit plan"
(within the meaning of Section 3(l) of ERISA) that provides health care benefits
to persons after termination of employment, other than as required by Section
601 of ERISA.
(rrr) "Single-employer Plan" shall mean any employee benefit plan that is
a "single-employer plan" as defined in Section 4001(a)(15) of ERISA.
(sss) "Statutory Exclusion" as of any time shall mean a percentage equal
to the percentage of interest with respect to a securities acquisition loan,
within the meaning of Section 133 of the Code, that is excludable at such time
from Federal Gross Income by a recipient that is described in Section 133(a)
(1), (2), (3), or (4) of the Code.
(ttt) "Subordinated Debt Documents" shall mean (i) the Note Purchase
Agreement of even date herewith (the "Note Purchase Agreement") between CDS and
Xxxxxxxxx ESOP Capital Partners ("Xxxxxxxxx"), (ii) the Senior Subordinated Note
of even date herewith issued by Borrowers, H.S.S. Consulting Services,
Incorporated and C.D.S. Transportation, Inc. in favor of Xxxxxxxxx, (iii) the
Warrant Agreement of even date herewith between CDS and Xxxxxxxxx, and (iv) the
Warrant of even date herewith (the "Warrant") issued by CDS in favor of
Xxxxxxxxx.
(uuu) "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 a 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 a Borrower.
(vvv) "Supplemental Payment Period" as to any Indemnitee, shall mean, with
respect to any Change of Law, the period from the earliest date as of which such
Change of Law is effective with respect to such Indemnitee, until payment in
full of such Indemnitee's ESOP Term Note, together with accrued interest
thereon.
(www) "Tax Allowance" shall mean any deduction, credit or other allowance
allowable in computing liability for any federal tax.
(xxx) "Unfunded Vested Liabilities" shall mean, with respect to any
Pension Plan at any time, the amount (if any) by which (i) the present value of
all vested nonforfeitable benefits under such Pension Plan exceeds (ii) the fair
market value of all Pension Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Pension Plan, but
only to the extent that such excess represents a potential liability of a member
of the Controlled Group to the PBGC or the Pension Plan under Title IV of ERISA.
2. LOANS. Subject to the terms and conditions of this Agreement (including
Exhibit A) and the Other Agreements, during the Original Term and any Renewal
13
Term, each Lender, severally and not jointly, agrees to make its Pro Rata Share
of such Loans to a Borrower, up to such Lender's Maximum Loan Amount, as such
Borrower shall from time to time request up to the Loan Limit set forth in
Exhibit A applicable to such Borrower; provided, that Agent may, but shall not
be obligated to make such Loans to such Borrower on behalf of Lenders as a
"Disproportionate Advance" (as defined). The aggregate unpaid principal of all
Loans outstanding at any one time shall not exceed the Loan Limit set forth in
Exhibit A and shall bear interest at the rates set forth in Exhibit A. Loans
shall be repaid as provided herein. It expressly understood and agreed that,
subject to the preceding sentences, each Lender shall be obligated to make its
Pro Rata Share of any Loan requested by a Borrower and approved by Agent. If at
any time the outstanding principal balance of the Loans of a Borrower exceeds
the Loan Limit applicable to such Borrower, or any portion of the Loans exceeds
any applicable sublimit set forth in Exhibit A, such Borrower shall immediately,
and without the necessity of a demand by Agent or Lenders, pay to Agent such
amount as may be necessary to eliminate such excess and Agent shall apply such
payment to the Liabilities in such order as Agent shall determine in its sole
discretion; provided, that if the outstanding principal balance of the Loans
with respect to Borrowers exceeds the Maximum Loan Limit or any portion of the
Loans with respect to a Borrower exceeds any applicable sublimit set forth in
Exhibit A (an "Interim Advance"), Agent may, in its sole discretion, so long as
no Event of Default exists as a result of a breach of Paragraph 11(o) of this
Agreement or Paragraphs 9, 10 and 11 of Exhibit A and no intercompany loans are
outstanding, permit such Interim Advance to remain outstanding and continue to
advance Loans to Borrowers on behalf of Lenders without the consent of any
Lender for a period of up to forty-five (45) calendar days, so long as (i) the
amount of the Interim Advance does not exceed Two Million Dollars ($2,000,000),
(ii) the aggregate outstanding principal balance of the Loans does not exceed
the aggregate Maximum Loan Amounts of all Lenders and (iii) Agent has not been
notified by Requisite Lenders to cease making such advances. Each Borrower
hereby authorizes Agent, in its sole discretion, to charge any of such
Borrower's accounts to make any payments of principal or interest required by
this Agreement. All Loans shall, in Agent's sole discretion, be evidenced by one
or more promissory notes delivered to each Lender in the amount of the maximum
amount of Loans that such Lender may make pursuant to the terms of this
Agreement, in form and substance satisfactory to Agent. However, if such Loans
are not so evidenced, such Loans may be evidenced solely by entries upon the
books and records maintained by Agent. Neither Agent nor any Lender shall be
responsible for any failure by any other Lender to perform its obligations to
make advances hereunder approved by Agent, and the failure of any Lender to make
its Pro Rata Share of any advance hereunder shall not relieve any other Lender
of its obligation, if any, to make its Pro Rata Share of Loans hereunder nor
require such other Lender to make more than its Pro Rata Share of any Loans
hereunder. If any Borrower makes a request for a Loan as provided herein and
Agent, at its option and in its sole and absolute discretion, shall do either of
the following:
(a) Advance the amount of the proposed Loan to such Borrower
disproportionately (a "Disproportionate Advance") out of Agent's own funds on
behalf of Lenders, and request settlement in accordance with Paragraph 17 of
Exhibit A such that upon
14
such settlement each Lender's share of the outstanding Loans (including, without
limitation, the amount of any Disproportionate Advance) equals its Pro Rata
Share; or
(b) Notify each Lender by telecopy or other similar form of
teletransmission of the proposed advance on the same day Agent is notified by
such Borrower of such Borrower's request for an advance pursuant to this
Paragraph 2 of this Agreement. Each Lender shall remit, to the demand deposit
account designated by such Borrower, on or prior to twelve o'clock noon, Chicago
time, on the Business Day immediately succeeding the date of such notification
or with respect to an advance which is to be a LIBOR Rate Loan, on the date such
advance is to be made, immediately available funds in an amount equal to such
Lender's Pro Rata Share of such proposed advance.
If and to the extent that a Lender does not settle with Agent as required under
clause (a), each Borrower agrees to repay to Agent forthwith on demand such
amount required to be paid by such Lender to Agent with respect to such Loan to
such Borrower, together with interest thereon, for each day from the date such
amount is made available to such Borrower until the date such amount is repaid
to Agent, at the interest rate applicable at such time for such Loans; provided,
that each Borrower's obligation to repay such advance to Agent shall not relieve
Lender of its liability to Agent for failure to settle as provided in clause (a)
or relieve any Lender of its liability to Borrower for failure to make a Loan.
3. FEES AND CHARGES. Borrowers shall pay to Agent, for the benefit of
Agent and Lenders, in addition to all other amounts payable hereunder, the fees
and charges set forth in Exhibit A. It is the intent of the parties that the
rate of interest and the other charges to each Borrower 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 or Lenders may lawfully
charge such Borrower, then the obligation to pay interest and other charges
shall automatically be reduced to such limit and, if any amount in excess of
such limit shall have been paid, then such amount shall be refunded to such
Borrower.
4. GRANT OF SECURITY INTEREST TO LASALLE. As security for the payment of
all Loans now or in the future made by Agent or Lenders hereunder and for the
payment or other satisfaction of all other Liabilities, each Borrower hereby
assigns to Agent, for the benefit of Agent and Lenders, and grants to Agent, for
the benefit of Agent and Lenders, a continuing security interest in the
following property of such Borrower, 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 such 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
15
and any rights to indemnification); (c) all Inventory (whether or not Eligible
Inventory); (d) all Goods (other than Inventory), including, without limitation,
Equipment (except for equipment designated on Schedule 4(d), attached hereto
which is the subject of an equipment lease), vehicles and fixtures; (e) all
deposits and cash and any other property of such Borrower now or hereafter in
the possession, custody or control of Agent or any Lender or any agent or any
parent, affiliate or subsidiary of Agent or any Lender or any participant with
any Lender in the Loans for any purpose (whether for safekeeping, deposit,
collection, custody, pledge, transmission or otherwise); and (f) 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 such Borrower's books and
records relating to any of the foregoing and to such Borrower's business. All
liens granted to Agent hereunder and under the Other Agreements and all
Collateral delivered to Agent hereunder and under the Other Agreements shall be
deemed to have been granted and delivered to Agent, for the benefit of Agent and
Lenders, to secure the Liabilities.
5. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
THEREIN. Each Borrower 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 deemed 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 (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. Each
Borrower further agrees that a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement shall be sufficient
as a financing statement.
6. POSSESSION OF COLLATERAL AND RELATED MATTERS. Until an "Event of
Default" (as hereinafter defined) 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, (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, and
(c) dispose of obsolete, defective or unnecessary Equipment, provided that all
proceeds resulting from said disposition of Equipment shall promptly be paid to
Agent to be credited to such Borrower's account.
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7. COLLECTIONS
(a) Each Borrower shall direct all of its Account Debtors to make all
payments on the Accounts directly to a post office box (the "Lock Box") with a
financial institution mutually acceptable to Agent and such Borrower, and in the
name and under exclusive control of Agent. Each Borrower shall establish an
account (the "Blocked Account") in Agent's name for the benefit of such Borrower
with a financial institution mutually acceptable to Agent and such Borrower,
into which all payments received in the Lock Box shall be deposited, and into
which such Borrower will immediately deposit all payments made for Inventory or
services and received by such Borrower in the identical form in which such
payments were made, whether by cash or check. If any Borrower, any Affiliate or
Subsidiary, or any shareholder, officer, director, employee or agent of any
Borrower or any Affiliate or Subsidiary, or any other Person acting for or in
concert with a Borrower shall receive any monies, checks, notes, drafts or other
payments relating to or as proceeds of Accounts or other Collateral, such
Borrower and each such Person shall receive all such items in trust for, and as
the sole and exclusive property of, Agent and, immediately upon receipt thereof,
shall remit the same (or cause the same to be remitted) in kind to the Blocked
Account pertaining to the Borrower to which such payments or proceeds pertain.
The financial institution with which the Blocked Account is established shall
acknowledge and agree, in a manner satisfactory to Agent, that the amounts on
deposit in such Blocked Account are the sole and exclusive property of Agent,
that such financial institution has no right to setoff against the Blocked
Account or against any other account maintained by such financial institution
into which the contents of the 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. Each Borrower and Agent agree that
all payments made to the Blocked Account pertaining to such Borrower or
otherwise received by Agent, whether in respect of the Accounts of such Borrower
or as proceeds of other Collateral of such Borrower or otherwise, will be
applied on account of the Liabilities of such Borrower in accordance with the
terms of this Agreement. Each Borrower agrees to pay all fees, costs and
expenses which Agent incurs in connection with opening and maintaining the
Blocked Account. All of such fees, costs and expenses which remain unpaid by
such Borrower pursuant to any Lock Box or Blocked Account Agreement, shall
constitute Loans hereunder, shall be payable to Agent by such Borrower upon
demand and, until paid, shall bear interest at the highest rate then applicable
to Loans hereunder. All checks, drafts, instruments and other items of payment
or proceeds of Collateral of a Borrower delivered to Agent in kind shall be
endorsed by such Borrower 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 such Borrower's 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 to (i) endorse such Borrower's name upon said items
of payment and/or proceeds of Collateral and upon any Chattel Paper, document,
instrument, similar document or agreement relating to any Account of such
Borrower or goods pertaining thereto; (ii) take control in any manner of any
item of payment or proceeds thereof;
17
and (iii) upon the occurrence and continuation of an Event of Default, have
access to any postal box into which any of such Borrower's mail is deposited,
and open and process all mail addressed to such Borrower and deposited therein
or in any Lock Box controlled by Agent.
(b) Agent may, with respect to each Borrower, at any time and from time to
time, 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 such Borrower's Accounts or contract rights by suit or otherwise; (ii)
exercise all of such 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 such 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 such Borrower upon such terms,
for such amount and at such time or times as Agent deems advisable; (v) prepare,
file and sign such Borrower's name on any proof of claim in bankruptcy or other
similar document against any Account Debtor of such Borrower; and (vi) do all
other acts and things which are necessary, in Agent's sole reasonable judgment,
to fulfill such 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 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) Agent shall, on the Business Day of 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.
(d) Agent, in its sole discretion, without waiving or releasing any
obligation, liability or duty of Borrowers under this Agreement or the Other
Agreements or any Event of Default, may at any time or times hereafter, 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 of a Borrower. All reasonable sums paid by Agent in respect
thereof and all reasonable costs, fees and expenses including, without
limitation, reasonable attorney fees, all court costs and all other charges
relating thereto incurred by Agent shall constitute Loans, payable by such
Borrower to Agent on demand and, paid, shall bear interest at the highest rate
then applicable to Loans hereunder.
(e) Immediately upon a Borrower's receipt of any portion of the Collateral
of such Borrower 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.
18
8. SCHEDULES AND REPORTS. Borrowers shall furnish or cause to
be furnished to Agent the following:
(a) Each Borrower shall provide Agent with an executed daily loan report
and certificate in Agent's then current form on each day on which such Borrower
requests a Loan, and in any event at least one (1) each week, which shall be
accompanied by copies of such Borrower's sales journal, cash receipts journal
and credit memo journal for the relevant period. Such report shall reflect the
activity of such Borrower with respect to Accounts for the immediately preceding
week, and 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 of such Borrower included, described
or referred to in such 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 of such Borrower. In addition, each Borrower shall deliver to Agent,
at least once a week (or more frequently as requested by Agent), within two (2)
days after the end of each calendar week, a summary report with respect to such
Borrower's Inventory.
(b) As soon as practicable and in any event within thirty (30) days
following the end of each calendar month (except that for the calendar months
ending on or prior to September 30, 1998, within forty-five (45) days following
the end of such month): (1) consolidated and consolidating statements of income
and statements of cash flow of such Borrower for each such month and for the
period from beginning of the then current fiscal year of such Borrower to the
end of such month, (2) consolidated and consolidating balance sheets of such
Borrower as of the end of such month, and (3) with respect to such statements of
income and balance sheets, in comparative form, figures for the corresponding
periods in the preceding fiscal year of such Borrower and to the then current
budget disclosing the variances from such budget, in all reasonable detail and
certified by the chief financial officer of such Borrower that such statements
fairly present the financial condition of such Borrower in accordance with
generally accepted accounting principles, subject to changes resulting from
normal year-end adjustments (including, without limitation, LIFO adjustments)
and the absence of footnotes.
(c) In addition to any other reports, as soon as practicable and in any
event: (1) within ten (10) days after the end of each month, (a) a detailed aged
trial balance of such Borrower's Accounts, in form and substance reasonably
satisfactory to Agent, including, without limitation, the names and addresses of
all Account Debtors of such Borrower, and (b) 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; and (2) within fifteen (15) days after the end of each month, the
general ledger inventory account balance, a summary inventory report and Agent's
standard form of Inventory report then in effect or the form most recently
requested from such Borrower by Agent, for such Borrower by each category of
Inventory of such Borrower, together with a description of the monthly change in
each category of Inventory of such Borrower.
