<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended October 3, 1998
Commission File No. 0-21404
-------
SAFETY 1ST, INC.
(Exact Name of Registrant as specified in its Charter)
Massachusetts 04-2836423
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
210 Boylston Street
Chestnut Hill, Massachusetts 02167
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code:
(617) 964-7744
Indicate by check mark whether the Registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
The aggregate number of Registrant's shares outstanding on October 31, 1998
was 7,231,122 shares of Common Stock, $.01 par value.
<PAGE> 2
SAFETY 1ST, INC.
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS AS OF OCTOBER 3, 1998
AND JANUARY 3, 1998 (Unaudited) 3
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED OCTOBER 3, 1998
AND SEPTEMBER 27, 1997 (Unaudited) 5
CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED OCTOBER 3, 1998
AND SEPTEMBER 27, 1997 (Unaudited) 6
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 3, 1998
AND SEPTEMBER 27, 1997 (Unaudited) 7
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited) 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Unaudited) 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
2
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SAFETY 1ST, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
ASSETS
OCTOBER 3, 1998 JANUARY 3, 1998
--------------- ---------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 446 $ 839
Accounts receivable, less allowance for doubtful accounts
of $900, and $1,700, respectively 29,958 23,411
Inventory 15,710 16,372
Prepaid expenses and other current assets 3,235 1,190
Deferred income taxes 3,300 3,300
------- -------
TOTAL CURRENT ASSETS 52,649 45,112
------- -------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $4,900, and $3,900, respectively 14,183 12,666
------- -------
OTHER ASSETS
Mold deposits $ 1,821 $ 1,568
Software systems in process 5,228 5,006
Goodwill, net of amortization of $780 and $561 respectively 6,340 6,546
Deferred income taxes 6,433 6,300
Patents and trademarks, net of amortization of
$541 and $464, respectively 631 634
Other assets 1,522 1,701
------- -------
TOTAL OTHER ASSETS 21,975 21,755
------- -------
$88,807 $79,533
======= =======
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
SAFETY 1ST, INC.
CONDENSED BALANCE SHEETS - CONTINUED
(IN THOUSANDS EXCEPT SHARE DATA)
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY:
OCTOBER 3, 1998 JANUARY 3, 1998
--------------- ---------------
<S> <C> <C>
CURRENT LIABILITIES
Revolving credit facility $ 30,178 $ 25,427
Accounts payable and accrued expenses 17,518 14,685
Current portion of long-term debt 2,706 3,763
-------- --------
TOTAL CURRENT LIABILITIES 50,402 43,875
Long-term debt 7,434 8,855
-------- --------
TOTAL LIABILITIES 57,836 52,730
-------- --------
REDEEMABLE PREFERRED STOCK 17,466 15,839
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, 15,000,000 shares authorized,
7,231,122 and 7,187,288 issued at October 3, 1998 and
January 3, 1998, respectively 72 72
Additional paid-in capital 40,524 40,242
Accumulated deficit (27,091) (29,350)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 13,505 10,964
-------- --------
$ 88,807 $ 79,533
======== ========
</TABLE>
Note: The Condensed Balance Sheet at January 3, 1998 has been derived from the
audited financial statements at that date. The accompanying notes are an
integral part of these Condensed Financial Statements.
4
<PAGE> 5
<TABLE>
<CAPTION>
SAFETY 1ST, INC.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
OCTOBER 3, 1998 SEPTEMBER 27, 1997
--------------- -----------------
<S> <C> <C>
Net Sales $32,442 $26,446
Cost of Sales 20,035 15,411
------- -------
GROSS PROFIT 12,407 11,035
Selling general and administrative expenses 9,785 8,573
------- -------
OPERATING INCOME 2,622 2,462
Interest expense 1,066 1,101
------- -------
INCOME BEFORE INCOME TAXES 1,556 1,361
Income tax expense (benefit) -- (1,496)
------- -------
Net Income 1,556 2,857
Dividends and accretion on redeemable
preferred stock 560 478
------- -------
Net income available to common shareholders $ 996 $ 2,379
======= =======
Basic earnings per common share $ 0.14 $ 0.33
======= =======
Diluted earnings per common share $ 0.12 $ 0.29
======= =======
Shares used to compute basic earnings per common share 7,231 7,187
======= =======
Shares used to compute diluted earnings per common share 8,510 8,088
======= =======
</TABLE>
The accompanying notes are an integral part of these
Condensed Financial Statements.
5
<PAGE> 6
<TABLE>
<CAPTION>
SAFETY 1ST, INC.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
OCTOBER 3, 1998 SEPTEMBER 27, 1997
--------------- ------------------
<S> <C> <C>
Net Sales $96,330 $79,844
Cost of Sales 58,691 47,516
------- -------
GROSS PROFIT 37,639 32,328
Selling general and administrative expenses 29,513 25,364
------- -------
OPERATING INCOME 8,126 6,964
Interest expense 3,023 3,364
------- -------
INCOME BEFORE INCOME TAXES 5,103 3,600
Income tax expense (benefit) 1,217 (668)
------- -------
Net Income 3,886 4,268
Dividends and accretion on redeemable
preferred stock 1,627 478
------- -------
Net income available to common shareholders $ 2,259 $ 3,790
======= =======
Basic earnings per common share $ 0.31 $ 0.53
======= =======
Diluted earnings per common share $ 0.26 $ 0.50
======= =======
Shares used to compute basic earnings per common share 7,214 7,187
======= =======
Shares used to compute diluted earnings per common share 8,649 7,614
======= =======
</TABLE>
The accompanying notes are an integral part of these
Condensed Financial Statements.
6
<PAGE> 7
<TABLE>
<CAPTION>
SAFETY 1ST, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
OCTOBER 3, 1998 SEPTEMBER 27, 1997
---------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $3,885 $ 4,268
Adjusted to Reconcile Net Income to Net Cash
provided by (used in) operating activities:
Depreciation 3,037 2,413
Amortization 583 354
------ -------
NET CASH PROVIDED BY OPERATING ACTIVITIES
BEFORE CHANGES IN ASSETS AND LIABILITIES: 7,505 7,035
Changes on Assets and Liabilities:
(Increase) Decrease in:
Accounts receivable (6,547) (6,144)
Inventory 662 (456)
Prepaid expenses and other assets (3,253) (938)
Tax refund receivable -- 5,027
Increase (Decrease) in:
Accounts Payable and accrued expenses 3,835 (9,968)
------ -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,202 (5,444)
------ -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisitions of property and equipment (4,224) (2,148)
Increase in software system in process (223) (2,345)
Acquisition of patents and trademarks (74) (51)
------ -------
NET CASH USED IN INVESTING ACTIVITIES (4,521) (4,544)
------ -------
CASH FLOW PROVIDED BY FINANCING ACTIVITIES:
Net borrowing from (repayment of) revolving credit facility 4,751 (13,640)
Proceeds from (repayment of) long-term debt (1,875) 12,500
Proceeds from issuance of redeemable preferred stock -- 15,000
Refinancing fees -- (2,350)
Proceeds from exercised Stock Options 283 59
Repayment of notes payable (825) (1,176)
Other (408) 250
------ -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,926 10,643
------ -------
Net (Decrease) Increase in cash (393) 655
Cash and Cash Equivalents - Beginning of period 839 509
------ -------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 446 $ 1,164
------ -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for Interest $2,846 $ 3,242
====== =======
</TABLE>
The accompanying notes are an integral part of these
Condensed Financial Statements
7
<PAGE> 8
SAFETY 1ST, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The Company is a developer, marketer and distributor of child safety and
child care, convenience, activity and home security products.
The accompanying unaudited condensed financial statements of the Company
have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission ("SEC") and, in the opinion of the management,
reflect all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the financial position, results of operations
and cash flows for the periods presented.
Certain information and footnote disclosures included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These condensed financial
statements should be read in conjunction with the audited financial
statements and notes thereto included in the financial statements filed as
part of the Company's Annual Report on Form 10-K filed for the year ended
January 3, 1998.
The results of the operations for the nine months ended October 3, 1998 are
not necessarily indicative of the operating results for the full year.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Statement of Forward-Looking Information:
The Company may occasionally make forward-looking statements and estimates, such
as forecasts and projections of the Company's future performance or statements
of management's plans and objectives. These forward-looking statements may be
contained in SEC filings, Annual Reports to Shareholders, Press Releases and
oral statements, among others, made by the Company. Actual results could differ
materially from those in such forward-looking statements. Therefore, no
assurances can be given that the results in such forward-looking statements will
be achieved. Important factors that could cause the Company's actual results to
differ from those contained in such forward-looking statements include, among
others, those factors set forth in Exhibit 99 to the Company's Annual Report on
Form 10-K for the year ended January 3, 1998, and incorporated herein by
reference.
Results of Operations (all $ amounts in thousands):
Three Months Ended October 3, 1998 and September 27, 1997
Net sales for the three months ended October 3, 1998 increased by $5,996, or
22.7%, to approximately $32,442 from $26,446 in the comparable period of 1997.
The increase is primarily attributable to an increase in sales domestically by
$5,841, as the Company's continuing product line carried forward from 1997
increased by 14%.
Gross profit for the three months ended October 3, 1998 was $12,407, or 38.2% of
net sales, as compared to $11,035, or 41.7%, for the three months ended
September 27, 1997. Gross profit percentage was impacted by the following
factors: (i) devaluation of the Canadian dollar, which increases cost of goods
sold for the Canadian subsidiary since all inventory purchases are made in U.S.
dollars; (ii) unusually high number of returns due to the Company's toy
replacement program for the Bounce `N Ride Buggy product; and (iii) higher mix
of bulk products sold, which generally carry a lower gross margin than peg
products.
Selling, general and administrative expenses increased by $1,212 to $9,785, or
30.2% of net sales, for the three months ended October 3, 1998 from $8,573, or
32.4% of net sales, for the comparable period in 1997. This increase is
primarily attributable to an increase in selling related expenses caused by the
sales increase as well as an increase in payroll and payroll related costs. The
improvement as a percentage of sales is due to the leveraging of the existing
fixed cost structure over a larger sales base.
As a result of the above factors, operating income for the three months ended
October 3, 1998 was $2,622. Operating income for the comparable period in 1997
was $2,462.
Interest expense decreased to $1,066 for the three months ended October 3, 1998
from $1,101 for the three months ended September 27, 1997 due to lower average
debt balances in 1998 versus the prior year.
The Company recorded an income tax provision of $0 for the three months ended
October 3, 1998 due to the recognition of approximately $500 of deferred tax
benefit related to the reduction in the valuation allowance, as management
believes it is more likely than not that the deferred tax assets on the balance
sheet will be realized through the generation of future taxable income. In the
third quarter of 1997, the Company reduced the valuation allowance by $2 million
based on a similar analysis of projected future income under the "more likely
than not" criteria.
9
<PAGE> 10
Nine Months Ended October 3, 1998 and September 27, 1997
Net sales for the nine months ended October 3, 1998 increased by $16,486, or
20.6%, to $96,330 from $79,844 in comparable period in 1997. The increase is
primarily attributable to an increase in sales domestically by $12,996, and
internationally by $3,490. New product sales were $16,230 for the nine months
ended October 3, 1998 versus $11,775 in the prior comparable period.
Gross profit for the nine months ended October 3, 1998 was $37,639, or 39.1% of
net sales, versus $32,328 or 40.5% for the comparable period in 1997. The
decrease in the percentage is primarily due to the same factors noted for the
three months ended October 3, 1998.
Selling, general and administrative expenses were $29,513, or 30.6% of net
sales, for the nine months ended October 3, 1998. For the comparable period
ending 1997, selling, general and administrative expenses were $25,364, or
31.8%, of net sales, an increase of $4,149.
As a result of the above factors, operating income was $8,126 for the nine
months ended October 3, 1998 versus an operating income of $6,964 during the
same period in 1997.
Interest expense decreased from $3,364 for the nine months ended September 27,
1997 to $3,023 for the same period in 1998 due to lower average debt balances in
1998 versus the prior year.
LIQUIDITY AND CAPITAL RESOURCES (ALL $ AMOUNTS IN THOUSANDS)
The Company's primary capital requirements are for working capital and capital
expenditures. The Company's capital needs are provided by availability under
the Company's term loan and revolving credit facilities (including a revolving
credit facility in the UK completed during the third quarter), as well as
through internally generated funds.
Net cash provided by operations increased to $2,202 for the nine months ended
October 3, 1998 versus net cash used in operations of $5,444 for the nine months
ended September 27, 1997. The primary cause of the increase was more efficient
working capital management, as inventory turns and days sales outstanding
improved versus the prior year.
Net cash used in investing activities was $4,521 due to the purchase of property
and equipment, principally molds for new product introductions. During 1998, net
cash provided by financing activities was $1,926, primarily related to
borrowings from the Company's revolving credit facility of $4,751 offset by
principal payments on the term loan of $1,875 and repayment of notes payable of
$825 issued in connection with the 1996 acquisition of Orleans Juvenile
Products, Inc.
The Company believes that its cash, together with its borrowing availability
will be sufficient to meet its operating and other cash requirements for the
next twelve months.
YEAR 2000
The Year 2000 problem is a result of computer programs being written using two
digits (rather than four) to define the applicable year. Any of the Company's
programs that have time-sentitive software may recognize a date using "00" as
the year 1900 rather the year 2000. This could result in a major system failure
or miscalculations. The Company presently believes that, with modifications to
existing software and conversion to new software, the Year 2000 problem will
not pose significant operational problems for the Company's computer systems as
modified and converted. The Company is also developing contingency plans to
address Year 2000 issues at customers and suppliers; at this time, the Company
is still assessing the effect the Year 2000 issue will have on customers and
suppliers, and therefore cannot fully determine the impact it will have.
10
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
On November 27, 1997, The Product Development Group, Inc. filed a complaint in
Federal District Court in Massachusetts alleging that the Company had infringed
two patents owned by the plaintiff by selling two of its child security gates.
The complaint seeks injunctive relief and treble damages of an unspecified
amount and attorney's fees. The Company disputes the charges of infringement and
the validity of the patents and intends to defend the lawsuit vigorously. The
case is presently in the discovery stage.
On December 4, 1995, T.S.A. Plastic Molds, Inc. ("TSA") filed a lawsuit against
the Company which alleged certain contract claims amounting to approximately
$94,000 (Canadian funds) based on TSA's construction of two steel molds for the
Company. In November of 1997, TSA amended its complaint to claim damages in
excess of $500,000 (Canadian funds). The Company had filed a cross complaint
against TSA claiming that TSA did not deliver the merchandise ordered by the
Company to the Company's specifications. On August 11, 1998, the parties
executed a Mutual Receipt, Release and Discharge under which the Company and TSA
agreed to settle all disputes between the parties, and on September 1, 1998, the
parties executed a Declaration of Settlement Out of Court. The amount of payment
required to be made by the Company pursuant to the settlement is not material.
The Company encounters personal injury litigation related to its products in the
ordinary course of business. The Company maintains product liability insurance
in amounts deemed adequate by the Company's management. The Company believes
that there are no claims or litigation pending the outcome of which would be
likely to have a material adverse effect on the financial position of the
Company.
11
<PAGE> 12
EXHIBIT INDEX
Exhibit Description
------- -----------
10.1 Fourth Amendment To Credit Agreement (dated as of July 30, 1997)
among the Company and Safety Home Products Canada, Inc., as
Borrowers, BT Commercial Corporation, as Lender and Agent, and
Bankers Trust Company, as Issuing Bank, dated as of May 15, 1998.
10.2 Fifth Amendment To Credit Agreement (dated as of July 30, 1997)
among the Company and Safety Home Products Canada, Inc., as
Borrowers, BT Commercial Corporation, as Lender and Agent, and
Bankers Trust Company, as Issuing Bank, dated as of July 4, 1998.
10.3 Loan Agreement dated as of 1st September, 1998 between Safety 1st
(Europe) Limited, as Borrower, and BNY International Limited, as
Lender.
10.4 Invoice Discounting Agreement dated as of 1st September, 1998
between Safety 1st (Europe) Limited and BNY International
Limited.
10.5 Company's side letter dated July 24, 1998 to BNY International
Limited waiving ownership claims in goods shipped to Safety 1st
(Europe) Limited and proceeds therefrom.
