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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest
Event Reported): May 14, 1997
FIRST ALERT, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-23630 04-3197075
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(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
3901 Liberty Street Road
Aurora, Illinois 60504-8122 (630) 851-7330
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(Address of principal executive (Zip Code) (Registrant's telephone number,
office) including area code)
Exhibit index is located at page 2
</TABLE>
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ITEM 5. OTHER EVENTS.
On May 14, 1997, the Company entered into a Financing and Security
Agreement (the "Credit Agreement") with NationsBank, N.A. (the "Bank"), pursuant
to which the Bank agreed to provide the Company and its subsidiaries with a new
$80.0 million three year credit facility ("New Credit Facility") replacing the
Company's then existing credit facility. Advances under the New Credit Facility
are limited to (a) 85% of eligible accounts receivable plus (b) the lesser of
60% of eligible inventory or $35.0 million. In addition, the Bank agreed to make
overadvances available to the Company in amounts not to exceed $10 million
during the period of May 1997 through October 1997 and $5.0 million during the
period of June 1998 to September 1998. All of the Company's obligations under
the New Credit Facility are secured by a first priority lien on substantially
all the assets of the Company and its subsidiaries. Amounts outstanding under
the New Credit Facility bear interest at the Bank's prime rate plus 1/2% or the
London Interbank Offered Rate plus 2%. Under the New Credit Facility, the
Company is required to pay the Bank a commitment fee of 0.375% per annum on the
unused portion of the commitment. The Credit Agreement requires the Company to
adhere to certain covenants, including the maintenance of specific ratios of (i)
total liabilities to tangible net worth and (ii) EBITDA to fixed charges. The
Credit Agreement also requires the Company to maintain specific levels of
tangible net worth and limits the Company's ability to incur additional
indebtedness and pay dividends.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS.
The following exhibits are included herein:
Exhibit No. Title
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10.52 Financing and Security Agreement, dated May
14, 1997, among First Alert, Inc., BRK
Brands, Inc., BRK Brands Europe Ltd., BRK
Brands Pty., the Lenders party thereto and
NationsBank, N.A. (filed herewith)
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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 duly authorized.
FIRST ALERT, INC.
By: /s/ B. Joseph Messner
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Name: B. Joseph Messner
Title: President and Chief Executive Officer
Dated: May 27, 1997
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FINANCING AND SECURITY AGREEMENT
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THIS FINANCING AND SECURITY AGREEMENT (this "Agreement") is made this
14th day of May, 1997, by and among
FIRST ALERT, INC., a corporation organized under the laws of the State
of Delaware (the "Parent"), BRK BRANDS, INC., a corporation organized
under the laws of the State of Delaware (the "US Subsidiary"), and BRK
BRANDS EUROPE LTD., a corporation organized under the laws of England
(the "UK Subsidiary") jointly and severally (each of the Parent, the US
Subsidiary, and the UK Subsidiary, a "Borrower" and collectively, the
"Borrowers");
BRK BRANDS PTY. LTD., a corporation organized under the laws of
Australia (the "Australian Subsidiary"); and
the financial institutions which are parties to this Agreement from
time to time, whether by execution of this Agreement or otherwise
(collectively, the "Lenders" and individually, a "Lender"); and
NATIONSBANK, N.A., a national banking association, in its capacity as
both collateral and administrative agent for each of the Lenders (the
"Agent").
RECITALS
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A. The Borrowers have applied to the Lenders for credit facilities
consisting of (i) a revolving credit facility in the maximum principal amount of
$74,500,000 to be made available jointly and severally to the Parent and the US
Subsidiary, (ii) a letter of credit facility in the maximum principal amount of
$2,000,000, as part of that revolving credit facility to be used by the Parent
and the US Subsidiary, and (iii) a time loan to be made to the UK Subsidiary in
the principal amount of $5,500,000, all for the Permitted Uses described in this
Agreement.
B. The Lenders severally are willing to make those credit facilities
available jointly and severally upon the terms and subject to the conditions set
forth in this Agreement.
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AGREEMENTS
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NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereby agree as follows:
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ARTICLE
1
DEFINITIONS
SECTION 1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the terms
defined in the Preamble and Recitals hereto shall have the respective meanings
specified therein, and the following terms shall have the following meanings:
"Account" individually and "Accounts" collectively mean all
presently existing or hereafter acquired or created accounts, accounts
receivable, contract rights, notes, drafts, instruments, acceptances, chattel
paper, leases and writings evidencing a monetary obligation or a security
interest in, or a lease of, goods, all rights to receive the payment of money or
other consideration under present or future contracts (including, without
limitation, all rights to receive payments under presently existing or hereafter
acquired or created letters of credit), or by virtue of merchandise sold or
leased, services rendered, loans and advances made or other considerations
given, by or set forth in or arising out of any present or future chattel paper,
note, draft, lease, acceptance, writing, bond, insurance policy, instrument,
document or general intangible, and all extensions and renewals of any thereof,
all rights under or arising out of present or future contracts, agreements or
general interest in merchandise which gave rise to any or all of the foregoing,
including all goods, all claims or causes of action now existing or hereafter
arising in connection with or under any agreement or document or by operation of
law or otherwise, all collateral security of any kind (including, without
limitation, real property mortgages and deeds of trust) and letters of credit
given by any Person with respect to any of the foregoing, all books and records
in whatever media (paper, electronic or otherwise) recorded or stored, with
respect to any or all of the foregoing and all equipment and general intangibles
necessary or beneficial to retain, access and/or process the information
contained in those books and records, and all proceeds (cash and non-cash) of
the foregoing.
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"Account Debtor" means any Person who is obligated on a
Receivable and "Account Debtors" mean all Persons who are obligated on the
Receivables.
"Additional Borrower" means each Person which has executed and
delivered an Additional Borrower Joinder Supplement which has been accepted and
approved by the Agent.
"Additional Borrower Joinder Supplement" means an Additional
Borrower Joinder Supplement in substantially the form attached hereto as Exhibit
A, with the blanks appropriately completed and executed and delivered by the
Additional Borrower and accepted by the Parent on behalf of the Borrowers.
"Administration Costs" means all reasonable expenses, charges,
costs and fees whatsoever (including, without limitation, reasonable attorney's
fees and expenses) paid or incurred by or on behalf of the Agent and/or any of
the Lenders in connection with (a) any or all of the Obligations, this Agreement
and/or any of the other Financing Documents or (b) the creation, perfection,
collection, maintenance, preservation, defense, or protection, of all or any
part of the Collateral, this Agreement or any of the other Financing Documents,
including, without limitation, those costs and expenses more specifically
enumerated in Section 3.7 (Costs), but not including those costs and expenses
more specifically enumerated in Section 9.11 (Enforcement Costs).
"Affiliate" means, with respect to any designated Person, any
other Person, (i) directly or indirectly controlling, directly or indirectly
controlled by, or under direct or indirect common control with the Person
designated, (ii) directly or indirectly owning or holding five percent (5%) or
more of any equity interest in such designated Person, or (iii) five percent
(5%) or more of whose stock or other equity interest is directly or indirectly
owned or held by such designated Person. For purposes of this definition, the
term "control" (including with correlative meanings, the terms "controlling",
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and
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policies of a Person, whether through ownership of voting securities or other
equity interests or by contract or otherwise.
"Agent" means the Person defined as the "Agent" in the
preamble of this Agreement and shall also include any successor Agent appointed
pursuant to Section 8.7.
"Agent's Obligations" shall mean any and all Obligations
payable solely to and for the exclusive benefit of the Agent by any or all of
the Borrowers under the terms of this Agreement and/or any of the other
Financing Documents, including, without limitation, Letter of Credit Fronting
Fees, any and all Collateral Management Fees, and/or Letter of Credit Fees.
"Agreement" means this Financing and Security Agreement, as
amended, restated, supplemented or otherwise modified in writing in accordance
with the provisions of Section 9.2 of this Agreement.
"Applicable Interest Rate" means (i) the LIBOR Rate, or (ii)
the Base Rate.
"Applicable Margin" means the applicable rate per annum added,
as set forth in Section 2.4.1, to the LIBOR Base Rate or the Prime Rate.
"Asset Disposition" means the disposition of any or all of the
Assets of any Borrower or any Subsidiary of any Borrower, including, the
Australian Subsidiary and the Mexican Subsidiary, whether by sale, lease,
transfer or other disposition (including any such disposition effected by way of
merger or consolidation) other than Permitted Asset Dispositions.
"Assets" means at any date all assets that, in accordance with
GAAP consistently applied, should be classified as assets on a consolidated
balance sheet of the Borrowers and their respective Subsidiaries.
"Assignee" means any Person to which any Lender assigns all or
any portion of its interests under this Agreement, any Commitment, and any Loan,
in accordance with the provisions of
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Section 9.5, together with any and all successors and assigns of such Person;
"Assignees" means the collective reference to all Assignees.
"Assignment of Proprietary Rights" means (i) that certain
collateral assignment of patents, as security, dated the date hereof from the US
Subsidiary to the Agent for the benefit of the Lenders ratably and the Agent,
(ii) that certain collateral assignment of trademarks, as security, dated the
date hereof from the US Subsidiary to the Agent for the benefit of the Lenders
ratably and the Agent and (iii) that certain collateral assignment of
copyrights, as security, dated the date hereof from the US Subsidiary to the
Agent for the benefit of the Lenders ratably and the Agent, each as amended,
restated, supplemented or otherwise modified in writing at any time and from
time to time, which Assignment of Proprietary Rights grants to the Agent for the
benefit of the Lenders ratably and the Agent a first priority Lien on and
assignment of all of the US Subsidiary's Patents, Trademarks and Copyrights.
"Australian Security Documents" means collectively any
assignment, pledge agreement, security agreement, mortgage, deed of trust, deed
to secure debt, indenture, charge, financing statement and any similar
instrument, document or agreement under or pursuant to which a Lien is hereafter
granted to, or for the benefit of, the Agent and/or the Lenders on any real or
personal property of the Australian Subsidiary as contemplated by Section 3.4.3
to secure all or any portion of the Obligations, all as the same may from time
to time be amended, restated, supplemented or otherwise modified.
"Bankruptcy Code" means the United States Bankruptcy Code, as
amended from time to time, and any successor Laws.
"Base Rate" means the sum of (i) the Prime Rate, plus (ii) the
Applicable Margin.
"Base Rate Loan" means any Loan for which interest is to be
computed with reference to the Base Rate.
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"Borrower" means each Person defined as a "Borrower" in the
preamble of this Agreement and each Additional Borrower; "Borrowers" means the
collective reference to all Persons defined as "Borrowers" in the preamble to
this Agreement and all Additional Borrowers.
"Borrowing Base" has the meaning described in Section 2.1.3
(Borrowing Base).
"Borrowing Base Deficiency" has the meaning described in
Section 2.1.3 (Borrowing Base).
"Borrowing Base Report" has the meaning described in
Section 2.1.4 (Borrowing Base Report).
"Business Day" means any day other than a Saturday, Sunday or
other day on which (i) in the case of NationsBank (as Agent and Lender),
commercial banks in the State are authorized or required to close and, (ii) in
the case of the Lenders other than NationsBank, those Lenders are open for the
transaction of business at the addresses stated after their names on the
signature pages of this Agreement.
"Capital Expenditure" means an expenditure (whether payable in
cash or other property or accrued as a liability) for Fixed or Capital Assets,
including, without limitation, the entering into of a Capital Lease.
"Capital Lease" means with respect to any Person any lease of
real or personal property, for which the related Lease Obligations have been or
should be, in accordance with GAAP consistently applied, capitalized on the
balance sheet of that Person.
"Canadian Division" means BRK Brands Canada, a division of the
US Subsidiary.
"Cash Equivalents" means (a) securities with maturities of one
year or less from the date of acquisition issued or fully guaranteed or insured
by the United States Government or any agency
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thereof, (b) certificates of deposit with maturities of one (1) year or less
from the date of acquisition of, or money market accounts maintained with, the
Agent, any Affiliate of the Agent, or any other domestic commercial bank having
capital and surplus in excess of One Hundred Million Dollars ($100,000,000.00)
or such other domestic financial institutions or domestic brokerage houses to
the extent disclosed to, and approved by, the Agent and (c) commercial paper of
a domestic issuer rated at least either A-1 by Standard & Poor's Corporation (or
its successor) or P-1 by Moody's Investors Service, Inc. (or its successor) with
maturities of six (6) months or less from the date of acquisition.
"Chattel Paper" means a writing or writings which evidence
both a monetary obligation and a security interest in or lease of specific
goods; any returned, rejected or repossessed goods covered by any such writing
or writings and all proceeds (in any form including, without limitation,
accounts, contract rights, documents, chattel paper, instruments and general
intangibles) of such returned, rejected or repossessed goods; and all proceeds
(cash and non-cash) of the foregoing.
"Closing Date" means the Business Day, in any event not later
than May 14, 1997, on which the Agent shall be satisfied that the conditions
precedent set forth in Section 5.1 (Conditions to Initial Advance) have been
fulfilled or otherwise waived by the Agent.
"Collateral" means all property of each and every Borrower and
any other Person subject from time to time to the Liens of this Agreement, any
of the Security Documents and/or any of the other Financing Documents, together
with any and all cash and non-cash proceeds and products thereof.
"Collateral Account" has the meaning described in Section
2.1.8 (The Collateral Account).
"Collateral Disclosure List" has the meaning described in
Section 3.3 (Collateral Disclosure List).
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"Collateral Management Fee" and "Collateral Management Fees"
have the meanings described in Section 8.9.
"Collection" means each check, draft, cash, money, instrument,
item, and other remittance in payment or on account of payment of the Accounts
or otherwise with respect to any Collateral, including, without limitation, cash
proceeds of any returned, rejected or repossessed goods, the sale or lease of
which gave rise to an Account, and other proceeds of Collateral; and
"Collections" means the collective reference to all of the foregoing.
"Commitment" means with respect to each Lender, such Lender's
Revolving Credit Commitment, Letter of Credit Commitment, or UK Time Loan
Commitment, as the case may be, and "Commitments" means the collective reference
to the Revolving Credit Commitments, the Letter of Credit Commitments and the UK
Time Loan Commitments of all of the Lenders.
"Committed Amount" means with respect to each Lender, such
Lender's Revolving Loan Committed Amount, Letter of Credit Committed Amount, or
UK Time Loan Committed Amount, as the case may be, and "Committed Amounts" means
collectively the Revolving Loan Committed Amount, the Letter of Credit Committed
Amount and the UK Time Loan Committed Amount of each of the Lenders.
"Compliance Certificate" means a periodic Compliance
Certificate described in Section 6.1.1 (Financial Statements).
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with any Borrower within the meaning
of Section 414(b) or (c) of the Internal Revenue Code.
"Copyrights" means and includes, in each case whether now
existing or hereafter arising, all of each Borrower's rights, title and interest
in and to (a) all copyrights, rights and interests in copyrights, works
protectable by copyright, copyright registrations, copyright applications, and
all renewals of any of the foregoing, (b) all income, royalties, damages and
payments now
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or hereafter due and/or payable under any of the foregoing, including, without
limitation, damages or payments for past, current or future infringements of any
of the foregoing, (c) the right to sue for past, present and future
infringements of any of the foregoing, and (d) all rights corresponding to any
of the foregoing throughout the world.
"Credit Facility" means with respect to each Lender, such
Lender's Pro Rata Share of the Revolving Credit Facility, the Letter of Credit
Facility, or the UK Time Loan Facility, as the case may be, and "Credit
Facilities" means collectively the Revolving Credit Facility, the Letter of
Credit Facility and the UK Time Loan Facility and any and all other credit
facilities now or hereafter extended under or secured by this Agreement.
"Default" means an event which, with the giving of notice or
lapse of time, or both, could or would constitute an Event of Default under the
provisions of this Agreement.
"Documents" means all documents of title, whether now existing
or hereafter acquired or created, and all proceeds (cash and non-cash) of the
foregoing.
"Dollar Equivalent" means, with respect to any amount
denominated in a currency other than Dollars on the date of determination
thereof, the equivalent of such amount in Dollars determined at the rate of
exchange equal to the Spot Rate on such date of determination.
"Dollars" and "$" mean the lawful money of the United States
of America.
"EBITDA" means as to the Borrowers and their Subsidiaries, on
a consolidated basis, for any period of determination thereof, the sum of (a)
the combined net profit (or loss) determined in accordance with GAAP
consistently applied for such period, plus (b) combined interest expense and
income tax provisions for such period, plus (c) combined depreciation and
amortization and other non-cash charges of Assets for such period.
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"Eligible Inventory" means the collective reference to all
Inventory of each Borrower and the Mexican Subsidiary held for sale in the
ordinary course of business, valued in Dollars, at the lowest of (i) the net
purchase cost or net manufacturing cost, (ii) any ceiling prices which may be
established by any Law of any Governmental Authority or (iii) prevailing market
value, EXCLUDING, however, any Inventory which consists of:
(a) any Inventory located outside of the United States
of America, except for (i) Inventory of the Canadian Division
located in Ontario, Canada, (ii) Inventory of the Mexican
Subsidiary located in Mexico and subject to the Lien of the
Mexican Security Documents, (iii) Inventory of the UK
Subsidiary located in England, Sweden or Netherlands or (iv)
Inventory of the US Subsidiary on consignment with the UK
Subsidiary and located in England,
(b) any Inventory located outside of a state or other
jurisdiction in which the Agent has properly and unavoidably
perfected the Liens of the Agent and the Lenders under this
Agreement (or any of the Security Documents) by filing (or
taking such other action as shall be appropriate) in that state
or other jurisdiction, free and clear of all other Liens,
(c) any Inventory not in the actual possession of, or
in transit to, or from, a Borrower or the Mexican Subsidiary,
except to the extent provided in subsection (d) below,
(d) any Inventory in the possession of a bailee,
warehouseman, consignee (other than a Borrower), processor or
similar third party, unless the bailee, warehouseman,
consignee, processor or similar third party has entered into a
waiver agreement with the Agent in form and substance
satisfactory to the Agent,
(e) any Inventory located on premises in the United
States or any state thereof, leased or rented to a
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Borrower or the Mexican Subsidiary or otherwise not owned by a
Borrower or the Mexican Subsidiary, unless the Agent has
received a waiver and consent from the lessor, landlord and/or
owner, in form and substance satisfactory to the Agent and from
any mortgagee of such lessor, landlord or owner to the extent
required by the Agent,
(f) any Inventory the sale or other disposition of
which has given rise to a Receivable,
(g) any Inventory which fails to meet in any material
respect all standards and requirements imposed by any
Governmental Authority over such Inventory or its production,
storage, use or sale,
(h) work-in-process, supplies, displays, packaging and
promotional materials,
(i) finished goods of the Mexican Subsidiary,
(j) any Inventory as to which the Agent determines in
the exercise of its sole, but reasonable credit judgement
applying standards customary to institutional asset-based
lenders, at any time and in good faith upon seven (7) days
prior written notice to the US Subsidiary, is not in good
condition or is defective, unmerchantable, post-seasonal, slow
moving or obsolete, and
(k) any Inventory which the Agent in the good faith
exercise of its sole, but reasonable credit judgment applying
standards customary to institutional asset-based lenders, and
upon seven (7) days prior written notice to the US Subsidiary,
has deemed to be ineligible because the Agent otherwise
considers the collateral value to the Agent and the Lenders to
be impaired in any material respect or its or their ability to
realize such value to be insecure.
For purposes of calculating the Dollar value of Eligible
Inventory included in the Borrowing Base and/or the UK
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Borrowing Base, as appropriate, and denominated in any foreign currency,
the Agent shall use the Spot Rate of that currency, and then reduce the
Dollar value as so calculated, by two percent (2%) or by such other
percentage as the Agent in its reasonable credit judgment applying
standards customary to institutional asset-based lenders typically
imposes in determining counterparty risk for foreign exchange futures
contracts involving that particular currency. In the event of any
dispute under the foregoing criteria, as to whether Inventory is, or has
ceased to be, Eligible Inventory, the decision of the Agent in the good
faith exercise of its reasonable credit judgment, applying standards
customary to institutional asset-based lenders, shall control.
"Eligible Non-UK Inventory" means all Eligible
Inventory of each Revolving Credit Borrower and the Mexican
Subsidiary.
"Eligible Non-UK Receivables" means all Eligible
Receivables of each Revolving Credit Borrower and the Mexican
Subsidiary.
"Eligible Receivable" and "Eligible Receivables" mean,
at any time of determination thereof, the unpaid portion of each account
due to a Borrower (net of returns, discounts, claims, credits, charges,
accrued rebates or other allowances, offsets, deductions, counterclaims,
disputes or other asserted defenses and reduced by the aggregate amount
of all reserves, limits and deductions provided for in this definition
and elsewhere in this Agreement), valued in Dollars, provided each
account conforms and continues to conform to the following criteria to
the satisfaction of the Agent:
(a) the account arose in the ordinary course of
business from a bona fide outright sale of Inventory by a
Borrower or from services performed by such Borrower;
(b) the account is a valid, legally enforceable
obligation of the Account Debtor and requires no further
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act on the part of any Person under any circumstances to make
the account payable by the Account Debtor;
(c) the account is based upon an enforceable order or
contract, written or oral, for Inventory shipped or for
services performed, and the same were shipped or performed in
accordance with such order or contract;
(d) if the account arises from the sale of Inventory,
the Inventory the sale of which gave rise to the account has
been shipped or delivered to the Account Debtor on an absolute
sale basis and not on a bill and hold sale basis, a consignment
sale basis, a guaranteed sale basis, a sale or return basis, or
on the basis of any other similar understanding;
(e) the account is evidenced by an invoice or other
documentation in form acceptable to the Agent, dated no later
than the date of shipment or performance and containing only
terms normally offered by the respective Borrower;
(f) the amount shown on the books of a Borrower and on
any invoice, certificate, schedule or statement delivered to
the Agent is owing to such Borrower and no partial payment has
been received unless reflected with that delivery;
(g) the account is not past due more than sixty (60)
days after its due date, which shall not be later than sixty
(60) days after the invoice date;
(h) the account is not owing by any Account Debtor for
which the Agent has deemed fifty percent (50%) or more of such
Account Debtor's other accounts (or any portion thereof) due to
a Borrower, individually, or all of the Borrowers,
collectively, to be non-Eligible Receivables;
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(i) the account is not owing by an Account Debtor or a
group of affiliated Account Debtors to any Borrower whose then
existing accounts owing to that Borrower, individually exceed
in aggregate face amount twenty-five percent (25%) of that
Borrower's total Eligible Receivables, as appropriate, and is
not owing by an Account Debtor or a group of affiliated Account
Debtors whose then existing accounts to any and all of the
Borrowers collectively exceed in aggregate face amount
twenty-five percent (25%) of the total Eligible Receivables of
all Borrowers;
(j) the Account Debtor is not a Subsidiary or
Affiliate of any Borrower or any Subsidiary or Affiliate of any
Borrower or an employee, officer, director or shareholder of
any Borrower or any Subsidiary or Affiliate of any Borrower;
(k) unless the applicable Account is secured by an
irrevocable commercial letter of credit or credit insurance
which is Dollar denominated and otherwise in form and substance
satisfactory to the Agent in the exercise of its discretion,
and is assigned to the Agent for the ratable benefit of the
Lenders, (i) the Account is not due to or collectable by any
Borrowers in a jurisdiction other than the jurisdiction of its
incorporation and principal place of business, (ii) the Account
Debtor is not incorporated in or primarily conducting business
in any jurisdiction located outside of (a) the United States of
America or Canada or (b) Europe, but only if the Account
Debtor's Account is with the UK Subsidiary, and (iii) the
Account is not denominated in any foreign currency, unless such
other foreign currency is satisfactory to the Agent in the
exercise of its reasonable discretion;
(l) the Account Debtor with respect to such account is
not insolvent or the subject of any bankruptcy or in solvency
proceedings of any kind or of any other proceeding or action,
threatened or pending;
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(m) the Account Debtor is not a Governmental
Authority, unless all rights of each Borrower, as appropriate,
with respect to such account have been assigned to the Agent
for the benefit of the Lenders ratably and the Agent on terms
reasonably acceptable to the Agent pursuant to the Assignment
of Claims Act of 1940, as amended;
(n) the account does not arise from services under or
related to any warranty obligation of a Borrower or out of
service charges, finance charges or other fees for the time
value of money;
(o) the account is not evidenced by chattel paper or
an instrument of any kind and is not secured by any letter of
credit;
(p) the title of the respective Borrower to the
account is absolute and is not subject to any prior assignment,
claim, Lien, or security interest, except Permitted Liens;
(q) each Borrower has the full and unqualified right
and power to assign and grant a security interest in, and Lien
on, the account to the Agent and the Lenders as security and
collateral for the payment of the Obligations and the Agent's
Obligations;
(r) the account is subject to a Lien in favor of the
Agent, for the benefit of the Lenders ratably and the Agent,
which Lien is perfected as to the account by the filing of
financing statements and which Lien upon such filing
constitutes a first priority security interest and Lien;
(s) no part of the account represents a progress
billing or a retainage;
(t) the Agent in the good faith exercise of its sole,
but reasonable credit judgment, applying standards
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customary to institutional asset-based lenders, upon seven (7)
days prior written notice to the US Subsidiary, has not deemed
the account ineligible because of uncertainty as to the
creditworthiness of the Account Debtor or because the Agent
otherwise considers the collateral value of such account to the
Agent and the Lenders to be impaired or its or their ability to
realize such value to be insecure.
For purposes of calculating the Dollar value of Eligible Receivables
included in the Borrowing Base or UK Borrowing Base, as appropriate, and
denominated in any foreign currency, the Agent shall use the Spot Rate of that
currency, and then reduce the Dollar value as so calculated, by two percent (2%)
or by such other percentage as the Agent in its reasonable credit judgment,
applying standards customary to institutional asset-based lenders, typically
imposes in determining counterparty risk for foreign exchange futures contracts
involving that particular currency. In the event of any dispute, under the
foregoing criteria, as to whether an account is, or has ceased to be, an
Eligible Receivable, the decision of the Agent in the good faith exercise of its
reasonable credit judgment, applying standards customary to institutional
asset-based lenders, shall control.
"Eligible Tax Refunds" means the unpaid Tax Refunds, net of
actual or probable offsets, deductions, set-offs, recoupments or diminutions of
any kind or nature whatsoever as reasonably determined by the Agent based on the
income tax returns filed by the Parent as prepared by certified public
accountants reasonably acceptable to the Agent, which tax returns confirm the
amount of the Tax Refunds. The Agent in the good faith exercise of its sole but
commercially reasonable discretion shall be entitled to deem all or a portion of
the Tax Refunds ineligible because of uncertainty as to the payment of the Tax
Refunds or because the Agent otherwise considers the collateral value of the Tax
Refunds to the Agent and the Lenders to be impaired in any material respect or
its or their ability to realize such value to be insecure in any material
respect.
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"Eligible UK Inventory" means all Eligible Inventory of the UK
Subsidiary.
"Eligible UK Receivables" means all Eligible Receivables of
the UK Subsidiary.
"Enforcement Costs" means all reasonable expenses, charges,
costs and fees whatsoever (including, without limitation, reasonable attorney's
fees and expenses) paid or incurred by or on behalf of the Agent and/or any of
the Lenders following the occurrence of a Default or an Event of Default in
connection with (a) any or all of the Obligations, this Agreement and/or any of
the other Financing Documents or (b) the realization upon, disposition, sale or
enforcement of all or any part of the Collateral, this Agreement or any of the
other Financing Documents, including, without limitation, those costs and
expenses more specifically enumerated in Section 9.11 (Enforcement Costs), but
excluding those costs and expenses more specifically enumerated in Section 3.7
(Costs).
"Equipment" means all equipment, machinery, computers,
chattels, tools, parts, machine tools, furniture, furnishings, fixtures and
supplies of every nature, presently existing or hereafter acquired or created
and wherever located, whether or not the same shall be deemed to be affixed to
real property, together with all accessions, additions, fittings, accessories,
special tools, and improvements thereto and substitutions therefor and all parts
and equipment which may be attached to or which are necessary or beneficial for
the operation, use and/or disposition of such personal property, all licenses,
warranties, franchises and general intangibles related thereto or necessary or
beneficial for the operation, use and/or disposition of the same, together with
all Accounts, Chattel Paper, Instruments and other consideration received on
account of the sale, lease or other disposition of all or any part of the
foregoing, and together with all rights under or arising out of present or
future Documents and contracts relating to the foregoing and all proceeds (cash
and non-cash) of the foregoing.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Eurodollar Business Day" means any Business Day on which
dealings in Dollar deposits are carried out on the London interbank market and
on which commercial banks are open for domestic and international business
(including dealings in Dollar deposits) in London, England.
"Eurodollar Lending Office" means with respect to the Agent
such branch or office of the Agent designated by the Agent, as applicable, from
time to time as the branch or office at which the LIBOR Loans are to be made or
maintained.
"Event of Default" has the meaning described in Article 7.
"Existing Credit Facilities" means that certain revolving
credit facility made available to one or more of the Borrowers by The First
National Bank of Chicago, Fleet National Bank, Credit Agricole and ABN-Amro in
the maximum principal amount of Seventy Million Dollars ($70,000,000) in
accordance with the provisions of that certain Credit Agreement dated as of
March 28, 1994 among the US Subsidiary, The First National Bank of Chicago,
individually, as LC issuer and as agent, and the other financial institutions
signatory thereto, as amended by that certain Assignment and Amendment Agreement
dated as of April 13, 1994 and that certain Amendment No. 2 to Credit Agreement
and Waiver dated as of September 3, 1996 and that certain Amendment No. 3 to
Credit Agreement and Waiver dated as of December 20, 1996.
"Facilities" means the collective reference to the loan,
letter of credit, interest rate protection, foreign exchange risk, cash
management, and other credit facilities now or hereafter provided to any one or
more of the Borrowers or the Mexican Subsidiary by the Agent or the Lenders
under this Agreement or otherwise by NationsBank.
"Federal Funds Rate" means for any day of determination,
the weighted average of the rates on overnight Federal funds
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<PAGE> 20
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day)
by the Federal Reserve Bank for the next preceding Business Day) by the Federal
Reserve Bank of Richmond or, if such rate is not so published for any day that
is a Business Day, the average of quotations for such day on such transactions
received by the Agent from three (3) Federal funds brokers of recognized
standing selected by the Agent.
"Fees" means the collective reference to each fee payable to
the Agent, for its own account or for the ratable benefit of the Lenders, under
the terms of this Agreement or under the terms of any of the other Financing
Documents, including, without limitation, the Revolving Credit Unused Line Fees,
the Letter of Credit Fronting Fees, the Letter of Credit Fees, the Origination
Fee, and the Collateral Management Fees.
"Financing Documents" means at any time collectively this
Agreement, the Notes, the Security Documents, the Letter of Credit Documents,
and any other instrument, agreement or document previously, simultaneously or
hereafter executed and delivered by any Borrower and/or any other Person, singly
or jointly with another Person or Persons, evidencing, securing, guarantying or
in connection with this Agreement, any Note, any of the Security Documents, any
of the Facilities, and/or any of the Obligations.
"First Alert License Agreement" means that certain Trademarks,
Technology and Know-How License Agreement dated July 31, 1992, among the Parent,
Pittway Corporation and the Trust pertaining to the use of trademarks and other
intellectual property of the Trust, as the same may be amended, restated,
supplemented or otherwise modified at any time and from time to time.
"Fixed or Capital Assets" of a Person at any date means all
assets which would, in accordance with GAAP consistently applied, be classified
on the balance sheet of such Person as property, plant or equipment at such
date.
"Fixed Charges" means for any period of determination,
scheduled payments (including, without limitation, principal and
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interest) on all Indebtedness for Borrowed Money of any or all of the Borrowers
and/or its or their Subsidiaries, plus non-financed Capital Expenditures (net of
Permitted Asset Dispositions), plus Taxes paid or estimated to be payable by any
or all of the Borrowers and/or its or their Subsidiaries (based upon forty
percent (40%) of consolidated pre-tax income for the measurement period), all as
calculated on a consolidated basis.
"Fixed Charge Coverage Ratio" means for the period of any
determination thereof the ratio of (a) EBITDA to (b) Fixed Charges.
"Foreign Exchange Protection Agreement" means any foreign
exchange, currency spot, foreign exchange forward contracts and other similar
agreements and arrangements between any Borrower or any Subsidiary of any
Borrower and a Person, acceptable to the Agent in its reasonable credit
judgement, providing for the transfer or mitigation of foreign exchange currency
risks either generally or under specific contingencies.
"Foreign Exchange Exposure" means at any time and from time to
time of determination, the amount of the obligations and liabilities of any or
all of the Borrowers and its or their Subsidiaries with respect to each Foreign
Exchange Protection Agreement arising as a result of a determination of the
amount of Dollars required at such time to purchase such amount of the foreign
currency covered by such Foreign Exchange Protection Agreement at the Spot Rate.
"GAAP" means generally accepted accounting principles in the
United States of America in effect from time to time.
"General Intangibles" means all general intangibles of every
nature, whether presently existing or hereafter acquired or created, and without
implying any limitation of the foregoing, further means all books and records,
claims (including without limitation all claims for income tax and other
refunds), choses in action, claims, causes of action in tort or equity, contract
rights, judgments, customer lists, Patents, Trademarks, Copyrights, Proprietary
Rights and goodwill (including goodwill symbolized by and associated with any
and all Proprietary Rights), rights under
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the First Alert License Agreement, royalty payments, licenses, rights as lessee
under any lease of real or personal property, literary rights, service names,
service marks, logos, trade secrets, amounts received as an award in or
settlement of a suit in damages, deposit accounts, interests in joint ventures,
general or limited partnerships, or limited liability companies or partnerships,
rights in applications for any of the foregoing, books and records in whatever
media (paper, electronic or otherwise) recorded or stored, with respect to any
or all of the foregoing and all Equipment and general intangibles necessary or
beneficial to retain, access and/or process the information contained in those
books and records, and all proceeds (cash and non-cash) of the foregoing.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any department, agency or instrumentality thereof.
"Hazardous Materials" means (a) any "hazardous waste" as
defined by the Resource Conservation and Recovery Act of 1976, as amended from
time to time, and regulations promulgated thereunder; (b) any "hazardous
substance" as defined by the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time, and regulations
promulgated thereunder; (c) any substance the presence of which on any property
now or hereafter owned, acquired or operated by any of the Borrowers and/or any
Subsidiary of any of the Borrowers is prohibited by any Law similar to those set
forth in this definition; and (d) any other substance which by any environmental
Law requires special handling in its collection, storage, treatment or disposal.
"Hazardous Materials Contamination" means the contamination
(whether presently existing or occurring after the date of this Agreement) by
Hazardous Materials of any property owned, operated or controlled by any of the
Borrowers and/or any Subsidiary of any of the Borrowers or for which any of the
Borrowers and/or any Subsidiary of any Borrower has responsibility, including,
without limitation, improvements, facilities, soil,
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<PAGE> 23
ground water, air or other elements on, or of, any property now or hereafter
owned, acquired or operated by any of the Borrowers and/or any Subsidiary of any
of the Borrowers, and any other contamination by Hazardous Materials for which
any of the Borrowers or any Subsidiary of any of the Borrowers is, or is claimed
to be, responsible.
"Indebtedness" of a Person means at any date the total
liabilities of such Person at such time determined in accordance with GAAP
consistently applied.
"Indebtedness for Borrowed Money" of a Person means at any
time the sum at such time of (a) Indebtedness of such Person for borrowed money
or for the deferred purchase price of property or services, (b) any obligations
of such Person in respect of letters of credit, banker's or other acceptances or
similar obligations issued or created for the account of such Person, (c) Lease
Obligations of such Person with respect to Capital Leases, (d) all liabilities
secured by any Lien on any property owned by such Person, to the extent attached
to such Person's interest in such property, even though such Person has not
assumed or become personally liable for the payment thereof; and (e) any
obligations, liabilities or indebtedness, contingent or otherwise, under or in
connection with, each Foreign Exchange Protection Agreement and each Interest
Rate Protection Agreement with any Lender or any Affiliate of any Lender, net of
liabilities owed to the respective Borrower or Borrowers and/or any Subsidiary
of any Borrower by the counterparties on any such Foreign Exchange Protection
Agreement and/or Interest Rate Protection Agreement; but excluding trade and
other accounts payable in the ordinary course of business in accordance with
customary trade terms and which are not overdue (as determined in accordance
with customary trade practices) or which are being disputed in good faith by
such Person and for which adequate reserves are being provided on the books of
such Person in accordance with GAAP.
"Instrument" means a negotiable instrument (as defined under
Article 3 of the Uniform Commercial Code), a "certificated security" (as defined
under Article 8 of the Uniform Commercial Code), or any other writing which
evidences a right to payment of
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<PAGE> 24
money and is not itself a security agreement or lease and is of a type which is
in the ordinary course of business transferred by delivery with any necessary
indorsement.
"Interest Payment Date" means the first day of each calendar
month commencing on June 1, 1997 and continuing thereafter until the Obligations
have been irrevocably paid in full.
"Interest Period" means as to any LIBOR Loan, the period
commencing on and including the date such LIBOR Loan is made (or on the
effective date of the Borrowers' election to convert any Base Rate Loan to a
LIBOR Loan in accordance with the provisions of this Agreement) and ending on
and including the day which is 1, 2, 3, or 6 months or 1 year thereafter, as
selected by the Borrowers in accordance with the provisions of this Agreement,
and thereafter, each period commencing on the last day of the then preceding
Interest Period for such LIBOR Loan and ending on, but excluding the day which
is 1, 2, 3 or 6 months or 1 year thereafter, as selected by the Borrowers in
accordance with the provisions of this Agreement; provided, however that:
(a) the first day of any Interest Period shall be a Eurodollar
Business Day;
(b) if any Interest Period would end on a day that shall not
be a Eurodollar Business Day, such Interest Period shall be extended to
the next succeeding Eurodollar Business Day unless such next succeeding
Eurodollar Business Day would fall in the next calendar month, in which
case, such Interest Period shall end on the next preceding Eurodollar
Business Day; and
(c) no Interest Period shall extend beyond the Revolving
Credit Expiration Date.
"Interest Rate Election Notice" has the meaning described in
Section 2.4.2(e).
"Interest Rate Protection Agreement" means any interest rate
exchange, swap, cap, future, protection, floor, collar or
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<PAGE> 25
similar agreements between any Borrower or any Subsidiary of any Borrower and a
Person, acceptable to the Agent in its reasonable credit judgement, providing
for the transfer or mitigation of interest rate risks either generally or under
specific contingencies.
"Interest Rate Protection Reserve" means at any time of
determination, the aggregate of the obligations of any or all of the Borrowers
and all Subsidiaries of any or all of the Borrowers under all Interest Rate
Protection Agreements to which any Borrower or any Subsidiary of any Borrower is
a party in the event of a termination of any such Interest Rate Protection
Agreements on an estimated "marked-to market" basis.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the Income Tax Regulations issued and
proposed to be issued thereunder.
"Inventory" means all inventory of each Borrower and the
Mexican Subsidiary and all right, title and interest of each Borrower and the
Mexican Subsidiary in and to all of its now owned and hereafter acquired goods,
merchandise and other personal property furnished under any contract of service
or intended for sale or lease, including, without limitation, all raw materials,
work-in-progress, finished goods and materials and supplies of any kind, nature
or description which are used or consumed in any business or are or might be
used in connection with the manufacture, packing, shipping, advertising, selling
or finishing of such goods, merchandise and other licenses, warranties,
franchises, general intangibles, personal property and all documents of title or
documents relating to the same and all proceeds (cash and non-cash) of the
foregoing.
"Item of Payment" means each check, draft, cash, money,
instrument, item, and other remittance in payment or on account of payment of
the Receivables or otherwise with respect to any Collateral, including, without
limitation, cash proceeds of any returned, rejected or repossessed goods, the
sale or lease of which gave rise to a Receivable, and other proceeds of
Collateral; and
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<PAGE> 26
"Items of Payment" means the collective reference to all of the foregoing.
"Laws" means all ordinances, statutes, rules, regulations,
orders, injunctions, writs, or decrees of any Governmental Authority.
"Lease Obligations" of a Person means for any period the
rental commitments of such Person for such period under leases for real and/or
personal property (net of rent from subleases thereof, but including taxes,
insurance, maintenance and similar expenses which such Person, as the lessee, is
obligated to pay under the terms of said leases, except to the extent that such
taxes, insurance, maintenance and similar expenses are payable by sublessees),
including rental commitments under Capital Leases.
"Letter of Credit" and "Letters of Credit" shall have the
meanings described in Section 2.2.1 hereof.
"Letter of Credit Agreement" means the collective reference to
each letter of credit application and agreement substantially in the form of the
Agent's then standard form of application for letter of credit or such other
form as may be approved by the Agent, executed and delivered by any one or more
of the Borrowers in connection with the issuance of a Letter of Credit, as the
same may from time to time be amended, restated, supplemented or modified; and
"Letter of Credit Agreements" means all of the foregoing in effect at any time
and from time to time.
"Letter of Credit Documents" means any and all drafts under or
purporting to be under a Letter of Credit, any Letter of Credit Agreement, and
any other instrument, document or agreement executed and/or delivered by any one
or more of the Revolving Credit Borrowers or any other Person under, pursuant to
or in connection with a Letter of Credit or any Letter of Credit Agreement.
"Letter of Credit Facility" means the facility established
pursuant to Section 2.2 (Letter of Credit Facility) of this Agreement.
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"Letter of Credit Fee" and "Letter of Credit Fees" have the
meanings described in Section 2.2.2 hereof.
"Letter of Credit Fronting Fee" and "Letter of Credit Fronting
Fees" have the meanings described in Section 2.2.2 hereof.
"Letter of Credit Obligations" means the collective reference
to all Obligations of any one or more of the Revolving Credit Borrowers with
respect to the Letters of Credit and the Letter of Credit Agreements.
