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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1994
Date of Report (Date of earliest event reported): February 22, 1995
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Tyco Toys, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-9357 13-3319358
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
6000 Midlantic Drive
Mount Laurel, New Jersey 08054
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 234-7400
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N/A
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Former name or former address,
if changed since last report
Total Number of Sequentially Numbered Pages:
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Item 1. Business.
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The Company has completed its acquisition of the remaining twenty-five
percent (25%) interest in its Mexican subsidiary, Ensueno-Tyco Toys de
Mexico S.A. de C.V. Ensueno-Tyco is now a wholly-owned subsidiary of
the Company.
Recent Developments.
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In February and March 1995 the company entered into $290,000,000 of
new credit facilities (the New Credit Facilities). The New Credit
Facilities consist of three separate three-year revolving credit
facilities with General Electric Capital Corporation and affiliates in
an aggregate amount of $90,000,000 and a $200,000,000 five-year
receivables securitization facility arranged by General Electric
Capital Corporation. Borrowings under the New Credit Facilities were
used to refinance outstanding indebtedness under the prior credit
facility and certain credit facilities of foreign subsidiaries.
The revolving credit facilities consist of up to $35,000,000 for
certain domestic entities (of which up to $10,000,000 may be used for
letters of credit), $20,000,000 for Tyco (Canada), Inc. and
$35,000,000 for the Company's subsidiaries in the United Kingdom (UK).
Availability under the domestic revolving credit is based upon
inventory, as defined, and availability under the foreign revolving
credits is based upon an aggregate of eligible accounts receivable and
inventory, as defined. The revolving credit facilities are secured by
a lien on substantially all of the Company's domestic assets and are
also guaranteed by certain foreign subsidiaries. Subject to the
maximum commitment under each of these facilities, borrowings are
permitted up to sixty percent (60%) of eligible inventory and, in the
Canadian and UK agreements, up to eighty percent (80%) of eligible
accounts receivable. Interest rates on borrowings are determined at
the option of the borrower based on various indices, including LIBOR
or bankers' acceptance rate, plus two and one-half percent (2.5%).
Under the securitization facility, Tyco Industries and Tyco
Manufacturing Corp. will sell and transfer substantially all of their
accounts receivable to Tyco Funding I Corporation (TFC I) and Tyco
Funding II Corporation (TFC II). These companies are newly-formed
bankruptcy remote subsidiaries of Tyco Industries and will be
consolidated in the financial statements of the Company. TFC I and
TFC II purchase the accounts receivable with proceeds from their
borrowings under a commercial paper facility (limited to a maximum of
seventy-five percent (75%) of eligible accounts receivable, as
defined) and certain deferred payments. The interest rate on
2
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the facility is the market rate for commercial paper plus one and one-
quarter percent (1.25%). The accounts receivable to be sold and/or
transferred are solely the assets of TFC I or TFC II and are pledged
as security for their borrowings. In the event of liquidation of TFC
I or TFC II, the creditors of TFC I or TFC II would be entitled to
satisfy their claims from the assets of TFC I or TFC II prior to any
distribution to Tyco Industries.
Under the terms of the New Credit Facilities, the Company and its
subsidiaries are (1) subject to covenants and conditions relating to
the maintenance of net worth, fixed charge coverage and income; (2)
restricted from incurring additional indebtedness or certain
obligations and from acquiring and other entities, whether by asset
purchase, merger or otherwise; (3) restricted in the ability to pay
dividends on capital stock subject to certain limitations; and (4)
permitted to guarantee additional amounts of debt incurred by certain
of its subsidiaries up to an aggregate of $70,000,000.
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: April ___, 1995 TYCO TOYS, INC.
By: /s/ R. Michael Kennedy, Jr.
______________________________
Name: R. Michael Kennedy, Jr.
Title: Senior Vice President
and General Counsel
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EXHIBIT INDEX
Exhibit
Number Description of Document
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10.46 Credit Agreement dated as of February 22, 1995 among Tyco Distribution
Corp. and Tyco Manufacturing Corp. as Borrowers and Tyco Toys, Inc.
and the Lenders Party hereto and General Electric Capital Corporation
as Agent (plus Annex A to Credit Agreement - "Definitions; Rules of
Construction").
10.47 Receivables Transfer Agreement dated as of February 24, 1995 by and
between Tyco Industries, Inc. and Tyco Funding I Corporation and Tyco
Funding II Corporation.
10.48 Receivables Funding and Servicing Agreement dated as of February 24,
1995 by and among Tyco Funding I Corporation, Tyco Funding II
Corporation, as Borrowers and, individually, as a "Borrower", Redwood
Receivables Corporation, as Lender, Tyco Industries, Inc., as
Servicer, Financial Security Assurance, Inc., as FSA, and General
Electric Capital Corporation, as Operating Agent and Collateral Agent.
10.49 Credit Agreement between Tyco Toys (Canada) Inc., as Borrower, and the
Lender or Lenders named herein, and General Electric Capital Canada
Inc., as Agent (plus Annex A to Credit Agreement - "Definitions; Rules
of Construction").
10.50 Guarantee and Revolving Credit Facility Agreement dated 13th March
1995 by Tyco Toys (UK) Limited, Matchbox Toys Limited, as Borrowers,
and The Lenders, and General Electric Capital Corporation, as Issuing
Bank, and General Electric Capital Corporation, as Agent.
10.53 Receivables Transfer Agreement dated as of February 24, 1995 by and
between Tyco Manufacturing Corp. and Tyco Funding I Corporation and
Tyco Funding II Corporation.
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EXECUTION COPY
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Exhibit 10.46
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Up to U.S.$35,000,000
CREDIT AGREEMENT
Dated as of February 22, 1995
among
TYCO DISTRIBUTION CORP.
and
TYCO MANUFACTURING CORP.,
as Borrowers
and
TYCO TOYS, INC.
and
THE LENDERS PARTY HERETO
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent
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TABLE OF CONTENTS
Page
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ARTICLE 1 AMOUNT AND TERMS OF CREDIT
SECTION 1.1. Revolving Credit Advances............... 2
SECTION 1.2. Non-Funding Lender; Actions by Lenders.. 3
SECTION 1.3. Repayment; Termination of Commitment.... 4
SECTION 1.4. Use of Proceeds......................... 6
SECTION 1.5. Letters of Credit....................... 6
SECTION 1.6. Interest................................ 7
SECTION 1.7. Eligible Inventory...................... 11
SECTION 1.8. Fees.................................... 11
SECTION 1.9. Cash Management System.................. 11
SECTION 1.10. Receipt of Payments..................... 11
SECTION 1.11. Pro Rata Treatment...................... 11
SECTION 1.12. Application and Allocation of Payments.. 12
SECTION 1.13. Non-Receipt of Funds by Agent........... 13
SECTION 1.14. Sharing of Payments, Etc................ 14
SECTION 1.15. Settlement Procedures................... 15
SECTION 1.16. Accounting.............................. 17
SECTION 1.17. Indemnity............................... 18
SECTION 1.18. Access.................................. 20
SECTION 1.19. Taxes................................... 21
SECTION 1.20. Additional Costs........................ 22
ARTICLE 2 CONDITIONS PRECEDENT
SECTION 2.1. Conditions to the Initial Revolving
Credit Advance and the Initial Letter of
Credit Obligation....................... 23
SECTION 2.2. Further Conditions to Each Revolving
Credit Advance and Each Letter of Credit
Obligation.............................. 28
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Existence; Compliance with Law.......... 29
SECTION 3.2. Executive Offices; Collateral Locations;
Corporate or Other Names................ 29
SECTION 3.3. Power; Authorization; Enforceable
Obligations............................. 29
SECTION 3.4. Financial Statements and Projections.... 30
SECTION 3.5. Material Adverse Change................. 31
SECTION 3.6. Ownership of Property; Liens............ 31
SECTION 3.7. Restrictions; No Default; Material
Contracts............................... 32
SECTION 3.8. Labor Matters........................... 33
SECTION 3.9. Ventures, Subsidiaries and Affiliates;
Outstanding Stock and Indebtedness...... 33
SECTION 3.10. Government Regulation................... 34
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Page
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SECTION 3.11. Margin Regulations...................... 34
SECTION 3.12. Taxes................................... 35
SECTION 3.13. ERISA................................... 36
SECTION 3.14. No Litigation........................... 37
SECTION 3.15. Brokers................................. 38
SECTION 3.16. Patents, Trademarks, Copyrights and
Licenses................................ 38
SECTION 3.17. Full Disclosure......................... 38
SECTION 3.18. Hazardous Materials..................... 39
SECTION 3.19. Insurance Policies...................... 39
SECTION 3.20. Deposit and Disbursement Accounts....... 39
SECTION 3.21. Solvency................................ 39
SECTION 3.22. Inactive Subsidiaries................... 40
SECTION 3.23. Existing Credit Agreement............... 40
SECTION 3.24. Subordinated Debt....................... 40
SECTION 3.25. Promissory Notes and Pledge............. 41
SECTION 3.26. Certain Accounts and Inventory.......... 41
ARTICLE 4 FINANCIAL STATEMENTS AND INFORMATION
SECTION 4.1. Reports and Notices..................... 41
SECTION 4.2. Communication with Accountants.......... 41
ARTICLE 5 AFFIRMATIVE COVENANTS
SECTION 5.1. Maintenance of Existence and Conduct of
Business................................ 42
SECTION 5.2. Payment of Charges and Claims........... 43
SECTION 5.3. Books and Records....................... 43
SECTION 5.4. Litigation.............................. 43
SECTION 5.5. Insurance............................... 44
SECTION 5.6. Compliance with Laws.................... 45
SECTION 5.7. Agreements.............................. 45
SECTION 5.8. Supplemental Disclosure................. 46
SECTION 5.9. Environmental Matters................... 46
SECTION 5.10. Landlord's Agreements................... 47
SECTION 5.11. Certain Obligations Respecting
Subsidiaries............................ 47
SECTION 5.12. Application of Proceeds................. 47
SECTION 5.13. Fiscal Year............................. 47
SECTION 5.14. Casualty and Condemnation............... 47
SECTION 5.15. Currency Hedging........................ 49
SECTION 5.16. Additional Subsidiaries................. 49
SECTION 5.18. Further Assurances...................... 50
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Page
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ARTICLE 6 NEGATIVE COVENANTS
SECTION 6.1. Mergers, Subsidiaries, Etc.............. 50
SECTION 6.2. Investments............................. 51
SECTION 6.3. Indebtedness............................ 52
SECTION 6.4. Affiliate and Employee Loans and
Transactions............................ 54
SECTION 6.5. Capital Structure and Business.......... 56
SECTION 6.6. Guaranteed Indebtedness................. 56
SECTION 6.7. Liens................................... 57
SECTION 6.8. Sale of Assets.......................... 58
SECTION 6.9. Material Contracts...................... 60
SECTION 6.10. ERISA................................... 60
SECTION 6.11. Financial Covenants..................... 61
SECTION 6.12. Hazardous Materials..................... 61
SECTION 6.13. Sale-Leasebacks......................... 61
SECTION 6.14. Cancellation of Indebtedness............ 61
SECTION 6.15. Restricted Payments..................... 62
SECTION 6.16. Real Property Leases.................... 63
SECTION 6.17. Bank Accounts........................... 64
SECTION 6.18. No Speculative Transactions............. 64
SECTION 6.19. Margin Regulations...................... 64
SECTION 6.20. Limitation on Negative Pledge Clauses,
Etc..................................... 64
SECTION 6.21. Accounting Changes...................... 65
SECTION 6.22. Inventory Sales......................... 65
SECTION 6.23. Tyco Parent and Certain Subsidiaries.... 66
SECTION 6.24. Amendments and Modifications to Debt
Documents............................... 66
SECTION 6.25. Inactive Subsidiaries................... 66
ARTICLE 7 TERM
SECTION 7.1. Duration................................ 67
SECTION 7.2. Survival of Obligations................. 67
ARTICLE 8 EVENTS OF DEFAULT; RIGHTS AND REMEDIES
SECTION 8.1. Events of Default....................... 67
SECTION 8.2. Remedies................................ 71
SECTION 8.3. Waivers by Loan Parties................. 71
SECTION 8.4. Application of Proceeds................. 72
ARTICLE 9 AGENT
SECTION 9.1. Appointment, Powers and Immunities...... 73
SECTION 9.2. Reliance by Agent....................... 74
SECTION 9.3. Defaults................................ 74
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Page
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SECTION 9.4. Rights as a Lender...................... 75
SECTION 9.5. Indemnification......................... 75
SECTION 9.6. Non-Reliance on Agent and Other Lenders. 75
SECTION 9.7. Failure to Act.......................... 76
SECTION 9.8. Successor Agent......................... 76
SECTION 9.9. Consents under Loan Documents........... 77
SECTION 9.10. Collateral Matters...................... 77
ARTICLE 10 SUCCESSORS AND ASSIGNS
SECTION 10.1. Successors and Assigns.................. 78
SECTION 10.2. Assignments and Participations.......... 78
ARTICLE 11 MISCELLANEOUS
SECTION 11.1. Complete Agreement; Modification of
Agreement............................... 81
SECTION 11.2. Fees and Expenses....................... 82
SECTION 11.3. No Waiver............................... 83
SECTION 11.4. Remedies................................ 83
SECTION 11.5. Severability............................ 84
SECTION 11.6. Conflict of Terms....................... 84
SECTION 11.7. Right of Set-off........................ 84
SECTION 11.8. Authorized Signature.................... 84
SECTION 11.9. Notices................................. 85
SECTION 11.10. Section Titles.......................... 86
SECTION 11.11. Counterparts............................ 86
SECTION 11.12. Time of the Essence..................... 86
SECTION 11.13. Confidentiality......................... 86
SECTION 11.14. GOVERNING LAW........................... 87
SECTION 11.15. WAIVER OF JURY TRIAL.................... 88
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INDEX OF ANNEXES, SCHEDULES AND EXHIBITS
Annex A - Definitions; Rules of Construction
Annex B - Cash Management System
Annex C - Schedule of Closing Documents
Annex D - Schedule of Certain Fees
Annex E - Financial, Projections and Notices
Annex F - Insurance Requirements
Annex G - Letters of Credit
Annex H - Financial Covenants
Schedule 3.2 - Executive Offices; Trade Names
Schedule 3.4 - Financial and Projections
Schedule 3.5 - Dividends
Schedule 3.6 - Real Estate and Leases
Schedule 3.7 - Material Contracts
Schedule 3.8 - Labor Matters
Schedule 3.9 - Ventures, Subsidiaries and
Affiliates; Outstanding Stock
Schedule 3.12 - Tax Matters
Schedule 3.13 - ERISA Plans
Schedule 3.14 - Litigation
Schedule 3.16 - Patents, Trademarks, Copyrights and
Licenses
Schedule 3.18 - Hazardous Materials
Schedule 3.19 - Insurance Policies
Schedule 3.20 - Disbursement and Deposit Accounts
Schedule 3.22 - Inactive Subsidiaries
Schedule 3.23 - Existing Credit Agreement
Schedule 6.1(c) - Mergers, Etc.
Schedule 6.2 - Investments
Schedule 6.4 - Loans to and Transactions with
Employees
Schedule 6.6 - Guaranteed Indebtedness
Schedule 6.7 - Liens
Schedule 11.8 - Authorized Signatures
Exhibit 1.1(a) - Form of Notice of Revolving Credit
Advance
Exhibit 1.1(d) - Form of Revolving Credit Note
Exhibit 1.1(e) - Form of Borrowing Base Certificate
Exhibit 1.6(d) - Form of Notice of Fixed Rate Election
Exhibit 3.4 - Projections
Exhibit A-1 - Form of Guaranty
Exhibit A-2 - Form of Canadian Guaranty
Exhibit A-3 - Form of UK Guaranty
Exhibit B - Form of Note Pledge Agreement
Exhibit C - Form of Patent, Trademark and
Copyright Assignment
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Exhibit D - Form of Security Agreement
Exhibit E - Form of Stock Pledge Agreement
Exhibit F - Form of Opinion of Counsel to Loan
Parties
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<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT ("Agreement") is entered into as of February 22,
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1995, by and among TYCO DISTRIBUTION CORP., a Delaware corporation
("Distribution"), TYCO MANUFACTURING CORP., an Oregon corporation
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("Manufacturing" and together with Distribution, each individually, a "Borrower"
- --------------- --------
and collectively, "Borrowers"), TYCO TOYS, INC., a Delaware corporation ("Tyco
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Parent"), each of the lenders listed on the signature pages hereof or which
- ------
pursuant to Section 10.2 becomes a "Lender" hereunder (each individually, a
------------
"Lender" and collectively, "Lenders"), and GENERAL ELECTRIC CAPITAL CORPORATION,
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a corporation organized under the banking laws of the State of New York, as
agent hereunder for the Lenders (in such capacity, together with its successors
in such capacity, "Agent").
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RECITALS
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WHEREAS, Borrowers desire to borrow up to $35,000,000 in the aggregate
from Lenders, and Lenders are willing to make certain loans and other financial
accommodations in favor of Borrowers of up to such amount in the aggregate upon
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto agree as follows:
Unless otherwise defined herein, capitalized terms used herein shall
have the respective meanings ascribed to them in Annex A and, for purposes of
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this Agreement and the other Loan Documents, the rules of construction set forth
in Annex A shall govern. Unless otherwise indicated, all references in this
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Agreement to articles, sections, subsections, schedules, annexes, exhibits, and
attachments shall refer to the corresponding articles, sections, subsections,
schedules, annexes, exhibits, and attachments of or to this Agreement. All
schedules, annexes, exhibits and attachments hereto, or expressly identified to
this Agreement, are incorporated herein by reference, and taken together, shall
constitute but a single agreement. Unless otherwise expressly set forth herein,
or in a written amendment referring to such schedules and annexes, all schedules
and annexes referred to herein shall mean the schedules and annexes as in effect
as of the Closing Date. The above Recitals shall be construed as part of this
Agreement.
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ARTICLE 1
AMOUNT AND TERMS OF CREDIT
SECTION 1.1. Revolving Credit Advances.
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(a) Upon and subject to the terms and conditions hereof, each Lender
severally agrees to make available, from time to time until the Commitment
Termination Date, for each Borrower's use and upon the request of each Borrower
therefor to Agent, advances (each, a "Revolving Credit Advance") in an aggregate
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principal amount at any time outstanding for all Borrowers up to but not
exceeding the Revolving Credit Commitment of such Lender, provided that in no
event shall (i) the aggregate principal amount of the Revolving Credit Loan plus
all outstanding Letter of Credit Obligations exceed the Maximum Revolving Credit
Commitment and (ii) the aggregate outstanding principal amount of the Revolving
Credit Advances made by all Lenders to a Borrower exceed the Borrowing
Availability of such Borrower. Each Borrower may from time to time borrow,
repay and reborrow Revolving Credit Advances under this Section 1.1.
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(b) Each Borrower shall give Agent (which shall promptly notify
Lenders) notice of each borrowing requested by such Borrower hereunder as
provided in Section 1.1(c) and, subject to Section 1.15, on the date specified
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for such borrowing each Lender shall make available the amount of the Revolving
Credit Advance to be made by it to such Borrower on such date to Agent to such
account of Agent as Agent may designate, in immediately available funds, for the
account of such Borrower.
(c) Each notice of a borrowing by a Borrower of a Revolving Credit
Advance shall be given in writing (by telecopy, hand delivery, or U.S. mail) by
such Borrower to Agent at its address at 501 Merritt Seven, Norwalk, Connecticut
06851, to the attention of Account Manager-Tyco or such other Person as may be
designated in writing by Agent, Telephone No. (203) 840-4500, Telecopy No. (203)
840-4680, given no later than 11:00 a.m. (New York time) on the Business Day of
the proposed Revolving Credit Advance requested by such Borrower. Each such
notice of borrowing (a "Notice of Revolving Credit Advance") shall be
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substantially in the form of Exhibit 1.1(a) hereto, specifying therein the
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requested date, the amount of such Revolving Credit Advance, the Disbursement
Account into which such Revolving Credit Advance shall be made, and such other
information as may reasonably be required by Agent. Agent and Lenders shall be
entitled to rely upon and shall be fully protected under this Agreement in
relying upon any Notice of Revolving Credit Advance believed by Agent to be
genuine and to assume that the persons executing and delivering the same were
duly authorized unless the responsible individual acting thereon for Agent shall
have actual knowledge to the contrary.
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(d) The Revolving Credit Advances made by each Lender to a Borrower
shall be evidenced by a single promissory note of such Borrower for such Lender
substantially in the form of Exhibit 1.1(d) hereto, dated the date hereof,
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payable to such Lender in a maximum principal amount equal to the amount of its
Revolving Credit Commitment as originally in effect and otherwise duly
completed. The date and amount of each Revolving Credit Advance made by each
Lender to a Borrower and each payment of principal with respect thereto shall be
recorded on the books and records of such Lender, which books and records shall
constitute prima facie evidence of the accuracy of the information therein
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recorded. The entire unpaid balance of the Revolving Credit Loan, together with
accrued but unpaid interest thereon, shall be immediately due and payable on the
Commitment Termination Date.
(e) Each Borrower shall furnish to Agent and each Lender a Borrowing
Base Certificate substantially in the form of Exhibit 1.1(e) hereto, completed
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and signed by the Chief Executive Officer or Chief Financial Officer of such
Borrower, which sets forth a calculation of the Borrowing Base of such Borrower
at the times and for the periods set forth in Annex E. Each Borrower agrees
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that in making any Revolving Credit Advance to such Borrower hereunder Agent and
each Lender shall be entitled to rely upon the most recent Borrowing Base
Certificate delivered to Agent and the Lenders by such Borrower. Each Borrower
further agrees that if such Borrower shall have failed to deliver a Borrowing
Base Certificate to Agent and Lenders within the specified period, Lenders shall
be under no obligation to make any further Revolving Credit Advances to (or
incur any additional Letter of Credit Obligations for the account of) such
Borrower until such time as such Borrowing Base Certificate is delivered to
Agent and Lenders.
(f) Each Borrower agrees that it shall be jointly and severally liable
for all Obligations.
SECTION 1.2. Non-Funding Lender; Actions by Lenders.
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(a) The failure of any Lender (such Lender, a "Non-Funding Lender") to
------------------
make any Revolving Credit Advance to be made by it on the date specified
therefor shall not relieve any other Lender (each such other Lender, an "Other
-----
Lender") of its obligation to make its Revolving Credit Advance on such date,
- ------
but neither any Other Lender nor Agent shall be responsible for the failure of
any Non-Funding Lender to make a Revolving Credit Advance to be made by such
Non-Funding Lender, and no Non-Funding Lender shall have any obligation to Agent
or any Other Lender for the failure by such Non-Funding Lender. Notwithstanding
anything set forth herein to the contrary, a Non-Funding Lender shall not have
any voting or consent rights under or with respect to any Loan Document or
constitute a "Lender" (or be included in the calculation of "Required Lenders"
hereunder) for any voting or consent rights under or with respect to any Loan
Document.
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(b) Anything in this Agreement to the contrary notwithstanding, each
Lender hereby agrees with each other Lender that no Lender shall take any action
to protect or enforce its rights arising out of this Agreement, the Revolving
Credit Notes or the other Loan Documents (including exercising any rights of
offset) without first obtaining the prior written consent of Agent and Required
Lenders, it being the intent of Lenders that any such action to protect or
enforce rights under this Agreement, the Revolving Credit Notes or the other
Loan Documents shall be taken in concert and at the direction or with the
consent of Agent and Required Lenders and not individually by a single Lender.
SECTION 1.3. Repayment; Termination of Commitment.
------------------------------------
(a) Borrowers hereby promise to pay to Agent, for the account of each
Lender, the entire outstanding principal amount of the Revolving Credit Loan,
and the Revolving Credit Loan shall mature, on the Commitment Termination Date.
(b) In the event that the outstanding principal balance of the
Revolving Credit Advances made to a Borrower shall at any time exceed the
Borrowing Availability of such Borrower, such Borrower shall immediately repay
the Revolving Credit Advances made to such Borrower in the amount of such
excess. In the event that the aggregate principal amount of the Revolving
Credit Loan, together with the outstanding Letter of Credit Obligations, shall
at any time exceed the Maximum Revolving Credit Commitment, Borrowers shall
immediately repay the Revolving Credit Loan in the amount of such excess;
provided that if after payment in full of the Revolving Credit Loan there shall
- --------
continue to remain any such excess, then Borrowers shall immediately pay to
Agent, for the ratable benefit of Lenders, cash or Cash Equivalents in an amount
equal to such remaining excess to be held by Agent in a Cash Collateral Account
pursuant to such documentation and on such terms as Agent shall require. In the
event that the outstanding principal balance of the Revolving Credit Advances
made to a Borrower plus the outstanding Letter of Credit Obligations of such
Borrower shall at any time exceed the Borrowing Availability of such Borrower
(without giving effect to any deduction of Letter of Credit Obligations as
provided in such defined term), then such Borrower shall immediately repay the
Revolving Credit Advances made to such Borrower until such excess is eliminated
and if there shall remain any excess after repayment in full of the Revolving
Credit Advances made to such Borrower, then such Borrower shall immediately pay
to Agent, for the ratable benefit of Lenders, cash or Cash Equivalents in an
amount equal to such remaining excess to be held by Agent in a Cash Collateral
Account pursuant to such documentation and on such terms as Agent shall require.
(c) Borrowers shall have the right at any time, upon ten (10) days'
prior written notice to Agent, to terminate voluntarily the Revolving Credit
Commitments of all (but not less than all) of
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Lenders (in whole but not in part) without premium or penalty other than payment
of the Termination Fee, if any. Upon such termination, Borrowers' right to
receive Revolving Credit Advances and the benefit of Letter of Credit
Obligations shall simultaneously terminate and Borrowers' obligation to pay the
Non-Use Fee shall terminate, and notwithstanding anything to the contrary
contained herein or in any Revolving Credit Note, the entire outstanding balance
of the Revolving Credit Loan shall be immediately due and payable. On the date
of such termination, Borrowers shall pay to Agent in immediately available funds
all of the Obligations, including the Termination Fee, if any, and any accrued
and unpaid interest, and make arrangements, in accordance with the terms and
conditions of Annex G, with respect to any outstanding Letter of Credit
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Obligations. Notwithstanding the foregoing, Borrowers may not voluntarily
terminate the Revolving Credit Commitments unless concurrently therewith the
commitments of the Global Lenders under each of the other Overall Facilities to
provide financial accommodations thereunder are terminated and all obligations,
contingent or otherwise, of the borrowers thereunder shall be paid in full in
immediately available funds.
(d) If the aggregate of the unpaid principal balance of the Revolving
Credit Loan plus the outstanding Letter of Credit Obligations should at any time
exceed the Maximum Revolving Credit Commitment or the unpaid principal balance
of the Revolving Credit Advances owing by a Borrower shall exceed such
Borrower's Borrowing Availability or any other excess balance described in
Section 1.3(b) shall occur, the excess balance shall nevertheless constitute
Obligations that are secured by the Collateral and entitled to all of the
benefits thereof and of the Loan Documents and shall, to the extent same are
part of the Revolving Credit Advances, be evidenced by the Revolving Credit
Notes.
(e) Borrowers shall make prepayments on the outstanding principal
amount of the Revolving Credit Loan and on the other Obligations in an amount
equal to one hundred percent (100%) of the net proceeds of any sale or other
disposition of any Collateral (other than (i) sales of Inventory in the ordinary
course of business and (ii) other sales and dispositions of any Collateral
permitted hereunder where the aggregate net proceeds thereof for all such sales
and dispositions made in any Fiscal Year shall not exceed $100,000) or of the
issuance by any Loan Party or any of its Subsidiaries (other than (i) any
Subsidiaries which are borrowers under any other Overall Facilities, (ii) any
other Foreign Subsidiaries of Tyco Parent which have credit facilities with
Persons which are not Affiliates of any Loan Party or any Subsidiary thereof and
(iii) any Subsidiaries of any of such borrowers or other Foreign Subsidiaries)
of any Indebtedness (other than Indebtedness permitted under any of clauses (a)
through (m) of Section 6.3), in each instance contemporaneously with any such
sale, other disposition or issuance. Subject to Section 8.4, such payments
-----------
shall be applied, without premium or penalty (except as
-5-
<PAGE>
provided in Section 1.6(g)), against outstanding amounts under the Revolving
--------------
Credit Loan, pro rata between the Revolving Credit Advances of each Borrower
based upon the respective principal amounts thereof owing by each Borrower
immediately prior to such prepayments (unless such Collateral was owned by a
Borrower or such Indebtedness was issued by a Borrower, in which case such
payment shall be applied first to the Revolving Credit Advances of such Borrower
and then to the other Revolving Credit Advances), and after payment in full of
the Revolving Credit Loan, to the other Obligations in such manner and order as
Agent shall determine (or if all Lenders determine otherwise, as Lenders so
determine). The foregoing shall not constitute a consent by Agent or any Lender
to any sale or other disposition of Collateral or to any issuance of
Indebtedness by a Loan Party or any of its Subsidiaries not otherwise expressly
permitted hereunder.
(f) Borrowers agree that, during a period of thirty (30) consecutive
days occurring at any time between December 1 of each year (commencing December
1995) and April 30 of the immediately succeeding year, the outstanding principal
balance of the Revolving Credit Loan shall be zero (0), and notwithstanding
anything to the contrary contained in this Agreement, during such thirty (30)
day period Borrowers shall prepay in full the Revolving Credit Loan, and shall
not request, obtain or cause to be obtained any Revolving Credit Advances, in
each instance, in order to comply with this provision.
(g) All Obligations, including the Revolving Credit Loan and the
Letter of Credit Obligations, shall be immediately due and payable, without
notice, on the "Commitment Termination Date," as defined in, and pursuant to,
the Receivables Funding Agreement.
SECTION 1.4. Use of Proceeds. Borrowers shall use the proceeds of the
---------------
Revolving Credit Loan for (i) the refinancing of certain outstanding
Indebtedness as provided in Section 2.1(c), (ii) the payment of costs and
--------------
expenses of the financing transactions contemplated by this Agreement that are
payable by Borrowers, and (iii) general working capital and other corporate
purposes of Borrowers not prohibited by the terms of this Agreement and the
other Loan Documents. Each Borrower agrees that it shall not borrow any
Revolving Advances except to fulfill its immediate cash needs for such purposes.
SECTION 1.5. Letters of Credit. Subject to the terms and conditions of
-----------------
this Agreement, each Borrower shall have the right to request, and Lenders agree
to incur, Letter of Credit Obligations in accordance with the terms and
conditions set forth in Annex G. Each Lender's participation obligations with
-------
respect to any Letter of Credit Obligations shall be set forth in Annex G.
-------
-6-
<PAGE>
SECTION 1.6. Interest.
--------
(a) Each Borrower shall pay to Agent for the account of each Lender
interest on the Revolving Credit Advances made to such Borrower at the following
times: (i) with respect to Revolving Credit Advances bearing interest based
upon the Index Rate, in arrears for the preceding calendar month, on the first
day of each calendar month, commencing on March 1, 1995 and, with respect to
each Fixed Rate Tranche, on the last day of the relevant Interest Period
therefor and such earlier date that the Fixed Rate therefor in effect on the
first day of such Interest Period is no longer applicable to all or a portion of
such Fixed Rate Tranche but only for that portion of the Fixed Rate Tranche for
which such Fixed Rate is no longer applicable; (ii) if not otherwise paid in
full pursuant to clause (i) above, on the Commitment Termination Date; and (iii)
if any interest accrues or remains payable after the Commitment Termination
Date, upon demand. Whenever any payment to be made hereunder or under any other
Loan Document or on any Revolving Credit Advance shall be stated to be due and
payable, or whenever the last day of any Interest Period would otherwise occur,
on a day which is not a Business Day (Eurodollar Business Day with respect to a
Fixed Rate Tranche), such payment shall be made and the last day of such
Interest Period shall occur on the next succeeding Business Day (Eurodollar
Business Day with respect to a Fixed Rate Tranche) and such extension of time
shall in such case be included in computing interest on such payment; provided,
--------
however, that if such extension would cause a payment of a Fixed Rate Tranche to
- -------
be made, or the last day of such Interest Period for a Fixed Rate Tranche to
occur, in the next following calendar month, such payment shall be made and the
last day of such Interest Period shall occur on the next preceding Eurodollar
Business Day. Interest shall be calculated by Agent on a daily basis and on the
basis of a three hundred sixty (360) day year, in each case for the actual
number of days occurring in the period for which such interest is payable. Each
determination by Agent of an interest rate hereunder and each calculation of
interest hereunder shall be conclusive and binding for all purposes, absent
manifest error or bad faith.
(b) Except as provided in paragraph (c) below, each Borrower shall be
obligated to pay interest to Agent for the account of each Lender on the
aggregate outstanding balance of the Revolving Credit Advances made to such
Borrower from the date made until paid in full at a floating rate equal to the
Index Rate in effect from time to time plus the Applicable Margin therefor.
----
(c) Provided that no Default or Event of Default has occurred and is
continuing, and subject to the terms and conditions set forth herein, each
Borrower may elect in the manner provided in paragraph (d) below that the entire
principal amount of the portion of the Revolving Credit Loan owing by such
Borrower, or a part thereof (any such entire principal amount or part thereof, a
"Fixed
-----
-7-
<PAGE>
Rate Tranche"), bear interest at a fixed rate (each such rate, a "Fixed Rate")
- ------------ ----------
for such Interest Period as such Borrower shall select equal to the Adjusted
LIBOR Rate (as in effect for such Interest Period) plus the Applicable Margin
----
therefor; provided that (i) not more than two Interest Periods in the aggregate
--------
for all Borrowers shall be in effect at any time with respect to the Revolving
Credit Loan; (ii) each Fixed Rate Tranche shall be in a minimum principal amount
of $1,000,000; (iii) no Interest Period shall extend beyond the Commitment
Termination Date; (iv) Fixed Rate Tranches in respect of any Borrower's share of
the Revolving Credit Loan shall be in amounts that such Borrower reasonably
anticipates will not exceed the outstanding principal amount of the Revolving
Credit Advances owing by such Borrower at any time during the Interest Period
selected by such Borrower; and (v) the principal amount of the Fixed Rate
Tranche to which any Interest Period relates shall not be reduced, by payment,
prepayment or otherwise, prior to the last day of such Interest Period, unless
such payment or prepayment is accompanied by payment of the amounts specified in
paragraph (g) below.
(d) Subject to the requirements set forth in paragraph (c) above, each
Borrower may, by written notice to Agent delivered not later than the second
full Eurodollar Business Day preceding the first day of any calendar month which
commences an Interest Period selected by such Borrower in respect of a Fixed
Rate, elect that a Fixed Rate Tranche with respect to any or all of the portion
of the Revolving Credit Loan owing by such Borrower bear interest at a Fixed
Rate. Each such notice (a "Notice of Fixed Rate Election") shall be
-----------------------------
substantially in the form of Exhibit 1.6(d) hereto and shall specify (i) the
--------------
amount of the Fixed Rate Tranche as to which such election is made and (ii) the
duration of the Interest Period selected by the relevant Borrower with respect
to such Fixed Rate Tranche. Agent and Lenders shall be entitled to rely upon
and shall be fully protected under this Agreement in relying upon any Notice of
Fixed Rate Election believed by Agent to be genuine and to assume that the
persons executing and delivering the same were duly authorized unless the
responsible individual acting thereon for Agent shall have actual notice to the
contrary. In the event that a Borrower shall fail to give a new Notice of Fixed
Rate Election with respect to any Fixed Rate Tranche in accordance with this
paragraph (d) the entire principal amount of such Fixed Rate Tranche shall
thereafter bear interest based upon the Index Rate as provided in paragraph (b)
above, commencing with the last day of the Interest Period applicable thereto,
unless and until such Borrower shall thereafter give a new Notice of Fixed Rate
Election in accordance with this paragraph (d).
(e) Upon the occurrence and during the continuation of any Default or
Event of Default, (x) the interest rate applicable to principal on the Revolving
Credit Advances shall be increased to the Default Rate and (y) interest on
interest and other Obligations
-8-
<PAGE>
(excluding principal on the Revolving Credit Advances) in default shall be
charged at the Default Rate (unless such increase or charge is waived in writing
by the Required Lenders) and shall be payable on demand.
(f) Notwithstanding anything to the contrary set forth in this Section
-------
1.6, if, at any time until payment in full of all of the Obligations, any rate
- ---
of interest payable hereunder exceeds the highest rate of interest permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto (the "Maximum Lawful Rate"), then in such
-------------------
event and so long as the Maximum Lawful Rate would be so exceeded, such rate of
interest shall be equal to the Maximum Lawful Rate; provided, that if at any
--------
time thereafter any rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrowers shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by each Lender
hereunder is equal to the total interest which such Lender would have received
had the interest rate or rates payable hereunder been (but for the operation of
this Section 1.6(f)) the interest rate or rates payable since the Closing Date
--------------
as otherwise provided in this Agreement. Thereafter, the interest rate or rates
payable hereunder shall be the rate or rates of interest provided in Sections
--------
1.6(a) through (e), unless and until any rate of interest again exceeds the
- ------ ---
Maximum Lawful Rate, in which event this Section 1.6(f) shall again apply. In
--------------
no event shall the total interest received by any Lender pursuant to the terms
hereof exceed the amount which such Lender could lawfully have received had the
interest due hereunder been calculated for the full term hereof at the Maximum
Lawful Rate. In the event the Maximum Lawful Rate is calculated pursuant to
this Section 1.6(f), (x) if required by applicable law, such interest shall be
--------------
calculated at a daily rate equal to the Maximum Lawful Rate divided by the
number of days in the year in which such calculation is made, and (y) if
permitted by applicable law, Borrowers and Lenders shall (i) characterize any
nonprincipal payment as an expense, fee or premium rather than as interest, (ii)
exclude voluntary prepayments and the effect thereof, and (iii) amortize, pro
rate, allocate and spread in equal or unequal parts the total amount of interest
throughout the entire contemplated term of the Obligations so that interest for
the entire term of this Agreement does not exceed the Maximum Lawful Rate. In
the event that a court of competent jurisdiction, notwithstanding the provisions
of this Section 1.6(f), shall make a final determination that a Lender has
--------------
received interest hereunder or under any of the Loan Documents in excess of the
Maximum Lawful Rate, such Lender shall, to the extent permitted by applicable
law, promptly apply such excess first to any lawful interest due and not yet
paid hereunder, then to the outstanding principal of the Obligations, then to
Fees and any other unpaid Obligations, and thereafter shall refund any excess to
the relevant Borrower or as a court of competent jurisdiction may otherwise
order.
-9-
<PAGE>
(g) In order to induce Lenders to fund and maintain any Fixed Rate
Tranche at a Fixed Rate on the terms provided herein, and in consideration of
the entering into by Lenders of funding arrangements from time to time in
contemplation thereof, whether or not funded in the London interbank market, if
any Fixed Rate Tranche is repaid in whole or in part on any day other than the
last day of the Interest Period therefor (whether any such repayment is made
pursuant to any provision of this Agreement or any other Loan Document or is the
result of acceleration, by operation of law or otherwise), the relevant Borrower
shall indemnify and hold harmless each Lender from and against and in respect of
any and all losses, costs and expenses resulting from, or arising out of or
imposed upon or incurred by such Lender by reason of the liquidation or
reemployment of funds acquired or committed to be acquired by such Lender to
fund or maintain such Fixed Rate Tranche at the Fixed Rate elected by such
Borrower, pursuant to such Lender's customary funding arrangements. The amount
of any losses, costs or expenses resulting in an obligation of such Borrower to
make a payment pursuant to the foregoing sentence shall not include any losses
attributable to a Lender's lost profit, but shall represent the excess, if any,
of (x) such Lender's cost or deemed cost of obtaining funding for the amount
necessary to fund or maintain its pro rata share of such Fixed Rate Tranche at
--- ----
the Fixed Rate elected by such Borrower, pursuant to such Lender's customary
funding arrangements, whether or not funded in the London interbank market, as
reasonably determined by such Lender (which may be computed by any Lender on the
basis of such funds having been borrowed at a rate equal to one percent (1%)
over the interest rate on United States Treasury bills or notes with a maturity
that most closely approximated the end of the relevant Interest Period as quoted
by Telerate News Service (page 5) at the close of business on the first day of
the Interest Period in respect of such Fixed Rate Tranche), over (y) the return
such Lender would receive on its reemployment of such funds, as reasonably
determined by each Lender (which, if such Lender's cost of obtaining funding is
computed pursuant to the parenthetical to clause (x) above, may be computed by
any Lender on the basis of its reinvestment of such funds in United States
Treasury bills or notes with a maturity that most closely approximates the end
of the relevant Interest Period, as quoted by Telerate News Service (page 5) at
the close of business on the date of repayment of such Fixed Rate Tranche);
provided, that if any Lender terminates any funding arrangements in respect of
- --------
its pro rata share of any such Fixed Rate Tranche, the amount of such losses,
--- ----
costs and expenses shall also include the cost to such Lender of such
termination. The determination of such amount by any Lender, when evidenced by
a certificate from that Lender giving a reasonably detailed calculation of the
amount of said cost, expense, claim, penalty, liability, loss, fee, damage or
other charge, shall be presumed correct in the absence of manifest error.
(h) In the event that the Adjusted LIBOR Rate for any Fixed Rate
Tranche shall be determined based upon a category of
-10-
<PAGE>
liabilities referred to in the parenthetical in clause (ii) of such defined term
(and not Regulation D) as a result of a Lender which is not organized under the
laws of the United States or any State or Commonwealth thereof or the District
of Columbia, then such Lender shall provide to the Borrowers an explanation of
the reason for the use of such category of liabilities and the effect thereof on
the calculation of the Adjusted LIBOR Rate; provided, however, that the failure
-------- -------
of such Lender to provide such information to the Borrowers shall not affect the
validity of the determination of the Adjusted LIBOR Rate.
SECTION 1.7. Eligible Inventory. Based on the most recent Borrowing Base
------------------
Certificate delivered by a Borrower to Agent and on other information available
to Agent, Agent shall determine which Inventory of such Borrower shall be deemed
to be "Eligible Inventory" of such Borrower for purposes of determining the
amounts, if any, to be advanced to such Borrower under the Revolving Credit
Loan.
SECTION 1.8. Fees. As compensation for Agent's and Lenders' costs,
----
skills, services and efforts incurred and expended in making the Revolving
Credit Loan, and the Letters of Credit available to Borrowers, Borrowers,
jointly and severally, agree to pay to Agent for its own account or the account
of Lenders, as the case may be, the fees set forth in Annex D.
-------
SECTION 1.9. Cash Management System. On or prior to the Closing Date,
----------------------
Borrowers, Tyco Parent and each other Domestic Subsidiary of Tyco Parent will
establish and maintain until the Termination Date, the cash management system
described in Annex B.
-------
SECTION 1.10. Receipt of Payments. Borrowers shall make each payment
-------------------
under this Agreement not later than 1:00 p.m. (New York time) on the day when
due in Dollars in immediately available funds to the Collection Account. For
purposes of computing interest and Fees and determining the Borrowing
Availability of any Borrower: (a) all payments (including cash sweeps)
consisting of cash, wire, or electronic transfers in immediately available funds
shall be deemed received by Agent upon deposit in the Collection Account and
notice to Agent of such deposit; and (b) all payments consisting of checks,
drafts, or similar non-cash items shall be deemed received upon receipt of good
funds following deposit in the Collection Account (together with notice to Agent
of such deposit). Subject to Section 1.15, each payment received by Agent under
------------
this Agreement or any Revolving Credit Note for the account of any Lender shall
be paid by Agent promptly to such Lender, in the same funds received, for
application to the Revolving Credit Loan or other obligation in respect of which
such payment is made.
SECTION 1.11. Pro Rata Treatment. Except to the extent otherwise provided
------------------
herein: (a) each Revolving Credit Advance (including any Revolving Credit
Advance pursuant to Sec-
----
-11-
<PAGE>
tion 1.15(b)) shall be incurred and made by Lenders, pro rata according to the
- ------------ --- ----
amounts of their respective ratable portion of the Revolving Credit Commitments;
(b) each payment or prepayment of principal of the Revolving Credit Loan by any
Borrower shall be made to Agent for the account of Lenders, and any payment of
the Termination Fee shall be made to Agent for the account of Lenders, pro rata
--- ----
in accordance with the respective unpaid principal amounts of the Revolving
Credit Loan held by Lenders; (c) each payment of interest on the Revolving
Credit Loan by any Borrower shall be made to Agent for the account of Lenders
pro rata in accordance with the amounts of interest on the Revolving Credit Loan
- --- ----
then due and payable to Lenders; and (d) each payment of Non-Use Fees shall be
made to Agent for the account of Lenders, pro rata according to the amounts of
--- ----
their respective Revolving Credit Commitments.
SECTION 1.12. Application and Allocation of Payments. Each Borrower
--------------------------------------
irrevocably waives the right to direct the application of any and all payments
at any time or times hereafter received from or on behalf of such Borrower or
any other Loan Party, and each Borrower irrevocably agrees that Agent and
Lenders shall have the continuing exclusive right to apply any and all such
payments against the then due and payable Obligations of such Borrower and in
repayment of the Revolving Credit Advances and Letter of Credit Obligations
owing by such Borrower as herein expressly provided or permitted or, if an Event
of Default is continuing, as Lenders may deem advisable; provided, that the
--------
prepayments required or permitted under Section 1.3(e) shall be applied in the
--------------
manner described in such Section. In the absence of a specific determination by
all Lenders with respect thereto (which determination may be made without the
consent of Borrowers only if an Event of Default is continuing) or unless
otherwise expressly provided herein, the same shall be applied in the following
order: (a) then due and payable Fees, expenses and other Obligations (including
Revolving Credit Advances made by Agent in its capacity as Agent) owing by such
Borrower to Agent; (b) then due and payable Fees and expenses of Lenders owing
by such Borrower; (c) then due and payable interest payments owing by such
Borrower; (d) Obligations to Lenders owing by such Borrower other than Fees,
expenses and interest and principal payments; and (e) then due and payable
principal payments on the Revolving Credit Loan owing by such Borrower; provided
--------
that if any such payments are received from or on behalf of any Loan Party other
than a Borrower or if an Event of Default shall occur and be continuing, such
payments shall be applied to the Obligations in such manner and order as Agent
shall determine (or if all Lenders determine otherwise, as all such Lenders so
determine). Except as otherwise provided in this Agreement, if after payment in
full of all then due and payable Obligations, there shall remain with Agent any
excess monies received from or on behalf of any Borrower, then Agent shall
promptly return same to the relevant Borrower. Agent, on behalf of Lenders, is
authorized to, and at its option may, make or cause to be made Revolving Credit
Advances by Lenders on behalf of a
-12-
<PAGE>
Borrower for payment of all Fees, expenses, charges, costs, principal, interest,
or other Obligations then due and payable by such Borrower under this Agreement
or any of the Loan Documents, even if the making of such Revolving Credit
Advance causes the outstanding balance of the Revolving Credit Loan, together
with the outstanding Letter of Credit Obligations, to exceed the Maximum
Revolving Credit Commitment or the outstanding principal balance of the
Revolving Credit Advances owing by a Borrower to exceed such Borrower's
Borrowing Availability, in which case the terms of Section 1.3(d) shall apply.
--------------
SECTION 1.13. Non-Receipt of Funds by Agent. Unless Agent shall have been
-----------------------------
notified by a Lender or by a Borrower (in either case, "Payor") prior to the
-----
date on which such Payor is to make payment to Agent of (in the case of a
Lender) the proceeds of a Revolving Credit Advance to be made by such Lender
hereunder or (in the case of a Borrower) a payment to Agent for account of one
or more of Lenders hereunder (such payment being herein called the "Required
--------
Payment"), which notice shall be effective upon receipt by Agent, that such
- -------
Payor does not intend to make the Required Payment to Agent, Agent may assume
that the Required Payment has been made and may, in reliance upon such
assumption (but shall not be required to), make the amount thereof available to
the intended recipient(s) on such date; and, if such Payor has not in fact made
the Required Payment to Agent, the recipient(s) of such payment shall, on
demand, repay to Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date (the
"Advance Date") such amount was so made available by Agent until the date Agent
- -------------
recovers such amount, at a rate per annum equal to the Index Rate in effect from
time to time plus the Applicable Margin and, if such recipient(s) shall fail
promptly to make such payment, Agent shall be entitled to recover such amount,
on demand, from such Payor, together with interest as aforesaid; provided, that
--------
if neither the recipient(s) nor such Payor shall return the Required Payment to
Agent within three (3) Business Days of the Advance Date, then, retroactively to
the Advance Date, such Payor and the recipient(s) shall each be obligated to pay
interest on the Required Payment (without duplication) as follows:
(a) if the Required Payment shall represent a payment to be made by a
Borrower to Lenders, such Borrower and the recipient(s) shall (without
duplication) each be obligated retroactively to the Advance Date to pay interest
in respect of the Required Payment at the Default Rate (and, in case the
recipient(s) shall return the Required Payment to Agent, without limiting the
obligation of the Borrower hereunder to pay interest to such recipient(s) at the
Default Rate in respect of the Required Payment); and
(b) if the Required Payment shall represent proceeds of a Revolving
Credit Advance to be made by Lenders to a Borrower,
-13-
<PAGE>
such Payor and Borrower shall (without duplication) each be obligated
retroactively to the Advance Date to pay interest in respect of the Required
Payment at the rate of interest provided for such Required Payment pursuant
hereto (and, in case such Borrower shall return the Required Payment to Agent,
without limiting any claim the Borrower may have against Payor in respect of the
Required Payment).
Nothing in this Section 1.13 or elsewhere in this Agreement or the other Loan
------------
Documents shall be deemed to require Agent to advance funds on behalf of any
Lender or to relieve any Lender from its obligation to fulfill its Revolving
Credit Commitment hereunder or to prejudice any rights that a Borrower may have
against any Lender as a result of any default by such Lender hereunder.
SECTION 1.14. Sharing of Payments, Etc.
-------------------------
(a) Each Borrower agrees that, in addition to (and without limitation
of) any right of setoff, banker's lien or counterclaim a Lender may otherwise
have, each Lender shall be entitled, at its option (but subject, as between
Lenders, to the provisions of Section 1.2(b)), to offset balances held by it for
--------------
the account of such Borrower at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Lender's pro rata
--- ----
portion of the Revolving Credit Loan (including any Revolving Credit Advances
deemed made by such Lender under Section 1.15(b)) or any other amount payable to
---------------
such Lender hereunder, that is not paid when due (regardless of whether such
balances are then due to such Borrower), in which case it shall promptly notify
such Borrower and Agent thereof; provided, that such Lender's failure to give
--------
such notice shall not affect the validity thereof.
(b) If any Lender shall obtain from a Borrower payment of any
principal of or interest on the pro rata portion of the Revolving Credit Loan
--- ----
owing to it or payment of any other amount under this Agreement, any Revolving
Credit Note held by it, or any other Loan Document through the exercise of any
right of setoff, banker's lien or counterclaim or similar right or otherwise
(other than from Agent as provided herein), and, as a result of such payment,
such Lender shall have received a greater percentage of the principal of or
interest on the Revolving Credit Loan or such other amounts then due hereunder
or thereunder by such Borrower to such Lender than the percentage received by
any other Lender, it shall promptly pay to Agent, for the benefit of Lenders,
the amount of such excess and simultaneously purchase from such other Lenders a
participation in (or, if and to the extent specified by such Lender, direct
interests in) the Revolving Credit Loan or such other amounts, respectively,
owing to such other Lenders (or in interest due thereon, as the case may be) in
such amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all Lenders shall share the benefit of such excess
-14-
<PAGE>
payment (net of any expenses that may be incurred by such Lender in obtaining or
preserving such excess payment) pro rata in accordance with the unpaid principal
--- ----
of and/or interest on the Revolving Credit Loan or such other amounts,
respectively, owing to each of Lenders. Amounts received by Agent under this
Section 1.14(b) shall be treated as a payment by the relevant Borrower under
- ---------------
Section 1.12. To such end all Lenders shall make appropriate adjustments among
- ------------
themselves (by the resale of any participation sold or otherwise) if such
payment is rescinded or must otherwise be restored.
(c) Each Borrower agrees that any Lender so purchasing such a
participation (or direct interest) may exercise, in a manner consistent with
Section 1.14(a), all rights of setoff, banker's lien, counterclaim or similar
- ---------------
rights with respect to such participation as fully as if such Lender were a
direct holder of the Revolving Credit Loan or other amounts (as the case may be)
owing to such Lender in the amount of such participation. Any Lender which so
exercises any right of setoff shall notify the relevant Borrower and Agent of
such exercise; provided that the failure to do so shall not affect the validity
--------
of such setoff.
(d) Nothing contained herein shall require any Lender to exercise any
right as against a Borrower as described in this Section 1.14 or shall affect
------------
the right of any Lender to exercise, and retain the benefits of exercising, any
such right with respect to any other indebtedness or obligation of such
Borrower. If, under any applicable bankruptcy, insolvency or other similar law,
any Lender receives a secured claim in lieu of a setoff or right as against a
Borrower to which this Section 1.14 applies, such Lender shall, to the extent
------------
practicable, assign such rights to Agent for the benefit of Lenders and, in any
event, exercise its rights in respect of such secured claim in a manner
consistent with the rights of Lenders entitled under this Section 1.14 to share
------------
in the benefits of any recovery on such secured claim.
SECTION 1.15. Settlement Procedures.
---------------------
(a) The Revolving Credit Loan balance may fluctuate from day to day
from Agent's disbursement of funds to, and receipt of funds from, Borrowers. In
order to minimize the frequency of transfers of funds between Agent and Lenders,
Revolving Credit Advances may be made by Agent and payments in respect thereof
will be settled according to the procedures set forth in this Section 1.15.
------------
Notwithstanding these procedures, each Lender's obligation to fund its portion
of any Revolving Credit Advance made to a Borrower will commence on the date
such Revolving Credit Advances are made. Such payments will be made by each
Lender without setoff, counterclaim or reduction of any kind.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Agent may elect, at its sole option, to fund the
-15-
<PAGE>
entire amount of any Revolving Credit Advance requested by a Borrower. In the
event Agent makes such election, such Revolving Credit Advance made by Agent
shall be deemed, and shall constitute, as of the date of making thereof, a
Revolving Credit Advance made by each Lender to such Borrower in an amount equal
to such Lender's pro rata share thereof, and each Lender shall be obligated to
--- ----
deliver to Agent such share of such Revolving Credit Advance on the Weekly
Settlement Date in accordance with the procedure for weekly settlement set forth
in Section 1.15(c) or as otherwise provided in Section 1.15(d). Notwithstanding
--------------- ---------------
anything to the contrary contained in this Agreement, for purposes of
calculating interest payable to any Lender (a) Agent shall be deemed a "Lender"
with respect to any outstanding Revolving Credit Advances funded by Agent, and
(b) the amount of Revolving Credit Advances of any Lender that are outstanding
on any day shall be equal to the amount of such Lender's Revolving Credit
Advances outstanding on such day excluding any Revolving Credit Advances that
have been funded entirely by Agent with respect to which such Lender has not
funded its pro rata share.
--- ----
(c) Each Lender shall settle with Agent, upon Agent's request, on the
third Business Day of each week (or on such other day of the week as may be
designated from time to time by Agent) in each successive week (the "Weekly
------
Settlement Date"), on the net Revolving Credit Advances and payments since the
- ---------------
date of the last settlement. On each Weekly Settlement Date, prior to 10:00
a.m. (New York time), Agent shall notify each Lender by telephone or by telex,
telecopy or other form of teletransmission, of such Lender's pro rata share of
--- ----
the outstanding Revolving Credit Advances and the amount of the payment
necessary to adjust such Lender's outstanding Revolving Credit Advances to such
Lender's pro rata share of such Revolving Credit Advances as of such Weekly
--- ----
Settlement Date (on a net basis taking into account any funds in the Collection
Account which Agent determines are available). Any such payment shall be made
by the party from which such payment is due to the other party, in same day
funds, not later than 1:00 p.m. (New York time) on such Weekly Settlement Date.
If any Lender shall, for any reason, not settle with Agent within one Business
Day after the Weekly Settlement Date, such Lender agrees to pay and Borrowers
agree to repay, severally, to Agent forthwith on demand the amount due Agent on
such Weekly Settlement Date together with interest thereon for each day from
such Weekly Settlement Date until the day such amount is paid to Agent, at (i)
in the case of such Lender, the Index Rate in effect for the first three (3)
days for which such amount remains unpaid and thereafter at the rate then in
effect with respect to Revolving Credit Advances pursuant to Section 1.6 hereof,
-----------
and (ii) in the case of a Borrower, the rate then in effect with respect to
Revolving Credit Advances pursuant to Section 1.6 hereof. If such Lender shall
-----------
pay to Agent such corresponding amount, such amount so paid shall constitute
such Lender's Revolving Credit Advance and, if both such Lender and Borrower
shall have paid and repaid, respectively, such
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<PAGE>
corresponding amount, Agent shall promptly pay over to such Borrower such
corresponding amount in same day funds, but such Borrower shall remain obligated
for all interest thereon.
(d) As an alternative to the weekly settlement provided for in Section
-------
1.15(c), Agent may elect at its sole option, to use the following same day
- -------
settlement procedure for borrowings of Revolving Credit Advances. Prior to
12:00 noon (New York time) on any date specified for a borrowing of a Revolving
Credit Advance in a Notice of Revolving Credit Advance, Agent may notify each
Lender by telephone or by telex, telecopy or other form of teletransmission, of
the requested Revolving Credit Advance. Not later than 2:00 p.m. (New York time)
on the date of such proposed Revolving Credit Advance, each Lender shall make
available to Agent, in same day funds, to such account of Agent as Agent may
designate, such Lender's pro rata share of such Revolving Credit Advance.
--- ----
Notwithstanding the foregoing, to the extent that there are available funds in
the Collection Account, Agent may, at Agent's discretion, notify each Lender
that such Lender's obligation to make available to Agent same day funds as
provided in the preceding sentence shall be satisfied to the extent of its pro
---
rata share out of such funds in the Collection Account, or such portion of such
- ----
funds as Agent shall indicate are to be applied to fund such Revolving Credit
Advance.
SECTION 1.16. Accounting. Agent will provide a monthly accounting of
----------
transactions under the Revolving Credit Loan to Borrowers. Each and every such
accounting shall (absent manifest error) be deemed final, binding and conclusive
upon Borrowers in all respects as to all matters reflected therein, unless a
Borrower, within sixty (60) days after the date any such accounting is rendered,
shall notify Agent in writing of any objection which such Borrower may have to
any such accounting, describing the basis for such objection with specificity.
In that event, only those items (the "disputed items") expressly objected to in
--------------
such notice shall be deemed to be disputed by Borrowers. Each and every such
accounting shall (absent manifest error) be deemed final, binding and conclusive
upon Agent and Lenders in all respects as to all matters reflected therein,
unless Agent or any Lender, within sixty (60) days after the date any such
accounting is rendered, shall notify Borrower and, if notice is being given by a
Lender, Agent in writing of any objection or change to such accounting; in which
case Borrowers shall be entitled to dispute such objection or change in the
manner provided above within the foregoing sixty (60) day period (which period
shall commence on the date Borrowers are notified of such objection or change).
Agent's determination in good faith, based upon the facts available, of any
disputed item shall (absent manifest error) be final, binding and conclusive on
Borrowers.
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<PAGE>
SECTION 1.17. Indemnity.
---------
(a) Each Loan Party shall, jointly and severally, indemnify and hold
Agent, each Lender and their respective Affiliates, officers, directors,
employees, attorneys and agents (each, an "Indemnified Person"), harmless from
------------------
and against any and all suits, actions, costs, fines, deficiencies, penalties,
proceedings, claims, damages, losses, liabilities and expenses (including
reasonable attorneys' fees and disbursements and other costs of investigations
or defense, including those incurred upon any appeal) (each, a "Claim") which
-----
may be instituted or asserted against or incurred by such Indemnified Person as
the result of credit having been extended under this Agreement or any other Loan
Document, the use or intended use of proceeds of Revolving Credit Advances, or
otherwise arising in connection with the transactions contemplated hereunder and
thereunder, including any and all Environmental Liabilities and Costs and
regardless of whether the Indemnified Person is a party to such Claim; provided,
--------
that no Loan Party shall be liable for any indemnification to such Indemnified
Person with respect to any portion of any such Claim which results solely from
such Indemnified Person's gross negligence, bad faith or willful misconduct as
determined by a final judgment of a court of competent jurisdiction and no Loan
Party shall be liable under this Section 1.17(a) for any lost profits of any
Lender. The relevant Indemnified Person shall give Tyco Parent prompt written
notice of any Claim asserted against it by a third party (other than a Claim for
which the Loan Parties have no indemnity obligations as described in the proviso
to the first sentence of this Section 1.17(a)) setting forth a description of
those elements of such Claim of which such Indemnified Person has knowledge.
The Loan Parties shall have the right at their sole cost and expense at any time
during which such Claim is pending to select counsel to defend and settle any
such Claim so long as (i) in any such event the Loan Parties shall have stated
in a writing delivered to the applicable Indemnified Person that, as between the
Loan Parties and such Indemnified Person, the Loan Parties are responsible to
such Indemnified Person with respect to such Claim (except to the extent
expressly set forth in the proviso to the first sentence of this Section
1.17(a)), (ii) the counsel selected by the Loan Parties shall be reasonably
acceptable to the relevant Indemnified Person and (iii) no Loan Party shall
settle any such Claim without the prior written consent of the relevant
Indemnified Person (which consent shall not be unreasonably withheld or
delayed); provided, however, that if an Indemnified Person shall have been
advised by its counsel that there are legal defenses available to such
Indemnified Person that are different from or additional to those available to
any of the Loan Parties which, in the reasonable opinion of such counsel, are
sufficient to make it undesirable for the same counsel to represent both such
Indemnified Person and any of the Loan Parties, such Indemnified Person shall
have the right to employ its own counsel in such action, and in such event, the
reasonable fees and disbursements of such counsel shall be paid by
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<PAGE>
the Loan Parties. If the Loan Parties shall fail to assume the defense of any
Claim in accordance with the terms of this indemnity, the relevant Indemnified
Person shall have the right to select counsel and control the defense of such
Claim; provided, however, that no Indemnified Person shall settle any such Claim
without the prior written consent of Tyco Parent, which consent shall not be
unreasonably withheld or delayed. With respect to any Claim for which the Loan
Parties are entitled to select counsel, each Indemnified Person shall have the
right, at its expense, to participate in the defense of such Claim. In the
event that, with respect to any Claim, more than one Indemnified Person shall be
permitted hereunder to select counsel to defend such Claim at the expense of the
Loan Parties and shall decide to do so, then all such Indemnified Persons shall
select the same counsel to defend such Indemnified Persons with respect to such
Claim; provided, however, that if any such Indemnified Person shall in its
reasonable opinion consider that the retention of one joint counsel as aforesaid
shall result in a conflict of interest, such Indemnified Person may, at the
expense of the Loan Parties, select its own counsel to defend such Indemnified
Person with respect to such Claim. Lenders, Agent and the Loan Parties and
their respective counsel shall cooperate with each other in all reasonable
respects in any investigation, trial and defense of any such Claim and any
appeal arising therefrom. NEITHER AGENT NOR ANY LENDER NOR ANY OTHER INDEMNIFIED
PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY HERETO, ANY SUCCESSOR,
ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING
CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED UNDER THE LOAN DOCUMENTS, THE USE OR INTENDED USE OF PROCEEDS OF
REVOLVING CREDIT ADVANCES OR OTHERWISE IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREBY. The foregoing provision in favor of any Indemnified Person
shall be in addition to any rights that such Indemnified Person may have at
common law or otherwise, including, but not limited to, any right to
contribution.
In any suit, proceeding or action brought by Agent or Lenders relating to any
Account, Chattel Paper, Contract, General Intangible, Instrument, Equipment or
Document for any sum owing thereunder, or to enforce any provision of any
Account, Chattel Paper, Contract, General Intangible, Instrument or Document,
Borrowers shall, jointly and severally, save, indemnify and keep Agent and
Lenders harmless from and against all expense, loss or damage suffered by reason
of any defense, setoff, counterclaim, recoupment or reduction of liability
whatsoever of the obligor thereunder arising out of a breach by a Borrower or
other Loan Party of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to, or in favor of, such
obligor or its successors from a Borrower or other Loan Party, all such
obligations of a Borrower or other Loan Party shall be and remain enforceable
against, and only against, such
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<PAGE>
Borrower or other Loan Party and shall not be enforceable against Agent or
Lenders.
(b) Borrowers hereby acknowledge and agree that neither Agent nor any
Lender (as of the date hereof) (i) is now or has ever been in control of any of
the Real Property or the affairs of any Borrower, any other Loan Party or any
Subsidiary thereof, and (ii) has the capacity through the provisions of the Loan
Documents to influence the conduct of any Borrower, any other Loan Party or any
Subsidiary thereof with respect to the ownership, operation or management of any
of the Real Property.
SECTION 1.18. Access. Each Loan Party shall (and shall cause each of its
------
Subsidiaries to) at such Person's expense (except for clause (c) below, which
shall be at Borrowers' expense except to the extent provided otherwise in such
clause (c)): (a) provide access during normal business hours to Agent and each
Lender and any of their respective officers, employees, representatives,
consultants and agents, as frequently as Agent or any Lender determines to be
appropriate, upon reasonable advance notice (unless a Default shall have
occurred and be continuing, in which event no notice shall be required and Agent
and each Lender shall have access at any and all times), to the properties and
facilities of such Loan Party or any of its Subsidiaries; (b) permit Agent and
each Lender and any of their officers, employees, representatives, consultants
and agents to inspect, audit and make extracts from all of such Loan Party's and
its Subsidiaries' records, files and books of account; and (c) permit Agent on
behalf of Lenders or any representatives, consultants or agents of Agent to
conduct audits to inspect, review and evaluate the Collateral (such audits, at
the expense of any Borrower, not to exceed (x) four times in any Fiscal Year for
all Loan Parties in the aggregate with respect to audits of inventory by Gordon
Brothers Partners, Inc. or other independent inventory auditors and (y) four
times in any Fiscal Year for all Loan Parties in the aggregate with respect to
other audits, unless an Event of Default has occurred in which case such limits
shall not apply; it being understood that the foregoing limits shall not
prohibit Agent from conducting additional audits at its expense), and such Loan
Party agrees to render to Agent and each Lender and their representatives,
consultants and agents at such Loan Party's cost and expense, such clerical and
other assistance as may be reasonably requested with regard thereto. Each Loan
Party shall, and shall cause each of its Subsidiaries to, make available to
Agent and each Lender and their respective counsel, as quickly as practicable
under the circumstances, originals or copies of all books, records, board
minutes, contracts, insurance policies, environmental audits, business plans,
files, financial statements (actual and pro forma), filings with federal, state
--- -----
and local and foreign regulatory agencies, and other instruments and documents
which Agent or any Lender may request which are in the possession or control of
any Loan Party or any of its Subsidiaries or any of their respective accountants
and other advisors. Each Loan Party
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<PAGE>
shall deliver any document or instrument reasonably necessary for Agent or any
Lender, as it may from time to time request, to obtain records from any service
bureau or other Person which maintains records for such Loan Party or its
Subsidiaries, and shall maintain duplicate records or supporting documentation
on media, including computer tapes and discs owned by such Loan Party. Each
Loan Party shall instruct its and its Subsidiaries' independent certified public
accountants and its banking and other financial institutions to make available
to Agent and each Lender such information and records as Agent and each Lender
may reasonably request.
SECTION 1.19. Taxes.
-----
(a) Any and all payments by or on behalf of any Borrower or other Loan
Party hereunder or under any Revolving Credit Note or other Loan Document, shall
be made, in accordance with this Section 1.19, free and clear of and without
------------
deduction or withholding for any and all present or future Taxes. If any
Borrower or other Loan Party shall be required by law to deduct or withhold any
Taxes from or in respect of any sum payable hereunder or under any Revolving
Credit Note or other Loan Document to Agent or any Lender, (i) the sum payable
shall be increased as may be necessary so that after making all required
deductions and withholdings (including deductions and withholdings applicable to
additional sums payable under this Section 1.19) Agent or such Lender receives
------------
an amount equal to the sum it would have received had no such deductions or
withholdings been made, (ii) such Borrower or other Loan Party shall make such
deductions and withholdings, and (iii) such Borrower or other Loan Party shall
pay the full amount deducted or withheld to the relevant taxing or other
authority in accordance with applicable law.
(b) In addition, each Borrower agrees, jointly and severally, to pay
any present or future intangible personal property, stamp or documentary taxes
or any other excise or property taxes, charges or similar levies that arise from
any payment made hereunder or under the Revolving Credit Notes or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement, the other Loan Documents or any other matter contemplated by this
Agreement (hereinafter referred to as "Other Taxes").
-----------
(c) Each Borrower shall, jointly and severally, indemnify and pay,
within ten (10) days of demand therefor, Agent and each Lender for the full
amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this Section 1.19) paid by Agent or
------------
such Lender and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted.
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<PAGE>
(d) Within thirty (30) days after the date of any such payment of
Taxes or Other Taxes, the relevant Loan Party shall furnish to Agent or such
Lender, at its address referred to in Section 11.9, the original or a certified
------------
copy of a receipt evidencing payment thereof.
(e) If any Lender subsequently receives from a taxing authority a
refund of any Tax or Other Tax previously paid by a Borrower and for which such
Borrower has indemnified such Lender pursuant to this Section 1.19, such Lender
------------
shall within thirty (30) days after receipt of such refund, and to the extent
permitted by applicable law, pay to such Borrower the net amount of any such
refund after deducting taxes and expenses attributable thereto.
(f) Without prejudice to the survival of any other agreement of any
Loan Party under this Agreement or any other Loan Document, the agreements and
obligations of the Loan Parties contained in this Section 1.19 shall survive the
------------
Termination Date.
SECTION 1.20. Additional Costs.
----------------
(a) Each Borrower shall pay directly to each Lender from time to time
on request such amounts as such Lender may reasonably determine to be necessary
to compensate such Lender for any costs that it reasonably determines are
attributable to the maintenance by such Lender, pursuant to any law or
regulation or any interpretation, directive or request (whether or not having
the force of law and whether or not failure to comply therewith would be
unlawful) of any court or governmental or monetary authority (i) following any
Regulatory Change relating to Taxes, reserves, deposits or similar requirements
or any other conditions affecting this Agreement or the financial accommodations
provided or committed to be provided hereunder or (ii) implementing after the
date hereof any risk-based capital guideline or other capital requirement
(whether or not having the force of law and whether or not the failure to comply
therewith would be unlawful) hereafter issued (or heretofore issued but not
required to be complied with as of the date hereof) by any Governmental
Authority in respect of such Lender's Revolving Credit Commitment or Revolving
Credit Advances hereunder (such compensation to include, without limitation, an
amount equal to any reduction of the rate of return on assets or equity of such
Lender to a level below that which such Lender could have achieved but for such
law, regulation, interpretation, directive or request).
(b) Each Lender will furnish to the relevant Borrower a certificate
setting forth the basis and amount of each request by such Lender for
compensation under this Section 1.20. Determinations and allocations by any
------------
Lender for purposes of this Section 1.20 of the effect of any Regulatory Change
------------
pursuant to or of capital maintained pursuant to this Section 1.20, on its costs
------------
or rate of return of maintaining its Revolving Credit Commitment or
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<PAGE>
Revolving Credit Advances, and of the amounts required to compensate such Lender
under this Section 1.20, shall be conclusive and binding absent manifest error.
------------
ARTICLE 2
CONDITIONS PRECEDENT
SECTION 2.1. Conditions to the Initial Revolving Credit Advance and the
----------------------------------------------------------
Initial Letter of Credit Obligation. Notwithstanding any other provision of
- -----------------------------------
this Agreement and without affecting in any manner the rights of Agent or any
Lender hereunder, Borrowers shall have no rights under this Agreement (but shall
have all applicable obligations hereunder), and Agent and Lenders shall not be
obligated to make any Revolving Credit Advance or to incur any Letter of Credit
Obligations or to take, fulfill, or perform any other action hereunder, until
the following conditions have been fulfilled to the satisfaction of Agent (and
to the extent specified below, of Lenders):
(a) This Agreement or counterparts thereof shall have been duly
executed by, and delivered to, Borrowers, Tyco Parent, Agent and each Lender.
(b) Agent and Lenders shall have received such documents, instruments,
certificates, opinions and agreements as Agent shall reasonably request in
connection with the transactions contemplated by this Agreement, including in
any event all documents, instruments, agreements and other materials listed in
the Schedule of Closing Documents attached as Annex C hereto, each in form and
-------
substance satisfactory to Agent and Required Lenders.
(c) Agent shall have received evidence satisfactory to Agent that all
Indebtedness and other obligations of Tyco Parent and its Subsidiaries under the
Existing Credit Agreement and related documents (as in effect immediately prior
to the Closing Date) will be performed and paid in full from the proceeds of the
initial Revolving Credit Advance and the initial sale of Accounts under the
Receivables Sale Agreements and all Liens upon any of the property (including
any cash collateral) of Tyco Parent and its Subsidiaries in favor of the lender
or lenders thereunder (or agent therefor) shall be terminated and released
immediately upon such payment and Agent and such lender or lenders (or agent
therefor) shall have entered into an escrow or other agreement in form and
substance satisfactory to Agent providing for the release and termination of all
such Liens, termination of the Existing Credit Agreement and acknowledgment of
payment in full of all outstanding Indebtedness and other obligations under or
relating to the Existing Credit Agreement.
-23-
<PAGE>
(d) Agent shall have received evidence satisfactory to Agent that the
Loan Parties have obtained consents, approvals and acknowledgments of all
Persons whose consents, approvals and acknowledgments may be required, including
all requisite Governmental Authorities, to the terms and to the execution and
delivery of this Agreement and the other Loan Documents and the consummation of
the transactions contemplated hereby and thereby.
(e) Agent shall have received evidence satisfactory to Agent that the
insurance policies provided for in Section 3.19 and Annex F are in full force
------------ -------
and effect, together with appropriate evidence showing a loss payable and/or
additional insured clauses or endorsements, as appropriate, in favor of Agent
and Lenders and in form and substance satisfactory to Agent.
(f) All of the borrowing base assets supporting the financial
accommodations to be provided under the Overall Facilities on the Closing Date
after giving effect to the amount, if any, of the reserves to be established
thereunder on the Closing Date (including reserves established in respect of
letter of credit obligations, if any) shall be sufficient in value, on a pro
---
forma basis after giving effect to the payment of all anticipated closing
- -----
expenditures, whether or not then paid, as determined by Agent, and without any
material deterioration of trade payables, to provide the borrowers under such
Overall Facilities with unused borrowing base availability of not less than
$12,500,000.
(g) Payment in immediately available funds by Borrowers to Agent for
its account and the account of Lenders, as the case may be, of all Fees and
reasonable costs and expenses of closing (including fees and expenses of
consultants and counsel to Agent presented as of the Closing Date), against
which will be credited certain amounts heretofore paid by Tyco Parent to GE
Capital as and to the extent provided in the Commitment Letter.
(h) No action, proceeding, investigation, audit, regulation or
legislation shall have been instituted, threatened or proposed before any
Governmental Authority (i) which, if successful, would have a Material Adverse
Effect, or (ii) to enjoin, restrain or prohibit, or to obtain damages in respect
of, or which is related to or arises out of, this Agreement or any of the other
Loan Documents or any of the other Overall Facilities or the consummation of the
transactions contemplated hereby or thereby and which, in Agent's sole judgment
exercised in good faith, would make it inadvisable to consummate the
transactions contemplated by this Agreement or any of the other Loan Documents
or any of the other Overall Facilities.
(i) Agent, in its sole judgment, shall not have determined that: (i)
Tyco Parent or any other Loan Party has made any Restricted Payment since
September 30, 1994 other than as set forth on Schedule 3.5; (ii) any material
------------
increase in liabilities,
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<PAGE>
liquidated or contingent, of Tyco Parent or any of its Subsidiaries, or any
material decrease in the assets of Tyco Parent or any of its Subsidiaries (other
than normal recurring seasonal changes in the foregoing consistent with prior
years' experience), shall have occurred since September 30, 1994; (iii) except
as set forth on Schedule 3.5, any Material Adverse Effect (or with respect to
------------
any of Tyco Parent's Subsidiaries which are not Loan Parties, material adverse
change in the business, operations, financial condition or prospects of such
Person or the industry in which it operates), shall have occurred since
September 30, 1994 (it being understood that the financial results described in
Tyco Parent's press release of October 25, 1994 shall not constitute such a
Material Adverse Effect or material adverse change so long as Agent shall have
determined, after due diligence, that the results described therein reflect
completely and accurately, in all material respects, the actual results for the
period covered); or (iv) the results of operations of Tyco Parent and each of
its Subsidiaries for the period commencing September 30, 1994 and ending on the
Closing Date are materially different from the projected results of each such
Person's operations for such period as indicated in the Projections.
(j) Agent and each Lender shall be reasonably satisfied with the
corporate, capital, tax, legal and management structure and cash management
systems of Tyco Parent and the other Loan Parties and any Subsidiary thereof,
and shall be satisfied, in its sole judgment, with the nature and status of all
contractual obligations, securities, labor, tax, ERISA, employee benefit,
environmental, health and safety matters, in each case, involving or affecting
any such Person. In connection therewith, Agent and its Affiliates shall have
completed, with results reasonably satisfactory to Lenders, such business and
legal due-diligence of Tyco Parent and the other Loan Parties and any Subsidiary
thereof as Agent may require including, without limitation, satisfactory review
by Agent's field examiners or attorneys, as applicable, of Tyco Parent's and the
other Loan Parties' accounts receivable, assets, inventory, financial controls
and records, contracts (including, without limitation, stockholder agreements,
Licenses and debt and equity agreements), leases, pension funds, organizational
or governing documents, environmental compliance, indebtedness, legal and
capital structure, liabilities, tax position and a liquidation analysis. Agent
and its Affiliates shall have had reasonable and continuing access to any
material it deems necessary to monitor the loans to be made hereunder, including
access to Tyco Parent's independent public accountants. Agent shall be
satisfied with the structure and the tax effect of the transactions contemplated
by this Agreement.
(k) Manufacturing, Industries and the Receivables Funding Subsidiary
shall have entered into the Receivables Funding Documents (which documents shall
be satisfactory to Agent) and shall have satisfied all conditions set forth in
Article III of the
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<PAGE>
Receivables Funding Agreement and the Receivables Funding Documents shall be in
full force and effect.
(l) Each of the Persons intended to be parties to the Canadian Credit
Agreement and the UK Credit Agreement (which agreements shall be satisfactory to
Agent) shall have executed and delivered such agreements, all conditions to the
Global Lenders thereunder providing any financial accommodations under such
agreements shall have been satisfied and such credit agreements shall be in full
force and effect.
(m) Agent and Lenders shall have obtained a pro forma balance sheet of
each Borrower, Industries and Tyco Parent as of the Closing Date after giving
effect to the transactions contemplated on the Closing Date under this Agreement
and the Receivables Funding Documents in form and substance reasonably
satisfactory to the Agent.
(n) (i) Agent shall be satisfied that there shall have been no
material adverse change in the value of the assets of those Loan Parties which
were the subject of an appraisal conducted by Gordon Brothers Partners, Inc. at
the request of GE Capital and (ii) Lenders shall have obtained appraisals in
form and substance reasonably acceptable to Lenders reflecting asset values of
the Loan Parties at levels acceptable to Lenders. The appraisals shall be
performed by appraisers retained by Tyco Parent and reasonably acceptable to
Lenders.
(o) Agent shall be satisfied that as of the Closing Date (i) the cash
and cash equivalents of Tyco Parent and its Subsidiaries (free of all Liens)
shall be at least $13,000,000 and (ii) there shall have been no deterioration in
the accounts payable and accrued expenses of Tyco Parent and its Subsidiaries
from that reflected in Tyco Parent's quarterly financial statements as at and
for the period ended September 30, 1994.
(p) Agent shall be satisfied that, as of the Closing Date, Tyco
Parent, each other Loan Party and each Subsidiary thereof shall be in compliance
in all material respects with all material agreements and all federal, state and
local and foreign laws and regulations including labor and environmental laws
and regulations and ERISA, and shall have obtained all waivers, consents,
approvals or withholding of objections necessary or appropriate in connection
with the transactions contemplated by this Agreement and the facilities provided
hereunder.
(q) Should any Lender have so required, as of the Closing Date, Tyco
Parent shall have provided at its expense an environmental review and audit
report (as to its consolidated properties), with results reasonably acceptable
in form and substance to such Lender, from an independent environmental firm
acceptable to such Lender. As of the Closing Date, Tyco Parent
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<PAGE>
shall have provided to Lenders copies of all existing environmental reviews and
audits, as well as other information pertaining to material actual or potential
environmental claims with respect to Tyco Parent and the other Loan Parties of
which they are aware.
(r) Tyco Parent and Lenders shall have agreed to a mutually acceptable
capital expenditure budget with respect to Tyco Parent and its Subsidiaries.
(s) As of the Closing Date, Agent and Lenders shall be reasonably
satisfied with all transfer pricing of Tyco Parent and its Subsidiaries and that
arrangements shall have been completed for a tax treaty exemption in connection
with the cross border facilities affecting any Loan Party or any of its
Subsidiaries, or the Loan Parties and the relevant Subsidiaries shall have
agreed to absorb incremental withholding of cross border tax, if any.
Additionally, Agent shall have received, in form and substance reasonably
satisfactory to Agent, copies of all tax sharing agreements involving Tyco
Parent or any of its Subsidiaries.
(t) Agent shall be satisfied that, as of the Closing Date, the
transactions contemplated by this Agreement shall be in compliance with all
applicable laws and regulations (including, without limitation, each state in
which any Loan Party is located or organized), and there shall be no legal
impediment to any of Lenders making loans or other extensions of credit
contemplated by this Agreement in any applicable jurisdiction.
(u) Agent shall be satisfied with the arrangements relating to the
purchase, sale and shipment by each Borrower of Inventory and shall have
received an agreement in form and substance satisfactory to Agent from
Industries pursuant to which Industries would agree that (i) with respect to any
Inventory sold by any Borrower to Industries, such Inventory shall at no time be
shipped directly to Industries (other than the shipment in any Fiscal Year of
Inventory having an aggregate value not exceeding $100,000 which is used by
sales personnel of Industries in promoting the sale of such Inventory or by
Industries in toy fairs and its toy showrooms) but rather, such Inventory shall
be required to be shipped directly to third party customers at the direction of
Industries (and for its account) and (ii) from and after the occurrence of a
"Termination Event" under and as defined in the Receivables Funding Agreement,
upon the direction of Agent (which determination Agent may make in its sole
discretion), each Borrower shall have the right, without any obligation or
liability to Industries, to ship or cause to be shipped (either by itself or by
its representatives or agents) Inventory of such Borrower directly to third
party customers rather than to (or for the account of) Industries and in
connection therewith, Industries will cooperate with each Borrower to effectuate
same (including, without limitation, by providing each Borrower with its
customer lists and unfilled sale orders).
-27-
<PAGE>
SECTION 2.2. Further Conditions to Each Revolving Credit Advance and Each
------------------------------------------------------------
Letter of Credit Obligation. It shall be a further condition to the funding of
- ---------------------------
the initial and each subsequent Revolving Credit Advance and the incurrence of
the initial and each subsequent Letter of Credit Obligation, if any, that the
following statements shall be true on the date of each such funding, advance or
incurrence, as the case may be:
(a) Each Loan Party's representations and warranties contained herein
or in any of the Loan Documents shall be true and correct in all material
respects on and as of the Closing Date and the date on which each such Revolving
Credit Advance is made or any Letter of Credit Obligation, if any, is incurred,
as appropriate, as though made on or incurred on and as of such date, except to
the extent that any such representation or warranty expressly relates solely to
an earlier date and except for changes therein permitted or contemplated by this
Agreement.
(b) No event shall have occurred and be continuing, or would result
from the making of any Revolving Credit Advance or the incurrence of any Letter
of Credit Obligation, as the case may be, which constitutes or would constitute
a Default or an Event of Default.
(c) After giving effect to any such Revolving Credit Advance or the
incurrence of any such Letter of Credit Obligation, as the case may be, the
aggregate principal amount of the Revolving Credit Advances made to the
appropriate Borrower shall not exceed the Borrowing Availability of such
Borrower and there shall be no requirement under Section 1.3(b) to prepay any
Revolving Credit Advance or provide cash collateral.
(d) There shall not have occurred a Material Adverse Effect which
shall not have been cured or waived in writing by Required Lenders.
(e) Each of the conditions set forth in Section 2.1(a) through Section
-------------- -------
2.1(e) shall continue to be satisfied by the Loan Parties as of such date.
- ------
The request and acceptance by any Borrower of the proceeds of any Revolving
Credit Advance, and the request by any Borrower for the incurrence by Lenders of
Letter of Credit Obligations, as the case may be, shall be deemed to constitute,
as of the date of such request or acceptance, (i) a representation and warranty
by such Borrower that the conditions in this Section 2.2 have been satisfied and
-----------
(ii) a confirmation by such Borrower of the granting and continuance of Agent's
and Lenders' Liens pursuant to the Collateral Documents.
-28-
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
To induce Agent and Lenders to enter into this Agreement, Tyco Parent and
each Borrower, jointly and severally, represents and warrants to Agent and
Lenders (which representations and warranties under Sections 3.25 and 3.26 shall
------------- ----
be continuously made during the term of this Agreement and all such other
representations and warranties shall be made on the Closing Date and made or
deemed made at such other times as provided hereunder (including without
limitation, as provided in Section 2.2) that:
-----------
SECTION 3.1. Existence; Compliance with Law. Each Loan Party and each of
------------------------------
its Subsidiaries: (a) is a corporation or partnership, as appropriate, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and is duly qualified to do business and is in
good standing in each other jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification (except for
those foreign jurisdictions where the failure to be duly qualified to do
business or in good standing would not have a Material Adverse Effect); (b) has
the requisite corporate or partnership authority and the legal right to own,
pledge, mortgage or otherwise encumber and operate its properties, to lease the
property it operates under lease, and to conduct its business as now, heretofore
and proposed to be conducted; (c) has all licenses, permits, consents or
approvals from or by, and has made all filings with, and has given all notices
to, all Governmental Authorities having jurisdiction, to the extent required for
such ownership, operation and conduct (except where the failure to have such
licenses, permits, consents or approvals or make such filings or give such
notices would not have a Material Adverse Effect); (d) is in compliance with its
articles or certificate of incorporation and bylaws or partnership agreement and
other organizational documents, as appropriate; and (e) is in compliance with
all applicable provisions of law (except where the failure to be in compliance
would not have a Material Adverse Effect).
SECTION 3.2. Executive Offices; Collateral Locations; Corporate or Other
-----------------------------------------------------------
Names. The current locations of each Borrower's executive office, principal
- -----
place of business, corporate offices, all warehouses and premises within which
any Collateral is stored or located, and the locations of all of each Borrower's
records concerning the Collateral are set forth in Schedule 3.2 and, except as
------------
set forth in Schedule 3.2, such locations have not changed during the preceding
------------
twelve months. During the prior five years, except as set forth in Schedule
--------
3.2, no Borrower has been known as or used any corporate, fictitious or trade
- ---
name.
SECTION 3.3. Power; Authorization; Enforceable Obligations. The
---------------------------------------------
execution, delivery and performance by each Loan Party of this
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<PAGE>
Agreement and the other Loan Documents to which it is a party and the creation
by such Loan Party of all Liens provided for herein and therein: (a) are within
such Loan Party's corporate or partnership power, as appropriate; (b) have been
duly authorized by all necessary corporate, partnership and shareholder or
partner action; (c) are not in contravention of any provision of such Loan
Party's articles or certificate of incorporation, bylaws, partnership agreement
or other organizational documents; (d) will not violate any law or regulation,
or any order or decree of any Governmental Authority; (e) will not conflict with
or result in the breach or termination of, constitute a default under or
accelerate any performance required by, any indenture, mortgage, deed of trust,
lease, agreement or other instrument to which any Loan Party or any Subsidiary
thereof is a party or by which any Loan Party or any Subsidiary thereof or any
of its property is bound; (f) will not result in the creation or imposition of
any Lien upon any of the property of any Loan Party or any Subsidiary thereof
other than those in favor of Agent or Lenders, all pursuant to the Loan
Documents; and (g) do not require the consent or approval of any Governmental
Authority or any other Person, except those referred to in Section 2.1(d), all
--------------
of which will have been duly obtained, made or complied with prior to the
Closing Date and which are in full force and effect. At or prior to the Closing
Date, each of the Loan Documents shall have been duly executed and delivered for
the benefit of or on behalf of the Loan Parties intended to be party thereto and
each shall then constitute a legal, valid and binding obligation of such Loan
Parties, enforceable against such Loan Parties in accordance with its terms
subject, as to enforceability, to bankruptcy, reorganization, insolvency and
similar laws affecting the enforcement of creditors' rights generally and to
general principles of equity. The execution, delivery and performance by each
Obligor of the documentation to which it is a party with respect to each of the
Overall Facilities and by Manufacturing, Industries and the Receivables Funding
Subsidiary of the Receivables Funding Documents (a) will not conflict with or
result in the breach or termination of, constitute a default under, or
accelerate any performance required by, any indenture, mortgage, deed of trust,
lease, agreement or other instrument to which any Obligor or any Subsidiary
thereof is a party or by which any such Person or any of its property is bound,
(b) will not result in the creation or imposition of any Lien upon any property
of any Obligor or any of its Subsidiaries other than those in favor of the
Global Lenders or their respective agents and (c) do not require the consent or
approval of any Governmental Authority or any other Person, except for those
which have been duly obtained, made or complied with prior to the Closing Date
and which are in full force and effect.
SECTION 3.4. Financial Statements and Projections. Tyco Parent has
------------------------------------
delivered the Financials and Projections identified in Schedule 3.4 (which
------------
Projections are attached hereto as
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<PAGE>
Exhibit 3.4), and each of such Financial and Projection complies with the
- ------------
description thereof contained in Schedule 3.4.
------------
SECTION 3.5. Material Adverse Change. As of the date hereof, no Loan
-----------------------
Party or Subsidiary thereof has any material obligations, contingent
liabilities, or liabilities for Charges, long-term leases or unusual forward or
long-term commitments which are not reflected in the audited December 31, 1993
balance sheet of Tyco Parent and its Subsidiaries, except for those which were
incurred or entered into in the ordinary course of such Loan Party's or
Subsidiary's business. As of the date hereof, there has been no material
deviation from the Projections provided to Lenders. Except as otherwise
permitted hereunder or as set forth in Schedule 3.5, no Restricted Payment has
------------
been made since September 30, 1994, and no shares of Stock of any Loan Party or
any of its Subsidiaries have been, or are now required to be, redeemed, retired,
purchased or otherwise acquired for value by any Loan Party or any of its
Subsidiaries. Except as set forth in Schedule 3.5, since September 30, 1994, no
------------
event has occurred which would result in a Material Adverse Effect (it being
understood that the financial results described in Tyco Parent's press release
of October 25, 1994 shall not constitute a Material Adverse Effect so long as
Agent shall have determined, after due diligence, that the results described
therein reflect completely and accurately, in all material respects, the actual
results for the period covered).
SECTION 3.6. Ownership of Property; Liens. The real estate listed in
----------------------------
Schedule 3.6 as such Schedule may, with respect to this sentence, be updated
- ------------
from time to time without the consent of Agent or Lenders by Borrowers in a
writing delivered to Agent and Lenders constitutes all of the Real Property
owned, leased (other than Real Property leased, as lessee, where the annual
rental payments are less than $150,000), or used in each Loan Party's and its
Subsidiaries' business (it being understood and agreed that if Schedule 3.6
------------
shall be updated as aforesaid to reflect the ownership by Tyco Parent, any of
its Domestic Subsidiaries or any Additional Loan Party that is a Guarantor of a
fee interest in Real Property (other than a fee interest purchased with a
purchase money mortgage permitted hereunder which prohibits another Lien
thereon, but only so long as the Indebtedness owing on such mortgage remains
unpaid), Agent may require that the owner grant in favor of Agent a Mortgage
thereon and execute and deliver or cause to be executed and delivered to Agent
the type of documents, instruments and other material required by Section 3 of
Annex C, all in form and substance satisfactory to Agent). Each Loan Party and
- -------
each of its Subsidiaries holds (a) good and marketable fee simple title to all
Real Property owned by it and described in Schedule 3.6, (b) valid and
------------
marketable leasehold interests in all of such Person's Leases (both as lessor
and lessee, sublessee or assignee) described in Schedule 3.6, and (c) good and
------------
marketable title to, or valid leasehold interests in, all of its other
properties and assets. None of the properties and assets of the Loan Parties
and their
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<PAGE>
Subsidiaries are subject to any Liens, except Liens permitted by Section 6.7.
-----------
Each Loan Party and its Subsidiaries has received all deeds, assignments,
waivers, consents, non-disturbance and recognition or similar agreements, bills
of sale and other documents, and duly effected all recordings, filings and other
actions necessary to establish, protect and perfect such Loan Party's or
Subsidiary's right, title and interest in and to all such real estate and other
assets or property. Except as described in Schedule 3.6, (a) no Loan Party nor
------------
any of its Subsidiaries nor, to any Loan Party's knowledge, any other party to
any such Lease described in Schedule 3.6 is in default of its obligations
------------
thereunder or has delivered or received any notice of default under any such
Lease, and no event has occurred which, with the giving of notice, the passage
of time, or both, would constitute a default under any such Lease (in each
instance with respect to any such Lease (other than the Leases of the leased
properties in Beaverton and Rivergate, Oregon) where the termination of such
Lease would reasonably be expected to have a Material Adverse Effect); (b) no
Loan Party nor any of its Subsidiaries either owns or holds, or is obligated
under or a party to, any option, right of first refusal or any other contractual
right to purchase, acquire, sell, assign or dispose of any Real Property owned
or leased by a Loan Party or any of its Subsidiaries except as set forth in
Schedule 3.6 as such Schedule may, with respect to this clause (b), be updated
- ------------
from time to time without the consent of Agent or Lenders by Borrowers in a
writing delivered to Agent and Lenders; and (c) no portion of any Real Property
owned or leased by any Loan Party or any of its Subsidiaries has suffered any
material damage by fire or other casualty loss which has not heretofore been
repaired and restored to good operating condition, except as notified by
Borrowers to Agent and Lenders in writing. All material permits required to
have been issued or appropriate to enable the Real Property to be lawfully
occupied and used for all of the purposes for which they are currently occupied
and used, have been lawfully issued and are, as of the date hereof, in full
force and effect. No Foreign Subsidiary of Tyco Parent owns any real or
personal property in the United States. Neither Tyco Parent nor any of its
Domestic Subsidiaries owns any tangible real or personal property located
outside the United States.
SECTION 3.7. Restrictions; No Default; Material Contracts. No contract,
--------------------------------------------
lease, agreement or other instrument to which any Loan Party or any of its
Subsidiaries is a party or by which it or any of its properties or assets is
bound or affected and no provision of any charter, corporate restriction,
applicable law or governmental regulation has resulted in or will result in a
Material Adverse Effect. No Loan Party nor any of its Subsidiaries is in
material default and, to each Loan Party's knowledge, no third party is in
material default, under or with respect to any material contract, agreement,
lease or other instrument to which any Loan Party or any of its Subsidiaries is
a party. No Default has occurred and is continuing. Schedule 3.7, as
------------
supplemented from
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<PAGE>
time to time by written disclosures to the Agent, sets forth a complete and
accurate list of all Material Contracts of each Loan Party and any Subsidiary
thereof. Tyco Parent and each of its Subsidiaries is in compliance in all
material respects with (i) all material license agreements to which it is a
party or bound by, (ii) its obligations to make royalty payments to other
Persons and (iii) the terms and conditions of its insurance coverage and
policies therefor.
SECTION 3.8. Labor Matters. Except as set forth in Schedule 3.8, there
------------- ------------
are no material strikes or other labor disputes against any Loan Party or any of
its Subsidiaries that are pending or, to any Loan Party's knowledge, threatened.
Hours worked by and payment made to employees of each Loan Party have not been
in violation of the Fair Labor Standards Act or any other applicable law dealing
with such matters which would have a Material Adverse Effect. All material
payments due from any Loan Party or any of its Subsidiaries on account of
employee health and welfare insurance have been paid or accrued as a liability
on the books of such Loan Party or Subsidiary. Except as set forth in Schedule
--------
3.8, no Loan Party nor any of its Subsidiaries has any material obligation under
- ---
any collective bargaining agreement, management agreement, or any employment
agreement, and a correct and complete copy of each agreement listed on Schedule
--------
3.8 has been provided to Agent. There is no material organizing activity
- ---
involving any Loan Party or any of its Subsidiaries pending or, to any Loan
Party's knowledge, threatened by any labor union or group of employees. Except
as set forth in Schedule 3.14, there are no material representation proceedings
-------------
pending or, to any Loan Party's knowledge, threatened with the National Labor
Relations Board or any similar Governmental Authority, and no labor organization
or group of employees of any Loan Party or any of its Subsidiaries has made a
pending demand for recognition, and, there are no material complaints or charges
against any Loan Party or any of its Subsidiaries pending or threatened to be
filed with any federal, state, local or foreign court, governmental agency or
arbitrator based on, arising out of, in connection with, or otherwise relating
to the employment or termination of employment by any Loan Party or any of its
Subsidiaries of any individual.
SECTION 3.9. Ventures, Subsidiaries and Affiliates; Outstanding Stock and
------------------------------------------------------------
Indebtedness. No Loan Party nor any of its Subsidiaries has any Subsidiaries
- ------------
other than those Subsidiaries set forth on Schedule 3.9 as such Schedule may be
------------
updated from time to time without the consent of Agent or Lenders by Borrowers
in a writing delivered to Agent and Lenders to reflect changes permitted under
Sections 6.1 or 6.2 in Subsidiaries of Tyco Parent and its Subsidiaries and,
- ------------ ---
except as set forth in Schedule 3.9, as such Schedule may be updated from time
------------
to time without the consent of Agent or Lenders by Borrowers in a writing
delivered to Agent and Lenders to reflect changes permitted under Sections 6.1
------------
or 6.2 in joint ventures, partnerships and equity interests, no Loan Party
---
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<PAGE>
nor any of its Subsidiaries is engaged in any joint venture or partnership with
any other Person or has any equity interest in any other Person. The Stock of
each Loan Party (other than Tyco Parent) and of any Subsidiary thereof owned by
each of the stockholders thereof named in Schedule 3.9 constitutes all of the
------------
issued and outstanding Stock of such Persons and all such Stock is duly and
validly issued, fully paid and non-assessable. Schedule 3.9 as updated from
------------
time to time as permitted above lists the name of each Subsidiary of Tyco
Parent, its jurisdiction of organization, the number of authorized and
outstanding shares or interest of Stock of such Subsidiary and the owners of
such Stock. Except as set forth in Schedule 3.9, there are no outstanding
------------
rights to purchase stock, options, warrants or similar rights, agreements or
plans pursuant to which any Loan Party or any of its Subsidiaries may be
required to issue, sell or purchase any Stock or other equity security (other
than any of the foregoing created, entered into or issued by Tyco Parent after
the date hereof solely with respect to the issuance or sale by Tyco Parent of
its common stock). Schedule 3.9 lists all Indebtedness of each Loan Party and
------------
its Subsidiaries as of the Closing Date.
SECTION 3.10. Government Regulation. No Loan Party nor any Subsidiary
---------------------
thereof (a) is an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company," as such
terms are defined in the Investment Company Act of 1940 as amended; (b) is
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act or any other federal or state or
foreign statute that restricts or limits such Person's ability to incur
Indebtedness, pledge its assets, or to perform its obligations hereunder or
under any other Loan Document, and, with respect to any Borrower, the making of
the Revolving Credit Advances and the incurrence of the Letter of Credit
Obligations, in each case by Lenders, the application of the proceeds and
repayment thereof by Borrowers, and the consummation of the transactions
contemplated by this Agreement and the other Loan Documents, will not constitute
a violation by any Loan Party or any Subsidiary thereof (or to the knowledge of
each Loan Party, by any other Person) of any provision of any such statute or
any rule, regulation or order issued by the Securities and Exchange Commission.
SECTION 3.11. Margin Regulations. No Loan Party or any Subsidiary thereof
------------------
is engaged in the business of extending credit for the purpose of purchasing or
carrying Margin Stock and no proceeds of any Revolving Credit Advance will be
used to purchase or carry any Margin Stock or to extend credit to others for the
purpose of purchasing or carrying any Margin Stock. No Loan Party nor any
Subsidiary thereof will take or permit to be taken any action which might cause
any Loan Document or any document or instrument delivered pursuant hereto or
thereto to violate any regulation of the Board of Governors of the Federal
Reserve Board.
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<PAGE>
SECTION 3.12. Taxes. All federal, state, local and foreign tax returns,
-----
reports and statements, including information returns (Form 1120-S) required to
be filed by any Loan Party or any Subsidiary thereof, have been filed with the
appropriate Governmental Authority and all Charges and other impositions shown
thereon to be due and payable have been paid prior to the date on which any
fine, penalty, interest or late charge may be added thereto for nonpayment
thereof, or any such fine, penalty, interest, late charge or loss has been paid.
Each Loan Party and each Subsidiary thereof has paid when due and payable all
material Charges required to be paid by it. Proper and accurate amounts have
been withheld by each Loan Party and each Subsidiary thereof from its employees
for all periods in full and complete compliance with the tax, social security
and unemployment withholding provisions of applicable federal, state, local and
foreign law and such withholdings have been timely paid to the respective
Governmental Authorities. Schedule 3.12, as such Schedule may, with respect to
-------------
this sentence, be updated from time to time without (except as provided below)
the consent of Agent or Lenders by Borrowers in a writing delivered to Agent and
Lenders, sets forth those taxable years for which any of the tax returns of any
Loan Party or any Subsidiary thereof are currently being audited by the IRS or
any other applicable Governmental Authority; and any assessments or threatened
assessments in connection with such audit or otherwise currently outstanding (it
being understood and agreed that any update of Schedule 3.12 as aforesaid with
-------------
respect to any material assessment or threatened assessment shall require the
prior written consent of the Required Lenders). Except as described in Schedule
--------
3.12, as such Schedule may, with respect to this sentence, be updated from time
- ----
to time without the consent of Agent or Lenders by Borrowers in a writing
delivered to Agent and Lenders, no Loan Party nor any Subsidiary thereof has
executed or filed with the IRS or any other Governmental Authority any agreement
or other document extending, or having the effect of extending, the period for
assessment or collection of any Charges. Except as described in Schedule 3.12,
-------------
as such Schedule may, with respect to this sentence, be updated from time to
time without the consent of Agent or Lenders by Borrowers in a writing delivered
to Agent and Lenders, none of the property owned by any Loan Party or any
Subsidiary thereof is property which is required to treat as being owned by any
other Person pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended, and in effect immediately prior to the
enactment of the Tax Reform Act of 1986 or is "tax-exempt use property" within
the meaning of IRC Section 168(h). No Loan Party nor any Subsidiary thereof has
agreed or been requested to make any adjustment under IRC Section 481(a) by
reason of a change in accounting method or otherwise. No Loan Party nor any
Subsidiary thereof has any obligation under any written tax sharing agreement
except as described in Schedule 3.12.
-------------
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<PAGE>
SECTION 3.13. ERISA.
-----
(a) Schedule 3.13 lists all Qualified Plans maintained or contributed
-------------
to by any Loan Party, any Subsidiary thereof or any ERISA Affiliate, and
separately identifies the Title IV Plans, Multi-employer Plans, multiple
employer plans subject to Section 4064 of ERISA, nonqualified Pension Plans, and
Retiree Welfare Plans. IRS determination letters regarding the qualified status
under IRC Section 401 of each Qualified Plan (other than Multi-employer Plans)
have been received as of the dates listed in Schedule 3.13. Each of the
-------------
Qualified Plans (other than Multi-employer Plans) has subsequently been amended
to comply with the Tax Reform Act of 1986 and to make other necessary or
desirable changes. To the knowledge of each Loan Party, the Qualified Plans
(other than Multi-employer Plans) as amended continue to qualify under Section
401 of the IRC, the trusts created thereunder continue to be exempt from tax
under the provisions of IRC Section 501(a), and nothing has occurred which would
cause the loss of such qualification or tax-exempt status. Each Qualified Plan
(other than Multi-employer Plans) so amended will be submitted to the IRS for a
determination letter as to the ongoing qualified status of the Plan under the
IRC within the applicable IRC Section 401(b) remedial amendment period for the
Tax Reform Act of 1986; and each such Plan shall be amended, including
retroactive amendments, as required during such determination letter process to
maintain the qualified status of such Plans. To the knowledge of each Loan
Party, each Plan (other than Multi-employer Plans) is in compliance in all
material respects with the applicable provisions of ERISA and the IRC, including
the filing of all reports required under the IRC or ERISA which are true and
correct in all material respects as of the date filed, and all required
contributions and benefits have been paid in accordance with the provisions of
each such Plan. Neither any Loan Party, any Subsidiary thereof nor any ERISA
Affiliate, with respect to any Qualified Plan (other than Multi-employer Plans),
has failed to make any contribution or pay any amount due as required by IRC
Section 412 or Section 302 of ERISA. Except as set forth on Schedule 3.13, with
-------------
respect to all Retiree Welfare Plans, the present value of future anticipated
expenses pursuant to the latest actuarial projections of liabilities does not
exceed $0 and will not exceed $1,000,000 at any time after the date hereof; with
respect to Pension Plans, other than Qualified Plans and the unfunded Pension
Plans listed in Schedule 3.13, and Multi-employer Plans, the present value of
-------------
the liabilities for current participants thereunder using interest assumptions
described in IRC Section 411(a)(ii) does not exceed $0 and will not exceed
$1,000,000 at any time after the date hereof. No Loan Party nor any Subsidiary
thereof has engaged in a prohibited transaction, as defined in IRC Section 4975
or Section 406 of ERISA, in connection with any Plan which would subject any
Loan Party or any Subsidiary thereof (after giving effect to any exemption) to a
material tax on prohibited transactions imposed by IRC Section 4975 or any other
material liability.
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<PAGE>
(b) Except as set forth in Schedule 3.13: (i) no Title IV Plan has
-------------
any Unfunded Pension Liability and will not have any such liability in excess of
$1,000,000 after the date hereof; (ii) no ERISA Event or event described in
Section 4062 (e) of ERISA with respect to any Title IV Plan has occurred or is
reasonably expected to occur which in either case would be material; (iii) there
are no pending, or to the knowledge of each Loan Party, any material threatened
claims, actions or lawsuits (other than claims for benefits in the normal
course), asserted or instituted against (x) any Plan or its assets, (y) any
fiduciary with respect to any Plan or (z) any Loan Party, any Subsidiary thereof
or any ERISA Affiliate with respect to any Plan; (iv) no Loan Party, Subsidiary
thereof or any ERISA Affiliate has incurred or reasonably expects to incur any
material Withdrawal Liability (and no event has occurred which, with the giving
of notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 of ERISA as a result of a complete or partial withdrawal from a
Multi-employer Plan; (v) within the last five (5) years no Loan Party,
Subsidiary thereof or any ERISA Affiliate has engaged in a transaction which
resulted in a Title IV Plan with Unfunded Pension Liabilities being transferred
outside of the "controlled group" (within the meaning of Section 4001(a)(14) of
ERISA) of any such entity; (vi) no Plan which is a Retiree Welfare Plan provides
for continuing benefits or coverage for any participant or any beneficiary of a
participant after such participant's termination of employment (except as may be
required by IRC Section 4980B and at the sole expense of the participant or the
beneficiary of the participant); (vii) each Loan Party, any Subsidiary thereof
and each ERISA Affiliate have complied in all material respects with the notice
and continuation coverage requirements of IRC Section 4980B and the proposed or
final regulations thereunder; and (viii) no liability under any Plan (other than
a Multi-employer Plan) has been funded, nor has such obligation been satisfied
with, the purchase of a contract from an insurance company that is not rated AAA
by Standard & Poor's Corporation and the equivalent by each other nationally
recognized rating agency.
SECTION 3.14. No Litigation. Except as set forth in Schedule 3.14, no
------------- -------------
action, claim or proceeding is now pending or, to the knowledge of each Loan
Party, threatened against any Loan Party or any Subsidiary thereof, at law, in
equity or otherwise, before any court, board, commission, agency or
instrumentality of any federal, state, or local government or of any agency or
subdivision thereof, or before any arbitrator or panel of arbitrators (a) which
challenges any such Person's right, power, or competence to enter into or
perform any of its obligations under the Loan Documents, or the validity or
enforceability of any Loan Document or any action taken thereunder, or (b) which
is reasonably likely to result in a Material Adverse Effect. To the knowledge
of each Loan Party, there does not exist a state of facts which is reasonably
likely to give rise to such proceedings. Except as set forth in Schedule 3.14,
-------------
no Loan Party is a party to any consent decree.
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SECTION 3.15. Brokers. No broker or finder acting on behalf of any Loan
-------
Party or any Subsidiary thereof brought about the obtaining, making or closing
of the credit extended pursuant to this Agreement or the transactions
contemplated by the Loan Documents or the other Overall Facilities or the
transactions contemplated thereby and no Loan Party or any Subsidiary thereof
has any obligation to any Person in respect of any finder's or brokerage fees in
connection therewith.
SECTION 3.16. Patents, Trademarks, Copyrights and Licenses. Except as
--------------------------------------------
otherwise set forth in Schedule 3.16, each Loan Party and each of its
-------------
Subsidiaries owns all licenses, patents, patent applications, copyrights,
service marks, trademarks, trademark applications and trade names which are
necessary to continue to conduct its business as heretofore conducted by it, now
conducted by it and proposed to be conducted by it, each of which is listed,
together with, for other than common law trademarks and copyrights, United
States Patent and Trademark Office application or registration numbers (or
similar information for foreign registration or applications), where applicable,
in Schedule 3.16, and will be updated by Borrowers or Tyco Parent not less often
-------------
than once a calendar quarter to reflect any change therein. Each Loan Party and
each of its Subsidiaries conducts business without infringement or claim of
infringement of any license, patent, copyright, service mark, trademark, trade
name, trade secret or other intellectual property right of others, except where
such infringement or claim of infringement could not have or result in a
Material Adverse Effect. Except as set forth in Schedule 3.16, to each Loan
-------------
Party's knowledge, there is no infringement or claim of infringement by others
of any material license, patent, copyright, service mark, trademark, trade name,
trade secret or other intellectual property right of any Loan Party or any
Subsidiary thereof.
SECTION 3.17. Full Disclosure. No information contained in this
---------------
Agreement, the other Loan Documents, the Financial or any written statement
furnished by or on behalf of any Loan Party or any Affiliate thereof pursuant to
the terms of this Agreement or any other Loan Document, which has previously
been delivered to Agent or any Lender, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made. With respect to all business plans and other forecasts
and projections (including the Projections) furnished by or on behalf of Tyco
Parent or any Borrower and made available to Agent or any Lender relating to the
financial condition, operations, business, properties or prospects of any
Borrower or other Loan Party or any Subsidiary thereof (a) all facts stated as
such therein are true and complete in all material respects, (b) all facts upon
which the forecasts or projections therein contained are based are true and
complete in all material respects and no material fact was omitted therefrom,
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(c) all assumptions made on that basis are reasonable under the circumstances
and are disclosed therein, and (d) the forecasts or projections are reasonably
based on those facts and assumptions. With respect to any such forecasts or
projections made available to Agent or any Lender after the Closing Date, the
foregoing clauses (a) through (d) shall be true and correct in all respects as
of the date of such projections or forecasts.
SECTION 3.18. Hazardous Materials. Except in the case of routine
-------------------
operations in the ordinary course of business in compliance with applicable
permits issued by a Governmental Authority, the Real Property is free of any
Hazardous Material. Except as set forth in Schedule 3.18, there are no existing
-------------
or potential environmental liabilities of any Loan Party or any of its
Subsidiaries of which any Loan Party, after due inquiry, has knowledge, which
could result in Environmental Liabilities and Costs in excess of $50,000
individually or $300,000 in the aggregate for Tyco Parent and its Subsidiaries.
Except as set forth in Schedule 3.18, no Loan Party nor any of its Subsidiaries
-------------
has caused or suffered to occur any Release at, under, above or within any Real
Property or any other real property which could expose such Person to any actual
or potential liability in excess of $50,000 and the aggregate actual or
potential liabilities of Tyco Parent and its Subsidiaries with respect to all
such Releases does not exceed $300,000. No Loan Party nor any of its
Subsidiaries is involved in operations which are reasonably likely to lead to
the imposition of any liability under the Environmental Laws in excess of
$500,000 or any Lien on it, or any owner of any premises which it occupies,
under the Environmental Laws, and no Loan Party nor any of its Subsidiaries has
permitted any tenant or occupant of such premises to engage in any such
activity.
SECTION 3.19. Insurance Policies. Schedule 3.19 lists all insurance of
------------------ -------------
any nature maintained as of the Closing Date for current occurrences by each
Loan Party and its Subsidiaries. Such insurance complies with and shall at all
times comply with the standards set forth in Annex F.
-------
SECTION 3.20. Deposit and Disbursement Accounts. Schedule 3.20 lists all
--------------------------------- -------------
banks and other financial institutions at which any Loan Party maintains
deposits and/or other accounts and/or post office lock boxes, including the
Disbursement Accounts, the Concentration Account and the Blocked Accounts, and
such Schedule correctly identifies the name, address and telephone number of
each depository, the name in which the account is held, a description of the
purpose of the account, and the complete account number.
SECTION 3.21. Solvency. Each Loan Party is solvent and will not become
--------
insolvent after giving effect to the transactions contemplated by this Agreement
and the Receivables Funding Documents. Tyco Parent, each Borrower and
Industries, after giving effect to the transactions contemplated by this
Agreement and the
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Receivables Funding Documents, will have an adequate amount of capital to
conduct its business in the foreseeable future.
SECTION 3.22. Inactive Subsidiaries. The aggregate book value of the
---------------------
assets (other than intercompany receivables existing on the Closing Date) of all
Inactive Subsidiaries does not exceed $3,000,000. The Inactive Subsidiaries do
not owe indebtedness (other than intercompany indebtedness existing on the
Closing Date set forth on Schedule 3.22 hereto and intercompany indebtedness
-------------
incurred after the Closing Date that is permitted to be incurred under Section
-------
6.3) in excess of $2,500,000 in the aggregate for all the Inactive Subsidiaries
- ---
(all of which is existing on the Closing Date and, with respect to any such
indebtedness owing to any Person in excess of $75,000, is set forth on Schedule
--------
3.22 hereto) nor do any of the Inactive Subsidiaries conduct any business or
- ----
other activity. No assets of any Inactive Subsidiary are subject to any Liens.
SECTION 3.23. Existing Credit Agreement. The Existing Credit Agreement in
-------------------------
the form when executed as of June 3, 1992 was in effect on August 15, 1992
without any amendment or modification thereto. Schedule 3.23 hereto sets forth
-------------
for each of the defined terms "Guarantor", "Credit Party", "Designated
Subsidiary", "Inactive Subsidiary" and "Subsidiary Guarantor" (all of which are
defined terms from the Existing Credit Agreement) those Subsidiaries of Tyco
Parent which immediately prior to the Closing Date were included under each such
defined term. No Foreign Subsidiary of Tyco Parent granted a Lien in any of its
assets (other than capital stock of its Subsidiaries) to any lender (or agent
therefor) under the Existing Credit Agreement. All of the capital stock of the
Subsidiaries of Tyco Parent which immediately prior to the Closing Date were
pledged as collateral under the Existing Credit Agreement (other than the
capital stock of the borrowers under the other Overall Facilities and their
respective Subsidiaries which are pledged under such facilities) are pledged as
collateral to Agent under the Stock Pledge Agreement or, with respect to the
pledge by certain individuals of shares of capital stock of certain Foreign
Subsidiaries of Tyco Parent, under a similar pledge agreement by such
individuals in favor of Agent. No Foreign Subsidiaries of Tyco Parent entered
into any "Bank Agency Agreements" (as defined in the Existing Credit Agreement)
pursuant to the Existing Credit Agreement.
SECTION 3.24. Subordinated Debt.
-----------------
(a) The Obligations of Tyco Parent and of any Loan Party which is a
guarantor of any of the notes issued pursuant to the Tyco Parent Senior
Subordinated Note Indenture are "Senior Indebtedness of the Company" and "Senior
Indebtedness of a Guarantor" as such terms are defined in such indenture,
subject, with respect to interest, to the provisos contained in such terms. The
payment of the obligations of the Loan Parties under such notes
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or any guarantees of such notes are, subject to the aforesaid provisos, junior
and subordinate to the payment of the Obligations of such Loan Parties.
(b) The Obligations of Tyco Parent constituting money borrowed, any
guaranties given by Tyco Parent with respect to money borrowed and any interest,
sums, obligations and liabilities with respect to the foregoing are "Senior
Debt" as such term is defined in the First Chicago Notes. The payment of the
obligations of Tyco Parent under such notes are junior and subordinate to the
payment of the foregoing Obligations of Tyco Parent.
SECTION 3.25. Promissory Notes and Pledge. Each loan or advance, now
---------------------------
existing or hereafter made, permitted to be made hereunder by Tyco Parent or any
of its Domestic Subsidiaries or an Additional Loan Party that is a Guarantor to
Tyco Parent or any of its Subsidiaries and each intercompany payable now or
hereafter owing to Tyco Parent or any of its Domestic Subsidiaries or an
Additional Loan Party that is a Guarantor is evidenced by a promissory note, in
form and substance satisfactory to Agent, which note is pledged to Agent
pursuant to the Note Pledge Agreement whereby Agent has obtained a first
priority perfected Lien in such promissory notes.
SECTION 3.26. Certain Accounts and Inventory. All accounts purchased by
------------------------------
Industries from Manufacturing are purchased free and clear of any and all
adverse claims, including any Liens in favor of Agent; it being understood and
agreed that without the prior written consent of Agent, no such Lien by Agent in
any such accounts shall be released for any such purchase. All Inventory
purchased by Manufacturing and Industries are purchased free and clear of any
and all adverse claims, including any Liens in favor of Agent.
ARTICLE 4
FINANCIAL STATEMENTS AND INFORMATION
SECTION 4.1. Reports and Notices. Tyco Parent and each Borrower
-------------------
covenants and agrees that from and after the Closing Date and until the
Termination Date, it shall deliver to Agent and each Lender the Financial
Statements, Projections and notices at the times and in the manner set forth in
Annex E.
- -------
SECTION 4.2. Communication with Accountants. Tyco Parent (for itself and
------------------------------
each other Loan Party and its Subsidiaries) authorizes Agent and each Lender to
communicate with its and each other Loan Party's and Subsidiary's independent
certified public accountants and authorizes those accountants to make available
to Agent and each Lender any and all financial statements and other supporting
financial documents and schedules with respect to the
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business, financial condition and other affairs of Tyco Parent and each
Subsidiary thereof, in each instance, provided that Agent or such Lender shall
(i) give Tyco Parent prior notice of each intended communication with such
accountants and of each request to have such accountants make available to Agent
or such Lender any such financial information and material and (ii) permit a
representative of Tyco Parent to be present at any such communication or making
available of financial information and material. At or before the Closing Date,
Tyco Parent shall deliver a letter (the "Accountant's Letter") addressed to such
-------------------
accountants instructing them to make available to Agent and Lenders such
information and records as Agent and Lenders may reasonably request and to
otherwise comply with the provisions of this Article 4. After the Closing Date,
---------
if Tyco Parent or any other Loan Party or any Subsidiary thereof engages the
services of accountants other than Deloitte & Touche, it shall deliver a letter
addressed to such accountants containing the same terms and provisions as the
Accountant's Letter.
ARTICLE 5
AFFIRMATIVE COVENANTS
Tyco Parent covenants and agrees (for itself and each of the other Loan
Parties and any Subsidiary thereof) that, unless Required Lenders shall
otherwise consent in writing, from and after the date hereof and until the
Termination Date:
SECTION 5.1. Maintenance of Existence and Conduct of Business. Tyco
------------------------------------------------
Parent shall (and shall cause each of its Subsidiaries to): (a) do or cause to
be done all things necessary to preserve and keep in full force and effect its
corporate or partnership existence, as appropriate, and its rights and
franchises (except for the dissolution, liquidation or merger of Inactive
Subsidiaries and other Subsidiaries of Tyco Parent permitted under Sections
--------
6.1(b) or (c)); (b) continue to conduct its business substantially as now
- ------ ---
conducted or as otherwise permitted hereunder; (c) at all times maintain,
preserve and protect all of its material Intellectual Property, and preserve all
the remainder of its property, in use or useful in the conduct of its business
and keep the same in good repair, working order and condition (taking into
consideration ordinary wear and tear) and from time to time make, or cause to be
made, all necessary or appropriate repairs, replacements and improvements
thereto consistent with industry practices, so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
(d) keep and maintain its Equipment and Fixtures in good operating condition
sufficient for the continuation of such Person's business conducted on a basis
consistent with past practices and shall provide or arrange for all maintenance
and service and all repairs necessary for such purpose;
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and (e) transact business only under the names set forth in Schedule 3.2 (unless
------------
the relevant Borrower shall provide Agent with not less than 30 days prior
written notice of such Borrower's use of another name and takes such actions as
Agent may reasonably request in connection therewith (including, without
limitation, to execute such UCC financing statements as Agent may reasonably
request)).
SECTION 5.2. Payment of Charges and Claims. Tyco Parent shall (and shall
-----------------------------
cause each of its Subsidiaries to) pay and discharge in accordance with the
terms thereof, (A) all Charges imposed upon it or its income and profits, or any
of its property (real, personal or mixed), and (B) all lawful claims for labor,
materials, supplies and services or otherwise, which if unpaid might by law
become a Lien on its property; provided, that Tyco Parent or any such Subsidiary
--------
shall not be required to pay any such Charge or claim which is being contested
in good faith by proper legal actions or proceedings, so long as at the time of
commencement of any such action or proceeding and during the pendency thereof
(i) no Event of Default shall have occurred and be continuing, (ii) adequate
reserves with respect thereto are established and are maintained in accordance
with GAAP, (iii) such contest operates to suspend collection of the contested
Charges or claims and is maintained and prosecuted continuously with diligence,
(iv) none of the Collateral would be subject to forfeiture or loss or any Lien
by reason of the institution or prosecution of such contest, (v) no Lien shall
exist, be imposed or be attempted to be imposed for such Charges or claims
during such action or proceeding unless the full amount of such Charge or claim
is covered by insurance satisfactory in all respects to Agent, and (vi) Tyco
Parent or such Subsidiary, as appropriate, shall promptly pay or discharge such
contested Charges and all additional charges, interest penalties and expenses,
if any, and shall deliver to Agent evidence acceptable to Agent of such
compliance, payment or discharge, if such contest is terminated or discontinued
adversely to Tyco Parent or such Subsidiary, as appropriate.
SECTION 5.3. Books and Records. Tyco Parent shall (and shall cause each
-----------------
of its Subsidiaries to) keep adequate records and books of account with respect
to its business activities, in which proper entries, reflecting all of its
consolidated and consolidating financial transactions, are made in accordance
with GAAP and on a basis consistent with the Financial.
SECTION 5.4. Litigation. Tyco Parent and/or a Borrower shall notify
----------
Agent and each Lender in writing, promptly upon learning thereof, of any
litigation, Claim or other action commenced or threatened against Tyco Parent or
any of its Subsidiaries, and of the institution against any such Person of any
suit or administrative proceeding which (a) is reasonably likely to involve an
amount in excess of $100,000 individually or (to the extent litigation, Claims
or other actions are related) in the
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aggregate or (b) is reasonably likely to result in a Material Adverse Effect if
adversely determined.
SECTION 5.5. Insurance.
---------
(a) Tyco Parent shall, at its (or any of its Subsidiaries') sole cost
and expense maintain or cause to be maintained with respect to each Loan Party
and its Subsidiaries, the policies of insurance in such amounts and as otherwise
described in Annex F. Tyco Parent and/or a Borrower shall notify Agent promptly
-------
of any occurrence causing a material loss or decline in value of any real or
personal property and the estimated (or actual, if available) amount of such
loss or decline, except as specified otherwise in Annex F. Tyco Parent and each
-------
Borrower (for itself and the other Loan Parties and its Subsidiaries) hereby
directs all present and future insurers under its "All Risk" policies of
insurance to pay all proceeds payable thereunder directly to Agent on behalf of
Lenders. Tyco Parent and each Borrower (for itself and the other Loan Parties
and its Subsidiaries) irrevocably makes, constitutes and appoints Agent (and all
officers, employees or agents designated by Agent) as such Person's true and
lawful agent and attorney in-fact for the purpose of making, settling and
adjusting claims under the "All Risk" policies of insurance, endorsing the name
of such Person on any check, draft, instrument or other item of payment for the
proceeds of such "All Risk" policies of insurance, and for making all
determinations and decisions with respect to such "All Risk" policies of
insurance. In the event Tyco Parent and/or a Borrower or other Subsidiary of
Tyco Parent at any time or times hereafter shall fail to obtain or maintain (or
fail to cause to be obtained or maintained) any of the policies of insurance
required above or to pay any premium in whole or in part relating thereto, Agent
or Lenders, without waiving or releasing any Obligations or Default or Event of
Default hereunder, may at any time or times thereafter (but shall not be
obligated to) obtain and maintain such policies of insurance and pay such
premium and take any other action with respect thereto which Agent or Lenders
deem advisable. All sums so disbursed, including reasonable attorneys' fees,
court costs and other charges related thereto, shall be payable, on demand, by
Tyco Parent and Borrowers (which liability is joint and several) to Agent on
behalf of Lenders and shall be additional Obligations hereunder secured by the
Collateral, provided, that if and to the extent Tyco Parent or Borrowers fail to
promptly pay any of such sums upon Agent's demand therefor, Agent is authorized
to, and at its option may, make or cause to be made Revolving Credit Advances on
behalf of Borrowers for payment thereof. If, notwithstanding that all proceeds
of insurance in respect of any Collateral shall be payable to Agent, any
Borrower or other Loan Party or any Subsidiary thereof receives any proceeds of
insurance in respect of any Collateral in respect of the policies required to be
maintained under this Agreement (except for such proceeds which a Loan Party or
Subsidiary thereof is permitted to retain pursuant to the last
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sentence of Section 5.14(a) to replace, repair or restore Property as therein
---------------
provided), such proceeds shall be held in trust by such Person (and Tyco Parent
shall cause such Person to hold in trust such proceeds) for Agent and, unless
Agent otherwise permits, shall be forthwith paid over to Agent.
(b) Agent and Required Lenders reserve the right at any time, upon
review of the risk profile of Tyco Parent and its Subsidiaries, to require
additional forms and limits of insurance to, in Agent's or Required Lenders'
sole opinion exercised in good faith, adequately protect the interests of Agent
and Lenders. Tyco Parent and/or a Borrower shall, if so requested by Agent,
deliver to Agent, as often as Agent may request, a report of a reputable
insurance broker satisfactory to Agent with respect to its insurance policies.
(c) Tyco Parent shall deliver to Agent endorsements to all of its and
its Subsidiaries' (i) "All Risk" and business interruption insurance naming
Agent on behalf of Lenders as loss payee, and (ii) general liability and other
liability policies naming Agent and each Lender as additional insureds.
SECTION 5.6. Compliance with Laws. Tyco Parent shall (and shall cause
--------------------
each of its Subsidiaries to) comply with all federal, state, local and foreign
laws, permits and regulations applicable to it, including those relating to
licensing, environmental, ERISA and labor matters (except where the failure to
so comply could not be reasonably expected to result in a Material Adverse
Effect and would not be reasonably likely to subject Tyco Parent or any of its
Subsidiaries to any criminal penalties (other than non-material fines) or any
Lender to any civil or criminal penalties).
SECTION 5.7. Agreements. Tyco Parent shall (and shall cause each of its
----------
Subsidiaries to) perform, within all required time periods (after giving effect
to any applicable grace periods), all of its obligations and enforce all of its
rights under each agreement, contract, instrument or other document to which it
is a party, including any leases, licenses and customer contracts to which it is
a party where the failure to so perform and enforce could have or result in a
Material Adverse Effect. Tyco Parent shall not (and shall not suffer or permit
any of its Subsidiaries to) terminate or modify any provision of any agreement,
contract, instrument or other document to which it is a party which termination
or modification could have or result in a Material Adverse Effect. Tyco Parent
shall (and shall cause each of its Subsidiaries to) perform and comply with all
of its material obligations in respect of Accounts, Chattel Paper, Contracts,
Licenses, Instruments, Documents and all other agreements constituting or giving
rise to Collateral. Tyco Parent shall (and shall cause each of its Subsidiaries
to) take such actions or omit to take such actions so as not to cause a breach
of the
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representations and warranties made hereunder and under the other Loan
Documents.
SECTION 5.8. Supplemental Disclosure. On the request of Agent or any
-----------------------
Lender (in the event that such information is not otherwise delivered by Tyco
Parent or a Borrower to Agent or Lenders pursuant to this Agreement and not more
often than once a calendar quarter unless an Event of Default has occurred and
is continuing in which case no such limit shall exist), Tyco Parent will
supplement (or cause to be supplemented) each Schedule hereto, or representation
herein or in any other Loan Document with respect to any matter hereafter
arising which, if existing or occurring at the date of this Agreement, would
have been required to be set forth or described in such Schedule or as an
exception to such representation or which is necessary to correct any
information in such Schedule or representation which has been rendered
inaccurate thereby; provided, that such supplement to such Schedule or
--------
representation shall not be deemed an amendment thereof unless expressly
consented to in writing by Agent and Required Lenders, and no such amendments,
except as the same may be consented to in a writing which expressly includes a
waiver, shall be or be deemed a waiver by Lenders of any Default disclosed
therein. Tyco Parent shall, if so requested by Agent or Required Lenders,
furnish to Agent and Lenders as often as they reasonably request, statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Agent or Required Lenders may
reasonably request, all in reasonable detail, and Tyco Parent shall advise Agent
and Lenders promptly, in reasonable detail, of (a) any Lien, other than as
permitted pursuant to Section 6.7, attaching to or asserted against any of the
-----------
Collateral, (b) any material change in the composition of the Collateral, and
(c) the occurrence of any other event which would have a Material Adverse Effect
upon the Collateral and/or Agent's Lien thereon.
SECTION 5.9. Environmental Matters. Tyco Parent shall (and shall cause
---------------------
each of its Subsidiaries to) (a) comply in all material respects with the
Environmental Laws and permits applicable to it, (b) notify Agent and each
Lender promptly after any Loan Party or any Subsidiary thereof becomes aware of
any Release upon any Real Property which is reasonably likely to result in or
expose Tyco Parent or any of its Subsidiaries to actual or potential liability
in excess of $50,000, and (c) promptly forward to Agent and each Lender a copy
of any order, notice, permit, application, or any communication or report
received by any Loan Party or any Subsidiary thereof in connection with any such
Release or any other matter relating to the Environmental Laws that may affect
any Real Property or any Loan Party or any Subsidiary thereof. The provisions
of this Section 5.9 shall apply whether or not the Environmental Protection
-----------
Agency, any other federal agency or any state or local or foreign environmental
agency has taken or
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threatened any action in connection with any Release or the presence of any
Hazardous Materials.
SECTION 5.10. Landlord's Agreements. Tyco Parent shall, unless otherwise
---------------------
agreed to by Agent in writing, obtain or cause to be obtained a landlord's
agreement, in form and substance substantially similar to those landlord
agreements delivered by any Borrower to Agent (and found satisfactory by Agent)
on or before the Closing Date or otherwise acceptable to Agent, from the lessor
of any present or future leased premises of each Loan Party which owns any
tangible property constituting Collateral located on such premises having a book
value of more than $100,000.
SECTION 5.11. Certain Obligations Respecting Subsidiaries. Except as
-------------------------------------------
reflected on Schedule 3.9 as in effect on the Closing Date with respect to
------------
Ensueno Tyco Toys de Mexico S.A. de C.V. and Croner-Tyco Toys Pty. Ltd., Tyco
Parent will, and will cause each of its Subsidiaries to, take such action from
time to time as shall be necessary to ensure that each Subsidiary of Tyco Parent
is a direct or indirect wholly owned Subsidiary of Tyco Parent and is owned
directly or indirectly only by Tyco Parent or its Domestic Subsidiaries.
SECTION 5.12. Application of Proceeds. Borrowers shall use the proceeds
-----------------------
of Revolving Credit Advances as provided in Section 1.4.
-----------
SECTION 5.13. Fiscal Year. Tyco Parent shall (and shall cause each of its
-----------
Subsidiaries to) maintain as its Fiscal Year the calendar year.
SECTION 5.14. Casualty and Condemnation.
-------------------------
(a) Tyco Parent or a Borrower shall promptly notify Agent of any loss,
damage, or destruction to any Collateral or any Real Property owned by any Loan
Parent or any of its Subsidiaries whether or not constituting Collateral
(collectively, "Property") or arising from its use, whether or not covered by
--------
insurance; provided that no such notice is necessary with respect to the loss,
--------
damage or destruction from a single casualty of any Collateral or Real Property
with a value of less than $100,000. Agent on behalf of Lenders is hereby
authorized to adjust losses and collect all insurance proceeds directly. If,
notwithstanding the provisions hereof which require that Agent be the sole loss
payee, a check or other instrument from an insurer is made payable to any Loan
Party or any Loan Party and Agent jointly, Agent may endorse such Loan Party's
name thereon and take such other action as Agent may elect to obtain the
proceeds thereof. After deducting from such proceeds the expenses, if any,
incurred by Agent in the collection or handling thereof, Agent may apply such
proceeds to the reduction of the Obligations in the manner set forth in Section
-------
1.12 or, at Agent's option in its sole discretion, may permit or require the
- ----
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relevant Loan Party to use such proceeds, or any part thereof, to replace,
repair or restore such Property as provided in paragraph (d) below (it being
agreed by Agent that so long as no Default or Event of Default shall be
continuing, the relevant Loan Party shall be entitled to use such money (or such
lesser amount thereof as shall be necessary) to replace, repair, restore or
rebuild such Property as provided in paragraph (d) below where the amount of
such moneys on account of a single event of loss, damage or destruction is less
than $250,000 and it is reasonably expected that such replacement, repair,
restoration or rebuilding can be completed within six months after the loss,
damage or destruction (and if not completed by the end of such six-month period,
the remaining monies shall be delivered to Agent to be applied to the payment of
the Obligations)).
(b) Tyco Parent shall, promptly upon Tyco Parent or any of its
Subsidiaries learning of the institution of any proceeding for the condemnation
or other taking of any of its Property, notify Agent of the pendency of such
proceeding, and agrees that Agent may participate in any such proceeding and
Tyco Parent from time to time will deliver (or cause to be delivered) to Agent
all instruments reasonably requested by Agent to permit such participation.
Agent shall (and is hereby authorized to) collect any and all awards, payments
or other proceeds of any such condemnation or taking and apply such proceeds to
the reduction of the Obligations in the manner set forth in Section 1.12 or, at
------------
Agent's option in its sole discretion, may permit or require the relevant Loan
Party to use such proceeds, or any part thereof, to replace, repair or restore
such Property as provided in paragraph (d) below.
(c) Subject to the terms and conditions hereof (including Section
-------
2.2), after application of the proceeds of any loss or taking of any Loan
- ---
Party's Property to the reduction of the Obligations pursuant to paragraphs (a)
and (b) above, Borrower may borrow Revolving Credit Advances for the purpose of
replacing, repairing or restoring any Property subject to such loss or taking in
accordance with paragraph (d) below.
(d) Any Property which is to be replaced, repaired or restored
pursuant to paragraph (a), (b) or (c) above shall be replaced, repaired or
restored pursuant to such terms and conditions as Agent may reasonably require
and with materials and workmanship of substantially as good a quality as existed
before such loss or taking, and the relevant Loan Party shall commence such
replacement, repair or restoration as soon as practicable and proceed diligently
with it until completion to Agent's satisfaction. Tyco Parent or a Borrower
shall provide to Agent written progress reports, other information and evidence
of its compliance with the foregoing.
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SECTION 5.15. Currency Hedging. Tyco Parent shall maintain at all times
----------------
operations and personnel therefor to monitor currency exchange rate changes
applicable to the business of the Loan Parties and to engage in prudent currency
hedging activities to protect the Loan Parties from changes to such exchange
rates, all in manner reasonably acceptable to the Agent.
SECTION 5.16. Additional Subsidiaries. Promptly upon any Person becoming
-----------------------
an Additional Loan Party, Tyco Parent or any Borrower shall so notify Agent and
Lenders thereof and, unless otherwise agreed to in writing by Agent, shall (i)
cause such Person to become a guarantor under the Guaranty and a grantor of
Liens under the Security Agreement, Note Pledge Agreement, Stock Pledge
Agreement and the Patent, Trademark and Copyright Assignment, all pursuant to
documentation in form and substance satisfactory to Agent and cause such Person
to execute and deliver such other Collateral Documents as Agent may reasonably
require to obtain a Lien on all the assets, now or hereafter existing, of such
Person, (ii) cause all of the capital stock of such Person to be delivered to
Agent (together with undated stock powers signed in blank) and pledged to Agent
(for the ratable benefit of the Lenders) pursuant to the Stock Pledge Agreement
by the owner(s) of such capital stock, (iii) cause such Person to enter into a
Blocked Account Agreement (executed in each case by the applicable depository
bank or other financial institution) and (iv) cause to be executed and delivered
to Agent (A) to the extent required by Section 5.10 hereof, appropriate
------------
landlord's agreements with respect to any lease of real property to which such
Person is a party and (B) such other documentation as Agent may reasonably
request in connection with the foregoing, including, without limitation,
appropriate UCC-1 financing statements, stock certificates and stock powers,
certified corporate resolutions and other corporate documents of such Person and
favorable opinions of counsel to such Person (which shall cover, among other
things, the legality, validity, binding effect and enforceability of the
documentation referred to above), all in form, content and scope satisfactory to
Agent. The foregoing shall not constitute a consent by Agent or any Lender to
the creation or acquisition of any Subsidiary. Agent and Tyco Parent shall use
their best efforts to structure any guaranties and security documentation
required by this Section 5.16 by any Additional Loan Party that is a Foreign
------------
Subsidiary of Tyco Parent and any pledge required by this Section 5.16 of the
------------
capital stock of such Foreign Subsidiary to avoid adverse tax consequences to
such Foreign Subsidiary or its parent corporation.
SECTION 5.17. Interest Rate Hedging. Tyco Parent shall, and shall cause
---------------------
each of its Subsidiaries to, within 60 days after the date hereof amend, modify
or terminate all interest hedging agreements involving Tyco Parent or any of its
Subsidiaries which are existing on the date hereof to the extent necessary so
that after giving effect to any such amendment, modification or
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termination all such agreements existing on such 60th day shall be reasonably
satisfactory to the Agent.
SECTION 5.18. Further Assurances. Tyco Parent shall, and shall cause each
------------------
of its Subsidiaries to, at its cost and expense, upon request of Agent, duly
execute and deliver, or cause to be duly executed and delivered, to Agent such
further instruments and do and cause to be done such further acts as may be
necessary or proper in the reasonable opinion of Agent to carry out more
effectually the provisions and purposes of this Agreement or any other Loan
Document.
ARTICLE 6
NEGATIVE COVENANTS
Tyco Parent covenants and agrees (for itself and each of its Subsidiaries)
that, without the Required Lenders' prior written consent, from and after the
date hereof and until the Termination Date:
SECTION 6.1. Mergers, Subsidiaries, Etc. Tyco Parent shall not (and
---------------------------
shall not suffer or permit any of its Subsidiaries to), directly or indirectly,
by operation of law or otherwise, merge with, consolidate with, acquire all or
substantially all of the assets or capital stock of, or otherwise combine with,
any Person or, except for the creation of the Receivables Funding Subsidiary or
as permitted by Section 6.2(e), form or acquire any Subsidiary; provided, that:
-------------- --------
(a) so long as no Event of Default shall be continuing at the time or
would result therefrom, (i) Matchbox Toys Pty. Ltd. may acquire from Croner
Trading Pty. Ltd. the 25% interest of such Person in Croner-Tyco Toys Pty. Ltd.
as, when and on the terms required pursuant to Section 6.1 of the Shareholders
Agreement, dated November 17, 1992, among Matchbox Toys Pty. Ltd., Croner
Trading Pty. Ltd., Tyco Parent, John Victor Hunter and Pamela Jean Hunter as in
effect on the date hereof and (ii) Industries may acquire from Billy and Jaime
Kopchinsky the 25% interest of such Persons in Ensueno Tyco Toys de Mexico S.A.
de C.V. as, when and on the terms required pursuant to Section 7.1 of the
Shareholders Agreement, dated April 30, 1993, among Tyco Parent, Industries and
such Persons as in effect on the date hereof;
(b) any Inactive Subsidiary may be liquidated or dissolved or merged
into Industries or a Foreign Subsidiary of Tyco Parent (but only if such
Inactive Subsidiary shall not have incurred any indebtedness after the Closing
Date, and View-Master Ideal (UK) Limited and Tyco Toys (Italy) S.p.A. may only
be liquidated, dissolved or merged into Industries); and
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(c) the distributions, capital contributions, liquidations,
dissolutions and mergers described in Schedule 6.1(c) shall be permitted subject
---------------
to compliance with the terms and conditions therefor described in such Schedule
--------
6.1(c).
- ------
SECTION 6.2. Investments. Tyco Parent shall not (and shall not suffer or
-----------
permit any of its Subsidiaries to), directly or indirectly, make or maintain any
Investment except:
(a) as otherwise permitted by Section 6.3 or 6.4;
----------- ---
(b) Investments outstanding on the date hereof and listed in Schedule
--------
6.2, but not any additional investments therein except as otherwise expressly
- ---
permitted hereunder;
(c) cash and Cash Equivalents; provided, that (i) so long as there
--------
shall remain outstanding any principal owing on the Revolving Credit Loan, the
aggregate amount of cash and Cash Equivalents of Tyco Parent and its
Subsidiaries shall not exceed $21,000,000 (the foregoing $21,000,000 limitation
to be tested on the last day of each Fiscal Month (or within two (2) Business
Days after such testing day with respect to such testing day) or more often
during such Fiscal Month if Tyco Parent or any Borrower is then aware of the
aggregate amount of cash and Cash Equivalents of Tyco Parent and its
Subsidiaries, and if such cash and Cash Equivalents shall at any such time
exceed such $21,000,000 limit while there remains outstanding any principal
owing on the Revolving Credit Loan, such excess shall be eliminated within two
(2) Business Days after the relevant testing day) and (ii) all Cash Equivalents
of Tyco Parent and any of its Subsidiaries which are either Domestic
Subsidiaries or Additional Loan Parties that are Guarantors (to the extent the
aggregate value of such Cash Equivalents exceeds $100,000 at any time) shall be
pledged to Agent pursuant to a pledge agreement in form and substance
satisfactory to Agent whereby Agent shall obtain a first priority perfected Lien
in such Cash Equivalents;
(d) the acquisition by Matchbox Toys Pty. Ltd. of interests in Croner-
Tyco Toys Pty. Ltd. and the acquisition by Industries of Ensueno Tyco Toys de
Mexico S.A. de C.V., in each instance so long as permitted by clause (a) of
Section 6.1;
- -----------
(e) capital contributions by a Loan Party not to exceed $500,000 in
the aggregate for all Loan Parties during the entire term of this Agreement to
Subsidiaries of Tyco Parent not existing on the Closing Date created to perform
sales and marketing functions in territories not previously served directly by a
Loan Party;
(f) capital contributions by Industries to the Receivables Funding
Subsidiary of Accounts created by Industries pursuant to and as contemplated by
the Receivables Sale Agreement
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<PAGE>
so long as no Termination Event (as defined in the Receivables Funding
Agreement) is continuing; and
(g) the Investments described in Schedule 6.1(c) subject to compliance
---------------
with the terms and conditions therefor described in such Schedule 6.1(c).
---------------
SECTION 6.3. Indebtedness. Tyco Parent shall not (and shall not suffer
------------
or permit any of its Subsidiaries to) create, incur, assume or permit to exist
any Indebtedness, except:
(a) the Obligations;
(b) Deferred Taxes;
(c) purchase money Indebtedness secured by purchase money Liens
permitted under clause (d) of Section 6.7 (and refinancings of such purchase
-----------
money Indebtedness permitted by such clause (d));
(d) Indebtedness under the other Overall Facilities;
(e) Indebtedness incurred by the Receivables Funding Subsidiary under
the Receivables Funding Agreement and Indebtedness of Industries and
Manufacturing to the Receivables Funding Subsidiary representing loans by the
Receivables Funding Subsidiary to such Persons as provided in the respective
Receivables Sale Agreement;
(f) Indebtedness which constitutes Guaranteed Indebtedness permitted
under Section 6.6;
-----------
(g) Indebtedness of Manufacturing owing to GP Portland Limited
Partnership I under that certain Lease Agreement, dated as of March 23, 1992,
between Manufacturing, as lessee, and GP Portland Limited Partnership I, as
lessor;
(h) Indebtedness under currency exchange agreements, currency futures
or currency options permitted under the parenthetical in Section 6.18;
------------
(i) Indebtedness of any direct or indirect Foreign Subsidiary of Tyco
Parent (other than TOMCO I and other than any Inactive Subsidiary) incurred in
the ordinary course of such Person's business for the purpose of satisfying the
working capital and trade finance needs of such Person and which does not
(together with the outstanding principal amount of the Indebtedness permitted
pursuant to clause (j) below owing by Foreign Subsidiaries of Tyco Parent plus
----
the outstanding principal amount of the Indebtedness owing under the other
Overall Facilities) exceed a principal amount of $80,000,000 in the aggregate
for all such Persons at any time outstanding;
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<PAGE>
(j) other Indebtedness set forth in Schedule 3.9, but not (I) any
------------
increase in the amount of any thereof or (II) any refinancing or refunding of
any thereof;
(k) Indebtedness of Tyco Parent constituting pay-in-kind interest
owing under the First Chicago Notes;
(l) Indebtedness under interest rate protection agreements which have
terms that are acceptable to Agent;
(m) reimbursement obligations of Industries in an aggregate amount not
to exceed $370,000 with respect to drawings which may be made after the Closing
Date under the letter of credit issued under the Existing Credit Agreement prior
to the Closing Date that is to remain outstanding after the Closing Date, but
only if the expiration date of such letter of credit is not extended and the
undrawn amount thereof is not increased; and
(n) unsecured Indebtedness of Tyco Parent incurred after the Closing
Date which (x) by its express terms is subordinated to the payment of the
Obligations of Tyco Parent, (y) has terms and provisions (including, without
limitation, as to principal amount, interest rate, covenants, events of default
and subordination) as are acceptable to Agent and (z) is not guaranteed in any
manner by any Subsidiaries of Tyco Parent.
Notwithstanding anything to the contrary set forth in this Section 6.3
-----------
or any other provision of this Agreement, the Loan Parties agree that (i) Tyco
Investment and TOMCO I shall not contract, create, incur, assume or permit to
exist any Indebtedness except for Indebtedness arising under this Agreement or
under any other Loan Document to which such Person is a party, (ii) Distribution
shall not contract, create, incur, assume or permit to exist any Indebtedness
except for Indebtedness arising under this Agreement or any other Loan Document
to which Distribution is a party, (iii) Manufacturing shall not contract,
create, incur, assume or permit to exist any Indebtedness except for (A)
Indebtedness arising under this Agreement or any other Loan Document to which
Manufacturing is a party and (B) Indebtedness to GP Portland Limited Partnership
I under that certain Lease Agreement, dated as of March 23, 1992, between
Manufacturing, as lessee, and GP Portland Limited Partnership I, as lessor and
(iv) Tyco Hong Kong shall not contract, create, incur, assume or permit to exist
any Indebtedness if as a result thereof the aggregate principal amount of all
Indebtedness of Tyco Hong Kong at such time would exceed $10,000,000.
Notwithstanding anything to the contrary set forth in this Agreement,
Manufacturing shall not contract, create, incur, assume or permit to exist any
indebtedness or obligations in excess of $5,000,000 relating to the purchase of
raw materials in the ordinary course of business for use in the manufacturing
operations of Manufacturing.
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<PAGE>
SECTION 6.4. Affiliate and Employee Loans and Transactions. Tyco Parent
---------------------------------------------
shall not (and shall not suffer or permit any of its Subsidiaries to) enter into
any lending, borrowing or other commercial transaction with any of its
Subsidiaries, Affiliates, officers, directors, shareholders or employees,
including payment of any management, consulting, advisory or similar fee;
provided, that:
- --------
(a) Manufacturing, Industries and the Receivables Funding Subsidiary
may enter into and perform the Receivables Funding Documents; provided that
--------
sales, transfers, capital contributions and other dispositions by Industries or
Manufacturing to the Receivables Funding Subsidiary of Accounts as therein
contemplated shall only be permitted so long as no Termination Event (as defined
in the Receivables Funding Agreement) is continuing;
(b) (1) Industries may purchase Inventory from Distribution, (2) any
Borrower may purchase Inventory from Tyco Hong Kong, (3) Distribution may
purchase Inventory from Manufacturing, (4) any Borrower or any Foreign
Subsidiary of Tyco Parent may purchase goods from Taiyo Kogyo Co, Ltd., a
Japanese joint stock corporation, and (5) Tyco Hong Kong may purchase Inventory
from Shanghai Universal Plastic Toys Co., Ltd., Shanghai Universal Printing Co.,
Ltd., Shanghai Universal Toys Co., Ltd., Guangzhaou Unitoys Tooling, Ltd.,
Universal International (Thailand) Co., Ltd. and Universal (Printing) Investment
Co. Ltd.; provided that each such transaction under this clause (b) is in the
ordinary course of business of Industries, Distribution, Manufacturing or other
Subsidiary of Tyco Parent, as the case may be, and is on terms and conditions
substantially as favorable to Industries, Distribution, Manufacturing or such
other Subsidiary of Tyco Parent, as the case may be, as would be obtainable by
it in a comparable arms-length transaction or agreement with a wholly
independent third party;
(c) Industries may purchase accounts from Manufacturing;
(d) Tyco Parent or any of its Subsidiaries may enter into transactions
(other than the transactions in clauses (b) and (c) above) with any of Tyco
Parent or its Subsidiaries, Affiliates, directors or shareholders (but in no
event with its or any Affiliate's employees or officers) in the ordinary course
of such Person's business on terms and conditions substantially as favorable to
such Person as would be obtainable by it in a comparable arms-length transaction
with a Person other than an officer, employee, director, shareholder or
Affiliate of such Person, provided that the sum of (i) the aggregate cost to all
--------
such Persons of property and assets purchased in any such transactions plus (ii)
----
the aggregate amounts outstanding at any time which are borrowed, loaned or
otherwise distributed by such Persons in any such transactions, would not exceed
$10,000,000;
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<PAGE>
(e) any Borrower may make loans, advances and other distributions with
proceeds of Revolving Credit Advances and with proceeds from the sale by
Manufacturing of its Accounts pursuant to its Receivables Sale Agreement, in
each instance, to any Subsidiary of Industries that is a Guarantor and to
Industries (but only for Industries' own working capital needs) and Industries
may make loans, advances and other distributions with proceeds received by
Industries from the sale of its Accounts pursuant to its Receivables Sale
Agreement to any Subsidiary of Industries that is a Guarantor;
(f) Tyco Parent may make capital contributions to Industries of funds
obtained by Tyco Parent through the issuance of common stock of Tyco Parent
which does not result in a Change of Control;
(g) a Loan Party may transfer (including, without limitation, by
capital contribution) to Tyco Investment Intellectual Property of such Loan
Party, provided that Agent shall be satisfied that it continues to hold a valid
--------
and perfected, first-priority Lien in such Intellectual Property after giving
effect to such transfer;
(h) Tyco Parent may grant stock options for common stock of Tyco
Parent pursuant to an existing stock option plan or agreement duly adopted by
the board of directors of Tyco Parent which is described on Schedule 3.9;
------------
(i) any Loan Party may make loans and advances to its officers and
employees for the purpose of assisting in relocations or in the exercise of
stock options by such officers or employees with respect to the common stock of
Tyco Parent, provided that the aggregate outstanding principal amount of all
--------
such loans and advances shall not exceed $3,000,000 at any time;
(j) unsecured loans by Subsidiaries of Tyco Parent to Tyco Parent or
its other Subsidiaries in an aggregate outstanding principal amount not to
exceed $2,000,000 at any time;
(k) to the extent permitted by Section 6.8; and
-----------
(l) any Subsidiary of Tyco Parent may pay royalty and management fees
to Industries or a direct or indirect parent corporation of such Subsidiary
obligor so long as the fee payable by any Subsidiary of Tyco Parent shall be
based solely upon a percentage of such Subsidiary's net sales (such percentage
to be uniform among all Subsidiaries of Tyco Parent which are paying any
management or royalty fee and not in any event to exceed 7.5%, the percentage in
effect on the Closing Date).
Notwithstanding anything to the contrary set forth in this Section
-------
6.4, no Loan Party will (nor will it permit any of its
- ---
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<PAGE>
Subsidiaries to) make any capital contributions to or other investments in
(other than (1) transactions permitted under clauses (a), (b) and (c) above, (2)
Investments outstanding on the date hereof and listed in Schedule 6.2 and (3)
------------
capital contributions to Tyco Investment of Intellectual Property permitted
under clause (g) above), or provide any guarantees of or other support for any
financing of (other than Guaranteed Indebtedness permitted under Section 6.6),
-----------
any Designated Subsidiary.
Set forth in Schedule 6.4 is a list of all such lending, borrowing or
------------
other commercial transactions existing or outstanding as of the Closing Date.
SECTION 6.5. Capital Structure and Business. Except as permitted under
------------------------------
Section 5.1, Tyco Parent shall not (and shall not suffer or permit any of its
- -----------
Subsidiaries to):
(a) make any changes in its business objectives, purposes, or
operations which could in any way adversely affect the repayment of the
Obligations or have or result in a Material Adverse Effect;
(b) make any change in its capital structure as described in Schedule
--------
3.9 and Schedule 6.3 (including the issuance or recapitalization of any shares
- --- ------------
of Stock or other securities convertible into Stock or any revision of the terms
of its outstanding Stock) except (i) for the issuance by Tyco Parent of
additional shares of its common stock, (ii) for the issuance by Tyco Parent of
additional shares of preferred stock having terms and provisions acceptable to
Agent and (iii) as permitted under Section 6.15(a), in each instance under
---------------
clauses (i), (ii) and (iii) above, so long as no Change of Control shall result
therefrom, and (iv) for the issuance of the Junior Preferred Stock in accordance
with the terms of the Rights Agreement;
(c) amend its articles of incorporation, charter, bylaws or other
organizational documents in any manner which is reasonably likely to adversely
affect the interests of Lenders (but in no event shall any such amendment
authorize any preferred stock or restrict the powers or purposes of Tyco Parent
or any of its Subsidiaries); or
(d) engage in any business other than the business currently engaged
in by such Person and any related toy or collectibles business.
SECTION 6.6. Guaranteed Indebtedness. Tyco Parent shall not (and shall
-----------------------
not suffer or permit any of its Subsidiaries to) incur any Guaranteed
Indebtedness except:
(a) by endorsement of instruments or items of payment for deposit to
the general account of such Person;
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<PAGE>
(b) for performance bonds or indemnities entered into in the ordinary
course of business consistent with past practices;
(c) for any Guaranties by Loan Parties of all or any portion of the
Obligations;
(d) guaranties of Indebtedness incurred under the other Overall
Facilities;
(e) unsecured Guaranteed Indebtedness of Tyco Parent to support the
Indebtedness permitted under Section 6.3(i); provided that the aggregate amount
-------------- --------
of such Guaranteed Indebtedness, together with the aggregate amount of
Guaranteed Indebtedness under clause (f) below where the primary obligor is a
Foreign Subsidiary of Tyco Parent, shall not exceed $70,000,000 for Tyco Parent
and its Subsidiaries at any one time outstanding;
(f) the existing unsecured Guaranteed Indebtedness set forth on
Schedule 6.6 hereto, but the amount of any thereof not to exceed the respective
- ------------
amounts set forth on such Schedule 6.6; and
------------
(g) for any guaranty by a Receivables Funding Subsidiary of the
obligations of the other Receivables Funding Subsidiary under the Receivables
Funding Documents.
SECTION 6.7. Liens. Tyco Parent shall not (and shall not suffer or permit
-----
any of its Subsidiaries to) create or permit to exist any Lien on any of its
properties or assets except for:
(a) presently existing or hereafter created Liens in favor of Agent or
Lenders to secure the Obligations (including to secure the obligations of any
Guarantor under any Guaranty);
(b) Liens set forth in Schedule 6.7 existing on the Closing Date, but
------------
not any increase in the amount secured by any such Liens or the coverage thereof
to other property or assets;
(c) Permitted Encumbrances;
(d) purchase money mortgages or other purchase money Liens and Capital
Leases (including, without limitation, finance leases) granted after the date
hereof upon any fixed or capital assets hereafter acquired, or Liens (including,
without limitation, finance leases) on any such assets hereafter acquired or
existing at the time of acquisition of such assets, whether or not assumed, so
long as (v) any such Lien does not extend to or cover any other asset of any
Loan Party or any of its Subsidiaries, (w) such Lien secures the obligation to
pay the purchase price of such asset (or the obligation under such capital or
finance lease) only, (x) the principal amount secured by each such Lien does not
exceed the unpaid purchase price for such asset, (y) the aggregate amount of
Indebtedness secured by such purchase money Liens and Capital
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<PAGE>
Leases shall not at any time exceed (together with the Indebtedness secured by
any purchase money Liens and Capital Leases permitted under clause (b) above and
any Indebtedness permitted below in this clause (d) to refinance purchase money
Indebtedness) $10,000,000, and (z) such fixed or capital asset, if Equipment, is
not a component, part or accessory installed on, or an accession, addition or
attachment to, any other Equipment or other personal property of a Loan Party or
an Affiliate of any thereof (except other Equipment on which a security interest
exists in favor of Agent under clause (a) above), and Liens to secure any
refinancing of the purchase money Indebtedness permitted under this clause (d)
and under clause (b) above so long as (x) the Indebtedness refinancing such
purchase money Indebtedness does not exceed the outstanding principal amount of
the Indebtedness being refinanced,(y) the Lien securing such new Indebtedness
secures only such Indebtedness and does not extend to or cover any asset other
than the asset secured by the refinanced Indebtedness and (z) the terms of such
new Indebtedness are no less favorable to the Loan Party or its Subsidiary owing
same as the terms of the Indebtedness being refinanced;
(e) in the case of the Receivables Funding Subsidiary, Liens created
under or pursuant to the Receivables Funding Documents;
(f) Liens granted pursuant to the other Overall Facilities;
(g) with respect to other than Tyco Investment, TOMCO I, the Inactive
Subsidiaries and Almat Toy Company, good faith deposits to secure performance of
performance and return money bonds incurred in the ordinary course of business;
provided, that the aggregate amount of such deposits shall not exceed $500,000
- --------
at any one time; and
(h) cash collateral delivered to NationsBank, N.A. (Carolinas),
formerly known as NationsBank of North Carolina, N.A., in an aggregate amount
not to exceed $388,000 to secure the reimbursement obligations of Industries
with respect to drawings which may be made under the letter of credit issued
under the Existing Credit Agreement prior to the Closing Date that is to remain
outstanding after the Closing Date.
SECTION 6.8. Sale of Assets. Tyco Parent shall not (and shall not suffer
--------------
or permit any of its Subsidiaries to) sell, transfer, convey, assign or
otherwise dispose of any of its assets or properties, including any Collateral;
provided, that the foregoing shall not prohibit:
- --------
(a) the sale by Manufacturing or Industries of its Accounts to the
Receivables Funding Subsidiary pursuant to and in accordance with the
Receivables Sale Agreement; provided, that no
--------
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<PAGE>
such sales shall be permitted so long as a Termination Event (as defined in the
Receivables Funding Agreement) is continuing;
(b) the sale of Inventory in the ordinary course of business
(including, in any event, sales of Inventory by Distribution to Industries or by
Manufacturing to Distribution consistent with historical practices but subject
to Section 6.22);
(c) the sale or disposition of any Equipment or Intellectual Property
which, in each instance, has become no longer useful, obsolete or surplus to the
business of any Loan Party or any Subsidiary thereof;
(d) (x) the sale, lease, transfer or other disposition of assets and
properties by any Subsidiary of Tyco Parent to Tyco Parent or any of its other
Subsidiaries in the ordinary course of business for fair consideration or (y)
the sale, lease, transfer or other disposition by any one or more Subsidiaries
of Tyco Parent of other assets and property having an aggregate purchase or sale
price or fair market value, whichever is greater, not in excess for each such
Subsidiary of $100,000 in any Fiscal Year; and
(e) the sale of any of the Inactive Subsidiaries to one or more
Persons each of which is not an Affiliate of Tyco Parent or any of its
Subsidiaries (but only after all intercompany debt owed by it has been paid in
full and all intercompany debt owed to it has been paid in full or forgiven).
Notwithstanding anything herein or in any other Loan Document to the contrary,
any assets and property permitted to be sold, assigned or otherwise transferred
hereunder by Tyco Parent or any of its Subsidiaries to any other of Tyco Parent
or any of its Subsidiaries which immediately prior to such sale, assignment or
transfer was subject to the Lien of the Agent therein shall continue to be
subject to such Lien after such sale, assignment or transfer (and such sale,
assignment or transfer shall be made subject to such Lien); provided, that (i)
--------
Liens in favor of Agent on Inventory sold by any Borrower to Industries or
Manufacturing (or by any Subsidiary of Tyco Parent which has granted a Lien
therein in favor of Agent to Manufacturing or Industries) shall be released upon
the sale of such Inventory in the ordinary course of business for fair
consideration to a Person which is not an Affiliate of Tyco Parent or any of its
Subsidiaries so long as no Termination Event (as defined in the Receivables
Funding Agreement) is continuing (the Agent retaining a Lien in the proceeds of
such sale, subject to the terms of the Intercreditor Agreement), (ii) Liens in
favor of Agent on Accounts sold or transferred by Manufacturing or Industries to
the Receivables Funding Subsidiary in accordance with the Receivables Funding
Documents shall be released to the extent provided in the Intercreditor
Agreement and (iii) Liens in favor of Agent on other Collateral sold or
transferred on an intercompany basis as provided above shall (if
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<PAGE>
such intercompany sale or transfer is permitted hereunder) be released upon a
sale of such Collateral permitted hereunder for fair consideration to a Person
which is not an Affiliate of Tyco Parent or any of its Subsidiaries and the
application of the net cash proceeds from such sale to the payment of the
Obligations. All tangible assets and property sold, assigned or transferred on
an intercompany basis for which the Lien of Agent shall continue after such
sale, assignment or transfer as provided above shall, until the Lien of Agent is
released as provided above, remain in the states of the United States where
Agent has filed appropriate UCC financing statements in order to continue the
perfection of its Lien after such sale, assignment or transfer and maintain the
status of such Lien as a first-priority perfected Lien in such assets and
property, except that Inventory sold by Industries to Foreign Subsidiaries of
Tyco Parent in the ordinary course of business shall not be subject to such
location restriction if immediately prior to such sale, assignment or transfer
such Inventory was not utilized in determining the Borrowing Base of any
Borrower and there shall have been no requirement under Section 1.3(b) to repay
--------------
any Revolving Credit Advances or provide cash collateral.
SECTION 6.9. Material Contracts. Tyco Parent shall not (and shall not
------------------
suffer or permit any of its Subsidiaries to) (a) cancel or terminate any
Material Contract or amend or otherwise modify any Material Contract, or waive
any default or breach under any Material Contract, in each instance except in
the ordinary course of business, but only so long as (i) Tyco Parent determines
that it is in the best interests of Tyco Parent and, if applicable, the relevant
Subsidiary to do so, (ii) at the time of such action no Event of Default is
continuing, and (iii) such action is not being taken with respect to any
Material Contract restricted under Section 6.24 or (b) take any other action in
------------
connection with any Material Contract that would have a Material Adverse Effect.
