UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the quarterly period ended: December 31, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Commission File No. 1-11474
BREED TECHNOLOGIES, INC.
(Exact name of registrant as specified in charter)
Delaware 22-2767118
(State of Incorporation) (I.R.S. Employer Identification No.)
5300 Old Tampa Highway Lakeland, Florida 33811
(Address of principal executive offices) (Zip Code)
(941) 668-6000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __.
As of February 12, 1998, 31,712,608 shares of the registrant's common
stock, par value $.01 per share, were outstanding.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - December 31, 1997
(Unaudited)and June 30, 1997 .......... 1
Consolidated Condensed Statements of Earnings (Unaudited)
Three and six months ended December 31, 1997 and 1996 3
Consolidated Condensed Statements of Cash Flows (Unaudited)
Six months ended December 31, 1997 and 1996 ..... 4
Consolidated Statement of Stockholders Equity (Unaudited).. 5
Notes to Consolidated Condensed Financial Statements
(Unaudited) ..................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................ 12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............ 16
Item 6. Exhibits and Reports on Form 8-K .............................. 17
Signatures ............................................................ 18
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Breed Technologies, Inc.
Consolidated Condensed Balance Sheets
In Millions, except per share data
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 32.3 $ 18.7
Accounts receivable, principally trade 287.1 208.0
Inventories:
Raw materials 56.1 24.8
Work in process 30.3 23.4
Finished goods 34.9 27.1
--------- ----------
Total Inventories 121.3 75.3
--------- ----------
Prepaid expenses and other current assets 61.9 13.5
--------- ----------
Total Current Assets 502.6 315.5
Property, plant and equipment, net 347.4 276.5
Intangibles, net 744.9 221.0
Net assets held for sale 22.2 52.6
Other assets 48.3 11.6
--------- ----------
Total Assets $ 1,665.4 $ 877.2
========= ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
Breed Technologies, Inc.
Consolidated Condensed Balance Sheets
In Millions, except per share data
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current portion of long-term debt (Note 3) $ 819.0 $ 191.7
Accounts payable 262.4 121.5
Accrued expenses 240.9 49.5
--------- ----------
Total Current Liabilities 1322.3 362.7
--------- ----------
Long-term debt 31.9 231.7
Other long-term liabilities 29.8 16.3
--------- ----------
Total Liabilities 1384.0 610.7
--------- ----------
Company obligated mandatorily redeemable convertible preferred
securities (Note 5) 250.0 ---
Stockholders' Equity:
Common stock, par value $0.01, authorized 50,000,000 shares, issued and
outstanding 31,712,608 and 31,679,442 shares at
December 31, 1997 and June 30, 1997, respectively 0.3 0.3
Series A Preference Stock par value $0.001, authorized 5,000,000
shares, issued and outstanding 4,883,227 shares at December
31, 1997 (Note 4) 115.0 ---
Additional paid-in capital 78.0 77.5
Warrants (Note 3) 1.9 ---
Retained earnings (139.3) 208.0
Foreign currency translation adjustments (24.2) (18.8)
Unearned compensation (0.3) (0.5)
--------- ----------
Total Stockholders' Equity 31.4 266.5
--------- ----------
Total Liabilities and Stockholders' Equity $ 1,665.4 $ 877.2
========= ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
Breed Technologies, Inc.
Consolidated Condensed Statements of Operations (Unaudited) In millions, except
earnings per share <TABLE> <CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
--------------------- ---------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $ 340.7 $ 182.6 $ 535.9 $ 341.2
Cost of sales (Note 6) 312.9 145.9 479.7 262.4
--------- -------- --------- ---------
Gross profit 27.8 36.7 56.2 78.8
Operating expenses:
Selling, general and administrative expenses 21.3 16.7 37.6 32.2
Research, development and engineering expenses 18.6 9.9 27.5 17.8
Repositioning charges (Note 6) 244.0 --- 244.0 ---
In-process research and development expenses (Note 6) 77.5 --- 77.5 ---
Amortization of intangibles 4.0 0.8 6.0 2.1
--------- -------- --------- ---------
Total operating expenses 365.4 27.4 392.6 52.1
--------- -------- --------- ---------
Operating income (loss) (337.6) 9.3 (336.4) 26.7
Interest expense 27.1 6.7 35.4 11.1
Other income (expense), net 0.4 2.3 (0.1) 2.5
--------- -------- --------- ---------
Earnings (loss) before income taxes, distributions on Company
obligation mandatorily redeemable convertible preferred
securities and extraordinary item (364.3) 4.9 (371.9) 18.1
Income taxes (benefit) (Note 7) (46.5) 1.8 (49.9) 7.1
Distributions on Company obligation mandatorily
redeemable convertible preferred securities (Note 5) 1.4 --- 1.4 ---
--------- -------- --------- ---------
Earnings (loss) before extraordinary loss (319.2) 3.1 (323.4) 11.0
Extraordinary loss, net of tax benefit of $0.4 million (0.7) --- (0.7) ---
--------- -------- --------- ---------
Net earnings (loss) $(319.9) $ 3.1 $(324.1) $ 11.0
========= ======== ========= ========
Basic earning (loss) per common share (Note 8):
Earnings (loss) before extraordinary loss $(10.07) $ 0.10 $(10.20) $ 0.35
Extraordinary loss (0.02) --- (0.02) ---
--------- -------- --------- ---------
Net earnings (loss) $(10.09) $ 0.10 $(10.22) $ 0.35
========= ======== ========= =========
Diluted earnings (loss) per common share:
Earnings (loss) before extraordinary loss $(10.07) $ 0.10 $(10.20) $ 0.34
Extraordinary loss (0.02) --- (0.02) ---
--------- -------- --------- ---------
Net earnings (loss) - assuming dilution $(10.09) $ 0.10 $(10.22) $ 0.34
========= ======== ========= =========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
Breed Technologies, Inc.
Consolidated Condensed Statements of Cash Flows (Unaudited)
In millions
<TABLE>
<CAPTION>
Six Months Ended December 31
---------------------------------
1997 1996
------------- -----------
Cash Flows from Operating Activities:
<S> <C> <C>
Net earnings (loss) $ (324.1) $11.0
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:
Depreciation and amortization 27.1 21.5
Non-cash items included in repositioning and other special charges 195.9 ---
Accrual for repositioning and other special charges 76.5 ---
Changes in working capital items and other 3.6 39.9
------------- ---------
Net cash provided by (used in) operating activities (21.0) 72.4
------------- ---------
Cash Flows from Investing Activities:
Cost of acquisition, net of cash acquired (Note 2) (710.0) (211.0)
Purchases of property, plant and equipment (23.4) (41.7)
Proceeds from sale of assets 2.6 ---
------------- ---------
Net cash used in investing activities (730.8) (252.7)
------------- ----------
Cash Flows from Financing Activities:
Proceeds from (repayment of) debt, net 427.5 119.0
Proceeds from Series A Preference Stock issuance 115.0 ---
Proceeds from Series B Preference Stock issuance 200.0 ---
Fees associated with Series B Preference Stock issunce (10.0) ---
Redemption of Series B Preference Stock issuance (200.0) ---
Proceeds from Company obligated mandatorily redeemable
convertible preferred securities, less relatedees 239.0 ---
Cash dividends paid (2.2) (4.4)
Proceeds from common stock issued 0.7 0.6
------------- ---------
Net cash provided by financing activies 770.0 115.2
------------- ---------
Effect of exchange rate changes on cash (4.6) (0.5)
------------- ----------
Net increase/(decrease) in cash and cash eqvalents 13.6 (65.6)
Cash and cash equivalents at beginning oferiod 18.7 95.8
------------- ----------
Cash and cash equivalents at end of period $ 32.3 $ 30.2
============= ==========
Cost of Acquisition:
Working capital, net of cash acquired $ 39.5 $ (44.2)
Property, plant and equipment (140.3) (151.2)
Cost in excess of net assets acquired (683.3) (72.9)
Intangibles-write-off of in-process research and development costs 77.5 ---
Investments and other assets (11.8) (19.0)
Long-term debt --- 33.9
Other long-term liabilities 8.4 42.4
------------- ---------
Net cost of acquisition $ (710.0) $ (211.0)
============= =========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
Breed Technologies, Inc.
Consolidated Statement of Stockholders Equity (Unaudited)
In Millions, except per share data
<TABLE>
<CAPTION>
Series A Series B Additional
Common Stock Preference Preference Paid-In Retained
Shares Amount Stock Stock Capital Warrants Earnings
---------------------------- ------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1997 31,679,442 $ 0.3 --- --- $ 77.5 --- $ 208.0
Net loss (324.1)
Translation adjustments
Issue Series A Preference
Stock, (Note 4) 115.0
Issue Series B Preference
Stock, (including fees), 200.0 (10.0)
(Note 5)
Redemption of Series B
Preference Stock, (Note 5) (200.0)
Fees associated with
Company obligated
mandatorily redeemable
convertible preferred
securities (11.0)
Warrants issued with Credit
Facility, (Note 3) 1.9
Shares issued under Stock
Option Plans 39,692 0.7
Shares terminated under Stock
Incentive Plan, net of granted
Shares (6,526) (0.2)
Cash dividends (2.2)
--------------- ----------- ------------- ------------- ------------- ------------ ------------
Balance at December 31, 1997 31,712,608 $ 0.3 $ 115.0 --- $ 78.0 $ 1.9 $ (139.3)
=============== =========== ============= ============= ============= ============ ============
</TABLE>
Foreign
Currency
Translation Unearned
Adjustments Compensation Total
--------------- ----------------- ----------
Balance at June 30, 1997 $ (18.8) $ (0.5) $ 266.5
Net Loss (324.1)
Translation adjustments (5.4) (5.4)
Issue Series A Preference
Stock, (Note 4) 115.0
Issue Series B Preference
Stock, (including fees),
(Note 5) 190.0
Redemption of Series B
Preference Stock, (Note 5) (200.0)
Fees associated with
Company obligated
mandatorily redeemable
convertible preferred
securities (11.0)
Warrants issued with Credit
Facility, (Note 3) 1.9
Shares issued under Stock
Option Plans 0.2 0.9
Shares terminated under Stock
Incentive Plan, net of granted
Shares (0.2)
Cash dividends (2.2)
--------------- ----------------- ----------
Balance at December 31, 1997 $ (24.2) $ (0.3) $ 31.4
=============== ================= ==========
<PAGE>
Notes to Consolidated Condensed Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated condensed financial statements of
Breed Technologies, Inc. (the "Company"or "Breed") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and notes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and six months ended December 31, 1997 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 1998. The consolidated financial statements include the accounts of
Breed and all majority owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated. For further information, refer to the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended June 30, 1997.
Note 2 - Acquisition On October 30, 1997 the Company completed the
acquisition of certain assets and the assumption of certain liabilities of the
"Safety Restraints Systems" business unit of AlliedSignal, Inc. and 100% of the
outstanding shares of capital stock of ICSRD Rueckhaltesysteme
Fahrzeugsicherheit GmbH, a German company, BSRD Limited, an English company,
AlliedSignal India, Inc., a Delaware company, Sistemas AlliedSignal de
Seguridad, S.A. de C.V., a Mexican company, and AlliedSignal Cinturones de
Seguridad, S.A. de C.V., a Mexican company (collectively, "SRS"). The
acquisition was made pursuant to the Asset Purchase Agreement ("Agreement")
dated August 27, 1997 among AlliedSignal, Inc. (and certain subsidiaries
identified in the Agreement) and Breed (and certain subsidiaries identified in
the Agreement).
SRS produces seatbelts and airbags with principal locations in Knoxville,
Tennessee; Maryville, Tennessee; Greenville, Alabama; St. Clair Shores,
Michigan; Sterling Heights, Michigan; Douglas, Arizona; Brownsville, Texas; El
Paso, Texas; Aqua Prieta, Mexico; Juarez, Mexico; Valle Hermoso, Mexico;
Carlisle, England; Colleferro, Italy; Turin, Italy; Siena, Italy; Arzano, Italy;
and Barcelona, Spain.
The purchase price for the SRS acquisition was $710.0 million, which was
financed with borrowings under a revolving and term credit facility, the net
proceeds from the issuance and sale of Series B Preference Securities (as
defined in Note 5) and the net proceeds from the issuance and sale of Series A
Preference Shares to Siemens AG.
The allocation of the purchase price is preliminary and subject to change.
In addition, the purchase price is subject to post-closing adjustments based on
the net book value of the acquired business, retained cash balances, if any, and
any amounts paid with respect to certain intercompany obligations. The initial
purchase price shall be increased or decreased by the amount by which the net
book value of SRS as of the closing date is greater than or less than,
respectively, $175.3 million. The Company has submitted to AlliedSignal, Inc. a
post closing purchase price adjustment in accordance with the terms of the
agreement. The final adjustment will be determined in accordance with the terms
of the Agreement.
The pro forma unaudited results of operations for the six months ended
December 31, 1997 and 1996, assuming the acquisition of SRS had been consummated
as of July 1, 1996, are as follows:
Six Months Ended
December 31,
In millions, except per share data 1997 1996
- --------------------------------------------------------------------------------
Net sales $ 813.5 $ 852.3
Net loss $ (389.9) $ (13.5)
Net loss per share - basic and diluted $ (12.30) $ (0.43)
<PAGE>
Note 3 - Borrowings
On October 30, 1997, in connection with the acquisition of SRS, the Company
and NationsBank entered into a new revolving and term credit facility ("Credit
Facility") pursuant to which the Company has $900 million of aggregate borrowing
availability. At December 31, 1997, the Company had an aggregate of $810 million
of borrowings outstanding under the Credit Facility (including approximately
$10.0 million of letters of credit) and the weighted average interest rate on
such borrowings was approximately 8.76% per annum.
The credit facility consists of a $600 million term loan and a $300 million
revolver (with $75 million multicurrency and $25 million letter of credit
sublimits). Both credit facilities have a 366 day term which expire on October
31, 1998. Borrowings under the Credit Facility bear interest at a per annum rate
equal to, at the election of the Company, either (i) the higher of the Federal
Funds Rate plus 0.5% or the NationsBank prime rate plus, in either case, an
additional margin ranging from 2.0% to 5.0% based on the length of time the
Credit Facility is in existence, or (ii) a rate based on the prevailing
interbank offered rate plus an additional margin ranging from 3.0% to 6.0% based
on the length of time the Credit Facility is in existence. The letter of credit
fee ranges from 3.0% to 6.0% and, when there is more than one Lender, an
additional 0.125% for the issuing bank. The Company is also required to pay a
quarterly unused facility fee. In addition, the Company paid a commitment fee,
upon the execution of the Credit Facility, equal to 3% of the aggregate
available borrowings under the Credit Facility ($27 million). The Credit
Facility has a 1.5% take-out fee ($13.5 million), subject to certain conditions,
which is payable upon repayment in full of all amounts outstanding under the
Credit Facility.
The Credit Facility is secured by (i) a security interest in all of the
personal property and assets (including inventory, accounts receivable,
intellectual property, mortgages on all real property owned by the Company and
the assets acquired pursuant to the SRS acquisition) of the Company and certain
subsidiaries, (ii) a stock pledge by the Company and certain subsidiaries of
their stock in certain domestic subsidiaries and at least 65% of the voting
stock and 100% of the non- voting stock of foreign subsidiaries, (iii) a pledge
of the common stock owned by A. Breed, L.P., a Texas limited partnership and J.
Breed, L.P., a Texas limited partnership, (iv) an assignment of certain leases
for facilities of the Company and certain subsidiaries, (v) a pledge and
subordination of intercompany notes, (vi) an assignment of certain partnership
interests, and (vii) an assignment of a trademark licensing agreement. The
Credit Facility is guaranteed by certain of the Company's subsidiaries.
The Credit Facility requires compliance with certain covenants by the
Company and its subsidiaries, including, among other things: (i) maintenance of
certain financial ratios and compliance with certain financial tests and
limitations; (ii) limitations on the payment of dividends, incurrence of
additional indebtedness and granting of certain liens; and (iii) restrictions on
mergers, acquisitions, and investments. At December 31, 1997, the Company was in
compliance with all covenants.
In connection with the Credit Facility, the Company also entered into a
warrant agreement with NationsBank providing for the issuance by the Company of
a warrant to purchase common stock. The warrant is exercisable for 250,000
common shares at an exercise price of $23.125 per share. The warrants were
valued at $1.9 million using the Black- Shoals model as recommended by Financial
Accounting Standards Statement No. 123. The number of shares for which the
warrant is exercisable may be increased to a maximum of 3,000,000 shares if the
Company fails to fulfill certain obligations prior to July 26, 1998. The
exercise price for such additional shares shall be the market price of the
common stock on the day such warrant shares become exercisable. The warrant
agreement and the warrant expire on October 30, 2000. NationsBank may elect that
the warrant shares be included in certain registration statements filed by the
Company under the Securities Act for the sale of common stock of the Company
and, until October 30, 2002, may demand that the Company register the warrant
shares on Form S-3.
<PAGE>
Note 4-Siemens Investment Joint Venture Agreement
On December 24, 1997, the Company and Siemens Aktiengesellschaft (A.G.),
Automotive Systems Group ("Siemens") signed an agreement forming a joint venture
for the worldwide research, development, engineering, assembly and marketing of
motor vehicle occupant safety restraint systems.
The joint venture will be owned effectively 50% by both the Company and
Siemens. Siemens will contribute to the joint venture its shares in the existing
Passive Restraint Systems ("PARS") GmbH. PARS operates crash test facilities and
develops occupant safety systems. It will serve as a center for the design,
engineering,simulation, testing and sales of integrated occupant safety systems
in Europe. Breed will form a company with its headquarters and facilities
located in Michigan and will contribute various assets which are comparable to
those existing at PARS. This new entity will act in the same capacity as PARS in
North America. Breed will then contribute its ownership interest in the new
company to the joint venture.
The joint venture will be governed by a partners' committee consisting of
three representatives from each of the Company and Siemens. The joint venture
will operate pursuant to an operating budget approved by the partners' committee
and subject to annual review. No expenditures in excess of budgeted amounts may
be made without consent of the partners' committee. The parties will provide
funding to the joint venture to the extent revenues and external funding sources
are inadequate to cover budgeted operating expenses and capital expenditures.
Neither party can be compelled to provide funding for operating expenses and
capital expenditures above budgeted amounts.
Any technology generated by the joint venture (either by itself or with one
of the parties) will belong jointly to Siemens and the Company. Each party will
be responsible for warranties and liabilities, including recall actions, arising
from its components marketed by the joint venture to customers.
The term of the joint venture is not fixed. However, it is subject to the
right of either party to terminate the joint venture with six month prior
written notice, or sooner upon mutual agreement, after the sixth anniversary
date of the formation of the joint venture.
Stock Purchase Agreement and the Preference Shares. Pursuant to the Stock
Purchase Agreement, on October 30, 1997, Siemens acquired 4,883,227 Series A
Preference Shares for an aggregate purchase price of $115 million. Pursuant to
the Stock Purchase Agreement, the Company agreed to indemnify Siemens for
breaches of representations, warranties, and covenants for a period of up to 18
months. The indemnification obligations of the Company are subject to a $1.5
million deductible and a cap of $30 million.
Each Series A Preference Share represents one one-thousandth (1/1000th) of
a share of 1997 Series A Convertible Non- Voting Preferred Stock of the Company
and, subject to adjustment, each Series A Preference Share is convertible into
one share of common stock. Except for voting rights required by law, and except
for the right to elect as a class one director of the Company during the period
that begins on the date when any Series A Preference Shares are converted into
Common Stock and ends on the date of the termination of the stockholders
agreement, the holders of shares of Series A Preference Shares do not have
voting rights. All other rights of the holders of Series A Preference Shares are
equal to the right of the holders of common stock and are shared ratably on an
as-converted basis.
On January 20, 1998, Siemens converted 4,883,226 of its Series A Preference
Shares into 4,883,226 shares of common stock.
The Make-Whole Agreement. In connection with the Siemens Investment, the
Company entered into a Make-Whole Agreement (the "Make-Whole Agreement") with
Siemens. Under the Make-Whole Agreement, within 30 days after a "Triggering
Event," Siemens will have the right to require the Company, at the Company's
election to either (i) repurchase the Series A Preference Shares purchased
pursuant to the Stock Purchase Agreement (and any shares issuable
<PAGE>
with respect to such shares) for a purchase price equal to $115 million
plus $15,753 per day for each day between December 15, 1997 and the exercise of
the right (the"Make-Whole Price"), or (ii) if the net proceeds from the bona
fide sale of such shares by Siemens to a third party financial institution does
not equal the Make-Whole Price, to issue to Siemens such number of shares
(subject to certain limits) the net proceeds from the sale of which would equal
the amount of the deficit. Under the Make-Whole Agreement, a "Triggering Event"
includes (a) the parties shall have been unable, after diligent and good faith
efforts, to obtain the governmental approvals required with respect to the
formation of the Siemens Joint Venture; or (b) the formation of the Siemens
Joint Venture shall not have been completed by June 30, 1998. The Make-Whole
Agreement terminates if (1) prior to Siemens' delivery of a notice that it has
entered into an agreement to sell its shares to a third party financial
institution as described above, Siemens sells or otherwise transfers any of the
securities subject to the Make-Whole Agreement to any person other than a direct
or indirect subsidiary of Siemens or (2) Siemens has not delivered such a notice
by the later to occur of (x) July 31, 1998, or (y) 45 days after a Triggering
Event.
Registration Rights Agreement. In connection with the Siemens Investment,
the Company entered into a Registration Rights Agreement (the "Registration
Rights Agreement") with Siemens. Pursuant to the Registration Rights Agreement
with Siemens, Siemens shall have the right, after June 1, 1998 and before the
tenth anniversary of the date of the Registration Rights Agreement with Siemens,
to require the Company to file up to three registration statements under the
Securities Act to register any shares of common stock owned by Siemens for sale
to the public, subject to certain limitations.The Company is required to pay all
expenses (other than discounts and commissions) in connection with such demand
registrations. In addition, if the Company elects to register securities under
the Securities Act of 1933 for its account or for the account of other
stockholders, Siemens shall have the right to register its shares under any such
registration statement, subject to certain limitations.
Note 5-Convertible Trust Preferred Securities
In connection with the SRS acquisition, on October 30, 1997, the Company
issued and sold to Prudential Securities Credit Corp. ("PSCC") $200 million of
Series B Convertible Preference Stock of the Company (the "Series B Preference
Securities"). On November 25, 1997, the Company issued and sold $250.0 million
of 6.50% Convertible Subordinated Debentures due 2027 (the "Convertible
Debentures") of the Company to BTI Capital Trust which, concurrently therewith,
issued and sold $250.0 million aggregate liquidation amount of its 6.50% Company
Obligated Mandatorily Redeemable Convertible Trust Preferred Securities (the
"Preferred Securities") (which are guaranteed by the Company) in a private
transaction under Rule 144A under the Securities Act of 1933. The Company used
the net proceeds from the issuance and sale of the Convertible Debentures to BTI
Capital Trust to redeem all of the outstanding Series B Preference Securities in
accordance with the terms thereof and for general corporate purposes.
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of 6.50% of the liquidation amount of $50 per
Preferred Security accruing from, and including November 25, 1997 and payable
quarterly in arrears commencing February 15, 1998. The Company has the right at
any time and from time to time to defer payments for a period not exceeding 20
consecutive quarters.
Each Preferred Security is convertible on or after January 25, 1998, at the
option of the holder, into shares of the Company's common stock, at a conversion
rate of 2.1973 shares of common stock for each Preferred Security, subject to
adjustment in certain circumstances. The Trust has the right to redeem the
Preferred Securities on or after November 25, 2000, in whole or in part, from
time to time, subject to certain conditions. The Preferred Securities do not
have any voting rights and rank pari passu with the common stock.
Note 6-Repositioning and Other Special Charges
Over the past three years the Company has grown rapidly through various
strategic acquisitions, increased market penetration in existing and new markets
and internally developed new products. The rapid growth experienced by the
Company and the demand of integrating acquired businesses out paced the
development of the Company's corporate infrastructure and systems. In the first
quarter of the fiscal year, management initiated a review of its global
operations, cost structure and balance sheet directed at reducing its operating
expenses, manufacturing costs and increasing
<PAGE>
productivity. This review focused on operational and organizational
structures and systems, facilities utilization, product offerings, inventory
valuation and other matters. As a result, in the second quarter ended December
31, 1997, the Company recorded $349.9 million before taxes ($318.4 after taxes)
of repositioning charges (which aggregated $244.0 million) and other special
charges (which aggregated $105.9 million), which are intended to have the
following objectives: (i) enhance the Company's competitiveness and
productivity, (ii) reduce costs and increase asset control and (iii) improve
processes and systems. It is anticipated that approximately $73.4 million of
these costs will result in cash outlays. The repositioning plan is expected to
be substantially completed within the next 12 to 18 months.
Repositioning Charges- The repositioning charge taken in the second quarter
ending December 31, 1997, was primarily focused on facility utilization,
operational systems and organizational structures. The repositioning charge
included (i) approximately $30.8 million relating to an approximately 25%
reduction of the Company's global work force (or 4,900 employees) by eliminating
redundant and overlapping positions resulting from recent acquisitions; (ii)
approximately $31.4 million relating to the consolidation of the Company's
manufacturing, sales and engineering facilities in North America and Europe
through the elimination of approximately 50% (or 32) and 33% (or 10) of such
facilities, respectively; (iii) $77.6 million relating to the write-down of
goodwill associated with the disposal of long-lived assets; (iv) approximately
$41.3 million relating to the write-down to net realizable value of certain
long-lived assets relating to businesses being divested; and (v) approximately
$62.9 million relating to the write-down of impaired production and other
equipment and the write-off of assets used to manufacture products being
replaced by new technologies.
Other Special Charges - With the acquisition of SRS (Note 2), the Company
conducted an evaluation and review of the assets acquired. As a result of such
review, the Company recorded a $77.5 million charge related to the write-off of
in- process research and development for acquired technology that has not been
established as technologically feasible. The Company also reviewed its
inventories for slow-moving and excess items in light of the SRS acquisition and
planned realignment of its manufacturing operations. The Company also
reevaluated its customer contracts relating to products lines that will be
discontinued. As a result, the Company recorded a $28.4 million charge for
inventory and long-term contracts relating to manufacturing processes that will
be exited (which is reflected as a charge to cost of sales).
Note 7 - IncomeTaxes
The estimated fiscal 1998 annual effective tax rate has been revised from a
45% benefit estimated in the first quarter of fiscal 1998 to a 13% benefit. This
change is primarily the result of: (i) the impact of certain repositioning and
other special charges (see Note 6) taken in jurisdictions where the Company may
not be able to recognize the full income tax benefit and (ii) no tax benefit on
write-down of goodwill included in the repositioning charge. Financial
Accounting Standards Statement No. 109 states that a valuation allowance is
recognized if, it is more likely than not, that some portion or all of the
deferred tax asset will not be realized. Because of limitations on the
utilization of net operating losses from foreign jurisdictions, a valuation
allowance for a portion of the deferred income tax benefit related to the
repositioning and the other special charges has been recorded.
Note 8 - Earning per Share
The following table sets forth the computation of the numerator and
denominator of the basic and diluted per share calculations:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
----------------------------- ----------------------------
1997 1996 1997 1996
<PAGE>
Numerator:
<S> <C> <C> <C> <C>
Net earnings (loss) $ (319.9) $ 3.1 $ (324.1) $ 11.0
------------- ------------- ------------- ------------
Numerator for basic earnings per
share-income available to common
stockholders (319.9) 3.1 (324.1) 11.0
------------- ------------- ------------- ------------
Effect of dilutive securities:
Company obligated mandatorily
redeemable convertible preferred
securities , net of tax benefit * --- * ---
------------- ------------- ------------- ------------
Numerator for diluted earnings per
share-income available to
common stockholders after
assumed conversions $ (319.9) $ 3.1 $ (324.1) $ 11.0
------------- ------------- ------------- ------------
Denominator:
Denominator for basic earnings per
share- weighted-average shares 31,705,492 31,640,199 31,693,537 31,633,894
------------- ------------- ------------- ------------
Effect of dilutive securities:
Employee stock options * 372,006 * 326,871
Series A Preference Stock * --- * ---
Company obligated mandatorily * --- * ---
redeemable convertible preferred
securities
------------- ------------- ------------- ------------
Dilutive potential common shares --- 372,006 --- 326,871
------------- ------------- ------------- ------------
Denominator for diluted earnings per
share- adjusted weighted-average
shares and assumed conversions 31,705,492 32,012,205 31,693,537 31,960,765
============= ============= ============= ============
</TABLE>
* Items not assumed in the computation because their effect is antidilutive.
For additional disclosures regarding the outstanding Series A Preference
Stock see Note 4, and the Company obligated mandatorily redeemable convertible
preferred securities, see Note 5.
Options to purchase 1,755,489 shares of common stock at prices between
$20.375 and $32.25 per share were outstanding as of December 31, 1997 but were
not included in the computation of diluted earnings per share because the
exercise prices were greater than the average market price of the common shares
and, therefore, the effect would be anti- dilutive.
As part of the acquisition of VTI in June 1995, the Company issued to
certain of the former stockholders of VTI warrants to purchase up to 100,000
shares of common stock between July 1, 1998 and June 30, 2000, at an exercise
price of $25.75 per share. The 100,000 warrants have not been included in the
computation of diluted earnings per share for the three and six month periods
ended December 31, 1997 because the effect would be anti dilutive.
In connection with its Credit Facility, the Company issued to NationsBank a
warrant to purchase 250,000 shares of common stock of the Company at an exercise
price of $23.125 per share. The 250,000 warrants have not been included in the
computation of diluted earnings per share for the three and six months ended
December 31, 1997 because the effect would be anti-dilutive.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
General
Over the past three years the Company has grown from a single technology,
single market company with gross revenues of approximately $400 million to a
global provider of state-of-the-art occupant safety systems solutions with gross
revenues on a pro forma basis of approximately $1.8 billion. This growth was
attained principally through various strategic acquisitions, increased market
penetration in existing and new markets and internally developed new products.
The rapid growth experienced by the Company and the demand of integrating
acquired businesses out paced the development of the Company's corporate
infrastructure and systems. In addition, cost structures and working capital
requirements increased to unacceptable levels. In the first quarter of the
fiscal year, management initiated a review of its global operations, cost
structure and balance sheet directed at reducing its operating expenses,
manufacturing costs and increasing productivity. This review focused on
operational and organizational structures and systems, facilities utilization,
product offerings, inventory valuation and other matters. As a result, in the
second quarter ended December 31, 1997, the Company recorded $349.9 million
before taxes ($318.4 after taxes) of repositioning and other special charges
which are intended to have the following objectives: (i) enhance the Company's
competitiveness and productivity, (ii) reduce costs and increase asset control
and (iii) improve processes and systems. It is anticipated that approximately
$73.4 million of these costs will result in cash outlays.
The repositioning plan is expected to be substantially completed within the
next 12 to 18 months, and the Company believes the provisions recorded are
adequate to cover the costs associated with the plan. The Company expects the
repositioning program to generate approximately $855 million of total cost
savings, which will be phased in through fiscal 2002. Of the $855 million in
cost savings, $780 million will be cash savings primarily related to salary and
benefit expense that will not be incurred in future years due to the anticipated
reduction in the Company's global workforce and the consolidation of
manufacturing, sales and engineering facilities.
Repositioning Charges- The repositioning charge taken in the second quarter
ending December 31, 1997, was primarily focused on facility utilization,
operational systems and organizational structures. The repositioning charge
included (i) approximately $30.8 million relating to an approximately 25%
reduction of the Company's global work force (or 4,900 employees) by eliminating
redundant and overlapping positions resulting from recent acquisitions; (ii)
approximately $31.4 million relating to the consolidation of the Company's
manufacturing, sales and engineering facilities in North America and Europe
through the elimination of approximately 50% (or 32) and 33% (or 10) of such
facilities, respectively; (iii) $77.6 million relating to the write-down of
goodwill associated with the disposal of long-lived assets; (iv) approximately
$41.3 million relating to the write-down to net realizable value of certain
long-lived assets relating to businesses being divested; and (v) approximately
$62.9 million relating to the write-down of impaired production and other
equipment and the write-off of assets used to manufacture products being
replaced by new technologies.
During the quarter ended December 31, 1997, the Company started to
implement its repositioning plan. Net headcount was reduced by 725 people during
the quarter ended December 31, 1997, primarily in North America. Also, the
Company closed three manufacturing facilities and announced the closure of an
additional facility and the relocation of a major portion of a Canadian facility
to Mexico.
Other Special Charges - With the acquisition of SRS, the Company conducted
an evaluation and review of the assets acquired. As a result of such review, the
Company recorded a $77.5 million charge related to the write-off of in-process
research and development for acquired technology that has not been established
as technologically feasible. The Company also reviewed its inventories for
slow-moving and excess items in light of the SRS acquisition and planned
realignment of its manufacturing operations. The Company also reevaluated its
customer contracts relating to products
<PAGE>
lines that will be discontinued. As a result, the Company recorded a $28.4
million charge for inventory and long-term contracts relating to manufacturing
processes that will be exited (which is reflected as a charge to cost of sales).
The repositioning and other special charges recorded in the quarter ended
December 31, 1997 do not include a provision for disruption costs in accordance
with Generally Accepted Accounting Principles ("GAAP"). Disruption costs are
expenses incurred in connection with the closing and consolidating of
manufacturing, engineering and sales facilities. Disruption costs include; (1)
inefficiencies associated with consolidating manufacturing, engineering and
sales facilities; (2) unabsorbed fixed overhead; (3) temporary increases in
factory labor; (4) premium freight and (5) excessive inventory scrap. GAAP
require that disruption costs be expensed as incurred and included in cost of
sales. The Company incurred disruption costs of approximately $2.8 million and
$4.5 million for the quarter and six months ended December 31, 1997,
respectively, associated with the closing of three manufacturing facilities and
the ongoing relocation of a North America facility to Mexico.
Three and Six Months Ended December 31, 1997 (FY98) Compared to Three and
Six Months Ended December 31, 1996 (FY97)
Net sales for the quarter and six months ended December 31, 1997 were
$340.7 million and $535.9 million, respectively, an increase of $158.1 million
or 87%, and $194.7 million or 57%, respectively, from the comparable periods of
the prior year. The increase in net sales was primarily due to growth from the
acquisition of United Steering Systems (USS) on October 25, 1996, Custom Trim on
February 25, 1997, and SRS on October 30, 1997. These three acquisitions
accounted for approximately $177.0 million and $235.2 million of the increase in
net sales for the three and six months ended December 31, 1997, respectively.
The increases were partially offset by a decline in sales of EMS sensors and
inflator and airbag systems products.
EMS sensor sales for the quarter and six months ended December 31, 1997
were $28.1 million and $54.7 million, a decrease of 23% and 32%, respectively,
from the comparable prior year periods. These decreases are primarily due to
lower demand as major customers continue to shift from EMS to electronic sensors
that are sourced internally.
Inflator and airbag module sales decreased 18% and 37% to $18.7 million and
$35.3 million, respectively, for the quarter and six months ended December 31,
1997 as compared to the comparable prior year periods. The decrease was
primarily due to the planned phase-out of all mechanical airbag systems at
Chrysler and Fiat, and the reduction of shipments into Asia of all inflators and
airbags.
Net sales for the quarter ended December 31, 1997, increased 75% to $340.7
million from $195.2 million in the first quarter ended September 30, 1997. The
quarter over quarter increase in net sales was primarily attributable to the
acquisition of SRS on October 30, 1997. Excluding the acquisition of SRS, net
sales for the quarter ended December 31, 1997 would have increased 4% over the
quarter ended September 30, 1997.
Cost of sales for the quarter and six months ended December 31, 1997 were
$312.9 and $479.7, respectively, as compared to $145.9 million and $262.4
million, respectively, for the quarter and six months ended December 31, 1996.
The increase primarily reflected the additional production costs of $151.0
million and $203.7 million for the quarter and six months ended December 31,
1997, resulting from the acquisitions of USS and Custom Trim during fiscal 1997
and the acquisition of SRS in fiscal 1998. In addition, the Company incurred
approximately $2.8 million and $4.5 million during the quarter and six months
ended December 31, 1997 related to disruption costs associated with the closing
of three manufacturing facilities and the ongoing relocation of a facility in
North America to Mexico, as well as a $28.4 million charge related to other
special charges (see "Repositioning and Other Special Charges" above).
Gross profit as a percentage of net sales was 8% and 10% for the three and
six months ended December 31, 1997, respectively, compared to 20% and 23%,
respectively, for the comparable periods of the prior year. The decrease in
gross margins was primarily attributable to a shift in product mix from high
margin EMS sensors to those of lower
<PAGE>
margin products acquired in recent acquisitions and certain special charges
aggregating $28.4 million. Excluding these special charges, gross profit as a
percentage of net sales would have been 17% and 16% for three and six months
ended December 31, 1997, respectively.
Selling, general and administrative expenses for the three and six months
ended December 31, 1997 were $21.3 million and $37.6 million (6% and 7% of net
sales), respectively, compared to $16.7 million and $32.2 million (in each case
9% of net sales) for the comparable periods of the prior year. Selling, general
and administrative expenses as a percentage of net sales decreased primarily as
a result of cost improvements associated with the reduction of headcount and
reduced spending.
Research, development and engineering expenses for the quarter and six
months ended December 31, 1997 were $18.6 million and $27.5 million,
respectively, as compared to $9.9 million and $17.8 million for the comparable
periods in the prior year. These increases reflected costs associated with
acquired businesses of $9.3 million and $10.1 million for the three and six
months ended December 31, 1997, respectively.
Operating income (loss) for the three and six months ended December 31,
1997 decreased significantly from last year's comparable periods primarily due
to items mentioned above and the repositioning and other special charges
aggregating $349.9 million included in cost of sales and operating expenses (see
"Repositioning and Other Special Charges" above). Exclusive of the effects of
the repositioning and other special charges, operating income would have been
$12.3 million and $13.5 million for the three and six months ended December 31,
1997, respectively.
Operating income before repositioning and other special charges for the
three months ended December 31, 1997 reflected an improvement over the three
months ended September 30, 1997. Operating income was $12.3 million or 4% of net
sales in the three months ended December 31, 1997 compared to $1.2 million or 1%
of net sales in the three months ended September 30, 1997. The quarter over
quarter increase in operating income was primarily attributable to the SRS
acquisition, higher sales volumes, and personnel reductions. Excluding the SRS
acquisition, operating income would have been approximately $7.9 million or 4%
of net sales for the three months ended December 31, 1997. The operating margin
improvement from 1% of net sales in the three months ended September 30, 1997 to
4% of net sales for the three months ended December 31, 1997 was primarily
attributable to personnel reductions resulting from the repositioning program.
Interest expense for the three and six months ended December 31, 1997 was
$27.1 million and $35.4 million, an increase of $20.4 million and $24.3 million,
respectively, from the comparative prior year periods. The increase in interest
expense was primarily due to the increase in average outstanding borrowings as a
result of the acquisitions of USS and Custom Trim in fiscal 1997 and SRS in
fiscal 1998. In addition the fees associated with the Credit Facility
(approximately $30.0 million) are being amortized over a six month period.
The estimated fiscal 1998 annual effective tax rate has been revised from a
45% benefit estimated in the three months ended September 30, 1997 to a 13%
benefit to reflect the impact of certain repositioning and other special charges
(i) taken in jurisdictions where the Company may not be able to recognize the
full income tax benefit due to limitations imposed by Financial Accounting
Standards Statement No. 109 (SFAS 109) and (ii) no tax benefit on write-down of
goodwill included in the repositioning charge. SFAS 109 states that a valuation
allowance is recognized if, it is more likely than not, that some portion or all
of the deferred tax asset will not be realized. Because of limitations on the
utilization of net operating losses from foreign jurisdictions, a valuation
allowance for a portion of the deferred income tax benefit related to the
repositioning and the other special charges has been recorded.
The extraordinary loss recorded in the three months ended December 31, 1997
related to the write-off of unamortized debt costs of the previous bank credit
facility.
Liquidity and Capital Resources
<PAGE>
The Company's primary cash requirements are for working capital, capital
expenditures and interest payments on outstanding indebtedness. The Company
believes that cash generated from operations, borrowings available under the
Credit Facility and net proceeds received in connection with the issuance of
debt and equity securities will be sufficient to meet the Company's working
capital, capital expenditures and debt service needs for the foreseeable future.
Cash flows from operating activities for the six months ended December 31,
1997, were a deficit of $21.0 million compared with a $72.4 million surplus for
the six months ended December 31, 1996. The decrease in cash flows was primarily
attributed to the net loss of $324.1 and changes in working capital items.
Capital expenditures aggregated $23.4 million for the six months ended
December 31, 1997. The Company continues to invest capital to expand capacity
and tool new products. Investments continue to be made to support productivity
improvements, cost reduction programs, and added capability for existing and new
products. Although the Credit Facility restricts the amount of capital
expenditures the Company can incur in any given quarter, the Company does not
believe that this covenant will adversely affect the Company's capital
expenditure plans .
On October 30, 1997, in connection with the acquisition of SRS, the Company
and NationsBank entered into the Credit Facility, pursuant to which the Company
has $900 million of aggregate borrowing availability. At December 31, 1997, the
Company had an aggregate of $810 million of borrowings outstanding under the
Credit Facility (including approximately $10.0 million letters of credit), and
the weighted average interest rate on such borrowings was approximately 8.76%
per annum. The Credit Facility consists of a 366-day revolving credit facility
providing up to $300 million of availablity, including a $25 million sublimit
for the issuance of standby letters of credit and a $75 million sublimit for
multi-currency borrowings, and a 366-day $600 million term loan. The Company is
currently in negotiations with a number of financial institutions, to replace
the current credit facility with longer term credit facilities. The Company
expects to replace the existing credit facility during its third quarter.
On October 14, 1997, the Company and Siemens entered into the Stock
Purchase Agreement pursuant to which, on October 30, 1997, the Company issued
and sold 4,883,227 Series A Preference Shares to Siemens for an aggregate
purchase price of $115.0 million. The $115.0 million of proceeds was used to
fund a portion of the purchase price for the SRS acquisition. On January 20,
1998, Siemens converted 4,883,226 of its Series A Preference Shares into
4,883,226 shares of common stock.
In connection with the SRS acquisition, on October 30, 1997, the Company
issued and sold to PSCC $200 million of Series B Preference Securities. On
November 25, 1997, the Company issued and sold $250.0 million of Convertible
Debentures to BTI Capital Trust which, concurrently therewith, issued and sold
$250.0 million aggregate liquidation amount of Preferred Securities (which are
guaranteed by the Company) in a private transaction under Rule 144A under the
Securities Act of 1933. The Company used the net proceeds from the issuance and
sale of the Convertible Debentures to BTI Capital Trust to redeem all of the
outstanding Series B Preference Securities in accordance with the terms thereof
and for general corporate purposes.
Forward Looking Statements
Based on a recent assessment, the company determined that it will be
required to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter. The Company presently believes that with modifications to existing
software and conversions to new software, the Year 2000 issue will not pose
significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not timely completed, the
Year 2000 Issue could have a material impact on the operations of the
Company. Statements herein regarding estimated cost savings and the Company's
anticipated performance in future periods constitute forward-looking statements
within the meaning of the Securities Act of 1933 and the Securities Exchange Act
of 1934. Such statements are subject to certain risks and uncertainties that
could cause actual amounts to differ
<PAGE>
materially from those projected. With respect to estimated cost savings,
management has made assumptions regarding, among other things, the timing of
plant closures, the amount and timing of expected short-term operating losses
and reductions in fixed labor costs. The realization of cost savings is subject
to certain risks, including, among other things, the risks that expected
operating losses have been underestimated, expected cost reductions have been
overestimated, unexpected costs and expenses will be incurred and anticipated
operating efficiencies will not be achieved. Further, statements herein
regarding the Company's performance in future periods are subject to risks
relating to, among other things, difficulties in integrating acquired
businesses, deterioration of relationships with material customers, possible
significant product liability claims, decreases in demand for the Company's
products and adverse changes in general market and industry conditions.
Management believes these forward-looking statements are reasonable; however,
undue reliance should not be placed on such forward-looking statements, which
are based on current expectations.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Stockholders held on November 20, 1997,
the following proposal was adopted by the votes specified below:
<TABLE>
Broker
<CAPTION>
Proposal For Against Withheld Abstain Nonvotes
Election of Directors:
<S> <C> <C> <C> <C> <C>
Allen K. Breed 28,236,791 -- 72,118 -- --
Johnnie Breed 28,236,724 -- 72,185 -- --
Larry W. McCurdy 28,242,144 -- 66,765 -- --
Charles J. Speranzella 28,241,290 -- 67,619 -- --
Robert W. Shower 28,241,602 -- 67,307 -- --
Fred J. Musone 28,237,926 -- 70,983 -- --
Alberto Negro 28,237,622 -- 71,287 -- --
Dr. Ing. Franz Wressnigg 28,238,510 -- 70,399 -- --
An increase in the number of shares of Common Stock available for issuance under
the 1994 Stock Incentive Plan from
2,500,000 to 3,700,000 shares 27,621,781 598,656 -- 88,472 --
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Stock Purchase Agreement, dated as of October 14, 1997, by and between
Breed Technologies,
<PAGE>
Inc., a Delaware corporation and Siemens Akfiengesellschaft, a company
organized under the laws of the Federal Republic of Germany
10.1.1 Make-Whole Agreement, dated as of October 14, 1997, by and between
Breed Technologies, Inc., a Delaware corporation and Siemens Akfiengesellschaft,
a company organized under the laws of the Federal Republic of Germany
10.1.2 Registration Rights Agreement, dated as of October 14, 1997, between
Breed Technologies, Inc., a Delaware corporation, and Siemens
Akfiengesellschaft, a company organized under the laws of the Federal Republic
of Germany
10.1.3 Stockholders Agreement, dated as of October 14, 1997, among Breed
Technologies, Inc. and certain of its subsidiaries.
10.2 Credit Agreement, dated as of October 30, 1997, by and among Breed
Technologies, Inc. and certain subsidiaries designated as Borrowers herein,
NationsBank National Association as agent and as lender and the lenders party
hereto from time to time. 10.3 Warrant Agreement, dated as of October 30, 1997,
between NationsBank, N.A. and Breed Technologies, Inc.
10.4 Joint Venture Agreement, dated as of December 24, 1997, between
Siemens Akfiengesellschaft and Breed Technologies, Inc.
(b) Reports on Form 8-K - The Company filed Form 8-K/A on January 13, 1998
amending the original filing that reported the acquisition of certain assets and
assumption of certain liabilities of the "Safety Restraints Systems" business of
AlliedSignal, Inc. to include Financial Statements of business acquired, Pro
Forma Financial Information and Exhibits as required under Item 7.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Breed Technologies, Inc.
(Registrant)
February 12, 1998
By: /s/ Frank J. Gnisci
Frank J. Gnisci
Executive Vice President and
Chief Financial Officer
Exhibit 10.1
STOCK PURCHASE AGREEMENT
by and between
BREED TECHNOLOGIES, INC.
and
SIEMENS AKTIENGESELLSCHAFT
dated as of October 14, 1997
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions and Principles of Construction................ 1
1.01 Defined Terms............................................. 1
1.02 Principles of Construction................................ 5
Section 2. Sale and Purchase of Stock................................ 5
2.01 Sale and Purchase of Stock................................ 5
2.02 Purchase Price; Number of Shares to be Purchased.......... 5
2.03 Closing................................................... 5
Section 3. Representations and Warranties of the Company............. 6
3.01 Organization and Good Standing............................ 6
3.02 Authorization............................................. 6
3.03 Enforceability............................................ 7
3.04 Approvals................................................. 7
3.05 Capitalization............................................ 7
3.06 Subsidiaries.............................................. 7
3.07 Compliance with Laws and Orders........................... 8
3.08 SEC Reports and Financial Statements...................... 8
3.09 Absence of Certain Changes or Events...................... 9
3.10 Absence of Undisclosed Liabilities........................ 9
3.11 Legal Proceedings......................................... 9
3.12 Patents and Trademarks..................................... 9
3.13 Taxes..................................................... 10
3.14 Employee Benefit Plans.................................... 10
3.15 Environmental............................................. 11
3.16 Affiliate Transactions.................................... 11
3.17 AlliedSignal Transaction...................................11
3.18 Disclosure.................................................12
3.19 Brokers....................................................12
Section 4. Representations and Warranties of Purchaser....... 12
4.01 Investment Intent......................................... 12
4.02 No Registration of Securities............................. 12
4.03 Investor Status........................................... 12
4.04 Authority to Execute and Perform Agreement................ 13
4.05 Brokers................................................... 13
4.06 Approvals................................................. 13
Section 5. Covenants of the Company and Purchaser.................... 13
5.01 Company................................................... 13
5.02 Purchaser................................................. 15
Section 6. Conditions Precedent to Obligations of Purchaser.......... 15
Section 7. Conditions Precedent to Obligations of the Company........ 18
Section 8. Notices................................................... 19
Section 9. Survival of Representations and Warranties................ 20
<PAGE>
Section 10. Indemnification................................... 20
10.01 Indemnity by the Company.................................. 20
10.02 Purchaser's Indemnity..................................... 21
10.03 Procedure................................................. 21
10.04 Basket and Cap Provisions................................. 23
Section 11. Termination....................................... 23
11.01 Termination............................................... 23
11.02 No Liability.............................................. 24
11.03 Notice.................................................... 24
Section 12. Miscellaneous..................................... 24
12.1 Amendment or Waiver....................................... 24
12.2 Consent to Jurisdiction................................... 24
12.3 Release of Siemens Aktiengesellschaft..................... 24
12.4 Waiver of Jury Trial; Trial Costs......................... 25
12.5 Assignment................................................ 25
12.6 Entire Agreement.......................................... 25
12.7 Expenses.................................................. 25
12.8 Public Announcements...................................... 25
Schedule 3.02 Authorization
Schedule 3.04 Approvals for Company
Schedule 3.05(b) Options
Schedule 3.06 Subsidiaries
Schedule 3.08(a) SEC Filings
Schedule 3.08(b) Treatment of Subsidiaries on Financial Statements
Schedule 3.09 Absence of Changes
Schedule 3.10 Undisclosed Liabilities
Schedule 3.11 Legal Proceedings
Schedule 3.12 Intellectual Property
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Environmental Matters
Schedule 3.16 Transactions with Affiliates
Schedule 3.17 AlliedSignal Agreement
Schedule 4.06 Approvals for Purchaser
Schedule 6(l) Financing Terms
Exhibit A Form of Certificate of Designations
Exhibit B Form of Make-Whole Agreement
Exhibit C Opinion of Special Counsel to the Company
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Stockholders Agreement
Exhibit F Opinions of Counsel to Purchaser
<PAGE>
This STOCK PURCHASE AGREEMENT, dated as of October 14, 1997, is by and
between Breed Technologies, Inc., a Delaware corporation (the "Company"), and
Siemens Aktiengesellschaft, a company organized under the laws of the Federal
Republic of Germany ("Purchaser").
WHEREAS, the Company has entered into an agreement to acquire the
automotive safety restraints business of AlliedSignal Inc. (the "AlliedSignal
Acquisition");
WHEREAS, Purchaser desires to invest in the Company as a result and in
furtherance of the AlliedSignal Acquisition; and
WHEREAS, the Company and Purchaser (through their respective Affiliates)
intend to form a joint venture for the worldwide research, development and
marketing of motor vehicle occupant safety restraint systems (the "Joint
Venture");
In consideration of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
Section 1. Definitions and Principles of Construction.
1.01 Defined Terms. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"Additional Shares" has the meaning set forth in Section 2.02(c).
"Adjustment Period" means the period beginning on the date of this
Agreement and ending six months after the date of the Closing.
"Affiliate" means any Person that directly or indirectly, through one or
more intermediaries, controls or is controlled by or is under common control
with the Person specified. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person, whether by Contract or otherwise. In any
event, and without limitation of the previous sentence, any Person owning more
than fifty (50%) of the voting securities of a second Person shall be deemed to
control that second Person.
"Agreement" means this Agreement, as the same may be amended, supplemented
or modified in accordance with the terms hereof.
"AlliedSignal Acquisition" has the meaning set forth in the forepart of
this Agreement.
"AlliedSignal Agreement" has the meaning set forth in Section 3.17.
"Benefit Plan" has the meaning set forth in Section 3.14.
"Best Price" means the Initial Price Per Share less an amount equal to the
Initial Price multiplied by the Biggest Discount.
"Biggest Discount" means the largest Stock Sale Discount.
"Breed Stockholders" means Allen K. Breed, Johnnie Cordell Breed, A. Breed,
L.P. and J. Breed, L.P.
<PAGE>
"Business Day" means any day other than a Saturday or a Sunday or a day
when commercial banks are permitted or required by law to be closed in New York
City.
"Certificate of Designations" means a Certificate of Designations in
substantially the form attached hereto as Exhibit A.
"Charter Amendment" means an amendment to the Company's Certificate of
Incorporation for the purpose of increasing the maximum number of shares of
Common Stock that the Corporation is authorized to issue to 75,000,000.
"Claim Notice" has the meaning set forth in Section 10.03.
"Closing" has the meaning set forth in Section 2.03(a).
"Closing Date" shall mean the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Common Stock of the Company, $.01 par value per
share.
"Company" means Breed Technologies, Inc.
"Company Financial Statements" has the meaning set forth in Section 3.08.
"Company Permits" has the meaning set forth in Section 3.07.
"Company SEC Reports" has the meaning set forth in Section 3.08.
"Damages" has the meaning set forth in Section 10.01.
"ERISA" has the meaning set forth in Section 3.14.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Governmental or Regulatory Authorities" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, the Federal Republic of Germany, any foreign jurisdiction,
the European Community or any political subdivision of any of the foregoing.
"HSR Act" means Section 7A of the Clayton Act (Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the rules
and regulations promulgated thereunder.
"Indemnified Party" and "Indemnifying Party" have the meanings set forth in
Section 10.03.
"Initial Price Per Share" means the Purchase Price divided by the number of
Initial Shares.
"Initial Shares" has the meaning set forth in Section 2.02(b).
"Joint Venture" means the joint venture contemplated by the Memorandum of
Understanding to be formed between the parties hereto (or through their
respective Affiliates) in connection with motor vehicle occupant safety
restraint systems.
<PAGE>
"Knowledge" means, as to any specified facts or information, that those
facts or information are within the actual knowledge of any executive officer or
senior vice president of any division, and in addition, as to Section 3.17(b)
only, the actual knowledge of the Company's Director of Corporate Compliance.
"Law" means any law, statute, rule, regulation, ordinance or other
pronouncement having the effect of law in the United States, the Federal
Republic of Germany, the European Community or any political subdivision of the
foregoing.
"Lien" means any lien, pledge, hypothecation, mortgage, security interest,
claim, lease, charge, option, right of first refusal, easement encroachment,
transfer restriction, or other encumbrance of any kind.
"Make-Whole Agreement" means an agreement in substantially the form
attached hereto as Exhibit B.
"Material Adverse Effect" means a material adverse effect upon the
business, assets, condition (financial or otherwise) or operations of the
Company and its Subsidiaries, taken as a whole.
"Memorandum of Understanding" means the memorandum of understanding
(including the related Term Sheet) between the Company and Purchaser, dated the
same date as this Agreement, with respect to a joint venture between the parties
or their affiliates.
"NYSE" means the New York Stock Exchange, Inc.
"Notice Period" has the meaning set forth in Section 10.03(a).
"Order" means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority.
"Person" means an individual, partnership, corporation, association, trust,
joint venture, unincorporated organization, and any government, governmental
department or agency or political subdivision thereof.
"Purchase Price" has the meaning set forth in Section 2.02.
"Purchaser" means Siemens Aktiengesellschaft.
"Registration Rights Agreement" means an agreement in the form attached as
Exhibit D.
"Related Agreements" means the Make-Whole Agreement, the Registration
Rights Agreement and the Stockholders Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SEC" means the Securities and Exchange Commission.
"Series A Preference Share" means a share, authorized by the Certificate of
Designations, which represents one one-thousandth (1/1,000) of a share of the
Company's 1997 Series A Convertible Non-Voting Preferred Shares, $.001 par value
per share, is convertible by the holder thereof at any time after issuance into
Common Stock, and has the other rights, qualifications, limitations,
restrictions and preferences set forth in the Certificate of Designations.
"Shares" has the meaning set forth in Section 2.01.
<PAGE>
"Stockholders Agreement" means the agreement in substantially the form
attached as Exhibit E.
"Stock Sale Discount" means, with respect to any sale of Common Stock by
the Company, the amount, if any, by which the purchase price per share paid by
the purchaser in such sale is less than the last reported sale price of the
Common Stock on the NYSE on the last Trading Day preceding the date the Company
first became contractually committed to make such sale, expressed as a
percentage of such last reported sale price.
"Subsidiaries" has the meaning set forth in Section 3.06.
"Taxes" means any federal, state, county, local or foreign taxes, charges,
fees, levies, or other assessments, including all net income, gross income,
sales and use, ad valorem, transfer, gains, profits, excise, franchise, real and
personal property, gross receipt, capital stock, production, business and
occupation, disability, employment, payroll, license, estimated, stamp, custom
duties, severance or withholding taxes or charges imposed by any governmental
entity, including any interest and penalties (civil or criminal) on or additions
to any such taxes and any expenses incurred in connection with the
determination, settlement or litigation of any Tax liability.
"Tax Return" means a report, return or other information required to be
supplied to a governmental entity with respect to Taxes including, where
permitted or required, combined or consolidated returns for any group of
entities that include the Company or any Subsidiary.
"Trading Day" means a day on which the NYSE opens for trading.
1.02 Principles of Construction. (a) All references to sections, schedules
and exhibits are to sections, schedules and exhibits in or to this Agreement
unless otherwise specified. The words "hereof," "herein," and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provisions of this Agreement.
(b) All accounting terms used in this Agreement shall be construed in
accordance with generally accepted accounting principles in the United States.
Section 2. Sale and Purchase of Stock.
2.01 Sale and Purchase of Stock. The Company agrees to issue and sell to
Purchaser, and, subject to the terms and conditions hereof and in reliance on
the representations, warranties and covenants set forth or referred to herein,
Purchaser agrees to purchase from the Company, the number of Series A Preference
Shares determined in accordance with Section 2.02 (the "Shares"). The rights,
qualifications, limitations, restrictions and preferences of the Shares shall be
as set forth in the Certificate of Designations.
2.02 Purchase Price; Number of Shares to be Purchased. (a) The aggregate
purchase price for the Shares (the "Purchase Price") shall be $115,000,000.
(b) The number of Shares (the "Initial Shares") to be issued and sold by
the Company at the Closing in consideration of the Purchase Price shall be
4,883,227. If there is a Best Price, then the number of Shares issued and sold
shall equal the Purchase Price divided by the Best Price.
(c) Not later than five days after the end of the Adjustment Period, the
Company shall issue and deliver to Purchaser a number of Shares (the "Additional
Shares") equal to the excess of (i)the number of Shares that is equal to the
Purchase Price divided by the Best Price over (ii) the number of Initial Shares.
<PAGE>
2.03 Closing.
(a) Subject to the other provisions of this Agreement, the closing of the
purchase and sale of the Initial Shares (the "Closing") will take place at the
same time and place as the closing of the AlliedSignal Acquisition.
(b) On the Closing Date, Purchaser will pay the Purchase Price in
immediately available funds, by wire transfer to an account designated by the
Company not less than two Business Days prior to the Closing Date or, if the
Company fails to so designate an account within the required time, by delivery
of a certified or official bank check payable to the order of the Company.
(c) Simultaneously with Purchaser's payment of the Purchase Price, the
Company will deliver to Purchaser a certificate representing the Initial Shares.
Section 3 Representations and Warranties of the Company. The Company
represents and warrants to and for the benefit of Purchaser as follows
(Notwithstanding anything in the Agreement to the contrary, except for the
representations and warranties contained in Section 3.17, neither the Company
nor any Subsidiary is making any representation or warranty concerning the
AlliedSignal Agreement, the AlliedSignal Acquisition or the business, assets or
operations being acquired by the Company or any Subsidiary as a result of the
AlliedSignal Acquisition.):
3.01 Organization and Good Standing. Each of the Company and each
Subsidiary (a) is duly organized and existing in good standing in its
jurisdiction of formation, (b) is duly qualified and authorized to do business
in all other jurisdictions in which the nature of its business or property makes
such qualification necessary, except where such failure to qualify would not
have a Material Adverse Effect, and (c) has the power to own its properties and
to carry on its business as now conducted and as proposed to be conducted.
3.02 Authorization. Except as set forth on Schedule 3.02, the execution,
delivery and performance by the Company of this Agreement and the Related
Agreements, the issuance and sale by the Company of the Shares and the issuance
of the Common Stock upon conversion of the Shares, (a) are within the Company's
corporate power and authority, (b) have been duly authorized by all necessary
corporate proceedings, (c) do not and will not conflict with or result in any
breach or violation of any provision of the Certificate of Incorporation or
Bylaws of the Company, (d) do not and will not conflict with or result in any
breach or violation of any provision of any law, regulation, order, judgment,
writ, injunction, license or permit, applicable to the Company or any
Subsidiary, and (e) do not and will not conflict with or result in any breach or
violation of any of the terms or conditions of, or constitute (or with notice or
lapse of time or both constitute) a default under, or give rise to the creation
of any lien upon any of the property or assets of the Company or any Subsidiary,
under any contract, agreement, lease or other instrument to which the Company or
any Subsidiary is a party (including without limitation all agreements and
instruments to be executed and delivered in connection with the financing of the
AlliedSignal Acquisition) or by which any of their respective assets or
properties is bound, the consequences of which, with respect to this clause (e),
could reasonably be expected to result in a Material Adverse Effect.
3.03 Enforceability. Each of this Agreement and the Related Agreements has
been duly executed and delivered by the Company and constitutes the valid and
legally binding obligation of the Company enforceable against it in accordance
with its terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally and by principles of equity regarding
the availability of remedies.
3.04 Approvals. Except as set forth on Schedule 3.04, the execution,
delivery and performance by the Company of this Agreement and the Related
Agreements, the purchase and sale of the Shares and the issuance of the number
of shares of Common Stock specified in the Certificate of Designations upon
conversion of the Shares, do not and will not require the approval or consent
of, or any filing with, any governmental authority or agency or any other
Person.
<PAGE>
3.05 Capitalization. (a) The authorized capital stock of the Company
consists solely of (i)50,000,000 shares of Common Stock, $.01 par value per
share, and (ii) 5,000,000 shares of preferred stock of the Company, $.001 par
value per share. All of the outstanding shares of capital stock of the Company
are duly authorized, validly issued, fully paid and nonassessable. Upon issuance
and sale to Purchaser in accordance with this Agreement the Shares will be, and
the Common Stock issuable upon conversion of the Shares will upon issuance be,
duly authorized, validly issued, fully paid and nonassessable and free and clear
of all Liens.
(b) Except for the Make-Whole Agreement and as otherwise set forth on
Schedule 3.05(b), neither the Company nor any Subsidiary has outstanding any
rights (either pre-emptive or other) or options to subscribe for or purchase
from the Company or such Subsidiary or any warrants or other agreements
providing for or requiring the issuance or purchase or other acquisition by or
on behalf of the Company or such Subsidiary of, any capital stock or other
equity interests or any securities convertible into or exchangeable for the
Company's or such Subsidiary's capital stock or other equity interests. Except
as set forth on Schedule 3.05(b), there are no voting trusts or other agreements
or understandings with respect to the voting of the capital stock or other
equity interests of the Company or such Subsidiary nor any restrictions on the
transferability or sale of such shares or other equity interests except as
provided under the Securities Act, state "blue sky" or securities laws, this
Agreement and the Related Agreements. Neither the Company nor any Subsidiary is
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire, redeem or retire any shares of capital stock or other equity interests
of the Company or such Subsidiary or any securities convertible into or
exchangeable for any such capital stock or other equity interests.
3.06. Subsidiaries. Schedule 3.06 sets forth the name, jurisdiction of
organization, and amount of the Company's and each other record owner's equity
interest in each corporation or other entity in which the Company directly or
indirectly owns or has the power to vote shares of any capital stock or other
ownership interests having ordinary voting power to elect a majority of the
directors of such corporation, or other persons performing similar functions for
such entity, as the case may be, and each partnership and limited liability
company in which such corporation or entity is a general partner or manager or
member, as the case may be (the "Subsidiaries"). Except for ownership by the
Company of the Subsidiaries as set forth on Schedule 3.06 or as otherwise set
forth on Schedule 3.06 neither the Company nor any Subsidiary directly or
indirectly owns any capital stock of, or other equity interest in, any person or
participates in any joint venture or similar arrangement with any person. Except
as set forth on Schedule 3.06, all of the outstanding shares of capital stock of
each Subsidiary have been duly authorized and validly issued, are fully paid and
non-assessable, and are owned, beneficially and of record, directly or
indirectly, by the Company free and clear of all Liens.
3.07 Compliance with Laws and Orders. The Company and its Subsidiaries hold
all permits, licenses, variances, exemptions, orders and approvals of all
Governmental and Regulatory Authorities necessary for the lawful conduct of
their respective businesses (the "Company Permits"), except for failures to hold
such permits, licenses, variances, exemptions, orders and approvals which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a Material Adverse Effect. The Company and its Subsidiaries are
in compliance with the terms of the Company Permits, except failures so to
comply which, individually or in the aggregate, are not having and could not be
reasonably expected to have a Material Adverse Effect. Except as disclosed in
the Company SEC Reports (as defined in Section 3.08) filed prior to the date of
this Agreement, the Company and its Subsidiaries are not in violation of or
default under any Law or Order of any Governmental or Regulatory Authority,
except for violations which, individually or in the aggregate, are not having
and could not be reasonably expected to have a Material Adverse Effect.
3.08 SEC Reports and Financial Statements. The Company delivered to
Purchaser prior to the execution of this Agreement a true and complete copy of
each form, report, schedule, registration statement and other document (together
with all amendments thereof and supplements thereto) filed by the Company or any
of its Subsidiaries with the SEC since December 31, 1996 (as such documents have
since the time of their filing been amended or supplemented, the "Company SEC
Reports"), which, except as disclosed on Schedule 3.08(a), are all the documents
(other than preliminary material) that the Company and its Subsidiaries were
required to file with the SEC since such date. Except as disclosed in Schedule
3.08(a), and in the cases where the Company SEC Reports have been amended, as of
their respective dates,
<PAGE>
the Company SEC Reports (i) complied as to form in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Except as disclosed in Schedule 3.08(b), the audited
consolidated financial statements and unaudited interim consolidated financial
statements (including, in each case, the notes, if any, thereto) included in the
Company SEC Reports (the "Company Financial Statements") complied as to form in
all material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated therein or in the notes thereto and except with respect to
unaudited statements as permitted by Form 10-Q of the SEC) and fairly present in
all material respects (subject, in the case of the unaudited interim financial
statements, to normal, recurring year-end audit adjustments which are not
expected to be, individually or in the aggregate, materially adverse to the
Company and its Subsidiaries taken as a whole) the consolidated financial
position of the Company and its consolidated subsidiaries as at the respective
dates thereof and the consolidated results of their operations and cash flows
for the respective periods then ended. Except as set forth in Schedule 3.08(b),
each Subsidiary of the Company is treated as a consolidated subsidiary of the
Company in the Company Financial Statements for all periods covered thereby.
3.09 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement or as disclosed on
Schedule 3.09, (a) since June 30, 1997 there has not been any change, event or
development having, or that could be reasonably expected to have, individually
or in the aggregate, a Material Adverse Effect and (b) between such date and the
date hereof the Company and its Subsidiaries have conducted their respective
businesses only in the ordinary course consistent with past practice.
3.10 Absence of Undisclosed Liabilities. Except for matters reflected or
reserved against in the balance sheet for the period ended June 30, 1997
included in the Company Financial Statements or as disclosed in Schedule 3.10,
neither the Company nor any of its Subsidiaries had at such date, or has
incurred since that date, any liabilities or obligations (whether absolute,
accrued, contingent, fixed or otherwise, or whether due or to become due) of any
nature that would be required by generally accepted accounting principles,
applied on a basis consistent with prior practice, to be reflected on a
consolidated balance sheet of the Company and its consolidated subsidiaries
(including the notes thereto), except liabilities or obligations (i) which were
incurred in the ordinary course of business consistent with past practice; (ii)
which have not, and could not reasonably be expected to have, individually or in
the aggregate, a Materially Adverse Effect.
3.11 Legal Proceedings. Except as disclosed in the Company SEC Reports
filed prior to the date of this Agreement or in Schedule 3.11, (i) there are no
actions, suits, arbitrations or proceedings pending or, to the Knowledge of the
Company, threatened against, relating to or affecting, nor to the Knowledge of
the Company are there any Governmental or Regulatory Authority investigations or
audits pending or threatened against, relating to or affecting, the Company or
any of its Subsidiaries or any of their respective assets and properties which,
if determined adversely to the Company or any of its Subsidiaries, individually
or in the aggregate, could be reasonably expected to have a Material Adverse
Effect, or a material adverse effect on the Company's ability to consummate the
transactions contemplated by this Agreement or the Related Agreements and (ii)
neither the Company nor any of its Subsidiaries is subject to any Order of any
Governmental or Regulatory Authority which, individually or in the aggregate, is
having or could be reasonably expected to have a Material Adverse Effect or a
material adverse effect on the Company's ability to consummate the transactions
contemplated by this Agreement or the Related Agreements.
3.12 Patents and Trademarks. Each of the Company and each Subsidiary owns
or possesses sufficient legal rights to all patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights, know-how and processes necessary for its business as now conducted. To
the Knowledge of the Company, no material activity of the Company or any
Subsidiary materially conflicts with or infringes on the intellectual property
rights of any other Person. Except as disclosed on Schedule 3.12, there are no
outstanding options, licenses, or agreements of any kind
<PAGE>
relating to the foregoing, nor is the Company or any Subsidiary bound by or
a party to any options, licenses or agreements of any kind with respect of the
patents, trademarks, service marks, trade names copyrights, trade secrets,
licenses, information, proprietary rights and processes of any other person or
entity.
3.13 Taxes. Each of the Company and, to the Company's Knowledge, each
Subsidiary has filed all Tax Returns required to be filed. All Tax Returns were
in all material respects true, complete and correct and have been filed on a
timely basis. Each of the Company and each Subsidiary have paid, in the time and
manner prescribed by law, all Taxes that are due and payable. Except for the
liens of property taxes being disputed in good faith, there are no Tax liens on
any property of the Company or any Subsidiary. Each of the Company and each
Subsidiary has complied in all material respects with the provisions of Code
Sections 1441-1464, 3401-3406, 6041 and 6049 (and similar provisions under any
other laws) and have, in the time and manner prescribed by law, withheld from
employee wages and have paid to the proper governmental authorities all amounts
required. Each of the Company and each Subsidiary has established on their books
and records reserves adequate to pay all Taxes not yet due and payable. There
are no agreements, waivers or other arrangements providing for an extension of
time with respect to the filing of any returns or the assessment of any Tax or
deficiency against the Company or any of the Subsidiaries nor are there any
known actions, suits, proceedings, investigations or claims pending against the
Company or any of the Subsidiaries in respect of any Tax, assessment or
governmental charge, or any other matters under discussion between the Company
or any of the Subsidiaries and any federal, state or local authority relating to
any Tax assessments, or governmental charges or any known claims against the
Company or any of the Subsidiaries for additional Taxes, assessments, or any
governmental charges asserted by any such authority.
3.14 Employee Benefit Plans. The plans listed in Schedule 3.14 are the only
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and plans, programs,
policies, practices arrangements or contracts (whether group or individual)
providing for payments, benefits or reimbursements to employees of the Company
or any Subsidiary, former employees, their beneficiaries and dependents, under
which such employees, former employees, their beneficiaries and dependents, are
covered through an employment relationship with the Company or any entity
required to be aggregated in a controlled group or affiliated service group with
the Company for purposes of ERISA or the Code (including without limitation,
under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA, at
any relevant time ("Benefit Plans"). With respect to each Benefit Plan, to the
extent applicable: (i) such Benefit Plan has been maintained and operated in
material compliance with its terms and with the applicable provisions of ERISA,
the Code and all other applicable governmental laws and regulations; each such
Benefit Plan intended to qualify under Section 401(a) of the Code is the subject
of a favorable unrevoked determination letter issued by the Internal Revenue
Service as to its tax-qualified status under the Code, (ii) there is no material
suit, action, dispute, claim, arbitration or legal, administrative or other
proceeding or governmental investigation pending, or threatened, alleging any
breach of the terms of any such Benefit Plan or of any fiduciary duties
thereunder or violation of any applicable statue, law, rule or regulation with
respect to any Benefit Plan, and (iii) neither Purchaser nor any plan maintained
by Purchaser or any of its Affiliates shall be subject to any tax, fine, penalty
or other liability of any kind whatsoever, that would not have been incurred by
Purchaser or any of its Affiliates but for the transactions contemplated hereby.
3.15 Environmental. Except as set forth on Schedule 3.15:
(a) To the Company's Knowledge, there has not been, as of the date hereof,
any "release" (as defined in 42 U.S.C. ss. 9601(22)) of any "hazardous waste"
(as defined in 42 U.S.C. ss. 9601(14)) or oil on or about any of the real
property currently or previously owned, leased or operated by the Company).
(b) To the Company's Knowledge, the Company has not by contract, agreement
or otherwise arranged for disposal or treatment, or arranged with a transporter
for the transport for disposal or treatment, of hazardous waste at any
"facility" (as defined in 42 U.S.C. ss. 9601(9)) owned or operated by another
person or entity.
<PAGE>
(c) To the Company's Knowledge, the Company has not accepted any hazardous
waste for transport to disposal or treatment facilities or sites selected by the
Company.
(d) To the Company's Knowledge, as of the date hereof, the Company and its
use of its real property is in compliance with all applicable laws, rules and
regulations of any federal, state or local governmental authority relating to
environmental protection, underground storage tanks, toxic waste, hazardous
waste, oil or hazardous substance handling, treatment, storage, disposal or
transportation or arranging therefor, products or materials previously or now
located on, delivered to, transmitted from, or in transit to or from, such real
property.
(e) To the Company's Knowledge, all of the Company's past disposal
practices relating to hazardous waste have been accomplished in accordance in
all material respects with applicable laws, rules, regulations and ordinances.
(f) To the Company's Knowledge, the Company has not been notified of any
potential liability of the Company with respect to the clean-up of any waste
disposal site and has no information to the effect that any site at which it has
disposed of hazardous waste or oil has been or is under investigation by any
federal, state or local governmental body, authority or agency.
3.16 Affiliate Transactions. As of the date of this Agreement, except as
disclosed on Schedule 3.16 and except for bona-fide intercompany obligations
among the Company and its Subsidiaries, (i) there are no outstanding amounts of
indebtedness in excess of $250,000, and (ii) there are no contracts or
agreements, between the Company and the Subsidiaries, or the Company and any
officer, director or Affiliate of the Company.
3.17 AlliedSignal Transaction. ( a) A true, complete and correct copy of
the Purchase Agreement, dated as of August 27, 1997, among AlliedSignal Inc.,
the other sellers named therein and the Company (the "AlliedSignal Agreement"),
including all exhibits, schedules and appendices thereto, has been furnished to
Purchaser. The AlliedSignal Agreement is in full force and effect and (except
for an amendment dated October 3, 1997, a true, complete and correct copy of
which has been furnished to Purchaser) has not been modified or amended.
(b) To the Knowledge of the Company, except as disclosed on Schedule 3.17,
none of the representations or warranties contained in the AlliedSignal
Agreement is false or inaccurate in any material respect.
3.18 Disclosure. No representation, warranty or statement made by the
Company or any Subsidiary in this Agreement or the Related Agreements, or in any
agreement, certificate, statement or document required to be delivered pursuant
hereto, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in this
Agreement or the Related Agreements or in such other agreement, certificate,
statement or document not misleading in light of the circumstances in which they
were made.
3.19 Brokers. All negotiations relative to this Agreement or the Related
Agreements and the transactions contemplated hereby have been carried out by the
Company directly with Purchaser without the intervention of any Person on behalf
of the Company in such manner as to give rise to any valid claim by any Person
against any Purchaser or its Affiliates for a finder's fee, brokerage commission
or similar payment.
Section 4. Representations and Warranties of Purchaser. Purchaser
represents and warrants to and for the benefit of the Company as follows:
4.01 Investment Intent. Purchaser is acquiring the Shares for investment,
and not with a view to selling or otherwise distributing the Shares.
4.02 No Registration of Securities. Purchaser is aware that the Shares have
not been registered under the Securities Act or under state securities or blue
sky laws in reliance upon certain exemptions from such registration, and may not
be
<PAGE>
transferred except pursuant to an effective registration under the
Securities Act and under state securities or blue sky laws or in a transaction
exempt from such registration.
4.03 Investor Status. (a) Purchaser is able to bear the economic risk of
the investment of Purchaser in the Shares and has such knowledge and experience
in financial and business matters, so as to be capable of evaluating the merits
and risks of the prospective investment in the Shares.
(b) Purchaser is aware that no Federal or state agency has (i) made any
finding or determination as to the fairness of any aspect of the investment in
the Shares or (ii) passed on or endorsed the merits of the offering of the
Shares.
(c) Purchaser is an "accredited investor," as that term is defined in Rule
501(a) of Regulation D promulgated under the Securities Act.
4.04 Authority to Execute and Perform Agreement. Purchaser has the legal
right and power and all authority required to enter into, execute and deliver
this Agreement. Each of this Agreement and the Related Agreements has been duly
executed and delivered and is the valid and binding obligation of such Purchaser
enforceable in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally and by principles of equity regarding the availability of remedies.
The execution, delivery and performance by Purchaser of this Agreement and the
Related Agreements, and the purchase by Purchaser of the Shares hereunder, (a)
are within Purchaser's corporate power and authority, (b) have been duly
authorized by all necessary corporate proceedings of Purchaser, (c) do not
conflict with or result in any breach or violation of any provision of the
Certificate of Incorporation (or similar organizational documents) or Bylaws (or
similar governing documents) of such Purchaser, (d) do not conflict with or
result in any breach or violation of any provision of any law, regulation,
order, judgment, writ, injunction, license or permit, applicable to such
Purchaser, or (e) conflict with or result in any breach or violation of any of
the terms or conditions of, or constitute (or with notice or lapse of time or
both constitute) a default under, or give rise to the creation of any lien upon
any of the property or assets of Purchaser, under any contract, agreement, lease
or other instrument to which Purchaser is a party or by which any of its
respective assets or properties is bound, the consequences of which, with
respect to this clause (e), could reasonably be expected to have a material
adverse effect on the validity or enforceability of this Agreement or the
Related Agreements or on the ability of Purchaser to perform its obligations
under any of such agreements.
4.05 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby, including, but not limited to, the Joint
Venture, have been carried out by Purchaser directly with the Company without
the intervention of any Person on behalf of Purchaser in such manner as to give
rise to any valid claim by any Person against the Company or any Subsidiary for
a finder's fee, brokerage commission or similar payment.
4.06 Approvals. Except as set forth on Schedule 4.06, the execution,
delivery and performance by Purchaser of this Agreement and the Related
Agreements, and the purchase and sale of the Shares, do not require the approval
or consent of, or any filing with, any governmental authority or agency or any
other Person.
Section 5. Covenants of the Company and Purchaser.
5.01 Company. The Company covenants and agrees that, except with the
written consent of Purchaser (which consent shall not unreasonably be withheld),
it shall:
(i) Conduct of Business. From the date hereof to the Closing Date, except
as disclosed to Purchaser, operate its business and the business of each of its
subsidiaries in a manner consistent with the manner in which it is being
operated at the date of this Agreement.
<PAGE>
(ii) Best Efforts. Use its best efforts to cause all of the conditions set
forth in Section 6 to be fulfilled as promptly as practicable after the date of
this Agreement.
(iii) Antitrust, Competition Law Requirements. Take promptly (and in any
event within five days after the Closing) all actions necessary to make the
filings required of the Company or its Affiliates with any Governmental or
Regulatory Authorities in connection with Purchaser's acquisition of Common
Stock upon conversion of the Shares, including without limitation those required
under the HSR Act and European Community and German competition Laws, comply at
the earliest practicable date with any request for additional information
received by the Company or its Affiliates from any Governmental or Regulatory
Authority in respect of such filing and cooperate with Purchaser in connection
with any similar or comparable filing required to be made by Purchaser and in
connection with resolving any investigation or other inquiry concerning the
transactions contemplated by this Agreement commenced by any Governmental or
Regulatory Authority.