"Liabilities" means at any date all liabilities that in
accordance with GAAP consistently applied should be classified as liabilities on
a consolidated balance sheet of the Borrowers and their respective Subsidiaries.
"Liabilities to Tangible Net Worth Ratio" means as to each
Borrower and its Subsidiaries, on a consolidated basis, for the date of any
determination thereof the ratio of (a) Liabilities to (b) the Tangible Net
Worth.
"LIBOR Base Rate" means for any Interest Period with respect
to any LIBOR Loan, the rate per annum (rounded upward, if necessary, to the
nearest next 1/100 of 1%) appearing on Telerate Page 3750 (or any successor
page) as the London interbank offered rate for deposits in United States Dollars
at approximately 11:00 a.m. (London time) two (2) Eurodollar Business Days prior
to the first day of such Interest Period for a term comparable to such Interest
Period. If for any reason such rate is not available, the term "LIBOR Base Rate"
shall mean, for any LIBOR Loan for any Interest Period therefor, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits in
United States Dollars at approximately 11:00 a.m. (London time) two (2)
Eurodollar Business Days prior to the first day of such Interest Period;
PROVIDED, HOWEVER, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable rate shall be the arithmetic mean of all such rates. For
purposes of this definition, Telerate Page 3750 refers to the British Bankers
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<PAGE> 28
Association Libor Rates (determined at approximately 11:00 a.m (London time))
that are published by Dow Jones Telerate, Inc.
"LIBOR Loan" means any Loan for which interest is to be
computed with reference to the LIBOR Rate.
"LIBOR Rate" means for any Interest Period with respect to any
LIBOR Loan, (i) the Applicable Margin, PLUS (ii) the per annum rate of interest
calculated pursuant to the following formula:
LIBOR BASE RATE
-------------------------
1.00 - Reserve Percentage
"Lien" means any mortgage, deed of trust, deed to secure debt,
grant, pledge, security interest, assignment, encumbrance, judgment, lien,
hypothecation, provision in any instrument or other document for confession of
judgment, cognovit or other similar right or remedy, claim or charge of any
kind, whether perfected or unperfected, avoidable or unavoidable, including,
without limitation, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction,
excluding the precautionary filing of any financing statement by any lessor in a
true lease transaction, by any bailor in a true bailment transaction or by any
consignor in a true consignment transaction under the Uniform Commercial Code of
any jurisdiction or the agreement to give any financing statement by any lessee
in a true lease transaction, by any bailee in a true bailment transaction or by
any consignee in a true consignment transaction.
"Loan" means each advance of the Revolving Loan and each UK
Time Loan, and "Loans" means the collective reference to all advances of the
Revolving Loan and the UK Time Loans.
"Loan Notice" has the meaning described in Section 2.1.2
(Procedure for Making Advances).
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"Lockbox" has the meaning described in Section 2.1.8 (The
Collateral Account).
"Material Adverse Effect" means an effect, either in any case
or in the aggregate, which would result in a material adverse change (x) in the
business, condition, affairs or operations of the Borrowers and their
Subsidiaries, on a consolidated basis, (y) in the right or ability of the any or
all of the Borrowers and its or their Subsidiaries to carry on a substantial
portion of its or their operations as now conducted or proposed to be conducted,
or (z) to the value of, or the ability of the Agent or any of the Lenders to
realize upon, the Collateral in any material respect.
"Mexican Security Documents" means collectively any
assignment, pledge agreement, guaranty trust agreement, security agreement,
mortgage, deed of trust, deed to secure debt, indenture, charge, financing
statement and any similar instrument, document or agreement under or pursuant to
which a Lien is now or hereafter granted to, or for the benefit of, the Agent
and/or the Lenders on any real or personal property of the Mexican Subsidiary to
secure all or any portion of the Obligations, all as the same may from time to
time be amended, restated, supplemented or otherwise modified.
"Mexican Subsidiary" means ELECTRONICA BRK DE MEXICO, S.A. DE
C.V., a corporation organized and existing under the laws of the Republic of
Mexico, and its successors and assigns.
"Multiemployer Plan" means a Plan which is a multiemployer
plan as defined in Section 4001(a)(3) of ERISA.
"Net Outstandings" of any Lender means, at any time, the sum
of (a) all amounts paid by such Lender (other than pursuant to Section 8.5
(Indemnification)) to the Agent in respect to the Revolving Loan or otherwise
under this Agreement, MINUS (b) all amounts paid by the Agent to such Lender
which are received by the Agent and which, pursuant to this Agreement, are paid
over to such Lender for application in reduction of the outstanding principal
balance of the Revolving Loan.
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"Net Worth" means as to each Borrower and its Subsidiaries, on
a consolidated basis, at any date the excess of (a) the Assets, over (b) the
Liabilities.
"Non-Ratable Loan" means an advance under the Revolving Loan
made by NationsBank in accordance with the provisions of Section 2.6.2(c).
"Note" means any Revolving Credit Note or any UK Time Note and
"Notes" means collectively each Revolving Credit Note, each UK Time Note and any
other promissory note which may from time to time evidence all or any portion of
the Obligations.
"Obligations" means all present and future indebtedness,
duties, obligations, and liabilities, whether now existing or contemplated or
hereafter arising, of any one or more of the Borrowers and/or any or all of its
or their Subsidiaries to the Lenders and/or Agent under, arising pursuant to, in
connection with and/or on account of the provisions of this Agreement, each
Note, each Security Document, any of the other Financing Documents, the Loans,
any of the Facilities, any Interest Rate Protection Agreement, and/or any
Foreign Exchange Protection Agreement, including, without limitation, the
principal of, and interest on, each Note, late charges, the Fees, Enforcement
Costs, the Administrative Costs and prepayment fees (if any), letter of credit
fees or fees charged with respect to any guaranty of any letter of credit; also
means all other present and future indebtedness, liabilities and obligations,
whether now existing or contemplated or hereafter arising, of any one or more of
the Borrowers and/or any or all of its or their Subsidiaries to the Agent and/or
to Lenders under or by virtue of this Agreement of any nature whatsoever
regardless of whether such debts, obligations and liabilities be direct,
indirect, primary, secondary, joint, several, joint and several, fixed or
contingent; and also means any and all renewals, extensions, substitutions,
amendments, restatements and rearrangements of any such debts, obligations and
liabilities.
"Outstanding Letter of Credit Obligations" has the meaning
described in Section 2.2.3 hereof.
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"Patents" means and includes, in each case whether now
existing or hereafter arising, all of rights, title and interest in and to (a)
any and all patents and patent applications, (b) any and all inventions and
improvements described and claimed in such patents and patent applications, (c)
reissues, divisions, continuations, renewals, extensions and
continuations-in-part of any patents and patent applications, (d) income,
royalties, damages, claims and payments now or hereafter due and/or payable
under and with respect to any patents or patent applications, including, without
limitation, damages and payments for past and future infringements, (e) rights
to sue for past, present and future infringements of patents, and (f) all rights
corresponding to any of the foregoing throughout the world.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Acquisition" means the acquisition or purchase of,
or investment in, any Person, any operating division or unit of any Person, or
the stock or Assets of any Person or the combination with any Person (each
individually, a "Subject Transaction") regardless of the structure of the
Subject Transaction, engaged principally in the lines of business set forth in
Section 6.1.7 or in a business reasonably related thereto; provided, however
that:
(i) the aggregate purchase prices of, investments in,
acquisition expenditures relating to (excluding customary and
reasonable transaction costs), and assumed Liabilities considered part
of the purchase price, in connection with, all Subject Transactions
made on or after the Closing Date shall not exceed One Million Dollar
($1,000,000),
(ii) such Subject Transaction shall not otherwise constitute
or give rise to a Default or an Event of Default,
(iii) if requested by the Agent, the Borrowers shall have
furnished financial projections in form and content reasonably
acceptable to the Agent which give effect to such Subject Transaction
and which project that such Subject Transaction would not cause a
Default or Event of Default,
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(iv) if requested by the Agent, a Phase I environmental
assessment of any real property to be acquired or purchased or owned by
any Person to be acquired or purchased or owned by any Person in which
any Borrower or any Subsidiary intends to make an investment, has been
performed by a reputable and recognized environmental consulting firm
engaged by the Borrowers and reasonably acceptable to the Requisite
Lenders and has revealed no material Hazardous Materials Contamination
or material violations of any Environmental Laws, the non-remediation
of or non-compliance with which would result in a material Liability
not reflected in the purchase price,
(v) if and to the extent the Subject Transaction consists of
the purchase or acquisition of a Person which is to be a Subsidiary of
a Borrower or merged into a Subsidiary of a Borrower created for the
express purpose of consummating the proposed acquisition:
(1) the Borrowers shall execute all documents and
take such other actions as the Agent may reasonably require to
grant to the Agent and the Lenders a first priority Lien on
one hundred percent (100%) of the stock of such Subsidiary,
and
(2) such Subsidiary shall be designated and qualify
immediately after the closing of the Subject Transaction
as an Additional Borrower,
(vi) if and to the extent the aggregate purchase price of the
Subject Transaction exceeds One Hundred Thousand Dollars ($100,000),
all legal matters incident to the Subject Transaction shall be
acceptable to the Agent in its reasonable discretion,
(vii) if and to the extent the aggregate purchase price of the
Subject Transaction exceeds One Hundred Thousand Dollars ($100,000),
the Agent shall have been given no less than thirty (30) days prior
written notice of any proposed Subject Transaction and shall have been
provided with all
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information which it may have reasonably requested in connection with
such proposed Subject Transaction,
The Borrowers understand and agree that the Agent shall have no obligation or
commitment to include any of the assets or properties of any Person acquired in
the Borrowing Base or in the UK Borrowing Base pursuant to a Subject
Transaction. The Agent and the Lenders agree, however, that if after completion
and review of a satisfactory field examination of the Assets and properties
which constitute or are part of a Permitted Acquisition, such Assets and
properties shall be included in the Borrowing Base or the UK Borrowing Base, as
appropriate, if the results of such field examination are reasonably acceptable
in all respects to the Agent in its discretion and such Assets and properties
otherwise satisfy the eligibility criteria for inclusion in the Borrowing Base
or the UK Borrowing Base, as appropriate.
"Permitted Asset Disposition" means any one or more of the
following Asset Dispositions; provided that (i) no such Asset Disposition shall
be permitted at any time following the occurrence and during the continuance of
a Default or an Event of Default or if and to the extent any such Asset
Disposition would give rise to a Default or an Event of Default, unless
otherwise agreed in writing by the Requisite Lenders and (ii) each such Asset
Disposition shall be made in the ordinary course of business:
(a) sales of Inventory,
(b) the licensing of Patents, Trademarks and/or
Copyrights,
(c) dispositions of worn, used, surplus or obsolete
Equipment or Trademarks, Patents, Copyrights and other intellectual
property deemed uneconomical or obsolete by a Borrower or a Subsidiary
of any Borrower,
(d) intercompany sales, leases or other dispositions
of Assets among and between the Borrowers and the Mexican Subsidiary;
provided, that any such Assets sold, leased or otherwise disposed of as
between and among the
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Borrowers and the Mexican Subsidiary shall remain subject to the first
priority Liens (subject only to Permitted Liens) of the Agent and the
Lenders under this Agreement and/or under any of the other Financing
Documents, as appropriate,
(e) dispositions of Assets as part of the actual
discontinuance or termination of one or more product lines by a
Borrower or any Subsidiary of a Borrower, including, for example
flashlights and safes, but only to the extent the aggregate amount of
net proceeds from all such dispositions does not or will not with the
making of any such proposed Asset Disposition exceed Two Million
Dollars ($2,000,000), and
(f) any other disposition of Assets during any given
fiscal year unless, until and only to the extent that the aggregate net
proceeds from such disposition, when combined with all other such
dispositions previously made during such fiscal year, exceeds $500,000.
"Permitted Liens" means: (a) Liens for Taxes which are not
delinquent or which the Agent has determined in the exercise of its sole and
absolute discretion (i) are being diligently contested in good faith and by
appropriate proceedings, and such contest operates to suspend collection of the
contested Taxes and enforcement of a Lien and (ii) the respective Borrower or
Subsidiary, as appropriate, has the financial ability to pay, with all penalties
and interest, at all times without materially and adversely affecting such
Borrower or Subsidiary; (b) deposits or pledges to secure obligations under
workers' compensation, social security or similar laws, or under unemployment
insurance in the ordinary course of business; (c) Liens securing the
Obligations; (d) judgment Liens to the extent the entry of such judgment does
not constitute a Default or an Event of Default under the terms of this
Agreement or result in the sale or levy of, or execution on, any of the
Collateral; (e) Purchase Money Security Interests not exceeding $100,000 in the
aggregate at any time outstanding; (f) Liens imposed by Law, such as carriers',
warehousemen's and mechanic's Liens and other similar Liens arising in the
ordinary course of business (i) which secure payment of obligations not more
than sixty (60) days past due, (ii) which are being contested in
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good faith by appropriate proceedings and for which adequate reserves shall have
been set aside on its books, and such contest operates to suspend collection of
the contested amounts and enforcement of a Lien; (g) utility easements, building
restrictions, and such other encumbrances or charges against real property as
are of a nature generally existing with respect to properties of a similar
character and which do not in any material way affect the marketability or value
of the same or interfere with the ownership or use thereof in the business of
any of the Borrowers or Subsidiaries; and (h) such other Liens, if any, as are
set forth on SCHEDULE 4.1.22 attached hereto and made a part hereof.
"Permitted Uses" means (a) with respect to the initial advance
Revolving Loan, the repayment and refinancing of any and all Indebtedness of the
Revolving Credit Borrowers under and in connection with the Existing Credit
Facilities and all transaction costs related to such repayment and refinancing
and to the transactions contemplated by this Agreement, (b) with respect to
subsequent advances under the Revolving Loan, the general corporate purposes of
the Revolving Credit Borrowers which do not violate this Agreement and (c) with
respect to the UK Time Loans, the repayment of the obligations of the UK
Subsidiary to the US Subsidiary in connection with that certain intercompany
trade payable in the approximate principal amount of the UK Time Loan Committed
Amount.
"Person" means and includes an individual, a corporation, a
partnership, a joint venture, a limited liability company or partnership, a
trust, an unincorporated association, a Governmental Authority, or any other
organization or entity.
"Plan" means any pension plan which is covered by Title IV of
ERISA and in respect of which any Borrower or a Commonly Controlled Entity is an
"employer" as defined in Section 3 of ERISA.
"Post-Default Rate" means the Applicable Interest Rate in
effect from time to time, plus two hundred (200) basis points.
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"Prepayment" means a Revolving Loan Mandatory Prepayment or a
Revolving Loan Optional Prepayment, as the case may be, and "Prepayments" mean
collectively all Revolving Loan Mandatory Prepayments and all Revolving Loan
Optional Prepayments.
"Prime Rate" means the floating and fluctuating per annum
prime commercial lending rate of interest of the Agent, as established and
declared by the Agent at any time or from time to time. The Prime Rate shall be
adjusted automatically, without notice, as of the effective date of any change
in such prime commercial lending rate. The Prime Rate does not necessarily
represent the lowest rate of interest charged by the Agent or any of the Lenders
to borrowers.
"Proforma Financial Projections" has the meaning described in
Section 4.1.12 (Proforma Financial Statements) below.
"Proforma Financial Statements" has the meaning described in
Section 4.1.12 (Proforma Financial Statements) below.
"Proprietary Rights" means and includes all now owned and
hereafter arising or acquired Patents, Copyrights, Trademarks and all other
rights, title and interest in and to any other intellectual property of any kind
or nature whatsoever, whether owned or licensed, including, without limitation,
those rights and interests arising under the First Alert License Agreement, and
all licenses and rights related to any of the foregoing, all extensions,
renewals, reissues, continuations and continuations-in-part of any of the
foregoing and all rights to sue for past, present and future infringement of any
of the foregoing.
"Pro Rata Share" means at any time and as to any Lender, the
percentage derived by dividing the unpaid principal amount of the Loans and
Letter of Credit Obligations owing to that Lender by the aggregate unpaid
principal amount of all Loans and Letter of Credit Obligations then outstanding;
or if no Loans or Letter of Credit Obligations are outstanding, by dividing the
total amount of such Lender's Commitments by the total amount of the Commitments
of the Agent and all of the Lenders.
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"Purchase Money Security Interest" means the interest of the
lessor under a Capital Lease and also means a purchase money security interest,
attaching at the time of acquisition, in Fixed or Capital Assets acquired after
the date of this Agreement; provided, however, that (i) the Indebtedness secured
by any such security interest shall not exceed one hundred percent (100%) of the
cost of the Fixed or Capital Assets covered plus finance charges, fees, costs
and expenses (including attorneys fees) of documentation, perfection, collection
and enforcement, (ii) each such security interest shall attach only to the Fixed
or Capital Assets so acquired for the purchase money for that Fixed or Capital
Assets, and (iii) the acquisition to which any such security interest relates
shall not result in a Default or Event of Default under this Agreement.
"Receivable" means all now owned and hereafter owned or
acquired Accounts, Chattel Paper, General Intangibles and Instruments; and
"Receivables" means all now or hereafter owned, acquired or created Accounts,
Chattel Paper, General Intangibles and Instruments, and all cash and non-cash
proceeds and products
thereof.
"Reportable Event" means any of the events set forth in
Section 4043(c) of ERISA or the regulations thereunder.
"Requisite Lenders" means at any time of determination one or
more of the Lenders holding at least fifty-one percent (51%) of the Commitments.
"Responsible Officer" means for each Borrower, its chief
executive officer or president or, with respect to financial matters, its chief
financial officer or controller.
"Reserve Percentage" means, at any time, the then current
maximum rate expressed as a decimal for which reserves (including any basic,
supplemental, marginal and emergency reserves) are required to be maintained by
member banks of the Federal Reserve System under Regulation D of the Board of
Governors of the Federal Reserve System against "Eurocurrency liabilities", as
that term is defined in Regulation D. The LIBOR Rate shall be adjusted
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automatically on and as of the effective date of any change in the Reserve
Percentage.
"Revolving Credit Borrowers" means the Parent, the US
Subsidiary, and each Additional Borrower designated as a Revolving Credit
Borrower by the Parent with the consent of the Agent.
"Revolving Credit Commitment" means the agreement of a Lender
relating to making the Revolving Loan and advances thereunder subject to and in
accordance with the provisions of this Agreement; and "Revolving Credit
Commitments" means the collective reference to the Revolving Credit Commitment
of each of the Lenders.
"Revolving Credit Commitment Period" means the period of time
from the Closing Date to the Business Day preceding the Revolving Credit
Termination Date.
"Revolving Credit Committed Amount" has the meaning described
in Section 2.1.1 (Revolving Credit Facility).
"Revolving Credit Expiration Date" means the third anniversary
date of this Agreement.
"Revolving Credit Facility" means the facility established by
the Lenders pursuant to Section 2.1 (Revolving Credit Facility) of this
Agreement.
"Revolving Credit Note" and "Revolving Credit Notes" have the
meanings described in Section 2.1.5 (Revolving Credit Notes).
"Revolving Credit Pro Rata Share" has the meaning described in
Section 2.1.1.
"Revolving Credit Termination Date" means the earlier of (a)
the Revolving Credit Expiration Date, or (b) the date on which the Revolving
Credit Commitments are terminated pursuant to Section 7.2 or otherwise.
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"Revolving Credit Unused Line Fee" and "Revolving Credit
Unused Line Fees" have the meanings described in Section 2.1.10 (Revolving
Credit Unused Line Fee).
"Revolving Loan" has the meaning described in Section 2.1.1
(Revolving Credit Facility).
"Revolving Loan Account" has the meaning described in Section
2.1.9 (Revolving Loan Account).
"Revolving Loan Mandatory Prepayment" and "Revolving Loan
Mandatory Prepayments" have the meanings described in Section 2.1.6 ((Mandatory
Prepayments of Revolving Loan)).
"Revolving Loan Optional Prepayment" and "Revolving Loan
Optional Prepayments" have the meanings described in Section 2.1.7 (Optional
Prepayment of Revolving Loan).
"Securities" means the collective reference to each and every
certificated or uncertificated security which constitutes a "security" under the
provisions of Title 8 of the Uniform Commercial Code and to each and every
"investment property" under the provisions of Title 9 of the Uniform Commercial
Code (if that definition is included in that Title), and all proceeds (cash and
non-cash) of the foregoing.
"Security Documents" means collectively any assignment, pledge
agreement, security agreement, mortgage, deed of trust, deed to secure debt,
financing statement and any similar instrument, document or agreement under or
pursuant to which a Lien is now or hereafter granted to, or for the benefit of,
the Agent and/or the Lenders on any real or personal property of any Person to
secure all or any portion of the Obligations, all as the same may from time to
time be amended, restated, supplemented or otherwise modified, including,
without limitation, this Agreement, the Stock Pledge Agreement, the Assignment
of Proprietary Rights, the UK Security Documents, the Australian Security
Documents, and the Mexican Security Documents.
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"Security Procedures" means the reasonable rules, policies and
procedures adopted and implemented generally by the Agent and its Affiliates at
any time and from time to time with respect to security procedures and measures
relating to electronic funds transfers, all as the same may be amended,
restated, supplemented, terminated, or otherwise modified at any time and from
time to time by the Agent in its sole and absolute discretion.
"Settlement Date" means each Business Day after the Closing
Date selected by the Agent in its sole discretion subject to and in accordance
with the provisions of Section 2.4.3(a) as of which a Settlement Report is
delivered by the Agent and on which settlement is to be made among the Lenders
in accordance with the provisions of Section 2.4.3.
"Settlement Report" means each report prepared by the Agent
and delivered to each Lender and setting forth, among other things, as of the
Settlement Date indicated thereon and as of the next preceding Settlement Date,
the aggregate outstanding principal balance of the Revolving Loan, each Lender's
Revolving Credit Pro Rata Share thereof, each Lender's Net Outstandings and all
Non-Ratable Loans made, and all payments of principal, interest and Fees
received by the Agent from the Borrowers during the period beginning on such
next preceding Settlement Date and ending on such Settlement Date.
"Spot Rate" means, as of any determination with respect to the
conversion of an amount in a foreign currency into Dollars, the rate of exchange
quoted at 11:00 a.m. (Baltimore City Time) by "CRT" tele-rate service for the
spot purchase in the foreign exchange market in Chicago, Illinois of such amount
of that currency with Dollars.
"State" means the State of Maryland.
"Stock Pledge Agreement" means (i) that certain pledge,
assignment and security agreement dated the date hereof from the Parent to the
Agent for the benefit of the Lenders ratably and the Agent and (ii) that certain
pledge, assignment and security agreement dated the date hereof from the US
Subsidiary to the Agent
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for the benefit of the Lenders ratably and the Agent, as the same may from time
to time be amended, restated, supplemented or otherwise modified.
"Subordinated Indebtedness" means all Indebtedness incurred at
any time by any one or more of the Borrowers and/or any or all of its or their
Subsidiaries, which is in amounts, subject to repayment terms, and subordinated
to the Obligations, as set forth in one or more written agreements, all in form
and substance satisfactory to the Agent in its sole and absolute discretion.
"Subsidiary" means any corporation the majority of the voting
shares of which at the time are owned directly by any Borrower and/or by one or
more Subsidiaries of any Borrower.
"Tangible Net Worth" means as to the Borrowers and their
Subsidiaries, on a consolidated basis, at any date of determination, the sum at
such time of: the Net Worth, less the total of (a) all Assets which would be
classified as intangible assets under GAAP consistently applied, (b) applicable
reserves, allowances and other similar properly deductible items to the extent
such reserves, allowances and other similar properly deductible items have not
been previously deducted by the Lender in the calculation of Net Worth, (c) any
revaluation or other write-up in book value of assets subsequent to the date of
the most recent financial statements delivered to the Agent, and (d) the amount
of all loans and advances to, or investments in, any Person, excluding Cash
Equivalents and deposit accounts maintained by the Borrowers or any of their
Subsidiaries with any financial institution.
"Tax Refunds" means the income tax refunds due to the Parent
from the State of Illinois for the tax year ending December 31, 1996, which
income tax refunds are set forth in, and established by, the 1996 consolidated
income tax returns filed by the Parent, true, correct and complete copies of
which have been furnished to the Agent on or before the Closing Date, and have
been confirmed and validated by independent certified public accountants
satisfactory to the Agent in a written opinion addressed to and in all respects
acceptable to the Agent.
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"Taxes" means all taxes and assessments whether general or
special, ordinary or extraordinary, or foreseen or unforeseen, of every
character (including all penalties or interest thereon), which at any time may
be assessed, levied, confirmed or imposed by any Governmental Authority on any
or all of the Borrowers or any of its or their Subsidiaries, properties or
assets or any part thereof or in respect of any of its or their franchises,
businesses, income or profits.
"Total Revolving Credit Committed Amount" has the meaning
described in Section 2.1.1.
"Total UK Time Loan Committed Amount" has the meaning
described in Section 2.3.1.
"Trademarks" means and includes in each case whether now
existing or hereafter arising, all rights, title and interest in and to (a) any
and all trademarks (including service marks), trade names and trade styles, and
applications for registration thereof and the goodwill of the business
symbolized by any of the foregoing, (b) any and all licenses of trademarks,
service marks and trade names, whether as licensor or licensee, (c) any renewals
of any and all trademarks, service marks, trade names, and/or licenses of any of
the foregoing, (d) income, royalties, damages and payments now or hereafter due
and/or payable with respect thereto, including, without limitation, damages,
claims, and payments for past, present and future infringements thereof, (e)
rights to sue for past, present and future infringements of any of the
foregoing, including the right to settle suits involving claims and demands for
royalties owing, and (f) all rights corresponding to any of the foregoing
throughout the world.
"Trust" means First Alert Trust, a trust organized and
existing under the laws of the State of Illinois, and its successors and
assigns.
"UK Borrowing Base" has the meaning described in Section 2.1.3
(Borrowing Base).
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"UK Borrowing Base Deficiency" has the meaning described in
Section 2.1.3 (Borrowing Base).
"UK Borrowing Base Report" has the meaning described in
Section 2.1.4 (Borrowing Base Report).
"UK Collateral Deficiency Reserve" has the meaning described
in Section 2.1.3 (Borrowing Base).
"UK Security Documents" means collectively any debenture,
assignment, pledge agreement, security agreement, mortgage, deed of trust, deed
to secure debt, indenture, charge, financing statement and any similar
instrument, document or agreement under or pursuant to which a Lien is now or
hereafter granted to, or for the benefit of, the Agent and/or the Lenders on any
real or personal property of the UK Subsidiary to secure all or any portion of
the UK Obligations, all as the same may from time to time be amended, restated,
supplemented or otherwise modified.
"UK Time Loan" has the meaning described in Section 2.3.1.
"UK Time Loan Commitment" and "UK Time Loan Commitments" have
the meanings described in Section 2.3.1.
"UK Time Loan Committed Amount" has the meaning described in
Section 2.3.1.
"UK Time Loan Pro Rata Share" has the meaning described in
Section 2.3.1.
"UK Time Loan Maturity Date" means the Revolving Credit
Expiration Date.
"UK Time Note" and "UK Time Loan Notes" have the meaning
described in Section 2.3.2.
"UK Obligations" means all obligations, liabilities and
indebtedness of the UK Subsidiary under and in connection with the UK Time
Loans, including, without limitation, principal, interest
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and Fees, Administration Costs and Enforcement Costs attributable solely to any
of the foregoing.
"Uniform Commercial Code" means, unless otherwise provided in
this Agreement, the Uniform Commercial Code as adopted by and in effect from
time to time in the State or in any other jurisdiction, as applicable.
"Wholly Owned Subsidiary" means any domestic United States
corporation all the shares of stock of all classes of which (other than
directors' qualifying shares) at the time are owned directly or indirectly by a
Borrower and/or by one or more Wholly Owned Subsidiaries of a Borrower.
"Wire Transfer Procedures" means the reasonable rules,
policies and procedures adopted and implemented generally by the Agent and its
Affiliates at any time and from time to time with respect to electronic funds
transfers, including, without limitation, the Security Procedures, all as the
same may be amended, restated, supplemented, terminated or otherwise modified at
any time and from time to time by the Agent in its sole and absolute discretion.
SECTION 1.2 ACCOUNTING TERMS AND OTHER DEFINITIONAL PROVISIONS.
Unless otherwise defined herein, as used in this Agreement and in any
certificate, report or other document made or delivered pursuant hereto,
accounting terms not otherwise defined herein, and accounting terms only partly
defined herein, to the extent not defined, shall have the respective meanings
given to them under GAAP, as consistently applied to the applicable Person.
Unless otherwise defined herein, all terms used herein which are defined by the
Uniform Commercial Code shall have the same meanings as assigned to them by the
Uniform Commercial Code unless and to the extent varied by this Agreement. The
words "hereof", "herein" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and article, section, subsection,
schedule and exhibit references are references to articles,
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sections or subsections of, or schedules or exhibits to, as the case may be,
this Agreement unless otherwise specified. As used herein, the singular number
shall include the plural, the plural the singular and the use of the masculine,
feminine or neuter gender shall include all genders, as the context may require.
Reference to any one or more of the Financing Documents shall mean the same as
the foregoing may from time to time be amended, restated, substituted,
extended, renewed, supplemented or otherwise modified. Reference in this
Agreement and the other Financing Documents to the "Borrower", the "Borrowers",
"each Borrower" or otherwise with respect to any one or more of the Borrowers
shall mean each and every Borrower and any one or more of the Borrowers, jointly
and severally, unless a specific Borrower is expressly identified.
ARTICLE 2
THE CREDIT FACILITIES
SECTION 2.1 THE REVOLVING CREDIT FACILITY.
2.1.1 REVOLVING CREDIT FACILITY. Subject to and upon the
provisions of this Agreement, the Lenders collectively, but severally, establish
a revolving credit facility in favor of the Revolving Credit Borrowers. The
aggregate of all advances under the Revolving Credit Facility are sometimes
referred to in this Agreement collectively as the "Revolving Loan".
The amount set forth opposite each Lender's name on the signature page
is herein called such Lender's "Revolving Credit Committed Amount" and the total
of each Lender's Revolving Credit Committed Amount is herein called the "Total
Revolving Credit Committed Amount". The proportionate share set forth opposite
each Lender's name on the signature page is herein called such Lender's
"Revolving Credit Pro Rata Share".
Neither the Agent nor any of the Lenders shall be responsible for the
Revolving Credit Commitment of any other Lender, nor will the failure of any
Lender to perform its obligations under its Revolving Credit Commitment in any
way relieve any other Lender
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from performing its obligations under its Revolving Credit Commitment.
During the Revolving Credit Commitment Period, any or all of the
Revolving Credit Borrowers may request advances under the Revolving Credit
Facility in accordance with the provisions of this Agreement; provided that
after giving effect to any such Revolving Credit Borrower's request:
(a) the outstanding principal balance of each Lender's Revolving Credit
Pro Rata Share of the Revolving Loan and of the Letter of Credit Obligations
would not exceed the lesser of (i) for the period beginning May 1, 1997 through,
and including, October 31, 1997, such Lender's Pro Rata Share of the sum of (1)
the Borrowing Base, plus (2) Ten Million Dollars ($10,000,000), (ii) for the
period beginning June 1, 1998 through, and including, September 30, 1998, such
Lender's Pro Rata Share of the sum of (1) the Borrowing Base, plus (2) Five
Million Dollars ($5,000,000), or (iii) at all other times such Lender's
Revolving Credit Pro Rata Share of the Borrowing Base; and,
(b) the aggregate outstanding principal balance of the Revolving Loan
and all Letter of Credit Obligations would not exceed the lesser of (i) the
Total Revolving Credit Committed Amount, (ii) for the period beginning May 1,
1997 through, and including, October 31, 1997, the Borrowing Base, plus Ten
Million Dollars ($10,000,000), (iii) for the period beginning June 1, 1998
through, and including, September 30, 1998, the Borrowing Base, plus Five
Million Dollars ($5,000,000), or (iv) for all other times, the Borrowing Base.
2.1.2 PROCEDURE FOR MAKING ADVANCES UNDER THE REVOLVING
LOAN; LENDER PROTECTION LOANS.
The Revolving Credit Borrowers may borrow under the Revolving Credit
Facility on any Business Day. Advances under the Revolving Loan shall be
deposited to a demand deposit account of a Revolving Credit Borrower with the
Agent or shall be otherwise applied as directed by the Revolving Credit
Borrowers, which direction the Agent may require to be in writing. Not later
than 12:00 p.m.
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(Baltimore City Time) on the date of the requested borrowing, the Revolving
Credit Borrowers shall give the Agent oral or written notice (a "Loan Notice")
of the amount and (if requested by the Agent) the purpose of the requested
borrowing. Any oral Loan Notice shall be confirmed in writing by the Revolving
Credit Borrowers within three (3) Business Days after the making of the
requested advance under the Revolving Loan. Each Loan Notice shall be
irrevocable. Upon receipt of any such Loan Notice, the Agent shall promptly
notify each Lender of the amount of each advance to be made by such Lender on
the requested borrowing date under such Lender's Revolving Credit Commitment.
Not later than 2:00 p.m. (Baltimore City Time) on each requested
borrowing date for the making of advances under the Revolving Loan, each Lender
shall, if it has received timely notice from the Agent of the Revolving Credit
Borrowers' request for such advances, make available to the Agent, in funds
immediately available to the Agent at the Agent's office set forth in Section
9.1, such Lender's Pro Rata Share of the advances to be made on such date.
In addition, each of the Revolving Credit Borrowers hereby irrevocably
authorizes the Lenders at any time and from time to time, without further
request from or notice to the Revolving Credit Borrowers, to make advances under
the Revolving Loan which the Agent, in its sole, but reasonable credit judgment,
deems necessary or appropriate to protect the interests of the Agent and/or any
or all of the Lenders under this Agreement, including, without limitation,
advances under the Revolving Loan made to cover debit balances in the Revolving
Loan Account, principal of, and/or interest on, any Loan, including, the UK Time
Loan, the Obligations (including any Letter of Credit Obligations),
Administrative Costs and/or Enforcement Costs, prior to, on, or after the
termination of other advances under this Agreement, regardless of whether the
outstanding principal amount of the Revolving Loan which the Lenders may advance
hereunder exceeds the Total Revolving Credit Committed Amount.
2.1.3 BORROWING BASE. As used in this Agreement, the term
"Borrowing Base" means at any time, an amount
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equal to the aggregate of (a) eighty-five percent (85%) of the amount of
Eligible Non-UK Receivables, plus (b) the lesser of (i) sixty percent (60%) of
the amount of Eligible Non-UK Inventory or (ii) Thirty-five Million Dollars
($35,000,000), plus (c) until the first to occur of (i) the payment in full of
all Tax Refunds and (ii) December 31, 1997, eighty percent (80%) of the amount
of all unpaid Eligible Tax Refunds, less (d) the Interest Rate Protection
Reserve, less (e) the UK Collateral Deficiency Reserve, and less (f) such other
reserves, if any, as the Agent may determine from time to time, in the exercise
of its reasonable credit judgment, applying standards customary to institutional
asset-based lenders, to be an appropriate respect to a material adverse change
affecting the value of the Collateral.
The Borrowing Base shall be computed based on the Borrowing Base Report
with respect to Eligible Non-UK Inventory, Eligible Non-UK Receivable and
Eligible Tax Refunds most recently delivered to the Agent in accordance with the
provisions of this Agreement. In the event the Revolving Credit Borrowers fail
to furnish a Borrowing Base Report required by Section 2.1.4 below, or in the
event the Agent reasonably believes that a Borrowing Base Report is no longer
accurate, the Agent may to the extent of such inaccuracy, direct the Lenders to
suspend the making of or limit advances under the Revolving Loan. The Borrowing
Base shall be subject to reduction by amounts credited to the Collateral Account
and by Tax Refunds amounts which have been paid, credited, reduced, rescinded or
otherwise discharged since the date of the most recent Borrowing Base Report and
by the amount of any Receivable, any Inventory or any Tax Refund which was
included in the Borrowing Base but which the Agent determines fails to meet the
respective criteria applicable from time to time for Eligible Non-UK
Receivables, Eligible Non-UK Inventory or Eligible Tax Refunds.
If at any time the total of the aggregate principal amount of the
Revolving Loan and Outstanding Letter of Credit Obligations exceeds the
Borrowing Base (or (1) for the period beginning May 1, 1997 through, and
including, October 31, 1997, the Borrowing Base, plus Ten Million Dollars
($10,000,000) or (2) for the period beginning June 1, 1998 through, and
including, September 30, 1998, the Borrowing Base, plus Five Million Dollars
($5,000,000)), a
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Borrowing Base Deficiency ("Borrowing Base Deficiency") shall exist. Each time a
Borrowing Base Deficiency exists, the Revolving Credit Borrowers at the sole and
absolute discretion of the Agent exercised from time to time shall pay the
Borrowing Base Deficiency ON DEMAND to the Agent for the benefit of the Lenders
from time to time.
As used in this Agreement, the term "UK Borrowing Base" means at any
time, an amount equal to the aggregate of (a) eighty-five percent (85%) of the
amount of Eligible UK Receivables, plus (b) the lesser of (i) sixty percent
(60%) of the amount of Eligible UK Inventory. If at any time the outstanding
balance of the UK Obligations exceeds the UK Borrowing Base, a UK Borrowing Base
Deficiency ("UK Borrowing Base Deficiency") shall exist and the Borrowing Base
shall be reduced by the amount of the UK Borrowing Base Deficiency (a "UK
Collateral Deficiency Reserve") until such time as a subsequent UK Borrowing
Base Report reveals that the UK Borrowing Base Deficiency no longer exists.
Without implying any limitation on the Agent's discretion with respect
to the Borrowing Base and the UK Borrowing Base, the criteria for Eligible
Receivables, for Eligible Inventory and for Eligible Tax Refunds contained in
the respective definitions of Eligible Receivables, of Eligible Inventory and of
Eligible Tax Refunds are in part based upon the business operations of the
Borrowers and the Mexican Subsidiary existing on or about the Closing Date and
upon information and records furnished to the Agent by the Borrowers and/or the
Mexican Subsidiary. If at any time or from time to time hereafter, the business
operations of the Borrowers and/or the Mexican Subsidiary change in any material
respect or such information and records furnished to the Agent is incorrect or
misleading in any material respect, the Agent in its reasonable credit judgment,
applying standards customary to institutional asset-based lenders, may at any
time and from time to time during the duration of this Agreement change such
criteria or add new criteria; provided, however, that any such change in, or
addition or removal of criteria shall be effective only after notice thereof
from the Agent to the Borrowers. Except in emergency circumstances, the Agent
agrees to use its commercially reasonable efforts to consult with the Borrowers
for a period not
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to exceed thirty (30) days prior to the effective date of any addition to, or
change in, eligibility criteria, but the Agent shall have no obligation or duty
to reach an agreement with the Borrowers as a condition of, or prior to,
imposing any changes in, or additions to, eligibility criteria. The Agent may
communicate such changed or additional criteria to the Borrowers from time to
time either orally or in writing.
2.1.4 BORROWING BASE REPORT. The Revolving Credit Borrowers
will furnish to the Agent no less frequently than weekly and at such other times
as may be reasonably requested by the Agent a report of the Borrowing Base (each
a "Borrowing Base Report"; collectively, the "Borrowing Base Reports") in the
form required from time to time by the Agent, appropriately completed and duly
signed. The Borrowing Base Report shall contain the amount and payments on the
Receivables of the Revolving Credit Borrowers and the Mexican Subsidiary, the
value of Inventory of the Revolving Credit Borrowers and the Mexican Subsidiary,
and the calculations of the Borrowing Base, all in such detail, and accompanied
by such supporting and other information, as the Agent may from time to time
reasonably request. Upon the Agent's reasonable request and upon the creation of
any Receivables by any Revolving Credit Borrower and/or the Mexican Subsidiary,
or at such intervals as the Agent may reasonably require, the Revolving Credit
Borrowers will provide and will cause the Mexican Subsidiary to provide the
Agent with (a) confirmatory assignment schedules; (b) copies of Account Debtor
invoices; (c) evidence of shipment or delivery; and (d) such further schedules,
documents and/or information regarding its or their Receivables and the
Inventory as the Agent may reasonably require. The items to be provided under
this subsection shall be in form satisfactory to the Agent, and certified as
true and correct by a Responsible Officer, and delivered to the Agent from time
to time solely for the Agent's convenience in maintaining records of the
Collateral. Any failure to deliver any of such items to the Agent shall not
affect, terminate, modify, or otherwise limit the Liens of the Agent and the
Lenders in the Collateral.
The UK Subsidiary will furnish to the Agent no less frequently than
monthly and at such other times as may be reasonably requested
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by the Agent a report of the UK Borrowing Base (each a "UK Borrowing Base
Report"; collectively, the "UK Borrowing Base Reports") in the form required
from time to time by the Agent, appropriately completed and duly signed. The UK
Borrowing Base Report shall contain the amount and payments on the Receivables
of the UK Subsidiary, the value of Inventory of the UK Subsidiary, and the
calculations of the UK Borrowing Base, all in such detail, and accompanied by
such supporting and other information, as the Agent may from time to time
reasonably request.
2.1.5 REVOLVING CREDIT NOTES. The obligation of the Revolving
Credit Borrowers to pay each Lender's Pro Rata Share of the Revolving Loan, with
interest, shall be evidenced by a series of promissory notes (as from time to
time extended, amended, restated, supplemented or otherwise modified,
collectively the "Revolving Credit Notes" and individually a "Revolving Credit
Note") substantially in the form of EXHIBIT "B-1" attached hereto and made a
part hereof, with appropriate insertions. Each Lender's Revolving Credit Note
shall be dated as of the Closing Date, shall be payable to the order of such
Lender at the times provided in the Revolving Credit Note, and shall be in the
principal amount of such Lender's Revolving Credit Pro Rata Share. Each of the
Revolving Credit Borrowers acknowledges and agrees that, if the outstanding
principal balance of the Revolving Loan at any time exceeds the aggregate face
amount of the Revolving Credit Notes, the excess shall bear interest at the
rates provided from time to time for advances under Revolving Loan evidenced by
the Revolving Credit Notes and shall be payable, with accrued interest, ON
DEMAND. The Revolving Credit Notes shall not operate as a novation of any of the
Obligations or nullify, discharge, or release any such Obligations or the
continuing contractual relationship of the parties hereto in accordance with the
provisions of this Agreement.