SECTION 6.10. ERISA. Neither any Loan Party nor any Subsidiary thereof
-----
nor any ERISA Affiliate shall acquire any new ERISA Affiliate that maintains or
has an obligation to contribute to a Pension Plan that has either a material
"accumulated funding deficiency," as defined in Section 302 of ERISA, or
material "unfunded vested benefits," as defined in Section 4006(a)(3)(E)(iii)
of ERISA in the case of any Pension Plan other than a Multi-employer Plan and in
Section 4211 of ERISA in the case of a Multi-employer Plan. Additionally,
neither any Loan Party nor any Subsidiary thereof nor any ERISA Affiliate shall:
(a) permit or suffer any condition set forth in Schedule 3.13 to cease to be met
-------------
and satisfied at any time; (b) terminate any Pension Plan that is subject to
Title IV of ERISA where such termination could reasonably be anticipated to
result in material liability to any Loan Party or any of its Subsidiaries, (c)
permit any material accumulated funding deficiency, as defined in Section
302(a)(2) of ERISA, to be incurred with respect to any Pension Plan; (d) fail to
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make any material contributions or fail to pay any material amounts due and
owing as required by the terms of any Plan before such contributions or amounts
become delinquent (or shall correct such failure within 30 days of the time such
contribution or amount was due); (e) make a complete or partial withdrawal
(within the meaning of Section 4201 of ERISA) from any Multi-employer Plan that
would cause such Loan Party, Subsidiary or ERISA Affiliate to incur material
withdrawal liability; or (f) at any time fail to provide Agent and any Lender
with copies of any Plan documents or governmental reports or filings, if
reasonably requested by Agent or any Lender.
SECTION 6.11. Financial Covenants. Tyco Parent shall not breach or fail
-------------------
to comply with any of the financial covenants set forth in Annex H, each of
-------
which shall be calculated in accordance with GAAP consistently applied (and
based upon the financial statements delivered hereunder).
SECTION 6.12. Hazardous Materials. Except as set forth in Schedule 3.18,
------------------- -------------
Tyco Parent shall not and shall not suffer or permit any of its Subsidiaries or
any other Person within the control of Tyco Parent: (a) to cause or permit a
Release of Hazardous Material on, under in or about any Real Property (except
where such Release is not reasonably likely to expose Tyco Parent and its
Subsidiaries to actual and potential liability for all such Releases in excess
of $500,000; (b) to use, store, generate, treat or dispose of Hazardous
Materials, except in compliance in all material respects with Environmental
Laws; or (c) to transport any Hazardous Materials to or from any Real Property,
except in compliance in all material respects with Environmental Laws.
SECTION 6.13. Sale-Leasebacks. Tyco Parent shall not (and shall not
---------------
suffer or permit any of its Subsidiaries to) engage in any sale-leaseback or
similar transaction involving any of its property or assets; provided, however,
-------- -------
that this Section 6.13 shall not be deemed to prohibit any transaction involving
------------
a transfer of Intellectual Property by any Loan Party to Tyco Investment
permitted under Section 6.4 and a corresponding taking back by such Loan Party
-----------
from Tyco Investment of a royalty license agreement with respect to such
Intellectual Property.
SECTION 6.14. Cancellation of Indebtedness. Tyco Parent shall not (and
----------------------------
shall not suffer or permit any of its Subsidiaries to) cancel any claim or
Indebtedness owing to it, except for reasonable consideration and in the
ordinary course of its business, or make any payment or prepayment of principal
of or interest on or otherwise with respect to, or purchase, defease, acquire or
redeem, any Indebtedness (other than under the Overall Facilities) or make any
deposit in respect thereof or give notice in respect thereof, provided, however,
-------- -------
that (i) Tyco Parent and its Subsidiaries may make regular, scheduled mandatory
payments on Indebtedness (other than the Indebtedness evidenced or governed by
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any of the Subordinated Debt Documents) which is permitted to be outstanding
under the terms hereof when and as due and payable, (ii) Tyco Parent may make
regular, scheduled mandatory payments of interest when and as due and payable
with respect to the Indebtedness evidenced or governed by any of the
Subordinated Debt Documents in the form as in effect on the date hereof or as
amended with the prior written consent of the Required Lenders (so long as any
such payment is not prohibited under the provisions of the relevant Subordinated
Debt Documents, including, without limitation, the subordination provisions
thereunder), (iii) any of Tyco Parent or any of its Subsidiaries may make
optional or voluntary payments or prepayments on loans and advances owing to
either Borrower, or, if owing by other than any Borrower, to Industries which is
permitted to be outstanding under the terms hereof so long as the Revolving
Credit Loan is concurrently prepaid in the amount of such payment or prepayment,
and (iv) so long as no Default or Event of Default is continuing or would result
therefrom (unless otherwise agreed to in writing by Agent), Subsidiaries of Tyco
Parent may make any optional or voluntary payments or prepayments on
Indebtedness owing by it to (x) any of Tyco Parent and its Subsidiaries which is
permitted to be outstanding under the terms hereof and (y) any Person which is
not an Affiliate of such Person which is permitted to be outstanding under the
terms hereof (other than the Indebtedness evidenced or governed by the
Subordinated Debt Documents) in an aggregate amount for all such optional or
voluntary payments and prepayments under this clause (y) not to exceed $200,000
in any Fiscal Year.
SECTION 6.15. Restricted Payments. Tyco Parent shall not (and shall not
-------------------
suffer or permit any of its Subsidiaries to) make any Restricted Payment to any
Person, except that:
(a) each of Tyco Parent and its Subsidiaries may declare and pay
dividends on its Stock solely in the same class of Stock of such Person;
(b) any direct Subsidiary of any Borrower may declare and pay
dividends or return capital or make any other distribution on its Stock to such
Borrower;
(c) any Subsidiary of Tyco Parent which is a Loan Party may declare
and pay dividends to, or return capital to or make any other distribution on its
Stock held by, any Borrower or any other Guarantor;
(d) so long as (x) no Default or Event of Default has occurred and is
continuing at such time or would be directly or indirectly caused as a result
thereof and (y) Tangible Net Worth (as defined in Annex H) for the Fiscal Year
-------
just ended is equal to or greater than $118,000,000 (compliance with the
Tangible Net Worth test to be determined from the annual audited financial
statements of Tyco Parent for such Fiscal Year required to be
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delivered pursuant to Section 3 of Annex E), Tyco Parent may declare and pay
-------
dividends on its Stock (other than the Junior Preferred Stock) in the then
current Fiscal Year in an aggregate amount for such current Fiscal Year not to
exceed, together with the cash payments made during such current Fiscal Year
under clause (h) below, 15% of the aggregate net income of Tyco Parent and its
Subsidiaries on a consolidated basis from continuing operations for the Fiscal
Year just ended;
(e) any Subsidiary of Tyco Parent may make mandatory payments and, to
the extent permitted by Section 6.14, voluntary payments and prepayments on
------------
loans and advances made to it by whichever of Tyco Parent or any of its
Subsidiaries is the owner of all or a portion of such Person's Stock, but in
each instance only so long as such loan or advance is permitted under Section
-------
6.2;
- ---
(f) any Subsidiary of Tyco Parent may make loans and advances to
whichever of Tyco Parent or any of its Subsidiaries is the owner of all or a
portion of such Person's Stock to the extent permitted by Section 6.2;
-----------
(g) any Subsidiary of Tyco Parent may make other transfers of funds or
other property to whichever of Tyco Parent or any of its Subsidiaries is the
owner of all or a portion of such Person's Stock to the extent permitted by
Section 6.4;
- -----------
(h) Tyco Parent may (x) pay cash in lieu of dividends consisting of
fractional shares of its Stock, (y) through April 15, 1996 pay cash as part of a
dividend on its preferred Stock and (z) pay cash in lieu of pay-in-kind interest
on the First Chicago Notes; provided that the aggregate cash payments made under
--------
this clause (h) in any Fiscal Year shall not exceed $500,000;
(i) those Subsidiaries of Tyco Parent which are the subject of the
transactions described in Schedule 6.1(c) may make the Restricted Payments
---------------
described in such Schedule 6.1(c) subject to compliance with the terms and
---------------
conditions therefor in such Schedule; and
(j) Tyco Parent may redeem rights issued pursuant to the Rights
Agreement in accordance with the terms of the Rights Agreement so long as (i)
the aggregate cash and other consideration paid to redeem rights shall not
exceed $500,000 (except that the foregoing shall not prohibit the redemption of
such rights with common stock of Tyco Parent), (ii) the redemption is pro rata
among the holders of such rights, and (iii) the redemption has been duly
approved by the Board of Directors of Tyco Parent.
SECTION 6.16. Real Property Leases. Tyco Parent shall not (and shall not
--------------------
suffer or permit any of its Domestic Subsidiaries to) enter into or renew (by
amendment, modification or otherwise) any Lease other than (i) renewals of
existing Leases upon more
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favorable (to such Person) or substantially the same terms as are in effect on
the Closing Date, (ii) leases of sales offices and showrooms in the ordinary
course of business, and (iii) leases by any Subsidiary of Tyco Parent, as
lessor, to Tyco Parent or any of its Subsidiaries to the extent permitted by
Section 6.4.
- -----------
SECTION 6.17. Bank Accounts. Tyco Parent shall not (and shall not suffer
-------------
or permit any of its Subsidiaries to) maintain any deposit, operating or other
bank accounts except for those accounts identified in Schedule 3.20.
-------------
SECTION 6.18. No Speculative Transactions. Tyco Parent shall not (and
---------------------------
shall not suffer or permit any of its Subsidiaries to) engage in any transaction
involving commodity options or futures contracts, derivatives, currency options
or futures contracts or any similar speculative transactions (other than with
respect to currency exchange rate fluctuations in the ordinary course of
business consistent with past practice and prudent business management in order
to comply with Section 5.15 and other than with respect to interest rate
------------
protection having terms acceptable to Agent).
SECTION 6.19. Margin Regulations. No Borrower shall use the proceeds of
------------------
any Revolving Credit Advance to purchase or carry any Margin Stock or any equity
security of a class which is registered pursuant to Section 12 of the Securities
Exchange Act of 1934.
SECTION 6.20. Limitation on Negative Pledge Clauses, Etc. Tyco Parent
-------------------------------------------
shall not (and shall not suffer or permit any of its Subsidiaries to), directly
or indirectly, enter into any agreement with any Person which prohibits or
limits the ability of Tyco Parent or any of its Subsidiaries to create, incur,
assume or suffer to exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, other than the agreements with Agent or
Lenders pursuant to a Loan Document, the agreements governing the other Overall
Facilities, Lien restrictions in a Capital Lease or other purchase money
financing arrangement permitted hereunder relating to the asset financing
thereunder and agreements governing Indebtedness of Foreign Subsidiaries of Tyco
Parent permitted under Sections 6.3(i) and (j), but only to the extent that such
-----------------------
prohibition or limitation applies to the borrower thereunder and its
Subsidiaries. Tyco Parent shall not (and shall not permit any of its
Subsidiaries to) enter into, after the date of this Agreement, any indenture,
agreement, instrument or other arrangement that, directly or indirectly,
prohibits or restrains, or has the effect of prohibiting or restraining, or
imposes materially adverse conditions upon, the incurrence or payment of
Indebtedness, the granting of Liens (other than pursuant to the terms of any
purchase money Indebtedness or Capital Lease permitted herewith relating to the
asset in question), the declaration or payment of dividends or other Restricted
Payments, the making of loans, advances or
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Investments or the sale, assignment, transfer or other disposition of any
property or assets (other than pursuant to the terms of any purchase money
Indebtedness or Capital Lease permitted herewith relating to the asset in
question) except (x) for the Receivables Funding Documents, in the case of the
Receivables Funding Subsidiary, and (y) for any debt documents governing
Indebtedness of Foreign Subsidiaries of Tyco Parent permitted under Section
-------
6.3(i), in the case of the Foreign Subsidiaries which are borrowers thereunder
- ------
and their respective Subsidiaries; provided that such prohibitions or
restrictions in such debt documents shall be permitted under Section 4.10 of the
Tyco Parent Senior Subordinated Note Indenture.
SECTION 6.21. Accounting Changes. Tyco Parent shall not (and shall not
------------------
suffer or permit any of its Subsidiaries to) make any significant change in
accounting treatment and reporting practices except for changes concurred in by
such Person's independent public accountants.
SECTION 6.22. Inventory Sales. No Borrower shall at any time ship or
---------------
cause to be shipped directly or indirectly to Industries or Manufacturing any
Inventory of such Borrower which is sold by it to Industries or Manufacturing
(other than, with respect to shipments to Industries, as permitted in clause (i)
of Section 2.1(u)), but shall ship or cause to be shipped any such Inventory
--------------
directly to third party customers at the direction of Industries or
Manufacturing, as appropriate (and for its account); provided that
notwithstanding the foregoing from and after the occurrence of a "Termination
Event" under and as defined in the Receivables Funding Agreement, Agent may, in
its sole discretion, require each Borrower to (or, in Agent's sole discretion,
Agent as attorney-in-fact for each Borrower, may itself) sell and ship such
Borrower's Inventory directly to third party customers rather than to (or for
the account of) Industries or Manufacturing. In connection with any such
shipment and sale of Inventory by Agent, each Borrower hereby appoints Agent
and Agent's designees as such Borrower's attorney, with power from and after the
occurrence of a Termination Event to take any and all actions in order for Agent
to ship and sell any Inventory of such Borrower (including, without limitation,
to sign such Borrower's name on any invoice, bill of lading or other document of
title relating to any such Inventory). Each Borrower hereby ratifies and
approves all lawful acts of such attorney. Neither Agent, any Lender nor the
attorney will be liable for any acts or omissions or for any error of judgment
or mistake of fact or law, except for Agent's own wilful misconduct, gross
negligence or bad faith. This power, being coupled with an interest, is
irrevocable until this Agreement has been terminated and the Obligations have
been fully satisfied. Each Borrower agrees to execute and deliver and to take
such actions as Agent may reasonably request in connection with any such
shipment or sale by Agent.
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SECTION 6.23. Tyco Parent and Certain Subsidiaries. Except for the
------------------------------------
acquisition by Tyco Parent from its Subsidiaries of assets to the extent such
acquisitions are expressly permitted hereunder, Tyco Parent shall not engage in
any business activity other than the ownership of shares of capital stock of its
Subsidiaries as described and permitted hereunder nor shall it own any assets
except for such shares of capital stock. Each of TOMCO I, TVMI Service Corp.
and Tyco Services, Inc. shall not engage in any business activity other than,
with respect to TOMCO I, holding certain voting preferred stock of Distribution
(all of which is pledged under the Stock Pledge Agreement) and, with respect to
such other Persons, performing certain administrative services for Tyco Parent
and its Subsidiaries.
SECTION 6.24. Amendments and Modifications to Debt Documents. Tyco Parent
----------------------------------------------
shall not (and shall not suffer or permit any of its Subsidiaries to) directly
or indirectly, amend, modify, supplement, waive compliance with, grant a waiver
under, or assent to noncompliance with: (i) any instrument, document or
agreement evidencing, creating, guaranteeing or governing Indebtedness or
Guaranteed Indebtedness in excess of $1,000,000 permitted under Section 6.3 or
-----------
6.6 or entered into in connection therewith (other than (x) the instruments,
- ---
documents and agreements governing the Overall Facilities in accordance with the
terms thereof and (y) any such instruments, documents or agreements relating to
credit facilities of Foreign Subsidiaries of Tyco Parent with Persons which are
not Affiliates of Tyco Parent or any of its Subsidiaries that are permitted
under Sections 6.3(i) or (j), but only so long as such amendment, modification,
--------------- ---
supplement, waiver or assent shall not directly or indirectly result in or cause
a Default, Event of Default or a Material Adverse Effect) or (ii) any of the
Subordinated Debt Documents (it being understood that this Section 6.24 shall be
deemed not to prohibit the holders of any Indebtedness under any of the
Subordinated Debt Documents (or any required percentage thereof) from waiving
any requirement or default under any Subordinated Debt Documents).
SECTION 6.25. Inactive Subsidiaries. Tyco Parent shall not suffer or
---------------------
permit (i) the book value of the assets (other than intercompany receivables
existing on the Closing Date) of all Inactive Subsidiaries to exceed $3,000,000
at any time or (ii) any Inactive Subsidiary to engage in any activity, or
contract, create, assume, incur or suffer to exist any indebtedness (other than
indebtedness for which Section 3.22 continues to be true and correct) or create,
------------
grant or suffer to exist any Liens on its property.
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ARTICLE 7
TERM
SECTION 7.1. Duration. The financing arrangements contemplated hereby
--------
shall be in effect until the Commitment Termination Date. On the Commitment
Termination Date, the Revolving Credit Commitments shall terminate and the
Revolving Credit Loan and all other Obligations shall immediately become due and
payable in full, in immediately available funds in Dollars.
SECTION 7.2. Survival of Obligations. Except as otherwise expressly
-----------------------
provided for in the Loan Documents, no termination or cancellation (regardless
of cause or procedure) of any financing arrangement under this Agreement shall
in any way affect or impair the Obligations, duties, indemnities, and
liabilities of Borrowers or any other Loan Party, or the rights of Agent or any
Lender relating to any Obligations, due or not due, liquidated, contingent or
unliquidated or any transaction or event occurring prior to such termination, or
any transaction or event, the performance of which is not required until after
the Commitment Termination Date. Except as otherwise expressly provided herein
or in any other Loan Document, all undertakings, agreements, covenants,
warranties and representations of or binding upon Borrowers or any other Loan
Party, and all rights of Agent and each Lender, all as contained in the Loan
Documents shall not terminate or expire, but rather shall survive such
termination or cancellation and shall continue in full force and effect until
such time as all of the Obligations have been paid in full in immediately
available funds in Dollars in accordance with the terms of the agreements
creating such Obligations.
ARTICLE 8
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
SECTION 8.1. Events of Default. The occurrence of any one or more of the
-----------------
following events (regardless of the reason therefor) shall constitute an "Event
-----
of Default" hereunder:
- ----------
(a) Any Borrower or other Loan Party shall fail to make any payment in
respect of any Obligations hereunder or under any of the other Loan Documents
when due and payable or declared due and payable, including any payment of
principal of, or interest on, or Fees in respect of, the Revolving Credit Loan,
and, with respect to the failure to make any payment of any Obligations
hereunder (other than principal on the Revolving Credit Loan or reimbursement
for payments of Letter of Credit Obligations which shall have no grace period),
such failure shall continue unremedied for five (5) days.
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<PAGE>
(b) Any Borrower or any other Loan Party shall fail or neglect to
perform, keep or observe any of the provisions of Section 1.9, Section 4.1, or
----------- -----------
Article 6, including any of the provisions set forth in Annex B, Annex E, or
- --------- ------- -------
Annex H, and such failure or neglect shall continue unremedied (if capable of
- -------
being remedied) for five (5) days with respect to Section 1.9 and Annex B and
----------- -------
for ten (10) days with respect to Section 4.1 and Annex E (other than Section 2
----------- ------- ---------
of Annex E for which the grace period shall be thirty (30) days) (with no grace
-------
period to be provided for any failure or neglect of Article 6 or Annex H).
--------- -------
(c) Any Borrower, any other Loan Party or any other Subsidiary of Tyco
Parent shall fail or neglect to perform, keep or observe any term or provision
of this Agreement or of any of the other Loan Documents (other than any such
term or provision referred to in paragraph (a) or (b) above), and the same shall
remain unremedied (if capable of being remedied) for a period ending on the
first to occur of thirty (30) days after Borrowers shall receive written notice
of any such failure from Agent or any Lender or thirty (30) days after any
Borrower shall become aware thereof.
(d) (x) a default shall occur and be continuing under any other
agreement, document or instrument to which any Borrower or any other Loan Party
or any of its Subsidiaries is a party or by which any such Person or its
property is bound, and such default (i) involves the failure to make any payment
(whether of principal, interest or otherwise) due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) in respect of
any Indebtedness of such Person in an aggregate amount exceeding $1,000,000 or
(ii) permits any holder of such Indebtedness or a trustee to cause) such
Indebtedness, or a portion thereof in an aggregate amount exceeding $1,000,000,
to become due prior to its stated maturity or prior to its regularly scheduled
dates of payment or (y) any such default under clause (x) above (whether or not
continuing) causes or results in such Indebtedness, or a portion thereof in an
aggregate amount exceeding $1,000,000, to become due prior to its stated
maturity or prior to its regularly scheduled dates of payment.
(e) Any representation or warranty herein or in any Loan Document or
in any written statement pursuant thereto or hereto, any report, financial
statement or certificate made or delivered to Agent or any Lender by any
Borrower or any other Loan Party or Subsidiary of Tyco Parent shall be untrue or
incorrect in any material respect as of the date when made or deemed made
(including those made or deemed made pursuant to Section 2.2).
-----------
(f) Assets of any Borrower, any other Loan Party or any Subsidiary
thereof or any other Collateral having an aggregate value for all such assets
and other Collateral in excess of $500,000 shall be attached, seized, levied
upon or subjected to a
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writ, execution, distress warrant or similar process, or come within the
possession of any receiver, trustee, custodian or assignee for the benefit of
creditors of such Person and shall remain unstayed or undismissed for thirty
(30) consecutive days; or any Person other than any Borrower or any other Loan
Party shall apply for the appointment of a receiver, trustee or custodian for
any Borrower's, any other Loan Parties' or any of its Subsidiaries' assets or
any other Collateral having an aggregate value for all such assets and other
Collateral in excess of $500,000 and shall remain unstayed or undismissed for
thirty (30) consecutive days; or any Borrower, any other Loan Party or any
Subsidiary thereof or any other Person which grants or provides Collateral shall
have concealed, removed or permitted to be concealed or removed, any part of its
property, with intent to hinder, delay or defraud its creditors or any of them
or made or suffered a transfer of any of its property or the incurring of an
obligation which may be fraudulent under any bankruptcy, fraudulent conveyance
or other similar law.
(g) A case or proceeding shall have been commenced against any
Borrower, any other Loan Party, any Subsidiary thereof or any other Person which
grants or provides Collateral in a court having competent jurisdiction seeking a
decree or order (i) under Title 11 of the United States Code, as now constituted
or hereafter amended, or any other applicable federal, state or foreign
bankruptcy or other similar law, (ii) appointing a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) of any
Borrower, any other Loan Party, any Subsidiary thereof or any such other Person
or of any substantial part of its properties, or (iii) ordering the winding up
or liquidation of the affairs of any Borrower, any other Loan Party, any
Subsidiary thereof or any such other Person and such case or proceeding shall
remain undismissed or unstayed for sixty (60) consecutive days or such court
shall enter a decree or order granting the relief sought in such case or
proceeding.
(h) Any Borrower, any other Loan Party, any Subsidiary thereof or any
other Person which grants or provides Collateral (i) shall file a petition
seeking relief under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable federal, state or foreign bankruptcy
or other similar law, (ii) shall consent to the institution of proceedings
thereunder or to the filing of any such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of any Borrower, any other Loan Party, any
Subsidiary thereof or any such other Person or of any substantial part of any
Borrower's, any other Loan Parties', any of its Subsidiaries' or any such other
Person's properties, (iii) shall fail generally to pay its debts as such debts
become due, or (iv) shall take any corporate action in furtherance of any such
action.
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<PAGE>
(i) Final judgment or judgments (after the expiration of all times to
appeal therefrom) shall be rendered against any Borrower, any other Loan Party
or any Subsidiary thereof for the payment of money exceeding insurance coverage
therefor by $1,000,000 or more for any such judgment or $3,000,000 or more in
the aggregate for all such judgments against Tyco Parent and its Subsidiaries,
unless the same shall be vacated, stayed, bonded, paid or discharged within a
period of 30 days from the date of such respective judgment (it being understood
that in any event any such judgment is not covered by insurance to the extent of
the applicable deductible therefor or if and to the extent the issuer of the
relevant insurance denies liability therefor).
(j) There shall occur any Material Adverse Effect which shall not have
been cured (or waived by Required Lenders) within ten (10) days of notice
thereof from Agent or the Required Lenders to Borrowers.
(k) Any material provision of any Loan Document shall for any reason
cease to be valid, binding and enforceable in accordance with its terms (other
than by reason of any action of Agent or Lenders or upon the written consent of
all Lenders) or any Borrower or other party thereto shall so state in writing;
or any Lien created under any Collateral Document shall cease to be a valid and
perfected Lien having the first priority in Collateral having a value in excess
of $50,000 purported to be covered thereby (subject to Liens permitted hereby).
(l) There shall occur a Change of Control.
(m) Without limiting the effect of Section 1.3(g) above, there shall
--------------
occur any "Termination Event" under and as defined in the Receivables Funding
Agreement.
(n) An event or condition specified in Section 6.10 hereof shall occur
------------
or exist with respect to any Plan or Multiemployer Plan and, as a result of such
event or condition, together with all other such events or conditions, any
Borrower, any other Loan Party, any Subsidiary thereof or any ERISA Affiliate
shall incur or in the opinion of Required Lenders shall be reasonably likely to
incur a liability (due to be paid within the twenty-four months following the
date of such event or condition) to a Plan, a Multi-employer Plan or PBGC (or
any combination of the foregoing) in excess of $1,000,000 in the aggregate.
(o) There shall occur and be continuing any "Event of Default" (as
defined in the Canadian Credit Agreement) or a "Default" (as defined in the UK
Credit Agreement) or any event, act or condition which, after giving effect to
any grace periods or notice requirements thereunder, permits the requisite
lenders or agent thereunder to accelerate the obligations of the borrower or
borrowers under such Overall Facility or any Indebtedness owing
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under any of the other Overall Facilities shall become due prior to its stated
maturity or prior to its regularly scheduled dates of payment.
SECTION 8.2. Remedies. If any Event of Default shall have occurred and be
--------
continuing, the rate of interest applicable to the Revolving Credit Loan, the
Letter of Credit Obligations and interest and other Obligations shall be
increased to or charged at, as appropriate, effective as of the date of the
occurrence of the Default giving rise to such Event of Default, the Default Rate
as provided in Section 1.6(e) or Annex D, as appropriate, unless such increase
-------------- -------
or charge is waived in writing by the Required Lenders. If any Event of Default
shall have occurred and be continuing, Agent may, or if requested by the
Required Lenders, shall, without notice, take any one or more of the following
actions: (a) terminate the Revolving Credit Commitments, whereupon Lenders'
obligation to make further Revolving Credit Advances shall terminate; (b)
declare all or any portion of the Obligations to be forthwith due and payable,
including the Revolving Credit Loan and any contingent liabilities with respect
to Letter of Credit Obligations, whereupon such Obligations shall become and be
due and payable; (c) require that all Letter of Credit Obligations be fully cash
collateralized in accordance with the terms of Annex G; or (d) exercise any
-------
rights and remedies provided to Agent or Lenders under the Loan Documents and/or
at law or equity, including all remedies provided under the Code; provided, that
--------
upon the occurrence of an Event of Default specified in Section 8.1 (g) or (h),
----------- --- ---
the Revolving Credit Commitments of each of the Lenders shall immediately
terminate and the Obligations shall become immediately due and payable, in each
case, without declaration, notice or demand by or to any Person.
SECTION 8.3. Waivers by Loan Parties. Except as otherwise provided for in
-----------------------
this Agreement and applicable law, to the full extent permitted by applicable
law, each Loan Party waives (a) presentment, demand and protest and notice of
presentment, dishonor, notice of intent to accelerate, notice of acceleration,
protest, default, nonpayment, maturity, release, compromise, settlement,
extension or renewal of any or all Loan Documents, notes, commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
at any time held by Agent or any Lender on which such Loan Party may in any way
be liable, and such Loan Party hereby ratifies and confirms whatever Agent or
any Lender may do in this regard, (b) all rights to notice and a hearing prior
to Agent's or Lenders' taking possession or control of, or to Agent's or
Lenders' replevy, attachment or levy upon, the Collateral or any bond or
security which might be required by any court prior to allowing Agent or Lenders
to exercise any of their remedies, and (c) the benefit of any right of
redemption and all valuation, appraisal and exemption laws. Each Loan Party
acknowledges that it has been advised by counsel of its choice with respect to
this Agreement, the other Loan Documents and the
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transactions contemplated by this Agreement and the other Loan Documents.
SECTION 8.4. Application of Proceeds. After the occurrence of an Event of
-----------------------
Default and acceleration of the Obligations, the proceeds of the Collateral and
of property of Persons other than the Loan Parties securing the Obligations and
collections from the Guaranty shall be applied by Agent to payment of the
Obligations in the following order, unless Lenders otherwise agree in writing or
a court of competent jurisdiction shall otherwise direct:
(i) FIRST, pro rata to each Lender to reimburse such Lender for that
portion of any payments made by it with respect to Letter of Credit
Obligations for which a Lender, as a participant in such Letter of Credit
Obligations, failed to pay its pro rata share thereof as required pursuant
to Section 11 of Annex G hereto;
-------
(ii) SECOND, to payment of all costs and expenses of Agent and
Lenders incurred in connection with the preservation, collection and
enforcement of the Obligations or the Guaranty, or of any of the Liens
granted to Agent pursuant to the Collateral Documents or otherwise,
including, without limitation, any amounts advanced by Agent or Lenders to
protect or preserve the Collateral;
(iii) THIRD, to payment of that portion of the Obligations
constituting accrued and unpaid interest and fees and indemnities payable
under Section 1 hereof and Annexes D and G hereof, ratably amongst Agent
---------------
and Lenders in accordance with the proportion which the accrued interest
and fees and indemnities payable under such Section 1 and Annexes D and G
---------------
constituting the Obligations owing to Agent and each such Lender at such
time bears to the aggregate amount of accrued interest and fees and
indemnities payable under such Section 1 and Annexes D and G constituting
---------------
the Obligations owing to the Agent and all Lenders at such time until such
interest, fees and indemnities shall be paid in full;
(iv) FOURTH, to payment of the principal of the Obligations
(excluding reimbursement obligations with respect to the aggregate amount
of any then outstanding Letter of Credit Obligations), ratably amongst
Lenders in accordance with the proportion which the principal amount of the
Obligations owing to each such Lender (excluding reimbursement obligations
with respect to the aggregate amount of any then outstanding Letter of
Credit Obligations) bears to the aggregate principal amount of the
Obligations (excluding reimbursement obligations with respect to the
aggregate amount of any then outstanding Letter of Credit Obligations)
owing to all Lenders until such principal of the Obligations shall be paid
in full;
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(v) FIFTH, to the extent, with respect to Letter of Credit
Obligations, that the collateral, if any, held by Agent as security for
reimbursement obligations with respect to the Letter of Credit Obligations
is less than the aggregate amount of the Letter of Credit Obligations
outstanding at the time of distribution hereunder, to Agent to be held by
Agent as additional collateral therefor;
(vi) SIXTH, to the payment of all other Obligations, ratably amongst
Lenders in accordance with the proportion which the amount of such other
Obligations owing to each such Lender bears to the aggregate principal
amount of such other Obligations owing to all Lenders until such other
Obligations shall be paid in full; and
(vii) SEVENTH, the balance, if any, after all of the Obligations has
been satisfied, shall, except as otherwise provided in any Loan Document,
be deposited by Agent in an operating account(s) of Borrowers with the
Agent designated by Borrowers or paid over to such other Person or Persons
as may be required by law.
The Loan Parties acknowledge and agree that they shall remain liable
to the extent of any deficiency between the amount of the proceeds of the
Collateral and collections under the Guaranty (to the fullest extent recourse to
such Loan Parties under the Guaranty) and the aggregate amount of the sums
referred to in the first through sixth clauses above.
ARTICLE 9
AGENT
SECTION 9.1. Appointment, Powers and Immunities. Each Lender hereby
----------------------------------
irrevocably appoints and authorizes GE Capital to act as its agent hereunder and
under the other Loan Documents with such powers as are specifically delegated to
Agent by the terms of this Agreement and of the other Loan Documents, together
with such other powers as are reasonably incidental thereto. Agent (which term
as used in this sentence and in Section 9.5 and the first sentence of Section
----------- -------
9.6 hereof shall include reference to its affiliates and its own and its
- ---
affiliates' officers, directors, employees and agents): (a) shall have no duties
or responsibilities except those expressly set forth in this Agreement and in
the other Loan Documents, and shall not by reason of this Agreement or any other
Loan Document be a trustee or fiduciary for any Lender; (b) shall not be
responsible to Lenders for any recitals, statements, representations or
warranties contained in this Agreement or in any other Loan Document, or in any
certificate or other document referred to or provided for in, or received by any
of them under, this Agreement or any other Loan Document, or for the value,
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validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document or any other document referred to or
provided for herein or therein or for any failure by a Borrower or any other
Person to perform any of its obligations hereunder or thereunder; (c) shall not
be required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Loan Document; (d) shall not be responsible to
Lenders for any action taken or omitted to be taken by it hereunder or under any
other Loan Document or under any other document or instrument referred to or
provided for herein or therein or in connection herewith or therewith, except
for its own gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction. Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it in good faith. Agent may
deem and treat the payee of any Revolving Credit Note as the holder thereof for
all purposes hereof unless and until a notice of the assignment or transfer
thereof shall have been filed with Agent.
SECTION 9.2. Reliance by Agent. Agent shall be entitled to rely upon any
-----------------
certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent. As to any matters not
expressly provided for by this Agreement or any other Loan Document, Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder or thereunder in accordance with instructions given by Required
Lenders or all of Lenders as is required in such circumstance, and such
instructions of such Lenders and any action taken or failure to act pursuant
thereto shall be binding on all Lenders.
SECTION 9.3. Defaults. Agent shall not be deemed to have knowledge or
--------
notice of the occurrence of a Default (other than the non-payment of principal
of or interest on the Revolving Credit Loan or of Fees) unless Agent has
received notice from a Lender or Borrower specifying such Default and stating
that such notice is a "Notice of Default". In the event that Agent receives
-----------------
such a notice of the occurrence of a Default, Agent shall give prompt notice
thereof to Lenders (and shall give each Lender prompt notice of each such non-
payment). Agent shall (subject to Section 9.7) take such action with respect to
-----------
such Default as shall be directed by Required Lenders; provided, that unless and
--------
until Agent shall have received such directions, Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interest of Lenders
except to the extent that this Agreement expressly requires that such action be
taken, or not be taken, only
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with the consent or upon the authorization of Required Lenders or all of Lenders
as is required in such circumstance.
SECTION 9.4. Rights as a Lender. With respect to its Revolving Credit
------------------
Commitment and all Revolving Credit Advances made by GE Capital (and any
successor acting as Agent), it shall have the same rights and powers hereunder
as any other Lender and may exercise the same as though it were not acting as
Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include Agent in its individual capacity. GE Capital (and any
successor acting as Agent) and its affiliates may (without having to account
therefor to any Lender) lend money to, make investments in and generally engage
in any kind of business with any Borrower or any other Loan Party (and any of
its Subsidiaries or Affiliates) as if it were not acting as Agent, and GE
Capital and its Affiliates may accept fees and other consideration from any
Borrower or any other Loan Party or Affiliate thereof for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
SECTION 9.5. Indemnification. Lenders agree to indemnify Agent (to the
---------------
extent not reimbursed by Borrowers hereunder and without limiting the
obligations of Borrowers hereunder) ratably in accordance with the aggregate
principal amount of the Revolving Credit Advances held by Lenders (or, if no
Revolving Credit Advances are at the time outstanding, ratably in accordance
with their respective Revolving Credit Commitments), for any and all Claims of
any kind and nature whatsoever that may be imposed on, incurred by or asserted
against Agent (including by any Lender) arising out of or by reason of any
investigation in or in any way relating to or arising out of this Agreement or
any other Loan Document or any other documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby (including
the costs and expenses that any Borrower is obligated to pay hereunder) or the
enforcement of any of the terms hereof or thereof or of any such other
documents; provided, that no Lender shall be liable for any of the foregoing to
--------
the extent they arise solely from the gross negligence or willful misconduct of
the party to be indemnified as determined by a final judgment of a court of
competent jurisdiction.
SECTION 9.6. Non-Reliance on Agent and Other Lenders. Each Lender agrees
---------------------------------------
that it has, independently and without reliance on Agent or any other Lender,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of Borrowers, the other Loan Parties and any Subsidiary
thereof and decision to enter into this Agreement and that it will,
independently and without reliance upon Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under this Agreement or any of the other Loan Documents. Agent shall not be
required to
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keep itself informed as to the performance or observance by Borrowers, any other
Loan Parties or any of their Subsidiaries of this Agreement or any of the other
Loan Documents or any other document referred to or provided for herein or
therein or to inspect the properties or books of Borrowers, any other Loan
Parties or any of their Subsidiaries. Agent will use reasonable efforts to
provide Lenders with any information received by Agent from any Borrowers which
is required to be provided to Lenders hereunder, with any notice of a Default
received by Agent from any Borrower and with any notice of a Default delivered
by Agent to any Borrower; provided, that Agent shall not be liable to any Lender
--------
for any failure to do so, except to the extent that such failure is attributable
to Agent's gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction. Agent shall not have any duty or
responsibility to provide any Lender with any other credit or other information
concerning the affairs, financial condition or business of any Borrower or any
other Loan Party (or any of their affiliates) that may come into the possession
of Agent or any of its affiliates nor to update or correct any information
previously given which becomes incorrect or which Agent learns is incorrect.
SECTION 9.7. Failure to Act. Except for action expressly required of
--------------
Agent hereunder and under the other Loan Documents, Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 9.5 hereof against any and all
-----------
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
SECTION 9.8. Successor Agent. Subject to and effective upon the
---------------
appointment and acceptance of a successor Agent as provided below, Agent may
resign at any time by giving notice thereof to Lenders and Borrowers, and the
Required Lenders may, at any time when GE Capital's pro rata share of the
--- ----
aggregate of the Revolving Credit Commitments of all Lenders at such time (or,
if the Commitment Termination Date has occurred, in lieu of the Revolving Credit
Commitments, the Revolving Credit Loan then outstanding in respect of the
Revolving Credit Commitment) equals less than fifty percent (50%), remove the
Agent by written notice to that effect, with the written consent of Borrowers
(which consent shall not unreasonably be withheld). Upon any such resignation
or removal, the Required Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Lenders and shall have accepted such appointment within thirty (30) days after
the retiring Agent's giving of notice of resignation or receipt of notice of
removal, then the retiring Agent may, on behalf of Lenders, appoint a successor
Agent, that shall be a financial institution with a combined capital and surplus
or net worth of at least $200,000,000. Upon the acceptance of any appointment
as Agent hereunder by a successor Agent, such
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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 hereunder. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Article
-------
9 shall continue in effect for its benefit in respect of any actions taken or
- -
omitted to be taken by it while it was acting as Agent.
SECTION 9.9. Consents under Loan Documents. Except as otherwise provided
-----------------------------
in Section 11.1 with respect to this Agreement, Agent may, with the prior
------------
consent of Required Lenders (but not otherwise), consent to any modification,
supplement or waiver under any of the Loan Documents; provided, that without the
--------
prior consent of each Lender, Agent shall not (except as provided herein or in
the Collateral Documents) release any material portion of the Collateral or
otherwise terminate any Lien under any Collateral Document with respect to any
material portion of the Collateral, or agree to additional obligations being
secured by such Collateral, except that no such consent shall be required, and
Agent is hereby authorized and instructed, to release any Lien covering
Collateral (a) which is the subject of a disposition permitted hereunder, (b)
which secures Indebtedness to the extent permitted under Section 6.3, (c) to
-----------
which Required Lenders have consented (except as otherwise provided in Section
-------
11.1), or (d) the value of which does not exceed $1,000,000 in any Fiscal Year.
- ----
SECTION 9.10. Collateral Matters.
------------------
(a) Except as otherwise expressly provided for in this Agreement,
Agent shall have no obligation whatsoever to any Lender or any other Person to
investigate, confirm or assure that the Collateral exists or is owned by any
Borrower or other Loan Party or is cared for, protected or insured or has been
encumbered, or that any particular items of Collateral meet the eligibility
criteria applicable in respect of the relevant Borrowing Base, or whether any
particular reserves are appropriate, 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 at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent in this Agreement or in any
of the other Loan Documents, it being understood and agreed that (i) 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 a Lender and (ii) that Agent shall have no duty or
liability whatsoever to any other Lender, other than liability solely resulting
from its own gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction.
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(b) Each Lender hereby appoints each other Lender as agent for the
purpose of perfecting Lenders' security interest in assets which, in accordance
with Article 9 of the Code, can be perfected only by possession. Should any
Lender (other than Agent) obtain possession of any such Collateral, such Lender
shall notify Agent thereof and, promptly upon Agent's request therefor, shall
deliver such Collateral to Agent or in accordance with Agent's instructions.
ARTICLE 10
SUCCESSORS AND ASSIGNS
SECTION 10.1. Successors and Assigns. This Agreement and the other Loan
----------------------
Documents shall be binding on and shall inure to the benefit of the Loan
Parties, Agent, Lenders, and their respective successors and assigns, except as
otherwise provided herein or therein. No Loan Party may assign, delegate,
transfer, hypothecate or otherwise convey its rights, benefits, obligations or
duties hereunder or under any of the Loan Documents without the prior express
written consent of Agent and all Lenders. Any such purported assignment,
transfer, hypothecation or other conveyance by any Loan Party without such prior
express written consent shall be void. The terms and provisions of this
Agreement and the other Loan Documents are for the purpose of defining the
relative rights and obligations of the Loan Parties, Agent and Lenders with
respect to the transactions contemplated hereby and there shall be no third
party beneficiaries of any of the terms and provisions of this Agreement or any
of the other Loan Documents.
SECTION 10.2. Assignments and Participations.
------------------------------
(a) Each Lender may, with the prior written consent of Agent, resell
(through syndication, assignment or a participation) all or a portion of its
rights and obligations under this Agreement (including all or a part of its
Revolving Credit Advances, Revolving Credit Commitment and Revolving Credit
Note), in minimum increments of $5,000,000, to any other Person. Any assignment
by a Lender of all or a portion of its rights and obligations under this
Agreement to a Person which is not an Affiliate of such Lender or another Lender
shall require the consent of Borrowers as to the identity of such assignee (but
not as to the terms of any such assignment), which consent shall not be
unreasonably withheld or delayed. No consent of Borrowers shall in any event be
required with respect to a participation.
(b) In the case of an assignment by any Lender under this Section
-------
10.2, the purchaser shall have, to the extent of such assignment, the same
- ----
rights, benefits and obligations as it would if it were a Lender hereunder;
provided, that each such assignment shall be of a constant, and not a varying,
- --------
percentage of the
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selling Lender's rights and obligations under this Agreement. Upon execution by
the assignor and the assignee of an instrument pursuant to which the assignee
assumes such rights and obligations, payment by such assignee to such assignor
of an amount equal to the purchase price agreed between such assignor and
assignee and delivery to Agent and Borrowers of an executed copy of such
instrument together with payment to Agent of a processing fee of $2,500, such
assignee shall have, to the extent of such assignment (unless otherwise provided
therein), the same rights and benefits as it would have if it were a Lender
hereunder and the assignor shall be, to the extent of such assignment (unless
otherwise provided therein) released from its obligations under this Agreement.
Each Loan Party hereby acknowledges and agrees that any assignment will give
rise to a direct obligation of such Loan Party to the assignee and that the
assignee shall be considered to be a "Lender" hereunder and under the other Loan
Documents. In all instances, each Lender's liability to make Revolving Credit
Advances shall be several and not joint and shall be limited to such Lender's
pro rata share thereof. Upon any such assignment, each Borrower, at its own
- --- ----
expense, shall execute and deliver to Agent in exchange for the surrendered
Revolving Credit Note of the assignor Lender a new Revolving Credit Note to the
order of the assignor Lender in an amount equal to the Revolving Credit
Commitment assumed by such assignee Lender, and if the assignor Lender has
retained a Revolving Credit Commitment hereunder, a new Revolving Credit Note to
the order of the assignor Lender in an amount equal to such retained Revolving
Credit Commitment. Such new Revolving Credit Notes shall be dated the Closing
Date and shall otherwise be in the form of the Revolving Credit Note replaced
thereby. The Revolving Credit Notes surrendered to Agent shall be returned by
Agent to the appropriate Borrower marked "canceled".
(c) In the case of a participation by any Lender under this Section
-------
10.2, (A) all amounts payable by any Borrower hereunder shall be determined as
- ----
if that Lender had not sold such participation and the participating Lender
shall remain a "Lender" for all purposes under this Agreement, (B) any such
grant of a participation will be made in compliance with all applicable state or
federal laws, rules, and regulations, and (C) such Lender shall not grant any
participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or the Loan Documents, except to the
extent such amendment or waiver would (i) extend the final maturity date for
payment of the Revolving Credit Loan; (ii) reduce the interest rate or the
amount of principal or Fees applicable to the Revolving Credit Loan; or (iii)
release all or substantially all of the Collateral, except as expressly provided
herein. In those cases in which a Lender grants rights to its participants to
approve any amendment to or waiver of this Agreement or the other Loan Documents
respecting the matters described in the foregoing clauses (i) through (iii), the
relevant participation agreements shall provide for a voting mechanism
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whereby a majority of the amount of the participating Lender's portion of the
Revolving Credit Loan (irrespective of whether held by such Lender or
participated), shall control the vote for all of such Lender's portion of the
Revolving Credit Loan. In the case of any participation, the participant shall
not have any rights under this Agreement or any of the other Loan Documents
entered into in connection herewith (the participant's right against such Lender
in respect of such participation to be those set forth in the participation or
other agreement executed by such Lender and the participant relating thereto)
and all amounts payable to any Lender hereunder shall be determined as if such
Lender had not sold such participation.
(d) Except as otherwise provided in this Section 10.2 no Lender shall,
------------
as between any Borrower or other Loan Party and that Lender, be relieved of any
of its obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the
Revolving Credit Loan or other Obligations owed to such Lender. Any Lender
permitted to sell assignments and participations under this Section 10.2 may
------------
furnish any information concerning any Borrower or other Loan Party and its
Subsidiaries in the possession of that Lender from time to time to assignees and
participants (including prospective assignees and participants), subject to the
provisions of Section 11.13 hereof.
-------------
(e) Each Borrower and other Loan Party shall assist any Lender
permitted to sell assignments or participations under this Section 10.2 in
------------
whatever manner necessary in order to enable or effect any such assignment or
participation, including the execution and delivery of any and all agreements,
notes and other documents and instruments as shall be requested and the
preparation and delivery of informational materials, appraisals or other
documents for, and the participation of relevant management in meetings with,
potential assignees or participants, subject to the provisions of Section 11.13
-------------
hereof. Each Borrower and other Loan Party shall certify the correctness,
completeness and accuracy of all descriptions of any Borrower or other Loan
Party or any of its Subsidiaries and its affairs contained in any selling
materials and all information provided by it and included in such materials.
(f) Each Lender which grants or sells a participation in all or any
part of its interest in this Agreement, any other Loan Document or any of the
financial accommodations provided or to be provided by it hereunder to any
Person shall promptly notify Borrowers thereof; provided that the failure of
--------
such Lender to do so shall not affect the validity of such grant or sale of a
participation interest.
(g) Each Lender agrees that if such Lender shall intend to assign or
grant a participation in all or any part of its interest in this Agreement, any
other Loan Document or any of the
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financial accommodations provided or to be provided by it hereunder to any bank
or other entity which is organized under the laws of a jurisdiction outside of
the United States or any Commonwealth thereof (a "Foreign Lending Entity"), such
----------------------
Lender, as a condition to the effectiveness of such assignment or participation,
shall request that such Foreign Lending Entity provide to Borrowers and Agent on
or prior to the consummation of such assignment or participation a properly
completed and executed Internal Revenue Service Form 4224 or Form 1001 or other
applicable form, certificate or document prescribed by the Internal Revenue
Service of the United States certifying as to such Foreign Lending Entity's
entitlement to exemption from United States withholding tax or a zero rate of
withholding under an applicable statute or tax treaty with respect to its
interest in the credit facility herein provided. In the event that such Foreign
Lending Entity is unable to deliver such form, certificate or document at or
prior to the consummation of such assignment or participation, such assignment
or participation shall not be permitted.
ARTICLE 11
MISCELLANEOUS
SECTION 11.1. Complete Agreement; Modification of Agreement. This
---------------------------------------------
Agreement and the other Loan Documents constitute the complete agreement between
the parties with respect to the subject matter hereof and thereof and supersede
all prior agreements, commitments, understandings or inducements (oral or
written, expressed or implied). Neither this Agreement nor any other Loan
Document nor any terms hereof or thereof may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination is in writing
signed by Required Lenders and the Loan Party or Loan Parties which are party
thereto; provided, that no such change, waiver, discharge or termination shall,
--------
without the consent of each affected Lender and Agent, (a) extend the scheduled
final maturity of the Revolving Credit Loan, or any portion thereof, or reduce
the rate or extend the time of payment of interest (other than as a result of
waiving the applicability of any post-Default increase in interest rates)
thereon or Fees, or reduce the principal amount thereof, or increase the
Revolving Credit Commitment of such Lender over the amount thereof then in
effect (it being understood that a waiver of any Default shall not constitute a
change in the terms of any Revolving Credit Commitment of any Lender), (b)
release more than $10,000,000 in value of the Collateral (except as expressly
permitted by the Loan Documents), (c) amend, modify or waive any provision of
this Section, or Section 1.11, 9.5, 11.2 or 11.7, (d) reduce any percentage
------------ --- ---- ----
specified in, or otherwise modify, the definition of Required Lenders, or (e)
consent to the assignment or transfer by any Borrower or other Loan Party of any
of its rights and obligations under this Agreement. No provision of Article 9
---------
may be amended without the prior written consent of Agent.
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SECTION 11.2. Fees and Expenses.
-----------------
(a) Tyco Parent and each Borrower shall, jointly and severally, pay on
demand all reasonable out-of-pocket costs and expenses (including reasonable
fees of counsel) of Agent, GE Capital and its Affiliates in connection with the
preparation, negotiation, approval, execution, delivery, administration,
modification, amendment, waiver and enforcement (whether through negotiations,
legal proceedings or otherwise) of the Loan Documents, and commitments relating
thereto, and the other documents to be delivered hereunder or thereunder and the
transactions contemplated hereby and thereby and the fulfillment or attempted
fulfillment of conditions precedent hereunder, including: (i) wire transfer
fees and other costs of forwarding to any Borrower or any other Person on behalf
of any Borrower by Agent and each Lender of the proceeds of the Revolving Credit
Advances; (ii) any amendment, modification or waiver of, or consent with respect
to, any of the Loan Documents or advice in connection with the administration of
the advances made pursuant hereto or its rights hereunder or thereunder; (iii)
any litigation, contest, dispute, suit, proceeding or action (whether instituted
by Agent, any Lender, any Borrower or any other Person) in any way relating to
the Collateral, any of the Loan Documents or any other agreements to be executed
or delivered in connection therewith or herewith, whether as party, witness, or
otherwise, including any litigation, contest, dispute, suit, case, proceeding or
action, and any appeal or review thereof, in connection with a case commenced by
or against any Borrower or any other Person that may be obligated to Agent and
Lenders by virtue of the Loan Documents, including any litigation, contest,
dispute, suit, case, proceeding or action (and any appeal or review) in
connection with a case under title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable Federal, state or
foreign bankruptcy or similar insolvency law; (iv) any attempt to enforce any
rights of Agent or Lenders against any Borrower or any other Person that may be
obligated to Agent or Lenders by virtue of any of the Loan Documents; or (v) any
effort to (A) monitor the Revolving Credit Loan and the Loan Documents, (B)
evaluate, observe or assess any Borrower or any other Loan Party or its affairs,
or (C) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or
otherwise dispose of the Collateral, subject to the limitations on the
obligations of Borrowers to pay for audits as provided in clause (c) of the
first sentence of Section 1.18.
------------
(b) Tyco Parent and each Borrower shall, jointly and severally, pay on
demand all reasonable out-of-pocket costs and expenses (including reasonable
fees of counsel) of Agent and each Lender in connection with any Default and any
enforcement or collection proceedings resulting therefrom or any amendment,
modification or waiver of, or consent with respect to, any of the Loan Documents
in connection with any Default.
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(c) Without limiting the generality of clauses (a) and (b) above (but
subject to the limitations on the obligations of Borrowers to pay for audits as
provided in clause (c) of the first sentence of Section 1.18), Tyco Parent's and
------------
each Borrower's obligation to reimburse Agent and/or any Lender for costs and
expenses shall include the reasonable fees and expenses of counsel (and local,
foreign or special counsel, advisors, consultants and auditors retained by such
counsel), as well as the fees and expenses of accountants, environmental
advisors, field examiners, appraisers, investment bankers, rating agencies,
management and other consultants and paralegals; court costs and expenses;
photocopying and duplicating expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telegram charges;
secretarial overtime charges; expenses for travel, lodging and food; and all
other reasonable out-of-pocket costs and expenses of every type and nature paid
or incurred in connection with the performance of such legal or other advisory
services.
SECTION 11.3. No Waiver. (a) No failure on the part of Agent or Lenders,
---------
at any time or times, to require strict performance by any Borrower or other
Loan Party, of any provision of this Agreement and any of the other Loan
Documents shall waive, affect or diminish any right of Agent or Lenders
thereafter to demand strict compliance and performance therewith. Any
suspension or waiver of a Default shall not suspend, waive or affect any other
Default whether the same is prior or subsequent thereto and whether of the same
or of a different type. None of the undertakings, agreements, warranties,
covenants and representations of any Borrower or other Loan Party contained in
this Agreement or any of the other Loan Documents and no Default by any Borrower
or other Loan Party shall be deemed to have been suspended or waived by Lenders,
unless such waiver or suspension is by an instrument in writing signed by an
officer of or other authorized employee of Agent and Required Lenders or all of
Lenders if required hereunder and directed to such Borrower or other Loan Party
specifying such suspension or waiver.
(b) No failure on the part of any Loan Party, at any time or times, to
require strict performance by any Lender or Agent, of any provision of this
Agreement and any of the other Loan Documents shall waive, affect or diminish
any right of such Loan Party thereafter to demand strict compliance and
performance therewith.
SECTION 11.4. Remedies. The rights and remedies of Agent and Lenders
--------
under this Agreement shall be cumulative and nonexclusive of any other rights
and remedies which Agent or any Lender may have under any other agreement,
including the Loan Documents, by operation of law or otherwise. Recourse to the
Collateral shall not be required.
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<PAGE>
SECTION 11.5. Severability. Wherever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
SECTION 11.6. Conflict of Terms. Except as otherwise provided in this
-----------------
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in any of the
other Loan Documents, the provisions contained in this Agreement shall govern
and control.
SECTION 11.7. Right of Set-off. Subject to Section 1.2 and 1.14, upon the
---------------- ----------- ----
occurrence and during the continuance of any Event of Default, each Lender is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to setoff and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Lender to or for the credit or the account of any
Borrower or other Loan Party against any and all of the Obligations now or
hereafter existing irrespective of whether or not such Lender shall have made
any demand under this Agreement or any other Loan Document and although such
Obligations may be unmatured. Each Lender agrees promptly to notify Agent and
Borrowers after any such setoff and application made by such Lender; provided,
--------
that the failure to give such notice shall not affect the validity of such
setoff and application. The rights of each Lender under this Section are in
addition to the other rights and remedies (including other rights of setoff)
which such Lender may have.
SECTION 11.8. Authorized Signature. Until Agent shall be notified by any
--------------------
Borrower to the contrary, the signature upon any document or instrument
delivered by such Borrower pursuant hereto and believed by Agent or any of
Agent's officers, agents, or employees to be that of an officer or duly
authorized representative of such Borrower listed in Schedule 11.8 shall bind
-------------
Borrowers and be deemed to be the act of such Borrower affixed pursuant to and
in accordance with resolutions duly adopted by such Borrower's Board of
Directors, and Agent and each Lender shall be entitled to assume the authority
of each signature and authority of the Person whose signature it is or appears
to be unless the Person acting in reliance on such signature shall have actual
knowledge of the fact that such signature is false or the Person whose signature
or purported signature is presented is without authority.
-84-
<PAGE>
SECTION 11.9. Notices. Except as otherwise provided herein, whenever it
-------
is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon
either of the parties by the other party, or whenever either of the parties
desires to give or serve upon the other party any communication with respect to
this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be deemed to
have been validly served, given or delivered (a) upon the earlier of actual
receipt and three (3) days after deposit in the United States Mail, registered
or certified mail, return receipt requested, with proper postage prepaid, (b)
upon transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
-------
11.9), (c) one Business Day after deposit with a reputable overnight courier
- ----
with all charges prepaid, or (d) when delivered, if hand-delivered by messenger,
all of which shall be addressed to the party to be notified and sent to the
address or facsimile number indicated below or to such other address (or
facsimile number) as may be substituted by notice given as herein provided. The
giving of any notice required hereunder may be waived in writing by the party
entitled to receive such notice. Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other communication
to any Person (other than Borrowers, Tyco Parent, Agent or any Lender)
designated below to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration
or other communication.
(a) If to Agent, as a Lender or as Agent, at:
General Electric Capital Corporation
501 Merritt Seven
Norwalk, Connecticut 06851
Attention: Vice President-Portfolio/Tyco
Telecopy No.: (203) 840-4680
with a copy to:
General Electric Capital Corporation
501 Merritt Seven, Third Floor
Norwalk, Connecticut 06851
Attention: Legal Counsel/Tyco
Telecopy No.: (203) 840-4520
and
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<PAGE>
Kaye, Scholer, Fierman, Hays & Handler
425 Park Avenue
New York, New York 10022
Attention: Robert Finley, Esq.
Telecopy No.: (212) 836-8689
(b) if to any Borrower or any other Loan Party, at:
6000 Midlantic Drive
Mt. Laurel, New Jersey 08054
Attention: Treasurer or Chief Financial Officer
Telecopy No.: (609) 273-2885
with a copy to:
Tyco Toys, Inc.
6000 Midlantic Drive
Mt. Laurel, New Jersey 08054
Attention: General Counsel
Telecopy No.: (609) 273-2885
SECTION 11.10. Section Titles. The Section titles and Table of Contents
--------------
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of this Agreement.
SECTION 11.11. Counterparts. This Agreement may be executed in any number
------------
of separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
SECTION 11.12. Time of the Essence. Time is of the essence of this
-------------------
Agreement and each of the other Loan Documents.
SECTION 11.13. Confidentiality.
---------------
(a) Each Borrower and other Loan Party agrees that it shall not (and
shall not permit any of its Subsidiaries to) issue any news release or make any
public announcement pertaining to the transactions contemplated by the Loan
Documents without the prior written consent of Agent (which consent shall not be
unreasonably withheld) unless such news release or public announcement is
required by law, in which case Tyco Parent or Borrowers shall consult with Agent
prior to the issuance of any such news release or public announcement.
(b) Tyco Parent and Borrowers have furnished and will furnish to Agent
and Lenders certain information concerning the Loan Parties and its Subsidiaries
which Tyco Parent and Borrowers have advised is non-public, proprietary or
confidential in nature ("Confidential Information"). Agent and each Lender
------------------------
confirms to Tyco Parent and each Borrower, for itself, that it is Agent's and
such Lender's policy and practice to maintain in confidence all
-86-
<PAGE>
Confidential Information which is provided to it under agreements providing for
the extension of credit and which is identified to it as such, and that it will
protect the confidentiality of Confidential Information submitted to it with
respect to any Loan Party and any of its Subsidiaries under this Agreement,
commensurate with its efforts to maintain the confidentiality of its own
Confidential Information, provided, however, that (i) nothing contained herein
-------- -------
shall prevent Agent or any Lender from disclosing Confidential Information (A)
to its Affiliates, Redwood and their respective directors, officers and
employees and to any legal counsel, auditors, appraisers, consultants or other
persons retained by it or its Affiliates as professional advisors, on the
condition that such information not be further disclosed except in compliance
with this Section 11.13(b); (B) under color of legal authority, including,
----------------
without limitation, to any regulatory authority having jurisdiction over it or
its operations or to or under the authority of any court deemed by it to be of
competent jurisdiction; (C) to any actual or potential assignee of or
participant in a Lender's rights and obligations under this Agreement pursuant
to Section 10.2 hereof to the extent such actual or potential assignee or
------------
participant has agreed to maintain such information in confidence on the basis
set forth in this Section 11.13(b); and (D) as necessary in connection with the
----------------
exercise of its remedies under this Agreement or any of the other Loan
Documents; (ii) the terms of this Section 11.13(b) shall be inapplicable to any
----------------
information furnished to it which is in its possession prior to the delivery to
it of such information by any Borrower, other Loan Party or any of its
Subsidiaries, or otherwise has been obtained by it on a non-confidential basis,
or which was or becomes available to the public or otherwise part of the public
domain (other than as a result of Agent's or such Lender's failure or any
prospective participant's or assignee's failure to abide hereby), or which was
not non-public, proprietary or confidential when any Borrower, other Loan Party
or any of its Subsidiaries delivered it to Agent or any Lender; and (iii) the
determination by Agent or any Lender as to the application of any of the
circumstances described in the foregoing clauses (i) and (ii) will be conclusive
and binding if made in good faith.
(c) Notwithstanding paragraph (b) above, each Borrower and Loan Party
consents to Agent publishing a tombstone or similar advertising material
relating to the financing transaction contemplated by this Agreement.
SECTION 11.14. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
-------------
ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. EACH BORROWER AND OTHER LOAN PARTY HEREBY CONSENTS AND
-87-
<PAGE>
AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, NEW YORK
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS;
PROVIDED, THAT EACH LENDER, BORROWER AND OTHER LOAN PARTY ACKNOWLEDGES THAT ANY
- --------
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW
YORK COUNTY, NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT
--------------------
SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT OR ANY LENDER FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS,
TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT OR ANY LENDER. EACH
BORROWER AND OTHER LOAN PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH
BORROWER AND OTHER LOAN PARTY HEREBY WAIVES ANY OBJECTION WHICH SUCH PERSON MAY
HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
----- ---
CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF
- ----------
AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH BORROWER AND OTHER LOAN PARTY
HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS
ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS,
COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO SUCH PERSON AT THE ADDRESS SET FORTH IN SECTION 11.9 OF THIS
------------
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON SUCH PERSON'S
ACTUAL RECEIPT THEREOF.
SECTION 11.15. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
--------------------
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN
CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
-88-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
TYCO DISTRIBUTION CORP.
By: /s/ R. Michael Kennedy, Jr.
---------------------------
Name: R. Michael Kennedy, Jr.
Title: Senior Vice President
TYCO MANUFACTURING CORP.
By: /s/ R. Michael Kennedy, Jr.
----------------------------
Name: R. Michael Kennedy, Jr.
Title: Senior Vice President
TYCO TOYS, INC.
By: /s/ R. Michael Kennedy, Jr.
----------------------------
Name: R. Michael Kennedy, Jr.
Title: Senior Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By: /s/ Peggy Erlenkotter
----------------------------
Name: Peggy Erlenkotter
Title: Duly Authorized Signatory
Lenders:
-------
Revolving Credit Commitment: GENERAL ELECTRIC CAPITAL
- --------------------------- CORPORATION
$35,000,000
By: /s/ Peggy Erlenkotter
----------------------------
Name: Peggy Erlenkotter
Title: Duly Authorized Signatory
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<PAGE>
Annex A to
Credit Agreement
----------------
DEFINITIONS; RULES OF CONSTRUCTION
----------------------------------
1. Definitions. Capitalized terms used in this Agreement and the other
-----------
Loan Documents shall have (unless otherwise provided elsewhere in this Agreement
and the other Loan Documents) the following respective meanings:
"Accounts" shall mean all "accounts," as such term is defined in the
--------
Code, now owned or hereafter acquired by any Borrower, any other Loan Party or
any Subsidiary thereof and, in any event, including: (a) all accounts
receivable, other receivables, book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper, Documents or Instruments)
now owned or hereafter received or acquired by or belonging or owing to any
Borrower, any other Loan Party or any Subsidiary thereof, whether arising out of
goods sold or services rendered by it or from any other transaction (including
any such obligations which may be characterized as an account or contract right
under the Code); (b) all of any Borrower's, any other Loan Party's or any of its
Subsidiaries' rights in, to and under all purchase orders or receipts now owned
or hereafter acquired by it for goods or services; (c) all of any Borrower's,
any other Loan Party's or any of its Subsidiaries' rights to any goods
represented by any of the foregoing (including unpaid sellers' rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods); (d) all monies due or to become due
to any Borrower, any other Loan Party or any Subsidiary thereof under all
purchase orders and contracts for the sale or lease of goods or the performance
of services or both by such Borrower or other Loan Party or Subsidiary or in
connection with any other transaction (whether or not yet earned by performance
on the part of such Borrower or other Loan Party or Subsidiary) now or hereafter
in existence, including, without limitation, the right to receive the proceeds
of said purchase orders and contracts; and (e) all collateral security and
guarantees of any kind, now or hereafter in existence, given by any Person with
respect to any of the foregoing.
"Additional Loan Party" shall mean each Person that becomes a direct
---------------------
or indirect Subsidiary of Tyco Parent after the Closing Date.
"Adjusted LIBOR Rate" shall mean, with respect to each Interest Period
-------------------
for a Fixed Rate Tranche, the rate obtained by dividing (i) the LIBOR Rate for
such Interest Period by (ii) a percentage equal to 1 minus the stated maximum
rate (stated as a decimal) of all reserves then required to be maintained
against "Eurocurrency liabilities" as specified in Regulation D (or
A-1
<PAGE>
against any other category of liabilities which includes deposits by reference
to which the interest rate on a Fixed Rate Tranche is determined or any category
of extensions of credit or other assets which includes loans by a non-United
States office of any Lender to United States residents).
"Advance Date" shall have the meaning assigned to it in Section 1.13.
------------ ------------
"Affiliate" shall mean, with respect to any Person, (a) each Person
---------
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, ten percent (10%) or more of the Stock
having ordinary voting power in the election of directors of such Person, (b)
each Person that controls, is controlled by or is under common control with such
Person or any Affiliate of such Person, or (c) each of such Person's officers,
directors, joint ventures and partners. For the purpose of this definition,
"control" of a Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" shall have the meaning assigned to it in the first paragraph
-----
of this Agreement.
"Agreement" shall mean the Credit Agreement to which this Annex A is
--------- -------
attached and of which it forms a part, including all Annexes, Schedules, and
Exhibits attached or otherwise identified thereto, all restatements,
modifications and supplements hereof or hereto, and any appendices, attachments,
exhibits or schedules to any of the foregoing, and shall refer to this Agreement
as the same may be in effect at the time such reference becomes operative;
provided, that any reference to the Schedules to this Agreement shall be deemed
- --------
a reference to the Schedules as in effect as of the Closing Date, unless
otherwise provided in a written amendment thereto.
"Applicable Margin" shall mean (a) with respect to interest based upon
-----------------
the Index Rate, one and one-quarter percent (1.25%) per annum and (b) with
respect to interest based upon the Adjusted LIBOR Rate, two and one-half percent
(2.50%) per annum.
"Blocked Account" shall have the meaning assigned to it in Annex B.
--------------- -------
"Blocked Account Agreement" shall have the meaning assigned to it in
-------------------------
Annex B.
- -------
"Borrower" and "Borrowers" shall have the meanings provided in the
-------- ---------
first paragraph of this Agreement.
A-2
<PAGE>
"Borrowing Availability" shall mean, at any time with respect to any
----------------------
Borrower, the Borrowing Base of such Borrower, less all outstanding Letter of
Credit Obligations of such Borrower.
"Borrowing Base" shall mean, at any time with respect to any Borrower:
--------------
(a) up to sixty percent (60%) of Eligible Inventory of such Borrower, valued on
a first-in, first-out basis (at the lower of cost or market), minus (b) the
-----
amount of any reserves as Agent may deem necessary or appropriate from time to
time in its sole discretion exercised in good faith.
"Borrowing Base Certificate" shall mean a certificate in the form
--------------------------
attached hereto as Exhibit 1.1(e).
--------------
"Business Day" shall mean any day that is not (i) a Saturday, a Sunday
------------
or a day on which banks are required or permitted to be closed in the Stated of
New York, or (ii) a day on which Agent is not open for business.
"Canadian Credit Agreement" shall mean the Credit Agreement, dated as
-------------------------
of the date hereof, among Tyco Toys (Canada) Inc., the lenders party thereto
from time to time and General Electric Capital Canada Inc., as agent, as
amended, modified or supplemented from time to time in accordance with the terms
thereof.
"Canadian Guaranty" shall mean the guaranty, substantially in the form
-----------------
of Exhibit A-2 hereto, to be executed by Tyco Toys (Canada) Inc. in favor of
-----------
Agent, for the ratable benefit of Lenders, to secure all or a portion of the
Obligations owing by Industries and Tyco Parent, including all amendments,
modifications and supplements thereto, and shall refer to the Canadian Guaranty
as the same may be in effect at the time such reference becomes operative.
"Capital Lease" shall mean any lease of any property (whether real,
-------------
personal or mixed) by any Person as lessee that, in accordance with GAAP, either
would be required to be classified and accounted for as a capital lease on a
balance sheet of such Person or otherwise be disclosed as such in a note to such
balance sheet.
"Capital Lease Obligation" shall mean, as of any date, the amount of
------------------------
the obligation of the lessee under a Capital Lease that, in accordance with
GAAP, would appear on a balance sheet of such lessee in respect of such Capital
Lease or otherwise be disclosed as such in a note to such balance sheet.
"Cash Collateral Account" shall have the meaning assigned to it in
-----------------------
Annex G.
- -------
A-3
<PAGE>
"Cash Equivalents" shall mean: (1) with respect to Tyco Parent and
----------------
its Subsidiaries (other than the Subsidiaries of Tyco Parent which are organized
under the laws of Canada, the United Kingdom or any political subdivision
thereof) (a) securities with maturities of one year or less from the date of
acquisition, issued or fully guaranteed or insured by the government of the
United States of America or any agency thereof and backed by the full faith and
credit of the United States of America; (b) certificates of deposit, Eurodollar
time deposits, overnight bank deposits and bankers' acceptances of any domestic
commercial bank having capital and surplus in excess of $500,000,000, having
maturities of one year or less from the date of acquisition; and (c) commercial
paper of an issuer rated at least A-1 by Standard & Poor's Corp. or at least P-1
by Moody's Investors Services, Inc., or carrying an equivalent rating by a
nationally recognized rating agency if both of the two named rating agencies
cease publishing ratings of investments, in each case with maturities of not
less than sixty (60) days from the date acquired, (2) with respect to the
Subsidiaries of Tyco Parent which are organized under the laws of Canada or any
political subdivision thereof, those investments included in the defined term
"Cash Equivalents" in the Canadian Credit Agreement and (3) with respect to the
Subsidiaries of Tyco Parent which are organized under the laws of the United
Kingdom or any political subdivision thereof, those investments set forth in
clause (1) above and such other investments consented to in writing by Agent.
"Change in Control" shall mean the time when (i) any Person or "group"
-----------------
has acquired "beneficial ownership" (as such terms are defined under Section
13d-3 of and Regulation 13D under the Securities Exchange Act of 1934, as
amended), either directly or indirectly, of outstanding shares of Stock of Tyco
Parent having more than twenty percent (20%) of the voting power for the
election of directors of Tyco Parent under ordinary circumstances, (ii) more
than fifty percent (50%) of the members of Tyco Parent's board of directors
shall have been replaced by new directors not nominated for membership on the
board by a majority of directors who were either (x) directors on the Closing
Date or (y) directors after the Closing Date and whose nomination to the board
of directors of Tyco Parent was itself approved by a majority of directors on
the board who were directors on the Closing Date, (iii) Tyco Parent has sold,
transferred, conveyed, assigned or otherwise disposed of all or substantially
all of the assets of Tyco Parent, (iv) a "Change of Control" (as defined in the
Tyco Parent Senior Subordinated Note Indenture) shall have occurred, (v) a
"Change of Control" or a "Fundamental Change" (each as defined in the First
Chicago Notes) shall have occurred or (vi) a "Section 11(a)(ii) Event" (as
defined in the Rights Agreement) shall have occurred.
"Charges" shall mean all Federal, state, county, city, municipal,
-------
local, foreign or other governmental taxes (including
A-4
<PAGE>
taxes owed to PBGC at the time due and payable), levies, assessments, charges or
Liens upon or relating to (a) the Collateral, (b) the Obligations, (c) the
employees, payroll, income or gross receipts of any Borrower, any other Loan
Party or any Subsidiary thereof, (d) the ownership or use by any Borrower, any
other Loan Party or any Subsidiary thereof of any of its assets, or (v) any
other aspect of any Borrower's, any other Loan Party's or any of its
Subsidiaries' business.
"Chattel Paper" shall mean all "chattel paper," as such term is
-------------
defined in the Code, now owned or hereafter acquired by any Borrower, any other
Loan Party or any Subsidiary thereof, wherever located.
"Claim" shall have the meaning assigned to it in Section 1.17.
----- ------------
"Closing Date" shall mean the Business Day on which the conditions
------------
precedent set forth in Article 2 have been satisfied, in Agent's sole
---------
discretion, or waived in writing by Agent, and the initial Revolving Credit
Advance has been made (which date shall in any event be on or prior to February
28, 1995).
"Code" shall mean the Uniform Commercial Code as the same may, from
----
time to time, be in effect in the State of New York; provided, that in the event
--------
that by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of, or the remedies with respect to, Agent's security
interest in any Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of New York, the term "Code" shall
mean the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection,
priority or remedies and for purposes of definitions related to such provisions.
"Collateral" shall mean the property covered by the Collateral
----------
Documents and any other property, real or personal, tangible or intangible, now
existing or hereafter acquired, that may at any time be or become subject to a
Lien in favor of Agent or Lenders to secure any or all of the Obligations.
"Collateral Documents" shall mean the Security Agreement, the Patent,
--------------------
Trademark and Copyright Assignment, the Mortgages, the Note Pledge Agreement,
the Stock Pledge Agreement and all other instruments and agreement now or
hereafter securing the whole or any part of the Obligations.
"Collection Account" shall mean that certain account of Agent, account
------------------
number 502-328-54 in the name of GECC/CAF Depository at Bankers Trust Company, 1
Bankers Trust Plaza, New York, New York 10006, ABA number 021-001-033, or such
other account as may be designated by Agent.
A-5
<PAGE>
"Commitment Letter" shall mean the Commitment Letter, dated November
-----------------
8, 1994, by GE Capital and General Electric Capital Canada Inc. to Tyco Parent
and agreed to and accepted by Tyco Parent on November 11, 1994, together with
all term sheets attached thereto, as amended on December 27, 1994, January 30,
1995 and February 8, 1995 and as further amended, modified or supplemented from
time to time.
"Commitment Termination Date" shall mean the earliest of (a) the third
---------------------------
anniversary of the Closing Date, (b) the date of termination of the Revolving
Credit Commitments pursuant to Section 8.2, and (c) the date of termination of
-----------
the Revolving Credit Commitments in accordance with the provisions of Section
-------
1.3.
- ---
"Confidential Information" shall have the meaning assigned to it in
------------------------
Section 11.13.
- -------------
"Contracts" shall mean all the contracts, undertakings, or agreements
---------
(other than rights evidenced by Chattel Paper, Documents or Instruments) in or
under which any Borrower, any other Loan Party or any Subsidiary thereof may now
or hereafter have any right, title or interest, including any agreement relating
to the terms of payment or the terms of performance of any Account.
"Copyrights" shall mean any copyright to which any Borrower, any other
----------
Loan Party or any Subsidiary thereof now or hereafter has title, as well as any
application for a copyright hereafter made by any Borrower, any other Loan Party
or any Subsidiary thereof.
"Default" shall mean any event which, with the passage of time or
-------
notice or both, would, unless cured or waived, become an Event of Default.
"Default Rate" shall mean (a) with respect to principal owing on
------------
Revolving Credit Advances, a rate per annum equal to two percent (2%) over the
rate or rates of interest otherwise in effect hereunder from time to time
therefor and (b) with respect to interest or other Obligations (excluding
principal on the Revolving Credit Advances), a rate per annum equal to the Index
Rate in effect from time to time plus three and one-quarter percent (3-1/4%)).
"Deferred Taxes" shall mean, with respect to any Person at any date,
--------------
the amount of deferred taxes of such Person as shown on the balance sheet of
such Person as of such date prepared in accordance with GAAP.
"Designated Subsidiary" shall mean any of the Receivables Funding
---------------------
Subsidiary (but only so long as not a Guarantor), Tyco Investment, Tyco Hong
Kong, Tyco Far East, TOMCO
A-6
<PAGE>
I, Illco Acquisition Corp., Matchbox International Limited, Matchbox Toys, Pty.
Ltd., Matchbox Collectibles Pty. Ltd., Tyco Toys (Singapore) Pte. Ltd., Tyco
Asia Ltd., Universal International (Holdings) Ltd., the Inactive Subsidiaries
and any other Subsidiary of Tyco Parent created or acquired after the Closing
Date that with the prior written agreement of Agent is not to become a
Guarantor.
"Disbursement Accounts" shall have the meaning assigned to it in Annex
--------------------- -----
B.
- -
"Distribution" shall have the meaning assigned to it in the first
------------
paragraph of this Agreement.
"Documents" shall mean all "documents," as such term is defined in the
---------
Code, now owned or hereafter acquired by any Borrower, any other Loan Party or
any Subsidiary thereof, wherever located, and in any event any bills of lading,
dock warrants, dock receipts, warehouse receipts, or other documents of title.
"Dollars" and "$" shall mean lawful money of the United States of
------- -
America.
"DOL" shall mean the United States Department of Labor or any
---
successor thereto.
"Domestic Subsidiary" shall mean, with respect to any Person, any
-------------------
Subsidiary of such Person which is incorporated or organized under the laws of
the United States, any State or Commonwealth thereof or the District of
Columbia.
"Eligible Inventory" shall mean, with respect to any Borrower, such
------------------
Inventory of such Borrower that consists of finished goods and that is not
ineligible as the basis for Revolving Credit Advances and Letter of Credit
Obligations based on such criteria determined by Agent from time to time in its
sole discretion exercised in good faith. Criteria for eligibility may be fixed
and revised from time to time by Agent in its sole discretion exercised in good
faith. Unless otherwise agreed to in writing by Agent, in determining whether
Inventory of any Borrower constitutes Eligible Inventory of such Borrower, Agent
shall not include any Inventory that:
(a) is not owned by such Borrower free and clear of all Liens and
rights of others, except first priority perfected Liens in favor of Agent;
(b) except as provided in paragraph (c) and (d) below, is not located
on premises owned and operated by such Borrower and referenced in Schedule 3.6;
------------
A-7
<PAGE>
(c) is Inventory in transit or Inventory held on or at any leased
premises where the landlord thereof has not executed a consent and waiver in
form and substance satisfactory to Agent;
(d) is in the possession or control of a bailee, warehouseman,
processor, converter, finisher or other Person other than such Borrower, unless
Agent is in possession of such agreements, instruments and documents as Agent
may require (each in form and content acceptable to Agent and duly executed, as
appropriate by the bailee, warehouseman, processor, converter or other Person in
possession or control of such Inventory, as applicable) including warehouse
receipts in Agent's name covering such Inventory;
(e) is covered by a negotiable document of title;
(f) in Agent's good faith judgment, is obsolete, unsalable, shopworn,
damaged, unfit for further processing, or is of substandard quality (it being
agreed that the determination of substandard quality with respect to any
Inventory which is the subject of a License as to which such Borrower is a
licensee that contains standards of quality for such Inventory shall be based
upon the quality standards set forth in such License);
(g) consists of display items, samples, supplies, small tools,
packaging and shipping materials or defective goods which have been returned by
the buyer;
(h) consists of discontinued or slow-moving items;
(i) does not meet all standards imposed by any Governmental Authority;
(j) is placed by such Borrower on consignment or held by such Borrower
on consignment from another Person;
(k) is produced in violation of the Fair Labor Standards Act and
subject to the "hot goods" provisions contained in Title 29 U.S.C. (S) 215 or
any successor statute or section;
(l) in any way fails to meet or violates any warranty, representation
or covenant contained in this Agreement or any other Loan Document; or
(m) is not otherwise acceptable in the sole discretion of Agent
exercised in good faith.
"Environmental Laws" shall mean all Federal, state and local and
------------------
foreign laws, statutes, ordinances, orders and regulations, now or hereafter in
effect, and in each case as amended or supplemented from time to time, and any
applicable judicial or administrative interpretation thereof relating to the
regulation and protection of human health, safety, the
A-8
<PAGE>
environment and natural resources (including ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic
species and vegetation). Environmental Laws include, but are not limited to,
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended (42 U.S.C. (S)(S) 9601 et seq.) ("CERCLA"); the Hazardous
-- ---
Material Transportation Act, as amended (49 U.S.C. (S)(S) 1801 et seq.); the
-- ---
Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. (S)(S)
136 et seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C.
-- ---
(S)(S) 6901 et seq.) ("RCRA"); the Toxic Substance Control Act, as amended (15
-- ---
U.S.C. (S)(S) 2601 et seq.); the Clean Air Act, as amended (42 U.S.C. (S)(S) 740
-- ---
et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. (S)(S)
- -- ---
1251 et seq.); the Occupational Safety and Health Act, as amended (29 U.S.C.
-- ---
(S)(S) 651 et seq.) ("OSHA"); and the Safe Drinking Water Act, as amended (42
-- ---
U.S.C. (S)(S) 300(f) et seq.), and any and all regulations promulgated
-- ---
thereunder, and all analogous state and local and foreign counterparts or
equivalents and any transfer of ownership notification or approval statutes.
"Environmental Liabilities and Costs" shall mean all liabilities,
-----------------------------------
obligations, responsibilities, remedial actions, removal costs, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim, suit,
action or demand by any person or entity, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute or
common law (including any thereof arising under any Environmental Law, permit,
order or agreement with any Governmental Authority) and which relate to any
health or safety condition regulated under any Environmental Law or in
connection with any other environmental matter or Release, threatened Release,
or the presence of a Hazardous Material.
"Equipment" shall mean all "equipment" as such term is defined in the
---------
Code, and, in any event, shall include all machinery, equipment, furnishings,
fixtures and vehicles and any and all additions, accessions, substitutions and
replacements of any of the foregoing, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
-----
(or any successor legislation thereto), as amended from time to time, and any
regulations promulgated thereunder.
"ERISA Affiliate" shall mean any trade or business (whether or not
---------------
incorporated) under common control with any Borrower, any other Loan Party or
any Subsidiary thereof and
A-9
<PAGE>
which, together with such Borrower, other Loan Party or such Subsidiary, is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the IRC.
"ERISA Event" shall mean, with respect to any Borrower or other Loan
-----------
Party, any Subsidiary thereof or any ERISA Affiliate, (a) a Reportable Event
with respect to a Title IV Plan or a Multi-employer Plan; (b) the withdrawal of
such Borrower or other Loan Party, any Subsidiary thereof or any ERISA Affiliate
from a Title IV Plan subject to Section 4063 of ERISA during a plan year in
which it was a substantial employer, as defined in Section 4001(a) (2) of ERISA;
(c) the complete or partial withdrawal of such Borrower or other Loan Party, any
Subsidiary thereof or any ERISA Affiliate from any Multi-employer Plan; (d) the
filing of a notice of intent to terminate a Title IV Plan or the treatment of a
plan amendment as a termination under Section 4041(c) of ERISA; (e) the
institution of proceedings to terminate a Title IV Plan or Multi-employer Plan
by the PBGC; (vi) the failure to make required contributions to a Qualified
Plan; or (f) any other event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multi-employer Plan
or the imposition of any material liability under Title IV of ERISA, other than
PBGC premiums due but not delinquent under Section 4007 of ERISA.
"Eurodollar Business Day" shall mean a Business Day on which banks
-----------------------
generally in the City of London are open for interbank or foreign exchange
transactions.
"Event of Default" shall have the meaning assigned to it in Section
---------------- -------
8.1.
- ---
"Excess Borrowing Availability" shall mean at any time of measurement
-----------------------------
with respect to any Borrower, the amount by which Borrowing Availability of such
Borrower exceeds the aggregate principal amount of the Revolving Credit Advances
owing by such Borrower.
"Existing Credit Agreement" shall mean the Amended and Restated Credit
-------------------------
Agreement, dated as of October 2, 1992, among Industries, as borrower, Tyco
Parent, certain Subsidiaries of Tyco Parent, the lenders party thereto,
NationsBank, N.A. (Carolinas) (formerly known as NationsBank of North Carolina,
N.A.), as Agent, and The Bank of Nova Scotia, as co-agent, as amended by
Amendment No. 1 thereto dated as of March 18, 1993, Amendment No. 2 thereto
dated as of February 10, 1994, Amendment No. 3 thereto dated as of November 15,
1994, Amendment No. 4 thereto dated as of February 8, 1995 and by a letter
agreement thereto dated June 7, 1994.
A-10
<PAGE>
"Fees" shall mean the fees due to Agent and Lenders as set forth in
----
Section 1.8, and any other fees due to Agent or Lenders pursuant to the Loan
- -----------
Documents.
"Financials" shall mean the financial statements referred to in
----------
paragraph 1 of Schedule 3.4.
------------
"First Chicago Notes" shall mean the Convertible Subordinated Notes
-------------------
due July 18, 2001 issued by Tyco Parent in the original aggregate principal
amount of $13,500,000, as amended, modified, supplemented, replaced or
substituted for from time to time in accordance with the terms thereof and
hereof.
"Fiscal Month" shall mean for Tyco Parent and its Subsidiaries the
------------
following:
(a) the first, fourth, seventh and tenth Fiscal Months of any Fiscal
Year shall be the periods commencing on January 1, April 1, July 1 and
October 1, respectively, in such Fiscal Year and ending on the fourth
Saturday thereafter;
(b) the second, fifth, eighth and eleventh Fiscal Months of any Fiscal
Year shall be the periods commmencing on the day after the last day of the
first, fourth, seventh and tenth Fiscal Months, respectively, of such
Fiscal Year and ending on the fourth Saturday thereafter; and
(c) the third, sixth, ninth and twelfth Fiscal Months of any Fiscal
Year shall be the periods commencing on the day after the last day of the
second, fifth, eighth and eleventh Fiscal Months, respectively, of such
Fiscal Year and ending on the last day of March, June, September and
December, respectively, immmediately thereafter.
"Fiscal Quarter" shall mean for Tyco Parent and its Subsidiaries each
--------------
calendar quarter.
"Fiscal Year" shall mean for Tyco Parent and its Subsidiaries the
-----------
calendar year. Subsequent changes of the fiscal year of Tyco Parent or any of
its Subsidiaries shall not change the term "Fiscal Year," unless Agent and
Required Lenders shall consent in writing to such change.
"Fixed Rate" shall have the meaning assigned to it in Section 1.6(c).
---------- --------------
"Fixed Rate Tranche" shall have the meaning assigned to it in Section
------------------ -------
1.6(c).
- ------
"Fixtures" shall mean all "fixtures," as such term is defined in the
--------
Code, now or hereafter owned or acquired by any Borrower, any other Loan Party
or any Subsidiary thereof,
A-11
<PAGE>
wherever located, and, in any event, including all of the fixtures, systems,
machinery, apparatus, equipment and fittings of every kind and nature whatsoever
and all appurtenances and additions thereto and substitutions therefor or
replacements thereof, now or hereafter attached or affixed to or constituting a
part of, or located in or upon, Real Property wherever located (including all
heating, electrical, mechanical, lighting, lifting, plumbing, ventilating, air-
conditioning and air cooling, refrigerating, incinerating and power, loading and
unloading, signs, escalators, elevators, boilers, communication, switchboards,
sprinkler and other fire prevention and extinguishing fixtures, systems,
machinery, apparatus and equipment, and all engines, motors, dynamos, machinery,
pipes, pumps, tanks, conduits and ducts constituting a part of any of the
foregoing, together with all extensions, improvements, betterments, renewals,
substitutes, and replacements of, and all additions and appurtenances to any of
the foregoing property).
"Foreign Lending Entity" shall have the meaning set forth in Section
---------------------- -------
10.2(g) of this Agreement.
- -------
"Foreign Subsidiary" shall mean, with respect to any Person, any
------------------
Subsidiary of such Person which is not a Domestic Subsidiary of such Person.
"GAAP" shall mean generally accepted accounting principles in the
----
United States of America as in effect from time to time, consistently applied.
"GE Capital" shall mean General Electric Capital Corporation, a
----------
corporation organized under the banking laws of the State of New York.
"General Intangibles" shall mean all "general intangibles," as such
-------------------
term is defined in the Code, now owned or hereafter acquired by any Borrower,
any other Loan Party or any Subsidiary thereof and, in any event, including all
right, title and interest which any Borrower, any other Loan Party or any
Subsidiary thereof may now or hereafter have in or under any Contract, all
customer lists, Intellectual Property, interests in partnerships, joint ventures
and other business associations, permits, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials and
records, goodwill (including the goodwill associated with any Intellectual
Property), all rights and claims in or under insurance policies, (including
insurance for fire, damage, loss, and casualty, whether covering personal
property, real property, tangible rights or intangible rights, all liability,
life, key man, and business interruption insurance, and all unearned premiums),
uncertificated securities, letters of credit, choses in action, and other bank
accounts (including the
A-12
<PAGE>
Blocked Account and the Disbursement Accounts), rights to receive tax refunds
and other payments and rights of indemnification.
"Global Lenders" shall mean, collectively, the lenders providing or
--------------
committing to provide any financial accommodations under any of the Overall
Facilities.
"Goods" shall mean all "goods" as such term is defined in the Code,
-----
now owned or hereafter acquired by any Borrower, any other Loan Party or any
Subsidiary thereof, wherever located, including movables, Fixtures, Equipment,
Inventory, or other tangible personal property.
"Governmental Authority" shall mean any nation or government, any
----------------------
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any obligation
-----------------------
of such Person guaranteeing any indebtedness, lease, dividend, or other
obligation ("primary obligations") of any other Person (the "primary obligor")
------------------- ---------------
in any manner including any obligation or arrangement of such Person (a) to
purchase or repurchase any such primary obligation, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet condition of the
primary obligor, (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation, or (d) to
indemnify the owner of such primary obligation against loss in respect thereof.
"Guarantor" shall mean, at any time (i) Tyco Parent; (ii) each
---------
Borrower; (iii) any other Domestic Subsidiary (other than Tyco Investment), now
existing or hereafter organized or created, of Tyco Parent; provided that, so
--------
long as the Receivables Funding Agreement has not been terminated or the
Receivables Funding Subsidiary has any obligations thereunder, the Receivables
Funding Subsidiary shall not be a Guarantor; (iv) any Foreign Subsidiary of Tyco
Parent existing on the Closing Date (other than Designated Subsidiaries existing
on the Closing Date which are Foreign Subsidiaries of Tyco Parent); and (v)
unless otherwise agreed to in writing by Agent (including, without limitation,
by reason of the last sentence of Section 5.16 hereof), any Additional Loan
------------
Party.
"Guaranty" shall mean the guaranty, substantially in the form of
--------
Exhibit A-1 hereto, to be executed by each Guarantor (other than Tyco Toys
- -----------
(Canada) Inc. which shall execute and deliver to Agent the Canadian Guaranty and
each of Tyco Toys
A-13
<PAGE>
(U.K.) Ltd., Matchbox Toys, Ltd., Illco (U.K.) Ltd., Matchbox Collectibles
(U.K.) Ltd. and Playtime Toys UK Ltd. which shall execute and deliver to Agent a
UK Guaranty) in favor of Agent, for the ratable benefit of Lenders, to secure
all or a portion of the Obligations, including all amendments, modifications and
supplements thereto, and shall refer to the Guaranty as the same may be in
effect at the time such reference becomes operative.
"Hazardous Material" shall mean a Hazardous Substance and/or a
------------------
Hazardous Waste.
"Hazardous Substance" shall mean any element, material, compound,
-------------------
mixture, solution, chemical, substance, or pollutant within the definition of
"hazardous substance" under Section 101(14) of the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. (S) 9601(14); petroleum or
any fraction, by-product or distillation product thereof; asbestos,
polychlorinated biphenyls, or any radioactive substances; and any material
regulated as a hazardous substance by any jurisdiction in which any Borrower,
any other Loan Party or any Subsidiary thereof owns or operates or has owned or
operated a facility.
"Hazardous Waste" shall mean any element, pollutant, contaminate or
---------------
discarded material (including any radioactive material) within the definition of
Section 103(6) of the Resource Conservation and Recovery Act, 42 U.S.C. (S)
6903(6); and any material regulated as a hazardous waste by any jurisdiction in
which any Borrower, any other Loan Party or any Subsidiary thereof owns or
operates or has owned or operated a facility, or to which any Borrower, any
other Loan Party or any Subsidiary thereof sends material for treatment, storage
or disposal as waste.
"Inactive Subsidiaries" shall mean any of View-Master International
---------------------
(Singapore) Pte., Ltd., View-Master Ideal (UK) Limited, DI Hong Kong Limited,
Nasta Far East, Limited, Hingham Enterprises Limited, GreatResult Electronics
Limited, Matchbox Japan Ltd., Matchbox Acquisition Ltd., Tyco Toys (Italy)
S.p.A., Macao Toys Ltd., and Macao Die-Casting Toys Ltd.
"Indebtedness" of any Person shall mean (a) all indebtedness of such
------------
Person for borrowed money or for the deferred purchase price of property or
services (including reimbursement and all other obligations with respect to
surety bonds, letters of credit and bankers' acceptances, whether or not
matured, but not including obligations to trade creditors incurred in the
ordinary course of business (which exclusion shall include inter-company trade
debt incurred with respect to purchases of Inventory permitted by Section
-------
6.4(b)) and not including obligations to pay inter-company management and
- ------
royalty fees so long as such fees are paid to Industries or the direct or
indirect parent corporation of the obligor of such fees), (b) all obligations
evidenced by notes, bonds, debentures or similar
A-14
<PAGE>
instruments, (c) all indebtedness created or arising under any conditional sale
or other title retention agreements with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (d) all Capital Lease Obligations, (e) all Guaranteed Indebtedness,
(f) all Indebtedness referred to in clause (a), (b), (c), (d) or (e) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness,
(f) the Obligations, (g) all liabilities under Title IV of ERISA and (h) all
liabilities under or with respect to interest rate protection agreements.
"Indemnified Person" shall have the meaning assigned to it in Section
------------------ -------
1.17.
- ----
"Index Rate" shall mean for any day, the rate per annum determined by
----------
Agent by reference to the higher of (i) the highest daily prime, base or
equivalent rate published or announced from time to time by Bankers Trust
Company, Citibank, N.A., Morgan Guaranty Trust Company of New York, Chemical
Bank, or The Chase Manhattan Bank (National Association) (or any successor to
any such bank) (whether or not such rate is actually charged by such bank or
successor) as in effect for such day, and (ii) the latest month-end rate for
ninety (90) day dealer placed commercial paper which normally is published in
the "Money Rates" section of The Wall Street Journal for such day (or in the
event such rate shall not so appear, in such other nationally recognized
publication as Agent may, from time to time, specify to Borrowers). If any of
the above-mentioned banks (or any successor thereto) does not timely publish or
announce its prime, base or equivalent rate and Agent is not otherwise able to
determine same, Agent shall determine the relevant interest rate on the basis of
the prime, base or equivalent rates published by the remaining banks (or
successors thereto) or, if none of such prime, base or equivalent rates is
available on a timely basis and Agent is not otherwise able to determine same,
Agent shall forthwith give notice thereof to Borrowers and Lenders, whereupon
until Agent notifies Borrowers and Lenders that such prime, base or equivalent
rates are available on a timely basis, Agent may utilize the prime, base or
equivalent rate of any bank having its principal place of business in New York,
New York and having a combined capital and surplus of not less than
$500,000,000.
"Industries" shall mean Tyco Industries, Inc., a Delaware corporation.
----------
"Instruments" shall mean all "instruments," as such term is defined in
-----------
the Code, now owned or hereafter acquired by any Borrower, any other Loan Party
or any Subsidiary thereof,
A-15
<PAGE>
wherever located and in any event all certificated securities, certificates of
deposit and all notes and other evidences of indebtedness, other than
instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"Intellectual Property" shall mean, collectively, all Trademarks, all
---------------------
Patents, all Copyrights and all Licenses now held or hereafter acquired by any
Borrower, any other Loan Party or any Subsidiary thereof, together with all
franchises, tax refund claims, rights of indemnification, payments under
insurance, indemnities, warranties and guarantees payable with respect to the
foregoing.
"Intercreditor Agreement" shall mean the Intercreditor Agreement to be
-----------------------
entered into among Agent, Manufacturing, Industries, Receivables Funding
Subsidiary, Financial Security Assurance and GE Capital as agent for Redwood
with respect to the priority of Liens granted by Manufacturing and Industries in
favor of Agent and the Receivables Funding Subsidiary in certain assets of
Manufacturing and Industries and certain other matters related to such Liens, as
amended, modified or supplemented from time to time in accordance with the terms
thereof.
"Interest Period" shall mean with respect to any Fixed Rate Tranche
---------------
bearing interest at a Fixed Rate, the period of one, two or three whole calendar
months commencing on the first day of the calendar month specified by the
relevant Borrower in its Notice of Fixed Rate Election with respect to such
Fixed Rate Tranche delivered to Agent in accordance with Section 1.6(d).
--------------
Notwithstanding the foregoing, all Interest Periods shall be adjusted in
accordance with the second sentence of Section 1.6(a).
--------------
"Inventory" shall mean all "inventory," as such term is defined in the
---------
Code, now or hereafter owned or acquired by, any Borrower, any other Loan Party
or any Subsidiary thereof, wherever located, and, in any event, including
inventory, merchandise, Goods and other personal property which are held by or
on behalf of any Borrower, any other Loan Party or any Subsidiary thereof for
sale or lease or are furnished or are to be furnished under a contract of
service or which constitute raw materials, work in process or materials used or
consumed or to be used or consumed in any Borrower's, any other Loan Party's or
any of its Subsidiaries' business or in the processing, production, packaging,
promotion, delivery or shipping of the same, including other supplies, and all
accessions and additions thereto and all Documents covering any of the
foregoing.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and
---
any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any successor
---
thereto.
A-16
<PAGE>
"Investment" shall mean, for any Person (a) the acquisition (whether
----------
for cash, property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of any other Person or any agreement to make any such acquisition;
(b) the making of any deposit with, or advance, loan or other extension of
credit to, any other Person (including the purchase of property from another
Person subject to an understanding or agreement, contingent or otherwise, to
resell such property to such Person); and (c) the entering into of any
Guaranteed Indebtedness of, or other contingent obligation with respect to,
Indebtedness or other liability of any other Person and (without duplication)
any amount committed to be advanced, lent or extended to such Person.
"Junior Preferred Stock" shall mean the Series A Junior Preferred
----------------------
Stock of Tyco Parent which may be issued pursuant to and in accordance with the
terms of the Rights Agreement having the terms and rights set forth in Exhibit A
to the Rights Agreement.
"Leases" shall mean all of those leasehold estates in real property
------
now owned or hereafter acquired by any Borrower, any other Loan Party or any
Subsidiary thereof, as lessee or sublessor.
"Lender" and "Lenders" shall have the meanings provided in the first
------ -------
paragraph of this Agreement.
"Letter of Credit Fee" shall have the meaning assigned to it in Annex
-------------------- -----
D to this Agreement.
- -
"Letter of Credit Obligations" shall mean all outstanding obligations
----------------------------
incurred by Agent or any Lender at the request of any Borrower, whether direct
or indirect, contingent or otherwise, due or not due, in connection with the
issuance or guaranty, by Agent, any Lender or another Person, of Letters of
Credit. The amount of such Letter of Credit Obligations with respect to any
Letter of Credit or guaranty thereof at any time shall equal the maximum amount
which may be payable by Agent or Lenders thereupon or pursuant thereto at such
time.
"Letters of Credit" shall mean commercial or standby letters of credit
-----------------
issued at the request and for the account of any Borrower for which Agent or any
Lender has incurred Letter of Credit Obligations.
"LIBOR Rate" shall mean for the purposes of determining any Fixed Rate
----------
for any Interest Period, the rate per annum offered on Eurodollar deposits in
U.S. dollars for a period corresponding to the duration of such Interest Period
in an amount approximately corresponding to the principal amount of the
applicable Fixed Rate Tranche, as quoted by Telerate News Service
A-17
<PAGE>
on page 3750 as of 11:00 a.m. (London time) on the second full Eurodollar
Business Day preceding the beginning of such Interest Period. The LIBOR Rate
will be determined by Agent on the second full Eurodollar Business Day preceding
the beginning of the relevant Interest Period and the LIBOR Rate so determined
will be utilized for the duration of such Interest Period. If such interest
rate ceases to be available from Telerate News Service, the LIBOR Rate will be
determined from such financial reporting service or other information as would
be mutually acceptable to Borrowers and Agent.
"License" shall mean any Patent License, Trademark License or other
-------
license of rights or interests now held or hereafter acquired by any Borrower,
any other Loan Party or any Subsidiary thereof.
"Lien" shall mean any mortgage, deed to secure debt or deed of trust,
----
pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Code or comparable law of any jurisdiction).
"Loan Documents" shall mean this Agreement, the Revolving Credit
--------------
Notes, the Collateral Documents, the Guaranty, the Canadian Guaranty, the UK
Guaranties and all agreements, instruments, documents and certificates in favor
of Agent or Lenders executed in connection with the transactions contemplated by
this Agreement, including, without limitation, those that are identified in the
Schedule of Closing Documents attached as Annex C, and including all other
-------
pledges, powers of attorney, consents, assignments, contracts, notices, and
other written matter whether heretofore, now or hereafter executed by or on
behalf of any Loan Party and delivered to Agent or Lenders in connection with
this Agreement or the financing transactions contemplated hereby.
"Loan Party" shall mean and include each Borrower, each other
----------
Guarantor, Tyco Investment, TOMCO I, Tyco Hong Kong, Tyco Far East, Illco
Acquisition Corp., Tyco Asia Limited, Matchbox International Limited and
Matchbox Toys Pty. Ltd.
"Manufacturing" shall have the meaning assigned to it in the first
-------------
paragraph of this Agreement.
"Margin Stock" shall have the meaning specified in Regulation G, T, U
------------
or X of the Board of Governors of the Federal Reserve System, as in effect from
time to time.
A-18
<PAGE>
"Material Adverse Effect" shall mean a material adverse effect on (i)
-----------------------
the business, assets, operations, prospects, or financial condition of any
Borrower, any other Loan Party or any Subsidiary thereof, (ii) any Borrower's
ability to pay or perform the Obligations in accordance with the terms thereof
or any other Loan Party's ability to perform its obligations under any Loan
Document to which it is a party, (iii) the Collateral or Agent's or Lenders'
Liens on the Collateral or the priority of any such Liens, or (iv) the rights
and remedies of Agent and Lenders under this Agreement and the other Loan
Documents.
"Material Contract" shall mean each contract (other than purchase
-----------------
orders for the sale by any Loan Party or any Subsidiary thereof in the ordinary
course of business of Inventory to Persons who are not Affiliates of any Loan
Party or any Subsidiary thereof) to which any Borrower, any other Loan Party or
any Subsidiary thereof is now or hereafter a party which (x) involves aggregate
consideration payable to or by (or guaranteed by) such Borrower or other Loan
Party or Subsidiary, contingent or otherwise, in excess of $1,000,000 in any
calendar year (other than foreign exchange contracts permitted hereunder) or (y)
is otherwise material to the business or operations of such Loan Party or
Subsidiary.
"Maximum Lawful Rate" shall have the meaning assigned to it in Section
------------------- -------
1.6(f).
- ------
"Maximum Revolving Credit Commitment" shall mean an amount equal to
-----------------------------------
$35,000,000 as of the Closing Date, as reduced or terminated in accordance with
the terms of this Agreement.
"Mortgage" shall mean any fee or leasehold mortgage or deed of trust
--------
executed by any Loan Party in favor of Agent (or any co-agent or trustee for the
benefit of Agent), for the ratable benefit of Lenders, to secure all or a
portion of the Obligations, including all amendments, modifications and
supplements thereto, and shall refer to the relevant Mortgage as the same may be
in effect at the time such reference becomes operative.
"Multi-employer Plan" shall mean a "Multi-employer plan" as defined in
-------------------
Section 4001(a) (3) of ERISA, and to which any Borrower, other Loan Party, any
Subsidiary thereof or any ERISA Affiliate is making, is obligated to make, or
within the last six years has made or been obligated to make, contributions on
behalf of participants who are or were employed by any of them.
"Non-Funding Lender" shall have the meaning assigned to it in Section
------------------ -------
1.2.
- ---
"Non-Use Fee" shall have the meaning assigned to it in Annex D.
----------- -------
A-19
<PAGE>
"Note Pledge Agreement" shall mean the Note Pledge Agreement,
---------------------
substantially in the form of Exhibit B hereto, to be executed by Tyco Parent,
---------
each other Loan Party which is or becomes either a Domestic Subsidiary of Tyco
Parent or an Additional Loan Party that is a Guarantor and Agent, including all
amendments, modifications and supplements thereto, and shall refer to the Note
Pledge Agreement as the same may be in effect at the time such reference becomes
operative.
"Notice of Fixed Rate Election" shall have the meaning assigned to it
-----------------------------
in Section 1.6(d).
"Notice of Revolving Credit Advance" shall have the meaning assigned
----------------------------------
to it in Section 1.1(c).
"Obligations" shall mean all loans, advances, liabilities and
-----------
obligations for the payment of monetary amounts (whether or not such payment is
then required or contingent, or amounts are liquidated or determinable) owing by
any Borrower or any other Loan Party to Agent or any Lender, of any kind or
nature, present or future, whether or not evidenced by any note, agreement or
other instrument, arising under any of the Loan Documents. This term includes
all principal, interest (including interest which accrues after the commencement
of any case or proceeding referred to in Section 8.1(g) or (h)), all Fees,
---------------------
Charges, Claims, expenses, attorneys' fees and any other sum chargeable to any
Borrower or any other Loan Party under any of the Loan Documents.
"Obligor" shall mean any borrower under any of the Overall Facilities
-------
and any guarantor of any or all of the obligations of any such borrower under
any of the Overall Facilities, including, without limitation, the Borrowers and
Guarantors.
"Other Lender" shall have the meaning assigned to it in Section 1.2.
------------ -----------
"Other Taxes" shall have the meaning assigned to it in Section
----------- -------
1.19(b).
- -------
"Overall Facilities" shall mean, collectively, the loan facilities
------------------
provided under this Agreement, the Canadian Credit Agreement and the UK Credit
Agreement.
"Patent License" shall mean, with respect to any Borrower, any other
--------------
Loan Party or any Subsidiary thereof, rights under any written agreement now
owned or hereafter acquired by such Person granting any right with respect to
any invention on which a Patent is in existence.
"Patent, Trademark and Copyright Assignment" shall mean the Trademark,
------------------------------------------
Patent and Copyright Security Agreement, substan-
A-20
<PAGE>
tially in the form of Exhibit C hereto, to be executed by Tyco Parent, each
---------
other Loan Party which is or becomes either a Domestic Subsidiary of Tyco Parent
or an Additional Loan Party that is a Guarantor and Agent, for the ratable
benefit of Lenders, including all amendments, modifications and supplements
thereto, and shall refer to the Patent, Trademark and Copyright Assignment as
the same may be in effect at the time such reference becomes operative.
"Patents" shall mean all of the following in which any Borrower, any
-------
other Loan Party or any Subsidiary thereof now holds or hereafter acquires any
interest: (a) all letters patent of the United States of America or any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States of America or any other country, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States of
America, any State or Territory thereof, or any other country, and (b) all
reissues, divisions, continuations, continuations-in-part or extensions thereof.
"Payor" shall have the meaning assigned to it in Section 1.13.
----- ------------
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
----
successor thereto.
"Pension Plan" shall mean an employee pension benefit plan, as defined
------------
in Section 3(2) of ERISA (other than a Multi-employer Plan), which is not an
individual account plan, as defined in Section 3(34) of ERISA, and which any
Borrower or any other Loan Party or, if a Title IV Plan, any Subsidiary of any
Borrower, any other Loan Party or any ERISA Affiliate maintains, contributes to
or has an obligation to contribute to on behalf of participants who are or were
employed by any of them.
"Permitted Encumbrances" shall mean the following encumbrances: (a)
----------------------
Liens for taxes or assessments or other governmental Charges or levies, either
not yet due and payable or to the extent that nonpayment thereof is permitted by
the terms of Section 5.2 of this Agreement; (b) pledges or deposits securing
-----------
obligations under workmen's compensation, unemployment insurance, social
security or public liability laws or similar legislation; (c) with respect to
any Person other than Tyco Investment, TOMCO I, any Inactive Subsidiary and
Almat Toy Company, pledges or deposits securing bids, tenders, contracts (other
than contracts for the payment of money) or leases to which any Loan Party or
any of its Subsidiaries is a party as lessee made in the ordinary course of
business; (d) deposits securing public or statutory obligations of any Loan
Party or any of its Subsidiaries; (e) with respect to any Person other than Tyco
Investment, TOMCO I, any Inactive Subsidiary and Almat Toy
A-21
<PAGE>
Company, inchoate and unperfected workers', mechanics', suppliers' or similar
liens arising in the ordinary course of business; (f) with respect to any Person
other than Tyco Investment, TOMCO I, any Inactive Subsidiary and Almat Toy
Company, carriers', warehousemen's or other similar possessory liens arising in
the ordinary course of business and securing Indebtedness not yet due and
payable in an outstanding aggregate amount not in excess of $100,000 at any
time; (g) deposits securing, or in lieu of, surety, appeal or customs bonds in
proceedings to which any Loan Party or any of its Subsidiaries is a party; (h)
any attachment or judgment lien, unless the judgment it secures shall not,
within 30 days after the entry thereof, have been discharged or execution
thereof stayed pending appeal, or shall not have been discharged within 30 days
after the expiration of any such stay; (i) with respect to any Person other than
Tyco Investment, TOMCO I, any Inactive Subsidiary and Almat Toy Company, zoning
restrictions, easements, licenses, or other restrictions on the use of real
property or other minor irregularities in title (including leasehold title)
thereto, so long as the same do not materially impair the use, value, or
marketability of such real property, leases or leasehold estates and (j) with
respect to any Foreign Subsidiary of Tyco Parent (other than TOMCO I, any
Inactive Subsidiary, Tyco Toys (Canada) Inc., Tyco Toys (U.K.) Ltd., Matchbox
Toys, Ltd. and the respective Subsidiaries of such Canadian and United Kingdom
Persons) which is a borrower (or a Subsidiary of a borrower) under a credit
facility permitted under Section 6.3(i) provided by a lender or group of lenders
which are not Affiliates of any Loan Party or any Subsidiary thereof, Liens in
favor of such lender or lenders (or agent acting on behalf of such lenders) to
secure the obligations of such Person under or with respect to such credit
facility in respect of any property or assets of such Person (other than the
capital stock of any Subsidiary of Tyco Parent) not located in the United
States, Canada or the United Kingdom.
"Person" shall mean any individual, sole proprietorship, partnership,
------
joint venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether Federal,
state, county, city, municipal or otherwise, including any instrumentality,
division, agency, body or department thereof).
"Plan" shall mean, with respect to any Borrower, any other Loan Party,
----
any Subsidiary thereof or any ERISA Affiliate, at any time, an employee benefit
plan, as defined in Section 3(3) of ERISA, which such Borrower, other Loan
Party, Subsidiary or ERISA Affiliate maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were employed
by any of them.
"Proceeds" shall mean all "proceeds," as such term is defined in the
--------
Code and, in any event, shall include, with
A-22
<PAGE>
respect to any Person: (a) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to such Person from time to time with respect to
any of its property or assets; (b) any and all payments (in any form whatsoever)
made or due and payable to such Person from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of such Person's property or assets by any governmental body, authority,
bureau or agency (or any person acting under color of governmental authority),
(c) any claim of such Person against third parties (i) for past, present or
future infringement of any Patent or Patent License or (ii) for past, present or
future infringement or dilution of any Trademark or Trademark License or for
injury to the goodwill associated with any Trademark, Trademark registration or
Trademark licensed under any Trademark License; (d) any recoveries by such
Person against third parties with respect to any litigation or dispute
concerning any of such Person's property or assets; and (e) any and all other
amounts from time to time paid or payable under or in connection with any of
such Person's property or assets, upon disposition or otherwise.
"Projections" shall mean the projections referred to in paragraph 2 of
-----------
Schedule 3.4 and any other projections required to be delivered by any Loan
- ------------
Party to Agent or any Lender under this Agreement.
"Property" shall have the meaning assigned to it in Section 5.14.
-------- ------------
"Qualified Plan" shall mean an employee pension benefit plan, as
--------------
defined in Section 3(2) of ERISA, which is intended to be tax-qualified under
IRC Section 401(a), and which any Borrower or other Loan Party, any Subsidiary
of any Borrower or other Loan Party or any ERISA Affiliate maintains,
contributes to or has an obligation to contribute to on behalf of participants
who are or were employed by any of them.
"Real Property" shall mean all real property owned, leased or operated
-------------
by any Borrower or any other Loan Party or any Affiliate of any Borrower or any
other Loan Party.
"Receivables Funding Agreement" shall mean the Receivables Funding and
-----------------------------
Servicing Agreement, dated as of even date with this Agreement, among the
Receivables Funding Subsidiary, as borrowers, Redwood, as lender, Industries, as
servicer, Financial Security Assurance and GE Capital, as operating agent and
collateral agent.
"Receivables Funding Documents" means, collectively, the Receivables
-----------------------------
Funding Agreement and the Receivables Sale Agreement.
A-23
<PAGE>
"Receivables Funding Subsidiary" shall mean, collectively, Tyco
------------------------------
Funding I Corporation and Tyco Funding II Corporation, each a Delaware
corporation and a direct subsidiary of Industries. Where the context requires,
such defined term shall mean and refer to one or both of such corporations.
"Receivables Sale Agreement" shall mean, collectively (i) the
--------------------------
Receivables Transfer Agreement, dated as of even date with this Agreement, by
and between Manufacturing and the Receivables Funding Subsidiary and (ii) the
Receivables Transfer Agreement, dated as of even date with this Agreement, by
and between Industries and the Receivables Funding Subsidiary. Where the
context requires, such defined term shall mean and refer to one or both of such
agreements.
"Redwood" shall mean Redwood Receivables Corporation, a Delaware
-------
corporation.
"Regulatory Change" shall mean, with respect to any Lender, any change
-----------------
after the date of this Agreement in Federal, state or foreign law or regulations
(including Regulation D) or the adoption or making after such date of any
interpretation, directive or request applying to a class of lenders including
such Lender of or under any Federal, state or foreign law or regulations
(whether or not having the force of law and whether or not failure to comply
therewith would be unlawful) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
"Release" shall mean, as to any Person, any release or any spilling,
-------
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, disposing or migration of a Hazardous Material into the
indoor or outdoor environment by such Person (or by a person under such Person's
direction or control), including the movement of a Hazardous Material through or
in the air, soil, surface water, ground water or property; but shall exclude any
release, discharge, emission or disposal in material compliance with a then
effective permit or order of a Governmental Authority.
"Reportable Event" shall mean any of the events described in Section
----------------
4043(b) (1), (2), (3), (5), (6), (8) or (9) of ERISA.
"Required Lenders" shall mean, at any time, Lenders holding more than
----------------
50% of the aggregate of the Revolving Credit Commitments of all Lenders at such
time (or, if the Commitment Termination Date has occurred, in lieu of the
Revolving Credit Commitments, the aggregate of the Revolving Credit Loan then
outstanding in respect of the Revolving Credit Commitment).
"Required Payment" shall have the meaning assigned to it in Section
---------------- -------
1.13.
- ----
A-24
<PAGE>
"Restricted Payment" shall mean, with respect to any Person: (a) the
------------------
declaration or payment of any dividend or the occurrence of any liability to
make any other payment or distribution of cash or other property or assets in
respect of such Person's Stock; (b) any payment on account of the purchase,
redemption, defeasance or other retirement of such Person's Stock or any other
payment or distribution made in respect thereof, either directly or indirectly;
or (c) any payment, loan, contribution, or other transfer of funds or other
property to any Stockholder of such Person; provided, that Restricted Payment
--------
shall not include any dividends declared or paid by the Receivables Funding
Subsidiary to Industries.
"Retiree Welfare Plan" shall refer to any Welfare Plan providing for
--------------------
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant's termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the IRC and at the
sole expense of the participant or the beneficiary of the participant.
"Revolving Credit Advance" shall have the meaning assigned to it in
------------------------
Section 1.1(a).
- --------------
"Revolving Credit Commitment" shall mean, as to each Lender, the
---------------------------
commitment of such Lender to make Revolving Credit Advances to Borrowers
pursuant to Section 1.1 in the aggregate principal amount outstanding not to
-----------
exceed the amount set forth opposite such Lender's name on the signature pages
of this Agreement or specified in any amendment hereto or any assignment hereof
pursuant to Section 10.2 hereof, as such amount may be reduced or terminated in
------------
accordance with the terms of this Agreement.
"Revolving Credit Loan" shall mean the aggregate amount of Revolving
---------------------
Credit Advances of all Lenders outstanding at any time.
"Revolving Credit Notes" shall mean the promissory notes provided for
----------------------
by Section 1.1(d) and all promissory notes delivered in substitution or exchange
--------------
therefor, in each case as the same may be modified and supplemented and in
effect from time to time.
"Rights Agreement" shall mean the Rights Agreement, dated as of
----------------
September 8, 1988, between Tyco Parent and Chemical Bank (as successor to
Manufacturers Hanover Trust Company), as rights agent, as in effect on the date
of execution thereof and as amended with the prior written consent of Agent.
"Security Agreement" shall mean the Security Agreement, substantially
------------------
in the form of Exhibit D attached hereto, to be executed by Tyco Parent and each
---------
other Loan Party which is or becomes either a Domestic Subsidiary of Tyco Parent
or an
A-25
<PAGE>
Additional Loan Party that is a Guarantor in favor of Agent, for the ratable
benefit of Lenders, including all amendments, modifications and supplements
thereto, and shall refer to the Security Agreement as the same may be in effect
at the time such reference becomes operative.
"Stock" shall mean all shares, options, warrants, general or limited
-----
partnership interests, participation or other equivalents (regardless of how
designated) of or in a corporation, partnership or equivalent entity whether
voting or nonvoting, including common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended).
"Stock Pledge Agreement" shall mean the Pledge Agreement,
----------------------
substantially in the form of Exhibit E hereto, to be executed by Tyco Parent,
---------
each other Loan Party which is a Domestic Subsidiary of Tyco Parent (now
existing or hereafter created or acquired), TOMCO I, certain other Foreign
Subsidiaries of Tyco Parent and each Additional Loan Party that is a Guarantor
in favor of Agent, for the ratable benefit of Lenders, including all amendments,
modifications and supplements thereto, and shall refer to the Stock Pledge
Agreement as the same may be in effect at the time such reference becomes
operative.
"Subject Property" shall mean all Real Property subject to a Mortgage
----------------
and serving as security for all or a portion of the Obligations, consisting of,
to the extent required by Agent, the leasehold interest of Manufacturing at 8585
SW Hall Blvd., Beaverton, Oregon.
"Subordinated Debt Documents" shall mean (i) the Tyco Parent Senior
---------------------------
Subordinated Note Indenture and the notes, guaranties and other documents
executed and delivered in connection therewith and (ii) the First Chicago Notes
and the documents executed and delivered in connection therewith, each as
amended, modified or supplemented from time to time in accordance with the terms
thereof and hereof.
"Subsidiary" shall mean, with respect to any Person: (a) any
----------
corporation of which an aggregate of more than 50% of the outstanding 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
or classes 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 legally or beneficially by such Person and/or one or more Subsidiaries of
such Person, or with respect to which any such Person has the right to vote or
designate the vote of more than 50% of such Stock whether by proxy, agreement,
operation of law or otherwise; and (b) any
A-26
<PAGE>
partnership in which such Person and/or one or more Subsidiaries of such Person
shall have an interest (whether in the form of voting or participation in
profits or capital contribution) of more than 50% or of which any such Person is
a general partner or may exercise the powers of a general partner.
"Taxes" shall mean taxes, levies, imposts, deductions, Charges or
-----
withholdings, and all liabilities with respect thereto, excluding franchise
taxes and other taxes imposed on or measured by the net income of any Lender by
the United States of America, the jurisdiction under the laws of which such
Lender is organized, the jurisdiction in which such Lender's applicable lending
office is located or other jurisdictions where such Lender is subject to tax
solely by reason of its activities or former activities in such jurisdictions
other than activities in connection with the transactions contemplated by this
Agreement or, in each case, any political subdivision thereof.
"Termination Date" shall mean the date on which (a) the Revolving
----------------
Credit Commitments have been terminated in full, and Lenders shall have no
further obligation to make any credit extensions or financial accommodations
hereunder, and (b) all Obligations have been paid in full in immediately
available funds in Dollars, and Borrowers shall have funded in immediately
available funds in Dollars and Cash Equivalents the amounts required, if any,
under the Loan Documents into the Cash Collateral Account in respect of Letter
of Credit Obligations, if any, then outstanding.
"Termination Fee" shall have the meaning provided in Annex D.
--------------- -------
"Title IV Plan" shall mean a Pension Plan, other than a Multi-employer
-------------
Plan, which is covered by Title IV of ERISA.
"TOMCO I" shall mean Tyco Management I, Limited, a Barbados
-------
corporation.
"Trademark License" shall mean, with respect to any Borrower, any
-----------------
other Loan Party or any Subsidiary thereof, rights under any written agreement
now owned or hereafter acquired by such Person granting any right to use any
Trademark or Trademark registration.
"Trademarks" shall mean all of the following in which any Borrower,
----------
any other Loan Party or any Subsidiary thereof now holds or hereafter acquires
any interest: (a) all common law and statutory trademarks, trade names,
corporate names, business names, trade styles, service marks, logos, other
source or business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like nature, now
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and all
A-27
<PAGE>
applications in connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States of America, any State or Territory
thereof, or any other country or any political subdivision thereof; (b) all
reissues, extensions or renewals thereof; and (c) all licenses thereunder and
together with the goodwill associated with and symbolized by such trademark.
"Tyco Parent" shall have the meaning assigned to it in the first
-----------
paragraph of this Agreement.
"Tyco Far East" shall mean Tyco (Far East) Limited, a Hong Kong
-------------
corporation.
"Tyco Hong Kong" shall mean Tyco (Hong Kong) Limited, a Hong Kong
--------------
corporation.
"Tyco Investment" shall mean Tyco Investment Corp., a Delaware
---------------
corporation.
"Tyco Parent Senior Subordinated Note Indenture" shall mean the
----------------------------------------------
Indenture, dated as of August 15, 1992, among Tyco Parent, as issuer, certain
Subsidiaries of Tyco Parent, as guarantors, and Bankers Trust Company, as
trustee (as successor trustee to NationsBank of Virginia, N.A.), with respect to
Tyco Parent's 10-1/8% Senior Subordinated Notes due August 15, 2002, as such
indenture was supplemented by two Supplemental Indentures, dated as of October
17, 1992 and as of June 8, 1993, respectively, adding additional Subsidiaries of
Tyco Parent as guarantors, and as such indenture shall be further amended,
modified or supplemented from time to time in accordance with the terms thereof
and hereof.
"UK Credit Agreement" shall mean the Guarantee and Revolving Credit
-------------------
Facility Agreement to be entered into among Tyco Toys (U.K.) Ltd., Matchbox
Toys, Ltd., the lenders party thereto from time to time, Lloyds Bank PLC, as
issuing bank, and GE Capital, as agent, as amended, modified or supplemented
from time to time in accordance with the terms thereof.
"UK Guaranty" shall mean a guaranty, substantially in the form of
-----------
Exhibit A-3 hereto, to be executed by each of Tyco Toys (U.K.) Ltd., Matchbox
- -----------
Toys, Ltd., Illco (U.K.) Ltd., Matchbox Collectibles (U.K.) Ltd. and Playtime
Toys UK Ltd. in favor of Agent, for the ratable benefit of Lenders, to secure
all or a portion of the Obligations, including all amendments, modifications and
supplements thereto, and shall refer to the respective UK Guaranty as the same
may be in effect at the time such reference becomes operative.
"Unfunded Pension Liability" shall mean, at any time, the aggregate
--------------------------
amount, if any, of the sum of (a) the amount by
A-28
<PAGE>
which the present value of all accrued benefits under each Title IV Plan exceeds
the fair market value of all assets of such Title IV Plan allocable to such
benefits in accordance with Title IV of ERISA, all determined as of the most
recent valuation date for each such Title IV Plan using the actuarial
assumptions in effect under such Title IV Plan, and (b) for a period of five (5)
years following a transaction reasonably likely to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by any
Borrower, other Loan Party, any Subsidiary thereof or any ERISA Affiliate as a
result of such transaction.
"Weekly Settlement Date" shall have the meaning assigned to it in
----------------------
Section 1.15(c).
- ---------------
"Welfare Plans" shall mean any welfare plan, as defined in Section
-------------
3(1) of ERISA, which is maintained or contributed to by any Borrower or other
Loan Party, any Subsidiary thereof or any ERISA Affiliate.
"Withdrawal Liability" shall mean, at any time, the aggregate amount
--------------------
of the liabilities, if any, pursuant to Section 4201 of ERISA, and any increase
in contributions pursuant to Section 4243 of ERISA with respect to all Multi-
employer Plans.
2. Certain Matters of Construction. (a) Except as otherwise set forth
-------------------------------
in Annex H, any accounting term used in the Agreement or the other Loan
-------
Documents shall have, unless otherwise specifically provided therein, the
meaning customarily given such term in accordance with GAAP.
(b) All other undefined terms contained in this Agreement or the other
Loan Documents shall, unless the context indicates otherwise, have the meanings
provided for by the Code as in effect in the State of New York to the extent the
same are used or defined therein.
(c) The words "herein," "hereof" and "hereunder" or other words of
similar import refer to this Agreement as a whole, including the annexes,
exhibits and schedules hereto, as the same may from time to time be amended,
modified or supplemented, and not to any particular section, subsection or
clause contained in this Agreement.
(d) For purposes of this Agreement and the other Loan Documents, the
following additional rules of construction shall apply: (i) wherever from the
context it appears appropriate, each term stated in either the singular or
plural shall include the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, the feminine
and the neuter; (ii) the term "including" shall not be limiting or exclusive,
unless specifically indicated to the
A-29
<PAGE>
contrary; (iii) all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations; and (iv) all
references to any instruments or agreements, including references to any of the
Loan Documents, shall include any and all modifications or amendments thereto
and any and all extensions or renewals thereof.
A-30
<PAGE>
Exhibit 10.47
EXECUTION COPY
RECEIVABLES TRANSFER AGREEMENT
Dated as of February 24, 1995
by and between
Tyco Industries, Inc.
and
Tyco Funding I Corporation
and
Tyco Funding II Corporation
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I ................................................................... 1
DEFINITIONS ................................................................. 1
SECTION 1.01. Definitions and Conventions ............................. 1
SECTION 1.02. Other Terms and Interpretation .......................... 16
SECTION 1.03. Rounding ................................................ 16
ARTICLE II .................................................................. 17
TRANSFERS OF RECEIVABLES .................................................... 17
SECTION 2.01. Agreement to Transfer to TFC I .......................... 17
SECTION 2.02. Agreement to Transfer to TFC II ......................... 18
SECTION 2.03. Grant of Security Interest .............................. 20
ARTICLE III
CONDITIONS OF SALE .......................................................... 20
SECTION 3.01. Conditions Precedent to the Initial
Sale .................................................... 20
SECTION 3.02. Conditions Precedent to All Sales ....................... 22
ARTICLE IV .................................................................. 23
REPRESENTATIONS, WARRANTIES AND COVENANTS ................................... 23
SECTION 4.01. Representations and Warranties of the
Company ................................................. 24
SECTION 4.02. Covenants of the Company ................................ 36
SECTION 4.03. Negative Covenants of the Company ....................... 45
SECTION 4.04. Restatement of Representations,
Warranties and Covenants ................................ 47
SECTION 4.05. Breach of Representations, Warranties or
Covenants ............................................... 47
ARTICLE V ................................................................... 48
TFC I LOANS TO THE COMPANY .................................................. 48
SECTION 5.01. TFC I Loans ............................................. 48
SECTION 5.02. Notices Relating to Loans ............................... 48
SECTION 5.03. Disbursement of Loan Proceeds ........................... 48
SECTION 5.04. Company Note I .......................................... 49
SECTION 5.05. Principal Repayments .................................... 49
SECTION 5.06. Interest ................................................ 49
SECTION 5.07. Time and Method of Payments ............................. 50
ARTICLE VI
TFC II LOANS TO THE COMPANY ................................................. 50
SECTION 6.01. TFC II Loans ............................................ 50
SECTION 6.02. Notices Relating to Loans ............................... 50
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 6.03. Disbursement of Loan Proceeds ........................... 51
SECTION 6.04. Company Note II ......................................... 51
SECTION 6.05. Principal Repayments .................................... 51
SECTION 6.06. Interest ................................................ 51
SECTION 6.07. Time and Method of Payments ............................. 52
ARTICLE VII
COLLATERAL SECURITY ......................................................... 52
SECTION 7.01. Security Interest ....................................... 52
SECTION 7.02. Other Collateral; Rights in Receivables ................. 53
SECTION 7.03. Indebtedness Secured .................................... 53
SECTION 7.04. Further Action Evidencing Security
Interest ................................................ 53
ARTICLE VIII
INDEMNIFICATION ............................................................. 54
SECTION 8.01. Indemnification ......................................... 54
SECTION 8.02. Assignment of Indemnities ............................... 55
ARTICLE IX
MISCELLANEOUS ............................................................... 56
SECTION 9.01. Notices, Etc ............................................ 56
SECTION 9.02. No Waiver; Remedies ..................................... 56
SECTION 9.03. Binding Effect; Assignability ........................... 57
SECTION 9.04. No Proceedings .......................................... 57
SECTION 9.05. Amendments; Consents and Waivers ........................ 57
SECTION 9.06. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL .................................... 57
SECTION 9.07. Execution in Counterparts;
Severability ............................................ 58
SECTION 9.08. Descriptive Headings .................................... 58
SECTION 9.09. No Setoff ............................................... 58
SECTION 9.10. Further Assurances ...................................... 58
SECTION 9.11. Third-Party Beneficiaries ............................... 59
SECTION 9.12. Assignment of Agreement ................................. 59
EXHIBIT 1A
[FORM OF ASSIGNMENT I] ...................................................... 62
EXHIBIT 1B
[FORM OF ASSIGNMENT II] ..................................................... 63
EXHIBIT 2A
[FORM OF COMPANY NOTE I] .................................................... 64
EXHIBIT 2B
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
[FORM OF COMPANY NOTE II] ................................................... 67
EXHIBIT 3
FORM OF LOCKBOX AGREEMENT ................................................... 70
EXHIBIT 4
FORM OF OPINION OF COUNSEL OF COMPANY ....................................... 71
SCHEDULE I
[Form of] Written Contracts ................................................. 75
SCHEDULE II
[Form of] Collection Policy ................................................. 76
SCHEDULE III
Addresses of Company ........................................................ 77
SCHEDULE IV
LockBox Banks and LockBox Accounts of Company ............................... 78
SCHEDULE V
Trade Names,"Doing Business Names", Fictitious Names and Assumed
Names of the Company ........................................................ 79
</TABLE>
iii
<PAGE>
Exhibit 10.47
RECEIVABLES TRANSFER AGREEMENT, dated as of February 24, 1995 (this
"Agreement"), among TYCO INDUSTRIES, INC. (the "Company"), a Delaware
corporation, TYCO FUNDING I CORPORATION, a Delaware corporation ("TFC I") and
TYCO FUNDING II CORPORATION ("TFC II"), a Delaware corporation (TFC I and TFC
II, collectively, the "Funding Corporations").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Funding Corporations have been formed for the sole
purpose of purchasing and acquiring by capital contribution, and financing such
purchases by borrowing funds from Redwood Receivables Corporation ("Redwood")
and granting to Redwood a security interest in, all trade receivables originated
by the Company and Tyco Manufacturing Corp.; and
WHEREAS, the Company intends to sell, or otherwise contribute, and the
Funding Corporations intend to purchase, or otherwise have contributed to them,
such trade receivables, from time to time, as described herein;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions and Conventions. As used herein, the
---------------------------
following terms shall have the following meanings:
"Accession Agreement" means an Accession Agreement substantially in
-------------------
the form of Exhibit A to the Collateral Agent Agreement.
"Accumulated Funding Deficiency" shall have the meaning provided in
------------------------------
Section 412 of the Code and Section 302 of ERISA, whether or not waived.
"Advance" means each of the advances made by Redwood to either TFC I
-------
or TFC II under the Funding Agreement.
"Advances Outstanding" means, with respect to each Funding
--------------------
Corporation, for any day, the aggregate principal amount of Advances outstanding
on such day to such Funding Corporation, after giving effect to all repayments
by and issuances of Advances to such Funding Corporation on such day; provided,
however, that Advances which have been paid with proceeds of a payment under the
Policy shall continue to remain Advances Outstanding for purposes of this
Agreement until FSA has been paid as subrogee to the rights of Redwood as Lender
under the
<PAGE>
Funding Agreement or reimbursed pursuant to the Insurance and Indemnity
Agreement for all payments under the Policy used to repay such Advances and all
amounts due in connection therewith under the Insurance and Indemnity Agreement,
as evidenced by a written notice from FSA delivered to the Operating Agent, and
FSA shall be deemed to be the "Lender" thereof (as that term is used in the
Funding Agreement) to the extent of any payments thereon made by FSA.
"Adverse Claim" means any claim of ownership or any lien, security
-------------
interest, title retention, trust or other charge or encumbrance, or other type
of preferential arrangement having the effect or purpose of creating a lien or
security interest, other than the security interest created under the Funding
Agreement.
"Affected Party" means Redwood, the Collateral Agent, the Liquidity
--------------
Agent, any of the Liquidity Lenders, the Operating Agent, any of the Letter of
Credit Providers, FSA or any affiliate of the foregoing persons.
"Affiliate" means, as to any Person, any other Person that, directly
---------
or indirectly, is in control of, is controlled by, or is under common control
with, such Person within the meaning of control under Section 15 of the
Securities Act of 1933, as amended.
"Agreement" means this Receivables Transfer Agreement between the
---------
Company and the Funding Corporations.
"Assignment I" has the meaning specified in Section 2.01(c).
------------
"Assignment II" has the meaning specified in Section 2.02(c).
-------------
"Assignments" means Assignment I and Assignment II, collectively.
-----------
"Billed Amount" means, with respect to any Receivable, the net amount
-------------
billed on the Billing Date to the related Obligor with respect thereto.
"Billing Date" means the date on which the invoice with respect to a
------------
Receivable was generated.
"Borrowing Base Certificate" means the certificate designated as such
--------------------------
pursuant to the Funding Agreement.
"Business Day" means any day of the year, other than a Saturday or
------------
Sunday, that in the City of New York is neither a
2
<PAGE>
legal holiday nor a day on which banking institutions are authorized or
obligated by law or executive order to be closed.
"Code" means the Internal Revenue Code of 1986, including, unless the
----
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Collateral" has the meaning specified in Section 7.01.
----------
"Collateral Agent" means GE Capital or such other party designated as
----------------
agent for Redwood and FSA and the other secured parties under the Collateral
Agent Agreement and this Agreement.
"Collateral Agent Agreement" means the Amended and Restated Collateral
--------------------------
Agent and Security Agreement, dated as of February 24, 1995, entered into by
Redwood with the Collateral Agent, the Letter of Credit Agent, the Liquidity
Agent, the Depositary and each Transaction Credit Provider, as amended,
modified, restated or supplemented from time to time.
"Collateral Obligations" means all obligations of the Company under
----------------------
Sections 4.05 and 8.01.
"Collection Account" means the deposit or trust account maintained
------------------
with the Depositary as described in Section 6.01(b) of the Funding Agreement.
"Collections" means, with respect to any Receivable, all collections
-----------
and other Proceeds of such Receivable (including late charges, fees and interest
arising thereon and all recoveries with respect to Receivables that have been
written off as uncollectible but excluding the Sale Price therefor).
"Commercial Paper" means commercial paper issued by Redwood.
----------------
"Commitment Termination Date" means the earlier of (a) the date so
---------------------------
designated pursuant to Section 9.01 of the Funding Agreement as a result of a
Termination Event and (b) the Termination Date; provided, however, that if each
of the Funding Corporations has not on or before the 270th day prior to the
Termination Date (i) entered into an agreement with Redwood, the Operating Agent
and FSA renewing or extending the Termination Date, or (ii) entered into a firm
commitment with a counterparty, acceptable to the Operating Agent and FSA, to
purchase from Redwood at par plus accrued interest all Advances Outstanding as
of the Termination Date, then if the Commitment Termination Date has not already
occurred pursuant to clause (a), the Commitment Termination Date shall be the
date that is the last day of the Clean Down Period Part 3 (as defined in the
Funding Agreement) occurring in the year 2000, but in no event later that April
1, 2000.
3
<PAGE>
"Commonly Controlled Entity" means the Company and any entity, whether
--------------------------
or not incorporated, affiliated with the Company pursuant to Section 414(b),
(c), (m) or (o) of the Code.
"Company" means Tyco Industries, Inc. as the transferor of Receivables
-------
under this Agreement.
"Company Interest Rate" has the meaning specified in Section 5.06.
---------------------
"Company Note I" has the meaning specified in Section 5.04.
--------------
"Company Note II" has the meaning specified in Section 6.04.
---------------
"Contract" means an agreement (or agreements) (including invoices)
--------
pursuant to, or under which, an Obligor shall be obligated to pay for services
rendered or merchandise or goods sold to such Obligor by the Company from time
to time.
"Contributed Receivables" means the Tier I Contributed Receivables and
-----------------------
the Tier II Contributed Receivables, collectively.
"Credit and Collection Policies" means the credit, collection,
------------------------------
customer relations and service policies of the Company in effect on the
Effective Date, as set forth in writing and delivered to Redwood, the Operating
Agent, the Collateral Agent and FSA on or before the Effective Date pursuant to
Section 3.01(p) of the Funding Agreement, and as such policies may hereafter be
amended, modified or supplemented from time to time with the prior written
consent of the Operating Agent and FSA.
"Dealer Agreement" means any dealer agreement entered into by Redwood
----------------
for the distribution of Commercial Paper.
"Debt" of any Person means (a) indebtedness of such Person for
----
borrowed money, (b) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) obligations of such Person to pay the
deferred purchase price of property or services (excluding trade payables
incurred in the ordinary course of business), (d) obligations of such Person as
lessee under leases which have been or should be, in accordance with GAAP,
recorded as capital leases, (e) obligations secured by any lien or other charge
upon property or assets owned by such Person, even though such Person has not
assumed or become liable for the payment of such obligations, (f) obligations of
such Person under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or obligations of
others of the
4
<PAGE>
kinds referred to in clauses (a) through (e) above, and (g) liabilities in
respect of unfunded vested benefits under plans covered by ERISA. For the
purposes hereof, the term "guarantee" shall include any agreement, whether such
agreement is on a contingency or otherwise, to purchase, repurchase or otherwise
acquire Debt of any other Person, or to purchase, sell or lease, as lessee or
lessor, property or services, in any such case primarily for the purpose of
enabling another person to make payment of Debt, or to make any payment (whether
as an advance, capital contribution, purchase of an equity interest or
otherwise) to assure a minimum equity, asset base, working capital or other
balance sheet or financial condition, in connection with the Debt of another
Person, or to supply funds to or in any manner invest in another Person in
connection with Debt of such Person.
"Defaulted Receivable" means a Receivable (a) as to which any payment,
--------------------
or part thereof, remains unpaid for more than 90 days from the Maturity Date for
such Receivable, or (b) as to which the Obligor thereof has taken any action, or
suffered any event to occur, of the type described in Section 9.01(c) of the
Funding Agreement (except that such action or event shall be taken by or occur
with respect to such Obligor, rather than by or to the parties mentioned in such
Section), or (c) which otherwise would be determined to be uncollectible and
written off in accordance with the Credit and Collection Policies.
"Depositary" means Bankers Trust Company, or any other Person
designated as the successor Depositary from time to time in its capacity as
issuing and paying agent or trustee in connection with the issuance of
Commercial Paper by Redwood.
"Depositary Agreement" means the Depositary Agreement, dated as of
--------------------
March 15, 1994, between Redwood and the Depositary and consented to by the
Liquidity Agent.
"Dollar" and "$" means lawful currency of the United States of
------
America.
"Effective Date" means the date of this Agreement.
--------------
"Eligible Customer" means any Obligor which is not an Excluded
-----------------
Customer.
"Eligible Receivable" has the meaning specified in the Funding
-------------------
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
it may be amended from time to time, and the regulations promulgated thereunder.
5
<PAGE>
"Event of Servicer Termination" has the meaning specified in Section
-----------------------------
9.02 the Funding Agreement.
"Excluded Customer" means an Obligor which is (a) an Affiliate of the
-----------------
Company or TFC I or TFC II, (b) a Governmental Authority, (c) domiciled outside
the United States or (d) an Obligor listed on Schedule 3 to the Funding
Agreement as revised from time to time in good faith by or with the prior
written consent of the Operating Agent and FSA pursuant to a letter in the form
of Annex A thereto.
"Excluded Receivables" means any Receivables agreed by the Company and
--------------------
either TFC I or TFC II, as the case may be, with the prior written consent of
the Operating Agent and FSA, to be excluded from any Sale or contribution.
"FSA" means Financial Security Assurance Inc., a stock insurance
---
company organized and created under the laws of the State of New York, and any
successors thereto or assigns thereof.
"Funding Agreement" means the Receivables Funding and Servicing
-----------------
Agreement, dated as of February 24, 1995 among the Funding Corporations (as
Borrowers), Redwood (as Lender), the Operating Agent, the Collateral Agent, FSA
and the Company (as Servicer).
"Funding Corporations" means, collectively TFC I and TFC II.
--------------------
"Funding Excess" means a Borrowing Excess as defined in the Funding
--------------
Agreement.
"GAAP" means generally accepted accounting principles as in effect in
----
the United States, consistently applied, as of the date of such application.
"GE Capital" means General Electric Capital Corporation.
----------
"Governmental Authority" means the United States of America, any
----------------------
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions thereof
or pertaining thereto.
"Governmental Consents" has the meaning specified in Section
---------------------
4.01(a)(xv).
"Income Discount Amount" means the amount calculated by the Operating
----------------------
Agent as set forth on Schedule 4 to the Funding Agreement, from time to time, at
its discretion, subject, with respect to Items E to H inclusive in the "Input
Table" of such
6
<PAGE>
Schedule 4 and the definitions set forth on such Schedule 4 relating to such
items, to the subsequent written notice to FSA and, upon notice by FSA to the
Operating Agent to the prior written consent of FSA to the next succeeding
calculation.
"Indemnified Amounts" has the meaning specified in Section 8.01.
-------------------
"Indemnified Party" has the meaning specified in Section 8.01.
-----------------
"Insurance and Indemnity Agreement" means the agreement of that name
---------------------------------
among the Funding Corporations, Redwood, GE Capital, the Servicer and FSA, dated
as of February 24, 1995.
"Intercreditor Agreement" means the Intercreditor Agreement, dated as
-----------------------
of February 24, 1995, among the Company, Tyco Manufacturing, Corp., the Funding
Corporations, Redwood, FSA, GE Capital and other parties.
"Lender Secured Parties" has the meaning given to that term in the
----------------------
Funding Agreement.
"Letter of Credit" means the letter of credit, dated April 12, 1994,
----------------
provided by the Letter of Credit Provider pursuant to the Letter of Credit
Agreement.
"Letter of Credit Agent" means GE Capital, in its capacity as agent
----------------------
for the Letter of Credit Providers under the Letter of Credit Agreement, and its
successors and permitted assigns in such capacity.
"Letter of Credit Agreement" means the Amended and Restated Letter of
--------------------------
Credit Reimbursement Agreement, dated as of February 24, 1995, entered into by
Redwood, the Letter of Credit Agent and the Letter of Credit Provider for the
provision of credit support for the Commercial Paper and the Liquidity Loans.
"Letter of Credit Provider" means, initially, GE Capital, as provider
-------------------------
of the Letter of Credit under the Letter of Credit Agreement, and thereafter its
successors and any permitted assigns in such capacity.
"Liquidity Agent" means GE Capital and its successors and assigns as
---------------
agent for the Liquidity Lenders pursuant to the Liquidity Loan Agreement.
"Liquidity Loan Agreement" means the Amended and Restated Liquidity
------------------------
Loan Agreement, dated as of February 24, 1995, entered into by Redwood, the
Liquidity Agent and the Liquidity Lenders in connection with the provision of
liquidity support for Redwood.
7
<PAGE>
"Liquidity Lenders" means, collectively, GE Capital and any other
-----------------
provider of liquidity loans under the Liquidity Loan Agreement.
"Liquidity Loans" means borrowings by Redwood under the Liquidity Loan
---------------
Agreement.
"Lockbox" has the meaning specified in Section 4.02(b).
-------
"Lockbox Account" means a segregated deposit account described in
---------------
Section 6.01(a) of the Funding Agreement in the name of the Collateral Agent,
into which all Collections in respect of Transferred Receivables owned by such
Funding Corporation shall be deposited, subject to and in accordance with such
Section 6.01.
"Lockbox Agreement" means the agreement among either TFC I or TFC II,
-----------------
as the case may be, the Operating Agent, Redwood, and a Lockbox Bank with
respect to the Lockbox Account associated with such Funding Corporation, in the
form of Exhibit 3 hereto.
"Lockbox Bank" means any of the banks approved in writing by FSA
------------
holding one or more Lockbox Accounts.
"Material Adverse Effect" means, with respect to any event or
-----------------------
circumstance and any Person, a material adverse effect with respect to:
(a) the business, financial condition, operations or assets of such
Person, or of such Person and such Person's Subsidiaries on a consolidated
basis or Tyco Industries, Inc., Tyco Investment Corp., Tyco Manufacturing
Corp., Tyco Distribution Corp., Matchbox (USA) Ltd. or Tyco Playtime, Inc.;
(b) the ability of such Person to perform its obligations under any
Related Document, any Program Document, the Receivables Transfer Agreements
or the Contracts;
(c) the validity or enforceability of, or collectibility of amounts
payable under, the Receivables Transfer Agreements, any Related Document or
any Program Document;
(d) the Receivables or the status, existence, perfection or first
priority of FSA's, Redwood's or the Collateral Agent's interest in the
Receivables, taken as a whole, free from any Adverse Claim;
8
<PAGE>
(e) the validity, enforceability or collectibility of the Receivables
or Contracts;
(f) the ability of FSA, Redwood or the Collateral Agent to liquidate,
or foreclose against, the Transferred Receivables;
(g) the practical realization by FSA, Redwood or the Collateral Agent
of any of the benefits or security afforded under the Receivables Transfer
Agreements, any Related Document or any Program Document; or
(h) the shadow rating assigned by either Rating Agency to the credit
risk exposure of FSA, if such adverse effect on the shadow rating is
notified to the Company by FSA.
"Maturity Date", for any Receivable, means the due date for payment
-------------
specified in the related Contract, or, if no date is specified, 60 days from the
Billing Date.
"Maximum Facility Commitment" has the meaning specified in the Funding
---------------------------
Agreement.
"Multiemployer Plan" means a multiemployer plan (within the meaning of
------------------
Section 4001(a)(3) of ERISA) in respect of which a Commonly Controlled Entity
makes contributions or has liability.
"Obligor" means, with respect to any Receivable, the Person primarily
-------
obligated to make payments in respect thereof.
"Operating Agent" means GE Capital as operating agent pursuant to the
---------------
Funding Agreement, together with its successors and assigns.
"Operating Agent Agreement" means the Operating Agent Agreement, dated
-------------------------
as of March 15, 1994, between Redwood and the Operating Agent.
"Outstanding Balance" of any Receivable at any time means an amount
-------------------
(not less than zero) equal to (a) its Billed Amount minus (b) all payments
received from the Obligor with respect thereto minus (c) all discounts to or any
other modifications that reduce the Billed Amount; provided, that if the
--------
Operating Agent or the Servicer makes a determination that all payments by the
Obligor with respect to such Billed Amount have been made, the Outstanding
Balance shall be zero.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
----
agency, corporation or instrumentality of the United States to which the duties
and powers of the Pension Benefit Guaranty Corporation are transferred.
9
<PAGE>
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust, association, joint venture,
Governmental Authority or any other entity of whatever nature.
"Plan" means any pension plan (other than a Multiemployer Plan)
----
covered by Title IV of ERISA, which is maintained by a Commonly Controlled
Entity or in respect of which a Commonly Controlled Entity has liability.
"Policy" means, collectively, the financial guaranty insurance
------
policies Nos. 50352A-N and 50352B-N issued by FSA with respect to each Note (as
defined in the Funding Agreement) pursuant to the Insurance and Indemnity
Agreement, including any endorsement thereto.
"Premium" has the meaning specified in the Insurance and Indemnity
-------
Agreement.
"Premium Letter" means the side letter dated as of February 24, 1995
--------------
among FSA, GE Capital in its capacity as Operating Agent and Collateral Agent,
Redwood and the Funding Corporations in respect of the premium payable by the
Funding Corporations in consideration of the issuance of the Policy.
"Proceeds" means, with respect to any Receivable, whatever is
--------
receivable or received when such Receivable is sold, collected, exchanged or
otherwise disposed of, whether such disposition is voluntary or involuntary, and
includes all rights to payment, including returned premiums, with respect to any
insurance relating to such Receivable but excludes the Sale Price and the
Advances.
"Program Documents" means the Letter of Credit Agreement, the
-----------------
Liquidity Loan Agreement, the Depositary Agreement, the Commercial Paper, the
Operating Agent Agreement, each Accession Agreement, and the Dealer Agreements.
"Purchase Price Calculation Date" has the meaning specified in Section
-------------------------------
2.01(c) with respect to Tier I Receivables and the meaning specified in Section
2.02(c) with respect to Tier II Receivables, respectively.
"Receivable" means: (a) indebtedness of an Obligor (whether
----------
constituting an account, chattel paper, instrument or general intangible)
arising from the provision of merchandise, goods or services by the Company to
such Obligor (other than the provision of goods or services to Tyco Toys, Inc.
or any Affiliate thereof), including the right to payment of any interest or
finance charges and other obligations of such Obligor with respect thereto;
10
<PAGE>
(b) all security interests or liens and property subject thereto from
time to time purporting to secure payment by the Obligor;
(c) all guarantees, indemnities and warranties and proceeds thereof,
proceeds of insurance policies, financing statements and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of such Receivable;
(d) all Collections with respect to any of the foregoing;
(e) all Records with respect to any of the foregoing; and
(f) all Proceeds of any of the foregoing.
"Receivables" means the Tier I Receivables and the Tier II
-----------
Receivables, collectively.
"Receivables Transfer Agreements" means this Agreement and that
-------------------------------
certain Receivables Transfer Agreement, dated as of February 24, 1995 among Tyco
Manufacturing Corp., TFC I and TFC II.
"Records" means all Contracts and other documents, agreements, books,
-------
records and other information (including, without limitation, computer programs,
tapes, disks, punch cards, data processing software and related property and
rights) prepared and maintained by the Company, the Servicer or either of the
Funding Corporations with respect to Receivables and the related Obligors.
"Redwood" means Redwood Receivables Corporation, a Delaware
-------
corporation.
"Related Documents" means the Assignments, the Insurance and Indemnity
-----------------
Agreement, the Policy, the Premium Letter, each Lockbox Agreement, the Funding
Agreement, the Intercreditor Agreement and all agreements, instruments,
certificates, financing statements or other documents required to be delivered
hereunder or thereunder.
"Reportable Event" means any of the events set forth in Section
----------------
4043(b) of ERISA or the regulations thereunder.
"Requested Amount" means the amount which the Company requested to
----------------
receive on any Purchase Price Calculation Date, pursuant to a Request Notice,
from the sale of Receivables on the related Sale Date.
11
<PAGE>
"Request Notice" means a notice in the form of a computer print-out,
--------------
tape or other form acceptable to the Funding Corporations and the Operating
Agent, which (a) by reference to an invoice register and file or microfiche of
actual invoices, (i) enables each of TFC I or TFC II, as the case may be, and
the Operating Agent to identify all Receivables to be sold or contributed on the
succeeding Sale Date by the Company to each of TFC I or TFC II, as the case may
be, and the Required Information with respect thereto and (ii) sets forth the
amount of payments received on each Transferred Receivable since the prior
Purchase Price Calculation Date and (b) sets forth the Requested Amount for the
succeeding Purchase Price Calculation Date.
"Request Notice Date" has the meaning set forth in Section 2.01(c)
-------------------
with respect to Tier I Receivables and the meaning set forth in Section 2.02(c)
with respect to Tier II Receivables.
"Required Information" means, with respect to a Receivable, (a) the
--------------------
Obligor, (b) the Obligor's address, (c) the invoice number, (d) the Billed
Amount, (e) the Maturity Date, (f) the Billing Date and (g) whether or not such
Receivable is an Eligible Receivable.
"Restrictions on Transferability" means any material condition to, or
-------------------------------
restriction on, the ability of the holder or an assignee of the holder of any
right, title or interest to sell, assign, transfer or otherwise liquidate such
right, title or interest in a commercially reasonable time and manner or which
would otherwise materially deprive the holder or any assignee of the holder of
the benefits thereof.
"Sale" means a sale of Receivables by the Company to either TFC I or
----
TFC II pursuant to Section 2.01 or Section 2.02, respectively.
"Sale Date" has the meaning specified in Section 2.01(b) with respect
---------
to Tier I Receivables and the meaning specified in Section 2.02(b) with respect
to Tier II Receivables, respectively.
"Sale Price" means with respect to the Eligible Receivables to be sold
----------
by the Company to the Funding Corporations on any day the price calculated by
TFC I or TFC II, as the case may be, and approved from time to time by the
Operating Agent with the consent of FSA, equal to:
(a) the Outstanding Balance of Eligible Receivables to be sold by the
Company to the Funding Corporations on such date, minus
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<PAGE>
(b) the expected costs to be incurred by the Funding Corporations of
financing such purchase of such Sold Receivables until the Outstanding
Balance of such Sold Receivables is paid in full, minus
(c) the portion of such Sold Receivables that are reasonably expected
by the Company to become Defaulted Receivables, minus
(d) the portion of such Sold Receivables that are reasonably expected
by the Company to be reduced by means other than by the receipt of
Collections on such Sold Receivables or pursuant to (c) above,
in each of (b), (c) and (d) determined based on historical experience by the
Company;
"Security Agreement" means the agreement dated as of February 24, 1995
------------------
between Tyco Manufacturing, Tyco Distribution Corp. and other parties, in favor
of GE Capital.
"Security Interest" has the meaning specified in Section 7.01.
-----------------
"Servicer" means the Company as Servicer or any successor Servicer
--------
pursuant to the Funding Agreement.
"Settlement Period" means, in the case of the initial Settlement
-----------------
Period, the period beginning with the Effective Date to and including the last
day of the week in which such Effective Date occurs; with respect to the final
Settlement Period, the period ending on the Termination Date and beginning with
the first day of the week in which the Termination Date occurs; and with respect
to all other Settlement Periods, each week, unless (with respect to any of the
foregoing Settlement Periods) otherwise specified to be a month.
"Sold Receivables" means together, the Tier I Sold Receivables and the
----------------
Tier II Sold Receivables.
"Subsidiary" means, as to any Person, any corporation or other entity
----------
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Termination Date" means August 24, 2000.
----------------
"Termination Event" means any event designated as such in the Funding
-----------------
Agreement.
13
<PAGE>
"TFC I" means Tyco Funding I Corporation, as a purchaser and
-----
transferee of Receivables under this Agreement.
"TFC II" means Tyco Funding II Corporation, as a purchaser and
------
transferee of Receivables under this Agreement.
"TFC I Deferred Sale Price" means the portion of the Sale Price of
-------------------------
Tier I Sold Receivables sold on any Sale Date exceeding the amount of the Sale
Price under Section 2.01 to be paid in cash, which portion (computed as of the
related Purchase Price Calculation Date of such Receivables) when added to the
cumulative amount of all previous TFC I Deferred Sale Prices (after giving
effect to any repayment of amounts due thereunder) shall not exceed 25% of the
Outstanding Balance of such Tier I Transferred Receivables, provided that no
such 25% limit shall apply during any Clean Down Period. The obligations of TFC
I in respect of the TFC I Deferred Sale Price shall be evidenced by TFC I's
subordinated promissory note in the form of Exhibit 5 hereto.
"TFC II Deferred Sale Price" means the portion of the Sale Price of
--------------------------
Tier II Sold Receivables sold on any Sale Date exceeding the amount of the Sale
Price under Section 2.02 to be paid in cash, which portion (computed as of the
related Purchase Price Calculation Date of such Receivables) when added to the
cumulative amount of all previous TFC II Deferred Sale Prices (after giving
effect to any repayment of amounts due thereunder) shall not exceed 25% of the
Outstanding Balance of such Tier II Transferred Receivables, provided that no
such 25% limit shall apply during any Clean Down Period. The obligations of TFC
II in respect of the TFC II Deferred Sale Price shall be evidenced by TFC II's
subordinated promissory note in the form of Exhibit 5 hereto.
"TFC I Loan" has the meaning specified in Section 5.01.
----------
"TFC II Loan" has the meaning specified in Section 6.01.
-----------
"TFC Loans" means together the TFC I Loans and the TFC II Loans.
---------
"TFC Secured Obligations" means all obligations of every nature of the
-----------------------
Funding Corporations, collectively (other than to the Company or Servicer), now
or hereafter existing, under the Funding Agreement and any promissory note or
other document or instrument delivered pursuant to such documents, and all
amendments, extensions or renewals thereof, whether for principal, interest,
fees, expenses or otherwise, whether now existing or hereafter arising,
voluntary or involuntary, whether or not jointly owed with others, direct or
indirect, absolute or contingent, liquidated or unliquidated, and whether or not
from
14
<PAGE>
time to time decreased or extinguished and later increased, created or incurred
and all or any portion of such obligations that are paid, to the extent that all
or any part of such payment is avoided or recovered directly or indirectly from
Redwood, the Operating Agent, FSA or the Collateral Agent as a preference,
fraudulent transfer or otherwise.
"Tier I Contributed Receivable" has the meaning specified in Section
-----------------------------
2.01(l).
"Tier II Contributed Receivable" has the meaning specified in 2.02(l).
------------------------------
"Tier I Eligible Receivable" means any Eligible Receivable other than
--------------------------
an Eligible Receivable the Obligor of which is Toys'R'Us.
"Tier II Eligible Receivable" means any Eligible Receivable the
---------------------------
Obligor of which is Toys'R'Us.
"Tier I Receivable" means any Receivable other than a Receivable the
-----------------
Obligor of which is Toys'R'Us.
"Tier II Receivable" means any Receivable the Obligor of which is
------------------
Toys'R'Us.
"Tier I Sold Receivable" has the meaning specified in Section 2.01(c).
----------------------
"Tier II Sold Receivable" has the meaning specified in Section
-----------------------
2.02(c).
"Tier I Transferred Receivable" has the meaning specified in Section
-----------------------------
2.01(d).
"Tier II Transferred Receivable" has the meaning specified in Section
------------------------------
2.02(d).
"Toys'R'Us" means Toys'R'Us Inc., a Delaware corporation.
---------
"Transaction Credit" shall have the meaning ascribed to it in the
------------------
Collateral Agent Agreement.
"Transaction Credit Agreement" means any agreement executed by a
----------------------------
Transaction Credit Provider, the Operating Agent and Redwood for the provision
of Transaction Credit.
"Transaction Credit Provider" shall have the meaning such term has
---------------------------
pursuant to the Collateral Agent Agreement.
15
<PAGE>
"Transferred Receivables" means, together, the Tier I Transferred
-----------------------
Receivables and the Tier II Transferred Receivables.
"Transferred Receivables Balance" means at any time the aggregate
-------------------------------
Outstanding Balance of the Transferred Receivables less the Outstanding Balance
of Transferred Receivables constituting Defaulted Receivables.
"UCC" means, for any jurisdiction, the Uniform Commercial Code as from
---
time to time in effect in such jurisdiction.
"Underfunded Plan" means any Plan that has an Underfunding.
----------------
"Underfunding" means, with respect to any Plan, the excess, if any, of
------------
(a) the present value of all benefits under the Plan (based on the assumptions
used to fund the Plan pursuant to Section 412 of the Code) as of the most recent
valuation date over (b) the fair market value of the assets of such Plan as of
such valuation date.
"Wire Payments" has the meaning specified in Section 4.02(b).
--------------
SECTION 1.02. Other Terms and Interpretation. All accounting terms
------------------------------
not specifically defined herein shall be construed in accordance with GAAP. All
terms used in Article 9 of the UCC of the State of New York, and not
specifically defined herein, are used herein as defined in such Article 9. All
hourly references herein shall refer to New York City time. Except as otherwise
indicated, all agreements defined in this Agreement refer to the same as from
time to time amended or supplemented or as the terms of such agreements are
waived or modified in accordance with their terms. All weekly or monthly
references with respect to Tyco Toys, Inc., the Company, TFC I or TFC II herein
shall refer to fiscal weeks or months of Tyco Toys, Inc., the Company, TFC I or
TFC II, as the case may be.
SECTION 1.03. Rounding. For purposes of any calculations referred to
--------
in this Agreement (unless otherwise specified), (i) all percentages resulting
from such calculations will be rounded up, if necessary, to the nearest one ten-
thousandth of a percentage point (e.g. 9.87654% (or .0987654) being rounded up
to 9.8766% (or .098766)) and (ii) all Dollar amounts used in or resulting from
such calculations will be rounded up to the nearest cent (e.g., $1,057.373 being
rounded up to $1,057.38).
16
<PAGE>
ARTICLE II
TRANSFERS OF RECEIVABLES
SECTION 2.01. Agreement to Transfer to TFC I. (a) On the terms and
------------------------------
conditions of this Agreement, on and after the date of this Agreement until the
Commitment Termination Date, the Company agrees to sell or contribute to TFC I
each Tier I Receivable originated by the Company other than Excluded
Receivables.
(b) The Company shall, on each Business Day (each, a "Sale Date"),
(i) identify, at its option, a certain number of Transferred Receivables as
contributed to TFC I ("Tier I Contributed Receivables") and (ii) identify as
purchased all other Transferred Receivables not previously identified as
purchased or contributed, in each case in accordance with the procedures
described in this Section 2.01(b). Each such identification shall be made as of
the opening of business of the Servicer on each Business Day.b
(c) On the Effective Date and on a date occurring no less frequently
than weekly thereafter (each a "Request Notice Date") the Company shall deliver
to TFC I a Request Notice setting forth all outstanding Tier I Receivables
originated and owned by the Company through such date. No later than the
following Business Day (the "Purchase Price Calculation Date") TFC I and the
Company shall identify and mutually agree which Tier I Eligible Receivables
designated in such Request Notice were, since the last Purchase Price
Calculation Date, or are to be purchased and sold on such Purchase Price
Calculation Date (the "Tier I Sold Receivables"). The price paid for such Tier I
Sold Receivables shall be the Sale Price for such Tier I Sold Receivables. Such
Sale Price shall be paid by means of (i) an immediate cash payment to the
Company plus (ii) the TFC I Deferred Sale Price. The cumulative amount of all
TFC I Deferred Sale Prices shall be subject at all times to the limitations
contained in the definition thereof. On each Purchase Price Calculation Date,
such cumulative TFC I Deferred Sale Price shall be recalculated by the Servicer.
To the extent that the Sale Price for the Tier I Sold Receivables is less than
the fair market value thereof, the difference shall be deemed a capital
contribution by the Company to TFC I. On or before the Effective Date, the
Company and TFC I shall enter into a Certificate of Assignment I substantially
in the form of Exhibit 1A hereto ("Assignment I"). On each Sale Date the Tier I
Sold Receivables and Tier I Contributed Receivables shall be assigned, and on
the subsequent Purchase Price Calculation Date TFC I shall pay the Sale Price
for such Tier I Sold Receivables. The portion of the Sale Price which is to be
payable immediately in cash shall be payable by wire transfer on the Purchase
Price Calculation Date to an account designated by the Company (and approved by
the
17
<PAGE>
Operating Agent) on or before the Purchase Price Calculation Date.
