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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 15, 1998
REGISTRATION NO. 333-48231
333-48231-01
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------
BTI CAPITAL TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS TRUST AGREEMENT)
DELAWARE TO BE APPLIED FOR
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
BREED TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-2767118
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5300 OLD TAMPA HIGHWAY
LAKELAND, FLORIDA 33807
(941) 668-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
CHARLES J. SPERANZELLA, JR.
VICE CHAIRMAN
BREED TECHNOLOGIES, INC.
5300 OLD TAMPA HIGHWAY
LAKELAND, FLORIDA 33807
(941) 668-6473
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
MARY A. BERNARD
KING & SPALDING
1185 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 556-2100
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement, as determined
in light of market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 15, 1998
PROSPECTUS
BREED TECHNOLOGIES, INC.
6.50% CONVERTIBLE SUBORDINATED DEBENTURES
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BTI CAPITAL TRUST
6.50% CONVERTIBLE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $50 PER CONVERTIBLE TRUST PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY, AND CONVERTIBLE INTO COMMON STOCK
OF,
BREED TECHNOLOGIES, INC.
This Prospectus relates to the resale from time to time of the 6.50%
Convertible Trust Preferred Securities (the "Preferred Securities"), which
represent preferred undivided beneficial interests in the assets of BTI Capital
Trust, a statutory business trust created under the laws of the State of
Delaware (the "Trust") and the shares of common stock, par value $.01 per share
("Common Stock"), of Breed Technologies, Inc., a Delaware corporation (the
"Company"), issuable upon conversion of the Preferred Securities. The Preferred
Securities were originally issued and sold (the "Original Offering") by the
trust in a private placement to the Initial Purchasers (as defined herein) on
November 25, 1997 (the "Original Offering Date") and were simultaneously resold
by the Initial Purchasers in transactions exempt from the Securities Act of
1933, as amended (the "Securities Act"), in the United States to persons
reasonably believed by the Initial Purchasers to be qualified institutional
buyers as defined in Rule 144A under the Securities Act, and outside the United
States to non-U.S. persons in reliance on Regulation S under the Securities
Act. The Company owns all of the common securities, which represent undivided
beneficial interests in the assets of the Trust (the "Common Securities" and,
together with the Preferred Securities, the "Trust Securities"). The Trust
exists for the sole purpose of issuing the Preferred Securities and the Common
Securities, investing the proceeds thereof in an equivalent amount of 6.50%
Convertible Subordinated Debentures due 2027 (the "Convertible Debentures") of
the Company in an aggregate principal amount equal to the aggregate liquidation
amount of Trust Securities. The Convertible Debentures are unsecured,
subordinated obligations of the Company as described herein. Upon an event of
default under the Declaration (as defined herein), the holders of Preferred
Securities will have a preference over the holders of the Common Securities
with respect to payments in respect of distributions and payments upon
redemption, liquidation and otherwise.
Each Preferred Security is convertible in the manner described herein, at the
option of the holder thereof, into shares of the Company's Common Stock, at a
conversion rate of 2.1973 shares of Common Stock for each Preferred Security
(equivalent to $22.755 per share of Common Stock), subject to adjustment in
certain circumstances. The Common Stock is listed on The New York Stock
Exchange (the "NYSE") under the symbol "BDT." See "Description of the Preferred
Securities--Conversion Rights." On June 12, 1998, the last reported sales price
of the Common Stock on the NYSE was $16 9/16 share.
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 on February 15, May 15, August 15 and November 15 of each
year, commencing February 15, 1998 (the "Distributions"). The distribution rate
and the distribution and other payment dates for the Preferred Securities
correspond to the interest rate and interest and other payment dates on the
Convertible Debentures, which are the sole asset of the Trust. As a result, if
principal and interest are not paid on the Convertible Debentures, no amounts
will be paid on the Preferred Securities.
The Preferred Securities, the Convertible Debentures, the Common Stock
issuable upon conversion thereof and the associated Guarantee (as defined
below) (collectively, the "Offered Securities") may be offered and sold from
time to time by the holders named herein or in an accompanying supplement to
this Prospectus (a "Prospectus Supplement") or by their transferees, pledgees,
donees or their successors (collectively, the "Selling Holders") pursuant to
this Prospectus. The Offered Securities may be sold by the Selling Holders from
time to time directly to purchasers or through agents, underwriters or dealers.
See "Plan of Distribution" and "Selling Holders." If required, the names of any
such agents or underwriters involved in the sale of the Offered Securities and
the applicable agent's commission, dealer's purchase price or underwriter's
discount, if any, will be set forth in a Prospectus Supplement. The Selling
Holders will receive all of the net proceeds from the sale of the Offered
Securities and will pay all underwriting discounts and selling commissions, if
any, applicable to any such sale. No portion of the net proceeds from the sale
of Offered Securities will be received by the Company or the Trust. The Company
is responsible for payment of certain other expenses incident to the offer and
sale of the Offered Securities. The Selling Holders and any broker/dealers,
agents or underwriters that participate in the distribution of the Offered
Securities may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commission received by them and any profit on the
resale of the Offered Securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. See "Plan of
Distribution" for a description of indemnification arrangements.
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN MATERIAL FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE PREFERRED SECURITIES OFFERED HEREBY.
APPLICATION WILL BE MADE TO LIST THE COMMON STOCK REGISTERED PURSUANT HERETO
ON THE NEW YORK STOCK EXCHANGE
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The Date of this Prospectus is June , 1998
<PAGE>
(continued from cover page)
The payment of Distributions out of moneys held by the Trust and payments on
liquidation of the Trust or the redemption of Preferred Securities, as set
forth below, are guaranteed by the Company (the "Guarantee") to the extent
described under "Description of the Guarantee." The Guarantee covers payments
of Distributions and other payments on the Preferred Securities only if and to
the extent that the Trust has funds available therefor, which will not be the
case unless the Company has made corresponding payments of interest or
principal or other payments on the Convertible Debentures held by the Trust.
The Guarantee, when taken together with the Company's obligations under the
Convertible Debentures, the Indenture (as defined herein) pursuant to which
the Convertible Debentures are issued and its obligations under the
Declaration, including its obligations to pay costs, expenses, debts and
liabilities of the Trust (other than with respect to the Trust Securities),
provides a full and unconditional guarantee of amounts due on the Preferred
Securities. See "Effect of Obligations Under the Convertible Debentures and
the Guarantee" and "Description of the Guarantee."
The Convertible Debentures are redeemable by the Company, in whole or in
part, from time to time, on or after November 25, 2000 at the redemption
prices specified herein, or at any time, in whole or in part, in certain
circumstances upon the occurrence of a Tax Event (as defined herein). If the
Company redeems Convertible Debentures, the Trust must redeem Trust Securities
having an aggregate liquidation amount equal to the aggregate principal amount
of the Convertible Debentures so redeemed at the redemption prices specified
herein per Trust Security, plus accrued and unpaid Distributions thereon to
the date fixed for redemption. The outstanding Preferred Securities will be
redeemed upon maturity of the Convertible Debentures on November 15, 2027. In
addition, upon the occurrence of a Special Event (as defined herein) arising
from a change in laws or a change in legal interpretation regarding tax or
investment company matters, unless the Convertible Debentures are redeemed in
the limited circumstances described herein, the Trust shall be dissolved, with
the result that the Convertible Debentures will be distributed to the holders
of the Trust Securities, on a pro rata basis, in lieu of any cash
distribution. See "Description of the Preferred Securities--Mandatory
Redemption," "Description of the Preferred Securities--Special Event
Redemption or Distribution" and "Description of the Convertible Debentures."
In the event of the voluntary or involuntary dissolution, winding up or
termination of the Trust, after satisfaction of liabilities to creditors of
the Trust as required by applicable law, the holders of the Preferred
Securities will be entitled to receive for each Preferred Security a
liquidation amount of $50 plus accrued and unpaid Distributions thereon to the
date of payment, unless, in connection with such dissolution, winding-up or
termination of the Trust, the Convertible Debentures are distributed to the
holders of the Preferred Securities. See "Description of the Preferred
Securities--Liquidation Distribution Upon Dissolution."
The obligations of the Company under the Guarantee rank (i) subordinate and
junior in right of payment to all other liabilities of the Company except any
liabilities that may be pari passu expressly by their terms, (ii) pari passu
with the most senior preferred or preference stock, if any, issued from time
to time by the Company, and with any guarantee now or hereafter entered into
by the Company in respect of any preferred or preference stock or preferred
securities of any affiliate of the Company and (iii) senior to the Common
Stock. If the Company does not make principal or interest payments on the
Convertible Debentures, the Trust will not have sufficient funds to redeem or
make distributions on the Preferred Securities, in which event holders of the
Preferred Securities would not be able to rely on the Guarantee for payment of
such redemption or distributions until the Trust has sufficient funds
available therefor. The obligations of the Company under the Convertible
Debentures are subordinate and junior in right of payment to all present and
future Senior Indebtedness (as defined herein) of the Company. As of April 30,
1998, the aggregate Senior Indebtedness of the Company was approximately $924
million. The obligations of the Company under the Convertible Debentures are
also effectively subordinated to all existing and future indebtedness and
other liabilities, including trade payables, of the Company's subsidiaries. As
of April 30, 1998, the aggregate of such indebtedness and other liabilities,
including trade payables, of the Company's subsidiaries was approximately $433
million.
The Company has the right to defer payments of interest on the Convertible
Debentures by extending the interest payment period on the Convertible
Debentures at any time (so long as no Indenture Event of Default (as defined
herein) has occurred and is continuing) for up to 20 consecutive quarters
(each, an "Extension Period"); provided that no such Extension Period may
extend beyond the maturity date of the Convertible Debentures. If interest
payments are so deferred, Distributions on the Preferred Securities will also
be deferred. During any Extension Period, Distributions on the Preferred
Securities will continue to accrue with interest thereon (to the extent
permitted by applicable law) at an annual rate of 6.50% per annum, compounded
quarterly. Additionally, during any Extension Period, holders of Preferred
Securities will continue to recognize interest income in the form of original
issue discount ("OID") for United States federal income tax purposes in
advance of receipt of cash distributions with respect to such deferred
interest payments. There could be multiple Extension Periods of varying
lengths throughout the term of the Convertible Debentures. The Company has no
current intention of exercising its right to defer payments of interest by
extending the interest payment period on the Convertible Debentures. See
"Description of the Convertible Debentures--Interest Income and Option to
Extend Interest Payment Periods," "Risk Factors--Company Option to Extend
Interest Payment Periods; OID Risk" and "United States Federal Income
Taxation--Interest Income and Original Issue Discount."
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AVAILABLE INFORMATION
The Company is subject to the information requirements of the Exchange Act
and in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information concerning the Company
can be inspected and copied at the public reference facilities maintained by
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549 and at the following regional offices of the
Commission: Seven World Trade Center, Suite 1300, New York, New York 10048 and
at Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies
of such material can be obtained by writing to the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission also maintains a web site that contains reports, proxy
statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov. Such material can also be inspected and copied at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein together with all amendments and exhibits thereto, called the
"Registration Statement") under the Securities Act with respect to the Offered
Securities. This Prospectus does not contain all of the information set forth
or incorporated by reference in the Registration Statement and the exhibits
and schedules relating thereto, certain portions of which have been omitted as
permitted by the Rules and Regulations of the Commission. For further
information with respect to the Company and the securities offered by this
Prospectus, reference is made to the Registration Statement and the exhibits
filed or incorporated as a part thereof, which are on file at the offices of
the Commission and may be obtained upon payment of the fee prescribed by the
Commission, or may be examined without charge at the offices of the Commission
or on the Commission's web site. Statements contained in this Prospectus as to
the contents of any documents referred to are not necessarily complete; with
respect to any such document filed as an exhibit to the Registration
Statement, reference is made to such exhibit for a more complete description
of the matter involved, and each such statement shall be deemed qualified in
its entirety by such reference.
No separate financial statements of the Trust have been included herein. The
Company does not believe that such financial statements would be material to
holders of Preferred Securities because (i) all of the voting securities of
the Trust are, and will continue to be, owned, directly or indirectly, by the
Company, a reporting company under the Securities Exchange Act of 1934 (the
"Exchange Act"), (ii) the Trust has no independent operations and exists for
the sole purpose of issuing securities representing undivided beneficial
interests in the assets of the Trust, investing the proceeds thereof in the
Convertible Debentures issued by the Company and engaging in only those other
activities that are necessary or incidental thereto and (iii) the obligations
of the Trust under the Trust Securities are fully and unconditionally
guaranteed by the Company if and to the extent that the Trust has funds
available to meet such obligations. See "The Trust," "Description of the
Preferred Securities," "Description of the Convertible Debentures" and
"Description of the Guarantee."
The summaries of various agreements referred to in this Prospectus do not
purport to be complete descriptions of such agreements and are subject to the
detailed provisions contained in the various documents. Copies of forms of
such agreements are available upon request from the Secretary of the Company.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference: (a) the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1997; (b) the Company's Quarterly Reports
on Form 10-Q for the quarters ended September 30, 1997, December 31, 1997 and
March 31, 1998; (c) the Company's Current Report on Form 8-K filed on November
14, 1997, as amended by the Company's Current Report on Form 8-K/A filed on
January 13, 1998; (d) the Company's Current Report on Form 8-K filed on May
12, 1998; (e) the Company's Current Report on Form 8-K filed on June 15, 1998;
and (f) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A as filed with the Commission on
October 19, 1992.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Offered Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the request of such person, a copy of any or all
of the foregoing documents incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests for such documents should be
submitted in writing to Stuart Boyd, Esq., Associate General Counsel, Breed
Technologies, Inc., 5300 Old Tampa Highway, P.O. Box 33050, Lakeland, Florida
33807, or by telephone at 941-668-6000.
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RISK FACTORS
An investment in the Offered Securities involves a high degree of risk.
Prospective investors should carefully consider the following risk factors, in
addition to the other information set forth in this Prospectus or incorporated
by reference herein, in connection with an investment in the Offered
Securities.
RISKS RELATING TO THE COMPANY
Substantial Leverage. The Company has been and will continue to be highly
leveraged. The Company has indebtedness that is substantial in relation to its
stockholders' equity. As of April 30, 1998, the Company had outstanding
approximately $924 million of total debt (excluding the Convertible
Debentures) and approximately $16 million of stockholders' equity. All of this
debt is senior to the Convertible Debentures, the interest payments on which
will provide the funds required for Distributions on the Preferred Securities.
See "Risk Factors--Ranking of Subordinate Obligations Under the Guarantee and
Convertible Debentures."
The degree to which the Company is leveraged could have important
consequences for the holders of the Preferred Securities (or Common Stock
which may be acquired upon conversion), including, but not limited to, the
following: (i) a substantial portion of the Company's cash flow from
operations must be dedicated to the payment of principal and interest on its
indebtedness and will not be available for other purposes; (ii) the Company's
ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions or other purposes may be impaired; (iii)
the Company's leverage may increase its vulnerability to economic downturns
and limit its ability to withstand competitive pressures; and (iv) the
Company's ability to capitalize on significant business opportunities may be
limited.
The ability of the Company to meet its debt service obligations and its
obligations under the Convertible Debentures will depend on the future
operating performance and financial results of the Company, which will be
subject in part to factors beyond the Company's control. Although management
believes that the Company's cash flow will be adequate to meet its interest
and principal payments, there can be no assurance that the Company will
continue to generate earnings in the future sufficient to cover its fixed
charges. If the Company is unable to generate earnings in the future
sufficient to cover its fixed charges (including its obligations under the
Convertible Debentures) and is unable to borrow sufficient funds under its
existing credit facilities or from other sources, it may be required to
refinance all or a portion of its existing debt (including the Convertible
Debentures) or to sell all or a portion of its assets. There can be no
assurance that a refinancing would be possible, nor can there be any assurance
as to the timing of any asset sales or the proceeds the Company could realize
therefrom.
Integration and Management of Acquired Businesses. Since August 1994, the
Company has completed ten acquisitions, including the acquisition of the
safety restraint systems business ("SRS") of AlliedSignal Inc.
("AlliedSignal") on October 30, 1997 (the "SRS Acquisition"). The SRS
Acquisition was significantly larger than any acquisition previously completed
by the Company and represents a substantial increase in the scope of the
Company's business. Pro forma for the SRS Acquisition and three acquisitions
completed during fiscal 1997 (the "1997 Acquisitions"), the Company's fiscal
1997 net sales would have been $1.8 billion compared to $795 million on an
actual basis. The Company has limited experience in the design, development,
manufacture and sale of seat belt systems, which represent a significant
portion of the SRS business. Pro forma for the SRS Acquisition and the 1997
Acquisitions, seat belt system sales would have accounted for 27.1% of the
Company's fiscal 1997 net sales. There can be no assurance that the Company
will be able to successfully integrate the operations of SRS or the other
recently acquired businesses into the Company's operations. In particular, the
Company may experience (i) difficulty in assimilating the operations and
personnel of the acquired companies, (ii) disruption of the Company's ongoing
business, (iii) the inability of management to maximize the financial and
strategic position of the Company by the successful incorporation of acquired
products or technologies into the Company's offerings, (iv) difficulty in the
maintenance of uniform standards, controls, procedures and policies and (v)
the impairment of relationships with employees and customers. In addition, the
Company has committed to a plan to reposition and combine certain of the
Company's manufacturing and sales and
5
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engineering facilities and, in connection with such plan, incurred a
repositioning charge of $244 million during the three months ended December
31, 1997 (the "Repositioning Charge"). Any failure on the part of the Company
to successfully integrate and manage the operations of SRS or the other
recently acquired businesses, or to successfully consolidate its facilities
and sales and marketing offices in accordance with the plan, could have a
material adverse effect on the Company's financial condition and results of
operations. The Company has little or no history of operations on a combined
basis with SRS or the other most recently acquired businesses.
Dependence on the Development of New Products. In recent years, automotive
occupant protection systems have changed significantly, based on changes in
government regulations, the demand by OEMs and consumers for improved systems
and rapid advances in the technology underlying these systems. The Company
believes that occupant protection systems will continue to change rapidly,
with industry participants seeking to develop and introduce intelligent
occupant protection systems that will be able to react differently to
individual crash situations and to make improvements in other components of
occupant protection systems. The Company believes that its future success will
depend in part on its ability to enhance its existing products and to develop
new products that meet changing government regulatory requirements and satisfy
OEM and consumer requirements, particularly requirements for intelligent
occupant protection systems. There can be no assurance that the Company will
meet these objectives and any failure to do so could have a material adverse
effect on the Company's financial condition and results of operations.
Reliance on Major Customers. Pro forma for the SRS Acquisition and the 1997
Acquisitions, sales to GM, Fiat, Ford and Chrysler represented approximately
21%, 18%, 17% and 16%, respectively, of the Company's net sales during fiscal
1997 and 23%, 18%, 14% and 21%, respectively, of the Company's net sales for
the first nine months of fiscal 1998. These customers are not committed to
purchase any specified quantities of products from the Company and there can
be no assurance that these customers will continue to purchase products from
the Company at levels consistent with previous purchases. A significant
decline in sales of the Company's products to these customers would have a
material adverse effect on the Company's financial condition and results of
operations.
Effects of Likely Price Decreases. The Company anticipates that the prices
of automotive occupant protection systems and components such as those sold by
the Company will continue to decline over the next several years as a result
of competitive pressures and OEM requirements. The Company's future
profitability, therefore, will depend, among other things, on its ability to
continue to reduce its per-unit costs and maintain a cost structure,
internally and with its suppliers, that will enable it to offer competitive
prices. There can be no assurance that the Company will be successful in doing
so.
Dependence on the Automotive Industry. Sales of products to the automotive
industry have accounted for substantially all of the net sales of the Company.
The automobile market is cyclical and dependent on general economic
conditions. Future declines in car production in the United States or in
markets outside the United States could have an adverse effect on the
Company's financial condition and results of operations. In addition, most of
the Company's customers are unionized and may, from time to time, experience
labor disruptions. Any disruption in production by the Company's customers
could have an adverse effect on the Company's financial condition and results
of operations.
Government Regulation. The North American market for automotive occupant
protection systems has been significantly affected by federal safety
regulations and the Company believes that such regulations will continue to
have a significant effect on this market. Specifically, the rapid installation
of driver-side and passenger-side airbags was initially caused in the United
States by federal safety regulations. Recently, there has been negative
publicity concerning airbag performance, particularly the performance of
passenger-side airbags, and it is possible that federal safety regulations
will be revised in response to the concerns raised. It is difficult to predict
the nature of any such regulatory changes or the impact of such changes on the
Company's financial condition and results of operations.
6
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Product Liability. The sale of airbag and seat belt systems and components
entails an inherent risk of product liability claims. Although the Company
maintains product liability insurance covering certain types of claims, the
Company's policies are subject to substantial deductibles and there can be no
assurance that the coverage limits of the Company's insurance policies will be
adequate or that any particular loss will be covered. Such insurance can be
expensive and in the future may not be available on acceptable terms, if at
all. A successful claim brought against the Company not covered by the
Company's insurance or resulting in a recovery in excess of its insurance
coverage could have a material adverse effect on the Company's financial
condition and results of operations.
Warranty and Recall Exposure. The Company warrants to its OEM customers that
its products are free from defects and that they meet certain OEM designated
specifications. The OEMs in turn offer product warranties to the purchasers of
vehicles. In some instances of common complaint, the automobile manufacturer
will institute a vehicle recall or will be required by a governmental agency
to conduct a recall. As a result, from time to time, the Company has received
claims against it and requests for payment from its OEM customers to remedy
complaints made by the purchasers of vehicles. There can be no assurance that
the Company will not incur substantial warranty or recall expense in the
future. Such complaints and the related expenses could have a material adverse
effect on the Company's relationship with its OEM customers and its financial
condition and results of operations.
Potential Fluctuations in Quarterly Results. The Company's quarterly
operating results may vary significantly depending on factors such as the
timing of significant orders, the level of sales by automobile manufacturers,
disruptions caused by labor disputes and the seasonal patterns of its
customers, especially those located in Europe. A large portion of the
Company's expenses are fixed and cannot be adjusted in response to a shortfall
in quarterly revenues. There can be no assurance that the Company will operate
profitably in any quarter.
Long Lead Times for Sales. The Company typically competes for new business
at the beginning of the development of new vehicle models and upon the
redesign of existing models by its customers. New model development generally
begins three to five years prior to the marketing of such models to the
public. As a result of the relatively long lead times required for sales of
automotive occupant protection systems and components, it may be difficult for
the Company to obtain new sales to replace any unexpected decline in sales to
existing customers. The failure of the Company to obtain new business for new
models or to retain or increase business on redesigned existing models could
adversely affect the Company's financial condition and results of operations.
Competition. The markets for automotive occupant protection systems and
components are highly competitive. Increased competition could result in price
reductions and loss of market share, which would adversely affect the
Company's financial condition and results of operations. Many of the Company's
current and potential competitors have greater financial and other resources
than the Company. There can be no assurance that the Company will be able to
continue to compete successfully with its existing competitors or will be able
to compete successfully with new competitors.
Risks Associated with International Sales. Pro forma for the SRS Acquisition
and the 1997 Acquisitions, international sales accounted for approximately 42%
and 47% of the Company's net sales in fiscal 1997 and the first nine months of
1998, respectively. The Company expects that international business will
continue to account for a significant portion of its business in the future.
The Company's ability to compete effectively outside the United States will
depend on its ability to develop the relationships and, if demand requires,
additional facilities necessary to service international customers. In
addition, the Company's financial results from international sales may be
affected by fluctuations in currency exchange rates, increases in duty rates,
difficulties in obtaining export licenses, trade and tariff regulations,
political instability, difficulties or delays in collecting accounts
receivable and difficulties in staffing and managing international operations.
Pro forma for the SRS Acquisition and the 1997 Acquisitions, sales in Asia
accounted for approximately 6% and 5% of the Company's net sales for
fiscal 1997 and the first nine months of fiscal 1998, respectively. In recent
months, certain Asian currencies have
7
<PAGE>
devalued significantly in relation to the United States dollar and financial
markets in Asia have experienced significant turmoil. There can be no
assurance that the Company's sales in Asia will not be materially adversely
affected by such developments.
Dependence on Key Personnel. The Company's success depends to a significant
degree upon the continued contributions of its key personnel, and the loss of
the services of such key personnel could have a material adverse effect on the
Company.
Dependence on Suppliers. Certain key components used in the Company's
products, such as restraints control modules and certain hybrid inflators, are
currently purchased from single sources. In addition, the Company subcontracts
the manufacture of certain of its subassemblies to third parties. The
inability to obtain sufficient sources of components or subassemblies as
required, or to obtain or develop alternative sources at competitive prices
and quality if and as required in the future, could result in delays in
product shipments or increase the Company's supply costs, either of which
would adversely affect the Company's financial condition and results of
operations.
Patents and Proprietary Technology. The Company relies on a number of
patents, trade secrets and non-disclosure agreements to protect its
technology. There can be no assurance that any patents now or hereafter owned
by the Company will afford protection against competitors that develop similar
technology. In addition, upon expiration of such patents, competitors may
develop and sell products based on technologies similar or equivalent to those
currently covered by the Company's patents. In addition, the laws of some
foreign countries do not protect the Company's patents and other proprietary
rights to the same extent as do the laws of the United States. There can be no
assurance that the steps taken by the Company to protect its proprietary
rights will be adequate to prevent imitation of its products or technology,
that the Company's proprietary information will not become known to
competitors, that the Company can effectively protect its rights to unpatented
proprietary information or that the Company's competitors will not
independently develop products or technologies that are superior to the
Company's products or technologies without infringing on the Company's
intellectual property rights. Although the Company believes that its products
and technology do not infringe on the proprietary rights of others, there can
be no assurance that third parties will not assert infringement claims in the
future.
Safety and Environmental Considerations. Sodium azide, which is used in the
propellant for certain of the Company's inflators, is flammable and has
exhibited toxicity in laboratory animal tests. In addition, the manufacture of
propellant containing sodium azide, as well as primers used in certain of the
Company's products, entails certain hazards. The Company's method of
production limits the quantity of these energetic materials in process at any
one time and utilizes certain safety measures. Notwithstanding these
precautions, the Company has on occasion experienced fires and explosions at
its manufacturing facilities. Although the Company's facilities and processes
are designed in a manner intended to minimize risks associated with the use of
energetic materials such as sodium azide and primers, there can be no
assurance that the Company will not encounter additional incidents or safety
issues relating to the use and manufacture of these energetic materials. The
Company uses various hazardous and toxic substances in its manufacturing
processes, including certain solvents, lubricants, sodium azide and other
pyrotechnic materials. The inadvertent release of any of these materials into
the environment could subject the Company to significant liability for clean-
up costs or fines, which could have a material adverse effect on the Company's
financial condition and results of operations. Additionally, the Company may
be required to make significant expenditures to ensure that the Company's
facilities and operations continue to satisfy environmental regulations and
these regulations may change significantly in the future.
Year 2000. 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. The Company cannot
currently quantify the cost of these modifications and conversions. 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.
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<PAGE>
Control of the Company by Principal Stockholders. As of May 31, 1998, Allen
K. Breed and Johnnie Cordell Breed beneficially owned approximately 47% of the
outstanding Common Stock of the Company. As of result, Mr. and Mrs. Breed are
able to exercise control over the Company's affairs through their ability to
elect all of the directors of the Company and control the vote on all matters
requiring stockholder approval.
RISKS RELATING TO THE OFFERED SECURITIES
Ranking of Subordinate Obligations Under the Guarantee and Convertible
Debentures. The Company's obligations under the Guarantee are subordinate and
junior in right of payment to all liabilities of the Company and pari passu
with the most senior preferred or preference stock issued, from time to time,
if any, by the Company. The obligations of the Company under the Convertible
Debentures are subordinate and junior in right of payment to all present and
future Senior Indebtedness of the Company. No payment of principal (including
redemption payments, if any), or premium, if any, on the Convertible
Debentures may be made if (i) any Senior Indebtedness of the Company is not
paid when due and any applicable grace period with respect to such default has
ended with such default not having been cured or waived or ceasing to exist,
or (ii) the maturity of any Senior Indebtedness has been accelerated because
of a default. At April 30, 1998, Senior Indebtedness, aggregated approximately
$924 million. In addition, because a significant portion of the Company's
operations are conducted through its subsidiaries and the subsidiaries have
not guaranteed the payment of principal of and interest on the Convertible
Debentures, all liabilities of such subsidiaries, including trade payables
(which aggregated approximately $433 million at April 30, 1998), are
effectively senior to the Convertible Debentures and the Guarantee. There are
no terms in the Preferred Securities, the Convertible Debentures or the
Guarantee that limit the Company's or any subsidiary's ability to incur
additional indebtedness, including indebtedness that ranks senior to the
Convertible Debentures and the Guarantee. See "Description of the Convertible
Debentures" and "Description of the Guarantee--Status of the Guarantee."
The Guarantee guarantees to the holders of the Preferred Securities the
payment of (i) any accrued and unpaid Distributions that are required to be
paid on the Preferred Securities, to the extent the Trust has funds available
therefor, (ii) the Redemption Price, including all accrued and unpaid
Distributions with respect to the Preferred Securities called for redemption
by the Trust, to the extent the Trust has funds available therefor, and (iii)
upon a voluntary or involuntary dissolution, winding-up or termination of the
Trust (other than in connection with the distribution of Convertible
Debentures to the holders of Preferred Securities or a redemption of all the
Preferred Securities), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid Distributions on the Preferred Securities to
the date of the payment, to the extent the Trust has funds available therefor,
or (b) the amount of assets of the Trust remaining available for distribution
to holders of the Preferred Securities in liquidation of the Trust. The
holders of a majority in liquidation amount of the Preferred Securities have
the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee (as defined herein) or to
direct the exercise of any trust or power conferred upon the Guarantee Trustee
under the Guarantee. Notwithstanding the foregoing, if the Company fails to
make a payment under the Guarantee, any holder of Preferred Securities may
directly institute a legal proceeding against the Company to enforce its
rights under the Guarantee without first instituting a legal proceeding
against the Trust, the Guarantee Trustee or any other person or entity. If the
Company were to default on its obligation to pay amounts payable on the
Convertible Debentures, the Trust would lack available funds for the payment
of Distributions or amounts payable on redemption of the Preferred Securities
or otherwise, and, in such event, holders of the Preferred Securities would
not be able to rely upon the Guarantee for payment of such amounts. Instead,
holders of the Preferred Securities would be required to rely on the
enforcement by (i) the Institutional Trustee of its rights as registered
holder of the Convertible Debentures against the Company pursuant to the terms
of the Convertible Debentures or (ii) such holder of its right against the
Company under certain circumstances to enforce payments on the Convertible
Debentures. See "--Enforcement of Certain Rights by Holders of Preferred
Securities," "Description of the Guarantee" and "Description of the
Convertible Debentures." The Declaration provides that each holder of
Preferred Securities, by acceptance thereof, agrees to the provisions of the
Guarantee, including the subordination provisions thereof, and the Indenture.
9
<PAGE>
Enforcement of Certain Rights by Holders of Preferred Securities. If a
Declaration Event of Default occurs and is continuing, then the holders of
Preferred Securities would rely on the enforcement by the Institutional
Trustee of its rights as a holder of the Convertible Debentures against the
Company. In addition, the holders of a majority in liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Institutional
Trustee or to direct the exercise of any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee to exercise the remedies available to it as a holder of
the Convertible Debentures. If the Institutional Trustee fails to enforce its
rights under the Convertible Debentures, to the fullest extent permitted by
law, any holder of Preferred Securities may directly institute a legal
proceeding against the Company to enforce the Institutional Trustee's rights
under the Convertible Debentures without first instituting any legal
proceeding against the Institutional Trustee or any other person or entity.
Notwithstanding the foregoing, if a Declaration Event of Default has occurred
and is continuing and such event is attributable to the failure of the Company
to pay principal on the Convertible Debentures on the date such principal is
otherwise payable (or in the case of redemption, on the redemption date), then
a holder of Preferred Securities may directly institute a proceeding for
enforcement of payment to such holder of the principal of the Convertible
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder (a "Direct Action") on or after the
respective due date specified in the Convertible Debentures. In connection
with such Direct Action, the Company will be subrogated to the rights of such
holder of Preferred Securities under the Declaration to the extent of any
payment made by the Company to such holder of Preferred Securities in such
Direct Action. The holders of Preferred Securities will not be able to
exercise directly any other remedy available to the holders of the Convertible
Debentures. The Indenture provides that the Indenture Trustee shall give
holders of the Convertible Debentures notice of all uncured defaults or events
of default within 30 days after occurrence. However, except in the case of a
default or an event of default in payment on the Convertible Debentures, the
Indenture Trustee is protected in withholding such notice if its officers or
directors in good faith determine that withholding of such notice is in the
interest of the holders.
Company Option to Extend Interest Payment Periods; OID Risk. The Company has
the right under the Indenture to defer payment of interest on the Convertible
Debentures by extending the interest payment period at any time (so long as no
Indenture Event of Default has occurred and is continuing), and from time to
time, on the Convertible Debentures. As a consequence of such an extension,
quarterly Distributions on the Preferred Securities would be deferred
(although such Distributions would continue to accrue thereon compounded
quarterly) by the Trust during any such extended interest payment period. Such
right to extend the interest payment period for the Convertible Debentures is
limited to a period not exceeding 20 consecutive quarters, during which no
interest shall be due and payable, provided that no such Extension Period may
extend beyond the maturity date of the Convertible Debentures. In the event
that the Company exercises this right to defer interest payments, the Company
has agreed, among other things, (a) not to declare or pay dividends on, or
make a distribution with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit
plans or the satisfaction by the Company of its obligations pursuant to any
contract or security requiring the Company to purchase shares of Common Stock,
(ii) as a result of a reclassification of the Company's capital stock or the
exchange or conversion of one class or series of the Company's capital stock
for another class or series of the Company's capital stock, (iii) the purchase
of fractional interests in shares of the Company's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged, (iv) purchases or acquisitions of shares of the
Company's Common Stock to be used in connection with acquisitions of the
Company's Common Stock by stockholders pursuant to a dividend reinvestment
plan or (v) stock dividends paid by the Company where the dividend stock is
the same stock as that on which the dividend is paid), (b) not to make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities (including guarantees) issued by the Company that
rank pari passu with or junior to the Convertible Debentures and (c) not to
make any guarantee payments with respect to the foregoing (other than pursuant
to the Guarantee). Prior to the termination of any such Extension Period, the
Company may further extend the interest payment period; provided that such
Extension Period, together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters or extend beyond the maturity
date of the
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<PAGE>
Convertible Debentures. Upon the termination of any Extension Period and the
payment of all amounts then due, the Company may commence a new Extension
Period, subject to the above requirements. See "Description of the Preferred
Securities--Distributions," "Description of the Convertible Debentures--
Interest Income and Option to Extend Interest Payment Periods" and "United
States Federal Income Taxation--Interest Income and Original Issue Discount."
Should the Company exercise its right to defer payments of interest by
extending the interest payment period, each holder of Preferred Securities
will continue to accrue income (as OID) in respect of the deferred interest
allocable to its Preferred Securities for United States federal income tax
purposes, which will be allocated but not distributed to holders of record of
Preferred Securities. As a result, each such holder of Preferred Securities
will recognize income for United States federal income tax purposes in advance
of the receipt of cash and will not receive the cash from the Trust related to
such income if such holder disposes of its Preferred Securities prior to the
record date for distributions of such amounts. There could be multiple
Extension Periods of varying lengths throughout the term of the Convertible
Debentures. The Company has no current intention of exercising its rights to
defer payments of interest by extending the interest payment period on the
Convertible Debentures. However, should the Company determine to exercise such
right in the future, the market price of the Preferred Securities is likely to
be adversely affected. In that event, a holder that disposes of its Preferred
Securities during an Extension Period might not receive the same return on its
investment as a holder that continues to hold its Preferred Securities. See
"--Uncertainty with Respect to Trading Price" and "United States Federal
Income Taxation--Interest Income and Original Issue Discount."
Special Event Redemption or Distribution. Upon the occurrence of a Special
Event, the Trust shall be dissolved, except in the limited circumstance
described below, with the result that the Convertible Debentures would be
distributed to the holders of the Trust Securities in connection with the
liquidation of the Trust. In the case of a Special Event that is a Tax Event,
in certain circumstances, the Company shall have the right to redeem the
Convertible Debentures, in whole or in part, in lieu of a distribution of the
Convertible Debentures by the Trust, in which event the Trust will redeem the
Trust Securities on a pro rata basis to the same extent as the Convertible
Debentures are redeemed by the Company. See "Description of the Preferred
Securities--Special Event Redemption or Distribution."
Under current United States federal income tax law, a distribution of
Convertible Debentures upon the dissolution of the Trust would not be a
taxable event to holders of the Preferred Securities. Upon the occurrence of a
Tax Event, however, a dissolution of the Trust in which holders of the
Preferred Securities receive cash would be a taxable event to such holders.
See "United States Federal Income Taxation--Receipt of Convertible Debentures
or Cash Upon Liquidation of the Trust."
There can be no assurance as to the market prices for the Preferred
Securities or the Convertible Debentures that may be distributed in exchange
for the Preferred Securities if a dissolution or liquidation of the Trust were
to occur. Accordingly, the Preferred Securities that an investor may purchase,
whether in this Offering or in the secondary market, or the Convertible
Debentures that a holder of Preferred Securities may receive on dissolution
and liquidation of the Trust, may trade at a discount to the price that the
investor paid to purchase the Preferred Securities offered hereby. Because
holders of Preferred Securities may receive Convertible Debentures upon the
occurrence of a Special Event, prospective purchasers of Preferred Securities
are also making an investment decision with regard to the Convertible
Debentures and should carefully review all the information regarding the
Convertible Debentures contained in this Prospectus. See "Description of the
Preferred Securities---Special Event Redemption or Distribution."
Limited Voting Rights. Holders of Preferred Securities have limited voting
rights and are not entitled to vote to appoint, remove, replace, or increase
or decrease the number of Trustees, which voting rights are vested exclusively
in the holder of the Common Securities. Prior to any conversion, holders of
Preferred Securities do not have any voting rights with respect to the Common
Stock of the Company. See "Description of the Preferred Securities."
Uncertainty with Respect to Trading Price. The Preferred Securities may
trade at a price that does not fully reflect the value of accrued but unpaid
interest with respect to the underlying Convertible Debentures. In
11
<PAGE>
addition, as a result of the Company's right to defer interest payments, the
market price of the Preferred Securities (which represent an undivided
interest in the assets of the Trust) may be more volatile than other similar
securities where the issuer does not have such right to defer interest
payments. A holder who disposes of his or her Preferred Securities between
record dates for payments of distributions thereon will be required to include
in income accrued but unpaid interest on the Convertible Debentures through
the date of disposition as ordinary income (i.e., OID) and to add such amount
to his or her adjusted tax basis in his or her pro rata share of the
underlying Convertible Debentures deemed disposed. To the extent the selling
price is less than the holder's adjusted tax basis, a holder will recognize a
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for federal income tax purposes. See "United
States Federal Income Taxation -- Interest Income and Original Issue Discount"
and "-- Sales of Preferred Securities."
THE COMPANY
The Company is a worldwide leader in the design, development, manufacture
and sale of automotive occupant protection systems and components. Its
principal products include sensors, electronics and related software, airbags
and inflators, seat belt systems and steering wheels. These products are used
in over 400 vehicle models manufactured by over 45 automobile manufacturers
("OEMs"), including General Motors, Fiat, Ford, Chrysler, Suzuki and most of
the other largest OEMs in the world.
The Company's goal is to become the leading worldwide supplier of complete,
integrated occupant protection systems, which consist of (i) sensors and
electronics (including crash and occupant protection sensors, diagnostic
electronics and related software), (ii) airbag modules (consisting primarily
of airbags and inflators), seat belt systems (including pretensioners and
retractors) and (iv) steering wheels. Since August 1994, the Company has
completed ten acquisitions. As a result of these ten acquisitions, the Company
has rapidly evolved from predominately the producer of a single product --
electromechanical sensors ("EMS sensors") -- to a leading manufacturer of all
of the components required for complete, integrated occupant protection
systems.
The Company was incorporated under the laws of the State of Delaware in
1986. The Company's principal executive offices are located at 5300 Old Tampa
Highway, P.O. Box 33050 Lakeland, FL 33807-3050 and its telephone number is
(941) 668-6000.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the consolidated ratio of earnings to
combined fixed charges and preferred stock dividends of the Company. For
purposes of computing the ratio of earnings to combined fixed charges and
preferred stock dividends, earnings consist of earnings before income taxes
and extraordinary item plus combined fixed charges and preferred stock
dividends. Combined fixed charges and preferred stock dividends consist of
interest expense, whether expensed or capitalized, amortization of debt
issuance costs, an estimated portion of rental expense that is representative
of the interest factor in such rentals and distributions on the Preferred
Securities (which are calculated on the basis of the amount of pre-tax income
required to pay such distributions).
<TABLE>
<CAPTION>
PRO FORMA(A) NINE MONTHS ENDED PRO FORMA(B)
YEAR ENDED JUNE 30, ------------ MARCH 31, ----------------
------------------------------ YEAR ENDED ----------------- NINE MONTHS ENDED
1993 1994 1995 1996 1997 JUNE 30, 1997 1997 1998 MARCH 31, 1998
----- ----- ----- ----- ---- ------------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
13.5x 52.3x 96.3x 34.0x 2.0x 1.1x 2.1x (c) (c)
</TABLE>
- --------
(a) Gives effect to the SRS Acquisition and the 1997 Acquisitions.
(b) Gives effect to the SRS Acquisition.
(c) During the nine months ended March 31, 1998, the Company incurred
repositioning and certain other special charges aggregating $349.9 million
and, as a result, earnings were insufficient to cover combined fixed
charges and preferred stock dividends by $380.2 million and $396.0 million
for the historical and pro forma nine months ended March 31, 1998,
respectively.
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<PAGE>
THE TRUST
The Trust is a statutory business trust created under Delaware law pursuant
to (i) a trust agreement, dated as of October 17, 1997, as amended by the
Amended and Restated Declaration of Trust dated as of November 25, 1997 (the
"Declaration"), executed by the Company, as sponsor (the "Sponsor"), and
certain of the trustees of the Trust (as described below) and (ii) the filing
of a certificate of trust with the Secretary of State of the State of Delaware
on October 17, 1997. The Declaration has been qualified as an indenture under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). See
"Description of the Preferred Securities." The Company has acquired all of the
Common Securities of the Trust. The Trust exists for the exclusive purposes of
(i) issuing the Trust Securities representing undivided beneficial interests
in the assets of the Trust, (ii) investing the gross proceeds of the Trust
Securities in the Convertible Debentures and (iii) engaging in only those
other activities necessary or incidental thereto.
The Trust's business and affairs are conducted by its trustees, each
appointed by the Company as holder of the Common Securities. Pursuant to the
Declaration, the number of trustees of the Trust is currently five: Wilmington
Trust Company, as the institutional trustee (the "Institutional Trustee"),
Wilmington Trust Company, as the Delaware trustee (the "Delaware Trustee"),
and three individual trustees (the "Regular Trustees" and, together with the
Institutional Trustee and the Delaware Trustee, the "Trustees"), who are, and
any successor Regular Trustees must be, persons who are employees or officers
of, or who are affiliated with, the Company. The Regular Trustees are
initially Charles J. Speranzella, Jr., Fred J. Musone and Frank J. Gnisci,
each of whom is an officer of the Company. The Institutional Trustee will act
as the sole indenture trustee under the Declaration for purposes of compliance
with the Trust Indenture Act until removed or replaced by the holder of the
Common Securities. Wilmington Trust Company will also act as indenture trustee
(the "Guarantee Trustee") under the Guarantee for the purposes of compliance
with the provisions of the Trust Indenture Act. See "Description of the
Guarantee" and "Description of the Convertible Debentures."
The Institutional Trustee holds title to the Convertible Debentures for the
benefit of the holders of the Trust Securities and, in its capacity as the
holder, the Institutional Trustee has the power to exercise all rights, powers
and privileges under the Indenture pursuant to which the Convertible
Debentures are issued. In addition, the Institutional Trustee maintains
exclusive control of a segregated non-interest bearing bank account (the
"Property Account") to hold all payments made in respect of the Convertible
Debentures for the benefit of the holders of the Trust Securities. The
Institutional Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise for the holders of the Trust Securities
out of funds from the Property Account. The Guarantee Trustee holds the
Guarantee for the benefit of the holders of the Preferred Securities. The
Company, as the direct or indirect holder of all the Common Securities, has
the right, subject to certain restrictions contained in the Declaration, to
appoint, remove or replace any Trustee and to increase or decrease the number
of Trustees. The Company has agreed to pay all fees and expenses related to
the Trust and the Offering of the Trust Securities. See "Description of the
Convertible Debentures--Miscellaneous".
USE OF PROCEEDS
The Selling Holders will receive all of the proceeds from any sale of the
Offered Securities. Neither the Company nor the Trust will receive any
proceeds from the sale of the Offered Securities.
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights are set forth in the
Declaration, the Delaware Business Trust Act, as amended (the "Trust Act"),
and the Trust Indenture Act. See "Description of the Preferred Securities."
The place of business and the telephone number of the Trust are the
principal executive offices and telephone numbers of the Company.
ACCOUNTING TREATMENT
The financial statements of the Trust will be reflected in the Company's
consolidated financial statements, with the Preferred Securities shown as
"Company-obligated Mandatorily Redeemable Convertible Preferred Securities of
BTI Capital Trust holding solely Convertible Debentures."
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<PAGE>
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities were issued pursuant to the terms of the
Declaration. The Declaration has been qualified as an indenture under the
Trust Indenture Act. Wilmington Trust Company, as Institutional Trustee, acts
as indenture trustee under the Declaration for purposes of compliance with the
provisions of the Trust Indenture Act. The terms of the Preferred Securities
include those stated in the Declaration and those made part of the Declaration
by the Trust Indenture Act. The following summary of the material terms and
provisions of the Preferred Securities does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the Declaration,
the Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue on behalf of the
Trust the Trust Securities, which represent undivided beneficial interests in
the assets of the Trust. All of the Common Securities are owned, directly or
indirectly, by the Company. The Common Securities rank pari passu, and
payments are made thereon on a pro rata basis, with the Preferred Securities,
except that upon the occurrence and during the continuance of a Declaration
Event of Default, the rights of the holders of the Common Securities to
receive payment of periodic Distributions and payments upon liquidation,
redemption and otherwise are subordinated to the rights of the holders of the
Preferred Securities. The Declaration does not permit the issuance by the
Trust of any securities other than the Trust Securities or the incurrence of
any indebtedness by the Trust. Pursuant to the Declaration, the Institutional
Trustee holds title to the Convertible Debentures purchased by the Trust for
the benefit of the holders of the Trust Securities. The payment of
Distributions out of money held by the Trust, and payments upon redemption of
the Preferred Securities or liquidation of the Trust out of money held by the
Trust, are guaranteed by the Company to the extent described under
"Description of the Guarantee." The Guarantee is held by the Guarantee
Trustee, for the benefit of the holders of the Preferred Securities. The
Guarantee does not cover payment of Distributions when the Trust does not have
sufficient available funds to pay such Distributions. In such event, the
remedy of a holder of Preferred Securities is to (i) vote to direct the
Institutional Trustee to enforce the Institutional Trustee's rights under the
Convertible Debentures or (ii) if the failure of the Trust to pay
distributions is attributable to the failure of the Company to pay interest or
principal on the Convertible Debentures, to institute a proceeding directly
against the Company for enforcement of payment to such holder of the principal
of or interest on the Convertible Debentures having a principal amount equal
to the aggregate liquidation amount of the Preferred Securities of such holder
on or after the respective due date specified in the Convertible Debentures.
See "--Declaration Events of Default" and "--Voting Rights."
DISTRIBUTIONS
Distributions on Preferred Securities are fixed at a rate per annum of 6.50%
of the stated liquidation amount of $50 per Preferred Security. Distributions
in arrears beyond the first date such Distributions are payable or would be
payable, if not for any Extension Period or default by the Company on the
Convertible Debentures, bear interest thereon at the rate per annum of 6.50%
thereof, compounded quarterly. The term "Distribution" as used herein includes
any such interest payable unless otherwise stated. The amount of Distributions
payable for any period is computed on the basis of a 360-day year of twelve
30-day months.
Distributions on the Preferred Securities are cumulative, accrue from the
date of initial issuance and are payable quarterly in arrears on February 15,
May 15, August 15 and November 15 of each year, commencing February 15, 1998,
when, as and if available for payment. Distributions are made by the
Institutional Trustee, except as otherwise described below.
The Distribution rate and the Distribution payment dates and other payment
dates for the Preferred Securities correspond to the interest rate and
interest payment dates and other payment dates on the Convertible Debentures.
Distributions on the Preferred Securities are made on the dates payable to
the extent that the Trust has funds available for the payment of such
Distributions in the Property Account. The Trust's funds available for
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<PAGE>
distribution to the holders of the Preferred Securities are limited to
payments received by the Trust from the Company pursuant to the Convertible
Debentures. See "Description of the Convertible Debentures." The payment of
Distributions out of monies held by the Trust is guaranteed by the Company to
the extent set forth under "Description of the Guarantee."
Distributions on the Preferred Securities are payable to the holders thereof
as they appear on the books and records of the Trust at the close of business
on the relevant record dates, which, as long as the Preferred Securities
remain in book-entry-only form, will be one Business Day (as defined below)
prior to the relevant payment dates. Such Distributions will be paid through
the Institutional Trustee, who holds amounts received in respect of the
Convertible Debentures in the Property Account for the benefit of the holders
of the Trust Securities. In the event that any date on which Distributions are
payable on the Preferred Securities is not a Business Day, then payment of the
Distributions payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment will be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date (the date on which Distributions are actually payable, a
"Distribution Date"). The period beginning on, and including, the date of
original issuance of the Preferred Securities, and ending on, but excluding,
the first Distribution Date, and each successive period beginning on, and
including, a Distribution Date, and ending on, but excluding, the next
succeeding Distribution Date is herein called a "Distribution Period." A
"Business Day" shall mean any day other than Saturday, Sunday or any other day
on which banking institutions in New York, New York or Wilmington, Delaware
are permitted or required by any applicable law or executive order to close.
So long as no Indenture Event of Default has occurred and is continuing, the
Company has the right under the Indenture to defer payments of interest on the
Convertible Debentures by extending the interest payment period from time to
time on the Convertible Debentures for an Extension Period not exceeding 20
consecutive quarterly interest periods during which no interest shall be due
and payable; provided, that no such Extension Period may extend beyond the
maturity date of the Convertible Debentures. As a consequence of the Company's
extension of the interest payment period, quarterly Distributions on the
Preferred Securities would be deferred (though such Distributions would
continue to accrue with interest thereon compounded quarterly since interest
would continue to accrue on the Convertible Debentures) during any such
Extension Period. In the event that the Company exercises its right to extend
the interest payment period, then (a) the Company shall not declare or pay
dividends on, or make any distribution or liquidation payment with respect to,
or redeem, purchase or acquire any of its capital stock (other than (i)
purchases or acquisitions of shares of Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit
plans or the satisfaction by the Company of its obligations pursuant to any
contract or security requiring the Company to purchase shares of the Common
Stock, (ii) as a result of a reclassification of the Company's capital stock
or the exchange or conversion of one class or series of the Company's capital
stock for another class or series of the Company's capital stock, (iii) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, (iv) purchases or acquisitions of
shares of the Company's Common Stock to be used in connection with the
acquisition of the Company's Common Stock by stockholders pursuant to a
dividend reinvestment plan or (v) stock dividends paid by the Company where
the dividend stock is the same stock as that on which the dividend is paid),
(b) the Company shall not make any payment of interest on or principal of (or
premium, if any, on) or repay, repurchase or redeem any debt securities
(including guarantees) issued by the Company that rank pari passu with or
junior to the Convertible Debentures and (c) the Company shall not make any
guarantee payment with respect to the foregoing (other than pursuant to the
Guarantees). Prior to the termination of any Extension Period, the Company may
further extend such Extension Period; provided, that such Extension Period,
together with all previous and further extensions thereof, may not exceed 20
consecutive quarters; and provided further that no Extension Period may extend
beyond the maturity date of the Convertible Debentures. Upon the termination
of any Extension Period and the payment of all amounts then due, the Company
may commence a new Extension Period, subject to the above requirements. See
"Description of the Convertible Debentures--Interest" and "Description of the
Convertible Debentures--Interest Income and Option to Extend Interest Payment
Periods."
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<PAGE>
The Regular Trustees shall give the holders of the Preferred Securities notice
of any Extension Period upon receipt of notice thereof from the Company. See
"Description of the Convertible Debentures--Interest Income and Option to
Extend Interest Payment Periods." If distributions are deferred as a result of
an Extension Period, the deferred distributions and accrued interest thereon
shall be paid to holders of record of the Preferred Securities as they appear
on the books and records of the Trust on the record date next following the
termination of such deferral period.
CONVERSION RIGHTS
General. The Preferred Securities are convertible at any time on or after
January 25, 1998 and prior to the close of business on the Business Day
immediately preceding the date of repayment of such Preferred Securities (or
in the case of Preferred Securities called for redemption, prior to the close
of business on the Business Day prior to the Redemption Date), whether at
maturity or upon redemption, at the option of the holder thereof and in the
manner described below, into shares of Common Stock at an initial conversion
rate of 2.1973 shares of Common Stock for each Preferred Security (equivalent
to a conversion price of $22.755 per share of Common Stock) (the "Initial
Conversion Price"), subject to adjustment as described under "--Conversion
Price Adjustments--General" and "--Conversion Price Adjustments--Fundamental
Change" below.
The Indenture Trustee has covenanted in the Indenture not to convert
Convertible Debentures held by it except pursuant to a notice of conversion
delivered to the Institutional Trustee, as conversion agent (the "Conversion
Agent"), by a holder of Preferred Securities. A holder of a Preferred Security
wishing to exercise its conversion right must deliver an irrevocable notice of
conversion, together, if the Preferred Security is held in certificated form,
with such certificated Preferred Security, to the Conversion Agent, which
shall, on behalf of such holder, exchange such Preferred Security for a
portion of the Convertible Debentures and immediately convert such Convertible
Debentures into Common Stock. Holders may obtain copies of the required form
of the notice of conversion notice from the Conversion Agent. Procedures for
converting book-entry Preferred Securities into shares of Common Stock will
differ, as described under "--Book-Entry-Only Issuance--The Depository Trust
Company."
Accrued Distributions will not be paid on Preferred Securities that are
converted, except that holders of Preferred Securities at the close of
business on a Distribution record date will be entitled to receive the
Distribution payable on such Preferred Securities on the corresponding
Distribution Date notwithstanding the conversion of such Preferred Securities
following such Distribution record date but prior to such Distribution Date,
and when so surrendered for conversion, the Preferred Securities must be
accompanied by payment of an amount equal to the Distribution payable on such
Distribution payment date. Except as described above, no Distribution will be
payable by the Company on converted Preferred Securities with respect to any
Distribution Date subsequent to the date of conversion. Except as provided
above, neither the Trust nor the Company will make, or be required to make,
any payment, allowance or adjustment for accumulated and unpaid Distributions,
whether or not in arrears, on Preferred Securities. Each conversion will be
deemed to have been effected immediately prior to the close of business on the
day on which the related conversion notice was received by the Conversion
Agent.
Shares of Common Stock issued upon conversion of Preferred Securities will
be validly issued, fully paid and nonassessable. No fractional shares of
Common Stock will be issued as a result of conversion, but in lieu thereof
such fractional interest will be paid by the Company in cash based on the last
reported sale price of Common Stock on the date such Preferred Securities are
surrendered for conversion.
Conversion Price Adjustments--General. The Initial Conversion Price is
subject to adjustment (under formulae set forth in the Indenture) in certain
events, including (a) the issuance of shares of Common Stock as a dividend or
a distribution with respect to Common Stock, (b) subdivisions, combinations
and reclassifications of Common Stock, (c) the issuance to all holders of
Common Stock of rights or warrants entitling them (for a period not exceeding
45 days) to subscribe for shares of Common Stock at less than the then Current
Market Price (as
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<PAGE>
defined below) of the Common Stock, (d) the distribution to holders of Common
Stock of (i) equity securities of the Company (other than Common Stock), (ii)
evidences of indebtedness of the Company and/or (iii) other assets (including
securities, but excluding (A) any rights or warrants referred to in clause (c)
above, (B) any rights or warrants to acquire any capital stock of any entity
other than the Company or any subsidiary of the Company, (C) any dividends or
distributions in connection with the liquidation, dissolution or winding-up of
the Company, (D) any dividends payable solely in cash that may from time to
time be fixed by the Board of Directors of the Company and (E) any dividends
or distributions referred to in clause (a) above), (e) distributions to all
holders of Common Stock, consisting of cash, excluding (i) any cash dividends
on Common Stock to the extent that the aggregate cash dividends per share of
Common Stock in any consecutive 12-month period do not exceed the greater of
(x) the amount per share of Common Stock of the cash dividends paid on Common
Stock in the immediately preceding 12-month period, to the extent that such
dividends for the immediately preceding 12-month period did not require an
adjustment of the conversion price pursuant to this clause (e) (as adjusted to
reflect subdivisions or combinations of Common Stock), and (y) 15% of the
Current Market Price of Common Stock for the trading day immediately prior to
the date of declaration of such dividend, and (ii) any dividend or
distribution in connection with the liquidation, dissolution or winding up of
the Company or a redemption of any rights issued under a rights agreement;
provided, however, that no adjustment shall be made pursuant to this clause
(e) if such distribution would otherwise constitute a Fundamental Change (as
defined below) and be reflected in a resulting adjustment described below, and
(f) the consummation of a tender offer by the Company or any subsidiary of the
Company for the Common Stock that involves an aggregate consideration that,
together with (X) any cash and other consideration payable in respect of any
tender offer consummated by the Company or a subsidiary of the Company for the
Common Stock consummated within the 12 months preceding the consummation of
such tender offer and (Y) the aggregate amount of all cash distributions
(excluding any cash distributions referred to in (d) above) to all holders of
the Common Stock within the 12 months preceding the consummation of such
tender offer, exceeds 110% of the Company's market capitalization at the date
of consummation of such tender offer. "Current Market Price" means the average
of the daily closing prices for the ten consecutive trading days selected by
the Company commencing not more than 20 trading days before, and ending not
later than, the day in question.
If any adjustment is required to be made as set forth in clause (e) above as
a result of a distribution that is a dividend described in clause (e) above
but exceeds the amount of the dividend permitted to be excluded pursuant to
such subclause (i) of clause (e), such adjustment would be based upon the
amount by which such distribution exceeds the amount permitted to be excluded.
If an adjustment is required to be made as set forth in clause (e) above as a
result of a distribution that is not such a dividend, such adjustment would be
based upon the full amount of such distribution. If an adjustment is required
to be made as set forth in clause (f) above, such adjustment would be
calculated based upon the amount by which the aggregate consideration paid for
the Common Stock acquired in the tender offer exceeds 110% of the Company's
market capitalization at the date of consummation of such tender offer. In
lieu of making such a conversion price adjustment in the case of certain
dividends or distributions, the Company may provide that upon the conversion
of the Preferred Securities the holder converting such Preferred Securities
will receive, in addition to the Common Stock to which such holder is
entitled, the cash, securities or other property which such holder would have
received if such holder had, immediately prior to the record date for such
dividend or distribution, converted its Preferred Securities into Common
Stock.
The Company from time to time may, to the extent permitted by law, reduce
the conversion price of the Convertible Debentures (and thus, the conversion
price of the Preferred Securities) by any amount selected by the Company for
any period of at least 20 days, in which case the Company shall give at least
15 days' notice of such reduction. The Company may, at its option, make such
reductions in the conversion price, in addition to those set forth above, as
the Company's Board of Directors deems advisable to avoid or diminish any
income tax to holders of Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated
as such for income tax purposes. See "United States Federal Income Taxation--
Conversion of Preferred Securities."
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<PAGE>
No adjustment of the conversion price will be made upon the issuance of any
shares of Common Stock pursuant to any present or future plan providing for
the reinvestment of dividends or interest payable on securities of the Company
and the investment of additional optional amounts in shares of Common Stock
under any such plan. No adjustment in the conversion price will be required
unless such adjustment would require a change of at least 1% in the conversion
price then in effect; provided, however, that any adjustment that would not be
required to be made shall be carried forward and taken into account in any
subsequent adjustment. If any action would require adjustment of the
conversion price pursuant to more than one of the provisions described above,
only one adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value to the holders of the Preferred
Securities.
Conversion Price Adjustments--Fundamental Change. In the event that the
Company shall be a party to any transaction or series of transactions
constituting a Fundamental Change, including, without limitation, (i) any
recapitalization or reclassification of the Common Stock (other than a change
in par value or as a result of a subdivision or combination of the Common
Stock); (ii) any consolidation or merger of the Company with or into another
entity as a result of which holders of Common Stock shall be entitled to
receive securities or other property or assets (including cash) with respect
to or in exchange for Common Stock (other than a merger which does not result
in a reclassification, conversion, exchange or cancellation of the outstanding
Common Stock); (iii) any sale or transfer of all or substantially all of the
assets of the Company constituting a Fundamental Change; or (iv) any
compulsory share exchange, pursuant to any of which holders of Common Stock
shall be entitled to receive other securities, cash or other property or
assets, then appropriate provision shall be made so that the holders of all
the Preferred Securities then outstanding shall have the right thereafter to
convert such Preferred Securities only into (x) if any such transaction is a
Non-Stock Fundamental Change (as defined below), the kind and amount of the
securities, cash or other property or assets that would have been receivable
upon such recapitalization, reclassification, consolidation, merger, sale,
transfer or share exchange by a holder of the number of shares of Common Stock
issuable upon conversion of such Preferred Securities immediately prior to
such recapitalization, reclassification, consolidation, merger, sale, transfer
or share exchange, after giving effect to any adjustment in the conversion
price in accordance with clause (i) of the following paragraph, and (y) if any
such transaction constitutes a Common Stock Fundamental Change (as defined
below), shares of common stock of the kind received by holders of Common Stock
as a result of such Common Stock Fundamental Change in an amount determined in
accordance with clause (ii) of the following paragraph. The company formed by
such consolidation or resulting from such merger or which acquires such assets
or which acquires the Common Stock, as the case may be, shall enter into a
supplemental indenture with the Indenture Trustee, satisfactory in form to the
Indenture Trustee and executed and delivered to the Indenture Trustee, the
provisions of which shall establish such right. Such supplemental indenture
shall provide for adjustments, which, for events subsequent to the effective
date of such supplemental indenture, shall be as nearly equivalent as
practical to the relevant adjustments provided for in the preceding paragraphs
and in this paragraph.
Notwithstanding any other provision in the preceding paragraphs, if any
Fundamental Change occurs, the conversion price in effect will be adjusted
immediately after that Fundamental Change as follows:
(i) in the case of a Non-Stock Fundamental Change, the conversion price
per share of Common Stock immediately following such Non-Stock Fundamental
Change will be the lower of (A) the conversion price in effect immediately
prior to such Non-Stock Fundamental Change, but after giving effect to any
other prior adjustments effected pursuant to the preceding paragraphs, and
(B) the result obtained by multiplying (X) the greater of the Applicable
Price (as defined below) and the then applicable Reference Market Price (as
defined below) by (Y) a fraction, the numerator of which is $50 and the
denominator of which is (I) the applicable Redemption Price for one
Preferred Security if the redemption date were the date of such Non-Stock
Fundamental Change (or for the twelve-month periods commencing November 25,
1997, November 25, 1998 and November 25, 1999, the product of 106.50%,
105.20% and 103.90%, respectively, times $50) plus (II) any then-accrued
but unpaid Distributions on one Preferred Security; and
(ii) in the case of a Common Stock Fundamental Change, the conversion
price per share of Common Stock will be the conversion price in effect
immediately prior to the Common Stock Fundamental Change,
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but after giving effect to any other prior adjustments effected pursuant to
the preceding paragraphs, multiplied by a fraction, the numerator of which
is the Purchaser Stock Price (as defined below) and the denominator of
which is the Applicable Price; provided, however, that in the event of a
Common Stock Fundamental Change in which (A) 100% of the value of the
consideration received by a holder of Common Stock (subject to certain
limited exceptions) is shares of common stock of the successor, acquiror or
other third party (and cash, if any, paid with respect to any fractional
interests in the shares of common stock resulting from the Common Stock
Fundamental Change) and (B) all of the Common Stock (subject to certain
limited exceptions) shall have been exchanged for, converted into, or
acquired for, shares of common stock (and cash, if any, with respect to
fractional interests) of the successor, acquiror or other third party, the
conversion price per share of Common Stock immediately following the Common
Stock Fundamental Change shall be the conversion price in effect
immediately prior to the Common Stock Fundamental Change divided by the
number of shares of common stock of the successor, acquiror, or other third
party received by a holder of one share of Common Stock as a result of the
Common Stock Fundamental Change.
The foregoing conversion price adjustments are designed, in "Fundamental
Change" transactions where all or substantially all of the Common Stock is
converted into securities, cash, or property and not more than 50% of the
value received by the holders of Common Stock consists of stock listed or
admitted for listing subject to notice of issuance on a national securities
exchange or quoted on the Nasdaq National Market ("NNM") (a "Non-Stock
Fundamental Change," as defined herein), to increase the securities, cash or
property into which each Preferred Security is convertible.
In a Non-Stock Fundamental Change transaction where the initial value
received per share of Common Stock (measured as described in the definition of
Applicable Price below) is lower than the then applicable conversion price of
the Preferred Securities but greater than or equal to the Reference Market
Price, the conversion price will be adjusted as described above with the
effect that each Preferred Security will be convertible into securities, cash
or property of the same type received by the holders of Common Stock in such
transaction but in an amount per Preferred Security equal to the amount
indicated as the denominator as of the date of such transaction as set forth
in clause (i) above with respect to conversion prices for Non-Stock
Fundamental Changes.
In a Non-Stock Fundamental Change transaction where the initial value
received per share of Common Stock (measured as described in the definition of
Applicable Price below) is lower than both the conversion price of a Preferred
Security and the Reference Market Price, the conversion price will be adjusted
as described above but calculated as though such initial value had been the
Reference Market Price.
In a Fundamental Change transaction where all or substantially all the
Common Stock is converted into securities, cash, or property and more than 50%
of the value received by the holders of Common Stock (subject to certain
limited exceptions) consists of listed or NNM-traded common stock (a "Common
Stock Fundamental Change," as defined herein), the foregoing adjustments are
designed to provide in effect that (a) where Common Stock is converted partly
into such common stock and partly into other securities, cash, or property,
each Preferred Security will be convertible solely into a number of shares of
such common stock determined so that the initial value of such shares
(measured as described in the definition of Purchaser Stock Price below)
equals the value of the shares of Common Stock into which such Preferred
Security was convertible immediately before the transaction (measured as
aforesaid) and (b) where Common Stock is converted solely into such common
stock, each Preferred Security will be convertible into the same number of
shares of such common stock receivable by a holder of the number of shares of
Common Stock into which such Preferred Security was convertible before such
transaction.
In determining the amount and type of consideration received by a holder of
Common Stock in the event of a Fundamental Change, consideration received by a
holder of Common Stock pursuant to a statutory right of appraisal will be
disregarded.
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"Applicable Price" means (i) in the event of a Non-Stock Fundamental Change
in which the holders of Common Stock receive only cash, the amount of cash
receivable by a holder of one share of Common Stock and (ii) in the event of
any other Fundamental Change, the Current Market Price for one share of Common
Stock on the record date for the determination of the holders of Common Stock
entitled to receive cash, securities, property or other assets in connection
with such Fundamental Change or, if there is no such record date, on the date
on which the holders of the Common Stock will have the right to receive such
cash, securities, property or other assets.
"Common Stock Fundamental Change" means any Fundamental Change in which more
than 50% of the value (as determined in good faith by the Company's Board of
Directors) of the consideration received by holders of Common Stock (subject
to certain limited exceptions) pursuant to such transaction consists of shares
of common stock that, for the twenty consecutive trading days immediately
prior to such Fundamental Change, has been admitted for listing or admitted
for listing subject to notice of issuance on a national securities exchange or
quoted on the NNM; provided, however, that a Fundamental Change will not be a
Common Stock Fundamental Change unless either (i) the Company continues to
exist after the occurrence of such Fundamental Change and the outstanding
Preferred Securities continue to exist as outstanding Preferred Securities, or
(ii) the outstanding Preferred Securities continue to exist as Preferred
Securities and are convertible into shares of common stock of the successor to
the Company.
"Fundamental Change" means the occurrence of any transaction or event or
series of transactions or events pursuant to which all or substantially all of
the Common Stock is exchanged for, converted into, acquired for or constitutes
solely the right to receive cash, securities, property or other assets
(whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise); provided, however, in the case of a plan involving more than one
such transaction or event, for purposes of adjustment of the conversion price,
such Fundamental Change will be deemed to have occurred when substantially all
of the Common Stock has been exchanged for, converted into, or acquired for or
constitutes solely the right to receive cash, securities, property or other
assets but the adjustment shall be based upon the consideration that the
holders of Common Stock received in the transaction or event as a result of
which more than 50% of the Common Stock shall have been exchanged for,
converted into, or acquired for, or shall constitute solely the right to
receive such cash, securities, property or other assets.
"Non-Stock Fundamental Change" means any Fundamental Change other than a
Common Stock Fundamental Change.
"Purchaser Stock Price" means, with respect to any Common Stock Fundamental
Change, the Current Market Price of common stock received by holders of Common
Stock in such Common Stock Fundamental Change on the record date for the
determination of the holders of Common Stock entitled to receive such shares
of common stock or, if there is no such record date, on the date upon which
the holders of Common Stock shall have the right to receive such shares of
common stock.
"Reference Market Price" will initially mean $12.33 (which is 66 2/3% of the
last reported sales price per share of Common Stock on the NYSE on the date of
the Offering Memorandum used in connection with the Original Offering) and, in
the event of any adjustment to the conversion price other than as a result of
a Fundamental Change, the Reference Market Price will also be adjusted so that
the ratio of the Reference Market Price to the conversion price after giving
effect to any adjustment will always be the same as the ratio of the initial
Reference Market Price to the Initial Conversion Price of the Preferred
Securities.
Conversions of the Preferred Securities may be effected by delivering them
to the office or agency of the Company maintained for such purpose in the
Borough of Manhattan, The City of New York.
Conversion price adjustments or omissions in making such adjustments may,
under certain circumstances, result in constructive distributions that could
be taxable as dividends under the Internal Revenue Code of 1986,
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as amended (the "Code") to holders of Preferred Securities or to the holders
of Common Stock. See "United States Federal Income Taxation--Conversion of
Preferred Securities."
MANDATORY REDEMPTION
The Preferred Securities have no stated maturity date but will be redeemed
upon the maturity of the Convertible Debentures or to the extent the
Convertible Debentures are redeemed. The Convertible Debentures will mature on
November 15, 2027 and are redeemable in whole or in part, from time to time,
on or after November 25, 2000 (as described under "Description of the
Convertible Debentures--Optional Redemption"). The Institutional Trustee shall
simultaneously use the proceeds from any such redemption to redeem Trust
Securities with an aggregate liquidation amount equal to the aggregate
principal amount of the Convertible Debentures redeemed by the Company at the
redemption prices (expressed as a percentage of the liquidation amount)
specified below for the twelve-month period commencing November 25, in the
year indicated:
<TABLE>
<CAPTION>
ORIGINAL
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2000...................................................... 102.60%
2001...................................................... 101.30
</TABLE>
and 100% if redeemed on or after November 25, 2002.
plus, in each case, accrued and unpaid Distributions to the date set for
redemption.
Upon the redemption of the Convertible Debentures by the Company, in whole
or in part, at any time in certain circumstances upon the occurrence of a Tax
Event described under "--Special Event Redemption or Distribution," the
Institutional Trustee shall simultaneously use the proceeds from such
redemption to redeem Trust Securities with an aggregate liquidation amount
equal to the aggregate principal amount of the Convertible Debentures redeemed
by the Company at a redemption price equal to 100% of the liquidation amount
thereof plus accrued and unpaid Distributions (including Distributions with
respect to Additional Interest (as defined herein) and Compound Interest (as
defined herein), if any, on the corresponding Convertible Debentures so
redeemed) to the date set for redemption (subject to the right of holders on
the relevant record date to receive Distributions due on the applicable
Distribution payment date that is on or prior to the redemption date).
Holders of the Trust Securities shall be given not less than 30 nor more
than 60 days' notice of any redemption. In the event that fewer than all of
the outstanding Preferred Securities are to be redeemed, the Preferred
Securities will be redeemed pro rata as described under "--Book-Entry-Only
Issuance--The Depository Trust Company" below.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
As used herein, "Tax Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent tax counsel
experienced in such matters (a "Dissolution Tax Opinion") to the effect that
as a result of (a) any amendment to, clarification of, or change (including
any announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision or taxing authority thereof
or therein, (b) any judicial decision, official administrative pronouncement,
ruling, regulatory procedure, notice or announcement, including any notice or
announcement of intent to adopt such procedures or regulations (an
"Administrative Action"), or (c) any amendment to, clarification of, or change
in, the official position or the interpretation of such Administrative Action
or judicial decision that differs from the theretofore generally accepted
position by any legislative body, court, governmental agency or regulatory
authority (including the enactment of any legislation and the publication of
any judicial decision or regulatory determination), in each case after the
date of this Prospectus, there is more than an insubstantial risk that (i) the
Trust is, or will be, subject to United States federal income tax with respect
to income accrued or received on the Convertible Debentures, (ii) the Trust
is, or will be, subject to more than a de minimis amount of other taxes,
duties or other
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governmental charges or (iii) interest paid in cash by the Company to the
Trust on the Convertible Debentures is not, or will not be, deductible, in
whole or in part, by the Company for United States federal income tax
purposes.
As used herein, "Investment Company Event" means that the Regular Trustees
shall have received an opinion of a nationally recognized independent counsel
experienced in practicing under the Investment Company Act of 1940 (the "1940
Act"), to the effect that, as a result of the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), which Change in 1940 Act Law becomes
effective on or after the date of this Prospectus, there is more than an
insubstantial risk that the Trust is or will be considered an "investment
company" which is required to be registered under the 1940 Act.
If, at any time, a Tax Event or an Investment Company Event (in either case,
a "Special Event") shall occur and be continuing, the Trust shall, except in
the limited circumstances described below, be dissolved with the result that
Convertible Debentures, with an aggregate principal amount equal to the
aggregate stated liquidation amount of, with an interest rate identical to the
Distribution rate of, with accrued and unpaid interest equal to accrued and
unpaid Distributions on, and having the same record date for payment as, the
Preferred Securities outstanding at such time, would be distributed to the
holders of the Trust Securities in liquidation of such holders' interests in
the Trust, on a pro rata basis within 90 days following the occurrence of such
Special Event; provided, however, that such dissolution and distribution shall
be conditioned on the Regular Trustees receipt of an opinion of nationally
recognized independent tax counsel experienced in such matters (a "No
Recognition Opinion"), which No Recognition Opinion may rely on, among other
things, published revenue rulings of the Internal Revenue Service, to the
effect that the holders of the Preferred Securities will not recognize any
gain or loss for United States federal income tax purposes as a result of such
dissolution and distribution of Convertible Debentures; and, provided,
further, that if at the time there is available to the Company or the Trust
the opportunity to eliminate, within such 90-day period, the Special Event by
taking some ministerial action, such as filing a form or making an election,
or pursuing some other similar reasonable measure that, in the sole judgment
of the Company, has or will cause no adverse effect on the Trust, the Company
or the holders of the Trust Securities, the Company or the Trust will pursue
such measure in lieu of dissolution. Furthermore, if in the case of the
occurrence of a Tax Event, (i) the Company has received an opinion (a
"Redemption Tax Opinion") of nationally recognized independent tax counsel
experienced in such matters that, as a result of such Tax Event, there is more
than an insubstantial risk that the Company would be precluded from deducting
the interest on the Convertible Debentures, in whole or in part, for United
States federal income tax purposes, even after the Convertible Debentures were
distributed to the holders of Trust Securities in liquidation of such holders'
interests in the Trust as described above, or (ii) the Regular Trustees shall
have been informed by such tax counsel that it cannot deliver a No Recognition
Opinion to the Regular Trustees, the Company shall have the right, upon not
less than 30 nor more than 60 days' notice to the holders of the Preferred
Securities, to redeem the Convertible Debentures, in whole or in part, at 100%
of the principal amount thereof plus accrued and unpaid interest thereon for
cash within 90 days following the occurrence of such Tax Event, and promptly
following such redemption, Preferred Securities with an aggregate liquidation
amount equal to the aggregate principal amount of Convertible Debentures so
redeemed shall be redeemed by the Trust at the Redemption Price on a pro rata
basis; provided, however, that if, at the time, there is available to the
Company or the Trust the opportunity to eliminate, within such 90-day period,
the Tax Event by taking some ministerial action, such as filing a form or
making an election, or pursuing some other similar reasonable measure that, in
the sole judgment of the Company, has or will cause no adverse effect on the
Trust, the Company or the holders of the Trust Securities, the Company or the
Trust will pursue such measure in lieu of redemption.
After the date fixed for any distribution of Convertible Debentures upon
dissolution of the Trust, (i) the Preferred Securities will no longer be
deemed to be outstanding, (ii) the depositary or its nominee, as the record
holder of the Preferred Securities, will receive a registered global
certificate or certificates representing the Convertible Debentures to be
delivered to the holders of the Preferred Securities upon such distribution
and (ii) any certificates representing Preferred Securities not held by the
securities depositary or its nominee will be deemed to represent beneficial
interests in Convertible Debentures having an aggregate principal amount equal
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to the aggregate stated liquidation amount of, with an interest rate identical
to the Distribution rate of, and with accrued and unpaid interest equal to
accrued and unpaid Distributions on, such Preferred Securities until such
certificates are presented to the Company or its agent for transfer or
reissuance.
There can be no assurance as to the market prices either for the Preferred
Securities or for the Convertible Debentures that may be distributed in
exchange for Preferred Securities if a dissolution and liquidation of the
Trust were to occur. Accordingly, the Preferred Securities that an investor
may purchase, whether pursuant to the offer made hereby or in the secondary
market, or the Convertible Debentures that the investor may receive if a
dissolution and liquidation of the Trust were to occur, may trade at a
discount to the price the investor paid to purchase Preferred Securities.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid Distributions have been paid on all
Preferred Securities for all quarterly Distribution Periods occurring on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred Securities
(which notice will be irrevocable), then, if the Company has paid to the
Institutional Trustee a sufficient amount of cash in connection with the
related redemption or maturity of the Convertible Debentures by 12:00 noon New
York City time on the redemption date, the Institutional Trustee will
irrevocably deposit (i) with the Depository Trust Company ("DTC"), funds
sufficient to pay the applicable Redemption Price on redemption of all
Preferred Securities represented by the Global Certificates (as defined
herein) and will give DTC irrevocable instructions and authority to pay such
amount in respect of Preferred Securities represented by the Global
Certificates and (ii) with the paying agent for the Preferred Securities,
funds sufficient to pay the applicable Redemption Price in respect of any
certificated Preferred Securities and will give such paying agent irrevocable
instructions and authority to pay such Redemption Price to the holders of
certificated Preferred Securities upon surrender of their certificates. See
"--Book-Entry-Only Issuance--The Depository Trust Company." If notice of
redemption shall have been given and funds are deposited as required, then
immediately prior to the close of business on the date of such deposit
Distributions will cease to accrue and all rights of holders of Preferred
Securities so called for redemption will cease, except the right of the
holders of such Preferred Securities to receive the Redemption Price, but
without interest on such Redemption Price. In the event that any date fixed
for redemption of Preferred Securities is not a Business Day, then payment of
the applicable Redemption Price payable on such date will be made on the next
succeeding day that is a Business Day (without any interest or other payment
in respect of any such delay), except that, if such Business Day falls in the
next calendar year, such payment will be made on the immediately preceding
Business Day. In the event that payment of the Redemption Price in respect of
Preferred Securities is improperly withheld or refused and not paid either by
the Trust or by the Company pursuant to the Guarantee, Distributions on such
Preferred Securities will continue to accrue at the applicable rate from the
original redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed as described below
under "--Book-Entry-Only Issuance--The Depository Trust Company."
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or its subsidiaries may at
any time, and from time to time, purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the amount payable upon redemption of, the
Trust Securities, as applicable, shall be made pro rata based on the
liquidation amount of the Trust Securities; provided, however,
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that, if on any Distribution date or redemption date a Declaration Event of
Default shall have occurred and be continuing, no payment of any Distribution
on, or amount payable upon redemption of, any Common Security, and no other
payment on account of the redemption, liquidation or other acquisition of
Common Securities, shall be made unless payment in full in cash of all
accumulated and unpaid Distributions on all outstanding Preferred Securities
for all distribution periods terminating on or prior thereto, or in the case
of payment of the amount payable upon redemption of the Preferred Securities,
all of such amount in respect of all outstanding Preferred Securities shall
have been made or provided for, and all funds available to the Institutional
Trustee shall first be applied to the payment in full in cash of all
Distributions on, or the amount payable upon redemption of, Preferred
Securities then due and payable.
In the case of any Declaration Event of Default, the holders of Common
Securities will be deemed to have waived any such Declaration Event of Default
with respect to the Common Securities until all such Declaration Events of
Default with respect to the Preferred Securities have been cured, waived or
otherwise eliminated. Until any such Declaration Events of Default with
respect to the Preferred Securities have been so cured, waived or otherwise
eliminated, the Institutional Trustee will act solely on behalf of the holders
of the Preferred Securities and not the holders of the Common Securities and
only the holders of the Preferred Securities will have the right to direct the
Institutional Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each, a "Liquidation"), the holders of
the Preferred Securities will be entitled to receive out of the assets of the
Trust, after satisfaction of liabilities of the Trust, distributions in an
amount equal to the aggregate of the stated liquidation amount of $50 per
Preferred Security plus accrued and unpaid Distributions thereon to the date
of payment (the "Liquidation Distribution"), unless, in connection with such
Liquidation, Convertible Debentures in an aggregate stated principal amount
equal to the aggregate stated liquidation amount of, with an interest rate
identical to the Distribution rate of, and accrued and unpaid interest equal
to accrued and unpaid Distributions on, the Preferred Securities outstanding
at such time have been distributed on a pro rata basis to the holders of the
Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities shall be paid on a pro rata basis. The
holders of the Common Securities will be entitled to receive distributions
upon any such dissolution pro rata with the holders of the Preferred
Securities, except that if a Declaration Event of Default has occurred and is
continuing, the holders of the Common Securities shall not be permitted to
receive such distributions until such Declaration Event of Default has been
cured.
Pursuant to the Declaration, the Trust shall dissolve: (i) upon the
bankruptcy of the Company or the holder of the Common Securities; (ii) upon
the filing of a certificate of dissolution or its equivalent with respect to
the holder of the Common Securities or the Company, the filing of a
certificate of cancellation with respect to the Trust after having obtained
the consent of at least a majority in liquidation amount of the Trust
Securities, voting together as a single class, to file such certificate of
cancellation, or the revocation of the charter of the Company or the holder of
the Common Securities and the expiration of 90 days after the date of
revocation without a reinstatement thereof; (iii) upon the entry of a decree
of judicial dissolution of the holder of the Common Securities, the Company or
the Trust; (iv) when all of the Trust Securities shall have been called for
redemption and the amounts necessary for redemption thereof, including any
Additional Interest and Compound Interest, shall have been paid to the holders
thereof in accordance with the terms of the Trust Securities; (v) upon the
distribution of Convertible Debentures upon the occurrence of a Special Event;
(vi) upon the distribution of the Common Stock to all Holders of the Trust
Securities upon conversion of all outstanding Preferred Securities; or (vii)
on November 15, 2027, the expiration of the term of the Trust.
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DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the
Trust Securities (a "Declaration Event of Default"); provided, that pursuant
to the Declaration, the holder of the Common Securities will be deemed to have
waived any Declaration Event of Default with respect to the Common Securities
until all Declaration Events of Default with respect to the Preferred
Securities have been cured, waived or otherwise eliminated. Until such
Declaration Events of Default with respect to the Preferred Securities have
been so cured, waived or otherwise eliminated, the Institutional Trustee will
be deemed to be acting solely on behalf of the holders of the Preferred
Securities, and only the holders of the Preferred Securities will have the
right to direct the Institutional Trustee with respect to certain matters
under the Declaration and, therefore, the Indenture. In the event any
Declaration Event of Default with respect to the Preferred Securities is
waived by the holders of the Preferred Securities as provided in the
Declaration, the holders of Common Securities pursuant to the Declaration have
agreed that such waiver also constitutes a waiver of such Declaration Event of
Default with respect to the Common Securities for all purposes under the
Declaration without any further act, vote or consent of the holders of Common
Securities. See "--Voting Rights." The Institutional Trustee shall notify all
holders of the Preferred Securities of any notice of default received from the
Indenture Trustee with respect to the Convertible Debentures. Such notice
shall state that such Indenture Event of Default also constitutes a
Declaration Event of Default.
If the Institutional Trustee fails to enforce its rights under the
Convertible Debentures, any holder of Preferred Securities may, to the fullest
extent permitted by law, directly institute a legal proceeding against the
Company to enforce the Institutional Trustee's rights under the Convertible
Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is continuing
and such event is attributable to the failure of the Company to pay interest
or principal on the Convertible Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption, on the
redemption date), the Company acknowledges that a holder of Preferred
Securities may then also directly institute a proceeding for enforcement of
payment to such holder of the principal of or interest on the Convertible
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder on or after the respective due date
specified in the Convertible Debentures without first (i) directing the
Institutional Trustee to enforce the terms of the Convertible Debentures or
(ii) instituting a legal proceeding against the Company to enforce the
Institutional Trustee's rights under the Convertible Debentures. In connection
with such Direct Action, the Company will be subrogated to the rights of such
holder of Preferred Securities under the Declaration to the extent of any
payment made by the Company to such holder of Preferred Securities in such
Direct Action. Consequently, the Company will be entitled to payment of
amounts that a holder of Preferred Securities receives in respect of an unpaid
Distribution that resulted in the bringing of a Direct Action to the extent
that such holder receives or has already received full payment with respect to
such unpaid Distribution from the Trust. The holders of Preferred Securities
will not be able to exercise directly any other remedy available to the
holders of the Convertible Debentures.
Upon the occurrence of an Indenture Event of Default, the Institutional
Trustee as the sole holder of the Convertible Debentures will have the right
under the Indenture to declare the principal of and interest on the
Convertible Debentures to be immediately due and payable. The Company and the
Trust are each required to file annually with the Institutional Trustee an
officers' certificate as to its compliance with all conditions and covenants
under the Declaration.
After the date for any distribution of Convertible Debentures upon
dissolution of the Trust, (i) the Preferred Securities will no longer be
deemed to be outstanding, (ii) the depositary or its nominee, as the record
holder of the Preferred Securities, will receive a registered global
certificate or certificates representing the Convertible Debentures to be
delivered upon such distribution and (iii) any certificates representing
Preferred Securities not held by the depositary or its nominee will be deemed
to represent Convertible Debentures having an aggregate principal amount equal
to the aggregate stated liquidation amount of, with an interest rate identical
to the Distribution rate of, and accrued and unpaid interest equal to accrued
and unpaid Distributions on, such Preferred Securities until such certificates
are presented to the Company or its agent for transfer or reissuance.
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REGISTRATION RIGHTS
The Company, the Trust and the Initial Purchasers entered into a
Registration Rights Agreement dated November 25, 1997 (the "Registration
Rights Agreement") pursuant to which the Company and the Trust agreed to file
with the Commission, on or prior to March 19, 1998 (the "Required Filing
Date"), a shelf registration statement (the "Shelf Registration Statement") on
Form S-1 or Form S-3 to cover resales of Transfer Restricted Securities (as
defined below) by the holders thereof. The Company further agreed to use its
best efforts to cause such Shelf Registration Statement to be declared
effective by the Commission as soon as practicable following the filing
thereof, but in any case no later than June 17, 1998 (the "Required
Effectiveness Date") and to maintain the effectiveness thereof until two years
after the date of the Original Offering Date or such earlier date as of which
all the Transfer Restricted Securities have been sold pursuant to the Shelf
Registration Statement. Notwithstanding the foregoing, the Company is
permitted to prohibit offers and sales of Transfer Restricted Securities
pursuant to the Shelf Registration Statement under certain circumstances and
subject to certain conditions (any period during which offers and sales are
prohibited being referred to as a "Suspension Period"). "Transfer Restricted
Securities" means each Preferred Security and any underlying Convertible
Debenture or Common Stock until the date on which such Preferred Security or
underlying Convertible Debenture or Common Stock (i) has been effectively
registered under the Securities Act and disposed of pursuant to the Shelf
Registration Statement, (ii) is distributed to the public pursuant to Rule 144
under the Securities Act or (iii) may be sold or transferred pursuant to Rule
144(k) under the Securities Act (or any similar provisions then in force).
If (i) the Shelf Registration Statement is not filed with the Commission
prior to the Required Filing Date, (ii) the Shelf Registration Statement has
not been declared effective by the Commission under the Securities Act on or
prior to the Required Effectiveness Date or (iii) a Suspension Period is in
effect then, in any such case referred to in clause (i), (ii) or (iii), a
"Registration Default" shall have occurred. During such period as a
Registration Default shall occur and until either the Shelf Registration
Statement is declared effective or the Suspension Period is terminated, as the
case may be, the Company will pay to each holder of Transfer Restricted
Securities as liquidated damages ("Liquidated Damages") an amount equal to an
additional one-quarter of one percent (25 basis points) per quarter, payable
in arrears, with the first quarterly payment due on the first interest or
Distribution date following the date on which such Liquidated Damages begin to
accrue in respect of any Preferred Security that is a Transfer Restricted
Security owned by such holder.
Holders of Transfer Restricted Securities are required, among other things,
to make certain representations to the Company and the Trust (as described in
the Registration Rights Agreement) in connection with the Shelf Registration
Statement pursuant to which such holder proposes to offer and sell Transfer
Restricted Securities. The Company will provide to each holder of Transfer
Restricted Securities copies of the prospectus which is a part of the Shelf
Registration Statement, notify each such Holder when the Shelf Registration
Statement has become effective and take certain other actions as are required
to permit unrestricted resales of the Transfer Restricted Securities. A holder
that proposes to sell Transfer Restricted Securities pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registrations Rights Agreement that are applicable to such a
holder (including indemnification and contribution rights and obligations).
The summary herein of certain provisions of the Registration Rights Agreement
is subject to, and is qualified in its entirety by reference to, all the
provisions of the Registration Rights Agreement. The Company will provide a
copy of the Registration Rights Agreement upon request.
VOTING RIGHTS
Except as described in this Prospectus and except as provided under the
Trust Act and the Trust Indenture Act and as otherwise required by law and the
Declaration, the holders of the Preferred Securities have no voting rights.
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Subject to the requirement of the Institutional Trustee's obtaining a tax
opinion in certain circumstances set forth in the following paragraph, the
holders of a majority in aggregate liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Institutional Trustee, or to
direct the exercise of any trust or power conferred upon the Institutional
Trustee under the Declaration, including the right to direct the Institutional
Trustee, as holder of the Convertible Debentures, to (i) exercise the remedies
available to the Institutional Trustee under the Indenture with respect to the
Convertible Debentures, (ii) waive any past Indenture Event of Default and its
consequences that is waivable under the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Convertible
Debentures shall be due and payable or (iv) consent to any amendment,
modification or termination of the Indenture or the Convertible Debentures
where such consent shall be required; provided, however, that where a consent
or action under the Indenture would require the consent or act of the holders
of more than a majority in principal amount of Convertible Debentures (a
"Super Majority") affected thereby, only the holders of at least such Super
Majority in aggregate liquidation amount of the Preferred Securities may
direct the Institutional Trustee to give such consent or take such action. If
the Institutional Trustee fails to enforce its rights under the Convertible
Debentures, any record holder of Preferred Securities may, to the fullest
extent permitted by law, directly institute a legal proceeding against the
Company to enforce the Institutional Trustee's rights under the Convertible
Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity.
Notwithstanding the foregoing, if a Declaration Event of Default has
occurred and is continuing and such event is attributable to the failure of
the Company to pay interest or principal on the Convertible Debentures on the
date such interest or principal is otherwise payable (or in the case of
redemption on the redemption date), the Company acknowledges that a holder of
Preferred Securities may then institute a Direct Action for enforcement of
payment to such holder of the principal of or interest on the Convertible
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder on or after the respective due date
specified in the Convertible Debentures. The Institutional Trustee shall,
within 90 days, notify all holders of the Preferred Securities of any notice
of default received from the Indenture Trustee with respect to the Convertible
Debentures. Such notice shall state that such Indenture Event of Default also
constitutes a Declaration Event of Default. Except with respect to directing
the time, method and place of conducting a proceeding for a remedy available
to the Institutional Trustee, the Institutional Trustee, as holder of the
Convertible Debentures, shall be under no obligation to take any action in
accordance with the direction of the holders of Preferred Securities under
clauses (i), (ii) or (iii) of the preceding paragraph unless the Institutional
Trustee has obtained an opinion of independent tax counsel experienced in such
matters to the effect that as a result of such action, the Trust will not fail
to be classified as a grantor trust for United States federal income tax
purposes. The holders of a majority in aggregate outstanding principal amount
of Convertible Debentures may annul any declaration of acceleration under the
Indenture and waive any default if the default has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Indenture Trustee.
In the case of the Convertible Debentures held by the Institutional Trustee on
behalf of the Trust, a waiver of any default shall not be effective until a
majority in liquidation amount of the Trust Securities shall have consented to
such waiver; provided, however, that if the Indenture requires the consent of
a Super Majority, such waiver shall be effective only if the holders of at
least the proportion in liquidation amount of the Trust Securities that the
relevant Super Majority represents of the aggregate principal amount of the
Convertible Debentures outstanding so consent.
In the event the consent of the Institutional Trustee, as the holder of the
Convertible Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Institutional
Trustee shall request the written direction of the holders of the Trust
Securities with respect to such amendment, modification or termination and
shall vote with respect to such amendment, modification or termination as
directed by a majority in liquidation amount of the Trust Securities voting
together as a single class; provided, however, that where any amendment,
modification or termination under the Indenture would require the consent of a
Super Majority, the Institutional Trustee may only give such consent at the
direction of the holders of at least the proportion in aggregate stated
liquidation amount of the Trust Securities which the relevant Super
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Majority represents of the aggregate principal amount of the Convertible
Debentures outstanding. The Institutional Trustee shall be under no obligation
to take any such action in accordance with the direction of the holders of the
Trust Securities unless the Institutional Trustee has obtained an opinion of a
nationally recognized independent tax counsel experienced in such matters to
the effect that for United States federal income tax purposes the Trust will
not be classified as other than a grantor trust.
A waiver of an Indenture Event of Default constitutes a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be
taken, to be mailed to each holder of record of Preferred Securities. Each
such notice will include a statement setting forth the following information:
(i) the date of such meeting or the date by which such action is to be taken;
(ii) a description of any resolution proposed for adoption at such meeting on
which such holders are entitled to vote or of such matter upon which written
consent is sought; and (iii) instructions for the delivery of proxies or
consents. No vote or consent of the holders of Preferred Securities will be
required for the Trust to redeem and cancel Preferred Securities or distribute
Convertible Debentures in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company or any entity directly
or indirectly controlling or controlled by, or under direct or indirect common
control with, the Company, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if such Preferred
Securities were not outstanding.
The procedures by which holders of Preferred Securities represented by the
Global Certificates may exercise their voting rights are described below. See
"--Book-Entry-Only Issuance--The Depository Trust Company."
Holders of the Preferred Securities have no right to appoint or remove any
of the Trustees, who may be appointed, removed or replaced solely by the
Company as the indirect or direct holder of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular
Trustees (and, in certain circumstances, the Institutional Trustee and/or the
Delaware Trustee), except that if any proposed amendment provides for, or the
Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the holders of
the Trust Securities, whether by way of amendment to the Declaration or
otherwise or (ii) the dissolution, winding-up or termination of the Trust
other than pursuant to the terms of the Declaration, then the holders of the
Trust Securities voting together as a single class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of holders of at least a majority in
liquidation amount of the Trust Securities affected thereby; provided, that if
any amendment or proposal referred to in clause (i) above would adversely
affect only the Preferred Securities or the Common Securities, then only the
affected class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of a
majority in liquidation amount of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for United States federal income tax purposes as other than a
grantor trust, (ii) reduce or otherwise adversely affect the powers of the
Institutional Trustee or (iii) cause the Trust to be deemed an "investment
company" that is required to be registered under the 1940 Act.
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MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other body, except as
described below or as otherwise set forth in the Declaration. The Trust may,
with the consent of the Regular Trustees and without the consent of the
holders of the Trust Securities, the Institutional Trustee or the Delaware
Trustee, consolidate, amalgamate, merge with or into, or be replaced by, or
convey, transfer or lease its properties and assets substantially as an
entirety to, a trust organized as such under the laws of any State provided,
however, that (i) if the Trust is not the survivor, such successor entity
either (x) expressly assumes all of the obligations of the Trust under the
Trust Securities or (y) substitutes for the Trust Securities other securities
having substantially the same terms as the Trust Securities (the "Successor
Securities"), so long as the Successor Securities rank the same as the Trust
Securities rank with respect to Distributions, assets and payments upon
liquidation, redemption and otherwise, (ii) the Company expressly acknowledges
a trustee of such successor entity possessing the same powers and duties as
the Institutional Trustee, in its capacity as the holder of the Convertible
Debentures, (iii) the Preferred Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon notification of
issuance, on the NNM, any national securities exchange or another organization
on which the Preferred Securities are then listed or quoted, (iv) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not cause the Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
holders of the Trust Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity), (vi) such successor entity has a purpose
substantially identical to that of the Trust, (vii) the Company guarantees the
obligations of such successor entity under the Successor Securities to the
same extent as provided by the Guarantees and (viii) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, the
Company has received an opinion of a nationally recognized independent counsel
to the Trust and experienced in such matters to the effect that: (A) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease will not adversely affect the rights, preferences and privileges of the
holders of the Trust Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity) and (B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor such successor entity will
be required to register as an "investment company" under the 1940 Act.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in liquidation amount of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by, or convey, transfer or
lease its properties and assets substantially as an entirety to, any other
entity or permit any other entity to consolidate, amalgamate, merge with or
into, or replace it, if, in the opinion of a nationally recognized independent
tax counsel experienced in such matters, such consolidation, amalgamation,
merger, replacement, conveyance, transfer or lease, would cause the Trust or
the successor entity to be classified as other than a grantor trust for United
States federal income tax purposes. In addition, so long as any Preferred
Securities remain outstanding and are not held entirely by the Company, the
Trust may not voluntarily liquidate, dissolve, wind-up or terminate except as
described above under "--Special Event Redemption or Distribution."
BOOK-ENTRY-ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Preferred Securities were issued in fully registered form. Except as
provided below, Preferred Securities held by "qualified institutional buyers,"
as defined in Rule 144A under the Securities Act ("QIBs"), are currently
evidenced by one or more global certificates representing Preferred Securities
(collectively, the "Restricted Global Certificate"), which has been deposited
with DTC and registered in the name of Cede & Co. ("Cede") as DTC's nominee.
Preferred Securities held by persons who acquired such Preferred Securities
in compliance with Regulation S under the Securities Act ("Non-U.S. persons")
are currently evidenced by one or more global certificates (collectively, the
"Regulation S Global Certificate" and together with the Restricted Global
Certificate, the "Global Certificates" or each individually, a "Global
Certificate"), which has been registered in
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the name of a nominee of DTC for the accounts of the Euroclear System
("Euroclear") or Cedel Bank, societe anonyme ("Cedel").
A QIB may hold its interest in the Restricted Global Certificate directly
through DTC if such QIB is a participant in DTC, or indirectly through
organizations that are participants in DTC ("Participants"). The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of securities in definitive form. Such laws may impair the ability to
transfer beneficial interests in the Preferred Securities as represented by
the Restricted Global Certificate.
Beneficial interests in the Restricted Global Certificate may be transferred
to a person who takes delivery in the form of an interest in the Regulation S
Global Certificate only upon receipt by the Institutional Trustee of a written
certification from the transferor to the effect that such transfer is being
made in accordance with Regulation S or Rule 144A under the Securities Act and
that the interest transferred will be held immediately thereafter through
Euroclear or Cedel. Any beneficial interest in one of the Global Certificates
will, upon transfer, cease to be an interest in such Global Certificate and
become an interest in such other Global Certificate and, accordingly,
thereafter will be subject to all transfer restrictions and other procedures
applicable to beneficial interest in such other Global Certificate for as long
as it remains such an interest.
Investors may hold their interests in the Regulation S Global Certificate
through Euroclear or Cedel, if they are participants in such systems, or
indirectly through organizations that are participants in such systems.
Investors also may hold such interests through organizations other than
Euroclear or Cedel that are Participants in DTC. Euroclear and Cedel will hold
interests in the Regulation S Global Certificate on behalf of their
participants through customers' securities accounts in their respective names
on the books of DTC. All interests in a Global Certificate, including those
held through Euroclear or Cedel, may be subject to the procedures and
requirements of DTC. Those interests held through Euroclear and Cedel also may
be subject to the procedures and requirements of such systems.
QIBs and Non-U.S. persons that are not Participants may beneficially own
interests in a Global Certificate held by DTC only through Participants,
including Euroclear and Cedel, or certain banks, brokers, dealers, trust
companies and other parties that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants"). So long as the nominee of DTC is the registered owner of a
Global Certificate, such nominee will be considered for all purposes the sole
holder of the Global Certificate. Except as provided below, owners of
beneficial interests in a Global Certificate will not be entitled to have
certificates registered in their names, will not receive or be entitled to
receive physical delivery of certificates in definitive form and will not be
considered holders thereof.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in Preferred Securities represented by a Global
Certificate to pledge such interest to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interest, may be affected by the lack of a physical certificate evidencing
such interest.
DTC has advised the Company and the Trust as follows: DTC is a limited-
purpose trust company organized under the New York Banking Law, a "banking
organization" within the meaning of New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC holds securities that
its Participants deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Participants in DTC include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of its Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as securities brokers and
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dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. The rules
applicable to DTC and its Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Participants, which will receive a credit for the Preferred Securities
on DTC's records. The ownership interest of each actual purchaser of each
Preferred Security ("Beneficial Owner") is in turn recorded on the
Participants' and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchases, but Beneficial
Owners are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
Participants or Indirect Participants through which the Beneficial Owners
purchased Preferred Securities. Transfers of ownership interests in the
Preferred Securities are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in the Preferred
Securities, except in the event that use of the book-entry system for the
Preferred Securities is discontinued. Accordingly, each Beneficial Owner must
rely on the procedures of DTC to exercise any rights under the Preferred
Securities.
