-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RmdWjJpxftgYqA0UN86TRC7OFTzo2ZzKdSj7iVQnwSZlopj2V0Kq6vgnjqPCxa4e hfhoQm1GX+jPhHhszQaBRw== 0000950144-98-008485.txt : 19980720 0000950144-98-008485.hdr.sgml : 19980720 ACCESSION NUMBER: 0000950144-98-008485 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980626 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980717 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WINDMERE DURABLE HOLDINGS INC CENTRAL INDEX KEY: 0000217084 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC HOUSEWARES & FANS [3634] IRS NUMBER: 591028301 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-10177 FILM NUMBER: 98667730 BUSINESS ADDRESS: STREET 1: 5980 MIAMI LAKES DR CITY: MIAMI LAKES STATE: FL ZIP: 33014 BUSINESS PHONE: 3053622611 MAIL ADDRESS: STREET 1: 5980 MIAMI LAKES DRIVE CITY: MIAMI LAKES STATE: FL ZIP: 33014 FORMER COMPANY: FORMER CONFORMED NAME: WINDMERE CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SAVE WAY INDUSTRIES INC DATE OF NAME CHANGE: 19830815 FORMER COMPANY: FORMER CONFORMED NAME: SAVE WAY BARBER & BEAUTY SUPPLIES INC DATE OF NAME CHANGE: 19770626 8-K 1 WINDMERE CORPORATION FORM 8-K 06/26/98 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JUNE 26, 1998 WINDMERE-DURABLE HOLDINGS, INC. ------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) FLORIDA ------------------------ (STATE OR OTHER JURISDICTION OF INCORPORATION) 1-10177 59-1028301 ----------------- ------------------- (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.) WINDMERE-DURABLE HOLDINGS, INC. 5980 MIAMI LAKES DRIVE MIAMI LAKES, FLORIDA 33014 -------------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (305) 362-2611 -------------- 2 ITEM 5. OTHER EVENTS. On June 26, 1998, the Company entered into a Credit Agreement with NationsBank, National Association dated June 26, 1998 which provided the Company with $345.0 million in Senior Credit Facilities, consisting of a $160.0 million Senior Secured Revolving Credit Facility, a $90.0 million Tranche A Term Loan, a $75.0 million Tranche B Term Loan and a $20.0 million Tranche C Term Loan. The Senior Secured Revolving Credit Facility includes (a) a $20 million sublimit for the issuance of letters of credit and (b) a $10 million sublimit for swing line loans (the "Swing Line Loans"). All amounts outstanding under the Senior Secured Revolving Credit Facility shall be payable on June 26, 2003. The Tranche A Term Loan will be payable in quarterly installments, ranging from $2.5 million for the quarter ended March 31, 1999 to $6.25 million for the quarter ended March 31, 2003, and all remaining amounts owing due the following quarter. The Tranche B Term Loan will be payable in annual installments of $750,000, with all remaining amounts owing thereunder due June 26, 2004. The Tranche C Term Loan will be payable in annual installments of $200,000, with all remaining amounts owing thereunder due June 26, 2004. Interest will accrue on the loans made under the Senior Secured Revolving Credit Facility (other than Swing Line Loans) at either LIBOR (adjusted for any reserves) or the base rate, which is the higher of NationsBank, N.A.'s prime rate and the federal funds rate plus 0.05% (the "Base Rate"), at the Company's option. Interest will accrue on the Senior Secured Revolving Credit Facility and the Tranche A Term Loan at either LIBOR (adjusted for any reserves) plus a specified margin which will be determined by the leverage ratio of the Company and its subsidiaries that initially will be set at 2.50%, or the Base Rate, plus a specified margin of 1.50%, at the Company's option. Interest will accrue on the Tranche B Term Note and the Tranche C Term Loan at either LIBOR (adjusted for any reserves) plus a specified margin which will be determined by the leverage ratio of the Company and its subsidiaries that initially will be set at 3.00%, or the Base Rate plus a specified margin of 2.00%, at the Company's option. Swing Line Loans will bear interest at the Base Rate. The post-default rate on outstanding loans is 2.00% above the otherwise applicable rate of interest. The aggregate amount outstanding under the Senior Credit Facilities will be prepaid by amounts equal to the net proceeds, or a specified portion thereof, from certain indebtedness and equity issuances and specified asset sales by the Company and its subsidiaries, and by a specified percentage of cash flows in excess of certain expenditures, costs and payments. The Company may at its option reduce the amount available under the Senior Credit Facilities to the extent such amounts are unused or prepaid in certain minimum amounts. The Company pays certain annual administration fees to NationsBank, N.A. for its own account as well as a commitment fee and certain fees relating to letters of credit to NationsBank, N.A. for its own account and the account of the other lenders under the Senior Credit Facilities. The Senior Credit Facilities are secured by a security interest in substantially all of the real and personal property, tangible and intangible, of the Company and its domestic subsidiaries, as well as a pledge of all of the stock of such domestic subsidiaries, a pledge of not less than 65% of the voting stock of each direct foreign subsidiary of the Company and each direct foreign subsidiary of each domestic subsidiary of the Company, and a pledge of all of the capital stock of any subsidiary of a subsidiary of the Company that is a borrower under the Senior Credit Facilities. The Senior Credit Facilities will be guaranteed by all of the current and future domestic subsidiaries of the Company. The Senior Credit Facilities contain a number of significant covenants that, among other things, will restrict the ability of the Company to dispose of assets, incur additional indebtedness, prepay other indebtedness, pay dividends, repurchase or redeem capital stock, enter into certain investments or create new subsidiaries, enter into sale and lease-back transactions, make certain acquisitions, engage in mergers or consolidations, create liens, or engage in certain transactions with affiliates, and that will otherwise restrict corporate and business activities. In 2 3 addition, under the Senior Credit Facilities, the Company is required to comply with specified financial ratios and tests, including a minimum net worth test, a fixed charge coverage ratio, an interest coverage ratio, a leverage ratio and a minimum EBITDA requirement. In addition, on June 26, 1998, the Company entered into a Bridge Loan Agreement with Nations which provided the Company with a $185.0 million in Senior Subordinated Loans. The Senior Subordinated Loans mature in 2008 and bear interest at an increasing rate equal to (i) the one-month London interbank offered rate, adjusted for reserves ("LIBOR Option") plus (ii) the "Applicable Margin," which shall initially be 550 basis points per annum, increasing by an additional 100 basis points per annum after the first 180-day period following the funding date, then increasing by 50 basis points per annum on each 90-day period thereafter for as long as the Senior Subordinated Loans are outstanding. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) Exhibits 10.1 Credit Agreement by and among Windmere-Durable Holdings, Inc. and NationsBank, National Association, and the Other Lenders Party thereto From Time to Time dated June 26, 1998 10.2 Bridge Loan Agreement dated as of June 26, 1998 among Windmere-Durable Holdings, Inc., the Guarantors listed therein, the Lenders named therein, NationsBanc Montgomery Securities LLC and NationsBridge, LLC. 3 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. WINDMERE-DURABLE HOLDINGS, INC. Date: July 16, 1998 By:/s/ Harry D. Schulman ----------------------------------------- Harry D. Schulman 4 EX-10.1 2 CREDIT AGREEMENT 1 EXHIBIT 10.1 CREDIT AGREEMENT by and among WINDMERE-DURABLE HOLDINGS, INC. as Borrower, NATIONSBANK, NATIONAL ASSOCIATION as Agent and as Lender, and THE OTHER LENDERS PARTY HERETO FROM TIME TO TIME June 26, 1998 2 TABLE OF CONTENTS
Page ARTICLE I Definitions and Terms...........................................................1 I.1. Definitions.......................................................................1 I.2. Rules of Interpretation..........................................................35 ARTICLE II The Term Loans................................................................37 II.1. Term Loans......................................................................37 II.2. Payment of Principal............................................................37 II.3. Payment of Interest.............................................................38 II.4. Manner of Payment...............................................................39 II.5. Optional Prepayments............................................................39 II.6. Mandatory Prepayments...........................................................40 II.7. Term Notes......................................................................42 II.8. Interest Periods................................................................42 II.9. Conversions and Elections of Subsequent Interest Periods........................42 II.10. Pro Rata Payments..............................................................43 II.11. Use of Proceeds................................................................43 ARTICLE III The Revolving Credit Facility................................................44 III.1. Revolving Loans................................................................44 III.2. Payment of Interest............................................................47 III.3. Payment of Principal...........................................................47 III.4. Manner of Payment..............................................................47 III.5. Revolving Notes and Swing Line Notes...........................................48 III.6. Pro Rata Payments..............................................................48 III.7. Optional Commitment Reductions.................................................48 III.8. Conversions and Elections of Subsequent Interest Periods.......................49 III.9. Increase and Decrease in Amounts...............................................49 III.10. Unused Fee....................................................................50 III.11. Deficiency Advances; Failure to Purchase Participations.......................50 III.12. Use of Proceeds...............................................................51 III.13. Swing Line....................................................................51 ARTICLE IV Letters of Credit.............................................................53 IV.1. Letters of Credit...............................................................53 IV.2. Reimbursement...................................................................53 IV.3. Letter of Credit Facility Fees..................................................57 IV.4. Administrative Fees.............................................................57 ARTICLE V Security.......................................................................58 V.1. Security Interest................................................................58 V.2. Stock Pledge.....................................................................58 V.3. Guaranty.........................................................................58 V.4. Mortgages........................................................................59 V.5. Intellectual Property............................................................59 V.6. Information Regarding Collateral.................................................59 V.7. Further Assurances...............................................................60 ARTICLE VI Change in Circumstances.......................................................61 VI.1. Increased Cost and Reduced Return...............................................61 VI.2. Limitation on Types of Loans....................................................62 VI.3. Illegality......................................................................63 VI.4. Treatment of Affected Loans.....................................................63 VI.5. Compensation....................................................................64
i 3 VI.6. Taxes...........................................................................64 VI.7. Replacement Banks...............................................................66 ARTICLE VII Conditions to Making Loans and Issuing Letters of Credit.....................67 VII.1. Conditions of Initial Advance..................................................67 VII.2. Conditions of Loans and Letter of Credit.......................................71 ARTICLE VIII Representations and Warranties..............................................73 VIII.1. Organization and Authority....................................................73 VIII.2. Loan Documents................................................................73 VIII.3. Solvency......................................................................74 VIII.4. Subsidiaries and Shareholders.................................................74 VIII.5. Ownership Interests...........................................................74 VIII.6. Financial Condition...........................................................74 VIII.7. Title to Properties...........................................................75 VIII.8. Taxes.........................................................................76 VIII.9. Other Agreements..............................................................76 VIII.10. Litigation...................................................................76 VIII.11. Margin Stock.................................................................76 VIII.12. Investment Company...........................................................76 VIII.13. Intellectual Property........................................................77 VIII.14. No Untrue Statement..........................................................77 VIII.15. No Consents, Etc.............................................................77 VIII.16. Employee Benefit Plans.......................................................77 VIII.17. No Default...................................................................79 VIII.18. Hazardous Materials..........................................................79 VIII.19. Employment Matters...........................................................80 VIII.20. RICO.........................................................................80 VIII.21. Year 2000 Compliance.........................................................80 VIII.22. Transaction Agreement Representations........................................81 ARTICLE IX Affirmative Covenants.........................................................82 IX.1. Financial Reports, Etc..........................................................82 IX.2. Maintain Properties and Agreements..............................................84 IX.3. Existence, Qualification, Etc...................................................84 IX.4. Regulations and Taxes...........................................................84 IX.5. Insurance.......................................................................84 IX.6. True Books......................................................................84 IX.7. Right of Inspection.............................................................85 IX.8. Observe all Laws................................................................85 IX.9. Covenants Extending to Other Persons............................................85 IX.10. Officer's Knowledge of Default.................................................85 IX.11. Suits or Other Proceedings.....................................................85 IX.12. Notice of Discharge of Hazardous Material or Environmental Complaint...........85 IX.13. Environmental Compliance.......................................................86 IX.14. Indemnification................................................................86 IX.15. Further Assurances.............................................................86 IX.16. Employee Benefit Plans.........................................................86 IX.17. Termination Events.............................................................87 IX.18. ERISA Notices..................................................................87 IX.19. Continued Operations...........................................................87 IX.20. Use of Proceeds................................................................87 IX.21. New Subsidiaries; Minority Interests...........................................87 ARTICLE X Negative Covenants.............................................................90 X.1. Indebtedness.....................................................................90
ii 4 X.2. Liens...........................................................................91 X.3. Investments; Acquisitions.......................................................92 X.4. Merger or Transfer of Assets....................................................92 X.5. Transactions with Affiliates....................................................93 X.6. Compliance with ERISA...........................................................94 X.7. Fiscal Year.....................................................................94 X.8. Dissolution, etc................................................................94 X.9. Hedging Obligations.............................................................95 X.10. Dividends, Redemptions and Other Payments......................................95 X.11. Subordinated Debt..............................................................95 X.12. Defaults Under Other Agreements................................................95 X.13. Compensation; Reimbursement of Expenses........................................96 X.14. Change in Accountants..........................................................96 X.15. Limitations on Sales and Leasebacks............................................96 X.16. Negative Pledge Clauses........................................................96 X.17. Intellectual Property..........................................................96 X.18. Licenses.......................................................................96 X.19. Amendment of Documents.........................................................97 X.20. Limitations on Certain Restrictive Covenants...................................97 X.21. Limitations on Business Activities.............................................97 X.22. Financial Covenants............................................................97 ARTICLE XI Events of Default and Acceleration...........................................101 XI.1. Events of Default..............................................................101 XI.2. Agent to Act...................................................................105 XI.3. Cumulative Rights..............................................................105 XI.4. No Waiver......................................................................105 XI.5. Allocation of Proceeds.........................................................105 ARTICLE XII The Agent...................................................................107 XII.1. Appointment, Powers, and Immunities...........................................107 XII.2. Reliance by Agent.............................................................107 XII.3. Defaults......................................................................108 XII.4. Rights as Lender..............................................................108 XII.5. Indemnification...............................................................108 XII.6. Non-Reliance on Agent and Other Lenders.......................................109 XII.7. Resignation of Agent..........................................................109 XII.8. Fees..........................................................................109 ARTICLE XIII Miscellaneous..............................................................110 XIII.1. Assignments and Participations...............................................110 XIII.2. Notices......................................................................112 XIII.3. Right of Set-off; Adjustments................................................113 XIII.4. Survival.....................................................................114 XIII.5. Expenses; Indemnification....................................................114 XIII.6. Amendments and Waivers.......................................................115 XIII.7. Counterparts.................................................................116 XIII.8. Termination..................................................................116 XIII.9. Confidentiality..............................................................116 XIII.10. Severability................................................................117 XIII.11. Entire Agreement............................................................117 XIII.12. Agreement Controls..........................................................117 XIII.13. Usury Savings Clause........................................................117 XIII.14. GOVERNING LAW; WAIVER OF JURY TRIAL.........................................118
iii 5 CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of June 26, 1998 (the "Agreement"), is made by and among WINDMERE-DURABLE HOLDINGS, INC., a Florida corporation having its principal place of business in Miami Lakes, Florida (the "Borrower"), NATIONSBANK, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States, in its capacity as a Lender ("NationsBank"), and each other financial institution executing and delivering a signature page hereto and each other financial institution which may hereafter execute and deliver an instrument of assignment with respect to this Agreement pursuant to Section 13.1 hereof (hereinafter such financial institutions may be referred to individually as a "Lender" or collectively as the "Lenders"), and NATIONSBANK, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States, in its capacity as agent for the Lenders (in such capacity, and together with any successor agent appointed in accordance with the terms of Article XII, the "Agent"); W I T N E S S E T H: WHEREAS, the Borrower has requested that the Lenders make available to it credit facilities up to an aggregate amount of $345,000,000 consisting of (a) a revolving credit facility in the maximum aggregate principal amount at any time outstanding of $160,000,000, which shall include (i) a letter of credit facility of $20,000,000 and (ii) a swing line facility of $10,000,000, and (b) a term loan A facility in the maximum principal amount of $90,000,000, (c) a term loan B facility in the maximum principal amount of $75,000,000 and (d) a term loan C facility in the maximum principal amount of $20,000,000; and WHEREAS, the Lenders are willing to make all such facilities available to the Borrower upon the terms and conditions set forth herein; NOW, THEREFORE, the Borrower, the Lenders and the Agent hereby agree as follows: ARTICLE I Definitions and Terms I.1. Definitions. For the purposes of this Agreement, in addition to the definitions set forth above, the following terms shall have the respective meanings set forth below: "Acquisition" means the acquisition of (i) a controlling equity interest in another Person (including the purchase of an option, warrant or convertible or similar type security to acquire such a controlling interest at the time it becomes exercisable by the 6 holder thereof), whether by purchase of such equity interest or upon exercise of an option or warrant for, or conversion of securities into, such equity interest, or (ii) assets of another Person which constitute any material part of the assets of such Person or of a line or lines of business conducted by such Person. "Advance" means a borrowing under the Revolving Credit Facility consisting of a Base Rate Loan or a Eurodollar Rate Loan or the advance of any Term Loan on the Closing Date. "Affiliate" means any Person (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with the Borrower; or (ii) which beneficially owns or holds 10% or more of any class of the outstanding voting stock of the Borrower or 10% or more of any class of the outstanding voting stock (or in the case of a Person which is not a corporation, 10% or more of the equity interest) of which is beneficially owned or held by the Borrower. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting stock, by contract or otherwise. "Applicable Commitment Percentage" means, with respect to each Lender at any time, (i) with respect to the Revolving Credit Facility and the Participations, a fraction, the numerator of which shall be such Lender's Revolving Credit Commitment and the denominator of which shall be the Total Revolving Credit Commitment, and (ii) with respect to each of the Term Loan A Facility, Term Loan B Facility or Term Loan C Facility, as the case may be, a fraction, the numerator of which shall be such Lender's Term Loan A Commitment, Term Loan B Commitment or Term Loan C Commitment, as applicable, and the denominator of which shall be the Total Term Loan A Commitment, the Total Term Loan B Commitment or the Total Term Loan C Commitment, as applicable, which Applicable Commitment Percentage in each case for each Lender as of the Closing Date is as set forth in Exhibit A hereto; provided that each Applicable Commitment Percentage of each Lender shall be increased or decreased to reflect any assignments to or by such Lender effected in accordance with Section 13.1 hereof. "Applicable Lending Office" means, for each Lender and for each Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such Lender) designated for such Type of Loan on the signature pages hereof or such other office of such Lender (or an affiliate of such Lender) as such Lender may from time to time specify to the Agent and the Borrower by written notice in accordance with the terms hereof as the office by which its Loans of such Type are to be made and maintained. "Applicable Margin" means that percent per annum set forth below, which shall be based upon the Consolidated Leverage Ratio for the period of four consecutive fiscal quarters most recently ended as specified below: 2 7
------------------------------------------------------------------------------------------------------ Applicable Applicable Applicable Applicable Margin for Margin for Margin for Margin for Eurodollar Rate Eurodollar Rate Base Rate Base Rate Loans that are Loans that are Loans that are Loans that are Revolving Loans Segments of Revolving Loans Segments of Consolidated or Segments of Term Loan B or Segments of Term Loan B Tier Leverage Ratio Term Loan A and Term Loan C Term Loan A and Term Loan C ------------------------------------------------------------------------------------------------------ I Equal to or less 1.75% 2.75% .75% 1.75% than 4.00 to 1.00 ------------------------------------------------------------------------------------------------------ II Greater than 4.00 2.00% 2.75% 1.00% 1.75% to 1.00 and less than or equal to 4.50 to 1.00 ------------------------------------------------------------------------------------------------------ III Greater than 4.50 2.25% 3.00% 1.25% 2.00% to 1.00 and less than or equal to 5.00 to 1.00 ------------------------------------------------------------------------------------------------------ IV Greater than 5.00 2.50% 3.00% 1.50% 2.00% to 1.00 ------------------------------------------------------------------------------------------------------
The Applicable Margin shall be established at the end of each fiscal quarter of the Borrower (each, a "Determination Date"). Any change in the Applicable Margin following each Determination Date shall be determined based upon the computations set forth in the certificate furnished to the Agent pursuant to Section 9.1(a) and (b) hereof, subject to review and confirmation of such computations by the Agent, and shall be effective (the "Effective Date") commencing on the first Business Day next following the date such certificate is received (or, if earlier, the date such certificate was required to be delivered) until the first Business Day following the date on which a new certificate is delivered or is required to be delivered, whichever shall first occur; provided however, if the Borrower shall fail to deliver any such certificate within the time period required by Section 9.1 hereof, then the Applicable Margin shall be Tier IV until the appropriate certificate is so delivered. From the Closing Date to the first Effective Date next following December 31, 1998 (the "Initial Period"), the Applicable Margin shall be as set forth in Tier IV; provided further, however, that if the Stock Offering is consummated prior to the end of the Initial Period, the Applicable Margin shall be as set forth in Tier III 3 8 for the remainder of the Initial Period; and provided further, however, that for the Determination Dates occurring December 31, 1998 and March 31, 1999 the calculation of Consolidated EBITDA for determining the Consolidated Leverage Ratio (for the purposes of calculating the Applicable Margin only) shall be made as if the HPG Acquisition were consummated on January 1, 1998 and shall include such pro forma adjustments as were permitted in the Registration Statement, all in form satisfactory to the Agent. "Applicable Period" means (i) for the fiscal quarter of the Borrower and its Subsidiaries ending June 30, 1999 and each fiscal quarter of the Borrower and its Subsidiaries thereafter, a Four-Quarter Period, and (ii) for the fiscal quarters of the Borrower and its Subsidiaries ending September 30, 1998, December 31, 1998, and March 31, 1999 the one, two and three fiscal quarter periods ending on such dates. For purposes of determining the Consolidated Leverage Ratio, the Consolidated Interest Coverage Ratio and the Consolidated Fixed Charge Ratio for the one, two or three fiscal quarter periods of the Borrower and its Subsidiaries ending September 30, 1998, December 31, 1998 and March 31, 1999, Consolidated EBITDA, Consolidated Interest Expense and Consolidated Fixed Charges shall be determined by multiplying the Adjusted Consolidated Fixed Charges (other than required principal payments) for such periods by four, two and four-thirds, respectively. Commencing with the fiscal quarter ending June 30, 1999 and thereafter, such ratios shall be calculated for a Four-Quarter Period. "Applications and Agreements for Letters of Credit" means, collectively, the Applications and Agreements for Letters of Credit, or similar documentation, executed by the Borrower from time to time and delivered to the Issuing Bank to support the issuance of Letters of Credit. "Approved Receivables Insurance Program" means a receivables insurance program with NationsBanc Commercial Credit approved in writing by the Required Lenders. "Approved Fund" means, with respect to any Lender that is a fund that invests in commercial loans, any other fund that invests in commercial loans, and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "Approved Stock Option Plan" means (a) each stock option plan (whether relating to employees or directors) or agreement pursuant to which the options listed on Schedule 1.4 hereto are listed and (b) any executive or employee stock option or incentive plan hereafter adopted by the board of directors of the Borrower. "Asheboro Facility" means the manufacturing facility of the Seller leased by the Borrower and located at 1758 Fayetteville Street, Asheboro, North Carolina 27203. 4 9 "Asset Disposition" means any voluntary disposition, whether by sale, lease or transfer, other than as permitted under Section 10.4 hereof, of (a) any or all of the assets, excluding cash and cash equivalents, of the Borrower or its Subsidiaries, and (b) any of the capital stock (including the Salton/Maxim Shares), or securities or investments exchangeable, exercisable or convertible for or into, or otherwise entitling the holder to receive any of the capital stock, of any Person (other than a disposition to a Guarantor). "Assignment and Acceptance" shall mean an Assignment and Acceptance in the form of Exhibit B hereto (with blanks appropriately filled in) delivered to the Agent in connection with an assignment of a Lender's interest under this Agreement pursuant to Section 13.1 hereof. "Authorized Representative" means any of the President or any Vice President of the Borrower or, with respect to financial matters, the chief financial officer of the Borrower, or any other Person expressly designated by the Board of Directors of the Borrower (or the appropriate committee thereof) as an Authorized Representative of the Borrower, as set forth from time to time in a certificate in the form of Exhibit C hereto. "Base Rate" means, for any day, the sum of (a) higher of (i) the Federal Funds Rate for such day plus one-half of one percent (0.5%) and (ii) the Prime Rate for such day, plus (b) the Applicable Margin. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or Federal Funds Rate. "Base Rate Loan" means a Revolving Loan or Segment of a Term Loan for which the rate of interest is determined by reference to the Base Rate. "Base Rate Refunding Loan" means a Base Rate Loan made either (i) to satisfy Reimbursement Obligations arising from a drawing under a Letter of Credit or (ii) to pay NationsBank in respect of Swing Line Outstandings. "Base Rate Segment" means a Segment bearing interest or to bear interest at the Base Rate. "Black & Decker License Agreement" means that certain Trademark License Agreement dated as of the date hereof among The Black & Decker Corporation and the Borrower. "Board" means the Board of Governors of the Federal Reserve System (or any successor body). "Borrower's Account" means a demand deposit account with the Agent, which 5 10 may be maintained at one or more offices of the Agent or an agent of the Agent. "Borrowing Base" means, as of the date of determination thereof, (i) Eligible Receivables multiplied by 85% plus (ii) the value, determined at the lower of cost or market value in accordance with GAAP, of all Eligible Inventory multiplied by (a) for the period from July 1 through December 31 of each year, 65% and (b) at all other times, 50%, less (iii) 50% of the aggregate amount of all Indebtedness of Foreign Subsidiaries permitted under Section 10.1(h) outstanding as of such date of determination; provided, however, at no time shall the amount of the Borrowing Base attributable to Eligible Inventory exceed the amount of the Borrowing Base attributable to Eligible Receivables. "Borrowing Base Certificate" means a certificate of an Authorized Representative in the form attached hereto as Exhibit K hereto. "Borrowing Notice" means the notice delivered by an Authorized Representative in connection with an Advance under the Revolving Credit Facility or a Swing Line Loan, in the forms of Exhibits D-1 and D-2, respectively. "Bridge Loan Agreement" means that certain Bridge Loan Agreement dated as of the date hereof by and between the Borrower and NationsBridge providing for the incurrence of the Subordinated Bridge Debt. "Bridge Loan Documents" means the Bridge Loan Agreement, the executed version of each document attached thereto as an exhibit and all other documents and agreements delivered or entered into in connection with the transactions contemplated thereby. "Business Day" means, (i) with respect to any Base Rate Loan, any day which is not a Saturday, Sunday or a day on which banks in the States of New York and North Carolina are authorized or obligated by law, executive order or governmental decree to be closed and, (ii) with respect to any Eurodollar Rate Loan, any day which is a Business Day, as described above, and on which the relevant international financial markets are open for the transaction of business contemplated by this Agreement in London, England, New York, New York and Charlotte, North Carolina. "Capital Expenditures" means, with respect to the Borrower and its Subsidiaries, for any period the sum of (without duplication) (i) all expenditures (whether paid in cash or accrued as liabilities) by the Borrower or any Subsidiary during such period for items that would be classified as "property, plant or equipment" or comparable items on the consolidated balance sheet of the Borrower and its Subsidiaries, including without limitation all transactional costs incurred in connection with such expenditures provided the same have been capitalized, and (ii) with respect to any Capital Lease entered into by the Borrower or its Subsidiaries during such period, the present value of the lease 6 11 payments due under such Capital Lease over the term of such Capital Lease applying a discount rate equal to the interest rate provided in such lease (or in the absence of a stated interest rate, the rate used in preparation of the financial statements described in Section 9.1(a)) all the foregoing in accordance with GAAP applied on a Consistent Basis. "Capital Leases" means all leases which have been or should be capitalized in accordance with GAAP as in effect from time to time including Statement No. 13 of the Financial Accounting Standards Board and any successor thereof. "Closing Date" means the date as of which this Agreement is executed by the Borrower, the Lenders and the Agent and on which the conditions set forth in Section 7.1 hereof have been satisfied. "Code" means the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder. "Collateral" means, collectively, all property of the Borrower, any Subsidiary or any other Person in which the Agent or any Lender is granted a Lien as security for all or any portion of the Obligations under any Security Instrument. "Collateral Assignment of Contracts" means that certain Collateral Assignment of Contracts dated as of the date hereof by HP Mexico in favor of the Agent pursuant to which HP Mexico has collaterally assigned all of their rights and interests under certain material contracts identified therein. "Commitments" means the Revolving Credit Commitment, the Term Loan A Commitment, the Term Loan B Commitment and the Term Loan C Commitment. "Company Securities" means common stock of the Borrower, par value $.10 per share, issued in connection with the Permanent Junior Financing in replacement of at least $100,000,000 in principal amount of the Bridge Notes. "Condemnation Award" means the cash proceeds received by the Borrower or any Subsidiary from any condemnation or other taking (by eminent domain or otherwise) of the whole or any part of the property of the Borrower or any Subsidiary by any Governmental Authority. "Consistent Basis" in reference to the application of GAAP means the accounting principles observed in the period referred to are comparable in all material respects to those applied in the preparation of the audited financial statements of the Borrower referred to in Section 8.6(a) hereof. "Consolidated EBITDA" means, with respect to the Borrower and its 7 12 Subsidiaries, for the Applicable Period ending as of the date of determination, the sum of, without duplication, (i) Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) taxes on income, (iv) amortization and (v) depreciation, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis; provided, however, that with respect