11 Statement regarding Computation of Per Share Earnings.
27 Financial Data Schedule.
<PAGE> 13
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.
a Massachusetts corporation
Date: November 16, 1998 By: /s/ Michael Lerner
--------------------------------
Michael Lerner
Chief Executive Officer
(Principal Executive Officer)
Date: November 16, 1998 By: /s/ Richard E. Wenz
--------------------------------
Richard E. Wenz
President and Chief Operating Officer
Date: November 16, 1998 By: /s/ Joseph Driscoll
--------------------------------
Joseph Driscoll
Chief Financial Officer
13
<PAGE> 1
EXHIBIT 10.1
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT (this "AMENDMENT"), to the Credit Agreement dated
as of July 30, 1997, among SAFETY 1ST, INC., a Massachusetts corporation
("SAFETY"), SAFETY 1ST HOME PRODUCTS CANADA INC., a Canadian federal corporation
("SAFETY CANADA" and, together with Safety, the "BORROWERS"), each of the
financial institutions from time to time parties thereto as lenders (the
"LENDERS"), BT COMMERCIAL CORPORATION, as agent (in such capacity, the "AGENT")
for the Lenders and BANKERS TRUST COMPANY, as issuer of letters of credit (in
such capacity, the "ISSUING BANK"), is made as of May 15, 1998 among the
Borrowers and the undersigned Lenders.
W I T N E S S E T H :
WHEREAS, the Borrowers, the Lenders, the Agent and the Issuing Bank are
parties to the Credit Agreement, dated as of July 30, 1997 (as heretofore
amended on October 29, 1997, January 23, 1998 and March 31, 1998 and as the same
may be further amended, supplemented or otherwise modified from time to time,
the "CREDIT AGREEMENT"; capitalized terms used herein shall have the meanings
assigned to them in the Credit Agreement unless otherwise defined herein);
WHEREAS, The Borrowers have requested that the Lenders agree to amend
the Credit Agreement as set forth herein; and
WHEREAS, the undersigned Lenders are agreeable to such amendments, but
only on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. Effective as of March 31,
1998, but subject to the satisfaction of the conditions precedent set forth in
Section 2, the Credit Agreement is hereby amended as follows:
(a) Section 7.2(r) of the Credit Agreement is amended by (i) deleting
"December 31, 1998" from each place it appears and substituting therefor
"January 2, 1999", (ii) deleting "December 31, 1999" and substituting therefor
"January 1, 2000", (iii) deleting "December 31, 2000" and substituting therefor
"December 30, 2000", (iv) deleting "December 31, 2001" and
<PAGE> 2
substituting therefor "December 29, 2001" and (v) deleting "June 30, 2002" and
substituting therefor "June 29, 2002".
(b) Section 7.2(t) of the Credit Agreement is amended by deleting the
table set forth therein and substituting therefor the following:
"PERIOD RATIO
------ ------
January 4, 1998 to April 4, 1998 1.00:1
April 5, 1998 to July 4, 1998 1.00:1
July 5, 1998 to October 3, 1998 1.25:1
October 4, 1998 to January 2, 1999 1.25:1
January 3, 1999 to April 3, 1999 1.25:1
April 4, 1999 to July 3, 1999 1.25:1
for each fiscal quarter thereafter 1.50:1"
(c) Section 7.2(u) of the Credit Agreement is amended by deleting the
table set forth therein and substituting therefor the following:
"PERIOD AMOUNT
------ -----------
three fiscal quarters ended April 4, 1998 $ 9,200,000
four fiscal quarters ended July 4, 1998 13,000,000
four fiscal quarters ended October 3, 1998 16,000,000
four fiscal quarters ended January 2, 1998 19,000,000
four fiscal quarters ended on the last
day of each fiscal quarter thereafter 20,000,000"
(d) Section 7.2(v) of the Credit Agreement is amended and restated as
follows:
"(v) MINIMUM CONSOLIDATED FIXED CHARGE COVERAGE RATIO. Safety will
not, for each period set forth below, permit Consolidated Fixed Charge
Coverage Ratio to be less than the ratio set forth below opposite such
period:
-2-
<PAGE> 3
"PERIOD RATIO
------ -----
three fiscal quarters ended April 4, 1998 1.15:1
four fiscal quarters ended July 4, 1998 1.50:1
four fiscal quarters ended October 3, 1998 1.50:1
four fiscal quarters ended January 2, 1999 1.50:1
four fiscal quarters ended on the last day of
each fiscal quarter thereafter 1.50:1"
SECTION 2. EFFECTIVENESS. This Amendment shall become effective upon
the Agent's receipt of this Amendment, duly executed by the Borrowers and the
Majority Lenders and duly consented to by the Guarantors.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS. Each of
the Borrowers represents and warrants as follows:
(a) The execution, delivery and performance by each Borrower of this
Amendment, the Credit Agreement as amended hereby and any documents delivered in
connection herewith to which such Borrower is a party (i) are within such
Borrower's corporate powers and authority, have been duly authorized by all
necessary corporate action and do not contravene (A) such Borrower's Governing
Documents (including, without limitation, the certificate of designation for any
preferred stock of a Borrower), (B) any Requirement of Law applicable to it or
any of its properties or (C) any franchise, license, permit, indenture,
contract, lease, agreement, instrument or other commitment to which it is a
party or by which it or any of its properties are bound, and (ii) will not
result in or require the creation or imposition of any Lien upon or with respect
to any property now owned or hereafter acquired by any Borrower (other than
Liens permitted by the Credit Agreement).
(b) This Amendment, the Credit Agreement as amended hereby and any
documents delivered in connection herewith to which such Borrower is a party
constitute the legal, valid and binding obligations of such Borrower enforceable
against such Borrower in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting creditor's rights generally and general principles of equity.
-3-
<PAGE> 4
(c) Since December 31, 1997 there has occurred no change, occurrence,
development or event which has had or could reasonably be expected to have a
Material Adverse Effect.
(d) After giving effect to this Amendment, no Default or Event of
Default has occurred and is continuing
SECTION 4. REFERENCE TO AND EFFECT ON THE CREDIT DOCUMENTS.
(a) Upon the effectiveness of this Amendment, on and after the date
hereof, each reference in the Credit Agreement to (i) "this Agreement,"
"hereunder," "hereof," "herein" and words of like import, and such words or
words of like import in each reference in the Credit Documents, shall mean and
be a reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended hereby, all of the terms and
provisions of the Credit Agreement shall remain in full force and effect and are
hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as an amendment to or a waiver
of any right, power or remedy of the Agent or the Lenders under any of the
Credit Documents, or constitute an amendment to or a waiver of any provision of
any of the Credit Documents.
(d) This Amendment shall be deemed to be a Credit Document for all
purposes.
SECTION 5. EXECUTION IN COUNTERPARTS; ETC. This Amendment may be
executed in counterparts each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument. This Amendment and each of the other documents
delivered in connection herewith may be executed and delivered by telecopier
with the same force and effect as if the same was a fully executed and delivered
original manual counterpart.
SECTION 6. COSTS, EXPENSES AND TAXES. The Borrowers shall jointly and
severally pay any and all stamp and other taxes payable or determined to be
payable in connection with the execution and delivery of this Amendment and the
documents contemplated hereby or delivered in connection herewith, and agrees to
hold the Lenders harmless from and against any and all liabilities with respect
to or resulting from any delay in paying or omission to pay such taxes. The
Borrowers shall jointly and severally pay for all of the reasonable
out-of-pocket expenses incurred by the Agent in connection with the preparation,
negotiation and closing of this Amendment, including, without limitation, the
reasonable fees and expenses of Luskin, Stern & Eisler LLP, counsel to the
Agent.
-4-
<PAGE> 5
SECTION 7. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF (OTHER
THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
BORROWERS
SAFETY 1ST, INC.
By: /s/ Richard E. Wenz
--------------------------------
Name:
Title:
SAFETY 1ST HOME PRODUCTS CANADA INC.
By: /s/ Richard E. Wenz
--------------------------------
Name:
Title:
LENDERS
BT COMMERCIAL CORPORATION
By: /s/ Eric S. Miller
--------------------------------
Name: Eric S. Miller
Title: Vice President
LASALLE NATIONAL BANK
By: /s/ Christopher G. Clifford
--------------------------------
Name: Christopher G. Clifford
Title: Senior Vice President
BNY FINANCIAL CORPORATION
By: /s/ Frank Imperato
--------------------------------
Name:
Title:
-6-
<PAGE> 7
SUMMIT COMMERCIAL/GIBRALTAR CORP.
By: /s/ Harvey Friedman
--------------------------------
Name: Harvey Friedman
Title: EVP
FINOVA CAPITAL CORPORATION
By: /s/ Maryann V. Richardson
--------------------------------
Name: Maryann V. Richardson
Title: Asst. Vice Pres.
Agreed and Consented as of the
First Date Written Above:
SAFETY 1ST INTERNATIONAL, INC.
By: /s/ Richard E. Wenz
--------------------------
Name:
Title:
SAFETY 1ST (EUROPE) LIMITED
By: /s/ Richard E. Wenz
--------------------------
Name:
Title:
3232301 CANADA, INC.
By: /s/ Richard E. Wenz
--------------------------
Name:
Title:
-7-
<PAGE> 1
EXHIBIT 10.2
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT (this "AMENDMENT"), to the Credit Agreement dated
as of July 30, 1997, among SAFETY 1ST, INC., a Massachusetts corporation
("SAFETY"), SAFETY 1ST HOME PRODUCTS CANADA INC., a Canadian federal corporation
("SAFETY CANADA" and, together with Safety, the "BORROWERS"), each of the
financial institutions from time to time parties thereto as lenders (the
"LENDERS"), BT COMMERCIAL CORPORATION, as agent (in such capacity, the "AGENT")
for the Lenders and BANKERS TRUST COMPANY, as issuer of letters of credit (in
such capacity, the "ISSUING BANK"), is made as of July 4, 1998 among the
Borrowers, the undersigned Lenders and the Agent.
W I T N E S S E T H :
WHEREAS, the Borrowers, the Lenders, the Agent and the Issuing Bank are
parties to the Credit Agreement, dated as of July 30, 1997 (as heretofore
amended on October 29, 1997, January 23, 1998, March 31, 1998 and May 15, 1998
and as the same may be further amended, supplemented or otherwise modified from
time to time, the "CREDIT AGREEMENT"; capitalized terms used herein shall have
the meanings assigned to them in the Credit Agreement unless otherwise defined
herein);
WHEREAS, Safety 1st (Europe) Limited, a Guarantor and a Subsidiary of
Safety ("SAFETY EUROPE"), desires to enter into a pounds sterling denominated
credit facility with BNY International Limited or another lender and grant liens
on substantially all of its assets to secure its obligations under such credit
facility (the "ENGLISH CREDIT FACILITY");
WHEREAS, in connection with the closing of the English Credit Facility,
the Borrowers have requested that the Agent release its Liens on the assets of
Safety Europe and release Safety Europe from the Guaranty and the Contribution
Agreement;
WHEREAS, the Borrowers have requested that the Lenders agree to amend
the Credit Agreement as set forth herein;
WHEREAS, the Agent and the undersigned Lenders are agreeable to such
requests, but only on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the date
hereof, but subject to the satisfaction of the conditions precedent set forth in
Section 3, the Credit Agreement is hereby amended as follows:
<PAGE> 2
(a) The definition of "Guarantors" in Section 1.1 of the Credit
Agreement is amended by deleting "Safety 1st (Europe) Limited,".
(b) The definition of "Inventory Borrowing Base" in Section 1.1 of
the Credit Agreement is amended by deleting "$10,000,000" and substituting
therefor "$12,500,000."
(c) Section 4.8(c)(v) of the Credit Agreement is amended by deleting
"three (3)" and substituting therefor "six (6)."
(d) Section 7.1(a) of the Credit Agreement is amended by inserting
the following at the end thereof:
"(vii) SAFETY EUROPE FINANCIAL INFORMATION. (A) As soon as
available, but not later than one hundred twenty (120) days after the
end of each fiscal year of Safety Europe, Safety Europe's annual
audited financial statements for such year, together with the auditor's
opinion thereon; (B) as soon as available, but not later than twenty
eight (28) days after the end of each month, Safety Europe's unaudited
financial statements for such month, together with a certification by
the financial director of Safety Europe that such financial statements
are true and correct in all material respects; and (C) not later than
five days after the respective dates on which BNY International Limited
("BNYIL") or any other lender to Safety Europe receives the same,
copies of all other financial information provided by Safety Europe to
BNYIL or such other lender."
(e) Clause (vi) of Section 7.2(a) of the Credit Agreement is amended
and restated as follows:
"(vi) Liens on goods of Safety or any of its Subsidiaries, or
documents evidencing title to such goods, which are established in the
ordinary course of such Person's business for the purpose of such
Person receiving interim trade financing; PROVIDED, HOWEVER, that no
such Lien shall extend to or cover any property other than such goods
or documents so financed;"
(f) Section 7.2(a) of the Credit Agreement is amended by (i) deleting
"and" at the end of clause (vii) thereof and (ii) deleting clause (viii) thereof
and substituting therefor the following:
"(viii) leases or subleases of real estate or immovable property
(other than the real estate or immovable property upon which Agent is
granted a mortgage) granted by Safety or any of its Subsidiaries
-2-
<PAGE> 3
to other Persons in the ordinary course of business and not materially
interfering with the conduct of the business of Safety or any of its
Subsidiaries and cash security deposits made pursuant to real estate or
immovable property leases in customary amounts; and
(ix) Liens on the assets of Safety Europe securing the
Indebtedness of Safety Europe permitted under Section 7.2(b)(ix)."
(g) Section 7.2(b) of the Credit Agreement is amended by (i) deleting
"and" at the end of clause (vii) thereof and (ii) deleting clause (viii) thereof
and substituting therefor the following:
"(viii) Indebtedness in an aggregate outstanding principal amount
not to exceed $250,000 owing by Safety Canada to Safety; PROVIDED that
(A) such Indebtedness is used only for general working capital
purposes, (B) such Indebtedness is evidenced by one or more demand
promissory notes in form and substance satisfactory to the Agent, (C)
such promissory notes are pledged to the Agent for the ratable benefit
of the Lenders pursuant to documentation in form and substance
satisfactory to the Agent and (D) such notes are delivered to the Agent
with note powers executed in blank; and
(ix) Indebtedness of Safety Europe under a pounds sterling
denominated credit facility."
(h) Section 7.2(c) of the Credit Agreement is amended by deleting
"Section 7.2(b)" and substituting therefor "Sections 7.2(b)(i) through (viii)."
(i) Section 7.2(d) of the Credit Agreement is amended by (i)
inserting "(other than Safety Europe)" immediately after "except for the merger
of any Subsidiary" and (ii) deleting "any Credit Party may modify" and
substituting therefor "Safety and any of its Subsidiaries may modify."
(j) Clause (v) of Section 7.2(f) of the Credit Agreement is amended
and restated as follows:
"(v) stock or obligations issued to Safety or any of its
Subsidiaries by any Person (or the representative of such Person) in
respect of Indebtedness of such Person owing to Safety or any of its
Subsidiaries in connection with the insolvency, bankruptcy,
receivership or reorganization of such Person or a composition or
readjustment of the debts of such Person; PROVIDED, THAT, the original
of any such stock or instrument evidencing such obligations and
-3-
<PAGE> 4
issued to a Credit Party shall be promptly delivered to the Agent, upon
the Agent's request, together with such stock power, assignment or
endorsement by such Credit Party as the Agent may request;".
(k) Section 7.2(f) of the Credit Agreement is amended by (i) deleting
"and" at the end of clause (vii), (ii) renumbering clause (viii) as clause (ix)
and (iii) inserting immediately after clause (vii) the following:
"(viii) a non-cash equity Investment of up to 200,000 pounds
sterling made by Safety in Safety Europe, which shall be consummated
solely by the conversion into equity of Accounts previously owing by
Safety Europe to Safety in an amount of up to 200,000 pounds sterling;
and"
(l) Section 7.2(t) of the Credit Agreement is amended and restated as
follows:
"(t) [Intentionally Omitted.]"
(m) Section 7.2(u) of the Credit Agreement is amended and restated as
follows:
"(u) MINIMUM CONSOLIDATED EBITDA. Safety will not, for each
period set forth below, permit EBITDA of Safety and its Subsidiaries to
be less than the amount set forth below opposite such period:
Period Amount
------ ------
three fiscal quarters ended October 3, 1998 $12,000,000
four fiscal quarters ended January 2, 1999 16,000,000
four fiscal quarters ended April 3, 1999 17,000,000
four fiscal quarters ended July 3, 1999 18,000,000
four fiscal quarters ended October 2, 1999 19,000,000
four fiscal quarters ended on the last
day of each fiscal quarter thereafter 20,000,000"
-4-
<PAGE> 5
(n) Section 7.2(v) of the Credit Agreement is amended and restated as
follows:
"(v) MINIMUM CONSOLIDATED FIXED CHARGE COVERAGE RATIO. Safety
will not, for each period set forth below, permit Consolidated Fixed
Charge Coverage Ratio to be less than the ratio set forth below
opposite such period:
Period Ratio
------ ------
four fiscal quarters ended July 4, 1998 1.20:1
three fiscal quarters ended October 3, 1998 1.20:1
four fiscal quarters ended on the last day
of each fiscal quarter thereafter 1.20:1"
(o) Section 8.1(e) of the Credit Agreement is amended by inserting
"(including, without limitation, Safety Europe)" immediately after "Safety or
any Subsidiary".