2.1.6 MANDATORY PREPAYMENTS OF REVOLVING LOAN. Subject to the
limitations and fees of Section 2.4.4 (Indemnity), the Revolving Credit
Borrowers shall make the mandatory prepayments (each a "Revolving Loan Mandatory
Prepayment" and collectively, the "Revolving Loan Mandatory Prepayments") of the
Revolving Loan at the following times:
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(a) The Revolving Credit Borrowers shall make a
Revolving Loan Mandatory Prepayment at any time and from time to time
in such amounts requested by the Agent pursuant to Section 2.1.3
(Borrowing Base) of this Agreement in order to cover any Borrowing Base
Deficiency;
(b) The Revolving Credit Borrowers shall make a
Revolving Loan Mandatory Prepayment on such dates and in such amounts
to achieve compliance with the provisions of Section 2.1.11 (Required
Availability under the Revolving Credit Facility); and
(c) The Revolving Credit Borrowers shall make a
Revolving Loan Mandatory Prepayment immediately upon the payment of all or any
portion of the Tax Refunds in an amount equal to one hundred percent (100%) of
the amount of Tax Refunds paid to or for the account of any or all of the
Revolving Credit Borrowers, including, any credit or other offset given to any
or all of the Revolving Credit Borrowers on account of any obligations of any or
all of the Revolving Credit Borrowers. The Borrowing Base shall be
contemporaneously reduced by the amount of all Tax Refunds paid or otherwise
credited to or for the benefit of any or all of the Revolving Credit Borrowers.
The Revolving Credit Borrowers shall not be obligated to make a Revolving Loan
Mandatory Prepayment to the extent of any Tax Refunds paid directly to the Agent
for application to the Obligations.
2.1.7 OPTIONAL PREPAYMENTS OF REVOLVING LOAN. Subject to the
limitations and fees of Section 2.4.4 (Indemnity), the Revolving Credit
Borrowers shall have the option at any time and from time to time prepay (each a
"Revolving Loan Optional Prepayment" and collectively the "Revolving Loan
Optional Prepayments") the Revolving Loan and all other Obligations, in whole
or in part without premium or penalty.
2.1.8 THE COLLATERAL ACCOUNT. Unless otherwise agreed by the
Agent with respect to Items of Payment payable to the Mexican Subsidiary
subsequent to the Closing Date, the Revolving Credit Borrowers and, if required
by the Agent, the Mexican Subsidiary, will deposit, or cause to be deposited,
all Items of
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Payment to a bank account designated by the Agent and from which the Agent alone
has power of access and withdrawal (the "Collateral Account"). The Agent agrees
that as of the Closing Date, Items of Payment payable to the Mexican Subsidiary
are not required to be deposited into the Collateral Account. Each deposit shall
be made not later than the next Business Day after the date of receipt of the
Items of Payment. The Items of Payment shall be deposited in precisely the form
received, except for the endorsements of the Revolving Credit Borrowers and/or
the Mexican Subsidiary where necessary to permit the collection of any such
Items of Payment, which endorsement the Revolving Credit Borrowers hereby agree
to make and to cause the Mexican Subsidiary to make. In the event the Revolving
Credit Borrowers fail to do so, the Revolving Credit Borrowers hereby authorize
the Agent to make the endorsement in the name of any or all of the Revolving
Credit Borrowers. Prior to such a deposit, the Revolving Credit Borrowers and
the Mexican Subsidiary will not commingle any Items of Payment with any of the
Revolving Credit Borrowers' other funds or property, but will hold them separate
and apart in trust and for the account of the Agent for the benefit of the
Lenders ratably and the Agent.
In addition, if so directed by the Agent, the Revolving Credit
Borrowers and the Mexican Subsidiary shall direct the mailing of all Items of
Payment from their Account Debtors to one or more post-office boxes designated
by the Agent, or to such other additional or replacement post-office boxes
pursuant to the request of the Agent from time to time (collectively, the
"Lockbox"). The Agent shall have unrestricted and exclusive access to the
Lockbox.
The Revolving Credit Borrowers hereby authorize the Agent to inspect
all Items of Payment, endorse all Items of Payment in the name of any or all of
the Revolving Credit Borrowers, and deposit such Items of Payment in the
Collateral Account. The Agent reserves the right, exercised in its sole and
absolute discretion from time to time, to provide to the Collateral Account
credit prior to final collection of an Item of Payment and to disallow credit
for any Item of Payment which is unsatisfactory to the Agent. In the event Items
of Payment are returned to the Agent for any reason whatsoever, the Agent may,
in the exercise of its discretion from time to time, forward such Items of
Payment a
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second time. Any returned Items of Payment shall be charged back to the
Collateral Account, the Revolving Loan Account, or other account, as
appropriate.
The Agent will apply the whole or any part of the collected funds
credited to the Collateral Account against the Revolving Loan (or with respect
to Items of Payment which are not proceeds of Accounts or Inventory or after a
Default or an Event of Default, against any of the Obligations) or credit such
collected funds to a depository account of any or all of the Revolving Credit
Borrowers with the Agent, the order and method of such application to be in the
sole discretion of the Agent.
In consideration for the Agent's agreement to credit the Collateral
Account as of the Business Day on which the Agent receives Items of Payment and
to reimburse the Agent for the cost of delays in the collection and clearance of
Items of Payment, the Revolving Credit Borrowers hereby consent and agree that
in computing interest on the Obligations the Agent shall be entitled to add one
(1) Business Days' interest on all Items of Payment not in the form of
immediately available funds in accordance with the following formula:
1996 gross sales of the Borrowers and Subsidiaries X Applicable Interest Rate
--------------------------------------------------
251 Business Days
Any resulting increase in the amount of interest payable by the Revolving Credit
Borrowers shall be part of the Agent's Obligations, shall be for the sole and
exclusive benefit of the Agent and shall not be shared with or payable to any of
the Lenders.
2.1.9 REVOLVING LOAN ACCOUNT. The Agent will establish and
maintain a loan account on its books (the "Revolving Loan Account") to which the
Agent will (a) DEBIT (i) the principal amount of each advance under the
Revolving Loan made by the Lenders hereunder as of the date made, (ii) the
amount of any interest accrued on the Revolving Loan as and when due, and (iii)
any other amounts due and payable by the Revolving Credit Borrowers to the Agent
and/or the Lenders from time to time under the provisions of this Agreement in
connection with the Revolving Loan, including,
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without limitation, Administrative Costs, Enforcement Costs, Fees, late charges,
and service, collection and audit fees, as and when due and payable, and (b)
CREDIT all payments made by the Revolving Credit Borrowers to the Agent on
account of the Revolving Loan as of the date made including, without limitation,
funds credited to the Revolving Loan Account from the Collateral Account. The
Agent may debit the Revolving Loan Account for the amount of any Item of Payment
which is returned to the Agent unpaid. All credit entries to the Revolving Loan
Account are conditional and shall be readjusted as of the date made if final and
indefeasible payment is not received by the Agent in cash or solvent credits.
The Revolving Credit Borrowers hereby promise to pay to the order of the Agent
for the ratable benefit of the Lenders, on the Revolving Credit Termination
Date, an amount equal to the excess, if any, of all debit entries over all
credit entries recorded in the Revolving Loan Account under the provisions of
this Agreement. Any and all periodic or other statements or reconciliations, and
the information contained in those statements or reconciliations, of the
Revolving Loan Account shall be presumed conclusively to be correct, and shall
constitute an account stated between the Agent, the Lenders and the Revolving
Credit Borrowers unless the Agent receives specific written objection thereto
from any Revolving Credit Borrower and/or any Lender within thirty (30) Business
Days after such statement or reconciliation shall have been sent by the Agent.
Any and all periodic or other statements or reconcilia tions, and the
information contained in those statements or reconciliations, of the Revolving
Loan Account shall be final, binding and conclusive upon the Revolving Credit
Borrowers in all respects, absent manifest error, unless the Agent receives
specific written objection thereto from the Revolving Credit Borrowers within
thirty (30) Business Days after such statement or reconciliation shall have been
sent by the Agent.
2.1.10 REVOLVING CREDIT UNUSED LINE FEE. The Revolving Credit
Borrowers shall pay to the Agent for the ratable benefit of the Lenders a
monthly revolving credit facility fee (collectively, the "Revolving Credit
Unused Line Fees" and individually, a "Revolving Credit Unused Line Fee") in an
amount equal to 37.5 basis points per annum on the average daily unused and
undisbursed portion of the Total Revolving Credit Committed
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Amount (less the amount of the minimum availability required by Section
2.1.11(a) below) in effect from time to time accruing during each calendar
month. The accrued and unpaid portion of the Revolving Credit Unused Line Fee
shall be paid by the Revolving Credit Borrowers to the Agent on the first day of
each month, commencing on the first such date following the date hereof, and on
the Revolving Credit Termination Date.
2.1.11 REQUIRED AVAILABILITY UNDER THE REVOLVING CREDIT
FACILITY.
(a) On the Closing Date and at all times thereafter,
the aggregate outstanding principal amount of the Revolving Loan and Outstanding
Letter of Credit Obligations shall not exceed an amount equal to (i) the lesser
of the Borrowing Base or the Total Revolving Credit Committed Amount, MINUS (ii)
$2,000,000. As of any date of determination, the lesser of (i) the Borrowing
Base (or (1) the Borrowing Base, plus $10,000,000 for the period beginning May
1, 1997 through, and including, October 31, 1997 or (2) the Borrowing Base, plus
$5,000,000 for the period beginning June 1, 1998 through, and including,
September 30, 1998) and (ii) the Total Revolving Credit Committed Amount, MINUS
the aggregate outstanding principal amount of the Revolving Loan and Outstanding
Letter of Credit Obligations is referred to herein as the "Actual Availability".
(b) The Revolving Credit Borrowers shall make a
Revolving Loan Mandatory Prepayment pursuant to the provisions of Section 2.1.6
to the extent necessary to achieve compliance with this Section. Notwithstanding
the foregoing, if the Revolving Credit Borrowers fail to maintain Actual
Availability at any time of at least $2,000,000, but Actual Availability is
greater than or equal to $500,000, the Revolving Credit Borrowers shall have a
period of not more than thirty (30) days to cure the deficiency in Actual
Availability; provided, that at all times during such 30-day period, Actual
Availability is equal to or greater than $500,000 and there does not otherwise
exist a Default or an Event of Default.
SECTION 2.2 THE LETTER OF CREDIT FACILITY.
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2.2.1 LETTERS OF CREDIT. Subject to and upon the provisions of
this Agreement, and as a part of the Revolving Credit Commitments, each of the
Revolving Credit Borrowers, upon the prior approval of the Agent, may obtain
documentary or standby letters of credit (as the same may from time to time be
amended, supplemented or otherwise modified, each a "Letter of Credit" and
collectively the "Letters of Credit") from the Agent from time to time from the
Closing Date until the Business Day preceding the Revolving Credit Termination
Date. The Revolving Credit Borrowers will not be entitled to obtain a Letter of
Credit unless (a) the Revolving Credit Borrowers are then able to obtain a
Revolving Loan from the Lenders in an amount not less than the proposed face
amount of the Letter of Credit requested by the Revolving Credit Borrowers, and
(b) the sum of the then Outstanding Letter of Credit Obligations (including the
amount of the requested Letter of Credit) does not exceed Two Million Dollars
($2,000,000).
2.2.2 LETTER OF CREDIT FEES. (a) With respect to each standby
Letter of Credit, the Revolving Credit Borrowers shall pay to the Agent, for its
own account, an issuance fee of one-eighth of one percent (.125%) of the stated
amount of the standby Letter of Credit and with respect to each documentary
Letter of Credit, the Revolving Credit Borrowers shall pay to the Agent, for its
own account, an issuance fee equal to the Agent's then customary issuance fees
for documentary letters of credit, all without regard for provisions contained
in the Letters of Credit which may give rise to a reduction in the stated amount
thereof unless such reduction has actually occurred (each a "Letter of Credit
Fronting Fee" and collectively, the "Letter of Credit Fronting Fees"). The
Letter of Credit Fronting Fees shall be paid upon the opening of each Letter of
Credit and upon each anniversary thereof, if any. In addition, the Revolving
Credit Borrower shall pay to the Agent all other reasonable and customary
amendment, negotiation, processing, transfer or other fees to the extent and as
and when required by the provisions of any Letter of Credit Agreement. All
Letter of Credit Fronting Fees and all such other additional fees are included
in and are a part of the "Fees" payable by the Revolving Credit Borrowers under
the provisions of this Agreement and are for the sole and exclusive benefit of
the Agent and are a part of the Agent's Obligations.
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(b) In addition and in connection with each standby Letter of
Credit, the Revolving Credit Borrower shall pay to the Agent for the ratable
benefit of the Lenders quarterly, in arrears, a letter of credit fee (each a
"Letter of Credit Fee" and collectively the "Letter of Credit Fees") in an
amount equal to two hundred (200) basis points (calculated on the basis of
actual number of days elapsed in a year of 360 days) of the stated amount of
each such Letter of Credit without regard for provisions contained in the
Letters of Credit which may give rise to a reduction in the stated amount
thereof unless such reduction has actually occurred. The accrued and unpaid
portion of each Letter of Credit Fee shall be paid by the Revolving Credit
Borrower to the Agent on the first day of each quarterly period, commencing on
the first such date following the issuance of the respective Letter of Credit,
and on the expiration or termination date of the respective Letter of Credit.
2.2.3 TERMS OF LETTERS OF CREDIT; POST- EXPIRATION DATE
LETTERS OF CREDIT.
Each Letter of Credit shall (a) be opened pursuant to a Letter of
Credit Agreement, (b) expire on a date not later than the Business Day preceding
the Revolving Credit Expiration Date; and (c) expire on a date not later than
one (1) year after the date of issuance; provided, however, if any Letter of
Credit does have an expiration date later than the Business Day preceding the
Revolving Credit Termination Date (each a "Post-Expiration Date Letter of
Credit" and collectively, the "Post-Expiration Date Letters of Credit"),
effective as of the Business Day preceding the Revolving Credit Termination Date
and without prior notice to or the consent of the Revolving Credit Borrowers,
the Lenders shall make advances under the Revolving Loan for the account of the
Revolving Credit Borrowers in the aggregate face amount of all such Letters of
Credit. The amount of each Lender's advance shall be equal to its Revolving
Credit Pro Rata Share of the aggregate face amount of all such Letters of
Credit. The Agent shall deposit the proceeds of such advances into one or more
interest bearing accounts with and in the name of the Agent and over which the
Agent alone shall have exclusive power of access and withdrawal (collectively,
the "Letter of Credit Cash Collateral Account"). The Letter of Credit Cash
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Collateral Account is to be held by the Agent, for the ratable benefit of the
Lenders, as additional collateral and security for any Letter of Credit
Obligations relating to the Post-Expiration Date Letters of Credit. The
Revolving Credit Borrowers hereby assign, pledge, grant and set over to the
Agent, for the ratable benefit of the Lenders, a first priority security
interest in, and Lien on, all of the funds on deposit in the Letter of Credit
Cash Collateral Account, together with any and all proceeds (cash and non-cash)
and products thereof as additional collateral and security for the Letter of
Credit Obligations relating to the Post-Expiration Date Letters of Credit. The
Revolving Credit Borrowers acknowledge and agree that the Agent shall be
entitled to fund any draw or draft on any Post-Expiration Date Letter of Credit
from the monies on deposit in the Letter of Credit Cash Collateral Account
without notice to or consent of the Revolving Credit Borrowers or any of the
Lenders. The Revolving Credit Borrowers further acknowledge and agree that the
Agent's election to fund any draw or draft on any Post-Expiration Date Letter of
Credit from the Letter of Credit Cash Collateral shall in no way limit, impair,
lessen, reduce, release or otherwise adversely affect the Revolving Credit
Borrowers' obligation to pay any Letter of Credit Obligations under or relating
to the Post-Expiration Date Letters of Credit. At such time as all
Post-Expiration Date Letters of Credit have expired and all Letter of Credit
Obligations relating to the Post-Expiration Date Letters of Credit have been
paid in full, the Agent agrees to apply the amount of any remaining funds on
deposit in the Letter of Credit Cash Collateral Account to the then unpaid
balance of the Obligations under the Revolving Credit Facility in such order and
manner as the Agent shall determine in its sole and absolute discretion in
accordance with the provisions of this Agreement.
The aggregate face amount of all Letters of Credit at any one time
outstanding and issued by the Agent pursuant to the provisions of this
Agreement, including, without limitation, any and all Post-Expiration Date
Letters of Credit, plus the amount of any unpaid Letter of Credit Fees accrued
or scheduled to accrue thereon, and less the aggregate amount of all drafts
issued under or purporting to have been issued under such Letters of Credit that
have been paid by the Agent and for which the Agent has been reimbursed by the
Revolving Credit Borrowers in full in accordance with Section
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2.3.5 below and the Letter of Credit Agreements, and for which the Agent has no
further obligation or commitment to restore all or any portion of the amounts
drawn and reimbursed, is herein called the "Outstanding Letter of Credit
Obligations".
2.2.4 PROCEDURES FOR LETTERS OF CREDIT. The Revolving Credit
Borrowers shall give the Agent written notice at least three (3) Business Days
prior to the date on which the Revolving Credit Borrower desires the Agent to
issue a Letter of Credit. Such notice shall be accompanied by a duly executed
Letter of Credit Agreement specifying, among other things: (a) the name and
address of the intended beneficiary of the Letter of Credit, (b) the requested
face amount of the Letter of Credit, (c) whether the Letter of Credit is to be
revocable or irrevocable, (d) the Business Day on which the Letter of Credit is
to be opened and the date on which the Letter of Credit is to expire, (e) the
terms of payment of any draft or drafts which may be drawn under the Letter of
Credit, and (f) any other terms or provisions the Revolving Credit Borrowers
desire to be contained in the Letter of Credit. Such notice shall also be
accompanied by such other information, certificates, confirmations, and other
items as the Agent may require to assure that the Letter of Credit is to be
issued in accordance with the provisions of this Agreement and a Letter of
Credit Agreement. In the event of any conflict between the provisions of this
Agreement and the provisions of a Letter of Credit Agreement, the provisions of
this Agreement shall prevail and control unless otherwise expressly provided in
the Letter of Credit Agreement. Upon (i) receipt of such notice, (ii) payment of
all Letter of Credit Fees, all Letter of Credit Fronting Fees and all other Fees
payable in connection with the issuance of such Letter of Credit, and (iii)
receipt of a duly executed Letter of Credit Agreement, the Agent shall process
such notice and Letter of Credit Agreement in accordance with its customary
procedures and open such Letter of Credit on the Business Day specified in such
notice.
2.2.5 PAYMENTS OF LETTERS OF CREDIT. The Revolving Credit
Borrowers hereby promise to pay to the Agent, ON DEMAND and in United States
Dollars, the following which are herein
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collectively referred to as the "Current Letter of Credit Obligations":
(a) the amount which the Agent has paid or will be required to
pay under each draft or draw on a Letter of Credit, whether such demand
be in advance of the Agent's payment or for reimbursement for such
payment;
(b) any and all reasonable charges and expenses which the
Agent may pay or incur relative to the Letter of Credit and/or such
draws or drafts; and
(c) interest on the amounts described in (a) and (b) not paid
by the Revolving Credit Borrowers as and when due and payable under the
provisions of (a) and (b) above from the day the same are due and
payable until paid in full at a rate per annum equal to the Base Rate.
In addition, the Revolving Credit Borrowers hereby promise to pay any
and all other Letter of Credit Obligations as and when due and payable in
accordance with the provisions of this Agreement and the Letter of Credit
Agreements. The obligation of the Revolving Credit Borrowers to pay Current
Letter of Credit Obligations and all other Letter of Credit Obligations shall be
absolute and unconditional under any and all circumstances and irrespective of
any setoff, counterclaim or defense to payment which the Revolving Credit
Borrowers or any other account party may have or have had against the
beneficiary of such Letter of Credit, the Agent, any of the Lenders, or any
other Person, including, without limitation, any defense based on the failure of
any draft or draw to conform to the terms of such Letter of Credit, any draft or
other document proving to be forged, fraudulent or invalid, or the legality,
validity, regularity or enforceability of such Letter of Credit, any draft or
other documents presented with any draft, any Letter of Credit Agreement, this
Agreement, or any of the other Financing Documents, all whether or not the Agent
or any of the Lenders had actual or constructive knowledge of the same, and
irrespective of any Collateral, security or guarantee therefor or right of
offset with respect thereto and irrespective of any other circumstances
whatsoever which constitutes, or might be construed to constitute, an equitable
or legal discharge of the Revolving Credit Borrowers
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for any Letter of Credit Obligations, in bankruptcy or otherwise; PROVIDED,
HOWEVER, that the Revolving Credit Borrowers shall not be obligated to reimburse
the Agent for any wrongful payment under such Letter of Credit made as a result
of the Agent's willful misconduct. The obligation of the Revolving Credit
Borrowers to pay the Letter of Credit Obligations shall not be conditioned or
contingent upon the pursuit by the Agent or any other Person at any time of any
right or remedy against any Person which may be or become liable in respect of
all or any part of such obligation or against any Collateral, security or
guarantee therefor or right of offset with respect thereto.
The Letter of Credit Obligations shall continue to be effective, or be
reinstated, as the case may be, if at any time payment of all or any portion of
the Letter of Credit Obligations is rescinded or must otherwise be restored or
returned by the Agent or any of the Lenders upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of any Person, or upon or as a result
of the appointment of a receiver, intervenor, or conservator of, or trustee or
similar officer for, any Person, or any substantial part of such Person's
property, all as though such payments had not been made.
2.2.6 CHANGE IN LAW; INCREASED COST. If any change in any law
or regulation or in the interpretation thereof by any court or other
Governmental Authority charged with the administration thereof shall either (a)
impose, modify or deem applicable any reserve, special deposit or similar
requirement against Letters of Credit issued by the Agent, or (b) impose on the
Agent or any of the Lenders any other condition regarding this Agreement or any
Letter of Credit, and the result of any event referred to in clauses (a) or (b)
above shall be to increase the cost to the Agent of issuing, maintaining or
extending the Letter of Credit or the cost to any of the Lenders of funding any
obligation under or in connection with the Letter of Credit (which increase in
cost shall be the result of the Agent's reasonable allocation of the aggregate
of such cost increases resulting from such events), then, within ten (10) days
following demand by the Agent, the Revolving Credit Borrowers shall pay to the
Agent from time to time as specified by the Agent, additional amounts which
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shall be sufficient to compensate the Agent and the Lenders for such increased
cost, together with interest on each such amount from the date demanded until
payment in full thereof at a rate per annum equal to the then highest current
rate of interest on the Revolving Loan. A certificate as to such increased cost
incurred by the Agent and/or any of the Lenders, submitted by the Agent to the
Revolving Credit Borrowers, shall be conclusive, absent manifest error.
2.2.7 GENERAL LETTER OF CREDIT PROVISIONS. The Revolving
Credit Borrowers hereby instruct the Agent to pay any draft complying with the
terms of any Letter of Credit irrespective of any instructions of the Revolving
Credit Borrowers to the contrary. The Revolving Credit Borrowers assume all
risks of the acts and omissions of the beneficiary and other users of any Letter
of Credit. The Agent, the Lenders and their respective branches, Affiliates
and/or correspondents shall not be responsible for and the Revolving Credit
Borrowers hereby indemnify and hold the Agent, the Lenders and their respective
branches, Affiliates and/or correspondents harmless from and against all
liability, loss and expense (including reasonable attorney's fees and costs)
incurred by the Agent, the Lenders and/or their respective branches, Affiliates
and/or correspondents (other than arising from its or their acts of gross
negligence or willful misconduct) relative to and/or as a consequence of (a) any
failure by the Revolving Credit Borrowers to perform the agreements hereunder
and under any Letter of Credit Agreement, (b) any Letter of Credit Agreement,
this Agreement, any Letter of Credit and any draft, draw and/or acceptance
under or purported to be under any Letter of Credit, (c) any action taken or
omitted by the Agent, any of the Lenders and/or any of their respective
branches, Affiliates and/or correspondents at the request of the Revolving
Credit Borrowers, (d) any failure or inability to perform in accordance with the
terms of any Letter of Credit by reason of any control or restriction rightfully
or wrongfully exercised by any DE FACTO or DE JURE Governmental Authority, group
or individual asserting or exercising governmental or paramount powers, and/or
(e) any consequences arising from causes beyond the control of the Agent, any of
the Lenders and/or any of their respective branches, Affiliates and/or
correspondents.
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Except for gross negligence and willful misconduct, the Agent,
the Lenders and their respective branches, Affiliates and/or correspondents,
shall not be liable or responsible in any respect for any (a) error, omission,
interruption or delay in transmission, dispatch or delivery of any one or more
messages or advices in connection with any Letter of Credit, whether transmitted
by cable, telegraph, mail or otherwise and despite any cipher or code which may
be employed, and/or (b) action, inaction or omission which may be taken or
suffered by it or them in good faith or through inadvertence in identifying or
failing to identify any beneficiary or otherwise in connection with any Letter
of Credit.
Any Letter of Credit may be amended, modified or revoked only
upon the receipt by the Agent from the Revolving Credit Borrowers and the
beneficiary (including any transferee and/or assignee of the original
beneficiary), of a written consent and request therefor.
If any Laws of the United States (or any state thereof) and/or
any country other than the United States permits a beneficiary under a Letter of
Credit to require the Agent, the Lenders and/or any of their respective
branches, Affiliates and/or correspondents to pay drafts under or purporting to
be under a Letter of Credit after the expiration date of the Letter of Credit,
the Revolving Credit Borrowers shall reimburse the Agent and the Lenders, as
appropriate, for any such payment pursuant to provisions of Section 2.3.5.
Except as may otherwise be specifically provided in a Letter
of Credit or Letter of Credit Agreement, the laws of the State of Maryland and
the Uniform Customs and Practice for Documentary Credits, 1993 Revision,
International Chamber of Commerce Publication No. 500 shall govern the Letters
of Credit. The Laws, rules, provisions and regulations of the Uniform Customs
and Practice for Documentary Credits are hereby incorporated by reference. In
the event of a conflict between the Uniform Customs and Practice for Documentary
Credits and the laws of the State of Maryland, the Uniform Customs and Practice
for Documentary Credits shall prevail.
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2.2.8 PARTICIPATIONS IN THE LETTERS OF CREDIT.
Each Lender hereby irrevocably authorizes the Agent to issue Letters of
Credit in accordance with the provisions of this Agreement. As of the date each
Letter of Credit is opened or issued by the Agent pursuant to the provisions of
this Agreement, each Lender shall have an undivided participating interest in
(a) the rights and obligations of the Agent under such Letter of Credit, and (b)
the Outstanding Letter of Credit Obligations of the Revolving Credit Borrowers
with respect to such Letter of Credit, in an amount equal to each Lender's
Revolving Credit Pro Rata Share of such Outstanding Letter of Credit
Obligations.
2.2.9 PAYMENTS BY THE LENDERS TO THE AGENT. If
the Revolving Credit Borrowers fail to pay to the Agent any Current Letter of
Credit Obligations as and when due and payable, the Agent shall promptly notify
each of the Lenders and shall demand payment from each of the Lenders such
Lender's Revolving Credit Pro Rata Share of such unpaid Current Letter of Credit
Obligations. In addition, if any amount paid to the Agent on account of Current
Letter of Credit Obligations is rescinded or required to be restored or turned
over by the Agent upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Revolving Credit Borrowers or upon or as a result of the
appointment of a receiver, intervenor, trustee, conservator or similar officer
for the Revolving Credit Borrowers, or is otherwise not indefeasibly covered by
an advance under the Revolving Loan, the Agent shall promptly notify each of the
Lenders and shall demand payment from each of the Lenders of its Revolving
Credit Pro Rata Share of its portion of the Current Letter of Credit Obligations
to be remitted to the Revolving Credit Borrowers.
Each of the Lenders irrevocably and unconditionally agrees to
honor any such demands for payment under this Section and promises to pay to the
Agent's account on the same Business Day as demanded the amount of its Revolving
Credit Pro Rata Share of the Current Letter of Credit Obligations in immediately
available funds, without any setoff, counterclaim or deduction of any kind. Any
payment by a Lender hereunder shall in no way release, discharge or lessen the
obligation of the Revolving Credit
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Borrowers to pay Current Letter of Credit Obligations to the Agent in accordance
with the provisions of this Agreement.
The obligation of each of the Lenders to remit the amounts of
its Revolving Credit Pro Rata Share of Current Letter of Credit Obligations for
the account of the Agent pursuant to this Section shall be unconditional and
irrevocable under any and all circumstances and may not be terminated, suspended
or delayed for any reason whatsoever, provided that all payments of such amounts
by each of the Lenders shall be without prejudice to the rights of each of the
Lenders with respect to the Agent's alleged gross negligence or willful
misconduct. Any claim any Lender may have against the Agent as a result of the
Agent's alleged gross negligence or willful misconduct may be brought by such
Lender in a separate action against the Agent but may not be used as a defense
to payment under the provisions of this Section.
No failure of any Lender to remit the amount of its Revolving
Credit Pro Rata Share of Current Letter of Credit Obligations to the Agent
pursuant to this Section shall affect the obligations of the Agent under any
Letter of Credit, and if any Lender does not remit to the Agent the amount of
its Revolving Credit Pro Rata Share of Current Letter of Credit Obligations on
the same day as demanded, then without limiting such Lender's obligation to
transmit funds on the same Business Day as demanded, such Lender shall be
obligated to pay, on demand of the Agent and without setoff, counterclaim or
deduction of any kind whatsoever interest on the unpaid amount at the Federal
Funds Rate for each day from the date such amount shall be due and payable to
the Agent until the date such amount shall have been paid in full to the Agent
by such Lender.
SECTION 2.3 THE TIME LOAN.
2.3.1 TIME LOAN COMMITMENTS. Subject to and
upon the provisions of this Agreement, each Lender severally agrees to make a
series of time loans (each a "UK Time Loan A") to the UK Subsidiary on the
Closing Date in the aggregate principal amount set forth opposite such Lender's
name on the signature page (herein called such Lender's "UK Time Loan Committed
Amount"). The total
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of each Lender's UK Time Loan Committed Amount is herein called the "Total UK
Time Loan Committed Amount". The proportionate share set forth opposite each
Lender's name on the signature page is herein called such Lender's "Time Loan
Pro Rata Share".
The obligation of each Lender to make a UK Time Loan is several and is
limited to its UK Time Loan Committed Amount and such obligation of each Lender
is herein called its "UK Time Loan Commitment". The UK Time Loan Commitment of
each of the Lenders is collectively referred to as the "UK Time Loan
Commitments".
The Agent shall not be responsible for the UK Time Loan Commitment of
any Lender; and similarly, none of the Lenders shall be responsible for the UK
Time Loan Commitment of any of the other Lenders; the failure, however, of any
Lender to perform its UK Time Loan Commitment shall not relieve any of the other
Lenders from the performance of their respective UK Time Loan Commitments.
2.3.2 THE UK TIME NOTES. The obligation of the
UK Subsidiary to pay the UK Time Loans with interest shall be evidenced by a
series of promissory notes (each as from time to time extended, amended,
restated, supplemented or otherwise modified, the "UK Time Note" and
collectively, the "UK Time Notes") substantially in the form of EXHIBIT "B-2"
attached hereto and made a part hereof with appropriate insertions. Each UK Time
Note shall be dated as of the Closing Date, shall be payable to the order of a
Lender at the times provided in the UK Time Note, and shall be in the principal
amounts of such Lender's UK Time Loan Committed Amount in accordance with the
provisions of Section 2.3.1.
2.3.3 PAYMENTS OF PRINCIPAL. The unpaid
principal balance of the UK Time Loans shall be payable on the UK Time Loan
Maturity Date. The UK Time Loans may not be prepaid without the prior written
consent of the Agent and the Lenders.
SECTION 2.4 INTEREST.
2.4.1 APPLICABLE INTEREST RATES.
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(a) Each Loan shall bear interest until
maturity (whether by acceleration, declaration, extension or otherwise) at
either the Base Rate or the LIBOR Rate, as selected and specified by the
Borrowers in an Interest Rate Election Notice furnished to the Agent in
accordance with the provisions of Section 2.4.2(e), or as otherwise determined
in accordance with the provisions of this Section 2.4, and as may be adjusted
from time to time in accordance with the provisions of Section 2.4.3.
(b) Notwithstanding the foregoing, following
the occurrence and during the continuance of an Event of Default, at the option
of the Lenders, all Loans and all other Obligations shall bear interest at the
Post-Default Rate.
(c) The Applicable Margin for LIBOR Loans
and Base Rate Loans shall be as follows:
-----------------------------------------
Applicable Applicable
Margin for Margin for
Base Rate Loans LIBOR Loans
(basis points) (basis points)
-----------------------------------------
50 200
========================================
2.4.2 SELECTION OF INTEREST RATES.
(a) The Borrowers may select the initial
Applicable Interest Rate or Applicable Interest Rates to be charged on the
Loans.
(b) From time to time after the date of this
Agreement as provided in this Section, by a proper and timely Interest Rate
Election Notice furnished to the Agent in accordance with the provisions of
Section 2.4.2(e), the Borrowers may select an initial Applicable Interest Rate
or Applicable Interest Rates for any Loans or may convert the Applicable
Interest Rate and, when applicable, the Interest Period, for any existing Loan
to any other Applicable Interest Rate or, when applicable, any other Interest
Period.
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(c) The Borrower's selection of an
Applicable Interest Rate and/or an Interest Period, the Borrowers' election to
convert an Applicable Interest Rate and/or an Interest Period to another
Applicable Interest Rate or Interest Period, and any other adjustments in an
interest rate are subject to the following limitations:
(i) the Borrowers shall not at any
time select or change to an Interest Period that extends beyond the
Revolving Credit Expiration Date,
(ii) except as otherwise provided in
Section 2.4.4, no change from the LIBOR Rate to the Base Rate shall
become effective on a day other than a Business Day and on a day which
is the day following the last day of the then current Interest Period,
no change of an Interest Period shall become effective on a day other
than the day following the last day of the then current Interest
Period, and no change from the Base Rate to the LIBOR Rate shall become
effective on a day other than a day which is a Eurodollar Business Day.
(iii) any Applicable Interest Rate
change for any Loan to be effective on a date on which any principal
payment on account of such Loan is scheduled to be paid shall be made
only after such payment shall have been made,
(iv) no more than ten (10) different
LIBOR Rates may be outstanding at any time and from time to time,
(v) the first day of each Interest
Period shall be a Eurodollar Business Day,
(vi) as of the effective date of a
selection, there shall not exist an Event of Default, and
(vii) the minimum principal amount
of a LIBOR Loan shall be One Million Dollars ($1,000,000) and shall be
an integral multiple of Two Hundred Fifty Thousand Dollars ($250,000).
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(d) If a request for an advance under the
Loans is not accompanied by an Interest Rate Election Notice or does not
otherwise include a selection of an Applicable Interest Rate and, if applicable,
an Interest Period, or if, after having made a selection of an Applicable
Interest Rate and, if applicable, an Interest Period, the Borrowers fail or are
not otherwise entitled under the provisions of this Agreement to continue such
Applicable Interest Rate or Interest Period, the Borrowers shall be deemed to
have selected the Base Rate as the Applicable Interest Rate until such time as
the Borrowers have selected a different Applicable Interest Rate and specified
an Interest Period in accordance with, and subject to, the provisions of this
Section.
(e) The Agent will not be obligated to make
Loans, to convert the Applicable Interest Rate on Loans to another Applicable
Interest Rate, or to change Interest Periods, unless the Agent shall have
received an irrevocable written or telephonic notice (an "Interest Rate Election
Notice") from the Borrowers specifying the following information:
(i) the amount to be borrowed or
converted,
(ii) a selection of the Base Rate or
the LIBOR Rate,
(iii) the length of the Interest
Period if the Applicable Interest Rate selected is the LIBOR Rate, and
(iv) the requested date on which
such election is to be effective.
Any telephonic notice must be confirmed in writing within three (3) Business
Days. Each Interest Rate Election Notice must be received by the Agent not later
than 12:00 p.m. (Baltimore City Time) on the Business Day of any requested
borrowing or conversion in the case of a selection of the Base Rate and not
later than 12:00 p.m. (Baltimore City time) on the second Business Day before
the effective date of any requested borrowing or conversion in the case of a
selection of the LIBOR Rate.
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2.4.3 DETERMINATION OF LIBOR BASE RATE.
(a) In the event that (i) the Agent shall
have determined in its reasonable credit judgment that, by reason of
circumstances affecting the London interbank eurodollar market, adequate and
reasonable means do not exist for ascertaining the LIBOR Base Rate for any
requested Interest Period with respect to a Loan the Borrowers have requested to
be made as or to be converted to a LIBOR Loan or (ii) the Agent shall determine
in its reasonable credit judgment that the LIBOR Base Rate for any requested
Interest Period with respect to a Loan the Borrowers have requested to be made
as or to be converted to a LIBOR Loan does not adequately and fairly reflect the
cost to the Agent of funding or converting such Loan, the Agent shall give
telephonic or written notice of such determination to the Borrowers at least one
(1) day prior to the proposed date for funding or converting such Loan. If such
notice is given, any request for a LIBOR Loan shall be made as or converted to a
Base Rate Loan. Until such notice has been withdrawn by the Agent, the Borrowers
will not request that any Loan be made as or converted to a LIBOR Loan.
(b) If applicable Laws shall (i) make it
unlawful for any Lender to fund through the purchase of Dollar deposits with
respect to any portion of the based, or requested by the Borrowers to be based,
on LIBOR or otherwise give effect to the Lender's obligations as contemplated
under this Section with respect to the use of the LIBOR Rate, or (ii) shall
impose on the Lender any costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
the Lender which includes deposits by reference to which the LIBOR Rate is
determined as provided herein or a category of extensions of credit or other
assets of the Lender which includes a LIBOR Rate, or (iii) shall impose on the
Lender any restrictions on the amount of such a category of liabilities or
assets which the Agent may hold, then, in each such case, the Agent may, by
notice thereof to Borrowers, terminate the LIBOR option. Any portion of the Loan
subject thereto shall immediately bear interest thereafter at the Base Rate.
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2.4.4 INDEMNITY. The Borrowers jointly and
severally agree to indemnify and reimburse the Agent and the Lenders and to hold
the Agent and the Lenders harmless from any loss, cost (including administrative
costs) or expense which such Lenders may sustain or incur as a consequence of
(a) a default by the Borrowers in payment when due of the principal amount of or
interest on any LIBOR Loan, (b) the failure of the Borrowers to make, or convert
the Applicable Interest Rate of, a Loan after the Borrowers have given a Loan
Notice or an Interest Rate Election Notice, (c) the failure of the Borrowers to
make any prepayment of a LIBOR Loan after the Borrowers have given notice of
such intention to make such a prepayment, (d) the termination of the LIBOR
option pursuant to Section 2.4.3(b), and/or (e) the making by the Borrowers of a
prepayment of a LIBOR Loan on a day which is not the last day of the Interest
Period for such LIBOR Loan, calculated as provided in the following paragraph.
This agreement and covenant of the Borrowers shall survive termination or
expiration of this Agreement and payment of the other Obligations.
Notwithstanding the foregoing, the liability of the UK Subsidiary under this
Section 2.4.4 shall be limited only to the indemnity obligations relating solely
to the UK Obligations.
Contemporaneously with any prepayment of principal
of a LIBOR Loan, a prepayment fee shall be due and payable to the Lenders in an
amount equal to the PRODUCT of
(A) the amount so prepaid
MULTIPLIED BY
(B) THE DIFFERENCE (but not less than zero) of
(i) the constant maturity 360-day interest yield (as
of the first day of the then effective Interest Period and
expressed as a decimal) for a United States Treasury bill,
note, or bond (a "Treasury obligation") selected by the Agent,
in an aggregate amount comparable to the amount prepaid, and
having, as of the first day of the then effective Interest
Period, a remaining term approximately equal to the original
Interest Period,
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MINUS
(ii) the 360-day interest yield (as of the Business
Day immediately preceding the prepayment date and expressed as
a decimal) on such Treasury obligation and having, as of the
Business Day immediately preceding the prepayment date, a
remaining term until maturity approximately equal to the
unexpired portion of the Interest Period,
MULTIPLIED BY
(C) THE QUOTIENT of
(y) the number of calendar days in the unexpired
portion of the Interest Period, DIVIDED BY
(x) 360.
The applicable yields on the Treasury obligations described above shall be
determined based upon the Federal Reserve statistical release H.15 published for
the applicable determination dates set forth above. Any Treasury obligation
selected when the related Interest Period is one year or less shall be United
States Treasury Bills. The Lenders shall not be obligated or required to have
actually reinvested the prepaid amount of the LIBOR Loan in any such Treasury
obligation as a condition precedent to the Borrowers' being obligated to pay a
prepayment fee as outlined above. The Lenders shall not be obligated to accept
any prepayment of principal unless it is accompanied by the prepayment fee, if
any, due in connection therewith as calculated pursuant to the provisions of
this paragraph. No prepayment fee payable in connection herewith shall in any
event or under any circumstances be deemed or construed as a penalty.
2.4.5 PAYMENT OF INTEREST.
(a) Unpaid and accrued interest on any
advance of the Loans shall be paid monthly, in arrears, on the first day of
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each calendar month, commencing on the first such date after the date of this
Agreement, and on the first day of each calendar month thereafter, and at
maturity (whether by acceleration, declaration, extension or otherwise).