to an Acquisition that is accounted for as a "purchase", for the four fiscal quarters ending after the date of such Acquisition, Consolidated EBITDA shall include the results of operations of such acquired Person or assets, which amounts shall be determined on a historical pro forma basis as if such Acquisition had been consummated as a "pooling of interest". "Consolidated Excess Cash Flow" means, with respect to the Borrower and its Subsidiaries for any Fiscal Year, (i) Consolidated EBITDA for such period (including therein any net gain or loss, as applicable, of an extraordinary nature otherwise excluded from the calculation thereof in the definition of "Consolidated Net Income") minus (ii) the sum of, without duplication, for such period (A) Capital Expenditures, plus (B) Consolidated Interest Expense, plus (C) required principal payments on Consolidated Funded Indebtedness and optional prepayments of the Term Loans, plus (D) accrued taxes on income, plus (E) all cash paid as part of the cost of any Acquisition plus (F) all amounts included in the calculation of Consolidated EBITDA for the purposes of this definition to the extent such amounts are subject to the mandatory prepayment provisions of Section 2.6(a), (b), (c) or (e) hereof. "Consolidated Fixed Charge Ratio" means, with respect to the Borrower and its Subsidiaries for the Applicable Period, the ratio of (i) Consolidated EBITDA for such period less Capital Expenditures for such period to (ii) Consolidated Fixed Charges for such period. "Consolidated Fixed Charges" means, with respect to Borrower and its Subsidiaries for the Applicable Period, the sum of, without duplication, (i) Consolidated Interest Expense, during such period, and (ii) the principal amount of Consolidated Funded Indebtedness due and payable during such period, all determined in accordance with GAAP applied on a Consistent Basis. "Consolidated Funded Indebtedness" means at any time as of which the amount thereof is to be determined, all Indebtedness of the Borrower and its Subsidiaries, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. "Consolidated Interest Coverage Ratio" means, with respect to the Borrower and its Subsidiaries, for the Applicable Period, the ratio of (i) Consolidated EBITDA to (ii) Consolidated Interest Expense. "Consolidated Interest Expense" means, with respect to any period of 8 13 computation thereof, the gross interest expense of the Borrower and its Subsidiaries, including without limitation (i) the amortization of debt discounts, (ii) the amortization of all fees payable in connection with the incurrence of Indebtedness to the extent included in interest expense, and (iii) the portion of any liabilities incurred in connection with Capital Leases allocable to interest expense, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. "Consolidated Leverage Ratio" means, for any date for which the computation thereof is being made, the ratio of (i) Consolidated Funded Indebtedness (determined as at such date) to (ii) Consolidated EBITDA for the Applicable Period ending on (or most recently ended prior to) such date. "Consolidated Net Income" means, for any period of computation thereof, the gross revenues from operations of the Borrower and its Subsidiaries less all operating and non-operating expenses (not related to extraordinary events) of the Borrower and its Subsidiaries including taxes on income, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis; but excluding (for all purposes other than (x) compliance with Section 10.23(a) hereof and (y) the computation of Consolidated EBITDA utilized to determine Excess Cash Flow) in such calculation (1) the amount of any net gains on the sale, conversion or other disposition of capital assets, (2) the amount of any net gains on the acquisition, retirement, sale or other disposition of capital stock and other securities of the Borrower or its Subsidiaries, (3) the amount of any net gains on the collection of proceeds of life insurance policies, (4) any write-up of any asset, (5) any other net gain of an extraordinary nature and (6) dividends and distributions in respect of minority investments in Persons other than Subsidiaries, all as determined in accordance with GAAP applied on a Consistent Basis; provided, however, that for the purposes of determining compliance with Section 10.23(a) hereof, there shall be disregarded any increase in Consolidated Net Income upon giving effect to an Acquisition which results from the treatment of such Acquisition as a "pooling of interest" although such Acquisition was a "purchase" transaction for GAAP purposes. "Consolidated Net Worth" means the total of Borrower's and its Subsidiaries' shareholders' equity as determined in accordance with GAAP on a Consistent Basis. "Contingent Obligation" of any Person means all contingent liabilities required (or which, upon the creation or incurring thereof, would be required) to be included in the financial statements (including footnotes) of such Person in accordance with GAAP applied on a Consistent Basis, including Statement No. 5 of the Financial Accounting Standards Board, and any obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including obligations of such Person however incurred: 9 14 (1) to purchase such Indebtedness or other obligation or any property or assets constituting security therefor; (2) to advance or supply funds in any manner (i) for the purchase or payment of such Indebtedness or other obligation, or (ii) to maintain a minimum working capital, net worth or other balance sheet condition or any income statement condition of the primary obligor; (3) to grant or convey any lien, security interest, pledge, charge or other encumbrance on any property or assets of such Person to secure payment of such Indebtedness or other obligation; (4) to lease property or to purchase securities or other property or services primarily for the purpose of assuring the owner or holder of such Indebtedness or obligation of the ability of the primary obligor to make payment of such Indebtedness or other obligation; or (5) otherwise to assure the owner of the Indebtedness or such obligation of the primary obligor against loss in respect thereof. Contingent Obligations shall be computed at the amount which, in light of all the facts and circumstances existing at the time, represent the amount which can reasonably be expected to become an actual or matured liability of such Person. "Continue", "Continuation", and "Continued" shall refer to the continuation pursuant to Section 2.9 hereof of a Eurodollar Rate Loan of one Type as a Eurodollar Rate Loan of the same Type from one Interest Period to the next Interest Period. "Control Subsidiary" means any entity not constituting a Subsidiary hereunder but which would otherwise be included as a subsidiary of the Borrower for consolidated financial reporting purposes in accordance with GAAP. "Convert", "Conversion", and "Converted" shall refer to a conversion pursuant to Section 2.9 or 3.8 or Article VI hereof of one Type of Loan into another Type of Loan. "Core Business" means, with respect to the Borrower and its Subsidiaries, the business of manufacturing and distributing of small household and outdoor appliances, pet products and related items consistent with past practices. "Cost of Acquisition" means, with respect to any Acquisition, as at the date of consummation of any such Acquisition, the sum of the following (without duplication): (i) the value of the capital stock, warrants or options to acquire capital stock of the Borrower or any Subsidiary to be transferred in connection therewith, (ii) any cash or 10 15 other property and the unpaid principal amount of any debt instrument given as consideration, (iii) any Indebtedness assumed by the Borrower or its Subsidiaries in connection with such Acquisition, and (iv) out of pocket transaction costs for the services and expenses of attorneys, accountants and other consultants incurred in effecting such a transaction, and other similar transaction costs so incurred. For purposes of determining the Cost of Acquisition for any transaction, (A) the capital stock of the Borrower shall be valued (I) at its market value as reported on the New York Stock Exchange with respect to shares that are freely tradeable, and (II) with respect to shares that are not freely tradeable, as determined by the Board of Directors of the Borrower and, if requested by the Agent, determined to be a reasonable valuation by the independent public accountants referred to in Section 9.1(a) hereof, (B) the capital stock of any Subsidiary shall be valued as determined by the Board of Directors of the Borrower or such Subsidiary and, if requested by the Agent, determined to be a reasonable valuation by the independent public accountants referred to in Section 9.1(a) hereof, and (C) with respect to any Acquisition accomplished pursuant to the exercise of options or warrants or the conversion of securities, the Cost of Acquisition shall include both the cost of acquiring such option, warrant or convertible security as well as the cost of exercise or conversion. "Credit Party" means, collectively, the Borrower, each Guarantor and each other Person providing Collateral pursuant to any Security Instrument. "Debt Offering" means a public or private offering of Indebtedness (including, without limitation, any security constituting Indebtedness which is exchangeable, exercisable or convertible for or into, or otherwise entitling the holder to receive, equity securities) of the Borrower or any Subsidiary (other than Indebtedness among the Borrower and any Subsidiary or one Subsidiary and another Subsidiary); provided, however, the term "Debt Offering" shall not include the issuance of the Permanent Subordinated Notes. "Default" means any event or condition which, with the giving or receipt of notice or lapse of time or both, would constitute an Event of Default hereunder. "Default Rate" means (i) with respect to each Eurodollar Rate Loan, until the end of the Interest Period applicable thereto, a rate of two percent (2%) above the Eurodollar Rate applicable to such Loan, and thereafter at a rate of interest per annum which shall be two percent (2%) above the Base Rate, (ii) with respect to Base Rate Loans, Swing Line Loans and Reimbursement Obligations, at a rate of interest per annum which shall be two percent (2%) above the Base Rate and (iii) in any case, the maximum rate permitted by applicable law, if lower. "Direct Foreign Control Subsidiary" means any Foreign Control Subsidiary whose outstanding voting stock is owned by the Borrower or a Domestic Subsidiary. 11 16 "Direct Foreign Subsidiary" means any Foreign Subsidiary whose outstanding voting stock is owned by the Borrower or a Domestic Subsidiary. "Dollars" and the symbol "$" means dollars constituting legal tender for the payment of public and private debts in the United States of America. "Domestic Control Subsidiary" means any Control Subsidiary which is organized under the laws of one of the states comprising the United States of America, any territory thereof or the District of Columbia. "Domestic Subsidiary" means any Subsidiary which is organized under the laws of one of the states comprising the United States of America, any territory thereof or the District of Columbia. "Eligible Assignee" means (i) a Lender; (ii) an affiliate or Approved Fund of a Lender; and (iii) any other Person approved by the Agent and, unless an Event of Default has occurred and is continuing at the time any assignment is effected in accordance with Section 13.1 hereof, the Borrower, such approval not to be unreasonably withheld or delayed by the Borrower or the Agent and such approval to be deemed given by the Borrower if no objection is received by the assigning Lender and the Agent from the Borrower within five Business Days after notice of such proposed assignment has been provided by the assigning Lender to the Borrower; provided, however, that neither the Borrower nor an affiliate of the Borrower shall qualify as an Eligible Assignee. "Eligible Inventory" means that domestic, Canadian and Mexican inventory owned by the Borrower or any Guarantor which is determined by the Agent in the reasonable exercise of its discretion to be Eligible Inventory; provided, however, that none of the following shall be Eligible Inventory: (i) inventory that is kept in any location other than the warehouses identified on Schedule 1.2 hereto as owned or leased warehouse locations; (ii) inventory that is unfinished, damaged, representing returned goods or is otherwise not readily marketable; (iii) inventory that is subject to any Lien or otherwise not in conformity with any representation or warranty contained in the Security Instruments; and (iv) inventory upon which a security interest in favor of the Agent for the benefit of the Lenders may not be perfected. "Eligible Receivables" means (a) all accounts receivable of Subsidiaries owing from Foreign Account Debtors (as defined in clause (iii) below) which are subject to an Approved Receivables Insurance Program less any discount, reserve or similar offset or 12 17 recourse to the Borrower or any Subsidiary applicable under such Approved Receivables Insurance Program and (b) those trade accounts receivable of the Borrower and each Domestic Subsidiary of the Borrower which are determined by the Agent in the reasonable exercise of its discretion to be an Eligible Receivable; provided, however, that none of the following shall be Eligible Receivables: (ii) intercompany receivables; (iii) receivables owed by the United States government or any of its states, departments, agencies or instrumentalities of any thereof; (iv) unless supported by a letter of credit issued by a financial institution, other than NationsBank, acceptable to the Agent, or payment of which is guaranteed or insured in a manner acceptable to the Agent and as to which there is a no recourse against the Borrower, receivables owed by any Person not a United States or Canadian citizen or corporation, partnership or other entity organized under the laws of the United States or province of Canada or the Commonwealth of Canada whose principal office is not located within the United States or Canada (a "Foreign Account Debtor"); (v) receivables of any customer more than 50% of which receivables due the Borrower or any Domestic Subsidiaries are more than 90 days past due; (vi) receivables that are due or unpaid for more than ninety (90) days from the original due date thereof; (vii) the portion of any receivable which is subject to any offset, deduction, defense, dispute or counterclaim, so long as no contest or dispute exist and no payment is being withheld with respect to the remainder of such receivable; and (viii) receivables of any customer with respect to which any bankruptcy or insolvency proceeding has been commenced or filed for and no court order exists directing payment with respect to such receivable. "Eligible Securities" means the following obligations and any other obligations previously approved in writing by the Agent: (ii) Government Securities; (iii) obligations of any corporation organized under the laws of any state of the United States of America or under the laws of any other nation, payable in the United States of America, expressed to mature not later than 180 13 18 days following the date of issuance thereof and rated in an investment grade rating category by S&P and Moody's; (iv) interest bearing demand or time deposits issued by any Lender or certificates of deposit maturing within one year from the date of issuance thereof and issued by a bank or trust company organized under the laws of the United States or of any state thereof having capital surplus and undivided profits aggregating at least $400,000,000 and being rated "A-" or better by S&P or "A3" or better by Moody's; (v) Repurchase Agreements; (vi) Municipal Obligations; (vii) Pre-Refunded Municipal Obligations; (viii) shares of mutual funds which invest in obligations described in paragraphs (a) through (f) above, the shares of which mutual funds are at all times rated "AAA" by S&P; (ix) tax-exempt or taxable adjustable rate preferred stock issued by a Person having a rating of its long term unsecured debt of "A" or better by S&P or "A-1" or better by Moody's; and (x) asset-backed remarketed certificates of participation representing a fractional undivided interest in the assets of a trust, which certificates are rated at least "A-1" by S&P and "P-1" by Moody's. "Employee Benefit Plan" means (i) any employee benefit plan, including any Pension Plan, within the meaning of Section 3(3) of ERISA which (A) is maintained for employees of the Borrower, any of its ERISA Affiliates, or any Subsidiary or is assumed by the Borrower, any of its ERISA Affiliates, or any Subsidiary in connection with any Acquisition or (B) has at any time within the last six years been maintained for the employees of the Borrower, any current or former ERISA Affiliate, or any Subsidiary and (ii) any plan, arrangement, understanding or scheme maintained by the Borrower or any Subsidiary that provides retirement, deferred compensation, employee or retiree medical or life insurance, severance benefits or any other benefit covering any employee or former employee and which is administered under any Foreign Benefit Law or regulated by any Governmental Authority other than the United States of America. "Environmental Laws" means, collectively, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery 14 19 Act, the Toxic Substances Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any other "Superfund" or "Superlien" law or any other federal, or applicable state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any pollutant, contaminant, or hazardous, toxic or dangerous waste, substance or material. "Equity Offering" means a public or private offering of equity securities (including, without limitation, any security or investment not constituting Indebtedness exchangeable, exercisable or convertible for or into, or otherwise entitling the holder to receive, equity securities) of the Borrower or any Subsidiary (other than securities issued to the Borrower or another Subsidiary); provided, however, the term "Equity Offering" shall not include (i) any issuance of equity securities whose aggregate market value when combined with all other similar equity issuances, does not exceed $10,000,000 and which issuance in connection with the exercise of stock options or warrants granted to, or purchase of restricted stock by, eligible participants under an Approved Stock Option Plan or (ii) the Stock Offering. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder. "ERISA Affiliate" means any Person or trade or business which is a member of a group which is under common control with the Borrower who together with the Borrower, is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code. "Eurodollar Rate Loan" means a Revolving Loan or Segment of a Term Loan for which the rate of interest is determined by reference to the Eurodollar Rate. "Eurodollar Rate" means the interest rate per annum calculated according to the following formula: Eurodollar = Interbank Offered Rate + Applicable Rate -------------------------------- Margin 1- Eurodollar Reserve Percentage
"Eurodollar Rate Segment" means a Segment bearing interest or to bear interest at the Eurodollar Rate. "Eurodollar Reserve Percentage" means, for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D or any successor regulation, as the maximum reserve requirement (including any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of 15 20 liabilities that includes deposits by reference to which the interest rate of Eurodollar Rate Loans is determined), whether or not the Agent or any Lender has any Eurocurrency liabilities subject to such requirements, without benefits of credits or proration, exceptions or offsets that may be available from time to time to the Agent or any Lender. The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage. "Event of Default" means any of the occurrences set forth as such in Section 11.1 hereof. "Existing Letters of Credit" means the letters of credit listed on Schedule 1.3 hereto issued by NationsBank in favor of Windmere Corporation under the Credit Agreement dated October 11, 1996. "Facilities" means the Revolving Credit Facilities and the Term Loan Facilities. "Facility Guaranty" means (i) the Guaranty Agreement dated as of the date hereof between the Guarantors and the Agent for the benefit of the Lenders, and (ii) any other Facility Guaranty otherwise delivered pursuant to Section 9.21 hereof, each in the form of Exhibit J hereto and each as the same may be amended, modified or supplemented. "Facility Termination Date" means the date on which both the Revolving Credit Termination Date and the Term Loan Termination Date shall have occurred, no Letters of Credit shall remain outstanding or all the Letters of Credit shall have been cash collateralized upon terms satisfactory to the Agent, all Swap Agreements shall have been terminated or cash collateralized upon terms satisfactory to the Agent and the Borrowers shall have fully paid and satisfied in full all other Obligations. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Agent (in its individual capacity) on such day on such transactions as determined by the Agent. "Fiscal Year" means the twelve month fiscal period of the Borrower beginning January 1 of each calendar year and ending the following December 31 of such calendar year. 16 21 "Florida Office" means the land and buildings owned by the Borrower located at 5980 Miami Lakes Drive, Miami Lakes, Florida. "Foreign Benefit Law" means any applicable statute, law, ordinance, code, rule, regulation, order or decree of any foreign nation or any province, state, territory, protectorate or other political subdivision thereof regulating, relating to, or imposing liability or standards of conduct concerning, any Employee Benefit Plan. "Foreign Control Subsidiary" means any Control Subsidiary organized under the laws of any jurisdiction other than one of the states comprising the United States of America, any territory thereof or the District of Columbia. "Foreign Subsidiary" means any Subsidiary organized under the laws of any jurisdiction other than one of the states comprising the United States of America, any territory thereof or the District of Columbia. "GAAP" or "Generally Accepted Accounting Principles" means generally accepted accounting principles, being those principles of accounting set forth in pronouncements of the Financial Accounting Standards Board, the American Institute of Certified Public Accountants or which have other substantial authoritative support and are applicable in the circumstances as of the date of a report. "General Assignment and Acceptance Agreement" means that certain General Assignment and Acceptance Agreement dated as of the date hereof and effective immediately prior to the effectiveness of this Agreement by and among the Existing Lenders, the Lenders, the Agent and the Borrower. "Government Securities" means direct obligations of, or obligations the timely payment of principal and interest on which are fully and unconditionally guaranteed by, the United States of America. "Governmental Authority" shall mean any Federal, state, municipal, national or other governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government, including but not limited to Malaysia, Mexico and Canada. "Guarantors" means the Domestic Subsidiaries. "Hazardous Material" means and includes any pollutant, contaminant, hazardous, toxic or dangerous waste, substance or material (including petroleum products, asbestos-containing materials and lead), the management, generation, handling, storage, 17 22 transportation, disposal, treatment, release, discharge or emission of which is subject to any Environmental Law. "Hedging Obligations" means any and all obligations of the Borrower, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, currency exchange rates or forward rates applicable to such party's commodities, assets, liabilities or exchange transactions, including, but not limited to, Dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts, warrants and those commonly known as interest rate "swap" agreements, and forward commodity price options, puts, warrants and those commonly known as commodity "swap" agreements; and (ii) any and all cancellations, buybacks, reversals, terminations or assignments of any of the foregoing; "HP Mexico" means Hosehold Products de Mexico, S.A. de C.V. "HPG" means the Household Products Group of the Seller, excluding the cleaning and lighting businesses, as described in the Transaction Agreement. "HPG Acquisition" means the purchase by the Borrower of HPG from the Seller pursuant to the terms of the Transaction Documents. "Indebtedness" means with respect to any Person, without duplication, all Indebtedness for Money Borrowed, all indebtedness of such Person for the acquisition of property other than purchases of property, product, merchandise and services in the ordinary course of business (so long as such amounts are payable in less than twelve (12) months), all indebtedness secured by any Lien on the property of such Person whether or not such indebtedness is assumed (except unperfected Liens incurred in the ordinary course of business and not in connection with the borrowing of money), all liability of such Person by way of endorsements (other than for collection or deposit in the ordinary course of business), all Contingent Obligations, the face amount of all issued and outstanding letters of credit, and all Hedging Obligations; provided that in no event shall the term Indebtedness include capital stock surplus and retained earnings, minority interests in the common stock of Subsidiaries, lease obligations (other than pursuant to Capital Leases), reserves for deferred income taxes and investment credits, other deferred credits or reserves. "Indebtedness for Money Borrowed" means with respect to any Person, without duplication, all amounts owed, including principal, interest, fees, indemnities, costs, premium, damages and expenses, in respect of money borrowed, including without 18 23 limitation the Subordinated Bridge Debt and the Permanent Subordinated Notes and all Capital Leases and the deferred purchase price of any property or asset, evidenced by a promissory note, bond, debenture or similar written obligation for the payment of money (including conditional sales or similar title retention agreements), other than trade payables incurred in the ordinary course of business. "Indenture" means the indenture entered into in connection with the issuance of the Permanent Subordinated Notes. "Insurance Award" means the net cash proceeds of any payment made by any casualty insurer or self-insurance program of the Borrower or any Subsidiary for any casualty or other loss with respect to the whole or any part of the property of the Borrower or any Subsidiary after deduction for taxes, fees and reasonable expenses incurred in the realization thereof. "Intellectual Property" has the meaning given to such term in Section 8.13 hereof. "Intellectual Property Assignments" means those certain Assignments of Patents, Trademarks, Copyrights and Licenses in the form attached to the Intellectual Property Security Agreement as Exhibit A, to be filed upon acceleration of the Obligations hereunder, as from time to time amended, supplemented or replaced. "Intellectual Property Security Agreement" means, collectively (or individually as the context may indicate), (i) the Intellectual Property Security Agreement dated as of the Closing Date and executed by the Borrower and certain of its Domestic Subsidiaries in favor of the Agent and (ii) each other Intellectual Property Security Agreement executed by the Borrower or a Domestic Subsidiary (whether of even date herewith or delivered after the Closing Date pursuant to Article VI or Section 9.21 hereof and whether executed individually or jointly and severally with other Subsidiaries) in favor of the Agent to collaterally secure payment and performance of its respective obligations hereunder and under the Guaranty, as applicable, substantially in the form of Exhibit I attached hereto and incorporated herein by reference, as from time to time amended, supplemented or replaced. "Interbank Offered Rate" means, for any Loan bearing interest at the Eurodollar Rate for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "Interbank Offered Rate" shall mean, for any Loan bearing interest at the Eurodollar Rate for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) appearing on Reuters Screen LIBO Page as the London interbank 19 24 offered rate for deposits in Dollars at approximately 11:00 a.m. (London Time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. "Interest Period" means, for each Eurodollar Rate Loan, a period commencing on the date such Eurodollar Rate Loan is made or converted and ending, at the Borrower's option, on the date one, two, three or six months thereafter as notified to the Agent by the Authorized Representative three (3) Business Days prior to the beginning of such Interest Period; provided, that, (ii) if the Authorized Representative fails to notify the Agent of the length of an Interest Period three (3) Business Days prior to the first day of such Interest Period, the Loan for which such Interest Period was to be determined shall be deemed to be a Base Rate Loan as of the first day thereof; (iii) if an Interest Period for a Eurodollar Rate Loan would end on a day which is not a Business Day, such Interest Period shall be extended to the next Business Day (unless such extension would cause the applicable Interest Period to end in the succeeding calendar month, in which case such Interest Period shall end on the next preceding Business Day); (iv) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; (v) no Interest Period shall extend past the Stated Termination Date in the case of Revolving Loans, the Term Loan A Maturity Date in the case of Term Loan A, the Term Loan B Maturity Date in the case of Term Loan B and the Term Loan C Maturity Date in the case of Term Loan C; and (vi) there shall not be more than twelve (12) Interest Periods in effect on any day. "Interest Rate Selection Notice" means the written notice delivered by an Authorized Representative in connection with the election of a subsequent Interest Period for any Eurodollar Rate Loan or the conversion of any Eurodollar Rate Loan into a Base Rate Loan or the conversion of any Base Rate Loan into a Eurodollar Rate Loan in the form of Exhibit E hereto. "Issuing Bank" means initially NationsBank and thereafter any Lender which is successor to NationsBank as issuer of Letters of Credit under Article III hereof. 20 25 "Kmart Agreement" means that certain Purchase, Distribution and Marketing Agreement dated as of January 27, 1997 between Kmart Corporation and Salton/Maxim. "Landlord Waivers" means, collectively, each of the landlord waiver and estoppel letters delivered by the landlord of each material facility now leased by the Borrower and any Guarantor, all of which are listed on Schedule 1.1 hereto, or arising after the Closing Date and delivered by the Borrower and the Guarantors, as applicable, pursuant to Article VI or Section 9.21 hereof, substantially in the form of Exhibit M hereto and incorporated herein by reference. "LC Account Agreement" means the LC Account Agreement dated as of the date hereof, between the Borrower and the Agent, as amended, modified or supplemented from time to time. "Lending Office" means, as to each Lender, the Lending Office of such Lender designated on the signature pages hereof or in an Assignment and Acceptance or such other office of such Lender (or of an affiliate of such Lender) as such Lender may from time to time specify to the Authorized Representative and the Agent as the office by which its Loans are to be made and maintained. "Letter of Credit" means (i) a standby or documentary letter of credit issued by the Issuing Bank for the account of the Borrower in favor of a Person advancing credit or securing an obligation on behalf of the Borrower and (ii) the Existing Letters of Credit. "Letter of Credit Commitment" means, with respect to each Lender, the obligation of such Lender to acquire Participations in respect of Letters of Credit and Reimbursement Obligations up to an aggregate amount at any one time outstanding equal to such Lender's Applicable Commitment Percentage of the Total Letter of Credit Commitment as the same may be increased or decreased from time to time pursuant to this Agreement. "Letter of Credit Facility" means the facility described in Article IV hereof providing for the issuance by the Issuing Bank for the account of the Borrower of Letters of Credit in an aggregate stated amount at any time outstanding not exceeding the Total Letter of Credit Commitment. "Letter of Credit Outstandings" means, as of any date of determination, the aggregate amount remaining undrawn under all Letters of Credit plus the principal amount of all Reimbursement Obligations then outstanding. "Lien" means any interest in property securing any obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the 21 26 common law, statute or contract, and including but not limited to the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. For the purposes of this Agreement, the Borrower and any Subsidiary shall be deemed to be the owner of any property which it has acquired or holds subject to a conditional sale agreement, financing lease, or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes. "Loan" or "Loans" means any of the Revolving Loans, the Swing Line Loans or the Term Loans. "Loan Documents" means this Agreement, the Notes, the Security Instruments, the Facility Guaranties, the LC Account Agreement, the Applications and Agreements for Letter of Credit, the Landlord Waivers and all other instruments and documents heretofore or hereafter executed or delivered to or in favor of any Lender, the Issuing Bank or the Agent in connection with the Loans made and transactions contemplated under this Agreement, as the same may be amended, supplemented or replaced from the time to time. "Material Adverse Effect" means a material adverse effect on (i) the business, properties, operations or condition, financial or otherwise, of the Borrower or any of its Subsidiaries or any other Credit Party, (ii) the ability of any Credit Party to pay or perform its respective obligations, liabilities and indebtedness under the Loan Documents as such payment or performance becomes due in accordance with the terms thereof, or (iii) the rights, powers and remedies of the Agent or any Lender under any Loan Document or the validity, legality or enforceability thereof (including for purposes of clauses (ii) and (iii) the imposition of burdensome conditions thereon). "Material Contract" means any contract or agreement (including license agreements) the termination of which or the default by any party thereto could reasonably be expected to have a Material Adverse Effect; such Material Agreements as of the Closing Date being listed on Schedule 1.2 hereto. "Moody's" means Moody's Investors Service, Inc. "Mortgages" means, collectively (or individually as the context may indicate), each mortgage or similar agreement executed by the Borrower or any Subsidiary and delivered after the Closing Date pursuant to Article VI or Section 9.21 hereof in favor of the Agent in the form of Exhibit O attached hereto and incorporated herein by reference, each as from time to time amended, supplemented or replaced. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or is 22 27 accruing an obligation to make, contributions or has made, or been obligated to make, contributions within the preceding six (6) fiscal years. "Municipal Obligations" means general obligations issued by, and supported by the full taxing authority of, any state of the United States of America or of any municipal corporation or other public body organized under the laws of any such state which are rated in the highest investment rating category by both S&P and Moody's. "NMS" means NationsBanc Montgomery Securities LLC and its successors. "NationsBank" means NationsBank, National Association. "NationsBridge" means NationsBridge, L.L.C. and its successors. "Net Proceeds" (a) from any Equity Offering means cash payments received by the Borrower therefrom as and when received, net of all legal, accounting, banking and underwriting fees and expenses, commissions, discounts and other issuance expenses incurred in connection therewith and all taxes required to be paid or accrued as a consequence of such issuance; and (b) from any Asset Disposition or option exercised under the Option Agreement means cash payments received by the Borrower therefrom (including any cash payments received pursuant to any note or other debt security received in connection with any Asset Disposition) as and when received, net of (i) all legal fees and expenses and other fees and expenses paid to third parties and incurred in connection therewith, (ii) all taxes required to be paid or accrued as a consequence of such sale and (iii) with respect to an Asset Disposition only, amounts applied to repayment of Indebtedness (other than the Obligations) secured by a Lien on the asset or property disposed. "Notes" means, collectively, the Revolving Notes, the Term Notes and the Swing Line Note. "Obligations" means the obligations, liabilities and Indebtedness of the Borrower with respect to (i) the principal and interest on the Loans as evidenced by the Notes, (ii) the Reimbursement Obligations and otherwise in respect of the Letters of Credit, (iii) all liabilities of Borrower to any Lender or an affiliate of a Lender which arise under a Swap Agreement, and (iii) the payment and performance of all other obligations, liabilities and Indebtedness of the Borrower to the Lenders, the Agent or NMS hereunder, under any one or more of the other Loan Documents or with respect to the Loans. "Operating Documents" means with respect to any corporation, limited liability company, partnership, limited partnership, limited liability partnership or other legally authorized incorporated or unincorporated entity, the bylaws, operating agreement, partnership agreement or limited partnership agreement of such entity. 