(p) Section 8.1(f) of the Credit Agreement is amended by deleting
"any Credit Party" and substituting therefor "Safety or any Subsidiary".
(q) Section 8.1(h) of the Credit Agreement is amended by deleting
"any Credit Party" and substituting therefor "Safety or any Subsidiary".
(r) Section 8.1 of the Credit Agreement is amended by deleting clause
(l) thereof and substituting therefor the following:
"(l) a Change in Control shall have occurred; or
(m) the aggregate unpaid amount of all Accounts of the Credit
Parties owing by Safety Europe shall exceed $2,000,000 at any time (it
being understood that if any such Account is denominated in a currency
other than Dollars, for purposes of this clause (m), such Account shall
be converted into Dollars at the Rate of Exchange on the date that such
Account is calculated)."
(s) Schedule 2 of the Credit Agreement is amended by deleting "20%"
from each place it appears and substituting therefor "25%."
-5-
<PAGE> 6
SECTION 2. RELEASE OF SAFETY EUROPE. Effective as of the date hereof,
but subject to the satisfaction of the conditions precedent set forth in Section
3, the Agent hereby (a) releases the Liens on all of the assets of Safety Europe
created in favor of the Agent for the ratable benefit of the Lenders and the
Issuing Bank under the Collateral Documents and (b) releases Safety Europe from
any liabilities and obligations under the Guaranty and the Contribution
Agreement. The undersigned Lenders hereby authorize the Agent, and the Agent
hereby agrees, to execute all such further documents and take all such further
actions, at the joint and several expense of the Borrowers, as the Borrowers
shall reasonably request to carry out the purpose and intent of the immediately
preceding sentence.
SECTION 3. EFFECTIVENESS.
(a) This Amendment (other than Sections 1(a), (d) through (k), (o)
through (r) and 2) shall become effective upon the Agent's receipt of this
Amendment, duly executed by the Borrowers and the Majority Lenders and duly
consented to by the Guarantors (excluding Safety Europe).
(b) Sections 1(a), (d) through (k), (o) through (r) and 2 shall
become effective upon the satisfaction of the condition precedent set forth in
Section 3(a) and upon the Agent's receipt of the following, in each case on or
before September 18, 1998 and in form and substance satisfactory to the Agent:
(i) certified copies of the loan agreement and other material
documentation relating to the English Credit Facility;
(ii) evidence that the English Credit Facility has closed in
accordance with the terms of the documentation described in clause (i)
above;
(iii) evidence that Safety Europe has applied the proceeds of
the initial loan under the English Credit Facility to repay (A)
Indebtedness owing to Safety and Safety's Subsidiaries in an aggregate
principal amount of not less than 121,466 pounds sterling plus accrued
and unpaid interest thereon since August 1, 1998 and (B) Accounts owing
by it to Safety in an aggregate amount of not less than $1,000,000; and
(iv) a certificate signed by an Authorized Officer of Safety
certifying that (i) the representations and warranties contained in
Section 4 are true and correct on and as of the date of such
certificate as though made on and as of such date, (ii) the
representations and warranties contained in Section 6.1 of the Credit
Agreement are true and
-6-
<PAGE> 7
correct on and as of the date of such certificate as though made on and
as of such date, except to the extent that such representations and
warranties expressly relate solely to an earlier date (in which case
such representations and warranties shall have been true and correct on
and as of such earlier date) and (iii) no Default or Event of Default
has occurred and is continuing.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS. Each of
the Borrowers represents and warrants as follows:
(a) The execution, delivery and performance by each Borrower of this
Amendment, the Credit Agreement as amended hereby and any documents delivered in
connection herewith to which such Borrower is a party (i) are within such
Borrower's corporate powers and authority, have been duly authorized by all
necessary corporate action and do not contravene (A) such Borrower's Governing
Documents (including, without limitation, the certificate of designation for any
preferred stock of a Borrower), (B) any Requirement of Law applicable to it or
any of its properties or (C) any franchise, license, permit, indenture,
contract, lease, agreement, instrument or other commitment to which it is a
party or by which it or any of its properties are bound, and (ii) will not
result in or require the creation or imposition of any Lien upon or with respect
to any property now owned or hereafter acquired by any Borrower (other than
Liens permitted by the Credit Agreement).
(b) This Amendment, the Credit Agreement as amended hereby and any
documents delivered in connection herewith to which such Borrower is a party
constitute the legal, valid and binding obligations of such Borrower enforceable
against such Borrower in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting creditor's rights generally and general principles of equity.
(c) Since June 30, 1998 there has occurred no change, occurrence,
development or event which has had or could reasonably be expected to have a
Material Adverse Effect.
(d) After giving effect to this Amendment, no Default or Event of
Default has occurred and is continuing.
SECTION 5. REFERENCE TO AND EFFECT ON THE CREDIT DOCUMENTS.
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<PAGE> 8
(a) Upon the effectiveness of this Amendment, on and after the date
hereof, each reference in the Credit Agreement to (i) "this Agreement,"
"hereunder," "hereof," "herein" and words of like import, and such words or
words of like import in each reference in the Credit Documents, shall mean and
be a reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended hereby, all of the terms and
provisions of the Credit Agreement and the other Credit Documents shall remain
in full force and effect and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as an amendment to or a waiver
of any right, power or remedy of the Agent or the Lenders under any of the
Credit Documents, or constitute an amendment to or a waiver of any provision of
any of the Credit Documents.
(d) This Amendment shall be deemed to be a Credit Document for all
purposes.
SECTION 6. EXECUTION IN COUNTERPARTS; ETC. This Amendment may be
executed in counterparts each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument. This Amendment and each of the other documents
delivered in connection herewith may be executed and delivered by telecopier
with the same force and effect as if the same was a fully executed and delivered
original manual counterpart.
SECTION 7. COSTS, EXPENSES AND TAXES. The Borrowers shall jointly and
severally pay any and all stamp and other taxes payable or determined to be
payable in connection with the execution and delivery of this Amendment and the
documents contemplated hereby or delivered in connection herewith, and agrees to
hold the Lenders harmless from and against any and all liabilities with respect
to or resulting from any delay in paying or omission to pay such taxes. The
Borrowers shall jointly and severally pay for all of the reasonable
out-of-pocket expenses incurred by the Agent in connection with the preparation,
negotiation and closing of this Amendment, including, without limitation, the
reasonable fees and expenses of Luskin, Stern & Eisler LLP, counsel to the Agent
SECTION 8. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF (OTHER
THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
BORROWERS
SAFETY 1ST, INC.
By: /s/ Richard E. Wenz
--------------------------------
Name:
Title:
SAFETY 1ST HOME PRODUCTS CANADA INC.
By: /s/ Richard E. Wenz
--------------------------------
Name:
Title:
AGENT
BT COMMERCIAL CORPORATION,
as Agent
By: /s/ Eric S. Miller
--------------------------------
Name: Eric S. Miller
Title: Vice President
LENDERS
BT COMMERCIAL CORPORATION
By: /s/ Eric S. Miller
--------------------------------
Name: Eric S. Miller
Title: Vice President
LASALLE NATIONAL BANK
By: /s/ Christopher G. Clifford
--------------------------------
Name: Christopher G. Clifford
Title: Senior Vice President
-9-
<PAGE> 10
BNY FINANCIAL CORPORATION
By: /s/ Richard Sini
--------------------------------
Name: Richard Sini
Title: V.P.
SUMMIT COMMERCIAL/GIBRALTAR CORP.
By: /s/ Harvey Friedman
--------------------------------
Name: Harvey Friedman
Title: EVP
FINOVA CAPITAL CORPORATION
By: /s/ Thomas L. Gibbons
--------------------------------
Name: Thomas L. Gibbons
Title: Vice President
-10-
<PAGE> 11
Each of the undersigned Credit Parties hereby consents to this
Amendment and acknowledges that the execution, delivery and performance of this
Amendment does not in any way affect such Credit Party's obligation under any
Credit Document to which it is a party, all of which obligations are ratified
and confirmed, remain absolute and unconditional and are not subject to any
defense, setoff or counterclaim.
SAFETY 1ST INTERNATIONAL, INC.
By: /s/ Richard E. Wenz
--------------------------
Name:
Title:
3232301 CANADA, INC.
By: /s/ Richard E. Wenz
--------------------------
Name:
Title:
-11-
<PAGE> 1
EXHIBIT 10.3
DATED 1ST SEPTEMBER 1998
SAFETY 1st (EUROPE) LIMITED
as borrower
AND
BNY INTERNATIONAL LIMITED
as lender
-------------------------------
LOAN AGREEMENT
--------------------------------
WILDE & PARTNERS
10 JOHN STREET
LONDON WC1N 2EB
TEL 0171 831 0800
FAX 0171 430 0678
DX 428 LONDON
<PAGE> 2
CONTENTS
No:
1 CONSTRUCTION
2 THE FACILITIES
3 TERM & DRAWDOWN
4 CONDITIONS PRECEDENT & CONDITIONS SUBSEQUENT
5 INTEREST & FEES
6 REPAYMENT
7 PREPAYMENT
8 DEFAULT INTEREST
9 PAYMENTS
10 CHANGES IN CIRCUMSTANCES & INCREASED COSTS
11 REPRESENTATIONS & WARRANTIES
12 FINANCIAL INFORMATION
13 COVENANTS
14 SPECIAL CONDITIONS
15 EVENTS OF DEFAULT
16 ASSIGNMENT AND TRANSFER
17 NOTICES
18 WAIVERS
19 EXPENSES
20 ILLEGALITY
21 SET-OFF
22 GOVERNING LAW
23 DEMANDS & NOTIFICATION BINDING
24 POWER OF ATTORNEY
<PAGE> 3
SCHEDULE 1
Pre-Conditions Documents
SCHEDULE 2
Special Conditions relating to the Inventory Facility
SCHEDULE 3
Inventory Monitoring Fee
SCHEDULE 4
(Form of Inventory Valuation)
Form of Inventory Designation
<PAGE> 4
THIS LOAN AGREEMENT is made the 1ST day of SEPTEMBER 1998
BETWEEN
(1) SAFETY 1st (EUROPE) LIMITED whose registered office is at 1st Floor,
180 Fleet Street, London EC4A 2HD ("the Borrower"); and
(2) BNY INTERNATIONAL LIMITED whose registered office is at Sovereign
House, Church Street, Brighton, BN1 1SS ("BNY")
WHEREAS
BNY has agreed to make available to the Borrower an invoice discounting facility
and a loan facility upon the terms and subject to the conditions set out in this
Agreement and the Invoice Discounting Agreement.
IT IS AGREED as follows:-
1. CONSTRUCTION
1. DEFINITIONS
In this Agreement, unless the context otherwise requires, the following
words and expressions will have the meaning set out opposite them:-
"Advance" means the principal amount of each advance
made or to be made under the Facilities (or
either of them) as from time to time reduced
by repayment or prepayment, and "Advances"
means all of them;
1
<PAGE> 5
"Agreement" means this agreement as the same may be
amended or supplemented in writing by the
parties from time to time and shall include
the Schedules hereto;
"Available Inventory Facility" means the Inventory Facility less the
outstanding Inventory Advances;
"Business Day" means the day (other than a Saturday or
Sunday) on which banks are open in London for
business of the nature required for the
purposes of this Agreement;
"Default Rate" means the rate which is 2 per cent per annum
above the Interest Rate
"Direct Obligations" means the aggregate of the Facilities, the
aggregate amount payable by the Borrower in
the event of BNY exercising its right of
recourse under the Invoice Discounting
Agreement and any other amounts directly (but
not contingently) owed by the Borrower or any
other Obligor to BNY;
"Drawdown Date" means any date after compliance with Schedule
1 and in respect of the Inventory Facility
after compliance with the first sentence of
Schedule 2 and in each case with Clause 4 on
which the whole or any part of the Facilities
are drawn hereunder;
2
<PAGE> 6
"Eligible Inventory" means the Inventory of all finished goods,
work in progress and raw materials, located at
the headquarters and warehouse locations (as
such locations are agreed by BNY from time to
time) of the Borrower which is in good
condition and is readily saleable at prices
not less than the lower of cost or market
value as such criteria may be revised from
time to time by BNY at BNY's sole discretion;
"Environmental Approval" means any permit, licence, approval, ruling,
exemption or other authorisation required
under applicable Environmental Laws;
"Environmental Laws" means any and all laws, rules, orders,
regulations, statutes, ordinances or codes of
any Governmental Authority regulating,
relating to or imposing liability or standards
of conduct concerning environmental protection
matters, including without limitation, in
relation to the manufacture, processing,
distribution, use, treatment, storage,
disposal, transport or handling of Materials
of Environmental Concern, as now or may at any
time hereafter be in effect;
"Event of Default" means any of the events specified in
Clause 15;
"Facilities" means the Inventory Facility and the Invoice
Discounting Facility and "Facility" means
3
<PAGE> 7
either of them;
"Facilities Limit" means the aggregate utilisation of the
Facilities from time to time by the Borrower
which utilisation shall (subject to the limit
of each Facility) not at any time exceed
(pound)2,500,000 (two million five hundred
thousand pounds);
"Governmental Authority" means any nation or government, any
state or political sub-division thereof and
any entity exercising executive, legislative,
judicial, regulatory or administrative
functions of any of the foregoing;
"Group" means the Borrower and all of its Subsidiaries
(excluding EEZI Air Services Limited Companies
Registration Number 2481657) and any
Subsidiaries of such Subsidiaries from time to
time and "member of the Group" or "Group
Company" means any of them;
"Interest Payment Date" means the last Business Day of each calendar
month after the date hereof,
"Interest Rate" means the rate which is 2 per cent per
annum for the first 12 months from date of
execution of this Agreement and thereafter
2.25 per cent per annum above the Base Rate of
Lloyds Bank Plc as fluctuating from time to
4
<PAGE> 8
time, charged on the balance outstanding from
day to day, debited to the Loan Account
monthly in arrears and compounded monthly;
"Inventory" means the Unencumbered unsold finished goods,
work in progress and raw materials of the
Borrower but there being excluded from such
definition Inventory in transit to the
premises of the Borrower or Inventory which
has been sold to customers or constructively
delivered to customers or which is subject to
any rights in favour of creditors or the
subject of a reservation of title in favour of
any third party or subject to any conditional
delivery to the Borrower;
"Inventory Advance" means the principal amount of each advance
made under the Inventory Facility as from time
to time reduced by repayment or prepayment,
and "Inventory Advances" means all of them;
"Inventory Facility" means the inventory facility to be made
available by BNY to the Borrower pursuant to
Clause 2.2. 1;
"Inventory Maturity Date" means, in relation to the Inventory Facility,
the date on which:-
(a) the Inventory Facility is voluntarily
terminated by the Borrower or BNY
5
<PAGE> 9
giving not less than 60 days prior
written notice of termination to the
other party provided that such notice
cannot be given by either party prior to
the third or any subsequent annual
anniversary of the date hereof; or
(b) BNY notifies the Borrower at any time in
writing of termination of the Inventory
Facility pursuant to Clause 15;
"Inventory Monitoring Fee" means the fee referred to in Clause 5.4 and
Schedule 3;
"Inventory Valuation" means a certificate signed by a director of
the Borrower as to the value of the Inventory
in the form shown in Schedule 4 (or in such
other form as BNY shall from time to time
reasonably require) and, at BNY's option, a
valuation thereof by a qualified valuer
nominated by BNY;
"Invoice Discounting Agreement" means the agreement in a form acceptable to
BNY dated on or before the date of this
Agreement made between BNY and the Borrower in
relation to the Invoice Discounting Facility;
"Invoice Discounting Facility" means the invoice discounting facility of up
to (pound)2,500,000 less the aggregate amount
6
<PAGE> 10
outstanding from time to time under the
Inventory Facility to be made available by BNY
to the Borrower pursuant to the Invoice
Discounting Agreement;
"Loan Account" means an account or accounts in the name of
the Borrower with BNY opened in connection
with the Inventory Facility ;
"Loan Account Balance" means the debit balance on the Loan Account
from time to time;
"Materials of means chemicals, pollutants, contaminants,
Environmental Concern" wastes, toxic substances, petroleum and
petroleum products and distillates, and all
hazardous substances defined or regulated as
such in or under any Environmental Law;
"Obligors" means the Borrower and each other member of
the Group which has undertaken (or in the
future undertakes) obligations to BNY pursuant
to one or more of the Security Documents, and
"Obligor" means any of them;
"Preferential Creditors" means those creditors of an Obligor who, upon
the insolvency of such Obligor would have
preference or priority to payment over the
holder of a floating charge;
"Prior Chargeholders" means the holder or beneficiary of any
7
<PAGE> 11
mortgage, charge, trust, lien, reservation of
ownership, security interest or any other
interest affecting the absolute and unfettered
ownership of the charged property;
"Reserves" means such amounts of the Inventory or its
proceeds of sale as BNY from time to time in
its reasonable discretion determines might be
unavailable to it upon the enforcement of
BNY's security;
"Security Documents" means those documents listed in Part II of
Schedule 1 and any other documents for the
time being securing (directly or indirectly)
all or any of the Borrower's obligations under
this Agreement and/or all or any other
obligation (present or future, actual or
contingent) of an Obligor to BNY and
references to any such documents shall include
the same as varied or amended in writing by
the parties thereto from time to time;
"Subsidiary" means:-
(a) a subsidiary as defined in Section 736 of
the Companies Act 1985; and
(b) a subsidiary undertaking as defined in
Section 21 of the Companies Act 1989;
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<PAGE> 12
"Transaction Documents" means this Agreement, the Invoice Discounting
Agreement and the Security Documents, ;
"Unencumbered" means not subject to any mortgage, charge,
trust, lien, reservation of ownership,
security interest or any other interest
affecting the Company's absolute and
unfettered ownership;
"Unused Line Fee" means the sum equal to 0.5 per cent per
annum of the average monthly difference
between the Facilities Limit and:-
(i) (for the first period of 12 months after
the Commencement Date) (pound)1,200,000
(one million two hundred thousand
pounds); and
(ii) (for the second period of 12 months
after the Commencement Date),
(pound)1,750,000 (one million seven
hundred and fifty thousand pounds); and
(iii) (for the third period of 12 months after
the Commencement Date), (pound)2,500,000
(two million five hundred thousand
pounds).
where the amounts detailed in (i), (ii) and
(iii)
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<PAGE> 13
above exceed the Facilities Limit at the
relevant time.