(d) On and after each Business Day hereunder, TFC I shall own the
Tier I Sold Receivables and the Tier I Contributed Receivables which have been
(assuming compliance with the terms hereof) identified as being transferred to
TFC I under this Section 2.01 (each a "Tier I Transferred Receivable") and the
------------
Company shall not take any action inconsistent with such ownership and shall not
claim any ownership interest in any such Tier I Transferred Receivable.
(e) Until the occurrence of an Event of Servicer Termination or a
resignation pursuant to the Funding Agreement, the Company, as Servicer, shall
conduct the servicing, administration and collection of Tier I Transferred
Receivables and shall take, or cause to be taken, all such actions as may be
necessary or advisable to service, administer and collect such Tier I
Transferred Receivables, from time to time, all in accordance with (i) the terms
of the Funding Agreement, (ii) the Credit and Collection Policies and, to the
extent not in conflict therewith, customary and prudent servicing procedures for
trade receivables of a similar type and (iii) all applicable laws, rules and
regulations. Documents relating to Tier I Transferred Receivables shall be held
in trust by the Company, as Servicer, for the benefit of TFC I and its assignees
as the owners thereof, and possession of any incident relating to the Tier I
Transferred Receivables and Contracts so retained is for the sole purpose of
facilitating the servicing of the Tier I Transferred Receivables. Such retention
and possession thereof is at the will of TFC I and its assignees and in a
custodial capacity for their benefit only.
SECTION 2.02. Agreement to Transfer to TFC II. (a) On the terms and
-------------------------------
conditions of this Agreement, on and after the date of this Agreement until the
Commitment Termination Date, the Company agrees to sell or contribute to TFC II
each Tier II Receivable originated by the Company other than Excluded
Receivables.
(b) The Company shall, on each Business Day (each, a "Sale Date"),
(i) identify, at its option, a certain number of Transferred Receivables as
contributed to TFC II ("Tier II Contributed Receivables") and (ii) identify as
purchased all other Transferred Receivables not previously identified as
purchased or contributed, in each case in accordance with the procedures
described in this Section 2.02(b). Each such identification shall be made as of
the opening of business of the Servicer on each Business Day.
(c) On the Effective Date and on a date occurring no less frequently
than weekly thereafter (each a "Request Notice Date") the Company shall deliver
to TFC II a Request Notice
18
<PAGE>
setting forth all outstanding Tier II Receivables originated and owned by the
Company through such date. No later than the following Business Day (the
"Purchase Price Calculation Date") TFC II and the Company shall identify and
mutually agree which Tier II Eligible Receivables designated in such Request
Notice were, since the last Purchase Price Calculation Date, or are to be
purchased and sold on such Purchase Price Calculation Date (the "Tier II Sold
Receivables"). The price paid for such Tier II Sold Receivables shall be the
Sale Price for such Tier II Sold Receivables. Such Sale Price shall be paid by
means of (i) an immediate cash payment to the Company plus (ii) the TFC II
Deferred Sale Price. The cumulative amount of all TFC II Deferred Sale Prices
shall be subject at all times to the limitations contained in the definition
thereof. On each Purchase Price Calculation Date, such cumulative TFC II
Deferred Sale Price shall be recalculated by the Servicer. To the extent that
the Sale Price for the Tier II Sold Receivables is less than the fair market
value thereof, the difference shall be deemed a capital contribution by the
Company to TFC II. On or before the Effective Date, the Company and TFC II shall
enter into a Certificate of Assignment II substantially in the form of Exhibit
1B hereto ("Assignment II"). On each Sale Date the Tier II Sold Receivables and
Tier II Contributed Receivables shall be assigned, and on the subsequent
Purchase Price Calculation Date TFC II shall pay the Sale Price for such Tier II
Sold Receivables. The portion of the Sale Price which is to be payable
immediately in cash shall be payable by wire transfer on the Purchase Price
Calculation Date to an account designated by the Company (and approved by the
Operating Agent) on or before the Purchase Price Calculation Date.
(d) On and after each Business Day hereunder, TFC II shall own the
Tier II Sold Receivables and the Tier II Contributed Receivables which have been
(assuming compliance with the terms hereof) identified as being transferred to
TFC II under this Section 2.02 (each a "Tier II Transferred Receivable") and the
------------
Company shall not take any action inconsistent with such ownership and shall not
claim any ownership interest in any such Tier II Transferred Receivable.
(e) Until the occurrence of an Event of Servicer Termination or a
resignation pursuant to the Funding Agreement, the Company, as Servicer, shall
conduct the servicing, administration and collection of Tier II Transferred
Receivables and shall take, or cause to be taken, all such actions as may be
necessary or advisable to service, administer and collect such Tier II
Transferred Receivables, from time to time, all in accordance with (i) the terms
of the Funding Agreement, (ii) the Credit and Collection Policies and, to the
extent not in conflict therewith, customary and prudent servicing procedures for
trade receivables of a similar type and (iii) all applicable laws, rules and
regulations. Documents relating to Tier II Transferred
19
<PAGE>
Receivables shall be held in trust by the Company, as Servicer, for the benefit
of TFC II and its assignees as the owners thereof, and possession of any
incident relating to the Tier II Transferred Receivables and Contracts so
retained is for the sole purpose of facilitating the servicing of the Tier II
Transferred Receivables. Such retention and possession thereof is at the will
of TFC II and its assignees and in a custodial capacity for their benefit only.
SECTION 2.03. Grant of Security Interest. (a) It is the intention of
--------------------------
the parties hereto that each transfer of Transferred Receivables to be made
hereunder shall constitute a purchase and sale or capital contribution and not a
loan. In the event, however, that a court of competent jurisdiction were to hold
that any transaction provided for hereby constitutes a loan and not a purchase
and sale or capital contribution, this Agreement shall constitute a security
agreement under applicable law and the Company does hereby grant to TFC I, with
respect to the TFC I Transferred Receivables, and to TFC II, with respect to the
TFC II Transferred Receivables, a first priority security interest in all of the
Company's right, title and interest in, to and under such Transferred
Receivables, all payments of principal, interest, fees, charges and indemnities
on or under such Transferred Receivables and all proceeds of any such
Transferred Receivables.
(b) The Company acknowledges and consents to the security interest
over the Transferred Receivables created pursuant to Section 8.02 of the Funding
Agreement and acknowledges the rights of the Collateral Agent and FSA and the
covenants given by the Funding Corporations and Redwood in favor of the
Collateral Agent and FSA set forth in the Funding Agreement, and further
acknowledges and consents that each of the Collateral Agent and FSA shall be
entitled to enforce the provisions of this Agreement and the Related Documents
to which the Company is a party and shall be entitled to all the rights and
remedies of the Funding Corporations and Redwood hereunder and thereunder. In
addition, the Company hereby authorizes each of the Collateral Agent and FSA to
rely on the representations, warranties and covenants of the Company contained
in this Agreement and the Related Documents to which the Company is a party and
in any other certificates and documents furnished by the Company to any party in
connection herewith or therewith.
ARTICLE III
CONDITIONS OF SALE
SECTION 3.01. Conditions Precedent to the Initial Sale. The initial
----------------------------------------
Sale hereunder is subject to the following conditions precedent:
20
<PAGE>
(a) that each of the Funding Corporations shall have received on or
before the date of the initial Sale under this Agreement, each dated such date
(unless otherwise indicated), in form and substance satisfactory to each of the
Funding Corporations, the Operating Agent and FSA:
(i) the Assignments executed by the Company;
(ii) a copy of resolutions duly adopted by the Board of Directors of
the Company approving this Agreement, the Assignments and the other
documents to be delivered by it hereunder and the transactions and matters
contemplated hereby, certified by its Secretary or Assistant Secretary;
(iii) the charter, as amended, of the Company, certified by the
Secretary of State of its state of incorporation, dated not earlier than 30
days prior to the date of the initial Sale;
(iv) good standing certificates for the Company issued by the
Secretaries of States of Delaware, California, Georgia, Illinois, New
Jersey and Washington, each dated not earlier than 30 days prior to the
date of the initial Sale;
(v) a copy of the Company's by-laws, as amended, certified by its
Secretary or Assistant Secretary;
(vi) a certificate of the Secretary or Assistant Secretary of the
Company certifying the names and true signatures of the officers authorized
on its behalf to sign this Agreement, the Assignments, and the other
documents to be delivered by it hereunder (on which certificate the Funding
Corporations may conclusively rely until such time as the Funding
Corporations shall receive from the Company a revised certificate meeting
the requirements of this Subsection (vi)) and certifying that (A) the
charter of the Company has not changed since the date of the certificate
referred to in Section 3.01(a)(iii), (B) that the Company is still in good
standing in all jurisdictions, including, without limitation, those
referred to in Section 3.01(a)(iv), (C) all representations and warranties
made by the Company in this Agreement are true and correct in every
particular and (D) no financing statements or other similar instruments and
documents relating to the Receivables have been filed in any jurisdiction,
other than those financing statements, other similar instruments and
documents shown on the certified copies of the Requests for Information or
Copies provided pursuant to clause (ix);
(vii) copies of proper financing statements (Form UCC-1), dated on or
prior to the date of the initial Sale, naming the Company as the assignor
of the Receivables and
21
<PAGE>
TFC I, with respect to the Tier I Receivables, and TFC II, with respect to
the Tier II Receivables, as assignee, or other similar instruments or
documents, in form and substance sufficient for filing under the UCC or any
comparable law of any and all jurisdictions as may be necessary or, in the
opinion of the Operating Agent or FSA, desirable to perfect TFC I's
ownership interests in all Tier I Receivables and TFC II's ownership
interest in all TFC II Receivables, in each case in which an interest may
be assigned hereunder;
(viii) copies of properly executed termination statements or
statements of release (Forms UCC-2 or UCC-3) or other similar instruments
or documents, if any, in form and substance satisfactory for filing under
the UCC or any comparable law of any and all jurisdictions as may be
necessary or, in the opinion of the Operating Agent or FSA, desirable to
release all security interests and similar rights of any Person in the
Receivables previously granted by the Company;
(ix) certified copies of Requests for Information or Copies (Form UCC-
11) (or a similar search report certified by a party acceptable to the
Operating Agent and FSA), dated a date reasonably near and prior to the
date of the initial Sale, listing all effective financing statements and
other similar instruments and documents, including those referred to above
in Subsections (vii) and (viii) which name the Company (under its present
name and any previous name) as debtor and which are filed in the
jurisdictions in which filings are to be made pursuant to such Subsections
(vii) and (viii) above, together with copies of such financing statements,
none of which, except those filed pursuant to Subsections (vii) and (viii),
above, shall cover any Receivables;
(x) the Lock-Box Agreements with all the Lock-Box Banks, in each case
executed by the Company and acknowledged and agreed to by the applicable
Lock-Box Bank and dated on or before the date of the initial Sale, together
with an acknowledgment executed by the Operating Agent and Redwood;
(xi) a favorable opinion of Wolf, Block, Schorr and Solis-Cohen,
counsel to the Company, in substantially the form of Exhibit 4 hereto and
with respect to such other matters as the Operating Agent or FSA may
reasonably request.
SECTION 3.02. Conditions Precedent to All Sales. The obligation of
---------------------------------
TFC I or TFC II, as the case may be, to pay for each Sold Receivable on each
Purchase Price Calculation Date (including the initial Purchase Price
Calculation Date) shall be
22
<PAGE>
subject to the further conditions precedent (any one of which can be waived by
TFC I, with respect to transfers of Tier I Receivables, or TFC II, with respect
to Tier II Receivables, in each case, with the prior written consent of FSA)
that on such Purchase Price Calculation Date:
(a) The following statements shall be true (and delivery by the
Company of a Request Notice and the acceptance by the Company of the Sale Price
for any Receivables on any Purchase Price Calculation Date shall constitute a
representation and warranty by the Company that on such Purchase Price
Calculation Date such statements are true):
(i) the representations and warranties of the Company contained in
Section 4.01 shall be correct on and as of such Purchase Price Calculation
Date in all material respects (except with respect to Section 4.01(b) and
those already so qualified which are true and correct in all respects),
before and after giving effect to such Sale and to the application of
proceeds therefrom, as though made on and as of such date; and
(ii) no event has occurred, or would result from such Sale or from the
application of the proceeds therefrom, which constitutes a Termination
Event or would constitute a Termination Event but for the requirement that
notice be given or time elapse or both;
(iii) the Company is in compliance with each of its covenants and other
agreements set forth herein;
(iv) no event has occurred which constitutes an Event of Servicer
Termination or would constitute an Event of Servicer Termination but for
the requirement that notice be given or time elapse or both; and
(v) each Transferred Receivable designated as an Eligible Receivable
is an Eligible Receivable;
(b) The Commitment Termination Date shall not have occurred; and
(c) The Company shall have taken such other action, including delivery
of approvals, consents, opinions, documents and instruments to Redwood, the
Operating Agent and FSA, as the Operating Agent or FSA may reasonably request.
23
<PAGE>
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 4.01. Representations and Warranties of the Company. The
---------------------------------------------
Company represents and warrants to the Funding Corporations and FSA as of each
Purchase Price Calculation Date and each Sale Date, which representations and
warranties are or will be true and correct as of such Purchase Price Calculation
Date or each Sale Date, as the case may be, that:
(a) With respect to the Company:
(i) the Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly qualified to do business and is in good standing
in every jurisdiction in which the failure to be so qualified, separately
or in the aggregate, would have a Material Adverse Effect;
(ii) the Company has the power and authority to own, pledge,
mortgage, operate and convey all of its properties and assets and to
execute and deliver this Agreement and the Related Documents and to perform
the transactions contemplated hereby and thereby;
(iii) the Company is operated in such a manner that neither TFC I
nor TFC II would be substantively consolidated in the estate of the Company
(that is, in such a manner that the separate corporate existence of either
TFC I and the Company or TFC II and the Company, as the case may be, would
not be disregarded), in the event of a bankruptcy or insolvency of the
Company and in such regard:
(1) each of TFC I and TFC II is a limited purpose corporation
whose activities are restricted in its respective certificate of
incorporation;
(2) neither the Company or any Affiliate of the Company is
involved in the day-to-day management of either of the Funding
Corporations;
(3) other than the purchase and contribution of Receivables, TFC
Loans, and other transactions contemplated by the Receivables Transfer
Agreements, the payment of dividends and the return of capital, any
lease or sub-lease of office space or equipment, any common officers
or other employees and the payment of Servicing Fees (as defined in
the Funding Agreement) to the Servicer under the Funding Agreement,
neither of the Funding Corporations engages in any intercorporate
24
<PAGE>
transactions with the Company or any Affiliate of the Company;
(4) each of the Funding Corporations maintains separate corporate
records and books of account from the Company, holds regular corporate
meetings and otherwise observes corporate formalities and has a
separate business office from the Company;
(5) all the financial statements and books and records of the
Funding Corporations and the Company reflect the respective separate
corporate existence of each of the Funding Corporations;
(6) each of the Funding Corporations maintains its assets
separately from the assets of the Company and any other Affiliate of
the Company (including through the maintenance of separate bank
accounts), each of the Funding Corporations' funds and assets, and
records relating thereto, have not been, are not and will not be
commingled with those of the Company or any other Affiliate of the
Company and the separate creditors of each of the Funding Corporations
will be entitled to be satisfied out of that Funding Corporation's
assets prior to any value in that Funding Corporation becoming
available to that Funding Corporation's equityholders; each Funding
Corporation has, and will continue to have, assets other than assets
contributed by the Company;
(7) neither the Company nor any Affiliate of the Company (A) pays
either of the Funding Corporations' expenses; (B) guarantees either of
the Funding Corporations' obligations, or (C) advances funds to either
of the Funding Corporations for the payment of expenses or otherwise;
(8) all business correspondence of each of the Funding
Corporations and other communications are conducted in that Funding
Corporation's own name, on its own stationery and through a
separately-listed telephone number;
(9) neither TFC I nor TFC II acts as agent for the Company or of
any of its Affiliates, but instead each presents itself to the public
as a corporation separate from the Company and its Affiliates,
independently engaged in the business of purchasing and financing
Receivables; and
(10) each of TFC I and TFC II maintains two independent
directors, each of whom at all times who
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shall at no time be a shareholder, director, officer, employee or
associate of the Company or any Affiliate of the Company (other than
as a Director of that Funding Corporation or of the other Funding
Corporation) as provided in its certificate or articles of
incorporation.
(11) each Funding Corporation is solvent and will not be rendered
insolvent by the transactions contemplated by any of the Receivables
Transfer Agreements or the Related Documents and, after giving effect
to such transactions, neither Funding Corporation will be left with an
unreasonably small amount of capital with which to engage in its
business nor will either of the Funding Corporations have intended to
incur, or believe that it has incurred, debts beyond its ability to
pay such debts as they mature. Neither of the Funding Corporations
contemplates the commencement of insolvency, bankruptcy, liquidation
or consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of
that Funding Corporation or any of its assets.
(12) The Company is the owner of 100% of the Class A common stock
and 49% of the Class B common stock of both Funding Corporations.
(iv) the execution, delivery and performance by the Company of
this Agreement and the Related Documents and the transactions contemplated
hereby and thereby (A) have been duly authorized by all necessary corporate
or other action on the part of the Company, (B) do not contravene or cause
the Company to be in default under (1) the Company's certificate or
articles of incorporation or by-laws, (2) any contractual restriction with
respect to any Debt of the Company or contained in any indenture, loan or
credit agreement, lease, mortgage, security agreement, bond, note, or other
agreement or instrument binding on or affecting the Company or its property
or (3) any law, rule, regulation, order, writ, judgment, award, injunction
or decree applicable to, binding on or affecting the Company, its
Affiliates or their respective property and (C) do not result in or require
the creation of any Adverse Claim upon or with respect to any of its
properties (other than in favor of TFC I or TFC II with respect to this
Agreement and Redwood, FSA and the Collateral Agent under the Funding
Agreement);
(v) this Agreement and the Related Documents have each been duly
executed and delivered by the Company;
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(vi) no approval or consent of, notice to, filing with or
licenses, permits, qualifications or other action by any Governmental
Authority or any other party, is required or necessary for the conduct of
the Company's business as currently conducted and for the due execution,
delivery and performance by the Company of this Agreement or any of the
Related Documents or for the perfection of or the exercise by either TFC I
or TFC II, Redwood, the Operating Agent, FSA or the Collateral Agent of any
of their rights or remedies thereunder or hereunder, other than approvals,
consents, notices, filings and other actions which have been obtained or
made and complete copies of which have been provided to Redwood, the
Operating Agent, FSA and the Collateral Agent;
(vii) each of this Agreement, each other Related Document
delivered by the Company and the respective obligations of the Company
thereunder is the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its respective terms
subject to (i) any applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the enforceability of creditors' rights generally and (ii)
general equitable principles, whether applied in a proceeding at law or in
equity;
(viii) there is no pending or threatened, nor any reasonable basis
for any, action, suit or proceeding against or affecting the Company, its
officers or directors, or the property of the Company, in any court or
tribunal, or before any arbitrator of any kind or before or by any
Governmental Authority (A) asserting the invalidity of this Agreement or
any of the Related Documents, (B) seeking to prevent the sale, pledge or
contribution of any Receivable or the consummation of any of the
transactions contemplated hereby or thereby, (C) seeking any determination
or ruling that might materially and adversely affect (1) the performance by
either of the Funding Corporations or the Company of its obligations under
this Agreement or any of the Related Documents, (2) the validity or
enforceability of this Agreement or any of the Related Documents, (3) the
Receivables or the Contracts or the interests of either of the Funding
Corporations, Redwood, FSA or the Lender Secured Parties therein, or (4)
the federal income tax attributes of the contribution, sale or pledge of
the Transferred Receivables, (D) asserting a claim for payment of money in
excess of $10,000,000 (other than such judgments or orders in respect of
which adequate insurance is maintained by the Company for the payment in
full thereof) or (E) which is reasonably likely to have a Material Adverse
Effect;
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(ix) no injunction, writ, restraining order or other order of any
nature adverse to the Company or the conduct of its business or which is
inconsistent with the due consummation of the transactions contemplated by
this Agreement or the Funding Agreement or any of the other Related
Documents has been issued by a Governmental Authority nor been sought by
any Person;
(x) the principal place of business and chief executive office
of the Company are located at the address of the Company referred to in
this Agreement and there are now no, and during the past four months there
have not been any, other locations where the Company is located (as that
term is used in the UCC of the jurisdiction where such principal place of
business is located) or keeps Records;
(xi) the legal name of the Company is as set forth at the
beginning of this Agreement and the Company has not changed its name in the
last six years, and during such period the Company did not use, nor does
the Company now use, any tradenames, fictitious names, assumed names or
"doing business as" names, other than those contained in Schedule V hereto;
(xii) the Lockbox Accounts are the only lockbox accounts
maintained by the Company, either of the Funding Corporations or otherwise
in respect of the Transferred Receivables;
(xiii) the Company is solvent and will not become insolvent after
giving effect to the transactions contemplated by this Agreement and the
Related Documents; the Company is paying its Debts as they mature; the
Company has not incurred Debts beyond its ability to pay as they mature;
and the Company, after giving effect to the transactions contemplated by
this Agreement and the Related Documents, will have an adequate amount of
capital to conduct its business in the foreseeable future;
(xiv) for federal income tax, reporting and accounting purposes,
the Company will treat the sale of each Receivable sold or assigned
pursuant to this Agreement as a sale of, or absolute assignment of, its
full right, title and ownership interest in such Receivable to either TFC I
or TFC II, as the case may be, (and each Receivable contributed to either
of the Funding Corporations by the Company pursuant to this Agreement shall
be accounted for as an increase in the stated capital of such Funding
Corporation), and the Company has not in any other respect accounted for or
treated the transactions contemplated by this Agreement or the Related
Documents;
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(xv) the Company has complied in all respects with all applicable
laws, rules, regulations, and orders with respect to it, its business and
properties and all Receivables and related Contracts (including without
limitation, all applicable environmental, health and safety requirements)
and all restrictions contained in any indenture, loan or credit agreement,
mortgage, security agreement, bond, note or other agreement or instrument
binding on or affecting the Company or its property, and has and maintains
all permits, licenses, authorizations, registrations, approvals and
consents of Governmental Authorities for (A) the activities and business of
the Company and each of its Affiliates as currently conducted and as
proposed to be conducted, (B) the ownership, use, operation and maintenance
by each of them of its properties, facilities and assets and (C) the
performance by the Company and each of TFC I and TFC II of this Agreement
and the Related Documents (hereinafter referred to collectively as
"Governmental Consents"), with respect to which any non-compliance or
failure to maintain such items would, separately or in the aggregate, have
a Material Adverse Effect;
(xvi) no practice, procedure or policy employed or proposed to be
employed by the Company in the conduct of its business violates any law,
regulation, judgment, agreement, order or decree applicable to the Company
which, if enforced, would have a Material Adverse Effect;
(xvii) without limiting the generality of the prior representation,
no condition exists or event has occurred which, in itself or with the
giving of notice or lapse of time or both, would result in the suspension,
revocation, impairment, forfeiture or non-renewal of any Governmental
Consent applicable to the Company or any Subsidiary, except where such
conditions or events would not, separately or in the aggregate, have a
Material Adverse Effect;
(xviii) the Company has filed on a timely basis all tax returns
(federal, state and local) required to be filed and has paid or made
adequate provisions for the payment of all taxes, fees, assessments and
other governmental charges due from the Company; no tax lien or similar
Adverse Claim has been filed, and no claim is being asserted, with respect
to any such tax, fee, assessment, or other governmental charge except as
set forth on Schedule VI. Any taxes, fees, assessments and other
governmental charges payable by the Company in connection with the
execution and delivery of this Agreement and the Related Documents and the
transactions contemplated hereby or thereby have been paid or when due, to
the extent due at or prior to such Purchase Price Calculation Date;
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<PAGE>
(xix) with respect to each of the Funding Corporations, the
Servicer (if the Servicer is the Company), the Company and Tyco
Manufacturing Corp. or any of its Affiliates, there has occurred no event
which has or is reasonably likely to have a Material Adverse Effect on the
Company;
(xx) the Company is licensed or otherwise has the lawful right to
use all patents, trademarks, servicemarks, tradenames, copyrights,
technology, know-how and processes used in or necessary for the conduct of
its business as currently conducted which are material to its financial
condition, business, operations, assets and prospects, individually or
taken as a whole;
(xxi) (a) the consolidated balance sheets of Tyco Toys, Inc. and
its consolidated Subsidiaries for each of the last three fiscal years prior
to the balance sheet date are delivered prior to such Purchase Price
Calculation Date, and the related statements of income and shareholders'
equity of Tyco Toys, Inc. and its consolidated Subsidiaries for such fiscal
years, certified without qualification by Tyco Toys, Inc.'s independent
certified public accountants, copies of which have been furnished to
Redwood, FSA and the Operating Agent, are complete and correct and fairly
present the consolidated financial condition, business and results of
operations of Tyco Toys, Inc. and its consolidated Subsidiaries as of the
last day of such fiscal years and the consolidated results of the
operations of Tyco Toys, Inc. and its consolidated Subsidiaries for the
periods ended on such dates, all in accordance with GAAP, (b) the unaudited
consolidated balance sheets and the related statements of income and
shareholders' equity of Tyco Toys, Inc. and its consolidated Subsidiaries
for each fiscal quarter in the period since the most recent consolidated
balance sheet and related statement of income and shareholders' equity
referred to in clause (a) above and ended at least 45 days prior to such
Purchase Price Calculation Date, copies of which have been furnished to
Redwood, FSA and the Operating Agent, are complete and correct and fairly
present the consolidated financial condition, business and operations of
the Tyco Toys, Inc. and its consolidated Subsidiaries as of the last day of
such fiscal quarters and the consolidated results of the operations of the
Company and its consolidated Subsidiaries for the periods ended on such
dates, all in accordance with GAAP, and (c) since the last date for which a
balance sheet of the Company and its consolidated Subsidiaries has been
delivered to Redwood, FSA and the Operating Agent, there has, except as
disclosed to the Operating Agent and FSA, been no material adverse change
in any such condition, business or results of operations; neither Tyco Toys
nor its consolidated Subsidiaries have any
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contingent liabilities or commitments which, separately or in the
aggregate, is reasonably likely to have a Material Adverse Effect on such
entities;
(xxii) each Obligor of a Transferred Receivable has been directed,
and is required to, remit all payments with respect to such Receivable for
deposit in a Lockbox Account or a Lockbox;
(xxiii) each Request Notice contains a complete and accurate list of
all Tier I Transferred Receivables or Tier II Transferred Receivables
contributed or sold by the Company to TFC I or TFC II, respectively, as of
its date;
(xxiv) no Obligor of an Eligible Receivable being sold on the
related Sale Date has any claim against or affecting the Company or the
property of the Company;
(xxv) the Company is in compliance with ERISA and has not incurred
and does not expect to incur any liabilities (except for premium payments
arising in the ordinary course of business) to the Pension Benefit Guaranty
Corporation (or any successor thereof) under ERISA;
(xxvi) each pension plan or profit sharing plan to which the
Company or any Affiliate is a party has been administered and fully funded
in accordance with the obligations of the Company under law and as set
forth in such plan, and the Company has complied with the applicable
provisions of ERISA in effect as of such Purchase Price Calculation Date;
(xxvii) the Company has valid business reasons for selling or
contributing its interests in the Transferred Receivables rather than
obtaining a loan with the Transferred Receivables as collateral;
(xxviii) the Company has not agreed to pay any fee or commission to
any agent, broker, finder or other person for or on account of services
rendered as a broker or finder in connection with this Agreement or the
Related Documents or the transactions contemplated hereby or thereby which
would give rise to any valid claim against either of the Funding
Corporations for any brokerage commission or finder's fee or like payment;
(xxix) all information heretofore or hereafter furnished by the
Company to TFC I, TFC II, Redwood, the Operating Agent, FSA or the
Collateral Agent in connection with any transaction contemplated by this
Agreement or the Related Documents is and will be true and complete in all
material respects and does not and will not omit to state a
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material fact necessary to make the statements contained herein or therein
not misleading. With respect to the Company, Tyco Manufacturing or the
Funding Corporations there has occurred no event which has or is reasonably
likely to have a Material Adverse Effect on such entity;
(xxx) no part of the proceeds received by the Company or any
Affiliate from the Sale Price will be used directly or indirectly for the
purpose of purchasing or carrying, or for payment in full or in part of,
Debt that was incurred for the purposes of purchasing or carrying any
"margin stock," as such term is defined in (S) 221.3 of Regulation U of the
Board of Governors of the Federal Reserve System.
(xxxi) there are not now, nor will there be at any time in the
future, any agreement or understanding between the Company and either of
the Funding Corporations (other than as expressly set forth herein)
providing for the allocation or sharing of obligations to make payments or
otherwise in respect of any taxes, fees, assessments or other governmental
charges;
(xxxii) no transaction contemplated by this Agreement or any of
the Related Documents requires compliance with any bulk sales act or
similar law;
(xxxiii) the Request Notice with respect to such Purchase Price
Calculation Date is accurate in all material respects;
(xxxiv) each purchase of Receivables under the Receivables Transfer
Agreements will constitute (i) a "current transaction" within the meaning
of Section 3(a)(3) of the Securities Act of 1933, as amended, and (ii) a
purchase or other acquisition of notes, drafts, acceptances, open accounts
receivable or other obligations representing part or all of the sales price
of merchandise, insurance or services within the meaning of Section 3(c)(5)
of the Investment Company Act of 1940, as amended;
(xxxv) (i) the Company is not a party to any indenture, loan or
credit agreement or any lease or other agreement or instrument or subject
to any charter or corporation restriction that is reasonably likely to
have, and no provision of applicable law or governmental regulation is
reasonably likely to have, a material adverse effect on the condition
(financial or otherwise), business, operations or properties of the
Company, or could have such an effect on the ability of the Company to
carry out its obligations under this Agreement and the other Related
Documents to which the Company is a party and (ii) the
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Company is not in default under or with respect to any contract, agreement,
lease or other instrument to which the Company is a party and which is
material to the Company's condition (financial or otherwise), business,
operations or properties, and the Company has not delivered or received any
notice of default thereunder;
(xxxvi) the Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940,
as amended. The purchase or acquisition of the Transferred Receivables by
the Funding Corporations, the application of the proceeds and the
consummation of the transactions contemplated by this Agreement and the
other Related Documents to which the Company is a party will not violate
any provision of such Act or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder;
(xxxvii) the bylaws and/or the articles of incorporation of the
Company require it to maintain (A) correct and complete books and records
of account, and (B) minutes of the meetings and other proceedings of its
shareholders and board of directors; and
(xxxviii) Each of the representations and warranties of the Company
contained in this Agreement and the Related Documents is true and correct
in all material respects and the Company hereby makes each such
representation and warranty to, and for the benefit of, the Collateral
Agent, the Operating Agent, FSA and Redwood as if the same were set forth
in full herein.
(b) On each Sale Date and as of the date of each Borrowing Base
Certificate delivered under the Funding Agreement, with respect to each
Receivable designated as an Eligible Receivable:
(i) such Receivable is an Eligible Receivable, and is a
receivable created through the unconditional provision of merchandise,
goods or services by the Company in the ordinary course of its business in
a current transaction;
(ii) such Receivable was created in accordance with and satisfies
all applicable requirements of the Credit and Collection Policies;
(iii) if requested, a copy of any related Contract (if such
Contract exists in a reproducible form) to such Receivable to which the
Company is a party has been
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delivered to Redwood, the Operating Agent, FSA and the Collateral Agent;
(iv) such Receivable represents the genuine, legal, valid and
binding obligation in writing of the Obligor enforceable by the holder
thereof in accordance with its terms, and neither such Receivable nor its
related Contract has been satisfied, subordinated, rescinded or amended in
any manner, subject to (i) any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the enforceability of creditors' rights generally
and (ii) general equitable principles, whether applied in a proceeding at
law or in equity;
(v) neither such Receivable nor its related Contract is or will
be subject to any right of rescission, set-off, recoupment, counterclaim or
defense, whether arising out of transactions concerning the Contract or
otherwise;
(vi) prior to its sale or contribution to either TFC I or TFC II
such Receivable was owned by the Company free and clear of any Adverse
Claim or Restrictions on Transferability, and the Company had the right to
contribute, sell, assign and transfer the same and interests therein as
contemplated under this Agreement and, upon such sale or contribution, TFC
I or TFC II acquired good and marketable title to and a valid and the sole
record and beneficial ownership interest in such Receivable, free and clear
of any Adverse Claim and any other restriction on transferability;
(vii) this Agreement and the Assignment related to such Receivable
constitute a valid sale, contribution, transfer, assignment, setover and
conveyance to either TFC I or TFC II, as the case may be, of all right,
title and interest of the Company in and to such Receivable;
(viii) the Billed Amount of such Receivable is net of contractual
allowances, any offset or other modifications and such Receivable is
entitled to be paid pursuant to the terms of the related Contract, has not
been paid in full or been compromised, adjusted, extended, satisfied,
subordinated, rescinded or modified, and is not subject to compromise,
adjustment, extension, satisfaction, subordination, rescission or
modification by the Company or Tyco Manufacturing (in each case, excluding
any contractual allowances of the types set forth in Schedule 2 to the
Funding Agreement granted by the Company or Tyco Manufacturing in the
ordinary course of its business and in accordance with the Credit and
Collection Policies, which
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<PAGE>
allowances shall by typical for businesses similar to the Company's or Tyco
Manufacturing's);
(ix) the Company has submitted all necessary documentation
(including any invoice) for payment of such Receivable to the Obligor and
has fulfilled all its other obligations in respect thereof;
(x) such Receivable has a Maturity Date no later than 270 days
from its Billing Date;
(xi) such Receivable is an "account" or "chattel paper" within
the meaning of the UCC of the jurisdiction where the Company's chief
executive office is located;
(xii) neither such Receivable nor its related Contract contravenes
in any material respect any laws, rules or regulations applicable thereto
(including, without limitation, laws, rules and regulations relating to
usury, consumer protection, truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection practices
and privacy) and no party to such related Contract is in violation of any
such law, rule or regulation in any material respect;
(xiii) such Receivable does not represent "billed but not yet
shipped" goods or merchandise, unperformed services, consigned goods or
"sale or return" goods; nor does such Receivable arise from a transaction
for which any additional performance by the Company or acceptance or other
act of the Obligor remains to be performed as a condition to payments on
such Receivable;
(xiv) there are no proceedings or investigations pending or
threatened before any Governmental Authority (A) asserting the invalidity
of such Receivable or such Contract, (B) asserting the bankruptcy or
insolvency of the related Obligor, (C) seeking the payment of such
Receivable or payment and performance of such Contract or (D) seeking any
determination or ruling that might materially and adversely affect the
validity or enforceability of such Receivable or such Contract;
(xv) as of the applicable date of transfer hereunder, no Obligor
on such Receivable is bankrupt or insolvent, is unable to make payment of
its obligations when due, is the debtor in a voluntary or involuntary
bankruptcy proceeding, or is the subject of a comparable receivership or
insolvency proceeding, other than Obligors under the protection of a
bankruptcy court or receivership which has approved payment by any such
Obligor of such Receivable; and
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(xvi) the Company has no knowledge of any fact (including any
defaults by the Obligor on any other accounts) which leads it or reasonably
should have led it to expect that the Billed Amount of such Receivable will
not be paid in full when due or to expect any other Material Adverse
Effect;
It is understood and agreed that the representations and warranties described in
this Section 4.01 shall survive the sale or contribution of the Transferred
Receivables to either of the Funding Corporations, any subsequent assignment of
the Transferred Receivables by either of the Funding Corporations (including its
grant of a first priority perfected security interest in, to and under the
Transferred Receivables, pursuant to the Funding Agreement, in order to secure
the due payment and performance by either of the Funding Corporations of TFC
Secured Obligations), and the termination of this Agreement and the Funding
Agreement and shall continue so long as any Transferred Receivable shall remain
outstanding.
SECTION 4.02. Covenants of the Company. (a) Offices and Records.
------------------------ -------------------
The Company shall keep its chief place of business and chief executive offices
and the office where it keeps its Records at the respective locations specified
in Section 4.01(a)(x) or, upon 30 days prior written notice to the Funding
Corporations, FSA and the Collateral Agent, at such other location in a
jurisdiction where all action required by Section 4.02(f) shall have been taken
with respect to the Transferred Receivables. The Company shall, for not less
than three years or for such longer period as may be required by law, from the
date on which any Transferred Receivable arose, maintain the Records with
respect to each Transferred Receivable, including records of all payments
received, credits granted and merchandise returned. The Company will permit
representatives of each Funding Corporation, the Servicer, FSA, the Operating
Agent or the Collateral Agent at any time and from time to time during normal
business hours, and at such times outside of normal business hours, upon
reasonable prior notice, as either Funding Corporation, FSA, the Servicer, the
Operating Agent or the Collateral Agent shall reasonably request, (i) to inspect
and make copies of and abstracts from such records, and (ii) to visit the
properties of the Company utilized in connection with the collection, processing
or servicing of the Transferred Receivables for the purpose of examining such
Records, and to discuss matters relating to the Transferred Receivables or the
Company's performance under this Agreement or the affairs, finances and accounts
of the Company with any of its officers, directors, employees, representatives
or agents and with its independent certified accountants and advise such
accountants that the Funding Corporations, the Operating Agent, FSA, the
Servicer and the Collateral Agent have been authorized to review and discuss
with such accountants any and all financial
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statements and other information of any kind that they may have with respect to
the Company and direct such accountants to comply with any request of the
Funding Corporations, the Operating Agent, FSA, the Servicer or the Collateral
Agent for such information. In connection therewith, the Company, the Operating
Agent, FSA or the Collateral Agent may institute procedures to permit it to
confirm the Obligor outstanding balances in respect of any Transferred
Receivables. The Company agrees to render to TFC I, TFC II, FSA, the Operating
Agent and the Collateral Agent, at the Company's own cost and expense, such
clerical and other assistance as may be reasonably requested with regard to the
foregoing. If a Termination Event under the Funding Agreement shall have
occurred and be continuing, promptly upon request therefor, the Company shall
assist the Funding Corporations in delivering to the Operating Agent records
reflecting activity through the close of business on the immediately preceding
Business Day.
(b) Collection of Transferred Receivables. TFC I has established
-------------------------------------
with a Lockbox Bank a Lockbox Account, and TFC II has established with a Lockbox
Bank a Lockbox Account, into which the Company and TFC I or TFC II as the case
may be shall deposit from time to time all monies, instruments and other
property received by either of them as Collections or Proceeds of the Tier I
Transferred Receivables and Tier II Transferred Receivables, respectively.
Except for Toys'R'Us, the Company has instructed all existing Obligors, and will
instruct all future Obligors, to make payments in respect of Transferred
Receivables only (i) by check or money order mailed to one or more lockboxes or
post office boxes in the name and under the control of the Collateral Agent
(each such box being a "Lockbox"), or (ii) by wire transfer or moneygram
directly to a Lockbox Account established by TFC I or a Lockbox Account
established by TFC II, as the case may be ("Wire Payments") in the name and
under the control of the Collateral Agent. The Lockboxes to which mail payments
are made as of the date hereof listed are listed on the attached Schedule IV.
The Company shall endorse, to the extent necessary, all checks or other
instruments received in any Lockbox so that the same can be deposited, and the
same shall be deposited in the applicable Lockbox Account in the form so
received (with all necessary endorsements), on the next Business Day after the
Business Day on which such check or other instruments are received. In addition,
the Company shall deposit or cause to be deposited in the Lockbox Account for
Tier I Receivables or in the Lockbox Account for Tier II Receivables, as
appropriate, all cash, checks, money orders or other Collections or Proceeds
received other than in a Lockbox or by Wire Payments, in the form so received
(with all necessary endorsements), not later than the close of business on the
Business Day following the date of such receipt, and until so deposited all such
items or other Collections or Proceeds shall be held in trust for the Collateral
Agent and FSA; provided that any payments by Toys'R'Us in respect
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of the Transferred Receivables shall be delivered directly by Toys'R'Us to a
bonded courier acceptable to Redwood and FSA and, directly upon receipt thereof
on the day so received, deposited into the Collection Account or deposited
directly by Toys'R'Us into the applicable Lockbox Account. FSA, the Company and
GE Capital will agree on satisfactory procedures for collecting payments from
Toys'R'Us from time to time. In connection with such collections, the Company
may take (and at the Collateral Agent's or FSA's direction after a Termination
Event has occurred and is continuing, shall take) such action as either TFC I or
TFC II or the Collateral Agent or FSA, in each case with the prior written
consent of FSA, may deem necessary or advisable to enforce collection of the
Transferred Receivables; provided, however, that the Collateral Agent may, at
any time that a Termination Event has occurred and is continuing, notify any
Obligor with respect to any Transferred Receivables of the assignment of such
Transferred Receivables to the Collateral Agent and direct that payments of all
amounts due or to become due thereunder be made directly to the Collateral Agent
or any servicer, collection agent or lockbox or other account designated by the
Collateral Agent and, upon such notification the Collateral Agent may enforce
collection of any such Receivable and adjust, settle or compromise the amount or
payment thereof, subject in each case to the prior written approval of FSA.
(c) Maintain Records of Transferred Receivables. The Company as
-------------------------------------------
Servicer shall, at its own cost and expense, maintain satisfactory and complete
records of the Transferred Receivables, including a record of all payments
received and all credits granted with respect to the Transferred Receivables and
all other dealings with the Transferred Receivables. The Company as Servicer
will mark conspicuously with a legend, in form and substance satisfactory to the
Operating Agent and FSA, its records, computer tapes, computer disks and credit
files pertaining to the Transferred Receivables, and its file cabinets or other
storage facilities where it maintains information pertaining to the Transferred
Receivables, to evidence this Agreement, the transfers hereunder and that
ownership of each Transferred Receivable is held by either TFC I or TFC II or
their respective assignees. Upon the occurrence and during the continuation of
a Termination Event, the Company as Servicer shall (i) provide to the Operating
Agent and FSA or its representatives with access to, at any time on demand of
the Operating Agent or FSA, all of the Company's facilities, personnel, books
and records pertaining to the Transferred Receivables, including all Records,
and (ii) allow the Operating Agent and FSA to occupy the premises of the Company
where such books and Records are maintained, and utilize such premises, the
equipment thereon and any personnel of the Company that either such party may
wish to employ to administer, service and collect the Transferred Receivables.
38
<PAGE>
(d) Compliance With Credit and Collection Policies. The Company
----------------------------------------------
shall comply in all respects with the Credit and Collection Policies with regard
to each Transferred Receivable and the related Contracts, and with the terms of
such Receivables and Contracts.
(e) Notice of Adverse Claim. The Company shall advise TFC I, TFC II,
-----------------------
FSA, the Operating Agent and the Collateral Agent promptly, in writing and in
reasonable detail, (i) of any Adverse Claim known to it made or asserted against
any of the Transferred Receivables, (ii) of any determination that a Sold
Receivable, or any other Receivable designated as an Eligible Receivable in a
Request Notice or otherwise, was not an Eligible Receivable at such time, and
(iii) of the occurrence of any event which would have a material adverse effect
on the aggregate value of the Transferred Receivables or on the validity of the
transfers in this Agreement.
(f) Further Assurances; Financing Statements. (i) The Company agrees
----------------------------------------
that at any time and from time to time, at its expense, it shall promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable or that TFC I, TFC II, the Operating
Agent, FSA or the Collateral Agent may reasonably request to perfect, preserve,
continue and maintain fully and protect the transfers made and the right, title
and interest (including any security interests) granted to either Funding
Corporation by this Agreement or to enable TFC I, TFC II, the Operating Agent,
FSA or the Collateral Agent to exercise and enforce its rights and remedies
under this Agreement or any of the Related Documents with respect to any
Transferred Receivables. Without limiting the generality of the foregoing, the
Company shall execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices as may be necessary or
desirable or that TFC I, TFC II, the Operating Agent, FSA or the Collateral
Agent may reasonably request to protect, preserve and perfect the transfers and
security interests granted by this Agreement, free and clear of all Adverse
Claims and Restrictions on Transferability. Without limitation of the
foregoing, the Company shall, upon the request of FSA, from time to time,
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, within five (5) days of such request, such amendments hereto and such
further instruments and take such further action as may be necessary or
advisable to effectuate the intention, performance and provisions of this
Agreement and the Related Documents or to protect the interest of TFC I in the
Tier I Receivables and TFC II in the Tier II Receivables, free and clear of all
Adverse Claims and Restrictions on Transferability. In addition, the Company
and the Operating Agent agree to cooperate with S&P and Moody's in connection
with any review of the transactions contemplated
39
<PAGE>
hereby or by the Related Documents which may be undertaken by S&P and Moody's
after the date hereof.
(ii) The Company hereby authorizes TFC I, TFC II, FSA and the
Collateral Agent to file one or more financing or continuation statements, and
amendments thereto, relating to all or any part of the Transferred Receivables
without the signature of the Company where permitted by law. A carbon,
photographic or other reproduction of this Agreement or any notice or financing
statement covering the Transferred Receivables or any part thereof shall be
sufficient as a notice or financing statement where permitted by law.
(g) Assignment. The Company acknowledges that, pursuant to the
----------
Funding Agreement, each of TFC I and TFC II may assign all of its right, title
and interest in, to and under the Transferred Receivables and TFC Loans and its
rights, title and interest under this Agreement, including its right to exercise
the remedies created by Section 4.05 hereof, to Redwood and the Collateral
Agent. The Company agrees that, upon such assignment, the assignee may enforce
directly, without joinder of either Funding Corporation, the repurchase
obligations of the Company set forth in Section 4.05 hereof with respect to
breaches of the representations and warranties or covenants set forth in
Sections 4.01 and 4.02 of this Agreement.
(h) Compliance With Agreements and Applicable Laws. The Company shall
----------------------------------------------
perform each of its obligations under this Agreement and the Related Documents
and comply with all material requirements of any law, rule or regulation
applicable to it.
(i) Corporate Existence. The Company shall maintain its corporate
-------------------
existence and shall at all times continue to be duly organized under the laws of
the State of Delaware and duly qualified and duly authorized (as described in
Section 4.01 hereof) and shall conduct its business in accordance with the terms
of its certificate of incorporation and bylaws.
(j) Financial Statements; Accountants' Reports; Other Information.
-------------------------------------------------------------
The Company shall keep or cause to be kept in reasonable detail books and
records of account of the Company's assets and business, including, but not
limited to, books and records relating to the transactions contemplated herein
and in the Related Documents, which shall be furnished to the Operating Agent or
FSA upon request. The books of the Company shall be kept on an accrual basis
and the Company shall report its operations for tax purposes on an accrual
basis. The fiscal year of the Company shall end on December 31 of each year.
The Company shall furnish or cause to be furnished to the Operating Agent and
FSA:
40
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(i) Annual Financial Statements. As soon as publicly available,
---------------------------
and in any event within 90 days after the close of each fiscal year of Tyco
Toys, Inc., the consolidated audited balance sheets of Tyco Toys, Inc. as
of the end of such fiscal year and the consolidated audited statements of
income, changes in shareholders' equity and cash flows of Tyco Toys, Inc.
for such fiscal year, all in reasonable detail and stating in comparative
form the respective figures for the corresponding date and period in the
preceding fiscal year, prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied by the
certificate of the independent accountants of Tyco Toys, Inc. (Deloitte &
Touche or any "Big 6" accounting firm shall be acceptable to FSA and the
Operating Agent) and by the certificate specified in Section 4.02(k)
hereof.
(ii) Quarterly Financial Statements. As soon as publicly
------------------------------
available, and in any event within 45 days after the close of each of the
first three quarters of each fiscal year of Tyco Toys, Inc., the
consolidated unaudited balance sheets of Tyco Toys, Inc. as of the end of
such quarter and the consolidated unaudited statements of income, changes
in shareholders' equity and cash flows of Tyco Toys, Inc. for the portion
of the fiscal year then ended, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and
period in the preceding fiscal year, prepared in accordance with generally
accepted accounting principles consistently applied (subject to normal
year-end adjustments), and accompanied by the certificate specified in
Section 4.02(k) hereof.
(iii) Accountants' Reports. Promptly upon receipt thereof, copies
--------------------
of any reports submitted to the Company by its independent accountants in
connection with any examination of the financial statements of the Company.
(iv) Certain Information. Promptly after the filing or sending
-------------------
thereof, copies of all proxy statements, financial statements, reports, and
registration statements which the Company or Tyco Toys, Inc. files with, or
delivers to, the Internal Revenue Service, the Securities Exchange
Commission or any other federal government agency, authority or body which
supervises the issuance of securities by the Company or Tyco Toys, Inc. or
any national securities exchange.
(k) Compliance Certificate. The Company shall deliver to the
----------------------
Operating Agent and FSA concurrently with the delivery of the financial
statements required pursuant to Section 4.02(j)(i) and (ii) hereof, a
certificate signed on its behalf by the Chief Financial Officer of the Company
stating that:
41
<PAGE>
(i) a review of the Company's performance under this Agreement and
the Related Documents during such period has been made under such officer's
supervision;
(ii) to the best of such individual's knowledge following due
inquiry, no Termination Event or event which, upon the giving of notice or
the passage of time, or both, would become a Termination Event, has
occurred, or if a Termination Event or such other event has occurred,
specifying the nature thereof and, if the Company has a right to cure
pursuant to the Funding Agreement, stating in reasonable detail the steps,
if any, being taken by the Company to cure such Termination Event or other
event or to otherwise comply with the terms of the agreement to which such
Termination Event or other event relates; and
(iii) the financial reports attached thereto and submitted in
accordance with Section 4.02(j)(i) or (ii) hereof, as applicable, are
complete and correct in all material respects and present fairly the
financial condition and results of operations of the Tyco Toys, Inc. and
its consolidated Subsidiaries as of the dates and for the periods
indicated, in accordance with GAAP consistently applied (subject as to
interim statements to normal year-end adjustments) and the attached
computations indicate compliance by the Company with the covenants set
forth in Section 7.06 of the Funding Agreement and other agreements of the
Company herein.
(l) Notice of Material Event. The Company shall promptly inform the
------------------------
Operating Agent and FSA in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against the
Company or with respect to or in connection with all or any portion of the
Transferred Receivables, involving potential damages or penalties in an
uninsured amount in excess of $100,000 in any one instance or $500,000 in
the aggregate;
(ii) any change in the location of Company's principal office or
any change in the location of the Company's books and records;
(iii) the occurrence of any Termination Event or event which,
upon the giving of notice or the passage of time, or both, would become a
Termination Event;
(iv) the commencement or threat of any rule making or
disciplinary proceedings or any proceedings instituted by or against the
Company in any federal, state or local court
42
<PAGE>
or before any governmental body or agency, or before any arbitration board,
or the promulgation of any proceeding or any proposed or final rule which,
if adversely determined, would have a Material Adverse Effect with respect
to the Company;
(v) the commencement of any proceedings by or against the
Company under any applicable bankruptcy, reorganization, liquidation,
rehabilitation, insolvency or other similar law now or hereafter in effect
or of any proceeding in which a receiver, liquidator, conservator, trustee
or similar official shall have been, or may be, appointed or requested for
the Company or any of its assets;
(vi) the receipt of notice that (A) the Company is being placed
under regulatory supervision, (B) any license, permit, charter,
registration or approval necessary for the conduct of the Company's
business is to be, or may be, suspended or revoked, or (C) the Company is
to cease and desist any practice, procedure or policy employed by the
Company in the conduct of its business, and such cessation may have a
Material Adverse Effect with respect to the Company; or
(vii) any other event, circumstance or condition that has had,
or has a material possibility of having, a Material Adverse Effect in
respect of the Company.
(m) Maintenance of Licenses. The Company shall maintain all
-----------------------
licenses, permits, charters and registrations which are material to the conduct
of its business.
(n) Use of Proceeds. The Company shall apply its funds towards
---------------
general corporate purposes and towards the other sums payable by the Company
under this Agreement and the Related Documents in connection with the
transactions contemplated hereby and by the Related Documents and for no other
purpose.
(o) Separate Identity.
-----------------
(i) The Company shall maintain corporate records and books of
account separate from those of both of the Funding Corporations.
(ii) The annual financial statements of Tyco Toys Inc. shall
disclose the effects of the Company's transactions in accordance with GAAP
and the annual financial statements of Tyco Toys, Inc. shall disclose that
the assets of neither of the Funding Corporations are available to pay
creditors of the Company, Tyco Manufacturing, or any other Affiliate of the
Company.
43
<PAGE>
(iii) The resolutions, agreements and other instruments
underlying the transactions described in this Agreement shall be
continuously maintained by the Company as official records.
(iv) The Company shall use its best efforts to maintain an
arm's-length relationship with TFC I and TFC II and will not hold itself
out as being liable for the debts of either of the Funding Corporations.
(v) The Company shall use its best efforts to keep its assets
and its liabilities wholly separate from those of each of TFC I and TFC II.
(vi) The Company will conduct its business solely in its own
name through its duly authorized officers or agents so as not to mislead
others as to the identity of the Company.
(vii) The Company will use its best efforts to avoid the
appearance of conducting business on behalf of the Funding Corporations or
that the assets of the Company are available to pay the creditors of either
of the Funding Corporations.
(viii) The Company will cause operating expenses and liabilities
of the respective Funding Corporations to be paid from their respective
funds.
(p) ERISA. The Company shall give the Operating Agent and FSA prompt
-----
notice of each of the following events (but in no event more than 30 days after
the occurrence of the event): (i) an Accumulated Funding Deficiency, (ii) the
failure to make a material required contribution to a Plan or Multiemployer Plan
(but in no event will a contribution failure sufficient to give rise to a lien
under (S)302(f) of ERISA be considered immaterial), (iii) a Reportable Event,
(iv) any action by a Commonly Controlled Entity to terminate any Plan or
withdraw from any Multiemployer Plan, (v) any action by the PBGC to terminate or
appoint a trustee to administer a Plan, (vi) the reorganization or insolvency of
any Multiemployer Plan and (vii) an aggregate Underfunding for all Underfunded
Plans in excess of $100,000. In addition, the Company shall promptly (but in no
case more than 30 days following issuance or receipt by the Commonly Controlled
Entity) provide to FSA a copy of all correspondence between a Commonly
Controlled Entity and the PBGC, Internal Revenue Service, Department of Labor or
the administrators of a Multiemployer Plan relating to any of the events
described in the preceding sentence or the underfunded status, termination or
possible termination of a Plan or a Multiemployer Plan which could result in a
material liability.
44
<PAGE>
(q) Cooperation With Requests for Information or Documents. The
------------------------------------------------------
Company will cooperate fully with all reasonable requests of Redwood, FSA, the
Operating Agent and the Collateral Agent regarding the provision of any
information or documents, necessary, including the provision of such information
or documents in electronic or machine-readable format, or desirable to allow
each of Redwood, the Operating Agent, FSA and the Collateral Agent to carry out
its responsibilities under the Related Documents.
(r) Payment, Performance and Discharge of Obligations. The Company
-------------------------------------------------
will pay, perform and discharge all of its obligations and liabilities,
including, without limitation, all taxes, assessments and governmental charges
upon its income and properties when due the non-payment, performance or
discharge of which would have a Material Adverse Effect, unless and to the
extent only that such obligations, liabilities, taxes, assessments and
governmental charges shall be contested in good faith and by appropriate
proceedings and that, to the extent required by GAAP, proper and adequate book
reserves relating thereto are established by the Company and then only to the
extent that a bond is filed in cases where the filing of a bond is necessary to
avoid the creation of an Adverse Claim against any of its properties;
SECTION 4.03. Negative Covenants of the Company. The Company shall
---------------------------------
not, without the prior written consent of TFC I, TFC II, the Operating Agent,
FSA and the Collateral Agent:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist, or agree to create, or consent to
cause or permit in the future (upon the happening of a contingency or otherwise)
the creation, incurrence or existence of, any Adverse Claim upon or with respect
to, or assign any right to receive income in respect of any Transferred
Receivable or related Contract with respect thereto, or upon or with respect to
the Lockbox Accounts or Lockboxes or any other account in which any Collections
or Proceeds of any Transferred Receivables are deposited;
(b) extend, amend, forgive, discharge, compromise, cancel or
otherwise modify the terms of any Transferred Receivable, or amend, modify or
waive any term or condition of any Contract related thereto;
(c) make any change in its instructions to Obligors regarding
payments to be made to the Funding Corporations or payments to be deposited to
the Lockbox Accounts or Lockboxes;
(d) merge with or into, consolidate with or into, convey, transfer,
lease or otherwise dispose of all or substantially all of its assets (whether
now owned or hereafter
45
<PAGE>
acquired) to, or acquire all or substantially all of the assets or capital stock
or other ownership interest of, any Person (whether in one transaction or in a
series of transactions);
(e) make statements or disclosures or prepare any financial
statements which shall account for the transactions contemplated by this
Agreement in any manner other than as a sale or contribution of the Transferred
Receivables to either TFC I or TFC II, as the case may be, or in any other
respect account for or treat the transactions contemplated hereby (including but
not limited to, for accounting, tax and reporting purposes) in any manner other
than as a sale or absolute assignment of the Transferred Receivables;
(f) The Company shall not amend, supplement or otherwise modify its
certificate of incorporation or bylaws (or permit any of the foregoing) to the
extent that such modification would have a Material Adverse Effect.
(g) The Company shall not (i) take any action, or fail to take any
action, if such action or failure to take action may interfere with the
enforcement of any rights under this Agreement or the Related Documents that are
material to the rights, benefits or obligations of the Funding Corporations,
Redwood or FSA (however, nothing herein shall be construed to constitute a
guarantee of collectibility by the Company); (ii) waive or alter any rights with
respect to the Receivables (or any agreement or instrument relating thereto);
(iii) take any action, or fail to take any action, if such action or failure to
take action may interfere with the enforcement of any rights with respect to the
Receivables; or (iv) fail to pay any tax, assessment, charge or fee with respect
to the Receivables, or fail to defend any action, if such failure to pay or
defend may adversely affect the priority or enforceability of the first priority
perfected interest of TFC I and TFC II in the Tier I Receivables or the Tier II
Receivables, respectively, or the Company's right, title or interest in the
Receivables.
(h) The Company shall not consolidate with or merge with or into any
Person or, except as permitted by this Agreement, transfer all or any material
amount of its assets to any Person or liquidate or dissolve.
(i) Neither the Company nor any Commonly Controlled Entity will:
(i) terminate any Plan so as to incur any material liability to the
PBGC;
(ii) knowingly participate in any "prohibited transaction" (as defined
in ERISA) involving any Plan or Multiemployer Plan or any trust created
thereunder which
46
<PAGE>
would subject any of them to a material tax or penalty on prohibited
transactions imposed under Section 4975 of the Code or ERISA;
(iii) fail to pay to any Plan or Multiemployer Plan any contribution
which it is obligated to pay under the terms of such Plan or Multiemployer
Plan, if such failure would cause such plan to have any material
Accumulated Funding Deficiency, whether or not waived; or
(iv) allow or suffer to exist any occurrence of a Reportable Event, or
any other event or condition, which presents a material risk of termination
by the PBGC on any Plan or Multiemployer Plan, to the extent that the
occurrence or nonoccurrence of such Reportable Event or other event or
condition is within the control of it or any Commonly Controlled Entity.
(j) The Company shall not make any change to the Credit and Collection
Policies or the terms of the contractual dilutions without the prior written
consent of FSA.
(k) Tax Status of Advances. The Company, shall not take or permit
----------------------
(other than with respect to actions taken or to be taken solely by a government
or governmental authority) to be taken any action which would have the effect
directly or indirectly of subjecting interest on any of the Advances or the
Commercial Paper to withholding taxation in the hands of, respectively, TFC I,
TFC II, Redwood or holders of the Commercial Paper generally who are residents
of the United States, and will perform all of its obligations under this
Agreement and the Related Documents to prevent or cure any default by the
Company which would have the effect, directly or indirectly, of subjecting
interest on any of the Advances or the Commercial Paper to withholding taxation.
SECTION 4.04. Restatement of Representations, Warranties and
----------------------------------------------
Covenants. The Company hereby restates, and makes, for the benefit of FSA, each
- ---------
of its representations, warranties, covenants and other agreements as set forth
in this Agreement and each of the other Related Agreements, to be included in
the Insurance and Indemnity Agreement, in each case with the same force and
effect as if each such representation, warranty, covenant and agreement were set
forth in full in the Insurance and Indemnity Agreement.
SECTION 4.05. Breach of Representations, Warranties or Covenants. Upon
--------------------------------------------------
discovery by the Company, TFC I or TFC II, the Operating Agent, Redwood, the
Collateral Agent or any assignee of either of the Funding Corporations' rights
hereunder, of a breach of any of the representations, warranties or covenants
described in Section 4.01, 4.02 or 4.03 hereof which is reasonably likely
47
<PAGE>
to have a Material Adverse Effect on the value of a Transferred Tier I
Receivable or a Transferred Tier II Receivable or the interests of either of the
Funding Corporations, Redwood, FSA or the Collateral Agent therein, the party
discovering such breach shall give prompt written notice to the other parties.
Thereafter, if requested by notice from TFC I or TFC II or any assignee of
either of the Funding Corporations, the Company shall on the next succeeding
Business Day make a capital contribution of the Rejected Amount (as defined
under the Funding Agreement) in cash to either TFC I or TFC II, as the case may
be, in an amount equal to the Billed Amount of such Receivable less Collections
----
received in respect thereof by remitting the amount of such capital contribution
to the Collection Account in accordance with the terms of the Funding Agreement.
Notice of any such contribution and the amount thereof shall promptly be given
to FSA by the Company.
ARTICLE V
TFC I LOANS TO THE COMPANY
SECTION 5.01. TFC I Loans. TFC I hereby agrees, on the terms and
-----------
subject to the conditions of this Agreement, upon request of the Company, to
make advances (each, a "TFC I Loan") to the Company to the extent of its
available funds during the term of this Agreement in an aggregate principal
amount at any one time outstanding up to, but not exceeding, the Maximum
Facility Commitment. Subject to the terms of this Agreement, the Company may
borrow, repay and reborrow; provided that no such TFC I Loans may be made if a
Termination Event or an Event of Servicer Termination, or an event which, upon
the giving of notice or the passage of time, or both would become a Termination
Event or an Event of Servicer Termination has occurred and is continuing, or if,
after giving effect thereto, there would be a Funding Excess or any amounts are
outstanding under the TFC I Deferred Sale Prices.
SECTION 5.02. Notices Relating to Loans. The Company shall give TFC I
-------------------------
and the Operating Agent same day notice, and FSA a monthly report (with the
option reserved by FSA to receive daily notice upon request therefor), of each
borrowing and repayment of each TFC I Loan. Each such notice of borrowing or
repayment shall specify the amount of TFC I Loans to be borrowed or repaid and
the date of such action (which shall be a Business Day).
SECTION 5.03. Disbursement of Loan Proceeds. Not later than 3:00 p.m.,
-----------------------------
New York City time, on the date specified for each TFC I Loan hereunder, TFC I
shall transfer, by wire transfer or otherwise, but in any event in immediately
available funds, the amount of the TFC I Loan to be made on such date, to
48
<PAGE>
the account designated by the Company maintained with [depository institution],
in accordance with instructions previously supplied to TFC I.
SECTION 5.04. Company Note I. (a) TFC I Loans made by TFC I hereunder
--------------
shall be evidenced by a single promissory note of the Company in substantially
the form of Exhibit 2A hereto ("Company Note I"). Company Note I shall be dated
the date of this Agreement, shall be payable to the order of TFC I in a
principal amount equal to $100,000,000 and shall otherwise be duly completed.
(b) TFC I shall enter on a schedule attached to Company Note I a
notation (which may be computer generated) with respect to each TFC I Loan made
hereunder of: (i) the date and principal amount thereof and (ii) each payment
and repayment of principal thereof. The failure of TFC I to make a notation on
the schedule to Company Note I as aforesaid shall not limit or otherwise affect
the obligation of the Company to repay TFC I Loans in accordance with their
respective terms as set forth herein.
(c) The Company acknowledges that Company Note I is pledged to the
Collateral Agent, on behalf of the Lender and FSA, pursuant to the Funding
Agreement to secure the obligations of TFC I thereunder.
SECTION 5.05. Principal Repayments. TFC I Loans may be repaid by the
--------------------
Company at any time and from time to time, in whole or in part, upon prior
written notice to TFC I, FSA and Operating Agent as provided in Section 5.02. In
addition, TFC I Loans shall be payable immediately on demand of TFC I or, upon
the occurrence and during the continuation of a Termination Event or an Event of
Servicer Termination, of FSA. Any amount so repaid may, subject to the terms and
conditions hereof, be reborrowed hereunder; provided, however, that all
repayments of TFC I Loans or any portion thereof shall be made together with
payment of all interest accrued on the amount repaid to (but excluding) the date
of such repayment.
SECTION 5.06. Interest. (a) On each monthly anniversary of the date
--------
hereof, the Company shall pay to TFC I interest at the prime rate plus 1% (the
"Company Interest Rate") on the unpaid principal amount of each TFC I Loan for
the period commencing on and including the date of such TFC I Loan until but
excluding the date such TFC I Loan shall be paid in full.
(b) Notwithstanding the foregoing, the Company shall pay interest on
unpaid interest, on any TFC I Loan or any installment thereof, and on any other
amount payable by the Company hereunder (to the extent permitted by law) that
shall not be paid in full when due (whether at stated maturity, by
49
<PAGE>
acceleration or otherwise) for the period commencing on the due date thereof to
(but excluding) the date the same is paid in full at the applicable Company
Interest Rate.
SECTION 5.07. Time and Method of Payments. All payments of principal,
---------------------------
interest and other amounts (including indemnities) payable by the Company
hereunder shall be made in Dollars, in immediately available funds, to TFC I not
later than 11:00 a.m., New York City time, on the date on which such payment
shall become due. Any such payment made on such date but after such time shall,
if the amount paid bears interest, be deemed to have been made on, and interest
shall continue to accrue and be payable thereon until, the next succeeding
Business Day. If any payment of principal or interest becomes due on a day other
than a Business Day, such payment may be made on the next succeeding Business
Day and such extension shall be included in computing interest in connection
with such payment. All payments hereunder and under Company Note I shall be made
without set-off or counterclaim and in such amounts as may be necessary in order
that all such payments shall not be less than the amounts otherwise specified to
be paid under this Agreement and Company Note I. Upon payment in full of Company
Note I, following the end of the term of this Agreement, TFC I shall mark
Company Note I "Paid" and return it to the Company.
ARTICLE VI
TFC II LOANS TO THE COMPANY
SECTION 6.01. TFC II Loans. TFC II hereby agrees, on the terms and
------------
subject to the conditions of this Agreement, upon request of the Company, to
make advances (each, a "TFC II Loan") to the Company to the extent of its
available funds during the term of this Agreement in an aggregate principal
amount at any one time outstanding up to, but not exceeding, the Maximum
Facility Commitment. Subject to the terms of this Agreement, the Company may
borrow, repay and reborrow; provided that no such TFC II Loans may be made if a
--------
Termination Event or an Event of Servicer Termination, or an event which, upon
the giving of notice or the passage of time, or both would become a Termination
Event or an Event of Servicer Termination, has occurred and is continuing, or
if, after giving effect thereto, there would be a Funding Excess or any amounts
are outstanding under the TFC II Deferred Sale Prices.
SECTION 6.02. Notices Relating to Loans. The Company shall give TFC II
-------------------------
and the Operating Agent same day notice, and FSA a monthly report (with the
option reserved by FSA to receive daily notice upon request therefor) of each
borrowing and repayment of each TFC II Loan. Each such notice of borrowing or
repayment shall specify the amount of TFC II Loans to be borrowed
50
<PAGE>
or repaid and the date of such action (which shall be a Business Day).
SECTION 6.03. Disbursement of Loan Proceeds. Not later than 3:00 p.m.,
-----------------------------
New York City time, on the date specified for each TFC II Loan hereunder, TFC II
shall transfer, by wire transfer or otherwise, but in any event in immediately
available funds, the amount of the TFC II Loan to be made on such date, to the
account designated by the Company maintained with [depository institution], in
accordance with instructions previously supplied to TFC II.
SECTION 6.04. Company Note II. (a) TFC II Loans made by TFC II
---------------
hereunder shall be evidenced by a single promissory note of the Company in
substantially the form of Exhibit 2B hereto ("Company Note II"). Company Note II
shall be dated the date of this Agreement, shall be payable to the order of TFC
II in a principal amount equal to $100,000,000 and shall otherwise be duly
completed.
(b) TFC II shall enter on a schedule attached to Company Note II a
notation (which may be computer generated) with respect to each TFC II Loan made
hereunder of: (i) the date and principal amount thereof and (ii) each payment
and repayment of principal thereof. The failure of TFC II to make a notation on
the schedule to Company Note II as aforesaid shall not limit or otherwise affect
the obligation of the Company to repay TFC II Loans in accordance with their
respective terms as set forth herein.
(c) The Company acknowledges that Company Note II is pledged to the
Collateral Agent, on behalf of the Lender and FSA, pursuant to the Funding
Agreement to secure the obligations of TFC II hereunder.
SECTION 6.05. Principal Repayments. TFC II Loans may be repaid by the
--------------------
Company at any time and from time to time, in whole or in part, upon prior
written notice to TFC II, FSA and Operating Agent as provided in Section 6.02.
In addition, TFC II Loans shall be payable immediately on demand of TFC II or,
upon the occurrence and during the continuation of a Termination Event or an
Event of Servicer Termination, of FSA. Any amount so repaid may, subject to the
terms and conditions hereof, be reborrowed hereunder; provided, however, that
all repayments of TFC II Loans or any portion thereof shall be made together
with payment of all interest accrued on the amount repaid to (but excluding) the
date of such repayment.
SECTION 6.06. Interest . (a) On each monthly anniversary of the date
--------
hereof, the Company shall pay to TFC II interest at the prime rate plus 1% (the
"Company Interest Rate") on the unpaid principal amount of each TFC II Loan for
the period
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<PAGE>
commencing on and including the date of such TFC II Loan until but excluding the
date such TFC II Loan shall be paid in full.
(b) Notwithstanding the foregoing, the Company shall pay interest on
unpaid interest, on any TFC II Loan or any installment thereof, and on any other
amount payable by the Company hereunder (to the extent permitted by law) that
shall not be paid in full when due (whether at stated maturity, by acceleration
or otherwise) for the period commencing on the due date thereof to (but
excluding) the date the same is paid in full at the applicable Company Interest
Rate.
SECTION 6.07. Time and Method of Payments . All payments of principal,
---------------------------
interest and other amounts (including indemnities) payable by the Company
hereunder shall be made in Dollars, in immediately available funds, to TFC II
not later than 11:00 a.m., New York City time, on the date on which such payment
shall become due. Any such payment made on such date but after such time shall,
if the amount paid bears interest, be deemed to have been made on, and interest
shall continue to accrue and be payable thereon until, the next succeeding
Business Day. If any payment of principal or interest becomes due on a day other
than a Business Day, such payment may be made on the next succeeding Business
Day and such extension shall be included in computing interest in connection
with such payment. All payments hereunder and under Company Note II shall be
made without set-off or counterclaim and in such amounts as may be necessary in
order that all such payments shall not be less than the amounts otherwise
specified to be paid under this Agreement and Company Note II. Upon payment in
full of Company Note II, following the end of the term of this Agreement, TFC II
shall mark Company Note II "Paid" and return it to the Company.
ARTICLE VII
COLLATERAL SECURITY
SECTION 7.01. Security Interest . The Company hereby grants each of
-----------------
TFC I and TFC II a security interest ("Security Interest") in the following
property, wherever located and whether now owned or hereafter acquired by the
Company (collectively, the "Collateral"):
(a) all accounts, inventory, general intangibles, chattel paper,
documents, and instruments (each as defined in the UCC), whether or not
specifically assigned to the Funding Corporations;
(b) all books, records and other information (including, without
limitation, computer programs, tapes, disks, punch cards, data processing
software, and other
52
<PAGE>
related property and rights) at any time evidencing or relating to any
Collateral; and
(c) all monies, securities and other property, now or hereafter held
or received by, or in transit to either of the Funding Corporations from or
for the Company, and all of the Funding Corporations' credits, and balances
with the Company existing at any time,
provided that the Collateral shall not include any items of property in which a
security interest is not granted as a result of the terms of the Security
Agreement delivered pursuant to the Inventory Facility and provided further that
any portion of the Collateral may be sold, transferred, conveyed, assigned or
otherwise disposed of, free and clear of the security interest granted
hereunder, to the extent provided in Section 6.8 of the Inventory Facility.
SECTION 7.02. Other Collateral; Rights in Receivables . Nothing
---------------------------------------
contained in this Article shall limit the rights of TFC I or TFC II, as the case
may be in and to any other collateral securing the Collateral Obligations which
may have been or may hereafter be granted to TFC I or TFC II as the case may be,
by the Company or any third party pursuant to any other agreement nor the rights
of TFC I or TFC II, as the case may be, under any of the Transferred
Receivables.
SECTION 7.03. Indebtedness Secured . The Security Interest secures
---------------------
payment of any and all recourse obligations of the Company to TFC I or TFC II,
as the case may be hereunder, including but not limited to those set forth in
Sections 4.05 and 8.01.
SECTION 7.04. Further Action Evidencing Security Interest . (a) The
--------------------------------------------
Company agrees that from time to time, at its expense, it will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or appropriate or that either of the Funding Corporations
may reasonably request in order to perfect, protect or more fully evidence the
Security Interest, or to enable either of the Funding Corporations to exercise
or enforce any of their respective rights hereunder. Without limiting the
generality of the foregoing, the Company will, upon the request of either of the
Funding Corporations: (i) execute and file such financing or continuation
statements, or amendments thereto or assignments thereof, and such other
instruments or notices, as may be necessary or appropriate or as either of the
Funding Corporations may request, in order to perfect, protect, or evidence such
Security Interest and (ii) mark conspicuously or segregate any Collateral in a
manner acceptable to the Funding Corporations.
53
<PAGE>
(b) The Company hereby authorizes both TFC I and TFC II to file one or
more financing or continuation statements, and amendments thereto and
assignments thereof, relating to all or part of any of TFC I's or TFC II's, as
the case may be, interest now existing or hereafter arising with respect to the
Collateral now existing or hereafter arising without the signature of the
Company where permitted by law. A carbon, photographic or other reproduction of
this Agreement or any financing statement covering the Collateral, or any part
thereof, shall be sufficient as a financing statement where permitted by law.
(c) If the Company fails to perform any agreement or obligations under
this Section, either TFC I or TFC II, as the case may be may (but shall not be
required to) itself perform, or cause performance of, such agreement or
obligation, and the reasonable expenses of such Funding Corporation incurred in
connection therewith shall be payable by the Company upon such Funding
Corporation's demand therefor.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Indemnification. (a) Without limiting any other rights
---------------
that TFC I, TFC II, Redwood, the Collateral Agent, FSA or any of their
shareholders, officers, employees or agents, any assignee of either Funding
Corporation's rights hereunder or such assignee's shareholders, officers,
employees or agents (each, an "Indemnified Party") may have hereunder or under
applicable law, the Company hereby agrees to indemnify each Indemnified Party
from and against any and all claims, losses (excluding consequential damages,
but including specifically any fees, including the Premium, past or future),
liabilities, obligations, damages, penalties, actions, judgments, suits, and
related costs and expenses of any nature whatsoever, including reasonable
attorneys' fees and disbursements (all of the foregoing being collectively
referred to as "Indemnified Amounts") which may be imposed on, incurred by or
asserted against an Indemnified Party in any way arising out of or resulting
from this Agreement or any Related Documents or the use by the Company of
proceeds of any purchase or assignment hereunder or in respect of any
Transferred Receivable or any Contract, excluding, however, (x) Indemnified
Amounts to the extent resulting solely from gross negligence, acts of bad faith
or willful misconduct on the part of such Indemnified Party or (y) recourse for
uncollectible or uncollected Transferred Receivables. Without limiting or being
limited by the foregoing, the Company shall pay within five Business Days after
demand to each Indemnified Party any and all Indemnified Amounts necessary to
indemnify such Indemnified Party from and against any and all Indemnified
Amounts relating to or resulting from:
54
<PAGE>
(i) reliance on any representation or warranty made or deemed
made by the Company (or any of its officers) under or in connection with
this Agreement or any Related Document, any report or any other information
delivered by the Company pursuant hereto, which shall have been incorrect
in any material respect when made or deemed made or delivered;
(ii) the failure by the Company to comply with any term,
provision or covenant contained in this Agreement or any Related Document,
or any agreement executed in connection with this Agreement or with any
applicable law, rule or regulation with respect to any Transferred
Receivable or the related Contract, or the nonconformity of any Transferred
Receivable or the related Contract with any such applicable law, rule or
regulation; or
(iii) the failure to vest and maintain vested in the either of the
Funding Corporations, or to transfer to either of the Funding Corporations,
legal and equitable title to and ownership of the Receivables which are, or
are purported to be, Transferred Receivables, together with all Collections
and Proceeds in respect thereof, free and clear of any Adverse Claim
(except as permitted hereunder) whether existing at the time of the
proposed sale of such Receivable or at any time thereafter.
(b) The Company shall have the right at any time during which any
claim is pending to select counsel to defend and settle any such claim so long
as in any such event the Company shall have stated in a writing delivered to the
applicable Indemnified Party that, as between the Company and such Indemnified
Party, the Company is responsible to such Indemnified Party with respect to such
claim (other than claims as to which it is ultimately determined that it has no
responsibility pursuant to clauses 8.01(a)(x) or 8.01(a)(y)); provided, however,
-----------------
that if an Indemnified Party shall have been advised by its counsel that there
are legal defenses available to such Indemnified Party that are different from
or additional to those available to the Company, such Indemnified Party shall
have the right to employ its own counsel in such action, and in such event, the
reasonable fees and disbursements of such counsel shall be paid by the Company.
If the Company shall fail to assume the defense of any claim in accordance with
the terms of this indemnity, the relevant Indemnified Party shall have the right
to select counsel and control the defense of such claim; provided, however, that
-----------------
no Indemnified Party shall settle any such claim without the prior written
consent of the Company, which shall not be unreasonably withheld or delayed.
SECTION 8.02. Assignment of Indemnities. The Company acknowledges
-------------------------
that, pursuant to the Funding Agreement, each of
55
<PAGE>
TFC I and TFC II may assign its rights of indemnity granted hereunder to
Redwood, FSA and the Collateral Agent and upon such assignment, Redwood, FSA or
the Collateral Agent, as applicable, shall have all rights of the Funding
Corporations hereunder and may in turn assign such rights. The Company agrees
that, upon such assignment, Redwood, FSA, the Collateral Agent or the assignee
of either Redwood, FSA or the Collateral Agent, as applicable, may enforce
directly, without joinder of either TFC I or TFC II, as the case may be, the
indemnities set forth in this Article VIII.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices, Etc. All notices and other communications
-------------
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile, telex and express mail) and mailed by registered mail or
transmitted by facsimile or telex, or delivered as to each party hereto, at its
address set forth under its name on the signature page hereof or at such other
address as shall be designated by such party in a written notice to the other
parties hereto or to FSA as follows:
To FSA: Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Telex No.: (212) 688-3101
Confirmation: (212) 826-0100
Telecopy Nos.: (212) 339-3518
(212) 339-3529
(In each case in which notice or other communication to FSA refers
to a Termination Event, an Event of Servicer Termination, a claim
on the Policy or with respect to which failure on the part of FSA
to respond shall be deemed to constitute consent or acceptance,
then copies of such notice or other communication should also be
sent to the attention of the General Counsel and the Head--
Financial Guaranty Group "URGENT MATERIAL ENCLOSED.")
------------------------
All such notices and communications shall not be effective until received by the
party to whom such notice or communication is addressed.
SECTION 9.02. No Waiver; Remedies. No failure on the part of the
-------------------
Company or TFC I or TFC II or any assignee of either of the Funding Corporations
or FSA to exercise, and no delay in
56
<PAGE>
exercising, any right hereunder or under any Assignment shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
other remedies provided by law.
SECTION 9.03. Binding Effect; Assignability. This Agreement shall be
-----------------------------
binding upon and inure to the benefit of the Company, TFC I and TFC II, and
their respective successors and permitted assigns. Except as contemplated
herein, none of the parties may assign any of its rights and obligations
hereunder or any interest herein without the prior written consent of the other
parties and FSA. This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall remain
in full force and effect until its termination; provided, that the rights and
--------
remedies pursuant to Section 4.05 with respect to any breach of any
representation, warranty or covenants made by the Company pursuant to Sections
4.01, 4.02 and 4.03 and the indemnification and payment provisions of Article
VII shall be continuing and shall survive any termination of this Agreement.
SECTION 9.04. No Proceedings. The Company hereby agrees that it will
--------------
not, directly or indirectly, institute, or cause to be instituted, against
either of the Funding Corporations any proceeding of the type referred to in
Section 9.01(c) of the Funding Agreement (except that such action or event shall
be taken by or occur with respect to such Funding Corporation, rather than by or
to the parties mentioned in such Section) so long as there shall not have
elapsed one year plus one day since the latest maturing commercial paper
----
issued by Redwood and allocated to TFC I or TFC II, as the case may be, has
been paid in full in cash.
SECTION 9.05. Amendments; Consents and Waivers. No modification,
--------------------------------
amendment or waiver of, or with respect to, any provision of this Agreement, and
all other agreements, instruments and documents delivered thereto, nor consent
to any departure by the Company or either of the Funding Corporations from any
of the terms or conditions thereof shall be effective unless it shall be in
writing and signed by each of the parties hereto, and prior written consent is
given in writing by Redwood, FSA and the Collateral Agent. Any waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No consent or demand in any case shall, in itself, entitle any party to
any other consent or further notice or demand in similar or other circumstances.
This Agreement and the documents referred to herein embody the entire agreement
of the Company and each of TFC I and TFC II respectively with respect to the
Transferred Receivables and supersede all prior agreements and understandings
relating to the subject hereof.
57
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SECTION 9.06. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
------------------------------------------------------
TRIAL . (A) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
- -----
THE LAW OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAW
PROVISIONS THEREOF).
(B) THE COMPANY, TFC I AND TFC II HEREBY SUBMIT TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND EACH
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND AGREES THAT ALL SUCH
SERVICE OF PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO SUCH
PERSON AT THE ADDRESS SET FORTH ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON SUCH PERSON'S ACTUAL RECEIPT THEREOF. THE
COMPANY, TFC I and TFC II EACH HEREBY WAIVE ANY OBJECTION BASED ON FORUM NON
---------
CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND
- ----------
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE
COMPANY OR TFC I or TFC II TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR AFFECT EITHER'S RIGHT TO BRING ANY ACTION OR PROCEEDING IN THE COURTS
OF ANY OTHER JURISDICTION.
(C) THE COMPANY, TFC I AND TFC II EACH HEREBY WAIVES ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT
OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH
THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY.
SECTION 9.07. Execution in Counterparts; Severability. This Agreement
---------------------------------------
may be executed by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and both of which when taken
together shall constitute one and the same agreement. In case any provision in
or obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations in any jurisdiction, or of such provision or
obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
SECTION 9.08. Descriptive Headings. The descriptive headings of the
--------------------
various sections of this Agreement are inserted for convenience of reference
only and shall not be deemed to affect the meaning or construction of any of the
provisions hereof.
SECTION 9.09. No Setoff. The Company's obligations under this
---------
Agreement shall not be affected by any right of setoff, counterclaim,
recoupment, defense or other right the Company might have against TFC I, TFC II,
Redwood, the Operating
58
<PAGE>
Agent, FSA, the Collateral Agent or any assignee, all of which rights are hereby
waived by the Company.
SECTION 9.10. Further Assurances. The Company agrees to do such
------------------
further acts and things and to execute and deliver to TFC I, TFC II, FSA,
Redwood, FSA the Operating Agent or any assignee such additional assignments,
agreements, powers and instruments as TFC I, TFC II, FSA, Redwood, FSA the
Operating Agent or any assignee may require or deem advisable to carry into
effect the purposes of this Agreement or to better assure and confirm unto any
such party its respective rights, powers and remedies hereunder.
SECTION 9.11. Third-Party Beneficiaries . This Agreement will inure
-------------------------
to the benefit of the parties hereto, FSA and its successors and permitted
assigns. Except as otherwise provided in this Agreement, no other person will
have any right or obligation hereunder.
SECTION 9.12. Assignment of Agreement . The Company acknowledges
-----------------------
that, pursuant to the Funding Agreement, each of TFC I and TFC II may assign its
rights (in addition to those set forth in Section 8.02) granted hereunder,
including any rights in the Collateral granted under Article VII, to the
Collateral Agent on behalf of the Secured Parties and upon such assignment, the
Collateral Agent shall have all rights of the Funding Corporations hereunder and
may in turn assign such rights. The Company agrees that, upon such assignment,
the Collateral Agent may enforce directly, without joinder of either TFC I or
TFC II, as the case may be, the rights set forth in this Agreement.
59
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Receivables Transfer Agreement
to be executed by their respective officers thereunto duly authorized, as of the
date first above written.
TYCO INDUSTRIES, INC.
By /s/ R. Michael Kennedy, Jr.
Name: R. Michael Kennedy, Jr.
Title: Senior V.P.
Address: 6000 Midlantic Drive
Mt. Laurel, New Jersey 08054
Attention: Chief Financial Officer
Phone number: (609) 840-1243
Telecopier number: (609) 273-2885
TYCO FUNDING I CORPORATION
By /s/ Anthony Di Michele
Name: Anthony Di Michele
Title: President & CFO
Address: 6000 Midlantic Drive - Room 400
Mt. Laurel, New Jersey 08054
Attention: Chief Financial Officer
Phone number: (609) 840-2159
Telecopier number: (609) 273-2885
TYCO FUNDING II CORPORATION
By /s/ Anthony Di Michele
Name: Anthony Di Michele
Title: President & CFO
Address: 6000 Midlantic Drive - Room 400
Mt. Laurel, New Jersey 08054
Attention: Chief Financial Officer
Phone number: (609) 840-2160
Telecopier number: (609) 273-2885
<PAGE>
EXHIBIT 1A
[FORM OF ASSIGNMENT I]
ASSIGNMENT, dated as of _______________ between TYCO INDUSTRIES, INC.
(the "Company") and TYCO FUNDING I CORPORATION ("TFC I").
1. We refer to the Receivables Transfer Agreement (the "Transfer
Agreement") dated as of __________ among the Company, TFC I and TFC II. All
provisions of such Transfer Agreement are incorporated herein by reference. All
capitalized terms shall have the meanings set forth in the Transfer Agreement.
2. The Company does hereby sell or contribute to TFC I, without
recourse, except with respect to contribution obligations pursuant to Section
4.05 of the Transfer Agreement, all right, title and interest of the Company in
and to all Tier I Transferred Receivables transferred from time to time in each
Sale or contribution from the Company under the Transfer Agreement.
3. Each Sale and/or contribution made from the Company under the
Transfer Agreement shall be endorsed by TFC I for TFC I on the grid attached
hereto which is a part of this Certificate of Assignment I, and such endorsement
shall evidence the ownership of the Tier I Transferred Receivables resulting
from such Sale and/or contribution thereof.
4. THIS CERTIFICATE OF ASSIGNMENT I SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
TYCO INDUSTRIES, INC.
By ________________________
Name: ________________
Title: _______________
TYCO FUNDING I CORP.
By ________________________
Name: ________________
Title: _______________
<PAGE>
EXHIBIT 1B
[FORM OF ASSIGNMENT II]
ASSIGNMENT, dated as of __________ between TYCO INDUSTRIES, INC. (the
"Company") and TYCO FUNDING II CORPORATION ("TFC II").
1. We refer to the Receivables Transfer Agreement (the "Transfer
Agreement") dated as of __________ among the Company, TFC I and TFC II. All
provisions of such Transfer Agreement are incorporated herein by reference. All
capitalized terms shall have the meanings set forth in the Transfer Agreement.
2. The Company does hereby sell or contribute to TFC II, without
recourse, except with respect to contribution obligations pursuant to Section
4.05 of the Transfer Agreement, all right, title and interest of the Company in
and to all Tier II Transferred Receivables transferred from time to time in each
Sale or contribution from the Company under the Transfer Agreement.
3. Each Sale and/or contribution made from the Company under the
Transfer Agreement shall be endorsed by TFC II for TFC II on the grid attached
hereto which is a part of this Certificate of Assignment II, and such
endorsement shall evidence the ownership of the Tier II Transferred Receivables
resulting from such Sale and/or contribution thereof.
4. THIS CERTIFICATE OF ASSIGNMENT II SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
TYCO INDUSTRIES, INC.
By ________________________
Name: ________________
Title: _______________
TYCO FUNDING II CORP.
By ________________________
Name: ________________
Title: _______________
<PAGE>
EXHIBIT 2A
[FORM OF COMPANY NOTE I]
$______________ [Date]
FOR VALUE RECEIVED, [Company] a _______________ (the "Company"),
hereby promises to pay to [Tyco Funding I Corporation] (the "Lender"), for its
account, at _____________, the principal sum of ____________ Dollars (or such
lesser amount as shall equal the aggregate unpaid principal amount of the TFC I
Loans made by the Lender to the Company under the Transfer Agreement referred to
below), in lawful money of the United States of America and in immediately
available funds immediately on the demand of the Lender.
The date, amount and interest rate, of each TFC I Loan made by the
Lender to the Company, and each payment made on account of the principal
thereof, shall be recorded by the Lender on its books and, prior to any transfer
of this Note, endorsed by the Lender on the schedule attached hereto or any
continuation thereof.
This Note is the Company Note I referred to in the Receivables
Transfer Agreement (as modified and supplemented and in effect from time to
time, the "Transfer Agreement") dated as of ________________ among the Company,
the Lender, TFC I and TFC II and evidences Loans made by the Lender thereunder.
Capitalized terms used in this Note and not defined herein have the respective
meanings assigned to them in the Transfer Agreement.
The Transfer Agreement provides for prepayments of Loans upon the
terms and conditions specified therein.
Notwithstanding any other provisions contained in this Note, if at any
time the rate of interest payable by the Company under this Note, when combined
with any and all other charges provided for in this Note, in the Funding
Agreement or in any other document (to the extent such other charges would
constitute interest for the purpose of any applicable law limiting interest that
may be charged on this Note), exceeds the highest rate of interest permissible
under applicable law (the "Maximum Lawful Rate"), then so long as the Maximum
Lawful Rate would be exceeded the rate of interest under this Note shall be
equal to the Maximum Lawful Rate. If at any time thereafter the rate of interest
payable under this Note is less than the Maximum Lawful Rate, the Company shall
continue to pay interest under this Note at the Maximum Lawful Rate until such
time as the total interest paid by the Company is equal to the total interest
that would have been paid had such applicable law not limited the interest
<PAGE>
rate payable under this Note. In no event shall the total interest received by
the Lender under this Note exceed the amount which the Lender could lawfully
have received had the interest due under this Note been calculated since the
date of this Note at the Maximum Lawful Rate.
If any payment under this Note falls due on a day which is not a
Business Day, then such due date shall be extended to the next succeeding
Business Day and interest (calculated at the Company Interest Rate for each day
during the period then ending) shall be payable on any principal so extended.
The Company expressly waives presentment, demand, diligence, protest
and all notices of any kind whatsoever with respect to this Note.
This Note is made and delivered in New York, New York and shall be
governed by, and construed in accordance with, the internal laws (without
application of its conflict of laws provisions) of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Note to be signed and
delivered by its duly authorized officer as of the date set forth above.
Very truly yours,
[NAME OF COMPANY]
By:____________________________
Name:
Title:
<PAGE>
SCHEDULE OF LOANS
-----------------
This Note evidences demand TFC I Loans made under the within-described
Transfer Agreement to the Company, on the date, at the interest rate, and in the
principal amounts set forth below, subject to the payments and prepayments of
principal set forth below:
<TABLE>
<CAPTION>
================================================================================
Principal Amount Unpaid Notation
Amount of Interest Paid Principal Made
Date Loan Rate or Prepaid Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
================================================================================
</TABLE>
<PAGE>
EXHIBIT 2B
[FORM OF COMPANY NOTE II]
$______________ [Date]
FOR VALUE RECEIVED, [Company] a _______________ (the "Company"),
hereby promises to pay to [Tyco Funding II Corporation] (the "Lender"), for its
account, at _____________, the principal sum of ____________ Dollars (or such
lesser amount as shall equal the aggregate unpaid principal amount of the TFC II
Loans made by the Lender to the Company under the Transfer Agreement referred to
below), in lawful money of the United States of America and in immediately
available funds immediately on the demand of the Lender.
The date, amount and interest rate, of each TFC II Loan made by the
Lender to the Company, and each payment made on account of the principal
thereof, shall be recorded by the Lender on its books and, prior to any transfer
of this Note, endorsed by the Lender on the schedule attached hereto or any
continuation thereof.
This Note is the Company Note II referred to in the Receivables
Transfer Agreement (as modified and supplemented and in effect from time to
time, the "Transfer Agreement") dated as of ________________ by and among the
Company, the Lender, TFC II and TFC I and evidences Loans made by the Lender
thereunder. Capitalized terms used in this Note and not defined herein have the
respective meanings assigned to them in the Transfer Agreement.
The Transfer Agreement provides for prepayments of Loans upon the
terms and conditions specified therein.
Notwithstanding any other provisions contained in this Note, if at any
time the rate of interest payable by the Company under this Note, when combined
with any and all other charges provided for in this Note, in the Funding
Agreement or in any other document (to the extent such other charges would
constitute interest for the purpose of any applicable law limiting interest that
may be charged on this Note), exceeds the highest rate of interest permissible
under applicable law (the "Maximum Lawful Rate"), then so long as the Maximum
Lawful Rate would be exceeded the rate of interest under this Note shall be
equal to the Maximum Lawful Rate. If at any time thereafter the rate of interest
payable under this Note is less than the Maximum Lawful Rate, the Company shall
continue to pay interest under this Note at the Maximum Lawful Rate until such
time as the total interest paid by the Company is equal to the total interest
that would have been paid had such applicable law not limited the interest
<PAGE>
rate payable under this Note. In no event shall the total interest received by
the Lender under this Note exceed the amount which the Lender could lawfully
have received had the interest due under this Note been calculated since the
date of this Note at the Maximum Lawful Rate.
If any payment under this Note falls due on a day which is not a
Business Day, then such due date shall be extended to the next succeeding
Business Day and interest (calculated at the Company Interest Rate for each day
during the period then ending) shall be payable on any principal so extended.
The Company expressly waives presentment, demand, diligence, protest
and all notices of any kind whatsoever with respect to this Note.
This Note is made and delivered in New York, New York and shall be
governed by, and construed in accordance with, the internal laws (without
application of its conflict of laws provisions) of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Note to be signed and
delivered by its duly authorized officer as of the date set forth above.
Very truly yours,
[NAME OF COMPANY]
By:____________________________
Name:
Title:
<PAGE>
SCHEDULE OF LOANS
-----------------
This Note evidences demand TFC II Loans made under the within-
described Transfer Agreement to the Company, on the date, at the interest rate,
and in the principal amounts set forth below, subject to the payments and
prepayments of principal set forth below:
<TABLE>
<CAPTION>
================================================================================
Principal Amount Unpaid Notation
Amount of Interest Paid Principal Made
Date Loan Rate or Prepaid Amount By
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
================================================================================
</TABLE>
<PAGE>
EXHIBIT 3
FORM OF LOCKBOX AGREEMENT
<PAGE>
EXHIBIT 4
FORM OF OPINION OF COUNSEL OF COMPANY
<PAGE>
EXHIBIT 5
FORM OF [TFC I][TFC II]
DEFERRED SALE PRICE NOTE
New York, New York
February 24, 1995
ON DEMAND [TFC I] [TFC II], a Delaware corporation, hereby promises to
pay to the order of TYCO INDUSTRIES, INC.(the "Company"), the principal amount
of this Note, determined as described below, together with interest thereon at a
rate per annum equal to the Company Interest Rate (as defined in the Receivables
Transfer Agreement referred to below) plus 1% in lawful money of the United
States of America. Capitalized terms used herein but not defined herein shall
have the meanings assigned to such terms in the Receivables Transfer Agreement
dated as of February 24, 1995, between TYCO INDUSTRIES, INC., a Delaware
corporation and TYCO FUNDING I CORPORATION ("TFC I") and TYCO FUNDING II
CORPORATION ("TFC II") (such agreement, as it may from time to time be amended,
supplemented or otherwise modified in accordance with its terms, the
"Receivables Transfer Agreement"). This Note is the Note referred to in the
definition of "[TFC I] [TFC II] Deferred Sale Price" in the Receivables Transfer
Agreement.
The aggregate principal amount of this Note at any time shall be equal
to the difference between (a) the sum of the aggregate principal amount of this
Note on the date of the issuance hereof and each addition to the principal
amount of this Note pursuant to the terms of Section [2.01] [2.02] of the
Receivables Transfer Agreement minus (b) the aggregate amount of all payments
made in respect of the principal of this Note, in each case, as recorded on the
schedule annexed to and constituting a part of this Note but failure to so
record shall not affect the obligations of the Company to [TFC I] [TFC II].
Payments of interest on this Note shall be paid on each Settlement Date (with
respect to interest accrued and not paid as of the end of the preceding
Settlement Period (or, in the case of the first Settlement Date, as of the date
on which this Note is issued)) and on the date of demand by the Company by wire
transfer of immediately available funds to such account of the Seller as such
Seller may designate in writing. The principal amount of this Note may, at the
option of [TFC I] [TFC II] be prepaid in whole at any time or in part from time
to time.
Default in the payment of principal or interest under this Note shall
not constitute a default or event of default hereunder or a Termination Event
under the Receivables Transfer Agreement.
<PAGE>
Payments under this Note are subject and subordinate to the prior
rights of payment to any obligations of TFC I or TFC II then due and payable
under any of the Related Documents.
The Company hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The failure of any holder to exercise any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
Neither this Note, nor any right of the Company to receive payments
hereunder, shall, without the prior written consent of [TFC I] [TFC II] and (so
long as the Funding Agreement remains in effect or any amounts owed remain
outstanding thereunder) the Collateral Agent, be assigned, transferred,
exchanged, pledged, hypothecated, participated or otherwise conveyed.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN
THAT STATE .
[TYCO FUNDING I CORPORATION]
[TYCO FUNDING II CORPORATION]
By:___________________________
Title:
<PAGE>
Schedule 1 to
Deferred Sale Price Note
LOANS AND PAYMENTS OF PRINCIPAL
-------------------------------
<TABLE>
<CAPTION>
================================================================================
Amount of Unpaid
Amount of Principal Principal Notation
Date Loans Repaid Balance Made By
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
================================================================================
</TABLE>
<PAGE>
SCHEDULE I
[Form of] Written Contracts
<PAGE>
SCHEDULE II
[Form of] Collection Policy
<PAGE>
SCHEDULE III
Addresses of Company
<PAGE>
SCHEDULE IV
LockBox Banks and LockBox Accounts of Company
<PAGE>
SCHEDULE V
Trade Names,"Doing Business Names", Fictitious Names and Assumed Names of the
Company
<PAGE>
SCHEDULE VI
<PAGE>
EXECUTION COPY
Exhibit 10.48
RECEIVABLES FUNDING AND SERVICING AGREEMENT
Dated as of February 24, 1995
by and among
TYCO FUNDING I CORPORATION,
TYCO FUNDING II CORPORATION,
as Borrowers and, individually, as a "Borrower"
REDWOOD RECEIVABLES CORPORATION,
as Lender
TYCO INDUSTRIES, INC.,
as Servicer
FINANCIAL SECURITY ASSURANCE INC.,
as FSA
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Operating Agent and Collateral Agent
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE I
<S> <C> <C>
DEFINITIONS............................... 2
SECTION 1.01. Certain Defined Terms.................................. 2
SECTION 1.02. Other Terms............................................ 30
SECTION 1.03. Interpretation......................................... 31
SECTION 1.04. Rounding............................................... 31
<CAPTION>
ARTICLE II
<S> <C> <C>
COMMITMENT; ADVANCES........................... 31
SECTION 2.01. Advances............................................... 31
SECTION 2.02. Optional Changes in Commitment......................... 31
SECTION 2.03. Notices Relating to Advances........................... 32
SECTION 2.04. Disbursement of Loan Proceeds.......................... 33
SECTION 2.05. Note................................................... 33
SECTION 2.06. Principal Repayments................................... 33
SECTION 2.07. Interest............................................... 33
SECTION 2.08. Fees................................................... 34
SECTION 2.09. Time and Method of Payments............................ 34
SECTION 2.10. Additional Costs; Capital Requirements................. 35
SECTION 2.11. Breakage Costs......................................... 37
SECTION 2.12. Collections on Receivables............................. 37
SECTION 2.13. Clean Down............................................. 37
<CAPTION>
ARTICLE III
<S> <C> <C>
CONDITIONS TO LENDING.......................... 38
SECTION 3.01. Conditions Precedent to Effectiveness of
the Agreement.......................................... 38
SECTION 3.02. Conditions Precedent to All Advances................... 41
<CAPTION>
ARTICLE IV
<S> <C> <C>
REPRESENTATIONS AND WARRANTIES........................... 42
SECTION 4.01. Representations and Warranties of the
Borrower............................................... 42
SECTION 4.02. Representations and Warranties of Each
Borrower With Respect to the Parent and
the Transferred Receivables............................ 50
SECTION 4.03. Representations and Warranties of the
Servicer............................................... 59
SECTION 4.04. Representations and Warranties of the
Lender................................................. 63
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE V
<S> <C> <C>
GENERAL COVENANTS OF THE BORROWERS ......................... 64
SECTION 5.01. Affirmative Covenants of the Borrowers................. 64
SECTION 5.02. Reporting Requirements of the Borrowers................ 70
SECTION 5.03. Negative Covenants of the Borrowers.................... 73
<CAPTION>
ARTICLE VI
<S> <C> <C>
COLLECTIONS AND DISBURSEMENTS............................ 76
SECTION 6.01. Establishment of Accounts.............................. 76
SECTION 6.02. Funding of Collection Account.......................... 79
SECTION 6.03. Daily Disbursements From the Collection
Account - Revolving Period............................. 80
SECTION 6.04. Disbursements From the Retention Account
- Settlement Date Procedures - Revolving
Period................................................. 82
SECTION 6.05. Liquidation Settlement Procedures...................... 83
SECTION 6.06. Notification by Operating Agent........................ 84
SECTION 6.07. Investment of Accounts................................. 84
SECTION 6.08. Termination Procedure.................................. 86
SECTION 6.09. Payment Under the Policy............................... 86
SECTION 6.10. Effect of Payments by FSA: Subrogation................. 87
<CAPTION>
ARTICLE VII
<S> <C> <C>
APPOINTMENT OF THE SERVICER............................. 88
SECTION 7.01. Appointment of the Servicer............................ 88
SECTION 7.02. Duties and Responsibilities of the Servicer............ 88
SECTION 7.03. Authorization of the Servicer.......................... 93
SECTION 7.04. Servicing Fees......................................... 94
SECTION 7.05. Negative Covenants of the Servicer..................... 94
SECTION 7.06. Financial Covenants.................................... 96
SECTION 7.07. Reporting.............................................. 97
SECTION 7.08. Annual Statement as to Compliance...................... 98
SECTION 7.09. Annual Independent Public Accountants' Servicing and
Compliance Report...................................... 99
SECTION 7.10. Retention and Termination of Servicer.................. 99
<CAPTION>
ARTICLE VIII
<S> <C> <C>
GRANT OF SECURITY INTERESTS............................. 100
SECTION 8.01. Borrowers' Grant of Security Interest.................. 100
SECTION 8.02. Lender's Assignment and Grant of Security Interest..... 102
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION> Page
----
<S> <C> <C>
SECTION 8.03. Delivery of Collateral................................. 102
SECTION 8.04. Borrowers Remain Liable................................ 103
SECTION 8.05. Covenants of the Borrowers and Servicer Regarding the
Collateral............................................. 103
<CAPTION>
ARTICLE IX
<S> <C> <C>
TERMINATION EVENTS............................ 107
SECTION 9.01. Termination Events..................................... 107
SECTION 9.02. Events of Servicer Termination......................... 110
<CAPTION>
ARTICLE X
<S> <C> <C>
REMEDIES................................. 112
SECTION 10.01. Actions Upon Termination Event........................ 112
SECTION 10.02. Receipt of Payments in Trust.......................... 113
SECTION 10.03. Application of Proceeds............................... 114
SECTION 10.04. Exercise of Remedies.................................. 114
SECTION 10.05. Severability of Remedies.............................. 114
SECTION 10.06. Waiver of Appraisement................................ 114
SECTION 10.07. Power of Attorney..................................... 115
SECTION 10.08. Continuing Security Interest.......................... 115
<CAPTION>
ARTICLE XI
<S> <C> <C>
SUCCESSOR SERVICER............................ 116
SECTION 11.01. Servicer Not to Resign................................ 116
SECTION 11.02. Appointment of the Successor Servicer................. 116
SECTION 11.03. Duties of the Servicer................................ 116
SECTION 11.04. Effect of Termination or Resignation.................. 117
<CAPTION>
ARTICLE XII
<S> <C> <C>
INDEMNIFICATION.............................. 117
SECTION 12.01. Indemnities by the Borrowers.......................... 117
SECTION 12.02. Indemnities by the Servicer........................... 119
<CAPTION>
ARTICLE XIII
<S> <C> <C>
OPERATING AGENT.............................. 120
SECTION 13.01. Authorization and Action.............................. 120
SECTION 13.02. Reliance, etc......................................... 120
SECTION 13.03. GE Capital and Affiliates............................. 121
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE XIV
<S> <C> <C>
MISCELLANEOUS............................... 121
SECTION 14.01. Notices, Etc.......................................... 121
SECTION 14.02. Binding Effect; Assignability......................... 121
SECTION 14.03. Costs, Expenses and Taxes............................. 122
SECTION 14.04. No Proceedings........................................ 123
SECTION 14.05. Amendments; Waivers; Consents......................... 124
SECTION 14.06. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL.................................. 124
SECTION 14.07. Execution in Counterparts;
Severability.......................................... 125
SECTION 14.08. Descriptive Headings.................................. 125
SECTION 14.09. Deemed Good Faith..................................... 125
SECTION 14.10. The Borrowers......................................... 125
SECTION 14.11. Financing Statements.................................. 126
SECTION 14.12. Intercreditor Agreement............................... 126
SECTION 14.13. The Note.............................................. 126
SECTION 14.14 Limited Recourse...................................... 126
</TABLE>
iv
<PAGE>
RECEIVABLES FUNDING AND SERVICING AGREEMENT, dated as of February 24,
1995 (the "Agreement") by and among TYCO FUNDING I CORPORATION, a Delaware
corporation ("TFC I"), TYCO FUNDING II CORPORATION, a Delaware corporation ("TFC
II")(together with TFC I, the "Borrowers"), REDWOOD RECEIVABLES CORPORATION, a
Delaware corporation, as Lender (as such, together with its successors and
assigns, the "Lender"), GENERAL ELECTRIC CAPITAL CORPORATION a New York banking
corporation ("GE Capital"), in its capacity as operating agent hereunder (as
such, together with its successors and assigns, the "Operating Agent") and in
its capacity as Collateral Agent for the Lender and FSA (as defined below) (as
such, together with its successors and assigns, the "Collateral Agent"), TYCO
INDUSTRIES, INC., a Delaware corporation (together with its successors and
assigns, the "Parent"), as servicer hereunder (together with its successors and
permitted assigns, the "Servicer"), and FINANCIAL SECURITY ASSURANCE INC., a New
York stock insurance company (together with its successors and assigns, "FSA"),
as insurer hereunder.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrowers are bankruptcy-remote subsidiaries of the
Parent;
WHEREAS, the Borrowers have been formed for the sole purpose of
purchasing and financing certain trade and other receivables originated by the
Parent and Tyco Manufacturing and purchased by or, in the case of the Parent,
contributed to the Borrowers pursuant to the Receivables Transfer Agreements,
each dated as of February 24, 1995 (the "Receivables Transfer Agreements"), by
and between the Borrowers and either Tyco Manufacturing or the Parent,
respectively;
WHEREAS, the Borrowers and the Lender intend that the Lender will make
advances to the Borrowers from time to time, such advances to be secured by
certain receivables and other collateral owned by the Borrowers;
WHEREAS, the Operating Agent has been requested and is willing to act
as operating agent on behalf of the Lender in connection with the making and
financing of such advances;
WHEREAS, to effectuate the purposes of this Agreement, the Lender and
the Operating Agent desire that a servicer be appointed to perform certain
servicing, administrative and collection functions in respect of the receivables
financed by the Lender under this Agreement;
<PAGE>
WHEREAS, the Parent has been requested and is willing to act as the
Servicer;
WHEREAS, FSA has been requested and is willing to provide the Policy
(as hereinafter defined) to the Borrowers for the benefit of the Lender; and
WHEREAS, to secure the advances made to the Borrowers by the Lender
and the reimbursement obligations to FSA arising hereunder or under the
Insurance and Indemnity Agreement, the Borrowers intend to grant to the
Collateral Agent, on behalf of the Lender and FSA, a security interest in such
receivables and other collateral owned by the Borrowers.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used herein, the following terms
---------------------
shall have the following meanings:
"Accession Agreement" means an Accession Agreement substantially in
-------------------
the form of Exhibit A to the Collateral Agent Agreement.
"Accrued Monthly Interest" means for any day within a Settlement
------------------------
Period, the Daily Interest calculated for each day from and including the first
day of the Settlement Period through and including the day for which the
calculation is being made.
"Accumulated Funding Deficiency" shall have the meaning provided in
------------------------------
Section 412 of the Code and Section 302 of ERISA, whether or not waived.
"Additional Amounts" means any amounts payable to any Affected Party
------------------
under Sections 2.10 and 2.11.
"Additional Costs" has the meaning specified in Section 2.10(b).
----------------
"Advance" has the meaning set forth in Section 2.01.
-------
"Advance Rate" means, for any date within a Settlement Period, a
------------
percentage equal to the lesser of (i) the Advance Rate Cap, and (ii) the Dynamic
Advance Rate.
"Advance Rate Cap" means 75% or such other greater figure as
----------------
determined by the Operating Agent (with the prior
2
<PAGE>
written approval of the Liquidity Lenders, the Rating Agencies and FSA) and
agreed to by the Borrowers.
"Advances Outstanding" means, with respect to each Borrower, for any
--------------------
day, the aggregate principal amount of Advances outstanding on such day to such
Borrower, after giving effect to all repayments by and issuances of Advances to
such Borrower on such day; provided, however, that Advances which have been paid
-------- -------
with a payment under either Policy shall continue to remain Advances Outstanding
for purposes of this Agreement until FSA has been paid as subrogee to the rights
of the Lender hereunder or reimbursed pursuant to the Insurance and Indemnity
Agreement for all draws under the Policy used to repay such Advances and all
amounts due in connection therewith under the Insurance and Indemnity Agreement,
as evidenced by a written notice from FSA delivered to the Operating Agent, and
FSA shall be deemed to be the "Lender" thereof to the extent of any payments
thereon made by FSA.
"Adverse Claim" means any claim of ownership or any lien, security
-------------
interest, title retention, trust or other charge or encumbrance, or other type
of preferential arrangement having the effect or purpose of creating a lien or
security interest, other than the security interest created under this Agreement
or the Collateral Agent Agreement.
"Affected Party" means the Lender, any of the Liquidity Lenders, the
--------------
Operating Agent, any of the Letter of Credit Providers, the Collateral Agent,
FSA or any Affiliate of the foregoing persons.
"Affiliate" means, as to any Person, any other Person that, directly
---------
or indirectly, is in control of, is controlled by, or is under common control
with, such Person within the meaning of control under Section 15 of the
Securities Act of 1933, as amended.
"Agreement" means this Receivables Funding and Servicing Agreement,
---------
among the Borrowers, the Lender, the Servicer, FSA, the Operating Agent and the
Collateral Agent.
"Anticipation Payments" means with respect to any Transferred
---------------------
Receivable on any date, the amount of any payments made by the related Obligor
prior to the Maturity Date thereof which such Maturity Date occurs after such
date.
"Assignment" means an assignment entered into between the Parent or
----------
Tyco Manufacturing and the Borrowers on any Transfer Date substantially in the
form of Exhibit 1A or 1B, as the case may be, to the Receivables Transfer
Agreements.
3
<PAGE>
"Authorized Officer" means, with respect to any corporation, the
------------------
Chairman or Vice-Chairman of the Board, the President, any Vice President, the
Secretary, the Treasurer, any Assistant Secretary, any Assistant Treasurer and
each other officer of such corporation specifically authorized in resolutions of
the Board of Directors of such corporation to sign agreements, instruments or
other documents in connection with this Agreement.
"Availability" means, as of any date and with respect to either
------------
Borrower, the lesser of X and Y, where:
X = the Borrowing Base (as of such date) times the Advance Rate (as
of such date) minus the Income Discount Amount minus the Advances
Outstanding to the other Borrower; and
Y = such Borrower's Maximum Facility Commitment as of such date.
"Balance Sheet Date" means September 30, 1994.
------------------
"Billed Amount" means, with respect to any Receivable, the amount
-------------
billed on the Billing Date to the related Obligor with respect thereto net of
contractual allowances, any set-off or other modifications, in each case as
permitted hereunder (excluding any contractual allowances of the types set forth
in Schedule 2 granted by the Parent or Tyco Manufacturing in the ordinary course
of its business which allowance shall be typical for businesses similar to the
Parent's or Tyco Manufacturing's).
"Billing Date" means the date on which the invoice with respect to a
------------
Receivable was generated.
"Borrower" means either of, and "Borrowers" means both of, Tyco
-------- ---------
Funding I Corporation and Tyco Funding II Corporation.
"Borrower Account Collateral" has the meaning specified in Section
---------------------------
8.01(c).
"Borrower Assigned Agreements" has the meaning specified in Section
----------------------------
8.01(b).
"Borrower Collateral" has the meaning specified in Section 8.01.
-------------------
"Borrower Notice" means a notice in the form of Exhibit A, setting
---------------
forth the information required by Section 2.03(b).
"Borrower Secured Obligations" means, collectively, all obligations of
----------------------------
every nature of the Borrowers (other than to the
4
<PAGE>
Parent, Tyco Manufacturing or the Servicer), now or hereafter existing, under
this Agreement, the Notes, the Insurance and Indemnity Agreement, the Premium
Letter and any promissory note or other document or instrument delivered
pursuant to such documents, and all amendments, extensions or renewals hereof or
thereof, whether for principal, interest, fees, expenses or otherwise, whether
now existing or hereafter arising, voluntary or involuntary, whether or not
jointly owed with others, direct or indirect, absolute or contingent, liquidated
or unliquidated, and whether or not from time to time decreased or extinguished
and later increased, created or incurred and all or any portion of such
obligations that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from the Lender, the Operating
Agent, FSA or the Collateral Agent as a preference, fraudulent transfer or
otherwise.
"Borrowers' Share" means the ratio of the aggregate Maximum Facility
----------------
Commitments of the Borrowers to the aggregate maximum commitments of the
Borrowers under this Agreement and all Other Funding Agreements.
"Borrowing Base" means, as of the date of its computation, an amount
--------------
equal to (a) the aggregate Outstanding Balance of Transferred Receivables that
are Eligible Receivables with respect to both Borrowers, plus (b) an amount
equal to the Outstanding Balance of Eligible Receivables to be purchased or
contributed on that date with respect to both Borrowers, minus (c) the sum of
-----
(i) the Concentration Discount Amounts for all Obligors in respect of such
Eligible Receivables and (ii) the Contractual Reserves in respect of all
Transferred Receivables and (iii) during the Clean Down Period Part 4, the Clean
Down Retention Amount.
"Borrowing Base Certificate" means, with respect to either Borrower on
--------------------------
any Business Day, an Officer's Certificate of such Borrower in the form of
Exhibit B, computing for such Business Day the Borrowing Base, the Availability
with respect to such Borrower and any net increase or decrease in the
Availability with respect to such Borrower since the date of the previous
Borrowing Base Certificate and New Advances Available for such Borrower.
"Borrowing Excess" means, with respect to the Borrowers and for any
----------------
date, the extent to which the then Advances Outstanding of such Borrowers
exceeds the aggregate Availability with respect to the Borrowers as of such
date.
"Breakage Costs" has the meaning specified in Section 2.11(a).
--------------
"Business Day" means any day of the year, other than a Saturday or
------------
Sunday that in the City of New York is neither a
5
<PAGE>
legal holiday nor a day on which banking institutions are authorized or
obligated by law or executive order to be closed.
"Capital Lease" shall mean any lease of any property (whether real,
-------------
personal or mixed) by any Person as lessee that, in accordance with GAAP, either
would be required to be classified and accounted for as a capital lease on a
balance sheet of such Person or otherwise be disclosed as such in a note to such
balance sheet.
"Capital Lease Obligation" shall mean, as of any date, the amount of
------------------------
the obligation of the lessee under a Capital Lease that, in accordance with
GAAP, would appear on a balance sheet of such lessee in respect of such Capital
Lease or otherwise be disclosed as such in a note to such balance sheet.
"Cash Interest Expense" means, with respect to any Person for any
---------------------
period, the amount of cash interest payable on all Debt of such Person and its
consolidated Subsidiaries.
"Change in Control" has the meaning specified in the Inventory
-----------------
Facility.
"Clean Down Period" means the period which is divided into the
-----------------
following parts:
"Clean Down Period Part 1" means, with respect to December 1, the
period commencing on December 1 of each such period, and ending on the
Business Day immediately following the Business Day on which the sum
of Advances Outstanding of both Borrowers are reduced by an amount
equal to the Clean Down Reserve Amount.
"Clean Down Period Part 2" means the period commencing on the Business
Day immediately following the Business Day on which Clean Down Period
1 ends, and ending on the Business Day when the sum of Advances
Outstanding of both Borrowers are equal to zero.
"Clean Down Period Part 3" means the period commencing on the Business
Day immediately following the Business Day on which Clean Down Period
Part 2 ends, and ending on the fifth Business Day immediately
following the Business Day on which Clean Down Period Part 3
commenced.
"Clean Down Period Part 4" means the period commencing on the Business
Day immediately following the Business Day on which Clean Down Period
Part 3 ends, and ending on the March 31st following the December 1st
on which that Clean Down Period commenced.
6
<PAGE>
"Clean Down Reserve Amount" means an amount calculated in accordance
-------------------------
with the following formula:
CDR = CDF x PYD
where
CDR = Clean Down Reserve
CDF = 1.5, but which may be increased in good faith by the
Operating Agent or FSA on any day during any Clean Down
Period with notice to the Borrowers.
PYD = the greater of (i) the total of all Variable Dilutions
recorded by the Parent or Tyco Manufacturing in the
immediately preceding period from December 1st to April
30th, and (ii) the total of all Variable Dilutions recorded
by the Parent or Tyco Manufacturing in the next preceding
period from December 1st to April 30th, provided that PYD
may be increased in good faith by the Operating Agent or FSA
on any day during any Clean Down Period with notice to the
Borrowers.
"Clean Down Retention Amount" on any day during the Clean Down Period
---------------------------
Part 4 means an amount calculated in accordance with the following formula:
CDRA = CDF x PYD - ADR
where
CDRA = Clean Down Retention Amount
CDF = 1.5, but which may be increased in good faith by the
Operating Agent or FSA on any day during any Clean Down
Period with notice to the Borrowers.
PYD = the greater of (i) the total of all Variable Dilutions
recorded by the Parent or Tyco Manufacturing in the
immediately preceding period from December 1st to April
30th, and (ii) the total of all Variable Dilutions recorded
by the Parent or Tyco Manufacturing in the second preceding
period from December 1st to April 30th, provided that PYD
shall at all times be an amount not less than ADR and
provided, further that PYD may be increased in good faith by
the Operating Agent or FSA
7
<PAGE>
on any day during any Clean Down Period with notice to the
Borrowers.
ADR = The sum of Variable Dilutions recorded by the Parent and
Tyco Manufacturing from and including the most recent
December 1 to and including such day during the related
Clean Down Period.
"Collateral" means, collectively, the Borrower Collateral pledged by
----------
the Borrowers in Section 8.01 and the Lender Collateral pledged and assigned by
the Lender in Section 8.02.
"Collateral Account" means the account maintained with the Depositary
------------------
described in Section 6.01(d).
"Collateral Agent" means GE Capital or such other party designated as
----------------
agent for the secured parties under the Collateral Agent Agreement.
"Collateral Agent Agreement" means the Amended and Restated Collateral
--------------------------
Agent and Security Agreement, dated as of February, 24 1994, as amended entered
into by the Lender with the Collateral Agent, the Letter of Credit Agent, the
Liquidity Agent, the Depositary and each Transaction Credit Provider.
"Collateral Agent Fees" means the fees paid to the Collateral Agent
---------------------
under the Collateral Agent Agreement.
"Collection Account" means the account maintained with the Depositary
------------------
described in Section 6.01(b).
"Collections" means, with respect to any Receivable, all collections
-----------
and other Proceeds of such Receivable (including late charges, fees and interest
arising thereon, and all recoveries with respect to Receivables that have been
written off as uncollectible) but excluding (i) the sale price therefor under
the Receivables Transfer Agreements, and (ii) the Advances.
"Commercial Paper" means commercial paper issued by the Lender.
----------------
"Commitment Letter" means the letter dated November 8, 1994, together
-----------------
with the commitment extension letters dated December 27, 1994 and January 31,
1995, each from Redwood Receivables Corporation to Tyco Toys, Inc.
"Commitment Termination Date" means the earlier of (a) the date so
---------------------------
designated pursuant to Section 9.01 as a result of a Termination Event, and (b)
the Final Maturity Date; provided, however, that if each of the Borrowers has
not on or
8
<PAGE>
before the 270th day prior to the Final Maturity Date (i) entered into an
agreement with the Lender, the Operating Agent and FSA renewing or extending the
Final Maturity Date, or (ii) entered into a firm commitment with a counterparty,
acceptable to the Operating Agent and FSA, to purchase from the Lender at par
plus accrued Interest all Advances Outstanding as of the Final Maturity Date,
then if the Commitment Termination Date has not already occurred pursuant to
clause (a), the Commitment Termination Date shall be the date that is the last
day of the Clean Down Period Part 3 occurring in the year 2000, but in no event
later than April 1, 2000.
"Commonly Controlled Entity" means each of the Borrowers and each
--------------------------
entity, whether or not incorporated, which is affiliated with any of the
foregoing pursuant to Section 414(b), (c), (m) or (o) of the Code.
"Company Notes" means the notes evidencing the loans made from time to
-------------
time by each of the Borrowers to the Parent and Tyco Manufacturing,
respectively, pursuant to Articles V and VI of the Transfer Agreements.
"Concentration Discount Amount" means, with respect to any Obligor, on
-----------------------------
any date after giving effect to all Eligible Receivables to be purchased on such
date, the amount by which the Outstanding Balance of Eligible Receivables
payable by such Obligor exceeds the lesser of either (a) the Dollar amount set
forth on Schedule 1, or (b) the product of (i) such Obligor's Concentration
Limit Percentage set forth on Schedule 1 and (ii) the Outstanding Balance of all
Transferred Receivables that are Eligible Receivables on such date. The
Concentration Discount Amount may be changed at any time by the Operating Agent
acting in good faith and with the prior written consent of FSA and the Rating
Agencies.
"Concentration Limit Percentage" means, with respect to any Obligor,
------------------------------
the maximum percentage that such Obligor's Outstanding Balance of Eligible
Receivables may be of the Outstanding Balance of all Eligible Receivables that
are Transferred Receivables at such time, as determined by the Operating Agent
acting in good faith and with the prior written consent of FSA and the Rating
Agencies and notified to the Borrowers in writing (such initial notification is
attached as Schedule 1A hereto.)
"Contract" means an agreement (or agreements) (including invoices)
--------
pursuant to, or under which, an Obligor shall be obligated to pay for services
rendered or merchandise or goods sold to such Obligor by the Parent or Tyco
Manufacturing, from time to time.
9
<PAGE>
"Contractual Reserves" means, as of any date, an amount equal to the
--------------------
sum of the Dilution Factors of the type listed on Schedule 2 as reflected on the
books of each of the Parent and Tyco Manufacturing as an accrued credit as of
such date.
"Controlling Party" means (i) FSA so long as an FSA Default shall not
-----------------
have occurred and be continuing and (ii) the Collateral Agent so long as an FSA
Default shall have occurred and be continuing; provided, however, that the
Collateral Agent shall be Controlling Party after delivery by FSA to the
Collateral Agent of a notice of resignation as Controlling Party.
"CP Holder" means any Person holding record or beneficial ownership of
---------
Commercial Paper.
"Credit and Collection Policies" means the credit, collection,
------------------------------
customer relations and service policies of the Parent or Tyco Manufacturing, as
the case may be, in effect on the Effective Date, as set forth in writing and
delivered to the Lender, the Operating Agent, FSA and the Collateral Agent on or
before the Effective Date pursuant to Section 3.01(p), and as such policies may
hereafter be amended, modified or supplemented from time to time with the prior
written consent of the Operating Agent and FSA.
"Daily Borrowing Rate" has the meaning specified in Schedule 5 to this
--------------------
Agreement.
"Daily Interest" has the meaning specified in Schedule 5.
--------------
"Daily Unused Facility Fee" means, with respect to either Borrower, a
-------------------------
fee payable by such Borrower to the Lender for each day in an amount equal to
(A) the product of (i) such Borrower's Maximum Facility Commitment on such day
minus the Advances Outstanding for such Borrower for such day, and (ii) the
Unused Facility Fee Rate (as set out in the Fee Letter), divided by (B) 360.
"Dealer" means any dealer under a Dealer Agreement.
------
"Dealer Agreement" means any dealer agreement entered into by the
----------------
Lender for the distribution of Commercial Paper.
"Debt" of any Person means (a) indebtedness of such Person for
----
borrowed money, (b) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) obligations of such Person to pay the
deferred purchase price of property or services, (excluding trade payables
incurred in the ordinary course of business), (d) Capital Lease Obligations, (e)
obligations secured by any lien or other charge upon property or assets owned by
such Person, even though such
10
<PAGE>
Person has not assumed or become liable for the payment of such obligations, (f)
obligations of such Person under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (a) through (e) above,
and (g) liabilities in respect of unfunded vested benefits under plans covered
by ERISA. For the purposes hereof, the term "guarantee" shall include any
agreement, whether such agreement is on a contingency or otherwise, to purchase,
repurchase or otherwise acquire Debt of any other Person, or to purchase, sell
or lease, as lessee or lessor, property or services, in any such case primarily
for the purpose of enabling another person to make payment of Debt, or to make
any payment (whether as an advance, capital contribution, purchase of an equity
interest or otherwise) to assure a minimum equity, asset base, working capital
or other balance sheet or financial condition, in connection with the Debt of
another Person, or to supply funds to or in any manner invest in another Person
in connection with Debt of such Person.
"Debt Service" shall mean, with respect to any fiscal period of Tyco
------------
Toys, the sum of (a) Interest Expense during such period, plus (b) regularly
----
scheduled payments of principal on Debt (other than Debt owing under this
Agreement and the Inventory Facility and Debt paid on February 24, 1995 under
the Existing Credit Agreement) of Tyco Toys and its Subsidiaries scheduled to be
paid during such period (whether or not actually paid during such period), plus
----
(c) dividend payments made by Tyco Toys during such period.
"Default Coverage" means a fraction (expressed as a percentage) where
----------------
the numerator is the product of (i) the Default Percentage, (ii) the Default
Horizon, and (iii) 1.5, and the denominator is the aggregate Outstanding Balance
of all Eligible Receivables.
"Default Horizon" means, at any time, the aggregate original
---------------
Outstanding Balances of Transferred Receivables generated during the 26 most
recent weeks.
"Default Percentage" for each week, means the greatest of the "DF"s
------------------
calculated as at the end of such week and each of the 51 immediately preceding
weeks, where DF equals a fraction (expressed as a percentage), the numerator of
which is sum of Delinquent Receivables recorded for such week and each of the 25
weeks prior to such week, and the denominator of which is the sum of the
Outstanding Balances of all Transferred Receivables generated during the period
from the 27th to 52nd (inclusive) weeks immediately preceding such week.
11
<PAGE>
"Default Ratio" means, as of any Settlement Date, the ratio (expressed
-------------
as a percentage) computed by dividing
(a) the aggregate Outstanding Balance of all Transferred
Receivables that were Delinquent Receivables as of the last day of the
prior Settlement Period
by
--
(b) the Outstanding Balance of all Transferred Receivables on
the last day of such prior Settlement Period.
"Defaulted Receivable" means a Receivable (a) as to which any payment,
--------------------
or part thereof, remains unpaid for more than 90 days after the Maturity Date of
such Receivable, or (b) as to which the Obligor thereof has taken any action, or
suffered any event to occur, of the type described in Section 9.01(c) in respect
of the Obligor (except that such action or event shall be taken by or occur with
respect to such Obligor, rather than by or to the parties mentioned in such
Section), or (c) which otherwise would be determined to be uncollectible and
written off in accordance with the Credit and Collection Policies.
"Delinquency Ratio" means, as of any Settlement Date, the ratio
-----------------
(expressed as a percentage) computed by dividing
(a) the aggregate Outstanding Balance of all Transferred
Receivables as to which any payment, or part thereof, remains unpaid for
more than 30 days but less than 61 days past its Maturity Date as of the
last day of the prior Settlement Period
by
--
(b) the Outstanding Balance of all Transferred Receivables on
the last day of such prior Settlement Period.
"Delinquent Receivable" means any Receivable, other than a Defaulted
---------------------
Receivable, as to which any payment, or part thereof, remains unpaid for more
than 60 days past its Maturity Date.
"Depositary" means Bankers Trust Company, or any other Person
----------
designated as the successor Depositary from time to time in its capacity as
issuing and paying agent or trustee in connection with the issuance of
Commercial Paper by the Lender.
"Depositary Agreement" means the depositary agreement, dated as of
--------------------
March 15, 1994, between the Lender and the Depositary and consented to by the
Liquidity Agent.
12
<PAGE>
"Depositary Fee" means the fee paid to the Depositary in connection
--------------
with the issuance of Commercial Paper by the Lender.
"Dilution Coverage" means, at any time, a fraction, expressed as a
-----------------
percentage, the numerator of which is the sum of the Normal Dilutions and the
Spike Impact calculated as of such date, and the denominator of which is the
aggregate Outstanding Balance of all Eligible Receivables.
"Dilution Factors" means, with respect to the Receivables, any net
----------------
credits, rebates, freight charges, cash discounts, volume discounts, cooperative
advertising expenses, royalty payments, warranties, cost of parts required to be
maintained by agreement (whether express or implied), warehouse and other
allowances, disputes, chargebacks, defective returns, other returned or
repossessed goods, inventory transfers, allowances for early payments and other
similar allowances that are made or coordinated with Tyco Manufacturing or the
Parent's usual practices, in each case after, in the case of any Receivable,
such Receivable first became a "Receivable" hereunder; provided that any
allowances or adjustments in accordance with the Credit and Collection Policies
made on account of an Obligor's insolvency or inability to pay shall not
constitute a Dilution Factor.
"Dilution Horizon" means, at any time, an amount calculated as the
----------------
aggregate original Outstanding Balances of Transferred Receivables generated
during the "N" most recent days, where N equals, if the Dilution Horizon is
calculated on any day in the months shown in Column A below, the corresponding
number of days shown in Column B below:
<TABLE>
<CAPTION>
COLUMN A COLUMN B
-------- --------
<S> <C>
January 180
February 180
March 180
April 120
May 120
June 120
July 120
August 150
September 180
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
October 210
November 240
December 270
</TABLE>
"Dilution Percentage" means, calculated during any month, a fraction
-------------------
(expressed as a percentage) calculated as set out in Schedule 9.
"Dilution Ratio" means, as of any Settlement Date, the ratio
--------------
(expressed as a percentage) computed by dividing
(a) an amount equal to the aggregate amount of the Variable
Dilutions as reflected on the books of each of the Parent and Tyco
Manufacturing during the preceding Settlement Period.
by
--
(b) the Outstanding Balance of all Eligible Receivables on the
last day of the prior Settlement Period.
"Dollar" and "$" means lawful currency of the United States of
------
America.
"Dynamic Advance Rate" means a rate, as of any date, expressed as a
--------------------
percentage, equal to 100% minus the sum of the Dilution Coverage, as calculated
on such date, and the Default Coverage, as calculated for the Settlement Period
preceding such date.
"EBITA" shall mean, with respect to any fiscal period of Tyco Toys,
-----
(i) operating profit of Tyco Toys and its Subsidiaries on a consolidated basis
for such period, plus (ii) to the extent deducted in determining such operating
----
profit, amortization expense of Tyco Toys and its Subsidiaries on a consolidated
basis for such period, minus (iii) to the extent deducted in determining net
-----
income of Tyco Toys and its Subsidiaries on a consolidated basis for such
period, extraordinary losses of Tyco Toys and its Subsidiaries on a consolidated
basis during such period.
"Effective Date" means the date of this Agreement.
--------------
"Eligible Bank Account" means (a) a segregated deposit account with a
---------------------
depositary institution or trust company acceptable to FSA whose short-term
unsecured debt obligations are rated at least A-1+ by S&P and P-1 by Moody's;
(b) a segregated account maintained in the corporate trust department of; a
depositary institution or trust (which may be an account maintained with the
Depositary) whose long-term unsecured debt obligations are rated
14
<PAGE>
at least A- by S&P and A3 by Moody's; or (c) a segregated trust account or
similar account maintained with a federally or state chartered depository
institution subject to regulations regarding fiduciary funds on deposit
substantially similar to 12 C.F.R. (S) 9.10(b) whose long-term unsecured debt
obligations are rated at least A- by S&P and A3 by Moody's.
"Eligible Customer" means any Obligor which is not an Excluded
-----------------
Customer.
"Eligible Receivable" means, at any time, a Transferred Receivable:
-------------------
(a) which is a liability of an Eligible Customer organized under
the laws of any jurisdiction in the United States and having its principal
office in the United States;
(b) which is denominated and payable in Dollars in the United
States;
(c) which is not and will not be subject to any right of
rescission, set-off, recoupment, counterclaim or defense, whether arising
out of transactions concerning the related Contract or otherwise;
(d) which is not a Delinquent Receivable or a Defaulted
Receivable;
(e) which does not represent "billed but not yet shipped" goods
or merchandise, unperformed services, consigned goods or "sale or return"
goods or any other conditional sale or supply of goods or services;
(f) as to which the representations and warranties of Section
4.02(c) are true and correct in all respects as of the date of its
inclusion in any Borrowing Base Certificate;
(g) which has a Maturity Date no later than 270 days from its
Billing Date;
(h) which complies with such other criteria and requirements as
the Operating Agent and FSA may in good faith from time to time specify to
the Borrower following 30 days' notice; and
(i) which is not a Receivable of an Obligor which has more than
30% of its Receivables as Delinquent Receivables.
15
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
it may be amended from time to time, and the regulations promulgated thereunder.
"Event of Servicer Termination" has the meaning specified in Section
-----------------------------
9.02.
"Excluded Customer" means an Obligor which is (a) an Affiliate of the
-----------------
Parent or Tyco Manufacturing or either of the Borrowers, (b) a Governmental
Authority, (c) a supplier of goods or services to the Parent, Tyco Manufacturing
or an Affiliate of either with respect to which the Parent, Tyco Manufacturing
and/or an Affiliate of either has accounts payable, on any date of
determination, in excess of 10% of the Outstanding Balance of Transferred
Receivables on such date or (d) a supplier of goods or services to the Parent,
Tyco Manufacturing or an Affiliate of either with respect to which the Parent,
Tyco Manufacturing or an Affiliate of either has accounts payable in an amount
which when added to the amount of all accounts payable of all other obligors
which supply goods or services to the Parent, Tyco Manufacturing or an Affiliate
of either exceeds $150,000, in which event all such Obligors shall be Excluded
Customers, (e) Toys'R'Us, if Toys'R'Us is then a supplier of goods or services
to the Parent, Tyco Manufacturing or an Affiliate of either or (f) an Obligor
listed on Schedule 3 hereof as revised from time to time in good faith by the
Operating Agent, with the prior written consent of FSA if any such Excluded
Customer shall be removed therefrom, pursuant to a letter in the form of Annex A
thereto.
"Facility Structuring Fee" has the meaning specified in the Fee
------------------------
Letter.
"Fee Letter" means the letter dated as of February 24, 1995, among the
----------
Borrowers, the Lender, the Servicer and the Operating Agent.
"Fees" mean the fees payable pursuant to the Fee Letter.
----
"Final Maturity Date" means August 24, 2000.
-------------------
"FSA" means Financial Security Assurance Inc., a stock insurance
---
company organized and created under the laws of the State of New York, and any
successors thereto.
"FSA Default" shall mean any one of the following events shall have
-----------
occurred and be continuing:
(a) FSA fails to make a payment required under the Policy in
accordance with its terms;
16
<PAGE>
(b) FSA (i) files any petition or commences any case or
proceeding under any provision or chapter of the United States
Bankruptcy Code or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization,
(ii) makes a general assignment for the benefit of its creditors, or
(iii) has an order for relief entered against it under the United
States Bankruptcy Code or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department
of Insurance or other competent regulatory authority enters a final
and nonappealable order, judgment or decree (i) appointing a
custodian, trustee, agent or receiver for FSA or for all or any
material portion of its property or (ii) authorizing the taking of
possession by a custodian, trustee, agent or receiver of FSA (or the
taking of possession of all or any material portion of the property of
FSA).
"Funded Debt" shall mean, with respect to any Person, all Debt of such
-----------
Person which by the terms of the agreement governing or instrument evidencing
such Debt matures more than one year from, or is directly or indirectly
renewable or extendible at the option of the debtor under a revolving credit or
similar agreement obligating the lender or lenders to extend credit over a
period of more than one year from, the date of creation thereof, including
current maturities of long-term debt, revolving credit, and short-term debt
extendable beyond one year at the option of such Person.
"Funding Date" means each day on which an Advance is
------------
made.
"GAAP" means generally accepted accounting principles as in effect in
----
the United States, consistently applied, as of the date of such application.
"GE Capital" means General Electric Capital Corporation.
----------
"Governmental Authority" means the United States of America, any
----------------------
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions thereof
or pertaining thereto.
"Governmental Consents" has the meaning specified in Section
---------------------
4.02(a)(xiv).
17
<PAGE>
"Guaranteed Distributions" has the meaning specified in the Policy.
------------------------
"Incipient Event" means an event which, upon the giving of notice or
---------------
the passage of time, or both, would become a Termination Event.
"Income Discount Amount" means the amount calculated by the Operating
----------------------
Agent as set forth on Schedule 4, from time to time at its discretion, subject,
with respect only to items E to H inclusive in the "Input Table" of such
Schedule 4 and the definitions set forth on such Schedule 4 relating to such
items, to the subsequent written notice to FSA and, upon notice by FSA to the
Operating Agent to the prior written consent of FSA to the next succeeding
calculation.
"Indemnified Amounts" has the meaning specified in Section 12.01(a).
-------------------
"Indemnified Party" has the meaning specified in Section 12.01(a).
-----------------
"Insurance and Indemnity Agreement" means the agreement of that name
---------------------------------
among the Borrowers, GE Capital, the Lender, the Servicer and FSA dated as of
February 24, 1995, as amended or supplemented in accordance with the provisions
thereof.
"Intercreditor Agreement" means the Intercreditor Agreement, dated as
-----------------------
of February 24, 1995, among Tyco Manufacturing, the Parent, the Borrowers, the
Lender, FSA, the Collateral Agent, the Inventory Lender Agent and the Operating
Agent.
"Interest", for any period, means the sum of the Daily Interest for
--------
each day in such period, as more fully specified in Schedule 5.
"Interest and Fees Shortfall" means, for any day within a Settlement
---------------------------
Period, the amount, if any, by which the sum of the Accrued Monthly Interest and
the Unused Facility Fees calculated as of that day exceed the sum of the
Retained Monthly Interest and the Unused Facility Fees transferred to or
retained in the Retention Account as of that same day.
"Interest Expense" shall mean with respect to any fiscal period of
----------------
Tyco Toys, interest expense of Tyco Toys and its Subsidiaries on a consolidated
basis for such period, including amortization of original issue discount on any
Debt and of all fees payable in connection with the incurring of such Debt (to
the extent included in interest expense), the interest portion of any deferred
payment obligation and the interest component of any Capital Lease Obligation.
18
<PAGE>
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended from time to time.
"Inventory Facility" means the Credit Agreement, dated as of February
------------------
24, 1995, among Tyco Distribution Corp., Tyco Manufacturing, Tyco Toys, the
lenders, parties thereto and GE Capital as in the effect on the Effective Date
with such amendments and modifications as may be agreed to by the Lender and FSA
and includes any refinancing, replacement, refunding of or successor to such
agreement.
"Investments" means, with respect to the Borrower Account Collateral
-----------
and the Lender Account Collateral, the certificates, instruments or other
Permitted Investments in which amounts in such accounts are invested from time
to time.
"Lender" means Redwood Receivables Corporation, a Delaware
------
corporation.
"Letter of Credit" means the letter of credit, dated April 12, 1994,
----------------
provided by the Letter of Credit Providers pursuant to the Letter of Credit
Agreement.
"Letter of Credit Agent" means GE Capital, in its capacity as agent
----------------------
for the Letter of Credit Providers under the Letter of Credit Agreement, and its
successors and permitted assigns in such capacity.
"Letter of Credit Agreement" means the Amende and Restated Letter of
--------------------------
Credit Reimbursement Agreement, dated as of February 24, 1995, entered into by
the Lender, the Letter of Credit Agent and the Letter of Credit Providers.
"Letter of Credit Providers" means, initially, GE Capital, as provider
--------------------------
of the Letter of Credit under the Letter of Credit Agreement, and thereafter its
successors and any permitted assigns in such capacity.
"Liquidity Agent" means GE Capital and its successors and assigns as
---------------
agent for the Liquidity Lenders pursuant to the Liquidity Loan Agreement.
"Liquidity Lenders" means, collectively, GE Capital and any other
-----------------
provider of Liquidity Loans under the Liquidity Loan Agreement.
"Liquidity Loan Agreement" means the Amended and Restated Liquidity
------------------------
Loan Agreement, dated as of February 24, 1995, entered into by the Lender, the
Liquidity Lenders and the Liquidity Agent in connection with the provision of
liquidity support for the Lender.
19
<PAGE>
"Liquidity Loans" means borrowings by the Lender under the Liquidity
---------------
Loan Agreement.
"Loans" means any indebtedness issued by an Affected Party, including
-----
Advances, payments under the Policy and Liquidity Loans.
"LOC Draw" means a draw under the Letter of Credit Agreement.
--------
"Lockbox" has the meaning specified in Section 6.01(a)(ii).
-------
"Lockbox Account" means a segregated deposit account described in
---------------
Section 6.01(a) in the name of the Collateral Agent into which Proceeds in
respect of Transferred Receivables shall be deposited.
"Lockbox Agreement" means an agreement among either TFC I or TFC II as
-----------------
the case may be, the Operating Agent, the Lender and a Lockbox Bank with respect
to the Lockbox Accounts, in the form, subject to the approval of FSA, of Exhibit
3 to the Receivables Transfer Agreements.
"Lockbox Bank" means any of the banks approved in writing by FSA
------------
holding one or more Lockbox Accounts.
"Material Adverse Effect" means, with respect to any event or
-----------------------
circumstance and any Person, a material adverse effect on:
(a) the business, financial condition, operations or assets of
such Person, or of such Person and of its Subsidiaries, on a
consolidated basis, or of Tyco Industries, Inc. Tyco Investment Corp.,
Tyco Manufacturing Corp., Tyco Distribution Corp., Matchbox Toys (USA)
Ltd. and Tyco Playtime, Inc.;
(b) the ability of such Person to perform its obligations under
any Related Document, any Program Document, or this Agreement;
(c) the validity or enforceability of, or collectibility of
amounts payable under, this Agreement, any Related Document or any
Program Document;
(d) the Collateral or the status, existence, perfection or first
priority of the Lender's, the Collateral Agent's or FSA's interest in
the Collateral, taken as a whole free of any Adverse Claim;
20
<PAGE>
(e) the validity, enforceability or collectibility of the
Receivables or Contracts;
(f) the ability of the Lender, the Collateral Agent or FSA to
liquidate, or foreclose against, the Collateral;
(g) the practical realization by the Lender, the Collateral
Agent or FSA of any of the benefits or security afforded under this
Agreement, any Related Document or any Program Document; or
(h) the shadow rating of the pool of Receivables purchased by
the Borrowers, if such adverse effect on the shadow rating is notified
to the Servicer or Tyco Manufacturing by FSA.
"Maturity Date", for any Receivable, means the due date for payment
-------------
specified in the related Contract, or, if no date is specified, 60 days from the
Billing Date.
"Maximum Facility Commitment" means with respect to each Borrower,
---------------------------
$100,000,000, as such amount may be subject to reduction in accordance with
Section 2.02(a).
"Maximum Lawful Rate" has the meaning specified in Section 2.07(c).
-------------------
"Monthly Report" has the meaning set forth in Section 5.02(a)(ii).
--------------
"Moody's" means Moody's Investors Service, Inc. or any successors
-------
thereto.
"Multiemployer Plan" means a multiemployer plan (within the meaning of
------------------
Section 4001(a)(3) of ERISA) in respect of which a Commonly controlled Entity
makes contributions or has liability.
"Net Income" shall mean, with respect to any fiscal period of Tyco
----------
Toys, Inc., the aggregate net income (or loss) of Tyco Toys, Inc. and its
Subsidiaries on a consolidated basis from continuing operations for such period,
calculated and determined in accordance with GAAP.
"Net Proceeds Amount" means the face amount of Commercial Paper minus
-------------------
the discount on the price to the public and dealer fees for such Commercial
Paper.
"New Advances Available" means, with respect to either Borrower, as of
----------------------
the date of any calculation, (a) the Availability with respect to such Borrower
as of such date, minus (b) Advances Outstanding with respect to such Borrower as
of such date.
21
<PAGE>
"Normal Dilutions" means an amount which is the product of (i) the
----------------
Dilution Percentage, (ii) the Dilution Horizon, and (iii) 1.5.
"Note" has the meaning set forth in Section 2.05(a).
----
"Notice of Claim" means the Notice of Claim and Certificate under the
---------------
Policy.
"Obligations" means all amounts owed by the Borrowers under this
-----------
Agreement and under the Insurance and Indemnity Agreement or the Premium Letter,
including with respect to Advances, payments under the Policy, Interest, Fees,
Additional Amounts, and indemnities.
"Obligor" means, with respect to any Receivable, the Person primarily
-------
obligated to make payments with respect thereto.
"Officers' Certificate" means, with respect to any Person, a
---------------------
certificate of such Person signed on its behalf by the Chairman of the Board,
Vice Chairman of the Board, the President, a Vice President, the Treasurer, the
Secretary or any other duly authorized officer of such Person acceptable to the
Operating Agent and FSA.
"Operating Agent" means GE Capital, as Operating Agent hereunder,
---------------
together with its successors and assigns.
"Operating Agent Agreement" means the Operating Agent Agreement, dated
-------------------------
as of March 15, 1994, between the Lender and the Operating Agent.
"Operating Agent Base Fees" means the amount designated as such and so
-------------------------
agreed by the Lender and the Operating Agent.
"Optional Prepayment of Advances" means the option of each Borrower to
-------------------------------
repay an Advance pursuant to a Borrower Notice and in accordance with Article
VI.
"Optional Repayment Amount" means the principal amount of any Optional
-------------------------
Prepayment of Advances, plus the interest accrued but unpaid on such principal
amount through the prepayment date, as set forth in any Borrower Notice.
"Other Costs" has the meaning specified in Section 14.03(a).
-----------
"Other Funding Agreements" means other agreements for the purchase or
------------------------
funding of receivables entered into from time to time by the Lender in which it
is contemplated that such purchases or fundings will be financed in the same
manner as contemplated hereunder.
22
<PAGE>
"Outstanding Balance" of any Receivable at any time means an amount
-------------------
(not less than zero) equal to (a) its Billed Amount, minus (b) all payments
received from the Obligor with respect thereto, minus (c) all discounts to or
any other modifications that reduce the Billed Amount; provided, that if the
--------
Operating Agent or the Servicer makes a determination that all payments by the
Obligor with respect to such Billed Amount have been made, the Outstanding
Balance shall be zero.
"Parent" means Tyco Industries, Inc. or any Affiliate thereof that is
------
an originator of Transferred Receivables.
"Parent's Sales" means, for any period, the Billed Amounts of all
--------------
Receivables originated by the Parent during such period, plus the aggregate
amount of any down payments or deposits made in respect of such Receivables.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
----
agency, corporation or instrumentality of the United States to which the duties
and powers of the Pension Benefit Guaranty Corporation are transferred.
"Permitted Investments" means one or more of the following:
---------------------
(a) obligations of, or guaranteed as to the full and timely
payment of principal and interest by, the United States or obligations of
any agency or instrumentality thereof, when such obligations are backed by
the full faith and credit of the United States;
(b) repurchase agreements on obligations specified in clause
(a); provided, that the short-term debt obligations of the party agreeing
to repurchase are rated at least A-1+ by S&P and P-1 by Moody's;
(c) federal funds, certificates of deposit, time deposits and
bankers' acceptances (which shall each have an original maturity of not
more than 90 days or, in the case of bankers' acceptances, shall in no
event have an original maturity of more than 365 days) of any United States
depository institution or trust company incorporated under the laws of the
United States or any state; provided, that the short-term obligations of
such depository institution or trust company are rated at least A-1+ by S&P
and P-1 by Moody's;
(d) commercial paper (having original maturities of not more
than 30 days) of any corporation incorporated under the laws of the United
States or any state thereof which on the date of acquisition are rated at
least A-1+ by S&P and P-1 by Moody's;
23
<PAGE>
(e) with the prior consent of FSA, securities of money market
funds rated at least Aam by S&P and P-1 by Moody's provided that Bankers
Trust Money Market Mutual Fund shall be acceptable; and
(f) with the prior written consent of FSA, such other
investments with respect to which each Rating Agency shall have confirmed
in writing to the Lender and Collateral Agent that such investments shall
not result in a withdrawal or reduction of the then current rating by such
Rating Agency of the Commercial Paper.
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust, association, joint venture,
Governmental Authority or any other entity of whatever nature.
"Plan" means any pension plan (other than a Multiemployer Plan)
----
covered by Title IV of ERISA, which is maintained by a Commonly Controlled
Entity or in respect of which a Commonly Controlled Entity has liability.
"Policy" means, collectively, the financial guaranty insurance
------
policies Nos. 50352A-N and 50352B-N issued by FSA with respect to a Note
pursuant to the Insurance and Indemnity Agreement, including any endorsement
thereto.
"Premium" has the meaning specified in the Insurance and Indemnity
-------
Agreement.
"Premium Letter" means the side letter dated as of February 24, 1995
--------------
among FSA, the Borrowers, GE Capital in its capacity as Collateral Agent and
Operating Agent and the Lender in respect of the premium payable by the
Borrowers in consideration of the issuance of the Policy.
"Proceeds" means, with respect to any Collateral, whatever is
--------
receivable or received when such Collateral is sold, collected, exchanged or
otherwise disposed of, whether such disposition is voluntary or involuntary, and
includes all rights to payment, including returned premiums, with respect to any
insurance relating to such Collateral.
"Program Documents" means the Letter of Credit Agreement, the
-----------------
Liquidity Loan Agreement, the Collateral Agent Agreement, the Depositary
Agreement, the Commercial Paper, the Operating Agent Agreement, each Accession
Agreement and the Dealer Agreements.
"Rating Agency" means each of Moody's and S&P.
-------------
24
<PAGE>
"Rating Agency Fee" means fees paid to each Rating Agency in
-----------------
connection with the rating of the Commercial Paper.
"Receivable" means:
----------
(a) indebtedness of an Obligor (whether constituting an account,
chattel paper, instrument or general intangible) arising from the provision
of merchandise, goods or services by the Parent or Tyco Manufacturing to
such Obligor (other than the provision of services to Tyco Toys or any
Affiliate thereof), including the right to payment of any interest or
finance charges and other obligations of such Obligor with respect thereto;
(b) all security interests or liens and property subject thereto
from time to time securing or purporting to secure payment by the Obligor;
(c) all guarantees, indemnities and warranties and proceeds
thereof, proceeds of insurance policies, financing statements and other
agreements or arrangements of whatever character from time to time
supporting or securing payment of such Receivable;
(d) all Collections with respect to any of the foregoing;
(e) all Records with respect to any of the foregoing; and
(f) all Proceeds of any of the foregoing.
"Receivable Collection Turnover" means, as of the last day of any
------------------------------
Settlement Period, a number of days equal to (A) a fraction, the numerator of
which is equal to the average of the Outstanding Balance of Transferred
Receivables on the first day of each month during the prior twelve fiscal months
and the denominator of which is equal to aggregate Collections less Anticipation
Payments received during such twelve month period with respect to all
Receivables originated by the Parent or Tyco Manufacturing, multiplied by (B)
the number of days in such prior twelve fiscal month period.
"Receivables Transfer Agreements" means the Receivables Transfer
-------------------------------
Agreements, each dated as of February 24, 1995, among the Borrowers and either
Tyco Manufacturing or the Parent, as the case may be.
"Records" means all Contracts and other documents, books, records and
-------
other information (including, without limitation, computer programs, tapes,
disks, punch cards, data processing software and related property and rights)
prepared and
25
<PAGE>
maintained by the Parent, Tyco Manufacturing, the Servicer or the Borrowers with
respect to Receivables and the related Obligors.
"Regulatory Change" shall mean any change after the Effective Date in
-----------------
federal, state or foreign law or regulations (including, without limitation,
Regulation D of the Federal Reserve Board) or the adoption or making after such
date of any interpretation, directive or request applying to any Affected Party
of or under any federal, state or foreign law or regulations (whether or not
having the force of law) by any Governmental Authority charged with the
interpretation or administration thereof.
"Rejected Amount" means, with respect to either Borrower, the amount
---------------
of the capital contribution or payment as the case may be, which the Parent or
Tyco Manufacturing, as the case may be, is required to make to such Borrower (as
reasonably determined by the Operating Agent) pursuant to the applicable
Receivables Transfer Agreement as a result of breaches by the Parent or Tyco
Manufacturing of representations and warranties with respect to Receivables
transferred to such Borrower by the Parent or Tyco Manufacturing pursuant to a
Receivables Transfer Agreement.
"Related Documents" means the Notes, the Lockbox Agreements, the
-----------------
Receivables Transfer Agreements, the Assignments, the Insurance and Indemnity
Agreement, the Policy, the Premium Letter, the Intercreditor Agreement and all
agreements, instruments, certificates, financing statements or other documents
required to be delivered hereunder or thereunder.
"Reportable Event" means any of the events set forth in Section
----------------
4043(b) of ERISA or the regulations thereunder.
"Request Notice" has the meaning set out in the Receivables Transfer
--------------
Agreement.
"Required Information" means, with respect to a Receivable, (a) the
--------------------
Obligor, (b) the Obligor's address, (c) the Billed Amount, (d) the Maturity
Date, (e) the Billing Date and (f) whether or not such Receivable is an Eligible
Receivable.
"Restrictions on Transferability" means any material condition to, or
-------------------------------
restriction on, the ability of the holder or an assignee of the holder of any
right, title or interest to sell, assign, transfer or otherwise liquidate such
right, title or interest in a commercially reasonable time and manner or which
would otherwise materially deprive the holder or any assignee of the holder of
the benefits thereof.
"Retained Monthly Interest" means, for any day within a Settlement
-------------------------
Period, all amounts transferred to or retained in the
26
<PAGE>
Retention Account with respect to Daily Interest calculated as of the previous
day in accordance with Section 6.03(a)(ii) and Accrued Monthly Interest
calculated as of that date in accordance with Section 6.04(a)(iii).
"Retention Account" means the account maintained with the Depositary
-----------------
described in Section 6.01(c).
"Retention Account Deficiency" means, for any Settlement Date, any
----------------------------
deficiency in the amounts on deposit in the Retention Account necessary to make
the payments required under Sections 6.04(a)(i) and (ii).
"Revolving Period" means the period commencing on the Effective Date
----------------
of this Agreement and ending on the day immediately prior to the Commitment
Termination Date.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-
---
Hill, Inc. or any successors thereto.
"Sale Date" has the meaning given to that term in the Receivables
---------
Transfer Agreements.
"Secured Parties" means, collectively, the Lender and FSA.
---------------
"Servicer" means the Parent, or any Person designated as Successor
--------
Servicer, and its successors and assigns from time to time hereunder.
"Servicer Documents" has the meaning set forth in Section 4.03 (l).
------------------ ----------------
"Servicer Extension Notice" has the meaning set forth in Section 7.10
------------------------- ------------
hereof.
"Servicer Termination Notice" means a notice by the Operating Agent,
---------------------------
with the prior written consent or at the direction of FSA, to the Servicer that
an Event of Servicer Termination has occurred and that the Servicer's
appointment hereunder has been terminated.
"Servicing Fee" means a fee payable by such Borrowers to the Servicer
-------------
on each Settlement Date equal to the product of (i) the Servicing Fee Rate, (ii)
the Average Outstanding Balance of all Transferred Receivables for the preceding
Settlement Period, and (iii) the actual number of days in such period divided by
360.
"Servicing Fee Rate" means 1.00% per annum.
------------------
27
<PAGE>
"Servicing Officer" means any officer of the Servicer involved in, or
-----------------
responsible for, the administration and servicing of the Transferred Receivables
whose name appears on an Officer's Certificate listing servicing officers
furnished to the Operating Agent and FSA by the Servicer, as amended from time
to time.
"Servicing Records" means all documents, books, records and other
-----------------
information (including, without limitation, computer programs, tapes, disks,
punch cards, data processing software and related property and rights) prepared
and maintained by the Servicer with respect to the Transferred Receivables and
the related Obligors.
"Settlement Date" means each Tuesday or if any such Tuesday is not a
---------------
Business Day, the next succeeding Business Day.
"Settlement Period" means, in the case of the initial Settlement
-----------------
Period, the period beginning with the Effective Date to and including the last
day of the week in which such Effective Date occurs; with respect to the final
Settlement Period, the period ending on the Final Maturity Date and beginning
with the first day of the week in which the Final Maturity Date occurs; and with
respect to all other Settlement Periods, each week, unless (with respect to any
of the foregoing Settlement Periods) otherwise specified to be a month.
"Spike" means, with respect to any Settlement Period, an amount
-----
expressed as a percentage and calculated as the greater of (i) ADP - DP, and
(ii) zero, where:
ADP = the arithmetic average of (a) the Dilution Percentage for
the Settlement Period in the year immediately prior to such
Settlement Period, and (b) the Dilution Percentage for the
Settlement Period two years immediately prior to such
Settlement Period.
DP = the Dilution Percentage for such Settlement Period
"Spike Impact" means, with respect to any Settlement Period, the
------------
product of the Spike and the Dilution Horizon.
"Sub-Servicer" means any Person with whom the Servicer enters into a
------------
Sub-Servicing Agreement.
"Sub-Servicing Agreement" means any written contract between the
-----------------------
Servicer and any Sub-Servicer, relating to servicing, administration or
collection of Transferred Receivables as provided in Section 7.01, in such form
as has been approved in writing by the Servicer, FSA and the Operating Agent.
28
<PAGE>
"Subsidiary" means, as to any Person, any corporation or other entity
----------
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Successor Servicer" has the meaning specified in Section 11.02.
------------------
"Successor Servicing Fees and Expenses" means the fees and expenses
-------------------------------------
payable by the Borrowers to the Successor Servicer, as agreed to by the
Borrowers, the Lender, the Operating Agent, the Liquidity Agent and FSA at a per
annum rate not to exceed 2% of the Outstanding Balance of Transferred
Receivables.
"Tangible Net Worth" shall mean, as of any date, (a) shareholders'
------------------
equity of Tyco Toys and its Subsidiaries on a consolidated basis minus (b) the
-----
amount of goodwill of Tyco Toys and its Subsidiaries on a consolidated basis,
determined in each case in accordance with GAAP; provided that Tangible Net
--------
Worth shall not in any event include any cumulative translation adjustments
which are made pursuant to FASB 52 or any similar accounting rule, regulation,
pronouncement or opinion.
"Tax Expense" shall mean, with respect to any fiscal period of Tyco
-----------
Toys, provision for income taxes of Tyco Toys and its Subsidiaries on a
consolidated basis for such period.
"Term of the Insurance and Indemnity Agreement" shall be determined as
---------------------------------------------
provided in Section 4.01 of the Insurance and Indemnity Agreement.
"Termination Event" has the meaning specified in Section 9.01.
-----------------
"TFC I" has the meaning specified in the preamble.
-----
"TFC II" has the meaning specified in the preamble.
------
"TFC I Deferred Sale Price" has the meaning specified in the
-------------------------
Receivables Transfer Agreements.
"TFC II Deferred Sale Price" has the meaning specified in the
--------------------------
Receivables Transfer Agreements.
"Tier I Transferred Receivables" has the meaning such term has
------------------------------
pursuant to the Receivables Transfer Agreements.
"Tier II Transferred Receivables" has the meaning such term has
-------------------------------
pursuant to the Receivables Transfer Agreements.
29
<PAGE>
"Transaction Credit Provider" shall have the meaning such term has
---------------------------
pursuant to the Collateral Agent Agreement.
"Transfer Date" means each date on which a Transferred Receivable is
-------------
sold or contributed to the Borrower by the Parent or Tyco Manufacturing under a
Receivables Transfer Agreement.
"Transferred Receivable" means any Receivable which has been purchased
----------------------
by either Borrower, or contributed as capital by the Parent to either Borrower,
under a Receivables Transfer Agreement.
"Tyco Manufacturing" means Tyco Manufacturing Corp., a company
------------------
incorporated under the laws of Oregon.
"Tyco Manufacturing's Sales" means, for any period, the Billed Amount
--------------------------
of all Receivables originated by Tyco Manufacturing during such period, plus the
aggregate amount of any downpayments or deposits made in respect of such
Receivables.
"Tyco Toys" means Tyco Toys, Inc., a company incorporated under the
---------
laws of Delaware.
"UCC" means, for any jurisdiction, the Uniform Commercial Code as from
---
time to time in effect in such jurisdiction.
"Underfunded Plan" means any Plan that has an Underfunding.
----------------
"Underfunding" means, with respect to any Plan, the excess, if any, of
------------
(a) the present value of all benefits under the Plan (based on the assumptions
used to fund the Plan pursuant to Section 412 of the Code) as of the most recent
valuation date over (b) the fair market value of the assets of such Plan as of
such valuation date.
"Unused Facility Fee" means for any period, the sum of the Daily
-------------------
Unused Facility Fees for each day in the period.
"Variable Dilutions" means, for any period, an amount equal to the sum
------------------
of the Dilution Factors as reflected on the books of each of the Parent and Tyco
Manufacturing for such period less the amounts of credit memos issued during
such period relating to the Contractual Reserves.
"Wire Payments" has the meaning specified in Section 6.01(a)(ii).
-------------
SECTION 1.02. Other Terms. All accounting terms not specifically defined
-----------
herein shall be construed in accordance with GAAP. All terms used in Article 9
of the UCC of the State of New
30
<PAGE>
York, and not specifically defined herein, are used herein as defined in such
Article 9. All hourly references herein shall refer to New York City time. All
weekly or monthly references with respect to Tyco Toys, the Parent, Tyco
Manufacturing or the Borrowers herein shall refer to fiscal weeks or months of
Tyco Toys, the Parent or Tyco Manufacturing, as the case may be.
SECTION 1.03. Interpretation. Except as otherwise indicated, all
--------------
agreements defined in this Agreement refer to the same as from time to time
amended or supplemented or as the terms of such agreements are waived or
modified in accordance with their terms.