Transfers between Participants will be effected in accordance with DTC's
procedures and will be settled in same-day funds. Transfers between
participants in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between Participants, on the one hand, and Euroclear
participants or Cedel participants, on the other hand, will be effected in DTC
in accordance with DTC's rules on behalf of Euroclear or Cedel, as the case
may be, by its respective depositary; however, such cross-market transactions
will require delivery of instructions to Euroclear or Cedel, as the case may
be, by the counterparty in such system in accordance with the rules and
procedures and within the established deadlines (Brussels time) of such
system. Euroclear or Cedel, as the case may be, will, if the transaction meets
its settlement requirements, deliver instructions to its respective depositary
to take action to effect final settlement on its behalf by delivering or
receiving interests in the Preferred Securities in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Cedel participants
may not deliver instructions directly to the depositaries for Euroclear or
Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Preferred Security from a
Participant in DTC will be credited, and any such crediting will be reported
to the relevant Euroclear participant or Cedel participant, during the
securities settlement processing day (which must be a business day for
Euroclear and Cedel, as the case may be) immediately following the DTC
settlement date. Cash received in Euroclear or Cedel as a result of sales of
interests in a Preferred Security by or through a Euroclear or Cedel
participant to a Participant in DTC will be received with value on the DTC
settlement date, but will be available in the relevant Euroclear or Cedel cash
account only as of the business day for Euroclear or Cedel following the DTC
settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Preferred Securities (including the presentation of
Preferred Securities for exchange as described below) only at the direction of
one or more Participants to whose account the DTC interests in the Global
Certificates are credited and only in respect of such portion of the aggregate
liquidation amount of Preferred Securities as to which such Participant or
Participants has or have given such direction.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Conversion and redemption notices shall be sent to DTC. If less than all of
the Preferred Securities are being redeemed, DTC will reduce the amount of the
interest of each Participant in such Preferred Securities in accordance with
its procedures.
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Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, DTC will not itself consent or vote with
respect to the Preferred Securities. Under its usual procedures, DTC would
mail an omnibus proxy to the Trust as soon as possible after the record date.
The omnibus proxy assigns DTC's consenting or voting rights to those
Participants to whose accounts the Preferred Securities are credited on the
record date (identified in a listing attached to the omnibus proxy).
Distributions on the Preferred Securities in the form of Global Certificates
will be made to DTC. DTC's practice is to credit Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive
payments on such payment date. Payments by Participants and Indirect
Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the account
of customers in bearer form or registered in "street name," and such payments
will be the responsibility of such Participants and not of DTC, the Trust or
the Company, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of Distributions to DTC is the
responsibility of the Trust, disbursement of such payments to Participants is
the responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Participants and Indirect Participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificates among Participants of DTC,
DTC is under no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time. Neither the Company, the
Trust nor any Trustee will have any responsibility for the performance by DTC
or its Participants or Indirect Participants under the rules and procedures
governing DTC. DTC may discontinue providing its services as securities
depositary with respect to the Preferred Securities at any time by giving
reasonable notice to the Trust. Under such circumstances, in the event that a
successor securities depositary is not obtained, Preferred Securities in the
form of physical certificates will be delivered in exchange for beneficial
interests in each Global Certificate. Additionally, the Trust (with the
consent of the Company) may decide to discontinue use of the system of book-
entry transfers through DTC (or a successor depositary) with respect to the
Preferred Securities. In that event, certificates for the Preferred Securities
will be printed and delivered. In each of the above circumstances, the Company
will appoint a paying agent with respect to the Preferred Securities.
The information in this Section concerning DTC, Cedel, Euroclear and DTC's
book-entry system has been obtained from sources that the Trust and the
Company believe to be reliable, but neither the Trust nor the Company takes
responsibility for the accuracy thereof.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with respect
to the Trust Securities and after the curing of any default that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after such a default, shall exercise the same degree
of care as a prudent individual would exercise in the conduct of his or her
own affairs. Subject to such provisions, the Institutional Trustee is under no
obligation to exercise any of the powers vested in it by the Declaration at
the request of any holder of Preferred Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which
might be incurred thereby. Notwithstanding the foregoing, the holders of
Preferred Securities will not be required to offer such indemnity in the event
such holders, by exercising their voting rights, direct the Institutional
Trustee to take any action following a Declaration Event of Default. The
Institutional Trustee also serves as Delaware Trustee and as trustee under the
Guarantee and the Indenture.
PAYMENT
Payments in respect of the Preferred Securities represented by the Global
Certificates will be made to DTC, which will credit the relevant accounts at
DTC on the applicable Distribution Dates or, in the case of certificated
Preferred Securities, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
Register.
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REGISTRAR, TRANSFER AGENT, PAYING AGENT AND CONVERSION AGENT
The Institutional Trustee acts as Registrar, Transfer Agent, Paying Agent
and Conversion Agent for the Preferred Securities. The Paying Agent initially
is the Institutional Trustee, which is presently located in Wilmington,
Delaware. The Paying Agent is permitted to resign as Paying Agent upon 30
days' written notice to the Trustees. In the event that the Institutional
Trustee will no longer be the Paying Agent, the Regular Trustees shall appoint
a successor to act as Paying Agent (which shall be a bank or trust company).
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Trust or the Company may require) in respect of any tax or
other government charges that may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
GOVERNING LAW
The Declaration and the Preferred Securities are governed by, and construed
in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way that the Trust will not be deemed to be an "investment company"
required to be registered under the 1940 Act or characterized as other than a
grantor trust for United States federal income tax purposes. In this
connection, the Company and the Regular Trustees are authorized to take any
action, not inconsistent with applicable law, the certificate of trust or the
Declaration that each of the Company and the Regular Trustees determine in
their discretion to be necessary or desirable for such purposes as long as
such action does not materially adversely affect the interests of the holders
of the Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
DESCRIPTION OF THE CONVERTIBLE DEBENTURES
Set forth below is a description of the specific terms of the Convertible
Debentures in which the Trust has invested the proceeds from the initial
issuance and sale of the Trust Securities. The Convertible Debentures have
been qualified under the Trust Indenture Act. The following description does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, the Indenture, dated as of November 25, 1997 (the
"Indenture") between the Company and Wilmington Trust Company, as trustee (the
"Indenture Trustee"). Certain capitalized terms used herein are defined in the
Indenture.
Under certain circumstances involving the dissolution of the Trust following
the occurrence of a Special Event, Convertible Debentures may be distributed
to the holders of the Trust Securities in liquidation of the Trust. See
"Description of the Preferred Securities--Special Event Redemption or
Distribution."
GENERAL
The Convertible Debentures were issued as unsecured debt under the
Indenture. The Convertible Debentures were limited in aggregate principal
amount to approximately $257.7 million, such amount being the sum of the
aggregate stated liquidation amount of the Preferred Securities and the
capital contributed by the Company in exchange for the Common Securities.
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The Convertible Debentures are not subject to a sinking fund provision. The
entire principal amount of the Convertible Debentures will mature and become
due and payable, together with any accrued and unpaid interest thereon,
including Compound Interest and Additional Interest, if any, on November 15,
2027.
If Convertible Debentures are distributed to holders of Preferred Securities
in liquidation of such holder's interest in the Trust, such Convertible
Debentures will initially be issued in the form of one or more Global
Securities (as defined below). As described herein under certain limited
circumstances, Convertible Debentures may be issued in certificated form in
exchange for a Global Security. In the event that Convertible Debentures are
issued in certificated form, such Convertible Debentures will be in
denominations of $50 and integral multiples thereof and may be transferred or
exchanged at the offices described below. Payments on Convertible Debentures
issued as a Global Security will be made to DTC, a successor depositary or, in
the event that no depositary is used, to a paying agent for the Convertible
Debentures. In the event Convertible Debentures are issued in certificated
form, principal and interest will be payable, the transfer of the Convertible
Debentures will be registrable and Convertible Debentures will be exchangeable
for Convertible Debentures of other denominations of a like aggregate
principal amount at the corporate trust office of the Indenture Trustee in New
York, New York; provided, however, that payment of interest may be made at the
option of the Company by check mailed to the address of the persons entitled
thereto.
There are no covenants or provisions in the Indenture that afford holders of
Convertible Debentures protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving the Company that may adversely affect such holders.
SUBORDINATION
The Indenture provides that the Convertible Debentures are subordinate and
junior in right of payment to all existing and future Senior Indebtedness of
the Company. No payment of principal of (including redemption payments),
premium, if any, or interest (including Additional Interest and Compound
Interest) on, the Convertible Debentures may be made if (i) any Senior
Indebtedness of the Company has not been paid when due and any applicable
grace period with respect to such default has ended and such default has not
been cured or waived, or ceased to exist or (ii) the maturity of any Senior
Indebtedness of the Company has been accelerated because of a default. At
April 30, 1998, Senior Indebtedness of the Company aggregated approximately
$924 million. Upon any distribution of assets of the Company to creditors upon
any dissolution, winding-up, liquidation or reorganization, whether voluntary
or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all principal, premium, if any, and interest due or to become due
on, all Senior Indebtedness of the Company must be paid in full before the
holders of the Convertible Debentures are entitled to receive or retain any
payment. Upon satisfaction of all claims related to all Senior Indebtedness of
the Company then outstanding, the rights of the holders of the Convertible
Debentures will be subrogated to the rights of the holders of Senior
Indebtedness of the Company to receive payments or distributions applicable to
Senior Indebtedness until all amounts owing on the Convertible Debentures are
paid in full.
The term "Senior Indebtedness" means, with respect to the Company, (i) the
principal, premium, if any, and interest in respect of (A) every obligation of
the Company for money borrowed and (B) every obligation of the Company
evidenced by securities, notes, debentures, bonds or other similar instruments
including obligations incurred in connection with the acquisition of property,
assets or businesses, (ii) all capital lease obligations of the Company, (iii)
all obligations of the Company issued or assumed as the deferred purchase
price of property, all conditional sale obligations of the Company and all
obligations of the Company under any title retention agreement (but excluding
trade accounts payable arising in the ordinary course of business), (iv) all
obligations of the Company for the reimbursement of any letter of credit,
banker's acceptance, security purchase facility or similar credit transaction
issued for the account of the Company, (v) all obligations of the Company in
respect of derivative products, including interest rate swap, cap or other
similar agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar agreements,
(vi) all obligations of the type referred to in clauses (i) through (v) above
of other persons for the payment of which the
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Company is responsible or liable as obligor, guarantor or otherwise, and (vii)
all obligations of the type referred to in clauses (i) through (vi) above of
other persons secured by any lien on any property or asset of the Company
(whether or not such obligation is assumed by the Company), except for (1) any
such indebtedness that is by its terms subordinated to or pari passu with the
Convertible Debentures and (2) any indebtedness between or among the Company
and its affiliates, including all other debt securities and guarantees in
respect of those debt securities issued to (a) the Trust or a trustee of the
Trust and (b) any other trust, or a trustee of such trust, partnership or
other entity affiliated with the Company that is a financing vehicle of the
Company (a "financing entity") in connection with the issuance by such
financing entity of preferred securities or other securities that rank pari
passu with, or junior to, the Preferred Securities. Such Senior Indebtedness
shall continue to be Senior Indebtedness and be entitled to the benefits of
the subordination provisions irrespective of any amendment, modification or
waiver of any term of such Senior Indebtedness.
In addition, because a significant portion of the Company's operations is
conducted through its subsidiaries and the subsidiaries have not guaranteed
the payment of and interest on the Convertible Debentures, all liabilities of
such subsidiaries, including trade payables (which aggregated approximately
$433 million at April 30, 1998), are effectively senior to the Convertible
Debentures.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by the Company.
OPTIONAL REDEMPTION
The Company has the right to redeem the Convertible Debentures, in whole or
in part, from time to time, on or after November 25, 2000 upon not less than
30 nor more than 60 days' notice, at the following Redemption Prices
(expressed as a percentage of the principal amount of the Convertible
Debentures), if redeemed during the twelve-month period commencing November 25
in the year indicated:
<TABLE>
<CAPTION>
ORIGINAL
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2000...................................................... 102.60%
2001...................................................... 101.30
</TABLE>
and 100% if redeemed on or after November 25, 2002.
plus, in each case, accrued and unpaid interest, including Additional Interest
and Compound Interest, if any, to, but not including, the date set for
redemption.
The Company may also redeem the Convertible Debentures, in whole or in part,
at any time in certain circumstances upon the occurrence of a Tax Event as
described under "Description of the Preferred Securities-Special Event
Redemption or Distribution" at a redemption price equal to 100% of the
principal amount to be redeemed plus accrued and unpaid interest, including
Additional Interest and Compound Interest, if any, to the date set for
redemption (subject to the rights of holders of record on the relevant record
date to receive interest due on an Interest Payment Date (as defined below)
that is on or prior to the redemption date).
If a partial redemption of the Preferred Securities resulting from a partial
redemption of the Convertible Debentures would result in the delisting of the
Preferred Securities, the Company may only redeem Convertible Debentures in
whole.
INTEREST
Each Convertible Debenture bears interest at the rate of 6.50% per annum
from the original date of issuance, payable quarterly in arrears on February
15, May 15, August 15 and November 15 (each, an "Interest Payment Date"),
commencing February 15, 1998 to the person in whose name such Convertible
Debenture is registered, subject to certain exceptions, at the close of
business on the Business Day next preceding such Interest Payment Date. In the
event the Convertible Debentures shall not continue to remain in book-entry
only form, the Company
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shall have the right to select record dates, which shall be more than 14 days
but less than 60 days prior to the Interest Payment Date.
The amount of interest payable for any period is computed on the basis of a
360-day year of twelve 30-day months. The amount of interest payable for any
period shorter than a full quarterly period for which interest is computed
will be computed on the basis of the actual number of days elapsed. In the
event that any date on which interest is payable on the Convertible Debentures
is not a Business Day, then payment of the interest payable on such date will
be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, then such payment shall
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date.
INTEREST INCOME AND OPTION TO EXTEND INTEREST PAYMENT PERIODS
So long as no Indenture Event of Default has occurred and is continuing, the
Company has the right at any time, and from time to time, during the term of
the Convertible Debentures, to defer payments of interest by extending the
interest payment period for a period not exceeding 20 consecutive quarters
with respect to each Extension Period; provided, that no Extension Period may
extend beyond the maturity of the Convertible Debentures, and at the end of
which Extension Period the Company shall pay all interest then accrued and
unpaid (including any Additional Interest) together with interest thereon
compounded quarterly at the rate specified for the Convertible Debentures to
the extent permitted by applicable law ("Compound Interest"); provided,
further, that during any such Extension Period, (a) the Company shall not
declare or pay dividends on, or make any distribution or liquidation payment
with respect to, or redeem, purchase or acquire any of its capital stock
(other than (i) purchases or acquisitions of shares of Common Stock in
connection with the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of its obligations
pursuant to any contract or security requiring the Company to purchase shares
of the Common Stock, (ii) as a result of a reclassification of the Company's
capital stock or the exchange or conversion of one class or series of the
Company's capital stock for another class or series of the Company's capital
stock, (iii) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such
capital stock or the security being converted or exchanged, (iv) purchases or
acquisitions of shares of the Company's Common Stock to be used in connection
with acquisitions of the Company's Common Stock by stockholders pursuant to a
dividend reinvestment plan, or (v) stock dividends paid by the Company where
the dividend stock is the same stock as that on which the dividend is paid),
(b) the Company shall not make any payment of interest on or principal of (or
premium, if any, on) or repay, repurchase or redeem any debt securities
(including guarantees) issued by the Company which rank pari passu with or
junior to the Convertible Debentures and (c) the Company shall not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Guarantees). Prior to the termination of any such Extension Period, the
Company may further defer payments of interest by extending the interest
payment period; provided, however, that such Extension Period together with
all previous and further extensions thereof may not exceed 20 consecutive
quarters; and provided further that no Extension Period may extend beyond the
maturity of the Convertible Debentures. Upon the termination of any Extension
Period and the payment of all amounts then due, the Company may commence a new
Extension Period, subject to the terms set forth in this section. No interest
shall be due and payable during an Extension Period. There could be multiple
Extension Periods of varying lengths throughout the terms of the Convertible
Debentures. The Company has no current intention of exercising its right to
defer payments of interest by extending the interest payment period on the
Convertible Debentures. If the Institutional Trustee shall be the sole holder
of the Convertible Debentures, the Company shall give the Regular Trustees,
the Indenture Trustee and the Institutional Trustee written notice of its
selection of such Extension Period at least one Business Day prior to the
earlier of (i) the date the Distributions on the Preferred Securities would be
payable, if not for such Extension Period or (ii) the date the Regular
Trustees are required to give notice to any applicable self-regulatory
organization or to holders of the Preferred Securities of the record date or
the date such Distribution would be payable if not for such Extension Period,
but in any event not less than one Business Day prior to such record date. The
Regular Trustees shall give notice of the Company's selection
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of such Extension Period to the holders of the Preferred Securities. If the
Institutional Trustee shall not be the sole holder of the Convertible
Debentures, the Company shall give the holders of the Convertible Debentures
and the Indenture Trustee written notice of its selection of such Extension
Period at least ten Business Days prior to the earlier of (i) the next
succeeding Interest Payment Date or (ii) the date upon which the Company is
required to give notice to any applicable self-regulatory organization or to
holders of the Convertible Debentures on the record or payment date of such
related interest payment.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in
any such case, the Company will pay as additional interest ("Additional
Interest") on the Convertible Debentures such additional amounts as shall be
required so that the net amounts received and retained by the Trust after
paying any such taxes, duties, assessments or governmental charges will be not
less than the amounts the Trust would have received had no such taxes, duties,
assessments or governmental charges been imposed.
CONVERSION OF THE CONVERTIBLE DEBENTURES
The Convertible Debentures are convertible into Common Stock at the option
of the holders of the Convertible Debentures at any time on or after January
25, 1998 and prior to 5:00 P.M. (Eastern time) on the Business Day immediately
preceding the date of repayment of such Convertible Debentures, whether at
maturity or upon redemption (or, in the case of Convertible Debentures called
for redemption, the close of business or the Business Day prior to the
Redemption Date), at the Initial Conversion Price subject to the conversion
price adjustments described under "Description of the Preferred Securities--
Conversion Rights." The Trust has agreed not to convert Convertible Debentures
held by it except pursuant to a notice of conversion delivered to the
Conversion Agent by a holder of Preferred Securities. Upon surrender of a
Preferred Security to the Conversion Agent for conversion, the Trust will
distribute Convertible Debentures to the Conversion Agent on behalf of the
holder of the Preferred Securities so converted, whereupon the Conversion
Agent will convert such Convertible Debentures to Common Stock on behalf of
such holder. The Company's delivery to the holders of the Convertible
Debentures (through the Conversion Agent) of the fixed number of shares of
Common Stock into which the Convertible Debentures are convertible (together
with the cash payment, if any, in lieu of fractional shares) will be deemed to
satisfy the Company's obligation to pay the principal amount of the
Convertible Debentures so converted, and the accrued and unpaid interest
thereon attributable to the period from the last date to which interest has
been paid or duly provided for; provided, however, that if any Convertible
Debenture is converted after a record date for payment of interest, the
interest payable on the related interest payment date with respect to such
Convertible Debenture shall be paid to the Trust (which will distribute such
interest to the converting holder of such Preferred Security on the record
date) or other holder of Convertible Debentures, as the case may be, despite
such conversion; provided, further that if any Convertible Debenture is
delivered for conversion during an Extension Period by a holder after
receiving a notice of redemption from the Institutional Trustee, the Company
shall be required to pay to the Trust all accrued and unpaid interest, if any,
on such Convertible Debenture through the date of conversion, which amount
shall be simultaneously distributed to the holders of the Preferred Securities
in respect of which such Convertible Debentures were delivered. See "--
Optional Redemption," "Description of the Preferred Securities--Conversion
Rights" and "Description of the Preferred Securities--Mandatory Redemption."
CERTAIN COVENANTS
In the Indenture, so long as any Convertible Debentures are outstanding, if
(i) there shall have occurred and be continuing any event that with the giving
of notice or the lapse of time or both, would constitute an Indenture Event of
Default, or (ii) the Company shall be in default with respect to its payment
of any obligations under the Guarantee, or (iii) the Company has exercised its
option to defer interest payments on the Convertible Debentures by extending
the interest payment period and such period, or any extension thereof, shall
be continuing, then (a) the Company shall not declare or pay dividends on, or
make any distribution or liquidation payment with
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respect to, or redeem, purchase or acquire any of its capital stock (other
than (i) purchases or acquisitions of shares of Common Stock in connection
with the satisfaction by the Company of its obligations under any employee
benefit plans or the satisfaction by the Company of its obligations pursuant
to any contract or security requiring the Company to purchase shares of the
Common Stock, (ii) as a result of a reclassification of the Company's capital
stock or the exchange or conversion of one class or series of the Company's
capital stock for another class or series of the Company's capital stock,
(iii) the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital stock
or the security being converted or exchanged, (iv) purchases or acquisitions
of shares of the Common Stock to be used in connection with acquisitions of
the Common Stock by shareholders pursuant to a dividend reinvestment plan, or
(v) stock dividends paid by the Company where the dividend stock is the same
stock as that on which the dividend is paid), (b) the Company shall not make
any payment of interest on or principal of (or premium, if any, on) or repay,
repurchase or redeem any debt securities (including guarantees) issued by the
Company that rank pari passu with or junior to the Convertible Debentures and
(c) the Company shall not make any guarantee payments with respect to the
foregoing (other than pursuant to the Guarantees).
The Company has covenanted (i) to maintain, directly or indirectly, 100%
ownership of the Common Securities of the Trust; provided, however, that any
permitted successor of the Company under the Indenture may succeed to the
Company's ownership of such Common Securities, (ii) as issuer of the
Convertible Debentures, not to voluntarily terminate, wind-up or liquidate the
Trust, except in connection with (a) a distribution of Convertible Debentures
to the holders of the Trust Securities in liquidation of the Trust or (b)
certain mergers, consolidations or amalgamations permitted by the Declaration,
(iii) to use its reasonable efforts (a) to cause the Convertible Debentures to
continue to be classified as indebtedness of the Company for United States
federal income tax purposes, and (b) to cause the Trust to otherwise continue
to be classified as a grantor trust for United States federal income tax
purposes.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Company will not consolidate with or merge
into any other corporation or convey, transfer or lease its properties and
assets substantially as an entirety unless (a) if the Company is not the
survivor, the successor is a corporation organized under the laws of a State
of the United States and expressly assumes the due and punctual payment of the
principal of (and premium, if any) and interest on all Convertible Debentures
issued under the Indenture and the performance or observance of every other
covenant of the Indenture on the part of the Company, (b) immediately
thereafter no Indenture Event of Default and no event which, after notice or
lapse of time, or both, would become an Indenture Event of Default, shall have
occurred and be continuing and (c) the Company shall have delivered to the
Indenture Trustee an officers' certificate and an opinion of counsel, each
stating that such transaction and any supplemental indenture required pursuant
to such transaction, comply with the terms of the Indenture and that all
conditions precedent provided for therein relating to such transaction have
been complied with. Upon any such consolidation, merger, conveyance or
transfer, the successor corporation shall succeed to and be substituted for
the Company under the Indenture and thereafter the predecessor corporation
shall be relieved of all obligations and covenants under the Indenture and the
Convertible Debentures.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events that has occurred and is continuing constitutes an Indenture Event of
Default with respect to the Convertible Debentures: (i) failure for 30 days to
pay interest on the Convertible Debentures, including any Additional Interest
and Compound Interest in respect thereof, when due; provided, however, that a
valid extension of an interest payment period will not constitute a default in
the payment of interest (including any Additional Interest and Compound
Interest) for this purpose; or (ii) failure to pay principal of or premium, if
any, on the Convertible Debentures when due whether at maturity, upon
redemption, by declaration or otherwise; or (iii) failure to observe or
perform, or breach of, in any material respect, any other covenant or
agreement contained in the Indenture that shall not have been
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remedied for a period of 90 days after notice to the Company by the Indenture
Trustee or by the holders of not less than 25% in aggregate outstanding
principal amount of the Convertible Debentures; or (iv) failure by the Company
to deliver shares of Common Stock upon an election by a holder of Preferred
Securities to convert such Preferred Securities; or (v) the dissolution,
winding-up or termination of the Trust, except in connection with (A) the
distribution of Convertible Debentures to the holders of Preferred Securities
in liquidation of the Trust upon the redemption of all outstanding Preferred
Securities and (B) certain mergers, consolidations or amalgamations permitted
by the Declaration; or (vi) certain events of bankruptcy, insolvency or
reorganization of the Company.
The Indenture provides that the Indenture Trustee may withhold notice to the
holders of the Convertible Debentures (except notice relating to any default
in the payment of principal, premium, if any, or interest on, the Convertible
Debentures) if the Indenture Trustee considers it in the interest of such
holders to do so.
The Indenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Convertible Debentures may declare the
principal of and interest on the Convertible Debentures due and payable
immediately on the occurrence of an Indenture Event of Default; provided,
however, that, after such acceleration, but before a judgment or decree based
on acceleration, the holders of a majority in aggregate principal amount of
outstanding Convertible Debentures may, under certain circumstances, rescind
and annul such acceleration if all Indenture Events of Default, other than the
nonpayment of accelerated principal, have been cured or waived as provided in
the Indenture. For information as to waiver of defaults, see "--Modifications
and Amendments of the Indenture."
Notwithstanding the foregoing, if an Indenture Event of Default has occurred
and is continuing and such event is attributable to the failure of the Company
to pay interest or principal on the Convertible Debentures on the date such
interest or principal is otherwise payable (or in the case of redemption, the
redemption date), the Company acknowledges that, in such event, a holder of
Preferred Securities may then institute a Direct Action for payment on or
after the respective due date specified in the Convertible Debentures. The
Company may not amend the Indenture to remove the foregoing right to bring a
Direct Action without the prior written consent of all the holders of
Preferred Securities. Notwithstanding any payment made to such holder of
Preferred Securities by the Company in connection with a Direct Action, the
Company shall remain obligated to pay the principal of (premium, if any, on)
or interest on the Convertible Debentures held by the Trust or the
Institutional Trustee, and the Company shall be subrogated to the rights of
the holder of such Preferred Securities with respect to payments on the
Preferred Securities to the extent of any payment made by the Company to such
holder in any Direct Action. The holders of Preferred Securities will not be
able to exercise directly any other remedy available to the holders of the
Convertible Debentures.
The holders of not less than a majority in principal amount of the
outstanding Convertible Debentures may on behalf of the holders of all the
Convertible Debentures waive any past default and its consequences except (a)
a default in payment of the principal of (or premium, if any) or interest
(including Additional Interest and Compound Interest) on any Convertible
Debentures and (b) a default in respect of a covenant or provision of the
Indenture that cannot be amended or modified without the consent of the holder
of each Convertible Debenture; provided, however, that if the Convertible
Debentures are held by the Trust or a trustee of the Trust, such waiver or
modification to such waiver shall not be effective until the holders of a
majority in liquidation amount of Trust Securities shall have consented to
such waiver or modification to such waiver; and provided, further, that if the
consent of the holder of each outstanding Convertible Debenture is required,
such waiver shall not be effective until each holder of the Trust Securities
shall have consented to such waiver.
A default under any other indebtedness of the Company would not constitute
an Indenture Event of Default.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, in case an Indenture Event of Default shall occur and be
continuing, the Indenture Trustee will be under no obligation to exercise any
of its rights or powers under the Indenture at the request or direction of any
holders of Convertible Debentures, unless such holders shall have offered to
the Indenture Trustee reasonable indemnity against expenses and
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liabilities. Subject to such provisions for the indemnification of the
Indenture Trustee and subject to any rule of law, the holders of a majority in
aggregate principal amount of the Convertible Debentures then outstanding will
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Indenture Trustee, or exercising
any trust or power conferred on the Indenture Trustee.
No holder of any Convertible Debenture has any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
(i) such holder shall have previously given to the Indenture Trustee written
notice of a continuing Indenture Event of Default, (ii) if the Trust is not
the sole holder of Convertible Debentures, the holders of not less than 25% in
aggregate principal amount of the Convertible Debentures then outstanding
shall also have made a written request to the Indenture Trustee, (iii) such
holder has offered reasonable indemnity to the Indenture Trustee to institute
such proceeding as Indenture Trustee, (iv) the Indenture Trustee shall have
failed to institute such proceeding within 60 days of such notice, and (v) the
Indenture Trustee shall not have received from the holders of a majority in
aggregate principal amount of the outstanding Convertible Debentures a
direction inconsistent with such request. However, such limitations do not
apply to a suit instituted by a holder of a Convertible Debenture for
enforcement of payment of the principal of or interest on such Convertible
Debenture on or after the respective due dates set forth in such Convertible
Debenture.
The Indenture requires the Company to file annually with the Indenture
Trustee and the Institutional Trustee a certificate as to the absence of
certain defaults and whether or not the Company is in compliance with all the
conditions and covenants under the Indenture.
MODIFICATIONS AND AMENDMENTS OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Indenture
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the outstanding Convertible Debentures, to
modify the Indenture or the rights of the holders of Convertible Debentures;
provided, however, that no such modification shall, without the consent of the
holder of each outstanding Convertible Debenture affected thereby, (i) change
the stated maturity of the Convertible Debentures or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, or make the principal of, or interest or premium, if any, on the
Convertible Debentures payable in any coin or currency other than that
provided in the Convertible Debentures, or impair or affect the right of any
holder of Convertible Debentures to institute suit for the payment thereof or
the right of prepayment, if any, at the option of the holder, or adversely
affect the right to convert Convertible Debentures or the subordination
provisions of the Indenture in a manner adverse to the holders of Convertible
Debentures, (ii) reduce the percentage in aggregate principal amount of
outstanding Convertible Debentures, for which the consent of the holders is
required for any such modification or (iii) modify any provision of the
Indenture with respect to (A) modification of the Indenture or (B) waiver of
defaults except under certain limited circumstances. If Convertible Debentures
are held by the Trust or a trustee thereof, a supplemental indenture requiring
such consent will not be effective until the holders of a majority in
liquidation amount of the Trust Securities shall have consented to such
supplemental indenture; provided, that if the consent of the holders of each
outstanding Convertible Debenture is required, such supplemental indenture
shall not be effective until each holder of the Trust Securities shall have
consented to such supplemental indenture. As a result of these pass-through
voting rights with respect to modifications to the Indenture, no modification
thereto shall be effective until the holders of a majority in liquidation
amount of the Trust Securities consent to such modification and no
modification described in clauses (i) or (ii) shall be effective without the
consent of each holder of Preferred Securities and each holder of Common
Securities.
In addition, the Company and the Indenture Trustee may execute, without the
consent of any holder of Convertible Debentures, any supplemental indenture to
cure any ambiguities, comply with the Trust Indenture Act and for certain
other customary purposes.
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SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Convertible
Debentures not previously delivered to the Indenture Trustee for cancellation
(i) have become due and payable or (ii) will become due and payable at their
stated maturity within one year, and the Company deposits or causes to be
deposited with the Indenture Trustee trust funds, in trust, for the purpose
of, and in an amount sufficient for, payment and discharge of the entire
indebtedness on the Convertible Debentures not previously delivered to the
Indenture Trustee for cancellation, for the principal (and premium, if any)
and interest and any Compound Interest and Additional Interest to the date of
the deposit or to the maturity of the Convertible Debentures or the Redemption
Date, as the case may be, then the Indenture will cease to be of further
effect (except as to the Company's obligations to pay all other sums due
pursuant to the Indenture and to provide the officers' certificates and
opinions of counsel described therein), and the Company will be deemed to have
satisfied and discharged the Indenture.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Trust
as a result of the occurrence of a Special Event, the Convertible Debentures
will be issued in the same form as the Preferred Securities that such
Convertible Debentures replace. Any Preferred Securities evidenced by a Global
Certificate will be replaced by Convertible Debentures in the form of one or
more global certificates (each, a "Global Security") registered in the name of
the depositary or its nominee. Except under the limited circumstances
described below under "--Discontinuance of the Depositary's Services,"
Convertible Debentures represented by a Global Security will not be
exchangeable for, and will not otherwise be issuable as, Convertible
Debentures in definitive form. The Global Securities described above may not
be transferred except by the depositary to a nominee of the depositary or by a
nominee of the depositary to the depositary or another nominee of the
depositary or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take delivery of such securities in definitive form. Such laws may impair the
ability to transfer beneficial interests in such a Global Security.
Except as described below under "--Discontinuance of the Depositary's
Services," owners of beneficial interests in such a Global Security will not
be entitled to receive physical delivery of Convertible Debentures in
definitive form and will not be considered the holders thereof for any purpose
under the Indenture, and no Global Security representing Convertible
Debentures shall be exchangeable, except for another Global Security of like
denomination and tenor to be registered in the name of the depositary or its
nominee or to a successor depositary or its nominee. Accordingly, each
beneficial owner must rely on the procedures of the depositary or if such
person is not a Participant, on the procedures of the Participant through
which such person owns its interest to exercise any rights of a holder under
the Indenture.
THE DEPOSITARY
If Convertible Debentures are distributed to holders of Preferred Securities
in liquidation of such holders' interest in the Trust, DTC will act as
securities depositary for the Convertible Debentures. For a description of DTC
and the specific terms of the depositary arrangements, see "Description of the
Preferred Securities--Book-Entry-Only Issuance--The Depository Trust Company."
As of the date of this Prospectus, the description herein of DTC's book-entry
system and DTC's practices as they relate to purchases, transfers, notices and
payments with respect to the Preferred Securities in the form of Global
Certificates apply in all material respects to any debt obligations
represented by one or more Global Securities held by DTC. The Company may
appoint a successor to DTC or any successor depositary in the event DTC or
such successor depositary is unable or unwilling to continue as a depositary
for the Global Securities.
None of the Company, the Trust, the Indenture Trustee, any paying agent and
any other agent of the Company or the Indenture Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global
Security for such Convertible Debentures or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
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DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
Each Global Security shall be exchangeable for a Convertible Debenture
registered in the names of persons other than the depositary or its nominee
only, if (i) the depositary notifies the Company that it is unwilling or
unable to continue as a depositary for such Global Security and no successor
depositary shall have been appointed, (ii) the depositary, at any time, ceases
to be a clearing agency registered under the Exchange Act at which time the
depositary is required to be so registered to act as such depositary and no
successor depositary shall have been appointed, (iii) the Company, in its sole
discretion, determines that such Global Security shall be so exchangeable or
(iv) there shall have occurred an Indenture Event of Default with respect to
such Convertible Debentures. Any Global Security that is exchangeable pursuant
to the preceding sentence shall be exchangeable for Convertible Debentures
registered in such names as the depositary shall direct. It is expected that
such instructions will be based upon directions received by the depositary
from its Participants with respect to ownership of beneficial interests in
such Global Security.
GOVERNING LAW
The Indenture and the Convertible Debentures are governed by, and construed
in accordance with, the internal laws of the State of New York.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Indenture and, after default,
shall exercise the same degree of care as a prudent individual would exercise
in the conduct of his or her own affairs. Subject to such provision, the
Indenture Trustee is under no obligation to exercise any of the rights or
powers vested in it by the Indenture at the request or direction of any holder
of Convertible Debentures, unless offered reasonable security or indemnity by
such holder against the costs, expenses and liabilities that might be incurred
thereby. The Indenture Trustee is not required to expend or risk its own funds
or otherwise incur personal financial liability in the performance of its
duties if the Indenture Trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it. The Indenture Trustee also serves
as the Institutional Trustee and Delaware Trustee under the Declaration and
the Guarantee Trustee under the Guarantee.
MISCELLANEOUS
The Indenture provides that the Company will pay all fees and expenses
related to (i) the offering of the Trust Securities and the Convertible
Debentures, (ii) the organization, maintenance and dissolution of the Trust,
(iii) the retention of the Trustees and (iv) the enforcement by the
Institutional Trustee of the rights of the holders of the Preferred
Securities. The payment of such fees and expenses is fully and unconditionally
guaranteed by the Company.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
has been executed and delivered by the Company for the benefit of the holders
of Preferred Securities. The summary does not purport to be complete and is
subject in all respects to the provisions of, and is qualified in its entirety
by reference to, the Guarantee. The Guarantee incorporates by reference the
terms of the Trust Indenture Act. The Guarantee has been qualified under the
Trust Indenture Act. Wilmington Trust Company, as the Guarantee Trustee, holds
the Guarantee for the benefit of the holders of the Preferred Securities. Any
references in this Prospectus to the "Guarantees" shall mean both the
Guarantee and the guarantee with respect to the Common Securities.
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GENERAL
Pursuant to and to the extent set forth in the Guarantee, the Company has
agreed, irrevocably and unconditionally, to pay in full to the holders of the
Preferred Securities (except to the extent paid by the Trust), as and when
due, regardless of any defense, right of set-off or counterclaim which the
Trust may have or assert, the following payments (the "Guarantee Payments"),
without duplication: (i) any accrued and unpaid Distributions that are
required to be paid on the Preferred Securities, to the extent the Trust has
funds available therefor, (ii) the Redemption Price with respect to any
Preferred Securities called for redemption by the Trust, to the extent the
Trust has funds available therefor, and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Trust (other than in connection
with the distribution of Convertible Debentures to the holders of Preferred
Securities or the redemption of all the Preferred Securities), the lesser of
(a) the aggregate of the liquidation amount and all accrued and unpaid
Distributions on the Preferred Securities to the date of payment and (b) the
amount of assets of the Trust remaining available for distribution to holders
of Preferred Securities upon the liquidation of the Trust. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amount by the Company to the holders of Preferred Securities or
by causing the Trust to pay such amounts to such holders.
The Guarantee is a guarantee on a subordinated basis with respect to the
Preferred Securities from the time of issuance of such Preferred Securities
but does not apply to any payment of Distributions or Redemption Price, or to
payments upon the dissolution, winding-up or termination of the Trust, except
to the extent the Trust shall have funds available therefor. If the Company
does not make interest payments on the Convertible Debentures, the Trust will
not pay Distributions on the Preferred Securities and will not have funds
available therefor. See "Description of the Convertible Debentures." The
Guarantee, when taken together with the Company's obligations under the
Convertible Debentures, the Indenture and the Declaration, including its
obligations to pay costs, expenses, debts and liabilities of the Trust (other
than with respect to the Trust Securities), provides a full and unconditional
guarantee on a subordinated basis by the Company of payments due on the
Preferred Securities.
The Company has also agreed, irrevocably and unconditionally, to guarantee
the obligations of the Trust with respect to the Common Securities to the same
extent as the Guarantee for the Preferred Securities, except that upon an
Indenture Event of Default, holders of Preferred Securities shall have
priority over holders of Common Securities with respect to distributions and
payments on liquidation, redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, the Company has covenanted that so long as any Preferred
Securities remain outstanding, if (i) the Company has exercised its option to
defer interest payments on the Convertible Debentures by extending the
interest payment period and such extension shall be continuing, (ii) the
Company shall be in default with respect to its payment or other obligations
under the Guarantee or (iii) there shall have occurred and be continuing any
event that, with the giving of notice or the lapse of time or both, would
constitute an Indenture Event of Default or a Declaration Event of Default,
then the Company shall not (a) declare or pay dividends on, or make a
distribution or liquidation payment with respect to, or redeem, purchase or
acquire any of its capital stock (other than (i) purchases or acquisitions of
shares of Common Stock in connection with the satisfaction by the Company of
its obligations under any employee benefit plans or the satisfaction by the
Company of its obligations pursuant to any contract or security requiring the
Company to purchase shares of Common Stock, (ii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion
of one class or series of the Company's capital stock for another class or
series of the Company's capital stock, (iii) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted
or exchanged, (iv) purchases or acquisitions of shares of the Company's Common
Stock to be used in connection with acquisitions of the Company's Common Stock
by shareholders pursuant to a dividend reinvestment plan or (v) stock
dividends paid by the Company where the dividend stock is the same stock as
that on which the dividend is paid), (b) make any payment of interest on or
principal of (or premium, if any, on) or repay, repurchase or redeem any debt
securities of the Company
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(including guarantees) that rank pari passu with or junior to the Convertible
Debentures, or (c) make any guarantee payments with respect to the foregoing
(other than pursuant to the Guarantees).
As part of the Guarantee, the Company has agreed that it will honor all
obligations described therein relating to the conversion of the Preferred
Securities into Common Stock as described in "Description of the Preferred
Securities--Conversion Rights."
MODIFICATION OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required),
the Guarantee may be amended only with the prior approval of the holders of at
least a majority in aggregate liquidation amount of all the outstanding
Preferred Securities. All guarantees and agreements contained in the Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Company and shall inure to the benefit of the holders of the Preferred
Securities then outstanding. Except in connection with any permitted merger or
consolidation of the Company with or into another entity or any permitted
sale, transfer or lease of the Company's assets to another entity as described
under "Description of the Convertible Debentures--Consolidation, Merger and
Sale of Assets," the Company may not assign its rights or delegate its
obligations under the Guarantee without the prior approval of the holders of
at least a majority of the aggregate stated liquidation amount of the
Preferred Securities then outstanding. All guarantees and agreements contained
in the Guarantee shall bind the permitted successors, assigns and transferees
of the Company and shall inure to the benefit of the holders of the Preferred
Securities then outstanding.
EVENTS OF DEFAULT
An Event of Default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of a majority in aggregate liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee in respect of
the Guarantee or to direct the exercise of any trust or power conferred upon
the Guarantee Trustee under the Guarantee. If the Guarantee Trustee fails to
enforce the Guarantee Trustee's rights under the Guarantee, any holder of
Preferred Securities may directly institute a legal proceeding against the
Company to enforce the Guarantee Trustee's rights under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee
or any other person or entity. A holder of Preferred Securities may also
directly institute a legal proceeding against the Company to enforce such
holder's right to receive payment under the Guarantee without first (i)
directing the Guarantee Trustee to enforce the terms of the Guarantee or (ii)
instituting a legal proceeding against the Trust or any other person or
entity.
The Company is required to provide annually to the Guarantee Trustee a
statement as to the performance by the Company of certain of its obligations
under the Guarantee and as to any default in such performance.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with respect
to the Trust Securities, undertakes to perform only such duties as are
specifically set forth in the Declaration and, after default, shall exercise
the same degree of care as a prudent individual would exercise in the conduct
of his or her own affairs. Subject to such provisions, the Institutional
Trustee is under no obligation to exercise any of the powers vested in it by
the Declaration at the request of any holder of Preferred Securities unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities that might be incurred thereby. The holders of Preferred
Securities are not required to offer such indemnity in the event such holders,
by exercising their voting rights, direct the Institutional Trustee to take
any action following a Declaration Event of Default.
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TERMINATION OF THE GUARANTEE
The Guarantee will terminate as to the Preferred Securities upon (i) full
payment of the Redemption Price of all Preferred Securities; (ii) distribution
of the Convertible Debentures held by the Trust to the holders of the
Preferred Securities; (iii) full payment of the amounts payable in accordance
with the Declaration upon liquidation of the Trust; or (iv) distribution of
Common Stock to the holders in respect of conversion of the holders' Preferred
Securities into Common Stock. The Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of Preferred
Securities must restore payment of any sum paid under such Preferred
Securities or the Guarantee.
STATUS OF THE GUARANTEE
The Guarantee constitutes an unsecured obligation of the Company and ranks
(i) subordinate and junior to all other liabilities of the Company except any
liabilities that may be pari passu expressly by their terms, (ii) pari passu
with the most senior preferred or preference stock, if any, issued from time
to time by the Company, including the Series A Preference Shares issued to
Siemens Aktiengesellschaft ("Siemens") in connection with the Siemens
Investment (as defined herein) and with any guarantee now or hereafter entered
into by the Company in respect of any preferred or preference stock or
preferred securities of any affiliate of the Company and (iii) senior to the
Common Stock. The terms of the Preferred Securities provide that each holder
of Preferred Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Guarantee. See "Description of Capital
Stock--Siemens Investment."
The Guarantee constitutes a guarantee of payment and not of collection (that
is, the guaranteed party may directly institute a legal proceeding against the
Company to enforce its rights under a Guarantee without instituting a legal
proceeding against any other person or entity).
GOVERNING LAW
The Guarantee is governed by, and construed in accordance with, the internal
laws of the State of New York.
EFFECT OF OBLIGATIONS UNDER THE CONVERTIBLE DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
the Trust Securities evidencing undivided beneficial interests in the assets
of the Trust, to invest the proceeds from such issuance and sale in the
Convertible Debentures and to engage in only those other activities that are
necessary or incidental to the issuance of the Trust Securities and investment
in the Convertible Debentures.
As long as payments of interest and other payments are made when due on the
Convertible Debentures, such payments will be sufficient to cover
Distributions and payments due on the Trust Securities because of the
following factors: (i) the aggregate principal amount of Convertible
Debentures will be equal to the sum of the aggregate stated liquidation amount
of the Trust Securities; (ii) the interest rate and the interest and other
payment dates on the Convertible Debentures will match the Distribution rate
and Distribution and other payment dates for the Preferred Securities; (iii)
pursuant to the Indenture, the Company shall pay all, and the Trust shall not
be obligated to pay, directly or indirectly, any, costs, expenses, debts and
liabilities of the Trust other than with respect to the Trust Securities; and
(iv) the Declaration further provides that the Trustees will not cause or
permit the Trust to, among other things, engage in any activity that is not
consistent with the purposes of the Trust.
Payments of Distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor
are available) are guaranteed by the Company as and to the extent set forth
under "Description of the Guarantee." If the Company does not make interest
payments on the Convertible Debentures purchased by the Trust, it is expected
that the Trust will not have sufficient funds to pay
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Distributions on the Preferred Securities. The Guarantee is a guarantee on a
subordinated basis with respect to the Preferred Securities from the time of
its issuance but does not apply to any payment of Distributions unless and
until the Trust has sufficient funds for the payment of such Distributions.
The Guarantee covers the payment of distributions and other payments on the
Preferred Securities only if and to the extent that the Company has made a
payment of interest or principal on the Convertible Debentures held by the
Trust as its sole asset. The Guarantee, when taken together with the Company's
obligations under the Convertible Debentures and the Indenture and its
obligations under the Declaration, including its obligations to pay costs,
expenses, debts and liabilities of the Trust (other than with respect to the
Trust Securities), provides a full and unconditional guarantee of amounts on
the Preferred Securities.
If the Company fails to make interest or other payments on the Convertible
Debentures when due (taking account of any Extension Period), the Declaration
provides a mechanism whereby the holders of the Preferred Securities, using
the procedures described in "Description of the Preferred Securities--Voting
Rights" and "--Book-Entry-Only Issuance--The Depository Trust Company," may
direct the Institutional Trustee to enforce its rights under the Convertible
Debentures. If the Institutional Trustee fails to enforce its rights under the
Convertible Debentures, to the fullest extent permitted by law, any holder of
Preferred Securities may directly institute a legal proceeding against the
Company to enforce the Institutional Trustee's rights under the Convertible
Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. If a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the Convertible
Debentures on the date such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), then a holder of Preferred
Securities may institute a Direct Action for payment on or after the
respective due date specified in the Convertible Debentures. In connection
with such Direct Action, the Company will be subrogated to the rights of such
holder of Preferred Securities under the Declaration to the extent of any
payment made by the Company to such holder of Preferred Securities in such
Direct Action. The Company, under the Guarantee, acknowledges that the
Guarantee Trustee shall enforce the Guarantee on behalf of the holders of the
Preferred Securities. If the Company fails to make payments under the
Guarantee, the Guarantee provides a mechanism whereby the holders of the
Preferred Securities may direct the Guarantee Trustee to enforce its rights
thereunder. If the Guarantee Trustee fails to enforce the Guarantee, any
holder of Preferred Securities may directly institute a legal proceeding
against the Company to enforce the Guarantee Trustee's rights under the
Guarantee without first instituting a legal proceeding against the Trust, the
Guarantee Trustee, or any other person or entity.
The Company and the Trust believe that the above mechanisms and obligations,
taken together, are equivalent to a full and unconditional guarantee by the
Company of payments due on the Preferred Securities. See "Description of
Guarantee--General."
DESCRIPTION OF CAPITAL STOCK
As of May 31, 1998, there were outstanding an aggregate of 36,806,701 shares
of Common Stock held of record by 798 stockholders, and 1 Series A Preference
Share held of record by one stockholder.
COMMON STOCK
The Company is authorized to issue up to 75,000,000 shares of Common Stock,
par value $.01 per share. Holders of Common Stock are entitled to one vote for
each share held on all matters submitted to a vote of stockholders and do not
have cumulative voting rights. Accordingly, holders of a majority of the
shares of Common Stock entitled to vote in any election of directors may elect
all of the directors standing for election. Holders of Common Stock are
entitled to receive ratably such dividends if, as and when declared by the
Board of Directors out of assets legally available therefor, subject to any
preferential dividend rights of outstanding Preferred Stock and restrictions
set forth in the Company's existing loan agreements and restrictions, if any,
imposed by other indebtedness outstanding from time to time, including any new
loan agreement that may be
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entered into after this Offering. Upon the liquidation, dissolution or winding
up of the Company, the holders of Common Stock are entitled to receive ratably
the net assets of the Company remaining available after the satisfaction of
all debts and other liabilities and the payment of the liquidation preference
of any outstanding Preferred Stock. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights, nor are they
entitled to the benefits of any sinking fund provisions. The outstanding
shares of Common Stock are fully paid and nonassessable. The rights,
preferences and privileges of holders of Common Stock are subject to, and may
be adversely affected by, the rights of the holders of shares of any series of
Preferred Stock which the Company may designate and issue in the future.
WARRANTS
Pursuant to a Warrant Agreement between NationsBank, N.A. ("NationsBank")
and the Company dated October 30, 1997, as amended March 2, 1998 (the "Warrant
Agreement"), in connection with that certain loan agreement dated as of
October 30, 1997 by and among the Company and certain subsidiaries as
borrowers, NationsBank as agent and lender, and the lenders party thereto from
time to time (the "Loan Agreement"), the Company issued to NationsBank a
warrant (the "NB Warrant") exercisable for 250,000 shares of Common Stock of
the Company (the "Warrant Shares") at an exercise price of $23.125 per share.
The Warrant Agreement and the NB 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 and also
has certain demand registration rights until October 30, 2002.
In connection with the Company's June 1995 acquisition of VTI Hamlin OY
("VTI"), a Finnish company that designs and manufactures silicon capacitive
micro-machined accelerometers and angular rate and differential and absolute
pressure sensors, the Company issued to the former stockholders of VTI
warrants to purchase an aggregate of 100,000 shares of Common Stock for a
purchase price of $25.75 per share. These warrants are exercisable between
July 1, 1998 and June 30, 2000. The Company granted certain demand and
incidental registration rights with respect to the shares of Common Stock
issuable upon the exercise of these warrants.
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of Preferred
Stock, par value $.001 per share. The Board of Directors is authorized,
subject to any limitations prescribed by law, without further stockholder
approval, to issue such shares of Preferred Stock in one or more series. Each
such series of Preferred Stock shall have such rights, preferences, privileges
and restrictions, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, as shall be determined by
the Board of Directors.
The purpose of authorizing the Board of Directors to issue Preferred Stock
and determine its rights and preferences is to eliminate delays associated
with a stockholder vote on specific issuances. The issuance of Preferred
Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, a majority of the outstanding voting stock of the
Company. The Company has no present plans to issue any additional shares of
Preferred Stock.
SIEMENS INVESTMENT
Stock Purchase Agreement. On October 30, 1997, pursuant to a Stock Purchase
Agreement dated October 14, 1997 (the "Stock Purchase Agreement"), Siemens
acquired 4,883,227 Series A Preference Shares for an aggregate purchase price
of $115.0 million (the "Siemens Investment"). Pursuant to the Stock Purchase
Agreement, the Company made certain customary representations and warranties
concerning its business, agreed to certain post-closing covenants, including
an agreement to provide Siemens with substantially equivalent rights to those
granted in the future to any stockholder acquiring an equal or smaller
percentage of voting interest in the Company as Siemens, agreed to indemnify
Siemens for breaches of representations and warranties for a period of up to
18 months, agreed to indemnify Siemens for breaches of covenants and granted
Siemens certain anti-dilution rights. The indemnification obligations of the
Company are subject to a $1.5 million deductible and a cap of $30.0 million.
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Series A Preference Shares. Each Series A Preference Share represents one
one-thousandth ( 1/1000) of a share of 1997 Series A Convertible Non-Voting
Preferred Stock of the Company and, subject to adjustment, 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 (as defined below), the holders of shares of Series A
Preference Shares have no voting rights. All other rights of the holders of
Series A Preference Shares, including rights upon liquidation or dissolution
of the Company, are identical to the rights 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. As of the date of this Prospectus, Siemens is the record holder
of one Series A Preference Share.
Stockholders Agreement. In connection with the Siemens Investment, the
Company entered into a Stockholders Agreement (the "Stockholders Agreement")
with Siemens, Allen K. Breed, Johnnie Cordell Breed, AB, L.P. and JB, L.P.
(collectively, the "Breed Holders"). See "Principal Stockholders." The
Stockholders Agreement obligates the Breed Holders to vote their shares and
take other necessary and appropriate corporate action to elect a designee of
Siemens to the Board of Directors of the Company at any time the right of the
holders of Series A Preference Shares to elect a member of the Board of
Directors is not in effect and to ensure that the Siemens director is a member
of the Audit Committee of the Board of Directors. The Stockholders Agreement
also (i) grants Siemens rights of first offer for up to five years with
respect to certain future issuances of Common Stock or securities convertible
into Common Stock by the Company (subject to certain exceptions), (ii) allows
Siemens to participate in certain sales of Common Stock by the Breed Holders,
(iii) grants the Company and the Breed Holders rights of first offer for up to
three years with respect to any sales by Siemens or its affiliates (subject to
certain exceptions), (iv) prohibits Siemens for three years from acquiring
certain securities of the Company (subject to certain exceptions), (v) grants
Siemens rights of first offer for up to three years with respect to transfers
of certain securities by the Breed Holders (subject to certain exceptions) and
(vi) grants the Siemens director special consent rights with respect to
certain business activities of the Company, including the conduct by the
Company of any business in the field of electronic components for automotive
safety restraint systems, other than through the joint venture the Company and
Siemens agreed to form in December 1997 (the "Siemens Joint Venture") or as
currently conducted by designated subsidiaries of the Company. The
Stockholders Agreement terminates upon the earlier to occur of the date on
which Siemens and certain of its affiliates 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 Shares acquired by
Siemens pursuant to the Stock Purchase Agreement or the delivery of a "First
Make-Whole Notice" (as defined in the Make-Whole Agreement).
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, either (i) to repurchase the Series A Preference Shares purchased
pursuant to the Stock Purchase Agreement (and any securities issuable with
respect to such Series A Preference Shares) for a purchase price equal to
$115.0 million plus $15,753 per day for each day between December 15, 1997 and
the termination of the right (the "Make-Whole Price") or (ii) if the net
proceeds from the bona fide sale of such Series A Preference Shares by Siemens
to a third party financial institution do not equal the Make-Whole Price, to
issue to Siemens such number of Series A Preference 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" means, among
other things, any of the following: (a) the parties shall have been unable,
after diligent and good faith efforts, to obtain the requisite governmental
approvals 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 (x) if, prior to Siemens'
delivery of a notice that it has entered into an agreement to sell its Series
A Preference Shares to a third party financial institution as described above,
Siemens
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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 (y) if Siemens has not delivered such a notice by the later to occur of (i)
July 31, 1998 or (ii) 45 days after a Triggering Event.
Registration Rights Agreement. In connection with the Siemens Investment,
the Company entered into a Registration Rights Agreement with Siemens (the
"Siemens Registration Rights Agreement"). Pursuant to the Siemens Registration
Rights Agreement, Siemens shall have the right, after June 1, 1998 and before
the tenth anniversary of the date of the Siemens Registration Rights
Agreement, to require the Company to file up to three registration statements
under the Securities Act to register any shares of Common Stock or Series A
Preference Shares 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 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.
DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to Section 203 of the Delaware General Corporation
Law, which prohibits a publicly held Delaware corporation from consummating a
"business combination," except under certain circumstances, with an
"interested stockholder" for a period of three years after the date such
person became an "interested stockholder" unless (i) before such person became
an interested stockholder, the board of directors of the corporation approved
the transaction in which the interested stockholder became an interested
stockholder or approved the business combination; (ii) upon consummation of
the transaction that resulted in the interested stockholder's becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding shares held by directors who are also officers of the
corporation and certain shares held by employee stock plans); or (iii)
following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of directors of
the corporation and authorized at a meeting of stockholders by the affirmative
vote of the holders of 66 2/3% of the outstanding voting stock of the
corporation not owned by the interested stockholder. An "interested
stockholder" generally is defined as a person who, together with affiliates
and associates, owns (or, within the prior three years, owned) 15% or more of
a corporation's outstanding voting stock. A "business combination" includes
mergers, asset sales and certain other transactions resulting in a financial
benefit to an interested stockholder.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is First
Chicago Trust Company of New York.
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UNITED STATES FEDERAL INCOME TAXATION
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH HEREIN IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE PREFERRED SECURITIES AND COMMON STOCK, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
GENERAL
The following is a summary of certain of the material United States federal
income tax consequences of the purchase, ownership, disposition and conversion
of Preferred Securities and Common Stock. This summary does not deal with
special classes of holders such as banks, thrift institutions, real estate
investment trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors, or persons that
will hold the Preferred Securities or Common Stock as part of a straddle,
hedge or conversion transaction, or as other than a capital asset. This
summary also does not address tax consequences to persons that have a
functional currency other than the U.S. Dollar or the tax consequences to
shareholders, partners or beneficiaries of a holder of Preferred Securities or
Common Stock. Further, it does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local government or
of any foreign government that may be applicable to the Preferred Securities
or Common Stock. This summary is based on the Code, United States Treasury
Regulations thereunder ("Treasury Regulations") and administrative and
judicial interpretations thereof, as of the date hereof, all of which are
subject to change, possibly on a retroactive basis.
As used herein, the term "U.S. Holder" means any beneficial owner of
Preferred Securities or Common Stock that is, for United States federal income
tax purposes, (i) a citizen or resident of the United States, (ii) a
corporation or partnership created or organized in or under the laws of the
United States, any state thereof, or the District of Columbia (other than a
partnership that is not treated as a United States person under any applicable
Treasury Regulations), (iii) an estate the income of which is subject to
United States federal income taxation regardless of its source, or (iv) a
trust if (A) a court within the United States is able to exercise primary
supervision over the administration of the trust and (B) one or more United
States persons have the authority to control all substantial decisions of the
trust. Notwithstanding the preceding sentence, to the extent provided in
Treasury Regulations, certain trusts in existence on August 20, 1996 and
treated as United States persons prior to such date that elect to continue to
be treated as United States persons also will be U.S. Holders. As used herein,
the term "Non-U.S. Holder" means a beneficial owner of Preferred Securities or
Common Stock that is not a U.S. Holder.
CLASSIFICATION OF THE CONVERTIBLE DEBENTURES
King & Spalding, special tax counsel to the Company and the Trust ("Tax
Counsel"), has rendered an opinion to the effect that under current law and
assuming full compliance with the terms of the Declaration and the Indenture
(and certain other documents), and based on certain facts and assumptions
contained in such opinion, the Convertible Debentures to be held by the Trust
will be classified for United States federal income tax purposes as
indebtedness of the Company. Such opinion is not binding on the Internal
Revenue Service ("IRS") and, accordingly, no complete assurance can be given
that the IRS will not challenge the classification of the Convertible
Debentures as debt, or if the classification were challenged, that such a
challenge would not be successful. The remainder of this discussion assumes
that the Convertible Debentures will be classified as indebtedness of the
Company for United States federal income tax purposes.
CLASSIFICATION OF THE TRUST
Tax Counsel also has rendered its opinion to the effect that, under current
law and assuming full compliance with the terms of the Declaration and the
Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Trust will be classified for United
States federal income tax purposes as a grantor trust and not as an
association taxable as a corporation. Because the Trust will be classified as
a grantor trust for United States federal income tax purposes, each holder of
Preferred Securities generally
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will be considered the owner of an undivided interest in the Convertible
Debentures and, as discussed below, each holder will be required to include in
gross income its allocable share of interest (or OID) paid or accrued on the
Convertible Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Because the Company has the option, under the terms of the Convertible
Debentures, to defer payments of interest by extending interest payment
periods for up to 20 consecutive quarters, and the likelihood of the Company's
exercise of this option is not remote, the Convertible Debentures were issued
with OID. As a result, U.S. Holders of Preferred Securities will be required
to include in income their allocable share of the interest income earned by
the Trust from the Convertible Debentures on an economic accrual basis over
the period of time the Preferred Securities (and underlying allocable share of
the Convertible Debentures) are held, regardless of their method of accounting
and whether interest has been paid on the Convertible Debentures or
distributions are made on the Preferred Securities. The amount of OID that
accrues in any taxable period will be approximately equal to the amount of
stated interest payments called for under the terms of the Convertible
Debentures. Actual distributions of stated interest will not be separately
reported as taxable income. Any OID included in income will increase the U.S.
Holder's tax basis in the Preferred Securities and the U.S. Holder's actual
receipt of interest payments will reduce such basis.
If the Company were to exercise its option to defer payments of stated
interest on the Convertible Debentures, U.S. Holders of the Preferred
Securities would continue to accrue OID income even though the Company would
not be making any actual cash payments during the Extension Period.
Because income on the Preferred Securities will constitute interest for
federal income tax purposes, corporate U.S. Holders of Preferred Securities
will not be entitled to a dividends received deduction with respect to any
income recognized with respect to the Preferred Securities.
ACQUISITION PREMIUM; PREMIUM
A U.S. Holder who purchases a Preferred Security will be considered to have
purchased the underlying Convertible Debenture at an "acquisition premium" if
such U.S. Holder's adjusted basis in the Preferred Security immediately after
the purchase is (i) greater than the "adjusted issue price" of the underlying
Convertible Debenture as of the purchase date and (ii) less than or equal to
the sum of all amounts payable on the underlying Convertible Debenture after
the purchase date. The "adjusted issue price" of a Convertible Debenture
equals its issue price (i.e., the first price at which a substantial amount of
the Convertible Debentures were sold, excluding sales to bond houses, brokers
or other persons acting in the capacity of an underwriter or selling agent),
plus the amount of OID allocable to all prior periods, and minus the amount of
any prior payments on the Convertible Debenture. Under the acquisition premium
rules, the amount of OID which such U.S. Holder must include in its gross
income for any taxable year (or portion thereof in which the U.S. Holder holds
the Preferred Securities) will be reduced (but not below zero) by the portion
of the acquisition premium properly allocable to the period.
A. U.S. Holder who purchases a Preferred Security will be considered to have
purchased the underlying Convertible Debenture at a "premium" if such U.S.
Holder's adjusted basis in the Preferred Security immediately after the
purchase is greater than the sum of all amounts payable on the underlying
Convertible Debenture after the purchase date. A U.S. Holder that purchases a
Preferred Security at a "premium" will not include any OID in gross income.
MARKET DISCOUNT
A U.S. Holder who purchases a Preferred Security will be considered to have
purchased the underlying Convertible Debenture at a "market discount" if such
U.S. Holder's adjusted basis in the Preferred Security immediately after the
purchase is less than the adjusted issue price of the underlying Convertible
Debenture as of the purchase date, unless such market discount is less than a
specified de minimis amount (generally 1/4 of 1
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percent of the adjusted issue price of the Convertible Debenture as of the
purchase date multiplied by its weighted average maturity as of such date).
Under the market discount rules, a U.S. Holder will be required to treat any
gain realized on the sale, exchange, retirement or other disposition of the
Preferred Securities as ordinary income to the extent of the lesser of (i) the
amount of such realized gain or (ii) the market discount which has not
previously been included in income and is treated as having accrued on the
underlying Convertible Debentures at the time of such disposition. Market
discount will be considered to accrue ratably during the period from the date
of acquisition to the maturity date of the Convertible Debentures, unless the
U.S. Holder elects to accrue market discount on a constant yield basis. Once
made, such an election is irrevocable.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry Preferred Securities with market discount until the maturity
of the Convertible Debentures or certain earlier dispositions, because a
current deduction is only allowed to the extent the interest expense exceeds
the portion of market discount allocable to the days during the taxable year
in which the Preferred Securities were held by the taxpayer. A U.S. Holder may
elect to include market discount in income currently as it accrues (on either
a ratable or constant yield basis), in which case the rules described above
regarding the treatment as ordinary income of gain upon the disposition of the
Preferred Securities and the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for federal income tax purposes. Such an election will apply to all
debt instruments with market discount acquired by the holder on or after the
first day of the taxable year to which such election applies and may be
revoked only with the consent of the IRS.
RECEIPT OF CONVERTIBLE DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption "Description of
the Preferred Securities--Special Event Redemption or Distribution," the
Convertible Debentures may be distributed to holders in exchange for the
Preferred Securities and in liquidation of the Trust. Under current law, such
a distribution, for United States federal income tax purposes, would be
treated as a non-taxable event to each holder, and each holder would receive
an aggregate tax basis in the Convertible Debentures equal to such holder's
aggregate tax basis in its Preferred Securities. A holder's holding period in
the Convertible Debentures so received in liquidation of the Trust would
include the period during which the Preferred Securities were held by such
holder.
Under certain circumstances described under "Description of the Preferred
Securities--Special Event Redemption or Distribution," the Convertible
Debentures may be redeemed for cash and the proceeds of such redemption
distributed to holders in redemption of their Preferred Securities. Such a
redemption of the Convertible Debentures would, for United States federal
income tax purposes, constitute a taxable disposition of the redeemed
Preferred Securities, and a holder could recognize gain or loss as if it sold
such redeemed Preferred Securities for cash. See "--Sales of Preferred
Securities."
SALES OF PREFERRED SECURITIES
A U.S. Holder that sells Preferred Securities will recognize gain or loss
equal to the difference between its adjusted tax basis in the Preferred
Securities and the amount realized on the sale of such Preferred Securities.
For purposes of determining gain or loss, a U.S. Holder's adjusted tax basis
in Preferred Securities generally will equal the cost of the Preferred
Securities to such Holder, increased by any OID included in income (and
accrued market discount, if any, if the U.S. Holder has included such market
discount in income), and decreased by the amount of any payment received with
respect to such Preferred Securities. Subject to the discussion below about
accrued and unpaid interest, such gain or loss generally will be a capital
gain or loss. In the case of a U.S. Holder that is treated as an individual or
as an estate or trust, the tax rate applicable to such a capital gain will
depend, among other things, upon the U.S. Holder's holding period for the
Preferred Securities that are sold.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the
underlying Convertible Debentures. A U.S. Holder who disposes of Preferred
52
<PAGE>
Securities between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest on the Convertible Debentures
through the date of disposition in income as ordinary income (i.e., OID) and
to add such amount to his or her adjusted tax basis in his or her pro rata
share of the underlying Convertible Debentures deemed disposed of. To the
extent the selling price is less than the U.S. Holder's adjusted tax basis
(which will include, in the form of OID, all accrued but unpaid interest), a
U.S. Holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
CONVERSION OF PREFERRED SECURITIES
A U.S. Holder generally will not recognize income, gain or loss upon the
conversion of its Preferred Securities into Common Stock, except to the extent
of ordinary income recognized with respect to accrued and unpaid interest on
the Convertible Debentures at that time. A U.S. Holder also will recognize
gain upon the receipt of cash in lieu of a fractional share of Common Stock
equal to the amount of cash received less the U.S. Holder's tax basis in such
fractional share. A U.S. Holder's tax basis in the Common Stock received upon
exchange and conversion should generally be equal to the U.S. Holder's tax
basis in the Preferred Securities exchanged, less the basis allocated to any
fractional share for which cash is received. Such U.S. Holder's holding period
in the Common Stock received upon exchange and conversion should generally
begin on the date the holder acquired the Preferred Securities exchanged.
DIVIDENDS
The amount of any distribution by the Company in respect of the Common Stock
will be equal to the amount of cash and the fair market value, on the date of
distribution, of any property distributed. Generally, distributions will be
treated as a dividend, subject to tax as ordinary income, to the extent of the
Company's current or accumulated earnings and profits, then as a tax-free
return of capital to the extent of a U.S. Holder's tax basis in the Common
Stock and thereafter as gain from the sale of exchange of such stock.
In general, a dividend distribution to a corporate U.S. Holder will qualify
for the 70% dividends received deduction if the U.S. Holder owns less than 20%
of the voting power and value of the Company's stock (other than any non-
voting, non-convertible, non-participating preferred stock). A corporate U.S.
Holder that owns 20% or more of the voting power and value of the Company's
stock (other than any non-voting, non-convertible, non-participating preferred
stock) generally will qualify for an 80% dividends received deduction. The
dividends received deduction is subject, however, to certain holding period,
taxable income and other limitations.
SALE OF COMMON STOCK
Upon the sale or exchange of Common Stock, a U.S. Holder generally will
recognize capital gain or loss equal to the difference between (i) the amount
of cash and the fair market value of any property received upon the sale or
exchange and (ii) such U.S. Holder's adjusted tax basis in the Common Stock.
In the case of a U.S. Holder other than a corporation, the tax rate applicable
to such a capital gain will depend, among other things, upon the U.S. Holder's
holding period for the Common Stock that is sold. A U.S. Holder's basis and
holding period in Common Stock received upon conversion of the Preferred
Securities are determined as discussed above under "--Conversion of Preferred
Securities."
ADJUSTMENT OF CONVERSION PRICE
Treasury Regulations promulgated under Section 305 of the Code would treat
holders of Preferred Securities as having received a constructive distribution
from the Company in the event the conversion ratio of the Convertible
Debentures were adjusted if (i) as a result of such adjustment, the
proportionate interest (measured by the quantum of Common Stock into or for
which the Convertible Debentures are convertible or exchangeable) of the
holders of the Preferred Securities in the assets or earnings and profits of
the Company were increased, and (ii) the adjustment was not made pursuant to a
bona fide, reasonable anti-dilution formula. An adjustment in the conversion
ratio would not be considered made pursuant to such a formula if the
adjustment was made to
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<PAGE>
compensate for certain taxable distributions with respect to the Common Stock.
Thus, under certain circumstances, a reduction in the conversion price for the
holders may result in deemed dividend income to U.S. Holders to the extent of
the current or accumulated earnings and profits of the Company. U.S. Holders
of the Preferred Securities would be required to include their allocable share
of such deemed dividend income in gross income but would not receive any cash
related thereto.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to income earned
on Preferred Securities, payments of dividends on Common Stock, and payments
of the proceeds of the sale of Preferred Securities or Common Stock. Such
income and payment of proceeds may be subject to a "backup" withholding tax of
31% unless the holder complies with certain identification and certification
requirements. Any withheld amounts will be allowed as a credit against the
holder's United States federal income tax, provided the required information
is provided to the IRS on a timely basis.
NON-U.S. HOLDERS
The rules governing United States federal income taxation of a beneficial
owner of Preferred Securities or Common Stock that, for United States federal
income tax purposes, is a Non-U.S. Holder are complex and no attempt will be
made herein to provide more than a summary of such rules. NON-U.S. HOLDERS
SHOULD CONSULT WITH THEIR OWN TAX ADVISORS TO DETERMINE THE EFFECT OF FEDERAL,
STATE, LOCAL AND FOREIGN INCOME TAX LAWS WITH REGARD TO AN INVESTMENT IN THE
PREFERRED SECURITIES AND COMMON STOCK, INCLUDING ANY REPORTING REQUIREMENTS.
Payment of Interest
Generally, interest income (or OID) of a Non-U.S. Holder that is not
effectively connected with a United States trade or business will be subject
to a withholding tax at a 30% rate (or, if applicable, a lower tax rate
specified by a treaty). However, OID earned on the Convertible Debentures by a
Non-U.S. Holder will qualify for the "portfolio interest exemption" and
therefore will not be subject to United States federal income tax or
withholding tax, provided that such interest income is not effectively
connected with a United States trade or business of the Non-U.S. Holder and
provided that (i) the Non-U.S. Holder does not actually or constructively own
(pursuant to the conversion feature of the Preferred Securities or otherwise)
10% or more of the combined voting power of all classes of stock of the
Company entitled to vote, (ii) the Non-U.S. Holder is not a controlled foreign
corporation related to the Company actually or constructively through stock
ownership, (iii) the Non-U.S. Holder is not a bank which acquired the
Preferred Securities in consideration for an extension of credit made pursuant
to a loan agreement entered into in the ordinary course of business and (iv)
either (a) the Non-U.S. Holder provides a Form W-8 (or a suitable substitute
form) signed under penalties of perjury that includes its name and address and
certifies as to its Non-U.S. status, or (b) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business provides a
statement to the Company or its agent under penalties of perjury in which it
certifies that a Form W-8 (or a suitable substitute) has been received by it
from the Non-U.S. Holder or qualifying intermediary and furnishes the Company
or its agent with a copy thereof.
Recently issued Treasury Regulations provide alternative methods for
satisfying the certification requirements described in clause (iv) above.
Based on IRS Notice 98-16, the Treasury Regulations will be effective for
payments made after December 31, 1999, subject to certain transition rules.
Except to the extent that an applicable treaty otherwise provides, a Non-
U.S. Holder generally will be taxed in the same manner as a U.S. Holder with
respect to interest (or OID) if the interest (or OID) income is effectively
connected with a United States trade or business of the Non-U.S. Holder.
Effectively connected interest (or OID) received or accrued by a corporate
Non-U.S. Holder may also, under certain circumstances, be subject to an
additional "branch profits tax" at a 30% rate (or, if applicable, a lower tax
rate specified by a
54
<PAGE>
treaty). Even though such effectively connected interest (or OID) is subject
to income tax, and may be subject to the branch profits tax, it is not subject
to withholding tax if the holder delivers a properly executed IRS Form 4224
(or successor form) to the payor.
Interest (or OID) income of a Non-U.S. Holder that is not effectively
connected with a United States trade or business and that does not qualify for
the portfolio interest exemption described above generally will be subject to
a withholding tax at a 30% rate (or, if applicable, a lower tax rate specified
by a treaty).
Sale, Exchange or Redemption of Preferred Securities
A Non-U.S. Holder of Preferred Securities generally will not be subject to
United States federal income tax or withholding tax on any gain realized on
the sale, exchange or redemption of the Preferred Securities (including the
receipt of cash in lieu of fractional shares upon conversion of Preferred
Securities into Common Stock) unless (1) the gain is effectively connected
with a United States trade or business of the Non-U.S. Holder, (2) in the case
of a Non-U.S. Holder who is an individual, such holder is present in the
United States for a period or periods aggregating 183 days or more during the
taxable year of the disposition, and either such holder has a "tax home" in
the United States or the disposition is attributable to an office or other
fixed place of business maintained by such holder in the United States, or (3)
the holder is subject to tax pursuant to the provisions of the Code applicable
to certain United States expatriates.
Conversion of the Preferred Securities
In general, no United States federal income tax or withholding tax will be
imposed upon the conversion of Preferred Securities into Common Stock by a
Non-U.S. Holder except with respect to the receipt of cash in lieu of
fractional shares by Non-U.S. Holders upon conversion of Preferred Securities
where one of the conditions described above under "--Sale, Exchange or
Redemption of Preferred Securities" is satisfied.
Sale or Exchange of Common Stock
A Non-U.S. Holder generally will not be subject to United States federal
income tax or withholding tax on the sale or exchange of Common Stock unless
one of the conditions described above under "--Sale, Exchange or Redemption of
Preferred Securities" is satisfied.
Dividends
Distributions by the Company with respect to the Common Stock that are
treated as dividends paid (or deemed paid), as described above under "--
Dividends" to a Non-U.S. Holder (excluding dividends that are effectively
connected with the conduct of a trade or business in the United States by such
holder and are taxable as described below) will be subject to United States
federal withholding tax at a 30% rate (or a lower rate provided under any
applicable tax treaty). Except to the extent that an applicable tax treaty
otherwise provides, a Non-U.S. Holder will be taxed in the same manner as a
U.S. Holder on dividends paid (or deemed paid) that are effectively connected
with the conduct of a trade or business in the United States by the Non-U.S.
Holder. If such Non-U.S. Holder is a foreign corporation, it may also be
subject to a United States branch profits tax on such effectively connected
income at a 30% rate or such lower rate as may be specified by an applicable
tax treaty. Even though such effectively connected dividends are subject to
income tax, and may be subject to the branch profits tax, they will not be
subject to U.S. withholding tax if the holder delivers a properly executed IRS
Form 4224 (or successor form) to the payor.
Under current Treasury Regulations, dividends paid to an address in a
foreign country are presumed to be paid to a resident of that country (unless
the payor has knowledge to the contrary) for purposes of the withholding
discussed above and for purposes of determining the applicability of a tax
treaty rate. Under recently issued Treasury Regulations, however, Non-U.S.
Holders of Common Stock who wish to claim the benefit of an applicable treaty
rate would be required to satisfy certain certification requirements. Based on
IRS Notice 98-16, the new Treasury Regulations are effective for payments made
after December 31, 1999.
55
<PAGE>
Death of a Non-U.S. Holder
Preferred Securities held by an individual who is not a citizen or resident
of the United States at the time of death will not be includable in the
decedent's gross estate for United States federal estate tax purposes,
provided that such holder or beneficial owner did not at the time of death
actually or constructively own 10% or more of the combined voting power of all
classes of stock of the Company entitled to vote, and provided that, at the
time of death, payments with respect to such Preferred Securities would not
have been effectively connected with the conduct by such Non-U.S. Holder of a
trade or business within the United States.
Common Stock actually or beneficially held (other than through a foreign
corporation) by a Non-U.S. Holder at the time of his or her death (or
previously transferred subject to certain retained rights or powers) will be
subject to United States federal estate tax unless otherwise provided by an
applicable estate tax treaty.
Information Reporting and Backup Withholding Tax
United States information reporting requirements and backup withholding tax
will not apply to payments on Preferred Securities to a Non-U.S. Holder if the
statement described in "--Payment of Interest" is duly provided by such
holder, provided that the payor does not have actual knowledge that the holder
is a United States person.
Information reporting requirements and backup withholding tax will not apply
to any payment of the proceeds of the sale of Preferred Securities, or any
payment of the proceeds of the sale of Common Stock effected outside the
United States by a foreign office of a "broker" (as defined in applicable
Treasury Regulations), unless such broker (i) is a United States person, (ii)
is a foreign person that derives 50% or more of its gross income for certain
periods from the conduct of a trade or business in the United States or (iii)
is a controlled foreign corporation for United States federal income tax
purposes. Payment of the proceeds of any such sale effected outside the United
States by a foreign office of any broker that is described in (i), (ii) or
(iii) of the preceding sentence will not be subject to backup withholding tax,
but will be subject to information reporting requirements unless such broker
has documentary evidence in its records that the beneficial owner is a Non-
U.S. Holder and certain other conditions are met, or the beneficial owner
otherwise establishes an exemption. Payment of the proceeds of any such sale
to or through the United States office of a broker is subject to information
reporting and backup withholding requirements unless the beneficial owner of
the Preferred Securities provides the statement described in "--Payment of
Interest" or otherwise establishes an exemption.
If paid to an address outside the United States, dividends on Common Stock
held by a Non-U.S. Holder generally will not be subject to the information
reporting and backup withholding requirements described in this section.
However, under recently issued Treasury Regulations, dividend payments will be
subject to information reporting and backup withholding unless applicable
certification requirements are satisfied. Based on IRS Notice 98-16, the new
Treasury Regulations apply to dividend payments made after December 31, 1999.
United States Real Property Holding Corporations
The discussion of the United States taxation of Non-U.S. Holders of
Preferred Securities and Common Stock assumes that the Company is at no time a
United States real property holding corporation within the meaning of Section
897(c) of the Code. If the Company were a United States real property holding
corporation, gain realized on the sale of the Common Stock by a Non-U.S.
Holder who owns 5 percent or more of the Common Stock, or gain realized on the
sale of Preferred Securities by a Non-U.S. Holder whose Preferred Securities
have a value greater than 5 percent of the Common Stock on the date the
Preferred Securities are acquired, generally would be subject to United States
federal income tax. Under present law, the Company would not be a United
States real property holding corporation so long as (a) the fair market value
of its United States real property interests is less than (b) 50% of the sum
of the fair market value of its United States real property interests, its
interests in real property located outside the United States, and its other
assets which are used or held or use in a trade or business. The Company
believes that it is not, and has not been at any time during the last five
years, a United States real property holding corporation and does not expect
to become such a corporation.
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<PAGE>
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP, AND
DISPOSITION OF THE PREFERRED SECURITIES AND THE COMMON STOCK, INCLUDING THE
TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS WITH
POSSIBLE RETROACTIVE EFFECTS.
SELLING HOLDERS
The Convertible Preferred Securities were originally issued by the Trust and
sold by Prudential Securities Incorporated and Furman Selz LLC (the "Initial
Purchasers"), in transactions exempt from the registration requirements of the
Securities Act, to persons reasonably believed by such Initial Purchasers to
be "qualified institutional buyers" (as defined in Rule 144A of the Securities
Act), or outside the United States to Non-U.S. persons in reliance on
Regulation S under the Securities Act. The Selling Holders may from time to
time offer and sell pursuant to this Prospectus any or all of the Preferred
Securities, the Convertible Debentures, the Common Stock issued upon
conversion of the Preferred Securities, and the associated Guarantee. The term
"Selling Holder" includes the holders listed below and the beneficial owners
of the Convertible Preferred Securities and their transferees, pledgees,
donees or other successors.
The Offered Securities have been registered pursuant to the Registration
Rights Agreement which provides that the Company file a registration statement
with regard to the Offered Securities by March 19, 1998 and use its best
efforts to keep such registration statement effective until two years after
the Original Offering Date or such earlier date as of which all the Transfer
Restricted Securities have been sold pursuant to this Registration Statement.
The following table sets forth information, as of June 5, 1998, with respect
to the Selling Holders of the Preferred Securities and the respective number
of Preferred Securities and Common Stock beneficially owned by each Selling
Holder that may be offered pursuant to this Prospectus. Such information has
been obtained from the Selling Holders. Except as otherwise indicated, to the
knowledge of the Company, all persons listed below have sole voting and
investment power with respect to their securities.
<TABLE>
<CAPTION>
PREFERRED PREFERRED COMMON COMMON
SECURITIES SECURITIES STOCK STOCK
BENEFICIALLY OFFERED BENEFICIALLY OFFERED
SELLING HOLDER OWNED HEREBY OWNED HEREBY
- -------------- ------------ ---------- ------------ -------
<S> <C> <C> <C> <C>
AAM/Zazove Institutional Income
Fund, L.P....................... 58,000 58,000 0 0
American Home Assurance Company.. 60,000 60,000 0 0
BNP Arbitrage SNC................ 80,000 80,000 3,600 0
Capital Market Transactions,
Inc. ........................... 80,000 80,000 0 0
Carrigaholt Capital (Bermuda)
L.P............................. 5,000 5,000 0 0
The Cincinnati Insurance
Company.......................... 150,000 150,000 0 0
The Cincinnati Life Insurance
Company......................... 50,000 50,000 0 0
The Class IC Company, Ltd. ...... 5,000 5,000 0 0
Commonwealth Life Insurance
Company (Teamsters--Camden
Non-Enhanced)................... 24,000 24,000 0 0
Commonwealth Life Insurance
Company--Stock Trac (Teamsters).. 18,000 18,000 0 0
Dean Witter Convertible Securi-
ties Trust...................... 120,000 120,000 0 0
Dean Witter Income Builder Fund.. 94,000 94,000 0 0
Dean Witter Variable Income
Builder Fund.................... 12,000 12,000 0 0
Deeprock & Co.................... 18,000 18,000 0 0
Delaware Group Dividend & Income
Fund, Inc....................... 25,500 25,500 0 0
Delaware Group Global Dividend &
Income Fund, Inc. .............. 12,500 12,500 0 0
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
PREFERRED PREFERRED COMMON COMMON
SECURITIES SECURITIES STOCK STOCK
BENEFICIALLY OFFERED BENEFICIALLY OFFERED
SELLING HOLDER OWNED HEREBY OWNED HEREBY
- -------------- ------------ ---------- ------------ -------
<S> <C> <C> <C> <C>
Delaware Group Premium Fund, Inc.
Convertible
Securities Series............... 2,700 2,700 0 0
DePrince, Race & Zollo, Inc...... 152,700 152,700 0 0
Deutsche Bank A.G. London........ 341,000 341,000 0 0
Evergreen Blue Chip Fund......... 70,000 70,000 0 0
Fidelity Financial Trust:
Fidelity Convertible Securities
Fund............................ 130,000 130,000 0 0
Fidelity Advisor Series II:
Fidelity Advisor High Yield
Fund............................ 7,000 7,000 0 0
Fidelity Management Trust Compa-
ny.............................. 200 200 0 0
Forest Alternative Strategies FD
II LP 2B3F...................... 2,789 2,789 0 0
Forest Alternative Strategies FD
II LP 2A5M...................... 1,300 1,300 0 0
Forest Alternative Strategies FD
II LP 2A5I...................... 2,500 2,500 0 0
Forest Alternative Strategies
Fund II LP Ser A-5.............. 46,600 46,600 0 0
Forest Global Convertible Fund
Ser A-5......................... 47,600 47,600 0 0
Forest Global Convertible Fund
Series B-1...................... 3,000 3,000 0 0
Forest Global Convertible Fund
Series B-2...................... 2,000 2,000 0 0
Forest Global Convertible Fund
Series B-3...................... 2,000 2,000 0 0
Forest Global Convertible Fund
Series B-5...................... 2,000 2,000 0 0
Forest Performance Fund.......... 2,711 2,711 0 0
Fox Family FDN DTD 10/10/87...... 1,600 1,600 0 0
Fox Family Portfolio Partner-
ship............................ 8,900 8,900 0 0
Furman Selz LLC.................. 15,000 15,000 0 0
Goldman, Sachs & Co. ............ 212,100 212,100 0 0
Harris Investment Management..... 15,000 15,000 0 0
Heartland Value Plus Fund, a se-
ries of Heartland Group, Inc.
(1)............................. 40,000 40,000 0 0
Highbridge Capital Corporation... 30,000 30,000 0 0
Highbridge International LLC..... 198,600 198,600 0 0
The Income Fund of America,
Inc. ........................... 500,000 500,000 0 0
J.L. Schiffman & Co., Inc. ...... 50,000 50,000 0 0
J.P. Morgan & Co., Inc........... 120,000 120,000 0 0
KA Management Ltd. .............. 87,769 87,769 0 0
KA Trading L.P. ................. 43,231 43,231 0 0
LLT Limited...................... 2,000 2,000 0 0
Mellon Bank N.A., Trustee for
General Motors
Employees Domestic Group Pension
Trust........................... 35,000 35,000 0 0
Merrill Lynch International
Ltd............................. 40,000 40,000 0 0
Salomon Brothers Asset Manage-
ment, Inc. 860,300 860,300 0 0
SC Fundamental Value, BVI, Ltd... 33,800 33,800 0 0
SC Fundamental Value Fund, L.P... 66,200 66,200 0 0
Shepherd Investments Interna-
tional Ltd...................... 384,300 384,300 0 0
SMALLCAP World Fund, Inc......... 250,000 250,000 0 0
SoundShore Partners, L.P......... 16,000 16,000 0 0
Stark International.............. 68,300 68,300 0 0
Third Avenue High Yield Fund..... 7,000 7,000 0 0
Tribeca Investments L.L.C........ 200,000 200,000 0 0
Zazove Convertible Fund, L.P..... 10,000 10,000 0 0
--------- --------- ----- ---
Total........................ 4,923,200 4,923,200 3,600 0
</TABLE>
- --------
(1) Heartland Value Fund, another series of Heartland Group, Inc. that is
managed by the same investment advisor as Heartland Value Plus Fund, held
436,100 shares of the Company's common stock at May 31, 1998. The
Heartland Value Fund may purchase additional shares or dispose of any or
all of its shares in the Company from time to time in the open market, in
privately negotiated transactions or otherwise.
58
<PAGE>
None of the Selling Holders has, or within the past three years has had, any
position, office or other material relationship with the Trust or the Company
or any of their predecessors or affiliates. Because the Selling Holders may,
pursuant to this Prospectus, offer all or some portion of the Preferred
Securities, the Convertible Debentures or the Common Stock issuable upon
conversion of the Preferred Securities, no estimate can be given as to the
amount of the Preferred Securities, Convertible Debentures or Common Stock
issuable upon conversion of Preferred Securities that will be held by the
Selling Holders upon termination of any such sales. In addition, the Selling
Holders identified above may have sold, transferred or otherwise disposed of
all or a portion of their Preferred Securities since the date on which they
provided the information regarding their Preferred Securities included herein
in transactions exempt from the registration requirements of the Securities
Act. See "Plan of Distribution."
Although none of the Selling Holders (other than those Selling Holders
listed above) have advised the Company that they currently intend to sell all
or any of the Offered Securities pursuant to this Prospectus, the Selling
Holders may choose to sell the Offered Securities from time to time upon
notice to the Company and the Trust. See "Plan of Distribution."
Prior to any use of this Prospectus in connection with an offering of the
Offered Securities, this Prospectus will be supplemented to set forth the name
and number of shares beneficially owned by the Selling Holder intending to
sell such Offered Securities, and the number of Offered Securities to be
offered. The Prospectus Supplement will also disclose whether any Selling
Holder selling in connection with such Prospectus Supplement has held any
position or office with, been employed by or otherwise has a material
relationship with, the Company or any of its affiliates during the three (3)
years prior to the date of the Prospectus Supplement.
PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time to purchasers directly
by the Selling Holders. Alternatively, the Selling Holders may from time to
time offer the Offered Securities to or through underwriters, broker/dealers
or agents, who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Holders or the purchasers of such
securities for whom they may act as agents. The Selling Holders, and any
underwriters, broker/dealers or agents that participate in the distribution of
Offered Securities may be deemed to be "underwriters" within the meaning of
the Securities Act, and any profit on the sale of such securities and any
discounts, commissions, concessions or other compensation received by any such
underwriter, broker/dealer or agent may be deemed to be underwriting discounts
and commissions under the Securities Act.
The Offered Securities may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. The
sale of the Offered Securities may be effected in transactions (which may
involve crosses or block transactions) (i) on any national securities exchange
or quotation service on which the Offered Securities may be listed or quoted
at the time of sale, (ii) in the over-the-counter market, (iii) in
transactions otherwise than on such exchanges or in the over-the-counter
market or (iv) through the writing and exercise of options. At the time a
particular offering of the Offered Securities is made, a Prospectus
Supplement, if required, will be distributed, which will set forth the
aggregate amount and type of Offered Securities being offered and the terms of
the offering, including the name or names of any underwriters, broker/dealers
or agents, any discounts, commissions and other terms constituting
compensation from the Selling Holders and any discounts, commissions or
concessions allowed or reallowed to paid broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Offered Securities will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Offered Securities may not be offered or sold unless they
have been registered or qualified for sale in such jurisdictions or any
exemption from registration or qualification is available and is complied
with.
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<PAGE>
The Selling Holders will be subject to applicable provisions of the Exchange
Act and rules and regulations thereunder, which provisions may limit the
timing of purchases and sales of any of the Offered Securities by the Selling
Holders. The foregoing may affect the marketability of such securities.
Pursuant to the Registration Rights Agreement, the Company and the Trust
shall pay all expenses of the registration of the Offered Securities
including, without limitation, all registration and filing fees and expenses
and fees and expenses of compliance with federal securities or state blue sky
laws; provided, however, that the Selling Holders will pay all broker's
commissions and underwriting discounts and commissions, if any. The Selling
Holders will be indemnified by the Company and the Trust, jointly and
severally against certain civil liabilities, including certain liabilities
under the Securities Act or the Exchange Act or otherwise, or will be entitled
to contribution in connection therewith. The Company and the Trust will be
indemnified by the Selling Holders severally against certain civil
liabilities, including certain liabilities under the Securities Act or
otherwise, or will be entitled to contribution in connection therewith.
LEGAL MATTERS
Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Convertible Debentures, the Guarantee and the Common Stock
issuable upon the conversion of the Preferred Securities will be passed upon
for the Company by King & Spalding. Certain matters of Delaware law relating
to the validity of the Preferred Securities will be passed upon on behalf of
the Trust by Richards, Layton & Finger, P.A., special Delaware counsel to the
Trust. Certain United States income taxation matters have been passed upon for
the Company and the Trust by King & Spalding.
EXPERTS
The consolidated financial statements of the Company at June 30, 1996 and
1997 and for each of the years in the two-year period ended June 30, 1997
included herein and appearing in the Company's Annual Report on Form 10-K
incorporated by reference herein have been audited by Ernst & Young LLP,
independent certified public accountants, as set forth in their reports
thereon included and incorporated by reference herein which, as to 1997 is
based in part on the report of KPMG S.p.A., independent auditors. The
financial statements referred to above are included and incorporated by
reference herein in reliance upon such reports given upon the authority of
such firms as experts in accounting and auditing.
The audited consolidated financial statements of the Company for the year
ended June 30, 1995 that are included herein and incorporated herein by
reference in this Prospectus and elsewhere in the Registration Statement have
been audited by KPMG Peat Marwick LLP, independent certified public
accountants, as indicated in their report with respect thereto, and are
included herein and incorporated herein in reliance upon the authority of said
firm as experts in accounting and auditing.
The combined financial statements of Safety Restraint Systems, a division of
AlliedSignal Inc., as of December 31, 1995 and 1996 and for each of the three
years in the period ended December 31, 1996 incorporated by reference in this
Prospectus from the Company's Current Report on Form 8-K/A dated October 30,
1997 have been so incorporated in reliance on the report (which contains an
explanatory paragraph relating to Safety Restraint Systems' transactions and
relationships with AlliedSignal Inc.) of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
60
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BREED:
Reports of Independent Auditors......................................... F-2
Consolidated Balance Sheets at June 30, 1997 and 1996................... F-5
Consolidated Statements of Earnings for the three years in the period
ended June 30, 1997.................................................... F-6
Consolidated Statements of Cash Flows for the three years in the period
ended June 30, 1997.................................................... F-7
Consolidated Statement of Stockholders' Equity for the three years in
the period ended
June 30, 1997.......................................................... F-8
Notes to Consolidated Financial Statements.............................. F-9
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
BREED Technologies, Inc.
We have audited the accompanying consolidated balance sheets of BREED
Technologies, Inc. and subsidiaries as of June 30, 1997 and 1996, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We did not audit
the financial statements of MOMO S.p.A., a wholly-owned subsidiary acquired
April 15, 1996, which statements reflect total assets of $106,398,000 as of
June 30, 1997 and net sales of $73,093,000 for the year then ended. Those
statements were audited by other auditors whose report has been furnished to
us, and our opinion, insofar as it relates to data included for MOMO S.p.A.,
is based solely on the report of the other auditors. The consolidated
financial statements of BREED Technologies, Inc. and subsidiaries for the year
ended June 30, 1995, were audited by other auditors whose report, dated July
21, 1995, expressed an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, based on our audits and the report of other auditors, the
1997 and 1996 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of BREED
Technologies, Inc. and subsidiaries at June 30, 1997 and 1996, and the
consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
Ernst & Young LLP
July 31, 1997, except for Note 12, as to which the date is August 27, 1997
Tampa, Florida
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
BREED Technologies, Inc.:
We have audited the consolidated statements of earnings, stockholders'
equity, and cash flows of BREED Technologies, Inc. and subsidiaries for the
year ended June 30, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of BREED Technologies, Inc. and subsidiaries for the year ended June 30,
1995, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Tampa, Florida
July 21, 1995
F-3
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
of Momo S.p.A.
We have audited the accompanying combined and consolidated balance sheet of
the Momo group as of 30 June 1997 and the related combined and consolidated
income statement, retained earnings and cash flows for the year then ended.
These financial statements are the responsibility of the management of Momo
S.p.A. Our responsibility is to express an opinion on the financial statements
based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Momo group as of 30
June 1997, and the results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles as
defined in the United States.
KPMG S.p.A.
Milan, 25 July 1997
F-4
<PAGE>
BREED TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
------------------
1997 1996
-------- --------
IN THOUSANDS
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 18,707 $ 95,830
Accounts receivable, principally trade.................... 207,951 110,656
Inventories............................................... 75,347 52,890
Prepaid expenses.......................................... 13,519 7,247
-------- --------
Total current assets.................................... 315,524 266,623
-------- --------
Property, plant and equipment:
Land...................................................... 15,206 10,805
Buildings................................................. 106,122 73,342
Machinery and equipment................................... 212,542 126,947
Construction in progress.................................. 28,013 14,417
Less accumulated depreciation........................... (85,433) (53,858)
-------- --------
Net property, plant and equipment....................... 276,450 171,653
-------- --------
Other assets:
Intangible assets......................................... 220,956 45,053
Investments and other assets.............................. 11,603 20,473
Net assets held for sale.................................. 52,620 --
-------- --------
Total other assets...................................... 285,179 65,526
-------- --------
Total assets.......................................... 877,153 503,802
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt....... 191,744 120,688
Accounts payable.......................................... 121,505 33,940
Employee compensation and benefits........................ 16,818 13,844
Accrued expenses.......................................... 32,661 7,980
-------- --------
Total current liabilities............................... 362,728 176,452
-------- --------
Long-term debt.............................................. 231,700 42,123
Other long-term and deferred liabilities.................... 16,306 10,147
-------- --------
Total liabilities..................................... 610,734 228,722
-------- --------
Stockholders' equity:
Common stock.............................................. 317 316
Additional paid-in capital................................ 77,470 76,652
Retained earnings......................................... 207,964 201,981
Foreign currency translation adjustments.................. (18,843) (2,927)
Unearned compensation..................................... (489) (942)
-------- --------
Total stockholders' equity.............................. 266,419 275,080
-------- --------
Total liabilities and stockholders' equity............ $877,153 $503,802
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
BREED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
IN THOUSANDS, EXCEPT PER SHARE DATA
<S> <C> <C> <C>
Net sales................................. $ 794,880 $ 431,689 $ 400,972
Cost of sales........................... 631,283 277,044 244,551
----------- ----------- -----------
Gross profit.......................... 163,597 154,645 156,421
Operating expenses:
Selling, general and administrative..... 70,583 38,243 33,098
Engineering, research and development... 36,121 23,588 18,506
Amortization of intangibles............. 6,310 2,001 286
----------- ----------- -----------
Total operating expenses.............. 113,014 63,832 51,890
----------- ----------- -----------
Operating income.......................... 50,583 90,813 104,531
Interest income (expense), net............ (24,460) (1,137) 704
Other income (expense), net............... 3,524 8,662 4,898
----------- ----------- -----------
Earnings before income taxes.............. 29,647 98,338 110,133
Income taxes.............................. 14,800 35,300 37,800
----------- ----------- -----------
Net earnings.............................. $ 14,847 $ 63,038 $ 72,333
=========== =========== ===========
Earnings per share (Note 14):
Basic................................... $ 0.47 $ 2.00 $ 2.30
=========== =========== ===========
Diluted ................................ $ 0.47 $ 1.99 $ 2.29
=========== =========== ===========
Shares used for computation:
Basic................................... 31,648 31,550 31,434
=========== =========== ===========
Diluted................................. 31,867 31,644 31,624
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE>
BREED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
----------------------------
1997 1996 1995
--------- -------- -------
IN THOUSANDS
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings.................................... $ 14,847 $ 63,038 $72,333
Adjustments:
Depreciation of plant and equipment............ 42,224 18,090 13,609
Amortization of intangible assets.............. 6,310 2,001 286
Deferred income taxes.......................... 1,157 1,665 (1,550)
(Gain) loss from sale of assets................ 634 (1,517) (1,349)
Compensation related to stock plan............. 89 230 296
Changes in operating assets and liabilities,
net of effects from acquisitions:
Accounts receivable........................... (16,284) (30,667) (5,473)
Inventories................................... 2,234 (1,548) (6,526)
Prepaid expenses.............................. (720) (717) (334)
Accounts payable.............................. 37,047 843 1,915
Accrued expenses.............................. (7,597) (9,215) (3,173)
Other assets and liabilities.................. 9,418 (1,000) (891)
--------- -------- -------
Net cash provided by operating activities.... 89,359 41,203 69,143
--------- -------- -------
Cash flows from investing activities:
Purchases of property, plant and equipment...... (75,851) (45,370) (69,268)
Sale (purchases) of short-term investments,
net............................................ -- 10,601 12,386
Cost of acquisition, net of cash acquired....... (291,922) (48,507) (6,941)
Deposit on Gallino acquisition.................. -- (10,299) --
Investment in and advances to affiliates........ (874) -- (6,376)
Proceeds from sale of assets.................... 1,382 2,742 1,349
--------- -------- -------
Net cash used in investing activities........ (367,265) (90,833) (68,850)
--------- -------- -------
Cash flows from financing activities:
Proceeds from short-term borrowings............. 577,688 86,957 5,486
Repayments of long-term debt and other
borrowings..................................... (412,830) (6,356) (9,333)
Proceeds from long-term debt.................... 45,441 45,000 --
Cash dividends paid............................. (8,861) (6,938) (4,715)
Common stock issued--options and stock plans.... 1,182 2,050 1,741
--------- -------- -------
Net cash provided by (used in) financing
activities.................................. 202,620 120,713 (6,821)
--------- -------- -------
Effect of exchange rate on cash.................. (1,837) (1,608) (587)
Net increase (decrease) in cash and cash
equivalents..................................... (77,123) 69,475 (7,115)
Cash and cash equivalents at beginning of year... 95,830 26,355 33,470
--------- -------- -------
Cash and cash equivalents at end of year......... $ 18,707 $ 95,830 $26,355
========= ======== =======
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest....................................... $ 20,776 $ 2,347 $ 1,794
Income taxes................................... 12,914 32,230 39,520
Cost of acquisitions:
Working capital (deficiency), net of cash
acquired..................................... (23,534) 125 6,824
Property, plant and equipment................. (144,995) (18,021) (4,483)
Patents....................................... (16,000) -- (5,272)
Costs in excess of net assets of businesses
acquired..................................... (158,073) (35,718) (3,634)
Other assets.................................. (2,231) (3,066) (451)
Long-term debt and other long-term
liabilities.................................. 52,911 8,173 75
--------- -------- -------
Net cost of acquisitions..................... $(291,922) $(48,507) $(6,941)
========= ======== =======
</TABLE>
See Notes to Consolidated Financial Statements
F-7
<PAGE>
BREED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK ADDITIONAL CURRENCY
------------------ PAID-IN RETAINED TRANSLATION UNEARNED
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENTS COMPENSATION
---------- ------ ---------- -------- ----------- ------------
IN THOUSANDS, EXCEPT FOR DATA
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30,
1994................... 31,342,033 $313 $71,395 $ 80,477 $ (937) $ --
Shares issued under
Stock Option Plans... 52,024 1 686 -- -- --
Shares sold under
Employee Stock
Purchase Plan........ 51,843 -- 1,054 -- -- --
Shares terminated
under Stock Incentive
Plan, net of granted
shares............... 69,490 1 1,927 -- -- (1,927)
Compensation expense.. -- -- -- -- -- 296
Net earnings.......... -- -- -- 72,333 -- --
Translation
adjustments.......... -- -- -- -- (606) --
Cash dividends -- $.20
per share............ -- -- -- (6,292) -- --
---------- ---- ------- -------- -------- -------
BALANCE AT JUNE 30,
1995................... 31,515,390 315 75,062 146,518 (1,543) (1,631)
Shares issued under
Stock Option Plans... 67,561 1 786 -- -- --
Shares sold under
Employee Stock
Purchase Plan........ 60,906 -- 1,038 -- -- --
Shares terminated
under Stock Incentive
Plan, net of granted
shares............... (17,200) -- (459) -- -- 459
Compensation expense.. -- -- -- -- -- 230
Tax benefit from
exercise of stock
options.............. -- -- 225 -- -- --
Net earnings.......... -- -- -- 63,038 -- --
Translation
adjustments.......... -- -- -- -- (1,384) --
Cash dividends -- $.24
per share............ -- -- -- (7,575) -- --
---------- ---- ------- -------- -------- -------
BALANCE AT JUNE 30,
1996................... 31,626,657 316 76,652 201,981 (2,927) (942)
Shares issued under
Stock Option Plans... 38,695 1 537 -- -- --
Shares sold under
Employee Stock
Purchase Plan........ 27,082 -- 529 -- -- --
Compensation expense.. -- -- -- -- -- 89
Shares terminated
under Stock Incentive
Plan, net of granted
shares............... (12,992) -- (364) -- -- 364
Tax benefit from
exercise of stock
options.............. -- -- 116 -- -- --
Net earnings.......... -- -- -- 14,847 -- --
Translation
adjustments.......... -- -- -- -- (15,916) --
Cash dividends -- $.28
per share............ -- -- -- (8,864) -- --
---------- ---- ------- -------- -------- -------
BALANCE AT JUNE 30,
1997................... 31,679,442 $317 $77,470 $207,964 $(18,843) $ (489)
</TABLE>
Preferred stock:
Authorized 5,000,000 shares, par value $.001 per share. To date,
none of these shares has been issued.