19
(d) As soon as practicable and in any event within one hundred twenty
(120) days after the end of each fiscal year of CDS: (1) consolidated and
consolidating statements of income of CDS for such fiscal year, and a
consolidated and consolidating balance sheet of CDS as of the end of such fiscal
year, and (2) consolidated and consolidating statements of cash flow of CDS for
such fiscal year, such statements to be presented in accordance with generally
accepted accounting principles and certified by independent certified public
accountants of recognized national standing selected by CDS and satisfactory to
Agent, whose opinion shall be unqualified, in form and substance reasonably
satisfactory to agent.
(e) As soon as practicable and in any event prior to the beginning of each
fiscal year of such Borrower, projected balance sheets, statements of income and
cash flow for such Borrower, for each of the twelve (12) months during such
fiscal year, which shall include the assumptions used therein, together with
appropriate supporting details as reasonably requested by Agent.
(f) As soon as practicable and in any event within ten (10) days of
delivery to a 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".
(g) In conjunction with the delivery of the annual presentation of
projections or budgets referred to in paragraph (e) above, a letter signed by
the President or a Vice President of CDS and by the Treasurer or Chief Financial
Officer of CDS, 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 each Borrower.
(h) With reasonable promptness, such other business or financial data,
reports, SEC reports, appraisals and projections as Agent may reasonably
request.
(i) Within ninety (90) days of the date following the date hereof, CDS
shall deliver to Agent an opening balance sheet dated as of the date hereof,
certified by their certified public accountants.
(j) All financial statements delivered to Agent pursuant to the
requirements of this paragraph shall be prepared in accordance with generally
accepted accounting principles (except that the financial statements referred to
in paragraph (b) above shall be subject to changes resulting from normal year-
end adjustments (including, without limitation, LIFO adjustments) as provided in
this Agreement. Together with each delivery of financial statements required by
paragraphs (b) and (d) above, CDS shall deliver to Agent an officer's
certificate in the form attached hereto as Exhibit E, which shall, for each
fiscal quarter, include a calculation of financial covenants in the schedule
attached to such officer's certificate in form satisfactory to Agent.
20
9. TERMINATION. This Agreement shall be in effect from the date hereof
until October 3, 2000 (the "Original Term") and shall automatically renew itself
from year to year thereafter (each such one-(1) year renewal being referred to
herein as a "Renewal Term") unless: (a) the due date of the Liabilities is
accelerated pursuant to Paragraph 13 hereof; or (b) Borrowers elect to terminate
this Agreement at the end of the Original Term or at the end of any Renewal Term
by giving Agent written notice of such election at least ninety (90) days prior
to the end of the Original Term or the then current Renewal Term and by paying
all of the Liabilities in full on the last day of such term or any Lender elects
to terminate this Agreement at the end of the Original Term or at the end of any
Renewal Term by giving CDS and Agent written notice of such election at least
ninety (90) days prior to the end of the Original Term or the then current
Renewal Term. If one or more of the events specified in clauses (a) or (b)
occurs, 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 payment of the Liabilities has become indefeasible. At
such time as Borrowers have repaid all of the Liabilities and this Agreement has
terminated, Borrowers shall deliver to Agent and Lenders a release, in form and
substance satisfactory to Agent, of all obligations and liabilities of Agent and
Lenders and their officers, directors, employees, agents, parents, subsidiaries
and affiliates to Borrowers, and if Borrowers are obtaining new financing from
another tender, Borrowers shall deliver such lender's indemnification of Agent
and Lenders, in form and substance satisfactory to Agent, for checks or other
forms of payment which Agent and Lenders have credited to Borrowers' accounts,
but which subsequently are dishonored for any reason. If, during the term of
this Agreement, Borrowers prepay all or any portion of the Liabilities, and in
connection therewith, either (a) permits any security agreement, financing
statement or analogous instrument to be executed or filed with respect to the
Collateral for the benefit of someone other than Agent, or (b) creates, incurs
or assumes any liability for borrowed money (except for borrowings from Agent
and borrowings permitted pursuant to Paragraph 10(q) hereof), Borrowers agree to
pay to Agent, for the benefit of Lenders, as a prepayment fee, in addition to
the payment of all other Liabilities, an amount determined in accordance with
Paragraph 5(d) of Exhibit A.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Borrower hereby
represents, warrants and covenants that (after giving effect to the
Acquisition):
(a) the financial statements delivered or to be delivered by such Borrower
to Agent or any Lender at or prior to the date of this Agreement and at all
times subsequent thereto accurately reflect the financial condition of such
Borrower, and there has been no material adverse change in the financial
condition, the operations or any other status of such Borrower since the date of
the most recent financial statements delivered to Agent prior to the date of
this Agreement;
(b) the office where such Borrower keeps its books, records and accounts
(or copies thereof) concerning the Collateral of such Borrower, such Borrower's
principal
21
place of business and all of such Borrower's other places of business, locations
of Collateral of such Borrower and post office boxes are as set forth in Exhibit
B; 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 of such Borrower, 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 B, and at other locations within the continental United
States of which Agent has been advised by such Borrower in writing;
(d) such Borrower shall immediately give written notice to Agent of any
use of any Goods in any state other than a state 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;
(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, 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" as set forth herein 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 Original Term or
any Renewal 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
22
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 other than Permitted Liens;
(i) Except as designated on Schedule 10(i) attached hereto, there are no
actions or proceedings which are pending or threatened against such Borrower
which might result in any material adverse change in its financial condition or
materially adversely affect the Collateral of such Borrower 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 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 or any Lender 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;
(1) 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 of such
Borrower is now, or will (while any Liabilities remain outstanding) be owned by
any Affiliate; provided, however, that such Borrower may enter into transactions
with Affiliates in the ordinary course of business pursuant to terms that are no
less favorable to such Borrower than the terms upon which such transfers or
transactions would have been made had they been made to or with a Person that is
not an Affiliate and, in connection therewith, may transfer cash or property to
Affiliates for fair value;
(m) 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 writing to Agent;
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 merchantable title to and ownership of all such Equipment
including, without limitation, the Equipment of such Borrower described or
listed on the schedule of Equipment delivered to Agent concurrently with this
Agreement, except for equipment leased to such Borrower as designated on
Schedule 4(d); (ii) such Borrower shall keep and maintain
23
the Equipment of such Borrower 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;
provided, however, that nothing herein shall limit such Borrower's right to
dispose of obsolete, defective or unnecessary Equipment; (iii) such Borrower
shall not permit any such items to become a fixture to real estate or an
accession to other personal property; and (iv) such Borrower, promptly 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 of such Borrower;
(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 as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general application affecting the
enforcement of creditors' rights and the availability of remedies which are
equitable in nature including, but not limited to, the remedies of specific
performance and injunctive relief;
(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) other than a guaranty by GDC of up to One Hundred Fifty Thousand
($150,000) of credit extended to Chicago Medical Equipment and Supply Co., such
Borrower is not now obligated, nor shall it create, incur, assume or become
obligated (directly or indirectly), for any loans or other indebtedness for
borrowed money other than the Loans, except that such Borrower may: (i) borrow
money from a Person other than Lenders and the other Borrowers on an unsecured
and subordinated basis if a subordination agreement in favor of Agent and in
form and substance satisfactory to Requisite Lenders is executed and delivered
to Agent relative thereto; (ii) maintain any present indebtedness to any Person
which has been disclosed to Agent in writing and consented to in writing by
Requisite Lenders; (iii) incur unsecured indebtedness to trade creditors in the
ordinary course of such Borrower's business; (iv) incur secured indebtedness in
connection with the acquisition (by capitalized lease or purchase money
financing) of Equipment after the date hereof so long as such indebtedness is
only secured by the Equipment so acquired and the aggregate amount of such
secured indebtedness outstanding for all Borrowers at any time does not exceed
Seven Hundred Fifty Thousand ($750,000); and (v) borrow money from another
Borrower so long as no Event of Default exists and the aggregate intercompany
loans outstanding for all Borrowers at any time does not exceed the "Maximum
Intercompany Amount" (as defined below). "Maximum Intercompany Amount" means Two
Million Dollars ($2,000,000) during the period October 1 through January 31 and
One Million Dollars ($1,000,000) at all
24
other times. The indebtedness allowed above shall be referred to herein as
"Permitted Borrowings";
(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 G or Regulation U of the Board
of Governors of the Federal Reserve System as in effect from time to time;
(s) except as otherwise disclosed in writing to Agent, such Borrower has no
Parents, Subsidiaries or divisions, nor is such Borrower engaged in any joint
venture or partnership with any other Person;
(t) if such Borrower is a corporation or partnership, 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 where the nature and extent of
the business transacted by it or the ownership of its assets makes such
qualification necessary;
(u) there is no Event of Default under this Agreement nor circumstances
that, with the passage of time or giving of notice, would result in an Event of
Default and 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 such Borrower;
(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; and
(w) such Borrower possesses, and shall continue to possess, adequate
licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, trade styles and tradenames to continue to conduct its
business as heretofore conducted by it.
(x) the ESOP is an employee stock ownership plan within the meaning of
Section 4975(e)(7) of the Code and is qualified under Sections 401 (a) and
501(a) of the Code. The trust forming part of the ESOP has been duly constituted
in accordance with valid and binding trust instruments, is validly existing and
is qualified under Sections 401 (a) and 501 (a) of the Code. The execution,
delivery and performance of this Agreement and the ESOP Term Notes and the ESOP
Stock Purchase Agreement by the parties hereto and thereto and the consummation
of the transactions contemplated hereby and thereby will not constitute a
25
violation of, or give rise to any liability under, Title I of ERISA or Section
4975 of the Code. The loan evidenced by the ESOP Term Notes will qualify as a
securities acquisition within the meaning of Section 133 of the Code, as amended
by the 1996 Small Business Job Protection Act.
(y) such Borrower has delivered to Agent true and correct copies of (i) all
documents governing the terms and administration of the ESOP, including its plan
description and all related trust instruments, and (ii) all agreements relating
to the ESOP Stock Purchase Agreement, together with all amendments or
modifications of the foregoing.
(z) As of the date of this Agreement, none of such Borrower or any member
of its Controlled Group maintains or contributes to any Benefit Plan,
Multiemployer Plan or any Retiree Health Plan, other than those listed on
Schedule 10(z) attached hereto. Each Benefit Plan has been and is being
maintained and funded in all material respects in accordance with its terms and
in compliance with all provisions of ERISA and the Code applicable thereto.
Such Borrower and each member of its Controlled Group have fulfilled in all
material respects their obligations related to the minimum funding standards of
ERISA and the Code for each Qualified Plan, are in compliance in all material
respects with the currently applicable provisions of ERISA and the Code relating
to the qualification with respect to each Qualified Plan intended to be so
qualified and have not incurred any material liability (other than routine
liability for premiums) under Title IV of ERISA. No Reportable Event has
occurred that has resulted in liability which either has not been satisfied or
is not reflected on such Borrower's financial statements nor has any other event
occurred that is likely to result in a Reportable Event that could reasonably be
expected to have a material adverse effect. No event or events have occurred in
connection with which such Borrower or any member of its Controlled Group or any
Benefit Plan, directly or indirectly, is likely to be subject to any liability
under ERISA, the Code or any other law, regulation or governmental order or
under any agreement, instrument, statute, rule of law or regulation pursuant to
or under which any such entity has agreed to indemnify or is required to
indemnify any person against liability incurred under, or for a violation or
failure to satisfy the requirements of, any such statute, regulation or order
which could reasonably be expected to have a material adverse effect. True,
correct and complete copies of the following documents have been made available
to Agent as of the date of this Agreement: (i) each Benefit Plan (or, where any
such plan is not in writing, a complete description thereof) (and if applicable,
related trust agreements or other funding instruments) and all amendments
thereto, all summary plan descriptions and summaries of material modifications,
(ii) the most recent determination letter issued by the Internal Revenue Service
with respect to each Qualified Plan; (iii) for the most recent plan year, Annual
Reports on Form 5500 Series required to be filed with any governmental agency
for each Benefit Plan; (iv) all actuarial reports prepared for the last three
(3) plan years for each Benefit Plan; (v) a listing of all Multiemployer Plans,
with the aggregate amount of the most recent annual contributions required to be
made by such Borrower and any member of its Controlled Group to each such plan
and copies of the collective bargaining agreements requiring such contributions;
(vi) any information that has been provided to such Borrower or any member of
its Controlled Group regarding withdrawal liability under any Multiemployer
26
Plan; and (vii) the aggregate amount of the most recent annual payments made to
former employees of such Borrower or any member of its Controlled Group under
any Retiree Health Plan.
Each Borrower represents, warrants and covenants to Agent and Lenders that all
representations, warranties and covenants of such Borrower contained in this
Agreement (whether appearing in Paragraphs 10 or 11 hereof or elsewhere) shall
be true in all material respects at the time of 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 in all material respects 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 pursuant to this
Agreement.
11. ADDITIONAL COVENANTS OF BORROWERS. Until payment or satisfaction in
full of all Liabilities and termination of this Agreement, unless Borrowers
obtain Agent's prior written consent (which consent will not be given without
Requisite Lenders' 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 B;
(b) Intentionally omitted;
(c) such Borrower shall promptly advise Agent in writing of any material
adverse change in the business, assets or condition, financial or otherwise, of
such Borrower, the occurrence of any Event of Default hereunder or the
occurrence of any event which, if uncured, will become an Event of Default
hereunder after notice or lapse of time (or both);
(d) Agent, or any Persons designated by it (including without limitation
any Lender that has notified Agent of its desire to accompany Agent), shall have
the right, 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 verification concerning such
Borrower's business as Agent may consider reasonable under the circumstances
(without limiting the foregoing, Agent, through its officers, employees or
agents shall have the right, at any time and
27
from time to time request. Each Borrower authorizes Agent to discuss the
affairs, finances and business of such Borrower with any officers, employees or
directors of such Borrower or with any Affiliate or the officers, employees or
directors of any Affiliate, 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 Borrower's
independent public accountants. Each Borrower shall pay to Agent all customary
fees and out-of-pocket expenses incurred by Agent in the exercise of its rights
hereunder including, but not limited to, an auditing fee of Six Hundred Dollars
($600) per auditor per day, and all of such fees and expenses shall constitute
Loans hereunder, payable on demand and, until paid, shall bear interest at the
highest rate then applicable to Loans hereunder;
(e) such Borrower shall:
(i) keep the Collateral of such Borrower properly housed and shall
keep the Collateral insured for the full insurable value thereof against
loss or damage by fire, theft, explosion, sprinklers, collision (in the
case of motor vehicles) and such other risks 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. Original (or certified) copies
of such policies of insurance have been or shall be delivered to Agent
within fifteen (15) days after the date hereof, together with evidence of
payment of all premiums therefor, and shall contain an endorsement, in form
and substance reasonably 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 canceled and that no act, whether willful
or negligent, or default of such Borrower or any other Person shall affect
the right of Agent to recover under such policy of insurance in case of
loss or damage. Each Borrower hereby directs all insurers under such
policies of insurance to pay all proceeds payable thereunder directly to
Agent. Each 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, that so long as no Event of Default shall have
occurred, such Borrower shall be entitled to make, settle and adjust claims
under its policies of insurance if the total amount of any such claims is
less than One Hundred Thousand Dollars ($100,000) in the aggregate for all
claims of such Borrower during the immediately preceding twelve (12) month
period; and Agent agrees that if it receives proceeds of insurance with
respect to any loss of or damage to Collateral in an amount less
28
than or equal to One Hundred Thousand Dollars ($100,000) in the aggregate
for all claims of such Borrower during the immediately preceding twelve
(12) month period, it will, at such Borrower's request, promptly make such
proceeds available to such Borrower for repair or replacement of the lost
or damaged Collateral of such Borrower.