SECTION 1.04. Rounding. For purposes of any calculations referred to in
--------
this Agreement (unless otherwise specified), (a) all percentages resulting from
such calculations will be rounded up, if necessary, to the nearest one ten-
thousandth of a percentage point (e.g. 9.87654% (or .0987654) being rounded up
to 9.8766% (or .098766)) and (b) all Dollar amounts used in or resulting from
such calculations will be rounded up to the nearest cent (e.g. $1,057.373 being
rounded up to $1,057.38).
ARTICLE II
COMMITMENT; ADVANCES
SECTION 2.01. Advances.
--------
Subject to Section 2.13, the Lender hereby agrees, on the terms and
subject to the conditions of this Agreement, to make advances (each, an
"Advance") to each of the Borrowers during the Revolving Period in an aggregate
principal amount at any one time outstanding up to, but not exceeding, such
Borrower's Availability. Subject to Section 2.13 and the other terms of this
Agreement, during the Revolving Period each of the Borrowers may borrow, repay
and reborrow up to the amount of such Borrower's Availability (after giving
effect to the mandatory and voluntary reductions required and permitted herein).
SECTION 2.02. Optional Changes in Commitment.
------------------------------
(a) Each Borrower shall be entitled at its option, not more than
twice during each calendar year, to reduce its Maximum Facility Commitment
permanently; provided that such Borrower shall give notice of such reduction to
--------
the Lender and FSA as provided in Section 2.03(b) hereof and that any partial
reduction of the Maximum Facility Commitment shall be in an amount equal to One
Million Dollars ($1,000,000) or an integral multiple thereof; and provided,
--------
further, that any reduction of its Maximum Facility Commitment below Advances
- -------
Outstanding of such Borrower shall be
<PAGE>
subject to such Borrower's repayment obligations under Sections 2.03(a) and
2.06(a).
(b) Subject to Section 2.02(c), each Borrower shall be entitled at
its option to terminate its Maximum Facility Commitment, provided that the
Lender and FSA shall be given 180 days prior notice by such Borrower of such
termination. Any such termination shall be permanent and irrevocable.
(c) Early termination or reduction of its Maximum Facility Commitment
shall obligate the applicable Borrower to pay to FSA an amount in respect of
"Unpaid Premium" as set forth in Section 3.02 of the Insurance and Indemnity
Agreement.
SECTION 2.03. Notices Relating to Advances.
----------------------------
(a) On each Settlement Date, on each Funding Date and on each
Business day during the Clean Down Period Part 1 and the Clean Down Period Part
2, the Borrowers shall each file a Borrowing Base Certificate and copies of all
applicable Request Notices under the Receivables Transfer Agreements with the
Operating Agent and, upon request, FSA. Availability will be calculated based
on the most recent Borrowing Base Certificate delivered to the Lender and the
Operating Agent. Subject to Section 2.13, the Borrowers may each request
additional Advances up to such Borrower's New Advances Available, if any. If
there is a Borrowing Excess with respect to a Borrower, the affected Borrower
must repay, in accordance with the procedures set forth in Sections
6.02(a)(iii), 6.03(a)(iii) and 6.04(a)(i)(D), Advances Outstanding of such
Borrower to the then current level of the Availability of such Borrower.
(b) Each Borrower shall give the Lender, FSA and the Operating Agent
written notice of each termination or reduction of its Maximum Facility
Commitment and of each borrowing and repayment of each Advance of such Borrower
(in each case, a "Borrower Notice"). Each such written notice shall be
irrevocable upon its effectiveness. Such notice and the termination, reduction,
borrowing or repayment referred to therein shall be effective, only if such
notice is received by the Lender, FSA and the Operating Agent not later than
2:00 p.m., New York City time on the Business Day prior to the date of the
related termination, reduction, borrowing or repayment. Each such notice of
termination or reduction shall specify the amount thereof. Each such notice of
borrowing or repayment shall specify the amount (subject to Section 2.01 hereof)
of Advances of such Borrower to be borrowed or repaid and the Funding Date or
repayment date (which shall be a Business Day).
(c) Each Borrower Notice requesting an Advance shall include a
representation by the applicable Borrower that the Advance requested shall not
on the Funding Date exceed the New
32
<PAGE>
Advances Available of such Borrower, based upon the most recent Borrowing Base
Certificate of such Borrower.
SECTION 2.04. Disbursement of Loan Proceeds. Each Borrower shall give the
-----------------------------
Lender and the Operating Agent and, upon request by FSA, FSA notice of each
Advance to it hereunder as provided in Section 2.03(b) hereof. Not later than
11:00 a.m., New York City time, on the date specified for each Advance
hereunder, the Lender shall transfer or cause the Collateral Agent to transfer,
by wire transfer or otherwise, but in any event in immediately available funds,
the amount of the Advance to be made on such date, to the Collection Account.
SECTION 2.05. Note.
----
(a) The Advances made by the Lender hereunder to each Borrower shall
be evidenced by a single promissory note of each Borrower in substantially the
form of Exhibit C hereto (each, a "Note"). The Note shall be dated the date of
the initial Advance under this Agreement, shall be payable to the order of the
Lender in a principal amount equal to such Borrower's Maximum Facility
Commitment as originally in effect, and shall otherwise be duly completed. The
Advances evidenced by each Note shall be payable as provided in Article VI
hereof.
(b) The Lender shall enter on a schedule attached to each Note a
notation (which may be computer generated) with respect to each Advance of the
related Borrower made hereunder of: (i) the date and principal amount thereof
and (ii) each payment and repayment of principal thereof. The failure of the
Lender to make a notation on the schedule to a Note as aforesaid shall not limit
or otherwise affect the obligation of the related Borrower to repay the related
Advances in accordance with their respective terms as set forth herein.
SECTION 2.06. Principal Repayments. The Advances of each Borrower (a)
--------------------
shall be repaid as and when necessary, as set forth in Sections 2.03(a), 6.03,
6.04 and 6.05, to cause the aggregate principal amount of the Advances
Outstanding of such Borrower not to exceed the Availability of such Borrower,
and (b) may be repaid at any time and from time to time, in whole or in part,
upon prior written notice to the Lender, FSA and Operating Agent as provided in
Section 2.03(b) hereof and any amount so repaid may, subject to the terms and
conditions hereof, be reborrowed hereunder during the Revolving Period, subject
to Section 2.13; provided, however, that all repayments of Advances or any
portion thereof shall be made together with payment of (i) all Interest accrued
on the amount repaid to (but excluding) the date of such repayment, and (ii) any
and all Breakage Costs payable under Section 2.11.
SECTION 2.07. Interest.
--------
33
<PAGE>
(a) Each Borrower shall pay to the Lender, as set forth in Sections
6.03, 6.04 and 6.05, Interest on the unpaid principal amount of each Advance of
such Borrower for the period commencing on and including the date of such
Advance until but excluding the date such Advance shall be paid in full.
(b) Notwithstanding the foregoing, each Borrower shall pay interest
on unpaid Interest, on any Advance of such Borrower or any installment thereof,
and on any other amount payable by such Borrower hereunder (to the extent
permitted by law) that shall not be paid in full when due (whether at stated
maturity, by acceleration or otherwise) for the period commencing on the due
date thereof to (but excluding) the date the same is paid in full at the
applicable Daily Borrowing Rate.
(c) Anything in this Agreement or any of the Related Documents to the
contrary notwithstanding, if at any time the rate of interest payable by any
Person under this Agreement or any of the Related Documents exceeds the highest
rate of interest permissible under any applicable law (the "Maximum Lawful
Rate"), then, so long as the Maximum Lawful Rate would be exceeded, the rate of
interest under this Agreement or such Related Document shall be equal to the
Maximum Lawful Rate. If at any time thereafter the rate of interest payable
under this Agreement or such Related Document is less than the Maximum Lawful
Rate, such Person shall continue to pay interest under this Agreement or such
Related Document at the Maximum Lawful Rate until such time as the total
interest received from such Person is equal to the total interest that would
have been received had the applicable law not limited the interest rate payable
under this Agreement or such Related Document. In no event shall the total
interest received by the Lender and the Collateral Agent under this Agreement or
any of the Related Documents exceed the amount which the Lender and the
Collateral Agent could lawfully have received, had the interest due under this
Agreement or such Related Document been calculated since the Effective Date at
the Maximum Lawful Rate.
SECTION 2.08. Fees.
----
(a) On the Effective Date and each Settlement Date, as the case may
be, the Borrowers shall pay the Fees to the Lender.
(b) On each Settlement Date, the Borrowers shall pay to the Servicer,
the Servicing Fee, or to the Successor Servicer, the Successor Servicing Fees
and Expenses.
SECTION 2.09. Time and Method of Payments. Subject to the provisions of
---------------------------
Sections 6.03, 6.04 and 6.05, all payments of principal, interest, fees and
other amounts (including indemnities) payable by the Borrowers hereunder shall
be made in Dollars, in immediately available funds, to the Lender not later
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than 11:00 a.m., New York City time, on the date on which such payment shall
become due. Any such payment made on such date but after such time shall, if
the amount paid bears interest, be deemed to have been made on, and interest
shall continue to accrue and be payable thereon until, the next succeeding
Business Day. If any payment of principal or interest becomes due on a day
other than a Business Day, such payment may be made on the next succeeding
Business Day and such extension shall be included in computing interest in
connection with such payment. All payments hereunder and under the Notes shall
be made without set-off or counterclaim and in such amounts as may be necessary
in order that all such payments shall not be less than the amounts otherwise
specified to be paid under this Agreement and the Notes (after withholding for
or on account of any present or future taxes, levies, imposts, duties or other
similar charges of whatever nature imposed upon an Affected Party by any
government or any political subdivision or taxing authority thereof, other than
any tax on or measured by the net income of the Affected Party to which any such
payment is due pursuant to applicable federal, state and local income tax laws).
Upon payment in full of any Note, following the Commitment Termination Date, the
Lender shall mark such Note "Paid" and return it to the applicable Borrower.
SECTION 2.10. Additional Costs; Capital Requirements.
--------------------------------------
(a) In the event that any existing or future law, regulation or
guideline, or interpretation thereof, by any court or administrative or
governmental authority charged with the administration thereof, or compliance by
any Affected Party with any request or directive (whether or not having the
force of law) of any such authority shall impose, modify or deem applicable or
result in the application of, any capital maintenance, capital ratio or similar
requirement against Loan commitments or other financial commitments made by any
Affected Party under this Agreement, the Insurance and Indemnity Agreement, the
Policy or a Program Document, and the result of any event referred to above is
to impose upon any Affected Party or increase any capital requirement applicable
as a result of the making or maintenance of, such Affected Party's loan or other
financial commitment (which imposition of capital requirements may be determined
by each Affected Party's reasonable allocation of the aggregate of such capital
increases or impositions), then, upon demand made by the Operating Agent on
behalf of such Affected Party as promptly as practicable after it obtains
knowledge that such law, regulation, guideline, interpretation, request or
directive exists and determines to make such demand, the Borrowers shall pay
within 5 Business Days after delivery of the certificate referred to below to
the Collateral Agent or the Operating Agent on behalf of such Affected Party
from time to time as specified by the Operating Agent additional amounts which
shall be sufficient to compensate such Affected Party for the Borrowers'
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Share of such imposition of or increase in capital requirements together with
interest on each such amount from the end of such 5 Business Day period until
payment in full thereof at the Daily Borrowing Rate. A certificate setting
forth in reasonable detail the amount necessary to compensate such Affected
Party as a result of an imposition of or increase in capital requirements
submitted by the Operating Agent to the Borrowers shall be conclusive, absent
manifest error, as to the amount thereof.
(b) In the event that any Regulatory Change shall: (i) change the
basis of taxation of any amounts payable to any Affected Party in respect of any
Loans (other than taxes imposed on the overall net income of such Affected Party
for any such Loans); (ii) impose or modify any reserve, Federal Deposit
Insurance Corporation premium or assessment, special deposit or similar
requirements relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of, such Affected Party; or (iii) impose any
other conditions affecting this Agreement or the Insurance and Indemnity
Agreement or the Policy in respect of Loans (or any of such extensions of
credit, assets, deposits or liabilities); and the result of any event referred
to in clause (i), (ii) or (iii) above shall be to increase such Affected Party's
costs of making or maintaining any Loans or its commitment under the Insurance
and Indemnity Agreement, the Policy or a Program Document, or to reduce any
amount receivable by such Affected Party hereunder in respect of any of its
Loans or its commitment (such increases in costs and reductions in amounts
receivable are hereinafter referred to as "Additional Costs") then, upon demand
made by the Operating Agent on behalf of such Affected Party, the Borrowers
shall pay within 5 Business Days after delivery of the certificate referred to
below to the Collateral Agent on behalf of such Affected Party (or, in the case
of FSA, directly to FSA), from time to time as specified by the Operating Agent,
additional commitment fees or other amounts which shall be sufficient to
compensate such Affected Party for the Borrowers' Share of such increased cost
or reduction in amounts receivable by such Affected Party from the date of such
change, together with interest on each such amount from the date demanded until
payment in full thereof at the Daily Borrowing Rate (or, in the case of FSA, at
the rate and amounts set forth in Sections 3.05 and 3.07 of the Insurance and
Indemnity Agreement). A certificate setting forth in reasonable detail the
amount necessary to compensate such Affected Party for such increased cost or
reduction in amounts receivable by such Affected Party submitted by the
Operating Agent to the Borrower shall be conclusive, absent manifest error, as
to the amount thereof.
(c) Determinations by any Affected Party for purposes of this Section
2.10 of the effect of any Regulatory Change on its costs of making or
maintaining Loans or on amounts receivable by it in respect of Loans, and of the
additional amounts required
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to compensate such Affected Party in respect of any Additional Costs, shall be
set forth in a written notice to the Borrower in reasonable detail and shall be
conclusive, absent manifest error.
SECTION 2.11. Breakage Costs.
--------------
(a) The Borrowers shall pay to the Collateral Agent for the account
of the Lender, upon the request of the Lender, such amount or amounts as shall
compensate the Lender for any loss (including loss of profit), cost or expense
incurred by the Lender (as reasonably determined by the Lender) as a result of
any repayment of an Advance (and Interest thereon) other than on the maturity
date of the Commercial Paper funding such Advance, such compensation to include,
without limitation, an amount equal to any loss or expense suffered by the
Lender during the period from the date of receipt of such repayment to (but
excluding) the maturity date of such Commercial Paper, if the rate of interest
obtainable by the Lender upon the redeployment of an amount of funds equal to
the amount of such repayment is less than the rate of interest applicable to
such Commercial Paper (such expense to be referred to as "Breakage Costs"). The
determination by the Lender of the amount of any such loss or expense shall be
set forth in a written notice to the Borrower in reasonable detail and shall be
prima facie evidence of such loss or expense, absent manifest error or bad
faith.
(b) Section 2.11(a) shall not apply during Clean Down Period Part 1
or Clean Down Period Part 2.
SECTION 2.12. Collections on Receivables. In the event that the Servicer
--------------------------
is unable to determine the specific Receivables on which Collections have been
received from an Obligor, the parties agree that such Collections shall be
deemed to have been received on the Receivables in the order in which they were
originated with respect to such Obligor. In the event that the Servicer is
unable to determine the specific Receivables on which discounts, offsets or
other non-cash reductions have been granted or made with respect to an Obligor,
the parties agree that such reductions shall be deemed to have been granted or
made in respect of the Receivables of such Obligor in the order in which they
were originated.
SECTION 2.13. Clean Down. During the Clean Period Part 1, the Clean Down
----------
Period Part 2 and the Clean Down Period Part 3, the Lender shall not make any
Advances.
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ARTICLE III
CONDITIONS TO LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of the Agreement.
------------------------------------------------------
The effectiveness of this Agreement is subject to the condition precedent that
the Lender, the Operating Agent, FSA and the Collateral Agent shall each have
received on or before the Effective Date the following, in form and substance
satisfactory to the Operating Agent, FSA and the Collateral Agent:
(a) An executed copy of the Receivables Transfer Agreements in the
form approved by the Operating Agent, FSA and the Collateral Agent and evidence
to the effect that all conditions precedent to the effectiveness thereof shall
have been satisfied.
(b) A certificate from an officer of the Parent in the form of
Exhibit D to the effect that the performance of the Receivables Transfer
Agreements will not render the Borrowers insolvent and the Borrowers will be
able to remain economically viable without further investments by the Parent for
the foreseeable future.
(c) A certificate from an officer of the Parent to the effect that
all Lockboxes into which Collections may from time to time be mailed are in the
name of the Borrowers.
(d) With respect to each of the Borrowers:
(i) the certificate or articles of incorporation of such
Borrower certified, as of a date no more than five days prior to the
Effective Date, by the Secretary of State of its state of incorporation;
(ii) a good standing certificate, dated no more than five days
prior to the Effective Date, from the respective Secretary of State of its
state of incorporation and each state in which such Borrower is required to
qualify, or represents that it is qualified, to do business;
(iii) a Certificate of the Secretary or Assistant Secretary of
such Borrower certifying as of the Effective Date: (A) the names and true
signatures of the officers authorized on its behalf to sign this Agreement,
(B) a copy of such Borrower's by-laws, and (C) a copy of the resolutions of
the board of directors of such Borrower approving this Agreement, the
Related Documents to which it is a party and the transactions contemplated
hereby and thereby;
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(iv) an Officer's Certificate in the form of Exhibit E hereto;
and
(v) a Note shall have been duly executed and delivered by such
Borrower to the Operating Agent and shall be in full force and effect.
(e) With respect to the Servicer:
(i) the certificate or articles of incorporation of the Servicer
certified, as of a date no more than five days prior to the Effective Date,
by the Secretary of State of its state of incorporation;
(ii) a good standing certificate, dated no more than five days
prior to the Effective Date, from the respective Secretary of State of its
state of incorporation and each state in which the Servicer is required to
qualify, or represents that it is qualified, to do business;
(iii) a certificate of the Secretary or Assistant Secretary of
the Servicer certifying as of the Effective Date: (A) the names and true
signatures of the officers authorized on its behalf to sign this Agreement,
(B) a copy of the Servicer's by-laws, and (C) a copy of the resolutions of
the board of directors of the Servicer approving this Agreement, the
Related Documents to which it is a party and the transactions contemplated
hereby and thereby; and
(iv) an Officer's Certificate in the form of Exhibit F hereto.
(f) Certified copies of Requests for Information or Copies of form
UCC-11 (or a similar search report certified by a party acceptable to the
Operating Agent and FSA), dated a date no more than five days prior to the
Effective Date listing all effective financing statements and other similar
instruments and documents which name the Parent or Tyco Manufacturing (under its
present name and any previous name) or either of the Borrowers as debtor,
together with copies of such financing statements.
(g) Executed financing statements (form UCC-3), if any, necessary to
release all security interests and other rights of any Person in Transferred
Receivables previously granted by the Parent or Tyco Manufacturing including,
without limitation, all such releases specified by the Parent or Tyco
Manufacturing prior to the date hereof.
(h) Any necessary third party consents to the closing of the
transactions contemplated hereby, in form and substance satisfactory to the
Operating Agent and FSA.
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(i) Executed copies of proper financing statements (form UCC-1), in
respect of Transferred Receivables, (i) pursuant to the Receivables Transfer
Agreements, naming the Parent or Tyco Manufacturing, as the case may be, as the
assignor and each of the Borrowers as the assignee, and (ii) pursuant to Article
VIII, naming each of the Borrowers as the debtor, the Collateral Agent on behalf
of the Lender and FSA as the secured party, or other, similar instruments or
documents, as may be necessary or, in the opinion of the Operating Agent and
FSA, desirable under the UCC of all appropriate jurisdictions or any other
applicable law (including the Assignment of Claims Act) to perfect the
Collateral Agent's interests in all Transferred Receivables in which an interest
may be assigned hereunder.
(j) Fully executed copies of (i) the Lockbox Agreements and, the
Receivables Transfer Agreements; (ii) the letter of instruction from each of the
Borrowers to the Lockbox Bank maintaining the Lockbox Account established by
such Borrower, assigning all interest in and control over such Lockbox Account
to the Collateral Agent and, upon the occurrence and during the continuation of
a Termination Event, the Collateral Agent; and (iii) the letter to each of the
post offices maintaining a Lockbox transferring control of such Lockbox to the
Collateral Agent.
(k) The opinion of counsel to the Borrowers, Tyco Manufacturing and
the Parent in form and substance satisfactory to the Lender, the Operating
Agent, FSA and the Collateral Agent, as to the matters set forth in Exhibit G.
(l) The favorable opinion of Wolf, Block, Schorr & Solis-Cohen,
counsel to the Borrowers, as to the true sale of the Receivables which are sold
by the Parent and Tyco Manufacturing, as the case may be, to the Borrowers, and
the nonconsolidation of either Borrower's assets into the bankruptcy estate of
the Parent, in form and substance satisfactory to FSA.
(m) Payment of the Facility Structuring Fee.
(n) Payment of (i) the Lender's and FSA's estimated legal and other
document preparation costs and (ii) the Lender's and FSA's out-of-pocket costs
associated with installation of an appropriate Receivables monitoring system,
account maintenance fees, and due diligence in an amount not in excess of the
Lender's and FSA's costs in the aggregate on or prior to the Effective Date.
(o) (i) Consolidated balance sheets and statements of income (loss)
and changes in financial position of Tyco Toys and its Subsidiaries for each
of the years in the three most recent calendar year period prior to the
Balance Sheet Date, audited by a nationally recognized accounting firm;
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(ii) Unaudited consolidated balance sheets and statements of
income (loss) of Tyco Toys and its Subsidiaries for the most recent month
end close but in any event for the twelve month period ended December 31,
1994;
(iii) Each Borrower's pro forma balance sheet, dated as of the
Effective Date and certified by the chief financial officer of the Parent
as being correct to the best of his knowledge; and
(iv) A complete and accurate Borrowing Base Certificate, dated
as of the Effective Date.
(p) A copy of each of the Parent's and Tyco Manufacturing's Credit
and Collection Policies.
(q) Written confirmation of the current ratings of the Commercial
Paper by the Rating Agencies.
(r) The Policy being issued by FSA in a form acceptable to the
Operating Agent and the Lender.
(s) Such other approvals, consents, opinions, documents and
instruments, as the Operating Agent or FSA may reasonably request.
SECTION 3.02. Conditions Precedent to All Advances. Each Advance to
------------------------------------
either Borrower, (including the initial Advance to such Borrower) shall be
subject to the further conditions precedent that:
(a) The representations and warranties of such Borrower, the Parent,
Tyco Manufacturing and the Servicer set forth in Sections 4.01, 4.02 and 4.03
and in the Related Documents are true and correct on and as of such date in all
material respects (except with respect to Sections 4.02(b) and (c) and those
already so qualified which are true and correct in all respects), before and
after giving effect to such borrowing and to the application of the proceeds
therefrom, as though made on and as of the date of such Advance (except to the
extent such representations and warranties expressly related to an earlier date,
in which case they shall have been true and correct on and as of such earlier
date);
(b) Each of such Borrowers and the Servicer is in compliance with
each of its covenants and other agreements set forth herein and in the Related
Documents; and
(c) No event has occurred or would result from such Advance or from
the application of the proceeds therefrom, which constitutes a Termination Event
or an Event of Servicer Termination or would constitute a Termination Event or
an Event
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of Servicer Termination but for the requirement that notice be given or time
elapse or both;
(d) On the related Funding Date, such Borrower shall have certified
as to the truthfulness of the preceding clauses (a) through (c) in the related
Borrowing Base Certificate that, except as specifically disclosed in the related
Borrower Notice (or specifically disclosed in a prior instance to the Lender in
writing), and specifically consented to in writing by each of the Lender and
FSA, each of subsections (a) through (c) above is true and correct;
(e) The Commitment Termination Date shall not have occurred;
(f) Before and after giving effect to such borrowing and to the
application of proceeds therefrom, there exists no Borrowing Excess;
(g) Each Transferred Receivable submitted by the Borrowers for
computation of the Borrowing Base is an Eligible Receivable; and
(h) The Parent, Tyco Manufacturing and the Borrowers shall have taken
such other action, including delivery of approvals, consents, opinions,
documents and instruments to the Lender, the Operating Agent and FSA, as the
Operating Agent or FSA may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. Each
----------------------------------------------
Borrower represents and warrants to the Lender, the Operating Agent, FSA and the
Collateral Agent as of the date hereof, as of the Effective Date and on each
subsequent Funding Date as follows:
(a) The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation and is
duly qualified to do business, and is in good standing, in each jurisdiction in
which the nature of its business requires it to be so qualified or where the
failure to be so qualified, separately or in the aggregate, would have a
Material Adverse Effect on the Borrower.
(b) The Borrower has the power and authority to own, pledge,
mortgage, operate and convey all of its properties and conduct its business as
now or currently proposed to be conducted and to execute and deliver this
agreement and the Related
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<PAGE>
Documents and to perform the transactions contemplated hereby and thereby.
(c) The Borrower is a subsidiary of the Parent.
(d) The Borrower is operated in the following manner:
<PAGE>
(i) the Borrower is a limited purpose corporation whose
activities are restricted in its certificate or articles of incorporation;
(ii) neither the Parent, Tyco Manufacturing nor any Affiliate of
the Parent or Tyco Manufacturing is involved in the day-to-day management
of the Borrower;
(iii) other than the purchase and contribution of Receivables
and other transactions contemplated by the Receivables Transfer Agreements,
the payment of dividends and return of capital, any lease or sub-lease of
office space or equipment and the payment of Servicing Fees to the Servicer
under this Agreement, the Borrower engages in no intercorporate
transactions with the Parent, Tyco Manufacturing or any Affiliate of the
Parent or Tyco Manufacturing;
(iv) the Borrower maintains proper corporate records and books of
account that are separate from each of the Parent and Tyco Manufacturing,
holds regular corporate meetings and otherwise observes corporate
formalities and has a separate business office from the Parent and Tyco
Manufacturing;
(v) all the financial statements and books and records of the
Borrower, the Parent and Tyco Manufacturing reflect the separate corporate
existence of the Borrower, the Parent and Tyco Manufacturing;
(vi) the Borrower maintains its assets separately from the assets
of the Parent and Tyco Manufacturing and any other Affiliate of the Parent
or Tyco Manufacturing (including through the maintenance of separate bank
accounts), the Borrower's funds and assets, and records relating thereto,
have not been, are not and will not be commingled with those of the Parent
or Tyco Manufacturing or any other Affiliate of the Parent or Tyco
Manufacturing and the separate creditors of the Borrower will be entitled
to be satisfied out of the Borrower's assets prior to any value in the
Borrower becoming available to the Borrower's equityholders; the Borrower
has, and will continue to have, assets other than assets contributed by the
Parent;
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(vii) neither the Parent, Tyco Manufacturing nor any Affiliate
of the Parent or Tyco Manufacturing (A) pays the Borrower's expenses; (B)
guarantees the Borrower's obligations, or (C) advances funds to the
Borrower for the payment of expenses or otherwise other than certain
incorporation or set-up expenses of the Borrower;
(viii) all business correspondence of the Borrower and other
communications are conducted in the Borrower's own name, on its own
stationery and through a separately-listed telephone number;
(ix) the Borrower does not act as agent for the Parent, Tyco
Manufacturing or of any of their Affiliates, but instead presents itself to
the public as a corporation separate from the Parent, Tyco Manufacturing
and their respective Affiliates, independently engaged in the business of
purchasing and financing Receivables; and
(x) the Borrower maintains at least two independent directors
each of whom at all times shall not be a shareholder, director, officer,
employee or associate of the Parent, Tyco Manufacturing or any Affiliate of
the Parent or Tyco Manufacturing (other than each Borrower) as provided in
its certificate or articles of incorporation;
(xi) the Borrower is solvent and will not be rendered insolvent
by the transactions contemplated hereby and by the Related Documents and,
after giving effect to such transactions, the Borrower will not be left
with an unreasonably small amount of capital with which to engage in its
business nor will the Borrower have intended to incur, or believe that it
has incurred, debts beyond its ability to pay such debts as they mature,
and the Borrower does not contemplate the commencement of insolvency,
bankruptcy, liquidation or consolidation proceedings or the appointment of
a receiver, liquidator, conservator, trustee or similar official in respect
of the Borrower or any of its assets; and
(xii) the bylaws and/or Articles of Incorporation of the Borrower
require it to maintain (A) correct and complete books and records of
account, and (B) minutes of the meetings and other proceedings of its
shareholders and board of directors.
(e) The Borrower has not engaged, and does not presently engage, in
any activity other than the activities undertaken pursuant to this Agreement and
the Related Documents, nor has the Borrower entered into any agreement other
than this Agreement, the Related Documents and any agreement necessary to
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<PAGE>
undertake any activity pursuant to this Agreement or the Related Documents.
(f) The execution, delivery and performance by the Borrower of this
Agreement, the Related Documents and the transactions contemplated hereby and
thereby (i) have been duly authorized by all necessary corporate or other action
on the part of the Borrower, (ii) do not contravene or cause the Borrower to be
in default under (A) the Borrower's certificate or articles of incorporation or
by-laws, (B) any contractual restriction contained in any indenture, loan or
credit agreement, lease, mortgage, security agreement, bond, note, or other
agreement or instrument binding on or affecting the Borrower or its property,
the Parent or its property or Tyco Manufacturing or its property, or (C) any
law, rule, regulation, order, license requirement, writ, judgment, award,
injunction, or decree applicable to, binding on or affecting the Borrower or its
property or the Parent or its property or Tyco Manufacturing or its property,
and (iii) do not result in or require the creation of any Adverse Claim upon or
with respect to any of the property of the Borrower, the Parent or Tyco
Manufacturing (other than in favor of the Collateral Agent as contemplated
hereunder).
(g) This Agreement and the Related Documents have each been duly
executed and delivered by the Borrower.
(h) No approval or consent of, notice to, filing with, licenses or
permits, qualifications or other action by any Governmental Authority or any
other party is required (i) for the due execution, delivery and performance by
the Borrower of this Agreement or any of the Related Documents, (ii) for the
perfection of or the exercise by each of the Lender, the Operating Agent, FSA or
the Collateral Agent of any of its rights or remedies hereunder or thereunder,
(iii) for the grant by the Borrower of the security interests granted under
Section 8.01 of this Agreement, (iv) for the perfection of or the exercise by
each of the Lender, FSA or the Collateral Agent of its rights and remedies
provided for in this Agreement, or (v) to ensure the legality, validity,
enforceability or admissibility into evidence of this Agreement and the Related
Documents in any jurisdiction in which any of the Collateral is located, or (vi)
to conduct its business as currently conducted, in each case other than
licenses, permits, charters, registrations, approvals, consents, notices,
filings and other actions which have been obtained or made and complete copies
of which have been provided to the Lender, the Operating Agent, FSA and the
Collateral Agent.
(i) No transaction contemplated by this Agreement requires compliance
with any bulk sales act or similar law.
(j) This Agreement and each Related Document is the legal, valid and
binding obligation of the Borrower, enforceable
<PAGE>
against the Borrower in accordance with its respective terms. Each of the
Borrower Assigned Agreements to which the Parent, Tyco Manufacturing or the
Borrower is a party constitutes the legal, valid and binding obligation of such
Person, enforceable against such Person in accordance with its terms subject to
(i) any applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to or affecting the
enforceability of creditors' rights generally and (ii) general equitable
principles, whether applied in a proceeding at law or in equity.
(k) There is no pending or threatened, nor any reasonable basis for
any, action, suit or proceeding against or affecting the Borrower, its officers
or directors, or the property of the Borrower, in any court or tribunal, or
before any arbitrator of any kind or before or by any Governmental Authority (A)
asserting the invalidity of this Agreement or any of the Related Documents, (B)
seeking to prevent the sale, pledge or contribution of any Receivable or the
consummation of any of the transactions contemplated hereby or thereby, (C)
seeking any determination or ruling that might materially and adversely affect
(1) the performance by either Borrower of its obligations under this Agreement
or any of the Related Documents, (2) the validity or enforceability of this
Agreement or any of the Related Documents (3) the Receivables or the Contracts
or the interests of either Borrower, the Lender or FSA therein, or (4) the
federal income tax attributes of the sale or pledge of the Transferred
Receivables, (D) asserting a claim for payment of money in excess of $10,000,000
(other than such judgments or orders in respect of which adequate insurance is
maintained by the Company for the payment in full thereof) or (E) which is
reasonably likely to have a Material Adverse Effect;
(l) No injunction, writ, restraining order or other order of any
nature adverse to the Borrower or the conduct of its business or which is
inconsistent with the due consummation of the transactions contemplated by this
Agreement or the Related Documents has been issued by a Governmental Authority
or been sought by any Person.
(m) The principal place of business and chief executive office of the
Borrower, and the office where the Borrower keeps its Records and the original
copies of the Borrower Assigned Agreements are located at the address of the
Borrower for notices under Section 14.01 as set forth on the attached Schedule 6
or in such written notice as the Borrower has delivered to, and which has been
received by, each of the parties named in the preamble to this Section 4.01 at
least 30 days prior to the date of making this representation and warranty, and
there are currently no, and during the past four months (or such shorter time as
the Borrower has been in existence) there have not been, any other locations
where the Borrower is located (as
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that term is used in the UCC of the jurisdiction where such principal place of
business is located) or keeps Records.
(n) The Borrower does not have and has never conducted business using
tradenames, fictitious names, assumed names or "doing business as" names.
(o) The Borrower does not have any Subsidiaries.
(p) The Borrower is solvent and will not become insolvent after
giving effect to the transactions contemplated by this Agreement and the Related
Documents. The Borrower has no Debts to any Person other than pursuant to this
Agreement and the Related Documents. The Borrower, after giving effect to the
transactions contemplated by this Agreement and the Related Documents, will have
an adequate amount of capital to conduct its business in the foreseeable future.
(q) For federal income tax, reporting and accounting purposes, the
Borrower will treat the purchase or absolute assignment of each Transferred
Receivable pursuant to the Receivables Transfer Agreements as a purchase or
absolute assignment of the Parent's or Tyco Manufacturing's (as the case may be)
full right, title and ownership interest in such Transferred Receivable to the
Borrower (and those Receivables contributed to such Borrower by the Parent
pursuant to the Receivables Transfer Agreements shall be accounted for as an
increase in the stated capital of the Borrower) and the Borrower has not in any
other manner accounted for or treated the transactions in Transferred
Receivables.
(r) The Borrower has complied in all respects with and will comply
with all applicable laws, rules, regulations, judgments, agreements, orders or
decrees with respect to it, its business and properties and all Collateral, the
non-compliance of which, separately or in the aggregate, would have a Material
Adverse Effect.
(s) The Borrower has filed on a timely basis all tax returns
(federal, state and local) required to be filed, is not liable for taxes payable
by any other Person (other than any liability imposed by a Governmental
Authority on the Borrower as a result of the filing of a consolidated tax return
incorporating the Borrower) and has paid or made adequate provisions for the
payment of all taxes, fees, assessments and other governmental charges due from
the Borrower. No tax lien or similar Adverse Claim has been filed, and no claim
is being asserted, with respect to any such tax, assessment or other
governmental charge. Any taxes, fees and other governmental charges payable by
the Parent or Tyco Manufacturing in connection with the execution and delivery
of this Agreement and the Related Documents and the transactions contemplated
hereby or thereby have been paid or
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shall have been paid if and when due at or prior to such Sale Date.
(t) Each Borrowing Base Certificate and Request Notice is accurate in
all material respects.
(u) The Collateral and each part thereof is owned by the Borrower
free and clear of any Adverse Claim and the Borrower has the full right,
corporate power and lawful authority to assign, transfer and pledge the same and
interests therein and all substitutions therefor and additions thereto pursuant
to Section 8.01, and upon making each Advance, the Collateral Agent will have
acquired a perfected, first priority and valid security interest in such
Collateral, free and clear of any Adverse Claim or Restrictions on
Transferability. No effective financing statement or other instrument similar in
effect covering all or any part of the Borrower Collateral is on file in any
recording office, except such as may have been filed in favor of the Collateral
Agent as "Secured Party" pursuant to Article VIII of this Agreement or, with
respect to the Transferred Receivables, in favor of the Borrower pursuant to the
Receivables Transfer Agreements.
(v) Each Transferred Receivable was purchased by or contributed to
the Borrower on the relevant Sale Date pursuant to the Receivables Transfer
Agreements and the Borrower is the true owner thereof.
(w) Each purchase of Receivables under the Receivables Transfer
Agreements will constitute (i) a "current transaction" within the meaning of
Section 3(a)(3) of the Securities Act of 1933, as amended, and (ii) a purchase
or other acquisition of notes, drafts, acceptances, open accounts receivable or
other obligations representing part or all of the sales price of merchandise,
insurance or services within the meaning of Section 3(c)(5) of the Investment
Company Act of 1940, as amended.
(x) All information heretofore or hereafter furnished by or on behalf
of the Borrower to the Collateral Agent, the Operating Agent, FSA or the Lender
or by the Operating Agent to FSA in connection with this Agreement or the
Related Documents or any transaction contemplated hereby or thereby is and will
be true and complete in all material respects and does not and will not omit to
state a material fact necessary to make the statements contained herein or
therein not misleading. With respect to each of the Borrowers, the Servicer,
the Parent and Tyco Manufacturing or any of their respective Affiliates, there
has occurred no event which has or is reasonably likely to have a Material
Adverse Effect on such entity.
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(y) Schedule 8 lists all Lockboxes and Lockbox Accounts maintained by
the Borrower or otherwise in respect of the Transferred Receivables.
(z) The Borrower is in compliance with ERISA and has not incurred and
does not expect to incur any liabilities (except for premium payments arising in
the ordinary course of business) to the Pension Benefit Guaranty Corporation (or
any successor thereto) under ERISA.
(aa) (i) The Borrower is not a party to any indenture, loan or
credit agreement or any lease or other agreement or instrument or subject to any
charter or corporation restriction that could have, and no provision of
applicable law or governmental regulation is reasonably likely to have, a
material adverse effect on the condition (financial or otherwise), business,
operations or properties of the Borrower, or could have such an effect on the
ability of the Borrower to carry out its obligations under this Agreement and
the other Related Documents to which the Borrower is a party and (ii) the
Borrower is not in default under or with respect to any contract, agreement,
lease or other instrument to which the Borrower is a party and which is material
to the Borrower's condition (financial or otherwise), business, operations or
properties, and the Borrower has not delivered or received any notice of default
thereunder.
(bb) The Borrower is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended. The making of the Advances by the Lender, the application of the
proceeds and repayment thereof by the Borrower and the consummation of the
transactions contemplated by this Agreement and the other Related Documents to
which the Borrower is a party will not violate any provision of such Act or any
rule, regulation or order issued by the Securities and Exchange Commission
thereunder.
(cc) There are not now, nor will there be at any time in the future,
any agreement or understanding between the Parent and the Borrower (other than
as expressly set forth herein) providing for the allocation or sharing of
obligations to make payments or otherwise in respect of any taxes, fees,
assessments or other governmental charges.
(dd) Each of the representations and warranties of the Borrower
contained in this Agreement and the Related Documents is true and correct in all
material respects and the Borrower hereby makes each such representation and
warranty to, and for the benefit of, the Collateral Agent, the Operating Agent,
FSA and the Lender as if the same were set forth in full herein.
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(ee) Each Obligor, other than Toys'R'Us, of a Transferred Receivable
has been directed, and is required to, remit all payments with respect to such
Receivable for deposit in a Lockbox Account or a Lockbox.
SECTION 4.02. Representations and Warranties of Each Borrower With Respect
------------------------------------------------------------
to the Parent and the Transferred Receivables. Each Borrower represents and
- ---------------------------------------------
warrants to the Lender, the Operating Agent, FSA and the Collateral Agent that
on the Effective Date it has entered into the Receivables Transfer Agreements
with the Parent and Tyco Manufacturing and that, as of each Funding Date (other
than the representation and warranty made in paragraph (a)(xix) of this Section
4.02, which is made on the initial Funding Date only), the Parent and Tyco
Manufacturing have made the following representations and warranties in such
Receivables Transfer Agreements as of each Sale Date, which representations and
warranties are or will be true and correct as of such Sale Date:
(a) With respect to the Parent and Tyco Manufacturing:
(i) each of the Parent and Tyco Manufacturing is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified to do business and is
in good standing in every jurisdiction in which the failure to be so
qualified, separately or in the aggregate, would have a Material Adverse
Effect;
(ii) each of the Parent and Tyco Manufacturing has the power and
authority to own, pledge, mortgage, operate and convey all of its
properties and assets, to execute and deliver this Agreement and the
Related Documents and to perform the transactions contemplated hereby and
thereby;
(iii) the Parent and Tyco Manufacturing are operated in such a
manner that the Borrower would not be substantively consolidated in the
estate of the Parent or Tyco Manufacturing (that is, in such a manner that
the separate corporate existence of the Borrower and the Parent or Tyco
Manufacturing would not be disregarded in the event of a bankruptcy or
insolvency of the Parent or Tyco Manufacturing);
(iv) the execution, delivery and performance by the Parent of
this Agreement and the Parent and Tyco Manufacturing of the Related
Documents and the transactions contemplated hereby and thereby (A) have
been duly authorized by all necessary corporate or other action on the part
of the Parent and Tyco Manufacturing, (B) do not contravene or cause the
Parent or Tyco Manufacturing, as the case may be, to be in default under
(1) its certificate or articles of incorporation or by-laws, (2) any
contractual
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restriction with respect to any Debt or contained in any indenture, loan or
credit agreement, lease, mortgage, security agreement, bond, note, or other
agreement or instrument binding on or affecting it or its property, or (3)
any law, rule, regulation, order, writ, judgment, award, injunction or
decree applicable to, binding on or affecting it, its Affiliate or their
respective property, and (C) do not result in or require the creation of
any Adverse Claim upon or with respect to any of its properties (other than
in favor of the Borrower with respect to the Receivables Transfer
Agreements and the Collateral Agent under Article VIII of this Agreement);
(v) this Agreement and the Related Documents have each been duly
executed and delivered by the Parent and Tyco Manufacturing;
(vi) no approval or consent of, notice to, filing with or
licenses, permits, qualifications or other action by any Governmental
Authority or any other party, is required for the due execution, delivery
and performance by the Parent of this Agreement or by the Parent or Tyco
Manufacturing of any of the Related Documents or for the perfection of or
the exercise by the Borrower, the Lender, the Operating Agent, FSA or the
Collateral Agent of any of their rights or remedies hereunder or
thereunder, other than approvals, consents, notices, filings and other
actions which have been obtained or made and complete copies of which have
been provided to the Lender, the Operating Agent, FSA and the Collateral
Agent;
(vii) each of this Agreement, each other Related Document
delivered by the Parent or Tyco Manufacturing and their respective
obligations thereunder is the legal, valid and binding obligation of the
Parent or Tyco Manufacturing, as the case may be, enforceable against the
Parent or Tyco Manufacturing, as the case may be, in accordance with its
respective terms subject to (i) any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the enforceability of creditors' rights generally
and (ii) general equitable principles, whether applied in a proceeding at
law or in equity;
(viii) there is no pending or threatened, nor any reasonable
basis for any, action, suit or proceeding, against or affecting the Parent
or Tyco Manufacturing, their officers or directors, or the property of the
Parent or Tyco Manufacturing, in any court or tribunal, before any
arbitrator of any kind or before or by any Governmental Authority (A)
asserting the invalidity of this Agreement or any of the Related Documents,
(B) seeking to prevent the
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contribution, sale or pledge of any Receivable or the consummation of any
of the transactions contemplated hereby or thereby, (C) seeking any
determination or ruling that may reasonably in the good faith opinion of
the Operating Agent or FSA materially and adversely affect (1) the
performance by the Borrower, the Parent or Tyco Manufacturing of its
obligations under this Agreement or any of the Related Documents, (2) the
validity or enforceability of this Agreement or any of the Related
Documents, (3) the Receivables or the Contracts or the interests therein of
either of the Borrowers, the Lender, FSA or the Collateral Agent therein or
(4) the federal income tax attributes of the contribution, sale or pledge
of the Transferred Receivables, (D) asserting a claim for payment of money
in excess of $10,000,000 (other than such judgments or orders in respect of
which adequate insurance is maintained by the Parent for the payment in
full thereof) or (E) which is reasonably likely to have a Material Adverse
Effect;
(ix) no injunction, writ, restraining order or other order of
any nature adverse to the Parent or Tyco Manufacturing or the conduct of
their businesses or which is inconsistent with the due consummation of the
transactions contemplated by this Agreement or the Related Documents has
been issued by a Governmental Authority or been sought by any Person;
(x) the principal place of business and chief executive office
of the Parent and Tyco Manufacturing are located at the addresses of the
Parent and Tyco Manufacturing respectively referred to in the Receivables
Transfer Agreements or in such written notice as the Parent or Tyco
Manufacturing, as the case may be, has delivered to, and which has been
received by, each of the parties named in the preamble to this Section 4.02
at least 30 days prior to the date of making this representation and
warranty, and there are now no, and during the past four months there have
not been any, other locations where the Parent or Tyco Manufacturing is
located (as that term is used in the UCC of the jurisdiction where such
principal place of business is located) or keeps Records;
(xi) the legal names of the Parent and Tyco Manufacturing are as
set forth at the beginning of this Agreement or in such written notice as
the Parent or Tyco Manufacturing, as the case may be, has delivered to, and
which has been received by, each of the parties named in the preamble to
this Section 4.02 at least 30 days prior to the date of making this
representation and warranty, and the Parent and Tyco Manufacturing have not
changed their names in the last six years, and during such period neither
the Parent nor Tyco Manufacturing used, nor does the Parent or
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Tyco Manufacturing now use, any tradenames, fictitious names, assumed names
or "doing business as" names;
(xii) each of the Parent and Tyco Manufacturing is solvent and
will not become insolvent after giving effect to the transactions
contemplated by this Agreement and the Related Documents; each of the
Parent and Tyco Manufacturing is paying its Debts as they mature; each of
the Parent and Tyco Manufacturing has not incurred Debts beyond its ability
to pay as they mature; and each of the Parent and Tyco Manufacturing, after
giving effect to the transactions contemplated by this Agreement and the
Related Documents, will have an adequate amount of capital to conduct its
business in the foreseeable future;
(xiii) for federal income tax, reporting and accounting
purposes, the Parent and Tyco Manufacturing will treat the sale of each
Receivable sold or assigned pursuant to the Receivables Transfer Agreements
as a sale of, or absolute assignment of, its full right, title and
ownership interest in such Receivable to a Borrower (and those Receivables
contributed to such Borrower by the Parent pursuant to the Receivables
Transfer Agreements shall be accounted for as an increase in the stated
capital of such Borrower), and each of the Parent and Tyco Manufacturing
has not in any other respect accounted for or treated the transactions
contemplated hereby or by the Related Documents in any way inconsistent
with the foregoing;
(xiv) each of the Parent and Tyco Manufacturing has complied in
all respects with all applicable laws, rules, regulations and orders with
respect to it, its business and properties and all Receivables and related
Contracts (including without limitation, all applicable environmental,
health and safety requirements) and all restrictions contained in any
indenture, loan or credit agreement, mortgage, security agreement, bond,
note or other agreement or instrument binding on or affecting it or its
property, and has and maintains all permits, licenses, authorizations,
registrations, approvals and consents of Governmental Authorities for (A)
its and each of its Affiliates activities and business as currently
conducted and as proposed to be conducted, (B) the ownership, use,
operation and maintenance by each of them of its properties, facilities and
assets, and (C) the performance by it and the Borrowers of this Agreement
and the Related Documents (hereinafter referred to collectively as
"Governmental Consents"), the non-compliance or non-maintenance of which,
separately or in the aggregate, would have a Material Adverse Effect;
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(xv) without limiting the generality of the prior
representation, no condition exists or event has occurred which, in itself
or with the giving of notice or lapse of time or both, would result in the
suspension, revocation, impairment, forfeiture or non-renewal of any
Governmental Consent applicable to the Parent, or Tyco Manufacturing or any
Affiliate thereof, the lack of which, separately or in the aggregate, would
have a Material Adverse Effect;
(xvi) the Parent and Tyco Manufacturing have each filed on a
timely basis all tax returns (federal, state and local) required to be
filed and has paid or made adequate provisions for the payment of all
taxes, assessments and other governmental charges due; no tax lien or
similar Adverse Claim has been filed, and no claim is being asserted, with
respect to any such tax, fee, assessment or other governmental charge. Any
taxes, fees and other governmental charges payable by the Parent or Tyco
Manufacturing in connection with the execution and delivery of this
Agreement and the Related Documents and the transactions contemplated
hereby or thereby have been paid or shall have been paid if and when due at
or prior to such Sale Date;
(xvii) with respect to each of the Parent and Tyco Manufacturing
and any of their Affiliates, there has occurred no event which has or is
reasonably likely to have a Material Adverse Effect on its operations,
including its ability to perform its obligations under this Agreement or
the Related Documents as Parent, Servicer or otherwise;
(xviii) each of the Parent and Tyco Manufacturing is licensed or
otherwise has the lawful right to use all patents, trademarks,
servicemarks, tradenames, copyrights, technology, know-how and processes
used in or necessary for the conduct of its business as currently conducted
which are material to its financial condition, business, operations, assets
and prospects, individually or taken as a whole;
(xix) the consolidated balance sheets of Tyco Toys and its
consolidated Subsidiaries for each of the last three calendar years ending
December 31, 1994 and the related statements of income and shareholders'
equity of Tyco Toys and its consolidated Subsidiaries for the years then
ended, certified without qualification by independent certified public
accountants, copies of which have been furnished to the Lender, FSA and
Operating Agent, (i) are, as of the dates and for the periods referred to
therein, complete and correct in all material respects, (ii) fairly present
the consolidated financial condition, business and results of operations of
Tyco Toys and its consolidated Subsidiaries as at such date and the
consolidated results of the operations
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of Tyco Toys and its consolidated Subsidiaries for the period ended on such
date, all in accordance with GAAP, and since December 31, 1994 there has
been no material adverse change in any such condition, business or
operations; neither Tyco Toys nor any of its consolidated Subsidiaries is
subject to any contingent liabilities or commitments which, individually or
in the aggregate, is reasonably likely to cause a Material Adverse Effect
with respect to any of the aforementioned;
(xx) since the last unaudited quarterly financial statements of
Tyco Toys, except as otherwise disclosed to FSA and the Lender, there have
been no material adverse changes in the financial condition or results of
operation and there have been no material increases in the liabilities
(liquidated or contingent) and no material decreases in the assets of Tyco
Toys, the Parent, Tyco Manufacturing or the Borrowers other than normal
recurring seasonal changes consistent with prior years' experience;
(xxi) each Request Notice contains a complete and accurate list
of all Transferred Receivables sold or contributed by the Parent and Tyco
Manufacturing to the Borrower as of its date;
(xxii) except as specified in Section 6.01, each Obligor of a
Transferred Receivable has been directed, and is required to, remit all
payments with respect to such Receivable for deposit in a Lockbox or a
Lockbox Account;
(xxiii) no Obligor of an Eligible Receivable being sold on any
Sale Date has any claim against or affecting the Parent or Tyco
Manufacturing or the property of the Parent or Tyco Manufacturing;
(xxiv) each pension plan or profit sharing plan to which the
Parent or Tyco Manufacturing is a party has been administered and fully
funded in accordance with the obligations of the Parent or Tyco
Manufacturing under law and as set forth in such plan, and the Parent and
Tyco Manufacturing have complied with the applicable provisions of ERISA in
effect as of such Sale Date; and neither the Parent nor Tyco Manufacturing
expects to incur any liabilities to the Pension Benefit Guaranty
Corporation (or any successor thereto) under ERISA;
(xxv) each of the Parent and Tyco Manufacturing has valid
business reasons for selling or contributing its interests in the
Transferred Receivables rather than obtaining a loan with the Transferred
Receivables as collateral;
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(xxvi) each of the Parent and Tyco Manufacturing has not agreed
to pay any fee or commission to any agent, broker, finder or other person
for or on account of services rendered as a broker or finder in connection
with this Agreement or the Related Documents or the transactions
contemplated hereby or thereby which would give rise to any valid claim
against the Borrowers for any brokerage commission, finder's fee or like
payment;
(xxvii) all information heretofore or hereafter furnished with
respect to the Parent or Tyco Manufacturing to the Borrowers, Lender,
Operating Agent, FSA or Collateral Agent or by the Operating Agent to FSA
in connection with any transaction contemplated by this Agreement or the
Related Documents is and will be true and complete in all material respects
and does not and will not omit to state a material fact necessary to make
the statements contained herein or therein not misleading; and
(xxviii) no part of the proceeds received by the Parent or Tyco
Manufacturing or any Affiliate from the Advances will be used directly or
indirectly for the purpose of purchasing or carrying, or for payment in
full or in part of, Debt that was incurred for the purposes of purchasing
or carrying, any "margin stock", as such term is defined in (S) 221.3 of
Regulation U of the Board of Governors of the Federal Reserve System.
(b) With respect to each Receivable sold or contributed pursuant to
the Receivables Transfer Agreements the Required Information contained in the
Request Notice and the Assignment relating to such Receivable is true and
correct.
(c) With respect to each Receivable designated as an Eligible
Receivable:
(i) such Receivable is an Eligible Receivable, and is a
receivable created through the unconditional provision of merchandise,
goods or services by the Parent or Tyco Manufacturing, as the case may be,
in the ordinary course of its business in a current transaction;
(ii) such Receivable was created in accordance with and
satisfies all applicable requirements of the Credit and Collection
Policies;
(iii) a copy of any related Contract, if such, to which the
Parent or Tyco Manufacturing, as the case may be, is a party has been
delivered to the Lender, the Operating Agent, the Collateral Agent and, if
FSA requests, FSA;
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(iv) such Receivable represents the genuine, legal, valid and
binding obligation in writing of the Obligor enforceable by the holder
thereof in accordance with its terms subject to (i) any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to or affecting the enforceability of
creditors' rights generally and (ii) general equitable principles, whether
applied in a proceeding at law or in equity, and neither the Receivable nor
the related Contract has been satisfied, subordinated, rescinded or amended
in any manner;
(v) neither the Receivable nor the related Contract is or will
be subject to any right of rescission, set-off, recoupment, counterclaim or
defense, whether arising out of transactions concerning the Contract or
otherwise;
(vi) prior to its sale or contribution to the Borrower, such
Receivable was owned by the Parent or Tyco Manufacturing, as the case may
be, free and clear of any Adverse Claim, and the Parent or Tyco
Manufacturing, as the case may be, had the right to contribute, sell,
assign and transfer the same and interests therein as contemplated under
the Receivables Transfer Agreements and, upon such sale or contribution,
that Borrower acquired good and marketable title and a valid ownership
interest in such Receivable, free and clear of any Adverse Claim and any
other restriction on transferability;
(vii) such Receivable was sold or contributed under the
Receivables Transfer Agreements, and the Receivables Transfer Agreements
and the related Assignment constitutes a valid transfer, assignment, set-
over and conveyance to the Borrower of all right, title and interest of the
Parent or Tyco Manufacturing, as the case may be, in and to such Receivable
sold or contributed thereunder;
(viii) the Billed Amount of such Receivable is net of
contractual allowances, any offset or other modifications and such
Receivable is entitled to be paid pursuant to the terms of the related
Contract, has not been paid in full or been compromised, adjusted extended,
satisfied, subordinated, rescinded or modified, and is not subject to
compromise, adjustment, extension, satisfaction, subordination, rescission
or modification by the Parent or Tyco Manufacturing, as the case may be
(excluding any contractual allowances of the types set forth in Schedule 2
to the Funding Agreement granted by the Parent or Tyco Manufacturing in the
ordinary course of its business and in accordance with the Credit and
Collection Policies, which
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allowances shall be typical for businesses similar to the Parent's or Tyco
Manufacturing's);
(ix) the Parent or Tyco Manufacturing, as the case may be, has
submitted all necessary documentation (including any invoice) for payment
of such Receivable to the Obligor and has fulfilled all its other
obligations in respect thereof;
(x) any Maturity Date of such Receivable is not greater than
270 days from its Billing Date;
(xi) such Receivable is an "account" within the meaning of the
UCC of the jurisdiction where the Parent's or Tyco Manufacturing's (as the
case may be) chief executive office is located;
(xii) neither such Receivable nor the related Contract
contravenes in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to usury, consumer protection, truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy) and no party to such related Contract is
in violation of any such law, rule or regulation in any material respect;
(xiii) such Receivable does not represent "billed but not yet
shipped" goods or merchandise, unperformed services, consigned goods or
"sale or return" goods nor does such Receivable arise from a transaction
for which any additional performance by the Borrower, the Parent or Tyco
Manufacturing or acceptance or other act of the Obligor remains to be
performed as a condition to payments on such Receivable;
(xiv) there are no proceedings or investigations pending or, to
the Parent's knowledge after due investigation, threatened before any
Governmental Authority (A) asserting the invalidity of such Receivable or
such Contract, (B) asserting the bankruptcy or insolvency of the related
Obligor, (C) seeking the payment of such Receivable or payment and
performance of such Contract, or (D) seeking any determination or ruling
that might materially and adversely affect the validity or enforceability
of such Receivable or such Contract;
(xv) as of the applicable date of transfer thereunder, no
Obligor on such Receivable is bankrupt, is insolvent, is unable to make
payment of its obligations when due, is the debtor in a voluntary or
involuntary bankruptcy proceeding, or is the subject of a comparable
receivership
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or insolvency proceeding, other than Obligors under the protection of a
bankruptcy court or receivership which has approved payment by any such
Obligor of such Receivable; and
(xvi) neither the Parent nor Tyco Manufacturing has knowledge of
any fact (including any defaults by the Obligor on any other accounts)
which reasonably should have led it to expect at the time of transfer of
such Receivable that the Billed Amount of such Receivable would not be paid
in full when due or to expect any Material Adverse Effect.
Each Borrower hereby certifies that (A) the benefits of such representations and
warranties of the Parent and Tyco Manufacturing have been assigned to the
Lender, FSA and the Collateral Agent; (B) the rights of the Borrowers under the
Receivables Transfer Agreements to require a capital contribution or payment of
a Rejected Amount from the Parent or Tyco Manufacturing may be enforced by the
Lender, FSA or the Collateral Agent; and (C) the Receivables Transfer Agreements
provide that the representations, warranties and covenants described in Sections
4.01, 4.02, and 4.03 shall survive the sale of the Transferred Receivables and
the termination of the Receivables Transfer Agreements and this Agreement.
SECTION 4.03. Representations and Warranties of the Servicer. The
----------------------------------------------
Servicer represents and warrants to the Lender, the Operating Agent, FSA and the
Collateral Agent as follows as of the date hereof:
(a) The Servicer and each of its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified to do business, and is in
good standing, and has obtained all necessary licenses, permits, charters,
registrations and approvals (together, "approvals") necessary for the conduct of
its business as currently conducted and the performance of its obligations under
this Agreement and the Related Documents in every jurisdiction in which the
nature of its business requires it to be so qualified or where the failure to be
so qualified, separately or in the aggregate, would have a Material Adverse
Effect.
(b) The Servicer has the power and authority to execute and deliver
this Agreement and each other Related Document it is a party to and to perform
the transactions contemplated hereby and thereby.
(c) The execution, delivery and performance by the Servicer of this
Agreement and each other Related Document to which it is a party and all other
agreements, instruments and documents which may be delivered by it pursuant
hereto and thereto and the transactions contemplated hereby and thereby
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(i) have been duly authorized by all necessary corporate or other action on the
part of the Servicer, (ii) do not contravene or cause the Servicer to be in
default under (A) its charter or by-laws, (B) any contractual restriction with
respect to any Debt of the Servicer or contained in any indenture, loan or
credit agreement, lease, mortgage, security agreement, bond, note or other
agreement or instrument binding on or affecting it or its property, or (C) any
law, rule, regulation, order, writ, judgment, award, injunction or decree
binding on or affecting it or its property, and (iii) do not result in or
require the creation of any Adverse Claim upon or with respect to any of its
properties.
(d) This Agreement and each other Related Document to which it is a
party has been duly executed and delivered by the Servicer.
(e) No approval or consent of, notice to, filing with or permits,
licenses, qualifications or other action by any Governmental Authority or any
other party is required for the due execution, delivery and performance by the
Servicer of this Agreement or any Related Document to which it is a party or any
other agreement, document or instrument to be delivered hereunder other than any
approvals, consents, notices, permits, qualifications, filings or other actions
which have been obtained or made and complete copies of which have been provided
to the Lender, the Operating Agent, FSA and the Collateral Agent.
(f) This Agreement and each other Related Document to which it is a
party is the legal, valid and binding obligation of the Servicer enforceable
against the Servicer in accordance with its terms.
(g) There is no pending or threatened, nor any reasonable basis for
any, action, suit, investigation or proceeding of a material nature against or
affecting the Servicer, any of its Subsidiaries or their respective officers or
directors, or the property of the Servicer, in any court or tribunal, before any
arbitrator of any kind or before or by any Governmental Authority (i) asserting
the invalidity of this Agreement or any other Related Documents or any document
to be delivered by the Servicer hereunder or thereunder, or (ii) seeking any
determination or ruling that might materially and adversely affect (A) the
performance by the Servicer of its obligations under this Agreement or any other
Related Document, or (B) the validity or enforceability of this Agreement or any
other Related Document or any document to be delivered by the Servicer hereunder
or thereunder.
(h) No injunction, writ, restraining order or other order of any
material nature adverse to the Servicer or the conduct of its business or which
is inconsistent with the due
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consummation of the transactions contemplated by this Agreement and the Related
Documents has been issued by a Governmental Authority or, to the knowledge of
the Servicer, has been sought by any other Person.
(i) In the event the Parent is the Servicer: the financial statements
of the Servicer, copies of which have been furnished to the Lender, the
Operating Agent, FSA and the Collateral Agent, (i) are, as of the dates and for
the periods referred to therein, complete and correct in all material respects,
(ii) present fairly the financial condition and results of operations of the
Servicer as of the dates and for the periods indicated and (iii) have been
prepared in accordance with GAAP, except as noted therein (subject as to interim
statements to normal year-end adjustments). Since the date of such financial
statements, there has been no material adverse change in such financial
condition or results of operations. Except as disclosed in the financial
statements, the Servicer is not subject to any contingent liabilities or
commitments that, individually or in the aggregate, have a material possibility
of causing a Material Adverse Effect in respect of the Servicer.
(j) If the Parent is the Servicer, the Servicer was or will be,
immediately prior to each transfer by it of Transferred Receivables, the owner
of, and had or will have at such time good and marketable title to, all such
Transferred Receivables free and clear of all Adverse Claims and Restrictions on
Transferability, and had or will have at such time full right, corporate power
and lawful authority to assign, transfer and pledge the Transferred Receivables
(and any documents which are a part thereof) and all such substitutions therefor
and additions thereto delivered under the Receivables Transfer Agreement to
which it is a party. The Borrowers will have, upon the transfer of the
Transferred Receivables, a valid and perfected first priority interest in the
Transferred Receivables free and clear of all Adverse Claims and Restrictions on
Transferability.
(k) The Servicer has filed all tax returns (federal, state and local)
required to be filed by it and has paid or has made adequate provision for the
payment of all taxes, fees, assessments and other governmental charges due from
the Servicer, no tax lien or other similar Adverse Claim has been filed, and no
claim has been filed, and no claim is being asserted, with respect to any such
tax, fee, assessment or other governmental charge. Any taxes, fees and other
governmental charges payable by the Servicer in connection with the transactions
contemplated by this Agreement and the Related Documents and the execution and
delivery of this Agreement and the Related Documents have been paid or shall
have been paid at or prior to the earlier of the Effective Date and the date the
Policy is issued as specified therein.
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(l) Neither this Agreement, the Related Documents nor any documents,
agreements, instruments, schedules, certificates, statements, cash flow
schedules, number runs or other writings or data (collectively, the "Servicer
Documents") furnished to the Lender, the Operating Agent, FSA or the Collateral
Agent by the Servicer (in its capacity as Servicer or otherwise) or by the
Operating Agent to FSA contain any statement of a material fact by the Servicer
which was untrue or misleading in any material respect when made. There is no
fact known to the Servicer which has a reasonable likelihood of causing a
Material Adverse Effect with respect to the Servicer or FSA. Since the
furnishing of the Servicer Documents, there has been no change nor any
development or event involving a prospective change known to the Servicer which
would render any of the Servicer Documents untrue or misleading in a material
respect.
(m) The Servicer is not required to be registered as an "investment
company" under the Investment Company Act. The Servicer will not be subject to
the information reporting requirements of the Securities Exchange Act.
(n) (i) The capital of the Servicer is adequate for the business and
undertakings of the Servicer.
(ii) Other than with respect to the purchase and contribution of
Receivables pursuant to the Receivables Transfer Agreements, the
making of other capital contributions and the receipt of dividends and
loans, the Servicer is not engaged in any business transactions with
the Borrowers.
(iii) Each of the Borrowers has, and will continue to have,
assets other than assets contributed by the Servicer.
(iv) At least two directors of each of the Borrowers is not, and
will not be, a director, officer, employee, associate or holder of 5%
or more of the equity securities of the Servicer or any Affiliate
thereof (other than the other Borrower).
(v) The Servicer's funds and assets are not, and will not be,
commingled with those of either of the Borrowers.
(vi) The Servicer is solvent and will not be rendered insolvent
by the transactions contemplated by this Agreement and the Related
Documents and, after giving effect to such transactions, the Servicer
will not be left with an unreasonably small amount of capital with
which to engage in its business nor will the Servicer have intended to
incur, or believe that it
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has incurred, debts beyond its ability to pay such debts as they
mature. The Servicer does not contemplate the commencement of
insolvency, bankruptcy, liquidation or consolidation proceedings or
the appointment of a receiver, liquidator, conservator, trustee or
similar official in respect of the Servicer or any of its assets.
(vii) All the outstanding shares of Class A Common Stock and 49%
of the Class B Common Stock of each of the Borrowers are owned by the
Servicer. All the outstanding shares of capital stock of the Servicer
are owned by Tyco Toys.
(o) Each of the representations and warranties of the Servicer
contained in this Agreement and the Related Documents is true and correct
in all material respects and the Servicer hereby makes each such
representation and warranty contained in the Related Documents to, and for
the benefit of, the Lender, the Operating Agent, FSA and the Collateral
Agent.
SECTION 4.04. Representations and Warranties of the Lender. The Lender
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represents, warrants and covenants to each other party as follows:
(a) Corporate Existence. The Lender is duly organized, validly
-------------------
existing and in good standing under the laws of the State of Delaware, has the
corporate power to own its assets and to transact the business in which it is
now engaged and is duly qualified as a foreign corporation and in good standing
under the laws of each jurisdiction in which its business or activities requires
such qualification.
(b) Corporate Power; Authorization; Enforceable Obligation. The
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Lender has the corporate power, authority and legal right to execute, deliver
and perform this Agreement and the Related Documents. The Lender has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement. No consent, license, permit, approval or authorization of,
exemption by, notice or report to or registration, filing or declaration with
any governmental authority is required for the execution, delivery and
performance by the Lender of this Agreement and the Related Documents which has
not been obtained, made, given or accomplished. This Agreement and each of the
Related Documents has been executed and delivered by a duly authorized officer
of the Lender and constitutes a legal, valid and binding agreement or obligation
of the Lender, enforceable against the Lender in accordance with its terms.
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ARTICLE V
GENERAL COVENANTS OF THE BORROWERS
SECTION 5.01. Affirmative Covenants of the Borrowers. Each Borrower
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shall, unless the Operating Agent and FSA shall otherwise consent in writing:
(a) perform each of its obligations under this Agreement and the
Related Documents and comply in all respects with all of its obligations under
this Agreement and the Related Documents and comply with all applicable laws,
rules, regulations and orders with respect to this Agreement, the Related
Documents, its business and properties and all Transferred Receivables, related
Contracts and Collections with respect thereto, where non-compliance or non-
performance, separately or in the aggregate, would have a Material Adverse
Effect on such Borrower;
(b) preserve and maintain its corporate existence, rights,
franchises and privileges in the jurisdiction of its incorporation and shall
conduct its business in accordance with the terms of its certificate of
incorporation and bylaws;
(c) engage exclusively in the activities contemplated by this
Agreement and the Related Documents;
(d) continue to operate its business in the manner set forth in
Sections 4.01(d) and (e);
(e) cause to be delivered to the Lender, the Operating Agent,
FSA and the Collateral Agent on or before March 31 of each year beginning on
March 31, 1996, (i) an Officer's Certificate of the Borrower, dated the date of
such delivery, bringing down to such date the matters set forth in the Officer's
Certificate delivered pursuant to Section 3.01(d)(iv), (ii) an Officer's
Certificate of the Servicer, dated the date of such delivery, bringing down to
such date the matters set forth in the Officer's Certificate delivered pursuant
to Section 3.01(e)(iv), and (iii) an opinion of counsel reaffirming as of the
date of its delivery the opinion of counsel with respect to the Borrowers, the
Parent and Tyco Manufacturing delivered to the Lender, the Operating Agent, FSA
and the Collateral Agent on the Effective Date pursuant to Section 3.01(l),
provided that any changes from the opinion delivered on the Effective Date are,
in form and substance, satisfactory to the Lender, the Operating Agent, FSA and
the Collateral Agent ;
(f) except as specified in Section 6.01, deposit all Collections
it may receive in respect of Transferred Receivables into the Lockbox Account
within one Business Day of receipt;
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(g) use the proceeds of the Advances made hereunder solely for
purposes of the Receivables Transfer Agreement;
(h) have or maintain a Tangible Net Worth not less than 5% of
the Outstanding Balance of all Transferred Receivables;
(i) cooperate fully with all reasonable requests of the Lender,
FSA, the Operating Agent and the Collateral Agent regarding any information or
documents (including the provision of information in appropriate electronic or,
if available, machine readable format) necessary or desirable to allow each of
the Lender, the Operating Agent, FSA and the Collateral Agent to carry out its
responsibilities hereunder or, in the case of FSA, under the Policy;
(j) permit the Lender, the Operating Agent, the Collateral Agent
and FSA:
(i) to make or cause to be made (and, after the occurrence
of and during the continuance of a Termination Event, at the Borrower's
expense) inspections and audits of any books, records and papers of the
Borrower, which shall be maintained at the address of the Borrower
designated herein for receipt of notices, unless the Borrower shall
otherwise advise the parties hereto in writing, and the Servicer, and to
make extracts therefrom and copies thereof, or to make inspections and
examinations of any properties and facilities of the Borrower and the
Servicer, on reasonable notice, which inspections and audits (excluding
inspections and audits made subject to Sections 5.01(m) and 5.02(e)), so
long as no Termination Event is continuing, shall be made no more
frequently than once each calendar quarter; and
(ii) to discuss the affairs, finances and accounts of the
Borrower or the Servicer with any of their officers, directors, employees,
representatives or agents and with their independent certified accountants
and advise such accountants that the Lender, the Operating Agent, FSA and
the Collateral Agent have been authorized to review and discuss with such
accountants any and all financial statements and other information of any
kind that they may have with respect to the Borrower or the Servicer and
direct such accountants to comply with any request of the Lender, the
Operating Agent, FSA or the Collateral Agent for such information;
(k) pay, perform and discharge all of its obligations and
liabilities, including, without limitation, all taxes, assessments and
governmental charges upon its income and properties when due the non-payment,
performance or discharge of
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which would have a Material Adverse Effect, unless and to the extent only that
such obligations, liabilities, taxes, assessments and governmental charges shall
be contested in good faith and by appropriate proceedings and that, to the
extent required by GAAP, proper and adequate book reserves relating thereto are
established by the Borrower and then only to the extent that a bond is filed in
cases where the filing of a bond is necessary to avoid the creation of an
Adverse Claim against any of its properties;
(l) promptly notify the Lender, FSA and the Operating Agent in
writing of any litigation, legal proceeding or dispute, whether or not in the
ordinary course of business, affecting the Borrower, whether or not fully
covered by insurance, and regardless of the subject matter thereof;
(m) permit once in each calendar year (in addition to such
examinations under Sections 5.01(j) and 5.02(e)), at the Borrower's expense, a
firm of independent public accountants acceptable to the Operating Agent and FSA
to provide a letter (upon which the Operating Agent, FSA and the Collateral
Agent may rely) to the effect that (i) such firm has examined the Monthly
Reports delivered during that calendar year (including the Borrowing Base
Certificates attached thereto) and such Records relating to the Transferred
Receivables as such firm deems necessary as a basis for the report contemplated
by this Section 5.01(m) and that, on the basis of such examination, such Monthly
Reports have been prepared substantially in compliance with this Agreement,
except for (A) such exceptions as such firm shall believe to be immaterial, and
(B) such other exceptions as shall be set forth in such statement, and (ii) such
firm has examined the financial statements for the preceding year of the
Borrower and the Borrower's financial covenants set forth in Section 7.06 and
that, on the basis of such examination, the Borrower is in compliance with such
covenants;
(n) if such report prepared pursuant to Section 5.01(m) sets out
material exceptions, permit examinations of the type set out in Section 5.01(m)
(in addition to the examinations pursuant to Section 5.01(m)) each calendar
month thereafter, each at the Borrower's expense, until the reports prepared
pursuant to such examinations contain no material exceptions for two successive
months;
(o) at such Borrower's expense, promptly take, or cause to be taken,
such actions as may be necessary or desirable, in the reasonable judgment of FSA
or the Operating Agent, (i) to create and maintain the security interest granted
under this Agreement as a valid and perfected lien covering the Collateral and
(ii) to fully preserve, publish notice of and protect the perfected first
priority security interest of the Collateral Agent in, and all rights of the
Secured Parties with respect to,
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the Collateral, including, without limitation, the execution and filing of all
necessary financing statements or other instruments, and any amendments or
continuation statements relating thereto, necessary to be kept and filed in such
manner and in such places as may be required by law to preserve, protect and
perfect fully the lien of the Collateral Agent with respect to the Collateral.
Without limitation of the foregoing, each Borrower shall, upon the request of
the Operating Agent or FSA, from time to time, execute, acknowledge and deliver,
or cause to be executed, acknowledged and delivered, within five (5) Business
Days of such request, such amendments hereto and such further instruments and
take such further action as may be necessary and advisable to effectuate the
intention, performance and provisions of the Related Documents or to protect the
interest of the Collateral Agent in the Collateral, free and clear of all liens
and Restrictions on Transferability. Each Borrower hereby designates the
Collateral Agent and FSA, its agent and attorney-in-fact to execute any
financing statement, continuation statement or other instrument required
pursuant to this Section 5.01(o). Such power of attorney is coupled with an
interest and is irrevocable, and each Borrower hereby ratifies and confirms all
that the Collateral Agent or FSA, as the case may be, may do by virtue thereof.
In addition each Borrower agrees to cooperate with S&P and Moody's in connection
with any review undertaken by S&P or Moody's after the date hereof with respect
to the transactions contemplated by this Agreement and the Related Documents;
(p) on or before January 31 of each calendar year, commencing January
31, 1996, each Borrower shall furnish to the Collateral Agent and FSA an opinion
of counsel (which opinion may contain qualifications and assumptions
substantially similar to those contained in the similar opinion delivered
pursuant to Section 3.01) acceptable in form and substance to FSA in each
jurisdiction in which Collateral is located or a Uniform Commercial Code
financing statement has been filed by or on behalf of the Lender or a Borrower
stating either that, in the opinion of such counsel, such action has been taken
with respect to the recording, filing, rerecording and refiling of this
Agreement, any supplements and any other requisite documents and with respect to
the execution and filing of any financing statements and continuation statements
as is necessary to perfect and maintain the perfection of the lien and security
interest of the Collateral Agent with respect to the Collateral and reciting the
details of such action or stating that, in the opinion of such counsel, no such
action is necessary to perfect and maintain the perfection of such lien and
security interest. Such opinion of counsel shall also describe the recording,
filing, rerecording and refiling of this Agreement, any supplements and any
other requisite documents and the execution and filing of any financing
statements and continuation statements that will, in the opinion of such
counsel, be required to perfect and maintain the
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perfection of the lien and security interest of the Collateral Agent with
respect to the Collateral until January 31 in the following calendar year;
(q) on or before January 31 in each calendar year, commencing January
31, 1996, deliver to the Collateral Agent and FSA a written statement signed by
an Authorized Officer, stating that:
(i) a review of the activities of the Borrowers during such year
and of performance under this Agreement has been made under their
supervision; and
(ii) to the best of such Authorized Officers' knowledge, based on
such review, each of the Borrowers has fulfilled all its obligations
under this Agreement throughout such year and no Termination Event or
Event or Servicer Termination has occurred, or, if there has been a
Termination Event or an Event or Servicer Termination in the
fulfillment of any such obligation, specifying each such Termination
Event or Event or Servicer Termination known to them and the nature
and status thereof;
(r) concurrently with the delivery of the financial statements
required pursuant to Section 5.02(b) and (c) hereof, furnish or cause to be
furnished, a certificate signed by the Chief Financial Officer of the Borrower
stating that:
(i) a review of the Borrower's performance under this Agreement
and the Related Documents during such period has been made under such
officer's supervision;
(ii) to the best of such individual's knowledge following
reasonable inquiry, no Termination Event has occurred, or if a
Termination Event has occurred, specifying the nature thereof and, if
the Borrower has a right to cure pursuant to Section 9.01, stating in
reasonable detail the steps, if any, being taken by the Borrower to
cure such Termination Event or to otherwise comply with the terms of
the agreement to which such Termination Event relates; and
(iii) the financial reports attached thereto and submitted in
accordance with Section 5.02(b) and (c) hereof, as applicable, are
complete and correct in all material respects and present fairly the
financial condition and results of operations of the Borrower as of
the dates and for the periods indicated, in accordance with generally
accepted accounting principles consistently applied (subject as to
interim statements to normal year-end adjustments) and the
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attached computations indicate compliance by the Borrower with the
covenants of the Borrower contained in Article V hereof;
(s) maintain all licenses, permits, charters and registrations which
are material to the conduct of its business;
(t) (i) use its best efforts to avoid the appearance of conducting
business on behalf of either of the Parent or Tyco Manufacturing or
that the assets of the Parent or Tyco Manufacturing are available to
pay the creditors of the Borrower;
(ii) maintain proper corporate records and books of account
separate from those of its Parent, Tyco Manufacturing or any other
Affiliate of the Borrower;
(iii) cause operating expenses and liabilities of the respective
Borrower to be paid from their respective funds;
(iv) cause the annual financial statements of the Borrower to
disclose the effects of the Borrower's transactions in accordance with
generally accepted accounting principles and to disclose that the
assets of the Borrower are not available to pay creditors of the
Parent or Tyco Manufacturing;
(v) cause the resolutions, agreements and other instruments
underlying the transactions described in this Agreement and the
Related Documents to be maintained by the Borrower as official
records;
(vi) use its best efforts to maintain an arm's-length
relationship with the Parent and Tyco Manufacturing and not to hold
itself out as being liable for the debts of its Parent or Tyco
Manufacturing; and
(vii) use its best efforts to keep its assets and its
liabilities wholly separate from those of all other entities,
including, but not limited to, the Parent or Tyco Manufacturing;
(u) comply in all respects with the Credit and Collection Policies
with regard to each Transferred Receivable and the related Contracts, and with
the terms of such Receivables and Contracts;
(v) keep or cause to be kept in reasonable detail, books and records
of account of its assets and business, including, but not limited to, books and
records relating to the
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transactions contemplated by this Agreement and the Related Documents;
(w) keep or cause its books to be kept on an accrual basis and each
Borrower shall report its operations for tax purposes on an accrual basis. The
fiscal year of each Borrower shall end on December 31 of each year; and
(x) give FSA prompt notice of each of the following events (but in no
event more than 30 days after the occurrence of the event): (i) an Accumulated
Funding Deficiency, (ii) the failure to make a required contribution to a Plan
or Multiemployer Plan, (iii) a Reportable Event, (iv) any action by a Commonly
Controlled Entity to terminate any Plan or withdraw from any Multiemployer Plan,
(v) any action by the PBGC to terminate or appoint a trustee to administer a
Plan, and (vi) the reorganization or insolvency of any Multiemployer Plan. In
addition, the Borrower shall promptly (but in no case more than 30 days
following issuance or receipt by the Commonly Controlled Entity) provide to FSA
a copy of all correspondence between a Commonly Controlled Entity and the PBGC,
Internal Revenue Service, Department of Labor or the administrators of a
Multiemployer Plan relating to any of the events described in the preceding
sentence or the underfunded status, termination or possible termination of a
Plan or a Multiemployer Plan which could result in a material liability.
SECTION 5.02. Reporting Requirements of the Borrowers. Each Borrower
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shall furnish, or cause to be furnished, at its own expense, to the Lender, the
Operating Agent and the Collateral Agent, and, unless otherwise notified by FSA,
FSA:
(a) (i) no less frequently than on the Settlement Date, commencing
with the Effective Date, and, during the Clean Down Period Part 1 and the Clean
Down Period Part 2, on each Business Day, a Borrowing Base Certificate; and (ii)
monthly, as soon as available, and in any event, within ten Days after the end
of each month, a Monthly Report in the form of Exhibit G, including all data
necessary to recalculate the Advance Rate and a list of Obligors on Transferred
Receivables not included in the previous Monthly Report;
(b) as soon as publicly available and in any event within 90 days
after the end of each fiscal year, a copy of the annual 10-K report and audited
consolidated financial statements for such year for Tyco Toys and its
consolidated Subsidiaries, certified, in a manner acceptable to the Operating
Agent, FSA and the Collateral Agent, by nationally recognized independent public
accountants acceptable to the Operating Agent, FSA and the Collateral Agent and
including comparisons to the prior comparable period provided that the Operating
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Agent and FSA
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acknowledge that Deloitte & Touche or any other "Big 6" firm shall be
acceptable,;
(c) as soon as publicly available and in any event within 45 days
after the end of each of the first three quarters of each fiscal year of Tyco
Toys, a consolidated balance sheet of Tyco Toys and its consolidated
Subsidiaries as of the end of such quarter, and consolidated statements of
income and retained earnings, and of cash flow, of Tyco Toys and its
consolidated Subsidiaries for such quarter and for the period commencing at the
end of the previous fiscal year and ending with the end of such quarter and
including comparisons to budget and the prior comparable period, certified by
the chief financial officer or chief accounting officer of Tyco Toys identifying
such documents as being the documents described in this paragraph (c) and
stating that the information set forth therein fairly presents the financial
condition of Tyco Toys and its consolidated Subsidiaries as of and for the
periods then ended, subject to year-end adjustments consisting only of normal,
recurring accruals;
(d) as soon as possible and in any event within five days after the
occurrence of a Termination Event (including without limitation a material
adverse change in the financial condition of the Borrower as determined by the
Operating Agent, FSA or the Collateral Agent and notified in writing to the
Borrower) or an Incipient Event, the statement of the chief executive officer of
the Borrower setting forth complete details of such Termination Event or
Incipient Event and the action which the Borrower has taken, is taking and
proposes to take with respect thereto;
(e) as soon as available and in any event within 90 days after the
end of each fiscal year of Tyco Toys, a letter from a firm of nationally
recognized independent public accountants acceptable to the Operating Agent and
FSA (and upon which the Operating Agent, FSA and the Collateral Agent may rely)
provided that the Operating Agent and FSA acknowledge that Deloitte & Touche or
- --------
any other "Big 6" firm shall be acceptable, to the effect that (i) such firm has
examined the Monthly Reports delivered during the previous calendar year
(including the Borrowing Base Certificates attached thereto) and such Records
relating to the Transferred Receivables as such firm deems necessary as a basis
for the report contemplated by this Section 5.02(e) and that, on the basis of
such examination, such Monthly Reports have been prepared substantially in
compliance with this Agreement, except for (A) such exceptions as such firm
shall believe to be immaterial, and (B) such other exceptions as shall be set
forth in such statement, and (ii) such firm has examined the financial
statements for the preceding year of the Borrower and the Borrower's financial
covenants in this Agreement and
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that, on the basis of such examination, the Borrower is in compliance with such
covenants;
(f) promptly, and in any event within three Business Days, after the
commencement thereof, notice of all actions, suits and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting the Borrower, the Parent, Tyco
Manufacturing or any Affiliate of any of them of the types described in Section
4.02(a)(viii);
(g) promptly and in any event within one Business Day after the
Borrower becomes aware of the existence thereof, telephonic, telex or telecopied
notice (confirmed in writing within 5 days) specifying the nature of any
Borrowing Excess, Termination Event or Incipient Event, any breach or
nonperformance by the Borrower, the Parent or Tyco Manufacturing of any other
Related Document or any development or other information which is reasonably
likely to materially and adversely affect the condition (financial or
otherwise), business, operations, prospects or properties of the Borrower or the
ability of the Borrower to perform its obligations under this Agreement or any
Related Document;
(h) within 10 days after its request, copies of all federal, state
and local tax returns and reports filed by the Borrower or in which the Borrower
was included on a consolidated or combined basis (excluding sales, use and like
taxes);
(i) within 10 days after receipt of Revenue Agent Reports (Internal
Revenue Service Form 886), or other written proposals of the Internal Revenue
Service, which propose, determine or otherwise set forth positive adjustments to
the Federal income tax liability of the affiliated group (within the meaning of
Section 1504(a)(1) of the Code) of which the Borrower is a member which equal or
exceed $1,000,000 in the aggregate, telephonic, telex or telecopied notice
(confirmed in writing within 5 days) specifying the nature of the items giving
rise to such adjustments and the amounts thereof;
(j) as soon as available and in any event prior to the end of each
fiscal year, a copy of any operating plan for Tyco Toys, such plan to include
sales and expense budgets and operating profit and cash flow projections for the
following year;
(k) promptly, from time to time, such other information, documents,
records or reports in the possession of the Borrower, the Parent or Tyco
Manufacturing respecting the Transferred Receivables or the Contracts or the
condition or operations, financial or otherwise, of the Borrower, the Parent,
Tyco Manufacturing or any of their Subsidiaries, as the Lender,
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the Operating Agent, FSA or the Collateral Agent may, from time to time,
reasonably request; and
(l) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against the
Borrower;
(m) any change in the location of Borrower's principal office or any
change in the location of the Borrower's books and records;
(n) written notice of the commencement or threat of any rule making
or disciplinary proceedings or any proceedings instituted by or against the
Borrower in any federal, state or local court or before any governmental body or
agency, or before any arbitration board, or the promulgation of any proceeding
or any proposed or final rule which, if adversely determined, would result in a
Material Adverse Effect with respect to the Borrower;
(o) the receipt of notice from any Governmental Authority that (A)
the Borrower is being placed under regulatory supervision, (B) any license,
permit, charter, registration or approval necessary for the conduct of the
Borrower's business is to be, or may be, suspended or revoked, or (C) the
Borrower is to cease and desist any practice, procedure or policy employed by
the Borrower in the conduct of its business, and such cessation is reasonably
likely to result in a Material Adverse Effect with respect to the Borrower; and
(p) any other event, circumstance or condition that has resulted, is
reasonably likely to result, in a Material Adverse Effect in respect of the
Borrower.
SECTION 5.03. Negative Covenants of the Borrowers. Neither Borrower
-----------------------------------
shall, without the prior written consent of the Lender, the Operating Agent, FSA
and the Collateral Agent:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist any Adverse Claim upon or with respect
to, or assign any right to receive income in respect of, (i) any Transferred
Receivable or related Contract with respect thereto, or upon or with respect to
the Lockbox Account, Lockbox, the Collection Account, the Retention Account or
other account in which any Collections of any Transferred Receivable are
deposited, or (ii) any of the Borrower's property;
(b) extend, amend, forgive, discharge, compromise, waive, cancel or
otherwise modify the terms of the Receivables Transfer Agreements, any Related
Document, the Credit and Collection Policies or of any Transferred Receivable,
or amend,
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modify or waive any term or condition of any Contract related thereto;
(c) make any change in its instructions to Obligors regarding
payments to be made to the Borrower or payments to be deposited to the Lockbox
Account or the Lockbox;
(d) amend its articles or certificate of incorporation, its by-laws
or any Related Document except as permitted by this Agreement;
(e) merge with or into, consolidate with or into, convey, transfer,
lease or otherwise dispose of all or substantially all of its assets (whether
now owned or hereafter acquired) to, or acquire all or substantially all of the
assets or capital stock or other ownership interest of, any Person (whether in
one transaction or in a series of transactions), or own any Subsidiary;
(f) prepare any financial statements of the Borrower which shall
account for the transactions contemplated by the Receivables Transfer Agreements
in any manner other than as a purchase or absolute assignment of the Transferred
Receivables to the Borrowers from the Parent or Tyco Manufacturing, as the case
may be, or in any other respect account for or treat the transactions
contemplated hereby (including but not limited to, for accounting, tax and
reporting purposes) in any manner other than as a purchase or absolute
assignment of the Transferred Receivables to the Borrower from the Parent or
Tyco Manufacturing, as the case may be;
(g) at any time (i) advance credit to any Person, or (ii) declare any
dividends or return any capital, if after giving effect to such distribution or
advance, there would be a Borrowing Excess or any amounts outstanding in respect
of any TFC I Deferred Sale Price or TFC II Deferred Sale Price;
(h) create, incur, permit to exist or have outstanding any Debt,
except:
(i) Debt of the Borrower to the Lender, any Affected Party or
any Indemnified Party under this Agreement and the Note;
(ii) taxes, assessments and governmental charges, non-interest
bearing accounts payable and accrued liabilities, in any case not more
than 90 days past due from the original due date thereof, and non-
interest bearing deferred liabilities other than for borrowed money
(e.g., deferred taxes), in each case incurred and continuing in the
ordinary course of business;
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(iii) the endorsement of negotiable instruments for deposit
or collection in the ordinary course of business; and
(iv) any subordinated Debt to the Parent or Tyco Manufacturing
in relation to the TFC I Deferred Sale Price or TFC II Deferred Sale
Price;
(i) issue any additional shares or any right or option to acquire any
shares, or any security convertible into any shares, of the capital stock of the
Borrower;
(j) make or suffer to exist any purchases of assets aggregating more
than $10,000 in any year or investments in any Person, including, without
limitation, any shareholder, director, officer or employee of the Borrower or
any of the Parent's other Subsidiaries, except Transferred Receivables and
Permitted Investments;
(k) (i) take any action, or fail to take any action (other than any
action or failure constituting a guaranty of collectibility of any Receivable),
if such action or failure to take action may interfere with the enforcement of
any rights under this Agreement or the Related Documents that are material to
the rights, benefits or obligations of the Secured Parties or FSA; (ii) waive or
alter any rights with respect to the Collateral (or any agreement or instrument
relating thereto); (iii) take any action, or fail to take any action, if such
action or failure to take action may interfere with the enforcement of any
rights with respect to the Collateral; or (iv) fail to pay any tax, assessment,
charge or fee with respect to the Collateral or fail to defend any action, if
such failure to pay or defend may adversely affect the priority or
enforceability of the Secured Parties' first priority lien on or perfected
security interest in the Collateral or the Borrowers' right, title or interest
in the Collateral;
(l) institute against, or join any other person in instituting
against the Parent or Tyco Manufacturing, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding or other proceeding, under any
bankruptcy or similar law, for one year and a day after the expiration of the
Term of the Insurance and Indemnity Agreement;
(m) terminate or designate any successor Servicer without the prior
approval of FSA;
(n) take or permit (other than with respect to actions taken or to be
taken solely by a government or governmental authority) to be taken any action
which would have the effect directly or indirectly of subjecting interest on the
Notes or the Commercial Paper to withholding taxation in the hands of,
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respectively, the Lender or holders of Commercial Paper generally who are
residents of the United States, and will perform all of its obligations under
this Agreement and the Related Documents to prevent or cure any default by the
Borrower which would have the effect, directly or indirectly, of subjecting
interest on the Notes or the Commercial Paper to withholding taxation; or
(o) nor any Commonly Controlled Entity will:
(i) terminate any Plan so as to incur any material liability
to the PBGC;
(ii) knowingly participate in any "prohibited transaction" (as
defined in ERISA) involving any Plan or Multiemployer Plan or any
trust created thereunder which would subject any of them to a material
tax or penalty on prohibited transactions imposed under Section 4975
of the Code or ERISA;
(iii) fail to pay to any Plan or Multiemployer Plan any
contribution which it is obligated to pay under the terms of such Plan
or Multiemployer Plan, if such failure would cause such plan to have
any material Accumulated Funding Deficiency, whether or not waived; or
(iv) allow or suffer to exist any occurrence of a Reportable
Event, or any other event or condition, which presents a material risk
of termination by the PBGC of any Plan or Multiemployer Plan, to the
extent that the occurrence or nonoccurrence of such Reportable Event
or other event or condition is within the control of it or any
Commonly Controlled Entity.
ARTICLE VI
COLLECTIONS AND DISBURSEMENTS
SECTION 6.01. Establishment of Accounts.
-------------------------
(a) The Lockbox Accounts. (i) TFC I has a Lockbox Account with a
--------------------
Lockbox Bank, subject to the approval of FSA, into which each of the
Servicer and TFC I shall deposit from time to time all monies, instruments
and other property received by it as Collections or Proceeds of the Tier I
Transferred Receivables, and TFC II has a Lockbox Account with a Lockbox
Bank, subject to the approval of FSA, into which each of the Servicer and
TFC II shall deposit from time to time all monies, instruments and other
property received by it as Collections or Proceeds of the Tier II
Transferred Receivables. The Borrowers agree that the Collateral Agent
shall have exclusive dominion and control
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of the Lockbox Accounts and all monies, instruments and other property from
time to time in the Lockbox Accounts. The Borrowers will not make or cause
to be made, or have any ability to make or cause, any withdrawals from the
Lockbox Account, except as provided in Section 6.01(b)(ii).
(ii) The Servicer and TFC I have instructed all existing
Obligors other than Toys'R'Us, and will instruct all future Obligors other
than Toys'R'Us, to make payments in respect of Transferred Receivables only
(A) by check or money order mailed to one or more lockboxes or post office
boxes under the control of the Operating Agent (each such box being a
"Lockbox"), or (B) by wire transfer or moneygram directly to the Lockbox
Account established by TFC I ("Wire Payments"). The Lockboxes to which mail
payments are made as of the date hereof are listed on the attached Schedule
8. TFC I and the Servicer shall endorse, to the extent necessary, all
checks or other instruments received in any Lockbox so that the same can be
deposited in such Lockbox Account established by TFC I, in the form so
received (with all necessary endorsements), and the Collateral Agent shall
deposit the same in such Lockbox Account on the next Business Day after the
Business Day on which such check or other instruments are received. In
addition, the Borrowers and Servicer shall deposit or cause to be deposited
in the appropriate Lockbox Account all cash, checks, money orders or other
Proceeds of Collateral received other than in a Lockbox or by Wire
Payments, in the form so received (with all necessary endorsements), not
later than the close of business on the Business Day following the date of
such receipt, and until so deposited all such items or other Proceeds shall
shall be held in trust for the Collateral Agent; provided that any payments
--------
by Toys'R'Us in respect of the Transferred Receivables shall be delivered
directly by Toys'R'Us to a bonded courier acceptable to the Lender and FSA
and, directly upon receipt thereof on the day so received, deposited into
the Collection Account or deposited by Toys 'R' Us directly into the
applicable Lockbox Account.
(iii) In the event that any of the Lockbox Agreements terminates
for any reason or the related Lockbox Bank fails to comply with its
obligations under such Lockbox Agreement for any reason, then the related
Borrower shall promptly notify all Obligors to make all future Wire
Payments to a new Lockbox Account established in accordance with the next
succeeding sentence with such Lockbox Bank or another depositary
institution. Such Borrower shall not close such Lockbox Account unless it
shall have (1) received the prior written consent of the Operating Agent,
FSA and the Collateral Agent, (2) established a new account with the
Lockbox Bank or with a new depositary institution satisfactory to the
Operating Agent, FSA and the Collateral
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Agent, (3) entered into an agreement covering such new account with the
Lockbox Bank or with such new depositary institution substantially in the
form of such Lockbox Agreement which is satisfactory in all respects to the
Operating Agent, FSA and the Collateral Agent (whereupon, for all purposes
of this Agreement and the Related Documents, such new account shall become
such Lockbox Account, such new agreement shall become such Lockbox
Agreement and any new depositary institution shall become the Lockbox
Bank), and (4) taken all such action as the Collateral Agent or FSA shall
require to grant and perfect a first priority security interest in such new
Lockbox Account to the Collateral Agent under Section 8.01 of this
Agreement.
(b) Collection Account. (i) The Lender has established and shall
------------------
maintain an Eligible Bank Account with the Depositary titled "Redwood
Receivables Corporation -Collection Account (Tyco Borrowers)." The
Borrowers agree that the Collateral Agent shall have exclusive dominion and
control of such Collection Account and all monies, instruments and other
property from time to time in such Collection Account.
(ii) Pursuant to Section 6.02, each Borrower shall instruct the
Lockbox Bank to transfer, and each Borrower hereby grants the Collateral
Agent the authority to instruct each Lockbox Bank to transfer, on each
Business Day in same day funds, all available funds deposited in the
Lockbox Accounts before such Business Day to the Collection Account. The
Lender, the Operating Agent and the Collateral Agent may deposit into the
Collection Account from time to time all monies, instruments and other
property received by any of them as Collections or Proceeds of the
Transferred Receivables. On each Business Day before the Commitment
Termination Date, so long as no Termination Event shall have occurred and
be continuing, the Collateral Agent shall instruct and cause the Depositary
(which instruction may be in writing or by telephone confirmed promptly
thereafter in writing) to release funds on deposit in the Collection
Account in the order of priority set forth in Section 6.03. On each
Business Day on and after the Commitment Termination Date and on each
Business Day during any period while a Termination Event has occurred and
is continuing, the Collateral Agent shall apply all amounts when received
in the Collection Account in the order of priority set forth in Section
6.05.
(iii) In the event that the Depositary wishes to resign as
depositary of the Collection Account for any reason or fails to carry out
the instructions of the Collateral Agent for any reason, then the Lender or
the
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Operating Agent shall promptly notify all Secured Parties. The Lender
shall not close the Collection Account unless it shall have (A) received
the prior written consent of the Operating Agent, FSA and the Collateral
Agent, (B) established a new account with the Depositary or with a new
depositary institution satisfactory to the Operating Agent, FSA and the
Collateral Agent, (C) entered into an agreement covering such new account
with the Depositary or such new depositary institution satisfactory in all
respects to the Operating Agent, and FSA and the Collateral Agent
(whereupon such new account shall become the Collection Account for all
purposes of this Agreement and the Related Documents), and (D) taken all
such actions as the Collateral Agent and FSA shall require to grant and
perfect first priority security interests in such new Collection Account to
the Collateral Agent under this Agreement.
(c) Retention Account. The Lender has established and shall maintain
-----------------
an Eligible Bank Account with the Depositary and controlled by the Operating
Agent titled "Redwood Receivables Corporation - Retention Account (Tyco
Borrowers)."
(d) Collateral Account. The Lender has established and shall
------------------
maintain an Eligible Bank Account with the Depositary and controlled by the
Operating Agent titled "Redwood Receivables Corporation - Collateral Account".
SECTION 6.02. Funding of Collection Account.
-----------------------------
(a) No later then 10:00 a.m. on each Business Day:
(i) the Collateral Agent shall transfer all Collections
deposited in the Lockbox Accounts prior to such Business Day to the
Collection Account;
(ii) the Lender shall, or shall cause the Collateral Agent to,
deposit any Advances made on such Business Day to the Collection Account;
(iii) if, on the prior Business Day, the Operating Agent has
notified the Borrowers of any Borrowing Excess pursuant to Section 6.03(b),
the Borrowers shall deposit cash in the amount of such Borrowing Excess in
the Collection Account;
(iv) if, pursuant to a Borrower Notice, the Borrowers have
requested to make an Optional Prepayment of Advances on such Business Day,
the Borrowers shall deposit cash into the Collection Account in an amount
equal to such Optional Repayment Amount;
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(v) if on such Business Day the Borrowers are required to make
other payments under this Agreement not previously retained out of
Collections (including Indemnified Amounts not previously paid), the
Borrowers shall deposit an amount equal to such payments in the Collection
Account;
(vi) if, on the prior Business Day, the Borrower shall have
received a capital contribution made by the Parent or a payment made by
Tyco Manufacturing of a Rejected Amount pursuant to the Receivables
Transfer Agreements, the Borrowers shall deposit cash in the amount
received from the Parent or Tyco Manufacturing for such capital
contribution or payment, in the Collection Account; and
(vii) the Servicer shall deposit into the Collection Account the
Outstanding Balance of any Transferred Receivable it elects to pay pursuant
to Section 7.03.
(b) If, two Business Days prior to any Settlement Date, the Operating
Agent notifies the Borrowers of any Retention Account Deficiency pursuant to
Section 6.04(b), the Borrowers shall deposit cash in the amount of such
deficiency into the Collection Account no later than 10:00 a.m. on such
Settlement Date.
(c) On and after the Commitment Termination Date, the Operating Agent
shall transfer all amounts held in the Retention Account as of that date to the
Collection Account.
SECTION 6.03. Daily Disbursements From the Collection Account - Revolving
-----------------------------------------------------------
Period.
- ------
(a) On each Business Day during the Revolving Period, following the
transfers made in accordance with Section 6.02, the Collateral Agent shall
disburse all amounts in the Collection Account in the following priority:
(i) to the Retention Account for the account of the Lender,
the amount of any Retention Account Deficiency deposited pursuant to
Section 6.02(b);
(ii) to the Retention Account for the account of the Lender,
an amount equal to the sum of
(A) Daily Interest on Advances Outstanding as of the
previous day;
(B) the Daily Unused Facility Fees for such day; and
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(C) the Interest and Fees Shortfall for the prior Business
Day;
(iii) to the Collateral Account for the account of the
Lender, as repayment of principal on Advances if, as disclosed in
either of the most recently submitted Borrowing Base Certificates,
there is a Borrowing Excess with respect to either Borrower, by
transfer of such Borrowing Excess;
(iv) if, pursuant to a Borrower Notice, either Borrower has
requested to make an Optional Prepayment of Advances on such date, the
related Optional Repayment Amount to the Collateral Account for the
account of the Lender, as repayment of principal on such Advance;
(v) during the Clean Down Period Part 1 to the Collateral
Account for the account of the Lender, as repayment of principal on
Advances, an amount equal to the lesser of the balance in the
Collection Account or the principal on all Advances Outstanding;
(vi) during the Clean Down Period Part 2, to the Collateral
Account for the account of the Lender, as repayment or principal of
Advances, an amount equal to 80% of the balance in the Collection
Account;
(vii) to an account designated by FSA, any amounts due and
owing to FSA pursuant to the Insurance and Indemnity Agreement or the
Premium Letter (excluding any amounts thereof disbursed pursuant to
clause (a)(ii)(B) above);
(viii) to the Collateral Account for the account of the Lender (or
in the case of Indemnified Amounts, for the account of the Indemnified
Party), amounts deposited into the Collection Account pursuant to
Section 6.02(a)(iii); and
(ix) to an account of each of the Borrowers previously
designated by the applicable Borrower, the balance, if any.
(b) After completion of the disbursements specified in Section
6.03(a), the Operating Agent shall notify the Borrowers of any remaining
Borrowing Excess, and the Borrowers shall deposit the amount of such remaining
Borrowing Excess in the Collection Account by 10:00 a.m. on the following
Business Day.
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SECTION 6.04. Disbursements From the Retention Account -Settlement Date
---------------------------------------------------------
Procedures - Revolving Period.
- -----------------------------
(a) No later than 11:00 a.m. on each Settlement Date during the
Revolving Period, the amounts held in the Retention Account shall be disbursed
or retained by the Collateral Agent in the following priority:
(i) to the Collateral Account for the account of the Lender (or,
if applicable, any Indemnified Party) or, with respect to payments to FSA,
to an account designated by FSA, in an amount equal to:
(A) accrued and unpaid Interest to the end of the preceding
Settlement Period (excluding any amounts thereof to be disbursed
pursuant to clause (B) below);
(B) all amounts due and owing to FSA with respect to the
Premium;
(C) all Unused Facility Fees accrued and unpaid to the end
of the preceding Settlement Period (excluding any amounts thereof to
be disbursed pursuant to clause (B) above);
(D) if there is a Borrowing Excess with respect to either
Borrower, an amount equal to such excess, in reduction of Advances
Outstanding of such Borrower;
(E) all Additional Amounts incurred and payable to any
Affected Party through the end of the preceding Settlement Period;
(F) all other amounts accrued and payable under this
Agreement other than principal payments on Advances (including
Indemnified Amounts incurred and payable to any Indemnified Party)
through the end of the preceding Settlement Period;
(ii) to the Servicer on behalf of the Borrowers, in an amount
equal to its accrued and unpaid Servicing Fee to the end of the preceding
Settlement Period;
(iii) retained in the Retention Account, the Accrued Monthly
Interest and Unused Facility Fee as of that date;
(iv) to an account designated by FSA, any other amounts due and
owing to FSA under the Insurance and Indemnity Agreement or the Premium
Letter;
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(v) to the extent that the balance in the Retention Account
exceeds the amount to be retained under Section 6.04(iii), that excess, if
so designated by the Borrowers, to the Collateral Account to repay Advances
Outstanding of the Borrowers as so designated; and
(vi) to the extent that the balance in the Retention Account
exceeds the amount to be retained or disbursed under Section 6.04(iii) or
(v), each Borrower's pro rata portion of that excess to accounts previously
designated by the Borrowers.
(b) Two Business Days prior to each Settlement Date, the Operating
Agent shall determine and notify the Borrowers of any Retention Account
Deficiency for the preceding Settlement Period, and the Borrowers shall deposit
cash in the amount of such Retention Account Deficiency to the Collection
Account pursuant to Section 6.02(b).
SECTION 6.05. Liquidation Settlement Procedures. On each Business Day on
---------------------------------
and after the Commitment Termination Date, the Collateral Agent shall transfer
all amounts from the Collection Account in the following priority:
(a) amounts due and owing to FSA with respect to any accrued and
unpaid Premium;
(b) if an Event of Servicer Termination has occurred and a Successor
Servicer has been appointed to the Successor Servicer in an amount equal to its
accrued and unpaid Successor Servicing Fees and Expenses;
(c) to the Collateral Account for the account of the Lender or, with
respect to amounts payable to FSA, to an account designated by FSA, in the
following order, priority and amount equal to:
(i) that portion of the accrued and unpaid Interest equal to the
product of the Daily Interest Rate and Advances Outstanding during the
period from the Commitment Termination Date through and including the date
of payment through and including such date;
(ii) the principal of all Advances Outstanding (excluding
Advances which have been paid with a payment under either Policy);
(iii) all accrued and unpaid fees and expenses of the Operating
Agent and the Collateral Agent, provided that the sum of all transfers made
pursuant to this clause (iii) after the Commitment Termination Date shall
at no time exceed in the aggregate $200,000;
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(iv) an amount equal to all other obligations due and owing to
FSA pursuant to the Insurance and Indemnity Agreement or the Premium
Letter;
(v) all accrued and unpaid Interest and Unused Facility Fees
(excluding any amounts thereof transferred pursuant to clauses (c)(i) and
(c)(iii) above);
(vi) all Additional Amounts incurred and payable to any Affected
Party; and
(vii) all Indemnified Amounts incurred and payable to any
Indemnified Party;
(d) if an Event of Servicer Termination has not occurred, to the
Servicer in an amount equal to its accrued and unpaid Servicing Fee.
SECTION 6.06. Notification by Operating Agent. The Collateral Agent
-------------------------------
shall notify the Borrowers, the Lender, the Operating Agent, FSA and the
Servicer of the determinations and disbursements made pursuant to Sections 6.03,
6.04, 6.05 and 6.08 no later than one Business Day thereafter.
SECTION 6.07. Investment of Accounts.
----------------------
(a) During the Revolving Period, to the extent there are uninvested
amounts deposited in the Collection Account or the Retention Account, the
Collateral Agent shall invest all such amounts in Permitted Investments selected
by the Collateral Agent and approved by the Borrowers and FSA that mature no
later than the immediately succeeding Business Day, in the case of the
Collection Account, and the immediately succeeding Settlement Date, in the case
of the Retention Account, provided that following a Termination Event or Event
of Servicer Termination, unless FSA otherwise consents in writing, money in each
such account shall be invested only in Permitted Investments described in
paragraph (a) of the definition of Permitted Investments;
(b) The securities purchased with the moneys in each such account
shall be deemed a part of such account and, for the purpose of determining the
amount of money in such account, the securities shall be valued at their cost or
market value, whichever is lower. To the extent the Collateral Agent invests
such monies in any Permitted Investment other than as permitted under clause (e)
of the definition of "Permitted Investments", monthly statements of the earnings
or losses, disbursements and deposits, and any other changes in the fund
balances, shall be submitted by the Collateral Agent to FSA and the Lender.
(c) To the extent the Collateral Agent invests such monies in any
Permitted Investment other than as permitted under
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clause (e) of the definition of "Permitted Investments", if at any time it shall
become necessary that some or all of the securities purchased with the moneys in
either the Collection Account or the Retention Account be redeemed or sold in
order to raise moneys necessary to comply with the provisions of this Agreement,
the Collateral Agent shall so redeem or sell such securities.
(d) To the extent the Collateral Agent invests such monies in any
Permitted Investment other than as permitted under clause (e) of the definition
of "Permitted Investments", the Lender will not direct the Collateral Agent to
make any investment of any funds in either the Collection Account or the
Retention Account or to sell any investment held in either such account except
under the following terms and conditions:
(i) each such investment shall be made in the name of the
Collateral Agent (in its capacity as such) or in the name of a nominee of
the Collateral Agent under its complete and exclusive dominion and control
(or, if, as stated in an opinion of counsel delivered to the Collateral
Agent and acceptable in form and substance to the Collateral Agent and FSA,
applicable law provides for perfection of pledges of an instrument not
evidenced by a certificate or other instrument through registration of such
pledge on books maintained by or on behalf of the issuer of such
investment, such pledge may be so registered),
(ii) the Collateral Agent shall have sole control over such
investment, the income thereon and the proceeds thereof,
(iii) other than the investments described in clause (i) above,
any certificate or other instrument evidencing such investment shall be
delivered directly to the Collateral Agent or its agent, and
(iv) the proceeds of each sale of such an investment shall be
remitted by the purchaser thereof directly to the Collateral Agent for
deposit in the account in which such investment was held.
(e) All income or other gain from investments of moneys deposited in
either the Collection Account or the Retention Account shall be deposited by the
Collateral Agent in such account, immediately upon receipt, and any loss
resulting from such investments shall be charged to such account. Subject to
Section 13.01 hereof, the Collateral Agent shall not in any way be held liable
by reason of any insufficiency in either the Collection Account or the Retention
Account resulting from any loss on any Permitted Investment included therein
except for losses attributable to the Collateral Agent's failure to make
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payments on such Permitted Investments issued by the Collateral Agent, in its
commercial capacity, in accordance with their terms.
(f) On or after the Commitment Termination Date, any investment of
such amounts shall be solely at the discretion of the Collateral Agent subject
to the restrictions described above.
SECTION 6.08. Termination Procedure.
---------------------
(a) On the earlier of (i) the first Business Day after the Commitment
Termination Date on which Advances Outstanding have been reduced to zero or (ii)
the Final Maturity Date, if the payments required to be made pursuant to
Sections 6.05(a), (b), (c) and (d) have not been made in full, the Borrowers
shall immediately deposit into the Collection Account an amount sufficient to
make such payments in full.
(b) On the later of (i) the Commitment Termination Date or (ii) the
Business Day on which the payments required pursuant to Sections 6.05(a), (b),
(c) and (d) have been made in full, and upon a final accounting in respect
thereof being made to FSA, all amounts held in the Collection Account and the
Retention Account, if any, shall be disbursed to the Borrowers and all security
interests of the Lender and the Collateral Agent in all Transferred Receivables
owned by the Borrowers shall be released by the Lender and the Collateral Agent.
Such disbursement shall constitute the final payment to which the Borrowers are
entitled pursuant to the terms of this Agreement.
(c) Upon payment in full of the Guaranteed Distributions, all
payments payable under the Policy shall be deemed to have been paid in full.
Upon the expiration of the Policy according to its terms, the Operating Agent
shall surrender the Policy to FSA for cancellation.
SECTION 6.09. Payment Under the Policy. (a) If, on the second
------------------------
anniversary of the Commitment Termination Date, there is not on deposit in the
Collection Account and Retention Account (or otherwise available) sufficient
moneys to pay the Guaranteed Distributions remaining unpaid as of such day, the
Operating Agent, as soon as practicable and in no event later than 12:00 noon
(New York City time) on the next succeeding Business Day, shall furnish a Notice
of Claim to FSA in accordance with the Policy in respect of the amount of such
deficiency.
(b) Any funds paid by FSA as a result of any claim under the Policy
shall be applied directly to the payment in full of Guaranteed Distributions.
Funds received by the Lender as a result of any claim under the Policy may not
be applied to satisfy any costs, expenses or liabilities of the Lender.
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SECTION 6.10. Effect of Payments by FSA: Subrogation. (a) Anything
--------------------------------------
herein to the contrary notwithstanding, any payment with respect to the
Guaranteed Distributions made with moneys received pursuant to the terms of the
Policy shall not be considered payment by a Borrower of Advances or in respect
of the Notes, shall not discharge any Borrower in respect of its obligation to
make such payment and shall not result in the payment of or the provision for
the payment of the principal of or interest on the Advances or the Notes within
the meaning of Section 2.09 hereof. The Lender, the Operating Agent, the
Collateral Agent and the Borrowers each acknowledge that without the need for
any further action on the part of FSA or any other Person, (i) to the extent FSA
makes payments, directly or indirectly, on account of the Guaranteed
Distributions, FSA will be fully subrogated to the rights of the Lender to
receive all payments of principal and interest from the Borrowers in respect of
the Advances or the Notes, and (ii) FSA shall be paid such payments in its
capacity as an obligee of the Notes but only from the sources and in the manner
provided herein for the payment of principal and interest in respect of the
Advances or the Notes by the Borrowers in each case only after the Lender has
received payment of the Guaranteed Distributions. Without limiting the
foregoing, and subject to and conditioned upon payment of any such Guaranteed
Distribution by or on behalf of FSA, the Lender shall assign to FSA all rights
to payment of interest or principal on the Notes which are then due for payment
to the extent of all payments made by FSA in respect of the Guaranteed
Distributions, and FSA may exercise any option, vote, right, power or the like
with respect to such obligations.
(b) Without limiting the provisions of Article IX hereof or the
rights or interests of the Lender or the Operating Agent as otherwise set forth
herein, the Lender, the Operating Agent, the Collateral Agent and each of the
Borrowers shall cooperate in all respects with any reasonable request by FSA for
action to preserve or enforce FSA's rights or interests under this Agreement,
including, without limitation, upon the occurrence and continuance of a
Termination Event or an Event of Servicer Termination, a request to take any one
or more of the following actions:
(i) institute proceedings for the collection of all amounts then
payable on the Advances or the Notes, or under this Agreement in respect to
the Advances or the Notes, enforce any judgment obtained and collect from
the Borrowers moneys adjudged due;
(ii) institute proceedings from time to time for the complete or
partial foreclosure of the Collateral; and
(iii) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other
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appropriate action to protect and enforce the rights and remedies of FSA
hereunder.
ARTICLE VII
APPOINTMENT OF THE SERVICER
SECTION 7.01. Appointment of the Servicer. The Borrowers hereby appoint
---------------------------
the Servicer as their agent to service the Transferred Receivables and enforce
their respective rights and interests in and under each Transferred Receivable
and each related Contract and to serve in such capacity until the termination of
its responsibilities pursuant to Sections 7.10, 9.02 or 11.01. The Servicer
hereby agrees to perform the duties and obligations with respect thereto set
forth herein. The Servicer may, with the prior written consent of the
Borrowers, the Lender, the Operating Agent, FSA and the Collateral Agent
subcontract with a Sub-Servicer for collection, servicing or administration of
the Transferred Receivables, provided, that (a) the Servicer shall remain liable
--------
for the performance of the duties and obligations of the Sub-Servicer pursuant
to the terms hereof, and (b) any Sub-Servicing Agreement that may be entered
into and any other transactions or services relating to the Transferred
Receivables involving a Sub-Servicer shall be deemed to be between the Sub-
Servicer and the Servicer alone and the Borrowers, the Lender, Operating Agent,
FSA and the Collateral Agent shall not be deemed parties thereto and shall have
no obligations, duties or liabilities with respect to the Sub-Servicer.
SECTION 7.02. Duties and Responsibilities of the Servicer.
-------------------------------------------
(a) The Servicer shall conduct the servicing, administration and
collection of the Transferred Receivables and shall take, or cause to be taken,
all such actions as may be necessary or advisable to service, administer and
collect each Transferred Receivable from time to time in accordance with the
Credit and Collection Policies.
(b) The duties of the Servicer shall include, without limitation:
(i) preparation and submission of claims to, and post-billing
liaison with, Obligors on Transferred Receivables;
(ii) arranging for the direct remittance of all Collections with
respect to each Transferred Receivable to the Lockbox Account or the
Lockbox;
(iii) maintaining all necessary Servicing Records with respect
to the Transferred Receivables and providing
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such reports to the Lender, the Operating Agent, FSA and the Collateral
Agent in respect of the servicing of the Transferred Receivables (including
information relating to its performance under this Agreement) as may be
required hereunder or as the Lender, the Operating Agent, FSA or the
Collateral Agent may reasonably request;
(iv) maintaining and implementing administrative and operating
procedures (including, without limitation, an ability to recreate Servicing
Records evidencing the Transferred Receivables in the event of the
destruction of the originals thereof) and keeping and maintaining all
documents, books, records and other information reasonably necessary or
advisable for the collection of the Transferred Receivables (including,
without limitation, records adequate to permit the identification of each
new Transferred Receivable and all Collections of and adjustments to each
existing Transferred Receivable);
(v) promptly delivering to the Operating Agent, FSA or the
Collateral Agent, from time to time, such information and Servicing Records
(including information relating to its performance under this Agreement) as
the Operating Agent, FSA or the Collateral Agent may from time to time
reasonably request;
(vi) identifying each Transferred Receivable clearly and
unambiguously in its Servicing Records to reflect that such Transferred
Receivable is owned by the Borrower and pledged to the Collateral Agent and
FSA;
(vii) complying in all respects with the Credit and Collection
Policies in regard to each Transferred Receivable and the related
Contracts, and with the terms of such Receivables and Contracts;
(viii) complying in all material respects with all applicable
laws, rules, regulations and orders with respect to it, its business and
properties and all Transferred Receivables, related Contracts and
Collections with respect thereto;
(ix) preserving and maintaining its corporate existence, rights,
franchises and privileges in the jurisdiction of its incorporation, and
qualifying and remaining qualified in good standing as a foreign
corporation and qualifying to and remaining authorized to perform
obligations as Servicer (including enforcement of collection of Transferred
Receivables on behalf of the Lender, FSA and the Collateral Agent) in each
jurisdiction where the failure to preserve and maintain such existence,
rights, franchises, privileges and qualification would
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materially adversely affect (A) the rights or interests of the Lender, FSA
or the Collateral Agent in the Transferred Receivables, (B) the
collectibility of any Transferred Receivable, (C) the ability of the
Servicer to perform its obligations hereunder, or (D) the ability of the
Parent and Tyco Manufacturing to perform their obligations under this
Agreement or under the Contracts;
(x) promptly notifying the Lender, the Operating Agent, FSA and
the Collateral Agent of the occurrence of a Termination Event (including,
without limitation, a material adverse change in the financial condition of
the Parent or Tyco Manufacturing) or an Incipient Event of which it has
knowledge;
(xi) notifying the Lender, the Operating Agent, FSA and the
Collateral Agent of any action, suit, proceeding, dispute, offset
deduction, defense or counterclaim that is or may be asserted by an Obligor
with respect to any Transferred Receivable;
(xii) upon the request of the Lender, the Operating Agent, FSA
or the Collateral Agent, permitting the Lender, the Operating Agent, FSA or
the Collateral Agent or its authorized agents:
(A) to inspect the books and records of the Servicer as they
may relate to the Notes, the Collateral, the obligations of the
Servicer under this Agreement and the Related Documents, the
Servicer's business and the transaction contemplated by this Agreement
or the Related Documents;
(B) to discuss the affairs, finances and accounts of the
Servicer with the chief operating officer and the chief financial
officer of the Servicer; and
(C) to discuss the affairs, finances and accounts of the
Servicer with the Servicer's independent accountants, provided that an
officer of the Servicer shall have the right to be present during such
discussions;
(xiii) promptly informing the Lender, the Operating Agent, FSA and
the Collateral Agent in writing of the occurrence of any of the following:
(A) the submission of any claim or the initiation of any
legal process, litigation or administrative or judicial investigation
against the Servicer involving potential damages or penalties in an
uninsured amount
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in excess of $100,000 in any one instance or $500,000 in the
aggregate;
(B) any change in the location of the Servicer's principal
office or any change in the location of the Servicer's books and
records;
(C) the commencement of or threat of any rule making or
disciplinary proceedings or any proceedings instituted by or against
the Servicer in any federal, state or local court or before any
governmental body or agency, or before any arbitration board, or the
promulgation of any proceeding or any proposed or final rule which, if
adversely determined, would have or cause a Material Adverse Effect on
or with respect to the Servicer;
(D) the commencement of any proceedings by or against the
Servicer under any applicable bankruptcy, reorganization, liquidation,
rehabilitation, insolvency or other similar law now or hereafter in
effect or of any proceeding in which a receiver, liquidator,
conservator, trustee or similar official shall have been, or may be,
appointed or requested for the Servicer or any of its assets; or
(E) the receipt of notice that (A) the Servicer is being
placed under regulatory supervision, (B) any license, permit, charter,
registration or approval necessary for the conduct of the Servicer's
business is to be, or may be, suspended or revoked, or (C) the
Servicer is to cease and desist any practice, procedure or policy
employed by the Servicer in the conduct of its business, and such
cessation may have or cause in a Material Adverse Effect on or with
respect to the Servicer;
(xiv) at its own expense, promptly taking, or causing to be taken,
such actions as may be necessary or desirable, in the sole judgment of the
Lender, the Operating Agent, FSA or the Collateral Agent, (i) to create and
maintain this Agreement as a valid and perfected first priority security
interest covering the Collateral and (ii) to fully preserve and protect the
perfected first priority security interest of the Secured Parties in, and
all rights of the Secured Parties with respect to, the Collateral,
including, without limitation, the execution and filing of all necessary
financing statements or other instruments, and any amendments or
continuation statements relating thereto, necessary to be kept and filed in
such manner and in such places as may be required by law to preserve,
protect and perfect fully the first priority security interest of the
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Secured Parties with respect to the Collateral; without limitation of the
foregoing, the Servicer shall, upon the request of the Lender, the
Operating Agent, FSA or the Collateral Agent, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and
delivered, within five (5) days of such request, such amendments hereto and
such further instruments and take such further action as may be necessary
or advisable to effectuate the intention, performance and provisions of the
Servicer Documents or to protect the interest of the Secured Parties in the
Collateral, free and clear of all Adverse Claims and Restrictions on
Transferability; additionally, the Servicer agrees to cooperate with S&P
and Moody's in connection with any review of the transactions contemplated
by this Agreement or the Related Documents which may be undertaken by S&P
or Moody's after the date hereof;
(xv) (A) maintaining corporate records and books of account separate
from those of the Borrowers;
(B) disclosing in its financial statements the effects of the
Servicer's transactions in accordance with GAAP and disclosing that
the assets of the Servicer are not available to pay creditors of
either of the Borrowers;
(C) continuously maintaining as official records the
resolutions, agreements and other instruments underlying the
transactions contemplated by this Agreement and the Related Documents;
(D) using its best efforts to maintain an arm's-length
relationship with the Borrowers and not holding itself out as being
liable for the debts of either of the Borrowers; and
(E) using its best efforts to keep its assets and its
liabilities wholly separate from those of the Borrowers;
(xvi) agreeing that FSA shall have all rights of a third-party
beneficiary in respect of the Receivables Transfer Agreements and the
Assignments and, accordingly, hereby incorporating and restating its
representations, warranties and covenants as set forth therein for the
benefit of FSA;
(xvii) giving the Lender, the Operating Agent, FSA and the Collateral
Agent prompt notice of each of the following events (but in no event more
than 30 days after the earlier of the occurrence of the event or the
existence of an expectation of the occurrence of the event): (i) an
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Accumulated Funding Deficiency, (ii) the failure to make a required
contribution to a Plan or Multiemployer Plan, (iii) a Reportable Event,
(iv) any action by a Commonly Controlled Entity to terminate any Plan or
withdraw from any Multiemployer Plan, (v) any action by the PBGC to
terminate or appoint a trustee to administer a Plan, and (vi) the
reorganization or insolvency of any Multiemployer Plan; additionally, the
Servicer shall promptly (but in no case more than 30 days following
issuance or receipt by the Commonly Controlled Entity) provide to the
Lender, the Operating Agent, FSA and the Collateral Agent a copy of all
correspondence between a Commonly Controlled Entity and the PBGC, Internal
Revenue Service, Department of Labor or the administrators of a
Multiemployer Plan relating to any of the events described in the preceding
sentence or the underfunded status, termination or possible termination of
a Plan or a Multiemployer Plan which could result in material liability;
and
(xviii) complying in all respects with the Credit and Collection
Policies with regard to each Transferred Receivable and the related
Contracts, and with the terms of such Receivables and Contracts.
(c) The Lender, the Operating Agent, FSA and the Collateral Agent
shall not have any obligation or liability with respect to any Transferred
Receivables or related Contracts, nor shall any of them be obligated to perform
any of the obligations of the Servicer hereunder.
SECTION 7.03. Authorization of the Servicer. Subject to Section 7.10
-----------------------------
hereof and to the further direction of FSA, each of the Borrowers, FSA and the
Lender hereby authorizes the Servicer (including any successor thereto) to take
any and all reasonable steps in its name and on its behalf necessary or
desirable and not inconsistent with the pledge of the Transferred Receivables to
the Collateral Agent, in the determination of the Servicer, to collect all
amounts due under any and all Transferred Receivables, including, without
limitation, endorsing any of their names on checks and other instruments
representing Collections, executing and delivering any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Transferred Receivables
and, after the delinquency of any Transferred Receivable and to the extent
permitted under and in compliance with applicable law and regulations, to
commence proceedings with respect to enforcing payment of such Transferred
Receivables and the related Contracts, and adjusting, settling or compromising
the account or payment thereof, to the same extent as the Parent or Tyco
Manufacturing could have done if it had continued to own such Receivable. The
Parent, Tyco Manufacturing, the Borrowers and the Lender shall furnish the
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Servicer (and any successors thereto) with any powers of attorney and other
documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder, and shall cooperate with the
Servicer to the fullest extent in order to ensure the collectibility of the
Transferred Receivables. Notwithstanding anything to the contrary contained
herein, each of the Lender, the Collateral Agent, FSA and the Operating Agent
shall, subject to the prior written consent of FSA, have the right to direct the
Servicer (whether the Servicer is the Parent or otherwise) to commence or settle
any legal action to enforce collection of any Transferred Receivable or to
foreclose upon, repossess or take any other action which the Collateral Agent,
FSA or the Operating Agent, subject to the prior written consent of FSA, deems
necessary or advisable with respect thereto; provided, that the Servicer may,
rather than commencing such action or taking other enforcement action, at its
option elect to pay the applicable Borrower the Outstanding Balance of such
Transferred Receivable. In no event shall the Servicer be entitled to make the
Lender, the Collateral Agent, FSA or the Operating Agent a party to any
litigation without such party's express prior written consent, or to make either
Borrower a party to any litigation without the Operating Agent's and FSA's prior
written consent.
SECTION 7.04. Servicing Fees. As compensation for its servicing
--------------
activities and as reimbursement for its expenses in connection therewith, the
Servicer shall be entitled to receive the Servicing Fees in the manner set forth
in Sections 6.04 and 6.05, payable monthly in arrears on each Settlement Date
with respect to the preceding Settlement Period. The Servicer shall be required
to pay for all expenses incurred by the Servicer in connection with its
activities hereunder (including any payments to accountants, counsel or any
other Person) and shall not be entitled to any payment therefor other than the
Servicing Fees.
SECTION 7.05. Negative Covenants of the Servicer. The Servicer shall
----------------------------------
not, without the prior written consent of the Operating Agent, FSA and the
Collateral Agent:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist or consent to cause or permit in the
future (upon the happening of a contingency or otherwise) the creation,
incurrence or existence of, any Adverse Claim or Restriction on Transferability
upon or with respect to (and any such purported disposition shall be null and
void), any Transferred Receivable or related Contract with respect thereto, or
upon or with respect to the Lockbox Accounts, the Lockboxes, the Collection
Account, the Retention Account or any other account to which any Collections of
any Receivable are deposited or any other Collateral, or assign any right to
receive income in respect thereof;
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(b) extend, amend or otherwise modify the terms of any Transferred
Receivable (other than adjusting, settling or compromising the account or
payment of a Transferred Receivable pursuant to Section 7.03), or amend, modify
or waive any term or condition of any Contract related thereto;
(c) make any material change in the character of its business;
(d) make any change in its instructions to Obligors to make payments
to the Lockbox Accounts or Lockboxes (other than to a new Lockbox Account
pursuant to Section 6.01(a)(iii));
(e) merge or consolidate with or into any entity in which the
Servicer is not the surviving entity, or convey, transfer, lease or otherwise
dispose of all or substantially all of its assets (whether now owned or
hereafter acquired) to, any Person (whether in one transaction or in a series of
transactions);
(f) (i) take any action, or fail to take any action, if such action
or failure to take action may interfere with the enforcement of any rights under
this Agreement or the Related Documents that are material to the rights,
benefits or obligations of the Secured Parties; (ii) waive or alter any rights
with respect to the Collateral (or any agreement or instrument relating
thereto); (iii) take any action, or fail to take any action, if such action or
failure to take action may interfere with the enforcement of any rights with
respect to the Collateral; or (iv) fail to pay any tax, assessment, charge or
fee with respect to the Collateral, or fail to defend any action, if such
failure to pay or defend may adversely affect the priority or enforceability of
the Secured Parties' first priority lien on or perfected security interest in
the Collateral or the Parent's or Tyco Manufacturing's right, title or interest
in the Transferred Receivables;
(g) waive, modify or amend, or consent to any waiver, modification or
amendment of, any of the terms, provisions or conditions of this Agreement or
the Related Documents;
(h) nor shall any Commonly Controlled Entity:
(i) terminate any Plan so as to incur any material liability to
the PBGC;
(ii) knowingly participate in any "prohibited transaction" (as
defined in ERISA) involving any Plan or Multiemployer Plan or any trust
created thereunder which would subject any of them to a material tax or
penalty on prohibited transactions imposed under Section 4975 of the Code
or ERISA;
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(iii) fail to pay to any Plan or Multiemployer Plan any
contribution which it is obligated to pay under the terms of such Plan or
Multiemployer Plan, if such failure would cause such plan to have any
material Accumulated Funding Deficiency, whether or not waived; or
(iv) allow or suffer to exist any occurrence of a Reportable
Event, or any other event or condition, which presents a material risk of
termination by the PBGC of any Plan or Multiemployer Plan, to the extent
that the occurrence or nonoccurrence of such Reportable Event or other
event or condition is within the control of it or any Commonly Controlled
Entity;
(i) take or permit to be taken any action which would have the effect
directly or indirectly of subjecting interest on any of the Advances or the
Commercial Paper to or withholding taxation in the hands of the Lender or the
holders of Commercial Paper generally, and will perform all of its obligations
under this Agreement and the Related Documents to prevent or cure any default by
the Servicer which would have the effect, directly or indirectly, of subjecting
interest on any of the Advances or the Commercial Paper to or withholding
taxation; or
(j) institute against, or join any other person in instituting
against, either of the Borrowers any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any bankruptcy
or similar law, for one year and a day after the expiration of the Term of the
Insurance and Indemnity Agreement.
SECTION 7.06. Financial Covenants. Tyco Toys shall not breach or fail to
-------------------
comply (or permit the breach or failure to comply) with any of the following
financial covenants:
(a) Tyco Toys shall maintain (or cause to be maintained) as of the
end of each Fiscal Quarter (as defined in the Inventory Facility), ending on
each of the dates set forth below, Tangible Net Worth of not less than the
respective amount set forth below opposite each such date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
March 31, 1995 $ 74,100,000
June 30, 1995 75,300,000
September 30, 1995 91,100,000
December 31, 1995 100,600,000
March 31, 1996 92,900,000
June 30, 1996 93,900,000
September 30, 1996 109,600,000
December 31, 1996 118,700,000
</TABLE>
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<TABLE>
<S> <C>
March 31, 1997 110,500,000
June 30, 1997 111,500,000
September 30, 1997 127,400,000
December 31, 1997 136,700,000
March 31, 1998 128,700,000
June 30, 1998 129,600,000
September 30, 1998 145,800,000
December 31, 1998 155,200,000
March 31, 1999 147,300,000
June 30, 1999 148,300,000
September 30, 1999 164,800,000
December 31, 1999 174,300,000
and the last day of each
Fiscal Quarter thereafter
</TABLE>
(b) Tyco Parent shall not permit for the three Fiscal Month period
ending March 31, 1995 or for the six Fiscal Month period (as defined in the
Inventory Facility) ending June 30, 1995 (x) EBITA for such three or six, as
appropriate, Fiscal Month period less (y) the aggregate amount of all Capital
----
Expenditures (as defined in the Inventory Facility) made by Tyco Toys and its
Subsidiaries during such three or six, as appropriate, Fiscal Month period, to
be less than ($17,300,000) and ($15,800,000), respectively.
(c) Tyco Toys shall maintain (or cause to be maintained), as of the
end of each Fiscal Quarter (commencing with the Fiscal Quarter ending September
30, 1995), for each Parent Rolling Period (as defined in the Inventory Facility,
provided that the principal repayments pursuant to the Inventory Facility shall
not be deemed Debt Service for the purpose of the calculations in this clause
(c)), a Minimum Debt Service Coverage Ratio (as defined in the Inventory
Facility) of not less than (x) .60 to 1.0 as of the end of the Fiscal Quarter
ending September 30, 1995, (y) 1.25 to 1.0 as of the end of each of the Fiscal
Quarters ending December 31, 1995, March 31, 1996, June 30, 1996 and September
30, 1996 and (z) 1.30 to 1.0 as of the end of each Fiscal Quarter thereafter.
SECTION 7.07. Reporting. During the term of this Agreement, the Servicer
---------
shall furnish to the Collateral Agent, the Operating Agent, FSA and the Lender:
(a) if the Servicer is not the Parent, as soon as available and in
any event within 90 days after the end of each fiscal year of the Servicer a
copy of the consolidated financial statement of the Servicer and its
consolidated Subsidiaries as of the end of such year and the related
consolidated statements of income and retained earnings, and of cash flow, of
the Servicer and its consolidated Subsidiaries for such year, in each case
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reported on by a firm of nationally recognized independent public accountants;
(b) on or before the 45th day after each quarter other than the last
quarter of any year, an Officer's Certificate stating, as to each signer
thereof, that (i) a review of the activities of the Servicer during the
preceding calendar quarter and of its performance under this Agreement has been
made under such officer's supervision, (ii) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled in all material
respects all its obligations under this Agreement throughout such quarter, or,
if there has been a material default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof, (iii) the Servicer has complied with the duties and responsibilities
set forth in Section 7.02 and the covenants set forth in Sections 7.05, 7.06 and
8.06 and (iv) the representations and warranties of the Servicer in Section 4.03
are true and correct as if made on the date of such Officers' Certificate;
(c) promptly after the sending or filing thereof, copies of all
reports which Tyco Toys sends to any of its security holders, and the annual
report of Tyco Toys;
(d) upon request, books and records of account in reasonable detail
of the Servicer's assets and business, including, but not limited to, books and
records relating to the transactions contemplated by this Agreement and the
Related Documents, and including the provision of all such information in
machine-readable format; and
(e) promptly upon request, such other periodic, special or other
reports or information as the Lender, the Operating Agent, FSA or the Collateral
Agent may reasonably require.
SECTION 7.08. Annual Statement as to Compliance. The Servicer shall
---------------------------------
deliver to the Collateral Agent, the Operating Agent, FSA and the Lender on or
before June 30, 1995 and March 31 of each subsequent year an Officer's
Certificate stating, as to each signer thereof, that (a) a review of the
activities of the Servicer during the preceding calendar year and of its
performance under this Agreement has been made under such officer's supervision,
(b) to the best of such officer's knowledge, based on such review, the Servicer
has fulfilled in all material respects all its obligations under this Agreement
throughout such year or, if there has been a material default in the fulfillment
of any such obligation, specifying each such default known to such officer and
the nature and status thereof, (c) the Servicer has complied with the duties and
responsibilities set forth in Section 7.02 and the covenants set
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forth in Sections 7.05, 7.06 and 8.06, and (d) the representations and
warranties of the Servicer in Section 4.03 are true and correct in all material
respects (except with respect to Section 4.03(j) and those already so qualified
which are true and in all respects) as if made on the date of such Officers'
Certificate and (e) if the Servicer is not the Parent, the attached financial
reports submitted in accordance with Section 7.07(a) hereof, as applicable, are
complete and correct in all material respects and present fairly the financial
condition and results of operations of the Servicer as of the dates and for the
periods indicated, in accordance with generally accepted accounting principles
consistently applied (subject as to interim statements to normal year-end
adjustments) and the attached computations indicate compliance by the Servicer
with the financial covenants of the Servicer contained in Section 7.06 of this
Agreement and in the Related Documents.
SECTION 7.09. Annual Independent Public Accountants' Servicing and
----------------------------------------------------
Compliance Report. On or before June 30, 1995 and March 31 of each subsequent
- -----------------
year commencing on March 31, 1996, the Servicer at its expense shall cause a
firm of nationally recognized independent public accountants to furnish a
statement to the Collateral Agent, FSA and the Operating Agent to the effect
that (a) such firm has examined such Servicing Records relating to the
Transferred Receivables as such firm deems necessary as a basis for the report
contemplated by this Section 7.09 and that, on the basis of such examination,
such servicing has been conducted substantially in compliance with this
Agreement (including the Credit and Collection Policies), except for (i) such
exceptions as such firm shall believe to be immaterial, and (ii) such other
exceptions as shall be set forth in such statement, (b) such firm has examined
the financial statements set forth in Section 5.02 for the preceding year (other
than with respect to the June 30, 1995 audit) of the Servicer and the Servicer's
financial covenants in this Agreement and that, on the basis of such
examination, the Servicer has complied during such year with such covenants, and
(c) that the Lender, the Operating Agent, FSA and the Collateral Agent may rely
on such report.
SECTION 7.10. Retention and Termination of Servicer. Subject to early
-------------------------------------
termination due to an Event of Servicer Termination described in Section 9.02 or
as otherwise provided below in this Section 7.10, the Servicer shall serve as
Servicer for an initial term commencing on the Effective Date and expiring on
June 30, 1995, which term, unless terminated, shall be extendible by FSA for
successive terms thereafter of one calendar year quarter each (in each case on
the next succeeding day that is March 31, June 30, September 30 or December 31
of such year) as specified in a writing delivered by FSA from time to time prior
to the expiration of each current term as described below to the Servicer and
the Operating Agent (or, at the discretion of
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FSA, exercised pursuant to revocable written standing instructions from time to
time to the Servicer and the Operating Agent, for any specified number of terms
greater than one), until the termination of this Agreement. Each such notice
(including each notice pursuant to standing instructions, which shall be deemed
delivered at successive calendar quarter intervals for so long as such
instructions are in effect) (a "Servicer Extension Notice") shall be delivered
by FSA to the Operating Agent and the Servicer. The Servicer hereby agrees that,
upon its receipt of any such Servicer Extension Notice, the Servicer shall
become bound, for the duration of the term covered by such notice, to continue
as Servicer subject to and in accordance with the other provisions of this
Agreement. The Operating Agent agrees that if as of the fifteenth (15th) day
prior to the last day of any term of the Servicer, the Operating Agent shall not
have received any Servicer Extension Notice from FSA, the Operating Agent will,
within five (5) days thereafter, give written notice of such non-receipt to FSA
and the Servicer. With the prior written consent of the Lender, the Operating
Agent, FSA and the Collateral Agent, the Borrowers may terminate the appointment
of the Servicer at any time.
ARTICLE VIII
GRANT OF SECURITY INTERESTS
SECTION 8.01. Borrowers' Grant of Security Interest. As security for the
-------------------------------------
prompt payment or performance in full when due, whether at stated maturity, by
acceleration or otherwise, of all Borrower Secured Obligations, each Borrower
hereby assigns and pledges to the Collateral Agent, on behalf of the Secured
Parties, and grants to the Collateral Agent, on behalf of the Secured Parties, a
security interest in and lien upon, all of the Borrower's right, title and
interest in and to the following, in each case whether now or hereafter existing
or in which such Borrower now has or hereafter acquires an interest and wherever
the same may be located (collectively, the "Borrower Collateral"):
(a) all Transferred Receivables, Contracts and Collections;
(b) the Receivables Transfer Agreements, the Lockbox Agreements,
the Company Notes, and all other Related Documents now or hereafter in
effect relating to the purchase, servicing or processing of Transferred
Receivables (the "Borrower Assigned Agreements"), including (i) all rights
of the Borrowers to receive moneys due and to become due under or pursuant
to the Borrower Assigned Agreements, (ii) all rights of the Borrowers to
receive proceeds of any insurance, indemnity, warranty or guaranty with
respect to the Borrower Assigned Agreements, (iii) claims of either
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Borrower for damages arising out of or for breach of or default under the
Borrower Assigned Agreements, and (iv) the right of the Borrowers to amend,
waive or terminate the Borrower Assigned Agreements, to perform under the
Borrower Assigned Agreements and to compel performance and otherwise
exercise all remedies under the Borrower Assigned Agreements;
(c) all of the following (the "Borrower Account Collateral"):
(i) the Lockbox Accounts, the Lockboxes and all funds held
in any Lockbox Account and the Lockboxes and all certificates and
instruments, if any, from time to time representing or evidencing any
Lockbox Account, the Lockboxes or such funds,
(ii) the Collection Account and the Retention Account, all
funds held in the Collection Account and the Retention Account, and
all certificates and instruments, if any, from time to time
representing or evidencing the Collection Account, the Retention
Account or such funds,
(iii) all Investments from time to time of amounts in the
Collection Account, the Lockbox Account and the Retention Account, and
all certificates and instruments, if any, from time to time
representing or evidencing such Investments,
(iv) all notes, certificates of deposit and other
instruments from time to time delivered to or otherwise possessed by
the Lender or any assignee or agent on behalf of the Lender in
substitution for or in addition to any of the then existing Borrower
Account Collateral, and
(v) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any and all of the then
existing Borrower Account Collateral;
(d) all additional property that may from time to time hereafter
be granted and pledged by the Borrower or by anyone on its behalf under
this Agreement, including the deposit with the Lender, the Operating Agent
or the Collateral Agent of additional moneys by the Borrower; and
(e) all Proceeds, accessions, substitutions, rents and profits
of any and all of the foregoing Borrower Collateral (including Proceeds
that constitute property of
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the types described in Sections 8.01(a) through (d) above) and, to the
extent not otherwise included, all payments under insurance (whether or not
the Lender or any assignee or agent on behalf of the Lender is the loss
payee thereof) or any indemnity, warranty or guaranty payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Borrower Collateral.
SECTION 8.02. Lender's Assignment and Grant of Security Interest. The
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Lender hereby assigns and pledges to the Collateral Agent for benefit of the
Lender and FSA:
(i) the Lockbox Accounts, the Lockboxes and all funds held
in any Lockbox Account and the Lockboxes and all certificates and
instruments, if any, from time to time representing or evidencing any
Lockbox Account, the Lockboxes or such funds,
(ii) the Collection Account and the Retention Account, all
funds held in the Collection Account and the Retention Account, and
all certificates and instruments, if any, from time to time
representing or evidencing the Collection Account, the Retention
Account or such funds,
(iii) all Investments from time to time of amounts in the
Collection Account, the Lockbox Account and the Retention Account, and
all certificates and instruments, if any, from time to time
representing or evidencing such Investments,
(iv) all notes, certificates of deposit and other
instruments from time to time delivered to or otherwise possessed by
the Lender or any assignee or agent on behalf of the Lender in
substitution for or in addition to any of the then existing Borrower
Account Collateral, and
(v) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any and all of the
foregoing.
SECTION 8.03. Delivery of Collateral. All certificates or instruments
----------------------
representing or evidencing Collateral shall be delivered to and held by or on
behalf of the Collateral Agent pursuant to this Agreement, and shall be in
suitable form for transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Collateral Agent, and to the extent not constituting an
assignment shall be irrevocable powers of
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attorney coupled with an interest. The Collateral Agent, with Controlling
Party's prior consent, shall have the right, at any time in its discretion and
without notice to the Borrowers or the Lender, to transfer to or to register in
the name of the Collateral Agent or any of its nominees any or all of the
Collateral. In addition, the Collateral Agent, with the consent of the
Controlling Party, shall have the right at any time to exchange certificates or
instruments representing or evidencing Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 8.04. Borrowers Remain Liable. Notwithstanding anything in this
-----------------------
Agreement, (a) each of the Borrowers, Tyco Manufacturing and the Parent shall
remain liable for their respective obligations under the Transferred
Receivables, Contracts, Borrower Assigned Agreements and other agreements
included in the Collateral to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (b)
the exercise by the Lender, FSA or the Collateral Agent of any of its rights
under this Agreement shall not release the Borrowers or the Servicer from any of
their respective duties or obligations under the Transferred Receivables,
Contracts, Borrower Assigned Agreements or other agreements included in the
Collateral, (c) the Lender, the Collateral Agent, FSA and the other Lender
Secured Parties shall not have any obligation or liability under the Transferred
Receivables, Contracts, Borrower Assigned Agreements or other agreements
included in the Collateral by reason of this Agreement, and (d) neither the
Collateral Agent nor any of the other Secured Parties shall be obligated to
perform any of the obligations or duties of the Borrowers or the Servicer under
the Transferred Receivables, Contracts, Borrower Assigned Agreements or other
agreements included in the Collateral or to take any action to collect or
enforce any claim for payment assigned under this Agreement.
SECTION 8.05. Covenants of the Borrowers and Servicer Regarding the
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Collateral.
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(a) Offices and Records. Each Borrower shall keep its chief place of
-------------------
business and chief executive offices and the office where it keeps its Records
at the respective locations specified in Section 4.01(m) or, upon 30 days prior
written notice to the Collateral Agent and FSA, at such other location in a
jurisdiction where all action required by Section 8.06(f) shall have been taken
with respect to the Collateral. The Borrowers and the Servicer shall, for not
less than three years or for such longer period as may be required by law, from
the date on which any Transferred Receivable arose, maintain the Records with
respect to each Transferred Receivable, including records of all payments
received, credits granted and merchandise returned. The Borrowers and the
Servicer will permit representatives of the
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Operating Agent, FSA and the Collateral Agent (upon reasonable notice unless a
Termination Event or an Event of Servicer Termination has occurred) at any time
and from time to time during normal business hours, and at such times outside of
normal business hours as the Operating Agent, FSA or the Collateral Agent shall
reasonably request, (i) to inspect and make copies of and abstracts from such
records, and (ii) to visit the properties of the Borrowers or the Servicer
utilized in connection with the collection, processing or servicing of the
Transferred Receivables for the purpose of examining such Records, and to
discuss matters relating to the Receivables or the Borrowers' or Servicer's
performance under this Agreement with any officer or employee of the Borrowers
or Servicer having knowledge of such matters. In connection therewith, the
Operating Agent, FSA or the Collateral Agent may institute procedures to permit
it to confirm the Obligor balances in respect of any Transferred Receivables.
Each of the Borrowers and the Servicer agrees to render to the Operating Agent,
FSA and the Collateral Agent such clerical and other assistance as may be
reasonably requested with regard to the foregoing. If a Termination Event shall
have occurred and be continuing, promptly upon request therefor, the Borrowers
or the Servicer shall deliver to the Collateral Agent and FSA records reflecting
activity through the close of business on the immediately preceding Business
Day.
(b) Collection of Transferred Receivables. Except as otherwise
-------------------------------------
provided in this Section 8.06(b), each Borrower shall continue to collect or
cause to be collected, at its own expense, all amounts due or to become due to
the Borrower under the Transferred Receivables, the Borrower Assigned Agreements
and any other Borrower Collateral. In connection with such collections, each
Borrower may take (and at FSA's and the Collateral Agent's direction after a
Termination Event has occurred and is continuing, shall take) such action as the
Borrower, FSA or the Collateral Agent may deem necessary or advisable to enforce
collection of the Transferred Receivables and the Borrower Assigned Agreements;
provided, however, that the Collateral Agent may, at any time that a Termination
Event has occurred and is continuing, notify any Obligor with respect to any
Transferred Receivables or obligors under the Borrower Assigned Agreements of
the assignment of such Transferred Receivables or Borrower Assigned Agreements,
as the case may be, to the Collateral Agent and FSA and, with the prior written
consent and subject to the direction of FSA, direct that payments of all amounts
due or to become due to the Borrowers thereunder be made directly to the
Collateral Agent or any servicer, collection agent or lockbox or other account
designated by the Collateral Agent or FSA and, upon such notification and at the
expense of the Borrowers, the Collateral Agent, with the consent and subject to
the direction of FSA, may enforce collection of any such Transferred Receivables
or the Borrower Assigned Agreements and adjust, settle or compromise the amount
or payment thereof.
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(c) Maintain Records of Transferred Receivables. The Borrowers and
-------------------------------------------
the Servicer shall, at their own cost and expense, maintain satisfactory and
complete records of the Collateral, including a record of all payments received
and all credits granted with respect to the Collateral and all other dealings
with the Collateral. Each of the Borrowers and the Servicer will mark
conspicuously with a legend, in form and substance satisfactory to the
Collateral Agent and FSA, its records, computer tapes, computer disks and credit
files pertaining to the Collateral and the Related Contracts, and its file
cabinets or other storage facilities where it maintains information pertaining
to the Collateral, to evidence this Agreement and the assignment and security
interest granted by this Article VIII. Upon the occurrence and during the
continuation of a Termination Event, the Borrowers and Servicer shall (i)
provide the Collateral Agent, FSA or their representatives with access to, at
any time on demand of the Collateral Agent or FSA, all of the Borrowers' and
Servicer's facilities, personnel, books and records pertaining to the
Collateral, including all Records, and (ii) allow the Collateral Agent or FSA to
occupy the premises of the Borrowers and those portions of the Servicer's
premises where such books, records and Records are maintained, and utilize such
premises, the equipment thereon and any personnel of the Borrowers or the
Servicer that the Collateral Agent or FSA may wish to employ to administer,
service and collect the Transferred Receivables.
(d) Performance of Borrower Assigned Agreements. Each Borrower shall
-------------------------------------------
(i) perform and observe all the terms and provisions of the Borrower Assigned
Agreements to be performed or observed by it, maintain the Borrower Assigned
Agreements in full force and effect, enforce the Borrower Assigned Agreements in
accordance with their terms and take all such action to such end as may be from
time to time requested by the Collateral Agent or FSA, and (ii) upon request of
the Operating Agent, FSA or the Collateral Agent, make to any other party to the
Borrower Assigned Agreements such demands and requests for information and
reports or for action as such Borrower is entitled to make under the Borrower
Assigned Agreements.
(e) Notice of Adverse Claim. Each of the Borrowers and the Servicer
-----------------------
shall advise the Lender, the Operating Agent, FSA and the Collateral Agent
promptly, in reasonable detail, (i) of any Adverse Claim known to it made or
asserted against any of the Borrower Collateral, and (ii) of the occurrence of
any event which would have a material adverse effect on the aggregate value of
the Borrower Collateral or on the assignments and security interests granted by
the Borrower in this Agreement.
(f) Further Assurances; Financing Statements.
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(i) Each of the Borrowers and the Servicer severally agrees that
at any time and from time to time, at its expense, it shall promptly
execute and deliver all further instruments and documents, and take all
further action, that may be necessary or desirable or that the Lender, the
Operating Agent, FSA or the Collateral Agent may request to perfect,
protect and preserve the assignments and security interests granted or
purported to be granted by this Article VIII or to enable the Lender, the
Operating Agent, FSA or the Collateral Agent to exercise and enforce its
rights and remedies under this Agreement with respect to any Collateral.
Without limiting the generality of the foregoing, the Borrowers shall
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices as may be necessary or
desirable or that the Lender, the Operating Agent, FSA or the Collateral
Agent may request to perfect, protect and preserve the assignments and
security interests granted by this Agreement.
(ii) The Borrowers and the Lender hereby severally authorize each
of the Collateral Agent, with the prior written consent and subject to the
direction of FSA, and FSA to file one or more financing or continuation
statements, and amendments thereto, relating to all or any part of the
Collateral without the signature of the Borrowers or the Lender where
permitted by law. A carbon, photographic or other reproduction of this
Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by
law. The Collateral Agent or FSA, as the case may be, will promptly send
to the Borrowers any financing or continuation statements thereto which it
files without the signature of the Borrowers and will promptly send to the
Lender any financing or continuation statements thereto which it files
without the signature of the Lender except, in the case of filings of
copies of this Agreement as financing statements, the Collateral Agent will
promptly send the Borrowers or the Lender, as the case may be, the filing
or recordation information with respect thereto.
(iii) Each of the Borrowers and the Servicer shall furnish to the
Collateral Agent and FSA from time to time such statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Collateral Agent or FSA may
reasonably request, all in reasonable detail.
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ARTICLE IX
TERMINATION EVENTS
SECTION 9.01. Termination Events. If any of the following events (each,
------------------
a "Termination Event") shall occur and be continuing:
(a) (i) either Borrower defaults in the payment of any amount owed by
it hereunder (including any obligation to make a payment under Section 2.06(a)
in the event of a Borrowing Excess) and such default shall remain outstanding
for one Business Day, or (ii) either Borrower shall fail to perform or observe
any other term, covenant or agreement contained in this Agreement and such
failure shall remain unremedied for five Business Days, in each case after
written notice thereof shall have been given by the Operating Agent, FSA or the
Collateral Agent to the Borrower; or
(b) an event of default shall have occurred and be continuing under
any instrument or agreement evidencing, securing or providing for the issuance
of Debt of Tyco Toys, the Parent, Tyco Manufacturing or the Borrowers (i) in the
case that such instrument or agreement has GE Capital or the Lender or any of
their Affiliates as a party, with any amount outstanding, including, without
limitation, an "Event of Default" under and as defined in or a default pursuant
to Section 8.1(a) (or a provision similar to Section 8.1(a), as the case may be)
of the Inventory Facility or (ii) in any other case (including for this
determination any trade payables), with aggregate amounts outstanding under any
such instruments and agreements equal to or greater than $1 million; or
(c) Tyco Toys, the Parent, Tyco Manufacturing or either of the
Borrowers shall admit in writing its inability to pay its Debts generally, or
shall make a general assignment for the benefit of creditors, or any proceeding
shall be instituted by or against the Parent, Tyco Manufacturing or the
Borrowers seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or any of its Debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it (but not
instituted by it), such proceeding shall remain undismissed or unstayed for a
period of 30 days, or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against, or the appointment
of a receiver, trustee, custodian or other similar official for, it or for any
substantial part of its property)
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shall occur, or Tyco Toys, the Parent, Tyco Manufacturing or the Borrowers shall
take any corporate action to authorize any of the actions set forth in this
Section 9.01(c); or
(d) judgments or orders for the payment of money (other than such
judgments or orders in respect of which adequate insurance is maintained for the
payment thereof) in excess of $5 million in the aggregate against the Parent or
any of its Affiliates shall remain unpaid, unstayed on appeal, undischarged,
unbonded or undismissed for a period of 45 days or more; or
(e) a judgment or order for the payment of money is rendered against
either of the Borrowers; or
(f) there is a breach of any of the representations and warranties of
either of the Borrowers set forth in Section 4.01 or 4.02 provided that with
--------
respect to any breach of the representations and warranties under Section
4.02(c) no breach shall be deemed to occur hereunder if the Parent and/or Tyco
Manufacturing shall have satisfied their obligations with respect to the
Receivables in respect of which the breach under Section 4.02(c) occurred upon
notice pursuant to and in accordance with the Receivables Transfer Agreements;
or
(g) any Governmental Authority (including the Internal Revenue
Service or the Pension Benefit Guaranty Corporation) shall file notice of a lien
with regard to any assets of the Parent or its Affiliates (other than a lien (i)
limited by its terms to assets other than Receivables or any other Collateral
and (ii) not materially adversely affecting the financial condition of the
Parent or its Affiliates or the Parent's ability to perform as Servicer
hereunder); or
(h) any Governmental Authority (including the Internal Revenue
Service or the Pension Benefit Guaranty Corporation) shall file notice of a lien
with regard to any of the assets of either of the Borrowers; or
(i) as of any Settlement Date, the Delinquency Ratio is greater
than 7.0%; or
(j) as of any Settlement Date, the Default Ratio is greater than
2.0%; or
(k) as of any Settlement Date, the Dilution Ratio is greater than
3.0% during the months of April through December or 15% during the months of
January through March; or
(l) as of any Settlement Date, the Receivable Collection Turnover
exceeds 150 days; or
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(m) any event which materially adversely affects the
collectibility of the Receivables has occurred, or that any other event which
materially adversely affects the financial condition of the Parent, Tyco
Manufacturing or either of the Borrowers or the ability of either of the
Borrowers to perform hereunder has occurred; or
(n) there shall occur a failure of the Parent or Tyco
Manufacturing to contribute capital or make a payment in the Rejected Amount or
make any other payment as required under the Receivables Transfer Agreements
within three Business Days after notice pursuant to and in accordance with such
Agreements, or either of the Receivables Transfer Agreements shall for any
reason cease to evidence the transfer to the applicable Borrower (or its
assignees or transferees) of the legal and equitable title to, and ownership of,
the Transferred Receivables; or
(o) any of the Lockbox Agreements or either of the Receivables
Transfer Agreements shall have been amended or terminated without the prior
written consent of the Lender, the Operating Agent, FSA and the Collateral Agent
except in conformance with the requirements of Section 6.01(a)(iii); or
(p) an Event of Servicer Termination shall have occurred; or
(q) the Operating Agent shall have determined that the funding of
Receivables hereunder is impracticable due to a drop in or withdrawal of any of
the ratings assigned to the Lender's Commercial Paper, the imposition of
Additional Amounts, restrictions on the amount of Transferred Receivables it may
finance or the inability of the Lender to issue Commercial Paper; or
(r) the Lender, FSA and the Collateral Agent cease to hold a first
priority, perfected security interest in the Transferred Receivables or any of
them; or
(s) the short-term unsecured debt rating assigned by either Rating
Agency to any Liquidity Provider or Letter of Credit Provider falls below A-1 or
P-1 or its equivalent, and such Liquidity Provider or Letter of Credit Provider
is not replaced according to the terms of the Liquidity Loan Agreement or Letter
of Credit Agreement, as the case may be, within 30 days; or
(t) the rating assigned by either Rating Agency to the claims paying
ability of FSA falls below AA or Aa2 or its equivalent; or
(u) an Event of Default (as defined in the Collateral Agent
Agreement) has occurred; or
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(v) an Event of Default under and as defined in the Insurance and
Indemnity Agreement has occurred; or
(w) the obligations of the Liquidity Lenders to make Liquidity Loans,
the proceeds of which may be used by the Lender to make Advances to the
Borrower, have terminated; or
(x) a breach of the covenants in Section 7.06 shall have occurred;
or
(y) the shadow rating assigned by either Rating Agency to the credit
risk exposure of FSA falls below investment grade (or its equivalent);
then and in any such event, the Operating Agent shall, at the request, or may
with the consent, of the Lender (with the prior written approval of FSA) or FSA,
or FSA shall, by notice to the Borrowers declare the Commitment Termination Date
to have occurred, whereupon the Commitment Termination Date shall forthwith
occur, without demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrowers; provided, that in the event that any
--------
of the Termination Events described in Section 9.01(c), (i), (j) or (k) shall
have occurred, the Commitment Termination Date shall automatically occur,
without demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrowers.
SECTION 9.02. Events of Servicer Termination. If any of the following
------------------------------
events (each, an "Event of Servicer Termination") shall occur and be continuing:
(a) the Servicer shall fail to perform or observe any term, covenant
or agreement contained in this Agreement and such failure shall remain
unremedied for five Business Days after written notice thereof shall have been
given by the Lender, the Collateral Agent, FSA or the Operating Agent to the
Servicer; or
(b) an event of default shall have occurred and be continuing under
any instrument or agreement evidencing, securing or providing for the issuance
of Debt of the Servicer; or
(c) the Servicer shall admit in writing its inability to pay its
Debts generally, or shall make a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or against the Servicer
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or any of its Debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property, and, in the
case of any
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such proceeding instituted against it (but not instituted by it), such
proceeding shall remain undismissed or unstayed for a period of 30 days, or any
of the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part of its
property) shall occur, or the Servicer shall take any corporate action to
authorize any of the actions set forth in this Section 9.02(c); or
(d) judgments or orders for the payment of money (other than such
judgments or orders in respect of which adequate insurance is maintained for the
payment thereof) in excess of $5 million in the aggregate against the Servicer
or any of its Affiliates shall remain unpaid, unstayed on appeal, undischarged,
unbonded or undismissed for a period of 45 days or more; or
(e) there is a breach of any of the representations and warranties of
the Servicer set forth in Section 4.03 provided that with respect to any breach
--------
of the representations and warranties under Section 4.03(j) no breach shall be
deemed to occur hereunder if the Parent and/or Tyco Manufacturing shall have
satisfied their obligations with respect to the Receivables in respect of which
the breach under Section 4.03(j) occurred upon notice pursuant to and in
accordance with the Receivables Transfer Agreements; or
(f) the Operating Agent, FSA or the Collateral Agent shall have
determined that any event which materially adversely affects the ability of the
Servicer to collect Receivables or to otherwise perform hereunder has occurred;
or
(g) a Termination Event shall have occurred or this agreement shall
have been terminated; or
(h) the Servicer shall assign or purport to assign any of its
obligations hereunder or under the Receivables Transfer Agreements without the
prior written consent of the Operating Agent, FSA and the Collateral Agent; or
(i) a Change in Control has occurred;
then, and in any such event, the Operating Agent shall (on behalf of the
Borrowers), at the request, or may with the consent, of the Lender, FSA or the
Collateral Agent, in each case subject to the prior written approval by FSA, or
FSA shall, by delivery of a Servicer Termination Notice to the Borrower and the
Servicer, terminate the servicing responsibilities of the Servicer hereunder,
without demand, protest or further notice of any kind, all of which are hereby
waived by the Servicer. Upon any such declaration, all authority and power of
the Servicer under this Agreement and the Receivables Transfer Agreements shall
pass to
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and be vested in the Successor Servicer appointed pursuant to Section 11.02;
provided, that notwithstanding anything to the contrary herein, each Borrower
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agrees that it will continue to follow the procedures set forth in Section
7.02(b)(ii) with respect to Collections on Transferred Receivables.
ARTICLE X
REMEDIES
SECTION 10.01. Actions Upon Termination Event. If any Termination Event
------------------------------
shall have occurred and be continuing and the Operating Agent or the Controlling
Party shall have declared the Commitment Termination Date to have occurred or
the Commitment Termination Date shall have been deemed to have occurred pursuant
to Section 9.01, then the Collateral Agent (with the prior written consent of
the Controlling Party) or the Controlling Party may exercise in respect of the
Borrower Collateral, in addition to any and all other rights and remedies
otherwise available to it, all of the rights and remedies of a secured party
upon default under the UCC (such rights and remedies to be cumulative and
nonexclusive), and, in addition, may take the following remedial actions:
(a) The Collateral Agent, subject to the prior written approval and
at the direction of the Controlling Party, may, without notice to the Borrowers
except as required by law and at any time or from time to time, charge, set-off
and otherwise apply all or any part of the Borrower Secured Obligations against
amounts payable to the Borrowers from the Collection Account, the Lockbox
Accounts, the Retention Account or any part of such accounts in accordance with
the priorities required by Section 10.03.
