<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) February 3, 1997
---------------------------
Safety 1st, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Massachusetts
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-21404 04-2836423
- --------------------- ------------------------------------
(Commission File No.) (I.R.S. Employer Identification No.)
210 Boylston St., Chestnut Hill, Massachusetts 02167
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(617) 964-7744
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
N/A
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 5. OTHER EVENTS
------------
(a) The Company has entered into a $45,000,000 secured credit facility
through Goldman Sachs Credit Partners L.P. ("GSCP") that replaced the Company's
previous loan arrangements.
The Company's new credit facility consists of a $25,000,000 term loan and a
$20,000,000 revolving credit facility, both of which expire on May 1, 1998. The
annual rate of interest on all borrowings for the initial six months of the
facilities is equal to the Prime Rate, as defined, plus 2.65%, increasing by one
percent (1%) every three (3) months thereafter to a maximum annual rate of the
Prime Rate, plus 5.65%. The credit facility is secured primarily by all
corporate assets of the Company and contain certain financial covenants.
Advances under the revolving credit facility, which includes trade letters of
credit, are calculated by an asset based borrowing formula. The loan agreement
requires the Company to pay certain fees to GSCP, as Agent, including, without
limitation, a monthly commitment fee equal to .50% of the average unused
commitment during the preceding month and letter of credit fees equal to the
Applicable Margin, as defined, plus 2% based on the face amount of each letter
of credit. The Company and GSCP have also entered into a separate letter
agreement that requires the Company to pay to GSCP a one-time facility fee of
$1,250,000, subject to a $500,000 refund under limited circumstances, and an
administration fee of $5,000 per month.
As part of the credit facility, the Company has delivered into escrow
pursuant to an Escrow Agreement, Warrants for up to 350,000 shares of the
Company's common stock. The Warrants are to be released from escrow and
delivered to GSCP as follows: if the credit facilities are still in effect after
six months, a Warrant for 250,000 shares shall be delivered; if the credit
facilities are still in effect after nine months, a Warrant for an additional
50,000 shares shall be delivered; and if the credit facilities are still in
effect after twelve months, a Warrant for the final 50,000 shares shall be
delivered. In the event the Company shall be unable to register the stock
underlying the Warrants within sixty (60) days after the release of the initial
250,000 Warrants, the Company is obligated to pay GSCP up to $100,000 per month
until the earlier of the date of such registration and the date the underlying
stock may be sold under Rule 144 of the Securities Act of 1933.
Finally, Michael Lerner, President and Chief Executive Officer of the
Company, has personally guaranteed up to $10,500,000 of the credit facility and
fully collateralized his guaranty obligation with personal assets that include
stock in the Company, all subject to reduction under certain limited
circumstances.
The above descriptions of the loan agreement are qualified in their
entirety by reference to the First Amended and Restate Loan Agreement which is
filed herewith as Exhibit 10.1 and incorporated herein by reference.
(b) In addition, on January 29, 1997, the Company obtained a Final
Judgment and Order of Dismissal with Prejudice of Class Action (the "Final
Order") from the United States District Court for the District of Massachusetts
in the action entitled ESNER, ET AL. V. SAFETY 1ST, ET AL., No. 95 11846-DPW.
The Court issued the Final Order which found the previously reported settlement
reasonable
2
<PAGE> 3
and fair and dismissed the action with prejudice against the Company and the
individually named officers of the Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
<TABLE>
(c) The following Exhibits are filed as part of this Report.
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
10.1 First Amended and Restated Loan Agreement dated as of
January 31, 1997, among the Company, as Borrower, the
Lenders listed on the signature pages thereof, as Banks,
and GSCP, as Agent.
10.2 $20,000,000 Revolving Note dated January 31, 1997, executed by the
Company in favor of GSCP, as Agent.
10.3 $25,000,000 Term Note dated January 31, 1997, executed by the
Company in favor of GSCP, as Agent.
</TABLE>
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Safety 1st, Inc.
--------------------------
(Registrant)
Date February 7, 1997 By /s/ Michael Lerner
--------------------- --------------------------
Michael Lerner, President
Chief Executive Officer
4
<PAGE> 5
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit Description Page
- ------- ----------- ----
<C> <S> <C>
10.1 First Amended and Restated Loan Agreement dated as of January 31,
1997, among the Company, as Borrower, the Lenders listed
on the signature pages thereof, as Banks, and GSCP, as Agent.
10.2 $20,000,000 Revolving Note dated January 31, 1997, executed by the
Company in favor of GSCP, as Agent.
10.3 $25,000,000 Term Note dated January 31, 1997, executed by the
Company in favor of GSCP, as Agent.
</TABLE>
5
<PAGE> 1
FIRST AMENDED AND RESTATED
LOAN AGREEMENT
DATED AS OF
JANUARY 31, 1997
among
SAFETY 1ST, INC.,
AS BORROWER,
THE LENDERS LISTED ON THE SIGNATURE PAGES HEREOF,
AS BANKS,
and
GOLDMAN SACHS CREDIT PARTNERS L.P.,
AS AGENT
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. DEFINITIONS..................................................... 2
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS...................... 16
2.1 Revolving Loans................................................. 16
2.2 Letters of Credit............................................... 20
2.3 Interest and Fees............................................... 23
2.4 Repayments, Prepayments and Reductions in Revolving Loan
Commitments; General Provisions Regarding Payments.............. 26
2.5 Use of Proceeds................................................. 30
SECTION 3. REPRESENTATION AND WARRANTIES................................... 30
3.1 Organization and Qualification.................................. 30
3.2 Corporate Authority............................................. 31
3.3 Valid Obligations............................................... 31
3.4 Approvals....................................................... 31
3.5 Title to Properties; Absence of Liens........................... 31
3.6 Compliance...................................................... 32
3.7 Financial Statements............................................ 32
3.8 Solvency........................................................ 33
3.9 Events of Default; Adverse Changes.............................. 33
3.10 Taxes........................................................... 33
3.11 Litigation...................................................... 33
3.12 Subsidiaries.................................................... 34
3.13 Restrictions on the Borrower or Subsidiaries.................... 34
3.14 ERISA........................................................... 34
3.15 Environmental and Regulatory Compliance......................... 34
3.16 Labor Relations................................................. 35
3.17 Places of Business.............................................. 35
3.18 Legal Name...................................................... 36
3.19 Existing Loans.................................................. 36
3.20 Governmental Regulation......................................... 36
3.21 Securities Activities........................................... 36
SECTION 4. CONDITIONS...................................................... 36
4.1 Conditions to Effectiveness..................................... 36
4.2 Conditions to Each Revolving Loan and Letter of Credit.......... 39
i
<PAGE> 3
TABLE OF CONTENTS
-----------------
(cont'd)
Page
----
SECTION 5. COVENANTS....................................................... 40
5.1 Financial Reporting............................................. 40
5.2 Conduct of Business............................................. 43
5.3 Maintenance and Insurance....................................... 44
5.4 Taxes........................................................... 44
5.5 Limitation of Indebtedness...................................... 44
5.6 Guaranties...................................................... 44
5.7 Restrictions on Encumbrances.................................... 45
5.8 Corporate Existence; Fundamental Changes........................ 45
5.9 Investments and Loans........................................... 46
5.10 Maximum Capital Expenditures.................................... 46
5.11 Restricted Payments............................................. 47
5.12 ERISA Compliance................................................ 47
5.13 Notification of Default......................................... 48
5.14 Notification of Material Litigation............................. 48
5.15 Notification of Material Adverse Change......................... 48
5.16 Inspection by the Agent and the Banks........................... 48
5.17 Maintenance of Books and Records................................ 48
5.18 Transactions with Affiliates.................................... 49
5.19 Environmental Regulations....................................... 49
5.20 Fiscal Year..................................................... 50
5.21 Minimum Consolidated Net Worth.................................. 50
5.22 Minimum Consolidated EBITDA..................................... 50
5.23 Minimum Interest Coverage Ratio................................. 51
5.24 Cash Flow from Accounts Payable and Inventory................... 51
5.25 Minimum Accounts Payable........................................ 52
5.26 Inventory Bulk Sales............................................ 53
5.27 Loss or Depreciation of Collateral.............................. 53
5.28 Disposition of Collateral....................................... 53
5.29 Ownership of Subsidiaries....................................... 53
5.30 Amendment of Certain Documents.................................. 53
5.31 Cash Management System.......................................... 54
5.32 Interest Rate Agreements........................................ 54
5.33 Lerner Trust ................................................... 54
5.34 Post-Closing Covenants ......................................... 54
ii
<PAGE> 4
TABLE OF CONTENTS
-----------------
(cont'd)
Page
----
SECTION 6. EVENTS OF DEFAULT; ACCELERATION................................. 55
6.1 Events of Default............................................... 55
6.2 Acceleration; Remedies.......................................... 57
SECTION 7. SET OFF; PARTICIPATIONS; ADDITIONAL ASSURANCES.................. 58
7.1 Set Off......................................................... 58
7.2 Reliance by Participants........................................ 58
7.3 Set Off by Participants......................................... 58
7.4 Further Assurances Regarding Proceeds........................... 58
7.5 Notification to Account Debtors................................. 59
7.6 Appointment as Attorney-in-Fact................................. 59
7.7 Consignment..................................................... 60
7.8 Accounts from Governmental Authorities.......................... 60
7.9 Rental of Premises to the Agent................................. 60
7.10 Further Assurances.............................................. 60
7.11 Certain Covenants Regarding Inventory........................... 61
7.12 Grant of License................................................ 61
SECTION 8. CONCERNING THE AGENT AND THE BANKS.............................. 61
8.1 Appointment and Authorization................................... 61
8.2 Agent and Affiliates............................................ 61
8.3 Future Advances................................................. 62
8.4 Delinquent Bank................................................. 62
8.5 Ratable Sharing................................................. 62
8.6 Action by Agent................................................. 63
8.7 Notification of Defaults and Events of Default.................. 63
8.8 Consultation with Experts....................................... 63
8.9 Liability of Agent.............................................. 64
8.10 Indemnification................................................. 64
8.11 Independent Credit Decision..................................... 65
8.12 Successor Agent................................................. 65
8.13 Assignments..................................................... 65
SECTION 9. GENERAL......................................................... 66
9.1 Limitation of Obligations of Safety Europe...................... 66
9.2 Written Notices................................................. 66
9.3 No Waivers...................................................... 66
9.4 Further Assurances.............................................. 67
9.5 Applicable Law.................................................. 67
9.6 Consent to Jurisdiction and Service of Process.................. 67
9.7 Expenses, Taxes and Indemnification............................. 68
iii
<PAGE> 5
TABLE OF CONTENTS
-----------------
(cont'd)
Page
----
9.8 Amendments, Waivers, Etc........................................ 70
9.9 Binding Effect of Agreement..................................... 70
9.10 Other Transactions Among Banks and Loan Parties................. 71
9.11 Entire Agreement................................................ 71
9.12 WAIVER OF A JURY TRIAL.......................................... 71
9.13 Captions........................................................ 71
9.14 Counterparts.................................................... 72
9.15 Severability.................................................... 72
iv
<PAGE> 6
TABLE OF CONTENTS
-----------------
(cont'd)
EXHIBITS
I Form of Revolving Note
II Form of Term Note
III Form of Notice of Borrowing
IV Form of Covenant Compliance Certificate
V Form of Borrowing Base Certificate
VI Form of Safety (Europe) Guaranty
VII Form of Canadian Subsidiary Guaranty
VIII Form of Safety International Guaranty
IX Form of First Amended and Restated Lerner Pledge Agreement
X Form of Lerner Trust Security Agreement
SCHEDULES
1.1 Obsolete Inventory
2.1 Banks' Commitments and Commitment Percentages
3.1 Jurisdictions
3.2 Ownership of Borrower Stock
3.5 Permitted Encumbrances
3.6 Certain Defaults
3.7 Certain Obligations
3.11 Litigation
3.12 Subsidiaries
3.15 Real Property
3.16 Labor Matters
3.17 Places of Business
3.18 Fictitious Business Names
5.5 Indebtedness
5.6 Contingent Obligations
5.9(ii) Investments
5.31 Deposit Accounts
v
<PAGE> 7
FIRST AMENDED AND RESTATED LOAN AGREEMENT
This FIRST AMENDED AND RESTATED LOAN AGREEMENT is made as of January 31,
1997 among SAFETY 1ST, INC., a Massachusetts corporation having its principal
place of business and chief executive office at 210 Boylston Street, Chestnut
Hill, Massachusetts 02167 (the "BORROWER"), THE FINANCIAL INSTITUTIONS LISTED ON
THE SIGNATURE PAGES HEREOF (each individually referred to herein as a "BANK" and
collectively as the "BANKS") and GOLDMAN SACHS CREDIT PARTNERS L.P. ("GSCP"), as
agent for the Banks (in such capacity, "AGENT").
R E C I T A L S
WHEREAS, the Borrower and its Subsidiaries entered into that certain Loan
Agreement dated as of March 28, 1996 with the lenders party thereto ("PRIOR
LENDERS") and Fleet National Bank, as agent for the Prior Lenders (in such
capacity, the "PRIOR AGENT"), as amended by that certain Amendment to Loan
Agreement dated April 19, 1996, that certain Amendment to Loan Agreement dated
May 10, 1996, that certain Third Amendment to Loan Agreement dated as of October
18, 1996, that certain Fourth Amendment to Loan Agreement dated as of November
29, 1996 and that certain Fifth Amendment to Loan Agreement dated as of December
6, 1996 (as so amended, the "EXISTING LOAN AGREEMENT");
WHEREAS, pursuant to that certain Assignment Agreement, dated as of January
31, 1997 and by and between GSCP, as buyer, and Fleet National Bank, The First
National Bank of Boston and USTrust, as seller, and subject to the terms
thereof, GSCP acquired the rights and obligations of the Prior Lenders under the
Existing Loan Agreement and the Loan Documents (as defined in the existing Loan
Agreement);
WHEREAS, the Borrower, the Banks and the Agent desire to amend and restate
the Existing Loan Agreement as provided herein;
WHEREAS, the Subsidiaries of the Borrower (i) were borrowers under the
Existing Loan Agreement, (ii) received proceeds of certain of the loans under
the Existing Loan Agreement and (iii) will receive proceeds of certain of the
loans hereunder;
WHEREAS, the Subsidiaries of the Borrower desire to guaranty all of the
obligations of the Borrower hereunder;
WHEREAS, the Borrower desires to secure all of the Obligations (as
hereinafter defined), and each Subsidiary of the Borrower desires to secure its
respective obligations under Subsidiary Guaranty (as hereinafter defined), by
granting to the Agent, for the benefit of the Agent and the Banks, (i) a first
priority Lien on substantially all of their respective real and personal
property and (ii) a first priority pledge of all of the capital stock of their
respective direct Subsidiaries;
<PAGE> 8
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Borrower, the Banks and the Agent
agree as follows:
SECTION 1. DEFINITIONS.
-----------
1.1 As used herein, the following terms shall have the following meanings:
"ACCOUNT" and "ACCOUNT RECEIVABLE" include all rights to payment for goods
sold or leased or for services rendered, all sums of money or other proceeds due
or becoming due thereon, all instruments pertaining thereto, all guaranties and
security therefor, and all rights pertaining to goods giving rise to such rights
to payment, including the right of stoppage in transit and all related
insurance.
"AFFILIATE" shall mean, with reference to any Person, (i) any director or
officer, (ii) any other Person controlling, controlled by or under direct or
indirect common control of that Person, (iii) any other Person directly or
indirectly holding five (5%) percent or more of the capital stock or other
equity interests (including options, warrants, convertible securities and
similar rights) of that Person and (iv) any other Person more than five (5%)
percent of whose capital stock or other equity interests (including options,
warrants, convertible securities and similar rights) is held directly or
indirectly by that Person.
"AGENT" has the meaning assigned to that term in the introduction to this
Agreement.
"AGREEMENT" means this First Amended and Restated Loan Agreement dated as
of January 31, 1997, as it may be amended, restated, supplemented or otherwise
modified from time to time.
"APPLICABLE MARGIN" means (i) for the period from the Effective Date to but
excluding the date that is six months after the Effective Date, 2.65%, (ii) for
the period from the date that is six months after the Effective Date to but
excluding the date that is nine months after the Effective Date, 3.65%, (iii)
for the period from the date that is nine months after the Effective Date to but
excluding the date that is twelve months after the Effective Date, 4.65% and
(iv) thereafter, 5.65%.
"ASSET SALE" means the sale (including in any sale-leaseback transaction)
by the Borrower or any of its Subsidiaries to any Person (other than the
Borrower or any of its wholly owned Subsidiaries) of (i) any of the stock of any
of the Borrower's Subsidiaries, (ii) all or substantially all of the assets of
any division or line of business of the Borrower or any of its Subsidiaries, or
(iii) any other assets other than (a) sales of assets in the ordinary course of
business, (b) sales of obsolete equipment, and (c) sales of obsolete Inventory
existing on the Effective Date and set forth on SCHEDULE 1.1 annexed hereto;
PROVIDED that in no event shall a sale of all or any portion of the receivables
of the Borrower or any of its Subsidiaries be deemed a sale of assets in the
ordinary course of business.
2
<PAGE> 9
"AVERAGE UNUSED COMMITMENT" for any period of time shall mean the daily
average difference between the aggregate amount of the Revolving Loan
Commitments and the Total Utilization of Revolving Loan Commitments during such
period.
"BANKS" shall means the persons identified as "BANKS" and listed on the
signature pages of this Agreement, together with their successors and permitted
assigns pursuant to Section 8.13; PROVIDED that the term "BANKS", when used in
the context of a particular Commitment, shall mean Banks having that Commitment.
"BASE ACCOUNTS" shall mean Accounts Receivable of the Borrower as to which
the Agent has a valid and perfected first-priority security interest and the
Borrower has furnished to the Agent information as provided by Section 5.1
hereof, and such Accounts Receivable have not been determined by the Agent in
its reasonable discretion to be not eligible for inclusion in the Borrowing
Base. If and when a Base Account exists by virtue of constituting proceeds of
Base Inventory, the Inventory giving rise to the Base Account automatically
loses its status as Base Inventory.
"BASE INVENTORY" shall mean Inventory as to which the Borrower has acquired
title, the Agent has acquired a valid and perfected first-priority security
interest and the Borrower has furnished to the Agent information as provided by
Section 5.1 hereof, and such Inventory has not been determined by the Agent in
its reasonable discretion to be not eligible for inclusion in the Borrowing
Base. Inventory immediately loses the status of Base Inventory if and when (i)
the Borrower sells it, otherwise passes title thereto or consumes it or (ii) the
Agent releases or transfers its security interest therein.
"BASE RATE" means, at any time, the higher of (i) the Prime Rate and (ii)
the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate.
"BORROWER PATENT AGREEMENT" means that certain Collateral Assignment of
Patents dated as of March 28, 1996, by and between the Borrower and the Agent
(as successor to the Prior Agent), as amended by that certain First Amendment to
Collateral Assignment of Patents dated as of the date hereof and as such
agreement may be further amended, restated, supplemented or otherwise modified
from time to time.
"BORROWER SECURITY AGREEMENT" means that certain Security Agreement (All
Asset) dated as of March 28, 1996, by and between the Borrower and the Agent (as
successor to the Prior Agent), as amended by that certain First Amendment to
Security Agreement (All Asset) dated as of the date hereof and as such agreement
may be further amended, restated, supplemented or otherwise modified from time
to time.
"BORROWER TRADEMARK AGREEMENT" means that certain Collateral Assignment of
Trademarks dated as of March 28, 1996, by and between the Borrower and the Agent
(as successor to the Prior Agent), as amended by that certain First Amendment to
Collateral Assignment of Trademarks dated as of the date hereof and as such
agreement may be further amended, restated, supplemented or otherwise modified
from time to time.
3
<PAGE> 10
"BORROWER'S ACCOUNTANTS" shall mean independent certified public
accountants acceptable to the Borrower and the Agent. The Borrower and the Agent
agree that Grant Thornton is an acceptable accountant for the Borrower until
such time as notice that such firm is not acceptable is sent to the Borrower by
the Agent.
"BORROWING BASE" shall mean an amount equal to the sum of: (i) 80% of the
Net Outstanding Amount of Base Accounts attributable to Domestic Accounts
Receivable and Foreign Accounts Receivable PLUS (ii) (a) the lesser of (I)
$11,000,000.00 or (II) 50% of the sum of Net Security Value of Base Inventory
plus Letters of Credit (other than standby letters of credit), less (b) the
inventory reserve reflected on the books and records of the Borrower.
"BORROWING BASE CERTIFICATE" has the meaning assigned that term in Section
5.1(g).
"BUSINESS DAY" means, any day other than a Saturday, Sunday or legal
holiday on which banks in New York, New York, are open for the conduct of a
substantial part of their commercial banking business.
"CANADIAN SUBSIDIARY GUARANTY" means that certain Canadian Subsidiary
Guaranty by Safety Canada and Orleans, dated as of the date hereof and
substantially in the form of EXHIBIT VII annexed hereto, as such Canadian
Subsidiary Guaranty may be amended, restated, supplemented or otherwise modified
from time to time in accordance with the terms hereof and thereof.
"CAPITAL EXPENDITURES" shall mean any expenditure for fixed assets,
leasehold improvements, installment purchases of machinery and equipment,
acquisitions of real estate and other similar expenditures including without
limitation any mold deposits, in each case to the extent reflected on the
statement of cash flows of the Borrower in accordance with GAAP.
"CASH PROCEEDS" means, with respect to any Asset Sale, Cash payments
(including any Cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means: all Accounts Receivable, Inventory, Machinery and
Equipment, fixtures, and all other goods, general intangibles, documents,
instruments and chattel paper, and all other tangible and intangible personal
property of the Loan Parties or another Person, now owned or hereafter acquired
which is designated as Collateral or in which the Agent is granted a security
interest to secure of any of the Obligations pursuant to any agreement
supplemental or ancillary hereto or otherwise, including, without limitation,
the Security Agreements and the Guaranty, whether or not any such agreement
makes reference to this Agreement or to the Obligations of the Loan Parties
hereunder.
"COMMITMENTS" means the commitments of the Banks to make and maintain Loans
as provided in Section 2.1.1.
4
<PAGE> 11
"COMMITMENT PERCENTAGE" means (i) with respect to all payments,
computations and other matters relating to the Term Loan Commitment or the Term
Loan of any Bank, the percentage obtained by DIVIDING (x) the Term Loan Exposure
of that Bank by (y) the aggregate Term Loan Exposure of all Banks and (ii) with
respect to all payments, computations and other matters relating to the
Revolving Loan Commitment or Revolving Loans of any Bank or any Letter of Credit
issued by any Bank or any participations purchased by any Bank therein, the
percentage obtained by DIVIDING (x) the Revolving Loan Exposure of that Bank by
(y) the aggregate Revolving Loan Exposure of all Banks and (iii) for all other
purposes with respect to each Bank, the percentage obtained by DIVIDING (x) the
sum of the Term Loan Exposure of that Bank PLUS the Revolving Loan Exposure of
that Bank by (y) the sum of the aggregate Term Loan Exposure of all Banks PLUS
the aggregate Revolving Loan Exposure of all Banks; in any such case as the
applicable percentage may be adjusted by assignments permitted hereunder. The
initial Commitment Percentage of each Bank for purposes of each of clauses (i),
(ii) and (iii) of the preceding sentence is set forth opposite the name of that
Bank in SCHEDULE 2.1 annexed hereto.
"CONSOLIDATED NET WORTH" shall mean the amount which is equal to the
consolidated net worth of the Borrower and its Subsidiaries, computed in
accordance with GAAP with inventory and cost of goods sold determined on a
"first in, first out" basis.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, total interest
expense (including that portion attributable to capital leases in accordance
with GAAP and capitalized interest) of the Borrower and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of the Borrower
and its Subsidiaries, including without limitation, all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs under interest rate agreement.
"CONTRA CUSTOMER" shall mean any customer or other Person with whom any
Loan Party has a contract and with respect to whom there is an Account
Receivable included in Base Accounts.
"CONTRAS" shall mean any amount which any Contra Customer may claim or
assert as an offset, charge or lien against any Base Account, including without
limitation the potential claim of any Contra Customer to offset such amount as
it may have to repay (because of an alleged preference payment by any Loan Party
to such Contra Customer under the Bankruptcy Code) to any Loan Party or its
legal representative in a bankruptcy proceeding involving any Loan Party.
"COVENANT COMPLIANCE CERTIFICATE" means a certificate substantially in the
form of Exhibit V attached hereto delivered by the Borrower pursuant to Section
5.1(b).