(ii) 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 original (or certified) copies of such
policies have been or shall be delivered to Agent within fifteen (15) days
after the date hereof, together with evidence of payment of all premiums
therefor; each such policy shall contain an endorsement showing Agent and
Lenders as additional insured thereunder and providing that the insurance
company shall give Agent at least thirty (30) days written notice before
any such policy shall be altered or canceled.
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 Loans hereunder and
shall be payable on demand by such Borrower to Agent and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder;
(f) such Borrower shall not use the Collateral of such Borrower, 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, shall keep the Collateral of such
Borrower in good condition, repair and order; shall permit Agent to examine any
of the Collateral at any reasonable time and wherever the Collateral may be
located; shall not permit the Collateral of such Borrower, or any part thereof,
to be levied upon under execution, attachment, distraint or other legal process,
shall not sell, lease, grant a security Interest in or otherwise dispose of any
of the Collateral of such Borrower except as expressly permitted by this
Agreement; and shall not secrete or abandon any of the Collateral of such
Borrower, or remove or permit removal of any of the Collateral of such Borrower
from any of the locations listed on Exhibit B or in any written notice to Agent
pursuant to Paragraph 10(b) hereof, except for the removal of Inventory sold in
the ordinary course of such Borrower's business and the disposition of obsolete,
defective or unnecessary Equipment of such Borrower, in each case as permitted
herein;
29
(g) all monies and other property obtained by such Borrower from Lenders
pursuant to this Agreement will be used solely for business purposes of such
Borrower;
(h) 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;
(i) 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)
such Borrower keeps on deposit with Agent (such deposit to be held without
interest) or as a reserve against revolving Loans provided for herein, 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 payment of such taxes. If such Borrower falls 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 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 Loans hereunder;
(j) other than a guaranty by GDC of up to One Hundred Fifty Thousand
($150,000) of credit extended to Chicago Medical Equipment and Supply Co., such
Borrower shall not 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;
(k) such Borrower shall not enter into any merger or consolidation, or
sell, lease or otherwise dispose of all or substantially all of its assets, or
enter into any transaction outside the ordinary course of such Borrower's
business, including, without limitation, any purchase, redemption or retirement
of any shares of any class of its stock, and any issuance of any shares of, or
warrants or other rights to receive or purchase any shares of, any class of its
stock; except, (A) a Borrower shall be permitted, without the approval of
Lenders, to acquire companies (whether by acquisition of stock or assets or by
merger) so long as the following conditions are satisfied to the satisfaction of
Agent: (i) the acquired company is an operating company that engages in a line
of business substantially similar to the line of business of Borrowers and has
annual sales of not more than Twenty Million Dollars ($20,000,000); (ii) the
aggregate consideration (including without limitation cash purchase price,
liabilities assumed (excluding trade payables and ordinary course accruals of
expenses), deferred or financed purchase price and purchase price characterized
as consulting agreements, non-competition
30
payments and the like) for all such acquisitions since the date hereof does not
exceed Five Million Five Hundred Thousand Dollars ($5,500,000); (iii) Borrowers
shall have excess availability pursuant to Paragraph 1 of Exhibit A after giving
effect to such acquisition and the anticipated working capital needs of the
acquired company (as determined by Agent in the sole reasonable discretion) of
at least Ten Million Dollars ($10,000,000), deeming all debts of Borrowers
current on a pro forma basis; (iv) no Event of Default shall exist before and
after giving effect to such acquisition; (v) to the extent such assets are to be
included in the borrowing availability of a Borrower, Agent shall have completed
a satisfactory field examination with respect to the working capital assets of
the acquired company; (vi) the acquired company (or any subsidiary formed to
consummate the acquisition) shall have executed any and all loan documentation
required by Agent; (vii) receipt by Agent of projections and other financial
information which demonstrate to Agent's satisfaction that Borrowers (including
the acquired company) shall be in pro forma compliance with all obligations to
repay the Liabilities and all financial covenant obligations); and (viii)
Borrowers shall have obtained all consents for such acquisition required under
law or under any agreement (including without limitation the consent of the
holders of the Subordinated Debt Documents); and (B) CDS may issue stock options
pursuant to the Employment Agreements and each such Borrower may provide loans
to customers who meet certain minimum credit requirements established by
Borrower and reasonably acceptable to Agent. Such credit requirements shall
include, without limitation, monthly principal (straight line) amortization not
to exceed twenty-four (24) months, interest at the rate of one and three-
quarters percent (1.75%) per annum in excess of the Prime Rate, and a second
priority security interest in the accounts and inventory of the customer. The
aggregate amount of loans for all such customers shall not, at any time, exceed
One Million Dollars ($1,000,000). The limitation set forth above shall not
apply to any purchase, retirement or redemption of any shares of any class of
its stock by CDS, so long as such purchase and redemption is permitted under all
applicable laws and is in connection with the exercise by an ESOP participant or
beneficiary of his put rights provided for under the terms of the ESOP or
applicable law, or in connection with the exercise by CDS of its right of first
refusal provided for under the terms of the ESOP;
(l) such Borrower shall not declare or pay any dividend or other
distribution (whether in cash or in kind) on any class of its stock (if such
Borrower is a corporation) or on account of any equity interest in such Borrower
(if such Borrower is a partnership or other type of entity);
(m) such Borrower shall not purchase or otherwise acquire, or contract to
purchase or otherwise acquire, the obligations or stock of any Person, other
than direct obligations of the United States;
(n) such Borrower shall not amend its articles of incorporation (except as
otherwise contemplated by Section 6.10 of the Note Purchase Agreement) or change
its fiscal year and CDS shall not amend or modify the Subordinated Debt
Documents;
(o) CDS's net worth shall not at any time be less than the amount set forth
in Paragraph (9) of Exhibit A; "Net Worth" (calculated on a FIFO basis) being
defined for purposes of this Paragraph as CDS's consolidated shareholders'
equity (including retained
31
earnings) plus the amount of any consolidated debt subordinated to Agent in a
manner satisfactory to Agent, all as determined under generally accepted
accounting principles; and
(p) Borrowers shall reimburse Agent for all reasonable costs and expenses,
including, without limitation, legal expenses and reasonable attorneys' fees
(both in-house and outside counsel), incurred by Agent in connection with
documentation and consummation of this transaction and any other transactions
among Borrowers, Agent and Lenders, including, without limitation, Uniform
Commercial Code 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 and
Lenders in seeking to collect any Liabilities and to administer and enforce any
of Agent's and Lenders' 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
Loans hereunder, shall be payable by Borrower to Agent on demand and, until
paid, shall bear interest at the highest rate then applicable to Loans
hereunder.
(q) As soon as practicable and in any event within thirty (30) days after
such Borrower or any member of its Controlled Group knows or has reason to know
(i) that a Reportable Event has occurred with respect to a Pension Plan (which
is not a Multiemployer Plan), (ii) that an application is to be or has been made
to the Secretary of the Treasury for a waiver of the minimum funding standard or
the extension of any amortization period under Section 412 of the Code with
respect to a Pension Plan (which is not a Multiemployer Plan), (iii) that a
notice of termination has been filed with the PBGC with respect to a Pension
Plan (which is not a Multiemployer Plan), (iv) that proceedings are likely to be
or have been instituted by the PBGC to terminate a Pension Plan (which is not a
Multiemployer Plan), (v) that such Borrower or any member of its Controlled
Group will or may incur any liability to or on account of a Plan that is a
Single-employer Plan under Section 4062, 4063 or 4064, or on account of a
Pension Plan that is a Multiemployer Plan under Section 4201 or 4204 of ERISA,
(vi) that as of the last day of any plan year, the present value of the benefits
under any Pension Plan (which is not a Multiemployer Plan), as determined by the
Pension Plan's independent actuaries, exceeds the value as of such date, as
determined by such actuaries, of all assets of such Pension Plan by more than
One Hundred Thousand Dollars ($100,000), or (vii) that the aggregate present
value of the benefits under all Pension Plans (which are not Multiemployer
Plans) that do not satisfy clause (vi) above, as of the end of each Plan's plan
year, as determined by such Pension Plan's independent actuaries, exceeds the
aggregate value as of such date, as determined by such actuaries, of all assets
of all such Plans by more than One Hundred Thousand Dollars ($100,000), such
Borrower shall submit to Agent a certificate of the chief financial officer of
such Borrower setting forth details as to such occurrence and action, if any,
that such Borrower or any member of its Controlled Group is required or proposes
to take, together with any notices required or proposed to be filed by such
Borrower or any member of its Controlled Group with the PBGC or the plan
administrator with respect thereto.
32
(r) such Borrower shall not, directly or indirectly, and shall not permit
and member of its Controlled Group to, directly or indirect, by reason of an
amendment or amendments to, or the adoption of, one or more Plans under Title IV
of ERISA, permit the present value of all benefit liabilities, as defined in
Title IV of ERISA (using the actuarial assumptions used by the PBGC upon
termination of a plan), to increase by more than One Hundred Thousand Dollars
($100,000); provided, however that this limitation shall not be applicable to
the extent that the fair market value of assets allocable to such benefits, all
determined as of the most recent valuation date for each such Title IV Plan, is
in excess of the benefit liabilities.
(s) such Borrower shall promptly advise Agent in writing of the occurrence
of any event including, but not limited to, the failure of the ESOP to retain
the minimum stock interest required by Section 133(b)(6) of the Code, that
causes or will cause the loan evidenced by the ESOP Term Notes to no longer
qualify as a "securities acquisition loan" within the meaning of Section 133 of
the Code.
12. DEFAULT. The occurrence of any one or more of the following events
shall constitute an "Event of Default" by Borrowers hereunder:
(a) the failure of any Obligor to pay when due, pursuant to 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) the failure of any Obligor to perform, keep or observe any of the
covenants, conditions, promises, agreements or obligations of such Obligor under
the Subordinated Debt Documents; or the failure of any Obligor to perform, keep
or observe any of the covenants, promises, agreements or obligations of such
Obligor under any other agreement with any Person if such failure under such
other agreement may have a material adverse effect on such Obligor's business,
property, assets, operations or condition, financial or otherwise;
(d) the making or furnishing by any Obligor to Agent or any Lender 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 or such
Lender, which is untrue or misleading in any material respect;
(e) the loss, theft, damage or destruction of, or (except as permitted
hereby) sale, lease or furnishing under a contract of service of, any of the
Collateral, except for Collateral of a Borrower with a value of up to One
Hundred Thousand Dollars ($100,000) in the aggregate for such Borrower for the
prior twelve (12) month period which is fully insured and the proceeds of which
promptly are tendered to Agent;
33
(f) 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;
(g) the commencement of any proceedings in bankruptcy by or against any
Obligor or for the liquidation or reorganization of any Obligor, or alleging
that such Obligor is insolvent or unable to pay its debts as they mature, or 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 sixty (60) days after the commencement of
such proceedings;
(h) the appointment of a receiver or trustee for any Obligor, for any
material portion 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 sixty (60) days after the
commencement of such proceedings;
(i) the entry of any judgment or order against any Obligor exceeding One
Hundred Thousand Dollars ($100,000) which remains unsatisfied or undischarged
and in effect for thirty (30) days after such entry without a stay of
enforcement or execution;
(j) the dissolution of any Obligor which is a partnership or corporation,
except that Borrower shall have sixty (60) days in which to provide a successor
plan to Agent, which Agent shall accept or reject in its sole reasonable
discretion;
(k) 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 or any Lender pursuant to which such Person has guaranteed
to Agent or any Lender the payment of all or any of the Liabilities or has
granted Agent 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;
(l) the institution in any court of a criminal proceeding against any
Obligor, or the indictment of any Obligor for any crime;
(m) a Gross-Up Event shall have occurred for any reason other than a change
in the Statutory Exclusion or a prepayment of the ESOP Term Notes;
34
(n) a Borrower or any member of its Controlled Group shall fail to pay when
due an amount or amounts aggregating in excess of Fifty Thousand Dollars
($50,000) that it shall have become liable to pay to the PBGC or to a Pension
Plan under Title IV of ERISA; or notice of intent to terminate a Pension Plan or
Pension Plans (which are not Multiemployer Plans) having aggregate Unfunded
Vested Liabilities in excess of Fifty Thousand Dollars ($50,000) (collectively,
a "Material Plan") shall be filed under Title IV of ERISA by a Borrower or any
member of its Controlled Group, or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate or to cause a
trustee to be appointed to administer any Material Plan or a proceeding shall be
instituted by a fiduciary of any Multiemployer Plan against a Borrower or any
member of its Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA and
such proceedings shall not have been dismissed within thirty (30) days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan must be
terminated; or
(o) the occurrence of any event or condition which has or is reasonably
likely to have a Material Adverse Effect.
13. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in Paragraph 12(g)
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 Liabilities may, at the option of Requisite Lenders, and without
demand, notice or legal process of any kind, be declared, and immediately shall
become, due and payable.
(b) Upon the occurrence of an Event of Default, Agent may exercise from
time to time any rights and remedies available to it under the Uniform
Commercial Code and 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, (i) cease (and cause Lenders to cease) advancing money or extending
credit to or for the benefit of Borrowers, implement any reserves which Agent
deems necessary and/or terminate this Agreement as to any future liability or
obligation of Agent and Lenders to Borrowers or (ii) 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 a Borrower's 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 a
Borrower's premises without cost to Agent. At Agent's request, each Borrower
shall, at such Borrower's 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 such Borrower. Each Borrower recognizes that if such
35
Borrower falls 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 and Lenders, and agrees that Agent and 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 five (5) 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.
14. 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 and each 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
reasonable 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 no Borrower shall
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, each Borrower shall satisfy such undertaking to the maximum
extent permitted by applicable law. Any liability, obligation, loss, damage,
penalty, cost or expense covered by 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 Loans hereunder from the
date incurred by each Indemnified Party until paid by such Borrower, be added to
the Liabilities of such Borrower and be secured by the Collateral of such
Borrower. The provisions of this Paragraph 14 shall survive the satisfaction and
payment of the other Liabilities and the termination of this Agreement.
15. NOTICE. 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 (i) in the case of Agent and
LaSalle shall be sent to it at 000 Xxxxx
00
XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, Attention: Credit Officer (X.X. Xxxxx),
(ii) in the case of Xxxxxx shall be sent to it at 000 Xxxx Xxxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxx 00000, Attention: Xxxxxxxxx Xxxxxxxxxxx, (iii) in the case ANB
shall be sent to it at Xxx Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000,
Attention: Xxxxxx Xxxxxxxx, and (iv) in the case of a Borrower shall be sent to
it at CDS's principal place of business set forth on the first page of this
Agreement.
16. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION. This Agreement
and the Other Agreements are submitted by Borrowers to Agent and Lenders for
Agent's and Lenders' acceptance or rejection at Agent's principal place of
business as an offer by Borrowers to borrow monies from Lenders now and from
time to time hereafter, and shall not be binding upon Agent or Lenders or become
effective until accepted by Agent and Lenders, in writing, at said place of
business. If so accepted by Agent and 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.
To induce Agent and 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; PROVIDED, THAT AGENT
SHALL USE ITS BEST EFFORTS TO PROCEED IN FEDERAL COURT WITHIN SAID CITY AND
STATE. Each Borrower hereby irrevocably appoints and designates CT Corporation
System, whose address is 000 Xxxxx XxXxxxx Xxxxxx Xxxxxxx, Xxxxxxxx 00000 (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 its sole reasonable
discretion in writing is satisfactory and who has executed an agreement in form
and substance satisfactory to Agent agreeing to act as such agent), as such
Borrower's 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
37
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.