(b) The Collateral Agent may, with the prior written consent of the
Controlling Party, and shall upon the request of the Controlling Party, without
notice except as specified below, solicit and accept bids for and sell the
Borrower Collateral or any part of the Borrower Collateral in one or more
parcels at public or private sale, at any exchange, broker's board or at any of
the Lender's, Operating Agent's or Collateral Agent's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as are
commercially reasonable. Each Borrower agrees that, to the extent notice of sale
shall be required by law, at least ten Business Days' notice to the Borrower of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. The Collateral Agent
shall not be obligated to make any sale of Borrower Collateral regardless of
notice of sale having been given. The Collateral Agent, with the prior written
consent of the Controlling Party may adjourn any public or private sale from
time to time by announcement at the
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time and place fixed for such sale, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. Every such sale
shall operate to divest all right, title, interest, claim and demand whatsoever
of the Borrowers in and to the Borrower Collateral so sold, and shall be a
perpetual bar, both at law and in equity, against the Borrowers, the Parent or
its Affiliates, any Person claiming the Borrower Collateral sold through the
Borrower, the Parent or its Affiliates and their respective successors or
assigns.
(c) Upon the completion of any sale under Section 10.01(b), the
Borrowers or the Servicer will deliver or cause to be delivered all of the
Borrower Collateral sold to the purchaser or purchasers at such sale on the date
of sale, or within a reasonable time thereafter if it shall be impractical to
make immediate delivery, but in any event full title and right of possession to
such property shall pass to such purchaser or purchasers forthwith upon the
completion of such sale. Nevertheless, if so requested by the Collateral Agent
or the Controlling Party or by any purchaser, the Borrowers shall confirm any
such sale or transfer by executing and delivering to such purchaser all proper
instruments of conveyance and transfer and releases as may be designated in any
such request.
(d) At any public sale under Section 10.01(b), the Lender, any holder
of a Note (the identity of which, if other than the Collateral Agent, shall if
known to Borrower be disclosed by the Borrowers to each Rating Agency), the
Collateral Agent or any Secured Party may, with the prior written consent of the
Controlling Party, bid for and purchase the property offered for sale and, upon
compliance with the terms of sale, may hold, retain and dispose of such property
without further accountability therefor. Any purchaser at any sale under
Section 10.01(b) shall be entitled, for the purpose of making payment for the
property purchased, to use such Note in order that there may be credited thereon
the sums payable out of the net proceeds of such sale to any such holder, and
thereupon such purchaser shall be credited on account of such purchase price
with the portion of such net proceeds that shall be applicable to the payment
of, and shall have been credited upon, the Note so used.
(e) Each of the Collateral Agent (with the prior written consent of
the Controlling Party) and the Controlling Party may exercise at the Borrowers'
expense any and all rights and remedies of the Borrowers under or in connection
with the Borrower Assigned Agreements or the other Borrower Collateral,
including any and all rights of the Borrower to demand or otherwise require
payment of any amount under, or performance of any provisions of, the Borrower
Assigned Agreements.
SECTION 10.02. Receipt of Payments in Trust. All payments received by
----------------------------
the Borrowers, Tyco Toys, the Parent, Tyco
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Manufacturing, the Servicer, the Lender or the Operating Agent under or in
connection with the Borrower Collateral shall be received in trust for the
benefit of the Collateral Agent and FSA, shall be segregated from other funds of
such party and shall be forthwith paid over to the applicable Lockbox Account in
the same form as so received (with any necessary endorsement).
SECTION 10.03. Application of Proceeds. Any cash, certificates,
-----------------------
instruments, securities and other assets or property held by or on behalf of the
Collateral Agent and FSA as Borrower Collateral, whether from Transferred
Receivables or otherwise, and all cash proceeds, certificates instruments,
securities and other assets or property received by the Collateral Agent in
respect of any sale of, collection from or other realization upon all or any
part of the Borrower Collateral, after the Commitment Termination Date shall be
applied as set forth in Section 6.05. Any surplus of such cash or cash
proceeds, certificates, instruments, securities and other assets or property
held by or on behalf of the Collateral Agent after the Commitment Termination
Date and after such application shall be disposed of in accordance with Section
6.08.
SECTION 10.04. Exercise of Remedies. No failure or delay on the part of
--------------------
the Collateral Agent or FSA to exercise any right, power or privilege under this
Agreement and no course of dealing between the Borrowers, the Servicer, the
Lender or the Operating Agent, on the one hand, and the Collateral Agent or FSA,
on the other hand, shall operate as a waiver of such right, power or privilege,
nor shall any single or partial exercise of any right, power or privilege under
this Agreement preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. The rights
and remedies expressly provided in this Agreement are cumulative and not
exclusive of any rights or remedies which the Collateral Agent or the Secured
Parties would otherwise have pursuant to law or equity. No notice to or demand
on any party in any case shall entitle such party to any other or further notice
or demand in similar or other circumstances, or constitute a waiver of the right
of the other party to any other or further action in any circumstances without
notice or demand.
SECTION 10.05. Severability of Remedies. The invalidity of any remedy in
------------------------
any jurisdiction shall not invalidate such remedy in any other jurisdiction.
The invalidity or unenforceability of the remedies herein provided in any
jurisdiction shall not in any way affect the right of the enforcement in such
jurisdiction or elsewhere of any of the other remedies herein provided.
SECTION 10.06. Waiver of Appraisement. Each of the Borrowers and the
----------------------
Servicer agrees, to the full extent that it may lawfully so agree, that neither
it nor anyone claiming through or under it will set up, claim or seek to take
advantage of any
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appraisement, valuation, stay, extension or redemption law now or hereafter in
force in any locality where Borrower Collateral may be situated in order to
prevent, hinder or delay the enforcement or foreclosure of this Agreement, or
the absolute sale of any of the Borrower Collateral or any part thereof, or the
final and absolute putting into possession thereof, immediately after such sale,
of the purchasers thereof, and each of the Borrowers and the Servicer, for
itself and all who may at any time claim through or under it, hereby waives, to
the full extent that it may be lawful so to do, the benefit of all such laws,
and any and all right to have any of the properties or assets comprising the
Borrower Collateral marshalled upon any such sale, and agrees that the
Collateral Agent, FSA or any court having jurisdiction to foreclose the security
interests granted in this Agreement may sell the Borrower Collateral as an
entirety or in such parcels as the Collateral Agent, FSA or such court may
determine.
SECTION 10.07. Power of Attorney. Each of the Borrowers and the Servicer
-----------------
hereby irrevocably appoints each of the Collateral Agent and FSA its true and
lawful attorney (with full power of substitution) in its name, place and stead
and at its expense, in connection with the enforcement of the rights and
remedies provided for in this Article X, including with the following powers:
(a) to give any necessary receipts or acquittance for amounts collected or
received hereunder, (b) to make all necessary transfers of the Borrower
Collateral in connection with any sale or other disposition made pursuant
hereto, (c) to execute and deliver for value all necessary or appropriate bills
of sale, assignments and other instruments in connection with any such sale or
other disposition, the Borrowers and the Servicer hereby ratifying and
confirming all that such attorney (or any substitute) shall lawfully do
hereunder and pursuant to the other provisions of this Agreement, and (d) to
sign any agreements, orders or other documents in connection with or pursuant to
this Agreement and any Related Document. Nevertheless, if so requested by the
Collateral Agent or a purchaser of Borrower Collateral, the Borrowers shall
ratify and confirm any such sale or other disposition by executing and
delivering to the Collateral Agent, FSA or such purchaser all proper bills of
sale, assignments, releases and other instruments as may be designated in any
such request.
SECTION 10.08. Continuing Security Interest. This Agreement shall create
----------------------------
a continuing security interest in the Collateral until the satisfaction of
Section 6.08 of this Agreement.
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ARTICLE XI
SUCCESSOR SERVICER
SECTION 11.01. Servicer Not to Resign. The Servicer shall not resign
----------------------
from the obligations and duties hereby imposed on it except upon determination
that (a) the performance of its duties hereunder has become impermissible under
applicable law, and (b) there is no reasonable action which the Servicer could
take to make the performance of its duties hereunder permissible under
applicable law. Any such determination permitting the resignation of the
Servicer shall be evidenced as to clause (a) above by an opinion of counsel to
such effect delivered to the Lender, the Collateral Agent, FSA and the Operating
Agent. No such resignation shall become effective until a successor servicer
shall have assumed the responsibilities and obligations of the Servicer in
accordance with Section 11.02.
SECTION 11.02. Appointment of the Successor Servicer. In connection with
-------------------------------------
the termination of the Servicer's responsibilities under this Agreement pursuant
to Sections 7.10, 9.02 or 11.01, the Operating Agent shall (a) succeed to and
assume all of the Servicer's responsibilities, rights, duties and obligations as
Servicer (but not in any other capacity, including specifically not its
obligations under Section 12.02) under this Agreement (and except that the
Operating Agent makes no representations and warranties pursuant to Section
4.03), or (b) prior to or simultaneous with any such termination, appoint a
successor servicer to the Servicer which shall be acceptable to the Collateral
Agent and FSA and shall succeed to all rights and assume all of the
responsibilities, duties and liabilities of the Servicer under this Agreement
(the Operating Agent, in such capacity, or such successor servicer being
referred to as the "Successor Servicer"); provided, that the Successor Servicer
shall have no responsibility for any actions of the Servicer prior to the date
of its appointment as Successor Servicer. In selecting a Successor Servicer,
the Operating Agent may obtain bids from any potential Successor Servicer and
may agree to any bid it deems appropriate. The Successor Servicer shall accept
its appointment by executing, acknowledging and delivering to the Operating
Agent, FSA and the Collateral Agent an instrument in form and substance
acceptable to the Operating Agent, FSA and the Collateral Agent.
SECTION 11.03. Duties of the Servicer. At any time following the
----------------------
appointment of a Successor Servicer:
(a) The Servicer agrees that it will terminate its activities as
Servicer hereunder in a manner acceptable to the Collateral Agent and FSA so as
to facilitate the transfer of servicing to the Successor Servicer including,
without limitation, timely delivery (i) to the Collateral Agent of any
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funds that were required to be remitted to the Collateral Agent for deposit in
the Lockbox Accounts, and (ii) to the Successor Servicer, at a place selected by
the Successor Servicer, of all Servicing Records and other information with
respect to the Transferred Receivables. The Servicer shall account for all funds
and shall execute and deliver such instruments and do such other things as may
reasonably be required to more fully and definitely vest and confirm in the
Successor Servicer all rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer.
(b) The Servicer shall terminate each Sub-Servicing Agreement that
may have been entered into and the Successor Servicer shall not be deemed to
have assumed any of the Servicer's interest therein or to have replaced the
Servicer as a party to any such Sub-Servicing Agreement.
SECTION 11.04. Effect of Termination or Resignation. Any termination or
------------------------------------
resignation of the Servicer under this Agreement shall not affect any claims
that the Borrowers, the Collateral Agent, the Lender, FSA or the Operating Agent
may have against the Servicer for events occurring or actions taken or not taken
by the Servicer arising prior to any such termination or resignation.
ARTICLE XII
INDEMNIFICATION
SECTION 12.01. Indemnities by the Borrowers.
----------------------------
(a) Without limiting any other rights that the Collateral Agent, the
Lender, the Operating Agent, the Liquidity Agent, any Liquidity Lender, FSA, the
Letter of Credit Agent or any Letter of Credit Provider or any director,
officer, employee or agent of such party (each an "Indemnified Party") may have
hereunder or under applicable law or that FSA may have under the Insurance and
Indemnity Agreement, each Borrower hereby agrees to indemnify by payment
pursuant to the next sentence each Indemnified Party from and against any and
all claims, losses, liabilities, obligations, damages, penalties, actions,
judgments, suits, and related costs and expenses of any nature whatsoever,
including reasonable attorneys' fees and disbursements (all of the foregoing
being collectively referred to as "Indemnified Amounts"), which may be imposed
on, incurred by or asserted against an Indemnified Party in any way arising out
of or relating to (i) any breach of the Borrowers' obligations under this
Agreement, (ii) the financing or the pledge of the Transferred Receivables, or
(iii) any Receivable or any Contract, excluding, however, Indemnified Amounts to
the extent resulting solely from gross negligence, acts in bad faith or willful
misconduct on the part of such Indemnified Party. Without
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limiting or being limited by the foregoing, the Borrowers shall pay within 5
Business Days after demand to each Indemnified Party any and all amounts
necessary to indemnify such Indemnified Party from and against any and all
Indemnified Amounts relating to or resulting from:
(A) reliance on any representation or warranty made or deemed made
by the Borrowers (or any of its officers) under or in connection with this
Agreement, any Related Document or any report or other information
delivered by the Borrowers pursuant hereto which shall have been incorrect
in any material respect when made or deemed made or delivered;
(B) the failure by the Borrowers to comply with any term, provision
or covenant contained in this Agreement, any Related Document or any
agreement executed by it in connection with this Agreement or with any
applicable law, rule or regulation with respect to any Transferred
Receivable or its related Contract, or the nonconformity of any Transferred
Receivable or its related Contract with any such applicable law, rule or
regulation; or
(C) the failure to vest and maintain vested in the Borrowers legal
and equitable title to and ownership of the Receivables which are, or are
purported to be, Transferred Receivables, together with all Collections in
respect thereof, free and clear of any Adverse Claim or Restrictions on
Transferability (except as permitted hereunder) whether existing at the
time of the purchase of such Receivable or at any time thereafter, and to
maintain or transfer to the Collateral Agent a first priority, perfected
security interest therein.
(b) Any Indemnified Amounts subject to the indemnification provisions
of this Section 12.01 not paid in accordance with Article VI, to the extent that
funds are available therefor in accordance with the provisions of Article VI,
shall be paid to the Indemnified Party within five Business Days following
demand therefor.
(c) The Borrowers shall have the right at any time during which any
claim is pending to select counsel to defend and settle any such claim so long
as in any such event the Borrowers shall have stated in a writing delivered to
the applicable Indemnified Party that, as between the Borrowers and such
Indemnified Party, the Borrowers are responsible to such Indemnified Party with
respect to such claim, subject however to the exclusion at the end of the first
sentence of Section 12.01(a); provided, however, that if an Indemnified Party
-------- -------
shall have been advised by its counsel that there are legal defenses available
to such Indemnified Party that are different from or additional to those
available to any of the Borrowers which, in
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the reasonable opinion of such counsel, are sufficient to make it undesirable
for the same counsel to represent both such Indemnified Party and any of the
Borrowers, such Indemnified Party shall have the right to employ its own counsel
in such action, and in such event, the reasonable fees and disbursements of such
counsel shall be paid by the Borrowers. If the Borrowers shall fail to assume
the defense of any claim in accordance with the terms of this indemnity, the
relevant Indemnified Party shall have the right to select counsel and control
the defense of such claim; provided, however, that no Indemnified Party shall
-------- -------
settle any such claim without the prior written consent of the Borrowers, which
consent shall not be unreasonably withheld or delayed.
SECTION 12.02. Indemnities by the Servicer.
---------------------------
(a) Without limiting any other rights that an Indemnified Party may
have hereunder or under applicable law or that FSA may have under the Insurance
and Indemnity Agreement, the Servicer hereby agrees to indemnify each
Indemnified Party from and against any and all Indemnified Amounts which may be
imposed on, incurred by or asserted against an Indemnified Party in any way
arising out of or relating to any breach of the Servicer's obligations under
this Agreement, excluding, however, Indemnified Amounts to the extent resulting
from gross negligence or willful misconduct on the part of such Indemnified
Party. Without limiting or being limited by the foregoing, the Servicer shall
pay on demand to each Indemnified Party any and all amounts necessary to
indemnify such Indemnified Party from and against any and all Indemnified
Amounts relating to or resulting from:
(i) reliance on any representation or warranty made or deemed
made by the Servicer (or any of its officers) under or in connection
with this Agreement, any Related Document or any report or other
information delivered by the Servicer pursuant hereto which shall have
been incorrect in any material respect when made or deemed made or
delivered; or
(ii) the failure by the Servicer to comply with any term,
provision or covenant contained in this Agreement, any Related
Document or any agreement executed by it in connection with this
Agreement or with any applicable law, rule or regulation with respect
to any Transferred Receivable or its related Contract, or the
imposition of any Adverse Claim or Restrictions on Transferability
(except as permitted hereunder) with respect to a Transferred
Receivable as a result of the Servicer's actions hereunder.
(b) Any Indemnified Amounts subject to the indemnification provisions
of this Section shall be paid to the
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Indemnified Party within five Business Days following demand therefor.
ARTICLE XIII
OPERATING AGENT
SECTION 13.01. Authorization and Action. The Operating Agent may take
------------------------
such action and carry out such functions under this Agreement as are delegated
to it by the terms hereof, pursuant to the Operating Agent Agreement or
otherwise contemplated hereby or thereby or are reasonably incidental thereto;
provided, that the duties of the Operating Agent shall be determined solely by
- --------
the express provisions of this Agreement, and other than the duties set forth in
Section 13.02, any permissive right of the Operating Agent hereunder shall not
be construed as a duty.
SECTION 13.02. Reliance, etc. None of the Operating Agent, any Affiliate
-------------
thereof nor any of their respective directors, officers, agents or employees
will be liable for any action taken or omitted to be taken by any of them under
or in connection with this Agreement, the Program Documents or the Related
Documents, except when caused solely by their own gross negligence or willful
misconduct. Without limiting the generality of the foregoing, and
notwithstanding any term or provision hereof to the contrary, the Borrower, the
Servicer and the Lender hereby acknowledge and agree that the Operating Agent,
subject to the terms of the Insurance and Indemnity Agreement, (a) acts as agent
hereunder for the Lender and has no duties or obligations to, will incur no
liabilities or obligations to, and does not act as an agent in any capacity for,
the Borrowers, the Parent or any Affiliate thereof, (b) may consult with legal
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts, (c)
makes no warranty or representation hereunder and shall not be responsible for
any statements, warranties or representations made in or in connection with this
Agreement, the Program Documents or the Related Documents (other than
representations, warranties and covenants made in the Insurance and Indemnity
Agreement), (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement, the Program Documents or Related Documents on the part of the
Borrowers, the Servicer or the Lender or to inspect the property (including the
books and records) of the Borrowers, the Servicer or the Lender, (e) shall not
be responsible to the Borrowers, the Servicer or the Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any other instrument or document furnished pursuant hereto
(including the
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Related Documents), (f) shall incur no liability under or in respect of this
Agreement, the Program Documents or the Related Documents by acting upon any
notice or communication (including a communication by telephone), consent,
certificate or other instrument or writing believed by it to be genuine and
signed, sent or communicated by the proper party or parties and (g) shall not be
bound to make any investigation into the facts or matters stated in any notice
or other communication hereunder and may rely on the accuracy of such facts or
matters.
SECTION 13.03. GE Capital and Affiliates. GE Capital and its Affiliates
-------------------------
may generally engage in any kind of business with the Borrowers, the Parent, the
Servicer, the Lender or any Obligor, any of their respective Affiliates and any
Person who may do business with or own securities of such parties or any of
their respective Affiliates, all as if GE Capital were not the Operating Agent,
and without the duty to account therefor to the Borrowers, the Parent, the
Servicer, the Lender or any other Person.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01. Notices, Etc. All notices and other communications
------------
provided for hereunder, unless otherwise stated herein, shall be in writing and
mailed by registered mail or telecommunicated, or delivered as to each party
hereto, at its address set forth on Schedule 6 or at such other address as shall
be designated by such party in a written notice to the other parties hereto.
All such notices and communications shall not be effective until received by the
party to whom such notice or communication is addressed.
SECTION 14.02. Binding Effect; Assignability.
-----------------------------
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrowers, the Servicer, the Lender, FSA, the Operating Agent and their
respective permitted successors and assigns. Neither the Borrowers nor the
Servicer may assign any of their rights and obligations hereunder or any
interest herein without the prior written consent of the Lender, FSA, the
Collateral Agent, FSA and the Operating Agent and unless each Rating Agency
shall have confirmed in writing to the Lender and the Operating Agent that such
assignment would not result in a withdrawal or reduction of the then current
rating by such Rating Agency of the Commercial Paper. The Lender, the
Collateral Agent, and the Operating Agent may, at any time, without the consent
of the Borrowers, or the Servicer or any of their respective Affiliates but
subject to the approval of FSA, assign any of their respective rights and
obligations hereunder or interest herein to any Person which is an Affiliate
and, with the
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consent of the Borrowers, to any other Person. Notwithstanding the foregoing,
FSA shall have the right to give participation in its rights under this
Agreement and to enter into contracts of reinsurance with respect to each of the
Policies upon such terms and conditions as FSA may in its discretion determine;
provided, however, that no such participation or reinsurance agreement or
arrangement shall relieve FSA of any of its obligations hereunder or under the
Policies.
In addition, and notwithstanding the foregoing, FSA shall be entitled
to assign or pledge to any bank or other lender providing liquidity or credit
with respect to the transactions contemplated under this Agreement and the
Related Documents or the obligations of FSA in connection therewith any rights
of FSA under this Agreement or the Related Documents or with respect to any real
or personal property or other interests pledged to FSA, or in which FSA has a
security interest, in connection with the transactions contemplated under this
Agreement and the Related Documents.
(b) Except as provided herein with respect to assignees, participants
and reinsurers, nothing in this Agreement shall confer any right, remedy or
claim, express or implied, upon any Person, including, particularly, any holders
of commercial paper issued by the Lender, other than FSA, against the Borrowers,
the Lender, the Servicer, the Operating Agent or the Collateral Agent, and all
the terms, covenants, conditions, promises and agreements contained herein shall
be for the sole and exclusive benefit of the parties hereto and their successors
and permitted assigns. Any such assignee may further assign at any time its
rights and obligations hereunder or interests herein without the consent of the
Borrowers, the Parent or the Servicer or any of their respective Affiliates.
This Agreement shall create and constitute the continuing obligations of the
parties hereto in accordance with its terms, and shall remain in full force and
effect until its termination; provided, that the rights and remedies with
--------
respect to any breach of any representation and warranty made by the Borrowers,
the Servicer or the Lender pursuant to Article IV and the indemnification and
payment provisions of Article XII shall be continuing and shall survive any
termination of this Agreement.
SECTION 14.03. Costs, Expenses and Taxes.
-------------------------
(a) In addition to the rights of indemnification under Article XII
hereof, each Borrower agrees to pay upon demand all reasonable costs and
expenses and taxes (excluding income and similar taxes) incurred by the Lender,
the Operating Agent or the Collateral Agent ("Other Costs") in connection with
the administration (including periodic auditing, Rating Agency requirements,
modification and amendment) of this Agreement, the Related Documents and the
other documents to be delivered
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hereunder, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Lender, the Operating Agent and the Collateral Agent
with respect thereto and with respect to advising the Lender, the Operating
Agent or the Collateral Agent as to its rights and remedies under this
Agreement, the Related Documents and the other agreements executed pursuant
hereto. Each Borrower further agrees to pay within five Business Days after
demand all reasonable costs, counsel fees and expenses in connection with the
enforcement (whether through negotiation, legal proceedings or otherwise) of
this Agreement, the Related Documents and the other agreements and documents to
be delivered hereunder, including, without limitation, reasonable counsel fees
and expenses in connection with the enforcement of such agreements and documents
by FSA and the enforcement of rights under this Section 14.03 in accordance with
the provisions of Article VI to the extent that funds are available therefor in
accordance therewith.
(b) In addition, each Borrower shall pay on demand any and all stamp,
sales, excise and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing or recording of this Agreement,
the Related Documents or the other agreements and documents to be delivered
hereunder, and agrees to indemnify and save each Indemnified Party from and
against any and all liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and fees.
(c) In the event that the Operating Agent determines that any of the
costs referred to in paragraphs (a) or (b) above were in any part incurred on
behalf of, or are attributable to the actions of, borrowers or sellers under
Other Funding Agreements, the Borrowers shall have no liability hereunder in
excess of the Borrowers' Share of such costs.
(d) If the Borrowers or the Servicer fails to perform any agreement
or obligation contained herein within 5 days after demand therefor by the
Lender, the Lender, the Collateral Agent, FSA or the Operating Agent may (but
shall not be required to) itself perform, or cause performance of, such
agreement or obligation, and the expenses of such party incurred in connection
therewith shall be payable by the party which has failed to so perform upon the
such party's demand therefor.
SECTION 14.04. No Proceedings. Each of the Borrowers and the Servicer
--------------
each hereby agrees that it will not, directly or indirectly, institute, or cause
to be instituted, against the Lender any proceeding of the type referred to in
Section 9.01(c) (except that such action or event shall be taken by or occur
with respect to the Lender, rather than by or to the other parties mentioned in
such Section) so long as there shall not have
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elapsed one year plus one day since the latest maturing Commercial Paper have
been paid in full in cash.
SECTION 14.05. Amendments; Waivers; Consents. No modification, amendment
-----------------------------
or waiver of or with respect to any provision of this Agreement, the Related
Documents or any other agreements, instruments and documents delivered pursuant
hereto, nor consent to or waiver of any departure by the Borrowers or the
Servicer from any of the terms or conditions thereof, shall be effective unless
it shall be in writing, signed by each of the parties hereto and approved in
writing by FSA. No modification, amendment or waiver of or with respect to the
Credit and Collection Policies shall be effective unless it shall be in writing
and approved in writing by the Operating Agent and FSA. Any waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No consent to or demand on the Borrower, the Parent or the Servicer or
any of their respective Affiliates in any case shall, in itself, entitle it to
any other consent or further notice or demand in similar or other circumstances.
This Agreement, the Related Documents and the documents referred to therein
embody the entire agreement among the Borrower, the Lender, the Operating Agent,
the Collateral Agent and the Servicer and supersede all prior agreements and
understandings relating to the subject hereof.
SECTION 14.06. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
------------------------------------------------------
TRIAL.
- -----
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAW
PROVISIONS THEREOF).
(b) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY SUBMITS TO THE NON-
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND
EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT
ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESSES
SET FORTH ON THE ATTACHED SCHEDULE 6, AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS,
POSTAGE PREPAID. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES ANY
OBJECTION BASED ON FORUM NON CONVENIENS AND ANY OBJECTION TO VENUE OF ANY ACTION
--------------------
INSTITUTED HEREUNDER, AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION 14.06(b)
SHALL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR AFFECT ANY PARTY'S RIGHT TO BRING ANY
ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION. COMPLAINTS AND
OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH
PERSON AT THE ADDRESS SET FORTH IN SCHEDULE 6 TO THIS AGREEMENT AND THAT
124
<PAGE>
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON SUCH PERSON'S ACTUAL RECEIPT
THEREOF.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR IN CONNECTION
WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN
A BENCH TRIAL WITHOUT A JURY.
SECTION 14.07. Execution in Counterparts; Severability. This Agreement
---------------------------------------
may be executed by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which when taken
together shall constitute one and the same agreement. In case any provision in
or obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation shall not in any
way be affected or impaired thereby in such jurisdiction and the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation shall not be impaired thereby in any other
jurisdiction.
SECTION 14.08. Descriptive Headings. The descriptive headings of the
--------------------
various sections of this Agreement are inserted for convenience of reference
only and shall not be deemed to affect the meaning or construction of any of the
provisions hereof.
SECTION 14.09. Deemed Good Faith. Any party shall be deemed to have
-----------------
acted in good faith in the exercise of any discretion under this Agreement if it
exercises such discretion at the request of or in furtherance of a request of a
Rating Agency.
SECTION 14.10. The Borrowers. In this Agreement:
-------------
(a) any obligation, duty, liability, warranty or covenant which
relates to either Borrower shall be a joint and several obligation, duty,
liability, warranty or covenant of each Borrower;
(b) any right of the Borrowers to take any action not arising out of
an obligation, exercise any rights or give any notice, shall be deemed to have
been taken, exercised as given, as the case may be, by both Borrowers, if it is
so taken, exercised or given by either Borrower; and
(c) notwithstanding any requirement to give notices or instruments to
both Borrowers, any notice or instrument given to
125
<PAGE>
either Borrower shall be deemed to have been given to both Borrowers.
SECTION 14.11. Financing Statements. All UCC-1's, UCC-2's, UCC-3's, and
--------------------
all other financing statements, termination statements, statements of release or
other similar instruments and documents described in Section 3.01 shall be
released to the Operating Agent directly upon this Agreement's becoming
effective pursuant to the terms hereof. The Operating Agent hereby agrees to
duly and properly file each of the foregoing in the appropriate offices of the
jurisdictions indicated above, in accordance with the UCC or any other
applicable law, as soon as is practicable, and in no event later than three
Business Days after the Effective Date.
SECTION 14.12. Intercreditor Agreement. This Agreement shall be subject
-----------------------
to the terms of the Intercreditor Agreement.
SECTION 14.13. The Note. The Note has been issued to the Lender,
--------
and the Lender, by receipt of the Note, acknowledges that it has not acquired
the Note with a view to resell or redistribute the Note or any interest therein.
SECTION 14.14 Limited Recourse. The obligations of Redwood under this
----------------
Agreement and all Related Documents are solely the corporate obligations of
Redwood. No recourse shall be had for the payment of any amount owing in respect
of Advances or for the payment of any fee hereunder or any other obligation or
claim arising out of or based upon this Agreement or any other Related Document
against any shareholder, employee, officer, director, agent or incorporator of
Redwood. Any accrued obligations owing by Redwood under this Agreement shall be
payable by Redwood solely to the extent that funds are available therefor from
time to time in accordance with the provisions of Article VI of the Collateral
Agent Agreement and Article VI of this Agreement (and such accrued obligations
shall not be extinguished until paid in full).
126
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Receivables Funding and
Servicing Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
TYCO INDUSTRIES, INC.
By /s/ R. Michael Kennedy, Jr.
Name: R. Michael Kennedy, Jr.
Title: Senior V.P.
Address: 6000 Midlantic Drive
Mt. Laurel, New Jersey 08054
Attention: Chief Financial Officer
Phone number: (609) 840-1243
Telecopier number: (609) 273-2885
REDWOOD RECEIVABLES CORPORATION
By /s/ Walter J. Owens
Name: Walter J. Owens
Title: Assistant Treasurer
Address: c/o General Electric Capital
Corporation
501 Merritt Seven - Third Floor
Norwalk, Connecticut 06851
Attention: Vice President -
Portfolio/Tyco
Phone number: (203) 840-4544
Telecopier number: (203) 840-4740
TYCO FUNDING I CORPORATION
By /s/ Anthony Di Michele
Name: Anthony di Michele
Title: President & CFO
Address: 6000 Midlantic Drive - Room 400
Mt. Laurel, New Jersey 08054
Attention: Chief Financial Officer
Phone number: (609) 840-2159
Telecopier number: (609) 273-2885
<PAGE>
TYCO FUNDING II CORPORATION
By /s/ Anthony Di Michele
Name: Anthony Di Michele
Title: President & CFO
Address: 6000 Midlantic Drive - Room 400
Mt. Laurel, New Jersey 08054
Attention: Chief Financial Officer
Phone number: (609) 840-2160
Telecopier number: (609) 273-2885
FINANCIAL SECURITY ASSURANCE, INC.
By /s/ Scott D. Gordon
Name: Scott D. Gordon
Title: Managing Director
Address: 350 Park Avenue
New York, New York 10022
Attention: Senior Vice President -
Surveillance
Phone number: (212) 826-0100
Telecopier number: (212) 339-3518
GENERAL ELECTRIC CAPITAL CORPORATION
as Operating Agent and Collateral Agent
By /s/ Catharine L. Midkiff
Name: Catharine L. Midkiff
Title: VP - Commercial Finance
Address: 501 Merritt Seven - Third Floor
Norwalk, Connecticut 06851
Attention: Vice President -
Portfolio/Tyco
Phone number: (203) 840-4544
Telecopier number: (203) 840-4740
<PAGE>
Schedule 1
----------
Concentration Limits
--------------------
<TABLE>
<CAPTION>
Short Term Rating* Concentration Limit
Obligor Requirement Percentage or Amount
- ------- ----------------- --------------------
<S> <C> <C>
Toys 'R' Us Inc. A-1 and P-1 The lesser of $100
million and 60%
A-2 and P-2 8%
Any other rating 2%
Walmart A-1 and P-2 20%
Stores, Inc.
A-2 and P-2 8%
Any other rating 2%
The K-Mart Corporation A-2 and P-2 6%
Any other rating 2%
Target Stores A-1 and P-2 10%
(Dayton-Hudson
Corporation) Any other rating 2%
Kay Bee A-1 and P-1 7%
(Melville Corporation)
Any other rating 2%
Any other Obligor 2%
</TABLE>
__________________
* Ratings by S&P and Moody's respectively.
** Subject to the ongoing approval by FSA. Ratings specified are those of the
parent (indicated in parenthesis) and then subject to 100% of stock
remaining owned by current parent.
<PAGE>
Schedule 2
----------
Contractual Reserves
--------------------
1. Cooperative Advertising - Balance of accrued and unpaid liabilities with
respect to cooperative advertising allowances earned by Obligor but for
which credit memos have not yet been issued
2. Pricing Allowance - Balance of accrued and unpaid liabilities with respect
to pricing allowances earned by Obligor but for which credit memos have not
yet been issued
3. Warehouse Allowance - Balance of accrued and unpaid liabilities with
respect to pricing allowances earned by Obligor but for which credit memos
have not yet been issued
S-2
<PAGE>
Schedule 3
----------
Excluded Customers
------------------
None
S-3-1
<PAGE>
Annex A
-------
to
--
Schedule 3
----------
[Form of Amending Letter]
-----------------------
[Insert Date]
[Borrower]
[Address]
Attention :
Redwood Receivables Corporation
[Address]
Attention:
[Parent]
[Address]
Attention:
Re: Receivables Funding and Servicing Agreement, dated as of February 24,
1995
Ladies and Gentlemen:
This notice is given pursuant to the Receivables Funding and Servicing
Agreement, dated as of February 24, 1995 (the "Funding Agreement"), between
Redwood Receivables Corporation (the "Lender"), Financial Security Assurance
Inc., General Electric Capital Corporation, as agent for the Company (in such
capacity, the "Operating Agent") and as Collateral Agent (in such capacity, the
"Collateral Agent"), [Names of Borrowers] (the "Borrowers") and [Name of Parent]
(the "Parent"). Capitalized terms used but not defined in this notice have the
meanings ascribed to such terms in the Funding Agreement.
The Operating Agent hereby amended Schedule 3 to the Funding Agreement
as follows:
[The following Obligors are added to Schedule 3 as "Excluded
Customers":
]
S-3-A1
<PAGE>
[The following customers are removed from Schedule 3:
The effective date of this amendment to Schedule 3 is ____________,
199_.
Very truly yours,
[Operating Agent]
By:_________________________________
Name:
Title:
[Consent of FSA]
S-3-A2
<PAGE>
Schedule 4
----------
INCOME DISCOUNT AMOUNT
<TABLE>
<S> <C>
Income Discount Amount = Borrowing Rate Discount Amount
+ Interest Volatility Discount Amount
+ Unused Facility Fee Discount Amount
+ Servicing Fee Discount Amount
#1 Borrowing Rate = Advances Outstanding
Discount Amount x Borrowing Rate
x Liquidation Term Factor
#2 Interest Volatility = Advances Outstanding
Discount Amount x Interest Volatility Percentage
x Liquidation Term Factor
#3 Unused Facility Fee = Unused Facility Amount
Discount Amount x Unused Facility Fee Rate
x Liquidation Term Factor
#4 Servicing Fee = Outstanding Balances of Transferred
Discount Amount Receivables
x Servicing Fee Rate
x Liquidation Term Factor
#5 Borrowing Rate = Daily Borrowing Rate (see Schedule 5)
x 360
#6 Liquidation Term = Expected Liquidation Period/360
Factor
#7 Unused Facility = Maximum Facility Commitment
Amount - Advances Outstanding
</TABLE>
"Expected Liquidation Period" means the product of (i) the weighted
---------------------------
average number of days from the date of the Borrowing Base Certificate to the
invoice due date for the Outstanding Balance of Transferred Receivables and (ii)
2.
"Interest Volatility Percentage" means the maximum increase in interest
------------------------------
rates anticipated over the Expected Liquidation Period, as determined from time
to time by the Collateral Agent in no event less than .50%.
S-4-1
<PAGE>
EXAMPLE
Income Discount Amount =
<TABLE>
<S> <C>
Borrowing Rate Discount Amount = $440,157
+ Interest Volatility Discount Amount = 6,333
+ Unused Facility Fee Discount Amount = 15,833
+ Servicing Fee Discount Amount = 70,932
--------
$533,255
========
</TABLE>
Input Table:
- -----------
A. Outstanding Balance of Transferred Receivables: $64,000,000
B. Maximum Facility Commitment: $60,000,000
C. Advances Outstanding: $40,000,000
D. Daily Borrowing Rate: 0.01931%
E. Unused Facility Fee Rate: 0.50%
F. Servicing Fee Rate: 0.70%
G. Average expected term to liquidate Receivables: 57 days
H. Interest Volatility Percentage: 0.1%
Calculations:
- ------------
<TABLE>
<S> <C>
#7. Unused Facility = B - C
Amount = $60,000,000 - $40,000,000
= $20,000,000
-----------
#6. Liquidation Term = G / 360
Factor = 57 / 360
= 0.15833
-------
#5. Borrowing Rate = D x 360
= 0.01931% x 360
= 6.95%
-----
#1. Borrowing Rate = C x #5 x #6
Discount Amount = $40,000,000 x 6.95% x 0.15833
= $440,157
--------
#2. Interest Volatility = C x H x #6
Discount Amount = $40,000,000 x 0.1% x 0.15833
= $6,333
------
#3. Unused Facility Fee = #7 x E x #6
Discount Amount = $20,000,000 x 0.5% x 0.15833
= $15.833
-------
#4. Servicing Fee = A x F x #6
Discount Amount = $64,000,000 x 0.7% x 0.15833
= $70,932
-------
</TABLE>
S-4-2
<PAGE>
Schedule 4
INCOME DISCOUNT AMOUNT CALCULATION
Tyco Funding Corp. (TFC)
C14. BORROWING RATE DISCOUNT AMOUNT:
------------------------------
C14a. Daily Yield/Interest Expense Due ($0/S Loan x (CP Rate + 1.255 Margin))
___________ __
C14b. BOD Advances Outstanding ___________
C14b1. Borrower Default Margin (Defined in Loan Docs) ___________
C14c. Annualized Yield/Interest Rate (((C14a/C14b)*360)+C14b1) ___________
C14d. Liquidation Term in Days (Determined by Time of Year, days until due plus
60) (A) ___________
C14e. Liquidation Term Factor (C14d/360) ___________
C14f. BORROWING RATE DISCOUNT AMOUNT (C14b*C14c*C14e) ___________
C15. INTEREST VOLATILITY DISCOUNT AMOUNT:
-----------------------------------
C15a. Interest Volatility Percentage (Determined by stability in the CP market)
___________
C15b. INTEREST VOLATILITY DISCOUNT AMOUNT (C14b*C14e*C15a) ___________
C16. UNUSED FACILITY FEE DISCOUNT AMOUNT:
-----------------------------------
C16a. Maximum Facility Commitment ___________
C16b. Unused Facility Fee Rate ___________
C16c. UNUSED FACILITY FEE DISCOUNT AMOUNT ((C16a-C14b)*C16b*C14e) ___________
S-4-3
<PAGE>
C17. SERVICING FEE DISCOUNT AMOUNT:
-----------------------------
C17a. BOD Outstanding Balance of Transferred Receivables ___________
C17b. Servicing Fee Rate (Defined in Loan Docs) ___________
C17c. SERVICING FEE DISCOUNT AMOUNT (C17a*C17b*C14e) ___________
C18. INCOME DISCOUNT AMOUNT (C14f+C15b+C16c+C17c)
===========
(A) This number is determined by the time of year and taken from the loan
documents
S-4-4
<PAGE>
Schedule 5
----------
DETERMINATION OF "INTEREST"
<TABLE>
<S> <C>
MONTHLY INTEREST EXPENSE = SUM OF DAILY INTEREST FOR THE SETTLEMENT PERIOD
#1) Daily Interest = Daily Borrowing Rate x Advances Outstanding on
the preceding day
#2) Daily Borrowing Rate:
(a) Pre-Termination = Daily Interest Rate + Daily Margin
(b) Post-Termination = Daily Interest Rate + Daily Margin + Daily
Default Margin
#3) Daily Interest Rate = [Daily Weighted Average CP Rate + Daily Weighted
Average Liquidity Rate] x Redwood Funding Factor
#4) Daily Weighted Average
CP Rate = [Commercial Paper Outstanding/Senior Debt] x
[Weighted Average CP Rate/360]
#5) Weighted Average
CP Rate = Average of CP Rates for all tranches of CP
Outstanding issued by Redwood, weighted by
CP Outstanding in each tranche
#6) Daily Weighted Average
Liquidity Rate = [Liquidity Loans Outstanding/Senior Debt] x
[Weighted Average Liquidity Rate/360 Days]
#7) Weighted Average = Average of Liquidity Rates (being Liquidity Rate
the greater of NYCHA Prime or 30 Day CP + 1.00%)
of Liquidity Loans Outstanding weighted by the
amount of each Liquidity Loan
#8) Daily Margin and
Daily Default Margin = 1.30% and 2.00% respectively/360 Days
#9) Senior Debt = CP Outstanding + Liquidity Loans Outstanding
</TABLE>
S-5-1
<PAGE>
#10) Redwood Funding Factor = Total Debt/Total Fundings Outstanding
Definitions
- -----------
"Redwood Debt" means, at any time, the aggregate of the Lender's
------------
Senior Debt, plus LOC Draws Outstanding, minus LOC Deposits for all RFCs at such
time.
"RFC" means a receivables financing company that either sells
---
receivables to the Lender, or makes borrowings from the Lender secured by
receivables.
"Total Fundings Outstanding" means, at any time, the aggregate of the
--------------------------
Advances Outstanding at such time, plus the amounts corresponding to Advances
Outstanding for all other RFCs that have pledged receivables as collateral for
such advances from the Lender at such time, plus the purchases outstanding for
all other RFCs as sellers of receivables to the Lender at such time.
S-5-2
<PAGE>
Tyco Funding Corporation Example for
Determination Of Interest Schedule 5
<TABLE>
<CAPTION>
Input Table
-----------
<S> <C> <C>
A Advances Outstanding - Tyco 30,000,000
B Other Advances Outstanding
10,000,000
C Weighted Average CP Interest Rate on 6,0000%
C/S
D Daily Margin 1,2500%
E Default Margin 2,0000%
F Commercial Paper Outstanding 40,000,500
G Liquidity Loans
Outstanding 0
H NYCGA Prime Rate 8,5000%
I CP 30 Day Rate 5,8900%
</TABLE>
Calculations:
------------
<TABLE>
<S> <C> <C>
1) Daily Interest Daily Borrowing Rate 0.0201%
X
Advances O/S 30,000,000
-------------
6,041.73
=============
2) Daily Borrowing Rate Daily Interest Rate 0.0167%
+
Daily Margin 0.0035%
-----------
3) Daily Interest Rate Daily WA CP Rate 0.0167%
X
Redwood Funding Factor 1.0000125
-----------
0.0167%
===========
4) Daily Weighted Average CP Outstanding 40,000,500
CP Rate /
Senior Debt 40,000,500
X
WA CP Rate 6.0000%
/
360 days 360
-----------
0.0167%
===========
</TABLE>
S-5-3
<PAGE>
<TABLE>
<S> <C> <C>
5) Daily Weighted Average Liquidity Loans O/S 0
Liquidity Rate /
Senior Debt 40,000,500
X
Liquidity Rate 9,5000%
/
360 days 360
-----------
0
===========
6) Liquidity Rate (> of NYCHA Prime or 8.5000%
Only If in Liquidation 30 day CP) 5.8900%
+
1.0000% 1.0000%
-----------
9.5000%
-----------
7) Daily Margin Daily Margin / 360 0.0035%
===========
Daily Default Margin Default Margin / 360 0.0056%
===========
8) Senior Debt CP Outstanding 40,000,500
+
Liquidity Outstanding 0
-----------
40,000,500
===========
9) Redwood Funding Factor Total Debt 40,000,500
/
Total Fundings
Outstanding 40,000,000
-----------
100,0013%
===========
</TABLE>
S-4-4
<PAGE>
Schedule 6
----------
Addresses for Notice and Other Offices of the Borrowers
To: Tyco Funding I Corporation
Address: 6000 Midlantic Drive - Room 400
Mt. Laurel, New Jersey 08054
Attention: Chief Financial Officer
Phone number: (609) 840-2159
Telecopier number: (609) 273-2885
To: Tyco Funding I Corporation
Address: 6000 Midlantic Drive - Room 400
Mt. Laurel, New Jersey 08054
Attention: Chief Financial Officer
Phone number: (609) 840-2159
Telecopier number: (609) 273-2885
To FSA: Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Telex No.: (212) 688-3101
Confirmation: (212) 826-0100
Telecopy Nos.: (212) 339-3518
(212) 339-3529
(in each case in which notice or other communication to FSA refers to
Termination Event, an Event of Servicer Termination, a claim on the Policy or
with respect to which failure on the part of FSA to respond shall be deemed to
constitute consent or acceptance, then copies of such notice or other
communication should also be sent to the attention of the General Counsel and
the Head--Financial Guaranty Group "URGENT MATERIAL ENCLOSED.")
S-6
<PAGE>
Schedule 7
----------
Former Names, assumed names, "dba" names of the Borrowers
None
<PAGE>
Schedule 8
----------
List of Lockboxes and Lockbox Accounts
S-8
<PAGE>
Schedule 9
----------
CALCULATION OF DILUTION PERCENTAGE
The Dilution Percentage means, calculated during any month shown in
Column A of the table below, a fraction (expressed as a percentage), the
numerator of which is the sum of the Variable Dilutions for the months
(inclusive) shown in Column B of the table below corresponding to the month
shown in Column A (and if calculated on any day during the month other than the
last day, for the cumulative number of days to the corresponding day in the last
month in Column B), and the denominator of which is the sum of the Outstanding
Balance of all Transferred Receivables generated during the immediately
preceding months shown in Column C of the table below corresponding to the month
shown in Column A (and if calculated at any day during the month other than the
last day, for the cumulative number of days to the corresponding day in the last
month in Column C).
<TABLE>
<CAPTION>
Column A Column B Column C
CALCULATED VARIABLE OUTSTANDING BALANCE OF
- ---------- -------- ----------------------
DURING THE DILUTIONS TRANSFERRED RECEIVABLES
- ---------- --------- -----------------------
MONTH OF: GENERATED
- --------- ---------
<S> <C> <C>
January December and June and July
January
February December to June to August
February
March December to June to September
March
April December to June to October
April
May December to June to November
May
June June December
July June and July December and January
</TABLE>
S-9
<PAGE>
<TABLE>
<S> <C> <C>
August June to December to February
August
September June to December to March
September
October June to October December to April
November June to December to May
November
December December June
</TABLE>
EXAMPLE
-------
This example is provided by way of illustration only, does not cover
all possible situations and does not restrict the calculation of Dilution
Percentage above.
If the Dilution Percentage is calculated as at January 20, 1995, the
sum of the Variable Dilutions from December 1, 1994 to January 20, 1995 is
divided by the sum of the Outstanding Balance of Transferred Receivables
recorded from June 1, 1994 to July 20, 1994. If July 20, 1994 had fallen on a
day other than a Business Day, the recorded Variable Dilutions and Transferred
Receivables at July 20 would have been equal to the balances generated on the
immediately preceding Business Day and no adjustment would be made.
S-9
<PAGE>
Exhibit A
to
Funding Agreement
[FORM OF BORROWER NOTICE - Request for Advance]
[Insert Date]
Redwood Receivables Corporation
[Address]
Attention:
General Electric Capital Corporation,
as Operating Agent
[Address]
Attention:
Re: Receivables Funding and Servicing Agreement, dated as of February 24,
1995
Ladies and Gentlemen:
This notice is given pursuant to Section 2.03(b) of the Receivables
Funding and Servicing Agreement, dated as of February 24, 1995 (the "Funding
Agreement"), between Redwood Receivables Corporation (the "Lender"), General
Electric Capital Corporation, as agent for the Company (in such capacity, the
"Liquidity Agent") and as Collateral Agent for the Lender Secured Parties (in
such capacity, the "Collateral Agent"), [Name of Borrower] (the "Borrower") and
[Name of Parent] (the "Parent") and Financial Security Assurance Inc.
Capitalized terms used but not defined in this notice have the meanings ascribed
to such terms in the Funding Agreement.
The Borrower hereby requests that the Lender make an Advance to the
Borrower on ___________, 19__ pursuant to Section 2.01 of the Funding Agreement
in the amount of $____________ to be disbursed to the Borrower in accordance
with Section 2.04 of the Funding Agreement. The Borrower hereby confirms that
the conditions set forth in Section 3.02 of the Funding Agreement for the making
of such Advance have been met.
Very truly yours,
[NAME OF BORROWER]
By:____________________________
Name:
Title:
A-1
<PAGE>
[FORM OF BORROWER NOTICE - Repayment of Advance]
[Insert Date]
Redwood Receivables Corporation
[Address]
Attention:
General Electric Capital Corporation,
as Operating Agent
[Address]
Attention:
Re: Receivables Funding and Servicing Agreement, dated as of February 24,
1995
Ladies and Gentlemen:
This notice is given pursuant to Section 2.03(b) of the Receivables
Funding and Servicing Agreement, dated as of February 24, 1995 (the "Funding
Agreement"), between Redwood Receivables Corporation (the "Lender"), General
Electric Capital Corporation, as agent for the Company (in such capacity, the
"Operating Agent") and as collateral agent for the Lender Secured Parties (in
such capacity, the "Collateral Agent"), [Names of Borrowers] (the "Borrowers"),
[Name of Parent] (the "Parent") and Financial Security Assurance Inc.
Capitalized terms used but not defined in this notice have the meanings ascribed
to such terms in the Funding Agreement.
The Borrower hereby notifies the Lender, FSA and the Operating Agent
that on ___________, 19__ (which is a Business Day) the Borrower intends to
repay $__________ of Advances currently outstanding to the Borrower pursuant to
Section 2.06(b) of the Funding Agreement, including (i) all Interest accrued on
the principal amount of Advances being repaid through the date of repayment, and
(ii) any and all Breakage Costs payable under Section 2.11 of the Funding
Agreement.
Very truly yours,
[NAME OF BORROWER]
By:____________________________
Name:
Title:
A-2
<PAGE>
[FORM OF BORROWER NOTICE - Reduction of Commitment]
[Insert Date]
Redwood Receivables Corporation
[Address]
Attention:
General Electric Capital Corporation,
as Operating Agent
[Address]
Attention:
Re: Receivables Funding and Servicing Agreement, dated as of February 24,
1995
Ladies and Gentlemen:
This notice is given pursuant to Section 2.03(b) of the Receivables
Funding and Servicing Agreement, dated as of February 24, 1995 (the "Funding
Agreement"), between Redwood Receivables Corporation (the "Lender"), and
Financial Security Assurance Inc. ("FSA"), General Electric Capital Corporation,
as agent for the Company (in such capacity, the "Operating Agent") and as
collateral agent (in such capacity, the "Collateral Agent"), [Names of
Borrowers] (the "Borrowers") and [Name of Parent] (the "Parent"). Capitalized
terms used but not defined in this notice have the meanings ascribed to such
terms in the Funding Agreement.
The Borrower hereby irrevocably notifies the Lender, FSA and the
Operating Agent pursuant to Section 2.02(a) of the Funding Agreement that on
____________, 19__ (which is a Business Day) the Maximum Facility Commitment
shall be reduced to $_________. This reduction is the [first] [second]
reduction of the calendar year permitted by Section 2.02(a) of the Funding
Agreement. After such reduction, the Maximum Facility Commitment will not be
less than the Advances Outstanding [after giving effect to, and conditioned
upon, the repayment of Advances set forth in the attached notice].
Very truly yours,
[NAME OF BORROWER]
By:____________________________
Name:
Title:
A-3
<PAGE>
[FORM OF BORROWER NOTICE - Termination of Commitment]
[Insert Date]
Redwood Receivables Corporation
[Address]
Attention:
General Electric Capital Corporation,
as Operating Agent
[Address]
Attention:
Re: Receivables Funding and Servicing Agreement, dated as of February 24,
1995
Ladies and Gentlemen:
This notice is given pursuant to Section 2.03(b) of the Receivables
Funding and Servicing Agreement, dated as of February 24, 1995 (the "Funding
Agreement"), between Redwood Receivables Corporation (the "Lender"), and
Financial Security Assurance Inc. ("FSA"), General Electric Capital Corporation,
as agent for the Company (in such capacity, the "Operating Agent") and as
collateral agent (in such capacity, the "Collateral Agent"), [Names of
Borrowers] (the "Borrowers") and [Name of Parent] (the "Parent"). Capitalized
terms used but not defined in this notice have the meanings ascribed to such
terms in the Funding Agreement.
The Borrower hereby irrevocably notifies the Lender, FSA and the
Operating Agent pursuant to Section 2.02(b) of the Funding Agreement that on
____________, 19__ (which is a Business Day at least 180 days after the date
this notice is given) the Maximum Facility Commitment shall be terminated.
Very truly yours,
[NAME OF BORROWER]
By:____________________________
Name:
Title:
A-4
<PAGE>
Exhibit B
to
Funding Agreement
[FORM OF BORROWING BASE CERTIFICATE]
Tyco Funding Corp.
Borrowing Base Certificate
1. As Of: ___________
___________
2. Transferred Receivables - Beginning of Period __________
3. Deposit of Customer Collections from ______ to _____________
4. Deposit of Rejected Amounts from ______ to ______ __________
5. Newly Transferred Receivables from ______ to _______________
6. Non-Cash Dilutions _________
7. Transferred Receivables - End of Period __________
8. Ineligible Receivables
8a. 61 days past due __________
8b. Credits over 61 days past due __________
8c. Unapplied Cash __________
8d. Code 5 __________
8e. Credit over 61 exceeds total balance __________
8f. Invoices with terms greater than 270 days __________
8g. Foreign Receivables __________
8h. 30% Rule __________
8i. Bankrupt Customers __________
8j. Other __________
8k. Total Ineligible Receivables __________
9. Excluded Customers
9a. Intercompany Receivables __________
9b. Government Receivables __________
9c. Other __________
9d. Total Excluded Receivables __________
10. Eligible Receivables __________
11. Concentration Discount Amount
12. Reserve for Co-op Advertising __________
B-1
<PAGE>
13. Reserve for Pricing Allowance
(including Warehouse Allowance) __________
14. Clean Down Retention Amount, if applicable __________
15. Borrowing Base __________
16. Advance Rate
(see chart) x Eligible _________% __________
17. Income Discount Amount __________
18. Accounts Receivable Availability __________
19. Advances Outstanding __________
20. Advances Available (Borrowing Excess) ==========
21. Maximum Facility Commitment __________
22. Parents Prior 52 Weeks Sales __________
23. Prior 52 Weeks Defaults __________
24. Prior 52 Weeks Non-Cash Dilutions Other
than Defaults __________
B-2
<PAGE>
Exhibit C
to
Funding Agreement
[FORM OF NOTE]
[Name of Borrower]
$[Insert Amount] [Insert Date]
FOR VALUE RECEIVED, [NAME OF BORROWER], a corporation (the
"Borrower"), promises to pay to Redwood Receivables Corporation (the "Lender"),
or registered assigns, the principal sum of ______________________________
DOLLARS ($____________ ) or, if less, the unpaid principal amount of the
aggregate loans ("Advances") made by the Lender to the Borrower pursuant to the
Funding Agreement (as defined below), as set forth on the attached Schedule, on
the dates specified in Section 2.06 of the Funding Agreement, and to pay
interest on the unpaid principal amount of this Note on each day that such
unpaid principal amount is outstanding at the Daily Borrowing Rate as provided
in Schedule 5 to the Funding Agreement on the dates specified in Section 2.07 of
the Funding Agreement.
This Note is issued pursuant to the Receivables Funding and Servicing
Agreement, dated as of February 24, 1995 (the "Funding Agreement"), between the
Borrowers, [Name of Parent], the Lender, Financial Security Assurance Inc. and
General Electric Capital Corporation as agent for the Lender (in such capacity,
the "Operating Agent") and as collateral agent (in such capacity, the
"Collateral Agent"). Capitalized terms used but not defined in this Note are
used with the meanings ascribed to them in the Funding Agreement.
Notwithstanding any other provisions contained in this Note, if at any
time the rate of interest payable by the Borrower under this Note, when combined
with any and all other charges provided for in this Note, in the Funding
Agreement or in any other document (to the extent such other charges would
constitute interest for the purpose of any applicable law limiting interest that
may be charged on this Note), exceeds the highest rate of interest permissible
under applicable law (the "Maximum Lawful Rate"), then so long as the Maximum
Lawful Rate would be exceeded the rate of interest under this Note shall be
equal to the Maximum Lawful Rate. If at any time thereafter the rate of interest
payable under this Note is less than the Maximum Lawful Rate, the Borrower shall
continue to pay interest under this Note at the Maximum Lawful Rate until such
time as the total interest paid by the Borrower is equal to the total interest
that would have been paid had applicable law not limited the interest rate
payable under this Note. In no event shall the total interest received by the
Lender under this Note exceed the amount which
C-1
<PAGE>
the Lender could lawfully have received had the interest due under this Note
been calculated since the date of this Note at the Maximum Lawful Rate.
Payments of the principal of, premium, if any, and interest on this
Note shall be made by the Borrower to the holder hereof by wire transfer of
immediately available funds by : a.m. New York City time, in the manner [and
---
at the address] specified for such purpose as provided in Section 2.09 of the
Funding Agreement, or in such manner or at such other address as the holder of
this Note shall have specified in writing by the Borrower for such purpose,
without the presentation or surrender of this Note or the making of any notation
on this Note.
If any payment under this Note falls due on a day which is not a
Business Day, then such due date shall be extended to the next succeeding
Business Day and Interest (calculated at the Daily Borrowing Rate for each day
during the period then ending) shall be payable on any principal so extended.
The Borrower expressly waives presentment, demand, diligence, protest
and all notices of any kind whatsoever with respect to this Note.
The holder hereof may, as provided in Section 14.02 of the Funding
Agreement, sell, assign, transfer, negotiate, grant participation in or
otherwise dispose of all or any portion of this Note and the indebtedness
evidenced by the Note.
This Note is secured by the security interests granted to the Lender
pursuant to Section 8.01 of the Funding Agreement. The holder of this Note is
entitled to the benefits of the Funding Agreement and may enforce the agreements
of the Borrower contained in the Funding Agreement and exercise the remedies
provided for by, or otherwise available in respect of, the Funding Agreement,
all in accordance with the terms of the Funding Agreement. If a Termination
Event shall occur and be continuing, the unpaid balance of the principal of this
Note, together with accrued interest, may be declared and become due and payable
in the manner and with the effect provided in the Funding Agreement.
This Note is made and delivered in New York, New York and shall be
governed by, and construed in accordance with, the
C-2
<PAGE>
internal laws (without application of its conflict of laws provisions) of the
State of New York.
IN WITNESS WHEREOF, the Borrower has caused this Note to be signed and
delivered by its duly authorized officer as of the date set forth above.
Very truly yours,
[NAME OF BORROWER]
By:____________________________
Name:
Title:
C-3
<PAGE>
Schedule to Note
<TABLE>
<CAPTION>
Date of Principal Principal Outstanding
Advance or Amount of Amount of Principal
Repayment Advance Repayment Amount
- ---------- --------- --------- -----------
<S> <C> <C> <C>
</TABLE>
C-4
<PAGE>
Exhibit D
to
Funding Agreement
[FORM OF OFFICER'S CERTIFICATE AS TO INSOLVENCY]
[NAME OF PARENT]
Officer's Certificate
I, [Name of Officer], the duly elected [Insert Title] of [Name of
Parent] (the "Parent"), hereby certify in connection with the Receivables
Funding and Servicing Agreement, dated as of February 24, 1995 (the "Funding
Agreement"; capitalized terms used but not defined in this Officer's Certificate
having the meaning set forth in the Funding Agreement), between [Names of
Borrowers] (the "Borrowers"), the Parent, Redwood Receivables Corporation (the
"Lender"), Financial Security Assurance Inc. ("FSA") and General Electric
Capital Corporation, as agent for the Lender (in such capacity, the "Operating
Agent") and as collateral agent (in such capacity, the "Collateral Agent"), and
for the benefit of the Lender, the Operating Agent, FSA and the Collateral
Agent, as follows:
(1) the performance of the Receivables Transfer Agreements,
dated as of February 24, 1995, between the Parent, as seller, and the
Borrowers, as buyers, will not render the Borrowers insolvent; and
(2) the Borrowers will be able to remain economically viable
without further investments by the Parent for the foreseeable future.
IN WITNESS WHEREOF, I have signed and delivered this Officer's
Certificate this _____ day of ___________, 19__;
[NAME OF PARENT]
By:____________________________
Name:
Title:
D
<PAGE>
Exhibit E
to
Funding Agreement
[FORM OF OFFICER'S CERTIFICATE OF BORROWER]
[NAME OF BORROWER]
Officer's Certificate
I, [Name of Officer], the duly elected [Insert Title] of [Name of
Borrower] (the "Borrower"), hereby certify pursuant to Section 3.01(d)(iv) of
the Receivables Funding and Servicing Agreement, dated as of February 24, 1995
(the "Funding Agreement"; capitalized terms used but not defined in this
Officer's Certificate having the meaning set forth in the Funding Agreement),
between the Borrowers, [Name of Parent], Redwood Receivables Corporation (the
"Lender"), Financial Security Assurance Inc. ("FSA") and General Electric
Capital Corporation, as agent for the Lender (in such capacity, the "Operating
Agent") and as collateral agent (in such capacity, the "Collateral Agent") for
the Lender Secured Parties (as defined in the Funding Agreement), and for the
benefit of the Lender, the Operating Agent, FSA and the Collateral Agent, as
follows:
(1) after giving effect to the effectiveness of the Funding
Agreement, no Termination Event or Incipient Event will have occurred and
be continuing; and
(2) the representations and warranties of the Borrower contained
in Sections 4.01 and 4.02 of the Funding Agreement, in the Receivables
Transfer Agreements and in any other document, certificate or financial or
other statement delivered by either of the Borrowers in connection with the
Funding Agreement or the Receivables Transfer Agreements are true and
correct in all material respects (unless such representation or warranty
contains a materiality qualification or in the case of Section 4, in which
case it is true and correct in all respects) and with the same force and
effect as though such representations and warranties had been made as of
such date, except to the extent any such representations and warranties
relate solely to an earlier date, in which case such representations and
warranties shall be true and correct in material respects (or in all
respects, as the case may be) as of such earlier date.
E-1
<PAGE>
IN WITNESS WHEREOF, I have signed and delivered this
Officer's Certificate this _____ day of ___________, 19__.
[NAME OF BORROWER]
By:____________________________
Name:
Title:
E-2
<PAGE>
Exhibit F
to
Funding Agreement
[FORM OF OFFICER'S CERTIFICATE OF SERVICER]
[NAME OF SERVICER]
Officer's Certificate
I, [Name of Officer], the duly elected [Insert Title] of [Name of
Parent] (the "Servicer"), hereby certify pursuant to Section 3.01(e)(iv) of the
Receivables Funding and Servicing Agreement, dated as of February 24, 1995 (the
"Funding Agreement"); capitalized terms used but not defined in this Officer's
Certificate having the meaning set forth in the Funding Agreement), between
[Names of Borrowers] (the "Borrowers"), the Servicer, Redwood Receivables
Corporation (the "Lender"), Financial Security Assurance Inc. ("FSA") and
General Electric Capital Corporation, as agent for the Lender (in such capacity,
the "Operating Agent") and as collateral agent (in such capacity, the
"Collateral Agent"), and for the benefit of the Lender, FSA, the Operating Agent
and the Collateral Agent, as follows:
(1) after giving effect to the effectiveness of the Funding
Agreement, no Event of Servicer Termination or event which, with the giving
of notice or lapse of time, or both, would constitute an Event of Servicer
Termination, will have occurred and be continuing; and
(2) the representations and warranties of the Servicer contained
in Section 4.03 of the Funding Agreement and in any other document,
certificate or financial or other statement delivered by the Servicer in
connection with the Funding Agreement are true and correct in all material
respects (unless such representation or warranty contains a materiality
qualification, in which case it is true and correct in all respects) and
with the same force and effect as though such representations and
warranties had been made as of such date, except to the extent any such
representations and warranties relate solely to an earlier date, in which
case they are true and correct in all material respects (or in all
respects, as the case may be) as of such earlier date.
F-1
<PAGE>
IN WITNESS WHEREOF, I have signed and delivered this Officer's
Certificate this _____ day of _____________, 19__.
[NAME OF SERVICER]
By:____________________________
Name:
Title:
F-2
<PAGE>
Exhibit G
to
Funding Agreement
Form of Monthly Reporting
-------------------------
<TABLE>
<S> <C>
Exhibit G-I. - Form of Advance Rate Calculation
Exhibit G-II. - Overcollateralization Model - Dilution Coverage
Exhibit G-III. - Overcollateralization Model - Default Coverage
Exhibit G-IV. - Sales and Receivable Analysis
Exhibit G-V. - Comparative Aging Analysis
Exhibit G-VI. - Financial Covenant Calculations and Termination Events
Exhibit G-VII. - Balance Sheet
Exhibit G-VIII. - Accounts Receivable Reconciliation and
New obligor Listing
</TABLE>
G-1
<PAGE>
Exhibit G-I
FORM OF ADVANCE RATE CALCULATION
Tyco Funding Corp. (TFC)
For the Week of:
<TABLE>
<CAPTION>
C. CALCULATION OF ADVANCE RATE AMOUNT
------------------------------
<S> <C> <C>
C1. Dilution Coverage (from model) _________
C2. Default Coverage (from model) _________
C3. Total Overcollateralization Required (C1 + C2)
=========
C4. Dynamic Advance Rate (100% - C3)
=========
C5. Advance Rate Cap (from loan documents
=========
C6. Advance Rate (lower of C4 and C5)
=========
</TABLE>
G-2
<PAGE>
Tyco Funding Corporation
Overcollateralization Model
Dilution Coverage
Factor 1:50 Exhibit G-II
DILUTIONS
_____________________________________________________________
_________________________________________________
<TABLE>
<CAPTION>
1 2 3 4 5 6 7 8 9 10 11
Anti Defect Oth Markdo
ci- ive Misc New er wn
SALE pati Bill Return Frei Prom Retur Mis Reserv
---- ---- ing ------ ---- ---- ----- --- ------
WEEK S A/R ons Adj s ght o ns c e
- ---- - --- --- --- - --- - -- - -
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
1 12 13 14 15 16 17 18 19 20 21
(4+5+6+7+8
+ Dilution Spike Spike
9+10+11) on Dilution Normal ----- / Spike Dilution Default Total
Week TOTAL % Horizon Dilution e Dilution Impact Coverage Coverage Coverage
- ---- ----- - ------- -------- - -------- ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
G-3
<PAGE>
Tyco Funding Corporation
Overcollateralization Model
Default Coverage
FACTOR: 1.50 Exhibit G-III
<TABLE>
<CAPTION>
Lag 6
Mo 6 Max
Default Monthly Month Last Default Base Default
MONTH SALES A/R Bucket Default % Average 12 Months Horizon Support Factor Defaults Coverage
- ----- ----- --- ------ --------- ------ --------- ------- ------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
G-4
<PAGE>
TYCO FUNDING CORPORATION
Sales and Receivable Analysis Exhibit G-IV
<TABLE>
<CAPTION>
1 2 3 4 5 6 7 8 9 10 11
BOM Gross Cash Miscellaneous Non (7+8-9)
Period Balance Credit Debit Total Receipts Adjustments Credits Adjustments Dil. Total Days
Sales CR Credits Dilution
Sales
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
12 13 14 15 16 17
Period (1/5.11) (10/2) YTD Rolling YTD Rolling
T/O DILUTION T/O 12 T/O Dilution 12
Dilution
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
G-5
<PAGE>
TYCO FUNDING CORPORATION
COMPARATIVE AGING ANALYSIS Exhibit G-V
<TABLE>
<CAPTION>
Date From S&R (S&R - Aging Future Current Dollars Over Chrgbk Future
A/H Bal. Aging) A/R -------
Variance Bal. 1-30 31-60 61-90 90
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
Current Percentage Over
----------
1-30 31-60 61-90 90 Chrgbk
<C> <C> <C> <C> <C> <C>
</TABLE>
G-6
<PAGE>
Schedule 1A
-----------
Concentration Level
-------------------
<TABLE>
<CAPTION>
Gross A/R Inelig. % of Inelig. Sales
--------- ------- ---- ------- -----
Obligor Balance Amount Elig. Elig. A/R % Limit Amount YTD
- ------- --------- ------- ----- --------- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Toys 'R' 60%
Us, Inc.
Walmart 20%
Stores,
Inc.
The K-Mart 6%
Corporation
Target 10%
Stores
(Dayton-
Hudson
Corp.)
Kay Bee 7%
(Melville
Corp.)
Any Other 2%
Obligor
</TABLE>
Note: There must be a minimum of ten obligors on this listing which equate
to the ten largest balances on the accounts receivable aging.
DEFINITIONS:
Eligible - Gross A/R obligor balance less ineligible obligor amount.
--------
% of Eligible A/R - Eligible divided by Line 10 of Exhibit B.
-----------------
Ineligible Amount - The percent of eligible A/R less the percent limit
-----------------
multiplied by the eligible obligor amount. (If the % of eligible A/R is
less than the % limit, the ineligible amount is zero).
G-7
<PAGE>
Schedule 1B
-----------
TOYS 'R' US MAXIMUM FUNDED AMOUNT
---------------------------------
<TABLE>
<S> <C> <C>
A. Gross A/R ___________
B. Less: Ineligible ___________
C. Eligible (A-B) ___________
D. Less:
Pro rata share of Contractual Reserves ___________
E. Net Eligible A/R (C-D) ___________
F. Advance Rate (Line 15 of Exhibit B) ___________
G. Maximum Funded Amount (E*F) ___________
H. Less Cap of $100,000,000 100,000,000
I. Excluded Amounts (If (G-H)> 1, (G-H),0) $
===========
</TABLE>
G-8
<PAGE>
Tyco Funding Corporation
Financial Covenant Calculations/Termination Events
- --------------------------------------------------
Exhibit G-VI
<TABLE>
<CAPTION>
Parent
------
Document Actual Covenant
Reference Covenant Amount Level
- --------- -------- ------ -----
<S> <C> <C> <C>
Net Worth
Interest Coverage
<CAPTION>
Borrower
--------
Document Actual Covenant
Reference Covenant Amount Level
- --------- -------- ------ -------
<S> <C> <C> <C>
9.01(i) Delinquency Ratio 7.00%
9.01(j) Default Ratio - Tyco 1 2.00%
9.01(k) Dilution Ratio - Tyco 1
April through December 3.00%
January through March 15.00%
9.01(m) Turnover 150 days
</TABLE>
G-9
<PAGE>
TYCO FUNDING CORPORATION
FINANCIAL COVENANT CALCULATIONS/TERMINATION EVENTS
- --------------------------------------------------
<TABLE>
<CAPTION>
PARENT Exhibit VI
------
Document Actual Covenant
Reference Covenant Amount Level
- --------- -------- ------ -----
<S> <C> <C> <C>
Net Worth
Interest Coverage
<CAPTION>
BORROWER
--------
Document Actual Covenant
Reference Covenant Amount Level
- --------- -------- ------ -----
<S> <C> <C> <C>
9.01i Delinquency Ratio 7.00%
9.01k Default Ratio - Tyco 2 2.00%
9.01m Dilution Ratio - Tyco 2
April through December 3.00%
January through March 15.00%
9.01n Turnover 150 days
</TABLE>
G-10
<PAGE>
Exhibit G-VII
TYCO FUNDING CORPORATION
BALANCE SHEET
AS OF:
Cash
Accounts Receivable
Dilution Reserve
Deferred Financing Costs
Other Miscellaneous Assets ___________
TOTAL ASSETS ===========
Loan Due To Redwood
Deferred Income
Other Miscellaneous Liabilities
Common Stock
Additional Paid in Capital
Retained Earnings ___________
TOTAL LIABILITIES
AND EQUITY ===========
NET WORTH ===========
G-11
<PAGE>
Exhibit G-VIII
I. RECONCILIATION
--------------
End of Month Balance per Accounts Receivable roll forward
Accounts Receivable Aging Balance
_______________
Adjustments (List) _______________
General Ledger Balance
_______________
II. NEW OBLIGORS
------------
CREDIT E.O.M.
NAME LINE BALANCE
---- ---- -------
(i)
(ii)
(iii)
(iv)
(v)
(vi) ___________ ____________ ___________
G-12
<PAGE>
Exhibit H
to
Funding Agreement
[FORM OF MONTHLY REPORT]
H-1
<PAGE>
- -------------------------------------------------------------------------------
CREDIT AGREEMENT Exhibit 10.49
- -------------------------------------------------------------------------------
between
TYCO TOYS (CANADA) INC.
as Borrower
and
THE LENDER OR LENDERS NAMED HEREIN
and
GENERAL ELECTRIC CAPITAL CANADA INC.
as Agent
- -------------------------------------------------------------------------------
Dollar Equivalent Amount of US$20,000,000
REVOLVING TERM CREDIT FACILITY
February 22, 1995
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
AMOUNT AND TERMS OF CREDIT
SECTION 1.1 Revolving Credit Advances............................ 1
SECTION 1.2 Non-Funding Lender; Actions by Lenders............... 3
SECTION 1.3 Repayment; Termination of Commitment................. 3
SECTION 1.4 Use of Proceeds...................................... 5
SECTION 1.5 Interest............................................. 5
SECTION 1.6 Eligible Accounts and Eligible Inventory............. 8
SECTION 1.7 Fees................................................. 8
SECTION 1.8 Cash Management System............................... 8
SECTION 1.9 Receipt of Payments.................................. 8
SECTION 1.10 Pro Rata Treatment................................... 9
SECTION 1.11 Application and Allocation of Payments............... 9
SECTION 1.12 Non-Receipt of Funds by Agent........................ 10
SECTION 1.13 Sharing of Payments, Etc............................. 11
SECTION 1.14 Settlement Procedures................................ 12
SECTION 1.15 Accounting........................................... 13
SECTION 1.16 Indemnity............................................ 14
SECTION 1.17 Access............................................... 16
SECTION 1.18 Taxes................................................ 17
SECTION 1.19 Additional Costs..................................... 18
ARTICLE 2
CONDITIONS PRECEDENT
SECTION 2.1 Conditions to the Initial Revolving Credit Advance... 19
SECTION 2.2 Further Conditions to Each Revolving Credit Advance.. 22
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Corporate Existence; Compliance with Law............. 23
SECTION 3.2 Executive Offices; Collateral Locations;
Corporate Names...................................... 23
SECTION 3.3 Corporate Power; Authorization; Enforceable
Obligations.......................................... 23
SECTION 3.4 Financial Statements and Projections................. 24
SECTION 3.5 Material Adverse Change.............................. 24
SECTION 3.6 Ownership of Property; Liens......................... 24
SECTION 3.7 Restrictions; No Default; Material Contracts......... 25
SECTION 3.8 Labor Matters........................................ 25
SECTION 3.9 Ventures, Subsidiaries and Equity Investments;
Outstanding Stock and Indebtedness................... 26
SECTION 3.10 Taxes................................................ 26
SECTION 3.11 No Foreign Business.................................. 27
SECTION 3.12 Benefit and Pension Plans............................ 27
SECTION 3.13 No Litigation........................................ 27
SECTION 3.14 Brokers.............................................. 28
<PAGE>
(ii)
SECTION 3.15 Patents, Trademarks, Copyrights and Licenses......... 28
SECTION 3.16 Full Disclosure...................................... 28
SECTION 3.17 Environmental Matters................................ 29
SECTION 3.18 Insurance Policies................................... 30
SECTION 3.19 Deposit and Disbursement Accounts.................... 30
SECTION 3.20 Existing US Credit Agreement......................... 30
SECTION 3.21 Subordinated Debt.................................... 31
SECTION 3.22 Promissory Notes and Pledge.......................... 31
SECTION 3.23 Inventory............................................ 31
SECTION 3.24 Deemed Repetition.................................... 31
ARTICLE 4
FINANCIAL STATEMENTS AND INFORMATION
SECTION 4.1 Reports and Notices.................................. 31
SECTION 4.2 Communication with Accountants....................... 31
ARTICLE 5
AFFIRMATIVE COVENANTS
SECTION 5.1 Maintenance of Existence and Conduct of Business..... 32
SECTION 5.2 Payment of Obligations, Charges and Claims........... 33
SECTION 5.3 Books and Records.................................... 33
SECTION 5.4 Litigation........................................... 33
SECTION 5.5 Insurance............................................ 34
SECTION 5.6 Compliance with Laws................................. 35
SECTION 5.7 Agreements........................................... 35
SECTION 5.8 Supplemental Disclosure.............................. 35
SECTION 5.9 Environmental Matters................................ 36
SECTION 5.10 Securities Regulatory Filings; Certain Other Notices. 38
SECTION 5.11 Canadian Benefit Plans............................... 38
SECTION 5.12 Landlord, Warehouseman/Bailee and Mortgagee
Agreements........................................... 39
SECTION 5.13 Certain Obligations Respecting Subsidiaries.......... 39
SECTION 5.14 Application of Proceeds.............................. 39
SECTION 5.15 Fiscal Year.......................................... 39
SECTION 5.16 Report to Other Creditors............................ 39
SECTION 5.17 Casualty and Condemnation............................ 39
SECTION 5.18 Intellectual Property................................ 40
SECTION 5.19 New Locations........................................ 41
SECTION 5.20 Security............................................. 41
SECTION 5.21 Currency and Interest Rate Hedging................... 42
ARTICLE 6
NEGATIVE COVENANTS
SECTION 6.1 Mergers, Subsidiaries, Etc........................... 43
<PAGE>
(iii)
SECTION 6.2 Investments.......................................... 43
SECTION 6.3 Indebtedness......................................... 43
SECTION 6.4 Affiliate and Employee Loans and Transactions........ 43
SECTION 6.5 Capital Structure and Business....................... 43
SECTION 6.6 Guaranteed Indebtedness.............................. 44
SECTION 6.7 Liens................................................ 44
SECTION 6.8 Sale of Assets....................................... 44
SECTION 6.9 Material Contracts................................... 44
SECTION 6.10 ERISA................................................ 45
SECTION 6.11 Canadian Benefit and Pension Plans................... 45
SECTION 6.12 Sale-Leasebacks...................................... 45
SECTION 6.13 Cancellation of Indebtedness......................... 45
SECTION 6.14 Restricted Payments.................................. 46
SECTION 6.15 Real Property Leases................................. 46
SECTION 6.16 Bank Accounts........................................ 46
SECTION 6.17 No Speculative Transactions.......................... 46
SECTION 6.18 Limitation on Negative Pledge Clauses, Etc........... 46
SECTION 6.19 Accounting Changes................................... 47
SECTION 6.20 Amendments and Modifications to Debt Documents....... 47
SECTION 6.21 Borrowing Solely for Immediate Cash Requirements..... 47
ARTICLE 7
TERM
SECTION 7.1 Duration............................................. 47
SECTION 7.2 Survival of Obligations.............................. 47
ARTICLE 8
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
SECTION 8.1 Events of Default.................................... 48
SECTION 8.2 Remedies............................................. 51
SECTION 8.3 Waivers by Borrower.................................. 51
SECTION 8.4 Application of Proceeds.............................. 51
ARTICLE 9
AGENT
SECTION 9.1 Appointment, Powers and Immunities................... 52
SECTION 9.2 Reliance by Agent.................................... 53
SECTION 9.3 Defaults............................................. 53
SECTION 9.4 Rights as a Lender................................... 53
SECTION 9.5 Indemnification...................................... 54
SECTION 9.6 Non-Reliance on Agent and Other Lenders.............. 54
SECTION 9.7 Failure to Act....................................... 55
SECTION 9.8 Successor Agent...................................... 55
SECTION 9.9 Consents under Loan Documents........................ 55
<PAGE>
(iv)
SECTION 9.10 Collateral Matters................................... 56
ARTICLE 10
SUCCESSORS AND ASSIGNS
SECTION 10.1 Successors and Assigns............................... 56
SECTION 10.2 Assignments and Participations....................... 57
ARTICLE 11
MISCELLANEOUS
SECTION 11.1 Complete Agreement; Modification of Agreement........ 59
SECTION 11.2 Fees and Expenses.................................... 59
SECTION 11.3 No Waiver............................................ 60
SECTION 11.4 Remedies............................................. 61
SECTION 11.5 Severability......................................... 61
SECTION 11.6 Conflict of Terms.................................... 61
SECTION 11.7 Right of Set-off..................................... 61
SECTION 11.8 Judgment Currency.................................... 62
SECTION 11.9 Authorized Signature................................. 62
SECTION 11.10 Notices.............................................. 63
SECTION 11.11 Section Titles....................................... 65
SECTION 11.12 Counterparts......................................... 65
SECTION 11.13 Time of the Essence.................................. 65
SECTION 11.14 Public Announcements and Confidentiality............. 65
SECTION 11.15 GOVERNING LAW........................................ 66
SECTION 11.16 Further Assurances................................... 66
<PAGE>
(v)
INDEX OF ANNEXES, SCHEDULES AND EXHIBITS
Annex A - Definitions; Rules of Construction
Annex B - Cash Management System
Annex C - Schedule of Closing Documents
Annex D - Schedule of Certain Fees
Annex E - Financials, Projections and Notices
Annex F - Insurance Requirements
Schedule 3.2 - Executive Office; Collateral Locations; Corporate Names
Schedule 3.4 - Financials and Projections
Schedule 3.5 - Restricted Payments
Schedule 3.6 - Real Estate and Leases
Schedule 3.7 - Material Contracts
Schedule 3.8 - Labor Matters
Schedule 3.9 - Ventures, Subsidiaries and Equity Investments;
Outstanding Stock and Indebtedness
Schedule 3.10 - Taxes
Schedule 3.12 - Benefit and Pension Plans
Schedule 3.13 - Litigation
Schedule 3.15 - Patents, Trademarks, Copyrights and Licenses
Schedule 3.17 - Environmental Matters
Schedule 3.18 - Insurance Policies
Schedule 3.19 - Deposit and Disbursement Accounts
Schedule 6.2 - Investments
Schedule 6.4 - Affiliate and Employee Loans and Transactions
Schedule 6.6 - Guaranteed Indebtedness
Schedule 6.7 - Liens
Schedule 11.8 - Signatures of Authorized Signatories
Exhibit 1.1(c) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(d) - Form of Revolving Credit Note
Exhibit 1.1(e) - Form of Borrowing Base Certificate
Exhibit 1.5(d) - Form of Notice of Fixed Rate Election
Exhibit 3.4 - Projections
Exhibit A - Agreement Respecting Distribution Agreement
Exhibit B - Assignment of Monies Payable Under Insurance
Policies
Exhibit C - General Assignment of Book Debts
Exhibit D - Hypothec
Exhibit E - Security Agreement
Exhibit F - Supplier Waiver and Assignment
Exhibit G - Tyco Industries Pledge Agreement
Exhibit H - Cash Collateral Agreement
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT ("Agreement") is entered into as of February 22,
---------
1995, between TYCO TOYS (CANADA) INC., a Canada corporation ("Borrower"), each
of the lenders listed on the signature pages hereof or which pursuant to Section
-------
10.2 becomes a "Lender" hereunder (each individually, a "Lender", and
- ---- ------
collectively, "Lenders"), and GENERAL ELECTRIC CAPITAL CANADA INC., a Canada
-------
corporation, as agent hereunder for the Lenders (in such capacity, together with
its successors in such capacity, "Agent").
-----
RECITALS
--------
A. Borrower desires to borrow up to the Dollar Equivalent Amount of
US$20,000,000 in the aggregate from Lenders, and Lenders are willing to make
secured revolving loans in favour of Borrower of up to such amount in the
aggregate upon the terms and conditions set forth herein.
B. Unless otherwise defined herein, capitalized terms used herein shall
have the respective meanings ascribed to them in Annex A and, for purposes of
-------
this Agreement and the other Loan Documents, the rules of construction set forth
in Annex A shall govern. Unless otherwise indicated, all references in this
-------
Agreement to articles, sections, subsections, schedules, annexes, exhibits, and
attachments shall refer to the corresponding articles, sections, subsections,
schedules, annexes, exhibits, and attachments of or to this Agreement. All
schedules, annexes, exhibits and attachments hereto, or expressly identified to
this Agreement, are incorporated herein by reference, and taken together, shall
constitute but a single agreement. Unless otherwise expressly set forth herein,
or in a written amendment referring to such schedules and annexes, all schedules
and annexes referred to herein shall mean the schedules and annexes as in effect
as of the Closing Date. These Recitals shall be construed as part of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
ARTICLE 1
AMOUNT AND TERMS OF CREDIT
SECTION 1.1 Revolving Credit Advances.
-------------------------
(a) Upon and subject to the terms and conditions hereof, each Lender
severally agrees to make available, from time to time until the Commitment
Termination Date, for Borrower's use and upon the request of Borrower therefor
to Agent, advances (each, a "Revolving Credit Advance") in an aggregate
------------------------
principal amount at any time outstanding up to but not exceeding the Revolving
Credit Commitment of such Lender, provided that in no event shall (i) the
--------
aggregate
<PAGE>
2
principal amount of the Revolving Credit Loan exceed the Maximum Revolving
Credit Commitment and (ii) the aggregate outstanding principal amount of the
Revolving Credit Advances made by all Lenders exceed the Borrowing Base.
Borrower may from time to time borrow, repay and reborrow Revolving Credit
Advances under this Section 1.1.
-----------
(b) Borrower shall give Agent (which shall promptly notify Lenders) notice
of each borrowing requested by Borrower hereunder, as provided in Section 1.1
-----------
(c), and, subject to Section 1.14, at or before 1:00 p.m. on the date specified
- --- ------------
for such borrowing, each Lender shall make available the amount of the Revolving
Credit Advance to be made by it to Borrower on such date to Agent to such
account of Agent as Agent may designate, in immediately available funds, for the
account of Borrower. Agent shall before 3:00 p.m. on the date specified for
such borrowing wire, in immediately available funds, to the Disbursement Account
into which Borrower has requested that such borrowing be made the aggregate
amount of the Revolving Credit Advance so made available by Lenders to Agent.
(c) Each notice of a borrowing by Borrower of a Revolving Credit Advance
shall be given in writing (by telecopy or hand delivery) to Agent at its address
at 2300 Meadowvale Blvd., Mississauga, Ontario L5N 5P9, to the attention of the
Vice-President, Commercial Finance or such other Person as may be reasonably
designated in writing by Agent to Borrower, Telephone No. (905) 858-5218,
Telecopy No. (905) 858-5456, with a copy to 501 Merritt Seven, Norwalk,
Connecticut 06851, to the attention of Account Manager-Tyco or such other Person
as may be designated in writing by Agent to Borrower, Telephone No. (203) 840-
4500, Telecopy No. (203) 840-4680, in each case given no later than 9:30 a.m. on
the Business Day of the proposed Revolving Credit Advance. Each such notice of
borrowing (a "Notice of Revolving Credit Advance") shall be substantially in the
----------------------------------
form of Exhibit 1.1(c) hereto, specifying therein the requested date, the
--------------
amount of such Revolving Credit Advance, the Disbursement Account into which
such Revolving Credit Advance shall be made, and such other information as may
be reasonably required by Agent. Agent and Lenders shall be entitled to rely
upon and shall be fully protected under this Agreement in relying upon any
Notice of Revolving Credit Advance believed by Agent to be genuine and to assume
that the persons executing and delivering the same were duly authorized unless
the responsible individual acting thereon for Agent shall have actual knowledge
to the contrary.
(d) The Revolving Credit Advances made by each Lender to Borrower shall be
evidenced by a single promissory note of Borrower for such Lender substantially
in the form of Exhibit 1.1(d) hereto (collectively the "Revolving Credit
--------------
Notes"), dated the date hereof, payable to such Lender in a maximum principal
amount equal to the amount of its Revolving Credit Commitment as originally in
effect and otherwise duly completed. The date and amount of each Revolving
Credit Advance made by each Lender to Borrower, the dates of the commencement
and the termination of each Interest Period and each payment of principal and
interest with respect thereto and all other amounts becoming due from Borrower
to such Lender and to Agent for the amount of such Lender or Agent shall be
recorded on the books and records of Agent, which books and records shall
constitute prima facie evidence of the accuracy of the information therein
----- -----
recorded and of the indebtedness of Borrower to such Lender and Agent, absent
manifest
<PAGE>
3
error. The entire unpaid balance of the Revolving Credit Loan, together with
accrued but unpaid interest thereon, shall be immediately due and payable on the
Commitment Termination Date.
(e) Borrower shall furnish to Agent and each Lender a Borrowing Base
Certificate substantially in the form of Exhibit 1.1(c) hereto, completed and
--------------
signed by the Chief Executive Officer or Chief Financial Officer of Borrower,
which sets forth a calculation of the Borrowing Base at the times and for the
periods set forth in Annex E. Borrower agrees that in making any Revolving
-------
Credit Advance to Borrower hereunder, Agent and each Lender shall be entitled to
rely upon the most recent Borrowing Base Certificate delivered to Agent and the
Lenders by Borrower. Borrower further agrees that if Borrower shall have failed
to deliver a Borrowing Base Certificate to Agent and Lenders within the
specified period, Lenders shall be under no obligation to make any further
Revolving Credit Advances to Borrower until such time as such Borrowing Base
Certificate is delivered to Agent and Lenders.
SECTION 1.2 Non-Funding Lender; Actions by Lenders.
--------------------------------------
(a) The failure of any Lender (such Lender, a "Non-Funding Lender") to make
------------------
any Revolving Credit Advance to be made by it on the date specified therefor
shall not relieve any other Lender (each such other Lender, an "Other Lender")
------------
of its obligation to make its Revolving Credit Advance on such date, but neither
any Other Lender nor Agent shall be responsible for the failure of any Non-
Funding Lender to make a Revolving Credit Advance to be made by such Non-Funding
Lender, and no Non-Funding Lender shall have any obligation to Agent or any
Other Lender for the failure by such Non-Funding Lender. Notwithstanding
anything set forth herein to the contrary, a Non-Funding Lender shall not have
any voting or consent rights under or with respect to any Loan Document or
constitute a "Lender" (or be included in the calculation of "Required Lenders"
hereunder) for any voting or consent rights under or with respect to any Loan
Document.
(b) Anything in this Agreement to the contrary notwithstanding, each Lender
hereby agrees with each other Lender that no Lender shall take any action to
protect or enforce its rights arising out of this Agreement, the Revolving
Credit Notes or the other Loan Documents (including exercising any rights of
offset) without first obtaining the prior written consent of Agent and Required
Lenders, it being the intent of Lenders that any such action to protect or
enforce rights under this Agreement, the Revolving Credit Notes or the other
Loan Documents shall be taken in concert and at the direction or with the
consent of Agent and Required Lenders and not individually by a single Lender.
SECTION 1.3 Repayment; Termination of Commitment.
------------------------------------
(a) Borrower hereby promises to pay to Agent, for the account of each
Lender, the entire outstanding principal amount of the Revolving Credit Loan and
unless otherwise payable hereunder, all other amounts outstanding under this
Agreement, and the Revolving Credit Loan shall mature, on the Commitment
Termination Date.
<PAGE>
4
(b) If the outstanding principal balance of the Revolving Credit Loan shall
at any time exceed the Borrowing Base, Borrower shall immediately repay to Agent
the Revolving Credit Loan in the amount of such excess. If the aggregate
principal amount of the Revolving Credit Loan shall at any time exceed the
Maximum Revolving Credit Commitment, Borrower shall immediately repay the
Revolving Credit Loan in the amount of such excess.
(c) Borrower shall have the right at any time, upon ten (10) days' prior
written notice to Agent, to terminate voluntarily the Revolving Credit
Commitments of all (but not less than all) of Lenders (in whole but not in part)
without premium or penalty other than payment to the Agent of the Termination
Fee, if any. Upon such termination, Borrower's right to receive Revolving
Credit Advances shall simultaneously terminate and Borrower's obligation to pay
the Non-Use Fee shall terminate, and notwithstanding anything to the contrary
contained herein or in any Revolving Credit Note, the entire outstanding balance
of the Revolving Credit Loan shall be immediately due and payable. On the date
of such termination, Borrower shall pay to Agent in immediately available funds
all of the Obligations, including the Termination Fee, if any, and any accrued
and unpaid interest. Notwithstanding the foregoing, Borrower may not
voluntarily terminate the Revolving Credit Commitments unless concurrently
therewith the commitments of the Global Lenders under each of the other Overall
Facilities to provide financial accommodations thereunder are terminated and all
obligations, contingent or otherwise, of the "Loan Parties" thereunder (as
defined thereunder) shall be paid in full in immediately available funds.
(d) If the aggregate of the unpaid principal balance of the Revolving
Credit Loan should at any time exceed the Maximum Revolving Credit Commitment or
the unpaid principal balance of the Revolving Credit Advances owing by Borrower
shall exceed the Borrowing Base, the excess balance shall nevertheless
constitute Obligations that are secured by the Collateral and entitled to all of
the benefits thereof and of the Loan Documents and shall be deemed to be
evidenced by the Revolving Credit Notes.
(e) Borrower shall make prepayments to Agent on the outstanding principal
amount of the Revolving Credit Loan in an amount equal to one hundred percent
(100%) of the net proceeds of any sale or other disposition of any Collateral
(other than (i) sales of Inventory in the ordinary course of business and (ii)
other sales and dispositions of any Collateral permitted hereunder where the
aggregate net proceeds thereof for all such sales and dispositions made in any
Fiscal Year shall not exceed US$100,000, or the Equivalent Amount thereof,) or
of the issuance by Borrower or any of its Subsidiaries of any Indebtedness
(other than Indebtedness permitted under Section 6.3), in each instance,
-----------
contemporaneously with any such sale, other disposition or issuance. Subject to
Section 8.4., such payments shall be applied first, without premium or penalty
- ------------
(except as provided in Section 1.5(g)), against outstanding amounts under the
-----------
Revolving Credit Loan, and then to the other Obligations in such manner and
order as Agent shall determine (or if all Lenders determine otherwise, as
Lenders so determine). The foregoing shall not constitute a consent by Agent or
any Lender to any sale or other disposition of Collateral or to any issuance of
Indebtedness by Borrower or any of its Subsidiaries not otherwise expressly
permitted hereunder.
<PAGE>
5
(f) Borrower agrees to repay the Revolving Credit Advances to the extent
necessary to cause, for a period of thirty (30) consecutive days occurring at
any time between December 1 of each year (commencing December, 1995) and April
30 of the immediately succeeding year, the outstanding principal balance of the
Revolving Credit Loan to be not more than the Borrowing Base less the value of
----
Eligible Inventory included in the Borrowing Base.
(g) All payments in respect of the Obligations shall be made in the
currency in which the Obligations are denominated.
(h) All Obligations shall be immediately due and payable, without notice,
on the "Commitment Termination Date", as defined in, and pursuant to, the
Receivables Funding Agreement.
SECTION 1.4 Use of Proceeds. Borrower shall use the proceeds of the
---------------
Revolving Credit Loan for (i) the refinancing of certain outstanding
Indebtedness as provided in Section 2.1(c), (ii) the payment of costs and
--------------
expenses of the financing transactions contemplated by this Agreement that are
payable by Borrower, and (iii) for general working capital and for other
corporate purposes of Borrower not prohibited by the terms of this Agreement and
the other Loan Documents.
SECTION 1.5 Interest.
--------
(a) Borrower shall pay to Agent for the account of each Lender interest on
the Revolving Credit Advances at the following times: (i) with respect to
Revolving Credit Advances bearing interest based upon the Index Rate, in arrears
for the preceding calendar month, on the first day of each calendar month,
commencing on March 1, 1995 and, with respect to each Fixed Rate Tranche, on the
last day of the relevant Interest Period therefor; (ii) if not otherwise paid in
full under clause (a)(i) above because the Commitment Termination Date occurs on
a date other than on the first day of a calendar month, on the Commitment
Termination Date; and (iii) if any interest accrues or remains payable after the
Commitment Termination Date, upon demand. Whenever any payment to be made
hereunder or under any other Loan Document or on any Revolving Credit Advance
shall be stated to be due and payable, or whenever the last day of any Interest
Period would otherwise occur, on a day which is not a Business Day, such payment
shall be made, and the last day of such Interest Period shall occur, on the next
succeeding Business Day and such extension of time shall in such case be
included in computing interest on such payment. Interest shall be calculated by
Agent on a daily basis and on the basis of a three hundred sixty (360) day year,
in each case for the actual number of days occurring in the period for which
such interest is payable. Each determination by Agent of an interest rate
hereunder and each calculation of interest payable hereunder shall be conclusive
and binding for all purposes, absent manifest error or bad faith.
<PAGE>
6
(b) Except as provided in paragraph (c) below, Borrower shall be obligated
to pay interest to Agent for the account of each Lender on the aggregate
outstanding balance of the Revolving Credit Advances made to Borrower from the
date made until paid in full at a floating rate equal to the Index Rate in
effect from time to time plus the Margin.
----
(c) Provided that no Default or Event of Default has occurred and is
continuing, and subject to the terms and conditions set forth herein, Borrower
may elect in the manner provided in paragraph (d) below that the entire
principal amount of the Revolving Credit Loan, or a part thereof (any such
entire principal amount or part thereof, a "Fixed Rate Tranche"), bear interest
------------------
at a fixed rate (each such rate, a "Fixed Rate") for an Interest Period equal to
----------
the BA Rate (as in effect for such Interest Period) plus the Margin; provided,
---- -------
that (i) not more than two Interest Periods shall be in effect at any time with
respect to the Revolving Credit Loan; (ii) each Fixed Rate Tranche shall be in a
minimum principal amount of $1,000,000; (iii) no Interest Period shall extend
beyond the Commitment Termination Date; (iv) Fixed Rate Tranches shall be in
amounts that Borrower reasonably anticipates will not exceed the outstanding
principal amount of the Revolving Credit Advances owing at any time during the
Interest Period; and (v) the principal amount of the Fixed Rate Tranche to which
any Interest Period relates shall not be reduced, by payment, prepayment or
otherwise, prior to the last day of such Interest Period, unless such payment or
prepayment is accompanied by payment of the amounts specified in paragraph (g)
below.
(d) Subject to the requirements set forth in paragraph (c) above, Borrower
may, on two (2) Business Days written notice to Agent, elect that a Fixed Rate
Tranche with respect to all or any portion of the Revolving Credit Loan bear
interest at a Fixed Rate. Each such notice (a "Notice of Fixed Rate Election")
-----------------------------
shall be substantially in the form of Exhibit 1.5(d) hereto and shall specify
--------------
the amount of the Fixed Rate Tranche as to which such election is made and the
date on which Borrower elects to have the Interest Period commence, the
immediately preceding day of which must be a Business Day. Agent and Lenders
shall be entitled to rely upon and shall be fully protected under this Agreement
in relying upon any Notice of Fixed Rate Election believed by Agent to be
genuine and to assume that the persons executing and delivering the same were
duly authorized unless the responsible individual acting thereon for Agent shall
have actual notice to the contrary. In the event that Borrower shall fail to
give a new Notice of Fixed Rate Election with respect to any Fixed Rate Tranche
in accordance with this paragraph (d), the entire principal amount of such Fixed
Rate Tranche shall thereafter bear interest based upon the Index Rate as
provided in paragraph (b) above, commencing with the last day of the Interest
Period applicable thereto (without duplication), unless and until Borrower shall
thereafter give a new Notice of Fixed Rate Election in accordance with this
paragraph (d).
(e) Upon the occurrence and during the continuation of any Default or Event
of Default, (x) the interest rate applicable to principal on the Revolving
Credit Advances shall be increased to the Default Rate and (y) interest on
interest and other Obligations (excluding principal on the Revolving Credit
Advances) in default shall be charged at the Default Rate (unless such increase
or charge is waived in writing by the Required Lenders) and shall be payable on
the earlier of the first day of each calendar month thereafter and demand
therefor.
<PAGE>
7
(f) If any provision of this Agreement or any of the other Loan Documents
would oblige Borrower to make any payment of interest or other amount payable to
any Lender in an amount or calculated at a rate which would be prohibited by law
or would result in a receipt by that Lender of interest at a criminal rate (as
such terms are construed under the Criminal Code (Canada)), then notwithstanding
such provision, such amount or rate shall be deemed to have been adjusted with
retroactive effect to the maximum amount or rate of interest, as the case may
be, as would not be so prohibited by law or so result in a receipt by that
Lender of interest at a criminal rate, such adjustment to be effected, to the
extent necessary, as follows: (i) firstly, by reducing the amount or rate of
interest required to be paid to the affected Lender under this Section 1.5; and
-----------
(ii) thereafter, by reducing any fees, commissions, premiums and other amounts
required to be paid to the affected Lender which would constitute interest for
purposes of Section 347 of the Criminal Code (Canada). Notwithstanding the
foregoing and after giving effect to all adjustments contemplated thereby, if
any Lender shall have received an amount in excess of the maximum permitted by
that section of the Criminal Code (Canada), then Borrower shall be entitled, by
notice in writing to the affected Lender, to obtain reimbursement from that
Lender in an amount equal to such excess, and pending such reimbursement, such
amount shall be deemed to be an amount payable by that Lender to Borrower. Any
amount or rate of interest referred to in this Section 1.5(f) shall be
--------------
determined in accordance with generally accepted actuarial practices and
principles as an effective annual rate of interest over the term that any
Revolving Credit Advance remains outstanding on the assumption that any charges,
fees or expenses that fall within the meaning of "interest" (as defined in the
Criminal Code (Canada)) shall, if they relate to a specific period of time, be
pro-rated over that period of time and otherwise be pro-rated over the period
from the Closing Date to the Termination Date.
(g) In order to induce Lenders to fund and maintain any Fixed Rate Tranche
at a Fixed Rate on the terms provided herein, and in consideration of the
entering into by Lenders of funding arrangements from time to time in
contemplation thereof, if any Fixed Rate Tranche is repaid in whole or in part
on any day other than the last day of the Interest Period therefor (whether any
such repayment is made pursuant to any provision of this Agreement or any other
Loan Document or is the result of acceleration, by operation of law or
otherwise), Borrower shall indemnify and hold harmless each Lender from and
against and in respect of any and all losses, costs and expenses resulting from,
or arising out of or imposed upon or incurred by such Lender by reason of the
liquidation or reemployment of funds acquired or committed to be acquired by
such Lender to fund or maintain such Fixed Rate Tranche at the Fixed Rate
elected by Borrower, pursuant to such Lender's customary funding arrangements.
The amount of any losses, costs or expenses resulting in an obligation of
Borrower to make a payment pursuant to the foregoing sentence shall not include
any losses attributable to a Lender's lost profit, but shall represent the
excess, if any, of (x) such Lender's cost or deemed cost of obtaining funding
for the amount necessary to fund or maintain its pro rata share of such Fixed
--- ----
Rate Tranche at the Fixed Rate elected by Borrower, pursuant to such Lender's
customary funding arrangements, as reasonably determined by such Lender (which
may be computed by any Lender on the basis of such funds having been borrowed at
a rate equal to one percent (1%) over CDOS on the first day of the Interest
Period in respect of such Fixed Rate Tranche), over (y) the return such Lender
would receive on its reemployment of such funds, as reasonably determined by
each Lender (which, if
<PAGE>
8
such Lender's cost of obtaining funding is computed pursuant to the
parenthetical to clause (x) above, may be computed by any Lender on the basis of
its reinvestment of such funds at CDOS on the date of repayment of such Fixed
Rate Tranche); provided, that if any Lender terminates any funding arrangements
--------
in respect of its pro rata share of any such Fixed Rate Tranche, the amount of
--- ----
such losses, costs and expenses shall also include the cost to such Lender of
such termination. The determination of such amount by any Lender, when
evidenced by a certificate from that Lender giving a reasonably detailed
calculation of the amount of said cost, expense, claim, penalty, liability,
loss, fee, damage or other charge, shall be presumed correct in the absence of
manifest error or bad faith.
(h) For purposes of disclosure pursuant to the Interest Act (Canada), the
annual rates of interest or fees to which the rates of interest or fees provided
in this Agreement (and stated herein to be computed on the basis of a 360 day
year) are equivalent are the rates so determined multiplied by the actual number
of days in the applicable calendar year and divided by 360.
SECTION 1.6 Eligible Accounts and Eligible Inventory. Based on the most
----------------------------------------
recent Borrowing Base Certificate delivered by Borrower to Agent and on other
information available to Agent, Agent shall determine which Accounts of Borrower
shall be deemed to be "Eligible Accounts" and which Inventory of Borrower shall
be deemed to be "Eligible Inventory", for purposes of determining the amounts,
if any, to be advanced under the Revolving Credit Loan.
SECTION 1.7 Fees. As compensation for Agent's and Lenders' costs,
----
skills, services and efforts incurred and expended in making the Revolving
Credit Loan available to Borrower, Borrower agrees to pay to Agent for its own
account or the account of Lenders, as the case may be, the fees set forth in
Annex D and the Fee Agreement.
- -------
SECTION 1.8 Cash Management System. On or prior to the Closing Date,
----------------------
Borrower will establish and maintain until the Termination Date, the cash
management system described in Annex B.
-------
SECTION 1.9 Receipt of Payments. Borrower shall make each payment under
-------------------
this Agreement not later than 1:00 p.m. on the day when due in immediately
available funds to the Collection Account. For purposes of computing interest
and Fees and determining the borrowing availability hereunder: (a) all payments
(including cash sweeps) consisting of cash, wire, or electronic transfers in
immediately available funds shall be deemed received by Agent upon deposit in
the Collection Account and notice from the financial institution at which the
Collection Account is located to Agent of such deposit; and (b) all payments
consisting of cheques, drafts, or similar non-cash items shall be deemed
received upon receipt of good funds following deposit in the Collection Account
(together with notice from the financial institution at which the Collection
Account is located to Agent of such deposit). Subject to Section 1.14, each
------------
payment received by Agent under this Agreement or any Revolving Credit Note for
the account of any Lender shall be paid by Agent promptly to such Lender, in the
same funds received, for application to the Revolving Credit Loan or other
Obligation in respect of which such payment is made.
<PAGE>
9
SECTION 1.10 Pro Rata Treatment. Except to the extent otherwise provided
------------------
herein: (a) each Revolving Credit Advance (including any Revolving Credit
Advance made pursuant to Section 1.14(b)) shall be incurred and made by Lenders,
----------------
pro rata according to the amounts of their respective ratable portion of the
- --- ----
Revolving Credit Commitments; (b) each payment or prepayment of principal of the
Revolving Credit Loan shall be made to Agent for the account of Lenders, pro
---
rata in accordance with the respective unpaid principal amounts of the Revolving
- ----
Credit Loan held by Lenders; (c) each payment of interest on the Revolving
Credit Loan shall be made to Agent for the account of Lenders pro rata in
--- ----
accordance with the amounts of interest on the Revolving Credit Loan then due
and payable to Lenders; and (d) each payment of Non-Use Fees shall be made to
Agent for the account of Lenders, pro rata according to the amounts of their
--- ----
respective Revolving Credit Commitments.
SECTION 1.11 Application and Allocation of Payments. Subject to Section
-------------------------------------- -------
8.4, Borrower irrevocably waives the right to direct the application of any and
- ---
all payments at any time or times hereafter received by Agent or any Lender from
or on behalf of Borrower or any other Loan Party, and Borrower irrevocably
agrees that Agent and Lenders shall have the continuing exclusive right to apply
any and all such payments against the then due and payable Obligations and in
repayment of the Revolving Credit Advances owing by Borrower as herein expressly
provided or permitted or, if an Event of Default is continuing, as Lenders may
deem advisable; provided, that the prepayments required or permitted under
--------
Section 1.3(e) shall be applied in the manner described in such Section. In the
- --------------
absence of a specific determination by all Lenders with respect thereto (which
determination may be made without the consent of Borrower only if an Event of
Default is continuing) or unless otherwise expressly provided herein, the same
shall be applied in the following order: (a) then due and payable Fees, expenses
and other Obligations (including Revolving Credit Advances made by Agent in its
capacity as Agent) owing by Borrower to Agent; (b) then due and payable Fees and
expenses of Lenders owing by Borrower; (c) then due and payable interest
payments owing by Borrower; (d) Obligations to Lenders owing by Borrower other
than Fees, expenses and interest and principal payments; and (e) then due and
payable principal payments on the Revolving Credit Loan owing by Borrower;
provided, that if any such payments are received from or on behalf of any Loan
- -------
Party other than Borrower or if an Event of Default shall occur and be
continuing, such payments shall be applied to the Obligations in such manner and
order as Agent shall determine (or if all Lenders determine otherwise, as all
Lenders so determine). If after payment in full of all then due and payable
Obligations, there shall remain with Agent any excess money received from or on
behalf of Borrower, then Agent promptly shall return that excess money to
Borrower. Agent, on behalf of Lenders, is authorized to, and at its option may,
make or cause to be made Revolving Credit Advances by Lenders on behalf of
Borrower for payment of all Fees, expenses, charges, costs, principal, interest,
or other Obligations then due and payable by Borrower under this Agreement or
any of the Loan Documents, even if the making of such Revolving Credit Advance
causes the outstanding balance of the Revolving Credit Loan to exceed the
Maximum Revolving Credit Commitment or the outstanding principal balance of the
Revolving Credit Advances to exceed the Borrowing Base, in which case the terms
of Section 1.3(d) shall apply.
-----------
<PAGE>
10
SECTION 1.12 Non-Receipt of Funds by Agent. Unless Agent shall have been
-----------------------------
notified by a Lender or Borrower (in either case, "Payor") one (1) Business Day
-----
prior to the date on which such Payor is to make payment to Agent of (in the
case of a Lender) the proceeds of a Revolving Credit Advance to be made by such
Lender hereunder or (in the case of Borrower) a payment to Agent for account of
Lenders hereunder (such payment being herein called the "Required Payment") that
----------------
such Payor does not intend to make the Required Payment to Agent, Agent may
assume that the Required Payment has been made and may, in reliance upon such
assumption (but shall not be required to), make the amount thereof available to
the intended recipient(s) (Borrower or Lenders, as applicable,) on such date;
and, if such Payor has not in fact made the Required Payment to Agent, the
recipient(s) of such payment (Borrower or Lenders, as applicable,) shall, on
demand, repay to Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date (the
"Advance Date") such amount was so made available by Agent until the date Agent
- -------------
recovers such amount, at a rate per annum equal to the Index Rate in effect from
time to time plus the Margin and, if such recipient(s) shall fail promptly to
make such payment, Agent shall be entitled to recover such amount, on demand,
from such Payor, together with interest as aforesaid; provided, that if neither
--------
the recipient(s) nor such Payor shall return the Required Payment to Agent
within three (3) Business Days of the Advance Date, then, retroactively to the
Advance Date, such Payor and the recipient(s) shall each be obligated to pay
interest on the Required Payment (without duplication) as follows:
(a) if the Required Payment represents a payment to be made by Borrower to
Lenders, Borrower and the recipient Lenders shall (without duplication) each be
obligated retroactively to the Advance Date to pay interest in respect of the
Required Payment at the Default Rate (and, in case the recipient Lenders shall
return the Required Payment to Agent, without limiting the obligation of
Borrower hereunder to pay interest to such recipient Lenders at the Default Rate
in respect of the Required Payment); and
(b) if the Required Payment represents proceeds of a Revolving Credit
Advance to be made by Lenders to Borrower, such Lenders and Borrower shall
(without duplication) each be obligated retroactively to the Advance Date to pay
interest in respect of the Required Payment at the rate of interest provided for
such Required Payment pursuant hereto (and, in case Borrower shall return the
Required Payment to Agent, without limiting any claim Borrower may have against
Lenders in respect of the Required Payment).
Nothing in this Section 1.12 or elsewhere in this Agreement or the other
------------
Loan Documents shall be deemed to require Agent to advance funds on behalf of
any Lender or to relieve any Lender from its obligation to fulfil its Revolving
Credit Commitment hereunder or to prejudice any rights that Borrower may have
against any Lender or Agent as a result of any default by such Lender or Agent
hereunder, as applicable.
<PAGE>
11
SECTION 1.13 Sharing of Payments, Etc.
-------------------------
(a) Borrower agrees that, in addition to (and without limitation of) any
right of setoff, banker's lien or counterclaim a Lender may otherwise have, each
Lender shall be entitled, at its option (but subject, as between Lenders, to the
provisions of Section 1.2(b)), to offset balances held by it for the account of
---------------
Borrower at any of its offices, in Dollars or in any other currency (at the
conversion rate at which it would be prepared to sell such currency in Toronto,
Ontario against the currency in which the obligation is denominated), against
any principal of or interest on any of such Lender's pro rata portion of the
--- ----
Revolving Credit Loan (including any Revolving Credit Advances deemed made by
such Lender under Section 1.14(b)) or any other amount payable to such Lender
----------------
hereunder, that is not paid when due (regardless of whether such balances are
then due to Borrower), in which case it shall promptly notify Borrower and Agent
thereof; provided, that such Lender's failure to give such notice shall not
--------
affect the validity thereof.
(b) If any Lender shall obtain from Borrower payment of any principal of or
interest on the pro rata portion of the Revolving Credit Loan owing to it or
--- ----
payment of any other amount under this Agreement, any Revolving Credit Note held
by it, or any other Loan Document through the exercise of any right of setoff,
banker's lien or counterclaim or similar right or otherwise (other than from
Agent as provided herein), and, as a result of such payment, such Lender shall
have received a greater percentage of the principal of or interest on the
Revolving Credit Loan or such other amounts then due hereunder or thereunder by
Borrower to such Lender than the percentage received by any other Lender, it
shall promptly pay to Agent, for the benefit of Lenders, the amount of such
excess and simultaneously purchase from such other Lenders a participation in
the Revolving Credit Loan or such other amounts, respectively, owing to such
other Lenders (or in interest due thereon, as the case may be) in such amounts,
and make such other adjustments from time to time as shall be equitable, to the
end that all Lenders shall share the benefit of such excess payment (net of any
expenses that may be incurred by such Lender in obtaining or preserving such
excess payment) pro rata in accordance with the unpaid principal of and/or
--- ----
interest on the Revolving Credit Loan or such other amounts, respectively, owing
to each of Lenders. Amounts received by Agent under this Section 1.13(b) shall
---------------
be treated as a payment by Borrower under Section 1.11. To such end, all
------------
Lenders shall make appropriate adjustments among themselves (by the resale of
any participation or assignment sold or otherwise) if such payment is rescinded
or must otherwise be restored.
(c) Borrower agrees that any Lender so purchasing such a participation (or
direct interest) may exercise, in a manner consistent with Section 1.13(a), all
---------------
rights of setoff, banker's lien, counterclaim or similar rights with respect to
such participation as fully as if such Lender were a direct holder of the
Revolving Credit Loan or other amounts (as the case may be) owing to such Lender
in the amount of such participation. Any Lender which so exercises any right of
setoff shall notify Borrower and Agent of such exercise; provided, that the
--------
failure to do so shall not affect the validity of such setoff.
<PAGE>
12
(d) Nothing contained herein shall require any Lender to exercise any right
as against Borrower as described in this Section 1.13 or shall affect the right
------------
of any Lender to exercise, and retain the benefits of exercising, any such right
with respect to any other indebtedness or obligation of Borrower. If, under any
Insolvency Statute, any Lender receives a secured claim in lieu of a setoff or
right as against Borrower to which this Section 1.13 applies, such Lender shall,
------------
to the extent practicable, assign such rights to Agent for the benefit of
Lenders and, in any event, exercise its rights in respect of such secured claim
in a manner consistent with the rights of Lenders entitled under this Section
-------
1.13 to share in the benefits of any recovery on such secured claim.
- ----
SECTION 1.14 Settlement Procedures.
---------------------
(a) The Revolving Credit Loan balance may fluctuate from day to day from
Agent's disbursement of funds to, and receipt of funds from, Borrower. In order
to minimize the frequency of transfers of funds between Agent and Lenders,
Revolving Credit Advances may be made by Agent and payments in respect thereof
will be settled according to the procedures set forth in this Section 1.14.
------------
Notwithstanding these procedures, each Lender's obligation to fund its portion
of any Revolving Credit Advance will commence on the date such Revolving Credit
Advance is made. Such payments will be made by each Lender without setoff,
counterclaim or reduction of any kind.
(b) Notwithstanding anything to the contrary contained in this Agreement,
Agent may elect, at its sole option, to fund the entire amount of any Revolving
Credit Advance requested by Borrower. In the event Agent makes such election,
such Revolving Credit Advance made by Agent shall be deemed, and shall
constitute, as of the date of making thereof, a Revolving Credit Advance made by
each Lender to Borrower in an amount equal to such Lender's pro rata share
--- ----
thereof, and each Lender shall be obligated to deliver to Agent such share of
such Revolving Credit Advance on the Weekly Settlement Date in accordance with
the procedure for weekly settlement set forth in Section 1.14(c) or as otherwise
---------------
provided in Section 1.14(d). Notwithstanding anything to the contrary
---------------
contained in this Agreement, for purposes of calculating interest payable to any
Lender (a) Agent shall be deemed a "Lender" with respect to any outstanding
Revolving Credit Advances funded by Agent, and (b) the amount of Revolving
Credit Advances of any Lender that are outstanding on any day shall be equal to
the amount of such Lender's Revolving Credit Advances outstanding on such day,
excluding any Revolving Credit Advances that have been funded entirely by Agent
with respect to which such Lender has not funded its pro rata share.
--- ----
(c) Each Lender shall settle with Agent, upon Agent's request, on the third
Business Day of each week (or on such other day of the week as may be designated
from time to time by Agent) in each successive week (the "Weekly Settlement
-----------------
Date"), on the net Revolving Credit Advances and payments since the date of the
- -----
last settlement. On each Weekly Settlement Date, prior to 10:00 a.m., Agent
shall notify each Lender by telephone or by telex, telecopy or other form of
teletransmission, of such Lender's pro rata share of the outstanding Revolving
--- ----
Credit Advances and the amount of the payment necessary to adjust such Lender's
outstanding
<PAGE>
13
Revolving Credit Advances to such Lender's pro rata share of such Revolving
--- ----
Credit Advances as of such Weekly Settlement Date (on a net basis taking into
account any funds in the Collection Account which Agent determines are
available). Any such payment shall be made by the party from which such payment
is due to the other party, in same day funds, not later than 1:00 p.m. on such
Weekly Settlement Date. If any Lender shall, for any reason, not settle with
Agent within one Business Day after the Weekly Settlement Date, such Lender
agrees to pay and Borrower agrees to repay, severally, to Agent forthwith on
demand the amount due Agent on such Weekly Settlement Date together with
interest thereon for each day from such Weekly Settlement Date until the day
such amount is paid to Agent, at (i) in the case of such Lender, the Index Rate
in effect for the first three (3) days for which such amount remains unpaid and
thereafter at the rate then in effect with respect to Revolving Credit Advances
pursuant to Section 1.5, and (ii) in the case of Borrower, the rate then in
-----------
effect with respect to Revolving Credit Advances pursuant to Section 1.5. If
-----------
such Lender shall pay to Agent such corresponding amount, such amount so paid
shall constitute such Lender's Revolving Credit Advance and, if both such Lender
and Borrower shall have paid and repaid, respectively, such corresponding
amount, Agent shall promptly pay over to Borrower such corresponding amount in
same day funds, but Borrower shall remain obligated for all interest thereon at
the rate then in effect with respect to Revolving Credit Advances pursuant to
Section 1.5.
- -----------
(d) As an alternative to the weekly settlement provided for in Section
-------
1.14(c), Agent may elect at its sole option, to use the following same day
- -------
settlement procedure for borrowings of Revolving Credit Advances. Prior to
12:00 noon on any date specified for a borrowing of a Revolving Credit Advance
in a Notice of Revolving Credit Advance, Agent may notify each Lender by
telephone or by telex, telecopy or other form of teletransmission, of the
requested Revolving Credit Advance. Not later than 1:00 p.m. on the date of
such proposed Revolving Credit Advance, each Lender shall make available to
Agent, in same day funds, to such account of Agent as Agent may designate, such
Lender's pro rata share of such Revolving Credit Advance. Notwithstanding the
--- ----
foregoing, to the extent that there are available funds in the Collection
Account, Agent may, at Agent's discretion, notify each Lender that such Lender's
obligation to make available to Agent same day funds as provided in the
preceding sentence shall be satisfied to the extent of its pro rata share out of
--- ----
such funds in the Collection Account, or such portion of such funds as Agent
shall indicate are to be applied to fund such Revolving Credit Advance.
SECTION 1.15 Accounting. Agent will provide a monthly accounting of
----------
transactions under the Revolving Credit Loan to Borrower. Each and every such
accounting shall (absent manifest error) be deemed final, binding and conclusive
upon Borrower in all respects as to all matters reflected therein, unless
Borrower, within sixty (60) days after the date any such accounting is rendered,
shall notify Agent in writing of any objection which Borrower may have to any
such accounting, describing the basis for such objection with specificity. In
that event, only those items (the "disputed items") expressly objected to in
--------------
such notice shall be deemed to be disputed by Borrower. Each and every
accounting shall (absent manifest error) be deemed final, binding and conclusive
upon Agent and Lenders in all respects as to all matters reflected therein,
unless Agent or any Lender, within sixty (60) days after the date on which any
such
<PAGE>
14
accounting is rendered, shall notify Borrower and, if notice is being given by a
Lender, Agent in writing of any objection or change to such accounting, in which
case Borrower shall be entitled to dispute such objection or change in the
manner provided above within the foregoing sixty (60) day period (which period
shall commence on the date Borrower and, if applicable, Agent, are notified of
such objection or change). Agent's determination in good faith, based upon the
facts available, of any disputed item shall (absent manifest error) be final,
binding and conclusive on Borrower.
SECTION 1.16 Indemnity.
---------
(a) Borrower shall, and shall cause each of its Subsidiaries to, jointly
and severally, indemnify and hold Agent, each Lender and their respective
Affiliates, officers, directors, employees, legal counsel and agents (each, an
"Indemnified Person"), harmless from and against any and all suits, actions,
- --------------------
costs, fines, deficiencies, penalties, proceedings, claims, damages, losses,
liabilities and expenses (including reasonable counsel fees and disbursements
and other reasonable costs of investigations or defense, including those
incurred upon any appeal) (each, a "Claim") which may be instituted or asserted
-----
against or incurred by such Indemnified Person as the result of credit having
been extended under this Agreement or any other Loan Document, the use or
intended use of proceeds of Revolving Credit Advances or otherwise arising in
connection with the transactions contemplated hereunder and thereunder and
regardless of whether the Indemnified Person is a party to such Claim; provided,
--------
that neither Borrower nor any of its Subsidiaries shall be liable for any
indemnification to such Indemnified Person with respect to any portion of any
such Claim which results solely from such Indemnified Person's gross negligence,
bad faith or willful misconduct as determined by a final judgment of a court of
competent jurisdiction and neither Borrower nor any of its Subsidiaries shall be
liable under this Section 1.16(a) for any lost profits of any Lender. To the
---------------
extent that the undertaking to indemnify and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, Borrower shall, and shall cause each of its Subsidiaries to,
contribute the maximum portion which Borrower and its Subsidiaries are permitted
to pay and satisfy under Applicable Law to the payment and satisfaction of all
indemnified matters incurred by any Indemnified Person. The relevant
Indemnified Person shall give Borrower prompt written notice of any Claim
asserted against it by a third party (other than a Claim for which Borrower and
its Subsidiaries have no indemnity obligations as described in the proviso in
the first sentence of this Section 1.16(a)) setting forth a description of those
----------------
elements of such Claim of which such Indemnified Person has knowledge. Borrower
and its Subsidiaries shall have the right at their sole expense at any time
during which such Claim is pending to select counsel to defend and settle any
such Claim so long as (i) in any such event Borrower and its Subsidiaries shall
have stated in a writing delivered to the applicable Indemnified Person that, as
between Borrower and its Subsidiaries and such Indemnified Person, Borrower and
its Subsidiaries are responsible to such Indemnified Person with respect to such
Claim (except to the extent expressly set forth in the proviso in the first
sentence of this Section 1.16(a)), (ii) the counsel selected by Borrower and its
----------------
Subsidiaries shall be reasonably acceptable to the relevant Indemnified Person
and (iii) Borrower and its Subsidiaries shall not settle any such Claim without
the prior written consent of the relevant Indemnified Person (which consent
shall not be unreasonably withheld or
<PAGE>
15
delayed); provided, however, if an Indemnified Person shall have been advised by
--------
its counsel that there are legal defenses available to such Indemnified Person
that are different from or additional to those available to any of Borrower and
its Subsidiaries which, in the reasonable opinion of such counsel, are
sufficient to make it undesirable for the same counsel to represent both such
Indemnified Person and any of Borrower and its Subsidiaries, such Indemnified
Person shall have the right to employ its own counsel in such action, and in
such event, the reasonable fees and disbursements of such counsel shall be paid
by Borrower and its Subsidiaries. If Borrower and its Subsidiaries shall fail
to assume the defense of any Claim in accordance with the terms of this
indemnity, the relevant Indemnified Person shall have the right to select
counsel and control the defense of such Claim; provided, however, no Indemnified
--------
Person shall settle any such Claim as to which it is controlling the defense
without the prior written consent of Borrower, which consent shall not be
unreasonably withheld or delayed. With respect to any Claim for which Borrower
and its Subsidiaries are entitled to select counsel, each Indemnified Person
shall have the right, at its expense, to participate in the defense of such
Claim. In the event that, with respect to any Claim, more than one Indemnified
Person shall be permitted hereunder to select counsel to defend such Claim at
the expense of Borrower and its Subsidiaries and shall decide to do so, then all
such Indemnified Persons shall select the same counsel to defend such
Indemnified Persons with respect to such Claim; provided, however, if any such
--------
Indemnified Person shall in its reasonable opinion consider that the retention
of one joint counsel shall result in a conflict of interest, such Indemnified
Person may, at the expense of Borrower and its Subsidiaries, select its own
counsel to defend such Indemnified Person with respect to such Claim. Lenders,
Agent and Borrower and its Subsidiaries and their respective counsel shall
cooperate with each other in all reasonable respects in any investigation, trial
and defense of any such Claim and any appeal arising therefrom. NEITHER AGENT
NOR ANY LENDER NOR ANY OTHER INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE
TO ANY OTHER PARTY HERETO, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF
SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH
PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE
ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED UNDER THE LOAN DOCUMENTS, THE
USE OR INTENDED USE OF PROCEEDS OF REVOLVING CREDIT ADVANCES OR OTHERWISE IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY. The foregoing provision in
favour of any Indemnified Person shall be in addition to any rights that such
Indemnified Person may have at common law or otherwise, including, but not
limited to, any right to contribution.
In any suit, proceeding or action brought by Agent or Lenders relating to
any sums owing to Borrower under or in connection with any contract or agreement
with an Account Debtor or other obligor or their successors, including, without
limitation, any Account, Chattel Paper, Instrument or Intellectual Property, or
to enforce any provision of the foregoing, Borrower shall, and shall cause each
of its Subsidiaries to, jointly and severally, indemnify and keep Agent and
Lenders harmless from and against all expense, loss or damage suffered by reason
of any defense, setoff, counterclaim, recoupment or reduction of liability
whatsoever of the obligor thereunder arising out of a breach by Borrower or any
of its Subsidiaries of any obligation
<PAGE>
16
thereunder or arising out of any other agreement, indebtedness or liability at
any time owing to, or in favour of, such obligor or its successors from Borrower
or any of its Subsidiaries, all such obligations of Borrower shall be and remain
enforceable against, and only against, Borrower or its applicable Subsidiary and
shall not be enforceable against Agent or Lenders.
(b) Borrower hereby acknowledges and agrees that neither Agent nor any
Lender (as of the date hereof) (i) is now or has ever been in control of any
real property or the affairs of Borrower or any other Loan Party, and (ii) has
the capacity through the provisions of the Loan Documents, other than through
such provisions contemplating the appointment of a receiver and manager on a
realization, to influence the conduct of Borrower or any other Loan Party with
respect to the ownership, operation or management of any of the real property.
SECTION 1.17 Access. Borrower shall, and shall cause each of its
------
Subsidiaries to, at such Person's expense (except for clause (c) below, which
shall be at Borrower's expense except to the extent provided otherwise in such
clause (c)): (a) provide access during normal business hours to Agent and each
Lender and any of their respective officers, employees, representatives,
consultants and agents, as frequently as Agent or any Lender determines to be
appropriate, upon reasonable advance notice (unless a Default shall have
occurred and be continuing, in which event no notice shall be required and Agent
and each Lender shall have access at any and all times), to the properties and
facilities of Borrower and each of its Subsidiaries; (b) permit Agent and each
Lender and any of their officers, employees, representatives, consultants and
agents to inspect, audit and make extracts from all of Borrower's and each of
its Subsidiaries' records, files and books of account; and (c) permit Agent on
behalf of Lenders or any representatives, consultants or agents of Agent to
conduct audits to inspect, review and evaluate the Collateral (such audits, at
the expense of Borrower, not to exceed (4) four times in any Fiscal Year for all
Loan Parties in the aggregate with respect to audits of inventory by Gordon
Brothers Partners, Inc. or other independent inventory auditors and (4) four
times in any Fiscal Year for all Loan Parties in the aggregate with respect to
other audits, unless an Event of Default has occurred, in which case, such
limits shall not apply; provided, however, the foregoing limits prior to the
--------
occurrence of an Event of Default shall not prohibit Agent from conducting
additional audits at Lenders' expense), and Borrower shall, and shall cause each
of its Subsidiaries to, render to Agent and each Lender and their
representatives, consultants and agents at Borrower's or its applicable
Subsidiaries' cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto. Borrower shall, and shall cause each
of its Subsidiaries to, make available to Agent and each Lender and their
respective legal counsel, as quickly as practicable under the circumstances,
originals or copies of all books, records, board minutes, contracts, insurance
policies, environmental audits, business plans, files, financial statements
(actual and pro forma), Tax Returns and other filings with any Governmental
--- -----
Body, and other instruments and documents which Agent or any Lender may request
which are in the possession or control of Borrower or any of its Subsidiaries or
any of their respective accountants and other advisors. Borrower shall deliver
any document or instrument reasonably necessary for Agent or any Lender, as it
may from time to time request, to obtain records from any service bureau or
other Person which maintains records for Borrower or its Subsidiaries, and shall
maintain duplicate records or supporting documentation on media, including
computer tapes
<PAGE>
17
and discs owned by Borrower or its Subsidiaries. Borrower shall, and shall
cause each of its Subsidiaries to, instruct its independent certified public
accountants and its banking and other financial institutions to make available
to Agent and each Lender such information and records as Agent and each Lender
may reasonably request.
SECTION 1.18 Taxes.
-----
(a) Any and all payments by Borrower under this Agreement or under the
Revolving Credit Notes shall be made, in accordance with this Section 1.18, in
------------
full, without set-off or counterclaim, and free and clear of and without
deduction or withholding for any and all present or future Taxes, excluding
Taxes imposed on or measured by the net income of Agent or Lenders by the
jurisdictions under the laws of which they are organized or carry on business or
any political subdivisions thereof. If Borrower shall be required by law to
deduct or withhold any Taxes from or in respect of any sum payable hereunder or
under any Revolving Credit Note to any Lender, (i) the sum payable shall be
increased, as may be necessary, so that after making all required deductions and
withholdings, (including deductions and withholdings applicable to additional
sums payable under this Section 1.18 and taking into account all Taxes on and
------------
arising by reason of the payment of additional sums payable under this Section
-------
1.18), Agent and/or the affected Lender, as applicable, receives an amount equal
- ----
to the sum that it would have received had no such deductions or withholdings
been made, (ii) Borrower shall make such deductions or withholdings, and (iii)
Borrower shall pay the full amount deducted or withheld to the relevant taxing
or other authority in accordance with Applicable Laws.
(b) In addition, Borrower agrees to pay any present or future Taxes that
arise from any payment made under this Agreement or under the Revolving Credit
Notes or from the execution, sale, transfer, delivery or registration of, or
otherwise with respect to, this Agreement or the Revolving Credit Notes, the
other Loan Documents and any other agreements and instruments contemplated
hereby or thereby (except for Taxes imposed on or measured by the net income of
Agent or Lenders by the jurisdictions under the laws of which they are organized
or carry on business or any political subdivisions thereof).
(c) Borrower shall indemnify Agent and each Lender for the full amount of
the Taxes referred to in this Section 1.18 (except for Taxes imposed on or
------------
measured by the net income of Agent or Lenders by the jurisdictions under the
laws of which they are organized or carry on business or any political
subdivisions thereof, but including, without limitation, any Taxes imposed by
any jurisdiction on amounts payable by Borrower under this Section 1.18) paid by
------------
Agent or such Lender and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
were correctly or legally asserted. This indemnification shall be made within
30 days after the date Agent makes written demand therefor for its own benefit
or the benefit of the affected Lender.
<PAGE>
18
(d) Within 30 days after the date of any payment of Taxes, Borrower shall
furnish to Agent, at its address referred to in Section 11.10, the original or a
-------------
certified copy of a receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement of Borrower
under this Agreement, the agreements and obligations of Borrower contained in
this Section 1.18 shall survive the Termination Date.
------------
(f) If any Lender subsequently receives from a taxing authority a refund of
any Taxes previously paid by Borrower and for which Borrower has indemnified
such Lender pursuant to this Section 1.18, such Lender shall within thirty (30)
------------
days after receipt of such refund, and to the extent permitted by Applicable
Laws, pay to Borrower the net amount of any such refund after deducting taxes
and expenses attributable thereto.
SECTION 1.19 Additional Costs.
----------------
(a) If at any time after the date of the initial Revolving Credit Advance,
any Lender determines, acting reasonably and with appropriate diligence, that
(i) any Regulatory Change, or (ii) compliance by such Lender with any direction,
requirement or request from any central bank or other regulatory authority given
after the date of execution hereof, whether or not having the force of law, has
or would have, as a consequence of such Lender's obligation under this
Agreement, and taking into consideration such Lender's policies with respect to
capital adequacy, the effect of reducing the rate of return on such Lender's
capital to a level below that which such Lender would have achieved under this
Agreement but for such change or compliance, such Lender shall determine the
amount of such additional amounts as will compensate such Lender for such
reduction.
(b) If after the date of execution hereof, any introduction of any
Applicable Law or any Regulatory Change or any change in the compliance of any
Lender therewith now or hereafter: (i) subjects any Lender to, or causes the
withdrawal or termination of a previously granted exemption with respect to, any
Tax or changes the basis of taxation, or increases any existing Tax, on payments
of principal, interest, fees or other amounts payable by Borrower to such Lender
under this Agreement (except for taxes on the overall net income of such
Lender), (ii) imposes, modifies or deems applicable any reserve, special
deposit, deposit insurance or similar requirement against assets held by, or
deposits in or for the account of or loans by or any other acquisition of funds
by, an office of such Lender, in connection with Revolving Credit Advances or
such Lender's Revolving Credit Commitment (iii) imposes or holds applicable on
such Lender, or expects there to be maintained by such Lender, any capital
adequacy or additional capital requirement in respect of Revolving Credit
Advances or its Revolving Credit Commitment or any other condition with respect
to this Agreement, or (iv) imposes any Tax on reserves or deemed reserves with
respect to the undrawn portion of its Revolving Credit Commitment, and the
result of any of the foregoing, in the determination of Lender acting reasonably
and with appropriate diligence, shall be to increase the cost to, or reduce the
amount of principal, interest or other amount received or receivable by such
Lender hereunder or its
<PAGE>
19
effective return hereunder in respect of making, maintaining or funding
Revolving Credit Advances hereunder, such Lender shall, acting reasonably,
determine that amount of money which shall compensate such Lender for such
increase in cost or reduction in income (herein referred to as "Additional
----------
Compensation").
- ------------
(c) Upon a Lender having determined that it is entitled to additional
amounts in accordance with the provisions of Section 1.19(a) or to Additional
---------------
Compensation in accordance with the provisions of Section 1.19(b), such Lender
---------------
shall promptly so notify Agent and shall provide to Agent a photocopy of the
relevant Regulatory Change or Applicable Law (if any, in either case,) and a
certificate of a duly authorized officer of such Lender setting forth the
additional amounts or Additional Compensation, as applicable, and the basis of
calculation thereof, which shall be prima facie evidence of such additional
amounts or Additional Compensation, as applicable. Agent shall promptly notify
Borrower and Borrower shall pay to Agent for the account of such Lender within
10 Business Days of the giving of such notice such Lender's additional amounts
or Additional Compensation, as applicable, calculated to the date of such
notification. Such Lender shall be entitled to be paid such additional amounts
or Additional Compensation, as applicable, from time to time to the extent that
the provisions of this Section 1.19 are then applicable notwithstanding that
------------
such Lender has previously been paid any additional amounts or Additional
Compensation.
ARTICLE 2
CONDITIONS PRECEDENT
SECTION 2.1 Conditions to the Initial Revolving Credit Advance.
--------------------------------------------------
Notwithstanding any other provision of this Agreement and without affecting in
any manner the rights of Agent or any Lender hereunder, Borrower shall have no
rights under this Agreement (but shall have all applicable obligations
hereunder), and Agent and Lenders shall not be obligated to make any Revolving
Credit Advance or to take, fulfil, or perform any other action hereunder, until
the following conditions have been fulfilled to the satisfaction of Agent (and
to the extent specified below, of Lenders):
(a) This Agreement or counterparts thereof shall have been duly executed
by, and delivered to, Borrower, Agent and each Lender.
(b) Agent and Lenders shall have received such documents, instruments,
certificates, opinions and agreements as Agent shall reasonably request in
connection with the transactions contemplated by this Agreement, including all
documents, instruments, agreements and other materials listed in the Schedule of
Closing Documents attached as Annex C hereto, each in form and substance
-------
satisfactory to Agent and Required Lenders (except that the Fee Agreement need
only be satisfactory to Agent), together with evidence of the completion of all
necessary or appropriate recordings and filings of the foregoing in order to
give agent first ranking Liens (subject to the other Liens permitted by Section
-------
6.7) created thereby in the Collateral.
- ---
<PAGE>
20
(c) Agent shall have received evidence satisfactory to Agent that all
Indebtedness and other obligations of Borrower under the Existing Credit
Agreement (as in effect immediately prior to the Closing Date) will be performed
and paid in full from the proceeds of the initial Revolving Credit Advance and
all Liens upon any of the property (including any cash collateral) of Borrower
in favour of the lender or lenders thereunder (or agent therefor) shall be
terminated and released immediately upon such payment and Agent and such lender
or lenders (or agent therefor) shall have entered into an escrow or other
agreement in form and substance satisfactory to Agent providing for the release
and termination of all such Liens, termination of the Existing Credit Agreement
and acknowledgment of payment in full of all outstanding Indebtedness and other
obligations under or relating to the Existing Credit Agreement.
(d) Agent shall have received evidence satisfactory to Agent that the Loan
Parties have obtained consents, approvals and acknowledgments of all Persons
whose consents, approvals and acknowledgments may be required, including all
requisite Governmental Approvals, to the terms and to the execution and delivery
of this Agreement and the other Loan Documents and the consummation of the
transactions contemplated hereby and thereby.
(e) Agent shall have received evidence satisfactory to Agent that the
insurance policies provided for in Section 3.18 and Annex F are in full force
------------ -------
and effect, together with appropriate evidence showing a loss payable and/or
additional insured clauses and/or mortgage clauses or endorsements, as
appropriate, in favour of Agent for Agent and Lenders and in form and substance
satisfactory to Agent.
(f) Payment in immediately available funds by Borrower to Agent for its
account and the account of Lenders, as the case may be, of all Fees and
reasonable costs and expenses of closing (including fees and expenses of
consultants and counsel to Agent and Lender presented as of the Closing Date).
(g) No action, proceeding, investigation, audit, regulation or legislation
shall have been instituted, threatened or proposed before any Governmental Body
(i) which, if successful, would have a Material Adverse Effect, or (ii) to
enjoin, restrain or prohibit, or to obtain damages in respect of, or which is
related to or arises out of, this Agreement or any of the other Loan Documents
or the consummation of the transactions contemplated hereby or thereby and
which, in Agent's sole judgment exercised in good faith, would make it
inadvisable to consummate the transactions contemplated by this Agreement or any
of the other Loan Documents.
(h) Agent, in its sole judgment, shall not have determined in good faith
that: (i) Borrower has made any Restricted Payment since September 30, 1994,
other than as set forth in Schedule 3.5; (ii) any material increase in
------------
liabilities, liquidated or contingent, of Borrower, or any material decrease in
the assets of Borrower (other than normal recurring seasonal changes in the
foregoing consistent with prior years' experience), shall have occurred since
September 30, 1994; (iii) except as set forth in Schedule 3.5, any Material
------------
Adverse Effect shall have occurred since September 30, 1994; or (iv) the results
of operations of Borrower for the period commencing
<PAGE>
21
September 30, 1994 and ending on the Closing Date are materially different from
the projected results of Borrower's operations for such period contained in the
Projections.
(i) Agent and each Lender shall be reasonably satisfied with the corporate,
capital, tax, legal and management structure and cash management systems of
Borrower, and shall be satisfied, in their respective sole judgments, with the
nature and status of all contractual obligations, securities, labor, tax,
employee benefit, environmental, health and safety matters, in each case,
involving or affecting Borrower. In connection therewith, Agent and its
Affiliates shall have completed, with results reasonably satisfactory to
Lenders, such business and legal due-diligence of Borrower as Agent may require
including, without limitation, satisfactory review by Agent's field examiners or
counsel, as applicable, of Borrower's Accounts, assets, inventory, financial
controls and records, contracts (including, without limitation, stockholder
agreements, licenses and debt and equity agreements), leases, pension funds,
organizational or governing documents, environmental compliance, indebtedness,
legal and capital structure, liabilities, tax position and a liquidation
analysis. Agent and its Affiliates shall have had reasonable and continuing
access to any material it deems necessary to monitor the loans to be made
hereunder, including access to Borrower's independent public accountants. Agent
shall be satisfied with the structure and the tax effect of the transactions
contemplated by this Agreement.
(j) Agent and Lenders shall have obtained a pro forma balance sheet of
Borrower as of the Closing Date after giving effect to the transactions
contemplated on the Closing Date under this Agreement in form and substance
reasonably satisfactory to Agent.
(k) Agent shall be satisfied that, as of the Closing Date, Borrower shall
be in compliance in all material respects with all material agreements and all
Applicable Laws, and shall have obtained all waivers, consents, approvals or
withholding of objections necessary or appropriate in connection with the
transactions contemplated by this Agreement and the facilities provided
hereunder.
(l) Should Agent have so required, as of the Closing Date, Borrower shall
have provided at its expense an Environmental Assessment, with results
reasonably acceptable in form and substance to Agent, from an independent
environmental firm acceptable to Agent. As of the Closing Date, Borrower shall
have provided to Lenders copies of any existing environmental reviews and
audits, as well as other information pertaining to material actual or potential
environmental claims with respect to Borrower of which it is aware.
(m) Agent shall be satisfied that, as of the Closing Date, the transactions
contemplated by this Agreement shall be in compliance with all Applicable Laws,
and there shall be no legal impediment to any of Lenders making loans or other
extensions of credit contemplated by this Agreement in any applicable
jurisdiction.
(n) Each of the Persons intended to be parties to the US Credit Agreement
and the UK Credit Agreement (which agreements shall be satisfactory to Agent)
shall have executed and delivered such agreements, all conditions to the Global
Lenders thereunder providing any
<PAGE>
22
financial accommodations under such agreements shall have been satisfied and
such credit agreements shall be in full force and effect.
(o) Tyco Manufacturing, Tyco Industries and the Receivables Funding
Subsidiary shall have entered into the Receivables Funding Documents (which
documents shall be satisfactory to GE Capital) and shall have satisfied all
conditions set forth in Article III of the Receivables Funding Agreement and the
Receivables Funding Documents shall be in full force and effect.
SECTION 2.2 Further Conditions to Each Revolving Credit Advance. It
---------------------------------------------------
shall be a further condition to the funding of the initial and each subsequent
Revolving Credit Advance that the following statements shall be true on the date
of each such funding, advance or incurrence, as the case may be:
(a) Each Loan Party's representations and warranties contained herein or in
any of the Loan Documents shall be true and correct in all material respects on
and as of the Closing Date and the date on which each such Revolving Credit
Advance is made, as though made on or incurred on and as of such date, except to
the extent that any such representation or warranty expressly relates solely to
an earlier date, in which case such representation and warranty shall have been
true and correct on such date, and except for changes permitted or contemplated
by this Agreement.
(b) No event shall have occurred and be continuing, or would result from
the making of any Revolving Credit Advance, which constitutes or would
constitute a Default or an Event of Default.
(c) After giving effect to any such Revolving Credit Advance, the aggregate
principal amount of the Revolving Credit Advances made to Borrower shall not
exceed the Borrowing Base and there shall be no requirement under Section
-------
1.3(b) to prepay any Revolving Credit Advance.
- ------
(d) There shall not have occurred a Material Adverse Effect which shall not
have been cured or waived in writing by Required Lenders.
(e) Agent shall have received a Notice of Revolving Credit Advance in
accordance with Section 1.1(c).
--------------
(f) Each of the conditions set forth in Section 2.1(a) through Section
-------------- -------
2.1(e) shall continue to be satisfied by the Loan Parties as of such date.
- ------
The request and acceptance by Borrower of the proceeds of any Revolving
Credit Advance shall be deemed to constitute, as of the date of such request,
(i) a representation and warranty by Borrower that the conditions in this
Section 2.2 have been satisfied and (ii) a confirmation by Borrower of the
- -----------
granting and continuance of Agent's and Lenders' Liens pursuant to the
Collateral Documents.
<PAGE>
23
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
To induce Agent and Lenders to enter into this Agreement, Borrower
represents and warrants to Agent and Lenders (which representations and
warranties under Sections 3.22 and 3.23 shall be continuously made until the
------------- ----
Termination Date and all such other representations and warranties shall be made
on the Closing Date and be made or deemed made at such other times as provided
hereunder (including as provided in Section 2.2); provided, however, for greater
----------- --------
certainty, Borrower's representations and warranties relating to Subsidiaries of
Borrower shall apply at and following the time at which Borrower creates or
acquires any Subsidiary) that:
SECTION 3.1 Corporate Existence; Compliance with Law. Each of Borrower
----------------------------------------
and its Subsidiaries: (a) is a corporation duly organized and validly existing
under the laws of the jurisdiction of its incorporation and is duly qualified to
do business and is in good standing under the laws of each jurisdiction where
its ownership or lease of property or the conduct of its business requires such
qualification; (b) has the requisite corporate power and authority and the legal
right to own, pledge, mortgage or otherwise encumber and operate its properties,
to lease the property it operates under lease, and to conduct its business as
now, heretofore and proposed to be conducted; (c) has all Governmental Approvals
and has made all filings with, and has given all notices to, all Governmental
Bodies having jurisdiction, to the extent required for such ownership, operation
and conduct (except when the failure to have such Governmental Approvals or make
such filings or give such notices would not have a Material Adverse Effect); (d)
is in compliance with its articles or certificate of incorporation and bylaws;
and (e) is in compliance with all Applicable Laws (except where the failure to
be in compliance would not have a Material Adverse Effect).
SECTION 3.2 Executive Offices; Collateral Locations; Corporate Names.
--------------------------------------------------------
The current location of each of Borrower's and its Subsidiaries' executive
office, principal place of business, corporate offices, all warehouses and
premises within which any Collateral is stored or located, and the locations of
all of Borrower's records concerning the Collateral are set forth in Schedule
--------
3.2. Each of Borrower's and its Subsidiaries' corporate names are set forth in
- ---
Section 3.2. Neither Borrower nor any of its Subsidiaries carries on any
- -----------
business under any name other than its corporate name.
SECTION 3.3 Corporate Power; Authorization; Enforceable Obligations.
-------------------------------------------------------
The execution, delivery and performance by each of Borrower and its Subsidiaries
of this Agreement and the other Loan Documents to which it is a party and the
creation by Borrower and its Subsidiaries of all Liens provided for herein and
therein: (a) are within Borrower's or its applicable Subsidiary's, as the case
may be, corporate power; (b) have been duly authorized by all necessary
corporate and shareholder action; (c) are not in contravention of any provision
of Borrower's or its applicable Subsidiary's, as the case may be, articles or
certificate of incorporation or bylaws or other organizational documents; (d)
will not violate any Applicable
<PAGE>
24
Laws of any Governmental Body; (e) will not conflict with or result in the
breach or termination of, constitute a default under or accelerate any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which Borrower or any of its Subsidiaries is a
party or by which Borrower, or any of its Subsidiaries, or any of their
respective property is bound, including the Subordinated Debt Documents; (f)
will not result in the creation or imposition of any Lien upon any of the
property of Borrower or any of its Subsidiaries other than those in favour of
Agent or Lenders, all pursuant to the Loan Documents; and (g) do not require the
consent or approval of any Governmental Body or any other Person, except those
referred to in Section 2.1, all of which will have been duly obtained, made or
-----------
complied with prior to the Closing Date and which are in full force and effect.
Each of the Loan Documents has been duly executed and delivered by each Loan
Party that is a party thereto, and each constitutes a legal, valid and binding
obligation of each such Loan Party, enforceable against each such Loan Party in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and principles of equity.
SECTION 3.4 Financial Statements and Projections. Borrower has
------------------------------------
delivered the Financials and Projections identified in Schedule 3.4 (which
------------
Projections are attached hereto as Exhibit 3.4), and each of such Financials and
------------
Projection complies with the description thereof contained in Schedule 3.4.
------------
SECTION 3.5 Material Adverse Change. As of the date hereof, Borrower
-----------------------
has no material obligations, contingent liabilities, or liabilities for Charges,
long-term leases or unusual forward or long-term commitments which are not
reflected in the audited December 31, 1993 balance sheet of Tyco Parent and its
Subsidiaries, except for those which were exercised or entered into in the
ordinary course of Borrower's business. As of the date hereof, there has been
no material deviation from the Projections. Except as otherwise permitted
hereunder or as set forth in Schedule 3.5, no Restricted Payment has been made
------------
since September 30, 1994, and no shares of Stock of Borrower or any of its
Subsidiaries have been, or are now required to be, redeemed, retired, purchased
or otherwise acquired for value by Borrower or any of its Subsidiaries. Except
as set forth in Schedule 3.5, since September 30, 1994, no event has occurred
------------
which would result in a Material Adverse Effect (it being understood that the
financial results described in Tyco Parent's press release of October 25, 1994
shall not constitute a Material Adverse Effect so long as Agent shall have
determined, after due diligence, that the results described therein reflect
completely and accurately, in all material respects the actual results for the
period covered).
SECTION 3.6 Ownership of Property; Liens. Neither Borrower nor any of
----------------------------
its Subsidiaries owns any real property. The real estate listed in Schedule 3.6
------------
constitutes all of the real property leased, or used in Borrower's or any of its
Subsidiaries' business. Borrower or one of its Subsidiaries holds (a) valid
and, subject to receipt of any necessary consent of any lessor thereunder,
marketable leasehold interests in all Leases (both as lessee and sublessee or
assignee) as described in Schedule 3.6, and (b) good and, subject to receipt of
------------
any necessary consent of any lessor thereunder, marketable title to, or valid
leasehold interests in, all of their other
<PAGE>
25
properties and assets. None of the properties and assets of Borrower or any of
its Subsidiaries is subject to any Liens, except Liens permitted by Section 6.7.
-----------
Borrower and each of its Subsidiaries have received all deeds, assignments,
waivers, consents, non-disturbance and recognition or similar agreements, bills
of sale and other documents, and duly effected all recordings, filings and other
actions necessary to establish, protect and perfect Borrower's and each of its
Subsidiaries' right, title and interest in and to all such real estate and other
assets or property. Except as described in Schedule 3.6, (a) neither Borrower
------------
nor any of its Subsidiaries nor, to Borrower's knowledge, any other party to any
such Lease described in Schedule 3.6 is in default of its obligations thereunder
------------
or has delivered or received any notice of default under any such Lease, and no
event has occurred which, with the giving of notice, the passage of time, or
both, would constitute a default under any such Lease; (b) neither Borrower nor
any of its Subsidiaries owns or holds, or is obligated under or a party to, any
option, right of first refusal or any other contractual right to purchase,
acquire, sell, assign or dispose of any real property; and (c) no portion of any
real property leased by Borrower or any of its Subsidiaries has suffered any
material damage by fire or other casualty loss which has not heretofore been
repaired and restored to good operating condition, except as notified by
Borrower to Agent and Lender. All Governmental Approvals required to have been
issued or appropriate to enable the real property subject to the Leases to be
lawfully occupied and used for all of the purposes for which they are currently
occupied and used, have been lawfully issued and are, as of the date hereof, in
full force and effect.
SECTION 3.7 Restrictions; No Default; Material Contracts. No contract,
--------------------------------------------
lease, agreement or other instrument to which Borrower or any of its
Subsidiaries is a party or by which it or any of its properties or assets is
bound or affected and no provision of any charter, corporate restriction or
Applicable Laws has resulted in or will result in a Material Adverse Effect.
Neither Borrower nor any of its Subsidiaries is in material default and, to
Borrower's knowledge, no third party is in material default, under or with
respect to any material contract, agreement, lease or other instrument to which
Borrower or any of its Subsidiaries is a party. No Default has occurred and is
continuing. Schedule 3.7, as supplemented from time to time by written
------------
disclosures to Agent, sets forth a complete and accurate list of all Material
Contracts. Borrower and each of its Subsidiaries is in compliance in all
material respects with (i) all material licence agreements to which it is a
party or bound by, (ii) its obligations to make royalty payments to other
Persons and (iii) the terms and conditions of its insurance coverage and
policies therefor.
SECTION 3.8 Labor Matters. Except as set forth in Schedule 3.8, there
------------- ------------
are no material strikes or other labor disputes against Borrower or any of its
Subsidiaries that are pending or, to Borrower's knowledge, threatened. Hours
worked by and payment made to employees of Borrower and its Subsidiaries have
not been in violation of any Applicable Laws which would have a Material Adverse
Effect. All material payments due from Borrower or any of its Subsidiaries on
account of employee insurance of every kind have been paid or accrued as a
liability on the books of Borrower or its applicable Subsidiary, as applicable.
Except as set forth in Schedule 3.8, neither Borrower nor any of its
------------
Subsidiaries has any material obligation under any collective bargaining
agreement, management agreement, or any employment
<PAGE>
26
agreement, and a correct and complete copy of each agreement listed on Schedule
--------
3.8 has been provided to Agent. There is no material organizing activity
- ---
involving Borrower or any of its Subsidiaries pending or, to Borrower's
knowledge, threatened by any labor union or group of employees. Except as set
forth in Schedule 3.13, neither Borrower nor any of its Subsidiaries has made a
-------------
pending demand for recognition, and, there are no material complaints or charges
against Borrower or any of its Subsidiaries pending or threatened to be filed
with any Governmental Body or arbitrator based on, arising out of, in connection
with, or otherwise relating to the employment or termination of employment by
Borrower or any of its Subsidiaries of any individual.
SECTION 3.9 Ventures, Subsidiaries and Equity Investments; Outstanding
----------------------------------------------------------
Stock and Indebtedness. Borrower has no Subsidiaries other than those
- ----------------------
Subsidiaries set forth on Schedule 3.9 and, except as set forth in Schedule 3.9,
------------ ------------
neither Borrower nor any of its Subsidiaries is engaged in any joint venture or
partnership with any other Person or has any equity interest in any other
Person. The Stock of Borrower and each of its Subsidiaries owned by each of the
stockholders thereof named in Schedule 3.9 constitutes all of the issued and
------------
outstanding Stock of such Persons and all such Stock is duly and validly issued,
fully paid and non-assessable. Except as set forth in Schedule 3.9, there are
------------
no outstanding rights to purchase options, warrants or similar rights,
agreements or plans pursuant to which Borrower or any of its Subsidiaries may be
required to issue, sell or purchase any Stock. Schedule 3.9 lists all
------------
outstanding Stock of Borrower and each of its Subsidiaries as of the Closing
Date and all Indebtedness of Borrower and each of its Subsidiaries immediately
prior to the time of closing on the Closing Date.
SECTION 3.10 Taxes. All Tax Returns required to be filed by or on behalf
-----
of Borrower or any of its Subsidiaries have been accurately prepared, duly
executed and filed within the prescribed period. All information provided in
such Tax Returns pertaining to Borrower or any of its Subsidiaries is true,
complete and accurate in all material respects. All Taxes attributable to each
of Borrower and its Subsidiaries that were due and payable have been paid
(except Taxes being contested pursuant to Section 5.2) and adequate provision
-----------
has been made on the books of Borrower and each of its Subsidiaries in
accordance with GAAP for all Taxes payable for the current or a prior year which
are not yet due. As of the Closing Date, Borrower has received notices of
assessment up to the 1991 taxation year from the Government of Ontario, the
Government of Quebec and the Government of Canada. Except as set out in
Schedule 3.10, as such Schedule may, with respect to this sentence, be updated
- -------------
from time to time without (except as provided below) the consent of Agent or
Lenders by Borrower in a writing delivered to Agent and Lenders, neither
Borrower nor any of its Subsidiaries has received any notice of assessment of
additional taxes or any other claim or notice of any nature whatsoever that any
Tax or additional Tax is due which has not been paid or otherwise finally
settled or satisfied (it being agreed that any update of Schedule 3.10 with
-------------
respect to any material assessment or any other material claim shall require the
consent of the Required Lenders). Except as set out in Schedule 3.10, as such
-------------
Schedule may, with respect to this sentence, be updated from time to time
without (except as provided below) the consent of Agent or Lenders by Borrower
in a writing delivered to Agent and Lenders, there are no actions, suits,
proceedings, investigations or claims, threatened
<PAGE>
27
or pending in respect of any Taxes, nor are there any matters under discussion
with any Governmental Body relating to any Taxes asserted by any such body (it
being agreed that any update of Schedule 3.10 with respect to any material
-------------
actions, suits, proceedings investigations or claims, threatened or pending, or
any material matters under discussion, shall require the consent of the Required
Lenders). Each of Borrower and its Subsidiaries has withheld from its
employees, customers and any other applicable payees (and timely paid to the
appropriate Governmental Body) the proper and accurate amount of all Taxes and
other amounts required to be withheld or collected and remitted in compliance
with all Applicable Laws. There are no Liens for Taxes on the assets of any of
Borrower or its Subsidiaries except for Liens for Taxes not yet due. Neither
Borrower nor its Subsidiaries have executed or filed with Revenue Canada or any
other Governmental Body any agreement, waiver or other document extending or
having the effect of extending the period for assessment, reassessment or
collection of any Taxes or the filing of any Tax Returns.
SECTION 3.11 No Foreign Business. Neither Borrower nor any of its
-------------------
Subsidiaries carries on any business, employs any employees or owns any material
assets outside Canada.
SECTION 3.12 Benefit and Pension Plans. Neither Borrower nor any of its
-------------------------
Subsidiaries has made at any time any improper withdrawal or application of
assets in respect of any Canadian Pension Plan to which Borrower has made at any
time contributions or which Borrower has maintained at any time. Neither
Borrower nor any of its Subsidiaries maintains or contributes to any Canadian
Pension Plan. Schedule 3.12 sets forth all Canadian Benefit Plans. No promises
-------------
of benefit improvements under the Canadian Benefit Plans have been made except
where such improvement could not have a Material Adverse Effect. All
contributions or premiums required to be made by Borrower and each of its
Subsidiaries to the Canadian Benefit Plans have been made in a timely fashion in
accordance with the terms of such plans and all Applicable Laws. All employee
contributions to the Canadian Benefit Plans by way of authorized payroll
deduction have been properly withheld by Borrower and each of its Subsidiaries
and fully paid into such plans. There have been no improper withdrawals or
applications of the assets of the Canadian Benefit Plans. Each of the Canadian
Benefit Plans is fully funded. Neither Borrower nor any of its Subsidiaries is
a party to, employs any employees who are participants in or has taken any
action which may have the effect of acknowledging, accepting or creating any
liability whatsoever under or in respect of any employee benefit plan which is
governed by ERISA. None of the assets of Borrower or any of its Subsidiaries is
subject to any Lien in favour of the PBGC or any other Person in connection with
any liability under or in connection with ERISA.
SECTION 3.13 No Litigation. Except as set forth in Schedule 3.13, no
------------- -------------
action, claim or proceeding is now pending or, to the knowledge of Borrower or
any of its Subsidiaries, threatened against Borrower or any of its Subsidiaries,
at law, in equity or otherwise, before any court, board, commission, agency or
instrumentality of any Governmental Body or before any arbitrator or panel of
arbitrators (a) which challenges any such Person's right, power, or competence
to enter into or perform any of its obligations under the Loan Documents, or the
validity or enforceability of any Loan Document or any action taken thereunder,
or (b) which if
<PAGE>
28
determined adversely, is reasonably likely to have a Material Adverse Effect.
To the knowledge of Borrower and its Subsidiaries, there does not exist a state
of facts which is reasonably likely to give rise to such proceedings. Except as
set forth in Schedule 3.13, neither Borrower nor any of its Subsidiaries is a
-------------
party to any consent order.
SECTION 3.14 Brokers. No broker or finder acting on behalf of Borrower
-------
brought about the obtaining, making or closing of the credit extended pursuant
to this Agreement or the transactions contemplated by the Loan Documents or the
transactions contemplated thereby and Borrower has no obligation to any Person
in respect of any finder's or brokerage fees in connection therewith.
SECTION 3.15 Patents, Trademarks, Copyrights and Licenses. The sole
--------------------------------------------
interest that Borrower or any of its Subsidiaries has in any Intellectual
Property is the right to use certain Intellectual Property under the
Distribution Agreement. Borrower's rights to use certain Intellectual Property
under the Distribution Agreement give to Borrower all the rights which Borrower
requires to continue to conduct its business as heretofore conducted by it, now
conducted by it and proposed to be conducted by it, each of which Intellectual
Property is listed by type of property, together with the owner thereof, in
Schedule 3.15. Following the Closing Date, Schedule 3.15 has been updated by
- ------------- -------------
Borrower to reflect promptly any change therein. Each of Borrower and its
Subsidiaries conducts business without infringement or claim of infringement of
any Intellectual Property of others, except where such infringement or claim of
infringement could not have or result in a Material Adverse Effect. Except as
set forth in Schedule 3.15, to Borrower's knowledge, there is no infringement or
-------------
claim of infringement by others of any Intellectual Property used by Borrower or
any of its Subsidiaries.
SECTION 3.16 Full Disclosure. No information contained in this
---------------
Agreement, the other Loan Documents, the Financials or any written statement
furnished by or on behalf of Borrower or any Affiliate thereof pursuant to the
terms of this Agreement or any other Loan Document, which has previously been
delivered to Agent or any Lender, contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made. With respect to all business plans and other forecasts
and projections (including the Projections) furnished by or on behalf of
Borrower and made available to Agent or any Lender relating to the financial
condition, operations, business, properties or prospects of Borrower (a) all
facts stated as such therein are true and complete in all material respects, (b)
all facts upon which the forecasts or projections therein contained are based
are true and complete in all material respects and no material fact was omitted
therefrom, (c) all assumptions made on that basis are reasonable under the
circumstances and are disclosed therein, and (d) the forecasts or projections
are reasonably based on those facts and assumptions. With respect to any such
forecasts or projections made available to Agent or any Lender after the Closing
Date, the foregoing clauses (a) through (d) shall be true and correct in all
respects as of the date of such projections or forecasts.