2. INTERPRETATION
Any reference in this Agreement to:-
1. a Clause, sub-clause or schedule shall (except where the context otherwise
requires) be construed as a reference to the relevant clause or sub-clause
in or schedule to (and forming a part of) this Agreement;
2. a person shall include a body corporate, individual, firm or an
unincorporated body of persons (as the case may be);
3. the singular shall include the plural and vice-versa and the masculine, the
feminine and the neuter;
4. any statutory provision shall be deemed to mean and to include a reference
to any modification, consolidation or re-enactment thereof for the time
being in force and any analogous provision or rule under any applicable
law;
5. "Borrower" and "BNY" shall, where the context admits, include their
respective personal representatives, successors in title or permitted
assigns (whether immediate or derivative);
6. any reference herein to any document, including to this Agreement includes
such document as amended, novated, supplemented, substituted, extended,
assigned or replaced from time to time and includes any document which is
supplemental hereto or thereto;
7. the meaning of general words introduced by the word "other" and the word
10
<PAGE> 14
"otherwise" shall not be limited by reference to any preceding words or
enumeration including a particular class of acts, matters or things;
8. where a word or phrase has to be considered in relation to a jurisdiction
outside England and there is no exact equivalent of such word or phrase
then it shall have the meaning of the closest equivalent in such
jurisdiction;
9. words and expressions defined in the Invoice Discounting Agreement shall
have the same meanings when used in this Agreement;
10. "indebtedness" includes any obligation (whether incurred as principal,
guarantor or surety) for the payment or repayment of money, whether present
or future, actual or contingent.
The headings in this Agreement are inserted for convenience only and shall not
affect its construction or interpretation.
Any right or power which may be exercised or any determination which may be made
hereunder by BNY may be exercised or made in the absolute and unfettered
discretion of BNY which shall not be under any obligation to give reasons
therefor.
2. THE FACILITIES
1. On the terms and subject to the conditions of this Agreement, BNY will make
available to the Borrower the Facilities which shall when aggregated with
the total of all other Direct Obligations at no time exceed an aggregate
amount of (pound)2,500,000 (two million five hundred thousand pounds) and
otherwise shall be in accordance with the remaining provisions of this
Clause 2.
2. On the terms and subject to the conditions of this Agreement, BNY agrees to
make available to the Borrower:-
11
<PAGE> 15
1. an Inventory Facility in a principal amount equal to the lesser of
(1) (pound)1,250,000, and (2) a principal sum equal to 60% of the
aggregate of the book value of (a) finished goods forming part of
the Eligible Inventory and (b) raw materials forming part of the
Eligible Inventory (in each case as evidenced by the most recently
delivered Inventory Valuation) less Reserves and any liability
estimated by BNY (acting reasonably) as being owed by the Borrower
to Preferential Creditors; and
2. an Invoice Discounting Facility in a principal amount of
(pound)2,500,000 on the terms and conditions of the Invoice
Discounting Agreement.
3. The Facilities will be used by the Borrower:-
1. to fund the working capital requirements of the Group; and
2. for such other purposes as BNY shall agree;
but BNY shall not be bound to enquire as to, nor shall it be
responsible for, the use or application by the Borrower of all or
any part of the Facilities.
3. TERM AND DRAWDOWN
Subject to Clause 4, the Facilities shall be available for drawing by the
Borrower as follows:-
1. the Inventory Facility shall be available for drawing each month up to (and
including) the date falling 5 Business Days prior to the Inventory Maturity
Date. Only one tranche may be drawn in any one calendar month unless BNY
otherwise agrees. Any advance requested under the Inventory Facility shall
not
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<PAGE> 16
exceed the Available Inventory Facility; and
2. the Invoice Discounting Facility shall be available for drawing subject to
and upon the terms and conditions of the Invoice Discounting Agreement.
4. CONDITIONS PRECEDENT AND CONDITIONS SUBSEQUENT
The Facilities will only be available for drawing under Clause 3 if:-
1. BNY has received, in form and substance satisfactory to it, all of the
documents and evidence listed in Parts I and II of Schedule 1 and any
listed and set out in Schedule 2;
2. there is no Event of Default and no event has occurred which, with the
lapse of time or giving of notice or both, would constitute an Event of
Default;
3. the representations and warranties set out in Clause 11 are true and
accurate in all material respects as of the date of the proposed Drawdown
Date and would remain true following such drawdown;
4. other than in respect of the first drawing hereunder, the Borrower has
given BNY at least two Business Days' prior written notice of its intention
to make the relevant drawing and specifying to BNY the account number to
which the funds are to be remitted;
5. the Borrower acknowledges that any notice given in accordance with Clause
4.4 shall be irrevocable and shall oblige the Borrower to borrow the amount
specified on the relevant Drawdown Date;
6. the requirements set out in Schedule 2 have been complied with; and
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<PAGE> 17
7. the Borrower shall have entered into the Invoice Discounting Agreement and
the Invoice Discounting Agreement is then in full force and effect and the
Borrower is not in default thereunder.
5. INTEREST AND FEES
1. Interest on the Inventory Facility will be charged on the Loan Account
Balance at the Interest Rate and will be debited to the Loan Account on
each Interest Payment Date.
2. Interest on the Inventory Facility shall be paid in accordance with
Clause 9.
3. Interest on the Inventory Facility shall accrue from day to day and shall
be computed on the basis of a 365 day year and the number of days elapsed.
4. The Inventory Monitoring Fee shall be payable in accordance with
Schedule 3.
5. BNY shall debit to the Loan Account an arrangement fee of (pound)12,500
upon the date of this Agreement.
6. BNY shall debit to the Loan Account on the first Business Day of the
following month any Unused Line Fee due in respect of the immediately
preceding month.
7. Early Termination Fee: If this Agreement is terminated prior to the third
anniversary of the Commencement Date, the client shall pay to BNY on such
termination a sum equal to:
(i) 3% of the Facilities Limit if terminated on or prior to the first
anniversary of the Commencement Date; or
(ii) 2% of the Facilities Limit if terminated on or prior to the second
14
<PAGE> 18
anniversary of the Commencement Date; or
(iii) 1% of the Facilities Limit if terminated on or prior to the third
anniversary of the Commencement Date.
6. REPAYMENT
The Inventory Facility shall terminate on the Inventory Maturity Date, and all
amounts outstanding hereunder in respect of the Inventory Facility shall be
repaid on that date.
7. PREPAYMENT
1. The Borrower may voluntarily prepay the whole (but not part) of the
Inventory Facility provided that (1) BNY has received from the Borrower not
less than 60 days prior written notice of the proposed date of prepayment,
(2) such written notice cannot be given by the Borrower prior to the third
anniversary of the date hereof and (3) on receipt of such written notice,
the whole (but not part) of the Inventory Facility shall become prepayable
by the Borrower on such proposed prepayment date. Such written notice when
given shall be irrevocable.
2. Any amount prepaid may not be re-borrowed and shall be applied by BNY in
repayment of amounts debited to the Loan Account in such order as BNY
shall, in its absolute discretion, deem appropriate.
3. If at any time the aggregate outstanding amount of the Inventory Advances
exceeds in accordance with Clause 2.2.1 60% of the aggregate of the book
value of (a) finished goods forming part of the Eligible Inventory and (b)
raw materials forming part of the Eligible Inventory (in each case as
evidenced by the most recently delivered Inventory Valuation) less Reserves
and any liability estimated by BNY (acting reasonably) as being owed by the
Borrower to
15
<PAGE> 19
Preferential Creditors, the Borrower shall promptly prepay to BNY such
amount as is necessary to ensure that the aggregate amount of outstanding
Inventory Advances is, after such prepayment, equal to or less than the
said 60% and until such prepayment no further Advances shall be made under
the Inventory Facility.
4. Any notice of prepayment of the whole of the Inventory Facility shall, in
addition, be deemed to be a notice of termination under clause 19.1 of the
Invoice Discounting Facility.
8. DEFAULT INTEREST
INTENTIONALLY LEFT BLANK
9. PAYMENTS
1. The Borrower will make all payments due under this Agreement:-
1. in cleared funds for value on the relevant date; and
2. without set-off or counterclaim and, except when required by law,
without any deduction for taxes or for any other reason. If the
Borrower is compelled by law to make any deductions, the Borrower
shall pay such additional amounts ("Additional Amounts") as are
necessary to ensure receipt by BNY of the full amount which BNY
would have received but for such deduction. Without prejudice to the
foregoing, in the event of any such deduction for tax, the Borrower
will within 7 days of effecting any such deduction provide BNY with
any appropriate certificate (Rl85 or similar certificate) in favour
of BNY in relation to such tax deduction and shall provide BNY with
evidence satisfactory to BNY of payment to the Inland Revenue of the
tax deducted within 7 days of the due date for
16
<PAGE> 20
payment of the same to the Inland Revenue. On receipt by BNY of such
appropriate certificate, BNY shall repay to the Borrower an amount
equal to the relevant Additional Amounts.
3. BNY shall be entitled (and is hereby authorised by the Borrower) to
debit all payments (including, without limitation, principal and
interest) due under this Agreement or any of the Security Documents
either to the Loan Account or any other account(s) of the Borrower
with BNY.
10. CHANGES IN CIRCUMSTANCES AND INCREASED COSTS
1. If at any time it becomes unlawful or impossible for BNY to advance,
maintain or fund the whole or any part of the Facilities or the Loan
Account Balance BNY may at any time by written notice to the Borrower
require the Borrower to repay the whole or any part of the Facilities or
the Loan Account Balance immediately, together with any outstanding
interest and all other sums due under this Agreement and the Security
Documents.
2. The Borrower shall pay to BNY on demand such amount as BNY may from time to
time certify as being necessary to compensate it for any increase in the
cost of funding the Facilities or the Loan Account Balance or for any
reduction in the rate of return under this Agreement, incurred by BNY as a
result of compliance with any official directives, requirements or requests
of any regulatory authority (whether or not having the force of law) or any
law or regulation (including, without limitation, those relating to reserve
assets, special deposits, taxes (other than tax on its overall net income),
capital adequacy and/or asset ratios).
11. REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants in relation to itself and each other
Obligor that:-
17
<PAGE> 21
1. it is a limited liability company incorporated under the laws of England
and Wales and has the power to own its property and assets and carry on its
business as it is now being and will be conducted;
2. it has the power to enter into and perform its obligations under each of
the Transaction Documents to which it is a party and all necessary action
(corporate or otherwise) has been taken to authorise its unconditional
entry into and performance of its obligations under each of the Transaction
Documents to which it is a party and the borrowing of the Facilities upon
the terms and conditions contained herein;
3. all authorisations, approvals, consents, licences, exemptions, filings,
registrations, notarisations and other matters required in connection with
the entry into, performance and validity of the Transaction Documents, the
borrowing of the Facilities and the granting of the Security Documents have
been obtained and are in full force and effect, and any requirements
thereof have been or will be at the appropriate time complied with or
fulfilled;
4. the Transaction Documents to which it is party constitute its legal, valid,
binding and enforceable obligations;
5. the entry into and performance of the Transaction Documents to which it is
party and the transactions contemplated hereby and thereby do not and will
not conflict with (i) any law or regulation or any official or judicial
order, or (ii) its Memorandum or Articles of Association; or (iii) any
agreement or document to which it is a party or which is binding upon it or
its assets;
6. no member of the Group is in default under any agreement to which it is a
party which may have a material adverse effect on it as a whole, no
petition has been presented or effective resolution passed for the
winding-up of any member of the Group nor has any other step under the
Insolvency Act 1986 been taken against
18
<PAGE> 22
any Group Company and no litigation, arbitration or administrative
proceedings are current or pending or threatened (save for any litigation
disclosed to BNY prior to the date of this Agreement) which might affect
the ability of an Obligor to perform and observe the obligations and
provisions binding upon it under the Transaction Documents (or any of
them);
7. it is not aware of any material fact or circumstances that has not been
disclosed to BNY which, if disclosed, would be likely at the date of this
Agreement to be relevant in relation to (1) any material liability of or
which may become due to BNY in its capacity as lender under this Agreement
or (2) in respect of Environmental Laws;
8. it is in all material respects in full compliance with all Environmental
Laws as presently applied and enforced which are currently applicable to
its operations and all Environmental Approvals required in respect thereof
have been obtained from the appropriate authorities and are in full force
and effect;
9. the financial and other business information furnished to BNY from time to
time under this Agreement and/or the Security Documents :-
1. is true and accurate in all material respects and does not contain
any misstatement or omit any material fact; and
2. in the case of audited accounts gives a true and fair view of the
results and financial position for the relevant period for the
Borrower and since then there has been no material adverse change in
the business, assets, conditions and operation of the Borrower;
10. all of its assets, property and undertaking are Unencumbered (other than as
constituted by the Security Documents or liens arising by operation of law
or contract in the ordinary course of business the rights to which have not
been
19
<PAGE> 23
asserted) and it is not a party to, nor are its assets bound by any order,
agreement or instrument under which it is, or in certain events may be,
required to create, assume or permit to arise any mortgage, charge or
encumbrance;
11. no Event of Default has occurred or is outstanding and no event has
occurred which with the giving of notice or the lapse of time or both would
constitute an Event of Default; and
12. no litigation, arbitration or administrative proceeding or claim exists
which might reasonably be expected to have by itself or together with any
other such proceedings or claims either:-
1. a material adverse effect on the business, assets or condition of an
Obligor; or
2. a material adverse effect on the ability of an Obligor to observe or
perform its obligations under the Transaction Documents (or any of
them), is current or pending or, to the best of the knowledge of the
Borrower, threatened.
The representations and warranties set out in this Clause 11 shall be deemed to
be repeated on each Drawdown Date and on each Interest Payment Date with
reference to the facts and circumstances then subsisting as if made at each such
time.
12. FINANCIAL INFORMATION
1. As soon as available and in any event within 120 days after the end of each
of its financial years the Borrower will deliver to BNY copy audited
accounts of the Borrower as at the end of such financial year which shall
have been audited or certified by an accountant acceptable to BNY.
20
<PAGE> 24
2. No later than 28 days after the end of each calendar month the Borrower
will deliver to BNY monthly management accounts for the most recent
calendar month certified as true and correct in all material respects by
the Financial Director of the Borrower.
3. If required by BNY the Borrower will provide to BNY within 30 days after
the end of any financial half year of the Borrower an Inventory Valuation
signed by the Financial Director of the Borrower or, if required by BNY, by
the Borrower's auditor.
4. From time to time the Borrower will provide to BNY annual projections and
monthly cash flow statements at the time and in the form required by BNY.
At BNY's option those projections and/or cash flows will be compiled by an
independent accountant reasonably acceptable to BNY.
5. Notwithstanding the specific provisions set out in Clauses 12.1 to 12.4
(inclusive) BNY reserves the right so long as the Facilities (or either of
them) remain in place to require the Borrower to provide BNY (at the
Borrower's cost) with such financial information or other information about
the Borrower as BNY may from time to time reasonably require.