(b) Notwithstanding the foregoing, any and
all unpaid and accrued interest on any Base Rate Loan converted to a LIBOR Loan
or on any Base Rate Loan or LIBOR Loan prepaid shall be paid immediately upon
such conversion and/or prepayment, as appropriate.
SECTION 2.5 GENERAL FINANCING PROVISIONS.
2.5.1 BORROWERS' REPRESENTATIVES.
(a) The Borrowers hereby represent and
warrant to the Agent and the Lenders that each of them and their respective
Subsidiaries will derive benefits, directly and indirectly, from each Letter of
Credit and from each Loan, both in their separate capacity and as a member of
the integrated group to which each of the Borrowers and their Subsidiaries
belong and because the successful operation of the integrated group is dependent
upon the continued successful performance of the functions of the integrated
group as a whole, because (i) this financing is enabling the refinancing of the
Existing Credit Facilities, (ii) the terms of the consolidated financing
provided under this Agreement are more favorable than would otherwise would be
obtainable by the Borrowers or their Subsidiaries individually, and (iii) the
additional administrative and other costs and reduced flexibility associated
with individual financing arrangements which would otherwise be required if
obtainable would substantially reduce the value of the financing. The Revolving
Credit Borrowers in the discretion of their respective managements are to agree
among themselves as to the allocation of the benefits of Letters of Credit and
the proceeds of Revolving Loan advances, provided, however, that the Revolving
Credit Borrowers shall be deemed to have represented and warranted to the Agent
and the Lenders at the time of allocation that each benefit and use of proceeds
is a Permitted Use.
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(b) For administrative convenience, each
Borrower hereby irrevocably appoints the Parent as the Borrower's
attorney-in-fact, with power of substitution (with the prior written consent of
the Agent in the exercise of its sole and absolute discretion), in the name of
the Parent or in the name of any or all of the Borrowers or otherwise to take
any and all actions with respect to this Agreement, the other Financing
Documents, the Obligations and/or the Collateral (including, without limitation,
the proceeds thereof) as the Parent may so elect from time to time, including,
without limitation, actions to (i) request advances under the Loans, apply for
and direct the benefits of Letters of Credits, and direct the Agent to disburse
or credit the proceeds of any Loan directly to an account of the Parent, any one
or more of the Revolving Credit Borrowers or otherwise, which direction shall
evidence the making of such Loan and shall constitute the acknowledgement by
each of the Revolving Credit Borrowers of the receipt of the proceeds of such
Loan or the benefit of such Letter of Credit, (ii) enter into, execute, deliver,
amend, modify, restate, substitute, extend and/or renew this Agreement, any
Additional Borrower Joinder Supplement, any other Financing Documents, security
agreements, mortgages, deposit account agreements, instruments, certificates,
waivers, letter of credit applications, releases, documents and agreements from
time to time, and (iii) endorse any check or other item of payment in the name
of any or all of the Borrowers or in the name of the Parent. The foregoing
appointment is coupled with an interest, cannot be revoked without the prior
written consent of the Agent, and may be exercised from time to time through the
Parent's duly authorized officer, officers or other Person or Persons designated
by the Parent to act from time to time on behalf of the Parent.
(c) Each of the Revolving Credit Borrowers
hereby irrevocably authorizes each of the Lenders to make Loans to any one or
more all of the Revolving Credit Borrowers, and hereby irrevocably authorizes
the Agent to issue or cause to be issued Letters of Credit for the account of
any or all of the Revolving Credit Borrowers, pursuant to the provisions of this
Agreement upon the written, oral or telephone request any one or more of the
Persons who is from time to time a Responsible Officer of a Revolving Credit
Borrower under the provisions of the most recent
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certificate of corporate resolutions and/or incumbency of the Revolving Credit
Borrowers on file with the Agent and also upon the written, oral or telephone
request of any one of the Persons who is from time to time a Responsible Officer
of the Parent under the provisions of the most recent certificate of corporate
resolutions and/or incumbency for the Parent on file with the Agent.
(d) Neither the Agent nor any of the Lenders
assumes any responsibility or liability for any errors, mistakes, and/or
discrepancies in the oral, telephonic, written or other transmissions of any
instructions, orders, requests and confirmations between the Agent and the
Borrowers or the Agent and any of the Lenders in connection with the Credit
Facilities, any Loan, any Letter of Credit or any other transaction in
connection with the provisions of this Agreement, except for acts of gross
negligence or willful misconduct.
(e) Without implying any limitation on the
joint and several nature of the Obligations, the Lenders agree that,
notwithstanding any other provision of this Agreement, the Revolving Credit
Borrowers may create reasonable inter-company indebtedness between or among the
Revolving Credit Borrowers with respect to the allocation of the benefits and
proceeds of the advances and Credit Facilities under this Agreement. The
Revolving Credit Borrowers agree among themselves, and the Agent and the Lenders
consent to that agreement, that each Revolving Credit Borrower shall have rights
of contribution from all of the other Revolving Credit Borrowers to the extent
such Revolving Credit Borrower incurs Obligations in excess of the proceeds of
the Loans received by, or allocated to purposes for the direct benefit of, such
Revolving Credit Borrower. All such indebtedness and rights shall be, and are
hereby agreed by the Revolving Credit Borrowers to be, subordinate in priority
and payment to the indefeasible repayment in full in cash of the Obligations,
and, unless the Agent agrees in writing otherwise, shall not be exercised or
repaid in whole or in part until all of the Obligations have been indefeasibly
paid in full in cash. The Revolving Credit Borrowers agree that all of such
inter-company indebtedness and rights of contribution are part of the Collateral
and secure the Obligations. Each Revolving Credit Borrower hereby waives all
rights of counter-
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claim, recoupment and offset between or among themselves arising on account of
that indebtedness and otherwise. No Revolving Credit Borrower shall evidence the
inter-company indebtedness or rights of contribution by note or other
instrument, and shall not secure such indebtedness or rights of contribution
with any Lien or security.
2.5.2 COMPUTATION OF INTEREST AND FEES. All
applicable Fees and interest shall be calculated on the basis of a year of 360
days for the actual number of days elapsed. Any change in the interest rate on
any of the Obligations resulting from a change in the Base Rate shall become
effective as of the opening of business on the day on which such change in the
Base Rate is announced.
2.5.3 PAYMENTS. All payments of the
Obligations, including, without limitation, principal, interest, Prepayments,
and Fees, shall be paid by the Borrowers in Dollars without setoff or
counterclaim to the Agent (except as otherwise provided herein) at the Agent's
office specified in Section 9.1 in immediately available funds not later than
noon (Baltimore City Time) on the due date of such payment, subject to any
applicable grace or cure period set forth in Section 7.1.1. All payments
received by the Agent after such time shall be deemed to have been received by
the Agent for purposes of computing interest and Fees and otherwise as of the
next Business Day. Payments shall not be considered received by the Agent until
such payments are paid to the Agent in immediately available funds.
Unless the Agent shall have received notice from the Borrowers prior to
the date on which any payment is due to the Agent that the Borrowers will not
make such payment in full, the Agent may assume that the Borrowers have made
such payment in full to the Agent on such date and the Agent in its sole
discretion may, in reliance upon such assumption, cause to be distributed to
each Lender on such due date an amount equal to the amount then due such Lender.
If and to the extent the Borrowers shall not have so made such payment in full
to the Agent and the Agent shall have distributed to any Lender all or any
portion of such amount, such Lender shall repay to the Agent on demand the
amount so distributed to such Lender, together with interest thereon at the
Federal Funds Rate,
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for each day from the date such amount is distributed to such Lender until the
date such Lender repays such amount to the Agent.
All payments to be made by the Borrowers to the Agent and/or any of the
Lenders under this Agreement or any of the other Financing Documents shall be
made in Dollars, without set-off or counterclaim and free and clear of, and
without deduction for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions, withholdings or
restrictions or conditions of any nature whatsoever now or hereafter imposed,
levied, collected, withheld or assessed against any of the Borrowers, other than
income and franchise taxes imposed on the Agent or any Lender (the
"Assessments"). If any Assessments are imposed and required to be withheld from
any such payment, the Borrowers shall either (i) increase the amount of such
payment so that the Agent for the benefit of the Lenders will receive a net
amount (after giving effect to the payment of such additional amount and to the
deduction of all Assessments) equal to the amount due hereunder, or (ii) pay
such Assessments to the appropriate taxing authority for the account of the
Agent and the Lenders, and, as promptly as possible thereafter, send the Agent
an original receipt (or a copy thereof that has been stamped by the appropriate
taxing authority to certify payment) showing payment thereof, together with such
additional documentary evidence as the Agent or any of the Lenders may from time
to time reasonably require. If any of the Borrowers fail to perform its
obligations to the Agent and the Lenders under parts (i) or (ii) of the
preceding sentence, the Borrowers shall indemnify the Agent and the Lenders for
any such Assessments that are paid by the Agent and/or any of the Lenders, plus
all incremental Assessments, interest or penalties that may become payable as a
consequence of such failure. Notwithstanding the foregoing, the liability of the
UK Subsidiary under this Section 2.5.3 shall be limited only to the indemnity
obligations relating solely to the UK Obligations.
2.5.4 SETOFF. Without implying any limitation
on any other rights the Agent and/or the Lenders may have under the Financing
Documents or applicable Laws, during the continuance of an Event of Default, the
Agent is hereby authorized by the Borrowers at any time and from time to time,
without notice to the
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Borrowers, to set off, appropriate and apply any or all items hereinabove
referred to against all Obligations (including, without limitation, the Agent's
Obligations) then outstanding (whether or not then due), all in such order and
manner as shall be determined by the Agent in its sole and absolute discretion,
except that any set off against any such items owned by the UK Subsidiary shall
be applied only to the UK Obligations.
2.5.5 REQUIREMENTS OF LAW. In the event that
any Lender shall have determined in its reasonable credit judgment and in good
faith that (a) the adoption of any Laws regarding capital adequacy, or (b) any
change therein or in the interpretation or application thereof or (c) compliance
by such Lender or any corporation controlling such Lender with any request or
directive regarding capital adequacy (whether or not having the force of law)
from any central bank or Governmental Authority, does or shall have the effect
of reducing the rate of return on the capital of such Lender or any corporation
controlling such Lender (other than assessments and reserves taken into account
in determining the interest rate applicable to LIBOR Loans), as a consequence of
the obligations of the such Lender hereunder to a level below that which such
Lender or any corporation controlling such Lender would have achieved but for
such adoption, change or compliance (taking into consideration the policies of
such Lender and the corporation controlling such Lender, with respect to capital
adequacy) by an amount deemed by such Lender to be material in the exercise of
its good faith, reasonable credit judgment, then from time to time, after
submission by such Lender to the Borrowers of a written request therefor and a
statement of the basis for such determination, the Borrowers shall pay to such
Lender such additional amount or amounts in order to compensate for such
reduction, except that the liability of the UK Subsidiary hereunder shall be
limited to any such reduction relating solely to the UK Obligations.
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2.5.6 FUNDS TRANSFER SERVICES.
(a) Each Borrower acknowledges that the
Agent has made available to the Borrowers Wire Transfer Procedures, a copy of
which is attached to this Agreement as EXHIBIT "C", and which include a
description of security procedures regarding funds transfers executed by the
Agent or an Affiliate bank at the request of the Borrowers (the "Security
Procedures"). Each Borrower further acknowledges that the full scope of the
Security Procedures which the Agent or such Affiliate bank offers and strongly
recommends for funds transfers is available only if the Borrowers communicate
directly with the Agent or such Affiliate bank as applicable in accordance with
said procedures. If a Borrower attempts to communicate by any other method or
otherwise not in accordance with the Security Procedures, the Agent or such
Affiliate bank, as applicable, shall not be required to execute such
instructions, but if the Agent or such Affiliate bank, as applicable, does so,
the Borrowers will be deemed to have refused the Security Procedures that the
Agent or such Affiliate bank as applicable offers and strongly recommends, and
the Borrowers will be bound by any funds transfer, whether or not authorized,
which is issued in any Borrower's name and accepted by the Agent or such
Affiliate bank, as applicable, in good faith. The Agent or such Affiliate bank,
as applicable, may modify Wire Transfer Procedures including, without
limitation, the Security Procedures at such time or times and in such manner as
the Agent or such Affiliate bank, as applicable, in its sole discretion, deems
appropriate to meet prevailing standards of good banking practice. By continuing
to use the Agent's or such Affiliate bank's, as applicable, wire transfer
services after receipt of any modification of the Wire Transfer procedures
including, without limitation, the Security Procedures, each Borrower agrees
that the Security Procedures, as modified, are likewise commercially reasonable.
Each Borrower further agrees to establish and maintain procedures to safeguard
the Security Procedures and any information related thereto. Neither the Agent
nor any Affiliate of the Agent is responsible for detecting any error in payment
order sent by any Borrower to the Agent or any of the Lenders.
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(b) The Agent or such Affiliate bank,
as applicable, will generally use the Fedwire funds transfer system for domestic
funds transfers, and the funds transfer system operated by the Society for
Worldwide International Financial Telecommunication (SWIFT) for international
funds transfers. International funds transfers may also be initiated through the
Clearing House InterBank Payment System (CHIPs) or international cable. However,
the Agent or such Affiliate bank, as applicable, may use any means and routes
that the Agent or such Affiliate bank, as applicable, in its sole discretion,
may consider suitable for the transmission of funds. Each payment order, or
cancellation thereof, carried out through a funds transfer system or a
clearinghouse will be governed by all applicable funds transfer system rules and
clearing house rules and clearing arrangements, whether or not the Agent or such
Affiliate bank, as applicable, is a member of the system, clearinghouse or
arrangement and each Borrower acknowledges that the Agent's or such Affiliate
bank's, as applicable, right to reverse, adjust, stop payment or delay posting
of an executed payment order is subject to the laws, regulations, rules,
circulars and arrangements described herein.
2.5.7 GUARANTY.
(a) Each Revolving Credit Borrower
hereby unconditionally and irrevocably, guarantees to the Agent and the Lenders:
(i) the due and punctual payment in
full (and not merely the collectibility) by the other Borrowers,
including, the UK Subsidiary, of the Obligations (including the UK
Obligations), including unpaid and accrued interest thereon, in each
case when due and payable, all according to the terms of this
Agreement, the Notes and the other Financing Documents;
(ii) the due and punctual payment in
full (and not merely the collectibility) by the other Borrowers,
including, the UK Subsidiary, of all other sums and charges which may
at any time be due and payable in accordance with
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this Agreement, the Notes or any of the other Financing Documents;
(iii) the due and punctual
performance by the other Borrowers, including, the UK Subsidiary, of
all of the other terms, covenants and conditions contained in the
Financing Documents; and
(iv) all the other Obligations of
the other Borrowers, including, the UK Subsidiary.
(b) The obligations and liabilities of
each Revolving Credit Borrower as a guarantor under this Section 2.5.7 shall be
absolute and unconditional and joint and several, irrespective of the
genuineness, validity, priority, regularity or enforceability of this Agreement,
any of the Notes or any of the Financing Documents or any other circumstance
which might otherwise constitute a legal or equitable discharge of a surety or
guarantor. Each Revolving Credit Borrower in its capacity as a guarantor
expressly agrees that the Agent and the Lenders may, in their sole and absolute
discretion, without notice to or further assent of such Revolving Credit
Borrower and without in any way releasing, affecting or in any way impairing the
joint and several obligations and liabilities of such Revolving Credit Borrower
as a guarantor hereunder:
(i) waive compliance with, or any
defaults under, or grant any other indulgences under or with respect to
any of the Financing Documents;
(ii) modify, amend, change or
terminate any provisions of any of the Financing Documents;
(iii) grant extensions or renewals
of or with respect to the Credit Facilities, the Notes or any of the
other Financing Documents;
(iv) effect any release,
subordination, compromise or settlement in connection with this
Agreement, any of the Notes or any of the other Financing Documents;
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(v) agree to the substitution,
exchange, release or other disposition of the Collateral or any part
thereof, or any other collateral for the Loan or to the subordination
of any lien or security interest therein;
(vi) make advances for the purpose
of performing any term, provision or covenant contained in this
Agreement, any of the Notes or any of the other Financing Documents
with respect to which any of the Borrowers shall then be in default;
(vii) make future advances pursuant
to the Financing Agreement or any of the other Financing Documents;
(viii) assign, pledge, hypothecate
or otherwise transfer the Commitments, the Obligations, the Notes, any
of the other Financing Documents or any interest therein, all as and to
the extent permitted by the provisions of this Agreement;
(ix) deal in all respects with the
other Borrowers as if this Section 2.5.7 were not in effect; and
(x) effect any release, compromise
or settlement with any of the other Borrowers, whether in their
capacity as a Borrower or as a guarantor under this Section 2.5.7, or
any other guarantor.
(c) The obligations and liabilities of
each Revolving Credit Borrower, as guarantor under this Section 2.5.7, shall be
primary, direct and immediate, shall not be subject to any counterclaim,
recoupment, set off, reduction or defense based upon any claim that a Revolving
Credit Borrower may have against any one or more of the other Borrowers, the
Agent, any one or more of the Lenders and/or any other guarantor and shall not
be conditional or contingent upon pursuit or enforcement by the Agent or other
Lenders of any remedies it may have against the Borrowers with respect to this
Agreement, the Notes or any of the other Financing Documents, whether pursuant
to the terms thereof or by operation of
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law. Without limiting the generality of the foregoing, the Agent and the Lenders
shall not be required to make any demand upon any of the Borrowers, or to sell
the Collateral or otherwise pursue, enforce or exhaust its or their remedies
against the Borrowers or the Collateral either before, concurrently with or
after pursuing or enforcing its rights and remedies hereunder. Any one or more
successive or concurrent actions or proceedings may be brought against each
Revolving Credit Borrower under this Section 2.5.7, either in the same action,
if any, brought against any one or more of the Revolving Credit Borrowers or in
separate actions or proceedings, as often as the Agent may deem expedient or
advisable. Without limiting the foregoing, it is specifically understood that
any modification, limitation or discharge of any of the liabilities or
obligations of any one or more of the Revolving Credit Borrowers, any other
guarantor or any obligor under any of the Financing Documents, arising out of,
or by virtue of, any bankruptcy, arrangement, reorganization or similar
proceeding for relief of debtors under federal or state law initiated by or
against any one or more of the Revolving Credit Borrowers, in their respective
capacities as borrowers and guarantors under this Section 2.5.7, or under any of
the Financing Documents shall not modify, limit, lessen, reduce, impair,
discharge, or otherwise affect the liability of each Revolving Credit Borrower
under this Section 2.5.7 in any manner whatsoever, and this Section 2.5.7 shall
remain and continue in full force and effect. It is the intent and purpose of
this Section 2.5.7 that each Revolving Credit Borrower shall and does hereby
waive all rights and benefits which might accrue to any other guarantor by
reason of any such proceeding, and the Revolving Credit Borrowers agree that
they shall be liable for the full amount of the obligations and liabilities
under this Section 2.5.7, regardless of, and irrespective to, any modification,
limitation or discharge of the liability of any one or more of the Borrowers,
any other guarantor or any obligor under any of the Financing Documents, that
may result from any such proceedings.
(d) Each Revolving Credit Borrower, as
guarantor under this Section 2.5.7, hereby unconditionally, jointly and
severally, irrevocably and expressly waives:
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(i) presentment and demand for
payment of the Obligations and protest of non-payment;
(ii) notice of acceptance of this
Section 2.5.7 and of presentment, demand and protest thereof;
(iii) notice of any default
hereunder or under the Notes or any of the other Financing Documents
and notice of all indulgences;
(iv) notice of any increase in the
amount of any portion of or all of the indebtedness guaranteed by this
Section 2.5.7;
(v) demand for observance,
performance or enforcement of any of the terms or provisions of this
Section 2.5.7, the Notes or any of the other Financing Documents;
(vi) all errors and omissions in
connection with the Agent's administration of all indebtedness
guaranteed by this Section 2.5.7, except errors and omissions resulting
from acts of gross negligence or willful misconduct;
(vii) any right or claim of right to
cause a marshalling of the assets of any one or more of the other
Borrowers;
(viii) any act or omission of the
Agent or the Lenders which changes the scope of the risk as guarantor
hereunder; and
(ix) all other notices and demands
otherwise required by law which the Revolving Credit Borrowers may
lawfully waive.
(e) Within ten (10) days following any
request of the Agent so to do, each Revolving Credit Borrower will furnish the
Agent and the Lenders and such other persons as the Agent may direct with a
written certificate, duly acknowledged stating in
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detail whether or not any credits, offsets or defenses exist with respect to
this Section 2.5.7.
SECTION 2.6 SETTLEMENT AMONG LENDERS.
2.6.1 REVOLVING LOAN. It is agreed that each
Lender's Net Outstandings are intended by the Lenders to be equal at all times
to such Lender's Revolving Credit Pro Rata Share of the aggregate outstanding
principal amount of the Revolving Loan outstanding. Notwithstanding such
agreement, the several and not joint obligation of each Lender to fund the
Revolving Loan made in accordance with the terms of this Agreement ratably in
accordance with such Lender's Revolving Credit Pro Rata Share and each Lender's
right to receive its ratable share of principal payments on the Revolving Loan
in accordance with its Revolving Credit Pro Rata Share, the Lenders agree that
in order to facilitate the administration of this Agreement and the Financing
Documents that settlement among them may take place on a periodic basis in
accordance with the provisions of this Section 2.6.
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2.6.2 SETTLEMENT PROCEDURES AS TO REVOLVING LOAN.
(a) IN GENERAL. To the extent and in the
manner hereinafter provided in this Section 2.6.2, settlement among the Lenders
as to the Revolving Loan may occur periodically on Settlement Dates determined
from time to time by the Agent, which may occur before or after the occurrence
or during the continuance of a Default or Event of Default and whether or not
all of the conditions set forth in Section 5.2 have been met. On each Settlement
Date payments shall be made by or to NationsBank and the other Lenders in the
manner provided in this Section 2.6.2 in accordance with the Settlement Report
delivered by the Agent pursuant to the provisions of this Section 2.6.2 in
respect of such Settlement Date so that as of each Settlement Date, and after
giving effect to the transactions to take place on such Settlement Date, each
Lender's Net Outstandings shall equal such Lender's Revolving Credit Pro Rata
Share of the Revolving Loan outstanding.
(b) SELECTION OF SETTLEMENT DATES. If the
Agent elects, in its discretion, but subject to the consent of NationsBank, to
settle accounts among the Lenders with respect to principal amounts of Revolving
Loan less frequently than each Business Day, then the Agent shall designate
periodic Settlement Dates which may occur on any Business Day after the Closing
Date; PROVIDED, HOWEVER, that the Agent shall designate as a Settlement Date any
Business Day which is an Interest Payment Date; and PROVIDED FURTHER, that a
Settlement Date shall occur at least once during each seven-day period. The
Agent shall designate a Settlement Date by delivering to each Lender a
Settlement Report not later than 12:00 noon (Baltimore City Time) on the
proposed Settlement Date, which Settlement Report shall be with respect to the
period beginning on the next preceding Settlement Date and ending on such
designated Settlement Date.
(c) NON-RATABLE LOANS AND PAYMENTS. Between
Settlement Dates, the Agent shall request and NationsBank may (but shall not be
obligated to) advance to the Revolving Credit Borrowers out of NationsBank's own
funds, the entire principal amount of any advance under the Revolving Loan
requested or deemed
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requested pursuant to Section 2.1.2 (any such advance under the Revolving Loan
being referred to as a "Non-Ratable Loan"). The making of each Non-Ratable Loan
by NationsBank shall be deemed to be a purchase by NationsBank of a 100%
participation in each other Lender's Revolving Credit Pro Rata Share of the
amount of such Non-Ratable Loan. All payments of principal, interest and any
other amount with respect to such Non-Ratable Loan shall be payable to and
received by the Agent for the account of NationsBank. Upon demand by
NationsBank, with notice to the Agent, each other Lender shall pay to
NationsBank, as the repurchase of such participation, an amount equal to 100% of
such Lender's Revolving Credit Pro Rata Share of the principal amount of such
Non-Ratable Loan. Any payments received by the Agent between Settlement Dates
which in accordance with the terms of this Agreement are to be applied to the
reduction of the outstanding principal balance of Revolving Loan, shall be paid
over to and retained by NationsBank for such application, and such payment to
and retention by NationsBank shall be deemed, to the extent of each other
Lender's Revolving Credit Pro Rata Share of such payment, to be a purchase by
each such other Lender of a participation in the advance under the Revolving
Loan (including the repurchase of participations in Non-Ratable Loans) made by
NationsBank. Upon demand by another Lender, with notice thereof to the Agent,
NationsBank shall pay to the Agent, for the account of such other Lender, as a
repurchase of such participation, an amount equal to such other Lender's
Revolving Credit Pro Rata Share of any such amounts (after application thereof
to the repurchase of any participations of NationsBank in such other Lender's
Revolving Credit Pro Rata Share of any Non-Ratable Loans) paid only to
NationsBank by the Agent.
(d) NET DECREASE IN OUTSTANDINGS. If on any
Settlement Date the increase, if any, in the Dollar amount of any Lender's Net
Outstandings which is required to comply with the first sentence of Section
2.6.1 is less than such Lender's Revolving Credit Pro Rata Share of amounts
received by the Agent but paid only to NationsBank since the next preceding
Settlement Date, such Lender and the Agent, in their respective records, shall
apply such Lender's Revolving Credit Pro Rata Share of such amounts to the
increase in such Lender's Net Outstandings, and NationsBank
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shall pay to the Agent, for the account of such Lender, the excess allocable to
such Lender.
(e) NET INCREASE IN OUTSTANDINGS. If on any
Settlement Date the increase, if any, in the dollar amount of any Lender's Net
Outstandings which is required to comply with the first sentence of Section
2.6.1 exceeds such Lender's Revolving Credit Pro Rata Share of amounts received
by the Agent but paid only to NationsBank since the next preceding Settlement
Date, such Lender and the Agent, in their respective records, shall apply such
Lender's Revolving Credit Pro Rata Share of such amounts to the increase in such
Lender's Net Outstandings, and such Lender shall pay to the Agent, for the
account of NationsBank, any excess.
(f) NO CHANGE IN OUTSTANDINGS. If a
Settlement Report indicates that no advance under the Revolving Loan has been
made during the period since the next preceding Settlement Date, then such
Lender's Revolving Credit Pro Rata Share of any amounts received by the Agent
but paid only to NationsBank shall be paid by NationsBank to the Agent, for the
account of such Lender. If a Settlement Report indicates that the increase in
the dollar amount of a Lender's Net Outstandings which is required to comply
with the first sentence of Section 2.6.1 is exactly equal to such Lender's
Revolving Credit Pro Rata Share of amounts received by the Agent but paid only
to NationsBank since the next preceding Settlement Date, such Lender and the
Agent, in their respective records, shall apply such Lender's Revolving Credit
Pro Rata Share of such amounts to the increase in such Lender's Net
Outstandings.
(g) RETURN OF PAYMENTS. If any amounts
received by NationsBank in respect of the Obligations are later required to be
returned or repaid by NationsBank to the Borrowers or any other obligor or their
respective representatives or successors in interest, whether by court order,
settlement or otherwise, in excess of the NationsBank's Revolving Credit Pro
Rata Share of all such amounts required to be returned by all Lenders, each
other Lender shall, upon demand by NationsBank with notice to the Agent, pay to
the Agent for the account of NationsBank, an amount equal to the excess of such
Lender's Revolving Credit Pro
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Rata Share of all such amounts required to be returned by all Lenders over the
amount, if any, returned directly by such Lender.
(h) PAYMENTS TO AGENT, LENDERS.
(i) Payment by any Lender to the
Agent shall be made not later than 2:00 p.m. (Baltimore City Time) on the
Business Day such payment is due, PROVIDED that if such payment is due on demand
by another Lender, such demand is made on the paying Lender not later than 10:00
a.m. (Baltimore City Time) on such Business Day. Payment by the Agent to any
Lender shall be made by wire transfer, promptly following the Agent's receipt of
funds for the account of such Lender and in the type of funds received by the
Agent, PROVIDED that if the Agent receives such funds at or prior to 12:00 p.m.
noon (Baltimore City Time), the Agent shall pay such funds to such Lender by
2:00 p.m. (Baltimore City Time) on such Business Day. If a demand for payment is
made after the applicable time set forth above, the payment due shall be made by
2:00 p.m. (Baltimore City Time) on the first Business Day following the date of
such demand.
(ii) If a Lender shall, at any time,
fail to make any payment to the Agent required hereunder, the Agent may, but
shall not be required to, retain payments that would otherwise be made to such
Lender hereunder and apply such payments to such Lender's defaulted obligations
hereunder, at such time, and in such order, as the Agent may elect in its sole
discretion.
(iii) With respect to the payment of
any funds under this Section 2.6.2, whether from the Agent to a Lender or from a
Lender to the Agent, the party failing to make full payment when due pursuant to
the terms hereof shall, upon demand by the other party, pay such amount together
with interest on such amount at the Federal Funds Rate.
2.6.3 SETTLEMENT OF OTHER OBLIGATIONS. All
other amounts received by the Agent on account of, or applied by the Agent to
the payment of, any Obligation owed to the Lenders (including, without
limitation, Fees payable to the Lenders and proceeds from the sale of, or other
realization upon, all or any
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part of the Collateral following an Event of Default) that are received by the
Agent not later than 11:00 a.m. (Baltimore City Time) on a Business Day will be
paid by the Agent to each Lender on the same Business Day, and any such amounts
that are received by the Agent after 11:00 a.m. (Baltimore City Time) will be
paid by the Agent to each Lender on the following Business Day. Unless otherwise
stated herein, the Agent shall distribute Fees payable to the Lenders ratably to
the Lenders based on each Lender's Revolving Credit Pro Rata Share and shall
distribute proceeds from the sale of, or other realization upon, all or any part
of the Collateral following an Event of Default ratably to the Lenders based on
the amount of the Obligations then owing to each Lender.
2.6.4 PRESUMPTION OF PAYMENT.
(a) Unless the Agent shall have received
notice from a Lender prior to 12:00 p.m. noon (Baltimore City Time) on the date
of the requested date for the making of advances under the Revolving Loan that
such Lender will not make available to the Agent, such Lender's Revolving Credit
Pro Rata Share of the advances to be made on such date, the Agent may assume
that such Lender has made such amount available to the Agent on such date in
accordance with this Section 2.6, and the Agent, in its sole discretion may, in
reliance upon such assumption, make available to the Revolving Credit Borrowers
on such date a corresponding amount on behalf of such Lender.
(b) If and to the extent such Lender shall
not have so made available to the Agent its Revolving Credit Pro Rata Share of
the advances under the Revolving Loan made on such date, and the Agent shall
have so made available to the Revolving Credit Borrowers a corresponding amount
on behalf of such Lender, such Lender shall, on demand, pay to the Agent such
corresponding amount, together with interest thereon, at the Federal Funds Rate,
for each day from the date such corresponding amount shall have been so
available by the Agent to the Revolving Credit Borrowers until the date such
amount shall have been repaid to the Agent. Such Lender shall not be entitled to
payment of any interest which accrues on the amount made available by the Agent
to the Revolving Credit Borrowers for the account of such Lender until such time
as
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such Lender reimburses the Agent for such amount, together with interest
thereon, as provided in this Section 2.6.4.
(c) A certificate of the Agent submitted to
any Lender with respect to any amounts owing to the Agent by such Lender under
this Section 2.6 shall be conclusive and binding on such Lender, absent manifest
error. If such Lender does not pay such amounts to the Agent promptly upon the
Agent's demand, the Agent shall promptly notify the Revolving Credit Borrowers
of such Lender's failure to make payment, and the Revolving Credit Borrowers
shall immediately repay such amounts to the Agent, together with accrued
interest thereon at the applicable rate on the Revolving Loan, all without
prejudice to the rights and remedies of the Agent against any defaulting Lender.
Any and all amounts due and payable to the Agent by the Revolving Credit
Borrowers under this Section 2.6 constitute and shall be part of the Agent's
Obligations.
(d) Unless the Agent shall have received
notice from the Borrowers prior to the date on which any payment is due to the
Agent that the Borrowers will not make such payment in full, the Agent may
assume that the Borrowers have made such payment in full to the Agent on such
date and the Agent in its sole discretion may, in reliance upon such assumption,
cause to be distributed to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent the Borrowers shall not have
so made such payment in full to the Agent and the Agent shall have distributed
to any Lender all or any portion of such amount, such Lender shall repay to the
Agent on demand the amount so distributed to such Lender, together with interest
thereon at the Federal Funds Rate, for each day from the date such amount is
distributed to such Lender until the date such Lender repays such amount to the
Agent.
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ARTICLE 3
THE COLLATERAL
SECTION 3.1 DEBT AND OBLIGATIONS SECURED. All property and Liens
assigned, pledged or otherwise granted under or in connection with this
Agreement (including, without limitation, those under Section 3.2 (Grant of
Liens) below) or any of the Financing Documents shall secure (a) the payment of
all of the Obligations, including, without limitation, any and all Outstanding
Letter of Credit Obligations, the UK Obligations, and any and all Agent's
Obligations, and (b) the performance, compliance with and observance by the
Borrowers and the Mexican Subsidiary of the provisions of this Agreement and all
of the other Financing Documents or otherwise under the Obligations. The
security interest and Lien of each Lender in such property shall rank equally in
priority with the interest of each other Lender, but the security interest and
Lien of the Agent with respect to the Agent's Obligations shall be superior and
paramount to the security interest and Lien of the Lenders.
SECTION 3.2 GRANT OF LIENS. Each of the Revolving Credit Borrowers
hereby assigns, pledges and grants to the Agent, for the ratable benefit of the
Lenders and for the benefit of the Agent with respect to the Agent's
Obligations, and agrees that the Agent and the Lenders shall have a continuing
security interest in, and Lien on, (a) all of such Revolving Credit Borrowers'
Accounts, Inventory, Chattel Paper, Documents, Instruments, Equipment,
Securities, and General Intangibles, whether now owned or existing or hereafter
acquired or arising, (b) all returned, rejected or repossessed goods, the sale
or lease of which shall have given or shall give rise to an Account or Chattel
Paper, (c) all insurance policies relating to the foregoing, (d) all books and
records in whatever media (paper, electronic or otherwise) recorded or stored,
with respect to the foregoing and all equipment and general intangibles
necessary or beneficial to retain, access and/or process the information
contained in those books and records, and (e) all cash and non-cash proceeds and
products of the foregoing. Each of the Revolving Credit Borrowers further agrees
that the Agent, for the ratable benefit of the Lenders and for the benefit
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of the Agent with respect to the Agent's Obligations, shall have in respect
thereof all of the rights and remedies of a secured party under the Uniform
Commercial Code as well as those provided in this Agreement, under each of the
other Financing Documents and under applicable Laws.
Without implying any limitation to the foregoing, as additional
Collateral and security for the Obligations, each of the Revolving Credit
Borrowers hereby pledges, assigns and grants to the Agent, for the ratable
benefit of the Lenders and for the benefit of the Agent with respect to the
Agent's Obligations, an assignment of, security interest in, and Lien on, all of
its respective rights, title and interest in, to, and under, the Tax Refunds.
In addition, the Revolving Credit Borrowers hereby grant to the Agent
and to the Lenders a continuing Lien for all of the Obligations (including,
without limitation, the Agent's Obligations) upon any and all monies,
securities, and other property of the Revolving Credit Borrowers and the
proceeds thereof, now or hereafter held or received by or in transit to, the
Agent, any of the Lenders, and/or any Affiliate of the Agent and/or any of the
Lenders, from or for the Revolving Credit Borrowers, and also upon any and all
deposit accounts (general or special) and credits of the Revolving Credit
Borrowers, if any, with the Agent, any of the Lenders or any Affiliate of the
Agent or any of the Lenders, at any time existing, excluding any deposit
accounts held by the Revolving Credit Borrowers in their capacity as trustee for
Persons who are not Borrowers or Affiliates or Subsidiaries of the Borrowers.
The Agent, the Lenders and the Borrowers agree that this Article 3 is
intended to grant and govern Liens on the assets of all of the Revolving Credit
Borrowers. The UK Security Documents are intended to grant Liens on the Assets
of the UK Subsidiary to the Agent and the Lenders with respect only to the UK
Obligations. No Australian Security Documents shall be executed and delivered
except as and to the extent required by Section 3.4.3. The Mexican Security
Documents are intended to grant Liens on the Assets covered by the Mexican
Security Documents to the Agent and the
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Lenders with respect to all of the Obligations, excluding the UK Obligations.
Any and all references to Collateral included elsewhere in this Agreement (other
than in this Article 3) are intended to include and govern the Collateral of all
of the Borrowers and the Mexican Subsidiary, whether the Liens on such
Collateral arise under the provisions of this Agreement or under any of the
other Security Documents.
SECTION 3.3 COLLATERAL DISCLOSURE LIST. On or prior to the Closing
Date, the Borrowers shall deliver and shall cause the Mexican Subsidiary and the
Australian Subsidiary to deliver to the Agent a list (the "Collateral Disclosure
List") which shall contain such information with respect to each of their
respective businesses and real and personal property as the Agent may require
and shall be certified by a Responsible Officer, all in the form provided to the
Borrowers by the Agent. Promptly after demand by the Agent, the Borrowers, as
appropriate, shall furnish to the Agent an update of the information contained
in the Collateral Disclosure List at any time and from time to time as may be
requested by the Agent.
SECTION 3.4 PERSONAL PROPERTY. Subject to the provisions and
limitations of Section 3.2, the Borrowers acknowledge and agree that it is the
intention of the parties to this Agreement that the Agent, for the ratable
benefit of the Lenders and for the benefit of the Agent with respect to the
Agent's Obligations, shall have a first priority, perfected Lien, in form and
substance satisfactory to the Agent and its counsel, on all of the personal
property of the Borrowers and the Mexican Subsidiary of any kind and nature
whatsoever, whether now owned or hereafter acquired, subject only to the
Permitted Liens, if any. In furtherance of the foregoing, but subject to the
provisions of Section 3.2:
3.4.1 SECURITIES, CHATTEL PAPER, PROMISSORY
NOTES, ETC.
(a) On the Closing Date and without implying
any limitation on the scope of Section 3.2 (Grant of Liens) above, each of the
Borrowers shall deliver to the Agent, for the ratable benefit of the Lenders and
for the benefit of the Agent with
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respect to the Agent's Obligations, but only if and to the extent requested by
the Agent, all originals of all of the Borrower's letters of credit, Securities,
Chattel Paper, Documents and Instruments and, if the Agent so requires, shall
execute and deliver a separate pledge, assignment and security agreement in form
and content acceptable to the Agent, which pledge, assignment and security
agreement shall assign, pledge and grant a Lien to the Agent, for the ratable
benefit of the Lenders and for the benefit of the Agent with respect to the
Agent's Obligations on all of each Borrower's letters of credit, Securities,
Chattel Paper, Documents and Instruments.
(b) In the event that any of the Borrowers
shall acquire after the Closing Date any letters of credit, Securities, Chattel
Paper, Documents or Instruments, each such Borrower shall promptly so notify the
Agent and, if and to the extent requested by the Agent, deliver the originals of
all of the foregoing to the Agent promptly and in any event within ten (10) days
of each acquisition.
(c) As and to the extent required by the
provisions of this Section, all letters of credit, Securities, Chattel Paper,
Documents and Instruments shall be delivered to the Agent endorsed and/or
assigned as required by the pledge, assignment and security agreement and/or as
the Agent may require and, if applicable, shall be accompanied by blank
irrevocable and unconditional stock or bond powers.
3.4.2 PROPRIETARY RIGHTS AND OTHER PROPERTY
REQUIRING ADDITIONAL STEPS TO PERFECT.
On the Closing Date and without implying any limitation on the scope of
Section 3.2 above, the Borrowers shall execute and deliver all Financing
Documents and take all actions requested by the Agent in order to perfect a
first priority assignment of domestic Patents, Copyrights, Trademarks, customer
lists or any other type or kind of intellectual property, including, without
limitation, rights under the First Alert License Agreement, acquired by any of
the Borrowers after the Closing Date and included in the Collateral.
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Each Borrower hereby grants to the Agent the nonexclusive right and
license after and during the continuance of an Event of Default to use any and
all Proprietary Rights of each of the Borrowers for the purposes set forth in
Section 7.2 of this Agreement and for the purpose of enabling the Agent to
process and realize on the Collateral and to permit any purchaser of any portion
of the Collateral through a foreclosure sale or any other exercise of the rights
and remedies of the Agent and/or any of the Lenders under this Agreement, under
any of the Financing Documents or under applicable Laws, to use, sell or
otherwise dispose of the Collateral. Such right and license is granted free of
charge, without the requirement that any monetary payment whatsoever be made to
the Borrowers or any other Person by the Agent, any Lender or any purchaser or
purchasers of the Collateral. Each Borrower hereby represents, warrants,
covenants and agrees that it presently has, and shall continue to have, the
right, without the approval or consent of others (other than the other
Borrowers) to grant the license set forth in this Section and each Borrower
hereby consents to the granting of such license by the other Borrowers.
3.4.3 AUSTRALIAN COLLATERAL. Notwithstanding
the foregoing or any other provision of this Agreement, the Agent and the
Lenders agree that as of the Closing Date, the Australian Subsidiary shall not
be required to grant to the Agent for the ratable benefit of the Lenders a Lien
on, security interest in, or assignment or pledge of, any Assets or properties
of the Australian Subsidiary as collateral for the Obligations. The Australian
Subsidiary covenants and agrees, however, that within ten (10) days following
written demand by the Agent at any time following the occurrence of an Event of
Default, the Australian Subsidiary shall execute and deliver any and all
Australian Security Documents as shall be reasonably required by the Agent to
grant to the Agent for the ratable benefit of the Lenders a Lien on and security
interest in all Assets and properties of the Australian Subsidiary located in
Australia. The Australian Subsidiary agrees that the Australian Security
Documents shall be in form and content reasonably acceptable to the Agent. All
reasonable fees (including reasonably attorneys' fees), costs and expenses
incurred by the Agent in connection with the execution, delivery and recordation
of the Australian Security Documents shall be payable by the Revolving
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Credit Borrowers to the Agent within ten (10) days following demand, including,
without limitation, any and all Taxes resulting from the recordation,
registration or filing of any Australian Security Documents and shall be deemed
part of the Administration Costs.