17. INTENTIONALLY OMITTED.
18. 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.
19. POWER OF ATTORNEY. Each Borrower acknowledges and agrees that its
appointment of Agent as its attorney and agent-in-fact 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.
20. WAIVER.
(a) EACH BORROWER HEREBY WAIVES 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 BY SUCH BORROWER OR AGENT OR ANY LENDER OR WHICH, IN ANY WAY, DIRECTLY
OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN SUCH
BORROWER AND AGENT OR ANY LENDER. IN NO EVENT SHALL AGENT OR ANY LENDER BE
LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
(b) Each Borrower hereby waives demand, presentment, protest and notice of
nonpayment, and further waives the benefit of all valuation, appraisal and
exemption laws.
(c) 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
SUCH BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.
(d) Agent's or Lender's failure, at any time or times hereafter, to require
strict performance by Borrowers of any provision of this Agreement or any of the
Other Agreements shall not waive, affect or diminish any right of Agent and
Lenders thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Agent and Lenders 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
38
on the part of Agent or Lenders 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 Borrowers 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 and Lenders unless such suspension or waiver
is in writing, signed by a duly authorized officer of Agent and Lenders and
directed to Borrowers specifying such suspension or waiver.
21. INCOME TAXATION.
(a) In the event that at any time (whether before or after payment of the
ESOP Term Note of an Indemnitee) a Gross-Up Event shall occur with respect to
such Indemnitee, CDS will pay to such Indemnitee in immediately available funds
at the time or times specified in subparagraph (c) below:
(i) an amount equal to the excess of
(A) the amount of interest which would have been payable on the unpaid
principal amount of such Indemnitee's interest in such Indemnitee's ESOP Term
Note during the Additional Payment Period if such ESOP Term Note had borne
interest at a rate per annum equal to the Lending Rate, over
(B) the amount of interest actually paid or payable under the terms of
such Indemnitee's ESOP Term Note during the Additional Payment Period; and
(ii) the sum of
(A) the amount of any interest and of any penalties, additions to tax and
additional amounts payable under Chapter 68 of the Code (such penalties,
additions to the tax and additional amounts being referred to as "Additions to
Tax") which are deductible for federal income tax purposes and which are payable
to the United States as a consequence of the failure to include more than fifty
percent (50%) of the interest referred to in subparagraph (i)(B) above in the
Federal Gross Income of such Indemnitee; and
(B) an amount which, after giving effect to all taxes attributable to the
inclusion of such amount in the gross income of such Indemnitee under the laws
of any federal, state or local governmental or other taxing authority (such
taxes to be calculated at the maximum statutory rate applicable to such
Indemnitee, after taking into account deductions attributable to imposition of
state and local taxes), shall be equal to the amount of any interest or
Additions to Tax which are not deductible for federal income tax purposes and
which are payable to the United States as a consequence of the failure to
include more than fifty percent (50%) of the interest referred to in
subparagraph (i)(B) above in the Federal Gross Income of such Indemnitee.
39
(b) In the event that at any time (whether before or after payment of
the ESOP Term Note of an Indemnitee) a Change of Law shall occur with
respect to such Indemnitee, CDS will pay to such Indemnitee in immediately
available funds at the time or subparagraph (c)(ii) an amount with respect
to the applicable Supplemental Payment Period which, after giving effect to
all taxes attributable to the inclusion of such amount in the gross income
of such Indemnitee under the laws of any federal, state or local
governmental or other taxing authority, shall be equal to any tax related
to such Indemnitee's ESOP Term Note which arises (and for this purpose tax
arises, among other events, as a result of a reduction in any Tax
Allowance) solely as a result of such Change of Law (all such taxes to be
calculated at the maximum statutory rate applicable to such Indemnitee
after taking into account deductions attributable to the imposition of
state and local taxes).
(c) (i) Payments under subparagraph (a) attributable to the period for
which interest on the ESOP Term Note of an Indemnitee has become due and
payable shall be paid by CDS promptly on written demand by such Indemnitee,
and payments under subparagraph (a) attributable to any subsequent period
shall be payable on each date thereafter on which interest on the ESOP Term
Note is due and payable.
(ii) If CDS becomes obligated to make payments to an Indemnitee
pursuant to subparagraph (b), such Indemnitee shall notify CDS (A) of the
amount that is payable in respect of such portion of the Supplemental
Payment Period as had elapsed prior to the date such notice is given, which
sum shall be due and payable within thirty (30) days after the date of such
notice, and (B) at least annually, of the amount that will be payable on
such date or dates thereafter as set forth in such notice (each of which
shall be at least thirty (30) days after the date of such notice). The
computation of any amount payable under subparagraphs (a)(ii)(B) or (b)
shall be made in good faith by such Indemnitee and delivered to CDS, and
CDS shall have no right to examine the federal income tax returns or any
other returns, documents or records of such Indemnitee with respect
thereto.
(iii) If CDS shall fall to pay any amount payable under subparagraphs
(a) or (b) on the due date pursuant to this Paragraph, CDS shall also pay,
to the extent lawful, interest on such unpaid amount at a rate per annum
equal to the lesser of (A) the Maximum Lawful Rate and (B) the Lending
Rate, from such date until each amount is paid.
(d) (i) Each Indemnitee shall notify CDS in the event that it shall
receive any inquiry from the Internal Revenue Service (including a revenue
agent's report or notice of proposed adjustments) questioning the exemption
from Federal Gross Income of the Statutory Exclusion of the interest
accrued or received on its ESOP Term Note and shall provide CDS with all
information available to such Indemnitee with respect to such inquiry. Each
Indemnitee
40
shall afford CDS an opportunity to discuss such inquiry with the Internal
Revenue Service and to make any written submissions to the Internal Revenue
Service which CDS deems desirable; provided, that if such Indemnitee shall,
in good faith and in its sole discretion, determine that the commencement
or continuance of any such discussions or submissions by CDS would extend
the audit or review of such Indemnitee's federal income tax return for any
taxable year beyond the period such audit or review would require but for
the commencement or continuance of such discussion or submission then, upon
receipt of notice by CDS from such Indemnitee to such effect, CDS shall
have no further right to commence or continue such discussions or
submissions, and such Indemnitee shall have the right to cause such audit
or review to be closed.
(ii) If any Indemnitee receives a notice of deficiency that allows the
exclusion of less than the Statutory Exclusion of the interest on ESOP Term
Note from Federal Gross Income and such Indemnitee determines in its sole
discretion not to pay the deficiency, it shall promptly notify CDS of its
determination and shall, at the request of CDS, file a petition in the Tax
Court and permit CDS to control the conduct of the proceedings before the
Tax Court insofar as it relates to the exclusion of less than the Statutory
Exclusion of interest on such Indemnitee's ESOP Term Note in Federal Gross
Income. Such Indemnitee shall have sole discretion to decide whether to
prosecute an appeal from an adverse determination with respect to the
exclusion of less than the Statutory Exclusion of the interest on such
Indemnitee's ESOP Term Note from Federal Gross Income by the Tax Court or
any court to which a Tax Court decision is appealed; provided, that in the
event such Indemnitee shall determine to prosecute an appeal with respect
to any other issue, then such Indemnitee shall at the request of CDS, also
prosecute an appeal with respect to such adverse determination and shall
permit CDS to control the conduct of the proceedings insofar as it relates
to the exclusion of less than the Statutory Exclusion of the interest on
such Indemnitee's ESOP Term Note from Federal Gross Income.
(iii) If CDS shall make payment to any Indemnitee pursuant to
subparagraph(a) hereof as a result of any event described in (i) or (ii) of
the definition of Gross-Up Event in Paragraph 1(aa), then such Indemnitee
shall, at the request of CDS, file a claim of refund with respect to the
tax attributable to the exclusion of less than the Statutory Exclusion of
the interest on such Indemnitee's ESOP Term Note from such Indemnitee's
Federal Gross Income. If any such claim shall not be allowed by the
Internal Revenue Service, such Indemnitee shall, at the request of CDS,
promptly commence a suit for refund (in a forum chosen by such Indemnitee
in its sole discretion). In the event of an adverse determination in such
suit on the exclusion of less than the Statutory Exclusion of the interest
on such Indemnitee's ESOP Term Note from Federal Gross Income, such
Indemnitee shall have sole discretion to decide whether to
41
prosecute an appeal from such adverse determination, except that, in the event
(A) the pleadings in the suit for refund do not involve any issue other than the
exclusion of less than the Statutory Exclusion of the interest on such
Indemnitee's ESOP Term Note from Federal Gross Income, or (B) the pleadings in
the suit for refund involve one or more issues other than the exclusion of less
than the Statutory Exclusion of the interest on such Indemnitee's ESOP Term Note
from Federal Gross Income and such Indemnitee determines to prosecute an appeal
with respect to any such other issue, then such Indemnitee shall, at the request
of CDS, prosecute an appeal with respect to such adverse determination. Such
Indemnitee shall permit CDS to control the conduct of proceedings insofar as it
relates to the exclusion of less than the Statutory Exclusion of the interest on
such Indemnitee's ESOP Term Note from Federal Gross Income.
(iv) For all purposes of this subparagraph(d), the right of CDS to
control any proceeding shall mean the right (subject to the approval of
counsel for Indemnitee, which approval shall, taking into account the best
interest of Indemnitee, the timeliness of any request made by CDS and all
other relevant facts and circumstances, not be unreasonably withheld) to
control the submission and content of documentation, protests, memoranda of
fact and law and briefs, the conduct of oral arguments or presentations,
the selection of witnesses and the negotiation of stipulations of facts,
all as may be appropriate in proceedings before the Internal Revenue
Service, the tax Court, Claims Court, a federal District Court or any court
of appellate jurisdiction, as the case may be.
(v) As a condition precedent to the exercise by CDS of the rights of
contest granted to it under this subparagraph, CDS shall deliver to
Indemnitee an opinion of counsel satisfactory to such Indemnitee to the
effect that a meritorious claim exists with respect to the exemption of the
Statutory Exclusion of the interest on such Indemnitee's ESOP Term Note
from Federal Gross Income. In addition, CDS shall reimburse and hold
harmless such Indemnitee on an after-tax basis for all costs, and expenses
incurred in connection with any contest including, without limitation, all
fees and disbursements of attorneys, accountants and expert witnesses.
(e) If CDS shall make any payment to an Indemnitee pursuant to subparagraph
(a) and such Indemnitee shall thereafter, as a result of the exercise by CDS of
the rights of contest granted to it under subparagraph (d), receive a refund or
credit of tax pursuant to Section 6402 of the Code in respect of a claim that
for a certain period no more than one hundred percent (100%) minus the Statutory
Exclusion of the interest on such Indemnitee's ESOP Term Note was includable in
its Federal Gross Income, such Indemnitee shall pay to CDS (i) an amount which
bears the same proportion to the amount previously paid to such Indemnitee under
subparagraph (a)(i) with respect to the Interest to which such
42
claim related (the "Disputed Interest") as such refund or credit received
(exclusive of interest) bears to the amount of tax paid by such Indemnitee with
respect to such Disputed Interest and with respect to which amounts were paid to
such Indemnitee under subparagraph (a)(i) (exclusive of interest), plus (ii) the
amount of any refund or credit received (exclusive of interest) of Additions to
Tax paid with respect to such Disputed Interest and which amount to such
Indemnitee under subparagraph (a) (i), plus (iii) interest on the amounts
described in (i) and (ii) above at a rate or rates equal to the rate or rates of
interest, if any, received on such amounts.
If CDS shall make any payment to an Indemnitee pursuant to subparagraph (b)
and, if in the federal income tax return of such Indemnitee or after any
adjustment of such return, the amount of the Tax Allowance or other amount by
reference to which the amount of the supplemental payments is determined differs
from the amount used to compute the amount of such payment, CDS promptly on
written demand shall pay to such Indemnitee any additional amount computed
pursuant to subparagraph (b), and Indemnitee shall refund to CDS any excess
amount id pursuant to subparagraph (b) attributable to such differences.
(f) If Indemnitee determines, in good faith after consultation with
counsel, that there is a substantial likelihood for any reason whatsoever
(including, without limitation, a Change of Law, issuance of temporary, proposed
or final Treasury Regulation, issuance of an Internal Revenue Service ruling, a
court decision or an actual or proposed prepayment) that it might be required to
include more than fifty percent (50%) of the interest on such Indemnitee's ESOP
Term Note in its Federal Gross Income, such Indemnitee shall be entitled to
request a Qualifying Opinion of Counsel with respect to such interest for a
period commencing with the date of issuance of such Indemnitee's ESOP Term Note
or for any lesser period specified in such Indemnitee's request.
43
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the 3rd day of October, 1997.
X.X. XXXXX DRUG COMPANY, as a
Borrower
By /s/ Xxxxxx X. Xxxxxx
---------------------
Title Chairman
--------
GENERAL DRUG COMPANY, as a
Borrower
By /s/ Xxxxxx X. Xxxxxx
--------------------
Title Chairman
--------
SBS PHARMACEUTICALS, INC., as a
Borrower
By /s/ Xxxxxx X. Xxxxxx
--------------------
Title Chairman
--------
XXXXX XXXXXXXX COMPANY, INC., as a Borrower
By /s/ Xxxxxx X. Xxxxxx
--------------------
Title Chairman
--------
LASALLE BUSINESS CREDIT, INC., as Agent and a Lender
By Xxxxxxxxx Xxxxxxx
-----------------
Title Vice President
--------------
Maximum Loan Amount: $32,964,466.61
XXXXXX FINANCIAL, INC., as a Lender
By Xxxxxxxxx Xxxxxxxxxxx
----------------------------------
Title Vice President
--------------
Maximum Loan Amount: $30,000,000
AMERICAN NATIONAL BANK &
TRUST COMPANY OF CHICAGO, as a
Lender
By /s/ M. Xxxxxx Xxxxxx
----------------------------------
Title Vice President
--------------
Maximum Loan Amount: $30,000,000
44
EXHIBIT A - SPECIAL PROVISIONS
Attached to and made a part of that certain Loan and Security Agreement of
even date herewith ("Agreement") among LASALLE BUSINESS CREDIT, INC., a Delaware
corporation (in its individual capacity, ("LaSalle"), for itself, as a Lender,
and as Agent for all Lenders that are now or hereafter parties to this
Agreement, XXXXXX FINANCIAL, INC., a Delaware corporation (in its individual
capacity, "Xxxxxx"), as a Lender, AMERICAN NATIONAL BANK & TRUST COMPANY OF
CHICAGO, a national banking association (in its individual capacity, "ANB"), as
a Lender, X.X. XXXXX DRUG COMPANY, a Missouri corporation ("CDS"), as a
Borrower, GENERAL DRUG COMPANY, an Illinois corporation ("GDC"), as a Borrower,
SBS PHARMACEUTICALS, INC., a Delaware corporation ("SBS"), as a Borrower, and
XXXXX XXXXXXXX COMPANY, INC., a Delaware corporation ("JBC"), as a Borrower.