13. COVENANTS
So long as the Facilities (or either of them) remain in place:-
1. no member of the Group shall without BNY's prior written consent:-
1. create or permit to subsist any mortgage, charge, assignment, right
of set-off or other form of encumbrance whatsoever over any of its
assets, property or undertaking (except pursuant to the Security
Documents to which it is a party); or
21
<PAGE> 25
2. make any loans or otherwise make credit (other than normal trade
credit) available to any person or grant any guarantee (except
pursuant to the Security Documents); or
3. by one or a series of transactions, whether related or not, sell or
otherwise dispose of all or any material part of its property,
assets or undertaking including without limitation by any form of
sale and leaseback or factoring (except in the normal course of it
business).
2. the Borrower will promptly notify BNY if any Event of Default arises under
Clause 15 and of anything which might result in an Event of Default ;
14. SPECIAL CONDITIONS
The Borrower agrees to perform, observe and comply with any special conditions
set out in Schedule 2 and also to provide BNY with any documents required by BNY
as set out in Part II of Schedule 1.
15. EVENTS OF DEFAULT
In the event that:-
1. any Obligor fails to pay on the due date any amount payable by it under
this Agreement or under any other agreement with BNY (including, without
limitation, the Invoice Discounting Agreement) or under any Security
Documents to which it is a party or any of them; or
2. any Obligor:-
1. fails to comply with any of its obligations in Clause 13.1.1
(negative
22
<PAGE> 26
pledge); or
2. fails to perform any of its respective obligations under this
Agreement or any other agreement with BNY (including, without
limitation, the Invoice Discounting Agreement) or the Security
Documents or any of them (other than those specified in Clause 15.1
or 15.2.1) and where such failure is capable of remedy fails to
remedy the same within 14 Business Days of a notice from BNY
requiring such remedy; or
3. any representation, warranty or statement made under or in connection with
this Agreement or any other agreement with BNY (including, without
limitation, the Invoice Discounting Agreement) or the Security Documents or
any of them is or proves to be untrue in any material respect on the date
as of which it was made or deemed to be made or repeated; or
4. any other of an Obligor's present or future indebtedness is declared or
becomes capable of being declared due and payable prior to the stated
maturity thereof or is not paid on the due date therefor or the relevant
Obligor falls to pay when due any amount payable by it under any present or
future guarantee or indemnity or the security therefore becomes
enforceable; or
5. a distress or other execution is levied against any part of an Obligor's
property or assets or undertaking; or
6. the Company:-
1. is deemed to be unable to pay its debts within the meaning of
Section 123 of the Insolvency Act 1986 or any statutory modification
or re-enactment thereof, or
2. shall convene a meeting of or shall propose or enter into any
23
<PAGE> 27
arrangement or composition for the benefit of its creditors
generally; or
3. ceases or threatens to cease to carry on all or a substantial part
of its business or disposes of or threatens to transfer or dispose
of the whole or a substantial part of its undertaking or assets
(other than in the normal course of trading); or
7. an encumbrancer takes possession of or a receiver, liquidator,
administrative receiver, administrator or similar officer is appointed in
respect of all or any part of the Company's undertaking, property or assets
or any part of such assets is subject to diligence, distress, attachment or
other form of legal enforcement; or
8. any order is made, petition presented (unless the Borrower demonstrates to
the satisfaction of BNY that the petition is vexatious and frivolous and is
discharged within 7 Business Days) or effective resolution passed for the
winding-up (except for the purposes of amalgamation or reorganisation (not
involving or arising out of insolvency) the terms of which shall have
received BNY's prior written approval) of the Company or any order is made
or petition presented for the appointment of an administrator in relation
to the Company; or
9. it becomes impossible or unlawful:-
1. for an Obligor or any member of the Group to perform any of its
respective obligations contained in the Transaction Documents or any
of them; or
2. for BNY to exercise any of its rights under this Agreement and/or
the Invoice Discounting Agreement and/or the Security Documents or
any of them; or
10. this Agreement and/or the Invoice Discounting Agreement and/or the Security
24
<PAGE> 28
Documents or any of them does not come into or ceases to be in full force
and effect or is not for any reason valid and binding upon and enforceable
in all respects against an Obligor or BNY is of the opinion on reasonable
grounds that any security conferred thereby is or may be in jeopardy; or
11. BNY is of the opinion on reasonable grounds that there has been a material
adverse change in the Borrower's trading or financial position or
condition; or
12. anything is done or permitted or omitted to be done by an Obligor which BNY
reasonably believes may materially impair the security created by the
Security Documents and/or prejudice or detract from an Obligor's ability to
perform the obligations contained in the Transaction Documents or any of
them; or
13. subject to clause 15.18 below any of the events specified in Clauses 15.4
to 15.11 above occurs in relation to any other company which is a
subsidiary or holding company of the Borrower, or which is a subsidiary of
any such holding company (if any); or
14. BNY is not furnished with all (or any) information required to be delivered
to it at the time indicated in Clause 12; or
15. the Invoice Discounting Agreement is terminated for any reason or the
Borrower is in default of obligations under the Invoice Discounting
Agreement in circumstances which give BNY the immediate right to terminate
the Invoice Discounting Agreement; or
16. BNY exercises its rights pursuant to a request in accordance with Clause
19.3.2 of the Invoice Discounting Agreement; or
17. if there is any change of control of the Borrower (which for these purposes
shall mean a change in the beneficial ownership of 50% or more of the
issued share
25
<PAGE> 29
capital of the Borrower by any person); or
18. Safety 1st Inc now or at any time hereafter breaches or otherwise commits
an event of default under any agreement to which it and BNY Financial
Corporation are parties which results in monies owed by Safety 1st Inc
being declared due and payable by any party to any such agreement;
then, in any such event BNY may by notice in writing (1) terminate the
Facilities (or any of them) and/or (2) declare the Loan Account Balance and
any other amounts due hereunder immediately due and payable, whereupon the
Borrower will immediately comply with such demand by repaying the Loan
Account Balance together with all outstanding Interest and any other
amounts due under the Transaction Documents.
16. ASSIGNMENT AND TRANSFER
1. The Borrower may not transfer or assign any of its rights under the
Transaction Documents to which it is a party or any of them.
2. BNY may, without notice, transfer or assign all or any part of
and/or grant co-participation in the Facilities (or either of them)
and/or the Security Documents to any company, person or body and the
Borrower hereby irrevocably consents to any such transfer,
assignment or participation (and the disclosure by BNY to a
transferee assignee or participant of any information about the
Borrower and the Facilities as BNY may consider appropriate) and
undertakes to execute any documentation BNY may require to effect
any such transfer or assignment or participation.
17. NOTICES
Any notice by BNY to the Borrower shall be sent to the address or telefax number
and
26
<PAGE> 30
marked for the attention set out on the signature page to this Agreement or such
other address or telefax number as may from time to time be notified by the
Borrower to BNY in accordance with this clause and shall be deemed duly given,
if delivered personally or sent by facsimile, when so delivered or sent and, if
sent by first class, registered or recorded delivery post, two days after the
notice is posted. Notices to BNY shall be sent to the address specified above or
such other address as may be notified by BNY to the Borrower in writing and
shall be effective on actual receipt by BNY.
18. WAIVERS
No failure or delay by BNY in exercising any right, power or privilege under the
Transaction Documents or any of them shall operate as a waiver thereof nor will
any single or partial exercise of any right, power or privilege preclude any
further exercise thereof or prejudice any other or further exercise by BNY of
any of its rights or remedies under the Transaction Documents or any of them.
Such rights and remedies are cumulative and not exclusive of any right or remedy
provided by law.
19. EXPENSES
1. The Borrower shall pay to BNY on demand on a full indemnity basis whether
or not there is a drawing under the Facilities (or either of them):-
1. all funding breakage costs and/or costs in relation to arrangements
incurred by BNY in connection with the funding of the Loan Account
Balance and/or the Facilities (or any of them);
2. any stamp documentary registration and other similar duties or taxes
in connection with the Transaction Documents or any of them;
3. all costs and expenses incurred in connection with the negotiation
or
27
<PAGE> 31
enforcement of the Transaction Documents (including legal fees,
charges, disbursements, survey and valuation fees, and value added
tax) and BNY's costs and fees in administering the Facilities and/or
the Loan Account; and
4. the Inventory Monitoring Fee;
5. any Unused Line Fees.
On non-payment to BNY of any of the above amounts BNY is entitled to debit
such amounts either to the Loan Account or any other account(s) of the
Borrower with BNY.
2. The Borrower shall also indemnify BNY against any loss or expense incurred
by it as a consequence of the occurrence of any non-payment.
20. ILLEGALITY
If any of the provisions of the Transaction Documents become invalid, illegal or
unenforceable in any respect under any law, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired.
21. SET-OFF
In addition to any right of set-off or other similar right to which BNY may be
entitled in law, BNY (through any of its branches) may at any time and without
notice to the Borrower combine and consolidate all or any of the accounts
between the Borrower and BNY and/or set-off any monies and in any currency
whatsoever, which BNY may at any time hold for the account of the Borrower,
against any liabilities whatsoever which may be due or accruing due to BNY from
the Borrower.
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22. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with English law
and the Borrower hereby submits to the exclusive jurisdiction of the English
Courts.
23. DEMANDS AND NOTIFICATION BINDING
Any demand notification or certificate given by BNY in writing and signed by a
duly authorised officer of BNY specifying any rate of interest or any amounts
due and payable under or in connection with any provision of the Transaction
Documents or any of them shall be conclusive and binding upon the Borrower and
in any proceedings against the Borrower shall be conclusive evidence of such
rate of interest or amounts so due and payable unless the Borrower objects
thereto within 30 days.
24. POWER OF ATTORNEY
For the purpose of enabling BNY to exercise more readily and beneficially the
powers conferred on BNY hereunder the Borrower hereby irrevocably appoints BNY
and its directors and officers from time to time jointly and each of them
severally to be the Attorney of the Borrower for the purpose of executing all
such deeds and documents performing all such acts and things in the name of the
Borrower as may be expedient for the exercise by BNY of any of its said powers
or to secure the performance of any of the Borrowers obligations hereunder.
IN WITNESS whereof the parties have executed this Agreement as a Deed on the
date set out above.
29
<PAGE> 33
SCHEDULE 1
PRE-CONDITIONS DOCUMENTS
(CLAUSE 4.1)
PART I
(1) Certified copy board resolutions of each Obligor approving and authorising
the execution of the Transaction Documents (and containing specimen
signatures of the person(s) authorised to execute the same ).
(2) A certified true copy of the Certificate of Incorporation of each Obligor.
(3) A certified true and up-to-date copy of the Memorandum and Articles of
Association of each Obligor.
(4) Such other documents, licences, waivers, approvals, resolutions and
evidence as BNY and its advisers shall deem necessary or advisable and
notified to the Borrower prior to the date hereof .
(5) Originals (duly addressed to the satisfaction of BNY including confirmation
from the person producing the report that the same may be relied upon by
the successors, assignees and transferees) of:-
(a) an Inventory Valuation;
(b) the Invoice Discounting Agreement;
(c) the Security Documents.
(6) Executed blank stock transfers in respect of all shares charged under the
Security Documents.
30
<PAGE> 34
(7) Evidence that the insurances required to be taken out pursuant to paragraph
3 of Schedule 2 and/or the Security Documents have been (or will on
Completion be) taken out and are in full force and effect.
(8) A Waiver (in a form acceptable to BNY) of all or any reservation of title
rights from Safety 1st Inc in respect of all or any Inventory supplied from
time to time by Safety 1st Inc to the Borrower.
31
<PAGE> 35
PART II
(CLAUSE 4.1)
(1) The originals of the documents listed in part VI of the Schedule to the
Invoice Discounting Agreement duly executed by the Borrower and all other
relevant parties where appropriate.
(2) Such other security or security documents and priority agreements, as BNY's
advisers advise to be necessary or advisable in connection with the
foregoing and notified to the Borrower prior to the date of this Agreement.
32
<PAGE> 36
SCHEDULE 2
SPECIAL CONDITIONS RELATING TO THE INVENTORY FACILITY
1. Within seven days of the last Business Day of each month the Borrower will
render an Inventory Valuation in respect of its Inventory and Preferential
Creditors as at such Business Day. From time to time the Borrower will
repay on demand that portion of the Inventory Facility which when added to
the Preferential Creditors and the Aggregate Prepayment (as defined in the
Invoice Discounting Agreement) exceeds the amount of such Inventory
Valuation.
2. The Borrower irrevocably authorises BNY to debit any account which the
Borrower may have with BNY with all or any amounts due to BNY in connection
with the Facilities and/or to set off any such amount against any amount
payable to the Borrower by BNY.
3. The Borrower will at all times keep the Inventory in a good state of repair
and insured with some insurance office approved by BNY (such approval not
to be unreasonably withheld or delayed) against loss or damage by accident,
fire and theft and such other risks as BNY may from time to time reasonably
require to the full insurance value of such Inventory and with BNY noted
upon such policy as loss payee. The Borrower will duly pay all premiums and
other sums for this purpose and produce the receipts therefor to BNY upon
reasonable request. In default of such payment BNY shall be at liberty (but
shall not be obliged) to pay the said premiums and sums and the same shall
thereupon be recoverable by BNY from the Borrower. Any sums received by the
Borrower under such policy shall be held in trust for and payable on demand
to BNY and may be applied by BNY in reduction of any amount owing by the
Borrower to BNY on any account whatsoever.
4. The Borrower will at all times ensure that all of its Preferential
Creditors are duly and punctually paid on the due dates for payment to
them.
33
<PAGE> 37
5. The Borrower will upon request advise BNY of the whereabouts of all
Inventory and shall keep proper books of account and make true and proper
entries of all dealings and transactions relating to Inventory and shall
permit BNY and any person authorised by BNY at all reasonable times to
inspect the same. BNY and any person so authorised shall have the right to
enter upon any premises in which the Inventory or any part of it is for the
time being kept or stored and may inspect the books and accounts and
documents and shall at the expense of the Borrower supply to BNY or to such
persons all information accounts and copies of documents as BNY or such
person shall reasonably require.
6. All or any payments due and owing by the Borrower to Safety 1st Inc
(howsoever arising) are to be paid on credit terms of not less than 60 days
from the date of invoice or supply of Goods (whichever is the later). The
Borrower will not vary or otherwise amend such terms and conditions of
trade entered into with Safety 1st Inc without the prior written consent of
BNY.
34
<PAGE> 38
SCHEDULE 3
INVENTORY MONITORING FEE
1. The Borrower shall pay an Inventory Monitoring Fee of fifteen thousand
pounds ((pound)15,000) per annum by equal monthly instalments with payment
due on the first Business Day in each month .
2. In the event that BNY determines that security monitoring and/or analysis
of the Inventory is required additional to that originally contemplated by
BNY (such determination being made by BNY at its sole discretion acting
reasonably) the Borrower shall additionally pay to BNY on the first
Business Day of each calendar month following any month in which BNY
performs such additional security monitoring, namely any audit visit to any
premises of the Borrower where the Borrower's financial records are
maintained or where any Inventory or other collateral is kept or other
business analysis the need for which is determined by BNY, an additional
collateral monitoring fee in an amount equal to BNY's standard rate
(currently four hundred pounds ((pound)400) per day) for each BNY person
performing such monitoring plus all costs and disbursements incurred by BNY
in the performance of such additional examination or analysis and the fees
and expenses of outside auditors as billed.
3. BNY hereby gives notice to the Borrower that without prejudice to the
generality of paragraph 2 BNY will require an audit visit each month for
the first 3 months during which the Inventory Facility is operated.
35
<PAGE> 39
SCHEDULE 4
(FORM OF INVENTORY VALUATION)
INVENTORY DESIGNATION FORM
To:- BNY International Limited ............................
Date Submitted
Sovereign House
Church Street
Brighton
Sussex
Attention:.................... (All figures in(pound)000s)
Pursuant to the loan agreement ("the Loan Agreement") relating to the Loan that
you make available to us and to the mortgage debenture registered on the company
that we have executed in your favour, we hereby represent and report to you with
respect to our Inventory and to the Preferential Creditors outstanding as at the
date of this Valuation. The terms used herein shall where the context requires
have the same meanings as in the Loan Agreement.
I. INVENTORY MOVEMENTS FOR THE MONTH
The following is a record of the Inventory for the
period _________________ through ________________
Opening Inventory as of: ___________________ ___________________
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<PAGE> 40
Add Purchase for month ___________________
Total goods available for sale ___________________
Less: Total Net Sales for Month ___________________
Cost of Goods Sold ___________________
Ending Inventory as of ===================
II. INVENTORY BREAKDOWN
________________________________________________________________________________
Locations A B C In At Outside Totals
Transit Contractors
================================================================================
Raw Materials
________________________________________________________________________________
WIP
________________________________________________________________________________
Finished Goods
________________________________________________________________________________
________________________________________________________________________________
Totals
________________________________________________________________________________
LOCATIONS:
Address of locations:
A)
B)
Add additional location if necessary.