"DEBENTURE" means that certain Debenture dated as of the date hereof
between the Agent, as agent for the Banks, and Safety Europe, as the same may be
amended, restated, supplemented or otherwise modified from time to time.
5
<PAGE> 12
"DOMESTIC ACCOUNTS RECEIVABLE" shall mean the gross amount of those Base
Accounts which arise in the ordinary course of the business operations of the
Borrower, consistent with past practices, and are due from account debtors
located in the United States of America.
"EBIT" for any period shall be an amount equal to Net Income for such
period, PLUS the following, to the extent deducted in computing such Net Income:
(i) Consolidated Interest Expense and (ii) consolidated foreign, state, federal
or local income taxes.
"EBITDA" for any period shall mean the EBIT for the Borrower and its
Subsidiaries on a consolidated basis (from both continuing and discontinued
operations) for such period PLUS the sum of the depreciation and amortization
expense for the Borrower and its Subsidiaries on a consolidated basis for such
period.
"EFFECTIVE DATE" means the date this Agreement becomes effective in
accordance with its terms.
"ENCUMBRANCES" shall have the meaning set forth in Section 5.7 hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder.
"ERISA AFFILIATE" shall mean, within the meaning of Section 414(b), (c),
(m) or (o) of the Internal Revenue Code of 1986, as amended, (i) any member of a
controlled group of corporations which includes the Borrower, (ii) any trade or
business, whether or not incorporated, under common control with the
Borrower,(iii) any member of an affiliated service group which includes the
Borrower, and (iv) any member of a group treated as a single employer by
regulation.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 6.1 hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"EXISTING LETTERS OF CREDIT" shall have the meaning assigned that term in
Section 2.2.1(b) hereof.
"EXISTING LOAN AGREEMENT" has the meaning assigned to that term in the
recitals to this Agreement.
"EXISTING LOANS" means the loans outstanding under the Existing Loan
Agreement on the Effective Date.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as
6
<PAGE> 13
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by the Agent.
"FOREIGN ACCOUNTS RECEIVABLE" shall mean the gross amount of those Base
Accounts receivable generated by the Borrower which arise in the ordinary course
of the business operations of the Borrower, consistent with past practices, and
which are due from account debtors located outside the United States of America.
"FUNDING AND PAYMENT OFFICE" means the office of the Agent located at 85
Broad Street, New York New York 10004 or such offices of the Agent or any
successor Agent specified by the Agent or such successor Agent in a written
notice to the Borrower).
"FUNDING DATE" means the date of the funding of a Loan.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"GSCP" shall have the meaning assigned to that term in the introductory
paragraph to this Agreement.
"GOVERNMENTAL ACTS" has the meaning assigned to that term in Section 2.2.5
hereof.
"GUARANTY" means the Limited Guaranty dated August 2, 1996 executed by
Michael Lerner of the obligations and liabilities of the Borrower to the Banks,
which Guaranty is limited in amount as set forth therein, as amended by that
certain First Amendment to Limited Guaranty dated August 13, 1996, that certain
Second Amendment to Limited Guaranty dated October 18, 1996, that certain Third
Amendment to Limited Guaranty dated as of December 6, 1996, and that certain
Fourth Amendment to Limited Guaranty dated as of the date hereof and as it may
be further amended, restated, supplemented or otherwise modified from time to
time.
"INDEBTEDNESS" with respect to any Person shall mean and include, without
duplication, (i) any item which, in accordance with GAAP, would be included as a
liability on the balance sheet of such Person, including capitalized leases but
excluding anything in the nature of capital stock, surplus capital and retained
earnings, (ii) the face amount of all banker's acceptances and of all letters of
credit issued by any bank for the account of such Person and all drafts drawn
thereunder, (iii) the total amount of all indebtedness secured by any
Encumbrance to which any property or asset of such Person is subject, whether or
not the indebtedness secured thereby shall have been assumed, and (iv) the total
amount of all indebtedness and obligations of others which such Person has
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business), discounted with recourse or agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire,
including, without limitation, any agreement (a) to advance or supply funds to
such other Person to maintain working capital, equity capital, net worth or
solvency, or (b) otherwise to assure or hold harmless such other Person against
loss in respect of its obligations.
7
<PAGE> 14
"INITIAL FINANCIAL STATEMENT" shall have the meaning set forth in Section
3.7 hereof.
"INSOLVENT" or "INSOLVENCY" shall mean that there shall have occurred one
or more of the following events with respect to a Person: dissolution;
termination of existence; insolvency within the meaning of the United States
Bankruptcy Code or other applicable statute; such Person's inability to pay its
debts as they come due; appointment of a receiver of all or any part of the
property of, execution of a trust mortgage or an assignment for the benefit of
creditors by, or the filing of a petition in bankruptcy or the commencement of
any proceedings under any bankruptcy or insolvency laws, or any laws relating to
the relief of debtors, readjustment of indebtedness or reorganization of
debtors, or the offering of a plan to creditors for composition or extension,
except for an involuntary proceeding commenced against such Person which is
dismissed within 60 days after the commencement thereof without the entry of an
order for relief or the appointment of a trustee.
"INTERNATIONAL" means Safety 1st International, Inc., a U.S. Virgin Islands
corporation.
"INVENTORY" shall mean goods, merchandise and other personal property
(other than Machinery and Equipment), now owned or hereafter acquired by any
Loan Party, which are: (i) held for sale or lease or are furnished or to be
furnished under a contract of service or (ii) are raw materials, work in
process, or (iii) are materials used or consumed or to be used or consumed in
the Loan Parties' businesses.
"ISSUING BANK" means, with respect to any Letter of Credit, the Bank or
other financial institution that issued such Letter of Credit, as provided in
Section 2.2.1.
"LEASES" shall mean any agreement granting a person the right to occupy
space in a structure or real estate for any period of time or any capital lease
or other lease of or agreement to use personal property including, but not
limited to, machinery, equipment, furniture and fixtures, whether evidenced by
written or oral lease, contract, sales agreement or other agreement no matter
how characterized.
"LERNER PLEDGE AGREEMENT" means that certain Third Party Pledge Agreement
dated as of August 2, 1996 executed by and between Michael Lerner and the Agent
(as assignee of the Prior Agent), as amended by that certain First Amendment to
Third Party Pledge Agreement dated as of August 13, 1996, that certain Second
Amendment to Third Party Pledge Agreement dated as of October 18, 1996, that
certain Third Amendment to Third Party Pledge Agreement dated as of December 6,
1996 and that certain Fourth Amendment to Third Party Pledge Agreement dated as
of the date hereof and as such Pledge Agreement may be amended, restated
(including without limitation pursuant to Section 5.33 hereof), supplemented or
otherwise modified from time to time.
"LERNER TRUST" means the Delaware business trust established pursuant to
Section 5.33 hereof.
8
<PAGE> 15
"LERNER TRUST SECURITY AGREEMENT" means that certain Security Agreement
executed by the Lerner Trust pursuant to Section 5.33 hereof and substantially
in the form attached as EXHIBIT X hereto, as such Security Agreement may be
amended, restated, supplemented or otherwise modified from time to time.
"LETTER OF CREDIT USAGE" means, as at any date of determination, the sum of
(i) the maximum aggregate amount which is or at any time thereafter may become
available for drawings under all Letters of Credit then outstanding PLUS (ii)
the aggregate amount of all drawings under Letters of Credit honored by Issuing
Banks and not theretofore reimbursed by the Borrower (including any such
reimbursement out of the proceeds of Revolving Loans).
"LETTERS OF CREDIT" shall mean the letters of credit issued or deemed
issued pursuant to Section 2.2.1.
"LOAN" and "LOANS" shall mean, collectively, the Revolving Loans and the
Term Loans.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Revolving
Notes, the Term Notes, the Guaranty, the Canadian Subsidiary Guaranty, the
Safety Europe Guaranty, the Safety International Guaranty, the Security
Agreements, and the Letters of Credit, if any (and all Letter of Credit
applications and reimbursement agreements executed and delivered in connection
therewith), together with any agreements, instruments or documents contemplated
thereby, and all schedules, exhibits and annexes thereto together with any and
all modifications, amendments, restatements, supplements and extensions thereto
or thereof.
"LOAN PARTIES" means, collectively, the Borrower and each Subsidiary of the
Borrower that is a party to any Loan Document.
"MACHINERY AND EQUIPMENT" shall mean any tangible personal property of the
Loan Parties which is not Inventory.
"MAJORITY BANKS" shall mean those Banks having or holding not less than 51%
of the sum of the aggregate Term Loan Exposure of all Banks PLUS the aggregate
Revolving Loan Exposure of all Banks.
"MATURITY DATE" shall mean May 1, 1998.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, Cash Proceeds of
such Asset Sale net of bona fide direct costs of sale including, without
limitation, (i) income taxes reasonably estimated to be actually payable as a
result of such Asset Sale within one year of the date of receipt of such Cash
Proceeds, (ii) transfer, sales, use and other taxes payable in connection with
such Asset Sale (after giving effect to all available tax credits and net
operating losses), (iii) payment of the outstanding principal amount of, premium
or penalty, if any, and interest on any Indebtedness (other than the Loans) that
is secured by an Encumbrance on the stock or assets in question and that is
required to be repaid under the terms thereof as a result of
9
<PAGE> 16
such Asset Sale, and (iv) broker's commissions and reasonable fees and expenses
of counsel in connection with such Asset Sale.
"NET INCOME" shall mean the consolidated gross revenues of the Borrower and
its Subsidiaries for the period in question, less all expenses and other proper
charges (including taxes on income), all determined in accordance with GAAP, but
in any event, excluding from Net Income: (i) any gain or loss arising from any
write-up of assets, except to the extent inclusion thereof shall be approved in
writing by the Majority Banks; (ii) earnings of any Subsidiary accrued prior to
the date it became a Subsidiary; (iii) the net earnings of any business entity
(other than a Subsidiary) in which the Borrower or any Subsidiary has an
ownership interest, except to the extent such net earnings shall have actually
been received by the Borrower or such Subsidiary in the form of cash
distributions; (iv) any gains or losses on the sale or other disposition of
investments or fixed or capital assets, any taxes on any such excluded gains,
and tax deductions or credits on account of any such excluded losses; (v) the
proceeds of any life insurance policy; (vi) any deferred or other credit
representing any excess of the equity of any Subsidiary at the date of
acquisition thereof over the amount invested in such Subsidiary; and (vii) any
reversal of any contingency reserve, except to the extent that provision for
such contingency reserve shall be made from income arising during such period.
"NET OUTSTANDING AMOUNT OF BASE ACCOUNTS" shall mean the net amount of Base
Accounts outstanding after (i) eliminating from the aggregate amount of
outstanding Base Accounts those Domestic Accounts Receivable and Foreign
Accounts Receivable (a) unpaid more than one hundred twenty (120) days after
invoice date or more than sixty (60) days from their respective due dates, (b)
owed by any governmental entity, (c) relating to Inventory sold on consignment
and (d) owed by any Person if more than 50% of the Accounts Receivable owed by
such Person to the Borrower are past due, (ii) deducting from the aggregate face
amount of the remaining Base Accounts (y) Accounts owing from Affiliates and (z)
all payments, adjustments, Contras and credits applicable thereto and all
amounts due thereon considered by the Agent to be difficult to collect or
uncollectible by reason of return, rejection, repossession, loss or damage of or
to the merchandise giving rise thereto, a merchandise or other dispute,
insolvency of the account debtor, the results of any credit checkings of foreign
account debtors performed by the Agent, risks relating to the country of
origination of any Account Receivable or any other reason, and Foreign Accounts
Receivable owed to the Borrower which are not backed, on terms and conditions
acceptable to the Agent, by letters of credit acceptable to the Agent or foreign
credit insurance acceptable to the Agent, all as determined by the Agent in its
discretion, which determination shall be final and binding upon the Borrower and
(iii) eliminating from the aggregate amount of outstanding Base Accounts those
Accounts Receivable determined by the Agent in its reasonable discretion to be
inappropriate for inclusion in the Borrowing Base. Without limiting the
foregoing, the Net Outstanding Amount of the Base Accounts shall also be reduced
by any Accounts Receivables owed by processors or other packagers of inventory.
"NET SECURITY VALUE OF BASE INVENTORY" shall mean the net value of Base
Inventory, calculated at the lesser of fair market value or cost determined on
the "first-in, first-out" basis, after subtracting the value of Base Inventory
(i) which is in transit to or from the Loan Parties or which is damaged or
defective and after taking into account charges and liens, other than those
10
<PAGE> 17
of the Agent, of all kinds against the Base Inventory, changes in the market
value thereof, and transportation, processing and other handling charges
affecting the value thereof (other than "freight in", customs and duty charges),
all as determined by the Agent in its reasonable discretion, (ii) that relates
to capitalized labor or overhead or other capitalized costs, (iii) that relates
to Inventory sold on consignment or (iv) that is determined by the Agent in its
reasonable discretion to be inappropriate for inclusion in the Borrowing Base.
The Net Security Value of Base Inventory shall also be reduced by the lesser of:
(a) accounts payable to any creditor of the Borrower at whose business location
Inventory of the Borrower is stored or held, and (b) the lesser of the book or
cost value of such Inventory of the Loan Parties stored or held by such creditor
or creditors.
"NOTES" means, collectively, the Term Notes and the Revolving Notes.
"NOTICE OF BORROWING" means a notice in the form of EXHIBIT III annexed
hereto delivered by the Borrower to the Agent pursuant to Section 2.1.2 with
respect to a proposed borrowing.
"OBLIGATION(S)" shall mean any and all obligations of the Loan Parties and
their Subsidiaries to the Agent and/or any Bank, or any of their respective
Affiliates or Subsidiaries, of every kind and description (including obligations
of the Borrower in respect of Letters of Credit and fees thereunder and Loans
under this Agreement), direct or indirect, absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising, whether
arising under this Agreement or regardless of how they arise or by what
agreement or instrument they may be evidenced or whether evidenced by any
agreement or instrument, and includes obligations to perform acts and to refrain
from acting as well as obligations to pay money.
"OFFICER'S CERTIFICATE" means, as applied to any corporation, a certificate
executed on behalf of such corporation by its chairman of the board (if an
officer) or its president or its chief financial officer; PROVIDED that every
Officer's Certificate with respect to the compliance with a condition precedent
to the making of any Loans hereunder shall include (i) a statement that the
officer making or giving such Officer's Certificate has read such condition and
any definitions or other provisions contained in this Agreement relating
thereto, (ii) a statement that, in the opinion of the signer he or she has made
or has caused to be made such examination or investigation as is reasonably
necessary to enable him or her to express an informed opinion as to whether or
not such condition has been complied with, and (iii) a statement as to whether,
in the opinion of the signer, such condition has been complied with.
"ORLEANS" means Safety 1st Home Products Canada, Inc., a Canadian federal
corporation.
"ORLEANS HYPOTHEC" means that certain Movable Hypothec dated as of the date
hereof granted by Orleans as such Movable Hypothec may be amended, restated,
supplemented or otherwise modified from time to time.
11
<PAGE> 18
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, and a government or
agency or political subdivision thereof.
"PLAN" shall have the meaning set forth in Section 3.14 hereof.
"PRIME RATE" shall mean, as of any date of determination, the highest rate
of interest reported as the prime rate as of such date of determination by
Citibank, N.A., The Chase Manhattan Bank and Morgan Guaranty Bank & Trust
Company. The Prime Rate is a reference rate and does not necessarily represent
the lowest or best rate actually charged to any customer.
"PRIOR AGENT" shall have the meaning assigned to that term in the recitals
to this Agreement.
"PRIOR LENDERS" shall have the meaning assigned to that term in the
recitals to this Agreement.
"PURCHASE AGREEMENT" means, that certain Assignment Agreement, dated as of
January 31, 1997 and by and between GSCP, as buyer, and Fleet National Bank, The
First National Bank of Boston and USTrust, as seller, as such agreement may be
amended, restated, supplemented or otherwise modified from time to time.
"REGISTER" has the meaning assigned to that term in Section 2.1.4 hereof.
"RESTRICTED PAYMENT" shall mean (i) any cash or property dividend or
distribution, direct or indirect, to any person who now or in the future may
hold an equity interest in the Borrower, whether evidenced by a security or not,
other than: (a) regular compensation and bonuses paid to employees of the
Borrower and its Subsidiaries in the ordinary course of business and consistent
with past practices, and (b) dividends payable solely in common stock of the
Borrower, (ii) any purchase, redemption, retirement or other acquisition for
value of any capital stock of the Borrower or any of its Subsidiaries whether
now or hereafter outstanding, or of any options, warrants or similar rights to
purchase such stock or of any security convertible into or exchangeable for such
stock and (iii) any prepayment, or defeasance or similar payment with respect to
the Seller Notes.
"REVOLVING LOAN COMMITMENT" means the commitment of a Bank to make
Revolving Loans to the Borrower pursuant to Section 2.1.1(b) and "REVOLVING LOAN
COMMITMENTS" means such commitments of all Banks in the aggregate.
"REVOLVING LOAN ACCOUNT" shall mean the account on the books of the Agent
in which will be recorded Revolving Loans made by the Banks to the Borrower
pursuant to this Agreement, payments made on such Revolving Loans and other
appropriate debits and credits as provided by this Agreement.
"REVOLVING LOAN EXPOSURE" means, with respect to any Bank as of any date of
determination (i) prior to the termination of the Revolving Loan Commitments,
that Bank's
12
<PAGE> 19
Revolving Loan Commitment and (ii) after the termination of the Revolving Loan
Commitments, the sum of (a) the aggregate outstanding principal amount of the
Revolving Loans of that Bank PLUS (b) in the event that Bank is an Issuing Bank,
the aggregate Letter of Credit Usage in respect of all Letters of Credit issued
by that Bank (net of any participations purchased by other Banks in any
outstanding Letters of Credit or any unreimbursed drawings under any Letters of
Credit).
"REVOLVING LOANS" means the Loans made by the Banks to the Borrower
pursuant to Section 2.1.1(b).
"REVOLVING NOTES" means (i) the promissory notes of the Borrower issued
pursuant to Section 2.1.5 on the Effective Date in respect of the Revolving Loan
Commitments and Revolving Loans and (ii) any promissory notes issued by the
Borrower pursuant to the last sentence of Section 8.13 in connection with
assignments of the Revolving Loan Commitment and Revolving Loans of any Bank, in
each case substantially in the form of EXHIBIT I annexed hereto, as the same may
be amended, restated, supplemented or otherwise modified from time to time.
"SAFETY CANADA" means 3232301 Canada Inc., a Canadian federal corporation.
"SAFETY CANADA HYPOTHEC" means that certain Movable Hypothec dated as of
the date hereof granted by Safety Canada as such Movable Hypothec may be
amended, restated, supplemented or otherwise modified from time to time.
"SAFETY EUROPE" means Safety 1st (Europe) Limited, a limited liability
company organized under the laws of the United Kingdom.
"SAFETY EUROPE GUARANTY" means that certain Guarantee by Safety Europe,
dated as of the date hereof and substantially in the form of EXHIBIT VI annexed
hereto, as such Guarantee may be amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms hereof and thereof.
"SAFETY INTERNATIONAL" means Safety 1st International, Inc., a U.S. Virgin
Islands corporation.
"SAFETY INTERNATIONAL GUARANTY" means that certain Guaranty Agreement dated
as of the date hereof, executed by Safety International in substantially the
form attached hereto as EXHIBIT VIII, as such guaranty may be amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms hereof and thereof.
"SAFETY INTERNATIONAL SECURITY AGREEMENT" means that certain Security
Agreement (All Asset) dated as of March 28, 1996, by and between Safety
International and the Agent (as successor to the Prior Agent), as amended by
that certain First Amendment to Security Agreement (All Asset) dated as of the
date hereof and as such agreement may be further amended, restated, supplemented
or otherwise modified from time to time in accordance with the terms hereof and
thereof.
13
<PAGE> 20
"SECURITIES" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"SECURITY AGREEMENTS" shall mean, collectively, the Borrower Security
Agreement, Borrower Trademark Agreement, Borrower Patent Agreement, Safety
International Security Agreement, Safety Canada Hypothec, Orleans Hypothec,
Debenture, Lerner Trust Security Agreement, Lerner Pledge Agreement and each
other agreement pursuant to which a security interest or other Encumbrance is
granted in favor of the Agent to secure the Obligations, as each such agreement
may be amended, restated, supplemented or otherwise modified from time to time.
"SELLER NOTES" means, collectively, (i) those certain promissory notes,
each dated as of March 15, 1996, executed by Safety Canada in favor of Stephen
Orleans and (ii) those certain promissory notes, each dated as of January 4,
1996, executed by the Borrower in favor of Stephan Paul Tollman, as such notes
may be amended, restated, supplemented or otherwise modified to the extent
permitted herein or therein.
"STATED AMOUNT" shall mean, with respect to each Letter of Credit
outstanding at any given time, the maximum amount then available to be drawn
thereunder (without regard to whether any conditions to drawing could then be
met), plus any outstanding unreimbursed drawings under each Letter of Credit.
"SUBSIDIARY" shall mean, with reference to any person, any corporation,
association, joint stock company, limited liability company, business trust or
other similar organization of whose total capital stock or voting stock such
person directly or indirectly owns or controls more than 50% thereof or any
partnership or other entity in which such person directly or indirectly has more
than a 50% interest or which is controlled directly or indirectly by such
person.
"SUBSIDIARY GUARANTIES" means, collectively, the Safety Europe Guaranty,
Canadian Subsidiary Guaranty, Safety International Guaranty and each other
guaranty, if any, executed from time to time by any Subsidiary of the Borrower,
as each such guaranty may be amended, restated, supplemented or otherwise
modified from time to time to the extent permitted herein and therein.
"TERM LOAN COMMITMENT" means the commitment of a Bank to maintain Existing
Loans as Term Loans pursuant to Section 2.1.1(a) and "Term Loan Commitments"
means such commitments of all Banks in the aggregate.
"TERM LOAN EXPOSURE" means, with respect to any Bank as of any date of
determination, the outstanding principal amount of the Term Loan of that Bank.
14
<PAGE> 21
"TERM LOANS" shall mean the Loans made by the Banks to the Borrower
pursuant to Section 2.1.1(a).
"TERM NOTES" means (i) the promissory notes of the Borrower issued pursuant
to Section 2.1.5 on the Effective Date in respect of the Term Commitments and
Term Notes and (ii) any promissory notes issued by the Borrower pursuant to the
last sentence of Section 8.13 in connection with assignments of the Term
Commitment and Term Loans of any Bank, in each case substantially in the form of
EXHIBIT II annexed hereto, as the same may be amended, restated, supplemented or
otherwise modified from time to time.
"TOTAL UTILIZATION OF REVOLVING LOAN COMMITMENTS" means, as at any date of
determination, the sum of (i) the aggregate principal amount of all outstanding
Revolving Loans (other than Revolving Loans made for the purpose of reimbursing
the applicable Issuing Bank for any amount drawn under any Letter of Credit but
not yet so applied) PLUS (ii) the Letter of Credit Usage.
"WARRANTS" means those certain warrants issued by the Borrower on the
Effective Date pursuant to Section 4.1.4 hereof, as such Warrants may be
amended, restated, supplemented or otherwise modified from time to time.
1.2 All accounting terms used herein which are not specifically defined
herein shall have the meanings customarily given to them in accordance with
GAAP.
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS.
------------------------------------------
2.1 REVOLVING LOANS.
---------------
2.1.1 COMMITMENTS. Subject to the term and conditions of this
Agreement and in reliance upon the representations and warranties of Loan
Parties set forth herein and in the other Loan Documents, each Bank hereby
severally agrees to make and maintain the Loans described in Sections 2.1.1(a)
and 2.1.1(b).
(a) TERM LOANS. Each Bank severally agrees to convert Existing
Loans outstanding on the Effective Date in an amount equal to its Commitment
Percentage of the aggregate amount of Term Loan Commitments to Term Loans and to
maintain such converted Existing Loans hereunder as Term Loans. The amount of
each Bank's Term Loan Commitment is set forth opposite its name on SCHEDULE 2.1
annexed hereto and the aggregate amount of the Term Loan Commitments is
$25,000,000; PROVIDED that the Term Loan Commitments of Banks shall be adjusted
to give effect to any assignments of the Term Loan Commitments pursuant to
Section 8.13. Term Loans that are repaid or prepaid may not be reborrowed.