SECTION 3.5 RECORD SEARCHES. As of the Closing Date and thereafter at
the time any Financing Document is executed and delivered by any of the
Borrowers or the Mexican Subsidiary pursuant to this Section, the Agent shall
have received, in form and substance satisfactory to the Agent, such Lien or
record searches with respect to any or all of the Borrowers and/or any other
Person, as appropriate, and the property covered by such Financing Document
showing that the Lien of such Financing Document will be a perfected first
priority Lien on the property covered by such Financing Document subject only to
Permitted Liens or to such other matters as the Agent may approve.
SECTION 3.6 REAL PROPERTY. Subject to the provisions of Section 3.2,
the Borrowers acknowledge and agree that it is the intention of the parties to
this Agreement that the Agent, for the ratable benefit of the Lenders and for
the benefit of the Agent with respect to the Agent's Obligations, shall have a
first priority, perfected Lien, in form and substance satisfactory to the Agent
and its counsel, on all of each Borrower's real property of any kind and nature
whatsoever, whether now owned or hereafter acquired, subject only to the
Permitted Liens, if any.
With respect to each parcel of real property now owned by any
of the Borrowers, each of the Borrowers, as appropriate, shall on the Closing
Date execute and deliver a deed of trust or a mortgage or other document, as
appropriate, which deed of trust, mortgage and/or other document shall be
included among the Financing Documents. With respect to real property acquired
by any of the Borrowers after the Closing Date, each of the Borrowers, as
appropriate, shall, promptly after acquisition thereof, grant a Lien covering
such real property to the Agent, for the ratable benefit of the Lenders and for
the benefit of the Agent with respect to the Agent's Obligations, under the
provisions of a mortgage, deed of trust or other document, as appropriate. Each
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Financing Document to be executed and delivered pursuant hereto shall:
(a) be in form and substance reasonably
satisfactory to the Agent;
(b) create a first priority Lien in such
real property in favor of the Agent, for the ratable benefit of the
Lenders and for the benefit of the Agent with respect to the Agent's
Obligations, subject only to Permitted Liens, zoning ordinances, and
such other matters as the Agent may approve;
(c) if required by the Agent, be accompanied
by a current appraisal of the fair market value of the subject real
property prepared by an appraiser reasonably satisfactory to the Agent;
(d) if required by the Agent, be accompanied
by a current survey satisfactory in all respects to the Agent of the
subject real property, prepared by a registered land surveyor or
engineer satisfactory to the Agent;
(e) if required by the Agent, be accompanied
by evidence reasonably satisfactory to the Agent regarding the current
and past pollution control practices at such real property in
connection with the discharge, emission, handling, disposal or
existence of Hazardous Materials, which may include, at the Agent's
request, an environmental audit of such real property prepared by a
person or firm reasonably acceptable to the Agent;
(f) if required by the Agent, be accompanied
by a mortgagee's title insurance policy or marked-up unconditional
commitment or binder for such insurance in form and substance
satisfactory to the Agent and issued by a title insurance company
satisfactory to the Agent; and
(g) upon request of the Agent, be
accompanied by a signed opinion of counsel addressed to the Agent and
each of the Lenders, in form and substance reasonably satisfactory
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to the Agent, and from counsel, satisfactory to the Agent, licensed to
practice in the state where the subject real property is located.
The Agent agrees that with respect to any real property located outside
of the United States, the Agent agrees that notwithstanding the above, the Agent
shall require only those Security Documents and other items (including surveys,
title insurance and similar items) as would ordinarily and customarily be
required by a real estate or commercial lender in the jurisdiction where any
such real property is located.
SECTION 3.7 COSTS. The Revolving Credit Borrowers agree to pay, as part
of the Administrative Costs and to the fullest extent permitted by applicable
Laws, on demand all costs, fees and expenses incurred by the Agent and/or any of
the Lenders in connection with the taking, perfection, preservation, protection
and/or release of a Lien on the Collateral, including, without limitation:
(a) customary fees and expenses incurred by
the Agent and/or any of the Lenders in preparing, reviewing,
negotiating and finalizing the Financing Documents from time to time
(including, without limitation, reasonable attorneys' fees incurred in
connection with preparing, reviewing, negotiating, and finalizing any
of the Financing Documents, including, any amendments and supplements
thereto);
(b) all filing and/or recording taxes or
fees;
(c) all title insurance premiums and costs;
(d) all costs of Lien and record searches;
(e) reasonable attorneys' fees in connection
with all legal opinions required;
(f) appraisal and/or survey costs; and
(g) all related costs, fees and expenses.
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SECTION 3.8 RELEASE. Upon the indefeasible repayment in full in cash of
the Obligations and performance of all Obligations of the Borrowers and all
obligations and liabilities of each other Person, other than the Agent and the
Lenders, under this Agreement and all other Financing Documents, the termination
and/or expiration of all of the Commitments, all Letters of Credit and all
Outstanding Letter of Credit Obligations, upon the Borrowers' request and at the
Borrowers' sole cost and expense, the Agent shall release and/or terminate any
Financing Document but only if and provided that there is no commitment or
obligation (whether or not conditional) of the Agent and/or any of the Lenders
to re-advance amounts which would be secured thereby and/or no commitment or
obligation of the Agent to issue any Letter of Credit or return or restore any
payment of any Current Letter of Credit Obligations.
SECTION 3.9 INCONSISTENT PROVISIONS. In the event that the provisions
of any Financing Document directly conflict with any provision of this
Agreement, the provisions of this Agreement governs.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 REPRESENTATIONS AND WARRANTIES. The Borrowers, for
themselves and for each other, represent and warrant to the Agent and the
Lenders, as follows:
4.1.1 SUBSIDIARIES. The Borrowers have the Sub-
sidiaries listed on the Collateral Disclosure List attached hereto and made a
part hereof and no others. Each of the Subsidiaries is a Wholly Owned Subsidiary
except as shown on the Collateral Disclosure List, which correctly indicates the
nature and amount of each Borrower's ownership interests therein.
4.1.2 GOOD STANDING. Each Borrower and its
Subsidiaries (a) is a corporation duly organized, existing and in good standing
under the laws of the jurisdiction of its incorporation, (b) has the corporate
power to own its property and to carry on its business as now being conducted,
and (c) is duly qualified
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to do business and is in good standing in each jurisdiction in which the
character of the properties owned by it therein or in which the transaction of
its business makes such qualification necessary and where failure to so qualify
would have a Material Adverse Effect.
4.1.3 POWER AND AUTHORITY. Each Borrower and
its Subsidiaries has full corporate power and authority to execute and deliver
this Agreement and the other Financing Documents to which it is a party, to make
the borrowings and request Letters of Credit under this Agreement and to incur
and perform the Obligations whether under this Agreement, the other Financing
Documents or otherwise, all of which have been duly authorized by all proper and
necessary corporate action. No consent or approval of shareholders or any
creditors of any Borrower or any Subsidiary of any Borrower, and no consent,
approval, filing or registration with or notice to any Governmental Authority on
the part of any Borrower or any Subsidiary of any Borrower, is required as a
condition to the execution, delivery, validity or enforceability of this
Agreement or any of the other Financing Documents, or the performance by any
Borrower or any Subsidiary of any Borrower of the Obligations.
4.1.4 BINDING AGREEMENTS. This Agreement and
the other Financing Documents executed and delivered by the Borrowers and any of
their Subsidiaries have been properly executed and delivered and constitute the
valid and legally binding obligations of the Borrowers and their Subsidiaries
and are fully enforceable against each of the Borrowers and their Subsidiaries
in accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general applications affecting the
rights and remedies of creditors and secured parties, and general principles of
equity regardless of whether applied in a proceeding in equity or at law.
4.1.5 NO CONFLICTS. Neither the execution,
delivery and performance of the terms of this Agreement or of any of the other
Financing Documents executed and delivered by any Borrower or any Subsidiary of
any Borrower nor the consummation of the transactions contemplated by this
Agreement will conflict with,
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violate or be prevented by (a) any Borrower's or Subsidiary's charter or bylaws,
(b) any existing mortgage, indenture, contract or agreement binding on any
Borrower or any Subsidiary of any Borrower or affecting its or their property,
or (c) any Laws.
4.1.6 NO DEFAULTS, VIOLATIONS.
(a) No Default or Event of Default has
occurred and is continuing.
(b) None of the Borrowers nor any of their
respective Subsidiaries is in default under or with respect to any obligation
under any existing mortgage, indenture, contract or agreement binding on it or
affecting its property in any respect which could be materially adverse to the
business, operations, property or financial condition of any Borrower or any
Subsidiary of any Borrower, or could materially adversely affect the business,
operations, or properties of any Borrower and/or its Subsidiaries.
4.1.7 COMPLIANCE WITH LAWS. None of the
Borrowers nor any of their respective Subsidiaries is in violation of any
applicable Laws (including, without limitation, any Laws relating to employment
practices, to environmental, occupational and health standards and controls) or
order, writ, injunction, decree or demand of any court, arbitrator, or any
Governmental Authority affecting any Borrower or any Subsidiary of any Borrower
or any of its or their properties, the violation of which, considered in the
aggregate, could materially adversely affect the business, operations or
properties of any Borrower and/or its Subsidiaries.
4.1.8 MARGIN STOCK. None of the proceeds of the
Loans will be used, directly or indirectly, by any Borrower or any Subsidiary
for the purpose of purchasing or carrying, or for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry,
any "margin security" within the meaning of Regulation G (12 CFR Part 207), or
"margin stock" within the meaning of Regulation U (12 CFR Part 221), of the
Board of Governors of the Federal Reserve System or for any other purpose which
might make the transactions contemplated in this
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Agreement a "purpose credit" within the meaning of said Regulation G or
Regulation U, or cause this Agreement to violate any other regulation of the
Board of Governors of the Federal Reserve System or the Securities Exchange Act
of 1934 or the Small Business Investment Act of 1958, as amended, or any rules
or regulations promulgated under any of such statutes.
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4.1.9 INVESTMENT COMPANY ACT; MARGIN SECURITIES.
None of the Borrowers nor any of their respective Subsidiaries is an
investment company within the meaning of the Investment Company Act of 1940, as
amended, nor is it, directly or indirectly, controlled by any Person which is an
investment company within the meaning of said Act. None of the Borrowers nor any
of their respective Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying "margin security" within the meaning of Regulation G (12
CFR Part 207), or "margin stock" within the meaning of Regulation U (12 CFR Part
221), of the Board of Governors of the Federal Reserve System.
4.1.10 LITIGATION. Except as otherwise disclosed
on SCHEDULE 4.1.10 attached to and made a part of this Agreement, there are no
proceedings, actions or investigations pending or, so far as any Borrower knows,
threatened before or by any court, arbitrator or any Governmental Authority
which, in any one case or in the aggregate, if determined adversely to the
interests of any Borrower or any Subsidiary, would have a material adverse
effect on the business, properties, condition (financial or otherwise) or
operations, present or prospective, of any Borrower or any Subsidiary.
4.1.11 FINANCIAL CONDITION. The consolidated
financial statements of the Borrowers and their Subsidiaries for the fiscal
years ending December 31, 1993, December 31, 1994, December 31, 1995 and
December 31, 1996, are complete and correct and fairly present the financial
position of each of the Borrowers and its Subsidiaries in all material respects
and the results of their operations and transactions in their surplus accounts
as of the date and for the period referred to and have been prepared in
accordance with GAAP applied on a consistent basis throughout the period
involved. There are no liabilities, direct or indirect, fixed or contingent, of
any Borrower or any Subsidiary as of the date of such financial statements which
are not reflected therein or in the notes thereto. There has been no material
adverse change in the financial condition or operations of any Borrower or any
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Subsidiary since the date of such financial statements and to the Borrowers'
knowledge no such adverse change is pending or threat ened. None of the
Borrowers nor any Subsidiary has guaranteed the obligations of, or made any
investment in or advances to, any Person, except as disclosed in such financial
statements.
4.1.12 PROFORMA FINANCIALS. The Borrowers have
furnished to the Agent proforma consolidated balance sheets, income statements
and cash flow statements of the Borrowers and their Subsidiaries (the "Proforma
Balance Sheet"), together with proforma financial projections for the two-year
period subsequent to the Closing Date (the "Proforma Financial Projections"). A
copy of the Proforma Balance Sheet and the Proforma Financial Projections are
attached hereto as Exhibits "E-1" and "E-2", respectively. The Proforma Balance
Sheet is correct and complete in all material respects, has been prepared in
accordance with GAAP, and fairly presents the consolidated financial condition
of the Borrowers and their Subsidiaries.
4.1.13 FULL DISCLOSURE. The financial statements
referred to in Section 4.1.11 (Financial Condition) of this Agreement, the
Financing Documents (including, without limitation, this Agreement), and the
statements, reports or certificates furnished by any Borrower in connection with
the Financing Documents taken as a whole (a) do not contain any untrue
statement of a material fact and (b) when taken in their entirety, do not omit
any material fact necessary to make the statements contained therein not
misleading in any material respect. There is no fact known to any Borrower which
such Borrower has not disclosed to the Agent and the Lenders in writing prior to
the date of this Agreement with respect to the transactions contemplated by the
Financing Documents which would be reasonably likely to result in a Material
Adverse Effect.
4.1.14 INDEBTEDNESS FOR BORROWED MONEY. Except
for the Obligations and except as set forth in SCHEDULE 4.1.14 attached to and
made a part of this Agreement, neither the Borrowers nor any of their
Subsidiaries have any Indebtedness for Borrowed Money. The Agent has received
photocopies of all promissory notes evidencing any Indebtedness for Borrowed
Money set
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forth in SCHEDULE 4.1.14, together with any and all subordination agreements,
other agreements, documents, or instruments securing, evidencing, guarantying or
otherwise executed and delivered in connection therewith.
4.1.15 FIRST ALERT LICENSE AGREEMENT. The First
Alert License Agreement has not been amended, supplemented, restated,
terminated, cancelled, rescinded, revoked, restricted or otherwise modified
except as otherwise disclosed to the Agent. In addition, there does not exist
any default or any event which upon notice or lapse of time or both would
constitute a default under the terms of the First Alert License Agreement and
none of the Borrowers have received or given any notice with respect to the
actual or pending termination, rescission or revocation of the First Alert
License Agreement or any rights or privileges thereunder or incident thereto.
4.1.16 TAXES. Each of the Borrowers and its
Subsidiaries has filed all returns, reports and forms for Taxes which, to the
knowledge of the Borrowers, are required to be filed, and has paid all Taxes as
shown on such returns or on any assessment received by it, to the extent that
such Taxes have become due, unless and to the extent only that such Taxes,
assessments and governmental charges are currently contested in good faith and
by appropriate proceedings by a Borrower or a Subsidiary, such Taxes are not the
subject of any Liens other than Permitted Liens, and adequate reserves therefor
have been established as required under GAAP. All tax liabilities of the
Borrowers and their Subsidiaries were as of the date of audited financial
statements referred to in Section 4.1.11 (Financial Condition) above, and are
now, adequately provided for on the books of the Borrowers and their
Subsidiaries, as appropriate. No tax liability has been asserted in writing by
the Internal Revenue Service or any state or local authority against any
Borrower or any Subsidiary for Taxes in excess of those already paid.
4.1.17 ERISA. With respect to any "pension plan"
as defined in SECTION 3(2) of ERISA, which plan is now or previously has been
maintained or contributed to by any Borrower and/or by any commonly controlled
entity: (a) no "accumulated
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funding deficiency" as defined in Code sec.412 or ERISA sec.302 has occurred,
whether or not that accumulated funding deficiency has been waived; (b) no
Reportable Event has occurred; (c) no termination of any plan subject to Title
IV of ERISA has occurred; (d) no Borrower nor any commonly controlled entity (as
defined under ERISA) has incurred a "complete withdrawal" within the meaning of
ERISA sec.4203 from any Multiemployer Plan; (e) no Borrower nor any commonly
controlled entity has incurred a "partial withdrawal" within the meaning of
ERISA sec.4205 with respect to any Multiemployer Plan; (f) no Multiemployer Plan
to which a Borrower or any commonly controlled entity has an obligation to
contribute is in "reorganization" within the meaning of ERISA sec.4241 nor has
notice been received by any Borrower or any commonly controlled entity that such
a Multiemployer Plan will be placed in "reorganization".
4.1.18 TITLE TO PROPERTIES. The Borrowers and
their Subsidiaries have good and marketable title to all of their respective
properties, including, without limitation, the Collateral and the properties and
assets reflected in the balance sheets described in Section 4.1.11 (Financial
Condition) above. The Borrowers and their Subsidiaries have in all material
respects legal, enforceable and uncontested rights to use freely such property
and assets.
4.1.19 PATENTS, TRADEMARKS, ETC. Each of the
Borrowers and its Subsidiaries owns, possesses, or has the right to use all
necessary Patents, licenses, Trademarks, Copyrights, permits and franchises to
own its properties and to conduct its business as now conducted, including,
without limitation, the "First Alert" Trademark, without known conflict with the
rights of any other Person. Any and all obligations to pay royalties or other
charges with respect to such properties and assets are properly reflected on the
financial statements described in Section 4.1.11 (Financial Condition) above.
4.1.20 EMPLOYEE RELATIONS. Except as disclosed on
Schedule 4.1.20 attached hereto and made a part hereof, (a) no Borrower nor any
Subsidiary thereof nor any of the Borrower's or Subsidiary's employees is
subject to any collective bargaining
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agreement, (b) to the knowledge of the Borrowers, no petition for certification
or union election is pending with respect to the employees of any Borrower or
any Subsidiary and no union or collective bargaining unit has sought such
certification or recognition with respect to the employees of a Borrower or any
Subsidiary, (c) there are no strikes, slowdowns, work stoppages or controversies
pending or, to the best knowledge of the Borrowers after due inquiry, threatened
between any Borrower or any Subsidiary and its or their employees, and (d) no
Borrower nor any Subsidiary is subject to an employment contract, severance
agreement, commission contract, consulting agreement or bonus agreement. Hours
worked and payments made to the employees of any one or more of the Borrowers
and/or their Subsidiaries have not been in violation of the Fair Labor Standards
Act or any other applicable law dealing with such matters. All payments due from
any one or more of the Borrowers and/or their Subsidiaries or for which any
claim may be made against a Borrower or a Subsidiary, on account of wages and
employee and retiree health and welfare insurance and other benefits have been
paid or accrued as a liability on its books. The consummation of the
transactions contemplated by the Financing Agreement or any of the other
Financing Documents, will not give rise to a right of termination or right of
renegotiation on the part of any union under any collective bargaining agreement
to which any Borrower or any Subsidiary is a party or by which it is bound.
4.1.21 PRESENCE OF HAZARDOUS MATERIALS OR HAZARDOUS
MATERIALS CONTAMINATION.
To the best of each Borrower's knowledge, (a) no Hazardous Materials
are located on any real property owned, controlled or operated by of any
Borrower or any Subsidiary or for which any Borrower or any Subsidiary is, or is
claimed to be, responsible, except for reasonable quantities of necessary
supplies for use by a Borrower or a Subsidiary in the ordinary course of its
current line of business and stored, used and disposed in accordance with
applicable Laws; and (b) no property owned, controlled or operated by any
Borrower or a Subsidiary or for which any Borrower or Subsidiary has, or is
claimed to have, responsibility has ever been used as a manufacturing, storage,
or dump site for Hazardous
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Materials nor is affected by Hazardous Materials Contamination at any other
property.
4.1.22 PERFECTION AND PRIORITY OF COLLATERAL.
The Agent and the Lenders have, or upon execution and recording of this
Agreement and the Security Documents will have as security for the Obligations,
a valid and perfected Lien on and security interest in all Collateral (unless
the Agent has elected in its discretion not to require that any such Lien be or
remain perfected), free of all other Liens, claims and rights of third parties
whatsoever except Permitted Liens, including, without limitation, those
described on SCHEDULE 4.1.22.
4.1.23 PLACES OF BUSINESS AND LOCATION OF
COLLATERAL.
The information contained in the Collateral Disclosure List is complete
and correct. The Collateral Disclosure List completely and accurately identifies
the address of (a) the chief executive office of each Borrower and each
Subsidiary, (b) any and each other place of business of each Borrower and each
Subsidiary, (c) the location of all books and records pertaining to the
Collateral, and (d) each location, other than the foregoing, where any of the
Collateral is located. The proper and only places to file financing statements
with respect to the Collateral within the meaning of the Uniform Commercial Code
are the filing offices for those jurisdictions in which any one or more of the
Borrowers or any Subsidiary maintain a place of business as identified on the
Collateral Disclosure List.
4.1.24 BUSINESS NAMES AND ADDRESSES. Since
December 31, 1992, no Borrower nor Subsidiary has changed its name, identity or
corporate structure, has conducted business under any name other than its
current name, and has conducted its business in any jurisdiction other than
those disclosed on the Collateral Disclosure List.
4.1.25 EQUIPMENT. All material Equipment is
personalty and is not affixed to real estate in such manner as to
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become a fixture or part of such real estate. No equipment is held by any
Borrower or any Subsidiary on a sale on approval basis.
4.1.26 INVENTORY. The Inventory of the Borrowers
and the Mexican Subsidiary is in all material respects (a) of good and
merchantable quality, free from defects, (b) not stored with a bailee,
warehouseman, carrier, or similar party, (c) not on consignment, sale on
approval, or sale or return, and (d) located at the places of business set forth
on the Collateral Disclosure List. No goods offered for sale by any Borrower or
the Mexican Subsidiary are consigned to or held on sale or return terms by that
Borrower or the Mexican Subsidiary.
4.1.27 ACCOUNTS. With respect to all Accounts
and to the best of the Borrowers' knowledge, in all material respects, (a) they
are genuine, and in all respects what they purport to be, and are not evidenced
by a judgment, an Instrument, or Chattel Paper (unless such judgment has been
assigned and such Instrument or Chattel Paper has been endorsed and delivered to
the Agent for the benefit of itself and the Lenders if and to the extent
requested by the Agent); (b) they represent bona fide transactions completed in
accordance with the terms and provisions contained in the invoices, purchase
orders and other contracts relating thereto, and the underlying transaction
therefor is in accordance with all applicable Laws; (c) the amounts shown on the
books and records, with respect thereto are actually and absolutely owing and
are not contingent or subject to reduction for any reason other than regular
discounts, credits or adjustments allowed in the ordinary course of business;
(d) no payments have been made thereon except payments turned over to the Agent;
(e) all Account Debtors thereon have the capacity to contract; and (f) the goods
sold, leased or transferred or the services furnished giving rise thereto are
not subject to any Liens except Permitted Liens.
4.1.28 COMPLIANCE WITH ELIGIBILITY STANDARDS.
Each Account, all Inventory and the Tax Refunds included in the calculation of
the Borrowing Base and of the UK Borrowing Base complies with all of the
standards for Eligible Receivables, Eligible Inventory and Eligible Tax Refunds.
With respect to those Accounts which the Agent has deemed Eligible Receivables
and with
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respect to the Tax Refunds which the Agent has deemed Eligible Tax Refunds (a)
there are no facts, events or occurrences which in any way impair the validity,
collectibility or enforceability thereof or tend to reduce the amount payable
thereunder in any material respect; and (b) there are no proceedings or actions
known to any Borrower which are threatened or pending against any Account Debtor
which might result in any material adverse change in the Borrowing Base or the
UK Borrowing Base.
4.1.29 TAX REFUNDS. As of the date of the Closing
Date, the Parent represents and warrants to the best of its information,
knowledge and belief, the aggregate amount of Tax Refunds payable to the Parent
by the State of Illinois for the tax year ending December 31, 1996 is
$1,200,000. None of the Borrowers have instructed the State of Illinois to apply
or otherwise credit all or any portion of the Tax Refunds to any past, present
or future tax obligations of any of the Borrowers or any other Person. To the
best information, knowledge and belief of the Borrowers, the Tax Refunds are not
subject to deduction, set-off, reduction, recoupment or diminution for any
reason whatsoever. The Borrowers have furnished to the Agent true, correct and
complete photocopies of the 1996 income tax returns for the Borrowers, together
with all schedules and exhibits thereto and all other forms, requests and other
documents filed with the State of Illinois in connection with any or all of the
Tax Refunds.
SECTION 4.2 SURVIVAL; UPDATES OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties contained in or made under or in
connection with this Agreement and the other Financing Documents shall survive
the Closing Date, the making of any advance under the Loans and extension of
credit made hereunder, and the incurring of any other Obligations and shall be
deemed to have been made at the time of each request for, and again at the time
the making of, each advance under the Loans or the issuance of each Letter of
Credit, except that the representations and warranties which relate to financial
statements which are referred to in Section 4.1.11, shall also be deemed to
cover financial statements
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furnished from time to time to the Agent and the Lenders pursuant to Section
6.1.1 (Financial Statements) of this Agreement.
ARTICLE 5
CONDITIONS PRECEDENT
SECTION 5.1 CONDITIONS TO THE INITIAL ADVANCE AND INITIAL
LETTER OF CREDIT.
The making of the initial advance under the Loans and the issuance of
the initial Letter of Credit is subject to the fulfillment on or before the
Closing Date of the following conditions precedent in a manner satisfactory in
form and substance to the Agent and its counsel:
5.1.1 ORGANIZATIONAL DOCUMENTS - BORROWERS. The
Agent shall have received for each Borrower and the Mexican Subsidiary, as
appropriate:
(a) a certificate of good standing
certified by the Secretary of State, or other appropriate Governmental
Authority, of the state of incorporation;
(b) a certificate of qualification to
do business certified by the Secretary of State or other Governmental
Authority of each state in which a Borrower or the Mexican Subsidiary
conducts business where the failure to so qualify would have a Material
Adverse Effect;
(c) a certificate dated as of the
Closing Date by the Secretary or an Assistant Secretary covering:
(i) true and complete copies of the
respective Borrower's or Mexican Subsidiary's corporate
charter, bylaws, or other constituent documents and all
amendments thereto;
(ii) true and complete copies of
the resolutions of its Board of Directors authorizing
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(i) the execution, delivery and performance of the Financing
Documents to which it is a party, (ii) the borrowings
hereunder, and (iii) the granting of the Liens contemplated by
this Agreement and the Financing Documents to which that
Borrower or the Mexican Subsidiary is a party; and
(iii) the incumbency, authority and
signatures of the officers of such Borrower and/or Mexican
Subsidiary authorized to sign this Agreement and the other
Financing Documents to which such Borrower or Mexican
Subsidiary is a party.
5.1.2 OPINION OF BORROWERS' COUNSEL. The Agent
shall have received the favorable opinion of counsel for the Borrowers addressed
to the Agent and the Lenders in form satisfactory to the Agent.
5.1.3 CONSENTS, LICENSES, APPROVALS, ETC. The
Agent shall have received copies of all consents, licenses and approvals,
required in connection with the execution, delivery, performance, validity and
enforceability of the Financing Documents, and such consents, licenses and
approvals shall be in full force and effect.
5.1.4 NOTES. The Agent shall have received for
delivery to each of the Lenders the Revolving Credit Notes and the UK Time
Notes, each conforming to the requirements hereof and executed by a Responsible
Officer of the respective Borrower or Borrowers and attested by a duly
authorized representative of such Borrower or Borrowers.
5.1.5 FINANCING DOCUMENTS AND COLLATERAL. Each
Borrower shall have executed and delivered and shall cause the Mexican
Subsidiary to execute and deliver the Financing Documents to be executed by it,
and shall have delivered original Chattel Paper, Instruments, Securities, and
related Collateral and all opinions, title insurance, and other documents
contemplated by Article 3 hereof.
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5.1.6 OTHER FINANCING DOCUMENTS. In addition to
the Financing Documents to be delivered by the Borrowers and the Mexican
Subsidiary, the Agent shall have received the Financing Documents duly executed
and delivered by Persons other than the Borrowers.
5.1.7 OTHER DOCUMENTS, ETC. The Agent shall
have received such other certificates, opinions, documents and instruments
confirmatory of or otherwise relating to the transactions contemplated hereby as
may have been reasonably requested by the Agent.
5.1.8 PAYMENT OF FEES. The Agent and the
Lenders shall have received payment of any Fees due on or before the Closing
Date.
5.1.9 COLLATERAL DISCLOSURE LIST. Each Borrower
and its Subsidiaries shall have delivered the Collateral Disclosure List
required under the provisions of Section 3.3 (Collateral Disclosure List) hereof
duly executed by a Responsible Officer of each Borrower or Subsidiary, as
appropriate.
5.1.10 RECORDINGS AND FILINGS. Each Borrower and
Subsidiary, as appropriate, shall have: (a) executed and delivered all Financing
Documents (including, without limitation, UCC-1 and UCC-3 statements) required
to be filed, registered or recorded in order to create, in favor of the Agent
and the Lenders, a perfected Lien in the Collateral (subject only to the
Permitted Liens) in form and in sufficient number for filing, registration, and
recording in each office in each jurisdiction in which such filings,
registrations and recordations are required, and (b) delivered such evidence as
the Agent may deem satisfactory that all necessary filing fees and all recording
and other similar fees, and all Taxes and other expenses related to such
filings, registrations and recordings will be or have been paid in full.
5.1.11 INSURANCE CERTIFICATE. The Agent shall
have received an insurance certificate in accordance with the provisions of
Section 6.1.8 (Insurance) of this Agreement.
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5.1.12 LANDLORD'S WAIVERS. The Agent shall have
received a landlord's waiver from each landlord of each and every business
premise leased by each domestic Borrower and on which any of the Collateral is
or may hereafter be located, which landlords' waivers must be reasonably
acceptable to the Agent and its counsel in their sole and absolute discretion.
5.1.13 FIELD EXAMINATION. The Agent shall have
completed a field examination of each Borrower's and Mexican Subsidiary's
business, operations and income, the results of which field examination shall be
in all respects acceptable to the Agent in its sole and absolute discretion and
shall include reference discussions with key customers and vendors.
5.1.14 APPRAISALS. The Agent shall have received
appraisals of the Equipment, real property Trademarks and other Proprietary
Rights of each Borrower and the Mexican Subsidiary, which appraisals shall be
performed by an appraiser satisfactory in all respects to the Agent and shall be
in such form and content as may be required by the Agent.
5.1.15 PROFORMA BALANCE SHEET AND PROJECTIONS.
The Agent shall have received and approved the Proforma Balance Sheet and
Proforma Financial Projections, which Proforma Balance Sheet and Proforma
Financial Projections must be in form and content acceptable to the Agent
in its sole and absolute discretion.
5.1.16 STOCK CERTIFICATES AND STOCK POWERS. The
Agent shall have received all of the original stock certificates of the US
Subsidiary, the UK Subsidiary, and the Mexican Subsidiary and fully executed
irrevocable stock powers from the holders of all such stock certificates.
5.1.17 TAX REFUNDS. The Agent shall have received
true, correct and complete photocopies of the 1996 income tax returns for the
Revolving Credit Borrowers, together with all schedules and exhibits thereto and
all other forms, requests and other documents filed with the State of Illinois
in connection with any or all of the Tax Refunds. In addition, the Revolving
Credit
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Borrowers shall furnish to the Agent such letters of instruction, assignments,
financing statements, powers of attorney, requests, agreements, confirmations,
instruments and other documents as the Agent may reasonably request to create,
perfect, protect, effect, and maintain the pledge and assignment of the Tax
Refunds to the Agent for the ratable benefit of the Lenders and to permit and
enable the Agent to enforce, collect and obtain payments of the Tax Refunds
directly from the State of Illinois.
5.1.18 MEXICAN INVENTORY. As of the Closing Date,
the Agent shall be satisfied that the aggregate value of the Inventory
consisting of raw materials located in Mexico is less than Seven Million Dollars
($7,000,000).
SECTION 5.2. CONDITIONS TO ALL EXTENSIONS OF CREDIT. The making of all
advances under the Loans and the issuance of all Letters of Credit is subject to
the fulfillment of the following conditions precedent in a manner satisfactory
in form and substance to the Agent and its counsel:
5.2.1 BORROWING BASE. The Borrowers shall have
furnished all Borrowing Base Reports and UK Borrowing Base Reports required by
Section 2.1.4 (Borrowing Base Report) of this Agreement, there shall exist no
Borrowing Base Deficiency, and as evidence thereof, the Borrowers shall have
furnished to the Agent such reports, schedules, certificates, records and other
papers as may be requested by the Agent, and the Borrowers shall be in
compliance with the provisions this Agreement both immediately before and
immediately after the making of the advance requested.
5.2.2 DEFAULT. There shall exist no Event of
Default or Default hereunder.
5.2.3 REPRESENTATIONS AND WARRANTIES. The
representations and warranties of each of the Borrowers contained among the
provisions of this Agreement shall be true in all material respects and with the
same effect as though such representations and warranties had been made at the
time of the making of, and of the request for, each advance under the Loans or
the issuance of each Letter of Credit, except for those representations
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and warranties which expressly reference a specific date and except that the
representations and warranties which relate to financial statements which are
referred to in Section 4.1.11, shall also be deemed to cover financial
statements furnished from time to time to the Agent pursuant to Section 6.1.1
(Financial Statements) of this Agreement.
5.2.4 ADVERSE CHANGE. No material adverse
change shall have occurred in the condition (financial or otherwise), operations
or business of the Borrowers and their Subsidiaries, taken as a whole, which
would reasonably be expected, in the good faith judgment of the Agent, to
constitute a Material Adverse Effect.
5.2.5 LEGAL MATTERS. All legal documents
incident to each advance under the Loans and each of the Letters of Credit shall
be reasonably satisfactory to the Agent.
ARTICLE 6
COVENANTS OF THE BORROWERS
SECTION 6.1 AFFIRMATIVE COVENANTS. So long as any of the Obligations
(or any the Commitments therefor) shall be outstanding hereunder, the Borrowers
agree jointly and severally with the Agent and the Lenders as follows:
6.1.1 FINANCIAL STATEMENTS. The Borrowers shall
furnish to the Agent and the Lenders:
(a) Annual Statements and Certificates. The
Borrowers shall furnish to the Agent and the Lenders as soon as available, but
in no event more than ninety (90) days after the close of the Borrowers' fiscal
years, (i) a copy of the annual financial statement in reasonable detail
satisfactory to the Agent relating to the Borrowers and their Subsidiaries,
prepared in accordance with GAAP and examined and certified by independent
certified public accountants satisfactory to the Agent, which financial
statement shall include a consolidated and consolidating balance sheet of the
Borrowers and their Subsidiaries as of the end
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of such fiscal year and consolidated and consolidating statements of income,
cash flows and changes in shareholders equity of the Borrowers and their
Subsidiaries for such fiscal year, (ii)(1) a Compliance Certificate, in
substantially the form attached to this Agreement as EXHIBIT E, containing a
detailed computation of each financial covenant in this Agreement which is
applicable for the period reported and (2) a certification that no change has
occurred to the information contained in the Collateral Disclosure List (except
as set forth any schedule attached to the certification), each prepared by a
Responsible Officer of the Borrowers in a format acceptable to the Agent and
(iii) a management letter in the form prepared by the Borrowers' independent
certified public accountants.
(b) Annual Opinion of Accountant. The
Borrowers shall furnish to the Agent and the Lenders as soon as available, but
in no event more than ninety (90) days after the close of the Borrowers' fiscal
years, a letter or opinion of the accountant who examined and certified the
annual financial statement relating to the Borrowers and their Subsidiaries
(i) stating whether anything in such accountant's examination has revealed the
occurrence of a Default or an Event of Default hereunder, and, if so, stating
the facts with respect thereto and (ii) acknowledging that the Agent and the
Lenders will rely on the statement and that the Borrowers know of the intended
reliance by the Agent and the Lenders.
(c) Monthly Statements and Certificates. The
Borrowers shall furnish to the Agent and the Lenders as soon as available, but
in no event more than thirty (30) days after the close of the Borrowers' fiscal
months (other than December), consolidated and consolidating balance sheets of
the Borrowers and its Subsidiaries as of the close of such period, consolidated
and consolidating income, cash flows and changes in shareholders equity
statements for such period, and a Compliance Certificate, in substantially the
form attached to this Agreement as EXHIBIT E, containing a detailed computation
of each financial covenant in this Agreement which is applicable for the period
reported, a certification that no change has occurred to the information
contained in the Collateral Disclosure List (except as set forth on
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any schedule attached to the certification), and a cash flow projection report,
each prepared by a Responsible Officer of or on behalf of each Borrower in a
format acceptable to the Lender, all as prepared and certified by a Responsible
Officer of the Borrowers and accompanied by a certificate of that officer
stating whether any event has occurred which constitutes a Default or an Event
of Default hereunder, and, if so, stating the facts with respect thereto.
(d) MONTHLY REPORTS. The Borrowers
shall furnish to the Agent and the Lenders within fifteen (15) days after the
end of each fiscal month, a report containing the following information:
(i) a detailed aging schedule of
all Receivables by Account Debtor, in such detail, and accompanied by
such supporting information, as the Agent may from time to time
reasonably request;
(ii) a detailed aging of all
accounts payable by supplier, in such detail, and accompanied by such
supporting information, as the Agent may from time to time reasonably
request;
(iii) a listing of all Inventory by
component, category and location, in such detail, and accompanied by
such supporting information as the Agent may from time to time
reasonably request; and
(iv) such other information as the
Agent may reasonably request.
(e) ANNUAL BUDGET AND PROJECTIONS. The
Borrowers shall furnish to the Agent as soon as available, but in no event later
than sixty (60) days after the commencement of each fiscal year, a consolidated
and consolidating budget and pro forma income statements, balance sheets and
cash flow projections on a month-to-month basis for such fiscal year.
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(f) ADDITIONAL REPORTS AND INFORMATION.
The Borrowers shall furnish to the Agent promptly, such additional information,
reports or statements as the Agent may from time to time reasonably request.
6.1.2 REPORTS TO SEC AND TO STOCKHOLDERS. The
Borrowers will furnish to the Agent and the Lenders, promptly upon the filing or
making thereof, at least one (l) copy of all financial statements, reports,
notices and proxy statements sent by any Borrower or any Subsidiary to its
stockholders, and of all regular and other reports filed by any Borrower or any
Subsidiary with any securities exchange or with the Securities and Exchange
Commission.
6.1.3 RECORDKEEPING, RIGHTS OF INSPECTION, FIELD
EXAMINATION, ETC.
(a) Each of the Borrowers shall, and
shall cause each of its Subsidiaries to, maintain (i) a standard system of
accounting in accordance with GAAP, and (ii) proper books of record and account
in which full, true and correct entries are made of all dealings and
transactions in relation to its properties, business and activities.
(b) Each of the Borrowers shall, and
shall cause each of its Subsidiaries to, permit authorized representatives of
the Agent to visit and inspect the properties of the Borrowers and its
Subsidiaries, to review, audit, check and inspect the Collateral at any time
with or without notice, to review, audit, check and inspect the Borrowers' and
each Subsidiary's other books of record at any time with or without notice and
to make abstracts and photocopies thereof, and to discuss the affairs, finances
and accounts of the Borrowers and their Subsidiaries, with the officers,
directors, employees and other representatives of the Borrowers and their
Subsidiaries and their respective accountants, all at such times during normal
business hours and other reasonable times and as often as the Agent may
reasonably request; provided, however, that prior to initiating discussions
with the Borrowers' or Subsidiaries' employees, the Agent or any Lender shall
advise an officer of the Borrowers of the Agent's or Lender's intention to do
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so and shall allow the Borrowers' officers to be present during such discussion.
The Agent and the Lenders shall give the Borrowers reasonable prior notice of
visits and inspections, provided, however, the Borrowers acknowledge and agree
that (i) no notice need be given if there exists an Event of Default or if the
Agent or the Lenders have information which the Agent or the Lenders believe is
consistent with a conclusion that information provided by or at the direction of
the Borrowers regarding the Collateral or the Borrowers' and/or Subsidiaries'
financial condition has been intentionally misstated; and (ii) the Borrowers
shall not prevent any visit or inspection if the Agent, the Lender or a
representative thereof advises (which advice may be oral) the Borrowers that no
notice is required because the inspection is being made pursuant to Section
6.1.2(b)(ii) of this Agreement.
(c) Subject to the terms of this Agreement,
each of the Borrowers hereby irrevocably authorize and direct all accountants
and auditors employed by any of the Borrowers and/or any of their Subsidiaries
at any time prior to the repayment in full of the Obligations to exhibit and
deliver to the Agent and the Lenders copies of any and all of the financial
statements, trial balances, management letters, or other accounting records of
any nature of any or all of the Borrowers and/or any or all of their respective
Subsidiaries in the accountant's or auditor's possession, and to disclose to the
Agent and any of the Lenders any information they may have concerning the
financial status and business operations of any or all of the Borrowers and/or
any or all of their respective Subsidiaries. Further, the Borrowers each hereby
authorize all Governmental Authorities to furnish to the Agent and the Lenders
copies of reports or examinations relating to any and all of the Borrowers
and/or any or all Subsidiaries, whether made by the Borrowers or otherwise.
(d) Any and all costs and expenses incurred
by, or on behalf of, the Agent in connection with the conduct of any of the
foregoing shall be part of the Administrative Costs and shall be payable to the
Agent within ten (10) days following demand. The Borrowers acknowledge and agree
that such expenses may include, but shall not be limited to, any and all
out-of-pocket
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costs and expenses of the Agent's employees and agents in, and when, travelling
to any of the Borrowers' facilities.
6.1.4 CORPORATE EXISTENCE. Each of the
Borrowers shall maintain, and cause each of its Subsidiaries to maintain, its
corporate existence in good standing in the jurisdiction in which it is
incorporated and in each other jurisdiction where it is required to register or
qualify to do business if the failure to do so in such other jurisdiction would
reasonably be expected to constitute a Material Adverse Effect.