Identify any new locations. Attach listing of paid or unpaid, consigned and
unconsigned, in transits by vessel, L/C, beneficiary and amounts and location of
outside contractors or in bill/pack and hold.
37
<PAGE> 41
Last Physical Inventory Check _________________ by________________________
Provide an estimate duty and freight on open L/C and in transits.
REPORTING BASIS - LOWER OF COST OR MARKET
Circle One:
BNY: Reporting Basis - FIFO/LIFO/AVERAGE
GAAP: Reporting Basis - FIFO/LIFO/AVERAGE
INSURANCE
Carrier: Max. Insured Amount: ________________ Expires _______________
Agent: Circle One: Insured at cost or selling price
BNY-Name Loss Payee Yes_______ No_______
PREFERENTIAL CREDITORS
Creditor Liability (pound)'000 Date of next payment
________________________________________________________________________________
PAYE
________________________________________________________________________________
VAT
________________________________________________________________________________
EMPLOYEE
________________________________________________________________________________
III. AVAILABILITY
Amount
(A) Gross Reported Inventory
Less WIP
38
<PAGE> 42
Less unpaid and/or unconsigned in transits
Less duty/freight on paid in transits consigned to BNY
Less unpaid royalties on finished goods (LDP and in transit) or prior shipments,
and unpaid distribution costs
Less estimated negative variances on manufacturing
Less capitalised overhead in Inventory
Less obsolete/impaired/distressed/Out of Season Inventory
Less other (list)
(B) Total Ineligibles
Total eligible inventory (A) - (B) --------------------------
Advance Percentage _________ --------------------------
Inventory Availability _________ --------------------------
--------------------------
Less Preferential Creditors --------------------------
Less Miscellaneous --------------------------
Inventory Advance Available --------------------------
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<PAGE> 43
IV. RECONCILE TO PLAN AND PRIOR PERIOD
________________________________________________________________________________
Designation General Budget Last Year
Reported Ledger Comparative
Period
________________________________________________________________________________
Raw Material
________________________________________________________________________________
WIP
________________________________________________________________________________
Finished
Goods
________________________________________________________________________________
In Transit
________________________________________________________________________________
Total Invent.
________________________________________________________________________________
Mo.
Purchases
________________________________________________________________________________
Tot. Ineligibles
________________________________________________________________________________
Open L/C's
________________________________________________________________________________
Open A/R
________________________________________________________________________________
Reported G/M
________________________________________________________________________________
Annual Inv.
Turn
________________________________________________________________________________
Prior Mo.
Sales
________________________________________________________________________________
Next Mo.
Sales
________________________________________________________________________________
Circle One: Designation report based on perpetual run, gross margin method, or
physical count.
Attach discussion on variances to this report
V. RECONCILE TO PLAN AND PRIOR PERIOD
40
<PAGE> 44
I do hereby certify that I am authorised and qualified to compile, prepare and
complete this report, and acknowledge that BNY is relying on the information
contained in this report for credit accommodations to the company. I have also
advised my accountants that information submitted to BNY International Limited
is relied on for credit decisions.
I do also certify that the information in this report is accurate and complete.
The value of the Inventory scheduled this report is represented to be at cost or
lower of the market.
Company Name ____________________________
Signature ____________________________
Title ____________________________
41
<PAGE> 45
SIGNED AND DELIVERED AS A DEED BY
SAFETY 1ST (EUROPE) LIMITED acting by
......................... a Director and } .....................................
......................... a Director/Secretary*}................................
(Insert full names above and where
indicated by * clarify whether the person
is a Director or a Secretary)
EXECUTED AS A DEED by )
)
as Attorney for BNY INTERNATIONAL ) /s/ Charles Anderson
LIMITED in the presence of )
/s/ E. Malkin
42
<PAGE> 46
SIGNED AND DELIVERED AS A DEED BY
SAFETY 1ST (EUROPE) LIMITED ACTING BY
Andrew Ratcliffe a Director and ) /s/ Andrew Ratcliffe
Robert Jones Secretary ) /s/ Robert Jones
(Insert full names above and where
indicated by "clarify whether the person
is a Director or a Secretary)
EXECUTED AS A DEED BY )
)
as Attorney for BNY INTERNATIONAL )
LIMITED in the presence of )
42
<PAGE> 1
EXHIBIT 10.4
DATED 1ST SEPTEMBER 1998
SAFETY 1ST (EUROPE) LIMITED
AND
BNY INTERNATIONAL LIMITED
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
INVOICE DISCOUNTING AGREEMENT
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
BNY INTERNATIONAL LIMITED
Sovereign House, Church Street, Brighton, BN1 1SS
<PAGE> 2
INDEX
Clause 1 DEFINITIONS AND INTERPRETATION
Clause 2 PURCHASE OF RECEIVABLES
Clause 3 TRANSFER OF GOODS
Clause 4 PERFECTION OF TITLE
Clause 5 PURCHASE PRICE OF RECEIVABLES
Clause 6 NOTIFICATION OF RECEIVABLES
Clause 7 ACCOUNTING AND PAYMENT TO THE CLIENT
Clause 8 THE ADMINISTRATION CHARGE AND DISCOUNT CHARGE
Clause 9 ANCILLARY DOCUMENTATION
Clause 10 SPECIAL CONDITIONS
Clause 11 SET-OFF AND COMBINATION
Clause 12 RECEIVABLES OTHERWISE THAN IN STERLING
Clause 13 WARRANTY AND UNDERTAKINGS
Clause 14 THE TRUST ACCOUNT
Clause 15 CLIENT'S ACCOUNTS AND RECORDS
Clause 16 POWER OF ATTORNEY
Clause 17 RECOURSE TO CLIENT
Clause 18 RIGHT TO DISCLOSURE
Clause 19 TERMINATION OR DETERMINATION
Clause 20 ENFORCEMENT OF PAYMENT OF RECEIVABLES
Clause 21 INDEMNITY
Clause 22 ASSIGNMENT
Clause 23 VAT
Clause 24 NOTICES
Clause 25 MISCELLANEOUS
SCHEDULE
<PAGE> 3
================================================================================
INVOICE DISCOUNTING AGREEMENT
================================================================================
THIS INVOICE DISCOUNTING AGREEMENT is made the 1st of SEPTEMBER 1998
BETWEEN
(1) BNY INTERNATIONAL LIMITED whose registered office is situate at Sovereign
House, Railway Approach, Brighton, BN1 1SS ("BNY"); and
(2) SAFETY 1ST (EUROPE) LIMITED Company Registration Number 2466356) whose
registered office is situate at 1st Floor, 180 Fleet Street,
London EC4A 2HD ("the Client").
- --------------------------------------------------------------------------------
IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement the following expressions shall have the meanings
ascribed to them respectively
"ADMINISTRATION CHARGE"
The amount detailed in Part IV of the Schedule
"ANCILLARY RIGHTS"
In relation to any Receivable:
(i) all the Client's rights as unpaid vendor and all other rights of the
Client under or in relation to the relevant Supply Contract (whether such rights
arise from or are created by statute common law contract or otherwise
howsoever);
(ii) the benefit of all guarantees indemnities insurances (including any
policy of credit or goods in transit insurance) and securities given to or held
by the Client in relation to such Receivable;
(iii) all cheques bills of exchange and other instruments held by or available
to the Client in relation to such Receivable; and
(iv) the right to possession of all ledgers computer data records and
documents on or by which such Receivable is recorded or evidenced
"ASSOCIATE"
A director shareholder or other officer of the Client or a person whose
relationship to the Client is within the meaning of Associate as defined by
ss.52 of The Companies Act 1989
"BUSINESS DAY"
A day (excluding a Saturday and Sunday) on which banks are open for business in
London
"CLIENT ACCOUNT"
The account or accounts maintained by BNY in the name of the Client for the
purpose of recording all transactions between BNY and the Client pursuant to
this Agreement and any reference to a balance on the Client Account shall mean a
balance on a combination of such accounts (whether or not such accounts have
been combined in fact)
"COLLECTION DATE"
In the case of a Receivable paid in cash or by bank credit transfer: two days
after the date of receipt of the funds in the bank account of BNY; and in the
case of a Receivable paid by cheque or other instrument: two days after the date
of its collection from the drawee or acceptor
"COMMENCEMENT DATE"
2ND SEPTEMBER 1998
"DEBTOR"
Any person firm or company which is or may become indebted to the Client in
respect of the sale or supply by the Client of any Goods
"DELIVERY"
In the case of goods their physical receipt by the Debtor and in the case of
services their performance and "delivered" shall be construed accordingly
"DISCOUNT CHARGE"
The charge to be calculated as specified in Part V of the Schedule by reference
to the percentage detailed in the said Part V or such other percentage as BNY
shall in its absolute discretion from time to time notify by not less than 4
weeks prior written notice to the Client
"ENCUMBRANCES"
Includes without limitation any mortgage charge (whether fixed or floating)
pledge lien assignment or assignation by way of security any other security
interest retention of title or encumbrance of any kind and any other agreement
or arrangement having substantially the same economic effect as any of the
foregoing
"GOODS"
Any merchandise and where the context so admits any services (and "Sale of
Goods" shall include the provision of services)
"GROSS PURCHASE PRICE"
The amount payable by the Debtor for the relevant Goods (together with any value
added tax thereon) but less any discount commission or other allowances due or
allowable to the Debtor under the Supply Contract
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<PAGE> 4
"INSOLVENCY"
1. In relation to a company a petition to wind up the company; or the calling
of a meeting to pass a resolution to wind up the company; or the appointment of
a receiver manager or administrative receiver in respect of all or any part of
the company's undertaking assets or property or the making of an application or
order for or in relation to the appointment of an administrator under the
Insolvency Act 1986
2. In relation to an individual or partnership the issue of a petition for
bankruptcy; or sequestration; in relation to a partnership a petition to wind it
up
3. In relation to a company individual or partnership the making of any
proposal or order for or in relation to any voluntary arrangement under the
Insolvency Act 1986; or allowing a security holder or encumbrancer to take
possession of any assets or the suffering of distress execution diligence or
sequestration or other legal process upon any assets or income or the making or
threat of a garnishee order on any person indebted to the Client in relation to
any judgement debt of the Client; or ceasing or threatening to cease to carry on
business; or the making of any arrangement or composition with or for the
benefit of creditors or the calling of a meeting for the same whether formal or
informal; or giving notice of the intended suspension of payment of debts; or
allowing any judgement or decree or order of any Court or Tribunal for payment
of money to remain unsatisfied for seven days or more
"THE OBLIGATIONS"
All monetary and other liabilities and prospective liabilities owed or incurred
at any time by the Client to BNY (liquidated or unliquidated) whether actual or
contingent and whether arising under this Agreement or otherwise and whether
arising in or by contract tort restitution or assignment
"OUTSTANDING"
In relation to any Receivable: included in a Transmittal Form and remaining
vested in BNY and unpaid and a Receivable shall be deemed to be unpaid until the
Collection Date thereof
"PERMITTED CREDIT PERIOD"
The period detailed in Part 1 of the Schedule or such period as BNY may decide
from time to time and notify to the Client in writing.
"THE PREPAYMENT PERCENTAGE"
The percentage as detailed in Part II of the Schedule of the Gross Purchase
Price as may be varied from time to time by BNY and notified to the Client in
writing of the Receivables which are Outstanding from time to time
"RECEIVABLE"
The amount of any book debt invoice debt accounts note bill acceptance and other
forms of obligation or indebtedness incurred or to be incurred by the Debtor
either under a Supply Contract including any tax or duty payable by the Debtor
or in respect of which the Client has obtained or acquired the beneficial
interest thereof
"RECOURSE"
The right of BNY in accordance with Clause 17 hereof to require the Client to
repurchase a Receivable (together with any Ancillary Rights and any Transferred
Goods) purchased by BNY
"THE SCHEDULE"
The schedule attached to and forming part of this Agreement
"SPECIAL MARGIN"
Such sum as notified in writing to the Client at any time by BNY in its absolute
discretion
"SUBSIDIARY"
A company whose relationship to the Client is within the meaning of s.144(1) of
The Companies Act 1989 (excluding EE21 Air Services Limited Companies
Registration Number 2481657)
"SUPPLY CONTRACT"
A contract between the Client or any agent(s) of the Client and a Debtor for the
provision of Goods
"TRANSFERRED GOODS"
Goods in respect of which the ownership shall vest in BNY pursuant to Clause 3.1
or 3.2
"TRANSMITTAL FORM"
The form referred to in Clause 6
"VAT"
Value Added Tax
1.2. Expressions which in or for the purposes of any proceedings outside
England and for the purposes of the interpretation of documents expressed to be
subject to other than English Law have no precise counterpart in the
jurisdiction in which those proceedings take place or in the law of such
contract as the case may be shall be construed as bearing the meaning of the
closest equivalent thereto in the jurisdiction concerned
1.3. This Agreement shall be governed by and construed in accordance with
English Law
1.4. The index marginal notes and headings are inserted for convenience of
reference and shall not form part of this Agreement or affect its interpretation
and references in this Agreement to clauses (except where otherwise specified)
are references to clauses of this Agreement
1.5. In this Agreement the singular shall include the plural and vice versa
the masculine shall include the feminine and neuter and vice versa and the
meaning of general words introduced by the word "other" shall not be limited to
reference to any preceding word or enumeration indicating a particular class of
acts matters or things
2. PURCHASE OF RECEIVABLES
2.1 The Client agrees to sell and BNY agrees to purchase free from
Encumbrances or other interests and upon the terms hereof all Receivables
together with all Ancillary Rights existing at the Commencement Date or arising
thereafter during the currency of this Agreement in relation to which payment to
the Client is to be made in the United Kingdom
2.2 The ownership of each Receivable and the Ancillary Rights relating
thereto shall as regards Receivables
2
<PAGE> 5
existing at the Commencement Date vest in BNY on such date and as regards future
Receivables vest in BNY automatically upon the same coming into existence
3. TRANSFER OF GOODS
3.1 The ownership of all Goods to which any Receivable purchased by
BNY pursuant to Clause 2.1 relates and which shall be either:
3.1.1. returned or rejected by the Debtor or
3.1.2 recovered by the Client by reason of any right of lien stoppage in
transit or ownership (whether or not pursuant to the relevant Supply Contract)
shall vest automatically in BNY upon the return rejection or recovery (as the
case may be) of such Goods without the requirement of any act of transfer
3.2 BNY shall have the right to have transferred to it the ownership of
any Goods the subject of any Supply Contract (other than such Goods as shall
have vested in BNY pursuant to Clause 3.1) in respect of which the ownership
shall not have passed to the Debtor
3.3 All Transferred Goods shall be set aside marked "These goods are
the property of BNY INTERNATIONAL LIMITED" and held for BNY's account as owner
3.4 BNY shall (in addition to and without prejudice to any other rights
it may have) possess the right to take possession of and to sell or cause to be
sold without notice any Transferred Goods at such prices to such purchasers and
upon such terms and conditions as it may deem advisable and in the event of any
such sale the Client shall pay to BNY on demand (and without asserting any right
of set-off):
3.4.1 the excess (if any) of the amount of the receivable relating to
such Goods and the amount received by BNY on any such sales; and
3.4.2 any costs and expenses (including legal fees) reasonably incurred
by BNY in relation to any such taking of possession and sale
4. PERFECTION OF TITLE
4.1 The Client shall at the request of BNY at any time before or after
determination of this Agreement and at the Client's expense execute stamp and
deliver a deed in a form to be approved by BNY legally assigning to BNY any
Receivable and its Ancillary Rights purchased by BNY hereunder and deliver to
BNY any instrument policies deeds securities records computer data or documents
included therein with any necessary endorsement signature
4.2 The Client shall hold on trust for BNY and separately from its own
property any Receivable or Ancillary Rights purchased by BNY of which the
ownership shall fail to vest in BNY for any reason
5. PURCHASE PRICE OF RECEIVABLES
In this Agreement the "Purchase Price" payable by BNY to the Client in
respect of any Receivable shall be the Gross Purchase Price less:
5.1 The Discount Charge; and
5.2 The Administration Charge other than any annual charge; and
5.3 In the case of a Receivable payable otherwise than in Sterling any
charges for collecting and converting in accordance with Clause 12 hereof
6. NOTIFICATION OF RECEIVABLES
The Client undertakes to notify BNY of each Receivable as soon as
reasonably practicable after the relevant Goods to which it relates have been
Delivered by fully and promptly completing a Transmittal Form and delivering the
same to BNY together with such other documents as BNY may require to evidence
the proper Delivery of the relevant Goods in respect of such Receivable
7. ACCOUNTING AND PAYMENT TO THE CLIENT
7.1 Upon receipt by BNY of a Transmittal Form relating to any
Receivable BNY shall credit its Purchase Price to the Client Account. For
administrative convenience BNY shall make all such credit before deduction of
any of the items to be deducted in calculating such Purchase Price as are
provided for in Clause 5 and shall consequently debit any such item to such
account in the name of the Client and at such time thereafter as BNY may
consider requisite
7.2 Subject to the provisions of Clauses 7.3, 7.4 and 7.5. BNY shall
remit to the Client or to its order on account of its obligation to pay the
Purchase Price of Receivables any part of the balance for the time being
standing to the credit of the Client in the Client Account