(b) REVOLVING LOANS. Each Bank severally agrees, subject to the
limitations set forth below with respect to the maximum amount of Revolving
Loans permitted to be outstanding from time to time, to lend to the Borrower
from time to time during the period from the Effective Date to but excluding the
Maturity Date an aggregate amount which shall not
15
<PAGE> 22
exceed its Commitment Percentage of the aggregate amount of the Revolving Loan
Commitments, to be used for the purposes identified in Section 2.5.2. All
Existing Loans outstanding on the Effective Date and not converted to Term Loans
pursuant to Section 2.1.1(a) shall be converted to Revolving Loans and may be
repaid and reborrowed as provided in this Section 2.1.1(b). The original amount
of each Bank's Revolving Loan Commitment is set forth opposite its name on
SCHEDULE 2.1 annexed hereto and the aggregate original amount of the Revolving
Loan Commitments is $20,000,000; PROVIDED that the Revolving Loan Commitments of
Banks shall be adjusted to give effect to any assignments of the Revolving Loan
Commitments pursuant to Section 8.13; PROVIDED FURTHER that the amount of the
Revolving Loan Commitments shall be reduced from time to time by the amount of
any reductions thereto made pursuant to Sections 2.4.2(b) or 2.4.2(c). Each
Bank's Revolving Loan Commitment shall expire on the Maturity Date and all
Revolving Loans and all other amounts owed hereunder with respect to the
Revolving Loans and the Revolving Loan Commitments shall be paid in full no
later than that date. Amounts borrowed under this Section 2.1.1(b) may be repaid
and reborrowed to but excluding the Maturity Date.
Notwithstanding anything contained herein to the contrary, in no event
shall the Total Utilization of Revolving Loan Commitments at any time exceed the
lesser of (i) the Revolving Loan Commitments then in effect and (ii) the
Borrowing Base.
2.1.2 BORROWING MECHANICS. Term Loans or Revolving Loans made on any
Funding Date (other than a Revolving Loan made for the purpose of reimbursing
any Issuing Bank for the amount of a drawing or payment under a Letter of Credit
issued by it) shall be in an aggregate minimum amount of $50,000 and integral
multiples of $25,000 in excess of that amount. Whenever the Borrower desires
that Banks make Term Loans or Revolving Loans it shall deliver to the Agent a
Notice of Borrowing no later than 12:00 Noon (New York City time), at least one
Business Day in advance of the proposed Funding Date. In lieu of delivering the
above-described Notice of Borrowing , the Borrower may give the Agent telephonic
notice by the required time of any proposed borrowing under this Section 2.1.2;
PROVIDED that such notice shall be promptly confirmed in writing by delivery of
a Notice of Borrowing to the Agent on or before the applicable Funding Date.
Neither the Agent nor any Bank shall incur any liability to any Loan
Party in acting upon any telephonic notice referred to above that the Agent
believes in good faith to have been given by a duly authorized officer or other
person authorized to borrow on behalf of the Borrower or for otherwise acting in
good faith under this Section 2.1.2, and upon funding of Loans by Banks in
accordance with this Agreement pursuant to any such telephonic notice the
Borrower shall have effected Loans hereunder.
The Borrower shall notify the Agent prior to the funding of any Loans
in the event that any of the matters to which the Borrower is required to
certify in the applicable Notice of Borrowing are no longer true and correct as
of the applicable Funding Date, and the acceptance by the Borrower of the
proceeds of any Loans shall constitute a recertification by the Borrower, as of
the applicable Funding Date, as to the matters to which is required to certify
in the applicable Notice of Borrowing.
16
<PAGE> 23
2.1.3 DISBURSEMENT OF FUNDS. All Term Loans and all Revolving Loans
under this Agreement shall be made by Banks simultaneously and proportionately
to their respective Commitment Percentages, it being understood that no Bank
shall be responsible for any default by any other Bank in that other Bank's
obligation to make a Loan requested hereunder nor shall the Commitment of any
Bank to make the particular type of Loan requested be increased or decreased as
a result of a default by any other Bank in that other Bank's obligation to make
a Loan requested hereunder. Promptly after receipt by the Agent of a Notice of
Borrowing pursuant to Section 2.1.2 (or telephonic notice in lieu thereof), the
Agent shall notify each Bank of the proposed borrowing and of the amount of such
Bank's Commitment Percentage of the applicable Loans.
Each Bank shall make the amount of its Loan available to the Agent not
later than 12:00 Noon (New York City time) on the applicable Funding Date in
same day funds, at the Funding and Payment Office. Except with respect to
Revolving Loans used to reimburse any Issuing Bank for the amount of an honored
drawing or payment under a Letter of Credit issued by it, upon satisfaction or
waiver of the conditions precedent specified in Section 4.1 (in the case of
Loans made on the Effective Date) and Section 4.2 (in the case of all Loans),
the Agent shall make the proceeds of such Loans available to the Borrower on the
applicable Funding Date by causing an amount of same day funds equal to the
proceeds of all such Loans received by the Agent from the Banks to be credited
to the account of the Borrower designated in the Notice of Borrowing.
Unless the Agent shall have been notified by any Bank prior to the Funding
Date for any Loans that such Bank does not intend to make available to the Agent
the amount of such Bank's Loan requested on such Funding Date, the Agent may
assume that such Bank has made such amount available to the Agent on such
Funding Date and the Agent may, in its sole discretion, but shall not be
obligated to, make available to the Borrower a corresponding amount on such
Funding Date. If such corresponding amount is not in fact made available to the
Agent by such Bank, the Agent shall be entitled to recover such corresponding
amount on demand from such Bank together with interest thereon, for each day
from such Funding Date until the date such amount is paid to the Agent, at the
customary rate set by the Agent for the correction of errors among banks for
three Business Days and thereafter at the Base Rate. If such Bank does not pay
such corresponding amount forthwith upon the Agent's demand therefor, the Agent
shall promptly notify the Borrower and Borrower shall immediately pay such
corresponding amount in the to the Agent together with interest thereon, for
each day from such Funding Date until the date such amount is paid to the Agent,
at the rate applicable to such Loan. Nothing in this Section 2.1.3 shall be
deemed to relieve any Bank from its obligation to fulfill its Commitments
hereunder or to prejudice any rights that the Borrower may have against any Bank
as a result of any default by such Bank hereunder.
2.1.4 THE REGISTER.
(a) The Agent shall maintain, at the address referred to in Section
9.2, a register for the recordation of the names and addresses of the Banks
and the Commitments and Loans of each Bank from time to time (the
"REGISTER"). The Register shall be
17
<PAGE> 24
available for inspection by the Borrower at any reasonable time and from
time to time upon reasonable prior notice.
(b) The Agent shall record in the Register the Commitments and the
outstanding Loans from time to time of each Bank and each repayment or
prepayment in respect of the principal amount of the outstanding Loans of
each Bank. Any such recordation shall be conclusive and binding on the
Borrower and each Bank, absent manifest error; PROVIDED that failure to
make any such recordation, or any error in such recordation, shall not
affect the Borrower's Obligations in respect of the applicable Loans.
(c) Each Bank shall record on its internal records (including, without
limitation, the Notes held by such Bank) the amount of each Loan made by it
and each payment in respect thereof. Any such recordation shall be prima
facie evidence of the amount of such Loans; PROVIDED that failure to make
any such recordation, or any error in such recordation, shall not affect
the Borrower's Obligations in respect of the applicable Loans; and
PROVIDED, FURTHER that in the event of any inconsistency between the
Register and any Bank's records, the recordations in the Register shall
govern.
(d) The Borrower, the Agent and the Banks shall deem and treat the
Persons listed as Banks in the Register as the holders and owners of the
corresponding Commitments and Loans listed therein for all purposes hereof,
and no assignment or transfer of any Commitment or Loan shall be effective,
in each case unless an until an assignment agreement effecting the
assignment or transfer thereof shall have been approved by the Agent as
provided in Section 8.13. Prior to such recordation, all amounts owed with
respect to the applicable Commitment or Loan shall be owed to the Bank
listed in the Register as the owner thereof, and any request, authority or
consent of any Person who, at the time of making such request or giving
such authority or consent, is listed in the Register as a Bank shall be
conclusive and binding on any subsequent holder, assignee or transferee of
the corresponding Commitments or Loans.
(e) The Borrower hereby designates GSCP, and any financial institution
serving as a successor the Agent, to serve as the Borrower's agent solely
for purposes of maintaining the Register as provided in this Section 2.1.4,
and the Borrower hereby agrees that, to the extent GSCP serves in such
capacity, GSCP and its officers, directors, employees, agents and
affiliates shall constitute indemnitees for all purposes under Section 9.7.
2.1.5 NOTES. The Borrower shall execute and deliver on the Effective Date
to each Bank (or to the Agent for that Bank) (a) a Revolving Note substantially
in the form of EXHIBIT I annexed hereto, to evidence that Bank's Revolving
Loans, in the principal amount of that Bank's Revolving Loan Commitment and with
other appropriate insertions, (b) a Term Note substantially in the form of
EXHIBIT II annexed hereto to evidence that Bank's Term Loans, in the principal
amount of that Bank's Term Loan Commitment and with other appropriate
insertions. The Notes and the Obligations evidenced thereby shall be governed
by, subject to and benefit from all of the terms and conditions of this
Agreement and the other Loan Documents and shall be guarantied and/or secured by
the Collateral as provided in the Loan Documents.
18
<PAGE> 25
2.2 LETTERS OF CREDIT.
-----------------
2.2.1 ISSUANCE OF LETTERS OF CREDIT. (a) Upon the terms and subject to
the conditions of this Agreement, and in reliance upon the representations,
warranties and covenants of the Loan Parties made herein and in the Loan
Documents, the Agent, under the joint responsibilities of the Banks, agrees to
use its reasonable best efforts to cause a financial institution reasonably
satisfactory to the Borrower to issue Letters of Credit, to the extent permitted
by law and the Uniform Customs and Procedures governing Letters of Credit
(Publication No. 500 or any successor thereto), upon the application of the
Borrower and on terms, and pursuant to documentation, reasonably satisfactory to
the Agent during the period from the Effective Date to the Maturity Date:
PROVIDED that (i) the Letter of Credit Usage shall not exceed at any time One
Million ($1,000,000.00) Dollars and (ii) the Total Utilization of Revolving Loan
Commitments shall not exceed the lesser of (a) the aggregate amount of the
Revolving Loan Commitments then in effect and (b) the Borrowing Base; and
PROVIDED, FURTHER, that at the time the Borrower requests the issuance of a
Letter of Credit and after giving effect to the issuance thereof, there has not
occurred and is not continuing an Event of Default or any event which, with the
giving of notice or the passage of time, or both would constitute an Event of
Default. All Letters of Credit shall expire not later than the Maturity Date.
(b) All letters of credit outstanding under the Existing Loan
Agreement on the Effective Date (the "EXISTING LETTERS OF CREDIT") shall be
deemed outstanding under this Agreement and, on the date of any drawing or
payment thereunder, the Borrower shall reimburse the Issuing Bank in
immediately available funds in an amount equal to the amount of such
drawing or payment.
(c) Immediately upon the issuance or deemed issuance of each Letter of
Credit, each Bank shall be deemed to, and hereby agrees to, have
irrevocably purchased from the Issuing Bank a participation in such Letter
of Credit and any drawings honored thereunder in an amount equal to such
Lender's Commitment Percentage of the maximum amount which is or at any
time may become available to be drawn thereunder.
2.2.2 FURTHER ASSURANCES. In order to evidence such Letters of Credit,
the Borrower shall enter into, with the Agent, such agreements and execute such
instruments and documents as the Agent may require, including, but not limited
to, a Letter of Credit application and reimbursement agreement. The Borrower
hereby acknowledges and agrees that its president, treasurer and vice president,
and those other persons or officers identified in writing to the Agent are each
authorized to sign applications for the issuance of Letters of Credit and that
the execution and submission thereof to the Agent by any such person or officer
for the account of the Borrower shall be for the benefit and liability hereunder
of the Borrower.
2.2.3 OBLIGATIONS ABSOLUTE. On the date of any drawing or payment
under any Letter of Credit, the Borrower shall reimburse the Issuing Bank in
immediately available funds in an amount equal to the amount of such drawing or
payment. The obligation of the Borrower to reimburse each Issuing Bank for
drawings honored or payments made under the Letters of Credit issued by it shall
be unconditional and irrevocable and shall be paid strictly in accordance
19
<PAGE> 26
with the terms of this Agreement under all circumstances including, without
limitation, the following circumstances:
(a) any lack of validity or enforceability of any Letter of Credit;
(b) the existence of any claim, set-off, defense or other right which
the Borrower or any Bank may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), any Issuing Bank or other Bank or any other
Person or, in the case of a Bank, against the Borrower whether in
connection with this Agreement, the transactions contemplated herein or any
unrelated transaction (including any underlying transaction between the
Borrower or one of its Subsidiaries and the beneficiary for which any
Letter of Credit was procured);
(c) any draft, demand, certificate or other document presented under
any 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;
(d) payment by the applicable Issuing Bank under any Letter of Credit
against presentation of a demand, draft or certificate or other document
which does not substantially comply with the terms of such Letter of
Credit;
(e) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of the Borrower or
any of its Subsidiaries;
(f) any breach of this Agreement or any other Loan Document by any
party thereto;
(g) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing; or
(h) the fact that an Event of Default or any event which, with the
giving of notice or the passage of time, or both would constitute an Event
of Default shall have occurred and be continuing;
PROVIDED, in each case, that payment by the applicable Issuing Bank under the
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Bank under the circumstances in question (as
determined by a final judgment of a court of competent jurisdiction).
2.2.4 NATURE OF ISSUING BANK'S DUTIES. As between the Borrower and any
Issuing Bank, the Borrower assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit issued by such Issuing Bank by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, such Issuing Bank shall not be responsible for: (a) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate,
20
<PAGE> 27
fraudulent or forged; (b) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any such Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (c) failure
of the beneficiary of any such Letter of Credit to comply fully with any
conditions required in order to draw upon such Letter of Credit; (d) errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher;
(e) errors in interpretation of technical terms; (f) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (g) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing or payment under such Letter of Credit; or (h) any consequences
arising from causes beyond the control of such Issuing Bank, including, without
limitation, any act or omission, whether rightful or wrongful, of any present or
future de jure or de facto government or governmental authority (all such acts
or omissions herein called "GOVERNMENTAL ACTS"), and none of the above shall
affect or impair, or prevent the vesting of, any of such Issuing Bank's rights
or powers hereunder.
2.3 INTEREST AND FEES.
-----------------
2.3.1 RATE OF INTEREST. Loans shall bear interest at a rate per annum
equal to the Base Rate in effect from time to time plus the Applicable Margin;
PROVIDED, that if an Event of Default shall occur, then at the option of the
Banks the unpaid balance of Loans and any interest payments not paid when due
and any fees and other amounts then due and payable hereunder shall bear
interest (including post-petition interest in any proceeding under the
Bankruptcy Code or other applicable insolvency laws), to the extent permitted by
law, compounded monthly at a rate per annum equal to 2% in excess of the
interest rate otherwise payable under this Agreement for the applicable Loans
(including post-petition interest in any proceeding under the Bankruptcy Code or
other applicable insolvency laws), in each case until such Event of Default is
cured or waived. Interest on Loans shall be payable monthly in arrears on the
last Business Day of each month commencing February 28, 1997. Any change in the
Base Rate shall result in a change on the same day in the rate of interest to
accrue from and after such day on the unpaid balance of principal of the Loans
bearing interest with reference to the Base Rate. Interest accruing on the
unpaid balance of Loans from time to time shall be calculated on the basis of a
360-day year for the actual number of days elapsed.
2.3.2 LATE FEE. If the entire amount of any required principal and/or
interest payment on any Loan is not paid in full within ten (10) days after the
same is due, the Borrower shall pay to the Agent a late fee equal to five (5%)
percent of the required payment. Any late charge shall be shared among the Banks
in accordance with the respective Commitment Percentages of the Banks.
2.3.3 COMMITMENT FEE. In addition to the interest described above, the
Borrower shall pay to the Agent on the last Business Day of each month
commencing on February 28, 1997, a commitment fee equal to .50% of the Average
Unused Commitment during the preceding month, such commitment fee to be payable
monthly in arrears. The commitment fee
21
<PAGE> 28
shall be shared among the Banks in accordance with the respective Commitment
Percentages of the Banks.
2.3.4 ADMINISTRATION FEE. In addition to any other amounts payable
pursuant to this Section 2.3, the Borrower shall pay to the Agent all amounts
required to be paid pursuant to that certain letter agreement regarding fees
dated as of the date hereof by and between the Borrower and GSCP in accordance
with the terms of such letter agreement.
2.3.5 LETTER OF CREDIT FEES. The Borrower shall pay (i) to the Issuing
Bank (or to the Agent for the account of the Issuing Bank), such documentary and
processing fees with respect to the issuance, amendment or transfer of, or
drawing under, each Letter of Credit as may be agreed to by the Borrower and the
applicable Issuing Bank and (ii) to the Agent for the account of the Banks in
accordance with their respective Commitment Percentages, a per annum letter of
credit fee equal to the product of (a) the Applicable Margin PLUS 2% and (b) the
face amount of each Letter of Credit.
2.3.6 OTHER FEES AND EXPENSES. The Borrower shall pay to the Agent any
and all reasonable charges customarily made by the Banks against borrowers in
connection with the providing by the Banks of revolving lines of credit. Such
fees and costs shall include, without limitation, the customary field
examination fees and costs incurred in connection with the Agent's and Banks'
examination of the Collateral, business records and businesses of the Borrower
and its Subsidiaries.
2.3.7 PAYMENTS CHARGED TO DEPOSIT ACCOUNTS. The Loan Parties authorize
the Agent to charge and the Agent intends to charge any deposit account which
any Loan Party may maintain with the Agent or any Bank the principal, interest,
fees, charges, taxes and expenses provided for in this Agreement or any other
document executed or delivered in connection herewith; PROVIDED, HOWEVER, that
only principal, interest, fees and expenses permitted under this Agreement may
be charged against the deposit accounts of the Loan Parties prior to the
occurrence of an Event of Default, or occurrence of an event that with the
passage of time or giving of notice or both would be an Event of Default.
2.3.8 CAPITAL ADEQUACY. If, after the date hereof, the Agent or any
Bank shall have determined that the adoption of any applicable law, rule,
regulation, guideline, directive or request (whether or not having the force of
law) regarding capital requirements for banks or bank holding companies, or any
change therein, 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 the Agent or such
Bank with any of the foregoing imposes or increases a requirement by the Agent
or such Bank to allocate capital resources to the Agent's or such Bank's
commitment to make Loans or to issue Letters of Credit hereunder which has or
would have the effect of reducing the return on the Agent's or such Bank's
capital to a level below that which the Agent or such Bank would have achieved
(taking into consideration the Agent's or such Bank's then existing policies
with respect to capital adequacy and assuming full utilization of the Agent's or
such Bank's capital) but for such adoption, change or compliance by any amount
deemed by the Agent or such Bank to be material,
22
<PAGE> 29
then: (a) the Agent or such Bank shall promptly after its determination of such
occurrence give notice thereof to the Borrower (if applicable, providing a copy
of such notice to the Agent); and (b) the Borrower shall pay to the Agent or
such Bank as an additional fee from time to time on demand such amount as the
Agent or such Bank certifies to be the amount that will compensate it for such
reduction. A certificate of the Agent or such Bank claiming compensation under
this section shall be conclusive in the absence of manifest error. Such
certificate shall set forth the nature of the occurrence giving rise to such
compensation, the additional amount or amounts to be paid to it hereunder and
the method by which such amounts were determined. In determining such amount,
the Agent or such Bank may use any reasonable averaging and attribution methods.
2.3.9 INCREASED COSTS; TAXES. Anything hereinbefore to the contrary
notwithstanding, if any present or future applicable law (which expression, as
used in this Agreement, includes statutes and rules and regulations thereunder
and interpretations thereof by any competent court or by any governmental or
other regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time heretofore or hereafter made upon or otherwise issued
to the Agent or any Bank by any central bank or other fiscal, monetary or other
authority, whether or not having the force of law) shall (a) subject the Agent
or such Bank to any tax, levy, impost, duty, charge, fee, deduction or
withholding of any nature with respect to this Agreement, the maximum amount of
the Loans or the payment to the Agent or such Bank of any amounts due to it
hereunder, or (b) materially change the basis of taxation of payments to the
Agent or such Bank of the principal or the interest thereon or any other amounts
payable to the Agent or such Bank hereunder, or (c) impose or increase or render
applicable any special or supplemental special deposit or reserve or similar
requirements or assessment against assets held by, or deposits in or for the
account of, or any liabilities of, or loans by an office of the Agent or such
Bank in respect of the transactions contemplated herein, or (d) impose on the
Agent or such Bank any other conditions or requirements with respect to this
Agreement, the Commitments, or any Loan or Letter of Credit , and the result of
any of the foregoing is (i) to increase the cost to the Agent or such Bank of
making, funding or maintaining all or any part of the Loans or Letters of
Credit, or (ii) to reduce the amount of principal, interest or any other amount
payable to the Agent or such Bank hereunder, or (iii) to require the Agent or
such Bank to make any payment or to forego any interest or other sum payable
hereunder, the amount of which payment or foregoing interest or other sum is
calculated by reference to the gross amount of any sum receivable or deemed
received by the Agent or such Bank from the Borrower hereunder, then, and in
each such case not otherwise provided for hereunder, the Agent or such Bank
shall promptly after its determination of such occurrence give notice thereof to
the Borrower accompanied by calculations thereof in reasonable detail, and the
Borrower shall pay to the Agent or such Bank such additional amounts as will be
sufficient to compensate the Agent or such Bank for such additional cost,
reduction, payment or foregoing interest or other sum, PROVIDED that the
foregoing provisions of this sentence shall not apply in the case of any
additional cost, reduction, payment or foregoing interest or other sum resulting
from any taxes charged upon or by reference to the overall net income, profits
or gains of the Agent or such Bank.
2.4 REPAYMENTS, PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN COMMITMENTS;
---------------------------------------------------------------------
GENERAL PROVISIONS REGARDING PAYMENTS.
-------------------------------------
23
<PAGE> 30
2.4.1 SCHEDULED MATURITY OF TERM LOANS.
The Term Loans and all other amounts owed hereunder with respect to
the Term Loans shall be paid in full no later than the Maturity Date.
2.4.2 PREPAYMENTS AND UNSCHEDULED REDUCTIONS IN REVOLVING LOAN
COMMITMENTS.
(a) VOLUNTARY PREPAYMENTS. The Borrower may, upon written or
telephonic notice to the Agent on or prior to 12:00 Noon (New York City
time) on the date of prepayment, which notice, if telephonic, shall be
promptly confirmed in writing, at any time and from time to time prepay,
without premium or penalty, any Loan on any Business Day in whole or in
part in an aggregate minimum amount of $250,000 and integral multiples of
$50,000 in excess of that amount. Notice of prepayment having been given as
aforesaid, the Loans shall become due and payable on the prepayment date
specified in such notice and in the aggregate principal amount specified
therein. Any voluntary prepayments pursuant to this Section 2.4.2(a) shall
be applied as specified in Section 2.4.3.
(b) VOLUNTARY REDUCTIONS OF REVOLVING LOAN COMMITMENTS. The Borrower
may, upon not less than three Business Days' prior written or telephonic
notice confirmed in writing to the Agent (which notice the Agent will
promptly transmit by telefacsimile or telephone to each Bank), at any time
and from time to time terminate in whole or permanently reduce in part,
without premium or penalty, the Revolving Loan Commitments in an amount up
to the amount by which the Revolving Loan Commitments exceed the sum of (i)
Total Utilization of Revolving Loan Commitments at the time of such
proposed termination or reduction PLUS (ii) $2,000,000; PROVIDED that any
such partial reduction of the Revolving Loan Commitments shall be in an
aggregate minimum amount of $250,000 and integral multiples of $50,000 in
excess of that amount. The Borrower's notice to Agent shall designate the
date (which shall be a Business Day) of such termination or reduction and
the amount of any partial reduction, and such termination or reduction of
the Revolving Loan Commitments shall be effective on the date specified in
such notice and shall reduce the Revolving Loan Commitment of each Bank
proportionately to its Commitment Percentage. Any such voluntary reduction
of the Revolving Loan Commitments shall be applied as specified in Section
2.4.3.
(c) Mandatory Prepayments and Mandatory Reductions of Revolving Loan
----------------------------------------------------------------
Commitments.
- -----------
The Loans shall be prepaid and the Revolving Loan Commitments shall be
reduced in the manner provided in Section 2.4.3 upon the occurrence of the
following circumstances:
24
<PAGE> 31
(i) PREPAYMENTS AND REDUCTIONS FROM ASSET SALES. No later than
the first Business Day following the date of receipt by the Borrower
or any of its Subsidiaries of the Cash Proceeds of any Asset Sale, the
Borrower shall prepay the Loans (and/or the Revolving Loan Commitments
shall be reduced) in the amount of such applicable Net Cash Proceeds.