(iv) Investigation by Purchaser. The Company will, and will cause the
Subsidiaries to, (A) provide Purchaser and its officers, directors, employees,
agents, counsel, accountants, financial advisors, consultants and other
representatives with full access, upon reasonable prior notice and during normal
business hours, to all officers, employees, agents and accountants of the
Company and the Subsidiaries and their assets, properties, books and records,
and (B) furnish Purchaser and such other Persons with all such information and
data concerning the business and operations of the Company and the Subsidiaries,
and (to the extent possible without causing unreasonable disruption) the
business and assets to be acquired in the AlliedSignal Acquisition as Purchaser
or any of such other Persons reasonably may request in connection with such
investigation.
(v) Notice of Events. Promptly give Purchaser notice of (A) any event,
condition or circumstance occurring from the date hereof through the Closing
Date that would constitute a material violation or breach of this Agreement or
(B) any event, occurrence, transaction or other item which would have been
required to have been disclosed on any Schedule or statement delivered
hereunder, had such event, occurrence, transaction or item existed on the date
hereof other than items arising in the ordinary course of business which would
not render any representation or warranty of such parties materially misleading.
(vi) Equality of Rights. Grant to Purchaser (in addition to rights already
held by Purchaser) rights substantially equivalent to those obtained by any
other equity holder who acquires from the Company or any Affiliate thereof an
equal or smaller percentage of voting interest in the Company than Purchaser.
(vii) Joint Venture. Use its best efforts (i) to cause the execution and
delivery of the definitive documentation with respect to the Joint Venture to be
executed and delivered by December 15, 1997, (ii) to obtain the requisite
governmental clearances, approvals or terminations of waiting periods required
or applicable (including under antitrust or competition laws) with respect to
the formation of the Joint Venture and the conversion of the Shares into Common
Stock (provided, however, that the foregoing shall not require the Company to
consent to the imposition of any conditions deemed by it to be unduly onerous)
and (iii) to cause the formation of the Joint Venture based on the terms
contained in the Memorandum of Understanding prior to June 30, 1998.
5.02 Purchaser. Purchaser covenants and agrees that, except with the
written consent of the Company (which consent shall not unreasonably be
withheld), it shall:
(a) Best Efforts. Use its best efforts to cause all of the conditions set
forth in Section 7 to be fulfilled as promptly as practicable after the date of
this Agreement. Without limiting the generality of the foregoing, Purchaser will
(i) take promptly (and in any event within five Business Days after the Closing)
all actions necessary to make the filings required of Purchaser or its
Affiliates with any Governmental or Regulatory Authorities, including without
limitation those required under the HSR Act and European Community and German
competition Laws, (ii) comply at the earliest practicable date with any request
for additional information received by Purchaser or its Affiliates from any
<PAGE>
Governmental or Regulatory Authority in respect of such filing and (iii)
cooperate with the Company in connection with any similar or comparable filing
required to be made by the Company and in connection with resolving any
investigation or other regulatory inquiry concerning the transactions
contemplated by this Agreement commenced by any Governmental or Regulatory
Authority.
(b) Joint Venture. Use its best efforts (i) to cause the execution and
delivery of the definitive documentation with respect to the Joint Venture to be
executed and delivered by December 15, 1997, (ii) to obtain the requisite
governmental clearances, approvals or terminations of waiting periods required
or applicable (including under antitrust or competition laws) with respect to
the formation of the Joint Venture and the conversion of the Shares into Common
Stock and (iii) to cause the formation of the Joint Venture based on the terms
contained in the Memorandum of Understanding prior to June 30, 1998.
Section 6. Conditions Precedent to Obligations of Purchaser. Purchaser's
obligation to purchase the Shares at the Closing pursuant to this Agreement is
subject to compliance by the Company with its agreements herein contained and to
the satisfaction, on or prior to the Closing Date with respect to Purchaser's
obligation to consummate the Closing, of the following conditions:
(a) Charter Documents; Good Standing Certificate. Purchaser shall have
received from the Company (i) a certificate from a duly authorized officer
thereof dated as of the Closing Date certifying as to (A) the absence of any
amendment to the Certificate of Incorporation since the date of the Secretary of
State's certificate referred to in clause (ii) below, and (B) the completeness
and accuracy of the By-Laws of the Company as in effect on the Closing Date,
(ii) a long-form certificate, dated not more than ten days prior to the Closing
Date, of the Secretary of State of Delaware listing the Certificate of
Incorporation and each amendment thereto on file in his office and certifying
that (A) the attached copy of the Certificate of Incorporation and each
amendment thereto is a true and correct copy thereof, (B) such amendments are
the only amendments on file in his office, (C) that the Company has paid all
franchise taxes to the date of such certificate and (D) that the Company is duly
incorporated and in good standing under the laws of the State of Delaware. (b)
Proof of Corporate Action. Purchaser shall have received from the Company
copies, certified by a duly authorized officer thereof to be true and complete
as of the Closing Date, of the resolutions of the Board of Directors and (to the
extent required under applicable Law or the requirements of the NYSE) the
stockholders of the Company authorizing the Charter Amendment, the Certificate
of Designations and the execution, delivery and performance of this Agreement,
the Stockholders Agreement and the Make-Whole Agreement. (It is understood that,
following the Closing, the Company may seek further approvals of its
stockholders, but the results of any such proceeding will not in any event
affect the validity of the corporate approvals referred to in this paragraph
(b), all of which will have been obtained prior to the Closing.)
(c) Incumbency Certificate. Purchaser shall have received from the Company
an incumbency certificate, dated the Closing Date, signed by a duly authorized
officer thereof, and giving the name and bearing a specimen signature of each
individual who shall be authorized to sign, in the name and on behalf of the
Company, this Agreement and to give notices and to take other action on behalf
of the Company under this Agreement.
(d) Legal Opinion. Purchaser shall have received from Hale & Dorr LLP
special counsel to the Company, at the Closing their opinion, dated the Closing
Date, substantially in the form of Exhibit C hereto.
(e) Representations and Warranties; Officers' Certificates. The
representations and warranties of the Company contained herein shall be true and
correct in all material respects on and as of the Closing Date with the same
force and effect as though such representations and warranties were made on and
as of such date (except for representations and warranties which by their terms
are made expressly as of an earlier date, which shall be true and correct as of
such earlier date) and the Company shall have performed and complied in all
material respects with all conditions, covenants and agreements required to be
performed or complied with by it prior to the Closing Date; and Purchaser shall
have received on the Closing Date a certificate to this effect signed by an
authorized officer of the
<PAGE>
Company.
(f) Legality; Authorization; Consents. The purchase of the Shares shall not
be prohibited by any Law or Order. All necessary consents, approvals, licenses,
permits, orders and authorizations of, or registrations, declarations and
filings with, any Governmental or Regulatory Authority or of or with any other
Person, with respect to any of the transactions contemplated by this Agreement
shall have been fully obtained or made and shall be in full force and effect and
any waiting period imposed under any applicable Law shall have expired or been
terminated.
(g) Litigation, Etc. No suit, action, investigation, inquiry or other
proceeding (including, without limitation, the enactment or promulgation of a
statute or rule) by or before any arbitrator or any governmental injunction or
order by a state or federal court shall have been entered (i) as of the Closing
Date in connection with this Agreement, the Related Agreements or any of the
transactions contemplated hereby or (ii) which would have a Material Adverse
Effect or a material adverse effect on the consummation of the transactions
contemplated by this Agreement or the Related Agreements, including, without
limitation, the acquisition of the Shares, contemplated hereby.
(h) Make-Whole Agreement. The Company shall have executed and delivered the
Make-Whole Agreement to Purchaser.
(i) Registration Rights Agreement. The Company shall have executed and
delivered the Registration Rights Agreement to Purchaser. (j) Stockholders
Agreement; Board Representative. The Company, Allen K. Breed, Johnnie Cordell
Breed and each other Breed Stockholder shall have executed and delivered the
Stockholders Agreement.
(k) Completion of AlliedSignal Acquisition. All of the conditions precedent
to the AlliedSignal Acquisition shall have been satisfied and the Company shall
have delivered to Purchaser fully executed copies of all documents relating
thereto (including any related financing documents).
(l) Satisfaction with Capital Structure. Purchaser shall have confirmed to
its satisfaction that the terms of the Company's financing arrangements in
connection with the AlliedSignal Acquisition are consistent with the terms
described in the commitment letters or term sheets attached hereto as Schedule
6(l) and will include the consent of any pledgee of Common Stock to a right of
first refusal in favor of Purchaser on terms reasonably satisfactory to
Purchaser.
(m) Certificate of Designations. The Company shall have duly executed and
filed the Certificate of Designations in accordance with the applicable
requirements of Delaware law and shall have furnished Purchaser with a
certificate of the Delaware Secretary of State to that effect.
(n) NYSE Requirements. The NYSE shall (i) have approved for listing on the
NYSE, subject to notice of issuance, the shares of Common Stock issuable upon
conversion of the Shares and (ii) issued to the Company a letter confirming that
(A) the obligations to be undertaken by the Company under the Stockholders
Agreement (including without limitation the right of first refusal to be granted
thereunder by the Company in favor of Purchaser) will satisfy the requirements
of the NYSE, provided the right of first refusal is first approved by a majority
vote of the holders of the Company's Common Stock, and (B) no further approval
of the Company's stockholders will be required under the NYSE's rules or
policies in connection with the Company's performance of its obligations under
the Stockholders Agreement.
(o) General. All instruments and legal, governmental, administrative and
corporate proceedings in connection with the transactions contemplated by this
Agreement shall be reasonably satisfactory in form and substance to Purchaser,
and Purchaser shall have received copies of all documents, including, without
limitation, records of corporate or other proceedings, opinions of counsel,
consents, licenses, approvals, permits and orders which Purchaser may have
reasonably requested in connection therewith.
<PAGE>
Section 7. Conditions Precedent to Obligations of the Company. The
Company's obligation to issue and sell the Shares pursuant to this Agreement is
subject to compliance by Purchaser with the agreements herein contained, and to
the satisfaction, on or prior to the Closing Date with respect to its obligation
to consummate the Closing of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Purchaser contained herein shall be true and correct in all material respects on
and as of the Closing Date with the same force and effect as though such
representations and warranties were made on and as of such date (except for
representations and warranties which by their terms are made expressly as of an
earlier date, which shall be true and correct as of such earlier date) and
Purchaser shall have performed and complied with all conditions, covenants and
agreements required to be performed or complied in all material respects with by
it prior to the Closing Date; and the Company shall have received on the Closing
Date a certificate to this effect signed by an authorized officer of Purchaser
with respect to the certificate to be issued on the Closing Date. (b) Legality;
Authorization; Consents. The issuance and sale of the Shares shall not be
prohibited by any Law or Order, and shall not subject the Company to any
penalty, special tax or other onerous condition. All necessary consents,
approvals, licenses, permits, orders and authorizations of, or registrations,
declarations and filings with, any Governmental or Regulatory Authority or of or
with any other Person, with respect to any of the transactions contemplated by
this Agreement shall have been fully obtained or made and shall be in full force
and effect and any waiting period under any applicable Law shall have expired or
been terminated.
(c) Stockholders Agreement. Purchaser shall have executed and delivered the
Stockholders Agreement.
(d) Legal Opinion. The Company shall have received from counsel for
Purchaser their legal opinions, dated the Closing Date, as to the matters
described in Exhibit F.
(e) Completion of AlliedSignal Acquisition. All of the conditions precedent
to the AlliedSignal Acquisition shall have been satisfied.
(f) Incumbency Certificate. The Company shall have received from Purchaser
an incumbency certificate, dated the Closing Date, signed by a duly authorized
officer thereof, and giving the name and bearing a specimen signature of each
individual who shall be authorized to sign, in the name and on behalf of
Purchaser, this Agreement and to give notices and to take other action on behalf
of Purchaser under this Agreement.
(g) Litigation, Etc. No suit, action, investigation, inquiry or other
proceeding (including, without limitation, the enactment or promulgation of a
statute or rule) by or before any arbitrator or any governmental injunction or
order by a state or federal court shall have been entered (i) as of the Closing
Date in connection with this Agreement, the Related Agreements or any of the
transactions contemplated hereby or (ii) which would have a Material Adverse
Effect or a material adverse effect on the consummation of the transactions
contemplated by this Agreement or the Related Agreements, including, without
limitation, the sale of the Shares, contemplated hereby.
(h) General. All instruments and legal, governmental, administrative and
corporate proceedings in connection with the transactions contemplated by this
Agreement shall be reasonably satisfactory in form and substance to the Company
and the Company shall have received copies of all documents, including, without
limitation, records of corporate or other proceedings, opinions of counsel,
consents, licenses, approvals, permits and orders which the Company may have
reasonably requested in connection therewith.
Section 8. Notices. Any notice or other communication in connection with
this Agreement shall be deemed to be delivered if in writing (or in the form of
a telecopy) addressed as provided below and if either (a) actually delivered or
telecopied to said address or (b) in the case of a letter, three Business Days
shall have elapsed after the same shall have been deposited in the United States
mail, postage prepaid and registered or certified:
<PAGE>
If to the Company:
Breed Technologies, Inc.
5300 Old Tampa Highway
Lakeland, Florida 33811
Attention: Charles J. Speranzella, Jr.
and
General Counsel
Telecopier: (941) 668-6016
If to Purchaser:
Siemens Aktiengesellschaft
Legal Department ZFR3
Werner-von-Siemens-Strasse 50
D-91052 Erlangen
Germany
Attention: Counsel for Automotive Systems Group
Telecopier: 011-49-9131-729001
With a copy to:
Siemens Corporation
Legal Department
1301 Avenue of the Americas
New York, New York
Attention: General Counsel
Telecopier: (212) 258-4945
Section 9. Survival of Representations and Warranties. All agreements,
representations and warranties made herein or in any certificate or other
document required to be delivered to Purchaser pursuant hereto shall be deemed
to have been relied on by Purchaser, notwithstanding any investigation made by
Purchaser or on Purchaser's behalf, and shall survive (i) with respect to
representations and warranties contained herein, until the first to occur of (x)
the date which is 18 months after the Closing Date or (y) the date of delivery
of the Make-Whole Notice as defined in the Put Agreement, and (ii) with respect
to each other covenant and agreement contained herein until the last date on
which such covenant or agreement specifies it is to be performed, or, if no such
date is specified, indefinitely.
Section 10. Indemnification.
10.01 Indemnity by the Company. Subject to the provisions of this Section
10, the Company from and after the Closing Date shall indemnify and hold
Purchaser and its respective officers, directors, stockholders, managers,
agents, employees, representatives, affiliates, successors and assigns, harmless
from and against any and all damage, loss (including loss of value), cost,
obligation, claims, demands, assessments, settlements, judgments or liability
(whether based on contract, tort, product liability, strict liability or
otherwise), including Taxes, and all expenses (including interest, penalties and
attorneys' and accountants' fees and disbursements) (collectively referred to
herein as "Damages") incurred in litigation or otherwise, and any investigation
relating thereto, by any of the above-named persons, directly or indirectly,
arising from or in connection with: the inaccuracy, untruth or incompleteness,
as of the date made or deemed made, of any representation or warranty by the
Company in this Agreement or in any other agreement, certificate (including
without limitation the certificates delivered by the Company pursuant to Section
6), schedule, exhibit or writing required to be delivered to Purchaser pursuant
to this Agreement; provided, however, that if any such
<PAGE>
representation or warranty is qualified in any respect by materiality or in
any similar respect, for purposes of this Section such qualification will be in
all respects ignored; and any breach of or failure to perform any covenant or
agreement made by the Company in this Agreement.
10.02 Purchaser's Indemnity. Subject to the provisions of this Section 10,
Purchaser, from and after the Closing Date, shall indemnify and hold the
Company, and its respective officers, directors, stockholders, agents,
employees, representatives, affiliates, successors and assigns, harmless from
and against any Damages incurred in litigation or otherwise, and any
investigation related thereto, by the Company, directly or indirectly, arising
from or in connection with: the inaccuracy, untruth or incompleteness, as of the
date made or deemed made, of any representation or warranty by Purchaser in this
Agreement or in any other agreement, certificate (including without limitation
the certificates delivered by Purchaser pursuant to Section 7), schedule,
exhibit or writing delivered to the Company pursuant to this Agreement;
provided, however, that if any such representation or warranty is qualified in
any respect by materiality or in any similar respect, for purposes of this
Section such qualification will be in all respects ignored; and any breach of or
failure to perform any covenant or agreement made by Purchaser in this
Agreement.
10.03 Procedure. No claim for indemnification shall be valid unless made
prior to the expiration (pursuant to Section 9) of the applicable
representation, warranty or covenant on which it is based. All claims for
indemnification by a party under this Section 10 (the party claiming
indemnification and the party against whom such claims are asserted being
hereinafter called the "Indemnified Party" and the "Indemnifying Party,"
respectively) shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which an Indemnifying Party
would be liable to an Indemnified Party hereunder is asserted against or sought
to be collected from such Indemnified Party by a third party, such Indemnified
Party shall with reasonable promptness give notice (the "Claim Notice") to the
Indemnifying Party of such claim or demand, specifying the nature of and
specific basis for such claim or demand and the amount or the estimated amount
thereof to the extent then feasible (which estimate shall not be conclusive of
the final amount of such claim and demand); provided, however, that no failure
to give, or delay in giving, any such Claim Notice shall excuse or diminish the
Indemnifying Party's obligations to the Indemnified Party under this Section 10,
unless such failure or delay is prejudicial to Indemnifying Party. The
Indemnifying Party shall have ten days from the date the Claim Notice is given
in accordance with Section 8 of this Agreement (the "Notice Period") to notify
the Indemnified Party (i) whether or not it disputes the liability of the
Indemnifying Party to the Indemnified Party hereunder with respect to such claim
or demand, and (ii) whether or not it desires, at the cost and expense of the
Indemnifying Party, to defend the Indemnified Party against such claim or
demand; provided, however, that any Indemnified Party is hereby authorized, but
is not obligated, prior to and during the Notice Period, to file any motion,
answer or other pleading that it shall deem necessary or appropriate to protect
its interests or those of the Indemnifying Party. If the Indemnifying Party
notifies the Indemnified Party within the Notice Period that it desires to
defend the Indemnified Party against such claim or demand, the Indemnifying
Party shall, subject to the last sentence of this paragraph, have the right to
control the defense against the claim by all appropriate proceedings, and any
settlement negotiations. If the Indemnifying Party assumes the defense of a
proceeding, (i) no compromise or settlement of such claims may be effected by
the Indemnifying Party without the Indemnified Party's consent (such consent not
to be unreasonably withheld or delayed) unless the sole relief provided is
monetary damages that are paid in full by the Indemnifying Party; and (ii) the
Indemnified Party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If the Indemnified Party
desires to participate in, but not control, any such defense, it may do so at
its sole cost and expense. If the Indemnifying Party fails to respond to the
Indemnified Party within the Notice Period or otherwise elects not to defend the
Indemnified Party, or after electing to defend fails to commence or diligently
pursue such defense, then the Indemnified Party shall have the right, but not
the obligation, to undertake or continue such defense and to compromise or
settle (exercising reasonable business judgment) the claim or other matter, all
on behalf, for the account and at the risk of the Indemnifying Party.
Notwithstanding the foregoing, if the basis of the proceeding relates to a
condition of operations which existed or were conducted both prior to and after
the Closing Date, or if the Indemnified Party would otherwise be adversely
affected as a result of an adverse decision of such proceeding, then each party
shall have the same right to participate in
<PAGE>
the proceeding at its own expense and at its own risk without either party
having the right of control.
(b) If requested by the Indemnifying Party, the Indemnified Party agrees,
at the Indemnifying Party's expense and upon presentation of adequate security
for the payment of such expenses, to cooperate with the Indemnifying Party and
its counsel in contesting any claim or demand which the Indemnifying Party
elects to contest, or, if appropriate and related to the claim in question, in
making any counterclaim against any person asserting the third- party claim or
demand, or any cross-complaint against any person. No claim as to which
indemnification is sought under this Agreement may be settled without the
consent of the Indemnifying Party.
(c) If any Indemnified Party should have a claim against the Indemnifying
Party hereunder which does not involve a claim or demand being asserted against
or sought to be collected from it by a third party, the Indemnified Party shall
send a Claim Notice with respect to such claim to the Indemnifying Party. If the
Indemnifying Party disputes such claim, such dispute shall be resolved by
litigation in an appropriate court of competent jurisdiction described in
Section 12.2. If the Indemnifying Party does not dispute such claim, then the
Indemnifying Party shall pay to the Indemnified Party the amount of such claim
within thirty days after receipt of such Claim Notice.
(d) In connection with the matters for which indemnification is sought
hereunder (i) the Company agrees to give Purchaser and its representatives
reasonable access during regular business hours and upon five days' prior
written notice to the Company, to the books, records and employees of the
Company to the extent such reasonably relate to the matters to which the Claim
Notice relates and (ii) Purchaser agrees to give the Company and its
representatives reasonable access, during regular business hours and upon five
days' prior written notice to Purchaser, to the books, records and employees of
Purchaser to the extent they reasonably relate to the matters to which the Claim
Notice relates.
10.04 Basket and Cap Provisions. Notwithstanding any other provision of
this Agreement:
(a) (i) no amount shall be payable by the Company to Purchaser as
indemnification pursuant to this Section 10 unless and until the aggregate
amount of all Damages suffered by Purchaser exceeds $1,500,000, in which event
the Company shall be liable only for the amount of such Damages in excess of
$1,500,000; and
(ii) the aggregate liability of the Company for indemnification under this
Section 10 shall not exceed $30,000,000.
(b) (i) no amount shall be payable by Purchaser to the Company as
indemnification pursuant to this Section 10 unless and until the aggregate
amount of all damages suffered by the Company exceeds $1,500,000, in which event
Purchaser shall be liable only for the amount of such Damages in excess of
$1,500,000; and
(ii) the aggregate liability of Purchaser for indemnification under this
Section 10 shall not exceed $30,000,000.
(c) Except for claims based on fraud, the rights of Purchaser and the
Company under this Section 10 shall be the exclusive remedy with respect to
claims resulting from or relating to any misrepresentation, breach of warranty
or a failure to perform any covenant or agreement of the other party contained
in this Agreement or in any certificate or other document (other than a Related
Agreement) delivered to the other party pursuant hereto.
Section 11. Termination.
11.01 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) By mutual agreement of the Company and Purchaser;
<PAGE>
(b) By either Purchaser or the Company if the Closing has not taken place
on or before November 7, 1997 and the failure to consummate the Closing is not
caused by a breach of this Agreement by a terminating party;
(c) By the Company or Purchaser, as the case may be, (i) if any of the
conditions precedent to the performance of the obligations of the party giving
notice of termination shall not have been fulfilled and cannot be fulfilled on
or prior to the Closing and shall not have been waived in writing by such party,
or (ii) if a material default shall be made by the other party in the due and
timely performance of any of the covenants and agreements herein contained that
cannot be cured on or prior to the Closing and shall not have been waived in
writing by the non-defaulting parties; provided, however, that a party may not
terminate this Agreement pursuant to this paragraph (e) on the basis of an act,
omission, occurrence, event or state of affairs that has been disclosed in
writing to such party unless such party exercises such right of termination
within 30 days of such disclosure; and
(d) At the option of the Company or Purchaser, if any action or proceeding
shall have been instituted and remain pending before any Governmental or
Regulatory Authorities to restrain or prohibit the consummation of the
transactions contemplated by this Agreement, or if the Federal Trade Commission,
the Department of Justice or any other Governmental or Regulatory Authority,
including without limitation the European Community or the Federal Republic of
Germany, or any political subdivision or agency thereof, shall have taken any
action to restrain or otherwise enjoin the consummation of the transactions
contemplated hereby, provided that neither the Company nor Purchaser shall have
the option to terminate this Agreement as provided herein after any such action
or notice by any federal, state or local government or governmental agency or
other person shall be withdrawn or after any action by the Federal Trade
Commission, the Department of Justice or any other governmental action shall be
settled.
11.02 No Liability. In the event of a termination of this Agreement
pursuant to paragraph 11.01(a) or paragraph 11.01(d), there shall be no
liability on the parties hereto or any of their respective directors, officers,
shareholders, members, managers, or affiliates as a result of such termination
of this Agreement. A termination under paragraph 11.01(b) or 11.01(c) shall not
prejudice any claim for damages which any party may have hereunder or in law or
in equity as a consequence of any breach by any other party of this Agreement.
11.03 Notice. Any party hereto may exercise its right of termination of
this Agreement only by delivering written notice to that effect to the other
parties hereto, provided that such notice is received by the latter party prior
to the Closing.
Section 12. Miscellaneous.
12.1 Amendment or Waiver. Neither this Agreement nor any terms hereof may
be changed, waived, discharged or terminated unless such change, waiver,
discharge or termination is in writing signed by the Company and Purchaser.
12.2 Consent to Jurisdiction. Subject to the provisions of Section 12.3,
each of the Company and Purchaser hereby agrees to submit to the exclusive
jurisdiction of the U.S. Federal courts in the Southern District of the State of
New York, and consents that service of process with respect to all such courts
may be made by registered mail to such Person at the address of such Person set
forth in Section 8 with respect to any disputes arising out of this Agreement.
12.3 Release of Siemens Aktiengesellschaft. If Purchaser assigns its rights
and obligations under this Agreement pursuant to Section 12.5, so long as
Siemens Corporation is subject to the jurisdiction of the Federal, state or
local courts of the United States with respect to claims or disputes relating to
this Agreement, the Related Agreements or the transactions contemplated hereby
or thereby, the Company for itself and its Affiliates hereby irrevocably and
unconditionally waive and release all rights and claims that it or any of them
may thereafter have that Purchaser is or has been at any time subject to the
jurisdiction of the Federal, state or local courts of the United States arising
out of claims or disputes relating to this Agreement, the Related Agreements or
the transactions contemplated hereby or thereby.
<PAGE>
12.4 Waiver of Jury Trial; Trial Costs. Each of the Company, for itself and
its Affiliates, and Purchaser hereby irrevocably waives all right to trial by
jury in any action, proceeding or counterclaim (whether based on contract, tort
or otherwise) arising out of or relating to the actions of the Company and
Purchaser or its Affiliates pursuant to this Agreement in the negotiation,
administration, performance or enforcement thereof. The party in whose favor a
final judgment is rendered shall be entitled to reasonable costs and reasonable
attorneys' fees.
12.5 Assignment. This Agreement is not assignable except by operation of
law or as each of the parties hereto may agree in writing and any attempted
assignment in violation of this provision shall be null and void.
Notwithstanding the foregoing, Purchaser may assign this Agreement to any of its
wholly-owned subsidiaries or Affiliates who have the economic resources to
fulfill Purchaser's obligations under this Agreement agree in writing to be
bound by the terms hereof.
12.6 Entire Agreement. This Agreement (including the Exhibits and
Schedules) sets forth the entire understanding of the parties hereto with
respect to the transactions contemplated hereby and supersede any prior written
or oral understandings with respect thereto including without limitation any
letters of intent. The invalidity or unenforceability of any terms or provisions
hereof shall not affect the validity or enforceability of any other term or
provision hereof. The headings in this Agreement are for convenience of
reference only and shall not alter or otherwise affect the meaning hereof. This
Agreement may be executed in any number of counterparts which together shall
constitute one instrument and shall be governed by and construed in accordance
with laws of the State of Delaware without giving regard to the principles of
conflicts of law, and shall bind and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
12.7 Expenses. Except as otherwise expressly provided in this Agreement,
the Company agrees to pay, without right of reimbursement from Purchaser, the
costs incurred by the Company, and Purchaser agrees to pay, without right of
reimbursement from the Company, the costs incurred by Purchaser, incident to the
preparation and execution of this Agreement and the Related Agreements and
performance of their respective obligations hereunder, whether or not the
transactions contemplated by this Agreement and the Related Agreements shall be
consummated, including, without limitation, the fees and disbursements or legal
counsel, accountants and consultants employed by the respective parties in
connection with the transactions contemplated by this Agreement and the Related
Agreements.
12.8 Public Announcements. At all times at or before the Closing, except as
required by law or on the advice of counsel, the Company and Purchaser will not
issue or make any release to the press or other public disclosure with respect
to this Agreement or the transactions contemplated hereby without the consent of
the other party, will not make any statement to any customer or supplier of the
Company with respect to this Agreement or the transactions contemplated hereby.
The Company and Purchaser will also obtain the other party's prior approval of
any press release to be issued immediately following the Closing announcing the
consummation of the transactions contemplated by this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Agreement as of the date first above
written.
BREED TECHNOLOGIES, INC.
By:
Name:
Title:
19
<PAGE>
SIEMENS AKTIENGESELLSCHAFT
By:
Name:
Title:
By:
Name:
Title:
Exhibit 10.1.1
MAKE-WHOLE AGREEMENT
AGREEMENT, dated as of October 30, 1997 by and between BREED TECHNOLOGIES,
INC., a Delaware corporation (the "Company") and SIEMENS AKTIENGESELLSCHAFT, a
company organized under the laws of the Federal Republic of Germany (together
with its permitted assigns, the "Holder").
WHEREAS, at a closing held on the date of this Agreement, the Company has
issued and sold to the Holder 4,883,227 of the Company's Series A Preference
Shares (the "Shares"), each of which (i) represents one-one thousandth of a
share of the Company's 1997 Series A Convertible Non-Voting Preferred Stock, par
value $.001 per share and (ii) is convertible into the Company's common stock,
par value $.01 per share (the "Common Stock") at an initial rate of one share of
Common Stock per Series A Preference Share, subject to adjustment (the Shares,
any additional Series A Preference Shares which in the future are issued and
paid as dividends on the Shares and the securities into which they may be
converted in the future are sometimes hereinafter collectively referred to as
the "Securities"); and
WHEREAS, the Company and the Holder have entered into a memorandum of
understanding, dated the same date as this Agreement, providing for the
formation of a joint venture (the "Joint Venture"); and
WHEREAS, in order to induce the Holder to purchase the Shares, the Company
has agreed to grant to the Holder the rights set forth in this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
Section 1. Make-Whole Right.
(a) At any time after the occurrence of a Triggering Event (as hereinafter
defined), the Holder shall have the right (the "Make-Whole Right"), exercisable
within 30 days after the Triggering Event, to require the Company to take the
action specified in Section 1(b). The Make-Whole Right shall be exercisable by
delivery of a written notice to the Company (the "First Make-Whole Notice").
(b) Upon the exercise of the Make-Whole Right, the Company may elect, at
the Company's sole option, either (i) to purchase all (but not less than all) of
the Securities for the Make-Whole Price (as hereinafter defined) at a closing
(the "Purchase Closing") to be held at a time and place specified by the Holder
in the First Make-Whole Notice or (ii) to comply with any Second Make-Whole
Notice that may be delivered as described in Section 2(a). The Company shall
advise the Holder of its election by delivery of a notice (the "Company Election
Notice") to the Holder not later than the last to occur of (x) 10 days after
delivery of the First Make-Whole Notice and (y) June 1, 1998.
(c) If the Company makes the election described in Section 1(b)(i), then,
at the Purchase Closing (and subject to Section 2), the Company shall purchase
the Securities and the Holder shall convey good and valid title to the
Securities to the Company, free and clear of all liens, security interests and
similar encumbrances (collectively, "Liens") by delivering to the Company
against payment therefor certificates for the Securities, duly endorsed in blank
or with stock powers attached. (d) For purposes of this Agreement:
(i) "Triggering Event" means any of the following: (A) the Company and the
Holder shall have abandoned their negotiations with respect to the Joint
Venture; (B) the definitive documentation with respect to the Joint
<PAGE>
Venture shall not have been executed and delivered by December 15, 1997;
(C) the parties shall have been unable after diligent and good faith efforts to
obtain the requisite governmental clearances, approvals, or terminations of
waiting periods required or applicable (including under antitrust or competition
laws) with respect to the formation of the Joint Venture or conversion of the
Shares into Common Stock without the imposition of materially adverse
conditions; or (D) the formation of the Joint Venture shall not have been
completed, in accordance with the definitive agreements entered into by the
Company and the Holder, by June 30, 1998.
(ii) "Make-Whole Price" means $115,000,000 plus $15,753 multiplied by the
number of days elapsed between December 15, 1997 and the first to occur of (i)
payment in full in cash by the Company of the Make- Whole Price; (ii) delivery
by the Company of the Make-Whole Shares; and (iii) the receipt by Siemens of
sale proceeds as described in Section 2(c).
Section 2. Make-Whole Provision.
(a) If (i) the Company makes the election described in Section 1(b)(ii), or
(ii) the Company fails to furnish the Company Election Notice within the time
specified in Section 1(b), or (iii) the Company shall have failed by the later
of (x) the date that is 10 days after delivery of the First Make-Whole Notice
and (y) June 1, 1998 to establish to the satisfaction of the Holder that the
Company has access to the funds required to purchase the Securities when and as
required by Section 1, and that such purchase will not be prohibited under the
terms of the Company's material contractual obligations, the Holder may elect in
its sole discretion to deliver a notice (a "Second Make Whole Notice") to the
Company to the effect that (x) the Holder has entered into a bona fide
arm's-length agreement with a financial institution to sell the Securities and
the Make-Whole Shares to the institution at a price (the "Sale Price") not less
than (1) if the Securities are sold at a time when a registration statement is
in effect under the Securities Act with respect to those shares and the
Make-Whole Shares (as hereinafter defined), 90% of the last reported sale price
per share of the Common Stock on the New York Stock Exchange on the last trading
day preceding at the date of the Make-Whole Notice or (2) otherwise, 75% of such
last reported sale price; and (y) the number (the "Make-Whole Number") of shares
of Common Stock that will be required to be sold at the Sale Price in order for
the Holder to realize net proceeds from such sale equal to the Make-Whole Price.
(b) Not later than the first to occur of (i) three New York Stock Exchange
trading days after the date of the Second Make-Whole Notice and (ii) July 1,
1998, the Company shall convey to the Holder good and valid title, free and
clear of all Liens, to a number of shares of Common Stock equal to the
Make-Whole Number ( the "Make-Whole Shares").
(c) Nothing in this Agreement shall restrict the right of the Holder to
sell or otherwise dispose of the Securities at any time; subject, however, to
the provision of Section 3(c). If after the delivery of a First Make-Whole
Notice when the Holder disposes of the Securities it realizes net proceeds in
excess of the Make-Whole Price, it will promptly remit the amount of such excess
to the Company.
(d) Siemens will not issue a press release or make any other similar public
announcement regarding any intention to sell or otherwise dispose of any
Securities, except to the extent required by law or on the advice of counsel.
Section 3. Amendment and Modification; Termination.
(a) This Agreement may be amended or modified, or any provision hereof may
be waived, provided that such amendment, modification or waiver is set forth in
writing executed by the Company and the Holder. No course of dealing or course
of conduct between or among any persons having any interest in this Agreement
will be deemed effective to modify, amend or waive any part of this Agreement or
any rights or obligations of any person under or by reason of this Agreement.
<PAGE>
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
(c) This Agreement shall terminate (i) if at any time prior to the delivery
of a Second Make-Whole Notice the Holder shall sell or otherwise transfer any of
the Securities to any person other than a direct or indirect subsidiary of the
Holder or (ii) if the Holder shall not have delivered a Second Make-Whole Notice
by the later to occur of (x) July 31, 1998 or (y) 45 days after a Triggering
Event.
Section 4. Successors and Assigns; Entire Agreement. Neither party may
assign its rights or delegate its obligations under this Agreement, except that
Siemens Aktiengesellschaft may transfer the Securities, and in connection
therewith assign its rights under this Agreement, to any direct or indirect
subsidiary. Subject to the foregoing, this Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns. This Agreement and the other agreements
referred to herein together set forth the entire agreement and understanding
between the parties as to the subject matter hereof and merges and supersedes
all prior discussions, agreements and understandings of any and every nature
among them.
Section 5. Separability. In the event that any provision of this Agreement
or the application of any provision hereof is declared to be illegal, invalid or
otherwise unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall not be affected.
Section 6. Notices.
(a) All notices provided for or permitted hereunder shall be made in
writing by hand-delivery, telecopier or air courier overnight delivery service
to the other at the following addresses (or at such other address as shall be
specified in a notice given by any party to the others in accordance with this
Section):
If to the Company to:
Breed Technologies, Inc.
5300 Old Tampa Highway
Lakeland, Florida 33811
Attention: Charles J. Speranzella, Jr.
and
General Counsel
Telecopier: (941) 668-6016
If to the Holder:
Siemens Aktiengesellschaft
Legal Department ZFR3
Werner-von-Siemens Strasse
D-91052 Erlangen
Germany
Telecopier: 011-49-9317-29001
Attention: Counsel for Automotive Systems Group
With a copy to:
Siemens Corporation
<PAGE>
1301 Avenue of the Americas
New York, New York 10019
Attention: General Counsel
Telecopier: (212) 258-4945
(b) All such notices shall be deemed to have been duly given: when
delivered by hand, if personally delivered; upon receipt, if received prior to
5:00 p.m. local time on a Business Day (and otherwise on the next succeeding
Business Day), if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
Section 7. Governing Law; Jurisdiction; Waiver of Jury Trial. (a)The
validity, performance, construction and effect of this Agreement is governed by
and shall be construed in accordance with the internal laws of the State of
Delaware, without giving effect to principles of conflicts of law.
(b) Subject to the provisions of Section 12, each of the Company and the
Holder each hereby agrees to submit to the exclusive jurisdiction of the U.S.
Federal courts in the Southern District of the State of New York, and consents
that service of process with respect to all such courts may be made by
registered mail to such Person at the address of such Person set forth in
Section 6 with respect to any disputes arising out of this Agreement.
(c) Each of the Company, for itself and its affiliates, and the Holder
hereby irrevocably waives all right to trial by jury in any action, proceeding
or counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to the actions of the Company and the Holder or its affiliates pursuant
to this Agreement in the negotiation, administration, performance or enforcement
thereof. The party in whose favor a final judgment is rendered shall be entitled
to reasonable costs and reasonable attorneys' fees.
Section 8. Headings and Counterparts. The headings in this Agreement are
for convenience of reference only and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect. This
Agreement may be executed in two or more counterparts and by the parties hereto
in separate counterparts, each of which when so executed shall be deemed to be
an original, and all of which taken together shall constitute one and the same
instrument.
Section 9. Further Assurances. Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby. Section 10. Remedies. In the event of a breach by any party to this
Agreement of its obligations under this Agreement, any party injured by such
breach, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The parties agree that the provisions of this
Agreement shall be specifically enforceable, it being agreed by the parties that
the remedy at law, including monetary damages, for breach of such provision will
be inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived. In the
event of any breach of this Agreement by any party hereto, each such breaching
party agrees to indemnify the persons to whom a representation and warranty is
given or an obligation is owed under this Agreement for all damages, costs and
expenses (including reasonable attorneys' fees) actually incurred as a result of
any such breach.
Section 11. Pronouns. Whenever the context may require, any pronouns used
herein shall be deemed also to include the corresponding single, plural, neuter,
masculine or feminine forms.
Section 12. Consent to Jurisdiction. Subject to the provisions of Section
7, each of the Company and the Holder hereby agrees to submit to the exclusive
jurisdiction of the U.S. Federal courts in the Southern District of the State of
New York, and consents that service of process with respect to all such courts
may be made by registered mail to such
<PAGE>
Person at the address of such Person set forth in Section 6 with respect to
any disputes arising out of this Agreement.
Section 13. Release of Siemens Aktiengesellschaft. If the Holder assigns
its rights and obligations under this Agreement pursuant to Section 4, so long
as Siemens Corporation is subject to the jurisdiction of the Federal, state or
local courts of the United States relating to claims arising out of, or disputes
relating to, this Agreement or the transaction contemplated hereby, the Company
and its Affiliates hereby irrevocably and unconditionally waive and release all
rights and claims that it or any of them may thereafter have that Holder is or
has been at any time subject to the jurisdiction of the Federal, state or local
courts of the United States relating to claims arising out of, or disputes
relating to, this Agreement or the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
BREED TECHNOLOGIES, INC.
By:
Name:
Title:
SIEMENS AKTIENGESELLSCHAFT
By:
Name:
Title:
By:
Name:
Title:
Exhibit 10.1.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of October 30, 1997, between BREED
TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and SIEMENS
AKTIENGESELLSCHAFT, a company organized under the laws of the Federal Republic
of Germany (together with its permitted assigns under this Agreement, the
"Holder").
WHEREAS, the Company and the Holder have entered into a Stock Purchase
Agreement, dated as of October 14, 1997 (the "Stock Purchase Agreement"), by and
between the Company and the Holder, pursuant to which the Company has issued and
sold to the Holder 4,883,227 shares (the "Series A Preference Shares," each such
Series A Preference Share representing one one-thousandth (1/1,000) of a share
of the Company's 1997 Convertible Non-Voting Preferred Stock, par value $.001
per share);
WHEREAS, the Series A Preference Shares are convertible at the option of
the Holder into shares of Common Stock (as hereinafter defined); and
WHEREAS, in order to induce the Holder to enter into the Stock Purchase
Agreement and to purchase the Series A Preference Shares, the Company agreed to
grant to the Holder the registration rights set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
SECTION 1 Definitions. As used in this Agreement, the following terms shall
have the following meanings:
"Advice" shall have the meaning set forth in Section 5.
"Affiliate" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person. For the purposes of this definition,
"control" when used with respect to any specified person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Business Day" means any day that is not a Saturday, a Sunday or a legal
holiday on which banking institutions in the State of New York are not required
to be open.
"Capital Stock" means, with respect to the Company, any and all shares,
interests, participations or other equivalents (however designated) of capital
stock issued by the Company, including each class of common stock and preferred
stock of the Company.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company or any other shares of capital stock or other securities of the Company
into which such shares of Common Stock shall be reclassified or changed,
including, by reason of a merger, consolidation, reorganization or
recapitalization. If the Common Stock has been so reclassified or changed, or if
the Company pays a dividend or makes a distribution on the Common Stock in
shares of capital stock, or subdivides (or combines) its outstanding shares of
Common Stock into a greater (or smaller) number of shares of Common Stock, a
share of Common Stock shall be deemed to be such number of shares of stock and
amount of other securities to which a holder of a share of Common Stock
outstanding immediately prior to such change, reclassification, exchange,
dividend, distribution, subdivision or combination would be entitled.
<PAGE>
"Company" has the meaning set forth in the introductory clauses.
"Delay Period" has the meaning set forth in Section 2(d).
"Demand Notice" has the meaning set forth in Section 2(a).
"Demand Registration" has the meaning set forth in Section 2(b).
"Effectiveness Period" has the meaning set forth in Section 2(d).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Holdback Period" has the meaning set forth in Section 4.
"Holder" has the meaning set forth in the introductory clauses and includes
any assignee thereof in accordance with Section 9 of this Agreement.
"Indemnified Party" has the meaning set forth in Section 8(c).
"Indemnifying Party" has the meaning set forth in Section 8(c).
"Inspectors" has the meaning set forth in Section 5(j).
"Interruption Period" has the meaning set forth in Section 5.
"Losses" has the meaning set forth in Section 8(a).
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Piggyback Registration" has the meaning set forth in Section 3(a).
"Prospectus" means the prospectus included in any Registration Statement
(including a prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable Shares
covered by such Registration Statement and all other amendments and supplements
to such prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in such
prospectus.
"Records" has the meaning set forth in Section 5(j).
"Registrable Shares" means Series A Preference Shares or shares of Common
Stock owned by a Holder at any time during the Registration Period, unless (i)
they have been effectively registered under Section 5 of the Securities Act and
disposed of pursuant to an effective Registration Statement, (ii) such
securities can be freely sold and transferred without restriction under Rule 144
or any other restrictions under the Securities Act or (iii) such securities have
been transferred pursuant to Rule 144 under the Securities Act or any successor
rule such that, after any such transfer referred to in this clause (iii), such
securities may be freely transferred without restriction under the Securities
Act.
"Registration" means registration under the Securities Act of an offering
of Registrable Shares pursuant to a Demand
<PAGE>
Registration or a Piggyback Registration.
"Registration Period" has the meaning set forth in Section 2(a).
"Registration Statement" means any registration statement under the
Securities Act of the Company that covers any of the Registrable Shares pursuant
to the provisions of this Agreement, including the related Prospectus, all
amendments and supplements to such registration statement, including pre- and
post-effective amendments, all exhibits thereto and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Series A Preference Shares" has the meaning set forth in the introductory
clauses.
"Shelf Registration" has the meaning set forth in Section 2(b).
"Stock Purchase Agreement" has the meaning set forth in the introductory
clauses.
"Underwritten Registration or Underwritten Offering" means a registration
under the Securities Act in which securities of the Company are sold to an
underwriter for reoffering to the public.
SECTION 2 Demand Registration.
(a) The Holder shall have the right, during the period (the "Registration
Period") commencing on June 1, 1998 and ending on the tenth anniversary of the
date of this Agreement, by written notice (the "Demand Notice") given to the
Company, to request the Company to register under and in accordance with the
provisions of the Securities Act all or any portion of the Registrable Shares
designated by such Holder; provided, however, that the aggregate number of
Registrable Shares requested to be registered pursuant to any Demand Notice and
pursuant to any related Demand Notices received pursuant to the following
sentence shall be at least 1,000,000 (subject to adjustment) and provided,
further, however, that such registration shall, at the option of the Company, be
on Form S-3 (or its successor form) if such form is then available for use by
the Company. Upon receipt of any such Demand Notice, the Company shall promptly
notify any other Holders of the receipt of such Demand Notice and allow them the
opportunity to include Registrable Shares held by them in the proposed
registration by submitting their own Demand Notice. In connection with any
Demand Registration in which more than one Holder participates, in the event
that such Demand Registration involves an Underwritten Offering and the managing
underwriter or underwriters participating in such offering advise in writing the
Holders of Registrable Shares to be included in such offering that the total
number of Registrable Shares to be included in such offering exceeds the amount
that can be sold in (or during the time of) such offering without delaying or
jeopardizing the success of such offering (including the price per share of the
Registrable Shares to be sold), then the amount of Registrable Shares to be
offered for the account of such Holders shall be reduced pro rata on the basis
of the number of Registrable Shares to be registered by each such Holder. The
Holders as a group shall be entitled to three Demand Registrations pursuant to
this Section 2 unless any Demand Registration does not become effective or is
not maintained for a period (whether or not continuous) of at least 120 days (or
such shorter period as shall terminate when all the Registrable Shares covered
by such Demand Registration have been sold pursuant thereto), in which case the
Holders will be entitled to an additional Demand Registration pursuant hereto.
(b) The Company, within 30 days of the date on which the Company receives a
Demand Notice given by Holders in accordance with Section 2(a) hereof, shall
file with the SEC, and the Company thereafter shall use its best efforts to
cause to be declared effective, a Registration Statement on the appropriate form
(subject to the last proviso of
<PAGE>
the first sentence of Section 2(a)) for the registration and sale, in
accordance with the intended method or methods of distribution, of the total
number of Registrable Shares specified by the Holders in such Demand Notice,
which may include a "shelf" registration (a "Shelf Registration") pursuant to
Rule 415 under the Securities Act (a "Demand Registration").
(c) The Company shall use commercially reasonable efforts to keep each
Registration Statement filed pursuant to this Section 2 continuously effective
and usable for the resale of the Registrable Shares covered thereby (i) in the
case of a Registration that is not a Shelf Registration, for a period of 120
days from the date on which the SEC declares such Registration Statement
effective and (ii) in the case of a Shelf Registration, continuously from the
date on which the SEC declares such Registration Statement effective, in either
case (x) until all the Registrable Shares covered by such Registration Statement
have been sold pursuant to such Registration Statement), and (y) as such period
may be extended pursuant to this Section 2.
(d) The Company shall be entitled to postpone the filing of any
Registration Statement otherwise required to be prepared and filed by the
Company pursuant to this Section 2, or suspend the use of any effective
Registration Statement under this Section 2, for a reasonable period of time,
but not in excess of 45 days (a "Delay Period"), if any executive officer of the
Company determines that in such executive officer's reasonable judgment and good
faith the registration and distribution of the Registrable Shares covered or to
be covered by such Registration Statement would materially interfere with any
pending material financing, acquisition or corporate reorganization or other
material corporate development involving the Company or any of its subsidiaries
or would require premature disclosure thereof and promptly gives the Holders
written notice of such determination, containing a general statement of the
reasons for such postponement and an approximation of the period of the
anticipated delay; provided, however, that (i) the aggregate number of days
included in all Delay Periods during any consecutive 12 months shall not exceed
the aggregate of (x) 90 days minus (y) the number of days occurring during all
Holdback Periods (as defined in Section 4) and Interruption Periods (as defined
in Section 5(k)) during such consecutive 12 months and (ii) a period of at least
60 days shall elapse between the termination of any Delay Period, Holdback
Period or Interruption Period and the commencement of the immediately succeeding
Delay Period. If the Company shall so postpone the filing of a Registration
Statement, the Holders of Registrable Shares to be registered shall have the
right to withdraw the request for registration by giving written notice from the
Holders of a majority of the Registrable Shares that were to be registered to
the Company within 45 days after receipt of the notice of postponement or, if
earlier, the termination of such Delay Period (and, in the event of such
withdrawal, such request shall not be counted for purposes of determining the
number of requests for registration to which the Holders of Registrable Shares
are entitled pursuant to this Section 2). The time period for which the Company
is required to maintain the effectiveness of any Registration Statement shall be
extended by the aggregate number of days of all Delay Periods, all Holdback
Periods and all Interruption Periods occurring during such Registration and such
period and any extension thereof is hereinafter referred to as the
"Effectiveness Period." The Company shall not be entitled to initiate a Delay
Period unless it shall (A) to the extent permitted by agreements with other
security holders of the Company, concurrently prohibit sales by such other
security holders under registration statements covering securities held by such
other security holders and (B) in accordance with the Company's policies from
time to time in effect, forbid purchases and sales in the open market by senior
executives of the Company.
(e) Except to the extent required by agreements with other security holders
of the Company entered into prior to the date of the Stock Purchase Agreement,
the Company shall not include any securities that are not Registrable Shares in
any Registration Statement filed pursuant to this Section 2 without the prior
written consent of the Holders of a majority in number of the Registrable Shares
covered by such Registration Statement.
(f) Holders of a majority in number of the Registrable Shares to be
included in a Registration Statement pursuant to this Section 2 may, at any time
prior to the effective date of the Registration Statement relating to such
Registration, revoke such request by providing a written notice to the Company
revoking such request. The Holders of Registrable Shares who revoke such request
shall reimburse the Company for all its out-of-pocket expenses incurred in the
preparation, filing and processing of the Registration Statement; provided,
however, that, if such revocation was
<PAGE>
based on the Company's failure to comply in any material respect with its
obligations hereunder, such reimbursement shall not be required.
SECTION 3 Piggyback Registration.
(a) Right to Piggyback. If at any time during the Registration Period the
Company proposes to file a registration statement under the Securities Act with
respect to a public offering of securities of the same type as the Registrable
Shares pursuant to a firm commitment underwritten offering solely for cash for
its own account (other than a registration statement (i) on Form S-4 or Form S-8
or any successor forms thereto, or (ii) filed solely in connection with a
dividend reinvestment plan or employee benefit plan covering officers or
directors of the Company or its Affiliates) or for the account of any holder of
securities of the same type as the Registrable Shares or the securities into
which the Registrable Securities then are convertible (to the extent that the
Company has the right to include Registrable Shares in any registration
statement to be filed by the Company on behalf of such holder), then the Company
shall give written notice of such proposed filing to the Holders at least 15
days before the anticipated filing date. Such notice shall offer the Holders the
opportunity to register such amount of Registrable Shares as they may request (a
"Piggyback Registration"). Subject to Section 3(b), the Company shall include in
each such Piggyback Registration all Registrable Shares with respect to which
the Company has received written requests for inclusion therein within 10 days
after notice has been given to the Holders. Each Holder shall be permitted to
withdraw all or any portion of the Registrable Shares of such Holder from a
Piggyback Registration at any time prior to the effective date of such Piggyback
Registration; provided, however, that if such withdrawal occurs after the filing
of the Registration Statement with respect to such Piggyback Registration, the
withdrawing Holders shall reimburse the Company for the portion of the
registration expenses payable with respect to the Registrable Shares so
withdrawn.
(b) Priority on Piggyback Registrations. The Company shall permit the
Holders to include all such Registrable Shares on the same terms and conditions
as any similar securities, if any, of the Company included therein.
Notwithstanding the foregoing, if the Company or the managing underwriter or
underwriters participating in such offering advise the Holders in writing that
the total amount of securities requested to be included in such Piggyback
Registration exceeds the amount which can be sold in (or during the time of)
such offering without delaying or jeopardizing the success of the offering
(including the price per share of the securities to be sold), then the amount of
securities to be offered for the account of the Holders and other holders of
securities who have piggyback registration rights with respect thereto shall be
reduced (to zero if necessary) pro rata on the basis of the number of common
stock equivalents requested to be registered by each such Holder or holder
participating in such offering.
(c) Right To Abandon. Nothing in this Section 3 shall create any liability
on the part of the Company to the Holders if the Company in its sole discretion
should decide not to file a registration statement proposed to be filed pursuant
to Section 3(a) or to withdraw such registration statement subsequent to its
filing, regardless of any action whatsoever that a Holder may have taken,
whether as a result of the issuance by the Company of any notice hereunder or
otherwise.
SECTION 4 Holdback Agreement. If (i) during the Effectiveness Period, the
Company shall file a registration statement (other than in connection with the
registration of securities issuable pursuant to an employee stock option, stock
purchase or similar plan or pursuant to a merger, exchange offer or a
transaction of the type specified in Rule 145(a) under the Securities Act) with
respect to the Common Stock or similar securities or securities convertible
into, or exchangeable or exercisable for, such securities and (ii) with
reasonable prior notice, the Company (in the case of a non- underwritten public
offering by the Company pursuant to such registration statement) advises the
Holders in writing that a public sale or distribution of such Registrable Shares
would materially adversely affect such offering or the managing underwriter or
underwriters (in the case of an underwritten public offering by the Company
pursuant to such registration statement) advises the Company in writing (in
which case the Company shall notify the Holders) that a public sale or
distribution of Registrable Shares would materially adversely impact such
offering, then each Holder shall, to the extent not inconsistent with applicable
law, refrain from, and agree in a writing to the Company and the underwriter or
<PAGE>
underwriters to refrain from, effecting any public sale or distribution of
Registrable Shares during the ten days prior to the effective date of such
registration statement and until the earliest of (A) the abandonment of such
offering, (B) 90 days from the effective date of such registration statement and
(C) if such offering is an underwritten offering, the termination in whole or in
part of any "hold back" period obtained by the underwriter or underwriters in
such offering from the Company in connection therewith but in no event longer
than 120 days (each such period, a "Holdback Period").
SECTION 5. Registration Procedures. In connection with the registration
obligations of the Company pursuant to and in accordance with Sections 2 and 3
(and subject to Sections 2 and 3), the Company shall use commercially reasonable
efforts to effect such registration to permit the sale of such Registrable
Shares in accordance with the intended method or methods of disposition thereof,
and pursuant thereto the Company shall as expeditiously as possible (but subject
to Sections 2 and 3):
(a) prepare and file with the SEC a Registration Statement for the sale of
the Registrable Shares on any form for which the Company then qualifies or which
counsel for the Company shall deem appropriate in accordance with such Holders'
intended method or methods of distribution thereof, subject to the last proviso
of the first sentence of Section 2(a), Section 2(b), and, subject to the
Company's right to terminate or abandon a registration pursuant to Section 3(c),
use commercially reasonable Efforts to cause such Registration Statement to
become effective and remain effective as provided herein;
(b) prepare and file with the SEC such amendments (including post-effective
amendments) to such Registration Statement, and such supplements to the related
Prospectus, as may be required by the rules, regulations or instructions
applicable to the Securities Act during the applicable period in accordance with
the intended methods of disposition specified by the Holders of the Registrable
Shares covered by such Registration Statement, make generally available earnings
statements satisfying the provisions of Section 11(a) of the Securities Act
(provided that the Company shall be deemed to have complied with this clause if
it has complied with Rule 158 under the Securities Act), and cause the related
Prospectus as so supplemented to be filed pursuant to Rule 424 under the
Securities Act; provided, however, that before filing a Registration Statement
or Prospectus, or any amendments or supplements thereto (other than reports
required to be filed by it under the Exchange Act), the Company shall furnish to
the Holders of Registrable Shares covered by such Registration Statement and
their counsel for review and comment, copies of all documents required to be
filed;
(c) notify the Holders of any Registrable Shares covered by such
Registration Statement promptly and (if requested) confirm such notice in
writing, (i) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to such Registration Statement or
any post-effective amendment, when the same has become effective, (ii) of any
request by the SEC for amendments or supplements to such Registration Statement
or the related Prospectus or for additional information regarding such Holders,
(iii) of the issuance by the SEC of any stop order suspending the effectiveness
of such Registration Statement or the initiation of any proceedings for that
purpose, (iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and (v) of the happening of any
event that requires the making of any changes in such Registration Statement,
Prospectus or documents incorporated or deemed to be incorporated therein by
reference so that they will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading;
(d) use commercially reasonable efforts to obtain the withdrawal of any
order suspending the effectiveness of such Registration Statement, or the
lifting of any suspension of the qualification or exemption from qualification
of any Registrable Shares for sale in any jurisdiction in the United States;
(e) furnish to the Holder of any Registrable Shares covered by such
Registration Statement, each counsel for such Holders and each managing
underwriter, if any, without charge, one conformed copy of such Registration
<PAGE>
Statement, as declared effective by the SEC, and of each post-effective
amendment thereto, in each case including financial statements and schedules and
all exhibits and reports incorporated or deemed to be incorporated therein by
reference; and deliver, without charge, such number of copies of the preliminary
prospectus, any amended preliminary prospectus, each final Prospectus and any
post-effective amendment or supplement thereto, as such Holder may reasonably
request in order to facilitate the disposition of the Registrable Shares of such
Holder covered by such Registration Statement in conformity with the
requirements of the Securities Act;
(f) prior to any public offering of Registrable Shares covered by such
Registration Statement, use commercially reasonable efforts to register or
qualify such Registrable Shares for offer and sale under the securities or Blue
Sky laws of such jurisdictions as the Holders of such Registrable Shares shall
reasonably request in writing; provided, however, that the Company shall in no
event be required to qualify generally to do business as a foreign corporation
or as a dealer in any jurisdiction where it is not at the time so qualified or
to execute or file a general consent to service of process in any such
jurisdiction where it has not theretofore done so or to take any action that
would subject it to general service of process or taxation in any such
jurisdiction where it is not then subject;
(g) upon the occurrence of any event contemplated by paragraph 5(c)(v),
prepare a supplement or post-effective amendment to such Registration Statement
or the related Prospectus or any document incorporated or deemed to be
incorporated therein by reference and file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Shares being sold
thereunder (including upon the termination of any Delay Period), such Prospectus
will not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(h) use commercially reasonable efforts to cause all Registrable Shares
covered by such Registration Statement to be listed on each securities exchange
or automated interdealer quotation system, if any, on which similar securities
issued by the Company are then listed or quoted;
(i) on or before the effective date of such Registration Statement, provide
the transfer agent of the Company for the Registrable Shares with printed
certificates for the Registrable Shares covered by such Registration Statement,
which are in a form eligible for deposit with The Depository Trust Company;
(j) if such offering is an underwritten offering, make available for
inspection by any Holder of Registrable Shares included in such Registration
Statement, any underwriter participating in any offering pursuant to such
Registration Statement, and any attorney, accountant or other agent retained by
any such Holder or underwriter (collectively, the "Inspectors"), all financial
and other records and other information, pertinent corporate documents and
properties of any of the Company and its subsidiaries and affiliates
(collectively, the "Records"), as shall be reasonably necessary to enable them
to exercise their due diligence responsibilities; provided, however, that the
Records that the Company determines, in good faith, to be confidential and which
it notifies the Inspectors in writing are confidential shall not be disclosed to
any Inspector unless such Inspector signs a confidentiality agreement reasonably
satisfactory to the Company (which shall permit the disclosure of such Records
in such Registration Statement or the related Prospectus if necessary to avoid
or correct a material misstatement in or material omission from such
Registration Statement or Prospectus) or either (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in such
Registration Statement or (ii) the release of such Records is ordered pursuant
to a subpoena or other order from a court of competent jurisdiction; provided
further, however, that (A) any decision regarding the disclosure of information
pursuant to subclause (i) shall be made only after consultation with counsel for
the applicable Inspectors and the Company and (B) with respect to any release of
Records pursuant to subclause (ii), each Holder of Registrable Shares agrees
that it shall, promptly after learning that disclosure of such Records is sought
in a court having jurisdiction, give notice to the Company so that the Company,
at the Company's expense, may undertake appropriate action to prevent disclosure
of such Records; and
<PAGE>
(k) if such offering is an underwritten offering, enter into such
agreements (including an underwriting agreement in form, scope and substance as
is customary in underwritten offerings) and take all such other appropriate and
reasonable actions requested by the Holders of a majority of the Registrable
Shares being sold in connection therewith (including those reasonably requested
by the managing underwriters) in order to expedite or facilitate the disposition
of such Registrable Shares, and in such connection, (i) use commercially
reasonable efforts to obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters and counsel to the Holders
of the Registrable Shares being sold), addressed to each selling Holder of
Registrable Shares covered by such Registration Statement and each of the
underwriters as to the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
such counsel and underwriters, (ii) use commercially reasonable efforts to
obtain "cold comfort" letters and updates thereof from the independent certified
public accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any business
acquired by the Company for which financial statements and financial data are,
or are required to be, included in the Registration Statement), addressed to
each selling holder of Registrable Shares covered by the Registration Statement
(unless such accountants shall be prohibited from so addressing such letters by
applicable standards of the accounting profession) and each of the underwriters,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with underwritten
offerings, (iii) if requested and if an underwriting agreement is entered into,
provide indemnification provisions and procedures substantially to the effect
set forth in Section 8 hereof with respect to all parties to be indemnified
pursuant to such Section. The above shall be done at each closing under such
underwriting or similar agreement, or as and to the extent required thereunder.
The Company may require each Holder of Registrable Shares covered by a
Registration Statement to furnish such information regarding such Holder and
such Holder's intended method of disposition of such Registrable Shares as it
may from time to time reasonably request in writing. If any such information is
not furnished within a reasonable period of time after receipt of such request,
the Company may exclude such Holder's Registrable Shares from such Registration
Statement.
Each Holder of Registrable Shares covered by a Registration Statement
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv) or 5(c)(v),
that such Holder shall forthwith discontinue disposition of any Registrable
Shares covered by such Registration Statement or the related Prospectus until
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 5(g), or until such Holder is advised in writing (the "Advice") by the
Company that the use of the applicable Prospectus may be resumed, and has
received copies of any amended or supplemented Prospectus or any additional or
supplemental filings which are incorporated, or deemed to be incorporated, by
reference in such Prospectus (such period during which disposition is
discontinued being an "Interruption Period") and, if requested by the Company,
the Holder shall deliver to the Company (at the expense of the Company) all
copies then in its possession, other than permanent file copies then in such
holder's possession, of the Prospectus covering such Registrable Shares at the
time of receipt of such request.
Each Holder of Registrable Shares covered by a Registration Statement
further agrees not to utilize any material other than the applicable current
preliminary prospectus or Prospectus in connection with the offering of such
Registrable Shares.
SECTION 6. Registration Expenses. Whether or not any Registration Statement
is filed or becomes effective, the Company shall pay all costs, fees and
expenses incident to the Company's performance of or compliance with this
Agreement, including (i) all registration and filing fees, including NASD filing
fees, (ii) all fees and expenses of compliance with securities or Blue Sky laws,
including reasonable fees and disbursements of counsel in connection therewith,
(iii) printing expenses (including expenses of printing certificates for
Registrable Shares and of printing prospectuses if the printing of prospectuses
is requested by the Holders or the managing underwriter, if any), (iv)
messenger, telephone and delivery expenses, (v) fees and disbursements of
counsel for the Company, (vi) fees and disbursements of all independent
certified public accountants of the Company (including expenses of any "cold
comfort"
<PAGE>
letters required in connection with this Agreement) and all other persons
retained by the Company in connection with such Registration Statement, (vii)
fees and disbursements of one counsel, other than the Company's counsel,
selected by Holders of a majority of the Registrable Shares being registered, to
represent all such Holders, (viii) fees and disbursements of underwriters
customarily paid by the issuers or sellers of securities and (ix) all other
costs, fees and expenses incident to the Company's performance or compliance
with this Agreement. Notwithstanding the foregoing, the fees and expenses of any
persons retained by any Holder, other than one counsel for all such Holders, and
any discounts, commissions or brokers' fees or fees of similar securities
industry professionals and any transfer taxes relating to the disposition of the
Registrable Shares by a Holder, will be payable by such Holder and the Company
will have no obligation to pay any such amounts.
SECTION 7. Underwriting Requirements.
(a) Subject to Section 7(b), any Holder shall have the right, by written
notice, to request that any Demand Registration provide for an underwritten
offering.
(b) In the case of any underwritten offering pursuant to a Demand
Registration, the Holders of a majority of the Registrable Shares to be disposed
of in connection therewith shall select the institution or institutions that
shall manage or lead such offering, which institution or institutions shall be
reasonably satisfactory to the Company. In the case of any underwritten offering
pursuant to a Piggyback Registration, the Company shall select the institution
or institutions that shall manage or lead such offering. No Holder shall be
entitled to participate in an underwritten offering unless and until such Holder
has entered into an underwriting or other agreement (including a "holdback
agreement" to the effect set forth in Section 4) with such institution or
institutions for such offering in such form as the Company and such institution
or institutions shall determine.
SECTION 8. Indemnification.
(a) Indemnification by the Company. The Company shall, without limitation
as to time, indemnify and hold harmless, to the full extent permitted by law,
each Holder of Registrable Shares whose Registrable Shares are covered by a
Registration Statement or Prospectus, the officers, directors and agents and
employees of each of them, each Person who controls each such Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, agents and employees of each such controlling
person, to the fullest extent lawful, from and against any and all losses,
claims, damages, liabilities, judgment, costs (including, without limitation,
costs of preparation and reasonable attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or based upon any untrue or alleged
untrue statement of a material fact contained in such Registration Statement or
Prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or based upon any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are based upon
information furnished in writing to the Company by or on behalf of such Holder
expressly for use therein; provided, however, that the Company shall not be
liable to any such Holder to the extent that any such Losses arise out of or are
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any preliminary prospectus if (i) having previously
been furnished by or on behalf of the Company with copies of the Prospectus,
such Holder failed to send or deliver a copy of the Prospectus with or prior to
the delivery of written confirmation of the sale of Registrable Shares by such
Holder to the person asserting the claim from which such Losses arise and (ii)
the Prospectus would have corrected in all material respects such untrue
statement or alleged untrue statement or such omission or alleged omission; and
provided further, however, that the Company shall not be liable in any such case
to the extent that any such Losses arise out of or are based upon an untrue
statement or alleged untrue statement or omission or alleged omission in the
Prospectus, if (x) such untrue statement or alleged untrue statement, omission
or alleged omission is corrected in all material respects in an amendment or
supplement to the Prospectus and (y) having previously been furnished by or on
behalf of the Company with copies of the Prospectus as so amended or
supplemented, such Holder thereafter fails to deliver such Prospectus as so
amended or supplemented, prior to or concurrently with the sale of Registrable
Shares.
<PAGE>
(b) Indemnification by Holder of Registrable Shares. In connection with any
Registration Statement in which a Holder is participating, such Holder shall
furnish to the Company in writing such information as the Company reasonably
requests for use in connection with such Registration Statement or the related
Prospectus and agrees to indemnify, to the full extent permitted by law, the
Company, its directors, officers, agents or employees, each Person who controls
the Company (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act) and the directors, officers, agents or employees of such
controlling Persons, from and against all Losses arising out of or based upon
any untrue or alleged untrue statement of a material fact contained in such
Registration Statement or the related Prospectus or any amendment or supplement
thereto, or any preliminary prospectus, or arising out of or based upon any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, that such untrue or alleged untrue statement or omission or
alleged omission is based upon any information so furnished in writing by or on
behalf of such Holder to the Company expressly for use in such Registration
Statement or Prospectus.
(c) Conduct of Indemnification Proceedings. If any Person shall be entitled
to indemnity hereunder (an "Indemnified Party"), such Indemnified Party shall
give prompt notice to the party from which such indemnity is sought (the
"Indemnifying Party") of any claim or of the commencement of any proceeding with
respect to which such Indemnified Party seeks indemnification or contribution
pursuant hereto; provided, however, that the delay or failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party from any obligation
or liability except to the extent that the Indemnifying Party has been
prejudiced by such delay or failure. The Indemnifying Party shall have the
right, exercisable by giving written notice to an Indemnified Party promptly
after the receipt of written notice from such Indemnified Party of such claim or
proceeding, to assume, at the Indemnifying Party's expense, the defense of any
such claim or proceeding, with counsel reasonably satisfactory to such
Indemnified Party; provided, however, that (i) an Indemnified Party shall have
the right to employ separate counsel in any such claim or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless: (1) the Indemnifying
Party agrees to pay such fees and expenses; (2) the Indemnifying Party fails
promptly to assume the defense of such claim or proceeding or fails to employ
counsel reasonably satisfactory to such Indemnified Party; or (3) the named
parties to any proceeding (including impleaded parties) include both such
Indemnified Party and the Indemnifying Party, and such Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to it that are inconsistent with those available to the Indemnifying
Party or that a conflict of interest is likely to exist among such Indemnified
Party and any other indemnified parties (in which case the Indemnifying Party
shall not have the right to assume the defense of such action on behalf of such
Indemnified Party); and (ii) subject to clause (3) above, the Indemnifying Party
shall not, in connection with any one such claim or proceeding or separate but
substantially similar or related claims or proceedings in the same jurisdiction,
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one firm of attorneys (together with appropriate
local counsel) at any time for all of the indemnified parties, or for fees and
expenses that are not reasonable. Whether or not such defense is assumed by the
Indemnifying Party, such Indemnified Party shall not be subject to any liability
for any settlement made without its consent. The Indemnifying Party shall not
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release, in form and substance reasonably
satisfactory to the Indemnified Party, from all liability in respect of such
claim or litigation for which such Indemnified Party would be entitled to
indemnification hereunder.
(d) Contribution. If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any Losses (other than in
accordance with its terms), then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such Losses, in such proportion
as is appropriate to reflect the relative fault of the indemnifying party, on
the one hand, and such indemnified party, on the other hand, in connection with
the actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such indemnifying
party, on the one hand, and indemnified party, on the other hand, shall be
determined by reference to, among other things, whether any action in question,
including any untrue statement of a material fact or omission or alleged
omission to state a material fact, has been taken by, or relates to information
supplied by, such indemnifying party or indemnified party, and
<PAGE>
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent any such action, statement or omission. The
amount paid or payable by a party as a result of any Losses shall be deemed to
include any legal or other fees or expenses incurred by such party in connection
with any investigation or proceeding. The parties hereto agree that it would not
be just and equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provision of this Section 8(d), an
indemnifying party that is a Holder shall not be required to contribute any
amount which is in excess of the amount by which the total proceeds received by
such Holder from the sale of the Registrable Shares sold by such Holder (net of
all underwriting discounts and commissions) exceeds the amount of any damages
that such indemnifying party has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
SECTION 9. Transfer of Registration Rights. The rights to cause the Company
to register Registrable Shares pursuant to this Agreement may not be assigned by
a Holder to a transferee or assignee of such securities except to (i) a Person
who acquires at least 1,000,000 Registrable Shares (subject to adjustment) and
who has agreed to be bound by the terms of this Agreement as if such Person were
a Holder and is (A) a Person to whom a Holder has transferred Registrable Shares
pursuant to Rule "4(1-1/2)" (or any similar private transfer exemption), or (B)
upon the death of any Holder, the executor of the estate of such Holder or any
of such Holder's heirs, devisees, legatees or assigns or (ii) upon the
disability of any Holder, any guardian or conservator of such Holder.
SECTION 10. Miscellaneous.
(a) Termination. This Agreement and the obligations of the Company and the
Holders hereunder (other than Section 8) shall terminate on the first date on
which no Registrable Shares remain outstanding. (b) Notices. All notices or
communications hereunder shall be in writing (including telecopy or similar
writing), addressed as follows:
To the Company:
Breed Technologies, Inc.
5300 Old Tampa Highway
Lakeland, Florida 33811
Attention: Charles J. Sperenzella, Jr.
And
General Counsel
Telecopier: (941) 668-6016
To the Holder:
Siemens Aktiengeselleschaft
Legal Department ZFR3
Werner-von-Siemens Strasse
D-91052 Erlangen
Germany
Telecopier: 011-49-91317-29001
Attention: Counsel for Automotive Systems Group
<PAGE>
with a copy to:
Siemens Corporation
Legal Department
1301 Avenue of the Americas
New York, New York 10019
Telecopier: (212) 258-4945
Attention: General Counsel
or such other addresses as each of the parties hereto or any future Holder
may designate to the other parties.
Any such notice or communication shall be deemed given (i) when made, if
made by hand delivery, (ii) upon transmission, if sent by confirmed telecopier,
(iii) one business day after being deposited with a next-day courier, postage
prepaid, or (iv) three business days after being sent certified or registered
mail, return receipt requested, postage prepaid, in each case addressed as above
(or to such other address or to such other telecopier number as such party may
designate in writing from time to time).
(c) Separability. If any provision of this Agreement shall be declared to
be invalid or unenforceable, in whole or in part, such invalidity or
unenforcibility shall not affect the remaining provisions hereof which shall
remain in full force and effect.
(d) Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, devisees, legatees,
legal representatives, successors and assigns.
(e) Entire Agreement. This Agreement represents the entire agreement of the
parties and shall supersede any and all previous contracts, arrangements or
understandings between the parties hereto with respect to the subject matter
hereof.
(f) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of Holders of at least a
majority in number of the Registrable Shares then outstanding.
(g) Publicity. No public release or announcement concerning the
transactions contemplated hereby shall be issued by any party without the prior
consent of the other parties, except to the extent that such party is advised by
counsel that such release or announcement is necessary or advisable under
applicable law or the rules or regulations of any securities exchange, in which
case the party required to make the release or announcement shall to the extent
practicable provide the other party with an opportunity to review and comment on
such release or announcement in advance of its issuance.
(h) Expenses. Whether or not the transactions contemplated hereby are
consummated, except as otherwise provided herein, all costs and expenses
incurred in connection with the execution of this Agreement shall be paid by the
party incurring such costs or expenses, except as otherwise set forth herein.
(i) Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(j) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be one and the same agreement, and shall become
effective when counterparts have been signed by each of the parties and
delivered to each other party.
<PAGE>
(k) Governing Law. This Agreement shall be construed, interpreted, and
governed in accordance with the internal laws of Delaware without giving regard
to the principles of conflicts of law.
(l) Calculation of Time Periods. Except as otherwise indicated, all periods
of time referred to herein shall include all Saturdays, Sundays and holidays;
provided, however, that if the date to perform the act or give any notice with
respect to this Agreement shall fall on a day other than a Business Day, such
act or notice may be timely performed or given if performed or given on the next
succeeding Business Day.
(m) Consent to Jurisdiction. Subject to the provisions of paragraph (n),
each of the Company and the Holder hereby agrees to submit to the exclusive
jurisdiction of the U.S. Federal courts in the Southern District of the State of
New York, and consents that service of process with respect to all such courts
may be made by registered mail to such Person at the address of such Person set
forth in Section 10 with respect to any disputes arising out of this Agreement.
(n) Release of Siemens Aktiengesellschaft. If the Holder assigns its rights
and obligations under this Agreement pursuant to paragraph (d), so long as
Siemens Corporation is subject to the jurisdiction of the Federal, state or
local courts of the United States with respect to claims or disputes relating to
this Agreement or the transactions contemplated hereby the Company for itself
and its Affiliates hereby irrevocably and unconditionally waive and release all
rights and claims that it or any of them may thereafter have that Holder is or
has been at any time subject to the jurisdiction of the Federal, state or local
courts of the United States arising out of claims or disputes relating to this
Agreement or the transactions contemplated hereby.
(0) Waiver of Jury Trial; Trial Costs. Each of the Company, for itself and
its Affiliates, and the Holder hereby irrevocably waives all right to trial by
jury in any action, proceeding or counterclaim (whether based on contract, tort
or otherwise) arising out of or relating to the actions of the Company and the
Holder or its Affiliates pursuant to this Agreement in the negotiation,
administration, performance or enforcement thereof. The party in whose favor a
final judgment is rendered shall be entitled to reasonable costs and reasonable
attorneys' fees.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first written above.
BREED TECHNOLOGIES, INC.
By:
Name:
Title:
SIEMENS AKTIENGESELLSCHAFT
By:
Name:
Title:
By:
Name:
Title:
Exhibit 10.1.3
STOCKHOLDERS AGREEMENT
among
BREED TECHNOLOGIES, INC.
and
CERTAIN OF ITS STOCKHOLDERS
dated as of October 30, 1997
<PAGE>
STOCKHOLDERS AGREEMENT
TABLE OF CONTENTS
ARTICLE 1.
Definitions
Section 1.1. Defined Terms 1
ARTICLE 2.
Board of Directors; Management
Section 2.1. Composition of Board.............................. 5
Section 2.2. Frequency of Meetings; Quorum...................... 5
Section 2.3. Audit Committee.................................... 5
Section 2.4. Notice of Board Meetings; Attendance Right......... 5
Section 2.5. Actions by the Board.............................. 6
Section 2.6. Special Consent Rights............................. 6
Section 2.7. Litigation......................................... 6
Section 2.8. Stockholders' Authorization........................ 6
Section 2.9. Confidentiality................................... 7
Section 3.1. Legend............................................. 7
Section 3.2. Right of First Refusal on Transfers by Breed Holders
or Siemens Holders............................. 9
Section 3.3. Right of First Refusal on Sales by the Company.... 10
Section 3.4. Tag-Along Right................................... 11
Section 3.5. Standstill........................................ 12
Section 3.6. Waiver of Dividend................................ 12
ARTICLE 4.
Miscellaneous
Section 4.1. Breed Holders' Stock Ownership.................... 13
Section 4.2. Amendment and Modification........................ 13
Section 4.3. Survival of Representations and Warranties........ 13
Section 4.4. Successors and Assigns; Entire Agreement.......... 13
Section 4.5. Separability...................................... 14
Section 4.6. Notices........................................... 14
Section 4.7. Governing Law..................................... 15
Section 4.8. Headings and Counterparts......................... 15
Section 4.9. Further Assurances; Assignment.................... 15
Section 4.10. Termination....................................... 15
Section 4.11. Remedies.......................................... 15
Section 4.12. Pronouns.......................................... 16
Section 4.13. Release of Siemens................................ 16
Section 4.14. Consent to Jurisdiction........................... 16
Section 4.15. Waiver of Jury Trial; Trial Costs................. 16
SCHEDULES
<PAGE>
Schedule A. Breed Holders
Schedule 3.3. Proposed Issuances
Schedule 4.1. Nationsbank Arrangements
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of October 30,
1997, is made by and among Breed Technologies, Inc., a Delaware corporation (the
"Company"); Allen K. Breed, Johnnie Cordell Breed, A. Breed, L.P., a Texas
limited partnership and J. Breed, L.P., a Texas limited partnership
(individually, a "Breed Holder" and collectively, the "Breed Holders"); and
Siemens Aktiengesellschaft, a company organized under the laws of the Federal
Republic of Germany ("Siemens").
WHEREAS, pursuant to a Stock Purchase Agreement, dated as of October 14,
1997, by and between the Company and Siemens (the "Stock Purchase Agreement"),
at a closing held on the date of this Agreement, Siemens purchased 4,883,227
shares (the "Series A Preference Shares"), each representing one one-thousandth
(1/1,000) of a share of the Company's 1997 Series A Non-Voting Convertible
Preferred Stock, par value $.001 per share (the "Preferred Stock"), which are
convertible at any time after issuance, at the option of the holder, into shares
of the Company's Common Stock, par value $.01 per share (the "Common Stock");
and
WHEREAS, the Breed Holders, Siemens and the Company desire to set forth
certain agreements regarding their future relationships and their rights and
obligations with respect to the shares of the Series A Preference Shares and the
Common Stock held by them, now or in the future;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, and intending to be
legally bound, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1 Defined Terms. As used in this Agreement, the following terms
shall have the respective meanings set forth below:
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person.
"Beneficially Own" shall mean, with respect to any security, having or
sharing the power to direct or control the voting or disposition of such
security.
"Beneficial Owner" shall mean, with respect to any security, a Person who
Beneficially Owns such security, and "Beneficial Ownership" has a corresponding
meaning.
"Board" shall mean the Company's board of directors as duly constituted
from time to time.
"Business Day" shall mean a day other than a Saturday, Sunday or day on
which commercial banks in New York City are permitted or required by law to be
closed for the conduct of regular banking business.
"By-Laws" shall mean the bylaws of the Company, as in effect as of the date
of this Agreement and as subsequently amended in accordance with the provisions
of this Agreement.