23 28 "Option Agreement" means that certain Stock Agreement dated as of May 6, 1998 between the Borrower and Salton/Maxim. "Organizational Documents" means with respect to any corporation, limited liability company, partnership, limited partnership, limited liability partnership or other legally authorized incorporated or unincorporated entity, the articles of incorporation, certificate of incorporation, articles of organization or certificate of limited partnership of such entity. "Outstandings" means, collectively, at any date, the Letter of Credit Outstandings, the Revolving Credit Outstandings, the Swing Line Outstandings and the Term Loan Outstandings on such date. "Participation" means, with respect to any Lender (other than the Issuing Bank) and a Letter of Credit, the extension of credit represented by the participation of such Lender hereunder in the liability of the Issuing Bank in respect of a Letter of Credit issued by the Issuing Bank in accordance with the terms hereof. "PBGC" means the Pension Benefit Guaranty Corporation and any successor thereto. "Pension Plan" means any employee pension benefit plan within the meaning of Section 3(2) of ERISA, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of the Code and which (i) is maintained for employees of the Borrower or any of its ERISA Affiliates or is assumed by the Borrower or any of its ERISA Affiliates or (ii) has at any time with the last six years been maintained for the employees of the Borrower or any current or former ERISA Affiliate. "Permanent Subordinated Notes" means the permanent senior subordinated notes in an aggregate principal amount of up to $125,000,000 to be issued by the Borrower to replace the Subordinated Bridge Debt. "Permanent Junior Financing" means the permanent financing entered into in replacement of the Subordinated Bridge Debt through the issuance of the Permanent Subordinated Notes and the Company Securities. "Permanent Junior Financing Documents" means the Registration Statement, the Indenture and all related documents entered into connection with the transactions contemplated thereby. "Permitted Acquisition" means (a) the HPG Acquisition and (b) each other Acquisition effected with the consent and approval of the board of directors or other applicable governing body of the Person being acquired, and with the duly obtained 24 29 approval of such shareholders or other holders of equity interest as such Person may be required to obtain, so long as (i) immediately prior to and immediately after the consummation of such Acquisition, no Default or Event of Default has occurred and is continuing, (ii) with respect to an Acquisition where the Cost of Acquisition exceeds $5,000,000, substantially all of the sales and operating profits generated by such Person (or assets) so acquired or invested are derived from a line or lines of business that are part of the Core Business, (iii) pro forma historical financial statements as of the end of the most recent fiscal quarter for the trailing twelve month period giving effect to such Acquisition are delivered to the Agent not less than five (5) Business Days prior to the consummation of such Acquisition, together with a certificate of an Authorized Representative demonstrating compliance with Section 10.23 hereof after giving effect to such Acquisition, (iv) the aggregate Cost of Acquisition (excluding the value of any capital stock of the Borrower given as part of the Cost of Acquisition) with respect to any Acquisitions consummated during any Fiscal Year shall not exceed $20,000,000; and (v) the aggregate Cost of Acquisition which consists in whole or in part of the value of any capital stock of the Borrower (including without limitation when combined with cash, debt or the assumption of indebtedness for any specific Acquisition) with respect to any Acquisition consummated after the Closing Date shall not exceed $10,000,000. "Permitted Indebtedness" has the meaning given to such term in Section 10.1 hereof. "Permitted Liens" has the meaning given to such term in Section 10.2 hereof. "Person" means an individual, partnership, corporation, trust, unincorporated organization, association, joint venture or a government or agency or political subdivision thereof. "Pledged Stock" means (i) all of the capital stock or partnership interests and related rights and interests owned by the Borrower, directly or indirectly, of (A) each Domestic Subsidiary and Domestic Control Subsidiary and (B) Newtech Electronics Industries, Inc., PX Distributors, Inc., Break Room of Tennessee, Inc., Anasazi Partners L.P. and after July 31, 1999, the Salton/ Maxim Shares, if any, (ii) 65% of the outstanding voting stock and related interests and rights of each Direct Foreign Subsidiary or Direct Foreign Control Subsidiary (to the extent such amount is directly or indirectly owned by the Borrower) and (iii) 100% of the capital stock and related interests and rights directly or indirectly owned by the Borrower of any Foreign Subsidiary or Foreign Control Subsidiary to the extent such action would not result in any material adverse tax impact on the Borrower, in each case now or hereafter pledged by the Borrower and certain Subsidiaries pursuant to the Stock Pledge Agreement. "Pre-Refunded Municipal Obligations" means obligations of any state of the United States of America or of any municipal corporation or other public body organized under the laws of any such state which are rated, based on the escrow, in the highest 25 30 investment rating category by both S&P and Moody's and which have been irrevocably called for redemption and advance refunded through the deposit in escrow of Government Securities or other debt securities which are (i) not callable at the option of the issuer thereof prior to maturity, (ii) irrevocably pledged solely to the payment of all principal and interest on such obligations as the same becomes due, and (iii) in a principal amount and bear such rate or rates of interest as shall be sufficient to pay in full all principal of, interest, and premium, if any, on such obligations as the same becomes due as verified by a nationally recognized firm of certified public accountants. "Prime Rate" means the rate of interest per annum established from time to time by the Agent as its prime rate. The Prime Rate is not necessarily the best or the lowest rate of interest offered by the Agent. "Principal Office" means the office of the Agent at NationsBank, National Association, Independence Center, 15th Floor, NC1 001-15-04, Charlotte, North Carolina 28255, Attention: Agency Services, or such other office and address as the Agent may from time to time designate. "Registration Statement" means the Borrower's Registration Statement on Form S-3, registration no. 333-56069, relating to the issuance of the Company Securities. "Regulation D" means Regulation D of the Board as the same may be amended or supplemented from time to time. "Reimbursement Obligation" shall mean at any time, the obligation of the Borrower with respect to any Letter of Credit to reimburse the Issuing Bank and the Lenders to the extent of their respective Participations (including by the receipt by the Issuing Bank of proceeds of Loans pursuant to Section 3.2 hereof) for amounts theretofore paid by the Issuing Bank pursuant to a drawing under such Letter of Credit. "Related Business Party" means any supplier, vendor or customer, or any group of individual suppliers, vendors or customers, whose inability to perform under existing agreements or general business failure could reasonably be expected to have a Material Adverse Effect. "Repurchase Agreement" means a repurchase agreement entered into with any financial institution whose debt obligations or commercial paper are rated "A" by either of S&P or Moody's or "A-1" by S&P or "P-1" by Moody's. "Required Lenders" means, as of any date, Lenders on such date having Credit Exposures (as defined below) aggregating in excess of 50% of the aggregate Credit Exposures of all Lenders on such date. For purposes of the preceding sentence, the amount of the "Credit Exposure" of each Lender shall be equal to the aggregate principal 26 31 amount of the Revolving Loans owing to such Lender plus the aggregate unutilized amounts of such Lender's Revolving Credit Commitment (without regard to any Swing Line Outstandings) plus the amount of such Lender's Applicable Commitment Percentage of Letter of Credit Outstandings plus the amount of such Lender's Applicable Commitment Percentage of the Term Loan Outstandings; provided that, (i) if any Lender with a Revolving Credit Commitment shall have failed to pay to the Issuing Bank its Applicable Commitment Percentage of any drawing under any Letter of Credit resulting in an outstanding Reimbursement Obligation, such Lender's Credit Exposure attributable to Letters of Credit and Reimbursement Obligations shall be deemed to be held by the Issuing Bank for purposes of this definition and (ii) if any Lender with a Revolving Credit Commitment shall have failed to pay to NationsBank its Applicable Commitment Percentage of any Swing Line Loan, such Lender's Credit Exposure equal to its Applicable Commitment Percentage of all Swing Line Outstandings shall be deemed to be held by NationsBank for purposes of this definition. "Reserve Requirement" means, at any time, the maximum rate at which reserves (including, without limitation, any marginal, special, supplemental, or emergency reserves) are required to be maintained under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) by member banks of the Federal Reserve System against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which the Eurodollar Rate is to be determined, or (ii) any category of extensions of credit or other assets which include Eurodollar Rate Loans. The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Requirement. "Revolving Credit Commitment" means, with respect to each Lender, the obligation of such Lender to make Loans to the Borrower up to an aggregate principal amount at any one time outstanding equal to such Lender's Applicable Commitment Percentage of the Total Revolving Credit Commitment. "Revolving Credit Facility" means the facility described in Article III hereof providing for Loans to the Borrower by the Lenders in the aggregate principal amount of the Total Revolving Credit Commitment. "Revolving Credit Outstandings" means, as of any date of determination, the aggregate principal amount of all Revolving Loans then outstanding. "Revolving Credit Termination Date" means (i) the Stated Termination Date or (ii) such earlier date of termination of Lenders' obligations pursuant to Section 11.1 hereof upon the occurrence of an Event of Default, or (iii) such date as the Borrower may voluntarily and permanently terminate the Revolving Credit Facility by payment in full of 27 32 all Revolving Credit Outstandings, Swing Line Outstandings and Letter of Credit Outstandings and cancellation of all Letters of Credit, together with all accrued and unpaid interest thereon. "Revolving Loan" means any borrowing pursuant to an Advance under the Revolving Credit Facility in accordance with Article III. "Revolving Notes" means the promissory notes of the Borrower evidencing Revolving Loans executed and delivered to the Lenders substantially in the form of Exhibit F-4 hereto. "Salton/Maxim" means Salton/Maxim Housewares, Inc., a Delaware corporation. "Salton/Maxim Shares" means the shares of capital stock of Salton/Maxim owned by the Borrower. "Security Agreement" means, collectively (or individually as the context may indicate), (i) the Security Agreement dated as of the date hereof, by the Borrower and the Guarantors to the Agent and (ii) any additional Security Agreement delivered to the Agent (whether of even date herewith or delivered after the Closing Date pursuant to Article VI or Section 9.21 hereof and whether executed individually or jointly and severally with other Subsidiaries), each in the form of Exhibit H hereto and each as hereafter amended, supplemented or replaced from time to time. "Security Instruments" means, collectively, the Security Agreement, the Intellectual Property Security Agreement, the Stock Pledge Agreement, the Mortgage (when and if required hereunder), the Collateral Assignments of Contract Rights and all other agreements, instruments and other documents, whether now existing or hereafter in effect, pursuant to which the Borrower, or any Credit Party, shall grant or convey to the Agent or the Lenders a Lien in property as security for all or any portion of the Obligations, as any of them may be amended, modified or supplemented from time to time. "Segment" means a portion of a Term Loan (or all thereof) with respect to which a particular interest rate is (or is proposed to be) applicable. "Seller" means The Black & Decker Corporation, a Maryland corporation. "Solvent" means, when used with respect to any Person, that at the time of determination: (ii) the fair value of its assets (both at fair valuation and at present fair saleable value on an orderly basis) is in excess of the total amount of its liabilities, including Contingent Obligations; and 28 33 (iii) it is then able and expects to be able to pay its debts as they mature; and (iv) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. "Special Purpose Subsidiary" means a wholly-owned Subsidiary of the Borrower organized for the sole purpose of accomplishing a Year End Domestic Receivables Transaction and which engages in no other business, the proper name of which shall be furnished to the Agent promptly following its organization. "Stated Termination Date" means June 26, 2003. "Stock Offering" means the issuance and sale to the public of the Company Securities resulting in net proceeds to the Borrower of at least $100,000,000. "Stock Pledge Agreement" means, collectively (or individually as the context may indicate), (i) that certain Stock Pledge Agreement dated as of the date hereof between the Borrower, certain Guarantors and the Agent for the benefit of the Lenders and (ii) any additional Stock Pledge Agreement delivered to the Agent (whether of even date herewith or delivered after the Closing Date pursuant to Article VI or Section 9.21 hereof and whether executed individually or jointly and severally with other Subsidiaries), substantially in the form attached hereto as Exhibit G hereto, as each such Stock Pledge Agreement may be amended, supplemented or replaced from time to time. "Subordinated Bridge Debt" means the subordinated bridge indebtedness incurred pursuant to the terms of the Bridge Loan Agreement in an aggregate original principal amount not in excess of $185,000,000, together with all other Indebtedness into which such Subordinated Bridge Debt is convertible or exchangeable. "Subordinated Bridge Notes" means the subordinated notes. "Subsidiary" means (a) any corporation in which more than 50% of its outstanding voting stock is owned directly or indirectly by the Borrower and/or by one or more of its Subsidiaries or (b) in the case of a Person other than a corporation, any Person with respect to which the Borrower or any Subsidiary, directly or indirectly, is entitled to more than 50% of the profits of such Person. "Swap Agreement" means one or more agreements between the Borrower and any 29 34 Person with respect to Indebtedness evidenced by any or all of the Notes, on terms mutually acceptable to the Borrower and such Person, which agreements create Rate hedging Obligations. "Swing Line" means the revolving line of credit established by NationsBank in favor of the Borrower pursuant to Section 3.13 hereof. "Swing Line Loans" means loans made by NationsBank to the Borrower pursuant to Section 3.13 hereof. "Swing Line Note" means the promissory note of the Borrower evidencing Swing Line Loans executed and delivered to the NationsBank substantially in the form of Exhibit F-5 hereto. "Swing Line Outstandings" means, as of any date of determination, the aggregate principal amount of all Swing Line Loans then outstanding. "Term Loans" means each of the Term Loan A, Term Loan B and Term Loan C, as the case may be. "Term Loan A" means the loan made pursuant to the Term Loan A Facility. "Term Loan A Commitment" means, with respect to each Lender, the obligation of a Term Loan A Lender to make available the Term Loan A to the Borrower in a principal amount equal to such Term Loan A Lender's Applicable Commitment Percentage of the Total Term Loan A Commitment, as set forth in Exhibit A hereto. "Term Loan A Facility" means the facility described in Section 2.1 hereof providing for a Term Loan to the Borrower by the Lenders in the original principal amount of $90,000,000. "Term Loan A Lender" means each Lender indicated on Exhibit A hereto as having a Term Loan A Commitment. "Term Loan A Maturity Date" means June 26, 2003. "Term Loan A Termination Date" means (i) the Term Loan A Maturity Date or (ii) such earlier date of termination of a Term Loan A Lenders' obligations pursuant to Section 11.1 hereof upon the occurrence of an Event of Default or (iii) such date as the Borrower may voluntarily and permanently terminate the applicable Term Loan A Facility by payment in full of all Obligations incurred in connection with such Term Loan A. 30 35 "Term Loan B" means the loan made pursuant to the Term Loan B Facility. "Term Loan B Commitment" means, with respect to each Lender, the obligation of a Term Loan B Lender to make available the Term Loan B to the Borrower in a principal amount equal to such Term Loan B Lender's Applicable Commitment Percentage of the Total Term Loan B Commitment, as set forth in Exhibit A hereto. "Term Loan B Facility" means the facility described in Section 2.1 hereof providing for the Term Loan to the Borrower in the original principal amount of $75,000,000. "Term Loan B Lender" means each Lender indicated on Exhibit A hereto as having a Term Loan B Commitment. "Term Loan B Maturity Date" means June 26, 2004. "Term Loan B Termination Date" means (i) the Term Loan B Maturity Date or (ii) such earlier date of termination of a Term Loan B Lender's obligations pursuant to Section 11.1 hereof upon the occurrence of an Event of Default or (iii) such date as the Borrower may voluntarily and permanently terminate the applicable Term Loan B Facility by payment in full of all Obligations incurred in connection with such Term Loan B. "Term Loan C" means the loan made pursuant to the Term Loan C Facility. "Term Loan C Commitment" means, with respect to each Lender, the obligation of a Term Loan C Lender to make available the Term Loan C to the Borrower in a principal amount equal to such Term Loan C Lender's Applicable Commitment Percentage of the Total Term Loan C Commitment, as set forth in Exhibit A hereto. "Term Loan C Facility" means the facility described in Section 2.1 hereof providing for the Term Loan to the Borrower in the original principal amount of $20,000,000. "Term Loan C Lender" means each Lender indicated on Exhibit A hereto as having a Term Loan C Commitment. "Term Loan C Maturity Date" means June 26, 2004. "Term Loan C Termination Date" means (i) the Term Loan C Maturity Date or (ii) such earlier date of termination of a Term Loan C Lender's obligations pursuant to Section 11.1 hereof upon the occurrence of an Event of Default or (iii) such date as the Borrower may voluntarily and permanently terminate the applicable Term Loan C 31 36 Facility by payment in full of all Obligations incurred in connection with such Term Loan C. "Term Loan Facilities" means the Term Loan A Facility, the Term Loan B Facility and the Term Loan C Facility. "Term Loan Outstandings" means, as of any date of determination, the aggregate principal amount of the Term Loans then outstanding and all interest accrued thereon. "Term Loan Termination Date" means the date upon which each of the Term Loan A Termination Date, the Term Loan B Termination Date and the Term Loan C Termination Date shall have occurred. "Term Notes" means, collectively, the Term A Notes, the Term B Notes and the Term C Notes. "Term A Notes" means, collectively, the promissory notes of the Borrower evidencing Term Loan A executed and delivered to the Term Loan A Lenders as provided in Section 2.8 hereof substantially in the form of Exhibit F-1 hereto, with appropriate insertions as to amounts, dates and names of Term Loan A Lenders. "Term B Notes" means, collectively, the promissory notes of the Borrower evidencing Term Loan B executed and delivered to the Term Loan B Lenders as provided in Section 2.8 hereof substantially in the form of Exhibit F-2 hereto, with appropriate insertions as to amounts, dates and names of Term Loan B Lenders. "Term C Notes" means, collectively, the promissory notes of the Borrower evidencing Term Loan B executed and delivered to the Term Loan C Lenders as provided in Section 2.8 hereof substantially in the form of Exhibit F-3 hereto, with appropriate insertions as to amounts, dates and names of Term Loan C Lenders. "Termination Event" means: (i) a "Reportable Event" described in Section 4043 of ERISA and the regulations issued thereunder (unless the notice requirement has been waived by applicable regulation); or (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA or was deemed such under Section 4062(e) of ERISA; or (iii) the termination of a Pension Plan, the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination under Section 4041 of ERISA; or (iv) the institution of proceedings to terminate a Pension Plan by the PBGC; or (v) any other event or condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; or (vi) the partial or complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan; or (vii) the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA; or (viii) any event or 32 37 condition which results in the reorganization or insolvency of a Multiemployer Plan under Section 4241 or Section 4245 of ERISA, respectively; or (ix) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA; or (x) any event or condition with respect to any Employee Benefit Plan which is regulated by any Foreign Benefit Law that results in such Employee Benefit Plan's termination or the revocation of the Employee Benefit Plan's authority to operate under the applicable Foreign Benefit Law. "Total Letter of Credit Commitment" means an amount not to exceed $20,000,000. "Total Revolving Credit Commitment" means $160,000,000, such amount as reduced from time to time in accordance with Section 3.7 hereof. "Total Term Loan A Commitment" means a principal amount equal to $90,000,000. "Total Term Loan B Commitment" means a principal amount equal to $75,000,000. "Total Term Loan C Commitment" means a principal amount equal to $20,000,000. "Total Term Loan Commitment" means the sum of the Total Term Loan A Commitment, the Total Term Loan B Commitment and the Total Term Loan C Commitment. "Transaction Agreement" means that certain Transaction Agreement dated as of May 10, 1998, as amended from time to time with notice to and the consent of the Agent, by and among the Borrower and the Seller providing for the purchase of HPG by the Borrower. "Transaction Documents" means the Transaction Agreement and each other agreement, together with exhibits and attachments thereto, identified in the definition of "Transaction Documents" contained in Exhibit A to the Transaction Agreement. "Type" shall mean any type of Loan bearing interest at a particular rate (i.e., a Base Rate Loan, a Eurodollar Rate Loan or a Swing Line Loan). "Year End Domestic Receivables Transaction" means the transfer by the Borrower and/or its Domestic Subsidiaries to Windmere Holdings II, Inc., a Guarantor, ("Holdings") or a Special Purpose Subsidiary on or about December 31 of any year of 33 38 Domestic Receivables (as defined in the Security Agreement entered into by the Borrower or such Domestic Subsidiary), subject at all times to the existing and continuing Lien on such property in favor of the Agent for the benefit of the Lenders; provided that all of the following conditions are satisfied: (ii) all Domestic Receivables transferred to Holdings or the Special Purpose Subsidiary on or about any December 31 and retransferred to the appropriate transferor not later than the fifth Business Day following January 1; (iii) immediately prior to giving effect to any such transfer, no Default or Event of Default shall have occurred and be continuing; (iv) Holdings and the Special Purpose Subsidiary shall incur no Indebtedness or other liabilities for the payment of money, other than those in favor of the Agent and the Lenders, corporate franchise taxes and similar unsecured obligations necessarily incurred to maintain its existence, and the obligation to retransfer Domestic Receivables as of the fifth Business Day following each January 1 to the appropriate transferor; (v) immediately before giving effect to any such transfer on or about any December 31, Holdings or the Special Purpose Subsidiary shall not have become liable to any Person, and no Person shall have asserted any claim against Holdings or the Special Purpose Subsidiary (including without limitation the submission of any invoice) for the payment of any amount or the delivery of any property or interest therein other than routine invoices for the payment of operating costs in connection with liabilities expressly permitted under the immediately preceding clause (iii); (vi) the Agent for the benefit of the Lenders shall have a duly perfected first priority security interest in the Domestic Receivables in which Holdings or the Special Purpose Subsidiary may acquire any interest at any time, subject to no adverse claims of creditors of, or purchasers for value from, Holdings or the Special Purpose Subsidiary; (vii) the Special Purpose Subsidiary shall have been created in full compliance with the provisions of Section 9.21 hereof and there shall be then in effect an appropriate guaranty and an appropriate security agreement executed and delivered by and effective against the Special Purpose Subsidiary as contemplated in such Section; and (viii) the purpose of the Special Purpose Subsidiary shall be strictly limited, by charter or in such other manner as shall be acceptable to the Agent, to (A) the acquisition and retransfer or Domestic Receivables as contemplated in the 34 39 preceding clauses of this definition and (B) the incurring of obligations and the grant of a Lien to the Agent and the Lenders as required by Section 9.21 hereof, and the operations and activities of the Special Purpose Subsidiary shall at all times be strictly limited to those actions necessary to accomplish such purposes. "Year 2000 Compliant" means all computer applications (including those affected by information received from its suppliers and vendors) that are material to the Borrower's or any of its Subsidiaries' business and operations will on a timely basis be able to perform properly data-sensitive functions involving all dates on and after January 1, 2000. "Year 2000 Problem" means the risk that computer applications used by the Borrower and any of its Subsidiaries (including those affected by information received from its suppliers and vendors) that are material to the Borrower's or any of its Subsidiaries' business or operations may be unable to recognize and perform properly data-sensitive functions involving certain dates on and after January 1, 2000. I.2. Rules of Interpretation (a) All accounting terms not specifically defined herein shall have the meanings assigned to such terms and shall be interpreted in accordance with GAAP applied on a Consistent Basis; provided, however, that to the extent any term defined in this Article I refers to "Subsidiaries" and contains a calculation to be made in accordance with GAAP, the term "Subsidiaries" shall be deemed to include Control Subsidiaries. (b) Each term defined in Article 1 or 9 of the Florida Uniform Commercial Code shall have the meaning given therein unless otherwise defined herein, except to the extent that the Uniform Commercial Code of another jurisdiction is controlling, in which case such terms shall have the meaning given in the Uniform Commercial Code of the applicable jurisdiction. (c) The headings, subheadings and table of contents used herein or in any other Loan Document are solely for convenience of reference and shall not constitute a part of any such document or affect the meaning, construction or effect of any provision thereof. (d) Except as otherwise expressly provided, references herein to articles, sections, paragraphs, clauses, annexes, appendices, exhibits and schedules are references to articles, sections, paragraphs, clauses, annexes, appendices, exhibits and schedules in or to this Agreement. (e) All definitions set forth herein or in any other Loan Document shall apply to the singular as well as the plural form of such defined term, and all references to the 35 40 masculine gender shall include reference to the feminine or neuter gender, and vice versa, as the context may require. (f) When used herein or in any other Loan Document, words such as "hereunder", "hereto", "hereof" and "herein" and other words of like import shall, unless the context clearly indicates to the contrary, refer to the whole of the applicable document and not to any particular article, section, subsection, paragraph or clause thereof. (g) References to "including" means including without limiting the generality of any description preceding such term, and for purposes hereof the rule of ejusdem generis shall not be applicable to limit a general statement, followed by or referable to an enumeration of specific matters, to matters similar to those specifically mentioned. (h) All dates and times of day specified herein shall refer to such dates and times at Charlotte, North Carolina. (i) Each of the parties to the Loan Documents and their counsel have reviewed and revised, or requested (or had the opportunity to request) revisions to, the Loan Documents, and any rule of construction that ambiguities are to be resolved against the drafting party shall be inapplicable in the construing and interpretation of the Loan Documents and all exhibits, schedules and appendices thereto. (j) Any reference to a Lender in Article II when used herein with respect to Term Loan A, Term Loan B or Term Loan C shall mean those Lenders with a Term Loan A Commitment, a Term Loan B Commitment or a Term Loan C Commitment, respectively, and when used in Article III and IV with respect to a Revolving Loan shall mean those Lenders having a Revolving Credit Commitment. (k) Any reference to an officer of the Borrower or any other Person by reference to the title of such officer shall be deemed to refer to each other officer of such Person, however titled, exercising the same or substantially similar functions. (l) All references to any agreement or document as amended, modified or supplemented, or words of similar effect, shall mean such document or agreement, as the case may be, as amended, modified or supplemented from time to time only as and to the extent permitted therein and in the Loan Documents. 36 41 ARTICLE II The Term Loans II.1. Term Loans. Subject to the terms and conditions of this Agreement, each Lender with a Term Loan A Commitment, a Term Loan B Commitment and/or a Term Loan C Commitment, as the case may be, severally agrees to make (i) an Advance of the Term Loan A on the Closing Date in an amount equal to its Applicable Commitment Percentage of the Total Term Loan A Commitment, (ii) an Advance of the Term Loan B on the Closing Date in an amount equal to its Applicable Commitment Percentage of the Total Term Loan B Commitment and (iii) an Advance of the Term Loan C on the Closing Date in an amount equal to its Applicable Commitment Percentage of the Total Term Loan C Commitment, in each case, by wire transfer to the Agent. Such wire transfer shall be directed to the Agent at the Principal Office and shall be in the form of immediately available Dollars . The amount so received by the Agent shall, subject to the terms and conditions of this Agreement, be made available to the Borrower by delivery of the proceeds thereof to the Borrower's Account or otherwise as shall be directed by the Authorized Representative and reasonably acceptable to the Agent. Each Term Loan shall be available in a single draw in Dollars at Closing. The principal amount of each Segment of the Term Loans outstanding hereunder from time to time shall bear interest, at the Borrower's election, at an interest rate per annum equal to the Base Rate or the applicable Eurodollar Rate; provided, however, that (x) no Eurodollar Rate Segment shall have an Interest Period that extends beyond the Term Loan A Maturity Date or the Term Loan B Maturity Date, as the case may be, (y) each Eurodollar Rate Segment of each Term Loan shall be in the minimum amount of $5,000,000 and if greater, in an integral multiple of $1,000,000, and (z) each Eurodollar Rate Segment may be repaid only on the last day of the Interest Period with respect thereto unless such payment is accompanied by the additional payment, if any, required by Section 6.5 hereof. No amount of any Term Loan repaid or prepaid by the Borrower may be reborrowed hereunder, and no subsequent Advances of Term Loans shall be made by any Lender after the initial Advance. II.2. Payment of Principal. (a) The principal amount of Term Loan A shall be repaid by the Borrower on the dates and in the amounts (subject to the provisions of Section 2.5 and 2.6) hereof set forth below: 37 42
Date Amount ---- ------ March 31, 1999 $2,500,000 June 30, 1999 $2,500,000 September 30, 1999 $2,500,000 December 31, 1999 $2,500,000 March 31, 2000 $2,500,000 June 30, 2000 $2,500,000 September 30, 2000 $5,000,000 December 31, 2000 $5,000,000 March 31, 2001 $5,000,000 June 30, 2001 $5,000,000 September 30, 2001 $6,250,000 December 31, 2001 $6,250,000 March 31, 2002 $6,250,000 June 30, 2002 $6,250,000 September 30, 2002 $7,500,000 December 31, 2002 $7,500,000 March 31, 2003 $7,500,000 June 26, 2003 All remaining principal outstanding on Term Loan A
(b) The principal amount of Term Loan B shall be repaid by the Borrower in five consecutive annual installments of $750,000 on June 26 of each year commencing with June 26, 1999 (subject to Sections 2.5 and 2.6 hereof) with a final sixth payment due on June 26, 2004 in the amount of all remaining principal outstanding on Term Loan B. (c) The principal amount of Term Loan C shall be repaid by the Borrower in five consecutive annual installments of $200,000 on June 26 of each year commencing with June 26, 1999 (subject to Sections 2.5 and 2.6 hereof) with a final sixth payment due on June 26, 2004 in the amount of all remaining principal outstanding on Term Loan C. (d) Notwithstanding the foregoing, the entire amount of Term Loan Outstandings shall be due and payable by the Borrower in full on the Term Loan A Termination Date or Term Loan B Termination Date or Term Loan C Termination Date, as applicable. II.3. Payment of Interest. The Borrower shall pay interest on the outstanding and unpaid principal amount of each Segment of each Term Loan commencing on the date of determination of the interest rate applicable to such Segment until such Segment shall be paid at the applicable Base Rate or Eurodollar Rate, as the case may be, as designated by the Borrower in the applicable Interest Rate Selection Notice or as otherwise provided hereunder. Interest relating to each Segment shall be computed on the basis of a year of 360 days and calculated for actual days elapsed. Interest on each Segment shall be paid on the earlier of (a) in the case of any Base Rate Segment, quarterly in arrears on the last Business Day of each March, June, September and December, commencing on September 30, 1998, until the applicable Term Loan A Maturity Date or Term Loan B Maturity Date, as applicable, or, if earlier, the applicable Term Loan A Termination Date or Term Loan B Termination Date or Term Loan C Termination Date, as applicable, on which date the entire principal amount of and all accrued interest on the Term Loans shall be paid in full, (b) in the case of any Eurodollar Rate Segment, on the last day of the applicable Interest Period for such Segment and if such Interest Period extends for more than three (3) months, at intervals of three (3) months after the first day of such Interest Period, and (c) upon payment in full of such Term Loan; provided, however, that if any Event of Default shall have occurred and be continuing, all amounts outstanding hereunder shall bear interest at 38 43 the Default Rate until such Event of Default is waived. II.4. Manner of Payment. (a) Each payment of principal (including any prepayment) and payment of interest and fees, and any other amount required to be paid to the Lenders with respect to the Term Loans, shall be made to the Agent at the Principal Office for the account of each Lender in Dollars in immediately available funds on or before 3:00 P.M. on the date such payment is due. Without prejudice to any of the other obligations set forth herein by the Borrower, the Agent shall, upon the request of the Borrower, debit the amount of such payment from any one or more ordinary deposit accounts of the Borrower with the Agent. The Borrower shall attempt to give the Agent telefacsimile notice of any intended payment of principal or interest prior to 12:00 Noon on the date of such payment. (b) The Agent shall deem any payment made by or on behalf of the Borrower that is not made both in Dollars in immediately available funds and prior to 3:00 P.M. on the date such payment is to be made to be a non-conforming payment. Any such non-conforming payment shall not be deemed to be received by the Agent until the later of (i) the time such funds become available funds and (ii) the next Business Day. Any non-conforming payment may, at the option of the Agent, constitute or become a Default or Event of Default. Interest shall continue to accrue on any principal as to which a non-conforming payment is made until the later of (i) the date such funds become available funds or (ii) the next Business Day at the Default Rate, from the date such amount was due and payable. (c) In the event that any payment hereunder or under the Term Notes becomes due and payable on a day other than a Business Day, then such due date shall be extended to the next succeeding Business Day unless provided otherwise under the definition of "Interest Period"; provided, however, that interest shall continue to accrue during the period of any such extension; and provided further, however, that in no event shall any such due date be extended beyond the Term Loan A Termination Date or Term Loan B Termination Date or Term Loan C Termination Date, as the case may be. II.5. Optional Prepayments. The Borrower may prepay the Term Loans, in whole or in part from time to time on any Business Day, without penalty or premium, upon not less than five (5) Business Days' prior written notice (effective upon receipt) to the Agent, which notice shall be irrevocable. Any partial prepayment of the Term Loans shall be applied pro rata among Term Loan A Outstanding, Term Loan B Outstandings and Term Loan C Outstandings to principal installments equally across all maturities thereof for the pro rata benefit of the Lenders. Any prepayment, whether a Base Rate Segment or a Eurodollar Rate Segment, shall be made at a prepayment price equal to (i) the amount of principal to be prepaid, plus (ii) all accrued and unpaid interest on the amount so prepaid, to the date of prepayment. All prepayments under this Section 2.5 hereof shall be made in the minimum principal amount of $1,000,000 or any integral 39 44 multiple of $1,000,000 in excess thereof (or in the entire remaining principal balance of the Term Loans). No such prepayment shall result in the payment of any Eurodollar Rate Segment other than on the last day of the Interest Period of such Segment unless such prepayment is accompanied by amounts due, if any, under Section 6.5 hereof. No payment under this Section 2.5 hereof shall reduce or excuse any payment required under Section 2.6 hereof. II.6. Mandatory Prepayments. In addition to the required payments of principal of the Term Loans set forth in Section 2.2 hereof and any optional payments of principal of the Loans effected under Section 2.5 hereof, the Borrower shall make the following required prepayments of the Term Loan Facilities and, to the extent indicated below, the Revolving Credit Facility, each such payment to be made to the Agent for the benefit of the Lenders within the time period