Common stock:
Authorized 50,000,000 shares, par value $.01 per share.
See Notes to Consolidated Financial Statements
F-8
<PAGE>
BREED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of BREED
Technologies, Inc. (the Company) and its wholly- and majority-owned
subsidiaries. All intercompany balances and transactions have been eliminated
in consolidation. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
primarily using the first-in, first-out method for inventories in North
America and primarily using the average cost method for inventories in Europe.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is computed
using the straight-line method applied to individual items based on estimated
useful lives of the assets which range from 5 to 40 years for buildings and
improvements, and 3 to 10 years for machinery, computer and office equipment.
Replacements and betterments that extend the lives of assets are capitalized,
while maintenance and repairs are expensed as incurred.
INTANGIBLE ASSETS
Cost in excess of net assets of businesses acquired (goodwill) is being
amortized on a straight-line basis over a period of 3 to 40 years and is
stated net of accumulated amortization of $6,247,000 and $895,000 at June 30,
1997 and 1996, respectively. Goodwill is reevaluated when business events and
circumstances indicate that the carrying amount may not be recoverable.
Reevaluation is based on projections of undiscounted future cash flows.
Patents are stated at cost less accumulated amortization of $1,271,000 and
$527,000 at June 30, 1997 and 1996, respectively. These items, which were
acquired in connection with the VTI Hamlin OY (VTI) and USS acquisitions, as
discussed in Note 3, are capitalized and amortized on a straight-line basis
over the average remaining life of the related patents.
TRANSLATION OF FOREIGN CURRENCIES AND FOREIGN EXCHANGE CONTRACTS
All assets and liabilities in the balance sheets of foreign subsidiaries
whose functional currency is other than the U.S. dollar are translated at
year-end exchange rates except stockholders' equity which is translated at
historical rates. Translation gains and losses are accumulated as a separate
component of stockholders' equity. Foreign currency transaction gains and
losses are included in determining net earnings.
The Company uses foreign exchange contracts to hedge certain foreign
denominated payables and receivables and also to hedge firm sales and purchase
commitments. Realized and unrealized gains and losses are deferred and
recognized as the related transactions are settled. The Company does not enter
into foreign exchange contracts for trading purposes. At June 30, 1997, the
Company had outstanding Canadian contracts to buy US$43 million, maturing
through January 1999 and to sell US$9 million, maturing through August 1997.
At June 30, 1996, the Company had outstanding contracts to sell 10.5 million
German marks, maturing through June 1997.
F-9
<PAGE>
BREED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share. Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where appropriate restated to conform to the Statement 128
requirements. See Note 14.
RECLASSIFICATIONS
Certain amounts in the prior years' Consolidated Financial Statements have
been reclassified to conform to the current year's presentation.
2. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
Financial instruments consist primarily of cash equivalents, short-term
investments, accounts receivable, accounts payable and bank debt. At June 30,
1997, the fair value of these financial instruments approximates the carrying
amount because of the short-term maturity of these items.
The Company has entered into various agreements with three major customers
to secure certain long-term sales contracts, however these do not commit the
customers to purchase specific quantities of products from the Company. The
agreement with Ford expires at the end of the 1999 model year. The Company is
in the process of negotiating its long-term contract through the model year
2000 with Delco-GM. In addition, a long-term sales agreement with Fiat expires
on December 31, 1999. Sales by the Company to Fiat in 1997 and 1996, accounted
for 32% and 14%, respectively, of the Company's net sales for such years.
Sales by the Company to Ford in fiscal 1997, 1996 and 1995, accounted for 25%,
33% and 37%, respectively, of the Company's net sales for such years. Sales by
the Company to Delco-GM in fiscal 1997, 1996 and 1995, accounted for 13%, 26%
and 40%, respectively, of the Company's net sales for such years.
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the strong financial condition of the Company's customer base.
However, as of June 30, 1997, the Company's receivables from Fiat, Ford, and
Delco-GM amounted to 38%, 12% and 8% respectively, of total trade accounts
receivable.
3. ACQUISITIONS
During the three years ended June 30, 1997, the Company made the
acquisitions set forth below. The Hamlin merger was accounted for as a pooling
of interests. All of the other acquisitions were accounted for by the purchase
method of accounting; accordingly, the purchased assets and liabilities have
been recorded at their estimated fair value at the date of acquisition, and
the consolidated financial statements include the operating results of each
business from the date of acquisition.
FISCAL 1995
Hamlin
On August 31, 1994, the Company completed a merger with Hamlin, Incorporated
(Hamlin), a manufacturer of crash sensors and reed switch products, with
operations in the United States, Mexico and Europe. The Company issued 838,324
shares of common stock for all of the outstanding common stock of Hamlin.
There were no adjustments necessary to conform the companies' methods of
accounting. There were no significant transactions between the companies prior
to the merger.
F-10
<PAGE>
BREED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
VTI
In June 1995, the Company acquired VTI Hamlin OY (VTI), a Finnish company
that designs and manufactures silicon capacitive micro machined acceleration,
angular rate and differential and absolute pressure sensors, for $1.7 million
in cash. Additionally, the Company issued stock warrants to certain of the
former stockholders of VTI which enable the holders to purchase up to 100,000
shares of common stock between July 1, 1998 and June 30, 2000, at a purchase
price of $25.75 per share ($2 above the market value of the Company's common
stock at the date of acquisition). The purchase price exceeded the fair value
of the net assets acquired by approximately $4.5 million. The resulting
goodwill is being amortized on a straight-line basis over seven years.
Concurrent with the purchase, the Company acquired, for $5.3 million in cash,
technology rights to use awarded and pending patents and related intellectual
property.
FISCAL 1996
MOMO
On April 15, 1996, the Company acquired all of the outstanding shares of
MOMO S.p.A. and G. Holding, S.r.1. (collectively MOMO), an original equipment
manufacturer and aftermarket supplier of luxury steering wheels and alloy
wheels, for $45.2 million in cash. The purchase price exceeded the fair value
of the net assets acquired by $31.1 million. The resulting goodwill is being
amortized over 40 years.
Italtest
On April 22, 1996, the Company acquired all of the outstanding shares of
Italtest S.r.l., an Italian manufacturer of printed circuit boards for the
automotive, computer and telecommunications markets for $1.8 million in cash.
The purchase price exceeded the fair value of the net assets acquired by $1.8
million. The resulting goodwill is being amortized over 10 years.
Force Imaging Technologies, Inc.
On May 31, 1996, the Company acquired all of the outstanding shares of Force
Imaging Technologies, Inc., a manufacturer of thin-profile variable force
sensors for multi-function automotive capabilities for $3 million in cash. The
purchase price exceeded the fair value of the net assets acquired by $2.8
million. The resulting goodwill is being amortized over 5 years.
The pro forma unaudited results of operations for the years ended June 30,
1996 and 1995, assuming the purchase of the acquisitions had been consummated
as of July 1, 1994, are as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
IN THOUSANDS, EXCEPT
PER SHARE DATA
<S> <C> <C>
Net sales............................................. $ 493,845 $ 482,885
Net earnings.......................................... $ 59,768 $ 65,377
Net earnings per share................................ $ 1.89 $ 2.08
</TABLE>
FISCAL 1997
Gallino
On July 1, 1996, the Company completed the acquisition of Gallino
Plasturgia, S.r.l. and affiliates (Gallino) from IAO Industrie Riunite S.p.A.
Gallino manufactures steering wheels, instrument panels, bumpers and other
plastic trim components used in automotive original equipment and aftermarket
applications. The aggregate purchase price was $126 million, comprised of cash
of $74 million and liabilities assumed of $52 million. The
F-11
<PAGE>
BREED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
acquisition was financed through borrowings on the Company's revolving credit
agreements. The purchase price exceeded the fair value of net assets acquired
by approximately $40 million. The resulting goodwill is being amortized on a
straight-line basis over 40 years.
United Steering Systems (USS)
On October 25, 1996, the Company completed the acquisition of certain assets
and the assumption of certain liabilities of the "North American Steering
Wheels Operation" of United Technologies and all of the shares of United
Technologies Automotive Clifford Limited (collectively USS). USS produces
steering wheels, airbag covers, horn pads and related molded products in the
U.S., Mexico and England. The purchase price was $154 million, financed
through borrowings under the Company's Revolving Credit Agreements. The
purchase price exceeded the fair value of net assets acquired by approximately
$75 million. The resulting goodwill is being amortized on the straight-line
basis over 40 years.
Custom Trim
On February 25, 1997, the Company completed the acquisition of the stock of
BTI Investments, Inc. ("BTI"), a holding company that owned the Custom Trim
group of companies, for $70 million. Additionally, up to $5 million may be
paid on September 1, 2002, contingent upon BTI attaining certain operating
profit targets for each of the years subsequent to the acquisition date. The
acquired operations produce leather-wrapped steering wheels and other
automotive leather-wrapped products in Canada and Mexico. The funds used by
the Company to acquire BTI were obtained from borrowings under the Company's
Revolving Credit Agreements. The purchase price exceeded the fair market value
of net assets acquired by $48 million. The allocation of the purchase price is
subject to change pending completion of the Company's integration plans. The
resulting goodwill is being amortized on a straight-line basis over 40 years.
The pro forma unaudited results of operations for the years ended June 30,
1997 and 1996, assuming the purchase of the acquisitions had been consummated
as of July 1, 1995, are as follows:
<TABLE>
<CAPTION>
1997 1996
---------------------
IN THOUSANDS, EXCEPT
PER SHARE DATA
<S> <C> <C>
Net sales............................................. $ 901,058 $ 1,056,588
Net earnings.......................................... $ 20,965 $ 45,897
Net earnings per share................................ $ .66 $ 1.45
</TABLE>
4. NET ASSETS HELD FOR SALE
The Company acquired Gallino in July 1996 primarily for the steering wheel
business. However, in order to acquire the steering wheel business it was
necessary to also acquire Gallino's instrument panel, bumper and other plastic
trim component business (non-steering wheel business). In 1997, the Company
evaluated whether the non-steering wheel business of Gallino could be
integrated into the core business of the Company.
During the fourth quarter of fiscal 1997, the Company committed to a plan to
dispose of Gallino's instrument panel, bumper and other plastic trim component
business (non-steering wheel business). In July 1997, the Company signed a
letter of intent to sell approximately 65% of the net assets of Gallino's non-
steering wheel business.
F-12
<PAGE>
BREED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company is negotiating with other prospective buyers for the remaining
portion of Gallino's non-steering wheel business. For financial reporting
purposes, the assets and liabilities attributable to all of Gallino's
non-steering wheel business, which are recorded at amounts approximating their
net realizable value, have been classified in the consolidated balance sheet
as "Net assets held for sale" and consist of the following at June 30, 1997:
<TABLE>
<CAPTION>
IN THOUSANDS
<S> <C>
Current assets.................................................. $42,221
Property, plant and equipment, net.............................. 62,739
Other noncurrent assets......................................... 977
-------
Total assets.................................................. 105,937
-------
Current liabilities............................................. 31,661
Other liabilities............................................... 21,656
-------
Total liabilities............................................. 53,317
-------
Net assets held for sale........................................ $52,620
=======
</TABLE>
5. INCOME TAXES
The components of earnings before income taxes are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- --------
IN THOUSANDS
<S> <C> <C> <C>
Domestic............................................ $23,699 $98,285 $107,521
Foreign............................................. 5,948 53 2,612
------- ------- --------
$29,647 $98,338 $110,133
======= ======= ========
</TABLE>
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
IN THOUSANDS
<S> <C> <C> <C>
Current
Federal.......................................... $ 6,442 $30,818 $37,214
Foreign.......................................... 6,434 2,001 750
State............................................ 767 816 1,386
------- ------- -------
Total current.................................. 13,643 33,635 39,350
Deferred
Federal.......................................... 1,501 1,665 (1,550)
Foreign.......................................... (344) -- --
------- ------- -------
Total deferred................................. 1,157 1,665 (1,550)
Income taxes....................................... $14,800 $35,300 $37,800
======= ======= =======
</TABLE>
A provision for income taxes has not been made for the undistributed
earnings of foreign subsidiaries of approximately $10 million at June 30,
1997, which have been or are intended to be permanently reinvested in expanded
foreign business operations.
F-13
<PAGE>
BREED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The provision for income taxes differs from the expected federal tax
provision as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
IN THOUSANDS
<S> <C> <C> <C>
Tax at U.S. statutory rate........................ $10,260 $34,418 $38,547
State taxes, net of Federal tax benefit........... 498 530 900
Change in valuation allowance..................... 1,816 2,161 (2,115)
Amortization of goodwill, without tax benefit..... 1,300 -- --
Foreign rate differential......................... 677 -- --
Reduction of taxes provided in prior years........ -- (1,154) --
Other............................................. 249 (655) 468
------- ------- -------
$14,800 $35,300 $37,800
======= ======= =======
</TABLE>
The temporary differences that give rise to significant portions of the
deferred tax assets and liabilities as of June 30, 1997 and 1996,
respectively, are presented below:
<TABLE>
<CAPTION>
1997 1996
------- ------
IN THOUSANDS
<S> <C> <C>
Deferred tax assets
Accrued expenses......................................... $ 5,132 $1,842
Net operating losses..................................... 3,977 --
Other.................................................... 923 961
Valuation allowance...................................... (3,977) --
------- ------
6,055 2,803
------- ------
Deferred tax liabilities
Depreciation and amortization............................ (7,845) (892)
Acquisition related asset basis differences.............. -- (2,544)
------- ------
(7,845) (3,436)
------- ------
$(1,790) $ (633)
======= ======
</TABLE>
Management has determined, based on the Company's history of domestic
taxable income and its expectation of the future, that domestic operating
income of the Company will likely be sufficient to fully recognize the net
deferred tax assets.
At June 30, 1997, the Company had foreign net operating loss carryforwards
(NOLs) for tax purposes of $11.7 million of which $6.1 million expires in the
year 2006 and $1.7 million expires in the year 2007. The remaining NOLs have
no expiration date. For financial reporting purposes, a valuation allowance of
$4.0 million has been recognized to reduce the deferred tax assets related to
those NOLs.
6. NOTES PAYABLE AND LONG-TERM DEBT
During fiscal 1997, the Company replaced its $200 million unsecured domestic
credit agreement. The Company now maintains two multi-currency credit
agreements totaling $450 million that expire on April 29, 1998 ($250 million)
and April 30, 2002 ($200 million). The amount outstanding under the new
agreements at June 30, 1997, was $358 million of which $200 million is due
April 30, 2002. The interest rate under the agreements is at or below the
prime rate or, at the Company's option, LIBOR plus a margin. The weighted
average interest rate on the outstanding borrowings at June 30, 1997, was
6.7%. A commitment fee of between
F-14
<PAGE>
BREED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
.125% and .3% per year is paid on the unused portion of the commitment
dependent upon the Company's level of leverage as set forth in the agreements.
Under the terms of the agreements, the Company must maintain acceptable
ratios, such as leverage ratio, minimum net worth, and interest coverage
ratio. At June 30, 1997, the Company was in compliance with all covenants.
The Company's subsidiaries outside of the United States have short-term
lines of credit aggregating approximately $100 million from various banks
worldwide. Most of these arrangements are reviewed periodically for renewal.
The amounts outstanding under these lines of credit with banks at June 30,
1997 and 1996 were $27.3 million and $34.1 million, respectively. Interest
rates are generally based on the prevailing bank prime rate in the various
countries in which the Company has operations. Additionally, the subsidiaries
have outstanding mortgage and equipment financing loans amounting to $38.1
million.
7. OTHER FINANCIAL DATA
The components of inventories consist of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
IN THOUSANDS
<S> <C> <C>
Finished goods............................................... $24,832 $19,439
Work in process.............................................. 23,385 14,417
Raw materials................................................ 27,130 19,034
------- -------
$75,347 $52,890
======= =======
</TABLE>
Other income (expense), net consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
IN THOUSANDS
<S> <C> <C> <C>
Foreign exchange gain (loss), net................... $2,161 $2,385 $ (352)
Gain (loss) on disposition of property, plant and
equipment.......................................... (634) 1,517 1,349
Royalty income...................................... 93 3,976 3,483
Government grant.................................... 1,000 -- --
Other, net.......................................... 904 784 418
------ ------ ------
$3,524 $8,662 $4,898
====== ====== ======
</TABLE>
8. EMPLOYEE BENEFIT PLANS
The Company's Omnibus Stock Plan provides for the granting of 2,500,000
shares of common stock for awards of options under the Company's 1992 Stock
Option Plan, the 1992 Employee Stock Purchase Plan, and the 1994 Stock
Incentive Plan.
Under the 1992 Stock Option Plan, options to purchase up to 1,500,000 shares
of common stock may be granted to officers, employees and consultants to the
Company. The Company may grant options that are either qualified (Incentive
Stock Options) or nonqualified under the Internal Revenue Code of 1986, as
amended. Options under the Plan will generally vest over a three-year period
and the option term may not exceed ten years. Total options granted under this
plan amounted to 48,313 in fiscal 1997 and 45,000 in fiscal 1996.
The Company's 1992 Employee Stock Purchase Plan provides that eligible
employees may contribute up to 10% of their base earnings toward the
semiannual purchase of the Company's common stock, at a price equal to 85% of
the lower of the market value of the common stock on the first and last day of
the applicable period.
F-15
<PAGE>
BREED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
There are limitations on the number of shares that can be purchased in any
period. Total shares issued under this plan were 27,082 in fiscal 1997 and
60,906 in fiscal 1996. Since the plan is noncompensatory, no charges to
operations have been recorded.
The 1994 Stock Incentive Plan permits the issuance of options of common
stock in the form of incentive stock options, nonstatutory stock options,
stock appreciation rights, performance shares, restricted stock or
unrestricted stock to selected employees of the Company. Options under the
plan vest over a four-year period. Stock appreciation rights entitle
recipients to receive an amount determined in whole or in part by appreciation
in the fair market value of the stock between the date of the award and the
date of exercise. Performance share awards entitle recipients to acquire
shares of stock upon attainment of specified performance goals. Restricted
stock awards entitle recipients to acquire shares of stock, subject to the
right of the Company to repurchase under certain circumstances all or part of
the shares at their purchase price (or to require forfeiture of such shares if
purchased at no cost) from the recipient. Restricted shares vest over a five-
year period. Unearned compensation, representing the fair market value of the
shares at the date of issuance, is charged to earnings over the vesting
period. Total options granted under this plan amounted to 63,744 in fiscal
1997 and 648,873 in fiscal 1996. No stock appreciation rights or performance
shares were granted in fiscal 1997 or fiscal 1996.
In addition to the above plans, the Company's 1992 Director Stock Option
Plan provides for the grant of nonqualified stock options to the Company's
nonemployee directors. The total number of shares to be issued under this plan
may not exceed 50,000 shares. Options granted under the 1992 Director Stock
Option Plan have an exercise price equal to the fair market value of the
common stock on the date of the grant and a term equal to ten years. Total
options granted under this plan amounted to 5,310 in fiscal 1997 and 14,600 in
fiscal 1996.
Following is a summary of the option and warrant transactions for the fiscal
years 1997 and 1996:
<TABLE>
<CAPTION>
SHARES PRICE
--------- ---------------
<S> <C> <C>
Balance at June 30, 1995.......................... 622,028 $ 3.14 - 32 1/4
Granted......................................... 708,473 16 3/4 - 20 3/8
Exercised....................................... (67,561) 3.14 - 24
Canceled........................................ (113,704) 12 - 28 3/8
Balance at June 30, 1996.......................... 1,149,236 12 - 32 1/4
Granted......................................... 117,367 21 3/8 - 28 1/4
Exercised....................................... (38,695) 19 3/4 - 28
Canceled........................................ (127,547) 16 3/4 - 28 5/8
Balance at June 30, 1997.......................... 1,100,361 12 - 32 1/4
Exercisable at June 30, 1997...................... 318,996 12 - 32 1/4
Shares reserved for future issuance............... 2,175,262
</TABLE>
The Company maintains a 401(k) retirement plan which covers substantially
all full-time U.S. employees. Under the plan, the Company will match employee
contributions at rates which are determined annually by management. Employer
contributions for the years ended June 30, 1997, 1996 and 1995 amounted to
$762,000, $911,000 and $669,000, respectively.
The Company adopted Statement of Financial Accounting Standard No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation," in fiscal 1997, but
elected to continue to measure compensation cost using the intrinsic value
method, in accordance with APB Opinion No 25 ("APB 25"), "Accounting for Stock
Issued to Employees." Accordingly, no compensation cost for stock options has
been recognized. If compensation cost had been determined based on the
estimated fair value of options granted in fiscal 1997 and fiscal 1996,
F-16
<PAGE>
BREED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
consistent with the methodology in SFAS 123, the pro forma effects on the
Company's net earnings and income per share would not have been material.
9. INFORMATION RELATED TO CUSTOMERS AND OPERATIONS IN DIFFERENT GEOGRAPHIC
AREAS
The Company operates in one principal industry segment: the design,
manufacture and sale of automotive occupant safety systems--which represents
more than 90% of consolidated net sales. The following financial information
relates to operations in different geographic areas. Net sales to unaffiliated
customers are based on the location of the Company's operating entity.
Transfers between geographic areas are recorded at amounts above cost and in
accordance with the rules and regulations of the respective governing tax
authorities. Identifiable assets of geographic areas are those assets used in
the Company's operations in each area. Corporate assets include cash and cash
equivalents, intangibles, long-term investments and deferred income taxes.
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
IN THOUSANDS
<S> <C> <C> <C>
Net sales to unaffiliated customers:
North America................................. $379,270 $324,565 $345,640
Europe........................................ 415,610 107,124 55,332
-------- -------- --------
Total net sales............................. $794,880 $431,689 $400,972
======== ======== ========
Transfers between geographic areas
(eliminated in consolidation):
North America................................. $ 42,809 $ 51,057 $ 27,018
Europe........................................ 35,043 21,832 22,689
-------- -------- --------
Total transfers............................. $ 77,852 $ 72,889 $ 49,707
======== ======== ========
Earnings before income taxes:
Operating income:
North America................................. $ 46,597 $ 88,371 $100,514
Europe........................................ 3,986 2,442 4,017
Interest and other income (expense), net........ (20,936) 7,525 5,602
-------- -------- --------
Earnings before income taxes................ $ 29,647 $ 98,338 $110,133
======== ======== ========
Identifiable assets:
North America................................. $447,076 $196,776 $185,574
Europe........................................ 410,577 219,340 38,410
Corporate assets.............................. 19,500 87,686 54,714
-------- -------- --------
Total assets................................ $877,153 $503,802 $278,698
======== ======== ========
</TABLE>
The Company also had foreign export sales from the United States amounting
to $34,559,000, $27,354,000 and $24,515,000 for the years ended June 30, 1997,
1996 and 1995, respectively.
The Company operates its Mexican manufacturing facilities under the
"Maquiladora" program. Pursuant to this program, materials and components
owned by the Company are transferred to the Mexican subsidiaries where they
are used to produce finished goods. The finished goods are returned to the
United States and the Company reimburses the Mexican subsidiaries for their
manufacturing costs without any intended significant profit or loss of
consequence. Accordingly, the Mexican sales, transfers, and income amounts are
excluded from the above geographic area information.
F-17
<PAGE>
BREED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. COMMITMENTS AND CONTINGENCIES
The Company is the subject of various lawsuits, claims and environmental
contingencies. In the opinion of management, the expected liability resulting
from these matters is adequately covered by amounts accrued, and will not have
a material adverse effect on the Company's consolidated financial position or
future results of operations.
11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following tables set forth selected quarterly financial information.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
--------------- --------------- --------------- --------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
FISCAL 1997
Net sales............... $ 158,671 $ 182,567 $ 209,409 $ 244,233 $ 794,880
Gross profit............ 41,648 36,690 37,955 47,304 163,597
Operating income........ 18,210 9,330 7,128 15,915 50,583
Net earnings............ 7,846 3,150 1,501 2,350 14,847
Earnings per share...... .25 .10 .05 .07 .47
Cash dividends per
share.................. .07 .07 .07 .07 .28
Market price range...... 18 1/2 - 27 7/8 22 5/8 - 28 1/2 19 1/4 - 27 1/4 17 3/8 - 23 17 3/8 - 28 1/2
FISCAL 1996
Net sales............... $ 92,601 $ 105,655 $ 103,927 $ 129,506 $ 431,689
Gross profit............ 34,864 42,844 35,841 41,096 154,645
Operating income........ 19,446 26,854 19,671 24,842 90,813
Net earnings............ 12,601 17,842 14,892 17,703 63,038
Earnings per share...... .40 .57 .47 .56 2.00
Cash dividends per
share.................. .05 .05 .07 .07 .24
Market price range...... 19 1/8 - 24 1/4 17 - 20 1/4 16 3/8 - 19 5/8 18 3/4 - 24 1/4 16 3/8 - 24 1/4
FISCAL 1995
Net sales............... $ 87,359 $ 99,001 $ 109,876 $ 104,736 $ 400,972
Gross profit............ 28,999 39,016 44,846 43,560 156,421
Operating income........ 17,538 26,488 31,759 28,746 104,531
Net earnings............ 11,231 18,191 21,984 20,927 72,333
Earnings per share...... .36 .58 .70 .66 2.30
Cash dividends per
share.................. .05 .05 .05 .05 .20
Market price range...... 25 1/4 - 33 3/4 25 1/2 - 36 3/8 20 1/4 - 29 18 3/8 - 24 1/4 18 3/8 - 36 3/8
</TABLE>
The Company recognized a charge during the fourth quarter of fiscal 1997
which decreased net income by $2.2 million. This charge increased income tax
expense to reflect an increase in the effective tax rate for the year due to
loss carryforwards in foreign countries that could not be utilized as
management had originally anticipated. This adjustment reduced fiscal 1997
fourth quarter net income per share by $.07.
12. SUBSEQUENT EVENT
On August 27, 1997, the Company entered into an Asset Purchase Agreement
with AlliedSignal Inc. ("Allied") to acquire substantially all of the assets
and certain liabilities of Allied's worldwide automotive occupant restraint
products and systems (the "Division"). The purchase price is $710 million in
cash and is subject to post-closing adjustments based on the net asset value
of the Division as of the closing date.
F-18
<PAGE>
BREED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES
The Company conducts a significant portion of its business through
subsidiaries. The Senior Subordinated Notes due 2008 (the "Notes") of the
Company are guaranteed, jointly and severally on a senior subordinated basis,
by the domestic subsidiaries (the "Subsidiary Guarantors") of the Company
other than BTI Capital Trust. The Company's foreign subsidiaries do not
guarantee the Notes (the "Non-Guarantor Subsidiaries"). The Notes will be
effectively subordinated in right of payment to all indebtedness and other
liabilities (including trade payables) of the Non-Guarantor Subsidiaries.
Presented below are condensed consolidating balance sheets as of June 30,
1997 and 1996, condensed consolidating statements of earnings for the years
ended June 30, 1997, 1996 and 1995 and condensed consolidating statements of
cash flows for the year ended June 30, 1997, 1996, 1995, for the Subsidiary
Guarantors, the Non-Guarantor Subsidiaries and the Company consolidated.
Separate financial statements for the Subsidiary Guarantors are not presented
based on management's determination that they do not provide additional
information that is material to investors.
BREED TECHNOLOGIES, INC. AND SUBSIDIARIES
JUNE 30, 1997
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR
GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents... $ (1.3) $ 20.0 $ -- $ 18.7
Accounts receivable, net.... 85.2 130.9 (8.1) 208.0
Inventories................. 30.4 45.2 (0.3) 75.3
Other current assets........ 177.7 18.7 (182.9) 13.5
------ ------ ------- ------
Total current assets.... 292.0 214.8 (191.3) 315.5
Property, plant and
equipment, net............. 158.7 109.6 8.2 276.5
Intangibles, net............ 97.5 123.5 -- 221.0
Assets held for sale........ -- 52.6 -- 52.6
Other assets................ 290.3 2.1 (280.8) 11.6
------ ------ ------- ------
Total assets............ $838.5 $502.6 $(463.9) $877.2
====== ====== ======= ======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-
term debt................ $158.0 $ 33.7 $ -- $191.7
Accounts payable.......... 23.2 98.5 (0.2) 121.5
Accrued expenses.......... 6.0 134.5 (91.0) 49.5
------ ------ ------- ------
Total current
liabilities............ 187.2 266.7 (91.2) 362.7
Long-term debt.............. 200.0 31.7 -- 231.7
Other long-term
liabilities................ 3.4 12.9 -- 16.3
------ ------ ------- ------
Total liabilities....... 390.6 311.3 (91.2) 610.7
Stockholders' equity........ 447.9 191.3 (372.7) 266.5
------ ------ ------- ------
Total liabilities and
stockholders' equity... $838.5 $502.6 $(463.9) $877.2
====== ====== ======= ======
</TABLE>
F-19
<PAGE>
BREED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
BREED TECHNOLOGIES, INC. AND SUBSIDIARIES
JUNE 30, 1996
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR
GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents... $ 53.6 $ 42.2 $ -- $ 95.8
Accounts receivable, net.... 44.1 66.6 -- 110.7
Inventories................. 23.0 29.9 -- 52.9
Other current assets........ 82.3 3.1 (78.2) 7.2
------ ------ ------- -------
Total current assets.... 203.0 141.8 (78.2) 266.6
Property, plant and equip-
ment, net.................. 121.6 50.0 -- 171.6
Intangibles, net............ 2.7 42.4 -- 45.1
Other assets................ 146.8 1.8 (128.1) 20.5
------ ------ ------- -------
Total assets............ $474.1 $236.0 $(206.3) $ 503.8
====== ====== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-
term debt................ $ 85.0 $ 35.7 $ -- $ 120.7
Accounts payable.......... 12.3 21.6 -- 33.9
Accrued expenses.......... 23.9 76.2 (78.2) 21.9
------ ------ ------- -------
Total current liabili-
ties................... 121.2 133.5 (78.2) 176.5
Long-term debt.............. 40.5 1.6 -- 42.1
Other long-term liabili-
ties....................... 1.7 8.4 -- 10.1
------ ------ ------- -------
Total liabilities....... 163.4 143.5 (78.2) 228.7
Stockholders' equity........ 310.7 92.5 (128.1) 275.1
------ ------ ------- -------
Total liabilities and
stockholders' equity... $474.1 $236.0 $(206.3) $ 503.8
====== ====== ======= =======
</TABLE>
BREED TECHNOLOGIES, INC. AND SUBSIDIARIES
YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR
GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales.................. $386.2 $453.9 $(45.2) $794.9
Cost of goods sold......... 280.6 395.7 (45.0) 631.3
------ ------ ------ ------
Gross profit........... 105.6 58.2 (0.2) 163.6
Selling, general and admin-
istrative expenses........ 32.6 37.9 0.1 70.6
Engineering, research, and
development............... 30.8 5.3 -- 36.1
Amortization of intangi-
bles...................... 1.5 4.9 (0.1) 6.3
------ ------ ------ ------
Operating income....... 40.7 10.1 (0.2) 50.6
Interest income (expense),
net....................... (17.5) (7.0) -- (24.5)
Other income, net.......... 1.1 2.0 0.4 3.5
------ ------ ------ ------
Earnings before income
taxes................. 24.3 5.1 0.2 29.6
Income tax ................ 8.7 6.1 -- 14.8
------ ------ ------ ------
Net earnings (loss).... $ 15.6 $ (1.0) $ 0.2 $ 14.8
====== ====== ====== ======
</TABLE>
F-20
<PAGE>
BREED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
BREED TECHNOLOGIES, INC. AND SUBSIDIARIES
YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR
GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales.................. $363.7 $107.1 $(39.1) $431.7
Cost of goods sold......... 222.4 94.2 (39.5) 277.1
------ ------ ------ ------
Gross profit........... 141.3 12.9 0.4 154.6
Selling, general and admin-
istrative expenses........ 31.1 7.1 -- 38.2
Engineering, research, and
development............... 21.0 2.6 -- 23.6
Amortization of intangi-
bles...................... 0.6 1.4 -- 2.0
------ ------ ------ ------
Operating income....... 88.6 1.8 0.4 90.8
Interest income (expense),
net....................... 0.9 (2.3) 0.3 (1.1)
Other income (expense),
net....................... 8.1 0.8 (0.3) 8.6
------ ------ ------ ------
Earnings before income
taxes................. 97.6 0.3 0.4 98.3
Income tax ................ 33.1 2.2 -- 35.3
------ ------ ------ ------
Net earnings (loss).... $ 64.5 $ (1.9) $ 0.4 $ 63.0
====== ====== ====== ======
</TABLE>
BREED TECHNOLOGIES, INC. AND SUBSIDIARIES
YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR
GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales.................. $372.9 $61.3 $(33.2) $401.0
Cost of goods sold......... 224.4 53.1 (32.9) 244.6
------ ----- ------ ------
Gross profit........... 148.5 8.2 (0.3) 156.4
Selling, general and
administrative expenses... 28.8 4.3 -- 33.1
Engineering, research, and
development............... 18.5 -- -- 18.5
Amortization of
intangibles............... 0.3 -- -- 0.3
------ ----- ------ ------
Operating income....... 100.9 3.9 (0.3) 104.5
Interest income (expense),
net....................... 1.0 (0.3) -- 0.7
Other income (expense),
net....................... 5.8 (0.9) -- 4.9
------ ----- ------ ------
Earnings before income
taxes................. 107.7 2.7 (0.3) 110.1
Income tax................. 37.0 0.8 -- 37.8
------ ----- ------ ------
Net earnings (loss).... $ 70.7 $ 1.9 $ (0.3) $ 72.3
====== ===== ====== ======
</TABLE>
F-21
<PAGE>
BREED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
BREED TECHNOLOGIES, INC. AND SUBSIDIARIES
YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR
GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net earnings/(loss)...... $ 15.6 $ (1.01) $ 0.3 $ 14.9
Adjustments to reconcile
net cash use in operating
activities:
Depreciation and
amortization............ 28.4 20.1 48.5
Other adjustments........ 1.9 1.9
Changes in operating
assets and liabilities.. (120.3) 144.7 (0.3) 24.1
------ ------- ----- ------
Net cash (used in)
provided by operating
activities.............. (74.4) 163.8 -- 89.4
------ ------- ----- ------
Cash flows from investing
activities:
Capital expenditures..... (40.6) (35.3) (75.9)
Cost of acquisitions, net
of cash acquired........ (151.2) (140.7) (291.9)
Investment in and
advances to affiliates.. (0.9) -- (0.9)
Proceeds from sale of
assets and equipment.... 0.8 0.6 -- 1.4
------ ------- ----- ------
Net cash (used in)
investing activities.... (191.9) (175.4) (367.3)
------ ------- ----- ------
Cash flows from financing
activities:
Net change in debt....... 219.1 (8.8) 210.3
Net change in equity..... (7.7) -- (7.7)
------ ------- ----- ------
Net cash provided by
(used in) financing
activities............ 211.4 (8.8) 202.6
------ ------- ----- ------
Effects of exchange rate
changes on cash........... (1.8) (1.8)
Decrease in cash and cash
equivalents............... (54.9) (22.2) (77.1)
Cash and cash equivalents
at beginning of year...... 53.6 42.2 -- 95.8
------ ------- ----- ------
Cash and cash equivalents
at end of year............ $ (1.3) $ 20.0 $ 18.7
====== ======= ===== ======
</TABLE>
F-22
<PAGE>
BREED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
BREED TECHNOLOGIES, INC. AND SUBSIDIARIES
YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR
GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net earnings/(loss)...... $ 64.5 $ (1.9) $ 0.4 $ 63.0
Adjustments to reconcile
net cash use in operating
activities:
Depreciation and
amortization............ 18.8 1.3 20.1
Other adjustments........ 0.4 0.4
Changes in operating
assets and liabilities.. (125.3) 83.4 (0.4) (42.3)
------- ------ ----- ------
Net cash (used in)
provided by operating
activities.............. (41.6) 82.8 -- 41.2
------- ------ ----- ------
Cash flows from investing
activities:
Capital expenditures..... (32.3) (13.1) (45.4)
Sale of short-term
investments............. 10.6 -- 10.6
Cost of acquisitions, net
of cash acquired........ (3.0) (45.5) (48.5)
Deposit on Gallino
acquisition............. (10.3) -- (10.3)
Proceeds from sale of
assets and equipment.... 2.7 -- -- 2.7
------- ------ ----- ------
Net cash used in
investing activities.... (32.3) (58.6) (90.9)
------- ------ ----- ------
Cash flows from financing
activities:
Net change in debt....... 108.3 17.3 125.6
Net change in equity..... (4.9) -- (4.9)
------- ------ ----- ------
Net cash provided by
(used in) financing
activities............ 103.4 17.3 120.7
------- ------ ----- ------
Effects of exchange rate
changes on cash........... -- (1.6) (1.6)
Increase in cash and cash
equivalents............... 29.5 39.9 69.4
Cash and cash equivalents
at beginning of year...... 24.1 2.3 -- 26.4
------- ------ ----- ------
Cash and cash equivalents
at end of year............ $ 53.6 $ 42.2 $ 95.8
======= ====== ===== ======
</TABLE>
F-23
<PAGE>
BREED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
BREED TECHNOLOGIES, INC. AND SUBSIDIARIES
YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR
GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------- ------------ ------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net earnings/(loss)...... $70.7 $ 1.9 $(0.3) $72.3
Adjustments to reconcile
net cash use in operating
activities:
Depreciation and
amortization............ 12.8 1.1 13.9
Other adjustments........ (2.6) (2.6)
Changes in operating
assets and liabilities.. (25.2) 10.4 0.3 (14.5)
----- ----- ----- -----
Net cash (used in)
provided by operating
activities.............. 55.7 13.4 -- 69.1
----- ----- ----- -----
Cash flows from investing
activities:
Capital expenditures..... (66.5) (2.8) (69.3)
Sale of short-term
investments............. 12.4 -- 12.4
Cost of acquisitions, net
of cash acquired........ (2.9) (4.0) (6.9)
Investment in and
advances to affiliates.. (6.4) -- (6.4)
Proceeds from sale of
assets and equipment.... 1.4 -- -- 1.4
----- ----- ----- -----
Net cash used in
investing activities.... (62.0) (6.8) (68.8)
----- ----- ----- -----
Cash flows from financing
activities:
Net change in debt....... -- (3.8) (3.8)
Net change in equity..... (3.0) -- (3.0)
----- ----- ----- -----
Net cash provided by
(used in) financing
activities............ (3.0) (3.8) (6.8)
----- ----- ----- -----
Effects of exchange rate
changes on cash........... -- (0.6) (0.6)
Increase (decrease) in cash
and cash equivalents...... (9.3) 2.2 (7.1)
Cash and cash equivalents
at beginning of year...... 33.4 0.1 -- 33.5
----- ----- ----- -----
Cash and cash equivalents
at end of year............ $24.1 $ 2.3 $26.4
===== ===== ===== =====
</TABLE>
14. EARNINGS PER SHARE
The following table sets forth the computation of the numerator and
denominator of the basic and diluted per share calculations (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Numerator:
Net earnings........................................... $14,847 $63,038 $72,333
Numerator for basic and dilutive earnings per share-
income available to common stockholders.............. $14,847 $63,038 $72,333
------- ------- -------
Denominator:
Denominator for basic earnings per share-weighted-
average shares....................................... 31,648 31,550 31,434
------- ------- -------
Effect of dilutive securities:
Employee stock options................................ 219 94 190
------- ------- -------
Denominator for diluted earnings per share-adjusted
weighted-average shares and assumed conversions...... 31,867 31,644 31,624
======= ======= =======
</TABLE>
For the years ended June 30, 1997, 1996 and 1995 options of 140,741,
354,761, and 169,749, respectively, are 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
antidilutive.
F-24
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................... $ 73,750
Legal fees and expenses............................................... 75,000
Accounting fees and expenses.......................................... 25,000
Printing and engraving expenses....................................... 75,000
Miscellaneous expenses................................................ 11,250
--------
Total............................................................... $405,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits indemnification
of officers and directors of the Company under certain conditions and subject
to certain limitations. Section 145 of the Delaware General Corporation law
also provides that a corporation has the power to purchase and maintain
insurance on behalf of its officers and directors against any liability
asserted against such person and incurred by him or her in such capacity, or
arising out of his or her status as such, whether or not the corporation would
have the power to indemnify him or her against such liability under the
provisions of Section 145 of the Delaware General Corporation Law.
Pursuant to Article 8 of the of the Company's Second Restated Certificate of
Incorporation (the "Restated Certificate"), the Company will indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that such person is or was, or has
agreed to become, a director or officer of the Company, or is or was serving,
or has agreed to serve, at the Company's request, in a similar capacity with
another enterprise. The Company will indemnify such officers and directors in
an action by or in the right of the Company to procure a judgment in its favor
under the same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
Company. Where an officer or director is successful on the merits or otherwise
in the defense of any action referred to above, the Company must indemnify him
or her against the expenses (including attorneys' fees) which he or she
actually and reasonably incurred in connection therewith.
In the event that the Company does not assume the defense of any action,
suit or proceeding, the Company will, in advance of the final disposition of
any such action, pay the expenses (including attorneys' fees) incurred by any
officer or director in defending such action, provided that the director or
officer undertakes to repay such amount if it shall ultimately be determined
that he or she is not entitled to be indemnified by the Company as authorized
by Article 8 of the Restated Certificate.
The indemnification provided by the Restated Certificate is not deemed to be
exclusive of any other rights to which an officer or director may be entitled
under any law, agreement, vote or otherwise, and inures to the benefit of the
estate, heirs, executors and administrators of the officer or director.
The Company is authorized to enter into agreements with its officers and
directors providing indemnification rights different from those provided in
the Restated Certificate, and may grant indemnification rights to other
employees or agents of, or other persons serving, the Company. The Company is
also permitted to purchase directors' and officers' liability insurance.
Article 8 of the Restated Certificate also provides that if the Delaware
General Corporation Law is amended after the adoption of the Restated
Certificate, the Company will indemnify its officers and directors to the
fullest extent permitted by applicable law in effect from time to time.
The foregoing statements are subject to the detailed provisions of Article 8
of the Restated Certificate.
II-1
<PAGE>
<PAGE>
The Declaration of Trust of BTI Capital Trust, filed as Exhibit 4.2 to this
Registration Statement, limits the liability of the Trustee to the Trust and
certain persons and provides for the indemnification by the Trust or the
Company of the Trustees, their officers, directors and employees and certain
other persons.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
4.1* -- Certificate of Trust of BTI Capital Trust.
4.2* -- Declaration of Trust of BTI Capital Trust dated as of October
17, 1997, among Breed Technologies, Inc. and Wilmington Trust
Company.
4.3* -- Amended and Restated Declaration of Trust dated as of
November 25, 1997 between Breed Technologies, Inc., as
Sponsor, Wilmington Trust Company, as Delaware Trustee and
Institutional Trustee, and Charles J. Speranzella, Jr., Fred
J. Musone, and Frank J. Gnisci, as Regular Trustees.
4.4* -- Indenture for the Convertible Debentures dated as of November
25, 1997 between Breed Technologies, Inc. and Wilmington Trust
Company, as Indenture Trustee.
4.5* -- Form of Preferred Security.
4.6* -- Form of Convertible Debentures.
4.7* -- Common Securities Guarantee Agreement dated as of November
25, 1997 by Breed Technologies, Inc., as Guarantor.
4.8* -- Preferred Securities Guarantee Agreement dated as of November
25, 1997 between Breed Technologies, Inc., as Guarantor, and
Wilmington Trust Company, as Preferred Guarantee Trustee.
4.9* -- Amendment No. 1 to Warrant Agreement dated March 2, 1998
between Breed Technologies, Inc. and NationsBank, N.A.
4.10 -- Indenture dated as of April 28, 1998, among Breed
Technologies, Inc., the Subsidiary Guarantors named therein
and IBJ Schroder Bank & Trust Company, as Trustee.
4.11 -- Amended and Restated Credit Agreement dated as of April 28,
1998, by and among Breed Technologies, Inc., certain
subsidiaries of Breed Technologies, Inc. designated as
Borrowers therein, NationsBank, National Association and
certain other financial institutions named therein as Lenders,
and NationsBank, National Association, as Agent for the
Lenders.
4.12 -- Registration Rights Agreement dated November 25, 1997 by and
among Breed Technologies, Inc., BTI Capital Trust, and
Prudential Securities Incorporated and Furman Selz LLC.
5.1 -- Opinion of King & Spalding as to the legality of the
Convertible Debentures, the Breed Technologies, Inc. Common
Stock issuable on the conversion of the Preferred Securities
and the Preferred Securities Guarantee (including the Consent
of such Counsel).
5.2** -- Opinion of Richards, Layton & Finger, P.A. as to the legality
of the Preferred Securities to be issued by BTI Capital Trust
(including the consent of such Counsel).
8.1 -- Tax Opinion of King & Spalding.
12.1 -- Computation of the Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of KPMG Peat Marwick LLP.
23.3 -- Consent of Price Waterhouse LLP.
23.4** -- Consent of KPMG S.p.A.
23.5 -- Consent of King & Spalding (included in Exhibit 5.1).
23.6** -- Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.2).
24.1* -- Power of Attorney (previously filed with signature pages to
the Registration Statement).
25.1* -- Statement of Eligibility of Indenture Trustee under the
Indenture.
25.2* -- Statement of Eligibility of Institutional Trustee under the
Amended and Restated Declaration of Trust of BTI Capital
Trust.
25.3* -- Statement of Eligibility of Preferred Guarantee Trustee under
the Preferred Securities Guarantee of Breed Technologies, Inc.
for the benefit of the holders of Preferred Securities of BTI
Capital Trust.
</TABLE>
- --------
*Previously filed
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
Each of the undersigned registrants (the "Registrants") hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by any Registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of any Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) That, insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrants have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by any Registrant of
expenses incurred or paid by a director, officer or controlling person of
such Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrants will,
unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
(6) That, (i) for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective; and (ii) for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Lakeland, State of Florida, on June
15, 1998.
BREED TECHNOLOGIES, INC.
/s/ Johnnie Cordell Breed
By: _________________________________
Johnnie Cordell Breed
Chairman of the Board and Chief
Executive Officer
BTI CAPITAL TRUST
/s/ Charles J. Speranzella, Jr.
By: _________________________________
Charles J. Speranzella, Jr.
Regular Trustee
/s/ Fred J. Musone
By: _________________________________
Fred J. Musone
Regular Trustee
/s/ Frank J. Gnisci
By: _________________________________
Frank J. Gnisci
Regular Trustee
II-5
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES WITH BREED TECHNOLOGIES, INC. AND ON THE DATE
INDICATED.
SIGNATURE TITLE DATE
* Chairman of the
- ------------------------------------ Board and Chief June 15, 1998
JOHNNIE CORDELL BREED Executive Officer
* Vice Chairman and
- ------------------------------------ Director June 15, 1998
CHARLES J. SPERANZELLA, JR.
* President, Chief
- ------------------------------------ Operating Officer June 15, 1998
FRED J. MUSONE and Director
* Executive Vice
- ------------------------------------ President and June 15, 1998
FRANK J. GNISCI Chief Financial
Officer
* Director
- ------------------------------------ June 15, 1998
LARRY W. MCCURDY
* Director
- ------------------------------------ June 15, 1998
ROBERT W. SHOWER
* Director
- ------------------------------------ June 15, 1998
ALBERTO NEGRO
* Director
- ------------------------------------ June 15, 1998
DR.-ING. FRANZ WRESSNIGG
*By: /s/ Lizanne Guptill
__________________________
Attorney-in-Fact
II-6
<PAGE>
Exhibit 4.11
================================================================================
AMENDED AND RESTATED
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
April 28, 1998
===============================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Terms
1.1 Amendment and Restatement ..............................................3
1.2 Definitions. ...........................................................4
1.3 Rules of Interpretation. ..............................................37
1.4 Change in GAAP. .......................................................38
ARTICLE II
The Term Loans
2.1. Term Loans ............................................................40
2.2. Term Loan Advance .....................................................40
2.3. Payment of Principal ..................................................41
2.4. Payment of Interest ...................................................42
2.5. Manner of Payment .....................................................42
2.6. Optional Prepayments ..................................................43
2.7. Mandatory Prepayments .................................................43
2.8. Term Notes ............................................................45
2.9. Interest Periods ......................................................45
2.10. Conversions and Elections of Subsequent Interest Periods ..............45
2.11. Pro Rata Payments .....................................................46
ARTICLE III
The Revolving Loans
3.1. Revolving Loans........................................................47
3.2. Payment of Interest....................................................53
3.3. Payment of Principal...................................................53
3.4. Non-Conforming Payments................................................54
3.5. Notes..................................................................55
3.6. Pro Rata Payments......................................................55
3.7. Voluntary Commitment Reductions........................................55
3.8. Conversions and Elections of Subsequent Interest Periods...............55
3.9. Increase and Decrease in Amounts.......................................56
3.10. Commitment Fee.........................................................56
<PAGE>
3.11. Deficiency Advances....................................................56
3.12. Use of Proceeds........................................................57
3.13. Designation of Borrowing Subsidiaries..................................57
3.14. Swing Line.............................................................57
ARTICLE IV
Letters of Credit
4.1. Letters of Credit......................................................60
4.2. Reimbursement..........................................................61
4.3. Letter of Credit Facility Fees.........................................64
ARTICLE V
Security
5.1. Guaranty...............................................................65
5.2. Stock Pledge...........................................................65
5.3. Security Interests.....................................................65
5.4. Lease Assignments......................................................65
5.5. Mortgages..............................................................66
5.6. Landlord Waivers.......................................................66
5.7. Intellectual Property..................................................66
5.8. Pledge and Subordination of Intercompany Notes.........................66
5.9. Pledge of Partnership Interests........................................66
5.10. Collateral Assignment of Trademark License Agreement...................67
5.11. Further Assurances.....................................................67
5.12. Release of Security Interest...........................................67
5.13. Release of Stock of BREED..............................................67
ARTICLE VI
Change in Circumstances
6.1. Increased Cost and Reduced Return......................................68
6.2. Limitation on Types of Loans...........................................69
6.3. Illegality.............................................................70
6.4. Treatment of Affected Loans............................................70
6.5. Compensation...........................................................70
6.6. Taxes..................................................................71
6.7. Lending Office.........................................................73
6.8. Replacement Banks......................................................73
ii
<PAGE>
ARTICLE VII
Conditions to Making Loans and Issuing Letters of Credit
7.1. Conditions of Extending Term Loan and Revolving Loans and
making Advances........................................................74
7.2. Conditions of all Loans and Letters of Credit..........................77
ARTICLE VIII
Representations and Warranties
8.1. Organization and Authority.............................................79
8.2. Loan Documents.........................................................79
8.3. Solvency...............................................................80
8.4. Subsidiaries and Stockholders..........................................80
8.5. Ownership Interests....................................................80
8.6. Financial Condition....................................................80
8.7. Title to Properties....................................................81
8.8. Taxes..................................................................81
8.9. Other Agreements.......................................................81
8.10. Litigation.............................................................82
8.11. Margin Stock...........................................................82
8.12. Investment Company.....................................................82
8.13. Patents, Etc...........................................................82
8.14. No Untrue Statement....................................................82
8.15. No Consents, Etc.......................................................83
8.16. Employee Benefit Plans.................................................83
8.17. No Default.............................................................84
8.18. Environmental Matters..................................................84
8.19. Employment Matters.....................................................85
8.20. RICO...................................................................85
8.21. Perfected Security Instruments.........................................85
8.22. Year 2000 Compliance...................................................86
ARTICLE IX
Affirmative Covenants
9.1. Financial Reports, Etc.................................................87
9.2. Maintain Properties....................................................88
9.3. Existence, Qualification, Etc..........................................88
9.4. Regulations and Taxes..................................................89
9.5. Insurance..............................................................89
9.6. True Books.............................................................89
iii
<PAGE>
9.7. Right of Inspection....................................................89
9.8. Observe all Laws.......................................................89
9.9. Governmental Licenses..................................................90
9.10. Covenants Extending to Other Persons...................................90
9.11. Officer's Knowledge of Default.........................................90
9.12. Suits or Other Proceedings.............................................90
9.13. Notice of Environmental Complaint or Condition.........................90
9.14. Environmental Compliance...............................................90
9.15. Indemnification........................................................91
9.16. Further Assurances.....................................................91
9.17. Employee Benefit Plans.................................................91
9.18. Continued Operations. Except as permitted under Section 10.12, c......92
9.19. Additional Support Documents...........................................92
9.20. Diligent Pursuit of Waiver.............................................93
9.21. Swap Agreements........................................................94
9.22. Subsidiary Support of Permitted Indebtedness. So long as not
prohibited by law,.....................................................94
9.24. Year 2000 Compliance...................................................94
ARTICLE X
Negative Covenants
10.1. Financial Covenants..................................................95
10.2. Acquisitions.........................................................96
10.3. Liens................................................................96
10.4. Indebtedness.........................................................97
10.5. Transfer of Assets...................................................99
10.6. Investments..........................................................99
10.7. Merger or Consolidation.............................................101
10.8. Restricted Payments.................................................101
10.9. Transactions with Affiliates........................................101
10.10. Compliance with ERISA, the Code and Foreign Benefit Laws............102
10.11. Accounting Changes..................................................103
10.12. Dissolution, etc....................................................103
10.13. Limitations on Sales and Leasebacks.................................103
10.14. Change in Control...................................................103
10.15. Negative Pledge Clauses.............................................103
10.16. Prepayments, Etc. of Indebtedness...................................103
10.17. Restrictive Agreements..............................................104
10.18. Subsidiaries and Partnership........................................104
10.19. BSRS Restraint......................................................104
iv
<PAGE>
ARTICLE XI
Events of Default and Acceleration
11.1. Events of Default....................................................105
11.2. Agent to Act.........................................................108
11.3. Cumulative Rights....................................................108
11.4. No Waiver............................................................108
11.5. Allocation of Proceeds...............................................108
11.6. Judgment Currency....................................................109
ARTICLE XII
The Agent
12.1. Appointment, Powers, and Immunities..................................110
12.2. Reliance by Agent....................................................110
12.3. Defaults.............................................................111
12.4. Rights as Lender.....................................................111
12.5. Indemnification......................................................111
12.6. Non-Reliance on Agent and Other Lenders..............................112
12.7. Resignation of Agent.................................................112
12.8. Fees.................................................................112
ARTICLE XIII
Miscellaneous
13.1. Assignments and Participations.......................................113
13.2. Notices..............................................................115
13.3. Right of Set-off; Adjustments........................................116
13.4. Survival.............................................................117
13.5. Expenses.............................................................117
13.6. Amendments and Waivers...............................................117
13.7. Counterparts.........................................................118
13.8. Termination..........................................................118
13.9. Indemnification......................................................119
13.10. Severability.........................................................119
13.11. Entire Agreement.....................................................119
13.12. Agreement Controls...................................................119
13.13. Usury Savings Clause.................................................119
13.14. Governing Law; Waiver of Jury Trial..................................120
13.15. Recovery Under Florida Mortgage......................................121
13.16. Economic and Monetary Union in the European Community................121
v
<PAGE>
13.17. Borrowers' Representative............................................122
EXHIBIT A Applicable Commitment Percentages..........................A-1
EXHIBIT B Form of Assignment and Acceptance..........................B-1
EXHIBIT C Notice of Appointment (or Revocation) of Authorized
Representative............................................C-1
EXHIBIT D-1 Form of Borrowing Notice (Revolving Loan)................D-1-1
EXHIBIT D-2 Form of Borrowing Notice (Swing Line Loan)...............D-2-1
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
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 Revolving Note...................................O-1-1
EXHIBIT O-2 Form of Term Note........................................O-2-1
EXHIBIT O-3 Form of Term Note........................................O-3-1
EXHIBIT O-4 Form of Swing Line Note..................................O-4-1
EXHIBIT P Form of Stock Pledge Agreement (U.S. Subsidiaries).........P-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 In-House Counsel.........................S-1-1
EXHIBIT S-2 Form of Opinion of King & Spalding.......................S-2-1
EXHIBIT T Compliance Certificate.....................................T-1
EXHIBIT U Form of Assumption Letter..................................U-1
EXHIBIT V Form of Applications and Agreements for Letters of
Credit....................................................V-1
Schedule 1.1(a) Borrowing Subsidiaries.....................................S-1
Schedule 1.1(c) Existing Letters of Credit.................................S-2
Schedule 8.4 Subsidiaries and Investments in Other Persons..............S-3
Schedule 8.6 Indebtedness...............................................S-4
Schedule 8.7 Liens......................................................S-5
Schedule 8.10 Litigation.................................................S-6
Schedule 8.19 Employment Matters.........................................S-7
Schedule 8.21 Financing Statements and Other Filings.....................S-8
Schedule 9.5 Insurance..................................................S-9
Schedule 10.4 Intercompany Indebtedness.................................S-10
Schedule 10.5 Permitted Asset Sales.....................................S-11
vi
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of April 28, 1998 (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"), the financial institutions named on the
signature pages hereto, and each other financial institution which may hereafter
execute and deliver an instrument of assignment with respect to this Agreement
pursuant to Section 13.1 (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 12.7, the "Agent");
------------
W I T N E S S E T H:
-------------------
WHEREAS, BREED, the Agent and certain lenders (the "Original Lenders") have
entered into a Credit Agreement dated October 30, 1997 (the "Original
Agreement") pursuant to which the Original Lenders have made available to the
Borrowers certain credit facilities of up to $900,000,000, which facilities
consist of a term loan facility of $600,000,000 which term loan is evidenced by
term notes dated October 30, 1997 (the "Original Term Notes") and a revolving
credit facility of $300,000,000 which revolving credit facility is evidenced by
revolving notes dated October 30, 1997 (the "Original Revolving Notes" and,
together with the Original Term Notes, collectively the "Original Notes"); and
WHEREAS, the obligations of the Borrowers under the Original Agreement are
secured by a security interest in substantially all of the assets of BREED and
its Domestic Subsidiaries and by not less than 65% of the outstanding Voting
Stock of certain Direct Foreign Subsidiaries of the Borrower, all as described
in various Security Instruments (as defined in the Original Agreement"); and
WHEREAS, the Borrower has issued its 9 1/4% Senior Subordinated Notes due
April, 2008 in the principal amount of $330,000,000 (the "Senior Subordinated
Notes") a portion of the principal amount of which Senior Subordinated Notes are
to be used to repay indebtedness outstanding under the Original Agreement; and
WHEREAS, BREED has requested that the Original Agreement be amended and
restated in its entirety in order to, among other things, extend the maturity
date of the indebtedness arising
<PAGE>
thereunder, change various covenants, reflect the reduction in the amount of
indebtedness and change the interest and fees payable thereunder; and
WHEREAS, certain of the Original Lenders have assigned all or a portion of
their interest in the Original Agreement to other Original Lenders and
simultaneously with the execution of this Agreement new lenders by their
execution of this Agreement and payment to the Agent pursuant to the terms
hereof of their portion of outstanding loans will acquire interests in all or a
portion of the loans made pursuant to this Agreement;
NOW, THEREFORE, the Borrowers, the Lenders and the Agent hereby agree as
follows:
2
<PAGE>
ARTICLE I
Definitions and Terms
---------------------
1.1 Amendment and Restatement. The Borrowers, the Agent and the Lenders
-------------------------
hereby agree that upon the effectiveness of this Agreement, the terms and
provisions of the Original Agreement shall be and hereby are amended and
restated in their entirety by the terms and conditions of this Agreement and the
terms and provisions of the Original Agreement, except as otherwise provided in
the next paragraph, shall be superseded by this Agreement.
Notwithstanding the amendment and restatement of the Original Agreement by
this Agreement, the Borrowers shall continue to be liable to the Agent and the
Original Lenders with respect to agreements on the part of the Borrowers under
the Original Agreement to indemnify and hold harmless the Agent and the Original
Lenders from and against all claims, demands, liabilities, damages, losses,
costs, charges and expenses to which the Agent and the Original Lenders may be
subject arising in connection with the Original Agreement. This Agreement is
given as a substitution of, and not as a payment of, the obligations of Borrower
under the Original Agreement and is not intended to constitute a novation of the
Original Agreement. On the Closing Date a portion of the indebtedness evidenced
by the Original Notes shall be repaid with a portion of the proceeds of the
Senior Subordinated Notes, such repayment to be allocated among the Original
Lenders in order that after giving effect thereto Lenders shall have the
Revolving Credit Commitment, Term Loan A Commitment or Term Loan B Commitment,
as the case be, described on Exhibit A. Except as otherwise selected by BREED
---------
on behalf of the Borrowers by delivery of a Borrowing Notice or Interest Rate
Selection Notice prior to the Closing Date in accordance with the terms hereof,
upon the effectiveness of this Agreement all amounts outstanding and owing by
Borrowers under the Original Agreement as of the Closing Date, less amounts
repaid with the proceeds of the Senior Subordinated Notes, shall constitute
Advances hereunder accruing interest with respect to the Base Rate Loans under
the Original Agreement, at the Base Rate hereunder. The parties hereto agree
that the Interest Periods for all Eurodollar Rate Loans outstanding under the
Original Agreement on the Closing Date shall be terminated, the Original Lenders
shall grant a one-time waiver of any payments required under Section 6.5 to the
-----------
Lenders and the Borrowers shall furnish to the Agent Interest Rate Selection
Notices for existing Loans and Borrowing Notices for additional Loans as may be
required in connection with the allocation of Loans among Lenders in accordance
with their Applicable Commitment Percentages.
3
<PAGE>
1.2 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.
"Acquired Business" means certain assets and liabilities acquired by
Borrower and certain of its Subsidiaries from AlliedSignal, Inc. on October
30, 1997;
"Advance" means any borrowing under the Revolving Credit Facility
consisting, in any case, of a Base Rate Loan or a Eurodollar Rate Loan.
The term "Advance" as used herein, shall also mean on the Closing Date, the
making of a Loan by a Lender that may or may not be an Original Lender, the
proceeds of which are used to purchase all or a portion of Term Loans (as
defined in the Original Credit Agreement) or Revolving Loans (as defined in
the Original Credit Agreement) of Original Lenders and for working capital
and general corporate purposes.
"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 3.8, 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 3.1(c).
--------------
"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.
4
<PAGE>
"Allied Acquisition" means the acquisition on October 30, 1997 by
BREED and certain of its Subsidiaries of the Acquired Business.
"Alternative Currency" means Pounds Sterling, French Francs, Italian
Lire, Deutsch Marks, Spanish Pesetas, Japanese Yen, ECU, Euro 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 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, as to each Lender at any
time (i) with respect to the Revolving Credit Facility and the
Participations, a fraction, the numerator of which shall be such Lender's
Revolving Credit Commitment and the denominator of which shall be the Total
Revolving Credit Commitment, and (ii) with respect to each of the Term Loan
A Facility or Term Loan B Facility, as the case may be, a fraction, the
numerator of which shall be such Lender's Term Loan A Commitment or Term
Loan B Commitment, as applicable, and the denominator of which shall be the
Total Term Loan A Commitment or the Total Term Loan B Commitment, as
applicable, which Applicable Commitment Percentage in each case for each
Lender as of the Closing Date is as set forth in Exhibit A; provided that
--------- --------
each 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 13.1.
------------
"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.
"Applicable Margin" means, for Revolving Loans, Swing Line Loans, each
of the Term Loans and the Commitment Fee referred to in Section 3.10 as
------------
indicated below, that percent per annum set forth below, which shall be
based upon the Consolidated Leverage Ratio (without giving effect to
subclause (vii) of clause (A) of the definition of Consolidated EBITDA) for
--------------- ----------
the Four-Quarter Period most recently ended as specified below:
5
<PAGE>
<TABLE>
<CAPTION>
Applicable Margin
---------------------------------------------------------
Eurodollar Rate Base Rate
---------------------------------------------------------
Revolving Loans, Revolving Loans,
Consolidated Swing Line Loans, Term Swing Line Loans, Term Commitment
TIER Leverage Ratio and Term Loan A Loan B and Term Loan A Loan B Fee
---- -------------- --------------- ------ --------------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
V Greater than 5.00 to 1.00 2 1/8% 2 3/8% 1 1/8% 1 3/8% 1/2%
IV Equal to or Less than 1 7/8% 2 1/8% 7/8% 1 1/8% 1/2%
5.00 to 1.00 and Greater
than 4.50 to 1.00
III Equal to or Less than 1 5/8% 1 7/8% 5/8% 7/8% 3/8%
4.50 to 1.00 and Greater
than 4.00 to 1.00
II Equal to or Less than 1 3/8% 1 3/4% 3/8% 3/4% 3/8%
4.00 to 1.00 and Greater
than 3.50 to 1.00
I Equal to or Less than 1 1/8% 1 3/4% 1/8% 3/4% 3/10%
3.50 to 1.00
</TABLE>
The Applicable Margin shall be established at the end of each fiscal
quarter of BREED (each, a "Determination Date"). Any change in the
------------------
Applicable Margin following each Determination Date shall be determined
based upon the computations set forth in the certificate furnished to the
Agent pursuant to Section 9.1(a)(ii) and Section 9.1(b)(ii), subject to
------------------ ------------------
review and approval of such computations by the Agent, and shall be
effective commencing on the date following the date such certificate is
received (or, if earlier, the date such certificate was required to be
delivered), and in each case, until the date following the date on which a
new certificate is delivered or is required to be delivered, whichever
shall first occur; provided, however, if BREED shall fail to deliver any
--------
such certificate within the time period required by Section 9.1, then the
-----------
Applicable Margin with respect to Revolving Loans, Segments under Term Loan
A and Term Loan B and the Commitment Fee shall be Tier V until the
appropriate certificate is so delivered. From the Closing Date to the
first Determination Date, the Applicable Margin shall be Tier V.
"Applications and Agreements for Letters of Credit" means,
collectively, the Applications and Agreements for Letters of Credit in
the form of Exhibit V hereto, 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 sold in the ordinary course of business) of BREED
or its Subsidiaries, where the Net Proceeds
6
<PAGE>
from any such sale, lease or transfer exceed $50,000, (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 and (c) any interest in (other
than profits from operations) or asset of BSRS Restraint to the extent such
proceeds are actually distributed to BREED or any of its Subsidiaries.
"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
-------
13.1.
----
"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.
---------
"BSRS Restraint" means BSRS Restraint Systems International GmbH & Co.
KG.
"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 Loan for which the rate of interest is
determined by reference to the Base Rate.
"Base Rate Refunding Loan" means a Base Rate Loan which is a Revolving
Loan or Swing Line Loan made either (i) to satisfy Reimbursement
Obligations arising from a drawing under a Letter of Credit or (ii) to pay
NationsBank in respect of Swing Line Outstandings.
"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).
7
<PAGE>
"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 on behalf of any of the Borrowers in connection with an
Advance under the Revolving Credit Facility or a Swing Line Loan, in the
forms of Exhibit D-1 and Exhibit D-2, respectively.
----------- -----------
"Borrowing Subsidiary" means each of 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 3.13 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 9.1(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 9.1(a)), all the foregoing
--------------
in accordance with GAAP applied on a Consistent Basis; provided, however,
that there shall be excluded from Capital Expenditures (i) up to
$20,000,000 of committed Capital Expenditures incurred for the benefit of
VTI Hamlin Oy in the third and fourth fiscal quarters of Fiscal Year 1998,
and (ii) Capital Expenditures made prior to December 31, 1998 with the
proceeds from the sale of Gallino Plasturgia S.r.l. (the "Excluded Capital
Expenditures").
"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.
8
<PAGE>
"Certificate and Receipt of Registrar" means, collectively or
individually as the context may indicate that certain Certificate and
Receipt of Registrar in the form attached to the Collateral Assignment of
Partnership Interests as Schedule I as the same may be hereafter amended,
supplemented or restated from time to time.
"Change in Working Capital" means, for any period, the amount (whether
positive or negative) by which Consolidated Working Capital for such period
changes from the Consolidated Working Capital for the immediately preceding
period of the same duration.
"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, A. Breed, L.P., a Texas limited
partnership, or J. Breed, L.P., 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 35% 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 7.1 have been satisfied.
-----------
"Code" means the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder.
9
<PAGE>
"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
October 30, 1997 by BREED in favor of the Agent and consented to by
AlliedSignal, Inc. 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
interests 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 the Collateral
Assignment of Partnership Interests substantially in the form of Exhibit
-------
F delivered to the Agent pursuant to Section 9.19, as the same may be
- ------------
hereafter amended, supplemented or restated from time to time.
"Confirmation of Guaranty" means the Confirmation of Guaranty dated
the Closing Date whereby each of the Guarantors has confirmed its Guaranty.
"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 8.6(a).
--------------
"Consolidated Current Assets" means all assets of BREED and its
Subsidiaries which are expected to be realized in cash, sold in the
ordinary course of business, or consumed within one year or which would be
classified as current assets, all determined on a consolidated basis in
accordance with GAAP applied on a Consistent Basis.
"Consolidated Current Liabilities" means all liabilities of BREED and
its Subsidiaries which by their terms are payable within one year
(including all Indebtedness payable on demand or maturing not more than one
year from the date of computation and the current portion of Indebtedness
for Borrowed Money having a maturity date of greater than one year), all
determined on a consolidated basis in accordance with GAAP applied on a
Consistent Basis.
"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, (v) depreciation, (vi) one time charges associated with (x)
the repositioning costs not to exceed $395,000,000 (including a one-time
write off of financing fees) incurred in Fiscal Year 1998 and (y) cash
disruption costs not to exceed $20,000,000 in Fiscal Year 1998 and
$30,000,000 in Fiscal Year 1999 and (vii) with respect to the fiscal
quarter ending June 30, 1998, pro forma annualized cash savings for
repositioning actions
10
<PAGE>
taken as of June 30, 1998, net of $35,000,000 in projected actual cash cost
savings expected to be realized as of such date, 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 Excess Cash Flow" means, with respect to BREED and its
Subsidiaries for any Fiscal Year ending on the date of computation thereof
Consolidated EBITDA minus, without duplication, the sum of (i) Capital
-----
Expenditures including the Excluded Capital Expenditures, (ii) cash taxes
on income, (iii) Restricted Payments, (iv) cash expenditures and cash
disruption costs associated with the restructure of BREED and its
Subsidiaries incurred in Fiscal Years 1998 and 1999, (v) the cash portion
of Consolidated Interest Expense, (vi) any Change in Working Capital for
such period net of the first $25,000,000 of proceeds received from the sale
of accounts receivable and all instruments, documents and other assets
relating thereto pursuant to Permitted Receivable Securitizations, and
(vii) scheduled principal payments of Indebtedness for Money Borrowed
having an original maturity date of greater than one year.
"Consolidated Fixed Charge Ratio" means, with respect to BREED and its
Subsidiaries for any Four-Quarter Period ending on the date of computation
thereof, the ratio of (i) Consolidated EBITDA for such period less Capital
Expenditures for such period to (ii) Consolidated Fixed Charges for such
period.
"Consolidated Fixed Charges" means, with respect to BREED and its
Subsidiaries for any Four-Quarter Period ending on the date of computation
thereof, the sum of, without duplication, (i) the cash portion of
Consolidated Interest Expense, (ii) Restricted Payments, (iii) scheduled
principal payments of Indebtedness for Money Borrowed having an original
maturity date of greater than one year, and (iv) beginning in the Fiscal
Year ending June 30, 2000 investments in BSRS Restraint in excess of the
amount set forth opposite each Fiscal Year in Section 10.6(i), all
---------------
determined on a consolidated basis in accordance with GAAP applied on a
Consistent Basis.
"Consolidated Interest Coverage Ratio" means, with respect to BREED
and its Subsidiaries for any Four-Quarter Period ending on the date of
computation thereof, the ratio of Consolidated EBITDA to the cash portion
of Consolidated Interest Expense.
"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
11
<PAGE>
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 Leverage Ratio" means, as at the date of computation
thereof, the ratio of (i) Indebtedness of BREED and its Subsidiaries
(determined as of such date) to (ii) Consolidated EBITDA (for the Four-
Quarter Period ending on (or most recently ended prior to) such date.
"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, distributions, fees and other amounts paid 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; provided,
however, that for so long as BREED retains a minority investment in BSRS
Restraint, Consolidated Net Income for any period will include BREED's
proportionate share of the net income or net loss of BSRS Restraint for
such period, determined as if BSRS Restraint were accounted for by BREED on
an equity accounting basis in accordance with GAAP and, provided further,
that notwithstanding the foregoing proviso, if BSRS Restraint generates net
income for any period, the amount of such net income that is included in
Consolidated Net Income for such period may not exceed the aggregate amount
of (i) dividends or other distributions plus (ii) other payments by BSRS
Restraint under any management agreement, royalty agreement or other
similar arrangement, in any case actually paid to BREED or any Subsidiary
in cash during such period.
"Consolidated Net Worth" means, as of any date on which the amount
thereof is to be determined, the sum of Consolidated Shareholders' Equity
and the outstanding principal amount of Convertible Preferred Securities
plus the positive amount of the balance in excess of $35,000,000 in
----
currency translation adjustment amounts and minus the amount of the balance
-----
below negative $35,000,000 in currency translation adjustment amounts.
"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), minus (iii) 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 with
GAAP applied on a Consistent Basis.
12
<PAGE>
"Consolidated Working Capital" means, as of the date on which the
amount thereof is to be determined, the excess of Consolidated Current
Assets over Consolidated Current Liabilities.
"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 2.10 or Section 3.8 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 2.10 or Section 3.8 or Article IV of one Type of Loan
-------- ---- ----------
into another Type of Loan.
13
<PAGE>
"Convertible Debentures" means the 6 1/2% Convertible Subordinated
Debentures due 2027 in an original principal amount of $257,700,000 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 $250,000,000
aggregate liquidation amount 6 1/2% Convertible Trust Preferred Securities
issued by BTI Capital Trust (the "BTI Trust"), a trust created solely for
the purpose of issuing the Convertible Preferred Securities and the Common
Securities (as defined in the Convertible Preferred Indenture) for so long
as such preferred and common securities are not accounted for under
stockholder's equity in the consolidated financial statements of BREED;
provided that, so long as no Indenture Event of Default shall have
--------
occurred, such Convertible Preferred Securities shall be at all times
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; and
(ii) the Convertible Preferred Securities shall not be treated
as a liability on the Consolidated Financial Statements of BREED in
accordance with GAAP;
"Cost of Acquisition" means, with respect to any Acquisition, as at
the date of entering into any agreement therefor, the sum of the following
---
(without duplication): (i) the value of the capital stock, warrants or
options to acquire capital stock of BREED or any Subsidiary to be
transferred in connection therewith, (ii) the amount of any cash and fair
market value of other property (excluding property described in clause (i)
and the unpaid principal amount of any debt instrument) given as
consideration, (iii) the amount (determined by using the face amount or the
amount payable at maturity, whichever is greater) of any Indebtedness
incurred, assumed or acquired by BREED or any Subsidiary in connection with
such Acquisition, (iv) all additional purchase price amounts in the form of
earnouts and other contingent obligations that should be recorded on the
financial statements of BREED and its Subsidiaries in accordance with GAAP,
(v) all amounts paid or payable in respect of covenants not to compete,
consulting agreements that should be recorded on financial statements of
BREED and its Subsidiaries in accordance with GAAP, and other affiliated
contracts in connection with such Acquisition which would constitute
additional consideration by BREED or any Subsidiary, (vi) the aggregate
fair market value of all other consideration given by BREED or any
Subsidiary in connection with such Acquisition, and (vii) out of pocket
transaction costs for the services and expenses of attorneys, accountants
and other consultants incurred in effecting such transaction, and other
similar transaction costs so incurred. For purposes of determining the
Cost of Acquisition for any transaction, (A) the capital stock of the
Borrower shall be valued (I) in the case of capital stock that is then
designated as a national market system security by
14
<PAGE>
the National Association of Securities Dealers, Inc. ("NASDAQ") or is
listed on a national securities exchange, the average of the last reported
bid and ask quotations or the last prices reported thereon, and (II) with
respect to shares that are not freely tradeable, as determined by a
committee composed of the disinterested members of the Board of Directors
of BREED and, if requested by the Agent, determined to be a reasonable
valuation by the independent public accountants referred to in Section
-------
9.1(a), (B) the capital stock of any Subsidiary shall be valued as
------
determined by a committee composed of the disinterested members of the
Board of Directors of BREED and, if requested by the Agent, determined to
be a reasonable valuation by the independent public accountants referred
to in Section 9.1(a), and (C) with respect to any Acquisition accomplished
--------------
pursuant to the exercise of options or warrants or the conversion of
securities, the Cost of Acquisition shall include both the cost of
acquiring such option, warrant or convertible security as well as the cost
of exercise or conversion.
"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
the Indebtedness permitted under Section 10.4 and the 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 and
Eurodollar Rate Segment, until the end of the Interest Period applicable
thereto, a rate of two percent (2%) above the Eurodollar Rate applicable to
such Loan or Segment, 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 and Base Rate Segments and Swing Line 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.
15
<PAGE>
"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.
"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 3.1.
-----------
"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.
"ECU" means the lawful currency of members of the European community
who are not members of the European Economic and Monetary Union.
"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 13.1, BREED, such
------------
approval not to be unreasonably withheld or delayed by BREED or the Agent,
it being agreed that BREED may withhold its approval if as a result of such
assignment BREED incurs increased cost under Section 6.1 or Section 6.6;
----------- -----------
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 180 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-" or better by S&P or "A3" or better
by Moody's;
16
<PAGE>
(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 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
17
<PAGE>
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 shareholders of BREED or to shareholders of any Subsidiary
and (iii) any issuance of equity securities as consideration for a
Permitted Acquisition.
"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.
"Euro" means the lawful currency of the European Economic and Monetary
Union.
"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:
<TABLE>
<S> <C> <C>
Eurodollar = Interbank Offered Rate + Applicable
Rate ------------------------------------- Margin
1 - Reserve Requirement
</TABLE>
"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 11.1.
- ------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the regulations promulgated thereunder.
"Excluded Capital Expenditure" has the meaning set forth in the
definition of "Capital Expenditures".
"Excluded Subsidiary" means, collectively, BREED International, Inc.,
a U.S. Virgin Islands corporation, any Receivables Subsidiary and BTI
Trust, a Delaware business trust.
"Existing Letters of Credit" means those Letters of Credit described
on Schedule 1.1(c) heretofore issued by the Issuing Bank.
--------------
18
<PAGE>
"Facility Termination Date" means the date on which both the Revolving
Credit Termination Date and the Term Loan Termination Date (with respect to
both Term Loan A and Term Loan B) 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.
"Financing Subsidiary" has the meaning set forth in Section 10.4(o).
---------------
"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 Receivables Financing Transactions" means sales, pledges or
assignments of accounts receivable by BREED or its Subsidiaries in the
ordinary course of business which accounts receivable are due from Persons
that are not domiciled in the United States and which sales, pledges or
assignments are treated as indebtedness in accordance with GAAP.
"Foreign Receivables Sales Transactions" means sales and assignments
of accounts receivable by BREED or its Subsidiaries in the ordinary course
of business which are due from Persons that are not domiciled in the United
States and which are treated as true sales and not indebtedness in
accordance with GAAP; provided, however, if such receivables are due from
-------- -------
an Affiliate, BREED shall have furnished to the Agent evidence satisfactory
to the Agent that the product or service giving rise to such receivable was
sold or furnished by the Affiliate to a person not domiciled in the United
States.
"Foreign Subsidiary" means any Subsidiary of BREED that is not a
Domestic Subsidiary.
19
<PAGE>
"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 and 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.
"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, Japan 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 dated October 30, 1997
between one or more Guarantors and the Agent for the benefit of the Lenders
heretofore, delivered to the Agent and any other Guaranty otherwise
delivered pursuant to Section 9.19 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.
20
<PAGE>
"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.
"Indenture Event of Default" means the occurrence of an Event of
Default as defined in the Indenture between the Borrower and Wilmington
Trust Company, as Trustee for the holder of the Convertible Debentures
pursuant to which Indenture the Convertible Debentures have been issued
("the Convertible Preferred Indenture").
"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 dated October 30, 1997 or delivered
pursuant to Section 9.19 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 other appropriate Telerate Page (or any successor
page) as the London interbank offered rate for deposits in Dollars or
21
<PAGE>
the relevant Alternative Currency 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 or the
relevant Alternative Currency 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 Intercompany
Note Pledge Agreement, 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 issued after October 30, 1997 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 dated October 30, 1997 between a
Borrower and the Agent and (ii) each Intercompany Note Pledge 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 October 30, 1997 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
22
<PAGE>
made or Converted and ending, at the Borrower's option, on the date one,
two, three or, if available, six 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 in the case of Revolving Loans, the Term Loan A
Maturity Date in the case of Term Loan A and the Term Loan B Maturity
Date in the case of Term Loan B; 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 on behalf of any of the Borrowers 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.
---------
"Issuing Bank" means initially NationsBank and thereafter any Lender
which is successor to NationsBank as issuer of Letters of Credit under
Article IV.
----------
"Italian Lire" means the official currency of Italy.
"Japanese Yen" means the official currency of Japan.
"Landlord Waivers" means, collectively, each of the Landlord Waivers
heretofore required by the Agent to be delivered by the landlord of each
facility leased by BREED or
23
<PAGE>
any Domestic Subsidiary or arising after October 30, 1997 and delivered by
BREED or a Domestic Subsidiary, as applicable, pursuant to Article VI or
----------
Section 9.19 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 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
October 30, 1997 and delivered by BREED or a Domestic Subsidiary pursuant
to Article V or Section 9.19 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, including the
Existing Letters of Credit.
"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 IV
----------
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.
24
<PAGE>
"Loan" means any of the Revolving Loans, Swing Line Loans or the Term
Loan made under the Revolving Credit Facility, Swing Line or the Term Loan
Facilities, respectively.
"Loan Documents" means this Agreement, the Notes, the Guaranties, the
Security Instruments, the Applications and Agreements for Letter of Credit,
the Confirmation of Guaranty and the Modification to Mortgage, 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.
"Material Adverse Effect" means a material adverse effect on (i) the
business, properties, operations or condition, prospects, 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.
"Modification to Mortgage" means, collectively, those Modification to
Mortgage instruments dated as of the Closing Date whereby certain of the
Mortgages are modified.
"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, as the same are amended as of the date hereof by Modification
to Mortgage executed by BREED and its Subsidiaries and as from time to time
further amended, supplemented or restated.
25
<PAGE>
"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.
"NMS" means NationsBanc Montgomery Securities LLC and its successors.
"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, printing, rating agency, 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, (iv) any
other necessary costs incurred in connection with the sale, (v) in the case
of a Permitted Receivables Securitization, the first $25,000,000 of
proceeds received from the sale of accounts receivable and all instruments,
documents and other assets relating thereto and (vi) in the case of a
Foreign Receivables Sales Transaction, all proceeds received from the sale
of accounts receivable and all instruments, documents and other assets
relating thereto; provided, that Net Proceeds shall not include cash
--------
payments received from Asset Dispositions in amounts less than $5,000,000
("Reserved Proceeds") until the aggregate amount of Reserved Proceeds from
one or more Asset Dispositions exceeds $5,000,000, at which time Net
Proceeds shall include all such Reserved Proceeds and the amount of
Reserved Proceeds shall be reset to zero.
"Notes" means, collectively, the Term Notes, the Revolving Notes and
the Swing Line Note.
"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 or affiliate of a Lender which
arise under a Swap Agreement, and (iii) the payment and performance of all
other
26
<PAGE>
obligations, liabilities and Indebtedness of the Borrowers or any of them
to the Lenders, the Agent or NMS 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 Senior Subordinated Notes.
"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.
"Organizational Action" means with respect to any corporation, limited
liability company, partnership, 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.
"Original Agreement" has the meaning set forth in the recitals at the
beginning of this Agreement.
"Original Notes" has the meaning set forth in the recitals at the
beginning of this Agreement.
"Outstandings" means, collectively, at any date, the Letter of Credit
Outstandings, the Revolving Credit Outstandings, the Swing Line
Outstandings and the Term Loan Outstandings on such date.
"Participation" means, (i) with respect to any Lender with a Revolving
Credit Commitment (other than the Issuing Bank) and a Letter of Credit
Commitment, 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 issued by the Issuing Bank in accordance with the terms
hereof and (ii) with respect to any Lender (other than NationsBank) and a
Swing Line Loan, the extension of credit represented by the participation
of such Lender hereunder in the liability of NationsBank in respect of a
Swing Line Loan made by NationsBank in accordance with the terms hereof.
27
<PAGE>
"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 Acquisition" means (a) an Acquisition which satisfies the
following: (i) the Cost of Acquisition excluding capital stock of BREED and
its Subsidiaries, does not exceed 15% of Consolidated Net Worth and the
total Cost of Acquisition, including capital stock of BREED and its
Subsidiaries, does not exceed 20% of Consolidated Net Worth, (ii) the Board
of Directors of the Person to be acquired or the Board of Directors of the
Person that owns the assets to be acquired has approved such Acquisition,
(iii) such business to be acquired is the same or a substantially similar
line or lines of business carried on by BREED or its Subsidiaries, and (iv)
no Default or Event of Default shall result as a result of such
Acquisition, (b) acquisitions of accounts receivable and related assets
previously sold pursuant to a Permitted Receivables Securitization or a
Foreign Receivables Transaction in accordance with the terms and conditions
governing any such transaction, and (c) acquisitions by BREED or any
Subsidiary of the capital stock of a trust or other Person acquired by
BREED or any Subsidiary in connection with a Permitted Receivables
Securitization or a Foreign Receivables Transaction.
"Permitted Indebtedness" has the meaning assigned to such term in
Section 10.4 hereof.
------------
"Permitted Liens" has the meaning assigned to such term in Section
-------
10.3 hereof.
----
"Permitted Receivables Securitization" means limited recourse sales
and assignments of accounts receivable of BREED or its Subsidiaries to one
or more special purpose entities secured by such accounts, the proceeds of
which obligations shall be made available to BREED or its Subsidiaries at
such rates of advance, and the obligations issued by such special purpose
entities shall be in such amount or amounts, bear such rate or rates of
interest, and be subject to such other terms and conditions, all as shall
be reasonably acceptable to the Agent and the Required Lenders.
"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 October 30, 1997
between BREED and the Agent, (ii) that certain Stock Pledge Agreement dated
October 30, 1997 between certain
28
<PAGE>
Domestic Subsidiaries and the Agent substantially in the form of Exhibit P
---------
hereto, (iii) 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 (iv) any additional
Pledge Agreement delivered to the Agent pursuant to Section 9.19, as any of
------------
the foregoing may be hereafter amended, supplemented or restated from time
to time.
"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.
"Ratable Reduction of Term Loan Facilities" means the application to
reduce pro rata each of the Term Loan Outstandings in respect of Term Loan
A and the Term Loan Outstandings in respect of Term Loan B.
"Rate Adjustment Payment" has the meaning set forth in Section 3.1(b).
--------------
"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
29
<PAGE>
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.
"Receivables Subsidiary" means a Subsidiary created for the purpose of
financing receivables of a Person created in the ordinary course of
business of BREED and its Subsidiaries, the sole assets of which consist of
such receivables and all instruments, documents and other assets relating
thereto which Receivables Subsidiary does not guaranty payment of the
Senior Subordinated Notes or any other Indebtedness of BREED or any
Guarantor or Direct Foreign Subsidiary.
"Regulation D" means Regulation D of the Board as the same may be
amended or supplemented from 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 4.2) 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. 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 (without regard to any Swing Line Outstandings)
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 and (ii) if any Lender with a Revolving
Credit Commitment shall have failed to pay to NationsBank its Applicable
Commitment Percentage of any Swing Line Loan, such Lender's Credit Exposure
equal to its Applicable Commitment Percentage of all Swing Line
Outstandings shall be deemed to be held by NationsBank for purposes of this
definition.
30
<PAGE>
"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 or any Subsidiary) 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 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
-------
3.1(a) hereof providing for Loans to the Borrowers by the Lenders and Swing
------
Line Loans to BREED by NationsBank 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.
"Revolving Credit Termination Date" means (i) the Stated Termination
Date or (ii) such earlier date of termination of Lenders' obligations
pursuant to Section 11.1 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
31
<PAGE>
Credit Outstandings, Swing Line 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 3.5(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 October 30, 1997
among Borrowers, the Guarantors and the Agent, and (ii) any additional
Security Agreement delivered to the Agent pursuant to Section 9.19 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.
"Senior Subordinated Notes" means the 9 1/4% Senior Subordinated Notes
due 2008 of BREED and any Exchange Notes in like principal amount issued in
exchange for the Senior Subordinated Notes pursuant to the Registration
Rights Agreement dated April __, 1998 among BREED, NMS and Prudential
Securities Incorporated.
"Series A Preference Shares" means BREED's 1997 Series A Convertible
Non-Voting Preferred Shares, par value $.001 per share.
32
<PAGE>
"Siemens" means Siemens Aktiengesell-Schaft, a German company.
"Siemens Joint Venture Agreement" means the Joint Venture Agreement
dated December 21, 1997 between Siemens and BREED concerning the
establishment of BSRS Restraint.
"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 by contacting its foreign
exchange trading desk 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's foreign exchange
trading desk 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 April 27, 2004.
"Stock Option Plans" means any stock option plan of BREED, including,
without limitation, collectively, the BREED Technologies, Inc. 1992 Stock
Option Plan, the BREED Technologies, Inc 1992 Director Stock Option Plan,
as amended as of November 20, 1996, the BREED Technologies, Inc 1992
Employee Stock Purchase Plan and the BREED Technologies, Inc 1994 Stock
Incentive Plan.
33
<PAGE>
"Subordinated Indebtedness" means all Indebtedness that is
subordinated to the Revolving Credit Facility and Term Loan Facilities
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; provided,
that BSRS Restraint shall not be a Subsidiary so long as BREED, directly or
indirectly, owns less than 50% of the capital interest of BSRS Restraint.
"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.
"Swing Line" means the revolving line of credit established by
NationsBank in favor of BREED pursuant to Section 3.14.
------------
"Swing Line Loan" and "Swing Line Loans" means a loan or loans made by
NationsBank to BREED pursuant to Section 3.14.
------------
"Swing Line Note" means a promissory note of BREED delivered to
NationsBank pursuant to Section 3.14(b) in the principal amount of
---------------
$20,000,000.
"Swing Line Outstandings" means, as of the date of determination, the
aggregate principal amount of all Swing Line Loans then outstanding, not to
exceed $20,000,000.
"Term Loan" means the Term Loan A or Term Loan B, as the case may be.
"Term Loan A" means the loan made pursuant to the Term Loan A
Facility.
"Term Loan A Commitment" means, with respect to each Lender, the
obligation of such Lender to make available the Term Loan A to BREED in a
principal amount equal to such Lender's Applicable Commitment Percentage of
the Total Term Loan A Commitment, as set forth in Exhibit A.
---------
"Term Loan A Facility" means the facility described in Section 2.1
-----------
providing for Term Loan to BREED by the Lenders in the original principal
amount of $325,000,000.
"Term Loan A Maturity Date" means April 27, 2004.
"Term Loan B" means the loan made pursuant to the Term Loan B
Facility.
34
<PAGE>
"Term Loan B Commitment" means, with respect to each Lender, the
obligation of such Lender to make available the Term Loan B to BREED in a
principal amount equal to such Lender's Applicable Commitment Percentage of
the Total Term Loan B Commitment, as set forth in Exhibit A.
---------
"Term Loan B Facility" means the facility described in Section 2.1
-----------
providing for the Term Loan to BREED in the original principal amount of
$200,000,000.
"Term Loan B Maturity Date" means April 27, 2006.
"Term Loan Facilities" means the Term Loan A Facility and the Term
Loan B Facility.
"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 A Termination Date" means (i) the Term Loan A Maturity Date
or (ii) such earlier date of termination of Lenders' obligations pursuant
to Section 11.1 upon the occurrence of an Event of Default or (iii) such
------------
date as BREED may voluntarily and permanently terminate the applicable Term
Loan A Facility by payment in full of all Obligations incurred in
connection with such Term Loan A.
"Term Loan B Termination Date" means (i) the Term Loan B Maturity Date
or (ii) such earlier date of termination of Lenders' obligations pursuant
to Section 11.1 upon the occurrence of an Event of Default or (iii) such
------------
date as BREED may voluntarily and permanently terminate the applicable Term
Loan B Facility by payment in full of all Obligations incurred in
connection with such Term Loan B.
"Term Notes" means, collectively, Term Notes A and Term Notes B.
"Term Notes A" means, collectively, the promissory notes of BREED
evidencing Term Loan A executed and delivered to the Lenders as provided in
Section 2.8 substantially in the form of Exhibit O-2, with appropriate
----------- -----------
insertions as to amounts, dates and names of Lenders.
"Term Notes B" means, collectively, the promissory notes of BREED
evidencing Term Loan B executed and delivered to the Lenders as provided in
Section 2.8 substantially in the form of Exhibit O-3, 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
35
<PAGE>
Section 4001(a)(2) of ERISA or was deemed such under Section 4062(e) 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 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
$150,000,000, as reduced from time to time in accordance with Section 3.7.
-----------
"Total Term Loan A Commitment" means a principal amount equal to
$325,000,000.
"Total Term Loan B Commitment" means a principal amount equal to
$200,000,000.
"Total Term Loan Commitment" means the sum of Total Term Loan A
Commitment and Total Term Loan B Commitment.
"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.
36
<PAGE>
"Year 2000 Compliant" means all computer applications (including those
affected by information received from its suppliers and vendors) that are
material to BREED or any of its Subsidiaries business and operations will
on a timely basis be able to perform properly data-sensitive functions
involving all dates on and after January 1, 2000.
"Year 2000 Problem" means the risk that computer applications used by
BREED and any of its Subsidiaries (including those affected by information
received from its suppliers and vendors) may be unable to recognize and
perform properly data-sensitive functions involving certain dates on and
after January 1, 2000.
1.3 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,
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
37
<PAGE>
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 a Lender in Article II when used herein with
----------
respect to Term Loan A or Term Loan B shall mean those Lenders with a Term
Loan A Commitment or a Term Loan B Commitment, respectively, and when used
in Article III and IV with respect to a Revolving Loan shall mean those
------------------
Lenders having a Revolving Credit Commitment.
(k) 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.
(l) 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.
1.4 Change in GAAP.
--------------
(a) Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where appropriate
applied on a Consistent Basis), and all accounting or financial terms shall have
the meanings ascribed to such terms by GAAP.
(b) If there shall occur any change in GAAP after the Closing Date, the
Borrower shall give written notice thereof to the Agent and the Lenders
promptly, and in any event within fifteen (15) days after the effective date of
any such change in GAAP, which notice shall be effective upon receipt and shall
(i) describe in detail the nature of such required change and its impact on (X)
the financial statements required to be delivered pursuant to Section 9.1
-----------
hereof, and (Y) the effect on calculation of any financial covenants contained
herein or determination of compliance with any other terms or conditions hereof
insofar as they relate to financial or accounting matters, and (ii) be
accompanied by a covenant compliance certificate in the form of Exhibit T,
---------
signed by an Authorized Representative and showing the computations therein
provided, after giving effect to the required change in GAAP, for the same
fiscal period of the Borrower and its Subsidiaries for which a
38
<PAGE>
compliance certificate required under Section 9.1(a)(ii) or 9.1(b)(ii), as the
------------------ ----------
case may be, has most recently theretofore been delivered.
(c) In the event that, in the judgment of the Agent, the change in GAAP
shall materially affect the calculation of any financial covenant or other
determination of compliance with any term or condition contained herein insofar
as it relates to financial or accounting matters so as to distort the intended
economic effect of any such covenant, term or condition, then the provisions of
GAAP without giving effect to such change shall continue to be utilized for all
purposes of such covenants, terms and provisions unless the Required Lenders
shall otherwise consent.
39
<PAGE>
ARTICLE II
The Term Loans
--------------
2.1. Term Loans. (a) Subject to the terms and conditions of this
----------
Agreement, each Lender with a Term Loan A Commitment or a Term Loan B
Commitment, or both, as the case may be, severally agrees, to the extent it has
not previously advanced to BREED any portion of its Term Loan A Commitment or
Term Loan B Commitment to make (i) an Advance of the Term Loan A to the Agent on
the Closing Date in an amount equal to the unfunded portion of its Applicable
Commitment Percentage of the Total Term Loan A Commitment and (ii) an Advance of
the Term Loan B to the Agent on the Closing Date in an amount equal to the
unfunded portion of its Applicable Commitment Percentage of the Total Term Loan
B Commitment. The Agent shall use the amounts of Term Loans received by it on
the Closing Date to purchase from Original Lenders, without recourse, on behalf
of the Lenders making Advances, their pro rata shares of outstanding Term Loans
(as defined in the Original Agreement) and shall remit the proceeds of such
Loans that are not used for such purpose to BREED for working capital and
general corporate purposes. The principal amount of each Segment of the Term
Loans 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, however, that (x) no Eurodollar Rate Segment shall have an
--------
Interest Period that extends beyond the Term Loan A Maturity Date or the Term
Loan B Maturity Date, as the case may be, (y) each Eurodollar Rate Segment of
each Term Loan shall be in the minimum amount of $5,000,000 and if greater, in
an integral multiple of $1,000,000, and (z) each Eurodollar Rate Segment may,
subject to the provisions of Sections 2.4, 2.6 and 2.7 and Article XI, be repaid
------------ --- --- ----------
only on the last day of the Interest Period with respect thereto. No amount of
any Term Loan repaid or prepaid by BREED may be reborrowed hereunder, and no
subsequent Advances of Term Loans shall be made by any Lender after the initial
such Advance.
(b) Interest and fees relating to the Term Loans, except for Base Rate
Segments, shall be computed on the basis of a year of 360 days and calculated
for the actual number of days elapsed. Interest relating to Base Rate Segments
shall be computed on the basis of a 365 or 366 day year, as applicable and
calculated for the actual number of days elapsed.
2.2. Term Loan Advance. Not later than 2:00 P.M. on the Closing Date, each
-----------------
Lender with the unfunded portion of its Term Loan A Commitment and Term Loan B
Commitment, as the case may be, shall, pursuant to the terms and subject to the
conditions of this Agreement, make the amount of the Advances of the Term Loan
to be made by it on such day available by wire transfer to the Agent in the
amount of its Term Loan A Commitment and Term Loan B Commitment. Such wire
transfer shall be directed to the Agent at the Principal Office and shall be in
the form of immediately available, freely transferable Dollars. The amount so
received by the Agent shall, subject to the terms and conditions of this
Agreement and following the application of such amounts pursuant to Section
-------
2.1(a), be made available to BREED by delivery of the proceeds thereof to the
- ------
Borrowers' Account or otherwise as shall be directed by the Authorized
Representative and reasonably acceptable to the Agent.
40
<PAGE>
2.3. Payment of Principal. (a) The principal amount of Term Loan A shall
--------------------
be repaid by BREED in twenty four (24) consecutive quarterly installments on the
dates and in the amounts (subject to the provisions of Section 2.6 and 2.7) set
-------------------
forth below:
Date Amount
---- ------
December 31, 1998 $ 9,166,666
March 31, 1999 $ 9,166,667
June 30, 1999 $ 9,166,667
September 30, 1999 $ 8,125,000
December 31, 1999 $ 8,125,000
March 31, 2000 $ 8,125,000
June 30, 2000 $ 8,125,000
September 30, 2000 $ 9,375,000
December 31, 2000 $ 9,375,000
March 31, 2001 $ 9,375,000
June 30, 2001 $ 9,375,000
September 30, 2001 $10,000,000
December 31, 2001 $10,000,000
March 31, 2002 $10,000,000
June 30, 2002 $10,000,000
September 30, 2002 $22,500,000
December 31, 2002 $22,500,000
March 31, 2003 $22,500,000
June 30, 2003 $22,500,000
September 30, 2003 $24,375,000
December 31, 2003 $24,375,000
March 31, 2004 $24,375,000
Term Loan A Maturity Date All remaining
principal outstanding
(b) The principal amount of Term Loan B shall be repaid by BREED in eight
(8) consecutive annual installments on the dates and in the amounts (subject to
Sections 2.6 and 2.7) set forth below:
- --------------------
Date Amount
---- ------
June 30, 1999 $ 1,250,000
June 30, 2000 $ 1,250,000
June 30, 2001 $ 1,250,000
June 30, 2002 $ 1,250,000
June 30, 2003 $ 1,250,000
June 30, 2004 $ 1,250,000
June 30, 2005 $96,250,000
Term Loan B Maturity Date All remaining
principal outstanding
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<PAGE>
(c) Notwithstanding the foregoing, the entire amount of Term Loan
Outstandings shall be due and payable by BREED in full on the Term Loan A
Termination Date or Term Loan B Termination Date, as appropriate.