<PAGE>
"Charter" shall mean the Certificate of Incorporation of the Company, as in
effect as of the date of this Agreement and as subsequently amended in
accordance with the provisions of this Agreement.
"Controlled Subsidiary" shall mean, as to any Person, any other Person of
which the first Person Beneficially Owns (directly or indirectly) securities
entitling the holder to cast 50% or more of the votes in the election or removal
of directors (or persons holding similar positions) of the second Person.
"Corporate Affiliate" shall mean, as to any Person, any other Person (other
than a natural person) (i) that directly or indirectly Beneficially Owns all or
substantially all of the common equity of the first Person (any such Person, a
"Parent"), or (ii) of which all or substantially all of the common equity is
directly or indirectly Beneficially Owned by the first Person or by a Parent of
the first Person.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exempt Transfer" shall mean any direct or indirect Transfer of Beneficial
Ownership of Common Stock made:
(i) in any transaction that has been approved by the affirmative vote of
(a) directors constituting a majority of the Board and (b) the Siemens Director;
(ii) to any Corporate Affiliate of the transferor (or to any Corporate
Affiliate of any other Person to whom an Exempt Transfer would be otherwise
permitted hereunder); provided, that if on a later date such Corporate Affiliate
ceases to be such a Corporate Affiliate of the transferor (or of another Person
to whom an Exempt Transfer would otherwise be permitted hereunder), a Transfer
(which shall not constitute an Exempt Transfer) of the amount of Common Stock
originally transferred to such transferee Person shall be deemed to have
occurred on such later date;
(iii) to a Person that is a Stockholder immediately prior to the Transfer;
(iv) by Transfer of shares of common stock of Siemens or any direct or
indirect parent company of Siemens; or
(v) pursuant to the Make-Whole Agreement.
"GAAP" shall mean U.S. generally accepted accounting principles.
"Incentive Arrangement" shall mean any plan, arrangement, agreement or
program with or for the benefit of any one or more natural persons who are or
are to become employees of the Company or any of its subsidiaries and that is
intended to induce one or more such persons to enter into or remain in the
employment of the Company or any of its subsidiaries or to incentives or reward
any such person, including without limitation stock options, stock grants and
restricted stock plans.
"Joint Venture" shall mean the joint venture relationship to be established
pursuant to the Memorandum of Understanding.
"Joint Venture Documents" shall mean the agreement (or series of related
agreements) contemplated by the Memorandum of Understanding.
"Make-Whole Agreement" shall mean the Make-Whole Agreement, dated the same
date as this Agreement, by and between the Company and Siemens.
<PAGE>
"Memorandum of Understanding" shall mean the memorandum of understanding
between the Company and Siemens, dated October 14, 1997, with respect to a joint
venture between the parties or their affiliates.
"Person" shall mean any individual, partnership, firm, corporation, limited
liability company, association, joint venture, trust or other entity, or any
government or political subdivision or agency, department or instrumentality
thereof.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated the same date as this Agreement, by and between the Company and
Siemens.
"Relevant Date" shall mean, as to any transaction or agreement or series of
related transactions or agreements, the date the transaction or agreement or
series of related transactions or agreements is approved by the Board or, if the
transaction or agreement or series of related transactions or agreements is not
presented to the Board for approval, the date on which the Company first becomes
contractually bound to proceed with the transaction or agreement or series of
related transactions or agreements.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Siemens Holder" shall mean, as of any date, Siemens and any Corporate Affiliate
of Siemens that owns Common Stock on that date.
"Stockholder" shall mean any Person who or which is a Siemens Holder or a
Breed Holder.
"Transfer" shall mean any sale, assignment or other outright transfer of
Beneficial Ownership of any securities (including through a direct or indirect
holding company) and any pledge, hypothecation or similar deposit. "Transferred"
shall have a correlative meaning.
In addition, the following terms are defined elsewhere in the Agreement:
"Agreement"................................................... Preamble
"Breed Holder"................................................ Preamble
"Common Stock"................................................ Recitals
"Company"..................................................... Preamble
"Confidential Information"............................ Section 2.9(a)
"First Offer Price"................................... Section 3.2(a)
"Issuance"............................................ Section 3.3(a)
"Maximum Purchase".................................... Section 3.4(c)
"Offered Securities".................................. Section 3.2(a)
"Offering Stockholder"................................ Section 3.2(a)
"Participating Stockholder"........................... Section 3.4(b)
"Participation Notice"................................ Section 3.4(b)
"Pre-emption Notice".................................. Section 3.3(a)
"Pre-emption Option".................................. Section 3.3(b)
"Preferred Stock"............................................. Recitals
"Proposed Sale Amounts"............................... Section 3.4(c)
"Purchaser"........................................... Section 3.2(a)
"Series A Election Right"............................. Section 2.1(a)
"Series A Preference Shares".................................. Recitals
"Siemens...................................................... Preamble
"Siemens Director".................................... Section 2.1(a)
"Special Consent Rights".............................. Section 2.6
"Stock Purchase Agreement".................................... Recitals
<PAGE>
"Tag-Along Notice".................................... Section 3.4(b)
"Tag-Along Right"..................................... Section 3.4(a)
"Transfer Notice"..................................... Section 3.2(a)
ARTICLE 2.
Board of Directors; Management
Section 2.1. Composition of Board.
(a) The holders of the Series A Preference Shares have the right, pursuant
to the Certificate of Designations with respect thereto, to elect one director
to the Board following the occurrence of certain events (the "Series A Election
Right"). At any time the Series A Election Right is not currently exercisable,
the Stockholders will vote their shares of Common Stock and take such other
corporate action in their respective capacities as stockholders as is necessary
and appropriate such that, effective as of the date of this Agreement and
thereafter so long as this Agreement remains in effect, the Board will consist
of not more than eleven persons, of whom one will be designated by the Siemens
Holders. Any director designated by the Siemens Holders pursuant to this Article
2 or elected pursuant to the Series A Election Right is hereinafter referred to
as a "Siemens Director."
(b) The Stockholders shall vote their shares and take such other corporate
action as is necessary and appropriate to ensure that, subject to the provisions
of the Certificate of Designations with respect to the Series A Preference
Shares, (i) the Siemens Holders shall be able to remove any Siemens Director
and, in the event of any such removal or of the death, incapacity or resignation
of a Siemens Director, shall have the right to appoint a replacement for that
director; (ii) a Siemens Director may be removed (other than for willful
misconduct) only with the consent of the Siemens Holders; and (iii) the Siemens
Holders shall be exclusively entitled to nominate all successors to Siemens
Director.
Section 2.2. Frequency of Meetings; Quorum. The Board shall meet at least
once each quarter. A quorum for a Board meeting shall be a majority of the
Directors, present in person, by telephone or video conference.
Section 2.3. Audit Committee. So long as Section 2.1 remains in effect, the
Stockholders shall take such action as may be necessary and appropriate to cause
their respective Board representatives to appoint and maintain in effect an
audit committee of the Board, of which the Siemens Director shall be a member.
Through the audit committee, representatives of Siemens will be permitted to
consult with appropriate personnel of the Company and with representatives of
the Company's independent auditor regarding the scope of the annual audit and
the terms of the auditors' engagement.
Section 2.4. Notice of Board Meetings; Attendance Right.
(a) Written notice of Board meetings must be given to all directors at
least two Business Days prior to each meeting, specifying in reasonable detail
the business to be conducted. Notice may be given by telecopier, messenger,
registered mail or overnight courier service and will be deemed given when
received.
(b) The Siemens Director shall have the right, with respect to any Board
meeting solely that such Director does not attend, to designate a representative
to attend the Board meeting in the capacity of an observer only.
Section 2.5. Actions by the Board. Except as otherwise provided in this
Agreement, the affirmative vote of a majority of the directors present at a
meeting at which a quorum is present, or the unanimous written consent, shall be
required on all actions required to be taken by the Board.
<PAGE>
Section 2.6. Special Consent Rights. Notwithstanding the provisions of
Section 2.5, the affirmative vote of the Siemens Director shall be necessary to
effect any of the following actions by the Company or any of its Controlled
Subsidiaries:
(a) the conduct or operation (other than (i) through the Joint Venture,
(ii) through Hamlin Incorporated or VTI Hamlin OY, except with respect to the
design, manufacture and marketing of full electronic crash sensors and (iii)
through Artistic Analytical Methods, Inc. in the conduct of its existing
business) of any business comprising in whole or in part the development,
selling, design, manufacturing or marketing of electronic components in the
field of automotive safety restraint systems.
(b) discontinuation of any material line of business in which the Company
is engaged at the date of this Agreement and which is material to the operations
of the Joint Venture; and
(c) use of the Siemens and any other trade names, marks or other similar
intellectual property rights of Siemens, except only to the extent specifically
permitted in the Joint Venture Documents.
The parties acknowledge and agree that the provisions of Section 2.6 shall
not impose any restrictions of any kind or nature on the business and activities
of any stockholder of the Company, including any future parent corporation of
the Company, except only for any such business or activity conducted through the
Company or its Controlled Subsidiaries.
Section 2.7. Litigation. Siemens shall be consulted about any material
products liability litigation or regulatory proceeding involving the Company in
which Siemens is not a named party. The Company shall provide prompt notice to
Siemens regarding all such matters.
Section 2.8. Stockholders' Authorization. The Company, the Siemens Holders
and the Breed Holders will take all actions legally permitted or required to be
taken by them (including without limitation amending the Charter) to ensure that
the Company shall at all times have available for issuance the number of shares
of Common Stock that may be issuable by the Company under the Make-Whole
Agreement. The Breed Holders will vote their shares of Common Stock in favor of
any proposal presented to the Company's stockholders for approval, pursuant to
the requirements of Delaware Law or the New York Stock Exchange, of any aspect
of the transactions contemplated by this Agreement.
Section 2.9. Confidentiality.
(a) Each Siemens Holder agrees that it will not, except to the extent
required by law or legal process, and it will cause each of its Affiliates
(regardless of whether such Person is an Affiliate on the date hereof) not to,
use or disclose or reveal to any person not authorized to receive the same by
the Company any trade secret or other confidential or proprietary information of
the Company, including, without limitation, any employee salaries, sales
figures, business terms of material contracts, business opportunities, customer
lists, cost of product lists or distributor lists (collectively, the
"Confidential Information"); provided, however, that information shall only be
deemed to be Confidential Information if it is disclosed by Breed only to the
designee (or observer) of Siemens to the Board of Directors of Breed as a result
of such person's position on or with respect to the Board of Directors; and
provided, further, that the parties hereto acknowledge and agree that if
established by clear and convincing evidence the following shall not be deemed
Confidential Information: (i) Confidential Information which is now in or
hereafter enters the public domain without a breach of this Agreement by
Siemens; (ii) Confidential Information known to Siemens prior to the time of
disclosure by the Breed or independently developed by Siemens personnel who do
not have access to the Confidential Information; or (iii) Confidential
Information disclosed in good faith to Siemens by a third person legally
entitled to disclose the same to Siemens.
(b) The foregoing shall not prohibit or restrict (i) disclosures to
directors, officers or employees of Siemens
<PAGE>
or its Affiliates provided they are advised of the confidential nature of
such information and are under obligations to protect such information; or (ii)
use or disclosure of such Information by Siemens or its Affiliates in enforcing
or exercising Siemens' rights under this Agreement, the Stockholders Agreement,
the Registration Rights Agreement, and the Make-Whole Agreement or with respect
to the Joint Venture.
(c) Siemens agrees that in the event of the breach of this Section 2.9 by
it, Breed would be irreparably injured and be without an adequate remedy at law.
In the event of such a breach, or threatened or attempted breach of any of the
provisions hereof, Breed shall be entitled to, in addition to any other remedies
which are made available to it at law or in equity, a temporary and/or permanent
injunction and a decree for the specific performance of the terms of this
Section 2.9 without being required to furnish a bond or other security. The
obligations under this Section 2.9 shall survive any termination or expiration
of this Agreement.
ARTICLE 3
Liquidity; Transfer Restrictions
Section 3.1. Legend.
(a) Each certificate representing any of the shares of Common Stock held by
a party to this Agreement (other than the Company) shall bear the following
legend in addition to any other legend required under applicable law:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES ACT AND MAY NOT BE TRANSFERRED WITHOUT
REGISTRATION UNDER SUCH ACTS OR AN OPINION OF COUNSEL, SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A STOCKHOLDERS AGREEMENT BY AND AMONG THE COMPANY AND THE HOLDERS
SPECIFIED THEREIN, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE
OF THE COMPANY. THE SALE, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES ARE
SUBJECT TO THE TERMS OF SUCH AGREEMENT AND THE SECURITIES ARE TRANSFERABLE ONLY
UPON PROOF OF COMPLIANCE THEREWITH.
(b) Prior to any proposed Transfer of any Common Stock by a Person subject
to the restrictions contained in this Article 3, the holder thereof (i) shall
give written notice to the Company and the other Stockholders describing the
manner and circumstances of the proposed Transfer, (ii) unless otherwise agreed
by the Company, shall deliver a written opinion of legal counsel, addressed to
the Company and the transfer agent, if other than the Company, and in form and
substance satisfactory to the Company and the transfer agent, if other than the
Company, to the effect that the proposed Transfer of the shares of Common Stock
may be effected without registration under the Securities Act and applicable
state securities laws and (iii) shall furnish the Company with such evidence as
the Company reasonably may request that the proposed Transfer will comply with
all applicable requirements of this Article 3. Each certificate evidencing the
shares of Common Stock transferred shall bear the legend set forth in Section
3.1(a), except that such certificate shall not bear the first paragraph of such
legend if the opinion of counsel referred to above is to the further effect that
such legend is not required in order to establish compliance with any provision
of the Securities Act or applicable state securities laws.
(c) A notation will be made in the appropriate transfer records of the
Company with respect to the restrictions on Transfer of the Securities referred
to in this Agreement.
<PAGE>
(d) It shall be a condition precedent to any Transfer of shares of Common
Stock (including an Exempt Transfer) made while this Agreement is in effect by a
Person party to or otherwise bound by this Agreement to any Person who is not a
party to this Agreement that such Person agree in writing to be bound by the
obligations of such Person's transferor under this Agreement. If the transferee
acquires its shares pursuant to an Exempt Transfer and acquires all the shares
Beneficially Owned by the transferor, upon execution and delivery of that
agreement the transferee will succeed to the rights of the transferor under this
Agreement and, in the case of a Transfer by Siemens, the transferee's rights
will apply to all shares of Common Stock held by Siemens Holders.
Section 3.2. Right of First Refusal on Transfers by Breed Holders or
Siemens Holders.
(a) If at any time prior to the third anniversary of the date of this
Agreement (i) any one or more Breed Holders, acting individually or as a group
or (ii) any one or more Siemens Holders, acting individually or as a group (any
such Person or Persons described in the preceding clauses (i) and (ii) are
hereinafter referred to as an "Offering Stockholder"), shall desire directly or
indirectly to Transfer any of the shares of Common Stock owned by the Offering
Stockholder other than in an Exempt Transfer, such Offering Stockholder shall
first give written notice thereof (the "Transfer Notice") to (x) the Siemens
Holders (if the Offering Stockholder is one or more Breed Holders) or (y) the
Breed Holders and the Company (if the Offering Stockholder is one or more
Siemens Holders) (any such recipient of a Transfer Notice, a "Purchaser"), which
Transfer Notice shall state the Offering Stockholder's desire to make a
Transfer, the number of shares of Common Stock proposed to be Transferred (the
"Offered Securities"), and the price, which shall be all cash and payable in
full at the closing of the sale (the "First Offer Price"), which the Offering
Stockholder proposes to be paid for the Offered Securities.
(b) Upon receipt of the Transfer Notice, the Purchaser shall have the
irrevocable and exclusive option to purchase all, but not less than all, of the
Offered Securities at the First Offer Price. The Purchaser's option under this
Section shall be exercisable by giving a written notice of exercise (i), if the
proposed sale is to be pursuant to Rule 144 under the Securities Act, 10
Business Days after the Transfer Notice is received or (ii), if the proposed
sale is not to be pursuant to Rule 144 under the Securities Act, within 30 days
after the Transfer Notice is received.
(c) If the Purchaser does not exercise its option to purchase the Offered
Securities at the First Offer Price after receipt of a Transfer Notice given
pursuant to this Section, then the Offering Stockholder who has duly given such
Transfer Notice shall be entitled, for a period of 180 days beginning on the
earlier of (i) the third day after the last date for the giving of a written
notice of exercise by the Purchaser pursuant to paragraph (b) of this Section or
(ii) the date the Offering Stockholder shall have received written notice from
the Purchaser stating that the Purchaser does not intend to exercise the options
granted under this Section, to enter into definitive agreements to sell all (but
not less than all) of the Offered Securities, at an all cash price equal to or
greater than (x) the First Offer Price or (y) if the sale is pursuant to a
registered public offering, 90% of the First Offer Price; subject, however, to
the provisions of Section 3.3.
(d) If the Purchaser does not exercise its (or their) option to purchase
all of the Offered Securities at the First Offer Price and the Offering
Stockholder desiring to Transfer shall not have entered into a definitive
agreement to Transfer all of the Offered Securities before the expiration of the
180-day period described in paragraph (c) of this Section, then no Transfer
subject to this Section (including Transfers of any securities that were
previously deemed Offered Securities) by such Offering Stockholder thereafter
shall be consummated unless all of the provisions of this Section 3.2 are again
complied with.
(e) If the Purchaser exercises its or their option to purchase all of the
Offered Securities at the First Offer Price, the Offering Stockholder shall
convey good and valid title to those shares to the Purchaser, free and clear of
all liens, encumbrances, security interests, restrictions and adverse claims
whatsoever (other than restrictions imposed pursuant to this Agreement), at a
time and place specified by the Purchaser in its exercise notice, not later than
30 days after the date of the exercise notice, by delivering to the Purchaser
against payment therefor certificates for those shares, duly endorsed in blank
or with stock powers attached. If the Offering Stockholder is one or more
Siemens Holders and
<PAGE>
the Company exercises its option to purchase pursuant to Section 3.2, the
Company shall purchase all the Offered Securities regardless of whether any
Breed Holder also elects to exercise. If more than one stockholder exercises its
option pursuant to Section 3.2, subject to the preceding sentence each such
stockholder shall purchase a number of Offered Securities equal to the total of
the Offered Securities multiplied by a fraction, the numerator of which is the
number of shares of Common Stock owned of record by that stockholder and the
denominator of which is the number of shares of Common Stock owned of record by
all stockholders who exercised options. If the Purchaser is one or more Siemens
Holders, the closing of the purchase shall be delayed until all governmental
permits, approvals, notices and waiting periods (including without limitation
those required pursuant to applicable antitrust or competition laws) have been
obtained or given or have expired. Each of the Company, the Siemens Holders and
the Breed Holders shall cooperate, in complying with, and promptly take all
actions required pursuant to, such requirements.
Section 3.3. Right of First Refusal on Sales by the Company.
(a) If the Company shall at any time desire to issue and sell, or to sell
from treasury (any such sale or issuance and sale being hereafter refined to as
an "Issuance"), at any time prior to the fifth anniversary of the date of this
Agreement, shares of Common Stock or securities convertible into or exchangeable
for shares of Common Stock, other than an Issuance pursuant to (x) a merger,
consolidation, acquisition or business consolidation of or with any other
Person; (y) an Incentive Arrangement; or (z) any proposed Issuance set forth or
described on Schedule 3.3 hereto, the Company shall first give written notice
thereof (the "Pre-emption Notice") to Siemens as early as reasonably practicable
prior to the proposed Issuance, which Pre-emption Notice shall state the
Company's desire to effect an Issuance, the number and type of securities
proposed to be sold in the Issuance and the price at which the Company proposes
to effect the Issuance.
(b) Upon receipt of the Pre-emption Notice, Siemens shall have the
irrevocable and exclusive option for a period of 45 days, exercisable in whole
but not in part (the "Pre-emption Option"), to purchase the number of shares of
Common Stock specified in the Pre-emption Notice.
(c) If Siemens does not exercise its Pre-emption Option within the time
period specified in the preceding paragraph, the Company shall be entitled, for
a period of 270 days beginning on the last day of that period, to effect the
Issuance described in the Pre-emption Notice, at a price per share not less than
the price specified in the Pre-emption Notice (or, in the case of an Issuance
proposed to be effected through a firm commitment underwriting pursuant to an
effective registration statement under the Securities Act, less than 90% of that
price). If the Issuance is not completed during that period, no such Issuance
may be effected unless all of the provisions of this Section 3.3 are again
complied with.
(d) If Siemens exercises its Pre-emption Option, the purchase and sale of
shares shall be completed at a closing held (x) on the same date as the balance
of the Issuance or (y) if the Pre-emption Option is in respect of the entire
Issuance, at a time and place specified by the Company by written notice given
at least ten days in advance, which shall be not more than 45 days after the
date of Siemens' notice of exercise. At the closing, the Company shall deliver
to Siemens, against payment of the purchase price, certificates for the shares
being purchased, conveying good and valid title to those shares, free and clear
of all liens, encumbrances, security interests, restrictions and adverse claims
whatsoever (other than restrictions imposed pursuant to this Agreement).
Section 3.4. Tag-Along Right.
(a) Except in the case of an Exempt Transfer, if any of the Breed Holders,
acting individually or as a group, elect to Transfer a number of shares of
Common Stock that carries voting power in excess of the voting power carried by
the shares of Capital Stock then Beneficially Owned by the Siemens Holders, each
Siemens Holder shall have the right (a "Tag-Along Right") to participate in such
transaction by including in such sale up to 100% of such Siemens Holder's shares
of Stock and the Breed Holders electing to Transfer shares shall comply with the
requirements of this Section 3.4.
<PAGE>
(b) In addition to complying with the requirements of Section 3.2, the
Breed Holders must deliver to all Siemens Holders a written notice (a "Tag-Along
Notice") of their intention to sell shares in a transaction subject to a Tag-
Along Right at least 45 days prior to effecting any such sale transaction. The
Tag-Along Notice shall set forth in reasonable detail the specifics of the
proposed sale transaction. Any Siemens Holder desiring to participate in such a
sale (a "Participating Stockholder") must deliver to the Breed Holders, within
30 days of receiving the Tag-Along Notice, written notice (a "Participation
Notice") of such holder's desire to participate in the Breed Holders' sale
transaction. The Participation Notice shall specify the number of shares such
Siemens Holder wishes to have included in that sale transaction.
(c) If the maximum number of shares that the transferee is willing acquire
on the terms specified in the Tag- Along Notice (the "Maximum Purchase") is less
than the aggregate of (i) the number of shares to be transferred by the Breed
Holders as described in the Tag-Along Notice plus (ii) the number of shares that
the Siemens Holders wish to include in the transaction, as described in their
respective Participation Notices, the number of shares to be sold by each of the
selling Breed Holders and each Siemens Holder that duly exercised its Tag-Along
Right shall be reduced from the numbers each of them wishes to sell, as
specified in the respective Tag-Along Notices and Participation Notices (the
"Proposed Sale Amounts"), to an aggregate amount equal to the Maximum Purchase,
by reducing each Proposed Sale Amount to an amount equal to the product of (x)
such Proposed Sale Amount and (y) a fraction, the numerator of which is the
Maximum Purchase and the denominator of which is the aggregate of all Proposed
Sale Amounts. (d) The Breed Holders shall provide each Participating Stockholder
with such information and instructions as shall be necessary to enable the
Participating Stockholder to participate in the sale transaction on the same
terms as the Breed Holders, and each Participating Stockholder shall cooperate
in such transaction by providing the Breed Holders all materials, such as
executed purchase and sale agreements and stock transfer documentation, as the
Breed Holders reasonably shall require.
(e) The Breed Holders shall take all reasonable steps necessary to ensure
that the purchaser is required to deliver any consideration due to any
Participating Stockholder on the same date as such consideration is required to
be delivered to the Breed Holders.
Section 3.5. Standstill.
(a) Each Siemens Holder hereby agrees that, until the third anniversary of
the date of this Agreement, without the prior consent of the Board, and except
as set forth in Section 3.5(b), neither it nor any of its Affiliates (regardless
or whether such person or entity is an Affiliate on the date hereof) will
acquire, offer to acquire, or agree to acquire, directly or indirectly, by
purchase or otherwise, any Common Stock or direct or indirect rights or options
to acquire any Common Stock.
(b) The provisions of Section 3.5(a) shall not apply to acquisitions made
(i) at any time (x) after a Person not affiliated with Siemens or a Breed Holder
has made a public announcement of an intent to seek to acquire, by a tender or
exchange offer, merger or other means, Beneficial Ownership of a number of
shares of Common Stock that, together with any Common Stock already Beneficially
Owned by such Person, would equal or exceed 50% of the shares of Common Stock
then outstanding and (y) prior to the time such Person has made a public
announcement of the cancellation of that intent; (ii) at any time that any
Person or group of Persons (determined in accordance with Section 13(d)(3) of
the Exchange Act), other than the Breed Holders, is the Beneficial Owner of 20%
or more of the shares of Common Stock then outstanding; or (iii) pursuant to
Article 3.
Section 3.6. Waiver of Dividend. Notwithstanding anything to the contrary
contained in the Certificate of Designations with respect to the Series A
Preference Shares, the Siemens Holders, for themselves and their successors in
interest, hereby irrevocably waive any right to receive dividends (i) at any
time pursuant to Section 2(a) of such Certificate of Designations, if and to the
extent that, on or prior to December 15, 1997, Siemens and the Company shall
have executed and delivered definitive documentation with respect to the Joint
Venture and (ii) pursuant to Section 2(a)
<PAGE>
of such Certificate of Designations following the termination of the
Make-Whole Agreement.
ARTICLE 4.
Miscellaneous
Section 4.1. Breed Holders' Stock Ownership. The Breed Holders represent
and warrant that as of the execution and delivery of this Agreement, each of
them is the record and beneficial owner, free and clear of all liens, security
interests and similar encumbrances, except in favor of Nationsbank on the terms
summarized on Schedule 4.1 hereto of the number of shares of Common Stock set
forth opposite such Person's name on Schedule A hereto.
Section 4.2. Amendment and Modification.
(a) This Agreement may be amended or modified, or any provision hereof may
be waived, provided that such amendment, modification or waiver is set forth in
writing executed by (i) the Company, (ii) the Siemens Holders, (iii) Breed
Holders holding a majority of the outstanding shares of Common Stock then held
by all Breed Holders, and (iv) in the case of any amendment which materially and
adversely affects any Breed Holder differently from any other Breed Holder, such
Breed Holder. No course of dealing or course of conduct between or among any
Person having any interest in this Agreement will be deemed effective to modify,
amend or waive any part of this Agreement or any rights or obligations of any
Person under or by reason of this Agreement.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 4.3. Survival of Representations and Warranties. All
representations, warranties, covenants and agreements set forth in this
Agreement will survive the execution and delivery of this Agreement and the
closing and the consummation of the transactions contemplated hereby.
Section 4.4. Successors and Assigns; Entire Agreement. This Agreement and
all of the provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and, except as provided herein, their respective successors
and assigns. This Agreement, the Stock Purchase Agreement and the other
agreements referred to herein and therein together set forth the entire
agreement and understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.
Section 4.5. Separability. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be illegal,
invalid or otherwise unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall not be affected.
Section 4.6. Notices.
(a) All notices provided for or permitted hereunder shall be made in
writing by hand-delivery, telecopier or air courier overnight delivery service
to the other at the following addresses (or at such other address as shall be
specified in a notice given by any party to the others in accordance with this
Section):
If to the Company to:
Breed Technologies, Inc.
5300 Old Tampa Highway
<PAGE>
Lakeland, Florida 33811
Attention: Charles J. Speranzella, Jr.
and
General Counsel
Telecopier: (941) 668-6016
If to Siemens or any Siemens Holder:
Siemens Aktiengesellschaft
Legal Department ZFR3
Werner-von-Siemens Strasse 50
D-91052 Erlangen
Germany
Attention: Counsel for Automotive Systems Group
Telecopier: 011-49-9131-729001
with a copy to:
Siemens Corporation
1301 Avenue of the Americas
New York, New York 10019
Attention: General Counsel
Telecopier: (212) 258-4945
If to the Breed Holders, to their addresses as listed from time to time in
the books of the Company.
(b) All such notices shall be deemed to have been duly given: when
delivered by hand, if personally delivered; upon receipt, if received prior to
5:00 p.m. local time on a Business Day (and otherwise on the next succeeding
Business Day), if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
Section 4.7. Governing Law. The validity, performance, construction and
effect of this Agreement is governed by and shall be construed in accordance
with the internal laws of the State of Delaware, without giving effect to
principles of conflicts of law.
Section 4.8. Headings and Counterparts. The headings in this Agreement are
for convenience of reference only and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect. This
Agreement may be executed in two or more counterparts and by the parties hereto
in separate counterparts, each of which when so executed shall be deemed to be
an original, and all of which taken together shall constitute one and the same
instrument.
Section 4.9. Further Assurances; Assignment. Each party shall cooperate and
take such action as may be reasonably requested by another party in order to
carry out the provisions and purposes of this Agreement and the transactions
contemplated hereby. Notwithstanding anything in this Agreement to the contrary,
this Agreement is not assignable by a Siemens Holder without the prior written
consent of each other party to this Agreement and any attempted assignment in
violation of this provision shall be null and void. Notwithstanding the
foregoing, any Siemens Holder may assign this Agreement to any of its Corporate
Affiliates.
Section 4.10. Termination. Unless sooner terminated in accordance with its
terms, this Agreement shall terminate upon the earlier to occur of (i) the date
on which the Siemens Holders first collectively Beneficially Own less than the
number of shares of Common Stock issued or issuable pursuant to the conversion
of the shares of Series A Preference
<PAGE>
Shares acquired by Siemens pursuant to the Stock Purchase Agreement (such
number to be ratably adjusted to reflect the impact of recapitalizations,
reverse stock splits and similar transactions) or (ii) the delivery of a First
Make-Whole Notice (as such term is defined in the Make-Whole Agreement). If a
party hereto ceases to own any shares of Common Stock, such party will no longer
be deemed to be a Stockholder for purposes of this Agreement and there shall be
no liability on the part of any such party, except for liabilities arising from
a breach of this Agreement prior to such termination. Following termination of
this Agreement, the parties shall have no further obligations or liabilities
hereunder except for obligations or liabilities accrued prior to such
termination.
Section 4.11. Remedies. In the event of a breach by any party to this
Agreement of its obligations under this Agreement, any party injured by such
breach, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The parties agree that the provisions of this
Agreement shall be specifically enforceable, it being agreed by the parties that
the remedy at law, including monetary damages, for breach of such provision will
be inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived. In the
event of any breach of this Agreement by any party hereto, each such breaching
party agrees to indemnify the persons to whom a representation and warranty is
given or an obligation is owed under this Agreement for all damages, costs and
expenses (including reasonable attorneys' fees) actually incurred as a result of
any such breach.
Section 4.12. Pronouns. Whenever the context may require, any pronouns used
herein shall be deemed also to include the corresponding neuter, masculine or
feminine forms.
Section 4.13. Release of Siemens. If Siemens assigns its rights and
obligations under this Agreement pursuant to Section 4.9, the Company for itself
and its Affiliates, and the Breed Holders so long as Siemens Corporation is
subject to the jurisdiction of the Federal, state or local courts of the United
States with respect to claims or disputes relating to this Agreement or the
transactions contemplated hereby, hereby irrevocably and unconditionally waive
and release all rights and claims that any of them may have following the time
that Siemens no longer owns of record any capital stock of the Company to the
effect that Siemens is or has been at any time subject to the jurisdiction of
the Federal, state or local courts of the United States with respect to claims
or disputes relating to this Agreement.
Section 4.14. Consent to Jurisdiction. Subject to the provisions of Section
4.13, the Company, each Breed Holder and each Siemens Holder hereby agrees to
submit to the exclusive jurisdiction of the U.S. Federal courts in the Southern
District of the State of New York, and consents that service of process with
respect to all such courts may be made by registered mail to such person at the
address of such person set forth in Section 4.6 with respect to any disputes
arising out of this Agreement.
Section 4.15. Waiver of Jury Trial; Trial Costs. The Company, for itself
and its Corporate Affiliates, each Breed Holder and each Siemens Holder hereby
irrevocably waives all right to trial by jury in any action, proceeding or
counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to the actions of the Company, any Breed Holder or any Siemens Holder
pursuant to this Agreement in the negotiation, administration, performance or
enforcement thereof. The party in whose favor a final judgment is rendered shall
be entitled to reasonable costs and reasonable attorneys' fees.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written. BREED TECHNOLOGIES, INC.
By:
Name:
Title:
<PAGE>
BREED HOLDERS:
Allen K. Breed
Johnnie Cordell Breed
A. BREED, L.P.
By:
General Partner
J. BREED, L.P.
By:
General Partner
SIEMENS AKTIENGESELLSCHAFT
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
Schedule A to
Stockholders Agreement
STOCK OWNERSHIP OF BREED FAMILY AND AFFILIATES
Number of Shares of Record Holder Common Stock Owned
J. Breed, L.P. 8,477,750
A. Breed, L.P. 8,477,750
Allen K. Breed and
Johnnie C. Breed, jointly 100
16,955,600
Exhibit 10.2
CREDIT AGREEMENT
by and among
BREED TECHNOLOGIES, INC. AND CERTAIN SUBSIDIARIES as Borrowers,
NATIONSBANK, NATIONAL ASSOCIATION, as Agent and as Lender,
and
THE LENDERS PARTY HERETO FROM TIME TO TIME
October 30, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Terms
1.1. Definitions. ........................................................ 2
1.2. Rules of Interpretation. ...........................................29
ARTICLE II
The Credit Facilities
2.1. Loans................................................................31
2.2. Payment of Interest. ...............................................37
2.3. Payment of Principal. ...............................................37
2.4. Non-Conforming Payments. ...........................................39
2.5. Notes. .............................................................40
2.6. Pro Rata Payments. .................................................40
2.7. Voluntary Commitment Reductions. ...................................40
2.8. Conversions and Elections of Subsequent Interest Periods. ..........40
2.9. Increase and Decrease in Amounts. ..................................41
2.10. Commitment Fee.......................................................41
2.11. Deficiency Advances. ...............................................42
2.12. Use of Proceeds. ...................................................42
2.13. Designation of Borrowing Subsidiaries................................42
ARTICLE III
Letters of Credit
3.1. Letters of Credit. ..................................................43
3.2. Reimbursement........................................................43
3.3. Letter of Credit Facility Fees. ....................................47
ARTICLE IV
Security
4.1. Guaranty. ..........................................................48
4.2. Stock Pledge. .......................................................48
4.3. Security Interests. ................................................48
4.4. Lease Assignments. .................................................49
4.5. Mortgages. .........................................................49
4.6. Landlord Waivers. ..................................................49
4.7. Intellectual Property................................................49
4.8. Pledge and Subordination of Intercompany Notes. ....................50
4.9. Pledge of Partnership and Joint Venture Interests. ..................50
4.10. Collateral Assignment of Trademark License Agreement.................50
4.11. Further Assurances. ................................................50
<PAGE>
ARTICLE V
Change in Circumstances
5.1. Increased Cost and Reduced Return. .................................51
5.2. Limitation on Types of Loans. ......................................52
5.3. Illegality. ........................................................52
5.4. Treatment of Affected Loans. .......................................53
5.5. Compensation. ......................................................53
5.6. Taxes. .............................................................54
5.7. Lending Office. ....................................................55
5.8. Syndication Costs. .................................................55
5.9. Replacement Banks. .................................................56
ARTICLE VI
Conditions to Making Loans and Issuing Letters of Credit
6.1. Conditions of Term Loan and Initial Advance..........................57
6.2. Conditions of all Loans and Letters of Credit. .....................61
ARTICLE VII
Representations and Warranties
7.1. Organization and Authority...........................................63
7.2. Loan Documents. ....................................................63
7.3. Solvency.............................................................64
7.4. Subsidiaries and Stockholders. .....................................64
7.5. Ownership Interests. ...............................................64
7.6. Financial Condition. ................................................64
7.7. Title to Properties. ...............................................65
7.8. Taxes. .............................................................65
7.9. Other Agreements. ..................................................65
7.10. Litigation. ........................................................66
7.11. Margin Stock. ......................................................66
7.12. Investment Company...................................................66
7.13. Patents, Etc. ......................................................66
7.14. No Untrue Statement. ...............................................66
7.15. No Consents, Etc.....................................................67
7.16. Employee Benefit Plans...............................................67
7.17. No Default...........................................................68
7.18. Environmental Matters. .............................................68
7.19. Employment Matters. ................................................68
7.20. RICO. ..............................................................69
7.21. Allied Acquisition Representations. ................................69
7.22. Allied Acquisition. ................................................69
7.23. Perfected Security Instruments.......................................69
<PAGE>
ARTICLE VIII
Affirmative Covenants
8.1. Financial Reports, Etc. ............................................71
8.2. Maintain Properties. ...............................................72
8.3. Existence, Qualification, Etc. .....................................73
8.4. Regulations and Taxes. .............................................73
8.5. Insurance. .........................................................73
8.6. True Books. ........................................................73
8.7. Right of Inspection. ...............................................73
8.8. Observe all Laws. ..................................................73
8.9. Governmental Licenses. .............................................74
8.10. Covenants Extending to Other Persons. ..............................74
8.11. Officer's Knowledge of Default. ....................................74
8.12. Suits or Other Proceedings. ........................................74
8.13. Notice of Environmental Complaint or Condition. .....................74
8.14. Environmental Compliance. ..........................................74
8.15. Indemnification. ...................................................75
8.16. Further Assurances. ................................................75
8.17. Employee Benefit Plans...............................................75
8.18. Continued Operations. ..............................................76
8.19. Additional Support Documents. ......................................76
8.20. Operating Plan. ....................................................77
8.21. Allied Acquisition Audit. ..........................................77
8.22. Diligent Pursuit of Waiver. ........................................78
8.23. Swap Agreements. ...................................................78
8.24. Subsidiary Support of Permitted Indebtedness. ......................78
ARTICLE IX
Negative Covenants
9.1. Financial Covenants..................................................79
9.2. Acquisitions. ......................................................80
9.3. Liens. .............................................................80
9.4. Indebtedness. ......................................................81
9.5. Transfer of Assets. .................................................82
9.6. Investments. .......................................................82
9.7. Merger or Consolidation. ...........................................83
9.8. Restricted Payments. ...............................................83
9.9. Transactions with Affiliates. ......................................83
9.10. Compliance with ERISA, the Code and Foreign Benefit Laws. ..........84
9.11. Accounting Changes. ................................................85
9.12. Dissolution, etc. ..................................................85
9.13. Limitations on Sales and Leasebacks. ...............................85
9.14. Change in Control. .................................................85
9.15. Limitation on Guaranties. ..........................................85
9.16. Negative Pledge Clauses..............................................85
9.17. Prepayments, Etc. of Indebtedness. .................................85
<PAGE>
9.18. Restrictive Agreements. ...........................................85
ARTICLE X
Events of Default and Acceleration
10.1. Events of Default. ................................................86
10.2. Agent to Act. .....................................................89
10.3. Cumulative Rights. ................................................89
10.4. No Waiver. ........................................................89
10.5. Allocation of Proceeds. ...........................................89
10.6. Judgment Currency. ................................................90
ARTICLE XI
The Agent
11.1. Appointment, Powers, and Immunities. ..............................91
11.2. Reliance by Agent. ................................................91
11.3. Defaults. .........................................................92
11.4. Rights as Lender. .................................................92
11.5. Indemnification. ..................................................92
11.6. Non-Reliance on Agent and Other Lenders. ..........................93
11.7. Resignation of Agent. .............................................93
11.8. Fees................................................................93
ARTICLE XII
Miscellaneous
12.1. Assignments and Participations. ...................................94
12.2. Notices. ..........................................................95
12.3. Right of Set-off; Adjustments. ....................................96
12.4. Survival. .........................................................97
12.5. Expenses. .........................................................97
12.6. Amendments and Waivers. ...........................................98
12.7. Counterparts. .....................................................98
12.8. Termination. ......................................................98
12.9. Indemnification. ..................................................99
12.10. Severability. .....................................................99
12.11. Entire Agreement. ................................................100
12.12. Agreement Controls. ..............................................100
12.13. Usury Savings Clause. ............................................100
12.14. Governing Law; Waiver of Jury Trial................................100
EXHIBIT A Applicable Commitment Percentages..........................A-1
EXHIBIT B-1 Form of Assignment and Acceptance..........................B-1
EXHIBIT C Notice of Appointment (or Revocation) of Authorized
Representative...........................................C-1
EXHIBIT D Form of Borrowing Notice.................................D-1-1
EXHIBIT E Form of Collateral Assignment of Trademark License
Agreement................................................E-1
EXHIBIT F Form of Collateral Assignment of Partnership Interests.....F-1
EXHIBIT G Form of Guaranty...........................................G-2
<PAGE>
EXHIBIT H Form of Intellectual Property Security Agreement...........H-1
EXHIBIT I Form of Intercompany Notes.................................I-1
EXHIBIT J Form of Subordination Agreement............................J-1
EXHIBIT K Form of Interest Rate Selection Notice.....................K-1
EXHIBIT L Form of Landlord Waiver....................................L-1
EXHIBIT M Form of LC Account Agreement...............................M-1
EXHIBIT N Form of Lease Assignment...................................N-1
EXHIBIT O-1 Form of Term Note........................................O-1-1
EXHIBIT O-2 Form of Revolving Note...................................O-2-1
EXHIBIT P-1 Form of Stock Pledge Agreement (Borrower)................P-1-1
EXHIBIT P-2 Form of Stock Pledge Agreement (US Subsidiaries).........P-2-1
EXHIBIT P-3 Form of Stock Pledge Agreement (Breeds)..................P-3-1
EXHIBIT Q Form of Intercompany Note Pledge Agreement.................Q-1
EXHIBIT R Form of Security Agreement.................................R-1
EXHIBIT S-1 Form of Opinion of US Counsel............................S-1-1
EXHIBIT S-2 Form of Opinion of Intellectual Property Counsel.........S-2-1
EXHIBIT S-3 Form of Opinion of Foreign Counsel.......................S-3-1
EXHIBIT T Compliance Certificate.....................................T-1
EXHIBIT U Form of Assumption Letter..................................U-1
Schedule 1.1(a) Borrowing Subsidiaries.....................................S-1
Schedule 1.1(b) Initial Advance Allocation ...............................S-2
Schedule 7.4 Subsidiaries and Investments in Other Persons..............S-3
Schedule 7.6 Indebtedness...............................................S-4
Schedule 7.7 Liens......................................................S-5
Schedule 7.10 Litigation.................................................S-6
Schedule 7.19 Employment Matters.........................................S-7
Schedule 7.23 Financing Statements and Other Filings.....................S-8
Schedule 8.5 Insurance..................................................S-9
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of October 30, 1997 (the "Agreement"), is
made by and among BREED TECHNOLOGIES, INC., a Delaware corporation having its
principal place of business in Lakeland, Florida ( "BREED"), and certain
Subsidiaries of BREED designated as Borrowers herein (BREED and such
Subsidiaries individually a "Borrower" and being collectively called the
"Borrowers") NATIONSBANK, NATIONAL ASSOCIATION, a national banking association
organized and existing under the laws of the United States, in its capacity as a
Lender ("NationsBank"), and each other financial institution which may hereafter
execute and deliver an instrument of assignment with respect to this Agreement
pursuant to Section 12.1 (hereinafter such financial institutions may be
referred to individually as a "Lender" or collectively as the "Lenders"), and
NATIONSBANK, NATIONAL ASSOCIATION, a national banking association organized and
existing under the laws of the United States, in its capacity as agent for the
Lenders (in such capacity, and together with any successor agent appointed in
accordance with the terms of Section 11.7, the "Agent");
W I T N E S S E T H:
WHEREAS, BREED and certain of its wholly-owned Subsidiaries have entered
into that certain Asset Purchase Agreement dated August 27, 1997 with
AlliedSignal Inc., a Delaware corporation ("AlliedSignal"), and certain of its
subsidiaries (the "Asset Purchase Agreement") pursuant to which BREED has agreed
to purchase or cause certain of its Subsidiaries to purchase certain assets and
liabilities of AlliedSignal and such subsidiaries including the business of
designing, manufacturing, and selling automotive restraint products and systems
(the "Acquired Business");
WHEREAS, the Borrowers have requested that the Lenders make available to
the Borrowers certain credit facilities of up to $900,000,000, which facilities
shall consist of a term loan facility to BREED of $600,000,000 and a revolving
credit facility to the Borrowers of up to $300,000,000, the latter of which will
include a $25,000,000 sublimit for the issuance of standby letters of credit and
a $75,000,000 sublimit for multi-currency borrowings, the proceeds of which are
to be used as provided in Section 2.12 hereof; and
WHEREAS, the Lenders are willing to make such revolving credit and letter
of credit facilities available to the Borrowers upon the terms and conditions
set forth herein;
NOW, THEREFORE, the Borrowers, the Lenders and the Agent hereby agree as
follows:
ARTICLE I
Definitions and Terms
1.1 Definitions. For the purposes of this Agreement, in addition to the
definitions set forth above, the following terms shall have the respective
meanings set forth below:
"Acquisition" means the acquisition of (i) a controlling equity interest in
another Person (including the purchase of an option, warrant or convertible or
similar type security to acquire such a controlling interest at the time it
becomes exercisable by the holder thereof), whether by purchase of such equity
interest or upon exercise of an option or warrant for, or conversion of
securities into, such equity interest, or (ii) assets of another Person which
constitute all or substantially all of the assets of such Person or of a line or
lines of business conducted by such Person. The term "controlling interest"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through
ownership of Voting Sock, by contract or otherwise.
"Acquisition Documents" means the Asset Purchase Agreement and all other
documents required to be delivered
<PAGE>
by AlliedSignal and its Subsidiaries to BREED and its Subsidiaries pursuant
to the Asset Purchase Agreement.
"Advance" means a borrowing under the Revolving Credit Facility consisting
of a Base Rate Loan or a Eurodollar Rate Loan.
"Advance Date Exchange Rate" means, with respect to a specified Advance or
Loan in an Alternative Currency, the Spot Rate of Exchange as of the date two
Business Days preceding the date such Advance is originally made, provided that,
if such Advance or Loan is Continued for a subsequent Interest Period or
Converted pursuant to Section 2.8, the Advance Date Exchange Rate with respect
to such Loan shall be the Spot Rate of Exchange two Business Days preceding the
effective date of the latest Continuation or Conversion of such Advance or Loan,
and the Dollar Value of such Advance or Loan shall be adjusted as set forth in
Section 2.1(b).
"Affiliate" means any Person (i) which directly or indirectly through one
or more intermediaries controls, or is controlled by, or is under common control
with BREED; or (ii) which beneficially owns or holds 5% or more of any class of
the outstanding Voting Stock (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of BREED or 5% or more of any
class of the outstanding Voting Stock (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of which is beneficially owned
or held by BREED. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of Voting Stock, by contract or
otherwise; provided that Integrated Sensor Solutions, Inc., a California
corporation, shall not be deemed an Affiliate of BREED for the purposes of this
Agreement.
"Allied Acquisition" means the acquisition by BREED and certain of its
Subsidiaries of the Acquired Business pursuant to the Asset Purchase Agreement
for an aggregate purchase price not to exceed $710,000,000, subject to
adjustment as provided in the Asset Purchase Agreement.
"Alternative Currency" means Pounds Sterling, French Francs, Italian Lire,
Deutsch Marks, Spanish Pesetas, and with the prior written consent of all
Lenders and the Agent, any other lawful currency other than Dollars which is
readily transferable and convertible into Dollars in the United States currency
market; provided, however, that an Alternative Currency (other than those
specified above) shall only be available to a Borrower to the extent that each
Lender shall have determined (which determination shall be conclusive) that it
has access to such Alternative Currency on terms reasonably acceptable to such
Lender and that the Alternative Currency is freely transferable and convertible
into Dollars.
"Alternative Currency Equivalent Amount" means with respect to a specified
Alternative Currency and a specified Dollar amount, the amount of such
Alternative Currency into which such Dollar amount would be Converted, based on
the applicable Advance Date Exchange Rate.
"Applicable Commitment Percentage" means, with respect to each Lender that
portion of the Total Credit Commitment, Total Revolving Credit Commitment or
Total Term Loan Commitment, as the case may be, (including its Participations
and its obligations hereunder to the Issuing Bank to acquire Participations)
allocable to such Lender (i) with respect to Lenders as of the Closing Date, as
set forth in Exhibit A and (ii) with respect to any Person who becomes a Lender
hereafter, as reflected in each Assignment and Acceptance to which such Lender
is a party Assignee; provided that the Applicable Commitment Percentage of each
Lender shall be increased or decreased to reflect any assignments to or by such
Lender effected in accordance with Section 12.1.
"Applicable Lending Office" means, for each Lender and for each Type of
Loan, the Lending Office" of such Lender (or of an affiliate of such Lender)
designated for such Type of Loan on the signature pages hereof or such other
office of such Lender (or an affiliate of such Lender) as such Lender may from
time to time specify to the Agent and BREED by written notice in accordance with
the terms hereof as the office by which its Loans of such Type are to be made
and maintained.
<PAGE>
"Applicable Margin" means for each Eurodollar Rate Loan or Base Rate Loan
that percent per annum as set forth below, which shall be based upon the length
of time the Revolving Credit Facility is in existence as specified below:
<TABLE>
<CAPTION>
Phase Dates Applicable Margin for Applicable Margin for
Eurodollar Rate Loans Base Rate Loans
<S> <C> <C>
I Closing Date through January 27, 1998 3.00% 2.00%
II January 28, 1998 through February 26, 3.75% 2.75%
1998
III February 27, 1998 through April 27, 1998 4.50% 3.50%
IV April 28, 1998 and thereafter 6.00% 5.00%
</TABLE>
"Applications and Agreements for Letters of Credit" means, collectively,
the Applications and Agreements for Letters of Credit, or similar documentation,
executed by a Borrower from time to time and delivered to the Issuing Bank to
support the issuance of Letters of Credit.
"Approved Fund" means, with respect to any Lender that is a fund that
invests in commercial loans, any other fund that invests in commercial loans and
is managed by the same investment advisor as such Lender or by an Affiliate of
such investment advisor.
"Asset Disposition" means any voluntary disposition, whether by sale, lease
or transfer of (a) any or all of the assets, excluding cash, cash equivalents
and inventory, of BREED or its Subsidiaries, where the Net Proceeds from any
such sale, lease or transfer exceed $50,000, and (b) any of the capital stock,
or securities and investments interchangeable, exercisable or convertible for or
into, or otherwise entitling the holder to receive, any of the capital stock of
any Subsidiary (other than a disposition to BREED or a Guarantor in the case of
(a) and (b)).
"Assigned Interests" has the meaning given to such term in any Collateral
Assignment of Partnership and Joint Venture Interests. "Assignment and
Acceptance" shall mean an Assignment and Acceptance in the form of Exhibit B
(with blanks appropriately filled in) executed and delivered to the Agent by the
parties thereto in connection with an assignment of a Lender's interest under
this Agreement pursuant to Section 12.1.
"Authorized Representative" means any of the Chief Executive Officer,
President, any Executive or Senior Vice President or Treasurer of BREED or, with
respect to financial matters, the chief financial officer or Treasurer of BREED,
or any other Person expressly designated by the Board of Directors of BREED (or
the appropriate committee thereof) as an Authorized Representative of BREED, as
set forth from time to time in a certificate in the form of Exhibit C.
"Base Rate" means the sum of (i) for any day, the rate per annum equal to
the higher of (a) the Federal Funds Rate for such day plus one-half of one
percent (0.5%) or (b) the Prime Rate for such day and (ii) the Applicable
Margin. Any change in the Base Rate due to a change in the Prime Rate or the
Federal Funds Rate shall be effective on the effective date of such change in
the Prime Rate or Federal Funds Rate.
"Base Rate Loan" means a Dollar denominated Loan or a Dollar denominated
Segment of the Term
<PAGE>
Loan for which the rate of interest is determined by reference to the Base
Rate.
"Base Rate Refunding Loan" means a Base Rate Loan made to satisfy
Reimbursement Obligations arising from a drawing under a Letter of Credit.
"Base Rate Segment" means a Segment bearing interest or to bear interest at
the Base Rate.
"Board" means the Board of Governors of the Federal Reserve System (or any
successor body).
"Borrowers' Account" means a demand deposit account number 3750894026 or
any successor account with the Agent, which may be maintained at one or more
offices of the Agent or an agent of the Agent.
"Borrowing Notice" means the notice delivered by an Authorized
Representative in connection with an Advance under the Revolving Credit Facility
in the form of Exhibit D hereto.
"Borrowing Subsidiary" means those Subsidiaries listed on Schedule 1.1(a)
as a Borrower under the Revolving Credit Facility and such other Foreign
Subsidiaries of BREED that are so designated pursuant to Section 2.13 hereof.
"Business Day" means, (i) with respect to any Base Rate Loan, any day which
is not a Saturday, Sunday or a day on which banks in the States of New York and
North Carolina are authorized or obligated by law, executive order or
governmental decree to be closed, and (ii) with respect to any Eurodollar Rate
Loan, any day which is a Business Day, as described above, and on which the
relevant international financial markets are open for the transaction of
business contemplated by this Agreement in London, England, New York, New York
and Charlotte, North Carolina.
"Capital Expenditures" means, with respect to BREED and its Subsidiaries,
for any period the sum of (without duplication) (i) all expenditures (whether
paid in cash or accrued as liabilities) by BREED or any Subsidiary during such
period for items that would be classified as "property, plant or equipment" or
comparable items on the consolidated balance sheet of BREED and its
Subsidiaries, including without limitation all transactional costs incurred in
connection with such expenditures provided the same have been capitalized,
excluding, however, the amount of any Capital Expenditures paid for with
proceeds of casualty insurance as evidenced in writing and submitted to the
Agent together with any compliance certificate delivered pursuant to Section
8.1(a) or (b), and (ii) with respect to any Capital Lease entered into by BREED
or its Subsidiaries during such period, the present value of the lease payments
due under such Capital Lease over the term of such Capital Lease applying a
discount rate equal to the interest rate provided in such Capital Lease (or in
the absence of a stated interest rate, that rate used in the preparation of the
financial statements described in Section 8.1(a)), all the foregoing in
accordance with GAAP applied on a Consistent Basis.
"Capital Leases" means all leases which have been or should be capitalized
in accordance with GAAP as in effect from time to time including Statement No.
13 of the Financial Accounting Standards Board and any successor thereof.
"Certificate and Receipt of Registrar" means, collectively or individually
as the context may indicate (i) that certain Certificate and Receipt of
Registrar dated as of the Closing Date between certain Subsidiaries and
<PAGE>
the Agent in the form attached to the Collateral Assignment of Partnership
and Joint Venture Interests as Schedule I and (ii) any additional Certificate
and Receipt of Registrar delivered to the Agent pursuant to Section 8.19, as any
of the foregoing may be hereafter amended, supplemented or restated from time to
time.
"Change of Control" means, at any time:
(i) any "person" or "group" (each as used in Sections 13(d)(3) and 14(d)(2)
of the Exchange Act), other than Allen K. Breed, Johnnie C. Breed, Siemens AG,
A. Breed, Ltd., a Texas limited partnership, or J. Breed, Ltd., a Texas limited
partnership, either (A) becomes the "beneficial owner" (as defined in Rule 13d-3
of the Exchange Act ), directly or indirectly, of Voting Stock of BREED (or
securities convertible into or exchangeable for such Voting Stock) representing
30% or more of the combined voting power of all Voting Stock of BREED (on a
fully diluted basis) or (B) otherwise has the ability, directly or indirectly,
to elect a majority of the board of directors of BREED; provided, however, that
this subsection shall apply only to any "person" or "group" (each as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) who is not identified
hereunder.
(ii) during any period of up to 12 consecutive months, commencing on the
Closing Date, individuals who at the beginning of such 12-month period were
directors of BREED shall cease for any reason (other than the death, disability
or retirement of an officer of BREED that is serving as a director at such time
so long as another officer of BREED replaces such Person as a director) to
constitute a majority of the board of directors of BREED; or
(iii) any Person or two or more Persons (other than those Persons
identified in clause (i) above or existing directors) acting in concert shall
have acquired by contract, or shall have entered into a contract or agreement
and satisfied any conditions to effectiveness, that, upon consummation thereof,
will result in its or their acquisition of the power to exercise, directly or
indirectly, more than 50% of the combined voting power of all Voting Stock of
BREED (on a fully diluted basis).
"Closing Date" means the date as of which this Agreement is executed by the
Borrowers, the Lenders and the Agent and on which the conditions set forth in
Section 6.1 have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder.
"Collateral" means the collateral described in the Security Instruments.
"Collateral Assignment of Trademark License Agreement" means that certain
Collateral Assignment of Trademark License Agreement dated as of the Closing
Date by BREED in favor of the Agent and consented to by AlliedSignal
substantially in the form of Exhibit E hereto and pursuant to which BREED and
BREED Automotive Technology, Inc. have collaterally assigned, pledged and
granted a Lien in all of its rights and under that certain Trademark License
Agreement dated October 30, 1997 between BREED and Allied Signal to the Agent
for the benefit of the Lenders, as amended, modified, or restated from time to
time.
"Collateral Assignment of Partnership Interests" means, (i) the Collateral
Assignment of Partnership Interests dated as of the Closing Date between BREED,
certain Subsidiaries and the Agent and (ii) each
<PAGE>
Collateral Assignment of Partnership Interests substantially in the form of
Exhibit F delivered to the Agent pursuant to Section 8.19, as any of the
foregoing may be hereafter amended, supplemented or restated from time to time.
"Commitment Fee" means one half percent (0.50%) per annum.
"Consistent Basis" in reference to the application of GAAP means the
accounting principles observed in the period referred to are comparable in all
material respects to those applied in the preparation of the audited financial
statements of BREED referred to in Section 7.6(a).
"Consolidated EBITDA" means, with respect to BREED and its Subsidiaries for
any period of computation ending on the date of computation thereof, (A) the sum
of, without duplication, (i) Consolidated Net Income, (ii) Consolidated Interest
Expense, (iii) taxes on income, (iv) amortization and (v) depreciation, minus
(B) (a) net gains or losses on the sale, conversion or other disposition of
capital assets, (b) net gains or losses on the acquisition, retirement, sale or
other disposition of capital stock and other securities of BREED or its
Subsidiaries, (c) net gains on the collection of proceeds of the life insurance
policies, (d) any write-up of any asset other than as permitted in accordance
with Statement No. 16 of the Financial Accounting Standards Board, and (e) any
other net gain or loss or credit of an extraordinary nature as determined in
accordance with GAAP applied on a Consistent Basis.
"Consolidated Interest Expense" means, with respect to any period of
computation thereof, the gross interest expense of BREED and its Subsidiaries,
including without limitation (i) the current amortized portion of debt discounts
to the extent included in gross interest expense, (ii) the current amortized
portion of all fees (including fees payable in respect of any Swap Agreement and
Letters of Credit) payable in connection with the incurrence of Indebtedness to
the extent included in gross interest expense and (iii) the portion of any
payments made in connection with Capital Leases allocable to interest expense,
in each of the foregoing cases determined on a consolidated basis in accordance
with GAAP applied on a Consistent Basis.
"Consolidated Net Income" means, for any period of computation thereof, the
gross revenues from operations of BREED and its Subsidiaries (including payments
received by BREED and its Subsidiaries of (i) interest income, and (ii)
dividends and distributions made in the ordinary course of their businesses by
Persons in which investment is permitted pursuant to this Agreement and not
related to an extraordinary event), less all operating and non-operating
expenses of BREED and its Subsidiaries including taxes on income, all determined
on a consolidated basis in accordance with GAAP applied on a Consistent Basis.
"Consolidated Shareholders' Equity" means, as of any date on which the
amount thereof is to be determined, the sum of the following in respect of BREED
and its Subsidiaries (determined on a consolidated basis): (i) the amount of
issued and outstanding share capital, plus (ii) the amount of additional paid-in
capital and retained earnings (or, in the case of a deficit, minus the amount of
such deficit), plus (iii) the amount of any foreign currency translation
adjustment (if positive, or, if negative, minus the amount of such translation
adjustment), minus (iv) the amount of any treasury stock, all as determined in
accordance with GAAP applied on a Consistent Basis.
"Consolidated Total Assets" means, as of the date on which the amount
thereof is to be determined, the net book value of all assets of BREED and its
Subsidiaries as determined on a consolidated basis in accordance
<PAGE>
with GAAP applied on a Consistent Basis.
"Contingent Obligation" of any Person means all contingent liabilities
required (or which, upon the creation or incurring thereof, would be required)
to be included in the financial statements (including footnotes but excluding
any actual or threatened litigation) of such Person in accordance with GAAP
applied on a Consistent Basis, including Statement No. 5 of the Financial
Accounting Standards Board, all Rate Hedging Obligations and any obligation of
such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or
other obligation of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including obligations of such Person however
incurred:
(1) to purchase such Indebtedness or other obligation or any property or
assets constituting security therefor;
(2) to advance or supply funds in any manner (i) for the purchase or
payment of such Indebtedness or other obligation, or (ii) to maintain a minimum
working capital, net worth or other balance sheet condition or any income
statement condition of the primary obligor;
(3) to grant or convey any lien, security interest, pledge, charge or other
encumbrance on any property or assets of such Person to secure payment of such
Indebtedness or other obligation of the primary obligor;
(4) to lease property or to purchase securities or other property or
services primarily for the purpose of assuring the owner or holder of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of such Indebtedness or other obligation; or
(5) otherwise to assure the owner of the Indebtedness or such obligation of
the primary obligor against loss in respect thereof;
excluding, however, Contingent Obligations (other than Guaranties) incurred
in the ordinary course of business which, in the aggregate, will not have a
Material Adverse Effect.
"Continue", "Continuation", and "Continued" shall refer to the continuation
pursuant to Section 2.8 hereof of a Eurodollar Rate Loan of one Type as a
Eurodollar Rate Loan of the same Type from one Interest Period to the next
Interest Period.
"Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 2.8 or Article IV of one Type of Loan into another Type of
Loan.
"Convertible Debentures" means the __% Convertible Subordinated Debentures
due 2027 in an aggregate principal amount of at least $200,000,000 issued by
BREED to BTI Capital Trust in consideration of the issuance of the Convertible
Preferred Securities and payment of the net proceeds thereof to BREED.
"Convertible Preferred Securities" means at least 4,000,000 ____%
Convertible Trust Preferred Securities issued by BTI Capital Trust (the "BTI
Trust"), a trust created or to be created solely for the purpose of issuing the
Convertible Preferred Securities for so long as such preferred securities are
not accounted for
<PAGE>
under stockholder's equity in the consolidated financial statements of
BREED; provided that such Convertible Preferred Securities shall be subject to
the following conditions: (i) the BTI Trust, at the direction of BREED, shall be
entitled in its discretion to defer payment of distributions on the Convertible
Preferred Securities for up to twenty (20) consecutive quarters (the "Deferral
Period"); provided that no such deferral may extend beyond the maturity date of
the Convertible Preferred Securities;
(ii) at least five (5) quarters shall remain in the Deferral Period when
the BTI Trust elects to defer payment of distributions; and
(iii) the Convertible Preferred Securities shall not be treated as a
liability on the Consolidated Financial Statements of BREED in accordance with
GAAP;
"Convertible Preferred Securities Issuance" means (a) completion of the
Offering Memorandum, (b) the consummation of the sale of the Converrtible
Preferred Securities contemplated thereby and (c) the issuance of the
Convertible Debentures and receipt of net proceeds thereof by BREED;
"Credit Commitment" means, with respect to each Lender, the obligation of
such Lender to make Loans to the Borrowers up to an aggregate principal amount
at any one time outstanding equal to such Lender's Applicable Commitment
Percentage of the Total Credit Commitment.
"Credit Parties" means any or all of the Borrowers and the Guarantors, as
the case may be.
"Debt Offering" means the incurrence of any Indebtedness for Money Borrowed
permitted hereunder in connection with a public offering or private placement of
debt securities of BREED or any Subsidiary (other than debt securities issued to
BREED or a Guarantor) or otherwise.
"Default" means any event or condition which, with the giving or receipt of
notice or lapse of time or both, would constitute an Event of Default hereunder.
"Default Rate" means (i) with respect to each Eurodollar Rate Loan, until
the end of the Interest Period applicable thereto, a rate of two percent (2%)
above the Eurodollar Rate applicable to such Loan, and thereafter at a rate of
interest per annum which shall be two percent (2%) above the Base Rate, (ii)
with respect to Base Rate Loans, at a rate of interest per annum which shall be
two percent (2%) above the Base Rate, and (iii) in any case, the maximum rate
permitted by applicable law, if lower.
"Deutsch Marks" means the official currency of Germany.
"Direct Foreign Subsidiary" means any Foreign Subsidiary a majority of
whose outstanding Voting Stock is owned by BREED or a Domestic Subsidiary.
"Dollar Equivalent Amount" means, with respect to a specified Alternative
Currency amount, the amount of Dollars into which the Alternative Currency
amount would be converted, based on the applicable Advance Date Exchange Rate.
<PAGE>
"Dollar Value" of an Advance or a Loan in an Alternative Currency means the
Dollar Equivalent Amount of the principal amount of such Advance or Loan based
on the Advance Date Exchange Rate with respect to such Advance or Loan, as
recorded in the Agent's records pursuant to Section 2.1.
"Dollars" and the symbol "$" means dollars constituting legal tender for
the payment of public and private debts in the United States of America.
"Domestic Subsidiary" means any Subsidiary of BREED organized under the
laws of the United States of America or a state or territory thereof, except the
Excluded Subsidiary.
"Eligible Assignee" means (i) a Lender; (ii) an affiliate or Approved Fund
of a Lender; and (iii) any other Person approved by the Agent and, unless an
Event of Default has occurred and is continuing at the time any assignment is
effected in accordance with Section 11.1, BREED, such approval not to be
unreasonably withheld or delayed by BREED, it being agreed that BREED may
withhold its approval if as a result of such assignment BREED incurs increased
cost under Section 5.6; provided, however, that neither BREED nor an affiliate
of BREED shall qualify as an Eligible Assignee.
"Eligible Securities" means the following obligations and any other
obligations previously approved in writing by the Agent:
(a) Government Securities;
(b) obligations of any corporation organized under the laws of any state of
the United States of America or under the laws of any other nation, payable in
the United States of America, expressed to mature not later than 92 days
following the date of issuance thereof and rated in an investment grade rating
category by S&P and Moody's;
(c) interest bearing demand or time deposits issued by any Lender or
certificates of deposit maturing within one year from the date of issuance
thereof and issued by a bank or trust company organized under the laws of the
United States or of any state thereof having capital surplus and undivided
profits aggregating at least $400,000,000 and being rated "A-3" or better by S&P
or "A" or better by Moody's;
(d) Repurchase Agreements;
(e) Municipal Obligations;
(f) Pre-Refunded Municipal Obligations;
(g) shares of mutual funds which invest in obligations described in
paragraphs (a) through (f) above, the shares of which mutual funds are at all
times rated "AAA" by S&P;
(h) tax-exempt or taxable adjustable rate preferred stock issued by a
Person having a rating of its long term unsecured debt of "A" or better by S&P
or "A-1" or better by Moody's; and
(i) asset-backed remarketed certificates of participation representing a
fractional undivided interest
<PAGE>
in the assets of a trust, which certificates are rated at least "A-1" by
S&P and "P-1" by Moody's.
"Employee Benefit Plan" means (i) any employee benefit plan, including any
Pension Plan, within the meaning of Section 3(3) of ERISA which (A) is
maintained for employees of BREED, any of its ERISA Affiliates, or any
Subsidiary or is assumed by BREED, any of its ERISA Affiliates, or any
Subsidiary in connection with any Acquisition or (B) has at any time been
maintained for the employees of BREED, any current or former ERISA Affiliate, or
any Subsidiary and (ii) any plan, arrangement, understanding or scheme
maintained by BREED or any Subsidiary that provides retirement, deferred
compensation, employee or retiree medical or life insurance, severance benefits
or any other benefit covering any employee or former employee and which is
administered under any Foreign Benefit Law or regulated by any Governmental
Authority other than the United States of America.
"Environmental Laws" means any federal, state, local or foreign statute,
law, ordinance, code, rule, regulation, order, decree, permit or license
regulating, relating to, or imposing liability or standards of conduct
concerning, any environmental matters or conditions, environmental protection or
conservation, including without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; the Superfund
Amendments and Reauthorization Act of 1986, as amended; the Resource
Conservation and Recovery Act, as amended; the Toxic Substances Control Act, as
amended; the Clean Air Act, as amended; the Clean Water Act, as amended;
together with all regulations promulgated thereunder, and any other "Superfund"
or "Superlien" law."
"Equity Offering" means a public or private offering of equity securities
(including, without limitation, any security or investment exchangeable,
exercisable or convertible for or into, or otherwise entitling the holder to
receive, equity securities) of BREED or any Subsidiary (other than securities
issued to BREED or another Subsidiary); provided, however, that the term "Equity
Offering" shall not include (i) any issuance of equity securities in connection
with the exercise of stock options granted to, or purchase of restricted stock
by, eligible participants under the Stock Option Plans, (ii) the issuance of any
stock issued as dividends or distributions to Siemens, AG (or its Subsidiary) in
accordance with the Siemens Stock Purchase Agreement, (iii) the issuance of the
Convertible Preferred Securities, (iv) the issuance of the Convertible
Debentures or any equity securities upon the conversion of any Convertible
Debentures, or (v) the issuance of the Series B Preference Shares.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.
"ERISA Affiliate", as applied to BREED, means any Person or trade or
business which is a member of a group which is under common control with BREED,
who together with BREED, is treated as a single employer within the meaning of
Section 414(b), (c), (m) or (o) of the Code.
"Eurodollar Rate Loan" means a Loan or Segment of the Term Loan for which
the rate of interest is determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means the interest rate per annum calculated according to
the following formula:
Eurodollar = Interbank Offered Rate + Applicable
Rate 1 - Reserve Requirement Margin
<PAGE>
"Eurodollar Rate Segment" means a Segment bearing interest or to bear
interest at the Eurodollar Rate.
"Event of Default" means any of the occurrences set forth as such in
Section 10.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the regulations promulgated thereunder.
"Excluded Subsidiary" means, collectively, BREED International, Inc., a
U.S. Virgin Islands corporation and BTI Trust, a Delaware _______ trust.
"Facility Termination Date" means the date on which both the Revolving
Credit Termination Date and the Term Loan Termination Date shall have occurred,
no Letters of Credit shall remain outstanding or all the Letters of Credit shall
have been cash collateralized, all Swap Agreements shall have been terminated or
cash collateralized and the Borrowers shall have fully paid and satisfied in
full all Obligations.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York (Statistical Release H-15) on the Business
Day next succeeding such day; provided that (a) if such day is not a Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Business Day as so published on the next succeeding
Business Day, and (b) if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the average rate
charged to the Agent (in its individual capacity) on such day on such
transactions as determined by the Agent. "Fiscal Year" means the twelve month
fiscal period of BREED commencing on the July 1 of each calendar year and ending
on June 30 of the following calendar year.
"Foreign Benefit Law" means any applicable statute, law, ordinance, code,
rule, regulation, order or decree of any foreign nation or any province, state,
territory, protectorate or other political subdivision thereof regulating,
relating to, or imposing liability or standards of conduct concerning, any
Employee Benefit Plan.
"Foreign Subsidiary" means any Subsidiary of BREED that is not a Domestic
Subsidiary.
"Four-Quarter Period" means a period of four full consecutive fiscal
quarters of BREED and its Subsidiaries, taken together as one accounting period.
"French Francs" means the official currency of France.
"Funding Bank" means any banking institution approved by the Agent located
within a country which country's currency has been approved by the Lenders as an
Alternative Currency.
"GAAP" or "Generally Accepted Accounting Principles" means generally
accepted accounting principles, being those principles of accounting set forth
in pronouncements of the Financial Accounting Standards Board, the American
Institute of Certified Public Accountants or which have other substantial
authoritative support and are applicable in the circumstances as of the date of
a report.
<PAGE>
"Government Securities" means direct obligations of, or obligations the
timely payment of principal and interest on which are fully and unconditionally
guaranteed by, the United States of America.
"Governmental Authority" shall mean any Federal, state, municipal, national
or other governmental department, commission, board, bureau, court, agency or
instrumentality or political subdivision thereof or any entity or officer
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any government or any court, in each case whether
associated with a state of the United States, the United States, or a foreign
entity or government including, but not limited to, the governments of Italy,
Germany, France, Spain, Mexico, the United Kingdom, Ireland, Finland and
Hungary.
"Guaranties" means all obligations of BREED or any Subsidiary directly or
indirectly guaranteeing, or in effect guaranteeing, any Indebtedness or other
obligation of any other Person.
"Guarantors" means, at any date, the Domestic Subsidiaries.
"Guarantors' Obligations" has the meaning ascribed to such term in the
Guaranty.
"Guaranty" means each Guaranty Agreement between one or more Guarantors and
the Agent for the benefit of the Lenders, delivered as of the Closing Date and
otherwise pursuant to Section 8.19 substantially in the form of Exhibit G hereto
as the same may be amended, supplemented or restated.
"Hazardous Material" means and includes any pollutant, contaminant, or
hazardous, toxic or dangerous waste, substance or material (including without
limitation petroleum products, asbestos-containing materials and lead), the
generation, handling, storage, transportation, disposal, treatment, release,
discharge or emission of which is subject to any Environmental Law.
"Indebtedness" means with respect to any Person, without duplication, all
Indebtedness for Money Borrowed, all indebtedness of such Person for the
acquisition of property or arising under Rate Hedging Obligations, all
indebtedness secured by any Lien on the property of such Person whether or not
such indebtedness is assumed, all liability of such Person by way of
endorsements (other than for collection or deposit in the ordinary course of
business), all Contingent Obligations, including letters of credit and other
items which in accordance with GAAP is required to be classified as a liability
on a balance sheet; but excluding all accounts payable and accruals in the
ordinary course of business so long as payment therefor is due within one year;
provided that in no event shall the term Indebtedness include surplus and
retained earnings, lease obligations (other than pursuant to Capital Leases),
reserves for deferred income taxes and investment credits, other deferred
credits or reserves and, so long as there is no Indenture Event of Default, both
the Convertible Preferred Securities and the Convertible Debentures (so long as
the Convertible Debentures are held by the BTI Trust).
"Indebtedness for Money Borrowed" means with respect to any Person, without
duplication, all indebtedness in respect of money borrowed, including without
limitation all Capital Leases and the deferred purchase price of any property or
asset, evidenced by a promissory note, bond, debenture or similar written
obligation for the payment of money (including conditional sales or similar
title retention agreements), other than trade payables and short-term accounts
payable incurred in the ordinary course of business.
<PAGE>
"Indenture Event of Default" means the occurrence of an Event of Default as
defined in the Indenture between the Borrower and a Trustee for the holder of
the Convertible Debentures pursuant to which Indenture the Convertible
Debentures shall be issued.
"Intellectual Property Assignments" means those certain Assignments of
Patents, Trademarks, Copyrights and Licenses in the form attached to the
Intellectual Property Security Agreement as Exhibit A, to be filed upon
acceleration of the Obligations hereunder, as from time to time amended,
supplemented or restated.
"Intellectual Property Security Agreement" means collectively each
Intellectual Property Security Agreement executed by BREED and Breed Automotive
Technology, Inc. (whether of even date herewith or delivered after the Closing
Date pursuant to Section 8.19 hereof and whether executed individually or
jointly and severally with other Subsidiaries) in favor of the Agent to
collaterally secure payment and performance of its respective obligations
hereunder and under the Guaranty, as applicable, substantially in the form of
Exhibit H attached hereto and incorporated herein by reference as from time to
time amended, supplemented or restated.
"Interbank Offered Rate" means, for any Eurodollar Rate Loan or Eurodollar
Rate Segment for any Interest Period therefor, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page
3750 (or any successor page) as the London interbank offered rate for deposits
in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to
the first day of such Interest Period for a term comparable to such Interest
Period. If for any reason such rate is not available, the term "Eurodollar Rate"
shall mean, for any Eurodollar Rate Loan for any Interest Period therefor, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Reuters Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period for a term comparable to such
Interest Period; provided, however, if more than one rate is specified on
Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%).
"Intercompany Advance" means a loan or advance heretofore or hereafter made
by an Intercompany Note Holder to a Borrower or a Domestic Subsidiary which is
evidenced by an Intercompany Note in which the Agent has a valid, duly
perfected, first priority Lien under the Collateral Assignment of Intercompany
Notes, and the repayment of which is subordinated to the rights of the Agent and
the Lenders under the Loan Documents in accordance to the provisions set forth
in the Intercompany Notes or in the Intercompany Note Subordination Agreement.
"Intercompany Notes" means, collectively, the promissory notes heretofore
issued and described on Schedule A to the Intercompany Note Pledge Agreement and
promissory notes hereafter issued in the form attached as Exhibit I hereto (with
appropriate insertions) outstanding from time to time evidencing the
Intercompany Advances.
"Intercompany Note Holder" means, at any date, any Borrower and any
Domestic Subsidiary who has extended any Intercompany Advance that remains
outstanding at such date.
"Intercompany Note Pledge Agreement" means, collectively (i) each
Intercompany Note Pledge Agreement of even date herewith between a Borrower and
the Agent and (ii) each Intercompany Note Pledge
<PAGE>
Agreement between each Intercompany Note Holder other than a Borrower and
the Agent, substantially in the form of Exhibit Q, pursuant to which the Agent
is granted a Lien in the Intercompany Notes held by such Intercompany Note
Holder, in each case as the same may be amended, supplemented or restated from
time to time.
"Intercompany Note Subordination Agreement" means that certain
Subordination Agreement dated as of the Closing Date between the Intercompany
Note Holders and the Agent substantially in the form of Exhibit J hereto, as
amended, supplemented, or restated from time to time.
"Interest Period" means, for each Eurodollar Rate Loan or Eurodollar Rate
Segment, a period commencing on the date such Eurodollar Rate Loan or Eurodollar
Rate Segment is made or Converted and ending, at the Borrower's option, on the
date one, two, or three months thereafter as notified to the Agent by the
Authorized Representative three (3) Business Days prior to the beginning of such
Interest Period; provided, that,
(i) if the Authorized Representative fails to notify the Agent of the
length of an Interest Period three (3) Business Days prior to the first day of
such Interest Period, the Loan or Segment for which such Interest Period was to
be determined shall be deemed to be a Base Rate Loan or Base Rate Segment as of
the first day thereof;
(ii) if an Interest Period for a Eurodollar Rate Loan or Eurodollar Rate
Segment would end on a day which is not a Business Day, such Interest Period
shall be extended to the next Business Day (unless such extension would cause
the applicable Interest Period to end in the succeeding calendar month, in which
case such Interest Period shall end on the next preceding Business Day);
(iii) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of a calendar month;
(iv) no Interest Period shall extend past the Stated Termination Date; and
(v) there shall not be more than ten (10) Interest Periods in effect on any
day.
"Interest Rate Selection Notice" means the written notice delivered by an
Authorized Representative in connection with the election of a subsequent
Interest Period for any Eurodollar Rate Loan or Eurodollar Rate Segment or the
Conversion of any Eurodollar Rate Loan or Eurodollar Rate Segment into a Base
Rate Loan or Base Rate Segment or the Conversion of any Base Rate Loan or Base
Rate Segment into a Eurodollar Rate Loan or Eurodollar Rate Segment, in the form
of Exhibit K.
"Initial Advance Allocation" means the allocation set forth on Schedule
1.1(b) of the initial Advance made hereunder among the Borrowers.
"Issuing Bank" means initially NationsBank and thereafter any Lender which
is successor to NationsBank as issuer of Letters of Credit under Article III.
"Italian Lire" means the official currency of Italy.
<PAGE>
"Landlord Waivers" means, collectively, each of the Landlord Waivers
required by the Agent to be delivered by the landlord of each facility leased by
BREED or any Domestic Subsidiary or arising after the Closing Date and delivered
by BREED or a Domestic Subsidiary, as applicable, pursuant to Article IV or
Section 8.19 hereof, substantially in the form of Exhibit L hereto, as amended
supplemented or restated from time to time.
"LC Account Agreement" means the LC Account Agreement dated as of the date
hereof among the Borrowers and the Agent substantially in the form of Exhibit M
hereto, as amended, supplemented or restated from time to time.
"Lease Assignments" means, collectively, Assignment of Lessee's Interest in
Leases assigning to the Agent each facility lease of BREED and any Domestic
Subsidiary heretofore entered into or entered into after the Closing Date and
delivered by BREED or a Domestic Subsidiary pursuant to Article IV or Section
8.19 hereof to collaterally secure the Borrowers' Obligations and the
Guarantors' Obligations under the Guaranty, substantially in the form of Exhibit
N hereto, as amended, supplemented or restated from time to time.