specified below: (a) Equity Offerings. The Borrower shall make, or shall cause each applicable Subsidiary to make, a prepayment of the Term Loan Facilities from the Net Proceeds of any Equity Offering in an amount equal to (i) prior to payment in full of all Term Loan Outstandings, seventy-five percent (75%) of such Net Proceeds and (ii) after payment in full of all Term Loan Outstandings, fifty percent (50%) of such Net Proceeds. Each such prepayment shall be made within fifteen (15) Business Days of receipt of such Net Proceeds and upon not less than three (3) Business' Days written notice to the Agent, and shall include within one (1) Business Day of repayment a certificate of an Authorized Representative setting forth in reasonable detail the calculations utilized in computing the amount of the Net Proceeds. (b) Debt Offerings. The Borrower shall make, or shall cause each applicable Subsidiary to make, a prepayment of the Term Loan Facilities from the Net Proceeds of any Debt Offering in an amount equal to one hundred percent (100%) of such Net Proceeds. Each such prepayment shall be made within fifteen (15) Business Days of receipt of such Net Proceeds and upon not less than three (3) Business' Days written notice to the Agent, and shall include within one (1) Business Day of repayment a certificate of an Authorized Representative setting forth in reasonable detail the calculations utilized in computing the amount of the Net Proceeds. (c) Asset Dispositions. The Borrower shall make, or shall cause each applicable Subsidiary to make, a prepayment of the Term Loan Facilities from the Net Proceeds of any Asset Disposition in an amount equal to (A) one hundred percent (100%) of such Net Proceeds to the extent any portion of the Subordinated Bridge Debt remains outstanding and (B) ninety percent (90%) of such Net Proceeds to the extent the Subordinated Bridge Debt has been fully retired, repaid or replaced by the Permanent Junior Financing; provided, however that with respect to any disposition of the Salton/Maxim Shares, one hundred percent (100%) of such Net Proceeds shall be applied (i) 50% pro rata to all Term Loan A Outstandings, Term Loan B Outstandings and Term Loan C Outstandings and (i) 50% to repay any Revolving Credit Outstandings or, if none, 40 45 to repay any foreign or domestic Indebtedness of the Borrower other than the Bridge Notes or the Permanent Subordinated Notes. Each such prepayment shall be made within fifteen (15) Business Days of receipt of such Net Proceeds and upon not less than three (3) Business' Days written notice to the Agent, which notice shall include a certificate of an Authorized Representative setting forth in reasonable detail the calculations utilized in computing the amount of the Net Proceeds. (d) Excess Cash Flow. Commencing with the Fiscal Year ending December 31, 1999, the Borrower shall make an annual prepayment of the Term Loan Facilities equal to fifty percent (50%) of Consolidated Excess Cash Flow for such Fiscal Year and each Fiscal Year thereafter. Each such prepayment shall be made within five (5) Business Days of delivery to the Agent of the certificate described in Section 9.1(a)(i) hereof. (e) Insurance or Condemnation Proceeds. The Borrower shall make, or shall cause each applicable Subsidiary to make, a prepayment of the Term Loan Facilities in an amount equal to one hundred percent (100%) of the proceeds of any Condemnation Award or Insurance Award; provided, however, that to the extent no Default or Event of Default has occurred and is continuing, no such prepayment shall be required with respect to proceeds which are reinvested by the Borrower in repair of any damaged property or in replacement property of approximately equivalent or greater value and utility as the property subject to such taking or loss withing 60 days following receipt of such proceeds. Each such prepayment shall be made (A) within fifteen (15) Business Days of receipt of such proceeds and upon not less than three (3) Business' Days written notice to the Agent unless the Borrower shall have delivered to the Agent a certificate setting forth the amount of such proceeds, confirming the intent of the Borrower to reinvest such proceeds as provided above and containing a detailed description of the plan of reinvestment with respect to such proceeds or (B) upon expiration of 60 days following receipt of such proceeds if a certificate referred to in clause (A) above has been received by the Agent but such reinvestment has not been consummated within the 60 day reinvestment period referred to above. (f) Proceeds of Permanent Junior Financing. The Borrower shall make a prepayment of Term Loan C, up to the amount of Term Loan C Outstandings, in an amount equal to 100% of the proceeds of the Permanent Junior Financing remaining after repayment of the Bridge Notes. All mandatory prepayments made pursuant to this Section 2.6 (other than 2.6(f) hereof) hereof shall be applied first to repay the Term Loans on a pro rata basis (that is, based on the ratio each outstanding Term Loan bears to Term Loan Outstandings) until the Term Loan Outstandings have been paid in full and then to reduce Revolving Credit Outstandings, if any. Each mandatory prepayment in an amount less than the Term Loan Outstandings shall be applied pro rata to each remaining installment of Term Loan A, Term Loan B and Term Loan C (or if no 41 46 Term Loan A Outstandings then exist, pro rata to each remaining installment of Term Loan B and Term Loan C, or if no Term Loan A Outstandings or Term Loan B Outstandings then exist, pro rata to each remaining installment of Term Loan C only); provided, however, that any holder of Term Loan B or Term Loan C shall have the right by the giving of at least one day's prior written notice to the Agent to refuse prepayment of all or a portion of the Term Loan B or Term Loan C held by it if, after giving effect to such partial prepayment, a portion of Term Loan A will remain outstanding, and any prepayment so refused shall be applied to prepay any remaining portion of Term Loan A. If the amount of Term Loan B or Term Loan C as to which prepayment is refused is in excess of the remaining Term Loan A Outstandings, then the Agent shall pro rate the amount of Term Loan B or Term Loan C which can be paid among holders of Term Loan A based upon the proportion that the principal amount of Term Loan A held by each Lender bears to the Total Term Loan Outstandings. The holders of Term Loan B and Term Loan C shall have no right to refuse prepayment of all or any portion of Term Loan B or Term Loan C, as applicable, to the extent that any amount so refused exceeds the amount of Term Loan A Outstandings. Any prepayment of an Eurodollar Rate Loan pursuant to this Section 2.6 hereof other than on the last day of an Interest Period shall be accompanied by the additional payment, if any, required by Section 6.5 hereof. II.7. Term Notes. The portion of each of the Term Loan A, Term Loan B and Term Loan C made by each Lender shall be evidenced by a Term A Note, Term B Note and the Term C Note, respectively, payable to the order of such Lender in the respective amounts of its Term Loan A Commitment, Term Loan B Commitment and Term Loan C Commitment, which Term Notes shall be dated the Closing Date or a later date pursuant to an Assignment and Acceptance and shall be duly completed, executed and delivered by the Borrower. II.8. Interest Periods. Each Term Loan shall be, at the option of the Borrower specified in an Interest Rate Selection Notice, comprised of either Eurodollar Rate Segments or Base Rate Segments. Eurodollar Rate Segments and Base Rate Segments may be outstanding at the same time, provided, however, there shall not be outstanding at any one time Eurodollar Rate Loans (including Revolving Loans) having more than twelve (12) different Interest Periods. If the Agent does not receive an Interest Rate Selection Notice giving notice of election of the duration of an Interest Period or of Conversion of any Segment to or Continuation of a Segment as a Eurodollar Rate Segment by the time prescribed by Section 2.9 hereof, the Borrower shall be deemed to have elected to Convert such Segment to (or Continue such Segment as) a Base Rate Segment until the Borrower notifies the Agent in accordance with Section 2.9 hereof. II.9. Conversions and Elections of Subsequent Interest Periods. Subject to the limitations set forth below and in Article VI, the Borrower may: (a) upon delivery (effective upon receipt) of a properly completed Interest Rate Selection Notice to the Agent on or before 11:00 A.M. on any Business Day, Convert any Eurodollar Rate Segment to a Base Rate Segment on the last day of the Interest Period for such Eurodollar Rate Segment; and 42 47 (b) provided that no Default or Event of Default shall have occurred and be continuing, upon delivery (effective upon receipt) of a properly completed Interest Rate Selection Notice to the Agent on or before 11:00 A.M. three (3) Business Days' prior to the date of such Conversion: (i) elect a subsequent Interest Period for any Eurodollar Rate Segment to begin on the last day of the then current Interest Period for such Eurodollar Rate Segment; and (ii) Convert any Base Rate Segment to a Eurodollar Rate Segment on any Business Day. Each Conversion pursuant to this Section 2.9 hereof shall be subject to the limitations on Eurodollar Rate Loans set forth in the definition of "Interest Period" herein and in Sections 2.1, 2.8 and Article VI hereof. The Agent shall give written notice to each Lender of such notice of Conversion prior to 1:00 P.M. on the day such notice of election or Conversion is received. All such Continuations or Conversions of Term Loans shall be effected pro rata based on the Applicable Commitment Percentages of the Lenders with respect to such Term Loan. II.10. Pro Rata Payments. Except as otherwise provided herein, (a) each payment on account of the principal of and interest on each Term Loan shall be made to the Agent for the account of the Lenders pro rata based on their Applicable Commitment Percentages of such Term Loan, (b) all payments to be made by the Borrower for the account of each of the Lenders on account of principal, interest and fees, shall be made without diminution, set-off, recoupment or counterclaim, and (c) the Agent will promptly distribute to the Lenders in immediately available funds payments received in fully collected, immediately available funds from the Borrower. II.11. Use of Proceeds. The proceeds of the Term Loans made pursuant to the Term Loan Facilities hereunder shall be used by the Borrower (a) to fund a portion of the purchase price paid in connection with the HPG Acquisition, (b) to refinance certain existing Indebtedness of the Borrower, (c) to pay certain costs associated with the closing of the Asheboro Facility, which costs paid by the Borrower shall not exceed $10,000,000, and (d) to pay certain fees and expenses incurred in connection with the HPG Acquisition, which fees and expenses shall not exceed $21,000,000. 43 48 ARTICLE III The Revolving Credit Facility III.1. Revolving Loans. (a) Commitment. Subject to the terms and conditions of this Agreement, each Lender severally agrees to make Advances to the Borrower under the Revolving Credit Facility from time to time from the Closing Date until the Revolving Credit Termination Date on a pro rata basis as to the total borrowing requested by the Borrower on any day determined by such Lender's Applicable Commitment Percentage of the Total Revolving Credit Commitment up to but not exceeding the Revolving Credit Commitment of such Lender, provided, however, that the Lenders will not be required and shall have no obligation to make any such Advance (i) so long as a Default or an Event of Default has occurred and is continuing or (ii) if the Agent has accelerated the maturity of any of the Revolving Notes as a result of an Event of Default; provided further, however, that immediately after giving effect to each such Advance, the principal amount of Revolving Credit Outstandings plus Swing Line Outstandings plus Letter of Credit Outstandings shall not exceed either (x) the Total Revolving Credit Commitment or (y) the Borrowing Base. Within such limits, the Borrower may borrow, repay and reborrow under the Revolving Credit Facility on a Business Day from the Closing Date until, but (as to borrowings and reborrowings) not including, the Revolving Credit Termination Date; provided, however, that (y) no Revolving Loan that is a Eurodollar Rate Loan shall be made which has an Interest Period that extends beyond the Stated Termination Date and (z) each Revolving Loan that is a Eurodollar Rate Loan may be repaid only on the last day of the Interest Period with respect thereto unless such payment is accompanied by the additional payment, if any, required by Section 6.5 hereof. (b) Amounts. Except as otherwise permitted by the Lenders from time to time, the aggregate unpaid principal amount of the Revolving Credit Outstandings plus Swing Line Outstandings plus Letter of Credit Outstandings shall not exceed at any time either (i) the Total Revolving Credit Commitment or (ii) the Borrowing Base and, in the event there shall be outstanding any such excess, the Borrower shall immediately make such payments and prepayments as shall be necessary to comply with this restriction. Each Revolving Loan hereunder, other than Base Rate Refunding Loans, and each Conversion under Section 3.8, hereof shall be in an amount of at least $5,000,000, and, if greater than $5,000,000, an integral multiple of $1,000,000. (c) Advances. (i) An Authorized Representative shall give the Agent (1) at least three (3) Business Days' irrevocable written notice by telefacsimile transmission of a Borrowing Notice or Interest Rate Selection Notice (as applicable) with 44 49 appropriate insertions, effective upon receipt, of each Revolving Loan that is a Eurodollar Rate Loan (whether representing an additional borrowing hereunder or the conversion of a borrowing hereunder from Base Rate Loans to Eurodollar Rate Loans) prior to 10:30 A.M. and (2) irrevocable written notice by telefacsimile transmission of a Borrowing Notice or Interest Rate Selection Notice (as applicable) with appropriate insertions, effective upon receipt, of each Revolving Loan (other than Base Rate Refunding Loans to the extent the same are effected without notice pursuant to Section 3.1(c)(iv)) hereof that is a Base Rate Loan (whether representing an additional borrowing hereunder or the Conversion of borrowing hereunder from Eurodollar Rate Loans to Base Rate Loans) prior to 10:30 A.M. on the day of such proposed Loan. Each such notice shall specify the amount of the borrowing, the type of Revolving Loan (Base Rate or Eurodollar Rate), the date of borrowing and, if a Eurodollar Rate Loan, the Interest Period to be used in the computation of interest. Notice of receipt of such Borrowing Notice or Interest Rate Selection Notice, as the case may be, together with the amount of each Lender's portion of an Advance requested thereunder, shall be provided by the Agent to each Lender by telefacsimile transmission with reasonable promptness, but (provided the Agent shall have received such notice by 10:30 A.M.) not later than 1:00 P.M. on the same day as the Agent's receipt of such notice. (ii) Not later than 2:00 P.M. on the date specified for each borrowing under this Section 3.1 hereof, each Lender shall, pursuant to the terms and subject to the conditions of this Agreement, make the amount of the Advance or Advances to be made by it on such day available by wire transfer to the Agent in the amount of its pro rata share, determined according to such Lender's Applicable Commitment Percentage of the Revolving Loan or Revolving Loans to be made on such day. Such wire transfer shall be directed to the Agent at the Principal Office and shall be in the form of Dollars constituting immediately available funds. The amount so received by the Agent shall, subject to the terms and conditions of this Agreement, be made available to the Borrower by delivery of the proceeds thereof to the Borrower's Account or otherwise as shall be directed in the applicable Borrowing Notice by the Authorized Representative and reasonably acceptable to the Agent. (iii) The Borrower shall have the option to elect the duration of the initial and any subsequent Interest Periods and to Convert the Revolving Loans in accordance with Section 3.8 hereof. Eurodollar Rate Loans and Base Rate Loans may be outstanding at the same time, provided, however, there shall not be outstanding at any one time Eurodollar Rate Loans (including Eurodollar Rate Segments) having more than twelve (12) different Interest Periods. If the Agent does not receive a Borrowing Notice or an Interest Rate Selection Notice giving notice of election of the duration of an Interest Period or of Conversion of any 45 50 Loan to or Continuation of a Loan as a Eurodollar Rate Loan by the time prescribed by Section 3.1(c) or 3.8 hereof, the Borrower shall be deemed to have elected to Convert such Loan to (or Continue such Loan as) a Base Rate Loan until the Borrower notifies the Agent in accordance with Section 3.8 hereof. (iv) Notwithstanding the foregoing, if a drawing is made under any Letter of Credit, such drawing is honored by the Issuing Bank prior to the Stated Termination Date, and the Borrower shall not immediately fully reimburse the Issuing Bank in respect of such drawing, (A) provided that the conditions to making a Revolving Loan as herein provided shall then be satisfied, the Reimbursement Obligation arising from such drawing shall be paid to the Issuing Bank by the Agent without the requirement of notice to or from the Borrower from immediately available funds which shall be advanced as a Base Rate Refunding Loan by each Lender under the Revolving Credit Facility in an amount equal to such Lender's Applicable Commitment Percentage of such Reimbursement Obligation, and (B) if the conditions to making a Revolving Loan as herein provided shall not then be satisfied, each of the Lenders shall fund by payment to the Agent (for the benefit of the Issuing Bank) in immediately available funds the purchase from the Issuing Bank of their respective Participations in the related Reimbursement Obligation based on their respective Applicable Commitment Percentages of the Total Letter of Credit Commitment. If a drawing is presented under any Letter of Credit in accordance with the terms thereof and the Borrower shall not immediately reimburse the Issuing Bank in respect thereof, then notice of such drawing or payment shall be provided promptly by the Issuing Bank to the Agent and the Agent shall provide notice to each Lender by telephone or telefacsimile transmission. If notice to the Lenders of a drawing under any Letter of Credit is given by the Agent at or before 12:00 noon on any Business Day, each Lender shall, pursuant to the conditions specified in this Section 3.1(c)(iv) hereof, either make a Base Rate Refunding Loan or fund the purchase of its Participation in the amount of such Lender's Applicable Commitment Percentage of such drawing or payment and shall pay such amount to the Agent for the account of the Issuing Bank at the Principal Office in Dollars and in immediately available funds before 2:30 P.M. on the same Business Day. If notice to the Lenders of a drawing under a Letter of Credit is given by the Agent after 12:00 noon on any Business Day, each Lender shall, pursuant to the conditions specified in this Section 3.1(c)(iv) hereof, either make a Base Rate Refunding Loan or fund the purchase of its Participation in the amount of such Lender's Applicable Commitment Percentage of such drawing or payment and shall pay such amount to the Agent for the account of the Issuing Bank at the Principal Office in Dollars and in immediately available funds before 12:00 noon on the next following Business Day. Any such Base Rate Refunding Loan shall be advanced as, and shall continue as, a Base Rate Loan unless and until the Borrower Converts such Base Rate Loan in accordance with the terms of Section 3.8 hereof. 46 51 III.2. Payment of Interest. (a) The Borrower shall pay interest to the Agent for the account of each Lender on the outstanding and unpaid principal amount of each Revolving Loan made by such Lender for the period commencing on the date of such Revolving Loan until such Revolving Loan shall be paid, continued or converted, as the case may be, at the then applicable Base Rate for Base Rate Loans or applicable Eurodollar Rate for Eurodollar Rate Loans, as designated by the Authorized Representative pursuant to Section 3.1 hereof; provided, however, that if any Event of Default shall have occurred and be continuing, all amounts outstanding hereunder shall bear interest thereafter at the Default Rate until such Event of Default is waived. (b) Interest on each Revolving Loan shall be computed on the basis of a year of 360 days and calculated in each case for the actual number of days elapsed. Interest on each Revolving Loan shall be paid (i) quarterly in arrears on the last Business Day of each September, December, March and June, commencing September 30, 1998 for each Base Rate Loan, (ii) on the last day of the applicable Interest Period for each Eurodollar Rate Loan and, if such Interest Period extends for more than three (3) months, at intervals of three (3) months after the first day of such Interest Period, and (iii) upon payment in full of the principal amount of such Revolving Loan. III.3. Payment of Principal. The principal amount of each Revolving Loan shall be due and payable to the Agent for the benefit of each Lender in full on the Revolving Credit Termination Date, or earlier as specifically provided herein. The principal amount of any Base Rate Loan may be prepaid in whole or in part at any time. The principal amount of any Eurodollar Rate Loan may be prepaid only at the end of the applicable Interest Period unless the Borrower shall pay to the Agent for the account of the Lenders the additional amount, if any, required under Section 6.5 hereof. All prepayments of Revolving Loans made by the Borrower shall be in the amount of $5,000,000 or such greater amount which is an integral multiple of $1,000,000, or the amount equal to all Revolving Credit Outstandings, or such other amount as necessary to comply with Section 3.1(b) or Section 3.7 hereof. III.4. Manner of Payment. (a) Each payment of principal (including any prepayment) and payment of interest and fees, and any other amount required to be paid to the Lenders with respect to the Revolving Loans, shall be made to the Agent at the Principal Office, for the account of each Lender, in Dollars and in immediately available funds, without setoff, deduction, or counterclaim before 12:30 P.M. on the date such payment is due. The Agent may, but shall not be obligated to, debit the amount of any such payment which is not made by such time to any ordinary deposit account, if any, of the Borrower with the Agent. 47 52 (b) The Agent shall deem any payment made by or on behalf of the Borrower hereunder that is not made both in Dollars and in immediately available funds and prior to 12:30 P.M. to be a non-conforming payment. Any such payment shall not be deemed to be received by the Agent until the later of (i) the time such funds become available funds and (ii) the next Business Day. Any non-conforming payment may, at the election, of the Agent constitute or become a Default or Event of Default. Interest shall continue to accrue on any principal as to which a non-conforming payment is made until the later of (x) the date such funds become available funds or (y) the next Business Day at the Default Rate from the date such amount was due and payable. (c) In the event that any payment hereunder or under the Revolving Notes becomes due and payable on a day other than a Business Day, then such due date shall be extended to the next succeeding Business Day unless provided otherwise under clause (ii) of the definition of "Interest Period"; provided that interest shall continue to accrue during the period of any such extension and provided further, that in no event shall any such due date be extended beyond the Revolving Credit Termination Date. III.5. Revolving Notes and Swing Line Notes. (a) Revolving Loans made by each Lender shall be evidenced by the Revolving Note payable to the order of such Lender in the respective amount of its Applicable Commitment Percentage of the Revolving Credit Commitment, which Revolving Note shall be dated the Closing Date or a later date pursuant to an Assignment and Acceptance and shall be duly completed, executed and delivered by the Borrower. (b) Swing Line Loans made by NationsBank shall be evidenced by, and be repayable with interest in accordance with the terms of, the Swing Line Note dated the Closing Date and duly executed and delivered by the Borrower. III.6. Pro Rata Payments. Except as otherwise provided herein, (a) each payment on account of the principal of and interest on the Revolving Loans and the fees described in Section 3.10 hereof shall be made to the Agent for the account of the Lenders pro rata based on their Applicable Commitment Percentages, (b) all payments to be made by the Borrower for the account of each of the Lenders on account of principal, interest and fees, shall be made without diminution, setoff, recoupment or counterclaim, and (c) the Agent will promptly distribute to the Lenders in immediately available funds payments received in fully collected, immediately available funds from the Borrower. III.7. Optional Commitment Reductions. The Borrower shall, by notice from an Authorized Representative, have the right from time to time but not more frequently than once each calendar month, upon not less than three (3) Business Days' written notice to the Agent, effective upon receipt, to permanently reduce the Total Revolving Credit Commitment. The 48 53 Agent shall give each Lender, within one (1) Business Day of receipt of such notice, telefacsimile notice, or telephonic notice (confirmed in writing), of such reduction. Each such reduction shall be in the aggregate amount of $1,000,000 or such greater amount which is in an integral multiple of $1,000,000, or the entire remaining Total Revolving Credit Commitment, and shall permanently reduce the Total Revolving Credit Commitment. Each reduction of the Total Revolving Credit Commitment shall be accompanied by payment of the Revolving Loans to the extent that the principal amount of Revolving Credit Outstandings plus Swing Line Outstandings plus Letter of Credit Outstandings exceeds either (i) the Total Revolving Credit Commitment or (ii) the Borrowing Base, after giving effect to such reduction, together with accrued and unpaid interest on the amounts prepaid. No such reduction shall result in the payment of any Eurodollar Rate Loan other than on the last day of the Interest Period of such Eurodollar Rate Loan unless such prepayment is accompanied by amounts due, if any, under Section 6.5 hereof. III.8. Conversions and Elections of Subsequent Interest Periods. Subject to the limitations set forth below and in Article VI, the Borrower may: (a) upon delivery, effective upon receipt, of a properly completed Interest Rate Selection Notice to the Agent on or before 10:30 A.M. on any Business Day, Convert all or a part of Eurodollar Rate Loans to Base Rate Loans on the last day of the Interest Period for such Eurodollar Rate Loans; and (b) provided that no Default or Event of Default shall have occurred and be continuing upon delivery, effective upon receipt, of a properly completed Interest Rate Selection Notice to the Agent on or before 10:30 A.M. three (3) Business Days' prior to the date of such election or Conversion: (i) elect a subsequent Interest Period for all or a portion of Eurodollar Rate Loans to begin on the last day of the then current Interest Period for such Eurodollar Rate Loans; and (ii) Convert Base Rate Loans to Eurodollar Rate Loans on any Business Day. Each election and Conversion pursuant to this Section 3.8 hereof shall be subject to the limitations on Eurodollar Rate Loans set forth in the definition of "Interest Period" herein and in Sections 3.1, 3.3 and Article VI hereof. The Agent shall give written notice to each Lender of such notice of election or Conversion prior to 3:00 P.M. on the day such notice of election or Conversion is received. All such Continuations or Conversions of Loans shall be effected pro rata based on the Applicable Commitment Percentages of the Lenders. III.9. Increase and Decrease in Amounts. The amount of the Total Revolving Credit Commitment which shall be available to the Borrower as Advances shall be reduced by the 49 54 aggregate amount of Revolving Credit Outstandings, Letters of Credit Outstandings and Swing Line Outstandings. III.10. Unused Fee. For the period beginning on the Closing Date and ending on the Revolving Credit Termination Date, the Borrower agrees to pay to the Agent, for the pro rata benefit of the Lenders based on their Applicable Commitment Percentages, an unused fee equal to the product of (a) the average daily amount by which the Total Revolving Credit Commitment exceeds the sum of (i) Revolving Credit Outstandings (without giving effect to Swing Line Outstandings) plus (ii) Letter of Credit Outstandings multiplied by (b) .50% per annum. Such fees shall be due in arrears on the last Business Day of each September, December, March and June commencing September 30, 1998 to and on the Revolving Credit Termination Date. Notwithstanding the foregoing, so long as any Lender fails to make available any portion of its Revolving Credit Commitment when requested, such Lender shall not be entitled to receive payment of its pro rata share of such fee until such Lender shall make available such portion. Such fee shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. III.11. Deficiency Advances; Failure to Purchase Participations. No Lender shall be responsible for any default of any other Lender in respect to such other Lender's obligation to make any Revolving Loan hereunder or fund its purchase of any Participation hereunder nor shall the Revolving Credit Commitment of any Lender hereunder be increased as a result of such default of any other Lender. Without limiting the generality of the foregoing, in the event any Lender shall fail to advance funds to the Borrower as herein provided, the Agent may in its discretion, but shall not be obligated to, advance under the applicable Revolving Note in its favor as a Lender all or any portion of such amount or amounts (each, a "deficiency advance") and shall thereafter be entitled to payments of principal of and interest on such deficiency advance in the same manner and at the same interest rate or rates to which such other Lender would have been entitled had it made such Advance under its Revolving Note; provided that, (i) such defaulting Lender shall not be entitled to receive payments of principal, interest or fees with respect to such deficiency advance until such deficiency advance shall be paid by such Lender and (ii) upon payment to the Agent from such other Lender of the entire outstanding amount of each such deficiency advance, together with accrued and unpaid interest thereon, from the most recent date or dates interest was paid to the Agent by the Borrower on each Revolving Loan comprising the deficiency advance at the interest rate per annum for overnight borrowing by the Agent from the Federal Reserve Bank, then such payment shall be credited against the applicable Revolving Note of the Agent in full payment of such deficiency advance and the Borrower shall be deemed to have borrowed the amount of such deficiency advance from such other Lender as of the most recent date or dates, as the case may be, upon which any payments of interest were made by such Borrower thereon. In the event any Lender shall fail to fund its purchase of a Participation after notice from the Issuing Bank or NationsBank, as the Swing Line lender, as applicable, such Lender shall pay to the Issuing Bank or NationsBank, as the Swing Line lender, as applicable, interest on the amount so due from the date of such notice at the interest rate per annum for overnight borrowing by the Agent from the Federal Reserve Bank to the date such 50 55 purchase price is received by the Issuing Bank or NationsBank, as the Swing Line lender, as applicable. III.12. Use of Proceeds. The proceeds of the Loans made pursuant to the Revolving Credit Facility shall be used by the Borrower (a) to fund a portion of the fees and expenses incurred in connection with the HPG Acquisition, which fees and expenses shall not exceed $21,000,000, (b) for general working capital needs and (c) for other corporate purposes, including capital expenditures and Permitted Acquisitions. III.13. Swing Line. Notwithstanding any other provision of this Agreement to the contrary, in order to administer the Revolving Credit Facility in an efficient manner and to minimize the transfer of funds between the Agent and the Lenders, NationsBank shall make available Swing Line Loans to the Borrower prior to the Revolving Credit Termination Date. NationsBank shall not be obligated to make any Swing Line Loan pursuant hereto (i) if to the actual knowledge of NationsBank the Borrower is not in compliance with all the conditions to the making of Revolving Loans set forth in this Agreement, (ii) if after giving effect to such Swing Line Loan, the Swing Line Outstandings exceed $10,000,000, or (iii) if after giving effect to such Swing Line Loan, the sum of the Swing Line Outstandings, Revolving Credit Outstandings and Letter of Credit Outstandings exceeds either (x) the Total Revolving Credit Commitment or (y) the Borrowing Base. Swing Line Loans shall bear interest at the Base Rate. The Company may borrow, repay and reborrow under this Section 3.13 hereof. Unless notified to the contrary by NationsBank, borrowings under the Swing Line shall be made in the minimum amount of $500,000 or, if greater, in amounts which are integral multiples of $100,000 or in the amount necessary to effect a Base Rate Refunding Loan, upon written request by telefacsimile transmission, effective upon receipt, by an Authorized Representative of the Borrower made to NationsBank not later than 12:30 P.M. on the Business Day of the requested borrowing. Each such Borrowing Notice shall specify the amount of the borrowing and the date of borrowing, and shall be in the form of Exhibit D-2 hereto. Unless notified to the contrary by NationsBank, each repayment of a Swing Line Loan shall be in an amount which is an integral multiple of $100,000 or the aggregate amount of all Swing Line Outstandings. If the Borrower instructs NationsBank to debit any demand deposit account of the Borrower in the amount of any payment with respect to a Swing Line Loan, or NationsBank otherwise receives repayment, after 12:30 P.M. on a Business Day, such payment shall be deemed received on the next Business Day. (a) The interest payable on Swing Line Loans is solely for the account of NationsBank, and all accrued and unpaid interest on Swing Line Loans shall be payable on the dates and in the manner provided in Sections 3.2(b) and 3.4 hereof with respect to interest on Base Rate Loans. The Swing Line Outstandings shall be evidenced by the Swing Line Note delivered to NationsBank pursuant to Section 3.5(b) hereof. (b) Upon the making of a Swing Line Loan, each Lender shall be deemed to have purchased from NationsBank a Participation therein in an amount equal to that Lender's Applicable Commitment Percentage of such Swing Line Loan. Upon demand 51 56 made by NationsBank, each Lender shall, according to its Applicable Commitment Percentage of such Swing Line Loan, promptly provide to NationsBank its purchase price therefor in an amount equal to its Participation therein. Any Advance made by a Lender pursuant to demand of NationsBank of the purchase price of its Participation shall be deemed (i) provided that the conditions to making Revolving Loans shall be satisfied, a Base Rate Refunding Loan under Section 3.1 hereof until the Borrower Converts such Base Rate Loan in accordance with the terms of Section 3.8 hereof, and (ii) in all other cases, the funding by each Lender of the purchase price of its Participation in such Swing Line Loan. The obligation of each Lender to so provide its purchase price to NationsBank shall be absolute and unconditional and shall not be affected by the occurrence of an Event of Default or any other occurrence or event. The Borrower, at its option and subject to the terms hereof, may request an Advance pursuant to Section 3.1 hereof in an amount sufficient to repay Swing Line Outstandings on any date and the Agent shall provide from the proceeds of such Advance to NationsBank the amount necessary to repay such Swing Line Outstandings (which NationsBank shall then apply to such repayment) and credit any balance of the Advance in immediately available funds in the manner directed by the Borrower pursuant to Section 3.1(c)(ii) hereof. The proceeds of such Advances shall be paid to NationsBank for application to the Swing Line Outstandings and the Lenders shall then be deemed to have made Loans in the amount of such Advances. The Swing Line shall continue in effect until the Revolving Credit Termination Date, at which time all Swing Line Outstandings and accrued interest thereon shall be due and payable in full. 52 57 ARTICLE IV Letters of Credit IV.1. Letters of Credit. The Issuing Bank agrees, subject to the terms and conditions of this Agreement, upon request of the Borrower to issue from time to time for the account of the Borrower Letters of Credit upon delivery to the Issuing Bank of an Application and Agreement for Letter of Credit relating thereto in form and content acceptable to the Issuing Bank; provided, that (i) the Letter of Credit Outstandings shall not exceed the Total Letter of Credit Commitment and (ii) no Letter of Credit shall be issued if, after giving effect thereto, Letter of Credit Outstandings plus Revolving Credit Outstandings plus Swing Line Outstandings shall exceed either (x) the Total Revolving Credit Commitment or (y) the Borrowing Base. No Letter of Credit shall have an expiry date (including all rights of the Borrower or any beneficiary named in such Letter of Credit to require renewal) or payment date occurring later than the earlier to occur of (x) (i) in the case of standby Letters of Credit, one year after the date of its issuance and (ii) in the case of documentary Letters of Credit, 120 days or (y) the Stated Termination Date. IV.2. Reimbursement. (a) The Borrower hereby unconditionally agrees to pay to the Issuing Bank immediately on demand at the Principal Office all amounts required to pay all drafts drawn or purporting to be drawn under the Letters of Credit and all reasonable expenses incurred by the Issuing Bank in connection with the Letters of Credit, and in any event and without demand to place in possession of the Issuing Bank (which shall include Advances under the Revolving Credit Facility if permitted by Section 3.1 hereof and Swing Line Loans if permitted by Section 3.14 hereof) sufficient funds to pay all debts and liabilities arising under any Letter of Credit. The Issuing Bank agrees to give the Borrower prompt notice of any request for a draw under a Letter of Credit. The Issuing Bank may charge any account the Borrower may