2.4. Payment of Interest. BREED shall pay interest on the outstanding and
-------------------
unpaid principal amount of each Segment of each Term Loan commencing on the date
of determination of the interest rate applicable to such Segment until such
Segment shall be due at the applicable Base Rate or Eurodollar Rate, as the case
may be, as designated by BREED in the applicable Interest Rate Selection Notice
or as otherwise provided hereunder. Interest relating to Eurodollar Rate
Segments shall be computed on the basis of a year of 360 days and calculated for
actual days elapsed. Interest relating to Base Rate Segments shall be computed
on the basis of a 365 or 366 day year, as applicable, and calculated for actual
days elapsed. Interest on each Segment of each Term Loan shall be paid on the
earlier of (a) in the case of any Base Rate Segment, quarterly in arrears on the
last Business Day of each March, June, September and December, commencing on
June 30, 1998, until the applicable Term Loan A Maturity Date or Term Loan B
Maturity Date, or if earlier the applicable Term Loan A Termination Date or Term
Loan B Termination Date, on which date the entire principal amount of and all
accrued interest on the Term Loans shall be paid in full, (b) in the case of any
Eurodollar Rate Segment, on the last day of the applicable Interest Period for
such Segment and if such Interest Period extends for more than three (3) months,
at intervals of three (3) months after the first day of such Interest Period,
and (c) upon payment in full of such Term Loan; provided, however, that if any
-------- -------
amount due under this Agreement shall not be paid when due (at maturity, by
acceleration or otherwise), all amounts outstanding hereunder shall bear
interest thereafter at the Default Rate.
2.5. Manner of Payment. (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 Term Loans, shall be made to the
Agent at the Principal Office for the account of each Lender in Dollars in
immediately available funds on or before 3:00 P.M. on the date such payment is
due. Without prejudice to any of the other obligations set forth herein by
BREED,the Agent shall, upon the request of BREED, debit the amount of such
payment from any one or more ordinary deposit accounts of BREED with the Agent.
BREED shall attempt to give the Agent telefacsimile notice of any intended
payment of principal or interest prior to 12:00 Noon on the date of such
payment.
(b) The Agent shall deem any payment made by or on behalf of BREED that
is not made both in Dollars in immediately available funds and prior to 3:00
P.M. on the date such payment is to be made to be a non-conforming payment. Any
such non-conforming 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; provided, that no
--------
such non-conforming payment constitutes an Event of Default unless the same
would constitute an Event of Default in accordance with Section 11.1. The Agent
------------
shall give prompt telephonic or telefacsimile notice to BREED if a non-
conforming payment constitutes a Default or Event of Default. Interest shall
continue to accrue on any principal as to which a non-conforming payment
42
<PAGE>
is made until the later of (i) the date such funds become available funds or
(ii) 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 Term 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 the definition of "Interest Period"; provided, however, that interest
--------
shall continue to accrue during the period of any such extension; and provided
--------
further, however, that in no event shall any such due date be extended beyond
the Term Loan A Termination Date or Term Loan B Termination Date, as the case
may be.
2.6. Optional Prepayments. The Borrower may prepay the Term Loans, in
--------------------
accordance with a Ratable Reduction of Term Loan Facilities, in whole or in part
from time to time on any Business Day, without penalty or premium, upon not less
than three (3) Business Days' prior written notice (effective upon receipt) to
the Agent, which notice shall be irrevocable. Any partial prepayment of the
Term Loans shall be applied to principal installments in the chronological order
of maturity rather than inverse order of maturity; provided, however, that any
holder of Term Loan B shall have the right by the giving of written notice to
the Agent to refuse prepayment of all or a portion of the Term Loan B held by it
if, after giving effect to such partial prepayment, a portion of Term Loan A
will remain outstanding, and any prepayment so refused shall be applied to
prepay any remaining portion of Term Loan A. If the amount of Term Loan B as to
which prepayment is refused is in excess of the remaining outstanding Term Loan
A, then the Agent shall pro rate the amount of Term Loan B which can be paid
among holders of Term Loan A based upon the proportion that the principal amount
of Term Loan A held by each Lender bears to the then total outstanding Term Loan
A. The holders of Term Loan B shall have no right to refuse prepayment of all or
any portion of Term Loan B to the extent that any amount so refused exceeds the
aggregate principal amount of Term Loan A then outstanding. Any prepayment,
whether a Base Rate Segment or a Eurodollar Rate Segment, shall be made at a
prepayment price equal to (i) the amount of principal to be prepaid, plus (ii)
all accrued and unpaid interest on the amount so prepaid, to the date of
prepayment. All prepayments under this Section 2.6 shall be made in the minimum
-----------
principal amount of $5,000,000 or any integral multiple of $1,000,000 in excess
thereof (or in the entire remaining principal balance of the Term Loans). No
such prepayment shall result in the payment of any Eurodollar Rate Segment other
than on the last day of the Interest Period of such Segment unless such
prepayment is accompanied by amounts due, if any, under Section 6.5. No payment
-----------
under this Section 2.6 shall reduce or excuse any payment required under Section
----------- -------
2.7.
- ---
2.7. Mandatory Prepayments. In addition to the required payments of
---------------------
principal of the Term Loans set forth in Section 2.3 and any optional payments
-----------
of principal of the Loans effected under Section 2.6, the Borrower shall make
-----------
the following required prepayments of the Term Loan Facilities and, to the
extent indicated below, the Revolving Credit Facility, each such payment to be
made to the Agent for the benefit of the Lenders within the time period
specified below and in the event of the prepayment of a Revolving Loan, in an
Alternative Currency, in the Alternative Currency Equivalent Amount of the
amount due:
43
<PAGE>
(i) Equity Offerings. BREED shall make, or shall cause each
----------------
applicable Subsidiary to make, a prepayment of the Term Loan Facilities
by application to the Ratable Reduction of Term Loan Facilities from the
Net Proceeds of any Equity Offering in an amount equal to fifty percent
(50%) of such Net Proceeds. Each such prepayment shall be made within
fifteen (15) 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 of the Term Loan Facilities by
application to the Ratable Reduction of Term Loan Facilities 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
fifteen (15) 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 of the Term Loan Facilities by
application to the Ratable Reduction of Term Loan Facilities 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
fifteen (15) 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, (x)
the proceeds received from the sale of Gallino Plasturgica, S.r.l and (y)
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 2.7(iii) to the extent that such amount is used for
----------------
severance payments to former employees of BREED or any Subsidiary that
owned such foreign assets who were released from employment in connection
with such sale.
(iv) Excess Cash Flow. BREED shall make a prepayment of the Term
----------------
Loan Facilities by application to the Ratable Reduction of Term Loan
Facilities of fifty percent (50%) of Consolidated Excess Cash Flow. Each
such prepayment shall be made within five (5) Business Days of delivery to
the Agent of the certificate described in Section 9.1(a)(ii).
------------------
All mandatory prepayments made pursuant to this Section 2.7 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. Each mandatory prepayment in an amount less than the Term Loan
Outstandings shall be applied pro rata to each remaining installment of Term
Loan A and Term Loan B. Any prepayment of an Eurodollar Rate Loan pursuant to
this Section 2.7 other
-----------
44
<PAGE>
than on the last day of an Interest Period shall be accompanied by the
additional payment, if any, required by Section 6.5 hereof.
-----------
2.8. Term Notes. The portion of each of the Term Loan A and Term Loan B
----------
made by each Lender shall be evidenced by the Term Note A and Term Note B,
respectively, payable to the order of such Lender in the respective amounts of
its Term Loan A Commitment and Term Loan B Commitment, which Term Notes 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 Borrower.
2.9. Interest Periods. Each Term Loan shall be, at the option of the
----------------
Borrower specified in an Interest Rate Selection Notice, comprised of either
Eurodollar Rate Segments or Base Rate Segments. Eurodollar Rate Segments and
Base Rate Segments may be outstanding at the same time, provided, however, there
-------- -------
shall not be outstanding at any one time Eurodollar Rate Loans (including
Revolving Loans) and Eurodollar Rate Segments having more than ten (10)
different Interest Periods. If the Agent does not receive an Interest Rate
Selection Notice giving notice of election of the duration of an Interest Period
or of conversion of any Segment to or continuation of a Segment as a Eurodollar
Rate Segment by the time prescribed by Section 2.10, the Borrower shall be
------------
deemed to have elected to convert such Segment to (or continue such Segment as)
a Base Rate Segment until the Borrower notifies the Agent in accordance with
Section 2.10.
- ------------
2.10. Conversions and Elections of Subsequent Interest Periods. Subject to
--------------------------------------------------------
the limitations set forth below and in Article VI, the Borrower 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 any Eurodollar Rate Segment to a Base Rate Segment on
the last day of the Interest Period for such Eurodollar Rate Segment; 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 conversion:
(i) elect a subsequent Interest Period for any Eurodollar
Rate Segment to begin on the last day of the then current Interest
Period for such Eurodollar Rate Segment; and
(ii) convert any Base Rate Segment to a Eurodollar Rate
Segment on any Business Day.
Each conversion pursuant to this Section 2.10 shall be subject to the
------------
limitations on Eurodollar Rate Loans set forth in the definition of "Interest
Period" herein and in Sections 2.1, 2.9 and Article VI. The Agent shall give
----------------- ----------
written notice to each Lender of such notice of
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<PAGE>
conversion prior to 1:00 P.M. on the day such notice of election or conversion
is received. All such continuations or conversions of Term Loan A or Term Loan B
shall be effected pro rata based on the Applicable Commitment Percentages of the
Lenders with respect to such Term Loan.
2.11. Pro Rata Payments. Except as otherwise provided herein, (a)
-----------------
each payment on account of the principal of and interest on each of Term Loan A
and Term Loan B shall be made to the Agent for the account of the Lenders pro
rata based on their Applicable Commitment Percentages of such Term Loan, (b) all
payments to be made by the Borrower for the account of each of the Lenders on
account of principal, interest and fees, shall be made without diminution, set-
off, 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 Borrower.
46
<PAGE>
ARTICLE III
The Revolving Loans
-------------------
3.1 Revolving Loans.
---------------
(a) Commitment. Subject to the terms and conditions of this Agreement,
----------
each Lender with a Revolving Credit Commitment 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
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 Swing Line 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 3.7, 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 6.5. 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 plus Swing Line 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 and Swing Line
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 3.1(b).
--------------
(b) 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
47
<PAGE>
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
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 to reflect the aggregate amount of Outstandings after giving
effect to such Continuation. In the event that such adjustment with respect to
a Continued Loan would cause the total Dollar Value of Revolving Credit
Outstandings plus Swing Line 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 Swing Line 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 6.5
-----------
hereof as a result of such Rate Adjustment Payment. For the purposes of
determining the maximum amount of Revolving Credit Outstandings, Swing Line
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 Swing Line Outstandings plus Letter of Credit
Outstandings shall not exceed at any time the Total Revolving Credit Commitment,
and (B) 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 3.8, shall be (A) in the case
-----------
of
48
<PAGE>
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).
(c) Advances and Rate Selection. (i) An Authorized Representative
---------------------------
acting on behalf of any Borrower 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 or
Continuation of a borrowing hereunder) prior to 11:00 A.M. and (B) 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 Loan (other than Base Rate Refunding Loans to the extent
the same are effected without notice pursuant to Section 3.1(c)(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 Borrower, the amount
of the borrowing, whether Dollar or Alternative Currency, 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 in 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 in 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 3.1, 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
49
<PAGE>
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 in 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, as instructed by the Agent.
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
Revolving Loans in accordance with Section 3.8. 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 Interest Period or of Conversion of any Revolving Loan to or
Continuation of a Revolving Loan as a Eurodollar Rate Loan by the time
prescribed by Section 3.1(c) or 3.8, 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 3.8.
-----------
(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 fully
reimburse the Issuing Bank in respect of such drawing by 1:00 p.m. on the same
Business Day as the day such drawing is honored, if notice thereof is received
by the applicable Borrower at or prior to 12:00 noon on such day, or by 12:00
noon on the Business Day next following the day such drawing is honored, if
notice thereof is received after 12:00 noon on such day, (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,
50
<PAGE>
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 3.1(c)(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 3.1(c)(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 3.8.
- -----------
(d) 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 on behalf
of 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 on behalf of
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 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 3.1(d), BREED,
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
51
<PAGE>
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 under the immediately preceding paragraph shall be absolute,
unconditional and irrevocable irrespective of:
(i) any lack of validity, legality or enforceability of this
Agreement, any Note, or 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
(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.
52
<PAGE>
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).
3.2. 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 Revolving 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 3.1, 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 Revolving Loan other than Base Rate Loans 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 Revolving Loans that are Base Rate
Loans shall be computed on the basis of a 365 or 366 day year, as applicable,
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 June 30, 1998 for each Base
Rate Loan, (ii) on the last day of the applicable Interest Period for each
Eurodollar Rate Loan, (iii) upon payment in full of the principal amount of such
Loan and (iv) in Dollars or in the Alternative Currency in which such Loan was
made.
3.3. 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 all Revolving Credit
Outstandings shall be recorded in Dollars as set forth in Section 3.1. The
-----------
repayment of such principal amount shall be made in the appropriate Alternative
Currency as follows: the portion of the Revolving Credit Outstandings
attributable to each specified Advance (or the Continuation or Conversion
thereof) (as determined from the Agent's records) shall be repaid
53
<PAGE>
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 3.3(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 6.5. All prepayments of Loans other than mandatory prepayments pursuant
- -----------
to Section 2.7 or 3.3(b) made by the Borrowers shall be in the amount of
----------- ------
$5,000,000 (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 3.1(c) or Section 3.8.
-------------- -----------
(b) Mandatory Prepayments. The Borrowers shall make the mandatory
---------------------
prepayments of Revolving Credit Outstandings to the extent set forth in
Section 2.7.
- -----------
3.4. 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 Revolving Loans, shall be made to
the Agent at the Principal Office, for the account of each Lender, in Dollars in
the case of Revolving Loans made in Dollars and in the same Alternative Currency
in the case of Revolving 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 attempt to 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 Revolving Loan to which payment relates. The Agent shall, at
the election of the applicable Borrower or Borrowers, 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
Revolving Loans made in Dollars and in the required Alternative Currency in the
case of Revolving 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; provided, that
--------
no such non-conforming payment shall constitute an Event of Default unless the
same would constitute an Event of Default in accordance with Section 11.1. 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
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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.
3.5. Notes. (a) Revolving Loans made by each Lender shall be evidenced by
-----
a Note in substantially the form of Exhibit O-1 payable to the order of such
------------
Lender in the respective amount of its Applicable Commitment 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.
3.6. 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 3.10 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.
3.7. Voluntary Commitment Reductions. The Borrowers shall, by notice from
-------------------------------
an Authorized Representative on their behalf, 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
reduce the Total Revolving Credit Commitment in whole or in part. 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) or such greater amount
which is in an integral multiple of $5,000,000 (or the Alternative Currency
Equivalent Amount thereof), 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 Revolving Loans to the extent that the principal amount of
Revolving Credit Outstandings plus Swing Line 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 6.5.
-----------
3.8. Conversions and Elections of Subsequent Interest Periods. Subject to
--------------------------------------------------------
the limitations set forth below and in Article VI, 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
55
<PAGE>
(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;
(ii) Convert Base Rate Loans to Eurodollar Rate Loans on any
Business Day; and
(iii) elect that any Eurodollar Rate Loan be converted from an
Alternative Currency into Dollars or another Alternative Currency on
the last day of the Interest Period for any Eurodollar Rate Loan.
Each election and Conversion pursuant to this Section 3.8 shall be subject
-----------
to the limitations on Eurodollar Rate Loans set forth in the definition of
"Interest Period" herein and in Sections 3.1, 3.3 and Article VI. 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.
3.9. 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 Revolving Credit Outstandings, Swing Line
Outstandings and Letters of Credit Outstandings.
3.10. 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 pro rata benefit of the Lenders based on their Applicable
Commitment Percentages, an unused fee equal to the Applicable Margin multiplied
by the average daily amount by which the Total Revolving Credit Commitment
exceeds the sum of (i) Revolving Credit Outstandings (without giving effect to
Swing Line 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 June 30, 1998 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.
3.11. 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 of any Lender hereunder be
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<PAGE>
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 Revolving 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 Revolving 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.
3.12. Use of Proceeds. The proceeds of the Loans made pursuant to the
---------------
Revolving Credit Facility hereunder shall be used by the Borrowers (i) to
refinance existing Indebtedness and the fees and expenses related to such
refinancing, and (ii) for general working capital needs and other corporate
purposes.
3.13. 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; subject to continuing liability under Section 13.9 to the
------------
extent applicable.
3.14. Swing Line. (a) Notwithstanding any other provision of this Agreement
----------
to the contrary, in order to administer the Revolving Credit Facility in an
efficient manner and to minimize the transfer of funds between the Agent and the
Lenders, NationsBank shall make available Swing Line Loans to BREED in Dollars
prior to the Revolving Credit Termination Date. NationsBank shall not make any
Swing Line Loan pursuant hereto (i) if to the actual knowledge of NationsBank
the Borrowers are not in compliance with all the conditions to the making of
Revolving Loans set forth in this Agreement, (ii) if after giving effect to such
Swing Line Loan, the Swing Line Outstandings exceed $20,000,000, or (iii) if
after giving effect to such Swing Line Loan, the sum of the principal amount of
Swing Line Outstandings, Revolving Credit Outstandings and Letter of
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<PAGE>
Credit Outstandings exceeds the Total Revolving Credit Commitment. Swing Line
Loans shall be limited to Base Rate Loans. BREED may borrow, repay and reborrow
under this Section 3.14. Borrowings under the Swing Line shall be made in the
------------
minimum amount of $500,000 or, if greater, in amounts which are integral
multiples of $100,000, or in the amount necessary to effect a Base Rate
Refunding Loan, upon written request by telefacsimile transmission, effective
upon receipt, by an Authorized Representative made to NationsBank not later than
2:00 P.M. on the Business Day of the requested borrowing. If such Borrowing
Notice is received by 2:00 P.M. on any Business Day, the amount of the Swing
Line Loan requested will be made available to the Borrower by a credit to the
Borrower's Account or as otherwise specified by the Borrower at or prior to 5:00
P.M. on such Business Day. If such Borrowing Notice is received later than 2:00
P.M. on any Business Day, the amount of the Swing Line Loan requested will be so
made available to the Borrower by 12:00 noon on the next succeeding Business
Day. Each such Borrowing Notice shall specify the amount of the borrowing and
the date of borrowing, and shall be in the form of Exhibit D-2, with appropriate
-----------
insertions. Each repayment of a Swing Line Loan shall be in an amount which is
an integral multiple of $100,000 or the aggregate amount of all Swing Line
Outstandings.
(b) Swing Line Loans shall be in Dollars and shall bear interest at the
Base Rate, the interest payable on Swing Line Loans is solely for the account of
NationsBank, and all accrued and unpaid interest on Swing Line Loans shall be
payable on the dates and in the manner provided in Sections 3.2(b) and 3.4 with
-----------------------
respect to interest on Base Rate Loans. Amounts not paid when due shall bear
interest at the Default Rate. The Swing Line Outstandings shall be evidenced by
a Swing Line Note delivered to NationsBank.
(c) Upon the making of a Swing Line Loan, each Lender with a Revolving
Credit Commitment shall be deemed to have purchased from NationsBank a
Participation therein in an amount equal to that Lender's Applicable Commitment
Percentage of such Swing Line Loan. Upon demand made by NationsBank, each
Lender shall, according to its Applicable Commitment Percentage of such Swing
Line Loan, promptly provide to NationsBank its purchase price therefor in an
amount equal to its Participation therein. Any Advance made by a Lender
pursuant to demand of NationsBank of the purchase price of its Participation
shall be deemed (i) provided that the conditions to making Revolving Loans shall
be satisfied, a Base Rate Refunding Loan under Section 3.1 until BREED Converts
-----------
such Base Rate Loan in accordance with the terms of Section 3.8, and (ii) in all
-----------
cases, the funding by each Lender of the purchase price of its Participation in
such Swing Line Loan. The obligation of each Lender to so provide its purchase
price to NationsBank shall be absolute and unconditional and shall not be
affected by the occurrence of a Default or an Event of Default or any other
occurrence or event.
BREED, at its option and subject to the terms hereof, may request an
Advance pursuant to Section 3.1 in an amount sufficient to repay Swing Line
-----------
Outstandings on any date and the Agent shall provide from the proceeds of such
Advance to NationsBank the amount necessary to repay such Swing Line
Outstandings (which NationsBank shall then apply to such repayment) and credit
any balance of the Advance in immediately available funds in the manner directed
by the Borrower pursuant to Section 3.1(c)(ii). The proceeds of such Advances
------------------
shall be paid to NationsBank for
58
<PAGE>
application to the Swing Line Outstandings and the Lenders shall then be deemed
to have made Loans in the amount of such Advances. The Swing Line shall continue
in effect until the Revolving Credit Termination Date, at which time all Swing
Line Outstandings and accrued interest thereon shall be due and payable in full.
59
<PAGE>
ARTICLE IV
Letters of Credit
-----------------
4.1 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 plus Swing Line 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. To the extent that there shall be any
conflict between the terms of this Agreement and the Applications and Agreements
for Letters of Credit this Agreement shall control.
(b) Upon completion of a proper Application and Agreement for Letter of
Credit, NationsBank shall, subject to the other provisions of this Article IV,
----------
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 reimbursed 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 Revolving Loan Outstandings plus Swing Line Outstandings and
Letters of Credit Outstanding 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 Revolving Loan
Outstandings plus Swing Line Outstandings plus Letters of Credit Outstanding do
not exceed the Total Revolving Credit Commitment and the Loans advanced in an
Alternative Currency plus Letters of Credit Outstanding issued in and
Alternative Currency do not exceed the Total Alternative Currency Sublimit.
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<PAGE>
4.2. 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 3.1(a) and Advances under the
--------------
Swing Line Facility if permitted by Section 3.14) sufficient funds to pay all
------------
debts and liabilities arising under any Letter of Credit as a result of such
draw. 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 shall, subject to the provisions of this Article IV, 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 3.1(c)(iv), amounts not so drawn from
------------------
charged accounts 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 365 or 366 days, as applicable,
for actual days elapsed.
(b) In accordance with the provisions of Section 3.1(c), 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 if such drawing was honored in
an Alternative Currency) of such liability, and to the extent that the
applicable Borrower or Borrowers are obligated to pay the Issuing Bank under
Section 4.2(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 III,
-----------
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 3.1(c)(iv).
------------------
(ii) Simultaneously with the making of each payment by a Lender
to the Issuing Bank pursuant to Section 3.1(c)(iv)(B), such Lender
---------------------
shall, automatically and
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<PAGE>
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 3.1(c)(iv), Swing
------------------
Line Loans made in accordance with Section 3.14, or otherwise.
------------
(iii) Each Lender's obligation to make payment to the Agent for
the account of the Issuing Bank pursuant to Section 3.1(c)(iv) and
------------------
this Section 4.2(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
-------
3.1(c)(iv) or this Section 4.2(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 3.1(c) 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 VII, 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
62
<PAGE>
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 13.9, 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 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 4.2(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 4.2(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
63
<PAGE>
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;
(vi) 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.
4.3 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 for the number of days outstanding at a rate equal
to the Applicable Margin for Eurodollar Rate Revolving Loans, and (ii) for the
Issuing Bank 0.125% based on the aggregate amount available to be drawn on each
outstanding Letter of Credit for the number of days outstanding. 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 first such date following the date of issuance of a Letter of
Credit. The fees described in this Section 4.3 shall be calculated on the basis
-----------
of a year of 360 days for the actual number of days elapsed.
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<PAGE>
ARTICLE V
Security
--------
5.1. Guaranty. To guarantee the full and timely payment and performance of
--------
all Obligations now existing or hereafter arising, the Borrowers have heretofore
caused the Guaranty to be delivered by each Domestic Subsidiary that is not a
Borrowing Subsidiary. The Borrowers hereby agree to cause a Guaranty to be
delivered by any Domestic Subsidiary acquired or created after October 30, 1997
pursuant to the terms of Section 9.19 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.
5.2. Stock Pledge. 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 have heretofore delivered, and caused each Person owning any Pledged
Stock to deliver, to the Agent, a Pledge Agreement together with certificates
representing Pledged Stock with stock powers duly executed in blank. The
Borrowers hereby agree to, and to cause each Subsidiary to, deliver to the Agent
for the benefit of the Lenders (w) 100% of the capital stock and related
interests and rights of any Domestic Subsidiary acquired or created after
October 30, 1997 and any Subsidiary of a Borrowing Subsidiary acquired or
created after October 30, 1997 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 acquired or created after October 30, 1997 in
accordance with the terms hereof and thereof.
5.3. 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
has heretofore delivered and caused each Domestic Subsidiary to deliver, 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. BREED
hereby agrees to cause Security Instruments to be delivered by any Domestic
Subsidiary acquired or created after October 30, 1997 pursuant to the terms of
Section 9.19 hereof.
- ------------
5.4. 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
has heretofore delivered, and caused each Domestic Subsidiary to deliver, to the
Agent, the Lease Assignments. Lease Assignments relating to facility leases
entered into by BREED or any Domestic Subsidiary after October 30, 1997 shall be
delivered on or before the Closing Date and thereafter as any new or additional
facility is leased by BREED or any Domestic Subsidiary.
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5.5. 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
has heretofore delivered, and caused each Domestic Subsidiary to deliver, to the
Agent, the Mortgages. Mortgages relating to real property acquired by BREED or
any Domestic Subsidiary after October 30, 1997 shall be delivered on or before
the Closing Date and thereafter as any new or additional real property is
acquired by BREED or any Domestic Subsidiary.
5.6. 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
has heretofore delivered, and caused each Domestic Subsidiary to deliver, to the
Agent, the Landlord Waivers. Landlord Waivers relating to facility leases
entered into by BREED or any Domestic Subsidiary after October 30, 1997 shall be
delivered on or before the Closing Date and thereafter as new or additional
facility is leased by BREED or any Domestic Subsidiary.
5.7. 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
has heretofore delivered, and caused each Domestic Subsidiary to deliver, 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 9.19; provided, however, that should any Intellectual
------------
Property Assignment require the consent of any third party, BREED and its
Domestic Subsidiaries shall use its best efforts to supply such Intellectual
Property Assignment; provided further that in the event the execution of an
Intellectual Property Assignment or the assignment or pledge of the Intellectual
Property shall result in a forfeiture of such Intellectual Property this
provision shall not apply to such Intellectual Property.
5.8. 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 has heretofore caused 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 issued after October 30, 1997.
5.9. Pledge of Partnership Interests. 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 hereby agrees to, and to cause each Subsidiary 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 acquired or
created after the Closing Date, other than the joint venture described in the
Siemens Joint Venture Agreement and any other
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joint venture or partnership interest which may not be assigned pursuant to the
terms of the joint venture or partnership agreement, and to deliver to the Agent
a Collateral Assignment of Partnership Interests within thirty (30) days of the
acquisition or creation of such interest pursuant to the terms of Section 9.19.
------------
5.10. 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 has heretofore
caused the Collateral Assignment of Trademark License Agreement to be delivered
to the Agent for the benefit of the Lenders.
5.11. 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.
5.12 Release of Security Interest. If at any time either (a) any
----------------------------
unsecured, long-term Indebtedness for Money Borrowed of BREED shall be rated
BBB- or Baa3 by S&P or Moody's, respectively, or (b) the Consolidated Leverage
Ratio shall be less than 2.00 to 1.00, the Agent shall, and the Lenders hereby
authorize, without any further action of the Lenders, the release of the Lien
of the security interest created in favor of the Agent for the benefit of the
Lenders in all Collateral other than Pledged Stock and Guaranties arising under
the Guaranty. The Borrowers shall reimburse the Agent for all costs and
expenses incurred in connection with the release of such Liens.
5.13. Release of Stock of BREED. The Agent and Lenders acknowledge
-------------------------
that from and after the Closing Date, the Agent shall have no further security
interest in the stock of BREED. On the Closing Date, the Agent shall release
and deliver to the pledgors thereof, the stock of BREED, and each of the Lenders
consents to such release and delivery.
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ARTICLE VI
Change in Circumstances
-----------------------
6.1. 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:
(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 Applicable Commitment Percentage of 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; provided, that no
--------
Lender will be entitled to any compensation for any such increased cost or
reduction if demand for payment thereof is made by such Lender more than 180
days after the occurrence of the circumstances giving rise to such claim. If
any Lender requests compensation by the Borrowers under this Section 6.1(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 6.4 shall be
-----------
applicable); provided that such suspension shall not affect the right of such
--------
Lender to receive the compensation so requested.
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<PAGE>
(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; provided, that no Lender will be entitled to any compensation for any
--------
such additional amounts if demand for payment thereof is made by such Lender
more than 180 days after the occurrence of the circumstances giving rise to such
claim.
(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 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.
6.2. 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.
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<PAGE>
6.3. 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 6.4 shall be applicable).
-----------
6.4. 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 6.1 or 6.3 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 6.3 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 6.1 or 6.3 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 Loans.
If such Lender gives notice to the applicable Borrower or Borrowers (with a copy
to the Agent) that the circumstances specified in Section 6.1 or 6.3 hereof that
------------------
gave rise to the Conversion of such Lender's Affected Loans pursuant to this
Section 6.4 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.
6.5. 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:
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(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 11.1) 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 VII
-----------
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 6.5 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.
6.6. 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 6.6) 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 the
Agent, at its address referred to in Section 13.2, 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 6.6) 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.
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<PAGE>
(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 6.6(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 6.6(a) or
-----------------
6.6(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.
(f) If the Borrowers are required to pay additional amounts to or for the
account of any Lender pursuant to this Section 6.6, 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.
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<PAGE>
(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 6.6 shall survive the termination of the Revolving Credit
-----------
Commitments and Term Loan Commitments and the payment in full of the Notes.
6.7. Lending Office. Without affecting its rights under this Article VI
-------------- ----------
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 VI, 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.
6.8. 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 or fails to make a
Loan in a requested Alternative Currency to (and such Lender shall) assign,
pursuant to Section 13.1, 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 6.5) 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 13.1.
- ------------
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<PAGE>
ARTICLE VII
Conditions to Making Loans and Issuing Letters of Credit
--------------------------------------------------------
7.1 Conditions of Extending Term Loan and Revolving Loans and making
----------------------------------------------------------------
Advances. The obligation of the Lenders to amend and restate this Agreement as
- --------
provided herein, of the Original Lenders which are continuing as Lenders
hereunder to continue their extension of credit hereunder, and of all Lenders to
extend the Term Loan and Revolving Loan and to make further Advances under the
Revolving Credit Facility, of NationsBank to make any Swing Line Loans and of
the Issuing Bank to issue any further Letters 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 additional Guaranties and the Security Instruments, if any,
required under either Article V or Section 8.19 of the Original
--------- ------------
Agreement, and the other Loan Documents, together with all schedules
and exhibits thereto;
(ii) the favorable written opinion or opinions with respect to
this Agreement, the Notes, the Confirmation of Guaranty and the
additional Guaranties and Security Instruments delivered pursuant to
Article V or Section 8.19 of the Original Agreement and the
transactions contemplated thereby of special counsel to the Loan
Parties dated the Closing Date, 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 and S-
----------- -
2 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 delivering this Agreement, the Notes, the
Confirmation of Guaranty or any additional Guaranty or Security
Instrument pursuant to Article V or Section 8.19 of the Original
Agreement on the Closing Date certified by its secretary or assistant
secretary as of the Closing Date, approving and adopting the Loan
Documents to be executed and delivered by such Person on the Closing
Date, and authorizing the execution and delivery thereof;
(iv) specimen signatures of officers of each of the Loan
Parties executing the Loan Documents delivered on the Closing Date on
behalf of such Person, certified by the secretary or assistant
secretary of such Person (or a certification by such secretary or
assistant secretary that the officers of the Loan Parties executing
Loan Documents delivered on the Closing Date are the same officers
with respect to whom incumbency and signature certifications were
delivered on October 30, 1997);
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(v) a certification by a Secretary or Assistant Secretary
as to the absence of any change to the Organizational Documents of
each of the Loan Parties executing the Loan Documents delivered on the
Closing Date since October 30, 1997 or if changed or not previously
furnished to the Agent the Organizational Documents certified as of a
recent date by the Secretary of State of its state of organization;
(vi) a certification by a Secretary or Assistant Secretary
as to the absence of any change to the Operating Documents of each of
the Loan Parties executing the Loan Documents delivered on the Closing
Date since October 30, 1997 or if changed or not previously furnished
to the Agent the Operating Documents certified as of the Closing Date
as true and correct by its secretary or assistant secretary;
(vii) a certificate issued as of a recent date by the
Secretary of State of the jurisdiction of formation of BREED as to the
due existence and good standing of BREED;
(viii) appropriate certificates of qualification to do
business, good standing and, where appropriate, authority to conduct
business under assumed name, issued in respect of BREED 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;
(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
entered into after October 30, 1997 certified as true and complete by
the Secretary or Assistant Secretary of the Loan Party thereto;
(xi) Modifications to Mortgage reflecting the amendments
made herein in each state such Modification to Mortgage is required or
advisable as determined by local counsel;
(xii) Intercompany Notes existing as of the Closing Date
together with endorsements or instruments of assignment executed in blank
and attached thereto;
(xiii) endorsements to the title policies insuring title to
the Mortgaged Properties updating the time and date of coverage of
such policy to the time and date of recordation of each Modification
to Mortgage, acceptable in form and substance to the Agent, provided
that, in lieu of such endorsements, title reports updating the title
to the time and date of recordation of the Modification to Mortgage
shall be acceptable to the Agent for the two Mortgaged Properties
located in Tennessee;
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(xiv) receipt and satisfactory review of Securities and
Exchange Commission Form 10-Q for BREED and its Subsidiaries as of
December 31, 1997 containing a consolidated balance and statements of
income demonstrating results of operations which are satisfactory to
the Agent;
(xv) receipt and satisfactory review of a pro forma
consolidated balance sheet, income statement and statement of cash
flows of BREED as of December 31, 1997, adjusted to (x) give effect to
the Allied Acquisition (y) the restructuring of existing Indebtedness
and (z) the restructuring plan related to the Allied Acquisition and
the effect of the synergies resulting therefrom which pro forma
statements shall demonstrate pro forma results of operations
acceptable to the Agent;
(xvi) notice of appointment of the initial Authorized
Representative(s);
(xvii) all schedules to the Credit Agreement and the other
Loan Documents which shall be reviewed by and satisfactory to the
Agent;
(xviii) evidence of the insurance program to be maintained by
BREED and its Subsidiaries, which such program shall be reasonably
satisfactory to the Agent;
(xix) evidence of the receipt by BREED of at least
$300,000,000 in proceeds from the sale of the Senior Subordinated
Notes;
(xx) evidence that all fees payable by BREED to the Agent,
Agent's counsel, NMS and the Lenders have been paid in full;
(xxi) an initial Borrowing Notice, if any; and
(xxii) 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
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<PAGE>
or its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect;
(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
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 (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; and
(iv) BREED and its Subsidiaries shall be in compliance with
all existing material financial obligations;
7.2. Conditions of all Loans and Letters of Credit. The obligations of the
---------------------------------------------
Lenders to make any Revolving Loans, of NationsBank to make any Swing Line Loan
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 or, in the case of Swing Line Loans, NationsBank shall
have received a Borrowing Notice if required by Article III;
-----------
(b) the representations and warranties of the Loan Parties set forth
in Article VIII 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 or Swing Line Loan, 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 8.6(a) shall be deemed to be
--------------
those financial statements most recently delivered to the Agent and the
Lenders pursuant to Section 9.1 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, Swing
Line Loan or the issuance of a Letter of Credit, no Default or Event of
Default specified in Article XI shall have occurred and be continuing; and
----------
(e) immediately after giving effect to:
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(i) a Revolving Loan, the aggregate principal balance of
all outstanding Revolving 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;
(iii) a Swing Line Loan, the Swing Line Outstandings shall
not exceed $20,000,000; and
(iv) a Loan or Letter of Credit issued in an Alternative
Currency, the Dollar Value of Loans and Letter of Credit Outstandings
in Alternative Currencies shall not exceed the Total Alternative
Currency Sublimit; and
(v) a Loan or a Letter of Credit or renewal thereof, the
sum of Letter of Credit Outstandings plus Revolving Credit
Outstandings plus Swing Line Outstandings shall not exceed the Total
Revolving Credit Commitment.
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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:
8.1 Organization and Authority.
--------------------------
(a) BREED and each Subsidiary is a corporation, partnership or
statutory business trust 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 and
where the failure to be so qualified could reasonably be expected to result
in a Material Adverse Effect;
(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);
8.2 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, order, determination, decree or
arbitral award of any Governmental Authority
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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;
8.3. Solvency. Each Loan Party is Solvent after giving effect to the
--------
transactions contemplated by the Loan Documents;
8.4. Subsidiaries and Stockholders. BREED has no Subsidiaries other than
-----------------------------
those Persons listed as Subsidiaries in Schedule 8.4 and additional Subsidiaries
------------
created or acquired after the Closing Date in compliance with Section 9.19;
------------
Schedule 8.4 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
--------
8.4, free and clear of any Lien;
- ---
8.5. Ownership Interests. BREED owns no interest in any Person other than
-------------------
the Persons listed in Schedule 8.4, Integrated Sensor Solutions, Inc. and the
------------
joint ventures described in the agreements provided to the Agent pursuant to
Section 7.1(a)(x), equity investments in Persons not constituting Subsidiaries
- -----------------
permitted under Section 10.6 and additional Subsidiaries created or acquired
------------
after the Closing Date in compliance with Section 9.19;
------------
8.6. 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 December 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
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BREED and its Subsidiaries as of the end of such Fiscal Year and six 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;
(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 8.6(a) or in Schedule 8.6 or permitted by Section 10.4, 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;
8.7. 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 8.7 and Liens permitted by Section
------------ -------
10.3;
- ----
8.8. 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 8.6(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;
8.9. 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 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
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(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.
8.10. Litigation. Except as set forth in Schedule 8.10, 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 to the best knowledge of the
Borrowers any properties or rights of BREED or any Subsidiary, which could
reasonably be expected to have a Material Adverse Effect;
8.11. 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 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;
8.12. 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. (S) 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;
8.13. 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;
8.14. 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
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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;
8.15. 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, or if so,
such consent, 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;
8.16. Employee Benefit Plans.
----------------------
(a) BREED, each ERISA Affiliate and each Subsidiary is in compliance
in all material respects with all applicable provisions of ERISA, the Code
and the regulations and published interpretations thereunder and in
compliance in all material respects 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,
or is in the process of receiving, 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
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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
which such Termination Event or unpaid withdrawal liability could
reasonably be expected to have a Material Adverse Effect;
(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
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;
8.17. No Default. As of the date hereof, there does not exist any Default
----------
or Event of Default hereunder;
8.18. 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 the failure to obtain
which could reasonably be expected to result in a Material Adverse Effect.
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,
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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;
8.19. Employment Matters. (a) Except as set forth in Schedule 8.19, 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;
8.20. 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;
8.21. 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 7.1 and of the agreements set forth in
-----------
Article V, 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 and the Intercompany Note Pledge
Agreement) by the parties thereto and completion of the filings and recordings
listed on Schedule 8.21 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 and the Intercompany Note Pledge Agreement) 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.
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8.22. Year 2000 Compliance. BREED and its Subsidiaries have (i) initiated
--------------------
a review and assessment of all areas within its and each of its Subsidiaries'
business and operations (including those affected by information received from
suppliers and vendors) that could reasonably be expected to be adversely
affected by the Year 2000 Problem, (ii) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan substantially in accordance with that timetable. BREED
reasonably believes that all computer applications (including those affected by
information received from its suppliers and vendors) that are material to its or
any of its Subsidiaries' business and operations will on a timely basis be Year
2000 Compliant, except to the extent that a failure to do so could not
reasonably be expected to have Material Adverse Effect.
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ARTICLE IX
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:
9.1. 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 (with a copy 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 10.1(a) through 10.1(e), 10.4(k), 10.6(j), 10.6(n), 10.8(c), and
---------------- ------- ------- ------- ------- -------
10.19 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 (with a copy 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 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 8.6(a) with respect to interim financial statements, and (ii) beginning
- --------------
with the fiscal quarter ending September 30, 1998 a certificate of an Authorized
Representative containing computations for such quarter comparable to that
required pursuant to Section 9.1(a)(ii);
------------------
(c) together with each delivery of the financial statements required by
Section 9.1(a)(i), deliver to the Agent (with a copy for each Lender) a letter
- -----------------
from BREED's accountants specified in Section 9.1(a)(i) stating that in
-----------------
performing the audit necessary to render an opinion on the financial statements
delivered under Section 9.1(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;
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(d) promptly upon their becoming available to BREED, BREED shall deliver
to the Agent (with a copy 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;
(e) 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;
(f) 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;
(g) promptly upon (i) approval by BREED and Siemens, deliver to the Agent
and each Lender the annual operating budget and business plan of BSRS Restraint,
(ii) upon receipt by BREED copies of all financial reports of BSRS Restraint
together with sufficient copies for each Lender, and (iii) request such other
information regarding BSRS Restraint as the Agent shall reasonably request.
Subject to Section 13.1(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, to the National Association of Insurance
Commissioners or to any other Person pursuant to legal process or who shall
acquire or consider the assignment of, or acquisition of any participation
interest in, any Obligation permitted by this Agreement provided that notice is
--------
given to BREED if such information is delivered to a Person not enumerated
herein.
9.2. 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 (except those created or permitted under the Loan
Documents) 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.
9.3. Existence, Qualification, Etc. Except as otherwise expressly
-----------------------------
permitted under Section 10.7, do or cause to be done all things necessary to
------------
preserve and keep in full force and effect its
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existence and all material rights and franchises, and, except to the extent
conveyed in connection with a transaction permitted under Section 10.5 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 and in which the failure to be so qualified could reasonably be
expected to result in a Material Adverse Effect.
9.4. 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.
9.5. 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 9.5. Each of the policies of
------------
insurance described in this Section 9.5 shall comply in all respects with the
-----------
terms of the Security Instruments.
9.6. 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.
9.7. 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.
9.8. 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.
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9.9. 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 the failure to obtain which could reasonably
be expected to result in a Material Adverse Effect.
9.10. 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 9.2 through 9.9, and 9.18 inclusive.
------------ --- ----
9.11. Officer's Knowledge of Default. Upon any Authorized Representative
------------------------------
or the General Counsel of BREED obtaining knowledge of any Default or Event of
Default, 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.
9.12. 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.
9.13. 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 that may reasonably be expected to have a
Material Adverse Effect; (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 if such release could not reasonably
be expected to result in a Material Adverse Effect; 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.
9.14. Environmental Compliance. If BREED or any Subsidiary shall receive
------------------------
any letter, notice, complaint, order, directive, claim or citation alleging that
BREED or any 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
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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.
9.15. Indemnification. Without limiting the generality or application of
---------------
Section 13.9, BREED hereby agrees to indemnify and hold the Agent, the Lenders
- ------------
and NMS, 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 9.15 shall survive the Facility Termination Date and
------------
expiration or termination of this Agreement.
9.16. 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.
9.17. 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
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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) below, 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 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.
9.18. Continued Operations. Except as permitted under Section 10.12,
-------------------- -------------
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.
9.19. 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
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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
(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 9.19 and addressed to the Agent and the Lenders, in form and
------------
substance substantially identical to the opinion of counsel delivered
pursuant to Section 7.1(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, resolutions (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 9.19.
------------
9.20. 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.
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9.21. Swap Agreements. Not later than thirty (30) days following the
---------------
Closing Date, the Borrowers shall fix or effectively cap exposure to interest
rate fluctuations relating to the Loans by entering into Swap Agreements or
similar agreements creating Rate Hedging Obligations at prevailing rates, with
counterparties having ratings of "A" or its equivalent or better by any
nationally recognized credit rating agency, 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.
9.22. 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 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.
9.23. Convertible Debentures. 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, unless an Indenture Event of Default
shall have occurred.
9.24. Year 2000 Compliance. BREED will promptly notify the Agent in the
--------------------
event BREED discovers or determines that any computer application (including
those affected by information received from its suppliers and vendors) that is
material to its or any of its Subsidiaries' business and operations will not be
Year 2000 Compliant on a timely basis, except to the extent that such failure
could not reasonably be expected to have a Material Adverse Effect.
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ARTICLE X
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
(except as otherwise indicated) to:
10.1. Financial Covenants.
-------------------
(a) Consolidated Net Worth. Permit Consolidated Net Worth to be less
----------------------
than sum of (i) $235,000,000, plus (ii) on a cumulative basis (with no
reduction for net losses during such period) 85% of Consolidated Net Income
for the most recently completed fiscal quarter of BREED beginning with the
fiscal quarter ending June 30, 1998, plus (iii) 100% of the Net Proceeds of
any Equity Offering.
(b) Consolidated Fixed Charge Ratio. Cause, suffer or permit the
-------------------------------
Consolidated Fixed Charge Ratio as of the end of each Four-Quarter Period
occurring during the respective periods set forth below to be less than the
ratio set forth opposite each such period:
Period Ratio
------ -----
June 30, 1998 to June 29, 1999 1.00 to 1.00
June 30, 1999 to June 29, 2000 1.15 to 1.00
Thereafter 1.25 to 1.00
(c) Consolidated Interest Coverage Ratio. Cause, suffer or permit
------------------------------------
the Consolidated Interest Coverage Ratio as of the end of each Four-Quarter
Period occurring during the respective periods set forth below to be less
than the ratio set forth opposite each such period:
Period Ratio
------ -----
June 30, 1998 to June 29, 1999 1.75 to 1.00
June 30, 1999 to June 29, 2000 2.00 to 1.00
June 30, 2000 to June 29, 2002 2.50 to 1.00
Thereafter 2.75 to 1.00
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<PAGE>
(d) Consolidated Leverage Ratio. Cause, suffer or permit at any time
---------------------------
the Consolidated Leverage Ratio as of the end of each Four-Quarter Period
occurring during the periods set forth below to exceed the ratio set forth
opposite each such period:
Period Ratio
------ -----
June 30, 1998 to June 29, 1999 5.75 to 1.00
June 30, 1999 to June 29, 2000 4.25 to 1.00
June 30, 2000 to June 29, 2001 3.75 to 1.00
Thereafter 3.50 to 1.00
(e) Capital Expenditures. Make or become committed to make during any
--------------------
Fiscal Year on a non-cumulative basis (so that amounts not expended in one
Fiscal Year may not be incurred in a subsequent Fiscal Year) Capital
Expenditures in excess of $100,000,000.
10.2 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 unless such Acquisition is a Permitted Acquisition.
10.3 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 Swap
Agreements and the following (collectively, the "Permitted Liens"):
(a) Liens existing as of the date hereof and as set forth in Schedule
--------
8.7;
---
(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 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
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<PAGE>
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 10.4(f) and incurred to purchase equipment and other personal or
---------------
real property in the ordinary course of business, 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 10.4(g) 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; and
(h) Liens created or incurred in connection with Permitted
Receivables Securitizations and Foreign Receivables Financing Transactions.
10.4. Indebtedness. Incur, create, assume or permit to exist any
------------
Indebtedness, howsoever evidenced, except the following, without duplication,
(collectively the "Permitted Indebtedness"):
(a) Indebtedness of BREED and its Domestic Subsidiaries existing as
of the Closing Date as set forth in Schedule 8.6; 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; provided, however, that any such Indebtedness may be
-------- -------
replaced, renewed or refinanced so long as the principal amount of such
Indebtedness, and the rate of interest, fees, and other payments relating
thereto, are not increased;
(b) Indebtedness owing to the Agent or any Lender in connection with
this Agreement, any Note or other Loan Document;
(c) the Senior Subordinated Notes;
(d) Indebtedness arising in connection with Rate Hedging Obligations
including those required under Section 9.21 so long as the notional amount
------------
of such Indebtedness does not at any time exceed $500,000,000;
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<PAGE>
(e) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(f) purchase money Indebtedness in an aggregate amount not to exceed
$10,000,000 at any time;
(g) Capital Leases in an aggregate principal amount not to exceed
$30,000,000 at any time;
(h) Intercompany Advances and Indebtedness evidenced by Intercompany
Notes not constituting Intercompany Advances existing on the Closing Date
and described in Schedule 10.4;
-------------
(i) Contingent Obligations in respect of Indebtedness permitted to be
incurred under this Section 10.4; provided, however, that (i) in the event
------------ -------- -------
any primary Indebtedness to which any such Contingent Obligation relates is
subordinated to the Obligations, such Contingent Obligation is subordinated
to the same extent and (ii) Contingent Obligations (without duplication),
of BREED and its Domestic Subsidiaries in respect of Indebtedness incurred
by Foreign Subsidiaries shall not exceed $140,000,000 at any one time
outstanding;
(j) unsecured Indebtedness in any aggregate outstanding amount at any
time not exceeding $25,000,000;
(k) Indebtedness of Foreign Subsidiaries, including Foreign
Receivables Financing Transactions, in an aggregate outstanding amount at
any time not exceeding $140,000,000;
(l) Indebtedness under the Convertible Debentures, the Convertible
Preferred Securities and the limited guaranty of the Convertible Preferred
Securities;
(m) Subject to Section 10.19, Indebtedness in respect of BSRS
-------------
Restraint;
(n) Indebtedness incurred in connection with a Permitted Receivables
Securitization; and
(o) Indebtedness of Foreign Subsidiaries which are not Borrowing
Subsidiaries to a Foreign Subsidiary which sole business is providing
financing for Foreign Subsidiaries (the "Finance Subsidiary") and
Indebtedness of the Finance Subsidiary to Foreign Subsidiaries to the
extent permitted under Section 10.6(j) and (k);
-----------------------
provided, however, that the aggregate amount of Indebtedness at any time
- --------
outstanding under clauses (a), (j) and (k) of this Section 10.4 shall not exceed
------------
$160,000,000.
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10.5. 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 or that of any Subsidiary; provided, however, such property may be
-------- -------
transferred to a Subsidiary;
(c) transfers of assets as an investment or in connection with
merger or consolidation transactions permitted by Sections 10.6 and 10.7;
------------- ----
(d) the sale, lease, transfer or other disposition of those assets
which are described in Schedule 10.5;
-------------
(e) sales of assets having a cumulative aggregate book value of
not to exceed 20% of Consolidated Net Worth, which assets do not constitute
capital stock of any Subsidiary if the purchase price of such capital stock
exceeds on a cumulative basis 5% of Consolidated Net Worth, so long as (i)
the purchase price for such assets is not less than the fair market value
as reasonably determined in good faith by BREED, (ii) the Net Proceeds are
applied as provided in Section 2.7, and (iii) no Default or Event of
-----------
Default exists after giving effect to such sale; and
(f) the sale of up to $25,000,000 or, if the Consolidated Leverage
Ratio as at the most recent fiscal quarter end is less than 3.00 to 1.00,
$75,000,000, of accounts receivable pursuant to a Permitted Receivables
Securitization so long as amounts received in connection with such sale in
excess of $25,000,000 are applied as provided in Section 2.7;
-----------
(g) the disposition of all or any part of the assets of Gallino
Plasturgia S.r.L.;
(h) the transfer of accounts receivables and all instruments,
documents and other assets relating thereto to a Receivables Subsidiary
subject to the limitations of subsection (f) and (i) of this Section;
(i) pursuant to Foreign Receivables Sales Transactions; and
(j) the sale, lease, transfer or other disposition of assets to
BSRS Restraint pursuant to the terms of the Siemens Joint Venture
Agreement.
10.6. 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:
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(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 8.4;
------------
(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) investments in Rate Hedging Obligations to the extent permitted
in Section 10.4(d);
---------------
(i) loans and investments in BSRS Restraint of up to the amount set
forth below opposite the Fiscal Year indicated, provided, that beginning in
--------
the Fiscal Year ending June 30, 2000 the amount of such loans or
investments may exceed the amount set forth below, however, such excess
occurring from and after the Fiscal Year ending June 30, 2000 shall be
added to Consolidated Fixed Charges:
Fiscal Year Amount
----------- ------
1998 $ 2,000,000
1999 $10,000,000
2000 $10,000,000
2001 and thereafter $15,000,000
(j) loans by Foreign Subsidiaries to the Financing Subsidiary in an
aggregate amount at any time not exceeding $30,000,000;
(k) loans by the Finance Subsidiary to the Foreign Subsidiaries in an
aggregate amount at any time not exceeding $30,000,000;
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(l) investments set forth in Schedule 10.4;
-------------
(m) transfers of assets permitted under Section 10.5; and
------------
(n) additional loans and investments of up to an aggregate amount at
anytime outstanding of ten percent (10%) of Consolidated Net Worth, subject
to the limitations set forth in clauses (g) through (k) of this Section
-------
10.6.
----
10.7. 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 10.2, 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.
10.8. Restricted Payments. Make any Restricted Payment or apply or set
-------------------
apart any of their assets therefor or agree to do any of the foregoing;
provided, however BREED may make the following Restricted Payments if prior to
- --------
and immediately after giving effect thereto no Default or Event of Default shall
exist and be continuing:
(a) the purchase, redemption or other acquisition of capital stock
of BREED acquired solely with the Net Proceeds of an Equity Offering of
capital stock of BREED having equal or inferior voting rights to the shares
so acquired;
(b) payments to the BTI Trust on the Convertible Debentures (and the
BTI Trust may make distributions on the Convertible Preferred Securities);
(c) if the Consolidated Leverage Ratio is equal to or less than 3.50
to 1.00 as at the end of the Four-Quarter Period most recently then ended
cash dividends of up to an aggregate of $10,000,000 plus fifty percent
(50%) of cumulative Consolidated Net Income earned subsequent to the
Consolidated Leverage Ratio being equal to or less than 3.50 to 1.00.
10.9. Transactions with Affiliates. Other than transactions permitted
----------------------------
under Sections 10.4, 10.5, 10.6, 10.7 and 10.8, transactions between BREED and
------------- ---- ---- ---- ----
the BTI Trust (to the extent necessary for BREED to perform its obligations with
respect to the Convertible Preferred Securities and for the BTI Trust to perform
its obligations with respect to the Convertible Debentures), and transactions
with Siemens or BSRS Restraint pursuant to the Siemens Joint Venture Agreement,
permit Guarantors, Borrowing Subsidiaries or Direct Foreign Subsidiaries, to
enter into any transaction after the Closing Date, including, without
limitation, the purchase, sale, lease or exchange of property,
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real or personal, or the rendering of any service, with any Affiliate of BREED
that is not a Loan Party, 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.
10.10. 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 which liability could
be reasonably expected to have a Material Adverse Effect; 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
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 and those existing on the date hereof; 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
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respects with the provisions of ERISA, the Code, all applicable Foreign
Benefit Laws and all other applicable laws and the regulations and
interpretations thereof.
10.11. Accounting Changes. Change its Fiscal Year or make any change in
------------------
its accounting treatment and reporting practices except as required by GAAP.
10.12. 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 10.7 or as provided in the Repositioning Plan
------------
furnished to the Agent and Lenders by BREED.
10.13. 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 except (i) BREED
or its Subsidiaries may enter into such transactions so long as the aggregate
amount of lease payments payable by BREED and its Subsidiaries in all such
transactions for any period of twelve consecutive months does not exceed
$25,000,000, (ii) BREED, Guarantors and Direct Foreign Subsidiaries (65% of
which stock is pledged to the Agent) may enter into such transactions on an
arms-length basis and (iii) Foreign Subsidiaries which are not Direct Foreign
Subsidiaries may engage in such transactions without limitation.
10.14. Change in Control. Cause, suffer or permit to exist or occur any
-----------------
Change of Control.
10.15. 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.
10.16. Prepayments, Etc. of Indebtedness. (a) Except as otherwise provided
---------------------------------
herein, 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 10.4(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.
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<PAGE>
10.17. 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.
10.18. Subsidiaries and Partnership. Create or acquire any Subsidiary or
----------------------------
become a general partner of any partnership except (a) for Receivables
Subsidiaries, (b) as permitted by Section 10.2, (c) the Financing Subsidiary and
------------
(d) for other Subsidiaries with respect to which the requirements of Section
-------
9.19 have been fulfilled.
- ----
10.19. BSRS Restraint. Permit that portion of the Indebtedness of BSRS
--------------
Restraint for which it is directly or indirectly liable to exceed at any time
$3,000,000.
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ARTICLE XI
Events of Default and Acceleration
----------------------------------
11.1. 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 and such
default continues unremedied for three Business Days; or
(c) if default shall be made in the performance or observance of any
covenant set forth in Section 2.7, 3.3(b), 9.7, 9.11, 9.12, or 9.19, or
------------ ------ --- ---- ---- ----
Article X;
---------
(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 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
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<PAGE>
Subsidiary in an amount not less than $10,000,000 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 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
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<PAGE>
(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 $5,000,000 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 $5,000,000 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
Repositioning Plan) or as otherwise permitted in this Agreement, 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 uninsured damage to or loss, theft or destruction of any of
the Collateral in an amount in excess of $5,000,000 shall occur;
(l) any actual or asserted invalidity by any Loan Party of the Loan
Documents; or
(m) if there shall occur any Termination Event other than as permitted
in Section 8.16(c) and 10.10(a); 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 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 Revolving Loans and Swing
Line Loans or to issue additional Letters of Credit terminated,
whereupon the obligation of each Lender to make further Revolving
Loans, of NationsBank to make further Swing Line 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,
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<PAGE>
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 Revolving Loans,
of NationsBank to make Swing Line 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.
11.2. 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.
11.3. 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.
11.4. 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.
11.5. 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 XI 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:
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<PAGE>
(a) amounts due to the Lenders pursuant to Sections 3.10, 4.3 and
----------------------
13.5;
(b) payments of interest on Loans, Swing Line Loans and Reimbursement
Obligations, to be applied for the ratable benefit of the Lenders;
(c) payments of principal of Loans, Swing Line 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 11.1(B);
---------------
(e) amounts due to the Lenders pursuant to Sections 4.2(g), 9.15 and
---------------------
13.9;
----
(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.
11.6. 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.
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ARTICLE XII
The Agent
---------
12.1. 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 12.5 and the first
------------
sentence of Section 12.6 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 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.
12.2. 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 13.1 hereof. As to any matters not expressly provided for by this
- ------------
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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.
12.3. 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 12.2 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.
12.4. Rights as Lender. With respect to its Revolving Credit Commitment
----------------
and Term Loan A 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.
12.5. Indemnification. The Lenders agree to indemnify the Agent (to the
---------------
extent not reimbursed under Section 13.9 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 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 13.5, to the extent that the Agent is not promptly reimbursed for such
- ------------
costs and expenses by
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the Borrowers. The agreements contained in this Section shall survive payment in
full of the Loans and all other amounts payable under this Agreement.
12.6. 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.
12.7. 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 and so long as no Default or Event of Default
exists shall otherwise be reasonably acceptable to BREED. 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 XII
-----------
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.
12.8. 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.
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ARTICLE XII
Miscellaneous
-------------
13.1. 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, its Term Loan A Commitment and its
Term Loan B 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, an
Affiliate of a Lender, or Approved Fund or an assignment of all of a Lender's
rights and obligations under this Agreement, any such partial assignment 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, Term Loan A Commitment or Term Loan B Commitment) in excess
thereof;
(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
A Facility shall be of a constant, and not varying, percentage of all of its
rights and obligations under the Term Loan A Facility and the Term Note A;
(v) each assignment by a Lender with respect to the Term Loan B
Facility shall be a constant, and not varying, percentage of all of its rights
and obligations under the Term Loan B Facility and the Term Note B; and
(vi) 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, acceptance and recordation 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
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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 6.6.
-----------
(b) The Agent shall maintain at its address referred to in Section 13.2 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 A Commitment and Term Loan B
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, Term Loan A
Commitment, Term Loan B 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 Notes 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, Term Loan A Commitment or Term Loan B 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 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
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<PAGE>
(which writing names the Borrowers as a third party beneficiary thereof) any
such assignee or participant or prospective assignee or participant to maintain
the confidentiality of any information delivered to it which is not publicly
available subject to the last paragraph of Section 9.1.
-----------
(g) Except in connection with a transaction permitted to occur by
Section 10.7, 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.
13.2. 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: Treasurer
Telephone: (941) 668-6000
Telefacsimile: (941) 668-6105
(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
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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:
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.
13.3. 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
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pursuant to this Section 13.3 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.
13.4. 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.
13.5. 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 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 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.
13.6. 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 XII 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 A
Commitments or Term Loan B Commitment 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 A Commitment or Term Loan B Commitment, (iv) change the percentage of the
Revolving Credit Commitments or Term Loan A Commitments or Term Loan B
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),
except as otherwise provided in this Agreement, release any Guarantor or Pledged
Stock or a
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material portion of the other Collateral except pursuant to any sale, merger or
consolidation permitted hereunder; provided, further, that no modification of
-------- -------
the relative proportion of any voluntary or mandatory prepayment to be received
by the Lenders holding, (a) Term Loan A shall be made without the consent of the
Lenders holding more than 50% of the Term Loan A, or (b) Term Loan B shall be
made without the consent of the Lenders holding more than 50% of the Term Loan B
or (c) Revolving Loans shall be made without the consent of the Lenders holding
more than 50% of the Revolving Loans; 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.
13.7. 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.
13.8. 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
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<PAGE>
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.
13.9. 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 13.9(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 13.9 shall survive the payment in full of the Loans and all
------------
other amounts payable under this Agreement and the Notes.
13.10. 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.
13.11. 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.
13.12. 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.
13.13. 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
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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 stated rates of interest
set forth herein 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 such applicable laws
which may hereafter be in effect and which allow a higher maximum nonusurious
interest rate than applicable laws now allow.
13.14. 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 CONSENT
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 THEY MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF
JURISDICTION OVER THEM AND THEIR 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.
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(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 13.2, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE
------------
APPLICABLE LAWS IN EFFECT IN THE STATE OF FLORIDA.
(d) NOTHING CONTAINED IN SUBSECTION (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.
13.15. 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 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.
13.16. Economic and Monetary Union in the European Community.
-----------------------------------------------------
121
<PAGE>
(a) The parties confirm that, except as provided in subsection (b) below
of this Section 13.16, the occurrence or non-occurrence of an event associated
-------------
with economic and monetary union in the European Community will not have the
effect of altering any term of, or discharging or excusing performance under,
this Agreement, any other Loan Document, any Loan or any transaction
contemplated by any of the foregoing, nor give a party the right unilaterally to
alter or terminate this Agreement, any other Loan Document, any Loan or any
transaction contemplated by any of the foregoing or give rise to an Event of
Default or otherwise be the basis for the effective designation of a Facility
Termination Date.
"An event associated with economic and monetary union in the European
Community" includes, without limitation, each (and any combination) of the
following:
(i) the introduction of, changeover to or operation of a single
or unified European currency (whether known as the euro or otherwise);
(ii) the fixing of conversion rates between a member state's
currency and the new currency or between the currencies of member states;
(iii) the substitution of that new currency for the Euro or ECU as
the unit of account of the European Community;
(iv) the introduction of that new currency as lawful currency in a
member state;
(v) the withdrawal from legal tender of any currency that, before
the introduction of the new currency, was lawful currency in one of the
member states; or
(vi) the disappearance or replacement of a relevant price source
for the Euro or ECU or the national currency of any member state, or the
failure of the agreed sponsor (or a successor sponsor) to publish or
display a relevant rate, index, price, page or screen.
(b) Any agreement between the parties that amends or overrides the
provisions of this Section in respect of any Loan or any other transaction
contemplated by this Agreement or any of the Loan Documents will be effective if
it is in writing and expressly refers to this Section or to European monetary
union or to an event associated with economic and monetary union in the European
Community and would otherwise be effective in accordance with Section 13.6.
-------------
(c) Each Borrower agrees that, notwithstanding anything to the contrary
contained in any agreement relating to "an event associated with economic and
monetary union in the European Community", upon the occurrence of any such
event, the Lenders shall have the right to convert any or all Alternative
Currency Loans into Loans denominated in Dollars determined as of such date as
may be selected by the Agent in its sole discretion.
13.17. Borrowers' Representative. Each Borrower hereby appoints and
-------------------------
authorizes BREED to act as its representative and agent hereunder to issue
notices and other communications on its
122
<PAGE>
behalf. Notwithstanding any provision herein to the contrary, the Agent, Issuing
Bank, NationsBank (as lender of Swing Line Loans) and each Lender agree that any
notice or other communication issued by an Authorized Representative on behalf
of any Borrower shall be acknowledged as a notice or other communication
properly issued by such Borrower and that it shall not recognize any notice or
other communication that was not issued by BREED as a properly authorized notice
or other communication from any Borrower.
[Signatures on following pages]
123
<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/ Judy Shatoff By: /s/ Robert J. Saltarelli
--------------------------------- -----------------------------------
Name: Robert J. Saltarelli
/s/ Stuart D. Boyd Title: Treasurer
---------------------------------
BREED AUTOMOTIVE SAFETY SYSTEMS SL
WITNESS:
/s/ Judy Shatoff By: /s/ Lizanne Guptill
--------------------------------- ------------------------------------
Name: Lizanne Guptill
/s/ Stuart D. Boyd Title: Vice-Secretary
---------------------------------
BREED ITALIAN HOLDINGS, SRL
WITNESS:
/s/ Judy Shatoff By: /s/ Lizanne Guptill
--------------------------------- ------------------------------------
Name: Lizanne Guptill
/s/ Stuart D. Boyd Title: Secretary
---------------------------------
BREED UK LIMITED
WITNESS:
/s/ Judy Shatoff By: /s/ Lizanne Guptill
--------------------------------- ------------------------------------
Name: Lizanne Guptill
/s/ Stuart D. Boyd Title: Secretary
---------------------------------
BREED R.F., GMBH
WITNESS:
/s/ Judy Shatoff By: /s/ Lizanne Guptill
--------------------------------- ------------------------------------
Name: Lizanne Guptill
/s/ Stuart D. Boyd Title: Secretary
---------------------------------
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
By: /s/ Miles C. Dearden III
--------------------------------
Name: Miles C. Dearden III
Title: Senior Vice President
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
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
Charlotte, North Carolina 28255
Attention: Agency Services
Telephone: (704) 388-2374
Telefacsimile: (704) 386-9923
Wire Transfer Instructions:
NationsBank, National Association
ABA #053000196
Account No.: 3750894026
Reference: BREED Technologies, Inc.
Attention: Agency Services
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
THE BANK OF NOVA SCOTIA
By: /s/ W. J. Brown
--------------------------------
Name: W. J. Brown
------------------------------
Title: Vice President
-----------------------------
Lending Office:
600 Peachtree Street, N.E.
Suite 600
Atlanta, Georgia 30308
Wire Transfer Instructions:
The Bank of Nova Scotia
New York, New York
ABA #026002532
Account #0606634/BNS Atlanta Agency
Attention: Phyllis Walker
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
BHF-BANK AKTIENGESELLSCHAFT
By: /s/ John Sykes
--------------------------------
Name: John Sykes
------------------------------
Title: Vice President
-----------------------------
By: /s/ Hans Scholz
--------------------------------
Name: Hans Scholz
------------------------------
Title: Assistant Vice President
-----------------------------
Lending Office:
590 Madison Avenue
New York, New York 10022
Wire Transfer Instructions:
Bank of New York
New York, New York
ABA #021000018
Account #8023014646
Reference: BHF-BANK/BREED
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.
By: /s/ Thomas N. Meyer
--------------------------------
Name: Thomas N. Meyer
------------------------------
Title: Senior Vice President
-----------------------------
Lending Office:
165 Broadway
New York, New York 10006
Wire Transfer Instructions:
Chase Manhattan Bank
New York, New York
ABA #021 000 021
Account Name: The Long-Term Credit Bank
of Japan, New York Branch
Account #544-7-75066
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Kim Striegl
--------------------------------
Name: Kim Striegl
------------------------------
Title: Authorized Agent
-----------------------------
Lending Office:
One First National Plaza
Suite 0167
Chicago, Illinois 60670
Wire Transfer Instructions:
The First National Bank of Chicago
Chicago, Illinois
ABA #071000013
Account #75217653
Attention: DES/BREED TECH
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
DRESDNER BANK AG NEW YORK AND
GRAND CAYMAN BRANCHES
By: /s/ Christopher E. Sarisky
--------------------------------
Name: Christopher E. Sarisky
------------------------------
Title: Assistant Vice President
-----------------------------
By: /s/ Brigitte Sacin
--------------------------------
Name: Brigitte Sacin
------------------------------
Title: Assistant Treasurer
-----------------------------
Lending Office:
190 South LaSalle Street
Suite 2700
Chicago, Illinois 60603
Wire Transfer Instructions:
Dresdner Bank AG, New York
New York, New York
ABA #026 008 303
For credit to: NYB 115.277/15
(for Interest & Principal
payments)
OR
NYB 115.277/16
(for L/C-related payments)
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ Stephanie E. Devane
-------------------------------------
Name: Executive Director
-----------------------------------
Title: CIBC Oppenheimer Corp., as Agent
----------------------------------
Lending Office:
425 Lexington Avenue
8th Floor
New York, NY 10017
Wire Transfer Instructions:
The Bank of New York
ABA #021000018
Account #890-0331-046 CIBC NY
Attention:
-----------------------
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
-------------------------------------
Name: Jeffrey W. Maillet
-----------------------------------
Title: Senior Vice President & Director
----------------------------------
Lending Office:
One Parkview Plaza, 5th Floor
Oakbrook Terrace, Illinois 60181
Wire Transfer Instructions:
State Street Bank & Trust
Boston, Massachusetts
ABA #011000028
Account #99001265
Reference: VKAC PRIT (Breed Technologies)
Attention: Mr. Sean Emerson
Telecopier No.: 617-664-5366
Telephone No.: 617-664-5481
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
SENIOR FLOATING RATE FUND
By: /s/ Jeffrey W. Maillet
-------------------------------------
Name: Jeffrey W. Maillet
-----------------------------------
Title: Senior Vice President & Director
----------------------------------
Lending Office:
One Parkview Plaza, 5th Floor
Oakbrook Terrace, Illinois 60181
Wire Transfer Instructions:
State Street Bank & Trust
Boston, Massachusetts
ABA #011000028
Account #99001265
Reference: VKAC PRIT (Breed)
Technologies)
Attention: Mr. Sean Emerson
Telecopier No.: 617-664-5366
Telephone No.: 617-664-5481
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
WACHOVIA BANK, N.A.
By: /s/ Patrick A. Phelan
--------------------------------
Name: Patrick A. Phelan
------------------------------
Title: Vice President
-----------------------------
Lending Office:
191 Peachtree Street
Atlanta, Georgia 30302
Wire Transfer Instructions:
Wachovia Bank, N.A.
Atlanta, Georgia
ABA #061000010
Account #18-171-498
Attention: Sharon Westmoreland
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
CREDIT LYONNAIS ATLANTA AGENCY
By: /s/ David M. Cawrse
-----------------------------------
Name: David M. Cawrse
---------------------------------
Title: First Vice President & Manager
--------------------------------
Lending Office:
303 Peachtree Street, N.E.
Suite 4400
Atlanta, Georgia 30308
Wire Transfer Instructions:
Credit Lyonnais New York Branch
New York, New York
ABA #0360-0807-3
Account #
------------------
Credit: CL Atlanta Agency
Attention: Loan Servicing
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
FLEET BANK, NATIONAL ASSOCIATION
By: /s/ Barrett D. Bencivenga
--------------------------------
Name: Barrett D. Bencivenga
------------------------------
Title: Senior Vice President
-----------------------------
Lending Office:
208 Harristown Road, 2nd Floor
Glen Rock, New Jersey 07452
Wire Transfer Instructions:
Fleet Bank, National Association
Syndications/Agent Bank Unit
ABA #021300019
GL Account #1510351-03102
Attention: Darlene Shoop
Reference: BREED Technologies, Inc.
Obligor Account #0002037661
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
THE FUJI BANK, LIMITED, NEW YORK
BRANCH
By: /s/ Teiji Teramoto
--------------------------------
Name: Teiji Teramoto
------------------------------
Title: Vice President & Manager
-----------------------------
Lending Office:
Two World Trade Center, 79th Floor
New York, New York 10048
Wire Transfer Instructions:
The Fuji Bank, Limited, New York Branch
New York, New York
ABA #026 009 700
Account Name: US Corporate Finance
Account #515 011 U3
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
SOCIETE GENERALE
By: /s/ Ralph Saheb
--------------------------------
Name: Ralph Saheb
------------------------------
Title: Vice President, Manager
-----------------------------
Lending Office:
2001 Ross Avenue
Suite 4800
Dallas, Texas 75201
Wire Transfer Instructions:
Societe Generale
New York, New York
ABA #026-004-226
For further credit to BREED Tech
Account #9044647
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
ARAB BANKING CORPORATION (B.S.C.)
By: /s/ Louise Bilbro
---------------------------------------------
Name: Louise Bilbro
-------------------------------------------
Title: Vice President
------------------------------------------
Lending Office:
277 Park Avenue, 32nd Floor
New York, New York 10172
Wire Transfer Instructions:
Chase Manhattan Bank
New York, New York
ABA #021-000-021
Name of Account: Arab Banking Corporation
Account #001-1-534682
Attention: Loan Administration
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
BAYERISCHE VERIENSBANK AG,
NEW YORK BRANCH
By: /s/ E. Ebner V. Eschenbach /s/ Sylvia K. Cheng
-------------------------------------------------
Name: E. Ebner V. Eschenbach Sylvia K. Cheng
----------------------------------------------
Title: Vice President Vice President
----------------------------------------------
Lending Office:
150 E. 42nd Street, 30th Floor
New York, New York 10017
Wire Transfer Instructions:
Bayerische Vereinsbank AG
New York, New York
ABA #026008 808 Bay Vereins Bk
Attention: Loan Servicing
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
COMPAGNIE FINANCIERE DE CIC ET DE
1'UNION EUROPEANNE
By: /s/ Anthony Rock /s/ Sean Mounier
-------------------------------------------------
Name: Anthony Rock Sean Mounier
-----------------------------------------------
Title: Vice President First Vice President
----------------------------------------------
Lending Office:
520 Madison Avenue, 37th Floor
New York, New York 10022
Attn: Anthony Rock
Wire Transfer Instructions:
Bankers Trust
New York, New York
ABA #021-001-033
Account #042-015-20
Attention: Louvenia Davis
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
CREDIT AGRICOLE INDOSUEZ
By: /s/ Dean Balice
----------------------------------------------
Name: Dean Balice
--------------------------------------------
Title: Senior Vice President/Branch Manager
-------------------------------------------
By: /s/ (illegible)
----------------------------------------------
Name: (illegible)
--------------------------------------------
Title: First VP & Deputy Chief Credit Officer USA
-------------------------------------------
Lending Office:
55 E. Monroe Street
Suite 4700
Chicago, Illinois 60603
Wire Transfer Instructions:
Citibank NA
New York, New York
ABA #021-000-089
Account #360 23 853
Attention: David Miller
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
FIRST COMMERCIAL BANK, NEW YORK
By: /s/ Vincent T.C. Chen
-----------------------------------------------
Name: Vincent T. C. Chen
---------------------------------------------
Title: SVP & General Manager
--------------------------------------------
Lending Office:
2 World Trade Center
Suite 7868
New York, New York 10048
Wire Transfer Instructions:
First Commercial Bank, New York
New York, New York
ABA #026012179
Attention: Helen Tong, Loan Dept.
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Janet K. Williams
-----------------------------------------------
Name: Janet K. Williams
---------------------------------------------
Title: Duly Authorized Signatory
--------------------------------------------
Lending Office:
201 High Ridge Road
Stamford, Connecticut 06927-5100
Wire Transfer Instructions:
Bankers Trust Company
New York, New York
ABA #021-001-033
Account Name: GECC CAF Depository
Account #50-232-854
Reference: CFN #2272 - BREED Technologies
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ Jeffrey Cole
-----------------------------------------------
Name: Jeffrey Cole
---------------------------------------------
Title: Senior Vice President
--------------------------------------------
Lending Office:
1251 Avenue of the Americas
New York, New York 10020-1104
Wire Transfer Instructions:
The Industrial Bank of Japan, Limited
New York, New York
ABA #026008345
Attention: Credit Administration
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
IKB DEUTSCHE INDUSTRIEBANK AG
LUXEMBOURG BRANCH
By: /s/ Wolfram Kieisel /s/ Manford Ziwey
-----------------------------------------------
Name: Wolfram Kieisel Manford Ziwey
---------------------------------------------
Title: Ass. Director Director
--------------------------------------------
Lending Office:
Wilhelm-Bozkes-StraBe 1, 40474 Dusseldorf
P.O. Box 10 11 18, 40002 Dusseldorf
Wire Transfer Instructions:
Bankers Trust Company
New York, New York
ABA #021-001-033
Account #04-082-832
Chips UID #245706
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
THE MITSUBISHI TRUST AND BANKING
CORPORATION, CHICAGO BRANCH
By: /s/ Hachiro Hosoda
-----------------------------------------------
Name: Hachiro Hosoda
---------------------------------------------
Title: Deputy General Manager
--------------------------------------------
Lending Office:
311 South Wacker Drive
Suite 6300
Chicago, Illinois 60606
Wire Transfer Instructions:
Harris Bank International
New York, New York
ABA #0260-0776-0
Account #990-266-77
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
TORONTO DOMINION (TEXAS), INC.
By: /s/ Debbie A. Greene
-----------------------------------------------
Name: Debbie A. Greene
---------------------------------------------
Title: Vice President
--------------------------------------------
Lending Office:
31 West 52nd Street
New York, New York 10019
Wire Transfer Instructions:
------------------------------------
------------------------------------
ABA #026009593
Account #6550-6-52270
Attention: Sheila M. Conley
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
PILGRIM AMERICA PRIME RATE TRUST
By: PILGRIM AMERICA INVESTMENTS, INC.
as its Investment Manager
By: /s/ Michael J. Bacevich
-----------------------------------------------
Name: Michael J. Bacevich
---------------------------------------------
Title: Vice President
--------------------------------------------
Lending Office:
c/o Pilgrim America Investments, Inc.
40 North Central Avenue
Suite 1200
Phoenix, Arizona 75044-4424
Wire Transfer Instructions:
State Street Bank & Trust Co.
Corporate Trust Department
ABA #011-00-0028
Account #9903-942-2
Reference: Pilgrim America Prime Rate Trust
BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
METROPOLITAN LIFE INSURANCE
COMPANY
By: /s/ James R. Dingler
-----------------------------------------------
Name: James R. Dingler
---------------------------------------------
Title: Director
--------------------------------------------
Lending Office:
334 Madison Avenue
Convent Station, New Jersey 07960
Wire Transfer Instructions:
Chase Manhattan Bank
New York, New York
ABA #021-000-021
Account #002-2-427850
Attention: Met Life Bank Syndications Account
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: /s/ Giles Marchand
-----------------------------------------------
Name: Giles Marchand
---------------------------------------------
Title:
--------------------------------------------
Lending Office:
c/o Merrill Lynch Asset Management
800 Scudders Mill Road, Area 1B
Plainsboro, New Jersey 08536
Wire Transfer Instructions:
Bank of New York
ABA #021-000-018
GLA #111-612
Account #245215
Account Name: Merrill Lynch Sr. Floating Rate Fund
Attention: Michelle Moore
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
OCTAGON LOAN TRUST
By: Octagon Credit Investors
as Manager
By: /s/ Richard W. Stewart
-----------------------------------------------
Name: Richard W. Stewart
---------------------------------------------
Title: Managing Director
--------------------------------------------
Lending Office:
380 Madison Avenue, 12th Floor
New York, New York 10017
Wire Transfer Instructions:
Name of Bank where funds are to be transferred:
State Street Bank and Trust Company
Contact: Wayne Elpus
Phone: 617/664-5596
Fax: 617/664-5291
ABA #011000028
Name of Account: Octagon Loan Trust
Account Number: 99039422
Reference: BREED Technologies, Inc.
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
ALLSTATE INSURANCE COMPANY
By: /s/ Charles D. Mires
-----------------------------------------------
Name: Charles D. Mires
---------------------------------------------
Title: Authorized Signatory
--------------------------------------------
By: /s/ Jerry D. Zinkula
-----------------------------------------------
Name: Jerry D. Zinkula
---------------------------------------------
Title: Authorized Signatory
--------------------------------------------
Lending Office:
3075 Sanders Road
Northbrook, Illinois 60062-7127
Wire Transfer Instructions:
Harris Trust and Savings Bank
ABA #071000288
Account Name: Allstate Insurance Company
Collection Account #168-114-7
Reference: BREED Technologies, Inc.
Term Loan B due 2006
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
AMARA-1 FINANCE LTD.
By: /s/ Ian David Moore
-----------------------------------------------
Name: Ian David Moore
---------------------------------------------
Title: Director
--------------------------------------------
Lending Office:
1166 Avenue of the Americas, 27th Floor
New York, New York 10036
Wire Transfer Instructions:
State Street Bank & Trust Co.
ABA #011-00-0028
Account #9903-942-2
Attention: Paul Thompson
Reference: AMARA-1 (BREED Technologies)
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
AMARA-2 FINANCE LTD.
By: /s/ Ian David Moore
-----------------------------------------------
Name: Ian David Moore
---------------------------------------------
Title: Director
--------------------------------------------
Lending Office:
-----------------------------------
-----------------------------------
Wire Transfer Instructions:
State Street Bank & Trust Co.
ABA #011-00-0028
Account #9903-942-2
Attention: Paul Thompson
Reference: AMARA-2 (BREED Technologies)
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
STRATA FUNDING LTD.
By: /s/ John Cullinane
-----------------------------------------------
Name: John Cullinane
---------------------------------------------
Title: Director
--------------------------------------------
Lending Office:
c/o Deutsche Morgan Grenfell (Cayman) Limited
P.O. Box 1984 GT, Elizabethan Square
Grand Cayman, Cayman Islands
Wire Transfer Instructions:
State Street Bank & Trust Company
-------------------------------
ABA #011-00-0028
Account #9900-126-5
Attention: Terrie Ly
Reference: Strata/Breed Technologies
SIGNATURE PAGE
CREDIT AGREEMENT
<PAGE>
EXHIBIT A
Applicable Commitment Percentages
I. Revolving Credit Facility
-------------------------
Lender Revolving Applicable
- ------ Credit Commitment
Commitment Percentage
---------- ----------
NationsBank, National Association $9,315,789.47 6.210526316%
The Bank of Nova Scotia $8,368,421.05 5.578947368%
BHF-Bank Aktiengesellschaft $8,368,421.05 5.578947368%
The Long-Term Credit Bank of Japan, Ltd. $8,368,421.05 5.578947368%
The First National Bank of Chicago $8,368,421.05 5.578947368%
Dresdner Bank AG New York and
Grand Cayman Branches $8,368,421.05 5.578947368%
Canadian Imperial Bank of Commerce $8,368,421.05 5.578947368%
Van Kampen American Capital Prime
Rate Income Trust $7,198,641.76 4.799094507%
Van Kampen American Capital Senior
Floating Rate Fund $1,169,779.29 .779852860%
Wachovia Bank, N.A. $6,947,368.42 4.631578947%
Credit Lyonnais Atlanta Agency $6,947,368.42 4.631578947%
Fleet Bank, National Association $6,947,368.42 4.631578947%
The Fuji Bank, Limited, New York Branch $6,947,368.42 4.631578947%
Societe Generale $6,947,368.42 4.631578947%
Arab Banking Corporation (B.S.C.) $4,736,842.11 3.157894737%
Bayerische Veriensbank AG, New York Branch $4,736,842.11 3.157894737%
A-1
<PAGE>
Compagnie Financiere de CIC et de 1'union
Europeenne $ 4,736,842.11 3.157894737%
Credit Agricole Indosuez $ 4,736,842.11 3.157894737%
First Commercial Bank, New York $ 4,736,842.11 3.157894737%
General Electric Capital Corporation $ 4,736,842.11 3.157894737%
The Industrial Bank of Japan, Limited $ 4,736,842.11 3.157894737%
IBK Deutsche Industriebank AG
Luxembourg Branch $ 4,736,842.11 3.157894737%
The Mitsubishi Trust and Banking Corporation,
Chicago Branch $ 4,736,842.11 3.157894737%
Toronto Dominion (Texas) Inc. $ 4,736,842.11 3.157894737%
--------------- -----------
$150,000,000.00 100%
II. Term Loan A Facility
--------------------
Lender Term Applicable
Loan A Commitment
Commitment Percentage
---------- ----------
NationsBank, National Association $20,184,210.53 6.210526316%
The Bank of Nova Scotia $18,131,578.95 5.578947368%
BHF-Bank Aktiengesellschaft $18,131,578.95 5.578947368%
The Long-Term Credit Bank of Japan, Ltd. $18,131,578.95 5.578947368%
The First National Bank of Chicago $18,131,578.95 5.578947368%
Dresdner Bank AG New York and
Grand Cayman Branches $18,131,578.95 5.578947368%
Canadian Imperial Bank of Commerce $18,131,578.95 5.578947368%
A-2
<PAGE>
Van Kampen American Capital Prime
Rate Income Trust $15,597,057.16 4.799094511%
Van Kampen American Capital Senior
Floating Rate Fund $ 2,534,521.79 .779852858%
Wachovia Bank, N.A. $15,052,631.58 4.631578947%
Credit Lyonnais Atlanta Agency $15,052,631.58 4.631578947%
Fleet Bank, National Association $15,052,631.58 4.631578947%
The Fuji Bank, Limited, New York Branch $15,052,631.58 4.631578947%
Societe Generale $15,052,631.58 4.631578947%
Arab Banking Corporation (B.S.C.) $10,263,157.89 3.157894737%
Bayerische Veriensbank AG, New York Branch $10,263,157.89 3.157894737%
Compagnie Financiere de CIC et de 1'union
Europeenne $10,263,157.89 3.157894737%
Credit Agricole Indosuez $10,263,157.89 3.157894737%
First Commercial Bank, New York $10,263,157.89 3.157894737%
General Electric Capital Corporation $10,263,157.89 3.157894737%
The Industrial Bank of Japan, Limited $10,263,157.89 3.157894737%
IBK Deutsche Industriebank AG
Luxembourg Branch $10,263,157.89 3.157894737%
The Mitsubishi Trust and Banking Corporation, $10,263,157.89 3.157894737%
Chicago Branch
Toronto Dominion (Texas) Inc. $10,263,157.89 3.157894737%
-------------- -----------
$325,000,000.00 100%
A-3
<PAGE>
III. Term Loan B Facility
--------------------
Lender Term Applicable
- ------ Loan B Commitment
Commitment Percentage
---------- ----------
NationsBank, National Association $104,000,000.00 52.000%
Van Kampen American Capital
Prime Rate Income Trust $ 17,204,301.08 8.602150540%
Van Kampen American Capital
Senior Floating Rate Fund $ 2,795,698.92 1.397849460%
Pilgrim America Prime Rate Trust $ 15,000,000.00 7.500%
Metropolitan Life Insurance Company $ 15,000,000.00 7.500%
Merrill Lynch Senior Floating Rate Fund, Inc. $ 10,000,000.00 5.000%
Octagon Loan Trust $ 8,000,000.00 4.000%
Allstate Insurance Company $ 8,000,000.00 4.000%
AMARA-1 Finance Ltd. $ 3,000,000.00 1.500%
AMARA-2 Finance Ltd. $ 4,000,000.00 2.500%
Strata Funding Ltd. $ 3,000,000.00 1.500%
--------------- -----------
$200,000,000.00 100%
A-4
<PAGE>
EXHIBIT B
Form of Assignment and Acceptance
DATED _______________, ____
Reference is made to the Amended and Restated Credit Agreement dated as of
April 28, 1998 (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 any of the Revolving Credit Commitment, the Term Loan A
Commitment or Term Loan B Commitment specified on Schedule 1. After giving
effect to such sale and assignment, the Assignee's Revolving Credit Commitment,
Term Loan A Commitment and Term Loan B 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 A
Commitment or Term Loan B Commitment, as the case may be, assumed by the
Assignee pursuant hereto and to the Assignor in an amount equal to the Revolving
Credit Commitment or Term Loan A Commitment or Term Loan B Commitment, as the
case may be, 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 9.1 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
B-1
<PAGE>
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 6.6.
-----------
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 a later date is otherwise specified on
Schedule 1.
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.
B-2
<PAGE>
SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
Percentage interest assigned:
(a) Revolving Credit Commitment ________%
(b) Term Loan A Commitment ________%
(c) Term Loan B 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 A Commitment: $_______
Aggregate outstanding principal amount
of Term Loan A assigned: $_______
Principal amount of Term Note A payable
to Assignee: $_______
Principal amount of Term Note A payable
to Assignor: $_______
Assignee's Term Loan B Commitment: $_______
Aggregate outstanding principal amount
of Term Loan B assigned: $_______
Principal amount of Term Note B payable
to Assignee: $_______
Principal amount of Term Note B payable
to Assignor: $_______
Effective Date (if other than date
of acceptance by Agent): _______, 19__
B-3
<PAGE>
[NAME OF ASSIGNOR], as Assignor
By:
---------------------------------
Title:
Dated: ,
---------------- -------
[NAME OF ASSIGNEE], as Assignee
By:
---------------------------------
Title:
Lending Office:
Accepted [and Approved] *
this ___ day of ___________, _____
NATIONSBANK NATIONAL ASSOCIATION
By:
----------------------------
Title:
[Approved this ____ day
of ____________, _____
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".
B-4
<PAGE>
EXHIBIT C
Notice of Appointment (or Revocation) of Authorized Representative
Reference is hereby made to the Amended and Restated Credit Agreement
dated as of April 28, 1998 (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 __________________, _____.
BREED TECHNOLOGIES, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
C-1
<PAGE>
EXHIBIT D-1
Form of Borrowing Notice
(Revolving Loan)
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 Amended and Restated Credit Agreement
dated as of April 28, 1998 (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.
BREED 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 to the Borrower indicated below if other than BREED:
Name of Borrower: ___________________________________
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)/ ------ --------- ------------
- -----------------------------------------------------
(1) For any Eurodollar Rate Loan, one, two, three or, if available, six
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,
Spanish Pesetas, Japanese Yen, ECU or Euro.
D-1-1
<PAGE>
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 Default exists either now or after giving
effect to the borrowing described herein; and
2. All the representations and warranties set forth in Article VIII 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
-------
8.6(a) of the Agreement are to those financial statements most recently
- ------
delivered to you pursuant to Section 9.1 of the Agreement (it being understood
-----------
that any financial statements delivered pursuant to Section 9.1(b) 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:
-------------------------------------
D-1-2
<PAGE>
EXHIBIT D-2
Form of Borrowing Notice
(Swing Line Loan)
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 Amended and Restated Credit Agreement dated
as of April 28, 1998 (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.
BREED hereby gives notice to NationsBank that a Swing Line Loan of the
amount set forth below be made on the date indicated:
Amount/(1)/ Date of Loan
----------- ------------
,
----------- ------------ ------
- -----------------
(1) Must be $500,000 or if greater an integral multiple of $100,000, unless a
Base Rate Refunding Loan.
The Borrower hereby requests that the proceeds of Swing Line 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 Default exists either now or after giving
effect to the borrowing described herein; and
2. All the representations and warranties set forth in Article VIII of
------------
the Agreement and in the Loan Documents (other than those expressly stated to
refer to a particular date) are true and
D-2-1
<PAGE>
correct as of the date hereof except that the reference to the financial
statements in Section 8.6(a) of the Agreement are to those financial statements
--------------
most recently delivered to you pursuant to Section 9.1 of the Agreement (it
-----------
being understood that any financial statements delivered pursuant to Section
-------
9.1(b) 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:
---------------------------------------------
D-2-2
<PAGE>
EXHIBIT E
Form of Collateral Assignment of Trademark License Agreement
[See Attached]
E-1
<PAGE>
COLLATERAL ASSIGNMENT OF TRADEMARK LICENSE AGREEMENT
THIS COLLATERAL ASSIGNMENT OF TRADEMARK LICENSE AGREEMENT (this
"Agreement") is made and entered into as of the 30th day of October, 1997 (the
"Agreement") by and between BREED TECHNOLOGIES, INC. (the "Guarantor and the
"Assignor") and NATIONSBANK, NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States, as Agent
(the "Agent") for each of the lenders (the "Lenders" and collectively with the
Agent, the "Secured Parties") now or hereafter party to the Credit Agreement (as
defined below). All capitalized terms used but not otherwise defined herein
shall have the respective meanings assigned thereto in the Credit Agreement.
W I T N E S S E T H:
--------------------
WHEREAS, the Secured Parties have agreed to provide to BREED
--------
Technologies, Inc. ("BREED") and certain Subsidiaries (collectively, the
"Borrower") certain credit facilities, including a term loan facility and a
revolving credit facility with a letter of credit sublimit and a multi-currency
sublimit pursuant to the Credit Agreement dated as of October 30, 1997 among the
Borrower and the Secured Parties (as from time to time amended, revised,
modified, supplemented, or amended and restated the "Credit Agreement"); and
WHEREAS, the Guarantor will materially benefit from the loans and advances
to be made, and the letters of credit to be issued, under the Credit Agreement
and the Guarantor is a party to that certain Guaranty Agreement (the "Guaranty")
dated as of the date hereof pursuant to which the Guarantor guaranteed the
Obligations of the Borrower; and
WHEREAS, as collateral security for payment and performance of the
Borrower's Obligations and the Guarantor's obligations under the Guaranty, the
Assignor is willing to collaterally assign and pledge, and grant to the Agent
for the benefit of the Secured Parties a security interest in, all of its right,
interest and title to all of the licenses granted to Assignor in that certain
Trademark License Agreement dated as of October 30, 1997 between the Assignor,
AlliedSignal Inc. and AlliedSignal Technologies Inc., as amended, (the "License
Agreement); and
WHEREAS, the Secured Parties are unwilling to enter into the Loan Documents
unless the Assignor enters into this Agreement;
NOW, THEREFORE, in order to induce the Secured Parties to enter into the
Loan Documents and to make Loans and issue Letters of Credit and in
consideration of the premises and the mutual covenants contained herein, the
parties hereto agree as follows:
<PAGE>
1. Creation of Security Interest and Collateral Assignment.
-------------------------------------------------------
(a) As collateral security for the payment and performance by the
Borrower of its now or hereafter existing Obligations [and the Guarantor's
obligations under the Guaranty] (the "Secured Obligations"), the Assignor
hereby collaterally assigns and pledges to the Agent for the benefit of the
Secured Parties, and grants to the Agent for the benefit of the Secured
Parties pursuant to the Florida Uniform Commercial Code (the "UCC") a
security interest in, all of the Assignor's now owned and hereafter
acquired contract rights, title and interest in and to the License
Agreement, and all obligations described therein, all moneys due and to
become due thereunder, and all proceeds and all other amounts and sums
receivable by the Assignor under the License Agreement (all of the
foregoing collectively referred to as the "Collateral").
(b) Simultaneously with the execution of this Agreement, the Assignor
shall deliver an original executed copy of the License Agreement to the
Agent, for the benefit of the Secured Parties, a copy of which is attached
hereto as Exhibit A and incorporated herein by reference, together with all
---------
necessary endorsements, assignments, and assignment statements necessary
to provide the Agent with a valid first priority Lien with respect to the
Collateral, including without limitation the execution in blank and
delivery of the Absolute Assignment in the form of Exhibit B attached
---------
hereto and incorporated herein by reference. At any time or times hereafter
at the request of the Agent, the Assignor shall execute and deliver all
assignments, endorsements, conveyances, assignment statements, security
agreements, affidavits, notices and all other agreements, instruments and
documents that the Agent requests and shall take any and all other steps
requested by the Agent in order to perfect and maintain the security
interests, assignments and liens in and against the Collateral as
contemplated herein.
2. Priority of Security Interests. The Assignor warrants and represents
------------------------------
that the security interest in and assignment of the Collateral granted and made
to the Agent, for the benefit of the Secured Parties, hereunder shall constitute
at all times a valid first priority perfected security interest in and
assignment by the Assignor of the Collateral and that such security interest in
and assignment of the Collateral shall not become subordinate or junior to the
security interests and assignments of any other Person. The Assignor shall not
grant (without the prior written approval of the Agent and the Required Lenders)
a security interest in or permit a Lien or encumbrance upon or assign or
otherwise grant any interest in any of the Collateral to anyone except the
Agent, for the benefit of the Secured Parties, as long as any of the Secured
Obligations remain unpaid. The Assignor further warrants and represents that no
previous assignments or security or other interests have been granted by the
Assignor in the Collateral, and that the Assignor has the power and authority to
assign and grant a security interest to the Agent, for the benefit of the
Secured Parties, in the Collateral pursuant to this Agreement.
3. Status of the Collateral.
------------------------
2
<PAGE>
(a) The Assignor represents and warrants that it is now and at all
times hereafter shall be the absolute owner, free and clear of all Liens,
encumbrances and security interests, except the collateral assignment to
the Agent granted herein or Permitted Liens, of indefeasible title to the
Collateral, that the License Agreement is valid and enforceable against
AlliedSignal Inc. and AlliedSignal Technologies Inc. and that the License
Agreement represents a valid and legally enforceable agreement according to
its terms.
(b) Upon the occurrence of and during the continuation of an Event of
Default, the Agent shall have the rights, without notice to the Assignor,
to notify any or all parties to the License Agreement, including without
limitation AlliedSignal Inc. and AlliedSignal Technologies, Inc., (i) that
the Agent has an assignment of the License Agreement and to direct all such
persons to make payments to the Agent, for the benefit of the Secured
Parties, of all sums owing by them to the Assignor; (ii) to direct all
notices to be given to the Assignor under the License Agreement to the
Agent, (iii) to settle or compromise on behalf of the Assignor any dispute
arising under the License Agreement; (iv) to extend and afford to the
Agent, for the benefit of the Secured Parties, all rights of the Assignor
under the License Agreement; (v) to sell or assign the Assignor's rights
under the License Agreement upon such terms as the Agent shall deem
advisable; and (vi) to discharge and release in the name of the Assignor
the License Agreement. Any and all disbursements for costs and expenses
incurred or paid by the Agent with respect to the enforcement, collection
or protection of their interest in the Collateral, or against the Assignor,
whether by suit or otherwise, including reasonable attorneys' fees, court
costs and similar expenses, if any, shall become a part of the Secured
Obligations secured by the Collateral, payable on demand.
(c) The Assignor will not assign or otherwise transfer its rights and
interest in the Collateral without the prior written consent of the Agent
and the Required Lenders. The Assignor will not amend, modify or waive any
term or provision of any of the Collateral nor shall it agree to a
compromise or any modifications of the terms of repayment of any of the
Collateral nor shall it release or terminate any of the Collateral without
the prior written consent of the Agent.
4. Preservation and Protection of the Collateral.
---------------------------------------------
(a) The Agent shall be under no duty or liability with respect to the
collection, protection or preservation of the Collateral, or otherwise,
beyond the use of reasonable care in the custody and preservation thereof
while in its possession.
(b) The Assignor agrees to pay when due all taxes, charges, Liens and
assessments against the Collateral, unless being contested in good faith by
appropriate proceedings diligently conducted and against which adequate
reserves have been established in accordance with GAAP applied on a
Consistent Basis. Upon the failure of the Assignor to so pay or contest
such taxes, charges, Liens or assessment, the Agent at its option may pay
or contest any of them (the Agent having the sole right to determine the
legality or validity and the amount necessary to discharge such taxes,
charges, Liens or assessments.)
3
<PAGE>
5. Rights and Remedies Upon Acceleration Event. Upon the occurrence of
-------------------------------------------
and during the continuation of an Event of Default, the Agent shall have the
following rights and remedies on behalf of the Secured Parties in addition to
any rights and remedies set forth elsewhere in this Agreement, all of which may
be exercised with or, if permitted by law, without notice to the Assignor:
(a) All of the rights and remedies of a secured party under the UCC,
all of which rights and remedies shall be cumulative, and none of which
shall be exclusive, to the extent permitted by law, in addition to any
other rights and remedies contained in this Agreement, the Credit
Agreement or any other Loan Document;
(b) The right to complete the Absolute Assignment and to have all
payments receivable by the Assignor under the Collateral remitted directly
to the Agent for the benefit of the Secured Parties to be applied on
account of the Secured Obligations in the manner set forth in Section 10.5
------------
of the Credit Agreement. The Agent, as a result of the Absolute
Assignment, shall have all rights and privileges of the Assignor granted by
the License Agreement, or by law with respect to the License Agreement, and
in the event of any default in payment or performance by the other party or
parties to the License Agreement, the Agent on behalf of the Secured
Parties may enforce and pursue all remedies which would otherwise then be
available to such Assignor.
(c) The right to sell, assign and deliver or collect the whole or part
of any of the Collateral, or any substitute therefor or any addition
thereto, in one or more sales, with or without any previous demands or
demand of performance or, to the extent permitted by law, notice or
advertisement, in such order as the Agent may elect; and any such sale may
be made either at public or private sale at the Agent's place of business
or elsewhere, either for cash or upon credit or for future delivery, at
such price as the Agent may reasonably deem fair; and the Agent may be the
purchaser of any or all Collateral so sold and hold the same thereafter in
its own right free from any claim of the Assignor or right of redemption.
The proceeds of any sale or other disposition of all or any part of the
Collateral, after payment of all costs and expenses thereof, including
reasonable attorneys' fees, may be applied by the Agent to the then
outstanding balance of any of the Secured Obligations. The Borrower shall
be liable for any deficiency remaining under the Secured Obligations in the
manner set forth in Section 10.5 of the Credit Agreement. Nothing
------------
contained in any of the Collateral, including the words of endorsement or
assignment "with recourse" or "without recourse" shall be deemed to
diminish or relieve the makers thereof or obligors thereunder of its or
their obligations to pay each of the License Agreements in full as required
by its terms and the terms hereof.
The rights, powers and remedies given to the Agent for the benefit of the
Secured Parties by this Agreement shall be in addition to all rights, powers and
remedies given to any Secured Party by virtue of any statute or rule of law.
Any forbearance or failure or delay by the Agent in exercising any right, power
or remedy hereunder shall not be deemed to be a waiver of such right, power or
4
<PAGE>
remedy, and any single or partial exercise of any right, power or remedy
hereunder shall not preclude the further exercise thereof; and every right,
power and remedy of the Secured Parties shall continue in full force and effect
until such right, power or remedy is specifically waived by the Required Lenders
by an instrument in writing.
6. Anti-Marshalling Provisions. The right is hereby given by each
---------------------------
Assignor to the Agent, for the benefit of the Secured Parties, to make releases
(whether in whole or in part) of all or any part of the Collateral agreeable to
the Agent without notice to, or the consent, approval or agreement of other
parties and interests, including junior lienors, which releases shall not impair
in any manner the validity of or priority of the Liens and security interests in
the remaining Collateral conferred under such documents, nor release such
Assignor from personal liability for the Secured Obligations hereby secured.