CREDIT TERMS
------------
1. LOAN LIMIT: Each Lender, severally and not jointly, agrees to make its Pro
Rata Share of such Loans to each Borrower as such Borrower shall request
from time to time, in accordance with the terms and conditions hereof and
in the Agreement up to the sum of the following sublimits (the "Loan
Limit"):
(a) Up to eighty-five percent (85%) of the face amount (less maximum
discounts, credits and allowances which may be taken by or granted to
Account Debtors in connection therewith) of such Borrower's Eligible
Accounts; plus
(b) Up to seventy percent (70%) of the lower of the cost or market value
(on a FIFO basis) of such Borrower's Eligible Inventory consisting of
finished goods (provided, that during the period commencing on the
date hereof and ending October 1, 1998, in addition to the foregoing,
up to an additional five percent (5%) (the "Additional Inventory
Advance Rate") of the lower of cost or market value (on an FIFO basis)
of such Borrower's Eligible Inventory consisting of finished goods;
provided, further, that the Additional Inventory Advance Rate shall
reduce by one (1) percentage point on the first day of each month
commencing May 1, 1998 until reduced to zero); plus
(c) (i) a term loan in the original principal amount of Four Hundred
Sixty-Four Thousand Four Hundred Sixty-Six and 61/100 Dollars
($464,466.61), amortized over a period of forty-eighty (48) months at
Twelve Thousand Eighty-Nine and 33/100 Dollars ($12,089.33) per month
plus a final payment of all remaining amounts due. The term loan shall
be evidenced by, and repayable in accordance with, the ESOP Term
Notes; plus
(ii) a term loan in the original principal amount of One Million
Dollars ($1,000,000), amortized over a period of sixty (60) months at
Sixteen Thousand Six Hundred Sixty-Seven Dollars ($16,667) per month
plus a final payment of all remaining amounts due. The term loan shall
be evidenced by, and repayable in accordance with, the Equipment Term
Notes; plus
(iii) a term loan in the original principal amount of Nine Hundred
Thousand Dollars ($900,000), amortized over a period of one hundred
eighty (180) months at Five Thousand Dollars ($5,000) per month plus a
final payment of all remaining amounts due and a term loan in the
original principal amount of Six Hundred Thousand Dollars ($600,000),
amortized over a period of one hundred eighty (180) months at Three
Thousand Three Hundred Thirty-Three and 33/100 Dollars ($3,333.33) per
month plus a final payment of all remaining amounts due. The term
loans shall be evidenced by, and repayable in accordance with, the
Real Estate Term Notes; minus
(d) Such reserves as Agent elects, in its sole discretion, to establish
from time to time including, without limitation, a reserve for
outstanding principal amount of the ESOP Term Note;
provided, that (i) the aggregate outstanding Loans to Borrowers advanced
pursuant to Paragraphs (1)(a) and (1)(b) hereof shall not exceed at any time an
amount equal to Ninety Million Dollars ($90,000,000), (ii) the aggregate
outstanding Loans to Borrowers advanced pursuant to Paragraph (1)(b) hereof
shall not exceed at any time an amount equal to Seventy Million Dollars
($70,000,000), (iii) the aggregate outstanding Loans to Borrowers advanced
pursuant to the proviso in Paragraph (1)(b) shall not exceed at any time an
amount equal to Four Million Dollars ($4,000,000), (iv) the Loans advanced
pursuant to Paragraphs (1)(c) of this Exhibit A shall only be advanced to CDS
(except the term loan in the original principal amount of Six Hundred Thousand
Dollars ($600,000) described in paragraph (1)(c)(iii) which shall be advanced to
GDC), (iv) the aggregate outstanding Loans to any Borrower (other than CDS and
GDC) shall not exceed the borrowing availability of such Borrower under
Paragraphs (1)(a) and (1)(b), the aggregate outstanding loans to GDC shall not
exceed the borrowing availability of GDC under Paragraphs 1(a) and 1(b) and the
term loan to GDC described in Paragraph (1)(c)(iii) and the aggregate
outstanding Loans to CDS shall not exceed the borrowing availability of CDS
under Paragraphs (1)(a) and (1)(b) and the term loan to CDS described in
Paragraph (1)(c)(iii) and (v) the aggregate outstanding Loans and Letters of
Credit to Borrowers shall in no event exceed Ninety-Two Million Nine Hundred
Sixty-Four Thousand Four Hundred Sixty-Six and 61/100 Dollars ($92,964,466.61)
(the "Maximum Loan Limit").
2
2. LETTERS OF CREDIT:
(a) Subject to the terms and conditions of this Agreement, including this
Exhibit A and the Other Agreements, during the Original Term or any
Renewal Term, Agent may, in its sole discretion, from time to time,
request that L/C Bank issue, upon a Borrower's request, documentary
and standby letters of credit for the account of such Borrower,
provided that the aggregate undrawn face amount of all such Letters of
Credit issued on behalf of all Borrowers shall at no time exceed Five
Million Dollars ($5,000,000). The undrawn face amount of each
outstanding standby Letter of Credit for the account of a Borrower
shall automatically reduce, dollar for dollar, the amount which such
Borrower may borrow based upon the Loan Limit and the undrawn face
amount of each outstanding documentary Letter of Credit for the
account of a Borrower shall automatically reduce, by an amount equal
to thirty percent (30%) of such Letter of Credit, the amount which
such Borrower may borrow based upon the Loan Limit. Payments made by
Agent or Lenders to any Person on account of any Letter of Credit
shall constitute Loans hereunder. At no time shall the aggregate of
direct Loans by Agent and Lenders to Borrowers plus the contingent
liability of Lenders under the outstanding Letters of Credit be in
excess of the Loan Limit.
(b) Each Borrower agrees to pay to the L/C Bank, on demand by the L/C
Bank, the L/C Bank's normal and customary administrative charges in
effect, from time to time, for issuing and administering any Letters
of Credit for the account of such Borrower and if not so paid each
Lender shall, without regard to any other provision of this Agreement
or any of the Other Agreements, any defense that a Borrower may have
to its obligation to pay the L/C Bank in connection with such charges
or any defense any Lender may have in connection with the
participation described in subsection (d) below in connection with any
Letter of Credit, pay the Issuing Bank for such Lender's Pro Rata
Share of such charges, and any payments so made by Lenders to Issuing
Bank shall be deemed to be Loans. Each Borrower further agrees to pay
Agent, for the benefit of Lenders, a letter of credit fee equal to one
percent (1%) per annum of the daily average of the aggregate undrawn
face amount of the outstanding Letters of Credit for the account of
such Borrower which letter of credit fee shall be paid to Agent
monthly in arrears on each date that interest is due hereunder (but in
no event shall the letter of credit fee applicable to any Letter of
Credit be less than One Hundred Fifty Dollars ($150)).
(c) Each Borrower agrees to reimburse the L/C Bank, on demand by the L/C
Bank, for each payment made by the L/C Bank under or pursuant to any
Letter of Credit for the account of such Borrower and, if not so
reimbursed, each Lender shall, without regard to any other provision
of this Agreement or any of the Other Agreements, any defense that
Borrower may have to its obligation to reimburse the L/C Bank in
connection with such payment or any defense any Lender may have in
connection with such payment or any defense any Lender may have in
connection with the
3
participation described in subsection (d) below in connection with any
Letter of Credit, reimburse the Issuing Bank for such Lender's Pro
Rata Share of such payment, and any payments so made by Lenders to
Issuing Bank shall be deemed to be Loans. Agent may provide for the
payment of any reimbursement obligations and any interest accrued
thereon by advancing the amount thereof to the L/C Bank on behalf of
the applicable Borrower as a Loan.
(d) Immediately upon the issuance of a Letter of Credit in accordance with
this Agreement, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received from the Issuing Bank, without
recourse or warranty, an undivided interest and participation therein
to the extent of such Lender's Pro Rata Share (including, without
limitation, all obligations of Borrowers with respect thereto). Each
Borrower hereby indemnifies Agent and each Lender against any and all
liability and expense it may incur in connection with any Letter of
Credit for the account of such Borrower and agrees to reimburse Agent
and Lenders for any payment made by Agent or Lenders to the L/C Bank,
except for any liability incurred or payment made as a result of
Agent's or Lenders' gross negligence or willful misconduct.
3. INTENTIONALLY OMITTED.
4. INTEREST RATES: Subject to the terms and conditions set forth below, the
Loans made pursuant to Paragraph (1)(c)(i) of this Exhibit A shall bear
interest at the publicly announced prime rate of LaSalle National Bank of
Chicago, Illinois ("Bank") (which is not intended to be Bank's lowest or
most favorable rate in effect at any time) (the "Prime Rate") in effect
from time to time minus one-half of one percent (0.5%), and the Loans made
pursuant to Paragraph 1(a), (b), (c)(ii) and (c)(iii)) shall bear interest
at the per annual rate of interest set forth in subsection (a) or (b)
below:
(a) The Prime Rate in effect from time to time, payable on the last
Business Day of each month in arrears.
(b) The "Applicable Margin" (as defined below), in effect at such time, in
excess of the per annum rate of interest at which U.S. dollar deposits
of an amount comparable to the amount of the Loans and for a period
equal to the relevant Interest Period (as hereinafter defined) are
offered generally to Agent (rounded upward necessary to the nearest
1/16 of 1.00%) in the London Interbank Eurodollar market at 11:00 a.m.
(London time) two (2) Business Days prior to the commencement of each
Interest Period ("LIBOR"), such rate to remain fixed for such Interest
Period. "Interest Period" shall mean any continuous period of thirty
(30), sixty (60) or ninety (90) days, as selected from time to time by
a Borrower by irrevocable notice (in writing, by telex, telegram or
cable) given to Agent before 12:00 noon, Chicago time, not less than
three (3) Business Days prior to the first day of each respective
Interest Period (any notice received by Agent after 12:00 noon,
Chicago time, will
4
be deemed received on the immediately succeeding Business Day)
commencing on the date hereof, provided, that: (i) each such period
occurring after such initial period shall commence on the day on which
the Immediately preceding period expires; (ii) the final Interest
Period shall be such that its expiration occurs on or before the end
of the Original Term or any Renewal Term; and (iii) if for any reason
a Borrower shall fail to timely select a period, then such Loans shall
continue as, or revert to, Prime Rate Loans. "Applicable Margin" shall
initially mean one hundred seventy-five (175) basis points; provided,
that the Applicable Margin shall be reduced to one hundred fifty (150)
basis points (i) if an IPO is consummated, or (ii) following Agent's
receipt of CDS's financial statements for any twelve (12) month period
ending on or after September 30, 1998, which demonstrate that CDS's
consolidated net income and cash flow exceed its budgeted consolidated
net income and cash flow for such period calculated in a manner
acceptable to Agent and pursuant to budgets approved by Agent. In the
event such financial statements are not audited and such financial
statements are subsequently adjusted such that CDS's consolidated net
income and cash flow do not exceed budgeted consolidated net income
and cash flow, Applicable Margin shall be increased to one hundred
seventy-five (175) basis points.
Interest on LIBOR Rate Loans shall be payable monthly in arrears the
last Business Day of each month. After Agent receives a notice from a
Borrower of the conversion or continuation of any LIBOR Rate Loan,
Agent shall provide a copy of such notice to each Lender before 3:00
p.m., Chicago time, on the date such notice is deemed given to Agent.
The rate of interest with respect to Prime Rate Loans increase or
decrease by an amount equal to each increase or decrease in the Prime
Rate effective on the effective date of each such change in the Prime
Rate.
Upon the occurrence of an Event of Default, and the continuance
thereof, each Loan shall bear interest at the rate of two percent (2%)
per annum in excess of the interest rate otherwise payable thereon,
which interest shall be payable on demand. All interest shall be
calculated upon the basis of a 360-day year, for the actual number of
days elapsed.
5. FEES AND CHARGES:
(a) Closing Fee: A closing fee, payable on the effective date of the Loans
herein, in the amount of one-half percent (0.5%) of the Maximum Loan
Limit.
(b) Unused Line Fee: An unused line fee of one-fifth of one percent (0.2%)
per annum (computed on the basis of a year of three hundred sixty
(360) days for the actual number of days elapsed) of the amount by
which the Maximum Loan Limit
5
exceeds the average monthly balance of the Loans and face amount of
outstanding Letters of Credit, payable monthly in arrears, on the
first day of each month.
(c) Agency Fee: An agency fee equal to Ten Thousand Dollars ($10,000) per
month, payable solely to Agent monthly in arrears on the first day of
each month.
(d) Prepayment Fee: Notwithstanding the provisions of Paragraph 9 of the
Agreement, if Borrowers elect to terminate this Agreement prior to the
termination date hereof, Borrowers shall pay to Agent, for the benefit
of Lenders, a prepayment fee equal to: (i) three percent (3%) of the
Maximum Loan Limit if this Agreement is terminated during the first
year of the Original Term; and (ii) two percent (2%) of the Maximum
Loan Limit if this Agreement is terminated during the second year of
the Loan Agreement; and (iii) one percent (1%) of the Maximum Loan
Limit if this Agreement is terminated during the third year of the
Original Term or during any Renewal Term; provided, that if pre-
payment is the result of an IPO and Borrowers do not obtain a secured
credit facility on or before October 3, 2000, no prepayment fee shall
be payable; provided, further, that if the prepayment is the result of
an IPO and in connection therewith Borrowers obtain a secured credit
facility (except for a secured credit facility from all the then
current Lenders in accordance With their then Pro Rata Shares). the
fee shall be one-half of one percent (0.5%) of the Maximum Loan Limit.
6. ENVIRONMENTAL AUDITS: Agent and Lenders rights under Paragraph 11(d) of the
Agreement shall include, without limitation, the night to cause
environmental audits of a Borrower's properties to be conducted from time
to time by environmental auditors satisfactory to Agent in its sole
reasonable judgment.
7. RESTRICTION ON MANAGEMENT FEES AND OTHER COMPENSATION: In addition to the
restrictions contained in Paragraph 11(1) of the Agreement, no Borrower
shall (i) pay any management or consulting fees to any Persons, except for
consulting fees in the aggregate of One Hundred Fifty Thousand Dollars
($150,000) per annum, or make any loan to any Person (except travel
advances made to employees in the ordinary course of business and loans to
employees not exceeding Seventy-Five Thousand Dollars ($75,000) in the
cumulative aggregate during the Original or any Renewal Term), (ii) pay
compensation to any employees covered by the Employment Agreements in
excess of the compensation set forth in such Employment Agreements as in
effect on the date hereof, subject to review of employment agreements, or
(iii) pay annual compensation, whether as salary or otherwise (except for
incentive compensation), to directors or officers of Borrowers (other than
those officers and directors covered by the Employment Agreements) in
excess of one hundred twenty percent (120%) of the aggregate compensation
in effect for those Persons on the date of this Agreement; provided, that
no incentive compensation for such officers and directors, whether in the
form of bonuses or otherwise, shall be granted without the prior written
approval of Requisite Lenders.
6
8. CHECKING ACCOUNT PROVISIONS: CDS shall maintain its general checking
account with Bank. Normal charges shall be assessed thereon. Although no
compensating balance is required, CDS must keep monthly balances in order
to merit earnings credits which will cover Bank's service charges for
demand deposit account activities. The other Borrowers shall maintain
banking relations with financial institutions acceptable to Agent.
9. NET WORTH: Notwithstanding the provisions of Paragraph 11(o) of the
Agreement, Borrowers shall maintain at all times a minimum Net Worth
(calculated on a FIFO basis) equal to the greater of (A) ninety percent
(90%) of Net Worth as of the date hereof (after giving effect to the
Acquisition) and (B) Fourteen Million Dollars ($14,000,000), such greater
amount to be increased, effective as of the close of each fiscal quarter of
CDS, by an amount equal to fifty percent (50%) of CDS's consolidated net
after tax fiscal year-to-date profit (but not decreased for losses) for the
fiscal period (i.e. quarter, half-year) then ending.