7.3 The Client shall not be entitled at any time to any payment in
respect of the Purchase Price of any Receivable:
7.3.1 Whilst any petition for the winding up of the Client or (pursuant
to the Insolvency Act 1986) any petition for an administration order or any
proposal for a voluntary arrangement is pending or whilst the Client's
Insolvency is threatened
7.3.2 If and to the extent that such payment would result in the
aggregate of the purchase moneys paid by BNY to the Client in respect of all
Outstanding receivables in accordance with this agreement exceeding a sum
produced by deducting the Special Margin from the Gross Purchase Price of all
Outstanding Receivables and multiplying the result by the Prepayment Percentage
7.4 At any time the aggregate of all purchase moneys paid by BNY to the
Client in accordance with this agreement in respect of all Outstanding
Receivables shall not at any time exceed the amount detailed in Part III of the
Schedule or such other amount as BNY shall notify to the Client from time to
time in its absolute discretion
7.5 At any time when BNY shall have the right to terminate this
Agreement pursuant to clause 19.2 (whether or not it shall have exercised such
right) BNY may withhold all payments of or on account of the Purchase Price of
any Receivable which is Outstanding and shall have the right on demand to the
immediate repayment by the Client of all payments previously made in respect of
the Purchase Price of Receivables then Outstanding
7.6 All payments to be made by BNY to the Client under this Agreement
shall be made in sterling by cheque and shall be sent by post to the Client or
to any bank
3
<PAGE> 6
account of the Client or by such other means of transmission as BNY may approve
7.7 BNY will at monthly intervals provide statements to the Client of
the Client Account showing the movements upon such account since the issue of
the previous statements. Such statements shall be binding upon the Client in the
absence of manifest error provided that such manifest error is notified in
writing to BNY within three months of the date the Client was provided with such
statements
8. THE ADMINISTRATION CHARGE AND THE DISCOUNT CHARGE
8.1 For administrative convenience the charges to be deducted in the
calculation of the Purchase Price of any Receivable pursuant to Clause 5 shall
be dealt with as follows:
8.1.1 the Administration Charge other than any annual charge shall
be debited to the Client Account on the last day of each month; and
8.1.2 the Discount Charge shall be calculated in aggregate and so
debited to the Client Account each month by applying each day the applicable
rate to the aggregate of unrecovered payments made by BNY in respect of the
Purchase Price of Receivables up to the end of such day and for this purpose any
amount debited to the Client Account except in respect of Recourse or any credit
note issued by the Client shall be treated as such a payment
8.2 Any annual Administration Charge shall be payable by equal monthly
instalments which shall be debited to the Client Account on the last day of
each month
9. ANCILLARY DOCUMENTATION
The Client covenants to execute or procure the execution of the additional
documentation specified in Part VI of the Schedule in the form stipulated by BNY
10. SPECIAL CONDITIONS
The Client, covenants and when applicable BNY agrees to observe and perform
the special conditions (if any) detailed in Part VIII of the Schedule
11. SET-OFF AND COMBINATION
11.1 BNY may debit to the Client Account the amount of any of the
Obligations or (in BNY's absolute discretion) BNY may apply by way of set-off
the amount of any of the Obligations in discharge of any amount payable by BNY
to the Client Account pursuant to this Agreement. If the amount of any such
Obligation cannot be immediately ascertained BNY may make a reasonable estimate
thereof. Any amount debited to the Client Account pursuant to this Clause
(except in respect of any credit note issued by the Client or any Recourse)
shall be treated as a payment on account of the Purchase Price of Receivables
11.2 BNY may in its absolute discretion without notice or other formality
combine any two or all the accounts maintained in BNY's records in the name of
the Client. At any time when BNY shall have the right to terminate this
Agreement immediately in accordance with sub-Clause 19.2 all such accounts shall
be deemed to have been combined and any balance owing to BNY on the Client
Account and any amount by which any balance on the Client Account in favour of
the Client falls short of the Special Margin at such time shall be paid by the
Client to BNY forthwith upon demand
12. RECEIVABLES OTHERWISE THAN IN STERLING
12.1 Unless otherwise agreed by BNY where a Receivable is payable
otherwise than in Sterling in the United Kingdom the charges for both the
collection and/or conversion into Sterling shall be deducted in calculating the
Purchase Price and such price shall be computed by reference to the spot rate of
exchange ruling in London on the Collection Date but at its discretion BNY may
provisionally apply the rate ruling on the date it receives the Transmittal Form
relating to such Receivable making such adjustments as shall thereafter be
necessary
12.2 Similar provisions shall apply to payment of the Repurchase Price
where BNY has Recourse to the Client in respect of such Receivable in accordance
with Clause 17 hereof and such Repurchase Price shall be computed at the same
rate as that applied in calculating the Purchase Price of the relevant
Receivable
13. WARRANTY AND UNDERTAKINGS
In addition to and without prejudice to any other warranty or undertaking
given elsewhere in this Agreement the Client warrants and undertakes (as
applicable):
13.1 that the Client's business is as stated in Part VII of the Schedule
13.2 that the Client has not granted and will not (without the written
consent of BNY) grant any assignment assignation or other disposition charge or
Encumbrance which affects or may affect any of the Receivables or any Ancillary
Rights or any Transferred Goods sold to BNY and that no supplier to the Client
has or may have any claim to any such Receivable or Ancillary Rights or Goods
whether by equitable tracing right or otherwise
13.3 that the Client has disclosed to BNY every fact or matter known to
the Client which the Client knew or ought reasonably to have known might
influence BNY in its decision whether or not to enter into this Agreement or to
accept any person as guarantor of the Client's obligations to BNY or as to the
terms of this Agreement and to disclose promptly to BNY any such fact or matter
of which the Client becomes aware throughout the duration of this Agreement
including (without prejudice to the generality of the foregoing) any change or
prospective change in the constitution or control of the Client or of any
guarantor
13.4 that the inclusion of a Receivable on a Transmittal Form or in any
schedule delivered to BNY pursuant to Clause 15.2 shall be deemed to constitute
a warranty or undertaking (as applicable) by the Client that:
13.4.1 The relevant Goods have been delivered and the Receivable is
a bona fide legally binding obligation of the relevant Debtor to the extent of
the amount notified by the Client on a Transmittal Form and has arisen from a
Supply Contract made in the ordinary course of the Client's business as
specified in part VII of the Schedule
13.4.2 The relevant Debtor has an established place of business and
is not an Associate of the Client
13.4.3 The Client has no obligations to the relevant Debtor other
than under any Supply Contract and there exists no agreement between the Client
and the Debtor for set-off or for abatement or whereby otherwise the amount of
the Receivables specified in the Transmittal Form may be reduced otherwise than
in accordance with the terms of the Supply Contract as approved by BNY
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<PAGE> 7
13.4.4 The Client is not in breach of its obligations to the
relevant Debtor under the terms of the Supply Contract and will continue in all
respects to comply with the Supply Contract to ensure that the Debtor will
accept the Goods and the invoice therefor (or if the Debtor is insolvent the
Debtor's trustee in Bankruptcy or Liquidator will accept a proof of debt for the
unpaid balance thereof) without any dispute or claim whatsoever (whether
justifiable or not) including disputes as t price terms quality or quantity
retention set-off compensation or counterclaim or claims of release from
liability or inability to pay because of an act of God or public enemy or war or
because of the requirements of law or rules orders or regulations having the
force of law
13.4.5 The Client will not vary or attempt to vary any of the terms
of any Supply Contract without the prior written consent of BNY
13.4.6 All statements in particular contained in the Transmittal
Form or in any documents delivered therewith or otherwise under the terms hereof
will be true and correct in every respect
13.4.7 The Client will on the Delivery of the Goods have no reason
to believe that the Debtor will be unable to or for any other reason will not
pay in full when due all moneys owed by it in respect of such Good
13.4.8 The Receivable has arisen from a Supply Contract which is
governed by the laws of England or of such other country as may be approved by
BNY in writing and that all claims or disputes arising in connection with the
Supply Contract are within the jurisdiction of the English Courts and that such
Supply Contract provides for payment in a currency and in accordance with terms
approved by BNY in writing
13.4.9 The Client will (if so required by BNY) provide evidence
satisfactory to BNY of the Debtor's order for the Goods and of the due delivery
of the Goods to which each Receivable included in the Transmittal Form relates
13.5 Promptly to supply to BNY copies of all credit notes issued to
Debtors (but so that BNY shall at all times have an absolute discretion to
require that its prior written approval be obtained before the issue of any
credit note)
13.6 To deliver to BNY upon the execution of this Agreement and upon the
opening of any account with any bank a letter of instruction in a form specified
by BNY to the Client's banker in respect of remittances received or to be
received by such banker purportedly in settlement of any Receivable
13.7 To inform BNY of any person who is or becomes an Associate and if so
required by BNY to procure that any Associate carrying on a business similar to
that of the Client shall enter into an agreement with BNY for the sale of its
receivables on terms similar to those of this Agreement
13.8 Promptly to notify BNY in writing of any dispute of any kind between
the Client and the Debtor and to use its best endeavours promptly to settle
every such dispute and promptly to perform all further and continuing
obligations of the Client to the Debtor under any Supply Contract and (if so
required by BNY) to give evidence to BNY of such performance
13.9 The warranties and undertakings contained in Clauses 13, 14 and 15
herein shall remain fulfilled throughout the duration of this Agreement
14. THE TRUST ACCOUNT
The Client warrants and undertakes as trustee for BNY to hold and keep
separate from the Client's other moneys all cheques instruments and moneys that
may be received by it in payment of or on account of Receivables purchased by
BNY and immediately to pay all such cheques instruments and moneys properly
endorsed where required either
14.1 direct to the account of BNY at the bankers of BNY from time to time
notified in writing by BNY to the Client or
14.2 into a Trust Account in the name of the Client as trustee of BNY
being an account of which the sole signatory or signatories is or are officers
or employees of BNY and
14.2.1 BNY agrees to instruct the bankers at which any such Trust
Account is maintained promptly to transfer to BNY's own bank account sums paid
into the said Trust Account and all sums paid into such Trust Account shall be
deemed to have been paid to BNY on the date on which they are credited to BNY's
own bank account
14.2.2 All bank commission and other charges and expenses incurred
or payable by BNY in relation to this Agreement and the arrangements
contemplated herein shall be paid by the Client to BNY on demand or at the
option of BNY shall be debited to the Client Account
15. CLIENT'S ACCOUNTS AND RECORDS
The Client undertakes with BNY:
15.1 That immediately after the purchase by BNY of any Receivable to make
an appropriate entry in its books of account recording such sale and to procure
that in all such accounts maintained in the books and records of the Client in
the name of the relevant debtor there are conspicuous notations that the
Receivable has been sold to BNY
15.2 To deliver to BNY by the tenth day of each month (or by such later
date as BNY shall from time to time agree in writing) and in a form approved by
BNY and made up to the last day of the preceding month the following:-
15.2.1 A schedule of all Receivables owed by each Debtor, each
Receivable being aged by date of invoice
15.2.2 A copy of the Client's sales ledger control account relating
to all Receivables purchased by BNY pursuant to this Agreement which must
include all such details as BNY will require and notify to the Client in writing
from time to time
15.2.3 All such other information as BNY may require and request in
writing from time to time
15.3 To promptly furnish BNY with management accounts showing its
financial position and the results of its operation as BNY may at any time
require but at not less than quarterly intervals in any event
15.4 To furnish BNY with a signed copy of its audited balance sheet and
accounts for each year or accounting reference period (as defined in the
Companies Act 1985 as amended by the Companies Act 1989) ending
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<PAGE> 8
throughout the duration of this Agreement within 6 months of the end of such
period and such other accounts or statements of its financial position or
affairs as BNY may at any time require and (if so required by BNY) to procure
that the Client's auditors shall report direct to BNY on any such balance sheet
or accounts
15.5 To promptly furnish BNY (at the Client's expense) with such of the
books records documents tapes computer equipment and other materials included in
the Ancillary Rights or copies of them and copies of any other records or
documents as BNY may at any time require and (if so required by BNY) to procure
that the Client's bankers shall furnish BNY with copies of any or all of the
statements of accounts between such bankers and the Client
15.6 To allow BNY, its employees and authorised agents at any time during
normal business hours to enter the Client's premises at which the Client carries
on business to inspect, verify, check, remove and take copies (at the Client's
expense) of any books, orders, accounts, records, correspondence of the Client
as BNY shall desire in respect of the Receivables and their Ancillary Rights and
to carry out such inspection and verification as BNY may in its absolute
discretion require of the Client's accounts records and documents at any time
throughout this Agreement and to indemnify BNY against every expense reasonably
and properly incurred or sustained in carrying out any of the above
16. POWER OF ATTORNEY
The Client hereby irrevocably:
16.1 appoints BNY the directors the company secretary and every other
officer of BNY from time to time jointly and severally to be the attorney of the
Client to execute such deeds or documents complete and endorse such instruments
institute or defend such proceedings and perform such other acts as BNY may
require to perfect BNY's title to any Receivable or its Ancillary Rights and to
secure performance of any of the Client's obligations under this Agreement or
under any Supply Contract
16.2 authorises BNY the directors the company secretary and every other
officer of BNY from time to time to endorse the name of the Client on any and
all cheques or other forms of remittance received where such endorsement is
required to effect collection or to perfect BNY's title as a holder in due
course or for any other reason
16.3 authorises the attorneys appointed pursuant to Clause 16.1 to
appoint and to remove any substitute attorney or agent to execute and perform
any of the documents and things referred to in Clauses 16.1 and 16.2 and the
Client shall be bound by whatever any of such attorney substitute attorney or
agent shall do by virtue of the powers hereby given
17. RECOURSE TO CLIENT
17.1 BNY may require the Client at any time after receiving a written
notice from BNY ("the Repurchase Notice") to immediately repurchase any
Receivable:
17.1.1 which remains unpaid, whether in whole or in part after
payment thereof has become due; or
17.1.2 which even if not due remains unpaid by the end of the
Permitted Credit Period; or
17. 1.3 where the Debtor at any time disputes liability for payment
or asserts any right of lien retention or set-off
17.2 The Repurchase Notice shall detail the relevant Receivable to be
repurchased and the price at which it is to be repurchased which shall be the
amount of the Receivable as included in the relevant Transmittal Form less any
amount already paid by a Debtor in respect of such Receivable ("the Repurchase
Price")
17.3 Until all the moneys payable by the Client under the Repurchase
Notice to BNY have been paid the Receivables included in such notice and its
Ancillary Rights any Transferred Goods relating thereto shall remain vested in
BNY
17.4 After the ownership of any Receivable shall have revested in the
Client BNY will credit the Client with all sums subsequently recovered by BNY in
respect of such Receivable as a result of BNY's enforcement of any of the
Ancillary Rights vested in BNY pursuant to Clause 2.2
17.5 BNY has an additional right to require the Client to repurchase any
Receivable at any time in its absolute discretion whether or not the Client is
in breach of any of its obligations hereunder
18. RIGHT TO DISCLOSURE
On request by BNY to the Client at any time the Client shall immediately
give in the form specified by BNY notice to the Debtors or to such of them as
BNY shall direct of the rights of BNY to the Receivables owed by the relevant
Debtors and Ancillary Rights together with any Receivables which may in the
future become due by those Debtors to the Client and thereafter the Client shall
include such notice in all statements invoices or demands for payment issued by
the Client in respect of every Receivable purchased by BNY pursuant to this
Agreement
19. TERMINATION OR DETERMINATION
19.1 Termination
This Agreement may be terminated by either party serving on the
other not less than eighty days notice in writing of such termination provided
that any such notices shall expire no earlier than the third anniversary of the
Commencement Date or any later annual anniversary thereof
19.2 Determination by BNY
On the occurrence of any of the following events BNY shall have the
right by notice to the Client to terminate this Agreement forthwith or at any
time thereafter:
19.2.1 Any breach of any of the Client's obligations under this
Agreement (or any other agreement (whether for financial facilities or
otherwise) between BNY and the client or the termination of such other
agreement)
19.2.2 The Insolvency of the Client