Notwithstanding the existence of any other security interest in the Collateral
held by the Agent, for the benefit of the Secured Parties, the Agent shall have
the right to determine the order in which any or all of the Collateral shall be
subjected to the remedies provided in this Agreement. The proceeds realized
upon the exercise of the remedies provided herein shall be applied by the Agent,
for the benefit of the Secured Parties, in the manner provided in Section 10.5
------------
of the Credit Agreement. Each Assignor hereby waives any and all right to
require the marshalling of assets in connection with the exercise of any of the
remedies permitted by applicable law or provided herein.
7. Attorney-in-Fact. The Assignor hereby appoints the Agent as the
----------------
Assignor's attorney-in-fact for the purposes of carrying out the provisions of
this Agreement and taking any action and executing any instrument which the
Agent may deem necessary or advisable to accomplish the purposes hereof, which
appointment is irrevocable and coupled with an interest; provided, that the
--------
Agent shall have and may exercise rights under this power of attorney only upon
the occurrence and during the continuance of an Event of Default. Without
limiting the generality of the foregoing, upon the occurrence and during the
continuance of an Event of Default, the Agent shall have the right and power to
receive, endorse and collect all checks and other orders for the payment of
money made payable to the Assignor representing any interest payment, principal
payment or other distribution payable or distributable in respect of, or
otherwise constituting, to the Collateral or any part thereof and to give full
discharge for the same.
8. Absolute Rights and Obligations. All rights of the Secured Parties in
-------------------------------
the Security Interests granted hereunder, and each of the Secured Obligations,
shall be absolute and unconditional irrespective of:
(a) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to departure from, the Credit
Agreement or any other Loan Document, including, but not limited to, (i) an
increase or decrease in the Secured Obligations and (ii) an amendment of
any Loan Document to permit the Agent or the Lenders or any one or more of
them to extend further or additional credit to the Borrower in any form
including credit by way of loan, purchase of assets, guarantee or
otherwise, which credit shall thereupon be and become subject to the Credit
Agreement and the other Loan Documents as a Secured Obligation;
5
<PAGE>
(b) any taking and holding of collateral or guarantees (including
without limitation any collateral pledged as security for the Secured
Obligations under the other Security Instruments) for all or any of the
Secured Obligations; or any amendment, alteration, exchange, substitution,
transfer, enforcement, waiver, subordination, termination or release of any
such collateral or guarantees, or any non-perfection of any such
collateral, or any consent to departure from any such guaranty;
(c) any manner of application of collateral, or proceeds thereof,
securing payment or enforcement of all or any of the Secured Obligations,
or the manner of sale of any such collateral;
(d) any consent by the Secured Parties to the change, restructure or
termination of the corporate structure or existence of the Borrower or any
Assignor and any corresponding restructure of the Secured Obligations, or
any other restructure or refinancing of the Secured Obligations or any
portion thereof;
(e) any modification, compromise, settlement or release by the Secured
Parties, by operation of law or otherwise, collection or other liquidation
of the Secured Obligations or the liability of the Borrower, any Assignor
or any Guarantor (other than the Assignor against which this Agreement is
to be enforced), or of any collateral for the Secured Obligation (including
without limitation any collateral pledged as security for the Secured
Obligations under the other Security Instruments), in whole or in part, and
any refusal of payment by the Agent or any Lender in whole or in part, from
any obligor or Guarantor (other than the Assignor against which this
Agreement is sought to be enforced) in connection with any of the Secured
Obligations, whether or not with notice to, or further assent by, or any
reservation of rights against, any Assignor; or
(f) any other circumstance (including without limitation any statute
of limitations) that might otherwise constitute a defense available to, or
a discharge of, the Borrower, any Guarantor or an Assignor.
The granting of a Security Interest in the Collateral shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Secured Obligations is rescinded or must otherwise be returned by any
Secured Party, upon the insolvency, bankruptcy or reorganization of the Borrower
or any Assignor or otherwise, all as though such payment had not been made.
9. Waiver by Assignor.
------------------
(a) The Assignor waives demand, protest, and notice of any protest,
default, release, compromise, settlement, extension or renewal and notice
of any action taken by the Agent unless expressly required by law.
6
<PAGE>
(b) Upon the occurrence and during the continuation of an Event of
Default, the Assignor irrevocably waives the right to direct the
application of any and all payments (including any proceeds which are part
of the Collateral) at any time or times hereafter which may be received by
the Agent by or for the benefit of the Assignor and the Assignor does
hereby irrevocably agree that the Agent shall have the continuing exclusive
right to apply and reapply any and all such payments received at any time
or times hereafter in such manner as it determines in its sole discretion.
(c) The Assignor waives (to the extent permitted by applicable law)
any right to require any Secured Party or any other obligee of the Secured
Obligations to (i) proceed against the Borrower, any other Guarantor, or
any other Person, (ii) proceed against or exhaust any collateral securing
payment or performance of any of the Secured Obligations, or (iii) pursue
any other remedy in its power; and waives (to the extent permitted by
applicable law) any defense arising by reason of any disability or other
defense of the Borrower, any Guarantor, any other Person, or by reason of
the cessation from any cause whatsoever of the liability of the Borrower,
any Guarantor or any other Person.
(d) The Assignor authorizes any Secured Party and any other obligee of
the Secured Obligations without notice (except notice required by
applicable law) or demand and without affecting its liability hereunder or
under the Loan Documents from time to time to (i) take and hold security,
other than the Collateral herein described, for the payment of such Secured
Obligations or any part thereof, and exchange, enforce, waive and release
the Collateral herein described or any part thereof or any such other
security; and (ii) apply such Collateral or other security and direct the
order or manner of sale thereof as such Secured Party or obligee in its
discretion may determine.
10. Definitions. All terms used herein shall be defined in accordance
-----------
with the appropriate definitions appearing in the Uniform Commercial Code as in
effect in Florida, and such definitions are hereby incorporated herein by
reference and made a part hereof.
11. Entire Agreement. This Agreement, together with the Credit Agreement,
----------------
the Guaranty Agreement and other Loan Documents, constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior agreements and understandings,
inducements, commitments or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof. Neither this Agreement nor any portion or provision hereof may be
changed, altered, modified, supplemented, discharged, canceled, terminated, or
amended orally or in any manner other than by an agreement, in writing signed by
the parties hereto.
12. Binding Agreement; Assignment. This Agreement, and the terms,
-----------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto, and to their respective successors and assigns, except
that the Assignor shall not be permitted to assign this Agreement or any
interest herein or in the Collateral, or any part thereof, or otherwise pledge,
7
<PAGE>
encumber or grant any option with respect to the Collateral, or any part
thereof. All references herein to the Agent shall include any successor
thereof, each Lender and any other obligees from time to time of the Secured
Obligations.
13. Further Assurances. The Assignor agrees at its own expense to do
------------------
such further acts and things, and to execute and deliver such additional
conveyances, assignments, financing statements, agreements and instruments, as
the Agent may at any time reasonably request in connection with the
administration or enforcement of this Agreement or related to the Collateral or
any part thereof or in order better to assure and confirm unto the Agent its
rights, powers and remedies for the benefit of the Lenders hereunder. The
Assignor hereby consents and agrees that the issuers of or obligors in respect
of the Collateral shall be entitled to accept the provisions hereof as
conclusive evidence of the right of the Agent, on behalf of the Lenders, to
exercise its rights hereunder with respect to the Collateral, notwithstanding
any other notice or direction to the contrary heretofore or hereafter given by
the Assignor or any other Person to any of such issuers or obligors.
14. Swap Agreements. All obligations of the Borrower under Swap
---------------
Agreements shall be deemed to be Secured Obligations secured hereby, and each
Lender or affiliate of a Lender party to any such Swap Agreement shall be deemed
to be a Secured Party hereunder.
15. Severability. In case any Lien, security interest or other right of
------------
any Secured Party or any provision hereof shall be held to be invalid, illegal
or unenforceable, such invalidity, illegality or unenforceability shall not
affect any other Lien, security interest or other right granted hereby or
provision hereof.
16. Counterparts. This Agreement may be executed in any number of
------------
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
17. Indemnification. Without limitation of Section 12.9 of the Credit
---------------
Agreement or any other indemnification provision in any Loan Document, the
Assignor hereby covenants and agrees to pay, indemnify, and hold the Secured
Parties harmless from and against any and all other out-of-pocket liabilities,
costs, expenses or disbursements of any kind or nature whatsoever arising in
connection with any claim or litigation by any Person resulting from the
execution, delivery, enforcement, performance and administration of this
Agreement or the Loan Documents, or the transactions contemplated hereby or
thereby, or in any respect relating to the Collateral or any transaction
pursuant to which the Assignor has incurred any Obligation (all the foregoing,
collectively, the "indemnified liabilities"); provided, however, that the
-------- -------
Assignor shall have no obligation hereunder with respect to indemnified
liabilities directly and primarily arising from the willful misconduct or gross
negligence of the Agent or any Lender. The agreements in this subsection shall
survive repayment of all Secured Obligations, termination or expiration of this
Agreement and occurrence of the Facility Termination Date.
18. Termination. This Agreement and all obligations of the Assignor
-----------
hereunder shall terminate on the Facility Termination Date, at which time the
Liens and rights granted to the Agent
8
<PAGE>
for the benefit of the Secured Parties hereunder shall automatically terminate
and no longer be in effect, and the Collateral shall automatically be released
from the Liens created hereby.
19. Remedies Cumulative. All remedies hereunder are cumulative and are
-------------------
not exclusive of any other rights and remedies of the Agent provided by law or
under the Credit Agreement, the other Loan Documents, or other applicable
agreements or instruments. The making of the Loans to, and the issuing of
Letters of Credit for the benefit of, the Borrower pursuant to the Credit
Agreement shall be conclusively presumed to have been made or extended,
respectively, in reliance upon each Assignor's assignment of the Collateral
pursuant to the terms hereof.
20. Notices. Any notice required or permitted hereunder shall be given,
-------
(a) with respect to the Assignor, at the address of the Borrower indicated in
Section 12.2 of the Credit Agreement and (b) with respect to the Agent or a
- ------------
Lender, at the Agent's address indicated in Section 12.2 of the Credit
------------
Agreement. All such notices shall be given and shall be effective as provided
in Section 12.2 of the Credit Agreement.
-------------
21. Governing Law; Venue; Waiver of Jury Trial.
------------------------------------------
(a) THIS AGREEMENT 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 ASSIGNOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES 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 ASSIGNOR EXPRESSLY WAIVES 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 ASSIGNOR HEREBY IRREVOCABLY SUBMITS GENERALLY
AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
(c) THE ASSIGNOR AGREES 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 BORROWER PROVIDED IN
SECTION
-------
9
<PAGE>
12.2 OF THE CREDIT AGREEMENT, 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 (b) or (c) HEREOF SHALL PRECLUDE
----------------------
ANY SECURED PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION WHERE
THE ASSIGNOR OR ANY OF THE ASSIGNOR'S PROPERTY OR ASSETS MAY BE FOUND OR
LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH
JURISDICTION, THE ASSIGNOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION
OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION
OR PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER IT AND ITS
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 THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION THEREWITH, THE ASSIGNOR AND THE AGENT ON BEHALF OF 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.
[Signature page follows.]
10
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Collateral
Assignment of Trademark License Agreement on the day and year first written
above.
ASSIGNOR:
BREED TECHNOLOGIES, INC.
WITNESS:
By:
-----------------------------
Name: Lizanne Guptill
- ------------------ ---------------------------
Title: Secretary
- ------------------ --------------------------
AGENT:
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
WITNESS:
By:
-----------------------------
Name: Miles C. Dearden, III
- ----------------- ---------------------------
Title: Senior Vice President
- ----------------- --------------------------
COLLATERAL ASSIGNMENT OF TRADEMARK LICENSE AGREEMENT
SIGNATURE PAGE 1 OF 1
<PAGE>
EXHIBIT A
License Agreement
-----------------
See Attached.
<PAGE>
EXHIBIT B
Form of Absolute Assignment
---------------------------
ABSOLUTE ASSIGNMENT OF TRADEMARK LICENSE AGREEMENT
KNOW ALL MEN by these presents that BREED Technologies, Inc., a Delaware
corporation (the "Licensee") is the Licensee of the Licensed Trademarks as set
forth and defined in that certain Trademark License Agreement dated as of
October 30, 1997 attached hereto with AlliedSignal Inc. and AlliedSignal
Technologies Inc. ("License Agreement") and, in consideration of the credit
facilities from NationsBank, National Association, a national banking
association, as Agent (the "Agent") for each of the lenders (the "Lenders") now
or hereafter party to that certain Credit Agreement dated as of October 30, 1997
among Breed Technologies, Inc. and certain Subsidiaries, the Agent and the
Lenders (as from time to time amended, supplemented or restated, the "Credit
Agreement") and has sold, assigned, transferred, sublicensed and set over, and
by this assignment does sell, assign, transfer, sublicense and set over to the
Agent, all of its right title, and interest in the License Agreement, and the
obligations described therein and any monies due and to become due thereunder.
TO HAVE AND TO HOLD the same unto Agent, its successors and assigns
forever.
IN WITNESS WHEREOF, the Licensee has caused this Assignment to be executed
as of the ___ day of ____, ____.
WITNESS:
BREED TECHNOLOGIES, INC.
- -----------------
- -----------------
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE>
EXHIBIT F
Form of Collateral Assignment of Partnership Interests
[See Attached]
F-1
<PAGE>
COLLATERAL ASSIGNMENT OF PARTNERSHIP INTERESTS
THIS COLLATERAL ASSIGNMENT OF PARTNERSHIP INTERESTS (the "Assignment") is
made and entered into as of this ____ day of _______, 199_ by and between
_________________________________, a ________ corporation (the "Assignor"), and
NATIONSBANK, NATIONAL ASSOCIATION, a national banking association organized and
existing under the laws of the United States, as Agent (the "Agent") for each of
the financial institutions (the "Lenders" and collectively with the Agent the
"Secured Parties") now or hereafter party to the Credit Agreement (as defined
below). All capitalized terms used but not otherwise defined herein shall have
the respective meanings assigned thereto in the Credit Agreement.
W I T N E S S E T H:
-------------------
WHEREAS, the Secured Parties have agreed to provide to BREED TECHNOLOGIES,
INC., ("BREED") and certain Subsidiaries (collectively, the "Borrower") certain
credit facilities, including a term loan facility and a revolving credit
facility with a letter of credit sublimit and a multi-currency sublimit pursuant
to the Amended and Restated Credit Agreement dated as of April 28, 1998 among
the Borrower and the Secured Parties (as from time to time amended, revised,
modified, supplemented, or amended and restated the "Credit Agreement"); and
WHEREAS, _______________ is the sole limited partner, and
____________________ is the sole general partner, of ___________________, a
_______ limited partnership ("_________"); and
WHEREAS, each Assignor pursuant to the terms of a Guaranty Agreement dated
as of the date hereof (the "Guaranty"), has guaranteed to the Secured Parties
the payment and performance of Borrower's Obligations (the "Guarantor's
Obligations"); and
WHEREAS, as collateral security for the payment and performance of the
Guarantor's Obligations, each Assignor is willing to pledge and grant to the
Agent for the benefit of the Secured Parties a security interest in, and
collaterally assign to the Agent for the benefit of the Secured Parties, all of
its Assigned Interests, including without limitation the Assigned Interests more
particularly described on Schedule I hereto; and
----------
WHEREAS, the Secured Parties are unwilling to enter into the Loan Documents
unless the Assignors enter into this Assignment; and
NOW, THEREFORE, in order to induce the Secured Parties to enter into the
Loan Documents and to make Loans and issue Letters of Credit and in
consideration of the premises and the mutual covenants contained herein, the
parties hereto agree as follows:
1. Assignment.
----------
<PAGE>
(a) As collateral security for the payment and performance of all
debts, obligations or liabilities now or hereafter existing, absolute or
contingent, of the Assignors to the Secured Parties under the Guaranty and the
other Loan Documents, including without limitation the Guarantor's Obligations
for the respective applicable Assignors (all the foregoing collectively referred
to herein as the "Secured Obligations"), each Assignor hereby collaterally
assigns to the Agent for the benefit of the Secured Parties, and grants to the
Agent for the benefit of the Secured Parties pursuant to the Florida Uniform
Commercial Code (the "UCC") a first priority security interest in the Assigned
Interests and all of the following:
(i) all cash, securities, rights (including without limitation
any and all rights to subscribe to additional partnership interests),
and other property at any time and from time to time declared or
distributed in respect of or in exchange for any or all of the
Assigned Interests; and
(ii) all other property hereafter delivered to any of the
Assignors in substitution for or in addition to any of the foregoing
and all certificates and instruments representing or evidencing any
Assigned Interests or such other property.
All such Assigned Interests, certificates, instruments, cash, securities,
interest, distributions, rights and other property referred to in this
Section 1 are herein collectively referred to as the "Assigned Collateral."
---------
All of the Assigned Interests currently owned by the Assignors are listed
on Schedule I hereto.
----------
(b) All advances, charges, costs and expenses, including reasonable
attorneys' fees, incurred or paid by any Secured Party in exercising any
right, power or remedy conferred by this Assignment, or in the enforcement
thereof, shall become a part of the Secured Obligations secured hereunder
and shall be paid jointly and severally by the Assignors to the Agent for
the benefit of the Secured Parties immediately upon demand therefor, with
interest thereon if not paid when due until paid in full at the Default
Rate.
2. Financing Statements. At the time of execution of this Agreement,
--------------------
each Assignor shall have furnished the Agent with properly executed financing
statements and assignments as prescribed by the UCC, prepared and approved by
the Agent in form and number sufficient for filing wherever required with
respect to the Assigned Collateral, in order that the Agent, for the benefit of
the Secured Parties, shall have a duly perfected security interest of record in
the Assigned Collateral, to the extent a security interest in such Assigned
Collateral can be perfected by filing a financing statement, following the
filing of such financing statements with the appropriate local and state
governmental authorities. Each Assignor shall execute as required by the Agent
any additional financing statements or other documents to effect the same,
together with any continuation statements determined by the Agent to be
necessary so long as this Assignment remains in effect.
3. Rights in Assigned Collateral. It is expressly understood and agreed
-----------------------------
that the Agent shall not exercise any of the rights, remedies or powers
conferred upon it under Section 10 hereof until an Event of Default shall occur.
----------
Upon the occurrence of an Event of Default, the Agent shall
2
<PAGE>
have the right, at any time at its discretion and without notice to the
Assignors, to exercise and enjoy each of the Assignors' rights, remedies,
benefits and privileges in the Assigned Collateral provided under this
Assignment.
4. Representations and Warranties. Each Assignor represents and warrants
------------------------------
as follows:
(a) the Assigned Interests have been duly authorized and validly
issued;
(b) the Assigned Interests constitute, and during the term of this
Assignment will constitute, all of the general or limited partnership
interests, respectively, owned by the Assignors;
(c) each Assignor is, and during the term of this Assignment will be,
the legal and beneficial owner of its respective portion of the Assigned
Collateral free and clear of any Lien, security interest, option or other
charge, claim, agreement, encumbrance or restriction except for the
assignment, liens and security interest created by this Assignment;
(d) each Assignor has the full power and authority to assign its
respective portion of the Assigned Interests to the Agent pursuant to this
Assignment;
(e) the assignment of the Assigned Interests to the Agent and the
filing of financing statements and registration thereof pursuant to
Section 2 and Section 18 of this Assignment, respectively, creates a valid
--------- ----------
and perfected first priority security interest in the Assigned Collateral,
securing the payment of the Secured Obligations;
(f) each Assignor will defend its respective title to the Assigned
Collateral against the claims of all Persons;
(g) no portion of the Assigned Interests is, or during the term of
this Assignment will be, subject to any right of first refusal or other
restriction which could affect the ability of any purchaser thereof from
Agent to sell the same;
(h) each Assignor shall at all times cause the Assigned Interests to
be and remain uncertificated, and in the event, notwithstanding the
foregoing, the Assigned Interests or any of them are certificated, to
deliver such certificates promptly to the Agent together with such
instruments of assignment and transfer duly executed in blank by such
Assignor as the Agent shall request; and
(i) each Assignor shall pay when due all taxes, charges, Liens and
assessments against the Assigned Collateral, unless being contested in good
faith by appropriate proceedings diligently conducted and against which
adequate reserves have been established in accordance with GAAP applied on
a Consistent Basis. Upon the failure of such Assignor to so pay or contest
such taxes, charges, Liens or assessments, the Agent at its option may
3
<PAGE>
pay or contest any of them (the Agent having the sole right to determine
the legality or validity and the amount necessary to discharge such taxes,
charges, Liens or assessments) and all such payments and all costs or
expenses incurred in connection with any such contest shall be deemed part
of the Secured Obligations and shall be secured by the Assigned Collateral.
5. Voting Rights, Consensual Rights, Dividends and Distributions.
-------------------------------------------------------------
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) each Assignor shall be entitled to exercise any and all
management, voting and other consensual rights pertaining to the
Assigned Collateral or any part thereof for any purpose not
inconsistent with the terms of this Assignment, the Credit Agreement
and the other Loan Documents;
(ii) each Assignor shall be entitled to receive and retain any
and all cash distributions paid on the Assigned Collateral which it is
otherwise entitled to receive, notwithstanding the assignment and transfer
of the Assigned Collateral and the grant of a security interest in Section
-------
1 of this Assignment; provided, however, upon the occurrence and during the
- -------- -------
continuation of an Event of Default all such rights and entitlements set
forth herein of each Assignor to receive and retain any such cash
distributions shall cease; provided further, however, any and all
-------- ------- -------
liquidating distributions, distributions in property, returns of capital or
other distributions made on or in respect of any of the Assigned
Collateral, whether received in exchange for the Assigned Collateral or any
part thereof or as a result of any merger, consolidation, acquisition or
other exchange of assets to which any issuer of any Assigned Collateral may
be a party or otherwise, and any and all cash and other property received
in exchange for any of the Assigned Collateral shall be and become part of
the Assigned Collateral hereunder and, if received by such Assignor, shall
forthwith be delivered to the Agent as provided in Section 5(b)(ii) hereof;
----------------
and
(b) Upon the occurrence and during the continuance of an Event of
Default:
(i) all rights of each Assignor to exercise the management,
voting and other consensual rights which it would otherwise be
entitled to exercise pursuant to Section 5(a)(ii) and to receive and
----------------
retain the distributions which it would otherwise be authorized to
receive and retain pursuant to Section 5(a)(ii) shall become vested in
----------------
the Agent, which shall thereupon have the sole right to exercise such
management, voting and other consensual rights and to receive and hold
as Assigned Collateral such distributions (whether or not the relevant
Assigned Collateral shall have been transferred into the name of the
Secured Parties or any of their nominees, each Assignor hereby
irrevocably appointing and constituting the Agent as proxy and
attorney-in-fact of such Assignor, which appointment is coupled with
an interest,
4
<PAGE>
with full power of substitution, to act as if the Agent were the
outright owner thereof);
(ii) all distributions which are received by any Assignor
contrary to the provisions of Section 5(a)(ii) or Section 5(b)(i)
---------------- ---------------
shall be received in trust for the benefit of the Agent, shall be
segregated from other funds of such Assignor and shall be paid over to
the Agent forthwith as Assigned Collateral in the same form as so
received (with any necessary endorsement); and
(iii) the Agent shall execute and deliver (or cause to be
executed and delivered) to each Assignor all such proxies and other
instruments as such Assignor may reasonably request for the purpose of
enabling such Assignor to exercise the management, voting, consensual
and other rights which such Assignor is entitled to exercise pursuant
to subparagraph (i) above and to receive such distributions and
dividends which it is authorized to receive and retain pursuant to
subparagraph (ii) above.
6. Other Liens; Additional Interests.
---------------------------------
(a) No Assignor shall (i) make further assignments (whether direct,
actual, conditional or collateral) of any of the Assigned Interests, or any
interest therein, (ii) create or permit to exist any Lien, security
interest, or other charge or encumbrance upon or with respect to any of the
Assigned Collateral, except for the security interest under this
Assignment, or (iii) amend, or permit the issuers of any partnership
interests to amend, the limited partnership agreement or its certificate of
limited partnership in any way adversely affecting the Assigned Collateral
or the rights and interests of the Secured Parties therein without the
prior written consent of the Agent.
(b) Each Assignor agrees that it will assign, transfer, grant, and
deliver to the Agent hereunder, immediately upon its acquisition (directly
or indirectly) thereof, any and all additional interests in Assigned
Collateral not owned by such Assignor on the date hereof and concurrently
therewith deliver all financing statements and other documents to be
delivered with respect thereto pursuant to Section 2 hereof.
---------
7. Agent Appointed Attorney-in-Fact. Each Assignor hereby irrevocably
--------------------------------
appoints the Agent as such Assignor's attorney-in-fact, which appointment is
coupled with an interest, with full authority in the place and stead of such
Assignor and in the name of such Assignor or otherwise, from time to time in
Agent's discretion to take any action and to execute any instrument which the
Agent may reasonably deem necessary or advisable to accomplish the purposes of
this Assignment, including, without limitation, to receive, endorse and collect
all instruments made payable to such Assignor representing any dividend,
interest payment or other distribution in respect of the Assigned Collateral or
any part thereof and to give full discharge for the same; provided, however,
that no such action shall be taken or instrument executed in respect of
management, voting and other consensual rights or distributions which such
Assignor is entitled, respectively, to exercise or to receive and
5
<PAGE>
retain pursuant to Section 5(a) without prior written notice to such Assignor,
------------
except upon the occurrence and during the continuation of an Event of Default.
8. Agent May Perform. If any of the Assignors fail to perform any
-----------------
agreement contained herein, the Agent may, but shall not be obligated to, itself
perform, or cause performance of, such agreement, and the reasonable expenses of
the Agent incurred in connection therewith shall be a Secured Obligation
hereunder and payable by such Assignor in accordance with the provisions of
Section 12 hereof.
- ----------
9. Reasonable Care. The Agent, by its execution of this Assignment,
---------------
accepts the assignment of the Assigned Collateral hereunder and agrees to hold
the same as herein provided, but only upon the following terms and conditions:
(a) the Agent shall be under no obligation to take any action in respect to the
Assigned Collateral pursuant to this Assignment other than to hold the Assigned
Collateral delivered to the Agent in connection herewith; and (b) the Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of the Assigned Collateral if it treats the Assigned Collateral
delivered herewith in the same manner as property of the same type belonging to
the Agent.
10. Remedies Upon Event of Default and Acceleration.
-----------------------------------------------
(a) Each Assignor agrees that from time to time, upon the occurrence
and during the continuation of an Event of Default, the Agent or its agent
or agents shall have the right to retain or to sell, assign and deliver the
Assigned Collateral at a price, upon such terms and using such methods as
may be determined within the sole discretion of the Agent, on ten (10) days
written notice to the Assignors (which each Assignor agrees is commercially
reasonable notification within the meaning of Article 9 of the UCC) either
at a public sale or private sale, for cash or upon credit or for future
delivery. Any purchaser of the Assigned Collateral (including any Secured
Party) at any such sale shall thereafter hold the same, absolutely, free
from any claim or right of any kind, including any equity or right of
redemption of any of the Assignors, who hereby specifically waive all
rights of redemption, stay or appraisal which any Assignor has or may have
under any rule of law or statute now existing or hereafter adopted. Each
Assignor will at the request of the Agent execute any and all documents or
instruments which the Agent deems necessary or appropriate to evidence the
Agent's rights as aforesaid. Such a sale shall not be a prerequisite to the
rights of the Agent to require any Assignor to pay the Agent in full,
amounts required to be paid pursuant to Section 12 hereof. Furthermore, the
----------
Assignors shall be jointly and severally liable for any deficiency
remaining after the sale of the Assigned Collateral. Each Assignor hereby
waives all rights, if any, of marshaling the Assigned Collateral and any
other security at the time held for any of the Liabilities or otherwise.
(b) With respect to the Assigned Collateral, each Assignor further
agrees that the Agent, the Lenders or their agent or agents may: (i)
reasonably restrict the eligibility of prospective buyers to those who are
creditworthy; (ii) bid-in at any sale; (iii) conduct, adjourn, or cancel
any public sale or private sale, for cash or on credit or for other
property,
6
<PAGE>
as the Secured Parties see fit, subject to compliance with the terms of any
applicable laws; (iv) sell and resell the Assigned Collateral on credit;
(v) include in the reimbursement costs of such sale any expenses or
indemnification reasonably necessary to effectuate the sale or necessary to
comply with applicable laws, regulations or instruments; (vi) grant partial
or limited waivers or releases without impairing other future rights of the
Agent or Lenders; and (vii) if such sale is on credit, until the Secured
Obligations have been paid in full, (a) defer any delivery of excess
proceeds to any of the Assignors and (b) retain possession of the Assigned
Collateral and a security interest in the Assigned Collateral, and each
Assignor shall remain liable for the payment of the Secured Obligations.
(c) Each Assignor recognizes that the Agent may be unable to effect a
public sale of all or a part of the Assigned Collateral because of certain
prohibitions contained in applicable laws and, therefore, may be compelled
to resort to one or more private sales to a restricted group of offerees
and purchasers who fulfill certain suitability standards and who agree,
among other things, to acquire the Assigned Collateral for their own
account for investment and not for distribution or resale. Each Assignor
consents to private sales so made even though such sales may be at prices
and upon other terms less favorable than if the Assigned Collateral were
sold at public sales. Each Assignor agrees that the Agent shall have no
obligation to delay sale of the Assigned Collateral for the period of time
necessary to permit the offering and sale of the Assigned Collateral to be
registered for sale under applicable laws. Each Assignor agrees that
private sales made under the foregoing circumstances will not, for that
reason, be deemed to have been made in a manner which is not commercially
reasonable, and that the Agent shall not be liable or accountable to any of
the Assignors for any discount allowed by reason of the fact that such
Assigned Collateral is sold in compliance with any such limitation or
restriction. In case of any sale of the Assigned Collateral on credit or
for future delivery, the Agent shall not incur any liability in case of the
failure of such purchaser to take up and pay for the Assigned Collateral
and, in case of any such failure, the Assigned Collateral may again be sold
upon like notice. In lieu of exercising the power of sale herein conferred
upon it, the Agent may proceed by a suit or suits at law or in equity to
foreclose on and sell the Assigned Collateral. Each Assignor agrees that
the Agent shall have the right to continue to retain the Assigned
Collateral until such time as the Agent in its sole judgment believes that
an advantageous price can be secured for the Assigned Collateral, and the
Agent shall not be liable to any of the Assignors for any loss in the value
of the Assigned Collateral by reason of any delay in the sale thereof.
11. Application of Proceeds. (i) All moneys collected by the Agent upon
-----------------------
any sale or other disposition of the Assigned Collateral, together with all
other moneys received by the Agent hereunder in respect of the Assigned
Collateral, shall first be applied to the payment of all costs and expenses
incurred by the Agent in connection with the provisions of Section 9 hereof, all
---------
such sales and dispositions, the delivery of the Assigned Collateral or the
collection of any such moneys (including, without limitation reasonable
attorneys' fees and expenses), and (ii) the balance of such moneys after
application thereof pursuant to clause (i) above shall be applied by the Agent
in accordance with the terms of Section 10.5 of the Credit Agreement.
------------
7
<PAGE>
12. Expenses; Indemnity. Each Assignor agrees that it will upon demand
-------------------
pay to the Agent the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, which
the Agent may reasonably incur in connection with (i) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Assigned Collateral hereunder or (ii) the failure by any of the Assignors
to perform or observe any of the provisions hereof. Without limitation of
Section 13.9 of the Credit Agreement, the Assignors jointly and severally agree
- ------------
to indemnify and hold harmless the Agent from and against any and all claims and
demands, losses, judgments and liabilities (including liabilities for penalties)
of whatsoever kind or nature, growing out of or resulting from this Assignment
or the exercise by the Agent of any right or remedy granted to it hereunder or
under the Credit Agreement or any other Loan Document, other than any such
claim, demand, loss, judgment or liability directly or primarily resulting from
the gross negligence or willful misconduct of the Agent. In no event shall the
Agent be liable, including any event caused by the Agent's own negligence, in
the absence of gross negligence or willful misconduct on its part, for any
matter or thing in connection with this Assignment other than to account for
moneys actually received by it hereunder and to preserve, in accordance with the
standards set forth herein, the Assigned Collateral delivered to it. If and to
the extent that the obligations of any of the Assignors under this Section 12
----------
are unenforceable for any reason, each Assignor hereby agrees to make the
maximum contribution to the payment and satisfaction of such obligations which
is permissible under applicable law.
13. Anti-Marshalling Provisions. The right is hereby given by each
---------------------------
Assignor to the Agent, for the benefit of the Secured Parties, to make releases
(whether in whole or in part) of all or any part of the Assigned Collateral
agreeable to the Agent without notice to, or the consent, approval or agreement
of other parties and interests, including junior lienors, which releases shall
not impair in any manner the validity of or priority of the Liens and security
interests in the remaining Assigned Collateral conferred under such documents,
nor release such Assignor from personal liability for the Secured Obligations
hereby secured. Notwithstanding the existence of any other security interest in
the Assigned Collateral held by the Agent, for the benefit of the Secured
Parties, the Agent shall have the right to determine the order in which any or
all of the Assigned Collateral shall be subjected to the remedies provided in
this Agreement. The proceeds realized upon the exercise of the remedies
provided herein shall be applied by the Agent, for the benefit of the Secured
Parties, in the manner provided in Section 11.5 of the Credit Agreement. Each
------------
Assignor hereby waives any and all right to require the marshalling of assets in
connection with the exercise of any of the remedies permitted by applicable law
or provided herein.
14. Attorney-in-Fact. Each Assignor hereby appoints the Agent as such
----------------
Assignor's attorney-in-fact for the purposes of carrying out the provisions of
this Agreement and taking any action and executing any instrument which the
Agent may deem necessary or advisable to accomplish the purposes hereof, which
appointment is coupled with an interest and is irrevocable; provided, that the
--------
Agent shall have and may exercise rights under this power of attorney only upon
the occurrence and during the continuance of an Event of Default. Without
limiting the generality of the foregoing, upon the occurrence and during the
continuance of an Event of Default, the Agent shall have the right and power to
receive, endorse and collect all checks and other orders for the payment of
money made payable to the applicable Assignor representing any interest payment,
8
<PAGE>
principal payment or other distribution payable or distributable in respect of,
or otherwise constituting, the Assigned Collateral or any part thereof and to
give full discharge for the same.
15. Absolute Rights and Obligations. All rights of the Secured
-------------------------------
Parties in the Assigned Interests granted hereunder, and each of the Secured
Obligations, shall be absolute and unconditional irrespective of:
(a) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to departure from, the Credit
Agreement or any other Loan Document, including, but not limited to, (i) an
increase or decrease in the Secured Obligations and (ii) an amendment of
any Loan Document to permit the Agent or the Lenders or any one or more of
them to extend further or additional credit to the Borrower in any form
including credit by way of loan, purchase of assets, guarantee or
otherwise, which credit shall thereupon be and become subject to the Credit
Agreement and the other Loan Documents as a Secured Obligation;
(b) any taking and holding of collateral or guarantees (including
without limitation any collateral pledged as security for the Secured
Obligations under the other Security Instruments) for all or any of the
Secured Obligations; or any amendment, alteration, exchange, substitution,
transfer, enforcement, waiver, subordination, termination or release of any
such collateral or guarantees, or any non-perfection of any such
collateral, or any consent to departure from any such guaranty;
(c) any manner of application of collateral, or proceeds thereof,
securing payment or enforcement of all or any of the Secured Obligations,
or the manner of sale of any such collateral;
(d) any consent by the Secured Parties to the change, restructure
or termination of the corporate structure or existence of the Borrower or
any Assignor and any corresponding restructure of the Secured Obligations,
or any other restructure or refinancing of the Secured Obligations or any
portion thereof;
(e) any modification, compromise, settlement or release by the
Secured Parties, by operation of law or otherwise, collection or other
liquidation of the Secured Obligations or the liability of the Borrower,
any Assignor or any Guarantor (other than the Assignors against which this
Agreement is to be enforced), or of any collateral for the Secured
Obligation (including without limitation any collateral pledged as security
for the Secured Obligations under the other Security Instruments), in whole
or in part, and any refusal of payment by the Agent or any Lender in whole
or in part, from any obligor or Guarantor (other than the Assignors against
which this Agreement is sought to be enforced) in connection with any of
the Secured Obligations, whether or not with notice to, or further assent
by, or any reservation of rights against, any Assignor; or
9
<PAGE>
(f) any other circumstance (including without limitation any
statute of limitations) that might otherwise constitute a defense available
to, or a discharge of, the Borrower, any Guarantor or Assignor.
The granting of a Security Interest in the Assigned Interests shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment of any of the Secured Obligations is rescinded or must otherwise be
returned by any Secured Party, upon the insolvency, bankruptcy or reorganization
of the Borrower or any Assignor or otherwise, all as though such payment had not
been made.
16. Definitions. All terms used herein shall be defined in accordance
-----------
with the appropriate definitions appearing in the Uniform Commercial Code as in
effect in Florida, and such definitions are hereby incorporated herein by
reference and made a part hereof.
17. Entire Agreement. This Agreement, together with the Credit Agreement,
----------------
the Guaranty Agreement and other Loan Documents, constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior agreements and understandings,
inducements, commitments or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof. Neither this Agreement nor any portion or provision hereof may be
changed, altered, modified, supplemented, discharged, canceled, terminated, or
amended orally or in any manner other than by an agreement, in writing signed by
the parties hereto.
18. Registration of Assignment. The registrar for each of the Assigned
--------------------------
Interests (the "Registrar") shall be as follows:
___________________, as the general partner of
______________________, is and acts as the registrar of
__________________ for all purposes of the registration of ownership
and transfers of interests in __________ Interests.
The registration records of each of the issuers of Assigned Interests are
maintained by and in the possession of the applicable Registrar (the
"Registration Books") are the only records maintained to evidence the ownership
and transfer of ownership or other interests, including security interests, in
the Assigned Interests. There is no registration of record or to the knowledge
of any Assignor any claim with respect thereto, of any lien, security interest
or other encumbrance or other interest or restriction of transfer on the
Assigned Interests, other than the assignment in favor of the Agent. The
assignment granted the Assigned Interests hereby in favor of the Agent has been
duly entered in the registration books maintained for such purpose by each
applicable Registrar and each such Registrar has delivered to the Agent its
Certificate, in the form of Exhibit A hereto, of even date herewith to such
---------
effect. Each Registrar shall not cause, suffer or permit to occur any transfer
of record of the Assigned Interests or any interest therein except in accordance
with the prior written consent of the Agent. Upon receipt of written notice by
the Agent that an Event of Default has occurred and that all or any part of the
Assigned Interests for which it is the Registrar or any interest therein have
been
10
<PAGE>
sold, assigned or otherwise disposed of by the Agent in accordance with the
terms of this Assignment, and identifying the Agent(s) and interest(s) assigned,
each Registrar shall forthwith cause the Assigned Interests for which it is the
Registrar to be reregistered as appropriate to duly reflect of record such
transfers. No Registrar shall resign or retire or permit its removal except upon
circumstances where the successor registrar shall provide to the Assignment its
written irrevocable acknowledgment of and covenant to comply with the terms of
this Section 18.
----------
19. Amendments, Waivers and Consents. No amendment or waiver of any
--------------------------------
provision of this Assignment or consent to any departure by any of the Assignors
from the terms hereof shall in any event be effective unless the same shall be
in writing and signed by each Assignor and the Agent, and then such amendment,
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No failure on the part of the Agent to
exercise, and no delay in exercising, any rights, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy by the Agent preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
20. Continuing Security Interest; Benefits of Assignment; Certain
-------------------------------------------------------------
Representations and Warranties. This Assignment shall create a continuing
- ------------------------------
security interest in the Assigned Collateral and shall (a) remain in full force
and effect until termination pursuant to Section 26 hereof; (b) be binding upon
----------
each Assignor, and its respective personal representatives, heirs and assigns;
and (c) inure to the benefit of the Agent as Agent for the Secured Parties and
its successors, transferees and assigns. Each Assignor affirms to the Agent that
each of the representations and warranties contained in the Credit Agreement and
made by the Borrower with respect to such Assignor is true and correct and that
each of the representations and warranties contained in the Guaranty, if any,
with respect to such Assignor is true and correct.
21. Other Rights. The rights, powers and remedies given to the Agent for
------------
the benefit of the Lenders by this Assignment shall be in addition to all
rights, powers and remedies given to any Lenders by virtue of any statute or
rule of law. Any forbearance or failure or delay by the Agent in exercising any
right, power or remedy hereunder shall not be deemed to be a waiver of such
right, power or remedy, and any single or partial exercise of any right, power
or remedy hereunder shall not preclude the further exercise thereof. Every
right, power and remedy of the Lenders shall continue in full force and effect
until such right, power or remedy is specifically waived by the Required Lenders
by an instrument in writing.
22. Further Assurances. Each Assignor agrees that at any time and from
------------------
time to time, at the expense of such Assignor, such Assignor will promptly
execute and deliver all further instruments, documents, and assignments,
including without limitation financing statements and continuation statements,
and take all further action as the Agent may request, including without
limitation delivering additional documentation, certificates or instruments
evidencing any Assigned Collateral, in order to carry out the terms of this
Assignment or to perfect and protect any security interest granted or purported
to be granted hereby, or to enable the Agent to exercise and enforce its rights
and remedies hereunder with respect to the Assigned Collateral.
11
<PAGE>
23. Binding Agreement; Assignment. This Assignment, and the terms,
-----------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto, and to their respective successors and assigns, except
that each Assignor shall not assign this Assignment or any interest herein or in
the Assigned Collateral, or any part thereof, or otherwise pledge, assign,
transfer, dispose, sell, encumber or grant any option with respect to the
Assigned Collateral, or any part thereof, or any cash or property held by the
Agent as Assigned Collateral under this Agreement. All references herein to the
Agent shall include any successor thereof, each Lender and any other obligees
from time to time of the Secured Obligations.
24. Severability. In case any Lien, security interest or other right of
------------
any Secured Party or any provision hereof shall be held to be invalid, illegal
or unenforceable, such invalidity, illegality or unenforceability shall not
affect any other Lien, security interest or other right granted hereby or
provision hereof.
25. Counterparts. This Assignment may be executed in any number of
------------
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
26. Termination. This Assignment and all obligations of the Assignors
-----------
hereunder shall terminate on the Facility Termination Date, at which time the
Liens and rights granted to the Agent for the benefit of the Secured Parties
hereunder shall automatically terminate and no longer be in effect, and the
Assigned Interests shall automatically be released from the Liens created
hereby. Upon such termination of this Assignment, the Agent shall, at the sole
expense of the Assignors, deliver to the Assignors, such of the Assigned
Collateral, if any, as shall not have been previously released to or at the
direction of the Assignors sold or otherwise applied by the Agent in accordance
with the terms hereof, together with appropriate instrument of reassignment and
release and take such further actions as may be necessary to effect the same and
as shall be reasonably acceptable to the Agent.
27. Remedies Cumulative. All remedies hereunder are cumulative and are
-------------------
not exclusive of any other rights and remedies of the Agent provided by law or
under the Credit Agreement, the other Loan Documents, or other applicable
agreements or instruments. The making of the Loans to, and the issuing of the
Letters of Credit for the benefit of, the Borrower pursuant to the Credit
Agreement shall be conclusively presumed to have been made or extended,
respectively, in reliance upon each Assignor's assignment of the Assigned
Interests pursuant to the terms hereof.
28. Notices. Any notice required or permitted hereunder shall be given,
-------
(a) with respect to any Assignor, care of the Borrower at its address indicated
in Section 13.2 of the Credit Agreement and (b) with respect to the Agent or a
------------
Lender, at the Agent's address indicated in Section 13.2 of the Credit
------------
Agreement. All such notices shall be given and shall be effective as provided
in Section 13.2 of the Credit Agreement.
-------------
29. Governing Law; Venue; Waiver of Jury Trial.
------------------------------------------
12
<PAGE>
(a) THIS ASSIGNMENT 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) EACH ASSIGNOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES 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, EACH ASSIGNOR EXPRESSLY WAIVES 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 EACH ASSIGNOR HEREBY IRREVOCABLY SUBMITS
GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY
SUCH SUIT, ACTION OR PROCEEDING.
(c) EACH ASSIGNOR AGREES 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 BORROWER PROVIDED IN
SECTION 13.2 OF THE CREDIT AGREEMENT, 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 (b) or (c) HEREOF SHALL
----------------------
PRECLUDE ANY SECURED PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY
JURISDICTION WHERE EACH ASSIGNOR OR ANY OF SUCH ASSIGNOR'S PROPERTY OR
ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE
LAWS OF ANY SUCH JURISDICTION, EACH ASSIGNOR HEREBY IRREVOCABLY SUBMITS TO
THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY
SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION
OVER IT AND ITS PROPERTY BY ANY SUCH OTHER COURT OR COURTS WHICH NOW OR
HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW.
13
<PAGE>
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION THEREWITH, EACH ASSIGNOR AND THE AGENT ON BEHALF OF 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.
[Signature pages follow.]
14
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Collateral
Assignment of Partnership Interests on the day and year first written above.
ASSIGNOR:
[INSERT NAME]
WITNESS:
By:
- --------------------- ----------------------------------------
Name:
--------------------------------------
- --------------------- Title:
-------------------------------------
AGENT:
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
WITNESS:
By:
- --------------------- ----------------------------------------
Name:
--------------------------------------
- --------------------- Title:
-------------------------------------
COLLATERAL ASSIGNMENT OF PARTNERSHIP INTERESTS
SIGNATURE PAGE 1 OF 1
<PAGE>
EXHIBIT A
---------
RECEIPT AND CERTIFICATE OF REGISTRAR
------------------------------------
The undersigned hereby certifies, acknowledges and agrees as follows to and
with NATIONSBANK, NATIONAL ASSOCIATION, as Agent, in connection with that
certain Collateral Assignment of Partnership Interests of even date herewith by
and among ____________ and the Agent. All capitalized terms not defined herein
shall have the definitions therein set forth.
1. The undersigned is the duly authorized and acting Registrar and as such
has sole custody of and is solely responsible for the Registration Books for
_____________ (the "Partnership").
2. The Assignors are all of the general and limited partners of the
Partnership and their interests in the Partnership (the "Assigned Interests")
are reflected as such on the Registration Books. As of the date hereof,
Schedule 1 hereto sets forth the Assigned Interests being all interests of all
- ----------
general, special and limited partners in the Partnership.
3. The undersigned, by execution of this Certificate, acknowledges receipt
of irrevocable instructions and direction from each Assignor, acknowledged and
agreed to by the Partnership , (i) to register on the Registration Books for the
Partnership, the Lien in favor of the Agent for the benefit of the secured
Parties upon the Assigned Interests as an assignment and security interest
therein (the "Registered Assignment"), and (ii) to otherwise fully comply with
the other provisions herein contained. The execution of this Certificate by each
Assignor and the Partnership shall constitute such irrevocable instructions and
direction.
4. The Registered Assignment on the Assigned Interests has been duly
registered of record on the Registration Books for the Partnership. There is no
registration of record of, or to the knowledge of the Registrar any claim with
respect to, any Lien or other interest or restriction of transfer on the
Assigned Interests, other than the Registered Assignment.
5. The Registrar will not cause, suffer or permit to occur any transfer
of record of (i) the Assigned Interests or any interest therein, or (ii) any
other interest in the Partnership the effect of which transfer would be to
lessen the percentage interest in the Partnership of the Assigned Interests as
specified in paragraph 2 above, except in accordance with the prior written
consent, or as provided below at the direction, of the Agent.
6. Upon receipt of written notice from the Agent that an Event of Default
has occurred and that all or any part of the Assigned Interests or any interest
therein has been sold, assigned or otherwise transferred by such holder pursuant
to the Loan Documents, and identifying the Agent or Agents and the interest or
interests assigned, the Registrar shall forthwith cause the Registration Books
for the Partnership to be duly noted to reflect each of such transfers of
record.
16
<PAGE>
7. The Registrar shall not resign or retire or permit its removal except
upon circumstances where the successor Registrar shall provide to the Agent its
written irrevocable acknowledgment of each of the above undertakings.
This the ___ day of _________, ____.
REGISTRAR:
[NAME OF REGISTRAR]
as Registrar
By: __________________________________
Name: ________________________________
Title: _______________________________
ACKNOWLEDGED AND AGREED TO, THIS THE _____ DAY OF _____, 1998
[NAME OF PARTNER]
as general partner
By: __________________________________
Name: ________________________________
Title: _______________________________
[NAME OF PARTNER]
as limited partner
By: __________________________________
Name: ________________________________
Title: _______________________________
17
<PAGE>
Schedule 1
----------
Assigned Interests
------------------
Name of Issuer Owner(s) Percentage Interest
================================================================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
18
<PAGE>
EXHIBIT G
Form of Guaranty
[See Attached]
G-2
<PAGE>
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (this "Guaranty Agreement" or this "Guaranty"),
dated as of __________, 199_, is made by EACH OF THE UNDERSIGNED (each a
"Guarantor" and collectively the "Guarantors") to NATIONSBANK, NATIONAL
ASSOCIATION, a national banking association organized and existing under the
laws of the United States, as Agent (the "Agent") for each of the lenders (the
"Lenders" and collectively with the Agent the "Secured Parties") now or
hereafter party to the Credit Agreement (as defined below). All capitalized
terms used but not otherwise defined herein shall have the meaning ascribed to
such terms in the Credit Agreement
W I T N E S S E T H:
-------------------
WHEREAS, the Secured Parties have agreed to provide to BREED Technologies,
Inc. ("BREED") and certain Subsidiaries (collectively the "Borrower") certain
credit facilities, including a term loan facility and a revolving credit
facility with a letter of credit sublimit and a multi-currency sublimit pursuant
to the Amended and Restated Credit Agreement dated as of April 28, 1998 among
the Borrower, the Agent and the Lenders (as from time to time amended, revised,
modified, supplemented or amended and restated, the "Credit Agreement"); and
WHEREAS, each Guarantor is, directly or indirectly, a wholly owned
Subsidiary of BREED; and
WHEREAS, as a condition to entering into the Credit Agreement and making
and continuing to make any loans or advances and issuing and continuing to issue
letters of credit thereunder, each Guarantor is required to guarantee to the
Secured Parties payment of the Borrower's Obligations in accordance with the
terms of this Agreement; and
WHEREAS, each Guarantor will materially benefit from the loans and advances
to be made, and the letters of credit to be issued, under the Credit Agreement,
and each Guarantor is willing to enter into this Guaranty to provide an
inducement for the Secured Parties to continue to make loans and advances, and
to issue letters of credit, under the Credit Agreement; and
WHEREAS, the Secured Parties are unwilling to enter into the Loan Documents
unless the Guarantors enter into this Agreement;
NOW, THEREFORE, in order to induce the Secured Parties to enter into the
Loan Documents and to make Loans and issue Letters of Credit, and in
consideration of the premises and mutual covenants contained herein, each
Guarantor hereby agrees as follows:
1. Guaranty. Each Guarantor hereby jointly and severally,
---------
unconditionally, absolutely, continually and irrevocably guarantees to the
Secured Parties the payment and performance in full of the Borrower's
Liabilities (as defined below). For all purposes of this Guaranty Agreement,
"Borrower's Liabilities" means: (a) the Borrower's prompt payment in full,
when due
<PAGE>
or declared due and at all such times, of all Obligations and all other amounts
pursuant to the terms of the Credit Agreement, the Notes, and all other Loan
Documents executed in connection with the Credit Agreement and all Rate Hedging
Obligations heretofore, now or at any time or times hereafter owing, arising,
due or payable from the Borrower to the Lenders, including without limitation
principal, interest, premium or fee (including, but not limited to, loan fees
and attorneys' fees and expenses); and (b) the Borrower's prompt, full and
faithful performance, observance and discharge of each and every agreement,
undertaking, covenant and provision to be performed, observed or discharged by
the Borrower under the Credit Agreement and all other Loan Documents executed in
connection therewith and all Swap Agreements. The Guarantors' obligations to the
Secured Parties under this Guaranty Agreement are hereinafter collectively
referred to as the "Guarantors' Obligations"; provided, however, that the
-------- -------
liability of each Guarantor individually with respect to the Guarantor's
Obligations shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions of
any applicable state law.
Each Guarantor agrees that it is jointly and severally, directly and
primarily liable for the Borrower's Liabilities.
2. Payment. If the Borrower shall default in payment or performance of
-------
any Borrower's Liabilities, whether principal, interest, premium, fee
(including, but not limited to, loan fees and attorneys' fees and expenses), or
otherwise, when and as the same shall become due, whether according to the terms
of the Credit Agreement, by acceleration, or otherwise, or upon the occurrence
of any Event of Default under the Credit Agreement that has not been cured or
waived, then any or all of the Guarantors will, upon demand thereof by the Agent
or its successors or assigns AS OF THE DATE OF SUCH DEMAND, fully pay to the
Agent, for the benefit of the Secured Parties, subject to any restriction set
forth in Section 1 hereof, an amount equal to all Guarantors' Obligations then
---------
due and owing.
3. Unconditional Obligations. This is a guaranty of payment and not of
-------------------------
collection. The Guarantors' Obligations under this Guaranty Agreement shall be
joint and several, absolute and unconditional irrespective of the validity,
legality or enforceability of the Credit Agreement, the Notes or any other Loan
Document or any other guaranty of the Borrower's Liabilities, and shall not be
affected by any action taken under the Credit Agreement, the Notes or any other
Loan Document, any other guaranty of the Borrower's Liabilities, or any other
agreement between the Secured Parties and the Borrower or any other Person, in
the exercise of any right or power therein conferred, or by any failure or
omission to enforce any right conferred thereby, or by any waiver of any
covenant or condition therein provided, or by any acceleration of the maturity
of any of the Borrower's Liabilities, or by the release or other disposal of any
security for any of the Borrower's Liabilities, or by the dissolution of the
Borrower or the combination or consolidation of the Borrower into or with
another entity or any transfer or disposition of any assets of the Borrower or
by any extension or renewal of the Credit Agreement, any of the Notes or any
other Loan Document, in whole or in part, or by any modification, alteration,
amendment or addition of or to the Credit Agreement, any of the Notes or any
other Loan Document, any other guaranty of the Borrower's Liabilities, or any
other agreement between the Secured Parties and the Borrower or any other
Person, or by any other
2
<PAGE>
circumstance whatsoever (with or without notice to or knowledge of any
Guarantor) which may or might in any manner or to any extent vary the risks of
such Guarantor, or might otherwise constitute a legal or equitable discharge of
a surety or a guarantor; it being the purpose and intent of the parties hereto
that this Guaranty Agreement and the Guarantors' Obligations hereunder shall be
absolute and unconditional under any and all circumstances and shall not be
discharged except by payment as herein provided.
4. Currency and Funds of Payment. Each Guarantor hereby guarantees that
-----------------------------
the Guarantors' Obligations will be paid in lawful currency of the United States
of America and in immediately available funds, regardless of any law, regulation
or decree now or hereafter in effect that might in any manner affect the
Borrower's Liabilities, or the rights of the Secured Parties with respect
thereto as against the Borrower, or cause or permit to be invoked any alteration
in the time, amount or manner of payment by the Borrower of any or all of the
Borrower's Liabilities.
5. Suits. Each Guarantor from time to time shall pay to the Agent for
-----
the benefit of the Secured Parties, on demand, at the Agent's place of business
set forth in the Credit Agreement or such other address as the Agent shall give
notice of to such Guarantor, the Guarantors' Obligations as they become or are
declared due, and in the event such payment is not made forthwith, the Agent or
the Lenders or any of them may proceed to suit against any one or more or all of
the Guarantors. At the Agent's election, one or more and successive or
concurrent suits may be brought hereon by the Agent against any one or more or
all of the Guarantors, whether or not suit has been commenced against the
Borrower, any other guarantor of the Borrower's Liabilities, or any other Person
and whether or not the Secured Parties have taken or failed to take any other
action to collect all or any portion of the Borrower's Liabilities or have taken
or failed to take any actions against any collateral securing payment or
performance of all or any portion of the Borrower's Liabilities.
6. Set-Off and Waiver. Each Guarantor waives any right to assert against
------------------
the Secured Parties as a defense, counterclaim, set-off or cross claim, any
defense (legal or equitable) or other claim which such Guarantor may now or at
any time hereafter have against the Borrower or the Secured Parties without
waiving any additional defenses, set-offs, counterclaims or other claims
otherwise available to such Guarantor. If at any time hereafter the Secured
Party employs counsel for advice or other representation to enforce the
Guarantors' Obligations that arise out of an Event of Default, then, in any of
the foregoing events, all of the reasonable attorneys' fees arising from such
services and all expenses, costs and charges in any way or respect arising in
connection therewith or relating thereto shall be paid by such Guarantor to the
Agent, for the benefit of the Secured Parties, on demand.
7. Waiver; Subrogation.
-------------------
(a) Each Guarantor hereby waives notice of the following events or
occurrences: (i) the Agent's acceptance of this Guaranty Agreement; (ii)
the Lenders' heretofore, now or from time to time hereafter making Loans
and issuing Letters of Credit and otherwise loaning monies or giving or
extending credit to or for the benefit of the Borrower, whether pursuant to
the Credit Agreement or the Notes or any other Loan Document or any
3
<PAGE>
amendments, modifications, or supplements thereto, or replacements or
extensions thereof; (iii) the Secured Parties or the Borrower heretofore,
now or at any time hereafter, obtaining, amending, substituting for,
releasing, waiving or modifying the Credit Agreement, the Notes or any
other Loan Documents; (iv) presentment, demand, default, non-payment,
partial payment and protest; (v) any Secured Party heretofore, now or at
any time hereafter granting to the Borrower (or any other party liable to
the Lenders on account of the Borrower's Liabilities) or to any certain
Guarantor any indulgence or extensions of time of payment of the Borrower's
Liabilities or Guarantors' Obligations, respectively; and (vi) any Secured
Party heretofore, now or at any time hereafter accepting from the Borrower,
any other Guarantor, any other guarantor of the Borrower's Liabilities or
any other Person, any partial payment or payments on account of the
Borrower's Liabilities or any collateral securing the payment thereof or
the Agent settling, subordinating, compromising, discharging or releasing
the same. Each Guarantor agrees that each Secured Party may heretofore, now
or at any time hereafter do any or all of the foregoing in such manner,
upon such terms and at such times as each Secured Party, in its sole and
absolute discretion, deems advisable, without in any way or respect
impairing, affecting, reducing or releasing such Guarantor from the
Guarantors' Obligations, and each Guarantor hereby consents to each and all
of the foregoing events or occurrences.
(b) Each Guarantor hereby agrees that payment or performance by such
Guarantor of the Guarantors' Obligations under this Guaranty Agreement may
be enforced by the Agent on behalf of the Lenders upon demand by the Agent
to such Guarantor without the Agent being required, such Guarantor
expressly waiving any right it may have to require the Agent, to (i)
prosecute collection or seek to enforce or resort to any remedies against
the Borrower or any other Guarantor or any other guarantor of the
Borrower's Liabilities, or (ii) seek to enforce or resort to any remedies
with respect to any security interests, Liens or encumbrances granted to
the Agent by the Borrower, any other Guarantor or any other Person on
account of the Borrower's Liabilities or any guaranty thereof, IT BEING
EXPRESSLY UNDERSTOOD, ACKNOWLEDGED AND AGREED TO BY SUCH GUARANTOR THAT
DEMAND UNDER THIS GUARANTY AGREEMENT MAY BE MADE BY THE AGENT, AND THE
PROVISIONS HEREOF ENFORCED BY THE AGENT, EFFECTIVE AS OF THE FIRST DATE ANY
EVENT OF DEFAULT OCCURS AND IS CONTINUING UNDER THE CREDIT AGREEMENT.
Neither the Agent nor any Lender shall have any obligation to protect,
secure or insure any of the foregoing security interests, Liens or
encumbrances on the properties or interests in properties subject thereto.
The Guarantors' Obligations shall in no way be impaired, affected, reduced,
or released by reason of any Secured Party's failure or delay to do or take
any of the acts, actions or things described in this Guaranty including,
without limiting the generality of the foregoing, those acts, actions and
things described in this Section 7.
---------
(c) Each Guarantor further agrees with respect to this Guaranty that
such Guarantor shall have no right of subrogation, reimbursement or
indemnity, nor any right of recourse to security for the Borrower's
Liabilities until the Facility Termination Date.
4
<PAGE>
8. Effectiveness; Enforceability. This Guaranty Agreement shall be
-----------------------------
effective as of the date of the initial Advance under the Credit Agreement and
shall continue in full force and effect until the Facility Termination Date.
This Guaranty Agreement shall be binding upon and inure to the benefit of each
Guarantor, the Agent and the Lenders and their respective successors and
assigns. Notwithstanding the foregoing, no Guarantor may, without the prior
written consent of the Agent, assign any rights, powers, duties or obligations
hereunder. Any claim or claims that the Secured Parties may at any time
hereafter have against a Guarantor under this Guaranty Agreement may be asserted
by any Secured Party by written notice directed to such Guarantor.
9. Representations and Warranties. Each Guarantor warrants and
------------------------------
represents to the Agent for the benefit of the Lenders that it is duly
authorized to execute, deliver and perform this Guaranty Agreement, that this
Guaranty Agreement is legal, valid, binding and enforceable against such
Guarantor in accordance with its terms except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles; and that such Guarantor's execution, delivery and performance of
this Guaranty Agreement do not violate or constitute a breach of its certificate
of incorporation or other documents of corporate governance or any agreement to
which such Guarantor is a party, or any applicable laws, orders, regulations,
decrees or awards of any applicable governmental authority or arbitral body.
10. Expenses. Each Guarantor agrees to be liable for the payment of all
--------
reasonable fees and expenses, including attorney's fees, incurred by the Agent
in connection with the enforcement of this Guaranty Agreement.
11. Reinstatement. Each Guarantor agrees that this Guaranty Agreement
-------------
shall continue to be effective or be reinstated, as the case may be, at any time
payment received by the Agent under the Credit Agreement or this Guaranty
Agreement is rescinded or must be restored for any reason.
12. Attorney-in-Fact. Each Guarantor hereby appoints the Agent as such
----------------
Guarantor's attorney-in-fact for the purposes of carrying out the provisions of
this Agreement and taking any action and executing any instrument which the
Agent may deem necessary or advisable to accomplish the purposes hereof, which
appointment is coupled with an interest and is irrevocable; provided, that the
--------
Agent shall have and may exercise rights under this power of attorney only upon
the occurrence and during the continuance of an Event of Default.
13. Absolute Rights and Obligations. All rights of the Secured Parties,
-------------------------------
and all obligations of each Guarantor hereunder, shall be absolute and
unconditional irrespective of:
(1) any lack of validity or enforceability of the Credit Agreement,
any other Loan Document or any other agreement or instrument relating to
any of the Guarantor's Obligations;
(2) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guarantor's Obligations, or any other
amendment or waiver of or any
5
<PAGE>
consent to any departure from the Credit Agreement, any other Loan Document
or any other agreement or instrument relating to any of the Guarantor's
Obligations;
(3) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Guarantor's Obligations; or
(4) any other circumstances which might otherwise constitute a defense
available to, or a discharge of, each Guarantor in respect of the
Guarantor's Obligations or of this Agreement.
14. Reliance. Each Guarantor represents and warrants to the Agent, for
--------
the benefit of the Secured Parties, that: (a) such Guarantor has adequate means
to obtain from Borrower, on a continuing basis, information concerning Borrower
and Borrower's financial condition and affairs and has full and complete access
to Borrower's books and records; (b) such Guarantor is not relying on any
Secured Party, its or their employees, agents or other representatives, to
provide such information, now or in the future; (c) such Guarantor is executing
this Guaranty Agreement freely and deliberately, and understands the obligations
and financial risk undertaken by providing this Guaranty; (d) such Guarantor has
relied solely on the Guarantor's own independent investigation, appraisal and
analysis of Borrower and Borrower's financial condition and affairs in deciding
to provide this Guaranty and is fully aware of the same; and (e) such Guarantor
has not depended or relied on any Secured Party, its or their employees, agents
or representatives, for any information whatsoever concerning Borrower or
Borrower's financial condition and affairs or other matters material to such
Guarantor's decision to provide this Guaranty or for any counseling, guidance,
or special consideration or any promise therefor with respect to such decision.
Each Guarantor agrees that neither the Agent nor any Lender has any duty or
responsibility whatsoever, now or in the future, to provide to such Guarantor
any information concerning Borrower or Borrower's financial condition and
affairs, other than as expressly provided herein, and that, if such Guarantor
receives any such information from the Agent or any Lender, its or their
employees, agents or other representatives, such Guarantor will independently
verify the information and will not rely on the Agent or any Lender, its or
their employees, agents or other representatives, with respect to such
information.
15. Definitions. All terms used herein shall be defined in accordance
-----------
with the appropriate definitions appearing in the Uniform Commercial Code as in
effect in Florida, and such definitions are hereby incorporated herein by
reference and made a part hereof.
16. Entire Agreement. This Guaranty Agreement, together with the Credit
----------------
Agreement and other Loan Documents, constitutes and expresses the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings, inducements,
commitments or conditions, express or implied, oral or written, except as herein
contained. The express terms hereof control and supersede any course of
performance or usage of the trade inconsistent with any of the terms hereof.
Neither this Guaranty Agreement nor any portion or provision hereof may be
changed, altered, modified, supplemented, discharged,
6
<PAGE>
canceled, terminated, or amended orally or in any manner other than by an
agreement, in writing signed by the parties hereto.
17. Binding Agreement; Assignment. This Guaranty Agreement, and the
-----------------------------
terms, covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto, and to their respective successors and assigns,
except that no Guarantor shall be permitted to assign this Agreement or any
interest herein. All references herein to the Agent shall include any successor
thereof, each Lender and any other obligees from time to time of the Guarantor's
Obligations.
18. Swap Agreements. All obligations of the Borrower under Swap
---------------
Agreements shall be deemed to be Secured Obligations secured hereby, and each
Lender or affiliate of a Lender party to any such Swap Agreement shall be deemed
to be a Secured Party hereunder.
19. Severability. In case any Lien, security interest or other right of
------------
any Secured Party or any provision hereof shall be held to be invalid, illegal
or unenforceable, such invalidity, illegality or unenforceability shall not
affect any other Lien, security interest or other right granted hereby or
provision hereof.
20. Counterparts. This Guaranty Agreement may be executed in any number
------------
of counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
21. Indemnification. Without limitation of Section 13.9 of the Credit
--------------- -------------
Agreement or any other indemnification provision in any Loan Document, each
Guarantor hereby covenants and agrees to pay, indemnify, and hold the Secured
Parties harmless from and against any and all other out-of-pocket liabilities,
costs, expenses or disbursements of any kind or nature whatsoever arising in
connection with any claim or litigation by any Person resulting from the
execution, delivery, enforcement, performance and administration of this
Guaranty Agreement or the Loan Documents, or the transactions contemplated
hereby or thereby, or in any respect relating to the Collateral or any
transaction pursuant to which such Guarantor has incurred any Guarantor's
Obligations (all the foregoing, collectively, the "indemnified liabilities");
provided, however, that such Guarantor shall have no obligation hereunder with
- -------- -------
respect to indemnified liabilities directly or primarily arising from the
willful misconduct or gross negligence of the Agent or any Lender. The
agreements in this subsection shall survive repayment of all Secured
Obligations, termination or expiration of this Guaranty Agreement and occurrence
of the Facility Termination Date.
22. Termination. This Guaranty Agreement and all Guarantor's
-----------
Obligations hereunder shall terminate on the Facility Termination Date.
23. Remedies Cumulative. All remedies hereunder are cumulative and are
-------------------
not exclusive of any other rights and remedies of the Agent provided by law or
under the Credit Agreement, the other Loan Documents, or other applicable
agreements or instruments. The making of the Loans to the Borrower pursuant to
the Credit Agreement and the extension of the Revolving Credit Facility and the
Term Loan Facility to the Borrower pursuant to the Credit Agreement shall be
conclusively
7
<PAGE>
presumed to have been made or extended, respectively, in reliance upon the
Guarantor's guaranty of the Guarantor's Obligations pursuant to the terms
hereof.
24. Notices. Any notice required or permitted hereunder shall be given,
-------
(a) with respect to each Guarantor, at the address of the Borrower indicated in
Section 13.2 of the Credit Agreement and (b) with respect to the Agent or a
- ------------
Lender, at the Agent's address indicated in Section 13.2 of the Credit
------------
Agreement. All such notices shall be given and shall be effective as provided
in Section 13.2 of the Credit Agreement.
-------------
25. Governing Law.
-------------
(a) THIS AGREEMENT 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) EACH GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES 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, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR
HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH
SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
(c) EACH GUARANTOR AGREES 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) AND IN ACCORDANCE WITH SECTION 13.2 OF THE
------------
CREDIT AGREEMENT, 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 (b) OR (c) HEREOF SHALL PRECLUDE
--------------- ---
THE AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN
THE COURTS OF ANY PLACE WHERE THE GUARANTOR OR ANY OF THE GUARANTOR'S
PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT
8
<PAGE>
PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH GUARANTOR
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND
EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE
JURISDICTION OF ANY OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON
OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION WITH THE FOREGOING, EACH GUARANTOR HEREBY AGREES, 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 EACH GUARANTOR HEREBY
WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT
MAY HAVE THAT EACH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
[Signature Page Follows.]
9
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Guaranty Agreement
on the day and year first written above.
GUARANTORS:
[INSERT NAME]
WITNESS:
By:
------------------------------------------
Name:
- ------------------ ----------------------------------------
Title:
---------------------------------------
- ------------------
GUARANTY AGREEMENT
SIGNATURE PAGE 1 OF 2
<PAGE>
AGENT:
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
WITNESS:
By:
----------------------------------
Name:
- ---------------------- --------------------------------
Title:
-------------------------------
- ----------------------
GUARANTY AGREEMENT
SIGNATURE PAGE 2 OF 2
<PAGE>
EXHIBIT H
Form of Intellectual Property Security Agreement
[See Attached]
H-1
<PAGE>
INTELLECTUAL PROPERTY SECURITY AGREEMENT
THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT (this "Agreement") is made
this 28th day of April, 1998 by EACH OF THE UNDERSIGNED (each a "Grantor" and
collectively the "Grantors") in favor of NATIONSBANK, NATIONAL ASSOCIATION, a
national banking association organized and existing under the laws of the United
States, as Agent (the "Agent") for each of the financial institutions (the
"Lenders" and collectively with the Agent the "Secured Parties") now or
hereafter party to the Credit Agreement (as defined below). All capitalized
terms used and not otherwise defined herein shall have the respective meanings
assigned thereto in the Credit Agreement.
W I T N E S S E T H:
-------------------
WHEREAS, the Secured Parties have agreed to provide to BREED Technologies,
Inc. ("BREED") and certain Subsidiaries (collectively the "Borrower") certain
credit facilities, including a term loan facility and a revolving credit
facility with a letter of credit sublimit and a multi-currency sublimit pursuant
to the Amended and Restated Credit Agreement dated as of April 28, 1998 among
the Borrower and certain Subsidiaries, the Agent and the Lenders (as from time
to time amended, revised, modified, supplemented, or amended and restated the
"Credit Agreement"); and
WHEREAS, each of the Grantors is, directly or indirectly, a wholly-owned
Subsidiary of BREED; and
WHEREAS, each Grantor has entered into that certain Guaranty Agreement of
even date herewith (the "Guaranty") pursuant to which it has jointly and
severally guaranteed payment and performance of the Borrower's obligations under
the Credit Agreement; and
WHEREAS, the Grantors will materially benefit from the Borrower and the
Secured Parties entering into the Credit Agreement, the making of loans and
advances to, and the issuance of letters of credit on behalf of, the Borrower as
contemplated thereby; and
WHEREAS, as collateral security for payment and performance of the
Borrower's Obligations and each Grantor's obligations under the Guaranty, each
Grantor is willing to grant to the Agent for the benefit of the Secured Parties
a security interest in the assets described herein; and
WHEREAS, the Secured Parties are unwilling to enter into the Loan Documents
unless the Grantors enter into this Agreement;
NOW, THEREFORE, in order to induce the Secured Parties to enter into the
Loan Documents and to make Loans and issue Letters of Credit and in
consideration of the premises and the mutual covenants contained herein, the
parties hereto agree as follows:
<PAGE>
1. Grant of Security. Each Grantor hereby grants a security interest in
-----------------
and collaterally assigns to the Agent, for the benefit of the Secured Parties,
all of the following (collectively, the "Collateral"):
(a) all of such Grantor's right, title and interest, whether now owned
or hereafter acquired, in and to all United States and foreign patents and
patent applications (including without limitation the patents and patent
applications identified on Schedule I attached hereto and incorporated
----------
herein by reference) and including the right to recover for all past,
present and future infringements thereof and all reissues, divisions,
continuations, continuations-in-part, substitutes, renewals, and extensions
thereof, all improvements thereon, and all other rights of any kind
whatsoever of such Grantor accruing thereunder or pertaining thereto
(collectively, the "Patents");
(b) all of such Grantor's right, title and interest, whether now owned
or hereafter acquired, in and to all United States and foreign trademarks,
trade names, trade dress, service marks, trademark and service mark
registrations, and applications for trademark or service mark registration
and any renewals thereof (including without limitation each trademark,
trade name, trade dress, registration and application identified in
Schedule II attached hereto and incorporated herein by reference) and
-----------
including all income, royalties, damages and payments now and hereafter due
and/or payable with respect thereto (including without limitation damages
for past or future infringements thereof), the right to sue or otherwise
recover for all past, present and future infringements thereof, all rights
corresponding thereto throughout the world (but only such rights as now
exist or may come to exist under applicable local law) and all other rights
of any kind whatsoever of each Grantor accruing thereunder or pertaining
thereto, together in each case with the goodwill of the business connected
with the use of, and symbolized by, each such trademark and service mark
(collectively, the "Trademarks");
(c) all of such Grantor's right, title and interest, whether now owned
or hereafter acquired, in and to all United States and foreign copyrights
and copyright applications (including without limitation the copyrights and
copyright applications identified on Schedule III attached hereto and
------------
incorporated herein by reference) and including the right to recover for
all past, present and future infringements thereof and all reissues,
divisions, continuations, continuations-in-part, substitutes, renewals, and
extensions thereof, all improvements thereon, and all other rights of any
kind whatsoever of such Grantor accruing thereunder or pertaining thereto
(collectively, the "Copyrights");
(d) all license agreements regarding Patents, Trademarks or Copyrights
with any other party, whether such Grantor is a licensor or licensee under
any such license agreement (including without limitation the licenses
listed on Schedule IV attached hereto and incorporated herein by
-----------
reference), and the right to prepare for sale, sell and advertise for sale,
all Inventory (as defined in the Security Agreement) now or hereafter owned
by such Grantor and now or hereafter covered by such licenses
(collectively, the "Licenses")); and
2
<PAGE>
(e) all proceeds of any of the foregoing.
In addition, each Grantor has executed in blank and delivered to the Agent
an assignment of licenses and federally registered patents, trademarks and
copyrights (the "IP Assignment") owned by it in the form of Exhibit A hereto.
---------
Each Grantor hereby authorizes the Agent to complete as Assignee and record with
the United States Patent and Trademark Office (the "Patent and Trademark
Office") and the United States Copyright Office (the "Copyright Office") each IP
Assignment upon the occurrence of an Event of Default that is continuing at the
time of filing.
In the event that the execution of this Agreement, or the assignment of any
Collateral hereunder will result in a forfeiture or revocation of such
Collateral, then this Agreement shall not apply to such Collateral.
2. Security for Obligations. The security interests granted under this
------------------------
Agreement (the "Security Interests") by each Grantor secure the payment of all
obligations of such Grantor under, in respect of or in connection with this
Agreement, the Guaranty (including without limitation its joint and several
"Guarantors' Obligations" thereunder) and each other Loan Document to which such
Grantor is or becomes a party (all such obligations being the "Secured
Obligations").
The Security Interests granted by this Agreement are granted in conjunction
with the security interests granted to the Agent, for the benefit of the Secured
Parties, in other assets of each Grantor pursuant to the other Loan Documents.
3. Collateral Assignment. In addition to, and not in limitation of, the
---------------------
grant of the Security Interests in the Patents, Trademarks, Copyrights and
Licenses in Section 1 above, each Grantor hereby grants, assigns, transfers,
---------
conveys and sets over to the Agent, for the benefit of the Lenders, the
Assignor's entire right, title and interest in and to the Patents, Trademarks,
Copyrights and Licenses; provided, that such grant, assignment, transfer and
--------
conveyance shall become effective only at the election of the Agent after the
occurrence of an Event of Default that is continuing at the time of such
election. The Grantor hereby agrees that after the effectiveness of such grant,
assignment, transfer and conveyance of any of the Patents, Trademarks,
Copyrights and License, the use by the Agent of any of such Patents, Trademarks,
Copyrights and Licenses shall be without any liability for royalties or other
related charges from the Agent to any Grantor.
4. Further Assurances.
------------------
(a) Each Grantor agrees that from time to time, at the expense of such
Grantor, such Grantor will promptly execute and deliver all further
instruments and documents and take all further action that may be necessary
or desirable in the Agent's determination, or that the Agent may reasonably
request, in order to (i) continue, perfect and protect any Security
Interest granted or purported to be granted hereby, (ii) perfect the
Agent's (for the benefit of the Secured Parties) Security Interest in and
assign to the Agent, for the benefit of the Secured Parties, as security
for the repayment and satisfaction of the Secured Obligations, all
Collateral located in any foreign jurisdiction, and (iii) enable the Agent,
for the benefit
3
<PAGE>
of the Lenders, to exercise and enforce its rights and remedies hereunder
with respect to any part of the Collateral. Without limiting the generality
of the foregoing, each Grantor will execute and file (with the appropriate
governmental offices, authorities, agencies and regulatory bodies in the
United States and any applicable foreign jurisdiction) such supplements to
this Agreement and such financing or continuation statements, or amendments
thereto, and such other instruments or notices, including executed IP
Assignments, with the Patent and Trademark Office and the Copyright Office,
as may be necessary or desirable, or as the Agent, on behalf of the Secured
Parties, may reasonably request, in order to perfect and preserve the
Security Interests granted hereby.
(b) Each Grantor hereby authorizes the Agent, on behalf of the Secured
Parties, upon the occurrence and during the continuation of an Event of
Default, to file, where permitted by law, one or more financing or
continuation statements, and amendments thereto, relative to all or any
part of the Collateral without the signature of such Grantor. A carbon,
photographic or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient
as a financing statement where permitted by law.
(c) Each Grantor will furnish to the Agent, on behalf of the Secured
Parties, from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Agent, on behalf of the Secured Parties, may reasonably
request, all in reasonable detail.
(d) Each Grantor agrees that, should it have or obtain an ownership
interest in any United States or foreign patent or patent application that
is not now identified on Schedule I, any registered trademark or trademark
----------
application that is not now identified on Schedule II or any registered
-----------
copyright or copyright application that is not now identified on Schedule
--------
III or any license agreement in respect of any patent, trademark or
---
copyright that is not now identified on Schedule IV: (i) the provisions of
-----------
this Agreement shall automatically apply to such item, and such item shall
automatically become part of the Collateral; and (ii) such Grantor shall,
within three months after acquiring or becoming aware of such ownership
interest, (A) give written notice thereof to the Agent and, (B) with
respect to Trademarks and Patents, cause the ownership of such Trademarks
and Patents to be properly registered with the Patent and Trademark Office,
(C) with respect to Copyrights, cause the ownership of such Copyrights to
be registered with the Copyright Office and (D) with respect to Patents,
Trademarks, Copyrights and Licenses having material economic value,
prepare, execute and file in the Patent and Trademark Office, the Copyright
Office or in the equivalent agencies in any foreign jurisdiction, within
the requisite time period, all documents that are known by such Grantor to
be necessary or that the Agent, on behalf of the Secured Parties,
reasonably requests in order to perfect the Security Interest of the Agent,
on behalf of the Secured Parties, therein. Each Grantor authorizes the
Agent, on behalf of the Secured Parties, to execute and file such a
document in the name of such Grantor if such Grantor fails to do so.
4
<PAGE>
(e) Each Grantor agrees that should any of its Subsidiaries (other
than a corporation which is a party hereto and whether now or hereafter
existing) obtain any ownership interest in any United States or foreign
intellectual property of a nature that would be Collateral hereunder if
owned by such Grantor, such Grantor shall either cause such corporation (i)
to become a party to the Guaranty and a party hereto, or (ii) to transfer
and assign all such corporation's ownership interests therein to such
Grantor, whereupon the provisions of subsection (d) of this Section 4 shall
---------
be applicable thereto.
(f) Each Grantor agrees: (i) to take all necessary steps in any
proceeding before the Patent and Trademark Office, the Copyright Office or
any similar office or agency in any other country or any political
subdivision thereof or in any court, to maintain and pursue each patent
application having material economic value now or hereafter included in the
Collateral and to maintain each patent, trademark or copyright having
material economic value now or hereafter included in the Collateral,
including the filing of divisional, continuation, continuation-in-part and
substitute applications, the filing of applications for reissue, renewal or
extensions, the payment of maintenance fees, and the participation in
interference, reexamination, opposition and infringement proceedings; (ii)
to take corresponding steps with respect to material unpatented inventions
on which such Grantor is now or hereafter becomes entitled to seek
protection; (iii) to bear any expenses incurred in connection with such
activities; and (iv) not to abandon any right to file a material patent
application, or abandon any material pending application with respect to
any of the Collateral, without the prior written consent of the Agent.
(g) No Grantor shall do any act or omit to do any act whereby any of
the Collateral may become dedicated or abandoned, except where such
dedication or abandonment (i) will not materially adversely affect the
business, condition (financial or otherwise), operations, performance, or
properties of such Grantor individually or of such Grantor and its
Subsidiaries taken as a whole, and (ii) is in the ordinary course of such
Grantor's business. Each Grantor agrees to notify the Agent promptly and
in writing if it learns that any of the Collateral may become abandoned or
dedicated or of any adverse determination or any development (including
without limitation the institution of any proceeding in the Patent and
Trademark Office, the Copyright Office or in the equivalent agencies in any
foreign jurisdiction, or any court) regarding any part of the Collateral
having material economic value.
(h) In the event that any of the Collateral as to which it has granted
the Security Interests is infringed or misappropriated by a third party,
such Grantor shall promptly notify the Agent and shall, unless such Grantor
shall reasonably determine that such Collateral would not reasonably be
likely to, individually or in the aggregate, be of material economic value
to such Grantor, take all reasonable steps to terminate the infringement or
misappropriation, and take such other actions as such Grantor shall deem
appropriate under the circumstances to protect such Collateral. Any
expense incurred in connection with such activities shall be borne by such
Grantor.
5
<PAGE>
(i) Each Grantor agrees (i) to maintain the quality of any and all
products in connection with which the Collateral is used, consistent with
the quality standards established by such Grantor for said products as of
the date of determination, and (ii) to provide the Agent, on behalf of the
Secured Parties, at least quarterly, with a certificate of an officer of
such Grantor certifying such Grantor's compliance with the foregoing
subsections (a) through (h).
(j) Each Grantor shall protect its products with markings or such
other measures as are required by statute.
5. General Representations and Warranties. Each Grantor represents and
--------------------------------------
warrants as follows:
(a) It has the unqualified right to enter into this Agreement and to
perform its terms.
(b) No authorization, consent, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body or
any other Person is required either (i) for the grant by such Grantor of
the Security Interests granted hereby (excluding such licenses which, by
their terms, require the consent of the licensor to assign the license) or
for the execution, delivery or performance of this Agreement by such
Grantor, or (ii) for the perfection of or the exercise by the Agent, on
behalf of the Secured Parties, of its rights and remedies hereunder, except
for the filing of this Agreement with the Patent and Trademark Office, the
Copyright Office and with the equivalent offices in any foreign
jurisdiction with respect to each Trademark, and the filings required by
the Uniform Commercial Code of the State in which such Grantor maintains
its chief executive office, and except to the extent that the exercise of
rights and remedies may be limited by any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law affecting creditors
rights generally or by general principles of equity.
(c) Set forth on Schedule IV is a list, which is complete and
-----------
accurate in all material respects as of the date hereof, of Licenses of
such Grantor necessary for the conduct of its business as currently
conducted or utilized and material in such Grantor's commercial
manufacturing operations or materially used in the selling or marketing of
such Grantor's products, including the expiration date of such Licenses.
(d) Each License of such Grantor identified on Schedule IV is validly
-----------
subsisting and has not been adjudged invalid or unenforceable, in whole or
in part, and is, to such Grantor's knowledge, valid and enforceable. No
action or proceeding is pending or threatened seeking to limit, cancel or
question the validity of Collateral.
(e) It has notified the Agent in writing of all uses of any Patent,
Trademark or Copyright, prior to such Grantor's use, of which such Grantor
is aware, which would in the reasonable judgment of such Grantor lead to
such item becoming invalid or unenforceable,
6
<PAGE>
including prior unauthorized uses by third parties and uses that were not
supported by the goodwill of the business connected with such item.
(f) It has not granted any release, covenant not to sue, or non-
assertion assurance to any third person, nor allowed any shop right to
arise with respect to any third person, with respect to any part of the
Collateral.
(g) It has protected its Collateral with markings or as otherwise
required by statute.
(h) The actions contemplated under or in connection with the Loan
Documents will not impair the legal right of such Grantor to use any of the
Collateral.
(i) Except as disclosed to the Lenders in writing prior to the date of
this Agreement, such Grantor has no knowledge of the existence of any right
under any patent, trademark, license agreement, trade name, trade secret,
know-how, confidential research, development and commercial information, or
other proprietary information held by any other Person that would preclude
such Grantor from publishing, distributing, marketing, selling, or using
any product currently made by it, being made for it or sold or used by it,
imported by it or exported by it, as the case may be, or to use any
processes currently used by it (except, in each case, to the extent that
such Grantor has granted an exclusive license to another Person), or
materially interfere with the ability of such Grantor to carry on its
business as currently carried on, and such Grantor has no knowledge of any
claim to the contrary that is likely to be made.
(j) Such Grantor has used consistent standards of quality in
manufacturing, distribution and marketing of each product sold and
provision of each service provided under any Collateral, and has taken all
steps necessary to ensure that all licensed users of any Collateral use
such consistent standards of quality.
(k) No Subsidiaries and none of such Grantor's Subsidiaries (except to
the extent that such Subsidiaries are also Grantors hereunder) has an
ownership interest in any patents, patent applications, copyrights,
copyright applications, trademark, trade name, trade dress, service marks,
trademark or service mark registrations or any applications for trademark
or service mark registration or any other intellectual property of a nature
that would be Collateral hereunder if owned by such Grantor.
(l) No claim has been made (and, as to Collateral with respect to
which such Grantor is a licensor, to the knowledge of such Grantor, no
claim has been made against the third party licensee), and such Grantor has
no knowledge of any claim that is likely to be made, that the use by such
Grantor of any Collateral does or may violate the rights of any Person.
7
<PAGE>
(m) The foregoing representations and warranties, and to the extent
applicable, the following representations and warranties, are, as they
apply to the Collateral acquired from AlliedSignal, Inc., et al. in
connection with the acquisition of the SRS business, made upon the
Grantors' information and belief and are made in reliance upon the
representations and warranties of the Sellers of the AlliedSignal
businesses.
6. Patent Representations and Warranties. Each Grantor represents and
-------------------------------------
warrants as follows:
(a) It is the sole legal and beneficial owner of the Patents set forth
opposite its name on Schedule I hereto, free and clear of any Lien,
----------
security interest, option, charge, pledge, assignment (whether conditional
or not), or any other encumbrance except for the security interests created
or permitted by this Agreement or the Credit Agreement and certain Licenses
and registered user agreements described on Schedule IV and no effective
-----------
financing statement or other instrument similar in effect covering all or
any part of such Collateral is on file in any recording office, except
such as may have been filed in favor of the Agent, for the benefit of the
Secured Parties.
(b) Set forth on Schedule I is a list of all of the Patents owned by
----------
such Grantor necessary for the conduct of its business as currently
conducted or utilized and material in such Grantor's commercial
manufacturing operations or materially used in the selling or marketing of
such Grantor's products.
(c) Each Patent of such Grantor identified on Schedule I hereto is
----------
subsisting and has not been adjudged unpatentable, invalid or
unenforceable, in whole or in part, and to the knowledge of such Grantor is
patentable, valid and enforceable, and each of such Patent applications has
been filed in conformity with applicable rules and procedures of the Patent
and Trademark Office and of the equivalent agencies in each applicable
foreign jurisdiction and will be diligently prosecuted in conformity
therewith so as to not improperly become abandoned.
7. Trademark Representations and Warranties. Each Grantor represents and
----------------------------------------
warrants as follows:
(a) It is the sole, legal and beneficial owner of the entire right,
title and interest in and to the Trademarks purported to be granted by it
hereunder, free and clear of any Lien, security interest, option, charge,
pledge, registered user agreement, assignment (whether conditional or not),
or covenant, or any other encumbrance, except for the Security Interests
created or permitted by this Agreement or the Credit Agreement and certain
Licenses and registered user agreements described on Schedule IV. No
-----------
effective financing statement or other instrument similar in effect
covering all or any part of the Trademarks purported to be granted by such
Grantor hereunder is on file in any recording office, including, without
8
<PAGE>
limitation, the Patent and Trademark Office and the equivalent offices in
any foreign jurisdiction, except such as may have been filed in favor of
the Agent, for the benefit of the Lenders.
(b) Set forth on Schedule II is a list of all of the Trademarks owned
-----------
by such Grantor necessary for the conduct of its business as currently
conducted or utilized and material in such Grantor's commercial
manufacturing operations or materially used in the selling or marketing of
such Grantor's products.
(c) Each Trademark of such Grantor identified on Schedule II is
-----------
validly subsisting and has not been abandoned or adjudged invalid,
unregistrable or unenforceable, in whole or in part, and is, to such
Grantor's knowledge, valid, registrable and enforceable.
8. Copyright Representations and Warranties. Each Grantor represents and
----------------------------------------
warrants as follows:
(a) It is the sole, legal and beneficial owner of the entire right,
title and interest in and to the Copyrights purported to be granted by it
hereunder, free and clear of any Lien, security interest, option, charge,
pledge, registered user agreement, assignment (whether conditional or not),
or covenant, or any other encumbrance, except for the Security Interests
created or permitted by this Agreement or the Credit Agreement and certain
Licenses and registered user agreements described on Schedule IV. No
-----------
effective financing statement or other instrument similar in effect
covering all or any part of the Copyrights purported to be granted by such
Grantor hereunder is on file in any recording office, including, without
limitation, the Copyright Office and the equivalent offices in any foreign
jurisdiction, except such as may have been filed in favor of the Agent, for
the benefit of the Lenders.
(b) Set forth on Schedule III is a list of all of the Copyrights owned
------------
by such Grantor necessary for the conduct of its business as currently
conducted or utilized and material in such Grantor's commercial
manufacturing operations or materially used in the selling or marketing of
such Grantor's products.
(c) Each Copyright of such Grantor identified on Schedule III is
------------
validly subsisting and has not been abandoned or adjudged invalid,
unregistrable or unenforceable, in whole or in part, and is, to such
Grantor's knowledge, valid, registrable and enforceable.
9. Transfers and Other Liens. No Grantor shall:
-------------------------
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of (except for such Collateral which has ceased to provide any
material economic value and which would otherwise have been disposed of in
the ordinary course of the Grantor's business) any of, or grant any option
with respect to, the Collateral, except as permitted by the Credit
Agreement, except that any Grantor may license the Collateral (i) in the
ordinary course of
9
<PAGE>
such Grantor's business, provided that such license is necessary or
--------
desirable in the conduct of such Grantor's business, or (ii) in connection
with a sale of assets in compliance with the Credit Agreement, provided
--------
that such license shall be on terms reasonably expected to maximize the
gain to such Grantor resulting from the granting of such license. The
Agent, for the benefit of the Lenders, shall execute any documents that
such Grantor may reasonably request in order to permit the Grantor to
exercise its right hereunder to license the Collateral, provided that the
--------
Agent shall not be required to do anything that may, in the sole judgment
of the Agent, adversely affect the validity of the Security Interests or
the assignment of the Collateral located in any foreign jurisdiction;
(b) create or suffer to exist any Lien, security interest or other
charge or encumbrance upon or with respect to any of the Collateral except
for the Security Interests created by this Agreement; or
(c) take any other action in connection with any of the Collateral
that would impair the value of the interest or rights of such Grantor in
the Collateral taken as a whole or that would impair the interest or rights
of the Agent for the benefit of the Secured Parties.
10. Agent Appointed Attorney-in-Fact. Without limiting any other
--------------------------------
provision of this Agreement, upon the occurrence and during the continuance of
an Event of Default, each Grantor hereby irrevocably appoints the Agent, for the
benefit of the Lenders, as such Grantor's attorney-in-fact, with full authority
in the place and stead of such Grantor and in the name of such Grantor or
otherwise, from time to time in the Agent's discretion, to take any action and
to execute any instrument that the Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including without limitation:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (a) above;
(c) to file any claims or take any action or institute any proceedings
that the Agent may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of the Agent, for the
benefit of the Secured Parties, with respect to any of the Collateral; and
(d) to execute, in connection with the sale provided for in Section 13
----------
hereof, any endorsement, assignments, or other instruments of conveyance or
transfer with respect to the Collateral.
10
<PAGE>
11. Agent May Perform.
-----------------
(a) If any Grantor fails to perform any agreement contained herein,
the Agent may itself perform, or cause performance of, such agreement, and
the expenses of the Agent incurred in connection therewith shall be payable
by such Grantor under Section 14(b) hereof to the fullest extent permitted
-------------
by applicable law.
(b) The Agent or its designated representatives shall have the right
to the extent reasonably requested and upon reasonable prior notice, at any
reasonable time during normal business hours of such Grantors and from time
to time, to inspect the Grantors' premises and to examine the Grantors'
books, records and operations relating to the Collateral.
12. The Agent's Duties. The powers conferred on the Agent, for the
------------------
benefit of the Secured Parties, hereunder are solely to protect the interest of
the Secured Parties in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder,
neither the Agent nor any Lender shall have any duty as to any Collateral or as
to the taking of any necessary steps to preserve rights against other parties or
any other rights pertaining to any Collateral. Each Secured Party shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which such party accords its own property.
13. Remedies Upon Acceleration Event. If an Event of Default shall
--------------------------------
have occurred and be continuing:
(a) The Agent, for the benefit of the Lenders, may exercise in respect
of the Collateral of any defaulting Grantor, in addition to other rights
and remedies provided for herein or otherwise available to it, all the
rights and remedies of a secured party upon default under the Uniform
Commercial Code (the "UCC") and also may (i) exercise any and all rights
and remedies of such Grantor under, in connection with, or otherwise in
respect of, such Collateral, including the completion and filing of the IP
Assignment, (ii) require such Grantor to, and each Grantor hereby agrees
that it will at its expense and upon request of the Agent forthwith,
assemble all or part of the documents embodying such Collateral as directed
by the Agent and make it available to the Agent, for the benefit of the
Lenders, at a place to be designated by the Agent that is reasonably
convenient to both the Agent and such Grantor, (iii) occupy any premises
owned or leased by such Grantor where documents embodying such Collateral
or any part thereof are assembled for a reasonable period in order to
effectuate the Agent's rights and remedies hereunder or under applicable
law, without obligation to such Grantor in respect of such occupation, (iv)
license such Collateral or any part thereof, and (v) without notice except
as specified below, sell such Collateral or any part thereof in one or more
parcels at public or private sale, at any of the Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Agent may deem commercially reasonable. Each Grantor agrees
that at least ten days' notice to such Grantor of the time and place of any
public sale or the time after which any private sale
11
<PAGE>
is to be made shall constitute reasonable notification. The Agent shall not
be obligated to make any sale of the Collateral regardless of notice of
sale having been given. The Agent may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to
which it was so adjourned.
(b) All payments received by any defaulting Grantor under or in
connection with any of such Collateral shall be received in trust for the
benefit of the Secured Parties, shall be segregated from other funds of
such Grantor and shall be immediately paid over to the Agent, for the
benefit of the Secured Parties, in the same form as so received (with any
necessary endorsement).
(c) All payments made under or in connection with or otherwise in
respect of the Collateral of any defaulting Grantor, and all cash proceeds
received by the Agent in respect of any sale of, collection from, or other
realization upon all or any part of such Collateral may, in the discretion
of the Agent, be held by the Agent, for the benefit of the Lenders, as
collateral for, and then or at any time thereafter applied (after payment
of any amounts payable to the Agent pursuant to Section 14 hereof) for the
----------
ratable benefit of the Secured Parties against all or any part of the
Secured Obligations, in such order set forth in Section 10.5 of the Credit
------------
Agreement. Any sale or other disposition of the Collateral and the
possession thereof by the Agent shall be in compliance with all provisions
of applicable law (including applicable provisions of the UCC).
14. Indemnity and Expenses.
----------------------
(a) Each Grantor agrees to indemnify the Agent, for the benefit of the
Lenders, from and against any and all claims, losses and liabilities
growing out of or resulting from this Agreement that are incurred by the
Agent (including without limitation enforcement of this Agreement), except
claims, losses or liabilities directly resulting from the Agent's gross
negligence or willful misconduct.
(b) Each Grantor will upon demand pay to the Agent, for the benefit of
the Secured Parties, the amount of any and all reasonable expenses,
including the reasonable fees and disbursements of its counsel and of any
experts and agents, that the Agent, for the benefit of the Secured Parties,
may incur in connection with (i) the administration of this Agreement, (ii)
the custody, preservation, use or operation of, or the sale of, collection
from or other realization upon, any of the Collateral, (iii) the exercise
or enforcement of any of the rights of the Secured Parties, or (iv) the
failure by any Grantor to perform or observe any of the provisions hereof.
15. Absolute Rights and Obligations. All rights of the Secured
-------------------------------
Parties in the Security Interests granted hereunder, and each of the Secured
Obligations, shall be absolute and unconditional irrespective of:
12
<PAGE>
(a) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to departure from, the Credit
Agreement or any other Loan Document, including, but not limited to, (i) an
increase or decrease in the Secured Obligations and (ii) an amendment of
any Loan Document to permit the Agent or the Lenders or any one or more of
them to extend further or additional credit to the Borrower in any form
including credit by way of loan, purchase of assets, guarantee or
otherwise, which credit shall thereupon be and become subject to the Credit
Agreement and the other Loan Documents as a Secured Obligation;
(b) any taking and holding of collateral or guarantees (including
without limitation any collateral pledged as security for the Secured
Obligations under the other Security Instruments) for all or any of the
Secured Obligations; or any amendment, alteration, exchange, substitution,
transfer, enforcement, waiver, subordination, termination or release of any
such collateral or guarantees, or any non-perfection of any such
collateral, or any consent to departure from any such guaranty;
(c) any manner of application of collateral, or proceeds thereof,
securing payment or enforcement of all or any of the Secured Obligations,
or the manner of sale of any such collateral;
(d) any consent by the Secured Parties to the change, restructure or
termination of the corporate structure or existence of the Borrower or any
Grantor and any corresponding restructure of the Secured Obligations, or
any other restructure or refinancing of the Secured Obligations or any
portion thereof;
(e) any modification, compromise, settlement or release by the Secured
Parties, by operation of law or otherwise, collection or other liquidation
of the Secured Obligations or the liability of the Borrower, any Grantor or
any Guarantor (other than the Grantor against which this Agreement is to be
enforced), or of any collateral for the Secured Obligation (including
without limitation any collateral pledged as security for the Secured
Obligations under the other Security Instruments), in whole or in part, and
any refusal of payment by the Agent or any Lender in whole or in part, from
any obligor or Guarantor (other than the Grantor against which this
Agreement is sought to be enforced) in connection with any of the Secured
Obligations, whether or not with notice to, or further assent by, or any
reservation of rights against, any Grantor; or
(f) any other circumstance (including without limitation any statute
of limitations) that might otherwise constitute a defense available to, or
a discharge of, the Borrower, any Guarantor or a Grantor.
The granting of a Security Interest in the Collateral shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Secured Obligations is rescinded or must otherwise be returned by any
Secured Party, upon the insolvency, bankruptcy or
13
<PAGE>
reorganization of the Borrower or any Grantor or otherwise, all as though such
payment had not been made.
16. Waiver. Each Grantor hereby waives promptness, diligence, notice of
------
acceptance and any other notice with respect to any of the Secured Obligations
and this Agreement and any requirement that the Secured Parties protect, secure,
perfect or insure any Security Interest or any Collateral subject thereto or
exhaust any right or take any action against any Grantor or any other Person
(including without limitation any Guarantor) or any collateral securing payment
of the Secured Obligations (including without limitation any collateral pledged
as security for the Secured Obligations under the other Security Instruments).
17. Subrogation. Prior to termination of this Agreement in accordance with
-----------
the provisions of Section 19(c) hereof, no Grantor will exercise any rights that
-------------
it may acquire by way of subrogation under this Agreement. If an amount shall be
paid to such Grantor on account of such subrogation rights at any time prior to
termination of this Agreement in accordance with the provisions of Section 19(c)
-------------
hereof, such amount shall be held in trust for the benefit of the Secured
Parties and shall forthwith be paid to the Agent, for the benefit of the Secured
Parties, to be credited and applied upon the Secured Obligations, whether
matured or unmatured, in accordance with the terms of the Credit Agreement and
the Guaranty.
18. Amendments, Etc.
----------------
(a) Except as provided in subsection (b) of this Section 18 hereof no
----------
amendment or waiver of any provision of this Agreement nor consent to any
departure by any Grantor therefrom shall in any event be effective unless
the same shall be in writing and signed by the Agent, and then such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which given.
(b) Upon the execution and delivery by any Person of a supplement to
this Agreement pursuant to which such Person agrees to become a party
hereto (each an "Intellectual Property Security Agreement Supplement"), (i)
such Person or entity shall be referred to as an "Additional Grantor" and
shall be and become a Grantor and each reference in this Agreement to
"Grantor" shall also mean and be a reference to such Additional Grantor,
and (ii) the schedules attached to each Intellectual Property Security
Agreement Supplement shall be incorporated into and become a part of and
supplement Schedules I, II, III and IV hereto, and the Agent may attach
----------- -- --- --
such supplements to such Schedules, and each reference to such Schedules
shall mean and be a reference to such Schedules as supplemented pursuant
hereto.
(c) Any person that executes an Intellectual Property Security
Agreement Supplement shall also execute and deliver such financing
statements and all further instruments and documents and take all further
action that may be necessary or desirable or
14
<PAGE>
that the Agent may reasonably request in order to perfect and protect any
Security Interest purported to be granted thereby.
19. Continuing Security Interest; Assignments Under the Credit Agreement;
---------------------------------------------------------------------
Release of Collateral.