"Letter of Credit" means a standby letter of credit issued by the Issuing
Bank for the account of a Borrower in favor of a Person advancing credit or
securing an obligation on behalf of a Borrower.
"Letter of Credit Commitment" means, with respect to each Lender, the
obligation of such Lender to acquire Participations in respect of Letters of
Credit and Reimbursement Obligations up to an aggregate amount at any one time
outstanding equal to such Lender's Applicable Commitment Percentage of the Total
Letter of Credit Commitment as the same may be increased or decreased from time
to time pursuant to this Agreement.
"Letter of Credit Facility" means the facility described in Article III
hereof providing for the issuance by the Issuing Bank for the account of one or
more of the Borrowers of Letters of Credit in an aggregate stated amount at any
time outstanding not exceeding the Total Letter of Credit Commitment.
"Letter of Credit Outstandings" means, as of any date of determination, the
aggregate amount remaining undrawn under all Letters of Credit plus
Reimbursement Obligations then outstanding.
"Lien" means any interest in property securing any obligation owed to, or a
claim by, a Person other than the owner of the property, whether such interest
is based on the common law, statute or contract, and including but not limited
to the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes. For the purposes of this Agreement, BREED and
any Subsidiary shall be deemed to be the owner of any property which it has
acquired or holds subject to a conditional sale agreement, financing lease, or
other arrangement pursuant to which title to the property has been retained by
or vested in some other Person for security purposes.
"Loan" means any of the Revolving Loans or the Term Loan made under the
Revolving Credit Facility or the Term Loan Facility, respectively.
"Loan Documents" means this Agreement, the Notes, the Guaranties, the
Security Instruments, the Applications and Agreements for Letter of Credit, and
all other instruments and documents heretofore or hereafter executed or
delivered to or in favor of any Lender or the Agent in connection with the Loans
made and
<PAGE>
transactions contemplated under this Agreement, as the same may be amended,
supplemented or restated from time to time.
"Loan Parties" means the Borrowers, the Guarantors and any other Person
(other than the Lenders) party to any of the Loan Documents.
"Managers" means collectively (or individually as the context may
indicate), Charles J. Speranzella, Jr., Fred J. Musone, and Robert M. Rapone.
"Material Adverse Effect" means a material adverse effect on (i) the
business, properties, operations or condition, financial or otherwise, of BREED
and its Subsidiaries, taken as a whole, (ii) the ability of the Loan Parties
taken as a whole to pay or perform the obligations, liabilities and indebtedness
under the Loan Documents as such payment or performance becomes due in
accordance with the terms thereof, or (iii) the rights, powers and remedies of
the Agent or any Lender under any Loan Document or the validity, legality or
enforceability thereof.
"Material Contract" means any contract or agreement, written or oral, of
any Borrower or any of its Subsidiaries the failure to comply with which could
reasonably be expected to have a Material Adverse Effect.
"Moody's" means Moody's Investors Service, Inc.
"Mortgaged Property" means, collectively (or individually as the context
may indicate) the real property and improvements thereon described in the
Mortgages.
"Mortgages" means, collectively (or individually as the context may
indicate), each Credit-Line Deed of Trust, Mortgage, Open-End Mortgage, Deed of
Trust, Deed to Secure Debt, Leasehold Mortgage, Open-End Leasehold Mortgage,
Leasehold Deed of Trust, Leasehold Deed to Secure Debt, Security Agreement,
Fixture Financing Statement, Assignment of Leases and Rents and Financing
Statement or similar mortgage instrument of BREED and its Subsidiaries now or
hereafter entered into in connection with this Agreement to secure the
Obligations or the Guarantors' Obligations, such term to include the Collateral
Assignment of Rents and Leases executed by a Subsidiary of BREED, BTI Michigan,
Inc., to secure its obligations under its Guaranty, and as from time to time
amended, supplemented or restated.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which BREED or any ERISA Affiliate is making, or is
accruing an obligation to make, contributions or has made, or been obligated to
make, contributions within the preceding six (6) Fiscal Years.
"Municipal Obligations" means general obligations issued by, and supported
by the full taxing authority of, any state of the United States of America or of
any municipal corporation or other public body organized under the laws of any
such state which are rated in the highest investment rating category by both S&P
and Moody's.
"NationsBank" means NationsBank, National Association and its successors.
"NMSI" means NationsBanc Montgomery Securities, Inc. and its successors.
<PAGE>
"Net Proceeds" means (a) from any Equity Offering or Debt Offering cash
payments received by BREED or any Subsidiary therefrom as and when received, net
of all legal, accounting, banking and underwriting fees and expenses,
commissions, discounts and other issuance expenses incurred in connection
therewith and all taxes required to be paid or accrued as a consequence of such
issuance and (b) from any Asset Disposition cash payments received by BREED or
any Subsidiary therefrom (including any cash payments received pursuant to any
note or other debt security received in connection with any Asset Disposition)
as and when received, net of (i) all legal fees and expenses and other fees and
expenses paid to third parties and incurred in connection therewith, (ii) all
taxes required to be paid or accrued as a consequence of such sale, (iii)
amounts applied to repayment of Indebtedness (other than the Obligations)
secured by a Lien on the asset or property disposed, and (iv) any other
necessary costs incurred in connection with the sale.
"Notes" means, collectively, the Term Notes and the Revolving Notes
executed and delivered to the Lenders substantially in the form of Exhibit O-1
and O-2, respectively.
"Obligations" means the obligations, liabilities and Indebtedness of the
Borrowers or any of them with respect to (i) the principal and interest on the
Loans as evidenced by the Notes, (ii) the Reimbursement Obligations and
otherwise in respect of the Letters of Credit, (iii) all liabilities of the
Borrowers or any of them to any Lender which arise under a Swap Agreement, and
(iii) the payment and performance of all other obligations, liabilities and
Indebtedness of the Borrowers or any of them to the Lenders, the Agent or NMSI
hereunder, under any one or more of the other Loan Documents or with respect to
the Loans.
"Offering Memorandum" means the offering memorandum prepared in connection
with the issuance of the Convertible Preferred Securities.
"Operating Documents" means with respect to any corporation, limited
liability company, partnership, limited partnership, limited liability
partnership, or other legally authorized incorporated or unincorporated entity,
the bylaws, operating agreement, partnership agreement, limited partnership
agreement or other applicable documents relating to the operation, governance or
management of such entity.
"Operating Plan" means the five (5) year consolidated business plan of
BREED and its Subsidiaries prepared by the management of BREED, giving effect to
the Allied Acquisition, which plan (a) is to include (i) proforma projected
balance sheets, statements of income and statements of cash flow (to include
separate forecasts for Consolidated Capital Expenditures and Consolidated EBITDA
by each major line of business) on a quarterly basis for the forthcoming Fiscal
Year and on an annual basis for the next succeeding four Fiscal Years, (ii)
detailed descriptions of all underlying assumptions, projected cost savings,
expense reductions, and synergies realized from the Allied Acquisition, (iii)
detailed descriptions of the long range plan for each major Subsidiary and for
operations which have been or will be discontinued and (iv) such other
calculations and descriptions as the Agent shall reasonably request, and (b)
shall otherwise be reasonably acceptable to the Agent; provided, that the
portion of the Operating Plan related to discontinued operations and
restructuring charges shall have been reviewed by Ernst & Young, LLP and the
five (5) year statements referred to in item (a)(i) above shall have been
prepared by the Borrower in accordance with procedures agreed upon with Ernst &
Young, LLP the compliance with and accuracy of which shall have tested for
conformity with such procedures by Ernst & Young, LLP.
"Organizational Action" means with respect to any corporation, limited
liability company, partnership,
<PAGE>
limited partnership, limited liability partnership or other legally
authorized incorporated or unincorporated entity, any corporate, organizational,
partnership action (including any required stakeholder, member or partner
action) or other similar official action, as applicable, taken by such entity.
"Organizational Documents" means with respect to any corporation, limited
liability company, partnership, limited partnership, limited liability
partnership or other legally authorized incorporated or unincorporated entity,
the articles of incorporation, certificate of incorporation, articles of
organization, certificate of limited partnership or other applicable
organizational or charter documents relating to the creation of such entity.
"Outstandings" means, collectively, at any date, the Letter of Credit
Outstandings, the Revolving Credit Outstandings, and the Term Loan Outstandings
on such date.
"Participation" means, with respect to any Lender (other than the Issuing
Bank) and a Letter of Credit, the extension of credit represented by the
participation of such Lender hereunder in the liability of the Issuing Bank in
respect of a Letter of Credit and any Reimbursement Obligation arising with
respect thereto issued by the Issuing Bank in accordance with the terms hereof.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
thereto.
"Pension Plan" means any employee pension benefit plan within the meaning
of Section 3(2) of ERISA, other than a Multiemployer Plan, which is subject to
the provisions of Title IV of ERISA or Section 412 of the Code and which (i) is
maintained for employees of BREED or any of its ERISA Affiliates or is assumed
by BREED or any of its ERISA Affiliates in connection with any Acquisition or
(ii) has at any time been maintained for the employees of BREED or any current
or former ERISA Affiliate.
"Permitted Indebtedness" has the meaning assigned to such term in Section
9.4 hereof.
"Permitted Liens" has the meaning assigned to such term in Section 9.3
hereof.
"Person" means an individual, partnership, corporation, trust, limited
liability company, unincorporated organization, association, joint venture or a
government or agency or political subdivision thereof.
"Pledge Agreement" means , collectively or individually as the context may
indicate (i) that certain Stock Pledge Agreement dated as of the Closing Date
between BREED and the Agent substantially in the form of Exhibit P-1 hereto,
(ii) that certain Stock Pledge Agreement dated as of the Closing Date between
certain Domestic Subsidiaries and the Agent substantially in the form of Exhibit
P-2 hereto, (iii) that certain Stock Pledge Agreement dated as of the Closing
Date among Allen K. Breed, Johnnie C. Breed, A. Breed, Ltd., a Texas limited
partnership, J. Breed, Ltd., a Texas limited partnership and the Agent
substantially in the form of Exhibit P-3 hereto, (iv) any Pledge Agreement,
Share Charge, Debenture or similar instrument whereby a Borrower or Domestic
Subsidiary creates a security interest in favor of the Agent of not less than
65% of the outstanding capital stock of a Direct Foreign Subsidiary, and (v) any
additional Pledge Agreement delivered to the Agent pursuant to Section 8.19, as
any of the foregoing may be hereafter amended, supplemented or restated from
time to time.
<PAGE>
"Pledged Stock" has the meaning given to such term in any Pledge Agreement.
"Pounds Sterling" means the official currency of the United Kingdom.
"Pre-Refunded Municipal Obligations" means obligations of any state of the
United States of America or of any municipal corporation or other public body
organized under the laws of any such state which are rated, based on the escrow,
in the highest investment rating category by both S&P and Moody's and which have
been irrevocably called for redemption and advance refunded through the deposit
in escrow of Government Securities or other debt securities which are (i) not
callable at the option of the issuer thereof prior to maturity, (ii) irrevocably
pledged solely to the payment of all principal and interest on such obligations
as the same becomes due, and (iii) in a principal amount and bear such rate or
rates of interest as shall be sufficient to pay in full all principal of,
interest, and premium, if any, on such obligations as the same becomes due as
verified by a nationally recognized firm of certified public accountants.
"Prime Rate" means the per annum rate of interest established from time to
time by NationsBank as its prime rate, which rate may not be the lowest rate of
interest charged by NationsBank to its customers.
"Principal Office" means the principal office of NationsBank, presently
located at, Independence Center, 15th Floor, NC1 001-15-04, Charlotte, North
Carolina 28255, Attention: Agency Services.
"Prudential" means Prudential Securities Credit Corp.
"Prudential Stock Purchase" means the purchase by Prudential of the Series
B Preference Shares pursuant to the Prudential Stock Purchase Agreement.
"Prudential Stock Purchase Agreement" means that certain Preferred Stock
Purchase Agreement dated as of October 30, 1997 between Prudential and BREED,
pursuant to which Prudential has agreed to purchase 4,000,000 shares of Series B
Preference Shares of BREED for an aggregate purchase price of $200,000,000.
"Prudential Stock Purchase Documents" means the Prudential Stock Purchase
Agreement, the Certificate of Designation (as defined in the Prudential Stock
Purchase Agreement) and all registration rights agreements, opinions and other
material principal documents entered into in connection with the transaction
contemplated thereby.
"Rate Hedging Obligations" means any and all obligations of BREED or any
Subsidiary, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, Dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts, warrants and those commonly known as
interest rate "swap" agreements; and (ii) any and all cancellations, buybacks,
reversals, terminations or assignments of any of the foregoing.
"Regulation D" means Regulation D of the Board as the same may be amended
or supplemented from
<PAGE>
time to time.
"Reimbursement Obligation" shall mean at any time, the obligation of one or
more of the Borrowers with respect to any Letter of Credit to reimburse the
Issuing Bank and the Lenders to the extent of their respective Participations
(including by the receipt by the Issuing Bank of proceeds of Loans pursuant to
Section 3.2) for amounts theretofore paid by the Issuing Bank pursuant to a
drawing under such Letter of Credit.
"Repurchase Agreement" means a repurchase agreement entered into with any
financial institution whose debt obligations or commercial paper are rated "A"
by either of S&P or Moody's or "A-1" by S&P or "P- 1" by Moody's.
"Required Lenders" means, as of any date, Lenders on such date having
Credit Exposures (as defined below) aggregating in excess of 50% of the
aggregate Credit Exposures of all Lenders on such date; provided, however, that
to the extent NationsBank has more than fifty percent (50%) of the aggregate
Credit Exposures, Required Lenders means Lenders on such date having Credit
Exposures of 66 2/3% of the aggregate Credit Exposures of all Lenders. For
purposes of the preceding sentence, the amount of the "Credit Exposure" of each
Lender shall be equal to the aggregate principal amount of the Revolving Loans
owing to such Lender plus the aggregate unutilized amounts of such Lender's
Revolving Credit Commitment plus the amount of such Lender's Applicable
Commitment Percentage of Letter of Credit Outstandings plus the amount of such
Lender's Applicable Commitment Percentage of the Term Loan Outstandings;
provided that, (i) if any Lender with a Revolving Credit Commitment shall have
failed to pay to the Issuing Bank its Applicable Commitment Percentage of any
drawing under any Letter of Credit resulting in an outstanding Reimbursement
Obligation, such Lender's Credit Exposure attributable to Letters of Credit and
Reimbursement Obligations shall be deemed to be held by the Issuing Bank for
purposes of this definition.
"Reserve Requirement" means, at any time, the maximum rate at which
reserves (including, without limitation, any marginal, special, supplemental, or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against in the case of
Eurodollar Rate Loans, "Eurocurrency liabilities" (as such term is used in
Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by such
member banks with respect to (i) any category of liabilities which includes
deposits by reference to which the Eurodollar Rate is to be determined, or (ii)
any category of extensions of credit or other assets which include Eurodollar
Rate Loans. The Eurodollar Rate shall be adjusted automatically on and as of the
effective date of any change in the Reserve Requirement.
"Restricted Payment" means (a) any dividend or other distribution, direct
or indirect, on account of any shares of any class of stock or equity securities
of BREED (including the Convertible Debentures) or any of its Subsidiaries
(other than those payable or distributable solely to BREED or by a Subsidiary to
its parent) now or hereafter outstanding, except a dividend payable solely in
shares of a class of stock to the holders of that class; (b) any redemption,
conversion, exchange, retirement or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of stock
of BREED or any of its Subsidiaries or other equity securities of BREED (other
than those payable or distributable solely to BREED) now or hereafter
outstanding; (c) any payment made to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire shares of any class of
stock of BREED or any of its Subsidiaries or other equity securities of BREED
<PAGE>
now or hereafter outstanding; and (d) any issuance and sale of capital
stock of any Subsidiary of BREED (or any option, warrant or right to acquire
such stock or other equity securities of BREED) other than to BREED or a
Domestic Subsidiary or Guarantor.
"Revolving Credit Commitment" means, with respect to each Lender, the
obligation of such Lender to make Revolving Loans to the Borrowers up to an
aggregate principal amount at any one time outstanding equal to such Lender's
Applicable Commitment Percentage of the Total Revolving Credit Commitment.
"Revolving Credit Facility" means the facility described in Section 2.1(a)
hereof providing for Loans to the Borrowers by the Lenders in the aggregate
principal amount of the Total Revolving Credit Commitment.
"Revolving Credit Outstandings" means, as of any date of determination, the
aggregate principal amount of all Revolving Loans then outstanding and all
interest accrued thereon.
"Revolving Credit Termination Date" means (i) the Stated Termination Date
or (ii) such earlier date of termination of Lenders' obligations pursuant to
Section 10.1 upon the occurrence of an Event of Default, or (iii) such date as
the Borrowers may voluntarily and permanently terminate the Revolving Credit
Facility by payment in full of all Revolving Credit Outstandings and Letter of
Credit Outstandings, termination of the Revolving Credit Commitment and the
Letter of Credit Commitment and cancellation (or, pursuant to the terms of the
LC Account Agreement, the cash collateralization) of all Letters of Credit.
"Revolving Loan" means any borrowing pursuant to an Advance under the
Revolving Credit Facility.
"Revolving Notes" means, collectively, the promissory notes of the
Borrowers evidencing Revolving Loans executed and delivered to the Lenders as
provided in Section 2.5(b) substantially in the form of Exhibit O-1, with
appropriate insertions as to amounts, dates, and names of Lenders.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, Inc.
"Security Agreement" means, collectively (or individually as the context
may indicate), (i) the Security Agreement dated as of the date hereof among
Borrowers, the Guarantors and the Agent, and (ii) any additional Security
Agreement delivered to the Agent pursuant to Section 8.19(a) hereof, in each
case, substantially in the form attached hereto as Exhibit R, as such Security
Agreement may be amended, supplemented or restated from time to time.
"Security Instruments" means the Security Agreement, the Intellectual
Property Security Agreement, the Pledge Agreement, the Collateral Assignment of
Partnership Interests, the Collateral Assignment of Trademark License Agreement,
the Mortgages, the Intercompany Note Pledge Agreement, the Lease Assignments,
the Landlord Waivers, the Intellectual Property Assignment, the Intercompany
Note Subordination Agreement, the LC Account Agreement and all other documents
and agreements executed and delivered in connection herewith granting to the
Lenders Liens on any assets of the Borrowers, any Guarantor, or any other Person
collaterally to secure payment and performance of the Obligations and the
Guarantors' Obligations under the Guaranty.
"Segment" means a portion of the Term Loan (or all thereof) with respect to
which a particular interest rate is (or is proposed to be) applicable.
<PAGE>
"Series A Preference Shares" means BREED's 1997 Series A Convertible
Non-Voting Preferred Shares, par value $.001 per share.
"Series B Preference Shares" means BREED's 1997 Series B Convertible
Preferred Stock, par value $.001 per share.
"Siemens" means Siemens Aktiengesell-Schaft, a German company.
"Siemens Stock Purchase" means the purchase by Siemens of the Series A
Preference Shares pursuant to the Siemens Stock Purchase Agreement.
"Siemens Stock Purchase Agreement" means that certain Stock Purchase
Agreement dated as of October 14, 1997 between Siemens and BREED, pursuant to
which Siemens has agreed to purchase 4,883,227 shares of Series A Preference
Shares of BREED for an aggregate purchase price of $115,000,000.
"Siemens Stock Purchase Documents" means the Siemens Stock Purchase
Agreement and all shareholder agreements, make-whole agreements, registration
rights agreements, opinions and other material principal documents entered into
in connection with the transaction contemplated thereby.
"Single Employer Plan" means any employee pension benefit plan covered by
Title IV of ERISA in respect of which BREED or any Subsidiary is an "employer"
as described in Section 4001(b) of ERISA and which is not a Multiemployer Plan.
"Solvent" means, when used with respect to any Person, that at the time of
determination:
(i) the fair value of its assets (both at fair valuation and at present
fair saleable value on an orderly basis) is in excess of the total amount of its
liabilities, including Contingent Obligations; and
(ii) it is then able and expects to be able to pay its debts as they
mature; and
(iii) it has capital sufficient to carry on its business as conducted and
as proposed to be conducted.
"Spanish Pesetas" means the official currency of Spain.
"Spot Rate of Exchange" means (i) in determining the Dollar Equivalent
Amount of a specified Alternative Currency amount as of any date, the spot
exchange rate determined by the Agent in accordance with its usual procedures
for the purchase by the Agent of Dollars with such Alternative Currency at
approximately 10:00 A.M. on the Business Day that is two (2) Business Days prior
to such date, and (ii) in determining the Alternative Currency Equivalent Amount
of a specified Dollar amount on any date, the spot exchange rate determined by
the Agent in accordance with its usual procedures for the purchase by the Agent
of such Alternative Currency with Dollars at approximately 10:00 A.M. on the
Business Day that is two (2) Business Days prior to such date.
"Stated Termination Date" means October 31, 1998.
<PAGE>
"Stock Option Plans" means, collectively, the BREED Technologies, Inc. 1992
Stock Option Plan, the BREED Technologies, Inc 1992 Director Stock Option Plan,
the BREED Technologies, Inc 1992 Employee Stock Purchase Plan and the BREED
Technologies, Inc 1994 Stock Incentive Plan.
"Subordinated Indebtedness" means all Indebtedness that is subordinated to
the Revolving Credit Facility under its own terms or under any separate
agreement of subordination, in each case upon terms satisfactory to the Agent.
"Subsidiary" means any corporation or other entity in which 50% or more of
its outstanding voting stock or 50% or more of all equity interests is owned
directly or indirectly by BREED and/or by one or more of BREED's Subsidiaries or
is otherwise required under GAAP to have its financial statements consolidated
with those of BREED and its Subsidiaries.
"Swap Agreement" means one or more agreements between the Borrowers and any
Lender with respect to Indebtedness evidenced by any or all of the Notes, on
terms mutually acceptable to Borrowers and such Lender, which agreements create
Rate Hedging Obligations.
"Term Loan" means the loan made pursuant to the Term Loan Facility.
"Term Loan Commitment" means, with respect to each Lender, the obligation
of such Lender to make the Term Loan to BREED in a principal amount equal to
such Lender's Applicable Commitment Percentage of the Total Term Loan
Commitment.
"Term Loan Facility" means the facility described in Section 2.1(b)
providing for a Term Loan to BREED by the Lenders in the original principal
amount of the Total Term Loan Commitment.
"Term Loan Outstandings" means, as of any date of determination, the
aggregate principal amount of the Term Loan then outstanding and all interest
accrued thereon.
"Term Loan Termination Date" means (i) the Stated Termination Date or (ii)
such earlier date of termination of Lenders' obligations pursuant to Section
10.1 upon the occurrence of an Event of Default, or (iii) such date as BREED may
voluntarily and permanently terminate the Term Loan Facility by payment in full
of all Obligations incurred in connection with the Term Loan.
"Term Notes" means, collectively, the promissory notes of BREED evidencing
Term Loans executed and delivered to the Lenders as provided in Section 2.5(a)
substantially in the form of Exhibit O-2, with appropriate insertions as to
amounts, dates and names of Lenders.
"Termination Event" means: (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder (unless the notice
requirement has been waived by applicable regulation); or (ii) the withdrawal of
BREED or any ERISA Affiliate from a Pension Plan during a plan year in which it
was a "substantial employer" as defined in Section 4001(a)(2) of ERISA or was
deemed such under Section 4068(f) of ERISA; or (iii) the termination of a
Pension Plan, the filing of a notice of intent to terminate a Pension Plan or
the treatment of a Pension Plan amendment as a termination under Section 4041 of
ERISA; or (iv) the institution of proceedings to terminate a Pension Plan by the
PBGC; or (v) any other event or condition which
<PAGE>
would constitute grounds under Section 4042(a) of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan; or (vi) the
partial or complete withdrawal of BREED or any ERISA Affiliate from a
Multiemployer Plan; or (vii) the imposition of a Lien pursuant to Section 412 of
the Code or Section 302 of ERISA; or (viii) any event or condition which results
in the reorganization or insolvency of a Multiemployer Plan under Section 4241
or Section 4245 of ERISA, respectively; or (ix) any event or condition which
results in the termination of a Multiemployer Plan under Section 4041A of ERISA
or the institution by the PBGC of proceedings to terminate a Multiemployer Plan
under Section 4042 of ERISA; or (x) any event or condition with respect to any
Employee Benefit Plan which is regulated by any Foreign Benefit Law that results
in such Employee Benefit Plan's termination or the revocation of the Employee
Benefit Plan's authority to operate under the applicable Foreign Benefit Law.
"Total Alternative Currency Sublimit" means $75,000,000.
"Total Credit Commitment" means a principal amount equal to the Total
Revolving Credit Commitment plus the Total Term Loan Commitment.
"Total Letter of Credit Commitment" means an amount not to exceed
$25,000,000.
"Total Revolving Credit Commitment" means a principal amount equal to
$300,000,000, as reduced from time to time in accordance with Section 2.7.
"Total Term Loan Commitment" means a principal amount equal to
$600,000,000.
"Type" shall mean any type of Loan (i.e., a Base Rate Loan or a Eurodollar
Rate Loan).
"Voting Stock" means shares of capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are ordinarily,
in the absence of contingencies, entitled to vote for the election of directors
(or persons performing similar functions) of such Person, even if the right so
to vote has been suspended by the happening of such a contingency.
1.2. Rules of Interpretation. (a) All accounting terms not specifically
defined herein shall have the meanings assigned to such terms and shall be
interpreted in accordance with GAAP applied on a Consistent Basis.
(b) Each term defined in Article 1 or 9 of the Florida Uniform Commercial
Code shall have the meaning given therein unless otherwise defined herein,
except to the extent that the Uniform Commercial Code of another jurisdiction is
controlling, in which case such terms shall have the meaning given in the
Uniform Commercial Code of the applicable jurisdiction.
(c) The headings, subheadings and table of contents used herein or in any
other Loan Document are solely for convenience of reference and shall not
constitute a part of any such document or affect the meaning, construction or
effect of any provision thereof.
(d) Except as otherwise expressly provided, references herein to articles,
sections, paragraphs, clauses, annexes, appendices, exhibits and schedules are
references to articles, sections, paragraphs, clauses,
<PAGE>
annexes, appendices, exhibits and schedules in or to this Agreement.
(e) All definitions set forth herein or in any other Loan Document shall
apply to the singular as well as the plural form of such defined term, and all
references to the masculine gender shall include reference to the feminine or
neuter gender, and vice versa, as the context may require.
(f) When used herein or in any other Loan Document, words such as
"hereunder", "hereto", "hereof" and "herein" and other words of like import
shall, unless the context clearly indicates to the contrary, refer to the whole
of the applicable document and not to any particular article, section,
subsection, paragraph or clause thereof.
(g) References to "including" means including without limiting the
generality of any description preceding such term, and for purposes hereof the
rule of ejusdem generis shall not be applicable to limit a general statement,
followed by or referable to an enumeration of specific matters, to matters
similar to those specifically mentioned.
(h) All dates and times of day specified herein shall refer to such dates
and times at Charlotte, North Carolina.
(i) Each of the parties to the Loan Documents and their counsel have
reviewed and revised, or requested (or had the opportunity to request) revisions
to, the Loan Documents, and any rule of construction that ambiguities are to be
resolved against the drafting party shall be inapplicable in the construing and
interpretation of the Loan Documents and all exhibits, schedules and appendices
thereto.
(j) Any reference to an officer of BREED or any other Person by reference
to the title of such officer shall be deemed to refer to each other officer of
such Person, however titled, exercising the same or substantially similar
functions.
(k) All references to any agreement or document as amended, modified or
supplemented, or words of similar effect, shall mean such document or agreement,
as the case may be, as amended, modified or supplemented from time to time only
as and to the extent permitted therein and in the Loan Documents.
ARTICLE II
The Credit Facilities
2.1. Loans.
(a) Revolving Loan. Subject to the terms and conditions of this Agreement,
each Lender severally agrees to make Advances in Dollars or an Alternative
Currency (as specified in the respective Borrowing Notice) to the applicable
Borrower or Borrowers under the Revolving Credit Facility from time to time from
the Closing Date until the Revolving Credit Termination Date on a pro rata basis
as to the total borrowing requested by the applicable Borrower or Borrowers on
any day determined by such Lender's Applicable Commitment Percentage up to but
not exceeding a Dollar Value equal to the Revolving Credit Commitment of such
Lender, provided, however, that the Lenders will not be required and shall have
no obligation to make any such
<PAGE>
Advance (i) so long as a Default or an Event of Default has occurred and is
continuing or (ii) if the Agent has accelerated the maturity of any of the Notes
as a result of an Event of Default; provided further, however, that immediately
after giving effect to each such Advance, (u) the Dollar Value of the principal
amount of Revolving Credit Outstandings plus Letter of Credit Outstandings shall
not exceed the Total Revolving Credit Commitment and (v) the Dollar Value of the
principal amount of Loans in an Alternative Currency shall not exceed the Total
Alternative Currency Sublimit. Within such limits, the Borrowers may borrow,
repay and reborrow under the Revolving Credit Facility on a Business Day from
the Closing Date until, but (as to borrowings and reborrowings) not including,
the Revolving Credit Termination Date; provided, however, that (w) no Eurodollar
Rate Loan shall be made which has an Interest Period that extends beyond the
Stated Termination Date and (x) each Eurodollar Rate Loan may, subject to the
provisions of Section 2.7, be repaid only on the last day of the Interest Period
with respect thereto unless such payment is accompanied by the additional
payment, if any, required by Section 5.5. The Borrowers agree that (y) if at any
time the Dollar Value of Revolving Credit Outstandings plus the Dollar Value of
Letter of Credit Outstandings shall exceed the Total Revolving Credit
Commitment, the Borrowers shall immediately reduce the outstanding principal
amount of the Revolving Loans such that, as a result of such reduction, the
Dollar Value of Revolving Credit Outstandings plus the Dollar Value of Letter of
Credit Outstandings shall not exceed the Total Revolving Credit Commitment and
(z) if at any time the Dollar Value of Loans in an Alternative Currency exceed
the Total Alternative Currency Sublimit by 105%, the Borrowers shall immediately
make a Rate Adjustment Payment as set forth below in Section 2.1(c).
(b) Term Loan. Subject to the terms and conditions of this Agreement, each
Lender severally agrees to make an Advance of the Term Loan in Dollars (as
specified in the Borrowing Notice) to BREED under the Term Loan Facility on the
Closing Date on a pro rata basis determined by its Applicable Commitment
Percentage up to the Term Loan Commitment of such Lender. The Term Loan shall be
available in a single draw on the Closing Date and shall be due and payable on
the Stated Termination Date. The principal amount of each Segment of the Term
Loan outstanding hereunder from time to time shall bear interest, at BREED's
election, at an interest rate per annum equal to the Base Rate or the Eurodollar
Rate; provided, that (x) no Eurodollar Rate Segment shall have an Interest
Period that extends beyond the Stated Termination Date, and (y) each Eurodollar
Rate Segment may, subject to the provisions of Section 2.7, be repaid only on
the last day of the Interest Period with respect thereto unless such payment is
accompanied by the additional payment, if any, required by Section 5.5. BREED
agrees that if at any time the Term Loan Outstandings shall exceed the Total
Term Loan Commitment, the Borrowers shall immediately reduce the outstanding
principal amount of the Term Loans such that, as a result of such reduction, the
Term Loan Outstandings shall not exceed the Total Term Loan Commitment.
(c) Amounts. (i) Each request for an Advance in an Alternative Currency
under a Borrowing Notice shall constitute the applicable Borrower's or
Borrowers' request for a Loan of the Dollar Value of the amount of the
Alternative Currency specified in such Borrowing Notice and for such Loan to be
made available by the Lenders to the applicable Borrower or Borrowers in the
Alternative Currency Equivalent Amount of such Dollar Value (determined based on
the Advance Date Exchange Rate applicable to such Advance). The principal amount
outstanding on any Loan shall be recorded in the Agent's records in Dollars (in
the case of an Advance in an Alternative Currency as if the Loan had initially
been made in Dollars), based on the amount of any Loan in Dollars and on the
Dollar Value of the initial Advance in an Alternative Currency, as reduced from
time to time by the Dollar Equivalent Amount (based on the Advance Date Exchange
Rate applicable to such Advance) of any principal payments with respect to such
Advance. Loans in an Alternative Currency shall be
<PAGE>
limited to Revolving Loans which are Eurodollar Rate Loans. The Term Loan
shall at all times be in Dollars.
In the event a Eurodollar Rate Loan of an Alternative Currency is
Continued, such election to Continue the Eurodollar Rate Loan shall be treated
as an Advance and the Agent shall notify the applicable Borrower or Borrowers
and the Lenders of the Advance Date Exchange Rate, Interest Period and the
Eurodollar Rate for such Continued Eurodollar Rate Loan. In such event, the
Lenders shall each be deemed to have made an Advance to the applicable Borrower
or Borrowers of its Applicable Commitment Percentage of such Loan of an
Alternative Currency and the Agent shall apply the Advance Date Exchange Rate
for such new Interest Period to such Continued Alternative Currency Equivalent
Amount to determine the new Dollar Value of such Eurodollar Rate Loan and shall
adjust its books and the Outstandings. In the event that such adjustment with
respect to a Continued Loan would cause the total Dollar Value of Revolving
Credit Outstandings plus the Dollar Value of Letter of Credit Outstandings to
exceed the Total Revolving Credit Commitment or the total Dollar Value of all
Loans in an Alternative Currency to exceed the Total Alternative Currency
Sublimit by 105%, the Borrowers shall, immediately on the effective date of such
Continuation, repay (a "Rate Adjustment Payment") the portion of such Continued
Loan (applying the new Advance Date Exchange Rate) necessary to ensure that the
total Dollar Value of all Revolving Credit Outstandings plus the Dollar Value of
Letter of Credit Outstandings does not exceed the Total Revolving Credit
Commitment and the total Dollar Value of Loans in an Alternative Currency does
not exceed the Total Alternative Currency Sublimit by 105%. Such Rate Adjustment
Payments shall be accompanied by payment of all amounts due pursuant to Section
5.5 hereof as a result of such Rate Adjustment Payment. For the purposes of
determining the maximum amount of Revolving Credit Outstandings and Letter of
Credit Outstandings and compliance with the Total Alternative Currency Sublimit
hereunder, it is intended by the parties that all Loans shall be the functional
equivalent of Loans made and repaid (based on the applicable Advance Date
Exchange Rate for each Advance) in Dollars. It is recognized that one or more
Lenders may elect to record Loans in Alternative Currencies. The Agent shall
maintain records sufficient to identify at any time, (A) the Advance Date
Exchange Rate with respect to each Advance and (B) the portion of the Revolving
Credit Outstandings attributable to each Advance.
(ii) The aggregate unpaid principal amount (including with respect to Loans
of Alternative Currencies the total Dollar Value) of (A) the Revolving Credit
Outstandings plus Letter of Credit Outstandings shall not exceed at any time the
Total Revolving Credit Commitment, (B) the Term Loan Outstandings shall not
exceed at any time the Total Term Loan Commitment, and (C) Loans in an
Alternative Currencies shall not exceed the Total Alternative Currency Sublimit
by 105%, and, in the event there shall be outstanding any such excess in any of
the foregoing instances, the Borrowers shall immediately make such payments and
prepayments as shall be necessary to comply with this restriction. Each Loan
hereunder, other than Base Rate Refunding Loans, and each Conversion under
Section 2.8, shall be (A) in the case of Loans made in Dollars, in an amount of
at least $5,000,000, and, if greater than $5,000,000, an integral multiple of
$1,000,000, and (B) in the case of Loans made in an Alternative Currency, in an
amount of at least $5,000,000 (or the Alternative Currency Equivalent Amount
thereof), and, if greater than $5,000,000, an integral multiple of $1,000,000
(or the Alternative Currency Equivalent Amount thereof).
(d) Advances and Rate Selection. (i) An Authorized Representative shall
give the Agent (A) at least three (3) Business Days' irrevocable written notice
by telefacsimile transmission of a Borrowing Notice or Interest Rate Selection
Notice (as applicable) with appropriate insertions, effective upon receipt, of
each Eurodollar Rate Loan (whether representing an additional borrowing
hereunder or the Conversion of a borrowing hereunder) prior to 11:00 A.M. and
(B) irrevocable written notice by telefacsimile transmission of a
<PAGE>
Borrowing Notice or Interest Rate Selection Notice (as applicable) with
appropriate insertions, effective upon receipt, of each Loan (other than Base
Rate Refunding Loans to the extent the same are effected without notice pursuant
to Section 2.1(d)(iv)) that is a Base Rate Loan (whether representing an
additional borrowing hereunder or the Conversion of borrowing hereunder) prior
to 11:00 A.M. on the day of such proposed Base Rate Loan. Each such notice shall
specify the amount of the borrowing, whether Dollar or Alternative Currency (in
the case of a Revolving Loan), the Type of Loan (Base Rate or Eurodollar Rate),
the date of borrowing and, if a Eurodollar Rate Loan, the Interest Period to be
used in the computation of interest. Notice of receipt of such Borrowing Notice
or Interest Rate Selection Notice, as the case may be, together with the amount
of each Lender's portion of an Advance or Segment requested, Continued, or
Converted thereunder, shall be promptly provided by the Agent to each Lender by
telefacsimile transmission, but (provided the Agent shall have received such
notice by 11:00 A.M.) not later than 1:00 P.M. on the same day as the Agent's
receipt of such notice. At approximately 10:00 A.M. two (2) Business Days
preceding the date specified for an Advance, Continuation or Conversion of an
Alternative Currency, the Agent shall determine the Advance Date Exchange Rate
and the applicable Eurodollar Rate. Not later than 10:45 A.M. two (2) Business
Days preceding the date specified for each Advance, Continuation or Conversion
of an Alternative Currency, the Agent shall provide the applicable Borrower or
Borrowers and each Lender notice by telefacsimile transmission of the Advance
Date Exchange Rate applicable to such Advance, Continuation or Conversion and
the applicable Alternative Currency Equivalent Amount of the Revolving Loan or
Loans required to be made by each Lender on such date, and the Dollar Value of
such Revolving Loan or Loans and the applicable Eurodollar Rate.
(ii) (A) In the case of Advances in Dollars, not later than 2:00 P.M. on
the date specified for each borrowing under this Section 2.1, each Lender shall,
pursuant to the terms and subject to the conditions of this Agreement, make the
amount of the Advance or Advances to be made by it on such day available by wire
transfer to the Agent in the amount of its pro rata share, determined according
to such Lender's Applicable Commitment Percentage of the Loan or Loans to be
made on such day. Such wire transfer shall be directed to the Agent at the
Principal Office and shall be in the form of Dollars constituting immediately
available funds. The amount so received by the Agent shall, subject to the terms
and conditions of this Agreement, be made available to the applicable Borrower
or Borrowers by delivery of the proceeds thereof to the Borrowers' Account or
otherwise as shall be directed in the applicable Borrowing Notice by the
Authorized Representative and reasonably acceptable to the Agent.
(B) In the case of Advances of an Alternative Currency, not later than
10:00 A.M. on the date specified for each Advance, each Lender shall, pursuant
to the terms and subject to the conditions of this Agreement, make the amount of
the Revolving Loan or Loans to be made by it on such day available to the
applicable Borrower or Borrowers at the Funding Bank, to the account of the
Agent with the Funding Bank. The amount so received by the Funding Bank shall,
subject to the terms and conditions of the Loan Documents and upon instruction
from the Agent to the Funding Bank on the same day or immediately preceding day
but no later than 10:00 A.M., be made available to the applicable Borrower or
Borrowers by delivery of the Alternative Currency Equivalent Amount to the
Borrowers' account with the Funding Bank.
(iii) The Borrowers shall have the option to elect the duration of the
initial and any subsequent Interest Periods and to Continue or Convert the Loans
in accordance with Section 2.8. Eurodollar Rate Loans and Base Rate Loans may be
outstanding at the same time, provided, however, there shall not be outstanding
at any one time Eurodollar Rate Loans having more than ten (10) different
Interest Periods. If the Agent does not receive a Borrowing Notice or an
Interest Rate Selection Notice giving notice of election of the duration of an
<PAGE>
Interest Period or of Conversion of any Loan to or Continuation of a Loan
as a Eurodollar Rate Loan by the time prescribed by Section 2.1(d) or 2.8, the
applicable Borrower or Borrowers shall be deemed to have elected to Convert such
Loans to (or continue such Loan as) a Base Rate Loan until the applicable
Borrower or Borrowers notifies the Agent in accordance with Section 2.8.
(iv) Notwithstanding the foregoing, if a drawing is made under any Letter
of Credit, such drawing is honored by the Issuing Bank prior to the Stated
Termination Date, and the applicable Borrower or Borrowers shall not immediately
fully reimburse the Issuing Bank in respect of such drawing, (A) provided that
the conditions to making a Revolving Loan as herein provided shall then be
satisfied, the Reimbursement Obligation arising from such drawing shall be paid
to the Issuing Bank by the Agent without the requirement of notice to or from
the applicable Borrower or Borrowers from immediately available funds which
shall be advanced as a Base Rate Refunding Loan by each Lender under the
Revolving Credit Facility in an amount equal to such Lender's Applicable
Commitment Percentage of such Reimbursement Obligation, and (B) if the
conditions to making a Revolving Loan as herein provided shall not then be
satisfied, each of the Lenders shall fund by payment to the Agent (for the
benefit of the Issuing Bank) in immediately available funds the purchase from
the Issuing Bank of their respective Participations in the related Reimbursement
Obligation based on their respective Applicable Commitment Percentages of the
Total Letter of Credit Commitment. If a drawing is presented under any Letter of
Credit in accordance with the terms thereof and the Borrowers shall not
immediately reimburse the Issuing Bank in respect thereof, then notice of such
drawing or payment shall be provided promptly by the Issuing Bank to the Agent
and the Agent shall promptly provide notice to each Lender by telephone or
telefacsimile transmission. If notice to the Lenders of a drawing under any
Letter of Credit is given by the Agent at or before 1:00 any Business Day, each
Lender shall, pursuant to the conditions specified in this Section 2.1(d)(iv),
either make a Base Rate Refunding Loan or fund the purchase of its Participation
in the amount of such Lender's Applicable Commitment Percentage of such drawing
or payment and shall pay such amount to the Agent for the account of the Issuing
Bank at the Principal Office in Dollars and in immediately available funds
before 2:00 P.M. on the same Business Day. If notice to the Lenders of a drawing
under a Letter of Credit is given by the Agent after 1:00 on any Business Day,
each Lender shall, pursuant to the conditions specified in this Section
2.1(d)(iv), either make a Base Rate Refunding Loan or fund the purchase of its
Participation in the amount of such Lender's Applicable Commitment Percentage of
such drawing or payment and shall pay such amount to the Agent for the account
of the Issuing Bank at the Principal Office in Dollars and in immediately
available funds before 12:00 noon on the next following Business Day. Any such
Base Rate Refunding Loan shall be advanced as, and shall continue as, a Base
Rate Loan unless and until the applicable Borrower or Borrowers Converts such
Base Rate Loan in accordance with the terms of Section 2.8.
(e) Notwithstanding any other provision of this Agreement, except as
hereinafter provided, each Borrower shall be jointly and severally liable as
primary obligor and not merely as surety for repayment of all Obligations
arising under the Loan Documents. Such joint and several liability shall apply
to each Borrower regardless of whether (i) any Loan was only requested by or
made to another Borrower or the proceeds of any Loan were used only by another
Borrower, (ii) any Letter of Credit was issued on the application of another
Borrower, (iii) any interest rate election was made only by another Borrower, or
(iv) any indemnification obligation or any other obligation arose only as a
result of the actions of another Borrower; provided the liability of each of the
Borrowers other than BREED under this Agreement, the Notes and the other Loan
Documents shall be limited to the maximum amount of the Obligations under the
Revolving Credit Facility for which such other Borrower may be liable without
violating any applicable fraudulent conveyance, fraudulent transfer or
comparable laws. Each Borrower shall retain any right of contribution arising
under applicable law against the
<PAGE>
other Borrowers as the result of the satisfaction of any Obligations;
provided, no Borrower shall assert such right of contribution against any other
Borrower until the Obligations shall have been paid in full. Notwithstanding
anything herein to the contrary, a Borrowing Subsidiary which is a Foreign
Subsidiary shall be liable hereunder only for Advances, Loans and Reimbursement
Obligations made by it or on its behalf hereunder together with interest
relating thereto and fees and expenses arising hereunder.
Without limiting the foregoing provisions of this Section 2.1(e), each of
the Borrowers, other than a Borrowing Subsidiary which is a Foreign Subsidiary,
hereby irrevocably, absolutely and unconditionally guarantees the full and
punctual payment or performance when due, whether at stated maturity, by
required prepayment, declaration, acceleration, demand or otherwise, of all
Obligations of each other Borrower whether owing to the Agent or any Lender.
This guarantee constitutes a guaranty of payment and not of collection. The
liability of each of the Borrowers other than BREED and a Borrowing Subsidiary
which is a Foreign Subsidiary under the immediately preceding two sentences
shall be limited to the maximum amount for which such Borrower may be liable
without violating any applicable fraudulent conveyance, fraudulent transfer or
comparable laws.
It is the intention of the parties that with respect to each Borrower its
obligations hereunder and under the other Loan Documents shall be absolute,
unconditional and irrevocable irrespective of:
(i) any lack of validity, legality or enforceability of this Agreement, any
Note, any other Loan Document as to any other Borrowers;
(ii) the failure of the Agent or any Lender:
(A) to enforce any right or remedy against any other Borrower or any other
Person under the provisions of this Agreement, any Note, any other Loan Document
or otherwise, or
(B) to exercise any right or remedy against any guarantor of, or collateral
securing, any Obligations;
(iii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other extension, compromise
or renewal of any Obligations with respect to any other Borrower;
(iv) any reduction, limitation, impairment or termination of any
Obligations with respect to any other Borrower or any other Person for any
reason including any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to (and each Borrower hereby waives any
right to or claim of) any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise or unenforceability of, or any other event or
occurrence affecting, any Obligations with respect to any other Borrower;
(v) any addition, exchange, release, surrender or nonperfection of any
collateral, or any amendment to or waiver or release or addition of, or consent
to departure from , any guaranty, held by the Agent, any Lender or any holder of
any Note securing any of the Obligations; or
<PAGE>
(vi) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, any other Borrower, any
surety or any guarantor.
Each Borrower (except Borrowing Subsidiaries which are Foreign
Subsidiaries) agrees that its joint and several liability hereunder shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment (in whole or in part) of any of the Obligations is rescinded or must
be restored by the Agent, any Lender or any holder of any Note, upon the
insolvency, bankruptcy or reorganization of any other Borrower as though such
payment had not been made.
Each Borrower hereby expressly waives: (a) notice of the Lenders'
acceptance of this Agreement; (b) notice of the existence or creation or
non-payment of all or any of the Obligations; (c) presentment, demand, notice of
dishonor, protest, and all other notices whatsoever other than notices expressly
provided for in this Agreement or by applicable law and (d) all diligence in
collection or protection of or realization upon the Obligations or any thereof,
any obligation hereunder, or any security for or guaranty of any of the
foregoing.
No delay on any of the Lenders' or the Agent's part in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by any of the Lenders or the Agent of any right or remedy shall
preclude any other or further exercise thereof or the exercise of any other
right or remedy. No action of the Agent or any of the Lenders permitted
hereunder shall in any way affect or impair any of their rights or any of their
obligations to any of the Borrowers under this Agreement (except as otherwise
waived, modified, or amended).
2.2. Payment of Interest. (a) The applicable Borrower or Borrowers shall
pay interest to the Agent for the account of each Lender on the outstanding and
unpaid principal amount of each Loan made by such Lender for the period
commencing on the date of such Loan until such Loan shall be due (i) in the case
of Loans made in Dollars, at the then applicable Base Rate for Base Rate Loans
or applicable Eurodollar Rate for Eurodollar Rate Loans, as designated by the
Authorized Representative pursuant to Section 2.1, such payments to be made in
Dollars, and (ii) in the case of Loans made in Alternative Currencies, at the
applicable Eurodollar Rate, such payments to be made in the appropriate
Alternative Currency; provided, however, that if any amount shall not be paid
when due (at maturity, by acceleration or otherwise), all amounts outstanding
hereunder shall bear interest thereafter at the Default Rate.
(b) Interest on each Loan shall be computed on the basis of a year of 360
days and calculated in each case for the actual number of days elapsed. Interest
on each Loan shall be paid (i) quarterly in arrears on the last Business Day of
each March, June, September and December, commencing December 31, 1997 for each
Base Rate Loan, (ii) on the last day of the applicable Interest Period for each
Eurodollar Rate Loan and (iii) upon payment in full of the principal amount of
such Loan.
2.3. Payment of Principal.
(a) Manner of Payment. The principal amount of the Revolving Credit
Outstandings shall be due and payable to the Agent for the benefit of each
Lender in full on the Revolving Credit Termination Date, or earlier as
specifically provided herein. The principal amount of the Term Loan Outstandings
shall be due and payable to the Agent for the benefit of each Lender in full on
the Stated Termination Date, or earlier as specifically provided herein. The
principal amount of all Outstandings shall be recorded in Dollars as set forth
<PAGE>
in Section 2.1. The repayment of such principal amount shall be made in the
appropriate Alternative Currency as follows: the portion of the Outstandings
attributable to each specified Advance (or the Continuation or Conversion
thereof) (as determined from the Agent's records) shall be repaid in the same
Alternative Currency as such Advance. The principal amount of any Base Rate Loan
may be prepaid in Dollars in whole or in part at any time. Other than
prepayments made pursuant to Section 2.3(b), the principal amount of any
Eurodollar Rate Loan may be prepaid only at the end of the applicable Interest
Period unless the applicable Borrower or Borrowers shall pay to the Agent for
the account of the Lenders the additional amount, if any, required under Section
5.5. All prepayments of Loans made by the Borrowers shall be in the amount of
$1,000,000 (or the Alternative Currency Equivalent Amount thereof) or such
greater amount which is an integral multiple of $1,000,000 (or the Alternative
Currency Equivalent Amount thereof), or the amount equal to all Outstandings, or
such other amount as necessary to comply with Section 2.1(c) or Section 2.8.
(b) Mandatory Prepayments. The Borrowers shall make the following required
prepayments, each such payment to be made to the Agent for the benefit of the
Lenders within the time period specified below and with respect to any Loan in
an Alternative Currency, in the Alternative Currency Equivalent Amount of the
amount due:
(i) Equity Offerings. BREED shall make, or shall cause each applicable
Subsidiary to make, a prepayment from the Net Proceeds of any Equity Offering in
an amount equal to one hundred percent (100%) of such Net Proceeds. Each such
prepayment shall be made within five (5) Business Days of receipt of such Net
Proceeds and upon not less than three (3) Business' Days written notice to the
Agent, and shall include within one (1) Business Day of repayment a certificate
of an Authorized Representative setting forth in reasonable detail the
calculations utilized in computing the amount of the Net Proceeds.
(ii) Debt Offerings. BREED shall make, or shall cause each applicable
Subsidiary to make, a prepayment from the Net Proceeds of any Debt Offering in
an amount equal to one hundred percent (100%) of such Net Proceeds. Each such
prepayment shall be made within five (5) Business Days of receipt of such Net
Proceeds and upon not less than three (3) Business' Days written notice to the
Agent, and shall include within one (1) Business Day of repayment a certificate
of an Authorized Representative setting forth in reasonable detail the
calculations utilized in computing the amount of the Net Proceeds.
(iii) Asset Dispositions. BREED shall make, or shall cause each applicable
Subsidiary to make, a prepayment from the Net Proceeds of any Asset Disposition
in an amount equal to one hundred percent (100%) of such Net Proceeds. Each such
prepayment shall be made within five (5) Business Days of receipt of such Net
Proceeds and upon not less than three (3) Business' Days written notice to the
Agent, which notice shall include a certificate of an Authorized Representative
setting forth in reasonable detail the calculations utilized in computing the
amount of the Net Proceeds. Notwithstanding the foregoing, however, an aggregate
amount of up to $10,000,000 of the Net Proceeds from the sale of nonproductive
foreign assets may be excluded from the payment required under this Section
2.3(b)(iii) to the extent that such amount is used for severance payments to
former employees of such foreign assets who were released from employment in
connection with such sale; provided, that upon receipt of the Operating Plan,
the Agent may, but in no event shall be required to, in its sole discretion,
increase the aggregate amount so excluded as appropriate; provided, further,
that any amount so excluded shall be included in the calculations required by
the preceding sentence.
(iv) Operating Plan. From and after the date of approval of the Operating
Plan, BREED shall
<PAGE>
be entitled to retain an aggregate of $20,000,000 of Net Proceeds resulting
from Asset Dispositions received by it or its Subsidiaries subsequent to such
date of approval.
All mandatory prepayments made pursuant to this Section 2.3(b) shall be
applied first to repay all Term Loans until the Term Loan Outstandings have been
paid in full and then to permanently reduce the Total Revolving Credit
Commitment. Any prepayment of an Eurodollar Rate Loan pursuant to this Section
2.3(b) other than on the last day of an Interest Period shall be accompanied by
the additional payment, if any, required by Section 5.5 hereof.
2.4. Non-Conforming Payments. (a) Each payment of principal (including any
prepayment) and payment of interest and fees, and any other amount required to
be paid to the Lenders with respect to the Loans, shall be made to the Agent at
the Principal Office, for the account of each Lender, in Dollars in the case of
Loans made in Dollars and in the same Alternative Currency in the case of Loans
made in Alternative Currencies, in immediately available funds before 12:30 P.M.
on the date such payment is due. The applicable Borrower or Borrowers shall give
the Agent one (1) Business Days' prior written notice of any payment of
principal, such notice to be given prior to 11:00 A.M. and to specify (i) the
date the payment will be made and (ii) the Loan to which payment relates. The
Agent may, at the election of the applicable Borrower or Borrowers, but shall
not be obligated to, debit the amount of any such payment which is not made by
such time to any ordinary deposit account, if any, of the Borrowers with the
Agent.
(b) The Agent shall deem any payment made by or on behalf of the Borrowers
hereunder that is not made both (i) in Dollars in the case of Loans made in
Dollars and in the required Alternative Currency in the case of Loans made in
Alternative Currencies in immediately available funds and (ii) prior to 12:30
P.M. on the date payment is due to be a non-conforming payment. Any such payment
shall not be deemed to be received by the Agent until the later of (i)the time
such funds become available funds and (ii)the next Business Day. Any
non-conforming payment may constitute or become a Default or Event of Default at
the determination of the Agent. The Agent shall give prompt telephonic or
telefacsimile notice to the applicable Borrower or Borrowers if a non-conforming
payment constitutes a Default or an Event of Default. Interest shall continue to
accrue on any principal as to which a non-conforming payment is made until the
later of (x) the date such funds become available funds or (y) the next Business
Day at the Default Rate from the date such amount was due and payable.
(c) In the event that any payment hereunder or under the Notes becomes due
and payable on a day other than a Business Day, then such due date shall be
extended to the next succeeding Business Day unless provided otherwise under
clause (ii) of the definition of "Interest Period"; provided that interest shall
continue to accrue during the period of any such extension and provided further,
that in no event shall any such due date be extended beyond the Stated
Termination Date.
2.5. Notes. (a) Term Loans made by each Lender shall be evidenced by a Note
in substantially the form set forth as Exhibit O-1 payable to the order of such
Lender in the respective amount of its Applicable Commitment Percentage of the
Total Term Loan Commitment, which Note shall be dated the Closing Date or a
later date pursuant to an Assignment and Acceptance and shall be duly completed,
executed and delivered by BREED.
(b) Revolving Loans made by each Lender shall be evidenced by a Note in
substantially the form of Exhibit O-2 payable to the order of such Lender in the
respective amount of its Applicable Commitment
<PAGE>
Percentage of the Total Revolving Credit Commitment, which Note shall be
dated the Closing Date or a later date pursuant to an Assignment and Acceptance
and shall be duly completed, executed and delivered by the Borrowers.
2.6. Pro Rata Payments. Except as otherwise provided herein, (a) each
payment on account of the principal of and interest on the Loans and the fees
described in Section 2.10 shall be made to the Agent for the account of the
Lenders pro rata based on their Applicable Commitment Percentages, (b) all
payments to be made by the Borrowers for the account of each of the Lenders on
account of principal, interest and fees, shall be made without diminution,
setoff, recoupment or counterclaim, and (c) the Agent will promptly distribute
to the Lenders in immediately available funds payments received in fully
collected, immediately available funds from the Borrowers.
2.7. Voluntary Commitment Reductions. The Borrowers shall, by notice from
an Authorized Representative, have the right from time to time but not more
frequently than once each calendar month, upon not less than three (3) Business
Days' written notice to the Agent, effective upon receipt, to repay Term Loans
or reduce the Total Revolving Credit Commitment. The Agent shall give each
Lender, within one (1) Business Day of receipt of such notice, telefacsimile
notice, or telephonic notice (confirmed in writing), of such reduction. Each
such reduction shall be in the aggregate amount of $5,000,000 (or the
Alternative Currency Equivalent Amount thereof in the case of a Revolving Loan)
or such greater amount which is in an integral multiple of $5,000,000 (or the
Alternative Currency Equivalent Amount thereof in the case of a Revolving Loan),
or the entire remaining Total Revolving Credit Commitment, and shall permanently
reduce the Total Revolving Credit Commitment. Each reduction of the Total
Revolving Credit Commitment shall be accompanied by payment of the Loans to the
extent that the principal amount of Revolving Credit Outstandings plus Letter of
Credit Outstandings exceeds the Total Revolving Credit Commitment after giving
effect to such reduction, together with accrued and unpaid interest on the
amounts prepaid. No such repayment or reduction shall result in the payment of
any Eurodollar Rate Loan other than on the last day of the Interest Period of
such Eurodollar Rate Loan unless such prepayment is accompanied by amounts due,
if any, under Section 5.5.
2.8. Conversions and Elections of Subsequent Interest Periods. Subject to
the limitations set forth below and in Article V, the applicable Borrower or
Borrowers may:
(a) upon delivery, effective upon receipt, of a properly completed Interest
Rate Selection Notice to the Agent on or before 11:00 A.M. on any Business Day,
Convert all or a part of Eurodollar Rate Loans to Base Rate Loans on the last
day of the Interest Period for such Eurodollar Rate Loans; and
(b) provided that no Default or Event of Default shall have occurred and be
continuing, upon delivery, effective upon receipt, of a properly completed
Interest Rate Selection Notice to the Agent on or before 11:00 A.M. three (3)
Business Days' prior to the date of such election or Conversion:
(i) elect a subsequent Interest Period for all or a portion of Eurodollar
Rate Loans to begin on the last day of the then current Interest Period for such
Eurodollar Rate Loans; and
(ii) Convert Base Rate Loans to Eurodollar Rate Loans on any Business Day;
(iii) elect that any Eurodollar Rate Loan be converted from an Alternative
Currency into
<PAGE>
another Alternative Currency on the last day of the Interest Period for any
Eurodollar Rate Loan.
Each election and Conversion pursuant to this Section 2.8 shall be subject
to the limitations on Eurodollar Rate Loans set forth in the definition of
"Interest Period" herein and in Sections 2.1, 2.3 and Article V. The Agent shall
give written notice to each Lender of such notice of election or Conversion
prior to 3:00 P.M. on the day such notice of election or Conversion is received.
All such Continuations or Conversions of Loans shall be effected pro rata based
on the Applicable Commitment Percentages of the Lenders.
2.9. Increase and Decrease in Amounts. The amount of the Total Revolving
Credit Commitment which shall be available to the Borrowers as Advances shall be
reduced by the aggregate amount of Letters of Credit Outstandings.
2.10. Commitment Fee. For the period beginning on the Closing Date and
ending on the Revolving Credit Termination Date, the Borrowers agree to pay to
the Agent, for the prorata benefit of the Lenders based on their Applicable
Commitment Percentages, an unused fee equal to the Commitment Fee multiplied by
the average daily amount by which the Total Revolving Credit Commitment exceeds
the sum of (i) Revolving Credit Outstandings plus (ii) Letter of Credit
Outstandings. Such fees shall be due in arrears on the last Business Day of each
March,June, September and December commencing December 31,1997 to the Revolving
Credit Termination Date (but excluding such day for the purpose of computing
such fee). Notwithstanding the foregoing, so long as any Lender fails to make
available any portion of its Revolving Credit Commitment when requested, such
Lender shall not be entitled to receive payment of its pro rata share of such
fee until such Lender shall make available such portion. Such fee shall be
calculated on the basis of a year of 360 days for the actual number of days
elapsed.
2.11. Deficiency Advances. No Lender shall be responsible for any default
of any other Lender in respect to such other Lender's obligation to make any
Loan or fund its purchase of any Participation hereunder nor shall the Revolving
Credit Commitment or Term Loan Commitment of any Lender hereunder be increased
as a result of such default of any other Lender. Without limiting the generality
of the foregoing, in the event any Lender shall fail to advance funds to the
applicable Borrower or Borrowers as herein provided, the Agent may in its
discretion, but shall not be obligated to, advance under the Note in its favor
as a Lender all or any portion of such amount or amounts (each, a "deficiency
advance") and shall thereafter be entitled to payments of principal of and
interest on such deficiency advance in the same manner and at the same interest
rate or rates to which such other Lender would have been entitled had it made
such advance under its Note; provided that, upon payment to the Agent from such
other Lender of the entire outstanding amount of each such deficiency advance,
together with accrued and unpaid interest thereon, from the most recent date or
dates interest was paid to the Agent by the applicable Borrower or Borrowers on
each Loan comprising the deficiency advance at the interest rate per annum for
overnight borrowing by the Agent from the Federal Reserve Bank, then such
payment shall be credited against the applicable Note of the Agent in full
payment of such deficiency advance and the applicable Borrower or Borrowers
shall be deemed to have borrowed the amount of such deficiency advance from such
other Lender as of the most recent date or dates, as the case may be, upon which
any payments of interest were made by the applicable Borrower or Borrowers
thereon.
2.12. Use of Proceeds. The proceeds of the Loans made pursuant to the
Revolving Credit Facility hereunder shall be used by the Borrowers (i) to
purchase the Acquired Business pursuant to the Asset Purchase Agreement, (ii) to
refinance existing Indebtedness and the fees and expenses related to such
refinancing, and
<PAGE>
(iii) for general working capital needs and other corporate purposes.
2.13. Designation of Borrowing Subsidiaries. With the consent of the Agent,
BREED may from time to time designate any Foreign Subsidiary of BREED which has
not joined in the execution of this Agreement as a "Borrowing Subsidiary"
hereunder under the Revolving Credit Facility by causing such Foreign Subsidiary
to execute and deliver a duly completed Assumption Letter in the form attached
hereto as Exhibit U to the Agent, with the written consent of BREED and the
Agent at the foot thereof. Upon such execution, delivery and consent such
Foreign Subsidiary shall for all purposes be a party hereto as a Borrowing
Subsidiary as fully as if it had executed and delivered this Agreement. So long
as all Obligations of any Borrowing Subsidiary under this Agreement shall have
been paid in full, such Borrowing Subsidiary may, by not less than five (5)
Business Days' prior notice to the Agent (which shall promptly notify the
Lenders thereof), terminate its status as a "Borrowing Subsidiary" hereunder.
ARTICLE III
Letters of Credit
3.1. Letters of Credit. (a) The Issuing Bank agrees, subject to the terms
and conditions of this Agreement, upon request of a Borrower or Borrowers to
issue from time to time for the account of the Borrower or Borrowers Letters of
Credit upon delivery to the Issuing Bank of an Application and Agreement for
Letter of Credit relating thereto in form and content acceptable to the Issuing
Bank; provided, that (i) the Letter of Credit Outstandings shall not exceed the
Total Letter of Credit Commitment and (ii) no Letter of Credit shall be issued
if, after giving effect thereto, Letter of Credit Outstandings plus the
Revolving Credit Outstandings shall exceed the Total Revolving Credit
Commitment. No Letter of Credit shall have an expiry date (including all rights
of a Borrower or any beneficiary named in such Letter of Credit to require
renewal) or payment date occurring later than the earlier to occur of one year
after the date of its issuance or the fifth Business Day prior to the Stated
Termination Date.
(b) Upon completion of a proper Application and Agreement for Letter of
Credit, NationsBank may issue upon request and for the account of an applicable
Borrower or Borrowers Letters of Credit payable in an Alternative Currency. For
purposes of determining Outstanding Letters of Credit, any Letter of Credit
issued in an Alternative Currency shall be recorded in the Agent's account in
Dollars based on the Alternative Currency Equivalent Amount on the date of
issuance of such Letter of Credit; provided, however, that the Agent shall
determine the Dollar Equivalent Amount of any Letter of Credit issued in an
Alternative Currency on the date of any Advance or Conversion for the purpose of
determining the amount of Revolving Credit Outstandings and compliance with the
Total Alternative Currency Sublimit. Any draw on a Letter of Credit issued in an
Alternative Currency shall be repaid in the same Alternative Currency Equivalent
Amount (determined based on the Spot Rate of Exchange on the date of drawing
under the Letter of Credit). In the event that the Agent shall determine at any
time that (i) the Dollar Value of outstanding Loans and Outstanding Letters of
Credit, in each case determined on the date of each Advance or issuance of a
Letter of Credit, made or issued in Alternative Currencies exceeds the Total
Alternative Currency Sublimit or (ii) that the sum of the Dollar Value described
in subclause (i) plus outstanding Revolving Loans and Outstanding Letters of
Credit made or issued in Dollars exceeds the Total Revolving Credit Commitment,
then the Borrowers shall immediately repay Revolving Loans so that after giving
effect to such payment the outstanding Revolving Loans plus Outstanding Letters
of Credit do not exceed the Total Revolving Credit Commitment and the Loans
advanced in an Alternative Currency plus
<PAGE>
Outstanding Letters of Credit issued in and Alternative Currency do not
exceed the Total Alternative Currency Sublimit.
3.2. Reimbursement.
(a) The applicable Borrower or Borrowers hereby unconditionally agrees to
pay to the Issuing Bank immediately on demand at the Principal Office all
amounts required to pay all drafts drawn or purporting to be drawn under the
Letters of Credit and all reasonable expenses incurred by the Issuing Bank in
connection with the Letters of Credit, and in any event and without demand to
place in possession of the Issuing Bank (which shall include Advances under the
Revolving Credit Facility if permitted by Section 2.1(a)) sufficient funds to
pay all debts and liabilities arising under any Letter of Credit. The Issuing
Bank agrees to give the applicable Borrower or Borrowers prompt notice of any
request for a draw under a Letter of Credit. The Issuing Bank may, at the
request of the applicable Borrower or Borrowers, charge any account the
applicable Borrower or Borrowers may have with it for any and all amounts the
Issuing Bank pays under a Letter of Credit, plus charges and reasonable expenses
as from time to time agreed to by the Issuing Bank and the applicable Borrower
or Borrowers; provided that to the extent permitted by Section 2.1(d)(iv),
amounts shall be paid pursuant to Advances under the Revolving Credit Facility.
The Borrowers agree to pay the Issuing Bank interest on any Reimbursement
Obligations not paid when due hereunder at the Base Rate plus two percent
(2.0%), or the maximum rate permitted by applicable law, if lower, such rate to
be calculated on the basis of a year of 360 days for actual days elapsed.
(b) In accordance with the provisions of Section 2.1(d), the Issuing Bank
shall notify the Agent of any drawing under any Letter of Credit promptly
following the receipt by the Issuing Bank of such drawing.
(c) Each Lender (other than the Issuing Bank) shall automatically acquire
on the date of issuance thereof, a Participation in the liability of the Issuing
Bank in respect of each Letter of Credit in an amount equal to such Lender's
Applicable Commitment Percentage (determined based on the Spot Rate of Exchange
on the date of drawing under the Letter of Credit) of such liability, and to the
extent that the applicable Borrower or Borrowers are obligated to pay the
Issuing Bank under Section 3.2(a), each Lender (other than the Issuing Bank)
thereby shall absolutely, unconditionally and irrevocably assume, and shall be
unconditionally obligated to pay to the Issuing Bank as hereinafter described,
its Applicable Commitment Percentage of the liability of the Issuing Bank under
such Letter of Credit.
(i) Each Lender (including the Issuing Bank in its capacity as a Lender)
shall, subject to the terms and conditions of Article II, pay to the Agent for
the account of the Issuing Bank at the Principal Office in Dollars and in
immediately available funds, an amount equal to its Applicable Commitment
Percentage of any drawing under a Letter of Credit, such funds to be provided in
the manner described in Section 2.1(d)(iv).
(ii) Simultaneously with the making of each payment by a Lender to the
Issuing Bank pursuant to Section 2.1(d)(iv)(B), such Lender shall, automatically
and without any further action on the part of the Issuing Bank or such Lender,
acquire a Participation in an amount equal to such payment (excluding the
portion thereof constituting interest accrued prior to the date the Lender made
its payment) in the related Reimbursement Obligation of the applicable Borrower
or Borrowers. The Reimbursement Obligations of the Borrowers shall be
immediately due and payable whether by Advances made in accordance with Section
2.1(d)(iv), or otherwise.
<PAGE>
(iii) Each Lender's obligation to make payment to the Agent for the account
of the Issuing Bank pursuant to Section 2.1(d)(iv) and this Section 3.2(c), and
the right of the Issuing Bank to receive the same, shall be absolute and
unconditional, shall not be affected by any circumstance whatsoever and shall be
made without any offset, abatement, withholding or reduction whatsoever. If any
Lender is obligated to pay but does not pay amounts to the Agent for the account
of the Issuing Bank in full upon such request as required by Section 2.1(d)(iv)
or this Section 3.2(c), such Lender shall, on demand, pay to the Agent for the
account of the Issuing Bank interest on the unpaid amount for each day during
the period commencing on the date of notice given to such Lender pursuant to
Section 2.1(d) until such Lender pays such amount to the Agent for the account
of the Issuing Bank in full at the interest rate per annum for overnight
borrowing by the Agent from the Federal Reserve Bank.
(iv) In the event the Lenders have purchased Participations in any
Reimbursement Obligation as set forth in clause (ii) above, then at any time
payment (in fully collected, immediately available funds) of such Reimbursement
Obligation, in whole or in part, is received by the Issuing Bank from the
applicable Borrower or Borrowers, the Issuing Bank shall promptly pay to each
Lender an amount equal to its Applicable Commitment Percentage of such payment
from the applicable Borrower or Borrowers.
(d) Promptly following the end of each calendar quarter, the Issuing Bank
shall deliver to the Agent a notice describing the aggregate undrawn amount of
all Letters of Credit at the end of such quarter. Upon the request of any Lender
from time to time, the Issuing Bank shall deliver to the Agent, and the Agent
shall deliver to such Lender, any other information reasonably requested by such
Lender with respect to each outstanding Letter of Credit.
(e) The issuance by the Issuing Bank of each Letter of Credit shall, in
addition to the conditions precedent set forth in Article VI, be subject to the
conditions that such Letter of Credit be in such form and contain such terms as
shall be reasonably satisfactory to the Issuing Bank consistent with the then
current practices and procedures of the Issuing Bank with respect to similar
letters of credit, and the applicable Borrower or Borrowers shall have executed
and delivered such other instruments and agreements relating to such Letters of
Credit as the Issuing Bank shall have reasonably requested consistent with such
practices and procedures and shall not be in conflict with any of the express
terms herein contained. All Letters of Credit shall be issued pursuant to and
subject to the Uniform Customs and Practice for Documentary Credits, 1993
revision, International Chamber of Commerce Publication No. 500 and all
subsequent amendments and revisions thereto.
(f) The Borrowers agree that the Issuing Bank may, in its sole discretion,
accept or pay, as complying with the terms of any Letter of Credit, any drafts
or other documents otherwise in order which may be signed or issued by an
administrator, executor, trustee in bankruptcy, debtor in possession, assignee
for the benefit of creditors, liquidator, receiver, attorney in fact or other
legal representative of a party who is authorized under such Letter of Credit to
draw or issue any drafts or other documents.
(g) Without limiting the generality of the provisions of Section 12.9, the
Borrowers hereby agree to indemnify and hold harmless the Issuing Bank, each
other Lender and the Agent from and against any and all claims and damages,
losses, liabilities, reasonable costs and expenses which the Issuing Bank, such
other Lender or the Agent may incur (or which may be claimed against the Issuing
Bank, such other Lender or the Agent) by any Person by reason of or in
connection with the issuance or transfer of or payment or failure to pay
<PAGE>
under any Letter of Credit; provided that the Borrowers shall not be
required to indemnify the Issuing Bank, any other Lender or the Agent for any
claims, damages, losses, liabilities, costs or expenses to the extent, but only
to the extent, (i) caused by the willful misconduct or gross negligence of the
party to be indemnified or (ii) caused by the failure of the Issuing Bank to pay
under any Letter of Credit after the presentation to it of a request for payment
strictly complying with the terms and conditions of such Letter of Credit,
unless such payment is prohibited by any law, regulation, court order or decree.
The indemnification and hold harmless provisions of this Section 3.2(g) shall
survive repayment of the Obligations, occurrence of the Revolving Credit
Termination Date and expiration or termination of this Agreement.
(h) Without limiting the Borrowers' rights as set forth in Section 3.2(g),
the obligation of the Borrowers to immediately reimburse the Issuing Bank for
drawings made under Letters of Credit and the Issuing Bank's right to receive
such payment shall be absolute, unconditional and irrevocable, and such
obligations of the Borrowers shall be performed strictly in accordance with the
terms of this Agreement (as waived, modified or amended) and such Letters of
Credit and the related Applications and Agreement for any Letter of Credit,
under all circumstances whatsoever, including the following circumstances:
(i) any lack of validity or enforceability of the Letter of Credit, the
obligation supported by the Letter of Credit or any other agreement or
instrument relating thereto (collectively, the "Related LC Documents");
(ii) any amendment or waiver of or any consent to or departure from all or
any of the Related LC Documents;
(iii) the existence of any claim, setoff, defense (other than the defense
of payment in accordance with the terms of this Agreement) or other rights which
the Borrowers may have at any time against any beneficiary or any transferee of
a Letter of Credit (or any persons or entities for whom any such beneficiary or
any such transferee may be acting), the Agent, the Lenders or any other Person,
whether in connection with the Loan Documents, the Related LC Documents or any
unrelated transaction;
(iv) any breach of contract or other dispute between the Borrowers and any
beneficiary or any transferee of a Letter of Credit (or any persons or entities
for whom such beneficiary or any such transferee may be acting), the Agent, the
Lenders or any other Person;
(v) any draft, statement or any other document presented under the Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
whatsoever;
(iv) any delay, extension of time, renewal, compromise or other indulgence
or modification granted or agreed to by the Agent, with or without notice to or
approval by the Borrowers in respect of any of the Borrowers' Obligations under
this Agreement.
Nothing contained in this clause (h) shall relieve the Issuing Bank of
liability for its gross negligence or willful misconduct or breach of contract.
<PAGE>
3.3. Letter of Credit Facility Fees. The Borrowers shall pay to the Agent,
(i) for the pro rata benefit of the Lenders based on their Applicable Commitment
Percentages, a fee on the aggregate amount available to be drawn on each
outstanding Letter of Credit at a rate equal to the Applicable Margin for
Eurodollar Rate Loans, and (ii) for the Issuing Bank, when there is more than
one Lender, 0.125% based on the aggregate amount available to be drawn on each
outstanding Letter of Credit. Such fees shall be due with respect to each Letter
of Credit quarterly in arrears on the last day of each March, June, September
and December, the first such payment to be made on the date of issuance of a
Letter of Credit. The fees described in this Section 3.3 shall be calculated on
the basis of a year of 360 days for the actual number of days elapsed.
ARTICLE IV
Security
4.1. Guaranty. To guarantee the full and timely payment and performance of
all Obligations now existing or hereafter arising, the Borrowers shall cause the
Guaranty to be delivered by each Domestic Subsidiary that is not a Borrowing
Subsidiary in the form and substance reasonably acceptable to the Agent, on or
before the Closing Date. The Borrowers hereby agree to cause a Guaranty to be
delivered by any hereafter acquired or created Domestic Subsidiary pursuant to
the terms of Section 8.19 hereof. Notwithstanding the foregoing, a Domestic
Subsidiary formed to issue Convertible Preferred Securities (and whose only
asset is the Convertible Debentures or amounts received thereon) shall not be
required to become a Guarantor.
4.2. Stock Pledge. (a) As security for the full and timely payment and
performance of (i) all Obligations now existing or hereafter arising and (ii) if
applicable, its obligations as a Guarantor under the Guaranty Agreement, the
Borrowers and each Person owning any Pledged Stock shall on or before the
Closing Date deliver to the Agent, in form and substance reasonably acceptable
to the Agent, a Pledge Agreement together with certificates representing such
Pledged Stock with stock powers duly executed in blank which Pledge Agreements
shall pledge to the Agent for the benefit of the Lenders (w) 100% of the capital
stock and related interests and rights of any Domestic Subsidiary and any
Subsidiary of a Borrowing Subsidiary and (x) not less than 65% of the Voting
Stock and 100% of the non-voting common stock and related interests and rights
of any Direct Foreign Subsidiary in accordance with the terms hereof and
thereof.
(b) BREED and each Subsidiary hereby agree to pledge to the Agent for the
benefit of the Lenders (y) 100% of the capital stock and related interests and
rights of any Domestic Subsidiary and any Subsidiary of a Borrowing Subsidiary
hereafter acquired or created and owned directly or indirectly by BREED and (z)
not less than 65% of the Voting Stock and 100% of the non-voting common stock
and related interests and rights of any Direct Foreign Subsidiary hereafter
acquired or created and, in each case, to deliver to the Agent a Pledge
Agreement substantially in the form of Exhibit P-1 or P-2, as applicable within
thirty (30) days after the acquisition or creation of such Domestic Subsidiary
or Direct Foreign Subsidiary, as the case may be, pursuant to the terms of
Section 8.19, hereof; provided, however, in the event the laws or practices of
any foreign jurisdiction preclude or prevent the completion or delivery of the
Pledge Agreement as provided herein, the Direct Foreign Subsidiary shall have an
additional forty-five (45) days to deliver such Pledge Agreement.
4.3. Security Interests. As security for the full and timely payment and
performance of (i) all Obligations now existing or hereafter arising and (ii) if
applicable, its obligations as a Guarantor under the Guaranty Agreement, BREED
shall, and shall cause each Domestic Subsidiary to, on or before the Closing
Date deliver to
<PAGE>
the Agent, in form and substance reasonably acceptable to the Agent, the
Security Agreement, the Uniform Commercial Code financing statements, and each
other Security Instrument sufficient to grant to the Agent a valid, duly
perfected security interest in the Collateral described therein, subject to no
prior Liens other than Permitted Liens, and with respect to the Mortgages, no
prior Liens other than the Permitted Encumbrances as defined therein, and do all
things necessary in the opinion of the Agent and its counsel to grant to the
Agent for the benefit of the Lenders a first priority security interest, duly
perfected with respect to Collateral governed by the UCC, in all Collateral
subject to no prior Lien or other encumbrance or restriction on transfer (other
than restrictions on transfer imposed by applicable securities laws and
Permitted Liens). BREED hereby agrees to cause the Security Instruments to be
delivered by any hereafter acquired or created Domestic Subsidiary or, to the
extent applicable under foreign law or practice, Direct Foreign Subsidiary
pursuant to the terms of Section 8.19 hereof.
4.4. Lease Assignments. As security for the full and timely payment and
performance of (i) all Obligations now existing or hereafter arising and (ii) if
applicable, the Guarantors' Obligations under the Guaranty Agreement, BREED
shall, and shall cause each Domestic Subsidiary to, on or before the Closing
Date deliver to the Agent, in form and substance reasonably acceptable to the
Agent, the Lease Assignments. The Lease Assignments shall be delivered on or
before the Closing Date and thereafter as any new or additional facility is
leased by BREED or any existing or hereafter acquired or created Domestic
Subsidiary.
4.5. Mortgages. As security for the full and timely payment and performance
of (i) all Obligations now existing or hereafter arising and (ii) if applicable,
the Guarantors' Obligations under the Guaranty Agreement, BREED shall, and shall
cause each Domestic Subsidiary to, on or before the Closing Date deliver to the
Agent, in form and substance reasonably acceptable to the Agent, the Mortgages.
The Mortgages shall be delivered on or before the Closing Date and thereafter as
any new or additional real property is acquired by BREED or any existing or
hereafter acquired or created Domestic Subsidiary.
4.6. Landlord Waivers. As security for the full and timely payment and
performance of (i) all Obligations now existing or hereafter arising and (ii) if
applicable, the Guarantors' Obligations under the Guaranty Agreement, BREED
shall, and shall cause each Domestic Subsidiary to, on or before the Closing
Date deliver to the Agent, in form and substance reasonably acceptable to the
Agent, to the extent available, the Landlord Waivers. The Landlord Waivers shall
be delivered on or before the Closing Date and thereafter as new or additional
facility is leased by BREED or any existing or hereafter acquired or created
Domestic Subsidiary.