10. INTEREST COVERAGE RATIO: Borrowers shall maintain an Interest Coverage
Ratio of not less than 1.50 to 1.00 measured for the twelve (12) month
period ending on the last day of each fiscal quarter, beginning with the
fiscal quarter ending February 28, 1998 (provided, that for the fiscal
quarters ending February 28, 1998, May 31, 1998, and August 31, 1998,
Interest Coverage Ratio shall be calculated for the period commencing
December 1, 1997 and ending on the last day of such fiscal quarter). For
purposes of this Paragraph, the aggregate annual amount of all ESOP
contribution expenses shall be excluded from the calculation for every
fiscal quarter.
11. DEBT SERVICE COVERAGE RATIO: Borrowers shall maintain a Debt Service
Coverage Ratio of not less than 1.25 to 1.00 measured for the twelve (12)
month period ending on the last day of each fiscal quarter, beginning with
the fiscal quarter ending February 28, 1998 (provided, that for the fiscal
quarters ending February 28, 1998, May 31, 1998, and August 31, 1998, Debt
Service Coverage Ratio shall be calculated for the period commencing
December 1, 1997 and ending on the last day of such fiscal quarter). For
purposes of this Paragraph, the aggregate annual amount of all ESOP
contribution expenses shall be excluded from the calculation for every
fiscal quarter.
12. ACQUISITION REPRESENTATION
(a) The Acquisition Agreement has been duly executed and delivered by the
parties thereto and the transactions contemplated thereunder have been
consummated in accordance with the terms thereof and all applicable
law. CDS has acquired and has good and marketable title to the
Partnership Interests (as defined in the Acquisition Agreement), free
and clear of all liens. Upon acquisition of the Partnership Interests
by CDS, the Partnership (as defined in the Acquisition Agreement) has
been dissolved and CDS has good and marketable title to the Shares (as
defined in the Acquisition Agreement), free and clear of all liens.
All conditions precedent set forth in the Acquisition Agreement have
been satisfied or
7
waived (but if waived by CDS, CDS has disclosed such waiver in writing
to Agent).
(b) All actions and proceedings required by the Acquisition Agreement and
applicable law (including compliance with the Xxxx-Xxxxx-Xxxxxx Anti-
Trust Improvements Act of 1976, as amended) have been taken.
(c) No governmental authority has issued any injunction, restraining order
or other order which prohibits consummation of the transactions
described in the Acquisition Agreement and no governmental or other
action or proceeding has been commenced or, to the best knowledge of
CDS, threatened, seeking any injunction, restraining order or other
order which seeks to void or otherwise modify the transactions
described in the Acquisition Agreement.
13. CAPITAL EXPENDITURES: Borrowers shall not make Capital Expenditures in
excess of Six Hundred Thousand Dollars ($600,000) for the period from
October 1, 1997 through February 28, 1998 or in excess of One Million Two
Hundred Fifty Thousand Dollars ($1,250,000) in any fiscal year starting
with CDS's 1999 fiscal year which begins on March 1, 1998.
14. OWNERSHIP: The ESOP and Xxxxxx X. Xxxxxx shall at all times individually
own, on a fully diluted basis, not less than sixty percent (60%) and
three and 15/100ths percent (3.15%), respectively, of the outstanding
capital stock (or any other equity securities) of CDS, which percentage, in
the case of the ESOP, shall be automatically reduced in accordance with any
purchase, retirement or redemption of such stock out of the ESOP by any
participant or beneficiary in accordance with the terms of the ESOP or
applicable law.
CONDITIONS TO CLOSING
---------------------
15. ADDITIONAL CONDITIONS TO CLOSING: Agent and Lenders shall be under no
obligation to consummate the transactions contemplated by this Agreement
until each of the conditions listed in this Paragraph 15 has been
satisfied. Whenever a condition contained herein requires delivery of an
agreement or other document to Agent and Lenders, each such agreement or
other document shall be in form and substance satisfactory to Agent and
Lenders in their sole discretion.
(a) Securities and Promissory Note as Collateral: CDS shall collaterally
assign to Agent (i) no less than forty-two thousand six hundred
twenty (42,620) shares of common stock of CDS pledged to CDS by X.X.
Xxxxx Drug Company Employee Stock Ownership Plan and Trust (the
"ESOP") pursuant to a Third Amended and Restated Security Agreement
between CDS and the ESOP dated October 3, 1997, (ii) the Third Amended
and Restated Promissory Note from the ESOP to CDS dated October 3,
1997, in the original principal amount of Four Hundred Sixty-four
Thousand Four Hundred Sixty-Six 61/100 Dollars ($464,466.61), (iii)
the
8
Third Amended and Restated Security Agreement between CDS and the ESOP
dated October 3, 1997, and (iv) the Third Amended and Restated Secured
Credit Agreement between CDS and the ESOP dated October 3, 1997, and
shall cause to be executed and delivered to Agent such documents as
Agent shall require to effectuate such assignment including, but not
limited to, a collateral assignment agreement together with all
certificates evidencing the securities so pledged and stock powers
relative thereto, executed in blank, and the original of the Third
Amended and Restated Promissory Note.
(b) Guaranty: Each Borrower shall cause to be executed in favor of Agent
and delivered to Agent its Continuing Unconditional Guaranty of any
and all indebtedness of the other Borrowers to Agent and Lenders.
(c) Excess Availability: Borrowers shall have availability Pursuant to
Paragraph 1 of this Exhibit A which at the time of disbursement of the
Loans exceeds by at least Ten Million Dollars ($10,000,000) the amount
of the initial disbursement of such Loans, deeming all debts of
Borrower current on a pro forma basis.
(d) Attorney's Opinion Letter: Borrowers shall cause to be executed and
delivered to Agent an Attorney's Opinion Letter concerning, among
other things, the authorization for, validity of and authenticity of
documents memorializing, the financing transaction the subject hereof.
(e) Insurance Binders: Borrowers shall provide Agent with originals or
certified copies of either the insurance policies covering the
Collateral, as set forth in Section 11 (e) of the Agreement, or
binders for same.
(f) Missouri Real Property as Collateral: As additional security for the
payment of all Loans now or in the future made by Lenders to Borrowers
and for the payment or other satisfaction of all other Liabilities,
CDS shall convey, mortgage, assign, transfer and pledge to Agent, for
the benefit of Agent and Lenders, that certain real property commonly
known as 0000 Xxxxx 00xx Xxxxxxx, Xx. Xxxxxx Xxxxxxxx 00000 ("Missouri
Property"). In connection therewith, CDS shall execute such
documentation with respect to each parcel as Agent, in its sole
discretion, deems necessary, including, without limitation, a Deed of
Trust or similar instrument. CDS shall also provide Agent with a copy
of all leases, if any, relative to said Missouri Property. Borrower
shall furnish Agent (i) a current ALTA survey of the Missouri Property
and certified to both Agent on behalf of Lenders and the title
insurance company, setting forth: (a) all easements, nights of way and
other encumbrances and matters of record affecting or appurtenant to
the Missouri Property; (b) the established building line(s) and side
yard line(s), if any; (c) the line of the street or streets abutting
the Missouri Property or any portion thereof; (d) any and all
encroachments (and the extent thereof in feet and inches) upon the
Missouri Property or any easement appurtenant thereto; (e) all
improvements on the Missouri
9
Property; and (f) the area of the Missouri Property; and (ii) a
commitment for an ALTA Mortgagee's Policy of Title Insurance (the
"Title Policy") issued by a title insurance company acceptable to
Agent and Lenders (the "Title Company") in such amount and with such
exceptions and endorsements as Agent deems proper in its sole
discretion. CDS shall furnish evidence satisfactory to Agent that the
Missouri Property is not located in an area designated by the
Secretary of Housing and Urban Development as having special flood
hazards, or if it is located, furnish satisfactory evidence that flood
insurance is in effect.
(g) Illinois Real Property as Collateral: As additional security for the
payment of all Loans now or in the future made by Lenders to Borrowers
and for the payment or other satisfaction of all other Liabilities,
GDC and CDS shall convey, mortgage, assign, transfer and pledge to
Agent, for the benefit of Agent and Lenders, that certain real
property commonly known as 000 Xxxxx Xxxxxxxxx, Xxxxxxx, Xxxxxxxx
00000 and 000 Xxxxxxxxxx, Xxxxxxx, Xxxxxxxx 00000 ("Illinois
Property"). In connection therewith, GDC and CDS shall execute such
documentation with respect to each parcel as Agent, in its sole
discretion, deems necessary, including, without limitation, a Mortgage
or similar instrument. GDC and CDS shall also send the Agent with a
copy of all leases, if any, relative to said Illinois Property.
Borrower shall furnish Agent (i) a current ALTA survey of the Illinois
Property and certified to both Agent on behalf of Lenders and the
title insurance company, setting forth: (a) all easements, rights of
way and other encumbrances and matters of record affecting or
appurtenant to the Illinois Property; (b) the established building
line(s) and side yard line(s), if any; (c) the line of the street or
streets abutting the Illinois Property or any portion thereof; (d) any
and all encroachments (and the extent thereof in feet and inches) upon
the Illinois Property or any easement appurtenant thereto; (e) all
improvements on the Illinois Property; and (f) the area of the
Illinois Property; and (ii) a commitment for an ALTA Mortgagee's
Policy of Title Insurance (the "Title Policy") issued by a title
insurance company acceptable to Agent and Lenders (the "Title
Company") in such amount and with such exceptions and endorsements as
Agent deems proper in its sole discretion. GDC and CDS shall furnish
evidence satisfactory to Agent that the Illinois Property is not
located in an area designated by the Secretary of Housing and Urban
Development as having special flood hazards, or if it is located,
furnish satisfactory evidence that flood insurance is in effect.
(h) Landlord's Agreements. Borrowers shall cause to be executed and
delivered to Agent a Landlord's Agreement from each lessor of property
set forth on Exhibit B, which landlord's Agreements shall include a
copy of the relevant lease.
(i) Subordination Agreement. CDS shall cause its indebtedness to Xxxxxxxxx
to be subordinated to the indebtedness of CDS to Agent and Lenders on
terms acceptable
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to Agent and Lenders in their sole discretion and shall cause such
subordinated debtholder to execute and deliver to Agent a
Subordination Agreement.
(j) Acquisition: The Acquisition shall have been consummated in accordance
with the Acquisition Agreement and applicable law.
(k) Real Estate Appraisals: Agent shall have received new appraisal
reports for the Missouri Real Property and Illinois Real Property
based on acceptable evaluation methods and prepared by appraisers
acceptable to Agent, which are sufficient to the Loan describe in
Paragraph (1)(c)(iii) above.
(l) Subordinated Debt: CDS shall have received a minimum of $12,000,000 of
subordinated debt on terms and conditions acceptable to Agent and
Lenders.
(m) Environmental Report. Agent shall have received satisfactory results
of an updated environmental audit on all real estate owned by
Borrowers, conducted by an engineering firm acceptable to Agent.
(n) Stock Pledge. Each of CDS and GDC shall cause to be executed in favor
of Agent and delivered to Agent its Stock Pledge Agreement with
respect to the capital stock of the other Borrowers.
(o) Commitment Letter: All the conditions precedent set forth In the
commitment letter dated August 26, 1997 shall have been satisfied or
waived in a manner satisfactory to Agent.
16. OTHER LIBOR PROVISIONS:
(a) Subject to the provisions of this Agreement, each Borrower shall have
the option (i) as of any date, to convert all or any part of the Prime
Rate Loans to, or request that new Loans be made as, LIBOR Rate Loans
of various Interest Periods, (ii) as of the last day of any Interest
Period, to continue all or any portion of the relevant LIBOR Rate
Loans as LIBOR Rate Loans; (iii) as of the last day of any Interest
Period, to convert all of any portion of the LIBOR Rate Loans to Prime
Rate Loans; and (iv) at any time, to request new Loans as Prime Rate
Loans; provided, that Loans may not be continued as or converted to
LIBOR Rate Loans, if the continuation or conversion thereof would
violate the provisions of Paragraphs (16)(b) and (16)(c) of this
Exhibit A or if an Event of Default has occurred and is continuing.
(b) Agent's determination of LIBOR as provided above shall be conclusive,
absent manifest error. Furthermore, if Agent or any Lender determines,
in good faith (which determination shall be conclusive, absent
manifest error), prior to the commencement of any Interest Period that
(i) U.S. dollar deposits of sufficient amount and maturity for funding
the Loan are not available to Agent or any Lender in the London
Interbank Eurodollar market in the ordinary course of business, or
(ii) by
11
reason of circumstances affecting the London Interbank Eurodollar market,
adequate and fair means do not exist for ascertaining the rate of interest
to be applicable to the Loans requested by a Borrower to be LIBOR Rate
Loans or the Loans bearing interest at the rates set forth in Paragraph
(4)(b) of this Exhibit A shall not represent the effective pricing to
Lenders for U.S. dollar deposits of a comparable amount for the relevant
period (such as for example, but not limited to, official reserve
requirements required by Regulation D to the extent not given effect in
determining the rate), Agent shall promptly notify such Borrower (after
Agent is notified by any such Lender), and (x) all existing LIBOR Rate
Loans shall convert to Prime Rate Loans upon the end of the applicable
Interest Period, and (y) no additional LIBOR Rate Loans shall be made until
such circumstances are cured.
(c) If, after the date hereof, the introduction of, or any change in any
applicable law, treaty, rule, regulation or guideline or in the
interpretation or administration thereof by any governmental authority or
any central bank or other fiscal, monetary or other authority having
jurisdiction over Agent, any Lender or their respective lending offices (a
"Regulatory Change"), shall, in the opinion of counsel to Agent or any
Lender, make it unlawful for Agent or any Lender to make or maintain LIBOR
Rate Loans, then Agent shall promptly notify each Borrower and (i) the
LIBOR Rate Loans shall immediately convert to Prime Rate Loans on the last
Business Day of the then existing Interest Period or on such earlier date
as required by law and (ii) no additional LIBOR Rate Loans shall be made
until such circumstance is cured.
(d) If, for any reason, a LIBOR Rate Loan is paid prior to the last Business
Day of any Interest Period or if a LIBOR Rate Loan does not occur on a date
specified by a Borrower in its request (other than as a result of a default
by a Lender), Borrowers agree to indemnify Agents and Lenders against any
loss (including any loss on redeployment of the funds repaid), cost or
expense incurred by the Agents and Lenders as a result of such prepayment.
(e) If any Regulatory Change (whether or not having the force of law) shall (i)
impose, modify or deem applicable any assessment, reserve, special deposit
or similar requirement against assets held by, or deposits in or for the
account of or loans by, Agent or any Lender; (ii) subject Agent or any
Lender or the LIBOR Rate Loans to any tax, duty, charge, stamp tax or fee
or change the basis of taxation of payments to Agent or any Lender of
principal or interest due from Borrower to Agent and Lenders hereunder
(other than a change in the taxation of the overall net income of Agent or
any Lender); or (iii) impose on Agent or any Lender any other condition
regarding the LIBOR Rate Loans or Agent's or any Lender's funding thereof,
and Agent or any Lender shall determine (which determination shall be
conclusive, absent any manifest error) that the result of the foregoing is
to increase the cost to Agent or such Lender of making or maintaining the
LIBOR Rate Loans or to reduce the amount of principal or interest received
by the Agent or such Lender hereunder,
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then Borrowers shall pay to Agent or such Lender hereunder, on demand,
such additional amount as Agent and Lenders shall, from time to time,
determine are sufficient to compensate and indemnify Agent and Lenders
from such increased cost or reduced amount.