- ---------------------
(a) This Agreement shall create a continuing Security Interest in the
Collateral and shall (i) remain in full force and effect until terminated
in accordance with the provisions of this Section 19(c) hereof, (ii) be
-------------
binding upon each Grantor, its successors and assigns, provided, however,
-------- -------
no Grantor shall make any assignment hereof without the prior consent of
the Agent, and (iii) inure, together with the rights and remedies of the
Secured Parties hereunder, to the benefit of the Secured Parties and their
respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (iii), any Lender may assign to one or
more Persons, or grant to one or more Persons participations in or to, all
or any part of its rights and obligations under the Credit Agreement (to
the extent permitted by the Credit Agreement); and to the extent of any
such assignment or participation such other Person shall, to the fullest
extent permitted by law, thereupon become vested with all the benefits in
respect thereof granted to such Lender herein or otherwise, subject
however, to the provisions of the Credit Agreement, including Article XI
thereof (concerning the Agent) and Section 11.1 thereof concerning
------------
assignments and participations.
(b) Except as permitted by the Credit Agreement, no Grantor shall
sell, lease, transfer or otherwise dispose of any item of Collateral
during the term of this Agreement without the prior written consent of the
Agent to such sale, lease, transfer or other disposition.
(c) On the Facility Termination Date, the Collateral shall be
automatically released from the Liens created hereby, all rights to the
Collateral shall automatically revert to the Grantors, and this Agreement
and all obligations of the Grantors hereunder shall terminate without
delivery of any instrument or performance of any act by any party. Upon
such termination of this Agreement, the Agent shall reassign and redeliver
such Collateral then held by or for the Agent and the Lenders and execute
and deliver to each Grantor such documents as it shall reasonably request
to evidence such termination.
20. Definitions. All terms used herein shall be defined in accordance
-----------
with the appropriate definitions appearing in the Uniform Commercial Code as in
effect in Florida, and such definitions are hereby incorporated herein by
reference and made a part hereof.
21. Entire Agreement. This Agreement, together with the Credit Agreement,
----------------
the Guaranty Agreement and other Loan Documents, constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior agreements and understandings,
inducements, commitments or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof. Neither this
15
<PAGE>
Agreement nor any portion or provision hereof may be changed, altered, modified,
supplemented, discharged, canceled, terminated, or amended orally or in any
manner other than by an agreement, in writing signed by the parties hereto.
22. Further Assurances. Each Grantor agrees at its own expense to do such
------------------
further acts and things, and to execute and deliver such additional conveyances,
assignments, financing statements, agreements and instruments, as the Agent may
at any time reasonably request in connection with the administration or
enforcement of this Agreement or related to the Collateral or any part thereof
or in order better to assure and confirm unto the Agent its rights, powers and
remedies for the benefit of the Secured Parties hereunder. Each Grantor hereby
consents and agrees that the issuers of or obligors in respect of the Collateral
shall be entitled to accept the provisions hereof as conclusive evidence of the
right of the Agent, on behalf of the Secured Parties, to exercise its rights
hereunder with respect to the Collateral, notwithstanding any other notice or
direction to the contrary heretofore or hereafter given by any Grantor or any
other Person to any of such issuers or obligors.
23. Binding Agreement; Assignment. This Agreement, and the terms,
-----------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto, and to their respective successors and assigns, except
that no Grantor shall be permitted to assign this Agreement or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Agreement. All
references herein to the Agent shall include any successor thereof, each Lender
and any other obligees from time to time of the Obligations.
24. Swap Agreements. All obligations of the Borrower under Swap Agreements
---------------
shall be deemed to be Secured Obligations secured hereby, and each Lender or
affiliate of a Lender party to any such Swap Agreement shall be deemed to be a
Secured Party hereunder.
25. Severability. If any term or provision of this Agreement is or shall
------------
become illegal, invalid or unenforceable in any jurisdiction, all other terms
and provisions of this Agreement shall remain legal, valid and enforceable in
such jurisdiction and such illegal, invalid or unenforceable provision shall be
legal, valid and enforceable in any other jurisdiction.
26. Counterparts. This Agreement 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 when
taken together shall constitute one and the same agreement.
27. Termination. This Agreement and all obligations of each Grantor
-----------
hereunder shall terminate on the Facility Termination Date, at which time the
Liens and rights granted to the Agent for the benefit of the Secured Parties
hereunder shall automatically terminate and no longer be in effect, and the
Collateral shall automatically be released from the Liens created hereby. Upon
such termination of this Agreement, the Agent shall, at the sole expense of the
Grantors, reassign and redeliver to each applicable Grantor such Collateral then
held by or for the Agent and execute and deliver to such Grantor such documents
as such Grantor shall reasonably request and take such
16
<PAGE>
further actions as may be necessary to effect the same and as shall be
reasonably acceptable to the Agent.
28. Remedies Cumulative. All remedies hereunder are cumulative and are
-------------------
not exclusive of any other rights and remedies of the Agent provided by law or
under the Credit Agreement, the other Loan Documents, or other applicable
agreements or instruments. The making of the Loans to, and issuing of Letters
of Credits for the benefit of, the Borrower pursuant to the Credit Agreement
shall be conclusively presumed to have been made or extended, respectively, in
reliance upon the each Grantor's grant of a Security Interest in the Collateral
pursuant to the terms hereof.
29. Notices. Any notice required or permitted hereunder shall be given,
-------
(a) with respect to each Pledgor, at the address of the Borrower indicated in
Section 13.2 of the Credit Agreement and (b) with respect to the Agent or a
- ------------
Lender, at the Agent's address indicated in Section 13.2 of the Credit
------------
Agreement. All such notices shall be given and shall be effective as provided
in Section 13.2 of the Credit Agreement.
-------------
30. Governing Law; Venue; Waiver of Jury Trial.
------------------------------------------
(a) THIS AGREEMENT 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) EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES 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, EACH GRANTOR EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY
HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF
ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
(c) EACH GRANTOR AGREES 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 BORROWER PROVIDED BY
SECTION 12.2 OF THE CREDIT AGREEMENT, OR BY ANY OTHER METHOD OF
------------
17
<PAGE>
SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF
FLORIDA.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL PRECLUDE
--------------- ---
THE AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN
THE COURTS OF ANY PLACE WHERE EACH GRANTOR OR ANY OF SUCH GRANTOR'S
PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE
APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH GRANTOR HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN
RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY
OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR
FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION WITH THE FOREGOING, EACH GRANTOR AND THE AGENT ON BEHALF OF 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 EACH PARTY HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ANY OBJECTION THAT IT MAY HAVE THAT EACH ACTION OR PROCEEDING HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
[Signature pages follow]
18
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Intellectual
Property Security Agreement on the day and year first written above.
GRANTORS:
[INSERT NAME]
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
INTELLECTUAL PROPERTY SECURITY AGREEMENT
SIGNATURE PAGE 1 OF 2
<PAGE>
AGENT:
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
INTELLECTUAL PROPERTY SECURITY AGREEMENT
SIGNATURE PAGE 2 OF 2
<PAGE>
SCHEDULE I
----------
Patents and Patent Applications
-------------------------------
<PAGE>
SCHEDULE II
-----------
Trademarks and Trademark Applications
-------------------------------------
<PAGE>
SCHEDULE III
------------
Copyrights
----------
<PAGE>
SCHEDULE IV
-----------
License Agreements
------------------
<PAGE>
EXHIBIT A
---------
ASSIGNMENT OF PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
THIS ASSIGNMENT OF PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES (this
"Agreement") is made as of this ___ day of _______, ____ by EACH OF THE
UNDERSIGNED (each a "Grantor"), to NATIONSBANK, NATIONAL ASSOCIATION, a national
banking association, as Agent (the "Agent") for each of the lenders (the
"Lenders" and collectively with the Agent, the "Secured Parties") now or
hereafter party to the Credit Agreement (as defined below). All capitalized
terms used but not otherwise defined herein shall have the respective meanings
assigned thereto in the Credit Agreement (as defined below);
W I T N E S S E T H:
--------------------
WHEREAS, the Secured Parties have agreed to provide to BREED Technologies,
Inc. ("BREED") and certain Subsidiaries (collectively, the "Borrower") certain
credit facilities, including a term loan facility and a revolving credit
facility with a letter of credit sublimit and a multi-currency sublimit pursuant
to the Amended and Restated Credit Agreement dated as of __________, 1998 among
the Borrower, the Agent and the Lenders (as from time to time amended, revised,
modified, supplemented, or amended and restated the "Credit Agreement"); and
WHEREAS, each Grantor is a wholly-owned direct or indirect Subsidiary of
the Borrower and will materially benefit from the loans and advances made and to
be made, and the letters of credit issued and to be issued, under the Credit
Agreement; and
WHEREAS, each Grantor has entered into a Guaranty Agreement (the "Guaranty
Agreement") dated as of __________, 199_ pursuant to which each Guarantor has
guaranteed payment and performance of the Borrower's Obligations under the
Credit Agreement; and
WHEREAS, each Grantor has entered into an Intellectual Property Security
Agreement (the "IP Security Agreement") dated as of __________, 199_ pursuant
to which each Grantor has granted to the Agent for the benefit of the Lenders a
security interest in the Marks, Copyrights, Licenses and Patents defined below
in order to secured its obligations under the Guaranty Agreement; and
WHEREAS, at least one Grantor (a) has adopted and used and is using each of
the trademarks and service marks (the "Marks") identified on Annex I hereto, and
is the owner of the registrations of and pending registration applications for
such Marks in the United States Patent and Trademark Office identified on Annex
I hereto, (b) is the owner of and uses the copyrights, copyright registrations
and pending registration applications set forth on Annex II hereto (the
"Copyrights"), (c) is a party to and has rights under the licenses and license
agreements listed on Annex III hereto (the "Licenses") and (d) is the owner of
and uses the patents, patent registrations and pending registration applications
set forth on Annex IV hereto (the "Patents" and together with the Marks, the
Copyrights and the Licenses, the "Collateral"); and
WHEREAS, the Agent for the benefit of the Secured Parties desires to
acquire the Marks, the Copyrights, the Licenses and the Patents and the
registrations thereof and registration
<PAGE>
applications therefor, as applicable, in connection with the exercise of its
remedies after the occurrence of an Event of Default under the Credit Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, each Grantor does hereby assign, sell and transfer unto the
Agent all right, title and interest in and to the Marks, Copyrights, Licenses
and Patents, together with (i) the registrations of and registration
applications therefor, as applicable, (ii) the goodwill of the business
symbolized by and associated with the Marks and the registrations thereof, (iii)
the right to sue and recover for, and the right to profits or damages due or
accrued arising out of or in connection with, any and all past, present or
future infringements or dilution of or damage or injury to the Marks,
Copyrights, Patents or the registrations thereof or such associated goodwill,
and (iv) all rights of each Grantor to enforce all Licenses.
Each Grantor hereby grants to the Agent, for the benefit of the Lenders,
and notice is hereby given that each Grantor has granted to the Agent, for the
benefit of the Lenders and the Agent, a first priority security interest in the
Collateral to secure the payment and performance in full of all of the
obligations of each Grantor under the Guaranty Agreement.
This Assignment is intended to and shall take effect as a sealed instrument
at such time as the Agent shall complete this instrument by signing its
acceptance of this Assignment below.
[Signature page follows.]
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Assignment of
Patents, Trademarks, Copyrights and Licenses on the day and year first written
above.
GRANTORS:
[INSERT NAME]
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
ASSIGNMENT OF TRADEMARKS, COPYRIGHTS AND LICENSES
SIGNATURE PAGE 1 OF 2
<PAGE>
The foregoing assignment of the Patents, Trademarks, Copyrights and
Licenses and the registrations thereof and registration applications therefor by
the Assignee and the Agent is hereby accepted as of the ____ day of _______,
199_.
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
ASSIGNMENT OF TRADEMARKS, COPYRIGHTS AND LICENSES
SIGNATURE PAGE 2 OF 2
<PAGE>
STATE OF ________________________ )
) ss.
COUNTY OF _________________________ )
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this __ day of _________, 199_, personally appeared
__________________________________________ to me known personally, and who,
being by me duly sworn, deposes and says that he is the
_______________________________ of __________________________________________,
and that the foregoing instrument was signed and sealed on behalf of said
corporation by authority of its Board of Directors, and said
_______________________________ acknowledged said instrument to be the free act
and deed of said corporation.
---------------------------------------
Notary Public
My commission expires:
<PAGE>
ANNEX I
-------
Trademark Registrations
-----------------------
Trademark United States Patent
or and Trademark Office
Service Mark Registration No. Registration Date
------------ -------------------- -----------------
[List chronologically in ascending numerical order]
Trademark Pending Applications
------------------------------
Trademark United States Patent
or and Trademark Office
Service Mark Serial No. Filing Date
------------ -------------------- -----------
[List chronologically in ascending numerical order]
<PAGE>
ANNEX II
--------
Part I
------
Copyrights Registered with U.S. Copyright Office
------------------------------------------------
Copyright Registration
Title [Author(s)] Number Date
----- ----------- ------ ----
Part II
-------
Copyrights Not Registered
-------------------------
Title [Author(s)]
----- -----------
<PAGE>
ANNEX III
---------
Licenses
--------
<PAGE>
ANNEX IV
--------
Patent Registrations
--------------------
United States Patent
and Trademark Office
Patent Registration No. Registration Date
------ -------------------- -----------------
[List chronologically in ascending numerical order]
Pending Applications
--------------------
United States Patent
and Trademark Office
Patent Serial No. Filing Date
------ -------------------- -----------
[List chronologically in ascending numerical order]
<PAGE>
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:
----------------------------
I-1
<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 10.4(g) of the Amended and
Restated Credit Agreement dated as of __________, 1998 (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.
I-2
<PAGE>
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 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).
I-3
<PAGE>
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,
(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
I-4
<PAGE>
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:
I-5
<PAGE>
(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 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
I-6
<PAGE>
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:
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I-7
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount of
Amount of Principal Paid Unpaid Principal Notation
Date Advance or Prepaid Balance Made By
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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ENDORSEMENT
PAY TO THE ORDER OF
Dated:
---------------- ----------------------------------------
By:
-------------------------------------
Title:
----------------------------------
I-8
<PAGE>
EXHIBIT J
Form of Subordination Agreement
[See Attached]
J-1
<PAGE>
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is made and entered into as
of this ____ day of _______, 199_ by and among each of BREED TECHNOLOGIES, INC.,
a Delaware corporation, ("BREED"), and EACH OF THE UNDERSIGNED (each an
"Initial Subordinated Creditor," and collectively with the Borrower, the
"Initial Subordinated Creditors"), and NATIONSBANK, NATIONAL ASSOCIATION, a
national banking association organized and existing under the laws of the United
States, as Agent (the "Agent") for each of the financial institutions (the
"Lenders" and collectively with the Agent, the "Secured Parties") now or
hereafter party to the Credit Agreement (as defined below). All capitalized
terms used herein and not defined shall have the respective meanings assigned
thereto in the Credit Agreement.
W I T N E S S E T H:
--------------------
WHEREAS, the Secured Parties have agreed to provide to the BREED and
certain Subsidiaries (collectively, the "Borrower") a certain revolving credit
facility with a letter of credit sublimit and a multi-currency sublimit pursuant
to the Amended and Restated Credit Agreement dated as of April 28, 1998 among
the Borrower, the Agent and the Lenders (as from time to time amended, revised,
modified, supplemented or amended and restated, the "Credit Agreement"); and
WHEREAS, certain Domestic Subsidiaries and Direct Foreign Subsidiaries have
incurred and hereafter may incur Indebtedness owing to a Subordinated Creditor
(as defined below) as an Intercompany Advance permitted under Section 10.4 of
------------
the Credit Agreement, which Indebtedness is evidenced by an Intercompany Note;
and
WHEREAS, each Initial Subordinated Creditor will materially and directly
benefit from the loans and advances to be made, and the letters of credit to be
issued, under the Credit Agreement, and the Secured Parties are not willing to
make the credit facilities available to the Borrower under the Credit Agreement
unless each Initial Subordinated Creditor executes and delivers this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Subordinated Creditors agree as follows:
1. Certain Definitions. In addition to terms defined elsewhere in this
-------------------
Agreement, the following terms, as used herein, shall have the following
meanings:
"Senior Creditors" means the Lenders, the Agent, and all other future
----------------
obligees or holders (or any one of them) of the Senior Obligations.
"Senior Loan Documents" means (i) the Credit Agreement and the
---------------------
Guaranty, together with the other Loan Documents and all other documents,
instruments and agreements related thereto, and any amendments, restatements,
supplements or modifications of or with respect
<PAGE>
to any of the foregoing, and (ii) any other agreement, document or instrument
executed by the Borrower in connection with such Senior Obligations, whether a
Swap Agreement or pursuant to a refinancing, refunding, restatement or
replacement of any of the Senior Obligations.
"Senior Obligations" means all Obligations and all other debt or other
------------------
obligations of any nature, whether now existing or hereafter arising, consisting
of (i) all principal, interest (including any interest accruing after the
commencement of any bankruptcy, insolvency, receivership or similar proceedings
and any other interest that would have accrued but for the commencement of such
proceedings, whether or not allowed), fees, reimbursement obligations arising in
connection with letters of credit, indemnification obligations, costs and
expenses payable by the Borrower or any Guarantor under the Senior Loan
Documents, and (ii) all indebtedness of the Borrower and the Guarantors, or any
of them, under any amendments, modification, renewals, extensions, restatements
or loan documents evidencing refinancings, refundings or replacements of any of
the foregoing.
"Standstill Period" means the period of time from the date hereof to
-----------------
and including the 91st day following the Facility Termination Date.
"Subordinated Creditors" means, collectively, each Initial
----------------------
Subordinated Creditor together with any Subsidiary which is not an Initial
Subordinated Creditor and which is the payee or obligee of any Subordinated
Obligations and hereafter executes and delivers a signature page and becomes a
party hereto in compliance with Section 10.4 of the Credit Agreement and any
------------
future permitted holders or assignees (or any of them) of all or any portion of
the Subordinated Obligations or any interest therein.
"Subordinated Obligations" means, collectively, the indebtedness,
------------------------
obligations and liabilities consisting of Intercompany Advances and evidenced by
the Intercompany Notes and all other indebtedness, obligations and liabilities
of each Subordinated Obligations Credit Party owing to a Subordinated Creditor.
"Subordinated Obligations Credit Party" means each a Domestic
-------------------------------------
Subsidiary and Direct Foreign Subsidiary which is the maker of an Intercompany
Note and its respective successors and permitted assigns, including, without
limitation, any receiver, trustee or debtor in possession thereof together with
any Domestic Subsidiary or Direct Foreign Subsidiary which after the date hereof
receives a loan or advance permitted under Section 10.4 of the Credit Agreement
------------
and is the payor and obligor of Subordinated Obligations, including without
limitation the maker hereafter of any Intercompany Note.
"Subordinated Transaction Documents" means each Intercompany Note and
----------------------------------
all documents, instruments and agreements entered into in connection with any
Subordinated Obligations and the other obligations evidenced thereby and any
amendments, restatements, supplements or modification of or with respect to any
of the foregoing and permitted hereunder.
2. Subordination; Subrogation.
--------------------------
2
<PAGE>
(a) The rights, powers and remedies of the Subordinated Creditors in
respect of the Subordinated Obligations are hereby subordinated to the
rights, powers and remedies of the Senior Creditors in respect of the
Senior Obligations as provided in this Agreement. Except to the extent
expressly permitted under Section 3(a) hereof the Subordinated Creditors
------------
will not at any time during the Standstill Period ask, demand, sue for,
take or receive from any Subordinated Obligations Credit Party or any other
Person, by setoff, or in any other manner, the whole or any part of any
amounts which may now or hereafter be owing by any Subordinated Obligations
Credit Party to any Subordinated Creditor with respect to the Subordinated
Obligations (whether such amounts represent principal, premium, interest or
fees or other obligations which are due or not due, direct or indirect,
absolute or contingent or obligations arising from the exercise of any
redemption, put or similar right in respect of any warrants or any stock
issued in connection with the exercise thereof), including, without
limitation, the taking of any instruments evidencing such amounts (other
than the delivery of the Subordinated Transaction Documents), nor any
security for any of the foregoing.
(b) The Subordinated Creditors agree that none of them shall obtain
or maintain any Lien in any property, tangible or intangible, of any
Subordinated Obligations Credit Party as security for payment of the
Subordinated Obligations.
(c) The Subordinated Creditors also hereby agree that, regardless of
whether the Senior Obligations are secured or unsecured, following the
occurrence and during the continuance of any Event of Default, the Senior
Creditors shall be subrogated to the Subordinated Creditors with respect to
the Subordinated Creditors' claims against each Subordinated Obligations
Credit Party and the proceeds thereof until the end of the Standstill
Period.
(d) The Subordinated Creditors further agree (i) that they will not
challenge any Liens of the Senior Creditors, or any of them, securing
payment of any of the Senior Obligations; and (ii) that as between the
Senior Creditors, on the one hand, and the Subordinated Creditors, on the
other hand, the terms of this Agreement shall govern, even if part or all
of the Senior Obligations or any Liens or security interests securing
payment thereof are avoided, disallowed, set aside or otherwise invalidated
in any judicial proceeding or otherwise. The Subordinated Creditors
acknowledge and agree that the terms and provisions of this Agreement and
the Senior Loan Documents do not violate any term or provision of the
Subordinated Transaction Documents, and that, to the extent that the terms
and provisions of this Agreement are inconsistent with the Subordinated
Transaction Documents, the Subordinated Transaction Documents shall be
deemed to be superseded by, and amended to incorporate the terms of, this
Agreement and the other Senior Loan Documents, as applicable.
3
<PAGE>
3. Permitted Payments.
------------------
(a) Provided that there shall not have occurred and be continuing any
Event of Default at the time of such payment, and the making of such
payment shall not cause, create, result in or otherwise give rise to any
Event of Default, the Subordinated Obligations Credit Party may make and
the Subordinated Creditors may receive (i) regularly scheduled interest
payments when and as due on the Subordinated Obligations pursuant to the
original terms thereof, and (ii) regularly scheduled payment of
installments of principal of the Subordinated Obligations when due pursuant
to the original terms thereof, but not on an accelerated basis.
(b) Except as expressly set forth above, the Subordinated Creditors
shall have no right during the Standstill Period to enforce any payment
with respect to the Subordinated Obligations, or to otherwise take any
action against any Subordinated Obligations Credit Party or any of their
respective assets in connection therewith. Following expiration of the
Standstill Period, the Subordinated Creditors may take appropriate action
to enforce their rights and remedies following a default in the payment of
Subordinated Obligations which shall not have been cured or waived.
(c) It is understood and agreed by the Subordinated Creditors that
payments of the Subordinated Obligations other than as expressly permitted
in this Section 3 shall not be permitted.
---------
4. Senior Creditors' Priority; Grant of Authority to Senior Creditors;
-------------------------------------------------------------------
Release Upon Sale.
- -----------------
(a) In the event of the occurrence of any Event of Default under the
Credit Agreement which shall not have been cured or waived:
(i) the Senior Creditors shall be entitled to receive final
payment in full in cash of any and all of the Senior Obligations then
owing or which become owing (including the aggregate stated amount
then available for drawing under all letters of credit) prior to the
payment of all or any part of the Subordinated Obligations, regardless
of whether any such amount in respect of Senior Obligations, or any
security therefor, is avoided, disallowed, set aside or otherwise
invalidated in any insolvency, bankruptcy, reorganization,
receivership or other proceeding, and including with respect to
obligations to the Senior Creditors under the Senior Loan Documents,
interest at the applicable rate or rates until payment has been made
in full; and
(ii) any payment or distribution of any kind or character,
whether in cash, securities or other property, which shall be payable
or deliverable upon or with respect to any or all of the Subordinated
Obligations shall be paid or delivered forthwith directly to the Agent
on behalf of the Senior Creditors for application
4
<PAGE>
against the Senior Obligations, whether due or not due, until the
Senior Obligations shall have first been fully paid and satisfied in
cash.
(b) In order to enable the Senior Creditors to enforce their rights
hereunder in any of the aforesaid actions or proceedings, the Senior
Creditors are hereby irrevocably authorized and empowered, in their
discretion, (i) to make and present for and on behalf of any or all of the
Subordinated Creditors such proofs of claims against any Subordinated
Obligations Credit Party on account of the Subordinated Obligations as the
Senior Creditors may deem expedient or proper, and to vote such proofs of
claims in any such proceeding, and to receive and collect any and all
dividends or other payments or disbursements made thereon in whatever form
the same may be paid or issued and to apply the same on account of any of
the Senior Obligations, whether due or not due; and (ii) to demand, sue
for, collect and receive each of the aforesaid payments and distributions
and give acquittance therefor and to file claims and take such other
actions, in the Senior Creditors' own name or names or in the name or names
of the Subordinated Creditors, or otherwise, as the Senior Creditors may
deem necessary or advisable for the enforcement of this Agreement. The
Subordinated Creditors will execute and deliver to the Senior Creditors
such powers of attorney, assignments and other instruments or documents,
including notes and stock certificates (together with such assignments or
endorsements as the Senior Creditors shall deem necessary or appropriate),
as may be requested by the Senior Creditors in order to enable the Senior
Creditors to enforce any and all claims upon or with respect to any or all
of the Subordinated Obligations and to collect and receive any and all
payments and distributions which may be payable or deliverable at any time
upon or with respect to the Subordinated Obligations, all for the Senior
Creditors' benefit.
5. Payments Received by Subordinated Creditors. Except as expressly
-------------------------------------------
permitted in Section 3(a) hereof, should any payment or distribution or security
------------
or instrument or property, or any proceeds thereof, be received by any
Subordinated Creditor upon or with respect to the Subordinated Obligations prior
to the end of the Standstill Period, then such Subordinated Creditor shall
receive and hold the same in trust, as trustee, for the benefit of the Senior
Creditors and shall forthwith deliver the same to the Agent on behalf of the
Senior Creditors (together with any required or appropriate endorsement or
assignment thereof by the Subordinated Creditor) for application on any of the
Senior Obligations, due or not due. In the event of the failure of any
Subordinated Creditor to make any such endorsement or assignment, the Agent, and
any of its officers or employees, is hereby irrevocably authorized to make the
same. Upon completion of the Standstill Period, the Subordinated Creditors
shall be subrogated to any rights of the Senior Creditors against each
Subordinated Obligations Credit Party to the extent of any payments with respect
to the Subordinated Obligations paid to and retained by the Senior Creditors.
6. Instrument Legend. Any instrument evidencing the Subordinated
-----------------
Obligations or any portion thereof, will, on the date hereof, be inscribed with
the following legend conspicuously indicating that payment thereof is
subordinated to the claims of the Senior Creditors pursuant to the terms of this
Agreement:
5
<PAGE>
THIS PROMISSORY NOTE IS SUBJECT TO THE TERMS OF A SUBORDINATION
AGREEMENT (AS FROM TIME TO TIME AMENDED, RESTATED, SUPPLEMENTED OR
OTHERWISE MODIFIED), DATED AS OF _________, 199_, AMONG [INSERT
SUBORDINATED CREDITORS THEN PARTY] AND NATIONSBANK, NATIONAL
ASSOCIATION, AS AGENT.
Any instrument evidencing any of the Subordinated Obligations or any portion
thereof which is hereafter executed by any Subordinated Obligations Credit Party
will, on the date thereof, be inscribed with the aforesaid legend. Upon
completion of the Standstill Period, the foregoing legend may be removed from
any instrument evidencing all or any part of the Subordinated Obligations, and
any original documents evidencing any of the Subordinated Obligations which have
been delivered to the Senior Creditors shall be returned to the Subordinated
Creditors.
7. Assignment of Claims. The Subordinated Creditors agree that until
--------------------
completion of the Standstill Period, the Subordinated Creditors will not assign
or transfer to others all or any portion of or any interest in any of the
Subordinated Obligations or any claims that it has or may hereafter have against
any Subordinated Obligations Credit Party relating to the Subordinated
Obligations.
8. Continuing Nature of Subordination. Except to the extent specifically
----------------------------------
provided herein, this Agreement shall continue to be effective until completion
of the Standstill Period.
9. Additional Agreements.
---------------------
(a) The Senior Creditors at any time and from time to time, without
the consent of the Subordinated Creditors, may enter into such agreements
with any Subordinated Obligations Credit Party or other Loan Party as the
Senior Creditors may deem proper, amending, modifying or otherwise altering
the terms of, all or any part of the Senior Obligations, or any of the
Senior Loan Documents, or affecting the security underlying any or all of
the Senior Obligations, and may exchange, sell, release, waive, surrender
or otherwise deal with any such security, without in any way thereby
impairing or affecting this Agreement.
(b) It is understood and agreed by the Subordinated Creditors that
the Subordinated Transaction Documents may not be modified or amended
without the prior written consent of the Required Lenders which consent
shall not be unreasonably withheld.
10. Senior Creditors' Waivers; Amendments. No waiver shall be deemed to
-------------------------------------
be made by the Senior Creditors of any of their rights hereunder unless the same
shall be in writing signed on behalf of the Required Lenders, and each waiver,
if any, shall be a waiver only with respect to the specific instance involved
and shall in no way impair the rights of the Senior Creditors in any other
respect at any other time. All modifications of or amendments to this Agreement
must be in writing and duly executed by each party hereto.
6
<PAGE>
11. Application of Payments on Senior Obligations. The Subordinated
---------------------------------------------
Creditors hereby agree that all payments received by the Senior Creditors may be
applied, reversed, and reapplied, in whole or in part, to any of the Senior
Obligations, as the Senior Creditors, in their sole discretion, deem
appropriate, and the Subordinated Creditors assent to (i) any extension or
postponement of the time of payment of all or any part of the Senior Obligations
and to any other indulgences with respect thereto; and (ii) any substitution,
exchange or release of any collateral which may at any time secure any of the
Senior Obligations.
12. Application to Post-Bankruptcy Matters. This Agreement shall be
--------------------------------------
applicable both before and after the filing of any petition by or against any
Borrower or Subordinated Obligations Credit Party under any federal, state or
foreign bankruptcy, insolvency, reorganization or receivership or similar law,
and all allocations of payments between the Senior Creditors, on the one hand,
and the Subordinated Creditors on the other hand, shall continue to be made
after the filing thereof on the same basis that the payments were to be applied
prior to the date of the petition, as if such petition had not been filed.
13. Anti-Marshalling Provisions. The right is hereby given by each
---------------------------
Subordinated Creditor to the Agent, for the benefit of the Secured Parties, to
make releases (whether in whole or in part) of all or any part of the Collateral
agreeable to the Agent without notice to, or the consent, approval or agreement
of other parties and interests, including junior lienors, which releases shall
not impair in any manner the validity of or priority of the Liens and security
interests in the remaining Collateral conferred under such documents, nor
release such Subordinated Creditor from personal liability for the Secured
Obligations hereby secured. Notwithstanding the existence of any other security
interest in the Collateral held by the Agent, for the benefit of the Secured
Parties, the Agent shall have the right to determine the order in which any or
all of the Collateral shall be subjected to the remedies provided in this
Agreement. The proceeds realized upon the exercise of the remedies provided
herein shall be applied by the Agent, for the benefit of the Secured Parties, in
the manner provided in Section 11.5 of the Credit Agreement. Each Subordinated
------------
Creditor hereby waives any and all right to require the marshalling of assets in
connection with the exercise of any of the remedies permitted by applicable law
or provided herein.
14. Attorney-in-Fact. Each Subordinated Creditor hereby appoints the
----------------
Agent as such Subordinated Creditor's attorney-in-fact for the purposes of
carrying out the provisions of this Agreement and taking any action and
executing any instrument which the Agent may deem necessary or advisable to
accomplish the purposes hereof, which appointment is coupled with an interest
and is irrevocable; provided, that the Agent shall have and may exercise rights
--------
under this power of attorney only upon the occurrence and during the continuance
of an Event of Default.
15. Absolute Rights and Obligations. All rights of the Secured Parties,
-------------------------------
and all obligations of the Subordinated Creditors hereunder, shall be absolute
and unconditional irrespective of:
(a) any lack of validity or enforceability of the Credit Agreement,
any other Loan Document or any other agreement or instrument relating to
any of the Secured Obligations;
7
<PAGE>
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, any other Loan Document or any other agreement or instrument
relating to any of the Secured Obligations;
(c) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Secured Obligations; or
(d) any other circumstances which might otherwise constitute a defense
available to, or a discharge of, the Subordinated Creditors in respect of
the Secured Obligations or of this Agreement.
16. Definitions. All terms used herein shall be defined in accordance
-----------
with the appropriate definitions appearing in the Uniform Commercial Code as in
effect in Florida, and such definitions are hereby incorporated herein by
reference and made a part hereof.
17. Entire Agreement. This Agreement, together with the Credit Agreement,
----------------
the Guaranty Agreement and other Loan Documents, constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior agreements and understandings,
inducements, commitments or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof. Neither this Agreement nor any portion or provision hereof may be
changed, altered, modified, supplemented, discharged, canceled, terminated, or
amended orally or in any manner other than by an agreement, in writing signed by
the parties hereto.
18. Binding Agreement; Assignment. This Agreement, and the terms,
-----------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto, and to their respective successors and assigns (including
any assignees of any of the Senior Creditors' rights under the Credit Agreement
or the other Senior Loan Documents), except that no Subordinated Creditor shall
be permitted to assign any Subordinated Obligations or any Subordinated
Transaction Documents or interests therein or any interest herein, except as
expressly permitted hereunder. All references herein to the Agent shall include
any successor thereof, each Lender and any other obligees from time to time of
the Senior Loan Documents.
19. Further Assurances. Each Subordinated Creditor agrees at its own
------------------
expense to do such further acts and things, and to execute and deliver such
additional, agreements and instruments, as the Agent may at any time request in
connection with the administration or enforcement of this Agreement in order
better to assure and confirm unto the Agent its rights, powers and remedies for
the benefit of the Senior Creditors hereunder. Each Subordinated Creditor
hereby consents and agrees that the issuers of or obligors in respect of the
Subordinated Obligations shall be entitled to accept the provisions hereof as
conclusive evidence of the right of the Agent, on behalf of the Secured Parties,
to exercise its rights hereunder with respect to the Subordinated Obligations,
8
<PAGE>
notwithstanding any other notice or direction to the contrary heretofore or
hereafter given by each Subordinated Creditor or any other Person to any of such
issuers or obligors.
20. Severability. In case any Lien, security interest or other right of
------------
any Senior Creditor or any provision hereof shall be held to be invalid, illegal
or unenforceable, such invalidity, illegality or unenforceability shall not
affect any other Lien, security interest or other right granted hereby or
provision hereof.
21. Counterparts. This Agreement may be executed in any number of
------------
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
22. Indemnification. Without limitation of Section 13.9 of the Credit
--------------- ------------
Agreement or any other indemnification provision in any Loan Document, each
Subordinated Creditor hereby covenants and agrees to pay, indemnify, and hold
the Secured Parties harmless from and against any and all other out-of-pocket
liabilities, costs, expenses or disbursements of any kind or nature whatsoever
arising in connection with any claim or litigation by any Person resulting from
the execution, delivery, enforcement, performance and administration of this
Agreement or the Loan Documents, or the transactions contemplated hereby or
thereby, or in any respect relating to the Collateral or any transaction
pursuant to which each Subordinated Creditor has incurred any Obligation (all
the foregoing, collectively, the "indemnified liabilities"); provided, however,
-------- -------
that each Subordinated Creditor shall have no obligation hereunder with respect
to indemnified liabilities directly and primarily arising from the willful
misconduct or gross negligence of the Agent or any Lender. The agreements in
this subsection shall survive repayment of all Secured Obligations, termination
or expiration of this Agreement and occurrence of the Facility Termination Date.
23. Termination. This Agreement and all obligations of each Subordinated
-----------
Creditor hereunder shall terminate on the Facility Termination Date, at which
time the Liens and rights granted to the Agent for the benefit of the Secured
Parties hereunder shall automatically terminate and no longer be in effect, and
the Collateral shall automatically be released from the Liens created hereby.
24. Remedies Cumulative. All remedies hereunder are cumulative and are
-------------------
not exclusive of any other rights and remedies of the Senior Creditors provided
by law or under the Credit Agreement, the other Loan Documents, or other
applicable agreements or instruments. The making of the Loans, and issuing
Letters of Credit for the benefit of, to the Borrower pursuant to the Credit
Agreement be conclusively presumed to have been made or extended, respectively,
in reliance upon each Subordinated Creditor's subordination of the Subordinated
Obligations pursuant to the terms hereof.
25. Notices. Any notice required or permitted hereunder shall be given,
-------
(a) with respect each Subordinated Creditor, at the Borrower's address indicated
in Section 13.2 of the Credit Agreement and (b) with respect to the Agent or a
------------
Lender, at the Agent's address indicated in Section 13.2 of the Credit
------------
Agreement. All such notices shall be given and shall be effective as provided in
Section 13.2 of the Credit Agreement.
- -------------
9
<PAGE>
26. Governing Law; Venue; Waiver of Jury Trial.
------------------------------------------
(a) THIS AGREEMENT 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) EACH SUBORDINATED CREDITOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES
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, EACH SUBORDINATED CREDITOR
EXPRESSLY WAIVES 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
EACH SUBORDINATED CREDITOR HEREBY IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
(c) EACH SUBORDINATED CREDITOR AGREES 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 BORROWER PROVIDED IN
SECTION 13.2 OF THE CREDIT AGREEMENT, 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 (b) or (c) HEREOF SHALL
----------------------
PRECLUDE ANY SENIOR CREDITOR FROM BRINGING ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY
JURISDICTION WHERE EACH SUBORDINATED CREDITOR OR ANY OF SUCH SUBORDINATED
CREDITOR'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT
PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH
SUBORDINATED CREDITOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR
PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER IT AND ITS
10
<PAGE>
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 THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION THEREWITH, EACH SUBORDINATED CREDITOR AND THE AGENT ON BEHALF OF
THE SENIOR CREDITORS 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.
[Signature page follows.]
11
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Subordination
Agreement on the day and year first written above.
SUBORDINATED CREDITORS:
BREED TECHNOLOGIES, INC.
WITNESS:
By:
----------------------------------
Name:
- --------------------- --------------------------------
Title:
-------------------------------
- ---------------------
[INSERT NAME]
WITNESS:
By:
----------------------------------
Name:
- --------------------- --------------------------------
Title:
-------------------------------
- ---------------------
AGENT:
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
WITNESS:
By:
----------------------------------
Name:
- --------------------- --------------------------------
Title:
-------------------------------
- ---------------------
SUBORDINATION AGREEMENT
SIGNATURE PAGE 1 OF 1
<PAGE>
EXHIBIT K
Form of Interest Rate Selection 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 Amended and Restated Credit Agreement dated
as of April 28, 1998 (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.
BREED through its Authorized Representative hereby gives notice to the
Agent of the following selection of a type of Loan and Interest Period for the
Borrower indicated if other than BREED:
Name of Borrower:
--------------------------------
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 A Segment
- -------------------
Base Rate Loan ______ _________ ____________
Eurodollar Rate Loan ______ _________ ____________
Term Loan B Segment
- -------------------
Base Rate Loan ______ _________ ____________
Eurodollar Rate Loan ______ _________ ____________
K-1
<PAGE>
(1) For any Eurodollar Rate Loan, one, two, three or, if available, six 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,
Spanish Pesetas, Yen, ECU or Euro.
BREED TECHNOLOGIES, INC.
BY:
-----------------------------------
Authorized Representative
DATE:
---------------------------------
K-2
<PAGE>
EXHIBIT L
Form of Landlord Waiver
[See Attached]
L-1
<PAGE>
EXHIBIT L
LANDLORD WAIVER AND ESTOPPEL CERTIFICATE
TO: NationsBank, N.A.
Independence Center, NC1 001-15-04
Charlotte, North Carolina 28255
Attention: _______________, Agency Services
_____________________ (the "Lessee") is the lessee under a lease (the
"Lease") between the Lessee and the undersigned ("Lessor") covering the premises
(the "Premises") commonly known as ___________________ located at
_______________________ as more fully described in the Lease. The undersigned is
the fee simple owner of the Premises.
Breed Technologies, Inc. ("Breed") and certain Subsidiaries have entered
into that certain Amended and Restated Credit Agreement, dated as of April 28,
1998 (together with related documentation being referred to hereinafter as the
"Loan Documents"), with NationsBank, National Association, as agent (in such
capacity, the "Agent") for the several financial institutions from time to time
parties thereto (the "Lenders"). Pursuant to that certain Guaranty Agreement
executed by Lessee for the benefit of the Agent and the Lenders (the
"Guaranty"), Lessee has guaranteed Breed's obligations under the Loan Documents.
As a condition to the Lenders making loans and providing other financial
accommodations to Breed pursuant to the Credit Agreement, and as security for
Lessee's obligation under the Guaranty, the Lessee has granted to the Agent, for
the benefit of the Lenders, liens on certain of the Lessee's personal property
as defined in the Loan Documents, whether now owned or hereafter acquired (said
personal property of the Lessee being hereinafter called the "Collateral,"
portions of which Collateral are or may hereafter be located on the Premises).
To induce the Lenders to make loans and to provide other financial
accommodations to Breed, and for other good and valuable consideration, receipt
of which is hereby acknowledged, the undersigned hereby certifies and agrees
that:
1. The undersigned is the lessor under the Lease and is the record owner
of the Premises.
2. Attached hereto as Exhibit A is a true and complete copy of the Lease
except that certain financial terms have been blacked out.
3. The Lease has not been modified or terminated, and, to the best of the
undersigned's knowledge, the Lease continues in full force and effect.
1
<PAGE>
4. Any liens or claims against the Collateral that the Agent has or may
hereafter have by virtue of the security interest granted in the
Collateral by the Lessee to the Agent, for the benefit of the Lenders,
or otherwise, are superior to any liens on or claims against the
Collateral (including, without limitation, rights of levy or distraint
for rent) which the undersigned now has or may hereafter have by
virtue of any statute, agreement or otherwise;
5. The Collateral located on the Premises shall at any time be removable
by the Agent in accordance with the Loan Documents if removable by the
Lessee pursuant to the terms of the Lease.
6. No default has occurred and remains uncured under the Lease and, to
the best of the undersigned's knowledge, no event has occurred which,
with the giving of notice or the passage of time, or both, would
constitute a default or an event of default under the Lease.
7. The undersigned will notify the Agent if the Lessee defaults on any of
its lease obligations to the undersigned and allow the Agent thirty
(30) days from its receipt of notice in which to cure or cause the
Lessee to cure any such defaults.
8. If, for any reason, the undersigned either deems itself entitled to
take possession of the Premises during the term of the Lease or sells
or otherwise transfers all or any part of its interest in the
Premises, the undersigned will notify the Agent thirty (30) days
before taking such action.
9. If the Lessee defaults on any of its obligations to the Agent and the
Lenders and, as a result, the Agent undertakes to enforce its security
interest in the Collateral, the undersigned (a) will reasonably
cooperate with the Agent in its efforts (i) to assemble all of the
Collateral located on the Premises for up to ninety (90) days after
the Agent declares such default, or, (ii) at the Agent's option, to
remove the Collateral from the Premises within a reasonable time (and
whether or not any or all of the Collateral is not removable by the
Lessee pursuant to the terms of the Lease), not to exceed ninety (90)
days after the Agent declares such default, provided that the Agent
pays or causes the Lessee to pay to the undersigned the reserved
rental at the rate set forth in the Lease, prorated for so long as the
Agent occupies the Premises, and provided further that the Agent pays
or causes the Lessee to pay reasonable compensation to the undersigned
for any damage to the Premises caused by removal of any Collateral not
removable by the Lessee pursuant to the terms of the Lease, and (c)
will not hinder the Agent's actions in enforcing its security interest
in the Collateral.
10. The Collateral shall not be deemed a fixture or a part of the Premises
but shall at all times be considered personal property.
2
<PAGE>
11. Any notice(s) required or desired to be given hereunder shall be
directed to the party to be notified at the following addresses: if to
the Agent, at the address stated above, and if to the undersigned, at
____________________________________________.
12. The undersigned hereby disclaims any interest in the Collateral which
may be prior to any security therein between the Agent and the Lessee.
The undersigned hereby waives all rights, present or future, to levy
on or distrain any of the Collateral and any additions and accessions
thereto as substitutions therefore.
13. The agreements contained herein shall continue in force until all of
the Lessee's obligations and liabilities to the Agent and the Lenders
are paid and satisfied in full and all financing arrangements among
the Agent, the Lenders and the Lessee have been terminated.
14. This Certificate may be assigned by the Agent for the benefit of the
Lenders by giving thirty (30) days notice of the assignment to the
Lessor.
15. The undersigned will notify all successor owners, transferees,
purchasers and mortgagees of the existence of this waiver. The
agreements contained herein may not be modified or terminated orally
and shall be binding upon the successors, assigns and personal
representatives of the undersigned, and upon any purchasers, including
any mortgagee, from the undersigned.
3
<PAGE>
This Certificate has been duly executed and delivered by the undersigned as
of the _____ day of ______, 1998.
LESSOR:
By: _________________________
Name: _________________________
Title: ________________________
4
<PAGE>
EXHIBIT M
Form of LC Account Agreement
[See Attached]
M-1
<PAGE>
LC ACCOUNT AGREEMENT
THIS LC ACCOUNT AGREEMENT (the "Agreement") is made and entered into as of
this ___ day of _______, 1998 by and between BREED TECHNOLOGIES, INC., a
Delaware corporation ("BREED" or the "Pledgor"), and NATIONSBANK, NATIONAL
ASSOCIATION, a national banking association organized and existing under the
laws of the United States, as Agent (the "Agent") for each of the financial
institutions (the "Lenders" and collectively with the Agent, the "Secured
Parties") now or hereafter party to the Credit Agreement (as defined below).
All capitalized terms used but not otherwise defined herein shall have the
respective meanings assigned thereto in either or both of the Credit Agreement.
W I T N E S S E T H:
--------------------
WHEREAS, the Secured Parties have agreed to provide to BREED and certain
Subsidiaries (collectively, the "Borrower") certain credit facilities, including
a term loan facility and a revolving credit facility with a letter of credit
sublimit and a multi-currency sublimit pursuant to the Amended and Restated
Credit Agreement dated as of April 28, 1998 among the Borrower, the Agent and
the Lenders (as from time to time amended, revised, modified, supplemented, or
amended and restated the "Credit Agreement"); and
WHEREAS, as a condition precedent to the Lenders' obligations to make the
Loans or to issue Letters of Credit, the Pledgor is required to execute and
deliver to the Agent a copy of this Agreement on or before the Closing Date;
WHEREAS, the Secured Parties are unwilling to enter into the Loan Documents
unless each Pledgor enters into this Agreement;
NOW, THEREFORE, in order to induce the Secured Parties to enter into the
Loan Documents and to make Loans and issue Letters of Credit and in
consideration of the premises and the mutual covenants contained herein, the
parties hereto agree as follows:
1. Definitions. The following capitalized terms used in this Agreement
------------
shall have the following meanings notwithstanding any definition thereof in the
Credit Agreement. Other capitalized terms used but not defined herein shall
have the meanings therefor set forth in the Credit Agreement.
"Collateral" means (a) all funds from time to time on deposit in the LC
----------
Account; (b) all Investments and all certificates and instruments from time to
time representing or evidencing such Investments; (c) all notes, certificates of
deposit, checks and other instruments from time to time hereafter delivered to
or otherwise possessed by the Agent for or on behalf of the Pledgor in
substitution for or in addition to any or all of the Collateral described in
clause (a) or (b) above; (d)
<PAGE>
all interest, dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Collateral described in clause (a), (b) or (c) above; and (e)
to the extent not covered by clauses (a) through (d) above, all proceeds of any
or all of the foregoing Collateral.
"Investments" means those investments, if any, made by the Agent pursuant
-----------
to Section 5 hereof.
---------
"LC Account" means the cash collateral account established and maintained
----------
pursuant to Section 2 hereof.
----------
"Secured Obligations" means (i) all Obligations of the Pledgor now existing
-------------------
or hereafter arising under or in respect of the Credit Agreement or the Notes
(including, without limitation, the Pledgor's obligation to pay principal and
interest and all other charges, fees, expenses, commissions, reimbursements,
indemnities and other payments related to or in respect of the obligations
contained in the Credit Agreement or the Notes) or any documents or agreement
related to the Credit Agreement or the Notes; and (ii) without duplication, all
obligations of the Pledgor now or hereafter existing under or in respect of this
Agreement, including, without limitation, with respect to all charges, fees,
expenses, commissions, reimbursements, indemnities and other payments related to
or in respect of the obligations contained in this Agreement.
2. LC Account; Cash Collateralization of Letters of Credit.
-------------------------------------------------------
(i) At any time, in the Agent's sole discretion, the Agent shall
establish and maintain at its offices at 101 North Tryon Street,
Charlotte, North Carolina, in its name and under its sole dominion and
control, a cash collateral account designated as Breed Technologies, Inc.
Cash LC Account (the "LC Account").
(ii) In the event that the Pledgor delivers to the Agent an amount
equal to the maximum amount remaining undrawn or unpaid under any Letters
of Credit either (A) as required pursuant to Article X of the Credit
---------
Agreement or (B) as otherwise agreed by the parties hereto to provide cash
collateral for the undrawn amount of any Letter of Credit other than after
the occurrence and during the continuation of an Event of Default, the
Agent shall deposit such amount into the LC Account to be held pursuant to
the terms of this Agreement. Upon a drawing under the Letters of Credit in
respect of which any amounts described above have been deposited in the LC
Account, the Agent shall apply such amounts to reimburse NationsBank for
the amount of such drawing. In the event the Letters of Credit are
canceled or expire or in the event of any reduction in the maximum amount
available at any time for drawing under such Letters of Credit (the
"Maximum Available Amount"), the Agent shall apply the amount then in the
LC Account less the Maximum Available Amount immediately after such
cancellation, expiration or reduction, if any, first, to the cash
-----
collateralization of the Letters of Credit if the Pledgor has failed to pay
all or a portion of the maximum amounts described in the first sentence of
this clause (ii) above, second, to the payment in full of the
------
2
<PAGE>
outstanding Secured Obligations and third, the balance, if any, to the
-----
Pledgor or as otherwise required by law.
(iii) Interest and other income received in respect of Investments
of any amounts deposited in the LC Account pursuant to clause (ii) of this
Section 2 shall be held by the Agent as additional Collateral hereunder.
---------
3. Pledge; Security for Secured Obligations. The Pledgor hereby grants
----------------------------------------
and pledges to the Agent, for itself and on behalf of the Secured Parties, a
first priority lien and security interest in the Collateral now existing or
hereafter arising or acquired, as collateral security for the prompt payment in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code), of all Secured Obligations.
4. Delivery of Collateral. The Collateral shall be delivered to the
----------------------
Agent, for the benefit of the Lenders, in the form of immediately available
funds.
5. Investing of Amounts in the LC Account; Amounts held by the Agent.
-----------------------------------------------------------------
Cash held by the Agent in the LC Account shall not be invested or reinvested
except as provided in this Section 5.
---------
(i) Subject to the remedies and other rights provided in Section 11
----------
hereof and provided that the lien and security interest in favor of the
Agent and Secured Parties remains perfected and so long as no Event of
Default shall have occurred and be continuing, any funds on deposit in the
LC Account shall be invested by the Agent in cash equivalents.
(ii) The Agent shall have no responsibility and the Pledgor hereby
agrees to hold the Agent and the Lenders harmless for any loss in the value
of the Collateral resulting from a fluctuation in interest rates or
otherwise. Any interest on Investments permitted hereunder and the net
proceeds of the sale or payment of any such Investments shall constitute
part of the Collateral and be held in the LC Account by the Agent.
6. Representations and Warranties. In addition to its representations
------------------------------
and warranties made pursuant to Article VI of the Credit Agreement, the Pledgor
----------
represents and warrants to the Agent (for itself and as agent on behalf of the
Lenders), that the following statements are true, correct and complete:
(i) The Pledgor will be the legal and beneficial owner of the
Collateral free and clear of any Lien except for the lien and security
interest created by this Agreement and Permitted Liens in favor of
Governmental Authorities;
3
<PAGE>
(ii) The pledge and assignment of the Collateral pursuant to this
Agreement creates a valid and perfected first priority security interest in
the Collateral, securing the payment of the Secured Obligations.
7. Further Assurances. The Pledgor agrees that at any time and from time
------------------
to time, at the Pledgor's expense, the Pledgor will promptly execute and deliver
to the Agent any further instruments and documents, and take any further
actions, that may be necessary or that the Agent may reasonably request in order
to perfect and protect any security interest granted or purported to be granted
hereby or to enable the Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral.
8. Transfers and Other Liens. The Pledgor agrees that it will not (a)
-------------------------
sell or otherwise dispose of any of the Collateral, or (b) create or permit to
exist any Lien upon or with respect to any of the Collateral, except for the
Lien and security interest created by this Agreement and the Credit Agreement
and Permitted Liens in favor of Governmental Authorities.
9. The Agent Appointed Attorney-in Fact. Upon the occurrence and during
------------------------------------
the continuation of an Event of Default, the Pledgor hereby appoints the Agent
as its attorney-in-fact, with full authority in the place and stead of the
Pledgor and in the name of the Pledgor or otherwise, from time to time in the
Agent's reasonable discretion to take any action and to execute any instrument
which the Agent may reasonably deem necessary or advisable to accomplish the
purposes of the Agreement, including, without limitation, to receive, endorse
and collect all instruments made payable to the Pledgor or either of them
representing any payment, dividend, or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the same. In
performing its functions and duties under this Agreement, the Agent shall act
solely for the Secured Parties and the Agent has not assumed nor shall be deemed
to have assumed any obligation towards or relationship of agency or trust with
or for the Pledgor.
10. The Agent May Perform. If Pledgor fails to perform any agreement
---------------------
contained herein, after notice to Pledgor, the Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Agent incurred in
connection therewith shall be payable by Pledgor under Section 13 hereof.
----------
11. Standard of Care; No Responsibility For Certain Matters. In dealing
-------------------------------------------------------
with the Collateral in its possession, the Agent shall exercise the same care
which it would exercise in dealing with similar collateral property pledged by
others in transactions of a similar nature, but it shall not be responsible for
(a) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Agent has or is deemed to have knowledge of such matters, (b) taking any
steps to preserve rights against any parties with respect to any Collateral
(other than steps taken in accordance with the standard of care set forth above
to maintain possession of the Collateral), (c) the collection of any proceeds,
(d) any loss resulting from Investments made pursuant to Section 4 hereof, or
---------
(e) determining (x) the correctness of any statement or calculation made by the
Pledgor in any written instructions, or (y) whether any deposit in the LC
Account is proper.
4
<PAGE>
12. Remedies upon Default; Application of Proceeds. If the Borrower shall
----------------------------------------------
fail to perform any action required hereunder or shall otherwise breach any term
or provision hereof (a "Default" hereunder) which Default shall not have been
waived in accordance with Section 13.6 of the Credit Agreement:
------------
(i) The Agent may and shall at the request of the Required Lenders
exercise in respect of the Collateral, in addition to other rights and
remedies provided for herein otherwise available to it, all the rights and
remedies of a secured party on default under the Uniform Commercial Code
(the "Code") as in effect in the state in which the Collateral is located
at that time, and the Agent may, without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange or broker's board or at any of the Agent's
offices or elsewhere, for cash, on credit or for future delivery, and at
such price or prices, and upon such other terms as the Agent may deem
commercially reasonable. Pledgor agrees that, to the extent notice of sale
shall be required by law, at least ten (10) days' notice to Pledgor of the
time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. The Agent shall
not be obligated to make any sale of the Collateral regardless of notice of
sale having been given. The Agent may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to
which it was so adjourned.
(ii) In addition to the remedies set forth in part (i) above and
subject to the provisions of Section 2(ii) hereof, any cash held by the
-------------
Agent as Collateral and all cash proceeds received by the Agent in respect
of any sale of, collection from, or other realization upon all or part of
the Collateral shall be applied (after payment of any amounts payable to
the Agent pursuant to Section 12 hereof) by the Agent to pay the Secured
----------
Obligations pursuant to Article XI of the Credit Agreement.
----------
13. Expenses. In addition to any payments of expenses of the Agent
--------
pursuant to the Credit Agreement or the other Loan Documents, the Pledgor agrees
to pay promptly to the Agent all the costs and expenses, including reasonable
attorneys fees and expenses, which the Agent may incur in connection with (a)
the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (b) the exercise or enforcement of any
of the rights of the Agent hereunder, or (c) the failure by the Pledgor to
perform or observe any of the provisions hereof.
14. No Delays; Waiver, etc. No delay or failure on the part of the Agent
----------------------
in exercising, and no course of dealing with respect to, any power or right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise by the Agent of any power or right hereunder preclude other or further
exercise thereof or the exercise of any other power or right. The remedies
herein provided are to the fullest extent permitted by law cumulative and are
not exclusive of any remedies provided by law.
5
<PAGE>
15. Amendments, Etc. No amendment, modification, termination or waiver of
---------------
any provision of this Agreement, or consent to any departure by the Pledgor
therefrom, shall in any event be effective without the written concurrence of
the Agent.
16. Continuing Security Interest; Termination. This Agreement shall
-----------------------------------------
create a continuing security interest in the Collateral and shall (a) remain in
full force and effect until all Secured Obligations (other than Secured
Obligations in the nature of continuing indemnities or expense reimbursement
obligations not yet due and payable) shall have been indefeasibly paid in full
in cash, the commitments or other obligations of the Agent or any Lender to make
any Loan under the Credit Agreement shall have expired, the Letters of Credit
shall have expired and the Facility Termination Date shall have occurred, (b) be
binding upon Pledgor, its successors and assigns, and (c) inure to the benefit
of the Agent, the Secured Parties and their respective successors, transferees
and assigns. Without limiting the generality of the foregoing clause (c) and
subject to the provisions of the Credit Agreement, any Lender may assign or
otherwise transfer any Note held by it to any other person or entity, and such
other person or entity shall thereupon become vested with all the benefits in
respect thereof granted to such Lender herein or otherwise. Upon the
indefeasible payment in full in cash of the Secured Obligations (other than
Secured Obligations in the nature of continuing indemnities or expense
reimbursement obligations not yet due and payable), and the cancellation or
expiration of the Letters of Credit and termination or expiration of all
commitments and other obligations of the Agent and any Lender to make any Loan
and the occurrence of the Facility Termination Date, Pledgor shall be entitled,
subject to the provisions of Section 11 hereof, to the return, upon its request
----------
and at its expense, of such of the Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof.
17. Successors and Assigns. Whenever in this Agreement any of the parties
----------------------
hereto is referred to, such reference shall be deemed to include the successors
and assigns of such party and all covenants, promises, and agreements by or on
behalf of the Pledgor or by and on behalf of the Agent shall bind and inure to
the benefit of the successors and assigns of the Pledgor, the Agent and the
Lenders.
18. Anti-Marshalling Provisions. The right is hereby given by each
---------------------------
Pledgor to the Agent, for the benefit of the Secured Parties, to make releases
(whether in whole or in part) of all or any part of the Collateral agreeable to
the Agent without notice to, or the consent, approval or agreement of other
parties and interests, including junior lienors, which releases shall not impair
in any manner the validity of or priority of the Liens and security interests in
the remaining Collateral conferred under such documents, nor release the Pledgor
from personal liability for the Secured Obligations hereby secured.
Notwithstanding the existence of any other security interest in the Collateral
held by the Agent, for the benefit of the Secured Parties, the Agent shall have
the right to determine the order in which any or all of the Collateral shall be
subjected to the remedies provided in this Agreement. The proceeds realized
upon the exercise of the remedies provided herein shall be applied by the Agent,
for the benefit of the Secured Parties, in the manner provided in Section 11.5
------------
of the Credit Agreement. The Pledgor hereby waives any and all right to require
the marshalling of assets in connection with the exercise of any of the remedies
permitted by applicable law or provided herein.
6
<PAGE>
19. Absolute Rights and Obligations. All rights of the Secured Parties,
-------------------------------
and all obligations of the Pledgors hereunder, shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability of the Credit Agreement,
any other Loan Document or any other agreement or instrument relating to
any of the Secured Obligations;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, any other Loan Document or any other agreement or instrument
relating to any of the Secured Obligations;
(c) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Secured Obligations; or
(d) any other circumstances which might otherwise constitute a defense
available to, or a discharge of, the Pledgors in respect of the Secured
Obligations or of this Agreement.
20. Definitions. All terms used herein shall be defined in accordance
-----------
with the appropriate definitions appearing in the Uniform Commercial Code as in
effect in Florida, and such definitions are hereby incorporated herein by
reference and made a part hereof.
21. Entire Agreement. This Agreement, together with the Credit Agreement,
----------------
the Guaranty Agreement and other Loan Documents, constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior agreements and understandings,
inducements, commitments or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof. Neither this Agreement nor any portion or provision hereof may be
changed, altered, modified, supplemented, discharged, canceled, terminated, or
amended orally or in any manner other than by an agreement, in writing signed by
the parties hereto.
22. Further Assurances. The Pledgor agrees at its own expense to do such
------------------
further acts and things, and to execute and deliver such additional conveyances,
assignments, financing statements, agreements and instruments, as the Agent may
at any time reasonably request in connection with the administration or
enforcement of this Agreement or related to the Collateral or any part thereof
or in order better to assure and confirm unto the Agent its rights, powers and
remedies for the benefit of the Secured Parties hereunder. The Pledgor hereby
consents and agrees that the issuers of or obligors in respect of the Collateral
shall be entitled to accept the provisions hereof as conclusive evidence of the
right of the Agent, on behalf of the Secured Parties, to exercise its rights
hereunder with respect to the Collateral, notwithstanding any other notice or
direction to the contrary heretofore or hereafter given by any Pledgor or any
other Person to any of such issuers or obligors.
7
<PAGE>
23. Binding Agreement; Assignment. This Agreement, and the terms,
-----------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto, and to their respective successors and assigns, except
that the Pledgor shall not be permitted to assign this Agreement or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Agreement. All
references herein to the Agent shall include any successor thereof, each Lender
and any other obligees from time to time of the Obligations.
24. Swap Agreements. All obligations of the Borrower under Swap
---------------
Agreements shall be deemed to be Secured Obligations secured hereby, and each
Lender or affiliate of a Lender party to any such Swap Agreement shall be deemed
to be a Secured Party hereunder.
25. Severability. In case any Lien, security interest or other right of
------------
any Secured Party or any provision hereof shall be held to be invalid, illegal
or unenforceable, such invalidity, illegality or unenforceability shall not
affect any other Lien, security interest or other right granted hereby or
provision hereof.
26. Counterparts. This Agreement may be executed in any number of
------------
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
27. Indemnification. Without limitation of Section 13.9 of the Credit
--------------- ------------
Agreement or any other indemnification provision in any Loan Document, the
Pledgor hereby covenants and agrees to pay, indemnify, and hold the Secured
Parties harmless from and against any and all other out-of-pocket liabilities,
costs, expenses or disbursements of any kind or nature whatsoever arising in
connection with any claim or litigation by any Person resulting from the
execution, delivery, enforcement, performance and administration of this
Agreement or the Loan Documents, or the transactions contemplated hereby or
thereby, or in any respect relating to the Collateral or any transaction
pursuant to which the Pledgor has incurred any Obligation (all the foregoing,
collectively, the "indemnified liabilities"); provided, however, that the
-------- -------
Pledgor shall have no obligation hereunder with respect to indemnified
liabilities directly or primarily arising from the willful misconduct or gross
negligence of the Agent or any Lender. The agreements in this subsection shall
survive repayment of all Secured Obligations, termination or expiration of this
Agreement and occurrence of the Facility Termination Date.
28. Termination. This Agreement and all obligations of the Pledgor
-----------
hereunder shall terminate on the Facility Termination Date, at which time the
Liens and rights granted to the Agent for the benefit of the Secured Parties
hereunder shall automatically terminate and no longer be in effect, and the
Collateral shall automatically be released from the Liens created hereby. Upon
such termination of this Agreement, the Agent shall, at the sole expense of the
Pledgor, deliver to the Pledgor the Collateral, together with any cash then
constituting the Collateral, not then sold or otherwise disposed of in
accordance with the provisions hereof and take such further actions as may be
necessary to effect the same and as shall be reasonably acceptable to the Agent.
8
<PAGE>
29. Remedies Cumulative. All remedies hereunder are cumulative and are
-------------------
not exclusive of any other rights and remedies of the Agent provided by law or
under the Credit Agreement, the other Loan Documents, or other applicable
agreements or instruments. The making of the Loans to the Borrower pursuant to
the Credit Agreement and the extension of the Revolving Credit Facility and the
Term Loan Facility to the Borrower pursuant to the Credit Agreement shall be
conclusively presumed to have been made or extended, respectively, in reliance
upon the Pledgor's pledge of the Collateral pursuant to the terms hereof.
30. Notices. Any notice required or permitted hereunder shall be given,
-------
(a) with respect to the Pledgor, at the address of the Borrower indicated in
Section 13.2 of the Credit Agreement and (b) with respect to the Agent or a
- ------------
Lender, at the Agent's address indicated in Section 13.2 of the Credit
------------
Agreement. All such notices shall be given and shall be effective as provided
in Section 13.2 of the Credit Agreement.
-------------
31. Governing Law; Venue; Waiver of Jury Trial.
------------------------------------------
(a) THIS AGREEMENT 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 PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES 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 PLEDGOR EXPRESSLY WAIVES 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 PLEDGOR HEREBY IRREVOCABLY SUBMITS GENERALLY
AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
(c) THE PLEDGOR AGREES 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 BORROWER PROVIDED IN SECTION 13.2
------------
OF THE CREDIT AGREEMENT, OR BY ANY OTHER METHOD OF
9
<PAGE>
SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF
FLORIDA.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) or (c) HEREOF SHALL PRECLUDE
----------------------
ANY SECURED PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION WHERE
THE PLEDGOR OR ANY OF THE PLEDGOR'S PROPERTY OR ASSETS MAY BE FOUND OR
LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH
JURISDICTION, THE PLEDGOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR
PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER IT AND ITS
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 THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION THEREWITH, THE PLEDGOR AND THE AGENT ON BEHALF OF 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.
[Signature page follows.]
10
<PAGE>
IN WITNESS WHEREOF, the Pledgor and the Agent have caused this LC Account
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
WITNESS: BREED TECHNOLOGIES, INC.
By:
- ------------------ -------------------------------
Name:
-----------------------------
Title:
- ------------------ ----------------------------
WITNESS: NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
By:
- ------------------ -------------------------------
Name:
-----------------------------
Title:
- ------------------ ----------------------------
LC ACCOUNT AGREEMENT
SIGNATURE PAGE 1 OF 1
<PAGE>
EXHIBIT N
Form of Lease Assignment
[See Attached]
N-1
<PAGE>
ASSIGNMENT OF LESSEE'S INTEREST IN LEASES
This ASSIGNMENT OF LESSEE'S INTEREST IN LEASES (this "Assignment") is made
as of the ___ day of ___________, 1998, by _______________________, a
______________corporation ("Assignor"), in favor of NATIONSBANK, NATIONAL
ASSOCIATION, a national banking association acting in its capacity as agent
(collectively with its successors and assigns, the "Agent") for the Secured
Creditors (as defined herein) under the Credit Agreement (as defined herein).
All capitalized terms used but not otherwise defined herein shall have the
respective meanings assigned thereto in the Credit Agreement (as defined below).
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Breed Technologies, Inc., a Delaware corporation ("Breed"), and
the other Subsidiaries of Breed designated as Borrowers in the Original Credit
Agreement (as defined below) (collectively, the "Borrower") have heretofore
entered into that certain Credit Agreement between the Borrower, the Agent, and
the lenders party thereto (the "Original Lenders") dated as of October 30, 1997
(the "Original Credit Agreement") pursuant to which the Original Lenders have
made available to the Borrower certain credit facilities of up to $900,000,000;
and
WHEREAS, Breed has requested that the Original Agreement be amended and
restated in its entirety and the Borrower has entered into that certain Amended
and Restated Credit Agreement between the Borrower, the Agent, and the lenders
from time to time party to the Amended and Restated Credit Agreement
(collectively, the "Lenders") dated as of April 28, 1998 (as amended, modified,
extended, renewed, restated and supplemented from time to time, the "Credit
Agreement") pursuant to which the Lenders have made available to the Borrower
term loans and a revolving credit facility up to the amount of $675,000,000
(collectively, the "Loans") (the Agent, the Lenders and NationsBanc Montgomery
Securities LLC, and each of their respective successors and assigns are herein
collectively defined as the "Secured Creditors");
WHEREAS, the Assignor is a subsidiary of BREED Technologies, Inc. and has
entered into [an assignment from the tenant thereunder of] that certain Lease
Agreement dated ___________,
DRAWN BY AND RETURN TO:
SMITH HELMS MULLISS & MOORE, L.L.P.
214 North Church Street (28202)
P.O. Box 31247
Charlotte, North Carolina 28231
Attn: Elizabeth W. Goode
<PAGE>
19__, between _________________________________________, and ________________
(the "Lease"), which Lease encumbers the real property located at
________________________ and more particularly described on Exhibit A attached
---------
hereto and by this reference incorporated herein (the "Real Property");
WHEREAS, the Assignor has heretofore guaranteed the payment and performance
of the Obligations in the Original Agreement pursuant to that certain Guaranty
Agreement dated as of October 30, 1997;
WHEREAS, the Assignor has confirmed its guaranty of the payment and
performance of the Obligations as defined in the Credit Agreement pursuant to
that certain Guaranty Agreement dated as of the date hereof (the "Guaranty")
(the obligations of Assignee under the Guaranty being defined as the
"Guarantor's Obligations" therein and herein);
WHEREAS, the Lenders have required an assignment of the Lease by Assignor
to Agent for the benefit of the Lenders as security for the Guarantor's
Obligations and for all other obligations of Assignor under the Loan Documents
(as defined in the Credit Agreement) (all such obligations together with the
Guarantor's Obligations being defined collectively as the "Secured
Obligations");
NOW THEREFORE, Assignor and Agent, on behalf of the Secured Creditors, in
consideration of the making of the Loans by the Lenders to the Borrower, the sum
of Ten Dollars ($10.00) and other valuable consideration, the receipt of which
is hereby acknowledged, hereby agree as follows:
ARTICLE I. ASSIGNMENT
----------------------
Assignor hereby presently, irrevocably, absolutely and unconditionally
transfers, assigns and sets over unto Agent, for the benefit of the Secured
Creditors, all of Assignor's right, title, and interest, as lessee, in and to
the Lease, together with all extensions, modifications, supplements, renewals,
amendments, assignments and replacements thereof, and also together with all
option rights granted in the Lease to Assignor and also together with the rights
of Assignor to enforce any and all of the agreements, terms, covenants and
conditions in the Lease and to give notices thereunder. So long as there shall
exist no Event of Default as defined herein, Assignor shall have the right with
respect to the Lease to fulfill, perform or enjoy each and every covenant,
condition and benefit to be fulfilled, performed or enjoyed by Assignor, as
lessee under the Lease. The foregoing transfer, assignment and set over shall
not be effective in the event such transfer, assignment and set over would
create a default under the Lease.
2
<PAGE>
ARTICLE II. WARRANTIES AND COVENANTS
-------------------------------------
2.1 Warranties of Assignor. Assignor hereby warrants and represents to
----------------------
the Secured Creditors the following:
(a) Assignor is the sole holder of the lessee's interest under the
Lease and has good right to sell, assign, transfer and set over the Lease
to Agent;
(b) Assignor has made no assignment other than this Assignment of any
of Assignor's rights in the Lease;
(c) There is no default by either lessor or lessee under the Lease
which has not been cured or any state of facts which, with the passing of
time or giving of notice, or both, would constitute a default by either
lessor or lessee under the Lease;
(d) The Lease provides for rent to be paid monthly in advance, all
rent due to date has been paid and no rent has been paid more than one
month in advance;
(e) Assignor, as lessee under the Lease, has no defense, setoff or
counterclaim against the lessor under the Lease;
(f) The Lease constitutes the entire agreement between the parties
thereto, and there are no agreements, undertakings, representations, or
warranties, either oral or written, which have not been submitted to the
Agent; and
(g) The Lease is valid, in full force and effect, and enforceable in
accordance with its terms.
2.2 Covenants of Assignor. Assignor hereby covenants and agrees that
---------------------
Assignor shall:
(a) Fulfill, perform and observe all of the obligations of lessee
under the Lease;
(b) Give prompt written notice to Agent of any default or claim of
default by lessor or by lessee under the Lease, along with a complete copy
of any written notice of such default or claim of default;
(c) Enforce, short of termination, the performance of the lessor under
the Lease;
(d) Not alter, modify or amend the Lease, nor terminate, cancel or
accept a surrender of the Lease, nor waive any material term or condition
of the Lease without the prior written consent of Agent, which consent
shall not be unreasonably withheld or delayed;
(e) Not pay rent more than one month in advance of the time any such
rent becomes due;
3
<PAGE>
(f) Not assign lessee's interest under the Lease, nor sublet any
portion of the Real Property, without the prior written consent of the
Agent, or suffer or permit such to occur by operation of law;
(g) Not take any action which will cause or permit the estate of the
lessee under the Lease to merge with Assignor's interests as lessor of the
Real Property, if any, without Agent's prior written consent; and
(h) Maintain at the Assignor's principal place of business all books,
records, documents and accounts relating to the Lease and the Real Property
and the Assignor's business thereon.
2.3 Covenants of Agent. Upon the payment and performance in full of the
------------------
Secured Obligations, the termination of the Guaranty, and the occurrence of the
Facility Termination Date, this Assignment shall be terminated and released of
record by Agent and shall thereupon be of no further force or effect.
ARTICLE III DEFAULTS; AGENT'S REMEDIES
---------------------------------------
3.1 Events of Default. Any of the following shall constitute an Event of
-----------------
Default hereunder:
(a) The occurrence of an Event of Default under, and as defined and
described in the Credit Agreement or the Guaranty;
(b) Any breach by Assignor, as lessee under the Lease, of any
covenant, agreement, or condition of this Assignment or of the Lease, which
is not cured within the earlier of (i) any cure period set forth in the
Lease or (ii) thirty (30) days after written notice of the breach from
Agent to Assignor.
3.2 Remedies. Upon an Event of Default, Agent may at any time thereafter,
--------
at its option and without notice or demand of any kind, and without regard to
the adequacy of security for payment of the Secured Obligations, exercise any or
all of the following remedies:
(a) Declare all of the Secured Obligations immediately due and
payable;
(b) Through a receiver or other court appointed agent, take physical
possession of each tract of the Real Property and of all books, records,
documents and accounts, or copies thereof, relating to the Real Property
and the Assignor's business thereon located, and manage and operate the
Real Property and the Assignor's business thereon without interference from
Assignor, at Assignor's expense, including, without limitation, the right
to rent and lease the Real Property and to hire a manager for the Real
Property;
4
<PAGE>
(c) In the event the Event of Default is Assignor's failure or refusal
(i) to pay or cause to be paid, as the same shall become due and payable,
any rental or other fee or charge payable by the Assignor under the Lease
or (ii) to perform any act which the Assignor is obligated to do or perform
thereunder, or should the Assignor fail to make any payment or to do any
act as herein provided, then the Agent, but without obligation so to do,
without notice to or demand on the Assignor and without releasing the
Assignor from any obligation herein, may make such payment or do or perform
such act on behalf of the Assignor, including, but not limited to,
appearing in and defending any action purporting to affect the security
hereof or the rights and powers of the Agent and performing any obligation
of the Assignor in the Lease contained, and in exercising any such powers,
paying necessary costs and expenses, employing counsel and incurring and
paying reasonable attorney's fees; and the Assignor will pay immediately
upon demand all payments made and all costs and expenses paid or incurred
by the Agent under the authority hereof, together with interest thereon at
the Default Rate (as defined in the Credit Agreement) from the date paid or
incurred by the Agent, and the same shall be added to the Secured
Obligations and shall be secured hereby. Agent expressly does not assume
and shall not be or remain liable, jointly with Assignor or severally, for
the payment of rent, additional rent or for the due performance of any
terms, covenants, conditions and agreements of the Assignor contained in
the Lease, unless the Agent elects to pay or do the same pursuant to this
Section 3.2;
(d) Any other remedies permitted to Agent under applicable law.
The foregoing remedies are in addition to any remedies afforded Agent under
any other of the Loan Documents or in law or equity, by statute or otherwise,
all of which rights and remedies are reserved by Agent. All of the remedies of
Agent shall be cumulative and may be exercised at Agent's option concurrently or
successively and the exercise or beginning of exercise by Agent of any such
remedies shall not preclude the simultaneous or subsequent exercise of the same
remedy or any other remedy available to Agent. No failure or delay on the part
of Agent to exercise any remedy shall operate as a waiver thereof.
3.3 Application of Proceeds. Any amounts collected by Agent hereunder
-----------------------
shall be applied by Agent, to pay, in such order as Agent shall elect, the
Secured Obligations, including all principal amounts guaranteed; accrued, unpaid
interest; prepayment fees; late charges; advances; and all costs and expenses,
including reasonable attorneys fees, incurred by Agent in operating, protecting,
preserving and realizing on Agent's interest in the Real Property including any
fees incurred in the representation of the Agent or the Secured Creditors in any
proceeding under Title 11, United States Code; and any other amount owing under
the Guaranty or any other of the Loan Documents.
3.4 Non-Merger of Estates. In the event that the estates of the lessor
---------------------
and lessee under the Lease are held by the same entity, it is the intention of
the parties that such estates shall be and remain separate and distinct and
shall not merge until such time as a separate written document signed by the
owner of all interests under the Lease, and expressly providing for cancellation
or termination of the Lease, is recorded in the appropriate recording office.
5
<PAGE>
3.5 No Mortgagee In Possession. It is understood and agreed that neither
--------------------------
the assignment of the Lease to Agent nor the exercise by Agent of any of its
rights or remedies on behalf of the Secured Creditors under this Assignment
shall be deemed to make Agent a "mortgagee-in-possession" or otherwise
responsible or liable in any manner with respect to the Lease or the Real
Property or the use, occupancy, enjoyment or operation of all or any portion
thereof, unless and until Agent, in person or by its agent, assumes actual
possession thereof, nor shall appointment of a receiver by any court at the
request of Agent or by agreement with Assignor or the entering into possession
of the Real Property or any part thereof by such receiver be deemed to make
Agent a "mortgagee-in-possession" or otherwise responsible or liable in any
manner with respect to the Lease, the Real Property or the use, occupancy,
enjoyment or operation of all or any portion thereof.
ARTICLE IV. NO LIABILITY, INDEMNIFICATION
------------------------------------------
4.1 No Liability. Nothing in this Assignment shall be construed to impose
------------
upon Agent any obligation or responsibility of Assignor, to lessor under the
Lease or to any other third party, for the control, care, management or repair
of the Real Property, the performance of any of the lessee's obligations under
the Lease, or for any dangerous or defective condition on the Real Property.
4.2 Indemnification. Assignor shall indemnify and hold Agent harmless
---------------
from and against all obligations, liabilities, losses, costs, expenses, civil
fines, penalties or damages (including reasonable attorneys fees) which Agent
may incur by reason of this Assignment or in connection with the Lease or with
regard to the Real Property prior to such time as Agent takes actual physical
possession of and manages and operates the Real Property after an Event of
Default. Assignor shall, with counsel satisfactory to Agent, defend Agent
against any claim or litigation involving Agent for the same. Should Agent
incur such obligation, liability, loss, cost, expense, civil fine, penalty or
damage, Assignor shall reimburse Agent upon demand. Any amount owed Agent under
this provision and not paid after demand shall bear interest at the Default Rate
(as defined in the Credit Agreement), and shall be secured by the Loan
Documents.
ARTICLE V. MISCELLANEOUS
-------------------------
5.1 Modifications, Etc. Assignor hereby consents and agrees that Agent
------------------
may at any time and from time to time, without notice to or further consent from
Assignor, either with or without consideration, surrender any property or other
security of any kind or nature whatsoever held by Agent or by any person, firm
or corporation on Agent's behalf or for its account, securing the Obligations;
substitute for any collateral so held by Agent, other collateral of like kind,
or of any kind; grant releases, compromises and indulgences with respect to the
Credit Agreement or any other of the Loan Documents to any person or entities
now or hereafter liable thereunder or hereunder; release any guarantor or
endorser of the Notes, from its obligations under the Credit Agreement or any
other of the Loan Documents; or take or fail to take any action of any type
whatsoever; and no such action which Agent shall take or fail to take in
connection with the Loan Documents, or any of them, or any security for the
payment of the Obligations or for the performance of any obligations
6
<PAGE>
or undertakings of Assignor pursuant to the Loan Documents, nor any course of
dealing with Assignor or any other person, shall release Assignor's obligations
hereunder, affect this Assignment in any way or afford Assignor any recourse
against Agent, except as expressly provided otherwise. The provisions of this
Assignment shall extend and be applicable to all renewals, amendments,
extensions, consolidations and modifications of the Loan Documents and the
Lease, and any and all references herein to the Loan Documents or the Lease
shall be deemed to include any such renewals, amendments, extensions,
consolidations or modifications thereof.
5.2 Further Assurance. At any time and from time to time, upon request by
-----------------
Agent, Assignor will make, execute and deliver, or cause to be made, executed
and delivered, to Agent and, where appropriate, cause to be recorded and/or
filed and from time to time thereafter to be re-recorded and/or refiled at such
time and in such offices and places as shall be deemed desirable by Agent, any
and all such other and further assignments, mortgages, deeds of trust, security
agreements, financing statements, continuation statements, instruments of
further assurance, certificates and other documents as may, in the reasonable
opinion of Agent, be necessary in order to effectuate, complete, or perfect, or
to continue and preserve (a) the obligations of Assignor under this Assignment
and (b) the security interest created by this Assignment as a first and prior
security interest upon the Lease. Upon any failure by Assignor so to do, Agent
may make, execute, record, file, rerecord and/or refile any and all such
assignments, mortgages, deeds of trust, security agreements, financing
statements, continuation statements, instruments, certificates, and documents
for and in the name of Assignor, and Assignor hereby irrevocably appoints Agent
the agent and attorney in fact of Assignor so to do.
5.3 Successors and Assigns. All of the terms and conditions of this
----------------------
Assignment are hereby made binding upon the executors, heirs, administrators,
successors and permitted assigns of both Agent and Assignor, including any
trustee or debtor-in-possession appointed in any proceeding under Title 11,
United States Code.
5.4 Notices. All notices shall be in writing, except as to telephonic
-------
notices expressly permitted and required herein, and written notice shall be
delivered by hand delivery, telefacsimile, overnight courier or certified or
registered mail. Any notice shall be conclusively deemed to have been received
by any party hereto and be effective on the day on which delivered to such party
(except as to telephonic or telefacsimile notice upon receipt therefor, and in
the case of telex, verification by return) at the address set forth below or
such other address as such party shall specify to the other parties in writing,
or if sent prepaid by certified or registered mail return receipt requested on
the third Business Day after the day on which mailed, addressed to such party at
said address:
(a) if to the Assignor:
BREED Technologies, Inc.
5300 Old Tampa Highway
Lakeland, Florida 33811
Attention: General Counsel
7
<PAGE>
Telephone: (941) 668-6000
Telefacsimile: ___________________
(b) if to the Agent:
NationsBank, National Association
400 N. Ashley Drive, 2nd Floor
Tampa, Florida 33602
Attention: Global Finance
Telephone:____________________
Telefacsimile:_________________
with a copy to:
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:
Smith Helms Mulliss & Moore, L.L.P.
214 North Church Street
Charlotte, North Carolina 28202
Attention: R. Malloy McKeithen
Telephone: (704) 343-2000
Telefacsimile: (704) 334-8467
5.5 APPLICABLE LAW: THE PARTIES TO THIS ASSIGNMENT AGREE THAT THEIR
--------------
RIGHTS AND OBLIGATIONS UNDER THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF FLORIDA, WITHOUT GIVING EFFECT
TO THE CONFLICTS OF LAW RULES AND PRINCIPLES THEREOF. THE PARTIES FURTHER AGREE
AND STIPULATE THAT THIS ASSIGNMENT AND THE LOAN DOCUMENTS WERE NEGOTIATED
PRIMARILY IN FLORIDA AND THAT FLORIDA HAS A SUBSTANTIAL RELATIONSHIP TO THE
PARTIES AND TO THE UNDERLYING TRANSACTIONS SECURED BY THIS ASSIGNMENT.
NOTWITHSTANDING THE FOREGOING, THE PARTIES AGREE THAT THE PROCEDURES GOVERNING
THE ENFORCEMENT BY AGENT OF THE PROVISIONAL REMEDIES AGAINST ASSIGNOR, INCLUDING
BY WAY OF ILLUSTRATION BUT NOT LIMITATION, ACTIONS FOR REPLEVIN, FOR CLAIM AND
DELIVERY OF PROPERTY, FOR INJUNCTIVE RELIEF OR FOR THE APPOINTMENT OF A RECEIVER
AND THE
8
<PAGE>
REQUIREMENTS NECESSARY TO CREATE OR GRANT, PERFECT OR FORECLOSE ON, OR DETERMINE
THE PRIORITY OF, THE LIEN AND SECURITY INTEREST OF THIS ASSIGNMENT, SHALL BE
GOVERNED BY THE LAWS OF THE STATE IN WHICH THE REAL PROPERTY IS LOCATED.
5.6 Captions. The captions of this Assignment are inserted only for the
--------
purpose of convenience, and in no way define, limit or prescribe the scope or
extent of this Assignment or any part hereof.
5.7 Exhibits. All Exhibits referred to herein and attached hereto are
--------
hereby incorporated and made a part of this Assignment.
5.8 No Oral Modifications; Amendments. No oral amendment to this
---------------------------------
Assignment shall be binding on the parties hereto. Any modification of or
amendment to this Assignment must be in writing signed by both parties.
5.9 Terms. Common nouns and pronouns shall be deemed to refer to the
-----
masculine, feminine, neuter, singular and plural, as the identity of the person
or persons, firm or corporation may in the context require.
5.10 Invalidity. If any provision of this Assignment shall be held
----------
invalid, the same shall not affect in any respect whatsoever the validity of the
remainder of this Assignment.
IN WITNESS WHEREOF, Assignor has duly executed this Assignment under seal
as of the date hereinabove set forth.
ASSIGNOR:
------------------------------------
By: (SEAL)
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Attest: (SEAL)
-----------------------------
Name:
-------------------------------
Title:
------------------------------
(CORPORATE SEAL)
9
<PAGE>
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF:
- ----------------------------
Print Name:
-----------------
- ----------------------------
Print Name:
-----------------
10
<PAGE>
STATE OF )
----------------------
) ss.
COUNTY OF )
---------------------
The foregoing instrument was acknowledged before me this _____ day of
October, 1997, by ____________________, __________ President and
____________________, _____ Secretary of ________________________________, a
___________________ corporation.
----------------------------------------
Notary Public
My commission expires:
- -------------------------------
[NOTARIAL SEAL]
11
<PAGE>
EXHIBIT A
---------
Description of Real Property
----------------------------
12
<PAGE>
EXHIBIT O-1
Form of Revolving Note
Promissory Note
(Revolving Loan)
$____________ __________, __________
__________, ____
FOR VALUE RECEIVED, BREED TECHNOLOGIES, INC., a Delaware corporation having
its principal place of business located in Lakeland, Florida ("BREED"), BREED
AUTOMOTIVE SAFETY SYSTEMS, S.L., BREED ITALIAN HOLDINGS, S.R.L., BREED UK
LIMITED, and BREED R.F., GMBH (each a "Borrower" and collectively with BREED
the "Borrowers"), hereby promise to pay to the order of _______________________
(the "Lender"), in its individual capacity, at the office of NATIONSBANK,
NATIONAL ASSOCIATION, as agent for the Lenders (the "Agent"), located at One
Independence Center, 101 North Tryon Street, NC1-001-15-04, Charlotte, North
Carolina 28255 (or at such other place or places as the Agent may designate in
writing) at the times set forth in the Amended and Restated Credit Agreement
dated as of April 28, 1998 among the Borrowers, the financial institutions party
thereto (collectively with the Lender, the "Lenders") and the Agent (as amended,
supplemented or restated and in effect from time to time, the "Agreement"; all
capitalized terms not otherwise defined herein shall have the respective
meanings set forth in the Agreement), in lawful money of the United States of
America or in the applicable Alternative Currency, as the case may be, in
immediately available funds, the principal amount of ________________ DOLLARS
($_________) 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 III 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 3.1(d) 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
THIS REVOLVING NOTE AND OTHER REVOLVING NOTES OF EVEN DATE ARE GIVEN IN
SUBSTITUTION AND NOT PAYMENT OF REVOLVING NOTES OF THE BORROWER DATED OCTOBER
30, 1997 ISSUED PURSUANT TO A CREDIT AGREEMENT DATED OCTOBER 30, 1997
O-1-1
<PAGE>
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 3.2(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. 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:
----------------------------------
O-1-2
<PAGE>
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:
----------------------------------
BREED R.F. GMBH
WITNESS:
By:
- ------------------------ -------------------------------------
Name:
- ------------------------ -----------------------------------
Title:
----------------------------------
O-1-3
<PAGE>
EXHIBIT O-2
Form of Term Note A
Promissory Note
(Term Loan A)
$____________ __________, ___________
_________, ____
FOR VALUE RECEIVED, BREED TECHNOLOGIES, INC., a Delaware corporation having
its principal place of business located in Lakeland, Florida (the "Borrower"),
hereby promises to pay to the order of _________________________ (the "Lender"),
in its individual capacity, at the office of NATIONSBANK, NATIONAL ASSOCIATION,
as agent for the Lenders (the "Agent"), located at One Independence Center, 101
North Tryon Street, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such
other place or places as the Agent may designate in writing) at the times set
forth in the Amended and Restated Credit Agreement dated as of April 28, 1998
among the Borrowers, the financial institutions party thereto (collectively with
the Lender, the "Lenders") and the Agent (as amended, supplemented or restated
and in effect from time to time, the "Agreement"; all capitalized terms not
otherwise defined herein shall have the respective meanings set forth in the
Agreement), in lawful money of the United States of America in immediately
available funds, the principal amount of ______________________ DOLLARS
($___________) 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 A 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 Section 2.4 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.
THIS TERM NOTE A AND OTHER TERM NOTES OF EVEN DATE ARE GIVEN IN SUBSTITUTION AND
NOT PAYMENT OF TERM NOTES OF THE BORROWER DATED OCTOBER 30, 1997 ISSUED PURSUANT
TO A CREDIT AGREEMENT DATED OCTOBER 30, 1997
O-2-1
<PAGE>
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 A 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:
- ----------------------------- -----------------------------
O-2-2
<PAGE>
EXHIBIT O-3
Form of Term Note B
Promissory Note
(Term Loan B)
$____________ __________, __________
_________, ____
FOR VALUE RECEIVED, BREED TECHNOLOGIES, INC., a Delaware corporation having
its principal place of business located in Lakeland, Florida (the "Borrower"),
hereby promises to pay to the order of ______________________________________
(the "Lender"), in its individual capacity, at the office of NATIONSBANK,
NATIONAL ASSOCIATION, as agent for the Lenders (the "Agent"), located at One
Independence Center, 101 North Tryon Street, NC1-001-15-04, Charlotte, North
Carolina 28255 (or at such other place or places as the Agent may designate in
writing) at the times set forth in the Amended and Restated Credit Agreement
dated as of April 28, 1998 among the Borrowers, the financial institutions party
thereto (collectively with the Lender, the "Lenders") and the Agent (as amended,
supplemented or restated and in effect from time to time, the "Agreement"; all
capitalized terms not otherwise defined herein shall have the respective
meanings set forth in the Agreement), in lawful money of the United States of
America in immediately available funds, the principal amount of
______________________ DOLLARS ($___________) 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 B 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 Section 2.4 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.
THIS TERM NOTE B AND OTHER TERM NOTES OF EVEN DATE ARE GIVEN IN SUBSTITUTION AND
NOT PAYMENT OF TERM NOTES OF THE BORROWER DATED OCTOBER 30, 1997 ISSUED PURSUANT
TO A CREDIT AGREEMENT DATED OCTOBER 30, 1997
O-3-1
<PAGE>
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 B 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:
- ----------------------------- -----------------------------
O-3-2
<PAGE>
EXHIBIT O-4
Form of Swing Line Note
Promissory Note
(Swing Line Loan)
$20,000,000 __________, __________
_________, ____
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 Amended and Restated Credit Agreement dated as of April
28, 1998 among the Borrower, certain Borrowing Subsidiaries, the financial
institutions party thereto (collectively with the Lender, 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 in immediately available funds, the principal amount of
TWENTY MILLION DOLLARS ($20,000,000) or, if less than such principal amount, the
aggregate unpaid principal amount of all Swing Line Loans made by the Lender to
the Borrower 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
-------
III of the Agreement. All or any portion of the principal amount of Swing Line
- ---
Loans may be prepaid or required to 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 Section 3.14(b) 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 Swing Line 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 Swing Line 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
O-4-1
<PAGE>
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 Swing Line Note is the Swing Line Note 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. 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 Swing Line 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 Swing Line 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:
- ----------------------------- -----------------------------
O-4-2
<PAGE>
EXHIBIT P
Form of Stock Pledge Agreement (U.S. Subsidiaries)
[See Attached]
P-1
<PAGE>
STOCK PLEDGE AGREEMENT
(US Subsidiaries)
THIS STOCK PLEDGE AGREEMENT (the "Agreement") is made and entered into as
of this ___ day of ________, 199_ by and between EACH OF THE UNDERSIGNED direct
and indirect subsidiaries of BREED Technologies, Inc. ("BREED") (the "Pledgors",
and each individually a "Pledgor"), and NATIONSBANK, NATIONAL ASSOCIATION, a
national banking association organized and existing under the laws of the United
States, as Agent (the "Agent") for each of the financial institutions (the
"Lenders" and collectively with the Agent the "Secured Parties") now or
hereafter party to the Credit Agreement (as defined below). All capitalized
terms used but not otherwise defined herein shall have the respective meanings
assigned thereto in the Credit Agreement.
W I T N E S S E T H:
--------------------
WHEREAS, the Secured Parties have agreed to provide to BREED and certain
Subsidiaries (collectively, the "Borrower") certain credit facilities, including
a term loan facility and a revolving credit facility with a letter of credit
sublimit and a multi-currency sublimit pursuant to the Amended and Restated
Credit Agreement dated as of April 28, 1998 among the Borrower, the Agent and
the Lenders (as from time to time amended, revised, modified, supplemented, or
amended and restated the "Credit Agreement"); and
WHEREAS, each of the Subsidiary Pledgors has entered into that certain
Guaranty Agreement of even date herewith (the "Guaranty") together with certain
other subsidiaries of BREED and the Agent; and
WHEREAS, as collateral security for the payment and performance of the
Borrower's Obligations and the Subsidiary Pledgors' obligations under the
Guaranty, each Pledgor is willing to pledge and grant to the Agent for the
benefit of the Lenders a security interest in all of the issued and outstanding
shares of capital stock, whether now in existence or hereafter issued, of each
of its subsidiaries which are Domestic Subsidiaries, and at least 65% of the
issued and outstanding shares of capital stock or equivalent indicia of
ownership under the law or practice of any foreign jurisdiction, whether now in
existence or hereafter issued, of each of its subsidiaries which are Direct
Foreign Subsidiaries, all of which are required to be subject to a Pledge
Agreement pursuant to the Credit Agreement (the "Pledged Stock"), including
without limitation the Pledged Stock in such Subsidiaries more particularly
described on Schedule I hereto (such Subsidiaries, together with all other
----------
Subsidiaries whose capital stock may be required to be subject to a Pledge
Agreement from time to time, are hereinafter referred to collectively as the
"Pledged Subsidiaries"); and
WHEREAS, the Lenders are unwilling to enter into the Loan Documents unless
each Pledgor enters into this Agreement;
<PAGE>
NOW, THEREFORE, in order to induce the Secured Parties to enter into the
Loan Documents and to make Loans and issue Letters of Credit and in
consideration of the premises and the mutual covenants contained herein, the
parties hereto agree as follows:
1. Pledge of Stock; Other Collateral.
---------------------------------
(a) As collateral security for the payment and performance by the Borrower
of its now or hereafter existing Obligations and by the Subsidiary Pledgors of
their now or hereafter existing liabilities and obligations under the Guaranty
(collectively with the Obligations, the "Secured Obligations"), each Pledgor
hereby pledges and collaterally assigns to the Agent for the benefit of the
Lenders, and grants to the Agent for the benefit of the Lenders a first priority
lien and security interest in, the Pledged Stock and all of the following:
(i) all cash, securities, dividends, rights, and other property
at any time and from time to time declared or distributed in respect of or
in exchange for any or all of the Pledged Stock, other than cash dividends
permitted to be retained by the Pledgors under Section 9 hereof;
(ii) all other property hereafter delivered to the Agent in
substitution for or in addition to any of the foregoing, all certificates
and instruments representing or evidencing such property and all cash,
securities, interest, dividends, rights, and other property at any time and
from time to time declared or distributed in respect of or in exchange for
any or all of the Pledged Stock; and
(iii) all proceeds of any of the foregoing.
All such Pledged Stock, certificates, instruments, cash, securities, interest,
dividends, rights and other property referred to in this Section 1, other than
---------
cash dividends issued in respect of such Pledged Stock that are permitted to be
retained by the Pledgors under Section 9 hereof, are herein collectively
referred to as the "Collateral." All of the Pledged Stock described on Schedule
--------
I in effect from time to time is currently owned by the respective Pledgors and
- -
represented by the stock certificates listed on Schedule I hereto. Certificates
----------
evidencing all the Pledged Stock on the Closing Date, together with stock powers
duly executed in blank by the Pledgors, have been delivered to the Agent.
(b) Each Pledgor agrees to deliver all the Collateral to the Agent at such
location or locations as the Agent shall from time to time designate by written
notice pursuant to Section 25 hereof for its custody at all times until
----------
termination of this Agreement, together with such instruments of assignment and
transfer as requested by the Agent.
(c) Each Pledgor agrees to deliver all share certificates, documents,
agreements, financing statements, amendments thereto, assignments or other
writings as the Agent may request to carry out the terms of this Agreement or to
protect or enforce the lien and security interest in
2
<PAGE>
the Collateral hereunder granted thereby to the Agent for the benefit of the
Lenders and further agrees to do and cause to be done all things determined by
the Agent to be necessary to perfect and keep in full force the Lien in the
Collateral hereunder granted thereby in favor of the Agent for the benefit of
the Lenders, including, but not limited to, the prompt payment of all documented
out-of-pocket fees and expenses incurred in connection with any filings made to
perfect or continue the lien and security interest in the Collateral hereunder
granted thereby in favor of the Agent for the benefit of the Lenders. Each
Pledgor agrees to make appropriate entries upon its books and records (including
without limitation its stock record and transfer books) disclosing the Lien in
the Collateral hereunder granted thereby to the Agent for the benefit of the
Lenders hereunder.
(d) All advances, charges, costs and expenses, including reasonable
attorneys' fees, incurred or paid by any Secured Party in exercising any right,
power or remedy conferred by this Agreement, or in the enforcement thereof,
shall become a part of the Secured Obligations and shall be paid to the Agent
for the benefit of the Lenders by the Pledgors immediately upon demand therefor,
with interest thereon until paid in full at the Default Rate for Base Rate
Loans.
2. Status of Pledged Stock. Each Pledgor hereby represents and warrants
-----------------------
to the Agent for the benefit of the Lenders that (i) all of the shares of
Pledged Stock of its Subsidiaries are validly issued and outstanding, fully paid
and nonassessable and constitute all the authorized, issued and outstanding
shares of common stock of each of the Pledged Subsidiaries of such Pledgor which
are Domestic Subsidiaries and at least 65% of the authorized, issued and
outstanding shares of common stock of each of the Pledged Subsidiaries of such
Pledgor which are Direct Foreign Subsidiaries, (ii) such Pledgor is the
registered and record and beneficial owner of such Pledged Stock, free and clear
of all Liens, charges, equities, encumbrances and restrictions on pledge or
transfer (other than the Liens created under the Loan Documents and restrictions
imposed by applicable law), (iii) such Pledgor has full corporate power, legal
right and lawful authority to execute this Agreement and to pledge, assign and
transfer such Pledged Stock in the manner and form hereof, and (iv) the pledge,
assignment and delivery of such Pledged Stock by the Pledgors to the Agent for
the benefit of the Lenders pursuant to this Agreement creates, together with the
delivery of the certificates evidencing such Pledged Stock, which delivery has
heretofore been accomplished, a valid and perfected first priority security
interest in such Pledged Stock in favor of the Agent for the benefit of the
Lenders, securing the payment of the Secured Obligations. Except as permitted
under Sections 10.5 or 10.7 of the Credit Agreement, none of the Pledged Stock
---------------------
(nor any interest therein or thereto) shall be sold, transferred or assigned,
nor any Lien created therein, without the Agent's prior written consent, which
may be withheld for any reason. Each Pledgor covenants with the Agent for the
benefit of the Lenders that it shall at all times cause the Pledged Stock to be
represented by the certificates now and hereafter delivered to the Agent in
accordance with Section 1 hereof and that it shall not cause, suffer or permit
---------
any of the Pledged Subsidiaries to issue any capital stock, or securities
convertible into, or exercisable or exchangeable for, capital stock, at any time
during the term of this Agreement other than to the Pledgors and subject to this
Agreement pursuant to Section 23 hereof.
----------
3
<PAGE>
3. Preservation and Protection of Collateral.
-----------------------------------------
(a) The Agent shall be under no duty or liability with respect to the
collection, protection or preservation of the Collateral, or otherwise, other
than the obligation to deal with the Collateral while in its possession in the
same manner as the Agent deals with similar securities or property for its own
account.
(b) Each Pledgor agrees to pay when due all taxes, charges, Liens and
assessments against the Collateral in which it has an interest, unless being
contested in good faith by appropriate proceedings diligently conducted and
against which adequate reserves have been established in accordance with GAAP
and evidenced to the satisfaction of the Agent and provided further that all
enforcement proceedings in the nature of levy or foreclosure are effectively
stayed. Upon the failure of the Pledgors to so pay or contest such taxes,
charges, Liens or assessments, the Agent at its option may pay or contest any of
them (the Agent having the sole right to determine the legality or validity and
the amount necessary to discharge such taxes, charges, Liens or assessments).