<PAGE>
29
SECTION 3.17 Environmental Matters. Except as disclosed in Schedule
--------------------- --------
3.17:
(a) all Facilities and the Undertaking have been, and continue to be,
owned, leased, managed, controlled or operated, and have been and are now in
compliance with all Environmental Laws;
(b) Borrower and each of its Subsidiaries have obtained all Governmental
Approvals which they require under Environmental Laws in respect of the
Facilities and the Undertaking. The Undertaking has been conducted in
compliance with all such Governmental Approvals and all such Governmental
Approvals are valid and in full force and effect;
(c) neither Borrower nor any of its Subsidiaries has received any notice,
nor is any aware of any proposal, to amend, revoke or replace any Governmental
Approval under Environmental Laws, or requiring the issue of any such additional
Governmental Approval in respect of the Facilities or the Undertaking;
(d) Borrower and each of its Subsidiaries and their predecessors in title
have carried on or are carrying on, as the case may be, the Undertaking in a
manner which would permit the issue, maintenance, renewal or reissue of all
Governmental Approvals required under the Environmental Laws in respect of the
Facilities and the Undertaking;
(e) no notice, citation, summons or order has been issued, no complaint has
been filed, no administrative or legal proceedings have been instituted and no
penalty has been assessed and no environmental investigation or review is
pending or threatened by any Governmental Body with respect to any alleged (1)
violation by Borrower or any of its Subsidiaries of any Environmental Law with
respect to the Facilities or the Undertaking; or (2) failure by Borrower or any
of it Subsidiaries to have any Governmental Approval which any of them is
required to have under the Environmental Laws in respect of the Facilities or
the Undertaking; or (3) violation of or failure by Borrower or any of its
Subsidiaries to comply with any Governmental Approval which any of them is
required to have under the Environmental Laws in respect of the Facilities or
the Undertaking;
(f) neither Borrower nor any of its Subsidiaries or predecessors in title
is or has been on notice of, or subject to, a claim, administrative order or
other demand either to take decontamination or restoration or other action under
any Environmental Laws, or to reimburse any Person who has taken such action, in
connection with a Facility or other property or is or has been the object of any
stop order, control order, directive, order, programme approval, certificate or
depollution programme relating to an Environmental Activity or any other
environmental matter which mandates any work, repairs, construction,
modifications, capital expenditures or any preparation of contingency plans
binding upon Borrower or any of its Subsidiaries;
<PAGE>
30
(g) neither Borrower nor any of its Subsidiaries nor any predecessor in
title has, contrary to any Environmental Laws, used, generated, treated, stored,
recycled, reused or Discharged any Contaminant in, on, under, or from any
property now or previously owned, operated, leased or occupied by Borrower or
any of its Subsidiaries or any predecessor in title;
(h) each of Borrower and its Subsidiaries and their predecessors in title
has reported promptly to appropriate Governmental Bodies the occurrence of any
Environmental Activity or any other event where required to do so by
Environmental Laws in respect of any of the Facilities and the Undertaking;
(i) there are no environmental Liens or registrations under any
Environmental Laws on any Facility and no actions have been taken which could
subject any Facility to such environmental Liens or registrations;
(j) there is no fact, condition or circumstance relating to the Facilities
or the Undertaking that could reasonably be expected to result in a Material
Adverse Effect as a result of non-compliance with any Environmental Laws;
(k) neither Borrower nor any of its Subsidiaries has any liability or
contingent liability under any Environmental Laws in connection with the
Facilities or the Undertaking constituting a Material Adverse Effect (whether or
not such contingent liability is required under GAAP to be reflected in the
financial statements of Borrower or any Subsidiary); and
(l) there are no unauthorized locations in Canada and the United States to
which Contaminants have been shipped or disposed of by any of Borrower or its
Subsidiaries. All facilities and all transporters and handlers engaged by
Borrower or its Subsidiaries to transport or dispose of any Contaminants had, at
the time of shipment or disposal, all required Governmental Approvals.
SECTION 3.18 Insurance Policies. Schedule 3.18 lists all insurance of
------------------ -------------
any nature maintained as of the Closing Date for current occurrences by Borrower
and each of its Subsidiaries. Such insurance complies with and shall at all
times comply with the standards set forth in Annex F.
-------
SECTION 3.19 Deposit and Disbursement Accounts. Schedule 3.19 lists all
--------------------------------- -------------
banks and other financial institutions at which Borrower and each of its
Subsidiaries maintains deposits and/or other accounts, including the Blocked
Account and the Disbursements Accounts, and such Schedule correctly identifies
the name, address and telephone number of each such financial institution, the
name in which the account is held, a description of the purpose of the account,
and the complete account number.
SECTION 3.20 Existing US Credit Agreement. The Existing US Credit
----------------------------
Agreement in the original form executed as of June 3, 1992 was in effect on
August 15, 1992 without any amendment or modification thereto. Immediately
prior to the Closing Date, Borrower was a
<PAGE>
31
"Credit Party", "Guarantor" and "Subsidiary Guarantor", all as defined in the
Existing US Credit Agreement. Borrower has not granted to any lender (or agent
thereof) under the Existing US Credit Agreement a Lien in any of its assets.
Borrower has not entered into any "Bank Agency Agreement" (as defined in the
Existing US Credit Agreement) under the Existing US Credit Agreement.
SECTION 3.21 Subordinated Debt. The Obligations of Borrower and each
-----------------
other Loan Party are "Senior Indebtedness of a Guarantor" as defined in the Tyco
Parent Senior Subordinated Note Indenture. The payment of the obligations of
Borrower and any other Loan Party under any guarantee of any of the notes issued
pursuant to the Tyco Parent Senior Subordinated Note Indenture are junior and
subordinate to the payment of the Obligations.
SECTION 3.22 Promissory Notes and Pledge. Each loan or advance, now
---------------------------
existing or hereafter made or permitted to be made hereunder, by Borrower or any
of its Subsidiaries, and each intercompany payable now or hereafter owing to
Borrower or any of its Subsidiaries, is evidenced by a promissory note, in form
and substance satisfactory to Agent, which note is pledged to Agent pursuant to
the Security Agreement whereby Agent has obtained a first priority perfected
Lien in such promissory notes.
SECTION 3.23 Inventory. All Inventory purchased by Borrower or any of
---------
its Subsidiaries is purchased free and clear of any and all adverse claims. All
Affiliates of Borrower from whom Borrower purchases Inventory have duly executed
Supplier Waivers and Assignments which are enforceable against such Affiliates.
Borrower has delivered to Agent those Supplier Waivers and Assignments.
SECTION 3.24 Deemed Repetition. In all material respects, the
-----------------
representations and warranties contained in Section 3.1 through Section 3.23
----------- ------------
inclusive shall be deemed to be repeated on each date on which a Revolving
Credit Advance is made as if made on such date, except to the extent that any
such representation or warranty expressly relates solely to an earlier date and
except for changes therein permitted or contemplated by this Agreement.
ARTICLE 4
FINANCIAL STATEMENTS AND INFORMATION
SECTION 4.1 Reports and Notices. Borrower covenants and agrees that
-------------------
from and after the Closing Date and until the Termination Date, it shall deliver
to Agent and each Lender the Financial Statements, Projections and notices at
the times and in the manner set forth in Annex E.
-------
SECTION 4.2 Communication with Accountants. Borrower authorizes Agent,
------------------------------
each Lender and each participant under the Participation Agreement to
communicate with its and its Subsidiaries' independent certified public
accountants and authorizes or will arrange for
<PAGE>
32
authorization for those accountants to make available to Agent, each Lender and
each participant under the Participation Agreement any and all financial
statements and other supporting financial documents and schedules with respect
to the business, financial condition and other affairs of Borrower and its
Subsidiaries, in each instance, provided that Agent, such Lender or such
participant shall (i) give Borrower prior notice of each intended communication
with such accountants and of each request to have such accountants make
available to Agent, such Lender or such participant any such financial
information and material and (ii) permit a representative of Borrower to be
present at any such communication or making available of financial information
and material. At or before the Closing Date, Borrower shall deliver a letter
addressed to and acknowledged by such accountants (such acknowledgement to be
made in favour of Agent, Lenders and participants under the Participation
Agreement) instructing them to make available to Agent, Lenders and participants
under the Participation Agreement such information and records as Agent, Lenders
and participants under the Participation Agreement may reasonably request and to
otherwise comply with the provisions of this Article 4 and a similar letter of
---------
Tyco Parent's accountants delivered under the US Credit Agreement (such letters,
the "Accountants' Letters"). After the Closing Date, if Tyco Parent or Borrower
engages the services of accountants other than Deloitte & Touche, Borrower shall
deliver or cause to be delivered a letter addressed to, and acknowledged by,
such accountants (such acknowledgement to be made in favour of Agent, Lenders
and participants under the Participation Agreement) containing the same terms
and provisions as the applicable Accountant's Letter. Borrower shall deliver to
Agent a copy of such letter so acknowledged by such accountants prior to the
engagement by Tyco Parent or Borrower of such accountants.
ARTICLE 5
AFFIRMATIVE COVENANTS
Borrower acknowledges that it controls its Subsidiaries, if any. To the
extent that the provisions of this Agreement impose obligations or restrictions
of any nature or kind on the Subsidiaries of Borrower, including the covenants
contained in Articles 5 and 6, the Borrower shall be obligated to Agent and
---------- -
Lenders to cause its Subsidiaries to comply with such obligations and
restrictions. Borrower covenants and agrees that, unless Required Lenders shall
otherwise consent in writing, from and after the date hereof and until the
Termination Date:
SECTION 5.1 Maintenance of Existence and Conduct of Business. Each of
------------------------------------------------
Borrower and its Subsidiaries shall: (a) do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence;
(b) continue to conduct its business substantially as now conducted or as
otherwise permitted hereunder; (c) at all times maintain, preserve and protect
all of its material Intellectual Property, and preserve all the remainder of its
property (unless obsolete), in use or useful in the conduct of its business and
keep the same in good repair, working order and condition (taking into
consideration ordinary wear and tear) and from time to time make, or cause to be
made, all necessary or appropriate repairs, replacements and improvements
thereto consistent with industry practices, so that the business carried on in
<PAGE>
33
connection therewith may be properly and advantageously conducted at all times;
(d) keep and maintain its Equipment and fixtures in good operating condition
(taking into consideration ordinary wear and tear) sufficient for the
continuation of Borrower's business conducted on a basis consistent with past
practices and shall provide or arrange for all maintenance and service and all
repairs necessary for such purpose; and (e) transact business only under the
names set forth in Schedule 3.2 (unless Borrower provides Agent with not less
------------
than 30 days prior notice of use of another name).
SECTION 5.2 Payment of Obligations, Charges and Claims. Each of
------------------------------------------
Borrower and its Subsidiaries shall pay and discharge in accordance with the
terms thereof: (a) all its Indebtedness and Obligations, as and when due and
payable, (b) all Charges imposed upon it or its income and profits, or any of
its property (real, personal or mixed), and (c) all lawful claims for labor,
materials, supplies and services or otherwise, which if unpaid might by law
become a Lien on its property; provided, that Borrower or any of its
--------
Subsidiaries shall not be required to pay any such Charge or claim which is
being contested in good faith by proper legal actions or proceedings, so long as
at the time of commencement of any such action or proceeding and during the
pendency thereof (i) no Default shall have occurred and be continuing, (ii)
adequate reserves with respect thereto are established and are maintained in
accordance with GAAP, (iii) such contest operates to suspend collection of the
contested Charges or claims and is maintained and prosecuted continuously with
diligence, (iv) none of the Collateral would be subject to forfeiture or loss or
any Lien by reason of the institution or prosecution of such contest, (v) no
Lien shall exist, be imposed or be attempted to be imposed for such Charges or
claims during such action or proceeding unless the full amount of such Charge or
claim is covered by insurance satisfactory in all respects to Agent, and (vi)
Borrower or its applicable Subsidiary, as appropriate, shall promptly pay or
discharge such contested Charges and all additional charges, interest, penalties
and expenses, if any, and shall deliver to Agent evidence acceptable to Agent of
such compliance, payment or discharge, if such contest is terminated or
discontinued adversely to Borrower or its Subsidiaries, as appropriate.
SECTION 5.3 Books and Records. Each of Borrower and its Subsidiaries
-----------------
shall keep adequate records and books of account with respect to its business
activities, in which proper entries, reflecting all of its consolidated and
consolidating financial transactions, are made in accordance with GAAP and on a
basis consistent with the Financials.
SECTION 5.4 Litigation. Borrower shall notify Agent and each Lender in
----------
writing, promptly upon learning thereof, of any litigation, Claim or other
action commenced or threatened against Borrower or any of its Subsidiaries, and
of the institution against any such Person of any suit or administrative
proceeding which (a) is reasonably likely to involve an amount in excess of
$100,000, or the Equivalent Amount thereof, individually or (to the extent
litigation, Claims or other actions are related) in the aggregate or (b) is
reasonably likely to result in a Material Adverse Effect if adversely
determined.
<PAGE>
34
SECTION 5.5 Insurance.
---------
(a) Each of Borrower and its Subsidiaries shall, at their sole cost and
expense maintain or cause to be maintained, the policies of insurance in such
amounts and as otherwise described in Annex F. Borrower shall notify Agent
-------
promptly of any occurrence causing a material loss or decline in value of any
real or personal property and the estimated (or actual, if available) amount of
such loss or decline, except as specified otherwise in Annex F. Borrower (for
-------
itself and its Subsidiaries) hereby directs all present and future insurers
under its "All Risk" policies of insurance to pay all proceeds payable
thereunder directly to Agent on behalf of Lenders. Borrower (for itself and its
Subsidiaries) irrevocably makes, constitutes and appoints Agent (and all
officers, employees or agents designated by Agent) as such Person's true and
lawful agent and attorney in-fact for the purpose of making, settling and
adjusting claims under the "All Risk" policies of insurance, endorsing the name
of such Person on any cheque, draft, instrument or other item of payment for the
proceeds of such "All Risk" policies of insurance, and for making all
determinations and decisions with respect to such "All Risk" policies of
insurance. In the event Borrower at any time or times hereafter shall fail to
obtain or maintain (or fail to cause to be obtained or maintained) any of the
policies of insurance required above or to pay any premium in whole or in part
relating thereto, Agent or Lenders, without waiving or releasing any Obligations
or Default or Event of Default hereunder, may at any time or times thereafter
(but shall not be obligated to) obtain and maintain such policies of insurance
and pay such premium and take any other action with respect thereto which Agent
or Lenders deem advisable. All sums so disbursed, including reasonable counsel
fees, court costs and other charges related thereto, shall be payable, on
demand, by Borrower to Agent on behalf of Lenders and shall be additional
Obligations hereunder secured by the Collateral, provided, that if and to the
--------
extent Borrower fails to promptly pay any of such sums upon Agent's demand
therefor, Agent is authorized to, and at its option may, make or cause to be
made Revolving Credit Advances on behalf of Borrower for payment thereof.
(b) Agent and Required Lenders reserve the right at any time, upon review
of the risk profile of Borrower and its Subsidiaries, to require additional
forms and limits of insurance to, in Agent's or Required Lenders' sole opinion,
adequately protect the interests of Agent and Lenders. Borrower shall, if so
requested by Agent, deliver to Agent, as often as Agent may request, a report of
a reputable insurance broker satisfactory to Agent with respect to its insurance
policies.
(c) Borrower shall deliver to Agent endorsements to all of its and its
Subsidiaries' (i) "All Risk" and business interruption insurance naming Agent on
behalf of Agent and Lenders as loss payee, and (ii) general liability and other
liability policies naming Agent on behalf of Agent and Lenders as additional
insureds.
(d) Prior to or contemporaneously with the amendment, supplementation or
other modification of Borrower's insurance coverage under which Agent is to be
named as a loss payee under the terms of this Agreement, Borrower agrees to
deliver to Agent (i) an Assignment of Monies Payable Under Insurance Policies
duly executed by Borrower; (ii) a duly executed
<PAGE>
35
confirmation of the applicable insurer confirming the receipt of the transfer
and assignment and authorization provided for in such Assignment of Monies
Payable Under Insurance Policies and the duly executed agreement of the
applicable insurer to pay all proceeds of insurance in accordance with same; and
(iii) a legal opinion of counsel acceptable to Agent in form and substance
acceptable to Agent as to the Assignment of Monies Payable Under Insurance
Policies being enforceable against Borrower.
SECTION 5.6 Compliance with Laws. Each of Borrower and its Subsidiaries
--------------------
shall comply in all material respects with all Applicable Laws, including those
regarding the withholding, collection, payment and deposit of employee's income,
unemployment insurance or other benefits and social security, except (other than
with respect to those Applicable Laws with which the failure to so comply would
result in a Lien against any of the Borrower's or any of its Subsidiaries'
property or assets) when the failure to so comply could not reasonably be
expected to result in a Material Adverse Effect and would not reasonably likely
subject Borrower or any of its Subsidiaries to any criminal penalties (other
than non-material fines) or the Agent or any Lender to any civil or criminal
penalties.
SECTION 5.7 Agreements. Each of Borrower and its Subsidiaries shall
----------
perform and comply with, within all required time periods (after giving effect
to any applicable grace periods), all of its obligations and enforce all of its
rights under each agreement, contract, instrument or other document to which it
is a party, including any Material Contracts, leases, licences and customer
contracts to which it is a party where the failure to so perform and enforce
could have or result in a Material Adverse Effect. Each of Borrower and its
Subsidiaries shall take such actions or omit to take such actions so as not to
cause a breach of the representations and warranties hereunder and under the
other Loan Documents.
SECTION 5.8 Supplemental Disclosure. On the request of Agent or any
-----------------------
Lender, at any time after an Event of Default has occurred which is continuing
and, otherwise, not more than once a calendar quarter (in the event that such
information is not otherwise delivered by Borrower to Agent or Lenders pursuant
to this Agreement), Borrower will supplement (or cause to be supplemented) each
Schedule hereto, or representation herein or in any other Loan Document with
respect to any matter hereafter arising which, if existing or occurring at the
date of this Agreement, would have been required to be set forth or described in
such Schedule or as an exception to such representation or which is necessary to
correct any information in such Schedule or representation which has been
rendered inaccurate thereby; provided, that any supplement to such Schedule or
--------
representation shall not be deemed an amendment thereof unless expressly
consented to in writing by Agent and Required Lenders, and no such amendments,
except as the same may be consented to in a writing which expressly includes a
waiver, shall be or be deemed a waiver by Lenders of any Default disclosed
therein. Borrower shall, if so requested by Agent or Required Lenders, furnish
to Agent and Lenders as often as they reasonably request, statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Agent or Required Lenders may
reasonably request, all in reasonable detail, and Borrower shall advise Agent
and Lenders promptly, in reasonable detail, of (a) any Lien, other than as
permitted pursuant to Section 6.7,
-----------
<PAGE>
36
attaching to or asserted against any of the Collateral, (b) any material change
in the composition of the Collateral, and (c) the occurrence of any other event
which would have a Material Adverse Effect upon the Collateral and/or Agent's
Lien thereon.
SECTION 5.9 Environmental Matters.
---------------------
(a) Each of Borrower and its Subsidiaries (1) shall be at all times in
compliance in all material respects with all Environmental Laws, and (2) shall
similarly ensure that the Facilities and the Undertaking are in compliance with
all Environmental Laws and that no Contaminants are, contrary to any
Environmental Laws, Discharged, generated, used, stored, transported or
otherwise dealt with thereon or in connection therewith.
(b) Borrower shall deliver to Agent promptly following the completion
thereof a copy of any environmental assessments or audits that it or any of its
Subsidiaries conducts or has conducted by a third party. Should any event occur
which Agent, in its discretion, acting reasonably, deems to require an
Environmental Assessment, Borrower shall, upon the request of Agent, provide to
Agent an Environmental Assessment concerning any Facility or element of the
Undertaking, which Environmental Assessment must prove satisfactory to Agent,
acting reasonably. If Borrower does not initiate such Environmental Assessment
within 30 days of Agent's request and diligently proceed with such Environmental
Assessment thereafter, Agent may, but is not required to, retain an independent,
qualified engineer or environmental consultant to conduct the Environmental
Assessment. Each of Borrower and its Subsidiaries shall grant full and complete
access to the Facilities, including, but not limited to, the right to enter
upon, investigate, and collect air, surface water, groundwater, and soil
samples, provided, that such entry, investigation and sampling shall not unduly
--------
interfere with the normal business and operations of Borrower and its
Subsidiaries. All costs of such an Environmental Assessment will be paid by
Borrower.
(c) Borrower shall promptly, and in any event within five Business Days,
notify Agent of any written notice or communication received by Borrower or any
of its Subsidiaries of the following:
(i) any report of any Environmental Activity relating to the
Facilities or the Undertaking, made by or known or which should
be known to Borrower, to a Governmental Body pursuant to any
applicable Environmental Laws or Governmental Approvals;
(ii) any notification to Borrower or any of its Subsidiaries by a
Governmental Body to the effect that: (1) it intends to cancel,
suspend or refuse to renew a Governmental Approval relating to
Environmental Laws or has so cancelled, suspended or refused to
renew the same; (2) it intends to impose or has imposed terms,
provisions, conditions or limitations in a Governmental Approval
relating to Environmental Laws; (3) it has imposed or intends to
impose any order, requirement, directive, program
<PAGE>
37
approval or certificate relating to Environmental Laws which
mandates any work, repairs, construction, stand-by equipment,
modifications or capital expenditure; (4) it has imposed or
intends to impose any stop order or control order under an
Environmental Law relating to Borrower or any of its
Subsidiaries; or (5) Borrower or any of its Subsidiaries may be
liable, in whole or in part, for any remedial action, including
decontamination or restoration work;
(iii) any investigation, inquiry, search (whether effected
pursuant to a search order, search warrant or powers conferred by
statute), characterization work, sampling, excavation or drilling
by a Governmental Body relating to any Environmental Activity or
other environmental matter concerning Borrower or any of its
Subsidiaries, but not including routine and periodic inspections
or site visits by members of a Governmental Body dealing with
pollution abatement;
(iv) any administrative or judicial complaint or order filed against
Borrower or any of its subsidiaries alleging violation of any
Environmental Laws or Governmental Approval;
(v) any injunction, prosecution, action, charge or proceeding,
whether before a court or a regulatory body, dealing with
Environmental Laws;
(vi) any request or order by a Governmental Body that Borrower or any
of its Subsidiaries perform any evaluation, assessment,
characterization work, study or test relating to any
Environmental Activity;
(vii) any change in Governmental Approvals issued to Borrower or
any of its Subsidiaries applicable to the generation,
transportation, storage or disposal by Borrower or any of its
Subsidiaries of Contaminants which reasonably could be expected
to have a Material Adverse Effect; and
(viii) any process, investigation or order which could result in
liability to Borrower or any of its Subsidiaries for any clean-up
or remedial action, including decontamination or restoration
work, associated with any Environmental Activity relating to any
Facility or the Undertaking or for any damages resulting from
such Environmental Activity.
(d) Borrower shall, upon receiving a written request therefor from Agent,
within 90 Business Days of delivering to Agent a notice mentioned in Section
-------
5.9(c), deliver to Agent a written estimate, prepared by an independent
- ------
environmental consulting firm and in form and substance satisfactory to Agent,
of the cost of the action, works or measures required pursuant to an
Environmental Law and mentioned in such notice.
<PAGE>
38
(e) Borrower shall promptly, and in any event within five Business Days,
forward to Agent a copy of any permit or application obtained or filed by
Borrower or any of its Subsidiaries under any Environmental Laws to the extent
that failure to hold or apply for the same could have a Material Adverse Effect.
(f) Borrower shall, to the extent permitted by Applicable Laws, indemnify
the Lender and Agent, their respective directors, officers, employees, agents,
shareholders and other Affiliates, and shall hold each of them harmless from and
against any and all losses, liabilities, damages, costs, penalties, fines,
expenses and claims of any and every kind whatsoever, including without
limitation, from and against:
(i) the reasonable cost of defending and/or counter-claiming or
claiming over against third parties in respect of any action or
matter relating to any Facility or the Undertaking, and
(ii) any cost, liability or damage arising out of the disposition or
settlement of any action entered into by Agent relating to any
Facility or the Undertaking, and
which at any time or from time to time may be paid or incurred by, or asserted
against, any of them for, with respect to or as a direct or indirect result of
(A) any Environmental Activity by Borrower or any of its Subsidiaries or any of
their predecessors in title in contravention of an Environmental Law, (B)
failure on the part of Borrower or any Subsidiaries or any of their predecessors
in title to comply with any Environmental Laws and (C) any misrepresentation,
breach of warranty or breach of covenant on the part of Borrower or any of its
Subsidiaries with respect to environmental matters. This indemnification shall
survive the Termination Date. To the extent that this indemnification may be
unenforceable because it violates any law or public policy, Borrower will
contribute the maximum portion which it is permitted to pay and satisfy under
Applicable Laws to the payment and satisfaction of all indemnified matters
incurred by any Person contemplated by this indemnification.
SECTION 5.10 Securities Regulatory Filings; Certain Other Notices.
----------------------------------------------------
Borrower shall provide to Agent (a) promptly, after the filing thereof with any
securities regulatory authority, a copy of each material report, notice or other
filing, if any, made by Borrower or any of its Subsidiaries with such regulatory
authority and (b) a copy of each material written communication received by
Borrower or any of its Subsidiaries from or delivered by Borrower or any of its
Subsidiaries to (i) any securities regulatory authority or (ii) any holder of
Stock of Borrower, in each case, promptly after each such receipt or delivery.
SECTION 5.11 Canadian Benefit Plans. Borrower shall deliver to Agent
----------------------
notification within 30 days of any material increases in the benefits of any
existing Canadian Benefit Plan, or the establishment of any new Canadian Benefit
Plan, or the commencement of contributions to any such plan to which Borrower or
any of its Subsidiaries was not previously contributing.
<PAGE>
39
SECTION 5.12 Landlord, Warehouseman/Bailee and Mortgagee Agreements.
------------------------------------------------------
Borrower shall, unless otherwise agreed to by Agent in writing, obtain or cause
to be obtained a landlord agreement or warehouseman/bailee agreement, in each
case in form and substance acceptable to Agent, with the lessor of each present
or future leased premises of Borrower or any of its Subsidiaries or the
warehouseman of each present or future warehouse in which Collateral is located
at any time, as applicable, together with a mortgagee consent and agreement, in
form and substance satisfactory to Agent, with each mortgagee of each such
leased premises; provided, however, no landlord agreement or mortgagee consent
--------
and agreement shall be required in respect of Borrower's leased premises at 4190
Thimens Boulevard, St. Laurent, Quebec so long as the nature of Borrower's
business conducted at such premises does not change following the Closing Date
and the amount of the Collateral located at such premises is less than
Cdn$100,000.
SECTION 5.13 Certain Obligations Respecting Subsidiaries. Each of
-------------------------------------------
Borrower and its Subsidiaries shall take such action from time to time as shall
be necessary to ensure that each of its Subsidiaries is a direct or indirect
wholly owned Subsidiary of Borrower and is owned directly or indirectly only by
Borrower.
SECTION 5.14 Application of Proceeds. Borrower shall use the proceeds of
-----------------------
Revolving Credit Advances as provided in Section 1.4.
-----------
SECTION 5.15 Fiscal Year. Borrower shall maintain as its Fiscal Year the
-----------
calendar year.
SECTION 5.16 Report to Other Creditors. Borrower shall provide to Agent
-------------------------
copies of any statement or report provided to any other party by Borrower or any
of its Subsidiaries pursuant to the terms of each contract or agreement relating
to Indebtedness of Borrower or any of its Subsidiaries and not otherwise
required to be provided to Agent pursuant to this Agreement promptly following
the provision to such other party.
SECTION 5.17 Casualty and Condemnation.
-------------------------
(a) Borrower shall promptly notify Agent of any loss, damage, or
destruction to any Collateral or arising from its use, whether or not covered by
insurance. Agent, on behalf of Agent and Lenders, is hereby authorized to
adjust losses and collect all insurance proceeds directly. If, notwithstanding
the provisions hereof which require that Agent be the sole loss payee, a check
or other instrument from an insurer is made payable to Borrower or any of its
Subsidiaries solely or jointly with Agent, Agent may endorse such Person's name
thereon and take such other action as Agent may elect to obtain the proceeds
thereof. After deducting from such proceeds the expenses, if any, incurred by
Agent in the collection or handling thereof, Agent may apply such proceeds to
the reduction of the Obligations in the manner set forth in Section 1.11 or, at
------------
Agent's option in its sole discretion, may permit or require Borrower or the
applicable Subsidiary of Borrower to use such proceeds, or any part thereof, to
replace, repair or restore such Collateral as provided in paragraph (d) below
(it being agreed by Agent that so long as no Default or Event of Default shall
be continuing, the Borrower or the applicable
<PAGE>
40
Subsidiary of Borrower shall be entitled to use such amount of such money as
shall be necessary to replace, repair or restore such Collateral, as provided in
paragraph (d) below, where the amount of such money on account of a single event
of loss, damage or destruction is less than $250,000 and it is reasonably
expected that such replacement, repair or restoration can be completed within
six months after loss, damage or destruction (and if not completed by the end of
such six month period, the remaining money shall be delivered to Agent to be
applied to the payment of the Obligations)). If, notwithstanding that all
proceeds of insurance in respect of any Collateral shall be payable to Agent,
Borrower or any of its Subsidiaries receives any proceeds of insurance in
respect of any Collateral in respect of the policies required to be maintained
under this Agreement, subject to the immediately preceding sentence, such
proceeds shall be held in trust by Borrower, or Borrower shall cause the
applicable Subsidiary of Borrower to hold in trust such proceeds, for Agent and,
unless Agent otherwise permits, shall be forthwith paid over to Agent.
(b) Borrower shall, promptly upon Borrower learning of the institution of
any proceeding for the condemnation or other taking of any of its Collateral,
notify Agent of the pendency of such proceeding, and agrees that Agent may
participate in any such proceeding and Borrower from time to time will deliver
to Agent all instruments reasonably requested by Agent to permit such
participation. Agent shall (and is hereby authorized to) collect any and all
awards, payments or other proceeds of any such condemnation or taking and apply
such proceeds to the reduction of the Obligations in the manner set forth in
Section 1.11 or, at Agent's option in its sole discretion, may permit or require
- ------------
Borrower to use such proceeds, or any part thereof, to replace, repair or
restore such Collateral as provided in paragraph (d) below.
(c) Subject to the terms and conditions hereof (including Section 2.2),
-----------
after application of the proceeds of any loss or taking of any Collateral to the
reduction of the Obligations pursuant to paragraphs (a) and (b) above, Borrower
may borrow Revolving Credit Advances for the purpose of replacing, repairing or
restoring any Collateral subject to such loss or taking in accordance with
paragraph (d) below.
(d) Any Collateral which is to be replaced, repaired or restored pursuant
to paragraph (a), (b) or (c) above shall be replaced, repaired or restored
pursuant to such terms and conditions as Agent may reasonably require and with
materials and workmanship of substantially as good a quality as existed before
such loss or taking, and each of Borrower and its Subsidiaries shall commence
such replacement, repair or restoration as soon as practicable and proceed
diligently with it until completion to Agent's satisfaction. Borrower shall
provide to Agent written progress reports, other information and evidence of its
compliance with the foregoing.
SECTION 5.18 Intellectual Property. If before the Obligations shall have
---------------------
been satisfied in full, Borrower or any of its Subsidiaries shall (a) obtain
rights to any new Intellectual Property or (b) become entitled to the benefit of
any Intellectual Property, Borrower shall give to Agent prompt written notice
thereof. In addition, Borrower or its applicable Subsidiary shall (i) prosecute
diligently each Intellectual Property registration application pending as of the
Closing Date or thereafter until the Termination Date, as is appropriate in its
best interests, (ii)
<PAGE>
41
make applications to register its Intellectual Property, as is appropriate in
its best interests, and (iii) use its best efforts to preserve and maintain all
rights in its Intellectual Property, as is appropriate in its best interests.
Each of Borrower and its Subsidiaries shall, and shall instruct the solicitor or
agent prosecuting or filing any Intellectual Property applications of Borrower
or its applicable Subsidiary to, take all necessary steps to perfect Agent's
security in the Intellectual Property that is the subject of such applications
and to deliver to Agent as soon as practically possible a legal opinion from
counsel, and in form and substance, satisfactory to Agent stating that Agent's
security is enforceable and duly perfected. With respect to all options and
licence rights of Borrower or any of its Subsidiaries constituting Intellectual
Property, Borrower shall deliver to Agent, in form and substance satisfactory to
Agent, an agreement duly executed by each owner and (in the case of rights sub-
licensed to Borrower or any or its Subsidiaries by Persons who are not at arm's
length with Borrower) licensor of such Intellectual Property substantially in
the form of the Agreement Respecting Distribution Agreement, together with a
legal opinion relating to such security from counsel, and in form and substance,
satisfactory to the Agent in its discretion. Neither Borrower nor any of its
Subsidiaries shall abandon any right to file or register any Intellectual
Property material to its business without the consent of Agent. At any time
after the occurrence and during the continuance of an Event of Default, Agent
shall have the right, but shall in no way be obligated, to bring suit in its own
name, on its behalf and on behalf of Lenders, to enforce all Intellectual
Property of Borrower or any of its Subsidiaries and, if Agent shall determine
that it shall commence any such suit, each of Borrower and its applicable
Subsidiary shall do any and all lawful acts and execute any and all proper
documents required by Agent in aid of such enforcement and each of Borrower and
its applicable Subsidiary shall, promptly, upon demand from Agent, reimburse and
indemnify Agent for all reasonable costs and expenses incurred by Agent in the
exercise of its rights under this Section 5.18.
------------
SECTION 5.19 New Locations. Borrower shall advise Agent in writing not
-------------
less than 30 days prior to Borrower or any of its Subsidiaries (a) changing the
location of any of their executive offices or principal places of business or
acquiring any new such locations, other than those set forth in Schedule 3.2, or
------------
(b) keeping, maintaining or storing Inventory at any location other than the
locations listed in Schedule 3.2; provided, in each case, that any such new
------------ --------
location must be within the Province of Ontario, Canada. Before changing any
such location or acquiring another such location (whether by purchase, lease or
otherwise), Borrower shall provide Agent and Lenders with such charges,
assignments, landlord agreements, warehouseman/bailee agreements, mortgagee
consents and agreements (as contemplated by Section 5.12) and legal opinions as
------------
Agent may reasonably require in order to assure and maintain the first priority,
perfected Lien on the Collateral, subject only to other Liens permitted by
Section 6.7, and to assure access thereto.
- -----------
SECTION 5.20 Security.
--------
(a) Each of Borrower and its Subsidiaries shall defend the Lien granted
pursuant to the Loan Documents against claims and demands of all Persons
whomsoever. Each of Borrower and its Subsidiaries shall maintain the Collateral
so as not to be co-mingled with the assets of any other Person thereby becoming
indistinguishable from that of another Person. Borrower will
<PAGE>
42
advise Agent in writing of any material change to or material acquisition of
Collateral within two Business Days of such material change or acquisition.
Upon the request of Agent, Borrower will furnish to Agent statements and
schedules further identifying and describing Collateral.
(b) Borrower shall, at the request of Agent, as soon as possible deliver to
Agent (i) such security agreements, financing statements and other documents as
Agent may request in order to grant to Agent a first ranking Lien (subject only
to other Liens permitted by Section 6.7) in the Collateral situated in the
-----------
Northwest Territories and (ii) a legal opinion relating to such security, from
counsel, and in form and substance, satisfactory to Agent in its discretion, if
at any time the amount of Accounts arising from Account Debtors of Borrower or
any of its Subsidiaries located in the Northwest Territories exceeds $100,000.
(c) If Borrower or any of its Subsidiaries acquires after the Closing Date
any property, real or personal, tangible or intangible, not subject to the Lien
granted pursuant to the Loan Documents (other than Accounts of Account Debtors
situated in the Northwest Territories), Borrower shall promptly advise Agent
and, at request of Agent, as soon as possible deliver to Agent (i) security
agreements, financing statements and other documents as Agent may request in
order to grant Agent a first ranking Lien (subject only to other Liens permitted
by Section 6.7) in such property and (ii) a legal opinion relating to such
-----------
security, from counsel, and in form and substance, satisfactory to Agent in its
discretion.
SECTION 5.21 Currency and Interest Rate Hedging.
----------------------------------
(a) Borrower shall, and shall cause each of its Subsidiaries to, within 60
days after the date hereof, maintain at all times operations and personnel
therefor to monitor currency exchange rate changes applicable to the business of
Borrower and its Subsidiaries and to engage in prudent currency hedging
activities to protect Borrower and its Subsidiaries from changes to such
exchange rates, all in a manner reasonably acceptable to Agent.
(b) Borrower shall, and shall cause each of its Subsidiaries to, within 60
days after the date hereof amend, modify or terminate all interest hedging
agreements involving Borrower or any of its Subsidiaries which are existing on
the date hereof to the extent necessary so that after giving effect to any such
amendment, modification or termination all such agreements existing on such 60th
day shall be reasonably satisfactory to Agent.
ARTICLE 6
NEGATIVE COVENANTS
Borrower covenants and agrees (for itself and each of its Subsidiaries, if
any,) that, without the Required Lenders' prior written consent, from and after
the date hereof and until the Termination Date:
<PAGE>
43
SECTION 6.1 Mergers, Subsidiaries, Etc. Neither Borrower nor any of its
---------------------------
Subsidiaries shall, directly or indirectly, by operation of law or otherwise,
amalgamate with, acquire all or substantially all of the assets or shares of, or
otherwise combine with, any Person or form or acquire any Subsidiary.
SECTION 6.2 Investments. Neither Borrower nor any of its Subsidiaries
-----------
shall, directly or indirectly, make or maintain any Investment except: (a) to
the extent that Borrower or any of its Subsidiaries is permitted do so under
Section 6.2(a) through Section 6.2(c) of the US Credit Agreement and (b)
- -------------- --------------
Investments in Cash Equivalents; provided that all Cash Equivalents of Borrower
--------
and any of its Subsidiaries (to the extent the aggregate value of such Cash
Equivalents exceeds $50,000 at any time) shall be pledged to Agent pursuant to
the Security Agreement or other documentation in form and substance satisfactory
to Agent whereby Agent shall obtain a first priority perfected Lien in such Cash
Equivalents. Set forth in Schedule 6.2 are all Investments of Borrower
------------
outstanding on the date hereof.
SECTION 6.3 Indebtedness. Neither Borrower nor any of its Subsidiaries
------------
shall create, incur, assume or permit to exist any Indebtedness, except to the
extent that the Borrower or any of its Subsidiaries is permitted to do so under
Section 6.3 of the US Credit Agreement; provided, that Indebtedness under
- ----------- --------
interest rate protection agreements shall have terms that are acceptable to
Agent.
SECTION 6.4 Affiliate and Employee Loans and Transactions. Neither
---------------------------------------------
Borrower nor any of its Subsidiaries shall enter into any lending, borrowing or
other commercial transaction with any of its Subsidiaries, Affiliates, officers,
directors or employees, including payment of any management, consulting,
advisory or similar fee except to the extent that the Borrower or any of its
Subsidiaries is permitted to do so under Section 6.4 of the US Credit Agreement;
-----------
provided, however, with reference to Section 6.4(l) of the US Credit Agreement,
- -------- --------------
neither Borrower nor any of its Subsidiaries shall pay any royalty fees to Tyco
Industries or a direct or indirect parent corporation of Borrower or any of its
Subsidiaries. Set forth in Schedule 6.4 is a list of all such lending,
------------
borrowing or other commercial transactions existing or outstanding as of the
Closing Date. Prior to Borrower purchasing any Inventory from any of its
Affiliates, other than those Affiliates identified in Schedule 6.4 as Affiliates
------------
from whom, as of the Closing Date, Borrower purchases Inventory, Borrower shall
deliver to Agent a Supplier Waiver and Assignment duly executed by the Affiliate
of Borrower from whom Borrower wishes to purchase Inventory.
SECTION 6.5 Capital Structure and Business. Except as permitted under
------------------------------
Section 5.1, neither Borrower nor any of its Subsidiaries shall: (a) make any
- -----------
changes in its business objectives, purposes, or operations which could in any
way adversely affect the repayment of the Obligations or have or result in a
Material Adverse Effect; (b) make any change in its capital structure as
described in Schedule 3.9 (including the issuance or recapitalization of any
------------
shares of Stock or other securities convertible into Stock or any revision of
the terms of its outstanding Stock), except in respect of the declaration and
payment of dividends on Borrower's or any of its Subsidiaries' Stock, solely in
the same class of Stock of such Person, provided that, such Stock is pledged to
--------
Agent on the same terms as Borrower's Stock is pledged to Agent on the Closing
<PAGE>
44
Date; (c) amend its articles of incorporation or other constating documents or
by-laws in any manner which is reasonably likely to adversely affect the
interests of Lenders (but in no event shall any such amendment restrict the
business or power of Borrower or any of its Subsidiaries); or (d) engage in any
business other than the business currently engaged in by such Person and any
related toy or collectibles business.
SECTION 6.6 Guaranteed Indebtedness. Neither Borrower nor any of its
-----------------------
Subsidiaries shall incur any Guaranteed Indebtedness except: (a) by endorsement
of instruments or items of payment for deposit to the general account of such
Person; (b) for performance bonds or indemnities entered into in the ordinary
course of business consistent with past practices; and (c) the unsecured
Guaranteed Indebtedness set forth in Schedule 6.6 hereto, but the amount of any
------------
thereof shall not exceed the respective amounts set forth on such Schedule 6.6.
------------
SECTION 6.7 Liens. Neither Borrower nor any of its Subsidiaries shall
-----
create or permit to exist any Lien on any of its properties or assets except
for: (a) presently existing or hereafter created Liens in favour of Agent or
Lenders to secure the Obligations; (b) Liens set forth in Schedule 6.7 existing
------------
on the Closing Date, but not any increase in the amount secured by any such
Liens or the coverage thereof to other property or assets; (c) Permitted
Encumbrances; and (d) Liens which under Section 6.7(d) of the US Credit
--------------
Agreement the Borrower or any of its Subsidiaries is permitted to create or
permit to exist.
SECTION 6.8 Sale of Assets. Neither Borrower nor any of its
--------------
Subsidiaries shall sell, transfer, convey, assign or otherwise dispose of any of
its assets or properties, including any Collateral; provided, that the foregoing
--------
shall not prohibit (a) the sale of Inventory in the ordinary course of
business; (b) the sale or disposition of any Equipment which has become no
longer useful or obsolete or surplus to the business of Borrower or any of its
Subsidiaries; and (c) (i) the sale, lease, transfer or other disposition of
assets and properties by Borrower or any of its Subsidiaries to Tyco Parent or
any of its other Subsidiaries in the ordinary course of business for fair
consideration or (ii) any other sale, lease, transfer or other disposition by
Borrower or any of its Subsidiaries of assets and property having an aggregate
purchase or sale price or fair market value, whichever is greater, not in excess
of US$100,000, or the Equivalent Amount thereof, in any Fiscal Year.
SECTION 6.9 Material Contracts. Neither Borrower nor any of its
------------------
Subsidiaries shall (a) cancel or terminate any Material Contract or amend or
otherwise modify any Material Contract, or waive any default or breach under any
Material Contract, except, in the case of the Distribution Agreement, in
accordance with the Agreement Respecting Distribution Agreement and, otherwise,
in each instance, in the ordinary course of business, but only so long as (i)
Tyco Parent determines that it is in the best interests of Tyco Parent and
Borrower or the applicable Subsidiary of Borrower, as the case may be, to do so,
(ii) at the time of such action no Event of Default is continuing and (iii) such
action is not being taken with respect to any Material Contract (as defined in
the US Credit Agreement) restricted under Section 6.24 of the US Credit
------------
Agreement or (b) take any other action in connection with any Material Contract
that would have a Material Adverse Effect.
<PAGE>
45
SECTION 6.10 ERISA. Borrower shall not, and shall not permit any of its
-----
Subsidiaries to, carry on any business, employ any employees or own any material
assets outside Canada. Borrower shall not, and shall not permit any Subsidiary
to, become a party to, employ any employees who are or who may become
participants in, or take any action which may have the effect of acknowledging,
accepting or creating any liability whatsoever under or in respect of, any
employee benefit plan which is governed by ERISA. Borrower shall not, and shall
not permit any Subsidiary to, create, assume or incur, or suffer to be created,
assumed or incurred or to exist, any Lien in favour of the PBGC or any other
Person in connection with any liability under or in connection with ERISA.
Borrower shall do all things necessary to maintain its corporate existence
separate and apart from Tyco Industries and other Affiliates of Borrower which
carry on business outside Canada, including, (a) practising and adhering to
corporate formalities, including maintaining the appropriate corporate books and
records; (b) maintaining all of its deposit and other bank accounts and all of
its assets separate and apart from those of any such Persons; (c) maintaining
all of its financial records separate and apart from those of any such Persons;
(d) maintaining its own separate offices, telephone numbers, stationery and
business forms; (e) accounting for and managing all of its liabilities
separately from those of any such Persons; and (f) conducting all of its
business (whether written or oral) solely in its own name.
SECTION 6.11 Canadian Benefit and Pension Plans. Neither Borrower nor
----------------------------------
any of its Subsidiaries shall establish, maintain or contribute to any Canadian
Pension Plan. Neither Borrower nor any of its Subsidiaries shall enter into any
new Canadian Benefit Plan or modify any such existing plan so as to increase its
obligations thereunder which could result in any liability to Borrower or any of
its Subsidiaries and which could have a Material Adverse Effect.
SECTION 6.12 Sale-Leasebacks. Neither Borrower nor any of its
---------------
Subsidiaries shall engage in any sale-leaseback or similar transaction involving
any of its property or assets; provided, however, subject to Section 5.18, this
-------- ------------
Section 6.12 shall not prohibit any transaction involving a transfer of
- ------------
Intellectual Property by Borrower or any of its Subsidiaries to Tyco Investment
Corp. permitted under Section 6.4 and a corresponding taking back by Borrower or
-----------
its applicable Subsidiary from Tyco Investment Corp. of a royalty license
agreement with respect to such Intellectual Property.
SECTION 6.13 Cancellation of Indebtedness. Neither Borrower nor any of
----------------------------
its Subsidiaries shall cancel any claim or Indebtedness owing to it, except for
reasonable consideration and in the ordinary course of its business, or make any
payment or prepayment of principal of or interest on or otherwise with respect
to, or purchase, defease, acquire or redeem, any Indebtedness (other than the
Obligations) or make any deposit in respect thereof or give notice in respect
thereof; provided, however, Borrower or any of its Subsidiaries may make those
--------
payments and prepayments permitted to be made by Borrower or any of its
Subsidiaries under clauses (i) and (iii) through (iv) of Section 6.14 of the US
------------
Credit Agreement; provided, that, with reference to clause (iv) of such Section
-------- -------
6.14, an additional condition precedent shall be that no Default or Event of
- ----
Default is continuing or would result therefrom (unless otherwise agreed to in
writing by Agent).
<PAGE>
46
SECTION 6.14 Restricted Payments. Neither Borrower nor any of its
-------------------
Subsidiaries shall make any Restricted Payment to any Person except to the
extent that the Borrower or any of its Subsidiaries is permitted to do so under
Section 6.15(a), (c), (d), (e), (f) or (g) of the US Credit Agreement.
- --------------- --- --- --- --- ---
SECTION 6.15 Real Property Leases. Neither Borrower nor any of its
--------------------
Subsidiaries shall enter into or renew (by amendment, modification or otherwise)
any Leases other than (i) renewals of existing Leases upon more favourable (to
such Person) or substantially the same terms as are in effect on the Closing
Date, (ii) leases of sales offices and showrooms in the ordinary course of
business and (iii) leases by Borrower or any of its Subsidiaries, as sublessor,
to Tyco Parent or any of its Subsidiaries to the extent permitted by Section
-------
6.4.
- ---
SECTION 6.16 Bank Accounts. Neither Borrower nor any of its Subsidiaries
-------------
shall maintain any deposit, operating or other bank accounts except for those
accounts identified in Schedule 3.19; provided, however, Borrower shall deliver
------------- --------
to Agent on or before March 24, 1995 evidence satisfactory to Agent that
Borrower has closed its accounts 1335-15 and 1314-15 maintained at The Bank of
Nova Scotia.
SECTION 6.17 No Speculative Transactions. Neither Borrower nor any of
---------------------------
its Subsidiaries shall engage in any transaction involving commodity options,
futures contracts, derivatives or any similar speculative transactions (other
than currency hedging in the ordinary course of business consistent with past
practice and prudent business management in order to comply with Section 5.21
------------
and other than with respect to interest rate protection in compliance with
Section 5.21).
- ------------
SECTION 6.18 Limitation on Negative Pledge Clauses, Etc. Neither
-------------------------------------------
Borrower nor any of its Subsidiaries shall, directly or indirectly, enter into
any agreement with any Person which prohibits or limits the ability of Borrower
or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired, other than the agreements with Agent or Lenders pursuant to a Loan
Document, the agreements under the US Credit Agreement and the Loan Documents
(as defined in the US Credit Agreement) delivered thereunder and Lien
restrictions in a Capital Lease or other purchase money financing arrangement
permitted hereunder relating to the asset financing thereunder. Neither
Borrower nor any of its Subsidiaries shall enter into, after the date of this
Agreement, any indenture, agreement, instrument or other arrangement that,
directly or indirectly, prohibits or restrains, or has the effect of prohibiting
or restraining, or imposes materially adverse conditions upon, the incurrence or
payment of Indebtedness, the granting of Liens (other than pursuant to a Capital
Lease or other purchase money financing arrangement permitted hereunder relating
to the asset financing thereunder, the declaration or payment of dividends or
other Restricted Payments, the making of loans, advances or Investments or the
sale, assignment, transfer or other disposition of any property or assets (other
than pursuant to a Capital Lease or other purchase money financing arrangement
permitted hereunder relating to the asset financing thereunder).
<PAGE>
47
SECTION 6.19 Accounting Changes. Neither Borrower nor any of its
------------------
Subsidiaries shall make any significant change in accounting treatment and
reporting practices except for changes concurred in by such Person's independent
public accountants.
SECTION 6.20 Amendments and Modifications to Debt Documents. Neither
----------------------------------------------
Borrower nor any of its Subsidiaries shall, directly or indirectly, amend,
modify, supplement, waive compliance with, grant a waiver under, or assent to
non-compliance with: (i) any instrument, document or agreement evidencing,
creating, guaranteeing or governing Indebtedness or Guaranteed Indebtedness in
excess of $500,000 permitted under Section 6.3 or Section 6.6 or entered into in
----------- -----------
connection therewith (other than the instruments, documents and agreements
governing the loan facility provided under this Agreement and the guarantee
executed and delivered by Borrower under the US Credit Agreement) or (ii) any of
the Subordinated Debt Documents (it being understood that this Section 6.20
------------
shall be deemed not to prohibit the holders of any Indebtedness under any of the
Subordinated Debt Documents (or any required percentage thereof) from waiving
any requirement or default under any of the Subordinated Debt Documents).
SECTION 6.21 Borrowing Solely for Immediate Cash Requirements. The
------------------------------------------------
Borrower shall not use the proceeds of any Revolving Credit Advance for any
purpose except as set out in Section 1.4 and, then, only to meet the Borrower's
-----------
immediate cash requirements in respect thereof.
ARTICLE 7
TERM
SECTION 7.1 Duration. The financing arrangements contemplated hereby
--------
shall be in effect until the Commitment Termination Date. On the Commitment
Termination Date, the Revolving Credit Commitments shall terminate and the
Revolving Credit Loan and all other Obligations shall immediately become due and
payable in full in immediately available funds.
SECTION 7.2 Survival of Obligations. Except as otherwise expressly
-----------------------
provided for in the Loan Documents, no termination or cancellation (regardless
of cause or procedure) of any financing arrangement under this Agreement shall
in any way affect or impair the Obligations, duties, indemnities, and
liabilities of Borrower or any other Loan Party, or the rights of Agent or any
Lender relating to any Obligations, due or not due, liquidated, contingent or
unliquidated or any transaction or event occurring prior to such termination, or
any transaction or event, the performance of which is not required until after
the Commitment Termination Date. Except as otherwise expressly provided herein
or in any other Loan Document, all undertakings, agreements, covenants,
warranties and representations of or binding upon Borrower or any other Loan
Party, and all rights of Agent and each Lender, all as contained in the Loan
Documents, shall not terminate or expire, but rather shall survive such
termination or cancellation and shall continue in full force and effect until
such time as all of the Obligations have been indefeasibly
<PAGE>
48
paid in full in immediately available funds in accordance with the terms of the
agreements creating such Obligations.
ARTICLE 8
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
SECTION 8.1 Events of Default. The occurrence of any one or more of the
-----------------
following events (regardless of the reason therefor) shall constitute an "Event
-----
of Default" hereunder:
- ----------
(a) Borrower or any other Loan Party shall fail to make any payment in
respect of any Obligations hereunder or under any of the other Loan Documents
when due and payable or declared due and payable, including any payment of
principal of, or interest on, or Fees in respect of, the Revolving Credit Loan,
and, with respect to the failure to make any payment of any Obligations
hereunder, other than the principal of the Revolving Credit Loan, such failure
shall continue unremedied for five (5) days.
(b) Borrower or any of its Subsidiaries shall fail or neglect to perform,
keep or observe any of the provisions of Section 1.8, Section 4.1, Section
----------- ----------- -------
5.1(e), Section 5.5(d), Section 5.9(a), Section 5.19 or Article 6, including
- ------ -------------- -------------- ------------ ---------
any of the provisions set forth in Annex B or Annex E and (if capable of being
------- -------
remedied) such failure or neglect shall continue unremedied for five (5) days
with respect to Section 1.9 and Annex B and for ten (10) days with respect to
----------- -------
Section 4.1, Section 5.9(a) and Annex E (other than Section 2 of Annex E for
- ----------- ------------- ------- -------
which the grace period (if the relevant provision of such Section 2 is capable
of being remedied) shall be thirty (30) days) (with no grace period to be
provided for any failure or neglect of any provision of Article 6); provided,
--------- --------
however, for greater certainty and without limitation, no grace period shall
be provided for any failure or neglect of any provision of Section 5.1(e),
-------------
Section 5.5(d), or Section 5.19 because any such failure or neglect is not
- ------------- ------------
capable of being remedied.
(c) Borrower or any other Loan Party shall fail or neglect to perform, keep
or observe any term or provision of this Agreement or of any of the other Loan
Documents (other than any such term or provision referred to in paragraph (a) or
(b) above), and (if capable of being remedied) the same shall remain unremedied
for a period ending on the first to occur of thirty (30) days after Borrower
shall receive written notice of any such failure from Agent or any Lender or
thirty (30) days after Borrower shall become aware thereof.
(d) A default shall occur and be continuing under any other agreement,
document or instrument to which Borrower or any other Loan Party is a party or
by which any such Person or its property is bound, and such default (i) involves
the failure to make any payment (whether of principal, interest or otherwise)
due (whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) in respect of any Indebtedness of such Person in an aggregate amount
exceeding $500,000, or the Equivalent Amount thereof, in the case of Borrower or
any
<PAGE>
49
of its Subsidiaries, or US$1,000,000, or the Equivalent Amount thereof, in the
case of any other Loan Party or (ii) permits any holder of any Indebtedness of
such Person or a trustee to cause such Indebtedness, or a portion thereof, in an
aggregate amount exceeding $500,000, or the Equivalent Amount thereof, in the
case of Borrower or any of its Subsidiaries, or US$1,000,000, or the Equivalent
Amount thereof, in the case of any other Loan Party, to become due prior to its
stated maturity or prior to its regularly scheduled date of payment or (y) any
such default under clause (x) above (whether or not continuing) causes or
results in such Indebtedness, or a portion thereof, in an aggregate amount
exceeding $500,000, or the Equivalent Amount thereof, in the case of Borrower or
any of its Subsidiaries, or US$1,000,000, or the Equivalent Amount thereof, in
the case of any other Loan Party to become due prior to its stated maturity or
prior to its regularly scheduled date of payment.
(e) Any representation or warranty herein or in any Loan Document or in any
written statement pursuant thereto or hereto, any report, financial statement or
certificate made or delivered to Agent or any Lender by Borrower or any other
Loan Party shall be untrue or incorrect in any material respect as of the date
when made or deemed made (including those made or deemed made pursuant to
Section 2.2).
- -----------
(f) Assets of Borrower or any of its Subsidiaries, or any Stock subject to
the Tyco Industries Pledge Agreement, having an aggregate value for all such
assets and stock in excess of $500,000, or the Equivalent Amount thereof, shall
be attached, seized, levied upon or subjected to a writ, execution, distress
warrant, or similar process, or come within the possession of any administrator,
receiver, trustee, custodian, assignee or bailiff for the benefit of creditors
of such Person and shall remain unstayed or undismissed for thirty (30)
consecutive days; or any Person, other than Borrower, shall apply for the
appointment of an administrator, receiver, trustee, custodian, assignee, bailiff
or similar official for Borrower's or any other Loan Party's assets having an
aggregate value for all such assets in excess of $500,000, or the Equivalent
Amount thereof, and shall remain unstayed or undismissed for thirty (30)
consecutive days; or Borrower or any other Loan Party shall have concealed,
removed or permitted to be concealed or removed, any part of its property, with
intent to hinder, delay or defraud its creditors or any of them or made or
suffered a transfer of any of its property or the incurring of an obligation
which may be fraudulent under any Insolvency Statute, fraudulent conveyance or
other similar law by whatever name called and in whatever jurisdiction.
(g) The commencement of a case or proceeding, or the presentation of a
petition, against Borrower or any other Loan Party in or to a court having
competent jurisdiction seeking a decree or order (i) under any Insolvency
Statute, (ii) appointing a custodian, administrator, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of Borrower or any other
Loan Party or of any substantial part of its properties or assets, or (iii)
ordering the winding up or liquidation of the affairs of Borrower or any other
Loan Party, and such case or proceeding shall remain undismissed or unstayed for
sixty (60) consecutive days or such court shall enter a decree or order granting
the relief sought in such case or proceeding.
<PAGE>
50
(h) Borrower or any other Loan Party shall (i) cease or threaten to cease
to carry on its business, (ii) commence a proceeding, (including, without
limitation, the filing of a petition or an assignment or a proposal or a notice
of intention to make a proposal) under any Insolvency Statute, (iii) consent to
the institution of proceedings under any Insolvency Statute or to the filing of
any such petition or to the appointment of or taking possession by a custodian,
administrator, receiver, liquidator, assignee, trustee, bailiff or sequestrator
(or similar official) of Borrower or any other Loan Party or of any substantial
part of Borrower's or any other Loan Parties' properties, (iv) shall fail
generally to pay its debts as such debts become due, or (v) shall take any
corporate action in furtherance of any such action.
(i) Final judgment or judgments (after the expiration of all times to
appeal therefrom) for the payment of money in excess of $500,000, or the
Equivalent Amount thereof, in the aggregate, in the case of Borrower or any of
its Subsidiaries, or US$1,000,000, or the Equivalent Amount thereof, in the
aggregate, in the case of any other Loan Party, shall be rendered against
Borrower or any other Loan Party, unless the same shall be (i) fully covered by
insurance in accordance with Section 5.5, or (ii) vacated, stayed, bonded, paid
-----------
or discharged within a period of thirty (30) days from the date of such
judgment.
(j) There shall occur any Material Adverse Effect which shall not have been
cured (or waived by Required Lenders) within ten (10) days of notice thereof
from Agent or the Required Lenders to Borrower.
(k) Any material provision of any Loan Document shall for any reason cease
to be valid, binding and enforceable in accordance with its terms (other than by
reason of any action of Agent or Lenders or upon the written consent of all
Lenders) or Borrower or other party thereto shall so state in writing; or any
Lien created under any Collateral Document shall cease to be a valid and
perfected Lien having the first priority in Collateral having a value in excess
of $25,000 purported to be covered thereby (subject to Liens permitted by
Section 6.7).
- -----------
(l) There shall occur a Change of Control.
(m) Without limiting the effect of Section 1.3(h), there shall occur any
--------------
"Termination Event" under and as defined in the Receivables Funding Agreement.
(n) There shall occur and be continuing any "Event of Default" (as defined
under the US Credit Agreement) or "Default" (as defined under the UK Credit
Agreement) or any event, act or condition which, after giving effect to any
grace periods or notice requirements thereunder, or both, permits the requisite
lenders or agent thereunder to accelerate the obligations of borrower or
borrowers under any of the loan facilities provided thereunder or any
Indebtedness owing under any of such loan facilities shall become due prior to
its stated maturity or prior to its regularly scheduled date of payment.
<PAGE>
51
SECTION 8.2 Remedies. If any Event of Default shall have occurred and
--------
be continuing, the rate of interest applicable to the Revolving Credit Loan and
interest and other Obligations shall be increased to or charged at, as
appropriate, effective as of the date of the occurrence of the Default giving
rise to such Event of Default, the Default Rate as provided in Section 1.5(e),
--------------
unless such increase or charge is waived by the Required Lenders. If any Event
of Default shall have occurred and be continuing, Agent may, or if requested by
the Required Lenders, shall, without notice, take any one or more of the
following actions: (a) terminate the Revolving Credit Commitments, whereupon
Lenders' obligations to make further Revolving Credit Advances shall terminate;
(b) declare all or any portion of the Obligations to be forthwith due and
payable, including the Revolving Credit Loan, whereupon such Obligations shall
become and be due and payable; (c) exercise any rights and remedies provided to
Agent or Lenders under the Loan Documents and/or at law or equity, provided,
--------
that upon the occurrence of an Event of Default specified in Section 8.1(g) or
--------------
Section 8.1(h), the Revolving Credit Commitments of each Lender shall
- --------------
immediately terminate and the Obligations shall become immediately due and
payable, in each case, without declaration, notice or demand by or to any
Person.
SECTION 8.3 Waivers by Borrower. Except as otherwise provided for in
-------------------
this Agreement and under Applicable Laws, to the full extent permitted by
Applicable Laws, Borrower waives (a) presentment, demand and protest and notice
of presentment, dishonour, notice of intent to accelerate, notice of
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all Loan Documents, notes, commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guarantees at any time held by Agent or any Lender on which Borrower may in any
way be liable, and Borrower hereby ratifies and confirms whatever Agent or any
Lender may do in this regard, absent bad faith, (b) all rights to notice and a
hearing prior to Agent's or Lenders' taking possession or control of, or to
Agent's or Lenders' replevy, attachment or levy upon, the Collateral or any bond
or security which might be required by any court prior to allowing Agent or
Lenders to exercise any of their remedies, and (c) the benefit of any right of
redemption and all valuation, appraisal and exemption laws. Borrower
acknowledges that it has been advised by counsel of its choice with respect to
this Agreement, the other Loan Documents and the transactions contemplated by
this Agreement and the other Loan Documents.
SECTION 8.4 Application of Proceeds. After the occurrence of an Event
-----------------------
of Default and acceleration of the Obligations, the proceeds of the Collateral
shall be applied by Agent to payment of the Obligations in the following order,
unless Lenders otherwise agree in writing or a court of competent jurisdiction
shall otherwise direct:
(a) FIRST, to payment of all costs and expenses of Agent and Lenders
incurred in connection with the preservation, collection and enforcement of the
Obligations, or of any of the Liens granted to Agent pursuant to the Collateral
Documents or otherwise, including, without limitation, any amounts advanced by
Agent or Lenders to protect or preserve the Collateral;
<PAGE>
52
(b) SECOND, to payment of that portion of the Obligations constituting
accrued and unpaid interest and fees and indemnities payable under Section 1,
---------
Annex D and the Fee Agreement ratably amongst Agent and Lenders in accordance
- -------
with the proportion which the accrued interest and fees and indemnities payable
under Section 1, Annex D and the Fee Agreement constituting the Obligations
--------- -------
owing to Agent and each such Lender at such time bears to the aggregate amount
of accrued interest and fees and indemnities payable under such Section 1, Annex
--------- -----
D and the Fee Agreement constituting the Obligations owing to the Agent and all
- -
Lenders at such time until such interest, fees and indemnities shall be paid in
full;
(c) THIRD, to payment of the principal of the Obligations, ratably amongst
Lenders in accordance with the proportion which the principal amount of the
Obligations owing to each such Lender bears to the aggregate principal amount of
the Obligations owing to all Lenders until such principal of the Obligations
shall be paid in full;
(d) FOURTH, to the payment of all other Obligations, ratably amongst
Lenders in accordance with the proportion which the amount of such other
Obligations owing to each such Lender bears to the aggregate principal amount of
such other Obligations owing to all Lenders until such other Obligations shall
be paid in full; and
(e) FIFTH, the balance, if any, after all of the Obligations has been
satisfied, shall, except as otherwise provided in any Loan Document, be paid
over to such other Person or Persons as may be required by law.
Borrower acknowledges and agrees that it shall remain liable to the extent
of any deficiency between the amount of the proceeds of the Collateral and the
aggregate amount of the sums referred to in the first through fourth clauses
above.
ARTICLE 9
AGENT
SECTION 9.1 Appointment, Powers and Immunities. Each Lender hereby
----------------------------------
irrevocably appoints and authorizes GE Capital Canada to act as its agent
hereunder and under the other Loan Documents with such powers as are
specifically delegated to Agent by the terms of this Agreement and of the other
Loan Documents, together with such other powers as are reasonably incidental
thereto. Agent (which term as used in this sentence and in Section 9.5 and the
-----------
first sentence of Section 9.6 shall include reference to its affiliates and its
-----------
own and its affiliates' officers, directors, employees and agents): (a) shall
have no duties or responsibilities except those expressly set forth in this
Agreement and in the other Loan Documents, and shall not by reason of this
Agreement or any other Loan Document be a trustee or fiduciary for any Lender;
(b) shall not be responsible to Lenders for any recitals, statements,
representations or warranties contained in this Agreement or in any other Loan
Document, or in any certificate or other document referred to or provided for
in, or received by any of them under, this Agreement
<PAGE>
53
or any other Loan Document, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or any other document referred to or provided for herein or therein or
for any failure by Borrower or any other Person to perform any of its
obligations hereunder or thereunder; (c) shall not be required to initiate or
conduct any litigation or collection proceedings hereunder or under any other
Loan Document; (d) shall not be responsible to Lenders for any action taken or
omitted to be taken by it hereunder or under any other Loan Document or under
any other document or instrument referred to or provided for herein or therein
or in connection herewith or therewith, except for its own gross negligence or
willful misconduct as determined by a final judgment of a court of competent
jurisdiction. Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or attorneys-in-
fact selected by it in good faith.
SECTION 9.2 Reliance by Agent. Agent shall be entitled to rely upon any
-----------------
certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent. As to any matters not
expressly provided for by this Agreement or any other Loan Document, Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder or thereunder in accordance with instructions given by Required
Lenders or all Lenders, as is required in such circumstance, and such
instructions of such Lenders and any action taken or failure to act pursuant
thereto shall be binding on all Lenders.
SECTION 9.3 Defaults. Agent shall not be deemed to have knowledge or
--------
notice of the occurrence of a Default (other than the non-payment of principal
of or interest on the Revolving Credit Loan or of Fees) unless Agent has
received notice from a Lender or Borrower specifying such Default and stating
that such notice is a "Notice of Default". In the event that Agent receives
-----------------
such a notice of the occurrence of a Default, Agent shall give prompt notice
thereof to Lenders (and shall give each Lender prompt notice of each such non-
payment). Agent shall (subject to Section 9.7) take such action with respect to
-----------
such Default as shall be directed by Required Lenders; provided, that unless and
--------
until Agent shall have received such directions, Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interest of Lenders
except to the extent that this Agreement expressly requires that such action be
taken, or not be taken, only with the consent or upon the authorization of
Required Lenders or all Lenders, as is required in such circumstance.
SECTION 9.4 Rights as a Lender. With respect to the Revolving Credit
------------------
Commitment of GE Capital Canada (if at any time GE Capital Canada becomes a
Lender), and all Revolving Credit Advances made by GE Capital Canada (and any
successor acting as Agent), GE Capital Canada (and any successor acting as
Agent) shall have the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not acting as Agent, and the term
"Lender" or "Lenders" shall, unless the context otherwise indicates, include
Agent in its individual capacity. GE Capital Canada (and any successor acting
as Agent) and its
<PAGE>
54
affiliates may (without having to account therefor to any Lender) lend money to,
make investments in and generally engage in any kind of business with Borrower
or any other Loan Party (and any of its Subsidiaries or Affiliates) as if it
were not acting as Agent, and GE Capital Canada and its affiliates may accept
fees and other consideration from Borrower or any other Loan Party or any
Affiliate thereof for services in connection with this Agreement or otherwise
without having to account for the same to Lenders.
SECTION 9.5 Indemnification. Lenders agree to indemnify Agent (to the
---------------
extent not reimbursed by Borrower hereunder and without limiting the obligations
of Borrower hereunder) ratably in accordance with the aggregate principal amount
of the Revolving Credit Advances held by Lenders (or, if no Revolving Credit
Advances are at the time outstanding, ratably in accordance with their
respective Revolving Credit Commitments), for any and all Claims of any kind and
nature whatsoever that may be imposed on, incurred by or asserted against Agent
(including by any Lender) arising out of or by reason of any investigation in or
in any way relating to or arising out of this Agreement or any other Loan
Document or any other documents contemplated by or referred to herein or therein
or the transactions contemplated hereby or thereby (including the costs and
expenses that any Borrower is obligated to pay hereunder) or the enforcement of
any of the terms hereof or thereof or of any such other documents; provided,
--------
that no Lender shall be liable for any of the foregoing to the extent they arise
solely from the gross negligence or willful misconduct of the party to be
indemnified as determined by a final judgment of a court of competent
jurisdiction.
SECTION 9.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees
---------------------------------------
that it has, independently and without reliance on Agent or any other Lender,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of Borrower and the other Loan Parties and decision to
enter into this Agreement and that it will, independently and without reliance
upon Agent or any other Lender, and based on such documents and information as
it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or any of the
other Loan Documents. Agent shall not be required to keep itself informed as to
the performance or observance by Borrower or any other Loan Party of this
Agreement or any of the other Loan Documents or any other document referred to
or provided for herein or therein or to inspect the properties or books of
Borrower or any other Loan Party. Agent will use reasonable efforts to provide
Lenders with any information received by Agent from Borrower which is required
to be provided to Lenders hereunder, with any notice of a Default received by
Agent from Borrower and with any notice of a Default delivered by Agent to
Borrower; provided, that Agent shall not be liable to any Lender for any failure
--------
to do so, except to the extent that such failure is attributable to Agent's
gross negligence or willful misconduct, as determined by a final judgment of a
court of competent jurisdiction. Agent shall not have any duty or
responsibility to provide any Lender with any other credit or other information
concerning the affairs, financial condition or business of Borrower or any other
Loan Party (or any of their Affiliates) that may come into the possession of
Agent or any of its affiliates nor to update or correct any information
previously given which becomes incorrect or which Agent learns is incorrect.
<PAGE>
55
SECTION 9.7 Failure to Act. Except for action expressly required of
--------------
Agent hereunder and under the other Loan Documents, Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 9.5 against any and all liability and
-----------
expense that may be incurred by it by reason of taking or continuing to take any
such action.
SECTION 9.8 Successor Agent. Subject to and effective upon the
---------------
appointment and acceptance of a successor Agent, as provided below, Agent may
resign at any time by giving notice thereof to Lenders and Borrower, and the
Required Lenders may, at any time when GE Capital Canada holds a participation
or GE Capital Canada's pro rata share of the aggregate of the Revolving Credit
--- ----
Commitments of all Lenders at such time (or, if the Commitment Termination Date
has occurred, in lieu of the Revolving Credit Commitments, the Revolving Credit
Loan then outstanding in respect of the Revolving Credit Commitment) equals less
than fifty percent (50%), remove Agent by written notice to that effect, with
the written consent of Borrower (which consent shall not be unreasonably
withheld). Upon any such resignation or removal, the Required Lenders shall
have the right to appoint a successor Agent. If no successor Agent shall have
been so appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Agent's giving of notice
of resignation or receipt of notice of removal, then the retiring Agent may, on
behalf of Lenders, appoint a successor Agent, that shall be a financial
institution with a combined capital and surplus or net worth of at least
$75,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent (retiring by reason of its resignation or removal) shall
be discharged from its duties and obligations hereunder. After any retiring
Agent's resignation or removal hereunder as Agent, the provisions of this
Article 9 shall continue in effect for its benefit in respect of any actions
- ---------
taken or omitted to be taken by it while it was acting as Agent.
SECTION 9.9 Consents under Loan Documents. Except as otherwise provided
-----------------------------
in Section 11.1 with respect to this Agreement, Agent may, with the prior
------------
consent of Required Lenders (but not otherwise), consent to any modification,
supplement or waiver under any of the Loan Documents; provided, that without the
--------
prior consent of each Lender, Agent shall not (except as provided herein or in
the Collateral Documents) release any material portion of the Collateral or
otherwise terminate any Lien under any Collateral Document with respect to any
material portion of the Collateral, or agree to additional obligations being
secured by such Collateral, except that no such consent shall be required, and
Agent is hereby authorized and instructed, to release any Lien covering
Collateral (a) which is the subject of a disposition permitted hereunder, (b)
which secures Indebtedness to the extent permitted under Section 6.3, (c) to
-----------
which Required Lenders have consented (except as otherwise provided in Section
-------
11.1), or (d) the value of which does not exceed $1,000,000, or the Equivalent
- ----
Amount thereof, in any Fiscal Year.
<PAGE>
56
SECTION 9.10 Collateral Matters.
------------------
(a) Except as otherwise expressly provided for in this Agreement, Agent
shall have no obligation whatsoever to any Lender or any other Person to
investigate, confirm or assure that the Collateral exists or is owned by
Borrower or any other Loan Party or is cared for, protected or insured or has
not been encumbered, or that any particular items of Collateral meet the
eligibility criteria applicable in respect of the relevant Borrowing Base, or
whether any particular reserves are appropriate, 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 at all or in any particular manner or under any duty or
care, disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent in this Agreement or in any
of the other Loan Documents, it being understood and agreed that (i) 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 a Lender and (ii) that Agent shall have no duty or
liability whatsoever to any other Lender, other than liability solely resulting
from its own gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction.
(b) Each Lender hereby appoints each other Lender as agent for the purpose
of perfecting Lenders' security interests in assets which can be perfected only
by possession. Should any Lender (other than Agent) obtain possession of any
such Collateral, such Lender shall notify Agent thereof and, promptly upon
Agent's request therefor, shall deliver such Collateral to Agent or in
accordance with Agent's instructions.
ARTICLE 10
SUCCESSORS AND ASSIGNS
SECTION 10.1 Successors and Assigns. This Agreement and the other Loan
----------------------
Documents shall be binding on and shall inure to the benefit of Borrower, Agent,
Lenders, and their respective successors and assigns, except as otherwise
provided herein or therein. Borrower may not assign, delegate, transfer,
hypothecate or otherwise convey its rights, benefits, obligations or duties
hereunder or under any of the Loan Documents without the prior express written
consent of Agent and all Lenders. Any such purported assignment, transfer,
hypothecation or other conveyance by Borrower without such prior express written
consent shall be void. The terms and provisions of this Agreement and the other
Loan Documents are for the purpose of defining the relative rights and
obligations of Borrower, Agent and Lenders with respect to the transactions
contemplated hereby and there shall be no third party beneficiaries of any of
the terms and provisions of this Agreement or any of the other Loan Documents.
<PAGE>
57
SECTION 10.2 Assignments and Participations.
------------------------------
(a) Each Lender may, with the prior written consent of Agent, resell
(through syndication, assignment or participation) all or a portion of its
rights and obligations under this Agreement (including all or a part of its
Revolving Credit Advances, Revolving Credit Commitment and Revolving Credit
Note, in minimum increments of $5,000,000, to any other Person. Any resale by a
Lender of all or a portion of its rights and obligations under this Agreement to
a Person which is a non-resident of Canada for the purpose of the ITA shall
require the consent of the Borrower as to the identity of such Person (but not
as to the terms of any such resale), which consent shall not be unreasonably
withheld or delayed; provided, that, for greater certainty, the refusal of
--------
Borrower to grant its consent to any resale to a Person on the basis that such
assignee is a non-resident of Canada for the purpose of the ITA shall be a
reasonable withholding of Borrower's consent. No consent of Borrower shall in
any event be required with respect to a participation.
(b) In the case of an assignment by any Lender under this Section 10.2, the
------------
purchaser shall have, to the extent of such assignment, the same rights,
benefits and obligations as it would if it were a Lender hereunder; provided,
--------
that each such assignment shall be of a constant, and not a varying, percentage
of the selling Lender's rights and obligations under this Agreement. Upon
execution by the assignor and the assignee of an instrument pursuant to which
the assignee assumes such rights and obligations, payment by such assignee to
such assignor of an amount equal to the purchase price agreed between such
assignor and assignee and delivered to Agent and Borrower of an executed copy of
such instrument, together with payment to Agent of a processing fee of US$2,500,
such assignee shall have, to the extent of such assignment (unless otherwise
provided therein), the same rights and benefits as it would have if it were a
Lender hereunder and the assignor shall be, to the extent of such assignment
(unless otherwise provided therein) released from its obligations under this
Agreement. Borrower hereby acknowledges and agrees that any assignment will
give rise to a direct obligation of Borrower to the assignee and that the
assignee shall be considered to be a "Lender" hereunder and under the other Loan
Documents. In all instances, each Lender's liability to make Revolving Credit
Advances shall be several and not joint and shall be limited to such Lender's
pro rata share thereof. Upon any such assignment, Borrower, at its own expense,
- --- ----
shall execute and deliver to Agent in exchange for the surrendered Revolving
Credit Note of the assignor Lender a new Revolving Credit Note to the order of
the assignor Lender in an amount equal to the Revolving Credit Commitment
assumed by such assignee Lender, and if the assignor Lender has retained a
Revolving Credit Commitment hereunder, a new Revolving Credit Note to the order
of the assignor Lender in an amount equal to such retained Revolving Credit
Commitment. Such new Revolving Credit Notes shall be dated the Closing Date and
shall otherwise be in the form of the Revolving Credit Note replaced thereby.
The Revolving Credit Notes surrendered to Agent shall be returned by Agent to
Borrower marked "cancelled".
(c) In the case of a participation by any Lender under this Section 10.2,
------------
(A) all amounts payable by Borrower hereunder shall be determined as if that
Lender had not sold such participation and the participating Lender shall remain
a "Lender" for all purposes under this
<PAGE>
58
Agreement, (B) any such grant of a participation will be made in compliance with
all Applicable Laws and (C) such Lender shall not grant any participation under
which the participant shall have rights to approve any amendment to or waiver of
this Agreement or the Loan Documents, except to the extent such amendment or
waiver would (i) extend the final maturity date for payment of the Revolving
Credit Loan; (ii) reduce the interest rate or the amount of principal or Fees
applicable to the Revolving Credit Loan; or (iii) release all or substantially
all of the Collateral, except as expressly provided herein. In those cases in
which a Lender grants rights to its participants to approve any amendment to or
waiver of this Agreement or the other Loan Documents respecting the matters
described in the foregoing clauses (i) through (iii), the relevant participation
agreements shall provide for a voting mechanism whereby a majority of the amount
of the participating Lender's portion of the Revolving Credit Loan (irrespective
of whether held by such Lender or participated), shall control the vote for all
of such Lender's portion of the Revolving Credit Loan. In the case of any
participation, the participant shall not have any rights under this Agreement or
any of the other Loan Documents entered into in connection herewith (the
participant's right against such Lender in respect of such participation to be
those set forth in the participation or other agreement executed by such Lender
and the participant relating thereto) and all amounts payable to any Lender
hereunder shall be determined as if such Lender had not sold such participation.
(d) Except as otherwise provided in this Section 10.2, no Lender shall, as
------------
between Borrower and that Lender, be relieved of any of its obligations
hereunder as a result of any sale, assignment, transfer or negotiation of, or
granting of participation in, all or any part of the Revolving Credit Loan or
other Obligations owed to such Lender. Any Lender permitted to sell assignments
and participations under this Section 10.2 may furnish any information
------------
concerning Borrower or any other Loan Party in the possession of that Lender
from time to time to assignee and participants (including prospective assignees
and participants), subject to the provisions of Section 11.14.
-------------
(e) Borrower shall, and shall cause each of its Subsidiaries to, assist any
Lender permitted to sell assignments or participations under this Section 10.2
------------
in whatever manner necessary in order to enable or effect any such assignment or
participation, including the execution and delivery of any and all agreements,
notes and other documents and instruments as shall be requested and the
preparation and delivery of informational materials, appraisals or other
documents for, and the participation of relevant management in meetings with,
potential assignees or participants, subject to the provisions of Section 11.14.
-------------
Borrower and its Subsidiaries shall certify the correctness, completeness and
accuracy of all descriptions of Borrower and any of its Subsidiaries and their
respective affairs contained in any selling materials and all information
provided by it and included in such materials.
(f) Each Lender which grants or sells a participation in all or any part of
its interest in this Agreement, any other Loan Document or any of the financial
accommodations provided or to be provided by it hereunder to any Person shall
promptly notify the Borrower thereof; provided, that the failure of such Lender
--------
to do so shall not affect the validity of such grant or sale of a participation
interest.
<PAGE>
59
ARTICLE 11
MISCELLANEOUS
SECTION 11.1 Complete Agreement; Modification of Agreement. This
---------------------------------------------
Agreement and the other Loan Documents constitute the complete agreement between
the parties with respect to the subject matter hereof and thereof and supersede
all prior agreements, commitments, understandings or inducements (oral or
written, expressed or implied), including the Commitment Letter. Neither this
Agreement nor any other Loan Document nor any terms hereof or thereof may be
changed, waived, discharged or terminated unless such change, waiver, discharge
or termination is in writing signed by the Required Lenders; provided, that no
--------
such change, waiver, discharge or termination shall, without the consent of each
affected Lender and Agent, (a) extend the scheduled final maturity of the
Revolving Credit Loan, or any portion thereof, or reduce the rate or extend the
time of payment of interest (other than as a result of waiving the applicability
of any post-Default increase in interest rates) thereon or Fees, or reduce the
principal amount thereof, or increase the Revolving Credit Commitment of such
Lender over the amount thereof then in effect (it being understood that a waiver
of any Default shall not constitute a change in the terms of any Revolving
Credit Commitment of any Lender), (b) release more than $1,000,000, or the
Equivalent Amount thereof, in value of the Collateral (except as expressly
permitted by the Loan Documents), (c) amend, modify or waive any provision of
this Section, or Section 1.10, 9.5, 11.2 or 11.7, (d) reduce any percentage
------------ --- ---- ----
specified in, or otherwise modify, the definition of Required Lenders, or (e)
consent to the assignment or transfer by Borrower or its Subsidiaries of any of
its rights and obligations under this Agreement. No provision of Article 9 may
---------
be amended without the prior written consent of Agent.
SECTION 11.2 Fees and Expenses.
-----------------
(a) Borrower shall pay on demand all reasonable out-of-pocket costs and
expenses (including reasonable fees of counsel) of Agent and its Affiliates and
Lenders, in connection with the preparation, negotiation, approval, execution,
delivery, administration, modification, amendment, waiver and enforcement
(whether through negotiations, legal proceedings or otherwise) of the Loan
Documents, and commitments relating thereto, and the other documents to be
delivered hereunder or thereunder and the transactions contemplated hereby and
thereby and the fulfilment or attempted fulfilment of conditions precedent
hereunder, and the costs of forwarding proceeds of borrowings to Borrower or any
other Person on behalf of Borrower and all costs and expenses for which Borrower
or any of its Subsidiaries is liable under Section 1.17 including: (i) wire
------------
transfer fees and other costs of forwarding to Borrower or any other Person on
behalf of Borrower by Agent and each Lender of the proceeds of the Revolving
Credit Advances; (ii) any amendment, modification or waiver of, or consent with
respect to, any of the Loan Documents or advice in connection with the
administration of the advances made pursuant hereto or its rights hereunder or
thereunder; (iii) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Agent, any Lender, Borrower or any other Person) in any
way relating to the Collateral, any of the Loan Documents or any other
agreements to be executed or
<PAGE>
60
delivered in connection therewith or herewith, whether as party, witness, or
otherwise, including any litigation, contest, dispute, suit, case, proceeding or
action, and any appeal or review thereof, in connection with a case commenced by
or against Borrower or any other Person that may be obligated to Agent and
Lenders by virtue of the Loan Documents, including any litigation, contest,
dispute, suit, case, proceeding or action (and any appeal or review) in
connection with a case under any Insolvency Statute; (iv) any attempt to enforce
any rights of Agent or Lenders against Borrower or any other Person that may be
obligated to Agent or Lenders by virtue of any of the Loan Documents; or (v) any
effort to (A) monitor the Revolving Credit Loan and the Loan Documents, (B)
evaluate, observe or assess Borrower or any other Loan Party or its affairs or
(C) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or
otherwise dispose of the Collateral, subject to the limitations on the
obligations of Borrower to pay for audits as provided in clause (c) of the first
sentence of Section 1.17.
------------
(b) Borrower shall pay on demand all reasonable out-of-pocket costs and
expenses (including reasonable fees of counsel) of Agent and each Lender in
connection with any Default and any enforcement or collection proceedings
resulting therefrom or any amendment, modification or waiver of, or consent with
respect to, any of the Loan Documents in connection with any Default.
(c) Without limiting the generality of clauses (a) and (b) above (but
subject to the limitations on the obligations of Borrower to pay for audits as
provided in clause (c) of the first sentence of Section 1.17), Borrower's
------------
obligation to reimburse Agent and/or any Lender for costs and expenses shall
include the reasonable fees and expenses of counsel (and local, foreign or
special counsel, advisors, consultants and auditors retained by such counsel),
as well as the reasonable fees and expenses of accountants, environmental
advisors, field examiners, appraisers, investment bankers, rating agencies,
management and other consultants and paralegals; court costs and expenses;
photocopying and duplicating expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telecopier charges;
secretarial overtime charges; expenses for travel, lodging and food; and all
other reasonable out-of-pocket costs and expenses of every type and nature paid
or incurred in connection with the performance of such legal or other advisory
services.
SECTION 11.3 No Waiver.
---------
(a) No failure on the part of Agent or Lenders, at any time or times, to
require strict performance by Borrower or any other Loan Party, of any provision
of this Agreement or any of the other Loan Documents shall waive, affect or
diminish any right of Agent or Lenders thereafter to demand strict compliance
and performance therewith. Any suspension or waiver of a Default or Event of
Default shall not suspend, waive or affect any other Default or Event of
Default, whether the same is prior or subsequent thereto, and whether of the
same or of a different type. None of the undertakings, agreements, warranties,
covenants and representations of Borrower or any other Loan Party contained in
this Agreement or any of the other Loan Documents and no Default or Event of
Default shall be deemed to have been suspended or waived by Lenders, unless such
waiver or suspension is by an instrument in writing signed by
<PAGE>
61
an officer of or other authorized employee of Agent and Required Lenders or all
Lenders if required hereunder and directed to Borrower or other Loan Party
specifying such suspension or waiver.
(b) No failure on the part of Borrower or any of its Subsidiaries, at any
time or times, to require strict performance by any Lender or Agent, of any
provision of this Agreement and any of the other Loan Documents shall waive,
affect or diminish any right of Borrower or any of its Subsidiaries thereafter
to demand strict compliance and performance therewith.
SECTION 11.4 Remedies. The rights and remedies of Agent and Lenders
--------
under this Agreement shall be cumulative and nonexclusive of any other rights
and remedies which Agent or any Lender may have under any other agreement,
including the Loan Documents, by operation of law or otherwise. Recourse to the
Collateral shall not be required.
SECTION 11.5 Severability. Wherever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
Applicable Laws, but if any provision of this Agreement shall be prohibited by
or invalid under Applicable Laws, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
SECTION 11.6 Conflict of Terms. Except as otherwise provided in this
-----------------
Agreement or any of the other Loan Documents (other than the Participation
Agreement) by specific reference in the applicable other Loan Document to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with any provision in any of the other Loan Documents
(other than the Participation Agreement), the provisions contained in this
Agreement shall govern and control. For greater certainty, any provision
contained in this Agreement shall not be in conflict with, or be inconsistent
with, any provision in any of the other Loan Documents (which shall not include
the Participation Agreement for the purpose of this sentence) unless the
relevant Loan Party cannot comply with both provisions. If any provision
contained in this Agreement is in conflict with any provision in the
Participation Agreement, the provisions contained in the Participation Agreement
shall govern and control.
SECTION 11.7 Right of Set-off. Subject to Section 1.2 and 1.13, upon the
---------------- ----------- ----
occurrence and during the continuance of any Event of Default, each Lender is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to setoff and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Lender to or for the credit or the account of Borrower
against any and all of the Obligations now or hereafter existing irrespective of
whether or not such Lender shall have made any demand under this Agreement or
any other Loan Document and although such Obligations may be unmatured. Each
Lender agrees promptly to notify Agent and Borrower after any such setoff and
application made by such Lender; provided, that the failure to give such notice
--------
shall not affect the validity of such setoff and application. The rights of
each Lender under this Section are in addition to the other rights and remedies
(including other rights of setoff) which such Lender may have.
<PAGE>
62
SECTION 11.8 Judgment Currency.
-----------------
(a) If, for the purpose of obtaining or enforcing judgment against Borrower
or any of its Subsidiaries in any court in any jurisdiction, it becomes
necessary to convert into any other currency (such other currency being
hereinafter in this Section 11.8 referred to as the "Judgment Currency") an
------------
amount due in Dollars or US Dollars under any Loan Document, the conversion
shall be made at the rate of exchange prevailing on the Business Day immediately
preceding (i) the date of actual payment of the amount due, in the case of any
proceeding in the courts of the Province of Ontario or in the courts of any
other jurisdiction that will give effect to such conversion being made on such
date, or (ii) the date on which the judgment is given, in the case of any
proceeding in the courts of any other jurisdiction (the applicable date as of
which such conversion is made pursuant to this Section 11.8(a) being hereinafter
---------------
in this Section 11.8 referred to as the "Judgment Conversion Date").
------------
(b) If, in the case of any proceeding in the court of any jurisdiction
referred to in Section 11.8(a), there is a change in the rate of exchange
---------------
prevailing between the Judgment Conversion Date and the date of actual receipt
of the amount due in immediately available funds, Borrower shall pay such
additional amount (if any, but in any event not a lesser amount) as may be
necessary to ensure that the amount actually received in the Judgment Currency,
when converted at the rate of exchange prevailing on the date of payment, will
produce the amount of Dollars or US Dollars, as the case may be, which could
have been purchased with the amount of the Judgment Currency stipulated in the
judgment or judicial order at the rate of exchange prevailing on the Judgment
Conversion Date.
(c) Any amount due from Borrower under Section 11.8(b) shall be due as a
---------------
separate debt and shall not be affected by judgment being obtained for any other
amounts due under or in respect of any of the Loan Documents.
(d) The term "rate of exchange" in this Section 11.8 means the spot rate of
------------
exchange at which Agent would, on the relevant date at or about 12:00 noon, be
prepared to sell Dollars or US Dollars, as the case may be, against the Judgment
Currency.
SECTION 11.9 Authorized Signature. Until Agent shall be notified by
--------------------
Borrower to the contrary, the signature upon any document or instrument
delivered by Borrower pursuant hereto and believed by Agent or any of Agent's
officers, agents, or employees to be that of an officer or duly authorized
representative of Borrower listed in Schedule 11.8 shall bind Borrower and be
-------------
deemed to be the act of Borrower affixed pursuant to and in accordance with
resolutions duly adopted by Borrower's board of directors, and Agent and each
Lender shall be entitled to assume the authority of each signature and authority
of the Person whose signature it is or appears to be unless the Person acting in
reliance on such signature shall have actual knowledge of the fact that such
signature is false or the Person whose signature or purported signature is
presented is without authority.
<PAGE>
63
SECTION 11.10 Notices. Except as otherwise provided herein, whenever it
-------
is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon one
party by the other party, or whenever one party desires to give or serve upon
the other party any communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and shall be deemed to have been validly served, given or
delivered (a) upon the earlier of actual receipt and five (5) days after deposit
with Canada Post, registered or certified mail, return receipt requested, with
proper postage prepaid, (b) upon transmission, when transmission occurs at or
before 5:00 p.m. on any Business Day, or, if transmission occurs after such time
on such Business Day, on the Business Day immediately following such Business
Day, when sent by telecopy or other similar facsimile transmission (with such
telecopy or facsimile promptly confirmed by delivery of a copy by personal
delivery or Canada Post as otherwise provided in this Section 11.10), (c) one
-------------
Business Day after deposit with a reputable overnight courier with all charges
prepaid, or (d) when delivered, if hand-delivered by messenger, all of which
shall be addressed to the party to be notified and sent to the address or
facsimile number indicated below or to such other address (or facsimile number)
as may be substituted by notice given as herein provided. The giving of any
notice required hereunder may be waived in writing by the party entitled to
receive such notice. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to any
Person (other than Borrower, Agent or any Lender) designated below to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
(a) Communications with Agent under this Section 11.10 shall be addressed
-------------
as follows:
General Electric Capital Canada Inc.
2300 Meadowvale Boulevard
Mississauga, Ontario
L5N 5P9
Attention: Vice-President, Commercial Finance
Telecopier No.: (905) 858-5456
with a copy to:
General Electric Capital Corporation
501 Merritt Seven
Norwalk, Connecticut 06851
Attention: Vice-President - Portfolio/Tyco
and Legal Counsel/Tyco
Telecopy Nos.: (203) 840-4680 and (203) 840-4520
and
<PAGE>
64
McMillan Binch
Suite 3600, South Tower
Royal Bank Plaza, 200 Bay Street
Toronto, Ontario
M5J 2J7
Attention: Bruce Barker
Telecopy No.: (416) 865-7048.
(b) Communications with Royal Bank of Canada, as Lender, under this Section
-------
11.10 shall be addressed as follows:
- -----
Royal Bank of Canada
200 Bay Street
South Tower, Royal Bank Plaza
14th floor
Toronto, Ontario
M5J 2J5
Attention: Corporate Banking, Multinational
Tyco Toys (Canada) Inc. Account Manager
Telecopy No.: (416) 974-0248
with a copy, in each case, to Agent and each Person to whom copies of
communications with Agent are to be given or served under Section 11.10(a).
----------------
(c) Communications with Borrower under this Section 11.10 shall be
-------------
addressed as follows:
Tyco Toys (Canada) Inc.
7420 B Bramalea Road
Mississauga, Ontario
L5S 1W9
Attention: Vice-President, Finance
Telecopy No.: (905) 612-8966
with a copy to:
6000 Midlantic Drive
Mt. Laurel, New Jersey 08054
Attention: Treasurer or Chief Financial Officer
Telecopy No.: (609) 273-2885.
<PAGE>
65
SECTION 11.11 Section Titles. The Section titles and Table of Contents
--------------
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of this Agreement.
SECTION 11.12 Counterparts. This Agreement may be executed in any number
------------
of separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
SECTION 11.13 Time of the Essence. Time is of the essence of this
-------------------
Agreement and each of the other Loan Documents.
SECTION 11.14 Public Announcements and Confidentiality.
----------------------------------------
(a) Borrower agrees that it and that each of its Subsidiaries shall not
issue any news release or make any public announcement pertaining to the
transactions contemplated by the Credit Documents without the prior consent of
Agent (which consent shall not be unreasonably withheld) unless such news
release or public announcement is required by law, in which case Borrower shall
consult with Agent prior to issuing any such news release or public
announcement.
(b) Borrower has furnished and will furnish to Agent and Lenders certain
information concerning Loan Parties which Borrower has advised is non-public,
proprietary or confidential in nature ("Confidential Information"). Agent and
------------------------
each Lender confirms to Borrower, for itself, that it is Agent's and such
Lender's policy and practice to maintain in confidence all Confidential
Information which is provided to it under agreements providing for the extension
of credit and which is identified to it as such, and that it will protect the
confidentiality of Confidential Information submitted to it with respect to any
Loan Party under this Agreement, commensurate with its efforts to maintain the
confidentiality of its own Confidential Information, provided, however, that (i)
-------- -------
nothing contained herein shall prevent Agent or any Lender from disclosing
Confidential Information (A) to its Affiliates and their respective directors,
officers and employees and to any legal counsel, auditors, appraisers,
consultants or other persons retained by it or its Affiliates as professional
advisors, on the condition that such information not be further disclosed except
in compliance with this Section 11.14(b); (B) under colour of legal authority,
----------------
including, without limitation, to any regulatory authority having jurisdiction
over it or its operations or to or under the authority of any court deemed by it
to be of competent jurisdiction; (C) to any actual or potential assignee of or
participant in a Lender's rights and obligations under this Agreement pursuant
to Section 10.2 hereof to the extent such actual or potential assignee or
------------
participant has agreed to maintain such information in confidence on the basis
set forth in this Section 11.14(b); and (D) as necessary in connection with the
----------------
exercise of its rights and remedies under this Agreement or any of the other
Loan Documents; (ii) the terms of this Section 11.14(b) shall be inapplicable to
----------------
any information provided to it which is in its possession prior to the delivery
to it of such information by Borrower or otherwise has been obtained by it on a
non-confidential basis, or which was or becomes available to the public or
otherwise part of the public domain (other than as a result of Agent's or such
Lender's failure or any prospective participant's or assignee's failure to abide
hereby), or which was not non-public,
<PAGE>
66
proprietary or confidential when Borrower delivered it to Agent or any Lender;
and (iii) the determination by Agent or any Lender as to the application of any
of the circumstances described in the foregoing clauses (i) and (ii) will be
conclusive if made in good faith.
(c) Notwithstanding paragraph (b) above, Borrower consents to Agent
publishing at its expense a tombstone or similar advertising material relating
to the financing transaction contemplated by this Agreement.
SECTION 11.15 GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL MATTERS OF
-------------
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE PROVINCE OF ONTARIO APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH PROVINCE, AND ANY LAWS OF CANADA APPLICABLE THEREIN.
SECTION 11.16 Further Assurances. The Borrower shall, and shall cause
------------------
each of its Subsidiaries to, from time to time, upon each request from Agent, at
Borrower's and its Subsidiaries' cost and expense, make, do, execute and cause
to be made, done and executed, all such further and other lawful acts, documents
and assurances whatsoever which Agent determines in its reasonable opinion may
be necessary in order to give effect to the provisions, purposes and intent of
this Agreement and the other Loan Documents and to complete the transactions
contemplated by this Agreement and the other Loan Documents.
[INTENTIONALLY LEFT BLANK.]
<PAGE>
67
IN WITNESS WHEREOF, this Agreement has been duly executed.
TYCO TOYS (CANADA) INC.
By: /s/ Robert Polovniak
-----------------------------------
Name: Robert Polovniak
Title: Vice-President, Finance
GENERAL ELECTRIC CAPITAL CANADA INC, as Agent
By: /s/ Richard Sabourin
-----------------------------------
Name: Richard Sabourin
Title: Vice-President, Commercial Finance
Lender:
------
Revolving Credit Commitment: ROYAL BANK OF CANADA
- ---------------------------
Dollar Equivalent Amount
of US$20,000,000
By: /s/ Don Bean
----------------------------------
Name: Don Bean
Title: Senior Account Manager
<PAGE>
Annex A to Credit Agreement
DEFINITIONS; RULES OF CONSTRUCTION
----------------------------------
1. Definitions. Capitalized terms used in this Agreement and the other Loan
-----------
Documents have (unless otherwise provided elsewhere in this Agreement and the
other Loan Documents) the following respective meanings:
"Account Debtor" means, as to any Person, any other Person who is or who
--------------
may become obligated to such Person under, with respect to, or on account of, an
Account.
"Accounts" means all "accounts," as such term is defined in the PPSA
--------
(Ontario), now owned or hereafter acquired by Borrower, including, without
limitation: (a) all accounts receivable, other receivables, book debts and
other forms of obligations (other than forms of obligations evidenced by Chattel
Paper or Instruments or a security) now owned or hereafter received or acquired
by or belonging or owing to Borrower, whether arising out of goods sold or
services rendered by it or from any other transaction; (b) all of Borrower's
rights in, to and under all purchase orders or receipts now owned or hereafter
acquired by it for goods or services; (c) all of Borrower's rights to any goods
represented by any of the foregoing (including unpaid sellers' rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods); (d) all monies due or to become due
to Borrower under all purchase orders and contracts for the sale or lease of
goods or the performance of services or both by Borrower or in connection with
any other transaction (whether or not yet earned by performance on the part of
Borrower) now or hereafter in existence, including, without limitation, the
right to receive the proceeds of said purchase orders and contracts; and (e) all
collateral security and guarantees of any kind, now or hereafter in existence,
given by any Person with respect to any of the foregoing.
"Advance Date" has the meaning assigned to it in Section 1.12.
------------ ------------
"Affiliate" means, with respect to any Person, (a) each Person that,
---------
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, ten percent (10%) or more of the Stock having
ordinary voting power in the election of directors of such Person, (b) each
Person that controls, is controlled by or is under common control with such
Person, or (c) each of such Person's officers, directors, joint ventures and
partners. For the purpose of this definition,
A - 1
<PAGE>
"control" of a Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" has the meaning assigned to it in the first paragraph of this
-----
Agreement.
"Agreement" means the Credit Agreement to which this Annex A is attached
--------- -------
and of which it forms a part, including all Annexes, Schedules, and Exhibits
attached or otherwise identified thereto, all restatements, modifications and
supplements hereof or hereto, and any appendices, attachments, exhibits or
schedules to any of the foregoing, and shall refer to this Agreement as the same
may be in effect at the time such reference becomes operative; provided, that
--------
any reference to the Schedules to this Agreement shall be deemed a reference to
the Schedules as in effect as of the Closing Date, unless otherwise provided in
a written amendment thereto.
"Agreement Respecting Distribution Agreement" means the agreement in the
-------------------------------------------
form of Exhibit A attached hereto, to be executed by Borrower and Tyco
---------
Industries in favour of Agent for the benefit of Agent and Lenders, including
all restatements, amendments, modifications and supplements thereto, and shall
refer to the Agreement Respecting Distribution Agreement as the same may be in
effect at the time such reference becomes operative.
"Applicable Laws" means, with respect to any Person, property, transaction
---------------
or event, all applicable laws, statutes, regulations, treaties, judgments and
decrees and (whether or not having the force of law) all applicable official
directives, rules, consents, approvals, authorizations, guidelines, orders and
policies of any Governmental Body having authority over such Person.
"Assignments of Monies Payable Under Insurance Policies" means each
------------------------------------------------------
agreement in the form of Exhibit B attached hereto, to be executed by Borrower
---------
in favour of Agent, for the benefit of Agent and Lenders, including all
restatements, amendments, modifications and supplements thereto, and shall refer
to the Assignments of Monies Payable Under Insurance Policies as the same may be
in effect at the time such reference becomes operative.
"BA Rate" means, in respect of any Interest Period applicable to a Fixed
-------
Rate Tranche, the rate of interest per annum determined by Agent which is equal
to the average rate (rounded upwards to the nearest basis point) shown for
Canadian dollar bankers' acceptances with a term of one month on "CDOR" page on
the Reuter Monitor Money Rates Service (or such other
A - 2
<PAGE>
page as may replace such page on the Reuter Monitor Money Rates Service for the
purpose of displaying Canadian interbank bid rates for Canadian dollar bankers'
acceptances with a term of one month) as of 10:00 a.m. one Business Day
immediately preceding the first day of such Interest Period. If for any reason
such rate does not appear on "CDOR" page on the Reuter Monitor Money Rates
Service, or such other page, as contemplated, BA Rate means the annual rate of
interest determined by Agent which is equal to the arithmetic average of the
rates quoted by such of The Bank of Nova Scotia, Royal Bank of Canada and
Canadian Imperial Bank of Commerce as may quote such a rate in respect of
Canadian dollar bankers' acceptances with a term of one month as of 10:00 a.m.
one Business Day immediately preceding the first day of such Interest Period.
For greater certainty, no adjustment shall be made to account for the difference
between the number of days in a year on which the rates referred to in this
definition are based and the number of days in a year on the basis of which
interest is calculated under this Agreement.
"Blocked Account" has the meaning assigned to it in Annex B.
--------------- -------
"Blocked Account Agreement" has the meaning assigned to it in Annex B.
------------------------- -------
"Borrower" has the meaning assigned to it in the first paragraph of this
--------
Agreement.
"Borrowing Base" means, at any time, an amount equal to the sum at such
--------------
time of: (a) up to eighty percent (80%) of Eligible Accounts plus (b) up to
----
sixty percent (60%) of Eligible Inventory, valued on a first-in, first-out basis
(at the lower of cost or market), minus (c) the amount of any reserves,
-----
including, in respect of Prior Claims, as Agent may deem necessary or
appropriate from time to time in its sole discretion exercised in good faith.
"Borrowing Base Certificate" means a certificate in the form attached
--------------------------
hereto as Exhibit 1.1(e).
--------------
"Business Day" means any day that is not (i) a Saturday, a Sunday or a day
------------
on which banks are required or permitted to be closed in the State of New York
or the Province of Ontario, or (ii) a day on which Agent is not open for
business.
"Canadian Benefit Plans" means all material employee benefit plans
----------------------
maintained or contributed to by Borrower or any of its Subsidiaries that are not
Canadian Pension Plans including, without limitation, all profit sharing,
savings, supplemental retirement, retiring allowance, severance, deferred
compensation, welfare, bonus, supplementary unemployment benefit plans or
arrangements and all life, health, dental and disability plans and arrangements
in which the employees or former employees of
A - 3
<PAGE>
Borrower or any of its Subsidiaries employed in Canada participate or are
eligible to participate but excluding all stock option or stock purchase plans.
"Canadian Pension Plans" means each plan which is considered to be a
----------------------
pension plan for the purposes of any applicable pension benefits standards
statute and/or regulation in Canada established, maintained or contributed to by
Borrower or any of its Subsidiaries for its or any of its Subsidiaries'
employees or former employees.
"Capital Lease" means any lease of any property (whether real, personal or
-------------
mixed) by any Person as lessee that, in accordance with GAAP, either would be
required to be classified and accounted for as a capital lease on a balance
sheet of such Person or otherwise be disclosed as such in a note to such balance
sheet.
"Capital Lease Obligation" means, as of any date, the amount of the
------------------------
obligation of the lessee under a Capital Lease that, in accordance with GAAP,
would appear on a balance sheet of such lessee in respect of such Capital Lease
or otherwise be disclosed as such in a note to such balance sheet.
"Cash Collateral Agreement" means the agreement, substantially in the form
-------------------------
of Exhibit H attached hereto, to be executed by Borrower and Lender, including
---------
all restatements, amendments, modifications and supplements thereto in form and
substance satisfactory to Borrower, Lender and Agent, and shall refer to the
Cash Collateral Agreement as the same may be in effect at the time such
reference becomes operative.
"Cash Equivalents" means: (a) securities with maturities of 180 days or
----------------
less from the date of acquisition, issued or fully guaranteed or insured by the
governments of Canada or the United States of America or any agency thereof; (b)
certificates of deposit, overnight bank deposits and bankers' acceptances issued
by commercial banks incorporated under the laws of Canada or the United States
of America, each having capital and surplus in excess of $500,000,000, or the
Equivalent Amount thereof, having maturities of one year or less from the date
of acquisition; and (c) commercial paper of an issuer rated at least A-1 by
Standard & Poor's Corp. or at least P-1 by Moody's Investors Services, Inc., or
carrying an equivalent rating by a nationally recognized rating agency if both
of the two named rating agencies cease publishing ratings of investments, in
each case with maturities of not more than sixty (60) days from the date
acquired.
"CDOS" means, at any date, the annual rate of interest determined by Agent
----
by reference to the average rate (rounded upwards to the nearest basis point)
shown for one month Government of Canada treasury bills on "CDOS" page on the
Reuters
A - 4
<PAGE>
Monitor Money Rates Service (or such other page as may replace such page on the
Reuters Monitor Money Rates Service for the purpose of displaying Canadian
interbank bid rates for one month Canadian dollar Government of Canada treasury
bills) as of 10:00 a.m. on such date.
"Certificate of Deposit" means a certificate of deposit in the amount of
----------------------
the Dollar Equivalent Amount of US$200,000, determined on the Closing Date,
maintained by Borrower with Lender as part of the security for the Obligations,
and all substitutions therefor.
"Change in Control" means the time when (i) any Person or "group" has
-----------------
acquired "beneficial ownership" (as such terms are defined under Section 13d-3
of and Regulation 13D under the Securities Exchange Act of 1934, as amended),
either directly or indirectly, of outstanding shares of Stock of Tyco Parent
having more than twenty percent (20%) of the voting power for the election of
directors of Tyco Parent under ordinary circumstances, (ii) more than fifty
percent (50%) of the members of Tyco Parent's board of directors shall have been
replaced by new directors not nominated for membership on the board by a
majority of directors who were either (x) directors on the Closing Date or (y)
directors after the Closing Date and whose nomination to the board of directors
of Tyco Parent was itself approved by a majority of directors on the board who
were directors on the Closing Date, (iii) Tyco Parent has sold, transferred,
conveyed, assigned or otherwise disposed of all or substantially all of the
assets of Tyco Parent or (iv) a "Change of Control" (as defined in the Tyco
Parent Senior Subordinated Note Indenture) shall have occurred.
"Charges" means all Taxes or Liens in respect of Taxes upon or relating to
-------
(a) the Collateral, (b) the Obligations, (c) the employees, payroll, income or
gross receipts of Borrower or any of its Subsidiaries, (d) the ownership or use
by Borrower or any of its Subsidiaries of any of its assets, or (v) any other
aspect of Borrower's or any of its Subsidiaries' business.
"Chattel Paper" means all "chattel paper," as such term is defined in the
-------------
PPSA (Ontario), now owned or hereafter acquired by Borrower, wherever located.
"Claim" has the meaning assigned to it in Section 1.16.
----- ------------
"Closing Date" means the Business Day on which the conditions precedent set
------------
forth in Article 2 have been satisfied, in Agent's sole discretion, or waived in
---------
writing by Agent, and on which the initial Revolving Credit Advance shall be
made (which date shall in any event be on or prior to February 28, 1995).
A - 5
<PAGE>
"Collateral" means the property covered by the Collateral Documents and any
----------
other property, real or personal, tangible or intangible, now existing or
hereafter acquired, that may at any time be or become subject to a Lien in
favour of Agent or Lenders to secure any or all of the Obligations.
"Collateral Documents" means the Security Agreement, the Hypothec, the
--------------------
General Assignment of Book Debts, the Tyco Industries Pledge Agreement, the
Assignments of Monies Payable under Insurance Policies, the Blocked Account
Agreement, the Cash Collateral Agreement, the Certificate of Deposit and all
other instruments and agreements now or hereafter securing the whole or any part
of the Obligations.
"Collection Account" means Agent's Dollar account 1011519 or Agent's US
------------------
Dollar account 4002739, as applicable, with account name GECCI COMM FIN at Royal
Bank of Canada, Corporate Banking, 10th Floor, 20 King Street West, Toronto,
Ontario, transit number 00002, or such other account as may be designated by
Agent.
"Commitment Letter" means the Commitment Letter, dated November 8, 1994,
-----------------
made by GE Capital and GE Capital Canada and agreed to and accepted by Tyco
Parent on November 11, 1994, together with all term sheets attached thereto, as
amended on December 27, 1994, January 30, 1995 and February 8, 1995 and as
further amended, modified or supplemented from time to time.
"Commitment Termination Date" means the earliest of (a) the third
---------------------------
anniversary of the Closing Date, (b) the date of termination of the Revolving
Credit Commitments pursuant to Section 8.2, and (c) the date of termination of
-----------
the Revolving Credit Commitments in accordance with the provisions of Section
-------
1.3.
- ---
"Concentration Account" has the meaning assigned to it in Annex B.
--------------------- -------
"Confidential Information" has the meaning assigned to it in Section
------------------------ -------
11.13(b).
- --------
"Contaminant" means any substance, solid, liquid or gaseous matter, fuel
-----------
(including, without limitation, petroleum or petroleum products, crude oil,
natural gas, natural gas liquid, liquified natural gas, synthetic fuel or any
combination of the above), microorganism, sound, vibration, ray, heat, odour,
radiation, energy vector, plasma, organic or inorganic matter, whether or not
animate or inanimate, container, transient reaction intermediate, nuclear
material or any combination of the above deemed hazardous, toxic, a pollutant, a
deleterious substance, a hazardous material, a waste, a hazardous waste, a
contaminant or a source of pollution or contamination under any Environmental
Laws or the presence of which in the Environment is
A - 6
<PAGE>
likely to affect adversely the quality of the Environment in any way, including,
without limitation, affecting adversely the life, health, safety, welfare or
comfort of human beings, or causing damage to or otherwise impairing the quality
of the soil, vegetation, wildlife or property.
"Default" means any event which, with the passage of time or notice or
-------
both, would, unless cured or waived, become an Event of Default.
"Default Rate" means (a) with respect to principal owing on Revolving
------------
Credit Advances, a rate per annum equal to (i) two percent (2%), plus, (ii) the
----
rate or rates of interest otherwise in effect hereunder from time to time
therefor and (b) with respect to interest or other Obligations (excluding
principal on the Revolving Credit Advances), a rate per annum equal to (i) the
Index Rate in effect from time to time, plus, (ii) four and one-half percent
----
(4.50%)).
"Disbursement Accounts" has the meaning assigned to it in Annex B.
--------------------- -------
"Discharge" means the emission, deposit, issue, discharge, release, escape,
---------
leaching, dispersal, migration, spraying, spill, leakage or seepage of a
Contaminant into the Environment.
"Dollar Equivalent Amount" means, on any date, the Equivalent Amount in
------------------------
Canadian Dollars of the stated fixed amount of US Dollars.
"Dollars" and "$" means lawful money of Canada.
------- -
"Eligible Account" means the gross outstanding balance of Accounts of
----------------
Borrower (arising out of the sale by Borrower of finished goods Inventory),
denominated in Dollars, net of reserves established therefor, which Agent, in
its discretion exercised in good faith, shall from time to time deem eligible,
less, all finance charges, late fees, other fees that are unearned, and all
- ----
reserves, allowances, rebates and discounts for volume, advertising, defective
returns, mark-down allowances, cash payment, warehouse delivery and booking
discounts and such other reserves as Agent, in its discretion exercised in good
faith, shall from time to time deem appropriate. Without in any way limiting
the discretion given to Agent hereunder to deem an Account of Borrower
ineligible, an Account of Borrower shall not be an Eligible Account if:
(1) any warranty or representation contained in this Agreement or any of
the other Loan Documents applicable either to Accounts of Borrower in
general or to any such specific Account has been breached with respect
to such Account in any material respect;
A - 7
<PAGE>
(2) (A) such Account is owing by an Account Debtor which is unable to pay
its debts as such debts become due, or is, or is adjudged or
declared to be, or admits to being, bankrupt or insolvent, or
makes, or files a notice of intention to make, a proposal under
any Insolvency Statute; or
(B) any notice of intention is filed or any voluntary case or
involuntary case or proceeding is commenced under any Insolvency
Statute, or incorporation or other law, now or hereinafter in
effect, for the (i) bankruptcy, liquidation, winding-up,
dissolution or suspension of general operations of such Account
Debtor, (ii) composition, reorganization, arrangement or
readjustment of, or other relief from, or stay of proceedings to
enforce, some or all of the debts of such Account Debtor, (iii)
appointment of a trustee, receiver, receiver and manager,
liquidator, custodian or other similar official for, or for all
or a substantial part of the assets of, such Account Debtor or
(iii) possession, foreclosure or retention, or sale or other
disposition of, or other proceedings to enforce security over,
all or a substantial part of the assets of such Account Debtor;
(3) such Account has remained unpaid after the earlier to occur of (A) 60
days after the date on which payment is specified to be due in the
original applicable invoice and (B) 270 days after the date of such
original applicable invoice;
(4) such Account is payable by an Account Debtor which is a supplier,
creditor (other than in respect of reserves, rebates and discounts
referred to above) or an Affiliate of Borrower;
(5) such Account originated outside of Canada or is not denominated in
Dollars;
(6) the sale represented by such Account is on a bill-and-hold,
undelivered sale, guaranteed sale, sale or return, consignment, or
sale on approval basis;
(7) Agent believes, in its sole discretion, that the collection of such
Account is insecure or that such Account may not be paid;
(8) such Account is subject to any material claim by or dispute with the
Account Debtor;
A - 8
<PAGE>
(9) such Account is subject to any right of set-off by the Account Debtor;
(10) Agent does not have a perfected first ranking Lien in and to such
Account, subject to no prior ranking Lien other than the Liens
described in paragraphs (a), (b) and, provided such Liens are not
registered, (e) of the definition of Permitted Encumbrances (it being
understood that, as of the Closing Date, Borrower has not granted to
Agent a perfected Lien in any Account generated from sales to Account
Debtors situated in Quebec, Yukon Territory or Northwest Territories);
(11) such Account is not evidenced by an invoice or other writing in form
acceptable to Agent in its sole discretion;
(12) such Account is an Account owing by a Governmental Body and Agent does
not have a legal opinion from counsel and in form and substance
acceptable to Agent stating that such Account is enforceable against
the applicable Governmental Body (it being understood that, as of the
Closing Date, the foregoing condition has not been satisfied);
(13) in order to be entitled to collect it, Borrower is required to perform
any additional service for, or perform or incur any additional
obligation to, Account Debtor;
(14) such Account is owing by an Account Debtor whose Indebtedness to
Borrower on Accounts which are otherwise ineligible exceeds 50% of
such Account Debtor's total Indebtedness to Borrower;
(15) such Account is owing by an Account Debtor whose total Indebtedness to
Borrower on Accounts exceeds 10% of the aggregate amount of all
Accounts of Borrower (the "Aggregate Accounts") and, in that case,
such Account shall be ineligible to the extent that the aggregate
amount of all Accounts owing by such Account Debtor and which are
otherwise eligible exceeds 10% of the Aggregate Accounts provided,
--------
however, (i) in the case of Accounts owing by Toys R Us (Canada) Ltd.
or any of its Affiliates, such Accounts shall be ineligible to the
extent that the aggregate amount of all Accounts owing by Toys R Us
(Canada) Ltd. and its Affiliates exceeds 45% of the Aggregate
Accounts; (ii) in the case of Accounts owing by Walmart Canada Inc. or
any of its Affiliates, such Accounts shall be ineligible to the extent
that the aggregate amount of all Accounts owing by Walmart Canada Inc.
and its Affiliates exceeds 40%
A - 9
<PAGE>
of the Aggregate Accounts; (iii) in the case of Accounts owing by
Canadian Tire Corporation Ltd. or any of its Affiliates, such Accounts
shall be ineligible to the extent that the aggregate amount of all
Accounts owing by Canadian Tire Corporation Ltd. and its Affiliates
exceeds 20% of the Aggregate Accounts; and (iv) in the case of
Accounts owing by Consumers Distributing Inc. or any of its
Affiliates, such Accounts shall be ineligible to the extent that the
aggregate amount of all Accounts owing by Consumers Distributing Inc.
and its Affiliates exceeds 15% of the Aggregate Accounts; or
(16) such Account is an Account in respect of which Account Debtor takes a
deduction or credit not authorized or otherwise agreed to by Borrower.
"Eligible Inventory" means such Inventory of Borrower that consists of
------------------
finished goods and that is not ineligible as the basis for Revolving Credit
Advances based on such criteria determined by Agent from time to time in its
sole discretion exercised in good faith. Criteria for eligibility may be fixed
and revised from time to time by Agent in its sole discretion exercised in good
faith. Unless otherwise agreed to in writing by Agent, in determining whether
Inventory of Borrower constitutes Eligible Inventory, Agent shall not include
any Inventory that:
(1) is not owned by Borrower free and clear of all Liens and rights of
others, except first priority Liens perfected in favour of Agent and
Liens described in paragraphs (a), (b) and, provided such Liens are
not registered, (e) of the definition of Permitted Encumbrances (it
being understood that, as of the Closing Date, Borrower has not
granted to Agent a perfected security interest in any Inventory of
Borrower situated outside of the Province of Ontario);
(2) except as provided in paragraphs (3) and (4) below, is not located on
premises owned and operated by Borrower in the Province of Ontario and
referenced in Schedule 3.2;
------------
(3) is Inventory in transit or Inventory held on or at any leased premises
where the landlord thereof has not executed a landlord agreement and
the mortgagee thereof,if any, has not executed a consent and agreement
to the terms of the applicable landlord agreement, in each case, in
form and substance satisfactory to Agent and that remains effective
(it being understood that, as of the Closing Date, only the landlord
and the mortgagees of Borrower's premises
A - 10
<PAGE>
located at 7420 B Bramalea Road, Mississauga, Ontario have executed a
landlord agreement and a mortgagee consent and agreement);
(4) is in the possession or control of a bailee, warehouseman, processor,
converter, finisher or other Person other than Borrower, unless Agent
is in possession of such agreements, instruments and documents as
Agent may require (each in form and content acceptable to Agent and
duly executed, as appropriate by the bailee, warehouseman, processor,
converter or other Person in possession or control of such Inventory,
as applicable) including warehouse receipts in Agent's name covering
such Inventory;
(5) is covered by a negotiable document of title;
(6) in Agent's good faith judgment, is obsolete, unsaleable, shopworn,
damaged, unfit for further processing, or is of substandard quality
(it being agreed that the determination of substandard quality with
respect to any Inventory which is the subject of a licence of rights
or interests now held or hereafter acquired by Borrower as licensee
that contains standards of quality for such Inventory shall be based
upon the quality standards set forth in such licence);
(7) consists of display items, samples, supplies, small tools, packaging
and shipping materials or defective goods which have been returned by
the buyer;
(8) such Inventory has not been within the preceding 12 months included in
a catalogue or other sales materials (including the Borrower's
Canadian price list) which are intended to be used for purposes of
promoting sales by Borrower at regular or incentive prices within the
next 12 months or is otherwise obsolete;
(9) does not meet all standards imposed by any Applicable Law or
promulgated by any Governmental Body including, without limitation,
all Applicable Laws governing product labelling, care labelling and
country of origin labelling;
(10) is placed by Borrower on consignment or held by Borrower on
consignment from another Person;
(11) in any way fails to meet or violates any warranty, representation or
covenant contained in this Agreement or any other Loan Document;
A - 11
<PAGE>
(12) has not been fully paid for by Borrower and 30 days have not expired
after the date of delivery of such Inventory to Borrower, unless Agent
has received a duly executed Supplier Waiver and Assignment from the
seller to Borrower of such Inventory; provided, however, for greater
--------
certainty, Agent may at any time exercise the discretion given to
Agent hereunder to deem such Inventory ineligible notwithstanding that
Agent has received a duly executed Supplier Waiver and Assignment from
the seller to Borrower of such Inventory. As of the Closing Date,
Agent has received a Supplier Waiver and Assignment only from Tyco
Industries, Tyco Manufacturing and Tyco (Hong Kong) Limited, a Hong
Kong corporation and Tyco Asia, Ltd., a Hong Kong corporation; or
(13) is not otherwise acceptable in the sole discretion of Agent exercised
in good faith.
"Environment" means all components of the Earth, including, all layers of
-----------
the atmosphere, air, land (including, all underground spaces and cavities and
all land submerged under water), soil, water (including surface and underground
water), all organic and inorganic matter and living organisms, animal life,
vegetation and property, and the interacting natural systems that include
components referred to above in this definition.
"Environmental Activity" means any past, present or future activity, event
----------------------
or circumstance in respect of a Contaminant (including its storage, holding,
collection, purchase, accumulation, assessment, generation, manufacture,
construction, processing, treatment, stabilization, disposition, handling,
transportation, deposit, recycling, elimination, sale, distribution, import or
export or its Discharge into the natural environment, including the movement
through or in the air, soil, surface water or ground water) or which is
otherwise regulated by Environmental Laws.
"Environmental Assessment" means an environmental audit conducted by a
------------------------
Person approved in writing by Agent in respect of any or all of the Facilities.
"Environmental Laws" means all applicable federal, state, provincial,
------------------
national and supra-national, and local laws, including statutes, regulations,
directives, ordinances, codes, orders, rules, subordinate legislation,
Governmental Approvals and other governmental actions, restrictions and
requirements, and all judgments, orders, instructions and awards of any court of
competent authority and all codes of practice and guidance, from time to time,
having the force of law, relating to environmental matters (including
Environmental Activities or
A - 12
<PAGE>
occupational health and safety), including, the Environment Quality Act
(Quebec), the Act respecting Pesticides (Quebec), the Act respecting
Occupational Health and Safety (Quebec), the Act respecting the Use of Petroleum
Products (Quebec), By-Law 87 of the Montreal Urban Community respecting
wastewater disposal in sewer systems and waterways, By-Law 90 of the Montreal
Urban Community pertaining to air purification, the Politique de rehabilitation
des terrains contamines (Quebec) (notwithstanding such policy does not have the
force of law), the Environmental Protection Act (Ontario), the Occupational
Health and Safety Act (Ontario), the Canadian Environmental Protection Act
(Canada), the Fisheries Act (Canada), the Transportation of Dangerous Goods Act
(Canada) and the Hazardous Materials Information Review Act (Canada), all as
amended, and includes all regulations made under such statutes.
"Equipment" means all "equipment" as such term is defined in the PPSA
---------
(Ontario), and, in any event, shall include all machinery, equipment,
furnishings, fixtures and vehicles and any and all additions, accessions,
substitutions and replacements of any of the foregoing, wherever located,
together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
"Equivalent Amount" means, on any date, with respect to obligations or
-----------------
valuations denominated in one currency (the "First Currency") the amount of the
First Currency which is required to purchase a fixed amount in another currency
(the "Other Currency") at the 12:00 noon rate quoted on "BOFC" page on the
Reuter Monitor Money Rates Service (or such other page on the Reuter Monitor
Money Rates Service as may replace such page for the purpose of displaying such
exchange rates) on the Business Day immediately preceding such date, or at such
other rate as may have been agreed in writing between Borrower and Agent.
"ERISA" means the United States Employee Retirement Income Security Act of
-----
1974 (or any successor legislation thereto), as amended from time to time, and
any regulations promulgated thereunder.
"Event of Default" has the meaning assigned to it in Section 8.1.
---------------- -----------
"Existing Credit Agreement" means the letter agreement dated May 28, 1993,
-------------------------
as amended and restated as of May 28, 1994 by an amending letter agreement dated
June 20, 1994, between Borrower and The Bank of Nova Scotia.
"Existing US Credit Agreement" means the credit agreement dated as of
----------------------------
October 2, 1992 between Tyco Industries, as borrower, Tyco Parent, certain
Subsidiaries of Tyco Parent, the lenders party thereto, NationsBank, N.A.
(Carolinas) (formerly known as
A - 13
<PAGE>
Nationsbank of North Carolina, N.A.), as agent, and The Bank of Nova Scotia, as
co-agent, as amended by Amendment No. 1 thereto dated as of March 18, 1993,
Amendment No. 2 thereto dated as of February 10, 1994, Amendment No. 3 thereto
dated as of November 15, 1994, Amendment No. 4 thereto dated as of February 8,
1995 and by a letter agreement dated June 7, 1994.
"Facilities" means the moveable, personal, immoveable and real properties
----------
(including buildings, equipment, machinery and lands) from time to time, owned,
leased, managed, controlled or operated by Borrower or any of its Subsidiaries.
"Fee Agreement" means the agreement dated as of February 22, 1995 between
-------------
Borrower and Agent, including all restatements, amendments, modifications and
supplements thereto, and shall refer to the Fee Agreement as the same may be in
effect at the time such reference becomes operative.
"Fees" means the fees due to Agent for the account of Lenders as set forth
----
in Annex D, and any other fees due to Agent or Lenders pursuant to the Fee
-------
Agreement or any other Loan Document.
"Financials" means the financial statements referred to in paragraph 1 of
----------
Schedule 3.4.
- ------------
"Fiscal Month" means for Tyco Parent, Borrower and its Subsidiaries the
------------
following:
(a) the first, fourth, seventh and tenth Fiscal Months of any Fiscal Year
shall be the periods commencing on January 1, April 1, July 1 and
October 1, respectively, in such Fiscal Year and ending on the fourth
Saturday thereafter;
(b) the second, fifth, eighth and eleventh Fiscal Months of any Fiscal
Year shall be the periods commencing on the day after the last day of
the first, fourth, seventh and tenth Fiscal Months, respectively, of
such Fiscal Year and ending on the fourth Saturday thereafter; and
(c) the third, sixth, ninth and twelfth Fiscal Months of any Fiscal Year
shall be the periods commencing on the day after the last day of the
second, fifth, eighth and eleventh Fiscal Months, respectively, of
such Fiscal Year and ending on the last day of March, June, September
and December, respectively, immediately thereafter.
"Fiscal Quarter" means for Tyco Parent, Borrower and its Subsidiaries each
--------------
calendar quarter.
A - 14
<PAGE>
"Fiscal Year" shall mean for Tyco Parent, Borrower and its Subsidiaries the
-----------
calendar year. Subsequent changes of the fiscal year of Tyco Parent, Borrower
or any of its Subsidiaries shall not change the term "Fiscal Year", unless Agent
and Required Lenders shall consent in writing to such change.
"Fixed Rate" has the meaning assigned to it in Section 1.5(c).
---------- --------------
"Fixed Rate Tranche" has the meaning assigned to it in Section 1.5(c).
------------------ --------------
"GAAP" means, subject to Section 2(a) of this Annex A, (a) with respect to
---- ------------ -------
Borrower and its Subsidiaries, generally accepted accounting principles in
Canada in effect from time to time and (b) with respect to Tyco Parent on a
consolidated basis, generally accepted accounting principles in the United
States of America in effect from time to time, in each case applied on a
consistent basis.
"GE Capital" means General Electric Capital Corporation, a corporation
----------
organized under the banking laws of the State of New York.
"GE Capital Canada" means General Electric Capital Canada Inc., a Canada
-----------------
corporation, having an office at 2300 Meadowvale Blvd., Mississauga, Ontario,
L5N 5P9.
"General Assignment of Book Debts" means the agreement, in the form of
--------------------------------
Exhibit C attached hereto, to be executed by Borrower in favour of Agent, for
- ---------
the benefit of Agent and Lenders, including all restatements, amendments,
modifications and supplements thereto, and shall refer to the General Assignment
of Book Debts as the same may be in effect at the time such reference becomes
operative.
"Global Lenders" means, collectively, the lenders providing or committing
--------------
to provide any financial accommodations under any of the Overall Facilities.
"Governmental Approval" means any authorization, certificate, attestation,
---------------------
permit, approval, grant, licence, consent, right, privilege, registration,
filing, commitment, order, judgment, direction, ordinance or decree issued or
granted by or under law or by any Governmental Body as well as any acquired or
vested right required or recognized pursuant to Environmental Laws.
"Governmental Body" means any government, parliament, legislature,
-----------------
regulatory authority, agency, tribunal, department, commission, board or court
or other law, regulation or rule making entity (including a Minister of the
Crown), national or
A - 15
<PAGE>
supra-national, having or purporting to have jurisdiction on behalf of any
nation, state, province, municipality or district, or any subdivision thereof.
"Guaranteed Indebtedness" means, as to any Person, any obligation of such
-----------------------
Person guaranteeing any indebtedness, lease, dividend, or other obligation
("primary obligation") of any other Person (the "primary obligor") in any
manner, including any obligation or arrangement of such Person (a) to purchase
or repurchase any such primary obligation, (b) to advance or supply funds (i)
for the purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet condition of the primary
obligor, (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (d) to
indemnify the owner of such primary obligation against loss in respect thereof.
"Hypothec" means the agreement, substantially in the form of Exhibit D
-------- ---------
attached hereto, to be executed by Borrower, Lender and Agent, including all
restatements, amendments, modifications and supplements thereto, and shall refer
to the Hypothec as the same may be in effect at the time such reference becomes
operative.
"Indebtedness" of any Person means (a) all indebtedness of such Person for
------------
borrowed money or for the deferred purchase price of property or services
(including reimbursement and all other obligations with respect to surety bonds,
letters of credit and bankers' acceptances, whether or not matured, but not
including obligations to trade creditors incurred in the ordinary course of
business and not including obligations to pay inter-company management fees so
long as such fees are paid to Tyco Industries or the parent corporation of the
obligor of such fees), (b) all obligations evidenced by notes, bonds, debentures
or similar instruments, (c) all indebtedness created or arising under any
conditional sale or other title retention agreements with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (d) all Capital Lease Obligations, (e) all Guaranteed
Indebtedness, (f) all Indebtedness referred to in clause (a), (b), (c), (d) or
(e) above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or in
property (including accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness, (f) the Obligations and (g) all liabilities under or with respect
to interest rate protection agreements.
A - 16
<PAGE>
"Indemnified Person" has the meaning assigned to it in Section 1.16.
------------------ ------------
"Index Rate" means, at any date, the annual rate of interest determined by
----------
Agent which is equal to the highest annual rate of interest announced from time
to time by any of The Bank of Nova Scotia, Royal Bank of Canada and Canadian
Imperial Bank of Commerce, as being its reference rate in effect on such date
(or if such date is not a Business Day, on the Business Day immediately
preceding such date) for determining interest rates on Canadian dollar
denominated commercial loans made by it in Canada (that is, prime rate), in each
case, regardless of whether any of such banks actually charges such rate of
interest in connection with extensions of credit in Canadian dollars to debtors
and, for greater certainty, without adjustment to account for the difference
between the number of days in a year on which such highest annual rate of
interest is based and the number of days in a year on the basis of which
interest is calculated under this Agreement.
"Insolvency Statute" means any of the Bankruptcy and Insolvency Act
------------------
(Canada), the Companies' Creditors Arrangement Act (Canada) and Title 11 of the
United States Code entitled "Bankruptcy", each as now and hereafter in effect,
any successors to such statutes and any other applicable insolvency or other
similar law of any jurisdiction.
"Instruments" means all "instruments," as such term is defined in the PPSA
-----------
(Ontario), now owned or hereafter acquired by Borrower, wherever located.
"Intellectual Property" means all intellectual and industrial property,
---------------------
including, without limitation, all patents, industrial designs, copyrights,
trademarks, trade names, trade secrets, and options and rights to use any of the
foregoing and, when the context permits, all registrations and applications that
have been made or shall be made or filed in any office in any jurisdiction in
respect of the foregoing, and all reissues, extensions and renewals thereof.
"Interest Period" means with respect to any Fixed Rate Tranche bearing
---------------
interest at a Fixed Rate, the period of 30 days commencing on the day of the
month specified by Borrower in its Notice of Fixed Rate Election with respect to
such Fixed Rate Tranche delivered to Agent in accordance with Section 1.5(d).
--------------
Notwithstanding the foregoing, all Interest Periods shall be adjusted in
accordance with the second sentence of Section 1.5(a).
--------------
"Inventory" means, as to any Person, all goods, wares and merchandise
---------
manufactured, produced or purchased for resale or lease by such Person or
procured for such manufacture,
A - 17
<PAGE>
production, resale or lease, and all goods, wares and merchandise used in or
procured for the packing or packaging of goods, wares and merchandise so
manufactured, produced or purchased for resale or lease.
"Investment" means, for any Person (a) the acquisition (whether for cash,
----------
property, services or securities or otherwise) of shares, bonds, notes,
debentures, partnership or other ownership interests or other securities of any
other Person or any agreement to make any such acquisition; (b) the making of
any deposit with, or advance, loan or other extension of credit to, any other
Person (including the purchase of property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such property to
such Person); and (c) the entering into of any Guaranteed Indebtedness of, or
other contingent obligation with respect to, Indebtedness or other liability of
any other Person and (without duplication) any amount committed to be advanced,
lent or extended to such Person.
"ITA" means the Income Tax Act (Canada), as amended, and any successor
---
thereto, and any regulations promulgated thereunder.
"Judgment Conversion Date" has the meaning assigned to it in Section 11.8.
------------------------ ------------
"Judgment Currency" has the meaning assigned to it in Section 11.8.
----------------- ------------
"Leases" means all of those leasehold estates in real property now owned or
------
hereafter acquired by Borrower or any of its Subsidiaries, as lessee or
sublessor.
"Lender" and "Lenders" have the meanings provided in the first paragraph of
------ -------
this Agreement.
"Lien" means any mortgage, deed to secure debt or deed of trust, pledge,
----
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Applicable Laws of any jurisdiction) whether or not filed, recorded or
otherwise perfected under such Applicable Laws.
"Loan Documents" mean this Agreement, the Revolving Credit Notes, the
--------------
Collateral Documents, the Agreement Respecting Distribution Agreement, the
Supplier Waivers and Assignments, the Fee Agreement, the Participation Agreement
and all agreements, instruments, documents and certificates in favour of Agent
and/or
A - 18
<PAGE>
Lenders executed in connection with the transactions contemplated by this
Agreement, including, without limitation, those that are identified in the
Schedule of Closing Documents attached as Annex C, and including all other
-------
pledges, powers of attorney, consents, assignments, contracts, notices, and
other written matter whether heretofore, now or hereafter executed by or on
behalf of any Loan Party and delivered to Agent and/or Lenders in connection
with this Agreement or the financing transactions contemplated hereby.
"Loan Party" means Borrower, each of its Subsidiaries, if any, and Tyco
----------
Industries.
"Margin" means two and one-half percent (2.50%) per annum.
------
"Material Adverse Effect" means a material adverse effect on (i) the
-----------------------
business, assets, operations, prospects, or financial condition of any Loan
Party, (ii) Borrower's ability to pay or perform the Obligations in accordance
with the terms thereof or any other Loan Party's ability to perform its
obligations under any Loan Document to which it is a party, (iii) the Collateral
or Agent's or Lenders' Liens on the Collateral or the priority of any such
Liens, or (iv) the rights and remedies of Agent and Lenders under this Agreement
and the other Loan Documents.
"Material Contract" means each contract to which Borrower or any of its
-----------------
Subsidiaries is now or hereafter a party which (x) involves aggregate
consideration payable to or by Borrower or any of its Subsidiaries, contingent
or otherwise, in excess of $500,000, or the Equivalent Amount thereof, except
contracts as to which the remaining consideration payable to or by Borrower or
any of its Subsidiaries is less than $100,000, or the Equivalent Amount thereof,
or (y) is otherwise material to the business or operations of Borrower or any of
its Subsidiaries.
"Maximum Revolving Credit Commitment" means, on any date, an amount equal
-----------------------------------
to the Dollar Equivalent Amount of US$20,000,000, as reduced or terminated in
accordance with the terms of this Agreement.
"Non-Funding Lender" has the meaning assigned to it in Section 1.2.
------------------ -----------
"Non-Use Fee" has the meaning assigned to it in Annex D.
----------- -------
"Notice of Fixed Rate Election" has the meaning assigned to it in Section
----------------------------- -------
1.5(d).
- ------
"Notice of Revolving Credit Advance" has the meaning assigned to it in
----------------------------------
Section 1.1(c).
- --------------
A - 19
<PAGE>
"Obligations" means all loans, advances, liabilities and obligations for
-----------
the payment of monetary amounts (whether or not such performance is then
required or contingent, or amounts are liquidated or determinable) owing by
Borrower or any other Loan Party to Agent or any Lender, of any kind or nature,
present or future, whether or not evidenced by any note, agreement or other
instrument, arising under any of the Loan Documents. This term includes all
principal, interest (including interest which accrues after the commencement of
any case or proceeding referred to in Section 8.1(g) or (h)), all Fees, Charges,
---------------------
Claims, expenses, counsel fees and any other sum chargeable to Borrower or any
other Loan Party under any of the Loan Documents.
"Other Lender" has the meaning assigned to it in Section 1.2.
------------ -----------
"Overall Facilities" means, collectively, the loan facilities provided
------------------
under this Agreement, the US Credit Agreement and the UK Credit Agreement.
"Participation Agreement" means the agreement dated as of February 22, 1995
-----------------------
between Borrower, Tyco Industries, Lender, GE Capital Canada and Agent,
including all restatements, amendments, modifications and supplements thereto,
and shall refer to the Participation Agreement as the same may be in effect at
the time such reference becomes operative.
"Payor" has the meaning assigned to it in Section 1.12.
----- ------------
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
----
thereto.
"Permitted Encumbrances" means the following encumbrances: (a) liens for
----------------------
Taxes, (excluding any liens arising under Canadian Pension Plans or Canadian
Benefits Plans), either not yet due and payable or to the extent that nonpayment
thereof is permitted by the terms of Section 5.2 of this Agreement; (b) liens
-----------
securing obligations not yet due and payable under unemployment insurance
legislation; (c) pledges or deposits securing bids, tenders, contracts (other
than contracts for the payment of money) or leases to which Borrower or any of
its Subsidiaries is a party as lessee made in the ordinary course of business;
(d) deposits securing public or statutory obligations of Borrower or any of its
Subsidiaries; (e) inchoate or statutory contractors', mechanics', suppliers' or
similar liens arising in the ordinary course of business; provided, that such
--------
liens are not registered against the title to any real or personal property or
are being contested in good faith by appropriate proceedings and in respect of
which there shall have been set aside a reserve (segregated to the extent
required by GAAP) in an amount which is reasonably adequate with respect
thereto; (f) carriers', warehousemen's or other similar possessory liens arising
in the ordinary course of
A - 20
<PAGE>
business and securing Indebtedness not yet due and payable in an outstanding
aggregate amount not in excess of $100,000, or the Equivalent Amount thereof, at
any time; (g) deposits securing, or in lieu of, surety, appeal or customs bonds
in proceedings to which Borrower or any of its Subsidiaries is a party; (h) any
attachment or judgment lien, unless the judgment it secures shall not, within 30
days after the entry thereof, have been discharged or execution thereof stayed
pending appeal, or shall not have been discharged within 30 days after the
expiration of any such stay; (i) zoning restrictions, easements, servitudes,
rights-of-way, licenses, reservations, limitations, provisos and conditions, if
any, expressed in any original grant from the Crown or other restrictions on the
use of real property or other minor irregularities in title (including leasehold
title) thereto, so long as the same do not materially impair the use, value, or
marketability of such real property, leases or leasehold estates; and (j) Liens
arising under the Loan Documents or any other security in favour of Agent or the
Lenders.
"Person" means any individual, sole proprietorship, partnership, joint
------
venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or Governmental Body.
"PPSA (Ontario)" means the Personal Property Security Act (Ontario) as the
--------------
same may, from time to time, be in effect in the Province of Ontario.
"Prior Claims" means, at any time, all Liens created by Applicable Laws
------------
which rank, or are capable of ranking, prior to or pari passu with Agent's
security against all or part of the Collateral including, without limitation,
for amounts owing for wages, vacation pay, employee deductions, goods and
services taxes, sales taxes, income taxes, workmen's compensation, government
royalties, pension fund obligations and overdue rents.
"Projections" means the projections referred to in paragraph 2 of Schedule
----------- --------
3.4 and any other projections required to be delivered by Borrower to Agent or
- ---
any Lender under this Agreement.
"Receivables Funding Agreement" means the receivables funding and servicing
-----------------------------
agreement, dated as of even date with this Agreement, between the Receivables
Funding Subsidiary, as borrowers, Redwood, as lender, Tyco Industries, as
servicer, Financial Security Assurance and GE Capital, as operating agent and
collateral agent.
"Receivables Funding Documents" means, collectively, the Receivables
-----------------------------
Funding Agreement and the Receivables Sale Agreement.
A - 21
<PAGE>
"Receivables Funding Subsidiary" means, collectively, Tyco Funding I
------------------------------
Corporation and Tyco Funding II Corporation, each a Delaware corporation and a
direct subsidiary of Tyco Industries. Where the context requires, such defined
term shall mean and refer to one or both of such corporations.
"Receivables Sale Agreement" means, collectively (i) the receivables
--------------------------
transfer agreement, dated as of even date with this Agreement, between Tyco
Manufacturing and the Receivables Funding Subsidiary and (ii) the receivables
transfer agreement, dated as of even date with this Agreement, between Tyco
Industries and the Receivables Funding Subsidiary. Where the context requires,
such defined term shall mean and refer to one or both of such agreements.
"Redwood" means Redwood Receivables Corporation, a Delaware corporation.
-------
"Regulatory Change" means, with respect to any Lender, any change after the
-----------------
date of this Agreement in Applicable Law or the adoption or making after such
date of any interpretation, directive or request applying to a class of lenders
including such Lender of or under any Applicable Law (whether or not failure to
comply therewith would be unlawful) by any court or Governmental Body or
monetary authority charged with the interpretation or administration thereof.
"Required Lenders" means, at any time, Lenders holding more than 50% of the
----------------
aggregate of the Revolving Credit Commitments of all Lenders at such time (or,
if the Commitment Termination Date has occurred, in lieu of the Revolving Credit
Commitments, the aggregate of the Revolving Credit Loan then outstanding in
respect of the Revolving Credit Commitment).
"Required Payment" has the meaning assigned to it in Section 1.11.
---------------- ------------
"Restricted Payment" means, with respect to any Person: (a) the
------------------
declaration or payment of any dividend or the occurrence of any liability to
make any other payment or distribution of cash or other property or assets in
respect of such Person's Stock; (b) any payment on account of the purchase,
redemption, defeasance or other retirement of such Person's Stock or any other
payment or distribution made in respect thereof, either directly or indirectly;
or (c) any payment, loan, contribution, or other transfer of funds or other
property to any holder of Stock of such Person.
"Revolving Credit Advance" has the meaning assigned to it in Section
------------------------ -------
1.1(a).
- ------
A - 22
<PAGE>
"Revolving Credit Commitment" means, as to each Lender, the commitment of
---------------------------
such Lender to make Revolving Credit Advances to Borrower pursuant to Section
-------
1.1 in the aggregate principal amount outstanding not to exceed the amount set
- ---
forth opposite such Lender's name on the signature pages of this Agreement or
specified in any amendment hereto or any assignment hereof pursuant to Section
-------
10.2 hereof, as such amount may be reduced or terminated in accordance with the
- ----
terms of this Agreement.
"Revolving Credit Loan" means the aggregate amount of Revolving Credit
---------------------
Advances of all Lenders outstanding at any time.
"Revolving Credit Notes" means the promissory notes provided for by Section
---------------------- -------
1.1(d) and all promissory notes delivered in substitution or exchange therefor,
- ------
in each case as the same may be restated, amended, modified and supplemented and
in effect from time to time.
"Security Agreement" means the agreement, substantially in the form of
------------------
Exhibit E attached hereto, to be executed by Borrower in favour of Agent, for
- ---------
the benefit of Agent and Lenders, including all restatements, amendments,
modifications and supplements thereto, and shall refer to the Security Agreement
as the same may be in effect at the time such reference becomes operative.
"Stock" means all shares, options, warrants, general or limited partnership
-----
interests, participation or other equivalents (regardless of how designated) of
or in a corporation, partnership or equivalent entity, whether voting or
nonvoting.
"Subordinated Debt Documents" means the Tyco Parent Senior Subordinated
---------------------------
Note Indenture and the notes, guarantees and other documents executed and
delivered in connection therewith, each as amended, modified or supplemented
from time to time in accordance with the terms hereof and thereof.
"Subsidiary" means, with respect to any Person: (a) any corporation of
----------
which an aggregate of more than 50% of the outstanding 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 or classes 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
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of more than 50% of such Stock whether by proxy, agreement,
operation of law or otherwise; and (b) any partnership in which such Person
and/or one or more Subsidiaries of such Person shall have an interest (whether
in the form of voting or participation in profits or capital contribution) of
A - 23
<PAGE>
more than 50% or of which any such Person is a general partner or may exercise
the powers of a general partner.
"Supplier Waiver and Assignment" means each agreement substantially in the
------------------------------
form of Exhibit F attached hereto, to be executed by any supplier of Inventory
---------
to Borrower in favour of Agent, for the benefit of Agent and Lenders, including
all restatements, amendments, modifications and supplements thereto, and shall
refer to the Supplier Waiver and Subordination as the same may be in effect at
the time such reference becomes operative.
"Tax" and "Taxes" includes all present and future taxes, surtaxes, duties,
--- -----
levies, imposts, rates, fees, assessments, withholdings and other charges of any
nature (including income, corporate, capital (including large corporations), net
worth, sales, consumption, use, transfer, goods and services, value-added,
stamp, registration, franchise, withholding, payroll, employment, health,
education, excise, business, school, property, occupation, customs, anti-dumping
and countervail taxes, surtaxes, duties, levies, imports, rates, fees,
assessments, withholdings and other charges) imposed by any Governmental Body,
together with any fines, interest, penalties or other additions on, to, in lieu
of, for non-collection of or in respect of those taxes, surtaxes, duties,
levies, imposts, rates, fees, assessments, withholdings and other charges.
"Tax Returns" means all reports, estimates, information statements and
-----------
returns relating to, or required to be filed in connection with, any Taxes
pursuant to the statutes, laws, rules and regulations of any federal,
provincial, state, municipal or foreign governmental taxing authority and "Tax
Return" shall mean any one thereof.
"Termination Date" means the date on which (a) the Revolving Credit
----------------
Commitments have been terminated in full, and Lenders shall have no further
obligation to make any credit extensions or financial accommodations hereunder,
and (b) all Obligations have been indefeasibly paid in full in immediately
available funds.
"Termination Fee" has the meaning assigned to it in Annex D.
--------------- -------
"Tyco Industries" means Tyco Industries, Inc., a Delaware corporation.
---------------
"Tyco Industries Pledge Agreement" means the agreement between Agent, for
--------------------------------
the benefit of Agent and Lenders, and Tyco Industries, substantially in the form
of Exhibit G, under which Tyco Industries pledges and/or charges to Agent all of
---------
the Stock of Borrower owned by Tyco Industries, including all amendments,
restatements, modifications and supplements thereto, in form and substance
satisfactory to Agent, and shall refer to such Tyco
A - 24
<PAGE>
Industries Pledge Agreement as the same may be in effect at the time such
reference becomes operative.
"Tyco Manufacturing" means Tyco Manufacturing Corp., an Oregon corporation.
------------------
"Tyco Parent" means Tyco Toys, Inc., a Delaware corporation.
-----------
"Tyco Parent Senior Subordinated Note Indenture" means the indenture, dated
----------------------------------------------
as of August 15, 1992, between Tyco Parent, as issuer, certain Subsidiaries of
Tyco Parent, as guarantors, and Bankers Trust Company, as trustee (as successor
trustee to NationsBank of Virginia, N.A.), with respect to Tyco parent's 10 1/8%
senior subordinated notes due August 15, 2002, as such indenture was
supplemented by two supplemental indentures, dated as of October 17, 1992 and as
of June 8, 1993, respectively, adding additional Subsidiaries of Tyco Parent as
guarantors, and as such indenture shall be further amended, modified or
supplemented from time to time in accordance with the terms thereof and hereof.
"UK Credit Agreement" means the revolving credit agreement to be entered
-------------------
into between Tyco Toys (U.K.) Ltd., Matchbox Toys, Ltd. (United Kingdom), the
lenders party thereto from time to time, Lloyds Bank PLC, as issuing bank, and
GE Capital, as agent, as amended, modified or supplemented from time to time in
accordance with the terms thereof.
"Undertaking" means the business, undertaking and operations of Borrower
-----------
and its Subsidiaries and of their predecessors in title.
"US Credit Agreement" means the credit agreement dated as of the date
-------------------
hereof, between Tyco Distribution Corp., Tyco Manufacturing, Tyco Parent, the
lenders party thereto from time to time and GE Capital as agent, as amended,
modified or supplemented from time to time in accordance with the terms thereof
and with the consent of Agent.
"US Dollars" and "US$" mean lawful money of the United States of America.
---------- ---
"Weekly Settlement Date" has the meaning assigned to it in Section 1.14(c).
---------------------- ---------------
2. Certain Matters of Construction. (a) Any accounting term used in the
-------------------------------
Agreement or the other Loan Documents shall have, unless otherwise specifically
provided therein, the meaning customarily given such term in accordance with
GAAP, and all financial computations shall be computed on a consolidated basis
in accordance with GAAP consistently applied. That certain items or
computations are explicitly modified by the phrase "in
A - 25
<PAGE>
accordance with GAAP" shall in no way be construed to limit the foregoing. In
the event that any "Accounting Changes" (as defined below) occur and such
changes result in a change in the standards or terms used in this Agreement,
then Borrower, Lenders and Agent agree to enter into negotiations in order to
amend such provisions of this Agreement so as equitably to reflect such
Accounting Changes with the desired result that the criteria for evaluating
Borrower's financial condition shall be the same after giving effect to such
Accounting Changes as if such Accounting Changes had not been made. "Accounting
----------
Changes" means (i) in respect of Borrower and its Subsidiaries, changes in
- -------
accounting principles required by the promulgation of any rule, regulation,
pronouncement or opinion by the Canadian Institute of Chartered Accountants (or
successor thereto or any agency with similar functions), and in respect of Tyco
Parent and its Subsidiaries, changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions) and (ii)
in respect of Borrower and its Subsidiaries, changes in accounting principles
concurred in by Borrower's independent public accountants, and in respect of
Tyco Parent and its Subsidiaries, changes in accounting principles concurred in
by Tyco Parent's independent public accountants. In the event that the parties
to this Agreement shall have agreed upon any such required amendment, then,
after such amendment has been evidenced in writing and the underlying Accounting
Change with respect thereto has been implemented, any reference to GAAP
contained in this Agreement shall, only to the extent of such Accounting Change,
refer to GAAP, consistently applied after giving effect to the implementation of
such Accounting Change. If the parties to this Agreement cannot agree upon any
required amendment within thirty (30) days following the date of implementation
of any Accounting Change, then all financial statements delivered in accordance
with Annex E to this Agreement and all standards and terms used in this
-------
Agreement shall be prepared and used without regard to the underlying Accounting
Change.
(b) Unless otherwise specified, all references to dollar amounts in this
Agreement or the other Loan Documents shall mean Dollars.
(c) Unless otherwise specified, any reference to a time of day means local
time in the City of Toronto, Province of Ontario, Canada.
(d) The words "herein," "hereof" and "hereunder" or other words of similar
import refer to this Agreement as a whole, including the annexes, exhibits and
schedules hereto, as the same may from time to time be restated, amended,
modified or
A - 26
<PAGE>
supplemented, and not to any particular section, subsection or clause contained
in this Agreement.
(e) For purposes of this Agreement and the other Loan Documents, the
following additional rules of construction shall apply: (i) wherever from the
context it appears appropriate, each term stated in either the singular or
plural shall include the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, the feminine
and the neuter; (ii) the term "including" shall not be limiting or exclusive,
unless specifically indicated to the contrary; (iii) all references to statutes
and related regulations shall include any amendments of same and any successor
statutes and regulations; and (iv) all references to any instruments or
agreements, including references to any of the Loan Documents, shall include any
and all modifications thereto and any and all extensions or renewals thereof.
A - 27
<PAGE>
Exhibit 10.50
DATED 13TH MARCH 1995
---------------------
TYCO TOYS (UK) LIMITED
MATCHBOX TOYS LIMITED
as Borrowers
- and -
THE LENDERS
- and -
GENERAL ELECTRIC CAPITAL CORPORATION
as Issuing Bank
- and -
GENERAL ELECTRIC CAPITAL CORPORATION
as Agent
----------------------------------------
GUARANTEE AND REVOLVING CREDIT
FACILITY AGREEMENT
----------------------------------------
WILDE SAPTE
1 Fleet Place
London EC4M 7WS
Tel. 071 246 7000
Fax. 071 246 7777
REF: HJB/573019/BF70290.05
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
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Clause Heading Page Number
- ------ ------- -----------
<C> <S> <C>
1. DEFINITIONS AND INTERPRETATION....................................................1
1.1 Definitions.......................................................................1
1.2 Clause Headings...................................................................19
1.3 Interpretation....................................................................19
2. CONDITIONS PRECEDENT..............................................................21
3. FACILITIES, OBLIGATIONS SEVERAL, RIGHTS SEVERAL...................................25
3.1 Facilities........................................................................25
3.2 Obligations Several...............................................................25
3.3 Rights Several....................................................................26
4. PURPOSES, ETC.....................................................................26
4.1 Purposes..........................................................................26
4.2 Undertaking by the Borrowers......................................................26
4.3 No Liability......................................................................26
5. AVAILABILITY, DRAWDOWN AND PARTICIPATIONS.........................................26
5.1 Commitment Period.................................................................26
5.2 Advances and Guarantees...........................................................27
5.3 Drawdown of Advances and Issue of Guarantees......................................27
5.4 Participations and Payments.......................................................29
5.5 Drawdown Indemnity................................................................29
5.6 Non-Availability of Sterling......................................................30
5.7 Effect of Notice..................................................................30
5.8 Indemnity.........................................................................30
5.9 Issue of Guarantees...............................................................30
6. INTEREST..........................................................................31
6.1 Basis and Amount..................................................................31
6.2 Interest Periods..................................................................31
6.3 Default Interest..................................................................32
6.4 Calculation and Payment of Interest...............................................33
6.5 Market Disruption.................................................................33
6.6 Agent's Determination.............................................................34
7. REPAYMENT.........................................................................35
7.1 Repayment.........................................................................35
7.2 Mandatory Prepayments.............................................................35
7.3 Clean Down Period.................................................................36
7.4 Reborrowing.......................................................................36
7.5 New Advances to repay Maturing Advances...........................................36
7.6 Settlement of Guarantees..........................................................37
7.7 Indemnity.........................................................................37
8. CANCELLATION AND TERMINATION......................................................38
9. CHANGES IN CIRCUMSTANCES..........................................................38
9.1 Illegality........................................................................38
9.2 Increased Costs...................................................................39
9.3 Certificates......................................................................41
10. PAYMENTS..........................................................................41
10.1 Time and Place....................................................................41
10.2 Business Days.....................................................................41
10.3 Breakage Costs Indemnity..........................................................42
10.4 Grossing-up.......................................................................43
10.5 Prepayment Right..................................................................45
10.6 Currency of Account...............................................................45
10.7 Accounts as Evidence..............................................................45
</TABLE>
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<TABLE>
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10.8 Borrower's Payments...............................................................46
10.9 Lenders' Payments.................................................................46
10.10 Appropriation.....................................................................47
11. SECURITY..........................................................................47
12. REPRESENTATIONS AND WARRANTIES....................................................47
12.1 Acknowledgement of Reliance.......................................................47
12.2 Representations and Warranties....................................................48
12.3 Repetition........................................................................57
13. UNDERTAKINGS......................................................................57
13.1 Information Undertakings..........................................................57
13.1.1 Weekly Information................................................................57
13.1.2 Monthly Information...............................................................57
13.1.3 Annual Information................................................................58
13.1.4 Other Information Undertakings....................................................60
13.1.5 Disclosure of Information.........................................................61
13.2 Positive Covenants................................................................62
13.3 Negative Covenants................................................................67
13.4 Financial Undertakings............................................................70
14. DEFAULT, ACCELERATION.............................................................73
14.1 Default...........................................................................73
14.2 Acceleration etc..................................................................76
15. SET-OFF AND PRO RATA PAYMENTS.....................................................76
15.1 Set-Off...........................................................................76
15.2 Pro Rata Sharing..................................................................77
16. THE AGENT, THE ISSUING BANK AND THE LENDERS.......................................78
16.1 Appointment and Duties............................................................78
16.2 Payments and Information Received.................................................78
16.3 Defaults..........................................................................79
16.4 Assumptions.......................................................................79
16.5 Legal Proceedings.................................................................79
16.6 No Liability......................................................................79
16.7 Credit Decisions..................................................................79
16.8 Advisers..........................................................................80
16.9 Relationship with Lenders and Issuing Bank........................................80
16.10 Agent's position as a Lender......................................................80
16.11 Indemnity.........................................................................81
16.12 Resignation.......................................................................81
16.13 Change of Office..................................................................82
16.14 Waivers, Amendments...............................................................82
16.15 Consents..........................................................................83
16.16 Evidence..........................................................................83
16.17 Security Documents................................................................83
16.18 Distribution of Proceeds of Enforcement...........................................84
17. FEES AND EXPENSES.................................................................85
17.1 Expenses..........................................................................85
17.2 Closing and Collateral Management Fees............................................86
17.3 Non-utilisation Fee...............................................................86
17.4 Guarantee Fees....................................................................86
17.5 Documentary Taxes Indemnity.......................................................86
17.6 Prepayment Fee....................................................................87
17.7 VAT...............................................................................87
17.8 Indemnity Payments................................................................87
17.9 Lloyds Administration Fees........................................................88
18. MISCELLANEOUS.....................................................................88
18.1 Severance.........................................................................88
18.2 Waivers, Remedies Cumulative......................................................88
</TABLE>
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<TABLE>
<C> <S> <C>
18.3 Further Assurance................................................................88
18.4 Counterparts.....................................................................88
18.5 Entire Agreement.................................................................88
18.6 Joint and Several Liability......................................................89
19. NOTICES..........................................................................89
19.1 Method...........................................................................89
19.2 Delivery.........................................................................89
19.3 Addresses........................................................................89
19.4 Deemed Receipt...................................................................91
19.5 Notices to the Lenders...........................................................92
20. ASSIGNMENTS AND TRANSFERS........................................................92
20.1 Benefit of Agreement.............................................................92
20.2 Assignments and Transfers by the Borrowers.......................................92
20.3 Assignments and Transfers by Lenders.............................................93
20.4 Disclosure of Information........................................................95
21. LAW..............................................................................95
21.1 Law..............................................................................95
21.2 Jurisdiction.....................................................................95
SCHEDULE 1 - THE LENDERS.................................................................96
SCHEDULE 2 - PART A - DRAWDOWN NOTICE....................................................97
SCHEDULE 2 - PART B - ISSUE REQUEST......................................................98
SCHEDULE 3 - THE CHARGING GROUP..........................................................99
SCHEDULE 4 - MANDATORY LIQUID ASSET COSTS FORMULA........................................100
SCHEDULE 5 - FORM OF TRANSFER CERTIFICATE................................................102
SCHEDULE 6 - BORROWING BASE CERTIFICATE..................................................106
SCHEDULE 7 - LOCATION OF PREMISES AND RECORDS............................................116
SCHEDULE 8 - PERMITTED INDEBTEDNESS......................................................117
SCHEDULE 9 - EVENTS CONSTITUTING A MATERIAL ADVERSE EFFECT...............................118
SCHEDULE 10 - ENCUMBRANCES AS AT COMPLETION DATE..........................................119
SCHEDULE 11 - REAL PROPERTY...............................................................120
SCHEDULE 12 - OPTIONS RELATING TO REAL PROPERTY...........................................121
SCHEDULE 13 - ACCOUNTS....................................................................122
SCHEDULE 14 - MATERIAL CONTRACTS..........................................................123
SCHEDULE 15 - PART I - INSURANCE POLICIES.................................................124
SCHEDULE 15 - PART II - INSURANCE POLICIES................................................125
SCHEDULE 16 - PART I - SHAREHOLDERS.......................................................127
SCHEDULE 16 - PART II - OPTIONS RELATING TO SHARES........................................128
SCHEDULE 17 - INTELLECTUAL PROPERTY.......................................................129
SCHEDULE 18 - EXCLUSIONS TO CLAUSE 12.2(ii)...............................................140
SCHEDULE 19 - HIGHER ELIGIBLE ACCOUNTS RECEIVABLE THRESHOLDS..............................141
SCHEDULE 20 - AGREED FORM OF GUARANTEE....................................................142
SCHEDULE 21 - LLOYDS GUARANTEES...........................................................143
</TABLE>
<PAGE>
THIS AGREEMENT is made on the 13th day of March 1995
BY:
(1) TYCO TOYS (UK) LIMITED, a company incorporated under the laws of England
and Wales with registered number 2461539 having its registered office at
Tyco House, Third Avenue, Globe Park, Marlow, Bucks SL7 1YF ("Tyco Toys")
and MATCHBOX TOYS LIMITED, a company incorporated under the laws of
England and Wales with registered number 1611433 having its registered
office at Swift Park Industrial Estate, Old Leicester Road, Rugby,
Warwickshire CV21 1DZ ("Matchbox") (each a "Borrower" and together the
"Borrowers");
(2) THE LENDERS as defined below;
(3) GENERAL ELECTRIC CAPITAL CORPORATION, a corporation organised under the
banking laws of the State of New York as the issuing bank in respect of
certain guarantees (the "Issuing Bank"); and
(4) GENERAL ELECTRIC CAPITAL CORPORATION, aforesaid as the Agent (as such
term is more particularly defined below).