Concurrently with any prepayment of the Loans and/or reduction of the
Commitments pursuant to this subsection 2.4.2(c)(i), the Borrower
shall deliver to the Agent an Officer's Certificate demonstrating the
derivation of the Net Cash Proceeds of the correlative Asset Sale from
the gross sales price thereof. In the event that the Borrower shall,
at any time after receipt of Cash Proceeds of any Asset Sale requiring
a prepayment or a reduction of the Revolving Loan Commitments pursuant
to this Section 2.4.2(c)(i), determine that the prepayments and/or
reductions of the Revolving Loan Commitments previously made in
respect of such Asset Sale were in an aggregate amount less than that
required by the terms of this Section 2.4.2(c)(i), the Borrower shall
promptly cause to be made an additional prepayment of the Loans
(and/or reduction in the Revolving Loan Commitments) in an amount
equal to the amount of any such deficit, and the Borrower shall
concurrently therewith deliver to the Agent an Officer's Certificate
demonstrating the derivation of the additional Net Cash Proceeds
resulting in such deficit.
(ii) PREPAYMENTS AND REDUCTIONS DUE TO ISSUANCE OF DEBT. On or
prior to the first Business Day after receipt by the Borrower or any
of its Subsidiaries of any proceeds of any Indebtedness (other than
the Loans and any other Indebtedness permitted by this Agreement), the
Borrower shall prepay the Loans (and/or the Revolving Loan Commitments
shall be reduced) in an amount equal to the amount of such proceeds
(net of reasonable costs and expenses incurred in connection with the
issuance of such Indebtedness); PROVIDED that payment or acceptance of
the amounts provided for in this Section 2.4.2(c)(ii) shall not
constitute a waiver of any Event of Default resulting from the
incurrence of such Indebtedness or otherwise prejudice any rights or
remedies of the Agent or the Banks.
(iii) PREPAYMENTS AND REDUCTIONS DUE TO ISSUANCE OF EQUITY
SECURITIES. On or prior to the first Business Day after receipt by the
Borrower or any of its Subsidiaries of any cash proceeds from the
issuance of any equity Securities, the Borrower shall prepay the Loans
(and/or the Revolving Loan Commitments shall be reduced) in an amount
equal to the amount of such proceeds (net of reasonable costs and
expenses incurred in connection with the issuance of such equity
Securities, including underwriting discounts and commissions);
(iv) PREPAYMENTS AND REDUCTIONS FROM INSURANCE AND CONDEMNATION
PROCEEDS AND TAX REFUNDS. No later than the second Business Day
following the date of receipt by the Borrower or any of its
Subsidiaries of (a) any cash payments under any casualty insurance
policies covering damage to or loss of property resulting from damage
to or loss of all or any portion of the Collateral or any other
tangible asset (net of actual and documented reasonable costs incurred
by the
25
<PAGE> 32
Borrower or any of its Subsidiaries in connection with adjustment and
settlement thereof, "INSURANCE PROCEEDS"), (b) any proceeds resulting
from the taking of assets by the power of eminent domain, condemnation
or otherwise (net of actual and documented reasonable costs incurred
by the Borrower or any of its Subsidiaries in connection with
adjustment and settlement thereof, "CONDEMNATION PROCEEDS") or (c) or
any tax refunds or other amounts received in respect of taxes
previously paid, the Borrower shall prepay the Loans (and/or the
Revolving Loan Commitments shall be reduced) in the amount of such
proceeds; PROVIDED that the Borrower shall not be required to make any
prepayments and the Revolving Loan Commitments shall not be reduced on
account of any tax refund for which the Borrower has applied prior to
the Effective Date.
(v) PREPAYMENTS DUE TO REDUCTIONS OR RESTRICTIONS OF REVOLVING
LOAN COMMITMENTS. The Borrower shall prepay the Revolving Loans from
time to time to the extent necessary so that the Total Utilization of
Revolving Loan Commitments shall not at any time exceed the lesser of
(1) Revolving Loan Commitments then in effect and (2) the Borrowing
Base.
(vi) PREPAYMENTS PURSUANT TO CASH MANAGEMENT SYSTEM. The Borrower
shall prepay the Revolving Loans from time to time to the extent
required in connection with the cash management system as provided in
Section 5.32.
2.4.3 APPLICATION OF PREPAYMENTS AND REDUCTIONS OF REVOLVING LOAN
COMMITMENTS.
(a) APPLICATION OF VOLUNTARY PREPAYMENTS BY TYPE OF LOANS. Any
voluntary prepayments pursuant to Section 2.4.2(a) shall be applied: FIRST
to repay outstanding Term Loans to the full extent thereof, and SECOND, to
repay outstanding Revolving Loans to the full extent thereof.
(b) APPLICATION OF MANDATORY PREPAYMENTS BY TYPE OF LOANS. Any amount
(the "APPLIED AMOUNT") required to be applied as a mandatory prepayment of
the Loans and/or a reduction of the Revolving Loan Commitments pursuant to
Sections 2.4.2(c)(i)- (iv) shall be applied FIRST to prepay the Term Loans
to the full extent thereof, and SECOND, to the extent of any remaining
portion of the Applied Amount, to prepay the Revolving Loans to the full
extent thereof and to permanently reduce the Revolving Loan Commitments by
the amount of such prepayment; PROVIDED that any prepayment pursuant to
Section 2.4.2(c)(iv) shall be applied FIRST to prepay the Revolving Loans
(and the Revolving Loan Commitments shall be permanently reduced by the
amount of such prepayment).
26
<PAGE> 33
2.4.4 GENERAL PROVISIONS REGARDING PAYMENTS.
(a) MANNER AND TIME OF PAYMENT. All payments by the Borrower of
principal, interest, fees and other Obligations hereunder and under the
Notes shall be made in same day funds and without defense, setoff or
counterclaim, free of any restriction or condition, and delivered to the
Agent not later than 12:00 Noon (New York City time) on the date due at the
Funding and Payment Office for the account of the Banks; funds received by
the Agent after that time on such due date shall be deemed to have been
paid by the Borrower on the next succeeding Business Day.
(b) APPLICATION OF PAYMENTS TO PRINCIPAL AND INTEREST. All payments in
respect of the principal amount of any Loan shall include payment of
accrued interest on the principal amount being repaid or prepaid, and all
such payments (and in any event any payments made in respect of any Loan on
a date when interest is due and payable with respect to such Loan) shall be
applied to the payment of interest before application to principal unless
the Agent elects to apply such amounts to principal.
(c) APPORTIONMENT OF PAYMENTS. Aggregate principal and interest
payments shall be apportioned among all outstanding Loans to which such
payments relate, in each case proportionately to the Banks' respective
Commitment Percentages. The Agent shall promptly distribute to each Bank
its Commitment Percentage of all such payments received by the Agent and
the commitment fees of such Bank when received by the Agent.
(d) PAYMENTS ON BUSINESS DAYS. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may be.
(e) NOTATION OF PAYMENT. Each Bank agrees that before disposing of any
Note held by it, or any part thereof (other than by granting participations
therein), that Bank will make a notation thereon of all Loans evidenced by
that Note and all principal payments previously made thereon and of the
date to which interest thereon has been paid; PROVIDED that the failure to
make (or any error in the making of) a notation of any Loan made under such
Note shall not limit or otherwise affect the obligations of Borrower
hereunder or under such Note with respect to any Loan or any payments of
principal or interest on such Note.
2.5 USE OF PROCEEDS.
---------------
2.5.1 TERM LOANS. The proceeds of the Existing Loans maintained as
Term Loans hereunder were used to finance the general corporate purposes of the
Borrower and its Subsidiaries.
27
<PAGE> 34
2.5.2 REVOLVING LOANS. Revolving Loans may be used to finance the
general corporate purposes of the Borrower and its Subsidiaries.
2.5.3 COMPLIANCE WITH LAWS. The Borrower hereby undertakes that no
portion of the proceeds of any Loans or other extensions of credit under this
Agreement shall be used by any Loan Party in any manner which would be illegal
under, or which would cause the invalidity or unenforceability (in each case in
whole or in part) of any Loan Document under, any applicable law.
2.5.4 MARGIN REGULATIONS. Without limiting the generality of Section
2.5.3, no portion of the proceeds of any borrowing under this Agreement shall be
used by the Borrower or any of its Subsidiaries in any manner that might cause
the borrowing or the application of such proceeds to violate Regulation G,
Regulation U, Regulation T or Regulation X of the Board of Governors of the
Federal Reserve System or any other regulation of such Board or to violate the
Securities Exchange Act of 1934, as amended, in each case as in effect on the
date or dates of such borrowing and such use of proceeds.
SECTION 3. REPRESENTATION AND WARRANTIES.
-----------------------------
The Borrower represents and warrants to the Agent and the Banks as follows:
3.1 ORGANIZATION AND QUALIFICATION.
------------------------------
(a) The Borrower and each of its Subsidiaries (i) are corporations
duly organized, validly existing and in good standing under the laws of the
jurisdiction of their incorporation as indicated on SCHEDULE 3.1 attached
hereto; (ii) have all requisite corporate power and authority to own their
properties and conduct their businesses as now conducted and as presently
contemplated; and (iii) are duly qualified and in good standing in each
jurisdiction (which jurisdictions are listed on SCHEDULE 3.1 attached
hereto) where the nature of their properties or their businesses (present
or proposed) requires such qualification, except where the failure to be so
qualified or be in good standing could not reasonably be expected to have a
material adverse effect on the prospects, condition (financial or
otherwise), properties, business or results of operations of the Borrower
or the Borrower and its Subsidiaries taken as a whole.
(b) Since the date of the Initial Financial Statement, the Borrower
and each of its Subsidiaries have continued to engage in substantially the
same business as that in which they were then engaged and are engaged in no
unrelated business.
3.2 CORPORATE AUTHORITY. The execution, delivery and performance of the
Loan Documents and the transactions and other documents contemplated hereby and
thereby are within the Borrower's and each of its Subsidiaries corporate
authority, have been authorized by all necessary corporate proceedings on the
part of the Borrower and each such Subsidiary and do not and will not contravene
any provision of law, or any charter document or by-laws of the Borrower or any
such Subsidiary, or contravene any provisions of, or constitute an Event of
Default
28
<PAGE> 35
hereunder or a default under, or an event which with the lapse of time or the
giving of notice, or both, would constitute an Event of Default hereunder or a
default under any other agreement, instrument, judgment, order, decree, permit,
license or undertaking binding upon or applicable to the Borrower, any of its
Subsidiaries or any of their respective properties, or result in the creation,
other than in favor of the Agent, of any mortgage, pledge, security interest,
lien, Encumbrance or charge upon any of the properties or assets of the Borrower
or any of its Subsidiaries. Based upon information available to the Borrower,
all of the stockholders of the Borrower owning more than 5% of the issued and
outstanding capital stock of the Borrower, the number of shares held by each,
and the percentage of outstanding shares represented by the holdings of each are
set forth on SCHEDULE 3.2 attached hereto.
3.3 VALID OBLIGATIONS. The Loan Documents have been duly executed and
delivered and constitute the legal, valid and binding obligations of the
Borrower and each of its Subsidiaries as applicable, enforceable in accordance
with their respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relative to limiting creditors'
rights generally.
3.4 APPROVALS. The execution, delivery and performance of the Loan
Documents and the transactions and other documents contemplated hereby and
thereby do not require any approval or consent of, or filing or registration
with, any governmental or other agency or authority, any stockholder or
creditor, or any other person (other than filings and registrations with the
Securities and Exchange Commission).
3.5 TITLE TO PROPERTIES; ABSENCE OF LIENS. As of the date of this
Agreement, the Borrower and each of its Subsidiaries (if any) have good and
marketable title to all of their respective properties, assets and rights of
every name and nature now purported to be owned by them, including without
limitation the properties, assets and rights reflected in the Initial Financial
Statement, in each case free from all liens, charges and Encumbrances
whatsoever, except as set forth on SCHEDULE 3.5 attached hereto or permitted by
subsection 5.7, and free from all defects of title that might materially and
adversely affect the value or use of such properties, assets or rights. All real
property owned and leased by the Borrower and its Subsidiaries is described on
SCHEDULE 3.5.
3.6 COMPLIANCE. The Borrower and each of its Subsidiaries have all
necessary permits, approvals, authorizations, consents, licenses, franchises,
registrations and other rights and privileges (including patents, trademarks,
trade names and copyrights) to allow them to own and operate their businesses
without any violation of law or the rights of others (except for any such right
or privilege as would not materially and adversely affect the prospects,
condition (financial or otherwise), properties, business or results of
operations of the Borrower or of the Borrower and its Subsidiaries taken as a
whole); and the Borrower and each of its Subsidiaries are duly authorized,
qualified and licensed under and, except as described in SCHEDULES 3.6 AND 3.11,
in material compliance with all applicable laws, regulations, authorizations and
orders of public authorities, including, without limitation, laws relating to
hazardous materials, hazardous waste and protection of the environment. Except
as described in SCHEDULE 3.6, the Borrower and each of its Subsidiaries have
performed all obligations required to be performed by them under,
29
<PAGE> 36
are not in default under or in violation of, their charters or By-Laws, and to
Borrower's knowledge are not in default under or in violation of any material
agreement, contract, lease, mortgage, note, bond, indenture, license or other
instrument or undertaking to which they are a party or by which any of them or
any of their properties are bound.
3.7 FINANCIAL STATEMENTS. The Borrower has furnished to the Agent the
consolidated balance sheet of the Borrower and its Subsidiaries as of December
31, 1996 and the related statements of earnings and retained earnings and cash
flows for the period then ended, each subject to adjustments (the "INITIAL
FINANCIAL STATEMENTS"), which were prepared by the Borrower in accordance with
GAAP. At the date hereof, the Borrower and its Subsidiaries have no Indebtedness
or other material liabilities, debts or obligations, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, including, but not
limited to, liabilities or obligations on account of taxes or other governmental
charges, that are not set forth on the Initial Financial Statement or on
SCHEDULE 3.7 attached hereto or that have not been previously disclosed in the
proforma financial statements delivered to Agent pursuant to Section 4.1.1(n).
On or before April 1, 1997, the Borrower shall furnish to the Agent the audited
consolidated balance sheet of the Borrower and its Subsidiaries as of December
31, 1996, which statement shall be certified by the Borrower's Accountants and
which shall fairly present the financial position of the Borrower and its
Subsidiaries at the close of business on such date and the result of their
operations for the period then ended.
3.8 SOLVENCY. The Borrower and each of its Subsidiaries have and, after
giving effect to the Loans will have, assets (both tangible and intangible)
having a fair saleable value in excess of the amount required to pay the
probable liability on their then-existing debts (whether matured or unmatured,
liquidated or unliquidated, fixed or contingent); the Borrower and each of its
Subsidiaries have and will have access to adequate capital for the conduct of
their businesses and the discharge of their debts incurred in connection
therewith as such debts mature; neither the Borrower nor any of its Subsidiaries
was Insolvent immediately prior to the consummation of the Loans, and
immediately after giving effect thereto, neither the Borrower nor any of its
Subsidiaries will be Insolvent.
3.9 EVENTS OF DEFAULT; ADVERSE CHANGES.
----------------------------------
(a) As of the date of this Agreement, no Event of Default exists, and
no event or condition exists which with the passage of time or the giving
of notice, or both, would constitute an Event of Default.
(b) Since the date of the Initial Financial Statement there have been
no changes in the prospects, assets, liabilities, financial condition or
business of the Borrower or any of its Subsidiaries the effect of which
has, individually or in the aggregate, been materially adverse to the
Borrower or the Borrower and its Subsidiaries, taken as a whole.
3.10 TAXES. Except as disclosed on SCHEDULE 3.6 hereto, the Borrower and
each of its Subsidiaries have filed all federal, state and other tax returns
required to be filed with each jurisdiction in which the Borrower or any such
Subsidiary may have tax liability, and all taxes,
30
<PAGE> 37
assessments and other such governmental charges due from the Borrower and such
Subsidiaries have been fully paid. The Borrower and each of its Subsidiaries
have not executed any waiver that would have the effect of extending the
applicable statute of limitations in respect of tax liabilities. Except as
disclosed in writing to the Agent prior to the Effective Date, the Borrower and
each of its Subsidiaries have established on their books reserves adequate for
the payment of all federal, state and other tax liabilities. The Borrower has
filed a claim for a refund of federal taxes of not less than $4,700,000 and, to
the best knowledge of the Borrower, the Borrower is entitled to receive the full
amount of such claimed refund.
3.11 LITIGATION. There is no litigation, proceeding or governmental
investigation, administrative or judicial, pending or threatened against the
Borrower or any of its Subsidiaries, which, if decided adversely to the Borrower
or such Subsidiary, could reasonably be expected to have a materially adverse
effect on the business, properties or condition (whether financial or otherwise)
of the Borrower or any of its Subsidiaries or on the ability of the Borrower or
any of its Subsidiaries to perform their respective obligations under the Loan
Documents or under any other agreement or document contemplated hereby or
thereby, except as disclosed in SCHEDULE 3.11.
3.12 SUBSIDIARIES. As of the date of this Agreement, all the Subsidiaries
of the Borrower are listed on SCHEDULE 3.12. hereto. The Borrower or a
Subsidiary of the Borrower is the owner, free and clear of all liens and
Encumbrances, of all of the issued and outstanding stock of each Subsidiary of
the Borrower, except liens and Encumbrances in favor of the Agent and except as
disclosed on SCHEDULE 3.12 hereto. All shares of such stock have been validly
issued and are fully paid and nonassessable, and no rights to subscribe to any
additional shares have been granted, and no options, warrants or similar rights
are outstanding.
3.13 RESTRICTIONS ON THE BORROWER OR SUBSIDIARIES. Except for the Loan
Documents, neither the Borrower nor any of its Subsidiaries is party to or bound
by any contract, agreement or instrument, nor subject to any charter or other
corporate restriction, materially and adversely affecting its business,
property, assets, operations or conditions, financial or otherwise.
3.14 ERISA. The Borrower, its Affiliates and each "employee pension benefit
plan" and each "employee welfare benefit plan" (as defined in ERISA) maintained
by the Borrower or any ERISA Affiliate (collectively, the "PLANS") are in
compliance with ERISA and the provisions of the Code applicable to the Plans,
except to the extent that any non-compliance would not have a material, adverse
effect upon the Borrower and its Subsidiaries, their properties, businesses or
prospects; none of the Borrower, any ERISA Affiliate of the Borrower or any Plan
has engaged in a "prohibited transaction" (as defined in ERISA and the Code)
which would subject the Borrower, any ERISA Affiliate of the Borrower or such
Plan to a tax or penalty imposed on a "prohibited transaction"; none of the
Borrower, any ERISA Affiliate or any Plan has incurred any "accumulated funding
deficiency" (as defined in ERISA); except as set forth in the Initial Financial
Statements, the aggregate current value of all assets of the Plans which are
single-employer plans is at least equal to the aggregate current value of all
accrued benefits under such Plans; neither the Borrower nor any ERISA Affiliate
of the Borrower has incurred any liability to the Pension Benefit Guaranty
Corporation over and above premiums required by law;
31
<PAGE> 38
and neither the Borrower nor any ERISA Affiliate of the Borrower have terminated
any Plan in a manner which could result in the imposition of a lien on the
property of the Borrower or such ERISA Affiliate.
3.15 ENVIRONMENTAL AND REGULATORY COMPLIANCE. As to each of the real
properties owned or leased by the Borrower or any of its Subsidiaries, all as
described on SCHEDULE 3.15, each such property is presently in compliance in all
material respects with, and has in full force and effect all permits or
approvals required by, all applicable building, zoning, anti-pollution,
hazardous substance, hazardous material, oil, environmental, health, safety or
other laws, ordinances or regulations and neither the Borrower nor any of its
Subsidiaries has received notification that any of the foregoing properties is
in violation of any of the foregoing provisions. Except as set forth on SCHEDULE
3.15, no inquiry, notice or threat to give notice by any governmental authority
has been received by the Borrower or any of its Subsidiaries with respect to the
generation, storage or disposal of any hazardous substances, hazardous material
or oil or release or threat of release thereof, or with respect to any violation
of any federal, state or local environmental, health or safety statute or
regulation. For the purposes of this Section, (i) "hazardous substances" shall
mean "hazardous substances" as defined in the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 U.S.C. ss.9601, ET
SEQ., and regulations thereunder or under the provisions of any other applicable
state, county or municipal law, ordinance, rule or regulation, (ii) "hazardous
material" and "oil" shall mean "hazardous material" and "oil", respectively, as
defined in the Massachusetts Oil and Hazardous Material Release Prevention and
Response Act, as amended, M.G.L. Chapter 21E, and regulations thereunder or
under the provisions of any other applicable state, county or municipal law,
ordinance, rule or regulation, and "release" or "threat of release" shall mean
such terms as they are defined in any of the foregoing laws, ordinances, rules
or regulations, as applicable.
3.16 LABOR RELATIONS. Neither the Borrower nor any Subsidiary or Affiliate
of the Borrower is engaged in, or, in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby,
will be engaged in an unfair labor practice. Except as set forth on SCHEDULE
3.16, there is (i) no unfair labor practice complaint pending or, to the best of
the Borrower's knowledge, threatened against the Borrower or any of its
Subsidiaries or, to the extent such practice could reasonably be expected to
have a material adverse effect on the Borrower or the Borrower and its
Subsidiaries, taken as a whole, against any Affiliate of the Borrower, before
the National Labor Relations Board, and no grievance or arbitration proceeding
arising out of or under any collective bargaining agreement is so pending or, to
the best of the Borrower's knowledge, threatened against the Borrower or any of
its Subsidiaries or, to the extent such practice could reasonably be expected to
have a material adverse effect on the Borrower or the Borrower and its
Subsidiaries, taken as a whole, against any Affiliate of the Borrower, (ii) no
strike, labor dispute, slowdown or stoppage or similar employee action pending
or threatened against the Borrower or any of its Subsidiaries or, to the extent
such action could reasonably be expected to have a material adverse effect on
the Borrower or the Borrower and its Subsidiaries, taken as a whole, against any
Affiliates, and (iii) to the best knowledge of the Borrower, no union
representation question existing with respect to the employees of the Borrower
or its Subsidiaries and, to the extent that such question could
32
<PAGE> 39
reasonably be expected to have a material adverse effect on the Borrower or the
Borrower and its Subsidiaries, taken as a whole, with respect to any Affiliates
of the Borrower.
3.17 PLACES OF BUSINESS. The Borrower and its Subsidiaries have no places
of business other than those shown in SCHEDULE 3.17. The Borrower will notify
the Agent in writing at least 30 days in advance of any change in the location
of any place of business or the location of any Collateral, or of the
establishment of any new place of business or location of Collateral, or office
where it or its Subsidiaries' records are kept.
3.18 LEGAL NAME. The Borrower's and each of its Subsidiaries' exact legal
names are as set forth in this Agreement and Borrower will not undertake or
commit to undertake any act which will result in a change of the Borrower's or
any Subsidiary's legal name without giving the Agent at least 30 days prior
written notice of same. Neither the Borrower nor any of its Subsidiaries has
used any other corporate or fictitious name except for those names set forth in
SCHEDULE 3.18.
3.19 EXISTING LOANS. The Borrower hereby acknowledges and agrees that
immediately prior to the effectiveness of this Agreement, Existing Loans in an
aggregate principal amount of $__________ were outstanding under the Existing
Loan Agreement and that, notwithstanding the fact that Subsidiaries of the
Borrower may have been the borrower under the Existing Loan Agreement with
respect to certain of the Existing Loans, the Borrower has no rights of set off
or counterclaim with respect to the Existing Loans and has no defenses to the
payment thereof.
3.20 GOVERNMENTAL REGULATION. Neither the Borrower nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act or the
Investment Company Act of 1940 or under any other federal or state statute or
regulation which may limit its ability to incur Indebtedness or which may
otherwise render all or any portion of the Obligations unenforceable.
3.21 SECURITIES ACTIVITIES. Neither the Borrower nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying any
Margin Stock.
SECTION 4. CONDITIONS.
----------
4.1 CONDITIONS TO EFFECTIVENESS. The effectiveness of this Agreement and
the obligation of the Agent or any Bank to make any Loan or to issue or
participate in any Letter of Credit is subject to the fulfillment on the date
hereof of the following conditions precedent:
4.1.1 DELIVERY OF DOCUMENTS; PAYMENTS OF FEES AND EXPENSES. Receipt by
the Agent of the following agreements, documents, certificates and opinions in
form and substance satisfactory to the Agent and the Banks and their respective
counsel and duly executed and delivered by the respective parties thereto:
(a) This Agreement;
33
<PAGE> 40
(b) The Revolving Notes;
(c) The Term Notes;
(d) The Debenture and amendments to each Security Agreement other
than the Debenture, each satisfactory in form and substance to the Agent,
including (i) that certain First Amendment to Security Agreement (all
Asset) executed by the Borrower, (ii) that certain First Amendment to
Collateral Assignment of Patents executed by the Borrower, (iii) that
certain First Amendment to Collateral Assignment of Trademarks executed by
the Borrower, (iv) that certain First Amendment to Security Agreement (All
Asset) executed by Safety International, (v) the Safety Canada Hypothec and
(vi) the Orleans Hypothec.