have with it for any and all amounts the Issuing Bank pays under a Letter of Credit, plus charges and reasonable expenses as from time to time agreed to by the Issuing Bank and the Borrower; provided that to the extent permitted by Section 3.1(c)(iv) hereof and Section 3.14 hereof, amounts shall be paid pursuant to Advances under the Revolving Credit Facility or, if the Borrower shall elect, by Swing Line Loans. The Borrower agrees to pay the Issuing Bank interest on any Reimbursement Obligations not paid when due hereunder at the Base Rate plus two percent (2.0%), or the maximum rate permitted by applicable law, if lower, such rate to be calculated on the basis of a year of 360 days for actual days elapsed. (b) In accordance with the provisions of Section 3.1(c) hereof, the Issuing Bank shall notify the Agent of any drawing under any Letter of Credit promptly following the receipt by the Issuing Bank of such drawing. (c) Each Lender (other than the Issuing Bank) shall automatically acquire on 53 58 the date of issuance thereof, a Participation in the liability of the Issuing Bank in respect of each Letter of Credit in an amount equal to such Lender's Applicable Commitment Percentage of such liability, and to the extent that the Borrower is obligated to pay the Issuing Bank under Section 4.2(a) hereof, each Lender (other than the Issuing Bank) thereby shall absolutely, unconditionally and irrevocably assume, and shall be unconditionally obligated to pay to the Issuing Bank as hereinafter described, its Applicable Commitment Percentage of the liability of the Issuing Bank under such Letter of Credit. (i) Each Lender (including the Issuing Bank in its capacity as a Lender) shall, subject to the terms and conditions of Article III, pay to the Agent for the account of the Issuing Bank at the Principal Office in Dollars and in immediately available funds, an amount equal to its Applicable Commitment Percentage of any drawing under a Letter of Credit, such funds to be provided in the manner described in Section 3.1(c)(iv) hereof. (ii) Simultaneously with the making of each payment by a Lender to the Issuing Bank pursuant to Section 3.1(c)(iv)(B) hereof, such Lender shall, automatically and without any further action on the part of the Issuing Bank or such Lender, acquire a Participation in an amount equal to such payment (excluding the portion thereof constituting interest accrued prior to the date the Lender made its payment) in the related Reimbursement Obligation of the Borrower. The Reimbursement Obligations of the Borrower shall be immediately due and payable whether by Advances made in accordance with Section 3.1(c)(iv) hereof, Swing Line Loans made in accordance with Section 3.14 hereof, or otherwise. (iii) Each Lender's obligation to make payment to the Agent for the account of the Issuing Bank pursuant to Section 3.1(c)(iv) hereof and this Section 4.2(c) hereof, and the right of the Issuing Bank to receive the same, shall be absolute and unconditional, shall not be affected by any circumstance whatsoever and shall be made without any offset, abatement, withholding or reduction whatsoever. If any Lender is obligated to pay but does not pay amounts to the Agent for the account of the Issuing Bank in full upon such request as required by Section 3.1(c)(iv) hereof or this Section 4.2(c) hereof, such Lender shall, on demand, pay to the Agent for the account of the Issuing Bank interest on the unpaid amount for each day during the period commencing on the date of notice given to such Lender pursuant to Section 3.1(c) hereof until such Lender pays such amount to the Agent for the account of the Issuing Bank in full at the interest rate per annum for overnight borrowing by the Agent from the Federal Reserve Bank. (iv) In the event the Lenders have purchased Participations in any 54 59 Reimbursement Obligation as set forth in clause (ii) above, then at any time payment (in fully collected, immediately available funds) of such Reimbursement Obligation, in whole or in part, is received by Issuing Bank from the Borrower, Issuing Bank shall promptly pay to each Lender an amount equal to its Applicable Commitment Percentage of such payment from the Borrower. (d) Promptly following the end of each calendar quarter, the Issuing Bank shall deliver to the Agent a notice describing the aggregate undrawn amount of all Letters of Credit at the end of such quarter. Upon the request of any Lender from time to time, the Issuing Bank shall deliver to the Agent, and the Agent shall deliver to such Lender, any other information reasonably requested by such Lender with respect to each Letter of Credit outstanding. (e) The issuance by the Issuing Bank of each Letter of Credit shall, in addition to the conditions precedent set forth in Article VII, be subject to the conditions that such Letter of Credit be in such form and contain such terms as shall be reasonably satisfactory to the Issuing Bank consistent with the then current practices and procedures of the Issuing Bank with respect to similar letters of credit, and the Borrower shall have executed and delivered such other instruments and agreements relating to such Letters of Credit as the Issuing Bank shall have reasonably requested consistent with such practices and procedures. All Letters of Credit shall be issued pursuant to and subject to the Uniform Customs and Practice for Documentary Credits, 1993 revision, International Chamber of Commerce Publication No. 500 and all subsequent amendments and revisions thereto. (f) The Borrower agrees that Issuing Bank may, in its sole discretion, accept or pay, as complying with the terms of any Letter of Credit, any drafts or other documents otherwise in order which may be signed or issued by an administrator, executor, trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, liquidator, receiver, attorney in fact or other legal representative of a party who is authorized under such Letter of Credit to draw or issue any drafts or other documents. (g) Without limiting the generality of the provisions of Section 13.5 hereof, the Borrower hereby agrees to indemnify and hold harmless the Issuing Bank, each other Lender and the Agent from and against any and all claims and damages, losses, liabilities, reasonable costs and expenses which the Issuing Bank, such other Lender or the Agent may incur (or which may be claimed against the Issuing Bank, such other Lender or the Agent) by any Person by reason of or in connection with the issuance or transfer of or payment or failure to pay under any Letter of Credit; provided that the Borrower shall not be required to indemnify the Issuing Bank, any other Lender or the Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, (i) caused by the willful misconduct or gross negligence of the party to be indemnified or (ii) caused by the failure of the Issuing Bank to pay under any Letter of Credit after the 55 60 presentation to it of a request for payment strictly complying with the terms and conditions of such Letter of Credit, unless such payment is prohibited by any law, regulation, court order or decree. The indemnification and hold harmless provisions of this Section 4.2(g) hereof shall survive the Facility Termination Date. (h) Without limiting Borrower's rights as set forth in Section 4.2(g) hereof, the obligation of the Borrower to immediately reimburse the Issuing Bank for drawings made under Letters of Credit and the Issuing Bank's right to receive such payment shall be absolute, unconditional and irrevocable, and that such obligations of the Borrower shall be performed strictly in accordance with the terms of this Agreement and such Letters of Credit and the related Applications and Agreement for any Letter of Credit, under all circumstances whatsoever, including the following circumstances: (i) any lack of validity or enforceability of the Letter of Credit, the obligation supported by the Letter of Credit or any other agreement or instrument relating thereto (collectively, the "Related LC Documents"); (ii) any amendment or waiver of or any consent to or departure from all or any of the Related LC Documents; (iii) the existence of any claim, setoff, defense (other than the defense of payment in accordance with the terms of this Agreement) or other rights which the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any persons or entities for whom any such beneficiary or any such transferee may be acting), the Agent, the Lenders or any other Person, whether in connection with the Loan Documents, the Related LC Documents or any unrelated transaction; (iv) any breach of contract or other dispute between the Borrower and any beneficiary or any transferee of a Letter of Credit (or any persons or entities for whom such beneficiary or any such transferee may be acting), the Agent, the Lenders or any other Person; (v) any draft, statement or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; or (vi) any delay, extension of time, renewal, compromise or other indulgence or modification granted or agreed to by the Agent, with or without notice to or approval by the Borrower in respect of any of Borrower's Obligations under this Agreement. 56 61 IV.3. Letter of Credit Facility Fees. The Borrower shall pay to the Agent, for the pro rata benefit of the Lenders based on their Applicable Commitment Percentages, an issuance fee on the aggregate amount available to be drawn on each (i) Letter of Credit which provides credit support, other than in connection with a commercial transaction, at a rate equal to the Applicable Margin, and (ii) Letter of Credit which provides credit support in a commercial transaction, of 1/4% for each 120 day term or part thereof of such Letter of Credit. Such fees shall be due with respect to each Letter of Credit quarterly in arrears on the last day of each December, March, June and September, the first such payment to be made on the first such date occurring after the date of issuance of a Letter of Credit. The fees described in this Section 4.3 before shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. IV.4. Administrative Fees. The Borrower shall pay to the Issuing Bank (i) such administrative fee and other fees, if any, in connection with the Letters of Credit in such amounts and at such times as the Issuing Bank and the Borrower shall agree from time to time and (ii) a fronting fee for each Letter of Credit equal to 1/8% on the aggregate amount available to be drawn on each Letter of Credit. IV.5. Existing Letters of Credit. The parties hereto agree that on the Closing Date all Existing Letters of Credit shall be deemed Letters of Credit hereunder and the outstanding undrawn face amount of such Existing Letters of Credit shall be deemed Letter of Credit Outstandings hereunder. 57 62 ARTICLE V Security V.1. Security Interest. As security for the full and timely payment and performance of all Obligations, and as a continuation of the security interests and rights granted by the Borrower and its Domestic Subsidiaries under the Existing Credit Agreement and the Security Instruments (as defined therein), the Borrower shall, and shall cause each Domestic Subsidiary to, on or before the Closing Date deliver to the Agent, in form and substance reasonably acceptable to the Agent, the Security Agreement, the Intellectual Property Security Agreement, the Landlord Waivers and such duly executed and filed Uniform Commercial Code financing statements sufficient to grant to the Agent a valid, duly perfected security interest in the Collateral described therein, subject to no prior Liens other than Permitted Liens, and do all things reasonably necessary in the opinion of the Agent and its counsel to grant to and continue with the Agent for the benefit of the Lenders a first priority security interest, duly perfected with respect to Collateral governed by the UCC, in all Collateral subject to no prior Lien or other encumbrance or restriction on transfer (other than restrictions on transfer imposed by applicable securities laws and Permitted Liens). V.2. Stock Pledge. As security for the full and timely payment and performance of all Obligations now existing or hereafter arising, the Borrower and each Domestic Subsidiary owning any Pledged Stock shall on or before the Closing Date deliver to the Agent, in form and substance reasonably acceptable to the Agent, the Stock Pledge Agreement together with certificates representing such Pledged Stock and such stock powers duly executed in blank as may be required by the Agent in accordance with the terms hereof and thereof. In addition to any Stock Pledge Agreement required to be delivered pursuant to Section 9.21 hereof, the Borrower and each Subsidiary hereby agrees to pledge to the Agent for the benefit of the Lenders (a) 100% of the capital stock and related interests and rights directly or indirectly owned by the Borrower of any Domestic Subsidiary or Domestic Control Subsidiary hereafter acquired or created, (b) 65% of the voting stock and related interests and rights directly or indirectly owned by the Borrower of any Direct Foreign Subsidiary or Direct Foreign Control Subsidiary hereafter acquired or created and (c) 100% of the capital stock and related interests and rights directly or indirectly owned by the Borrower of any Foreign Subsidiary or Foreign Control Subsidiary of the Borrower to the extent such action would not result in any material adverse tax impact on the Borrower and, in each case, to deliver to the Agent a Stock Pledge Agreement substantially in the form of Exhibit G hereto within thirty (30) days of the acquisition or creation of such Subsidiary. V.3. Guaranty. To guarantee the full and timely payment and performance of all Obligations now existing or hereafter arising, the Borrower shall cause the Guaranty to be delivered by each Domestic Subsidiary, in form and substance reasonably acceptable to the Agent, on or before the Closing Date. The Borrower hereby agrees to cause a Guaranty to be delivered by any hereafter acquired, created or arising (a) Domestic Subsidiary and (b) Foreign Subsidiary to the extent such action would not result in (i) any material adverse tax impact on the 58 63 Borrower or (ii) any violation of any debt agreement to which such Foreign Subsidiary is a party. V.4. Mortgages. As security for the full and timely payment and performance of all Obligations now existing or hereafter arising, the Borrower shall cause the Mortgage to be delivered to the Agent after the Closing Date with respect to any material real property (other than the Florida Office) that is acquired by the Borrower or any Domestic Subsidiary, in form and substance reasonably acceptable to the Agent. The Borrower shall deliver to the Agent all environmental reports, title insurance, appraisals, surveys, legal opinions and other certificates and documents reasonably requested by the Agent in connection with such Mortgage. V.5. Intellectual Property. As security for the full and timely payment and performance of all Obligations now existing or hereafter arising, the Borrower and each Domestic Subsidiary owning any material patents, patent applications, trademarks, trademark registrations and applications therefor, copyrights, copyright registrations and applications therefor or any other material intellectual property, shall deliver to the Agent for the benefit of the Lenders the Intellectual Property Security Agreements and the Intellectual Property Assignments and opinions of counsel to the Borrower and such Domestic Subsidiary in any appropriate jurisdiction designated by the Agent as to the validity and enforceability of such agreements and such other legal matters as the Agent reasonably requests, in form and substance reasonably acceptable to the Agent and the Lenders. In addition to any Intellectual Property Security Agreement required to be delivered pursuant to Section 9.21 hereof, the Borrower hereby agrees to pledge, or cause to be pledged, all intellectual property interests and licenses hereafter acquired or created and owned by the Borrower or any Domestic Subsidiary within thirty (30) days of the acquisition or creation of such intellectual property or license. V.6. Information Regarding Collateral. The Borrower represents, warrants and covenants that (a) the chief executive office of the Borrower and each Guarantor at the Closing Date is located at the address or addresses specified on Schedule 5.6 hereto, and (b) Schedule 5.6 hereto contains a true and complete list of (i) the legal name and address of the Borrower and each Guarantor and of each other Person that has effected any merger or consolidation with the Borrower or a Guarantor or contributed or transferred to the Borrower or a Guarantor any significant portion of its assets constituting Collateral at any time since January 1, 1993 (excluding Persons making sales in the ordinary course of their businesses to the Borrower or a Guarantor of property constituting inventory in the hands of such seller), (ii) each location at which goods constituting Collateral are now located (together with the name of each owner of the property located at such address if not the Borrower or the applicable Guarantor, and a summary description of the relationship between the applicable Guarantor and such Person), and (iii) each currently used trade style and each trade name used by the Borrower or any Guarantor since January 1, 1993 and the purposes for which it was used. Borrower shall not change, and shall not permit any other Guarantor to change, the location of its chief executive office or any location specified in clause (ii) of the immediately preceding sentence, or use or permit any Guarantor to use, any additional trade style, except upon giving not less than thirty (30) days' prior written notice to the Agent and taking or causing to be taken all such action at Borrower's 59 64 or such other Guarantor's expense as may be reasonably requested by the Agent to perfect or maintain the perfection of the Lien of the Agent in Collateral. V.7. Further Assurances. At the request of the Agent, the Borrower will, and will cause each Subsidiary to, execute by its duly authorized officers, alone or with the Agent, any certificate, instrument, statement or document and will procure any such certificate, instrument, statement or document (and pay all connected costs) which the Agent reasonably deems necessary to create or preserve the Liens (and the perfection and priority thereof) of the Agent for the benefit of the Lenders contemplated hereby and by the other Loan Documents and specifically including all Collateral acquired by the Borrower or any Guarantor after the Closing Date. 60 65 ARTICLE VI Change in Circumstances VI.1. Increased Cost and Reduced Return. (a) If, after the date hereof, the adoption of any applicable law, rule, or regulation, or any change in any applicable law, rule, or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such governmental authority, central bank, or comparable agency: (i) shall subject such Lender (or its Applicable Lending Office) to any tax, duty, or other charge with respect to any Loans, its Notes, or its obligation to make Loans, or change the basis of taxation of any amounts payable to such Lender (or its Applicable Lending Office) under this Agreement or its Notes in respect of any Loans (other than taxes imposed on the overall net income of such Lender by the jurisdiction in which such Lender has its principal office or such Applicable Lending Office and franchise taxes); (ii) shall impose, modify, or deem applicable any reserve, special deposit, assessment, or similar requirement (other than the Reserve Requirement utilized in the determination of the Eurodollar Rate) relating to any extensions of credit or other assets of, or any deposits with or other liabilities or commitments of, such Lender (or its Applicable Lending Office), including the Commitments of such Lender hereunder; or (iii) shall impose on such Lender (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting this Agreement or its Note or any of such extensions of credit or liabilities or commitments; and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making, Converting into, Continuing, or maintaining any Loans or to reduce any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement or its Notes with respect to any Loans, then the Borrower shall pay to such Lender on demand such amount or amounts as will compensate such Lender for such increased cost or reduction. If any Lender requests compensation by the Borrower under this Section 6.1(a) hereof, the Borrower may, by notice to such Lender (with a copy to the Agent), suspend the obligation of such Lender to make or Continue Loans of the Type with respect to which such compensation is 61 66 requested, or to Convert Loans of any other Type into Loans of such Type, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of Section 6.4 hereof shall be applicable); provided that such suspension shall not affect the right of such Lender to receive the compensation so requested. (b) If, after the date hereof, any Lender shall have determined that the adoption of any applicable law, rule, or regulation regarding capital adequacy or any change therein or in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such governmental authority, central bank, or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lender's obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change, request, or directive (taking into consideration its policies with respect to capital adequacy), then from time to time upon demand the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. (c) Each Lender shall promptly notify the Borrower and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section 6.1 hereof and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the reasonable judgment of such Lender, be otherwise disadvantageous to it. Any Lender claiming compensation under this Section 6.1 hereof shall furnish to the Borrower and the Agent a statement setting forth the additional amount or amounts to be paid to it hereunder which shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. VI.2. Limitation on Types of Loans. If on or prior to the first day of any Interest Period for any Eurodollar Rate Loan: (a) the Agent determines (which determination shall be conclusive) that by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period; or (b) the Required Lenders determine (which determination shall be conclusive) and notify the Agent that the Eurodollar Rate will not adequately and fairly reflect the cost to the Lenders of funding Eurodollar Rate Loans for such Interest Period; then the Agent shall give the Borrower prompt notice thereof specifying the relevant Type of Loans and the relevant amounts or periods, and so long as such condition remains in effect, the 62 67 Lenders shall be under no obligation to make additional Loans of such Type, Continue Loans of such Type, or to Convert Loans of any other Type into Loans of such Type and the Borrower shall, on the last day(s) of the then current Interest Period(s) for the outstanding Loans of the affected Type, either prepay such Loans or Convert such Loans into another Type of Loan in accordance with the terms of this Agreement. VI.3. Illegality. Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender or its Applicable Lending Office to make, maintain, or fund Eurodollar Rate Loans hereunder, then such Lender shall promptly notify the Borrower thereof and such Lender's obligation to make or Continue Eurodollar Rate Loans and to Convert other Types of Loans into Eurodollar Rate Loans shall be suspended until such time as such Lender may again make, maintain, and fund Eurodollar Rate Loans (in which case the provisions of Section 6.4 hereof shall be applicable). VI.4. Treatment of Affected Loans. If the obligation of any Lender to make a particular Type of Eurodollar Rate Loan or to Continue, or to Convert Loans of any other Type into, Loans of a particular Type shall be suspended pursuant to Section 6.1 or 6.3 hereof (Loans of such Type being herein called "Affected Loans" and such Type being herein called the "Affected Type"), such Lender's Affected Loans shall be automatically Converted into Base Rate Loans on the last day(s) of the then current Interest Period(s) for Affected Loans (or, in the case of a Conversion required by Section 6.3 hereof, on such earlier date as such Lender may specify to the Borrower with a copy to the Agent) and, unless and until such Lender gives notice as provided below that the circumstances specified in Section 6.1 or 6.3 hereof that gave rise to such Conversion no longer exist: (a) to the extent that such Lender's Affected Loans have been so Converted, all payments and prepayments of principal that would otherwise be applied to such Lender's Affected Loans shall be applied instead to its Base Rate Loans; and (b) all Loans that would otherwise be made or Continued by such Lender as Loans of the Affected Type shall be made or Continued instead as Base Rate Loans, and all Loans of such Lender that would otherwise be Converted into Loans of the Affected Type shall be Converted instead into (or shall remain as) Base Rate Loans. If such Lender gives notice to the Borrower (with a copy to the Agent) that the circumstances specified in Section 6.1 or 6.3 hereof that gave rise to the Conversion of such Lender's Affected Loans pursuant to this Section 6.4 hereof no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Loans of the Affected Type made by other Lenders are outstanding, such Lender's Base Rate Loans shall be automatically Converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Loans of the Affected Type, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Loans of the Affected Type and by such Lender are held pro rata (as to principal amounts, Types, and Interest Periods) in accordance with their respective 63 68 Commitments. VI.5. Compensation. Upon the request of any Lender, the Borrower shall pay to such Lender such amount or amounts as shall be sufficient (in the reasonable opinion of such Lender) to compensate it for any loss, cost, or expense (including loss of anticipated profits) incurred by it as a result of: (a) any payment, prepayment, or Conversion of a Eurodollar Rate Loan for any reason (including, without limitation, the acceleration of the Loans pursuant to Section 11.1 hereof) on a date other than the last day of the Interest Period for such Loan; or (b) any failure by the Borrower for any reason (including, without limitation, the failure of any condition precedent specified in Article VII to be satisfied) to borrow (other than by reason of the failure of a Lender or Lenders to make funds available without cause), Convert, Continue, or prepay a Eurodollar Rate Loan on the date for such borrowing, Conversion, Continuation, or prepayment specified in the relevant notice of borrowing, prepayment, Continuation, or Conversion under this Agreement. The Borrower hereby acknowledges that such losses, costs and expenses requiring compensation from the Borrower shall include any such loss, cost or expense incurred within 90 days after the Closing Date in connection with the syndication of the Facilities. Any Lender claiming compensation under this Section 6.5 hereof shall furnish the Borrower and the Agent a statement setting forth in reasonable detail the amounts to be paid to it hereunder and the determination thereof shall be conclusive absent manifest error. VI.6. Taxes. (a) Any and all payments by the Borrower to or for the account of any Lender or the Agent hereunder or under any other Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender (or its Applicable Lending Office) or the Agent (as the case may be) is organized or any political subdivision thereof (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable under this Agreement or any other Loan Document to any Lender or the Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 6.6 hereof) such Lender or the Agent receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make 64 69 such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, and (iv) the Borrower shall furnish to the Agent, at its address referred to in Section 13.2 hereof, the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Borrower agrees to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under this Agreement or any other Loan Document or from the execution or delivery of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as "Other Taxes"). (c) The Borrower agrees to indemnify each Lender and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 6.6 hereof) paid by such Lender or the Agent (as the case may be) and any liability (including penalties, interest, and expenses) arising therefrom or with respect thereto. (d) Each Lender organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Lender listed on the signature pages hereof and on or prior to the date on which it becomes a Lender in the case of each other Lender, and from time to time thereafter if requested in writing by the Borrower or the Agent (but only so long as such Lender remains lawfully able to do so), shall provide the Borrower and the Agent with (i) Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States, (ii) Internal Revenue Service Form W-8 or W-9, as appropriate, or any successor form prescribed by the Internal Revenue Service, and (iii) any other form or certificate required by any taxing authority (including any certificate required by Sections 871(h) and 881(c) of the Internal Revenue Code), certifying that such Lender is entitled to an exemption from or a reduced rate of tax on payments pursuant to this Agreement or any of the other Loan Documents. (e) For any period with respect to which a Lender has failed to provide the Borrower and the Agent with the appropriate form pursuant to Section 6.6(d) hereof (unless such failure is due to a change in treaty, law, or regulation occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under Section 6.6(a), 6.6(b) or 6.6(c) hereof with respect to Taxes imposed by the United States; provided, however, that should a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take 65 70 such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes at such Lender's expense. (f) If the Borrower is required to pay additional amounts to or for the account of any Lender pursuant to this Section 6.6 hereof, then such Lender will agree to use reasonable efforts to change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Lender, is not otherwise disadvantageous to such Lender. (g) Within thirty (30) days after the date of any payment of Taxes, the Borrower shall furnish to the Agent evidence of such payment. (h) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 6.6 hereof shall survive the termination of the Commitments and the payment in full of the Notes. VI.7. Replacement Banks. The Borrower may, in its sole discretion, on ten (10) Business Days' prior written notice to the Agent and the applicable Lender, cause a Lender who has (a) incurred increased costs or is unable to make Eurodollar Rate Loans, (b) failed to fund any requested Advance, or (c) made any claim for taxes under Section 6.6 hereof, require such Lender to (and such Lender shall) assign, pursuant to Section 13.1 hereof, all of its rights and obligations under this Agreement to an Eligible Assignee designated by the Borrower which is willing to become a Lender for a purchase price equal to the outstanding principal amount of the Loans payable to such Lender plus any accrued but unpaid interest on such Loans, any accrued but unpaid fees with respect to such Lender's Commitments and any other amount payable to such Lender under this Agreement; provided, however, that any expenses or other amounts which would be owing to such Lender pursuant to any indemnification provision hereof (including, if applicable, Section 6.5 hereof) shall be payable by the Borrower as if the Borrower had prepaid the Loans of such Lender rather than such Lender having assigned its interest hereunder. The Borrower or the assignee shall pay the applicable processing fee under Section 13.1 hereof. 66 71 ARTICLE VII Conditions to Making Loans and Issuing Letters of Credit VII.1. Conditions of Initial Advance. The obligation of the Lenders to make the Term Loans and the initial Advance under the Revolving Credit Facility, and of the Issuing Bank to issue any additional Letter of Credit, and of NationsBank to make any Swing Line Loan, is subject to the conditions precedent that: (a) the Agent shall have received on the Closing Date, in form and substance satisfactory to the Agent and Lenders, the following: (i) executed originals of each of this Agreement, the Notes, the Security Instruments and the other Loan Documents, together with all schedules and exhibits thereto; (ii) certificates representing all of the shares of Pledged Stock, together with undated stock powers executed in blank; (iii) the favorable written opinion or opinions with respect to the Loan Documents and the transactions contemplated thereby of counsel to the Credit Parties dated the Closing Date, addressed to the Agent and the Lenders and satisfactory to Smith Helms Mulliss & Moore, L.L.P., special counsel to the Agent, substantially in the form of Exhibit P hereto; (iv) a certificate of the Chief Financial Officer of the Borrower, certifying the solvency of the Borrower and its Subsidiaries on the date of and immediately after giving effect to the transactions contemplated hereby; (v) resolutions of the boards of directors or other appropriate governing body (or of the appropriate committee thereof) of each Credit Party certified by its secretary or assistant secretary as of the Closing Date, approving and adopting the Loan Documents to be executed by such Person, and authorizing the execution and delivery thereof; (vi) specimen signatures of officers of each Credit Party executing the Loan Documents on behalf of such Credit Party, certified by the secretary or assistant secretary of such Credit Party; (vii) the charter documents of each Credit Party certified as of a recent date by the Secretary of State of its state of organization; (viii) the bylaws of each Credit Party certified as of the Closing Date as 67 72 true and correct by its secretary or assistant secretary; (ix) certificates issued as of a recent date by the Secretaries of State of the respective jurisdictions of formation of each Credit Party as to the due existence and good standing of each Credit Party; (x) appropriate certificates of qualification to do business, good standing and, where appropriate, authority to conduct business under assumed name, issued in respect of each Credit Party as of a recent date by the Secretary of State or comparable official of each jurisdiction in which the failure to be qualified to do business or authorized so to conduct business could have a Material Adverse Effect; (xi) notice of appointment of the initial Authorized Representative(s); (xii) evidence of all insurance required by the Loan Documents; (xiii) an initial Borrowing Notice, if any, Borrowing Base Certificate, and, if elected by the Borrower, Interest Rate Selection Notice; (xiv) evidence of the filing of Uniform Commercial Code financing statements reflecting the filing in all places required by applicable law to perfect the Liens of the Agent under the Security Instruments as a first priority Lien as to items of Collateral in which a security interest may be perfected by the filing of financing statements, and such other documents and/or evidence of other actions as may be necessary under applicable law to perfect the Liens of the Agent under the Security Instruments as a first priority Lien in and to such other Collateral as the Agent may require; (xv) fully executed Landlord Waivers for the warehouse facilities located in Nevada, Florida, Arkansas, South Carolina, California, North Carolina and Washington; (xvi) an executed copy of the Transaction Documents certified as a full, true and correct copy of such documents by an Authorized Officer of the Borrower; (xvii) an executed copy of the Junior Financing Documents certified as a full, true and correct copy of such documents by an Authorized Representative of the Borrower; (xviii) evidence that all fees payable by the Borrower on the Closing Date to the Agent, NMS and the Lenders have been paid in full; 68 73 (xix) copies of all executed employment or compensation agreements with all members of key management of the Borrower; (xx) The Agent and the Lenders shall have received (a) the unaudited financial statements for the Borrower and its Subsidiaries and HPG for the three-month period ended March 31, 1998 and for all subsequent monthly periods ended prior to the Closing Date, (b) audited financial statements of HPG for each of fiscal years 1995, 1996 and 1997, (c) pro forma consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of March 31, 1998 and financial projections of the Borrower and its Subsidiaries covering not less than five complete Fiscal Years after the Closing, in each case giving effect to the Acquisition, the transactions contemplated thereby and the proposed capital structure, and (d) interim monthly financial statements and monthly working capital detail for the most recent trailing twelve months for which internal financial statements are available and the first projected year, in each case in form and substance satisfactory to the Agent, all of which projections and financial statements shall conform to GAAP applied on a consistent basis except as otherwise disclosed; (xxi) certificate of an Authorized Representative dated the Closing Date certifying as to the matters set forth in Section 7.1(b)(i), (ii), (iii), (iv), (vi) and (vii) below; (xxii) copies of independent environmental reports with respect to the Queretero Property in form and content acceptable to the Agent and the Lenders; (xxiii) such other documents, instruments, certificates and opinions as the Agent or any Lender may reasonably request on or prior to the Closing Date in connection with the consummation of the transactions contemplated hereby; (b) Each of the following shall be true: (i) The Junior Financing and the HPG Acquisition shall have been consummated on terms acceptable to the Agent and the Lenders; (ii) there shall not have occurred or become known to the Agent or the Lenders any event, condition, situation or status since the date of the information contained in the financial and business projections, budgets, pro forma data and forecasts concerning the Credit Parties delivered to the Agent prior to the Closing Date that has had or could reasonably be expected to result in a Material Adverse Effect; 69 74 (iii) There shall not be any action, suit, investigation or proceeding pending or threatened in any court or before any arbitrator or governmental instrumentality that (a) purports to affect the transactions contemplated hereby (including the HPG Acquisition), (b) could reasonably be expected to have a material adverse effect on the financings or any other transactions contemplated hereby (including the HPG Acquisition), or on the Borrower or its Subsidiaries or (c) would reasonably be expected to have a material adverse effect on the ability of the parties hereto and thereto to perform their obligations hereunder or under the Transaction Documents; (iv) the Borrower and its Subsidiaries shall have received all approvals, consents and waivers, and shall have made or given all necessary filings and notices as shall