(f) Each request for LIBOR Rate Loans shall be in an amount not less than
One Million Dollars ($1,000,000), and in integral multiples of Five
Hundred Thousand Dollars ($500,000) thereafter.
(g) No more than five (5) LIBOR Rate Loans may be outstanding at any time.
(h) Unless otherwise specified by a Borrower, a Loans shall be Prime Rate
Loans.
17. SETTLEMENTS, DISTRIBUTIONS AND APPORTIONMENT OF PAYMENTS: On a weekly basis
(or more frequently if requested by Agent) (a "Settlement Date"), Agent shall
provide each Lender with a statement of the outstanding balance of the
Liabilities as of the end of the Business Day preceding the Settlement Date (the
"Pre-Settlement Determination Date") and the current balance of the Loans funded
by each Lender (whether made directly by such Lender to a Borrower or
constituting a settlement by such Lender of a previous Disproportionate Advance
made by Agent on behalf of such Lender to a Borrower). If such statement
discloses that such Lender's current balance of the Loans as of the Pre-
Settlement Determination Date exceeds such Lender's Pro Rata Share of the
Liabilities outstanding as of the Pre-Settlement Determination Date, then Agent
shall, one (1) Business Day after the Settlement Date, transfer, by wire
transfer, the net amount due to such Lender in accordance with such Lender's
instructions, and if such statement discloses that such Lender's current balance
of the Loans as of the Pre-Settlement Determination Date is less than such
Lender's Pro Rata Share of the Liabilities outstanding as of the Pre-Settlement
Determination Date, then such Lender shall, one (1) Business Day after the
Settlement Date, transfer, by wire transfer the net amount due to Agent in
accordance with Agent's instructions. In addition, payments actually received by
Agent With respect to the following items shall be distributed by Agent to
Lenders as follows;
(a) On the Business Day of receipt thereof by Agent, payments to be applied to
interest on the Loans shall be paid to each Lender in proportion to its Pro
Rata Share, subject to any adjustments for any Disproportionate Advance as
provided in Paragraph 2 of the Agreement so that Agent shall receive
interest on the Disproportionate Advances and Lenders shall only receive
interest on the amount of funds actually advanced by such Lender;
(b) On the Business Day of receipt thereof by Agent, payments to be applied to
the prepayment fee as provided in Paragraph 9 of the Agreement shall be
paid to each Lender in proportion to its Pro Rata Share; and
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(c) On the Business Day of receipt thereof by Agent, payments to be
applied to the Letter of Credit fee set as provided in Paragraph
(2)(b) of this Exhibit A shall be paid to each Lender in proportion to
its Pro Rata Share.
18. AGENT:
(a) Appointment of Agent:
(i) Each Lender hereby designates LaSalle as Agent to act as herein
specified. Each Lender hereby irrevocably authorizes Agent to
take such action on its behalf under the provisions of this
Agreement and the notes and any other instruments and agreements
referred to herein 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.
Except as otherwise provided herein, Agent shall hold all
Collateral and all payments of principal, Interest fees, charges
and expenses received pursuant to this Agreement or any of the
Other Agreements for the benefit of Lenders. Agent may perform
any of its duties hereunder by or through its agents or
employees.
(ii) The provisions of this Paragraph (18) are solely for the benefit
of Agent and Lenders, and no Borrower nor any other Obligor shall
have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under
this Agreement, Agent shall act solely as agent of Lenders and
does not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust With or for
any Obligor.
(b) Nature of Duties of Agent: Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement.
Neither Agent nor any of its officers, directors, employees or agents
shall be liable for any action taken or omitted by it as such
hereunder or in connection herewith, unless caused by its or their
gross negligence or willful misconduct. The duties of Agent 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 she 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
(i) Independently and without reliance upon Agent, each Lender, to
the extent it deems appropriate, has made and shall continue to
make (A) its own independent investigation of the financial or
other condition and affairs of
14
Agent, each Obligor and any other Lender in connection with the
taking or not taking of any action in connection herewith and (B)
its own appraisal of the creditworthiness of Agent, each Obligor
and any other Lender, and, except as expressly provided in this
Agreement, 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 the making of the Loans or at
any time or times thereafter.
(ii) Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or
in any document, certificate or other writing delivered in
connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility, priority
or sufficiency of this Agreement or any notes or the financial or
other condition of any Obligor. Agent shall not be required to
make any inquiry concerning either the performance or observance
of any of the terms, provisions or conditions of this Agreement
or the notes, or the financial condition of any Obligor, or the
existence or possible existence of any Default or Event of
Default unless specifically requested to do so in writing by any
Lender.
(d) Certain Rights of Agent: Agent shall have the night to request
instructions from the Requisite Lenders or all Lenders, as applicable
pursuant to Paragraph 21 of this Exhibit A, by notice to each Lender.
If Agent shall request instructions from the Requisite Lenders or all
Lenders, as applicable, with respect to any act or action (including
the failure to act) in connection with this Agreement, Agent shall be
entitled to refrain from such act or taking such action unless and
until Agent shall have received instructions from the Requisite
Lenders or all Lenders, as applicable, and Agent shall not incur
liability to any Person by reason of so refraining. If Agent desires
to take action which requires the consent of all Lenders and requests
instructions from a Lender and within ten (10) days of such request a
Lender does not provide instructions objecting to such action, such
Lender shall be deemed to not prove to have consented to such action.
If such Lender objects to such action within such ten (10) day period,
Agent may (but shall not be obligated to) purchase (without the
consent of Borrowers or any Lender) such Lender's interest hereunder
within ten (10) days of such objection for a purchase price equal to
such Lender's Pro Rata Share of the Liabilities. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against
Agent as a result of Agent acting or refraining from acting hereunder
in accordance with the instructions of the Requisite Lenders or all
Lenders, as applicable.
(e) Reliance by Agent. 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, radiogram, order or other documentary,
15
teletransmission or telephone message believed by it to be genuine and
correct and to have been signed, sent or made by the proper person.
Agent may consult with legal counsel (including counsel for any
Borrower with respect to matters concerning such Borrower),
independent public accountants and other experts reasonably selected
by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such
counsel, accountants or experts.
(f) Indemnification of Agent: To the extent Agent is not reimbursed and
indemnified by Borrowers, each Lender will reimburse and indemnify
Agent, in proportion to its Pro Rata Share, for and against any and
all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including counsel fees and
disbursements) or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing
its duties hereunder, in any way relating to or arising out of this
Agreement; provided, that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from
Agent's gross negligence or willful misconduct.
(g) Agent in its Individual Capacity: With respect to the Loans made by it
pursuant hereto, Agent shall have the same rights and powers hereunder
as any other Lender or holder of a note or participation interest and
may exercise the same as though it was not performing the duties
specified herein; and the terms "Lenders," "Requisite Lenders" or any
similar terms shall, unless the context clearly otherwise indicates,
include Agent in its individual capacity. Agent may accept deposits
from, lend money to, and generally engage in any kind of banking,
trust, financial advisor or other business with any Borrower or any
Affiliate of any Borrower as if it were not performing the duties
specified herein, and may accept fees and other consideration from any
Borrower for services in connection with this Agreement and otherwise
without having to account for the same to Lenders, to the extent such
activities are not in contravention of the terms of this Agreement.
(h) Holders of Notes: Agent may deem and treat the payee of any promissory
note as the owner thereof for all purposes hereof unless and until a
written notice of the assignment or transfer thereof shall have been
filed with Agent. Any request authority or consent of any Person who,
at the time of making such request or giving such authority or
consent, is the holder of any promissory note, shall be conclusive and
binding on any subsequent holder, transferee or assignee of such
promissory note or of any promissory note or notes issued in exchange
therefor.
(i) Successor Agent
(i) Agent may, upon five (5) Business Days' notice to Lenders and
Borrowers, resign at any time (effective upon the appointment of
a successor Agent
16
pursuant to the provisions of this Paragraph (18)(i) by giving
written notice thereof to Lenders and Borrowers. Upon any such
resignation, the Lenders shall have the right, upon five (5)
days' notice, to appoint a successor Agent. If no successor Agent
shall have been so appointed by the Lenders and accepted such
appointment, within thirty (30) days after the retiring Agent's
giving of notice of resignation, then, upon five (5) days'
notice, the retiring Agent may, on behalf of Lenders, appoint a
successor Agent, which shall be a bank or a trust company or
other financial institution which maintains an office in the
United States, or a commercial bank organized under the laws of
the United States of America or of any State thereof, or any
Affiliate of such bank or trust company or other financial
institution which is engaged in the banking business, having a
combined capital and surplus of at least Fifty Million and No/100
Dollars ($50,000,000).
(ii) Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and
duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement.
After any retiring Agent's resignation hereunder as Agent, the
provisions of this Paragraph (18) she inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent
under this Agreement.
(j) Collateral Matters:
(i) Each Lender authorizes and directs Agent to enter into the Other
Agreements for the benefit of Lenders. Each Lender hereby agrees
that, except as otherwise set forth herein, any action taken by
the Requisite Lenders in accordance with the provisions of this
Agreement or the Other Agreements, and the exercise by the
Requisite Lenders of the powers set forth herein or therein,
together with such other powers as are reasonably incidental
thereto, shall be authorized and binding upon all Lenders. Agent
is hereby authorized on behalf of all Lenders, without the
necessity of any notice to or further consent from any Lender to
take any action with respect to any Collateral or Other
Agreements which may be necessary to perfect and maintain
perfected the security interest in and liens upon the Collateral
granted pursuant to the Other Agreements.
(ii) Agent will not, without the consent of all Lenders, which consent
shall (a) be in writing and (b) not be unreasonably withheld,
execute any release of Agent's security interest in any
Collateral except for releases relating to dispositions of
Collateral (x) permitted by this Agreement and (y) in connection
with the repayment in full of all of the Liabilities by Borrowers
and the termination of all obligations of Agent and Lenders under
this
17
Agreement and the Other Agreements; provided, that Agent shall
not be required to execute any such release on terms which, in
Agent's opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of
such liens without recourse or warranty. In the event of any
sale or transfer of any of the Collateral, Agent shall be
authorized to deduct all of the expenses reasonably incurred by
Agent from the proceeds of any such sale, transfer or
foreclosure.
(iii) Lenders hereby agree that the lien granted to Agent in any
property sold or disposed of in accordance with the provisions
of Paragraph 6 of the Agreement shall be automatically released;
provided, however that Agent's lien shall attach to and continue
for the benefit of Agent and Lenders in the proceeds and
products of such property arising from any such sale or
disposition.
(iv) To the extent, pursuant to the provisions of this Paragraph
(18)(iv), Agent's execution of a release is required to release
its lien upon any sale and transfer of Collateral which is
consented to in writing by the Requisite Lenders or all Lenders,
as applicable, and upon at least five (5) Business Days' prior
written request by a Borrower, Agent shall (and is hereby
irrevocably authorized by Lenders to) execute such documents as
may be necessary to evidence the release of the liens granted to
Agent for the benefit of Lenders herein or pursuant hereto upon
the Collateral that was sold or transferred.
(v) Agent shall have no obligation whatsoever to Lenders or to any
other Person to assure that the Collateral exists or is owned by
a Borrower or any other Obligor or is cared for, protected or
insured or that the liens granted to Agent herein or pursuant
hereto have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any
particular priority, or to exercise or to continue exercising at
all or in any manner or under any duty of care, disclosure or
fidelity any of the rights, authorities and powers granted or
available to Agent in this Paragraph (18) or in any of the Other
Agreements, it being understood and agreed that in respect of
the Collateral, or any act, omission or event related thereto,
Agent may act in any manner it may deem appropriate, in its sole
discretion, given Agent's own interest in the Collateral as one
of Lenders and that Agent shall have no duty or liability
whatsoever to Lenders, except for its gross negligence or
willful misconduct.
(k) Actions with Respect to Defaults: In addition to Agent's right to take
actions on its own accord as permitted under this Agreement, Agent
shall take such action with respect to an Event of Default as shall be
directed by the Requisite Lenders or all Lenders, as applicable
pursuant to Paragraph 21 of this Exhibit A; provided, that
18
until Agent she 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 Event of Default as it shall deem
advisable and in the best interests of Lenders.
(l) Delivery of Information: Agent shall not be required to deliver to any
Lender originals or copies of any documents, instruments, notices,
communications or other information received by Agent from any
Borrower or any other Obligor, the Requisite Lenders, any Lender or
any other Person under or in connection with this Agreement or any
Other Agreement except (i) as specifically provided in this Agreement
or any Other Agreement, (ii) Agent shall deliver to Lenders within
five (5) days of receipt thereof from Borrower the reports referred to
in Paragraph 8 of the Agreement (except those reports to be delivered
on a daily basis which shall only be delivered to a Lender at its
request), and (iii) as specifically requested from time to time in
writing by any Lender with respect to a specific document, instrument,
notice or other written communication received by and in the
possession of Agent at the time of receipt of such request and then
only in accordance with such specific request.
(m) Demand: Agent shall make demand for repayment by Borrowers of all
Liabilities owing by Borrowers hereunder, after the occurrence of an
Event of Default, upon the written request of the Requisite Lenders.
Agent shall make such demand in such manner as it deems appropriate,
in its sole discretion, to effectuate the request of the Requisite
Lenders. Nothing contained herein shall limit the discretion of Agent
to make or not make Loans hereunder, to take reserves, to deem certain
Accounts and Inventory ineligible, or to exercise any other discretion
granted to Agent in this Agreement.
19. ASSIGNABILITY:
(a) No Borrower shall have the right to assign this Agreement or any
interest therein except with the prior written consent of Agent and
all Lenders.
(b) Any Lender may make, carry or transfer Loans at, to or for the account
of, any of its branch offices or the office of an Affiliate of such
Lender except to the extent such transfer would result in increased
costs to Borrowers. Except as provided in the immediately preceding
sentence, no Lender may assign its Loans without the consent of Agent
and Borrowers. In connection with a permitted assignment, the assignor
and assignee shall execute an Assignment and Acceptance Agreement in
the form of Exhibit D.
(c) Each Lender may sell participations (without the consent of Agent,
Borrowers or any other Lender) to one or more parties, in or to all or
a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Maximum Loan
Amount or the Loans owing to it); provided, that (i) such
19
Lender's obligations under this Agreement (including, without
limitation, its Maximum Loan Amount hereunder) shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) Borrowers, Agent
and the other Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations
under this Agreement, and (iv) such Lender shall not transfer, grant
assign or sell any participation under which the participant shall
have rights to approve any amendment or waiver of this Agreement
except to the extent such amendment or waiver would (A) extend the
final maturity date or the date for the payment of any installment of
fees or principal or interest of any Loans in which such participant
is participating, (B) reduce the amount of any installment of
principal of the Loans in which such participant is participating, (C)
reduce the interest rate applicable to the Loans in which such
participant is participating, or (D) reduce any fees payable
hereunder.
20. INDEMNIFICATION: Each Borrower hereby agrees that Agent and Lenders may
exchange any information concerning Borrowers, including, without
limitation, information relating to the creditworthiness of each Borrower
in the possession or control of Agent or Lenders, as the case may be; (i)
with any of their respective affiliates; (ii) to any regulatory authority
having jurisdiction over Agent or Lenders; (iii) to any representative or
agent of Agent or any Lender, in connection with the exercise of Agent's or
Lenders' rights hereunder or under any of the Other Agreements.