(e) A Borrowing Base Certificate;
(f) The Guaranty and the Subsidiary Guaranties;
(g) A favorable legal opinion addressed to the Agent and the
Banks from Kassler & Feuer, P.C., counsel to the Loan Parties and from
applicable local counsel, each dated as of the Effective Date and
satisfactory in form and substance to the Agent, together with evidence
satisfactory to the Agent that the Loan Parties have instructed such
counsel to deliver such opinions to the Agent and the Banks;
(h) UCC-1 and UCC-3 Financing Statements, as applicable;
(i) Long-form certifications from governmental officials
evidencing the legal existence and corporate and tax good standing of each
Loan Party as of the most recent practicable date for the applicable
jurisdiction of incorporation of each Loan Party and each other
jurisdiction in which it is qualified as a foreign corporation to do
business;
(j) Officers' Certificates of each Loan Party as to authorizing
resolutions, incumbency of officers and specimen signatures, and certifying
that there have no changes to the Charter and By-Laws of such Loan Party
since December 31, 1995 and that such documents remain in full force and
effect (with a copy of the resolutions, Charter and Bylaws of the
applicable Loan Party attached);
(k) Any required consents to this Agreement and the other Loan
Documents from any third parties;
(l) Reimbursement for fees and disbursements of O'Melveny & Myers
LLP, counsel to the Agent;
(m) Evidence of insurance coverage with respect to the Borrower,
its Subsidiaries and the Collateral; and
34
<PAGE> 41
(n) Projected financial statements for the Borrower and its
Subsidiaries for their 1997 fiscal year, satisfactory in form and substance
to the Agent.
4.1.2 FIELD EXAMINATIONS. The Agent and the Banks shall have received
the results of a field examinations of the Loan Parties' Collateral, books,
records and businesses, the results of which shall be satisfactory to the Banks
in their sole discretion.
4.1.3 COLLATERAL. The Agent and the Banks shall have confirmed that
the Agent holds a valid, perfected first-priority security interest in the
Collateral (including without limitation the capital stock of the Borrower's
Subsidiaries), free of all Encumbrances other than those permitted hereunder.
4.1.4 WARRANTS. The Borrower shall have issued warrants, satisfactory
in form and substance to the Banks, for the purchase of 350,000 shares of common
stock of the Borrower and such warrants shall have been deposited in escrow
pursuant to an escrow agreement satisfactory in form and substance to the Banks.
4.1.5 PURCHASE AGREEMENT. The Purchase Agreement shall be satisfactory
in form and substance to the Banks and shall have become effective in accordance
with its terms. The Prior Agent and the Prior Lenders shall have executed all
documents (including without limitation UCC assignment forms) and taken all
actions necessary or requested by the Agent to assign to the Agent and the
Banks, as applicable, all security interests, filings and instruments in form of
the Prior Agent and the Prior Lenders, including without limitation delivery to
the Agent of all Collateral held by the Prior Agent and the Prior Lenders.
Without limiting the generality of the foregoing, the Prior Agent, Prior Lenders
and Michael Lerner shall execute all documents and take all actions required or
reasonably requested by the Agent in order to assign all rights under the Lerner
Pledge Agreement to the Agent and grant in favor of the Agent a first priority
perfected security interest in all Collateral under and as defined in the Lerner
Pledge Agreement.
4.1.6 FEES AND EXPENSES. The Borrower shall have paid to GSCP all fees
and expenses required to be paid on or prior to the Effective Date pursuant to
that certain letter agreement regarding fees dated as of the date hereof by and
between the Borrower and GSCP.
4.1.7 REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Section 3 hereof shall be true and accurate in all
material respects on and as of the date of the initial Loan or other advance of
credit, the Loan Parties shall have performed and complied with all covenants
and conditions required in this Agreement and the other Loan Documents to be
performed or complied with by them prior to the making of such Loan or other
advance of credit, and no event shall have occurred and be continuing and no
condition shall exist, or would result from the Loans to be made on the date
hereof or the transactions contemplated hereby, which would constitute, or with
the passage of time or the giving of notice, or both, would constitute, an Event
of Default.
4.1.8 ADDITIONAL DOCUMENTS. The Borrower shall have provided the Agent
with such additional instruments, certificates, opinions and other documents as
the Agent shall request.
35
<PAGE> 42
4.2 CONDITIONS TO EACH REVOLVING LOAN AND LETTER OF CREDIT. The
obligation of the Agent or any Bank to make any Loan and to try to cause any
Person to issue any Letter of Credit is subject to the fulfillment to the
reasonable satisfaction of the Agent and the Banks immediately prior to or
contemporaneously with such Loan or Letter of Credit of each of the following
conditions:
4.2.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in this Agreement, any other Loan Document or otherwise
made in writing by or on behalf of the Borrower or any other Loan Party pursuant
hereto or in connection with the transactions contemplated hereby shall be true
and correct in all material respects at the time of each Funding Date (except
for representations and warranties limited as to time or with respect to a
specific event, which representations and warranties shall continue to be
limited to such time or event) with and without giving effect to the Revolving
Loans to be made or the Letters of Credit to be issued, as applicable, at such
time and the application of the proceeds thereof.
4.2.2 PERFORMANCE OF AGREEMENTS. The Borrower and each other Loan
Party shall have performed and complied with all agreement and conditions
contained in this Agreement and the other Loan Documents required to be
performed or complied with by the applicable Funding Date;
4.2.3 NO DEFAULT. No condition or event that constitutes an Event of
Default or that, after notice or lapse of time or both, would constitute an
Event of Default shall have occurred and be continuing; and
4.2.4 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the prospects, condition (financial or otherwise), business or
properties of the Borrower or any of its Subsidiaries since the date of this
Agreement.
4.2.5 RECEIPT OF NOTICE. The Agent shall have received before the
Funding Date, in accordance with the provisions of Section 2.1, an originally
executed Notice of Borrowing or a notice reasonably satisfactory in form and
substance to the Agent regarding the issuance of a letter of credit, as
applicable.
4.2.6 NO VIOLATION OF GOVERNMENTAL AUTHORITY. No order, judgment or
decree of any court, arbitrator or governmental authority shall purport to
enjoin or restrain any Bank from making Loans to be made by it or from issuing
the Letter of Credit to be issued by it, on that Funding Date;
4.2.7 MARGINS AND REGULATIONS. The making of the Loans requested on
such Funding Date shall not violate any law including, without limitation,
Regulation G, Regulation T, Regulation U or Regulation X of the Board of
Governors of the Federal Reserve System; and
4.2.8 LITIGATION. There shall not be pending or, to the knowledge of
the Borrower, threatened, any action, suit, proceeding, governmental
investigation or arbitration against or affecting the Borrower or any of its
Subsidiaries or any property of the Borrower or
36
<PAGE> 43
any of its Subsidiaries that has not been disclosed by the Borrower in writing
and that is required to be so disclosed pursuant to Section 5.14 prior to the
making of the last preceding Loans (or, in the case of the initial Loans, prior
to the execution of this Agreement), and there shall have occurred no
development not so disclosed in any such action, suit, proceeding, governmental
investigation or arbitration so disclosed that, in either event, in the
reasonable judgment of the Agent or of Majority Banks, could be reasonably
expected to have a material adverse effect on the condition (financial or
otherwise), business, properties or prospects of the Borrower or the Borrower
and its Subsidiaries, taken as a whole, since the date of this Agreement, and no
injunction or other restraining order shall have been pending or noticed with
respect to any action, suit or proceeding seeking to enjoin or otherwise prevent
the consummation of, or to recover any damages or obtain relief as a result of,
the transactions contemplated by this Agreement or the making of Loans
hereunder.
SECTION 5. COVENANTS.
---------
During the term of this Agreement and so long as any Indebtedness of the
Borrower in respect of any Loan or any Letter of Credit remains outstanding:
5.1 FINANCIAL REPORTING. The Borrower shall furnish to the Agent and to
each of the Banks:
(a) as soon as available to the Borrower, but in any event within
90 days after each fiscal year-end, the Borrower's consolidated and
consolidating balance sheet of the Borrower and its Subsidiaries as at
the end of, and related statements of income and retained earnings and
cash flow for, such fiscal year prepared in accordance with GAAP and,
in the case of such statements, certified by the Borrower's
Accountants; and concurrently with such financial statements, a
written statement by the Borrower's Accountants that, in the making of
the audit necessary for their report and opinion upon such financial
statements, they have obtained no knowledge of any Event of Default,
or knowledge of any event which, with the passage of time, will
constitute such Event of Default, or, if in the opinion of such
accountant such Event of Default or event exists, they shall disclose
in such written statement the nature and status thereof;
(b) as soon as available to the Borrower, but in any event within
30 days after the close of each fiscal month, the consolidating
balance sheet of the Borrower and its Subsidiaries as at the end of,
and related consolidating statements of income and retained earnings
and cash flow for, the portion of the fiscal year then ended and for
such month, prepared in accordance with GAAP applied in a manner
consistent with the audited financial statements required by clause
(a) above (setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the projections
delivered pursuant to Section 4.1(n) or Section 5.1(i)) and certified
by the respective chief financial officer of the respective Loan Party
and by the chief financial officer for the Borrower, and a written
statement (if such is
37
<PAGE> 44
the case, or statement that such is not the case) by such chief
financial officer that the respective Loan Party was in compliance as
of the end of such month with all of the covenants and agreements
contained in this Agreement and the other Loan Documents, together
with a Covenant Compliance Certificate.
(c) within fifteen (15) days after the close of each calendar
month, the Borrower shall deliver to the Agent (i) a report of
Inventory on a form supplied by the Agent and certified by the chief
financial officer of the applicable Loan Party and by the chief
financial officer of the Borrower, setting forth an analysis of
Inventory value, (ii) an accounts receivable monthly aging data
report, in form satisfactory to Agent and the Banks, reflecting all
Accounts of each Loan Party as of the close of such calendar month and
showing a total amount due from each Account debtor and the date on
which each such Account was created, (iii) an accounts payable monthly
aging data report in form satisfactory to the Agent and the Banks, and
(iv) such other information as the Agent or Majority Banks shall
reasonably request. In addition, the Borrower shall submit (x) a
detailed analysis of deductions, closeouts and Accounts Receivable
reserve and a reconciliation of the Accounts Receivable roll forward
through the last day of each month to the actual end of month balances
and (y) a detailed analysis of changes in the Inventory reserve and a
detailed analysis of revenue and cost of sales or bulk sales or other
dispositions of Inventory outside the ordinary course and (z) a report
detailing the shipment or other delivery of inventory in connection
with a bulk sale of inventory or other disposition of inventory
outside the ordinary course.
(d) promptly as soon as it becomes available but in any event,
within 20 days after each fiscal year end, a reconciliation report of
Loan Parties' Inventory and copies of any reports and reconciliation
of Loan Parties' Inventory prepared by Borrower's Accountants
(including any workpapers related thereto if the Agent so requests);
(e) promptly as they become available, but in any event within
120 days after the end of each fiscal year, a copy of each report
(expressly including any so-called "management letters") submitted to
the Borrower or any of its Subsidiaries by Borrower's Accountants in
connection with each annual audit of the books of the Borrower and its
Subsidiaries by Borrower's Accountants or in connection with any
interim audit thereof pertaining to any phase of the businesses of the
Borrower or any of its Subsidiaries;
(f) promptly as they become available, copies of all such
financial statements, proxy material and reports as it shall send to
or make available to stockholders or holders of any Indebtedness of
the Loan Parties;
(g) By 12:00 noon New York City time on the first Business Day of
each week, a Borrowing Base Certificate as of 9:00 a.m. of that day,
substantially in the form of EXHIBIT VI hereto (the "BORROWING BASE
38
<PAGE> 45
CERTIFICATE") together with such other information regarding Inventory
and Accounts Receivable as the Agent or any Bank may reasonably
require. The Borrowing Base Certificates shall be reviewed, at the
Borrower's expense, on a monthly basis by Policano & Manzo or other
examiners acceptable to the Agent;
(h) from time to time, such other financial data and information
about the Borrower and its Subsidiaries and the Collateral as the
Agent or any Bank may reasonably request; and
(i) at least 30 days prior to the end of each fiscal year, PRO
FORMA projections for the Borrower and its Subsidiaries for the next
fiscal year, including pro forma balance sheets as at the end of each
fiscal month, income statements, cash flow statements and such other
statements as the Agent or any Bank may reasonably request and in form
and substance satisfactory to the Agent and the Banks, all prepared on
a basis consistent with financial statements required by clause (a);
(j) immediately upon receipt, a written statement detailing
receipt of any payments or other proceeds received in connection with
such bulk sales, other dispositions or tax refunds, as set forth in
Section 5.32 below.
5.2 CONDUCT OF BUSINESS. The Borrower and each of its Subsidiaries shall:
(a) duly observe and comply with all applicable laws and all
requirements of any governmental authorities relative to its corporate
existence, rights and franchises, to the conduct of their businesses
and to their property and assets, and shall maintain and keep in full
force and effect all licenses and permits necessary to the proper
conduct of their businesses, to the extent that the failure to do so
might have a material adverse effect on the business, Collateral,
financial conditions or prospects of the Borrower or of the Borrower
and its Subsidiaries, taken as a whole; and
(b) maintain their respective corporate existences and remain or
engage in substantially the same business as that in which they are
now engaged and in no unrelated business except with the written
consent of the Majority Banks, and except that the Borrower or any of
its Subsidiaries may, upon notice to the Agent and the Banks, withdraw
from any business activity which its respective Board of Directors
deems unprofitable or unsound.
5.3 MAINTENANCE AND INSURANCE.
-------------------------
(a) The Borrower and each of its Subsidiaries will maintain and
keep their real and personal properties in good repair, working order
and condition, ordinary wear and tear excepted and from time to time
make all needful and proper repairs, renewals, replacements, additions
and improvements thereto so that their
39
<PAGE> 46
businesses may be properly and advantageously conducted at all times.
The Borrower and each of its Subsidiaries at all times will maintain
insurance with such insurance companies, in such amounts (including,
without limitation, so-called "all-risk" coverage at replacement value
and "broad form" liability coverage), against such hazards and
liabilities and for such purposes as the Agent determines is
reasonable and as is customary in the industry for companies of
established reputation engaged in the same or similar businesses and
owning or operating similar properties. The Agent shall be named as
loss payee and additional insured under the Borrower's and each
Subsidiary's insurance and shall be given 30 days' advance notice of
any cancellation of insurance.
(b) Upon request of the Agent from time to time, the Borrower
shall furnish to the Agent duplicate original insurance policies,
certificates or other evidence satisfactory to the Agent of compliance
with the foregoing insurance provisions. If the Borrower fails to
provide or cause to be provided such insurance, the Agent, in its sole
discretion, may provide such insurance and charge the cost to the Loan
Account or to the Borrower's or any of its Subsidiaries' deposit
accounts with the Agent or any Bank. Any payment not recovered from
the Borrower shall bear interest at the then rate of interest under
the Revolving Notes. The Agent shall not, by the fact of approving,
disapproving, or accepting any such insurance, incur any liability for
the form or legal sufficiency of insurance contracts, solvency of
insurance companies or payment of lawsuits, and the Borrower hereby
expressly assume full responsibility therefor and liability, if any,
thereunder.
5.4 TAXES. The Borrower and each of its Subsidiaries shall pay or cause to
be paid all taxes, assessments or governmental charges on or against them or
their properties prior to such taxes becoming delinquent, except for any tax,
assessment or charge (other than any charge for environmental cleanup costs
referred to in Section 5.20) which is being contested in good faith by proper
legal proceedings and with respect to which adequate reserves have been
established and are being maintained. The Borrower shall respond promptly to any
notices or requests for information from any governmental authority in
connection with any audit or inquiry by such governmental authority regarding
taxes paid or payable by the Borrower and its Subsidiaries.
5.5 LIMITATION OF INDEBTEDNESS. Except with the prior written consent of
the Agent and Majority Banks, neither the Borrower nor any Subsidiary of the
Borrower shall create, incur, assume or suffer to exist, or in any manner become
or be liable directly or indirectly with respect to, any Indebtedness except:
(a) the Obligations; (b) Indebtedness existing on the date of this Agreement,
listed and described, but only to the extent so listed and described, on the
Initial Financial Statement or on SCHEDULES 3.7 OR 5.5 attached hereto; (c)
Indebtedness for taxes, assessments or governmental charges to the extent that
payment therefor shall at the time not be required to be made in accordance with
Section 5.4; and (d) Indebtedness on open account for the purchase price of
services, materials and supplies incurred by the Borrower or any of its
Subsidiaries in the ordinary course of business (not as a result of borrowing),
so long as all of such open account Indebtedness shall be promptly paid and
discharged when due (or in conformity
40
<PAGE> 47
with customary trade practices of the Borrower), except for any such open
account Indebtedness which is being contested in good faith by the Borrower or
such Subsidiary.
5.6 GUARANTIES. Except as described in SCHEDULE 5.6, neither the Borrower
nor any of its Subsidiaries is or shall become or be liable by way of guaranty,
surety or other arrangement for the Indebtedness or obligations of any nature or
kind of any other entity or person (including any Subsidiary or Affiliate),
except for endorsement of instruments for collection in the ordinary course of
business by the Borrower of leases of real property occupied or to be occupied
by any of the other Loan Parties, which leases do not involve more than
$300,000.00 in any calendar year in any one instance.
5.7 RESTRICTIONS ON ENCUMBRANCES. Neither the Borrower nor any of its
Subsidiaries shall create, incur, assume or suffer to exist any mortgage,
pledge, security interest, lien or other charge or encumbrance, including the
lien or retained security title of a conditional vendor ("ENCUMBRANCES"), upon
or with respect to any property or assets, real or personal, of the Borrower or
such Subsidiary, or assign or otherwise convey any right to receive income,
except:
(a) Encumbrances existing on the date of this Agreement and set
forth on SCHEDULE 3.5; or
(b) Liens for taxes, fees, assessments and other governmental
charges to the extent that payment of the same is not required in
accordance with the provisions of Section 5.4; or
(c) Encumbrances in favor of the Agent; or
(d) Liens of mechanics, laborers, materialmen, carriers and
warehousemen arising by operation of law to secure payment for labor,
materials, supplies or services incurred in the ordinary course of
business of the Borrower or any of its Subsidiaries, but only if the
payment thereof is not at the time required and such liens do not,
individually or in the aggregate, materially detract from the value or
limit the use of any property subject thereto; or
(e) Deposits made in the ordinary course of the Borrower's or any
of its Subsidiaries' businesses in connection with workmen's
compensation, unemployment insurance, social security and other
similar laws.
5.8 CORPORATE EXISTENCE; FUNDAMENTAL CHANGES.
----------------------------------------
(a) Except as expressly provided herein, the Borrower will, and
will cause each of its Subsidiaries to, at all times preserve and keep
in full force and effect its corporate existence and all rights and
franchises material to the business of the Borrower and its
Subsidiaries on a consolidated basis. Without limiting the foregoing,
the Borrower shall, and shall cause each of its Subsidiaries to, file
and diligently process to completion applications for all material
permits,
41
<PAGE> 48
licenses and other governmental approvals necessary for the operation
of its debt collection business.
(b) Neither the Borrower any of its Subsidiaries will alter the
corporate, capital or legal structure of the Borrower or any of its
Subsidiaries, create any new Subsidiaries, or consolidate or merge
with or into any other corporation or other entity, or acquire the
assets or stock of any entity, or liquidate, wind-up or dissolve
itself (or suffer any liquidation or dissolution), or sell, lease,
transfer or otherwise dispose of any portion of its assets, other than
(i) the sale of finished goods in the ordinary course of business,
(ii) the disposition of scrap, waste and obsolete items in the
ordinary course of business and (iii) as otherwise expressly permitted
by this Agreement; PROVIDED that Orleans and Safety Canada may merge
with each other.
5.9 INVESTMENTS AND LOANS. Neither the Borrower nor any of its Subsidiaries
shall make or have outstanding at any time any investments in or loans to any
other Person (including any Subsidiary), whether by way of advance, guaranty,
extension of credit, capital contribution, purchase of stocks, notes, bonds or
other securities or evidences of Indebtedness, or acquisition of limited or
general partnership interests, other than: (a) loans and advances to any wholly
owned Subsidiary of the Borrower not in excess of $750,000 to Safety Europe,
$1,000,000 to Orleans, and $1,100,000 to Safety Canada in the aggregate
outstanding at any time, exclusive of money owed as a result of sales of goods
in the ordinary course of business on normal business terms; (b) those loans and
advances which are scheduled on SCHEDULE 5.9(ii); (c) in direct obligations of
the United States of America, maturing within one year of their issuance; (d) in
time certificates of deposit or repurchase agreements, maturing within one year
of their issuance, from banks in the United States having capital, surplus and
undivided profits in excess of $200,000,000; (e) in short-term commercial paper
carrying the investment grade rating by Moody's or Standard and Poor's rating
services and issued by corporations in currency of the United States of America;
(f) in shares of money-market mutual funds having assets in excess of
$100,000,000, all of the assets of which consist of investments referred to in
clauses (a) through (c) inclusive above.
5.10 MAXIMUM CAPITAL EXPENDITURES.
----------------------------
<TABLE>
(a) The consolidated Capital Expenditures of the Borrower
and its Subsidiaries, measured as of any date set forth below on
a cumulative basis from January 1, 1997, shall not be more than
the applicable amount set forth below:
<CAPTION>
MAXIMUM CAPITAL
DATE EXPENDITURES
---- ------------
<S> <C>
February 28, 1997 $1,700,000
March 31, 1997 2,260,000
April 30, 1997 2,680,000
</TABLE>
42
<PAGE> 49
<TABLE>
<S> <C>
May 31, 1997 3,260,000
June 30, 1997 3,460,000
July 31, 1997 3,700,000
August 31, 1997 3,950,000
September 30, 1997 4,190,000
October 31, 1997 4,430,000
November 30, 1997 4,675,000
December 31, 1997 4,920,000
January 31, 1998 5,200,000
February 28, 1998 5,500,000
March 31, 1998 6,000,000
</TABLE>
(b) The Borrower shall not, and shall not permit its
Subsidiaries to, make, at any time during Borrower's 1997 fiscal
year, any commitment, or otherwise become obligated, to make
Capital Expenditures during Borrower's 1998 fiscal year in an
aggregate amount in excess of $4,000,000.
5.11 RESTRICTED PAYMENTS. Neither the Borrower nor any of its Subsidiaries
shall pay, make, declare, authorize or set apart any sum for any Restricted
Payment.
5.12 ERISA COMPLIANCE.
----------------
(a) Each Plan shall comply with ERISA. None of the Borrower, any ERISA
Affiliate of the Borrower, any Plan or any fiduciary thereof shall (i)
engage in any Prohibited Transaction, (ii) incur any "accumulated funding
deficiency" (as defined in Section 412(a) of the Code and Section 302 of
ERISA, or (iii) terminate any Pension Plan in a manner which could result
in the imposition of a lien on any property of any of the Borrower or any
ERISA Affiliate of the Borrower.
(b) With respect to any Plan, the Borrower shall, or shall cause its
Affiliates to, furnish to the Agent promptly (i) written notice of the
occurrence of a Reportable Event, (ii) a copy of any request for a waiver
of the funding standards or an extension of the amortization periods
required under Section 412 of the Code and Section 302 of ERISA, (iii) a
copy of any notice of intent to terminate any Plan, (iv) notice that the
Borrower or any ERISA Affiliate of the Borrower will or may incur any
liability to or on account of a Plan under Sections 4062, 4063, 4064, 4201
or 4204 of ERISA, and (v) a copy of the annual report of each Plan (Form
5500 or comparable form) required to be filed with the IRS and/or the
Department of Labor. Any notice to be provided to the Agent under this
Section shall include a certificate of the chief financial officer of the
Borrower setting forth details as to such occurrence and the action, if
any, which the Borrower or the applicable ERISA Affiliate is required or
proposes to take, together with any notices required or proposed to be
filed with or by the Borrower, any ERISA Affiliate of the Borrower, the
PBGC, the IRS, the trustee or the plan administrator with respect thereto.