be required to consummate the transactions contemplated hereby and under the Junior Financing Documents and the Transaction Documents without the occurrence of any default under, conflict with or violation of (A) any applicable law, rule, regulation, order or decree of any Governmental Authority or arbitral authority or (B) any agreement, document or instrument to which any of the Borrower or any Subsidiary is a party or by which any of them or their properties are bound or (C) the charter documents or bylaws of any Credit Party; and (v) there shall not have occurred or exist (A) an engagement in hostilities by the United States of America or other national or international emergency or calamity, (B) a general suspension of or material limitation on trading on the New York Stock Exchange or other national securities exchange, (C) the declaration of a general banking moratorium by any applicable Governmental Authority or the imposition by any applicable Governmental Authority of any material limitation on transactions of the type contemplated by the Loan Documents, or (D) any other material disruption of financial or capital markets that could reasonably be expected to adversely affect the transactions contemplated under the Loan Documents. (vi) There shall not have occurred a material adverse change since December 31, 1997 in the business, assets, operations or condition (financial or otherwise) of the Borrower and its Subsidiaries and HPG, taken as a whole or prospects of the Borrower and its Subsidiaries, taken as a whole, or in the facts and information regarding such entities as represented to date, including, without limitation, the absence of any (a) event or circumstance, (b) change in laws or regulations or (c) action, suit, investigation or proceeding pending or threatened in any court or before any governmental authority that purports to affect the Borrower or any of its Subsidiaries, or HPG or any transaction contemplated hereby, and that could have or could be reasonably expected to have a Material Adverse Effect or a material adverse effect on the ability of the Borrower or its 70 75 Subsidiaries or HPG to perform their respective obligations under the Transaction Documents or the Junior Financing Documents. (vii) All of the representations and warranties and covenants contained in the Transaction Documents and the Junior Financing Documents shall be true or performed in accordance with their terms, respectively. VII.2. Conditions of Loans and Letter of Credit. The obligations of the Lenders to make any Loans, and the Issuing Bank to issue Letters of Credit, and of NationsBank to make any Swing Line Loan, hereunder on or subsequent to the Closing Date are subject to the satisfaction of the following conditions: (a) the Agent or, in the case of Swing Line Loans, NationsBank shall have received a Borrowing Notice if required by Article III; (b) the representations and warranties of the Borrower set forth in Article VIII and in each of the other Loan Documents shall be true and correct in all material respects on and as of the date of such Advance, Swing Line Loan or Letter of Credit issuance or renewal, with the same effect as though such representations and warranties had been made on and as of such date, except to the extent that such representations and warranties expressly relate to an earlier date and except that the financial statements referred to in Section 8.6(a)(i) hereof shall be deemed to be those financial statements most recently delivered to the Agent and the Lenders pursuant to Section 9.1 hereof from the date financial statements are delivered to the Agent and the Lenders in accordance with such Section; (c) in the case of the issuance of a Letter of Credit, the Borrower shall have executed and delivered to the Issuing Bank an Application and Agreement for Letter of Credit in form and content acceptable to the Issuing Bank together with such other instruments and documents as it shall request; (d) at the time of (and after giving effect to) each Advance, Swing Line Loan or the issuance of a Letter of Credit, no Default or Event of Default specified in Article X shall have occurred and be continuing; and (d) the Agent and the Lenders shall be reasonably satisfied that the Borrower and each Subsidiary will be Year 2000 Compliant on and after 90 days prior to year 2000. (e) immediately after giving effect to: (i) a Revolving Loan, the aggregate principal balance of all outstanding Loans for each Lender shall not exceed such Lender's Revolving Credit Commitment; 71 76 (ii) a Letter of Credit or renewal thereof, the aggregate principal balance of all outstanding Participations in Letters of Credit and Reimbursement Obligations (or in the case of the Issuing Bank, its remaining interest after deduction of all Participations in Letters of Credit and Reimbursement Obligations of other Lenders) for each Lender and in the aggregate shall not exceed, respectively, (X) such Lender's Letter of Credit Commitment or (Y) the Total Letter of Credit Commitment; (iii) a Swing Line Loan, the Swing Line Outstandings shall not exceed $10,000,000; and (iv) a Revolving Loan, Swing Line Loan or a Letter of Credit or renewal thereof, the sum of Letter of Credit Outstandings plus Revolving Credit Outstandings plus Swing Line Outstandings shall not exceed either (x) the Total Revolving Credit Commitment or (y) the Borrowing Base. 72 77 ARTICLE VIII Representations and Warranties The Borrower represents and warrants with respect to itself and its Subsidiaries (which representations and warranties are made after giving effect to the HPG Acquisition and which shall survive the delivery of the documents mentioned herein and the making of Loans), that: VIII.1. Organization and Authority. (a) The Borrower and each Subsidiary is a corporation duly organized and validly existing under the laws of the jurisdiction of its formation; (b) The Borrower and each Subsidiary (x) has the requisite power and authority to own its properties and assets and to carry on its business as now being conducted and as contemplated in the Loan Documents, and (y) is qualified to do business in every jurisdiction in which failure so to qualify would have a Material Adverse Effect; (c) The Borrower has the power and authority to execute, deliver and perform this Agreement and the Notes, and to borrow hereunder, and to execute, deliver and perform each of the other Loan Documents to which it is a party; (d) Each Credit Party has the power and authority to execute, deliver and perform the applicable Facility Guaranty and each of the other Loan Documents to which it is a party; and (e) When executed and delivered, each of the Loan Documents to which the Borrower or any other Credit Party is a party will be the legal, valid and binding obligation or agreement, as the case may be, of the Borrower or such Credit Party, enforceable against the Borrower or such Credit Party in accordance with its terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors' rights generally and to the effect of general principles of equity (whether considered in a proceeding at law or in equity). VIII.2. Loan Documents. The execution, delivery and performance by the Borrower and each other Credit Party of each of the Loan Documents to which it is a party: (a) have been duly authorized by all requisite corporate action (including any required shareholder approval) of the Borrower and each other Credit Party required for the lawful execution, delivery and performance thereof; 73 78 (b) do not violate any provisions of (i) applicable law, rule or regulation, (ii) any judgment, writ, order, determination, decree or arbitral award of any Governmental Authority or arbitral authority binding on the Borrower or any other Credit Party or its properties, or (iii) the charter documents or bylaws of the Borrower or any other Credit Party; (c) does not and will not be in conflict with, result in a breach of or constitute an event of default, or an event which, with notice or lapse of time or both, would constitute an event of default, under any contract, indenture, agreement or other instrument or document to which Borrower or any other Credit Party is a party, or by which the properties or assets of Borrower or any other Credit Party are bound; and (d) does not and will not result in the creation or imposition of any Lien upon any of the properties or assets of Borrower or any other Credit Party except any Liens in favor of the Agent and the Lenders created by the Security Instruments. VIII.3. Solvency. The Borrower and each other Credit Party is Solvent after giving effect to the transactions contemplated by the Loan Documents. VIII.4. Subsidiaries and Shareholders. All shares of capital stock or other equity interests of the Borrower are duly authorized, validly issued, fully paid and non-assessable. The Borrower has no Subsidiaries other than those Persons listed as Subsidiaries in Schedule 8.4 hereto and additional Subsidiaries created or acquired after the Closing Date in compliance with Section 9.21 hereof; Schedule 8.4 hereto states as of the date hereof the organizational form of each entity, the authorized and issued capitalization of each Subsidiary listed thereon, the number of shares or other equity interests of each class of capital stock or interest issued and outstanding of each such Subsidiary and the number and/or percentage of outstanding shares or other equity interest (including options, warrants and other rights to acquire any interest) of each such class of capital stock or other equity interest owned by Borrower or by any such Subsidiary; the outstanding shares or other equity interests of each such Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable; and Borrower and each such Subsidiary owns beneficially and of record all the shares and other interests it is listed as owning in Schedule 8.4 hereto, free and clear of any Lien other then the Liens created under the Loan Documents in favor of the Agent for the benefit of the Lenders. VIII.5. Ownership Interests. The Borrower owns no interest in any Person other than the Persons listed in Schedule 8.4 hereto and additional Subsidiaries created or acquired after the Closing Date in compliance with Section 9.21 hereof. VIII.6. Financial Condition. (a) The Borrower has heretofore furnished to the Agent and each Lender audited consolidated and related consolidating balance sheets of the Borrower and its 74 79 Subsidiaries (including Borrower) as at December 31, 1997 and the notes thereto and the related consolidated statements of income, shareholders' equity and cash flows for the Fiscal Year then ended as examined and certified by the Borrower's independent certified public accountants. Except as set forth therein, such financial statements (including the notes thereto) present fairly the financial condition of the Borrower and its Subsidiaries as of the end of such Fiscal Year and results of their operations and the changes in its shareholders' equity for the Fiscal Year then ended, all in conformity with GAAP applied on a Consistent Basis; (b) since December 31, 1997, there has been no material adverse change in the condition, financial or otherwise, of the Borrower and its Subsidiaries or in the businesses, properties, performance, prospects or operations of the Borrower or its Subsidiaries, nor have such businesses or properties been materially adversely affected as a result of any fire, explosion, earthquake, accident, strike, lockout, combination of workers, flood, embargo or act of God; and (c) the consolidated balance sheets of each of the Borrower and its Subsidiaries and HPG that are attached hereto as Schedule 8.6(c) hereto fairly present the consolidated financial position of the Borrower and its Subsidiaries and HPG as of the dates set forth therein, in each case in accordance with GAAP applied on a Consistent Basis (except as otherwise specifically indicated therein). The consolidated statements of income and cash flows of the Borrower and its Subsidiaries and HPG that are attached hereto as Schedule 8.6(c) have been prepared in conformity with GAAP applied on a Consistent Basis through all the periods involved (except as otherwise specifically indicated therein) and fairly present the consolidated results of operations of each of the Borrower and its Subsidiaries and HPG for the periods indicated. The pro forma consolidated statements of income and cash flows included in Schedule 8.6(c) hereto fairly present the estimated consolidated income and cash flows of the Borrower and its Subsidiaries assuming the consummation of the HPG Acquisition as if it had occurred on the date set forth therein, and the pro forma consolidated balance sheet of the Borrower included in Schedule 8.6(c) hereto fairly presents the consolidated financial condition of the Borrower and its Subsidiaries on the Closing Date (after giving effect to all simultaneous transactions to occur on such date). (d) except as set forth in the financial statements referred to in Section 8.6(a) hereof or as set forth in Schedule 8.6(d) hereto, neither the Borrower nor any Subsidiary has incurred, other than in the ordinary course of business, any material Indebtedness, Contingent Obligation or other commitment or liability which remains outstanding or unsatisfied. VIII.7. Title to Properties. The Borrower and each of its Subsidiaries has good and marketable title to all its real and personal properties, subject to no transfer restrictions or Liens of any kind, except for the transfer restrictions and Liens described in Schedule 8.7 hereto. 75 80 VIII.8. Taxes. The Borrower and each of its Subsidiaries have filed or caused to be filed all federal, state and local tax returns which are required to be filed by it and, except for taxes and assessments being contested in good faith by appropriate proceedings diligently conducted and against which reserves reflected in the financial statements described in Section 8.6(a) hereof and satisfactory to the Borrower's independent certified public accountants have been established, have paid or caused to be paid all taxes as shown on said returns or on any assessment received by it, to the extent that such taxes have become due. VIII.9. Other Agreements. Neither the Borrower nor any Subsidiary is: (a) a party to or subject to any judgment, order, decree, agreement, lease or instrument, or subject to other restrictions, which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect; or (b) in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which the Borrower or any Subsidiary is a party, which default has, or if not remedied within any applicable grace period could reasonably be likely to have, a Material Adverse Effect. VIII.10. Litigation. Except as set forth in Schedule 8.10 hereto, there is no action, suit, investigation or proceeding at law or in equity or by or before any governmental instrumentality or agency or arbitral body pending, or, to the knowledge of the Borrower, threatened by or against the Borrower, or any of its Subsidiaries or affecting the Borrower or any of its Subsidiaries or any properties or rights of the Borrower or any of its Subsidiaries, which could reasonably be expected to have a Material Adverse Effect. VIII.11. Margin Stock. The proceeds of the borrowings made hereunder will be used by the Borrower only for the purposes expressly authorized herein. None of such proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any margin stock or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry margin stock or for any other purpose which might constitute any of the Loans under this Agreement a "purpose credit" within the meaning of said Regulation U or Regulation X (12 C.F.R. Part 224) of the Board. Neither the Borrower nor any agent acting in its behalf has taken or will take any action which might cause this Agreement or any of the documents or instruments delivered pursuant hereto to violate any regulation of the Board or to violate the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, or any state securities laws, in each case as in effect on the date hereof. VIII.12. Investment Company. Neither the Borrower nor any of its Subsidiaries is an "investment company," or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended (15 U.S.C. Section 80a-1, et seq.). The application of the proceeds of the Loans and 76 81 repayment thereof by the Borrower and the performance by the Borrower and the other Credit Parties of the transactions contemplated by the Loan Documents will not violate any provision of said Act, or any rule, regulation or order issued by the Securities and Exchange Commission thereunder, in each case as in effect on the date hereof. VIII.13. Intellectual Property. The Borrower and its Subsidiaries own or have the right to use under valid license agreements or otherwise, all licenses, franchises, patents, trademarks, trademark rights, trade names, trade name rights, trade secrets and copyrights, and all applications for any of the foregoing, material to the conduct of their businesses as now conducted (the "Intellectual Property"), all such Intellectual Property being identified on the schedules to the Intellectual Property Security Agreement and, except as set forth on Schedule 8.13 hereto, without conflict with any patent, license, franchise, trademark, trade secrets and confidential commercial or proprietary information, trade name, copyright, rights to trade secrets or other proprietary rights of any other Person. Each Credit Party owning any Collateral as defined in the Intellectual Property Security Agreement is a party to the Intellectual Property Security Agreement. VIII.14. No Untrue Statement. Neither (a) this Agreement nor any other Loan Document or certificate or document executed and delivered by or on behalf of the Borrower or any other Credit Party in accordance with or pursuant to any Loan Document nor (b) any statement, representation, or warranty provided to the Agent in connection with the negotiation or preparation of the Loan Documents contains any misrepresentation or untrue statement of material fact or omits to state a material fact necessary, in light of the circumstance under which it was made, in order to make any such warranty, representation or statement contained therein not misleading. VIII.15. No Consents, Etc. Neither the respective businesses or properties of the Borrower or any of its Subsidiaries, nor any relationship between the Borrower or any of its Subsidiaries and any other Person, nor any circumstance in connection with the execution, delivery and performance of the Loan Documents and the transactions contemplated thereby, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority or any other Person on the part of the Borrower or any of its Subsidiaries as a condition to the execution, delivery and performance of, or consummation of the transactions contemplated by the Loan Documents, which, if not obtained or effected, would be reasonably likely to have a Material Adverse Effect, or if so, such consent, approval, authorization, filing, registration or qualification has been duly obtained or effected, as the case may be. VIII.16. Employee Benefit Plans. (a) The Borrower and each ERISA Affiliate is in compliance with all applicable provisions of ERISA and the regulations and published interpretations thereunder and in compliance with all Foreign Benefit Laws with respect to all Employee 77 82 Benefit Plans except for any required amendments for which the remedial amendment period as defined in Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified, each trust related to such plan has been determined to be exempt under Section 501(a) of the Code and each Employee Benefit Plan subject to any Foreign Benefit Law has received the required approvals from any Governmental Authority regulating such Employee Benefit Plan. No material liability has been incurred by the Borrower or any ERISA Affiliate which remains unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan or any Multiemployer Plan; (b) Neither the Borrower nor any ERISA Affiliate has (i) engaged in a nonexempt prohibited transaction described in Section 4975 of the Code or Section 406 of ERISA affecting any of the Employee Benefit Plans or the trusts created thereunder which could subject any such Employee Benefit Plan or trust to a material tax or penalty on prohibited transactions imposed under Internal Revenue Code Section 4975 or ERISA, (ii) incurred any accumulated funding deficiency with respect to any Employee Benefit Plan, whether or not waived, or any other liability to the PBGC which remains outstanding other than the payment of premiums and there are no premium payments which are due and unpaid, (iii) failed to make a required contribution or payment to a Multiemployer Plan, (iv) failed to make a required installment or other required payment under Section 412 of the Code, Section 302 of ERISA or the terms of such Employee Benefit Plan or (v) failed to make a required contribution or payment, or otherwise failed to operate in compliance with any Foreign Benefit Law regulating any Employee Benefit Plan; (c) No Termination Event has occurred or is reasonably expected to occur with respect to any Pension Plan or Multiemployer Plan, and neither the Borrower nor any ERISA Affiliate has incurred any unpaid withdrawal liability with respect to any Multiemployer Plan; (d) The present value of all vested accrued benefits under each Employee Benefit Plan which is subject to Title IV of ERISA or whose funding is regulated by any Foreign Benefit Law, did not, as of the most recent valuation date for each such plan, exceed the then current value of the assets of such Employee Benefit Plan allocable to such benefits; (e) To the best of the Borrower's knowledge, each Employee Benefit Plan subject to Title IV of ERISA or the funding of which is regulated by any Foreign Benefit Law, maintained by the Borrower or any ERISA Affiliate, has been administered in accordance with its terms in all material respects and is in compliance in all material respects with all applicable requirements of ERISA, all Foreign Benefit Laws and other applicable laws, regulations and rules; 78 83 (f) The consummation of the Loans and the issuance of the Letters of Credit provided for herein will not involve any prohibited transaction under ERISA which is not subject to a statutory or administrative exemption; and (g) No material proceeding, claim, lawsuit and/or investigation exists or, to the best knowledge of the Borrower after due inquiry, is threatened concerning or involving any Employee Benefit Plan. VIII.17. No Default. As of the date hereof, there does not exist any Default or Event of Default hereunder. VIII.18. Hazardous Materials. (a) The Borrower and each of its Subsidiaries is in compliance with all applicable Environmental Laws in all material respects, and has been issued and maintains all required federal, state and local permits, licenses, certificates and approvals pertaining to Hazardous Materials that are germane to the conduct of its business. Neither the Borrower nor any of its Subsidiaries has been notified of any pending or threatened action, suit, proceeding or investigation which, and neither the Borrower nor any of its Subsidiaries is aware of any facts, which (i) calls into question, or could reasonably be expected to call into question, compliance by the Borrower or any of its Subsidiaries with any Environmental Laws, (ii) seeks, or could reasonably be expected to form the basis of a meritorious proceeding to seek, to suspend, revoke or terminate any license, permit, certification or approval pertaining to Hazardous Material that is germane to the conduct of its business, or (iii) seeks to cause, or could reasonably be expected to form the basis of a meritorious proceeding to cause, any property of the Borrower or any of its Subsidiaries to be subject to any restrictions on ownership, use, occupancy or transferability under any Environmental Law; (b) Neither the Borrower nor any of its Subsidiaries, nor, to the best of Borrower's knowledge, any previous owner or operator of any real property owned or operated by the Borrower or any of its Subsidiaries or any other Person, has managed, generated, stored, released, treated, or disposed of any Hazardous Material on any portion of such property, or transferred or caused to be transferred any Hazardous Material from such property to any other location except in compliance with all Environmental Laws. Except for Hazardous Materials necessary for the routine maintenance of the Properties owned or operated by the Borrower and its Subsidiaries and as used in the ordinary course of the Borrower's or its Subsidiaries' business, which Hazardous Material shall be used in accordance with all applicable Environmental Laws, the Borrower covenants it shall, and shall cause each of its Subsidiaries to, not permit any Hazardous Materials to be brought on to the real property owned or operated by the Borrower and its Subsidiaries, or if so brought or found located thereon, shall be immediately removed, 79 84 with proper disposal, and all environmental cleanup requirements shall be diligently undertaken pursuant to all Environmental Laws. VIII.19. Employment Matters. (a) Except with respect to employees located in Mexico, none of the employees of the Borrower or any of its Subsidiaries is subject to any collective bargaining agreement and there are no strikes, work stoppages, election or decertification petitions or proceedings, unfair labor charges, equal opportunity proceedings, or other material labor/employee related controversies or proceedings pending or, to the best knowledge of the Borrower, threatened against the Borrower or any such Subsidiary or between the Borrower or any such Subsidiary and any of their employees, other than employee grievances arising in the ordinary course of business which could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; and (b) Except to the extent a failure to maintain compliance would not have a Material Adverse Effect, the Borrower and each of its Subsidiaries is in compliance in all respects with all applicable laws, rules and regulations pertaining to labor or employment matters, including without limitation those pertaining to wages, hours, occupational safety and taxation and there is neither pending or threatened any litigation, administrative proceeding nor, to the knowledge of the Borrower, any investigation, in respect of such matters which, if decided adversely, could reasonably be likely, individually or in the aggregate, to have a Material Adverse Effect. VIII.20. RICO Neither the Borrower nor any of its Subsidiaries is engaged in or has engaged in any course of conduct that could subject any of their respective properties to any Lien, seizure or other forfeiture under any criminal law, racketeer influenced and corrupt organizations law, civil or criminal, or other similar laws. VIII.21. Year 2000 Compliance. The Borrower has (a) undertaken a review and assessment of the business and operations of the Borrower and its Subsidiaries with respect to becoming Year 2000 Compliant and the Borrower is taking or causing to be taken or undertaking to commence all actions necessary to become and continue to be Year 2000 Compliant prior to 90 days prior to year 2000, including taking all actions and at the times specified in the Year 2000 Compliance Plan, as adopted, and (b) undertaken a review and assessment of the business and operations of each of its Related Business Parties with respect to becoming Year 2000 Compliant and the Borrower reasonably believes that each Related Business Party is taking or causing to be taken or undertaking to commence all actions necessary to become and continue to be Year 2000 Compliant prior to 90 days prior to year 2000; the Borrower reasonably believes each of the Borrower and each Subsidiary will be Year 2000 Compliant prior to, on and after 90 days prior to year 2000. 80 85 VIII.22. Transaction Agreement Representations. To the best of Borrower's knowledge, each of the representations and warranties of the Seller contained in Exhibit B of the Transaction Agreement and each of the other Transaction Documents are true and correct as of the Closing Date. 81 86 ARTICLE IX Affirmative Covenants Until the Facility Termination Date, unless the Required Lenders shall otherwise consent in writing, the Borrower will, and where applicable will cause each Subsidiary to: IX.1. Financial Reports, Etc. (a) As soon as practical and in any event within 90 days after the end of each Fiscal Year after the Closing Date, deliver or cause to be delivered to the Agent and each Lender (i) the audited consolidated and unaudited consolidating balance sheets of the Borrower and its Subsidiaries, with the notes thereto, and the related audited consolidated and unaudited consolidating statements of earnings, cash flow, and shareholders' equity and the notes thereto, for such Fiscal Year, setting forth in the case of the consolidated statements comparative financial statements for the preceding Fiscal Year, all prepared in accordance with GAAP applied on a Consistent Basis and containing, with respect to the audited consolidated financial reports, opinions of Grant Thornton LLP, or other such independent certified public accountants selected by the Borrower and approved by the Agent, which are unqualified and without an exception not acceptable to the Agent; and (ii) a certificate of an Authorized Representative as to the absence of any Default or Event of Default and demonstrating compliance with Section 10.22 hereof, which certificate shall be in the form attached hereto as Exhibit L and incorporated herein by reference; (b) as soon as practical and in any event within 45 days after the end of each fiscal quarter beginning with the fiscal quarter ended June 30, 1998, deliver to the Agent and each Lender (i) the consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of the end of such fiscal quarter, and the related consolidated and consolidating statements of earnings and cash flow for such fiscal quarter and for the period from the beginning of the Fiscal Year through the end of such fiscal quarter, accompanied by a certificate of an Authorized Representative to the effect that such financial statements present fairly the financial position of the Borrower and its Subsidiaries as of the end of such fiscal quarter and the results of their operations and the changes in shareholders' equity for such fiscal quarter, in conformity with the standards of GAAP with respect to interim financials, and (ii) a certificate of an Authorized Representative as to the absence of any Default or Event of Default and containing computations for such quarter comparable to that required pursuant to Section 9.1(a)(ii); (c) together with delivery of the financial statements required under Section 9.1(a) above, deliver or cause to be delivered to the Agent and each Lender a letter from the Borrower's accountants specified in Section 9.1(a)(i) hereof stating that, in performing the audit necessary to render an opinion on the financial statements delivered under Section 9.1(a)(i), they obtained no knowledge of any Default or Event of Default 82 87 by the Borrower in the fulfillment of the terms and provisions of this Agreement insofar as they relate to financial matters (which at the date of such statement remains uncured); and if the accountants have obtained knowledge of such Default or Event of Default, a statement specifying the nature and period of existence thereof; (d) as soon as practical and in any event within 25 days after the end of each month, deliver or cause to be delivered to the Agent and each Lender (i) a summary and aging of Eligible Receivables and (ii) a Borrowing Base Certificate in the form of Exhibit K hereto; (e) not later than the last Business Day of each Fiscal Year, deliver to the Agent and each Lender consolidated financial projections for the Borrower and its Subsidiaries for the period from the beginning of the next Fiscal Year to the Stated Maturity Date, prepared on an annual basis; (f) promptly upon their becoming available to the Borrower, the Borrower shall deliver to the Agent and each Lender a copy of (i) all regular or special reports or effective registration statements which the Borrower or any Subsidiary shall file from and after the date hereof with the Securities and Exchange Commission (or any successor thereto) or any securities exchange, (ii) any proxy statement distributed by the Borrower to its shareholders, bondholders or the financial community in general, and (iii) any management letter or other report submitted to the Borrower or any of its Subsidiaries by independent accountants in connection with any annual, interim or special audit of the Borrower or any of its Subsidiaries; (g) together with each delivery of the financial statements required by Section 9.1(a) or (b) hereof, deliver to the Agent and each Lender a management letter or other report setting forth any material deviation from the Year 2000 Compliance Plan and any other event or condition which could reasonably be expected to prevent or materially delay the Borrower, any Subsidiary or any Related Business Party from becoming Year 2000 Compliant before 90 days prior to year 2000; and (h) promptly, from time to time, deliver or cause to be delivered to the Agent and each Lender such other information regarding the Borrower's and any of its Subsidiaries' operations, business affairs and financial condition as the Agent or such Lender may reasonably request; The Agent and the Lenders are hereby authorized to deliver a copy of any such financial or other information delivered hereunder to the Lenders (or any affiliate of any Lender) or to the Agent, to any Governmental Authority having jurisdiction over the Agent or any of the Lenders pursuant to any written request therefor or in the ordinary course of examination of loan files, or, subject to Section 13.9 hereof, to any other Person who shall acquire or consider the assignment of, or acquisition of any participation interest in, any Obligation permitted by this Agreement. 