4.7. Intellectual Property. As security for the full and timely payment and
performance of (i) all Obligations now existing or hereafter arising and (ii)
certain of the Guarantors' Obligations under the Guaranty Agreement, BREED
shall, and shall cause each Domestic Subsidiary to, on or before the Closing
Date deliver to the Agent, in form and substance reasonably acceptable to the
Agent, the Intellectual Property Security Agreement and the Intellectual
Property Assignment. BREED hereby agrees to pledge, or cause to be pledged, all
intellectual property interests and licenses hereafter acquired or created and
owned by BREED and any Domestic Subsidiary within thirty (30) days of the
acquisition or creation of such intellectual property or license, pursuant to
the terms of Section 8.19; provided, however, that should any Intellectual
Property Agreement require the consent of any third party, BREED and its
Domestic Subsidiaries shall use its best efforts to supply such Assignment;
provided further that in the event the execution of an Assignment or the
assignment of the Intellectual Property shall result in a forfeiture of such
Intellectual Property this provision shall not apply to such Intellectual
Property.
<PAGE>
4.8. Pledge and Subordination of Intercompany Notes. As security for the
full and timely payment and performance of (i) all Obligations now existing or
hereafter arising and (ii) certain of the Guarantors' Obligations under the
Guaranty Agreement, BREED shall cause the Intercompany Note Holders to deliver
the Intercompany Note Pledge Agreement to the Agent for the benefit of the
Lenders. BREED hereby agrees to cause the Intercompany Note Holders now existing
or hereafter acquired or created to pledge, grant a Lien and collaterally assign
to the Agent for the benefit of the Lenders all Intercompany Notes now existing
or hereafter arising.
4.9. Pledge of Partnership Interests. (a) As security for the full and
timely payment and performance of (i) all Obligations now existing or hereafter
arising and (ii) if applicable, the Guarantors' Obligations under the Guaranty
Agreement, BREED and each Person owning any Assigned Interests shall on or
before the Closing Date deliver to the Agent, in form and substance reasonably
acceptable to the Agent, a Collateral Assignment of Partnership Interests
together with a Receipt and Certificate of Registrar as may be required by the
Agent, which Collateral Assignment of Partnership Interests shall pledge to the
Agent for the benefit of the Lenders 100% of the ownership interests and rights
in limited partnerships in accordance with the terms hereof and thereof and, to
the extent hereafter required by the Agent, any joint venture interests.
(b) BREED and each Subsidiary hereby agree to collaterally assign to the
Agent for the benefit of the Lenders 100% of the ownership interests and rights
in limited partnership and joint ventures hereafter acquired or created, other
than the joint venture described in Section 9.6(h), and to deliver to the Agent
a Collateral Assignment of Partnership Interests substantially in the form and
content acceptable to the Agent within thirty (30) days of the acquisition or
creation of such Subsidiary pursuant to the terms of Section 8.19.
4.10. Collateral Assignment of Trademark License Agreement. As security for
the full and timely payment and performance of (i) all Obligations now existing
or hereafter arising and (ii) if applicable, the Guarantors' Obligations under
the Guaranty Agreement, BREED shall cause the Collateral Assignment of Trademark
License Agreement to be delivered to the Agent for the benefit of the Lenders on
or before the Closing Date.
4.11. Further Assurances. At the request of the Agent, BREED will, and will
cause each Subsidiary to, execute by its duly authorized officers, alone or with
the Agent, any certificate, instrument, statement or document and will procure
any such certificate, instrument, statement or document (and pay all connected
costs) which the Agent reasonably deems necessary to create or preserve the
Liens (and the perfection and priority thereof) of the Agent for the benefit of
the Lenders contemplated hereby and by the other Loan Documents.
ARTICLE V
Change in Circumstances
5.1. Increased Cost and Reduced Return. (a) If, after the date hereof, the
adoption of any applicable law, rule, or regulation, or any change in any
applicable law, rule, or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Lender (or its Applicable Lending Office) with any request or
directive (whether or not having the force of law) of any such governmental
authority, central bank, or comparable agency:
<PAGE>
(i) shall subject such Lender (or its Applicable Lending Office) to any
tax, duty, or other charge with respect to any Eurodollar Rate Loans, its Note,
or its obligation to make Eurodollar Rate Loans, or change the basis of taxation
of any amounts payable to such Lender (or its Applicable Lending Office) under
this Agreement or its Note in respect of any Eurodollar Rate Loans (other than
taxes imposed on the overall net income of such Lender by the jurisdiction in
which such Lender has its principal office or such Applicable Lending Office and
franchise taxes);
(ii) shall impose, modify, or deem applicable any reserve, special deposit,
assessment, or similar requirement (other than the Reserve Requirement utilized
in the determination of the Eurodollar Rate) relating to any extensions of
credit or other assets of, or any deposits with or other liabilities or
commitments of, such Lender (or its Applicable Lending Office), including the
Total Credit Commitment of such Lender hereunder; or
(iii) shall impose on such Lender (or its Applicable Lending Office) or the
London interbank market any other condition affecting this Agreement or its Note
or any of such extensions of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such
Lender (or its Applicable Lending Office) of making, Converting into,
Continuing, or maintaining any Eurodollar Rate Loans or to reduce any sum
received or receivable by such Lender (or its Applicable Lending Office) under
this Agreement or its Note with respect to any Eurodollar Rate Loans, then the
Borrowers shall pay to such Lender on demand such amount or amounts as will
compensate such Lender for such increased cost or reduction. If any Lender
requests compensation by the Borrowers under this Section 5.1(a), the Borrowers
may, by notice to such Lender (with a copy to the Agent), suspend the obligation
of such Lender to make or Continue Loans of the Type with respect to which such
compensation is requested, or to Convert Loans of any other Type into Loans of
such Type, until the event or condition giving rise to such request ceases to be
in effect (in which case the provisions of Section 5.4 shall be applicable);
provided that such suspension shall not affect the right of such Lender to
receive the compensation so requested.
(b) If, after the date hereof, any Lender shall have determined that the
adoption of any applicable law, rule, or regulation regarding capital adequacy
or any change therein or in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank, or comparable agency, has or would have
the effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of such Lender's
obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change, request, or
directive (taking into consideration its policies with respect to capital
adequacy), then from time to time upon demand the Borrowers shall pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction.
(c) Each Lender shall promptly notify the Borrowers and the Agent of any
event of which it has actual knowledge, occurring after the date hereof, which
will entitle such Lender to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to it. Any
Lender claiming compensation under this Section shall furnish to the
<PAGE>
Borrowers and the Agent a statement setting forth the additional amount or
amounts to be paid to it hereunder which shall be conclusive in the absence of
manifest error. In determining such amount, such Lender may use any reasonable
averaging and attribution methods.
5.2. Limitation on Types of Loans. If on or prior to the first day of any
Interest Period for any Eurodollar Rate Loan:
(a) the Agent determines (which determination shall be conclusive) that by
reason of circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such Interest
Period; or
(b) the Required Lenders determine (which determination shall be
conclusive) and notify the Agent that the Eurodollar Rate will not adequately
and fairly reflect the cost to the Lenders of funding Eurodollar Rate Loans for
such Interest Period;
then the Agent shall give the Borrowers prompt notice thereof specifying
the relevant Type of Loans and the relevant amounts or periods, and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make additional Loans of such Type, Continue Loans of such Type, or to Convert
Loans of any other Type into Loans of such Type and the applicable Borrower or
Borrowers shall, on the last day(s) of the then current Interest Period(s) for
the outstanding Loans of the affected Type, either prepay such Loans or Convert
such Loans into another Type of Loan in accordance with the terms of this
Agreement.
5.3. Illegality. Notwithstanding any other provision of this Agreement, in
the event that it becomes unlawful for any Lender or its Applicable Lending
Office to make, maintain, or fund Eurodollar Rate Loans hereunder, then such
Lender shall promptly notify the applicable Borrower or Borrowers thereof and
such Lender's obligation to make or Continue Eurodollar Rate Loans and to
Convert other Types of Loans into Eurodollar Rate Loans shall be suspended until
such time as such Lender may again make, maintain, and fund Eurodollar Rate
Loans (in which case the provisions of Section 5.4 shall be applicable).
5.4. Treatment of Affected Loans. If the obligation of any Lender to make a
particular Type of Eurodollar Rate Loan or to Continue, or to Convert Loans of
any other Type into, Loans of a particular Type shall be suspended pursuant to
Section 5.1 or 5.3 hereof (Loans of such Type being herein called "Affected
Loans" and such Type being herein called the "Affected Type"), such Lender's
Affected Loans shall be automatically Converted into Base Rate Loans on the last
day(s) of the then current Interest Period(s) for Affected Loans (or, in the
case of a Conversion required by Section 5.3 hereof, on such earlier date as
such Lender may specify to the Borrowers with a copy to the Agent) and, unless
and until such Lender gives notice as provided below that the circumstances
specified in Section 5.1 or 5.3 hereof that gave rise to such Conversion no
longer exist:
(a) to the extent that such Lender's Affected Loans have been so Converted,
all payments and prepayments of principal that would otherwise be applied to
such Lender's Affected Loans shall be applied instead to its Base Rate Loans;
and
(b) all Loans that would otherwise be made or Continued by such Lender as
Loans of the Affected Type shall be made or Continued instead as Base Rate
Loans, and all Loans of such Lender that would otherwise be Converted into Loans
of the Affected Type shall be Converted instead into (or shall remain as) Base
Rate
<PAGE>
Loans.
If such Lender gives notice to the applicable Borrower or Borrowers (with a
copy to the Agent) that the circumstances specified in Section 5.1 or 5.3 hereof
that gave rise to the Conversion of such Lender's Affected Loans pursuant to
this Section 5.4 no longer exist (which such Lender agrees to do promptly upon
such circumstances ceasing to exist) at a time when Loans of the Affected Type
made by other Lenders are outstanding, such Lender's Base Rate Loans shall be
automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Loans of the Affected Type, to the extent
necessary so that, after giving effect thereto, all Loans held by the Lenders
holding Loans of the Affected Type and by such Lender are held pro rata (as to
principal amounts, Types, and Interest Periods) in accordance with their
respective Revolving Credit Commitments and Term Loan Commitments.
5.5. Compensation. Upon the request of any Lender, the Borrowers shall pay
to such Lender such amount or amounts as shall be sufficient (in the reasonable
opinion of such Lender) to compensate it for any loss, cost, or expense
(including loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or Conversion of a Eurodollar Rate Loan for
any reason (including, without limitation, the acceleration of the Loans
pursuant to Section 9.1) on a date other than the last day of the Interest
Period for such Loan; or
(b) any failure by the Borrowers for any reason (including, without
limitation, the failure of any condition precedent specified in Article VI to be
satisfied) to borrow (other than by reason of the failure of a Lender or Lenders
to make funds available without cause), Convert, Continue, or prepay a
Eurodollar Rate Loan on the date for such borrowing, Conversion, Continuation,
or prepayment specified in the relevant notice of borrowing, prepayment,
Continuation, or Conversion under this Agreement.
Any Lender claiming compensation under this Section 5.5 shall furnish the
Borrowers and the Agent a statement setting forth in reasonable detail the
amounts to be paid to it hereunder and the determination thereof shall be
conclusive absent manifest error.
5.6. Taxes. (a) Any and all payments by the Borrowers to or for the account
of any Lender or the Agent hereunder or under any other Loan Document shall be
made free and clear of and without deduction for any and all present or future
taxes, duties, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender and the
Agent, taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Lender (or its Applicable Lending
Office) or the Agent (as the case may be) is organized or any political
subdivision thereof, except withholding taxes applicable to a Lender, (all such
non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings,
and liabilities being hereinafter referred to as "Taxes"). If the Borrowers or
the Lender shall be required by law to deduct any Taxes from or in respect of
any sum payable under this Agreement or any other Loan Document to any Lender or
the Agent, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 5.6) such Lender or the Agent receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Borrowers shall make such deductions, (iii) the Borrowers shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law, and (iv) the Borrowers shall furnish to
<PAGE>
the Agent, at its address referred to in Section 11.2, the original or a
certified copy of a receipt evidencing payment thereof.
(b) In addition, the Borrowers agree to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes or charges or
similar levies which arise from any payment made under this Agreement or any
other Loan Document or from the execution or delivery of, or otherwise with
respect to, this Agreement or any other Loan Document (hereinafter referred to
as "Other Taxes").
(c) The Borrowers agree to indemnify each Lender and the Agent for the full
amount of Taxes and Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section 5.6) paid by such Lender or the Agent (as the case may be) and any
liability (including penalties, interest, and expenses) arising therefrom or
with respect thereto.
(d) Each Lender organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender listed on the signature pages hereof and on
or prior to the date on which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing by the
Borrowers or the Agent (but only so long as such Lender remains lawfully able to
do so), shall provide the Borrowers and the Agent with (a) if such Lender is a
"bank" within the meaning of Section 881(c)(3)(A) of the Code (i) Internal
Revenue Service Form 1001 or 4224, as appropriate, or any successor form
prescribed by the Internal Revenue Service, certifying that such Lender is
entitled to benefits under an income tax treaty to which the United States is a
party which reduces the rate of withholding tax on payments of interest or
certifying that the income receivable pursuant to this Agreement is effectively
connected with the conduct of a trade or business in the United States, (ii)
Internal Revenue Service Form W-8 or W-9, as appropriate, or any successor form
prescribed by the Internal Revenue Service, and (iii) any other form or
certificate required by any taxing authority (including any certificate required
by Sections 871(h) and 881(c) of the Internal Revenue Code), certifying that
such Lender is entitled to an exemption from or a reduced rate of tax on
payments pursuant to this Agreement or any of the other Loan Documents or, (b)
if such Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code and which intends to claim exemption from U.S. Federal withholding tax
under Section 871(h) of 881(c) of the Code with respect to payments of
"portfolio interest", a form W-8, or any subsequent versions thereof or
successors thereto (and, if such Lender delivers a Form W-8, a certificate
representing that such Lender is not a bank for purposes of Section 881(c) of
the Code, is not a 10-percent shareholder (within the meaning of Section
871(h)(3)(B) of the Code of any of the Borrowers and is not a controlled foreign
corporation related to any of the Borrowers (within the meaning of Section
864(d)(4) of the Code)), properly completed and duly executed by such Lender
claiming complete exemption from, or a reduced rate of, U.S. Federal withholding
tax on payments of interest by the Borrower under this Agreement and the other
Loan Documents.
(e) For any period with respect to which a Lender has failed to provide the
Borrowers and the Agent with the appropriate form pursuant to Section 5.6(d)
(unless such failure is due to a change in treaty, law, or regulation occurring
subsequent to the date on which a form originally was required to be provided),
such Lender shall not be entitled to indemnification under Section 5.6(a) or
5.6(b) with respect to Taxes imposed by the United States; provided, however,
that should a Lender, which is otherwise exempt from or subject to a reduced
rate of withholding tax, become subject to Taxes because of its failure to
deliver a form required hereunder, the Borrowers shall take such steps as such
Lender shall reasonably request to assist such Lender to recover such Taxes at
such Lender's expense.
<PAGE>
(f) If the Borrowers are required to pay additional amounts to or for the
account of any Lender pursuant to this Section 5.6, then such Lender will agree
to use reasonable efforts to change the jurisdiction of its Applicable Lending
Office so as to eliminate or reduce any such additional payment which may
thereafter accrue if such change, in the judgment of such Lender, is not
otherwise disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment of Taxes, the
Borrowers shall furnish to the Agent evidence of such payment and the Agent
shall provide a copy of such evidence to the applicable Lender.
(h) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in this Section 5.6 shall survive the termination of the Revolving Credit
Commitments and Term Loan Commitments and the payment in full of the Notes.
5.7. Lending Office. Without affecting its rights under this Article V or
any other provision of this Agreement, each Lender agrees that if there is any
increase in cost to or reduction in an amount receivable by such Lender with
respect to which the Borrowers would be obligated to compensate such Lender
pursuant to this Article V, such Lender shall use reasonable efforts to elect an
alternative lending office (to the extent such Lender has available to it such
an office) which would not result in any such increase in any cost to or
reduction in any amount receivable by such Lender; provided, however, that no
Lender shall be obligated to select an alternative lending office if such Lender
determines, in its sole discretion, that (i) as a result of such selection such
Lender would be in violation of any applicable law, regulation, treaty, or
guideline, or would incur additional costs or expenses or (ii) such selection
would be inadvisable for regulatory reasons or would impose an unreasonable
burden or additional costs on such Lender.
5.8. Syndication Costs. If during Phase I, II, or III (as set forth in the
definition of Applicable Margin), the Agent incurs any breakage costs, charges
or fees incurred with respect to Eurodollar Rate Loans on account of the
syndication of the Revolving Credit Facility and Term Loan Facility, the
Borrowers shall immediately reimburse the Agent for any such costs, charges or
fees. Such right of reimbursement is in addition to, and not in limitation of,
the other provisions of this Article V. In addition, the Borrowers agree that
the incurrence of such costs and expenses shall not be the basis for the
Borrowers withholding its consent or approval of any Person as an Eligible
Assignee.
5.9. Replacement Banks. BREED may, on ten (10) Business Days' prior written
notice to the Agent and a Lender, cause a Lender who has incurred increased
costs or is unable to make Eurodollar Rate Loans to (and such Lender shall)
assign, pursuant to Section 12.1, all of its rights and obligations under this
Agreement to an Eligible Assignee designated by BREED which is willing to become
a Lender for a purchase price equal to the outstanding principal amount of the
Loans payable to such Lender plus any accrued but unpaid interest on such Loans,
any accrued but unpaid fees with respect to such Lender's Revolving Credit
Commitment and any other amount payable to such Lender under this Agreement;
provided, however, that any expenses or other amounts which would be owing to
such Lender pursuant to any indemnification provision hereof (including, if
applicable, Section 5.5) shall be payable by BREED as if BREED had prepaid the
Loans of such Lender rather than such Lender having assigned its interest
hereunder. BREED or the assignee shall pay the applicable processing fee under
Section 12.1.
<PAGE>
ARTICLE VI
Conditions to Making Loans and Issuing Letters of Credit
6.1. Conditions of Term Loan and Initial Advance. The obligation of the
Lenders to make the Term Loan and the initial Advance under the Revolving Credit
Facility, and of the Issuing Bank to issue any Letter of Credit, is subject to
the conditions precedent that:
(a) the Agent shall have received on the Closing Date, in form and
substance satisfactory to the Agent and Lenders, the following:
(i) executed originals of each of this Agreement, the Notes, the initial
Guaranties, the Security Instruments, the LC Account Agreement, and the other
Loan Documents, together with all schedules and exhibits thereto;
(ii) the favorable written opinion or opinions with respect to the Loan
Documents and the transactions contemplated thereby of special counsel to the
Loan Parties dated the Closing Date (including opinions of local U.S. counsel,
local counsel to Direct Foreign Subsidiaries, special U.S. intellectual property
counsel as to issues relating to Collateral, and special tax counsel as to the
deductibility of interest payments on the Convertible Preferred Securities),
addressed to the Agent and the Lenders and satisfactory to Smith Helms Mulliss &
Moore, L.L.P., special counsel to the Agent, substantially in the forms of
Exhibit S-1, S-2, and S-3 hereto;
(iii) resolutions of the boards of directors or other appropriate governing
body (or of the appropriate committee thereof) of each of the Loan Parties
certified by its secretary or assistant secretary as of the Closing Date,
approving and adopting the Loan Documents to be executed by such Person, and
authorizing the execution and delivery thereof;
(iv) specimen signatures of officers of each of the Loan Parties executing
the Loan Documents on behalf of such Person, certified by the secretary or
assistant secretary of such Person;
(v) the Organizational Documents of each of the Loan Parties certified as
of a recent date by the Secretary of State of its state of organization;
(vi) the Operating Documents of each of the Loan Parties certified as of
the Closing Date as true and correct by its secretary or assistant secretary;
(vii) certificates issued as of a recent date by the Secretaries of State
of the respective jurisdictions of formation of each of the Credit Parties as to
the due existence and good standing of such Person or the equivalent, if any, in
foreign jurisdictions;
(viii) appropriate certificates of qualification to do business, good
standing and, where appropriate, authority to conduct business under assumed
name, issued in respect of each of the Credit Parties as of a recent date by the
Secretary of State or comparable official of each jurisdiction, if any, in which
the failure to be qualified to do business or authorized so to conduct business
could have a Material Adverse Effect;
<PAGE>
(ix) stock certificates representing all of the shares of Pledged Stock
with undated stock powers executed in blank for each certificate;
(x) copies of all partnership and joint venture agreements certified as
true and complete by the Secretary or Assistant Secretary of the Loan Party
party thereto;
(xi) Certificate and Receipt of Registrar of all of the Assigned Interests;
(xii) Intercompany Notes existing as of the Closing Date together with
endorsements or instruments of assignment executed in blank and attached
thereto;
(xiii) consent by makers of Intercompany Notes to pledge under Intercompany
Note Assignment;
(xiv) copies of the Organizational Documents and Operating Documents for A.
Breed, Ltd. and J. Breed, Ltd.
(xv) commitments for policies insuring title to the Mortgaged Properties
acceptable in form and substance to the Agent;
(xvi) copies of title exceptions with respect to the Mortgaged Properties,
acceptable in form and substance to the Agent;
(xvii) to the extent they currently exist, surveys for the owned real
property of BREED and its Subsidiareis;
(xviii) insurance report for certain owned and leased real property of
BREED and its Subsidiaries as reasonably required by the Agent;
(xix) flood certificates and evidence of flood insurance for any Mortgaged
Property in a federally designated flood zone;
(xx) owner's affidavit for each of the Mortgaged Properties;
(xxi) to the extent available to BREED, the environmental audit with
respect to the owned and leased real property of BREED and its Subsidiaries and
other environmental information as reasonably requested by the Agent and with
results satisfactory to the Agent;
(xxii) to the extent consented to by the respective landlords, Landlord
Waivers and Lease Assignments for each of BREED's or any Domestic Subsidiary's
leased facilities;
(xxiii) to the extent available, consents to the Lease Assignments from
each landlord for the leased real property of BREED and its Domestic
Subsidiaries;
(xxiv) an executed copy of the sublease from AlliedSignal to BREED of the
Greenville,
<PAGE>
Alabama property; and a copy of the opinion required under the lease
between AlliedSignal and the Industrial Development Board of the City of
Greenville dated May 1, 1992 as a condition to AlliedSignal subleasing such
property to BREED; and consents from The Bank of New York, the Indenture Trustee
and the Industrial Development Board of the City of Greenville, in form and
substance satisfactory to the Agent, consenting to the assignment of the
sublease to the Agent;
(xxv) certified copy of the Trademark License Agreement;
(xxvi) UCC-1 Financing Statements, including without limitation fixture
filings, duly executed by the Borrowers and each of the Guarantors and in proper
form for filing, for all locations required by applicable law to perfect the
lien of the Agent and the Lenders under the Security Agreement as a first
priority Lien as to items of Collateral in which a security interest may be
perfected by the filing of financing statements;
(xxvii) a copy of BREED's employment agreement with each of the Managers,
certified as true and complete by the Secretary or Assistant Secretary of BREED;
(xxviii)receipt and satisfactory review of (A) audited consolidated
financial statements of BREED and its Subsidiaries as of June 30, 1997, (B)
consolidated interim financial statements of BREED and its Subsidiaries as of
July 31, 1997, and (C) operating statements of the Acquired Business as of
August 31, 1997;
(xxix) receipt and satisfactory review of a pro forma consolidated balance
sheet, income statement and statement of cash flows of BREED as of June 30,
1997, adjusted to give effect to the Allied Acquisition and the financings
contemplated in this Agreement reviewed by certified public accountants
acceptable to the Agent;
(xxx) notice of appointment of the initial Authorized Representative(s);
(xxxi) all schedules to the Credit Agreement and the other Loan Documents
which shall be reviewed by and satisfactory to the Agent;
(xxxii) evidence of the insurance program to be maintained by BREED and its
Subsidiaries after the Allied Acquisition, which such program shall be
reasonably satisfactory to the Agent;
(xxxiii)executed copies, certified as true and correct by the Secretary of
BREED, of the Siemens Stock Purchase Documents and the Prudential Stock Purchase
Documents together with evidence of receipt of at least $300,000,000 in the
aggregate from the Siemens Stock Purchase and the Prudential Stock Purchase;
(xxxiv)certificate of the President or Chief Financial Officer of BREED
that (A) all conditions precedent to the consummation of the Siemens Stock
Purchase and the Prudential Stock Purchase have been satisfied, (B) all
conditions precedent to the consummation of the Allied Acquisition as set forth
in the Asset Purchase Agreement and other Acquisition Documents have been
satisfied and not waived without the approval of the Agent including all
required consents set forth on Schedule 9.3 of the Asset Purchase Agreement and
all Required Consents (as defined in the Asset Purchase Agreement) of third
parties, (C) upon the tendering of the cash proceeds from the Revolving Credit
Facility and Term Loan Facility, the Allied Acquisition shall be
<PAGE>
effective, and (D) no event has occurred or condition exists that could
reasonably be expected to have a material adverse effect on the ability of BREED
or any other party thereto to consummate the Convertible Preferred Securities
Issuance;
(xxxv) evidence satisfactory to the Agent that after payment of the
purchase price for the Allied Acquisition, repayment of existing Indebtedness
and all related fees and expenses, and after deducting all Letter of Credit
Outstandings, there shall be available to the Borrowers for working capital at
least $75,000,000;
(xxxvi)a schedule of the corporate and capital ownership structure of BREED
and its Subsidiaries immediately after giving effect to the Allied Acquisition
which shall be reviewed by and be satisfactory to the Agent;
(xxxvii)evidence that all fees payable by BREED to the Agent, NMSI and the
Lenders have been paid in full;
(xxxviii)an initial Borrowing Notice, if any;
(xxxix)payoff letters from the holders of existing Indebtedness to be
refinanced with the Revolving Credit Facility;
(xl) such other documents, instruments, certificates and opinions as the
Agent or any Lender may reasonably request in connection with the consummation
of the transactions contemplated hereby, including the due perfection of a first
priority security interest in all Collateral.
(b) In the good faith judgment of the Agent and the Lenders:
(i) there shall not have occurred or become known to the Agent or the
Lenders any event, condition, situation or status since the date of the
information contained in the financial and business projections, budgets, pro
forma data and forecasts concerning BREED and its Subsidiaries delivered to the
Agent prior to the making of the initial Loan that has had or could reasonably
be expected to result in a Material Adverse Effect;
(ii) no litigation, action, suit, investigation or other arbitral,
administrative or judicial proceeding shall be pending or threatened that
purports to affect BREED or its Subsidiaries, or the Acquired Business or that
could have a material adverse effect on BREED or its Subsidiaries, the Acquired
Business, the Allied Acquisition or any other transaction contemplated hereby or
on the ability of BREED and the other Loan Parties to perform their obligations
under the Loan Documents and the early termination or expiration of any
applicable waiting period imposed by law or regulation with respect the Allied
Acquisition without notice of intent to challenge or a request for additional
information, and no injunction shall have been issued enjoining BREED from
purchasing the Acquired Business;
(iii) the Loan Parties shall have received all approvals, consents and
waivers, and shall have made or given all necessary filings and notices as shall
be required to consummate the Allied Acquisition and the transactions
contemplated hereby without the occurrence of any default under, conflict with
or violation of (A) any applicable law, rule, regulation, order or decree of any
Governmental Authority or arbitral authority or
<PAGE>
(B) any agreement, document or instrument to which any of the Loan Parties
is a party or by which any of them or their properties is bound;
(iv) BREED and its Subsidiaries shall be in compliance with all existing
material financial obligations;
(v) there shall not have been any material amendment, modification or
waiver of any of the terms or conditions of the Asset Purchase Agreement without
consent of the Agent; and
(vi) immediately after giving effect to the Allied Acquisition, there shall
be not less than $75,000,000 under the terms of the Revolving Credit Facility
available for working capital purposes, excluding Letters of Credit issued
pursuant to Article III.
6.2. Conditions of all Loans and Letters of Credit. The obligations of the
Lenders to make any Loans, and the Issuing Bank to issue Letters of Credit,
hereunder on or subsequent to the Closing Date are subject to the satisfaction
of the following conditions:
(a) the Agent shall have received a Borrowing Notice if required by Article
II;
(b) the representations and warranties of the Loan Parties set forth in
Article VII and in each of the other Loan Documents shall be true and correct in
all material respects on and as of the date of such Advance or Letter of Credit
issuance or renewal, with the same effect as though such representations and
warranties had been made on and as of such date, except to the extent that such
representations and warranties expressly relate to an earlier date and except
that the financial statements referred to in Section 7.6(a) shall be deemed to
be those financial statements most recently delivered to the Agent and the
Lenders pursuant to Section 8.1 and except as otherwise permitted hereunder from
the date financial statements are delivered to the Agent and the Lenders in
accordance with such Section;
(c) in the case of the issuance of a Letter of Credit, the applicable
Borrower or Borrowers shall have executed and delivered to the Issuing Bank an
Application and Agreement for Letter of Credit in form and content acceptable to
the Issuing Bank together with such other instruments and documents as it shall
request;
(d) at the time of (and after giving effect to) each Advance or the
issuance of a Letter of Credit, no Default or Event of Default specified in
Article X shall have occurred and be continuing; and
(e) immediately after giving effect to:
(i) a Loan, the aggregate principal balance of all outstanding Loans,
Participations and Reimbursement Obligations for each Lender shall not exceed
such Lender's Revolving Credit Commitment;
(ii) a Letter of Credit or renewal thereof, the aggregate principal balance
of all outstanding Participations in Letters of Credit and Reimbursement
Obligations (or in the case of the Issuing Bank, its remaining interest after
deduction of all Participations in Letters of Credit and Reimbursement
Obligations of other Lenders) for each Lender and in the aggregate shall not
exceed, respectively, (X) such Lender's Letter of Credit Commitment or (Y) the
Total Letter of Credit Commitment;
<PAGE>
(iii) a Loan or Letter of Credit issued in an Alternative Currency, the
Dollar Value of Loans in Alternative Currencies shall not exceed the Total
Alternative Currency Sublimit; and
(iv) a Loan or a Letter of Credit or renewal thereof, the sum of Letter of
Credit Outstandings plus Revolving Credit Outstandings shall not exceed the
Total Revolving Credit Commitment.
ARTICLE VII
Representations and Warranties
Each Borrower represents and warrants with respect to itself and to its
Subsidiaries (which representations and warranties shall survive the delivery of
the documents mentioned herein and the making of Loans and the issuing of
Letters of Credit), that:
7.1. Organization and Authority.
(a) BREED and each Subsidiary is a corporation or partnership duly
organized and validly existing under the laws of the jurisdiction of its
formation;
(b) BREED and each Subsidiary (x) has the requisite power and authority to
own its properties and assets and to carry on its business as now being
conducted and as contemplated in the Loan Documents, and (y) is qualified to do
business in every jurisdiction in which the conduct of its business or ownership
of its assets requires it to be so qualified;
(c) BREED has the power and authority to execute, deliver and perform this
Agreement and the Notes, and to borrow hereunder, and to execute, deliver and
perform each of the other Loan Documents to which it is a party;
(d) Each Guarantor has the power and authority to execute, deliver and
perform the Guaranty and each of the other Loan Documents to which it is a
party; and
(e) When executed and delivered, each of the Loan Documents to which any
Loan Party is a party will be the legal, valid and binding obligation or
agreement of such Loan Party, enforceable against such Loan Party in accordance
with its terms, subject to the effect of any applicable bankruptcy, moratorium,
insolvency, reorganization or other similar law affecting the enforceability of
creditors' rights generally and to the effect of general principles of equity
(whether considered in a proceeding at law or in equity);
7.2. Loan Documents. The execution, delivery and performance by each Loan
Party of each of the Loan Documents to which it is a party:
(a) have been duly authorized by all requisite Organizational Action
(including any required shareholder or partner approval) of such Loan Party
required for the lawful execution, delivery and performance thereof;
(b) do not violate any provisions of (i) applicable law, rule or
regulation, (ii) any judgment, writ,
<PAGE>
order, determination, decree or arbitral award of any Governmental
Authority or arbitral authority binding on such Loan Party or its properties, or
(iii) the Organizational Documents or Operating Documents of such Loan Party;
(c) does not and will not be in conflict with, result in a breach of or
constitute an event of default, or an event which, with notice or lapse of time
or both, would constitute an event of default, under any contract, indenture,
agreement or other instrument or document to which such Loan Party is a party,
or by which the properties or assets of such Loan Party are bound; and
(d) except as provided in the Security Instruments, does not and will not
result in the creation or imposition of any Lien upon any of the properties or
assets of such Loan Party or any Subsidiary;
7.3. Solvency. Each Loan Party is Solvent after giving effect to the
transactions contemplated by the Loan Documents;
7.4. Subsidiaries and Stockholders. BREED has no Subsidiaries other than
those Persons listed as Subsidiaries in Schedule 7.4 and additional Subsidiaries
created or acquired after the Closing Date in compliance with Section 8.19;
Schedule 7.4 states as of the date hereof the organizational form of each
entity, the authorized and issued capitalization of each Subsidiary listed
thereon, the number of shares or other equity interests of each class of capital
stock or interest issued and outstanding of each such Subsidiary and the number
and/or percentage of outstanding shares or other equity interest (including
options, warrants and other rights to acquire any interest) of each such class
of capital stock or other equity interest owned by BREED or by any such
Subsidiary; the outstanding shares or other equity interests of each such
Subsidiary have been duly authorized and validly issued and are fully paid and
nonassessable; and BREED and each such Subsidiary owns beneficially and of
record all the shares and other interests it is listed as owning in Schedule
7.4, free and clear of any Lien;
7.5. Ownership Interests. BREED owns no interest in any Person other than
the Persons listed in Schedule
7.4, Integrated Sensor Solutions, Inc. and the joint ventures described in
the agreements provided to the Agent pursuant to Section 6.1(a)(x), equity
investments in Persons not constituting Subsidiaries permitted under Section 9.6
and additional Subsidiaries created or acquired after the Closing Date in
compliance with Section 8.19;
7.6. Financial Condition.
(a) BREED has heretofore furnished to each Lender (i) an audited
consolidated balance sheet of BREED and its Subsidiaries as at June 30, 1997 and
the notes thereto and the related consolidated statements of income,
stockholders' equity and cash flows for the Fiscal Year then ended as examined
and certified by Ernst & Young, LLP and (ii) an unaudited consolidated interim
statement of income of BREED and its Subsidiaries as of July 31, 1997. Except as
set forth therein, such financial statements (including the notes thereto in the
case of the audited statements) present fairly the financial condition of BREED
and its Subsidiaries as of the end of such Fiscal Year and one month period and
results of their operations for the Fiscal Year and interim period then ended
and the changes in its stockholders' equity for the Fiscal Year then ended, all
in conformity with GAAP applied on a Consistent Basis, subject however, in the
case of unaudited interim statements to year end audit adjustments;
<PAGE>
(b) since June 30, 1997 there has been no material adverse change in the
condition, financial or otherwise, of BREED or any of its Subsidiaries or in the
businesses, properties, performance, prospects or operations of BREED or its
Subsidiaries, nor have such businesses or properties been materially adversely
affected as a result of any fire, explosion, earthquake, accident, strike,
lockout, combination of workers, flood, embargo or act of God; and
(c) except as set forth in the financial statements referred to in Section
7.6(a) or in Schedule 7.6 or permitted by Section 9.4, neither BREED nor any
Subsidiary has incurred, other than in the ordinary course of business, any
Indebtedness, or other commitment or liability which remains outstanding or
unsatisfied;
7.7. Title to Properties. BREED and each of its Subsidiaries has title to
all its real and personal properties, subject to no transfer restrictions or
Liens of any kind, except with respect to the real property subject to the
Mortgages, the Permitted Encumbrances as defined in each of the Mortgages, and
with respect to the other real and personal properties, the transfer
restrictions and Liens described in Schedule 7.7 and Liens permitted by Section
9.3;
7.8. Taxes. BREED and each of its Subsidiaries has filed or caused to be
filed all federal, state and local tax returns which are required to be filed by
it and, except for taxes and assessments being contested in good faith by
appropriate proceedings diligently conducted and against which reserves
reflected in the financial statements described in Section 7.6(a) and
satisfactory to BREED's independent certified public accountants have been
established, have paid or caused to be paid all taxes as shown on said returns
or on any assessment received by it, to the extent that such taxes have become
due and the failure of which would reasonably be expected to have a Material
Adverse Effect;
7.9. Other Agreements. No Loan Party nor any Subsidiary is
(a) a party to or subject to any judgment, order, decree, agreement, lease
or instrument, or subject to other restrictions, which individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect;
(b) in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument
(including the Asset Purchase Agreement) to which BREED or any Subsidiary is a
party, which default has, or if not remedied within any applicable grace period
could reasonably be likely to have, a Material Adverse Effect; or
(c) a party to or bound by any agreement with any other Person (other than
the Agent and the Lenders pursuant to this Agreement or any other Loan Document)
which prohibits, limits or restricts the ability of any Subsidiary to make any
payments, directly or indirectly, to BREED by way of dividends, advances,
repayments of loans or advances, or other returns on investments, or by any
other agreement or arrangement which restricts the ability of any Subsidiary to
make any payment, directly or indirectly, to BREED.
7.10. Litigation. Except as set forth in Schedule 7.10, there is no action,
suit, investigation or proceeding at law or in equity or by or before any
governmental instrumentality or agency or arbitral body pending, or, to the best
knowledge of the Borrowers, threatened by or against BREED or any Subsidiary or
affecting BREED or any Subsidiary or any properties or rights of BREED or any
Subsidiary, which could reasonably be expected to
<PAGE>
have a Material Adverse Effect;
7.11. Margin Stock. The proceeds of the borrowings made hereunder will be
used by the Borrowers only for the purposes expressly authorized herein. None of
such proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin stock or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
margin stock or for any other purpose which might constitute any of the Loans
under this Agreement a "purpose credit" within the meaning of said Regulation U
or Regulation X (12 C.F.R. Part 224) of the Board. Neither the Borrowers nor any
agent acting in their behalf has taken or will take any action which might cause
this Agreement or any of the documents or instruments delivered pursuant hereto
to violate any regulation of the Board or to violate the Securities Exchange Act
of 1934, as amended, or the Securities Act of 1933, as amended, or any state
securities laws, in each case as in effect on the date hereof;
7.12. Investment Company. No Loan Party 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 (15 U.S.C. ss. 80a-1, et seq.). The application of the proceeds
of the Loans and repayment thereof by the Borrowers and the performance by the
Loan Parties of the transactions contemplated by the Loan Documents will not
violate any provision of said Act, or any rule, regulation or order issued by
the Securities and Exchange Commission thereunder, in each case as in effect on
the date hereof;
7.13. Patents, Etc. BREED and each Subsidiary owns or has the right to use,
under valid license agreements or otherwise, all material patents, licenses,
franchises, trademarks, trademark rights, trade names, trade name rights, trade
secrets and copyrights necessary to or used in the conduct of its businesses as
now conducted and as contemplated by the Loan Documents, in all cases without
known conflict with any patent, license, franchise, trademark, trade secret,
trade name, copyright, other proprietary right of any other Person, which
conflict is reasonably likely to have a Material Adverse Effect;
7.14. No Untrue Statement. Neither (a) this Agreement nor any other Loan
Document or certificate or document executed and delivered by or on behalf of
BREED or any Subsidiary in accordance with or pursuant to any Loan Document nor
(b) any statement, representation, or warranty provided to the Agent in
connection with the negotiation or preparation of the Loan Documents contains
any misrepresentation or untrue statement of material fact or omits to state a
material fact necessary, in light of the circumstance under which it was made,
in order to make any such warranty, representation or statement contained
therein not misleading;
7.15. No Consents, Etc. Neither the respective businesses or properties of
the Loan Parties or any Subsidiary, nor any relationship among the Loan Parties
or any Subsidiary and any other Person, nor any circumstance in connection with
the execution, delivery and performance of the Loan Documents and the
transactions contemplated thereby, is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any
Governmental Authority or any other Person on the part of any Loan Party or any
Subsidiary as a condition to the execution, delivery and performance of, or
consummation of the transactions contemplated by the Loan Documents, including,
without limitation, the Allied Acquisition (other than the consents identified
in the Asset Purchase Agreement), or if so, such consent (and in the case of the
Allied Acquisition the Required Consents, as defined in the Asset Purchase
Agreement), approval, authorization, filing, registration or qualification has
been duly obtained or effected, or shall have been obtained or effected prior to
the Closing Date, as the case may be;
<PAGE>
7.16. Employee Benefit Plans.
(a) BREED, each ERISA Affiliate and each Subsidiary is in compliance with
all applicable provisions of ERISA, the Code and the regulations and published
interpretations thereunder and in compliance with all Foreign Benefit Laws and
the regulations and published interpretations thereunder with respect to all
Employee Benefit Plans, except for any required amendments for which the
remedial amendment period as defined in Section 401(b) of the Code has not yet
expired. Each Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code has been determined or BREED or its Subsidiaries is
in the process of obtaining a determination by the Internal Revenue Service to
be so qualified, each trust related to such plan has been determined to be
exempt under Section 501(a) of the Code, and each Employee Benefit Plan subject
to any Foreign Benefit Law has received the required approvals by any
Governmental Authority regulating such Employee Benefit Plan. No material
liability has been incurred by BREED or any ERISA Affiliate which remains
unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan
or any Multiemployer Plan;
(b) Neither BREED, any ERISA Affiliate nor any Subsidiary has (i) engaged
in a nonexempt prohibited transaction described in Section 4975 of the Code or
Section 406 of ERISA affecting any of the Employee Benefit Plans or the trusts
created thereunder which could subject any such Employee Benefit Plan or trust
to a material tax or penalty on prohibited transactions imposed under Internal
Revenue Code Section 4975 or ERISA, (ii) incurred any accumulated funding
deficiency with respect to any Employee Benefit Plan, whether or not waived, or
any other material liability to the PBGC which remains outstanding other than
the payment of premiums and there are no premium payments which are due and
unpaid, (iii) failed to make a required contribution or payment to a
Multiemployer Plan, (iv) failed to make a required installment or other required
payment under Section 412 of the Code, Section 302 of ERISA or the terms of such
Employee Benefit Plan, or (v) failed to make a required contribution or payment,
or otherwise failed to operate in compliance with any Foreign Benefit Law
regulating any Employee Benefit Plan;
(c) No Termination Event has occurred or is reasonably expected to occur
with respect to any Employee Benefit Plan except for the hourly represented
retirement plans of BREED's Grabill, Indiana and Niles, Michigan facilities, and
neither BREED nor any ERISA Affiliate has incurred any unpaid withdrawal
liability with respect to any Multiemployer Plan;
(d) The present value of all vested accrued benefits under each Employee
Benefit Plan which is subject to Title IV of ERISA or whose funding is regulated
by any Foreign Benefit Law, did not, as of the most recent valuation date for
each such plan, exceed the then current value of the assets of such Employee
Benefit Plan allocable to such benefits;
(e) To the best of BREED's knowledge, each Employee Benefit Plan subject to
Title IV of ERISA or the funding of which is regulated by any Foreign Benefit
Law, maintained by BREED, any ERISA Affiliate or any Subsidiary, has been
administered in accordance with its terms in all material respects and is in
compliance in all material respects with all applicable requirements of ERISA,
all Foreign Benefit Laws, and other applicable laws, regulations and rules;
(f) The consummation of the Loans and the issuance of the Letters of Credit
provided for herein will not involve any prohibited transaction under ERISA
which is not subject to a statutory or administrative
<PAGE>
exemption; and
(g) No material proceeding, claim, lawsuit and/or investigation exists or,
to the best knowledge of BREED after due inquiry, is threatened concerning or
involving any Employee Benefit Plan;
7.17. No Default. As of the date hereof, there does not exist any Default
or Event of Default hereunder;
7.18. Environmental Matters. BREED and each Subsidiary is in compliance
with all applicable Environmental Laws in all material respects and has been
issued and currently maintains or is pursuing all required federal, state, local
and foreign permits, licenses, certificates and approvals. Neither BREED nor any
Subsidiary has been notified of any pending or threatened action, suit,
proceeding or investigation which, and neither BREED nor any Subsidiary is aware
of any facts which, (i) calls into question, or could reasonably be expected to
call into question, compliance by BREED or any Subsidiary with any Environmental
Laws, (ii) which seeks, or could reasonably be expected to form the basis of a
meritorious proceeding, to suspend, revoke or terminate any license, permit or
approval necessary for the generation, handling, storage, treatment or disposal
of any Hazardous Material or the operation of BREED's or any Subsidiary's
business or facility, or (iii) seeks to cause, or could reasonably be expected
to form the basis of a meritorious proceeding to cause, any property of BREED or
any Subsidiary to be subject to any restrictions on ownership, use, occupancy or
transferability under any Environmental Law, which in any of the foregoing
instances would reasonably be expected to have a Material Adverse Effect;
7.19. Employment Matters. (a) Except as set forth in Schedule 7.19, none of
the employees of BREED or any Subsidiary is subject to any collective bargaining
agreement and there are no strikes, work stoppages, election or decertification
petitions or proceedings, unfair labor charges, equal opportunity proceedings,
or other material labor/employee related controversies or proceedings pending
or, to the best knowledge of BREED, threatened against BREED or any Subsidiary
or between BREED or any Subsidiary and any of its employees, other than (in each
of the foregoing cases) employee grievances arising in the ordinary course of
business which could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect;
(b) Except to the extent a failure to maintain compliance would not have a
Material Adverse Effect, BREED and each Subsidiary is in compliance in all
material respects with all applicable laws, rules and regulations pertaining to
labor or employment matters, including without limitation those pertaining to
wages, hours, occupational safety and taxation and there is neither pending or,
to the knowledge of BREED, threatened any litigation, administrative proceeding
nor, to the knowledge of BREED, any investigation, in respect of such matters
which, if decided adversely, could reasonably be likely, individually or in the
aggregate, to have a Material Adverse Effect;
7.20. RICO. Neither BREED nor any Subsidiary is engaged in or has engaged
in any course of conduct that could subject any of their respective properties
to any Lien, seizure or other forfeiture under any criminal law, racketeer
influenced and corrupt organizations law, civil or criminal, or other similar
laws;
7.21. Allied Acquisition Representations. On the Closing Date, each of the
representations and warranties contained in Article 6 of the Asset Purchase
Agreement, including all Exhibits and Schedules referenced therein and all
definitions of defined terms referenced therein and all disclosures of Allied
contained therein, are incorporated herein by reference and given by BREED as of
the Closing Date;
<PAGE>
7.22. Allied Acquisition. All conditions precedent to the consummation of
the Allied Acquisition as set forth in the Asset Purchase Agreement and other
Acquisition Documents have been satisfied and not waived without the approval of
the Agent (which approval shall not be unreasonably withheld) including all
Required Consents (as defined in the Asset Purchase Agreement) and approvals of
third parties and upon the tendering of the cash proceeds from the Revolving
Credit Facility, the Allied Acquisition shall be effective;
7.23. Perfected Security Instruments. (a) At all times after execution and
delivery of each Pledge Agreement by the Pledgor thereunder and satisfaction of
the conditions set forth in Section 6.1, the security interests created in favor
of the Agent for the benefit of the Lenders under the Pledge Agreements will
constitute valid, perfected security interests in the Pledged Stock and Assigned
Interests, subject to no other Liens;
(b) At all times after execution and delivery of each Security Instrument
(other than the Pledge Agreements) by the parties thereto and completion of the
filings and recordings listed on Schedule 7.23 hereto, the security interests
created in favor of the Agent for the benefit of the Lenders under the Security
Instruments (other than the Pledge Agreements) will constitute valid, perfected
security interests in the Collateral described therein, subject to no other
Liens whatsoever, except for Permitted Liens, and with respect to the Mortgages,
subject to no other Liens whatsoever, except for the Permitted Encumbrances as
defined in each of the Mortgages.
ARTICLE VIII
Affirmative Covenants
Until the Facility Termination Date, unless the Required Lenders shall
otherwise consent in writing, BREED will, and where applicable will cause each
Subsidiary to:
8.1. Financial Reports, Etc. (a) As soon as practical and in any event
within 90 days after the end of each Fiscal Year of BREED, deliver or cause to
be delivered to the Agent, together with sufficient copies for each Lender (i)
consolidated and consolidating (by major lines of business) balance sheets of
BREED and its Subsidiaries as at the end of such Fiscal Year, and the notes
thereto, and the related consolidated and consolidating statements of income,
stockholders' equity and cash flows, and the respective notes thereto, for such
Fiscal Year, setting forth comparative financial statements for the preceding
Fiscal Year, all prepared in accordance with GAAP applied on a Consistent Basis
and containing opinions (in the case of the consolidated statements) of Ernst &
Young LLP, or other such independent certified public accountants selected by
BREED and approved by the Agent, which are unqualified as to the scope of the
audit performed and as to the "going concern" status of BREED and its
Subsidiaries and without any exception not acceptable to the Required Lenders,
and (ii) a certificate of an Authorized Representative demonstrating compliance
with Sections 9.1(a) through 9.1(c), which certificate shall be in the form of
Exhibit T;
(b) as soon as practical and in any event within 45 days after the end of
each fiscal quarter (except the last fiscal quarter of the Fiscal Year), deliver
to the Agent together with sufficient copies for each Lender, (i) consolidated
and consolidating (by major line of business) balance sheets of BREED and its
Subsidiaries as at the end of such fiscal quarter, and the related consolidated
and consolidating statements of income and cash flows for such fiscal quarter
and for the period from the beginning of the then current Fiscal Year through
the end of such reporting period, and accompanied by a certificate of an
Authorized Representative to the effect that
<PAGE>
such financial statements present fairly the financial position of BREED
and its Subsidiaries as of the end of such fiscal period and the results of
their operations and the changes in their financial position for such fiscal
period, in conformity with the standards set forth in Section 7.6(a) with
respect to interim financial statements, and (ii) a certificate of an Authorized
Representative containing computations for such quarter comparable to that
required pursuant to Section 8.1(a)(ii);
(c) as soon as practical and in any event within 30 days after the end of
each calendar month (except the last month of a fiscal quarter or Fiscal Year),
deliver to the Agent consolidated and consolidating (by major line of business)
balance sheets of BREED and its Subsidiaries as at the end of such calendar
month, and the related consolidated and consolidating statements of income and
cash flows for such calendar month and for the period from the beginning of the
then current Fiscal Year through the end of such month, and accompanied by a
certificate of an Authorized Representative to the effect that such financial
statements present fairly the results of operations of BREED and its
Subsidiaries as of the end of such calendar month and for such calendar month,
respectively, and the changes in their financial position for such period, in
conformity with the standards set forth in Section 7.6(a) with respect to
interim financial statements;
(d) together with each delivery of the financial statements required by
Section 8.1(a)(i), deliver to the Agent and each Lender a letter from BREED's
accountants specified in Section 8.1(a)(i) stating that in performing the audit
necessary to render an opinion on the financial statements delivered under
Section 8.1(a)(i), they obtained no knowledge of any Default or Event of Default
by the Borrowers in the fulfillment of the terms and provisions of this
Agreement insofar as they relate to financial matters (which at the date of such
statement remains uncured); or if the accountants have obtained knowledge of
such Default or Event of Default, a statement specifying the nature and period
of existence thereof; (e) promptly upon their becoming available to BREED, BREED
shall deliver to the Agent, together with sufficient copies for each Lender, a
copy of (i) all regular or special reports or effective registration statements
which BREED or any Subsidiary shall file with the Securities and Exchange
Commission (or any successor thereto) or any securities exchange, (ii) any proxy
statement distributed by BREED or any Subsidiary to its shareholders,
bondholders or the financial community in general, and (iii) any management
letter or other report submitted to BREED or any Subsidiary by independent
accountants in connection with any annual, interim or special audit of BREED or
any Subsidiary;
(f) promptly deliver or cause to be delivered to the Agent, written notice
of any event which constitutes or which with the passage of time or giving of
notice or both would constitute a default or event of default under any Material
Contract to which BREED or any of its Subsidiaries is a party or by which BREED
or any Subsidiary thereof or any of their respective properties may be bound;
(g) promptly, from time to time, deliver or cause to be delivered to the
Agent such other information regarding BREED's and any Subsidiary's operations,
business affairs and financial condition as the Agent may reasonably request;
Subject to Section 12.1(f), the Agent and the Lenders are hereby authorized
to deliver a copy of any such financial or other information delivered hereunder
to the Lenders (or any affiliate of any Lender) or to the Agent, to any
Governmental Authority having jurisdiction over the Agent or any of the Lenders
pursuant to any written request therefor or in the ordinary course of
examination of loan files, or to any other Person who shall acquire or consider
the assignment of, or acquisition of any participation interest in, any
Obligation permitted by
<PAGE>
this Agreement provided that notice is given to BREED if such information
is delivered to a Person not enumerated herein;
8.2. Maintain Properties. Maintain all properties necessary to its
operations in good working order and condition, ordinary wear and tear excepted,
make all needed repairs, replacements and renewals to such properties, and
maintain free from Liens all trademarks, trade names, patents, copyrights, trade
secrets, know- how, and other intellectual property and proprietary information
(or adequate licenses thereto), in each case as are necessary to conduct its
business as currently conducted or as contemplated hereby, all in accordance
with customary and prudent business practices;
8.3. Existence, Qualification, Etc. Except as otherwise expressly permitted
under Section 9.7, do or cause to be done all things necessary to preserve and
keep in full force and effect its existence and all material rights and
franchises, and, except to the extent conveyed in connection with a transaction
permitted under Section 9.5 hereof, maintain its license or qualification to do
business as a foreign corporation and good standing in each jurisdiction in
which its ownership or lease of property or the nature of its business makes
such license or qualification necessary;
8.4. Regulations and Taxes. Comply in all material respects with or contest
in good faith all statutes and governmental regulations and pay all taxes,
assessments, governmental charges, claims for labor, supplies, rent and any
other obligation which, if unpaid, would become a Lien against any of its
properties except liabilities being contested in good faith by appropriate
proceedings diligently conducted and against which adequate reserves acceptable
to BREED's independent certified public accountants have been established unless
and until any Lien resulting therefrom attaches to any of its property and
becomes enforceable against the Lenders;
8.5. Insurance. (a) Keep all of its insurable properties adequately insured
at all times with responsible insurance carriers against loss or damage by fire
and other hazards, including containing provisions required by the Security
Instruments, (b) maintain general public liability insurance at all times with
responsible insurance carriers against liability on account of damage to persons
and property and (c) maintain insurance under all applicable workers'
compensation laws (or in the alternative, maintain required reserves if
self-insured for workers' compensation purposes) and against loss by reason of
business interruption such policies of insurance to have such limits,
deductibles, exclusions, co-insurance and other provisions providing no less
coverages than that specified in Schedule 8.5. Each of the policies of insurance
described in this Section 8.5 shall comply in all respects with the terms of the
Security Instruments;
8.6. True Books. Keep true books of record and account in which full, true
and correct entries will be made of all of its dealings and transactions, and
set up on its books such reserves as may be required by GAAP with respect to
doubtful accounts and all taxes, assessments, charges, levies and claims and
with respect to its business in general, and include such reserves in interim as
well as year-end financial statements;
8.7. Right of Inspection. Permit any representative designated by the Agent
or any Lender, to visit and inspect any of the properties, corporate books and
financial reports of BREED or any Subsidiary and to discuss its affairs,
finances and accounts with its principal officers and independent certified
public accountants, all at reasonable times, at reasonable intervals and with
reasonable prior notice and permit any Lender to discuss BREED's affairs,
finances and accounts with its principal officers and its independent
accountants all at reasonable times, at reasonable intervals and with reasonable
prior notice;
<PAGE>
8.8. Observe all Laws. Conform to and duly observe in all material respects
all laws, rules and regulations and all other valid requirements of any
Governmental Authority with respect to the conduct of its business;
8.9. Governmental Licenses. Obtain and maintain all licenses, permits,
certifications and approvals of all applicable Governmental Authorities as are
required for the conduct of its business as currently conducted and as
contemplated by the Loan Documents;
8.10. Covenants Extending to Other Persons. Cause each of its Subsidiaries
to do with respect to itself, its business and its assets, each of the things
required of BREED in Sections 8.2 through 8.9, and 8.18 inclusive;
8.11. Officer's Knowledge of Default. Upon any Authorized Representative or
the General Counsel of BREED obtaining knowledge of any Default or Event of
Default hereunder or under any other obligation of BREED or any Subsidiary to
any Lender, or any event, development or occurrence which could reasonably be
expected to have a Material Adverse Effect, cause such officer or an Authorized
Representative to promptly notify the Agent of the nature thereof, the period of
existence thereof, and what action BREED or such Subsidiary proposes to take
with respect thereto;
8.12. Suits or Other Proceedings. Upon any Authorized Representative or the
General Counsel of BREED obtaining knowledge of any litigation or other
proceedings being instituted against BREED or any Subsidiary or any attachment,
levy, execution or other process being instituted against any assets of BREED or
any Subsidiary making a claim or claims which is likely to result in damages in
an aggregate amount greater than $10,000,000 not otherwise covered by insurance,
or could reasonably be expected to have a Material Adverse Effect, promptly
deliver to the Agent written notice thereof stating the nature and status of
such litigation, dispute, proceeding, levy, execution or other process;
8.13. Notice of Environmental Complaint or Condition. Promptly provide to
the Agent true, accurate and complete copies of any and all notices, complaints,
orders, directives, claims, or citations received by BREED or any Subsidiary
relating to any (a) violation or alleged violation by BREED or any Subsidiary of
any applicable Environmental Law; (b) release or threatened release by BREED or
any Subsidiary, or at any facility or property owned or leased or operated by
BREED or any Subsidiary or by any Person handling, transporting, or disposing of
any Hazardous Material on behalf of BREED or any Subsidiary, of any Hazardous
Material, except where occurring legally; or (c) liability or alleged liability
of BREED or any Subsidiary for the costs of cleaning up, removing, remediating
or responding to a release of Hazardous Materials, which in any of the foregoing
instances would reasonably be expected to have a Material Adverse Effect;
8.14. Environmental Compliance. If BREED or any Subsidiary shall receive
any letter, notice, complaint, order, directive, claim or citation alleging that
BREED or and Subsidiary has violated any Environmental Law, has released any
Hazardous Material or is liable for the costs of cleaning up, removing,
remediating or responding to a release of Hazardous Materials, which in any of
the foregoing instances would reasonably be expected to have a Material Adverse
Effect, BREED shall, within the time period permitted by the applicable
Environmental Law or the Governmental Authority responsible for enforcing such
Environmental Law, either (i) remove or remedy, or cause the applicable
Subsidiary to remove or remedy, such violation or release or satisfy such
liability or (ii) contest in good faith such violation so long as no remedial
action shall be required to be taken during the period of such contest;
<PAGE>
8.15. Indemnification. Without limiting the generality or application of
Section 12.9, BREED hereby agrees to indemnify and hold the Agent, the Lenders
and NMSI, and their respective officers, directors, employees and agents,
harmless from and against any and all claims, losses, penalties, liabilities,
damages and expenses (including assessment and cleanup costs and reasonable
attorneys' fees and disbursements) arising directly or indirectly from, out of
or by reason of (a) the violation of any Environmental Law by BREED or any
Subsidiary or with respect to any property owned, operated or leased by BREED or
any Subsidiary or (b) the handling, storage, treatment, emission or disposal of
any Hazardous Materials by or on behalf of BREED or any Subsidiary or on or with
respect to property owned or leased or operated by BREED or any Subsidiary. The
provisions of this Section 8.15 shall survive the Facility Termination Date and
expiration or termination of this Agreement;
8.16. Further Assurances. At the Borrowers' cost and expense, upon request
of the Agent, duly execute and deliver or cause to be duly executed and
delivered, to the Agent such further instruments, documents, certificates,
financing and continuation statements, and do and cause to be done such further
acts that may be reasonably necessary or advisable in the reasonable opinion of
the Agent to carry out more effectively the provisions and purposes of this
Agreement and the other Loan Documents;
8.17 Employee Benefit Plans.
(a) With reasonable promptness, and in any event within thirty (30) days
thereof, give notice to the Agent of (a) the establishment of any new Employee
Benefit Plan (which notice shall include a summary of such plan), (b) the
commencement of contributions to any Employee Benefit Plan to which BREED, any
of its ERISA Affiliates or any of its Subsidiaries was not previously
contributing, (c) any material increase in the benefits of any existing Employee
Benefit Plan, (d) each funding waiver request filed with respect to any Employee
Benefit Plan and all communications received or sent by BREED, any ERISA
Affiliate or any Subsidiary with respect to such request and (e) the failure of
BREED or any ERISA Affiliate or any Subsidiary to make a required installment or
payment under Section 302 of ERISA or Section 412 of the Code (in the case of
Employee Benefit Plans regulated by the Code or ERISA) or any Foreign Benefit
Law (in the case of any Employee Benefit Plan regulated by any Foreign Benefit
Law) by the due date;
(b) Promptly and in any event within fifteen (15) days of becoming aware of
the occurrence or forthcoming occurrence of any (a) Termination Event or (b)
nonexempt "prohibited transaction," as such term is defined in Section 406 of
ERISA or Section 4975 of the Code, in connection with any Pension Plan or any
trust created thereunder, deliver to the Agent a notice specifying the nature
thereof, what action BREED, any ERISA Affiliate or any Subsidiary has taken, is
taking or proposes to take with respect thereto and, when known, any action
taken or threatened by the Internal Revenue Service, the Department of Labor,
the PBGC or any other Governmental Authority with respect thereto; and
(c) With reasonable promptness but in any event within fifteen (15) days
for purposes of clauses (a), (b) and (c), deliver to the Agent copies of (a) any
unfavorable determination letter from the Internal Revenue Service regarding the
qualification of an Employee Benefit Plan under Section 401(a) of the Code, (b)
all notices received by BREED or any ERISA Affiliate or any Subsidiary of the
PBGC's or any Governmental Authority's intent to terminate any Employee Benefit
Plan or to have a trustee appointed to administer any Pension Plan, (c) each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed
by BREED or any ERISA Affiliate with the Internal Revenue Service with respect
to each Employee Benefit Plan
<PAGE>
and (d) all notices received by BREED or any ERISA Affiliate from a
Multiemployer Plan sponsor concerning the imposition or amount of withdrawal
liability pursuant to Section 4202 of ERISA. BREED will notify the Agent in
writing within five (5) Business Days of BREED or any ERISA Affiliate obtaining
knowledge or reason to know that BREED or any ERISA Affiliate has filed or
intends to file a notice of intent to terminate any Pension Plan under a
distress termination within the meaning of Section 4041(c) of ERISA;
8.18. Continued Operations. Except as permitted under Section 9.12,
continue at all times to conduct its business and engage principally in the same
or complementary line or lines of business substantially as heretofore
conducted;
8.19 Additional Support Documents. Within thirty (30) days (or such
additional amount of time as is reasonably necessary in the case of a Foreign
Subsidiary but in no event more than ninety (90) days) of the acquisition or
creation of any Domestic Subsidiary or Direct Foreign Subsidiary or any
Subsidiary of a Borrowing Subsidiary cause to be delivered to the Agent for the
benefit of the Lenders each of the following:
(a) in the case of a Domestic Subsidiary,
(i) a Guaranty executed by such Domestic Subsidiary substantially in the
form of Exhibit G hereto;
(ii) a Security Agreement executed by such Domestic Subsidiary
substantially in the form of Exhibit R hereto;
(iii) if applicable, to the extent consented to by any necessary third
party, Landlord Waivers (in the form of Exhibit L), Lease Assignments (in the
form of Exhibit N), Mortgages, an Intellectual Property Security Agreement (in
the form of Exhibit H), and an Intercompany Note Pledge Agreement (in the form
of Exhibit Q);
(b) (i) in the case that such Subsidiary is directly owned by BREED or a
Domestic Subsidiary or a Borrowing Subsidiary which has previously delivered a
Pledge Agreement, Exhibit A and a revised Schedule I to the Pledge Agreement
dated the date hereof together with (x) stock certificates or other appropriate
evidence of ownership representing 100% of the capital stock and related
interests and rights of a Domestic Subsidiary and a Subsidiary of a Borrowing
Subsidiary or (y) not less than 65% of the Voting Stock and 100% of the
non-voting common stock and related interests and rights of any Direct Foreign
Subsidiary and (z) duly executed stock powers or powers of assignment in blank
affixed thereto;
(ii) in the case that such Subsidiary is directly owned by a Domestic
Subsidiary which has not previously delivered a Pledge Agreement, a Pledge
Agreement substantially similar in form and content to that executed and
delivered by certain Domestic Subsidiaries on the Closing Date, with appropriate
revisions as to the identity of the pledgor and as required by applicable law,
if such Subsidiary is a Foreign Subsidiary, and securing Obligations of such
Pledgor under its Guaranty, together with (x) stock certificates or other
appropriate evidence of ownership representing 100% of the capital stock and
related interests and rights of a Domestic Subsidiary or (y) not less than 65%
of the Voting Stock and 100% of the non-voting common stock and related
interests and rights of any Direct Foreign Subsidiary (z) duly executed stock
powers or powers of assignment in blank affixed thereto or a Certificate and
Receipt of Registrar; or
<PAGE>
(c) in the case that such Subsidiary is a partnership that has not issued
certificates evidencing ownership of such partnership or joint venture, the
Collateral Assignment of Partnership Interests and Certificate and Receipt of
Registrar of such partnership or such joint venture with respect to the
registration of the Lien on Assigned Interests so long as such assignment is not
prohibited by the Governing Documents of such partnership or joint venture;
(d) an opinion of counsel to the Subsidiary dated as of the date of
delivery of the Guaranty and other Loan Documents provided for in this Section
8.19and addressed to the Agent and the Lenders, in form and substance
substantially identical to the opinion of counsel delivered pursuant to Section
6.1(a)(ii) hereof on the Closing Date with respect to each Loan Party which is
party to any Loan Document which such newly acquired or created Subsidiary is
required to deliver or cause to be delivered pursuant to subparagraphs (a), (b),
or (c) above.
(e) current copies of the Organizational Documents and Operating Documents
of such Subsidiary, minutes of duly called and conducted meetings (or duly
effected consent actions) of the Board of Directors, partners, or appropriate
committees thereof (and, if required by such Organizational Documents or
Operating Documents, of the shareholders) of such Subsidiary authorizing the
actions and the execution and delivery of documents described in this Section
8.19.
8.20. Operating Plan. As soon as practical and in any event within 90 days
after the Closing Date, BREED shall deliver to the Agent a copy of the Operating
Plan; provided, however, that if at any time before the Facility Termination
Date, management of BREED determines that the forecasts of the Operating Plan no
longer accurately reflect the current projected financial results of BREED and
its Subsidiaries, as promptly as practicable after such determination date and
in any event within 30 days of the end of the fiscal quarter for which such
determination was made, BREED shall deliver to the Agent a revised Operating
Plan;
8.21. Allied Acquisition Audit. As soon as practical and in any event
within 45 days after the Closing Date, BREED shall deliver to the Agent a copy
of an audit of the Acquired Business for the three (3) years ending December 31,
1996 conducted by Price Waterhouse, LLP and unaudited financial statements as of
September 30, 1997; and within 95 days after the initial Advance, unaudited
financial statements as of the date of the initial Advance. Notwithstanding the
foregoing, AlliedSignal's failure to provide such statements, without fault of
BREED, shall not constitute an Event of Default;
8.22. Diligent Pursuit of Waiver. BREED shall use its best efforts to
obtain a waiver of the limitations set forth in the letter dated August 26, 1996
to BREED from the Securities and Exchange Commission;
8.23. Swap Agreements. Not later than thirty (30) days following the
Closing Date, the Borrowers shall enter into interest rate protection agreements
containing terms and conditions acceptable to BREED and the Agent providing Rate
Hedging Obligations which limit the risk of interest rate fluctuations in a
notional amount of not less than (i) $300,000,000 or (ii) in the event that
Outstandings are less than $300,000,000, fifty percent (50%) of all
Outstandings;
8.24. Subsidiary Support of Permitted Indebtedness. So long as not
prohibited by law, BREED and each Subsidiary shall cause each of their
Subsidiaries to make cash payments, directly or indirectly, to the Borrowers by
way of dividends, advances, repayments of loans or advances, or other returns on
investments, or by way of
<PAGE>
any other arrangement such that the Borrowers shall have the ability to
satisfy all interest and principal payments required under the terms of this
Agreement or any other Loan Document and under the terms of any other Permitted
Indebtedness.
8.25. Convertible Debentures.
(a) The Convertible Preferred Securities Issuance shall have occurred
within 180 days of the Closing Date.
(b) In the event any distribution with respect to the Convertible
Debentures would give rise to an Event of Default, promptly give the BTI Trust
notice of the election by BREED to defer such distribution until payment in full
of the Obligations.
8.26 Management. Cause the Person occupying the office of (i) Vice Chairman
of the Board of Directors, (ii) President and Chief Operating Officer, and (iii)
Executive Vice President of Operations Worldwide to remain in such office,
except for reason of death or disability.
ARTICLE IX
Negative Covenants
Until the Facility Termination Date, unless the Required Lenders shall
otherwise consent in writing, BREED will not, nor will it permit any Subsidiary
to:
9.1. Financial Covenants.
(a) Consolidated Shareholder's Equity. Permit Consolidated Shareholder's
Equity to be less than the following: (i) ninety percent (90%) of the pro-forma
Consolidated Shareholders' Equity of BREED and its Subsidiaries and the Acquired
Business as set forth in the Form 8-K filed with the Securities and Exchange
Commission as a result of the completion of the Allied Acquisition, less
(ii) the sum of:
(A) All after tax charges related to the restructure plan announced in the
second quarter of Fiscal Year 1998, as approved by the Agent, plus
(B) All after tax charges for disruption costs directly related to the
aforementioned restructure plan, as approved by the Agent, plus
(C) All after tax fees and expenses, including financing fees, that are
related to the Allied Acquisition, as approved by the Agent, plus
(D) After tax charges for the write off of in process R&D of the Acquired
Business, as approved by the Agent, plus
<PAGE>
(E) Cash Dividends on either the Convertible Preferred Securities or the
Series B Preference Shares so long as the Convertible Preferred Securities have
not been issued, plus
(F) Cash dividends paid to common stockholders on or about November 4,
1997;
plus
(iii) the sum of:
(A) Ninety percent (90%) of Consolidated Net Income (with no reduction for
losses), plus
(B) One hundred percent (100%) of the Net Proceeds of any Equity Offering.
(iv) The foregoing calculation, (i) - (ii) + (iii) shall be exclusive of
the effects of any foreign currency translation amounts after September 30,
1997.
(b) Consolidated EBITDA. Permit at any time during the respective periods
set forth below Consolidated EBITDA (less those items described in Section 9.1
(a)(ii)(A)(B) and (D)) to be less than that set forth opposite each such period:
Period Amount
Three months ending December 31, 1997 $25,000,000
Six months ending March 31, 1997 $64,000,000
Nine months ending June 30, 1998 $107,000,000
(c) Limitation on Capital Expenditures. Make Capital Expenditures which
exceed during the respective periods set forth below (on a cumulative basis) the
amount set forth opposite each such period:
Period Amount
Three months ending December 31, 1997 $17,000,000
Six months ending March 31, 1998 $37,000,000
Nine months ending June 30, 1998 $57,000,000
9.2. Acquisitions. Enter into any agreement, contract, binding commitment
or other arrangement providing for any Acquisition, or take any action to
solicit the tender of securities or proxies in respect thereof in order to
effect any Acquisition.
9.3. Liens. Incur, create or permit to exist any Lien, charge or other
encumbrance of any nature whatsoever with respect to any property or assets now
owned or hereafter acquired by BREED or any Subsidiary, other than Liens created
in favor of the Agent and the Lenders under the Loan Documents and the following
(collectively, the "Permitted Liens"):
<PAGE>
(a) Liens existing as of the date hereof and as set forth in Schedule 7.7;
(b) Liens imposed by law for taxes, assessments or charges of any
Governmental Authority for claims not yet due or which are being contested in
good faith by appropriate proceedings diligently conducted and with respect to
which adequate reserves or other appropriate provisions are being maintained in
accordance with GAAP.
(c) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other Liens imposed by law or created in the ordinary
course of business and in existence less than 90 days from the date of creation
thereof for amounts not yet due or which are being contested in good faith by
appropriate proceedings diligently conducted and with respect to which adequate
reserves or other appropriate provisions are being maintained in accordance with
GAAP;
(d) Liens incurred or deposits made in the ordinary course of business
(including, without limitation, surety bonds and appeal bonds) in connection
with workers' compensation, unemployment insurance and other types of social
security benefits or to secure the performance of tenders, bids, leases,
contracts (other than for the repayment of Indebtedness), statutory obligations
and other similar obligations or arising as a result of progress payments under
government contracts;
(e) purchase money Liens to secure Indebtedness permitted under Section
9.4(e) and incurred to purchase fixed assets, provided such Indebtedness
represents not less than 75% and not more than 100% of the purchase price of
such assets as of the date of purchase thereof and no property other than the
assets so purchased secured such Indebtedness;
(f) Liens arising in connection with Capital Leases permitted under Section
9.4(f) provided that no such Lien shall extend to any Collateral or to any other
property other than the assets subject to such Capital Leases;
(g) easements (including reciprocal easement agreements and utility
agreements), rights-of-way, covenants, consents, reservations, encroachments,
variations and zoning and other restrictions, charges or encumbrances (whether
or not recorded), which do not interfere materially with the ordinary conduct of
the business of BREED or any Subsidiary and which do not materially detract from
the value of the property to which they attach or materially impair the use
thereof to BREED or any Subsidiary;
9.4. Indebtedness. Incur, create, assume or permit to exist any
Indebtedness, howsoever evidenced, except the following (collectively the
"Permitted Indebtedness"):
(a) Indebtedness existing as of the Closing Date as set forth in Schedule
7.6; provided the outstanding amount of such Indebtedness shall not at any time
exceed $100,000,000 in the aggregate; provided, further, none of the instruments
and agreements evidencing or governing such Indebtedness shall be amended,
modified or supplemented after the Closing Date to change any terms of
subordination, repayment or rights of conversion, put, exchange or other rights
from such terms and rights as in effect on the Closing Date;
(b) Indebtedness owing to the Agent or any Lender in connection with this
Agreement, any Note or other Loan Document;
(c) Indebtedness required under Section 8.23;
(d) the endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business;
(e) purchase money Indebtedness in an aggregate amount not to exceed
$10,000,000 at any time;
<PAGE>
(f) Capital Leases (i) with respect to the construction and equipping of
the VT1 FAB2 Facility in Finland in an aggregate amount not to exceed
$10,000,000 at any time and (ii) other than described in clause (i) above in an
aggregate principal amount not to exceed $10,000,000 at any time;
(g) Intercompany Advances; and
(h) Guaranties of Indebtedness permitted hereunder of Guarantors and Direct
Foreign Subsidiaries., and the limited guaranty of the Convertible Preferred
Securities.
9.5. Transfer of Assets. Sell, lease, transfer or otherwise dispose of any
assets of BREED or any Subsidiary other than:
(a) dispositions of assets in the ordinary course of business; (b)
dispositions of property that is substantially worn, damaged, obsolete or, in
the judgment of BREED, no longer best used or useful in its business (including
Gallino Plasturgia S.r.l.) or that of any Subsidiary;
(c) transfers of assets necessary to give effect to investment or merger or
consolidation transactions permitted by Sections 9.6 and 9.7.
(d) after the Agent has approved the Operating Plan, dispositions described
therein.
9.6. Investments. Purchase, own, invest in or otherwise acquire, directly
or indirectly, any stock or other securities, or make or permit to exist any
interest whatsoever in any other Person or permit to exist any loans or advances
to any Person, except that BREED and its Subsidiaries may maintain investments
or invest in:
(a) any Person acquired in an Acquisition permitted hereunder;
(b) Eligible Securities;
(c) investments, including joint ventures, existing as of the date hereof
and as set forth in Schedule 7.4 and the Siemens joint venture referred to in
Section 9.6(h);
(d) accounts receivable arising and trade credit granted in the ordinary
course of business and any securities received in satisfaction or partial
satisfaction thereof in connection with accounts of financially troubled Persons
to the extent reasonably necessary in order to prevent or limit loss;
(e) Intercompany Advances;
(f) investments in Guarantors formed for the purpose of an Equity Offering
or a Debt Offering;
(g) loans and advances to employees in the ordinary course of business in
an aggregate amount not to exceed $4,000,000;
(h) non-cash investments in a joint venture with Siemens AG or a subsidiary
thereof not to exceed in the aggregate $20,000,000;
(i) other investments in joint ventures, the BTI Trust and minority
interest investments in an aggregate amount not to exceed $1,000,000;
(j) advances to Foreign Subsidiaries who are not Borrowing Subsidiaries nor
Direct Foreign Subsidiaries in
<PAGE>
an aggregate amount not to exceed $1,000,000; and
(k) investments in BTI Trust of up to 3% of the principal amount of the
Convertible Preferred Securities.
9.7. Merger or Consolidation. (a) Consolidate with or merge into any other
Person, or (b) permit any other Person to merge into it; provided, however, (i)
any Subsidiary of BREED may merge or transfer all or substantially all of its
assets into or consolidate with its parent, a Guarantor, a Borrowing Subsidiary,
or BREED, and (ii) any other Person may merge into or consolidate with BREED or
any wholly-owned Subsidiary and any Subsidiary may merge into or consolidate
with any other Person in order to consummate an Acquisition permitted by Section
9.2, provided further, that any resulting or surviving entity shall execute and
deliver such agreements and other documents, including a Guaranty, and take such
other action as the Agent may require to evidence or confirm its express
assumption of the obligations and liabilities of its predecessor entities under
the Loan Documents;
9.8 Restricted Payments. Make any Restricted Payment or apply or set apart
any of their assets therefor or agree to do any of the foregoing except (a) a
one time cash dividend of approximately $2,200,000 payable to the holders of
BREED common stock on or before November4, 1997, (b) BREED may make Restricted
Payments (i) prior to the issuance of the Convertible Preferred Securities on
the Series B Preference Shares required pursuant to the Prudential Stock
Purchase Documents and (ii) after the issuance of the Convertible Preferred
Securities to the BTI Trust on the Convertible Debentures (and the BTI Trust may
make distributions on the Convertible Preferred Securities) so long as both
before and after giving effect thereto, no Default or Event of Default exists,
and (c) the redemption of the Series B Preference Shares with Net Proceeds
received from the sale of the Convertible Preferred Securities or such other
equity or equity linked securities as approved by the Required Lenders.
9.9. Transactions with Affiliates. Other than transactions permitted under
Sections 9.5, 9.6, 9.7 and 9.8, and transactions with the BTI Trust (to the
extent necessary for BREED to perform its obligations with respect to the
Convertible Preferred Securities), Guarantors, Borrowing Subsidiaries or Direct
Foreign Subsidiaries, enter into any transaction after the Closing Date,
including, without limitation, the purchase, sale, lease or exchange of
property, real or personal, or the rendering of any service, with any Affiliate
of BREED, except (a)that such Persons may render services to BREED or its
Subsidiaries for compensation at the same rates generally paid by Persons
engaged in the same or similar businesses for the same or similar services,
(b)that BREED or any Subsidiary may render services to such Persons for
compensation at the same rates generally charged by BREED or such Subsidiary and
(c) in either case in the ordinary course of business and pursuant to the
reasonable requirements of BREED's (or any Subsidiary's) business consistent
with past practice of BREED and its Subsidiaries and upon fair and reasonable
terms no less favorable to BREED (or any Subsidiary) than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate;
9.10. Compliance with ERISA, the Code and Foreign Benefit Laws. With
respect to any Pension Plan, Employee Benefit Plan or Multiemployer Plan:
(a) permit the occurrence of any Termination Event which would result in a
liability on the part of BREED, any ERISA Affiliate, or any Subsidiary to the
PBGC or any Governmental Authority; or
(b) permit the present value of all benefit liabilities under all Employee
Benefit Plans to exceed the current value of the assets of such Employee Benefit
Plans allocable to such benefit liabilities; or
(c) permit any accumulated funding deficiency (as defined in Section 302 of
ERISA and Section 412 of the Code) with respect to any Pension Plan, whether or
not waived; or
(d) fail to make any contribution or payment to any Multiemployer Plan
which BREED or any ERISA Affiliate may be required to make under any agreement
relating to such Multiemployer Plan, or any law pertaining
<PAGE>
thereto; or
(e) engage, or permit BREED or any ERISA Affiliate to engage, in any
prohibited transaction under Section 406 of ERISA or Sections 4975 of the Code
for which a civil penalty pursuant to Section 502(I) of ERISA or a tax pursuant
to Section 4975 of the Code may be imposed; or
(f) permit the establishment of any Employee Benefit Plan providing
post-retirement welfare benefits or establish or amend any Employee Benefit Plan
which establishment or amendment could result in liability to BREED or any ERISA
Affiliate or any Subsidiary or increase the obligation of BREED or any ERISA
Affiliate or any Subsidiary to a Multiemployer Plan other than those to be
established for certain employees acquired as part of the Allied Acquisition; or
(g) fail, or permit BREED or any ERISA Affiliate or any Subsidiary to fail
to establish, maintain and operate each Employee Benefit Plan in compliance in
all material respects with the provisions of ERISA, the Code, all applicable
Foreign Benefit Laws and all other applicable laws and the regulations and
interpretations thereof;
9.11. Accounting Changes. Change its Fiscal Year or make any change in its
accounting treatment and reporting practices except as required by GAAP;
9.12. Dissolution, etc. Wind up, liquidate or dissolve (voluntarily or
involuntarily) or commence or suffer any proceedings seeking any such winding
up, liquidation or dissolution, except for the dissolution of Gallino Plasturgia
S.r.l. and Akebono Vaitec and in connection with a merger or consolidation
permitted pursuant to Section 9.7 or as provided in the Operating Plan;
9.13. Limitations on Sales and Leasebacks. Enter into any arrangement with
any Person providing for the leasing by BREED or any Subsidiary of real or
personal property, whether now owned or hereafter acquired in a related
transaction or series of related transactions, which has been or is to be sold
or transferred by BREED or any Subsidiary to such Person or to any other Person
to whom funds have been or are to be advanced by such Person on the security of
such property or rental obligations of BREED or any Subsidiary;
9.14. Change in Control. Cause, suffer or permit to exist or occur any
Change of Control;
9.15. Limitation on Guaranties. Enter into or cause, suffer or permit to
exist any Guaranties except as permitted in Section 9.4.