4. Default. Upon the occurrence and during the continuance of any Event
-------
of Default, the Agent is given full power and authority, then or at any time
thereafter, to sell, assign and deliver or collect the whole or any part of the
Collateral, or any substitute therefor or any addition thereto, in one or more
sales, with or without any previous demands or demand of performance or, to the
extent permitted by law, notice or advertisement, in such order as the Agent may
elect; and any such sale may be made either at public or private sale at the
Agent's place of business or elsewhere, either for cash or upon credit or for
future delivery, at such price as the Agent may reasonably deem fair; and the
Agent may be the purchaser of any or all Collateral so sold and hold the same
thereafter in its own right free from any claim of the Pledgors or right of
redemption. Demands of performance, advertisements and presence of property and
sale and notice of sale are hereby waived to the extent permissible by law and
the Pledgors acknowledge that the Collateral is of a type customarily sold on a
recognized market. Any sale hereunder may be conducted by an auctioneer or any
officer or agent of the Agent. Each Pledgor recognizes that the Agent may be
unable to effect a public sale of the Collateral by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act"), and applicable law, and may be otherwise delayed or adversely
affected in effecting any sale by reason of present or future restrictions
thereon imposed by governmental authorities, and that as a consequence of such
prohibitions and restrictions the Agent may be compelled (i) to resort to one or
more private sales to a restricted group of purchasers who will be obliged to
agree, among other things, to acquire the stock for their own account, for
investment and not with a view to the distribution or resale thereof, or (ii) to
seek regulatory approval of any proposed sale or sales, or (iii) to limit the
amount of Collateral sold to any Person or group. Each Pledgor agrees and
acknowledges that private sales so made may be at prices and upon terms less
favorable to the Pledgors than if such Collateral was sold either at public
sales or at private sales not subject to other regulatory restrictions, and that
the Agent has no obligation to delay the sale of any of the Collateral for the
period of time necessary to permit the issuer of such Collateral to register or
otherwise qualify
4
<PAGE>
the Pledged Stock, even if such issuer would agree to register or otherwise
qualify for public sale under the Securities Act or applicable state law. The
Pledgor agrees that private sales made under the foregoing circumstances will
not, for that reason, be deemed to have been made in a manner which is not
commercially reasonable. Each Pledgor hereby acknowledges that a ready market
may not exist for the Pledged Stock since it is not traded on a national
securities exchange or quoted on an automated quotation system and agrees and
acknowledges that in such event the Pledged Stock may be sold for an amount less
than a pro rata share of the fair market value of the issuer's assets minus its
liabilities. In addition to the foregoing, the Lenders may exercise such other
rights and remedies as may be available under the Loan Documents, at law or in
equity.
5. Proceeds of Sale. The proceeds of the sale of any of the Collateral
----------------
and all sums received or collected from or on account of such Collateral shall
be applied to the payment of expenses incurred or paid by the Agent in
connection with any holding, sale, transfer or delivery of the Collateral, to
the payment of any other costs, charges, reasonable attorneys' fees or expenses
mentioned herein, and to the payment of the Secured Obligations or any part
thereof, all in such order and manner as is provided in Section 11.5 of the
------------
Credit Agreement and otherwise as the Agent may determine and as permitted by
applicable law. The Agent shall, upon satisfaction in full of all such Secured
Obligations, pay any balance to the Pledgors or otherwise as may be required by
applicable law.
6. Presentments, Demands and Notices. The Agent shall not be under any
---------------------------------
duty or obligation whatsoever to make or give any presentments, demands for
performances, notices of nonperformance, protests, notice of protest or notice
of dishonor in connection with any obligations or evidences of indebtedness held
thereby as collateral, or in connection with any obligations or evidences of
indebtedness which constitute in whole or in part the Secured Obligations
secured hereunder.
7. Attorney-in-Fact. Each Pledgor hereby appoints the Agent as such
----------------
Pledgor's attorney-in-fact for the purposes of carrying out the provisions of
this Agreement and taking any action and executing any instrument which the
Agent may deem necessary or advisable to accomplish the purposes hereof, which
appointment is coupled with an interest and is irrevocable; provided, that the
--------
Agent shall have and may exercise rights under this power of attorney only upon
the occurrence and during the continuance of an Event of Default. Without
limiting the generality of the foregoing, upon the occurrence and during the
continuance of an Event of Default, the Agent shall have the right and power to
receive, endorse and collect all checks and other orders for the payment of
money made payable to such Pledgor representing any dividend, interest payment,
principal payment or other distribution payable or distributable in respect of,
or otherwise constituting, the Collateral or any part thereof and to give full
discharge for the same.
8. Waiver by Pledgors. Each Pledgor waives (to the extent permitted by
------------------
applicable law) any right to require the Agent or any Lender or any other
obligee of the Secured Obligations to (a) proceed against any other Pledgor or
any Person, including without limitation ant Guarantor, (b) proceed against or
exhaust any Collateral or other collateral for the Secured
5
<PAGE>
Obligations, or (c) pursue any other remedy in its power; and waives (to the
extent permitted by applicable law) any defense arising by reason of any
disability or other defense of any other Pledgor or any other Person, including
without limitation any Guarantor, or by reason of the cessation from any cause
whatsoever of the liability of any other Pledgor or any other Person, including
without limitation, any Guarantor. The Agent may at any time deliver (without
representation, recourse or warranty) the Collateral or any part thereof to any
Pledgor who has an interest therein and the receipt thereof by such Pledgor
shall be a complete and full acquittance for the Collateral so delivered, and
the Agent shall thereafter be discharged from any liability or responsibility
therefor.
9. Dividends and Voting Rights.
---------------------------
(a) All dividends and other distributions with respect to the Pledged
Stock shall be subject to the pledge hereunder, except for cash dividends which
are, to the extent permitted to be made under the Credit Agreement, permitted to
be retained by the Pledgors so long as no Event of Default shall have occurred
and be continuing, and any such dividends may be retained by the Pledgors free
from any Lien hereunder. Upon the occurrence and during the continuance of any
Event of Default, all such cash and other dividends shall be promptly delivered
to the Agent (together, if the Agent shall request, with stock powers or
instruments of assignment duly executed in blank affixed to any stock
certificate or other negotiable document or instrument so distributed) to be
held, released or disposed of by it hereunder or, at the option of the Agent, to
be applied to the Secured Obligations as they become due.
(b) So long as no Event of Default shall have occurred and be continuing,
the registration of the Collateral in the name of any Pledgor shall not be
changed and the Pledgors shall be entitled to exercise all voting and other
rights and powers pertaining to the Collateral for all purposes not inconsistent
with the terms hereof.
(c) Upon the occurrence and during the continuance of any Event of
Default, at the option of the Agent, all rights of the Pledgors to receive and
retain dividends upon the Collateral shall cease and shall thereupon be vested
in the Agent for the benefit of the Lenders.
(d) Upon the occurrence and during the continuance of any Event of
Default, at the option of the Agent, all rights of the Pledgors to exercise the
voting or consensual rights and powers which it is authorized to exercise with
respect to the Collateral pursuant to subsection (b) above shall cease and the
Agent may thereupon (but shall not be obligated to), at its request, cause such
Collateral to be registered in the name of the Agent or its nominee or agent for
the benefit of the Lenders and exercise such voting or consensual rights and
powers as appertain to ownership of such Collateral, and to that end each
Pledgor hereby appoints the Agent as its proxy, with full power of substitution,
to vote and exercise all other rights as a shareholder with respect to the
Pledged Stock hereunder upon the occurrence and during the continuance of any
Event of Default, which proxy is coupled with an interest and is irrevocable
prior to termination of this Agreement as set forth in Section 22 hereof, and
----------
each Pledgor hereby agrees to provide such further proxies as the Agent may
request; provided, however, that the Agent in its discretion may from time to
-------- -------
6
<PAGE>
time refrain from exercising, and shall not be obligated to exercise, any such
voting or consensual rights or such proxy.
10. Power of Sale. Until the Facility Termination Date, the power of sale
-------------
and other rights, powers and remedies granted to the Agent for the benefit of
the Lenders hereunder shall continue to exist and may be exercised by the Agent
at any time and from time to time irrespective of the fact that any Secured
Obligations or any part thereof may have become barred by any statute of
limitations or that the liability of any Pledgor may have ceased.
11. Other Rights. The rights, powers and remedies given to the Agent for
------------
the benefit of the Lenders by this Agreement shall be in addition to all rights,
powers and remedies given to any Lenders by virtue of any statute or rule of
law. Any forbearance or failure or delay by the Agent in exercising any right,
power or remedy hereunder shall not be deemed to be a waiver of such right,
power or remedy, and any single or partial exercise of any right, power or
remedy hereunder shall not preclude the further exercise thereof. Every right,
power and remedy of the Lenders shall continue in full force and effect until
such right, power or remedy is specifically waived by the Required Lenders by an
instrument in writing.
12. Anti-Marshalling Provisions. The right is hereby given by each
---------------------------
Pledgor to the Agent, for the benefit of the Secured Parties, to make releases
(whether in whole or in part) of all or any part of the Collateral agreeable to
the Agent without notice to, or the consent, approval or agreement of other
parties and interests, including junior lienors, which releases shall not impair
in any manner the validity of or priority of the Liens and security interests in
the remaining Collateral conferred under such documents, nor release such
Pledgor from personal liability for the Secured Obligations hereby secured.
Notwithstanding the existence of any other security interest in the Collateral
held by the Agent, for the benefit of the Secured Parties, the Agent shall have
the right to determine the order in which any or all of the Collateral shall be
subjected to the remedies provided in this Agreement. The proceeds realized
upon the exercise of the remedies provided herein shall be applied by the Agent,
for the benefit of the Secured Parties, in the manner provided in Section 11.5
------------
of the Credit Agreement. Each Pledgor hereby waives any and all right to
require the marshalling of assets in connection with the exercise of any of the
remedies permitted by applicable law or provided herein.
13. Absolute Rights and Obligations. All rights of the Secured Parties,
-------------------------------
and all obligations of the Pledgors hereunder, shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability of the Credit Agreement,
any other Loan Document or any other agreement or instrument relating to
any of the Secured Obligations;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, any other Loan Document or any other agreement or instrument
relating to any of the Secured Obligations;
7
<PAGE>
(c) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Secured Obligations; or
(d) any other circumstances which might otherwise constitute a defense
available to, or a discharge of, the Pledgors in respect of the Secured
Obligations or of this Agreement.
14. Definitions. All terms used herein unless otherwise defined in the
-----------
Credit Agreement shall be defined in accordance with the appropriate definitions
appearing in the Uniform Commercial Code as in effect in Florida, and such
definitions are hereby incorporated herein by reference and made a part hereof.
15. Entire Agreement. This Agreement, together with the Credit Agreement,
----------------
the Guaranty Agreement and other Loan Documents, constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior agreements and understandings,
inducements, commitments or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof. Neither this Agreement nor any portion or provision hereof may be
changed, altered, modified, supplemented, discharged, canceled, terminated, or
amended orally or in any manner other than by an agreement, in writing signed by
the parties hereto.
16. Further Assurances. Each Pledgor agrees at its own expense to do such
------------------
further acts and things, and to execute and deliver such additional conveyances,
assignments, financing statements, agreements and instruments, as the Agent may
at any time request in connection with the administration or enforcement of this
Agreement or related to the Collateral or any part thereof or in order better to
assure and confirm unto the Agent its rights, powers and remedies for the
benefit of the Lenders hereunder. Each Pledgor hereby consents and agrees that
the issuers of or obligors in respect of the Collateral shall be entitled to
accept the provisions hereof as conclusive evidence of the right of the Agent,
on behalf of the Lenders, to exercise its rights hereunder with respect to the
Collateral, notwithstanding any other notice or direction to the contrary
heretofore or hereafter given by the Pledgors or any other Person to any of such
issuers or obligors.
17. Binding Agreement; Assignment. This Agreement, and the terms,
-----------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto, and to their respective successors and assigns, except
that no Pledgor shall assign this Agreement or any interest herein or in the
Collateral, or any part thereof, or otherwise pledge, encumber or grant any
option with respect to the Collateral, or any part thereof, or any cash or
property held by the Agent as Collateral under this Agreement. All references
herein to the Agent shall include any successor thereof, each Lender and any
other obligees from time to time of the Secured Obligations.
8
<PAGE>
18. Swap Agreements. All obligations of the Borrower under Swap
---------------
Agreements shall be deemed to be Secured Obligations secured hereby, and each
Lender or affiliate of a Lender party to any such Swap Agreement shall be deemed
to be a Secured Party hereunder.
19. Severability. In case any Lien, security interest or other right of
------------
any Secured Party or any provision hereof shall be held to be invalid, illegal
or unenforceable, such invalidity, illegality or unenforceability shall not
affect any other Lien, security interest or other right granted hereby or
provision hereof.
20. Counterparts. This Agreement may be executed in any number of
------------
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
21. Indemnification. Without limitation of Section 13.9 of the Credit
--------------- ------------
Agreement or any other indemnification provision in any Loan Document, the
Pledgor hereby covenants and agrees to pay, indemnify, and hold the Secured
Parties harmless from and against any and all other out-of-pocket liabilities,
costs, expenses or disbursements of any kind or nature whatsoever arising in
connection with any claim or litigation by any Person resulting from the
execution, delivery, enforcement, performance and administration of this
Agreement or the Loan Documents, or the transactions contemplated hereby or
thereby, or in any respect relating to the Collateral or any transaction
pursuant to which the Pledgor has incurred any Obligation (all the foregoing,
collectively, the "indemnified liabilities"); provided, however, that the
-------- -------
Pledgor shall have no obligation hereunder with respect to indemnified
liabilities directly or primarily arising from the willful misconduct or gross
negligence of the Agent or any Lender. The agreements in this subsection shall
survive repayment of all Secured Obligations, termination or expiration of this
Agreement and occurrence of the Facility Termination Date.
22. Termination. This Agreement and all obligations of the Pledgors
-----------
hereunder shall terminate on the Facility Termination Date, at which time the
Liens and rights granted to the Agent for the benefit of the Lenders hereunder
shall automatically terminate and no longer be in effect, and the Collateral
shall automatically be released from the Liens created hereby. Upon such
termination of this Agreement, the Agent shall, at the sole expense of the
Pledgors, deliver to the Pledgors the certificates evidencing the Pledged Stock
(and any other property received as a dividend or distribution or otherwise in
respect of the Pledged Stock then in its custody), together with any cash then
constituting the Collateral, not then sold or otherwise disposed of in
accordance with the provisions hereof and take such further actions as may be
necessary to effect the same and as shall be reasonably acceptable to the Agent.
23. Additional Shares. If any Pledgor shall acquire or hold (a) any
-----------------
additional shares of capital stock of any Pledged Subsidiary or (b) any shares
of capital stock of any Subsidiary not listed on Schedule I hereto which are
----------
required to be subject to a Pledge Agreement pursuant to the terms of Article IV
----------
or any other provision of the Credit Agreement (any such shares described in
clauses (a) or (b) above being referred to herein as the "Additional Shares"),
such Pledgor shall deliver to the Agent for the benefit of the Lenders (i) a
revised Schedule I hereto reflecting the ownership and pledge of such Additional
----------
Shares and (ii) a Stock Pledge Agreement Supplement
9
<PAGE>
in the form of Exhibit A hereto with respect to such Additional Shares duly
---------
completed and signed by such Pledgor. Each Pledgor shall comply with the
requirements of this Section 23 concurrently with the acquisition of any such
----------
Additional Shares in the case of shares described in clause (a) above, and
within the time period specified in Article IV or elsewhere in the Credit
----------
Agreement with respect to shares described in clause (b) above.
24. Remedies Cumulative. All remedies hereunder are cumulative and are
-------------------
not exclusive of any other rights and remedies of the Agent provided by law or
under the Credit Agreement, the other Loan Documents, or other applicable
agreements or instruments. The making of the Loans to the Borrower pursuant to
the Credit Agreement, and the issuing of Letters of Credit for the benefit of,
shall be conclusively presumed to have been made or extended, respectively, in
reliance upon each Assignor's assignment of the Assigned Interests pursuant to
the terms hereof.
25. Notices. Any notice required or permitted hereunder shall be given,
-------
(a) with respect to any Pledgor, care of the Borrower at its address indicated
in Section 13.2 of the Credit Agreement and (b) with respect to the Agent or a
------------
Lender, at the Agent's address indicated in Section 13.2 of the Credit
------------
Agreement. All such notices shall be given and shall be effective as provided in
Section 13.2 of the Credit Agreement.
- ------------
26. Governing Law; Venue; Waiver of Jury Trial.
------------------------------------------
(a) THIS AGREEMENT 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) EACH PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES 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, EACH PLEDGOR EXPRESSLY WAIVES 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 EACH PLEDGOR HEREBY IRREVOCABLY SUBMITS GENERALLY
AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
10
<PAGE>
(c) EACH PLEDGOR AGREES 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 BORROWER PROVIDED IN
SECTION 13.2 OF THE CREDIT AGREEMENT, 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 (b) or (c) HEREOF SHALL
----------------------
PRECLUDE ANY SECURED PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY
JURISDICTION WHERE EACH PLEDGOR OR ANY OF SUCH PLEDGOR'S PROPERTY OR ASSETS
MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF
ANY SUCH JURISDICTION, EACH PLEDGOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH
SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER
IT AND ITS 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 THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION THEREWITH, EACH PLEDGOR AND THE AGENT ON BEHALF OF 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.
[Signature pages follow.]
11
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Stock Pledge
Agreement on the day and year first written above.
PLEDGORS:
[INSERT NAME]
WITNESS:
By:
--------------------------
Name:
- --------------------- ------------------------
Title:
-----------------------
- ---------------------
STOCK PLEDGE AGREEMENT
SIGNATURE PAGE 1 OF 2
<PAGE>
AGENT:
NATIONSBANK, NATIONAL ASSOCIATION, as Agent
for the Lenders
WITNESS:
By:
----------------------------------------
Name:
- -------------------- --------------------------------------
Title:
-------------------------------------
- --------------------
STOCK PLEDGE AGREEMENT
SIGNATURE PAGE 2 OF 2
<PAGE>
SCHEDULE I
----------
<PAGE>
EXHIBIT A
STOCK PLEDGE AGREEMENT SUPPLEMENT
THIS STOCK PLEDGE AGREEMENT SUPPLEMENT (this " Supplement"), dated as of
______________, 199__ is made by and between ___________________________,
_____________________________ (the "Pledgor"), and NATIONSBANK, NATIONAL
ASSOCIATION, a national banking association organized and existing under the
laws of the United States, as Agent (the "Agent") for each of the financial
institutions (the "Lenders") now or hereafter party to the Amended and Restated
Credit Agreement dated as of April 28, 1998 among such Lenders, the Agent and
Breed Technologies, Inc. and certain Subsidiaries. All capitalized terms used
but not otherwise defined herein shall have the respective meanings assigned
thereto in the Stock Pledge Agreement (as defined below).
WHEREAS, the Pledgor is a party to that certain Stock Pledge Agreement
dated as of __________, 1998 by the Pledgor and certain affiliates of the
Pledgor in favor of the Agent for the benefit of the Lenders (the "Stock Pledge
Agreement"); and
WHEREAS, the Pledgor is required under the terms of the Credit Agreement
and the Stock Pledge Agreement to cause certain shares of capital stock held by
it and listed on Annex A to this Supplement (the "Additional Shares") to become
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subject to the Stock Pledge Agreement; and
WHEREAS, a material part of the consideration given in connection with and
as an inducement to the execution and delivery of the Credit Agreement by the
Secured Parties was the obligation of the Pledgor to pledge to the Agent for the
benefit of the Lenders the Additional Shares, whether then owned and not
required to be subject to a pledge or subsequently acquired or created; and
WHEREAS, the Secured Parties have required the Pledgor to pledge to the
Agent for the benefit of the Lenders all of the Additional Shares in accordance
with the terms of the Credit Agreement and the Stock Pledge Agreement;
NOW, THEREFORE, the Pledgor hereby agrees as follows with the Agent, for
the benefit of the Lenders:
1. The Pledgor hereby reaffirms and acknowledges the pledge and
collateral assignment to, and the grant of security interest in, the Additional
Shares contained in the Stock Pledge Agreement and pledges and collaterally
assigns to the Agent for the benefit of the Lenders, and grants to the Agent for
the benefit of the Lenders a first priority lien and security interest in, the
Additional Shares and all of the following:
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(a) all cash, securities, dividends, rights, and other property at any
time and from time to time declared or distributed in respect of or in
exchange for any or all of the Additional Shares, other than cash dividends
permitted to be retained by the Pledgor under Section 9 of the Stock Pledge
Agreement;
(b) all other property hereafter delivered to the Agent in
substitution for or in addition to any of the foregoing, all certificates
and instruments representing or evidencing such property and all cash,
securities, interest, dividends, rights, and other property at any time and
from time to time declared or distributed in respect of or in exchange for
any or all of the Additional Shares; and
(c) all proceeds of any of the foregoing.
The Pledgor hereby acknowledges, agrees and confirms that, by its execution of
this Supplement, the Additional Shares constitute "Pledged Stock" under and are
subject to the Stock Pledge Agreement. Each of the representations and
warranties with respect to Pledged Stock contained in the Stock Pledge Agreement
is hereby made by the Pledgor with respect to the Additional Shares. A revised
Schedule I to the Stock Pledge Agreement reflecting the Additional Shares and
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all other Pledged Stock, together with stock certificates representing the
Additional Shares with stock powers duly executed in blank by the Pledgor, have
been delivered herewith to the Agent.
IN WITNESS WHEREOF, the Pledgor has caused this Supplement to be duly
executed by its authorized officer as of the day and year first above written.
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By:
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Name:
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Title:
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Acknowledged and accepted:
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
By:
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Name:
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Title:
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ANNEX A
Additional Shares
Name of Pledged Class of Stock Total Number Certificate Numbers
--------------- -------------- ------------ -------------------
Subsidiary or Issuer Shares Pledged
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EXHIBIT Q
Form of Intercompany Note Pledge Agreement
[See Attached]
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EXHIBIT Q
INTERCOMPANY NOTE PLEDGE AGREEMENT
THIS INTERCOMPANY NOTE PLEDGE AGREEMENT (the "Agreement") is made and
entered into as of this 28th day of April, 1998 by and between BREED
TECHNOLOGIES, INC., a Delaware corporation ("BREED"), EACH OF THE UNDERSIGNED
(each a "Guarantor", and collectively with BREED, the "Pledgors", and each
individually a "Pledgor"), and NATIONSBANK, NATIONAL ASSOCIATION, a national
banking association organized and existing under the laws of the United States,
as Agent (the "Agent") for each of the financial institutions (the "Lenders" and
collectively with the Agent, the "Secured Partner") now or hereafter party to
the Credit Agreement (as defined below). All capitalized terms used but not
otherwise defined herein shall have the respective meanings assigned thereto in
the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Secured Parties have agreed to provide to the BREED and
certain Subsidiaries (collectively, the "Borrower") certain credit facilities,
including a term loan facility and a revolving credit facility with a letter of
credit sublimit and a multi-currency sublimit pursuant to the Amended and
Restated Credit Agreement dated as of April 28, 1998 among the Borrower, the
Agent and the Lenders (as from time to time amended, revised, modified,
supplemented, or amended and restated the "Credit Agreement"); and
WHEREAS, each Pledgor other than BREED is a Guarantor pursuant to that
certain Guaranty Agreement (the "Guaranty") dated as of the date hereof pursuant
to each which each Guarantor guaranteed payment and performance of the
Obligations of the Borrower; and
WHEREAS, as collateral security for the payment and performance of the
Borrower's Obligations and, if such Pledgor is a Guarantor, such Guarantor's
obligations under the Guaranty, (collectively the "Secured Obligations"), each
Pledgor is willing to pledge and grant to the Secured Parties a security
interest in all of the Intercompany Notes held by it from time to time
evidencing loans and advances made by such Pledgor to any one or more of its
Subsidiaries which are Domestic Subsidiaries and Direct Foreign Subsidiaries,
whether now in existence or hereafter issued (the "Pledged Notes"), including
without limitation the Pledged Notes more particularly described on Schedule I
hereto; and
WHEREAS, the Secured Parties are unwilling to enter into the Loan Documents
unless each Pledgor enters into this Agreement;
NOW, THEREFORE, in order to induce the Secured Parties to enter into the
Loan Documents and to make Loans and issue Letters of Credit and in
consideration of the premises and the mutual covenants contained herein, the
parties hereto agree as follows:
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1. PLEDGE OF INTERCOMPANY NOTES; OTHER COLLATERAL.
(a) As collateral security for the payment and performance of all Secured
Obligations now or hereafter existing, absolute or contingent, each Pledgor
hereby pledges and collaterally assigns to the Agent for the benefit of the
Secured Parties, and grants to the Agent for the benefit of the Secured Parties
pursuant to the Florida Uniform Commercial Code (the "UCC") a first priority
security interest in, the Pledged Notes and all of the following:
(i) all cash, securities, dividends, rights and other property at any
time and from time to time declared or distributed in respect of or in
exchange for any or all of the Pledged Notes, other than cash dividends
permitted to be retained by the Pledgor hereunder;
(ii) all other property hereafter delivered to the Agent in
substitution for or in addition to any of the foregoing, all certificates
and instruments representing or evidencing such property and all cash,
securities, interest, dividends, rights, and other property at any time and
from time to time declared or distributed in respect of or in exchange for
any or all of the Pledged Notes; and
(iii) all proceeds of any of the foregoing.
All such Pledged Notes, certificates, instruments, cash, securities,
interest, dividends, rights and other property referred to in this Section 1,
other than payments of principal and interest under and in accordance with the
terms of such Pledged Notes that are permitted to be retained by the Pledgors
hereunder and under the other Loan Documents, are herein collectively referred
to as the "Collateral." Each of the Pledged Notes described on Schedule I in
effect from time to time are currently owned by such Pledgor as thereon
indicated. The Pledged Notes as of the Closing Date, each with an assignment
duly executed in blank by the applicable Pledgor substantially in the form of
Exhibit A, have been delivered to the Agent.
(b) Each Pledgor agrees to deliver all the Collateral to the Agent at
such location as the Agent shall from time to time designate by written
notice pursuant to Section 24 hereof for its custody at all times until
termination of this Agreement, together with such instruments of assignment
and transfer as requested by the Agent.
(c) Each Pledgor agrees to deliver all notes, documents, agreements,
financing statements, amendments thereto, assignments or other writings as
the Agent may request to carry out the terms of this Agreement or to
protect or enforce the Lien in the Collateral hereunder granted thereby to
the Agent for the benefit of the Secured Parties and further agrees to do
and cause to be done all things determined by the Agent to be necessary to
perfect and keep in full force such Lien, including, but not limited to,
the prompt payment
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of all documented out-of-pocket fees and expenses incurred in
connection with any filings made to perfect or continue such Lien. Each
Pledgor agrees to make appropriate entries upon its books and records
disclosing the Lien in the Collateral hereunder granted thereby to the
Agent for the benefit of the Secured Parties hereunder.
(d) All advances, charges, costs and expenses, including reasonable
attorneys' fees incurred or paid by the Agent or any Lender in exercising
any right, power or remedy conferred by this Agreement, or in the
enforcement thereof, shall become a part of the Secured Obligations and
shall be paid to the Agent for the benefit of the Secured Parties by the
Pledgors immediately upon demand therefor, with interest thereon until paid
in full at the Default Rate.
2. STATUS OF PLEDGED NOTES. Each Pledgor hereby represents and warrants to
the Agent for the benefit of the Secured Parties that (i) the Pledged Notes
payable to it or its order evidence, and constitute the only instruments
evidencing, all Intercompany Advances outstanding from the Pledgor to any of its
Domestic Subsidiary or a Direct Foreign Subsidiary (collectively the "Restricted
Subsidiaries"), (ii) each Pledgor is the record and beneficial owner of the
Pledged Notes payable to it or its order, such ownership being free and clear of
all Liens, charges, equities, encumbrances and restrictions on pledge or
transfer (other than the pledge hereunder and applicable restrictions pursuant
to federal and state securities laws), (iii) each Pledgor has full corporate
power, legal right and lawful authority to execute this Agreement and to pledge,
assign and transfer the Pledged Notes in the manner and form hereof, and (iv)
the pledge, assignment and delivery of the Pledged Notes payable to it or its
order to the Agent for the benefit of the Secured Parties pursuant to this
Agreement creates, together with the delivery of the Pledged Notes, which
delivery has heretofore been accomplished, a valid and perfected first priority
security interest in the Pledged Notes in favor of the Agent for the benefit of
the Secured Parties, securing the payment of the Secured Obligations. Except as
otherwise expressly permitted herein or in the Credit Agreement, none of the
Pledged Notes (nor any interest therein or thereto) shall be sold, transferred
or assigned, nor any Lien created therein other than pursuant to the Loan
Documents, without the Agent's prior written consent, which may be withheld for
any reason.
3. PRESERVATION AND PROTECTION OF COLLATERAL.
(a) The Agent shall be under no duty or liability with respect to the
collection, protection or preservation of the collateral, or otherwise,
beyond the use of reasonable care in the custody and preservation thereof
while in its possession.
(b) The Pledgor agrees to pay when due all taxes, charges, Liens and
assessments against the Collateral, unless being contested in good faith by
appropriate proceedings diligently conducted and against which adequate
reserves have been established in accordance with GAAP applied on a
Consistent Basis and evidenced to the satisfaction of the Agent and
provided further that all enforcement proceedings in the nature of levy or
foreclosure are effectively stayed. Upon the failure of the Pledgor to so
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pay or contest such taxes, charges, Liens or assessments, the Agent at
its option may pay or contest any of them (the Agent having the sole right
to determine the legality or validity and the amount necessary to discharge
such taxes, charges, Liens or assessments).
4. RIGHTS AND REMEDIES UPON DEFAULT. Upon the occurrence and during the
continuance of any Event of Default, the Agent is given full power and
authority, then or at any time thereafter, to sell, assign and deliver or
collect the whole or any part of the Collateral, or any substitute therefor or
any addition thereto, in one or more sales, with or without any previous demands
or demand of performance or, to the extent permitted by law, notice or
advertisement, in such order as the Agent may elect; and any such sale may be
made either at public or private sale at the Agent's place of business or
elsewhere, either for cash or upon credit or for future delivery, at such price
as the Agent may reasonably deem fair; and the Agent may be the purchaser of any
or all Collateral so sold and hold the same thereafter in its own right free
from any claim of any Pledgor or right of redemption. Demands of performance,
advertisements and presence of property and sale and notice of sale are hereby
waived to the extent permissible by law. Any sale hereunder may be conducted by
an auctioneer or any officer or agent of the Agent. Each Pledgor recognizes that
the Agent may be unable to effect a public sale of the Collateral by reason of
certain prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state law, and may be otherwise delayed or
adversely affected in effecting any sale by reason of present or future
restrictions thereon imposed by governmental authorities, and that as a
consequence of such prohibitions and restrictions the Agent may be compelled (i)
to resort to one or more private sales to a restricted group of purchasers who
will be obliged to agree, among other things, to acquire the stock for their own
account, for investment and not with a view to the distribution or resale
thereof, or (ii) to seek regulatory approval of any proposed sale or sales, or
(iii) to limit the amount of Collateral sold to any Person or group. Each
Pledgor agrees and acknowledges that private sales so made may be at prices and
upon terms less favorable to such Pledgor than if such Collateral was sold
either at public sales or at private sales not subject to other regulatory
restrictions, and that the Agent has no obligation to delay the sale of any of
the Collateral for the period of time necessary to permit the issuer of such
Collateral to register or otherwise qualify the Pledged Notes, even if any
issuer or maker of the Pledged Notes would agree to register or otherwise
qualify such Collateral for public sale under the Securities Act or applicable
state law. The Pledgor agrees that private sales made under the foregoing
circumstances will not, for that reason, be deemed to have been made in a manner
which is not commercially reasonable. Each Pledgor hereby acknowledges that a
ready market does not exist for the Pledged Notes and agrees and acknowledges
that as a result thereof the Pledged Notes may be sold for an amount less than a
pro rata share of the fair market value of the issuer's assets minus its
liabilities. In addition to the foregoing, the Secured Parties may exercise such
other rights and remedies as may be available under the Loan Documents, at law
(including without limitation the UCC) or in equity.
5. PROCEEDS OF SALE. The proceeds of the sale of any of the Collateral and
all sums received or collected from or on account of such Collateral from and
after the occurrence of any Event of Default shall be applied to the payment of
expenses incurred or paid by the Agent in
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connection with any holding, sale, transfer or delivery of the Collateral, to
the payment of any other costs, charges, reasonable attorneys' fees or expenses
mentioned herein, and to the payment of the Obligations or any part thereof, all
in such order and manner as is provided in Section 11.5 of the Credit Agreement.
6. PRESENTMENTS, DEMANDS AND NOTICES. The Agent shall not be under any duty
or obligation whatsoever to make or give any presentments, demands for
performances, notices of nonperformance, protests, notice of protest or notice
of dishonor in connection with any obligations or evidences of indebtedness held
thereby as collateral, or in connection with any obligations or evidences of
indebtedness which constitute in whole or in part the Secured Obligations.
7. ANTI-MARSHALLING PROVISIONS. The right is hereby given by each Pledgor
to the Agent, for the benefit of the Secured Parties, to make releases (whether
in whole or in part) of all or any part of the Collateral agreeable to the Agent
without notice to, or the consent, approval or agreement of other parties and
interests, including junior lienors, which releases shall not impair in any
manner the validity of or priority of the Liens and security interests in the
remaining Collateral conferred under such documents, nor release such Pledgor
from personal liability for the Secured Obligations hereby secured.
Notwithstanding the existence of any other security interest in the Collateral
held by the Agent, for the benefit of the Secured Parties, the Agent shall have
the right to determine the order in which any or all of the Collateral shall be
subjected to the remedies provided in this Agreement. The proceeds realized upon
the exercise of the remedies provided herein shall be applied by the Agent, for
the benefit of the Secured Parties, in the manner provided in Section 11.5 of
the Credit Agreement. Each Pledgor hereby waives any and all right to require
the marshalling of assets in connection with the exercise of any of the remedies
permitted by applicable law or provided herein.
8. ATTORNEY-IN-FACT. Each Pledgor hereby appoints the Agent as such
Pledgor's attorney-in-fact for the purposes of carrying out the provisions of
this Agreement and taking any action and executing any instrument which the
Agent may deem necessary or advisable to accomplish the purposes hereof, which
appointment is coupled with an interest and is irrevocable; provided, that the
Agent shall have and may exercise rights under this power of attorney only upon
the occurrence and during the continuance of an Event of Default. Without
limiting the generality of the foregoing, upon the occurrence and during the
continuance of an Event of Default, the Agent shall have the right and power to
enforce the Pledged Notes in accordance with their terms, in its own name or in
the name of the applicable Pledgor, and to receive, endorse and collect all
checks and other orders for the payment of money made payable to the applicable
Pledgor representing any interest payment, principal payment or other
distribution payable or distributable in respect of, or otherwise constituting,
the Collateral or any part thereof and to give full discharge for the same.
9. ABSOLUTE RIGHTS AND OBLIGATIONS. All rights of the Secured Parties, and
all obligations of the Pledgors hereunder, shall be absolute and unconditional
irrespective of:
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(a) any lack of validity or enforceability of the Credit Agreement,
any other Loan Document or any other agreement or instrument relating to
any of the Secured Obligations;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Credit
Agreement, any other Loan Document or any other agreement or instrument
relating to any of the Secured Obligations;
(c) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Secured Obligations; or
(d) any other circumstances which might otherwise constitute a defense
available to, or a discharge of, the Pledgors in respect of the Secured
Obligations or of this Agreement.
10. WAIVER BY PLEDGORS. Each Pledgor waives (to the extent permitted by
applicable law) any right to require any Secured Party or any other obligee of
the Secured Obligations to (a) proceed against any Person, including without
limitation any Guarantor, (b) proceed against or exhaust any collateral securing
payment or performance of any of the Secured Obligations, or (c) pursue any
other remedy in its power; and waives (to the extent permitted by applicable
law) any defense arising by reason of any disability or other defense of any
other Person, including without limitation any Guarantor, or by reason of the
cessation from any cause whatsoever of the liability of any other Person,
including without limitation any Guarantor. The Agent may at any time deliver
(without representation, recourse or warranty) the Collateral or any part
thereof to the applicable Pledgor and the receipt thereof by such Pledgor shall
be a complete and full acquittance for the Collateral so delivered, and the
Secured Parties shall thereafter be discharged from any liability or
responsibility therefor.
11. PAYMENTS AND ENFORCEMENT RIGHTS.
(a) All payments of principal, interest, fees and other amounts with
respect to the Pledged Notes shall be subject to the pledge hereunder,
except for those payments of principal and interest which, to the extent
permitted to be made under the Credit Agreement and the Subordination
Agreement and the terms (including any subordination provisions) of the
Pledged Notes, are permitted to be retained by the Pledgor to which each
such Pledged Note is payable so long as no Event of Default shall have
occurred and be continuing, and any such payments may be retained by the
applicable Pledgor free from any Lien hereunder. Upon the occurrence and
during the continuance of any Event of Default, all such payments and other
amounts received in respect of the Pledged Notes shall be promptly
delivered to the Agent (together, if the Agent shall request, with stock
powers or instruments of assignment duly executed in blank affixed to any
capital stock
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or other negotiable document or instrument so distributed) to be
applied to the Secured Obligations pursuant to Section 5 hereof.
(b) So long as no Event of Default shall have occurred and be
continuing, the Pledgors shall be entitled to exercise all rights of
enforcement, and other rights and powers pertaining to the Collateral for
all purposes not inconsistent with the terms hereof.
(c) Upon the occurrence and during the continuance of any Event of
Default, at the option of the Agent, all rights of the Pledgors to receive
and retain payments in respect of the Collateral shall cease and shall
thereupon be vested in the Agent for the benefit of the Secured Parties.
(d) Upon the occurrence and during the continuance of any Event of
Default, at the option of the Agent, all rights of the Pledgors to exercise
rights of enforcement or other rights and powers in respect of the Pledged
Notes which they are authorized to exercise pursuant to subsection (b)
above shall cease and the Agent may thereupon (but shall not be obligated
to), at its request, cause such Collateral to be registered in the name of
the Agent or its nominee or agent for the benefit of the Secured Parties
and exercise such enforcement and other rights and powers as appertain to
ownership of such Collateral, pursuant to the power of attorney conferred
under Section 8 hereof, and each Pledgor hereby agrees to provide such
further powers of attorney as the Agent may request; provided, however,
that the Agent in its discretion may from time to time refrain from
exercising, and shall not be obligated to exercise, any such enforcement or
other power or right.
12. POWER OF SALE. Until occurrence of the Facility Termination Date, the
power of sale and other rights, powers and remedies granted to the Agent for the
benefit of the Secured Parties hereunder shall continue to exist and may be
exercised by the Agent at any time and from time to time irrespective of the
fact that any Secured Obligations or any part thereof may have become barred by
any statute of limitations or that the liability of any Pledgor may have ceased.
13. OTHER RIGHTS. The rights, powers and remedies given to the Agent for
the benefit of the Secured Parties by this Agreement shall be in addition to all
rights, powers and remedies given to any Secured Party by virtue of any statute
or rule of law. Any forbearance or failure or delay by the Agent in exercising
any right, power or remedy hereunder shall not be deemed to be a waiver of such
right, power or remedy, and any single or partial exercise of any right, power
or remedy hereunder shall not preclude the further exercise thereof; and every
right, power and remedy of the Secured Parties shall continue in full force and
effect until such right, power or remedy is specifically waived by the Required
Lenders by an instrument in writing.
14. DEFINITIONS. All terms used herein shall be defined in accordance with
the appropriate definitions appearing in the Uniform Commercial Code as in
effect in Florida, and such definitions are hereby incorporated herein by
reference and made a part hereof.
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15. ENTIRE AGREEMENT. This Agreement, together with the Credit Agreement,
the Guaranty Agreement and other Loan Documents, constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior agreements and understandings,
inducements, commitments or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof. Neither this Agreement nor any portion or provision hereof may be
changed, altered, modified, supplemented, discharged, canceled, terminated, or
amended orally or in any manner other than by an agreement, in writing signed by
the parties hereto.
16. FURTHER ASSURANCES. Each Pledgor agrees at its own expense to do such
further acts and things, and to execute and deliver such additional conveyances,
assignments, financing statements, agreements and instruments, as the Agent may
at any time reasonably request in connection with the administration or
enforcement of this Agreement or related to the Collateral or any part thereof
or in order better to assure and confirm unto the Agent its rights, powers and
remedies for the benefit of the Secured Parties hereunder. Each Pledgor hereby
consents and agrees that the issuers of or obligors in respect of the Collateral
shall be entitled to accept the provisions hereof as conclusive evidence of the
right of the Agent, on behalf of the Secured Parties, to exercise its rights
hereunder with respect to the Collateral, notwithstanding any other notice or
direction to the contrary heretofore or hereafter given by any Pledgor or any
other Person to any of such issuers or obligors.
17. BINDING AGREEMENT; ASSIGNMENT. This Agreement, and the terms, covenants
and conditions hereof, shall be binding upon and inure to the benefit of the
parties hereto, and to their respective successors and assigns, except that no
Pledgor shall be permitted to assign this Agreement or any interest herein or in
the Collateral, or any part thereof, or otherwise pledge, encumber or grant any
option with respect to the Collateral, or any part thereof, or any cash or
property held by the Agent as Collateral under this Agreement. All references
herein to the Agent shall include any successor thereof, each Lender and any
other obligees from time to time of the Obligations.
18. SWAP AGREEMENTS. All obligations of the Borrower under Swap Agreements
shall be deemed to be Secured Obligations secured hereby, and each Lender or
affiliate of a Lender party to any such Swap Agreement shall be deemed to be a
Secured Party hereunder.
19. SEVERABILITY. In case any Lien, security interest or other right of any
Secured Party or any provision hereof shall be held to be invalid, illegal or
unenforceable, such invalidity, illegality or unenforceability shall not affect
any other Lien, security interest or other right granted hereby or provision
hereof.
20. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
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21. INDEMNIFICATION. Without limitation of Section 13.9 of the Credit
Agreement or any other indemnification provision in any Loan Document, the
Assignor hereby covenants and agrees to pay, indemnify, and hold the Secured
Parties harmless from and against any and all other out-of-pocket liabilities,
costs, expenses or disbursements of any kind or nature whatsoever arising in
connection with any claim or litigation by any Person resulting from the
execution, delivery, enforcement, performance and administration of this
Agreement or the Loan Documents, or the transactions contemplated hereby or
thereby, or in any respect relating to the Collateral or any transaction
pursuant to which the Assignor has incurred any Obligation (all the foregoing,
collectively, the "indemnified liabilities"); provided, however, that the
Assignor shall have no obligation hereunder with respect to indemnified
liabilities directly or primarily arising from the willful misconduct or gross
negligence of the Agent or any Lender. The agreements in this subsection shall
survive repayment of all Secured Obligations, termination or expiration of this
Agreement and occurrence of the Facility Termination Date.
22. TERMINATION. This Agreement and all obligations of the Pledgor
hereunder shall terminate on the Facility Termination Date, at which time the
Liens and rights granted to the Agent for the benefit of the Secured Parties
hereunder shall automatically terminate and no longer be in effect, and the
Collateral shall automatically be released from the Liens created hereby. Upon
such termination of this Agreement, the Agent shall, at the sole expense of the
Pledgors, deliver to each applicable Pledgor the Pledged Notes (and any other
property received as a dividend or distribution or otherwise in respect of the
Pledged Notes then in its custody), together with any cash then constituting the
Collateral, not then sold or otherwise disposed of in accordance with the
provisions hereof and take such further actions as may be necessary to effect
the same and as shall be reasonably acceptable to the Agent.
23. REMEDIES CUMULATIVE. All remedies hereunder are cumulative and are not
exclusive of any other rights and remedies of the Agent provided by law or under
the Credit Agreement, the other Loan Documents, or other applicable agreements
or instruments. The making of the Loans to the Borrower pursuant to the Credit
Agreement and the extension of the Revolving Credit Facility and the Term Loan
Facility to the Borrower pursuant to the Credit Agreement shall be conclusively
presumed to have been made or extended, respectively, in reliance upon the
Pledgors' pledge of the Pledged Notes pursuant tot the terms hereof.
24. NOTICES. Any notice required or permitted hereunder shall be given, (a)
with respect to each Pledgor, at the address of the Borrower indicated in
Section 13.2 of the Credit Agreement and (b) with respect to the Agent or a
Lender, at the Agent's address indicated in Section 13.2 of the Credit
Agreement. All such notices shall be given and shall be effective as provided in
Section 13.2 of the Credit Agreement.
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25. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT 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) EACH PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES 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 PLEDGOR EXPRESSLY WAIVES 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 PLEDGOR HEREBY IRREVOCABLY SUBMITS GENERALLY
AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
(c) EACH PLEDGOR AGREES 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 PROCEEDINGS, OR BY REGISTERED OR
CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF THE BORROWER PROVIDED IN
SECTION 13.2 OF THE CREDIT AGREEMENT, 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 (b) OR (c) HEREOF SHALL PRECLUDE
ANY SECURED PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION WHERE
EACH PLEDGOR OR ANY OF SUCH PLEDGOR'S PROPERTY OR ASSETS MAY BE FOUND OR
LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH
JURISDICTION, EACH PLEDGOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION
OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION
OR PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER IT
Q-10
<PAGE>
AND ITS 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 THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION THEREWITH, EACH PLEDGOR AND THE AGENT ON BEHALF OF 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.
[Signature Page Follows.]
Q-11
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Intercompany Note
Pledge Agreement on the day and year first written above.
WITNESS: PLEDGORS:
BREED TECHNOLOGIES, INC.
By:
----------------------------------
Name: Robert J. Saltarelli
- ------------------- ----------------------------------
Title: Treasurer
- ------------------- ----------------------------------
BREED EUROPEAN HOLDINGS, LTD.
WITNESS:
By:
----------------------------------
- ------------------- Name: Lisanne Guptill
----------------------------------
- ------------------- Title: Secretary
----------------------------------
BREED AUTOMOTIVE WEST, INC.
WITNESS:
By:
----------------------------------
- ------------------- Name: Stuart D. Boyd
----------------------------------
- ------------------- Title: Secretary
----------------------------------
AGENT:
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
WITNESS:
By:
----------------------------------
- ------------------- Name: Miles C. Dearden III
----------------------------------
- ------------------- Title: Senior Vice President
----------------------------------
INTERCOMPANY NOTE PLEDGE AGREEMENT
SIGNATURE PAGE 1 OF 1
<PAGE>
Exhibit A
Form of Assignment
ASSIGNMENT OF PROMISSORY NOTE
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 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 as of the ___ day of _________, ____.
---------------------------
By:
----------------------
Name:
----------------------
Title:
----------------------
INTERCOMPANY NOTE PLEDGE AGREEMENT
<PAGE>
SCHEDULE I
Name of Obligor Name of Obligee Date Face Amount
--------------- --------------- ---- -----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERCOMPANY NOTE PLEDGE AGREEMENT
<PAGE>
EXHIBIT R
Form of Security Agreement
[See Attached]
R-1
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made and entered into as of
__________, 199_ by BREED TECHNOLOGIES, INC., a Delaware corporation ("BREED"),
and EACH OF THE UNDERSIGNED (each a "Guarantor", and collectively with the
Borrower, the "Grantors"), and NATIONSBANK, NATIONAL ASSOCIATION, a national
banking association, as Agent (the "Agent") for each of the lenders (the
"Lenders" and collectively with the Agent, the "Secured Parties") now or
hereafter party to the Credit Agreement (as defined below). All capitalized
terms used but not otherwise defined herein shall have the respective meanings
assigned thereto in the Credit Agreement (as defined below);
W I T N E S S E T H:
--------------------
WHEREAS, the Secured Parties have agreed to provide to BREED and certain
Subsidiaries (collectively, the "Borrower") certain credit facilities, including
a term loan facility and a revolving credit facility with a letter of credit
sublimit and a multi-currency sublimit pursuant to the Amended and Restated
Credit Agreement dated as of April 28, 1998 among the Borrower, certain
Subsidiaries, the Agent and the Lenders (as from time to time amended, revised,
modified, supplemented or amended and restated, the "Credit Agreement"); and
WHEREAS, as collateral security for payment and performance of its
Obligations, BREED is willing to grant to the Agent for the benefit of the
Secured Parties a security interest in all of its personal property and assets
pursuant to the terms of this Agreement; and
WHEREAS, each Guarantor will materially benefit from the Loans and Advances
to be made, and the Letters of Credit to be issued, under the Credit Agreement
and each Guarantor is a party to that certain Guaranty Agreement (the
"Guaranty") dated as of the date hereof pursuant to which each Guarantor
guaranteed the Obligations of the Borrower; and
WHEREAS, as collateral security for payment and performance of its
obligations under the Guaranty, each Guarantor is willing to grant to the Agent
for the benefit of the Secured Parties a security interest in all of its
personal property and assets; and
WHEREAS, the Secured Parties are unwilling to enter into the Loan Documents
unless BREED and the Guarantors enter into this Agreement;
NOW, THEREFORE, in order to induce the Secured Parties to enter into the
Loan Documents and to make Loans and issue Letters of Credit and in
consideration of the premises and the mutual covenants contained herein, the
parties hereto agree as follows:
1. Grant of Security Interest. As collateral security for the payment,
--------------------------
performance, and satisfaction of all obligations and liabilities of the
Guarantors under the Guaranty and all of the Borrower's Obligations
(collectively, the "Secured Obligations"), each Grantor hereby affirms, grants,
pledges and assigns to the Agent for the benefit of the Lenders and grants to
the Agent for
<PAGE>
the benefit of the Lenders a continuing first priority security interest in and
to all of the property of such Grantor, whether now owned or existing or
hereafter acquired or arising and wheresoever located, including without
limitation the following:
(a) All accounts, accounts receivable, contracts, notes, bills,
acceptances, choses in action, chattel paper, instruments, documents and
other forms of obligations at any time owing to each Grantor arising out of
goods sold or leased or for services rendered by such Grantor, the proceeds
thereof and all of such Grantor's rights with respect to any goods
represented thereby, whether or not delivered, goods returned by customers
and all rights as an unpaid vendor or lienor, including rights of stoppage
in transit and of recovering possession by proceedings including replevin
and reclamation, together with all customer lists, books and records,
ledger and account cards, computer tapes, software, disks, printouts and
records, whether now in existence or hereafter created, relating thereto
(collectively referred to hereinafter as "Accounts");
(b) All inventory of each Grantor wherever located in the United
States of America and any state, district, territory or other political
subdivision thereof, including without limitation, all goods manufactured
or acquired for sale or lease, and any piece goods, raw materials, work in
process and finished merchandise, findings or component materials, and all
supplies, goods, incidentals, office supplies, packaging materials and any
and all items used or consumed in the operation of the business of such
Grantor or which may contribute to the finished product or to the sale,
promotion and shipment thereof, in which such Grantor now or at any time
hereafter may have an interest, whether or not the same is in transit or in
the constructive, actual or exclusive occupancy or possession of such
Grantor or is held by such Grantor or by others for such Grantor's account
(collectively referred to hereinafter as "Inventory");
(c) All goods of each Grantor, including without limitation, all
machinery, equipment, parts, supplies, apparatus, appliances, tools,
patterns, molds, dies, blueprints, fittings, furniture, furnishings,
fixtures and articles of tangible personal property of every description
now or hereafter owned by such Grantor or in which such Grantor may have or
may hereafter acquire any interest, at any location (collectively referred
to hereinafter as "Equipment");
(d) All general intangibles of each Grantor in which a Grantor now
has or hereafter acquires any rights, including but not limited to, causes
of action, corporate or business records, inventions, designs, goodwill,
trade names, trade secrets, trade processes, licenses, permits, franchises,
customer lists, computer programs, all claims under guaranties, tax refund
claims, rights and claims against carriers and shippers, leases, claims
under insurance policies, all rights to indemnification and all other
intangible personal property and intellectual property of every kind and
nature (collectively referred to hereinafter as "General Intangibles");
2
<PAGE>
(e) All rights now or hereafter accruing to each Grantor under
contracts (including without limitation the Trademark License Agreement by
and among AlliedSignal Inc., AlliedSignal Technologies, Inc., BREED
Technologies, Inc. and BREED Automotive Technologies, Inc., dated as of the
date hereof), leases, agreements or other instruments to perform services,
to hold and use land and facilities, and to enforce all rights thereunder
(collectively referred to hereinafter as "Contract Rights");
(f) All books and records relating to any of the Collateral (as
hereinafter defined) (including without limitation, customer data, credit
files, computer programs, printouts, and other computer materials and
records of each Grantor pertaining to any of the foregoing); and
(g) All accessions to, substitutions for and all replacements,
products and proceeds of the foregoing, including without limitation
proceeds of insurance policies insuring the Collateral (as hereinafter
defined).
All of the property and interests in property described in subsections (a)
through (g) and all other property and interests in personal property which
shall, from time to time, secure the Secured Obligations are herein collectively
referred to as the "Collateral."
2. Financing Statements. At the time of execution of this Agreement,
--------------------
each Grantor shall have furnished the Agent with properly executed financing
statements, registrar's certificates, amendments and assignments as prescribed
by the Uniform Commercial Code as presently in effect in the states where the
Collateral is located, prepared and approved by the Agent in form and number
sufficient for filing wherever required with respect to the Collateral, in order
that the Agent, for the benefit of the Lenders, shall have a duly perfected
security interest of record in the Collateral, to the extent a security interest
in such Collateral can be perfected by filing a financing statement, following
the filing of such financing statements with the appropriate local and state
governmental authorities, subject only to Permitted Liens. Each Grantor shall
execute as reasonably required by the Agent any additional financing statements
or other documents to effect the same, together with any necessary continuation
statements so long as this Agreement remains in effect.
3. Maintenance of Security Interest. Each Grantor will, from time to
--------------------------------
time, upon the request of the Agent, deliver specific assignments of Collateral,
together with such other instruments and documents, financing statements,
amendments thereto, assignments or other writings as the Agent may request to
carry out the terms of this Agreement or to protect or enforce the Agent's
security interest in the Collateral.
With respect to any and all Collateral to be secured and conveyed under
this Agreement, each Grantor agrees to do and cause to be done all things
necessary to perfect and keep in full force the security interest granted in
favor of the Agent for the benefit of the Lenders, including, but not limited
to, the prompt payment of all fees and expenses incurred in connection with any
filings made to perfect or continue a security interest in the Collateral in
favor of the Agent for the benefit of the Lenders.
3
<PAGE>
Each Grantor agrees to make appropriate entries upon its financial
statements and books and records disclosing the security interest granted
hereunder to the Agent for the benefit of the Secured Parties.
4. Receipt of Payment. In the event an Event of Default shall occur and
------------------
be continuing and a Grantor (or any of its affiliates, subsidiaries,
stockholders, directors, officers, employees or agents) shall receive any
proceeds of Collateral, including without limitation monies, checks, notes,
drafts or any other items of payment, each Grantor shall hold all such items of
payment in trust for the Agent, for the benefit of the Secured Parties, and as
the property of the Agent, for the benefit of the Secured Parties, separate from
the funds of such Grantor, and no later than the first Business Day following
the receipt thereof, at the election of the Agent, such Grantor shall cause the
same to be forwarded to the Agent for its custody and possession on behalf of
the Lenders as additional Collateral.
5. Covenants. Each Grantor covenants with the Agent that from and after
---------
the date of this Agreement until termination hereof in accordance with Section
-------
28 hereof:
- --
(a) Inspection. The Agent (by any of its officers, employees and
----------
agents), on behalf of the Lenders, shall have the right upon prior notice
to an executive officer of the Borrower, and at any reasonable times during
such Grantor's usual business hours, to inspect the Collateral, all records
related thereto (and to make extracts or copies from such records), and the
premises upon which any of the Collateral is located, to discuss such
Grantor's affairs and finances with any Person (other than Account Debtors)
and to verify with any Person other than Account Debtors the amount,
quality, quantity, value and condition of, or any other matter relating to,
the Collateral and, if an Event of Default has occurred and is continuing,
to discuss such Grantor's affairs and finances with such Grantor's Account
Debtors and to verify the amount, quality, value and condition of, or any
other matter relating to, the Collateral and such Account Debtors. Upon or
after the occurrence and during the continuation of an Event of Default,
the Agent may at any time and from time to time employ and maintain on such
Grantor's premises a custodian selected by the Agent who shall have full
authority to do all acts necessary to protect the Agent's (for the benefit
of the Secured Parties) interest. All expenses incurred by the Agent, on
behalf of the Secured Parties, by reason of the employment of such
custodian shall be paid by such Grantor, added to the Secured Obligations
and secured by the Collateral.
(b) Assignments, Records and Schedules of Accounts. Each Grantor
----------------------------------------------
shall keep accurate and complete records of its Accounts ("Account
Records") and from time to time at intervals designated by the Agent such
Grantor shall provide the Agent with a schedule of Accounts in form and
substance acceptable to the Agent describing all Accounts created or
acquired by such Grantor ("Schedule of Accounts"); provided, however, that
-------- -------
such Grantor's failure to execute and deliver any such Schedule of Accounts
shall not affect or limit the Agent's security interest or other rights in
and to any Accounts for the benefit of the Secured Parties. If requested
by the Agent, each Grantor shall furnish the Agent with copies of proof of
delivery and other documents relating to the Accounts so scheduled,
including
4
<PAGE>
without limitation repayment histories and present status reports
(collectively, "Account Documents") and such other matter and information
relating to the status of then existing Accounts as the Agent shall
request. No Grantor shall remove any Account Records or Account Documents
or change its chief executive offices from the locations set forth in
Exhibit A hereto without 30 days prior written notice to the Agent as
---------
provided in Section 19 hereof and delivery to the Agent by the applicable
----------
Grantor prior to such removal of executed financing statements, amendments
and other documents necessary in the determination of the Agent to maintain
the security interests granted hereunder.
(c) Notice Regarding Disputed Accounts. In the event any amounts due
----------------------------------
and owing in excess of $250,000 individually, or $500,000 in the aggregate
amount, are in dispute between any Account Debtor and a Grantor (which
shall include without limitation any dispute in which an offset claim or
counterclaim may result), such Grantor shall provide the Agent with written
notice thereof as soon as practicable, explaining in detail the reason for
the dispute, all claims related thereto and the amount in controversy.
(d) Verification of Accounts. If an Event of Default has occurred and
------------------------
is continuing, any of the Agent's officers, employees or agents shall have
the right, at any reasonable time or times hereafter, to verify with
Account Debtors the validity, amount or any other matter relating to any
Accounts and, whether or not a Default or Event of Default has occurred,
any of the Agent's officers, employees or agents shall have the right to
verify the same with any Grantor.
(e) Change of Trade Styles. No Grantor shall change, amend, alter,
----------------------
terminate, or cease using its material trade names or styles under which it
sells Inventory as of the date of this Agreement ("Trade Styles"), or use
additional Trade Styles, without giving the Agent at least 30 days' prior
written notice and delivery to the Agent by the applicable Grantor prior to
such removal, change, amendment, alteration, or use, of executed financing
statements, amendments and other documents necessary in the determination
of the Agent to maintain the security interests granted hereunder.
(f) Safekeeping of Inventory. Each Grantor shall be responsible for
------------------------
the safekeeping of its Inventory, and, subject to Section 13 hereof, in no
----------
event shall the Agent have any responsibility for:
(i) Any loss or damage to Inventory or destruction thereof
occurring or arising in any manner or fashion from any cause;
(ii) Any diminution in the value of Inventory; or
(iii) Any act or default of any carrier, warehouseman, bailee
or forwarding agency thereof or other Person in any way dealing with
or handling Inventory.
5
<PAGE>
(g) Location, Records and Schedules of Inventory. Each Grantor shall
--------------------------------------------
keep correct and accurate records itemizing and describing the kind, type,
location and quantity of Inventory, its cost therefor and the selling price
of Inventory held for sale, and the daily withdrawals therefrom and
additions thereto, and shall furnish to the Agent from time to time at
reasonable intervals designated by the Agent, a current schedule of
Inventory ("Schedule of Inventory") based upon its most recent physical
inventory and its daily inventory records. Each Grantor shall conduct a
physical inventory, no less than annually, and shall furnish to the Agent
such other documents and reports thereof as the Agent shall reasonably
request with respect to the Inventory. Subject to compliance at all times
with Sections 6(c), (d) and (e), no Grantor shall, other than in the
--------------------------
ordinary course of business in connection with its sale, remove any
material amount of Inventory from the locations set forth on Exhibit B
---------
hereto to a location not also set forth on Exhibit B hereto, each of such
---------
locations being owned by a Grantor unless otherwise indicated, without 30
days prior written notice to the Agent as provided in Section 29 hereof and
----------
delivery to the Agent by the applicable Grantor prior to such removal of
executed financing statements, amendments and other documents necessary in
the determination of the Agent to maintain the security interests granted
hereunder.
(h) Returns of Inventory. If any Account Debtor returns any Inventory
--------------------
to a Grantor after shipment thereof, and such return generates a credit in
excess of $500,000 on any individual Account or $1,000,000 in the aggregate
on any Accounts of such Account Debtor, such Grantor shall notify the Agent
in writing of the same as soon as practicable.
(i) Evidence of Ownership of Equipment. The Grantors, as soon as
----------------------------------
practicable following a request therefor by the Agent, shall deliver to the
Agent any and all evidence of ownership of any of the Equipment (including
without limitation certificates of title and applications for title).
(j) Location, Records and Schedules of Equipment. The Grantors shall
--------------------------------------------
maintain accurate, itemized records itemizing and describing the kind,
type, quality, quantity and value of its Equipment and shall furnish the
Agent upon request with a current schedule containing the foregoing
information, but, other than during the continuance of an Event of Default,
not more often than once per fiscal quarter. No Grantor shall remove any
material portion of the Equipment from the locations set forth in Exhibit C
---------
hereto to a location not also set forth on Exhibit C hereto without at
---------
least 30 days' prior written notice to the Agent as provided in Section 29
----------
hereof and delivery to the Agent by the applicable Grantor prior to such
removal of executed financing statements, amendments and other documents
necessary to maintain the security interests granted hereunder.
(k) Sale or Mortgage of Equipment. Other than in the ordinary course
-----------------------------
of business with respect to disposition of obsolescent Equipment or
replacement of Equipment with other Equipment performing similar functions
and having similar or better utility and value, and except as permitted by
the Credit Agreement prior to the occurrence and continuance of an Event of
Default, no Grantor shall sell, exchange, lease, mortgage,
6
<PAGE>
encumber, pledge or otherwise dispose of or transfer any of the Equipment
or any part thereof without the prior written consent of the Agent.
(l) Maintenance of Equipment. Each Grantor shall keep and maintain
------------------------
its Equipment in good operating condition and repair, ordinary wear and
tear excepted. No Grantor shall permit any such items to become a fixture
to real property (unless such Grantor has granted the Agent for the benefit
of the Lenders a lien on such real property) or accessions to other
personal property.
(m) Transfers and Other Liens. Each Grantor shall not (i) sell,
-------------------------
assign (by operation of law or otherwise) or otherwise dispose of any of,
or grant any option with respect to, the Collateral, except for
dispositions permitted under the Credit Agreement and Section 5(k) hereof,
------------
(ii) create or suffer to exist any Lien, security interest or other charge
or encumbrance upon or with respect to any of the Collateral except for the
security interests created by this Agreement or other Permitted Liens; or
(iii) take any other action in connection with any of the Collateral that
would materially impair the value of the interest or rights of such Grantor
in the Collateral taken as a whole or that would materially impair the
interest or rights of the Agent for the benefit of the Lenders.
6. Warranties and Representations Regarding Collateral Generally. Each
-------------------------------------------------------------
Grantor warrants and represents that:
(a) It is and, except as permitted by the Credit Agreement and Section
-------
5(m) hereof, will continue to be the owner of the Collateral hereunder, now
----
owned and upon the acquisition of the same, free and clear of all Liens,
claims, encumbrances and security interests other than the security
interest in favor of the Agent for the benefit of the Lenders hereunder and
Permitted Liens, and that it will defend such Collateral and any products
and proceeds thereof against all material claims and demands of all Persons
(other than holders of Permitted Liens) at any time claiming the same or
any interest therein adverse to the Secured Parties.
(b) It has the unqualified right to enter into this Agreement and to
perform its terms.
(c) No authorization, consent, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body or
any other Person is required either (i) for the grant by such Grantor of
the security interests granted hereby or for the execution, delivery or
performance of this Agreement by such Grantor, or (ii) for the perfection
of or the exercise by the Agent, on behalf of the Secured Parties, of its
rights and remedies hereunder, except for the filings required by the
Uniform Commercial Code of the State in which such Grantor maintains its
chief executive office.
(d) No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral purported to be granted
by such Grantor hereunder is on file
7
<PAGE>
in any recording office, except such as may have been filed in favor of the
Agent, for the benefit of the Secured Parties other than Permitted Liens.
7. Account Warranties and Representations. With respect to its Accounts,
--------------------------------------
each Grantor warrants and represents to the Agent for the benefit of the Secured
Parties that the Agent and each Lender may rely on all statements or
representations made by such Grantor on or with respect to any Schedule of
Accounts prepared and delivered by it and that:
(a) All Account Records and Account Documents are located only at such
Grantor's locations as set forth on Exhibit A attached hereto and
---------
incorporated herein by reference or at such other locations as to which the
Grantor has notified the Agent in writing not less than 30 days prior to
such relocation;
(b) The Accounts are genuine, are in all material respects what they
purport to be, are not evidenced by an instrument or document or, if
evidenced by an instrument or document, are only evidenced by one original
instrument or document;
(c) The Accounts cover bona fide sales and deliveries of Inventory
usually dealt in by such Grantor, or the rendition by such Grantor of
services, to an Account Debtor in the ordinary course of business;
(d) The amounts of the face value shown on any Schedule of Accounts or
invoice statement delivered to the Agent with respect to any Account, are
actually owing to such Grantor and are not contingent for any reason; and
there are no setoffs, discounts, allowances, claims, counterclaims or
disputes of any kind or description in an amount greater than $1,000,000 in
the aggregate, or greater than $500,000 individually, existing or asserted
with respect thereto and such Grantor has not made any agreement with any
Account Debtor thereunder for any deduction therefrom, except as may be
stated in the Schedule of Accounts and reflected in the calculation of the
face value of each respective invoice related thereto;
(e) Except for conditions generally applicable to such Grantor's
industry and markets, there are no facts, events, or occurrences known to
such Grantor pertaining particularly to any Accounts which are reasonably
expected to materially impair in any way the validity, collectibility or
enforcement of Accounts that would reasonably be likely, in the aggregate,
to be of material economic value, or in the aggregate materially reduce the
amount payable thereunder from the amount of the invoice face value shown
on any Schedule of Accounts, and on all contracts, invoices and statements
delivered to the Agent, with respect thereto;
(f) The goods or services giving rise thereto are not, and were not at
the time of the sale or performance thereof, subject to any Lien, claim,
encumbrance or security interest, except those of the Agent for the benefit
of Secured Parties and Permitted Liens;
8
<PAGE>
(g) The Accounts have not been pledged to any Person other than to the
Agent for the benefit of the Secured Parties under this Agreement and will
be owned by such Grantor free and clear of any Liens, claims, encumbrances
or security interests except Permitted Liens;
(h) The Agent's and the Lenders' security interest therein will not be
subject to any offset, deduction, counterclaim, Lien or other adverse
condition, other than Permitted Liens; and
(i) The location of its chief executive office and any state in which
it (i) has a place of business in only one county of such state or (ii)
resides in such state (within the meaning of the applicable Uniform
Commercial Code) but does not have any place of business in such state, is
set forth on Exhibit A attached hereto and incorporated herein by reference
---------
and each Grantor shall deliver to the Agent not less than 30 days written
notice prior to any change of such location or status of places of business
or residency.
8. Inventory Warranties and Representations. With respect to its
----------------------------------------
Inventory, each Grantor warrants and represents to the Agent for the benefit of
the Lenders that the Secured Parties may rely on all statements or
representations made by such Grantor on or with respect to any Inventory and
that:
(a) All Inventory, other than Inventory having a value of less than
$1,000,000 in the aggregate for all locations, is located only at such
Grantor's locations as set forth on Exhibit B attached hereto and
---------
incorporated herein by reference;
(b) None of its Inventory is or will be subject to any Lien, claim,
encumbrance or security interest whatsoever, except for the security
interest of the Agent for the benefit of the Lenders hereunder and
Permitted Liens;
(c) No Inventory of such Grantor that would reasonably be likely, in
the aggregate with the Inventory of all Grantors, to be of value in excess
of $1,000,000 is, and shall not at any time or times hereafter be, stored
with a bailee, warehouseman, or similar party without the Agent's prior
written consent which consent shall not be unreasonably withheld and, if
the Agent gives such consent, such Grantor will concurrently therewith
cause any such bailee, warehouseman, or similar party to issue and deliver
to the Agent upon its request therefor, in form and substance reasonably
acceptable to the Agent, warehouse receipts therefor in the Agent's name
and take such other action and be party to such document as deemed
necessary or prudent by the Agent to maintain the security interest of the
Lenders in such Inventory; provided, however, Grantor shall be entitled to
store Inventory for periods of less than 30 days with any bailee,
warehouseman or similar party who the Grantor can demonstrate it has been
directed to utilize by any customer without compliance with this subsection
(c) so long as the value of such Inventory does not exceed $2,500,000;
9
<PAGE>
(d) No Inventory is, and shall not at any time or times hereafter be,
under consignment to any Person, the value of which, when aggregated with
all other Inventory under consignment of such Grantor and all other
Material Subsidiaries, would exceed $500,000; and
(e) No Inventory is at or shall be kept at any location that is leased
by such Grantor from any other Person, the value of which, when aggregated
with all other Inventory kept at any location which is leased by all
Grantors, would exceed $500,000, unless such location and lessee is set
forth on Exhibit B hereto and the Grantor has used its best efforts to have
---------
the lessor waive its rights with respect to such Inventory in form and
substance acceptable to the Agent and delivered in writing to the Agent
prior to such amount of Inventory being at such one or more locations.
9. Equipment Representations and Warranties. With respect to its
----------------------------------------
Equipment, each Grantor warrants and represents to the Agent for the benefit of
the Lenders that the Secured Parties may rely on all statements or
representations made by such Grantor on or with respect to any Equipment and
that:
(a) All Equipment (other than Equipment located at facilities of
Grantor's suppliers) is located only at such Grantor's locations set forth
in Exhibit C hereto or at such other locations as to which such Grantor has
---------
notified the Agent in writing not less than 30 days prior to such
relocation and has provided to the Agent executed financing statements for
such location satisfying the requirements of Section 2 hereof;
(b) None of its Equipment is or will be subject to any Lien, claim,
encumbrance or security interest whatsoever, except for the security
interest of the Agent, for the benefit of the Lenders, hereunder and
Permitted Liens;
(c) No Equipment of such Grantor is at or shall be kept at any
location that is leased by such Grantor from any other Person unless such
location and lessee is set forth on Exhibit C hereto and the Grantor has
---------
used its best efforts to have the lessor waive its rights with respect to
such Equipment in form and substance acceptable to the Agent.
10. Casualty and Liability Insurance Required.
-----------------------------------------
(a) Each Grantor will keep the Collateral continuously insured against
such risks as are customarily insured against by businesses of like size
and type engaged in the same or similar operations including, without
limiting the generality of any other covenant herein contained:
(i) casualty insurance on the Inventory and the Equipment in
an amount not less than the full insurable value thereof, against loss
or damage by theft, fire and lightning and other hazards ordinarily
included under uniform broad form standard extended coverage policies,
limited only as may be provided in the standard broad
10
<PAGE>
form of extended coverage endorsement at the time in use in the states
in which the Collateral is located;
(ii) comprehensive general liability insurance against claims
for bodily injury, death or property damage occurring with or about
such Collateral (such coverage to include provisions waiving
subrogation against the Secured Parties), with Agent and Lenders as
additional insured parties, in amounts as shall be reasonably
satisfactory to Agent;
(iii) liability insurance with respect to the operation of its
facilities under the workers' compensation laws of the states in which
such Collateral is located; and
(iv) business interruption insurance.
(b) Each insurance policy obtained in satisfaction of the requirements
of Section 10(a) hereof:
-------------
(i) may be provided by blanket policies now or hereafter
maintained by each Grantor or the Borrower;
(ii) shall be issued by such insurer (or insurers) as shall be
financially responsible, of recognized standing and reasonably
acceptable to the Agent;
(iii) shall be in such form and have such provisions (including
without limitation the loss payable clause, the waiver of subrogation
clause, the deductible amount, if any, and the standard mortgagee
endorsement clause), as are generally considered standard provisions
for the type of insurance involved and are reasonably acceptable in
all respects to the Agent;
(iv) shall prohibit cancellation or substantial modification,
termination or lapse in coverage by the insurer without at least 30
days' prior written notice to the Agent, except for non-payment of
premium, in which case such policies shall provide ten (10) days'
prior written notice;
(v) without limiting the generality of the foregoing, all
insurance policies where applicable under Section 10(a)(i) carried on
----------------
the Collateral shall name the Agent, for the benefit of the Lenders,
as loss payee and the Agent and Lenders as parties insured thereunder
in respect of any claim for payment.
(c) Prior to expiration of any such policy, such Grantor shall furnish
the Agent with evidence satisfactory to the Agent that the policy or
certificate has been renewed or replaced or is no longer required by this
Agreement.
11
<PAGE>
(d) Each Grantor hereby irrevocably makes, constitutes and appoints
the Agent (and all officers, employees or agents designated by the Agent),
for the benefit of the Lenders, effective upon the occurrence and during
the continuance of an Event of Default, as such Grantor's true and lawful
attorney (and agent-in-fact) for the purpose of making, settling and
adjusting claims under such policies of insurance, endorsing the name of
such Grantor on any check, draft, instrument or other item or payment for
the proceeds of such policies of insurance and for making all
determinations and decisions with respect to such policies of insurance.
(e) In the event such Grantor shall fail to maintain, or fail to cause
to be maintained, the full insurance coverage required hereunder or shall
fail to keep any of its Collateral in good repair and good operating
condition subject to ordinary wear and tear, the Agent may (but shall be
under no obligation to), without waiving or releasing any Secured
Obligation or Event of Default by such Grantor hereunder, contract for the
required policies of insurance and pay the premiums on the same or make any
required repairs, renewals and replacements; and all sums so disbursed by
Agent, including reasonable attorneys' fees, court costs, expenses and
other charges related thereto, shall be payable on demand by such Grantor
to the Agent and shall be additional Secured Obligations secured by the
Collateral.
(f) Each Grantor agrees that to the extent that it shall not carry
insurance required by Section 10(a) hereof, it shall in the event of any
-------------
loss or casualty pay promptly to the Agent, for the benefit of the Secured
Parties, for application in accordance with the provisions of Section 10(h)
-------------
hereof, such amount as would have been received as Net Proceeds (as
hereinafter defined) by the Agent, for the benefit of the Secured Parties,
under the provisions of Section 10(h) hereof had such insurance been
-------------
carried to the extent required.
(g) The Net Proceeds of the insurance carried pursuant to the
provisions of Sections 10(a)(ii) and 10(a)(iii) hereof shall be applied by
------------------ ----------
such Grantor toward extinguishment of the defect or claim or satisfaction
of the liability with respect to which such insurance proceeds may be paid.
(h) The Net Proceeds of the insurance carried with respect to the
Collateral pursuant to the provisions of Section 10(a)(i) hereof shall be
----------------
paid to such Grantor and held by such Grantor in a separate account and
applied as follows: (i) as long as no Event of Default shall have occurred
and be continuing, after any loss under any such insurance and payment of
the proceeds of such insurance, each Grantor shall have a period of 30 days
after payment of the insurance proceeds with respect to such loss to elect
to either (x) repair or replace the Collateral so damaged, (y) deliver such
Net Proceeds to the Agent, for the benefit of the Lenders, as additional
Collateral or (z) apply such Net Proceeds to the acquisition of tangible
assets used or useful in the conduct of the business of such Grantor,
subject to the provisions of this Agreement. If such Grantor elects to
repair or replace the Collateral so damaged, such Grantor agrees the
Collateral shall be repaired to a condition substantially similar to its
condition prior to damage or replaced with Collateral in a condition
substantially similar to the condition of the Collateral so replaced prior
to damage; and (ii)
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<PAGE>
at all times during which an Event of Default shall have occurred and be
continuing, after any loss under such insurance and payment of the proceeds
of such insurance, such Grantor shall immediately deliver such Net Proceeds
to such Agent, for the benefit of the Secured Parties, as additional
Collateral.
(i) "Net Proceeds" when used with respect to any insurance proceeds
shall mean the gross proceeds from such proceeds, award or other amount,
less all taxes, fees and expenses (including attorneys' fees) incurred in
the realization thereof.
(j) In case of any material damage to or destruction of all or any
part of the Collateral pledged hereunder by a Grantor, such Grantor shall
give prompt notice thereof to the Agent. Each such notice shall describe
generally the nature and extent of such damage, destruction, taking, loss,
proceeding or negotiations. Each Grantor is hereby authorized and
empowered to adjust or compromise any loss under any such insurance.
(k) All insurance policies covering the Mortgaged Property shall
comply in all respects with Section 4.6 of the Mortgages.
-----------
11. Rights and Remedies Upon Event of Default. Upon and after an Event of
-----------------------------------------
Default, the Agent shall have the following rights and remedies on behalf of the
Lenders in addition to any rights and remedies set forth elsewhere in this
Agreement, all of which may be exercised with or, if allowed by law, without
notice to a Grantor:
(a) All of the rights and remedies of a secured party under the
Uniform Commercial Code of the state where such rights and remedies are
asserted, or under other applicable law, all of which rights and remedies
shall be cumulative, and none of which shall be exclusive, to the extent
permitted by law, in addition to any other rights and remedies contained in
this Agreement, the Guaranty Agreement or any other Loan Document;
(b) The right to foreclose the Liens and security interests created
under this Agreement by any available judicial procedure or without
judicial process;
(c) The right to (i) enter upon the premises of a Grantor through
self-help and without judicial process, without first obtaining a final
judgment or giving such Grantor notice and opportunity for a hearing on the
validity of the Agent's claim and without any obligation to pay rent to
such Grantor, or any other place or places where any Collateral is located
and kept, and remove the Collateral therefrom to the premises of the Agent
or any agent of the Agent, for such time as the Agent may desire, in order
effectively to collect or liquidate the Collateral, and (ii) require such
Grantor to assemble the Collateral and make it available to the Agent at a
place to be designated by the Agent that is reasonably convenient to both
parties;
(d) The right to (i) demand payment of the Accounts; (ii) enforce
payment of the Accounts, by legal proceedings or otherwise; (iii) exercise
all of a Grantor's rights and
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<PAGE>
remedies with respect to the collection of the Accounts and General
Intangibles; (iv) settle, adjust, compromise, extend or renew the Accounts,
General Intangibles and Contract Rights; (v) settle, adjust or compromise
any legal proceedings brought to collect the Accounts; (vi) if permitted by
applicable law, sell or assign the Accounts, General Intangibles and
Contract Rights upon such terms, for such amounts and at such time or times
as the Agent deems advisable; (vii) discharge and release the Accounts;
(viii) take control, in any manner, of any item of payment or proceeds
referred to in Section 4 above; (ix) prepare, file and sign a Grantor's
---------
name on a Proof of Claim in bankruptcy or similar document against any
Account Debtor; (x) prepare, file and sign a Grantor's name on any notice
of Lien, assignment or satisfaction of Lien or similar document in
connection with the Accounts; (xi) endorse the name of a Grantor upon any
chattel paper, document, instrument, invoice, freight bill, bill of lading
or similar document or agreement relating to the Accounts, Inventory or
Equipment; (xii) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to any
Collateral to which a Grantor has access; (xiii) to open such Grantor's
mail and collect any and all amounts due to such Grantor from Persons
obligated on any Accounts ("Account Debtors"); (xiv) to take over such
Grantor's post office boxes or make other arrangements as the Agent, on
behalf of the Lenders, deems necessary to receive such Grantor's mail,
including notifying the post office authorities to change the address for
delivery of such Grantor's mail to such address as the Agent, on behalf of
the Lenders, may designate; and (xv) to notify any or all Account Debtors
that the Accounts have been assigned to the Agent for the benefit of the
Lenders and that Agent has a security interest therein for the benefit of
the Lenders (provided that the Agent may at any time give such notice to an
Account Debtor that is a department, agency or authority of the United
States government); each Grantor hereby agrees that any such notice, in the
Agent's sole discretion, may be sent on such Grantor's stationery, in which
event such Grantor shall co-sign such notice with the Agent; and (xvi) do
all acts and things and execute all documents necessary, in Agent's sole
discretion, to collect the Accounts and General Intangibles; and
(e) The right to sell, assign, lease or to otherwise dispose of all or
any Collateral in its then existing condition, or after any further
manufacturing or processing thereof, at public or private sale or sales,
with such notice as may be required by law, in lots or in bulk, for cash or
on credit, with or without representations and warranties, all as the
Agent, in its sole discretion, may deem advisable. The Agent shall have
the right to conduct such sales on a Grantor's premises or elsewhere and
shall have the right to use a Grantor's premises without charge for such
sales for such time or times as the Agent may see fit. The Agent may, if
it deems it reasonable, postpone or adjourn any sale of the Collateral from
time to time by an announcement at the time and place of such postponed or
adjourned sale, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. Each Grantor agrees that the
Agent has no obligation to preserve rights to the Collateral against prior
parties or to marshall any Collateral for the benefit of any Person. The
Agent is hereby granted a license or other right to use, without charge,
each Grantor's labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in
14
<PAGE>
completing production of, advertising for sale and selling any Collateral
and a Grantor's rights under any license and any franchise agreement shall
inure to the Agent's benefit. If any of the Collateral shall require
repairs, maintenance, preparation or the like, or is in process or other
unfinished state, the Agent shall have the right, but shall not be
obligated, to perform such repairs, maintenance, preparation, processing or
completion of manufacturing for the purpose of putting the same in such
saleable form as the Agent shall deem appropriate, but the Agent shall have
the right to sell or dispose of the Collateral without such processing and
no Guarantor shall have any claim against the Agent for the value that may
have been added to such Collateral with such processing. In addition, each
Grantor agrees that in the event notice is necessary under applicable law,
written notice mailed to such Grantor in the manner specified herein ten
(10) days prior to the date of public sale of any of the Collateral or
prior to the date after which any private sale or other disposition of the
Collateral will be made shall constitute commercially reasonable notice to
such Grantor. All notice is hereby waived with respect to any of the
Collateral which threatens to decline speedily in value or is of a type
customarily sold on a recognized market. The Agent may purchase all or any
part of the Collateral at public or, if permitted by law, private sale,
free from any right of redemption which is hereby expressly waived by such
Grantor and, in lieu of actual payment of such purchase price, may set off
the amount of such price against the Secured Obligations. The net cash
proceeds resulting from the collection, liquidation, sale, lease or other
disposition of the Collateral shall be applied first to the expenses
(including all attorneys' fees) of retaking, holding, storing, processing
and preparing for sale, selling, collecting, liquidating and the like, and
then to the satisfaction of all Secured Obligations in accordance with the
terms of Section 11.5 of the Credit Agreement. Any sale or other
------------
disposition of the Collateral and the possession thereof by the Agent shall
be in compliance with all provisions of applicable law (including
applicable provisions of the Uniform Commercial Code). Each Grantor shall
be liable to the Agent, for the benefit of the Lenders, and shall pay to
the Agent, for the benefit of the Lenders, on demand any deficiency which
may remain after such sale, disposition, collection or liquidation of the
Collateral.
12. Anti-Marshalling Provisions. The right is hereby given by each
---------------------------
Grantor to the Agent, for the benefit of the Secured Parties, to make releases
(whether in whole or in part) of all or any part of the Collateral agreeable to
the Agent without notice to, or the consent, approval or agreement of other
parties and interests, including junior lienors, which releases shall not impair
in any manner the validity of or priority of the Liens and security interests in
the remaining Collateral conferred under such documents, nor release such
Grantor from personal liability for the Secured Obligations hereby secured.
Notwithstanding the existence of any other security interest in the Collateral
held by the Agent, for the benefit of the Secured Parties, the Agent shall have
the right to determine the order in which any or all of the Collateral shall be
subjected to the remedies provided in this Agreement. The proceeds realized
upon the exercise of the remedies provided herein shall be applied by the Agent,
for the benefit of the Secured Parties, in the manner provided in Section 11.5
------------
of the Credit Agreement. Each Grantor hereby waives any and all right to
require the marshalling of assets in connection with the exercise of any of the
remedies permitted by applicable law or provided herein.
15
<PAGE>
13. Indemnity and Expenses.
----------------------
(a) Each Grantor agrees to indemnify the Agent, for the benefit of the
Secured Parties, from and against any and all claims, losses and
liabilities growing out of or resulting from this Agreement that are
incurred by the Agent (including without limitation enforcement of this
Agreement), except claims, losses or liabilities directly resulting from
the Agent's gross negligence or willful misconduct.
(b) Each Grantor will upon demand pay to the Agent, for the benefit of
the Secured Parties, the amount of any and all reasonable expenses,
including the reasonable fees and disbursements of its counsel and of any
experts and agents, that the Agent, for the benefit of the Lenders, may
incur in connection with (i) the administration of this Agreement, (ii) the
custody, preservation, use or operation of, or the sale of, collection from
or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Secured Parties, or (iv) the
failure by such Grantor to perform or observe any of the provisions hereof.
14. Appointment of Agent as Grantor's Lawful Attorney. Without limitation
-------------------------------------------------
of any other provision of this Agreement, each Grantor irrevocably designates,
makes, constitutes and appoints the Agent (and all Persons designated by the
Agent), for the benefit of the Secured Parties, as the Grantor's true and lawful
attorney (and agent-in-fact) at all times on and after the occurrence and during
the continuation of an Event of Default, to take all actions and to do all
things required to be taken or done by the Grantor under this Agreement,
including without limitation:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection with clause (a) above;
(c) to endorse such Grantor's name on any checks, notes, drafts or any
other payment relating to or constituting proceeds of the Collateral which
comes into the Agent's possession or Agent's control, and deposit the same
to the account of the Agent, for the benefit of the Lenders, on account and
for payment of the Secured Obligations.
(d) to file any claims or take any action or institute any proceedings
that the Agent may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of the Agent, for the
benefit of the Lenders, with respect to any of the Collateral; and
(e) to execute, in connection with the sale provided for in Section
-------
11, any endorsement, assignments, or other instruments of conveyance or
transfer with respect to the Collateral.
16
<PAGE>
All acts of the Agent or its designee taken pursuant to this Section 14 are
----------
hereby ratified and confirmed by each Grantor and the Agent or its designee
shall not be liable for any acts of omission or commission nor for any error of
judgment or mistake of fact or law, other than as a result of its gross
negligence or willful misconduct. This power, being coupled with an interest,
is irrevocable by such Grantor until this Agreement has been terminated in
accordance with Section 28 hereof.
----------
15. Supplemental Documentation. At the Agent's request, each Grantor
--------------------------
shall execute and deliver to the Agent, at any time or times hereafter, all
documents, instruments and other written matter that the Agent may request to
perfect and maintain perfected the Agent's (for the benefit of the Secured
Parties) security interest in the Collateral, in form and substance acceptable
to the Agent, and pay all charges, expenses and fees the Agent may reasonably
incur in filing any of such documents, and all taxes relating thereto. Each
Grantor agrees that a carbon, photographic, photostatic, or other reproduction
of this Agreement or a financing statement is sufficient as a financing
statement and may be filed by the Agent in any filing office.
16. Waivers. In addition to the other waivers contained herein, each
-------
Grantor hereby expressly waives, to the extent permitted by law: presentment for
payment, demand, protest, notice of demand, notice of protest, notice of default
or dishonor, notice of payments and nonpayments and all other notices and
consents to any action taken by the Agent unless expressly required by this
Agreement.
17. Trade Names. Each Grantor represents that the only trade name(s) or
-----------
style(s) used by such Grantor are as set forth on Exhibit D, next to the name of
---------
such Grantor.
18. Absolute Rights and Obligations. All rights of the Secured Parties in
-------------------------------
the Security Interests granted hereunder, and each of the Secured Obligations,
shall be absolute and unconditional irrespective of:
(a) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to departure from, the Credit
Agreement or any other Loan Document, including, but not limited to, (i) an
increase or decrease in the Secured Obligations and (ii) an amendment of
any Loan Document to permit the Agent or the Lenders or any one or more of
them to extend further or additional credit to the Borrower in any form
including credit by way of loan, purchase of assets, guarantee or
otherwise, which credit shall thereupon be and become subject to the Credit
Agreement and the other Loan Documents as a Secured Obligation;
(b) any taking and holding of collateral or guarantees (including
without limitation any collateral pledged as security for the Secured
Obligations under the other Security Instruments) for all or any of the
Secured Obligations; or any amendment, alteration, exchange, substitution,
transfer, enforcement, waiver, subordination, termination or release of any
such collateral or guarantees, or any non-perfection of any such
collateral, or any consent to departure from any such guaranty;
17
<PAGE>
(c) any manner of application of collateral, or proceeds thereof,
securing payment or enforcement of all or any of the Secured Obligations,
or the manner of sale of any such collateral;
(d) any consent by the Secured Parties to the change, restructure or
termination of the corporate structure or existence of the Borrower or any
Grantor and any corresponding restructure of the Secured Obligations, or
any other restructure or refinancing of the Secured Obligations or any
portion thereof;
(e) any modification, compromise, settlement or release by the Secured
Parties, by operation of law or otherwise, collection or other liquidation
of the Secured Obligations or the liability of the Borrower, any Grantor or
any Guarantor (other than the Grantor against which this Agreement is to be
enforced), or of any collateral for the Secured Obligation (including
without limitation any collateral pledged as security for the Secured
Obligations under the other Security Instruments), in whole or in part, and
any refusal of payment by the Agent or any Lender in whole or in part, from
any obligor or Guarantor (other than the Grantor against which this
Agreement is sought to be enforced) in connection with any of the Secured
Obligations, whether or not with notice to, or further assent by, or any
reservation of rights against, any Grantor; or
(f) any other circumstance (including without limitation any statute
of limitations) that might otherwise constitute a defense available to, or
a discharge of, the Borrower, any Guarantor or a Grantor.
The granting of a Security Interest in the Collateral shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Secured Obligations is rescinded or must otherwise be returned by any
Secured Party, upon the insolvency, bankruptcy or reorganization of the Borrower
or any Grantor or otherwise, all as though such payment had not been made.
19. Definitions. All terms used herein shall be defined in accordance
-----------
with the appropriate definitions appearing in the Uniform Commercial Code as in
effect in Florida, and such definitions are hereby incorporated herein by
reference and made a part hereof.
20. Entire Agreement. This Agreement, together with the Credit Agreement,
----------------
the Guaranty Agreement and other Loan Documents, constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior agreements and understandings,
inducements, commitments or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof. Neither this Agreement nor any portion or provision hereof may be
changed, altered, modified, supplemented, discharged, canceled, terminated, or
amended orally or in any manner other than by an agreement, in writing signed by
the parties hereto.
18
<PAGE>
21. Further Assurances. Each Grantor agrees at its own expense to do such
------------------
further acts and things, and to execute and deliver such additional conveyances,
assignments, financing statements, agreements and instruments, as the Agent may
at any time reasonably request in connection with the administration or
enforcement of this Agreement or related to the Collateral or any part thereof
or in order better to assure and confirm unto the Agent its rights, powers and
remedies for the benefit of the Secured Parties hereunder. Each Grantor hereby
consents and agrees that the issuers of or obligors in respect of the Collateral
shall be entitled to accept the provisions hereof as conclusive evidence of the
right of the Agent, on behalf of the Secured Parties, to exercise its rights
hereunder with respect to the Collateral, notwithstanding any other notice or
direction to the contrary heretofore or hereafter given by any Grantor or any
other Person to any of such issuers or obligors.
22. Binding Agreement; Assignment. This Agreement, and the terms,
-----------------------------
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto, and to their respective successors and assigns, except
that no Grantor shall be permitted to assign this Agreement or any interest
herein or in the Collateral, or any part thereof, or otherwise pledge, encumber
or grant any option with respect to the Collateral, or any part thereof, or any
cash or property held by the Agent as Collateral under this Agreement. All
references herein to the Agent shall include any successor thereof, each Lender
and any other obligees from time to time of the Obligations.
23. Swap Agreements. All obligations of the Borrower under Swap Agreements
---------------
shall be deemed to be Secured Obligations secured hereby, and each Lender or
affiliate of a Lender party to any such Swap Agreement shall be deemed to be a
Secured Party hereunder.
24. Severability. The provisions of this Agreement are independent of and
------------
separable from each other. If any provision hereof shall for any reason be held
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity or enforceability of any other provision hereof, but this Agreement
shall be construed as if such invalid or unenforceable provision had never been
contained herein.
25. Successors and Assigns. This Agreement shall be binding upon the
----------------------
successors and assigns of each Grantor, and the right, remedies, powers, and
privileges of the Agent hereunder shall inure to the benefit of the successors
and assigns of the Agent; provided, however, that no Grantor shall make any
-------- -------
assignment hereof without the prior written consent of the Agent.
26. Counterparts. This Agreement may be executed in any number of
------------
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
27. Remedies Cumulative. All remedies hereunder are cumulative and are
-------------------
not exclusive of any other rights and remedies of the Agent provided by law or
under the Credit Agreement, the other Loan Documents, or other applicable
agreements or instruments. The making of the Loans to, and issuing of Letters
of Credit for the benefit of, the Borrower pursuant to the Credit Agreement and
the extension of the Revolving Credit Facility and the Term Loan Facility to the
Borrower
19
<PAGE>
pursuant to the Credit Agreement shall be conclusively presumed to have been
made or extended, respectively, in reliance upon each Assignor's assignment of
the Assigned Interests pursuant to the terms hereof.
28. Termination. This Agreement and all obligations of each Grantor
-----------
hereunder shall terminate on the Facility Termination Date, at which time the
Liens and rights granted to the Agent for the benefit of the Secured Parties
hereunder shall automatically terminate and no longer be in effect, and the
Collateral shall automatically be released from the Liens created hereby. Upon
such termination of this Agreement, the Agent shall, at the sole expense of the
Grantors, reassign and redeliver to each applicable Grantor such Collateral then
held by or for the Agent and execute and deliver to such Grantor such documents
as such Grantor shall reasonably request and take such further actions as may be
necessary to effect the same and as shall be reasonably acceptable to the Agent.
29. Notices. Any notice required or permitted hereunder shall be given,
-------
(a) with respect to the Borrower or any Grantor, at the Borrower's address
indicated in Section 13.2 of the Credit Agreement and (b) with respect to the
------------
Agent or a Lender, at the Agent's address indicated in Section 13.2 of the
------------
Credit Agreement. All such notices shall be given and shall be effective as
provided in Section 13.2 of the Credit Agreement.
------------
20
<PAGE>
30. Governing Law; Venue; Waiver of Trial by Jury.
---------------------------------------------
(a) THIS AGREEMENT 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) EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES 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, EACH GRANTOR EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY
HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF
ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
(c) EACH GRANTOR AGREES 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 BORROWER PROVIDED BY
SECTION 13.2 OF THE CREDIT AGREEMENT, 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 (b) OR (c) HEREOF SHALL PRECLUDE
--------------- ---
THE AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN
THE COURTS OF ANY PLACE WHERE EACH GRANTOR OR ANY OF SUCH GRANTOR'S
PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE
APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH GRANTOR HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN
RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY
OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR
FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT.
21
<PAGE>
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION WITH THE FOREGOING, EACH GRANTOR AND THE AGENT ON BEHALF OF 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 EACH PARTY HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ANY OBJECTION THAT IT MAY HAVE THAT EACH ACTION OR PROCEEDING HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
[Signature pages follow]
22
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Security Agreement
on the day and year first written above.
GRANTORS:
[INSERT NAME]
WITNESS:
By:
-----------------------------------
Name:
- ------------------------- ---------------------------------
Title:
--------------------------------
- -------------------------
SECURITY AGREEMENT
SIGNATURE PAGE 1 OF 2
<PAGE>
AGENT
NATIONSBANK, NATIONAL ASSOCIATION,
as Agent for the Lenders
WITNESS:
By:
-----------------------------------
Name:
- ---------------------- ---------------------------------
Title:
--------------------------------
- ----------------------
SECURITY AGREEMENT
SIGNATURE PAGE 2 OF 2
<PAGE>
EXHIBIT A
---------
Location of Accounts
--------------------
<PAGE>
EXHIBIT B
---------
Location of Inventory
---------------------
<PAGE>
EXHIBIT C
---------
Location of Equipment
---------------------
<PAGE>
EXHIBIT D
---------
Trade Names and Styles
----------------------
<PAGE>
EXHIBIT S-1
Form of Opinion of In-House Counsel
[See attached.]
S-1-1
<PAGE>
Exhibit S-1
April 28, 1998
NationsBank, National Association,
as Agent and each of the Lenders
Party to the Credit Agreement
Referenced Below
NationsBank Corporate Center
Charlotte, NC 28255-0065
Re: $525,000,000 Term Loan Facilities and $150,000,000 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:
I am associate general counsel to BREED Technologies, Inc., a Delaware
corporation ("BREED") and certain Domestic Subsidiaries of BREED identified on
Schedule I hereto (the "CORPORATE GUARANTORS") and Schedule II hereto (the
"PARTNERSHIP GUARANTORS" and, together with the Corporate Guarantors, the
"GUARANTORS") in connection with the term loan facilities of $525,000,000 and
the revolving credit facility of up to $150,000,000, including the $25,000,000
sublimit for the Letter of Credit Facility constituting part of the Revolving
Credit Facility, the term loan facilities being made available to BREED and the
Revolving Credit Facility being made available to BREED and certain foreign
Subsidiaries of BREED designated as Borrowers (the "BORROWING SUBSIDIARIES") on
this date pursuant to the Amended and Restated Credit Agreement of even date
herewith among you, the Lenders, BREED and the Borrowing Subsidiaries (thE
"RESTATED CREDIT AGREEMENT"), and the other transactions contemplated under the
Restated Credit Agreement.
This opinion is being delivered in accordance with the conditions set forth
in Section 7.1 of the Restated Credit Agreement. All capitalized terms not
otherwise defined herein shall have the meanings provided therefor in the
Restated Credit Agreement.
<PAGE>
NationsBank, National Association, as Agent
and each of the Lenders Party to the
Credit Agreement Referenced Below
April 28, 1998
Page 2
In my capacity as associate general counsel, I have reviewed the following
documents:
1. the Restated Credit Agreement;
2. the Notes;
3. the Confirmation of Guaranty Agreement;
4. the Modification to a 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 Filing, Assignment of Leases and Rents and
Financing Statement, dated as of April 28, 1998, between BREED and
NationsBank, National Association (the "MODIFICATION OF BREED MORTGAGE");
5. the Modification to a 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 Filing, Assignment of Leases and Rents and
Financing Statement, dated as of April 28, 1998, between, BREED Automotive
of Florida, Inc. ("BREED FLORIDA") and NationsBank, National Association
(the "MODIFICATION OF FLORIDA MORTGAGE");
6. the Modification to a 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 Filing, Assignment of Leases and Rents and
Financing Statement, dated as of April 28, 1998, between BREED
Manufacturing of Texas, Inc. ("BREED TEXAS") and NationsBank, National
Association (the "MODIFICATION OF TEXAS MORTGAGE");
7. the Modification to a 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 Filing, Assignment of Leases and Rents and
Financing Statement, dated as of April 28, 1998, between BREED Tennessee
Holdings, Inc. ("BREED TENNESSEE") and NationsBank, National Association
relating to real estate located in Blount County, Tennessee (the
"MODIFICATION OF BLOUNT COUNTY, TENNESSEE MORTGAGE");
<PAGE>
NationsBank, National Association, as Agent
and each of the Lenders Party to the
Credit Agreement Referenced Below
April 28, 1998
Page 3
8. the Modification to a 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 Filing, Assignment of Leases and Rents and
Financing Statement, dated as of April 28, 1998, between BREED Alabama,
Inc. ("BREED ALABAMA") and NationsBank, National Association (the
"MODIFICATION OF ALABAMA MORTGAGE");
9. the Modification to a 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 Filing, Assignment of Leases and Rents and
Financing Statement, dated as of April 28, 1998, between BREED Tennessee
Holdings, L.P. ("BREED TENNESSEE") and NationsBank, National Association
relating to real estate located in Knox County, Tennessee (the
"MODIFICATION OF KNOX COUNTY, TENNESSEE MORTGAGE");
10. the Modification of Assignment of Lessee's Interest in Leases dated as
April 28, 1998 between BREED and NationsBank, National Association relating
to the Farmington Hills, Michigan leasehold owned by BREED (the "MICHIGAN
MODIFICATION OF ASSIGNMENT");
11. the Modification of Assignment of Lessee's Interest in Leases dated as of
April 28, 1998 between BREED and NationsBank, National Association relating
to the Ohio leasehold owned by BREED (the "OHIO MODIFICATION OF
ASSIGNMENT");
12. the charter documents and bylaws of BREED and the Guarantors;
13. the certificates of the various state regulatory authorities relating to
BREED described on Schedule III hereto;
14. copies of certified copies of resolutions of the boards of directors of
BREED, the Corporate Guarantors and the general partners of the Partnership
Guarantors authorizing, among other things, the execution, delivery and
performance by BREED and each of the Guarantors of the Credit Agreement and
each of the other agreements, documents and instruments to which they are a
party, and
15. such other documents, instruments and certificates as I have considered
necessary for the purposes of this opinion.
<PAGE>
NationsBank, National Association, as Agent
and each of the Lenders Party to the
Credit Agreement Referenced Below
April 28, 1998
Page 4
The documents described in items 3 through 11 immediately above are
refereed to herein as the "LOAN DOCUMENTS." The documents described in items 4
through 9 above are referred to herein as the "MODIFICATIONS TO THE MORTGAGES."
The documents described in items 10 and 11 are referred to herein as the
"MODIFICATIONS OF ASSIGNMENTS."
I express no opinion herein with respect to the laws of any state or
jurisdiction other than the laws of the State of Florida.
References in this opinion to the "FLORIDA UCC" shall mean the Uniform
Commercial Code as in effect on the date hereof in The State of Florida.
With respect to paragraph 3 below, the opinion therein that each Corporate
Guarantor or Partnership Guarantor is validly existing and in good standing
under the laws of its respective state of formation is based solely upon
certificates of the Secretary of State of the relevant jurisdictions certifying
that such Corporate Guarantor or Partnership Guarantor is validly existing and
in good standing under the laws such jurisdiction as of the date specified in
such certificate and my lack of knowledge of any facts which would indicate that
any Corporate Guarantor or Partnership Guarantor is not validly existing or in
good standing under the laws such jurisdiction.
Based upon the subject to the foregoing, it is my opinion that:
1. BREED has full corporate power and authority to enter into the
Modification of BREED Mortgage and to perform its obligations thereunder.
2. The Modification of BREED Mortgage to which BREED is a party has been
duly executed and delivered by BREED, and constitutes the legal, valid and
binding obligation of BREED, enforceable against BREED in accordance with its
respective terms, subject as to enforcement of remedies to bankruptcy laws and
general equitable principles and the discretion of courts in granting equitable
remedies.