83 88 IX.2. Maintain Properties and Agreements. Maintain (a) all properties necessary to their operations in good working order and condition, make all needed repairs, replacements and renewals to such properties, and maintain free from Liens all trademarks, trade names, patents, copyrights, trade secrets, know-how, and other intellectual property and proprietary information (or adequate licenses thereto), in each case as are reasonably necessary to conduct their business as currently conducted or as contemplated hereby, all in accordance with customary and prudent business practices and (b) all Material Contracts and Material Leases in full force and effect without material defaults thereunder. IX.3. Existence, Qualification, Etc. Do or cause to be done all things necessary to preserve and keep in full force and effect their existence and all material rights and franchises, and maintain their licenses or qualifications to do business as foreign corporations and good standing in each jurisdiction in which their ownership or lease of property or the nature of their business makes such license or qualification necessary except where the failure to so qualify would not have a Material Adverse Effect. IX.4. Regulations and Taxes. Comply in all material respects with or contest in good faith all statutes and governmental regulations and pay all taxes, assessments, governmental charges, claims for labor, supplies, rent and any other obligation which, if unpaid, would become a Lien against any of their properties except liabilities being contested in good faith by appropriate proceedings diligently conducted and against which adequate reserves acceptable to the Borrower's independent certified public accountants determined on a consolidated basis have been established unless and until any Lien resulting therefrom attaches to any of their property and becomes enforceable against any of their creditors. IX.5. Insurance. (a) Keep all of their insurable properties adequately insured at all times with responsible insurance carriers against loss or damage by fire and other hazards to the extent and in the manner as are customarily insured against by similar businesses owning such properties similarly situated, (b) maintain general public liability insurance at all times with responsible insurance carriers against liability on account of damage to persons and property and (c) maintain insurance under all applicable workers' compensation laws (or in the alternative, maintain required reserves if self-insured for workers' compensation purposes) such policies of insurance to have such limits, deductibles, exclusions, co-insurance and other provisions providing no less coverages than are maintained by similar businesses that are similarly situated, in any manner. such insurance policies to be in form reasonably satisfactory to the Agent. Each of the policies of insurance described in this Section 9.5 hereof shall provide that the Agent shall be named as loss payee or additional insured, as applicable, and that the insurer shall give the Agent not less than thirty (30) days' prior written notice before any such policy shall be terminated, lapse or be altered IX.6. True Books. Keep true books of record and account in which full, true and correct entries will be made of all of their dealings and transactions, and set up on their books such reserves as may be required by GAAP with respect to doubtful accounts and all taxes, 84 89 assessments, charges, levies and claims and with respect to its business in general, and include such reserves in interim as well as year-end financial statements. IX.7. Right of Inspection. Permit any Person designated by any Lender or the Agent to visit and inspect any of the properties, corporate books and financial reports of the Borrower or any of its Subsidiaries and to discuss their affairs, finances and accounts with their principal officers and independent certified public accountants, all at reasonable times, at reasonable intervals and with reasonable prior notice. IX.8. Observe all Laws. Conform to and duly observe in all respects all laws, rules and regulations and all other valid requirements of any Governmental Authority with respect to the conduct of their business where the failure to observe such laws, rules, regulations or other requirements could have a Material Adverse Effect. IX.9. Covenants Extending to Other Persons. Cause each of its Subsidiaries to do with respect to itself, its business and its assets, each of the things required of the Borrower in Sections 9.2 through 9.8 inclusive. IX.10. Officer's Knowledge of Default. Upon any officer of the Borrower obtaining knowledge of any Default or Event of Default hereunder or under any other obligation of the Borrower or any of its Subsidiaries to any Lender, or any event, development or occurrence which could reasonably be expected to have a Material Adverse Effect, cause such officer or an Authorized Representative to promptly notify the Agent of the nature thereof, the period of existence thereof, and what action the Borrower or such Subsidiary proposes to take with respect thereto. IX.11. Suits or Other Proceedings. Upon any officer of the Borrower obtaining knowledge of (a) any action or proceeding against the Borrower or any Subsidiary by any Governmental Authority the outcome of which could reasonably be expected to have a Material Adverse Effect or (b) any litigation or other proceedings being instituted against the Borrower or any Subsidiary, or any attachment, levy, execution or other process being instituted against any assets of the Borrower or any Subsidiary, in an aggregate amount in respect of all such proceedings and processes greater than $1,000,000 not otherwise covered by insurance, in each case promptly deliver to the Agent written notice thereof stating the nature and status of such litigation, dispute, proceeding, levy, execution or other process. IX.12. Notice of Discharge of Hazardous Material or Environmental Complaint. Promptly provide to the Agent true, accurate and complete copies of any and all letters, notices, complaints, orders, directives, claims, or citations received by the Borrower or any Subsidiary relating to any (a) violation or alleged violation by the Borrower or any Subsidiary of any applicable Environmental Laws; (b) release or threatened release into the environment by the Borrower or any Subsidiary, or by any Person handling, transporting or disposing of any Hazardous Material on behalf of the Borrower or any Subsidiary, or at any facility or property 85 90 owned or leased or operated by the Borrower or a Subsidiary, of any Hazardous Material, except where occurring legally; or (c) liability or alleged liability of the Borrower or any Subsidiary for the costs of cleaning up, removing, remediating or responding to a release of Hazardous Materials. IX.13. Environmental Compliance. If the Borrower or any Subsidiary shall receive any letter, notice, complaint, order, directive, claim or citation alleging that the Borrower or any Subsidiary has violated any Environmental Law or is liable for the costs of cleaning up, removing, remediating or responding to a release of Hazardous Materials, the Borrower shall, within the time period permitted and to the extent required by the applicable Environmental Law or the Governmental Authority responsible for enforcing such Environmental Law, remove or remedy, or cause the applicable Subsidiary to remove or remedy, such violation or release or satisfy such liability unless, and only during the period that, the applicability of the Environmental Law, the fact of such violation or liability or what is required to remove or remedy such violation is being contested by the Borrower or the applicable Subsidiary by appropriate proceedings diligently conducted and all reserves with respect thereto as may be required under GAAP, if any, have been made. IX.14. Indemnification. The Borrower hereby agrees to defend, indemnify and hold the Agent and the Lenders, and their respective officers, directors, employees and agents, harmless from and against any and all claims, losses, penalties, liabilities, damages and expenses (including, without limitation, assessment and cleanup costs and reasonable attorneys', consultants' and other experts' fees and disbursements) arising directly or indirectly from, out of or by reason of (a) the violation of any Environmental Law by the Borrower or any Subsidiary or with respect to any property owned, operated or leased by the Borrower or any Subsidiary or (b) the handling, storage, treatment, emission or disposal of any Hazardous Material by or on behalf of the Borrower or any Subsidiary on or with respect to property owned or leased or operated by the Borrower or any Subsidiary. The provisions of this Section 9.14 shall survive repayment of the Obligations, the occurrence of the Facility Termination Date and expiration or termination of this Agreement. IX.15. Further Assurances. At the Borrower's cost and expense upon request of the Agent, duly execute and deliver or cause to be duly executed and delivered, to the Agent such further instruments, documents, certificates, agreements, financing and continuation statements, and do and cause to be done such further acts that may be reasonably necessary or advisable in the reasonable opinion of the Agent to carry out more effectively the provisions and purposes of this Agreement and the other Loan Documents. IX.16. Employee Benefit Plans. With reasonable promptness, and in any event within thirty (30) days, the Borrower will give notice of and/or deliver to Agent copies of (a) the establishment of any new Employee Benefit Plan, (b) the commencement of contributions to any Pension Plan or Multiemployer Plan to which the Borrower or any of its ERISA Affiliates was not previously contributing, (c) any material increase in the benefits of any existing Employee 86 91 Benefit Plan, (d) each funding waiver request filed with respect to any Pension Plan and all communications received or sent by the Borrower or any ERISA Affiliate with respect to such request and (e) the failure of the Borrower or any ERISA Affiliate to make a required installment or payment under Section 302 of ERISA or Section 412 of the Code or any Foreign Benefit Law (in the case of an Employee Benefit Plan regulated by any Foreign Benefit Law) by the due date. IX.17. Termination Events. Promptly and in any event within ten (10) days of becoming aware of the occurrence of or forthcoming occurrence of any (a) Termination Event or (b) "prohibited transaction," as such term is defined in Section 406 of ERISA or Section 4975 of the Code, in connection with any Pension Plan or any trust created thereunder, the Borrower will deliver to Agent a notice specifying the nature thereof, what action the Borrower has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto. IX.18. ERISA Notices. With reasonable promptness but in any event within ten (10) days for purposes of clauses (a), (b) and (c), the Borrower will deliver to the Agent copies of (a) any favorable or unfavorable determination letter from the Internal Revenue Service regarding the qualification of an Employee Benefit Plan under Section 401(a) of the Code, (b) all notices received by the Borrower or any ERISA Affiliate of the PBGC's or any Governmental Authority's intent to terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan, (c) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by the Borrower or any ERISA Affiliate with the Internal Revenue Service with respect to each Pension Plan and (d) all notices received by the Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA. The Borrower will notify the Agent in writing within ten (10) Business Days of the Borrower obtaining knowledge or reason to know that the Borrower or any ERISA Affiliate has filed or intends to file a notice of intent to terminate any Pension Plan under a distress termination within the meaning of Section 4041(c) of ERISA. IX.19. Continued Operations. Continue at all times (a) to conduct its business and engage principally in the Core Business and (b) to preserve, protect and maintain free from Liens (other than Permitted Liens) its Intellectual Property. IX.20. Use of Proceeds. Use the proceeds of the Loans solely for the purposes specified in Sections 2.11 or 3.12 hereof. IX.21. New Subsidiaries; Minority Interests. (a) In the event of the acquisition or creation of any Subsidiary or Control Subsidiary (a "New Subsidiary"), cause to be delivered to the Agent for the benefit of the Lenders a Stock Pledge Agreement with respect to the Pledged Stock of such New Subsidiary substantially in the form of Exhibit G hereto within thirty (30) Business Days of the acquisition or creation of a Subsidiary; provided, however, that if such New 87 92 Subsidiary is a Foreign Subsidiary, such pledge of capital stock shall be limited to 65% of the outstanding voting stock of such New Subsidiary and shall only be required if it is a Direct Foreign Subsidiary or a Direct Foreign Control Subsidiary; (b) In the event of the acquisition or creation of any Domestic Subsidiary, cause to be delivered to the Agent for the benefit of the Lenders each of the following indicated to be delivered by such Subsidiary within thirty (30) Business Days of the acquisition or creation of such Subsidiary: (i) a Guaranty executed by such Subsidiary, substantially in the form of Exhibit J hereto; (ii) a Security Agreement executed by such Subsidiary, substantially in the form of Exhibit H hereto; (iii) if such Subsidiary has any material leased locations, a Landlord Waiver in the form of Exhibit M hereto; (iv) if such Subsidiary owns any real property, a Mortgage executed by such Subsidiary, substantially in the form of Exhibit O hereto; (v) if such Subsidiary owns any Intellectual Property, an Intellectual Property Security Agreement, executed by such Subsidiary, substantially in the form of Exhibit I hereto; (c) In the event of the acquisition or creation of any Subsidiary subject to the provisions of clauses (a) or (b) above, cause to be delivered to the Agent for the benefit of the Lenders each of the following within the time periods indicated therein: (i) an opinion of counsel to such Subsidiary dated as of the date of delivery of the other documents required to be delivered pursuant to this Section 9.21 and addressed to the Agent and the Lenders, in form and substance identical to the opinion of counsel delivered pursuant to Section 7.1 hereof on the Closing Date with respect to any Guarantor and the Pledged Stock; and (ii) current copies of the Organizational Documents and Operating Documents of such Subsidiary, minutes of duly called and conducted meetings (or duly effected consent actions) of the Board of Directors, or appropriate committees thereof (and, if required by such Organizational Documents or Operating Documents or by applicable laws, of the shareholders), of such Subsidiary authorizing the actions and the execution and delivery and performance of such Guaranty, Security Agreement, Stock Pledge Agreement, Intellectual Property Security Agreement or other agreement required under this 88 93 Section 9.21 and evidence satisfactory to the Agent (confirmation of the receipt of which will be provided by the Agent to the Lenders) that such Subsidiary is Solvent as of such date after giving effect to such Guaranty, Security Agreement, Stock Pledge Agreement, and, if applicable, Intellectual Property Security Agreement. (d) In the event (i) the Borrower or any Domestic Subsidiary creates or acquires any material minority investment in any Person or (ii) the Borrower owns any Salton/Maxim Shares after July 31, 1999, cause to be delivered to the Agent for the benefit of the Lenders (A) a Stock Pledge Agreement with respect to the equity interests (or the Salton/Maxim Shares, as applicable) of such Person owned by the Borrower or such Domestic Subsidiary (subject to the 65% limitation on pledging shares of Foreign Subsidiaries contained herein) substantially in the form of Exhibit G hereto and (B) an opinion of counsel dated as of the date of delivery of the other documents required to be delivered pursuant to this Section 9.21 and addressed to the Agent and the Lenders, in form and substance identical to the opinion of counsel delivered pursuant to Section 7.1 hereof on the Closing Date with respect to the Pledged Stock, all within thirty (30) Business Days of the acquisition or creation of such investment. 89 94 ARTICLE X Negative Covenants Until the occurrence of the Facility Termination Date, unless the Required Lenders shall otherwise consent in writing, the Borrower will not, nor will it permit any Subsidiary to: X.1. Indebtedness. Incur, create, assume or permit to exist any Indebtedness of the Borrower and its Subsidiaries determined on a consolidated basis, howsoever evidenced, except the following (collectively, the "Permitted Indebtedness"): (a) Indebtedness set forth in Schedule 8.6 hereto and incorporated herein by reference and any extension, renewal or refinancing thereof that does not increase the principal amount thereof or the interest rate payable thereon from that existing immediately prior to such extension, renewal or refinancing; provided, none of the instruments and agreements evidencing or governing such Indebtedness shall be amended, modified or supplemented after the Closing Date to change any terms of subordination, repayment or rights of conversion, put, exchange or other rights from such terms and rights as in effect on the Closing Date; (b) Indebtedness owing to the Agent or any Lender in connection with this Agreement, any Note or other Loan Document; (c) Indebtedness evidenced by the Subordinated Notes; (d) Indebtedness consisting of Hedging Obligations not prohibited under Section 10.9 hereof; (e) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (f) (i) purchase money Indebtedness and (ii) Indebtedness incurred with respect to financing of Capital Expenditures, collectively under both clause (i) and (ii) not to exceed an aggregate outstanding amount at any time of $5,000,000; (g) Indebtedness of any Guarantor owing to the Borrower or another Guarantor and Indebtedness of the Borrower owing to any Guarantor; (h) Indebtedness consisting of guaranties by the Borrower of Indebtedness permitted under Section 10.1(i) below; (i) additional Indebtedness incurred by any Foreign Subsidiary in an aggregate outstanding principal amount at any time not to exceed the difference of (A) 90 95 $80,000,000 less (B) the amount of any investments permitted under Section 10.3(f) hereof. X.2. Liens. Incur, create or permit to exist any pledge, Lien, charge or other encumbrance of any nature whatsoever with respect to any property or assets now owned or hereafter acquired by the Borrower or any of its Subsidiaries, including without limitation any capital stock of the Borrower or any of its Subsidiaries, other than any of the following (collectively, the "Permitted Liens"): (a) Liens existing as of the date hereof and as set forth in Schedule 8.7 attached hereto, provided, however, that any such Lien that is released after the date hereof may not thereafter re-attach or otherwise become permitted by this Section 10.2(a); (b) Liens imposed by law for taxes, assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (c) Liens in respect of purchase money Indebtedness permitted to be incurred pursuant to Section 10.1(f)(i) hereof in connection with the acquisition of certain tangible property; provided that (a) the original principal balance of the Indebtedness secured by such Lien constitutes not less than 80% nor more than 100% of the purchase price of the property acquired and (B) such Lien extends only to the property acquired with the proceeds of the Indebtedness so secured; (d) statutory Liens of landlords who are not subject to a Landlord Waiver and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law or created in the ordinary course of business and in existence less than 90 days from the date of creation thereof for amounts not yet due or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (e) Liens incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers' compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations or arising as a result of progress payments under government contracts; (f) easements (including, without limitation, reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, reservations, encroachments, variations and zoning and other restrictions, charges or encumbrances (whether or not 91 96 recorded), which do not interfere with the ordinary conduct of the business of the Borrower or any Subsidiary and do not impair the use of the property to which they attach to the extent that such interference or impairment would reasonably be expected to have a Material Adverse Effect; and (g) Liens on real property securing Indebtedness permitted under Section 10.1(a), (b), (f) or (i) hereof (subject to compliance with subsection (c) above in connection with purchase money Indebtedness). X.3. Investments; Acquisitions. Make any Acquisition or otherwise purchase, own, invest in or otherwise acquire, directly or indirectly, any stock or other securities, or make or permit to exist any interest whatsoever in any other Person or permit to exist any loans or advances to any Person, except that Borrower and its Subsidiaries may: (a) invest in Eligible Securities; (b) maintain investments, loans and advances existing as of the date hereof and as set forth in Schedule 8.4 hereto; (c) accept and maintain accounts receivable arising and trade credit granted in the ordinary course of business and retain any securities received in satisfaction or partial satisfaction thereof in connection with accounts of financially troubled Persons to the extent reasonably necessary in order to prevent or limit loss; (d) make and maintain loans and advances to and investments in Subsidiaries which are Guarantors; (e) consummate Permitted Acquisitions and mergers permitted under Section 10.4(a) hereof; (f) make and maintain loans, advances and investments in Foreign Subsidiaries in an aggregate principal amount at any time outstanding not to exceed $40,000,000. (g) make and maintain other loans, advances and investments in an aggregate principal amount at any time outstanding not to exceed $10,000,000. X.4. Merger or Transfer of Assets. (a) Consolidate with or merge into any other Person, or permit any other Person to merge into it; provided, however, (i) any Subsidiary may merge or transfer all or any part of its assets into or consolidate with the Borrower or any Domestic Subsidiary, in each case, provided the requirements of Article VI and Section 9.21 hereof 92 97 are complied with as of the effective date of the consummation of such merger, (ii) any Subsidiary may merge into another Person that is not a Subsidiary prior to such merger whereby such other Person is the surviving corporation provided the requirements of Article VI and Section 9.21 hereof are complied with and such other Person becomes a Subsidiary as of the effective date of the consummation of such merger and that such merger would be a Permitted Acquisition but for the Subsidiary not being the surviving corporation, (iii) any Direct Foreign Subsidiary may merge with or into any other Direct Foreign Subsidiary provided the requirements of Article VI and Section 9.21 hereof are complied with as of the effective date of the consummation of such merger, (iv) any Foreign Subsidiary which is not a Direct Foreign Subsidiary may merge with or into any other Foreign Subsidiary provided the requirements of Article VI and Section 9.21 hereof are complied with as of the effective date of the consummation of such merger and (v) the Borrower or any Subsidiary may make a Permitted Acquisition. (b) Sell, lease, transfer or otherwise dispose of any assets other than (i) dispositions of inventory in the ordinary course of business, (ii) dispositions of equipment which, in the aggregate during any Fiscal Year, have a fair market value or book value, whichever is less, of not more than three percent (3%) of Property, Plant and Equipment and Capitalized Software as shown on the consolidated balance sheet of the Borrower and its Subsidiaries adjusted to provide for the HPG Acquisition which is not replaced by equipment having at least equivalent value, (iii) dispositions of equipment which is replaced with equipment of like kind, function and value, provided the replacement equipment shall be acquired prior to or substantially contemporaneously with any disposition of the Equipment that is to be replaced, and the replacement equipment shall be free and clear of Liens other than Permitted Liens, (iv) dispositions of other assets which, in the aggregate during any Fiscal Year, have a fair market value or book value, whichever is less, of not more than one percent (1%) of Consolidated Shareholders' equity of Borrower and its Subsidiaries adjusted to provide for the HPG Acquisition and (v) any Equity Offering of authorized but unissued equity securities the Net Proceeds of which are subject to the terms of Section 2.6(b) hereof except as otherwise provided therein. X.5. Transactions with Affiliates. Other than transactions permitted under Sections 10.3 and 10.4 hereof, enter into any transaction after the Closing Date, including, without limitation, the purchase, sale, lease or exchange of property, real or personal, or the rendering of any service, with any Affiliate of the Borrower, except (a) that such Persons may render services or sell inventory to the Borrower or its Subsidiaries for compensation at the same rates generally paid by Persons engaged in the same or similar businesses for the same or similar services, (b) that the Borrower or any Subsidiary may render services or sell inventory to such Persons for compensation at the same rates generally charged by the Borrower or such Subsidiary and (c) in the ordinary course of and pursuant to the reasonable requirements of the Borrower's (or any Subsidiary's) business consistent with past practice of the Borrower and its Subsidiaries and upon fair and reasonable terms no less favorable to the Borrower (or any Subsidiary) than would 93 98 be obtained in a comparable arm's-length transaction with a Person not an Affiliate. X.6. Compliance with ERISA. With respect to any Pension Plan, Employee Benefit Plan or Multiemployer Plan: (a) permit the occurrence of any Termination Event which would result in a liability to the Borrower or any ERISA Affiliate in excess of $500,000; (b) permit the present value of all benefit liabilities under all Pension Plans (except as provided below) to exceed the current value of the assets of such Pension Plans allocable to such benefit liabilities (the "Excess Liabilities Value") by more than $500,000; (c) permit any accumulated funding deficiency in excess of $500,000 (as defined in Section 302 of ERISA and Section 412 of the Code) with respect to any Pension Plan, whether or not waived; (d) fail to make any contribution or payment to any Multiemployer Plan which the Borrower or any ERISA Affiliate may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto which results in or is likely to result in a liability in excess of $500,000; or (e) engage, or permit any Borrower or any ERISA Affiliate to engage, in any prohibited transaction under Section 406 of ERISA or Sections 4975 of the Code for which a civil penalty pursuant to Section 502(i) of ERISA or a tax pursuant to Section 4975 of the Code may be imposed; or (f) permit the establishment of any Employee Benefit Plan providing post-retirement welfare benefits or establish or amend any Employee Benefit Plan which establishment or amendment could result in liability to the Borrower or any ERISA Affiliate or increase the obligation of the Borrower or any ERISA Affiliate to a Multiemployer Plan which liability or increase, individually or together with all similar liabilities and increases, is in excess of $500,000; or (g) fail, or permit the Borrower or any ERISA Affiliate to fail, to establish, maintain and operate each Employee Benefit Plan in compliance in all material respects with the provisions of ERISA, the Code, all applicable Foreign Benefit Law and all other applicable laws and the regulations and interpretations thereof. X.7. Fiscal Year. Change the Borrower's Fiscal Year. X.8. Dissolution, etc. Wind up, liquidate or dissolve (voluntarily or involuntarily) or commence or suffer any proceedings seeking any such winding up, liquidation or dissolution, 94 99 except in connection with the merger or consolidation of Subsidiaries into each other or into a Borrower permitted pursuant to Section 10.4 hereof. X.9. Hedging Obligations. Incur any Hedging Obligations or enter into any agreements, arrangements, devices or instruments relating to Hedging Obligations, except for Hedging Obligations entered into in the ordinary course of business which are not for speculative or investment purposes. X.10. Dividends, Redemptions and Other Payments. (a) Declare or pay any cash dividends or make any other payment or distribution on account of its capital stock (other than dividends payable in the ordinary course of business solely in Common Stock) on any shares of stock of any class of the Borrower, now or hereafter outstanding, or (b) purchase, redeem (whether mandatory or optional redemption) or otherwise retire any such shares or interests in consideration of cash or any debt instrument (whether or not subordinated) or shares of capital stock issued by any Subsidiary of the Borrower, or apply or set apart any of their assets therefor or make any other distribution (by redemption of capital or otherwise) in respect of any such shares, or agree to do any of the foregoing, other than (i) dividends payable by any Subsidiary to another Subsidiary or to the Borrower and (ii) the purchase or redemption of capital stock of employees pursuant to an Approved Stock Option Plan so long as (A) the aggregate amount paid in connection with such purchase or redemption during any twelve month period does not exceed $500,000 and (B) no Default or an Event of Default exist after giving effect to such purchase or redemption. X.11. Subordinated Debt. (a) Pay or prepay, or set aside any cash or other assets to pay or prepay, (i) all or any part of the principal amount owing with respect of the Subordinated Bridge Debt or the Permanent Subordinated Notes or (ii) any interest, premium or other amounts in respect to the Subordinated Bridge Debt or the Permanent Subordinated Notes other than in accordance with the terms of the Bridge Loan Agreement and the Indenture; provided, however, that the Subordinated Bridge Debt may be refinanced and replaced by the Permanent Subordinated Notes in connection with the consummation of the Permanent Junior Financing. (b) Materially amend the provisions of or terminate (other than in connection with the full and final payment of the Subordinated Bridge Debt or the Permanent Subordinated Notes) the Bridge Loan Documents or the Permanent Junior Financing Documents without the prior written consent of the Required Lenders. X.12. Defaults Under Other Agreements. Permit any landlord, mortgagee, trustee under deed of trust or lienholder to lawfully declare a default under any lease, mortgage, deed of trust or lien instrument on real estate owned or leased by the Borrower or any Guarantor or permit any landlord to lawfully terminate, prior to the expiration of its term, any leasehold interest of the 95 100 Borrower or any Guarantor, if such default or termination, individually or collectively, would reasonably be expected to result in a Material Adverse Effect. X.13. Compensation; Reimbursement of Expenses. (a) Pay any salary, fees, and other direct and indirect remuneration and compensation to any of its directors and executive officers in an amount in excess of those amounts paid to directors and executive officers of comparable companies engaged in the same general type of business and in similar financial condition. (b) Reimburse any stockholder, officer, director, employee or agent of the Borrower or any Guarantor for any expenses incurred by such Person other than reasonable expenses incurred for or on behalf of the Borrower or any Guarantor in the ordinary course of business. X.14. Change in Accountants. Change its independent public accountants to any Person other than Grant Thornton LLP, Price Waterhouse, L.L.P., Deloitte & Touche, L.L.P., KPMG Peat Marwick, L.L.P., Arthur Andersen & Co., L.L.P., Coopers & Lybrand, L.L.P. or Ernst & Young, L.L.P., or any successor to any thereof as a result of their combination. X.15. Limitations on Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by the Borrower or any Guarantor of real or personal property which has been or is to be sold or transferred by the Borrower or any Guarantor to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or any Guarantor. X.16. Negative Pledge Clauses. Enter into any agreement other than this Agreement and the other Loan Documents and the Junior Financing Documents which prohibits or limits the ability of any of the Borrower or any Guarantor to create, incur, assume or suffer to exist any Lien, security interest or encumbrance upon any of its property, assets or revenues, whether now owned or hereafter acquired. X.17. Intellectual Property. Cause or permit any of the licenses, trademarks, patents, copyrights, or other Intellectual Property of the Borrower or its Subsidiaries to be sub-licensed, assigned or transferred or subject to any encumbrance or interest, other than in favor of the Agent for the benefit of the Lenders hereunder or, with respect to sub-licenses only, to manufacturers and distributors of Inventory in the ordinary course of business as currently conducted. X.18. Licenses. Grant, establish, create or permit to exist any license of any of the Intellectual Property to any Person except for (i) such licenses granted for the limited purpose of conducting sales or marketing promotions in the ordinary course of business of existing or new products for a reasonable, limited time period, (ii) such licenses approved by the Required Lenders in writing prior to the granting thereof within 30 days after request therefor, such 96 101 approval not to be unreasonably withheld, and (iii) such licenses granted to any Material Subsidiary party to the Intellectual Property Security Agreement which has delivered an appropriate Intellectual Property Assignment executed in blank with respect to such license. X.19. Amendment of Documents. Materially amend, supplement or replace, or waive any of the material terms or provisions of, (a) any Material Contract, (b) the Transaction Documents, (c) the Bridge Loan Agreement or (d) the Organizational Documents or Operating Documents of the Borrower without the prior written consent of the Agent and the Required Lenders. X.20. Limitations on Certain Restrictive Covenants. Neither the Borrower nor any Subsidiary shall enter into, or permit to exist, with any Person any agreement (other than this Agreement) which prohibits or limits the ability of any Subsidiary to declare or pay any dividend or make any loan to or investment in the Borrower or any other owner of such Subsidiary. X.21. Limitations on Business Activities. The Borrower will not conduct any business or engage in any activity or hold any assets other than holding the shares of capital stock of its Subsidiaries and administrative activities directly related thereto. X.22. Financial Covenants. (a) Consolidated Net Worth. Permit at any time Consolidated Net Worth to be less than 90% of Consolidated Net Worth at June 30, 1998, such amount to be increased as at the first day of each fiscal quarter, beginning with the fiscal quarter beginning October 1, 1998, by an amount equal to (a) seventy-five percent (75%) of Consolidated Net Income during the immediately preceding fiscal quarter, plus (b) one hundred percent (100%) of the Net Proceeds of any Equity Offering consummated during the immediately preceding fiscal quarter; provided, however, in no event shall the Consolidated Net Worth requirement be decreased as a result of a net loss of the Borrower and its Subsidiaries (i.e., negative Consolidated Net Income) for any fiscal quarter, except that Consolidated Net Worth may be reduced by the actual amount of non-cash charges incurred in connection with the HPG Acquisition up to but not exceeding $25,000,000. Any increase calculated pursuant hereto shall be determined based upon financial statements delivered in accordance with Section 9.1(a) and (b) hereof; provided, however such increase shall be deemed effective as of the first day of the fiscal quarter in which such financial statements are delivered or required to be delivered, if earlier. (b) During the period prior to the refinancing of the Subordinated Bridge Notes with the Permanent Junior Financing: (i) Consolidated Fixed Charge Coverage Ratio. Permit Consolidated Fixed Charge Coverage Ratio to be less than the ratio indicated below at any time during the period indicated: 97 102 Closing Date through third fiscal quarter 1999 1.00 to 1.00 Fourth fiscal quarter 1999 and thereafter 1.25 to 1.00
(ii) Consolidated Interest Coverage Ratio. Permit Consolidated Interest Coverage Ratio to be less than the ratio indicated below at any time during the period indicated: Closing Date through first fiscal quarter 1999 1.75 to 1.00 Second fiscal quarter 1999 through third fiscal quarter 1999 1.50 to 1.00 Fourth fiscal quarter 1999 through third fiscal quarter 2000 1.75 to 1.00 Fourth fiscal quarter 2000 and thereafter 2.00 to 1.00
(iii) Consolidated Leverage Ratio. Permit Consolidated Leverage Ratio to be greater than the ratio indicated below at any time during the period indicated: Second fiscal quarter 1999 6.50 to 1.00 Third fiscal quarter 1999 6.80 to 1.00 Fourth fiscal quarter 1999 through first fiscal quarter 2000 5.00 to 1.00 Second fiscal quarter 2000 5.50 to 1.00 Third fiscal quarter 2000 5.75 to 1.00 Fourth fiscal quarter 2000 through second fiscal quarter 2001 4.00 to 1.00 Third fiscal quarter 2001 4.50 to 1.00
98 103 Fourth fiscal quarter 2001 and thereafter 3.50 to 1.00
(iv) Consolidated EBITDA. Permit Consolidated EBITDA to be less than the amount indicated below at the date indicated: Third fiscal quarter end 1998 $23,000,000 Fourth fiscal quarter end 1998 $54,000,000 First fiscal quarter end 1999 $60,000,000
(v) Total Indebtedness. Permit the aggregate amount of Indebtedness owing by the Borrower and its Subsidiaries on a consolidated basis, less the outstanding amount of the Subordinated Bridge Notes, to exceed $355,000,000 at any time. (c) During the period on or after the consummation of the refinancing of the Subordinated Bridge Notes with the Permanent Junior Financing: (i) Consolidated Fixed Charge Coverage Ratio. Permit Consolidated Fixed Charge Coverage Ratio to be less than the ratio indicated below at any time during the period indicated: Closing Date through third fiscal quarter 1999 1.00 to 1.00 Fourth fiscal quarter 1999 through third fiscal quarter 2000 1.25 to 1.00 Fourth fiscal quarter 2000 and thereafter 1.50 to 1.00
(ii) Consolidated Interest Coverage Ratio. Permit Consolidated Interest Coverage Ratio to be less than the ratio indicated below at any time during the period indicated: Closing Date through third fiscal quarter 1999 2.00 to 1.00 Fourth fiscal quarter 1999 through third fiscal quarter 2000 2.50 to 1.00 Fourth fiscal quarter 2000 and thereafter 3.00 to 1.00
99 104 (iii) Consolidated Leverage Ratio. Permit Consolidated Leverage Ratio to be greater than the ratio indicated below at any time during the period indicated: Second fiscal quarter 1999 5.50 to 1.00 Third fiscal quarter 1999 6.00 to 1.00 Fourth fiscal quarter 1999 through first fiscal quarter 2000 4.00 to 1.00 Second fiscal quarter 2000 Through third fiscal quarter 2000 4.50 to 1.00 Fourth fiscal quarter 2000 through second fiscal quarter 2001 3.00 to 1.00 Third fiscal quarter 2001 3.50 to 1.00 Fourth fiscal quarter 2001 and thereafter 3.00 to 1.00
(iv) Consolidated EBITDA. Permit Consolidated EBITDA to be less than the amount indicated below at the date indicated: Third fiscal quarter end 1998 $23,000,000 Fourth fiscal quarter end 1998 $54,000,000 First fiscal quarter end 1999 $60,000,000