9.16. Negative Pledge Clauses. Enter into or cause, suffer or permit to
exist any agreement with any Person other than the Agent and the Lenders
pursuant to this Agreement or any other Loan Documents which prohibits or limits
the ability of any of BREED or any Subsidiary to create, incur, assume or suffer
to exist any Lien upon any of its property, assets or revenues, whether now
owned or hereafter acquired, in favor of the Agent and the Lenders under the
Loan Documents; provided that BREED and any Subsidiary may enter into such an
agreement in connection with, and limited solely to, property acquired with the
proceeds of purchase money Indebtedness permitted hereunder;
9.17. Prepayments, Etc. of Indebtedness. (a) Prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity thereof in any
manner, or make any payment in violation of any subordination terms of, any
Indebtedness; or
(b) amend, modify or change in any manner any term or condition of any
Indebtedness described in Section 9.4(a) or any lease so that the terms and
conditions thereof are less favorable to the Agent and the Lenders than the
terms of such Indebtedness or leases as of the Closing Date;
<PAGE>
9.18. Restrictive Agreements. Enter into or cause, suffer or permit to
exist any agreement with any other Person (other than the Agent and the Lenders
pursuant to this Agreement or any other Loan Document) which prohibits, limits
or restricts the ability of any Subsidiary to make any payments, directly or
indirectly, to BREED by way of dividends, advances, repayments of loans or
advances, or other returns on investments, or any other agreement or arrangement
which restricts the ability of any such Subsidiary to make any payment, directly
or indirectly, to BREED.
ARTICLE X
Events of Default and Acceleration
10.1. Events of Default. If any one or more of the following events (herein
called "Events of Default") shall occur for any reason whatsoever (and whether
such occurrence shall be voluntary or involuntary or come about or be effected
by operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any Governmental
Authority), that is to say:
(a) if default shall be made in the due and punctual payment of the
principal of any Loan, Reimbursement Obligation or other Obligation, when and as
the same shall be due and payable whether pursuant to any provision of Article
II or Article III, at maturity, by acceleration or otherwise and; or
(b) if default shall be made in the due and punctual payment of any amount
of interest on any Loan, Reimbursement Obligation or other Obligation or of any
fees or other amounts payable to any of the Lenders or the Agent on the date on
which the same shall be due and payable; or
(c) if default shall be made in the performance or observance of any
covenant set forth in Section 2.3(b), 2.12, 8.7, 8.11, 8.12, 8.19, 8.20, 8.25(a)
or 8.26 (and such Default in the case of Section 8.26 shall continue for 15
days) or Article IX;
(d) if a default shall be made in the performance or observance of, or
shall occur under, any covenant, agreement or provision contained in this
Agreement or the Notes (other than as described in clauses (a), (b) or (c)
above) and such default shall continue for thirty (30) or more days after the
earlier of receipt of notice of such default by the Authorized Representative
from the Agent or an Authorized Representative of BREED becomes aware of such
default, or if a default shall be made in the performance or observance of, or
shall occur under, any covenant, agreement or provision contained in any of the
other Loan Documents (beyond any applicable grace period, if any, contained
therein) ( including without limitation failure of any Guarantor to pay the
Agent all of the Guaranteed Obligations in accordance with, and as defined in,
the Guaranty on the Business Day on which the Agent has demanded such payment in
accordance with the terms of the Guaranty ) or in any instrument or document
evidencing or creating any obligation, guaranty, or Lien in favor of the Agent
or any of the Lenders or delivered to the Agent or any of the Lenders in
connection with or pursuant to this Agreement or any of the Obligations, or if
any Loan Document ceases to be in full force and effect (other than by reason of
any action by the Agent or any Lender), or if without the written consent of the
Lenders, this Agreement or any other Loan Document shall be disaffirmed or shall
terminate, be terminable or be terminated or become void or unenforceable for
any reason whatsoever (other than in accordance with its terms in the absence of
default or by reason of any action by the Lenders or the Agent); or
(e) if there shall occur (i) a default, which is not waived, in the payment
of any principal, interest, premium or other amount with respect to any
Indebtedness or Rate Hedging Obligation (other than the Loans and other
Obligations) of BREED or any Subsidiary in an amount not less than $2,000,000 in
the aggregate outstanding, or (ii) a default, which is not waived, in the
performance, observance or fulfillment of any term or covenant contained in any
agreement or instrument under or pursuant to which any such Indebtedness or Rate
Hedging Obligation referred to in clause (i) may have been issued, created,
assumed, guaranteed or secured by BREED or any Subsidiary, or (iii) any other
event of default as specified in any agreement or instrument under or pursuant
to which any such Indebtedness or Rate
<PAGE>
Hedging Obligation may have been issued, created, assumed, guaranteed or
secured by BREED or any Subsidiary, and any such default or event of default
specified in clauses (i), (ii) or (iii) shall continue for more than the period
of grace, if any, therein specified, or such default or event of default shall
permit the holder of any such Indebtedness or Rate Hedging Obligation (or any
agent or trustee acting on behalf of one or more holders) to accelerate the
maturity thereof; or
(f) if any representation, warranty or other statement of fact contained in
any Loan Document or in any writing, certificate, report or statement at any
time furnished to the Agent or any Lender by or on behalf of the Borrowers
pursuant to or in connection with any Loan Document, or otherwise, shall be
false or misleading in any material respect when given; or
(g) if BREED or any Subsidiary shall be unable to pay its debts generally
as they become due; file a petition to take advantage of any insolvency statute;
make an assignment for the benefit of its creditors; commence a proceeding for
the appointment of a receiver, trustee, liquidator or conservator of itself or
of the whole or any substantial part of its property; file a petition or answer
seeking liquidation, reorganization or arrangement or similar relief under the
federal bankruptcy laws or any other applicable law or statute; or
(h) if a court of competent jurisdiction shall enter an order, judgment or
decree appointing a custodian, receiver, trustee, liquidator or conservator of
BREED or any Subsidiary or of the whole or any substantial part of its
properties and such order, judgment or decree continues unstayed and in effect
for a period of sixty (60) days, or approve a petition filed against BREED or
any Subsidiary seeking liquidation, reorganization or arrangement or similar
relief under the federal bankruptcy laws or any other applicable law or statute
of the United States of America or any state, which petition is not dismissed
within sixty (60) days; or if, under the provisions of any other law for the
relief or aid of debtors, a court of competent jurisdiction shall assume custody
or control of BREED or any Subsidiary or of the whole or any substantial part of
its properties, which control is not relinquished within sixty (60) days; or if
there is commenced against BREED or any Subsidiary any proceeding or petition
seeking reorganization, arrangement or similar relief under the federal
bankruptcy laws or any other applicable law or statute of the United States of
America or any state which proceeding or petition remains undismissed for a
period of sixty (60) days; or if BREED or any Subsidiary takes any action to
indicate its consent to or approval of any such proceeding or petition; or
(i) if (i) one or more judgments or orders where the amount not covered by
insurance (or the amount as to which the insurer is found not to be liable for)
is in excess of $1,000,000 is rendered against BREED or any Subsidiary, or (ii)
there is any attachment, injunction or execution against any of BREED's or
Subsidiaries' properties for any amount in excess of $1,000,000 in the
aggregate; and such judgment, attachment, injunction or execution remains
unpaid, unstayed, undischarged, unbonded or undismissed for a period of thirty
(30) days; or
(j) if BREED or any Subsidiary shall, other than in the ordinary course of
business (as determined by past practices or as set forth in the Operating
Plan), suspend all or any part of its operations material to the conduct of the
business of BREED or such Subsidiary for a period of more than sixty (60) days;
or (k) any material uninsured damage to or loss, theft or destruction of any of
the Collateral shall occur;
(l) any actual or asserted invalidity (other than by the Agent or Lenders)
of the Loan Documents; or
(m) if there shall occur any Termination Event; or
(n) there shall occur any Change in Control; or
(o) the occurrence of any Indenture Event of Default or the failure to
register securities of the Borrower or BTI Trust as required by any agreement or
instrument to which either of them is a party;
then, and in any such event and at any time thereafter, if such Event of
Default or any other Event of Default shall have
<PAGE>
not been waived,
(A) either or both of the following actions may be taken: (i) the Agent,
with the consent of the Required Lenders, may, and at the direction of the
Required Lenders shall, declare any obligation of the Lenders and the Issuing
Bank to make further Loans or to issue additional Letters of Credit terminated,
whereupon the obligation of each Lender to make further Loans and of the Issuing
Bank to issue additional Letters of Credit, hereunder shall terminate
immediately, and (ii) the Agent shall at the direction of the Required Lenders,
at their option, declare by notice to the Borrowers any or all of the
Obligations to be immediately due and payable, and the same, including all
interest accrued thereon and all other obligations of the Borrowers to the Agent
and the Lenders, shall forthwith become immediately due and payable without
presentment, demand, protest, notice or other formality of any kind, all of
which are hereby expressly waived, anything contained herein or in any
instrument evidencing the Obligations to the contrary notwithstanding; provided,
however, that notwithstanding the above, if there shall occur an Event of
Default under clause (g) or (h) above, then the obligation of the Lenders to
make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall
automatically terminate and any and all of the Obligations shall be immediately
due and payable without the necessity of any action by the Agent or the Required
Lenders or notice by or to the Agent or the Lenders;
(B) The Borrowers shall, upon demand of the Agent or the Required Lenders,
deposit cash with the Agent in an amount equal to the amount of any Letter of
Credit Outstandings, as collateral security for the repayment of any future
drawings or payments under such Letters of Credit, and such amounts shall be
held by the Agent pursuant to the terms of the LC Account Agreement; and
(C) the Agent and each of the Lenders shall have all of the rights and
remedies available under the Loan Documents or under any applicable law.
10.2. Agent to Act. In case any one or more Events of Default shall occur
and not have been waived or cured, the Agent may, and at the direction of the
Required Lenders shall, proceed to protect and enforce their rights or remedies
either by suit in equity or by action at law, or both, whether for the specific
performance of any covenant, agreement or other provision contained herein or in
any other Loan Document, or to enforce the payment of the Obligations or any
other legal or equitable right or remedy.
10.3. Cumulative Rights. No right or remedy herein conferred upon the
Lenders or the Agent is intended to be exclusive of any other rights or remedies
contained herein or in any other Loan Document, and every such right or remedy
shall be cumulative and shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law or in equity or
by statute, or otherwise.
10.4. No Waiver. No course of dealing between the Borrowers and any Lender
or the Agent or any failure or delay on the part of any Lender or the Agent in
exercising any rights or remedies under any Loan Document or otherwise available
to it shall operate as a waiver of any rights or remedies and no single or
partial exercise of any rights or remedies shall operate as a waiver or preclude
the exercise of any other rights or remedies hereunder or of the same right or
remedy on a future occasion.
10.5. Allocation of Proceeds. If an Event of Default has occurred and not
been waived, and the maturity of the Notes has been accelerated pursuant to
Article X hereof, all payments received by the Agent hereunder, in respect of
any principal of or interest on the Obligations or any other amounts payable by
the Borrowers hereunder, shall be applied by the Agent in the following order:
(a) amounts due to the Lenders pursuant to Sections 2.10, 3.3 and 12.5;
(b) payments of interest on Loans and Reimbursement Obligations, to be
applied for the ratable benefit of the Lenders;
<PAGE>
(c) payments of principal of Loans and Reimbursement Obligations, to be
applied for the ratable benefit of the Lenders;
(d) payments of cash amounts to the Agent in respect of outstanding Letters
of Credit pursuant to Section 10.1(B);
(e) amounts due to the Lenders pursuant to Sections 3.2(g), 8.15 and 12.9;
(f) payments of all other amounts due under any of the Loan Documents, if
any, to be applied for the ratable benefit of the Lenders;
(g) amounts due to any of the Lenders in respect of Obligations consisting
of liabilities under any Swap Agreement with any of the Lenders on a pro rata
basis according to the amounts owed; and
(h) any surplus remaining after application as provided for herein, to the
Borrowers or otherwise as may be required by applicable law.
10.6. Judgment Currency. The Borrowers, the Agent and each Lender hereby
agree that if, in the event that a judgment is given in relation to any sum due
to the Agent or any Lender hereunder, such judgment is given in a currency (the
"Judgment Currency") other than that in which such sum was originally
denominated (the "Original Currency"), the Borrowers agree to indemnify the
agent or such Lender, as the case may be, to the extent that the amount of the
Original Currency which could have been purchased by the Agent in accordance
with normal banking procedures on the Business Day following receipt of such sum
is less than the sum which could have been so purchased by the Agent had such
purchase been made on the day on which such judgment was given or, if such day
is not a Business Day, on the Business Day immediately preceding the giving of
such judgment, and if the amount so purchased exceeds the amount which could
have been so purchased by the Agent had such purchase been made on the day on
which such judgment was given or, if such day is not a Business Day, on the
Business Day immediately preceding such judgment, the Agent or the applicable
Lenders agrees to remit such excess to the Borrowers. The agreements in this
Section shall survive payment of all Obligations.
ARTICLE XI
The Agent
11.1. Appointment, Powers, and Immunities. Each Lender hereby irrevocably
appoints and authorizes the Agent to act as its agent under this Agreement and
the other Loan Documents with such powers and discretion as are specifically
delegated to the Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
The Agent (which term as used in this sentence and in Section 11.5 and the first
sentence of Section 11.6 hereof shall include its affiliates and its own and its
affiliates' officers, directors, employees, and agents): (a) shall not have any
duties or responsibilities except those expressly set forth in this Agreement
and shall not be a trustee or fiduciary for any Lender; (b) shall not be
responsible to the Lenders for any recital, statement, representation, or
warranty (whether written or oral) made in or in connection with any Loan
Document or any certificate or other document referred to or provided for in, or
received by any of them under, any Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability, or sufficiency of any Loan Document,
or any other document referred to or provided for therein or for any failure by
any Loan Party or any other Person to perform any of its obligations thereunder;
(c) shall not be responsible for or have any duty to ascertain, inquire into, or
verify the performance or observance of any covenants or agreements by any Loan
Party or the satisfaction of any condition or to inspect the property (including
the books and records) of any Loan Party or any of its Subsidiaries or
affiliates; (d) shall not be required to initiate or conduct any litigation or
collection proceedings under any Loan Document; and (e) shall not be responsible
to any Lender for any action taken or omitted to be taken by it under or in
connection with any Loan
<PAGE>
Document, except for its own gross negligence or willful misconduct. The
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 with reasonable care. Each Lender hereby irrevocably designates and appoints
NationsBank as the Agent for the Lenders under this Agreement, and each of the
Lenders hereby irrevocably authorizes NationsBank as the Agent for such Lender,
to take such action on its behalf under the provisions of this Agreement and the
other Loan Documents and to exercise such powers as are expressly delegated to
the Agent by the terms of this Agreement and such other Loan Documents, together
with such other powers as are reasonably incidental thereto. The Agent shall not
have any duties or responsibilities, except those expressly set forth herein, or
any fiduciary relationship with any of the Lenders, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Agent.
11.2. Reliance by Agent. The Agent shall be entitled to rely upon any
certification, notice, instrument, writing, or other communication (including,
without limitation, any thereof by telephone or telefacsimile) believed by it to
be genuine and correct and to have been signed, sent or made by or on behalf of
the proper Person or Persons, and upon advice and statements of legal counsel
(including counsel for any Loan Party), independent accountants, and other
experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the holder thereof for all purposes hereof unless and until the Agent
receives and accepts an Assignment and Acceptance executed in accordance with
Section 12.1 hereof. As to any matters not expressly provided for by this
Agreement, the Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding on all of the
Lenders; provided, however, that the Agent shall not be required to take any
action that exposes the Agent to personal liability or that is contrary to any
Loan Document or applicable law or unless it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking any such action.
11.3. Defaults. The Agent shall not be deemed to have knowledge or notice
of the occurrence of a Default or Event of Default unless the Agent has received
written notice from a Lender or the Borrowers specifying such Default or Event
of Default and stating that such notice is a "Notice of Default". In the event
that the Agent receives such a notice of the occurrence of a Default or Event of
Default, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall (subject to Section 11.2 hereof) take such action with respect to such
Default or Event of Default as shall reasonably be directed by the Required
Lenders, provided that, unless and until the Agent shall have received such
directions, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Lenders.
11.4. Rights as Lender. With respect to its Revolving Credit Commitment and
Term Loan Commitment and the Loans made by it, NationsBank (and any successor
acting as Agent) in its capacity as a Lender hereunder shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not acting as the Agent, and the term "Lender" or "Lenders"
shall, unless the context otherwise indicates, include the Agent in its
individual capacity. NationsBank (and any successor acting as Agent) and its
affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in, provide services to, and
generally engage in any kind of lending, trust, or other business with any Loan
Party or any of its Subsidiaries or affiliates as if it were not acting as
Agent, and NationsBank (and any successor acting as Agent) and its affiliates
may accept fees and other consideration from any Loan Party or any of its
Subsidiaries or affiliates for services in connection with this Agreement or
otherwise without having to account for the same to the Lenders.
11.5 Indemnification. The Lenders agree to indemnify the Agent (to the
extent not reimbursed under Section 12.9 hereof, but without limiting the
obligations of the Borrowers under such Section) ratably in accordance with
their respective Total Credit Commitments, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including attorneys' fees), or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against the Agent
(including by any Lender) in any way relating to or arising
<PAGE>
out of any Loan Document or the transactions contemplated thereby or any
action taken or omitted by the Agent under any Loan Document; provided that no
Lender shall be liable for any of the foregoing to the extent they arise from
the gross negligence or willful misconduct of the Person to be indemnified.
Without limitation of the foregoing, each Lender agrees to reimburse the Agent
promptly upon demand for its ratable share of any costs or expenses payable by
the Borrowers under Section 12.5, to the extent that the Agent is not promptly
reimbursed for such costs and expenses by the Borrowers. The agreements
contained in this Section shall survive payment in full of the Loans and all
other amounts payable under this Agreement.
11.6. Non-Reliance on Agent and Other Lenders. Each Lender agrees that it
has, independently and without reliance on the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Loan Parties and their Subsidiaries and decision to
enter into this Agreement and that it will, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under the Loan Documents. Except for
notices, reports, and other documents and information expressly required to be
furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition, or business of any Loan
Party or any of its Subsidiaries or affiliates that may come into the possession
of the Agent or any of its affiliates.
11.7. Resignation of Agent. The Agent may resign at any time by giving
notice thereof to the Lenders and the Borrowers. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Agent meeting the
requirements set forth herein. The Borrowers shall have the right to approve
such Agent so long as no Default or Event of Default exist. 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, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent which shall be a commercial bank organized
under the laws of the United States of America having combined capital and
surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor, such successor shall thereupon succeed to and
become vested with all the rights, powers, discretion, 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 XI 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.
11.8. Fees. When and if there shall be more than one Lender under this
Agreement, the Borrowers agree to pay to the Agent, for its individual account,
an Agent's fee as from time to time agreed to by the Borrowers and Agent in
writing.
ARTICLE XII
Miscellaneous
12.1. Assignments and Participations. (a) Each Lender may assign to one or
more Eligible Assignees all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its Loans,
its Notes, its Revolving Credit Commitment, and its Term Loan Commitment);
provided, however, that
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Lender or an assignment
of all of a Lender's rights and obligations under this Agreement, any such
partial assignment made prior to November 5, 1997 shall be in an amount at least
equal to $1,000,000 or an integral multiple of $1,000,000 and after November 4,
1997 shall be in an amount at least equal to $5,000,000 or an integral multiple
of $5,000,000 (or if less, the entire remaining amount of such Lender's
Revolving Credit Commitment or Term Loan Commitment) in excess thereof;
<PAGE>
(iii) each such assignment by a Lender with respect to the Revolving Credit
Facility shall be of a constant, and not varying, percentage of all of its
rights and obligations under the Revolving Credit Facility and Letter of Credit
Facility and the Revolving Note;
(iv) each such assignment by a Lender with respect to the Term Loan
Facility shall be of a constant, and not varying, percentage of all of its
rights and obligations under the Term Loan Facility and the Term Note; and
(v) the parties to such assignment shall execute and deliver to the Agent
for its acceptance an Assignment and Acceptance in the form of Exhibit B hereto,
together with any Note subject to such assignment and a processing fee of
$3,500; provided, that in the case of contemporaneous assignments by a Lender to
more than one fund managed by or advised by the same investment advisor (which
funds are not then Lenders hereunder), only a single $3,500 fee shall be payable
for all such contemporaneous assignments.
Upon execution, delivery, and acceptance of such Assignment and Acceptance,
the assignee thereunder shall be a party hereto and, to the extent of such
assignment, have the obligations, rights, and benefits of a Lender hereunder and
the assigning Lender shall, to the extent of such assignment, relinquish its
rights and be released from its obligations under this Agreement. Upon the
consummation of any assignment pursuant to this Section, the assignor, the Agent
and the Borrowers shall make appropriate arrangements so that, if required, new
Notes are issued to the assignor and the assignee. If the assignee is not
incorporated under the laws of the United States of America or a state thereof,
it shall deliver to the Borrowers and the Agent certification as to exemption
from deduction or withholding of Taxes in accordance with Section 5.6.
(b) The Agent shall maintain at its address referred to in Section 12.2 a
copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and the
Revolving Credit Commitment and Term Loan Commitment of, and principal amount of
the Loans owing to, each Lender from time to time (the "Register"). The entries
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrowers, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrowers or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(c) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Note subject to such assignment and payment
of the processing fee, the Agent shall, if such Assignment and Acceptance has
been completed and is in substantially the form of Exhibit B hereto, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein in
the Register and (iii) give prompt notice thereof to the parties thereto.
(d) Each Lender may sell participations at its expense to one or more
Persons in all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Revolving Credit Commitment and its Loans);
provided, however, that (i) such Lender's obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the Borrowers
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement, and such Lender shall
retain the sole right to enforce the obligations of the Borrowers relating to
its Loans and its Note and to approve any amendment, modification, or waiver of
any provision of this Agreement (other than amendments, modifications, or
waivers decreasing the amount of principal of or the rate at which interest is
payable on such Loans or Note, extending any scheduled principal payment date or
date fixed for the payment of interest on such Loans or Note, or extending its
Revolving Credit Commitment) and (iv) the sale of any such participation which
requires BREED to file a registration statement with federal or state regulatory
authorities shall not be permitted.
(e) Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time assign and pledge all or any portion of its Loans and its
Note to any Federal Reserve Bank as collateral security pursuant to Regulation A
and any Operating Circular issued by such Federal Reserve Bank. No such
assignment shall release the
<PAGE>
assigning Lender from its obligations hereunder.
(f) Any Lender may furnish any information concerning BREED or any of its
Subsidiaries in the possession of such Lender from time to time to assignees and
participants (including prospective assignees and participants) so long as such
Lender shall require in writing (which writing names the Borrowers as a third
party beneficiary thereof) any such assignee or participant or perspective
assignee or participant to maintain the confidentiality of any information
delivered to it which is not publicly available.
(g) The Borrowers may not assign, nor shall they cause, suffer or permit
any Guarantor to assign any rights, powers, duties or obligations under this
Agreement of the other Loan Documents without the prior written consent of all
the Lenders.
12.2. Notices. Any notice shall be conclusively deemed to have been
received by any party hereto and be effective (i) on the day on which delivered
(including hand delivery by commercial courier service) to such party (against
receipt therefor), (ii) on the date of receipt at such address, telefacsimile
number or telex number as may from time to time be specified by such party in
written notice to the other parties hereto or otherwise received), in the case
of notice by telegram or telefacsimile, respectively (where the receipt of such
message is verified by return), or (iii) on the fifth Business Day after the day
on which mailed, if sent prepaid by certified or registered mail, return receipt
requested, in each case delivered, transmitted or mailed, as the case may be, to
the address or telefacsimile number, as appropriate, set forth below or such
other address or number as such party shall specify by notice hereunder:
(a) if to the Borrowers:
BREED Technologies, Inc.
5300 Old Tampa Highway
Lakeland, Florida 33811
Attention:
Telephone:
Telefacsimile:
(b) if to the Agent:
NationsBank, National Association
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telephone: (704) 388-2374
Telefacsimile: (704) 386-9923
with a copy to:
NationsBank, National Association
400 N. Ashley Drive, 2nd Floor
Tampa, Florida 33602
Attention: Global Finance
Telephone: (813) 224-5194
Telefacsimile: (813) 224-5948
(c) if to the Lenders:
<PAGE>
At the addresses set forth on the signature pages hereof and on the
signature page of each Assignment and
Acceptance;
(d) if to any Guarantor, at the address set forth on the signature page of
the Guaranty or other Loan Document executed by such Guarantor, as the case may
be.
12.3. Right of Set-off; Adjustments. (a) Upon the occurrence and during the
continuance of any Event of Default, each Lender (and each of its affiliates) is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off 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 (or any of its affiliates) to or for the credit or
the account of the Borrowers against any and all of the obligations of the
Borrowers now or hereafter existing under this Agreement and the Note held by
such Lender, irrespective of whether such Lender shall have made any demand
under this Agreement or such Note and although the payment of such obligations
may not have been accelerated. Each Lender agrees promptly to notify the
Borrowers after any such set-off and application made by such Lender; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Lender under this Section are
in addition to other rights and remedies (including, without limitation, other
rights of set-off) that such Lender may have.
(b) If any Lender (a "benefitted Lender") shall at any time receive any
payment of all or part of the Loans owing to it, or interest thereon, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other
Lender's Loans owing to it, or interest thereon, such benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loans owing to it, or shall provide such
other Lenders with the benefits of any such collateral, or the proceeds thereof,
as shall be necessary to cause such benefitted Lender to share the excess
payment or benefits of such collateral or proceeds ratably with each of the
Lenders; provided, however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest. The Borrowers agree that any Lender so
purchasing a participation from a Lender pursuant to this Section 12.3 may, to
the fullest extent permitted by law, exercise all of its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Person were the direct creditor of the Borrowers in the amount of such
participation.
12.4. Survival. All covenants, agreements, representations and warranties
made herein shall survive the making by the Lenders of the Loans and the
issuance of the Letters of Credit and the execution and delivery to the Lenders
of this Agreement and the Notes and shall continue in full force and effect so
long as any of Obligations remain outstanding or any Lender has any commitment
hereunder or the Borrowers have continuing obligations hereunder unless
otherwise provided herein. Whenever in this Agreement any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
permitted assigns of such party and all covenants, provisions and agreements by
or on behalf of the Borrowers which are contained in the Loan Documents shall
inure to the benefit of the successors and permitted assigns of the Lenders or
any of them.
12.5. Expenses. The Borrowers agree to pay on demand all reasonable costs
and expenses of the Agent in connection with the syndication, preparation,
execution, and delivery of this Agreement, the other Loan Documents, and the
other documents to be delivered hereunder, including, without limitation, the
reasonable fees (not to exceed $500,000) and expenses of Smith Helms Mulliss &
Moore, L.L.P., counsel for the Agent, with respect thereto and with respect to
advising the Agent as to its rights and responsibilities under the Loan
Documents. The Borrowers further agree to pay on demand all reasonable costs and
expenses of the Agent, including, without limitation, the reasonable fees and
expenses of counsel for the Agent, in connection with any future modification or
amendment of this Agreement, the other Loan Documents, and the other documents
delivered hereunder. The Borrowers further agree to pay on demand all reasonable
costs and expenses of the Agent and the Lenders, if any (including, without
limitation, reasonable attorneys' fees and
<PAGE>
expenses and the cost of internal counsel), in connection with the
enforcement (whether through negotiations, legal proceedings, or otherwise) of
the Loan Documents and the other documents to be delivered hereunder.
12.6. Amendments and Waivers. Any provision of this Agreement or any other
Loan Document may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Borrowers and the Required Lenders (and, if
Article XI or the rights or duties of the Agent are affected thereby, by the
Agent); provided that no such amendment or waiver shall, unless signed by all
the Lenders, (i) increase the Revolving Credit Commitments or Term Loan
Commitments of the Lenders, (ii) reduce the principal of or rate of interest on
any Loan or any fees or other amounts payable hereunder, (iii) postpone any date
fixed for the payment of any scheduled installment of principal of or interest
on any Loan or any fees or other amounts payable hereunder or for termination of
any Revolving Credit Commitment or Term Loan Commitment, (iv) change the
percentage of the Revolving Credit Commitments or Term Loan Commitments or of
the unpaid principal amount of the Notes, or the number of Lenders, which shall
be required for the Lenders or any of them to take any action under this Section
or any other provision of this Agreement or (v) release any Guarantor or Pledged
Stock or a material portion of the other Collateral except pursuant to any sale,
merger or consolidation permitted hereunder; and provided, further, that no such
amendment or waiver which affects the rights, privileges, or obligations of
NationsBank as issuer of Letters of Credit, shall be effective unless signed in
writing by NationsBank.
Notwithstanding any provision of the other Loan Documents to the contrary,
as between the Agent and the Lenders, execution by the Agent shall not be deemed
conclusive evidence that the Agent has obtained the written consent of the
Required Lenders. No notice to or demand on the Borrowers in any case shall
entitle the Borrowers to any other or further notice or demand in similar or
other circumstances, except as otherwise expressly provided herein. No delay or
omission on any Lender's or the Agent's part in exercising any right, remedy or
option shall operate as a waiver of such or any other right, remedy or option or
of any Default or Event of Default.
12.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such fully-executed counterpart.
12.8. Termination. The termination of this Agreement shall not affect any
rights of the Borrowers, the Lenders or the Agent or any obligation of the
Borrowers, the Lenders or the Agent, arising prior to the effective date of such
termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into or rights created or obligations incurred
prior to such termination have been fully disposed of, concluded or liquidated
and the Obligations arising prior to or after such termination have been
irrevocably paid in full. The rights granted to the Agent for the benefit of the
Lenders under the Loan Documents shall continue in full force and effect,
notwithstanding the termination of this Agreement, until all of the Obligations
have been paid in full after the termination hereof (other than Obligations in
the nature of continuing indemnities or expense reimbursement obligations not
yet due and payable, which shall continue) or the Borrowers have furnished the
Lenders and the Agent with an indemnification satisfactory to the Agent and each
Lender with respect thereto. All representations, warranties, covenants, waivers
and agreements contained herein shall survive termination hereof until payment
in full of the Obligations unless otherwise provided herein. Notwithstanding the
foregoing, if after receipt of any payment of all or any part of the
Obligations, any Lender is for any reason compelled to surrender such payment to
any Person because such payment is determined to be void or voidable as a
preference, impermissible setoff, a diversion of trust funds or for any other
reason, this Agreement shall continue in full force and the Borrowers shall be
liable to, and shall indemnify and hold the Agent or such Lender harmless for,
the amount of such payment surrendered until the Agent or such Lender shall have
been finally and irrevocably paid in full. The provisions of the foregoing
sentence shall be and remain effective notwithstanding any contrary action which
may have been taken by the Agent or the Lenders in reliance upon such payment,
and any such contrary action so taken shall be without prejudice to the Agent or
the Lenders' rights under this Agreement and shall be deemed to have been
conditioned upon such payment having become final and irrevocable.
<PAGE>
12.9. Indemnification. (a) The Borrowers agree to indemnify and hold
harmless the Agent and each Lender and each of their affiliates and their
respective officers, directors and employees (each, an "Indemnified Party") from
and against any and all claims, damages, losses, liabilities, costs, and
expenses (including, without limitation, reasonable attorneys' fees) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of (including, without
limitation, in connection with any investigation, litigation, or proceeding or
preparation of defense in connection therewith) the Loan Documents, any of the
transactions contemplated herein or the actual or proposed use of the proceeds
of the Loans, except to the extent such claim, damage, loss, liability, cost, or
expense is finally judicially determined to have directly and primarily resulted
from such Indemnified Party's gross negligence or willful misconduct. In the
case of an investigation, litigation or other proceeding to which the indemnity
in this Section 12.9(a) applies, such indemnity shall be effective whether or
not such investigation, litigation or proceeding is brought by the Borrowers,
their directors, shareholders or creditors or an Indemnified Party or any other
Person or any Indemnified Party is otherwise a party thereto and whether or not
the transactions contemplated hereby are consummated.
(b) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in this Section 12.9 shall survive the payment in full of the Loans and all
other amounts payable under this Agreement and the Notes.
12.10. Severability. If any provision of this Agreement or the other Loan
Documents shall be determined to be illegal or invalid as to one or more of the
parties hereto, then such provision shall remain in effect with respect to all
parties, if any, as to whom such provision is neither illegal nor invalid, and
in any event all other provisions hereof shall remain effective and binding on
the parties hereto.
12.11. Entire Agreement. This Agreement, together with the other Loan
Documents, constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all previous proposals, negotiations,
representations, commitments and other communications between or among the
parties, both oral and written, with respect thereto.
12.12. Agreement Controls. In the event that any term of any of the Loan
Documents other than this Agreement conflicts with any express term of this
Agreement, the terms and provisions of this Agreement shall control to the
extent of such conflict.
12.13 Usury Savings Clause. Notwithstanding any other provision herein, the
aggregate interest rate charged under any of the Notes, including all charges or
fees in connection therewith deemed in the nature of interest under applicable
law shall not exceed the Highest Lawful Rate (as such term is defined below). If
the rate of interest (determined without regard to the preceding sentence) under
this Agreement at any time exceeds the Highest Lawful Rate (as defined below),
the outstanding amount of the Loans made hereunder shall bear interest at the
Highest Lawful Rate until the total amount of interest due hereunder equals the
amount of interest which would have been due hereunder if the stated rates of
interest set forth in this Agreement had at all times been in effect. In
addition, if when the Loans made hereunder are repaid in full the total interest
due hereunder (taking into account the increase provided for above) is less than
the total amount of interest which would have been due hereunder if the stated
rates of interest set forth in this Agreement had at all times been in effect,
then to the extent permitted by law, the Borrowers shall pay to the Agent an
amount equal to the difference between the amount of interest paid and the
amount of interest which would have been paid if the Highest Lawful Rate had at
all times been in effect. Notwithstanding the foregoing, it is the intention of
the Lenders and the Borrowers to conform strictly to any applicable usury laws.
Accordingly, if any Lender contracts for, charges, or receives any consideration
which constitutes interest in excess of the Highest Lawful Rate, then any such
excess shall be cancelled automatically and, if previously paid, shall at such
Lender's option be applied to the outstanding amount of the Loans made hereunder
or be refunded to the Borrowers. As used in this paragraph, the term "Highest
Lawful Rate" means the maximum lawful interest rate, if any, that at any time or
from time to time may be contracted for, charged, or received under the laws
applicable to such Lender which are presently in effect or, to the extent
allowed by law, under
<PAGE>
such applicable laws which may hereafter be in effect and which allow a
higher maximum nonusurious interest rate than applicable laws now allow.
12.14. Governing Law; Waiver of Jury Trial.
(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN CERTAIN PLEDGE
AGREEMENTS COVERING SHARES OF DIRECT FOREIGN SUBSIDIARIES) SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE NOTWITHSTANDING ITS
EXECUTION AND DELIVERY OUTSIDE SUCH STATE.
(b) THE BORROWERS HEREBY EXPRESSLY AND IRREVOCABLY AGREE AND CONSENTS THAT
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL
COURT SITTING IN THE COUNTY OF HILLSBOROUGH, STATE OF FLORIDA, UNITED STATES OF
AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWERS
EXPRESSLY WAIVE ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY, ANY
SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND THE BORROWERS HEREBY
IRREVOCABLY SUBMIT GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH
COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING.
(c) THE BORROWERS AGREE THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL
SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY
SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE
PREPAID) TO THE ADDRESS OF THE BORROWERS PROVIDED IN SECTION 12.2, OR BY ANY
OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE
STATE OF FLORIDA.
(d) NOTHING CONTAINED IN SUBSECTIONS (a) OR (b) HEREOF SHALL PRECLUDE THE
AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION WHERE THE
BORROWERS OR ANY OF THE BORROWERS' PROPERTY OR ASSETS MAY BE FOUND OR LOCATED.
TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, THE
BORROWERS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY SUCH COURT AND
EXPRESSLY WAIVE, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO
THE EXERCISE OF JURISDICTION OVER THEM AND THEIR PROPERTY BY ANY SUCH OTHER
COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES
UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION
THEREWITH, THE BORROWERS, THE AGENT AND THE LENDERS HEREBY AGREE, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN
ANY SUCH ACTION OR PROCEEDING.
12.15. Recovery Under Florida Mortgage. The recovery of the Agent under the
Mortgage executed by BREED Automotive of Florida, Inc. to secure the Obligations
as defined therein encumbering approximately 430 acres of real property as
described therein and to be recorded in the Clerk of Circuit Court of Polk
County, Florida (the "Florida
<PAGE>
Mortgage") shall be limited to the principal amount of $50,000,000 together
with accrued interest on such amount and other costs and fees as provided in
such Florida Mortgage. The Florida Mortgage secures the first amounts advanced
and the last amounts repaid to the Lenders.
[Signatures on following pages]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
made, executed and delivered by their duly authorized officers as of the day and
year first above written.
BREED TECHNOLOGIES, INC.
WITNESS:
/s/ R. Malloy McKeithen By:/s/ Lizanne Guptill
Name: Lizanne Guptill
/s/ Joseph J. Troy Title: Secretary
BREED AUTOMOTIVE SAFETY SYSTEMS SL
WITNESS:
/s/ R. Malloy McKeithen By: /s/ Lizanne Guptill
Name: Lizanne Guptill
/s/ Joseph J. Troy Title:
BREED ITALIAN HOLDINGS, SRL
WITNESS:
/s/ R. Malloy McKeithen By:/s/ Lizanne Guptill
Name: Lizanne Guptill
/s/ Joseph J. Troy Title:
BREED UK LIMITED
WITNESS:
/s/ R. Malloy McKeithen By:/s/ Lizanne Guptill
Name:Lizanne Guptill
/s/ Joseph J. Troy Title:
ICSRD R.F., GMBH
WITNESS:
/s/ R. Malloy McKeithen By:/s/ Lizanne Guptill
Name: Lizanne Guptill
/s/ Joseph J. Troy Title:
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
By:/s/ Miles C. Dearden III
Name: Miles C. Dearden III
Title:Senior Vice President
NATIONSBANK, NATIONAL ASSOCIATION
By:/s/ Miles C. Dearden III
Name:Miles C. Dearden III
Title:Senior Vice President
Domestic Lending Office:
NationsBank, National Association
Independence Center, 15th Floor
NC1-001-15-04
<PAGE>
Charlotte, North Carolina 28255
Attention: Jamie McCotter
Telephone: (704) 388-2374
Telefacsimile: (704) 386-9923
Wire Transfer Instructions:
NationsBank, National Association
ABA# _________ Account No.:
Reference: BREED Technologies, Inc.
Attention: Agency Services
BHF-BANK AKRIENGESELLSCHAFT
By:/s/ Linda Pace Anthony Heyman
Name:Linda Pace Anthony Heyman
Title: V.P. A.T.
Domestic Lending Office:
BHF-BANK
590 Madison Avenue
New York, New York 10022
Attention: John Sykes
Telephone: (212) 756-5939
Telefacsimile: (212) 756-5536
Wire Transfer Instructions:
Bank of New York
New York, New York
ABA No.: 021000018
Account No.: 8023014646
Reference: BHF-BANK/Breed
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED
By:/s/ Satoru Otsubo
Name:Satoru Otsubo
Title: Joint General Manager
Domestic Lending Office:
The Long-Term Credit Bank of Japan, Limited
165 Broadway
New York, New York 10006
Wire Transfer Instructions:
The Chase Manhattan Bank
ABA No.: 021 000 021
Account No.: 544-7-75066
Reference: The Long-Term Credit Bank of Japan,
New York Branch
<PAGE>
THE BANK OF NOVA SCOTIA
By:/s/ W.J. Brown
Name: W.J. Brown
Title:Vice President
Domestic Lending Office:
The Bank of Nova Scotia
600 Peachtree Street, N.E., Suite 2700
Atlanta, Georgia 30308
Attention: Frank Sandler
Telephone: (404) 877-1505
Telefacsimile: (704) 888-8998
Wire Transfer Instructions:
The Bank of Nova Scotia
New York, New York
ABA No.: 026002532
Credit: ScotiaBanc Inc.
Account No.: 0735639
Reference: BREED Technologies, Inc.
Attention: Phyllis Walker
VAN KAMPEN AMERICAN CAPITAL
By:/s/ Jeffrey W. Maillet
Name:Jeffrey W. Maillet
Title: Senior Vice President and Director
Domestic Lending Office:
Van Kampen American Capital
One Parkview Plaza - 5th Floor
Oakbrook Terrace, Illinois 60181
Wire Transfer Instructions:
State Street Bank & Trust
ABA#011000028
Account No.: 99001265
Reference: VKAC PRIT (Breed Technologies)
Attention: Mr. Sean Emerson
Telecopier No.: 617-664-5366
Telephone No.: 617-664-5481
<PAGE>
EXHIBIT A
Applicable Commitment Percentages
I. Revolving Credit Facility
Lender Revolving Applicable
Credit Commitment
Commitment Percentage
NationsBank, National
Association $ 225,000,000 75.000000000%
The Long-Term Credit Bank
of Japan, Limited $ 25,000,000 8.333333333%
BHF-Bank Akriengesellschaft $ 25,000,000 8.333333333%
The Bank of Nova Scotia $ 25,000,000 8.333333333%
$ 300,000,000 100%
II. Term Loan Facility
Lender Term Applicable
Loan Commitment
Commitment Percentage
NationsBank, National
Association $ 375,000,000 62.500000000%
The Long-Term Credit Bank
of Japan, Limited $ 50,000,000 8.333333333%
BHF-Bank Akriengesellschaft $ 50,000,000 8.333333333%
The Bank of Nova Scotia $ 50,000,000 8.333333333%
Van Kampen American Capital $ 75,000,000 12.500000000%
$ 600,000,000 100%
<PAGE>
EXHIBIT B-1
Form of Assignment and Acceptance
DATED ,
Reference is made to the Credit Agreement dated as of October 30, 1997 (the
"Agreement") among BREED TECHNOLOGIES, INC., a Delaware corporation (the
"Borrower"), the Lenders (as defined in the Agreement), and NationsBank,
National Association , as Agent for the Lenders ("Agent"). Unless otherwise
defined herein, terms defined in the Agreement are used herein with the same
meanings.
The "Assignor" and the "Assignee" referred to on Schedule 1 agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, WITHOUT RECOURSE
and without representation or warranty except as expressly set forth herein, and
the Assignee hereby purchases and assumes from the Assignor, an interest in and
to the Assignor's rights and obligations under the Credit Agreement and the
other Loan Documents as of the date hereof equal to the percentage interest in
either the Revolving Credit Commitment or the Term Loan Commitment, or both,
specified on Schedule 1. After giving effect to such sale and assignment, the
Assignee's Revolving Credit Commitment and Term Loan Commitment and the amount
of the Loans owing to the Assignee will be as set forth on Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Loan Party or the
performance or observance by any Loan Party of any of its obligations under the
Loan Documents or any other instrument or document furnished pursuant thereto;
and (iv) attaches the Note or Notes held by the Assignor and requests that the
Agent exchange such Note or Notes for new Notes payable to the order of the
Assignee in an amount equal to the Revolving Credit Commitment or Term Loan
Commitment, or both, assumed by the Assignee pursuant hereto and to the Assignor
in an amount equal to the Revolving Credit Commitment or Term Loan Commitment,
or both, retained by the Assignor, if any, as specified on Schedule 1.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 8.1 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon the Agent, the Assignor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Credit Agreement as are delegated to the
Agent by the terms thereof, together with such powers and discretion as are
reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all of the obligations that by the terms of the Credit
Agreement are required to be performed by it as a Lender; and (vi) attaches any
U.S. Internal Revenue Service or other forms required under Section 5.6.
4. Following the execution of this Assignment and Acceptance, it will be
delivered to the Agent for acceptance and recording by the Agent. The effective
date for this Assignment and Acceptance (the "Effective Date") shall be the date
of acceptance hereof by the Agent, unless otherwise specified on Schedule 1.
<PAGE>
5. Upon such acceptance and recording by the Agent, as of the Effective
Date, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and after the
Effective Date, the Agent shall make all payments under the Credit Agreement and
the Notes in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest and commitment fees with respect
thereto) to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement and the Notes for periods
prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of Florida.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telefacsimile
shall be effective as delivery of a manually executed counterpart of this
Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to
this Assignment and Acceptance to be executed by their officers thereunto duly
authorized as of the date specified thereon.
<PAGE>
SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
Percentage interest assigned: ________%
(a) Revolving Credit Commitment ________%
(b) Term Loan Commitment ________%
Assignee's Revolving Credit Commitment: $_______
Aggregate outstanding principal amount
of Revolving Loans assigned: $_______
Principal amount of Revolving Note payable
to Assignee: $_______
Principal amount of Revolving Note payable
to Assignor: $_______
Assignee's Term Loan Commitment: $_______
Aggregate outstanding principal amount
of Term Loans assigned: $_______
Principal amount of Term Note payable
to Assignee: $_______
Principal amount of Term Note payable
to Assignor: $_______
Effective Date (if other than date
of acceptance by Agent): _______, 19__
<PAGE>
[NAME OF ASSIGNOR], as Assignor
By:
Title:
Dated: , 19 _
[NAME OF ASSIGNEE], as Assignee
By:
Title:
Lending Office:
Accepted [and Approved] *
this ___ day of ___________, 19 _
NATIONSBANK NATIONAL ASSOCIATION
By:
Title:
[Approved this ____ day
of ____________, 19__
BREED TECHNOLOGIES, INC.
By: ]*
Title:
* Required if the Assignee is an Eligible Assignee solely by reason of
clause (iii) of the definition of "Eligible Assignee".
<PAGE>
EXHIBIT C
Notice of Appointment (or Revocation) of Authorized Representative
Reference is hereby made to the Credit Agreement dated as of October 30,
1997 (the "Agreement") among BREED TECHNOLOGIES, INC., a Delaware corporation
("BREED"), and certain Subsidiaries of BREED designated as Borrowers therein
(BREED and such Subsidiaries being collectively called the "Borrowers"), the
Lenders (as defined in the Agreement), and NationsBank, National Association, as
Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein
shall have the respective meanings therefor set forth in the Agreement.
The Borrower hereby nominates, constitutes and appoints each individual
named below as an Authorized Representative under the Loan Documents, and hereby
represents and warrants that (i) set forth opposite each such individual's name
is a true and correct statement of such individual's office (to which such
individual has been duly elected or appointed), a genuine specimen signature of
such individual and an address for the giving of notice, and (ii) each such
individual has been duly authorized by the Borrower to act as Authorized
Representative under the Loan Documents:
Name and Address Office Specimen Signature
Borrower hereby revokes (effective upon receipt hereof by the Agent) the
prior appointment of ________________ as an Authorized Representative.
This the ___ day of __________________, 19__.
BREED TECHNOLOGIES, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT D
Form of Borrowing Notice
To: NationsBank, National Association,
as Agent
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telefacsimile: (704)386-9923
Reference is hereby made to the Credit Agreement dated as of October 30,
1997 (the "Agreement") among BREED TECHNOLOGIES, INC., a Delaware corporation
("BREED"), and certain Subsidiaries of BREED designated as Borrowers therein
(BREED and such Subsidiaries being collectively called the "Borrowers"), the
Lenders (as defined in the Agreement), and NationsBank, National Association, as
Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein
shall have the respective meanings therefor set forth in the Agreement.
The Borrower through its Authorized Representative hereby gives notice to
the Agent that Loans of the type and amount set forth below be made on the date
indicated:
Type of Loan Interest Aggregate
(check one) Period(1) Amount(2) Date of Loan(3)
Revolving Loan
Base Rate Loan ______ _________ ____________
Eurodollar Rate Loan ______ _________ ____________
Alternative Currency(4) ______ _________ ____________
Term Loan Segment
Base Rate Loan ______ _________ ____________
Eurodollar Rate Loan ______ _________ ____________
Alternative Currency(4) ______ _________ ____________
- --------------------------------------------------
(1) For any Eurodollar Rate Loan, one, two, or three months.
(2) Must be $5,000,000 or if greater an integral multiple of $1,000,000,
unless a Base Rate Refunding Loan.
(3) At least three (3) Business Days later if a Eurodollar Rate Loan;
(4) Specify Pounds Sterling, Italian Lire, French Francs, Deutsch Marks,
or Spanish Pesetas.
The Borrower hereby requests that the proceeds of Loans described in this
Borrowing Notice be made available to the Borrower as follows: [insert
transmittal instructions] .
The undersigned hereby certifies that:
1. No Default or Event of Defaultexists either now or after giving
effect to the borrowing described herein; and
<PAGE>
2. All the representations and warranties set forth in Article VII of the
Agreement and in the Loan Documents (other than those expressly stated to refer
to a particular date) are true and correct in all material respects as of the
date hereof except that the reference to the financial statements in Section
7.6(a) of the Agreement are to those financial statements most recently
delivered to you pursuant to Section 8.1 of the Agreement (it being understood
that any financial statements delivered pursuant to Section 8.1(b) or (c) have
not been certified by independent public accountants) and attached hereto are
any changes to the Schedules referred to in connection with such representations
and warranties.
3. All conditions contained in the Agreement to the making of any Loan
requested hereby have been met or satisfied in full .
BREED TECHNOLOGIES, INC.
BY:
Authorized Representative
DATE:
<PAGE>
EXHIBIT E
Form of Collateral Assignment of Trademark License Agreement
[See Attached]
EXHIBIT F
Form of Collateral Assignment of Partnership Interests
[See Attached]
EXHIBIT G
Form of Guaranty
[See Attached]
EXHIBIT H
Form of Intellectual Property Security Agreement
[See Attached]
EXHIBIT I
Form of Intercompany Notes
ASSIGNMENT
KNOW ALL MEN by these presents that the undersigned is the owner and holder
of that certain promissory note dated ________ payable by ________________ to
the undersigned in the original principal amount of $________ the ("Promissory
Note") and has sold, assigned, transferred, endorsed and set over, and by this
assignment does sell, assign, transfer, endorse and set over to
______________________________________________ all of its right title and
interest in the Promissory Note, and the obligations described therein and the
monies due and to become due thereunder.
TO HAVE AND TO HOLD the same unto ______________________________, its
successors and assigns forever.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
executed on the __ day of __________, _____.
---------------------------------
By:______________________________
Name:___________________________
Title:____________________________
<PAGE>
Certificate No. 1
INTERCOMPANY NOTE
Dated: [Insert Date]
FOR VALUE RECEIVED, the undersigned, [Insert name of Intercompany Note
Maker], a ______ corporation (the "Payor"), hereby promises to pay to the order
of [Insert name of Intercompany Note Holder], a __________ corporation (the
"Payee"), UPON DEMAND, at [Insert address of Intercompany Note Holder], in
lawful money of the United States of America and in immediately available funds,
the aggregate amount of all loans and advances by the Payee to the Payor
remaining outstanding at such time, such loans and advances constituting
Intercompany Advances in accordance with Section 9.4(g) of the Credit Agreement
dated as of October 30, 1997 (as amended, supplemented or restated from time to
time, the "Credit Agreement"; the terms defined therein and not otherwise
defined herein being used herein as therein defined) among BREED Technologies,
Inc. ("BREED") and certain Subsidiaries of BREED designated as Borrowers
therein, as Borrowers, NationsBank, National Association in its capacity as a
Lender ("NationsBank") and each other financial institution executing and
delivering a signature page to the Credit Agreement and each other financial
institution which may hereafter execute and deliver an instrument of assignment
with respect to the Credit Agreement (hereunder such financial institutions may
be referred to individually as a "Lender" or collectively as the "Lenders"), and
NationsBank in its capacity as the Agent for the Lenders (the "Agent"), provided
that any and all amounts advanced by the Payor to the Payee at any time when
amounts are outstanding hereunder shall be applied to the prepayment of such
outstanding amounts, including any interest which constitutes part of such
outstanding amounts.
Interest shall be payable under this Intercompany Note on any and all
principal amounts from time to time outstanding hereunder from and including the
date of the initial advance by the Payee and the Payor until such principal
amounts are paid in full, at a rate per annum equal to
[___________________________________________________________]. Accrued interest
shall be payable upon demand, or if no demand is made therefor, quarterly on the
last day of each calendar quarter.
This Intercompany Note may, at the option of the Payor, be prepaid at any
time in whole or in part, without penalty or premium
The Payee agrees that the accounts of the Payor shall be prima facie
evidence of the amounts advanced by the Payee to the Payor and the amounts
repaid by the Payor to the Payee. All advances made by the Payee to the Payor
hereunder, and all payments made on account of principal hereof, shall be
recorded by the Payor and, prior to any transfer hereof, endorsed on the grid
attached hereto that is part of this Intercompany Note; provided that the
failure to record any such advance or payment shall not affect the obligations
of the Payor and the Payee with respect thereto.
The indebtedness evidenced by this Intercompany Note (the "Subordinated
Indebtedness") is and shall be subordinate and subject in right of payment, to
the extent and in the manner hereinafter set forth, to the prior payment in full
of all obligations of the Payor now or hereafter existing under or in respect of
(a) the Loan Documents, whether for principal, interest (including, without
limitation, interest accruing after the filing of a petition initiating any
Proceeding (as defined below), whether or not such interest accrues after the
filing of such petition for purposes of Chapter 11 of Title 11 of the United
States Code or is an allowed claim in such Proceeding), fees, commissions,
expenses or otherwise; and
(b) any and all amendments, modifications, extensions, refinancing,
renewals and refunding of the
<PAGE>
obligations referred to in clause (a) of this paragraph that are made in
accordance with the applicable terms thereof (all such obligations under clauses
(a) and (b) of this paragraph being, collectively, the "Senior Indebtedness").
For the purposes of the provisions hereof, the Senior Indebtedness shall
not be deemed to have been paid in full until the Facility Termination Date;
provided, however, that on such date neither the Agent nor any other Lender
shall have made any claim against the Payee or any other Loan Party under any
provision of any of the Loan Documents that has not been cash collateralized by
an amount sufficient in the reasonable judgment of the Agent, to secure such
claim.
So long as the Senior Indebtedness shall not have been paid in full, the
Payee shall not (a) ask, demand, sue for, take or receive from the Payor
(except, so long as no Default or Event of Default shall have occurred and be
continuing, in the ordinary course of business of the Payor and the Payee,
directly or indirectly, in cash or other property or by setoff or in any manner
(including, without limitation, from or by way of Collateral), payment of all or
any of the Subordinated Indebtedness or (b) commence, or join with any creditor
other than the Agent or any Lender in commencing, or directly or indirectly
cause the Payor to commence, or assist the Payor in commencing, any Proceeding.
Upon the occurrence and during the continuance of a Default or an Event of
Default, no payment or distribution of any assets of the Payor of any kind or
character (including, without limitation, any payment that may be payable by
reason of any other Indebtedness of the Payor being subordinated to payment of
the Subordinated Indebtedness) shall be made by or on behalf of the Payor for or
on account of any Subordinated Indebtedness, and the Payee shall not ask,
demand, sue for, take or receive from the Payor, directly or indirectly, in cash
or other property or by setoff or in any other manner (including, without
limitation, from or by way of Collateral), payment of all or any of the
Subordinated Indebtedness, unless and until such Default or Event of Default
shall have been cured or waived in writing or such Senior Indebtedness shall
have been paid in full, after which the Payor may resume making any and all
required payments in respect of the Subordinated Indebtedness (including any
missed payments).
In the event of any dissolution, winding up, liquidation, arrangement,
reorganization, adjustment, protection, relief or composition of the Payor or
its debts, whether voluntary or involuntary, in any bankruptcy, insolvency,
arrangement, reorganization, receivership, relief or other similar case or
proceeding under any federal or state bankruptcy or similar law or upon an
assignment for the benefit of creditors or any other marshalling of the assets
and liabilities of the Payor or otherwise (each, a "Proceeding"), the Agent, for
its benefit and for the ratable benefit of the Lenders, shall be entitled to
receive payment in full of all of the Senior Indebtedness before the Payee is
entitled to receive any payment or distribution of any kind or character on
account of all or any of the Subordinated Indebtedness, and, to that end, any
payment or distribution of any kind (whether in cash, property or securities)
that otherwise would be payable or deliverable upon or with respect to the
Subordinated Indebtedness in any such Proceeding (including, without limitation,
any payment that may be payable by reason of any other Indebtedness of the Payor
being subordinated to payment of the Subordinated Indebtedness) shall be paid or
delivered directly to the Agent, for its benefit and for the ratable benefit of
the Lenders for application (in the case of cash) to, or as collateral (in the
case of noncash property or securities) for, the payment or prepayment of the
Senior Indebtedness until all of the Senior Indebtedness shall have been paid in
full. In the event that any Subordinated Indebtedness is declared due and
payable before its stated maturity, if any, the Agent, for its benefit and for
the ratable benefit of the Lenders, shall be entitled to receive payment in full
of all amounts due or to become due on or in respect of all of the Senior
Indebtedness before the Payee is entitled to receive any payment (including,
without limitation, any payment that may be payable by reason of the payment of
any other Indebtedness of the Payor being subordinated to the payment of the
Subordinated Indebtedness) by the Payor on account of the Subordinated
Indebtedness.
Until such time as the Senior Indebtedness has been paid in full, if any
Proceeding is commenced by or against the Payor,
<PAGE>
(a) the Agent is hereby irrevocably authorized and empowered (in its own
name or in the name of the Payee or otherwise), but shall have no obligation, to
demand, sue for, collect and receive every payment or distribution referred to
above and give acquittance therefor, and to file claims and proofs of claim and
take such other action (including, without limitation, voting the Subordinated
Indebtedness or enforcing any security interest or other lien securing payment
of the Subordinated Indebtedness) as it may deem necessary or advisable for the
exercise or enforcement of any of the rights or interest of the Agent and the
Lenders hereunder; and
(b) the Payee shall duly and promptly take such action as the Agent may
request (i) to collect the Subordinated Indebtedness for the account of the
Agent, for its benefit and for the ratable benefit of the Lenders, and to file
appropriate claims or proofs of claim in respect of the Subordinated
Indebtedness, (ii) to execute and deliver to the Agent such powers of attorney,
assignments or other instruments as the Agent may request in order to enable to
Agent to enforce any and all claims with respect to, and any security interests
and other liens securing payment of, the Subordinated Indebtedness, and (iii) to
collect and receive any and all payments or distributions that may be payable or
deliverable upon or with respect to the Subordinated Indebtedness.
All payments or distributions upon or with respect to the Subordinated
Indebtedness that are received by the Payee contrary to the provisions of this
Agreement shall be received in trust for the benefit of the Agent, for its
benefit and for the ratable benefit of the Lenders, shall be segregated from
other property or funds held by the Payee and shall be forthwith paid over or
delivered directly to the Agent, for its benefit and for the ratable benefit of
the Lenders, in the same form as so received (with any necessary endorsement) to
be applied (in the case of cash) to, or held as collateral (in the case of
noncash property or securities) for, the payment or prepayment of the Senior
Indebtedness in accordance with the terms of the Loan Documents.
The Agent is hereby authorized to demand specific performance of these
provisions, whether or not the Payor shall have complied with any of the
provisions hereof applicable to it, at any time when the Payee shall have failed
to comply with any of these provisions. The Payee hereby irrevocably waives any
defense based on the adequacy of a remedy at law, which might be asserted as a
bar to such remedy of specific performance. The Payee will not:
(a) (i) Cancel or otherwise discharge any of the Subordinated Indebtedness
(except upon payment in full of the Senior Indebtedness); (ii) convert or
exchange any of the Subordinated Indebtedness into or for any other Indebtedness
or equity interest; or (iii) subordinate any of the Subordinated Indebtedness to
any Indebtedness of the Payor other than the Senior Indebtedness;
(b) Sell, assign, pledge, encumber or otherwise dispose of any of the
Subordinated Indebtedness other than the pledge of the instruments evidencing
the Subordinated Indebtedness to the Agent, on behalf of the Lenders, under the
applicable Security Instruments; or
(c) Permit the terms of any of the Subordinated Indebtedness to be changed
in such a manner as to have an adverse effect upon the rights or interests of
the Secured Parties hereunder.
No payment or distribution to the Agent or any Lender pursuant to the
provisions hereof shall entitle the Payee to exercise any rights of subrogation
in respect thereof until the Facility Termination Date.
The holders of the Senior Indebtedness may, at any time and from time to
time, without any consent of or notice to the Payee or any other holder of the
Subordinated Indebtedness and without impairing or releasing the obligations of
the Payee hereunder:
(a) change the manner, place or terms of payment, or change or extend the
time of payment of, or renew payment or change or extend the time or payment of,
or renew or alter, the Senior Indebtedness (including any change
<PAGE>
in the rate of interest thereon), or amend in any manner any agreement
under which any of the Senior Indebtedness is outstanding;
(b) sell, exchange, release, not perfect and otherwise deal with any
property at any time pledged, assigned or mortgaged to secure the Senior
Indebtedness;
(c) release anyone liable in any manner under or in respect of the Senior
Indebtedness;
(d) exercise or refrain from exercising any rights against the Payor, any
other Loan Party or any other Person; and
(e) apply to the Senior Indebtedness any sums from time to time received.
The foregoing provisions regarding subordination are and are intended
solely for the purpose of defining the relative rights of the holders of the
Senior Indebtedness on the one hand and the holders of the Subordinated
Indebtedness on the other hand. Such provisions are for the benefit of the
holders of the Senior Indebtedness and shall inure to the benefit of, and shall
be enforceable by, the Agent, on behalf of itself and the Lenders, directly
against the holders of the Subordinated Indebtedness, and no holder of the
Senior Indebtedness shall be prejudiced in its right to enforce subordination of
any of the Subordinated Indebtedness by any act or failure to act by the Payor
or anyone in custody of its property or assets. Nothing contained in the
foregoing provisions is intended to or shall impair, as between the Payor and
the holders of the Subordinated Indebtedness, the obligations of the Payor to
such holders.
The Payor agrees to pay on demand all costs and expenses (including,
without limitation, reasonable fees and expenses of counsel) incurred by the
Agent or any Lender in enforcing the provisions hereof
The Payor hereby waives presentment for payment, demands, notice of
dishonor and protest of this Intercompany Note and further agrees that none of
the terms or provisions hereof may be waived, altered, modified or amended,
except as the Payee may consent in a writing duly signed for and on its behalf.
No amendment, waiver or modification of this Intercompany Note (including,
without limitation, the subordination provisions hereof), and no consent to any
departure here from, shall adversely affect the Agent or any other Lender in any
manner unless the same shall be in writing and signed by the Agent and/or such
Lender, and then such waiver, modification or consent shall be effective only in
the specific instance and for the specific purpose for which given.
No failure or delay on the part of the Payee in exercising any of its
rights, powers or privileges hereunder shall operate as a waiver thereof, nor
shall a single or partial exercise thereof preclude any other or further
exercise of any right, power or privilege. The remedies provided herein are
cumulative and are not exclusive of any remedies provided by law.
This Intercompany Note shall be governed by and construed in accordance
with the laws of the State of Florida.
By:
Title:
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
Amount of
Amount of Principal Paid Unpaid Principal Notation
Date Advance or Prepaid Balance Made By
ENDORSEMENT
PAY TO THE ORDER OF
Dated: _____________________________________________
By:
Title:
EXHIBIT J
Form of Subordination Agreement
[See Attached]
EXHIBIT K Form of Interest Rate Selection Notice To: NationsBank, National
Association, as Agent
<PAGE>
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telefacsimile: (704) 386-9923
Reference is hereby made to the Credit Agreement dated as of October 30,
1997 (the "Agreement") among BREED TECHNOLOGIES, INC. , a Delaware corporation
("BREED"), and certain Subsidiaries of BREED designated as Borrowers therein
(BREED and such Subsidiaries being collectively called the "Borrowers"), the
Lenders (as defined in the Agreement), and NationsBank, National Association, as
Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein
shall have the respective meanings therefor set forth in the Agreement.
The Borrower through its Authorized Representative hereby gives notice to the
Agent of the following selection of a type of Loan and Interest Period:
Type of Loan Interest Aggregate
(check one) Period(1) Amount(2) Date of Loan(3)
Revolving Loan
Base Rate Loan ______ _________ ____________
Eurodollar Rate Loan ______ _________ ____________
Alternative Currency(4) ______ _________ ____________
Term Loan Segment
Base Rate Loan ______ _________ ____________
Eurodollar Rate Loan ______ _________ ____________
Alternative Currency(4) ______ _________ ____________
- --------------------------------------------------
(1) For any Eurodollar Rate Loan, one, two, or three months.
(2) Must be $5,000,000 or if greater an integral multiple of $1,000,000,
unless a Base Rate Refunding Loan.
(3) At least three (3) Business Days later if a Eurodollar Rate Loan;
(4) Specify Pounds Sterling, Italian Lire, French Francs, Deutsch Marks,
or Spanish Pesetas.
BREED TECHNOLOGIES, INC.
BY:___________________________________
Authorized Representative
DATE:_________________________________
<PAGE>
EXHIBIT L
Form of Landlord Waiver
[See Attached]
EXHIBIT M
Form of LC Account Agreement
[See Attached]
EXHIBIT N
Form of Lease Assignment
[See Attached]
EXHIBIT O-1
Form of Term Note
Promissory Note (Term Loan)
$600,000,000 Charlotte, North Carolina
October 30, 1997
FOR VALUE RECEIVED, BREED TECHNOLOGIES, INC., a Delaware corporation having
its principal place of business located in Lakeland, Florida (the "Borrower"),
hereby promises to pay to the order of NATIONSBANK, NATIONAL ASSOCIATION (the
"Lender"), in its individual capacity, at the office of NATIONSBANK, NATIONAL
ASSOCIATION, as agent for the Lenders (the "Agent"), located at One Independence
Center, 101 North Tryon Street, NC1-001-15-04, Charlotte, North Carolina 28255
(or at such other place or places as the Agent may designate in writing) at the
times set forth in the Credit Agreement dated as of ____________, 1997 among the
Borrowers, the financial institutions party thereto (collectively, the
"Lenders") and the Agent (as amended, supplemented or restated and in effect
from time to time, the "Agreement"; all capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Agreement), in lawful
money of the United States of America or in the applicable Alternative Currency,
as the case may be, in immediately available funds, the principal amount of SIX
HUNDRED MILLION DOLLARS ($600,000,000) or, if less than such principal amount,
the aggregate unpaid principal amount of the Term Loan made by the Lender to the
Borrower pursuant to the Agreement on the Term Loan Termination Date or such
earlier date as may be required pursuant to the terms of the Agreement, and to
pay interest from the date hereof on the unpaid principal amount hereof, in like
money, at said office, on the dates and at the rates provided in Article II of
the Agreement. All or any portion of the principal amount of Term Loans may be
prepaid as provided in the Agreement.
If payment of all sums due hereunder is accelerated under the terms of the
Agreement or under the terms of the other Loan Documents executed in connection
with the Agreement, the then remaining principal amount and accrued but unpaid
interest shall bear interest which shall be payable on demand at the rates per
annum set forth in the proviso to
<PAGE>
Section 2.2(a) of the Agreement or the maximum rate permitted under
applicable law, if lower, until such principal and interest have been paid in
full. Further, in the event of such acceleration, this Term Note, and all other
indebtedness of the Borrower to the Lender shall become immediately due and
payable, without presentation, demand, protest or notice of any kind, all of
which are hereby waived by the Borrower.
In the event this Term Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees and
disbursements, and interest due hereunder thereon at the rates set forth above.
Interest hereunder shall be computed as provided in the Agreement.
This Term Note is one of the Term Notes referred to in the Agreement and is
issued pursuant to and entitled to the benefits and security of the Agreement to
which reference is hereby made for a more complete statement of the terms and
conditions upon which the Term Loans evidenced hereby were or are made and are
to be repaid. This Term Note is subject to certain restrictions on transfer or
assignment as provided in the Agreement.
All Persons bound on this obligation, whether primarily or secondarily
liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive
to the full extent permitted by law the benefits of all provisions of law for
stay or delay of execution or sale of property or other satisfaction of judgment
against any of them on account of liability hereon until judgment be obtained
and execution issues against any other of them and returned satisfied or until
it can be shown that the maker or any other party hereto had no property
available for the satisfaction of the debt evidenced by this instrument, or
until any other proceedings can be had against any of them, and also their
right, if any, to require the holder hereof to hold as security for this Term
Note any collateral deposited by any of said Persons as security. Protest,
notice of protest, notice of dishonor, dishonor, demand or any other formality
are hereby waived by all parties bound hereon.
IN WITNESS WHEREOF, the Borrower has caused this Term Note to be made,
executed and delivered by its duly authorized representative as of the date and
year first above written, all pursuant to authority duly granted.
BREED TECHNOLOGIES, INC.
WITNESS:
By:
Name:
Title:
<PAGE>
EXHIBIT O-2
Form of Revolving Note
Promissory Note
(Revolving Loan)
$300,000,000 Charlotte, North Carolina
October 30, 1997
FOR VALUE RECEIVED, BREED TECHNOLOGIES, INC., a Delaware corporation having
its principal place of business located in Lakeland, Florida ("BREED"), BREED
AUTOMOTIVE SAFETY SYSTEMS, S.L., BREED ITALIAN HOLDINGS, S.R.L., BREED UK
LIMITED, and ICSRD R.F., GMBH (each a "Borrower" and collectively with BREED the
"Borrowers"), hereby promise to pay to the order of NATIONSBANK, NATIONAL
ASSOCIATION (the "Lender"), in its individual capacity, at the office of
NATIONSBANK, NATIONAL ASSOCIATION, as agent for the Lenders (the "Agent"),
located at One Independence Center, 101 North Tryon Street, NC1-001-15-04,
Charlotte, North Carolina 28255 (or at such other place or places as the Agent
may designate in writing) at the times set forth in the Credit Agreement dated
as of October 30, 1997 among the Borrowers, the financial institutions party
thereto (collectively, the "Lenders") and the Agent (as amended, supplemented or
restated and in effect from time to time, the "Agreement"; all capitalized terms
not otherwise defined herein shall have the respective meanings set forth in the
Agreement), in lawful money of the United States of America or in the applicable
Alternative Currency, as the case may be, in immediately available funds, the
principal amount of THREE HUNDRED MILLION DOLLARS ($300,000,000) or, if less
than such principal amount, the aggregate unpaid principal amount of all
Revolving Loans made by the Lender to the Borrowers pursuant to the Agreement on
the Revolving Credit Termination Date or such earlier date as may be required
pursuant to the terms of the Agreement, and to pay interest from the date hereof
on the unpaid principal amount hereof, in like money, at said office, on the
dates and at the rates provided in Article II of the Agreement. All or any
portion of the principal amount of Revolving Loans may be prepaid or required to
be prepaid as provided in the Agreement.
Each Borrower shall be jointly and severally liable as a primary obligor;
provided that a Borrower which is a Foreign Subsidiary shall be liable hereunder
only for Obligations made by or on its behalf together with interest, fees and
expenses relating thereto as provided in Section 2.1(e) of the Agreement.
If payment of all sums due hereunder is accelerated under the terms of the
Agreement or under the terms of the other Loan Documents executed in connection
with the Agreement, the then remaining principal amount and accrued but unpaid
interest shall bear interest which shall be payable on demand at the rates per
annum set forth in the proviso to Section 2.2(a) of the Agreement or the maximum
rate permitted under applicable law, if lower, until such principal and interest
have been paid in full. Further, in the event of such acceleration, this
Revolving Note, and all other indebtedness of the Borrowers to the Lender shall
become immediately due and payable, without presentation, demand, protest or
notice of any kind, all of which are hereby waived by the Borrowers.
In the event this Revolving Note is not paid when due at any stated or
accelerated maturity, the Borrowers agree to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees and
disbursements, and interest due hereunder thereon at the rates set forth above.
Interest hereunder shall be computed as provided in the Agreement.
This Revolving Note is one of the Revolving Notes referred to in the
Agreement and is issued pursuant to and entitled to the benefits and security of
the Agreement to which reference is hereby made for a more complete statement of
the terms and conditions upon which the Revolving Loans evidenced hereby were or
are made and are to be repaid.
<PAGE>
This Revolving Note is subject to certain restrictions on transfer or
assignment as provided in the Agreement.
All Persons bound on this obligation, whether primarily or secondarily
liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive
to the full extent permitted by law the benefits of all provisions of law for
stay or delay of execution or sale of property or other satisfaction of judgment
against any of them on account of liability hereon until judgment be obtained
and execution issues against any other of them and returned satisfied or until
it can be shown that the maker or any other party hereto had no property
available for the satisfaction of the debt evidenced by this instrument, or
until any other proceedings can be had against any of them, also their right, if
any, to require the holder hereof to hold as security for this Revolving Note
any collateral deposited by any of said Persons as security. Protest, notice of
protest, notice of dishonor, dishonor, demand or any other formality are hereby
waived by all parties bound hereon.
IN WITNESS WHEREOF, the Borrowers have caused this Revolving Note to be
made, executed and delivered by its duly authorized representative as of the
date and year first above written, all pursuant to authority duly granted.
BREED TECHNOLOGIES, INC.
WITNESS: By:
Name:
Title:
BREED AUTOMOTIVE SAFETY SYSTEMS SL
WITNESS: By:
Name:
Title:
BREED ITALIAN HOLDINGS, S.R.L.
WITNESS:
By:
Name:
Title:
BREED UK LIMITED
WITNESS:
By:
Name:
Title:
ICSRD R.F. GMBH
WITNESS:
By:
Name:
Title:
EXHIBIT P-1
Form of Stock Pledge Agreement (Borrower)
[See Attached]
<PAGE>
EXHIBIT P-2
Form of Stock Pledge Agreement (US Subsidiaries)
[See Attached]
EXHIBIT P-3
Form of Stock Pledge Agreement (Breeds)
[See Attached]
EXHIBIT Q
Form of Intercompany Note Pledge Agreement
[See Attached]
EXHIBIT R
Form of Security Agreement
[See Attached]
EXHIBIT S-1
Form of Opinion of US Counsel
October 30, 1997
NationsBank, National Association, as Agent,
and each of the Lenders Party to the
Credit Agreement Referenced Below
NationsBank Corporate Center
Charlotte, North Carolina 28255-0065
Re: $500,000,000 Term Loan Facility and $400,000,000 Revolving Credit and
Letter of Credit Facility among NationsBank, National Association, as Agent, the
Lenders party thereto, BREED Technologies, Inc. and certain Subsidiaries
designated as Borrowers therein
Ladies and Gentlemen:
We have acted as counsel to BREED Technologies, Inc., a Delaware
corporation ("BREED") and the Guarantors in connection with the term loan
facility of $500,000,000 (the "Term Loan") and the revolving credit facility of
up to $400,000,000 (the "Revolving Loan"), including the $25,000,000 sublimit
for the Letter of Credit Facility constituting part of the Revolving Credit
Facility (the "LC Facility") and the $75,000,000 sublimit for multi-currency
borrowings, each being made available to BREED and certain Subsidiaries
designated as Borrowers ("Borrowing Subsidiaries" and referred to collectively
with BREED as the "Borrowers") on this date pursuant to the Credit Agreement of
even date herewith among you, the Lenders, BREED and the Borrowing Subsidiaries
(the "Credit Agreement"), and the other transactions contemplated under the
Credit Agreement.
<PAGE>
This opinion is being delivered in accordance with the conditions set forth
in Section 6.1 of the Credit Agreement. All capitalized terms not otherwise
defined herein shall have the meanings provided therefor in the Credit
Agreement.
As such counsel, we have reviewed the following documents:
1. the Credit Agreement;
2. the Note;
3. the Guaranty;
4. the Security Instruments;
5. the Financing Statements (as defined herein).
The documents described in items 1 through 5 immediately above are referred
to herein as the "Loan Documents".
For purposes of the opinions expressed below, we have assumed that all
natural persons executing the Loan Documents have legal capacity to do so; that
all signatures (other than those of representatives of BREED and the Guarantors
on the Loan Documents) on all documents submitted to us are genuine; that all
documents submitted to us as originals (other than the Loan Documents) are
authentic; and that all documents submitted to us as certified copies or
photocopies conform to the originals of such documents, which themselves are
authentic.
In addition, for purposes of giving this opinion, we have examined such
corporate records of BREED and the Guarantors, certificates of public officials,
certificates of appropriate officials of BREED and the Guarantors, and such
other documents, and have made such inquiries as we have deemed appropriate.
Based upon and subject to the foregoing, it is our opinion that:
1. BREED is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation and is duly qualified to
transact business as a foreign corporation and is in good standing in all
jurisdictions in which the nature of its business requires such qualification.
BREED has full corporate power and authority to own its assets and conduct the
businesses in which it is now engaged and as are expressly contemplated by the
Loan Documents, and has full corporate power and authority to enter into each of
the Loan Documents to which it is a party and to perform its obligations
thereunder.
2. Each of the Loan Documents to which BREED is a party has been duly
authorized by the Board of Directors of BREED (and by any required shareholder
action), has been duly executed and delivered by BREED, and constitutes the
legal, valid and binding obligation, agreement, instrument or conveyance, as the
case may be, of BREED, enforceable against BREED in accordance with its
respective terms, except as the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization and other similar laws
relating to or affecting creditors' rights generally and by the application of
general equitable principles (whether considered in proceedings at law or in
equity).
3. Each Guarantor is a corporation or partnership, as the case may be duly
organized, validly existing and in good standing under the laws of its
respective state of its formation and is duly qualified to transact business as
a foreign entity and is in good standing in all jurisdictions in which the
nature of its business requires such qualification and in which the failure to
be so qualified would reasonably be likely to result in a Material Adverse
Effect. Each Guarantor has full corporate power and authority to own its assets
and conduct the businesses in which it is now engaged and as expressly
contemplated in the Loan Documents, and has full corporate power and authority
to enter into each of the Loan
<PAGE>
Documents to which it is a party and to perform its obligations thereunder.
4. Each of the Loan Documents to which each Guarantor is a party has been
duly authorized by the Board of Directors or required partners of such Guarantor
(and by any required shareholder or partnership action), has been duly executed
and delivered by such Guarantor, and constitutes the legal, valid and binding
obligation, agreement or instrument, as the case may be, of such Guarantor,
enforceable against such Guarantor in accordance with its respective terms,
except as the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization and other similar laws relating to or affecting
creditors' rights generally and by the application of general equitable
principles (whether considered in proceedings at law or in equity).
5. Neither the execution or delivery of, nor performance by BREED or any
Guarantor of its obligations under, the Loan Documents (a) does or will conflict
with, violate or constitute a breach of (i) the Organizational Documents or
Operating Documents of BREED or any Guarantor, (ii) any laws, rules or
regulations applicable to BREED or any other Guarantor, or (iii) any contract,
agreement, indenture, lease, instrument, other document, judgment, writ,
determination, order, decree or arbitral award to which BREED or any Guarantor
is a party or by which BREED or any Guarantor or any of their properties is
bound, (b) requires the prior consent of, notice to, license from or filing with
any Governmental Authority which has not been duly obtained or made on or prior
to the date hereof, or (c) does or will result in the creation or imposition of
any lien, pledge, charge or encumbrance of any nature upon or with respect to
any of the properties of BREED or any Guarantor, except for the Liens in your
favor expressly created pursuant to the Loan Documents.