21. AMENDMENTS, ETC.: No amendment or waiver of any provision of this Agreement
or any of the Other Agreements, nor consent to any departure by any Obligor
therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Requisite Lenders, or if Lenders shall not be
parties thereto, by the parties thereto and consented to by the Requisite
Lenders, and each such amendment, waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given;
provided, that no amendment, waiver or consent shall, unless in writing and
signed by Lenders, do any of the following: (i) increase the Maximum Loan
Amounts of Lenders or subject Lenders to any additional obligations to
extend credit to Borrowers, (ii) reduce the principal of, or interest on,
the Loans or any fees hereunder, (iii) postpone any date fixed for any
payment in respect of principal of, or interest on, the Loan or any fees
hereunder, (iv) change the Pro Rata Shares of Lenders, or any minimum
requirement necessary for Lenders or the Requisite Lenders to take any
action hereunder, (v) amend or waive this Paragraph 21, or change the
definition of the Requisite Lenders, (vi) amend or waive any of the
covenants set forth in Paragraph 11 (o) of the Agreement or Paragraphs 9,
10, 11 or 13 of this Exhibit A, (vii) increase the advance rates for
Eligible Account or Eligible Inventory above the percentages originally
stated herein or (viii) except in connection with the financing,
refinancing, sale or other disposition of any asset of Borrowers permitted
under this Agreement, release or subordinate any liens in favor of Agent,
for the benefit of Agent and Lenders, on any of the Collateral and provided
further, that no amendment, waiver or consent affecting the rights or
duties of Agent under this Agreement or any Other
20
Agreement shall in any event be effective, unless in writing and signed by
Agent in addition to Lenders required hereinabove to take such action.
Notwithstanding any of the foregoing to the contrary, the consent of
Borrowers shall not be required for any amendment modification or waiver of
the provisions of Paragraph 18 of this Exhibit A.
22. NONLIABILITY OF AGENT AND LENDERS: The relationship between Borrowers and
Lenders and Agent shall be solely that of borrower and lender. Neither
Agent nor any Lender shall have any fiduciary responsibilities to
Borrowers. Neither Agent nor any Lender undertakes any responsibility to
Borrowers to review or inform Borrowers of any matter in connection with
any phase of either Borrower's business or operations.
21
IN WITNESS WHEREOF, the parties hereto have duly executed this Exhibit A as
of the 3rd day of October, 1997.
X.X. XXXXX DRUG COMPANY, as a
Borrower
By /s/ Xxxxxx X. Xxxxxx
---------------------------
Title Chairman
------------------------
GENERAL DRUG COMPANY, as a
Borrower
By /s/ Xxxxxx X. Xxxxxx
---------------------------
Title Chairman
------------------------
SBS PHARMACEUTICALS, INC., as a
Borrower
By /s/ Xxxxxx X. Xxxxxx
---------------------------
Title Chairman
------------------------
XXXXX XXXXXXXX COMPANY, INC.,
as a Borrower
By /s/ Xxxxxx X. Xxxxxx
---------------------------
Title Chairman
------------------------
LASALLE BUSINESS CREDIT, INC.,
as Agent and a Lender
By Xxxxxxxxx Xxxxxxx
---------------------------
Title Vice President
------------------------
Maximum Loan Amount: $32,964,466.61
XXXXXX FINANCIAL, INC., as a Lender
By Xxxxxxxxx Xxxxxxxxxxx
---------------------------
Title Vice President
------------------------
Maximum Loan Amount: $30,000,000
AMERICAN NATIONAL BANK &
TRUST COMPANY OF CHICAGO, as a
Lender
By /s/ M. Xxxxxx Xxxxxx
---------------------------
Title Vice President
------------------------
Maximum Loan Amount: $30,000,000
22
EXHIBIT B - BUSINESS AND COLLATERAL LOCATIONS
Attached to and made a part of that certain Loan and Security Agreement of
even date herewith ("Agreement") by and among LASALLE BUSINESS CREDIT, INC., a
Delaware corporation (in its individual capacity, ("LaSalle"), for itself, as a
Lender, and as Agent for all Lenders that are now or hereafter parties to this
Agreement XXXXXX FINANCIAL, INC., a Delaware corporation (in its individual
capacity, "Xxxxxx"), as a Lender, AMERICAN NATIONAL BANK & TRUST COMPANY OF
CHICAGO, a national banking association (in its individual capacity, "ANB"), as
a Lender, X.X. XXXXX DRUG COMPANY, a Missouri corporation ("CDS"), as a
Borrower, GENERAL DRUG COMPANY, an Illinois corporation ("GDC"), as a Borrower,
SBS PHARMACEUTICALS, INC., a Delaware corporation ("SBS"), as a Borrower, and
XXXXX XXXXXXXX COMPANY, INC., a Delaware corporation ("JBC"), as a Borrower.
A. CDS Business Locations (please indicate which location is the principal
place of business and at which locations originals and all copies of CDS's
books, records and accounts are kept).
0000 Xxxxx 00xx Xxxxxxx
Xx. Xxxxxx, Xxxxxxxx 00000
B. Other locations of Collateral (including, without limitation, warehouse
locations, processing locations, consignment locations) and all post office
boxes of CDS. Please indicate the relationship of such location to CDS
(i.e. public warehouse, processor, etc.).
None
C. GDC Business Locations (please indicate which location is the principal
place of business and at which locations originals and all copies of GDC's
books, records and accounts are kept).
000 Xxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxx 00000
D. Other locations of Collateral (including, without limitation, warehouse
locations, processing locations, consignment locations) and all post office
boxes of GDC. Please indicate the relationship of such location to GDC
(i.e. public warehouse, processor, etc.).
000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
E. SBS Business Locations (please indicate which location is the principal
place of business and at which locations originals and all copies of SBS's
books, records and accounts are kept).
000 Xxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxx 00000
F. Other locations of Collateral (including, without limitation, warehouse
locations, processing locations, consignment locations) and all post office
boxes of SBS. Please indicate the relationship of such location to SBS
(i.e. public warehouse, processor, etc.).
000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Processor: 00000 Xxxxxxxxxx Xxxx
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000
Processor: 0000 Xxxxx Xxxx
Xxxxxxxxx, Xxxx 00000
G. JBC Business Locations (please indicate which location is the principal
place of business and at which locations originals and all copies of JBC's
books, records and accounts are kept).
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
H. Other locations of Collateral (including, without limitation, warehouse
locations, processing locations, consignment locations) and all post office
boxes of JBC. Please indicate the relationship of such location to JBC
(i.e. public warehouse, processor, etc.).
None
2
EXHIBIT C
Letters of Credit
None.
EXHIBIT D
ASSIGNMENT AND ACCEPTANCE
THIS ASSIGNMENT AND ACCEPTANCE (this "Assignment and Acceptance") and is
executed as of _______, 1997 between ________ ("Assignor") and
_____________________ ("Assignee").
WITNESSETH:
----------
WHEREAS, Assignor is party to a Loan and Security Agreement dated as of
__________, 1997 (the "Loan Agreement") among Assignor, [LIST OTHER LENDERS],
X.X. Xxxxx Drug Company, General Drug Company, SBS Pharmaceuticals, Inc. and
Xxxxx Xxxxxxxx Company, Inc. (collectively, "Borrowers");
WHEREAS, Assignor has agreed to assign to Assignee a portion of its loans
and other financial accommodations to Borrowers pursuant to the Loan Agreement;
and
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
the parties hereto agree as follows:
1. Defined Terms.
-------------
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to such terms in the Loan Agreement.
2. Assignment and Assumption.
-------------------------
Assignor hereby assigns to Assignee, without recourse, representation or
warranty (other than as expressly provided herein), and Assignee hereby assumes,
all of Assignor's right, title and interest arising under the Loan Agreement and
the Other Agreements with respect to a portion of the outstanding Loans to
Borrowers equal to Assignee's Pro Rata Share of the outstanding Loans to
Borrowers; provided, that Assignee's obligations to Assignor, Borrowers or any
Lender are strictly limited to those obligations under the Loan Agreement unless
otherwise explicitly provided for herein.
3. Payments on Assignment Effective Date.
-------------------------------------
In consideration of the assignment by Assignor to Assignee pursuant to this
Assignment and Acceptance, Assignee agrees to pay to Assignor on or prior to the
Assignment Effective Date (as defined below) an amount specified by Assignor in
writing on or prior to the Assignment Effective Date which represents Assignee's
Pro Rata Share of the Loans to Borrowers outstanding on the Assignment Effective
Date.
4. Effectiveness.
-------------
This Assignment and Acceptance shall become effective upon (i) the full
execution and delivery of this Assignment and Acceptance and (ii) the date that
no overadvances exist under the Loan Agreement (the "Assignment Effective
Date").
5. Representations and Warranties.
(a) Each of Assignor and Assignee represents and warrants to the
other party as follows:
(i) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Acceptance and to
fulfill its obligations under, and to consummate the transactions
contemplated by, this Assignment and Acceptance;
(ii) the making and performance by it of this Assignment and
Acceptance and all documents required to be executed and delivered by it
hereunder do not and will not violate any law or regulation of the
jurisdiction of its incorporation or any other law or regulation applicable
to it;
(iii) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms, except as limited by applicable
bankruptcy, reorganization, insolvency or similar laws affecting the
enforcement of creditors' rights generally and by general equity
principles; and
(iv) all approvals, authorizations, or other actions by, or filing
with, any governmental authority necessary for the validity or
enforceability of its obligations under this Assignment and Acceptance have
been obtained.
(b) Assignor represents and warrants to Assignee that Assignee's Pro Rata
Share of the Loan Limit and the outstanding Loans being assigned hereunder are
not subject to any liens or security interests created by or known to Assignor.
6. Miscellaneous.
(a) Assignor shall not be responsible to Assignee for the execution (by
any party other than Assignor), effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of the Loan Agreement, the Other
Agreements or any of the agreements, documents or instruments executed and/or
delivered in connection therewith (collectively, the "Loan Documents") or for
any representations, warranties, recitals or statements made therein or in any
written or oral statement or in any financial or other statements, instruments,
reports, certificates or any other documents made or furnished or made available
by Assignor to Assignee or by or on behalf of Borrowers or any other person
obligated under the Loan Documents (collectively, the "Credit Parties") to
Assignor or Assignee in connection with the Loan Documents and the trans actions
contemplated thereby. Except as otherwise set forth in the Loan Agreement,
Assignor shall not be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or agreements
contained in any of the Loan Documents or as to the use of the proceeds of the
Loans or as to the existence or possible existence of any default (matured or
unmatured) under the Loan Documents.
2
(b) Assignee represents and warrants that it has made its own independent
investigation of the financial condition and affairs of the Credit Parties in
connection with the making of the Loans and the assignment by Assignor to
Assignee hereunder and has made and shall continue to make its own appraisal of
the creditworthiness of the Credit Parties. Assignor shall have no duty or
responsibility (except as expressly provided in the Loan Agreement) either
initially or on a continuing basis to make any such investigation or any such
appraisal on behalf of Assignee or to provide Assignee with any credit or other
information with respect thereto, whether coming into its possession before the
making of the Loans or at any time or times thereafter and shall further have no
responsibility with respect to the accuracy of, or the completeness of, any
information provided to Assignee, whether by Assignor or by or on behalf of any
Credit Party.
(c) Assignee (x) agrees that it will perform all of the obligations which
by the terms of the Loan Agreement are required to be performed by it as a
Lender and (y) represents that it is either (i) a corporation organized under
the laws of the United States or a state thereof or (ii) entitled to complete
exemption from United States withholding tax imposed on or with respect to any
payments to be made to it pursuant to the Loan Agreement.
(d) ANY DISPUTE BETWEEN ASSIGNOR AND ASSIGNEE ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE AND WHETHER ARISING IN CONTRACT,
TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL
LAWS AND NOT THE CONFLICTS OF LAW PROVISIONS OF THE STATE OF ILLINOIS.
(e) No term or provision of this Assignment and Acceptance may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the parties to this Assignment and Acceptance and Agent.
(f) This Assignment and Acceptance may be executed in one or more
counterparts, each of which shall be an original but all of which, taken
together, shall constitute one and the same instrument.
(g) All payments hereunder or in connection herewith shall be made in
United States Dollars and in immediately available funds, payable to the account
of Assignor at its office as designated in the Loan Agreement.
(h) This Assignment and Acceptance shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Neither of the parties hereto may assign or transfer any of its rights or
obligations under this Assignment and Acceptance without the prior consent of
the other party. The preceding sentence shall not limit the right of Assignee to
assign all or part of its Pro Rata Share of the Loan Limit and any outstanding
Loans assigned under this Assignment and Acceptance in the manner contemplated
by the Loan Agreement.
3
(i) All representations and warranties made herein and indemnities
provided for herein shall survive the consummation of the transactions
contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment and
Acceptance as the date first above written.
---------------------------------
By
------------------------------
Title
----------------------------
---------------------------------
By
------------------------------
Title
----------------------------
4
EXHIBIT E
OFFICER'S CERTIFICATE
This Certificate is submitted pursuant to paragraph 8(j) of the Loan and
Security Agreement dated ___________________, 1997 ("Loan Agreement") among
LaSalle Business Credit, Inc., as a lender and as agent ("Agent") for all
lenders from time to time party thereto (the "Lenders"), the Lenders, X.X. Xxxxx
Drug Company ("Xxxxx"), General Drug Company, SBS Pharmaceuticals, Inc. and
Xxxxx Xxxxxxxx Company, Inc. (collectively, the "Borrowers").
The undersigned hereby certifies to Agent and Lenders that as of the date
of this Agreement:
1. The undersigned is the _________ of Xxxxx.
2. There exists no event or circumstance which is, or which with the
passage of time, the giving of notice, or both would constitute an Event of
Default, as that term is defined in the Loan Agreement, or, if such an event or
circumstance exists, a writing attached hereto specifies the nature thereof,
the period of existence thereof and the action that the appropriate Borrower has
taken or proposes to take with respect thereto.
3. No material adverse change in the condition, financial or otherwise,
business, property, or results of operations of any Borrower has occurred since
February 28, 1997, or, if such a change has occurred, a writing attached hereto
specifies the nature thereof and the action that such Borrower has taken or
proposes to take with respect thereto.
4. All insurance premiums payable by each Borrower due as of such date
have been paid.
5. All taxes of each Borrower due as of such date have been paid or, for
those taxes which have not been paid, or, if any taxes have not been paid, a
writing attached hereto describes the nature and amount of such taxes, and sets
forth such Borrower's rationale for not paying such taxes and the action that
such Borrower has taken or proposes to take with respect thereto.
6. To the best of the undersigned's knowledge, after appropriate inquiry,
except as previously disclosed to Agent in writing, no litigation, investigation
or proceeding, or injunction, writ or restraining order is pending or threatened
against any Borrower, or, if any litigation, investigation or proceeding, or
injunction, writ or restraining order is pending or threatened against any
Borrower, a writing attached hereto specifies the nature thereof and the action
that such Borrower has taken or proposes to take with respect thereto.
7. Each Borrower is in compliance with the representations and warranties
in all material respects, and is in compliance with the covenants, in the Loan
Agreement, or,
if any Borrower is not in compliance with any representations or warranties in
any material respect or any covenants in the Loan Agreement, a writing attached
hereto specifies the nature thereof, the period of existence thereof and the
action that such Borrower has taken or proposes to take with respect thereto.
8. Attached hereto is a true and correct calculation of the financial
covenants contained in paragraph 11 of the Loan Agreement and in Exhibit A to
the Loan Agreement.
X.X. XXXXX DRUG COMPANY
By (SEAL)
---------------------------
Name
-------------------------------
Title
------------------------------
2