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
------------------------------
1.1 Definitions
-----------
In this Agreement (unless otherwise provided) the following expressions
shall have the following meanings:
"Accounts" means:
--------
(a) in relation to Tyco Parent, the audited consolidated accounts
(audited by the Auditors) (including all additional information
and notes thereto) of Tyco Parent and its Subsidiaries together
with the relative directors' report and auditors' report; and
(b) in relation to each of the Borrowers and their respective
Subsidiaries from time to time, its audited accounts (audited by
the Auditors) (including all additional information and notes
thereto) together with the relative directors' report and
auditors' report;
"Advance" means an advance drawn down under the Facility and thereafter
-------
the principal amount of each such advance from time to time outstanding;
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"Affiliate" means, with respect to any person, (a) each person that,
---------
directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, ten per cent. or more of the Stock
having ordinary voting power in the election of directors of such person,
(b) each person that controls, is controlled by or is under common
control with such person or any Affiliate of such person, or (c) each of
such person's officers, directors, joint ventures and partners. For the
purpose of this definition, "control" of a person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of
voting securities, by contract or otherwise;
"Agent" means General Electric Capital Corporation, in its capacity as
-----
agent and trustee for the Lenders and each successor Agent appointed from
time to time under Clause 16.12;
"Applicable Laws" means, with respect to any person, property,
---------------
transaction or event, all applicable laws, statutes, regulations,
treaties, judgments and decrees and (whether or not having the force of
law) all applicable official directives, rules, consents, approvals,
authorisations, guidelines order and policies of any Governmental
Authority having authority over such person, property, transaction or
event;
"A/R Availability" means at any time with respect to any Borrower, an
----------------
amount determined by the Agent in its sole discretion exercised in good
faith of up to 80 per cent. of such Borrower's Eligible Accounts
Receivable at such time;
"Auditors" means Touche Ross or such other firm of chartered accountants
--------
of internationally recognised standing as shall have been previously
approved by the Agent and appointed as auditors of the Tyco Parent, each
Borrower and its Subsidiaries;
"Base Accounts" means in respect of Tyco Parent, the Accounts of Tyco
-------------
Parent for the period of nine months ending on 30th September 1994;
"Beneficiary" means any of H.M. Customs & Excise or the immediate
-----------
landlord of any of the sites occupied by either Borrower in England at
the date of this Agreement;
"Borrowing Availability" means, at any time with respect to any Borrower,
----------------------
an amount determined by the Agent in its sole discretion exercised in
good faith to be equal to the aggregate at such time of (a) up to sixty
per cent. of Eligible Inventory of such Borrower, valued on a first-in,
first-out basis (at the lower of the actual cost or then subsisting open
market price of the same), and (b) the A/R Availability, less the
aggregate of (i) the Outstandings and (ii) the amount of any reserves
(other than those already taken into account by the Agent in determining
the amount of such Borrower's Eligible Accounts Receivable) as the Agent
may deem necessary or appropriate from time to time in its sole
discretion exercised in good faith;
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"Borrowing Base Certificate" means a certificate in the form set out in
--------------------------
Schedule 6;
"Business Day" means a day on which banks generally in the City of London
------------
and in New York are open for interbank or foreign exchange transactions;
"Canadian Credit Agreement" means the Credit Agreement, dated as of 22nd
-------------------------
February 1995, among Tyco Toys (Canada), Inc., the lenders party thereto
from time to time and General Electric Capital Canada Inc., as agent, as
amended, modified or supplemented from time to time in accordance with
the terms thereof;
"Capital Expenditure" shall have the meaning given to such term in the US
-------------------
Credit Agreement;
"Cash Cover" means credit balances in Sterling over which the Issuing
----------
Bank has rights which at all times satisfy the Bank of England's
requirements for nil-weighting for capital adequacy purposes pursuant to
the Solvency Ratio Directive (such requirements at the date of this
Agreement being contained in BSD/1993/3);
"Certified Copy" means, in relation to any document, a copy of such
--------------
document bearing the endorsement "Certified a true, complete and accurate
copy of the original, which has not been amended otherwise than by a
document, a Certified Copy of which is attached hereto" signed and dated
by a duly authorised officer of the company in question;
"Change in Control" means the time when (i) any person or "group" has
-----------------
acquired "beneficial ownership" (as such terms are defined under Section
13d-3 of and Regulation 13D under the Securities Exchange Act of 1934, as
amended), either directly or indirectly, of outstanding shares of Stock
of Tyco Parent having more than twenty per cent. of the voting power for
the election of directors of Tyco Parent under ordinary circumstances,
(ii) more than fifty per cent. of the members of Tyco Parent's board of
directors shall have been replaced by new directors not nominated for
membership on the board by a majority of directors who were either (X)
directors on the Completion Date or (Y) directors after the Completion
Date and whose nomination to the board of directors of Tyco Parent was
itself approved by a majority of directors on the board who were
directors on the Completion Date, or (iii) Tyco Parent has sold,
transferred, conveyed, assigned or otherwise disposed of all or
substantially all of the assets of Tyco Parent, (iv) a "Change of
Control" (as defined in the Tyco Parent Senior Subordinated Note
Indenture) shall have occurred or (v) a "Change of Control" or a
"Fundamental Change" (each as defined in the First Chicago Notes) shall
have occurred;
"Charge Over Shares" means each charge over shares in form and content
------------------
satisfactory to the Agent given or to be given by a member of the
Charging Group;
"Charged Property" means the property charged by the Security Documents
----------------
and any other property, real or personal, tangible or intangible, now
existing or hereafter acquired, that may at any time be or become subject
to a Encumbrance in favour of
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<PAGE>
Agent, the Issuing Bank or any of the Lenders to secure any or all of the
obligations under the Financing Documents;
"Charging Group" means each of the companies listed in Schedule 3
--------------
together with all other members of the Group that have executed and
delivered Security Documents;
"Commitment" means, in relation to each Lender, the principal amount set
----------
opposite its name in Schedule 1 or the Schedule to any relative Transfer
Certificate, in each case as reduced or cancelled under the terms of this
Agreement and "Total Commitments" means the aggregate of the Lenders'
-----------------
Commitments;
"Commitment Period" means the period from and including the Completion
-----------------
Date to but excluding the date falling one (1) month prior to the Final
Repayment Date;
"Completion Date" means the Business Day on which the Conditions
---------------
Precedent have been satisfied, in the Agent's sole discretion, or waived
in writing by the Agent with the consent of all the Lenders;
"Conditions Precedent" means each of the conditions set out in Clause 2;
--------------------
"Contribution" means, in relation to a Lender and an Advance or the Loan,
------------
the part of such Advance or the Loan, as the case may be, made available
or to be made available by such Lender and thereafter the part of such
Advance or the Loan, as the case may be, owing to such Lender from time
to time;
"Debenture" means each guarantee and debenture in form and content
---------
satisfactory to the Agent executed or to be executed by a member of the
Charging Group;
"Deed of Subordination" means the deed entered into or to be entered into
---------------------
between (1) the Borrowers, (2) the Lenders, (3) the Issuing Bank, (4) the
Agent and (5) Tyco Industries, Tyco (Far East) Limited and Tyco
Manufacturing (Europe) Inc.;
"Default" means any of the events specified in Clause 14.1;
-------
"Default Occurrence" means any event, occurrence or omission which with
------------------
the passing of time, giving of notice or satisfaction of any other
condition would be a Default;
"Default Rate" means (a) with respect to principal owing on an Advance, a
------------
rate per annum equal to the aggregate of two per cent. and the rate at
which interest is then otherwise accruing hereunder from time to time
thereon and (b) with respect to interest outstanding and unpaid or other
amounts outstanding under any of the Financing Documents (excluding
principal on the Advances), a rate per annum equal to the aggregate of
the Index Rate in effect from time to time and four and one half per
cent.;
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"Deferred Taxes" shall mean, with respect to any person at any date, the
--------------
amount of deferred taxes of such person as shown on the balance sheet of
such person as of such date prepared in accordance with UK GAAP;
"Dollar Equivalent" means in relation to an amount in Sterling on the day
-----------------
on which the calculation falls to be made, the amount of Dollars which
could be purchased with such amount of Sterling on the basis of the spot
buying rate for Dollars appearing on "FXFX" page on the Reuters Monitor
Money Rates Service (or such other page as may replace such page of such
service for the purpose of displaying spot exchange rates in London for
acquiring Dollars) at or about 11.00 am (New York Time) on the date of
such determination;
"Dollars" and "$" means lawful money of the United States of America;
------- -
"Drawdown Date" means any date, being a Business Day, on which an Advance
-------------
is made, or is proposed to be made pursuant to a Drawdown Notice;
"Drawdown Notice" means a notice substantially in the form set out in
---------------
Part A of Schedule 2;
"Eligible Accounts Receivable" means at any time, with respect to any
----------------------------
Borrower, the gross outstandings balance of all accounts receivable at
such time of such Borrower denominated in Sterling, net of reserves
established therefor, which the Agent, in its discretion, shall from time
to time deem eligible, less all finance charges, late fees, other fees
that are unearned, reserves for volume, advertising and booking discounts
and such other reserves as the Agent, in its discretion, shall from time
to time deem appropriate. Without in any way limiting the discretion
given to the Agent hereunder to deem an account receivable of a Borrower
ineligible, an account receivable of a Borrower shall not be an Eligible
Accounts Receivable if:
(1) any warranty or representation contained in this Agreement or any
of the other Financing Documents applicable either to accounts
receivable of a Borrower in general or to any such specific
account receivable has been breached with respect to such account
receivable in any material respect;
(2) (A) such account receivable is owing by a debtor which is
unable to pay its debts as such debts become due or is, or
is adjudged or declared to be, or admits to being, bankrupt
or insolvent or is wound up or dissolved; or
(B) such account receivable is owing by a debtor in relation to
whom any legal proceedings are started or other steps are
taken for (i) the bankruptcy, liquidation, winding-up,
dissolution or suspension of general operations of such
debtor, (ii) the composition, reorganisation,
reconstruction of, or the granting of other relief from, or
stay of proceedings to enforce, some or all of the debts of
such debtor, (iii) the appointment of a trustee, receiver,
administrative receiver, administrator,
-5-
<PAGE>
liquidator, or similar officer over the whole or any
substantial part of the undertaking and assets of, such
debtor; or
(C) such account receivable is owing by a debtor in relation to
whom a creditor or encumbrancer attaches or takes
possession of, or a distress, execution, sequestration or
other process is levied, commenced or enforced upon or sued
out against, or other proceedings are taken to enforce
security over, all or a substantial part of the assets of
such debtor;
(3) such account receivable has remained unpaid after the earlier to
occur of (A) 60 days after the date on which payment is specified
to be due in the original applicable invoice and (B) 270 days
after the date of such original applicable invoice;
(4) such account receivable is subject to a volume discount, and in
that case such account receivable shall be ineligible to the
extent of the amount of the volume discount;
(5) such account receivable is payable by a debtor which is a
supplier, creditor or an Affiliate of either of the Borrowers;
(6) such account receivable is owing by a debtor whose billing address
(as determined by the Agent) is situated outside of the United
Kingdom and Eire or such account receivable is not denominated in
Sterling;
(7) the sale represented by such account receivable is on a bill-and-
hold, undelivered sale, guaranteed sale, sale or return,
consignment or sale on approval basis;
(8) the Agent believes, in its sole discretion, that the collection of
such account receivable is uncertain or that such account
receivable may not be paid;
(9) such account receivable is subject to any claim by or dispute with
the debtor where the payment of an amount which is, in the opinion
of the Agent exercised in good faith, equal to or greater than ten
per cent. of such account receivable is disputed;
(10) such account receivable is subject to any right of set-off by the
debtor;
(11) the Agent does not have a perfected first ranking Encumbrance in
and to such account receivable as agent and trustee for itself,
the Issuing Bank and the Lenders, subject to no prior ranking
Encumbrance;
(12) such account receivable is not evidenced by an invoice (or other
writing in form acceptable to the Agent in its sole discretion);
-6-
<PAGE>
(13) such account receivable is an account receivable owing by a
Governmental Authority;
(14) in order to be entitled to collect payment of it, a Borrower is
required to perform any additional service or perform or incur any
additional obligation;
(15) such account receivable is owing by a debtor whose indebtedness to
a Borrower in respect of accounts receivable which are otherwise
ineligible exceeds 50% of such debtor's total indebtedness to such
Borrower;
(16) such account receivable is owing by a debtor whose accounts
receivable owing to a Borrower exceeds, in the case of the debtors
set out in Schedule 19, the percentages specified therein, and in
the case of any other debtor, 10% of the aggregate amount of all
accounts receivable of such Borrower and, in that case, such
account receivable shall be ineligible to the extent that the
amount of all accounts receivable owing by such debtor and which
are otherwise eligible exceeds, in the case of each such debtor
such percentage set against its name in Schedule 19, and in the
case of any other debtor, 10% of the aggregate amount of all
accounts receivable of such Borrower; or
(17) such account receivable is an account receivable in respect of
which a debtor takes a deduction of credit not authorised or
otherwise agreed to by a Borrower and in that case such account
receivable shall be ineligible to the extent of the amount of the
deduction;
"Eligible Inventory" means, with respect to any Borrower, such Inventory
------------------
of such Borrower that consists of finished goods and that are not
ineligible as the basis for Advances based on such criteria determined by
Agent from time to time in its sole discretion exercised in good faith.
Criteria for eligibility may be fixed and revised from time to time by
the Agent in its sole discretion exercised in good faith. Unless
otherwise agreed to in writing by the Agent, in determining whether
Inventory of any Borrower constitutes Eligible Inventory of such
Borrower, the Agent shall not include any Inventory that:
(a) is not owned by such Borrower free and clear of all Encumbrances
and rights of others, (other than a first priority Encumbrance in
favour of the Agent as agent and trustee for itself, the Issuing
Bank and the Lenders) (save for liens over Inventory held by a
person described in paragraph (d) below where the Agent is in
possession of such agreements as described in paragraph (d) as it
reasonably requires);
(b) except as provided in paragraph (c) and (d) below, is not located
on premises owned and operated by such Borrower and referenced in
Schedule 7;
-7-
<PAGE>
(c) is Inventory in transit or Inventory held on or at any leased
premises where the landlord thereof has not executed a consent and
waiver in form and substance reasonably satisfactory to the Agent;
(d) is in the possession or control of a bailee, warehouseman,
processor, converter, finisher or other person other than such
Borrower, unless the Agent is in possession of such agreements,
instruments and documents as the Agent may reasonably require
(each in form and content reasonably acceptable to the Agent and
duly executed, as appropriate by the bailee, warehouseman,
processor, converter or other person in possession or control of
such Inventory, as applicable) including warehouse receipts in the
Agent's name covering such Inventory;
(e) is covered by a negotiable document of title which is not in the
actual possession of the Agent;
(f) in the Agent's judgment, is obsolete, unsaleable, shopworn,
damaged, unfit for further processing, or is of substandard
quality;
(g) consists of display items, samples, supplies, small tools,
packaging and shipping materials or defective goods which have
been returned by the buyer;
(h) consists of discontinued or slow-moving items;
(i) does not meet all standards imposed by any Governmental Authority
situated in the United Kingdom which are applicable in the United
Kingdom;
(j) is placed by such Borrower on consignment or held by such Borrower
on consignment from another person;
(k) is in violation of the Consumer Protection Act 1987, the Sale of
Goods Act 1979, the Sale and Supply of Goods Act 1994, the Toys
(Safety) Regulations 1989 and any legislation or regulation
amending, replacing or supplementing the same or any successor
statute or section; or
(l) in any way fails to meet or violates any warranty, representation
or covenant contained in this Agreement or any other Financing
Document;
"Encumbrance" means any mortgage, charge, assignment for the purpose of
-----------
security, pledge, lien, rights of set-off, arrangements for retention of
title or hypothecation or trust arrangement for the purpose of, or which
has the effect of, granting security or other security interest or
preferential arrangement of any kind whatsoever or any agreement, whether
expressed to be conditional or otherwise, to create any of the same or
any agreement to sell or otherwise dispose of any asset on terms whereby
such asset is or may be leased to or re-acquired or acquired by any
member of the Group (other than sales which, in the opinion of the Agent,
constitute
-8-
<PAGE>
bona fide sales of Inventory in the ordinary course of trade of any
Borrower to any such member of the Group);
"Environment" means all or any of the following media; air (including air
-----------
within buildings or other structures and whether above or below ground),
land (including buildings and any other structures or erections in, on or
under it and any soil and anything below the surface of land), land
covered with water and water (including sea, ground and surface water);
"Environmental Claim" means any written or oral notice or intimation from
-------------------
anyone including, without limitation, any regulatory authority or
government agency, alleging any breach, contravention or violation of any
Environmental Law by either Borrower or any of its Subsidiaries or the
existence of any liability or potential liability arising from any such
breach, contravention or violation including, without limitation,
liability to conduct, pay for or for damages in respect of any
investigation or audit, clean-up, remediation, administrative cost or
charge or expense, damage to the Environment or any natural resource,
property, loss or damage, personal injury or any penalty attaching or
relating to the presence, emission, release or leak of any Hazardous
Material in or to the Environment;
"Environmental Law" means all statutes, treaties and conventions,
-----------------
directives, regulations and all codes of practice or conduct, circulars
and guidance notes having legal or judicial import or effect whether of a
criminal, civil or administrative nature, and the rules of Common Law,
relating to or concerning:
(a) pollution or contamination of the Environment;
(b) harm, whether actual or potential, to mankind and human senses,
living organisms and ecological systems;
(c) the generation, manufacture, processing, distribution, use
(including abuse), treatment, storage, disposal, transport or
handling of Hazardous Materials; and
(d) the emission, leak, release or discharge into the Environment of
noise, vibration, dust, fumes, gas, odours, smoke, steam,
effluvia, heat, light, radiation (of any kind), infection,
electricity or any Hazardous Material and any matter or thing
capable of constituting a nuisance or an actionable tort of any
kind in respect of such matters;
"Environmental Permit" means any and all approvals, authorisations,
--------------------
consents, licences, mandates, registrations or permits required by any
Environmental Law;
"Existing Credit Agreement" means the Amended and Restated Credit
-------------------------
Agreement, dated as of 2nd October, 1992, among Tyco Industries, as
borrower, Tyco Parent, certain Subsidiaries of Tyco Parent, the lenders
party thereto, NationsBank N.A. (Carolinas) formerly known as NationsBank
of North Carolina, N.A., as Agent, and The Bank of Nova Scotia, as co-
agent, as amended by Amendment No. 1 thereto
-9-
<PAGE>
dated as of 18th March, 1993, Amendment No. 2 thereto dated as of 10th
February 1994, Amendment No. 3 thereto dated as of 15th November 1994,
Amendment No. 4 thereto dated as of 8th February 1995 and by a letter
agreement thereto dated 7th June 1994;
"Facility" means the revolving credit facility, the terms and conditions
--------
of which are set out in this Agreement;
"Facility Limit" means, subject to Clauses 7.2 and 8, $35,000,000;
--------------
"Fees Letter" means the letter of even date herewith from the Agent to
-----------
the Borrowers relating to certain fees payable to the Agent by the
Borrowers in relation to this Agreement, being described on its face as
the Fees Letter;
"Final Repayment Date" means the third anniversary of the Completion
--------------------
Date;
"Financial Year" in relation to a person the calendar year or such other
--------------
period as agreed by the Agent (acting on the instructions of the Majority
Lenders);
"Financing Documents" means this Agreement, the Fees Letter, the
-------------------
Participation Agreement, the Hedging Agreements and the Security
Documents;
"First Chicago Notes" shall mean the convertible subordinated notes due
-------------------
July 18, 2001 issued by Tyco Parent in the original aggregate principal
amount of $13,500,000, as amended, modified, supplemented, replaced or
substituted for from time to time in accordance with the terms thereof
and of the US Credit Agreement;
"Global Lenders" means, collectively, the lenders (other than Lloyds)
--------------
providing or committing to provide any financial accommodations under any
of the Overall Facilities;
"Governmental Authority" means any nation or government, any state or
----------------------
other political subdivision thereof, and any agency, department or other
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government;
"Group" means each of the Tyco Parent and each Subsidiary of the Tyco
-----
Parent from time to time during the Security Period;
"Guarantee" means a guarantee issued or to be issued by the Issuing Bank
---------
in favour of Lloyds at the request of either Borrower, subject to the
terms and conditions hereof, in the terms or in substantially the terms
set out in Schedule 20;
"Guarantee Facility" means the guarantee facility, the terms and
------------------
conditions of which are set out in this Agreement;
"Guarantee Facility Limit" means, subject to Clause 8, (Pounds)1,525,600;
------------------------
-10-
<PAGE>
"Hazardous Materials" means any element or substance, whether natural or
-------------------
artificial, and whether consisting of gas, liquid, solid or vapour,
whether on its own or in any combination with any other element or
substance, which is listed, identified, defined or determined by any
applicable Environmental Law to be, to have been, or to be capable of
being or becoming harmful to mankind or any living organism or damaging
to the Environment;
"Hedging Agreements" means each of the agreements entered into pursuant
------------------
to Clause 13.2(x)(ii);
"Indebtedness" means, in relation to any member of the Group (or any
------------
other person), its obligation (whether present or future, actual or
contingent and whether incurred as principal or surety) for the payment
or repayment of money (whether in respect of interest, principal or
otherwise) incurred in respect of any of:
(i) moneys borrowed or raised;
(ii) any bond, note, loan stock, debenture or similar instrument;
(iii) acceptance credit, bill discounting, note purchase, factoring
facilities or documentary credit facilities;
(iv) payment obligations under hire purchase agreements, conditional
sale agreements and leases (whether in respect of land, machinery,
equipment or otherwise);
(v) guarantees, bonds, stand-by letters of credit or other similar
instruments issued in connection with the performance of
contracts;
(vi) interest rate or currency swap agreements or any other hedging
instrument in respect of interest rates or currencies;
(vii) where the calculation falls to be made in relation to any member
of the Group, any arrangement pursuant to which any asset disposed
of by any member of the Group is to be or may be re-acquired or
acquired by any member of the Group (whether following the
exercise of an option or otherwise) save for sales, which in the
opinion of the Agent, constitute bona fide sales of Inventory in
the ordinary course of trade of such member of the Group; and
(viii) counter-indemnities, guarantees or other assurances against
financial loss in respect of the liability or obligation of any
person falling within any of paragraphs (i) to (vii) above;
Provided that Indebtedness shall not include obligations to trade
creditors incurred in the ordinary course of business (including trade
debt incurred to any member of the Group with respect to purchases of
Inventory), and shall not include obligations
-11-
<PAGE>
to pay inter-company management and royalty fees to Tyco Industries, Inc
or any company which is a parent company of the company bound to pay such
fees.
"Index Rate" shall mean for any day, the rate per annum certified by
----------
Lloyds Bank Plc to be its base lending rate on such day;
"Interest Date" means with respect to Advances where the Index Rate Basis
-------------
under Clause 6 is applicable, each of the first day of the calendar month
next succeeding the month in which such Advance is made (or if such first
day is not a Business Day, the immediately succeeding Business Day), the
first day of each subsequent calendar month until the Final Repayment
Date and the Final Repayment Date and, where the LIBOR Basis under Clause
6 is applicable, the Repayment Date for such Advance, or in respect of
any amount on which interest accrues under Clause 6.3, the last day of
the relevant Interest Period;
"Interest Period" means each period determined in accordance with Clause
---------------
6 for the purpose of calculating interest on Advances or overdue amounts;
"Inventory" means all stock, inventory, merchandise, goods and other
---------
moveable chattels, wherever located, which are held by or on behalf of
any Borrower for sale or lease in either Borrower's business or hereafter
owned or acquired by either Borrower;
"Issue Date" means, in respect of a Guarantee, the Business Day on which
----------
such Guarantee is issued by the Issuing Bank under this Agreement or
proposed to be issued pursuant to an Issue Request;
"Issue Request" means a request substantially in the form of Part B of
-------------
Schedule 2;
"Leases" shall mean all of those leasehold estates in real property now
------
owned or hereafter acquired by any Borrower or any other member of the
Charging Group, as lessee or sub lessee;
"Lender Transferee" has the meaning attributed thereto in Clause 20;
-----------------
"Lenders" means each of the lenders listed in Schedule 1, their
-------
respective successors in title, assigns and each Lender Transferee and
"Lender" shall be construed accordingly;
"Lending Office" means, in relation to each Lender, the lending office
--------------
details of which are set out in Schedule 1 or the relative Transfer
Certificate or such other lending office in the United Kingdom through
which its Commitment is maintained and through which its Contribution is
made and maintained under this Agreement and in relation to a
Participant, the office at which the relevant assets and liabilities
relating to it in its capacity as such are, or are to be, booked;
"LIBOR" means, in respect of an Advance or other sum the rate per annum
-----
determined by the Agent by reference to the rate per annum established by
the
-12-
<PAGE>
British Bankers' Association as the Sterling London Interbank Offered
Rate or, if not denominated in Sterling, the London Interbank Offered
Rate for the relevant currency, for a period equal to the relative
Interest Period, which appears on Telerate Page 3750 as of 11:00 a.m.
(London time), in the case of Sterling one Business Day prior to the
beginning of such Interest Period and in the case of any other currency
two Business Days prior to the beginning of such Interest Period;
"Lloyds" means Lloyds Bank Plc;
------
"Lloyds Deposit Agreements" means deposit agreements in Lloyds' standard
-------------------------
form to be entered into between each of the Borrowers (1) and Lloyds (2);
"Lloyds Deposits" mean (Pounds)109,382 and (Pounds)109,382 standing to
---------------
the credit of the Lloyds Tyco Deposit Account and the Lloyds Matchbox
Deposit Account respectively;
"Lloyds Guarantees" means the guarantees issued by Lloyds specified in
-----------------
Schedule 21:
"Lloyds Matchbox Deposit Account" means the account numbered 7535854 with
-------------------------------
Lloyds Bank Plc and designated "Lloyds Bank Plc re Matchbox Toys
Limited";
"Lloyds Tyco Deposit Account" means the account numbered 7534866 with
---------------------------
Lloyds Bank Plc and designated "Lloyds Bank Plc re Tyco Toys (UK)
Limited";
"Loan" means, at any time, the aggregate amount of Advances outstanding
----
at such time;
"Majority Lenders" means those Lenders the aggregate of whose
----------------
participations comprise at least 50 per cent. of the Advances or, at any
time when an Advance is not outstanding, those Lenders whose Commitments
comprise at least 50 per cent. of the Total Commitments;
"Mandatory Liquid Asset Costs" means, in relation to each Lender, the
----------------------------
additional cost to such Lender of compliance with the reserve asset ratio
from time to time required by the Bank of England, expressed as a rate
per cent. per annum, in accordance with the formula set out in
Schedule 4;
"Margin" means 2.5 per cent. per annum;
------
"Matchbox Fixed IRB Advances" means the initial Advance or Advances made
---------------------------
to Matchbox on an Index Rate Basis and which, at the time of drawing, in
aggregate equal (Pounds)109,382;
"Matchbox International" means Matchbox International Limited a company
----------------------
incorporated under the laws of Hong Kong with registered number 112203;
"Material Adverse Effect" shall mean a material adverse effect on (i) the
-----------------------
business, assets, operations, prospects, or financial condition of any
Borrower or any of its
-13-
<PAGE>
Subsidiaries, (ii) the ability of any Borrower or any Subsidiary thereof
to pay or perform its obligations under the Financing Documents in
accordance with the terms thereof, (iii) the Charged Property or the
Agent's, Issuing Bank's or Lenders' Encumbrances on the Charged Property
or the priority of any such Encumbrances, or (iv) the rights and remedies
of the Agent, the Issuing Bank and Lenders under this Agreement and the
other Financing Documents;
"Material Contracts" shall mean each contract (other than any purchase
------------------
order by any Borrower or Subsidiary thereof in the ordinary course of
trading of Inventory to persons who are not Affiliates of any Borrower or
Subsidiary thereof) to which any Borrower or any Subsidiary thereof is
now or hereafter a party which (i) involves aggregate consideration
payable to or by such Borrower or Subsidiary, contingent or otherwise, in
excess of (Pounds)200,000 in any calendar year or (ii) is otherwise
material to its business or operations;
"Obligor" shall mean any borrower under any of the Overall Facilities and
-------
any guarantor of any or all of the obligations of any such borrower under
any of the Overall Facilities, including, without limitation, the
Borrowers and the other members of the Charging Group;
"Outstandings" means, at any given time in respect of each of the
------------
Guarantees then in issue, the aggregate maximum amount for which such
Guarantees were issued less the aggregate amount of any permanent
reductions thereof;
"Overall Facilities" shall mean, collectively, the loan facilities
------------------
provided under this Agreement, the Canadian Credit Agreement and the US
Credit Agreement;
"Participant" means General Electric Capital Corporation in its capacity
-----------
as sub-Participant under the Participation Agreement and its successors
and assigns thereunder;
"Participated Amount" of any Contribution, any Commitment, the Loan or of
-------------------
any Advance or Advances means, in respect of a Participant at any time,
the amounts of such Contribution, Commitment, Loan, Advance or Advances
in respect of which the Participant has a participation or liability
(whether present or future, actual or contingent) pursuant to the
Participation Agreement;
"Participation Agreement" means a participation agreement in form and
-----------------------
content satisfactory to the Agent, made or to be made between (1) Lloyds,
(2) the Agent, (3) the Participant and (4) the Borrowers;
"Permitted Encumbrance" means:
---------------------
(a) all security interests and the other Encumbrances created in
favour of the Agent pursuant to this Agreement and any of the
Security Documents;
(b) liens arising by operation of law not exceeding (Pounds)100,000 or
any rights of set-off;
-14-
<PAGE>
(c) any leases to which any member of the Group is a party as lessee
made in the ordinary course of business;
(d) any Encumbrance listed in Schedule 10 being those Encumbrances
subsisting at the date of this Agreement, provided that the amount
thereby secured shall not be increased after the date of this
Agreement;
(e) any Encumbrance granted over an asset which secures a liability to
a creditor incurred after the Completion Date in the ordinary
course of business in relation to and incurred solely for the
purpose of the financing or refinancing of an asset where such
Encumbrance secures that asset alone provided that:
(i) the principal amount secured by such Encumbrance does not
exceed the unpaid purchase price for such asset, or, in the
case of a refinancing, the Indebtedness secured does not
exceed the outstanding principal amount of the Indebtedness
being refinanced;
(ii) the aggregate amount of Indebtedness secured by
Encumbrances falling within this paragraph (e) shall not at
any time exceed (together with any Indebtedness permitted
in this paragraph (e) to refinance Indebtedness under any
conditional sale agreements) (Pounds)100,000;
(iii) in the case of refinancing, the terms of such new
Indebtedness are no less favourable to the person owing the
same as the terms of the Indebtedness being financed; and
(iv) such asset is not a component, part or accessory installed
on, or an accession, addition or attachment to any other
asset or property of any member of the Charging Group or an
Affiliate of any thereof;
(f) the Lloyds Deposit Agreements;
"Permitted Indebtedness" means:
----------------------
(a) Indebtedness outstanding under the Overall Facilities or under any
guarantee or security granted in respect of any such Indebtedness;
(b) Indebtedness to trade creditors incurred in the normal course of
the prudent conduct of the trading activities of a member of the
Charging Group;
-15-
<PAGE>
(c) Indebtedness under hire purchase agreements, conditional sale
agreements and leases where such agreements have not been entered
into primarily as a method of raising finance not exceeding
(Pounds)500,000;
(d) Deferred Taxes;
(e) any Indebtedness set out in Schedule 8 and any refinancing or
refunding thereof provided that such Indebtedness is not increased
in amount after the date hereof;
(f) Indebtedness under currency exchange agreements, currency futures
or currency options permitted under the words in parenthesis in
Clause 13.3(n);
(g) Indebtedness under interest rate protection agreements the terms
of which are acceptable to the Agent;
(h) Indebtedness of the Borrowers and their respective Subsidiaries
which would be permitted under the terms of Section 6.3 of the US
Credit Agreement; and
(i) Indebtedness under counter-indemnities given by either Borrower to
Lloyds in respect of Lloyds Guarantees;
"Prior Claims" means, at any time, all Encumbrances created by any
------------
Applicable Law, which rank or are capable of ranking prior to or pari
passu with the Agent's security in the Charged Property, including,
without limitation, for preferential debts;
"Real Property" shall mean all real property owned, leased or operated by
-------------
any Borrower or any other member of the Group or any Affiliate of any
Borrower or any other member of the Group;
"Receivables Funding Agreement" shall mean the Receivables Funding and
-----------------------------
Servicing Agreement, dated as of the date of the US Credit Agreement,
among Tyco Funding I Corporation and Tyco Funding II Corporation, as
seller, Redwood, as buyer, Tyco Industries, as servicer, Financial
Security Assurance Inc. and General Electric Capital Corporation, as
operating agent and collateral agent;
"Receivables Funding Documents" means, collectively, the Receivables
-----------------------------
Funding Agreement and the Receivables Sale Agreement;
"Receivables Sale Agreement" shall mean, collectively (i) the Receivables
--------------------------
Transfer Agreement, dated as of the date of the US Credit Agreement, by
and among Tyco Manufacturing Corporation and Tyco Funding I and Tyco
Funding II Corporation and (ii) the Receivables Transfer Agreement, dated
as of the date of the US Credit Agreement, by and between Tyco Industries
and Tyco Funding I and Tyco Funding II Corporation;
-16-
<PAGE>
"Redwood" shall mean Redwood Receivables Corporation;
-------
"Repayment Date" means in relation to (a) an Advance to which the LIBOR
--------------
Basis applies, the last day of the Interest Period relative thereto, (b)
a Matchbox Fixed IRB Advance and a Tyco Fixed IRB Advance, the Final
Repayment Date and (c) an Advance made on an Index Rate Basis (other than
a Matchbox Fixed IRB Advance or a Tyco Fixed IRB Advance) the Final
Repayment Date, subject to the provisions of clause 7.6 of each of the
Debentures;
"Restricted Payment" shall mean, with respect to any person (a) the
------------------
declaration or payment of any dividend or the occurrence of any liability
to make any other payment or distribution of cash or other property or
assets in respect of such person's Stock; (b) any payment on account of
the purchase, redemption, defeasance or other retirement of such person's
Stock or any other payment or distribution made in respect thereof,
either directly or indirectly; or (c) any payment, loan, contribution, or
other transfer of funds or other property to any Stockholder of such
person;
"Security Documents" means each of the Deed of Subordination, the
------------------
Debentures, the Charges over Shares and the Trade Mark Charges set out in
Schedule 3 executed or to be executed by members of the Charging Group
and any guarantees and documents creating security executed and delivered
after the date hereof in respect of the obligations and liabilities of
any of the Borrowers and the other members of the Group under this
Agreement or the other Financing Documents;
"Security Period" means the period starting on the date hereof and ending
---------------
on the date on which all of the obligations and liabilities of the
members of the Group under each of this Agreement and the other Financing
Documents are discharged in full and none of the Agent, the Issuing Bank
and the Lenders has any continuing obligation in relation to the Facility
or the Guarantee Facility;
"Settlement Amount" means the amount payable by the Issuing Bank to
-----------------
Lloyds in respect of a Guarantee, which amount shall include all
interest, commissions and expenses payable by the Issuing Bank to Lloyds;
"Settlement Date" means the date on which payment of a Settlement Amount
---------------
is due to Lloyds in respect of a Guarantee;
"Solvency Ratio Directive" means the Council directive of 18 December
------------------------
1989 on a solvency ratio for credit institutions (89/647/EEC) as
currently in force and as modified or re-adopted from time to time;
"Sterling", "Pounds" and "(Pounds)" means the lawful currency for the
-------- ------ --------
time being of the United Kingdom;
"Sterling Equivalent" means, in relation to an amount in Dollars on the
-------------------
day on which the calculation falls to be made, the amount of Sterling
which could be purchased with such amount of Dollars on the basis of the
spot buying rate for Sterling
-17-
<PAGE>
appearing on "FXFX" page on the Reuters Money Rates Service (or such
other page as may replace such page of such service for the purpose of
displaying spot exchange rates in London for acquiring Sterling at or
about 11.00 a.m. (New York time) on the date of such determination;
"Stock" means all shares, options, warrants, general or limited
-----
partnership interests, participations or other equivalents (regardless of
how designated) on or in a corporation, partnership or equivalent entity
whether voting or non-voting, including common stock, preferred stock, or
any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as
amended);
"Subsidiary" has the meaning ascribed to it by section 736 of the
----------
Companies Act 1985 and "Subsidiaries" shall be construed accordingly;
------------
"Tax" includes all present and future taxes, charges, imposts, duties,
---
levies, deductions, withholdings or fees of any kind whatsoever, or any
amount payable on account of or as security for any of the foregoing,
payable at the instance of or imposed by any statutory, governmental,
international, state, federal, provincial, local or municipal authority,
agency, body or department whatsoever or any central bank or monetary
agency or European Union institution, in each case whether in the United
Kingdom or elsewhere, together with any penalties, additions, fines,
surcharges or interest relating thereto including (without limitation)
income tax, corporation tax, advance corporation tax, capital gains tax,
value added tax, petroleum revenue tax, customs and other import duties,
stamp duty, stamp duty reserve tax, capital transfer tax, inheritance
tax, insurance premium tax, capital duty, payments to be made under the
Pay As You Earn system and national insurance contributions; and "Taxes"
-----
and "Taxation" shall be construed accordingly;
--------
"Tax Liability" means in respect of any person:
-------------
(a) any liability or any increase in the liability of that person to
make any payment or payments of or in respect of Tax;
(b) the loss of any relief, allowance, deduction or credit in respect
of Tax which would otherwise have been available to that person;
(c) the setting off against income, profits or gains or against any
Tax liability of any relief, allowance deduction or credit in
respect of Tax which would otherwise have been available to that
person; and
(d) the loss or setting off against any Tax liability of a right to
repayment of Tax which would otherwise have been available to that
person.
For the purposes of this definition any question of whether or not any
relief, allowance, deduction, credit or right to repayment of Tax has
been lost or set-off,
-18-
<PAGE>
and if so, the date on which that loss or set-off took place, shall be
conclusively determined by the relevant person's auditors;
"Tax on Overall Net Income" means in relation to a Lender and a
-------------------------
Participant Tax (other than Tax deducted or withheld from any payment)
imposed on such Lender or such Participant on its net profits by the
jurisdiction in which either its Lending Office or its head office is
situated;
"Total Commitments" has the meaning ascribed to it in the definition of
-----------------
Commitment;
"Trade Mark Charge" means a fixed charge over inter alia certain trade
-----------------
mark rights in form and content satisfactory to the Agent given or to be
given pursuant to Clause 2;
"Transfer Certificate" means a transfer certificate in substantially the
--------------------
form set out in Schedule 5;
"Tyco Fixed IRB Advance" means the Initial Advance or Advances made to
----------------------
Tyco Toys on an Index Rate Basis and which, at the time of drawing, in
aggregate equals (Pounds)109,382;
"Tyco Industries" means Tyco Industries Inc., a Delaware corporation;
---------------
"Tyco Parent" means Tyco Toys, Inc., a Delaware corporation;
-----------
"Tyco Parent Senior Subordinated Note Indenture" shall mean the
----------------------------------------------
Indenture, dated 15th August 1992, between Tyco Parent, as issuer,
certain Subsidiaries of Tyco Parent, as guarantors, and Bankers Trust
Company, as trustee (as successor trustee to NationsBank of Virginia,
N.A.), with respect to Tyco Parent's 10-1/8% senior subordinated notes
due August 15, 2002, as such indenture was supplemented by two
supplemental indentures, dated 17th October 1992 and 8th June 1993,
respectively, adding additional Subsidiaries of Tyco Parent as guarantor
and as such indenture shall be further amended, modified or supplemented
from time to time in accordance with the terms thereof and the US Credit
Agreement;
"UK Generally Accepted Accounting Principles" and "UK GAAP" means
------------------------------------------- -------
accounting principles, concepts, bases and policies generally adopted and
accepted in the United Kingdom;
"US Generally Accepted Accounting Principles" and "US GAAP" means
------------------------------------------- -------
accounting principles, concepts, bases and policies generally adopted and
accepted in the United States of America;
"US Credit Agreement" shall mean the Credit Agreement, dated as of 22nd
-------------------
February 1995, made among Tyco Distribution Corporation and Tyco
Manufacturing Corporation (1), Tyco Parent (2), certain lenders and
General Electric Capital
-19-
<PAGE>
Corporation as agent, as amended, modified or supplemented from time to
time in accordance with the terms thereof; and
"VAT" means value added tax as provided for in the Value Added Tax Act
---
1983 and legislation (or purported legislation and whether delegated or
otherwise) supplemental thereto or in any primary or secondary
legislation promulgated by the European Union or any official body or
agency thereof, and any tax similar or equivalent to value added tax
imposed by any country other than the United Kingdom and any similar or
turnover Tax replacing or introduced in addition to any of the same;
1.2 Clause Headings
---------------
Clause headings are for convenience of reference only and shall not
affect the construction of this Agreement.
1.3 Interpretation
--------------
In this Agreement (unless otherwise provided):
1.3.1 where a covenant or obligation is expressed to be subject to
materiality, an event, occurrence or omission shall only
constitute a breach of that covenant or obligation if such
potential breach (considered together with all other potential
breaches of that covenant or obligation) may in the opinion of
the Majority Lenders have a Material Adverse Effect;
1.3.2 references to Clauses and Schedules are to be construed as
references to the Clauses of, and Schedules to, this Agreement
as amended or varied from time to time and references to sub-
Clauses shall unless otherwise specifically stated be construed
as references to the sub-Clauses of the Clause in which the
reference appears;
1.3.3 references to any Financing Document shall be construed as
references to this Agreement or such Financing Document, as
amended, varied, novated or supplemented, as the case may be,
from time to time;
1.3.4 words importing the singular shall include the plural and vice
versa;
1.3.5 references to any person shall include that person's assigns or
transferees or successors in title and shall be construed as
including references to an individual, sole proprietorship,
firm, partnership, joint venture, trust, company, corporation,
institution, unincorporated body of persons, association public
benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof);
-20-
<PAGE>
1.3.6 references to any statute or statutory provision include any
statute or statutory provision which amends, extends,
consolidates or replaces the same, or which has been amended,
extended, consolidated or replaced by the same, and shall
include any orders, regulations, instruments or other
subordinate legislation made under the relevant statute;
1.3.7 accounting terms shall be construed so as to be consistent with
US Generally Accepted Accounting Principles except where
expressly stated to be construed in accordance with UK Generally
Accepted Accounting Principles;
1.3.8 the words "other" and "otherwise" shall not be construed ejusdem
generis with any foregoing words where a wider construction is
possible;
1.3.9 the words "including" and "in particular" shall be construed as
being by way of illustration or emphasis only and shall not be
construed as, nor shall they take effect as, limiting the
generality of any foregoing words; and
1.3.10 all capitalised words and expressions appearing in Clause 13.2
shall have the meaning ascribed to such words and expressions in
the US Credit Agreement.
2. CONDITIONS PRECEDENT
--------------------
Notwithstanding any other provision of this Agreement, none of the Agent,
the Issuing Bank and the Lenders shall be under any obligation whatsoever
under or in connection with this Agreement unless:-
(a) the Agent shall have received (in form and content reasonably
satisfactory to the Agent), by 10th March 1995, all of the
following:
(i) a Certified Copy of the Certificate of Incorporation (and
any relative certificate of incorporation on change of
name) and the Memorandum and Articles of Association in
form and content satisfactory to the Agent of each of the
Borrowers and each member of the Charging Group
incorporated in England and Wales, the articles or
certificate of incorporation of Tyco Industries certified
by the Secretary of State of Delaware and the by-laws of
Tyco Industries as in effect on the Completion Date,
certified by the Secretary, Assistant Secretary or other
appropriate officer or director of Tyco Industries, and
the equivalent constitutional documents of Matchbox
International;
(ii) a Certified Copy of the board minutes and resolutions of
each of the Borrowers approving and authorising the
execution, delivery and performance of each of the
Financing Documents to which such Borrower is a party on
the terms and conditions
-21-
<PAGE>
thereof and authorising a person or persons to sign or
otherwise attest the due execution of such documents and
any other documents to be executed or delivered by the
relevant Borrower pursuant thereto together with a
certificate of a duly authorised officer of each Borrower
setting out the names and signatures of the persons
authorised to sign such documents on behalf of such
Borrower;
(iii) Certified Copies of board minutes and resolutions of each
member of the Charging Group (other than the Borrowers)
approving and authorising the execution, delivery and
performance by it of each of the Security Documents to
which it is a party on the terms and conditions thereof and
authorising a person or persons to sign or otherwise attest
the due execution of such documents and any other documents
to be executed by it pursuant thereto together with a
certificate of a duly authorised officer of each such
member of the Charging Group setting out the names and
signatures of the persons authorised to sign such documents
on its behalf;
(iv) Certified Copies of all consents, licences, approvals or
authorisations of any governmental or other authority,
bureau or agency or of any other third party required by
each member of the Charging Group in connection with the
execution, delivery, performance, validity or
enforceability of the Financing Documents or any document
to be delivered thereunder;
(v) the Fees Letter duly executed by each Borrower together
with the fees payable thereunder on the Completion Date;
(vi) each Security Document listed in Column 3 of Schedule 3
duly executed by the company listed opposite such Security
Document in Column 1 of Schedule 3 together with all
documents deliverable therewith;
(vii) evidence that each Borrower and each Subsidiary of any
Borrower (or, in either case, an Affiliate thereof)
maintains such policies of insurance in such amounts as are
satisfactory to the Agent and otherwise meeting the
requirements of clause 10 of any Debenture to which a
Borrower and each Subsidiary of any Borrower is a party;
(viii) legal opinions from Wilde Sapte, Wolf, Block, Schorr &
Solis-Cohen counsel to Tyco Parent, Denton Hall and Denton
Hall Hong Kong;
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(ix) a Borrowing Base Certificate as of the Completion Date in
relation to each Borrower certified by Tyco Parent;
(x) all relevant deeds of release relating to all Encumbrances
(other than Permitted Encumbrances) affecting any of the
assets of members of the Charging Group or undertakings
acceptable to the Agent;
(xi) Certified Copies of all existing environmental
reviews and audits (if any) pertaining to any
member of the Charging Group;
(xii) a letter from the agent under each of the Overall
Facilities and the Receivables Funding Agreement that the
conditions precedent to drawdown thereunder have been, or
shall immediately after the satisfaction of the Conditions
Precedent be, satisfied and that the Receivables Funding
Documents are in full force and effect;
(xiii) a certificate from an officer of Tyco Parent that each
member of the Charging Group is in compliance in all
material respects with all Material Contracts;
(xiv) evidence that other than in relation to any matter
specified in Schedule 9 (i) since 30th September 1994,
there has been no material increase in liabilities,
liquidated or contingent, of any Borrower or any of their
Subsidiaries, or any material decrease in the assets of any
Borrower or any of their Subsidiaries (other than normal
recurring seasonal changes in the foregoing consistent with
prior years' experience), (ii) no event since 30th
September 1994 has occurred which would have a Material
Adverse Effect (it being understood that the financial
results described in Tyco Parent's press release of October
25th 1994 shall not constitute a Material Adverse Effect so
long as the Agent has determined, after due diligence, that
the results described therein reflect completely and
accurately, in all material respects, the actual results
for the period covered);
(xv) confirmation that there is no subsisting unsatisfied
judgment or award given against any member of the Charging
Group by any court, arbitrator or other body and no action,
litigation, arbitration or administrative proceeding has
been commenced, or is pending or threatened against any
member of the Charging Group which :
(i) challenges any such member of the Charging Group's
right, power or ability to enter into or perform any
of its obligations under the Financing Documents or
the
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validity or enforceability of any Financing
Document; or
(ii) which is reasonably likely to have a Material
Adverse Effect;
and, in either case which, in the Agent's sole judgment
exercised in good faith, would make it inadvisable to
complete the transactions contemplated by the Financing
Documents or any of the other Overall Facilities;
(xvi) the Accountant's Letter (as defined in Clause 13.1.5).
(xvii) evidence that the repayment of any sums owing from one
member of the Group to another is subordinated to the
repayment of any sums due under the Financing Documents to
the extent permitted under the Existing Credit Agreement;
(xviii) a certificate of the Chief Financial Officer of Tyco
Parent that neither of the Borrowers is deemed to be
unable to pay its debts by reason of s123 of the
Insolvency Act 1986;
(xix) acknowledgement of the Debenture by third party holders of
Inventory;
(xx) any other documents, instruments, certificates, opinions
and agreements as the Agent shall reasonably request in
connection with the transactions contemplated by this
Agreement;
(xxi) a pro forma balance sheet in relation to each of the
Borrowers as at the Completion Date (based on figures as
at 31st January 1995) in form and content satisfactory to
the Agent;
(xxii) the Lloyds Deposit Agreements executed by each of the
Borrowers;
(xxiii) a letter from Lloyds Bank Plc addressed to the Agent
concerning the lock-box service agreement to be entered
into between Lloyds Bank Plc, International Factors PLC,
the Agent and in each case a different Borrower ;
(xxiv) the Deed of Subordination duly executed by the parties
stated therein;
(xxv) dated executed stock transfer forms in relation to all
shares charged under each of the Charges over Shares;
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(xxvi) the Participation Agreement duly executed by the
parties thereto;
(xxvii) a Certified Copy of the board minutes of Tyco (Far
East) Limited in relation to the Deed of Subordination;
and
(xxviii) a Certified Copy of the board minutes of Tyco
Manufacturing (Europe) Inc. in relation to the Deed of
Subordination.
(b) If so requested by any Lender, such Lender shall have received
(in form and content reasonably satisfactory to it) an
environmental review and audit report as to the properties of
the Charging Group from an independent environmental firm
acceptable to such Lender.
(c) The Agent has completed, with results reasonably satisfactory to
it, business and legal due diligence in relation to all assets
and liabilities of all companies within the Group.
(d) The Global Lenders are reasonably satisfied with the cash
management systems of the Group.
(e) The Global Lenders are reasonably satisfied with the corporate,
capital, tax, legal and management structure of the Group.
(f) The Agent is reasonably satisfied that arrangements have been
completed for a tax treaty exemption in connection with the
cross-border facilities of the Group, if any and the relevant
member of the Group has agreed to absorb incremental withholding
of cross border tax, if any.
(g) A certificate of title prepared by Messrs Denton Hall in form
and content satisfactory to the Agent relating to the property
known as Unit A1, Swift Park, Old Leicester Road, Rugby.
(h) The Lloyds Deposits shall have been credited to the Lloyds
Deposit Accounts.
3. FACILITIES, OBLIGATIONS SEVERAL, RIGHTS SEVERAL
-----------------------------------------------
3.1 Facilities
----------
3.1.1 Upon and subject to the terms and conditions of this
Agreement and in reliance upon the representations and
warranties in Clause 12:
(a) the Issuing Bank agrees to issue Guarantees to Lloyds
for the account of either of the Borrowers in the
maximum aggregate amount of the Guarantee Facility
Limit from time to time in respect of the liabilities
of the Borrowers to Lloyds under
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counter-indemnities given by the Borrowers to Lloyds in
respect of the liabilities of Lloyds under Lloyds
Guarantees; and
(b) the Lenders agree to make available to the Borrowers a
revolving credit facility in the maximum aggregate
principal amount of the Sterling Equivalent at any time
of $35,000,000 less the Outstandings from time to time.
3.1.2 For the avoidance of doubt, it is hereby declared that,
notwithstanding any other provision of this Agreement:
(a) the Dollar Equivalent of the aggregate of Advances and
Outstandings shall not, at any time, exceed the Total
Commitments; and
(b) no Lender shall be obliged to lend the Borrowers in
aggregate more than its Commitment.
3.2 Obligations Several
-------------------
3.2.1 The obligations of the Lenders under this Agreement are several.
3.2.2 The failure of a Lender to carry out its obligations hereunder
shall not relieve any other party hereto of any of its
obligations hereunder.
3.2.3 None of the Lenders nor the Agent or the Issuing Bank shall
be responsible for the obligations of any others hereunder.
3.3 Rights Several
--------------
3.3.1 Without prejudice to the provisions of this Agreement relating
to or requiring action by all or any of the Lenders, the rights
of each of the Lenders, the Issuing Bank and the Agent are
several and all amounts due, and obligations owed, to each of
them are separate and independent debts or, as the case may be,
obligations .
3.3.2 Each Lender, the Issuing Bank and the Agent may, except as
otherwise stated in this Agreement, separately enforce its
rights hereunder.
4. PURPOSES, ETC
-------------
4.1 Purposes
--------
(a) Guarantees are to be requested to guarantee the liability of the
Borrowers to Lloyds pursuant to counter-indemnities given by the
Borrowers to Lloyds in respect of the liability of Lloyds to a
Beneficiary pursuant to Lloyds Guarantees;
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(b) The proceeds of all Advances shall be used to repay existing
Indebtedness of the Borrowers, for the general working capital
and other corporate purposes of the Borrowers, and to repay
maturing Advances.
4.2 Undertaking by the Borrowers
----------------------------
Each Borrower undertakes that it will use Advances and seek Guarantees
only as permitted by this Clause 4.
4.3 No Liability
------------
Neither the Agent, the Issuing Bank nor any of the Lenders shall be
obliged to investigate the use or application of the proceeds of the
Advances or the Guarantees.
5. AVAILABILITY, DRAWDOWN AND PARTICIPATIONS
-----------------------------------------
5.1 Commitment Period
-----------------
Subject to the other terms of this Agreement and, in particular, Clause
2, Advances shall be made to a Borrower at any time during the Commitment
Period and Guarantees shall be issued in favour of Lloyds up to the date
falling one year prior to the end of the Commitment Period, or such later
date as the Issuing Bank and the Lenders may agree, when requested by a
Borrower by means of a Drawdown Notice or, as the case may be, an Issue
Request, in accordance with this Clause 5. Any portion of the Facility
or the Guarantee Facility which shall remain unused at the close of
business in London on the last day of the Commitment Period shall be
automatically cancelled at that time.
5.2 Advances and Guarantees
-----------------------
5.2.1 Advances shall be denominated in Sterling and shall be the
Sterling amount requested by the relative Borrower in the
relative Drawdown Notice and, in the case of an Advance to be
made on a LIBOR basis shall be in minimum amounts of
(Pounds)100,000 and integral multiples of (Pounds)50,000 (or, if
less, the undrawn balance available under the Facility) and may
be borrowed for 30, 60 or 90 days as specified in the relative
Drawdown Notice subject to Clause 6.2. Tyco Fixed IRB Advances
and Matchbox IRB Advances shall be borrowed for a period
commencing on the relative Drawdown Date and ending on the Final
Repayment Date (but no shorter period). Other Advances on an
Index Rate Basis shall be borrowed for a period commencing on
the relative Drawdown Date and ending on the earlier of the
Final Repayment Date or earlier repayment out of payments
received and credited to the relevant Charged Account (as
defined in each Debenture).
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<PAGE>
5.2.2 Guarantees shall be denominated in Sterling, be in favour of
Lloyds and shall expire no later than the Final Repayment Date.
5.2.3 In relation to the first Advance to a Borrower the Index Rate
Basis shall be selected pursuant to Clause 6 and no Advance to
such Borrower shall be made on a LIBOR Basis unless there is
then outstanding from such Borrower an Advance or Advances on an
Index Rate Basis equal to or greater than (Pounds)109,382 in
aggregate. No more than two Advances in relation to which the
LIBOR Basis has been selected pursuant to Clause 6 shall be
outstanding at any one time.
5.2.4 Advances shall be made and Guarantees shall be issued only on
a Business Day.
5.3 Drawdown of Advances and Issue of Guarantees
--------------------------------------------
5.3.1 Whenever a Borrower wishes an Advance to be made or a Guarantee
to be issued, it shall give a Drawdown Notice or, as the case
may be, an Issue Request to the Agent to be received not later
than 11.00 a.m. (London time) three Business Days prior to the
Drawdown Date or, as the case may be, the Issue Date, unless
such Advance is to be on an Index Rate Basis, when if more than
the Sterling Equivalent of $1,000,000 such notice shall be
received no later than 11.00 a.m. (London time) two Business
Days prior to the Drawdown Date and if less than or equal to the
Sterling Equivalent of $1,000,000 it shall be received no later
than 11.00 a.m. (London time) one Business Day prior to the
Drawdown Date PROVIDED THAT notwithstanding any other provision
of this Agreement, no Drawdown Notice and no Issue Request may
be served and no Advance will be made and no Guarantee will be
issued:
(a) unless the Conditions Precedent shall have been
satisfied; or
(b) if a Default or Default Occurrence has occurred and is
continuing or if a Default or Default Occurrence would
occur on the making of such Advance or, as the case may
be, the issue of such Guarantee; or
(c) unless the representations and warranties set out in
Clause 12 are, or will be, true and accurate in all
material respects on the date on which such Drawdown
Notice or Issue Request is served and on the Drawdown
Date or, as the case may be, the Issue Date; or
(d) if the making of such Advance or the issue of such
Guarantee would cause the Dollar Equivalent of the
aggregate of the Loan and Outstandings to be greater
than the Facility Limit; or
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(e) if the making of such Advance or the issue of such
Guarantee would cause the aggregate of the Loan and the
Outstandings to exceed the relevant Borrower's
Borrowing Availability as determined by the Agent as at
the date the relevant Drawdown Notice or Issue Request
is served based on the latest available Borrowing Base
Certificate of such Borrower (for the avoidance of
doubt, the issue of a Guarantee on account of a
Borrower shall constitute the use of an amount of such
Borrower's Borrowing Availability equal to the maximum
amount for which such Guarantee is issued); or
(f) if a Material Adverse Effect has occurred which has not
been cured or waived in writing by the Majority
Lenders; or
(g) if the issue of any such Guarantee would cause the
Outstandings to be greater than the Guarantee Facility
Limit at any time during the period to the expiry date
of such Guarantee.
5.3.2 Subject always to the other terms of this Agreement, each
Drawdown Notice shall be irrevocable and the relevant Borrower
shall be obliged to borrow in accordance with its terms and each
Issue Request shall be irrevocable.
5.4 Participations and Payments
---------------------------
5.4.1 Subject always to the other terms of this Agreement, each Lender
acting through its Lending Office, agrees to contribute its
Contribution in each Advance in Sterling , the amount of its
Contribution being that proportion which its unutilised
Commitment bears to the unutilised part of the Total Commitments
on the Drawdown Date PROVIDED THAT notwithstanding any other
provisions of this Agreement the obligation of the relevant
Lender to contribute its Contribution is subject to and
conditional upon the deposit by each of the Participants with
such Lender by or before 10.00 a.m. on the relevant Drawdown
Date of the amount in full which should have been so deposited
by such Participant in accordance with the Participation
Agreement in respect of the relevant Advance and PROVIDED
FURTHER THAT if a Participant fails so to deposit such an
amount, the amount of the proposed Advance shall be reduced by
the amount of such shortfall. Without prejudice to the
provisions of this Clause 5.4, the relevant Lender shall notify
the relevant Borrower of the amount of any shortfall in respect
of a proposed Advance if the Participant fails to deposit all or
any part of the amount to be deposited by such Participant as
referred to in this Clause 5.4.1 .
5.4.2 If, for any reason, any Participation Agreement terminates or
any Participant's obligations under a Participation Agreement
terminates, the relevant Lender's obligations under this
Agreement shall terminate
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immediately and without any further action being required from
such Lender and such Lender shall be entitled to require the
Borrowers immediately to repay such Lender's Contribution
together with accrued interest thereon and immediately to pay
all other sums payable to such Lender under this Agreement,
whereupon the same shall become immediately due and payable by
the Borrowers to such Lender and the Lender's Commitment shall
be cancelled.
5.4.3 Subject to Clauses 5.4.1 and 5.4.2 and subject to receiving the
same number of Business Days prior written notification as
specified in Clause 5.3.1 relative to the Advance from the Agent
of the terms of a Drawdown Notice, each Lender shall on the
Drawdown Date make available to the Agent to such account as the
Agent may have previously specified for this purpose, not later
than 11 a.m. (London time) on such date in immediately available
funds, an amount in Sterling equal to its Contribution in the
requested Advance.
5.5 Drawdown Indemnity
------------------
If any Advance (or part thereof) is not made to a Borrower on a Drawdown
Date in accordance with the Drawdown Notice, such Borrower shall
indemnify each of the Lenders in accordance with Clause 10.3.
5.6 Non-Availability of Sterling
----------------------------
If, before 11.00 a.m. on the Drawdown Date relative to an Advance the
Agent receives notice from a Lender that:
(a) for whatever reason it is impracticable for such Lender or a
Participant from such Lender to fund its Contribution in such
Advance in the ordinary course of business in the London Inter-
Bank Market; or
(b) central bank or other governmental authorisation is required to
permit such Lender to make, or the Participant to make a
corresponding deposit with the Lender in respect of, such
Advance and the authorisation has not been obtained or is not in
full force and effect or is subject to unacceptable conditions;
or
(c) the use of Sterling is restricted or prohibited by any request,
directive, regulation or guideline of any governmental body,
agency, department or regulatory or other authority (whether or
not having the force of law) in accordance with which such
Lender or a Participant from such Lender is accustomed to act;
the Agent shall give notice to the relevant Borrower to that effect
before 11.30 a.m. on such Drawdown Date.
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5.7 Effect of Notice
----------------
5.7.1 If the Agent delivers a notice under Clause 5.6, then the
relevant Borrower may elect by notice served on the Agent by
noon on such Drawdown Date that the relevant Advance or the
relevant Lender's Contribution in such Advance shall not be
made.
5.7.2 If the relevant Borrower does not elect as set out in Clause
5.7.1, the relevant Advance shall be denominated in Dollars,
shall be made on the LIBOR basis (as defined in Clause 6.1.3)
and the relative Drawdown Date shall be the date which is two
Business Days after the Drawdown Date which was specified in the
relative Drawdown Notice.
5.8 Indemnity
---------
The Borrowers hereby indemnify each Lender on demand against any costs,
losses or expenses which such Lender may have incurred, including any
liability to indemnify any Participant, as a consequence of the operation
of Clauses 5.6 and 5.7.
5.9 Issue of Guarantees
-------------------
5.9.1 Upon receipt of an Issue Request complying with the terms of
this Agreement, the Agent shall notify the Issuing Bank thereof.
5.9.2 The Borrowers represent that at the date of this Agreement all
subsisting Lloyds Guarantees are as set out in Schedule 21 and
are subsisting in favour of a Beneficiary whereunder the
aggregate maximum liability (whether present or future, actual
or contingent) is equal to (Pounds)1,525,600. Subject always to
the other terms of this Agreement, each Borrower shall serve an
Issue Request for the issue of Guarantees in favour of Lloyds in
respect of such Lloyds Guarantees on compliance with the
conditions set out in Clauses 2 and 5.3.
6. INTEREST
--------
6.1 Basis and Amount
----------------
6.1.1 In each Drawdown Notice the relevant Borrower may elect that the
interest accruing in respect of the requested Advance, subject
to the limitations in Clause 5.2.3 shall be calculated in
accordance with Clause 6.1.2 (the "Index Rate Basis") or Clause
----------------
6.1.3 (the "LIBOR Basis").
-----------
6.1.2 If a Borrower elects in the relevant Drawdown Notice that the
Index Rate Basis shall apply in respect of the requested
Advance, then interest shall accrue on the outstanding balance
of such Advance from the relative Drawdown Date to, but
excluding, the date of repayment of such
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Advance in full at the rate determined by the Agent to be the
aggregate of:
(a) the Margin; and
(b) the Index Rate from time to time during such period.
6.1.3 If a Borrower elects in the relevant Drawdown Notice that the
LIBOR Basis shall apply in respect of the requested Advance,
then interest shall accrue on such Advance in respect of the
period from and including the relative Drawdown Date to, but
excluding, the relative Repayment Date at the rate determined by
the Agent to be the aggregate of:
(a) the Margin;
(b) LIBOR; and
(c) the Mandatory Liquid Asset Costs.
6.2 Interest Periods
----------------
6.2.1 Interest Periods in respect of Advances in relation to which a
Borrower has selected the LIBOR Basis may be of 30, 60 or 90
days' duration .
6.2.2 The relevant Borrower shall, subject to Clause 6.2.3, in each
Drawdown Notice in which it selects the LIBOR Basis also select
the Interest Period of the Advance to which such Drawdown Notice
relates.
6.2.3 No Interest Period shall extend beyond the Final Repayment Date
and if an Interest Period selected purports so to do, it shall
nevertheless expire on the Final Repayment Date.
6.2.4 If the relevant Borrower fails to select an Interest Period for
an Advance on a LIBOR basis, the Borrower shall, subject to
Clause 6.2.3, be deemed to have selected an Interest Period of
30 days.
6.2.5 Any Interest Period which commences on the last Business Day of
a calendar month or on a Business Day for which there is no
numerically corresponding day in the calendar month in which
that Interest Period is to end, shall (subject to Clause 6.2.4)
end on the last Business Day in that later calendar month.
6.2.6 Any Interest Period which would otherwise end on a day which is
not a Business Day shall end on the next succeeding Business Day
or, if that day falls in the following calendar month, on the
immediately preceding Business Day.
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6.3 Default Interest
----------------
6.3.1 If a Borrower defaults in the payment of any sum due and payable
under any Financing Document on the due date, such Borrower
shall pay default interest on such sum (or, as the case may be,
the amount thereof for the time being due and unpaid) to the
Agent for the account of the Agent, the Issuing Bank or the
Lenders, as the case may be, from the due date to the date of
actual payment in full calculated by reference to successive
Interest Periods (each of such duration as the Agent may from
time to time select and the first beginning on the relative due
date) at the rate per annum being the aggregate of:
(a) the Default Rate; and
(b) if the Default Rate is accruing by reference to LIBOR,
to the extent that any are certified by any Lender to
the Agent as having been incurred by such Lender, the
Mandatory Liquid Asset Costs of such Lender.
6.3.2 So long as the default continues, such rate shall be
recalculated in accordance with the provisions of this Clause
6.3 on the last day of each such Interest Period and unpaid
interest then payable but unpaid under this Clause shall be
compounded at the end of each Interest Period.
6.4 Calculation and Payment of Interest
-----------------------------------
6.4.1 The Agent will notify the relevant Borrower of the rate and
amount of interest payable for each Interest Period (but in the
case of such interest calculated under Clause 6.3, any such
notification need not be made more frequently than weekly). Such
notification shall set out in reasonable detail the basis of
computation of the amount of interest so payable.
6.4.2 Interest due from either of the Borrowers to any of the Agent
and the Lenders under this Agreement shall:
(a) accrue from day to day at the rate calculated under
this Clause 6;
(b) except as otherwise provided in this Agreement, be paid
by the Borrower to the Agent for the account of the
Lenders, the Issuing Bank or the Agent, as the case may
be, in arrears on each Interest Date;
(c) be calculated on the basis of the actual number of days
elapsed and a 365 day year; and
(d) be payable after as well as before judgment.
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6.5 Market Disruption
-----------------
If, following receipt of a Drawdown Notice for an Advance on a LIBOR
Basis from a Borrower:
(i) before the close of business in London on the first day of the
requested Interest Period the Agent has been notified by one or
more Lenders and Participants the aggregate of whose Commitments
or, as the case may be, Contributions is equal to at least 33
per cent. of the Total Commitments or, as the case may be, total
Contributions, that LIBOR does not accurately reflect the cost
to it of obtaining deposits, or
(ii) by reason of circumstances generally affecting the London Inter-
Bank Market, reasonable and adequate means do not exist for
ascertaining LIBOR for any Interest Period;
then:
(a) the Agent shall promptly notify such Borrower in writing of such
event ("market disruption notice");
------------------------
(b) promptly upon receipt of the market disruption notice such
Borrower shall either:
(i) withdraw the relative Drawdown Notice in which event the
Borrower shall not be obliged to borrow the proposed
Advance, but without prejudice to the Borrower's
liability under Clauses 10.3 and 17.3; or
(ii) discuss with the Agent an alternative basis for
calculating the rate of interest for the relative Advance
(the "Affected Advance") on the basis that the net return
to the Lenders and their corresponding Participants shall
be no less than it would have been had such event not
occurred ("alternative basis");
-----------------
(c) such Borrower shall throughout any period in relation to which a
market disruption notice is in effect (subject always to Clause
6.5(d)) pay interest to the Agent for the account of each of the
Lenders on the amount of such Lender's Contribution in the
Affected Advance at the rate per annum determined by the Agent
on behalf of such Lender to be the aggregate of:
(x) the Margin;
(y) the rate notified by such Lender to the Agent to be the
rate which expresses as a percentage rate per annum the
cost to such Lender of funding for the time being from
whatever sources it may select its Contribution in the
Affected Advance,
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including from the Participant under the Participation
Agreements; and
(z) the higher of the Mandatory Liquid Asset Costs of such
Lender or its Participants; or
(d) if no agreement is reached on an alternative basis within
fifteen Business Days of the date of service of the market
disruption notice then, if such notice remains in effect, the
Borrowers shall prepay the Affected Advances upon giving the
Agent three Business Days notice of its intention to make such
prepayment together with interest accrued thereon and without
prejudice to Clauses 6.3 and 10.3; or
(e) if such Borrower and the Lenders shall agree an alternative
basis, then such agreement shall take effect in accordance with
its terms and shall be deemed to take effect under this
Agreement.
6.6 Agent's Determination
---------------------
The determination by the Agent of any interest payable under any of
Clauses 6.1, 6.3 and 6.5 shall, save for manifest error, be conclusive
and binding on the Borrowers.
7. REPAYMENT
---------
7.1 Repayment
---------
7.1.1 Each Advance made on a LIBOR basis shall, subject to the other
terms hereof, be repaid in full on the Repayment Date relating
to such Advance.
7.1.2 For the avoidance of doubt, subject to the other terms hereof,
all Advances shall be repaid on or before the Final Repayment
Date.
7.2 Mandatory Prepayments
---------------------
7.2.1 If the Dollar Equivalent of the aggregate of the outstanding
principal balances of the Advances made to a Borrower and the
Outstandings under those Guarantees issued for the account of
such Borrower shall at any time exceed the Borrowing
Availability of such Borrower, without prejudice to Clauses 10.3
and 17.3, such Borrower shall immediately prepay the Advances
made to such Borrower or, in relation to the Outstandings
provide Cash Cover, (or a combination of each) in the amount the
Dollar Equivalent of which is equal to such excess (which shall
nevertheless be secured by the Security Documents). Any such
prepayments shall be applied without premium or penalty pro rata
between the Advances of such Borrower based upon the respective
principal amounts thereof.
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7.2.2 If on the date falling one month after the earlier of the first
Drawdown Date and the first Issue Date hereunder or on any date
falling on successive monthly intervals thereafter:
(a) the Dollar Equivalent of the aggregate of the Loan and
the Outstandings less the Dollar Equivalent of the
amount of any Cash Cover exceeds the Facility Limit,
the Borrowers will, on demand from the Agent (acting on
the instructions of the Majority Lenders) prepay,
subject to Clauses 10.3 and 17.3, such excess. Such
payments shall be applied without premium or penalty
pro rata between all Advances based upon the respective
principal amounts thereof;
(b) the Dollar Equivalent of the Outstandings less the
amount of any Cash Cover exceeds the Guarantee Facility
Limit, the Borrowers will, on demand from the Agent
(acting on the instructions of the Issuing Bank or the
Majority Lenders) pay additional Cash Cover equal to
the Sterling Equivalent of such excess.
7.2.3 Without prejudice to Clauses 10.3 and 17.3 each Borrower shall
make prepayments of the Loan or, if no Loan is outstanding,
payments of Cash Cover in an amount equal to one hundred per
cent. of the net proceeds of any sale or other disposition of
any Charged Property (other than (i) sales of Inventory in the
ordinary course of business or (ii) other sales and dispositions
of any Charged Property otherwise permitted hereunder PROVIDED
THAT the aggregate net proceeds thereof so excluded shall not
exceed (Pounds)50,000 in any Financial Year) or of the issuance
by any member of the Charging Group or any Subsidiary thereof of
any Indebtedness (other than Permitted Indebtedness), in each
instance contemporaneously with any such sale, other disposition
or issuance. Such prepayments shall be applied without premium
or penalty against outstanding amounts under the Loan, pro rata
between the Advances of each Borrower based upon the respective
principal amounts thereof owing by each Borrower immediately
prior to such prepayments (unless such Charged Property was
owned by a Borrower or such Indebtedness was issued by a
Borrower, in which case such prepayment shall be applied first
pro rata to the Advances of such Borrower and then pro rata to
the other Advances). The foregoing shall not constitute a
consent by Agent or any Lender to any sale or other disposition
of Charged Property or to any issuance of Indebtedness by a
member of the Charging Group or any of its Subsidiaries not
otherwise expressly permitted hereunder.
7.3 Clean Down Period
-----------------
Each Borrower agrees that, throughout a period of thirty consecutive days
occurring at any time between December 1 of each year (commencing
December 1995) and
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April 30 of the immediately succeeding year selected by the Borrowers and
notified to the Lenders, the Issuing Bank and the Agent, the Dollar
Equivalent of the aggregate of the Loan and Outstandings less any Cash
Cover shall be equal to or less than the aggregate A/R Availability of
the Borrowers, and, notwithstanding anything to the contrary contained in
this Agreement, the Borrowers shall without prejudice to Clauses 10.3 and
17.3 make such prepayments or provide such Cash Cover as may be necessary
to comply with this covenant, and the Borrowers shall not be entitled to
request, obtain or cause to be obtained any Advance or request any
Guarantee, in each instance, in breach of this provision. In the absence
of any selection by the Borrowers by 1st April in any year, the relevant
30 day period shall be as selected and notified to the Borrowers, the
Issuing Bank and the Lenders by the Agent.
7.4 Reborrowing
-----------
Subject to the other terms hereof, all amounts repaid or prepaid in
respect of an Advance may, during the Commitment Period, be reborrowed
without prejudice to the remaining provisions of this Agreement.
7.5 New Advances to repay Maturing Advances
---------------------------------------
If all or part of one or more existing Advances is to be repaid from the
proceeds of all or part of a new Advance, then as between each Lender and
the relevant Borrower, the amount to be repaid by such Borrower shall be
set off against the amount to be advanced by such Lender in relation to
the new Advance and the person to whom the smaller amount is to be paid
shall pay to the other party a sum equal to the difference between the
two amounts.
7.6 Settlement of Guarantees
------------------------
The Issuing Bank shall, promptly after being notified by Lloyds that the
Issuing Bank is required to make payment under a Guarantee, notify the
Borrower for whose account the corresponding Lloyds Guarantee was issued
and the Agent:
(a) that such payment is due; and
(b) of the Settlement Amount and the Settlement Date in respect
thereof;
whereupon such Borrower shall pay in Sterling the Settlement Amount to
the Issuing Bank on the Settlement Date.
7.7 Indemnity
---------
Each of the Borrowers hereby unconditionally and irrevocably agrees and
undertakes to the Issuing Bank as follows:
(a) it will at all times indemnify the Issuing Bank and keep the
same indemnified from and against all actions, proceedings,
claims and demands
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which may be brought or made against any of them and all losses,
costs, charges, damages and expenses which any of them may incur
or sustain or for which any of them may become liable by reason
either directly or indirectly of the Issuing Bank having opened
or issued any Guarantee or having made a payment thereunder;
(b) the Issuing Bank is hereby irrevocably authorised by each
Borrower to comply with the terms of any demand or drawing
served or made or purported to be served or made on the Issuing
Bank under any Guarantee without any reference to, or further
authority from, either Borrower and without enquiry by the
Issuing Bank into the justification for such demand or drawing
or the validity thereof and each Borrower further agrees that
any payment which the Issuing Bank shall make in accordance with
such a demand or drawing or purported demand or drawing shall be
binding on the Borrowers and be accepted by each of them as
conclusive and binding evidence that the Issuing Bank was liable
to comply with the terms of such demand or drawing and was
liable to do so in the manner and for the amount in which the
Issuing Bank effected such compliance; and
(c) the indemnity contained in this Clause 7.7 shall constitute and
be a continuing security to the Issuing Bank and shall extend to
each Guarantee as it may, from time to time, be varied,
modified, amended or extended.
8. CANCELLATION
------------
8.1 On giving not less than 10 days' prior irrevocable written notice to the
Agent, the Borrowers acting jointly may cancel all (but not part) of the
Facility and the Guarantee Facility for the time being unutilised without
premium or penalty other than payment of the cancellation fee, if any in
accordance with Clause 17.6. Amounts so cancelled shall cease to be
available for borrowing hereunder and the Facility Limit, the Guarantee
Facility Limit and the Total Commitments of the Lenders will be reduced
to zero.
8.2 Upon cancellation of the Facility and the Guarantee Facility pursuant to
this Clause 8, the Borrowers' obligation to pay the non-utilisation fee
referred to in Clause 17.3 shall terminate (except in respect of any
portion of such fee accrued up to the date of cancellation) and,
notwithstanding anything to the contrary contained herein, the Loan shall
be immediately due and payable and the Borrowers shall immediately
provide Cash Cover in respect of the contingent liabilities of the
Issuing Bank under the Guarantees in an amount no less than the
Outstandings then subsisting.
8.3 Notwithstanding the foregoing, the Borrowers may not voluntarily cancel
the Facility and the Guarantee Facility under Clause 8.1 unless
concurrently therewith the commitments of the Global Lenders to provide
further financial accommodations under each of the other Overall
Facilities are also cancelled.
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9. CHANGES IN CIRCUMSTANCES
------------------------
9.1 Illegality
----------
If after the date of this Agreement it becomes illegal for a Lender to
maintain its Commitment or to continue to make available or fund its
share of any Advance under this Agreement or for a Participant in
relation to such Lender to make available or fund its share of the
corresponding payments or deposits made or to be made by it under the
Participation Agreement or for the Issuing Bank to issue a Guarantee, or
to maintain its contingent liability or fund any sum requested to be paid
by it thereunder, then
(a) such Lender or, as the case may be, the Issuing Bank shall so
notify the Agent and each Borrower; and
(b) if such illegality relates to such Lender, to the extent
necessary to cure that illegality, the Commitment of such Lender
shall be cancelled and each Borrower shall repay to the Agent
(for the account of that Lender) that Lender's contribution to
any Advances made to that Borrower (together with accrued
interest thereon and all amounts owing to such Lender under this
Agreement) within five Business Days of demand by that Lender
(or, if permitted by the relevant law, on the next Interest Date
of the relevant Advances); and
(c) if such illegality relates to such Participant, the Commitment
of such Lender shall immediately be reduced by an amount equal
to the Participated Amount thereof in respect of such
Participant and its obligations to make Advances hereunder shall
reduce accordingly and each Borrower shall repay to the Agent
(for the account of such Lender) an amount equal to the
Participated Amount of any Advance made to that Borrower in
respect of such Participant (together with accrued interest
thereon and any other amounts owing to such Lender under this
Agreement which are referable to such Participant) within five
Business Days of demand by that Lender (or, if permitted by the
relevant law, on the next Interest Date of the relevant
Advances); and
(d) if such illegality relates to the Issuing Bank, the Issuing
Bank's obligations under the Guarantee Facility will terminate
and the relevant Borrower will use all reasonable endeavours to
procure the cancellation of each Guarantee and shall within five
Business Days of demand by the Issuing Bank provide it with Cash
Cover in an amount no less than the Outstandings from time to
time.
Without prejudice to the foregoing, each such Lender and the Issuing Bank
confirms that if it informs the Agent as aforesaid and if it is satisfied
that it will not prejudice its legal or commercial interests so to do, it
shall, as between itself and the
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Borrowers (and shall endeavour to procure that any relevant Participant
shall) thereafter use reasonable endeavours to avoid or mitigate the
effects of such illegality and such Lender or, as the case may be, the
Issuing Bank and the Agent will (and any such Lender shall endeavour to
procure that any relevant Participant shall) enter into negotiations in
good faith with a view to finding a means of avoiding or mitigating the
effects of such illegality PROVIDED THAT neither such Lender nor the
Agent or the Issuing Bank shall be obliged to continue (and any such
Lender shall not be obliged to procure that any relevant Participant so
continue) such negotiations for a period exceeding 30 days.
9.2 Increased Costs
---------------
9.2.1 If, after the date of this Agreement, the introduction,
implementation, repeal, withdrawal or change in, or in the
interpretation or application of, (a) any applicable law,
regulation, practice or concession, or (b) any applicable
directive, requirement, request or guidance (whether or not
having the force of law) of any central bank or other fiscal,
monetary or other authority (each of such occurrences being
referred to in this Clause 9.2 as a "Change") causes an
------
Increased Cost (as defined in Clause 9.2.4) to the Issuing Bank,
any Lender or any Participant (or any company of which the
Issuing Bank, a Lender or a Participant is a Subsidiary) then
the Borrowers shall pay (as additional interest) from time to
time to the Agent (for the account of the Issuing Bank or, as
the case may be, such Lender) within 5 Business Days of demand
all amounts which the Issuing Bank certifies to be necessary to
compensate it for the Increased Cost or, as the case may be,
such Lender certifies to be necessary to compensate such Lender
or such Participant for the Increased Cost.
9.2.2 Any demand made under Clause 9.2.1 shall be made by the Issuing
Bank or, as the case may be, the relevant Lender through the
Agent and shall set out in reasonable detail so far as is
practicable the basis of computation of the Increased Cost.
9.2.3 Without prejudice to Clause 9.2.1, the Issuing Bank or, as the
case may be, each Lender agrees that it will, after consultation
with the Borrowers and the Agent, take such reasonable steps as
may be available to the Issuing Bank or, as the case may be, the
Lender (but only so long as such steps do not, in the opinion of
the Issuing Bank or, as the case may be, the Lender, produce any
other adverse effects for the Issuing Bank or, as the case may
be, the Lender) to avoid or reduce the Increased Cost.
9.2.4 In this Clause 9.2 "Increased Cost" means any cost to, or
--------------
reduction in the amount payable to, or reduction in the return
on capital achieved by, the Issuing Bank, a Lender or a
Participant (or any company of which the Issuing Bank, that
Lender or that Participant is a Subsidiary) to the extent that
they arise, directly or indirectly, as a result of the Change
and are attributable to the issue of any Guarantee or the
liability of the Issuing
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<PAGE>
Bank under any Guarantee, the Commitment or Contribution of that
Lender, or the funding of that Lender's Contribution, the
commitment under the Participation Agreement or the Participated
Amount of such Participant or the funding of that Participant's
Participated Amount including, without limitation:
(a) any Tax Liability (other than Tax on Overall Net Income)
incurred by the Issuing Bank, that Lender or that
Participant;
(b) any changes in the basis or timing of Taxation of the
Issuing Bank in relation to the Guarantee Facility, that
Lender in relation to its Commitment or Contribution or
to the funding of that Lender's Contribution or that
Participant in relation to its commitment under the
Participation Agreement, the Participated Amount or to
the funding of that Participant's Participated Amount;
(c) the cost to the Issuing Bank, that Lender or that
Participant (or any company of which the Issuing Bank,
that Lender or that Participant is a Subsidiary) of
complying with any capital adequacy or similar
requirements howsoever arising including, without
limitation, as a result of an increase in the amount of
capital to be allocated to the Facility, the Guarantee
Facility or the Participation Agreement or of a change to
the weighting of the Guarantee Facility or that Lender's
Contribution or Commitment under the Facility or to the
weighting of that Participant's commitment under the
Participation Agreement or its Participated Amount;
(d) the cost to the Issuing Bank, that Lender or that
Participant of complying with any reserve, cash ratio,
special deposit or liquidity requirements (or any other
similar requirements).
9.2.5 Neither of the Borrowers shall be obliged to make a payment in
respect of an Increased Cost under this Clause 9.2 if and to the
extent that:
(a) it has been compensated for by the payment of Mandatory
Liquid Asset Costs or the operation of Clause 10.4;
(b) it is payable to an assignee or to a Lender Transferee
(as defined in Clause 20.3) or to an assignee or to a
transferee under the Participation Agreement or a Lender
or a Participant acting through a new Lending Office if
the Increased Cost:
(i) arose or is payable at the time of the assignment
or transfer to the Lender Transferee or transferee
under the Participation Agreement or change in
Lending Office, and
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<PAGE>
(ii) would not have been payable if the transfer or
change of Lending Office had not occurred.
9.3 Certificates
------------
The certificate or notification of the Agent, the Issuing Bank or, as the
case may be, the relevant Lender as to any of the matters referred to in
Clauses 9.1, 9.2 and 10.3 shall be in reasonable detail and, save for any
manifest error, be conclusive and binding on the Borrowers.
10. PAYMENTS
--------
10.1 Time and Place
--------------
All payments to be made by each Borrower for the account of the Agent,
the Issuing Bank or the Lenders, as the case may be, in relation to this
Agreement or the Fees Letter shall be made on the due date in immediately
available funds by not later than 12.00 noon (London time) to the
appropriate account in London of the Agent which account shall have been
previously specified by the Agent.
10.2 Business Days
-------------
If, but for this Clause, any sum would become due for payment under this
Agreement on a day which is not a Business Day, such payment shall be
made on the next succeeding Business Day PROVIDED THAT if the next
succeeding Business Day falls in the next calendar month, then such
payment shall be made on the immediately preceding Business Day.
10.3 Breakage Costs Indemnity
------------------------
10.3.1 Each Borrower agrees to indemnify the Issuing Bank and each
Lender on demand against any loss or expense (including, but not
limited to, any loss of the Margin or any other loss or expense
sustained or incurred or to be sustained or incurred by (i) the
Issuing Bank in liquidating or employing deposits acquired or
contracted for to effect any payment under any Guarantee,
including any loss of profit, or (ii) any Lender in (A)
liquidating or employing deposits acquired or contracted for to
effect or maintain its Contribution in the Loan or any part
thereof or (B) in indemnifying any Participant for any loss or
expense including any loss of profit, sustained or incurred or
to be sustained or incurred by it in liquidating or employing
deposits acquired or contracted for to effect or maintain its
Participated Amount or any part thereof) which the Issuing Bank,
such Lender or such Participant has sustained or incurred as a
consequence of any of:
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(a) an Advance not being made following the service of a
Drawdown Notice by reason of the non-fulfilment of any of
the Conditions Precedent or otherwise (save as may arise
as a result of the failure of such Lender to comply with
its obligations hereunder or of such Participant to
comply with its obligations under the Participation
Agreement respectively);
(b) a failure of any Borrower to make payment on the due date
of any sum due under this Agreement;
(c) the repayment of the Loan or the termination of the
Facility pursuant to Clause 7 (other than pursuant to
Clause 7.1), Clause 6.5(d), Clause 9.1, Clause 10.5 or
Clause 14;
(d) a failure of any Borrower to pay the Settlement Amount in
full on the relevant Settlement Date;
(e) the occurrence of any Default; and
(f) the prepayment of any Advance or any part thereof being
made otherwise than on the Repayment Date relative
thereto.
10.3.2 If any prepayment or repayment of an Advance is made otherwise
than on an Interest Date relative to such Advance, the Borrower
thereof shall on demand pay to the Agent, for the account of the
Lenders, such additional amount as the Agent may (after
consultation with the Lenders) certify is necessary to
compensate the Lenders, or any of them for any loss or expense
on account of funds borrowed, contracted for or utilised to fund
the amounts so repaid or prepaid, including pursuant to the
Participation Agreement. Any certifications issued by the Agent
pursuant to this Clause shall be conclusive and binding on such
Borrower save in the case of manifest error.
10.4 Grossing-Up
-----------
10.4.1 Subject to Clause 10.4.2, all sums payable to any of the Agent,
the Issuing Bank and the Lenders pursuant to or in connection
with any of the Financing Documents shall be paid in full
without any set-off or counterclaim and free and clear of all
deductions or withholdings whatsoever save only as may be
required by law.
10.4.2 If any deduction or withholding is required by law in respect of
any payment due to any of the Agent, the Issuing Bank or the
Lenders pursuant to or in connection with any of the Financing
Documents, the relevant Borrower shall:
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(a) ensure or procure that the deduction or withholding is
made and that it does not exceed the minimum legal
requirement therefor;
(b) pay, or procure the payment of, the full amount deducted
or withheld to the relevant Taxation or other authority
in accordance with the applicable law;
(c) if the payment is to be made by the relevant Borrower,
increase the payment in respect of which the deduction or
withholding is required so that the net amount received
by the payee (which expression when used in this Clause
10.4.2 shall mean the Agent, the Issuing Bank or any
Lender) after the deduction or withholding (and after
taking account of any further deduction or withholding
which is required to be made as a consequence of the
increase) shall be equal to the amount which the payee
would have been entitled to receive in the absence of any
requirement to make any deductions or withholdings; and
(d) promptly deliver or procure the delivery to the relative
payee of receipts evidencing each deduction or
withholding which has been made.
10.4.3.1 If the Agent is obliged to make any deduction or withholding
from any payment to the Issuing Bank or any of the Lenders (an
"agency payment") which represents an amount or amounts received
--------------
by the Agent from any obligor under any of the Financing
Documents , the relevant Borrower shall pay directly to the
Issuing Bank or the relative Lender such sum (an "agency
------
compensating sum") as will, after taking into account any
----------------
deduction or withholding which such Borrower is obliged to make
from the agency compensating sum, enable such Lender to receive,
on the due date for payment of the agency payment, an amount
equal to the agency payment which such Lender would have
received in the absence of any obligation to make any deduction
or withholding.
10.4.3.2 If any payment to be made by a Lender or by the Agent on its
behalf to the Participant under the Participation Agreement is
required by law to be made subject to any deduction or
withholding on account of Tax or otherwise in connection with
this Agreement or the Participation Agreement, the Borrowers
shall, within 5 Business Days of demand pay to the Agent for the
account of such Lender an amount which is equal to such
additional sum as would be necessary for such Lender or the
Agent on its behalf to ensure that such Participant would be
able to receive and be entitled to retain, in aggregate, a net
amount equal to the full amount which it would have secured and
been entitled to retain had no such deduction or withholding
been made.
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10.4.4 (a) If the Issuing Bank or any of the Lenders determines, in
its absolute discretion, that it has received, realised,
utilised or retained a Tax benefit or payment from a
Participant by reason of any deduction or withholding in
respect of which a Borrower has made an increased payment
or paid a compensating sum or an agency compensating sum
under Clause 10.4, such Lender shall, provided that the
Agent, the Issuing Bank and each Lender has received all
amounts which are then due and payable by the obligors
under any of the Financing Documents, pay to such
Borrower (to the extent that the Issuing Bank or, as the
case may be, such Lender can do so without prejudicing
the amount of such benefit, payment or repayment and the
right of the Issuing Bank or, as the case may be, such
Lender, to obtain any other benefit, relief, repayment or
allowance which may be available to it) such amount, if
any, as the Issuing Bank or, as the case may be, such
Lender, in its absolute discretion shall determine, will
leave the Issuing Bank or, as the case may be, such
Lender in no worse position than it would have been in if
the deduction or withholding had not been required
PROVIDED THAT:
(i) the Issuing Bank and each Lender shall have an
absolute discretion as to the time at which and
the order and manner in which it realises or
utilises any Tax benefit and shall not be obliged
to arrange its business or its Tax affairs in any
particular way in order to be eligible for any
credit or refund or similar benefit;
(ii) neither the Issuing Bank nor any Lender shall be
obliged to disclose any information regarding its
or any other person's business, Tax affairs or Tax
computations;
(iii) if the Issuing Bank or a Lender has made a payment
to a Borrower pursuant to this Clause 10.4.4 on
account of any repayment or Tax benefit or payment
from the Participant and it subsequently
transpires that the Issuing Bank or, as the case
may be, such Lender did not receive that repayment
or Tax benefit or payment from the Participant, or
received a lesser repayment or Tax benefit or
payment from the Participant, such Borrower shall,
on demand, pay to the Issuing Bank or, as the case
may be, such Lender such sum as the Issuing Bank
or, as the case may be, the relative Lender may
determine as being necessary to restore its after-
Tax position to that which it would have been had
no adjustment under this
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Clause 10.4.4 been made. Any sums payable by a
Borrower to the Issuing Bank or, as the case may
be, a Lender under this Clause 10.4.4 shall be
subject to the provisions of Clause 17.7.
(b) Neither the Issuing Bank nor any Lender shall be obliged
to make any payment under this Clause 10.4.4 if, by doing
so, it would contravene the terms of any applicable law
or any notice, direction or requirement of any
governmental or regulatory authority (whether or not
having the force of law).
10.5 Prepayment Right
----------------
If a Borrower is required to make an increased payment for the account of
a Lender under Clause 10.4.2 (but only so long as such requirement
exists), subject to giving the Agent and such Lender not less than 3
days' prior written notice (which shall be irrevocable), such Borrower
may prepay all, but not part, of such Lender's Contribution in the Loan
together with accrued interest thereon PROVIDED THAT any such prepayment
shall be subject to the provisions of Clause 10.3. On any such
prepayment the Commitment of the relevant Lender will be automatically
cancelled.
10.6 Currency of Account
-------------------
All payments to be made by a Borrower in respect of a Guarantee or an
Advance, whether of interest or principal, shall be made in Sterling (or,
in relation to an Advance denominated in Dollars, in Dollars). All
payments to be made under any indemnity or reimbursement provision of
this Agreement relating to costs, losses and expenses shall be paid in
the currency in which the relative costs, losses or expenses were
incurred.
10.7 Accounts as Evidence
--------------------
Each Lender shall maintain in accordance with its usual practice an
account or accounts, evidencing the amounts from time to time advanced
by, owing to, paid and repaid to such Lender under this Agreement. The
Agent shall maintain a control account or accounts showing the amounts of
Guarantees and amounts owing to the Issuing Bank, the Agent and the
Lenders and each payment made in respect thereof from time to time. The
control accounts shall as between a Borrower and the Agent, the Issuing
Bank and the Lenders be prima facie evidence of the amounts from time to
time advanced, owing, paid and repaid and outstanding under Guarantees
and under this Agreement.
10.8 Borrower's Payments
-------------------
10.8.1 The Agent may assume that each Borrower will make all payments
due from such Borrower under this Agreement on the due date and
the Agent may, in reliance upon such assumption, make available
to each Lender on
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any payment date an amount equal to such Lender's pro-rata share
of such assumed payment.
10.8.2 If a Borrower does not in fact make such payment to the Agent,
each Lender shall forthwith on demand by the Agent repay to the
Agent the amount made available to such Lender (together with
interest thereon up to the date of repayment at the rate
determined by the Agent as being its cost of funding such
payment) unless such Lender has already made the corresponding
payment to a Participant, in which case the Lender shall repay
such amount to such extent that it receives the same from the
Participant.
10.9 Lenders' Payments
-----------------
10.9.1 The Agent may assume that each Lender has made its Contribution
in an Advance available to the Agent on the relative Drawdown
Date unless the relevant Lender has notified the Agent to the
contrary in writing prior to the relative Drawdown Date and the
Agent may in reliance upon such assumption, make available to
the relevant Borrower a corresponding amount.
10.9.2 If such corresponding amount is not in fact made available to
the Agent by such Lender and such Lender has failed to notify
the Agent in accordance with Clause 10.9.1, the Agent shall be
entitled to recover such corresponding amount (together with
interest thereon at the rate determined by the Agent as being
its cost of funds in the circumstances) on demand from the
relevant Borrower.
10.9.3 Where the Agent has made available an amount to a Borrower in
reliance upon the assumption contained in Clause 10.9.1 but a
Lender has not made its Contribution in the relevant Advance
available to the Agent then, unless that Lender notified the
Agent in writing prior to the relevant Drawdown Date that it
would not be making its Contribution in such Advance available,
that Lender shall (subject to and conditional upon that Lender
having received the corresponding payment from the relevant
Participant):
(a) if such Borrower does not refund the corresponding amount
to the Agent within 3 Business Days, reimburse the Agent
for such amount (together with interest thereon at the
rate determined by the Agent as being its cost of funds
in the circumstances) on demand; and
(b) indemnify the Agent from and against all losses, costs,
charges and expenses which the Agent may incur or sustain
by reason of that Lender not having made its Contribution
in the relevant Advance available.
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10.10 Appropriation
-------------
If a Borrower shall pay a sum which is less than the total amount due and
payable under this Agreement on the day on which such sum is paid, such
Borrower hereby waives any rights it may have to make any appropriation
thereof as between any amounts so due and payable and the sum so paid
shall be applied in or towards satisfaction of principal, interest, fees
and other sums which are due or overdue for payment on that day in such
order as the Majority Lenders may determine PROVIDED THAT (save in
relation to amounts standing to the credit of the Lloyds Tyco Deposit
Account and the Lloyds Matchbox Deposit Account which are appropriated by
Lloyds) each Lender shall receive its pro-rata share of any such sum.
Except as otherwise provided in the Financing Documents, if after payment
in full of all then due and payable obligations under the Financing
Documents, there remains with the Agent any excess monies received from
or on behalf of any Borrower, then the Agent shall promptly return the
same to the relevant Borrower.
11. SECURITY
--------
The obligations and liabilities of the Borrowers to the Agent, the
Issuing Bank and each Lender under this Agreement inter alia shall be
secured by the interests and rights granted in favour of the Agent as
trustee for itself, the Issuing Bank and the Lenders under the Security
Documents.
12. REPRESENTATIONS AND WARRANTIES
------------------------------
12.1 Acknowledgement of Reliance
---------------------------
Each Borrower hereby acknowledges that the Agent, the Issuing Bank and
each Lender has entered into this Agreement and accepted the security
granted in favour of the Agent under the Security Documents in full
reliance on the representations and warranties made or deemed to be made
and repeated under this Clause 12.
12.2 Representations and Warranties
------------------------------
Each Borrower hereby represents and warrants to each of the Lenders, the
Issuing Bank and the Agent that:
(a) each member of the Charging Group (other than Tyco Industries and
Matchbox International) is a limited company duly incorporated
under the laws of England and Wales, and possesses the capacity to
sue and be sued in its own name and has the power to carry on its
business and to own its property and other assets;
(b) Tyco Industries is a corporation duly organised, validly existing
and in good standing under the laws of the state of Delaware and
Matchbox International Limited is a corporation duly organised,
and validly existing
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under the laws of Hong Kong and each is duly qualified to do
business and is in good standing in each other jurisdiction where
its ownership or leasing of property or the conduct of its
business requires such qualification except for those foreign
jurisdictions where the failure to be duly qualified to do
business or in good standing would not have a Material Adverse
Effect;
(c) each member of the Charging Group has power to own, operate,
pledge, mortgage, assign and charge its properties, assets and
business, to execute, deliver and perform its obligations under
the Financing Documents to which it is a party and to carry out
the transactions contemplated by each of the aforementioned
documents and all necessary corporate, shareholder and other
action has been or will be taken to authorise the execution,
delivery and performance of the same;
(d) each member of the Charging Group and each Subsidiary thereof is
in compliance in all material respects with all applicable
provisions of law except where the failure to be in compliance
would not have a Material Adverse Effect;
(e) the obligations of each member of the Charging Group under the
Financing Documents to which it is a party, constitute its legal,
valid and binding obligations and are in full force and effect and
enforceable against such member of the Charging Group in
accordance with its terms subject, as to enforceability, to
bankruptcy, reorganisation, insolvency and similar laws affecting
the enforcement of creditors' rights generally and to general
principles of equity;
(f) the execution, delivery and performance by each member of the
Charging Group of the Financing Documents to which it is a party
does not:
(i) contravene any applicable law or regulation or any order of
any governmental or other official authority, body or
agency or any judgment, order or decree of any court having
jurisdiction over it;
(ii) conflict with, or result in any breach of any of the terms
of, or constitute a default under, any agreement or other
instrument to which it or any of its Subsidiaries is a
party or any licence or other authorisation to which it or
any of its Subsidiaries is subject or by which it or any of
its Subsidiaries or any of its or its Subsidiaries'
property is bound;
(iii) contravene or conflict with the provisions of its
Memorandum and Articles of Association or, as the case may
be, its by-laws or other organisational documents; or
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(iv) require the consent or approval of any governmental or
other official authority, body or agency or of any other
person which has not been obtained;
(g) except as set out in Schedule 9, since 30th September 1994, no
event has occurred which would have a Material Adverse Effect (it
being understood that the financial results described in Tyco's
Parent's press release of 25th October, 1994 shall not constitute
a Material Adverse Effect so long as the Agent shall have
determined, after due diligence, that the results described
therein reflect completely and accurately, in all material
respects, the actual results for the period covered);
(h) as at the date hereof, no member of the Charging Group or any
Subsidiary thereof has any material obligations, contingent
liabilities, or liabilities to Tax, long term leases or unusual
forward or long term commitments which are not reflected in the
audited 31st December 1993 balance sheet of Tyco Parent and its
Subsidiaries except for those which were incurred or entered into
in the normal course of the prudent conduct of trading activities
by such member or Subsidiary. Except as otherwise permitted
hereunder no dividend has been declared or paid by any member of
the Charging Group since 30th September 1994 and no payment has
been made in respect of the purchase, or redemption of any share
capital of any member of the Charging Group and none of the share
capital of any member of the Charging Group has been, or is now
required to be redeemed, purchased or otherwise acquired for value
by any member of the Charging Group;
(i) no member of the Charging Group has taken any action nor have any
steps been taken or legal proceedings been started or, so far as
it is aware, threatened against it for winding-up, dissolution or
re-organisation, the enforcement of any Encumbrance over its
assets or for the appointment of a receiver, administrative
receiver, or administrator, trustee or similar officer of it or of
any or all of its assets or revenues;
(j) no member of the Charging Group is (nor would be with any of the
giving of notice, lapse of time, determination of materiality or
other condition) in material breach of or in material default
under any deed, instrument or any agreement to which it is a party
or which is binding on it or any of its assets;
(k) no action, litigation, arbitration or administrative proceeding
has been commenced, or is pending or, so far as it is aware,
threatened against any member of the Charging Group or any
Subsidiary thereof which:
(i) challenges any such member of the Charging Group's or
Subsidiary's right, power or ability to enter into or
perform any of its obligations under the Financing
Documents or the validity or enforceability of any
Financing Document; or
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(ii) which is reasonably likely to have a Material Adverse
Effect;
and nor is there subsisting any unsatisfied judgment or award
given against any of them by any court, arbitrator or other body;
(l) there are no material strikes or other employment disputes against
any member of the Charging Group or any Subsidiary thereof which
are pending or, to any such company's knowledge, threatened and
none of them has any material obligation under any collective
bargaining agreement, there is no organising activity involving
any member of the Charging Group or any Subsidiary thereof pending
or to any of their knowledge, threatened by any trade union or
group of employees, there are no proceedings pending or to any of
their knowledge threatened with any industrial tribunal or
employment appeals tribunal and no organisation or group of
employees of any of them has made any demand for recognition and
there are no material complaints or charges against any member of
the Charging Group or any Subsidiary thereof pending or, so far as
it is aware, threatened to be filed with any governmental body or
agency or any local authority arising out of or in connection with
or otherwise relating to the employment or termination of
employment by any member of the Charging Group or any Subsidiary
thereof of any individual;
(m) (i) each of the latest Accounts of Tyco Parent or the Borrowers
required to be delivered pursuant to Clause 13.1 is
prepared in the case of Tyco Parent in accordance with US
Generally Accepted Accounting Principles and in the case of
each Borrower in accordance with UK Generally Accepted
Accounting Principles and in each case gives a true and
fair view of the financial position of Tyco Parent or, as
the case may be, the relevant Borrower as at the date to
which the same were prepared and for the period then ended;
(ii) each set of management accounts required to be delivered
under Clause 13.1 shows with reasonable accuracy the
financial condition of the member of the Group in respect
of which they were prepared during the period to which they
relate;
(iii) all liabilities (contingent or otherwise) which should have
been fully disclosed or reserved against in such Accounts
or, as the case may be, management accounts, were so
disclosed or reserved against therein;
(n) once the Conditions Precedent have been satisfied, no Encumbrance
other than a Permitted Encumbrance exists over all or any part of
the present or future revenues or assets of any member of the
Charging Group or any Subsidiary thereof;
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(o) all licences, consents, exemptions, clearances, filings,
registrations and authorisations which are or may be necessary to
enable each member of the Charging Group and each Subsidiaries
thereof to own its assets, to carry on its business and to perform
its obligations under the Financing Documents to which it is a
party and to fulfil the transactions contemplated by such
documents and for the proper conduct of its business or which are
required in connection with the execution, delivery, validity,
enforceability or admissibility in evidence of the Financing
Documents are in full force and effect;
(p) the accounting reference date of each Borrower is 31st December;
(q) the execution of the Financing Documents by members of the
Charging Group and the exercise of each of their respective rights
and the performance of each of their respective obligations
thereunder will not result in the creation of any Encumbrance over
or in respect of any of their or their Subsidiaries' present or
future revenues, assets or undertakings, other than a Permitted
Encumbrance;
(r) each member of the Charging Group and each Subsidiary thereof has
complied with all Taxation laws in all jurisdictions in which it
is subject to Taxation and has paid all Taxes due and payable by
it and no claims are being asserted against it in respect of Taxes
save for assessments in relation to the ordinary course of its
business or claims contested in good faith and in respect of which
adequate provision has been made and disclosed in the latest
Accounts or information delivered in writing to the Agent
hereunder;
(s) no member of the Charging Group nor any Subsidiary thereof has any
obligation to contribute to any form of occupational or personal
pension schemes or has any liabilities in relation to any form of
occupational or personal pension schemes;
(t) the obligations of each Borrower under this Agreement and each
member of the Charging Group under the Financing Documents (to the
extent that any such obligations do not acquire enhanced priority
by virtue of security created and/or conferred by the Security
Documents) shall, without prejudice to the provisions of Clause
13.3, at all times rank at least pari passu with all its other
present and future unsecured and unsubordinated Indebtedness with
the exception of any obligations which are mandatorily preferred
by law and not by contract;
(u) (i) each of the Borrowers and each of their Subsidiaries is
complying and has at all times complied with Environmental
Law;
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(ii) each of the Borrowers and each of their Subsidiaries has
obtained every Environmental Permit it requires in
connection with the conduct of its business and the
ownership, use, exploitation or occupation of its property
and assets, and has conducted its business in accordance
with such Environmental Permits; all such Environmental
Permits are in full force and effect and there has been no
default in the observance of the conditions and
restrictions (if any) imposed in, or in connection with,
any of the same and no member of the Charging Group nor any
Subsidiary thereof has received any notice, nor is aware of
any proposal to amend, revoke, or replace any such
Environmental Permits, or requiring the issue of any new
Environmental Permits in respect of its undertaking,
property, assets or business;
(iii) each of the Borrowers and each of their Subsidiaries has at
all times carried on and is now carrying on its business in
a manner which would permit the issue, maintenance, renewal
or reissue of all Environmental Permits required under
Environmental Law applying to its undertaking, property,
assets and business;
(iv) no Borrower nor any Subsidiary thereof is or has been on
notice of, or subject to, a claim, order, notice or other
demand either to take decontamination, remedial or other
action under any Environmental Law, or to reimburse any
person who has taken such action, in connection with any
property or is or has been the subject of any claim, order,
notice or other communication which requires any work,
repairs, construction, modifications or capital expenditure
pursuant to any Environmental Law;
(v) no Borrower nor any Subsidiary thereof has any liability or
contingent liability under any Environmental Law in
connection with its undertaking, property, assets or
business;
(vi) there is no Environmental Claim pending against any
Borrower or any Subsidiary thereof and to the knowledge of
the officers of each Borrower or each such Subsidiary, no
circumstances have arisen which might give rise to an
Environmental Claim against any such company;
(vii) no Borrower nor any Subsidiary thereof nor any premises now
in the ownership, occupation or control of either of the
Borrowers or any Subsidiary thereof has been the subject of
any investigation or inspection under any Environmental Law
other than merely routine inspections and so far as it is
aware no such investigation or inspection is pending,
threatened or proposed.
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(v) (i) since the date of first ownership, leasing, occupation or
control of any premises by any Borrower or any Subsidiary
thereof no Hazardous Materials have been used, disposed of,
generated, stored, transported, dumped, released,
deposited, buried, or emitted at, on, from or under any
such premises and, so far as each of the Borrowers and each
of their Subsidiaries is aware, prior to any such date no
Hazardous Materials have been used, disposed of,
generated, stored, transported, dumped, released,
deposited, buried, or emitted at, on, from or under any
such premises;
(ii) there are no unauthorised locations in the United Kingdom
to which or where Hazardous Materials have been shipped or
disposed of by any Borrower or any Subsidiary thereof. All
facilities and all transporters and handlers engaged by any
Borrower or any Subsidiary thereof to transport or dispose
of any Hazardous Materials had, at the time of shipment or
disposal, all required Environmental Permits.
(w) the locations of each Borrower's warehouses and premises within
which any of its Charged Property is stored or located, and the
location of all of each Borrower's records concerning the Charged
Property are set forth in Schedule 7;
(x) the property listed in Schedule 11, as such Schedule may with
respect to this sentence have been previously updated in writing
(for which no consent is required) by the Borrowers in writing
delivered to the Agent, the Issuing Bank and the Lenders,
constitutes all the real property owned, leased (other than
property leased, as lessee where the annual rental payments are
less than (Pounds)20,000) or used in the business of any member of
the Charging Group or any of their Subsidiaries, and each such
company holds (a) good and marketable fee simple title to all real
property owned by it and described in Part 1 of Schedule 11, (b)
valid and marketable leasehold interests in all of such leases
(both as lessor and lessee, sub-lessee or assignee) described in
Part 2 of Schedule 11, and (c) good and marketable title to or
valid leasehold interests in, all of its other property and
assets;
(y) without prejudice to Clause 12.2(j), no member of the Charging
Group nor any Subsidiary thereof, nor, to any member of the
Charging Group's knowledge, any other party to any such lease
described in Schedule 11 is in default of its obligations
thereunder or has delivered or received any notice of default
under any lease, and no event has occurred which, with the giving
of notice, the passage of time, or both, would constitute a
default under any such lease, where, with respect to any such
lease, the termination of such lease would reasonably be expected
to have a Material Adverse Effect;
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(z) no member of the Charging Group nor any Subsidiary thereof either
owns or holds, or is obligated under or a party to, any option,
right of first refusal or any other contractual right to purchase,
acquire, sell, assign or dispose of any real property owned or
leased by a member of the Charging Group or any Subsidiary thereof
except as set forth in Schedule 12, as such Schedule may with
respect to this sentence have been previously updated in writing
(for which no consent is required) by the Borrowers in writing
delivered to the Agent, the Issuing Bank and the Lenders;
(aa) no portion of any real property owned or leased by any member of
the Charging Group or any Subsidiary thereof has suffered any
material damage by fire or other casualty loss which has not
heretofore been repaired and restored to good operating condition
except as shall have been previously notified by such member or
Subsidiary to the Agent, the Issuing Bank and the Lenders in
writing; all material permits required to have been issued or
appropriate to enable the real property to be lawfully occupied
and used for all of the purposes for which they are currently
occupied and used, have been lawfully issued and are, as of the
date hereof, in full force and effect;
(bb) no contract, lease, agreement or other instrument to which any
member of the Charging Group or any Subsidiary thereof is a party
or by which it or any of its properties or assets is bound or
affected and no provision of any constitutional document,
applicable law or governmental regulation or any corporate
restriction has resulted in or will result in a Material Adverse
Effect;
(cc) the list of accounts in Schedule 13 constitutes a full list of all
banks and other financial institutions at which any Borrower and
any of their respective Subsidiaries maintains deposits and/or
other accounts and such Schedule correctly identifies the name and
address of each deposit or, as the case may be, account holder,
the name in which the account is held, a description of the
purpose of the account, and the complete account number;
(dd) the list of contracts in Schedule 14 as supplemented from time to
time by written disclosure to the Agent is a complete and accurate
list of all Material Contracts of each member of the Charging
Group and each Subsidiary thereof;
(ee) the list of insurances in Schedule 15 as supplemented from time to
time by written disclosure to the Agent is a complete and accurate
list of all insurances (including, without limitation, all
insurances relating to receivables) maintained by each Borrower
and each of their respective Subsidiaries;
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(ff) without prejudice to Clause 12.2(j), no member of the Group is in
material default and, to each member of the Group's knowledge, no
third party is in material default, under or with respect to any
Material Contract, agreement, lease or other instrument to which
any member of the Group is a party;
(gg) each member of the Group is in compliance in all material respects
with (i) all material license agreements to which it is a party or
bound by, and (ii) its obligations to make royalty payments to
other persons;
(hh) neither of the Borrowers has any Subsidiaries other than those
Subsidiaries set forth in Schedule 3 and no member of the Charging
Group nor any Subsidiary thereof is engaged in any joint venture
or partnership with any other person or has any equity interest in
any other person. The issued share capital of each member of the
Charging Group and each Subsidiary thereof is owned by each of the
Shareholders named in Schedule 16 Part I and constitutes all of
the issued share capital of such persons and all such share
capital is duly and validly issued and fully paid. Except as set
out in Schedule 16 Part II, there are no outstanding rights to
purchase stock, or options, warrants or similar rights, agreements
or plans pursuant to which any member of the Charging Group or any
Subsidiary thereof may be required to issue, sell or purchase any
shares or other equity security;
(ii) except as set out in Schedule 18, (or, in relation to Tyco
Industries except as set out in the US Credit Agreement) each
member of the Charging Group and each Subsidiary of the Borrowers
owns all licences, patents, patent applications, copyrights,
service marks, trademarks, trademark applications and trade names
which are necessary to continue to conduct its business as
heretofore conducted by it and proposed to be conducted by it,
each of which is listed together with relevant application or, as
the case may be, registration numbers in Schedule 17, and each
Borrower will procure that each member of the Charging Group and
each Subsidiary of each Borrower will update the contents of such
Schedule not less than once in each calendar quarter in each
calendar year to reflect promptly any change therein. Each member
of the Charging Group and each Subsidiary thereof conducts
business without infringement or claim of infringement of any
licence, patent, copyright, service mark, trademark, trade name,
trade secret or other intellectual property right of others,
except where such infringement or claim of infringement could not
have or result in a Material Adverse Effect. To the knowledge of
each member of the Charging Group and each Subsidiary thereof,
there is no infringement or claim of infringement by others of any
material licence, patent, copyright, service mark, trademark,
trade name, trade secret or other intellectual property right of
any member of the Charging Group or any of its Subsidiaries;
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(jj) neither Borrower has any obligations to any person in respect of
any finder's or brokerage fees in connection with the Financing
Documents;
(kk) since the latest management accounts of the Tyco Parent delivered
to the Agent in accordance with Clause 13.1 there has been no
material decrease in the consolidated assets of Tyco Parent (other
than normal recurring seasonal changes in the foregoing consistent
with prior years' experience).
(ll) each member of the Charging Group is solvent and will not become
insolvent after giving effect to the transactions contemplated by
this Agreement and the other Financing Documents; each Borrower
and each of their respective Subsidiaries after giving effect to
the transactions contemplated by this Agreement and the other
Financing Documents will have an adequate amount of capital to
conduct its business in the foreseeable future;
(mm) no information contained in this Agreement or the other Financing
Documents or any written statement furnished by or on behalf of
any member of the Charging Group or any Affiliate thereof pursuant
to the terms of this Agreement or any other Financing Document,
which has previously been delivered to the Agent or any Lender,
contains any untrue statement of a material fact or omits to state
a material fact necessary to make the statements contained herein
or therein not misleading in light of the circumstances under
which they were made; with respect to all business plans and other
forecasts and projections furnished to the Agent, the Issuing Bank
or any Lender relating to the financial condition, operations,
business, properties or prospects of any Borrower or any
Subsidiary thereof (i) all the facts stated as such therein are
true and complete in all material respects, (ii) all facts upon
which each forecast or projection therein contained are based are
true and complete in all material respects and no material fact
was omitted therefrom, (iii) all assumptions made on which each of
them were based are reasonable under the circumstances and are
disclosed therein, and (iv) the forecasts or projections are
reasonably based on those facts and assumptions; with respect to
any such forecasts or projections made available to the Agent, the
Issuing Bank or any Lender after the Completion Date, the
foregoing sub-clauses (i) to (iv) shall be true and accurate in
all respects as of the date of each such projection and forecast;
(nn) no Borrower or any of their respective Subsidiaries is subject to
regulation under any statute that restricts or limits the ability
of any person subject thereto to incur indebtedness, charge,
assign or mortgage its assets or perform its obligations hereunder
or under any other Financing Document, the making of the Advances
by the Lenders, the application of the proceeds and repayment
thereof by the Borrowers or the issue of any Guarantees on account
of and with recourse to either Borrower, and the consummation of
the transactions contemplated by this
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Agreement and other Financing Documents will not violate any
provision of any such statute, regulation or order issued by any
such body;
(oo) neither Borrower employs any person in Eire or is liable to VAT in
Eire; and
(pp) the trademarks "Speedking", "Play Track", "Fighting Furies" and
"Streakers" are not in use with either Borrower in its business.
12.3 Repetition
----------
The representations and warranties set out in Clause 12.2 shall survive
the execution of this Agreement and (save for the representation and
warranty made under Clause 12.2(g)) shall be deemed to be repeated by
each of the Borrowers on each Drawdown Date and each Issue Date and,
except where the terms of such representation and warranty imply
otherwise, as if made with reference to the facts and circumstances
existing at that time.
13. UNDERTAKINGS
------------
13.1 Information Undertakings
------------------------
13.1.1 Weekly Information
------------------
Each Borrower hereby undertakes and agrees with the Agent, the
Issuing Bank and each Lender that throughout the Security Period
it shall by no later than Tuesday of each week deliver to the
Agent:
(i) a Borrowing Base Certificate for each Borrower as of the
last day of the preceding week; and
(ii) for each Borrower, an Inventory report by product line
and a schedule detailing ineligible Inventory in each
case accompanied by such supporting detail and
documentation as the Agent may request.
13.1.2 Monthly Information
-------------------
Each Borrower hereby undertakes and agrees with the Agent, the
Issuing Bank and each Lender that throughout the Security Period
it shall as soon as the same become available, but in any event
within 30 days after the end of each period of one month (or 45
days after the end of each March, June and September) during any
Financial Year, deliver to the Agent for distribution to the
Issuing Bank and the Lenders, copies in sufficient numbers for
all of them of:
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(a) monthly management accounts of each of the Borrowers and
their respective Subsidiaries incorporating an income
statement and balance sheet (such information to be in
the form of the consolidating information provided
pursuant to the terms of the US Credit Agreement) for
such month and that portion of the current Financial Year
ending as of the end of such month which shall provide
comparisons to the prior year's equivalent period, both
on a monthly and year-to-date basis, and to budget and
otherwise in form and substance satisfactory to the Agent
and which shall give a true and fair view of the
consolidated financial position of such companies;
(b) a report of the Managing Director or Finance Director of
each Borrower and their respective Subsidiaries setting
forth the board of directors' discussion and analysis of
all current income statement, balance sheet and cash flow
financial trends; and
(c) a certificate of the Managing Director or Finance
Director of each Borrower and their respective
Subsidiaries that all such financial statements are
complete and do not contain any material error, mis-
statement or omission and present fairly in accordance
with UK GAAP (subject to normal year end adjustments) the
financial position, the results of operations of the
Borrowers and their respective Subsidiaries as at the end
of such month and for the period then ended, and that to
his or her knowledge there was no Default or Default
Occurrence in existence as of such date or specifying
those Defaults or Default Occurrences of which he or she
was aware and with respect to the certificate to be
delivered for the last month in each period of three
months ending on 31st March, 30th June, 30th September
and 31st December in each year, accompanied by a
statement in reasonable detail showing the calculations
used in determining the compliance by each Borrower with
the financial undertakings contained in Clause 13.4.
13.1.3 Annual Information
------------------
Each Borrower hereby undertakes and agrees with the Agent, the
Issuing Bank and each Lender that throughout the Security Period
it shall, as soon as the same become available, but in any event
in relation to the items required by Clauses 13.1.3(a) to (d)
within 90 days after the end of each Financial Year and in
relation to the items required by Clauses 13.1.3(e) on the last
Business Day of each Financial Year, deliver to the Agent for
distribution to the Issuing Bank and the Lenders, copies in
sufficient numbers for all of them of:
(a) the Accounts of Tyco Parent for the relevant Financial
Year together with a copy of the management letter (if
any)
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addressed by the Auditors to the directors of the
relevant company accompanied by a statement in reasonable
detail showing the calculations used in determining the
Borrowers compliance with the financial undertakings set
forth in Clause 13.4 together with a report from the
Auditors to the effect that in connection with their
audit examination, they did not become aware of any
Default or Default Occurrence or specifying those
Defaults or Default Occurrences of which they became
aware;
(b) a report of Tyco Parent executed on its behalf by the
Chief Executive Officer or Chief Financial Officer
setting forth the board of directors discussion and
analysis of all current income statement, balance sheet
and cash flow financial trends;
(c) the annual letter from Tyco Parent's Chief Executive
Officer or Chief Financial Officer to the Auditors in
connection with their audit examination detailing the
Borrowers' material contingent liabilities and material
litigation;
(d) a certificate of the Chief Executive Officer or Chief
Financial Officer of Tyco Parent that all such financial
statements are complete and correct and represent fairly
in accordance with US GAAP the financial position, the
results of operations and the changes in financial
position of Tyco Parent as at the end of Financial Year
and for the period then ended, and that there was no
Default or Default Occurrence in existence as of such
time or specifying the Default or Default Occurrence of
which he or she was aware; and
(e) financial projections for the next succeeding Financial
Year which shall include monthly financial projections
(including a Capital Expenditures budget) for each of the
Borrowers and their respective Subsidiaries acceptable to
the Agent for the following Financial Year approved by
the board of directors of each of the Borrowers and their
respective Subsidiaries, as the case may be, and, which,
in each case, include the following:
(i) projected balance sheets of each Borrower and each
of their Subsidiaries for such Financial Year, on
a monthly basis;
(ii) projected cash flow statements and forecasted
excess borrowing availability of the Borrowers,
including summary details of cash disbursements
(including Capital Expenditure) for such Financial
Year, on a monthly basis;
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(iii) projected statements of operations of each
Borrower and each of their respective Subsidiaries
for such Financial Year, on a monthly basis; and
(iv) projected annual balance sheet, cash flow
statements, and statements of operations of each
Borrower and each of their respective Subsidiaries
for such Financial Year together with the
description of major assumptions used in
generating such balance sheets, cash flows and
income statements, and other appropriate
supporting details as requested by the Agent;
and all such projections shall be broken down by division
and otherwise in a manner satisfactory to the Agent.
13.1.4 Other Information Undertakings
------------------------------
Each Borrower hereby undertakes and agrees with the Agent, the
Issuing Bank and each Lender that throughout the Security Period
it shall:
(a) promptly furnish to the Agent such information, documents
and records about the business, financial condition,
operations and prospects of any member of the Group as
the Agent or any Lender may from time to time reasonably
require;
(b) ensure that all Accounts and other financial information
(other than Accounts of and other financial information
relating solely to a Borrower) submitted to the Agent
have been prepared in accordance with US Generally
Accepted Accounting Principles as applied in respect of
the Base Accounts;
(c) ensure that all Accounts and other financial information
submitted to the Agent relating solely to a Borrower have
been prepared in accordance with UK Generally Accepted
Accounting Principles as applied in respect of the
Accounts of such Borrower filed at Companies House in
respect of its Financial Year ended 31st December 1993;
(d) promptly notify the Agent of:
(i) any Default and any Default Occurrence;
(ii) any litigation, arbitration or administrative
proceeding commenced against any member of the
Group which, is reasonably likely if adversely
determined to have a Material Adverse Effect or to
give rise to a judgment or award exceeding
(Pounds)50,000
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<PAGE>
individually in value or (to the extent
litigation, arbitration or administrative
proceedings are related) in the aggregate;
(iii) any Encumbrance which is not a Permitted
Encumbrance of which a Borrower becomes aware
attaching to its assets or revenues; and
(iv) any occurrence (including without limitation any
third party claim or liability) of which a
Borrower becomes aware which may have a Material
Adverse Effect;
and in each case such notification to be confirmed in
writing to the Agent within 5 days; and
(e) by no later than the twentieth day after the end of each
month, a reconciliation for each Borrower or the weekly
Inventory reports of such Borrower required in Clause
13.1.1(ii) for such month to such Borrower's general
ledger for such month and monthly financial statement, in
each case accompanied by such supporting detail and
documentation as the Agent may require.
13.1.5 Disclosure of Information
-------------------------
Each Borrower (for itself and each of its respective
Subsidiaries) authorises the Agent, the Issuing Bank and each
Lender to communicate with its and each of its Subsidiary's
independent accountants and authorises those accountants to make
available to the Agent, the Issuing Bank and each Lender any and
all financial statements and other supporting financial
documents and information, with respect to the business,
financial condition and other affairs of each Borrower and each
of their respective Subsidiaries provided that the Agent, the
Issuing Bank, or such Lenders shall (i) give the relevant
Borrower prior notice of each intended communication with such
accountants and of each request to have such accountants make
available to the Agent, the Issuing Bank or such Lender any such
financial information and material and (ii) permit a
representative of the relevant Borrower to be present at any
communication or making available of financial information and
material. On or before the Completion Date, each Borrower shall
deliver a letter (the "Accountants Letter") addressed to such
accountants instructing them to make available to the Agent, the
Issuing Bank and the Lenders such information and records as the
Agent, the Issuing Bank and the Lenders may reasonably request
and to otherwise comply with the provisions of this Clause
13.1.5 and if any Borrower or any of their Subsidiaries engages
the services of accountants other than Touche Ross, it shall
deliver a letter addressed to such accountants containing the
same terms and provisions as the Accountants Letter.
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<PAGE>
13.2 Positive Covenants
------------------
Each of the Borrowers hereby undertakes and agrees with the Agent, the
Issuing Bank and each Lender that, throughout the Security Period, it
shall and it shall procure that it and each of its Subsidiaries shall
unless the Agent (acting on the instructions of the Majority Lenders)
shall otherwise agree:
(a) do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence and its rights
and franchises other than the dissolution, liquidation or merger
of Subsidiaries of the Borrowers insofar as permitted under Clause
13.3(d), and continue to conduct its business substantially as now
conducted or as otherwise permitted hereunder;
(b) permit the Agent and any person (being an accountant, auditor,
solicitor, valuer or other professional adviser of the Agent)
authorised by the Agent to have, at all reasonable times during
normal business hours and on reasonable notice, access to the
property, premises and accounting books and records of any member
of the Group and to the officers of any member of the Group,
permit such person to inspect, audit and make extracts from all
accounting books and records of such member of the Group and
permit such person to conduct audits to inspect, review and
evaluate the Charged Property (such audits not to exceed, at the
expense of any member of the Charging Group, (x) four times in any
Financial Year with respect to audits of inventory and (y) four
times in any Financial Year with respect to other audits unless a
Default has occurred in which case such limits shall not apply; it
being understood that the foregoing limit shall not prohibit the
Agent from conducting additional audits at the expense of the
Lenders);
(c) at the request of the Agent, do or procure the doing of all such
things and execute or procure the execution of all such documents
as are in the reasonable opinion of the Agent or any Lender,
necessary or desirable to ensure that the Agent, the Issuing Bank
and the Lenders obtain the full benefit of their rights and
benefits under the Financing Documents;
(d) pay and discharge all Taxes and governmental charges prior to the
date on which the same become overdue unless, and only to the
extent that, such Taxes and charges shall be contested in good
faith by appropriate proceedings, pending determination of which
payment may lawfully be withheld, and there shall be set aside
adequate reserves in accordance with UK Generally Accepted
Accounting Principles with respect to any such Taxes or charges so
contested;
(e) pay and discharge its debts as they fall due for payment in the
ordinary course of its trading activities (unless contested in
good faith);
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<PAGE>
(f) at all times comply with all laws and regulations applicable to it
and which are necessary in relation to:
(i) the conduct of its business generally and obtain, effect
and maintain in full force and effect all governmental and
other regulatory consents, licences, exemptions,
clearances, filings, registrations and authorisations
required for the conduct of its business generally; and
(ii) the validity, enforceability or, as the case may be,
admissibility in evidence of the Financing Documents;
except where the failure to so comply could not be reasonably
expected to result in a Material Adverse Effect and would not be
reasonably likely to subject Tyco Parent or any of its
Subsidiaries to any criminal penalties (other than non-material
fines) or the Agent, the Issuing Bank or any Lender to any civil
or criminal penalties;
(g) promptly and in any event within any period provided for the same
in any applicable statute, law or regulation deliver all necessary
forms and documents required to be delivered to or registered with
any governmental, statutory or other body or agency in connection
with the Financing Documents and any of the transactions
contemplated hereunder or thereunder;
(h) remain resident in the United Kingdom for Tax purposes;
(i) comply, and procure that each other member of the Charging Group
and each Subsidiary thereof complies, in all material respects
with all requirements of Environmental Law applicable to each such
member of the Charging Group and each Subsidiary thereof
(including, without limitation, obtaining and maintaining in full
force and effect all consents, authorisations, licences or
approvals required from time to time) and promptly notify the
Agent of (i) any Environmental Claim which has been made or
threatened against any member of the Charging Group and each
Subsidiary thereof or against any occupier of any property owned
or leased by any member of the Charging Group and each Subsidiary
thereof or of any circumstanecs that arises which might give rise
to any such Environmental Claim and (ii) any revocation,
suspension, amendment, variation, withdrawal or refusal to grant
any consent, authorisation, licence or approval, which in the case
of either (i) or (ii) above might have a Material Adverse Effect;
(j) notify the Agent in writing, promptly upon learning thereof, of
any litigation, claim (whether in respect of Tax or otherwise)
commenced or threatened against any Borrower or any of their
respective Subsidiaries, and of the institution against any such
person of any suit or administrative proceeding which (a) may
involve an amount in excess of (Pounds)50,000
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<PAGE>
individually or in aggregate or (b) could have or result in a
Material Adverse Effect if adversely determined;
(k) at all times maintain, preserve and protect all of its material
Intellectual Property, and preserve all the remainder of its
property, in use or useful in the conduct of its business and keep
the same in good repair, working order and condition (taking into
consideration ordinary wear and tear) and from time to time make,
or cause to be made, all necessary or appropriate repairs,
replacements and improvements thereto consistent with industry
practices, so that the business carried on in connection therewith
may be properly and advantageously conducted at all times;
(l) keep and maintain its equipment and fixtures in good operating
condition sufficient for the continuing of such company's business
conducted on a basis consistent with past practices and shall
provide or arrange for all maintenance and service and all repairs
necessary for such purpose;
(m) transact business only under the names set forth in Schedule 20;
(n) keep adequate records and books of account with respect to its
business activities, in which proper entries, reflecting all of
its financial transactions, are made in accordance with UK GAAP;
(o) at its sole cost and expense maintain insurances or cause to be
maintained with respect to each member of the Charging Group and
each Subsidiary thereof on and in relation to its business and
assets against such risks and to such an extent and with such
underwriters or insurance companies as the Agent deems advisable
from time to time and which include:
(i) property damage insurance where the cover is for amounts
which are no lower than the higher of the market value and
book value of the relative property; and
(ii) business interruption insurance where the cover shall be
substantially similar in amount to that customarily
maintained by or on behalf of the relevant company;
and shall, without limitation, comply with all obligations
contained in any Guarantee and Debenture to which the Borrower is
a party relating to insurance and shall further, without
limitation, maintain all those insurances listed in Schedule 15
and shall ensure that save in relation to those insurances listed
in Part 2 of Schedule 15 the Agent is named as an insured party on
all such policies of insurance and, if so required by the Agent,
as loss payee and shall if so requested by the Agent, deliver to
the Agent, as often as the Agent may request, a report of a
reputable insurance broker satisfactory to the Agent with respect
to its insurance policies. If, notwithstanding that all proceeds
of insurance in respect of any Charged Property are payable to the
Agent, any member of the
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<PAGE>
Charging Group or Subsidiary thereof receives any proceeds of
insurance in respect of any Charged Property in respect of the
policies required to be maintained under this Agreement, such
proceeds shall be held in trust by such person and the Borrowers
shall cause such person to hold such proceeds in trust for the
Agent and, unless the Agent otherwise permits, shall be forthwith
paid over to the Agent;
(p) notify the Agent promptly of any occurrence causing a material
loss or decline in value of any property or assets of any Borrower
or any of their Subsidiaries and the estimated (or actual, if
available) amount of such loss or decline; each Borrower (for
itself and its respective Subsidiaries) hereby directs all present
and future insurers to pay all proceeds of insurance described in
Part 1 of Schedule 15 directly to the Agent on behalf of itself,
the Issuing Bank and the Lenders; and each Borrower (for itself
and its Subsidiaries) irrevocably makes, constitutes and appoints
the Agent (and all officers, employees or agents designated by the
Agent) as such persons true and lawful agent and attorney-in-fact
for the purpose of making, settling and adjusting claims under all
policies of insurance and for doing all things in connection
therewith;
(q) perform, within all required time periods (after giving effect to
any applicable grace periods), all of its obligations and enforce
all of its rights under each agreement, contract, instrument or
other document to which it is a party, including any leases,
licenses and customer contracts to which it is a party where the
failure to so perform and enforce could have or result in a
Material Adverse Effect;
(r) on the request of the Agent, the Issuing Bank or any Lender, but
not more often than once a calendar quarter unless a Default has
occurred and is continuing in which case no such limit shall
exist, supplement (or cause to be supplemented) each Schedule or
representation herein or in any other Financing Document with
respect to any matter hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required
to be set forth or described in such Schedule or as an exception
to such representation or which is necessary to correct any
information in such Schedule or representation which has been
rendered inaccurate thereby, provided that such supplement to such
Schedule or representation shall not be deemed an amendment
thereof unless expressly consented to in writing by the Agent and
the Majority Lenders and no such amendments, except as the
Majority Lenders have consented to in writing which expressly
includes a waiver, shall be or be deemed a waiver by the Lenders
of any Default disclosed therein; each Borrower shall, if so
requested by the Agent or the Majority Lenders, furnish to the
Agent, the Issuing Bank and the Lenders as often as they
reasonably request, statements and schedules further identifying
and describing the Charged Property and such other reports in
connection with the Charged Property as the Agent or Majority
Lenders may reasonably request and shall advise the Agent, the
Issuing Bank and the Lenders promptly of any
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<PAGE>
Encumbrance, other than a Permitted Encumbrance, attaching to or
asserted against any of the Charged Property, any material change
in the composition of the Charged Property and the occurrence of
any other event which would have a Material Adverse Effect upon
the Charged Property and/or the Agent's security of the Agent as
agent and security trustee thereon;
(s) unless otherwise agreed to by the Agent in writing, obtain or
cause to be obtained a landlord's agreement in form and substance
acceptable to Agent from the lessor of any present or future
leased premises of each member of the Group which owns any
tangible property constituting Charged Property located on such
premises having a book value of more than (Pounds)50,000 or
constituting any Eligible Inventory;
(t) take such action from time to time as shall be necessary to ensure
that each Subsidiary of each Borrower is a direct or indirect
wholly owned Subsidiary of either of the Borrowers and is owned
directly or indirectly only by members of the Group;
(u) promptly notify the Agent of any loss, damage, or destruction to
any Charged Property or any real property owned by any member of
the Group whether or not constituting Charged Property
(collectively, "Property") or arising from its use, whether or
--------
not covered by insurance provided that no such notice is necessary
with respect to the loss, damage or destruction from a single
casualty of any Property with a value less than (Pounds)20,000;
(v) if either Borrower establishes a retirement benefit scheme (as
defined in Section 611 of the Income and Corporation Taxes Act
1988) (the "scheme") it shall (i) promptly provide the Agent with
------
copies of such documentation relating thereto as the Agent shall
request, (ii) not do anything which would or might prejudice any
Inland Revenue approval of that scheme, (iii) duly and punctually
pay all contributions or other sums required under the trust deed
and rules or other documentation containing provisions governing
the scheme and ensure that all lump sum death in service benefits
payable under the scheme or by the relevant Borrower are fully
insured, (iv) comply with all statutory requirements relating
thereto including without restriction the provisions of Article
119 of the Treaty of Rome establishing the European Economic
Community, (v) immediately notify the Agent of any claims, actions
or suits which have or may be made against the relevant Borrower
or the trustees of the scheme;
(w) procure that each member of the Charging Group and each Subsidiary
thereof shall within 60 days after the date hereof amend, modify
or terminate all hedging agreements involving any member of the
Charging Group and any Subsidiary thereof which are existing on
the date hereof to the extent necessary so that after giving
effect to any such amendment,
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<PAGE>
modification or termination, all such agreements existing on such
60th day shall be reasonably satisfactory to the Agent;
(x) within 60 days of the date of this Agreement, enter into:
(i) a distribution agreement with the other companies in the
Group, in form and substance satisfactory to the Agent; and
(ii) currency hedging agreements in amount, duration, form and
substance reasonably acceptable to the Agent; and
(iii) an agreement to alter the name of the Owner under the
agency agreement dated 27th July 1994 between Tyco Matchbox
Limited and Just Licensing Limited and change the name of
the principal to Matchbox Toys Limited in the annexed
licence agreement;
(y) within 15 days of the date of this Agreement, agree and procure
that Lloyds Bank Plc and International Factors Limited agree a
form of lockbox service agreement which each is willing to enter
into if required to do so by the Agent pursuant to the Debenture
in form and content satisfactory to the Agent; and
(z) if at any time any of the trademarks referred to in Clause
12.2(pp) are in use with either Borrower in its business, such
Borrower shall promptly notify the Agent thereof and on request
from the Agent execute a fixed charge substantially in the form of
a Trade Mark Change over its rights to use the same and procure
that any member of the Group which is a registered proprietor or
licensor to such Borrower on request from the Agent shall also
execute a fixed charge substantially in the form of a Trade Marks
Change over its right, title, benefit and interest in and to such
mark.
13.3 Negative Covenants
------------------
Each of the Borrowers hereby undertakes with the Agent, the Issuing Bank
and each Lender that during the Security Period it shall not and the
Borrowers shall procure that none of their respective Subsidiaries shall
unless the Agent (acting on the instructions of the Majority Lenders)
otherwise agrees:
(a) other than Permitted Encumbrances, create or permit to subsist any
Encumbrance over any of its undertaking and assets from time to
time or directly or indirectly enter into any agreement with any
person which prohibits or limits the ability of any of the
Borrowers or their respective Subsidiaries to create, incur,
assume or suffer to exist any Encumbrance upon any of its
property, assets or revenues whether now owned or hereafter
acquired other than agreements with the Agent, the Issuing Bank or
the Lenders which are entered into pursuant to a Financing
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<PAGE>
Document and other than agreements which restrict Encumbrances
which fall within paragraph (e) of the definition of "Permitted
Encumbrance" in Clause 1.1;
(b) sell, transfer, lease, lend or otherwise dispose of any of its
undertaking and assets from time to time owned by it other than
the sale of Inventory, or the sale or disposal of any assets which
have become obsolete or surplus to the business of such Borrower
or Subsidiary, in any such case in the ordinary course of the
prudent conduct of its trading activities, or other than any sale,
transfer, lease, loan or other disposal which would then be
permitted under Section 6.8 of the US Credit Agreement;
(c) make or threaten to make any change in its business objectives,
purposes or operations as at present conducted, which could in any
way adversely affect the satisfaction of any obligations under the
Financing Documents on the due date for performance thereof or
have or result in a Material Adverse Effect or make any material
change in the terms and conditions upon which any of the Borrowers
or their respective Subsidiaries does business, amend its
Memorandum or Articles of Association in any manner which is
reasonably likely to adversely affect the interests of the Issuing
Bank or the Lenders, or engage in any business other than the
business in which it is currently engaged or any related toy or
collectibles business;
(d) directly or indirectly, by operation of law or otherwise, merge or
consolidate with or otherwise combine with any other person or
enter into any joint venture or partnership agreement, other than
any such merger, consolidation or combination, joint venture or
partnership agreement which would then be permitted under Section
6.1 of the US Credit Agreement;
(e) subject to Clause 13.3(f) below, pay any fees or commissions to
any person other than on open market terms and for the purpose of
its trade and in the ordinary course of the prudent conduct of its
trade;
(f) make any loans or grant any credit or enter into any commercial
transaction with any of its Subsidiaries, Affiliates, officers,
directors or employees, including payment of any management,
consulting, advisory or similar fee, other than any such loan,
granting of credit or entry into a commercial transaction which
would then be permitted under Section 6.4 of the US Credit
Agreement;
(g) other than Permitted Indebtedness, incur or permit to subsist any
Indebtedness;
(h) incorporate any company as its Subsidiary or acquire all or
substantially all of the assets, shares or securities issued by
any company;
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<PAGE>
(i) cancel or terminate any Material Contract or amend or otherwise
modify any Material Contract, or waive any default or breach any
Material Contract, except any such cancellation, termination,
amendment, modification, waiver or breach which would then be
permitted under Section 6.9 of the US Credit Agreement, or take
any other action in connection with any Material Contract that
would have a Material Adverse Effect;
(j) cancel any claim or Indebtedness owing to it, except for
reasonable consideration and in the ordinary course of its
business, or make any payment or prepayment of principal or of
interest on or otherwise with respect to, or purchase, acquire or
redeem any Indebtedness (other than under the Overall Facilities)
or make any deposit in respect thereof or give notice in respect
thereof, except any payments of Indebtedness which would then be
permitted under the US Credit Agreement;
(k) declare or make any Restricted Payment, other than a Restricted
Payment which then may be declared or made under Section 6.15 of
the US Credit Agreement;
(l) enter into or renew (by amendment, modification or otherwise) any
lease of real property other than (x) renewals of existing leases
of real property upon more favourable (to such company) or
substantially the same terms as are in effect on the Completion
Date and (y) leases of real property permitted under the terms of
clause 6.16 of the US Credit Agreement;
(m) maintain any deposit, operating or other bank accounts except for
those accounts identified in Schedule 13;
(n) engage in any transaction involving commodity options or futures
contracts, derivatives, currency options or futures contracts or
any similar speculative transaction (other than with respect to
currency exchange rate fluctuations in the ordinary course of
business consistent with past practice and prudent business
management or with respect to interest rate protection the terms
of which are acceptable to the Agent);
(o) make any significant change in accounting treatment and reporting
practices except for changes concurred with by its Auditors;
(p) not make any deposit with, or advance, loan or other extension of
credit to any other person (including the purchase of property
from another person subject to an understanding or agreement,
contingent or otherwise, to resell such property to such person)
other than deposits, advances, loans and extensions of credit
which would be permitted under Section 6.2 of the US Credit
Agreement or are otherwise contemplated by any of the Financing
Documents, or are made in the ordinary course of its business with
or to institutions authorised under the Banking Act 1987;
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<PAGE>
(q) make any change in its capital structure (including the issuance
or recapitalisation of any shares of Stock or other securities
convertible into Stock or any revision of the terms of its
outstanding Stock) save as permitted under the terms of clause
6.15(a) of the US Credit Agreement; and
(r) directly or indirectly, amend, modify, supplement, waive
compliance with, grant a waiver under, or assent to non-
compliance with: (i) any instrument, document or agreement
evidencing, creating, guaranteeing or governing Indebtedness in
excess of (Pounds)100,000 permitted under this Agreement or
entered into in connection herewith (other than the instruments,
documents and agreements governing the Overall Facilities in
accordance with the terms thereof) or (ii) any subordinated
Indebtedness (it being understood that this Clause 13.3(r) shall
not be deemed to prohibit the holders of any subordinated
Indebtedness (or any required percentage thereof) from waiving
any requirement or default under any subordinated Indebtedness).
13.4 Financial Undertakings
----------------------
13.4.1 In this Clause 13.4 words and expressions shall have the
meanings attributed to them in the US Credit Agreement. This
Clause 13.4 shall be construed in accordance with the rules of
construction set out in Section 2(b) of Annex H to the US Credit
Agreement.
13.4.2 Each Borrower shall procure that Tyco Parent shall maintain (or
cause to be maintained) as of the end of each Fiscal Quarter
ending on each of the dates set forth below, Tangible Net Worth
of not less than the respective amount set forth below opposite
each such date:
<TABLE>
<CAPTION>
Date Amount in Dollars
---- -----------------
<S> <C>
March 31, 1995 74,100,000
June 30, 1995 75,300,000
September 30, 1995 91,100,000
December 31, 1995 100,600,000
March 31, 1996 92,900,000
June 30, 1996 93,900,000
September 30, 1996 109,600,000
December 31, 1996 118,700,000
March 31, 1997 110,500,000
June 30, 1997 111,500,000
September 30, 1997 127,400,000
December 31, 1997 136,700,000
March 31, 1998 128,700,000
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
June 30, 1998 129,600,000
September 30, 1998 145,800,000
December 31, 1998 155,200,000
March 31, 1999 147,300,000
June 30, 1999 148,300,000
September 30, 1999 164,800,000
December 31, 1999 174,300,000
and the last day of each
Fiscal Quarter thereafter
</TABLE>
13.4.3 Each Borrower shall procure that Tyco Parent shall maintain (or
cause to be maintained), as of the end of each Fiscal Quarter
(commencing with the Fiscal Quarter ending September 30, 1995),
for each Parent Rolling Period, a Minimum Debt Service Coverage
Ratio of not less than (x) 0.60 to 1.0 as of the end of the
Fiscal Quarter ending September 30, 1995, (y) 1.25 to 1.0 as of
the end of each of the Fiscal Quarters ending December 31, 1995,
March 31, 1996, June 30, 1996 and September 30, 1996 and (z)
1.30 to 1.0 as of the end of each Fiscal Quarter thereafter.
13.4.4 Each Borrower shall procure that Tyco Parent shall not permit
for the three Fiscal Month period ending March 31, 1995 or for
the six Fiscal Month period ending June 30, 1995 (x) EBITA for
such three or six, as appropriate, Fiscal Month period less (y)
the aggregate amount of all Capital Expenditures made by Tyco
Parent and its Subsidiaries during such three or six, as
appropriate, Fiscal Month period, to be less than ($17,300,000)
and ($15,800,000), respectively.
13.4.5 Each Borrower shall procure that Tyco Parent shall not permit
EBITA of the International Management Subsidiaries as of the end
of any Fiscal Month set forth below for each Subsidiary Rolling
Period to be less than the respective amount in Dollars set
forth below opposite such Fiscal Month:
<TABLE>
<CAPTION>
Fiscal Month Ending In EBITA
<S> <C>
June, 1995 (2,481,000)
July, 1995 (1,289,000)
August, 1995 2,169,000
September, 1995 10,485,000
October, 1995 18,604,000
November, 1995 23,141,000
December, 1995 23,064,000
January, 1996 23,250,000
February, 1996 23,345,000
March, 1996 23,399,000
April, 1996 23,461,000
May, 1996 23,513,000
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
June, 1996 23,566,000
July, 1996 23,625,000
August, 1996 23,553,000
September, 1996 23,588,000
October, 1996 23,994,000
November, 1996 24,221,000
December, 1996 24,217,000
January, 1997 24,396,000
February, 1997 24,488,000
March, 1997 24,543,000
April, 1997 24,606,000
May, 1997 24,658,000
June, 1997 24,714,000
July, 1997 24,776,000
August, 1997 24,712,000
September, 1997 24,768,000
October, 1997 25,194,000
November, 1997 25,432,000
December, 1997 25,428,000
January, 1998 25,601,000
</TABLE>
13.4.6 Each Borrower shall procure that Tyco Parent shall not permit
EBITA of the Direct Import Subsidiaries as of the end of any
Fiscal Month set forth below for each Subsidiary Rolling Period
to be less than the respective amount in Dollars set forth below
opposite such Fiscal Month:
<TABLE>
<CAPTION>
Fiscal Month Ending In EBITA
<S> <C>
June, 1995 (537,000)
July, 1995 842,000
August, 1995 3,482,000
September, 1995 5,938,000
October, 1995 7,048,000
November, 1995 7,893,000
December, 1995 8,735,000
January, 1996 8,759,000
February, 1996 8,787,000
March, 1996 8,807,000
April, 1996 8,814,000
May, 1996 8,805,000
June, 1996 8,761,000
July, 1996 8,778,000
August, 1996 8,910,000
September, 1996 9,032,000
October, 1996 9,088,000
November, 1996 9,130,000
December, 1996 9,172,000
January, 1997 9,195,000
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
February, 1997 9,221,000
March, 1997 9,240,000
April, 1997 9,247,000
May, 1997 9,238,000
June, 1997 9,197,000
July, 1997 9,216,000
August, 1997 9,355,000
September, 1997 9,484,000
October, 1997 9,542,000
November, 1997 9,587,000
December, 1997 9,631,000
January, 1998 9,652,000
</TABLE>
14. DEFAULT, ACCELERATION
---------------------
14.1 Default
-------
There shall be a Default if:
(a) any amount payable under this Agreement is not paid by either
Borrower within 5 days of the date and at the place at which it is
expressed to be payable; or
(b) any of the Borrowers fails to comply with any of its obligations
under Clauses 13.1, 13.2(x), 13.2(y), 13.2(z), 13.3, 13.4 of this
Agreement and such failure shall continue unremedied for 10 days
with respect to obligations under Clause 13.1 (other than under
Clause 13.1.2 for which the grace period shall be 30 days) (with
no grace period for any failure to comply with obligations under
Clauses 13.3 and 13.4); or
(c) any member of the Charging Group or any Subsidiary thereof fails
to comply with any of its obligations and undertakings under any
of the Financing Documents (other than the obligations and
undertakings referred to in the foregoing Clause 14.1(a) or (b))
and, if, in the opinion of the Agent, capable of remedy, such
default is not remedied within 30 days after notice of such
failure has been given by the Agent to the relevant Borrower or 30
days after any Borrower shall become aware thereof; or
(d) any representation, warranty or statement made or deemed to be
repeated by any member of the Charging Group under any of the
Financing Documents or in any notice, certificate, statement of
fact, financial information, statement or accounts referred to in
or delivered under any of the Financing Documents is or proves to
have been incorrect in any material respect when made or deemed to
have been repeated; or
(e) any material provision of any of the Financing Documents is not or
ceases to be in full force and effect, other than by reason of any
action of the
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Agent, the Issuing Bank or the Lenders or upon the written consent
of the Lenders, or the validity or enforceability of any of the
terms of any of the Financing Documents shall be contested by any
of the members of the Charging Group; or
(f) any Indebtedness in excess of, in aggregate, $1,000,000 of any of
the members of the Charging Group:
(i) is declared to be or otherwise becomes due and payable
prior to its specified maturity or prior to its regularly
scheduled dates of payment; or
(ii) is not paid when due;
or any creditor or creditors of members of the Charging Group
become entitled to declare any such Indebtedness due and payable
prior to its specified maturity; or
(g) a creditor or encumbrancer attaches or takes possession of, or a
distress, execution, sequestration or other process is levied or
enforced upon or sued out against, any of the undertaking and
assets of any of the members of the Charging Group having an
aggregate value for all such assets in excess of $500,000 other
than where such proceedings are set aside or withdrawn within 30
days, or any member of the Charging Group conceals, removes or
permits to be concealed or removed any part of its property, with
intent to hinder, delay or defraud its creditors or any of them or
makes or suffers a transfer of its property or the incurring of an
obligation which may be fraudulent under any bankruptcy,
fraudulent conveyance or other similar law; or
(h) any of the members of the Charging Group:
(i) suspends payment of its debts or is unable or admits its
inability to pay its debts as they fall due; or
(ii) commences negotiations with one or more of its creditors
with a view to the general readjustment or rescheduling of
all or part of its Indebtedness which it would otherwise
not be able to pay as it falls due; or
(iii) proposes or enters into any composition or other
arrangement for the benefit of its creditors generally or
any class of creditors; or
(i) any of the members of the Charging Group takes any action or any
legal proceedings are started or other steps taken for:
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(i) any of the members of the Charging Group to be adjudicated
or found insolvent; or
(ii) the winding-up or dissolution of any of the members of the
Charging Group (other than in connection with a solvent
reconstruction, the terms of which have been previously
approved in writing by the Majority Lenders); or
(iii) the appointment of a trustee, receiver, administrative
receiver, or similar officer of any of the members of the
Charging Group, or the whole or any substantial part of
their respective undertaking and assets; or
(j) any adjudication, order or, as the case may be, appointment is
made under or in relation to any of the proceedings referred to in
Clause 14.1(h)); or
(k) an application is made to the court for an administration order
under the Insolvency Act 1986 with respect to any of the members
of the Charging Group; or
(l) any event occurs or proceeding is taken with respect to any member
of the Charging Group in any jurisdiction to which it is subject
which has an effect equivalent or similar to any of the events
mentioned in Clauses 14.1(f), (g), (h), (i) or (j); or
(m) any of the members of the Charging Group suspends, ceases or
threatens to suspend or cease to carry on its business; or
(n) without the prior written consent of the Agent acting on the
instructions of the Majority Lenders, any of the members of the
Charging Group makes any redemption of any of their shares,
purchases any of their shares or otherwise reduces their issued
share capital from time to time; or
(o) at any time there occurs any event or circumstance which have had
or are reasonably likely, in the opinion of the Majority Lenders,
to have a Material Adverse Effect and which is not remedied within
10 days after notice of such failure has been given by the Agent
to either Borrower; or
(p) any "Termination Event" under and as defined in the Receivables
Funding Agreement occurs; or
(q) there shall occur and be continuing any "Event of Default" (as
defined in the Canadian Credit Agreement) or any "Event of
Default" (as defined in the US Credit Agreement) or any event, act
or condition which, after giving effect to any grace periods or
notice requirements thereunder, permits the requisite lenders or
agent thereunder to accelerate the obligations of the borrower or
borrowers under such Overall Facility or any Indebtedness owing
under any of the other Overall Facilities shall
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become due prior to its stated maturity or prior to its regularly
scheduled dates of payment; or
(r) a Change of Control occurs; or
(s) a final judgment or judgments (after the expiration of all times
to appeal therefrom) in the aggregate is made against any member
of the Charging Group for the payment of money exceeding insurance
coverage therefor by $500,000 or more for any such judgment or
$3,000,000 or more in the aggregate for all such judgments against
the Group unless the same is set aside or paid within 15 days of
such judgment (it being understood that in any event any such
judgment is not covered by insurance to the extent of the
applicable deductible therefor or if and to the extent the issuer
of the relevant insurance denies liability therefor);
save that the liquidation of a company as part of a solvent
reorganisation of the Group in relation to which the Agent has given its
prior written consent shall not constitute a Default hereunder.
14.2 Acceleration etc.
-----------------
At any time when any Default remains unremedied the Agent may, and shall,
if so instructed by the Majority Lenders, by notice to either of the
Borrowers cancel the Facility and the Guarantee Facility in whole or in
part and:
(a) require that Cash Cover be provided by the Borrowers in respect of
the contingent liabilities of the Issuing Bank under the
Guarantees in an amount no less than the Outstandings then
subsisting; and
(b) require the Borrowers immediately to repay the Loan together with
accrued interest thereon and immediately to pay all other sums
payable under this Agreement, whereupon the same shall become
immediately due and payable; or
(c) place the Loan on demand, whereupon the same and all other sums
payable hereunder shall become repayable on demand made by the
Agent on the instructions of the Majority Lenders.
Upon the service of any such notice by the Agent on the instructions of
the Majority Lenders, the Lenders' obligations shall be terminated and
each of the Lenders' Commitments shall be cancelled and reduced to zero,
but without prejudice to any present or future liability pursuant to
Clause 7.6.2.
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15. SET-OFF AND PRO-RATA PAYMENTS
-----------------------------
15.1 Set-Off
-------
Each Borrower hereby authorises the Agent, the Issuing Bank and each
Lender to apply any credit balance on any account of such Borrower with
any of the Agent, the Issuing Bank and the Lenders in satisfaction of any
sum due and payable by such Borrower pursuant to the terms of the
Financing Documents which is not paid when due. For this purpose each of
the Agent, the Issuing Bank and the Lenders is authorised to purchase at
its spot rate of exchange with the moneys standing to the credit of any
such account Sterling or such other currencies as may be necessary to
effect such application. The Agent, the Issuing Bank or the relevant
Lender which so applies such credit balance shall use reasonable efforts
to notify the relevant Borrower, the Agent and the Lenders of such
application PROVIDED THAT the failure to do so shall not affect the
validity of such application.
15.2 Pro Rata Sharing
----------------
15.2.1 If any Lender (the "Sharing Lender") shall at any time obtain
(whether by way of voluntary or involuntary payment, right of
set-off, or otherwise but excluding (i) any amount received or
recoverable by it pursuant to a Participation Agreement and (ii)
amounts standing to the credit of the Lloyds Tyco Deposit
Account and the Lloyds Matchbox Deposit Account) a proportion in
respect of its Contribution in any sum due from a Borrower under
this Agreement which is greater than the proportion obtained by
the Lender or Lenders respectively obtaining the smallest
proportion of its Contribution therein, including a nil receipt,
(the amount so obtained by the Sharing Lender which represents
such excess being herein called "the excess amount") then:
-------------
(a) the Sharing Lender shall promptly pay to the Agent, for
the account of the Lenders, an amount equal to the excess
amount, whereupon the Agent shall notify the relevant
Borrower of such amount and its receipt by the Agent;
(b) the Agent shall treat such payment as if it were a
payment by the relevant Borrower on account of sums owed
to the Lenders; and
(c) as between the relevant Borrower and the Sharing Lender
the excess amount shall be treated as not having been
paid, while as between the relevant Borrower and each
Lender it shall be treated as having been paid to the
extent any moneys are received by such Lender.
15.2.2 Each Lender shall forthwith notify the Agent of any such receipt
or recovery by it other than by payment through the Agent.
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15.2.3 If any excess amount subsequently has to be wholly or partly
refunded to a Borrower by a Sharing Lender which has paid an
amount equal thereto to the Agent under Clause 15.2.1, each
Lender to which any part of that amount was distributed shall on
request from the Sharing Lender repay to the Sharing Lender such
Lender's pro rata share of the amount which has to be so
refunded by the Sharing Lender. Each Lender shall on request
supply to the Agent such information as the Agent may from time
to time request for the purpose of this Clause 15.2.
Notwithstanding the foregoing provisions of this Clause 15.2, no
Sharing Lender shall be obliged to share any excess amount which
it receives or recovers pursuant to legal proceedings taken by
it to recover any sums owing to it under this Agreement with any
other party which has a legal right to, but does not, either
join in such proceedings or commence and diligently pursue
separate proceedings to enforce its rights in the same or
another court, unless the proceedings instituted by the Sharing
Lender are instituted by it without prior notice having been
given to such party through the Agent and an opportunity to such
party to join in such proceedings.
15.2.4 Nothing in this Agreement shall oblige the Agent, the Issuing
Bank or any Lender to apply any credit balance or other benefit
received from a Borrower against the liabilities of such
Borrower under this Agreement in priority to any other
liabilities of such Borrower to the Agent, the Issuing Bank or
that Lender.
16. THE AGENT, THE ISSUING BANK AND THE LENDERS
-------------------------------------------
16.1 Appointment and Duties
----------------------
16.1.1 Each Lender and the Issuing Bank hereby irrevocably appoints the
Agent to act as its agent in connection with the administration
of the Facility and to act as its agent and trustee in
connection with the Security Documents and for such purposes
irrevocably authorises the Agent to take such action and to
exercise and carry out all the discretions, authorities, rights,
powers and duties as are specifically delegated to the Agent in
this Agreement and each Security Document together with such
powers and discretions as are incidental thereto.
16.1.2 The Agent shall have no duties or responsibilities except those
expressly set out in the Financing Documents. As to any matters
not expressly provided for by this Agreement, save in respect of
the Security Documents, the Agent shall, subject to the
provisions hereof or thereof, act hereunder or thereunder or in
connection herewith or therewith in accordance with the
instructions of the Majority Lenders (but in the absence of any
such instructions shall not be obliged to act) and any such
instructions and any action taken by the Agent in accordance
therewith shall be binding upon all the Lenders.
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16.2 Payments and Information Received
---------------------------------
The Agent will promptly account to the Issuing Bank or, as the case may
be, the Lending Office of each Lender for the Issuing Bank's or, as the
case may be, such Lender's due proportion of all sums received by the
Agent for the Issuing Bank's or such Lender's account, whether by way of
repayment or prepayment of principal or payment of interest, fees or
otherwise. The Agent shall provide the Issuing Bank and the Lenders with
all information and copies of all notices which by the terms of this
Agreement are to be provided or given to the Issuing Bank or the Lenders
respectively. The Agent may retain for its own use and benefit (and shall
not be liable to account to the Issuing Bank or any of the Lenders for
all or any part of) any sums received by it by way of agency or
management or arrangement fees or by way of reimbursement of expenses
incurred by it.
16.3 Defaults
--------
The Agent shall not be obliged to take any steps to ascertain whether any
Default (other than a default in repayment of principal or in payment of
interest or fees due pursuant to this Agreement) or Default Occurrence
has happened or exists and, until the Agent shall have received express
notice to the contrary from a Borrower, the Issuing Bank or any Lender,
the Agent shall be entitled to assume that no Default (other than as
aforesaid) or Default Occurrence has happened or exists. Upon receipt of
such notice the Agent shall promptly inform the Issuing Bank and the
Lenders. The Agent shall promptly notify the Lenders of any Default
Occurrence of which it is notified by a Borrower.
16.4 Assumptions
-----------
The Agent shall be entitled to rely on any communication or document
believed by it to be genuine and correct and to have been communicated or
signed by the person by whom it purports to be communicated or signed and
shall not be liable to any of the parties to this Agreement for any of
the consequences of such reliance.
16.5 Legal Proceedings
-----------------
The Agent shall not be obliged to take or commence any legal action or
proceeding against a Borrower or any other person arising out of or in
connection with any of the Financing Documents until it shall have been
indemnified or secured to its satisfaction against any and all costs,
claims and expenses (including, but not limited to, any costs award which
may be made against it as a result of any such legal action or proceeding
not being successful) which it may expend or incur in such legal action
or proceeding.
16.6 No Liability
------------
Neither the Agent nor any of its directors, employees or agents shall be
liable for any action taken or omitted to be taken by it or any of them
under or in connection with the Financing Documents unless caused by its
or their gross negligence or wilful
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misconduct. The Agent shall not be responsible for any statements,
representations or warranties in the Financing Documents or for any
information supplied or provided or hereafter to be supplied or provided
to the Issuing Bank or any of the Lenders by the Agent, in respect of a
Borrower or any other person or for any other matter relating to the
Facility, the Security Documents or for the execution, effectiveness,
genuineness, validity, enforceability or sufficiency of such documents or
any of the other documents referred to herein or therein or for the
recoverability of all or any of the Advances or any of the other sums to
become due and payable pursuant hereto.
16.7 Credit Decisions
----------------
16.7.1 Each Lender acknowledges that it has, independently and without
reliance on the Agent or the Issuing Bank, and the Issuing Bank
acknowledges that it has, independently and without reliance on
the Agent, and based on such documents and information as it
deemed appropriate, made its own analysis of the transaction
contemplated by, and reached its own decision to enter into,
this Agreement and made its own investigation of the financial
condition and affairs of each Borrower and any surety for each
Borrower's obligations and its own appraisal of the
creditworthiness of each Borrower and any surety for each
Borrower's obligations.
16.7.2 Save as specifically provided herein, the Agent shall not be
under any duty or obligation, either initially or on a
continuing basis, to provide any Lender or the Issuing Bank with
any credit information or other information with respect to the
financial condition of either Borrower or which is otherwise
relevant to the Facility or Guarantee Facility.
16.7.3 Each Lender and the Issuing Bank further acknowledges and
confirms that it will, independently and without reliance on the
Agent and based on such documents and information as it shall
deem appropriate at the time, make its own decisions in taking
or not taking action under the Financing Documents.
16.8 Advisers
--------
The Agent shall be entitled to obtain and rely on the advice of any
professional advisers selected by it given in connection with the
Financing Documents or any of the matters contemplated hereby or thereby,
and shall not be liable to any of the Lenders or the Issuing Bank for any
of the consequences of such reliance.
16.9 Relationship with Lenders and Issuing Bank
------------------------------------------
16.9.1 In performing its functions and duties under this Agreement, the
Agent shall act solely as the agent for the Lenders and, as
specified herein, for the Issuing Bank and save as expressly
provided herein and in the Security Documents shall not be
deemed to be acting as trustee for any Lender or the Issuing
Bank and shall not assume or be deemed to have assumed any
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obligation as agent or trustee for, or any relationship of
agency or trust with, any of the Borrowers.