6. There is no pending or, to the best of our knowledge, threatened,
action, suit, investigation or proceeding (including, without limitation, any
action, suit, investigation, or proceeding under any environmental or labor
law), nor is there any basis therefor, before or by any court, or governmental
department, commission, board, bureau, instrumentality, agency or arbitral
authority, (i) which calls into question the validity or enforceability of any
of the Loan Documents, or the titles to their respective offices or authority of
any officers of BREED or any Guarantor or (ii) an adverse result in which would
reasonably be likely to have a Material Adverse Effect.
7. To the best of our knowledge after due inquiry, neither BREED nor any
Guarantor (i) is in default (which default has not been waived) under any
agreement, document or instrument to which it is a party or by which it or any
of its assets is bound or (ii) is in violation of any law, rule, regulation,
judgment, writ, determination, order, decree or arbitral award to which BREED or
any Guarantor is a party or by which BREED or any Guarantor or any of their
respective properties is bound, which default or violation, as the case may be,
would constitute a Default or Event of Default under the Credit Agreement or
otherwise could reasonably be likely to have a Material Adverse Effect.
8. None of the transactions contemplated by the Credit Agreement,
including, without limitation, the use of the proceeds of the Loans provided for
in the Loan Documents, will violate or result in a violation of Section 7 of the
Securities Exchange Act of 1934, as amended, any regulations issued pursuant
thereto, or regulations G, T, U or X of the Board of Governors of the Federal
Reserve System.
9. None of the provisions of the Loan Documents violate any laws of the
State of Florida relating to interest or usury.
10. Once value has been given to BREED by the Lenders and assuming the
Agent, for the benefit of the Lenders, has taken possession of the certificates
representing all of the Pledged Stock, as more fully described in Schedule A
hereto, and the stock powers related thereto, for value in good faith and
without notice of an adverse claim, so long as the Agent, for the benefit of the
Lenders, maintains continuous and uninterrupted possession of the certificates
representing the Pledged Stock, the Pledge Agreement will create a valid and
perfected security interest in favor of the Agent, for the benefit of the
Lenders, in the Pledged Stock subject to no other security interest, lien,
encumbrance or adverse claim (other than restrictions on transfer imposed by
applicable securities laws) and no filings or recordation are
<PAGE>
necessary to perfect the security interests created by the Pledge Agreement
in the Pledged Stock. Such security interest will have priority over any other
consensual security interests in the Pledged Stock.
11. All of the shares of Pledged Stock which are shares of the capital
stock of any Domestic Subsidiary ("Pledged Domestic Subsidiary Stock") are duly
authorized, validly issued, fully paid and nonassessable, and free of any
preemptive rights. The Certificates listed on Schedule A hereto are now the sole
evidence of the shares of Pledged Domestic Subsidiary Stock and all shares of
Pledged Domestic Subsidiary Stock have been duly delivered to you with an
appropriate stock power assignment sufficient to permit the sale or transfer of
the shares of Pledged Domestic Subsidiary Stock by you in accordance with the
terms of the Pledge Agreement, subject to applicable federal and state
securities law. The delivery of physical possession of the Pledged Domestic
Subsidiary Stock to the Agent and the execution and delivery of the stock powers
with respect to the Pledged Domestic Subsidiary Stock have been duly authorized
by the owner of such Pledged Domestic Subsidiary Stock.
12. All of the shares of Pledged Stock which are shares of the capital
stock of BREED ("Pledged BREED Stock") are duly authorized, validly issued,
fully paid and nonassessable, and free of any preemptive rights. The
Certificates listed on Schedule A hereto are now the sole evidence of the
Pledged BREED Stock and all shares of Pledged BREED Stock have been delivered to
you with an appropriate stock power assignment sufficient to permit the sale or
transfer of the shares of Pledged BREED Stock by you in accordance with the
terms of the Pledge Agreement, subject to applicable federal and state
securities law. The delivery of physical possession of the Pledged BREED Stock
to the Agent and the execution and delivery of the stock powers with respect to
the Pledged BREED Stock have been duly authorized by Johnnie C. Breed, Allen K.
Breed, A. BREED Ltd, a Texas limited partnership, J. BREED Ltd, a Texas limited
partnership, BREED Charitable Foundation, and [five trusts of which Ms. Breed is
trustee with shared voting and investment power].
13. Once value has been given to BREED by the Lenders and the Receipt and
Certificate of Registrar is executed, the Collateral Assignment of Partnership
Interests will create a valid and perfected security interest in favor of the
Agent, for the benefit of the Lenders, in the Assigned Interests subject to no
other security interest, lien, encumbrance or adverse claim and no filings or
recordations are necessary to perfect the security interests created by the
Collateral Assignment of Partnership Interests in the Assigned Interests. Such
security interest will have priority over any other consensual security
interests in the Assigned Interests. All required consents to the assignment of
the Assigned Interests have been obtained. All of the Assigned Interests are
duly authorized, validly issued, fully paid and nonassessable, and free of any
preemptive rights.
14. The Security Agreement and the Collateral Assignment of Trademark
License Agreement are effective to create a valid security interest in favor of
the Agent for the benefit of the Lenders in the Collateral described therein.
The Uniform Commercial Code Financing Statements on Form UCC-1 described on
Schedule 7.23 of the Credit Agreement (collectively, the "Financing Statements")
have been duly executed and delivered to the Agent and are in form, number and
content sufficient (together with the tender of necessary filing fees) for
filing with the respective filing offices described on Schedule 7.23 with the
effect that, upon such filing, the Agent shall have a duly perfected security
interest in the Collateral described in the Security Agreement and the
Collateral Assignment of Trademark License Agreement to the extent that a
security interest in such Collateral can be perfected by the filing of financing
statements under the Uniform Commercial Code as in effect in the appropriate
jurisdictions. No further filings or recordation are necessary to perfect the
security interests created by the Security Agreement and the Collateral
Assignment of Trademark License Agreement.
Our opinions contained herein are rendered solely in connection with the
transactions contemplated under the Loan Documents and may not be relied upon in
any manner by any Person other than the addressees hereof, any successor or
assignee of any addressee (including successive assignees) and any Person who
shall acquire a participation interest in the interest of any Lender
(collectively, the "Reliance Parties"), or by any Reliance Party for any other
purpose. Our opinions herein shall not be quoted or otherwise included,
summarized or referred to in any publication or document, in
<PAGE>
whole or in part, for any purposes whatsoever, or furnished to any Person
other than a Reliance Party (or a Person considering whether to become a
Reliance Party), except as may be required of any Reliance Party by applicable
law or regulation or in accordance with any auditing or oversight function or
request of regulatory agencies to which a Reliance Party is subject.
Very truly yours,
Schedule A to Legal Opinion
Pledged Stock
EXHIBIT S-2
Form of Opinion of Intellectual Property Counsel
October 30, 1997
NationsBank, National Association, as Agent and Each of the Lenders Party
to the Credit Agreement Referenced Below NationsBank Corporate Center Charlotte,
North Carolina 28255-0065
Re: $500,000,000 Term Loan Facility and $400,000,000 Revolving Credit and
Letter of Credit Facility among NationsBank, National Association, as Agent, the
Lenders party thereto, BREED Technologies, Inc. and certain Subsidiaries
designated as Borrowers therein
Ladies and Gentlemen:
We have acted as special intellectual property counsel to BREED
Technologies, Inc., a Delaware corporation ("BREED") and the Guarantors in
connection with the term loan facility of $500,000,000 (the "Term Loan") and the
revolving credit facility of up to $400,000,000 (the "Revolving Loan"),
including the $25,000,000 sublimit for the Letter of Credit Facility
constituting part of the Revolving Credit Facility (the "LC Facility") and the
$75,000,000 sublimit for multi-currency borrowings, each being made available to
BREED and certain Subsidiaries designated as Borrowers ("Borrowing Subsidiaries"
and referred to collectively with BREED as the "Borrowers") on this date
pursuant to the Credit Agreement of even date herewith among you, the Lenders,
BREED and the Borrowing Subsidiaries (the "Credit Agreement"), and the other
transactions contemplated under the Credit Agreement.
This opinion is being delivered in accordance with the conditions set forth
in Section 6.1 of the Credit Agreement. All capitalized terms not otherwise
defined herein shall have the meanings provided therefor in the Credit
Agreement.
As such counsel, we have reviewed the following documents:
1. the Credit Agreement;
<PAGE>
2. the Guaranty;
3. the Intellectual Property Security Agreement; and
4. the Assignment of Patents, Trademarks, Copyrights and Licenses.
The documents described in items 1 through 4 immediately above are referred
to herein as the "Loan Documents".
For purposes of the opinions expressed below, we have assumed that all
natural persons executing the Loan Documents have legal capacity to do so; that
all signatures (other than those of representatives of BREED and the Guarantors
on the Loan Documents) on all documents submitted to us are genuine; that all
documents submitted to us as originals (other than the Loan Documents) are
authentic; and that all documents submitted to us as certified copies or
photocopies conform to the originals of such documents, which themselves are
authentic.
In addition, for purposes of giving this opinion, we have examined such
corporate records of BREED and the Guarantors, certificates of public officials,
certificates of appropriate officials of BREED and the Guarantors, and such
other documents, and have made such inquiries as we have deemed appropriate.
Based upon and subject to the foregoing, it is our opinion that:
1. The Intellectual Property Security Agreement is effective to create a
valid security interest in the right, title, and interest of BREED and each
Guarantor which is a signatory thereto in the Patents, Trademarks, Copyrights
and Licenses (as defined in the Agreement) with respect to which a security
interest can be created under Chapter 9 of the Uniform Commercial Code and any
applicable federal law.
2. If the Intellectual Property Security Agreement is recorded (i) in the
case of patents and trademarks with the United States Patent and Trademark
Office and there is attached to such recorded document (A) with respect to
trademarks claimed as collateral a listing naming the correct grantor as owner
and giving the correct name of the trademark and federal registration or
application number of each trademark owned by such grantor, and (B) with respect
to patents claimed as collateral a listing naming the correct grantor as owner
and giving the title of the invention, together with its associated patent
number or patent application number of each patent owned by such grantor, and
(ii) in the case of copyrights with the United States Copyright Office and there
is attached to such recorded document with respect to copyrights claimed as
collateral a listing specifying the title of the work, the registration number,
and the registration date, and a Financing Statement in the form reviewed is
properly filed with the [__________], the security interest of the Secured Party
in such trademarks, patents, and copyrights will be perfected if perfection is
determined by [________________] law or any applicable Federal Law.
Our opinions contained herein are rendered solely in connection with the
transactions contemplated under the Loan Documents and may not be relied upon in
any manner by any Person other than the addressees hereof, any successor or
assignee of any addressee (including successive assignees) and any Person who
shall acquire a participation interest in the interest of any Lender
(collectively, the "Reliance Parties"), or by any Reliance Party for any other
purpose. Our opinions herein shall not be quoted or otherwise included,
summarized or referred to in any publication or document, in whole or in part,
for any purposes whatsoever, or furnished to any Person other than a Reliance
Party (or a Person considering whether to become a Reliance Party), except as
may be required of any Reliance Party by applicable law or regulation or in
accordance with any auditing or oversight function or request of regulatory
agencies to which a Reliance Party is subject.
Very truly yours,
<PAGE>
EXHIBIT S-3
Form of Opinion of Foreign Counsel
[See Attached]
EXHIBIT T
Compliance Certificate
NationsBank, National Association,
as Agent
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telefacsimile: (704) 386-9923
Reference is hereby made to the Credit Agreement dated as of October 30,
1997 (the "Agreement") among BREED Technologies, Inc., a Delaware corporation
("BREED"), and certain Subsidiaries of BREED designated as Borrowers therein
(BREED and such Subsidiaries being collectively referred to as the "Borrowers")
the Lenders (as defined in the Agreement) and NationsBank, National Association,
as Agent for the Lenders ("Agent"). Capitalized terms used but not otherwise
defined herein shall have the respective meanings therefor set forth in the
Agreement. The undersigned, a duly authorized and acting Authorized
Representative, hereby certifies to you as of __________ (the "Determination
Date") as follows:
1. Calculations:
A. Compliance with Section 9.1(a): Consolidated Net Worth
1. Required Consolidated Net Worth at the last day of the most recent
fiscal quarter $______________
2. Consolidated Net Income x 0.9 $______________
3. 100% of the Net Proceeds from any Equity Offering $______________
3. Sum of A.1 + A.2 + A.3 $______________
4. Actual Consolidated Net Worth $______________
Required: A.4 must not be less than A.3
B. Compliance with Section 9.1(b): Consolidated EBITDA
1. Consolidated Net Income $______________
2. Consolidated Interest Expense $______________
<PAGE>
3. Taxes on income $______________
4. Depreciation $______________
5. Amortization $______________
6. Consolidated EBITDA $______________ (B.1 + B.2 + B.3 +B.4 +B.5)
Required: B.1 must not be less than $25,000,000 for the two months ending
12/31/97, $64,000,000 for the five months ending 3/31/98, or $107,000,000 for
the eight months ending 6/30/98
C. Compliance with Section 9.1(c): Capital Expenditures
1. Capital Expenditures $______________
Required: C.1 must not exceed $17,000,000 in for the two months ending
12/31/97, $37,000,000 for the five months ending 3/31/98, or $57,000,000 for the
eight months ending 6/30/98
2. No Default
A. Since __________ (the date of the last similar certification), (a) BREED
has not defaulted in the keeping, observance, performance or fulfillment of its
obligations pursuant to any of the Loan Documents; and (b) no Default or Event
of Default specified in Article X of the Agreement has occurred and is
continuing.
B. If a Default or Event of Default has occurred since __________ (the date
of the last similar certification), BREED proposes to take the following action
with respect to such Default or Event of Default: .
(Note, if no Default or Event of Default has occurred, insert "Not
Applicable").
The Determination Date is the date of the last required financial
statements submitted to the Lenders in accordance with Section 8.1 of the
Agreement.
IN WITNESS WHEREOF, I have executed this Certificate this _____ day of
__________, 19___.
By:
Authorized Representative
Name:
Title:
<PAGE>
EXHIBIT U
Form of Assumption Letter
[Date]
To NationsBank, National Association,
as Agent and the Lenders party to the
Credit Agreement referred to below
Ladies and Gentlemen:
Reference is hereby made to the Credit Agreement dated as of October 30,
1997 (as the same may be amended, supplemented or restated from time to time,
the "Credit Agreement") among BREED Technologies, Inc., a Delaware corporation
("BREED"), and certain Subsidiaries of BREED designated as Borrowers therein
(BREED and such Subsidiaries being collectively referred to as the "Borrowers")
the Lenders (as defined in the Agreement) and NationsBank, National Association,
as Agent for the Lenders ("Agent"). Terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Credit Agreement.
1. Borrowing Subsidiary.
(i) The undersigned, _________________ (the "Subsidiary") a ______________
corporation and a Subsidiary of BREED, proposes to become a "Borrowing
Subsidiary" under the Credit Agreement, and accordingly hereby agrees that from
the date hereof until the payment in full of the principal of and interest on
all Loans made to it or on its behalf under the Credit Agreement and performance
of all of its other obligations thereunder, and termination of its status as a
"Borrowing Subsidiary" as provided below, it shall perform, comply with and be
bound by each of the provisions of the Credit Agreement which are stated to
apply to a "Borrowing Subsidiary" or a "Borrower". In addition, the Subsidiary
hereby represents and warrants that: (i) each of the representations and
warranties set forth in Article VII of the Credit Agreement is true and correct
with respect to the Subsidiary as of the date hereof and (ii) it has heretofore
received a true and correct copy of the Credit Agreement (including any
amendments thereto, modifications thereof or waivers thereunder) as in effect on
the date hereof.
(ii) So long as the principal of and interest on all Loans made to the
Subsidiary or on its behalf under the Credit Agreement shall have been paid in
full and all other obligations of the Subsidiary under the Credit Agreement
shall have been fully performed, the Subsidiary may, by not less than five
Business Days' prior notice to the Agent, terminate its status as a "Borrowing
Subsidiary."
2. Conditions Precedent. No Lender shall make any Loan to or on behalf of
the Subsidiary unless the Subsidiary has furnished to the Agent, with sufficient
copies for all the Lenders, the following items:
(i) Copies of the Organizational Documents of the Subsidiary, together with
all amendments, and a certificate of good standing (if available), both
certified by the appropriate governmental officer in its jurisdiction of
incorporation.
(ii) Copies, certified by an appropriate officer or director of the
Subsidiary, of its Operating Documents and of its Board of Directors resolutions
(and other Organizational Action, if any are deemed necessary by counsel for the
Agent) authorizing the execution of this Assumption Letter and all other
<PAGE>
Loan Documents to which the Subsidiary is a party.
(iii) An incumbency certificate, executed by an appropriate officer or
director of the Subsidiary, which shall identify by name and title and bear the
signature of the officers or directors of the Subsidiary authorized to sign this
Assumption Letter and the other Loan Documents to which it is a party and to
request Loans thereunder, upon which certificate the Agent and the Lenders shall
be entitled to rely until informed of any change in writing by the Subsidiary.
(iv) A favorable written opinion of counsel to the Subsidiary, addressed to
the Lenders, in form and substance satisfactory to the Agent.
(v) Notes issued by the Subsidiary to the order of each of the Lenders.
(vi) Written money transfer instructions, in substantially the form of
Exhibit "A" attached hereto addressed to the Agent on behalf of the Subsidiary
and signed by duly authorized officer, together with such other related money
transfer authorizations as the Agent may have reasonably requested.
(vii) Stock Pledge Agreement pledging 100% of the capital stock and related
interests and rights of any Subsidiary of the Borrowing Subsidiary and any other
document required under Article IV of the Credit Agreement.
(viii) Such other documents as the Agent or its counsel may reasonably
request.
3. Representations. The Subsidiary further represents and warrants to the
Lenders as follows:
(i) Existence and Power. The Subsidiary and each of its Subsidiaries:
(a) is a corporation, partnership or limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation;
(b) has the power and authority and governmental licenses, authorizations,
consents and approvals to own its assets, carry on its business and to execute,
deliver, and perform its obligations under this Assumption Letter and the Loan
Documents;
(c) is duly qualified and is licensed and in good standing under the laws
of each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification or license; and
(d) is in compliance in all material respects with all laws, rules and
regulations and all other valid requirements of any Governmental Authority.
(ii) Authorization; No Contravention. The execution, delivery and
performance by the Subsidiary and its Subsidiaries of this Assumption Letter and
each other Loan Document to which such Subsidiary is party have been duly
authorized by all necessary action and do not and will not:
(a) contravene the terms of any such Subsidiary's Organizational Documents
or Operating Documents; or
(b) conflict with or result in a material breach or contravention of, or
the creation of any Lien
<PAGE>
under, any Material Contract or any document evidencing any material
contractual obligation to which such Subsidiary is a party or any order,
injunction, writ or decree of any Governmental Authority to which such
Subsidiary or its property is subject.
(iii) Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Subsidiary or
any of its Subsidiaries of this Assumption Letter or any other Loan Document.
(iv) Binding Effect. This Assumption Letter and each other Loan Document to
which the Subsidiary or any of its Subsidiaries is a party constitute the legal,
valid and binding obligations of the Subsidiary and any of its Subsidiaries to
the extent it is a party thereto, enforceable against such Person in accordance
with their respective terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability).
(v) Filing. To ensure the enforceability or admissibility in evidence of
this Assumption Letter, the Notes issued by the Subsidiary or any of the other
Loan Documents in the Subsidiary's country of organization or incorporation and
country which is its principal place of business (each, a "Subject Country"), it
is not necessary that this Assumption Letter or such Notes or any other
documents be filed or recorded with any court or other authority in any Subject
Country or that any stamp or similar tax be paid in respect of this Assumption
Letter or such Notes or any other documents. The qualification by any Lender or
the Agent for admission to do business under the laws of any Subject Country
does not constitute a condition to, and the failure to so qualify does not
affect, the exercise by any Lender or the Agent of any right, privilege, or
remedy afforded to any Lender or the Agent in connection with the Loan Documents
or the enforcement of any such right, privilege, or remedy. The performance by
any Lender or the Agent of any action required or permitted under the Loan
Documents will not violate any law or regulation of any Subject Country or any
political subdivision thereof or result in any tax liability or other
unfavorable consequence to such party pursuant to the laws of any such Subject
Country or political subdivision or taxing authority thereof or any rule or
regulation of any federation or organization or similar entity of which such
Subject Country is a member.
(vi) No Immunity. Neither the Subsidiary nor any of its assets is entitled
to immunity from suit, execution, attachment or other legal process. The
Subsidiary's execution and delivery of this Assumption Letter and the other Loan
Documents to which it is a party constitute, and the exercise of its rights and
performance of and compliance with its obligations under such Loan Documents
will constitute, private and commercial acts done and performed for private and
commercial purposes.
(vii) Regulation U. Margin stock (as defined in Regulation U) constitutes
less than 25% of those assets of the Subsidiary and its Subsidiaries which are
subject to any limitation on sale, pledge, or other restriction hereunder.
4. BREED Guaranty of Subsidiary Obligations. BREED expressly agrees as
follows:
(i) Direct Obligations. BREED hereby unconditionally and irrevocably
affirms to the Lenders its direct liability for, and guarantees to the Lenders,
the due and punctual payment of all obligations and liabilities of the
Subsidiary to the Lenders, whether arising under this Assumption Letter, the
Credit Agreement, the other Loan Documents or any other documents related
thereto (collectively, the "Borrowing Subsidiary Obligations") including, but
not limited to, the due and punctual payment of
<PAGE>
principal of and interest on the Notes issued by the Subsidiary, and
punctual payment of all other sums now or hereafter owed by the Subsidiary under
this Assumption Letter, the Credit Agreement, the Loan Documents, any Note
issued by the Subsidiary and any other document related thereto as and when the
same shall become due (whether by acceleration or otherwise) and according to
the terms hereof and thereof. In case of failure by the Subsidiary punctually to
pay any Borrowing Subsidiary Obligation, BREED hereby unconditionally agrees to
cause such payment to be made punctually as and when the same shall become due
and payable, whether at maturity or by declaration or otherwise, and as if such
payment were made by the Subsidiary.
(ii) Obligations Unconditional. The obligations of BREED under this
Assumption Letter shall be irrevocable, unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released, discharged or
otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or release in
respect of any obligation of the Subsidiary (or any other Borrowing Subsidiary)
or under any Note or other agreement issued or entered into by any Subsidiary
(or any other Borrowing Subsidiary), by operation of law or otherwise;
(b) any modification or amendment of or supplement to this Assumption
Letter or any Loan Document;
(c) any compromise, settlement, modification, amendment, waiver, release,
non-perfection or invalidity of or to any direct or indirect security, guarantee
or other liability of any third party with respect to any Borrowing Subsidiary
Obligation;
(d) any change in the corporate existence, structure, or ownership of, or
any insolvency, bankruptcy, reorganization or other similar proceeding
affecting, the Subsidiary (or any other Borrowing Subsidiary) or their assets or
any resulting release or discharge of any Borrowing Subsidiary Obligation;
(e) the existence of any claim, set-off or other right which BREED may have
at any time against the Subsidiary (or any other Borrowing Subsidiary), the
Agent, any Lender or any other Person, whether or not arising in connection with
this Assumption Letter or any other Loan Document; provided, however, that
nothing herein shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(f) any invalidity or unenforceability relating to or against the
Subsidiary (or any other Borrowing Subsidiary) for any reason of this Assumption
Letter or any Loan Document, or any provision of applicable law or regulation
purporting to prohibit the payment by the Subsidiary (or any other Borrowing
Subsidiary) of the principal of or interest on any Note issued by the Subsidiary
(or any other Borrowing Subsidiary) or any other amount payable by the
Subsidiary (or any other Borrowing Subsidiary) under this Assumption Letter, the
Credit Agreement or any Loan Document; or
(g) any other act or omission to act or delay of any kind by the Subsidiary
(or any other Borrowing Subsidiary), the Agent, any Lender or any other Person
or any other circumstance whatsoever that might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of the obligations of BREED
under this Assumption Letter, the Credit Agreement or any Loan Document.
<PAGE>
(iii) Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances. BREED's obligations hereunder shall remain in full force and
effect until each Revolving Credit Commitment and Term Loan Commitment has
expired or is terminated and the principal of and interest on the Notes and all
other Obligations payable under this Assumption Letter and the Loan Documents
shall have been paid in full. If at any time any payment of the principal of or
interest on any Note issued by the Subsidiary or any other amount payable by the
Subsidiary under this Assumption Letter or any Loan Document is rescinded or
must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Subsidiary or otherwise, BREED's obligations under this
Assumption Letter with respect to such payment shall be reinstated at such time
as though such payment had become due but had not been made at such time. This
provision shall survive the termination of this Assumption Letter and the
payment in full of the Obligations.
(iv) Waiver. BREED irrevocably waives acceptance hereof, presentment,
demand, protest and any notice not provided for herein, as well as any
requirement that at any time any action be taken by any Person against the
Subsidiary or any other Person. BREED waives any benefit of the collateral, if
any, which may from time to time secure the Obligations or any part thereof and
authorizes the Agent or the Lenders to take any action, or exercise any remedy
with respect thereto, which the Agent or the Lenders in its or their sole
discretion shall determine, without notice to BREED. In the event the Lenders in
their sole discretion elect to give notice of any action with respect to the
collateral, if any, securing the Obligations or any part thereof, ten days'
written notice mailed to BREED by certified mail at the address set forth in the
Credit Agreement shall be deemed reasonable notice of any matter contained in
such notice.
(v) Stay of Acceleration. If acceleration of the time for payment of any
amount payable by the Subsidiary under this Assumption Letter or any of the Loan
Documents is stayed upon the insolvency, bankruptcy or reorganization of the
Subsidiary or any other Person, all such amounts otherwise subject to
acceleration under the terms of this Assumption Letter or any Loan Document
shall nonetheless be payable by BREED hereunder forthwith on demand by the
Agent.
(vi) Payments. All payments to be made by BREED pursuant to this Assumption
Letter shall be made at the times and in the manner and in the currency
prescribed for payments in the Credit Agreement.
(vii) Delay of Subrogation. Until BREED's obligations under this Assumption
Letter have been paid in full and terminated, BREED shall not exercise any right
of subrogation with respect to payments made by BREED pursuant to this
Assumption Letter.
5. Notice. Any notice to be given to the Subsidiary may be given to BREED
(and shall conclusively be deemed to have been received by the Subsidiary when
received, or deemed received, by BREED) in the manner set forth in the Credit
Agreement. The Subsidiary agrees that BREED may give notice under this
Assumption Letter and the Loan Documents on behalf of the Subsidiary, and that
any such notice given by BREED on behalf of the Subsidiary shall be binding upon
the Subsidiary.
6. Jurisdiction and Governing Law.
(i) Without limiting the provisions of Section 12.14 of the Credit
Agreement, the Subsidiary and BREED each irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
United States federal court and any Florida state court sitting in the county of
Hillsborough, State of Florida, United States of America, and any appellate
court from any thereof, in any action or proceeding arising out of or relating
to this Assumption Letter, the Credit Agreement or any other Loan Document or
for recognition or enforcement of any judgment relating thereto, and the
<PAGE>
Subsidiary and BREED each irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and determined
in any such court. The Subsidiary and BREED each agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Assumption Letter shall affect any right that any Lender or the
Agent may otherwise have to bring any action or proceeding relating to this
Assumption Letter, the Credit Agreement or any other Loan Document in the courts
of any jurisdiction.
(ii) This Assumption Letter shall be governed by, and construed in
accordance with, the internal laws (and not the law of conflicts) of the State
of Florida; provided that the Agent and the Lenders shall retain all rights
arising under federal law.
[signatures follow]
IN WITNESS WHEREOF, the Subsidiary has duly executed and delivered this
Assumption Letter as of the date and year first above written.
[NAME OF BORROWING SUBSIDIARY]
By
Name:
Title:
Agreed and Consented to:
BREED TECHNOLOGIES, INC.
By:
Name:
Title:
NATIONSBANK, NATIONAL ASSOCIATION, as Agent
By:
Name:
Title:
EXHIBIT "A"
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To NationsBank, National Association
as Agent (the "Agent") under the Credit
Agreement Described Below
RE: Credit Agreement dated as of October 30, 1997 (as the same may be
amended, supplemented or restated, the "Credit Agreement"), among BREED
Technologies, Inc., a Delaware corporation ("BREED"), and certain Subsidiaries
of BREED designated as Borrowers therein (BREED and such Subsidiaries being
collectively referred to as the "Borrowers") the Lenders (as defined in the
Agreement) and NationsBank, National Association, as Agent for the Lenders
("Agent"). Terms used herein and not otherwise defined shall have the meanings
assigned thereto in the Credit Agreement.
The Agent is specifically authorized and directed to act upon the following
standing money transfer instructions with respect to the proceeds of Loans or
other extensions of credit from time to time until receipt by the Agent of a
specific written revocation of such instructions by [Name of Borrowing
Subsidiary] (the "Borrowing
<PAGE>
Entity"), provided, however, that the Agent may otherwise transfer funds as
hereafter directed in writing by the Borrowing Entity in accordance with Section
12.2 of the Credit Agreement or based on any telephonic notice made in
accordance with any other applicable provision of the Credit Agreement.
Facility Identification Number(s)_______________________________________________
Customer/Account Name___________________________________________________________
Transfer Funds to_______________________________________________________________
- ------------------------------------------------------------------------
For Account No._________________________________________________________________
Reference/Attention To__________________________________________________________
Authorized Officer (Customer Representative) Date_______________________
- ------------------------- -----------------------------------
(Please Print) (Signature)
Bank Officer Name Date_______________________
- ------------------------- -----------------------------------
(Please Print) (Signature)
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
<PAGE>
Schedule 1.1(a)
Borrowing Subsidiaries
Name of Subsidiary Jurisdiction
BREED Automotive Safety Systems SL Spain
BREED Italian Holdings, Srl Italy
BREEDUK Limited United Kingdom
ICSRD R.F., GmbH Germany
Schedule 1.1(b)
Initial Advance Allocation
Borrower Initial Advance
BREED Technologies, Inc. $ 718,000,000
BREED Automotive Safety Systems SL $ 15,000,000
BREED Italian Holdings, Srl $ 49,000,000
BREED UK Limited $ 17,000,000
BREED R.F., GmbH $ 1,000,000
$ 800,000,000
Schedule 7.4
Subsidiaries and Investments in Other Persons
Schedule 7.6
Indebtedness
Schedule 7.7
Liens
Schedule 7.10
Litigation
Schedule 7.19
Employment Matters
Schedule 7.23
Financing Statements and Other Filings
Schedule 8.5
Insurance
Exhibit 10.3
WARRANT AGREEMENT
BETWEEN
NATIONSBANK, N.A.
AND
BREED TECHNOLOGIES, INC.
October 30, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 CERTAIN DEFINITIONS..........................................1
ARTICLE 2 ORIGINAL ISSUE OF WARRANTS...................................3
2.1 Form of Warrant Certificates.................................3
2.2 Legend.......................................................3
2.3 Delivery of the Warrants.....................................4
ARTICLE 3 EXERCISE OF WARRANTS.........................................4
3.1 Exercise of Warrants; Increase in Warrants...................4
3.2 Exercise Price...............................................5
3.3 Restrictions on Exercise; Expiration.........................5
3.4 Method of Exercise; Payment of Exercise Price................5
3.5 Dividends and Distributions..................................6
ARTICLE 4 ADJUSTMENTS..................................................6
4.1 Adjustments..................................................6
4.2 Below Market Price Issuances.................................8
4.3 Notice of Adjustment........................................10
4.4 Statements in the Warrants..................................10
4.5 Notice of Consolidation, Merger or Sale of Assets...........10
4.6 Fractional Interests........................................11
4.7 No Dilution or Impairment...................................11
ARTICLE 5 RESERVATION AND AUTHORIZATION OF COMMON SHARES,
ETC.........................................................11
5.1 Reservation and Authorization...............................11
5.2 Covenant Regarding Securities...............................11
5.3 Registration................................................12
5.4 S-3 Eligibility.............................................12
ARTICLE 6 WARRANT TRANSFER BOOKS: RESTRICTIONS ON TRANSFER............12
6.1 Transfer and Exchange.......................................12
6.2 Special Transfer Provisions.................................13
6.3 Surrender of a Warrant Certificate..........................13
ARTICLE 7 OPTIONS.....................................................13
7.1 Option to Redeem Warrants...................................13
ARTICLE 8 REGISTRATION RIGHTS.........................................14
8.1 Registration by the Corporation.............................14
8.2 Registration Procedures and Expenses........................14
8.3 Indemnification.............................................15
8.4 Conflicting Rights..........................................17
8.5 Termination.................................................17
8.6 Registration on Form S-3....................................17
ARTICLE 9 MISCELLANEOUS...............................................17
9.1 Loss or Mutilation..........................................17
9.2 Payment of Taxes............................................18
9.3 No Merger, Consolidation or Sale of Assets or the Corporation.18
<PAGE>
9.4 Notices.....................................................18
9.5 Governing Law...............................................19
9.6 Assignment; Successors......................................19
9.7 Counterparts................................................19
9.8 Amendments..................................................19
9.9 Headings....................................................20
9.10 Third Party Beneficiaries...................................20
9.11 Severability................................................20
9.12 No Inconsistent Agreements..................................20
EXHIBIT A WARRANT CERTIFICATE.........................................22
<PAGE>
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of October 30, 1997 (this "Agreement"), between
BREED TECHNOLOGIES, INC. a Delaware corporation (the "Corporation"), and
NATIONSBANK, N.A. ("NationsBank").
Pursuant to the terms of a Credit Agreement dated October 30, 1997,
NationsBank, N.A. as agent (the "Agent") and as a Lender has agreed to make
available to the Corporation loans of up to $900,000,000 (the "Loans") which
Loans are to be evidenced by Notes of the Corporation in favor of the Lenders
(the "Notes"). In order to induce NationsBank to agree to make the Loans, the
Corporation agreed to issue to NationsBank warrants (the "Warrants") exercisable
for Common Stock, $.01 par value per share of the Corporation (the "Common
Stock").
Initially, the Corporation is authorizing the issuance to NationsBank of
3,000,000 Warrants to purchase a total of 3,000,000 shares of Common Stock (the
"Warrant Shares") of the Corporation under the terms and conditions hereof,
which amount is subject to increase as provided herein. Each Warrant shall
entitle the holder thereof to purchase one share of Common Stock, subject to
adjustment as provided herein.
In consideration of the foregoing and of the agreements contained in the
Credit Agreement, and for the purpose of defining the terms and provisions of
the Warrants and Warrant Shares and the respective rights and obligations
thereunder of the Corporation and the Holder(s) (as defined herein), the
Corporation and NationsBank hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly provided:
(a) the terms defined in this Article 1 have the meanings assigned to them
in this Article, and include the plural as well as the singular; and
(b) the words "herein," "hereof" and "hereunder," and other words of
similar import, refer to this Agreement as a whole and not to any particular
article, section or other subdivision.
"Additional Warrants" has the meaning set forth in Section 3.1 hereof.
"Affiliate" means, as to any person, any other person which directly or
indirectly controls, or is under common control with, or is controlled by, such
person. For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "under common control with" and "controlled
by"), and as used with respect to any person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such person, whether through the ownership of voting
stock, by agreement or otherwise; provided, however, that beneficial ownership
of 5% or more of the voting stock of a person shall be deemed to be control.
"Appraised Market Value" shall mean the market value of the Common Stock as
agreed by the Corporation and the affected Holder(s) of the Warrants, or if the
Corporation and such Holder(s) cannot agree, as determined by a valuation by an
investment banking company suitable to the Corporation and such Holder(s). In
the event the parties cannot agree on an investment banking company to perform
the valuation described above, the Corporation and such Holder(s) shall each
select an investment banking company and the two investment banking companies so
selected shall select a third investment banking company which shall determine
the Appraised Market Value. In determining the Appraised Market Value of the
Common Stock, no discount shall be applied because the shares of Common Stock
<PAGE>
held by the holders thereof (a) have not been registered under the
Securities Act, or (b) represent a minority interest in the Corporation. The
fees and expenses of the investment banking company or companies shall be borne
by the Corporation.
"Board of Directors" means the board of directors of the Corporation.
"Board Resolution" means a copy of a resolution certified by the Secretary
or any Assistant Secretary of the Corporation to have been duly adopted by the
Board of Directors.
"Business Day" means any day which is not a Saturday, Sunday or a day on
which banking institutions in the States of New York and Florida are not
authorized or obligated by law, executive order, regulation or governmental
decree to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" has the meaning set forth in the preamble hereto.
"Corporation" has the meaning set forth in the preamble hereto.
"Credit Agreement" has the meaning set forth in the preamble hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Exercise Price" has the meaning set forth in Section 3.2 hereof.
"Expiration Date" means October 30, 2000.
"Holders" means the holders from time to time of the Warrants or Warrant
Shares issued upon exercise of the Warrants.
"Issue Date" means the date of the original issuance of the Warrants.
"Market Price" means the closing price of a share of Common Stock on the
principal national securities exchange (including the Nasdaq National Market) on
which the shares of Common Stock are listed or admitted to trading as reported
in The Wall Street Journal or, if not listed or admitted to trading on any
national securities exchange (including the Nasdaq National Market), the average
of the bid and asked prices in the over-the-counter market as furnished by
Nasdaq, or, if the shares of Common Stock are not publicly traded, the Appraised
Market Value.
"NationsBank" has the meaning set forth in the preamble hereto.
"Notes" has the meaning set forth in the preamble hereof.
"Private Placement Legend" means the legend in the form set forth in
Section 2.2 hereof.
"Registration Expenses" has the meaning set forth in Section 8.2 hereof.
"Registrable Securities" shall mean the Warrant Shares.
<PAGE>
"Rights" means rights, options or warrants for the purchase of, or
securities convertible into or exchangeable for, Common Stock.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Warrants" have the meaning set forth in the preamble hereto.
"Warrant Certificates" have the meaning set forth in Section 2.1 hereof.
"Warrant Shares" have the meaning set forth in the preamble hereto.
ARTICLE 2 ORIGINAL ISSUE OF WARRANTS
2.1 Form of Warrant Certificates. Any certificate representing the Warrants
(a "Warrant Certificate"), the form of which is attached hereto as Exhibit A,
shall be detachable from this Agreement, the Credit Agreement and any Notes and
shall be dated the date on which it is signed by a duly authorized officer of
the Corporation and shall have such insertions as are appropriate or required or
permitted by this Agreement and may have such letters, numbers or other marks of
identification as the Corporation may deem appropriate and as are not
inconsistent with the provisions of this Agreement.
2.2 Legend. Each Warrant Certificate and, until registered or an exemption
from registration is available, each certificate representing securities
acquired upon exercise of the Warrants shall bear the following legend on the
face thereof:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"). THE SECURITIES MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT.
2.3 Delivery of the Warrants.
This Agreement authorizes the initial issuance of 3,000,000 Warrants which
amount is subject to increase as provided in Section 3.1. On the Closing Date
(as defined in the Credit Agreement), the Corporation shall issue to NationsBank
in connection therewith (but detachable therefrom) a Warrant Certificate for
3,000,000 Warrants.
If Additional Warrants become authorized under Section 3.1, the Corporation
shall promptly issue and deliver to NationsBank a Warrant Certificate for the
Additional Warrants.
ARTICLE 3 EXERCISE OF WARRANTS
3.1 Exercise of Warrants; Increase in Warrants.
(a) Subject to the limitations and adjustments as provided herein, on or
before the Expiration Date, the Warrants may be exercised on any Business Day as
to all or any portion of the Warrant Shares for which the Warrants are then
exercisable as follows: (a) as of the date of this Agreement and the issuance of
the Warrant Certificate, the number of Warrants which may be exercised pursuant
to this Agreement, and the number of Warrant Shares issuable
<PAGE>
upon exercise of such Warrants, shall be 250,000; (b) in the event the
Corporation shall not have paid in full its Obligations (as defined in the
Credit Agreement) on or prior to January 27, 1998, the number of Warrants which
may be exercised pursuant to this Agreement, and the number of Warrant Shares
issuable upon exercise of such Warrants, shall be automatically increased to
1,000,000 effective as of January 27, 1998 unless the Corporation (i) shall have
furnished NationsBank a Plan (as defined in the Credit Agreement) and (ii) shall
be in receipt of not less than $300,000,000 of permanent capital [excluding
indebtedness] (over September 24, 1997 levels) on terms reasonably acceptable to
NationsBank; (c) in the event the Corporation shall not have paid in full its
Obligations (as defined in the Credit Agreement) (or if a binding commitment to
refinance and/or repay the obligations arising under the Credit Agreement does
not exist) on or prior to April 27, 1998, the number of Warrants which may be
exercised pursuant to this Agreement, and the number of Warrant Shares issuable
upon exercise of such Warrants, shall be automatically increased to 2,000,000
effective as of April 27, 1998; and (d) in the event the Corporation shall not
have paid in full its Obligations (as defined in the Credit Agreement) on or
prior to July 26, 1998, (or if a binding commitment to refinance and/or repay
the obligations arising under the Credit Agreement does not exist), the number
of Warrants which may be exercised pursuant to this Agreement, and the number of
Warrant Shares issuable upon exercise of such Warrants, will be automatically
increased to 3,000,000 effective as of July 26, 1998.
(b) If the Corporation shall not have paid in full its Obligations (as
defined in the Credit Agreement) on or prior to July 31, 1998, the number of
Warrants granted hereunder shall increase and the Holders shall be entitled to
immediately exercise and purchase under the terms of this Agreement an amount of
Warrant Shares equal to (x) 7.7% of all shares of Common Stock outstanding or
deemed outstanding on a fully diluted basis on July 31, 1998 less (y) 3,000,000
(the "Additional Warrants").
For purposes of calculating the number of shares of Common Stock
outstanding on July 31, 1998, the number of shares of Common Stock issuable in
connection with the exercise of conversion rights of the holders of (i) the
Corporation's Series A Preference shares (the "Series A Preference Shares") and
(ii) the Breed Capital Trust ____% Convertible Trust Preferred Securities (the
"Trust Preferred Securities") or if the Trust Preferred Securities have not been
issued then 4,000,000 shares of Common Stock issuable upon conversion of the
Corporation's Series B Preference Shares (the "Series B Preference Shares")
shall be deemed to be outstanding, whether or not such conversion rights are
then exercisable or have been exercised.
3.2 Exercise Price. Initially, the Warrant Certificates shall entitle the
Holders thereof, subject to the provisions of this Agreement, to purchase an
aggregate of 3,000,000 Warrant Shares at a per share purchase price (the
"Exercise Price") determined as follows, subject to adjustment as provided in
Article 4 hereof:
The Exercise Price for the 250,000 Warrant Shares exercisable as of the
date of this Agreement shall be $23.125. The Exercise Price for the remaining
Warrant Shares shall be the Market Price of the Common Stock on the day the
Warrants for such Warrant Shares become exercisable under the provisions of
Section 3.1.
The Exercise Price for any additional Warrant Shares to be subject to the
Additional Warrants shall be the Market Price of the Common Stock on July 31,
1998.
Once established for a number of Warrant Shares, the Exercise Price for
those shares shall not be adjusted by reason of any later increase in the total
number of Warrants which may be exercised by the Holders.
3.3 Restrictions on Exercise; Expiration. On or before the Expiration Date,
the Warrants may be exercised on any Business Day as to all or any portion of
the Warrant Shares. If any of the Warrants are not exercised by 5:00 p.m., New
York City time, on the Expiration Date, this Agreement and unexercised Warrants
shall expire and all rights of the Holders hereunder and thereunder shall
terminate unless otherwise provided herein or therein.
<PAGE>
3.4 Method of Exercise; Payment of Exercise Price.
(a) In order to exercise all or any of the Warrants, the Holder thereof
must provide written notice to the Corporation at its address set forth in
Section 9.4 hereof specifying the number of Warrants being exercised. Such
notice shall be accompanied by one or more Warrant Certificates representing not
less than the number of Warrants being exercised, together with payment in full
of the per share Exercise Price multiplied by the number of Warrant Shares to be
purchased pursuant to the exercise. The Exercise Price shall be payable, at the
option of the Holder, (i) by wire transfer, certified check, official bank check
or bank cashier's check payable to the order of the Corporation, or (ii) by the
surrender of Warrants exercisable for a number of shares having an aggregate
Market Price as of the date of surrender equal to the aggregate Exercise Price
of all Warrants covered thereby. If the number of Warrants being exercised is
less than the number of Warrants represented by the Warrant Certificate(s)
tendered in connection with the exercise, the Corporation shall issue new
Warrant Certificate(s) for the unexercised Warrants in accordance with
instructions contained in the notice of exercise and this Agreement.
(b) Upon exercise of any Warrant in conformity with the foregoing
provisions, the Corporation shall (i) transfer promptly to, or upon the written
order of the Holder of such Warrant, appropriate evidence of ownership of any
Warrant Shares or other securities or property (including money) to which it is
entitled, registered or otherwise placed in such name or names as may be
directed in writing by the Holder thereof, (ii) deliver such evidence of
ownership and any other securities or property (including money) to the person
or persons entitled to receive the same, and (iii) reissue, as the case may be,
a Warrant Certificate for any unexercised Warrants. A Warrant shall be deemed to
have been exercised immediately prior to the close of business on the date of
the surrender for exercise of the Warrant Certificate representing such Warrant
being exercised and, for all purposes of this Agreement, the person entitled to
receive any Warrant Shares or other securities or property deliverable upon such
exercise shall, as between such person and the Corporation, be deemed to be the
Holder of such Warrant Shares or other securities or property of record as of
the close of business on such date and shall be entitled to receive any Warrant
Shares or other securities or property (including money) to which such person
would have been entitled had such person been the record holder of such Warrant
Shares or other securities or property on such date.
3.5 Dividends and Distributions. For so long as any of the Warrants remain
outstanding and unexercised, the Corporation will, upon the declaration of a
cash dividend upon its Common Stock or other distribution to the holders of its
Common Stock (other than a dividend payable in shares of the Corporation's
Common Stock) and at least 20 days prior to the record date, notify the Holders
of such declaration, which notice will contain, at a minimum, the following
information: (i) the date of the declaration of the dividend or distribution,
(ii) the amount of such dividend or distribution, (iii) the record date of such
dividend or distribution, (iv) the payment date or distribution date of such
dividend or distribution, and (v) the Corporation's best estimate of the
frequency and amount of cash dividends or other distributions (other than a
dividend payable in shares of the Corporation's Common Stock) to be paid or made
in each of the succeeding three years.
ARTICLE 4 ADJUSTMENTS
4.1 Adjustments. The Exercise Price and the number of Warrant Shares
issuable upon exercise of each Warrant shall be subject to adjustment from time
to time as follows:
(a) Adjustments for Change in Common Stock. If the Corporation at any time
after the date hereof (i) declares a dividend payable in shares of the
Corporation's Common Stock, (ii) subdivides its outstanding shares of Common
Stock into a larger number of shares or (iii) combines its outstanding shares of
Common Stock into a smaller number of shares, the number and kind of Warrant
Shares issuable upon exercise of each Warrant, at the time of the record date
for such dividend or of the effective date of such subdivision or combination
shall be proportionately adjusted so that the Holder of any Warrant exercised
after such time shall be entitled to receive the
<PAGE>
aggregate number and kind of shares of Common Stock which, if such Warrant
had been exercised immediately prior to such date, such Holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision or combination. An adjustment made pursuant to this Section 4.1(a)
shall become effective immediately after the effective date of such subdivision
or combination. Such adjustment shall be made successively whenever any such
event shall occur.
If at any time, as a result of an adjustment made pursuant to this Section
4.1(a), the Holder of any Warrant thereafter exercised becomes entitled to
receive any securities other than shares of Common Stock, the number of such
other securities so receivable upon exercise of such Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Warrant Shares contained in
this Section 4.1, and the provisions of this Agreement with respect to the
Warrant Shares shall apply on like terms to any such other securities.
(b) De Minimis Adjustments. No adjustment in the Exercise Price or number
of Warrant Shares purchasable upon exercise of any Warrant pursuant to this
Section 4.1 or Section 4.2 below shall be required unless such adjustment would
require an increase or decrease of at least one-tenth of one percent in the
Exercise Price or number of Warrant Shares purchasable upon the exercise of each
Warrant, as the case may be; provided, however, that any adjustments which by
reason of this Section 4.1(b) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
(c) Adjustment of Exercise Price. Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant is adjusted, as herein provided,
the Exercise Price per Warrant Share payable upon exercise of each Warrant shall
be adjusted (calculated to the nearest $.0001) so that it shall equal the price
determined by multiplying such Exercise Price immediately prior to such
adjustment by a fraction, the numerator of which shall be the number of shares
purchasable upon the exercise of each Warrant immediately prior to such
adjustment, and the denominator of which shall be the number of shares so
purchasable immediately thereafter.
(d) Consolidation, Merger or Sale of Assets; Liquidation.
(i) Subject to the provisions of Section 4.1(d)(ii) below, in the event
that, at any time after the date of this Agreement, the Corporation consolidates
with, merges with or into, or sells, transfers or otherwise disposes of all or
substantially all of its property and assets to, any person, and in connection
therewith consideration is payable to holders of shares of Common Stock, the
Warrants shall remain subject to the terms and conditions set forth in this
Agreement and each Warrant shall, after such consolidation, merger or sale,
entitle the Holder thereof to receive, upon exercise, the number of shares of
capital stock or other securities or property (including cash) of the
Corporation, or of such person resulting from such consolidation or surviving
such merger or to which such sale shall be made, that would have been
distributable or payable on account of the shares of Common Stock (or other
securities or property purchasable upon exercise of the Warrants) if the
Warrants had been exercised immediately prior to such merger, consolidation or
sale (or, if applicable, any record date therefor); and, in any such case, the
provisions of this Agreement with respect to the rights and interests thereafter
of the Holders shall be appropriately adjusted by the Board of Directors, in
good faith, as evidenced by a Board Resolution, so as to be applicable, as
nearly as reasonably possible, to any shares of stock or other securities or any
property thereafter deliverable on the exercise of the Warrants.
(ii) Notwithstanding the provisions of Section 4.1(d)(i) above, (A) if the
Corporation consolidates with, merges with or into, or sells all or
substantially all of its property and assets to, any person, and consideration
is payable to holders of shares of Common Stock in exchange for their shares of
Common Stock in connection with such merger, consolidation or sale which
consists solely of cash, or (B) in the event of the dissolution, liquidation or
winding-up of the Corporation, then the Holders shall receive per share
distributions at the same time and on an equal basis with holders of shares of
Common Stock (or other
<PAGE>
securities or property purchasable upon exercise of the Warrants) as if the
Warrants had been exercised immediately prior to such event (or, if applicable,
any record date therefor), less the per share Exercise Price. Upon receipt of
such payment, with respect to the Warrants in respect of which such payment was
received, the rights of the Holders shall terminate except as expressly provided
herein or in the Warrant Certificate and such Warrants shall expire. The Holders
shall promptly deliver such Warrant Certificates to the Corporation for
cancellation. In the case of any such merger, consolidation or sale of assets,
the surviving or acquiring person or, in the event of any dissolution,
liquidation or winding up of the Corporation, the Corporation, shall deposit
promptly on behalf of the Holders the funds, if any, necessary to pay the
Holders pursuant to this Section 4.1(d)(ii).
(e) Adjustments by Board. In addition to the foregoing adjustments, the
Board of Directors may make any other adjustment to increase the number of
Warrant Shares purchasable upon exercise of Warrants or to decrease the Exercise
Price as it may, in good faith, deem desirable to protect the rights and
benefits of the Holders hereunder.
(f) Further Adjustments. If a state of facts shall occur which, without
being specifically controlled by the provisions of this Section 4.1, would not
fairly protect the exercise rights of the Holders in accordance with the
essential intent and principles of such provisions, then the Board of Directors
of the Corporation shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such exercise rights.
4.2 Below Market Price Issuances.
(a) Subject to the provisions of Section 4.2(g) below, if the Corporation
shall issue (other than as provided in Section 4.1) or sell any shares of Common
Stock for a consideration per share less than the Market Price, then at the time
of such issuance or sale the Exercise Price shall be appropriately adjusted to
the number determined by multiplying the Exercise Price in effect immediately
prior to such issuance or sale by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding, whether issued or issuable
upon conversion or exercise, immediately prior to the issuance or sale of such
shares of Common Stock plus the number of such shares of Common Stock which the
aggregate consideration for such additional shares of Common Stock so issued or
sold would purchase at a consideration per share equal to the Market Price, and
the denominator of which shall be the number of shares of Common Stock
outstanding, whether issued or issuable upon conversion or exercise, immediately
prior to the issuance or sale of such shares of Common Stock plus the number of
shares of Common Stock so issued or sold.
(b) If the Corporation shall issue (other than as provided in Section 4.1)
or sell any Rights, and the consideration per share for which shares of Common
Stock may at any time thereafter be issuable pursuant to such Rights (when added
to the consideration per share of Common Stock, if any, received for such
Rights) shall be less than the Market Price, then the Exercise Price shall be
appropriately adjusted by the number determined by multiplying the Exercise
Price in effect immediately prior to such issuance or sale by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding,
whether issued or issuable upon conversion or exercise, immediately prior to the
issuance or sale of such Rights plus the number of additional shares of Common
Stock which the aggregate offering price of the total number of shares of Common
Stock so offered (when added to the consideration per share of Common Stock, if
any, received for such Rights) would purchase at the Market Price, and the
denominator of which shall be the number of shares of Common Stock outstanding,
whether issued or issuable upon conversion or exercise, immediately prior to the
issuance or sale of such Rights plus the number of additional shares of Common
Stock issuable upon exercise of such Rights.
(c) For the purposes of this Section 4.2, the date as of which the Market
Price shall be computed shall be the date of the issuance or sale of such shares
of Common Stock or Rights.
<PAGE>
(d) No adjustment of the Exercise Price shall be made under this Section
4.2 upon the issuance of any shares of Common Stock which are issued pursuant to
the exercise of any Rights, if such adjustment shall previously have been made
upon the issuance of such Rights pursuant to this Section 4.2.
(e) If Rights (or any portion thereof) which shall have given rise to an
adjustment pursuant to this Section 4.2 shall have expired or terminated without
the exercise thereof, or if by reason of the terms of such Rights there shall
have been an increase or increases, with the passage of time or otherwise, in
the exercise or conversion price thereof, then the Exercise Price hereunder
shall be readjusted (but to no greater extent than originally adjusted) on the
basis of (i) eliminating from the computation of any shares of Common Stock
attributable to such Rights as shall have expired or terminated, and (ii)
treating the shares of Common Stock, if any, actually issued pursuant to the
previous exercise of such Rights as having been issued for the consideration
actually received and receivable therefor.
(f) (i) In any such case covered by this Section 4.2, in determining the
amount of consideration received by the Corporation for the Common Stock or
Rights if the consideration is in whole or in part consideration other than
cash, the amount of the consideration shall be deemed to be the fair value of
such consideration as reasonably determined by the Board of Directors of the
Corporation. If shares of Common Stock shall be issued as part of a unit with
Rights, then the amount of consideration for the Rights shall be deemed to be
the amount reasonably determined by the Board of Directors of the Corporation;
and (ii) in case any shares of Common Stock or Rights shall be issued in
connection with any merger or consolidation in which the Corporation is the
surviving corporation, the amount of consideration therefor shall be deemed to
be the fair value, as reasonably determined by the Board of Directors of the
Corporation, of such portion of the assets and business of the nonsurviving
corporation or corporations as the Board shall determine to be attributable to
such shares of Common Stock or Rights.
(g) Notwithstanding the foregoing provisions of this Section 4.2, the
provisions of this Section 4.2 shall not apply to (i) any issuance or sale of
Common Stock or Rights to any employee or other person providing services to the
Corporation as an element of such individual's compensation, (ii) any issuance
or sale of Common Stock in connection with any merger or consolidation or the
acquisition of the assets (other than cash or cash equivalents) of a person or
entity, (iii) the issuance or sale of Common Stock based upon the average
closing price of a share of Common Stock over a period not to exceed 30 trading
days and the average price so obtained is less than the Market Price on the date
of the issuance or sale of such shares of Common Stock, or (iv) any issuance or
sale of any Common Stock issuable upon the exercise of the Warrants or the
warrants issued pursuant to this Warrant Agreement.
(h) For purposes of this Section 4.2, that number of shares of Common Stock
issuable to (i) holders of Series A Preference Shares in excess of 4,883,227
shares, (ii) holders of Trust Preferred Securities in excess of the number of
shares of Common Stock initially issuable to such holders as at the date such
Trust Preferred Securities are issued and (iii) Series B Preference Shares in
excess of 4,000,000 shares shall be deemed to be shares issuable pursuant to
Rights for a consideration less than the Market Price.
4.3 Notice of Adjustment. Whenever the number of Warrant Shares or other
securities or property purchasable upon the exercise of each Warrant or the
Exercise Price is adjusted, as herein provided, the Corporation shall promptly
mail to the Holders a notice of such adjustment or adjustments, and shall
deliver to the Holders a certificate of a firm of independent public accountants
selected by the Board of Directors (who may be the regular accountants employed
by the Corporation) setting forth (i) the number of Warrant Shares or other
securities or property purchasable upon the exercise of each Warrant and the
Exercise Price after such adjustment, (ii) a brief statement of the facts
requiring such adjustment, and (iii) the computation by which such adjustment
was made.
4.4 Statements in the Warrants. Notwithstanding any adjustment in the
Exercise Price or the number or kind of Warrant Shares purchasable upon the
exercise of the Warrants, the Warrant Certificates theretofore or thereafter
issued may continue to express the same price and number and kind of shares as
are stated in the Warrant Certificate initially issued pursuant to this
Agreement.
<PAGE>
4.5 Notice of Consolidation, Merger or Sale of Assets. In the event that,
at any time after the date of this Agreement, and prior to 5:00 p.m., New York
City time, on the Expiration Date, there shall be any (a) consolidation or
merger involving the Corporation, or sale, transfer or other disposition of all
or substantially all of the Corporation's property and assets (except a merger
or other reorganization in which the Corporation shall be the surviving
corporation and holders of shares of Common Stock (or other securities or
property purchasable upon exercise of the Warrants) receive no consideration in
respect of their shares or property) or (b) any other transaction contemplated
by Section 4.1(d)(ii) above, then in any such case, the Corporation shall cause
to be mailed to the Holders, at the earliest practicable time (and, in any
event, not later than the later of (i) the date the proxy materials (if any) are
first distributed (or other notice is first given) to the Corporation's
shareholders regarding the proposed transaction, or (ii) 20 days before the
effective date (or record date, if earlier) of such proposed transaction),
notice of the date on which such reorganization, sale, consolidation, merger,
dissolution, liquidation or winding up or other such transaction shall take
place, as the case may be. Such notice shall also set forth such facts as shall
indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the Exercise Price and the kind and amount of
securities and property purchasable upon exercise of the Warrants. Such notice
shall also specify the date as of which the holders of record of the shares of
Common Stock or other securities or property purchasable upon exercise of the
Warrants shall be entitled to exchange their shares or other securities or
property for securities, money or other property deliverable upon such
reorganization, sale, consolidation, merger, dissolution, liquidation or winding
up or other such transaction, as the case may be.
4.6 Fractional Interests. In computing adjustments under this Article 4,
fractional interests in Common Stock shall be taken into account to the nearest
one-thousandth of a share. No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issued upon any exercise
of the Warrants, but, in lieu thereof, there shall be paid an amount in cash
equal to the same fraction of the Market Price of a whole share of Common Stock
on the business day preceding the day of exercise.
4.7 No Dilution or Impairment. The Corporation shall not amend its
Certificate of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times, in good faith, assist in
carrying out all such actions as may be reasonably necessary or appropriate in
order to protect the rights of the holders of the Warrants against dilution or
other impairment.
ARTICLE 5 RESERVATION AND AUTHORIZATION OF COMMON SHARES, ETC.
5.1 Reservation and Authorization. The Corporation hereby represents and
warrants that it has reserved, and shall at all times hereafter reserve and keep
available, for issuance upon exercise of the Warrants such number of its duly
authorized but unissued shares of Common Stock or other securities of the
Corporation purchasable upon exercise of the Warrants as will be sufficient to
permit the exercise in full of all outstanding Warrants and will cause
appropriate evidence of ownership of such shares of Common Stock or other
securities to be delivered to the Holders of the Warrants upon their request for
delivery of such, and shall take such action as shall be necessary so that all
such shares of Common Stock or other securities shall, at all times, be duly
approved for listing, subject to official notice of issuance, on each securities
exchange, if any, on which such shares of Common Stock or other securities are
then listed.
5.2 Covenant Regarding Securities. The Corporation covenants that all
shares of Common Stock or other securities of the Corporation that may be issued
upon the exercise of the Warrants will, upon issuance, be (a) duly authorized,
validly issued, fully paid and nonassessable, (b) free from preemptive and any
other similar rights and (c) free from any taxes, liens, charges or security
interest with respect thereto.
<PAGE>
5.3 Registration. If the Warrant Shares or any securities of the
Corporation issuable upon the exercise of the Warrants require registration
with, or approval of, any governmental authority (in addition to such as the
Corporation is required to obtain pursuant to Article 8 hereof), or the taking
of any other action (in addition to such as the Corporation is required to
obtain pursuant to Article 8 hereof), under the laws of the United States of
America or any state or political subdivision thereof, before such securities
may be validly offered or sold in compliance with such laws, then the
Corporation covenants that at its expense it will, in good faith and as
expeditiously as practicable, endeavor to secure and maintain such registration
or approval or to take such other action, as the case may be; provided, however,
that the Corporation will not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process or to taxation in any such
jurisdiction where it is not then so subject.
5.4 S-3 Eligibility. The Corporation has represented to NationsBank that it
is currently eligible to register its securities for resale on Form S-3 under
the provisions of the Securities Act and hereby covenants that it will take all
action appropriate to maintain such eligibility at all times during the term of
this Agreement.
ARTICLE 6 WARRANT TRANSFER BOOKS: RESTRICTIONS ON TRANSFER
6.1 Transfer and Exchange.
(a) The Corporation shall keep and maintain at its office a register in
which, subject to such reasonable regulations as it may prescribe, the
Corporation shall provide for the registration of the Warrant Certificates on
the Corporation's records and transfers or exchanges of the Warrant Certificates
as herein provided.
(b) The Holders may transfer a Warrant Certificate by written notice to the
Corporation stating the name of the proposed transferee and otherwise complying
with the terms of this Agreement.
(c) Subject to Section 6.2(a) hereof, when a Warrant Certificate is
presented to the Corporation with a request to register the transfer of such
Warrant Certificate, the Corporation shall register the transfer or make the
exchange as requested if its requirements for such transactions and any
applicable requirements hereunder are satisfied. To permit registrations of
transfers and exchanges, the Corporation shall execute and deliver such Warrant
Certificate in accordance with the provisions hereof. No service charge shall be
made for any registration of transfer or exchange of the Warrants.
(d) Any Warrant Certificate when duly endorsed in blank shall be deemed
negotiable. The Holder of a Warrant Certificate duly endorsed in blank may be
treated by the Corporation and all other persons dealing therewith as the
absolute owner thereof for any purpose and as the person entitled to exercise
the rights represented thereby, any notice to the contrary notwithstanding; but
until such transfer on such register, the Corporation may treat the registered
Holder thereof as the owner for all purposes.
6.2 Special Transfer Provisions.
(a) By its acceptance of the Warrants represented by a Warrant Certificate
bearing the Private Placement Legend, each Holder of the Warrants acknowledges
the restrictions on transfer of the Warrants and Warrant Shares and agrees that
it will transfer the Warrants and Warrant Shares only in accordance with those
restrictions.
(b) Upon the transfer, exchange or replacement of a Warrant Certificate or
certificate representing Warrant Shares not bearing the Private Placement
Legend, the Corporation shall deliver a Warrant Certificate or stock certificate
that does not bear the Private Placement Legend. Upon the transfer, exchange or
replacement of a Warrant Certificate or certificate representing Warrant Shares
bearing the Private Placement Legend, the Corporation shall
<PAGE>
deliver such Warrant Certificate or stock certificate bearing the Private
Placement Legend, unless such legend may be removed from a Warrant Certificate
or stock certificate as provided in the next sentence. The Private Placement
Legend may be removed from a Warrant Certificate or stock certificate if there
is delivered to the Corporation evidence satisfactory to the Corporation to
confirm that neither such legend nor the restrictions on transfer set forth
therein are required to ensure that transfers of such security will not violate
the registration and prospectus delivery requirements of the Securities Act or
applicable law; provided, however, that the Corporation shall not be required to
determine the sufficiency of any such evidence.
6.3 Surrender of a Warrant Certificate. Any Warrant Certificate surrendered
for registration of transfer, exchange or exercise of the Warrants represented
thereby shall be promptly canceled by the Corporation and shall not be reissued
by the Corporation and, except in case of mutilation or partial exercise of the
Warrants represented by such Warrant Certificate, no Warrant Certificate shall
be issued hereunder in lieu thereof.
ARTICLE 7 OPTIONS
7.1 Option to Redeem Warrants. The Corporation shall have the right to
redeem for cash all, but not less than all, outstanding exercisable Warrants and
Warrant Shares held by the Holders by the delivery of a notice of purchase not
less than 20 nor more than 45 days prior to the specified purchase date. The
purchase price per Warrant or Warrant Share shall be an amount equal to the
greater of (a) 135% of the Exercise Price (net of the respective Exercise Price)
or (b) the higher of the Market Price on the date of giving of notice and the
Business Day immediately preceding the specified closing date for such purchase.
ARTICLE 8 REGISTRATION RIGHTS
8.1 Registration by the Corporation. If at any time the Corporation
proposes to register any of its Common Stock under the Securities Act, whether
or not for sale for its own account (except with respect to registration
statements filed on Form S-4 or Form S-8 or any successor forms thereto), it
will give written notice to each Holder, at such Holder's address as it shall
appear upon the Warrant register, of its intention so to do. Upon the written
request of the Holders of not less than 50% of the Warrant Shares, given within
20 days after receipt of the Corporation's notice, the Corporation will use its
best efforts to cause all or a part of the Registrable Securities (in accordance
with the request of the Holders) to be included in the securities to be covered
by the registration statement proposed to be filed by the Corporation. The
Corporation shall not be required to include any Registrable Securities in such
registration statement unless the Holder thereof accepts the terms of the
underwriting as agreed upon between the Corporation (or other persons who have
the right to agree upon the underwriting terms relating to the offering) and the
underwriter(s) selected by the Corporation (or other persons who have the right
to select such underwriter). Notwithstanding any other provision of this Article
8, if the underwriter of such registration advises the Corporation in writing
with a copy to the Holders that marketing factors require a limitation of the
number of shares of Registrable Securities to be underwritten, the Corporation
shall so advise all Holders, and the number of securities including Registrable
Securities that may be included in such registration shall be apportioned pro
rata based on the number of shares requested to be included in such registration
by the Holders and by all other holders of securities participating in such
registration, including the holders of the Preference Shares and the Trust
Preferred Securities and the Common Stock related thereto (other than the
Corporation). The Corporation may, in its sole discretion and without the
consent of the Holders, withdraw any such registration statement and abandon the
proposed offering in which the Holders shall have requested to participate
pursuant to this Section 8.1.
8.2 Registration Procedures and Expenses.
(a) In connection with any registration of Registrable Securities under
this Article 8, the Holders of said
<PAGE>
Registrable Securities will furnish in writing such information as is
reasonably requested by the Corporation or its underwriter or underwriters for
inclusion in the registration statement relating to such offering and such other
information and documentation as the Corporation or its underwriter or
underwriters may reasonably request and the Holders hereby agree to comply with
all requirements of the Securities Act or other laws applicable to them in
connection with the offer, sale, underwriting and distribution of its respective
Registrable Securities. The Holders participating in such registration shall not
be required to make any representations or warranties to or agreement with the
Corporation or the underwriters other than those relating to the Holder, its
Registrable Securities and information provided by it in writing for use in the
registration statement. In connection with the registration, the Corporation
will, as expeditiously as possible:
(i) take all actions, supply information and use its best efforts to obtain
all legal opinions, auditors' consents and comfort letters and experts'
computations that may be necessary or desirable to complete the registration
process;
(ii) furnish, at the request of the Holders, on the date that all or any
part of such Registrable Securities is delivered to the underwriters for sale
pursuant to such registration, an opinion dated such date of independent counsel
representing the Corporation for the purposes of such registration, addressed to
the Holders making such request, with respect to such legal matters relating to
the registration in connection with which such opinion is being given in the
same form mutatis, mutandis, as the opinion of such counsel given to
underwriters; and
(iii) notify the Holders of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(b) All expenses incurred by the Corporation in complying with this Article
8, including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Corporation, auditors' fees
and blue sky fees and expenses ("Registration Expenses"), except for all
underwriting discounts and selling commissions applicable to the sales of the
Holders' Registrable Securities being included in the subject offering and all
fees and disbursements of counsel for the Holders of Registrable Securities
(including counsel designated by any such seller for a "due diligence"
investigation of the Corporation) shall be borne by the Corporation.
8.3 Indemnification.
(a) In the event of a registration of any of the Registrable Securities
under the Securities Act or under any state securities laws pursuant to this
Article 8, the Corporation will indemnify and hold harmless the sellers of such
Registrable Securities, each underwriter of such Registrable Securities, the
Holders and the transferors of the Registrable Securities or any portion thereof
to underwriters, and each other person, if any, who controls such seller,
transferor or underwriter within the meaning of Section 15 of the Securities Act
(each, an "Indemnified Party"), against any and all losses, claims, damages or
liabilities, joint or several, to which such seller, underwriter, Holder,
transferor or controlling person may become subject under the Securities Act and
under any state securities laws (or any successor law) or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which such
Registrable Securities shall have been registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and the Corporation
will reimburse such Indemnified Party
<PAGE>
for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Corporation will not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, said
preliminary prospectus or said prospectus or said amendment or supplement in
reliance upon and in conformity with written information furnished to the
Corporation through an instrument executed by such Indemnified Party
specifically for inclusion in such registration statement, preliminary
prospectus, final prospectus, amendment or supplement thereto. Notwithstanding
the foregoing, the liability of any such Holder shall not exceed an amount equal
to the proceeds realized by each such Holder of Registrable Securities sold as
contemplated herein.
(b) In the event of any registration of any Registrable Securities under
the Securities Act pursuant to this Article 8, each seller of such Registrable
Securities (other than any underwriter or dealer purchasing Warrant Shares), and
the holder of the Warrants, as transferors of Registrable Securities, jointly
and severally, will indemnify and hold harmless the Corporation, each person, if
any, who controls the Corporation within the meaning of Section 15 of the
Securities Act, each officer of the Corporation who signs the registration
statement and each director of the Corporation against any and all such losses,
claims, damages, or liabilities arising out of or based upon any untrue
statement or alleged untrue statement in or omission or alleged omission from
any such registration statement, prospectus, amendment or supplement, if the
untrue statement or omission or alleged untrue statement or omission in respect
of which such loss, claim, damage or liability is asserted was made in reliance
upon and in conformity with information furnished in writing to the Corporation
by or on behalf of such seller or transferor specifically for inclusion in such
registration statement, preliminary prospectus, final prospectus, amendment or
supplement thereto; and such seller or transferor will reimburse the Corporation
or such indemnified party for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that, if any losses,
claims, damages or liabilities arise out of or are based upon an untrue
statement, alleged untrue statement, omission or alleged omission contained in
any preliminary prospectus which did not appear in the final prospectus, such
seller or transferor shall not have any such liability with respect thereto to
the Corporation, any person who controls the Corporation within the meaning of
Section 15 of the Securities Act, any officer of the Corporation who signed the
registration statement or any director of the Corporation if the Corporation or
any person on their behalf delivered a copy of the preliminary prospectus to the
person alleging such losses, claims, damages or liabilities and failed to
deliver a copy of the final prospectus, as amended or supplemented if it has
been amended or supplemented, to such person at or prior to the written
confirmation of the sale to such person.
(c) Payments in respect of indemnifications required by this Section 8.3
shall be made by periodic payments during the course of the investigation or
defense, as and when bills are received or expenses incurred. Any party which
proposes to assert the right to be indemnified under this Section 8.3 will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim is to be made against
an indemnifying party under this Section 8.3, notify each such indemnifying
party of the commencement of such action, suit or proceeding, enclosing a copy
of all papers served, but the omission so to notify such indemnifying party of
any such action, suit or proceeding shall not relieve it from any liability
which it may have to any indemnified party otherwise than under this Section
8.3. In case any such action, suit or proceeding shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in, and, to the
extent that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof with counsel reasonably satisfactory to
such indemnified party, and after notice from such indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof except as provided in the next sentence. The
indemnified party shall have the right to employ its own counsel in any such
action, but the fees and expenses of such counsel shall be at the expense of
such indemnified party, when and as incurred, unless (i) the employment of
counsel by such indemnified party has been authorized by the indemnifying party,
(ii) the
<PAGE>
indemnified party shall have received a written opinion from independent
counsel that there may be a conflict of interest between the indemnifying party
and the indemnified party in the conduct of the defense of such action (in which
case the indemnifying party shall not have the right to direct the defense of
such action on behalf of the indemnified party) or (iii) the indemnifying party
shall not in fact have employed counsel to assume the defense of such action. An
indemnifying party shall not be liable for any settlement of any action or claim
effected without its consent. In no event shall an indemnifying party be
required to pay for more than one counsel for an indemnified party, exclusive of
local counsel.
8.4 Conflicting Rights. The Corporation shall not, without the prior
written consent of the Holders of not less than 50% of the Warrant or Warrant
Shares (assuming exercise of all Warrants), grant any rights to any persons to
register any shares of capital stock or other securities of the Corporation if
such right is senior to the rights of the Holders hereunder.
8.5 Termination. The registration rights granted under this Article 8 shall
terminate with respect to any Holder on the date on which the Holder may sell
the Warrants or Warrant Shares without restriction pursuant to Rule 144(k)
promulgated under the Securities Act.
8.6 Registration on Form S-3. At any time prior to two years after the
Expiration Date, the Holder shall have the unlimited right (but no more
frequently than once each six months) to require the Corporation to promptly
register the Warrant Shares on Form S-3. The Corporation will include in the
Form S-3 Registration Statement such information as any underwriters may
reasonably request for marketing reasons. If at the time of sale, only Warrant
Shares are being offered, any underwriters selected in connection with such sale
shall be acceptable to the Selling Holders. The Corporation shall keep the
Holder advised of the initiation of such registration and its effectiveness and
shall take all steps appropriate to maintain such effectiveness for a period of
24 months.
ARTICLE 9 MISCELLANEOUS
9.1 Loss or Mutilation. Upon receipt by the Corporation of (a) evidence
satisfactory to it of the ownership, and the loss, theft, destruction or
mutilation, of any Warrant Certificate and (b) of indemnity satisfactory to it
or, in the case of mutilation, upon surrender and cancellation of the mutilated
Warrant Certificate, then, the Corporation shall execute and deliver to the
registered Holder of the lost, stolen, destroyed or mutilated Warrant
Certificate, in exchange for or in lieu thereof, a new Warrant Certificate of
the same tenor and for a like aggregate number of Warrant Shares. Upon the
issuance of any new Warrant Certificate under this Section 9.1, the Corporation
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and other expenses
in connection therewith. Every new Warrant Certificate executed and delivered
pursuant to this Section in lieu of any lost, stolen or destroyed Warrant
Certificate shall constitute a contractual obligation of the Corporation,
whether or not the allegedly lost, stolen or destroyed Warrant Certificate shall
be at any time enforceable by anyone, and shall be entitled to the benefits of
this Agreement. The provisions of this Section 9.1 are exclusive and shall
preclude (to the extent lawful) all other rights or remedies with respect to the
replacement of the mutilated, lost, stolen, or destroyed Warrant Certificate.
9.2 Payment of Taxes. The Corporation shall pay any taxes and other
governmental charges that may be imposed under the laws of the United States of
America or any political subdivision or taxing authority thereof or therein in
respect of the issue or delivery of Warrant Shares or of other securities or
property deliverable upon exercise of the Warrants (other than income taxes
imposed on the Holders). The Corporation shall not be required, however, to pay
any tax or other charge imposed in connection with any transfer involved in the
issue of any certificate for Warrant Shares or other securities or property
issuable upon the exercise of the Warrants or payment of cash to any person
other than the Holder of a Warrant Certificate surrendered upon exercise of the
Warrants and in case of such transfer or payment, the Corporation shall not be
required to issue any stock certificate or pay any cash
<PAGE>
until such tax or charge has been paid or it has been established to the
Corporation's satisfaction that no such tax or charge is due.
9.3 No Merger, Consolidation or Sale of Assets or the Corporation. Except
as otherwise provided herein, the Corporation will not merge into or consolidate
with any other person, or sell or otherwise transfer its property, assets and
business substantially as an entirety to a successor of the Corporation, unless
the person resulting from such merger or consolidation, or such successor of the
Corporation, shall expressly assume, by supplemental agreement satisfactory in
form to the Holders and executed and delivered to the Holders, the due and
punctual performance and observance of each and every covenant and condition of
this Agreement to be performed and observed by the Corporation.
9.4 Notices. Any notice, demand or delivery authorized by this Agreement
shall be in writing and shall be delivered by hand or overnight courier service,
mailed or set by facsimile as follows:
To the Corporation:
BREED Technologies, Inc.
5300 Old Tampa Highway
Lakeland, Florida 33811
Attention: General Counsel
Telephone No. 941-668-6000
To NationsBank:
NationsBank, N.A.
400 N. Ashley Drive, 2nd Floor
Tampa, Florida 33602
Attention: Global Finance
Telecopy: (813) 224-5948
Attention: Joseph J. Troy
With a copy to:
NationsBank, N.A.
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Telecopy: (704) 386-9923
or such other address or telecopy number as shall have been furnished to
the party giving or making such notice, demand or delivery. Any notice that is
sent in a manner provided herein shall have been duly given when sent.
9.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT GIVING EFFECT TO
CONFLICTS OF LAW PRINCIPLES THEREOF.
9.6 Assignment; Successors. Subject to Section 6.2(a) hereof, this
Agreement may be assigned by NationsBank to any Affiliate at any time upon
written notice. This Agreement shall be binding upon and inure to the benefit of
the Corporation and the Holders and their respective successors and assigns, and
the Holders from time to time of the
<PAGE>
Warrants. Nothing in this Agreement is intended or shall be construed to
confer upon any person, other than the Corporation, and the Holders, any right,
remedy or claim under or by reason of this Agreement or any part hereof.
9.7 Counterparts. This Agreement may be executed manually or by facsimile
in any number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
9.8 Amendments. Any provision of this Agreement or the Warrant Certificate
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed by the Corporation and the Holders of a majority in interest of
the issued or issuable Warrant Shares; provided, however, if any amendment
adversely affects the Exercise Price or the number of Warrant Shares issued upon
exercise of any Warrant, then the Holders of all the issued or issuable Warrant
Shares must sign the amendment.
9.9 Headings. The descriptive headings of the several Sections of this
Agreement are inserted for convenience only and shall not control or affect the
meaning or construction of any of the provisions hereof.
9.10 Third Party Beneficiaries. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Corporation, on the
one hand, and NationsBank, on the other hand, and the Holders shall have the
right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of the
Holder hereunder.
9.11 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.
9.12 No Inconsistent Agreements. Except as provided in Section 8.4, the
Corporation has not, as of the date hereof, entered into, nor shall it, on or
after the date hereof, enter into, any agreement that is inconsistent with the
rights granted to the Holders herein or that otherwise conflicts with the
provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, as of the date first above written
BREED TECHNOLOGIES, INC.
By:
Name:
Title:
NATIONSBANK, N.A.
By:
Name: Miles C. Dearden III
Title:Senior Vice President
<PAGE>
EXHIBIT A
WARRANT CERTIFICATE
THE WARRANTS EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE"SECURITIES ACT"). THE WARRANTS MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE WARRANTS UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
No. 1
Warrants to purchase an aggregate of __________shares of Common Stock
WARRANT TO PURCHASE COMMON STOCK
This certifies that _______________________ (the "Holder") or its assigns,
is the owner of ___________________ Warrants to purchase shares of Common Stock
("Common Stock") of BREED Technologies, Inc. (the "Corporation"). Each Warrant
initially entitles the holder thereof (the "Holder") to purchase from the
Corporation one share of Common Stock at the purchase price (the "Exercise
Price") set forth in the Agreement (as defined below), subject to the terms and
conditions hereof and of the Agreement. In order to exercise the Warrants
represented by this Warrant Certificate, the registered Holder hereof must
surrender this Warrant Certificate at the office of Corporation as set forth in
the Agreement or to its successor.