19.2.3 The occurrence of any of the events mentioned in sub-Clauses
19.2.2 19.2.4 and 19.2.6 in relation to any person firm or company which
guarantees indemnifies or provides third party security for the Client's
obligations under this Agreement or the death of any such person or the
termination or attempted termination of any such guarantee indemnity or third
party security
19.2.4 The Client suspends or threatens to suspend its operation or
except in the ordinary course of
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<PAGE> 9
business sell, lease, transfer, or otherwise dispose, of all or any substantial
part of its assets (whether by a single transaction or by a series) or all or
any part of its assets are seized or appropriated by or on behalf of any
governmental or other authority or are compulsorily acquired
19.2.5 Any breach of a representation covenant undertaking or
warranty made by the Client or by any other person in reliance on which BNY
entered into or continued this Agreement or the withdrawal or attempted
withdrawal of any waiver or release given to BNY in relation to any security
right affecting any asset of the Client
19.2.6 The termination of any agreement with BNY relating to any
Receivables by any mortgagee or debenture-holder of the Client or any supplier
of Goods to the Client
19.2.7 The making of a request by BNY in accordance with Clause 17
or 18 herein
19.3 Consequences of Termination
19.3.1 Upon termination of this Agreement in accordance with Clause
19.1 or upon BNY becoming entitled to terminate it pursuant to clause 19.2
whether or not BNY shall have exercised such right
19.3.2 BNY shall have the immediate right of Recourse in respect of
all Receivables then Outstanding (and if the Agreement shall have been
terminated such right shall be deemed to have arisen immediately prior to such
termination), but so that BNY shall remain the legal and beneficial owner of the
Receivables until the Repurchase Price has been paid
19.3.3 Subject to the provisions of Clause 7.5 and 19.3.1
termination of this Agreement shall not affect the rights and obligations of
either party in relation to any Receivables which are in existence on the date
of termination and such rights and obligations shall remain in full force and
effect until duly extinguished
20. ENFORCEMENT OF PAYMENT OF RECEIVABLES
20.1 BNY shall have the sole right of collecting and enforcing payment of
Receivables of which the ownership remains vested in BNY in whatever manner it
may in its absolute discretion decide and the Client shall at all times
co-operate with and assist BNY to procure such collection and enforcement
20.2 BNY shall be entitled at its absolute discretion to institute carry
on and defend any legal proceedings in respect of the Receivables and to settle
compromise and adjust any claims by or against the Client or BNY upon such terms
as it shall think fit and the Client undertakes to co-operate in any such
proceedings including the giving of evidence) if so required by BNY and agrees
to be bound by anything done by BNY under this Clause
20.3 Without prejudice to the provisions of Clause 20.1 and 20.2 BNY
hereby appoints the Client as agent of BNY for the purpose of administering the
accounts of Debtors and procuring payment of Receivables for the account of BNY
and for the realisation or recovery of any Ancillary Rights or Transferred Goods
and the Client accepts such appointment and undertakes to act promptly and
efficiently in carrying out such tasks
20.4 BNY may at any time by written or oral notice to the Client withdraw
the agency for which provision is made in Clause 20.3 and such notice shall be
deemed to be a request pursuant to Clause 18 and the provisions of that clause
shall thereafter apply in full
20.5 The Client undertakes that while the agency referred to in Clause
20.3 remains in existence it will not hold itself out as agent for BNY for any
purpose other than that for which it shall have been appointed and that after
termination of such agency it will not hold itself out as the agent of BNY for
any purpose
21. INDEMNITY
The Client shall fully indemnify BNY against all costs losses and expenses
(including all internal and external legal fees and disbursements) which it may
sustain or incur at any time as a consequence of any or all of the following:
21.1 the termination of this Agreement in accordance with Clause 19;
21.2 the exercise of Recourse in accordance with Clause 17;
21.3 on the exercise or the contemplation of the exercise of its rights
of enforcement of payment of any Receivable in accordance with Clause 20;
21.4 any default by the Client in the due performance of any of its
obligations under this Agreement;
21.4 the negotiation preparation and execution of this Agreement and
Ancillary Documentation or any matter incidental thereto;
21.5 the granting of any waiver consent or variation of this Agreement or
Ancillary Documentation
21.6 the monitoring or verification of the records of the Client
throughout the duration of this Agreement or the enforcement perfection
protection or preservation of any of BNY's rights hereunder (or an attempt of
the same)
22. ASSIGNMENT
22.1 The Client shall not be entitled to assign or to charge any of its
rights or to delegate any of its obligations under this Agreement
22.2 BNY shall have the full and unfettered right to assign or novate the
whole or any part of this Agreement and the expression "BNY" wherever used
herein shall be deemed to include the assignees and other successors whether
immediate or derivative of BNY who shall be entitled to enforce and proceed upon
this Agreement on the same manner as if named herein
22.3 All undertakings representations and warranties made or deemed made
in this Agreement shall survive any assignment made pursuant to this Clause
22.4 BNY may disclose on a confidential basis to in relation to this
Agreement such information about the Client as has been given to BNY
23. VAT
23.1 All charges specified in this Agreement are quoted exclusive of VAT
23.2 The Client shall comply with any directions which BNY may give to
the Client in relation to the relief or
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<PAGE> 10
any refund on behalf of BNY of VAT included in any Receivable purchased by BNY
pursuant to this Agreement where such relief or refund may be available to BNY
in respect of the Insolvency of the Debtor
24. NOTICES
24.1 Any written notice or demand required or permitted to be served or
made by BNY hereunder shall be validly served or made if handed to any officer
of the Client or if sent by facsimile transmission to any facsimile number of
the Client made known by the Client to BNY or if sent by post or delivered to
the registered office of the Client or to its address stated herein or to its
address last known to BNY or to any address at which the Client carries on
business. Such notices and demands served personally or orally shall take effect
upon their service and notices sent and demands made by post shall be
conclusively deemed to have been received within seventy-two hours of the time
of posting and notices sent and demands made by facsimile shall be deemed to
have been received upon their transmission is sent prior to 4.30pm London time
on a Business Day but if sent after 4.30pm or on a non Business Day it shall be
deemed to have been received on the next following Business Day.
24.2 Any written notice required or permitted to be served by the Client
hereunder shall be effective as from the date of the receipt of such notice by
BNY at its address stated herein or if any other address for notices shall be
communicated by BNY to the Client in writing such other address
25. MISCELLANEOUS
25.1 BNY's rights and benefits under this Agreement shall not be affected
by the granting of any time or indulgence to the Client or to any surety or
guarantor of the obligations of the Client to BNY hereunder or to any Debtor or
by any failure to exercise or delay in exercising any right or option against
such person
25.2 BNY shall be entitled to rely on any act done and on any document
signed and on any oral or written communication (including any such
communication sent by facsimile) by any person purportedly doing or signing or
communicating on behalf of the Client notwithstanding any defect in or absence
of any authority in such person
25.3 The provisions of this Agreement including the Schedule represent
the whole of the terms agreed between BNY and the Client to the exclusion of any
representations or statements made by or on behalf of BNY whether orally or in
writing prior to the making of this Agreement. Without prejudice to the
provisions of Clause 25.2 and except as otherwise provided in this Agreement no
variation of this Agreement shall be binding upon the parties unless it is
evidenced in writing and signed by or on behalf of BNY by an authorised
signatory of BNY and on behalf of the Client by a director or the secretary or
officer thereof
25.4 Each of the provisions of this Agreement shall be several and
distinct from one another and if at any time one or more of such provisions is
or becomes invalid illegal or unenforceable the validity legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby
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================================================================================
THE SCHEDULE
================================================================================
PART I
Permitted Credit Period: 120 days from date of invoice
PART II
(Prepayment Percentage)
80%
PART III
(Aggregate Prepayment)
(POUND)2,500,000 (less any sums advanced by BNY to the Client under a Loan
Agreement made between BNY and the Client and dated on the date of this
Agreement)
PART IV
(Administration Charge)
Nil
PART V
(Discount Charge)
For the first twelve months from the Commencement Date, 2.0% per annum (and
thereafter 2.25% per annum) above the base rate of Lloyds Bank Plc from time to
time of the amount of any payment made by BNY in respect of the Purchase Price
of any Receivable calculated on a day to day basis from the time of such payment
until the Collection Date.
PART VI
(Ancillary Documents - Clause 9)
Prior to the Commencement Date BNY shall require the execution and/or delivery
(as appropriate) to BNY in a form satisfactory to BNY of each of the following
documents:-
a) a first ranking all assets debenture to be granted in favour of BNY, and
b) a Deed of Priority to be entered into by all or any third party holding any
security or other interest over any assets of the Client and,
c) Sight and satisfaction of estimated budgets/cashflows to include monthly
Profit and Loss Accounts and Balance Sheets in respect of 1998 and 1999.
PART VII
(Client's Business - 13.1)
Distributor and Importer of baby and nursery products.
PART VIII
(Special Conditions - Clause 10)
a) Without prejudice to clause 13.4.8 Receivables due from Debtors resident
outside the United Kingdom aggregating to 15% or more of the aggregate of
all Receivables then Outstanding shall be subject to the Special Margin.
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<PAGE> 12
b) The Receivables due from any one UK Debtor which when aggregated with all
other Receivables then due from such Debtor cause such aggregate to be in
excess of a sum equal to 345% (5% in respect of any one non UK Debtor) of
all Receivables then Outstanding, shall be subject to the Special Margin.
c) The Client shall pay to BNY on demand or BNY may at its option debit to the
Client Account the sum of (pounds)25.00 in respect of each remittance by
BNY to the Client hereunder which is made by the Clearing House Automated
Payment System (commonly referred to as "CHAPS").
d) Transmittal Forms are to be provided to BNY on a weekly basis and every
such Transmittal Form shall be accompanied by a copy of the Client's sales
ledger day book listing detailing the Receivables the subject of such
Transmittal Form.
d) The Client shall deliver to BNY on a monthly basis following the
Commencement Date true copy aged debts and aged purchase ledger analyses in
respect of the Client.
f) The Client shall deliver to BNY on a monthly basis following the
Commencement Date true copy management accounts in respect of the Client
within 28 days of the relevant month end to which such accounts relate.
g) All Receivables due from any person who is an Associate or Subsidiary of
the Client shall be notified to BNY but remain subject to the Special
Margin
h) The Client shall on or before the Commencement Date provide to BNY evidence
satisfactory to BNY that the accounting systems of the Client in respect of
aged Receivables and accounts payable listings meet BNY's operational and
format requirements.
i) The Client shall or before the Commencement Date ensure that a monitoring
and recording system acceptable to BNY in respect of credit notes,
discounts, promotion and selling expenses contribution arrangements is in
place and will be maintained during the currency of this Agreement. Such
system, and all records thereof, shall be available for inspection by BNY
or any agent of BNY upon request.
j) No dividends of any kind are to be paid to Safety 1st Inc during the
currency of this Agreement without the prior written approval of BNY
k) All documentary evidence in respect of Goods the subject of a Receivable
relating to delivery and/or supply or such Goods are to be signed by the
Client's agent or by an agent of any courier of such Goods instructed by
the Client. Such documentary evidence shall be available for review by BNY
at BNY's request.
l) The Client will provide evidence satisfactory to BNY prior to 31st December
1998 that the Issued and Paid Up Share Capital of the Client is not less
than(pounds)200,000.
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IN WITNESS whereof the parties hereto have caused these presents to be duly
executed and delivered as a deed the day and year first before written
THE COMMON SEAL OF THE CLIENT {
{
was hereunto affixed in the presence of:- {
Director
Secretary / Director
OR
SIGNED AND DELIVERED AS A DEED BY THE CLIENT
acting by
Andrew Ratcliffe a Director and { /s/ Andrew Ratcliffe
{
Robert Jones a Director/Secretary { /s/ Robert Jones
(Insert full names above and where indicated by * clarify whether the person is
a Director or a Secretary.)
EXECUTED AS A DEED
by {
as Attorney for BNY INTERNATIONAL LIMITED in { /s/ Charles Anderson
the presence of:- {
/s/ E. Malkin
11
<PAGE> 14
CERTIFIED COPY MINUTE
Extract of a Minute of the Meeting of the Board of Directors of
held at
on at am/pm
________________________________________
There was produced to the meeting a copy of the proposed Invoice Discounting
Agreement between the Company and BNY International Limited.
IT WAS RESOLVED FIRSTLY that the Common Seal of the Company should be affixed to
such Agreement and that such Agreement be signed for and on behalf of the
Company by any two of its Directors or any one Director and the Secretary, and
SECONDLY, that any one Director of the Company or its Secretary be and are
hereby authorised to sign such other documentation as may be necessary or
conducive to permit the invoice discounting contemplated by such Agreement to
commence as soon as practically possible.
Certified to be a true and complete extract of the minutes of the above meeting.
...................................Chairman
...................................Secretary
12
<PAGE> 1
EXHIBIT 10.5
(SAFETY 1ST LETTERHEAD)
July 24, 1998
BNY International Limited
Sovereign House
PO Box 240
Church Street
Brighton
BN1 1SS
Dear Sirs:
RE: SAFETY 1ST (EUROPE) LIMITED ("the COMPANY")
We are aware that you propose to enter or have entered into an Invoice
Discounting Agreement together with certain other financial facilities with the
Company ("the Facilities").
In consideration of you entering into and/or continuing to provide the
Facilities to the Company we hereby confirm that we shall not at any time claim
any interest (whether by Reservation of Title rights or otherwise) that we may
have in respect of any goods supplied to the Company or the proceeds thereof
which claim may in any way conflict with any interest acquired or purportedly
acquired by you in or in respect of such goods or such proceeds pursuant to the
Facilities.
We understand that the confirmation as detailed above is to be relied upon by
yourselves and forms an integral part of the conditions you require in order to
enter into and thereafter continue to provide the Facilities to the Company. We
confirm that such confirmation may not be revoked without your consent.
Yours faithfully,
/s/ Andrew Genor
Andrew Genor
Chief Financial Officer
<TABLE>
<CAPTION>
<S> <C>
Safety 1st, Inc. 210 Boylston Street, Chestnut Hill, Massachusetts 02167 1-617-964-7744
WATS 1-800-962-7233 FAX 1-617-332-0125 VOICE MAIL 1-800-962-9929
</TABLE>
<PAGE> 1
EXHIBIT 11
SAFETY 1ST, INC.
BASIC EARNINGS PER SHARE AND DILUTED
EARNINGS PER SHARE
(In thousands except share data)
<TABLE>
<CAPTION>
Three Months Ended
October 3, September 27,
1998 1997
-------------------------
<S> <C> <C>
BASIC EARNINGS PER SHARE
Net income available to common shareholders $ 996 $ 2,379
Primary net income (loss) per share $ 0.14 $ 0.33
SHARES USED IN COMPUTATION
------------------------
Weighted average common shares outstanding 7,231,000 7,187,000
------------------------
DILUTED EARNINGS PER SHARE
Net income available to common shareholders $ 996 $ 2,379
Diluted earnings per share $ 0.12 $ 0.29
SHARES USED IN COMPUTATION
Weighted average common share outstanding
Common stock equivalents - stock options 7,231,000 7,187,000
and warrants 1,279,000 901,000
------------------------
Total 8,510,000 8,088,000
========================
</TABLE>
<PAGE> 2
EXHIBIT 11
<TABLE>
<CAPTION>
SAFETY 1ST, INC.
BASIC EARNINGS PER SHARE AND DILUTED
EARNINGS PER SHARE
(In thousands except share data)
Nine Months Ended
October 3, September 27,
1998 1997
---------------------------
<S> <C> <C>
BASIC EARNINGS PER SHARE
Net income available to common shareholders $ 2,259 $ 3,790
Basic earnings per share $0.31 $0.53
SHARES USED IN COMPUTATION
---------------------------
Weighted average common shares outstanding 7,214,000 7,187,000
---------------------------
DILUTED EARNINGS PER SHARE
Net income available to common shareholders $ 2,259 $ 3,790
Diluted earnings per share $ 0.26 $ 0.50
SHARES USED IN COMPUTATION
Weighted average common shares outstanding 7,214,000 7,187,000
Common stock equivalents - stock options and warrants 1,435,000 427,000
---------------------------
Total 8,649,000 7,614,000
===========================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SAFETY 1ST,
INC. FORM 10-Q FOR THE QUARTERLY PERIOD ENDED OCTOBER 3, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JUL-05-1998
<PERIOD-END> OCT-03-1998
<EXCHANGE-RATE> 1
<CASH> 446
<SECURITIES> 0
<RECEIVABLES> 30,858
<ALLOWANCES> 900
<INVENTORY> 15,710
<CURRENT-ASSETS> 52,649
<PP&E> 19,083
<DEPRECIATION> 4,900
<TOTAL-ASSETS> 88,807
<CURRENT-LIABILITIES> 50,402
<BONDS> 0
17,466
0
<COMMON> 72
<OTHER-SE> 13,433
<TOTAL-LIABILITY-AND-EQUITY> 88,807
<SALES> 32,442
<TOTAL-REVENUES> 32,442
<CGS> 20,035
<TOTAL-COSTS> 20,035
<OTHER-EXPENSES> 9,786
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,066
<INCOME-PRETAX> 1,556
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,556
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,556
<EPS-PRIMARY> .14
<EPS-DILUTED> .12
</TABLE>