3. Each Corporate Guarantor is a corporation 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 in the jurisdiction specified
with respect to each such Corporate Guarantor on Schedule IV hereto. Each
Partnership Guarantor is a limited partnership validly existing and in good
standing under the laws of its respective state of formation.
4. Each of the Loan Documents to which each Guarantor is a party has been
duly authorized and executed and delivered by such Guarantor.
<PAGE>
NationsBank, National Association, as Agent
and each of the Lenders Party to the
Credit Agreement Referenced Below
April 28, 1998
Page 5
5. The Modification of BREED Mortgage has been duly authorized and executed
and delivered by BREED. The Modification of Florida Mortgage has been duly
authorized and executed and delivered by BREED Florida.
6. 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 charter or bylaws of BREED or
any Guarantor, (ii) any laws, rules or regulations applicable to BREED or any
other Guarantor, (iii) any contract listed on Schedule V hereto, or (iv) to my
knowledge, any 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
under any contract listed on Schedule V hereto, except for the Liens in your
favor expressly created pursuant to the Loan Documents.
7. Except as disclosed in the Loan Documents, to my knowledge there is no
pending or threatened action, suit, investigation or proceeding (including,
without limitation, any action, suit, investigation, or proceeding under any
environmental or labor law), 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.
My 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. My 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),
<PAGE>
NationsBank, National Association, as Agent
and each of the Lenders Party to the
Credit Agreement Referenced Below
April 28, 1998
Page 6
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>
SCHEDULE I
----------
CORPORATE GUARANTORS
--------------------
<TABLE>
<CAPTION>
State of
Name Incorporation
- ------------------------------------------------------------------- -------------
<S> <C>
BREED Asian Holdings, Inc. (f/k/a AlliedSignal India, Inc.) Delaware
Artistic Analytical Methods, Inc. Michigan
Auto Trim, Inc. Texas
BREED Alabama, Inc. Alabama
BREED Arizona, Inc. Arizona
BREED Automotive of Florida, Inc. Florida
BREED Automotive Technology, Inc. Delaware
BREED Automotive West, Inc. Delaware
BREED International Manufacturing Development Corporation Delaware
BREED Manufacturing of Texas, Inc. Texas
BREED Nevada, Inc. Nevada
BTI Michigan, Inc. Michigan
BTI Tennessee, Inc. Tennessee
Force Imaging Technologies, Inc. Illinois
Hamlin, Incorporated Delaware
Innovative Mim Technologies, Inc. Delaware
BREED Steering Systems, Inc. (f/k/a United Steering Systems, Inc.) Delaware
</TABLE>
<PAGE>
SCHEDULE II
-----------
PARTNERSHIP GUARANTORS
----------------------
State of
Name Formation
- -------------------------------- ---------
BREED Automotive, L.P. Delaware
BREED Tennessee Holdings, L.P. Delaware
<PAGE>
SCHEDULE III
------------
STATE AUTHORITY CERTIFICATES
----------------------------
Artistic Analytical Methods, Inc.
- ---------------------------------
State of Michigan, Good Standing, September 29, 1997
BREED Automotive, L.P.
- ----------------------
State of Delaware
BREED International Manufacturing Development Corporation
- ---------------------------------------------------------
State of Delaware, Good Standing, September 29, 1997
State of Florida, Good Standing, September 29, 1997
BREED Tennessee Holdings, L.P.
- ------------------------------
State of Delaware, Good Standing, September 29, 1997
State of Tennessee, Good Standing, September 29, 1997
BREED Manufacturing of Texas, Inc.
- ----------------------------------
State of Texas, Good Standing, September 29, 1997
BTI Michigan, Inc.
- ------------------
State of Michigan, Good Standing, September 29, 1997
BREED Nevada, Inc.
- ------------------
State of Nevada, Good Standing, September 29, 1997
BTI Tennessee, Inc.
- -------------------
State of Tennessee, Good Standing, September 29, 1997
Force Imaging Technologies, Inc.
- --------------------------------
State of Illinois, Good Standing, September 29, 1997
BREED Technologies, Inc.
- ------------------------
State of Delaware, Good Standing, September 29, 1997
State of Ohio, Good Standing, September 29, 1997
State of Florida, Good Standing, September 29, 1997
State of Michigan, Good Standing, September 29, 1997
State of New Jersey, Good Standing, September 29, 1997
State of Texas, Good Standing, September 29, 1997
Auto Trim, Inc.
- ---------------
State of Texas, Good Standing, September 29, 1997
<PAGE>
Innovative MIM Technologies, Inc.
- ---------------------------------
State of Delaware, Good Standing, September 29, 1997
State of California, Certificate of Status, September 29, 1997
State of Colorado, Good Standing, September 26, 1997
State of Florida, Good Standing, September 29, 197
State of Georgia, Certificate of Existence, September 29, 1997
State of Illinois, Good Standing, September 29, 1997
State of Michigan, Good Standing, September 29, 1997
State of Ohio, Good Standing, September 29, 1997
State of Texas, Good Standing, September 29, 1997
State of Utah, Good Standing, September 29, 1997
BREED Automotive Technology, Inc.
- ---------------------------------
State of Delaware, Good Standing, September 29, 1997
State of Michigan, Good Standing, September 29, 1997
BREED Automotive of Florida, Inc.
- ---------------------------------
State of Florida, Good Standing, September 29, 1997
BREED Automotive West, Inc.
- ---------------------------
State of Delaware, Good Standing, September 29, 1997
State of Nevada, Certificate of Existence with Status in Good Standing,
September 29, 1997
BREED Asian Holdings, Inc. (f/k/a AlliedSignal India, Inc.)
- -----------------------------------------------------------
State of Delaware, Good Standing, September 29, 1997
BREED Steering Systems, Inc. (f/k/a United Steering Systems, Inc.)
- ------------------------------------------------------------------
State of Delaware, Good Standing, September 29, 1997
State of Indiana, Certificate of Authorization, September 29, 1997
State of Michigan, Good Standing, September 29, 1997
State of Ohio, Good Standing, September 29, 1997
BREED Alabama, Inc.
- -------------------
State of Alabama, Good Standing, September 29, 1997
Hamlin, Incorporated
- --------------------
State of Delaware, Good Standing, September 29, 1997
State of Wisconsin, Good Standing, September 30, 1977
BREED Arizona, Inc.
- -------------------
State of Arizona, Good Standing, October 1, 1997
<PAGE>
SCHEDULE IV
-----------
FOREIGN QUALIFICATIONS
----------------------
Status of Foreign
Name Qualification
- ---------------------------------- -----------------
BREED Asian Holdings, Inc. (f/k/a None
AlliedSignal India, Inc.)
Artistic Analytical Methods, Inc. None
Auto Trim, Inc. None
BREED Alabama, Inc. None
BREED Arizona, Inc. None
BREED Automotive of Florida, Inc. None
BREED Automotive Technology, Inc. Michigan
BREED Automotive West, Inc. Nevada
BREED International Manufacturing Florida
Development Corporation
BREED Manufacturing of Texas, Inc. None
Breed Nevada, Inc. None
BTI Michigan, Inc. None
BTI Tennessee, Inc. None
Force Imaging Technologies, Inc. None
Innovative MIM Technologies, Inc. California, Colorado,
Florida, Georgia,
Illinois, Michigan,
Ohio, Texas, Utah
BREED Steering Systems, Inc. (f/k/a Indiana, Michigan,
United Steering Systems, Inc.) Ohio
<PAGE>
SCHEDULE V
----------
CONTRACTS
---------
1. Agreement and Plan of Merger dated August 3, 1994, by and among Hamlin,
Incorporated, the Company and a subsidiary of the Company.
2. Stock Purchase Agreement dated as of May 31, 1996, by and between the
Company and Felt Products Mfg. Co.
3. Stock Purchase Agreement dated as of April 22, 1996, by and among the
Company, Alberto Zucchelli and Andrea Zucchelli.
4. Stock Purchase Agreement dated as of March 29, 1996, by and among the
Company, Mercury Holdings S.A., AGOM CHUR S.A., HIRGIZ S.A., Purfleet
Investments Ltd. and Coquira Industrial Inc.
5. Stock Purchase Agreement dated as of March 29, 1996, by and among the
Company, Mercury Holdings S.A., AGOM CHUR S.A., HIRGIZ S.A. and Purfleet
Investments Ltd.
6. Master Agreement dated as of July 1, 1996, by and among the Company,
IAO-Industrie Riunite S.p.A., Gallino Componenti Plastici S.p.A., Carifin
S.p.A., Macchi Arturo S.r.l., Gruppo Plastico Industriale S.r.l. and Emilio
Cassaniga.
7. Amended and Restated Purchase Agreement dated as of October 25, 1996, by
and among the Company, UT Automotive, Inc., United Technologies Automotive
Systems, Inc., United Technologies Automotive Systems de Mexico S.A. de
C.V. and IPCO, Inc.
8. Stock Purchase Agreement, dated as of October 14, 1997, between Siemens
AktiengesellSchaft, a German company, and the Company.
9. Joint Venture Agreement, between Siemens Aktiengesell-Schaft, a German
company, and BREED.
<PAGE>
EXHIBIT S-2
Form of Opinion of King & Spalding
[See attached.]
S-3-1
<PAGE>
Exhibit S-2
April 28, 1998
NationsBank, National Association, as Agent,
and each of the Lenders party to the
Restated Credit Agreement referred to below
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Re: Breed Technologies, Inc. - Term Loan Facilities and Revolving Credit
Facility
Ladies and Gentlemen:
We have acted as special New York counsel for Breed Technologies, Inc., a
Delaware corporation (the "Company"), in connection with the Amended and
Restated Credit Agreement, dated as of April 28, 1998 (the "Restated Credit
Agreement"), by and among the Company, certain Subsidiaries of the Company
designated as Borrowers, NationsBank, National Association, as Agent, and the
Lenders party thereto, which provides for Term Loan Facilities in an aggregate
principal amount of $525,000,000, and a Revolving Credit Facility in an
aggregate principal amount of up to $150,000,000, including a $25,000,000
sublimit for a Letter of Credit Facility, a $75,000,000 sublimit for Alternative
Currency denominated borrowings and a $20,000,000 sublimit for Swing Line Loans.
This opinion is being rendered pursuant to Section 7.1 of the Restated Credit
Agreement. Unless the context otherwise requires, all capitalized terms used in
this opinion and not otherwise defined shall have the meanings ascribed to such
terms in the Restated Credit Agreement.
In our capacity as such counsel, we have reviewed (a) the Restated Credit
Agreement, (b) the Notes (together with the Restated Credit Agreement, the
"Transaction Documents"), (c) the certificate of incorporation and bylaws of the
Company, (d) the certificates listed on Schedule I hereto, and (e) certified
copies of the resolutions of the board of directors of the Company authorizing,
among other things, the execution, delivery and performance by the Company of
its obligations under the Transaction Documents.
We have also reviewed such matters of law and examined original, certified,
conformed or photographic copies of such other documents, instruments, records,
agreements and certificates as we have deemed necessary as a basis for the
opinions hereinafter expressed. In such review we have assumed the genuineness
of signatures on all documents submitted to us as
<PAGE>
NationsBank, National Association
April 28, 1998
Page 2
originals and the conformity to original documents of all copies submitted to us
as certified, conformed or photographic copies, and, as to certificates of
public officials, we have assumed the same to be accurate and to have been given
properly. We have relied, as to the matters set forth therein, on certificates
and telegrams of public officials.
We have assumed that the execution and delivery of, and the performance of
all obligations under, the Transaction Documents have been duly authorized by
all requisite action by each party thereto other than the Company, and that such
documents have been duly executed and delivered by, and are valid and legally
binding obligations of, such parties, enforceable against such parties in
accordance with their respective terms.
As to certain matters of fact material to this opinion, we have relied,
without independent verification, (i) on the representations and warranties of
the Company in the Restated Credit Agreement and (ii) on certificates of
officers of the Company. Whenever our opinion in this letter is stated to be
based upon our knowledge or information "known to us," such qualification shall
signify that no information has come to the attention of the attorneys in our
firm who have given substantive attention to matters involving the Company or
any Subsidiary of the Company that would give them actual knowledge of the
existence or absence of such matter in question. In addition, except to the
extent expressly set forth in this opinion, we have not undertaken any
independent investigation to determine the existence or absence of the matter in
question, and no inference as to our knowledge of such existence or absence
should be drawn from our representation of the Company.
This opinion is limited in all respects to the federal laws of the United
States of America, the laws of the State of New York and the General Corporation
Law of the State of Delaware, and no opinion is expressed with respect to the
laws of any other jurisdiction or any effect which such laws may have on the
opinions expressed herein. This opinion is limited to the matters stated herein,
and no opinion is implied or may be inferred beyond the matters expressly stated
herein.
Based upon the foregoing, and the other limitations and qualifications set
forth herein, we are of the opinion that:
(i) The Company is a corporation validly existing in good standing
under the laws of the State of Delaware, and is duly qualified to
transact business as a foreign corporation in the States of Ohio,
Florida, Michigan, New Jersey and Texas, with the corporate power and
authority under the General Corporation Law of the State of Delaware to
own, lease and operate its properties and conduct the businesses in
which it is now engaged and as are expressly contemplated by the
Transaction Documents, and to execute, deliver and perform its
obligations under the Transaction Documents.
<PAGE>
NationsBank, National Association
April 28, 1998
Page 3
(ii) Each of the Transaction Documents has been duly authorized,
executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms.
(iii) The execution, delivery and performance of the Transaction
Documents by the Company (a) do not and will not result in any violation
of the certificate of incorporation or bylaws of the Company, (b) do not
and will not result in any breach of any of the terms or provisions of,
or constitute a default under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company under, (1) the Stock Purchase Agreement, dated as of October 14,
1997, between Siemens and the Company, (2) the Siemens Joint Venture
Agreement, (3) the Indenture, dated as of April 28, 1998, between the
Company and IBJ Schroder Bank & Trust Company, as Trustee, under which
the Senior Subordinated Notes were issued, (4) the Indenture, dated as
of November 25, 1997, between the Company and Wilmington Trust Company,
as Indenture Trustee, under which the Convertible Debentures were
issued, or (5) any contract, indenture, mortgage, loan agreement, note,
lease or other instrument in any such case filed (or incorporated by
reference) as an exhibit to the Company's Annual Report on Form 10-K for
the year ended June 30, 1997, except for the Liens created under the
Loan Documents, and (c) do not and will not result in a violation of (1)
any existing material law, rule or regulation applicable to the Company
or (2) any judgment, order, writ, injunction or decree known to us of
any governmental authority or court having jurisdiction over the
Company.
(iv) Assuming the accuracy of the representations and warranties of
the Company in Section 8.15 of the Restated Credit Agreement, no
authorization, approval, consent or order of, notice to, license from,
or filing with, any Governmental Authority is required for the
execution, delivery and performance of the Transaction Documents by the
Company, except such as have been obtained or made on or prior to the
date hereof.
(v) Except as disclosed in the Transaction Documents, to our
knowledge, no legal or governmental proceedings are threatened or
pending to which the Company is a party or to which the property of the
Company is subject, that, if determined adversely to the Company, (a)
would call into question the ability of the Company to perform its
obligations under the Transaction Documents or (b) would reasonably be
expected to have a Material Adverse Effect.
The opinions set forth above are subject to the following
qualifications:
<PAGE>
NationsBank, National Association
April 28, 1998
Page 4
(a) The opinion in paragraph (i) above as to the good standing of
the Company under the laws of the State of Delaware and the due
qualification of the Company to transact business as a foreign
corporation in the States of Ohio, Florida, Michigan, New Jersey and
Texas is based solely upon the information contained in the certificates
listed on Schedule I hereto.
--------
(b) We refer you to the fact that the parties to the Restated
Credit Agreement have agreed that the Transaction Documents be governed
by the law of the State of Florida. The opinion expressed in paragraph
(ii) above that each of the Transaction Documents constitute the legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, does not purport to express an
opinion as to the laws of the State of Florida. Rather, such opinion
should be read to mean that if a court were to hold that the Transaction
Documents are governed by, and to be construed in accordance with, the
laws of the State of New York, such documents would constitute, under
the laws of the State of New York, the legal, valid and binding
obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject, however, to the
following limitations:
(1) the enforceability of such documents is subject to
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, general equitable principles
and the discretion of courts in granting equitable remedies;
(2) we note further that, in addition to the application of
equitable principles described in the immediately preceding
paragraph, courts have imposed an obligation on contracting parties
to act reasonably and in good faith in the exercise of their
contractual rights and remedies;
(3) we express no opinion with respect to the enforceability
of any provision of the Transaction Documents providing for a
choice of law or the selection, or submission to the jurisdiction,
of any forum for the resolution of any dispute or controversy;
(4) we express no opinion as to the enforceability of the
indemnification provisions set forth in the Transaction Documents
to the extent enforcement thereof is contrary to (x) public policy
or (y) laws limiting the enforceability of provisions exculpating
or exempting a party, or requiring indemnification of a party for,
liability for its own action or inaction, to the
<PAGE>
NationsBank, National Association
April 28, 1998
Page 5
extent the action or inaction involves negligence, bad faith,
recklessness, willful misconduct or unlawful conduct;
(5) we express no opinion as to (a) Section 13.3(a) of the
Restated Credit Agreement insofar as it authorizes each Lender to
setoff and apply any deposits at any time held, and any other
indebtedness at any time owing, by such Lender to or for account of
any Borrower, (b) Section 13.3(b) of the Restated Credit Agreement
insofar as it provides that any Person purchasing a participation
from a Lender may exercise setoff or similar rights with respect to
such participation, (c) the enforceability of provisions purporting
to grant to a party conclusive rights of determination, (d) the
availability of specific performance or other equitable remedies,
(e) the enforceability of rights to indemnity under federal or
state securities laws, (f) the enforceability of waivers by parties
of their respective rights and remedies under law, or (g) the
effect of the laws of any jurisdiction in which any Lender is
located (other than New York) that limits the interest, fees or
other charges it may impose;
(6) we express no opinion with respect to the enforceability
of any provision of the Transaction Documents providing for
indemnity by one party to any other party against any loss in
obtaining the currency due to such party under the Transaction
Documents from a judgment or order given or made by any court for
the payment of any amount in another currency;
(7) the enforceability of any provision of the Transaction
Documents to the effect that terms may not be waived or modified
except in writing may be limited under certain circumstances; and
(8) certain other provisions of the Transaction Documents are
or may be unenforceable in whole or in part, but the inclusion of
such provisions does not affect the validity of such documents, and
each such document contains adequate provisions for the practical
realization of the rights and benefits afforded thereby.
This opinion is furnished by us on behalf of the Company solely for the
benefit of the Agent and the Lenders from time to time party to the Restated
Credit Agreement in connection with the transactions contemplated by the
Transaction Documents, and it is not to be quoted in whole or in part or
otherwise referred to (other than in connection with the transactions
contemplated by the Transaction Documents), nor is it to be filed with any
governmental agency
<PAGE>
NationsBank, National Association
April 28, 1998
Page 6
or any other person, and no person or entity other than the Company, the Agent
and the Lenders from time to time party to the Restated Credit Agreement shall
be entitled to rely upon this opinion without our express written consent. This
opinion is given as of the date hereof, and we assume no obligation to advise
you after the date hereof of facts or circumstances that come to our attention
or changes in law that occur that could affect the opinions contained herein.
Very truly yours,
PF:MB:smk
<PAGE>
SCHEDULE I
1. Certificate of the Secretary of State of the State of Delaware, dated April
16, 1998, as to the good standing of the Company.
2. Certificate of the Secretary of State of the State of Ohio, dated April 17,
1998, as to the qualification of the Company to do business in such State.
3. Certificate of the Secretary of State of the State of Florida, dated April
17, 1998, as to the qualification of the Company to do business in such
State.
4. Certificate of the Secretary of State of the State of Michigan, dated April
23, 1998, as to the qualification of the Company to do business in such
State.
5. Certificate of the Secretary of State of the State of New Jersey, dated
April 17, 1998, as to the qualification of the Company to do business in
such State.
6. Certificate of the Secretary of State of the State of Texas, dated April
16, 1998, as to the qualification of the Company to do business in such
State.
<PAGE>
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 Amended and Restated Credit Agreement dated
as of April 28, 1998 (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. Schedule I attached hereto sets forth calculations with respect to various
covenants contained in the Agreement, which calculations are true and correct.
[TO BE INSERTED]
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 XI 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").
T-1
<PAGE>
The Determination Date is the date of the last required financial
statements submitted to the Lenders in accordance with Section 9.1 of the
-----------
Agreement.
IN WITNESS WHEREOF, I have executed this Certificate this _____ day of
__________, 19___.
By:
--------------------------------
Authorized Representative
Name:
------------------------------
Title:
-----------------------------
T-2
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
10.1(a) Consolidated Net Worth ($ in actual amount) Four Quarters
Ended
1998
----
<S> <C>
Covenant: Amount to be no less than the $ sum of:
$235,000,000 $
Plus: 85% of Consolidated Net Income beginning 6/30/98
--------------
100% of Net Proceeds of any Equity Offering
--------------
Variance $
==============
Compliance Status _____ Yes _____ No
<CAPTION>
10.1(b) Consolidated Fixed Charge Ratio ($ in actual amount) Four Quarters
Ended
1998
----
<S> <C>
Consolidated Net Income (loss) $
Plus: Consolidated Interest Expense
Taxes on income
Amortization
Depreciation
One time charges: (i) Repositioning costs to be Less
than $395,000,000 in FY98
(ii) Cash disruption costs to be Less
than $20,000,000 in FY98 and
$30,000,000 in FY99
(iii) pro forma annualized costs savings
in excess of $35,000,000 in FY 1998
Minus: Gains or losses on capital assets
Gain or loss on capital stock or other securities of
BREED or its Subsidiaries
Net gains on life insurance policies
Write-up of any asset not in accordance with FASB 16
Extraordinary net gain or loss in accordance with GAAP
--------------
=Consolidated EBITDA $
Less: Consolidated Capital Expenditures *
--------------
=Numerator $
==============
Consolidated Cash Interest Expense $
Plus: Restricted Payments
Required principal payments
Investments in BSRS Restraints in excess amount
permitted in 10.6(j)
--------------
=Denominator $
==============
Consolidated Fixed Charge Coverage
--------------
Covenant 1.00
--------------
Variance
==============
</TABLE>
* Does not include Excluded Capital Expenditures.
T-3
<PAGE>
Compliance Status _____ Yes _____ No
10.1(c) Consolidated Interest Coverage Ratio ($ in actual
amount) Four Quarters
Ended
1998
----
Consolidated EBITDA $
--------------
=Numerator $
==============
Consolidated Cash Interest Expense
--------------
=Denominator $
==============
Consolidated Interest Coverage Ratio
--------------
Covenant 1.75
--------------
Variance
==============
Compliance Status _____ Yes _____ No
10.1(d) Consolidated Leverage Ratio ($ in actual amount) Four Quarters
Ended
1998
----
Consolidated Indebtedness: $
Revolver outstandings
Plus: LC's outstandings
Swing Line outstandings
Term Loan outstandings
Senior Subordinated Notes
Capital Leases
Other Indebtedness
Contingent Obligations
--------------
=Numerator $
==============
Consolidated EBITDA
--------------
=Denominator $
==============
Consolidated Leverage Ratio
--------------
Covenant 5.75
--------------
Variance
==============
Compliance Status _____ Yes _____ No
10.1(e) Consolidated Capital Expenditures *
Consolidated Capital Expenditures for Fiscal
Year to date $
--------------
Cannot exceed $100,000,000
Compliance Status _____ Yes _____ No
T-4
<PAGE>
10.4(k) Consolidated Indebtedness as of the Closing Date in
Schedule 8.6 ($ in actual amount)
Actual Outstanding Indebtedness of Foreign Subsidiaries $
Covenant: Outstanding amount not to exceed $140,000,000 $ 150,000,000
--------------
Variance $
==============
Compliance Status _____ Yes _____ No
Proviso:
Total debt in (a), (j) and (k) in 10.4 not to exceed
$160,000,000
10.4(a) Indebtedness $
10.4(j) Indebtedness
10.4(k) Indebtedness
--------------
Total $
Covenant: Not to exceed $160,000,000 $ 160,000,000
--------------
Variance
==============
Compliance Status _____ Yes _____ No
10.6(j) Loans and investments in BSRS Restraint ($ in actual
amount) Fiscal Year
Ended
1998
----
Actual loans and investments in BSRS Restraint $
Covenant: Amount not to exceed $2,000,000 in FY98 $ 2,000,000
--------------
Variance $
==============
Compliance Status _____ Yes _____ No
10.6(n) Additional loans and investments
Outstanding loans and investments in addition to those
permitted in clauses (g) through (k) of Section 10.6 $
Covenant: Not to exceed 10% of Consolidated Net Worth $
Consolidated Net Worth x 10% $
--------------
$
==============
Compliance Status _____ Yes _____ No
T-5
<PAGE>
<TABLE>
<CAPTION>
10.8(c) Restricted Payments ($ in actual amount) Four Quarters
Ended
1998
----
<S> <C>
Actual Restricted Payments $
Covenant: If Consolidated Leverage Ratio is Less than or equal
to 3.50 to 1.00 at the most recent Four Quarters
then ended, cash dividends of up to an aggregate
amount of $10,000,000 $ 10,000,000
Plus: 50% of Consolidated Net Income earned subsequent to the
Consolidated Leverage Ratio being Less than or equal to
3.50 to 1.00
--------------
Total Restricted Payments $
--------------
Variance $
==============
Compliance Status _____ Yes _____ No
10.19 BSRS Restraint
Covenant: Indebtedness of BSRS Restraint for which BREED is
liable cannot exceed $3,000,000.
Actual amount of Indebtedness of BSRS Restraint $
x .49
--------------
Amount for which BREED is liable $
--------------
Compliance Status _____Yes _____No
</TABLE>
T-6
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
Consolidated Applicable Margin for Applicable Margin for
Eurodollar Rate Loans Base Rate Loans
--------------------- ---------------------
Leverage Ratio Revolver Revolver
Tier (10.1[d]) and Term Loan A Term Loan B and Term Loan A Term Loan B
---------------------- ---------------------
<S> <C> <C> <C> <C> <C>
V Greater than 5.00 : 1.00 2 1/8% 2 3/8% 1 1/8% 1 3/8%
IV Less than or equal to 5.00 :
1.00 and Greater than 4.50 : 1.00 1 7/8% 2 1/8% 7/8% 1 1/8%
III Less than or equal to 4.50 :
1.00 and Greater than 4.00 : 1.00 1 5/8% 1 7/8% 5/8% 7/8%
II Less than or equal to 4.00 :
1.00 and Greater than 3.50 : 1.00 1 3/8% 1 3/4% 3/8% 3/4%
I Less than or equal to 3.50 : 1.00 1 1/8% 1 3/4% 1/8% 3/4%
</TABLE>
T-7
<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 Amended and Restated Credit Agreement dated as
of April 28, 1998 (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 VIII 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."
U-1
<PAGE>
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 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 V 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;
U-2
<PAGE>
(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 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
U-3
<PAGE>
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 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:
U-4
<PAGE>
(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.
(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
U-5
<PAGE>
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.
------------------------------
U-6
<PAGE>
(i) Without limiting the provisions of Section 13.14 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 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]
U-7
<PAGE>
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:
----------------------------
U-8
<PAGE>
EXHIBIT "A"
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To NationsBank, National Association
as Agent (the "Agent") under the Credit
Agreement Described Below
RE: Amended and Restated Credit Agreement dated as of April 28, 1998 (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 Entity"), provided, however, that the Agent may
otherwise transfer funds as hereafter directed in writing by the Borrowing
Entity in accordance with Section 13.2 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)
U-9
<PAGE>
EXHIBIT V
Form of Applications and Agreements for Letters of Credit
V-1
<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
BREED R.F., GmbH Germany
S-1
<PAGE>
Schedule 1.1(c)
---------------
Existing Letters of Credit
NATIONSBANK OF TEXAS
INTERNATIONAL TRADE SERVICES
P.O. BOX 830483
DALLAS, TEXAS 75283-0483
DATE: MARCH 31, 1998
INVOICE OF FEES & EXPENSES LETTER OF CREDIT OFFICER: DEARDEN, MILES
CUST NO: 0039038
BREED TECHNOLOGIES, INC.
ATTN; ARTHUR R. SCHAUFFETT
P.O. BOX 33050
LAKELAND, FL 33807-3050
- --------------------------------------------------------------------------------
TRANSACTION OR
CREDIT DATE
<TABLE>
<CAPTION>
FROM THRU AMOUNT OF CHG.
DATE DATE DAYS L/C NO. ISSUING BANK CREDIT CODE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1/1/98 1/1/98 1 L921177 ISTITUTO BAUCARIO $3,908,173.84 50
1/2/98 3/31/98 89 $3,338,962.71 50
2/24/98 30
2/24/98 70
1/1/98 1/1/98 1 L921308 BANKINTER $3,445,405.48 50
1/2/98 3/31/98 89 $3,314,052.18 50
2/6/98 30
2/6/98 70
2/6/98 5
1/1/98 1/1/98 1 L921309 DEUTSCHE BANK AG $ 639,297.45 50
1/2/98 1/22/98 21 $ 561,387.78 50
1/23/98 3/31/98 68 $1,107,507.59 50
1/23/98 30
1/23/98 70
1/1/98 1/1/98 1 L970204 CREDITANO ITALIAN $2,751,767.91 50
1/2/98 2/27/98 57 $2,703,442.16 50
1/1/98 3/31/98 90 L970237 JIN HENG AIRBAG L $ 110,000.00 50
1/30/98 3/31/98 61 L972009 CONTENENTAL CASUALTY $ 394,190.00 50
1/30/98 29
2/23/98 3/31/98 37 L972191 FERRO VAZ GESELLS $ 374,850.00 50
</TABLE>
- --------------------------------------------------------------------------------
S-2
<PAGE>
Schedule 8.4
Subsidiaries and Investments in Other Persons
---------------------------------------------
<PAGE>
SCHEDULE 8.4 - SUBSIDIARIES and CAPITALIZATION
<TABLE>
<CAPTION>
TOTAL NUMBER OF SHARES OWNERSHIP
COMPANY/SUBSIDIARY OF CAPITAL STOCK (Number of Shares Issued/Company)
AUTHORIZED
<S> <C> <C>
BREED Technologies, Inc. 75,000,000 Common Stock 36,659,107 Common Stock as of 3/31/98
("BTI") 5,000,000 Preferred Stock
BREED Automotive of Florida, Inc. 3,000 shares/ 100% owned by BTI (100 Shares)
("BAFI") $1.00 par value
Productos Electro-Mecanicos BAC, S.A. 10,000 shares of Series A Series A Series B
de C.V. ("PEBAC") 10,000,000 shares of Series B -------- --------
1,000 pecos par value 9,996 owned by BTI 9,490,000 owned by BTI
1 owned by BATI
1 owned by BALP
2 owned by BAFI
BREED Mexicana, S.A. de C.V. 10,000 shares of Series A Series A Series B
12,690,000 shares of Series B -------- --------
1,000 pecos par value 9,996 owned by BTI 12,690,000 owned by BTI
1 owned by BATI
1 owned by BALP
2 owned by BAFI
BREED Automotive Technology, Inc. 3,000 shares/ 100% owned by BTI (1,000 Shares)
("BATI") $1.00 par value
BREED Manufacturing of Texas, Inc. 1,000 shares/ 100% owned by BTI (1,000 Shares)
("BMTI") $1.00 par value
BREED International, Inc. 2,500 shares/ 100% owned by BTI (1,000 shares)
no par value
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL NUMBER OF SHARES OWNERSHIP
COMPANY/SUBSIDIARY OF CAPITAL STOCK (Number of Shares Issued/Company)
AUTHORIZED
<S> <C> <C>
BREED Italia, S.r.l. 27,000,000 quotas stated capital 92% owned by BTI
No stock certificates 8% owned by Carfin, S.p.A
BREED Technik, GmbH 500,000 DM stated capital 100% owned by BTI
BTI Assurance Group, Ltd. 120,000 shares/ 100% owned by BTI (120,000 Shares)
("BAG") $1.00 par value
BREED Automotive West, Inc. ("BAWI") 1,000 shares/ 100% owned by BMTI (1,000 Shares)
$1.00 par value
BREED Automotive, L.P. No Stock 99% owned by BAWI
("BALP") 1% owned by BMTI
BREED International Manufacturing 1,000 shares/ 100% owned by BTI (1,000 Shares)
Development Corporation $1.00 par value
("BIMDC")
Hamlin, Incorporated 100 shares/ 100% owned by BTI (100 Shares)
("Hamlin") $1.00 par value
(August 31, 1994)
Hamlin Electronics GmbH 50,000 DM stated capital 100% owned by Hamlin
Hamlin Electronics Europe Limited 6,000,000 shares/ 5,004,349 owned by Hamlin
(pound)1 per ordinary share
Hamlin, S.A., de C.V. 250 shares 250 owned by Hamlin
1,000 pecos par value
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPANY/SUBSIDIARY TOTAL NUMBER OF SHARES OWNERSHIP
OF CAPITAL STOCK (Number of Shares Issued/Company)
AUTHORIZED
<S> <C> <C>
Hamlin Sarl 20,000 francs of 200 parts 199 parts owned by Hamlin
authorized capital 1 part owned by Falk-Ingo Krommes
Elec-Trol, Inc. 1,000 shares/ 100% owned by Hamlin (100 Shares)
$1.00 par value
Elec-Trol de Mexico, S.A. de C.V. 1,000 shares 996 owned by Hamlin
4 owned by Electrol, Inc.
BREED Technologies Finland OY 60,000 shares 100% owned by BTI (60,000 Shares)
VTI Hamlin Oy f/k/a Vaisala 89,000 shares 100% owned by BTF (89,000 Shares)
Technologies, Inc. OY
(June 16, 1995)
Italtest, S.r.l. Capital Stock 500,000,000 Lit. 100% owned by BTI
(April 22, 1996)
Italtest Due S.r.l. Capital Stock 20,000,000 Lit. 100% owned by BTI
(April 22, 1996)
Force Imaging Technologies, Inc. 200 shares/ 100% owned by BTI (200 Shares)
(May 31, 1996) $0 par value
Momo, S.p.A. 1,500,000 shares/quotas 100% owned by BTI
(March 29, 1996) Lit 10,000 par value
. Decemviri, S.r.l. 20,000 shares/quotas 100% owned by Momo, S.p.A.
Lit 1,000 par value
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL NUMBER OF SHARES OWNERSHIP
COMPANY/SUBSIDIARY OF CAPITAL STOCK (Number of Shares Issued/Company)
AUTHORIZED
<S> <C> <C>
. Momo Corse, S.r.l. 150,000 shares/quotas 96% owned by Momo, S.p.A.
Lit 1,000 par value 4% owned by Agostino Alberghino
. Momo Design, S.r.l. 190,000 shares/quotas 100% owned by Momo, S.p.A.
Lit 1,000 par value
. Momo Hungharia, Kft 1,215 shares/quotas 79% owned by Momo, S.p.A.
Lit 10,000 20% owned by Aranykalasz (Hungarian Co-op)
1% owned by Kolonics Tibor
. Momo USA, Inc. 1,000 shares 100% owned by Momo, S.p.A.
$.01 par value
. Mowest, Inc. 1,000 shares 100% owned by Momo USA, Inc.
$1.00 par value
G Holding, S.r.l. 20,000 shares/quotas 100% owned by BTI
Lit 1,000 par value
. Arpel Rivestimenti, S.r.l. 20,000 shares/quotas 67% owned by G Holding, S.r.l.
Lit 1,000 par value 33% owned by Turco Ermenegildo
. Arte Pelle, S.r.l. 20,000 shares/quotas 80% owned by G Holding, S.r.l.
Lit 1,000 par value 20% owned by Fiocco Corrado
. Autotop Rivestimenti, S.r.l. 20,000 shares/quotas 67% owned by G Holding, S.r.l.
Lit 1,000 par value 33% owned by Turco Ermenegildo
. CLP, S.r.l. 50,000 shares/quotas 80% owned by G Holding, S.r.l.
Lit 1,000 par value 20% owned by Fiocco Corrado
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL NUMBER OF SHARES OWNERSHIP
COMPANY/SUBSIDIARY OF CAPITAL STOCK (Number of Shares Issued/Company)
AUTHORIZED
<S> <C> <C>
. CRV, S.r.l. 20,000 shares/quotas 80% owned by G Holding, S.r.l.
Lit 1,000 par value 20% owned by Turco Ermenegildo
. Due LM, S.r.l. 20,000 shares/quotas 80% owned by G Holding, S.r.l.
Lit 1,000 par value 20% owned by Soave Gino
. Hobby Legno, S.r.l. 99,000 shares/quotas 75% owned by G Holding, S.r.l.
Lit 1,000 par value 25% owned by Fortini Daniela
. L.A.M.M., S.r.l. 99,000 shares/quotas 70% owned by G Holding
Lit 1,000 par value 30% owned by Aprili Gianpaolo
. L.T.M., S.r.l. 60,000 shares/quotas 75% owned by G Holding, S.r.l.
Lit 1,000 par value 20% owned by Aprili Gianpao;o
1.66% owned by Giancarlo Zusi
1.67% owned by Giuseppe Lerco
1.67% owned by Egidio Zappelli
. Scaligera, S.r.l. 20,000 shares/quotas 80% owned by G Holding, S.r.l.
Lit 1,000 par value 20% owned by Fiocco Corrado
. Selva, S.r.l. 20,000 shares/quotas 80% owned by G Holding, S.r.l.
Lit 1,000 par value 20% owned by Fiocco Corrado
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL NUMBER OF SHARES OWNERSHIP
COMPANY/SUBSIDIARY OF CAPITAL STOCK (Number of Shares Issued/Company)
AUTHORIZED
<S> <C> <C>
. Union, S.r.l. 20,000 shares/quotas 51% owned by G Holding, S.r.l.
Lit 1,000 par value 17.25% owned by Marani Bruno
12.25% owned by Lauretta Cappelletti
12.25% owned by Bruna Cappelletti
12.25% owned by Renato Stoppele
BREED European Holdings, Ltd. 1,000 shares 100% owned by BTI (100 Shares)
("BEHL") (pound)1 par value
. Gallino Plasturgia, S.r.l. 20,000 shares/quotos 98% owned by BEHL
(July 1, 1996) Lit 1,000 par value 2% owned by BTI
. FAS, S.p.A. 3,300,000 shares 98% owned by BEHL
Lit. 1,000 par value 2% owned by BTI
. A.P. Co., S.r.l. Paid in Capital - Lit. 8,100,000,000 98% owned by BEHL
Nominal Value - Lit. 7,938,000,000 2% owned by BTI
BTI - Lit. 162,000,000
. Iron Sud, S.r.l. 230,000 shares 98% owned by BEHL
Lit. 10,000 par value 2% owned by BTI
BREED Steering Systems, Inc. f/k/a 1,000 Shares 100% owned by BTI (1,000 Shares)
United Steering Systems, Inc. $1.00 par value
(October 25, 1996)
BREED Steering Systems Limited f/k/a 3,000,000 Shares 2,586,849 owned by BEHL
United Steering Systems Clifford (pound)1.00 par value
Limited
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL NUMBER OF SHARES OWNERSHIP
COMPANY/SUBSIDIARY OF CAPITAL STOCK (Number of Shares Issued/Company)
AUTHORIZED
<S> <C> <C>
Innovative Mim Technologies, Inc. 1,000 Shares 100% owned by BTI (1,000 Shares)
$1.00 par value
1224194 Ontario, Inc. 100 Shares 100% owned by BTI (100)
Custom Trim, Ltd. 1200 Shares Class A 121 Class A owned by 1224194 Ontario
(February 25, 1997) 1200 Shares Common 1,079 Common owned by 1224194 Ontario
No par value
Auto Trim, Inc. 10,000,000 Shares 1,000,000 - owned by BTI
$1.00 par value
Texmex Trim, Inc. 10,000 Shares 5,500 Shares - Oscar DelGado (Minority Ownership)
No Par Value 4,500 Shares - Auto Trim, Inc.
Trimmex de Mexico, S.A. de C.V. 1,000 Series B Shares 999 Series B - Auto Trim, Inc.
50,000 Pecos Authorized Capital 1 Series B - BREED Automotive, L.P.
Custom Trim de Mexico, S.A. de C.V. 5,000 Series B1 Shares 4,999 Series B1 - Auto Trim, Inc.
50,000 Pecos Authorized Capital 1 Series B1 - BREED Automotive, L.P.
Custom Trim Ltd. de Mexico, S.A. de 5,000 Series B1 Shares 4,999 Series B1 - Auto Trim, Inc.
C.V. 50,000 Pecos Authorized Capital 1 Series B1 - BREED Automotive, L.P.
Auto Trim de Mexico, S.A. de C.V. 4,000 Series A Shares 3,999 Series A - Auto Trim, Inc.
3,150,000 Series B1 Shares 1 Series A - BREED Automotive, L.P.
457,680 Series B2 Shares 3,150,000 Series B1 - Auto Trim, Inc.
50,000 Pecos Authorized Capital 457,680 Series B2 - Auto Trim, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL NUMBER OF SHARES OWNERSHIP
COMPANY/SUBSIDIARY OF CAPITAL STOCK (Number of Shares Issued/Company)
AUTHORIZED
<S> <C> <C>
BREED Alabama, Inc. 1,000 Shares 1,000 owned by BTI
$1.00 par value
BREED Arizona, Inc. 1,000 Shares 1,000 owned by BTI
$1.00 par value
BREED Automotive Safety Systems, SL 50,000 authorized capital 98% owned by BTI (1-49)
50 stockholdings 02% owned by BIMDC (50)
10.00 par value
BREED Nevada, Inc. 1,000 Shares 1,000 owned by BTI
$1.00 par value
BREED South America Safety Systems, R$10,000 (Reals) authorized capital 9,999 quotas to BTI
Ltda 10,000/quotas - R$1.00 par value 1 quota to BIMDC
No Stock Certificates
BREED Technologies France EURL 50,000 francs authorized capital 100% owned by BTI
BREED Tennessee Holdings, L.P. None 99% owned by BREED Nevada, Inc.
1% owned by BTI Tennessee, Inc.
BREED UK Limited 10,000,000 Shares 100% owned by BTI (2,000,000) shares)
1(pound)par value
BTI Michigan, Inc. 1,000 Shares 1,000 owned by BTI
$1.00 par value
BTI Tennessee, Inc. 1,000 shares 1,000 owned by BTI
$1.00 par value
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPANY/SUBSIDIARY TOTAL NUMBER OF SHARES OWNERSHIP
OF CAPITAL STOCK (Number of Shares Issued/Company)
AUTHORIZED
<S> <C> <C>
Artistic Analytical Methods, Inc. 35,000 shares Class A 100% owned by BTI (1 share Class A)
25,000 shares Class B
$1.00 par value
BREED Italian Holdings, S.r.l. 20,000,000 lire capital 100% owned by BTI
No Stock Certificates
BREED Asian Holdings, Inc. f/k/a 1,000 shares 100% owned by BTI (1,000 shares)
AlliedSignal India, Inc. $1.00 par value
BSRD Limited 1,023,000 shares 100% owned by BREED UK Limited
1(pound) par value (1,023,000 shares)
BREED Ruckhaltesysteme fur No Stock Certificates 100% owned by BTI
Fahrzeugsicherheit, GmbH f/k/a
ICSRD RF, GmbH
Sistemas BREED de Seguridad, S.A. de 3,000 Shares Series A 2,999 Series A owned by BTI
C.V. 391,142 Shares Series B 1 Series B owned by BIMDC
1.00 pecos par value 391,142 Series B owned by BTI
BREED Cinturones de Seguridad, S.A. de 500 shares Series A 499 Series A owned by BTI
C.V. 41,208,488 Series B 1 Series A owned by BIMDC
1.00 pecos par value 41,208,488 Series B owned by BTI
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME OF CORPORATION JOINT VENTURE INTEREST PERCENTAGE OF OWNERSHIP
<S> <C> <C>
VTI Hamlin Oy Akebono Vaitee, K.K. (Japan) Forty percent (40%)
BREED Technologies, Inc. Bag, S.p.A. (Italy) Thirty-three percent (33%)
Auto Trim, Inc. Petri Trim, LLC (Delaware)/Petri de Forty-nine percent (49%)
Mexico, S.A. de C.V. (Mexico)
BREED Technologies, Inc. Hankook Sheller (Japan) Thirty-three percent (33%)
BREED Asian Holdings, Inc. Jaybharat AlliedSignal, Ltd. (India) Fifty percent (50%)
BREED Technologies, Inc. Morton Bendix (Tennessee) Fifty percent (50%)
</TABLE>
<PAGE>
Schedule 8.6
------------
Indebtedness
None.
S-4
<PAGE>
Schedule 8.7
------------
Liens
-----
None.
S-5
<PAGE>
Schedule 8.10
-------------
LITIGATION
On April 16, 1998, the Company was served with a Complaint in the matter
of Takata corporation v. AlliedSignal, Inc., and BREED Technologies, Inc.,
(United States District Court, District of Delaware, case no. 98-94). The suit
alleges patent infringement on the part of AlliedSignal and BREED relating to
the production of two seat belt retractors formerly manufactured by AlliedSignal
and not manufactured by BREED. The suit seeks monetary damages and injunctive
relief. Under the Asset Purchase Agreement relating to the SRS Acquisition,
AlliedSignal will be required to indemnify the Company (on a net after tax
basis) against any monetary damages incurred by the Company in connection with
this lawsuit, including any reasonable royalties that might be paid in respect
to sales made through February, 2000. Pursuant to the Asset Purchase Agreement,
AlliedSignal will vigorously defend the matter.
S-6
<PAGE>
Schedule 8.19
Labor and Collective Bargaining Agreements
------------------------------------------
<PAGE>
LABOR and COLLECTIVE BARGAINING AGREEMENTS
------------------------------------------
1. Agreement Between UT Automotive, Inc. of Grabill, Indiana (assumed under
BREED Technologies, Inc., effective October 25, 1996 upon acquisition of
asset purchase)
2. Annual Domestic Agreement between the Company and the Hourly-Paid
Employees, represented by the Amalgamated Union of Engineering Workers
(assumed under BREED Technologies, Inc., effective October 25, 1996 upon
acquisition of asset purchase)
3. Agreement between PRODUCTOS ELECTROMECANICOS BAC, S.A. DE C.V. AND THE
SINDICATO DE JORNALEROS Y OBREROS INDUSTRIALES Y DE LA INDUSTRIA DE
MAQUILADORA
4. Agreement between BREED MEXICANA S.A. DE C.V. AND MAQUILADORA INDUSTRY
DIRECT WORKERS OF THE MUNICIPALITY OF VALLE HERMOSA, TAMAULIPAS
5. Agreement between Trimmex and Sindicato Industrial de Trabajadores en
Plantas Maquiladoras, similares y Cenexos Del Municipio de Cd. Victoria,
TAM
6. Agreement between Auto Trim de Mexico and El Sindicato de Jornaleros y
Obreros Industriales y de La Industria Maquiladora
7. Agreement between Custom Trim Limited de Mexico and Sindicato de
Trabajadores de la Industria Maquiladora del Municipio de Valle Hermosa,
Tamps
8. Agreement between Custom Trim de Mexico 1 & 2 and Sindicato Industrial de
Trabajadores en Plantas Maquiladoras y Ensambladoras de Matamoros y su
Municipio
9. Agreement between Custom Trim and United Steelworkers of America on behalf
of its Local 1090
10. Agreement between Italtest, S.r.l. and the Italian Manufactures'
Association and with CGIL CISL VIL (a trade union organization.)
<PAGE>
11. Agreement between Breed Italia S.r.l. and C.N.L.M. (Contratto Nazionale
Lavoratori Metalmeccanici e installazione de impianti) on behalf of workers
and employees dated February 4 , 1997 and C.M.D.A.I. (Contratto Nazionale
Dirigenti Aziende Industriali) on behalf of managers and dated April 27,
1995.
12. Agreement between MOMO S.p.A. and Federmeccanica and trade unions F.I.M.-
C.I.S.L., F.I.O.M.- C.I.S.L., U.I.L.M .- U.I.L. on behalf of mechanic
workers and dated February 4, 1997 and Italian Federation of Wood
Industries and trade unions F.E.N.E.A.L. - U.I.L., F.I.L.C.A. - C.I.S.L.,
F.I.L.L.E.A. - C.G.I.L. on behalf of wood workers and dated December 13,
1994 and Italian General Confederation of Trade and Tourism and trade
unions U.I.L., C.I.S.L., C.G.I.L. on behalf of trade workers and dated
January 01, 1995 and Confindustria and trade unions U.I.L., C.I.S.L.,
C.G.I.L. on behalf of industrial management and dated April 27, 1995.
13. Agreement between Gallino Plasturgia S.r.l. and Confederazione Italiana
Sindacati Lavoratori (Italian Federation of Workers Unions) and
Confederazione Generale Italiana Lavoratori (Italian General Federation of
Workers) and Unione Italiana Lavoratori (Workers Italian Federation).
14. Agreement between AlliedSignal, Inc. and the Union of Needle Industrial
Trade Employees (Knoxville, Tennessee)
15. Agua Prieta, Mexico - Agreement with Asociacion Sindical de Obreros y en
Maquiladoras armandoras y Fabricantes de Agua Prieta
16. Valle Hermosa, Mexico - Agreement with Sindicato de Trabajadores de la
Industria Maquiladora del Municipio de Valle Hermosa
17. Carlise, UK - Agreement with Transport and General Workers Union (TGWU) and
Affiliation of Clerical Technical Staff (ACTS)
18. Colleferro, Italy - Agreement with Unione Italiana del Lavoro (UILM)
Arzano, Italy - Agreement with Confederazione Italiana (FIM-CISL)
Moncalleri, Italy - Agreement with Sindacati Lavorati Siena, Italy -
Agreement with SLAI Villastellone, Italy - Agreement with Unione Generale
Italiana Sindacati Lavoratori
19. Barcelona, Spain - Agreement with Comisiones Obreras (CCOO)
<PAGE>
Schedule 8.21
-------------
Financing Statements and Other Filings
S-8
<PAGE>
BREED TECHNOLOGIES UCC-1 FILINGS
- -----------------------------------------------------------------------
COMPANY FILING OF UCC
- -----------------------------------------------------------------------
1. AlliedSignal India, Inc. Florida Secretary of State
- -----------------------------------------------------------------------
2. Artistic Analytical Methods, Inc. Florida Secretary of State
Michigan Secretary of State
Oakland County, Michigan
- -----------------------------------------------------------------------
3. Auto Trim, Inc. Florida Secretary of State
Texas Secretary of State
Cameron County, Texas
- -----------------------------------------------------------------------
4. BREED Alabama, Inc. Alabama Secretary of State
Butler County, Alabama
Florida Secretary of State
- -----------------------------------------------------------------------
5. BREED Arizona, Inc. Arizona Secretary of State
Cochise County, Arizona
Florida Secretary of State
- -----------------------------------------------------------------------
6. BREED Automotive of Florida, Inc. Florida Secretary of State
Polk County, Florida
- -----------------------------------------------------------------------
7. BREED Automotive, LP Florida Secretary of State
Texas Secretary of State
Cameron County, Texas
El Paso County, Texas
- -----------------------------------------------------------------------
8. BREED Automotive Technology, Inc. Florida Secretary of State
Michigan Secretary of State
Oakland County, Michigan
- -----------------------------------------------------------------------
9. BREED Automotive West, Inc. Florida Secretary of State
Nevada Secretary of State
Washoe County, Nevada
- -----------------------------------------------------------------------
10. BREED International Manufacturing Florida Secretary of State
Development Corporation
- -----------------------------------------------------------------------
11. BREED Manufacturing of Texas, Inc. Florida Secretary of State
Texas Secretary of State
Cameron County, Texas
- -----------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------
COMPANY FILING OF UCC
- -----------------------------------------------------------------------
12. BREED Technology, Inc. Florida Secretary of State
Ohio Secretary of State
Montgomery County, Ohio
Indiana Secretary of State
Allen County, Indiana
Michigan Secretary of State
Oakland County, Michigan
- -----------------------------------------------------------------------
13. BREED Nevada, Inc. Florida Secretary of State
Nevada Secretary of State
Washoe County, Nevada
- -----------------------------------------------------------------------
14. BREED Tennessee Holdings, LP Florida Secretary of State
Tennessee Secretary of State
Blount County, Tennessee
Knox County, Tennessee
- -----------------------------------------------------------------------
15. BTI Michigan, Inc. Florida Secretary of State
Michigan Secretary of State
Macomb County, Michigan
- -----------------------------------------------------------------------
16. BTI Tennessee, Inc. Florida Secretary of State
Tennessee Secretary of State
Blount County, Tennessee
Knox County, Tennessee
- -----------------------------------------------------------------------
17. Force Imaging Technologies, Inc. Florida Secretary of State
Illinois Secretary of State
Cook County, Illinois
- -----------------------------------------------------------------------
18. Hamlin, Inc. Florida Secretary of State
Wisconsin Secretary of State
Jefferson County, Wisconsin
Marquette County, Wisconsin
- -----------------------------------------------------------------------
19. Innovative Mim Technology, Inc. Florida Secretary of State
- -----------------------------------------------------------------------
20. Mowest, Inc. California Secretary of State
Orange County, California
- -----------------------------------------------------------------------
21. United Steering Systems, Inc. Florida Secretary of State
Indiana Secretary of State
Allen County, Indiana
Michigan Secretary of State
Oakland County, Michigan
- -----------------------------------------------------------------------
2
<PAGE>
3
<PAGE>
Schedule 9.5
------------
Insurance
S-9
<PAGE>
Schedule 9.5
Insurance
<TABLE>
<CAPTION>
Coverage Term Limits Deductible
- -------- ---- ------ ----------
<S> <C> <C> <C>
Workers' Compensation & 10/30/97 - Statutory Workers' Compensation $250,000 per occurrence
Employers' Liability 11/01/98 $1 M Employers' Liability $1,985,000 aggregate
General Liability 11/01/97 - $2 M each occurrence $10,000 per occurrence
11/01/98 $2 M general aggregate $100,000 aggregate
$2 M Personal Injury
$2 M Advertising Injury
$1 M Premises Damage
$1 M Employee Benefit Liability
Products & Completed 11/01/97 - $2 M each claim None - Insured by the
Operations Liability 11/01/98 $2 M aggregate BREED-owned captive
insurance company
Automobile Liability 11/01/97 - $1 M any one loss Nil.
11/01/98 (Bodily Injury/Property Damage)
PIP: Statutory
$10,000 Medical Payments
$50,000 Uninsured Motorists
Global DIC/DIL 11/01/97 - $2 M General Liability Nil.
(Foreign Liability) 11/01/98 $1 M Employers' Liability
$2 M Automobile Liability
Aircraft Products & 10/01/97 - $15 M each occurrence Nil.
Completed Operations 10/01/98 $15 M aggregate
Umbrella Liability 11/01/97 - $25 M each occurrence Nil.
11/01/00 $25 M aggregate
excess primary liability insurance
Excess Liability 11/01/97 - $75 M excess primary and umbrella Nil.
11/01/98 liability insurances
Global Property 11/01/97 - $250 M Loss Limit $100,000 per occurrence
11/01/98 subject to sublimits on the in USA
policy $50,000 per occurrence rest
of world
Cargo 05/01/96 - $2 M any Land Conveyance $10,000 per occurrence
until canceled $2 M any one Vessel
$2 M any Aircraft
Executive Protection 09/01/97 - $3 M Fiduciary Liability Fiduciary: $1,000
09/01/99
$10 M Fidelity Fidelity: $50,000 any loss
Directors' & officers' 09/01/97 - $50 M each claim/aggregate Individual Directors/
Liability Insurance 09/01/99 Officers: $0
Corporate Liability:
$250,000 each claim
</TABLE>
<PAGE>
Schedule 10.4
-------------
Intercompany Indebtedness
S-10
<PAGE>
Schedule 10.4
Intercompany Indebtedness
-------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
BREED Technologies, Inc.
Intercompany Loans
As of April 28, 1998
============================================================================================================
Name of Obligor Name of Obligee Date Currency
--------------- --------------- ---- --------
Notes On Parent's Books
-----------------------
<S> <C> <C> <C>
BREED Italia, S.r.l. BREED Automotive West, Inc. 1-Jul-97 LIT
Gallino Plasturgia, S.r.l. BREED Automotive West, Inc. 1-Jul-97 LIT
MOMO, S.p.A. BREED Automotive West, Inc. 1-Jul-97 LIT
Hamlin, Inc. BREED Automotive West, Inc. 1-Sep-94 USD
Custom Trim Ltd. BREED Automotive West, Inc. 6-Jun-97 USD
Sistemas BREED de Seguridad, S.A. de C.V. BREED Automotive West, Inc. 31-Oct-97 MXP
BREED Cinturones de Seguridad, S.A. de C.V. BREED Automotive West, Inc. 31-Oct-97 MXP
BREED UK Limited BREED Automotive West, Inc. 31-Oct-97 GBP
BSRD Limited BREED Automotive West, Inc. 31-Oct-97 GBP
BREED Automotive Safety Systems, S.L. BREED Automotive West, Inc. 31-Oct-97 ESP
BREED Italian Holdings, S.r.l. BREED Automotive West, Inc. 31-Oct-97 LIT
BREED Ruckhaltesysteme fur Fahrzeugsicher GmbH BREED Automotive West, Inc. 31-Oct-97 DEM
BREED France, EURL BREED Automotive West, Inc. 31-Oct-97 FFR
BREED Korea, Ltd. BREED Automotive West, Inc. 31-Oct-97 KRW
BREED Japan, KK BREED Automotive West, Inc. 31-Oct-97 JPY
============================================================================================================
</TABLE>
<PAGE>
Schedule 10.5
-------------
Sale of real and personal property referred to in the
Operating/Repositioning Plan and the Plant Closure/Consolidation Schedule as
furnished to the Agent.
<PAGE>
EXHIBIT 4.12
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of November 25, 1997, by and among BTI Capital Trust, a statutory
business trust created under the laws of the state of Delaware (the "Trust"),
Breed Technologies, Inc., a Delaware corporation (the "Company"), and Prudential
Securities Incorporated and Furman Selz LLC (together, the "Initial
Purchasers"), who, simultaneously with the execution and delivery of this
Agreement, have purchased 5,000,000 and have the right to purchase an additional
750,000 of the 6.50% Convertible Trust Preferred Securities (the "Preferred
Securities") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to a Purchase Agreement dated as of
November 19, 1997 among the Trust, the Company and the Initial Purchasers (the
"Purchase Agreement"). In order to induce the Initial Purchasers to enter into
the Purchase Agreement, the Trust and the Company have provided the registration
rights set forth in this Agreement. The execution and delivery of this Agreement
is a condition to closing under the Purchase Agreement. All defined terms used
but not defined herein shall have the meanings ascribed to them in the Indenture
(as defined herein).
The parties hereto, intending to be legally bound, hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Advice: As defined in Section 4.
Application: As defined in Section 6.1.
Closing Date: The first date on which Preferred Securities are sold by the
Trust to the Initial Purchasers.
Commission: The Securities and Exchange Commission.
Common Stock: means the Common Stock, par value $.01 per share of the
Company.
Company: As defined in the first paragraph of this Agreement.
<PAGE>
Convertible Debentures: means the 6.50% Convertible Subordinated Debentures
due 2027 of the Company.
Damages Payment Date: With respect to any Transfer Restricted Security,
February 15, May 15, August 15 and November 15 of any year in which a
Registration Default has occurred or is continuing.
Effectiveness Date: As defined in Section 2.1.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Holder: A Person that owns Transfer Restricted Securities.
Indenture: The Indenture, dated as of November 25, 1997, between the
Company and Wilmington Trust Company, as Trustee, pursuant to which the
Convertible Debentures are to be issued, as such Indenture is amended or
supplemented from time to time in accordance with the terms thereof.
Initial Purchasers: As defined in the first paragraph of this Agreement.
Latest Issuance Date: The latest date on which any of the Preferred
Securities are originally sold by the Trust pursuant to the terms of the
Purchase Agreement.
Majority Holders. The Holders of a majority of the Preferred Securities
registered pursuant to the Shelf Registration Statement and/or the Holders of a
majority in aggregate principal amount of the Convertible Debentures and/or the
Holders of a majority of the Common Stock registered pursuant to the Shelf
Registration Statement.
Person: An individual, corporation, partnership, joint venture, limited
liability company, trust, unincorporated organization or government or agency or
political subdivision thereof.
Preferred Securities: As defined in the first paragraph of this Agreement.
Prospectus: The prospectus included in the Shelf Registration Statement
(including any preliminary prospectus), as amended or supplemented by any
Prospectus Supplement (including any Prospectus Supplement relating to the terms
of the offering of any Transfer Restricted Securities) and by all other
amendments thereto, including post-effective amendments, and all material which
may be incorporated by reference into such prospectus.
Prospectus Supplement: As defined in Section 4(b).
Purchase Agreement. As defined in the second paragraph of this Agreement.
-2-
<PAGE>
Record Holder: (a) With respect to any Damages Payment Date relating to the
Convertible Debentures, each Person who is deemed an owner pursuant to Section
3.08 of the Indenture with respect to the Interest Payment Date on which such
Damages Payment Date shall occur and (b) with respect to any Damages Payment
Date relating to any Preferred Securities or Common Stock, each Person who is a
holder of record of such Preferred Securities or Common Stock ten (10) business
days prior to the Damages Payment Date.
Required Effectiveness Date: As defined in Section 2.1 hereof.
Required Filing Date: As defined in Section 2.1 hereof.
Resale Period: As defined in Section 2.2 hereof.
Shelf Registration Statement: As defined in Section 2.1 hereof.
Suspension Period: As defined in Section 2.2 hereof.
TIA: The Trust Indenture Act of 1939, as amended (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Preferred Security, any restricted
Convertible Debenture issued on conversion of any Preferred Security and any
Common Stock issued on conversion of any Convertible Debenture until the date on
which such Preferred Security, restricted Convertible Debenture or Common Stock
(i) has been effectively registered under the Act and disposed of pursuant to
the Shelf Registration Statement, (ii) is distributed to the public pursuant to
Rule 144 under the Act or (iii) may be sold or transferred pursuant to Rule
144(k) under the Act (or any similar provisions then in force).
Underwriters: Any one or more underwriters selected in accordance with
Section 2.4 to underwrite and administer any Underwritten Offering of Transfer
Restricted Securities registered pursuant to the Shelf Registration Statement.
Underwritten Offering: An offering in which Transfer Restricted Securities
are sold to Underwriters or with the assistance of Underwriters for reoffering
to the public on a firm commitment basis.
SECTION 2. SHELF REGISTRATION
2.1 Shelf Registration. The Company shall cause to be filed with the
Commission on or prior to March 19, 1998 (the "Required Filing Date") a shelf
registration statement pursuant to Rule 415 under the Act on Form S-1 or Form
S-3 to cover resales of Transfer Restricted
-3-
<PAGE>
Securities by any Holder that complies with Section 2.5 and Section 2.4(e), if
applicable (such shelf registration statement, as amended from time to time, or
any successor registration statement, as amended from time to time, the "Shelf
Registration Statement"). The Company shall use its best efforts to cause the
Shelf Registration Statement to be declared effective by the Commission under
the Act as soon as practicable following the filing thereof, but in any case no
later than June 17, 1998 (the "Required Effectiveness Date"). The date on which
the Shelf Registration Statement is declared effective by the Commission under
the Act is referred to herein as the "Effectiveness Date." None of the Company,
the Trust nor any of their respective security holders, other than the Holders
of Transfer Restricted Securities in their capacity as such, shall have the
right to register any securities of the Company or the Trust pursuant to the
Shelf Registration Statement.
2.2 Effectiveness. The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective for a period ending two years
after the earlier of the Latest Issuance Date and the date on which all of the
Transfer Restricted Securities shall cease to be Transfer Restricted Securities
or such earlier date as all Transfer Restricted Securities have been sold
pursuant to the Shelf Registration Statement (the "Resale Period"). Subject to
the immediately succeeding sentence, the Company shall be deemed not to have
used its best efforts to keep the Shelf Registration Statement effective during
the Resale Period if it voluntarily takes any action or fails to take any action
that would result in Holders of the Transfer Restricted Securities covered by
the Shelf Registration Statement not being able to offer and sell such Transfer
Restricted Securities during the Resale Period. Notwithstanding anything to the
contrary in this Section 2, subject to compliance with Sections 3 and 4(b), if
applicable, the Company may prohibit offers and sales of Transfer Restricted
Securities pursuant to the Shelf Registration Statement at any time if (a) (i)
it is in possession of material non-public information, (ii) the Board of
Directors of the Company determines (based on advice of counsel) that such
prohibition is necessary in order to avoid a requirement to disclose such
material non-public information and (iii) the Board of Directors of the Company
determines in good faith that disclosure of such material non-public information
would not be in the best interests of the Company and its stockholders or (b)
the Company has made a public announcement relating to an acquisition or
business combination transaction including the Company and/or one or more of its
subsidiaries (i) that is material to the Company and its subsidiaries taken as a
whole and (ii) the Board of Directors of the Company determines in good faith
that offers and sales of Transfer Restricted Securities pursuant to the Shelf
Registration Statement prior to the consummation of such transaction (or such
earlier date as the Board of Directors shall determine) is not in the best
interests of the Company and its stockholders (the period during which any such
prohibition of offers and sales of Transfer Restricted Securities pursuant to
the Shelf Registration Statement is in effect pursuant to clause (a) or (b) of
this Section 2.2 is referred to herein as a "Suspension Period"). A Suspension
Period shall commence on and include the date on which the Company provides
written notice to Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement that offers and sales of Transfer Restricted Securities
cannot be made thereunder in accordance with this Section 2 and shall end on the
date on which each Holder of Transfer Restricted Securities covered by the Shelf
Registration Statement either receives copies
-4-
<PAGE>
of a Prospectus Supplement contemplated by Section 4(b) or is advised in writing
by the Company that offers and sales of Transfer Restricted Securities pursuant
to the Shelf Registration Statement and use of the Prospectus may be resumed.
2.3 Updating Obligations. Notwithstanding any other provisions hereof,
subject to Section 2.2, at all times during the Resale Period, the Company and
the Trust will take all actions necessary (including, without limitation, filing
any amendment to the Shelf Registration Statement or preparing any Prospectus
Supplement to the Prospectus) to ensure that (a) the Shelf Registration
Statement and any amendment thereto and the Prospectus complies in all material
respects with the Act and the rules and regulations thereunder, (b) the Shelf
Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (c) the Prospectus does not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements, in the light of the circumstances under which they were
made, not misleading.
2.4 Underwritten Offering. (a) If, pursuant to written notice delivered to
the Company by at least the Majority Holders, such Majority Holders so elect,
the offer and sale of any such Transfer Restricted Securities pursuant to the
Shelf Registration Statement may be effected in the form of an Underwritten
Offering. The Underwriters for any Underwritten Offering shall be selected by
the Company; provided that such Underwriters shall be reasonably satisfactory to
the Majority Holders.
(b) If the Underwriters for any Underwritten Offering advise the Company,
the Trust and the Holders of such Transfer Restricted Securities in writing that
in their opinion the principal amount or number, as the case may be, of Transfer
Restricted Securities proposed to be sold in such Underwritten Offering exceeds
the principal amount or number of Transfer Restricted Securities which can be
sold in such Underwritten Offering, there shall be included in such Underwritten
Offering the principal amount and/or number of such Transfer Restricted
Securities which in the opinion of such Underwriters can be sold, and such
principal amount and/or number of Transfer Restricted Securities shall be
allocated pro rata among the Holders of such Transfer Restricted Securities on
the basis of the principal amount and/or number of Preferred Securities,
Convertible Debentures or Common Stock requested to be included in such
Underwritten Offering by such Holders. The Holders of the Transfer Restricted
Securities to be sold in any Underwritten Offering shall pay all underwriting
discounts and commissions of such Underwriters applicable to the sale of any of
their respective Transfer Restricted Securities.
(c) Each Holder whose Transfer Restricted Securities are registered
pursuant to the Shelf Registration Statement agrees, upon the request of the
Underwriters in any Underwritten Offering, not to effect any public sale or
distribution of securities of the Company of the same class as the securities
included in the Shelf Registration Statement, including a sale pursuant to
-5-
<PAGE>
Rule 144 under the Act (except as part of such registration), during the 10-day
period prior to, and during the 90-day period beginning on, the closing date of
any such Underwritten Offering, to the extent timely notified in writing by such
Underwriters. This Section 2.4(c) shall not apply to any Holder of Transfer
Restricted Securities if such Holder is prevented by applicable statute or
regulation from entering into any such agreement; provided that any such Holder
shall undertake, in its request to participate in any such Underwritten Offering
pursuant to Section 2.4(a), not to effect any public sale or distribution of any
of its Transfer Restricted Securities commencing on the date of sale of such
Transfer Restricted Securities unless it has provided 90 days prior written
notice of such sale or distribution to the Underwriters.
(d) The Company agrees not to effect any public or private offer, sale or
distribution of securities of the same quality and nature as the Transfer
Restricted Securities to be registered in an Underwritten Offering, including a
sale pursuant to Regulation D under the Act, during the 10-day period prior to,
and during the 90-day period beginning on, the closing date of such Underwritten
Offering to the extent timely notified in writing by the Underwriters (except as
part of such registration, if permitted, or pursuant to any registration on Form
S-4 or Form S-8 or any successor form to such Forms), unless the Underwriters
shall consent in writing to a shorter period of time; provided that this Section
2.4(d) shall not prohibit (i) the issuance by the Company of any Common Stock to
employees of the Company or to any other eligible person pursuant to any
employee stock option plan, stock ownership plan, stock bonus plan or stock
compensation plan of the Company in effect on the date of such Underwritten
Offering, (ii) the issuance by the Company of Common Stock upon the conversion
of securities, or the exercise of options or warrants, outstanding at the date
of such Underwritten Offering or (iii) the issuance by the Company of Common
Stock in a private offer and sale in connection with an acquisition or other
business combination transaction provided the subsequent transfer or other
disposition of such Common Stock is restricted during the time period referred
to in this clause (d).
(e) No Holder may participate in any Underwritten Offering hereunder unless
such Holder (i) agrees to sell such Holder's Transfer Restricted Securities on
the basis provided in the underwriting arrangements approved by the Majority
Holders participating in such Underwritten Offering, (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements and
(iii) furnishes the Company in writing information required pursuant to Section
2.5.
2.5 Holder Agreements. No Holder of Transfer Restricted Securities may
register any of its Transfer Restricted Securities pursuant to the Shelf
Registration Statement unless such Holder furnishes to the Company and the
Trust, in writing, within 10 business days after receipt of written request
therefor, such information as the Company may reasonably request for use in
connection with the Shelf Registration Statement, the Prospectus and any
Prospectus Supplement.
2.6 Company Underwritten Public Offering. In the event that during the
Resale Period the Company shall give written notice to each Holder of Transfer
Restricted Securities that it
-6-
<PAGE>
intends to effect an underwritten public offering (on a firm commitment basis)
of its Common Stock pursuant to a registration statement filed under the Act and
the Company offers to include all of the Transfer Restricted Securities then
held by such Holders in such underwritten public offering on terms consistent
with the terms contained herein with respect to Underwritten Offerings pursuant
to the Shelf Registration Statement, then, under such circumstances, the Company
shall not be required to take any action to enable the Holders of such Transfer
Restricted Securities to dispose of such Transfer Restricted Securities in an
Underwritten Offering pursuant to this Agreement during the period from receipt
of such written notice by such Holders until the earlier to occur of 90 days
after delivery of such notice and consummation of such underwritten public
offering by the Company contemplated by such notice. In any such underwritten
public offering by the Company which so includes all such Transfer Restricted
Securities pursuant to this Section 2.6, the Company shall have the right to
select the Underwriters; provided that such Underwriters shall be reasonably
satisfactory to the Majority Holders.
SECTION 3. LIQUIDATED DAMAGES
If the Shelf Registration Statement (a) is not filed with the Commission
under the Act prior to the Required Filing Date, (b) has not been declared
effective under the Act by the Commission on or prior to the Required
Effectiveness Date or (c) is filed and declared effective but shall thereafter
cease to be effective (without being succeeded immediately by a subsequent Shelf
Registration Statement filed and declared effective) or usable for the offer and
sale of the Transfer Restricted Securities covered thereby for a period of time
(including any Suspension Period) which shall exceed (i) 60 consecutive days
during the period from the Effectiveness Date through the first anniversary of
the Latest Issuance Date or (ii) 90 consecutive days during the period after
such first anniversary date through the second anniversary of the Latest
Issuance Date then, in any such case referred to in clause (a), (b) or (c), a
"Registration Default" shall have occurred. During such period as a Registration
Default shall occur and be continuing, the Company shall pay to each Holder of
Transfer Restricted Securities as liquidated damages an amount equal to an
additional one-quarter of one percent (25 basis points) per quarter, payable in
arrears, in respect of any Preferred Security or Convertible Debenture that is a
Transfer Restricted Security owned by such Holder. All accrued liquidated
damages shall be paid by the Company or the Trust, as the case may be, to each
Record Holder on each Damages Payment Date in the manner provided in the
Indenture (with respect to the payment of interest) to the extent any of such
Record Holder's Transfer Restricted Securities are subject to the Indenture, and
otherwise by wire transfer of immediately available funds or by federal funds
check. On the date of the cure of all Registration Defaults, liquidated damages
will cease to accrue with respect to such Registration Defaults.
All of the Company's or the Trust's obligations set forth in this Section 3
which are outstanding with respect to any Transfer Restricted Security at the
time it ceases to be a Transfer
-7-
<PAGE>
Restricted Security shall survive until such time as all such obligations shall
have been satisfied in full.
SECTION 4. REGISTRATION PROCEDURES
In connection with the Shelf Registration Statement, subject to the terms
of this Agreement, the Company will use its best efforts to effect such
registration to permit the offer and sale of the Transfer Restricted Securities
being sold in accordance with the intended method or methods of distribution or
disposition thereof, and pursuant thereto the Company will:
(a) prepare and file with the Commission the Shelf Registration
Statement for the offer and sale of the Transfer Restricted Securities in
accordance with the intended method or methods of distribution thereof and
shall include all financial statements required to be included or
incorporated by reference therein; cooperate and assist in any filings
required to be made with the appropriate exchange and use its best efforts
to cause such Shelf Registration Statement to become effective and approved
by such governmental agencies or authorities as may be necessary to enable
the selling Holders to consummate the disposition of such Transfer
Restricted Securities; provided that before filing the Shelf Registration
Statement, any amendments thereto, or the Prospectus or any Prospectus
Supplement, the Company and the Trust will furnish to the Holders (and to
their counsel) and the Underwriters, if any, copies of all such documents
proposed to be filed (except that the Company shall not be required to
furnish any exhibits to such documents, including those incorporated by
reference, unless so requested by a Holder in writing), and the Company
will not file the Shelf Registration Statement, any amendment thereto, the
Prospectus or any Prospectus Supplement, to which (i) the Underwriters, if
any, shall reasonably object or (ii) the Majority Holders shall reasonably
object, in each such case within five (5) business days after the receipt
thereof (a Holder or Underwriter, if any, shall be deemed to have
reasonably objected to such filing if the Shelf Registration Statement,
amendment thereto, Prospectus or Prospectus Supplement, as applicable, as
proposed to be filed contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, which misstatement or
omission is specifically identified to the Company in writing within such
five (5) business days);
(b) prepare and file with the Commission such amendments and
post-effective amendments to the Shelf Registration Statement as may be
necessary to keep the Shelf Registration Statement effective during the
Resale Period; cause the Prospectus to be supplemented by any supplement
thereto required in order to comply with the Act (a "Prospectus
Supplement") and to file any such Prospectus Supplement pursuant to Rule
424 under the Act; to comply fully with the applicable provisions of Rules
424 and 430A under the Act in a timely manner; and to comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Shelf Registration Statement
-8-
<PAGE>
during the Resale Period in accordance with the intended method or methods
of distribution by the selling Holders set forth in such Shelf Registration
Statement, the Prospectus or any Prospectus Supplement;
(c) if requested by the Holders of Transfer Restricted Securities or
the Underwriters of any Underwritten Offering, promptly incorporate in the
Prospectus, any Prospectus Supplement or post-effective amendment to the
Shelf Registration Statement, such information as such Holders or
Underwriters agree should be included therein relating to the plan of
distribution of the Transfer Restricted Securities, including, without
limitation, information with respect to the principal amount or number of
Transfer Restricted Securities being sold, the purchase price being paid
therefor and any other terms with respect to such Underwritten Offering;
and make all required filings of such Prospectus, Prospectus Supplement or
post-effective amendment as soon as practicable after the Company is
notified of the matters to be incorporated in such Prospectus, Prospectus
Supplement or post-effective amendment;
(d) advise the Underwriters, if any, and Holders (and their counsel)
promptly and, if requested by such Persons, to confirm such advice in
writing, (i) when the Shelf Registration Statement, any amendment thereto,
and the Prospectus have been filed and, with respect to the Shelf
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (ii) of any request by the Commission for
amendments to the Shelf Registration Statement or supplements to the
Prospectus or for additional information relating thereto, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Shelf Registration Statement under the Act or of the suspension by
any state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, (iv) if at
any time the representations and warranties of the Company contemplated by
paragraph (n)(ii) below cease to be true and correct, and (v) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Shelf Registration Statement, any
amendment thereto, the Prospectus or any Prospectus Supplement or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes therein in order to make the
statements therein not misleading;
(e) if at any time the Commission shall issue any stop order
suspending the effectiveness of the Shelf Registration Statement, or any
state securities commission or other regulatory authority shall issue an
order suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the
Company shall promptly notify the Underwriters, if any, and the Holders
(and their counsel) and shall use its reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
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(f) promptly following the filing of any document that is to be
incorporated by reference into the Shelf Registration Statement or the
Prospectus subsequent to the initial filing of the Shelf Registration
Statement, provide copies of such document (excluding exhibits, unless
requested by a Holder in writing) to the Holders;
(g) furnish to each Holder of Transfer Restricted Securities
registered pursuant to the Shelf Registration Statement and each of the
Underwriters, if any, without charge, at least one copy of the Shelf
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits thereto (excluding exhibits to documents
incorporated by reference therein unless requested by such Holder);
(h) deliver to each Holder of Transfer Restricted Securities covered
by the Shelf Registration Statement and each of the Underwriters, if any,
without charge, as many copies of the Prospectus and any Prospectus
Supplement thereto as such Persons may reasonably request; the Company
consents to the use of the Prospectus and any Prospectus Supplement by each
such Holder and Underwriter, if any, in connection with the offer and sale
of any Transfer Restricted Securities covered thereby;
(i) prior to any public offering of Transfer Restricted Securities,
cooperate with the Holders of Transfer Restricted Securities covered by the
Shelf Registration Statement (and their counsel), the Underwriters, if any,
and their respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities or
Blue Sky laws of such jurisdictions as such Holders or Underwriters may
request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement; provided that the
Company shall not be required (i) to register or qualify as a foreign
corporation where it is not now so registered or qualified, (ii) to take
any action that would subject it to the service of process in suits in any
jurisdiction where it is not now so subject, or (iii) to take any action
that would subject it to taxation in any jurisdiction in an amount greater
than it would be so subject without having taken such action;
(j) cooperate with the Holders of Transfer Restricted Securities
covered by the Shelf Registration Statement (and their counsel) and the
Underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold which
do not bear any restrictive legends; and enable such Transfer Restricted
Securities to be in such denominations and registered in such names as the
Holders or the Underwriters, if any, may request at least two business days
prior to the delivery of any Transfer Restricted Securities in connection
with any sale thereof;
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(k) use its best efforts to cause the Transfer Restricted Securities
covered by the Shelf Registration Statement to be registered with or
approved by such other United States governmental agencies or authorities
as may be necessary to enable the Holders thereof or the Underwriters, if
any, to consummate the disposition of such Transfer Restricted Securities,
subject to the proviso contained in clause (i) above;
(l) if any fact or event contemplated by clause (d)(v) above shall
exist or have occurred, prepare a post-effective amendment to the Shelf
Registration Statement or a Prospectus Supplement or an amendment to any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus together with any Prospectus
Supplement will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
(m) provide a CUSIP number, if necessary, for all Transfer Restricted
Securities not later than the effective date of the Shelf Registration
Statement and provide the Trustee under the Indenture and/or the transfer
agent for the Preferred Securities and Common Stock with printed
certificates for the Transfer Restricted Securities which are in a form
eligible for deposit with the Depository Trust Company;
(n) in connection with any Underwritten Offering and, with respect to
clause (iii) below, on the effective date of the Shelf Registration
Statement and as of the date of any Prospectus Supplement, (i) enter into
an underwriting agreement in customary form, (ii) make such representations
and warranties to the selling Holders and the Underwriters in form,
substance and scope as they may reasonably request and as are customary in
primary underwritten public offerings and covering matters including, but
not limited to, those set forth in the Purchase Agreement, (iii) obtain
opinions of counsel to the Company and the Trust and updates thereof in
customary form and covering matters reasonably requested by the
Underwriters of the type customarily covered in legal opinions to
underwriters in connection with primary underwritten public offerings
addressed to each selling Holder and the Underwriter requesting the same,
(iv) obtain, to the extent permitted by Statement on Auditing Standards No.
72 or any successor Statement thereto, "cold comfort" letters and updates
thereof from the Company's independent certified public accountants
addressed to each selling Holder and the Underwriters requesting the same,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters to Underwriters in connection
with primary underwritten public offerings, (v) set forth in full or
incorporate by reference in the underwriting agreement the indemnification
provisions and procedures of Section 6 hereof with respect to all parties
to be indemnified pursuant to said Section, and (vi) deliver such documents
and certificates as may be reasonably requested by each selling Holder or
the Underwriters
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to evidence compliance with clause (ii) above and with any customary
conditions contained in the underwriting agreement entered into by the
Company and the Trust pursuant to this clause (n) (the foregoing shall be
done at or prior to each closing under such underwriting agreement, as and
to the extent required thereunder);
(o) make available at reasonable times and in a reasonable manner for
inspection by the Holders of the Transfer Restricted Securities (and their
counsel), the Underwriters (and their counsel) participating in any
Underwritten Offering pursuant to the Shelf Registration Statement, and any
accountant or other representative retained by such selling Holders or any
of the Underwriters, all financial and other records, pertinent corporate
documents and properties of the Company and cause the Company's officers,
directors and employees to supply all information reasonably requested by
any such Holder, Underwriter, attorney or accountant in connection with
such Shelf Registration Statement prior to its effectiveness; provided that
such representatives, attorneys or accountants shall agree to keep
confidential (which agreement shall be confirmed in writing in advance to
the Company if the Company shall so request) all information, records or
documents made available to such persons which are not otherwise available
to the general public unless disclosure of such records, information or
documents is required by court or administrative order (of which the
Company shall have been given prior notice and an opportunity to defend)
after the exhaustion of all appeals therefrom, and to use such information
obtained pursuant to this provision only in connection with the transaction
for which such information was obtained, and not for any other purpose;
(p) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission and make generally
available to its security holders, as soon as practicable, a consolidated
earnings statement, which consolidated earnings statement shall satisfy the
provisions of Section 11(a) of the Act, for the twelve month period (i)
commencing at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to Underwriters in an Underwritten Offering or (ii) if
not sold to Underwriters in such an offering, beginning with the first
month of the Company's first fiscal quarter commencing after the effective
date of the Shelf Registration Statement;
(q) cause the Indenture to be qualified under the TIA, and, in
connection therewith, cooperate with the Trustee and the Holders to effect
such changes to the Indenture as may be required for such Indenture to be
so qualified in accordance with the terms of the TIA; and execute and use
its best efforts to cause the Trustee to execute, all documents as may be
required to effect such changes and all other forms and documents required
to be filed with the Commission to enable such Indenture to be so qualified
in a timely manner; and
(r) cause all Transfer Restricted Securities covered by the Shelf
Registration Statement to be listed on each securities exchange or
quotation system on which similar
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securities issued by the Company are then listed if requested by the
Majority Holders or the Underwriters, if any.
Each Holder, by acquisition of any Transfer Restricted Securities, agrees
that upon receipt of any notice from the Company of the existence of any fact of
the kind described in Section 4(d)(v) hereof, such Holder will forthwith
discontinue offering and selling Transfer Restricted Securities until such
Holder's receipt of the copies of a Prospectus Supplement contemplated by
Section 4(l) hereof or until it is advised in writing (the "Advice") by the
Company that the use of the Prospectus may be resumed. If so directed by the
Company, each Holder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Holder's possession, of
the Prospectus covering such Transfer Restricted Securities current at the time
of receipt of such notice.
SECTION 5. REGISTRATION AND OTHER EXPENSES
5.1 Registration Expenses. All expenses incident to the Company's and the
Trust's performance of or compliance with this Agreement (the "Registration
Expenses") will be borne by the Company and the Trust, regardless of whether the
Shelf Registration Statement becomes effective, including without limitation:
(a) all registration and filing fees and expenses (including filings
made with the appropriate exchange);
(b) fees and expenses of compliance with federal securities or state
blue sky laws (including the reasonable fees and disbursements of counsel
to the Holders as provided in Section 5.2);
(c) expenses of printing (including, without limitation, expenses of
printing or engraving certificates for the Transfer Restricted Securities
in a form eligible for deposit with Depository Trust Company and of
printing the Prospectus and any Preliminary Prospectus), messenger and
delivery services and telephone;
(d) reasonable fees and disbursements of counsel for the Company and
for the Holders of the Transfer Restricted Securities (subject to the
provisions of Section 5.2 hereof);
(e) fees and disbursements of all independent certified public
accountants of the Company (including the expenses of any special audit and
"cold comfort" letters required by or incidental to the preparation and
filing of a Shelf Registration Statement and Prospectus and the disposition
of Transfer Restricted Securities); and
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(f) fees and expenses of listing the Transfer Restricted Securities on
any securities exchange or quotation system in accordance with Section 4(r)
hereof.
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, rating
agency fees and the fees and expenses of any Person, including special experts,
retained by the Company. The Holders of Transfer Restricted Securities shall
bear the expense of any broker's commission or underwriting discounts and
commissions.
5.2 Counsel For Holders. In connection with the Shelf Registration
Statement, the Company will reimburse the Holders of Transfer Restricted
Securities being registered pursuant to the Shelf Registration Statement for the
fees and disbursements of not more than one counsel chosen by the Majority
Holders, up to a maximum of $50,000. Notwithstanding the provisions of this
Section 5.2, each Holder of Transfer Restricted Securities shall pay all
Registration Expenses to the extent required by applicable law.
SECTION 6. INDEMNIFICATION
6.1 Company Indemnification Obligation. The Company and the Trust, jointly
and severally, agree to indemnify and hold harmless each Holder and each person,
if any, who controls any Holder within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act or the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon:
(a) any untrue statement or alleged untrue statement of any material
fact contained in (i) the Shelf Registration Statement or any amendment
thereto, the Prospectus or any Prospectus Supplement or (ii) any
application or other document, or any amendment or supplement thereto,
executed by the Company or the Trust or based upon written information
furnished by or on behalf of the Company or the Trust filed in any
jurisdiction in order to qualify the Transfer Restricted Securities under
the securities or blue sky laws thereof or filed with the Commission or any
securities association or securities exchange (each an "Application");
(b) the omission or alleged omission to state in the Shelf
Registration Statement or any amendment thereto, the Prospectus, any
Prospectus Supplement or any Application a material fact required to be
stated therein or necessary to make the statements therein not misleading;
or
(c) any untrue statement or alleged untrue statement of any material
fact contained in any audio or visual materials, if any, supplied by the
Company or the Trust in connection with an Underwritten Offering (or
otherwise) of the Transfer Restricted Securities, including without
limitation, slides, videos, films and tape recordings, and the
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Company and the Trust will reimburse, as incurred, each Holder for any
legal or other expenses reasonably incurred by such Holder in connection
with investigating, defending against or appearing as a third-party witness
in connection with any such loss, claim, damage, liability or action;
provided that the Company and the Trust 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 any untrue statement or alleged untrue statement or
omission or alleged omission made in such Shelf Registration Statement or
any amendment thereto, the Prospectus, any Prospectus Supplement or any
Application in reliance upon and in conformity with written information
furnished to the Company by such Holder specifically for use therein. This
indemnity agreement will be in addition to any liability which the Company
may otherwise have. The Company will not, without the prior written consent
of the Majority Holders, settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action, suit or proceeding
in respect of which indemnification may be sought hereunder (whether or not
any such Holder or any person who controls any such Holder within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act is a
party to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of all of the
Holders and such controlling persons from all liability arising out of such
claim, action, suit or proceeding.
6.2 Holder Indemnification Obligation. Each Holder, severally and not
jointly, will indemnify and hold harmless the Company, each of its directors,
each of its officers who signs the Shelf Registration Statement and the Trust
and each person, if any, who controls the Company or the Trust within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, against any
losses, claims, damages or liabilities to which the Company or the Trust or any
such director, officer or controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Shelf
Registration Statement or any amendment thereto, the Prospectus, any Prospectus
Supplement or any Application or (ii) the omission or the alleged omission to
state therein a material fact required to be stated in the Shelf Registration
Statement or any amendment thereto, the Prospectus, any Prospectus Supplement or
any Application necessary to make the statements therein not misleading, in each
case to the extent, and only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company and the
Trust by such Holder specifically for use therein; and, subject to the
limitation set forth in the immediately preceding clause, will reimburse, as
incurred, any legal or other expenses reasonably incurred by the Company and the
Trust or any such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or any action
in respect thereof.
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This indemnity agreement will be in addition to any liability which such Holder
may otherwise have.
6.3 Procedure. Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 6 or except to the extent that the Indemnifying Party has
been prejudiced by such delay, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under this Section 6. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such indemnified
party; provided that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnifying party shall not have
the right to direct the defense of such action on behalf of such indemnified
party or parties and such indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof and approval by such
indemnified party of counsel appointed to defend such action, the indemnifying
party will not be liable to such indemnified party under this Section 6 for any
legal or other expenses, other than reasonable costs of investigation
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the same general
allegations or circumstances, designated by the Holders in the case of Section
6.1, representing the indemnified parties under such Section 6.1 who are parties
to such action or actions) or (ii) the indemnifying party does not promptly
retain counsel satisfactory to the indemnified party or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. After such notice from the indemnifying party
to such indemnified party, the indemnifying party will not be liable for the
costs and expenses of any settlement of such action effected by such indemnified
party without the consent of the indemnifying party.
6.4 Contribution. In circumstances in which the indemnity agreement
provided for in Sections 6.1 through 6.3 of this Agreement is unavailable or
insufficient, for any reason, to hold harmless an indemnified party in respect
of any losses, claims, damages or liabilities (or actions in respect thereof)
that by the terms of Sections 6.1 through 6.3 of this Agreement could otherwise
be the subject of an indemnity claim, each indemnifying party, in order to
provide for just and
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equitable contribution, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect (i) the relative benefits received by the indemnifying party or
parties on the one hand and the indemnified party on the other from the
Underwritten Offering or (ii) if the allocation provided by the foregoing clause
(i) is not permitted by applicable law, not only such relative benefits but also
the relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions or
alleged statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) that by the terms of Sections 6.1
through 6.3 of this Agreement could otherwise be the subject of an indemnity
claim, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Trust on the one hand and the Holders
on the other shall be deemed to be in the same proportion as the total net
proceeds from the Underwritten Offering (before deducting expenses) received by
the Company and the Trust bear to the total net proceeds from the Underwritten
Offering (before deducting expenses) received by the Holders, as set forth in
the table on the cover page of the Prospectus or Prospectus Supplement, as the
case may be. The relative fault of the parties shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Trust or the Holders, the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission, and any other equitable
considerations appropriate in the circumstances. The Company, the Trust and the
Holders agree that it would not be equitable if the amount of such contribution
were determined by pro rata or per capita allocation (even if the Holders were
treated as one entity for such purpose) or by any other method of allocation
that does not take into account the equitable considerations referred to above
in this Section 6.4. Notwithstanding any other provision of this Section 6.4, no
Holder shall be obligated to make contributions hereunder that in the aggregate
exceed the total public offering price of the Transfer Restricted Securities,
less the aggregate amount of any damages that such Holder has otherwise been
required to pay in respect of any claim arising out of Section 6.2 hereof, and
no person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Holders' obligations to
contribute hereunder are several in proportion to their respective obligations
and not joint. For purposes of this Section 6.4, each person, if any, who
controls a Holder within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act shall have the same rights to contribution as such Holder, and
each director of the Company, each officer of the Company who signed the Shelf
Registration Statement and each person, if any, who controls the Company or the
Trust within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act, shall have the same rights to contribution as the Company and the Trust.
6.5 Controlling Persons. The Company and the Trust shall also indemnify
each Underwriter participating in an Underwritten Offering, its agents,
employees, officers and directors and each person who controls such Underwriter
(within the meaning of Section 15 of
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the Act or Section 20 of the Exchange Act) to the same extent as provided above
with respect to the indemnification of the Holders.
6.6 Nonexclusive Remedy. The indemnity and contribution agreements
contained in this Section 6 are in addition to any liability that any
indemnifying party may otherwise have to any indemnified party.
6.7 Survival. The indemnity and contribution agreements contained in this
Section 6 shall remain operative and in full force and effect regardless of (a)
any termination of any underwriting or agency agreement relating to an
Underwritten Offering, (b) any investigation made by or on behalf of the
Holders, the Company, the Trust or any Underwriter in connection with an
Underwritten Offering or (c) the consummation of the sale or successive resales
of any Transfer Restricted Securities.
SECTIONS 7. RULE 144A
The Company and the Trust hereby agree with each Holder, for so long as
Transfer Restricted Securities remain outstanding or, if earlier, two years from
the Last Issuance Date, and during any such period in which the Company or the
Trust is not subject to Section 13 or 15(d) of the Exchange Act, to make
available to the Initial Purchasers or any beneficial owner of Transfer
Restricted Securities in connection with any offer or sale thereof and any
prospective purchaser of such Transfer Restricted Securities from such Initial
Purchaser or beneficial owner, the information required by Rule 144A(d)(4) under
the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A.
SECTION 8. MISCELLANEOUS
8.1 No Inconsistent Agreements. The Company and the Trust will not on or
after the date of this Agreement enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders of
Transfer Restricted Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders of Transfer Restricted
Securities hereunder do not in any way conflict with and are not inconsistent
with the rights granted to the holders of the Company's or the Trust's
securities under any other agreements.
8.2 Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
unless the Company and the Trust have obtained the written consent of Holders of
a majority of the Preferred Securities constituting Transfer Restricted
Securities affected by such amendment, modification, supplement, waiver or
departure (provided that, if any Preferred Securities have been converted into
Convertible Debentures, a majority in aggregate principal amount of such
Convertible Debentures as affected or if the Convertible Debentures have been
converted into Common Stock, consents
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by Holders of such shares shall be calculated as if such conversions had not
taken place). Notwithstanding the foregoing, a waiver or consent to departure
from the provisions hereof that relates exclusively to the rights of Holders of
Transfer Restricted Securities whose securities are being sold pursuant to the
Shelf Registration Statement and that does not directly or indirectly affect the
rights of other Holders of Transfer Restricted Securities shall be valid only
with the written consent of Holders of at least 66-2/3% of the Transfer
Restricted Securities being sold, in each case calculated in accordance with the
definition of Majority Holders.
8.3 Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(a) if to a Holder of Convertible Debentures, in accordance with
Section 106 of the Indenture with respect to Convertible Debentures, with a
copy to the Registrar and with respect to Preferred Securities or Common
Stock to each Holder thereof;
(b) if to the Company or an Initial Purchaser, initially at its
address set forth in the Purchase Agreement and thereafter at such other
address notice of which is given in accordance with the provisions of this
Section; and
(c) if to the Company, with a copy to:
Hale and Dorr LLP
1455 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attention: David Sylvester, Esq.
All such notices and communications shall be deemed to have been duly given
as follows: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and on
the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in the Indenture.
8.4 Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided that this Agreement shall
not inure to the benefit of or be binding upon a successor or
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assign of a Holder of Transfer Restricted Securities unless and to the extent
such successor or assign acquired Transfer Restricted Securities from such
Holder; and provided further that nothing herein shall be deemed to permit any
assignment, transfer or any disposition of Transfer Restricted Securities in
violation of the terms of the Purchase Agreement. If any transferee of any
Holder shall acquire Transfer Restricted Securities, in any manner, whether by
operation of law or otherwise, such Transfer Restricted Securities shall be held
subject to all of the terms of this Agreement and by taking and holding such
Transfer Restricted Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such Person shall be entitled to receive the benefits hereof.
8.5 Counterparts. This Agreement may be executed in any number of
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 agreement.
8.6 Heading. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
8.7 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be effected or impaired thereby.
8.8 Entire Agreement. This Agreement together with the Other Company
Agreements (as defined in the Purchase Agreement) is intended by the parties as
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company and the
Trust with respect to the securities sold pursuant to the Purchase Agreement.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
8.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICTS OF LAW RULES THEREOF.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
BREED TECHNOLOGIES, INC.
By: /s/ Lizanne Guptill
-------------------
Name: Lizanne Guptill
Title: Secretary
BTI CAPITAL TRUST
By: Breed Technologies, Inc.,
as Sponsor
By: /s/ Charles J. Speranzella, Jr.
-------------------------------
Name: Charles J. Speranzella, Jr.
Title: Regular Trustee
PRUDENTIAL SECURITIES INCORPORATED
FURMAN SELZ LLC
By: Prudential Securities Incorporated
By: /s/ Jean Claude Canfin
----------------------
Name: Jean Claude Canfin
Title: Managing Director
For itself and on behalf of the Initial Purchasers
<PAGE>
EXHIBIT 5.2
[LETTERHEAD OF RICHARDS, LAYTON & FINGER]
June 15, 1998
BTI Capital Trust
c/o Breed Technologies, Inc.
5300 Old Tampa Highway
Lakeland, Florida 33807
Re: BTI Capital Trust
-----------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for BTI Capital Trust, a
Delaware business trust (the "Trust"), in connection with the matters set forth
herein. At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust, dated as of October 17, 1997
(the "Certificate"), as filed in the office of the Secretary of State of the
State of Delaware (the "Secretary of State") on October 17, 1997;
(b) The Trust Agreement of the Trust, dated as of October 17, 1997, by
and between Breed Technologies, Inc., a Delaware corporation (the "Company"), as
sponsor, and Wilmington Trust Company, a Delaware banking corporation
("Wilmington Trust"), as trustee of the Trust;
(c) The Amended and Restated Declaration of the Trust, dated as of
November 25, 1997 (the "Declaration"), among the Company, Wilmington Trust, as
Institutional Trustee and Delaware Trustee, the Regular Trustees and the
holders, from time to time, of undivided beneficial interests in the assets of
the Trust;
<PAGE>
BTI Capital Trust
June 15, 1998
Page 2
(d) Amendment No. 2 to Registration Statement on Form S-3 (the
"Registration Statement"), including a preliminary prospectus (the
"Prospectus"), relating to the 6.50% Convertible Trust Preferred Securities of
the Trust representing undivided beneficial interests in the assets of the Trust
(each, a "Preferred Security" and collectively, the "Preferred Securities"), as
proposed to be filed by the Company and the Trust with the Securities and
Exchange Commission on or about June 15, 1998; and
(e) A Certificate of Good Standing for the Trust, dated June 15, 1998,
obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are
used as defined in the Declaration.
For purposes of this opinion, we have not reviewed any documents other
than the documents listed above, and we have assumed that there exists no
provision in any document that we have not reviewed that bears upon or is
inconsistent with the opinions stated herein. We have conducted no independent
factual investigation of our own but rather have relied solely upon the
foregoing documents, the statements and information set forth therein and the
additional matters recited or assumed herein, all of which we have assumed to
be true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Declaration
constitutes the entire agreement among the parties thereto with respect to the
subject matter thereof, including with respect to the creation, operation and
termination of the Trust, and that the Declaration and Certificate are in full
force and effect and have not been amended, (ii) except to the extent provided
in paragraph 1 below, the due creation or due organization or due formation, as
the case may be, and valid existence in good standing of each party to the
documents examined by us under the laws of the jurisdiction governing its
creation, organization or formation, (iii) the legal capacity of natural persons
who are parties to the documents examined by us, (iv) that each of the parties
to the documents examined by us has the power and authority to execute and
deliver, and to perform its obligations under, such documents, (v) the due
authorization, execution and delivery by all parties thereto of all documents
examined by us, (vi) the receipt by each Person to whom a Preferred Security was
issued by the Trust (collectively, the "Preferred Security Holders") of a
Preferred Security Certificate and the payment for the Preferred Security
acquired by it, in accordance with the Declaration, and as described in the
Registration Statement, and (vii) that the Preferred Securities were issued to
the Preferred Security Holders in
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BTI Capital Trust
June 15, 1998
Page 3
accordance with the Declaration, and as described in the Registration Statement.
We have not participated in the preparation of the Registration Statement and
assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware (excluding
the securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal laws
and rules and regulations relating thereto. Our opinions are rendered only with
respect to Delaware laws and rules, regulations and orders thereunder that are
currently in effect.
Based upon the foregoing, and upon our examination of such questions of
law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Business Trust Act.
2. The Preferred Securities represent valid and, subject to the
qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
3. The Preferred Security Holders, as beneficial owners of the Trust,
are entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Preferred Security
Holders may be obligated to make payments as set forth in the Declaration.
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In addition, we
hereby consent to the use of our name under the heading "Legal Matters" in the
Prospectus. In giving the foregoing consents, we do not thereby admit that we
come within the category of Persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder. Except as stated above, without
our prior written consent, this opinion may not be furnished or quoted to, or
relied upon by, any other Person for any purpose.
Very truly yours,
Richards, Layton & Finger PA
MIL/DJM
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[LOGO]
EXHIBIT 23.4
[KPMG LETTERHEAD]
Mr. Roger F. Ross
Breed Technologies, Inc.
5300 Old Tampa Highway
PO Box 33050
Lakeland, FL 33807-3050
U.S.A.
Dear Mr. Ross,
At your request we provide the following consent.
We consent to the incorporation by reference of our report dated 25 July 1997
with respect to the combined and consolidated financial statements of the Momo
group included in the Annual Report on Form 10-K for the year ended 30 June
1997, of Breed Technologies, Inc. (the "company") in the Registration Statement
on Form S-3 and related Prospectus of the company for the registration of
10,986,500 shares of its common stock and the 6.50% Convertible Trust Preferred
Securities of BTI Capital Trust.
Yours sincerely
KPMG S.p.A.
/s/ Tony Deegan
Anthony P. Deegan
Director of Audit
APD/kp