43
<PAGE> 50
(c) Promptly after the adoption by the Borrower or any ERISA Affiliate
of the Borrower of any Plan subject to ERISA, the Borrower shall notify the
Agent of such adoption and of the vesting and funding schedules and other
principal provisions thereof.
5.13 NOTIFICATION OF DEFAULT. Upon becoming aware of the existence of any
Event of Default, or any condition or event which would upon notice or passage
of time, or both, constitute an Event of Default, the Borrower shall promptly
give the Agent written notice thereof specifying the nature and duration thereof
and the action being or proposed to be taken with respect thereto.
5.14 NOTIFICATION OF MATERIAL LITIGATION. The Borrower shall promptly
notify the Agent in writing of (a) any litigation or of any investigative
proceedings of a governmental agency or authority commenced or threatened
against the Borrower or any of its Subsidiaries which could reasonably be
expected to be materially adverse to the prospects, business or the financial
condition of the Borrower or of the Borrower and its Subsidiaries, taken as a
whole, and (b) the issuance of any judgment, award, decree, order or other
determination in or relating to any such litigation or proceedings.
5.15 NOTIFICATION OF MATERIAL ADVERSE CHANGE. The Borrower shall promptly
notify the Agent of any occurrence, condition or event affecting the Borrower or
any of its Subsidiaries which could reasonably be expected to constitute a
material adverse change in or which could reasonably be expected to have a
material adverse effect on the prospects, business, properties or condition
(financial or otherwise) of the Borrower or of the Borrower and its
Subsidiaries, taken as a whole.
5.16 INSPECTION BY THE AGENT AND THE BANKS. The Borrower shall, and shall
cause its Subsidiaries to, permit the Agent or any one or more of the Banks or
its designees, at any reasonable time and from time to time, to visit and
inspect the properties of the Borrower and its Subsidiaries to examine and make
copies of and take abstracts from the books and records of the Borrower and its
Subsidiaries and to discuss the affairs, finances and accounts of the Borrower
and its Subsidiaries with appropriate officers and employees. In connection
therewith, the Agent may, using its reasonable customary procedures, communicate
with account debtors to verify the existence, amount and payment terms of any
Accounts Receivable. In the absence of an Event of Default or event which with
the passage of time or giving of notice or both would become an Event of
Default, the Agent shall not conduct more than three such field examinations in
any calendar year. All expenses incurred by the Agent in connection with such
visits, inspections and examinations shall be paid by the Borrower. In addition
to the foregoing, upon receipt of a notice pursuant to Section 5.28(b), the
Agent may cause Gordon Brothers Partners Inc. to do an appraisal analysis of the
Inventory; PROVIDED that the aggregate amount payable pursuant to Section 9.7(a)
in respect of any one such appraisal analysis shall not exceed $12,000.
5.17 MAINTENANCE OF BOOKS AND RECORDS. The Borrower and its Subsidiaries
shall keep adequate books and records of account in which true and complete
entries will be made reflecting all of its business and financial transactions,
and such entries will be made in accordance
44
<PAGE> 51
with GAAP and applicable law including, without limitation, laws with respect to
questionable, improper or corrupt payments.
5.18 TRANSACTIONS WITH AFFILIATES. The Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly enter into any
purchase, sale, lease or other transaction with any Affiliate except in the
ordinary course of business on terms that are no less favorable to the Borrower
or any of its Subsidiaries than those which might be obtained at the time in a
comparable arm's length transaction with any person (including an individual,
corporation, partnership, trust and governmental agency or instrumentality) who
is not an Affiliate; PROVIDED that, the Board of Directors of the Borrower shall
approve each such transaction or such series of related transactions with an
aggregate value of $50,000 or more (other than any transaction between the
Borrower and one or more of its wholly owned Subsidiaries); PROVIDED HOWEVER
that the Borrower may reimburse Michael Lerner and Michael Bernstein in an
aggregate amount not to exceed $300,000 for sums paid by them to the Prior
Lenders after the Effective Date for obligations relating to the Existing Loan
Agreement.
5.19 ENVIRONMENTAL REGULATIONS.
-------------------------
(a) The Borrower shall, and shall cause its Subsidiaries to, comply in
all material respects with all applicable laws and regulations relating to
pollution control, hazardous materials and hazardous waste in all
jurisdictions in which any of them operates now or in the future, and the
Borrower shall, and shall cause its Subsidiaries to, comply with all such
laws and regulations that may in the future be applicable to the Borrower,
its Subsidiaries and their properties and assets.
(b) If the Borrower or any of its Subsidiaries shall (i) receive
notice that any violation of any federal, state or local environmental law
or regulation may have been committed or is about to be committed by the
Borrower or any of its Subsidiaries, (ii) receive notice that any
administrative or judicial complaint or order has been filed or is about to
be filed against the Borrower or any of its Subsidiaries alleging a
violation of any federal, state or local environmental law or regulation or
requiring the Borrower or any of its Subsidiaries to take any action in
connection with the release of toxic or hazardous wastes or materials into
the environment or (iii) receive any notice from a federal, state, or local
governmental agency or private party alleging that the Borrower or any of
its Subsidiaries may be liable or responsible for any costs associated with
a response to or cleanup of a release of hazardous wastes or materials into
the environment or any damages caused thereby, the Borrower shall provide
the Agent with a copy of such notice within five (5) days after the
Borrower's receipt or the applicable Subsidiaries' thereof. Within fifteen
(15) days after the Borrower or any of its Subsidiaries has learned of the
enactment or promulgation of any federal, state or local environmental law
or regulation which may result in any material adverse change in the
business, properties or condition (financial or otherwise) of any of the
Borrower or any of its Subsidiaries, the Borrower shall provide the Agent
with notice thereof.
45
<PAGE> 52
5.20 FISCAL YEAR. The Borrower and its Subsidiaries shall have fiscal years
ending on December 31 of each year and shall not change such fiscal years
without the prior written consent of the Agent.
<TABLE>
5.21 MINIMUM CONSOLIDATED NET WORTH. The Borrower shall not permit
Consolidated Net Worth as of any date set forth below to be less than an amount
equal to the remainder of (a) Consolidated Net Worth as of December 31, 1996
MINUS the applicable amount set forth below:
<CAPTION>
CONSOLIDATED NET
DATE WORTH DEDUCTION
---- ---------------
<S> <C>
February 28, 1997 $4,000,000
March 31, 1997 4,000,000
April 30, 1997 4,000,000
May 31, 1997 4,000,000
June 30, 1997 4,000,000
July 31, 1997 4,000,000
August 31, 1997 3,900,000
September 30, 1997 3,800,000
October 31, 1997 3,800,000
November 30, 1997 3,650,000
December 31, 1997 3,500,000
January 31, 1998 3,400,000
February 28, 1998 3,300,000
March 31, 1998 3,200,000
</TABLE>
<TABLE>
5.22 MINIMUM CONSOLIDATED EBITDA. The Borrower will not permit the
consolidated EBITDA of the Borrower and its Subsidiaries, measured as of any
date set forth below on a cumulative basis from January 1, 1997, to be less than
the applicable amount set forth below:
<CAPTION>
MINIMUM
CONSOLIDATED
DATE EBITDA
---- ------
<S> <C>
February 28, 1997 $<1,221,000>
March 31, 1997 <1,192,000>
April 30, 1997 <381,000>
May 31, 1997 739,000
June 30, 1997 1,163,000
July 31, 1997 2,058,000
August 31, 1997 3,240,000
September 30, 1997 4,565,000
October 31, 1997 5,063,000
November 30, 1997 6,490,000
December 31, 1997 8,013,000
</TABLE>
46
<PAGE> 53
<TABLE>
<S> <C>
January 31, 1998 9,500,000
February 28, 1998 11,000,000
March 31, 1998 12,500,000
</TABLE>
<TABLE>
5.23 MINIMUM INTEREST COVERAGE RATIO. The Borrower will not permit the
ratio of (a) consolidated EBITDA of the Borrower and its Subsidiaries to (b)
Consolidated Interest Expense, in each case measured as of any date set forth
below on a cumulative basis from January 1, 1997, to be less than the applicable
ratio set forth below:
<CAPTION>
MINIMUM INTEREST
DATE COVERAGE RATIO
---- --------------
<S> <C>
March 31, 1997 <1.10> to 1:00
April 30, 1997 <.20> to 1:00
May 31, 1997 .40 to 1:00
June 30, 1997 .50 to 1:00
July 31, 1997 .70 to 1:00
August 31, 1997 1.00 to 1:00
September 30, 1997 1.20 to 1:00
October 31, 1997 1.20 to 1:00
November 30, 1997 1.40 to 1:00
December 31, 1997 1.60 to 1:00
January 31, 1998 1.60 to 1:00
February 28, 1998 1.60 to 1:00
March 31, 1998 1.60 to 1:00
</TABLE>
<TABLE>
5.24 CASH FLOW FROM ACCOUNTS PAYABLE AND INVENTORY. The consolidated net
cash flow generated from changes in accounts payable and inventory (excluding
inventory reductions resulting from inventory writedowns) of the Borrower and
its Subsidiaries measured as of any date set forth below on a cumulative basis
from January 1, 1997, shall not be less than the applicable amount set forth
below:
MINIMUM CASH FLOW
FROM ACCOUNTS PAYABLE
DATE AND INVENTORY
---- -------------
<S> <C>
March 31, 1997 $ 630,000
April 30, 1997 920,000
May 31, 1997 3,340,000
June 30, 1997 970,000
July 31, 1997 <140,000>
August 31, 1997 <420,000>
September 30, 1997 <730,000>
October 31, 1997 <2,510,000>
November 30, 1997 <2,550,000>
</TABLE>
47
<PAGE> 54
<TABLE>
<S> <C>
December 31, 1997 <2,630,000>
January 31, 1998 <2,630,000>
February 28, 1998 <2,630,000>
March 31, 1998 <2,630,000>
</TABLE>
5.25 MINIMUM ACCOUNTS PAYABLE. The aggregate amount of consolidated
accounts payable of the Borrower and its Subsidiaries shall not be less than (a)
$11,500,000 at any time during the period from the Effective Date to and
including September 30, 1997 and (b) $10,000,000 at any time thereafter.
5.26 INVENTORY BULK SALES. The Borrower will use its best efforts to sell
in bulk sales or other dispositions, any excess or discontinued Inventory.
5.27 LOSS OR DEPRECIATION OF COLLATERAL. The Borrower shall notify the
Agent immediately of the occurrence of each of the following events, if such
event involves an aggregate amount in excess of $100,000, and shall in any event
reflect each such occurrence (without regard to amount involved) in the next
regularly scheduled financial reporting: (a) loss or depreciation in value of
Base Inventory and the amount of the loss or depreciation and reason or basis
for such loss or depreciation; (b) rejection, return, repossession or loss of
any goods giving rise to any Base Account; (c) damage to any such goods; (d) any
request by an account debtor for credit or adjustment of an Account in excess of
normal adjustments and credits are prompt payment; (e) any adjustment by any
Loan Party on the amount owing on an Account in excess of normal adjustments and
credits; (f) any merchandise or other dispute; (g) any other event affecting
Base Inventory or Base Accounts or the value or amount thereof or loss or
depreciation in value of Base Inventory shall be immediately reflected in the
Net Security Value of Base Inventory, and all payments on Base Accounts and all
adjustments and credits with respect thereto, whether unilateral, negotiated or
otherwise, shall be immediately reflected in the Net Outstanding Amount of Base
Accounts.
5.28 DISPOSITION OF COLLATERAL. (a) Neither the Borrower nor any of its
Subsidiaries shall sell, assign, exchange or otherwise dispose of any of the
Collateral, except for Inventory consisting of: (i) scrap, waste, defective
goods and the like; (ii) obsolete goods and equipment; and (iii) finished goods
sold in the ordinary course of business.
(b) If the Borrower sells more than $2,000,000 of Inventory, other
than obsolete Inventory in existence on the Effective Date and referred to on
SCHEDULE 1.1 hereto, in any consecutive 60-day period at an aggregate price of
less than 120% of the aggregate original cost of such Inventory, the Borrower
shall promptly deliver to the Agent written notice of such sales.
5.29 OWNERSHIP OF SUBSIDIARIES. Except as set forth on SCHEDULE 3.12
hereto, the Borrower shall at all times continue to be the sole shareholder of
Safety Canada, Safety Europe and International and none of such Subsidiaries
shall issue any other shares of their common or preferred stock to any other
Person or entity. Safety Canada shall at all times be the sole stockholder of
Orleans and Orleans shall not issue any other shares of its common or preferred
48
<PAGE> 55
stock to any other Person or entity; PROVIDED that Orleans and Safety Canada may
merge with each other.
5.30 AMENDMENT OF CERTAIN DOCUMENTS. Neither the Borrower nor any of its
Subsidiaries shall amend or otherwise change any terms of the Seller Notes.
5.31 CASH MANAGEMENT SYSTEM. The Borrower shall maintain a cash management
system reasonably satisfactory in form and substance to the Agent and such cash
management system shall provide, among other things, that (a) all receipts of
the Borrower and its Subsidiaries shall be deposited in lockbox accounts
maintained at a cash manager reasonably satisfactory to the Agent, (b) neither
the Borrower nor any of its Subsidiaries shall open any deposit account after
the Effective Date without the prior written consent of the Agent and (c) all
such receipts shall be applied daily to prepay Revolving Loans and may be
reborrowed subject to the terms and conditions of Section 2.1. The deposit
accounts in existence on the Effective Date are set forth or SCHEDULE 5.31
hereto. The Agent hereby acknowledges that Fleet National Bank is a satisfactory
cash manager.
5.32 INTEREST RATE AGREEMENTS. Upon the request of the Agent, the Borrower
shall enter into, and maintain in full force and effect, interest rate
agreements satisfactory in form and substance to the Agent.
5.33 LERNER TRUST. Within 15 Business Days of the Effective Date, Michael
Lerner shall establish the Lerner Trust, a Delaware business trust, pursuant to
a trust agreement reasonably satisfactory in form and substance to the Agent and
which shall provide, among other things, that (except with respect to the filing
of a bankruptcy petition or other insolvency proceeding and issues related
thereto, or upon the exercise of remedies with respect to the Lerner Trust)
Michael Lerner shall retain voting rights with respect to stock contributed to
the Lerner Trust. The trust estate of the Lerner Trust shall include $9,500,000
of cash or U.S. Treasury securities and capital stock of the Borrower with a
fair market value on the date the trust is established of at least $2,000,000.
In the event the value of the stock held by the Lerner Trust is at any time less
than $2,000,000, Michael Lerner shall contribute to the trust estate additional
capital stock of the Borrower so that the aggregate value of the capital stock
held by the Lerner Trust will at all times be at least $2,000,000. Concurrently
with the establishment of the Lerner Trust, (i) Michael Lerner shall amend and
restate the Lerner Pledge Agreement substantially in the form attached as
EXHIBIT IX hereto in order to, among other things, grant a first priority
perfected security interest in his interest in the Lerner Trust and (ii) Lerner
Trust shall grant a first priority perfected security interest in the trust
estate pursuant to the Lerner Trust Security Agreement.
5.34 POST-CLOSING COVENANTS. (a) Within 10 days after the Effective Date,
the Borrower shall cause Michael Lerner to deliver to the Agent to be held as
Collateral pursuant to the Lerner Pledge Agreement, stock certificates
representing capital stock of the Borrower with an aggregate fair market value
such that, upon such delivery, the aggregate fair market value of the stock
pledged pursuant to the Lerner Pledge Agreement shall not be less than
$2,000,000.
49
<PAGE> 56
(b) The Borrower shall use its best efforts to deliver to Agent
landlord waivers and collateral access agreements reasonably satisfactory in
form and substance to the Agent with respect to the warehouses located in
Londonderry, New Hampshire and Salem, New Hampshire; PROVIDED that, with respect
to each such location, if any, for which the Borrower fails to deliver any such
landlord waiver or collateral access agreement on or prior to the date that is
45 days after the Effective Date, the Borrowing Base shall be decreased by an
amount equal to three months rent or storage charges for such location until the
applicable landlord waiver or collateral access agreement is delivered to the
Agent.
SECTION 6. EVENTS OF DEFAULT; ACCELERATION.
-------------------------------
6.1 EVENTS OF DEFAULT. The following shall constitute events of default
(individually, an "EVENT OF DEFAULT"):
(a) default in the payment, when due or payable, of any Obligation for
the payment of money (including failure by any of the Borrower to pay when due
any amount on a Loan);
(b) default in the performance or observance of or compliance with any
of the provisions of Sections 2.5, 5.1 5.5, 5.6, 5.7, 5.8, 5.9, 5.10, 5.11,
5.18, 5.20, 5.21, 5.22, 5.23, 5.24, 5.25, 5.28, 5.29, 5.30 and 5.31.
(c) default in the performance or observance of or compliance with any
other covenant or condition of this Agreement, any other Loan Document or any
other Obligation not separately listed above or below in this Section and such
default shall not have been remedied or waived within 10 Business Days after the
earlier of (i) an officer of the Borrower or any of its Subsidiaries becoming
aware of such default or (ii) receipt by the Borrower or one of its Subsidiaries
of notice from the Agent or any Bank of such default;
(d) the making by any of the Loan Parties or any endorser, guarantor
or surety for any Obligation of any material misrepresentation to the Agent or
any Bank contained in this Agreement, any other Loan Document or otherwise,
whether or not for the purpose of obtaining credit or an extension of credit;
(e) issuance of an injunction against any Loan Party or any endorser,
guarantor or surety for any Obligation, or an attachment against any material
amount of property of any Loan Party or any endorser, guarantor or surety for
any Obligation which is not dismissed or bonded, to the satisfaction of the
Agent, within fifteen (15) business days after issuance;
(f) calling of a meeting of creditors, appointment of a committee of
creditors or liquidating agents or offering of a composition or extension to
creditors by, for or with the consent or acquiescence of any of the Loan Parties
or any endorser, guarantor or surety for any Obligation;
50
<PAGE> 57
(g) Insolvency of any of the Loan Parties or any endorser, guarantor
or surety for any Obligation;
(h) the occurrence of any default (other than those set forth or
referred to on SCHEDULE 3.6 hereto) under any agreement (other than any
agreement relating solely to a trade payable incurred in the ordinary course of
business), note or other instrument evidencing or relating to any obligation of
any of the Loan Parties to any other person or entity for the payment of
$500,000 or more in the aggregate or under any Seller Note, unless such default
is the subject of a good faith dispute and the affected Loan Party, endorser or
guarantor has established a reserve satisfactory to the Agent to fully cover any
potential liability to the Loan Party, endorser or guarantor resulting from such
alleged default, or the acceleration of or demand for payment under any
agreement (other than any agreement relating solely to a trade payable incurred
in the ordinary course of business), note or other instrument evidencing or
relating to any obligation of any of the Loan Parties or any endorser, guarantor
or surety for any Obligation to any other person or entity for the payment of
$500,000 or more in the aggregate or under any Seller Note, unless such default
is the subject of a good faith dispute and the affected Loan Party, endorser or
guarantor has established a reserve satisfactory to the Agent to fully cover any
potential liability to the Loan Party, endorser or guarantor resulting from such
alleged default;
(i) any money judgment or judgments aggregating in excess of $750,000
in any consecutive twelve month period are entered against any of the Loan
Parties or any endorser, guarantor or surety for any Obligation, unless such
judgment or judgments are fully covered by insurance from a company acceptable
to the Agent which has acknowledged liability therefor or the Borrower and its
Subsidiaries enter into one or more settlement agreements involving settlements
within any 12 consecutive month period (other than settlements relating solely
to trade payables in default on the Effective Date) in an aggregate amount in
excess of $750,000.
(j) the occurrence of any material adverse change in the prospects,
condition or affairs (financial or otherwise) of any of the Loan Parties or any
endorser, guarantor or surety for any Obligation which causes the Agent or
Majority Banks to deem itself insecure;
(k) termination, cancellation, revocation or rescission of any of the
Loan Documents;
(l) service upon the Agent or any Bank of a writ naming the Agent or
such Bank as trustee for any of the Loan Parties;
(m) attachment of any Lien securing any Indebtedness in excess of
$500,000 not permitted hereunder upon property of any of the Loan Parties
without the Agent's prior written consent which is not dismissed or bonded over
by an insurance carrier or other surety acceptable to the Agent within thirty
(30) days of its attachment;
(n) If Michael Lerner or two or more members of the Borrower's Senior
Management should within a period of six (6) months (whether due to retirement,
disability, death or otherwise) cease to hold the office, serve in the capacity
to exercise the managerial or policy making responsibilities which he or they
now hold, serve in or exercise with or on behalf of the
51
<PAGE> 58
Borrower and are not replaced within forty-five (45) days of such event with a
person or persons reasonably acceptable to the Majority Banks. For purposes
hereof, Senior Management shall be deemed to consist of Michael Lerner, Michael
Bernstein and Richard Caturano and their respective successors (whether direct
or indirect);
(o) any loss, theft, damage or destruction to or of any material
part of the Collateral not fully covered by insurance (the existence of any
standard deductible provision in such insurance coverage shall not mean that a
loss is not "fully covered");
(p) reclamation or repossession of, nor any action by a creditor
to reclaim or repossess, any material part of the asset(s) of any of the Loan
Parties; or
(q) there shall occur and be continuing any Reportable Event
which constitutes grounds for termination of or for appointment by a United
States district court of a trustee to administer any Plan, and such Reportable
Event shall continue for thirty (30) days; the PBGC shall institute proceedings
to terminate or to appoint a trustee to administer any Plan, which proceeding
shall continue undismissed for thirty (30) days; a United States district court
shall appoint a trustee to administer any Plan; or any Plan shall be terminated
in circumstances giving rise to liabilities having a material adverse effect on
any of the Loan Parties' financial condition; or
(r) the Agent shall not have or shall cease to have a valid,
perfected security interest in any Collateral purported to be covered by any
Loan Document for any reason other than the failure of the Agent to take any
action within its control, subject only to Liens permitted under the applicable
Loan Document; or
(s) (i) any Person (other than Michael Lerner) or related group
of Persons (including a "group" as such term is used in Section 13(d)(3) of the
Exchange Act) owns or controls more than 25% of the common stock or 25% of the
voting power of the Borrower entitled to vote for the election of members of the
board of directors of the Borrower or (ii) Michael Lerner shall cease to
beneficially own at least 30% of the common stock and 30% of the voting power of
the Borrower entitled to vote for the election of members of the board of
directors of the Borrower (assuming, for purposes of this subsection, that
Michael Lerner beneficially owns the stock in the Lerner Trust) or (iii) a
change shall occur in the Board of Directors of the Borrower so that a majority
of the Board of Directors of the Borrower ceases to consist of the individuals
who constituted the Board of Directors of the Borrower on the Effective Date (or
individuals whose election or nomination for election was approved by a vote of
at least 66-2/3% of the directors then in office who either were directors on
the Effective Date or whose election or nomination for election was previously
so approved).
6.2 ACCELERATION; REMEDIES. If an Event of Default shall occur and be
continuing, the Agent may, at its option, or upon the direction of the Majority
Banks, shall, take any or all of the following actions, except in the case of a
default under Section 6.1(f) in which instance (a), (b) and (c), below, shall
occur automatically without requirement of any action by the Banks:
52
<PAGE> 59
(a) declare any or all of the Obligations to be immediately due and
payable without further notice or demand, whereupon the same shall become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower;
(b) limit, suspend or terminate the Borrower's right to borrow
hereunder;
(c) require the Borrower to deposit cash with the Agent in the Stated
Amount of all Letters of Credit outstanding at the time of such Event of
Default; and
(d) exercise any rights and remedies under the Security Agreements,
the other Loan Documents, at law or in equity.
In the event any or all of the Obligations become due and payable as
hereinabove set forth, the Borrower shall pay immediately to the Agent for the
benefit of the Banks and the Issuing Banks all such Obligations owing or payable
by it (the Borrower hereby acknowledging that it shall then have the obligation
to pay to the Agent all such Obligations), failing which the Agent may exercise
any rights and remedies under the Security Agreement, the other Loan Documents,
at law or in equity and such payment to the Agent when made shall be deemed to
have been made in discharge of such Obligations (to the extent of amounts
received), and the Agent shall distribute such proceeds as provided herein.
SECTION 7. SET OFF; PARTICIPATIONS; ADDITIONAL ASSURANCES.