This Warrant Certificate is issued under and in accordance with a Warrant
Agreement dated October __, 1997 by and between NationsBank, N.A. and the
Corporation (the "Agreement"), and is subject to the terms and provisions
contained therein, to all of which terms and provisions the Holder of this
Warrant Certificate consents by acceptance hereof. The Agreement is hereby
incorporated herein by reference and made a part hereof. Reference is hereby
made to the Agreement for a full description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Corporation and the
Holder of the Warrants. The summary or the terms of the Agreement contained in
this Warrant Certificate is qualified in its entirety by express reference to
the Agreement. All terms used in this Warrant Certificate that are defined in
the Agreement shall have the meanings assigned to them in the Agreement.
Copies of the Agreement are on file at the office of the Corporation and
may be obtained by writing to the Corporation requesting the same.
The number of shares of Common Stock purchasable upon the exercise of the
Warrants and the Exercise Price are subject to adjustment as provided in the
Agreement.
In the event the Corporation merges or consolidates with, or sells all or
substantially all of its assets to, another person, the Holder of the Warrants
will, upon exercise, be entitled to receive the number of shares of stock or
other securities or the amount of money or other property to be received by
holders on Common Stock on an equal basis with holders of Common Stock, as if
the Warrants had been exercised immediately prior to such transaction.
All shares of Common Stock issuable by the Corporation upon the exercise of
the Warrants shall be validly issued, fully paid and nonassessable. The
Corporation shall pay any taxes and other governmental charges that may be
imposed under the laws of the United States of America or any political
subdivision or taxing authority thereof or therein in respect of the issue or
delivery of the Warrant Shares or of other securities or property deliverable
upon exercise of the Warrants (other than income taxes imposed on the Holder).
The Corporation shall not be required, however, to pay any tax or other charge
imposed in connection with any transfer involved in the issue of any
<PAGE>
certificate for Warrant Shares or other securities or property issuable
upon the exercise of the Warrants or payment of cash to any person other than
the Holder of a Warrant Certificate surrendered upon exercise of a Warrant and,
in case of such transfer or payment, the Corporation shall not be required to
issue any stock certificate or pay any cash until such tax or charge has been
paid or it has been established to the Corporation's satisfaction that no such
tax or charge is due.
Subject to the requirements set forth in the Agreement and the restrictions
on transfer set forth above, this Warrant Certificate and all rights hereunder
shall be transferable by the registered Holder hereof on the register of the
Corporation maintained by the Corporation for such purpose at its office upon
surrender of this Warrant Certificate duly endorsed, or accompanied by a written
instrument of transfer in form satisfactory to the Corporation duly executed, by
the registered Holder hereof or such Holder's attorney duly authorized in
writing and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. Upon any partial transfer the Corporation
will issue and deliver to such Holder a new Warrant Certificate with respect to
any portion not so transferred.
This Warrant Certificate shall be void and all exercise rights evidenced
hereby shall cease on October __, 200_.
This Warrant Certificate and the Agreement are subject to amendment as
provided in the Agreement.
Dated:_______________, 1997.
BREED TECHNOLOGIES, INC.
By:
Name:
Title:
Exhibit 10.4
Joint Venture Agreement
between
Siemens Aktiengesellschaft
and
Breed Technologies, Inc.
concerning
the establishment and operation of the joint venture company
BST Restraint Systems International GmbH & Co. KG
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TABLE OF CONTENTS
Preamble
1. Definitions
I. ESTABLISHMENT OF THE COMPANY
2. The COMPANY
3. Contributions
4. CHANGE OF CONTROL
5. Disposal of CAPITAL INTERESTS
II. ORGANIZATION OF THE COMPANY
6. Bodies of the COMPANY
7. PARTNERSHIP MEETING
8. PARTNERS= BOARD
9. MANAGEMENT
10. Staff, Non-Solicitation of Employees
11. Organizational Structure
III. OPERATION OF THE COMPANY
12. Initial Business Plan, Budget
13. Profit and Loss, Financing, Corporate Opportunities
14. Books and Records, FISCAL YEAR, Financial Statements
15. Guidelines for the Operation of the COMPANY
16. Contracts
IV. TERM OF AGREEMENT, DISSOLUTION
17. Term of Agreement
18. Dissolution
V. OTHER PROVISIONS
19. Premerger Control
20. Applicable Law
21. DISPUTE Settlement
22. Confidentiality
23. Miscellaneous
24. Notices
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This Agreement is made between
(1) Siemens Aktiengesellschaft, a corporation organized and existing under
the laws of Germany and having its registered seats at Nonnendammallee 101,
D-13599 Berlin and at Wittelsbacher Platz 2, D-80333 Munich, Germany,
hereinafter referred to as "SIEMENS"
(2) Breed Technologies, Inc. a corporation organized and existing under the
laws of Delaware, USA and having its registered seat and head office at 5300 Old
Tampa Highway, Lakeland, Florida 33807-3050, USA hereinafter referred to as
"BREED"
Preamble
Passive Restraint Systems for cars are presently regarded to be stand-alone
components and subsystems such as seatbelt, steering wheel, airbag sensors,
ECU's etc. and they are mainly developed as applications for specific cars. The
airbag successfully achieved high penetration rates (>50% worldwide, >75% in
Europe) and now there are many airbags in the field. It is recognized, that the
airbag saved many people from death or serious injury in accidents. In certain,
but rare occasions, it caused damages to passengers unintentionally.
While all safety components need to be further developed and improved
technically, it is imperative to begin incorporating the components into
integrated, smart systems that detect, monitor and control all related functions
and actions. The critical objectives in offering maximum benefit to the
occupants are adaptive reactions and to avoid malfunctions and misuse of the
system.
The most likely customer and legislative requirements for adaptive future
protection systems shall be to improve e.g. passenger size sensing, passenger
position sensing, adaptive air bag inflation adaptive seat belt pre-tensioning.
To facilitate development of advanced systems which incorporate the appropriate
technologies a joint venture between the PARTIES shall be formed to utilize the
respective capabilities of each company, to meet the evolving technical market
demands and to increase passenger safety as fast as possible.
Through the joint venture it is ensured that all components of a motor
vehicle occupant safety restraint system are indentified, designed and
manufactured in accordance with the automotive safety standards with the
objective to increase the overall quality level of all subcomponents.
This AGREEMENT is being entered into under the following circumstances:
WHEREAS SIEMENS, through its Automotive Systems Group, and its affiliated
companies, are involved in the development, manufacturing and sale of mainly
electronic components for motor vehicle occupant safety restraint systems;
WHEREAS, BREED and its affiliated companies are involved in the
development, manufacturing and sale of mainly mechanical components for motor
vehicle occupant safety restraint systems;
WHEREAS, SIEMENS and BREED are determined to cooperate on a worldwide basis
with respect to the worldwide research, development, engineering and marketing
of motor vehicle occupant safety restraint systems as defined herein; WHEREAS,
SIEMENS and BREED are determined to appoint the joint venture as their reseller
in order to market and sell components of motor vehicle occupant safety
restraint systems;
WHEREAS, the PARTIES, have concluded a Non Binding Memorandum of
Understanding on July, 27 1997 and a Memorandum of Understanding on October, 14
1997;
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WHEREAS the PARTIES have decided to carry out such a cooperation through a
joint venture company to be incorporated and organized under German law; and
WHEREAS the PARTIES desire to set forth herein their rights, duties and
responsibilities with respect to the joint venture company;
NOW, THEREFORE, in consideration of these premises and of the mutual
promises, obligations and agreements contained herein, the PARTIES hereto,
intending to be legally bound, subject to any necessary governmental or
corporate approvals, do hereby agree as follows:
1. Definitions
Wherever the following terms are used in this AGREEMENT in capital letters
in the singular or plural form, or in any of its ANNEXES, they shall be
understood as defined below.
"ACCOUNTING FIRM" means: the international independent certified accounting
firm KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft
Wirtschaftsprhfungsgesellschaft, located in Frankfurt/ Main, Germany, if the
PARTIES fail to agree on KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft
Wirtschaftsprhfungsgesellschaft in special cases the accounting firm shall be
appointed by the president of the Chamber of Commerce of Munich, Germany;
"AUDITOR" means: the auditor of the COMPANY and of the VERWALTUNGS-GMBH
designated by unanimous vote of the PARTNERSHIP MEETING according to SECTION 7.2
(F) and unanimous resolution of the SHAREHOLDERS'= MEETING;
"AFFILIATE" means: related companies within the meaning of Secs. 15 et seq.
of the German Stock Corporation Act ("Aktiengesetz"), in which either of the
PARTIES has more than 50 % of all voting rights, directly or indirectly owned;
"AGREEMENT" means: this Agreement and its ANNEXES;
"ANNEX" means: an annex to this AGREEMENT;
"ARTICLES OF LIMITED PARTNERSHIP" means: the articles of organization of
the COMPANY as a limited partnership;
BREED-FAMILY means: Allen K. Breed and Johnnie Cordell Breed including
their heirs and legal sucessors;
"CAPITAL INTEREST" means: the capital interest in the COMPANY and/or the
VERWALTUNGS-GMBH as the case may be;
"CEO" means: Chief Executive Officer ("Vorsitzender der Gesch@ftsfhhrung")
of the COMPANY;
"CFO" means: Chief Financial Officer ("Kaufm@nnischer Gesch@ftsfhhrer") of
the COMPANY;
2
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"CHANGE OF CONTROL" means: (A) for SIEMENS that any person or entity other
than SIEMENS or its AFFILIATES acquires directly or indirectly fifty percent
(50%) or more of shareholders' voting rights in the SIEMENS Automotive Systems
Group; (B) (i) for BREED that (i) any person or entity other than the
BREED-FAMILIY acquires beneficial ownership (as defined in Rule 13d-3 under the
US Security Exchange Act of 1934) of fifty percent (50%) or more of the
outstanding common stock of BREED; or (ii) any company which is a competitor of
SIEMENS in the automotive field or a competitor of the COMPANY or its
SUBSIDIARIES either: (a) becomes the largest single shareholder in BREED; or (b)
makes a tender offer resulting in the ownership of fifty percent (50 %) or more
of the shares of outstanding common stock of BREED
"CLOSING" means: the consummation of all transactions which have to occur
under this AGREEMENT after the EFFECTIVE DATE including all governmental
authorizations and approvals of any nature necessary for the effectiveness of
this transactions;
"CLOSING DATE" means: the earliest date on which the CLOSING will occur,
provided that such date may not be later than June, 6.1998 unless otherwise
agreed by the PARTIES;
"COMPANY" means: the joint-venture company under the laws of Germany in the
legal form of a limited partnership ("Kommanditgesellschaft") with the
VERWALTUNGS-GMBH as general partner and with SIEMENS and BREED or an AFFILIATE
of SIEMENS or an AFFILIATE of BREED each as limited partners ("GmbH & Co. KG"),
to be established in accordance with this AGREEMENT;
"COMPONENTS"A means: components of SRS-SYSTEMS as listed in ANNEX 1;
"CONTRIBUTION AGREEMENT" means: the contribution agreement regarding the
contribution of shares in PARS to be contributed by SIEMENS or an AFFILIATE of
SIEMENS to the COMPANY and the contribution agreement regarding the contribution
of interests in the US-PARTNERSHIP to be contributed by BREED or an AFFILIATE of
BREED to the COMPANY and to the VERWALTUNGS-GMBH;
"DEADLOCK"" means: a situation of impasse where a decision which is
required for the continuing operations of the COMPANY as a going-business
concern cannot be taken because of a failure to agree upon a common course of
action among the MANAGEMENT, the PARTNERS' BOARD, the PARTNERSHIP MEETING or the
SHAREHOLDERS MEETING or the PARTIES;
"DISPUTE" means: any claims, differences or disputes, arising out of or in
connection with this AGREEMENT, including any question regarding its existence,
validity, termination or its performance, or in connection with arrangements
regarding the perfor mance of this AGREEMENT;
"EFFECTIVE DATE" means: the date on which this AGREEMENT becomes effective
according to SECTION 19. hereof;
"FISCAL YEAR" means: the fiscal year of the COMPANY and of the
VERWALTUNGS-GMBH, as provided for in this AGREEMENT.
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"MANAGEMENT" means: the management of the VERWALTUNGS-GMBH and/or the
COMPANY as the case may be, consisting of a CEO and a CFO, as provided for in
this AGREEMENT;
"OFFER" means: the offer to be made under the procedure described in the
case of disposal of CAPITAL INTEREST as per SECTION 5 hereof;
"OFFEREE" means: the offeree in the procedure described in the case of
disposal of CAPITAL INTEREST as per SECTION 5 hereof;
"OFFEROR" means: the offeror under the procedure described in the case of
disposal of CAPITAL INTEREST as per SECTION 5 hereof;
"PARS" means: PARS Passive Rhckhaltesysteme GmbH, a limited liability
corporation organized and existing under the laws of Germany and having its
registered seats at Carl-Zeiss-Strasse 9, D-63755 Alzenau, Germany, of which the
shares are to be contributed to the COMPANY by SIEMENS or an AFFILIATE of
SIEMENS according to this AGREEMENT;
"PARTNER" means: a limited partner ("Kommanditist") in the COMPANY, i.e.
SIEMENS or BREED or an AFFILIATE of SIEMENS or BREED, as the case may be;
"PARTNERSHIP MEETING" means: the partnership meeting for the COMPANY as
provided for in this AGREEMENT;
"PARTY" means: SIEMENS or BREED;
"PARTNERS' BOARD" means: the partners' board for the COMPANY as provided
for in this AGREEMENT;
"SECTION" means: a section of this AGREEMENT;
"SHAREHOLDERS' MEETING" means: the shareholders' meeting for the
VERWALTUNGS-GMBH as provided for in this AGREEMENT;
"SIGNATURE A means: the date on which the AGREEMENT is signed by both
PARTIES;
"SRS-BACKGROUND-TECHNOLOGY" means: the technology with respect to
SRS-SYSTEMS and COMPONENTS available on the CLOSING DATE, whether in written or
oral form and whether under statutory protection such as patent applications,
patents, utility models, or not, at SIEMENS in its Automotive Systems Group
subdivision safety and chassis systems location Regensburg, Germany and
available at BREED, and which technology o is needed by the COMPANY and its
SUBSIDIARIES for the development, integration and application of SRS-SYSTEMS,
and o either PARTY is legally entitled to license to the other PARTY and/or the
COMPANY and its
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SUBSIDIARIES;
"SRS-FOREGROUND-TECHNOLOGY" means: the technology with respect to
SRS-SYSTEMS and COMPONENTS available after the CLOSING DATE, whether in written
or oral form and whether under statutory protection such as patent applications,
patents, utility models, or not,
o at SIEMENS in its Automotive Systems Group subdivision sayety and
chaissis systems location Regensburg, Germany and at BREED, and which technology
is needed by the COMPANY and its SUBSIDIARIES for the development, integration
and application of SRS-SYSTEMS, or
o at the COMPANY and/or at its SUBSIDIARIES
and which technology either PARTY or the COMPANY or its SUBSIDIARIES,
respectively, is legally entitled to license as laid down in this AGREEMENT.
"SRS-SYSTEM" means: a motor vehicle occupant safety restraint system as
described in ANNEX 1.
"STATUTES" means: the articles of organization of the VERWALTUNGS-GMBH as
provided for in this AGREEMENT;
"SUBSECTION" means: a subsection of this AGREEMENT;
"SUBSIDIARY A means: any legal entity, in which the COMPANY or the
VERWALTUNGS-GMBH, as the case may be, has more than 50 % of all voting rights,
directly or indirectly owned, such as but not limited to the US-PARTNERSHIP and
the PARS;
"US-PARTNERSHIP" means: the legal entity in the form of a limited
partnership organized and existing under the laws of the State of Delaware, USA,
which is to be founded by BREED and an AFFILIATE of BREED and of which the
interests are to be contributed to the COMPANY and the VERWALTUNGS-GMBH by BREED
and an AFFILIATE of BREED under this AGREEMENT;
"VERWALTUNGS-GMBH" means: a legal entity in the form of a limited liability
company (GmbH) under the laws of Germany which assumes personal liability and
the management of the COMPANY as general partner, to be established in
accordance with this AGREEMENT;
I. ESTABLISHMENT OF THE COMPANY
2. The COMPANY
2.1 The PARTIES or AFFILIATES designated by the respective PARTY shall
establish the COMPANY with ARTICLES OF LIMITED PARTNERSHIP set forth in ANNEX
2.1 A and the VERWALTUNGS-GMBH with STATUTES set forth in ANNEX 2.1 B. The
COMPANY shall be established for an indefinite period of time subject to the
right of either PARTY to terminate this Agreement as per SECTION 17 hereof.
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2.2 The name of the COMPANY shall be: "BST Restraint Systems International
GmbH & Co. KG" The name of the VERWALTUNGS-GMBH shall be: "BST Restraint Systems
Verwaltungs-GmbH" On its corporate stationary the COMPANY may add to its name
the words: "A joint venture of Siemens and Breed"
2.3 The COMPANY and the VERWALTUNGS-GMBH shall have their registered seats
and administrative head offices at Alzenau, Germany.
2.4 The scope of the COMPANY shall be: the worldwide research, development,
engineering, assembly, marketing and sale of SRS-SYSTEMS, and the purchase,
marketing and sale of COMPONENTS, and the holding of participations in companies
which are engaged in businesses as described in SUBSECTION 2.4.1 and 2.4.2
hereof.
2.5 It is understood, that the COMPANY and the SUBSIDIARIES shall exercise
the worldwide research, development and engineering of SRS-SYSTEMS on a
contractual basis. The COMPANY may perform by itself or through its SUBSIDIARIES
on a worldwide basis all activities related to this scope, including but not
limited to the representation, administration or acquisition of other
enterprises of the same or a similar nature and participation in such
enterprises. Furthermore, the COMPANY may establish branches and/or SUBSIDIARIES
worldwide. The scope of the COMPANY may be extended by unanimous resolution of
the PARTNERSHIP MEETING.
2.6 It is understood, that any SUBSIDIARY established by the COMPANY or the
VERWALTUNGS-GMBH shall be found in the most beneficial way in respect of
taxation and liability. All shares of SUBSIDIARIES in the form of a corporation
with its registered seat outside Germany shall be solely owned by the
VERWALTUNGS-GMBH or any other legal entity agreed upon by the PARTIES.
2.7 The COMPANY shall have a registered liability capital ("Haftkapital")
to be registered in the companies' register ("Handelsregister") in an aggregate
amount of DM 10.000.000 (Deutsche Mark ten million) divided into one (1) CAPITAL
INTEREST of DM 5.020.000 (Deutsche Mark five million twenty thousand) held by
SIEMENS or an AFFILIATE designated by SIEMENS and into one (1) CAPITAL INTEREST
of DM 4.980.000 (Deutsche Mark four million ninety eight thousand) held by BREED
or an AFFILIATE designated by BREED.
2.8 The scope of the VERWALTUNGS-GMBH as general partner ("Komplement@r")
in the COMPANY shall be the assumption of the personal liability for and the
management of the COMPANY. The VERWALTUNGS- GMBH will not hold any interest in
the COMPANY'S capital. Its aggregate share capital shall be DM 50,000 (Deutsche
Mark fifty thousand) divided into one (1) CAPITAL INTEREST of DM 25.100
(Deutsche Mark twenty five thousand one hundred) held by SIEMENS, or an
AFFILIATE designated by SIEMENS, and one (1) CAPITAL INTEREST of, DM 24.900
(Deutsche Mark twenty four thousand nine hundred) held by BREED, or an AFFILIATE
designated by BREED.
2.9 As of the CLOSING DATE, the CAPITAL INTERESTS in the COMPANY and the
CAPITAL INTERESTS in the VERWALTUNGS-GMBH shall be fully paid in as provided for
in SECTION 3 hereof and the ratio of shareholding of SIEMENS, or an AFFILIATE
designated by SIEMENS, shall be 50,2 % and the ratio of shareholding of BREED or
an AFFILIATE designated by BREED, shall be 49,8 % in the COMPANY and the
VERWALTUNGS- GMBH, as provided for in SECTION 2.7 and 2.8 hereof.
2.10 The CAPITAL INTERESTS in the COMPANY and the CAPITAL INTERESTS in the
VERWALTUNGS-GMBH may only be transferred together and to the same extent.
Therefore, to the extent that in this AGREEMENT or the ARTICLES OF LIMITED
PARTNERSHIP any provisions have been agreed for a voluntary or involuntary
transfer of CAPITAL INTERESTS in the COMPANY, such provisions, in particular
SECTION 5., shall apply
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mutatis mutandis to a transfer of CAPITAL INTERESTS in the VERWALTUNGS-GMBH
subject to the hereof condition that any such transfer shall occur
simultaneously. The same shall apply to any other disposal or encumbrance of the
CAPITAL INTERESTS.
3. Contributions
3.1 Immediately after the EFFECTIVE DATE, SIEMENS, or an AFFILIATE
designated by SIEMENS, and BREED, or an AFFILIATE designated by BREED, shall
jointly form the VERWALTUNGS-GMBH and shall make their contributions to the
aggregate share capital in cash in order to receive in return their respective
CAPITAL INTERESTS, as provided for in SUBSECTION 2.8 hereof.
3.2. After the incorporation of the VERWALTUNGS-GMBH, the VERWALTUNGS-GMBH
as general partner ("Komplementar"), SIEMENS, or an AFFILIATE designated by
SIEMENS, and BREED, or an AFFILIATE designated by BREED, as limited partners
("Kommanditisten") shall jointly form the COMPANY and SIEMENS, or an AFFILIATE
designated by SIEMENS, as well as BREED, or an AFFILIATE designated by BREED,
shall make their contributions to the aggregate share capital of the COMPANY in
kind as provided for in SUBSECTION 3.2.1, 3.2.2 and 3.2.3 hereof in order to
receive in return their respective CAPITAL INTERESTS as provided for in
SUBSECTION 2.7 hereof:
3.2.1 SIEMENS, or an AFFILIATE designated by SIEMENS, shall according to
SECTION 3.2 contribute all of the shares of PARS to the COMPANY with economic
effect as of the EFFECTIVE DATE.The value of the shares of PARS is DM
9.318.000,-- (Deutsche Mark nine million threehundred eighteen thousand) as of
September 30, 1997.
3.2.2 Prior to the EFFECTIVE DATE BREED, and an AFFILIATE designated by
BREED, shall form the US- PARTNERSHIP as a limited partnership and transfer the
tangible assets with respect to development, research and testing of SRS-SYSTEMS
as described in ANNEX 3.2.2 into the US-PARTNERSHIP. Any licenses or transfer of
SRS- BACKGROUND-TECHNOLOGY shall be solely provided according to SECTION 15.
BREED shall be the limited partner in the US-PARTNERSHIP with capital interests
of 99% and the AFFILIATE designated by BREED shall be the general partner in the
US-PARTNERSHIP with capital interest of 1 %. BREED shall according to SECTION
3.2 contribute all its interests as a limited partner of the US-PARTNERSHIP to
the COMPANY and the AFFILIATE designated by BREED shall according to SECTION 3.2
transfer all its interests as a general partner of the US- PARTNERSHIP to the
VERWALTUNGS-GMBH with economic effect as of the EFFECTIVE DATE.The value of the
assets to be transfered by BREED, and an AFFILIATE designated by BREED, into the
US-PARTNERSHIP and accordingly the value of the interests of the US-PARTNERSHIP
are DM 9.318.000,-- (Deutsche Mark Mark nine million threehundred eighteen
thousand) as of the EFFECTIVE DATE.
3.2.3 The shares of PARS and interests in the US-PARTNERSHIP contributed by
the respective PARTNER shall be entered in the registered liability contribution
of the contributing PARTNER in the COMPANY up to an amount of DM 5.020.000
(Deutsche Mark five million twenty thousand) for SIEMENS or an AFFILIATE
designated by SIEMENS and up to an amount of DM 4.980.00 (Deutsche Mark four
million ninety eight thousand) for BREED or an AFFILIATE designated by BREED.
The exceeding amount of DM 8.636.000 (Deutsche Mark eight million sixhundred
thirty-six thousand) shall be entered in the joint capital reserve of the
COMPANY.
3.2.4 The shares in PARS shall be contributed by SIEMENS or an AFFILIATE
designated by SIEMENS, to the COMPANY under the condition that any and all risks
resulting from product liability or liability for infringement of proprietary
rights or any other liabilities for any products produced or developed or
services rendered before the CLOSING DATE shall remain with SIEMENS who shall
hold the COMPANY harmless from any and all claims of third parties resulting
therefrom. The interests in the US-PARTNERSHIP shall be contributed by BREED and
an AFFILIATE designated by BREED, to the COMPANY and the VERWALTUNGS-GMBH under
the condition that any and all risks
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resulting from product liability or liability for infringement of
proprietary rights or any other liabilities for any products produced or
developed or services rendered before the CLOSING DATE shall remain with BREED
and the AFFILIATE designated by BREED who shall hold the COMPANY and the
VERWALTUNGS-GMBH harmless from any and all claims of third parties resulting
therefrom.
3.2.5 The CONTRIBUTION AGREEMENTS shall each contain adequate
representations and warranties substantially in the form as stated in ANNEX
3.2.5.
3.3 With the exception of costs and expenses for counsel and auditors to be
borne solely by each PARTY, SIEMENS and BREED shall jointly bear all costs and
expenses related to the formation of the VERWALTUNGS-GMBH and the COMPANY unless
the ARTICLES OF LIMITED PARTNERSHIP or the STATUTES stipulate that the costs and
expenses, such as for the notarized application to and the registration in the
companies' register ("Handelsregister") as well as the publication costs, shall
be borne directly by the VERWALTUNGS-GMBH or the COMPANY. SIEMENS shall solely
bear all cost and expenses ,including any and all duties and taxes, related to
the contribution of the shares in PARS to the COMPANY as per SUBSECTIONS 3.2.1.
and BREED shall solely bear all cost and expenses, including any and all duties
and taxes, related to the contribution of the interests in the US-PARTNERSHIP to
the COMPANY and the VERWALTUNGS-GMBH as per SUBSECTION 3.2.2. BREED shall solely
bear all costs and expenses, including any and all duties and taxes, related to
the formation of the US-PARTNERSHIP and the transfer of the assets thereto as
per SUBSECTION 3.2.2.
3.4 Third parties shall only be permitted to join the VERWALTUNGS-GMBH and
the COMPANY if all PARTIES approve.
3.5 After the implementation of the contribution according to SUBSECTION
3.2.1 and 3.2.2 the corporate names of the SUBSIDIARIES shall be changed as far
as legally possible
3.5.1 PARS in "BST Restraint Systems-GmbH
3.5.2 US-PARTNERSHIP in BST Restraint Systems-LP Any other SUBSIDIARY of
the COMPANY or the VERWALTUNGS-GMBH shall be named with a similar name as far as
legally possible.
4. CHANGE OF CONTROL
4.1 If, after the incorporation of the COMPANY and/or the VERWALTUNGS-
GMBH, a CHANGE OF CONTROL occurs in respect of a PARTY, this PARTY shall notify
this to the other PARTY without undue delay and shall sell all or part of its
CAPITAL INTERESTS in the COMPANY and the VERWALTUNGS-GMBH to the other PARTY if
and to the extent so requested by the other PARTY. Such a request shall be made
in writing not later than three (3) months after the notification. The price for
the CAPITAL INTERESTS shall be agreed upon by the PARTIES and, failing such
agreement, shall be determined by an ACCOUNTING FIRM jointly appointed by the
PARTIES. The opinion of the ACCOUNTING FIRM as to the price of the CAPITAL
INTERESTS shall be based on a generally accepted valuation method being in
common use at the time of appointment of the ACCOUNTING FIRM and shall result in
a reasonable, arm's-length price on the basis of a willing buyer and a willing
seller of the relevant CAPITAL INTERESTS. The cost of the opinion of the
ACCOUNTING FIRM shall be paid by the selling PARTY.
4.2 Insofar as the conditions as set out in sentence 1 of SUBSECTION 4.1
already exist and have been disclosed in writing at the time of SIGNATURE, this
shall not be deemed to be CHANGE OF CONTROL within the meaning of this
provision.
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4.3 An AFFILIATE of a PARTY shall be deemed not to be a third party within
the meaning of this provision, but only as long as it remains an AFFILIATE.
5. Disposal of CAPITAL INTERESTS
5.1 For a time period of six (6) years commencing at the CLOSING DATE, the
transfer of any CAPITAL INTERESTS by a PARTY to a third party or any other
disposal or encumbrance thereof shall not be permitted and after such six (6)
years time period shall require the prior written consent of the other PARTY,
such consent to be given if and when the following conditions are fulfilled:
(A) If a PARTY (the "OFFEROR") wishes to transfer its CAPITAL INTERESTS in
the COMPANY, it shall first offer such CAPITAL INTERESTS in writing (the
"OFFER") to the other PARTY (the "OFFEREE").
(B) If within one (1) months from receipt of the OFFER the OFFEREE
indicates in writing that he is not interested in purchasing the CAPITAL
INTERESTS or does not reply to the OFFER, the OFFEROR shall have the right to
offer its CAPITAL INTERESTS to a third party of whose identity the OFFEROR has
immediately informed the OFFEREE. In such a case, the OFFEREE may withhold its
approval only for cause which must relate to the potential third party
purchaser. Such cause shall be deemed to be constituted without limitation if
such third party purchaser is a direct competitor of the OFFEREE.
(C) If within one (1) months from receipt of the OFFER the OFFEREE
indicates in writing that he is interested in purchasing the CAPITAL INTERESTS,
the PARTIES shall seek to agree on a reasonable purchase price on an arm's
length basis.
(D) If the PARTIES fail to agree on the purchase price within two (2)
months from the time the OFFER was received by the OFFEREE, they shall, within a
period of one (1) month commencing after the elapse of the aforementioned
two-month period, ask an ACCOUNTING FIRM, jointly appointed by the PARTIES, to
prepare an opinion on the price to be paid for the CAPITAL INTERESTS. The
opinion of the ACCOUNTING FIRM as to the price of the CAPITAL INTERESTS shall be
based on a generally accepted valuation method being in common use at the time
of appointment of the ACCOUNTING FIRM and shall result in a reasonable,
arm's-length price on the basis of a willing buyer and a willing seller of the
relevant CAPITAL INTERESTS. The cost of the opinion of the ACCOUNTING FIRM shall
be shared by the OFFEROR and the OFFEREE in proportion to their then respective
CAPITAL INTERESTS.
(E) The OFFEROR shall inform the OFFEREE within one (1) month from
receiving the opinion of the ACCOUNTING FIRM on the price whether he is prepared
to sell his CAPITAL INTERESTS at the price stated in the opinion. If the OFFEROR
refuses to sell his CAPITAL INTERESTS at that price or if he does not inform the
OFFEREE within that one (1) month period, he shall not be entitled to sell his
CAPITAL INTERESTS to such third party.
(F) The OFFEREE shall inform the OFFEROR within one (1) month after the
OFFEROR has indicated his willingness to sell whether he is prepared to purchase
the CAPITAL INTERESTS at the given price pursuant to SUBSECTION (E) hereof. If
the OFFEREE refuses to purchase the CAPITAL INTERESTS at this price or if he
does not within the period of one (1) month inform the OFFEROR, the OFFEROR
shall have the right to offer his CAPITAL INTERESTS for sale to a third party of
whose identity the OFFEROR has immediately informed the OFFEREE. In such a case,
the OFFEREE may withhold its approval only for cause which must relate to the
potential third party purchaser. Such cause shall be deemed to be constituted
without limitation if such third party purchaser is a direct competitor of the
OFFEREE.
5.2 Before the transfer of CAPITAL INTERESTS to a third party is executed,
the OFFEREE shall have the right to require the offered CAPITAL INTERESTS to be
sold to him on the same terms and conditions as offered to the
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third party. Such right of first refusal shall be exercised in writing
within a period of three (3) weeks after the OFFEROR has informed the OFFEREE in
writing of the name and the address of the third party and of the terms of the
transfer agreement.
5.3 The restrictions on transfer contained in SECTIONS 5.1 and 5.2 hereof
shall not apply to a transfer of CAPITAL INTERESTS in the COMPANY to an
AFFILIATE or from an AFFILIATE to the respective PARTY. The transfer shall only
be made on the condition that the AFFILIATE shall be bound by the terms of this
AGREEMENT, the ARTICLES OF LIMITED PARTNERSHIP and the STATUTES and, if so
required by the PARTIES, if applicable, will not permit the AFFILIATE to cease
to be an AFFILIATE without first procuring the transfer of the CAPITAL INTERESTS
in the COMPANY owned by that AFFILIATE either to the other PARTY or to one of
its AFFILIATES.
5.4 If so required by the OFFEREE, the OFFEROR, when selling its CAPITAL
INTERESTS to a third party, shall undertake that, prior to and as a precondition
to such transfer, the third party shall have entered into an agreement with the
OFFEROR, whereby the third party shall be bound by the terms of this AGREEMENT,
the ARTICLES OF LIMITED PARTNERSHIP and the STATUTES in every way as if the
third party were a party to this AGREEMENT and had been such a party from the
date when this AGREEMENT came into force.
5.5 Should one of the PARTIES be prevented from accepting the OFFER or from
exercising the pre-emptive right according to SUBSECTION 5.1 or 5.2 hereof due
to the laws in force in Germany or the US or due to the compliance with any
order or regulation of governmental authorities in Germany or the US or of the
authorities of the European Union, such PARTY shall then be entitled to assign
such rights to a third party to which the respective change in law, order or
regulation does not apply.
5.6 Except as otherwise provided in SUBSECTION 5.5 none of the PARTIES
shall assign all or part of its rights or obligations under this AGREEMENT to
any other company or person without obtaining the prior written consent of the
other PARTY. Such consent is however not necessary in connection with a transfer
of CAPITAL INTERESTS to an AFFILIATE or from an AFFILIATE to the respective
PARTY in accordance with SUBSECTION 5.3 hereof.
5.7 Notwithstanding SUBSECTION 5.1 to 5.6 each PARTY shall inform the other
PARTY prior to any execution of transfer of CAPITAL INTERESTS in writing.
II. ORGANIZATION OF THE COMPANY
6. Bodies of the COMPANY
6.1 The corporate bodies of the COMPANY are
- the PARTNERSHIP MEETING;
- the PARTNERS' BOARD.
- the MANAGEMENT
6.2 The corporate bodies of the VERWALTUNGS-GMBH are - the
SHAREHOLDERS' MEETING; - the MANAGEMENT.
7. PARTNERSHIP MEETING
7.1 The PARTNERSHIP MEETING is the supreme authority of the COMPANY. It
shall pass and ratify
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resolutions with regard to all activities and business actions to which it
is entitled. Its resolutions shall be binding upon all other bodies of the
COMPANY.
7.2 The PARTNERSHIP MEETING shall resolve upon
(A) amendments of the ARTICLES OF LIMITED PARTNERSHIP, including but not
limited to, changes of the scope of the COMPANY, the increase or decrease of the
partnership capital, the increase or decrease of PARTNERS interests in the
COMPANY, the sale of PARTNERS interests to third parties;
(B) merger with or demerger from or management contracts with any other
company;
(C) dissolution of the COMPANY and disposition of the COMPANY'S property in
case of its dissolution;
(D) sale of all or substantially all of the assets of the COMPANY;
(E) determination of the annual financial statements and allocation of the
financial result (such as dividends and distributions);
(F) designation of the AUDITOR;
(G) appointment and dismissal of the MANAGEMENT pursuant to the procedures
in SUBSECTION 9.3;
(H) all other matters if so required by mandatory law.
The resolution as listed in SUBSECTION 7.2 letter A to H require an
unanimous vote of the PARTNERS.
7.3 PARTNERS resolutions shall regularly be adopted at PARTNERSHIP
MEETINGS. Unless mandatory law requires otherwise, resolutions may, however,
also be adopted in writing or by telefax if all PARTNERS concerned agree thereto
in writing or by telefax. A PARTNERSHIP MEETING may also be held by video
conference if all PARTNERS agree. A PARTNERSHIP MEETING need not to be held if
all PARTNERS agree in writing with the resolution to be taken. In such a case,
the MANAGEMENT shall immediately after receipt of the written vote inform all
PARTNERS about the result thereof.
7.4 Decisions of the PARTNERSHIP MEETING shall be taken by unanimous vote
of the liability capital according to SUBSECTION 2.7, unless otherwise required
by this AGREEMENT, in accordance with the ARTICELS OF LIMITED PARTNERSHIP or by
strictly binding law. Every Deutsche Mark one thousand (DM 1,000.00) of a
PARTNERS CAPITAL INTEREST in the COMPANY shall confer one (1) vote. The
VERWALTUNGS-GMBH as general partner shall have no right to vote.
7.5 Each of the PARTIES shall at all times exercise its powers and votes in
the COMPANY towards procuring that the COMPANY will comply with all obligations
under this AGREEMENT, the ARTICLES OF LIMITED PARTNERSHIP and that all key
personnel of the COMPANY and any representative of either PARTY will implement
the provisions of this AGREEMENT in relation to the COMPANY and any other PARTY.
7.6 A PARTNERSHIP MEETING may be called by the MANAGEMENT or by any
PARTNER. The PARTNERSHIP MEETING shall be called by giving four (4) weeks prior
notice in writing or by telefax, indicating the agenda, the place and the date
of the PARTNERSHIP MEETING. PARTNERSHIP MEETINGS shall generally take place at
the head office of the COMPANY if not otherwise agreed upon by all PARTNERS.
<PAGE>
7.7 For the purpose of resolutions to be adopted by the PARTNERSHIP MEETING
each PARTNER may be represented by written proxy given to a member of its
Company authorized to represent the same or to an attorney at law, an auditor or
a tax-advisor.
7.8 A quorum shall exist in a PARTNERSHIP MEETING if all PARTNERS are
represented therein. If no quorum exists in a PARTNERSHIP MEETING, then a second
meeting having the same agenda shall be called within one (1) week and a quorum
shall be deemed to exist in such second meeting regardless of the liability
capital represented therein; reference to this provision shall be included in
the notice for such PARTNERSHIP MEETING.
7.9 The ordinary PARTNERSHIP MEETING shall be held within the first six (6)
months of the running FISCAL YEAR. It shall resolve on the approval of the
annual financial statement and the employment of the annual profit, the approval
of the acts of the MANAGEMENT for the previous FISCAL YEAR and the appointment
of the AUDITORS for the running FISCAL YEAR.
7.10 Unless a notarial recording is required, the course of the PARTNERSHIP
MEETING shall be recorded in minutes reflecting the place and date of the
PARTNERSHIP MEETING, the participants therein, the items of the agenda, the
material contents of negotiations and the resolutions adopted by the PARTNERS.
The minutes shall be signed by the chairman and by the keeper of the minutes and
a copy shall be furnished to each of the PARTNERS and to the general partner.
7.11 Any action challenging the validity of a PARTNERS' resolution shall be
excluded unless it is filed within one (1) month after receipt of the minutes
pertaining thereto.
7.12 If a DEADLOCK occurs in the PARTNERSHIP MEETING, then each PARTNER has
the right to request a new voting on the same item. Such new voting shall occur
within one (1) month counting from the date of the last voting.
7.13 If in the second voting pursuant to SUBSECTION 7.12 hereof unanimity
cannot be reached the respective upper management of each PARTY, i.e. the
chairman of BREED and the chairman of SIEMENS' Automotive Systems Group, shall
be asked for a final decision.
7.14 If the upper management of the PARTIES cannot reach an unanimous final
decision within forty-five (45) days after the second voting pursuant to
SUBSECTION 7.13 hereof the PARTIES shall immediately consult each other as to
whether one of them wishes to purchase the entire CAPITAL INTERESTS held by the
other PARTY or its AFFILIATE. If none of the PARTIES is willing to purchase then
each PARTY shall have the right to demand the dissolution of the COMPANY
according to SECTION 18 hereof. If one of the PARTIES is willing to purchase the
other PARTY shall be obligated to sell. The purchase price shall be determined
in accordance with SUBSECTION 5.1 letter D hereof, provided, however, that the
opinion of the ACCOUNTING FIRM shall be final and binding upon both PARTIES. If
both PARTIES wish to purchase, then each PARTY shall submit to the respective
other PARTY a sealed envelope containing the purchase price at which it is
prepared to purchase the CAPITAL INTERESTS of the other PARTY and at which it is
prepared to sell its own CAPITAL INTERESTS to the other PARTY. The purchase
price offer submitted by sealed envelope constitutes an irrevocable offer to
purchase the CAPITAL INTERESTS of the other PARTY at the purchase price stated
therein. The PARTY whose purchase price offer is higher shall automatically be
entitled to purchase, and the other PARTY shall be obligated to sell the CAPITAL
INTERESTS at such higher purchase price. The transactions to sell and purchase
according to this SUBSECTION 7.14 shall be completed without undue delay.
7.15 The provisions of this SECTION 7 shall apply mutatis mutandis for the
SHAREHOLDERS MEETING of the VERWALTUNGS-GMBH.
<PAGE>
8. PARTNERS' BOARD
8.1 A PARTNERS' BOARD shall be formed for the COMPANY, consisting of six
(6) members. Three (3) members of the PARTNERS' BOARD shall be appointed by
SIEMENS. Three (3) members of the PARTNERS' BOARD shall be appointed by BREED.
The members of the PARTNERS' BOARD may represent each other mutually on the
basis of written or telexed/telefaxed power of attorney. The PARTNERS' BOARD
shall elect from among its members a chairman and a vice chairman, it being
understood that the chairman of the PARTNERS' BOARD shall be nominated by the
PARTNER not nominating the CEO and that the vice chairman of the PARTNERS' BOARD
shall be nominated by the PARTNER nominating the CEO, as provided for herein.
8.2 The task of the PARTNERS' BOARD shall be to establish the principles of
business policy and ensuring adherence thereto. The PARTNERS' BOARD shall
supervise the MANAGEMENT and shall be entitled to issue directions to the
MANAGEMENT.
8.3 The PARTNERS BOARD shall decide on all matters which require approval
of the PARTNERS BOARD according to this AGREEMENT, the ARTICELS OF LIMITED
PARTNERSHIP or the rules of procedure for the PARTNERS' BOARD. Further details
shall be governed by the ARTICELS OF LIMITED PARTNERSHIP and the rules of
procedure for the PARTNERS' BOARD to be adopted by the PARTNERSHIP MEETING in
accordance with ANNEX 8.3.
8.4 The PARTNERS BOARD shall at least meet four (4) times a year.
8.5 If a DEADLOCK occurs in the PARTNERS' BOARD, the members of the
PARTNERS' BOARD shall submit the item for decision to the PARTNERSHIP MEETING.
8.6 A supervisory board shall not be formed for the COMPANY and/or the
VERWALTUNGS-GMBH unless required by strictly binding law.
9. MANAGEMENT
9.1 The MANAGEMENT of the COMPANY shall be assumed by the VERWALTUNGS-GMBH.
9.2 The VERWALTUNGS-GMBH shall act through the two (2) members of its own
MANAGEMENT, a CEO and a CFO. The VERWALTUNGS-GMBH itself and its MANAGEMENT
shall be exempt from the restrictions of Section 181 of the German Civil Code
("Buhrgerliches Gesetzbuch") to the extent that transactions between the COMPANY
and the VERWALTUNGS-GMBH are concerned. Any further exemptions shall require a
resolution of the shareholders of the VERWALTUNGS-GMBH according to a proposal
to be decided upon by the PARTNERS BOARD.
9.3 Each PARTY has the right to nominate one (1) member to the MANAGEMENT
of the VERWALTUNGS-GMBH according to the following procedure.
9.3.1 The initial CEO of the VERWALTUNGS-GMBH will be nominated by SIEMENS
and is subject to BREEDS approval, such approval not to be unreasonably
withheld. The CEO will be given a three-year term.
9.3.2 The initial CFO of the VERWALTUNGS-GMBH will be nominated by BREED
and is subject to SIEMENS' approval, such approval not to be unreasonably
withheld. The CFO will be given a term which shall end on the same date as the
term of the CEO.
9.3.3 If the CEO or the CFO is removed for any reason during his respective
term, then the PARTY which
<PAGE>
nominated such officer shall nominate his replacement, subject to the other
PARTY'S approval, such approval not to be unreasonably withheld. Such
replacement officer's term shall end on the same date as the term of the officer
which he is replacing.
9.3.4 At the end of the initial three-year term, if the PARTNERS' BOARD
agrees to renew the term of the CEO, then the CEO shall be given an additional
term of three years. In that event, at BREED'S election, the CFO shall either:
(i) be given an additional term ending on the same date as the CEO's new term;
or (ii) replaced by a new CFO nominated by BREED, subject to SIEMENS' approval,
such approval not to be unreasonably withheld: Such replacement CFO to be given
a term contract which shall end on the same date as the CEO's new term.
9.3.5 At the end of the initial three year term, if the PARTNERS' BOARD
does not agree to renew the CEO's employment, then the replacement CEO of the
VERWALTUNGS-GMBH will be nominated by BREED and is subject to SIEMENS' approval,
such approval not to be unreasonably withheld. The replacement CEO will be given
a three-year term. Likewise, if the CFO's employment will not be renewed, the
replacement CFO will be nominated by SIEMENS, subject to BREED'S approval, such
approval not to be unreasonably withheld. The replacement CFO will be given a
term which shall end on the same date as the term of the replacement CEO. If
either of these replacement officers is removed, they shall be replaced in
accordance with the procedure described in SUBSECTION 9.3.3.
9.3.6 Thereafter, each time that the PARTNERS' BOARD does not agree to
renew the CEO's employment, a new CEO will be nominated by the PARTY which did
not nominate such non-renewed CEO and a new CFO will be nominated by the other
PARTY.
9.4 The CEO and the CFO shall jointly represent the VERWALTUNGS-GMBH and
consistently the COMPANY. As long as there is only one manager on duty he is
entitled to represent the VERWALTUNGS-GMBH and consistently the COMPANY alone.
9.5 The MANAGEMENT shall have the broadest powers to manage and supervise
the business and the affairs of the COMPANY and to supervise the business and
the affairs of its SUBSIDIARIES and, being the head of the executive
organization of the COMPANY, shall have full authority to manage and direct its
business and affairs with the exception of those matters which are explicitly
reserved to the PARTNERSHIP MEETING or to the PARTNERS' BOARD by this AGREEMENT
or by the ARTICLES OF LIMITED PARTNERSHIP or by decision of the PARTNERSHIP
MEETING or by the STATUTES or by mandatory law.
9.6 The MANAGEMENT shall, in addition to other duties, with respect to the
COMPANY and the VERWALTUNGS-GMBH
- be responsible for the proper conduct of the business; - be responsible
for the efficient organization; - be responsible for all their activities
and all the personnel; - keep the PARTNERSHIP MEETING, the PARTNERS' BOARD
and the SHAREHOLDERS'
MEETING informed about all major business activities;
- prepare all business plans and budgets;
- prepare the annual report, the balance sheet and the profit and loss
statement;
9.7 The following actions of the MANAGEMENT with respect to the COMPANY
including its SUBSIDIARIES and/or the VERWALTUNGS-GMBH including its
SUBSIDIARIES shall be submitted for consideration to the PARTNERS' BOARD and no
action may be taken on such matters without the prior approval of the PARTNERS'
BOARD:
(A) all business plans and amendments thereto including, but not limited
to, the operating, financial and
<PAGE>
investment budgets and the headcount and sales plans;
(B) substantial deviations from the approved business plans;
(C) principles concerning general terms of employment and specification
thereof, including without limitation the hiring and terms of employment of the
management of the SUBSIDIARIES;
(D) conclusion, specification or termination of employment contracts if the
annual salary exceeds limits of 125.000 $ (onehundred and twenty-five thousand
US Dollar) if the salary is defined in US Dollar or 200.000 DM (two hundred
thousand Deutsche Mark) if the salary is defined in Deutsche Mark or, in case of
a termination, if a compensation including benefits of more than 125.000 $
(onehundred and twenty-five thousand US Dollar ) if defined in US Dollar or
200.000 DM (two hundred thousand Deutsche Mark) if defined in Deutsche Mark
shall be granted;
(E) capital expenditures and investments (including capitalized leases) not
included in the annual business plan and exceeding in individual instance
500.000 $ ( fivehundred thousand US Dollar), except the use of surplus cash for
short-time financial investments in highly rated securities for a period not
exceeding one year;
(F) acquisition and sale of investment in any other enterprises, or merging
or consolidating with any other enterprise or entering into or terminating any
joint venture or strategic alliance with other enterprises;
(G) establishment of new business sites and closing of existing ones, or
the purchase, sale or other disposition of real estate;
(H) establishment of SUBSIDIARIES beyond PARS and US-PARTNERSHIP;
(I) sale or disposal of fixed assets or other material assets other than in
the ordinary course of business;
(J) issuing of debt securities, borrowing money or otherwise incurring
indebtedness other than in the ordinary course of its business, the mortgaging,
pledging or encumbering of assets to secure any indebtedness, or the incurring
of any other long-term (more than 12 months) obligations;
(K) conclusion or termination of agreements regarding intellectual property
rights and know-how related to COMPONENTS and SRS-SYSTEMS;
(L) conclusion or termination of agency and distribution agreements
(M) conclusion of lease agreements with a term exceeding three (3) years or
with an aggregate annual payment exceeding an aggregate annual limit of 250.000
$ (twohundred and fifty thousand US Dollar );
(N) establishment or change of any significant accounting principles and
practices;
(O) startup of new or discontinuation of active product lines;
(P) product and marketing strategy, including pricing policy, and marketing
the products of any third party;
(Q) fundamental change in the scope or character of business of the COMPANY
and/or its SUBSIDIARIES or actions outside the scope of the COMPANY previously
defined in SUBSECTION 2.4.;
(R) substantial changes in the organizational structure of the COMPANY;
<PAGE>
(S) initiating any legal or arbitral actions or settling any claims, causes
of action or rights against any third parties (with the exception of collecting
outstanding accounts receivables) or commencing bankruptcy or insolvency
proceedings;
(T) conclusion or termination of agreements between either of the PARTIES
and the COMPANY and/or its SUBSIDIARIES except as otherwise stated in this
AGREEMENT;
(U) the promise or granting of any employment benefits, pension commitments
or special annual payments exceeding the normal salary (including without
limitation Christmas bonuses) or any modifications thereof;
(V) the granting of commercial power of representation
("Handlungsvollmacht") and commercial power of attorney ("Prokura");
(W) all other matters exceeding the ordinary course of business of the
COMPANY or the SUBSIDIARIES.
9.8 Decisions of the MANAGEMENT shall be taken by unanimous vote of its
members. In case unanimity cannot be reached, the PARTRNERS' BOARD shall decide.
9.9 Rules of procedure for the members of the MANAGEMENT shall be adopted
by the SHAREHOLDERS' MEETING in accordance with ANNEX 9.9.
10. Staff, Non-Solicitation of Employees
10.1. Before hiring new employees for the COMPANY and/or its SUBSIDIARIES,
the COMPANY and/or the VERWALTUNGS-GMBH shall examine whether employees with the
necessary qualification are available from the PARTIES or their AFFILIATES.
10.2 Neither SIEMENS or BREED shall solicit or hire the employees of either
corporation or the COMPANY. However, the PARTIES remain free to run general
advertisements for employment.
11. Organizational Structure
The COMPANY and its initial SUBSIDIARIES, i.e. PARS and US-PARTNERSHIP,
shall have the initial organizational structure as set forth in ANNEX 11 and as
amended from time to time by resolution of the PARTNERS' BOARD.
III. OPERATION OF THE COMPANY
12. Initial Business Plan, Budget
12.1 The initial business plan as per ANNEX 12.1 shall be submitted by the
MANAGEMENT to the PARTNERS' BOARD for approval at its first meeting.
12.2 The COMPANY shall operate pursuant to an operating budget approved by
the PARTNERS' BOARD at its inaugural meeting and subject to annual review.
<PAGE>
13. Profit and Loss, Financing, Corporate Opportunities
13.1 The PARTNERSHIP MEETING for the COMPANY and the SHAREHOLDERS' MEETING
for the VERWALTUNGS-GMBH shall take the resolution on the allocation of the
financial results as per SUBSECTION 7.2 letter (E) hereof.
13.2 In case that any profit of the COMPANY and/or the VERWALTUNGS-GMBH is
allocated to the PARTIES, this profit shall be distributed among the PARTIES in
proportion to the value of their respective CAPITAL INTERESTS.
13.3 The COMPANY and the VERWALTUNGS-GMBH shall meet their financial
requirements by their own means or by loans raised locally from banks or other
third parties unless the PARTNERS' BOARD otherwise decides upon. The PARTIES are
not obliged to make further contributions in addition to their contribution as
per SECTION 3 hereof, unless otherwise provided for in this AGREEMENT.
13.4 SIEMENS and BREED shall provide funding to the extent revenues and
external funding sources (such as but not limited to loans raised from banks or
other third parties) are inadequate to cover budgeted operating expenses and
capital expenditures. Neither PARTY can be compelled to provide funding for
expenses and capital expenditures above budgeted amounts, except that each PARTY
must fund up to 500.000 $ (fivehundred thousand US Dollar), each FISCAL YEAR, if
required, to prevent insolvency of the COMPANY for German statutory purposes or
to enable the PARTIES to transfer losses of the COMPANY under Sect. 15a of the
German Income Tax Code ("Einkommensteuergesetz"), as decided upon by the
PARTNERS' BOARD.
13.5 If a research and development opportunity with respect to new
SRS-SYSTEMS or COMPONENTS therefor are presented to either PARTY, such PARTY
shall present such opportunity to the COMPANY. If the other PARTY refuses to
fund it in the COMPANY and/or its SUBSIDIARIES, the presenting PARTY will be
permitted to take and exploit the opportunity for its own account.
14. Books and Records, FISCAL YEAR, Financial Statements
14.1 Full and accurate books of account, financial records and annual
financial statements shall be made according to German accounting practices
showing the condition of the business and finances of the COMPANY and the
VERWALTUNGS-GMBH and the ownership of each PARTY and shall be kept at the
principal office of the COMPANY and the VERWALTUNGS-GMBH. Each PARTY, or its
designated representatives, shall have access to and may inspect and copy any
part thereof. In addition, the COMPANY and the VERWALTUNGS-GMBH shall forward
monthly financial reports to each PARTY, which reports shall be presented in
such format and shall contain such information as the PARTNERS' BOARD shall
agree. The financial records and annual financial statements of the SUBSIDIARIES
shall be made according to the generally accepted accounting principles at their
registered seat.
14.2 The COMPANY and the VERWALTUNGS-GMBH shall also furnish to each PARTY
such additional financial information and statements as such PARTY may
reasonably request for its internal reporting procedures and for the preparation
of its consolidated financial statements for any FISCAL YEAR in which the
COMPANY and/or the VERWALTUNGS-GMBH are included in its tax consolidation. The
COMPANY and the VERWALTUNGS-GMBH shall provide BREED at August 1. each year with
the reconciliation of the net-earning statement of the COMPANY and the
VERWALTUNGS-GMBH from German-GAAP to US-GAAP for the period commencing from July
1 to June 30 of the consecutive year.
14.3 The FISCAL YEAR of the COMPANY and of the VERWALTUNGS-GMBH shall run
from October 1 to September 30 of the consecutive year. At the end of each
FISCAL YEAR, an audit of the COMPANY'S and the
<PAGE>
VERWALTUNGS-GMBH'S financial statements shall be performed by the AUDITOR.
14.4 The MANAGEMENT shall, within the first three (3) months of each FISCAL
YEAR prepare the annual financial statements (balance sheet, profit and loss
account including notes and a statement of cash flow) plus an annual FISCAL YEAR
report for the previous FISCAL YEAR, for the COMPANY and the VERWALTUNGS-GMBH
observing the respective provisions on corporations as per Secs. 264 et seq. of
the German Commercial Code ("Handelgesetzbuch"). The annual financial statements
record shall, without undue delay, be submitted to the AUDITOR for auditing. The
audit shall be performed by observing Secs. 316 et seq. of the German Commercial
Code.
14.5 The MANAGEMENT shall submit the audited financial statements together
with the audit report immediately after their completion to each of the
PARTNERS. The PARTNERSHIP MEETING shall resolve within the first six (6) months
of the running FISCAL YEAR on the approval of the annual financial statement and
the employment of the annual profit, the approval of the acts of the MANAGEMENT
for the previous FISCAL YEAR and the appointment of the auditors for the running
FISCAL YEAR, according to SUBSECTION 7.2 letter F hereof.
15. Guidelines for the Operation of the COMPANY
15.1 Concerning the scope of the COMPANY as defined in SUBSECTION 2.4.1
hereof, the PARTIES agree to work exclusively together through the COMPANY
and/or the SUBSIDIARIES, insofar as legally possible and insofar as the
customers do not wish to place an order with only one of the PARTIES or their
AFFILIATES, alone or together with another Party. The PARTIES shall immediately
notify each other if any inquiries concerning the scope of the COMPANY become
known to them.
15.2 If a customer of the COMPANY or the SUBSIDIARIES request the use of
components of third parties, the COMPANY or the SUBSIDIARY shall be permitted to
purchase such component from such third parties. Under such circumstances
neither PARTY shall be obliged to provide technical support for such components.
Any technical information generated by the COMPANY or the SUBSIDIARIES as a
result of the use of such third parties components shall be considered
SRS-FORGROUND TECHNOLOGY.
15.3 The COMPANY and/or its SUBSIDIARIES will act as a reseller for the
PARTIES on a non-exclusive basis in order to market and sell COMPONENTS
worldwide. Customers will be invoiced by the COMPANY or the SUBSIDIARIES and
SIEMENS and BREED will then invoice the COMPANY or the SUBSIDIARIES. The
external and internal pricing, sales and invoicing of COMPONENTS shall be
handled according to the principles laid down in ANNEX 15.3.
15.4 Each of the PARTIES agrees that it shall not sell COMPONENTS, either
directly or indirectly, to third parties which compete with the COMPANY or the
SUBSIDIARIES in the sale of SRS-SYSTEMS and COMPONENTS, unless such PARTY
receives the prior written permission of the PARTNERS' BOARD.
15.5 The preferred suppliers of the COMPANY shall be the PARTIES and their
AFFILLIATES under supply contracts if and to the extent that price, quality,
technology and volume are at least comparable to those obtainable by the
PARTIES' competitors on the market.
15.6 The SRS-BACKGROUND TECHNOLOGY of either BREED or SIEMENS in its
Automotive Systems Group subdivision safety and chassis systems location
Regensburg, Germany shall be licensed on an arms length, non exclusive basis
under technology transfer contracts to the other PARTY as well as to the COMPANY
and its SUBSIDIARIES as of the CLOSING DATE to be used exclusively for the
purposes as described in SUBSECTION 2.4.1. Upon termination of this AGREEMENT
all such licenses shall immediately terminate except for the use of the
fulfillment of existing contractual commitments, provided, however, that upon
termination of this AGREEMENT as per
<PAGE>
SUBSECTION 17.6 (A), the licenses granted to the PARTY terminating this
AGREEMENT and to the COMPANY and its SUBSIDIARIES shall remain in full force and
effect. At any time, no assignment or sublicensing of SRS- BACKGROUND TECHNOLOGY
shall be permitted without the prior written approval of the PARTY owning such
SRS- BACKGROUND TECHNOLOGY.
15.7 Except as otherwise agreed in development contracts between one PARTY
and the COMPANY or the SUBSIDIARIES SRS-FOREGROUND-TECHNOLOGY generated by the
COMPANY or the SUBSIDIARIES on the basis of development or research agreements
with both PARTIES shall be owned jointly by SIEMENS and BREED and those
ownership rights shall continue following termination of this AGREEMENT. Either
PARTY shall be entitled to assign or sublicense such SRS-FOREGROUND-TECHNOLOGY
to third parties with the other PARTY'S consent, which shall not be unreasonably
withheld, during the term of this AGREEMENT and without the other PARTY'S
consent following termination of this AGREEMENT or dissolution of the COMPANY
and the VERWALTUNGS-GMBH.
15.8 SRS-FOREGROUND-TECHNOLOGY generated by either SIEMENS in its
Automotive Systems Group subdivision safety and chassis systems location
Regensburg, Germany and BREED outside the COMPANY shall remain with the
generating PARTY but shall be licensed on an arms length, non exclusive basis
under technology transfer contracts to the other PARTY as well as to the COMPANY
and its SUBSIDIARIES to be used exclusively for the purposes as described in
SUBSECTION 2.4.1. Upon termination of this AGREEMENT all such licenses shall
immediately terminate except for the use of the fulfillment of existing
contractual commitments, provided, however, that upon termination of this
AGREEMENT as per SUBSECTION 17.6 (A), the licenses granted to the PARTY
terminating this AGREEMENT and to the COMPANY and its SUBSIDIARIES shall remain
in full force and effect. At any time, no assignment or sublicensing of such
SRS-FOREGROUND TECHNOLOGY shall be permitted without the prior written approval
of the PARTY owning such SRS-FOREROUND TECHNOLOGY.
15.9 The sole obligation of the PARTY, COMPANY and the SUBSIDIARY which is
a licensor in accordance with this SECTION 15 under any SRS-BACKGROUND
TECHNOLOGY as well as SRS-FOREGROUND TECHNOLOGY shall be to forward same on an
"as available basis" to the relevant licensee as provided in the applicable
technology transfer agreement, and, to correct errors that might have occurred
in the relevant information without undue delay after such errors become known
to the relevant licensor.
THE WARRANTIES SET FORTH IN THIS SUBSECTION 15.10 APPLY TO ALL SRS-
BACKGROUND TECHNOLOGY AND SRS-FOREGROUND TECHNOLOGY LICENSED OR KNOWINGLY
DISCLOSED HEREUNDER AND ARE IN LIEU OF ALL WARRANTIES EXPRESS OR IMPLIED
INCLUDING WITHOUT LIMITATION THE WARRANTIES THAT SRS-BACKGROUND TECHNOLOGY AND
SRS- FOREGROUND TECHNOLOGY CAN BE USED WITHOUT INFRINGING STATUTORY AND OTHER
RIGHTS OF THIRD PARTIES.
No licensor shall be liable for any indirect or consequential damages of
its licensee, including loss of profit or interest, under any legal cause
whatsoever and on account of whatsoever reason, except where such liability is
mandatory by applicable law.
Nothing in this AGREEMENT shall obligate either PARTY, COMPANY or the
SUBSIDIARIES to apply for, take out, maintain or acquire any statutory
protection, in any country.
15.10 Either PARTY shall be responsible for warranty and liability,
including recall actions, arising from its COMPONENTS marketed by the COMPANY or
the SUBSIDIARIES to customers, and shall indemnify the COMPANY or the
SUBSIDIARIES and the other PARTY and hold them harmless from third parties'
claims. The responsibility for all other cases of warranty and liability,
including recall actions, which cannot be clearly allocated to a PARTY or to the
COMPANY or the SUBSIDIARIES, shall be deemed to be allocated to the COMPANY or
the SUBSIDIARIES, which exercises the respective business, unless the PARTNERS'
BOARD otherwise decides on a case by case basis. The
<PAGE>
COMPANY or the SUBSIDIARIES shall cover such risks with sufficient
insurances.
15.11 Insofar as necessary for the proper operation of the COMPANY, the
VERWALTUNGS-GMBH and their SUBSIDIARIES, SIEMENS and BREED shall provide
administrative, financial, legal, consultancy and other services of similar kind
to the COMPANY and the VERWALTUNGS-GMBH including their SUBSIDIARIES as
requested by the COMPANY or the VERWALTUNGS-GMBH under service contracts on
arm's length basis.
16. Contracts
The PARTIES shall take the necessary steps to ensure that the contracts as
provided for in this AGREEMENT shall be concluded between themselves and/or with
the COMPANY or the SUBSIDIARIES as of the CLOSING DATE:
- research and development contracts
- license agreements
- supply contracts
- reseller basic
-contracts
- service contracts
IV. TERM OF AGREEMENT, DISSOLUTION
17. Term of AGREEMENT
17.1 Except as otherwise stipulated in SUBSECTION 17.2, this AGREEMENT
including its ANNEXES, if not a later date is agreed upon for the ANNEXES, shall
not become binding until the EFFECTIVE DATE.
17.2 Notwithstanding SUBSECTION 17.1 SUBSECTION 17.2, 19.2, 19.3, 20, 21,
22 and 23.9 shall become binding upon SIGNATURE.
17.3 Except as provided otherwise in this AGREEMENT, this AGREEMENT shall
only terminate upon either PARTY disposing of its entire CAPITAL INTERESTS in
the COMPANY and the VERWALTUNGS-GMBH in accordance with the provisions under
SECTIONS 4, 5 and SUBSECTION 7.14 of this AGREEMENT or in accordance with the
ARTICLES OF LIMITED PARTNERSHIP or the STATUTES. The same shall apply if the
COMPANY and the VERWALTUNGS-GMBH are dissolved and liquidated for any reason
whatsoever.
17.4 This AGREEMENT may be ordinarily terminated by either PARTY giving six
(6) months written notice to the other PARTY prior to the end of a FISCAL YEAR
of the COMPANY, but not before the end of the sixth (6) FISCAL YEAR.
17.5 Any notice of termination of this AGREEMENT shall automatically extend
to the COMPANY and the VERWALTUNGS-GMBH. The consequence of termination shall be
the dissolution of the COMPANY and the VERWALTUNGS-GMBH. SECTION 18 shall apply
mutatis mutandis.
17.6 The right to terminate this AGREEMENT extraordinarily without prior
written notice for important cause shall remain unaffected thereby. Important
cause shall be constituted without limitation if:
<PAGE>
(A) this AGREEMENT or the ARTICLES OF LIMITED PARTNERSHIP or the STATUTES
or any of the related agreements provided for herein and necessary for the
proper operation of the COMPANY and its SUBSIDIARIES has been materially
breached by the other PARTY and despite prior written notice by the terminating
PARTY and an adequate opportunity to cure the breach, the other PARTY has failed
to cure the breach;
(B) the other PARTY is permanently or for an unforeseeable period of time
prevented from fulfilling its obligations under this AGREEMENT or the ARTICLES
OF LIMITED PARTNERSHIP or the STATUTES or any of the related agreements provided
for herein and necessary for the proper operation of the COMPANY and its
SUBSIDIARIES;
(C) the other PARTY undergoes bankruptcy, reorganization proceedings or any
other insolvency proceedings opened against it by a court or another public
authority or has voluntarily filed a respective petition or has involuntarily
filed against it a respective petition which is not dismissed within sixty (60)
days;
(D) the other PARTY has become insolvent or faces a substantial
deterioration, actual or imminent, in its assets without an appropriate plan to
avoid such deterioration;
(E) the other PARTY has an order entered against it either appointing a
receiver or trustee for, or issuing a levy attachment against, a substantial
portion of its assets, without such order being vacated, set aside or stayed
within sixty (60) days;
(F) the other PARTY has its CAPITAL INTERESTS in the COMPANY seized by a
creditor based on an executory title which is not only provisionally enforceable
or makes an assignment for the benefit of its creditors;
(G) The other Party is dissolved.
17.7 SECTION 20 and 21 shall survive the termination of this AGREEMENT for
whatever reasons.
18. Dissolution
18.1 The COMPANY and the VERWALTUNGS-GMBH shall be dissolved if so decided
unanimously by the PARTNERSHIP MEETING and the SHAREHOLDERS' MEETING or
according to a respective provision of this AGREEMENT.
18.2 Following any decision about the dissolution of the COMPANY and the
VERWALTUNGS-GMBH the PARTIES shall commence an liquidation procedure according
to the mandatory law. The liquidation shall be carried out as follows:
18.2.1 The assets of the COMPANY and the VERWALTUNGS-GMBH without the
interests in the SUBSIDIARIES held by the COMPANY shall be distributed among the
PARTIES taking into consideration the respective scope of business. If the
assets, including any intellectual property rights like patents or other
know-how developed during the existence of the COMPANY, can be allocated clearly
to one of the PARTIES, this PARTY shall have the right to take over these
assets.
18.2.2 The interests in the SUBSIDIARIES held by the COMPANY shall be
retransfered to the PARTY, which has contributed such interests to the COMPANY
or the VERWALTUNGS-GMBH according to SUBSECTION 3.2.1 and 3.2.2. Each PARTY
shall bear all costs and expenses, including any and all duties and taxes,
related to such retransfer of the shares and interests in the SUBSIDIARIES to
the respective PARTY.
<PAGE>
18.2.3 It is hereby understood that the allocation and take-over of assets
as well as the retransfer of shares by one PARTY shall be compensated to the
other PARTY if it results in a shift of value distributed among the PARTIES. The
value of the assets and the interest in the SUBSIDIARIES shall be determined by
an ACCOUNTING FIRM jointly appointed by the PARTIES. The opinion of the
ACCOUNTING FIRM as to the value of the assets and the interests in the
SUBSIDIARIES shall be based on a generally accepted valuation method being in
common use at the time of appointment of the ACCOUNTING FIRM, however the
opinion of the chartered ACCOUNTING FIRM shall be final and binding upon both
PARTIES.
18.2.4 It is hereby understood, that all employees which were employed by
either PARTY at the CLOSING DATE and transfered to the COMPANY or the
SUBSIDIARIES shall, as far as legally possible, return to the respective PARTY.
18.3. The dissolution of the COMPANY and the VERWALTUNGS-GMBH shall be
carried out in a manner that is most tax efficient for both PARTIES.
18.4 The dissolution may be averted by a PARTY buying the entire CAPITAL
INTERESTS of the other PARTY in the COMPANY and the VERWALTUNGS-GMBH.
18.4.1 The PARTY unwilling to buy the other PARTY'S CAPITAL INTERESTS is
obliged to sell its CAPITAL INTEREST, to the other PARTY. The purchase price
shall be agreed upon by the PARTIES and, failing such agreement, shall be
determined by an ACCOUNTING FIRM jointly appointed by the PARTIES. The opinion
of the ACCOUNTING FIRM as to the price of the CAPITAL INTERESTS shall be based
on a generally accepted valuation method being in common use at the time of
appointment of the ACCOUNTING FIRM and shall result in a reasonable,
arm's-length price on the basis of a willing buyer and a willing seller of the
relevant CAPITAL INTEREST; however, that the opinion of the chartered ACCOUNTING
FIRM shall be final and binding upon both PARTIES. The cost of the opinion of
the ACCOUNTING FIRM shall be paid by the PARTY obliged to sell.
18.4.2 If both PARTIES are willing to purchase, SUBSECTION 7.14 sentences 5
to 7 shall apply mutatis mandis. The transaction to sell and purchase according
to SUBSECTION 18.5.1 shall be completed without undue delay.
18.4.3 If neither PARTY is willing to buy the entire CAPITAL INTEREST in
the COMPANY and in the VERWALTUNGS-GMBH and consent cannot be reached within two
(2) months after receipt of the termination notice or after occurrence of any
other cause upon which this AGREEMENT ends, the COMPANY and the VERWALTUNGS-
GMBH have to be dissolved.
V. OTHER PROVISIONS
19. EFFECTIVE DATE, Premerger Control
19.1 The EFFECTIVE DATE shall be the date on which each of the following
conditions is fulfilled:
19.1.1 Signature of both PARTIES;
19.1.2 Approval of the Corporate Executive Board ("Zentralvorstand") of
SIEMENS and the Board of Directors of BREED;
19.1.3 Obtaining of all the permissions or clearances, which the PARTIES
jointly indentify to be relevant to the transaction under premerger control, or
of any other competent antitrust authorities;
<PAGE>
19.1.4 Expiration of any required premerger notification waiting period;
19.1.5 Submittal of the application for antitrust clearance under Art. 85
EEC Treaty. to the European Commission
19.2 Immediately after SIGNATURE, the PARTIES shall jointly file the
relevant antitrust notifications and applications to any competent antitrust
authority. The PARTIES shall assist each other with respect to the preparation
of such notifications and applications and provide each other with all
information requested by the competent antitrust authority.
19.3 Except as otherwise provided for in the Stock Purchase Agreement dated
October, 14. 1997 including its annexes and the Make Whole Agreement dated
November, 07. 1997 the PARTIES shall have no claims, of whatever kind, against
each other in case that the creation of the COMPANY should not be approved in
the premerger control procedure(s) or the antitrust clearance under Art. 85 EEC
Treaty should not be given.
20. Applicable Law
The substantive law applicable to this AGREEMENT and its ANNEXES, unless
otherwise agreed upon in an ANNEX, is the law in force in Germany.
21. DISPUTE Settlement
21.1 DISPUTES in technical matters shall be referred to a single expert
chosen by the PARTNERS' BOARD. Such expert's opinion shall be binding upon the
PARTIES and/or the COMPANY. The expert's costs shall be borne by the COMPANY.
21.2 Any DISPUTE shall at first be settled by an amicable effort on the
part of the PARTIES affected. An attempt to arrive at a settlement shall be
deemed to have failed as soon as one of the PARTIES so notifies the other PARTY
in writing.
21.3 If an attempt at settlement has failed, the DISPUTE shall be finally
and binding settled under the commercial arbitration rules of the United Nations
Commission on International Trade Law (the "Rules"). Each PARTY shall appoint an
arbitrator, and then the two PARTY-appointed arbitrators shall appoint a third
arbitrator, or failing agreement on such choice, such third arbitrator shall be
appointed by the President of the International Chamber of Commerce in Paris.
The third arbitrator shall have the qualifications to hold a judgeship.
21.4 The seat of arbitration shall be The Hague, The Netherlands. The
procedural law of this place shall apply where the Rules are silent.
21.5 The language to be used in the arbitration proceedings shall be
English.
21.6 The arbitral award shall be substantiated in writing. The arbitral
tribunal shall decide on the matter of costs of the arbitration and on the
allocation of expenditure among the respective PARTIES to the arbitration
proceedings. The PARTY in whose favor a final arbitral award is rendered shall
be entitled to be reimbursed its reasonable costs and reasonable attorneys fees
by the other PARTY.
22. Confidentiality
<PAGE>
22.1 Either PARTY shall use all business and technical information received
from the other PARTY or the COMPANY and/or the VERWALTUNGS-GMBH in connection
with this AGREEMENT and its performance and which the other PARTY expressly
states to be confidential, or the confidential nature of which can be assumed on
the basis of the circumstances of its disclosure, solely for the purposes for
which it was provided, and shall treat it in the same way as its own business
secrets and not make it available to any third party, unless the business or
technical information in question:
(A) is generally available from public sources or in the public domain; or
(B) is received at any time from any third party without nondisclosure
obligation to the disclosing PARTY; or
(C) is shown to have been developed independently by the receiving PARTY
without reliance on the disclosing PARTY'S confidential information or to have
been known to the receiving PARTY prior to its disclosure by the disclosing
PARTY; or
(D) must be disclosed to a third party for the purpose of
performing this AGREEMENT, if the third party is or becomes subject to an
equivalent confidentiality obligation.
22.2 Through this SECTION 22 neither PARTY shall be prevented from making
available its technology others than SRS-BACKGROUND TECHNOLOGY or SRS-FOREGROUND
TECHNOLOGY developed independently by one PARTY to third parties if this
technology is derived in part from the cooperation under this AGREEMENT, but is
inseparably connected with that PARTY'S own know-how.
22.3 The obligations imposed by this SECTION 22 shall continue for a period
of five (5) years after termination of this AGREEMENT.
22.4 The PARTIES shall cause the COMPANY AND THE SUBSIDIARIES to be bound
by the same confidentiality obligations as imposed by this SECTION 22 with
respect to the business and technical information which the COMPANY or the
SUBSIDARIES will receive from either PARTY.
22.5 The conclusion of this AGREEMENT, as well as its content, is to be
treated confidential by the PARTIES according to SUBSECTION 22.1. Any reference
to business links between the PARTIES to the AGREEMENT must not be made in
advertising literature until written approval has been received from the other
PARTY which shall not be unreasonably withheld.
23. Miscellaneous
23.1 This AGREEMENT shall not be modified except by a written instrument
executed by duly authorized representatives of the PARTIES hereto.
23.2 The governing language between the PARTIES shall be English. All
reports, statements, balance sheets and the like to be prepared and issued under
operation of the COMPANY as well as any auditing shall, in addition to
requirements under the German law, also be done in the English language, if
reasonably requested by a PARTY. The same applies for any kind of communication
in and between the corporate bodies of the COMPANY and/or the VERWALTUNGS-GMBH
and between the COMPANY and/or the VERWALTUNGS-GMBH and the PARTIES, unless
otherwise decided by the PARTNERS' BOARD.
23.3 In the event that any provision herein shall be held to be invalid or
unenforceable, the remaining provisions herein shall not be affected thereby.
Should an individual provision of this AGREEMENT be or become
<PAGE>
ineffective or unenforceable for reasons beyond the PARTIES' control the
PARTIES shall attempt to arrive amicably at a new provision on a favorable
economic effect corresponding to the ineffective or unenforceable provision it
is replacing.
23.4 Each PARTY hereto may request additional audits performed by an
auditor of its choice who must be certified in Germany. The cost of the
additional audit shall be borne by the PARTY requesting the audit.
23.5 The PARTIES hereto shall ensure that their representatives or nominees
within the COMPANY and the VERWALTUNGS-GMBH, in executing their respective
functions, will comply with the provisions of this AGREEMENT, the ARTICLES OF
LIMITED PARTNERSHIP and the STATUTES as well as with any other agreements
concluded or to be concluded between the PARTIES with respect to the COMPANY
and/or the VERWALTUNGS-GMBH or any of their activities.
23.6 The following ANNEXES form an integral part of this AGREEMENT:
ANNEX 1: COMPONENTS/SRS-SYSTEM
ANNEX 2.1A: ARTICLES OF LIMITED PARTNERSHIP of the COMPANY
ANNEX 2.1B: STATUTES of the VERWALTUNGS-GMBH
ANNEX 3.2.2:Assets to be contributed by BREED to US-PARTNERSHIP
ANNEX 3.2.5:Representations and Warranties of the CONTRIBUTION AGREEMENTS
ANNEX 8.3: Rules of Procedure for the PARTNERS' BOARD
ANNEX 9.9: Rules of Procedure for the MANAGEMENT
ANNEX 11: Initial Organizational Structure of the COMPANY and its SUBSIDIARIES
ANNEX 12.1: Business Plan
ANNEX 15.3: Principles for pricing, sales and invoicing of components of SRS-
SYSTEMS
In the event of any ambiguity or conflict arising between the provisions of
this AGREEMENT and those of the ANNEXES this AGREEMENT shall prevail.
23.7 In the event of any conflict between the provisions of this AGREEMENT
and ARTICLES OF LIMITED PARTNERSHIP and the STATUTES or other corporate
documents of the COMPANY and/or the VERWALTUNGS- GMBH, the provisions of this
AGREEMENT shall prevail and the PARTIES shall exercise all voting and other
rights and powers available to them so as to give effect to the provisions of
this AGREEMENT and shall further procure any required amendment to the ARTICLES
OF LIMITED PARTNERSHIP and/or the STATUTES and/or other constitutional documents
of the COMPANY and/or the VERWALTUNGS-GMBH, as may be necessary.
23.8 This AGREEMENT, including its ANNEXES, entirely replaces and
supersedes between the PARTIES the Non-Binding Memorandum of Understanding dated
July, 22. 1997 entered into by the PARTIES and the Memorandum of Understanding
including the Joint Venture Term Sheet dated October, 14. 1997 entered into by
the PARTIES.
23.9 Either PARTY shall bear its own expenses, including those of counsel
and auditors, in connection with this AGREEMENT and the COMPANY contemplated
herein, unless otherwise provided for in this AGREEMENT or the ARTICLES OF
LIMITED PARTNERSHIP or the STATUTES. The administrative fees for the pre-merger
control procedure(s) as per SUBSECTION 19.1.3 as well as any expenses for
outside counsels related to such premerge controll procedures and the filing
procedure for the clearance under Art. 85 EEC Treaty shall be shared equally by
the PARTIES.
24. Notices
All communications and notices to be given under this AGREEMENT shall be
delivered:
<PAGE>
if addressed to SIEMENS to:
Siemens Aktiengesellschaft
Rechtsabteilung
Werner-von-Siemens-Str. 50
D-91050 Erlangen, Germany
Telephone: ++49-9131-7-43592
Telefax: ++49-9131-7-29001
and if addressed to BREED to:
Breed Technologies, Inc.
Legal Department
5300 Old Tampa Highway
Lakeland Florida 33807-3050, USA
Telephone: ++1-941-688-6473
Telefax: ++1-941-688-6016
or any other address and/or telephone or telefax number designated in
writing.
<PAGE>
IN WITNESS WHEREOF, the PARTIES have duly executed this AGREEMENT
in Regensburg, Germany on [.....] [.......................].
Siemens Aktiengesellschaft Breed Technologies, Inc.
- --------------------------- ---------------------------
Name: Name:
Title: Title:
- ---------------------------- ----------------------------
Name: Name:
Title: Title:
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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