6.1.5 COMPLIANCE WITH LAWS. Each of the
Borrowers shall comply, and cause each of its Subsidiaries to comply, with all
applicable Laws and observe the valid requirements of Governmental Authorities,
the noncompliance with or the nonobservance of which might reasonably be
expected to constitute a Material Adverse Effect.
6.1.6 PRESERVATION OF PROPERTIES. Each of the
Borrowers will, and will cause each of its Subsidiaries to, at all times (a)
maintain, preserve, protect and keep its material properties, whether owned or
leased, in good operating condition, working order and repair (ordinary wear and
tear excepted), and from time to time will make all proper repairs, maintenance,
replacements, additions and improvements thereto needed to maintain such
properties in good operating condition, working order and repair, and (b) do or
cause to be done all things necessary to preserve and to keep in full force and
effect its material franchises, leases of real and personal property, trade
names, patents, trademarks and permits which are necessary for the orderly
continuance of its business.
6.1.7 LINE OF BUSINESS. Each of the Borrowers
will, and will cause each of its Subsidiaries to, continue to engage
substantially in the business of the manufacturing, sale and distribution of
personal or residential smoke detectors, carbon monoxide detectors and other
personal or residential safety or security products, such as fire extinguishers
and rechargeable lights.
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6.1.8 INSURANCE. Each of the Borrowers will, and
will cause each of its Subsidiaries to, at all times maintain with "A-" or
better rated insurance companies or such other insurance companies as shall be
reasonably acceptable to the Agent such insurance as is required by applicable
Laws and such other insurance, in such amounts, of such types and against such
risks, hazards, liabilities, casualties and contingencies as are usually insured
against in the same geographic areas by business entities engaged in the same or
similar business. Without limiting the generality of the foregoing, each of the
Borrowers will, and will cause each of its Subsidiaries to, keep adequately
insured all of its property against loss or damage resulting from fire or other
risks insured against by extended coverage and maintain public liability
insurance against claims for personal injury, death or property damage occurring
upon, in or about any properties occupied or controlled by it, or arising in any
manner out of the businesses carried on by it, all in such amounts as are
reasonable and appropriate. Each of the Borrowers shall deliver to the Agent on
the Closing Date (and thereafter on each date there is a material change in the
insurance coverage) a certificate of a Responsible Officer of the Borrowers
containing a detailed list of the insurance then in effect and stating the
names of the insurance companies, the types, the amounts and rates of the
insurance, dates of the expiration thereof and the properties and risks covered
thereby. In particular, the Borrowers will maintain and cause each of their
Subsidiaries to maintain hazard insurance with fire and extended coverage and
naming the Agent as an additional insured with loss payable to the Agent and the
Borrowers as their respective interests may appear on the Equipment and
Inventory in an amount at least equal to the lesser amount of the outstanding
principal amount of the Obligations or the fair market value of the Equipment
and Inventory (but in any event sufficient to avoid any co-insurance
obligations) and with a specific endorsement to each such insurance policy
pursuant to which the insurer agrees to give the Agent at least thirty (30) days
written notice before any alteration or cancellation of such insurance policy.
6.1.9 TAXES. Except to the extent that the
validity or amount thereof is being contested in good faith and by appropriate
proceedings, each of the Borrowers will, and will cause
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each of its Subsidiaries, to pay and discharge all Taxes prior to the date when
any interest or penalty would accrue for the nonpayment thereof. Each of the
Borrowers shall furnish to the Agent at such times as the Agent may require
proof satisfactory to the Agent of the making of payments or deposits required
by applicable Laws including, without limitation, payments or deposits with
respect to amounts withheld by any of the Borrowers or any Subsidiary from wages
and salaries of employees and amounts contributed by any of the Borrowers or any
Subsidiary on account of federal and other income or wage taxes and amounts due
under the Federal Insurance Contributions Act, as amended.
6.1.10 ERISA. Each of the Borrowers will, and
will cause each of its Subsidiaries and Affiliates to, comply with the funding
requirements of ERISA with respect to employee pension benefit plans for its
respective employees. The Borrowers will not permit with respect to any employee
benefit plan or plans covered by Title IV of ERISA (a) any prohibited
transaction or transactions under ERISA or the Internal Revenue Code, which
results, or may result, in any material liability of the Borrowers (taken as a
whole), or (b) any Reportable Event if, upon termination of the plan or plans
with respect to which one or more such Reportable Events shall have occurred,
there is or would be any material liability of the Borrowers (taken as a whole).
Upon the Agent's request, the Borrowers will deliver to the Agent a copy of the
most recent actuarial report, financial statements and annual report completed
with respect to any "defined benefit plan", as defined in ERISA. In particular,
none of the Borrowers nor any Commonly Controlled Entity shall: (a) cause any
"accumulated funding deficiency" as defined in ERISA and/or the Internal Revenue
Code; (b) terminate any pension plan in a manner which could result in the
imposition of a lien on the property of any Borrower pursuant to ERISA; (c)
terminate or consent to the termination of any Multiemployer Plan; or (d) incur
a complete or partial withdrawal with respect to any Multiemployer Plan.
6.1.11 NOTIFICATION OF EVENTS OF DEFAULT AND
ADVERSE DEVELOPMENTS.
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Each of the Borrowers shall promptly notify the Agent upon obtaining
knowledge of the occurrence of:
(a) any Event of Default;
(b) any Default;
(c) any litigation instituted or threatened
against any of the Borrowers or any of their Subsidiaries and of the
entry of any judgment or Lien (other than any Permitted Liens) against
any of the assets or properties of any of the Borrowers or any
Subsidiary where the claims against any Borrower or any Subsidiary
exceed Two Hundred Fifty Thousand Dollars ($250,000) and are not
covered by insurance;
(d) any event, development or circumstance
whereby the financial statements furnished hereunder fail in any
material respect to present fairly, in accordance with GAAP, the
financial condition and operational results of any of the Borrowers or
any of their respective Subsidiaries;
(e) any judicial, administrative or arbitral
proceeding pending against any of the Borrowers or any of their
respective Subsidiaries and any judicial or administrative proceeding
known by any of the Borrowers to be threatened against any Borrower or
any Subsidiary which, if adversely decided, could materially adversely
affect the financial condition or operations (present or prospective)
of any Borrower or any Subsidiary;
(f) the receipt by any of the Borrowers or
any Subsidiary of any notice, claim or demand from any Governmental
Authority which alleges that any of the Borrowers or any Subsidiary is
in violation in any material respect of any of the terms of, or has
failed to comply with any applicable Laws regulating its operation and
business, including, but not limited to, the Occupational Safety and
Health Act and the Environmental Protection Act; and
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(g) any other development in the business or
affairs of any of the Borrowers or any of their respective Subsidiaries
which may be materially adverse, including, without limitation, the
termination, rescission, revocation, restriction or other limitation on
the Borrower's use of the "First Alert" Trademark;
in each case describing in detail reasonably satisfactory to the Agent the
nature thereof and the action the Borrowers propose to take with respect
thereto.
6.1.12 HAZARDOUS MATERIALS; CONTAMINATION. Each
of the Borrowers agree to:
(a) give notice to the Agent immediately
upon acquiring knowledge of the presence of any Hazardous Materials or
any Hazardous Materials Contamination on any property owned, operated
or controlled by any Borrower or any Subsidiary or for which any
Borrower or any Subsidiary is, or is claimed to be, responsible
(provided that such notice shall not be required for Hazardous
Materials placed or stored on such property in accordance with
applicable Laws in the ordinary course (including, without limitation,
quantity) of a Borrower's or Subsidiary's line of business expressly
described in this Agreement), with a full description thereof;
(b) promptly comply with any Laws requiring
the removal, treatment or disposal of Hazardous Materials or Hazardous
Materials Contamination and provide the Agent with satisfactory
evidence of such compliance;
(c) provide the Agent, within thirty (30)
days after a demand by the Agent, with a bond, letter of credit or
similar financial assurance evidencing to the Agent's reasonable
satisfaction that the necessary funds are available to pay the cost of
removing, treating, and disposing of such Hazardous Materials or
Hazardous Materials Contamination and discharging any Lien which
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may be established as a result thereof on any property owned, operated
or controlled by any Borrower or any Subsidiary or for which any
Borrower or any Subsidiary is, or is claimed to be, responsible; and
(d) as part of the Obligations, defend,
indemnify and hold harmless the Agent, each of the Lenders and each of
their respective agents, employees, trustees, successors and assigns
from any and all claims which may now or in the future (whether before
or after the termination of this Agreement) be asserted as a result of
the presence of any Hazardous Materials or any Hazardous Materials
Contamination on any property owned, operated or controlled by any
Borrower or any Subsidiary for which any Borrower or any Subsidiary is,
or is claimed to be, responsible. Each Borrower acknowledges and agrees
that this indemnification shall survive the termination of this
Agreement and the Commitments and the payment and performance of all of
the other Obligations.
6.1.13 DISCLOSURE OF SIGNIFICANT LOSSES. Each of
the Borrowers shall deliver to the Agent a written notice describing in detail
each loss or casualty to an interest in Fixed or Capital Assets which exceeds
Two Hundred Fifty Thousand Dollars ($250,000.00), said notices to be delivered
to the Agent within thirty (30) days of the occurrence thereof.
6.1.14 FINANCIAL COVENANTS.
(a) TANGIBLE NET WORTH. The Borrowers and
their Subsidiaries, on a consolidated basis, will as at the end of each of the
quarterly period set forth below maintain a Tangible Net Worth of not less than
the following:
<TABLE>
<CAPTION>
Quarter Ending Amount
-------------- ------
<S> <C>
June 30, 1997 $50,000,000
September 30, 1997 $54,000,000
December 31, 1997 $57,000,000
March 31, 1998 $55,000,000
</TABLE>
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<TABLE>
<S> <C>
June 30, 1998 $52,000,000
September 30, 1998 $56,000,000
December 31, 1998 $61,000,000
March 31, 1999 $59,000,000
June 30, 1999 $56,000,000
September 30, 1999 $58,000,000
December 31, 1999 $63,000,000
</TABLE>
(b) LIABILITIES TO TANGIBLE NET WORTH RATIO.
The Borrowers and their Subsidiaries, on a consolidated basis, will maintain,
tested as of the end of each of the Borrowers' fiscal quarters, a Liabilities to
Tangible Net Worth Ratio so that it is not more than the following:
<TABLE>
<CAPTION>
Quarter Ending Ratio
-------------- -----
<S> <C>
June 30, 1997 1.50 to 1.0
September 30, 1997 2.10 to 1.0
December 31, 1997 1.45 to 1.0
March 31, 1998 1.10 to 1.0
June 30, 1998 1.25 to 1.0
September 30, 1998 2.00 to 1.0
December 31, 1998 1.40 to 1.0
March 31, 1999 1.00 to 1.0
June 30, 1999 1.00 to 1.0
September 30, 1999 1.75 to 1.0
December 31, 1999 1.25 to 1.0
</TABLE>
(c) FIXED CHARGE COVERAGE RATIO. The
Borrowers and their Subsidiaries, on a consolidated basis, will maintain, tested
as of the end of each period set forth below, on a rolling four (4) quarter
basis, a Fixed Charge Coverage Ratio of not less than the following:
<TABLE>
<CAPTION>
Period Ending Ratio
------------- -----
<S> <C>
Four (4) month period
ending September 30, 1997 1.25 to 1.0
Seven (7) month period
ending December 31, 1997 1.45 to 1.0
</TABLE>
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<TABLE>
<S> <C>
Ten (10) month period
ending March 31, 1998 1.25 to 1.0
Twelve (12) month period
ending June 30, 1998 1.00 to 1.0
Twelve (12) month period
ending September 30, 1998 1.05 to 1.0
Twelve (12) month period
ending December 31, 1998 1.10 to 1.0
March 31, 1999 1.10 to 1.0
June 30, 1999 1.10 to 1.0
September 30, 1999 1.10 to 1.0
December 31, 1999 and each
fiscal quarter end thereafter 1.20 to 1.0
</TABLE>
6.1.15 COLLECTION OF RECEIVABLES. Until such
time that the Agent shall notify the Borrowers of the revocation of such
privilege following the occurrence and during the continuance of an Event of
Default, the Borrowers and their Subsidiaries shall at their own expense have
the privilege for the account of, and in trust for, the Agent and the Lenders of
collecting their Receivables and receiving in respect thereto all Items of
Payment and shall otherwise completely service all of the Receivables including
(a) the billing, posting and maintaining of complete records applicable thereto,
(b) the taking of such action with respect to the Receivables as the Agent may
request or in the absence of such request, as each of the Borrowers and each of
the Subsidiaries may deem advisable; and (c) the granting, in the ordinary
course of business, to any Account Debtor, any rebate, refund or adjustment to
which the Account Debtor may be lawfully entitled, and may accept, in connection
therewith, the return of goods, the sale or lease of which shall have given rise
to a Receivable and may take such other actions relating to the settling of any
Account Debtor's claim as may be commercially reasonable. The Agent may, at its
option, at any time or from time to time after and during the continuance of an
Event of Default hereunder, revoke the collection privilege given in this
Agreement to any one or more of the Borrowers and each of the Subsidiaries by
either giving notice of its assignment of, and Lien on the Collateral to the
Account Debtors or giving notice of such revocation to the Borrowers. The Agent
shall not have any duty to, and the Borrowers
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hereby release the Agent and the Lenders from all claims of loss or damage
caused by the delay or failure to collect or enforce any of the Receivables or
to preserve any rights against any other party with an interest in the
Collateral, except for acts of gross negligence and willful misconduct.
6.1.16 ASSIGNMENTS OF RECEIVABLES. Subject to
the provisions of Section 3.2, each Borrower will promptly and will cause each
Subsidiary promptly, upon request, execute and deliver to the Agent written
assignments, in form and content reasonably acceptable to the Agent, of specific
Receivables or groups of Receivables; provided, however, the Lien and/or
security interest granted to the Agent, for the ratable benefit of the Lenders
and for the benefit of the Agent with respect to the Agent's Obligations, under
this Agreement shall not be limited in any way to or by the inclusion or
exclusion of Receivables within such assignments. Receivables so assigned shall
secure payment of the Obligations and are not sold to the Agent and/or the
Lenders whether or not any assignment thereof, which is separate from this
Agreement, is in form absolute. The Borrowers agree that neither any assignment
to the Lender nor any other provision contained in this Agreement or any of the
other Financing Documents shall impose on the Agent or the Lenders any
obligation or liability of any of the Borrowers with respect to that which is
assigned and the Borrowers hereby agree jointly and severally to indemnify the
Agent and the Lenders and hold the Agent and the Lenders harmless from any and
all claims, actions, suits, losses, damages, costs, expenses, fees, obligations
and liabilities which may be incurred by or imposed upon the Agent and/or any of
the Lenders by virtue of the assignment of and Lien on any Borrower's rights,
title and interest in, to, and under the Collateral, except for acts of gross
negligence or willful misconduct.
6.1.17 GOVERNMENT ACCOUNTS. The Borrowers will
promptly notify, and will cause the Subsidiaries to promptly notify, the Agent
if any of the Receivables arise out of contracts with the United States or with
any other Governmental Authority, and, as appropriate, execute any Instruments
and take any steps required by the Agent in order that all moneys due and to
become due under such contracts shall be assigned to the Agent, for the
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ratable benefit of the Lenders and for the benefit of the Agent with respect to
the Agent's Obligations, and notice thereof given to the Governmental Authority
under the Federal Assignment of Claims Act or any other applicable Laws.
6.1.18 NOTICE OF RETURNED GOODS, ETC. The
Borrowers will promptly notify, and will cause the Subsidiaries to promptly
notify, the Agent of the return, rejection or repossession of any goods sold or
delivered in respect of any Receivables, and of any claims made in regard
thereto to the extent that the aggregate purchase price of any such goods in any
given calendar month exceeds in the aggregate one hundred fifty percent (150%)
of the aggregate purchase price of all such goods for the same fiscal month of
the then prior fiscal year.
6.1.19 INVENTORY. With respect to the Inventory,
the Borrowers and their Subsidiaries will: (a) as soon as possible upon demand
by the Agent from time to time, prepare and deliver to the Agent designations of
Inventory specifying the Borrowers' and Subsidiaries' cost of Inventory, the
retail price thereof, and such other matters and information relating to the
Inventory as the Agent may reasonably request; (b) keep correct and accurate
records itemizing and describing the kind, type, quality and quantity of
Inventory, the Borrowers' and Subsidiaries' cost therefor and the selling price
thereof, all of which records shall be available to the officers, employees or
agents of the Agent upon demand for inspection and copying thereof; and (c) not
store any Inventory with a bailee, warehouseman or similar Person without the
Agent's prior written consent, which consent may be conditioned on, among other
things, delivery by the bailee, warehouseman or similar Person to the Agent of
warehouse receipts, in form acceptable to the Agent, in the name of the Agent
evidencing the storage of Inventory and the interests of the Agent and the
Lenders therein.
6.1.20 EQUIPMENT. The Borrowers and their
Subsidiaries shall (a) maintain all material Equipment as personalty, (b) not
affix any material Equipment to any real estate in such manner as to become a
fixture or part of such real estate, and (c) shall hold no Equipment on a sale
on approval basis.
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6.1.21 DEFENSE OF TITLE AND FURTHER ASSURANCES.
At their expense, the Borrowers will defend the title to the Collateral (and any
part thereof), and will immediately execute, acknowledge and deliver any
financing statement, renewal, affidavit, deed, assignment, continuation
statement, security agreement, certificate or other document which the Agent may
reasonably require in order to perfect, preserve, maintain, continue, protect
and/or extend the Lien or security interest granted to the Agent, for the
ratable benefit of the Lenders and for the benefit of the Agent with respect to
the Agent's Obligations, under this Agreement, under any of the other Financing
Documents and the first priority of that Lien, subject only to the Permitted
Liens. The Borrowers will from time to time do whatever the Agent may require by
way of obtaining, executing, delivering, and/or filing financing statements,
landlords' or mortgagees' waivers, notices of assignment and other notices and
amendments and renewals thereof and the Borrowers will take any and all steps
and observe such formalities as the Agent may require, in order to create and
maintain a valid Lien upon, pledge of, or paramount security interest in, the
Collateral, subject to the Permitted Liens. To the extent that the proceeds of
any of the Accounts or Receivables of the Borrowers are expected to become
subject to the control of, or in the possession of, a party other than the
Borrowers or the Agent, the Borrowers shall cause all such parties to execute
and deliver on the Closing Date security documents, financing statements or
other documents as requested by the Agent and as may be necessary to evidence
and/or perfect the security interest of the Agent, for the ratable benefit of
the Lenders and for the benefit of the Agent with respect to the Agent's
Obligations, in those proceeds. The Borrowers agree that a copy of a fully
executed security agreement and/or financing statement shall be sufficient to
satisfy for all purposes the requirements of a financing statement as set forth
in Article 9 of the applicable Uniform Commercial Code. Each Borrower hereby
irrevocably appoints the Agent as the Borrower's attorney-in-fact, with power of
substitution, in the name of the Agent or in the name of the Borrower or
otherwise, for the use and benefit of the Agent for itself and the Lenders, but
at the cost and expense of the Borrowers and without notice to the Borrowers, to
execute and deliver any and all of the instruments and other documents and take
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any action which the Agent may require to perfect, preserve, maintain, continue,
protect and/or extend the Liens granted to the Agent and the Lenders under this
Agreement and/or under any of the other Financing Documents.
6.1.22 BUSINESS NAMES; LOCATIONS. Each Borrower
will notify and cause each of the Subsidiaries to notify the Agent not less than
thirty (30) days prior to (a) any change in the name under which the Borrower or
the applicable Subsidiary conducts its business, (b) any change of the location
of the chief executive office of the applicable Borrower or Subsidiary, and (c)
the opening of any new place of business or the closing of any existing place of
business, and any change in the location of the places where the Collateral, or
any part thereof, or the books and records, or any part thereof, are kept.
6.1.23 SUBSEQUENT OPINION OF COUNSEL AS TO
RECORDING REQUIREMENTS.
In the event that any Borrower or any Subsidiary shall transfer its
principal place of business or the office where it keeps its records pertaining
to the Collateral, upon the Agent's reasonable request the Borrowers will
provide to the Agent a subsequent opinion of counsel as to the filing,
recording and other requirements with which the Borrowers and their Subsidiaries
have complied to maintain the Lien and security interest in favor of the Agent,
for the ratable benefit of the Lenders and for the benefit of the Agent with
respect to the Agent's Obligations, in the Collateral.
6.1.24 TAX REFUNDS. The Borrowers shall pay or
shall cause to be paid to the Agent one hundred percent (100%) of all Tax
Refunds immediately upon their receipt of any such payment, which shall be
applied by the Agent to reduce the then outstanding balance under the Revolving
Loan. The Borrowers covenant and agree not to instruct or authorize the States
of Illinois to apply all or any portion of the Tax Refunds to any obligation or
liability of any of the Borrowers or any other Person to the State of Illinois
any other Governmental Authority or any other Person. The Borrowers acknowledge
and agree that to the extent permitted by
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applicable Laws, it is the intention of the Borrowers that payments of the Tax
Refunds are to be paid directly to the Agent for application to the Obligations.
The Borrowers covenant and agree to execute and deliver to the Agent all letters
of instruction, assignments, financing statements, powers of attorney, requests,
agreements, confirmations, instruments and other documents as the Agent may
reasonably request to effect, protect, perfect and maintain the assignment of
the Tax Refunds to the Agent for the ratable benefit of the Lenders and to
permit and enable the Agent to enforce, collect and obtain payments of the Tax
Refunds directly from the State of Illinois. In furtherance thereof, each of the
Borrower hereby irrevocably appoints the Agent as its attorney-in-fact, with
power of substitution, in the name of the Agent, in the names of the Lenders or
in the names of any or all of the Borrowers, and without the consent of the
Borrowers, to execute and delivery any and all such letters of instruction,
assignments, powers of attorney, requests, agreements, confirmations,
instruments and other documents and take any other action the Agent may require
to effect any of the foregoing.
SECTION 6.2 NEGATIVE COVENANTS. So long as any of the Obligations or
the Commitments or Letters of Credit therefor shall be outstanding hereunder,
the Borrowers agree with the Agent and the Lenders that without the prior
written consent of the Agent:
6.2.1 CAPITAL STRUCTURE, MERGER, ACQUISITION OR
SALE OF ASSETS.
None of the Borrowers nor any of their Subsidiaries (i) will alter or
amend their capital structure, (ii) authorize any additional class of equity
securities, (iii) issue any stock or equity securities of any class, (iv) enter
into any merger or consolidation or amalgamation, (v) windup or dissolve
themselves (or suffer any liquidation or dissolution), (vi) acquire all or
substantially all the Assets of any Person, or (vii) sell, lease or otherwise
dispose of any of its Assets, except that prior to the occurrence of a Default
or an Event of Default, each of the following actions shall be permitted,
provided that no Default or Event of Default would reasonably be expected to
result from any such action:
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(a) alterations or amendments to their capital
structure which would not reasonably be expected to result in a Material Adverse
Effect or a Default or Event of Default;
(b) Permitted Asset Dispositions;
(c) authorization of any additional class of equity
securities or the issuance of stock to the extent such authorization or
issuance would not reasonably be expected to result in a Material
Adverse Effect or a Default or Event of Default;
(d) mergers or consolidations among and between
Borrowers; provided, that after closing and consummation of any merger
or consolidation involving any Borrower (x) a domestic Borrower is the
surviving entity, and (y) the Agent and the Lenders retain a first
priority Lien on and collateral assignment of one hundred percent
(100%) of the capital stock of all surviving Borrowers (other than the
Parent), subject only to Permitted Liens, and a first priority Lien on
all of the Assets of the Borrowers which had been pledged or required
to be pledged under the provisions of this Agreement prior to such
merger or consolidation, subject only to Permitted Liens; and
(e) Permitted Acquisitions.
Any consent of the Agent to any Asset Disposition, other than a Permitted Asset
Disposition, may be conditioned on a specified use of the proceeds of
disposition.
6.2.2 SUBSIDIARIES. None of the Borrowers nor
any of their Subsidiaries will create or acquire any Subsidiaries other than the
Subsidiaries identified on the Collateral Disclosure List as of the Closing
Date, without the prior written consent of the Agent, which consent may be
conditioned upon, among other things, the execution and delivery of an
Additional Borrower Joinder Supplement and/or such other Financing Documents as
the Agent may reasonably require.
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6.2.3 PURCHASE OR REDEMPTION OF SECURITIES,
DIVIDEND RESTRICTIONS.
None of the Borrowers nor any of their Subsidiaries will (a) purchase,
redeem or otherwise acquire any shares of its capital stock or warrants now or
hereafter outstanding, (b) declare or pay any dividends thereon (other than
stock dividends), (c) apply any of its property or assets to the purchase,
redemption or other retirement of, set apart any sum for the payment of any
dividends on, or for the purchase, redemption, or other retirement of, make any
distribution by reduction of capital or otherwise in respect of, any shares of
any class of capital stock of any Borrower or any Subsidiary, or any warrants,
(d) permit any Subsidiary to purchase or acquire any shares of any class of
capital stock of, or warrants issued by, any Borrower or any Subsidiary, (e)
make any distribution to stockholders or set aside any funds for any such
purpose, and (f) not prepay, purchase or redeem any Indebtedness for Borrowed
Money other than the Obligations; except that prior to the occurrence of a
Default or an Event of Default, (i) the Borrowers and their Subsidiaries shall
be entitled to repurchase capital stock owned by any management Person employed
by any of the Borrowers and/or their Subsidiaries if such Person is no longer so
employed, provided, that the aggregate net amount payable for this purpose shall
not exceed Five Hundred Thousand Dollars ($500,000), plus the proceeds of the
sale of any equity securities to management, on a per annum basis and (ii) the
Borrowers and their Subsidiaries shall be entitled to pay management fees to the
Thomas H. Lee Company under and to the extent provided in the Management
Agreement dated as of July 31, 1992 as in effect on the Closing Date and as may
be subsequently amended with the prior written consent of the Agent, which
consent shall not be unreasonably withheld and shall only be required to the
extent any proposed amendment affects the timing, manner or increase of amounts
of any payments to Thomas H. Lee Company.
6.2.4 INDEBTEDNESS. None of the Borrowers will
create, incur, assume or suffer to exist any Indebtedness for Borrowed Money or
permit any Subsidiary to do so, except:
(a) the Obligations;
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(b) current accounts payable arising in the
ordinary course;
(c) Indebtedness secured by Permitted Liens;
(d) Subordinated Indebtedness;
(e) Indebtedness of the Borrowers and their
Subsidiaries existing on the date hereof and reflected on the financial
statements furnished pursuant to Section 4.1.11 (Financial Condition);
(f) Unsecured letters of credit, bankers'
acceptances and/or (1) secured Interest Rate Protection Agreements and
Foreign Exchange Agreements between a Borrower or a Subsidiary and a
Lender and/or (2) unsecured Interest Rate Protection Agreements and
Foreign Exchange Agreements between a Borrower or a Subsidiary and any
other financial institution reasonably acceptable to the Agent,
providing for the transfer or mitigation of foreign exchange risks or
interest rate risks either generally or under specific contingencies;
(g) Indebtedness for Borrowed Money incurred
by the Borrowers and their Subsidiaries after the Closing Date and
secured by a permitted Purchase Money Security Interest;
(h) Indebtedness set forth in Schedule 6.2.4
attached hereto and made a part hereof; and
(i) Other unsecured Indebtedness for
Borrowed Money in aggregate principal amount not to exceed at any time
One Million Dollars ($1,000,000).
6.2.5 INVESTMENTS, LOANS AND OTHER TRANSACTIONS.
Except as otherwise provided in this Agreement, none of the Borrowers
will, and will permit any of its Subsidiaries to, (a) make, assume, acquire or
continue to hold any investment in any
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real property (unless used in connection with their business and treated as a
Fixed or Capital Asset of any Borrower or any Subsidiary) or any Person, whether
by stock purchase, capital contribution, acquisition of indebtedness of such
Person or otherwise (including, without limitation, investments in any joint
venture or partnership), (b) guaranty or otherwise become contingently liable
for the Indebtedness or obligations of any Person, or (c) make any loans or
advances, or otherwise extend credit to any Person, other than among and between
the Borrowers in the ordinary course of business, except:
(i) any advance to an officer
or employee of any Borrower or any Subsidiary for travel or other
business expenses in the ordinary course of business, provided that the
aggregate amount of all such advances by all of the Borrowers and their
Subsidiaries (taken as a whole) outstanding at any time shall not
exceed Twenty-five Thousand Dollars ($25,000);
(ii) the endorsement of
negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business;
(iii) any investment in Cash
Equivalents, which are pledged to the Agent, for the ratable benefit of
the Lenders and for the benefit of the Agent with respect to the
Agent's Obligations, as collateral and security for the Obligations;
(iv) those investments more
particularly set forth in Schedule 6.2.5 attached hereto and made a
part hereof,
(iv) trade credit extended to
customers in the ordinary course of business.
6.2.6 OPERATING LEASE OBLIGATIONS. None of the
Borrowers will incur or permit to exist any Lease Obligations except Capital
Leases expressly permitted by this Agreement or permit any Subsidiary to do so,
if the aggregate amount of all such Lease Obligations of the Borrowers and their
Subsidiaries (taken as
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a whole) would at any time exceed Five Million Dollars ($5,000,000) during any
fiscal year of the Borrowers.
6.2.7 CAPITAL EXPENDITURES. None of the Borrowers
will, and will permit any Subsidiary to, directly or indirectly (by way of the
acquisition of the securities of a Person or otherwise), make any Capital
Expenditures in the aggregate for the Borrowers and their Subsidiaries (taken as
a whole) in amount which, after deduction of Permitted Asset Dispositions of
Fixed or Capital Assets and permitted Indebtedness for Borrowed Money used to
purchase Fixed or Capital Assets, exceed the following amounts at any time
during the following fiscal years (for each fiscal year, the "Capital
Expenditure Ceiling"):
<TABLE>
Fiscal Year Capital Expenditure Ceiling
- ----------- ---------------------------
<CAPTION>
<S> <C>
1997 $6,000,000
1998 $6,000,000
1999 $6,500,000
</TABLE>
If in any given fiscal year, the total Capital Expenditures of the Borrowers and
its Subsidiaries, taken as a whole, are less than the applicable Capital
Expenditure Ceiling for that fiscal year, the unused portion of the amount
permitted for Capital Expenditures (the "Carry Forward Amount") may be used to
increase the applicable Capital Expenditure Ceiling for the then next succeeding
fiscal year. The Carry Forward Amount for any given fiscal year cannot be
carried forward for more than one (1) fiscal year.
6.2.8 STOCK OF SUBSIDIARIES. None of the
Borrowers will sell or otherwise dispose of any shares of capital stock of any
Subsidiary (except in connection with a merger or consolidation of a Wholly
Owned Subsidiary into any of the Borrowers or another Wholly Owned Subsidiary of
any of the Borrowers or with the dissolution of any Subsidiary) or permit any
Subsidiary to issue any additional shares of its capital stock except PRO RATA
to its stockholders.
6.2.9 SUBORDINATED INDEBTEDNESS. None of the
Borrowers will, and will permit any Subsidiary to make:
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(a) any payment of principal of, or interest
on, any of the Subordinated Indebtedness, including, without
limitation, the Subordinated Debt, if a Default then exists hereunder
or would result from such payment;
(b) any payment of the principal or interest
due on the Subordinated Indebtedness as a result of acceleration
thereunder or a mandatory prepayment thereunder;
(c) any amendment or modification of or
supplement to the documents evidencing or securing the Subordinated
Indebtedness which is materially adverse to the Agent or any Lender;
and
(d) payment of principal or interest on the
Subordinated Indebtedness other than when due (without giving effect to
any acceleration of maturity or mandatory prepayment).
6.2.10 LIENS. Each Borrower agrees that it (a)
will not create, incur, assume or suffer to exist any Lien upon any of its
properties or assets, whether now owned or hereafter acquired, or permit any
Subsidiary so to do, except for Permitted Liens, (b) will not agree to, assume
or suffer to exist any provision in any instrument or other document for
confession of judgment, cognovit or other similar right or remedy, (c) will not
allow or suffer to exist any Permitted Liens to be superior to Liens securing
the Obligations unless and to the extent any such Permitted Liens are superior
under and by virtue of applicable Laws, (d) will not enter into any contracts
for the consignment of goods, will not execute or suffer the filing of any
financing statements or the posting of any signs giving notice of consignments,
and will not, as a material part of its business, engage in the sale of goods
belonging to others, and (e) will not allow or suffer to exist the failure of
any Lien described in the Security Documents to attach to, and/or remain at all
times perfected on, any of the property described in the Security Documents to
the extent required thereby, except for Assets which are the subject of a
Permitted Asset Disposition.
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6.2.11 TRANSACTIONS WITH AFFILIATES. None of the
Borrowers nor any of their Subsidiaries will enter into or participate in any
transaction with any Affiliate or, except in the ordinary course of business,
with the officers, directors, employees and other representatives of any
Borrower and/or any Subsidiary, other than those transactions entered into in a
manner and on terms which are commercially reasonable and on an arm's length
basis and which do not otherwise violate the provisions of this Agreement.
6.2.12 AMENDMENTS. None of the Borrowers will
amend or terminate or agree to amend or terminate the First Alert License
Agreement or consent to or waive any material provisions thereof, other than in
the normal course of business.
6.2.13 METHOD OF ACCOUNTING; FISCAL YEAR. Each
Borrower agrees that:
(a) neither it nor any Subsidiary shall
change the method of accounting employed in the preparation of any financial
statements furnished to the Agent under the provisions of Section 6.1.1
(Financial Statements) of this Agreement, unless required to conform to GAAP and
on the condition that the Borrowers' accountants shall furnish such information
as the Agent may request to reconcile the changes with prior financial
statements.
(b) without at least thirty (30) days prior
written notice to the Agent, it will not change its fiscal year from a year
ending on December 31.
6.2.14 COMPENSATION. None of the Borrowers nor
any Subsidiary will pay any bonuses, fees, compensation, commissions, salaries,
drawing accounts, or other payments (cash and non-cash), whether direct or
indirect, to any stockholders of any Borrower or any Subsidiary, or any
Affiliate of any Borrower or any Subsidiary, other than reasonable compensation
for actual services rendered by stockholders in their capacity as officers or
employees and provided that the foregoing shall not include payments made under
the Management Agreement with Thomas H. Lee
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Company dated as of July 31, 1992 prior to the occurrence of an Event of
Default.
6.2.15 SALE AND LEASEBACK. None of the Borrowers
nor any of the Subsidiaries will directly or indirectly enter into any
arrangement to sell or transfer all or any substantial part of its fixed assets
and thereupon or within one year thereafter rent or lease the assets so sold or
transferred.
ARTICLE 7
DEFAULT AND RIGHTS AND REMEDIES
SECTION 7.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default" under the provisions of
this Agreement:
7.1.1 FAILURE TO PAY. The failure of the
Borrowers to pay any of the Obligations within three (3) Business Days as and
when due and payable in accordance with the provisions of this Agreement, the
Notes and/or any of the other Financing Documents.
7.1.2 BREACH OF REPRESENTATIONS AND WARRANTIES.
Any representation or warranty made in this Agreement or in any report,
statement, schedule, certificate, financial statement or other document
furnished in connection with this Agreement, any of the other Financing
Documents, or the Obligations, shall prove to have been false or misleading when
made (or, if applicable, when reaffirmed) in any material respect.
7.1.3 FAILURE TO COMPLY WITH CERTAIN COVENANTS.
The failure of the Borrowers or any of their Subsidiaries to perform, observe or
comply with any covenant, condition or agreement contained in Sections 6.1.1
(Financial Statements), Section 6.1.1(a) (Recordkeeping, Rights of Inspection,
Field Examination, Etc.) with respect to inspection rights only, Section
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6.1.8 (Insurance), Section 6.1.14 (Financial Covenants), Section 6.1.21 (Defense
of Title and Further Assurances), Section 6.1.22 (Business Names; Locations), or
Section 6.2 (Negative Covenants).
7.1.4 FAILURE TO COMPLY WITH OTHER COVENANTS.
The failure of the Borrowers or any of their Subsidiaries to perform, observe or
comply with any covenant, condition or agreement contained in this Agreement
other than those set forth in Section 7.1.1, 7.1.2 or 7.1.3 above, which failure
shall remain unremedied for a period of thirty (30) days after written notice
thereof to the Borrowers by the Agent.
7.1.5 DEFAULT UNDER OTHER FINANCING DOCUMENTS OR
OBLIGATIONS.
A default shall occur under any of the other Financing Documents or
under any other Obligations, and such default is not cured within any applicable
grace period provided therein.
7.1.6 RECEIVER; BANKRUPTCY. Any Borrower, any
Subsidiary or any guarantor shall (a) apply for or consent to the appointment of
a receiver, trustee or liquidator of itself or any of its property, (b) admit in
writing its inability to pay its debts as they mature, (c) make a general
assignment for the benefit of creditors, (d) be adjudicated a bankrupt or
insolvent, (e) file a voluntary petition in bankruptcy or a petition or an
answer seeking or consenting to reorganization or an arrangement with creditors
or to take advantage of any bankruptcy, reorganization, insolvency, readjustment
of debt, dissolution or liquidation law or statute, or an answer admitting the
material allegations of a petition filed against it in any proceeding under any
such law, or take corporate action for the purposes of effecting any of the
foregoing, or (f) by any act indicate its consent to, approval of or
acquiescence in any such proceeding or the appointment of any receiver of or
trustee for any of its property, or suffer any such receivership, trusteeship or
proceeding to continue undischarged for a period of sixty (60) days, or (g) by
any act indicate its consent to, approval of or acquiescence in any order,
judgment or decree by any court of competent jurisdiction or any Governmental
Authority enjoining or otherwise prohibiting the operation of a
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material portion of any Borrower's, any Subsidiary's or any guarantor's business
or the use or disposition of a material portion of any Borrower's, any
Subsidiary's or any guarantor's assets.
7.1.7 INVOLUNTARY BANKRUPTCY, ETC. (a) An order
for relief shall be entered in any involuntary case brought against any
Borrower, any Subsidiary or any guarantor under the Bankruptcy Code, or (b) any
such case shall be commenced against any Borrower, any Subsidiary or any
guarantor and shall not be dismissed within sixty (60) days after the filing of
the petition, or (c) an order, judgment or decree under any other Law is entered
by any court of competent jurisdiction or by any other Governmental Authority on
the application of a Governmental Authority or of a Person other than any
Borrower, any Subsidiary or any guarantor (i) adjudicating any Borrower, any
Subsidiary or any guarantor bankrupt or insolvent, or (ii) appointing a
receiver, trustee or liquidator of any Borrower, any Subsidiary or of any
guarantor, or of a material portion of any Borrower's, any Subsidiary's or any
guarantor's assets, or (iii) enjoining, prohibiting or otherwise limiting the
operation of a material portion of any Borrower's, any Subsidiary's or any
guarantor's business or the use or disposition of a material portion of any
Borrower's, any Subsidiary's or any guarantor's assets, and such order, judgment
or decree continues unstayed and in effect for a period of sixty (60) days from
the date entered. Notwithstanding the foregoing, the Agent and the Lenders agree
that for purposes of this Section 7.1.7 the term "Subsidiary" shall not include
the Australian Subsidiary unless and until such time as the Agent has required
the execution and delivery of the Australian Security Documents in accordance
with the provisions of Section 3.4.3
7.1.8 JUDGMENT. Unless adequately insured in
the opinion of the Agent, the entry of a final judgment for the payment of money
involving more than One Hundred Thousand Dollars ($100,000) against any Borrower
or any Subsidiary, and the failure by such Borrower or such Subsidiary to
discharge the same, or cause it to be discharged, within forty-five (45) days
from the date of the order, decree or process under which or pursuant to which
such
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judgment was entered, or to secure a stay of execution pending appeal of such
judgment.
7.1.9 EXECUTION; ATTACHMENT. Any execution or
attachment shall be levied against the Collateral, or any part thereof, and such
execution or attachment shall not be set aside, discharged or stayed within
forty-five (45) days after the same shall have been levied.
7.1.10 DEFAULT UNDER OTHER BORROWINGS. Default
shall be made with respect to any Indebtedness for Borrowed Money of any of the
Borrowers or any of their Subsidiaries (other than the Loans) in a principal
amount in excess of One Hundred Thousand Dollars ($100,000), either individually
or in the aggregate if such Indebtedness for Borrowed Money was not paid when
due, after giving effect to any applicable notice and cure period, or if the
effect of such default is to accelerate the maturity of such Indebtedness for
Borrowed Money or to permit the holder or obligee thereof or other party thereto
to cause such Indebtedness for Borrowed Money to become due prior to its stated
maturity.
7.1.11 CHALLENGE TO AGREEMENTS. Any Borrower or
any Subsidiary shall challenge the validity and binding effect of any provision
of any of the Financing Documents or any of the Financing Documents shall for
any reason (except to the extent permitted by its express terms) cease to be
effective or to create a valid first priority Lien (except for Permitted Liens)
on, or security interest in, any of the Collateral purported to be covered
thereby.
7.1.12 MATERIAL ADVERSE CHANGE. The Agent, in
its sole discretion, determines in good faith that a Material Adverse Effect has
occurred, notifies the Borrowers of that determination and such condition
continues unremedied to the reasonable satisfaction of the Agent for thirty (30)
days after such notice.
7.1.13 CHANGE IN OWNERSHIP. (1) The Parent shall
cease to own and control, beneficially and of record, directly or
indirectly, at least one hundred percent (100%) of the issued and
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outstanding capital stock of the US Subsidiary, the UK Subsidiary, the
Australian Subsidiary and the Mexican Subsidiary, (2) prior to a public or
private offering of Securities by the Parent which generates at least
$10,000,000 in net proceeds payable to the Parent, Thomas H. Lee Company and its
Affiliates shall cease to own and control, beneficially and of record, at least
forty percent (40%) or more of the issued and outstanding voting capital stock
of the Parent, or (3) at any time, any Person or group of Persons acquires more
than thirty-five percent (35%) of the issued and outstanding voting capital
stock of the Parent.