----------------------------------------------
7.1 SET OFF. Regardless of the adequacy of any Collateral, any deposits or
other sums at any time credited by or due from the Agent or any Bank to any of
the Loan Parties may, at any time after the occurrence and during the
continuance of an Event of Default, be applied to or set off against any of the
Obligations. Any and all instruments, documents, policies and certificates of
insurance, securities, goods, accounts, choses in action, general intangibles,
chattel papers, cash, property and all proceeds thereof owned by any of the Loan
Parties or in which any of the Loan Parties has an interest, which now or
hereafter are at any time in possession or control of any of the Banks or in
transit by mail or carrier to or from any of the Banks without regard to whether
the Banks received the same in pledge, for safekeeping, as agent for collection
or transmission, or otherwise shall constitute additional security for the
Obligations and may be applied at any time after occurrence of an event of
default to any Obligations which are then owing. The Banks shall be entitled to
presume in the absence of clear and specific written notice to the contrary
provided by the applicable Loan Party to the Banks that any and all deposits
maintained by any of the Loan Parties with the Banks are general accounts as to
which no person or entity other than the applicable Loan Parties has any legal
or equitable interest.
7.2 RELIANCE BY PARTICIPANTS. The Borrower agrees that any bank or other
financing institution which may consider investing or participating in the Loans
(each such financing institution being referred to in this Section as a
"PARTICIPANT") may rely upon all of the representations, warranties, covenants
and other provisions of this Agreement, the Revolving Notes, the Term Notes, the
other Loan Documents and the other agreements, instruments and
53
<PAGE> 60
documents referred to herein or contemplated hereby in making such investment or
participation and agrees that its becoming a Participant in the Loans shall
constitute an acceptance of such offer and shall make the Participant a creditor
of the Borrower.
7.3 SET OFF BY PARTICIPANTS. Any deposits or other sums which at any time
may be credited to any of the Loan Parties by or due to them from any
Participant may, at any time after the occurrence and during the continuance of
an Event of Default, be applied to or set off by such Participant against the
then outstanding indebtedness of the Loan Parties hereunder.
7.4 FURTHER ASSURANCES REGARDING PROCEEDS. The Agent may require the Loan
Parties to deliver to it immediately upon receipt of same, all checks, drafts,
cash and other remittances in payment of any Inventory sold or in payment or on
account of the Loan Parties' Accounts, contracts, contract rights, notes, bills,
drafts, acceptances, general intangibles, choses in action and all other forms
of obligations. Said proceeds shall be delivered to Bank in the same form
received except for the endorsement of the Loan Parties where necessary to
permit collection of items, which endorsement the Loan Parties agree to make. If
the Agent so requires, the Loan Parties shall direct all account debtor
remittances and payments to be made directly to a lockbox established by the
Agent and shall enter into a lockbox arrangement with the Agent for the
collection of such remittances and payments or in the alternative, to a
designated remittance account established with the Agent or at another financial
institution which has agreed to accept drafts drawn on it by the Agent under a
written depository transfer agreement with the Agent, and to block the Loan
Parties' accounts and waive its own rights as against such account. Any proceeds
of Accounts or Inventory constituting Collateral received by the Loan Parties,
whether in the form of cash, checks, notes or other instruments, shall be held
in trust for the Agent for the benefit of the Banks and the Loan Parties shall
deliver said proceeds immediately to the Agent, without commingling, in the
identical form received (properly endorsed or assigned where required to enable
the Agent to collect same). The order and method of such application shall be in
the sole discretion of the Agent and any portion of such funds which the Agent
elects not to so apply shall be paid over from time to time by the Agent to the
Borrower.
7.5 NOTIFICATION TO ACCOUNT DEBTORS. The Agent may at any time after an
Event of Default notify account debtors that Collateral has been assigned to the
Agent and that payments shall be made directly to the Agent. Upon request of the
Agent at any time after occurrence of an Event of Default, the Loan Parties will
so notify such account debtors and will indicate on all billings to such account
debtors that their Accounts must be paid to the Agent. The Agent shall have full
power to collect, compromise, endorse, sell or otherwise deal with the
Collateral or proceeds thereof in its own name or in the name of any of the Loan
Parties.
7.6 APPOINTMENT AS ATTORNEY-IN-FACT. The Borrower and each of its
Subsidiaries hereby make, constitute and appoint any officer or agent of the
Agent as their true and lawful attorney-in-fact, with power to endorse the name
of the Borrower, and its Subsidiaries, or the Borrower's or any of its
Subsidiaries' officers or agents upon any notes, checks, drafts, money orders,
or other instruments of payment (including payments payable under any policy of
insurance on the Collateral) or Collateral that may come into possession of the
Agent in full or part payment of any amounts owing to the Agent; to sign and
endorse the name of the Borrower
54
<PAGE> 61
or any of its Subsidiaries, or any of the Borrower's or such Subsidiaries
officers or agents, upon any invoice, freight or express bill, bill of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts, and any instrument or
documents relating thereto or to the Borrower's or any of its Subsidiaries
rights therein; to give written notice to such office and officials of the
United States Post Office to effect such change or changes of address so that
all mail addressed to the Borrower or any of its Subsidiaries, may be delivered
directly to the Agent; granting upon Borrower's and such Subsidiaries' said
attorney full power to do any and all things necessary to be done in and amount
the premises as fully and effectually as the Borrower or any of its Subsidiaries
might or could do, to be done by virtue hereof. Neither the Agent nor the
attorney shall be liable for any acts or omissions nor for any error of judgment
or mistake, except for their gross negligence or willful misconduct. This power
of attorney shall be irrevocable for the term of this Agreement and all
transactions hereunder and thereafter as long as the Borrower or any of its
Subsidiaries may be indebted to the Banks or any Commitments are in effect.
7.7 CONSIGNMENT. If any of the Loan Parties' Inventory is held by any
customer on consignment, then the Loan Parties will protect their (and the
Agent's) interest therein by filing financing statements against such customer
and sending prior notification of the consignment to such customer's secured
lenders (if any) and will furnish the Agent with copies of such filings and
notices.
7.8 ACCOUNTS FROM GOVERNMENTAL AUTHORITIES. If any of the Loan Parties'
Accounts arise out of contracts with the United States or any department,
agency, or instrumentality thereof, the applicable Loan Party will immediately
notify the Agent thereof in writing and execute any instruments and take any
steps required by the Agent in order that all monies due and to become due under
such contracts shall be assigned to the Agent and notice thereof given to the
Government under the Federal Assignment of Claims Act. If any of the Loan
Parties' Accounts should be evidenced by promissory notes, trade acceptances, or
other instruments for the payment of money, the Loan Parties will immediately
deliver same to the Agent, appropriately endorsed to the Agent's order and,
regardless of the form of such endorsement, the Loan Parties hereby waive
presentment, demand, notice of dishonor, protest and notice of protest and all
other notices with respect thereto.
7.9 RENTAL OF PREMISES TO THE AGENT. The Loan Parties hereby grant to the
Agent for a term to commence on the date of this Agreement and continuing
thereafter until all debts and Obligations of any kind or character owing from
the Loan Parties to the Agent and the Banks are fully paid and discharged and
all Commitments terminated, the right to use all premises or places of business
which any of the Loan Parties presently has or may hereafter have and where any
of the Collateral may be located, at a total rental for the entire period of
$1.00. The Agent agrees not to exercise the rights granted in this paragraph
unless and until they determine to exercise their rights against the Collateral
herein.
7.10 FURTHER ASSURANCES. The Loan Parties will, at their expense, upon
request of the Agent promptly and duly execute and deliver such documents and
assurances and take such actions as may be necessary or desirable or as the
Agent may request in order to correct any defect, error
55
<PAGE> 62
or omission which may at any time be discovered or to more effectively carry out
the intent and purpose of the Agreement and to establish, perfect and protect
the Agent's security interest, rights and remedies created or intended to be
created hereunder. Without limiting the generality of the above, the Loan
Parties will join with the Agent in executing financing and continuation
statements pursuant to the Uniform Commercial Code or other notices appropriate
under applicable Federal or state law in form satisfactory to the Agent and
filing the same in all public offices and jurisdictions wherever and whenever
requested by the Agent.
7.11 CERTAIN COVENANTS REGARDING INVENTORY. The Loan Parties shall perform
any and all further steps reasonably requested by the Agent to perfect the
Agent's security interest in Inventory, such as leasing warehouses to the Agent
or its designee, placing and maintaining signs, appointing custodians,
maintaining stock records and transferring Inventory to warehouses. A physical
listing of all Inventory and Machinery and Equipment, wherever located, shall be
delivered by the Borrower to the Agent at least annually and whenever reasonably
requested by the Agent.
7.12 GRANT OF LICENSE. The Loan Parties hereby grant to the Agent for a
term to commence on the date of this Agreement and continuing thereafter until
all debts and Obligations of any kind or character owed to the Agent and the
Banks are fully paid and discharged and all Commitments terminated, a
non-exclusive irrevocable royalty-free license in connection with the Agent's
exercise of its rights hereunder, to use, apply or affix any trademark,
servicemark, tradename, logo or the like and to use any patents, franchises,
licenses, and goodwill in which the Loan Parties now or hereafter have rights,
which license may be used by the Agent upon and after the occurrence of any one
or more Events of Default, PROVIDED, HOWEVER, that such use by the Agent shall
be suspended if such events of default are cured. This license shall be in
addition to, and not in lieu of, the inclusion of all of the Loan Parties'
trademarks, servicemarks, tradenames, logos, goodwill, patents, franchises and
licenses in the Collateral; in addition to the foregoing license, the Agent
shall have full right to exercise any and all of its other rights regarding
Collateral with respect to such trademarks, servicemarks, tradenames, logos,
goodwill, patents, franchises and licenses.
SECTION 8. CONCERNING THE AGENT AND THE BANKS.
----------------------------------
8.1 APPOINTMENT AND AUTHORIZATION. Each of the Banks hereby appoints GSCP
to serve as Agent under this Agreement and irrevocably authorizes the Agent to
take such action on such Bank's behalf under this Agreement and to exercise such
powers and to perform such duties under this Agreement and the other documents
and instruments executed and delivered in connection with the consummation of
the transactions contemplated hereby as are delegated to the Agent by the terms
hereof or thereof, together with all such powers as are reasonably incidental
thereto.
8.2 AGENT AND AFFILIATES. GSCP shall also have the same rights and powers
under this Agreement of a Bank and may exercise or refrain from exercising the
same as though it were not the Agent, and GSCP and its Affiliates may accept
deposits from, lend money to, and generally engage in any kind of business with
the Borrower or any Affiliate of the Borrower as if it were
56
<PAGE> 63
not the Agent hereunder. Except as otherwise provided by the terms of this
Agreement, nothing herein shall prohibit any Bank from accepting deposits from,
lending money to or generally engaging in any kind of business with the Borrower
or any Affiliate of the Borrower.
8.3 FUTURE ADVANCES.
---------------
(a) The Agent and the Banks shall settle all Loans, liabilities with
respect to Letters of Credit, payments and other charges with respect to the
Loans on each business day based upon the respective Commitment Percentages of
the Banks with respect to such Loans, Letters of Credit, payments and other
charges.
(b) Anything in this Agreement to the contrary notwithstanding, the
obligations to make Loans and other advances of credit under the terms of this
Agreement shall be the several and not joint obligation of each of the Banks and
any advances made by the Agent on behalf of any Bank are strictly for the
administrative convenience of the parties and shall in no way diminish any
Bank's liability to the Agent to repay the Agent for such Loans and advances.
The Borrower acknowledges that the obligation of each of the Banks to make
Revolving Loans and other advances of credit hereunder is a several obligation
of each Bank, and that no Bank is required to advance monies on behalf of any
other Bank hereunder.
8.4 DELINQUENT BANK. Notwithstanding anything to the contrary contained in
this Agreement, any Bank that fails to make available to the Agent its share of
any Revolving Loan when and to the full extent required by the provisions of
this Agreement shall be deemed delinquent (a "DELINQUENT BANK") and shall be
deemed a Delinquent Bank until such time as such delinquency is satisfied. A
Delinquent Bank shall be deemed to have assigned any and all payments due to it
from the Borrower, whether on account of outstanding Loans, interest, fees or
otherwise, to the remaining non-delinquent Banks for application to, and
reduction of, their respective PRO RATA shares of all outstanding Revolving
Loans. The Delinquent Bank hereby authorizes the Agent to distribute such
payments to the non-delinquent Banks in proportion to their respective PRO RATA
shares of all outstanding Revolving Loans. A Delinquent Bank shall be deemed to
have satisfied in full a delinquency when and if, as a result of application of
the assigned payments to all outstanding Revolving Loans of the non-delinquent
Banks, the Banks' respective PRO RATA shares of all outstanding Loans have
returned to those in effect immediately prior to such delinquency and without
giving effect to the nonpayment causing such delinquency.
8.5 RATABLE SHARING.
---------------
Each of the Banks and the Agent hereby agrees that if it should
receive any amount (whether by voluntary payment, by the exercise of the right
of set-off or banker's lien, by counterclaim or cross action, by the enforcement
of any right hereunder under or otherwise) in respect of principal of, or
interest on, the Loans or any fees which are to be shared among the Banks,
which, as compared to the amounts theretofore received by the other Banks with
respect to such principal, interest or fees, is in excess of such Bank's pro
rata share of such principal, interest or fees as provided in this Agreement,
such Bank shall share such excess, less the costs and expenses (including,
reasonable attorneys' fees and disbursements) incurred by such Bank in
57
<PAGE> 64
connection with such realization, exercise, claim or action, PRO RATA with all
other Banks in proportion to their respective interests therein, and such
sharing shall be deemed a purchase (without recourse by such sharing party of
participation interest in the Loans or such fees, as the case may be, owed to
the recipients of such shared payments to the extent of such shared payments;
PROVIDED, HOWEVER, that if all or any portion of such excess amount is
thereafter recovered from such bank, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest.
8.6 ACTION BY AGENT.
---------------
(a) The obligations of the agent hereunder are only those expressly
set forth herein. The Agent shall have no duty to exercise any right or power or
remedy hereunder or under any other document or instrument executed and
delivered in connection with or as contemplated by this Agreement or to take any
affirmative action hereunder or thereunder.
(b) The Agent shall keep all records of the Loans and payments
hereunder, and shall give and receive notices and other communications to be
given or received by the Agent hereunder on behalf of the Banks.
(c) Upon the occurrence of an Event of Default the Agent may, and upon
the direction of the Majority Banks pursuant to Section 6.2 the Agent shall,
exercise the option of the Banks pursuant to Section 6.2 to declare all Loans
and other Obligations immediately due and payable and may take such action as
may appear necessary or desirable to collect the Obligations and enforce the
rights and remedies of the Agent or the Banks.
8.7 NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank hereby agrees
that, upon learning of the existence of an Event of Default or of an event or
condition which, with the giving of notice or the passage of time, or both,
would constitute an Event of Default, pursuant to Section 5.13 or otherwise, it
shall notify the Agent thereof. The Agent hereby agrees that upon receipt of any
notice under this Section 8.7, it shall notify the other Banks of the existence
of such Event of Default or event or condition which, with the giving of notice
of the passage of time, or both, would create an Event of Default.
8.8 CONSULTATION WITH EXPERTS. The Agent shall be entitle to retain and
consult with legal counsel, independent public accountants, appraisers, licensed
site professionals, and other experts selected by it and shall not be liable to
the Banks for any action taken, omitted to be taken or suffered in good faith by
it in accordance with the advice of such counsel, accountants or experts. The
Agent may employ agents and attorneys-in-fact and shall not be liable to the
Banks for the default or misconduct of any such agents or attorneys, unless it
was grossly negligent in the selection of such agents or attorneys-in-fact.
However, if the Agent has gotten the consent of the Majority Banks before
engaging such Agents or attorneys-in-fact, the Agent shall have no liability to
the Banks with respect to the acts of such Agents or attorneys-in-fact.
8.9 LIABILITY OF AGENT. The Agent shall exercise the same care to protect
the interest of each Bank as it does to protect its own interest, so that so
long as the Agent exercises such care
58
<PAGE> 65
it shall not be under any liability to any of the Banks, except for the Agent's
gross negligence or willful misconduct with respect to anything it may do or
refrain from doing. Subject to the immediately preceding sentence, neither the
Agent nor any of its directors, officers, agents or employees shall be liable
for any action taken or not taken by it in connection herewith in its capacity
as Agent. Without limiting the generality of the foregoing, but subject to the
first sentence of this Section 8.9, neither the Agent nor any of its directors,
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into or verify: (a) any statement, warranty or representation
made in connection with this Agreement, any document, instrument or agreement
ancillary or related hereto, or any borrowing hereunder; (b) the performance or
observance of any of the covenants or agreements of the Loan Parties; (c) the
satisfaction of any condition specified in Sections 4.1 or 4.2, except receipt
of items required to be delivered to the Agent; (d) the validity, effectiveness,
enforceability or genuineness of this Agreement, the Revolving Notes, the Term
Notes, any other Loan Document or any other document or instrument executed and
delivered in connection with or as contemplated by this Agreement; (e) the
existence, value, collectibility or adequacy of the Collateral or any part
thereof or the validity, effectiveness, perfection or relative priority of the
liens and security interests of the Banks (through the Agent) therein; or (f)
the filing, recording, re-filing, continuing or rerecording of any financing
statement or other document or instrument evidencing or relating to the security
interests or liens of the banks (through the Agent) in the Collateral. The Agent
shall not incur any liability by acting in reliance upon any notice, consent,
certificate, statement or other writing (which may be a bank wire, telecopy or
similar writing) believed by it to be genuine or to be signed by the proper
party or parties.
8.10 INDEMNIFICATION. Each Bank agrees to indemnify the Agent (to the
extent the Agent is not reimbursed by the Borrower), ratably in accordance with
its Commitment Percentage from and against any cost, expense (including
attorneys' fees and disbursements), claim, demand, action, loss or lability
which the Agent may suffer or incur in connection with this agreement in its
capacity as Agent, or any action taken or omitted by the Agent hereunder, or the
Agent's relationship with the Loan Parties hereunder, including, without
limitation, the costs and expenses of defending itself against any claims or
liability in connection with the exercise or performance of any of its powers
and duties hereunder and of taking or refraining from taking any action
hereunder, but excluding any costs, expenses or losses directly arising from the
Agent's gross negligence or willful misconduct. No payment by any Bank under
this Section shall in any way relieve the Loan Parties of their obligations
under this Agreement with respect to the amounts so paid by any Bank, and the
Banks shall be subrogated to the rights of the Agent, if any, in respect
thereto.
8.11 INDEPENDENT CREDIT DECISION. Each of the Banks represents and warrants
to the Agent that it has, independently and without reliance upon the Agent or
any other Bank and based on the financial statements referred to in Section 3.7
and such other documents and information as it has deemed appropriate, made its
own independent credit analysis and decision to enter into this agreement. Each
of the Banks acknowledges that it has not relied upon any representation by the
Agent and that the Agent shall not be responsible for any statements in
omissions from any documents or information concerning the Borrower, this
Agreement, the Revolving Notes, the Term Notes, any other Loan Document or any
other document or instrument executed and
59
<PAGE> 66
delivered in connection with or as contemplated by this Agreement. Each of the
Banks acknowledges that it will, independently and without reliance upon the
Agent or other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make is own credit decisions in taking or
not taking action under this Agreement.
8.12 SUCCESSOR AGENT. GSCP, or any successor Agent, may resign as Agent at
any time by giving written notice thereof to the Banks and to the Borrower. Upon
any such resignation, the Banks shall have the right to appoint a successor
Agent, which successor Agent shall be reasonably acceptable to the Borrower. If
no successor Agent shall have been so appointed by the Banks, and shall have
accepted such appointment, within 30 days after the retiring Agent's giving of
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a commercial bank (or Affiliate
thereof) or savings and loan association organized under the laws of the United
States of America or any State thereof or under the laws of another country
which is doing business in the United States of America or any state thereof and
having a combined capital, surplus and undivided profits of at least
$100,000,000 and shall be reasonably acceptable to the Borrower. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from all further duties and obligations under this
Agreement. After any retiring Agent's resignation as Agent, the provisions of
this Section 8 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement.
8.13 ASSIGNMENTS. With the prior written consent of the Agent, each of the
Banks shall have the right to sell or transfer all or any portion of its
interest in the Loans and the Commitments (i) to any commercial bank, savings
bank or savings and loan association organized under the law of the United
States of America or any state thereof, or under the laws of any country which
is doing business in the United States of America and which has a combined
capital, surplus and undivided profits of at least $100,000,000 or (ii) any
other entity that is an "accredited investor" (as defined in Regulation D under
the Securities Exchange Act of 1934, as amended, in which case any such
transferee shall become a "Bank" hereunder. No Bank shall at any time hold less
than a Commitment Percentage in the Loans and the Revolving Loan Commitments
which is the equivalent of Five Million ($5,000,000) Dollars. In addition, with
the prior written consent of the Agent, each of the Banks shall have the right
to sell participations to any Person in, all or any part of its Commitments
(together with its Letter of Credit or participations therein made or arising
pursuant to its Revolving Loan Commitments) or any Loan or Loans made by it or
any other interest herein or in any other Obligations owed to it. The Agent may
charge the assignor any such transferor an administrative fee of $3,000 for
processing of each such transfer. On request of the Borrower, from time to time
the Agent will certify to the Borrower the Banks which hold interests in the
Obligations and their respective Commitment Percentages. If any such assignment
occurs after the issuance of the Notes hereunder, the assigning Bank shall
surrender its applicable Notes and, upon such surrender, new Notes shall be
issued to the assignee and, if applicable, to the assigning Bank, substantially
in the form of EXHIBIT I, or EXHIBIT II annexed hereto, as the case may be, with
appropriate insertions, to reflect the new Commitments and/or outstanding Term
Loans of the assignee and the assigning Bank.
60
<PAGE> 67
SECTION 9. GENERAL.
-------
9.1 LIMITATION OF OBLIGATIONS OF SAFETY EUROPE. Notwithstanding anything to
the contrary contained in any Loan Document (including without limitation the
Safety Europe Guaranty), the liability of Safety Europe for the Obligations
shall be limited as provided in the Debenture.
9.2 WRITTEN NOTICES. Any notice, unless otherwise specified may be given
orally or in writing. Any notices, expressly required by this Agreement to be in
writing, to any party hereto shall be deemed to have been given when delivered
by hand, or sent by telecopy, on the next succeeding Business Day when delivered
to any overnight delivery service, freight pre-paid or 3 Business Days after
deposit in the United States mails, postage prepaid, and addressed to such party
at the notice address set forth on the applicable signature page hereof or at
any other address specified in writing to the Agent or, with respect to the
Agent's notice address, the Borrower.
9.3 NO WAIVERS. No failure or delay by the Agent or the Banks in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided are cumulative and not exclusive of any
rights or remedies otherwise provided by law.
9.4 FURTHER ASSURANCES. (a) The Loan Parties shall do, make, execute and
deliver all such additional and further acts, things, assurances, and
instruments as the Agent or the Banks may reasonably require more completely to
vest in and assure to the Agent and the Banks their respective rights hereunder
and under the other Loan Documents, and to carry into effect the provisions and
intent of this Agreement and the other Loan Documents.
(b) In the event that any Person becomes a Subsidiary after the date
hereof, (it being understood that this Section 9.4(b) is not and shall not be
deemed to be, a consent to the creation or acquisition of any such Subsidiary,
the Borrower will promptly notify the Agent of that fact and cause such
Subsidiary to execute and deliver to the Agent a counterpart of the Subsidiary
Guaranty, the Security Agreement and the Trademark Security Agreement, and to
take all such further actions and execute all such further documents and
instruments as may be required to grant and perfect in favor of the Agent, for
the benefit of the Banks, a first-priority security interest in all of the
personal property assets of such Subsidiary described therein. The Borrower
shall deliver to the Agent, together with such Loan Documents, all charter
documents, legal opinions and other documents that the Agent may request. In the
event that the Borrower or any of its Subsidiaries creates a new Subsidiary, all
of the capital stock or partnership interests of such new domestic Subsidiary
shall be duly and validly pledged to the Agent for the benefit of the Agent and
the Banks pursuant to the Loan Documents, subject to no other Liens.
9.5 APPLICABLE LAW.
--------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
61
<PAGE> 68
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
9.6 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST THE BORROWER OR ANY OF ITS SUBSIDIARIES ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND
DELIVERING THIS AGREEMENT, THE BORROWER, FOR ITSELF AND ITS SUBSIDIARIES AND IN
CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY
SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO THE BORROWER AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SECTION 9.2;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE BORROWER AND ITS
SUBSIDIARIES IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE
CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT BANKS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST THE BORROWER AND
ITS SUBSIDIARIES IN THE COURTS OF ANY OTHER APPLICABLE JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SECTION 9.6 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.