16.9.2 Neither the Agent, the Issuing Bank nor any Lender shall be
under any liability or responsibility of any kind to any of the
Borrowers, the Issuing Bank or any of the other Lenders arising
out of or in relation to any failure or delay in performance or
breach by any other Lender or Lenders, the Issuing Bank or, as
the case may be, either Borrower of any of its or their
respective obligations pursuant to or in connection with the
Financing Documents or any of the Guarantees.
16.10 Agent's position as a Lender
----------------------------
With respect to its own Contribution in the Loan, the Agent shall have
the same rights and powers under and in respect of the Financing
Documents as though it were not also acting as agent for the Lenders and,
as specified herein, for the Issuing Bank. The Agent may, without
liability to account, accept deposits from, lend money to and generally
engage in any kind of banking or trust business with or for a Borrower as
if it were not the agent or the trustee for the Lenders and, as specified
herein, for the Issuing Bank under any Financing Document.
16.11 Indemnity
---------
16.11.1 The Lenders agree to indemnify the Agent (to the extent not
reimbursed by either of the Borrowers) rateably according to the
Lenders' respective Contributions in the Loan (or, if no Advance
shall then be outstanding, their respective Commitments) from
and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses
and disbursements of any kind or nature whatsoever (except in
respect of any agency, management or other fee due to the Agent)
which may be imposed on, incurred by or asserted against the
Agent in its capacity as agent or trustee for the Lenders or in
any way relating to or arising out of the Financing Documents or
any action taken or omitted by the Agent in enforcing or
preserving the rights of the Lenders under the Financing
Documents, 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 the Agent's gross negligence, bad
faith or wilful misconduct.
16.11.2 Each of the Lenders shall make such payments as are due and
payable to the Agent under Clause 16.11.1 promptly following
demand subject to and conditional upon having received the
corresponding payment from the relevant Participant under the
Participation Agreement.
16.12 Resignation
-----------
16.12.1 Subject to the appointment and acceptance of a successor Agent
as hereinafter provided, the Agent may resign at any time by
giving to either
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of the Borrowers, the Issuing Bank and each of the Lenders not
less than 60 days' notice of its intention to do so. Upon
receipt of such notice of resignation the Lenders and the
Issuing Bank shall appoint as successor Agent any bank or
financial institution selected by the Borrowers and the Majority
Lenders (such selection in the case of the Borrowers not to be
unreasonably withheld or delayed) which is willing and able to
act as such agent for the Lenders.
16.12.2 If no such successor Agent selected by the Borrowers and the
Majority Lenders shall have accepted such appointment within 20
days after the Agent's giving of notice of resignation then the
Majority Lenders after consultation with the Borrowers shall
have the right to appoint such a successor Agent.
16.12.3 If no such successor Agent shall have been so appointed by the
Majority Lenders and shall have accepted such appointment within
40 days after the Agent's giving of notice of resignation then
the resigning Agent may, after consultation with the Borrowers,
appoint as its successor any reputable and experienced bank or
other financial institution with an office in London.
16.12.4 Any such appointment shall take effect upon notice thereof
(which notice shall specify the bank in London to which payments
shall be made thereafter) being given to the Borrowers, the
Issuing Bank and each Lender. Thereafter, the resigning Agent
shall be discharged from any further obligation under the
Financing Documents and its successor and each of the other
parties hereto and thereto shall have the same rights and
obligations inter se as they would have had if such successor
had been a party to the Financing Documents in place of the
resigning Agent. The resigning Agent shall make over to its
successor all such records as its successor requires to carry
out its duties.
16.13 Change of Office
----------------
The Agent may from time to time in its sole discretion by written notice
to the Borrowers, the Issuing Bank and each Lender designate a different
office in the United Kingdom from which its duties as the Agent will
thereafter be performed.
16.14 Waivers, Amendments
-------------------
The Agent may (except where the same is required by the express
provisions of this Agreement to be authorised by all the Lenders) grant
waivers, vary the terms of the Financing Documents and do or omit to do
all such acts and things in connection therewith as may be authorised in
writing by the Majority Lenders. Any such waiver, variation, act or
omission so authorised and effected by the Agent shall be binding on all
the leaders and the Issuing Bank and the Agent shall be under no
liability whatsoever in respect of any such waiver, consent, variation,
act or
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omission Nothing in this Clause shall authorise (as between the Agent,
the Issuing Bank and the Lenders), except with the prior written
agreement of all the Lenders:
(i) any change in the rate at which any interest on the Loan is
payable under this Agreement;
(ii) any agreed extension of the date for, or alteration in the amount
or currency of, the payment of any principal, interest, fees or
any other amount payable under this Agreement other than in
connection with the Guarantee Facility (including under any
Guarantee);
(iii) any increase in any Lender's Commitment;
(iv) any variation of the definitions of "Majority Lenders" in Clause
1;
(v) any variation of Clauses 6 or 7 insofar as it relates to Advances
and interest thereon and this Clause 16 except insofar as it may
affect the Issuing Bank
(vi) any provision of this Agreement which requires the consent of all
the Lenders; and
except with the prior written agreement of the Issuing Bank:
(a) any increase in the Guarantee Facility Limit or any agreed
extension of the date for, or alteration in the amount or currency
of, the payment of any principal, interest, fees or any other
amount payable under this Agreement in connection with the
Guarantee Facility (including under any Guarantee);
(b) any variation of Clauses 6 or 7 insofar as it does not relate to
Advances and interest thereon, any variation of Clause 14 and any
variation to this Clause 16 insofar as it may affect the Issuing
Bank; and
(c) any provision of this Agreement which requires the consent of the
Issuing Bank; and
except with the prior written agreement of the Issuing Bank and all the
Lenders, any release of security constituted under the Security
Documents.
16.15 Consents
--------
The Agent may at any time upon the application and at the cost of either
Borrower and without any consent of any of the Lenders (only if and so
far as in its reasonable opinion the interests of the Lenders shall not
be significantly prejudiced thereby) give any consent, approval or
licence required of the Agent under the terms of this Agreement, save
where this Agreement expressly requires that such consent,
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approval or licence should be given only with the approval of, or on the
instructions of, the Lenders or the Majority Lenders.
16.16 Evidence
--------
The Agent may accept a certificate signed by any director or the
secretary of a Borrower as to any fact or matter on which the Agent may
need or wish to be satisfied as sufficient evidence thereof and a like
certificate that any assets in the opinion of the person so certifying
have a particular value or produce a particular income or are suitable
for a particular purpose as sufficient evidence that they have that value
or produce that income or are so suitable and the Agent shall not be
bound in any such case to call for further evidence or be responsible for
any loss that may be occasioned by its failing to do so.
16.17 Security Documents
------------------
16.17.1 The Agent shall accept without investigation, requisition or
objection such title as any person may have to the undertaking,
property and assets which are subject to the Security Documents
and shall not be bound or concerned to examine or enquire into
nor be liable for any defect or failure in the title of any
person whether such defect or failure was known to the Agent or
might have been discovered upon examination or enquiry and
whether capable of remedy or not nor for any failure on the part
of the Agent to give notice to any third party of the Security
Documents to which it is party or otherwise perfect or register
the security thereby created.
16.17.2 The Agent shall hold the benefit of the Security Documents upon
trust for itself, the Issuing Bank and the Lenders. The
applicable perpetuity period for trusts arising under Financing
Documents shall be 80 years.
16.17.3 The Issuing Bank and each of the Lenders hereby confirms and
agrees that it does not wish to be registered in accordance with
Rule 146 of the Land Registration Rules 1925 as the joint
proprietor of any mortgage or charge created pursuant to any
Financing Document and accordingly authorises the Agent to hold
such mortgage or charge in its sole name as agent and trustee
for the Agent, the Issuing Bank, the Lenders and General
Electric Capital Corporation and hereby request H.M. Land
Registry to register the Agent as the sole proprietor of any
such mortgage or charge.
16.18 Distribution of Proceeds of Enforcement
---------------------------------------
16.18.1 In this Clause 16.18 the following expressions shall have the
following meanings:
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"Lender Outstandings" means, in respect of a Lender, the
-------------------
aggregate amount owed to such Lender by way of principal,
interest, commission and fees in respect of the Facility; and
"Total Outstandings" means, at any time, the aggregate amount
------------------
of all the Lender Outstandings at such time.
16.18.2 On the enforcement of all or any of the Security Documents, the
Agent shall be entitled to deduct from the proceeds of such
enforcement its costs, charges and expenses incurred in
connection with such enforcement together with an amount equal
to all sums due to it as agent or trustee and due to the Issuing
Bank hereunder and under the Security Documents before
distributing the balance by forwarding to each Lender (including
itself) an amount equal to such remaining proceeds multiplied
by:
Lender Outstandings of such Lender
----------------------------------
Total Outstandings
where all Lender Outstandings and the Total Outstandings are
calculated as at the date of distribution.
16.18.3 For the purpose of this Clause 16.18, where any part of any
Lender Outstandings is denominated in a currency other than
Sterling, any distribution shall be calculated on the basis of
the Sterling Equivalent of such part calculated at the date of
distribution. However, an actual distribution may, in the
Agent's discretion, be made in the currencies of the Lender
Outstandings and for this purpose the Agent is authorised by the
Borrowers to convert any proceeds of enforcement (including the
proceeds of any previous conversion under this Clause) from
their existing currency of denomination into any other currency
at such rate or rates of exchange and at such time as the Agent
thinks fit.
16.18.4 The Agent shall notify the Lenders of any proposed distribution
and the proposed date of distribution and each of the Lenders,
shall provide to the Agent a calculation of what is due to it in
respect of the sums referred to in Clause 16.18.1. The Agent
shall send copies of all such calculations to all other parties
and, in the absence of manifest error, the Agent shall make the
distributions on the basis of such calculations.
16.18.5 The Agent may, at its discretion, accumulate proceeds of
realisations on an interest bearing account in its own name
until there is a minimum of (Pounds)10,000 to distribute under
Clause 16.18.2.
16.19 In respect of any determination, certificate or opinion made or given by
the Agent hereunder, the Agent shall as soon as reasonably practicable
provide the Borrowers (or the relevant Borrower) with details of how it
has arrived at the determination or any conclusion or opinion expressed
PROVIDED THAT the Agent shall have no obligation to disclose any matter
which it deems to be confidential.
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17. FEES AND EXPENSES
-----------------
17.1 Expenses
--------
The Borrowers shall on demand pay all expenses reasonably incurred
(including, but not limited to, legal, valuation and accounting fees) and
any VAT thereon:
(a) by the Agent and the Issuing Bank in connection with the
negotiation, preparation, administration, and execution of the
Financing Documents and the other documents contemplated hereby or
thereby now or at any time hereafter;
(b) by the Agent, the Issuing Bank and the Lenders in connection with
the granting of any release, waiver or consent or in connection
with any amendment or variation of any Financing Document,
including any amount which the Lenders are obliged to reimburse
the Participants in respect thereof;
(c) by the Agent, the Issuing Bank and the Lenders in enforcing,
perfecting, protecting or preserving (or attempting so to do) any
of their rights, or in suing for or recovering any sum due from
any Borrower or any other person under any Financing Document
including any amount which any Lender is obliged to reimburse any
Participant in respect thereof; and
(d) by Lloyds in connection with the negotiation, preparation,
administration and execution of this Agreement, the Participation
Agreement, the Deed of Subordination, the Debentures and the deeds
of release granted by Lloyds pursuant to Clause 2(a)(x) and the
negotiation, preparation, administration, execution and
enforcement of the Guarantees and the Lloyds Deposit Agreements.
17.2 Closing and Collateral Management Fees
--------------------------------------
The Borrowers shall pay to the Agent closing and collateral management
fees in accordance with the terms of the Fees Letter. For the avoidance
of doubt, all liabilities and obligations of the Borrowers under the Fees
Letter will be deemed to be incurred hereunder and will be secured by the
Security Documents.
17.3 Non-utilisation Fee
-------------------
The Borrowers shall pay a non-utilisation fee in Sterling to the Agent
for the account of the Lenders at the rate of 0.5% cent. per annum on the
difference from time to time between (i) the Sterling Equivalent of the
Total Commitments and (ii) the total of all Advances. Such fee shall
accrue day to day on the basis of a 365 day year and the number of days
elapsed in respect of each successive period of one month from the date
hereof and shall be paid in arrear on the first Business Day
-87-
<PAGE>
after the end of each such period and on the date when the Total
Commitments are reduced to zero.
17.4 Guarantee Fees
--------------
The Borrowers shall pay a guarantee fee in Sterling to the Agent for the
account of the Issuing Bank at the rate of 2.5 per cent. per annum on the
daily Outstandings. Such fee shall accrue from day to day on the basis of
a 365 day year and the number of days elapsed in respect of each
successive period of one month from the date hereof and shall be paid in
arrear on the first Business Day after the end of each such period.
17.5 Documentary Taxes Indemnity
---------------------------
All stamp, documentary, registration or other like duties or Taxes,
including any penalties, additions, fines, surcharges or interest
relating thereto, which are imposed or chargeable on or in connection
with the Financing Documents shall be paid by the Borrowers PROVIDED THAT
the Agent shall be entitled but not obliged to pay any such duties or
Taxes (whether or not they are its primary responsibility), whereupon the
Borrowers shall on demand indemnify the Agent against those duties or
Taxes and against any costs and expenses so incurred by the Agent in
discharging them.
17.6 Cancellation Fee
----------------
In the event that the Borrowers cancel the undrawn Facility and Guarantee
Facility pursuant to Clause 8, the Borrowers shall pay a cancellation fee
in Dollars to the Agent for the account of the Lenders in an amount equal
to
(i) $350,000 if the Borrowers terminate the Facility and the Guarantee
Facility on or before the first anniversary of the Completion
Date;
(ii) $175,000 if the Borrowers terminate the Facility and the Guarantee
Facility after the first anniversary of the Completion Date but on
or prior to the second anniversary of the Completion Date; and
(iii) $87,500 if the Borrowers terminate the Facility and the Guarantee
Facility after the second anniversary of the Completion Date but
on or prior to the third anniversary of the Completion Date
payable on the termination of the Facility and Guarantee Facility in
accordance with Clause 8 PROVIDED THAT no cancellation fee shall be
payable if the Borrowers refinance the obligations under the Financing
Documents with the Agent on terms and conditions acceptable to the Agent.
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17.7 VAT
---
17.7.1 All payments made by a Borrower under the Financing Documents
are calculated without regard to VAT. If any such payment
constitutes the whole or any part of the consideration for a
taxable or deemed taxable supply (whether that supply is taxable
pursuant to the exercise of an option or otherwise) by the
Agent, the Issuing Bank or a Lender, the amount of that payment
shall be increased by an amount equal to the amount of VAT which
is chargeable in respect of the taxable supply in question.
17.7.2 No payment or other consideration to be made or furnished by the
Agent, the Issuing Bank or a Lender, to a Borrower pursuant to
or in connection with the Financing Documents or any transaction
or document contemplated herein or therein may be increased or
added to by reference to (or as a result of any increase in the
rate of) any VAT which shall be or may become chargeable in
respect of any taxable supply.
17.8 Indemnity Payments
------------------
Where in the Financing Documents a Borrower has an obligation to
indemnify or reimburse the Agent, the Issuing Bank or a Lender in respect
of any loss or payment, the calculation of the amount payable by way of
indemnity or reimbursement shall take account of the likely Tax treatment
in the hands of the Agent, the Issuing Bank or the relevant Lender, as
the case may be, (as determined by the relevant party's auditors) of the
amount payable by way of indemnity or reimbursement and of the loss or
payment in respect of which that amount is payable.
17.9 Lloyds Administration Fees
--------------------------
The Borrowers shall pay to Lloyds Bank plc within 7 Business Days of
receipt of an invoice from time to time an administration fee for time
spent by its personnel in administering, and performing its obligations
and duties under, the Participation Agreement which shall be payable at
the rate of (Pounds)100 per man hour spent over the period covered by
each such invoice, together with any VAT chargeable thereon.
18. MISCELLANEOUS
-------------
18.1 Severance
---------
If at any time any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any respect under the law of any jurisdiction
neither the legality, validity or enforceability of the remaining
provisions hereof nor the legality, validity or enforceability of such
provision under the law of any other jurisdiction shall in any way be
affected or impaired thereby.
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<PAGE>
18.2 Waivers, Remedies Cumulative
----------------------------
No failure to exercise, nor any delay in exercising, on the part of the
Agent, the Issuing Bank or any Lender, any right or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial
exercise of any right or remedy prevent any further or other exercise
thereof or the exercise of any other right or remedy. The rights and
remedies herein provided are cumulative and not exclusive of any rights
or remedies provided by law.
18.3 Further Assurance
-----------------
Each of the Borrowers expressly agree that at any time and from time to
time at its cost and expense it will upon the request of the Agent
execute and deliver such further documents and do such other acts and
things as the Agent on behalf of the Issuing Bank and the Lenders may
reasonably request in order to further fulfil the obligations of the
Borrowers hereunder or under any of the Financing Documents.
18.4 Counterparts
------------
This Agreement may be executed in any number of counterparts and all of
such counterparts taken together shall be deemed to constitute one and
the same instrument.
18.5 Entire Agreement
----------------
This Agreement constitutes the entire Agreement between the parties
hereto in relation to the Facility, the Guarantee Facility and the Loan
and supersedes all previous proposals, agreements and other written and
oral communications in relation thereto.
18.6 Joint and Several Liability
---------------------------
Wherever in this Agreement it is specified that the Borrowers shall be
liable to make any payment such liability of the Borrowers shall be joint
and several. Each Borrower agrees and consents to be bound by this
Agreement notwithstanding that the other Borrower may not execute this
Agreement or may not effectually be bound and notwithstanding this
Agreement may be void, voidable or unenforceable against the other
Borrower, whether or not the deficiency is known to the Agent, the
Issuing Bank or any of the Lenders. The Agent, the Issuing Bank and any
of the Lenders shall be at liberty to release either of the Borrowers
from this Agreement and to compound with or otherwise vary or agree to
vary the liability of or to grant time to, indulgence to, or make other
arrangements with, any Borrower or any other person, without prejudicing
or affecting the rights or remedies of the Agent, the Issuing Bank or any
of the Lenders against the other Borrower.
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19. NOTICES
-------
19.1 Method
------
Each communication to be made hereunder shall be made in writing in
English but, unless otherwise provided, may be made by facsimile
transmission or letter.
19.2 Delivery
--------
Any communication or document to be made or delivered by one party to
another pursuant to this Agreement shall (unless the one has by 15 days'
written notice to the other specified another address) be made or
delivered to that other party, in the case of the Borrowers, the Issuing
Bank and the Agent at the respective addresses given in Clause 19.3, and
in the case of notice to either Borrower with a copy to Tyco Parent and
in the case of notice to the Agent with copies as specified, in the case
of the Lenders at the respective addresses given in Schedule 1 or, as the
case may be, the Schedule of the relative Transfer Certificate.
19.3 Addresses
---------
The addresses referred to in Clause 19.2 are:
(A) the Borrowers:
Tyco Toys (UK) Limited
Tyco House
Third Avenue
Globe Park
Marlow
Buckinghamshire SL7 1YF
Attention: Brian Triptree
Fax: 01628 488 222
Matchbox Toys Limited
Tyco House
Third Avenue
Globe Park
Marlow
Buckinghamshire SL7 1YF
Attention: Brian Triptree
Fax: 01628 488 222
with a copy to:
Tyco Toys, Inc.
6000 Midlantic Drive
-91-
<PAGE>
Mt. Laurel
New Jersey 08054
USA
Attention: General Counsel
Fax: 0101 609 273 2885
(B) the Issuing Bank:
General Electric Capital Corporation
501 Merritt Seven
Norwalk
CT 06851
USA
Attention: Vice President - Portfolio/Tyco
Fax: 0101 203 840 4680
with a copy to:
General Electric Capital Corporation
501 Merritt Seven
3rd Floor
Norwalk
CT 06851
USA
Attention: Legal Counsel/Tyco
Fax: 0101 203 840 4520
and a further copy to:
Wilde Sapte
1 Fleet Place
London
EC4M 7WS
Attention: Howard Barrie
Fax: 0171 246 7777
(C) the Agent:
General Electric Capital Corporation
501 Merritt Seven
Norwalk
CT 06851
USA
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<PAGE>
Attention: Vice President - Portfolio/Tyco
Fax: 0101 203 840 4680
with a copy to:
General Electric Capital Corporation
501 Merritt Seven
3rd Floor
Norwalk
CT 06851
USA
Attention: Legal Counsel/Tyco
Fax: 0101 203 840 4520
and a further copy to:
Wilde Sapte
1 Fleet Place
London
EC4M 7WS
Attention: Howard Barrie
Fax: 0171 246 7777
19.4 Deemed Receipt
--------------
19.4.1 Any notice given by the Agent to either of the Borrowers shall
be deemed to have been received:
(a) If sent by facsimile transmission, with a confirmed
receipt of transmission from the receiving machine, on
the Business Day on which transmitted or the following
Business Day if transmitted after the normal business
hours of the recipient;
(b) in the case of a written notice lodged by hand
(including, without limitation, reputable international
courier service), on the Business Day of actual delivery
or the following Business Day if delivered after the
normal business hours of the recipient;
(c) if posted in the United Kingdom to an address in the
United Kingdom, on the third Business Day following the
day on which it was properly despatched by first class
mail postage prepaid; and
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<PAGE>
(d) if posted inside or outside the United Kingdom to an
address outside or inside the United Kingdom
respectively, on the seventh Business Day following the
day on which it was properly despatched by airmail
postage prepaid.
19.4.2 Any notice given to the Agent, the Issuing Bank or the Lenders
shall be deemed to have been given only on actual receipt.
19.5 Notices to the Lenders
----------------------
Any notice to be given by either of the Borrowers to the Lenders or any
of them may be given by serving such notice on the Agent together with a
written instruction that such notice is to be treated as notice to one or
more specified Lenders. In the absence of such written instructions it
shall be deemed to be a notice to the Agent alone.
20. ASSIGNMENTS AND TRANSFERS
-------------------------
20.1 Benefit of Agreement
--------------------
This Agreement shall be binding upon and enure to the benefit of each
party hereto and its successors and assigns.
20.2 Assignments and Transfers by the Borrowers
------------------------------------------
Neither Borrower shall be entitled to assign or transfer all or any of
its rights and benefits under this Agreement.
20.3 Assignments and Transfers by Lenders
------------------------------------
20.3.1 Any Lender may at any time assign all or any of its rights and
benefits under any of the Financing Documents or transfer in
accordance with Clause 20.3.3 all or any of its rights, benefits
and obligations under any of the Financing Documents. Any
assignment by a Lender of all or any of its rights and benefits
under this Agreement to a person which is not (i) an Affiliate
of such Lender or of another Lender or (ii) General Electric
Capital Corporation or an Affiliate thereof, shall require the
consent of the Borrowers as to the identity of such assignee
(but not as to the terms of any such assignment), which consent
shall not be unreasonably withheld or delayed. No consent of the
Borrowers shall in any event be required with respect to a
participation.
20.3.2 If any Lender assigns all or any of its rights and benefits
under any of the Financing Documents in accordance with Clause
20.3.1, then, unless and until the assignee has confirmed to the
Agent, the Issuing Bank and the other Lenders that it shall be
under the same obligations towards each of them as it would have
been under if it had been a party hereto as a
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<PAGE>
Lender, the Agent, the Issuing Bank and the other Lenders shall
not be obliged to recognise such assignee as having the rights
against each of them which it would have had if it had been such
a party hereto.
20.3.3 If any Lender (the "Existing Lender") wishes to transfer all or
---------------
any part of its Commitment or Contribution to another bank or
financial institution (the "Lender Transferee"), such transfer
-----------------
may be effected by way of a novation by the delivery to, and the
execution by, the Agent of a duly completed Transfer
Certificate.
20.3.4 On the date specified in the Transfer Certificate:
(a) to the extent that in the Transfer Certificate the
Existing Lender seeks to transfer its Commitment or
Contribution, the Borrowers and the Existing Lender shall
be released from further obligations to each other under
this Agreement and their respective rights against each
other shall be cancelled (such rights and obligations
being referred to in this Clause 20.3.4 as "Discharged
----------
Rights and Obligations");
----------------------
(b) each Borrower and the Lender Transferee shall assume
obligations towards each other and/or acquire rights
against each other which differ from the Discharged
Rights and Obligations only insofar as such Borrower and
the Lender Transferee have assumed and/or acquired the
same in place of such Borrower and the Existing Lender;
(c) the Agent, the Issuing Bank, the Borrowers, the Lender
Transferee and the other Lenders shall acquire the same
rights and assume the same obligations among themselves
as they would have acquired and assumed had the Lender
Transferee been a party hereunder as a Lender with the
rights and/or the obligations acquired or assumed by it
as a result of the transfer; and
(d) a proportion of the Existing Lender's rights under the
Security Documents, equal to the proportion of the
Existing Lender's rights under this Agreement being
transferred, shall automatically be transferred to the
Lender Transferee.
20.3.5 The Agent will promptly complete Transfer Certificates on
request by an Existing Lender and upon payment by the Lender
Transferee of a fee of $200 to the Agent. The Borrowers, the
Issuing Bank and each of the Lenders hereby irrevocably
authorise the Agent to execute any duly completed Transfer
Certificate on its behalf provided that such authorisation does
not extend to the execution of a Transfer Certificate on behalf
of either the Existing Lender or the Lender Transferee named
therein.
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<PAGE>
20.3.6 The Agent shall promptly notify the Borrowers of the receipt and
execution on its behalf by the Agent of any Transfer
Certificate.
20.3.7 The Borrowers shall be under no obligation to pay any greater
amount under this Agreement following an assignment or transfer
by a Lender of any of its rights or obligations pursuant to the
foregoing provisions of this Clause 20 if, in the circumstances
existing at the time of such assignment or transfer, such
greater amount would not have been payable but for the
assignment or transfer.
20.3.8 Each Borrower and the other members of the Charging Group shall
assist any Lender permitted to assign or transfer any of its
rights and benefits under the Financing Documents under this
Clause 20 or wishing to grant a sub-participation in respect to
any of the same in whatever manner necessary in order to enable
or effect any such assignment, transfer or participation,
including the execution and delivery of any and all agreements
and other documents and instruments as shall be requested and
the preparation and delivery of information materials,
appraisals or other documents for, and the participation of
relevant management in meetings with, potential assignees,
transferees or sub-participants, subject to the provisions of
Clause 20.4 hereof. Each Borrower and other members of the
Charging Group shall certify the correctness, completeness and
accuracy of all descriptions of any member of the Charging Group
or any of their Subsidiaries and their affairs contained in any
such materials and all information provided by it and included
in such materials.
20.4 Disclosure of Information
-------------------------
The Agent, the Issuing Bank and the Lenders may disclose any information
furnished or made available to them hereunder by the Borrowers to each
other, their professional advisers and to any actual or potential
assignee, transferee or sub-participant subject to the condition (except
where such information is available in the public domain and except where
such disclosure is required by law) that each of the same keeps
confidential any such information.
21. LAW AND JURISDICTION
--------------------
21.1 Law
---
This Agreement shall be governed by, and construed in all respects in
accordance with, English law.
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21.2 Jurisdiction
------------
The parties agree that the English courts shall have non-exclusive
jurisdiction in relation to any dispute or controversy arising out of or
in respect of this Agreement and that any judgment or order of an English
court made in this respect is conclusive and binding on them and may be
enforced against them in the courts of any other jurisdiction and the
Agent hereby irrevocably submits to the non-exclusive jurisdiction of
such court and irrevocably appoints GE Global Project and Structured
Finance Group Limited currently at 20 St James's Street, London SW1A 1ES
(to be marked for the attention of George Tappert, Managing Director) to
accept service of any proceedings in such court on its behalf. Nothing in
this Clause limits the right of the Agent, the Issuing Bank or any Lender
to bring proceedings in any other court of competent jurisdiction or
concurrently in more than one jurisdiction.
21.3 For the purposes of this Agreement the Borrowers hereby:
(i) waive any objections on the grounds of venue or forum non
conveniens or any similar grounds; and
(ii) consent to service of process by mail or in any other manner
permitted by the relevant law.
IN WITNESS whereof the parties hereto have caused this Agreement to be duly
executed on the date set out above.
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<PAGE>
The Lender
- ----------
SIGNED by ) K.G.SANKEY
as Attorney for and on behalf of )
LLOYDS BANK PLC )
in the presence of : ) S.SPRING
S.SPRING )
The Agent
- ---------
SIGNED by ) P.WALSH
GENERAL ELECTRIC )
CAPITAL CORPORATION )
acting by )
as Attorney who under the laws )
of the State of New York is acting )
under the authority of )
General Electric Capital )
Corporation )
The Participant
- ---------------
SIGNED by ) P.WALSH
GENERAL ELECTRIC )
CAPITAL CORPORATION )
acting by P.WALSH )
who under the laws of the State of )
New York is acting under the )
authority of General Electric )
Capital Corporation )
The Borrowers
- -------------
SIGNED by B. TRIPTREE ) B.TRIPTREE
for and on behalf of )
MATCHBOX TOYS LIMITED )
SIGNED by B. TRIPTREE ) B.TRIPTREE
for and on behalf of )
TYCO TOYS (U.K.) LIMITED )
-147-
<PAGE>
EXHIBIT 10.53
EXECUTION COPY
RECEIVABLES TRANSFER AGREEMENT
Dated as of February 24, 1995
by and between
Tyco Manufacturing Corp.
and
Tyco Funding I Corporation
and
Tyco Funding II Corporation
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I................................................................... 1
DEFINITIONS................................................................. 1
SECTION 1.01. Definitions and Conventions............................. 1
SECTION 1.02. Other Terms and Interpretation.......................... 16
SECTION 1.03. Rounding................................................ 16
ARTICLE II.................................................................. 16
TRANSFERS OF RECEIVABLES.................................................... 16
SECTION 2.01. Agreement to Transfer to TFC I.......................... 16
SECTION 2.02. Agreement to Transfer to TFC II......................... 18
SECTION 2.03. Grant of Security Interest.............................. 19
ARTICLE III
CONDITIONS OF SALE.......................................................... 20
SECTION 3.01. Conditions Precedent to the Initial Sale................ 20
SECTION 3.02. Conditions Precedent to All Sales....................... 22
ARTICLE IV.................................................................. 23
REPRESENTATIONS, WARRANTIES AND COVENANTS................................... 23
SECTION 4.01. Representations and Warranties of the Company........... 23
SECTION 4.02. Covenants of the Company................................ 35
SECTION 4.03. Negative Covenants of the Company....................... 44
SECTION 4.04. Restatement of Representations, Warranties and
Covenants............................................. 47
SECTION 4.05. Breach of Representations, Warranties or Covenants...... 47
ARTICLE V................................................................... 47
TFC I LOANS TO THE COMPANY.................................................. 47
SECTION 5.01. TFC I Loans............................................. 47
SECTION 5.02. Notices Relating to Loans............................... 48
SECTION 5.03. Disbursement of Loan Proceeds........................... 48
SECTION 5.04. Company Note I.......................................... 48
SECTION 5.05. Principal Repayments.................................... 48
SECTION 5.06. Interest................................................ 49
SECTION 5.07. Time and Method of Payments............................. 49
ARTICLE VI
TFC II LOANS TO THE COMPANY................................................. 49
SECTION 6.01. TFC II Loans............................................ 50
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 6.02. Notices Relating to Loans............................... 50
SECTION 6.03. Disbursement of Loan Proceeds........................... 50
SECTION 6.04. Company Note II......................................... 50
SECTION 6.05. Principal Repayments.................................... 51
SECTION 6.06. Interest................................................ 51
SECTION 6.07. Time and Method of Payments............................. 51
ARTICLE VII
COLLATERAL SECURITY......................................................... 52
SECTION 7.01. Security Interest....................................... 52
SECTION 7.02. Other Collateral; Rights in Receivables................. 52
SECTION 7.03. Indebtedness Secured.................................... 52
SECTION 7.04. Further Action Evidencing Security Interest............. 53
ARTICLE VIII
INDEMNIFICATION............................................................. 53
SECTION 8.01. Indemnification......................................... 53
SECTION 8.02. Assignment of Indemnities............................... 55
ARTICLE IX
MISCELLANEOUS............................................................... 55
SECTION 9.01. Notices, Etc............................................ 55
SECTION 9.02. No Waiver; Remedies..................................... 56
SECTION 9.03. Binding Effect; Assignability........................... 56
SECTION 9.04. No Proceedings.......................................... 56
SECTION 9.05. Amendments; Consents and Waivers........................ 57
SECTION 9.06. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL................................................. 57
SECTION 9.07. Execution in Counterparts; Severability................. 58
SECTION 9.08. Descriptive Headings.................................... 58
SECTION 9.09. No Setoff............................................... 58
SECTION 9.10. Further Assurances...................................... 58
SECTION 9.11. Third-Party Beneficiaries............................... 58
SECTION 9.12. Assignment of Agreement................................. 59
EXHIBIT 1A - FORM OF ASSIGNMENT I
EXHIBIT 1B - FORM OF ASSIGNMENT II
EXHIBIT 2A - FORM OF COMPANY NOTE I
EXHIBIT 2B - FORM OF COMPANY NOTE II
EXHIBIT 3 - FORM OF LOCKBOX AGREEMENT
EXHIBIT 4 - FORM OF OPINION OF COUNSEL OF COMPANY
EXHIBIT 5 - FORM OF [TFC I][TFC II] SALE PRICE NOTE
SCHEDULE I - FORM OF Written Contracts
SCHEDULE II - FORM OF Collection Policy
SCHEDULE III - Addresses of Company
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SCHEDULE IV - LockBox Banks and LockBox Accounts of Company
SCHEDULE V - Trade Names,"Doing Business Names",
Fictitious Names and Assumed Names of the Company
</TABLE>
iii
<PAGE>
Exhibit 10.53
RECEIVABLES TRANSFER AGREEMENT, dated as of February 24, 1995 (this
"Agreement"), among TYCO MANUFACTURING CORP. (the "Company"), an Oregon
corporation, TYCO FUNDING I CORPORATION, a Delaware corporation ("TFC I") and
TYCO FUNDING II CORPORATION ("TFC II"), a Delaware corporation (TFC I and TFC
II, collectively, the "Funding Corporations").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Funding Corporations have been formed for the sole
purpose of purchasing and financing such purchases by borrowing funds from
Redwood Receivables Corporation ("Redwood") and granting to Redwood a security
interest in, all trade receivables originated by the Company and Tyco
Industries, Inc.; and
WHEREAS, the Company intends to sell, and the Funding Corporations
intend to purchase, such trade receivables, from time to time, as described
herein;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions and Conventions. As used herein, the
---------------------------
following terms shall have the following meanings:
"Accession Agreement" means an Accession Agreement substantially
-------------------
in the form of Exhibit A to the Collateral Agent Agreement.
"Accumulated Funding Deficiency" shall have the meaning provided in
------------------------------
Section 412 of the Code and Section 302 of ERISA, whether or not waived.
"Advance" means each of the advances made by Redwood to either TFC I
-------
or TFC II under the Funding Agreement.
"Advances Outstanding" means, with respect to each Funding
--------------------
Corporation, for any day, the aggregate principal amount of Advances outstanding
on such day to such Funding Corporation, after giving effect to all repayments
by and issuances of Advances to such Funding Corporation on such day; provided,
however, that Advances which have been paid with proceeds of a payment under the
Policy shall continue to remain Advances Outstanding for purposes of this
Agreement until FSA has been paid as subrogee to the rights of Redwood as Lender
under the Funding Agreement or reimbursed pursuant to the Insurance and
<PAGE>
Indemnity Agreement for all payments under the Policy used to repay such
Advances and all amounts due in connection therewith under the Insurance and
Indemnity Agreement, as evidenced by a written notice from FSA delivered to the
Operating Agent, and FSA shall be deemed to be the "Lender" thereof (as that
term is used in the Funding Agreement) to the extent of any payments thereon
made by FSA.
"Adverse Claim" means any claim of ownership or any lien, security
-------------
interest, title retention, trust or other charge or encumbrance, or other type
of preferential arrangement having the effect or purpose of creating a lien or
security interest, other than the security interest created under the Funding
Agreement.
"Affected Party" means Redwood, the Collateral Agent, the Liquidity
--------------
Agent, any of the Liquidity Lenders, the Operating Agent, any of the Letter of
Credit Providers, FSA or any affiliate of the foregoing persons.
"Affiliate" means, as to any Person, any other Person that, directly
---------
or indirectly, is in control of, is controlled by, or is under common control
with, such Person within the meaning of control under Section 15 of the
Securities Act of 1933, as amended.
"Agreement" means this Receivables Transfer Agreement between the
---------
Company and the Funding Corporations.
"Assignment I" has the meaning specified in Section 2.01(c).
------------
"Assignment II" has the meaning specified in Section 2.02(c).
-------------
"Assignments" means Assignment I and Assignment II, collectively.
-----------
"Billed Amount" means, with respect to any Receivable, the net amount
-------------
billed on the Billing Date to the related Obligor with respect thereto.
"Billing Date" means the date on which the invoice with respect to a
------------
Receivable was generated.
"Borrowing Base Certificate" means the certificate designated as such
--------------------------
pursuant to the Funding Agreement.
"Business Day" means any day of the year, other than a Saturday or
------------
Sunday, that in the City of New York is neither a legal holiday nor a day on
which banking institutions are authorized or obligated by law or executive order
to be closed.
2
<PAGE>
"Code" means the Internal Revenue Code of 1986, including, unless the
----
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Collateral" has the meaning specified in Section 7.01.
----------
"Collateral Agent" means GE Capital or such other party designated as
----------------
agent for Redwood and FSA and the other secured parties under the Collateral
Agent Agreement and this Agreement.
"Collateral Agent Agreement" means the Amended and Restated Collateral
--------------------------
Agent and Security Agreement, dated as of February 24, 1995, entered into by
Redwood with the Collateral Agent, the Letter of Credit Agent, the Liquidity
Agent, the Depositary and each Transaction Credit Provider, as amended,
modified, restated or supplemented from time to time.
"Collateral Obligations" means all obligations of the Company under
----------------------
Sections 4.05 and 8.01.
"Collection Account" means the deposit or trust account maintained
------------------
with the Depositary as described in Section 6.01(b) of the Funding Agreement.
"Collections" means, with respect to any Receivable, all collections
-----------
and other Proceeds of such Receivable (including late charges, fees and interest
arising thereon and all recoveries with respect to Receivables that have been
written off as uncollectible but excluding the Sale Price therefor).
"Commercial Paper" means commercial paper issued by Redwood.
----------------
"Commitment Termination Date" means the earlier of (a) the date so
---------------------------
designated pursuant to Section 9.01 of the Funding Agreement as a result of a
Termination Event and (b) the Termination Date; provided, however, that if each
of the Funding Corporations has not on or before the 270th day prior to the
Termination Date (i) entered into an agreement with Redwood, the Operating Agent
and FSA renewing or extending the Termination Date, or (ii) entered into a firm
commitment with a counterparty, acceptable to the Operating Agent and FSA, to
purchase from Redwood at par plus accrued interest all Advances Outstanding as
of the Termination Date, then if the Commitment Termination Date has not already
occurred pursuant to clause (a), the Commitment Termination Date shall be the
date that is the last day of the Clean Down Period Part 3 (as defined in the
Funding Agreement) occurring in the year 2000, but in no event later that April
1, 2000.
3
<PAGE>
"Commonly Controlled Entity" means the Company and any entity, whether
--------------------------
or not incorporated, affiliated with the Company pursuant to Section 414(b),
(c), (m) or (o) of the Code.
"Company" means Tyco Manufacturing Corp. as the transferor of
-------
Receivables under this Agreement .
"Company Interest Rate" has the meaning specified in Section 5.06.
---------------------
"Company Note I" has the meaning specified in Section 5.04.
--------------
"Company Note II" has the meaning specified in Section 6.04.
---------------
"Contract" means an agreement (or agreements) (including invoices)
--------
pursuant to, or under which, an Obligor shall be obligated to pay for services
rendered or merchandise or goods sold to such Obligor by the Company from time
to time.
"Credit and Collection Policies" means the credit, collection,
------------------------------
customer relations and service policies of the Company in effect on the
Effective Date, as set forth in writing and delivered to Redwood, the Operating
Agent, the Collateral Agent and FSA on or before the Effective Date pursuant to
Section 3.01(p) of the Funding Agreement, and as such policies may hereafter be
amended, modified or supplemented from time to time with the prior written
consent of the Operating Agent and FSA.
"Dealer Agreement" means any dealer agreement entered into by Redwood
----------------
for the distribution of Commercial Paper.
"Debt" of any Person means (a) indebtedness of such Person for
----
borrowed money, (b) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) obligations of such Person to pay the
deferred purchase price of property or services (excluding trade payables
incurred in the ordinary course of business), (d) obligations of such Person as
lessee under leases which have been or should be, in accordance with GAAP,
recorded as capital leases, (e) obligations secured by any lien or other charge
upon property or assets owned by such Person, even though such Person has not
assumed or become liable for the payment of such obligations, (f) obligations of
such Person under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or obligations of
others of the kinds referred to in clauses (a) through (e) above, and (g)
liabilities in respect of unfunded vested benefits under plans covered by ERISA.
For the purposes hereof, the term "guarantee" shall include any agreement,
whether such agreement is on a
4
<PAGE>
contingency or otherwise, to purchase, repurchase or otherwise acquire Debt of
any other Person, or to purchase, sell or lease, as lessee or lessor, property
or services, in any such case primarily for the purpose of enabling another
person to make payment of Debt, or to make any payment (whether as an advance,
capital contribution, purchase of an equity interest or otherwise) to assure a
minimum equity, asset base, working capital or other balance sheet or financial
condition, in connection with the Debt of another Person, or to supply funds to
or in any manner invest in another Person in connection with Debt of such
Person.
"Defaulted Receivable" means a Receivable (a) as to which any payment,
--------------------
or part thereof, remains unpaid for more than 90 days from the Maturity Date for
such Receivable, or (b) as to which the Obligor thereof has taken any action, or
suffered any event to occur, of the type described in Section 9.01(c) of the
Funding Agreement (except that such action or event shall be taken by or occur
with respect to such Obligor, rather than by or to the parties mentioned in such
Section), or (c) which otherwise would be determined to be uncollectible and
written off in accordance with the Credit and Collection Policies.
"Depositary" means Bankers Trust Company, or any other Person
----------
designated as the successor Depositary from time to time in its capacity as
issuing and paying agent or trustee in connection with the issuance of
Commercial Paper by Redwood.
"Depositary Agreement" means the Depositary Agreement, dated as of
--------------------
March 15, 1994, between Redwood and the Depositary and consented to by the
Liquidity Agent.
"Dollar" and "$" means lawful currency of the United States of
------
America.
"Effective Date" means the date of this Agreement.
--------------
"Eligible Customer" means any Obligor which is not an Excluded
-----------------
Customer.
"Eligible Receivable" has the meaning specified in the Funding
-------------------
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
it may be amended from time to time, and the regulations promulgated thereunder.
"Event of Servicer Termination" has the meaning specified in Section
-----------------------------
9.02 of the Funding Agreement.
"Excluded Customer" means an Obligor which is (a) an Affiliate of the
-----------------
Company or TFC I or TFC II, (b) a Governmental
5
<PAGE>
Authority, (c) domiciled outside the United States or (d) an Obligor listed on
Schedule 3 to the Funding Agreement as revised from time to time in good faith
by or with the prior written consent of the Operating Agent and FSA pursuant to
a letter in the form of Annex A thereto.
"Excluded Receivables" means any Receivables agreed by the Company and
--------------------
either TFC I or TFC II, as the case may be, with the prior written consent of
the Operating Agent and FSA, to be excluded from any Sale.
"FSA" means Financial Security Assurance Inc., a stock insurance
---
company organized and created under the laws of the State of New York, and any
successors thereto or assigns thereof.
"Funding Agreement" means the Receivables Funding and Servicing
-----------------
Agreement, dated as of February 24, 1995 among the Funding Corporations (as
Borrowers), Redwood (as Lender), the Operating Agent, the Collateral Agent, FSA
and the Company (as Servicer).
"Funding Corporations" means, collectively TFC I and TFC II.
--------------------
"Funding Excess" means a Borrowing Excess as defined in the Funding
--------------
Agreement.
"GAAP" means generally accepted accounting principles as in effect in
----
the United States, consistently applied, as of the date of such application.
"GE Capital" means General Electric Capital Corporation.
----------
"Governmental Authority" means the United States of America, any
----------------------
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions thereof
or pertaining thereto.
"Governmental Consents" has the meaning specified in Section
---------------------
4.01(a)(xv).
"Income Discount Amount" means the amount calculated by the Operating
----------------------
Agent as set forth on Schedule 4 to the Funding Agreement, from time to time, at
its discretion, subject, with respect to Items E to H inclusive in the "Input
Table" of such Schedule 4 and the definitions set forth on such Schedule 4
relating to such items, to the subsequent written notice to FSA and, upon notice
by FSA to the Operating Agent to the prior written consent of FSA to the next
succeeding calculation.
6
<PAGE>
"Indemnified Amounts" has the meaning specified in Section 8.01.
-------------------
"Indemnified Party" has the meaning specified in Section 8.01.
-----------------
"Insurance and Indemnity Agreement" means the agreement of that name
---------------------------------
among the Funding Corporations, Redwood, GE Capital, the Servicer and FSA, dated
as of February 24, 1995.
"Intercreditor Agreement" means the Intercreditor Agreement, dated as
-----------------------
of February 24, 1995, among the Company, Tyco Industries, Inc., the Funding
Corporations, Redwood, FSA, GE Capital and other parties.
"Lender Secured Parties" has the meaning given to that term in the
----------------------
Funding Agreement.
"Letter of Credit" means the letter of credit, dated April 12, 1994,
----------------
provided by the Letter of Credit Provider pursuant to the Letter of Credit
Agreement.
"Letter of Credit Agent" means GE Capital, in its capacity as agent
----------------------
for the Letter of Credit Providers under the Letter of Credit Agreement, and its
successors and permitted assigns in such capacity.
"Letter of Credit Agreement" means the Amended and Restated Letter of
--------------------------
Credit Reimbursement Agreement, dated as of February 24, 1995, entered into by
Redwood, the Letter of Credit Agent and the Letter of Credit Provider for the
provision of credit support for the Commercial Paper and the Liquidity Loans.
"Letter of Credit Provider" means, initially, GE Capital, as provider
-------------------------
of the Letter of Credit under the Letter of Credit Agreement, and thereafter its
successors and any permitted assigns in such capacity.
"Liquidity Agent" means GE Capital and its successors and assigns as
---------------
agent for the Liquidity Lenders pursuant to the Liquidity Loan Agreement.
"Liquidity Loan Agreement" means the Amended and Restated Liquidity
------------------------
Loan Agreement, dated as of February 24, 1995, entered into by Redwood, the
Liquidity Agent and the Liquidity Lenders in connection with the provision of
liquidity support for Redwood.
"Liquidity Lenders" means, collectively, GE Capital and any other
-----------------
provider of liquidity loans under the Liquidity Loan Agreement.
7
<PAGE>
"Liquidity Loans" means borrowings by Redwood under the Liquidity Loan
---------------
Agreement.
"Lockbox" has the meaning specified in Section 4.02(b).
-------
"Lockbox Account" means a segregated deposit account described in
---------------
Section 6.01(a) of the Funding Agreement in the name of the Collateral Agent
into which all Collections in respect of Transferred Receivables owned by such
Funding Corporation shall be deposited, subject to and in accordance with such
Section 6.01.
"Lockbox Agreement" means the agreement among either TFC I or TFC II,
-----------------
as the case may be, the Operating Agent, Redwood, and a Lockbox Bank with
respect to the Lockbox Account associated with such Funding Corporation, in the
form of Exhibit 3 hereto.
"Lockbox Bank" means any of the banks approved in writing by FSA
------------
holding one or more Lockbox Accounts.
"Material Adverse Effect" means, with respect to any event or
-----------------------
circumstance and any Person, a material adverse effect with respect to:
(a) the business, financial condition, operations or assets of such
Person, or of such Person and such Person's Subsidiaries on a consolidated
basis or Tyco Industries, Inc., Tyco Investment Corp., Tyco Manufacturing
Corp., Tyco Distribution Corp., Matchbox (USA) Ltd. or Tyco Playtime, Inc.;
(b) the ability of such Person to perform its obligations under any
Related Document, any Program Document, the Receivables Transfer Agreements
or the Contracts;
(c) the validity or enforceability of, or collectibility of amounts
payable under, the Receivables Transfer Agreements, any Related Document or
any Program Document;
(d) the Receivables or the status, existence, perfection or first
priority of FSA's, Redwood's or the Collateral Agent's interest in the
Receivables, taken as a whole, free from any Adverse Claim;
(e) the validity, enforceability or collectibility of the Receivables
or Contracts;
8
<PAGE>
(f) the ability of FSA, Redwood or the Collateral Agent to liquidate,
or foreclose against, the Transferred Receivables;
(g) the practical realization by FSA, Redwood or the Collateral Agent
of any of the benefits or security afforded under the Receivables Transfer
Agreements, any Related Document or any Program Document; or
(h) the shadow rating assigned by either Rating Agency to the credit
risk exposure of FSA, if such adverse effect on the shadow rating is
notified to the Company by FSA.
"Maturity Date", for any Receivable, means the due date for payment
-------------
specified in the related Contract, or, if no date is specified, 60 days from the
Billing Date.
"Maximum Facility Commitment" has the meaning specified in the Funding
---------------------------
Agreement.
"Multiemployer Plan" means a multiemployer plan (within the meaning of
------------------
Section 4001(a)(3) of ERISA) in respect of which a Commonly Controlled Entity
makes contributions or has liability.
"Obligor" means, with respect to any Receivable, the Person primarily
-------
obligated to make payments in respect thereof.
"Operating Agent" means GE Capital as operating agent pursuant to the
---------------
Funding Agreement, together with its successors and assigns.
"Operating Agent Agreement" means the Operating Agent Agreement, dated
-------------------------
as of March 15, 1994, between Redwood and the Operating Agent.
"Outstanding Balance" of any Receivable at any time means an amount
-------------------
(not less than zero) equal to (a) its Billed Amount minus (b) all payments
received from the Obligor with respect thereto minus (c) all discounts to or any
other modifications that reduce the Billed Amount; provided, that if the
--------
Operating Agent or the Servicer makes a determination that all payments by the
Obligor with respect to such Billed Amount have been made, the Outstanding
Balance shall be zero.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
----
agency, corporation or instrumentality of the United States to which the duties
and powers of the Pension Benefit Guaranty Corporation are transferred.
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust,
9
<PAGE>
association, joint venture, Governmental Authority or any other entity of
whatever nature.
"Plan" means any pension plan (other than a Multiemployer Plan)
----
covered by Title IV of ERISA, which is maintained by a Commonly Controlled
Entity or in respect of which a Commonly Controlled Entity has liability.
"Policy" means, collectively, the financial guaranty insurance
------
policies Nos. 50352A-N and 50352B-N issued by FSA with respect to each Note (as
defined in the Funding Agreement) pursuant to the Insurance and Indemnity
Agreement, including any endorsement thereto.
"Premium" has the meaning specified in the Insurance and Indemnity
-------
Agreement.
"Premium Letter" means the side letter dated as of February 24, 1995
--------------
among FSA, GE Capital in its capacity as Operating Agent and Collateral Agent,
Redwood and the Funding Corporations in respect of the premium payable by the
Funding Corporations in consideration of the issuance of the Policy.
"Proceeds" means, with respect to any Receivable, whatever is
--------
receivable or received when such Receivable is sold, collected, exchanged or
otherwise disposed of, whether such disposition is voluntary or involuntary, and
includes all rights to payment, including returned premiums, with respect to any
insurance relating to such Receivable but excludes the Sale Price and the
Advances.
"Program Documents" means the Letter of Credit Agreement, the
-----------------
Liquidity Loan Agreement, the Depositary Agreement, the Commercial Paper, the
Operating Agent Agreement, each Accession Agreement, and the Dealer Agreements.
"Purchase Price Calculation Date" has the meaning specified in Section
-------------------------------
2.01(c) with respect to Tier I Receivables and the meaning specified in Section
2.02(c) with respect to Tier II Receivables, respectively.
"Receivable" means: (a) indebtedness of an Obligor (whether
----------
constituting an account, chattel paper, instrument or general intangible)
arising from the provision of merchandise, goods or services by the Company to
such Obligor (other than the provision of goods or services to Tyco Toys, Inc.
or any Affiliate thereof), including the right to payment of any interest or
finance charges and other obligations of such Obligor with respect thereto;
10
<PAGE>
(b) all security interests or liens and property subject thereto from
time to time purporting to secure payment by the Obligor;
(c) all guarantees, indemnities and warranties and proceeds thereof,
proceeds of insurance policies, financing statements and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of such Receivable;
(d) all Collections with respect to any of the
foregoing;
(e) all Records with respect to any of the foregoing; and
(f) all Proceeds of any of the foregoing.
"Receivables" means the Tier I Receivables and the Tier II
-----------
Receivables, collectively.
"Receivables Transfer Agreements" means this Agreement and that
-------------------------------
certain Receivables Transfer Agreement, dated as of February 24, 1995 among Tyco
Manufacturing Corp., TFC I and TFC II.
"Records" means all Contracts and other documents, agreements, books,
-------
records and other information (including, without limitation, computer programs,
tapes, disks, punch cards, data processing software and related property and
rights) prepared and maintained by the Company, the Servicer or either of the
Funding Corporations with respect to Receivables and the related Obligors.
"Redwood" means Redwood Receivables Corporation, a Delaware
-------
corporation.
"Related Documents" means the Assignments, the Insurance and Indemnity
-----------------
Agreement, the Policy, the Premium Letter, each Lockbox Agreement, the Funding
Agreement, the Intercreditor Agreement and all agreements, instruments,
certificates, financing statements or other documents required to be delivered
hereunder or thereunder.
"Reportable Event" means any of the events set forth in Section
----------------
4043(b) of ERISA or the regulations thereunder.
"Requested Amount" means the amount which the Company requested to
----------------
receive on any Purchase Price Calculation Date, pursuant to a Request Notice,
from the sale of Receivables on the related Sale Date.
11
<PAGE>
"Request Notice" means a notice in the form of a computer print-out,
--------------
tape or other form acceptable to the Funding Corporations and the Operating
Agent, which (a) by reference to an invoice register and file or microfiche of
actual invoices, (i) enables each of TFC I or TFC II, as the case may be, and
the Operating Agent to identify all Receivables to be sold on the succeeding
Sale Date by the Company to each of TFC I or TFC II, as the case may be, and the
Required Information with respect thereto and (ii) sets forth the amount of
payments received on each Transferred Receivable since the prior Purchase Price
Calculation Date and (b) sets forth the Requested Amount for the succeeding
Purchase Price Calculation Date.
"Request Notice Date" has the meaning set forth in Section 2.01(c)
-------------------
with respect to Tier I Receivables and the meaning set forth in Section 2.02(c)
with respect to Tier II Receivables.
"Required Information" means, with respect to a Receivable, (a) the
--------------------
Obligor, (b) the Obligor's address, (c) the invoice number, (d) the Billed
Amount, (e) the Maturity Date, (f) the Billing Date and (g) whether or not such
Receivable is an Eligible Receivable.
"Restrictions on Transferability" means any material condition to, or
-------------------------------
restriction on, the ability of the holder or an assignee of the holder of any
right, title or interest to sell, assign, transfer or otherwise liquidate such
right, title or interest in a commercially reasonable time and manner or which
would otherwise materially deprive the holder or any assignee of the holder of
the benefits thereof.
"Sale" means a sale of Receivables by the Company to either TFC I or
----
TFC II pursuant to Section 2.01 or Section 2.02, respectively.
"Sale Date" has the meaning specified in Section 2.01(b) with respect
---------
to Tier I Receivables and the meaning specified in Section 2.02(b) with respect
to Tier II Receivables, respectively.
"Sale Price" means with respect to the Eligible Receivables to be sold
----------
by the Company to the Funding Corporations on any day the price calculated by
TFC I or TFC II, as the case may be, and approved from time to time by the
Operating Agent with the consent of FSA, equal to:
(a) the Outstanding Balance of Eligible Receivables to be sold by the
Company to the Funding Corporations on such ate, minus
12
<PAGE>
(b) the expected costs to be incurred by the Funding Corporations of
financing such purchase of such Sold Receivables until the Outstanding
Balance of such Sold Receivables is paid in full, minus
(c) the portion of such Sold Receivables that are reasonably expected
by the Company to become Defaulted Receivables, minus
(d) the portion of such Sold Receivables that are reasonably expected
by the Company to be reduced by means other than by the receipt of
Collections on such Sold Receivables or pursuant to (c) above,
in each of (b), (c) and (d) determined based on historical experience by the
Company;
"Security Agreement" means the agreement dated as of February 24, 1995
------------------
between Tyco Manufacturing, Tyco Distribution Corp. and other parties, in favor
of GE Capital.
"Security Interest" has the meaning specified in Section 7.01.
-----------------
"Servicer" means the Company as Servicer or any successor Servicer
--------
pursuant to the Funding Agreement.
"Settlement Period" means, in the case of the initial Settlement
-----------------
Period, the period beginning with the Effective Date to and including the last
day of the week in which such Effective Date occurs; with respect to the final
Settlement Period, the period ending on the Termination Date and beginning with
the first day of the week in which the Termination Date occurs; and with respect
to all other Settlement Periods, each week, unless (with respect to any of the
foregoing Settlement Periods) otherwise specified to be a month.
"Sold Receivables" means together, the Tier I Sold Receivables and the
----------------
Tier II Sold Receivables.
"Subsidiary" means, as to any Person, any corporation or other entity
----------
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Termination Date" means August 24, 2000.
----------------
"Termination Event" means any event designated as such in the Funding
-----------------
Agreement.
13
<PAGE>
"TFC I" means Tyco Funding I Corporation, as a purchaser and
-----
transferee of Receivables under this Agreement.
"TFC II" means Tyco Funding II Corporation, as a purchaser and
------
transferee of Receivables under this Agreement.
"TFC I Deferred Sale Price" means the portion of the Sale Price of
-------------------------
Tier I Sold Receivables sold on any Sale Date exceeding the amount of the Sale
Price under Section 2.01 to be paid in cash, which portion (computed as of the
related Purchase Price Calculation Date of such Receivables) when added to the
cumulative amount of all previous TFC I Deferred Sale Prices (after giving
effect to any repayment of amounts due thereunder) shall not exceed 25% of the
Outstanding Balance of such Tier I Transferred Receivables, provided that no
such 25% limit shall apply during any Clean Down Period. The obligations of TFC
I in respect of the TFC I Deferred Sale Price shall be evidenced by TFC I's
subordinated promissory note in the form of Exhibit 5 hereto.
"TFC II Deferred Sale Price" means the portion of the Sale Price of
--------------------------
Tier II Sold Receivables sold on any Sale Date exceeding the amount of the Sale
Price under Section 2.02 to be paid in cash, which portion (computed as of the
related Purchase Price Calculation Date of such Receivables) when added to the
cumulative amount of all previous TFC II Deferred Sale Prices (after giving
effect to any repayment of amounts due thereunder) shall not exceed 25% of the
Outstanding Balance of such Tier II Transferred Receivables, provided that no
such 25% limit shall apply during any Clean Down Period. The obligations of TFC
II in respect of the TFC II Deferred Sale Price shall be evidenced by TFC II's
subordinated promissory note in the form of Exhibit 5 hereto.
"TFC I Loan" has the meaning specified in Section 5.01.
----------
"TFC II Loan" has the meaning specified in Section 6.01.
-----------
"TFC Loans" means together the TFC I Loans and the TFC II Loans.
---------
"TFC Secured Obligations" means all obligations of every nature of the
-----------------------
Funding Corporations, collectively (other than to the Company or Servicer), now
or hereafter existing, under the Funding Agreement and any promissory note or
other document or instrument delivered pursuant to such documents, and all
amendments, extensions or renewals thereof, whether for principal, interest,
fees, expenses or otherwise, whether now existing or hereafter arising,
voluntary or involuntary, whether or not jointly owed with others, direct or
indirect, absolute or contingent, liquidated or unliquidated, and whether or not
from
14
<PAGE>
time to time decreased or extinguished and later increased, created or incurred
and all or any portion of such obligations that are paid, to the extent that all
or any part of such payment is avoided or recovered directly or indirectly from
Redwood, the Operating Agent, FSA or the Collateral Agent as a preference,
fraudulent transfer or otherwise.
"Tier I Eligible Receivable" means any Eligible Receivable other than
--------------------------
an Eligible Receivable the Obligor of which is Toys'R'Us.
"Tier II Eligible Receivable" means any Eligible Receivable the
---------------------------
Obligor of which is Toys'R'Us.
"Tier I Receivable" means any Receivable other than a Receivable the
-----------------
Obligor of which is Toys'R'Us.
"Tier II Receivable" means any Receivable the Obligor of which is
------------------
Toys'R'Us.
"Tier I Sold Receivable" has the meaning specified in Section 2.01(c).
----------------------
"Tier II Sold Receivable" has the meaning specified in Section
-----------------------
2.02(c).
"Tier I Transferred Receivable" has the meaning specified in Section
-----------------------------
2.01(d).
"Tier II Transferred Receivable" has the meaning specified in Section
------------------------------
2.02(d).
"Toys'R'Us" means Toys'R'Us Inc., a Delaware corporation.
---------
"Transaction Credit" shall have the meaning ascribed to it in the
------------------
Collateral Agent Agreement.
"Transaction Credit Agreement" means any agreement executed by a
----------------------------
Transaction Credit Provider, the Operating Agent and Redwood for the provision
of Transaction Credit.
"Transaction Credit Provider" shall have the meaning such term has
---------------------------
pursuant to the Collateral Agent Agreement.
"Transferred Receivables" means, together, the Tier I Transferred
-----------------------
Receivables and the Tier II Transferred Receivables.
"Transferred Receivables Balance" means at any time the aggregate
-------------------------------
Outstanding Balance of the Transferred Receivables less the Outstanding Balance
of Transferred Receivables constituting Defaulted Receivables.
15
<PAGE>
"UCC" means, for any jurisdiction, the Uniform Commercial Code as from
---
time to time in effect in such jurisdiction.
"Underfunded Plan" means any Plan that has an Underfunding.
----------------
"Underfunding" means, with respect to any Plan, the excess, if any, of
------------
(a) the present value of all benefits under the Plan (based on the assumptions
used to fund the Plan pursuant to Section 412 of the Code) as of the most recent
valuation date over (b) the fair market value of the assets of such Plan as of
such valuation date.
"Wire Payments" has the meaning specified in Section 4.02(b).
--------------
SECTION 1.02. Other Terms and Interpretation. All accounting terms
------------------------------
not specifically defined herein shall be construed in accordance with GAAP. All
terms used in Article 9 of the UCC of the State of New York, and not
specifically defined herein, are used herein as defined in such Article 9. All
hourly references herein shall refer to New York City time. Except as otherwise
indicated, all agreements defined in this Agreement refer to the same as from
time to time amended or supplemented or as the terms of such agreements are
waived or modified in accordance with their terms. All weekly or monthly
references with respect to Tyco Toys, Inc., the Company, TFC I or TFC II herein
shall refer to fiscal weeks or months of Tyco Toys, Inc., the Company, TFC I or
TFC II, as the case may be.
SECTION 1.03. Rounding. For purposes of any calculations referred to
--------
in this Agreement (unless otherwise specified), (i) all percentages resulting
from such calculations will be rounded up, if necessary, to the nearest one ten-
thousandth of a percentage point (e.g. 9.87654% (or .0987654) being rounded up
to 9.8766% (or .098766)) and (ii) all Dollar amounts used in or resulting from
such calculations will be rounded up to the nearest cent (e.g., $1,057.373 being
rounded up to $1,057.38).
ARTICLE II
TRANSFERS OF RECEIVABLES
SECTION 2.01. Agreement to Transfer to TFC I. (a) On the terms and
------------------------------
conditions of this Agreement, on and after the date of this Agreement until the
Commitment Termination Date, the Company agrees to sell to TFC I each Tier I
Receivable originated by the Company other than Excluded Receivables.
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(b) The Company shall, on each Business Day (each, a "Sale Date"),
identify as purchased all Receivables not previously identified as Transferred
Receivables, in accordance with this Section 2.01(b), on such Business Day.
Each such identification shall be made as of the opening of the business of the
Servicer on each Business Day.
(c) On the Effective Date and on a date occurring no less frequently
than weekly thereafter (each a "Request Notice Date") the Company shall deliver
to TFC I a Request Notice setting forth all outstanding Tier I Receivables
originated and owned by the Company through such date. No later than the
following Business Day (the "Purchase Price Calculation Date") TFC I and the
Company shall identify and mutually agree which Tier I Eligible Receivables
designated in such Request Notice were, since the last Purchase Price
Calculation Date, or are to be purchased and sold on such Purchase Price
Calculation Date (the "Tier I Sold Receivables"). The price paid for such Tier
I Sold Receivables shall be the Sale Price for such Tier I Sold Receivables.
Such Sale Price shall be paid by means of (i) an immediate cash payment to the
Company plus (ii) the TFC I Deferred Sale Price. The cumulative amount of all
TFC I Deferred Sale Prices shall be subject at all times to the limitations
contained in the definition thereof. On each Purchase Price Calculation Date,
such cumulative TFC I Deferred Sale Price shall be recalculated by the Servicer.
On or before the Effective Date, the Company and TFC I shall enter into a
Certificate of Assignment I substantially in the form of Exhibit 1A hereto
("Assignment I"). On each Sale Date the Tier I Sold Receivables shall be
assigned, and on the subsequent Purchase Price Calculation Date TFC I shall pay
the Sale Price for such Tier I Sold Receivables. The portion of the Sale Price
which is to be payable immediately in cash shall be payable by wire transfer on
the Purchase Price Calculation Date to an account designated by the Company (and
approved by the Operating Agent) on or before the Purchase Price Calculation
Date.
(d) On and after each Business Day hereunder, TFC I shall own the
Tier I Sold Receivables which have been (assuming compliance with the terms
hereof) identified as being transferred to TFC I under this Section 2.01 (each a
------------
"Tier I Transferred Receivable") and the Company shall not take any action
inconsistent with such ownership and shall not claim any ownership interest in
any such Tier I Transferred Receivable.
(e) Until the occurrence of an Event of Servicer Termination or a
resignation pursuant to the Funding Agreement, the Company, as Servicer, shall
conduct the servicing, administration and collection of Tier I Transferred
Receivables and shall take, or cause to be taken, all such actions as may be
necessary or advisable to service, administer and collect such Tier I
Transferred Receivables, from time to time, all in
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accordance with (i) the terms of the Funding Agreement, (ii) the Credit and
Collection Policies and, to the extent not in conflict therewith, customary and
prudent servicing procedures for trade receivables of a similar type and (iii)
all applicable laws, rules and regulations. Documents relating to Tier I
Transferred Receivables shall be held in trust by the Company, as Servicer, for
the benefit of TFC I and its assignees as the owners thereof, and possession of
any incident relating to the Tier I Transferred Receivables and Contracts so
retained is for the sole purpose of facilitating the servicing of the Tier I
Transferred Receivables. Such retention and possession thereof is at the will of
TFC I and its assignees and in a custodial capacity for their benefit only.
SECTION 2.02. Agreement to Transfer to TFC II. (a) On the terms and
-------------------------------
conditions of this Agreement, on and after the date of this Agreement until the
Commitment Termination Date, the Company agrees to sell to TFC II each Tier II
Receivable originated by the Company other than Excluded Receivables.
(b) The Company shall, on each Business Day (each, a "Sale Date"),
identify as purchased all Receivables not previously identified as Transferred
Receivables, in accordance with this Section 2.02(b), on such Business Day.
Each such identification shall be made as of the opening of the business of the
Servicer on each Business Day.
(c) On the Effective Date and on a date occurring no less frequently
than weekly thereafter (each a "Request Notice Date") the Company shall deliver
to TFC II a Request Notice setting forth all outstanding Tier II Receivables
originated and owned by the Company through such date. No later than the
following Business Day (the "Purchase Price Calculation Date") TFC II and the
Company shall identify and mutually agree which Tier II Eligible Receivables
designated in such Request Notice were, since the last Purchase Price
Calculation Date, or are to be purchased and sold on such Purchase Price
Calculation Date (the "Tier II Sold Receivables"). The price paid for such Tier
II Sold Receivables shall be the Sale Price for such Tier II Sold Receivables.
Such Sale Price shall be paid by means of (i) an immediate cash payment to the
Company plus (ii) the TFC II Deferred Sale Price. The cumulative amount of all
TFC II Deferred Sale Prices shall be subject at all times to the limitations
contained in the definition thereof. On each Purchase Price Calculation Date,
such cumulative TFC II Deferred Sale Price shall be recalculated by the
Servicer. On or before the Effective Date, the Company and TFC II shall enter
into a Certificate of Assignment II substantially in the form of Exhibit 1B
hereto ("Assignment II"). On each Sale Date the Tier II Sold Receivables shall
be assigned, and on the subsequent Purchase Price Calculation Date TFC II shall
pay the Sale Price for such Tier II Sold Receivables. The portion of the Sale
Price which is to be payable immediately in cash shall be payable by wire
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transfer on the Purchase Price Calculation Date to an account designated by the
Company (and approved by the Operating Agent) on or before the Purchase Price
Calculation Date.
(d) On and after each Business Day hereunder, TFC II shall own the
Tier II Sold Receivables which have been (assuming compliance with the terms
hereof) identified as being transferred to TFC II under this Section 2.02 (each
------------
a "Tier II Transferred Receivable") and the Company shall not take any action
inconsistent with such ownership and shall not claim any ownership interest in
any such Tier II Transferred Receivable.
(e) Until the occurrence of an Event of Servicer Termination or a
resignation pursuant to the Funding Agreement, the Company, as Servicer, shall
conduct the servicing, administration and collection of Tier II Transferred
Receivables and shall take, or cause to be taken, all such actions as may be
necessary or advisable to service, administer and collect such Tier II
Transferred Receivables, from time to time, all in accordance with (i) the terms
of the Funding Agreement, (ii) the Credit and Collection Policies and, to the
extent not in conflict therewith, customary and prudent servicing procedures for
trade receivables of a similar type and (iii) all applicable laws, rules and
regulations. Documents relating to Tier II Transferred Receivables shall be held
in trust by the Company, as Servicer, for the benefit of TFC II and its
assignees as the owners thereof, and possession of any incident relating to the
Tier II Transferred Receivables and Contracts so retained is for the sole
purpose of facilitating the servicing of the Tier II Transferred Receivables.
Such retention and possession thereof is at the will of TFC II and its assignees
and in a custodial capacity for their benefit only.
SECTION 2.03. Grant of Security Interest. (a) It is the intention of
--------------------------
the parties hereto that each transfer of Transferred Receivables to be made
hereunder shall constitute a purchase and sale and not a loan. In the event,
however, that a court of competent jurisdiction were to hold that any
transaction provided for hereby constitutes a loan and not a purchase and sale
this Agreement shall constitute a security agreement under applicable law and
the Company does hereby grant to TFC I, with respect to the TFC I Transferred
Receivables, and to TFC II, with respect to the TFC II Transferred Receivables,
a first priority security interest in all of the Company's right, title and
interest in, to and under such Transferred Receivables, all payments of
principal, interest, fees, charges and indemnities on or under such Transferred
Receivables and all proceeds of any such Transferred Receivables.
(b) The Company acknowledges and consents to the security interest
over the Transferred Receivables created pursuant to Section 8.02 of the Funding
Agreement and
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acknowledges the rights of the Collateral Agent and FSA and the covenants given
by the Funding Corporations and Redwood in favor of the Collateral Agent and FSA
set forth in the Funding Agreement, and further acknowledges and consents that
each of the Collateral Agent and FSA shall be entitled to enforce the provisions
of this Agreement and the Related Documents to which the Company is a party and
shall be entitled to all the rights and remedies of the Funding Corporations and
Redwood hereunder and thereunder. In addition, the Company hereby authorizes
each of the Collateral Agent and FSA to rely on the representations, warranties
and covenants of the Company contained in this Agreement and the Related
Documents to which the Company is a party and in any other certificates and
documents furnished by the Company to any party in connection herewith or
therewith.
ARTICLE III
CONDITIONS OF SALE
SECTION 3.01. Conditions Precedent to the Initial Sale. The initial
----------------------------------------
Sale hereunder is subject to the following conditions precedent:
(a) that each of the Funding Corporations shall have received on or
before the date of the initial Sale under this Agreement, each dated such date
(unless otherwise indicated), in form and substance satisfactory to each of the
Funding Corporations, the Operating Agent and FSA:
(i) the Assignments executed by the Company;
(ii) a copy of resolutions duly adopted by the Board of Directors of
the Company approving this Agreement, the Assignments and the other
documents to be delivered by it hereunder and the transactions and matters
contemplated hereby, certified by its Secretary or Assistant Secretary;
(iii) the charter, as amended, of the Company, certified by the
Secretary of State of its state of incorporation, dated not earlier than 30
days prior to the date of the initial Sale;
(iv) good standing certificates for the Company issued by the
Secretaries of States of Delaware, California, Georgia, Illinois, New
Jersey and Washington, each dated not earlier than 30 days prior to the
date of the initial Sale;
(v) a copy of the Company's by-laws, as amended, certified by its
Secretary or Assistant Secretary;
(vi) a certificate of the Secretary or Assistant Secretary of the
Company certifying the names and true
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signatures of the officers authorized on its behalf to sign this Agreement,
the Assignments, and the other documents to be delivered by it hereunder
(on which certificate the Funding Corporations may conclusively rely until
such time as the Funding Corporations shall receive from the Company a
revised certificate meeting the requirements of this Subsection (vi)) and
certifying that (A) the charter of the Company has not changed since the
date of the certificate referred to in Section 3.01(a)(iii), (B) that the
Company is still in good standing in all jurisdictions, including, without
limitation, those referred to in Section 3.01(a)(iv), (C) all
representations and warranties made by the Company in this Agreement are
true and correct in every particular and (D) no financing statements or
other similar instruments and documents relating to the Receivables have
been filed in any jurisdiction, other than those financing statements,
other similar instruments and documents shown on the certified copies of
the Requests for Information or Copies provided pursuant to clause (ix);
(vii) copies of proper financing statements (Form UCC-1), dated on or
prior to the date of the initial Sale, naming the Company as the assignor
of the Receivables and TFC I, with respect to the Tier I Receivables, and
TFC II, with respect to the Tier II Receivables, as assignee, or other
similar instruments or documents, in form and substance sufficient for
filing under the UCC or any comparable law of any and all jurisdictions as
may be necessary or, in the opinion of the Operating Agent or FSA,
desirable to perfect TFC I's ownership interests in all Tier I Receivables
and TFC II's ownership interest in all TFC II Receivables, in each case in
which an interest may be assigned hereunder;
(viii) copies of properly executed termination statements or
statements of release (Forms UCC-2 or UCC-3) or other similar instruments
or documents, if any, in form and substance satisfactory for filing under
the UCC or any comparable law of any and all jurisdictions as may be
necessary or, in the opinion of the Operating Agent or FSA, desirable to
release all security interests and similar rights of any Person in the
Receivables previously granted by the Company;
(ix) certified copies of Requests for Information or Copies (Form UCC-
11) (or a similar search report certified by a party acceptable to the
Operating Agent and FSA), dated a date reasonably near and prior to the
date of the initial Sale, listing all effective financing statements and
other similar instruments and documents, including those referred to above
in Subsections (vii) and (viii) which name the Company (under its present
name and any previous name) as
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debtor and which are filed in the jurisdictions in which filings are to be
made pursuant to such Subsections (vii) and (viii) above, together with
copies of such financing statements, none of which, except those filed
pursuant to Subsections (vii) and (viii), above, shall cover any
Receivables;
(x) the Lock-Box Agreements with all the Lock-Box Banks, in each case
executed by the Company and acknowledged and agreed to by the applicable
Lock-Box Bank and dated on or before the date of the initial Sale, together
with an acknowledgment executed by the Operating Agent and Redwood;
(xi) a favorable opinion of Wolf, Block, Schorr and Solis-Cohen,
counsel to the Company, in substantially the form of Exhibit 4 hereto and
with respect to such other matters as the Operating Agent or FSA may
reasonably request.
SECTION 3.02. Conditions Precedent to All Sales. The obligation of
---------------------------------
TFC I or TFC II, as the case may be, to pay for each Sold Receivable on each
Purchase Price Calculation Date (including the initial Purchase Price
Calculation Date) shall be subject to the further conditions precedent (any one
of which can be waived by TFC I, with respect to transfers of Tier I
Receivables, or TFC II, with respect to Tier II Receivables, in each case, with
the prior written consent of FSA) that on such Purchase Price Calculation Date:
(a) The following statements shall be true (and delivery by the
Company of a Request Notice and the acceptance by the Company of the Sale Price
for any Receivables on any Purchase Price Calculation Date shall constitute a
representation and warranty by the Company that on such Purchase Price
Calculation Date such statements are true):
(i) the representations and warranties of the Company contained in
Section 4.01 shall be correct on and as of such Purchase Price Calculation
Date in all material respects (except with respect to Section 4.01(b) and
those already so qualified which are true and correct in all respects),
before and after giving effect to such Sale and to the application of
proceeds therefrom, as though made on and as of such date; and
(ii) no event has occurred, or would result from such
Sale or from the application of the proceeds therefrom,
which constitutes a Termination Event or would constitute a
Termination Event but for the requirement that notice be
given or time elapse or both;
(iii) the Company is in compliance with each of its
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covenants and other agreements set forth herein;
(iv) no event has occurred which constitutes an Event
of Servicer Termination or would constitute an Event of
Servicer Termination but for the requirement that notice be
given or time elapse or both; and
(v) each Transferred Receivable designated as an Eligible Receivable
is an Eligible Receivable;
(b) The Commitment Termination Date shall not have occurred; and
(c) The Company shall have taken such other action, including delivery
of approvals, consents, opinions, documents and instruments to Redwood, the
Operating Agent and FSA, as the Operating Agent or FSA may reasonably request.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 4.01. Representations and Warranties of the Company. The
---------------------------------------------
Company represents and warrants to the Funding Corporations and FSA as of each
Purchase Price Calculation Date and each Sale Date, which representations and
warranties are or will be true and correct as of such Purchase Price Calculation
Date or Sale Date, as the case may be, that:
(a) With respect to the Company:
(i) the Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly qualified to do business and is in good standing
in every jurisdiction in which the failure to be so qualified, separately
or in the aggregate, would have a Material Adverse Effect;
(ii) the Company has the power and authority to own, pledge,
mortgage, operate and convey all of its properties and assets and to
execute and deliver this Agreement and the Related Documents and to perform
the transactions contemplated hereby and thereby;
(iii) the Company is operated in such a manner that neither TFC I
nor TFC II would be substantively consolidated in the estate of the Company
(that is, in such a manner that the separate corporate existence of either
TFC I and the Company or TFC II and the Company, as the case may be, would
not be disregarded), in the event of a bankruptcy or insolvency of the
Company and in such regard:
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(1) each of TFC I and TFC II is a limited purpose corporation
whose activities are restricted in its respective certificate of
incorporation;
(2) neither the Company or any Affiliate of the
Company is involved in the day-to-day management of
either of the Funding Corporations;
(3) other than the purchase of Receivables, TFC Loans, and other
transactions contemplated by the Receivables Transfer Agreements, the
payment of dividends and the return of capital, any lease or sub-lease
of office space or equipment, any common officers or other employees
and the payment of Servicing Fees (as defined in the Funding
Agreement) to the Servicer under the Funding Agreement, neither of the
Funding Corporations engages in any intercorporate transactions with
the Company or any Affiliate of the Company;
(4) each of the Funding Corporations maintains separate corporate
records and books of account from the Company, holds regular corporate
meetings and otherwise observes corporate formalities and has a
separate business office from the Company;
(5) all the financial statements and books and records of the
Funding Corporations and the Company reflect the respective separate
corporate existence of each of the Funding Corporations;
(6) each of the Funding Corporations maintains its assets
separately from the assets of the Company and any other Affiliate of
the Company (including through the maintenance of separate bank
accounts), each of the Funding Corporations' funds and assets, and
records relating thereto, have not been, are not and will not be
commingled with those of the Company or any other Affiliate of the
Company and the separate creditors of each of the Funding Corporations
will be entitled to be satisfied out of that Funding Corporation's
assets prior to any value in that Funding Corporation becoming
available to that Funding Corporation's equityholders; each Funding
Corporation has, and will continue to have, assets other than assets
contributed by the Company;
(7) neither the Company nor any Affiliate of the Company (A) pays
either of the Funding Corporations' expenses; (B) guarantees either of
the Funding Corporations' obligations, or (C) advances funds to either
of the Funding Corporations for the payment of expenses or otherwise;
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<PAGE>
(8) all business correspondence of each of the Funding
Corporations and other communications are conducted in that Funding
Corporation's own name, on its own stationery and through a
separately-listed telephone number;
(9) neither TFC I nor TFC II acts as agent for the Company or of
any of its Affiliates, but instead each presents itself to the public
as a corporation separate from the Company and its Affiliates,
independently engaged in the business of purchasing and financing
Receivables; and
(10) each of TFC I and TFC II maintains two independent
directors, each of whom at all times who shall at no time be a
shareholder, director, officer, employee or associate of the Company
or any Affiliate of the Company (other than as a Director of that
Funding Corporation or of the other Funding Corporation) as provided
in its certificate or articles of incorporation.
(11) each Funding Corporation is solvent and will not be rendered
insolvent by the transactions contemplated by any of the Receivables
Transfer Agreements or the Related Documents and, after giving effect
to such transactions, neither Funding Corporation will be left with an
unreasonably small amount of capital with which to engage in its
business nor will either of the Funding Corporations have intended to
incur, or believe that it has incurred, debts beyond its ability to
pay such debts as they mature. Neither of the Funding Corporations
contemplates the commencement of insolvency, bankruptcy, liquidation
or consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of
that Funding Corporation or any of its assets.
(12) The Company is the owner of 100% of the Class A common stock
and 49% of the Class B common stock of both Funding Corporations.
(iv) the execution, delivery and performance by the Company of
this Agreement and the Related Documents and the transactions contemplated
hereby and thereby (A) have been duly authorized by all necessary corporate
or other action on the part of the Company, (B) do not contravene or cause
the Company to be in default under (1) the Company's certificate or
articles of incorporation or by-laws, (2) any contractual restriction with
respect to any Debt of the Company or contained in any indenture, loan or
credit
25
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agreement, lease, mortgage, security agreement, bond, note, or other
agreement or instrument binding on or affecting the Company or its property
or (3) any law, rule, regulation, order, writ, judgment, award, injunction
or decree applicable to, binding on or affecting the Company, its
Affiliates or their respective property and (C) do not result in or require
the creation of any Adverse Claim upon or with respect to any of its
properties (other than in favor of TFC I or TFC II with respect to this
Agreement and Redwood, FSA and the Collateral Agent under the Funding
Agreement);
(v) this Agreement and the Related Documents have each been duly
executed and delivered by the Company;
(vi) no approval or consent of, notice to, filing with or
licenses, permits, qualifications or other action by any Governmental
Authority or any other party, is required or necessary for the conduct of
the Company's business as currently conducted and for the due execution,
delivery and performance by the Company of this Agreement or any of the
Related Documents or for the perfection of or the exercise by either TFC I
or TFC II, Redwood, the Operating Agent, FSA or the Collateral Agent of any
of their rights or remedies thereunder or hereunder, other than approvals,
consents, notices, filings and other actions which have been obtained or
made and complete copies of which have been provided to Redwood, the
Operating Agent, FSA and the Collateral Agent;
(vii) each of this Agreement, each other Related Document
delivered by the Company and the respective obligations of the Company
thereunder is the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its respective terms
subject to (i) any applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the enforceability of creditors' rights generally and (ii)
general equitable principles, whether applied in a proceeding at law or in
equity;
(viii) there is no pending or threatened, nor any reasonable basis
for any, action, suit or proceeding against or affecting the Company, its
officers or directors, or the property of the Company, in any court or
tribunal, or before any arbitrator of any kind or before or by any
Governmental Authority (A) asserting the invalidity of this Agreement or
any of the Related Documents, (B) seeking to prevent the sale, pledge or
contribution of any Receivable or the consummation of any of the
transactions contemplated hereby or thereby, (C) seeking any determination
or ruling that
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might materially and adversely affect (1) the performance by either of the
Funding Corporations or the Company of its obligations under this Agreement
or any of the Related Documents, (2) the validity or enforceability of this
Agreement or any of the Related Documents, (3) the Receivables or the
Contracts or the interests of either of the Funding Corporations, Redwood,
FSA or the Lender Secured Parties therein, or (4) the federal income tax
attributes of the sale or pledge of the Transferred Receivables, (D)
asserting a claim for payment of money in excess of $10,000,000 (other than
such judgments or orders in respect of which adequate insurance is
maintained by the Company for the payment in full thereof) or (E) which is
reasonably likely to have a Material Adverse Effect;
(ix) no injunction, writ, restraining order or other order of any
nature adverse to the Company or the conduct of its business or which is
inconsistent with the due consummation of the transactions contemplated by
this Agreement or the Funding Agreement or any of the other Related
Documents has been issued by a Governmental Authority nor been sought by
any Person;
(x) the principal place of business and chief executive office
of the Company are located at the address of the Company referred to in
this Agreement and there are now no, and during the past four months there
have not been any, other locations where the Company is located (as that
term is used in the UCC of the jurisdiction where such principal place of
business is located) or keeps Records;
(xi) the legal name of the Company is as set forth at the
beginning of this Agreement and the Company has not changed its name in the
last six years, and during such period the Company did not use, nor does
the Company now use, any tradenames, fictitious names, assumed names or
"doing business as" names, other than those contained in Schedule V hereto;
(xii) the Lockbox Accounts are the only lockbox accounts
maintained by the Company, either of the Funding Corporations or otherwise
in respect of the Transferred Receivables;
(xiii) the Company is solvent and will not become insolvent after
giving effect to the transactions contemplated by this Agreement and the
Related Documents; the Company is paying its Debts as they mature; the
Company has not incurred Debts beyond its ability to pay as they mature;
and the Company, after giving effect to the transactions contemplated by
this Agreement and the Related
27
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Documents, will have an adequate amount of capital to conduct its business
in the foreseeable future;
(xiv) for federal income tax, reporting and accounting purposes,
the Company will treat the sale of each Receivable sold or assigned
pursuant to this Agreement as a sale of, or absolute assignment of, its
full right, title and ownership interest in such Receivable to either TFC I
or TFC II, as the case may be, (and each Receivable contributed to either
of the Funding Corporations by the Company pursuant to this Agreement shall
be accounted for as an increase in the stated capital of such Funding
Corporation), and the Company has not in any other respect accounted for or
treated the transactions contemplated by this Agreement or the Related
Documents;
(xv) the Company has complied in all respects with all applicable
laws, rules, regulations, and orders with respect to it, its business and
properties and all Receivables and related Contracts (including without
limitation, all applicable environmental, health and safety requirements)
and all restrictions contained in any indenture, loan or credit agreement,
mortgage, security agreement, bond, note or other agreement or instrument
binding on or affecting the Company or its property, and has and maintains
all permits, licenses, authorizations, registrations, approvals and
consents of Governmental Authorities for (A) the activities and business of
the Company and each of its Affiliates as currently conducted and as
proposed to be conducted, (B) the ownership, use, operation and maintenance
by each of them of its properties, facilities and assets and (C) the
performance by the Company and each of TFC I and TFC II of this Agreement
and the Related Documents (hereinafter referred to collectively as
"Governmental Consents"), with respect to which any non-compliance or
failure to maintain such items would, separately or in the aggregate, have
a Material Adverse Effect;
(xvi) no practice, procedure or policy employed or proposed to be
employed by the Company in the conduct of its business violates any law,
regulation, judgment, agreement, order or decree applicable to the Company
which, if enforced, would have a Material Adverse Effect;
(xvii) without limiting the generality of the prior representation,
no condition exists or event has occurred which, in itself or with the
giving of notice or lapse of time or both, would result in the suspension,
revocation, impairment, forfeiture or non-renewal of any Governmental
Consent applicable to the Company or any Subsidiary, except
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where such conditions or events would not, separately or in the aggregate,
have a Material Adverse Effect;
(xviii) the Company has filed on a timely basis all tax returns
(federal, state and local) required to be filed and has paid or made
adequate provisions for the payment of all taxes, fees, assessments and
other governmental charges due from the Company; no tax lien or similar
Adverse Claim has been filed, and no claim is being asserted, with respect
to any such tax, fee, assessment, or other governmental charge except as
set forth on Schedule VI. Any taxes, fees, assessments and other
governmental charges payable by the Company in connection with the
execution and delivery of this Agreement and the Related Documents and the
transactions contemplated hereby or thereby have been paid or when due, to
the extent due at or prior to such Purchase Price Calculation Date;
(xix) with respect to each of the Funding Corporations, the
Servicer (if the Servicer is the Company), the Company and Tyco
Manufacturing Corp. or any of its Affiliates, there has occurred no event
which has or is reasonably likely to have a Material Adverse Effect on the
Company;
(xx) the Company is licensed or otherwise has the lawful right to
use all patents, trademarks, servicemarks, tradenames, copyrights,
technology, know-how and processes used in or necessary for the conduct of
its business as currently conducted which are material to its financial
condition, business, operations, assets and prospects, individually or
taken as a whole;
(xxi) (a) the consolidated balance sheets of Tyco Toys, Inc. and
its consolidated Subsidiaries for each of the last three fiscal years prior
to the balance sheet date are delivered prior to such Purchase Price
Calculation Date, and the related statements of income and shareholders'
equity of Tyco Toys, Inc. and its consolidated Subsidiaries for such fiscal
years, certified without qualification by Tyco Toys, Inc.'s independent
certified public accountants, copies of which have been furnished to
Redwood, FSA and the Operating Agent, are complete and correct and fairly
present the consolidated financial condition, business and results of
operations of Tyco Toys, Inc. and its consolidated Subsidiaries as of the
last day of such fiscal years and the consolidated results of the
operations of Tyco Toys, Inc. and its consolidated Subsidiaries for the
periods ended on such dates, all in accordance with GAAP, (b) the unaudited
consolidated balance sheets and the related statements of income and
shareholders' equity of Tyco Toys, Inc. and its consolidated Subsidiaries
for each fiscal quarter in the
29
<PAGE>
period since the most recent consolidated balance sheet and related
statement of income and shareholders' equity referred to in clause (a)
above and ended at least 45 days prior to such Purchase Price Calculation
Date, copies of which have been furnished to Redwood, FSA and the Operating
Agent, are complete and correct and fairly present the consolidated
financial condition, business and operations of the Tyco Toys, Inc. and its
consolidated Subsidiaries as of the last day of such fiscal quarters and
the consolidated results of the operations of the Company and its
consolidated Subsidiaries for the periods ended on such dates, all in
accordance with GAAP, and (c) since the last date for which a balance sheet
of the Company and its consolidated Subsidiaries has been delivered to
Redwood, FSA and the Operating Agent, there has, except as disclosed to the
Operating Agent and FSA, been no material adverse change in any such
condition, business or results of operations; neither Tyco Toys nor its
consolidated Subsidiaries have any contingent liabilities or commitments
which, separately or in the aggregate, is reasonably likely to have a
Material Adverse Effect on such entities;
(xxii) each Obligor of a Transferred Receivable has been directed,
and is required to, remit all payments with respect to such Receivable for
deposit in a Lockbox Account or a Lockbox;
(xxiii) each Request Notice contains a complete and accurate list of
all Tier I Transferred Receivables or Tier II Transferred Receivables sold
by the Company to TFC I or TFC II, respectively, as of its date;
(xxiv) no Obligor of an Eligible Receivable being sold on the
related Sale Date has any claim against or affecting the Company or the
property of the Company;
(xxv) the Company is in compliance with ERISA and has not incurred
and does not expect to incur any liabilities (except for premium payments
arising in the ordinary course of business) to the Pension Benefit Guaranty
Corporation (or any successor thereof) under ERISA;
(xxvi) each pension plan or profit sharing plan to which the
Company or any Affiliate is a party has been administered and fully funded
in accordance with the obligations of the Company under law and as set
forth in such plan, and the Company has complied with the applicable
provisions of ERISA in effect as of such Purchase Price Calculation Date;
(xxvii) the Company has valid business reasons for selling its
interests in the Transferred Receivables rather
30
<PAGE>
than obtaining a loan with the Transferred Receivables as collateral;
(xxviii) the Company has not agreed to pay any fee or commission to
any agent, broker, finder or other person for or on account of services
rendered as a broker or finder in connection with this Agreement or the
Related Documents or the transactions contemplated hereby or thereby which
would give rise to any valid claim against either of the Funding
Corporations for any brokerage commission or finder's fee or like payment;
(xxix) all information heretofore or hereafter furnished by the
Company to TFC I, TFC II, Redwood, the Operating Agent, FSA or the
Collateral Agent in connection with any transaction contemplated by this
Agreement or the Related Documents is and will be true and complete in all
material respects and does not and will not omit to state a material fact
necessary to make the statements contained herein or therein not
misleading. With respect to the Company, Tyco Manufacturing or the Funding
Corporations there has occurred no event which has or is reasonably likely
to have a Material Adverse Effect on such entity;
(xxx) no part of the proceeds received by the Company or any
Affiliate from the Sale Price will be used directly or indirectly for the
purpose of purchasing or carrying, or for payment in full or in part of,
Debt that was incurred for the purposes of purchasing or carrying any
"margin stock," as such term is defined in (S) 221.3 of Regulation U of the
Board of Governors of the Federal Reserve System.
(xxxi) there are not now, nor will there be at any time in the
future, any agreement or understanding between the Company and either of
the Funding Corporations (other than as expressly set forth herein)
providing for the allocation or sharing of obligations to make payments or
otherwise in respect of any taxes, fees, assessments or other governmental
charges;
(xxxii) no transaction contemplated by this Agreement or any of the
Related Documents requires compliance with any bulk sales act or similar
law;
(xxxiii) the Request Notice with respect to such Purchase Price
Calculation Date is accurate in all material respects;
(xxxiv) each purchase of Receivables under the Receivables Transfer
Agreements will constitute (i) a "current transaction" within the meaning
of Section 3(a)(3)
31
<PAGE>
of the Securities Act of 1933, as amended, and (ii) a purchase or other
acquisition of notes, drafts, acceptances, open accounts receivable or
other obligations representing part or all of the sales price of
merchandise, insurance or services within the meaning of Section 3(c)(5) of
the Investment Company Act of 1940, as amended;
(xxxv) (i) the Company is not a party to any indenture, loan or
credit agreement or any lease or other agreement or instrument or subject
to any charter or corporation restriction that is reasonably likely to
have, and no provision of applicable law or governmental regulation is
reasonably likely to have, a material adverse effect on the condition
(financial or otherwise), business, operations or properties of the
Company, or could have such an effect on the ability of the Company to
carry out its obligations under this Agreement and the other Related
Documents to which the Company is a party and (ii) the Company is not in
default under or with respect to any contract, agreement, lease or other
instrument to which the Company is a party and which is material to the
Company's condition (financial or otherwise), business, operations or
properties, and the Company has not delivered or received any notice of
default thereunder;
(xxxvi) the Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940,
as amended. The purchase or acquisition of the Transferred Receivables by
the Funding Corporations, the application of the proceeds and the
consummation of the transactions contemplated by this Agreement and the
other Related Documents to which the Company is a party will not violate
any provision of such Act or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder;
(xxxvii) the bylaws and/or the articles of incorporation of the
Company require it to maintain (A) correct and complete books and records
of account, and (B) minutes of the meetings and other proceedings of its
shareholders and board of directors; and
(xxxviii) Each of the representations and warranties of the Company
contained in this Agreement and the Related Documents is true and correct
in all material respects and the Company hereby makes each such
representation and warranty to, and for the benefit of, the Collateral
Agent, the Operating Agent, FSA and Redwood as if the same were set forth
in full herein.
32
<PAGE>
(b) On each Sale Date and as of the date of each Borrowing Base
Certificate delivered under the Funding Agreement, with respect to each
Receivable designated as an Eligible Receivable:
(i) such Receivable is an Eligible Receivable, and is a
receivable created through the unconditional provision of merchandise,
goods or services by the Company in the ordinary course of its business in
a current transaction;
(ii) such Receivable was created in accordance with and satisfies
all applicable requirements of the Credit and Collection Policies;
(iii) if requested, a copy of any related Contract (if such
Contract exists in a reproducible form) to such Receivable to which the
Company is a party has been delivered to Redwood, the Operating Agent, FSA
and the Collateral Agent;
(iv) such Receivable represents the genuine, legal, valid and
binding obligation in writing of the Obligor enforceable by the holder
thereof in accordance with its terms, and neither such Receivable nor its
related Contract has been satisfied, subordinated, rescinded or amended in
any manner, subject to (i) any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the enforceability of creditors' rights generally
and (ii) general equitable principles, whether applied in a proceeding at
law or in equity;
(v) neither such Receivable nor its related Contract is or will
be subject to any right of rescission, set-off, recoupment, counterclaim or
defense, whether arising out of transactions concerning the Contract or
otherwise;
(vi) prior to its sale to either TFC I or TFC II such Receivable
was owned by the Company free and clear of any Adverse Claim or
Restrictions on Transferability, and the Company had the right to sell,
assign and transfer the same and interests therein as contemplated under
this Agreement and, upon such sale, TFC I or TFC II acquired good and
marketable title to and a valid and the sole record and beneficial
ownership interest in such Receivable, free and clear of any Adverse Claim
and any other restriction on transferability;
(vii) this Agreement and the Assignment related to such Receivable
constitute a valid sale, transfer,
33
<PAGE>
assignment, setover and conveyance to either TFC I or TFC II, as the case
may be, of all right, title and interest of the Company in and to such
Receivable;
(viii) the Billed Amount of such Receivable is net of contractual
allowances, any offset or other modifications and such Receivable is
entitled to be paid pursuant to the terms of the related Contract, has not
been paid in full or been compromised, adjusted, extended, satisfied,
subordinated, rescinded or modified, and is not subject to compromise,
adjustment, extension, satisfaction, subordination, rescission or
modification by the Company or Tyco Manufacturing (in each case, excluding
any contractual allowances of the types set forth in Schedule 2 to the
Funding Agreement granted by the Company or Tyco Manufacturing in the
ordinary course of its business and in accordance with the Credit and
Collection Policies, which allowances shall by typical for businesses
similar to the Company's or Tyco Manufacturing's);
(ix) the Company has submitted all necessary documentation
(including any invoice) for payment of such Receivable to the Obligor and
has fulfilled all its other obligations in respect thereof;
(x) such Receivable has a Maturity Date no later than 270 days
from its Billing Date;
(xi) such Receivable is an "account" or "chattel paper" within
the meaning of the UCC of the jurisdiction where the Company's chief
executive office is located;
(xii) neither such Receivable nor its related Contract contravenes
in any material respect any laws, rules or regulations applicable thereto
(including, without limitation, laws, rules and regulations relating to
usury, consumer protection, truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection practices
and privacy) and no party to such related Contract is in violation of any
such law, rule or regulation in any material respect;
(xiii) such Receivable does not represent "billed but not yet
shipped" goods or merchandise, unperformed services, consigned goods or
"sale or return" goods; nor does such Receivable arise from a transaction
for which any additional performance by the Company or acceptance or other
act of the Obligor remains to be performed as a condition to payments on
such Receivable;
(xiv) there are no proceedings or investigations pending or
threatened before any Governmental Authority (A)
34
<PAGE>
asserting the invalidity of such Receivable or such Contract, (B) asserting
the bankruptcy or insolvency of the related Obligor, (C) seeking the
payment of such Receivable or payment and performance of such Contract or
(D) seeking any determination or ruling that might materially and adversely
affect the validity or enforceability of such Receivable or such Contract;
(xv) as of the applicable date of transfer hereunder, no Obligor
on such Receivable is bankrupt or insolvent, is unable to make payment of
its obligations when due, is the debtor in a voluntary or involuntary
bankruptcy proceeding, or is the subject of a comparable receivership or
insolvency proceeding, other than Obligors under the protection of a
bankruptcy court or receivership which has approved payment by any such
Obligor of such Receivable; and
(xvi) the Company has no knowledge of any fact (including any
defaults by the Obligor on any other accounts) which leads it or reasonably
should have led it to expect that the Billed Amount of such Receivable will
not be paid in full when due or to expect any other Material Adverse
Effect;
It is understood and agreed that the representations and warranties described in
this Section 4.01 shall survive the sale of the Transferred Receivables to
either of the Funding Corporations, any subsequent assignment of the Transferred
Receivables by either of the Funding Corporations (including its grant of a
first priority perfected security interest in, to and under the Transferred
Receivables, pursuant to the Funding Agreement, in order to secure the due
payment and performance by either of the Funding Corporations of TFC Secured
Obligations), and the termination of this Agreement and the Funding Agreement
and shall continue so long as any Transferred Receivable shall remain
outstanding.
SECTION 4.02. Covenants of the Company. (a) Offices and Records.
------------------------ -------------------
The Company shall keep its chief place of business and chief executive offices
and the office where it keeps its Records at the respective locations specified
in Section 4.01(a)(x) or, upon 30 days prior written notice to the Funding
Corporations, FSA and the Collateral Agent, at such other location in a
jurisdiction where all action required by Section 4.02(f) shall have been taken
with respect to the Transferred Receivables. The Company shall, for not less
than three years or for such longer period as may be required by law, from the
date on which any Transferred Receivable arose, maintain the Records with
respect to each Transferred Receivable, including records of all payments
received, credits granted and merchandise returned. The Company will permit
representatives of each Funding Corporation, the Servicer, FSA, the Operating
Agent or the
35
<PAGE>
Collateral Agent at any time and from time to time during normal business hours,
and at such times outside of normal business hours, upon reasonable prior
notice, as either Funding Corporation, FSA, the Servicer, the Operating Agent or
the Collateral Agent shall reasonably request, (i) to inspect and make copies of
and abstracts from such records, and (ii) to visit the properties of the Company
utilized in connection with the collection, processing or servicing of the
Transferred Receivables for the purpose of examining such Records, and to
discuss matters relating to the Transferred Receivables or the Company's
performance under this Agreement or the affairs, finances and accounts of the
Company with any of its officers, directors, employees, representatives or
agents and with its independent certified accountants and advise such
accountants that the Funding Corporations, the Operating Agent, FSA, the
Servicer and the Collateral Agent have been authorized to review and discuss
with such accountants any and all financial statements and other information of
any kind that they may have with respect to the Company and direct such
accountants to comply with any request of the Funding Corporations, the
Operating Agent, FSA, the Servicer or the Collateral Agent for such information.
In connection therewith, the Company, the Operating Agent, FSA or the Collateral
Agent may institute procedures to permit it to confirm the Obligor outstanding
balances in respect of any Transferred Receivables. The Company agrees to
render to TFC I, TFC II, FSA, the Operating Agent and the Collateral Agent, at
the Company's own cost and expense, such clerical and other assistance as may be
reasonably requested with regard to the foregoing. If a Termination Event under
the Funding Agreement shall have occurred and be continuing, promptly upon
request therefor, the Company shall assist the Funding Corporations in
delivering to the Operating Agent records reflecting activity through the close
of business on the immediately preceding Business Day.
(b) Collection of Transferred Receivables. TFC I has established
-------------------------------------
with a Lockbox Bank a Lockbox Account, and TFC II has established with a Lockbox
Bank a Lockbox Account, into which the Company and TFC I or TFC II as the case
may be shall deposit from time to time all monies, instruments and other
property received by either of them as Collections or Proceeds of the Tier I
Transferred Receivables and Tier II Transferred Receivables, respectively.
Except for Toys'R'Us, the Company has instructed all existing Obligors, and will
instruct all future Obligors, to make payments in respect of Transferred
Receivables only (i) by check or money order mailed to one or more lockboxes or
post office boxes in the name and under the control of the Collateral Agent
(each such box being a "Lockbox"), or (ii) by wire transfer or moneygram
directly to a Lockbox Account established by TFC I or a Lockbox Account
established by TFC II, as the case may be ("Wire Payments") in the name and
under the control of the Collateral Agent. The Lockboxes to which mail payments
are made
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<PAGE>
as of the date hereof listed are listed on the attached Schedule IV. The Company
shall endorse, to the extent necessary, all checks or other instruments received
in any Lockbox so that the same can be deposited, and the same shall be
deposited in the applicable Lockbox Account in the form so received (with all
necessary endorsements), on the next Business Day after the Business Day on
which such check or other instruments are received. In addition, the Company
shall deposit or cause to be deposited in the Lockbox Account for Tier I
Receivables or in the Lockbox Account for Tier II Receivables, as appropriate,
all cash, checks, money orders or other Collections or Proceeds received other
than in a Lockbox or by Wire Payments, in the form so received (with all
necessary endorsements), not later than the close of business on the Business
Day following the date of such receipt, and until so deposited all such items or
other Collections or Proceeds shall be held in trust for the Collateral Agent
and FSA; provided that any payments by Toys'R'Us in respect of the Transferred
--------
Receivables shall be delivered directly by Toys'R'Us to a bonded courier
acceptable to Redwood and FSA and directly upon receipt thereof on the day so
received, deposited into the Collection Account or deposited directly by
Toys'R'Us into the applicable Lockbox Account. FSA, the Company and GE Capital
will agree on satisfactory procedures for collecting payments from Toys'R'Us
from time to time. In connection with such collections, the Company may take
(and at the Collateral Agent's or FSA's direction after a Termination Event has
occurred and is continuing, shall take) such action as either TFC I or TFC II or
the Collateral Agent or FSA, in each case with the prior written consent of FSA,
may deem necessary or advisable to enforce collection of the Transferred
Receivables; provided, however, that the Collateral Agent may, at any time that
a Termination Event has occurred and is continuing, notify any Obligor with
respect to any Transferred Receivables of the assignment of such Transferred
Receivables to the Collateral Agent and direct that payments of all amounts due
or to become due thereunder be made directly to the Collateral Agent or any
servicer, collection agent or lockbox or other account designated by the
Collateral Agent and, upon such notification the Collateral Agent may enforce
collection of any such Receivable and adjust, settle or compromise the amount or
payment thereof, subject in each case to the prior written approval of FSA.
(c) Maintain Records of Transferred Receivables. The Company as
-------------------------------------------
Servicer shall, at its own cost and expense, maintain satisfactory and complete
records of the Transferred Receivables, including a record of all payments
received and all credits granted with respect to the Transferred Receivables and
all other dealings with the Transferred Receivables. The Company as Servicer
will mark conspicuously with a legend, in form and substance satisfactory to the
Operating Agent and FSA, its records, computer tapes, computer disks and credit
files pertaining to the Transferred Receivables, and its file cabinets
37
<PAGE>
or other storage facilities where it maintains information pertaining to the
Transferred Receivables, to evidence this Agreement, the transfers hereunder and
that ownership of each Transferred Receivable is held by either TFC I or TFC II
or their respective assignees. Upon the occurrence and during the continuation
of a Termination Event, the Company as Servicer shall (i) provide to the
Operating Agent and FSA or its representatives with access to, at any time on
demand of the Operating Agent or FSA, all of the Company's facilities,
personnel, books and records pertaining to the Transferred Receivables,
including all Records, and (ii) allow the Operating Agent and FSA to occupy the
premises of the Company where such books and Records are maintained, and utilize
such premises, the equipment thereon and any personnel of the Company that
either such party may wish to employ to administer, service and collect the
Transferred Receivables.
(d) Compliance With Credit and Collection Policies. The Company
----------------------------------------------
shall comply in all respects with the Credit and Collection Policies with regard
to each Transferred Receivable and the related Contracts, and with the terms of
such Receivables and Contracts.
(e) Notice of Adverse Claim. The Company shall advise TFC I, TFC II,
-----------------------
FSA, the Operating Agent and the Collateral Agent promptly, in writing and in
reasonable detail, (i) of any Adverse Claim known to it made or asserted against
any of the Transferred Receivables, (ii) of any determination that a Sold
Receivable, or any other Receivable designated as an Eligible Receivable in a
Request Notice or otherwise, was not an Eligible Receivable at such time, and
(iii) of the occurrence of any event which would have a material adverse effect
on the aggregate value of the Transferred Receivables or on the validity of the
transfers in this Agreement.
(f) Further Assurances; Financing Statements. (i) The Company agrees
----------------------------------------
that at any time and from time to time, at its expense, it shall promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable or that TFC I, TFC II, the Operating
Agent, FSA or the Collateral Agent may reasonably request to perfect, preserve,
continue and maintain fully and protect the transfers made and the right, title
and interest (including any security interests) granted to either Funding
Corporation by this Agreement or to enable TFC I, TFC II, the Operating Agent,
FSA or the Collateral Agent to exercise and enforce its rights and remedies
under this Agreement or any of the Related Documents with respect to any
Transferred Receivables. Without limiting the generality of the foregoing, the
Company shall execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices as may be necessary or
desirable or that TFC I, TFC II, the Operating
38
<PAGE>
Agent, FSA or the Collateral Agent may reasonably request to protect, preserve
and perfect the transfers and security interests granted by this Agreement, free
and clear of all Adverse Claims and Restrictions on Transferability. Without
limitation of the foregoing, the Company shall, upon the request of FSA, from
time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, within five (5) days of such request, such
amendments hereto and such further instruments and take such further action as
may be necessary or advisable to effectuate the intention, performance and
provisions of this Agreement and the Related Documents or to protect the
interest of TFC I in the Tier I Receivables and TFC II in the Tier II
Receivables, free and clear of all Adverse Claims and Restrictions on
Transferability. In addition, the Company and the Operating Agent agree to
cooperate with S&P and Moody's in connection with any review of the transactions
contemplated hereby or by the Related Documents which may be undertaken by S&P
and Moody's after the date hereof.
(ii) The Company hereby authorizes TFC I, TFC II, FSA and the
Collateral Agent to file one or more financing or continuation statements, and
amendments thereto, relating to all or any part of the Transferred Receivables
without the signature of the Company where permitted by law. A carbon,
photographic or other reproduction of this Agreement or any notice or financing
statement covering the Transferred Receivables or any part thereof shall be
sufficient as a notice or financing statement where permitted by law.
(g) Assignment. The Company acknowledges that, pursuant to the
----------
Funding Agreement, each of TFC I and TFC II may assign all of its right, title
and interest in, to and under the Transferred Receivables and TFC Loans and its
rights, title and interest under this Agreement, including its right to exercise
the remedies created by Section 4.05 hereof, to Redwood and the Collateral
Agent. The Company agrees that, upon such assignment, the assignee may enforce
directly, without joinder of either Funding Corporation, the repurchase
obligations of the Company set forth in Section 4.05 hereof with respect to
breaches of the representations and warranties or covenants set forth in
Sections 4.01 and 4.02 of this Agreement.
(h) Compliance With Agreements and Applicable Laws. The Company shall
----------------------------------------------
perform each of its obligations under this Agreement and the Related Documents
and comply with all material requirements of any law, rule or regulation
applicable to it.
(i) Corporate Existence. The Company shall maintain its corporate
-------------------
existence and shall at all times continue to be duly organized under the laws of
the State of Delaware and duly qualified and duly authorized (as described in
Section 4.01
39
<PAGE>
hereof) and shall conduct its business in accordance with the terms of its
certificate of incorporation and bylaws.
(j) Financial Statements; Accountants' Reports; Other Information.
-------------------------------------------------------------
The Company shall keep or cause to be kept in reasonable detail books and
records of account of the Company's assets and business, including, but not
limited to, books and records relating to the transactions contemplated herein
and in the Related Documents, which shall be furnished to the Operating Agent or
FSA upon request. The books of the Company shall be kept on an accrual basis
and the Company shall report its operations for tax purposes on an accrual
basis. The fiscal year of the Company shall end on December 31 of each year.
The Company shall furnish or cause to be furnished to the Operating Agent and
FSA:
(i) Annual Financial Statements. As soon as publicly available,
---------------------------
and in any event within 90 days after the close of each fiscal year of Tyco
Toys, Inc., the consolidated audited balance sheets of Tyco Toys, Inc. as
of the end of such fiscal year and the consolidated audited statements of
income, changes in shareholders' equity and cash flows of Tyco Toys, Inc.
for such fiscal year, all in reasonable detail and stating in comparative
form the respective figures for the corresponding date and period in the
preceding fiscal year, prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied by the
certificate of the independent accountants of Tyco Toys, Inc. (Deloitte &
Touche or any "Big 6" accounting firm shall be acceptable to FSA and the
Operating Agent) and by the certificate specified in Section 4.02(k)
hereof.
(ii) Quarterly Financial Statements. As soon as publicly
------------------------------
available, and in any event within 45 days after the close of each of the
first three quarters of each fiscal year of Tyco Toys, Inc., the
consolidated unaudited balance sheets of Tyco Toys, Inc. as of the end of
such quarter and the consolidated unaudited statements of income, changes
in shareholders' equity and cash flows of Tyco Toys, Inc. for the portion
of the fiscal year then ended, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and
period in the preceding fiscal year, prepared in accordance with generally
accepted accounting principles consistently applied (subject to normal
year-end adjustments), and accompanied by the certificate specified in
Section 4.02(k) hereof.
(iii) Accountants' Reports. Promptly upon receipt thereof, copies
--------------------
of any reports submitted to the Company by its independent accountants in
connection with any examination of the financial statements of the Company.
40
<PAGE>
(iv) Certain Information. Promptly after the filing or sending
-------------------
thereof, copies of all proxy statements, financial statements, reports, and
registration statements which the Company or Tyco Toys, Inc. files with, or
delivers to, the Internal Revenue Service, the Securities Exchange
Commission or any other federal government agency, authority or body which
supervises the issuance of securities by the Company or Tyco Toys, Inc. or
any national securities exchange.
(k) Compliance Certificate. The Company shall deliver to the
----------------------
Operating Agent and FSA concurrently with the delivery of the financial
statements required pursuant to Section 4.02(j)(i) and (ii) hereof, a
certificate signed on its behalf by the Chief Financial Officer of the Company
stating that:
(i) a review of the Company's performance under this Agreement
and the Related Documents during such period has been made under such
officer's supervision;
(ii) to the best of such individual's knowledge following due
inquiry, no Termination Event or event which, upon the giving of notice or
the passage of time, or both, would become a Termination Event, has
occurred, or if a Termination Event or such other event has occurred,
specifying the nature thereof and, if the Company has a right to cure
pursuant to the Funding Agreement, stating in reasonable detail the steps,
if any, being taken by the Company to cure such Termination Event or other
event or to otherwise comply with the terms of the agreement to which such
Termination Event or other event relates; and
(iii) the financial reports attached thereto and submitted in
accordance with Section 4.02(j)(i) or (ii) hereof, as applicable, are
complete and correct in all material respects and present fairly the
financial condition and results of operations of the Tyco Toys, Inc. and
its consolidated Subsidiaries as of the dates and for the periods
indicated, in accordance with GAAP consistently applied (subject as to
interim statements to normal year-end adjustments) and the attached
computations indicate compliance by the Company with the covenants set
forth in Section 7.06 of the Funding Agreement and other agreements of the
Company herein.
(l) Notice of Material Event. The Company shall promptly inform the
------------------------
Operating Agent and FSA in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against the
Company or with respect
41
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to or in connection with all or any portion of the Transferred Receivables,
involving potential damages or penalties in an uninsured amount in excess
of $100,000 in any one instance or $500,000 in the aggregate;
(ii) any change in the location of Company's principal office or
any change in the location of the Company's books and records;
(iii) the occurrence of any Termination Event or event which, upon
the giving of notice or the passage of time, or both, would become a
Termination Event;
(iv) the commencement or threat of any rule making or disciplinary
proceedings or any proceedings instituted by or against the Company in any
federal, state or local court or before any governmental body or agency, or
before any arbitration board, or the promulgation of any proceeding or any
proposed or final rule which, if adversely determined, would have a
Material Adverse Effect with respect to the Company;
(v) the commencement of any proceedings by or against the Company
under any applicable bankruptcy, reorganization, liquidation,
rehabilitation, insolvency or other similar law now or hereafter in effect
or of any proceeding in which a receiver, liquidator, conservator, trustee
or similar official shall have been, or may be, appointed or requested for
the Company or any of its assets;
(vi) the receipt of notice that (A) the Company is being placed
under regulatory supervision, (B) any license, permit, charter,
registration or approval necessary for the conduct of the Company's
business is to be, or may be, suspended or revoked, or (C) the Company is
to cease and desist any practice, procedure or policy employed by the
Company in the conduct of its business, and such cessation may have a
Material Adverse Effect with respect to the Company; or
(vii) any other event, circumstance or condition that has had, or
has a material possibility of having, a Material Adverse Effect in respect
of the Company.
(m) Maintenance of Licenses. The Company shall maintain all licenses,
-----------------------
permits, charters and registrations which are material to the conduct of its
business.
(n) Use of Proceeds. The Company shall apply its funds towards
---------------
general corporate purposes and towards the other sums payable by the Company
under this Agreement and the Related
42
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Documents in connection with the transactions contemplated hereby and by the
Related Documents and for no other purpose.
(o) Separate Identity.
-----------------
(i) The Company shall maintain corporate records and books of
account separate from those of both of the Funding Corporations.
(ii) The annual financial statements of Tyco Toys Inc. shall
disclose the effects of the Company's transactions in accordance with GAAP
and the annual financial statements of Tyco Toys, Inc. shall disclose that
the assets of neither of the Funding Corporations are available to pay
creditors of the Company, Tyco Manufacturing, or any other Affiliate of the
Company.
(iii) The resolutions, agreements and other instruments underlying
the transactions described in this Agreement shall be continuously
maintained by the Company as official records.
(iv) The Company shall use its best efforts to maintain an arm's-
length relationship with TFC I and TFC II and will not hold itself out as
being liable for the debts of either of the Funding Corporations.
(v) The Company shall use its best efforts to keep its assets and
its liabilities wholly separate from those of each of TFC I and TFC II.
(vi) The Company will conduct its business solely in its own name
through its duly authorized officers or agents so as not to mislead others
as to the identity of the Company.
(vii) The Company will use its best efforts to avoid the
appearance of conducting business on behalf of the Funding Corporations or
that the assets of the Company are available to pay the creditors of either
of the Funding Corporations.
(viii) The Company will cause operating expenses and liabilities
of the respective Funding Corporations to be paid from their respective
funds.
(p) ERISA. The Company shall give the Operating Agent and FSA prompt
-----
notice of each of the following events (but in no event more than 30 days after
the occurrence of the event): (i) an Accumulated Funding Deficiency, (ii) the
failure to make a material required contribution to a Plan or Multiemployer Plan
(but in no event will a contribution failure sufficient to give
43
<PAGE>
rise to a lien under (S)302(f) of ERISA be considered immaterial), (iii) a
Reportable Event, (iv) any action by a Commonly Controlled Entity to terminate
any Plan or withdraw from any Multiemployer Plan, (v) any action by the PBGC to
terminate or appoint a trustee to administer a Plan, (vi) the reorganization or
insolvency of any Multiemployer Plan and (vii) an aggregate Underfunding for all
Underfunded Plans in excess of $100,000. In addition, the Company shall
promptly (but in no case more than 30 days following issuance or receipt by the
Commonly Controlled Entity) provide to FSA a copy of all correspondence between
a Commonly Controlled Entity and the PBGC, Internal Revenue Service, Department
of Labor or the administrators of a Multiemployer Plan relating to any of the
events described in the preceding sentence or the underfunded status,
termination or possible termination of a Plan or a Multiemployer Plan which
could result in a material liability.
(q) Cooperation With Requests for Information or Documents. The
------------------------------------------------------
Company will cooperate fully with all reasonable requests of Redwood, FSA, the
Operating Agent and the Collateral Agent regarding the provision of any
information or documents, necessary, including the provision of such information
or documents in electronic or machine-readable format, or desirable to allow
each of Redwood, the Operating Agent, FSA and the Collateral Agent to carry out
its responsibilities under the Related Documents.
(r) Payment, Performance and Discharge of Obligations. The Company
-------------------------------------------------
will pay, perform and discharge all of its obligations and liabilities,
including, without limitation, all taxes, assessments and governmental charges
upon its income and properties when due the non-payment, performance or
discharge of which would have a Material Adverse Effect, unless and to the
extent only that such obligations, liabilities, taxes, assessments and
governmental charges shall be contested in good faith and by appropriate
proceedings and that, to the extent required by GAAP, proper and adequate book
reserves relating thereto are established by the Company and then only to the
extent that a bond is filed in cases where the filing of a bond is necessary to
avoid the creation of an Adverse Claim against any of its properties;
SECTION 4.03. Negative Covenants of the Company. The Company shall
---------------------------------
not, without the prior written consent of TFC I, TFC II, the Operating Agent,
FSA and the Collateral Agent:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist, or agree to create, or consent to
cause or permit in the future (upon the happening of a contingency or otherwise)
the creation, incurrence or existence of, any Adverse Claim upon or with respect
to, or assign any right to receive income in respect of any Transferred
44
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Receivable or related Contract with respect thereto, or upon or with respect to
the Lockbox Accounts or Lockboxes or any other account in which any Collections
or Proceeds of any Transferred Receivables are deposited;
(b) extend, amend, forgive, discharge, compromise, cancel or
otherwise modify the terms of any Transferred Receivable, or amend, modify or
waive any term or condition of any Contract related thereto;
(c) make any change in its instructions to Obligors regarding
payments to be made to the Funding Corporations or payments to be deposited to
the Lockbox Accounts or Lockboxes;
(d) merge with or into, consolidate with or into, convey, transfer,
lease or otherwise dispose of all or substantially all of its assets (whether
now owned or hereafter acquired) to, or acquire all or substantially all of the
assets or capital stock or other ownership interest of, any Person (whether in
one transaction or in a series of transactions);
(e) make statements or disclosures or prepare any financial
statements which shall account for the transactions contemplated by this
Agreement in any manner other than as a sale of the Transferred Receivables to
either TFC I or TFC II, as the case may be, or in any other respect account for
or treat the transactions contemplated hereby (including but not limited to, for
accounting, tax and reporting purposes) in any manner other than as a sale or
absolute assignment of the Transferred Receivables;
(f) The Company shall not amend, supplement or otherwise modify its
certificate of incorporation or bylaws (or permit any of the foregoing) to the
extent that such modification would have a Material Adverse Effect.
(g) The Company shall not (i) take any action, or fail to take any
action, if such action or failure to take action may interfere with the
enforcement of any rights under this Agreement or the Related Documents that are
material to the rights, benefits or obligations of the Funding Corporations,
Redwood or FSA (however, nothing herein shall be construed to constitute a
guarantee of collectibility by the Company); (ii) waive or alter any rights with
respect to the Receivables (or any agreement or instrument relating thereto);
(iii) take any action, or fail to take any action, if such action or failure to
take action may interfere with the enforcement of any rights with respect to the
Receivables; or (iv) fail to pay any tax, assessment, charge or fee with respect
to the Receivables, or fail to defend any action, if such failure to pay or
defend may adversely affect the priority or enforceability of the first priority
perfected interest of TFC I and TFC II in the Tier I Receivables or the
45
<PAGE>
Tier II Receivables, respectively, or the Company's right, title or interest in
the Receivables.
(h) The Company shall not consolidate with or merge with or into any
Person or, except as permitted by this Agreement, transfer all or any material
amount of its assets to any Person or liquidate or dissolve.
(i) Neither the Company nor any Commonly Controlled Entity will:
(i) terminate any Plan so as to incur any material liability to the
PBGC;
(ii) knowingly participate in any "prohibited transaction" (as defined
in ERISA) involving any Plan or Multiemployer Plan or any trust created
thereunder which would subject any of them to a material tax or penalty on
prohibited transactions imposed under Section 4975 of the Code or ERISA;
(iii) fail to pay to any Plan or Multiemployer Plan any contribution
which it is obligated to pay under the terms of such Plan or Multiemployer
Plan, if such failure would cause such plan to have any material
Accumulated Funding Deficiency, whether or not waived; or
(iv) allow or suffer to exist any occurrence of a Reportable Event, or
any other event or condition, which presents a material risk of termination
by the PBGC on any Plan or Multiemployer Plan, to the extent that the
occurrence or nonoccurrence of such Reportable Event or other event or
condition is within the control of it or any Commonly Controlled Entity.
(j) The Company shall not make any change to the Credit and Collection
Policies or the terms of the contractual dilutions without the prior written
consent of FSA.
(k) Tax Status of Advances. The Company, shall not take or permit
----------------------
(other than with respect to actions taken or to be taken solely by a government
or governmental authority) to be taken any action which would have the effect
directly or indirectly of subjecting interest on any of the Advances or the
Commercial Paper to withholding taxation in the hands of, respectively, TFC I,
TFC II, Redwood or holders of the Commercial Paper generally who are residents
of the United States, and will perform all of its obligations under this
Agreement and the Related Documents to prevent or cure any default by the
Company which would have the effect, directly or indirectly, of subjecting
interest on any of the Advances or the Commercial Paper to withholding taxation.
46
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SECTION 4.04. Restatement of Representations, Warranties and
----------------------------------------------
Covenants. The Company hereby restates, and makes, for the benefit of FSA, each
- ---------
of its representations, warranties, covenants and other agreements as set forth
in this Agreement and each of the other Related Agreements, to be included in
the Insurance and Indemnity Agreement, in each case with the same force and
effect as if each such representation, warranty, covenant and agreement were set
forth in full in the Insurance and Indemnity Agreement.
SECTION 4.05. Breach of Representations, Warranties or Covenants.
--------------------------------------------------
Upon discovery by the Company, TFC I or TFC II, the Operating Agent, Redwood,
the Collateral Agent or any assignee of either of the Funding Corporations'
rights hereunder, of a breach of any of the representations, warranties or
covenants described in Section 4.01, 4.02 or 4.03 hereof which is reasonably
likely to have a Material Adverse Effect on the value of a Transferred Tier I
Receivable or a Transferred Tier II Receivable or the interests of either of the
Funding Corporations, Redwood, FSA or the Collateral Agent therein, the party
discovering such breach shall give prompt written notice to the other parties.
Thereafter, if requested by notice from TFC I or TFC II or any assignee of
either of the Funding Corporations, the Company shall on the next succeeding
Business Day make a payment of the Rejected Amount (as defined under the Funding
Agreement) in cash to either TFC I or TFC II, as the case may be, in an amount
equal to the Billed Amount of such Receivable less Collections received in
----
respect thereof by remitting the amount of such payment to the Collection
Account in accordance with the terms of the Funding Agreement. Notice of any
such payment and the amount thereof shall promptly be given to FSA by the
Company.
ARTICLE V
TFC I LOANS TO THE COMPANY
SECTION 5.01. TFC I Loans. TFC I hereby agrees, on the terms and
-----------
subject to the conditions of this Agreement, upon request of the Company, to
make advances (each, a "TFC I Loan") to the Company to the extent of its
available funds during the term of this Agreement in an aggregate principal
amount at any one time outstanding up to, but not exceeding, the Maximum
Facility Commitment. Subject to the terms of this Agreement, the Company may
borrow, repay and reborrow; provided that no such TFC I Loans may be made if a
--------
Termination Event or an Event of Servicer Termination, or an event which, upon
the giving of notice or the passage of time, or both would become a Termination
Event or an Event of Servicer Termination has occurred and is continuing, or if,
after giving effect thereto, there would be a Funding Excess or any amounts are
outstanding under the TFC I Deferred Sale Prices.
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SECTION 5.02. Notices Relating to Loans. The Company shall give TFC
-------------------------
I and the Operating Agent same day notice, and FSA a monthly report (with the
option reserved by FSA to receive daily notice upon request therefor), of each
borrowing and repayment of each TFC I Loan. Each such notice of borrowing or
repayment shall specify the amount of TFC I Loans to be borrowed or repaid and
the date of such action (which shall be a Business Day).
SECTION 5.03. Disbursement of Loan Proceeds. Not later than 3:00
-----------------------------
p.m., New York City time, on the date specified for each TFC I Loan hereunder,
TFC I shall transfer, by wire transfer or otherwise, but in any event in
immediately available funds, the amount of the TFC I Loan to be made on such
date, to the account designated by the Company maintained with [depository
institution], in accordance with instructions previously supplied to TFC I.
SECTION 5.04. Company Note I. (a) TFC I Loans made by TFC I
--------------
hereunder shall be evidenced by a single promissory note of the Company in
substantially the form of Exhibit 2A hereto ("Company Note I"). Company Note I
shall be dated the date of this Agreement, shall be payable to the order of TFC
I in a principal amount equal to $100,000,000 and shall otherwise be duly
completed.
(b) TFC I shall enter on a schedule attached to Company Note I a
notation (which may be computer generated) with respect to each TFC I Loan made
hereunder of: (i) the date and principal amount thereof and (ii) each payment
and repayment of principal thereof. The failure of TFC I to make a notation on
the schedule to Company Note I as aforesaid shall not limit or otherwise affect
the obligation of the Company to repay TFC I Loans in accordance with their
respective terms as set forth herein.
(c) The Company acknowledges that Company Note I is pledged to the
Collateral Agent, on behalf of the Lender and FSA, pursuant to the Funding
Agreement to secure the obligations of TFC I thereunder.
SECTION 5.05. Principal Repayments. TFC I Loans may be repaid by the
--------------------
Company at any time and from time to time, in whole or in part, upon prior
written notice to TFC I, FSA and Operating Agent as provided in Section 5.02.
In addition, TFC I Loans shall be payable immediately on demand of TFC I or,
upon the occurrence and during the continuation of a Termination Event or an
Event of Servicer Termination, of FSA. Any amount so repaid may, subject to the
terms and conditions hereof, be reborrowed hereunder; provided, however, that
all repayments of TFC I Loans or any portion thereof shall be made together with
48
<PAGE>
payment of all interest accrued on the amount repaid to (but excluding) the date
of such repayment.
SECTION 5.06. Interest. (a) On each monthly anniversary of the date
--------
hereof, the Company shall pay to TFC I interest at the prime rate plus 1% (the
"Company Interest Rate") on the unpaid principal amount of each TFC I Loan for
the period commencing on and including the date of such TFC I Loan until but
excluding the date such TFC I Loan shall be paid in full.
(b) Notwithstanding the foregoing, the Company shall pay interest on
unpaid interest, on any TFC I Loan or any installment thereof, and on any other
amount payable by the Company hereunder (to the extent permitted by law) that
shall not be paid in full when due (whether at stated maturity, by acceleration
or otherwise) for the period commencing on the due date thereof to (but
excluding) the date the same is paid in full at the applicable Company Interest
Rate.
SECTION 5.07. Time and Method of Payments. All payments of
---------------------------
principal, interest and other amounts (including indemnities) payable by the
Company hereunder shall be made in Dollars, in immediately available funds, to
TFC I not later than 11:00 a.m., New York City time, on the date on which such
payment shall become due. Any such payment made on such date but after such
time shall, if the amount paid bears interest, be deemed to have been made on,
and interest shall continue to accrue and be payable thereon until, the next
succeeding Business Day. If any payment of principal or interest becomes due on
a day other than a Business Day, such payment may be made on the next succeeding
Business Day and such extension shall be included in computing interest in
connection with such payment. All payments hereunder and under Company Note I
shall be made without set-off or counterclaim and in such amounts as may be
necessary in order that all such payments shall not be less than the amounts
otherwise specified to be paid under this Agreement and Company Note I. Upon
payment in full of Company Note I, following the end of the term of this
Agreement, TFC I shall mark Company Note I "Paid" and return it to the Company.
ARTICLE VI
TFC II LOANS TO THE COMPANY
SECTION 6.01. TFC II Loans. TFC II hereby agrees, on the terms and
------------
subject to the conditions of this Agreement, upon request of the Company, to
make advances (each, a "TFC II Loan") to the Company to the extent of its
available funds during the term of this Agreement in an aggregate principal
amount at any one time outstanding up to, but not exceeding, the Maximum
Facility Commitment. Subject to the terms of this Agreement, the
49
<PAGE>
Company may borrow, repay and reborrow; provided that no such TFC II Loans may
--------
be made if a Termination Event or an Event of Servicer Termination, or an event
which, upon the giving of notice or the passage of time, or both would become a
Termination Event or an Event of Servicer Termination, has occurred and is
continuing, or if, after giving effect thereto, there would be a Funding Excess
or any amounts are outstanding under the TFC II Deferred Sale Prices.
SECTION 6.02. Notices Relating to Loans. The Company shall give TFC
-------------------------
II and the Operating Agent same day notice, and FSA a monthly report (with the
option reserved by FSA to receive daily notice upon request therefor) of each
borrowing and repayment of each TFC II Loan. Each such notice of borrowing or
repayment shall specify the amount of TFC II Loans to be borrowed or repaid and
the date of such action (which shall be a Business Day).
SECTION 6.03. Disbursement of Loan Proceeds. Not later than 3:00
-----------------------------
p.m., New York City time, on the date specified for each TFC II Loan hereunder,
TFC II shall transfer, by wire transfer or otherwise, but in any event in
immediately available funds, the amount of the TFC II Loan to be made on such
date, to the account designated by the Company maintained with [depository
institution], in accordance with instructions previously supplied to TFC II.
SECTION 6.04. Company Note II. (a) TFC II Loans made by TFC II
---------------
hereunder shall be evidenced by a single promissory note of the Company in
substantially the form of Exhibit 2B hereto ("Company Note II"). Company Note
II shall be dated the date of this Agreement, shall be payable to the order of
TFC II in a principal amount equal to $100,000,000 and shall otherwise be duly
completed.
(b) TFC II shall enter on a schedule attached to Company Note II a
notation (which may be computer generated) with respect to each TFC II Loan made
hereunder of: (i) the date and principal amount thereof and (ii) each payment
and repayment of principal thereof. The failure of TFC II to make a notation on
the schedule to Company Note II as aforesaid shall not limit or otherwise affect
the obligation of the Company to repay TFC II Loans in accordance with their
respective terms as set forth herein.
(c) The Company acknowledges that Company Note II is pledged to the
Collateral Agent, on behalf of the Lender and FSA, pursuant to the Funding
Agreement to secure the obligations of TFC II hereunder.
SECTION 6.05. Principal Repayments. TFC II Loans may be repaid by
--------------------
the Company at any time and from time to time, in
50
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whole or in part, upon prior written notice to TFC II, FSA and Operating Agent
as provided in Section 6.02. In addition, TFC II Loans shall be payable
immediately on demand of TFC II or, upon the occurrence and during the
continuation of a Termination Event or an Event of Servicer Termination, of FSA.
Any amount so repaid may, subject to the terms and conditions hereof, be
reborrowed hereunder; provided, however, that all repayments of TFC II Loans or
any portion thereof shall be made together with payment of all interest accrued
on the amount repaid to (but excluding) the date of such repayment.
SECTION 6.06. Interest. (a) On each monthly anniversary of the date
--------
hereof, the Company shall pay to TFC II interest at the prime rate plus 1% (the
"Company Interest Rate") on the unpaid principal amount of each TFC II Loan for
the period commencing on and including the date of such TFC II Loan until but
excluding the date such TFC II Loan shall be paid in full.
(b) Notwithstanding the foregoing, the Company shall pay interest on
unpaid interest, on any TFC II Loan or any installment thereof, and on any other
amount payable by the Company hereunder (to the extent permitted by law) that
shall not be paid in full when due (whether at stated maturity, by acceleration
or otherwise) for the period commencing on the due date thereof to (but
excluding) the date the same is paid in full at the applicable Company Interest
Rate.
SECTION 6.07. Time and Method of Payments. All payments of
---------------------------
principal, interest and other amounts (including indemnities) payable by the
Company hereunder shall be made in Dollars, in immediately available funds, to
TFC II not later than 11:00 a.m., New York City time, on the date on which such
payment shall become due. Any such payment made on such date but after such
time shall, if the amount paid bears interest, be deemed to have been made on,
and interest shall continue to accrue and be payable thereon until, the next
succeeding Business Day. If any payment of principal or interest becomes due on
a day other than a Business Day, such payment may be made on the next succeeding
Business Day and such extension shall be included in computing interest in
connection with such payment. All payments hereunder and under Company Note II
shall be made without set-off or counterclaim and in such amounts as may be
necessary in order that all such payments shall not be less than the amounts
otherwise specified to be paid under this Agreement and Company Note II. Upon
payment in full of Company Note II, following the end of the term of this
Agreement, TFC II shall mark Company Note II "Paid" and return it to the
Company.
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ARTICLE VII
-----------
COLLATERAL SECURITY
-------------------
SECTION 7.01. Security Interest. The Company hereby grants each of
-----------------
TFC I and TFC II a security interest ("Security Interest") in the following
property, wherever located and whether now owned or hereafter acquired by the
Company (collectively, the "Collateral"):
(a) all accounts, inventory, general intangibles, chattel paper,
documents, and instruments (each as defined in the UCC), whether or not
specifically assigned to the Funding Corporations;
(b) all books, records and other information (including, without
limitation, computer programs, tapes, disks, punch cards, data processing
software, and other related property and rights) at any time evidencing or
relating to any Collateral; and
(c) all monies, securities and other property, now or hereafter held
or received by, or in transit to either of the Funding Corporations from or
for the Company, and all of the Funding Corporations' credits, and balances
with the Company existing at any time,
provided that the Collateral shall not include any items of property in which a
security interest is not granted as a result of the terms of the Security
Agreement delivered pursuant to the Inventory Facility and provided further that
any portion of the Collateral may be sold, transferred, conveyed, assigned or
otherwise disposed of, free and clear of the security interest granted
hereunder, to the extent provided in Section 6.8 of the Inventory Facility.
SECTION 7.02. Other Collateral; Rights in Receivables. Nothing
---------------------------------------
contained in this Article shall limit the rights of TFC I or TFC II, as the case
may be in and to any other collateral securing the Collateral Obligations which
may have been or may hereafter be granted to TFC I or TFC II as the case may be,
by the Company or any third party pursuant to any other agreement nor the rights
of TFC I or TFC II, as the case may be, under any of the Transferred
Receivables.
SECTION 7.03. Indebtedness Secured. The Security Interest secures
--------------------
payment of any and all recourse obligations of the Company to TFC I or TFC II,
as the case may be hereunder, including but not limited to those set forth in
Sections 4.05 and 8.01.
52
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SECTION 7.04. Further Action Evidencing Security Interest. (a) The
-------------------------------------------
Company agrees that from time to time, at its expense, it will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or appropriate or that either of the Funding Corporations
may reasonably request in order to perfect, protect or more fully evidence the
Security Interest, or to enable either of the Funding Corporations to exercise
or enforce any of their respective rights hereunder. Without limiting the
generality of the foregoing, the Company will, upon the request of either of the
Funding Corporations: (i) execute and file such financing or continuation
statements, or amendments thereto or assignments thereof, and such other
instruments or notices, as may be necessary or appropriate or as either of the
Funding Corporations may request, in order to perfect, protect, or evidence such
Security Interest and (ii) mark conspicuously or segregate any Collateral in a
manner acceptable to the Funding Corporations.
(b) The Company hereby authorizes both TFC I and TFC II to file one or
more financing or continuation statements, and amendments thereto and
assignments thereof, relating to all or part of any of TFC I's or TFC II's, as
the case may be, interest now existing or hereafter arising with respect to the
Collateral now existing or hereafter arising without the signature of the
Company where permitted by law. A carbon, photographic or other reproduction of
this Agreement or any financing statement covering the Collateral, or any part
thereof, shall be sufficient as a financing statement where permitted by law.
(c) If the Company fails to perform any agreement or obligations
under this Section, either TFC I or TFC II, as the case may be may (but shall
not be required to) itself perform, or cause performance of, such agreement or
obligation, and the reasonable expenses of such Funding Corporation incurred in
connection therewith shall be payable by the Company upon such Funding
Corporation's demand therefor.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Indemnification. (a) Without limiting any other
---------------
rights that TFC I, TFC II, Redwood, the Collateral Agent, FSA or any of their
shareholders, officers, employees or agents, any assignee of either Funding
Corporation's rights hereunder or such assignee's shareholders, officers,
employees or agents (each, an "Indemnified Party") may have hereunder or under
applicable law, the Company hereby agrees to indemnify each Indemnified Party
from and against any and all claims, losses (excluding consequential damages,
but including specifically any fees, including the Premium, past or future),
liabilities,
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obligations, damages, penalties, actions, judgments, suits, and related costs
and expenses of any nature whatsoever, including reasonable attorneys' fees and
disbursements (all of the foregoing being collectively referred to as
"Indemnified Amounts") which may be imposed on, incurred by or asserted against
an Indemnified Party in any way arising out of or resulting from this Agreement
or any Related Documents or the use by the Company of proceeds of any purchase
or assignment hereunder or in respect of any Transferred Receivable or any
Contract, excluding, however, (x) Indemnified Amounts to the extent resulting
solely from gross negligence, acts of bad faith or willful misconduct on the
part of such Indemnified Party or (y) recourse for uncollectible or uncollected
Transferred Receivables. Without limiting or being limited by the foregoing, the
Company shall pay within five Business Days after demand to each Indemnified
Party any and all Indemnified Amounts necessary to indemnify such Indemnified
Party from and against any and all Indemnified Amounts relating to or resulting
from:
(i) reliance on any representation or warranty made or deemed
made by the Company (or any of its officers) under or in connection with
this Agreement or any Related Document, any report or any other information
delivered by the Company pursuant hereto, which shall have been incorrect
in any material respect when made or deemed made or delivered;
(ii) the failure by the Company to comply with any term,
provision or covenant contained in this Agreement or any Related Document,
or any agreement executed in connection with this Agreement or with any
applicable law, rule or regulation with respect to any Transferred
Receivable or the related Contract, or the nonconformity of any Transferred
Receivable or the related Contract with any such applicable law, rule or
regulation; or
(iii) the failure to vest and maintain vested in the either of the
Funding Corporations, or to transfer to either of the Funding Corporations,
legal and equitable title to and ownership of the Receivables which are, or
are purported to be, Transferred Receivables, together with all Collections
and Proceeds in respect thereof, free and clear of any Adverse Claim
(except as permitted hereunder) whether existing at the time of the
proposed sale of such Receivable or at any time thereafter.
(b) The Company shall have the right at any time during which any
claim is pending to select counsel to defend and settle any such claim so long
as in any such event the Company shall have stated in a writing delivered to the
applicable Indemnified Party that, as between the Company and such Indemnified
Party, the Company is responsible to such Indemnified Party with respect
54
<PAGE>
to such claim (other than claims as to which it is ultimately determined that it
has no responsibility pursuant to clauses 8.01(a)(x) or 8.01(a)(y)); provided,
---------
however, that if an Indemnified Party shall have been advised by its counsel
- -------
that there are legal defenses available to such Indemnified Party that are
different from or additional to those available to the Company, such Indemnified
Party shall have the right to employ its own counsel in such action, and in such
event, the reasonable fees and disbursements of such counsel shall be paid by
the Company. If the Company shall fail to assume the defense of any claim in
accordance with the terms of this indemnity, the relevant Indemnified Party
shall have the right to select counsel and control the defense of such claim;
provided, however, that no Indemnified Party shall settle any such claim without
- -----------------
the prior written consent of the Company, which shall not be unreasonably
withheld or delayed.
SECTION 8.02. Assignment of Indemnities. The Company acknowledges
-------------------------
that, pursuant to the Funding Agreement, each of TFC I and TFC II may assign its
rights of indemnity granted hereunder to Redwood, FSA and the Collateral Agent
and upon such assignment, Redwood, FSA or the Collateral Agent, as applicable,
shall have all rights of the Funding Corporations hereunder and may in turn
assign such rights. The Company agrees that, upon such assignment, Redwood, FSA,
the Collateral Agent or the assignee of either Redwood, FSA or the Collateral
Agent, as applicable, may enforce directly, without joinder of either TFC I or
TFC II, as the case may be, the indemnities set forth in this Article VIII.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices, Etc. All notices and other communications
-------------
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile, telex and express mail) and mailed by registered mail or
transmitted by facsimile or telex, or delivered as to each party hereto, at its
address set forth under its name on the signature page hereof or at such other
address as shall be designated by such party in a written notice to the other
parties hereto or to FSA as follows:
55
<PAGE>
To FSA: Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Telex No.: (212) 688-3101
Confirmation: (212) 826-0100
Telecopy Nos.: (212) 339-3518
(212) 339-3529
(In each case in which notice or other communication to FSA
refers to a Termination Event, an Event of Servicer Termination,
a claim on the Policy or with respect to which failure on the
part of FSA to respond shall be deemed to constitute consent or
acceptance, then copies of such notice or other communication
should also be sent to the attention of the General Counsel and
the Head--Financial Guaranty Group "URGENT MATERIAL ENCLOSED.")
------------------------
All such notices and communications shall not be effective until received by the
party to whom such notice or communication is addressed.
SECTION 9.02. No Waiver; Remedies. No failure on the part of the
-------------------
Company or TFC I or TFC II or any assignee of either of the Funding Corporations
or FSA to exercise, and no delay in exercising, any right hereunder or under any
Assignment shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any other remedies provided by law.
SECTION 9.03. Binding Effect; Assignability. This Agreement shall be
-----------------------------
binding upon and inure to the benefit of the Company, TFC I and TFC II, and
their respective successors and permitted assigns. Except as contemplated
herein, none of the parties may assign any of its rights and obligations
hereunder or any interest herein without the prior written consent of the other
parties and FSA. This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall remain
in full force and effect until its termination; provided, that the rights and
--------
remedies pursuant to Section 4.05 with respect to any breach of any
representation, warranty or covenants made by the Company pursuant to Sections
4.01, 4.02 and 4.03 and the indemnification and payment provisions of Article
VII shall be continuing and shall survive any termination of this Agreement.
SECTION 9.04. No Proceedings. The Company hereby agrees that it will
--------------
not, directly or indirectly, institute, or
56
<PAGE>
cause to be instituted, against either of the Funding Corporations any
proceeding of the type referred to in Section 9.01(c) of the Funding Agreement
(except that such action or event shall be taken by or occur with respect to
such Funding Corporation, rather than by or to the parties mentioned in such
Section) so long as there shall not have elapsed one year plus one day since the
----
latest maturing commercial paper issued by Redwood and allocated to TFC I or TFC
II, as the case may be, has been paid in full in cash.
SECTION 9.05. Amendments; Consents and Waivers. No modification,
--------------------------------
amendment or waiver of, or with respect to, any provision of this Agreement, and
all other agreements, instruments and documents delivered thereto, nor consent
to any departure by the Company or either of the Funding Corporations from any
of the terms or conditions thereof shall be effective unless it shall be in
writing and signed by each of the parties hereto, and prior written consent is
given in writing by Redwood, FSA and the Collateral Agent. Any waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No consent or demand in any case shall, in itself, entitle any party to
any other consent or further notice or demand in similar or other circumstances.
This Agreement and the documents referred to herein embody the entire agreement
of the Company and each of TFC I and TFC II respectively with respect to the
Transferred Receivables and supersede all prior agreements and understandings
relating to the subject hereof.
SECTION 9.06. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
------------------------------------------------------
TRIAL. (A) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
- -----
WITH THE LAW OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAW
PROVISIONS THEREOF).
(B) THE COMPANY, TFC I AND TFC II HEREBY SUBMIT TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND EACH
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND AGREES THAT ALL SUCH
SERVICE OF PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO SUCH
PERSON AT THE ADDRESS SET FORTH ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON SUCH PERSON'S ACTUAL RECEIPT THEREOF. THE
COMPANY, TFC I and TFC II EACH HEREBY WAIVE ANY OBJECTION BASED ON FORUM NON
---------
CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND
- ----------
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE
COMPANY OR TFC I or TFC II TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR AFFECT EITHER'S RIGHT TO BRING ANY ACTION OR PROCEEDING IN THE COURTS
OF ANY OTHER JURISDICTION.
57
<PAGE>
(C) THE COMPANY, TFC I AND TFC II EACH HEREBY WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION
WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN
A BENCH TRIAL WITHOUT A JURY.
SECTION 9.07. Execution in Counterparts; Severability. This
---------------------------------------
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and both of which
when taken together shall constitute one and the same agreement. In case any
provision in or obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations in any jurisdiction, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 9.08. Descriptive Headings. The descriptive headings of the
--------------------
various sections of this Agreement are inserted for convenience of reference
only and shall not be deemed to affect the meaning or construction of any of the
provisions hereof.
SECTION 9.09. No Setoff. The Company's obligations under this
---------
Agreement shall not be affected by any right of setoff, counterclaim,
recoupment, defense or other right the Company might have against TFC I, TFC II,
Redwood, the Operating Agent, FSA, the Collateral Agent or any assignee, all of
which rights are hereby waived by the Company.
SECTION 9.10. Further Assurances. The Company agrees to do such
------------------
further acts and things and to execute and deliver to TFC I, TFC II, FSA,
Redwood, FSA the Operating Agent or any assignee such additional assignments,
agreements, powers and instruments as TFC I, TFC II, FSA, Redwood, FSA the
Operating Agent or any assignee may require or deem advisable to carry into
effect the purposes of this Agreement or to better assure and confirm unto any
such party its respective rights, powers and remedies hereunder.
SECTION 9.11. Third-Party Beneficiaries. This Agreement will inure
-------------------------
to the benefit of the parties hereto, FSA and its successors and permitted
assigns. Except as otherwise provided in this Agreement, no other person will
have any right or obligation hereunder.
58
<PAGE>
SECTION 9.12. Assignment of Agreement. The Company acknowledges
-----------------------
that, pursuant to the Funding Agreement, each of TFC I and TFC II may assign its
rights (in addition to those set forth in Section 8.02) granted hereunder,
including any rights in the Collateral granted under Article VII, to the
Collateral Agent on behalf of the Secured Parties and upon such assignment, the
Collateral Agent shall have all rights of the Funding Corporations hereunder and
may in turn assign such rights. The Company agrees that, upon such assignment,
the Collateral Agent may enforce directly, without joinder of either TFC I or
TFC II, as the case may be, the rights set forth in this Agreement.
59
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Receivables Transfer
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
TYCO MANUFACTURING CORP.
By /s/ R. Michael Kennedy, Jr.
Name: R. Michael Kennedy, Jr.
Title: Senior V.P.
Address: 6000 Midlantic Drive - Room 400
Mt. Laurel, New Jersey 08054
Attention: Chief Financial Officer
Phone number: (609) 273-1243
Telecopier number: (609) 273-2885
TYCO FUNDING I CORPORATION
By /s/ Anthony Di Michele
Name: Anthony Di Michele
Title: President & CFO
Address: 6000 Midlantic Drive - Room 400
Mt. Laurel, New Jersey 08054
Attention: Chief Financial Officer
Phone number: (609) 840-2159
Telecopier number: (609) 273-2885
TYCO FUNDING II CORPORATION
By /s/ Anthony Di Michele
Name: Anthony Di Michele
Title: President & CFO
Address: 6000 Midlantic Drive - Room 400
Mt. Laurel, New Jersey 08054
Attention: Chief Financial Officer
Phone number: (609) 840-2160
Telecopier number: (609) 273-2885
<PAGE>
EXHIBIT 1A
FORM OF ASSIGNMENT I
ASSIGNMENT, dated as of _______________ between Tyco Manufacturing
Corp. (the "Company") and Tyco Funding I Corporation ("TFC I").
1. We refer to the Receivables Transfer Agreement (the "Transfer
Agreement") dated as of __________ among the Company, TFC I and TFC II. All
provisions of such Transfer Agreement are incorporated herein by reference. All
capitalized terms shall have the meanings set forth in the Transfer Agreement.
2. The Company does hereby sell to TFC I, without recourse, except
with respect to contribution obligations pursuant to Section 4.05 of the
Transfer Agreement, all right, title and interest of the Company in and to all
Tier I Transferred Receivables transferred from time to time in each Sale from
the Company under the Transfer Agreement.
3. Each Sale made from the Company under the Transfer Agreement shall
be endorsed by TFC I for TFC I on the grid attached hereto which is a part of
this Certificate of Assignment I, and such endorsement shall evidence the
ownership of the Tier I Transferred Receivables resulting from such Sale
thereof.
4. THIS CERTIFICATE OF ASSIGNMENT I SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
Tyco Manufacturing Corp.
By ________________________
Name: ________________
Title: _______________
Tyco Funding I Corp.
By ________________________
Name: ________________
Title: _______________
<PAGE>
EXHIBIT 1B
FORM OF ASSIGNMENT II
ASSIGNMENT, dated as of __________ between Tyco Manufacturing Corp.
(the "Company") and Tyco Funding II Corporation ("TFC II").
1. We refer to the Receivables Transfer Agreement (the "Transfer
Agreement") dated as of __________ among the Company, TFC I and TFC II. All
provisions of such Transfer Agreement are incorporated herein by reference. All
capitalized terms shall have the meanings set forth in the Transfer Agreement.
2. The Company does hereby sell to TFC II, without recourse, except
with respect to contribution obligations pursuant to Section 4.05 of the
Transfer Agreement, all right, title and interest of the Company in and to all
Tier II Transferred Receivables transferred from time to time in each Sale from
the Company under the Transfer Agreement.
3. Each Sale made from the Company under the Transfer Agreement shall
be endorsed by TFC II for TFC II on the grid attached hereto which is a part of
this Certificate of Assignment II, and such endorsement shall evidence the
ownership of the Tier II Transferred Receivables resulting from such Sale
thereof.
4. THIS CERTIFICATE OF ASSIGNMENT II SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
Tyco Manufacturing Corp.
By ________________________
Name: ________________
Title: _______________
Tyco Funding II Corp.
By ________________________
Name: ________________
Title: _______________
<PAGE>
EXHIBIT 2A
FORM OF COMPANY NOTE I
______________$ [Date]
FOR VALUE RECEIVED, [Company] a _______________ (the "Company"),
hereby promises to pay to [Tyco Funding I Corporation] (the "Lender"), for its
account, at _____________, the principal sum of ____________ Dollars (or such
lesser amount as shall equal the aggregate unpaid principal amount of the TFC I
Loans made by the Lender to the Company under the Transfer Agreement referred to
below), in lawful money of the United States of America and in immediately
available funds immediately on the demand of the Lender.
The date, amount and interest rate, of each TFC I Loan made by the
Lender to the Company, and each payment made on account of the principal
thereof, shall be recorded by the Lender on its books and, prior to any transfer
of this Note, endorsed by the Lender on the schedule attached hereto or any
continuation thereof.
This Note is the Company Note I referred to in the Receivables
Transfer Agreement (as modified and supplemented and in effect from time to
time, the "Transfer Agreement") dated as of ________________ among the Company,
the Lender, TFC I and TFC II and evidences Loans made by the Lender thereunder.
Capitalized terms used in this Note and not defined herein have the respective
meanings assigned to them in the Transfer Agreement.
The Transfer Agreement provides for prepayments of Loans upon the
terms and conditions specified therein.
Notwithstanding any other provisions contained in this Note, if at any
time the rate of interest payable by the Company under this Note, when combined
with any and all other charges provided for in this Note, in the Funding
Agreement or in any other document (to the extent such other charges would
constitute interest for the purpose of any applicable law limiting interest that
may be charged on this Note), exceeds the highest rate of interest permissible
under applicable law (the "Maximum Lawful Rate"), then so long as the Maximum
Lawful Rate would be exceeded the rate of interest under this Note shall be
equal to the Maximum Lawful Rate. If at any time thereafter the rate of
interest payable under this Note is less than the Maximum Lawful Rate, the
Company shall continue to pay interest under this Note at the Maximum Lawful
Rate until such time as the total interest paid by the Company is equal to the
total interest that would
<PAGE>
have been paid had such applicable law not limited the interest rate payable
under this Note. In no event shall the total interest received by the Lender
under this Note exceed the amount which the Lender could lawfully have received
had the interest due under this Note been calculated since the date of this Note
at the Maximum Lawful Rate.
If any payment under this Note falls due on a day which is not a
Business Day, then such due date shall be extended to the next succeeding
Business Day and interest (calculated at the Company Interest Rate for each day
during the period then ending) shall be payable on any principal so extended.
The Company expressly waives presentment, demand, diligence, protest
and all notices of any kind whatsoever with respect to this Note.
This Note is made and delivered in New York, New York and shall be
governed by, and construed in accordance with, the internal laws (without
application of its conflict of laws provisions) of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Note to be signed and
delivered by its duly authorized officer as of the date set forth above.
Very truly yours,
[NAME OF COMPANY]
By:____________________________
Name:
Title:
<PAGE>
SCHEDULE OF LOANS
-----------------
This Note evidences demand TFC I Loans made under the within-described
Transfer Agreement to the Company, on the date, at the interest rate, and in the
principal amounts set forth below, subject to the payments and prepayments of
principal set forth below:
<TABLE>
<CAPTION>
================================================================================
Principal Amount Unpaid Notation
Amount of Interest Paid or Principal Made
Date Loan Rate Prepaid Amount By ______
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
</TABLE>
<PAGE>
EXHIBIT 2B
FORM OF COMPANY NOTE II
______________$ [Date]
FOR VALUE RECEIVED, [Company] a _______________ (the "Company"),
hereby promises to pay to [Tyco Funding II Corporation] (the "Lender"), for its
account, at _____________, the principal sum of ____________ Dollars (or such
lesser amount as shall equal the aggregate unpaid principal amount of the TFC II
Loans made by the Lender to the Company under the Transfer Agreement referred to
below), in lawful money of the United States of America and in immediately
available funds immediately on the demand of the Lender.
The date, amount and interest rate, of each TFC II Loan made by the
Lender to the Company, and each payment made on account of the principal
thereof, shall be recorded by the Lender on its books and, prior to any transfer
of this Note, endorsed by the Lender on the schedule attached hereto or any
continuation thereof.
This Note is the Company Note II referred to in the Receivables
Transfer Agreement (as modified and supplemented and in effect from time to
time, the "Transfer Agreement") dated as of ________________ by and among the
Company, the Lender, TFC II and TFC I and evidences Loans made by the Lender
thereunder. Capitalized terms used in this Note and not defined herein have the
respective meanings assigned to them in the Transfer Agreement.
The Transfer Agreement provides for prepayments of Loans upon the
terms and conditions specified therein.
Notwithstanding any other provisions contained in this Note, if at any
time the rate of interest payable by the Company under this Note, when combined
with any and all other charges provided for in this Note, in the Funding
Agreement or in any other document (to the extent such other charges would
constitute interest for the purpose of any applicable law limiting interest that
may be charged on this Note), exceeds the highest rate of interest permissible
under applicable law (the "Maximum Lawful Rate"), then so long as the Maximum
Lawful Rate would be exceeded the rate of interest under this Note shall be
equal to the Maximum Lawful Rate. If at any time thereafter the rate of
interest payable under this Note is less than the Maximum Lawful Rate, the
Company shall continue to pay interest under this Note at the Maximum Lawful
Rate until such time as the total interest paid by the Company is equal to the
total interest that would
<PAGE>
have been paid had such applicable law not limited the interest rate payable
under this Note. In no event shall the total interest received by the Lender
under this Note exceed the amount which the Lender could lawfully have received
had the interest due under this Note been calculated since the date of this Note
at the Maximum Lawful Rate.
If any payment under this Note falls due on a day which is not a
Business Day, then such due date shall be extended to the next succeeding
Business Day and interest (calculated at the Company Interest Rate for each day
during the period then ending) shall be payable on any principal so extended.
The Company expressly waives presentment, demand, diligence, protest
and all notices of any kind whatsoever with respect to this Note.
This Note is made and delivered in New York, New York and shall be
governed by, and construed in accordance with, the internal laws (without
application of its conflict of laws provisions) of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Note to be signed and
delivered by its duly authorized officer as of the date set forth above.
Very truly yours,
[NAME OF COMPANY]
By:____________________________
Name:
Title:
<PAGE>
SCHEDULE OF LOANS
-----------------
This Note evidences demand TFC II Loans made under the within-
described Transfer Agreement to the Company, on the date, at the interest rate,
and in the principal amounts set forth below, subject to the payments and
prepayments of principal set forth below:
<TABLE>
<CAPTION>
================================================================================
Principal Amount Unpaid Notation
Amount of Interest Paid or Principal Made
Date Loan Rate Prepaid Amount By ______
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
</TABLE>
<PAGE>
EXHIBIT 3
FORM OF LOCKBOX AGREEMENT
<PAGE>
EXHIBIT 4
FORM OF OPINION OF COUNSEL OF COMPANY
<PAGE>
EXHIBIT 5
FORM OF [TFC I][TFC II]
DEFERRED SALE PRICE NOTE
New York, New York
February 24, 1995
ON DEMAND [TFC I] [TFC II], a Delaware corporation, hereby promises to
pay to the order of TYCO MANUFACTURING CORP.(the "Company"), the principal
amount of this Note, determined as described below, together with interest
thereon at a rate per annum equal to the Company Interest Rate (as defined in
the Receivables Transfer Agreement referred to below) plus 1% in lawful money of
the United States of America. Capitalized terms used herein but not defined
herein shall have the meanings assigned to such terms in the Receivables
Transfer Agreement dated as of February 24, 1995, between TYCO MANUFACTURING
CORP., a Delaware corporation and TYCO FUNDING I CORPORATION ("TFC I") and TYCO
FUNDING II CORPORATION ("TFC II") (such agreement, as it may from time to time
be amended, supplemented or otherwise modified in accordance with its terms, the
"Receivables Transfer Agreement"). This Note is the Note referred to in the
definition of "[TFC I] [TFC II] Deferred Sale Price" in the Receivables Transfer
Agreement.
The aggregate principal amount of this Note at any time shall be equal
to the difference between (a) the sum of the aggregate principal amount of this
Note on the date of the issuance hereof and each addition to the principal
amount of this Note pursuant to the terms of Section [2.01] [2.02] of the
Receivables Transfer Agreement minus (b) the aggregate amount of all payments
made in respect of the principal of this Note, in each case, as recorded on the
schedule annexed to and constituting a part of this Note but failure to so
record shall not affect the obligations of the Company to [TFC I] [TFC II].
Payments of interest on this Note shall be paid on each Settlement Date (with
respect to interest accrued and not paid as of the end of the preceding
Settlement Period (or, in the case of the first Settlement Date, as of the date
on which this Note is issued)) and on the date of demand by the Company by wire
transfer of immediately available funds to such account of the Seller as such
Seller may designate in writing. The principal amount of this Note may, at the
option of [TFC I] [TFC II] be prepaid in whole at any time or in part from time
to time.
Default in the payment of principal or interest under this Note shall
not constitute a default or event of default hereunder or a Termination Event
under the Receivables Transfer Agreement.
<PAGE>
Payments under this Note are subject and subordinate to the prior
rights of payment to any obligations of TFC I or TFC II then due and payable
under any of the Related Documents.
The Company hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The failure of any holder to exercise any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
Neither this Note, nor any right of the Company to receive payments
hereunder, shall, without the prior written consent of [TFC I] [TFC II] and (so
long as the Funding Agreement remains in effect or any amounts owed remain
outstanding thereunder) the Collateral Agent, be assigned, transferred,
exchanged, pledged, hypothecated, participated or otherwise conveyed.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN
THAT STATE.
[TYCO FUNDING I CORPORATION]
[TYCO FUNDING II CORPORATION]
By:___________________________
Title:
<PAGE>
Schedule 1 to
Deferred Sale Price Note
LOANS AND PAYMENTS OF PRINCIPAL
-------------------------------
<TABLE>
<CAPTION>
=============================================================================
Amount of Unpaid
Amount of Principal Principal Notation
Date Loans Repaid Balance Made By
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
=============================================================================
</TABLE>
<PAGE>
SCHEDULE I
Form of Written Contracts
<PAGE>
SCHEDULE II
Form of Collection Policy
<PAGE>
SCHEDULE III
Addresses of Company
<PAGE>
SCHEDULE IV
LockBox Banks and LockBox Accounts of Company
<PAGE>
SCHEDULE V
Trade Names,"Doing Business Names", Fictitious Names and Assumed
Names of the Company
<PAGE>
SCHEDULE VI