7.1.14 LIQUIDATION, TERMINATION, DISSOLUTION,
CHANGE IN MANAGEMENT, ETC.
Any Borrower or any Subsidiary shall liquidate, dissolve or terminate
its existence or Thomas H. Lee Company no longer has a representative on the
board of directors, without the prior written consent of the Agent.
SECTION 7.2 REMEDIES. Upon the occurrence and during the continuance of
any Default or Event of Default, the Agent may, in the exercise of its sole and
absolute discretion from time to time, and shall, at the direction of the
Requisite Lenders of the Lenders, at any time thereafter exercise any one or
more of the following rights, powers or remedies:
7.2.1 ACCELERATION. The Agent may declare any
or all of the Obligations to be immediately due and payable, notwithstanding
anything contained in this Agreement or in any of the other Financing Documents
to the contrary, without presentment, demand, protest, notice of protest or of
dishonor, or other notice of any kind, all of which the Borrowers hereby waive.
7.2.2 FURTHER ADVANCES. The Agent may from time
to time without notice to the Borrowers suspend, terminate or limit any further
advances, loans or other extensions of credit under the Commitment, under this
Agreement and/or under any of the other Financing Documents. Further, upon the
occurrence of an Event of Default or Default specified in Sections 7.1.6
(Receiver; Bankruptcy) or 7.1.7 (Involuntary Bankruptcy, etc.) above, the
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Revolving Credit Commitments, the Letter of Credit Commitments and any agreement
in any of the Financing Documents to provide additional credit and/or to issue
Letters of Credit shall immediately and automatically terminate and the unpaid
principal amount of the Notes (with accrued interest thereon) and all other
Obligations then outstanding, shall immediately become due and payable without
further action of any kind and without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived by the Borrowers.
7.2.3 UNIFORM COMMERCIAL CODE. The Agent shall
have all of the rights and remedies of a secured party under the applicable
Uniform Commercial Code and other applicable Laws. Upon demand by the Agent
after acceleration of the Obligations under Section 7.2.1, the Borrowers shall
assemble the Collateral and make it available to the Agent, at a place
designated by the Agent. The Agent or its agents may without notice after
acceleration of the Obligations under Section 7.2.1, from time to time enter
upon any Borrower's premises to take possession of the Collateral, to remove it,
to render it unusable, to process it or otherwise prepare it for sale, or to
sell or otherwise dispose of it.
Any written notice of the sale, disposition or other intended action by
the Agent with respect to the Collateral which is sent by regular mail, postage
prepaid, to the Borrowers at the address set forth in Section 9.1 of this
Agreement, or such other address of the Borrowers which may from time to time be
shown on the Agent's records, at least ten (10) days prior to such sale,
disposition or other action, shall constitute commercially reasonable notice to
the Borrowers. The Agent may alternatively or additionally give such notice in
any other commercially reasonable manner. Nothing in this Agreement shall
require the Agent to give any notice not required by applicable Laws.
If any consent, approval, or authorization of any state, municipal or
other Governmental Authority or of any other Person or of any Person having any
interest therein, should be necessary to effectuate any sale or other
disposition of the Collateral, the Borrowers agree to execute all such
applications and other instruments, and to take all other action, as may be
required in
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connection with securing any such consent, approval or authorization.
The Borrowers recognize that the Agent may be unable to effect a public
sale of all or a part of the Collateral consisting of Securities by reason of
certain prohibitions contained in the Securities Act of 1933, as amended, and
other applicable Federal and state Laws. The Agent may, therefore, in its
discretion, take such steps as it may deem appropriate to comply with such Laws
and may, for example, at any sale of the Collateral consisting of securities
restrict the prospective bidders or purchasers as to their number, nature of
business and investment intention, including, without limitation, a requirement
that the Persons making such purchases represent and agree to the satisfaction
of the Agent that they are purchasing such securities for their account, for
investment, and not with a view to the distribution or resale of any thereof.
The Borrowers covenant and agree to do or cause to be done promptly all such
acts and things as the Agent may request from time to time and as may be
necessary to offer and/or sell the securities or any part thereof in a manner
which is valid and binding and in conformance with all applicable Laws. Upon any
such sale or disposition, the Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral consisting of securities so
sold.
7.2.4 SPECIFIC RIGHTS WITH REGARD TO COLLATERAL.
In addition to all other rights and remedies provided hereunder or as
shall exist at law or in equity from time to time, the Agent may (but shall be
under no obligation to), without notice to any of the Borrowers, and each
Borrower hereby irrevocably appoints the Agent as its attorney-in-fact, with
power of substitution, in the name of the Agent and/or any or all of the Lenders
and/or in the name of any or all of the Borrowers or otherwise, for the use and
benefit of the Agent and the Lenders, but at the cost and expense of the
Borrowers and without notice to the Borrowers:
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(a) request any Account Debtor obligated on
any of the Accounts to make payments thereon directly to the Agent,
with the Agent taking control of the cash and non-cash proceeds
thereof;
(b) compromise, extend or renew any of the
Collateral or deal with the same as it may deem advisable;
(c) make exchanges, substitutions or
surrenders of all or any part of the Collateral;
(d) copy, transcribe, or remove from any
place of business of any Borrower or any Subsidiary all books, records,
ledger sheets, correspondence, invoices and documents, relating to or
evidencing any of the Collateral or without cost or expense to the
Agent or the Lenders, make such use of any Borrower's or any
Subsidiary's place(s) of business as may be reasonably necessary to
administer, control and collect the Collateral;
(e) repair, alter or supply goods if
necessary to fulfill in whole or in part the purchase order of any
Account Debtor;
(f) demand, collect, receipt for and give
renewals, extensions, discharges and releases of any of the Collateral;
(g) institute and prosecute legal and
equitable proceedings to enforce collection of, or realize upon, any of
the Collateral;
(h) settle, renew, extend, compromise,
compound, exchange or adjust claims in respect of any of the Collateral
or any legal proceedings brought in respect thereof;
(i) endorse or sign the name of any Borrower
upon any Items of Payment, certificates of title, instruments,
securities, stock powers, documents, documents of title,
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financing statements, assignments, notices or other writing relating to
or part of the Collateral and on any proof of claim in bankruptcy
against an Account Debtor;
(j) notify the Post Office authorities to
change the address for the delivery of mail to the Borrowers to such
address or Post Office Box as the Agent may designate and receive and
open all mail addressed to any of the Borrowers; and
(k) take any other action necessary or
beneficial to realize upon or dispose of the Collateral or to carry out
the terms of this Agreement.
In addition, following and during the continuance of an Event of Default, the
Agent (i) may use any of the Borrowers' owned or leased lifts, hoists, trucks
and other facilities or equipment for handling or removing the Collateral, (ii)
shall have, and is hereby granted, a right of ingress and egress to the places
where the Collateral is located, and may proceed over and through any of the
Borrowers' owned or leased property, (iii) may hire such security guards or
implement such other security protection measures as the Agent deems
appropriate, (iv) may employ and maintain at any of the Borrowers' premises a
custodian who shall have full authority to do all acts necessary to protect the
interests of the Agent and the Lenders in the Collateral and (v) may lease
warehouse facilities to which the Agent may move all or any part of the
Collateral to the extent commercially reasonable. The Borrowers agree to
cooperate fully with the Agent's efforts to preserve the Collateral and will
take such actions to preserve the Collateral as the Agent may reasonably direct.
All of the Agent's expenses of preserving the Collateral, including any
reasonable expenses relating to the compensation and bonding of a custodian,
shall part of the Enforcement Costs.
7.2.5 APPLICATION OF PROCEEDS. Any proceeds of
sale or other disposition of the Collateral will be applied by the Agent to the
payment first of any and all Agent's Obligations, then to any and all
Administrative Costs and Enforcement Costs, and any balance of such proceeds
will be remitted to the Lenders in like
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currency and funds received ratably in accordance with their respective Pro Rata
Shares of such balance. Each Lender shall apply any such proceeds received from
the Agent to its Obligations in such order and manner as such Lender shall
determine. If the sale or other disposition of the Collateral fails to fully
satisfy the Obligations, the Borrowers shall remain liable to the Agent and the
Lenders for any deficiency.
7.2.6 PERFORMANCE BY AGENT. If the Borrowers
shall fail to pay the Obligations or otherwise fail to perform, observe or
comply with any of the conditions, covenants, terms, stipulations or agreements
contained in this Agreement or any of the other Financing Documents, the Agent
without notice to or demand upon the Borrowers and without waiving or releasing
any of the Obligations or any Default or Event of Default, may (but shall be
under no obligation to) at any time thereafter make such payment or perform such
act for the account and at the expense of the Borrowers, and may enter upon the
premises of the Borrowers for that purpose and take all such action thereon as
the Agent may consider necessary or appropriate for such purpose and each of the
Borrowers hereby irrevocably appoints the Agent as its attorney-in-fact to do
so, with power of substitution, in the name of the Agent, in the name of any or
all of the Lenders, or in the name of any or all of the Borrowers or otherwise,
for the use and benefit of the Agent, but at the cost and expense of the
Borrowers and without notice to the Borrowers. All sums so paid or advanced by
the Agent together with interest thereon from the date of payment, advance or
incurring until paid in full at the Post-Default Rate and all costs and
expenses, shall be deemed part of the Enforcement Costs, shall be paid by the
Borrowers to the Agent on demand, and shall constitute and become a part of the
Agent's Obligations.
7.2.7 OTHER REMEDIES. The Agent may from time
to time proceed to protect or enforce the rights of the Agent and/or any of the
Lenders by an action or actions at law or in equity or by any other appropriate
proceeding, whether for the specific performance of any of the covenants
contained in this Agreement or in any of the other Financing Documents, or for
an injunction against the violation of any of the terms of this
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Agreement or any of the other Financing Documents, or in aid of the exercise or
execution of any right, remedy or power granted in this Agreement, the Financing
Documents, and/or applicable Laws. The Agent and each of the Lenders is
authorized to offset and apply to all or any part of the Obligations all moneys,
credits and other property of any nature whatsoever of any or all of the
Borrowers now or at any time hereafter in the possession of, in transit to or
from, under the control or custody of, or on deposit with, the Agent, any of the
Lenders or any Affiliate of the Agent or any of the Lenders.
ARTICLE 8
THE AGENT
SECTION 8.1 APPOINTMENT. Each Lender hereby designates and appoints
NationsBank as its agent under this Agreement and the Financing Documents, and
each Lender hereby irrevocably authorizes the Agent to take such action or to
refrain from taking such action on its behalf under the provisions of this
Agreement and the Financing Documents and to exercise such powers as are set
forth herein or therein, together with such other powers as are reasonably
incidental thereto. The Agent agrees to act as such on the express conditions
contained in this Article 8. The provisions of this Article 8 are solely for the
benefit of the Agent and the Lenders and neither the Borrowers nor any Person
shall have any rights as a third party beneficiary of any of the provisions
hereof. In performing its functions and duties under this Agreement, the Agent
shall act solely as an administrative representative of the Lenders and does not
assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for the Lenders, the Borrowers or any
Person. The Agent may perform any of its duties hereunder, or under the
Financing Documents, by or through its agents or employees.
SECTION 8.2 NATURE OF DUTIES.
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8.2.1 IN GENERAL. The Agent shall have no
duties, obligations or responsibilities except those expressly set forth in this
Agreement or in the Financing Documents. The duties of the Agent shall be
mechanical and administrative in nature. The Agent shall not have by reason of
this Agreement a fiduciary relationship in respect of any Lender. Each Lender
shall make its own independent investigation of the financial condition and
affairs of the Borrowers in connection with the extension of credit hereunder
and shall make its own appraisal of the credit worthiness of the Borrowers, and
the Agent shall have no duty or responsibility, either initially or on a
continuing basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before the Closing Date
or at any time or times thereafter. If the Agent seeks the consent or approval
of any of the Lenders to the taking or refraining from taking of any action
hereunder, then the Agent shall send notice thereof to each Lender. The Agent
shall promptly notify each Lender any time that the applicable percentage of the
Lenders have instructed the Agent to act or refrain from acting pursuant hereto.
8.2.2 EXPRESS AUTHORIZATION. The Agent is
hereby expressly and irrevocably authorized by each of the Lenders, as agent on
behalf of itself and the other Lenders:
(a) To receive on behalf of each of the
Lenders any payment or collection on account of the Obligations and to
distribute to each Lender its Pro Rata Share of all such payments and
collections so received as provided in this Agreement;
(b) To receive all documents and items to be
furnished to the Lenders under the Financing Documents (nothing contained herein
shall relieve the Borrowers of any obligation to deliver any item directly to
the Lenders to the extent expressly required by the provisions of this
Agreement);
(c) To act or refrain from acting in this
Agreement and in the other Financing Documents with respect to those matters so
designated for the Agent;
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(d) To act as nominee for and on behalf of
the Lenders in and under this Agreement and the other Financing Documents;
(e) To arrange for the means whereby the
funds of the Lenders are to be made available to the Borrowers;
(f) To distribute promptly to the Lenders,
if required by the terms of this Agreement, all written information, requests,
notices, Loan Notices, payments, Prepayments, documents and other items received
from the Borrowers or other Person;
(g) To amend, modify, or waive any
provisions of this Agreement or the other Financing Documents on behalf of the
Lenders subject to the requirement that certain of the Lenders' consent be
obtained in certain instances as provided in Section 9.2.2;
(h) To deliver to the Borrowers and other
Persons, all requests, demands, approvals, notices, and consents received from
any of the Lenders;
(i) To exercise on behalf of each Lender all
rights and remedies of the Lenders upon the occurrence of any Event of Default
and/or Default specified in this Agreement and/or in any of the other Financing
Documents or applicable Laws;
(j) To execute any of the Security Documents
and any other documents on behalf of the Lenders as the secured party for the
benefit of the Agent and the Lenders; and
(k) To take such other actions as may be
requested by the Requisite Lenders.
SECTION 8.3 RIGHTS, EXCULPATION, ETC. Neither the Agent nor any of its
officers, directors, employees or agents shall be liable to any Lender for any
action taken or omitted by them hereunder or under any of the Financing
Documents, or in connection herewith or therewith, except that the Agent shall
be obligated on the terms set forth herein for performance of its express
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obligations hereunder, and except that the Agent shall be liable with respect to
its own gross negligence or willful misconduct. The Agent shall not be liable
for any apportionment or distribution of payments made by it in good faith and
if any such apportionment or distribution is subsequently determined to have
been made in error the sole recourse of any Lender to whom payment was due but
not made, shall be to recover from other the Lenders any payment in excess of
the amount to which they are determined to be entitled (and such other Lenders
hereby agree to return to such Lender any such erroneous payments received by
them). The Agent shall not be responsible to any Lender for any recitals,
statements, representations or warranties herein or for the execution,
effectiveness, genuineness, validity, enforceability, collectible, or
sufficiency of this Agreement or any of the Financing Documents or the
transactions contemplated thereby, or for the financial condition of any Person.
The Agent shall not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any of the Financing Documents or the financial condition of any
Person, or the existence or possible existence of any Default or Event of
Default. The Agent may at any time request instructions from the Lenders with
respect to any actions or approvals which by the terms of this Agreement or of
any of the Financing Documents the Agent is permitted or required to take or to
grant, and the Agent shall be absolutely entitled to refrain from taking any
action or to withhold any approval and shall not be under any liability
whatsoever to any Person for refraining from any action or withholding any
approval under any of the Financing Documents until it shall have received such
instructions from the applicable percentage of the Lenders. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against the Agent
as a result of the Agent acting or refraining from acting under this Agreement
or any of the other Financing Documents in accordance with the instructions of
the applicable percentage of the Lenders and notwithstanding the instructions of
the Lenders, the Agent shall have no obligation to take any action if it, in
good faith believes that such action exposes the Agent to any liability.
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SECTION 8.4 RELIANCE. The Agent shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents or any
telephone message or other communication (including any writing, telex, telecopy
or telegram) believed by it in good faith to be genuine and correct and to have
been signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement or any of the Financing Documents and its duties
hereunder or thereunder, upon advice of counsel selected by it. The Agent may
deem and treat the original Lenders as the owners of the respective Notes for
all purposes until receipt by the Agent of a written notice of assignment,
negotiation or transfer of any interest therein by the Lenders in accordance
with the terms of this Agreement. Any interest, authority or consent of any
holder of any of the Notes shall be conclusive and binding on any subsequent
holder, transferee, or assignee of such Notes. The Agent shall be entitled to
rely upon the advice of legal counsel, independent accountants, and other
experts selected by the Agent in its sole discretion.
SECTION 8.5 INDEMNIFICATION. Each Lender, severally, agrees to
reimburse and indemnify the Agent for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, advances or disbursements including, without limitation,
Administrative Costs, Enforcement Costs, of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against the Agent in any way
relating to or arising out of this Agreement or any of the Financing Documents
or any action taken or omitted by the Agent under this Agreement for any of the
Financing Documents, in proportion to each Lender's Pro Rata Share, all of the
foregoing as they may arise, be asserted or be imposed from time to time;
PROVIDED, HOWEVER, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, advances or disbursements resulting from the Agent's gross
negligence or willful misconduct. The obligations of the Lenders under this
Section 8.5 shall survive the payment in full of the Obligations and the
termination of this Agreement.
SECTION 8.6 NATIONSBANK INDIVIDUALLY. With respect to its Commitments
and the Loans made by it, and the Notes issued to it,
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NationsBank shall have and may exercise the same rights and powers hereunder and
is subject to the same obligations and liabilities as and to the extent set
forth herein for any other Lender. The terms "the Lenders" or "Requisite
Lenders" or any similar terms shall, unless the context clearly otherwise
indicates, include NationsBank in its individual capacity as a Lender or one of
the Requisite Lenders. NationsBank and its Affiliates may lend money to, accept
deposits from and generally engage in any kind of banking, trust or other
business with the Borrowers, any Affiliate or Subsidiary of any Borrower, or any
other Person or any of their officers, directors and employees as if NationsBank
were not acting as the Agent pursuant hereto and the Agent may accept fees and
other consideration from the Borrowers, any Subsidiary or Affiliate of the
Borrowers or any of their officers, directors and employees (in addition to the
Collateral Management Fees or other arrangements fees heretofore agreed to
between the Borrowers and the Agent) for services in connection with this
Agreement or otherwise without having to account for or share the same with the
Lenders.
SECTION 8.7 Successor Agent.
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8.7.1 RESIGNATION. The Agent may resign from
the performance of all its functions and duties hereunder at any time by giving
at least thirty (30) Business Days' prior written notice to the Borrowers and
the Lenders. Such resignation shall take effect upon the acceptance by a
successor Agent of appointment pursuant to Section 8.7.2 below or as otherwise
provided below.
8.7.2 APPOINTMENT OF SUCCESSOR. Upon any such
notice of resignation pursuant to Section 8.7.1 above, the Requisite Lenders
shall appoint a successor to the Agent. If a successor to the Agent shall not
have been so appointed within said thirty (30) Business Day period, the Agent
retiring, upon notice to the Borrowers, shall then appoint a successor Agent who
shall serve as the Agent until such time, as the Requisite Lenders appoint a
successor the Agent as provided above.
8.7.3 SUCCESSOR AGENT. Upon the acceptance of
any appointment as the Agent under the Financing Documents by a successor
Agent, such successor to the Agent shall thereupon
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succeed to and become vested with all the rights, powers, privileges and duties
of the Agent retiring, and the Agent retiring shall be discharged from its
duties and obligations under the Financing Documents. After any Agent's
resignation as the Agent under the Financing Documents, the provisions of this
Article 8 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was the Agent under the Financing Documents.
SECTION 8.8 COLLATERAL MATTERS.
8.8.1 RELEASE OF COLLATERAL. The Lenders hereby
irrevocably authorize the Agent, at its option and in its discretion, to release
any Lien granted to or held by the Agent upon any property covered by this
Agreement or the Financing Documents:
(a) upon termination of the Commitments and
payment and satisfaction of all Obligations;
(b) constituting property being sold or
disposed of if the Borrowers certify to the Agent that the
sale or disposition is made in compliance with the provisions
of this Agreement (and the Agent may rely in good faith
conclusively on any such certificate, without further
inquiry);
(c) constituting property leased to the
Borrowers under a lease which has expired or been terminated
in a transaction permitted under this Agreement or is about to
expire and which has not been, and is not intended by the
Borrowers to be, renewed or extended; or
(d) constituting property covered by
Permitted Liens with lien priority superior to those Liens in
favor or for the benefit of the Lenders.
In addition during any fiscal year of the Borrowers (x) the Agent may release
Collateral having a book value of not more than 5% of the book value of all
Collateral, (y) the Agent, with the consent
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of the Requisite Lenders, may release Collateral having a book value of not more
than 25% of the book value of all Collateral and (z) the Agent, with the consent
of the Lenders having 90% of (i) the Commitments and (ii) Loans, may release all
the Collateral.
8.8.2 CONFIRMATION OF AUTHORITY, EXECUTION OF
RELEASES.
Without in any manner limiting the Agent's authority to act without any
specific or further authorization or consent by the Lenders as set forth in
Section 8.8.1, each Lender agrees to confirm in writing, upon request by the
Borrowers, the authority to release any property covered by this Agreement or
the Financing Documents conferred upon the Agent under Section 8.8.1. So long as
no Event of Default is then continuing, upon receipt by the Agent of
confirmation from the requisite percentage of the Lenders, of its authority to
release any particular item or types of property covered by this Agreement or
the Financing Documents, and upon at least five (5) Business Days prior written
request by the Borrowers, the Agent shall (and is hereby irrevocably authorized
by the Lenders to) execute such documents as may be necessary to evidence the
release of the Liens granted to the Agent for the benefit of the Lenders herein
or pursuant hereto upon such Collateral; PROVIDED, HOWEVER, that (a) the Agent
shall not be required to execute any such document on terms which, in the
Agent's opinion, would expose the Agent to liability or create any obligation or
entail any consequence other than the release of such Liens without recourse or
warranty, and (b) such release shall not in any manner discharge, affect or
impair the Obligations or any Liens upon (or obligations of any Person, in
respect of), all interests retained by any Person, including, without
limitation, the proceeds of any sale, all of which shall continue to constitute
part of the property covered by this Agreement or the Financing Documents.
8.8.3 ABSENCE OF DUTY. The Agent shall have no
obligation whatsoever to any Lender, the Borrowers or any other Person to assure
that the property covered by this Agreement or the Financing Documents exists or
is owned by the Borrowers or is cared for, protected or insured or has been
encumbered or that the Liens
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granted to the Agent on behalf of the Lenders herein or pursuant hereto have
been properly or sufficiently or lawfully created, perfected, protected or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to the Agent in this Section 8.8.3 or in any of the Financing
Documents, it being understood and agreed that in respect of the property
covered by this Agreement or the Financing Documents or any act, omission or
event related thereto, the Agent may act in any manner it may deem appropriate,
in its discretion, given the Agent's own interest in property covered by this
Agreement or the Financing Documents as one of the Lenders and that the Agent
shall have no duty or liability whatsoever to any of the other the Lenders.
SECTION 8.9 COLLATERAL MANAGEMENT FEE. The Borrowers shall pay to the
Agent, annually a loan administration and agency fee (collectively, the
"Collateral Management Fees" and individually, a "Collateral Management Fee")
each in the amount of $75,000 per annum. The initial Collateral Management Fee
shall be payable in advance on the Closing Date, and each Collateral Management
Fee thereafter shall be payable in advance on each anniversary date of the
Closing Date. Each Collateral Management Fee shall be fully earned and
non-refundable upon the date paid. The Agent shall retain all of the Collateral
Management Fees for its own account and shall have no obligation to remit or pay
any portion thereof to any of the Lenders.
SECTION 8.10 AGENCY FOR PERFECTION. Each Lender hereby appoints the
Agent and each other Lender as agent for the purpose of perfecting the Lenders'
Liens in Collateral which, in accordance with Article 9 of the Uniform
Commercial Code in any applicable jurisdiction or otherwise, can be perfected
only by possession. Should any Lender (other than the Agent) obtain possession
of any such Collateral, such Lender shall notify the Agent thereof, and,
promptly upon the Agent's request therefor, shall deliver such Collateral to the
Agent or in accordance with the Agent's instructions.
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SECTION 8.11 EXERCISE OF REMEDIES. Each Lender agrees that it will
not have any right individually to enforce or seek to enforce this Agreement or
any Financing Document or to realize upon any collateral security for the Loans,
it being understood and agreed that such rights and remedies may be exercised
only by the Agent.
SECTION 8.12 CONSENTS.
(a) In the event the Agent requests the consent of a
Lender and does not receive a written denial thereof, or a written notice from a
Lender that due course consideration of the request requires additional time, in
each case, within ten (10) Business Days after such Lender's receipt of such
request, then such Lender will be deemed to have given such consent.
(b) In the event the Agent requests the consent of a
Lender and such consent is denied, then NationsBank may, at its option, require
such Lender to assign its interest in the Loans to NationsBank for a price equal
to the then outstanding principal amount thereof PLUS accrued and unpaid
interest, fees and costs and expenses due such Lender under the Financing
Documents, which principal, interest, fees and costs and expenses will be paid
on the date of such assignment. In the event that NationsBank elects to require
any Lender to assign its interest to NationsBank, NationsBank will so notify
such Lender in writing within thirty (30) days following such Lender's denial,
and such Lender will assign its interest to NationsBank no later than five (5)
days following receipt of such notice.
SECTION 8.13 DISSEMINATION OF INFORMATION. The Agent will provide
the Lenders with any information received by the Agent from the Borrowers which
is required to be provided to the Agent or to the Lenders hereunder; PROVIDED,
HOWEVER, that the Agent shall not be liable to any one or more the Lenders for
any failure to do so, except to the extent that such failure is attributable to
the Agent's gross negligence or willful misconduct.
SECTION 8.14 DISCRETIONARY ADVANCES. The Agent may, in its sole
discretion, make, for the account of the Lenders on a pro rata
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basis, advances under the Revolving Loan of up to 10% in excess of the Borrowing
Base (but not in excess of the limitation set forth in aggregate Revolving
Credit Commitments) for a period of not more than thirty (30) consecutive days.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 NOTICES. All notices, requests and demands to or upon the
parties to this Agreement shall be in writing and shall be deemed to have been
given or made when delivered by hand on a Business Day, or two (2) days after
the date when deposited in the mail, postage prepaid by registered or certified
mail, return receipt requested, or when sent by overnight courier, on the
Business Day next following the day on which the notice is delivered to such
overnight courier, addressed as follows:
Borrowers: c/o First Alert, Inc.
3901 Liberty Street
Aurora, Illinois 60504-8122
Attention: Mr. Michael A. Rohl
Vice President and
Chief Financial Officer
with a copy to: Hutchins, Wheeler & Dittmar,
a Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
Attention: Jeffrey S. Wieand
Agent: NATIONSBANK, N.A.
NationsBank Business Credit
100 S. Charles Street
Baltimore, Maryland 21201
Attention: David Thayer
with a copy to: Shaun F. Carrick, Esquire
Miles & Stockbridge, P.A.
10 Light Street
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Baltimore, Maryland 21202
By written notice, each party to this Agreement may change the address to which
notice is given to that party, provided that such changed notice shall include a
street address to which notices may be delivered by overnight courier in the
ordinary course on any Business Day.
SECTION 9.2 AMENDMENTS; WAIVERS.
9.2.1 IN GENERAL. This Agreement and the other
Financing Documents may not be amended, modified, or changed in any respect
except by an agreement in writing signed by the Agent, the Requisite Lenders and
the Borrowers, and, to the extent provided in Section 9.2.2, by an agreement in
writing signed by the Agent, all of the Lenders and the Borrowers. No waiver of
any provision of this Agreement or of any of the other Financing Documents, nor
consent to any departure by the Borrowers therefrom, shall in any event be
effective unless the same shall be in writing signed by the Requisite Lenders.
No course of dealing between the Borrowers and the Agent and/or any of the
Lenders and no act or failure to act from time to time on the part of the Agent
and/or any of the Lenders shall constitute a waiver, amendment or modification
of any provision of this Agreement or any of the other Financing Documents or
any right or remedy under this Agreement, under any of the other Financing
Documents or under applicable Laws. Without implying any limitation on the
foregoing, and subject to the provisions of Section 9.2.2:
(a) Any waiver or consent shall be effective
only in the specific instance, for the terms and purpose for which given,
subject to such conditions as the Agent and Lenders may specify in any such
instrument.
(b) No waiver of any Default or Event of
Default shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereto.
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(c) No notice to or demand on the Borrowers
in any case shall entitle the Borrowers to any other or further notice or demand
in the same, similar or other circumstance.
(d) No failure or delay by the Lenders to
insist upon the strict performance of any term, condition, covenant or agreement
of this Agreement or of any of the other Financing Documents, or to exercise any
right, power or remedy consequent upon a breach thereof, shall constitute a
waiver, amendment or modification of any such term, condition, covenant or
agreement or of any such breach or preclude the Lenders from exercising any such
right, power or remedy at any time or times.
(e) By accepting payment after the due date
of any amount payable under this Agreement or under any of the other Financing
Documents, the Lenders shall not be deemed to waive the right either to require
prompt payment when due of all other amounts payable under this Agreement or
under any of the other Financing Documents, or to declare a default for failure
to effect such prompt payment of any such other amount.
9.2.2 CIRCUMSTANCES WHERE CONSENT OF ALL OF THE
LENDERS IS REQUIRED.
Notwithstanding anything to the contrary contained herein, no
amendment, modification, change or waiver shall be effective without the consent
of all of the Lenders to:
(a) extend the maturity of the principal of,
or interest on, any Note or of any of the other Obligations;
(b) reduce the principal amount of any Note
or of any of the other Obligations, the rate of interest thereon or the Fees due
to the Lenders, except as expressly permitted therein;
(c) change the aggregate Commitments;
(d) extend the date of payment of principal
of, or interest on, any Note or of any of the other Obligations;
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(e) change the method of calculation
utilized in connection with the computation of interest and Fees;
(f) change the manner of pro rata
application by the Agent of payments made by the Borrowers, or any other
payments required hereunder or under the other Financing Documents;
(g) modify this Section, Section 8.8.1,
Section 8.13, or the definition of "Requisite Lenders";
(h) release or agree to subordinate any
material portion of any Collateral or Financing Document (except to the extent
provided herein or therein); and
(i) change the definition of "Borrowing
Base" or "UK Borrowing Base".
Additionally, no change may be made to the amount of a Lender's Commitment or to
the Lender's percentage of all Commitments without the prior written consent of
that Lender.
SECTION 9.3 CUMULATIVE REMEDIES. The rights, powers and remedies
provided in this Agreement and in the other Financing Documents are cumulative,
may be exercised concurrently or separately, may be exercised from time to time
and in such order as the Agent shall determine, subject to the provisions of
this Agreement, and are in addition to, and not exclusive of, rights, powers and
remedies provided by existing or future applicable Laws. In order to entitle the
Agent to exercise any remedy reserved to it in this Agreement, it shall not be
necessary to give any notice, other than such notice as may be expressly
required in this Agreement. Without limiting the generality of the foregoing and
subject to the terms of this Agreement, the Agent may:
(a) proceed against any one or more of the
Borrowers with or without proceeding against any other Person who may
be liable (by endorsement, guaranty, indemnity or otherwise) for all or
any part of the Obligations;
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(b) proceed against any one or more of the
Borrowers with or without proceeding under any of the other Financing
Documents or against any Collateral or other collateral and security
for all or any part of the Obligations;
(c) without reducing or impairing the
obligation of the Borrowers and without notice, release or compromise
with any guarantor or other Person liable for all or any part of the
Obligations under the Financing Documents or otherwise;
(d) without reducing or impairing the
obligations of the Borrowers and without notice thereof: (i) fail to
perfect the Lien in any or all Collateral or to release any or all the
Collateral or to accept substitute Collateral, (ii) approve the making
of advances under the Revolving Loan under this Agreement, (iii) waive
any provision of this Agreement or the other Financing Documents, (iv)
exercise or fail to exercise rights of set-off or other rights, or (v)
accept partial payments or extend from time to time the maturity of all
or any part of the Obligations.
SECTION 9.4 SEVERABILITY. In case one or more provisions, or part
thereof, contained in this Agreement or in the other Financing Documents shall
be invalid, illegal or unenforceable in any respect under any Law, then without
need for any further agreement, notice or action:
(a) the validity, legality and
enforceability of the remaining provisions shall remain effective and
binding on the parties thereto and shall not be affected or impaired
thereby;
(b) the obligation to be fulfilled shall be
reduced to the limit of such validity;
(c) if such provision or part thereof
pertains to repayment of the Obligations, then, at the sole and
absolute discretion of the Agent, all of the Obligations of
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the Borrowers to the Agent and the Lenders shall become immediately due
and payable; and
(d) if the affected provision or part
thereof does not pertain to repayment of the Obligations, but operates
or would prospectively operate to invalidate this Agreement in whole or
in part, then such provision or part thereof only shall be void, and
the remainder of this Agreement shall remain operative and in full
force and effect.
SECTION 9.5 ASSIGNMENTS BY LENDERS. Any Lender may, with the prior
written consent of the Agent (which consent shall not be unreasonably withheld),
but without notice to or consent of the Borrowers, assign to any Person (each an
"Assignee" and collectively, the "Assignees") all or a portion of such Lender's
Commitments; provided that (i) the amount assigned by such Lender must be at
least equal to Five Million Dollars ($5,000,000) or equal to one hundred percent
(100%) of such Lender's Commitments if less than Five Million Dollars
($5,000,000). Any Lender which elects to make such an assignment shall pay to
the Agent, for the exclusive benefit of the Agent, an administrative fee for
processing each such assignment in the amount of Three Thousand Five Hundred
Dollars ($3,500.00). Such Lender and its Assignee shall notify the Agent and the
Borrowers in writing of the date on which the assignment is to be effective (the
"Adjustment Date"). On or before the Adjustment Date, the assigning Lender, the
Agent, the Borrowers and the respective Assignee shall execute and deliver a
written assignment agreement in a form acceptable to the Agent, which shall
constitute an amendment to this Agreement to the extent necessary to reflect
such assignment. Upon the request of any assigning Lender following an
assignment made in accordance with this Section 9.5, the Borrowers shall issue
new Notes to the assigning Lender and its Assignee reflecting such assignment,
in exchange for the existing Notes held by the assigning Lender.
In addition, notwithstanding the foregoing, any Lender may at any time
pledge all or any portion of such Lender's rights under this Agreement, any of
the Commitments or any of the Obligations to a Federal Reserve Bank.
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SECTION 9.6 PARTICIPATIONS BY LENDERS. Any Lender may at any time sell
to one or more financial institutions participating interests in any of such
Lender's Obligations or Commitments; provided, however, that (a) no such
participation shall relieve such Lender from its obligations under this
Agreement or under any of the other Financing Documents to which it is a party,
(b) such Lender shall remain solely responsible for the performance of its
obligations under this Agreement and under all of the other Financing Documents
to which it is a party, and (c) the Borrowers, the Agent and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and the other
Financing Documents.
SECTION 9.7 DISCLOSURE OF INFORMATION BY LENDERS. In connection with
any sale, transfer, assignment or participation by any Lender in accordance with
Section 9.5 or 9.6 above, each Lender shall have the right to disclose to any
actual or potential purchaser, assignee, transferee or participant all financial
records, information, reports, financial statements and documents obtained in
connection with this Agreement and/or any of the other Financing Documents or
otherwise, provided that such actual or potential purchaser shall agree to keep
confidential any non-public information delivered or made available to such
Lender.
Each of the Lenders and the Agent hereby agree to exercise reasonable
efforts to keep any non-public information delivered or made available to it
pursuant to this Agreement or any of the Financing Documents, confidential from
any other Person (including any Affiliate of any Lender except as may be
necessary in connection with the administration of the Obligations under this
Agreement) and except (a) Persons employed or retained by such Lender or Agent
who are or are expected to become engaged in evaluating, approving, structuring
or administering the Obligations, (b) with the prior written consent the US
Subsidiary, (c) as required in connection with the exercise of any remedy under
this Agreement or any of the Financing Documents or (e) as may be required by
Law, provided that in the event that any Lender, the Agent or any of its or
their representatives are requested or compelled (by oral questions,
interrogatories, requests for
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information or documents, subpoena, civil investigative demand or similar
process) to disclose any of the non-public information delivered or made
available to any Lender or the Agent pursuant to this Agreement or any of the
Financing Documents, the Lenders, the Agent and its or their representatives, as
appropriate, agree to provide Borrowers with prompt notice of such request(s).
SECTION 9.8 TAX WITHHOLDING CLAUSE. Each Lender or Assignee or
participant of a Lender that is not incorporated under the Laws of the United
States of America or a state thereof agrees that it will deliver to each of the
Borrowers and the Agent two (2) duly completed copies of the following: (i)
Internal Revenue Service Form W-9, 4224 or 1001, or other applicable form
prescribed by the Internal Revenue Service, certifying that such Lender,
Assignee or participant is entitled to receive payments under this Agreement and
the other Financing Documents without deduction or withholding of any United
States federal income taxes, or is subject to such tax at a reduced rate under
an applicable tax treaty, or (ii) Internal Revenue Service Form W-8 or other
applicable form or a certificate of such Lender, Assignee or participant
indicating that no such exemption or reduced rate is allowable with respect to
such payments. Each Lender, Assignee or participant required to deliver to the
Borrowers and the Agent a form or certificate pursuant to the preceding sentence
shall deliver such form or certificate as follows: (A) each Lender which is a
party hereto on the Closing Date shall deliver such form or certificate at least
five (5) Business Days prior to the first date on which any interest or fees are
payable by the Borrowers hereunder for the account of each Lender; (B) each
Assignee or participant shall deliver such form or certificate at least five (5)
Business Days before the effective date of such assignment or participation
(unless the Agent in its sole discretion shall permit such Assignee or
participant to deliver such form or certificate less than five (5) Business Days
before such date in which case it shall be due on the date specified by the
Agent). Each Lender, Assignee or participant which so delivers a Form W-8, W-9,
4224 or 1001 further undertakes to deliver to each of the Borrowers and the
Agent two (2) additional copies of such form (or a successor form) on or before
the date that such form expires or becomes obsolete or after the occurrence of
any event requiring a change in the most recent form
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so delivered by it, and such amendments thereto or extensions or renewals
thereof as may be reasonably requested by the Borrowers or the Agent, either
certifying that such Lender, Assignee or participant is entitled to receive
payments under this Agreement and the other Financing Documents without
deduction or withholding of any United States federal income taxes or is subject
to such tax at a reduced rate under an applicable tax treaty or stating that no
such exemption or reduced rate is allowable. The Agent shall be entitled to
withhold United States federal income taxes at the full withholding rate unless
the Lender, Assignee or participant establishes an exemption or that it is
subject to a reduced rate as established pursuant to the above provisions.
SECTION 9.9 SUCCESSORS AND ASSIGNS. This Agreement and all other
Financing Documents shall be binding upon and inure to the benefit of the
Borrowers, the Agent and the Lenders and their respective heirs, personal
representatives, successors and assigns, except that the Borrowers shall not
have the right to assign their rights hereunder or any interest herein without
the prior written consent of the Agent and the Requisite Lenders of the Lenders.
SECTION 9.10 CONTINUING AGREEMENTS. All covenants, agreements,
representations and warranties made by the Borrowers in this Agreement, in any
of the other Financing Documents, and in any certificate delivered pursuant
hereto or thereto shall survive the making by the Lenders of the Loans, the
issuance of Letters of Credit by the Agent and the execution and delivery of the
Notes, shall be binding upon the Borrowers regardless of how long before or
after the date hereof any of the Obligations were or are incurred, and shall
continue in full force and effect so long as any of the Obligations are
outstanding and unpaid. From time to time upon the Agent's request, and as a
condition of the release of any one or more of the Security Documents, the
Borrowers and other Persons obligated with respect to the Obligations shall
provide the Agent with such acknowledgments and agreements as the Agent may
require to the effect that there exists no defenses, rights of setoff or
recoupment, claims, counterclaims, actions or causes of action of any kind or
nature whatsoever against the Agent, any or all of the Lenders, and/or any of
its or their agents and others, or to the extent there are, the same are waived
and released.
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SECTION 9.11 ENFORCEMENT COSTS. The Borrowers agree to pay to the Agent
on demand all Enforcement Costs, together with interest thereon from the date
incurred or advanced until paid in full at a per annum rate of interest equal at
all times to the Post-Default Rate. Enforcement Costs shall be immediately due
and payable at the time advanced or incurred, whichever is earlier. Without
implying any limitation on the foregoing, the Borrowers agree, as part of the
Enforcement Costs, to pay upon demand any and all stamp and other Taxes and fees
payable or determined to be payable in connection with the execution and
delivery of this Agreement and the other Financing Documents and to save the
Agent and the Lenders harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay any Taxes or
fees referred to in this Section. The provisions of this Section shall survive
the execution and delivery of this Agreement, the repayment of the other
Obligations and shall survive the termination of this Agreement.
SECTION 9.12 APPLICABLE LAW; JURISDICTION.
9.12.1 As a material inducement to the Agent and
the Lenders to enter into this Agreement, the Borrowers acknowledge and agree
that the Financing Documents, including, this Agreement, shall be governed by
the Laws of the State, as if each of the Financing Documents and this Agreement
had each been executed, delivered, administered and performed solely within the
State even though for the convenience and at the request of the Borrowers, one
or more of the Financing Documents may be executed elsewhere. The Agent and the
Lenders acknowledge, however, that remedies under certain of the Financing
Documents which relate to property outside the State may be subject to the laws
of the state in which the property is located.