9.7 EXPENSES, TAXES AND INDEMNIFICATION.
-----------------------------------
(a) Whether or not the transactions contemplated hereby shall be
consummated, the Borrower agrees to pay promptly (i) all the actual and
reasonable costs and expenses of the Agent of preparation of the Loan Documents
and any consents, amendments, waivers or other
62
<PAGE> 69
modifications thereto; (ii) all reasonable costs (A) of furnishing all opinions
by counsel for the Loan Parties (including any opinions reasonably requested by
the Banks as to any legal matters arising hereunder) and (B) of the Loan
Parties' performance of and compliance with all agreements and conditions on
their part to be performed or complied with under this Agreement and the other
Loan Documents including with respect to confirming compliance with
environmental, insurance and solvency requirements; (iii) the reasonable fees,
expenses and disbursements of counsel to the Agent in connection with the
negotiation, preparation, execution and administration of the Loan Documents and
any consents, amendments, waivers or other modifications thereto and any other
documents or matters requested by any Loan Party; (iv) all the actual and
reasonable costs and reasonable expenses of creating and perfecting liens in
favor of the Agent on behalf of the Banks pursuant to any Loan Document,
including filing and recording fees, expenses and taxes, stamp or documentary
taxes, search fees, title insurance premiums, and reasonable fees, expenses and
disbursements of counsel to the Agent and of counsel providing any opinions that
the Agent may reasonably request, in accordance with the terms hereof, in
respect of the Loan Documents or the liens created pursuant thereto; (v) all the
actual costs and reasonable expenses (including the reasonable fees, expenses
and disbursements of any auditors, accountants, appraisers or other consultants,
advisors and agents employed or retained by the Agent or its counsel) of
obtaining and reviewing any audits or reports provided for hereunder with
respect to Inventory and Accounts Receivable of the Loan Parties; (vi) the
custody or preservation of any of the Collateral; (vii) all other actual and
reasonable costs and expenses incurred by the Agent in connection with the
syndication of the Commitments; and (viii) after the occurrence and during the
continuance of an Event of Default, all reasonable costs and expenses, including
reasonable attorneys' fees and costs of settlement, incurred by the Agent and
Banks in enforcing any Obligations of or in collecting any payments due from any
Loan Party hereunder or under the other Loan Documents by reason of such Event
of Default (including in connection with the sale of, collection from, or other
realization upon any of the Collateral or the enforcement of any guaranty of the
Obligations) or in connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement in the nature of a "workout"
or pursuant to any insolvency or bankruptcy proceedings.
(b) In addition to the payment of expenses pursuant to Section 9.7(a),
whether or not the transactions contemplated hereby shall be consummated, the
Borrower, agrees to defend (subject to Indemnitees' selection of counsel),
indemnify, pay and hold harmless the Agent and the Banks and the officers,
directors, employees, agents and affiliates of the Agent and the Banks
(collectively called the "INDEMNITEES"), from and against any and all
Indemnified Liabilities (as hereinafter defined); provided that the Borrower
shall not have any obligation to any Indemnitee hereunder with respect to any
Indemnified Liabilities to the extent such Indemnified Liabilities arise solely
from the gross negligence or willful misconduct of that Indemnitee as determined
by a final judgment of a court of competent jurisdiction.
As used herein, "INDEMNIFIED LIABILITIES" means, collectively, any and all
liabilities, obligations, losses, damages (including natural resource damages),
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including the reasonable fees and
disbursements of counsel for Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened by any Person,
whether or not any
63
<PAGE> 70
such Indemnitee shall be designated as a party or a potential party thereto, and
any fees or expenses incurred by Indemnitees in enforcing this indemnity),
whether direct, indirect or consequential and whether based on any federal,
state or foreign laws, statutes, rules or regulations (including securities and
commercial laws, statutes, rules or regulations and environmental laws), on
common law or equitable cause or on contract or otherwise, that may be imposed
on, incurred by, or asserted against any such Indemnitee, in any manner relating
to or arising out of (i) this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby (including Banks' agreement to make
the Loans hereunder or the use or intended use of the proceeds thereof or the
issuance of Letters of Credit hereunder or the use or intended use of any
thereof, or any enforcement of any of the Loan Documents (including any sale of,
collection from, or other realization upon any of the Collateral or the
enforcement of any guaranty of the obligations)), or (ii) any environmental
claim relating to or arising from, directly or indirectly, any past or present
activity, operation, land ownership, or practice of the Borrower or any of their
respective Subsidiaries.
To the extent that the undertakings to defend, indemnify, pay and hold
harmless set forth in this Section 9.7(b) may be unenforceable in whole or in
part because they are violative of any law or public policy, the Borrower shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by Indemnitees or any of them.
9.8 AMENDMENTS, WAIVERS, ETC.
------------------------
(a) Except as otherwise expressly provided in this Agreement
(including without limitation in Section 9.8(b) hereof) or any of the other Loan
Documents: (i) each of the Loan Documents may be modified, amended or
supplemented in any respect whatever only with the prior written consent or
approval of the Majority Banks and the Borrower; and (ii) the performance or
observance by the Loan Parties of any of its covenants, agreements or
obligations under any of the Loan Documents may be waived only with the written
consent of the Majority Banks; PROVIDED, HOWEVER, that the following changes
shall require the written consent, agreement or approval of all of the Banks:
(1) any change in the amount or the due date of any of the Obligations; (2) any
change in the interest rates prescribed in any of the Revolving Notes or the
Term Notes; (3) any change in the Revolving Loan Commitment or Commitment
Percentage of any of the Banks; (4) any release of all or substantially all of
the Collateral; (5) any change in the definition of Majority Banks; and (6) any
change in the terms of this Section 9.8. Neither Section 8 or any other
provisions of this Agreement affecting the rights or obligations of the Agent
shall be amended or modified without the prior written consent of the Agent.
(b) Notwithstanding anything to the contrary contained in Section
9.8(a), the Agent may, with the prior written consent of each Lender but without
the prior written consent of the Borrower, amend, supplement or otherwise modify
the Loan Documents in order to subordinate in right of payment certain
Obligations to other Obligations and to establish different lien priorities with
respect to different Obligations; PROVIDED that no such amendment, supplement or
modification shall affect the rights or obligations of the Loan Parties under
the Loan Documents.
64
<PAGE> 71
9.9 BINDING EFFECT OF AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of the Borrower, the Agent and the Banks and their
respective successors and assigns. Each Bank may sell, assign or otherwise
transfer all or any portion of its right, title and interest in, and its
obligation under, this Agreement and the Loans made and to be made hereunder, or
grant participations in its right, title and interest herein and therein,
provided that any such assignee or transferee must be reasonably satisfactory to
the Agent. No Loan Party may assign or transfer their rights or obligations
hereunder.
9.10 OTHER TRANSACTIONS AMONG BANKS AND LOAN PARTIES. The Banks and Loan
Parties, or any of them, may be parties to other transactions not arising under
this Loan Agreement (the "OUTSIDE OBLIGATIONS"). The Banks and Loan Parties
agree and acknowledge that any Outside Obligations shall be secured by the
Collateral, but that the Obligations of the Borrower to the Banks under this
Loan Agreement shall constitute a first priority claim against the Collateral
(except for purchase money security interests to the extent permitted
hereunder). Any Outside Obligations shall constitute a second priority claim
against the Collateral, which interest in the Collateral shall be shared by the
Banks which are parties to such Outside Obligations on a pari passu basis, based
upon the relative amount of the respective Outside Obligations to each of the
Banks as a percentage of the total Outside Obligations.
9.11 ENTIRE AGREEMENT. This Agreement, including the Schedules and Exhibits
hereto, sets forth the entire agreement and understanding of the parties hereto
in respect of the subject matter contained herein, and supersedes all prior
agreements, promises, covenants, arrangements, communications, representations,
warranties, whether oral or written, by any officer, employee or representative
of any party hereto.
9.12 WAIVER OF A JURY TRIAL. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE
ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN ANY JURISDICTION AND IN ANY COURT
WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE
OBLIGATIONS, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT HERETO OR THERETO,
OR ANY CLAIM OR DISPUTE HOWSOEVER ARISING, BETWEEN OR AMONG ANY OF THE BORROWER
AND THE AGENT AND THE BANKS. THIS WAIVER OF JURY TRIAL SHALL BE EFFECTIVE FOR
EACH AND EVERY DOCUMENT EXECUTED BY THE BORROWER OR THE AGENT OR ANY BANK AND
DELIVERED TO THE AGENT OR THE BORROWER, AS THE CASE MAY BE, WHETHER OR NOT SUCH
DOCUMENT SHALL CONTAIN A WAIVER OF JURY TRIAL. THE BORROWER FURTHER ACKNOWLEDGE
THAT ALL DOCUMENTS DELIVERED BY THE AGENT OR ANY BANK OR THE BORROWER ARE
SUBJECT TO THIS WAIVER OF JURY TRIAL AS TO ANY ACTION THAT MAY BE BROUGHT AS TO
ANY OF SUCH DOCUMENTS, INSTRUMENTS OR LETTERS TO THE LIKE. THE BORROWER FURTHER
CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE.
9.13 CAPTIONS. The captions for the sections of this Agreement are for ease
of reference only and are not an integral part of this Agreement.
65
<PAGE> 72
9.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if the signatures hereto and thereto were
upon the same instrument.
9.15 SEVERABILITY. The provisions of this Agreement are severable, and if
any of those provisions shall be held by any court of competent jurisdiction to
be unenforceable, such holdings shall not affect or impair any other provision
hereof.
[Remainder of page intentionally left blank.]
66
<PAGE> 73
WITNESS the execution hereof under seal on the day and year first above
written.
SAFETY 1ST, INC.
By:
---------------------------------
Title:
Notice Address:
Safety 1st, Inc.
210 Boylston Street
Chestnut Hill, MA 02167
Attention: Michael Lerner
with a copy to:
Curt R. Feuer, Esq.
Kassler & Feuer, P.C.
101 Arch Street
Boston, MA 02110
GOLDMAN SACHS CREDIT PARTNERS L.P.,
individually and as Agent
-------------------------------------
Authorized Signatory
Notice Address:
Goldman Sachs Credit Partners L.P.
85 Broad Street
New York, New York 10004
Attention: Ed Mule and Doug Hitchner
67
<PAGE> 1
REVOLVING NOTE
$20,000,000.00 January 31, 1997
New York, New York
FOR VALUE RECEIVED, the undersigned (the "BORROWER"), promises to pay to
Goldman Sachs Credit Partners L.P. ("BANK"), or order, the principal amount of
Twenty Million Dollars ($20,000,000.00) on or before the Maturity Date (as
defined in the Loan Agreement referred to below), with interest from the date
hereof on the said principal balance from time to time outstanding at the rates
determined in accordance with the provisions of that certain First Amended and
Restated Loan Agreement dated as of January 31, 1997 by and among Borrower, the
financial institutions party thereto (the "BANKS") and Goldman Sachs Credit
Partners L.P., as agent for the Banks (in such capacity, "AGENT")(said First
Amended and Restated Loan Agreement, as it may be amended, supplemented or
otherwise modified from time to time being the "LOAN AGREEMENT," the terms
defined therein and not otherwise defined herein being used herein as therein
defined) Interest shall be payable at the times determined in accordance with
the provisions of the Loan Agreement.
Principal and interest shall be payable at the Agent's main office in
lawful money of the United States of America without set-off, deduction or
counterclaim. Interest shall be calculated on the basis of actual days elapsed
and a 360-day year.
This Note is a revolving note and subject to the foregoing the Borrower
may, at its option, at any time prior to demand borrow, pay, prepay and reborrow
hereunder, all in accordance with the provisions of the Loan Agreement;
provided, however, that the principal balance outstanding shall at no time
exceed the face amount of the Note.
At the option of the holder, this Note shall become immediately due and
payable without notice or demand upon the occurrence of an Event of Default (as
defined in the Loan Agreement).
Any payments received by the Bank on account of this Note prior to demand
shall be applied first, to any costs, expenses or charges then owed to the Bank
by the Borrower; second, to accrued and unpaid interest; and third, to the
unpaid principal balance hereof. Any payments so received after demand shall be
applied in such manner as the Bank may determine. The Borrower hereby authorizes
the Bank to charge any deposit account which the Borrower may maintain with the
Bank for any payment required hereunder.
Any and all deposits or other sums at any time credited by or due to the
undersigned or any endorser or guarantor hereof from the Bank or any of its
banking or lending affiliates, or any bank acting as a participant under any
loan arrangement between the Bank and the Borrower, any endorser or guarantor
hereof, and any cash, securities, instruments or other property of the
undersigned in the possession of the Bank or any of its banking or lending
affiliates, or any bank acting as a participant under any loan arrangement
between the Bank and the Borrower, any endorser or guarantor hereof,
1
<PAGE> 2
whether for safekeeping or otherwise, or in transit to or from the Bank or any
of its banking or lending affiliates or any such participant, or in the
possession of any third party acting on the Bank's behalf (regardless of the
reason the Bank had received same or whether the Bank has conditionally released
the same) shall at all times constitute security for all of the liabilities and
obligations of the undersigned and any endorser and guarantor hereof to the Bank
and may be applied or set off against such liabilities and obligations of the
undersigned, any endorser or guarantor hereof to the Bank at any time, whether
or not such are then due, whether or not demand has been made and whether or not
other collateral is then available to the Bank.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right of such
holder, nor shall any delay, omission or waiver on any one occasion be deemed a
bar to, or waiver of, the same or any other right on any future occasion. The
Borrower and every other maker and every endorser or guarantor of this Note,
regardless of the time, order or place of signing, waives presentment, demand,
protest and notices of every kind and assents to any extension or postponement
of the time of payment or any other indulgence, to any substitution, exchange or
release of Collateral and to the addition or release of any other party or
person primarily or secondarily liable.
The Borrower and each endorser and guarantor of this Note shall indemnify,
defend and hold the Bank and its directors, officers, employees, agents and
attorneys harmless against any claim brought or threatened against the Bank by
the Borrower, by any endorser or guarantor, or by any other person (as well as
from attorneys' reasonable fees and expenses in connection therewith) on account
of the Bank's relationship with the Borrower or any endorser or guarantor
hereof, all to the extent provided in Section 9.7(b) of the Loan Agreement.
The Borrower and each endorser and guarantor of this Note agrees to pay,
upon demand, costs of collection of the principal of and interest on this Note,
including without limitation reasonable attorneys' fees. At the option of the
Bank, after the occurrence of an Event of Default or after demand, interest
shall accrue at a rate per annum equal to the aggregate of Two (2%) percent plus
the rate provided for herein. If any payment due under this Note is unpaid for
Ten (10) days or more, the Borrower shall pay, in addition to any other sums due
under this Note (and without limiting the holder's other remedies on account
thereof, a late charge equal to Five (5%) percent of the amount of such unpaid
amount.
This Note shall be binding upon the Borrower and each endorser and
guarantor hereof and upon their respective heirs, successors, assigns and
representatives, and shall inure to the benefit of the Bank and its successors,
endorsees and assigns.
The liabilities of the Borrower and any endorser or guarantor of this Note
are joint and several; provided, however, the release by the Bank of the
Borrower or any one or more endorser or guarantor shall not release any other
person obligated on account of this Note. Any and all present and future debts
of the Borrower to any endorser or guarantor of this Note are subordinated to
the full payment and performance of all present and future debts and obligations
of the Borrower to the Bank. Each reference in this Note to the Borrower, any
endorser and any guarantor is to such person individually and also to all such
persons jointly. No person obligated, unless and until all liabilities,
obligations and indebtedness to the Bank of the person from whom contribution is
sought have been
2
<PAGE> 3
satisfied in full. The release or compromise by the Bank of any collateral shall
not release any person obligated on account of this Note.
The Borrower and each endorser and guarantor hereof each authorizes the
Bank to complete this Note if delivered incomplete in any respect. A
photographic or other reproduction of this Note may be made by the Bank, and any
such reproduction shall be admissible in evidence with the same effect of the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY , AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
The Borrower and each endorser and guarantor of this Note each irrevocably
submits to the nonexclusive jurisdiction of any federal or state court sitting
in New York, New York, over any suit, action or proceeding arising out of or
relating to this Agreement. Each Borrower, endorser or guarantor irrevocably
waives, to the fullest extent it may effectively do so under applicable law, any
objection it may nor or hereafter have to the laying of the venue of any such
suit, action or proceeding brought in any such court and any claim that the same
has been brought in an inconvenient forum. Borrower, and each endorser or
guarantor irrevocably consents to process in any such suit, action or proceeding
being served (i) by mailing a copy thereof by registered or certified mail,
postage prepaid, return receipt requested, to such Borrower, endorsees or
guarantees address shown below or as notified to the Bank and (ii) by serving
the same upon such agent, and agrees that such service shall in every respect be
deemed effective service upon such Borrower, endorser or guarantor.
[Remainder of page intentionally left blank.]
3
<PAGE> 4
BORROWER, AND EACH ENDORSER AND GUARANTOR AND BANK EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY, AND AFTER AN OPPORTUNITY TO CONSULT WITH LEGAL
COUNSEL, WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
IN CONNECTION WITH THIS NOTE, THE OBLIGATIONS, ALL MATTERS CONTEMPLATED HEREBY
AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH. EACH BORROWER, ENDORSER AND
GUARANTOR CERTIFIES THAT NEITHER THE BANK NOR ANY OF ITS REPRESENTATIVES,
AGENTS, OR COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD
NOT IN THE EVENT OF ANY SUCH PROCEEDING SEEK TO ENFORCE THIS WAIVER OF RIGHT TO
TRIAL BY JURY.
WITNESS: BORROWER:
SAFETY 1ST, INC.
By:
- ------------------------------ -----------------------------
Name: Name:
Title:
4
<PAGE> 1
TERM NOTE
$25,000,000.00 January 31, 1997
New York, New York
FOR VALUE RECEIVED, the undersigned (the "BORROWER") promises to pay to
Goldman Sachs Credit Partners L.P. ("BANK"), or order, the principal amount of
Twenty-Five Million Dollars ($25,000,000.00) on or before the Maturity Date (as
defined in the Loan Agreement referred to below), with interest from the date
hereof on the said principal balance from time to time outstanding at the rates
determined in accordance with the provisions of that certain First Amended and
Restated Loan Agreement dated as of January 31, 1997 by and among Borrower, the
financial institutions party thereto (the "BANKS"), and Goldman Sachs Credit
Partners L.P., as agent (in such capacity , "AGENT")(said First Amended and
Restated Loan Agreement, as it may be amended, supplemented or otherwise
modified from time to time being the "LOAN AGREEMENT," the terms defined herein
and not otherwise defined therein being used herein as therein defined).
Interest shall be payable at the times determined in accordance with the
provisions of the Loan Agreement.
Principal and interest shall be payable at the Bank's main office in lawful
money of the United States of America without set-off, deduction or
counterclaim. Interest shall be calculated on the basis of actual days elapsed
and a 360-day year.
At the option of the holder, this Note shall become immediately due and
payable without notice or demand upon the occurrence of an Event of Default (as
defined in the Loan Agreement).
Any payments received by the Bank on account of this Note prior to demand
shall be applied first, to any costs, expenses or charges then owed to the Bank
by the Borrower; second, to accrued and unpaid interest; and third, to the
unpaid principal balance hereof. Any payments so received after demand shall be
applied in such manner as the Bank may determine. The Borrower hereby authorizes
the Bank to charge any deposit account which the Borrower may maintain with the
Bank for any payment required hereunder.
Any and all deposits or other sums at any time credited by or due to the
undersigned or any endorser or guarantor hereof from the Bank or any of its
banking or lending affiliates, or any bank acting as a participant under any
loan arrangement between the Bank and the Borrower, any endorser or guarantor
hereof, and any cash, securities, instruments or other property of the
undersigned in the possession of the Bank or any of its banking or lending
affiliates, or any bank acting as a participant under any loan arrangement
between the Bank and the Borrower, any endorser or guarantor hereof, whether for
safekeeping or otherwise, or in transit to or from the Bank or any of its
banking or lending affiliates or any such participant, or in the possession of
any third party acting on the Bank's behalf (regardless of the reason the Bank
had received same or whether the Bank has conditionally released the same) shall
at all times constitute security for all of the liabilities and obligations of
the undersigned, any endorser or guarantor hereof to the Bank at any time,
whether or not such are then
<PAGE> 2
due, whether or not demand has been made and whether or not other collateral is
then available to the Bank.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right of such
holder, nor shall any delay, omission or waiver on any one occasion be deemed a
bar to, or waiver of, the same or any other right on any future occasion. The
Borrower and every other maker and every endorser or guarantor of this Note,
regardless of the time, order or place of signing, waives presentment, demand,
protest and notices of every kind and assents to any extension or postponement
of the time of payment or any other indulgence, to any substitution, exchange or
release of Collateral and to the addition or release of any other party or
person primarily or secondarily liable.
The Borrower and each endorser and guarantor of this Note shall indemnify,
defend and hold the Bank and its directors, officers, employees, agents and
attorneys harmless against any claim brought or threatened against the Bank by
the Borrower, by any endorser or guarantor, or by any other person (as well as
from attorneys' reasonable fees and expenses in connection therewith) on account
of the Bank's relationship with the Borrower or any endorser or guarantor
hereof, all to the extent provided in Section 9.7(b) of the Loan Agreement.
The Borrower and each endorser and guarantor of this Note agrees to pay,
upon demand, costs of collection of the principal of and interest on this Note,
including without limitation reasonable attorneys' fees. At the option of the
Bank, after the occurrence of an Event of Default or after demand, interest
shall accrue at a rate per annum equal to the aggregate of Two (2%) percent plus
the rate provided for herein. If any payment due under this Note is unpaid for
Ten (10) days or more, the Borrower shall pay, in addition to any other sums due
under this Note (and without limiting the holder's other remedies on account
thereof, a late charge equal to Five (5%) percent of the amount of such unpaid
amount.
The Note shall be binding upon the Borrower and each endorser and guarantor
hereof and upon their respective heirs, successors, assigns and representatives,
and shall inure to the benefit of the Bank and its successors, endorsees and
assigns.
The liabilities of the Borrower and any endorser or guarantor of this Note
are joint and several; provided, however, the release by the Bank of the
Borrower or any one or more endorser or guarantor shall not release any other
person obligated on account of this Note. Any and all present and future debts
of the Borrower to any endorser or guarantor of this Note are subordinated to
the full payment and performance of all present and future debts and obligations
of the Borrower to the Bank. Each reference in this Note to the Borrower, any
endorser and any guarantor is to such person individually and also to all such
persons jointly. No person obligated on account of this Note may seek
contribution from any other person also obligated, unless and until all
liabilities, obligations and indebtedness to the Bank of the person from whom
contribution is sought have been satisfied in full. The release or compromise by
the Bank of any collateral shall not release any person obligated on account of
this Note.
The Borrower and each endorser and guarantor hereof each authorizes the
Bank to complete this Note if delivered incomplete in any respect. A
photographic or other reproduction of this Note
2
<PAGE> 3
may be made by the Bank, and any such reproduction shall be admissible in
evidence with the same effect of the original itself in any judicial or
administrative proceeding, whether or not the original is in existence.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY , AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
The Borrower and each endorser and guarantor of this Note each irrevocably
submits to the nonexclusive jurisdiction of any federal or state court sitting
in New York, New York, over any suit, action or proceeding arising out of or
relating to this Agreement. Each Borrower, endorser or guarantor irrevocably
waives, to the fullest extent it may effectively do so under applicable law, any
objection it may now or hereafter have to the laying of the venue of any such
suit, action or proceeding brought in any such court and any claim that the same
has been brought in an inconvenient forum. Borrower, and each endorser or
guarantor irrevocably consents to process in any such suit, action or proceeding
being served (i) by mailing a copy thereof by registered or certified mail,
postage prepaid, return receipt requested, to Borrower, or such endorsees or
guarantees address shown below or as notified to the Bank and (ii) by serving
the same upon such agent, and agrees that such service shall in every respect be
deemed effective service upon such Borrower, endorser or guarantor.
[Remainder of page intentionally left blank.]
3
<PAGE> 4
BORROWER, AND EACH ENDORSER AND GUARANTOR AND BANK EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY, AND AFTER AN OPPORTUNITY TO CONSULT WITH LEGAL
COUNSEL, WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
IN CONNECTION WITH THIS NOTE, THE OBLIGATIONS, ALL MATTERS CONTEMPLATED HEREBY
AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH. EACH BORROWER, ENDORSER AND
GUARANTOR CERTIFIES THAT NEITHER THE BANK NOR ANY OF ITS REPRESENTATIVES, AGENTS
OR COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT IN
THE EVENT OF ANY SUCH PROCEEDING SEEK TO ENDORSE THIS WAIVER OF RIGHT TO TRIAL
BY JURY.
WITNESS: BORROWER:
SAFETY 1ST, INC.
By:
- -------------------------------- -----------------------------
Name: Name:
Title:
4