9.12.2 The Borrowers irrevocably submit to the
jurisdiction of any state or federal court sitting in the State over any suit,
action or proceeding arising out of or relating to this Agreement or any of the
other Financing Documents. The Borrowers irrevocably waive, to the fullest
extent permitted by law, any objection that it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in any
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such court and any claim that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum. Final judgment in any such
suit, action or proceeding brought in any such court shall be conclusive and
binding upon the Borrowers and may be enforced in any court in which the
Borrowers are subject to jurisdiction, by a suit upon such judgment, PROVIDED
that service of process is effected upon the Borrowers in one of the manners
specified in this Section or as otherwise permitted by applicable Laws.
9.12.3 The Borrowers hereby irrevocably designate
and appoint The Corporation Trust, Incorporated, 32 South Street, Baltimore,
Maryland 21202, as the Borrowers' authorized agent to receive on the Borrowers'
behalf service of any and all process that may be served in any suit, action or
proceeding of the nature referred to in this Section in any state or federal
court sitting in the State. If such agent shall cease so to act, the Borrowers
shall irrevocably designate and appoint without delay another such agent in the
State satisfactory to the Agent and shall promptly deliver to the Agent evidence
in writing of such other agent's acceptance of such appointment and its
agreement that such appointment shall be irrevocable.
9.12.4 The Borrowers hereby consent to process
being served in any suit, action or proceeding of the nature referred to in this
Section by (i) the mailing of a copy thereof by registered or certified mail,
postage prepaid, return receipt re quested, to the Borrowers at the Borrowers'
address designated in or pursuant to Section 9.1 hereof, and (ii) serving a copy
thereof upon the agent, if any, designated and appointed by the Borrowers as the
Borrower's agent for service of process by or pursuant to this Section. The
Borrowers irrevocably agree that such service (i) shall be deemed in every
respect effective service of process upon the Borrowers in any such suit, action
or proceeding, and (ii) shall, to the fullest extent permitted by law, be taken
and held to be valid personal service upon the Borrowers. Nothing in this
Section shall affect the right of the Agent to serve process in any manner
otherwise permitted by law or limit the right of the Agent otherwise to bring
proceedings against the Borrowers in the courts of any jurisdiction or
jurisdictions.
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SECTION 9.13 DUPLICATE ORIGINALS AND COUNTERPARTS. This Agreement may
be executed in any number of duplicate originals or counterparts, each of such
duplicate originals or counterparts shall be deemed to be an original and all
taken together shall constitute but one and the same instrument.
SECTION 9.14 HEADINGS. The headings in this Agreement are included
herein for convenience only, shall not constitute a part of this Agreement for
any other purpose, and shall not be deemed to affect the meaning or construction
of any of the provisions hereof.
SECTION 9.15 NO AGENCY. Nothing herein contained shall be construed to
constitute the Borrowers as the agent of the Agent or any of the Lenders for any
purpose whatsoever or to permit the Borrowers to pledge any of the credit of the
Agent or any of the Lenders. Neither the Agent nor any of the Lenders shall be
responsible or liable for any shortage, discrepancy, damage, loss or destruction
of any part of the Collateral wherever the same may be located and regardless of
the cause thereof. Neither the Agent nor any of the Lenders shall, by anything
herein or in any of the Financing Documents or otherwise, assume any of the
Borrowers' obligations under any contract or agreement assigned to the Agent
and/or the Lenders, and neither the Agent nor any of the Lenders shall be
responsible in any way for the performance by the Borrowers of any of the terms
and conditions thereof.
SECTION 9.16 DATE OF PAYMENT. Should the principal of or interest on
the Notes become due and payable on other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day and in the case of
principal, interest shall be payable thereon at the rate per annum specified in
the Notes during such extension.
SECTION 9.17 ENTIRE AGREEMENT. This Agreement is intended by the Agent,
the Lenders and the Borrowers to be a complete, exclusive and final expression
of the agreements contained herein. Neither the Agent, the Lenders nor the
Borrowers shall hereafter have any rights under any prior agreements pertaining
to the matters addressed by this Agreement but shall look solely to this
Agreement for definition and determination of all of their
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respective rights, liabilities and responsibilities under this Agreement.
SECTION 9.18 WAIVER OF TRIAL BY JURY. THE BORROWERS, THE AGENT AND THE
LENDERS HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO WHICH THE BORROWER AND THE AGENT AND/OR ANY OR ALL OF THE LENDERS
MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT,
(B) ANY OF THE FINANCING DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER
CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH
ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO
THIS AGREEMENT.
This waiver is knowingly, willingly and voluntarily made by
the Borrowers, the Agent and the Lenders, and the Borrowers, the Agent and the
Lenders hereby represent that no representations of fact or opinion have been
made by any individual to induce this waiver of trial by jury or to in any way
modify or nullify its effect. The Borrowers, the Agent and the Lenders further
represent that they have been represented in the signing of this Agreement and
in the making of this waiver by independent legal counsel, selected of their own
free will, and that they have had the opportunity to discuss this waiver with
counsel.
SECTION 9.19 LIABILITY OF THE AGENT AND THE LENDERS. The Borrowers
hereby agree that neither the Agent nor any of the Lenders shall be chargeable
for any negligence, mistake, act or omission of any accountant, examiner, agency
or attorney employed by the Agent and/or any of the Lenders in making
examinations, investigations or collections, or otherwise in perfecting,
maintaining, protecting or realizing upon any lien or security interest or any
other interest in the Collateral or other security for the Obligations, except
for acts of gross negligence or willful misconduct.
By inspecting the Collateral or any other properties of the
Borrowers or by accepting or approving anything required to be observed,
performed or fulfilled by the Borrowers or to be given to the Agent and/or any
of the Lenders pursuant to this Agreement or any of the other Financing
Documents, neither the Agent nor any of
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the Lenders shall be deemed to have warranted or represented the condition,
sufficiency, legality, effectiveness or legal effect of the same, and such
acceptance or approval shall not constitute any warranty or representation with
respect thereto by the Agent and/or the Lenders.
IN WITNESS WHEREOF, each of the parties hereto have executed and
delivered this Agreement under their respective seals as of the day and year
first written above.
WITNESS OR ATTEST: FIRST ALERT, INC.
By:/s/ MICHAEL A. ROHL (Seal)
- ------------------------- -----------------------------
Michael A. Rohl
Vice President and Chief
Financial Officer
WITNESS OR ATTEST: BRK BRANDS, INC.
By:/s/ MICHAEL A. ROHL (Seal)
- ------------------------- -----------------------------
Michael A. Rohl
Vice President and Chief
Financial Officer
WITNESS OR ATTEST: BRK BRANDS EUROPE LTD.
By:/s/ MICHAEL A. ROHL (Seal)
- ------------------------- -----------------------------
Michael A. Rohl
Director
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WITNESS OR ATTEST: BRK BRANDS PTY. LTD.
By:/s/ MICHAEL A. ROHL (Seal)
- ------------------------- -----------------------------
Michael A. Rohl
Director
WITNESS: NATIONSBANK, N.A.
in its capacity as Agent
By:/s/ DAVID B. THAYER (Seal)
- ------------------------- -----------------------------
David B. Thayer
Vice President
WITNESS: NATIONSBANK, N.A.
in its capacity as a Lender
By:/s/ DAVID B. THAYER (Seal)
- ------------------------- -----------------------------
David B. Thayer
Vice President
Revolving Credit Pro Rata Share: 100%
UK Time Loan Pro Rata Share: 100%
Address: NationsBank, N.A.
NationsBank Business Credit
100 South Charles Street
Mail Stop MD4-325-04-14
Baltimore, Maryland 21201
Attention: David Thayer
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LIST OF EXHIBITS
----------------
A. Additional Borrower Joinder Supplement
B-1. Revolving Credit Note
B-2. UK Time Note
C. Wire Transfer Procedures
D-1. Pro Forma Financial Statements
D-2. Pro Forma Financial Projections
E. Form of Compliance Certificate
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LIST OF SCHEDULES
-----------------
SCHEDULE 4.1.10 Litigation
SCHEDULE 4.1.14 Additional Indebtedness for Borrowed Money
SCHEDULE 4.1.20 Employee Relations Matters
SCHEDULE 4.1.22 Additional Permitted Liens
SCHEDULE 6.2.4 Permitted Indebtedness
SCHEDULE 6.2.5 Permitted Investments
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EXHIBIT A
ADDITIONAL BORROWER JOINDER SUPPLEMENT
______________, 199_
TO: EACH OF THE LENDERS UNDER THE FINANCING AGREEMENT REFERRED TO BELOW
Reference is hereby made to the Financing and Security Agreement dated
as of May 14, 1997 (the "Financing Agreement") by and among BRK Brands, Inc., a
Delaware corporation, the subsidiaries or affiliates of Designated Borrower
which are parties thereto as borrowers (together with Designated Borrower, the
"Borrowers"), the Lenders from time to time parties thereto, and NationsBank,
N.A., as Agent. Capitalized terms not otherwise defined in this Additional
Borrower Joinder Supplement (this "JOINDER SUPPLEMENT") shall have the meanings
given to them in the Financing Agreement.
The undersigned entities (each an "Additional Borrower" and
collectively, the "ADDITIONAL BORROWERS") hereby jointly and severally
acknowledge, confirm and agree that on and as of the date of this Joinder
Supplement each Additional Borrower has become, and is, a "Borrower" under the
Financing Agreement and the other Financing Documents for all purposes thereof,
and as such shall be jointly and severally liable, as provided in the Financing
Documents, for all Obligations thereunder (whether incurred or arising prior to,
on, or subsequent to the date hereof) and otherwise bound by all of the terms,
provisions and conditions thereof.
Without in any way implying any limitation on any of the provisions of
this Agreement, the Financing Agreement, or any of the other Financing
Documents, each Additional Borrower hereby assigns, pledges and grants to the
Agent, for the ratable benefit of the Lenders as security for the Obligations
and for the benefit of the Agent as security for the Agent's Obligations, and
agrees that the Agent and the Lenders shall have a perfected and continuing
security interest in, and Lien on, (a) all of the
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Additional Borrower's Accounts, Chattel Paper, Documents, Equipment,
Instruments, Securities, and General Intangibles, whether now owned or existing
or hereafter acquired or arising, (b) all returned, rejected or repossessed
goods, the sale or lease of which shall have given or shall give rise to an
Account or Chattel Paper, (c) all insurance policies relating to the foregoing,
(d) all books and records in whatever media (paper, electronic or otherwise)
recorded or stored, with respect to the foregoing and all equipment and general
intangibles necessary or beneficial to retain, access and/or process the
information contained in those books and records, and (e) all cash and non-cash
proceeds and products of the foregoing. Each Additional Borrower further agrees
that the Agent, for the ratable benefit of the Lenders and for the benefit of
the Agent with respect to the Agent's Obligations, shall have in respect thereof
all of the rights and remedies of a secured party under the Uniform Commercial
Code as well as those provided in this Agreement, under each of the other
Financing Documents and under applicable Laws.
Without in any way implying any limitation on any of the provisions of
this Agreement, each Additional Borrower agrees to execute such financing
statements, instruments, and other documents as the Agent may require including,
without limitation, allonge to the Notes.
Each Additional Borrower hereby represents and warrants that all of the
representations and warranties contained in the Financing Documents are true and
correct on and as of the date hereof as if made on and as of such date, both
before and after giving effect to this Joinder Supplement, and that no Event of
Default or Default has occurred and is continuing or exists or would occur or
exist after giving effect to this Joinder Supplement.
This Joinder Supplement shall be governed by and construed and enforced
in accordance with the laws of the State of Maryland, without regard to
principles of choice of law.
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WITNESS the due execution hereof as of the day and year first written
above.
WITNESS: Additional Borrower
_________________________ By:________________________(SEAL)
Name:
Title:
WITNESS: BRK BRANDS, INC.
_________________________ By:________________________(SEAL)
Name:
Title:
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EXHIBIT C
NATIONSBANK BUSINESS CREDIT
WIRE TRANSFER PROCEDURES
The transfer of funds by means of wire may be made by NationsBank
(lender) at the request of its customer (borrower). Such wire transfers are
categorized by lender as either repetitive or non-repetitive.
REPETITIVE:
Repetitive wire transfers may vary in amount, but are consistent in terms of the
payee, the location to which funds are wired, the bank name, account number and
the routing transit number.
Either borrower or lender may initiate a repetitive wire transfer. The borrower
may identify the repetitive nature of transfers and request they be established
as such via the "Repetitive Wire Transfer Authorization Form" (copy attached).
Lender, after observing numerous transfers to the same recipient and
destination, may initiate the repetitive process by faxing or mailing the
"Repetitive Wire Authorization Form" to the borrower for completion and return.
Although a first request for a repetitive wire transfer may be honored from a
faxed copy of the "Repetitive Wire Transfer Authorization Form", a copy of the
form containing an original signature must be received from the borrower. All
transfer authorization forms must be approved by and contain the signature of a
person authorized by the borrower to advance funds from borrower's line of
credit with the lender.
After receipt of the original "Repetitive Wire Transfer Authorization Form" by
the lender, subsequent wire transfers to the recipient named thereon may be
initiated by telephone request, provided the requesting party is identified by
the lender as a person authorized by borrower to advance funds from the
borrower's line of credit with lender.
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NON-REPETITIVE:
Non-Repetitive wire transfers are directed to recipients on a one-time or
infrequent basis or are directed to varied destinations. Non-repetitive wire
transfers require that written notification be provided to lender by borrower,
showing payee, location, account number, routing transit number and name and
location of bank into which funds are to be transferred. Such written
notification may be provided by means of a "Non-Repetitive Wire Transfer
Authorization Form" (copy attached).
Required information may be faxed to lender in order to expedite the transfer;
however, a copy of the transfer authorization form with an original signature(s)
must be received by lender from borrower. The transfer authorization form must
be approved by and contain the signature of a person authorized by the borrower
to advance funds from borrower's line of credit with the lender.
For any non-repetitive wire transfer, Lender may, at its discretion, perform a
telephone verification with an authorized representative (the original signer or
another authorized representative) of borrower prior to initiating the transfer.
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NATIONSBANK BUSINESS CREDIT
REPETITIVE WIRE TRANSFER AUTHORIZATION
CUSTOMER INFORMATION
CUSTOMER NAME: ___________________________ DATE: ___________________________
NAME OF PERSON AUTHORIZING TRANSFER FOR CUSTOMER:_______________________________
NOTE: MUST BE PERSON AUTHORIZED
TO ADVANCE FUNDS
SIGNATURE OF PERSON AUTHORIZING TRANSFER FOR CUSTOMER: _________________________
PAYEE
NAME OF RECIPIENT OF FUNDS: ____________________________________________________
LOCATION: ______________________________________________________________________
ACCOUNT NUMBER INTO WHICH FUNDS ARE TO BE TRANSFERRED: _________________________
DESTINATION OF FUNDS
NAME AND LOCATION OF BANK RECEIVING FUNDS:
BANK NAME: _____________________________________________________________________
ROUTING INFORMATION (ABA NUMBER): ______________________________________________
BANK LOCATION: CITY: ___________________________________________
STATE: _____________________________________
(FOR INTERNATIONAL WIRES) COUNTRY: _____________________________________________
SPECIAL INSTRUCTIONS: __________________________________________________________
__________________________________________________________
__________________________________________________________
BANK USE ONLY
BUSINESS CREDIT DEPARTMENT
BUSINESS CREDIT AUTHORIZATION: _________________________________________________
PRINT NAME OF PERSON AT BANK APPROVED TO
AUTHORIZE WIRE TRANSFERS
BUSINESS CREDIT AUTHORIZATION: _________________________________________________
SIGNATURE OF PERSON AT BANK APPROVED TO AUTHORIZE
WIRE TRANSFERS
WIRE TRANSFER DEPARTMENT
F.D. NUMBER ASSIGNED: __________________________________________________________
ACCOUNT NUMBER TO DEBIT: _______________________________________________________
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NATIONSBANK BUSINESS CREDIT
NON-REPETITIVE WIRE TRANSFER AUTHORIZATION
CUSTOMER INFORMATION
CUSTOMER NAME: ___________________________ DATE: ___________________________
NAME OF PERSON AUTHORIZING TRANSFER FOR CUSTOMER:_______________________________
NOTE: MUST BE PERSON AUTHORIZED
TO ADVANCE FUNDS
SIGNATURE OF PERSON AUTHORIZING TRANSFER FOR CUSTOMER: _________________________
PAYEE
NAME OF RECIPIENT OF FUNDS: ____________________________________________________
LOCATION: ______________________________________________________________________
ACCOUNT NUMBER INTO WHICH FUNDS ARE TO BE TRANSFERRED: _________________________
DESTINATION OF FUNDS
NAME AND LOCATION OF BANK RECEIVING FUNDS:
BANK NAME: _____________________________________________________________________
ROUTING INFORMATION (ABA NUMBER): ______________________________________________
BANK LOCATION: CITY: ___________________________________________
STATE: _____________________________________
(FOR INTERNATIONAL WIRES) COUNTRY: _____________________________________________
SPECIAL INSTRUCTIONS: __________________________________________________________
__________________________________________________________
__________________________________________________________
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EXHIBIT D-1
-----------
Pro Forma Financial Statements
------------------------------
Previously provided to Agent and, accordingly, not attached hereto as
an exhibit.
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EXHIBIT D-2
-----------
Pro Forma Financial Projections
-------------------------------
Previously provided to Agent and, accordingly, not attached hereto as
an exhibit.
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EXHIBIT E
FINANCING AGREEMENT
COMPLIANCE CERTIFICATE
----------------------
THIS CERTIFICATE is made as of __________________, 199_ , by FIRST
ALERT, INC., a corporation organized under the laws of the State of Delaware,
("Designated Borrower"), to NATIONSBANK, N.A., a national banking association
(the "Agent"), pursuant to Section of the Financing and Security Agreement dated
May 14, 1997, (as amended, modified, restated, substituted, extended and renewed
at any time and from time to time, the "Financing Agreement") by and among
Designated Borrower, the other corporations identified as "Borrowers" in the
Financing Agreement, the Agent, and the financial institutions identified as the
"Lenders" in the Financing Agreement.
I, ____________________, hereby certify that I am the ______________ of
Designated Borrower and am a Responsible Officer (as that term is defined in the
Financing Agreement) authorized to certify to the Lender on behalf of the
Borrowers as follows:
1. This Certificate is given to induce the Lender to make advances to
Borrowers under the Financing Agreement.
2. This Certificate accompanies the _____________ financial statements
for the period ended ___________________, 199__ (the "Current Financials") which
Designated Borrower on behalf of the Borrowers is furnishing to the Lender
pursuant to Section 6.1.1(__) of the Financing Agreement. The Current Financials
have been prepared in accordance with GAAP (as that term is defined in the
Financing Agreement).
3. As required by Section 6.1.1(__) of the Financing Agreement, I have
set forth on SCHEDULE 1 a detailed computation of each financial covenant in
Financing Agreement and a cash flow projection report.
4. No change has occurred to the information contained in the
Collateral Disclosure List except as set forth on Schedule 2 to this
Certificate. By way of example and not limitation, the Collateral Disclosure
List, together with SCHEDULE 2, contains a listing of all of the Borrowers'
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Patents, Trademarks, Copyrights (as those terms are defined in the Financing
Agreement), all locations (owned, leased, warehouses or otherwise) where any
Collateral (as that term is defined in the Financing Agreement) is located, all
Subsidiaries (as that term is defined in the Financing Agreement).
5. As of the date hereof, there exists no Default or Event of Default,
as defined in the Article 7 of the Financing Agreement, nor any event which,
upon notice or the lapse of time, or both, would constitute such an Event of
Default.
9.20 On the date hereof, the representations and warranties contained
in Article 5 of the Financing Agreement are true with the same effect as though
such representations and warranties had been made on the date hereof.
WITNESS my signature this _____ day of ____________, 199_.
__________________________________________
Name:
Title:
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ARTICLE 1
DEFINITIONS
SECTION 1.1 Certain Defined Terms.................................... 2
SECTION 1.2 Accounting Terms and Other Definitional Provisions....... 35
ARTICLE 2
THE CREDIT FACILITIES
SECTION 2.1 The Revolving Credit Facility............................ 36
2.1.1 Revolving Credit Facility................................ 36
2.1.2 Procedure for Making Advances Under the Revolving
Loan; Lender Protection Loans............................ 37
2.1.3 Borrowing Base........................................... 38
2.1.4 Borrowing Base Report.................................... 40
2.1.5 Revolving Credit Notes................................... 41
2.1.6 Mandatory Prepayments of Revolving Loan.................. 41
2.1.7 Optional Prepayments of Revolving Loan................... 42
2.1.8 The Collateral Account................................... 42
2.1.9 Revolving Loan Account................................... 44
2.1.10 Revolving Credit Unused Line Fee......................... 44
2.1.11 Required Availability under the Revolving Credit
Facility................................................. 45
SECTION 2.2 The Letter of Credit Facility............................ 45
2.2.1 Letters of Credit........................................ 45
2.2.2 Letter of Credit Fees.................................... 46
2.2.3 Terms of Letters of Credit; Post-Expiration Date
Letters of Credit........................................ 47
2.2.4 Procedures for Letters of Credit......................... 48
2.2.5 Payments of Letters of Credit............................ 49
2.2.6 Change in Law; Increased Cost............................ 50
2.2.7 General Letter of Credit Provisions...................... 51
2.2.8 Participations in the Letters of Credit.................. 52
2.2.9 Payments by the Lenders to the Agent..................... 52
SECTION 2.3 The Time Loan............................................ 53
2.3.1 Time Loan Commitments.................................... 53
2.3.2 The UK Time Notes........................................ 54
2.3.3 Payments of Principal.................................... 54
SECTION 2.4 Interest................................................. 54
2.4.1 Applicable Interest Rates................................ 54
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2.4.2 Selection of Interest Rates.............................. 55
2.4.3 Determination of LIBOR Base Rate......................... 57
2.4.4 Indemnity................................................ 58
2.4.5 Payment of Interest...................................... 59
SECTION 2.5 General Financing Provisions
2.5.1 Borrowers' Representatives............................... 60
2.5.2 Computation of Interest and Fees......................... 62
2.5.3 Payments................................................. 62
2.5.4 Setoff................................................... 63
2.5.5 Requirements of Law...................................... 64
2.5.6 Funds Transfer Services.................................. 64
2.5.7 Guaranty................................................. 65
SECTION 2.6 Settlement Among Lenders................................. 69
2.6.1 Revolving Loan........................................... 69
2.6.2 Settlement Procedures as to Revolving Loan............... 70
2.6.3 Settlement of Other Obligations.......................... 73
2.6.4 Presumption of Payment................................... 73
ARTICLE 3
THE COLLATERAL
SECTION 3.1 Debt and Obligations Secured............................. 74
SECTION 3.2 Grant of Liens........................................... 75
SECTION 3.3 Collateral Disclosure List............................... 76
SECTION 3.4 Personal Property........................................ 76
3.4.1 Securities, Chattel Paper, Promissory Notes, etc......... 77
3.4.2 Proprietary Rights and Other Property Requiring
Additional Steps to Perfect.............................. 77
SECTION 3.5 Record Searches.......................................... 79
SECTION 3.6 Real Property............................................ 79
SECTION 3.7 Costs.................................................... 80
SECTION 3.8 Release.................................................. 81
SECTION 3.9 Inconsistent Provisions.................................. 81
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Representations and Warranties
4.1.1 Subsidiaries............................................. 81
4.1.2 Good Standing............................................ 82
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4.1.3 Power and Authority...................................... 82
4.1.4 Binding Agreements....................................... 82
4.1.5 No Conflicts............................................. 82
4.1.6 No Defaults, Violations.................................. 83
4.1.7 Compliance with Laws..................................... 83
4.1.8 Margin Stock............................................. 83
4.1.9 Investment Company Act; Margin Securities................ 84
4.1.10 Litigation............................................... 84
4.1.11 Financial Condition...................................... 84
4.1.12 Proforma Financials...................................... 84
4.1.13 Full Disclosure.......................................... 85
4.1.14 Indebtedness for Borrowed Money.......................... 85
4.1.15 First Alert License Agreement............................ 85
4.1.16 Taxes.................................................... 86
4.1.17 ERISA.................................................... 86
4.1.18 Title to Properties...................................... 86
4.1.19 Patents, Trademarks, Etc. .............................. 87
4.1.20 Employee Relations....................................... 87
4.1.21 Presence of Hazardous Materials or Hazardous
Materials Contamination.................................. 87
4.1.22 Perfection and Priority of Collateral.................... 88
4.1.23 Places of Business and Location of Collateral............ 88
4.1.24 Business Names and Addresses............................. 88
4.1.25 Equipment................................................ 88
4.1.26 Inventory................................................ 89
4.1.27 Accounts................................................. 89
4.1.28 Compliance with Eligibility Standards.................... 89
4.1.29 Tax Refunds.............................................. 89
SECTION 4.2 Survival; Updates of Representations and
Warranties............................................... 90
ARTICLE 5
CONDITIONS PRECEDENT
SECTION 5.1 Conditions to the Initial Advance and Initial Letter of
Credit
5.1.1 Organizational Documents - Borrowers..................... 90
5.1.2 Opinion of Borrowers' Counsel............................ 91
5.1.3 Consents, Licenses, Approvals, Etc. .................... 91
5.1.4 Notes.................................................... 91
5.1.5 Financing Documents and Collateral....................... 92
5.1.6 Other Financing Documents................................ 92
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5.1.7 Other Documents, Etc..................................... 92
5.1.8 Payment of Fees.......................................... 92
5.1.9 Collateral Disclosure List............................... 92
5.1.10 Recordings and Filings................................... 92
5.1.11 Insurance Certificate.................................... 93
5.1.12 Landlord's Waivers....................................... 93
5.1.13 Field Examination........................................ 93
5.1.14 Appraisals............................................... 93
5.1.15 Proforma Balance Sheet and Projections................... 93
5.1.16 Stock Certificates and Stock Powers...................... 93
5.1.17 Tax Refunds.............................................. 93
5.1.18 Mexican Inventory........................................ 94
SECTION 5.2. Conditions to all Extensions of Credit................... 94
5.2.1 Borrowing Base........................................... 94
5.2.2 Default.................................................. 94
5.2.3 Representations and Warranties........................... 94
5.2.4 Adverse Change........................................... 94
5.2.5 Legal Matters............................................ 95
ARTICLE 6
COVENANTS OF THE BORROWERS
SECTION 6.1 Affirmative Covenants.................................... 95
6.1.1 Financial Statements..................................... 95
6.1.2 Reports to SEC and to Stockholders....................... 97
6.1.3 Recordkeeping, Rights of Inspection, Field
Examination, Etc......................................... 97
6.1.4 Corporate Existence...................................... 98
6.1.5 Compliance with Laws..................................... 99
6.1.6 Preservation of Properties............................... 99
6.1.7 Line of Business......................................... 99
6.1.8 Insurance................................................ 99
6.1.9 Taxes....................................................100
6.1.10 ERISA....................................................100
6.1.11 Notification of Events of Default and Adverse
Developments.............................................101
6.1.12 Hazardous Materials; Contamination.......................102
6.1.13 Disclosure of Significant Losses.........................103
6.1.14 Financial Covenants......................................103
(a) Tangible Net Worth.......................................103
(b) Liabilities to Tangible Net Worth Ratio..................103
6.1.15 Collection of Receivables................................104
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6.1.16 Assignments of Receivables...............................105
6.1.17 Government Accounts......................................106
6.1.18 Notice of Returned Goods, etc............................106
6.1.19 Inventory................................................106
6.1.20 Equipment................................................106
6.1.21 Defense of Title and Further Assurances..................106
6.1.22 Business Names; Locations................................107
6.1.23 Subsequent Opinion of Counsel as to Recording
Requirements.............................................108
6.1.24 Tax Refunds..............................................108
SECTION 6.2 Negative Covenants.......................................109
6.2.1 Capital Structure, Merger, Acquisition or Sale of
Assets...................................................109
6.2.2 Subsidiaries.............................................110
6.2.3 Purchase or Redemption of Securities, Dividend
Restrictions.............................................110
6.2.4 Indebtedness.............................................111
6.2.5 Investments, Loans and Other Transactions................111
6.2.6 Operating Lease Obligations..............................112
6.2.7 Capital Expenditures.....................................112
6.2.8 Stock of Subsidiaries....................................113
6.2.9 Subordinated Indebtedness................................113
6.2.10 Liens....................................................114
6.2.11 Transactions with Affiliates.............................114
6.2.12 Amendments...............................................114
6.2.13 Method of Accounting; Fiscal Year........................114
6.2.14 Compensation.............................................115
6.2.15 Sale and Leaseback.......................................115
ARTICLE 7
DEFAULT AND RIGHTS AND REMEDIES
SECTION 7.1 Events of Default........................................115
7.1.1 Failure to Pay...........................................115
7.1.2 Breach of Representations and Warranties.................115
7.1.3 Failure to Comply with Certain Covenants.................115
7.1.4 Failure to Comply with Other Covenants...................116
7.1.5 Default Under Other Financing Documents or
Obligations..............................................116
7.1.6 Receiver; Bankruptcy.....................................116
7.1.7 Involuntary Bankruptcy, etc..............................117
v
<PAGE> 196
7.1.8 Judgment.................................................117
7.1.9 Execution; Attachment....................................117
7.1.10 Default Under Other Borrowings...........................117
7.1.11 Challenge to Agreements..................................118
7.1.12 Material Adverse Change..................................118
7.1.13 Change in Ownership......................................118
SECTION 7.2 Remedies.................................................118
7.2.1 Acceleration.............................................119
7.2.2 Further Advances.........................................119
7.2.3 Uniform Commercial Code..................................119
7.2.4 Specific Rights With Regard to Collateral................120
7.2.5 Application of Proceeds..................................122
7.2.6 Performance by Agent.....................................122
7.2.7 Other Remedies...........................................123
ARTICLE 8
THE AGENT
SECTION 8.1 Appointment..............................................123
SECTION 8.2 Nature of Duties.........................................124
8.2.1 In General...............................................124
8.2.2 Express Authorization....................................124
SECTION 8.3 Rights, Exculpation, Etc.................................125
SECTION 8.4 Reliance.................................................126
SECTION 8.5 Indemnification..........................................127
SECTION 8.6 NationsBank Individually.................................127
SECTION 8.7 Successor Agent..........................................127
8.7.1 Resignation..............................................127
8.7.2 Appointment of Successor.................................128
8.7.3 Successor Agent..........................................128
SECTION 8.8 Collateral Matters.......................................128
8.8.1 Release of Collateral....................................128
8.8.2 Confirmation of Authority, Execution of Releases.........129
8.8.3 Absence of Duty..........................................129
SECTION 8.9 Collateral Management Fee................................130
SECTION 8.10 Agency for Perfection....................................130
SECTION 8.11 Exercise of Remedies.....................................130
SECTION 8.12 Consents.................................................130
SECTION 8.13 Dissemination of Information.............................131
SECTION 8.14 Discretionary Advances...................................131
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<PAGE> 197
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 Notices..................................................131
SECTION 9.2 Amendments; Waivers......................................132
9.2.1 In General...............................................132
9.2.2 Circumstances Where Consent of all of the Lenders
is Required..............................................133
SECTION 9.3 Cumulative Remedies......................................134
SECTION 9.4 Severability.............................................135
SECTION 9.5 Assignments by Lenders...................................135
SECTION 9.6 Participations by Lenders................................136
SECTION 9.7 Disclosure of Information by Lenders.....................136
SECTION 9.9 Successors and Assigns...................................138
SECTION 9.10 Continuing Agreements....................................138
SECTION 9.11 Enforcement Costs........................................138
SECTION 9.12 Applicable Law; Jurisdiction.............................139
SECTION 9.13 Duplicate Originals and Counterparts.....................140
SECTION 9.14 Headings.................................................140
SECTION 9.15 No Agency................................................140
SECTION 9.16 Date of Payment..........................................141
SECTION 9.17 Entire Agreement.........................................141
SECTION 9.18 Waiver of Trial by Jury..................................141
SECTION 9.19 Liability of the Agent and the Lenders...................141
vii
<PAGE> 198
LIST OF SCHEDULES
-----------------
SCHEDULE 4.1.10 Litigation
SCHEDULE 4.1.14 Additional Indebtedness for Borrowed Money
SCHEDULE 4.1.20 Employee Relations Matters
SCHEDULE 4.1.22 Additional Permitted Liens
SCHEDULE 6.2.4 Permitted Indebtedness
SCHEDULE 6.2.5 Permitted Investments
-145 -
<PAGE> 199
SCHEDULE 4.1.10
---------------
Litigation
----------
None except as otherwise disclosed in the Parent's 10-K or 10-Q.
<PAGE> 200
Schedule 4.1.14
Additional Indebtedness for Borrowed Money
Only outstanding debt is with The First National Bank of Chicago
$51,200,000 outstanding which will be paid when Company enters
into Financing and Security Agreement with NationsBank, N.A
<PAGE> 201
Schedule 4.1.20
Employee Relations Matters
Company is entered into one union contract
International Brotherhood of Electrical Workers
Local 134
<PAGE> 202
SCHEDULE 4.1.22
PERMITTED LIENS
---------------
FIRST ALERT, INC.
<TABLE>
Litigation Search Results
-------------------------
<CAPTION>
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Jurisdiction Litigation
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<S> <C>
US District Court of Illinois, Northern District, Eastern Division Gilbert, et al. v. First Alert, Inc., et al.
Case No. CV6760, Filed: 11/10/94
Stipulation of Settlement filed 2/25/97
Fairness Hearing set for 6/20/97
Unable to determine settlement terms from Court Docket
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</TABLE>
BRK BRANDS, INC.
<TABLE>
UCC Lien Search Results
-----------------------
Texas Secretary of State
<CAPTION>
====================================================================================================================================
Debtor Secured Party Recording References Collateral
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<S> <C> <C> <C>
BRK Brands, Inc. Toyota Motor Credit Corporation Filed: 03/07/94 Specific equipment, including, forklift, sideshifting
780 McClure Road P.O. Box 3457 ID No. 94042213 carriage, industrial battery and magnetic charger
Aurora, Illinois 60504 Torrance, California 60510-3457
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BRK Brands, Inc. Citicorp Dealer Finance Filed: 03/07/94 Specific equipment, including, forklift truck, pallet
780 McClure Road 450 Mamaroneck Avenue ID No. 94042214 forks, industrial battery and charger and electronic
Aurora, Illinois 60504 Harrison, New York 10528 wire guidance system with sensors
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BRK Brands, Inc. Citicorp Dealer Finance Filed: 03/07/94 Specific equipment, including, turret truck, pallet
780 McClure Road 450 Mamaroneck Avenue I.D. No. 94042215 forks, industrial battery and charger, electronic
Aurora, Illinois 60504 Harrison, New York 10528 wire guidance system with sensors
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BRK Brands, Inc. Toyota Motor Credit Corporation Filed: 05/27/94 Specific equipment, including, forklifts,
780 McClure Road P.O. Box 3457 ID No. 94105793 sideshifting carriage, pallet forks, industrial
Aurora, Illinois 60504 Torrance, California 60510-3457 batteries, industrial chargers
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</TABLE>
<PAGE> 203
<TABLE>
<CAPTION>
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Debtor Secured Party Recording References Collateral
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<S> <C> <C> <C>
BRK Brands, Inc. C Leasing Company, a Division of Price's Filed: 08/10/94 Leased Sharp copier with bin sorter
780 McClure Road Producers. Inc. I.D. No. 94157292
Aurora, Illinois 60504 201 E. Main Street, Suite 1521
El Paso, Texas 79901
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BRK Brands, Inc. (Plant I) State National Bank Filed: 08/09/95 Leased copier
25 Spur Drive P.O. Box 1072 I.D. No. 95155633
El Paso, Texas 79906 El Paso, Texas 79958-1443
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BRK Brands, Inc. (Plant I) State National Bank Filed: 08/09/95 Leased copier equipment
25 Spur Drive P.O. Box 1072 I.D. No. 95155634
El Paso, Texas 79906 El Paso, Texas 79958-1443
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BRK Brands, Inc. State National Bank Filed: 09/25/95 Leased copier equipment
25 Spur Drive P.O. Box 1072 I.D. No. 95186254
El Paso, Texas 79906 El Paso, Texas 79958-1443
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BRK Brands, Inc. Norwest Bank - El Paso Filed: 03/13/96 Leased copier equipment
PO. Box 9817 P.O. Box 1072 I.D. No. 96049951
El Paso, Texas 79998 El Paso, Texas 79958-1443
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BRK Brands, Inc. Norwest Bank - El Paso Filed: 05/06/96 Leased copier equipment
25 Spur Drive P.O. Box 1072 I.D. No. 96088873
El Paso, Texas 79906 El Paso, Texas 79958-1443
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BRK Brands, Inc. Norwest Bank - El Paso Filed: 05/06/96 Leased fax equipment
25 Spur Lane P.O. Box 1072 I.D. No, 96088877
El Paso, Texas 79906 El Paso, Texas 79958-1443
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BRK Brands, Inc. Norwest Bank - El Paso Filed: 05/06/96 Leased copier equipment
25 Spur Lane P.O. Box 1072 I.D. No. 96088878
El Paso, Texas 79906 El Paso, Texas 79958-1443
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BRK Brands, Inc. Norwest Bank - El Paso Filed: 05/29/96 Leased fax equipment
25 Spur Lane P.O. Box 1072 I.D. No. 96106256
El Paso, Texas 79906 El Paso, Texas 79958-1443
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</TABLE>
<PAGE> 204
<TABLE>
Illinois Secretary of State
<CAPTION>
====================================================================================================================================
Debtor Secured Party Recording References Collateral
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<S> <C> <C> <C>
BRK Brands, Inc. Oce- USA, Inc. Filed: 04/24/95 Specific equipment
780 McClure Road 5450 North Cumberland I.D. No. 3392392
Aurora, Illinois 60504-7330 Chicago, Illinois 60656
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BRK Brands, Inc. Toyotalift of El Paso, Inc. Filed: 04/08/94 Specific equipment
780 McClure Road 7010 Industrial Avenue I.D. No. 3243335
Aurora, Illinois 60504 El Paso, Texas 79915
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BRK Brands Incorporated Pitney Bowes Credit Corporation Filed: 01/22/97 All equipment of whatever nature manufactured,
3901 Liberty Street 201 Merritt Seven I.D. No. 3641505 sold or distributed by Pitney Bowes, Inc.,
Aurora, Illinois 60504 Norwalk, Connecticut 06856 Monarch Marketing Systems Inc., Pitney Bowes
Credit Corp., Dictaphone Corp. and subject to
lease dated 9/27/96 between Debtor and, Secured
Party and all proceeds, additions thereto and
replacements thereof.
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BRK Brands, Inc. Oce Office Systems Filed: 12/16/96 Specific equipment
39O1 Liberty Street Road 5450 N. Cumberland I.D. No.: 3626943
Aurora, Illinois 60504 Chicago, Illinois 60656
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BRK Brands, Inc. Associates Commercial Corporation Filed: 01/08/96 Specific equipment
3901 Liberty Street Road 8001 Ridgepoint Drive I.D. No.: 3489718
Aurora, Illinois 60504 Irving, Texas 75063-3117
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BRK Brands, Inc. Sanwa Business Credit Corporation Filed: 09/20/94 Leased equipment
780 McClure Road One South Wacker Drive I.D. No.: 3308262
Aurora, Illinois 60504 Chicago, Illinois 60606
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</TABLE>
<TABLE>
Chattel Records of DuPage County, Illinois
<CAPTION>
====================================================================================================================================
Debtor Secured Party Recording References Collateral
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<S> <C> <C> <C>
BRK Brands, Inc. Oce Office Systems Filed: 12/16/96 Specific equipment
3901 Liberty Street Road 5450 N. Cumberland I.D. No.: 96U-4147
Aurora, Illinois 60504 Chicago, Illinois 60656
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</TABLE>
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<PAGE> 205
<TABLE>
Chattel Records of Kane County. Illinois
<CAPTION>
====================================================================================================================================
Debtor Secured Party Recording References Collateral
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<S> <C> <C> <C>
BRK Brands, Inc. Oce - USA, Inc. Filed: 04/24/95 Specific equipment
780 McClure Road 5450 North Cumberland I.D. No. BB173329
Aurora, Illinois 60504-7330 Chicago, Illinois 60656
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</TABLE>
BRK ELECTRONICS, INC.
<TABLE>
UCC Lien Search Results
-----------------------
Texas Secretary of State
<CAPTION>
====================================================================================================================================
Debtor Secured Party Recording References Collateral
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BRK Electronics, Inc. C Leasing Company, a Division of Price's Filed: 12/14/92 Leased computer equipment.
25 Spur Drive Producers, Inc. I.D. No. 92241519
El Paso, Texas 79906 1521 Texas Commerce Bank Bldg.
El Paso, Texas 79901
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BRK Electronics, Inc. C Leasing Company, a Division of Price's Filed: 05/17/93 Leased copier and fax equipment.
25 Spur Drive Producers, Inc. I.D. No. 93096726
El Paso, Texas 79906 1521 Texas Commerce Bank Bldg.
El Paso, Texas 79901
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BRK Electronics, Inc. C Leasing Company, a Division of Price's Filed: 08/09/93 Leased copier equipment.
25 Spur Drive Producers, Inc. I.D. No. 93154627
El Paso, Texas 79906 1521 Texas Commerce Bank Bldg.
El Paso, Texas 79901
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BRK Electronics, Inc. ATT Credit Corporation Filed: 01/10/94 Specific equipment.
25 Spur Drive P.O. Box 845 I.D. No. 94005880
El Paso, Texas 79906 Parsippany, New Jersey 07054 ASSIGNMENT - assigned from AT&T
ASSIGNMENT:
Filed: 04/25/94
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</TABLE>
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<PAGE> 206
SCHEDULE 6.2.4
--------------
Permitted Indebtedness
----------------------
$71,000 to Sanwa Credit, Inc.
$12,790 to Highland Safety
<PAGE> 207
SCHEDULE 6.2.5
--------------
Permitted Investments
---------------------
NONE