(v) Total Indebtedness. Permit the aggregate amount of Indebtedness owing by the Borrower and its Subsidiaries on a consolidated basis, less the outstanding amount of the Permanent Subordinated Notes, to exceed $335,000,000 at any time. 100 105 ARTICLE XI Events of Default and Acceleration XI.1. Events of Default. If any one or more of the following events (herein called "Events of Default") shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Authority), that is to say: (a) if default shall be made in the due and punctual payment of the principal of any Loan, Reimbursement Obligation or other Obligation, when and as the same shall be due and payable whether pursuant to any provision of Article II, Article III or Article IV, at maturity, by acceleration or otherwise; or (b) if default shall be made in the due and punctual payment of any amount of interest on any Loan, Reimbursement Obligation or other Obligation or of any fees or other amounts payable to any of the Lenders, the Issuing Bank or the Agent on the date on which the same shall be due and payable; or (c) if default shall be made in the performance or observance of any covenant set forth in Sections 9.7, 9.10, 9.20, 9.21 and Article X; or (d) if a default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in this Agreement or the Notes (other than as described in clauses (a) or (b) above) and such default shall continue for 30 or more days after the earlier of receipt of notice of such default by the Authorized Representative from the Agent or an officer of the Borrower becomes aware of such default, or if a default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in any of the other Loan Documents (beyond any applicable grace period, if any, contained therein) or in any instrument or document evidencing or creating any obligation, guaranty, or Lien in favor of the Agent or any of the Lenders or delivered to the Agent or any of the Lenders in connection with or pursuant to this Agreement or any of the Obligations, or if any Loan Document ceases to be in full force and effect (other than in accordance with its terms in the absence of default or with the consent of the Agent and the Lenders), or if without the written consent of the Lenders, this Agreement or any other Loan Document shall be disaffirmed or shall terminate, be terminable or be terminated or become void or unenforceable for any reason whatsoever (other than in accordance with its terms in the absence of default or with the consent of the Agent and the Lenders); or (e) if there shall occur (i) a default, which is not waived, in the payment of any principal, interest, premium or other amount with respect to any Indebtedness (other 101 106 than the Loans and other Obligations) of the Borrower or any of its Subsidiaries in an amount not less than $500,000 in the aggregate outstanding, or (ii) a default, which is not waived, in the performance, observance or fulfillment of any term or covenant contained in any agreement or instrument under or pursuant to which any such Indebtedness may have been issued, created, assumed, guaranteed or secured by the Borrower or any of their Subsidiaries, or (iii) any other event of default as specified in any agreement or instrument under or pursuant to which any such Indebtedness may have been issued, created, assumed, guaranteed or secured by the Borrower or any of its Subsidiaries, and such default or event of default shall continue for more than the period of grace, if any, therein specified, or such default or event of default shall permit the holder of any such Indebtedness (or any agent or trustee acting on behalf of one or more holders) to accelerate the maturity thereof; or (f) if any representation, warranty or other statement of fact contained in any Loan Document or in any writing, certificate, report or statement at any time furnished to the Agent or any Lender by or on behalf of the Borrower or any of its Subsidiaries pursuant to or in connection with any Loan Document, or otherwise, shall be false or misleading in any material respect when given; or (g) if the Borrower or any of its Subsidiaries shall be unable to pay its debts generally as they become due; file a petition to take advantage of any insolvency statute; make an assignment for the benefit of its creditors; commence a proceeding for the appointment of a receiver, trustee, liquidator or conservator of itself or of the whole or any substantial part of its property; file a petition or answer seeking liquidation, reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute; or (h) if a court of competent jurisdiction shall enter an order, judgment or decree appointing a custodian, receiver, trustee, liquidator or conservator of the Borrower or any of its Subsidiaries or of the whole or any substantial part of its properties and such order, judgment or decree continues unstayed and in effect for a period of sixty (60) days, or approve a petition filed against the Borrower or any of its Subsidiaries seeking liquidation, reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state, which petition is not dismissed within sixty (60) days; or if, under the provisions of any other law for the relief or aid of debtors, a court of competent jurisdiction shall assume custody or control of the Borrower or any of its Subsidiaries or of the whole or any substantial part of any of its properties, which control is not relinquished within sixty (60) days; or if there is commenced against the Borrower or any of its Subsidiaries any proceeding or petition seeking reorganization, arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state which proceeding or petition remains undismissed for a period of sixty (60) days; or if the Borrower or any of its Subsidiaries takes any action to indicate its consent to or approval of any such proceeding or petition; or 102 107 (i) if (i) one or more judgments or orders where the amount not covered by insurance (or the amount as to which the insurer denies liability) is in excess of $1,000,000 is rendered against the Borrower or any of its Subsidiaries, or (ii) there is any attachment, injunction or execution against any of the Borrower's or its Subsidiaries' or properties for any amount in excess of $1,000,000 in the aggregate; and such judgment, attachment, injunction or execution remains unpaid, unstayed, undischarged, unbonded or undismissed for a period of thirty (30) days; or (j) if the Borrower or any of its Subsidiaries shall suspend all or any part of its operations material to the conduct of the business of the Borrower and its Subsidiaries taken as a whole; or (k) if the Borrower merges into another Person or dissolves; (l) if there shall occur and not be waived an Event of Default as defined in any of the other Loan Documents; or (m) if any Event of Default as defined in any of the Bridge Loan Documents or the Permanent Junior Financing Documents shall occur; or (n) if any Person or group of Persons acting in concert, other than the owners of more than 10% of outstanding securities of the Borrower as of Closing Date having voting rights in the election of directors, shall own or control, directly or indirectly, more than 30% of the outstanding securities of the Borrower having voting rights in the election of directors, in each case to be determined on a fully diluted basis and taking into account any outstanding securities or contract rights exercisable, exchangeable or convertible into equity interests; or (o) if (i) the Borrower or any Subsidiary shall fail (A) to implement or complete any material action or process constituting a portion of the Year 2000 Compliance Plan on the date set forth for implementation or completion of such action or process and such failure shall continue for a period of 30 or more days or (B) to be Year 2000 Compliant on or after 90 days prior to year 2000; or (ii) any Related Business Party (A) shall notify the Borrower that it will not or reasonably does not expect to be Year 2000 Compliant prior to January 1, 2000 or (B) shall fail to be Year 2000 Compliant on or after 90 days prior to January 1, 2000; or (p) if the Kmart Agreement shall be terminated or any amendment thereof is entered into by the parties thereto without the consent of the Agent and such termination or amendment has or could reasonably be expected to have a Material Adverse Effect; or 103 108 (q) if the report of the field examination of the assets of the Borrower is not completed with results satisfactory to the Agent within 90 days after the Closing Date; or (r) if the the acquistion of the Queretero, Mexico property is not consummated in accordance with the terms of the Transaction Agreement on or before August 31, 1998; or (s) if the Black & Decker License Agreement shall (i) be modified in any material respect having an adverse effect on the Borrower without the written consent of the Agent or (ii) terminate, or the license granted thereunder shall terminate, for any reason prior to the expiration of the Initial Term (as defined in the Black & Decker License Agreement); then, and in any such event and at any time thereafter, if such Event of Default or any other Event of Default shall have not been waived, (A) either or both of the following actions may be taken: (i) the Agent, with the consent of the Required Lenders, may, and at the direction of the Required Lenders shall, declare any obligation of the Lenders and the Issuing Bank to make further Revolving Loans and Swing Line Loans or to issue additional Letters of Credit terminated, whereupon the obligation of each Lender to make further Revolving Loans, of NationsBank to make further Swing Line Loans, and of the Issuing Bank to issue additional Letters of Credit, hereunder shall terminate immediately, and (ii) the Agent shall at the direction of the Required Lenders, at their option, declare by notice to the Borrower any or all of the Obligations to be immediately due and payable, and the same, including all interest accrued thereon and all other obligations of the Borrower to the Agent and the Lenders, shall forthwith become immediately due and payable without presentment, demand, protest, notice or other formality of any kind, all of which are hereby expressly waived, anything contained herein or in any instrument evidencing the Obligations to the contrary notwithstanding; provided, however, that notwithstanding the above, if there shall occur an Event of Default under clause (g) or (h) above, then the obligation of the Lenders to make Revolving Loans, of NationsBank to make Swing Line Loans, and of the Issuing Bank to issue Letters of Credit hereunder shall automatically terminate and any and all of the Obligations shall be immediately due and payable without the necessity of any action by the Agent or the Required Lenders or notice to the Agent or the Lenders; (B) the Borrower shall, upon demand of the Agent or the Required Lenders, deposit cash with the Agent in an amount equal to the amount of any Letter of Credit Outstandings, as collateral security for the repayment 104 109 of any future drawings or payments under such Letters of Credit, and such amounts shall be held by the Agent pursuant to the terms of the LC Account Agreement; and (C) the Agent and each of the Lenders shall have all of the rights and remedies available under the Loan Documents or under any applicable law. XI.2. Agent to Act. In case any one or more Events of Default shall occur and not have been waived, the Agent may, and at the direction of the Required Lenders shall, proceed to protect and enforce their rights or remedies either by suit in equity or by action at law, or both, whether for the specific performance of any covenant, agreement or other provision contained herein or in any other Loan Document, or to enforce the payment of the Obligations or any other legal or equitable right or remedy. XI.3. Cumulative Rights. No right or remedy herein conferred upon the Lenders or the Agent is intended to be exclusive of any other rights or remedies contained herein or in any other Loan Document, and every such right or remedy shall be cumulative and shall be in addition to every other such right or remedy contained herein and therein or now or hereafter existing at law or in equity or by statute, or otherwise. XI.4. No Waiver. No course of dealing between the Borrower and any Lender or the Agent or any failure or delay on the part of any Lender or the Agent in exercising any rights or remedies under any Loan Document or otherwise available to it shall operate as a waiver of any rights or remedies and no single or partial exercise of any rights or remedies shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or of the same right or remedy on a future occasion. XI.5. Allocation of Proceeds. If an Event of Default has occurred and not been waived, and the maturity of the Notes has been accelerated pursuant to this Article XI, all payments received by the Agent hereunder, in respect of any principal of or interest on the Obligations or any other amounts payable by the Borrower hereunder, shall be applied by the Agent in the following order: (a) amounts due to the Lenders pursuant to Sections 3.10, 4.3, 4.4 and 13.5 hereof; (b) amounts due to the Agent pursuant to Section 12.8 hereof; (c) payments of interest on Loans and Reimbursement Obligations, to be applied for the ratable benefit of the Lenders; (d) payments of principal of Loans and Reimbursement Obligations, to be applied for the ratable benefit of the Lenders; 105 110 (e) payments of cash amounts to the Agent in respect of outstanding Letters of Credit pursuant to Section 11.1 hereof; (f) amounts due to the Agent, the Issuing Bank and/or Lenders pursuant to Sections 4.2(g) and 12.9 hereof; (g) payments of all other amounts due under any of the Loan Documents, if any, to be applied for the ratable benefit of the Lenders; (h) payments of amount due to Lenders under any Swap Agreement; (i) any surplus remaining after application as provided for herein, to the Borrower or otherwise as may be required by applicable law. 106 111 ARTICLE XII The Agent XII.1. Appointment, Powers, and Immunities. Each Lender hereby irrevocably appoints and authorizes the Agent to act as its agent under this Agreement and the other Loan Documents with such powers and discretion as are specifically delegated to the Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. The Agent (which term as used in this sentence and in Section 12.5 hereof and the first sentence of Section 12.6 hereof shall include its affiliates and its own and its affiliates' officers, directors, employees, and agents): (a) shall not have any duties or responsibilities except those expressly set forth in this Agreement and shall not be a trustee or fiduciary for any Lender; (b) shall not be responsible to the Lenders for any recital, statement, representation, or warranty (whether written or oral) made in or in connection with any Loan Document or any certificate or other document referred to or provided for in, or received by any of them under, any Loan Document, or for the value, validity, effectiveness, genuineness, enforceability, or sufficiency of any Loan Document, or any other document referred to or provided for therein or for any failure by any Loan Party or any other Person to perform any of its obligations thereunder; (c) shall not be responsible for or have any duty to ascertain, inquire into, or verify the performance or observance of any covenants or agreements by any Loan Party or the satisfaction of any condition or to inspect the property (including the books and records) of any Loan Party or any of its Subsidiaries or affiliates; (d) shall not be required to initiate or conduct any litigation or collection proceedings under any Loan Document; and (e) shall not be responsible for any action taken or omitted to be taken by it under or in connection with any Loan Document, except for its own gross negligence or willful misconduct. The Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. Each Lender hereby irrevocably designates and appoints NationsBank as the Agent for the Lenders under this Agreement, and each of the Lenders hereby irrevocably authorizes NationsBank as the Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers as are expressly delegated to the Agent by the terms of this Agreement and such other Loan Documents, together with such other powers as are reasonably incidental thereto. The Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any of the Lenders, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. XII.2. Reliance by Agent. The Agent shall be entitled to rely upon any certification, notice, instrument, writing, or other communication (including, without limitation, any thereof by telephone or telefacsimile) believed by it to be genuine and correct and to have been signed, sent or made by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel (including counsel for any Loan Party), independent accountants, and other experts 107 112 selected by the Agent. The Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until the Agent receives and accepts an Assignment and Acceptance executed in accordance with Section 13.1 hereof. As to any matters not expressly provided for by this Agreement, the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding on all of the Lenders; provided, however, that the Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to any Loan Document or applicable law or unless it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking any such action. XII.3. Defaults. The Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or Event of Default unless the Agent has received written notice from a Lender or the Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default". In the event that the Agent receives such a notice of the occurrence of a Default or Event of Default, the Agent shall give prompt notice thereof to the Lenders. The Agent shall (subject to Section 12.2 hereof) take such action with respect to such Default or Event of Default as shall reasonably be directed by the Required Lenders, provided that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interest of the Lenders. XII.4. Rights as Lender. With respect to its Revolving Credit Commitment and the Loans made by it, NationsBank (and any successor acting as Agent) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include the Agent in its individual capacity. NationsBank (and any successor acting as Agent) and its affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to, make investments in, provide services to, and generally engage in any kind of lending, trust, or other business with any Credit Party or any of its Subsidiaries or affiliates as if it were not acting as Agent, and NationsBank (and any successor acting as Agent) and its affiliates may accept fees and other consideration from any Credit Party or any of its Subsidiaries or affiliates for services in connection with this Agreement or otherwise without having to account for the same to the Lenders. XII.5. Indemnification. The Lenders agree to indemnify the Agent (to the extent not reimbursed under Section 13.5 hereof, but without limiting the obligations of the Borrower under such Section) ratably in accordance with their respective Revolving Credit Commitments, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees), or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Agent (including by any Lender) in any way relating to or arising out of any Loan Document or the transactions contemplated thereby or 108 113 any action taken or omitted by the Agent under any Loan Document; provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Person to be indemnified. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any costs or expenses payable by the Borrower under Section 13.5 hereof, to the extent that the Agent is not promptly reimbursed for such costs and expenses by the Borrower. The agreements contained in this Section shall survive the Facility Termination Date and the expiration or termination of this Agreement. XII.6. Non-Reliance on Agent and Other Lenders. Each Lender agrees that it has, independently and without reliance on the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Credit Parties and its Subsidiaries and decision to enter into this Agreement and that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under the Loan Documents. Except for notices, reports, and other documents and information expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition, or business of any Credit Party or any of its Subsidiaries or affiliates that may come into the possession of the Agent or any of its affiliates. XII.7. Resignation of Agent. The Agent may resign at any time by giving notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Agent meeting the requirements set forth herein. The Borrower shall have the right to approve such Agent so long as no Default or Event of Default exist. If no successor Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a commercial bank organized under the laws of the United States of America having combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor, such successor shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges, and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article XI shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. XII.8. Fees. The Borrower agrees to pay to the Agent, for its individual account, an annual Agent's fee as from time to time agreed to by the Borrower and Agent in writing. 109 114 ARTICLE XIII Miscellaneous XIII.1. Assignments and Participations. (a) Each Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Loans, its Note, and its Commitment); provided, however, that (i) each such assignment shall be to an Eligible Assignee; (ii) except in the case of an assignment to another Lender, an Affiliate of a Lender, or Approved Fund or an assignment of all of a Lender's rights and obligations under this Agreement, any such partial assignment shall be in an amount at least equal to $5,000,000 or an integral multiple of $1,000,000 (or if less, the entire remaining amount of such Lender's Revolving Credit Commitment, Term Loan A Commitment, Term Loan B Commitment or Term Loan C Commitment) in excess thereof; (iii) each such assignment by a Lender with respect to the Revolving Credit Facility shall be of a constant, and not varying, percentage of all of its rights and obligations under the Revolving Credit Facility and Letter of Credit Facility and the Revolving Note; (iv) each such assignment by a Lender with respect to the Term Loan A Facility shall be of a constant, and not varying, percentage of all of its rights and obligations under the Term Loan A Facility and the Term Note A; (v) each assignment by a Lender with respect to the Term Loan B Facility shall be a constant, and not varying, percentage of all of its rights and obligations under the Term Loan B Facility and the Term Note B; (vi) each assignment by a Lender with respect to the Term Loan C Facility shall be a constant, and not varying, percentage of all of its rights and obligations under the Term Loan C Facility and the Term Note C; and (vii) the parties to such assignment shall execute and deliver to the Agent for its acceptance an Assignment and Acceptance in the form of Exhibit B hereto, together with any Note subject to such assignment and a processing fee of $3,500. 110 115 Upon execution, delivery, and acceptance of such Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of such assignment, have the obligations, rights, and benefits of a Lender hereunder and the assigning Lender shall, to the extent of such assignment, relinquish its rights and be released from its obligations under this Agreement. Upon the consummation of any assignment pursuant to this Section, the assignor, the Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the assignor and the assignee. If the assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Agent certification as to exemption from deduction or withholding of Taxes in accordance with Section 6.6 hereof. (b) The Agent shall maintain at its address referred to in Section 13.2 hereof a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (c) Upon its receipt of an Assignment and Acceptance executed by the parties thereto, together with any Note subject to such assignment and payment of the processing fee, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit B hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the parties thereto. (d) Each Lender may sell participations to one or more Persons in all or a portion of its rights, obligations or rights and obligations under this Agreement (including all or a portion of its Commitment or its Loans); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the right of set-off contained in Section 13.3 hereof, and (iv) the Borrower shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrower relating to its Loans and its Notes and to approve any amendment, modification, or waiver of any provision of this Agreement; provided, however, that consent of the participant may be required for amendments, modifications, or waivers decreasing the amount of principal of or the rate at which interest is payable on such Loans or Notes, extending any scheduled principal payment date or date fixed for the payment of interest on such Loans or Notes, or extending or increasing its Commitment). 111 116 (e) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time assign and pledge all or any portion of its Loans and its Note to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. (f) Any Lender may furnish any information concerning the Borrower or any of its Subsidiaries in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants), subject, however, to the provisions of Section 13.9 hereof. XIII.2. Notices. Any notice shall be conclusively deemed to have been received by any party hereto and be effective (i) on the day on which delivered (including hand delivery by commercial courier service) to such party (against receipt therefor), (ii) on the date of receipt at such address, telefacsimile number or telex number as may from time to time be specified by such party in written notice to the other parties hereto or otherwise received), in the case of notice by telegram, telefacsimile or telex, respectively (where the receipt of such message is verified by return), or (iii) on the fifth Business Day after the day on which mailed, if sent prepaid by certified or registered mail, return receipt requested, in each case delivered, transmitted or mailed, as the case may be, to the address, telex number or telefacsimile number, as appropriate, set forth below or such other address or number as such party shall specify by notice hereunder: (a) if to the Borrower: Windmere-Durable Holdings, Inc. 5980 Miami Lakes Drive Miami Lakes, Florida 33014 Attn: Chief Financial Officer Telephone: (305) 362-2611 Telefacsimile: (305) 364-0635 (b) if to the Agent: NationsBank, National Association Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Cindy Harmon, Agency Services Telephone: (704) 386-8451 Telefacsimile: (704) 386-9923 with a copy to: 112 117 NationsBank, National Association NationsBank Tower 100 Southeast 2nd Street, 14th Floor Miami, Florida 33131 Attention: Corporate Finance Telephone: (305) 533-2418 Telefacsimile: (305) 523-2437 (c) if to the Lenders: At the addresses set forth on the signature pages hereof and on the signature page of each Assignment and Acceptance; (d) if to any other Credit Party, at the address set forth on the signature page of the Facility Guaranty or Security Instrument executed by such Credit Party, as the case may be. XIII.3. Right of Set-off; Adjustments (a) Upon the occurrence and during the continuance of any Event of Default, each Lender (and each of its affiliates) is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender (or any of its affiliates) to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement and the Note held by such Lender, irrespective of whether such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have. (b) If any Lender (a "benefitted Lender") shall at any time receive any payment of all or part of the Loans owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans owing to it, or interest thereon, such benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loans owing to it, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds 113 118 thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Borrower agrees that any Lender so purchasing a participation from a Lender pursuant to this Section 13.3 may, to the fullest extent permitted by law, exercise all of its rights of payment (including the right of set-off) with respect to such participation as fully as if such Person were the direct creditor of the Borrower in the amount of such participation. XIII.4. Survival. All covenants, agreements, representations and warranties made herein shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit and the execution and delivery to the Lenders of this Agreement and the Notes and shall continue in full force and effect so long as any of Obligations remain outstanding or any Lender has any commitment hereunder or the Borrower has continuing obligations hereunder unless otherwise provided herein. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such party and all covenants, provisions and agreements by or on behalf of the Borrower which are contained in the Loan Documents shall inure to the benefit of the successors and permitted assigns of the Lenders or any of them. XIII.5. Expenses; Indemnification. (a) The Borrower agrees to pay on demand all costs and expenses of the Agent in connection with the syndication of the facilities and the preparation, execution, delivery, administration, modification or amendment of this Agreement, the other Loan Documents and the other documents to be delivered hereunder, including, without limitation, the reasonable fees and expenses of counsel for the Agent with respect thereto and with respect to advising the Agent as to its rights and responsibilities under the Loan Documents. The Borrower acknowledges that NationsBank and NMS on behalf of the Borrower will cause a substantial portion of the Commitments to be acquired by other financial institutions subsequent to the Closing Date. NationsBank, at the request of the Borrower and in order to expedite the HPG Acquisition, has agreed to provide all the Commitments at the Closing Date. The Borrower agrees that during a period of up to 90 days following the Closing Date one or more assignments of portions of the Commitments will occur and that to the extent the Borrower has outstanding Eurodollar Rate Loans the Borrower will likely incur additional costs, fees and charges under Section 6.5 hereof. The Borrower agrees to immediately reimburse the Agent and NationsBank for any such costs, fees and charges. In addition, the Borrower agrees that the incurrence of such costs, fees and charges shall not be the basis for the Borrower withholding its consent or approval of any Person as an Eligible Assignee. The Borrower further agrees to pay on demand all costs and expenses of the Agent and the Lenders, if 114 119 any (including, without limitation, reasonable attorneys' fees and expenses), in connection with the enforcement (whether through negotiations, legal proceedings, or otherwise) of the Loan Documents and the other documents to be delivered hereunder. (b) The Borrower agrees to indemnify and hold harmless the Agent and each Lender and each of their affiliates and their respective officers, directors, employees, agents, and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities, costs, and expenses (including, without limitation, reasonable attorneys' fees) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation, or proceeding or preparation of defense in connection therewith) the Loan Documents, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Loans, except to the extent such claim, damage, loss, liability, cost, or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 13.5 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower, its directors, shareholders or creditors or an Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. The Borrower agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to it, any of its Subsidiaries, any Guarantor, or any security holders or creditors thereof arising out of, related to or in connection with the transactions contemplated herein, except to the extent that such liability is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified party's gross negligence or willful misconduct; provided, however, in no event shall any Indemnified Party be liable for punitive, consequential, indirect or special damages, as opposed to direct damages. (c) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 13.5 shall survive the Facility Termination Date and the expiration or termination of this Agreement. XIII.6. Amendments and Waivers. Any provision of this Agreement or any other Loan Document may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Lenders (and, if Article XII or the rights or duties of the Agent are affected thereby, by the Agent); provided that no such amendment or waiver shall, unless signed by all the Lenders, (i) increase the Commitments of the Lenders, (ii) reduce the principal of or rate of interest on any Loan or any fees or other amounts payable hereunder, (iii) postpone any date fixed for the payment of any scheduled installment of principal of or interest on any Loan or any fees or other amounts payable hereunder or for termination of any 115 120 Commitment, or (iv) change the percentage of the Commitments or of the unpaid principal amount of the Notes, or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this Section 13.5 or any other provision of this Agreement or (v) release Guarantors or all or substantially all of the Collateral other than as otherwise permitted herein; and provided further that no such amendment or waiver shall, unless signed by Lenders holding more than 50% of the Term Loan A Commitments, Term Loan B Commitments or Term Loan C Commitments, as applicable, change the application of any payment of Term Loan A, Term Loan B or Term Loan C. XIII.7. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such fully-executed counterpart. XIII.8. Termination. The termination of this Agreement shall not affect any rights of the Borrower, the Lenders or the Agent or any obligation of the Borrower, the Lenders or the Agent, arising prior to the effective date of such termination, and the provisions hereof shall continue to be fully operative until all transactions entered into or rights created or obligations incurred prior to such termination have been fully disposed of, concluded or liquidated and the Obligations arising prior to or after such termination have been irrevocably paid in full. The rights granted to the Agent for the benefit of the Lenders under the Loan Documents shall continue in full force and effect, notwithstanding the termination of this Agreement, until all of the Obligations have been paid in full after the termination hereof (other than Obligations in the nature of continuing indemnities or expense reimbursement obligations not yet due and payable, which shall continue) or the Borrower has furnished the Lenders and the Agent with an indemnification satisfactory to the Agent and each Lender with respect thereto. All representations, warranties, covenants, waivers and agreements contained herein shall survive termination hereof until payment in full of the Obligations unless otherwise provided herein. Notwithstanding the foregoing, if after receipt of any payment of all or any part of the Obligations, any Lender is for any reason compelled to surrender such payment to any Person because such payment is determined to be void or voidable as a preference, impermissible setoff, a diversion of trust funds or for any other reason, this Agreement shall continue in full force and the Borrower shall be liable to, and shall indemnify and hold the Agent or such Lender harmless for, the amount of such payment surrendered until the Agent or such Lender shall have been finally and irrevocably paid in full. The provisions of the foregoing sentence shall be and remain effective notwithstanding any contrary action which may have been taken by the Agent or the Lenders in reliance upon such payment, and any such contrary action so taken shall be without prejudice to the Agent or the Lenders' rights under this Agreement and shall be deemed to have been conditioned upon such payment having become final and irrevocable. XIII.9. Confidentiality. The Agent and each Lender (each, a "Lending Party") agrees to keep confidential any information furnished or made available to it by the Borrower pursuant to this Agreement that is marked confidential; provided that nothing herein shall prevent any 116 121 Lending Party from disclosing such information (a) to any other Lending Party or any affiliate of any Lending Party, or any officer, director, employee, agent, or advisor of any Lending Party or affiliate of any Lending Party, (b) to any other Person if reasonably incidental to the administration of the credit facility provided herein, (c) as required by any law, rule, or regulation, (d) upon the order of any court or administrative agency, (e) upon the request or demand of any regulatory agency or authority, (f) that is or becomes available to the public or that is or becomes available to any Lending Party other than as a result of a disclosure by any Lending Party prohibited by this Agreement, (g) in connection with any litigation to which such Lending Party or any of its affiliates may be a party, (h) to the extent necessary in connection with the exercise of any remedy under this Agreement or any other Loan Document, and (i) subject to provisions substantially similar to those contained in this Section 13.9, to any actual or proposed participant or assignee. XIII.10. Severability. If any provision of this Agreement or the other Loan Documents shall be determined to be illegal or invalid as to one or more of the parties hereto, then such provision shall remain in effect with respect to all parties, if any, as to whom such provision is neither illegal nor invalid, and in any event all other provisions hereof shall remain effective and binding on the parties hereto. XIII.11. Entire Agreement. This Agreement, together with the other Loan Documents, constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all previous proposals, negotiations, representations, commitments and other communications between or among the parties, both oral and written, with respect thereto. XIII.12. Agreement Controls. In the event that any term of any of the Loan Documents other than this Agreement conflicts with any express term of this Agreement, the terms and provisions of this Agreement shall control to the extent of such conflict. XIII.13. Usury Savings Clause. Notwithstanding any other provision herein, the aggregate interest rate charged under any of the Notes, including all charges or fees in connection therewith deemed in the nature of interest under applicable law shall not exceed the Highest Lawful Rate (as such term is defined below). If the rate of interest (determined without regard to the preceding sentence) under this Agreement at any time exceeds the Highest Lawful Rate (as defined below), the outstanding amount of the Loans made hereunder shall bear interest at the Highest Lawful Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect. In addition, if when the Loans made hereunder are repaid in full the total interest due hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect, then to the extent permitted by law, the Borrower shall pay to the Agent an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Highest Lawful Rate had at all times been in effect. Notwithstanding the foregoing, it is the intention of 117 122 the Lenders and the Borrower to conform strictly to any applicable usury laws. Accordingly, if any Lender contracts for, charges, or receives any consideration which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be canceled automatically and, if previously paid, shall at such Lender's option be applied to the outstanding amount of the Loans made hereunder or be refunded to the Borrower. As used in this paragraph, the term "Highest Lawful Rate" means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to such Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. XIII.14. GOVERNING LAW; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN THOSE SECURITY INSTRUMENTS WHICH EXPRESSLY PROVIDE THAT THEY SHALL BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE. (b) THE BORROWER AND EACH LENDER HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN NEW YORK AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER AND EACH LENDER EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND THE BORROWER AND EACH LENDER HEREBY IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (c) THE BORROWER AND EACH LENDER AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF THE BORROWER PROVIDED IN SECTION 13.2 HEREOF, BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF FLORIDA. 118 123 (d) NOTHING CONTAINED IN SUBSECTIONS (A) OR (B) HEREOF SHALL PRECLUDE THE AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION WHERE THE BORROWER OR ANY OF THE BORROWER'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW. (e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH, THE BORROWER, THE AGENT AND THE LENDERS HEREBY AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING. [Signatures on following pages] 119 124 IN WITNESS WHEREOF, the parties hereto have caused this instrument to be made, executed and delivered by their duly authorized officers as of the day and year first above written. WINDMERE-DURABLE HOLDINGS, INC. WITNESS: By: --------------------------------------- Name: Harry D. Schulman Title: Senior Vice President-Finance and Administration NATIONSBANK, NATIONAL ASSOCIATION, AS AGENT By: --------------------------------------- Name: Andrew M. Airheart Title: Senior Vice President Credit Agreement Signature Page 1 125 NATIONSBANK, NATIONAL ASSOCIATION By: --------------------------------------- Name: Andrew M. Airheart Title: Senior Vice President Domestic Lending Office: NationsBank, National Association Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Telephone: (704) 388-2374 Telefacsimile: (704) 386-9923 Wire Transfer Instructions: NationsBank, National Association ABA # 053000196 Account No.:1366212250600 Reference: Corporate Credit Services Attention: Windmere Credit Agreement Signature Page 2 EX-10.2 3 BRIDGE LOAN AGREEMENT 1 EXHIBIT 10.2 EXECUTION COPY ================================================================================ BRIDGE LOAN AGREEMENT dated as of June 26, 1998 among WINDMERE-DURABLE HOLDINGS, INC. as Borrower the Guarantors listed on the signature pages hereto, as Guarantors THE LENDERS named herein, NationsBanc Montgomery Securities LLC, as Arranger and NationsBridge, L.L.C., as Administrative Agent ================================================================================ 2 TABLE OF CONTENTS
PAGE ARTICLE I. DEFINITIONS.....................................................1 SECTION 1.1. DEFINED TERMS...................................................1 SECTION 1.2. INTERPRETATION.................................................22 ARTICLE II THE CREDIT AGREEMENT...........................................23 SECTION 2.1. COMMITMENTS TO MAKE BRIDGE LOANS...............................23 SECTION 2.2. CONVERSION TO TERM LOANS.......................................23 SECTION 2.3. OPTION TO EXCHANGE TERM LOANS FOR EXCHANGE NOTES...............23 SECTION 2.4. INTEREST; PAYMENT IN KIND OPTION; AND DEFAULT INTEREST.........24 SECTION 2.5. MANDATORY PREPAYMENT...........................................25 SECTION 2.6. OPTIONAL PREPAYMENT............................................25 SECTION 2.7. BREAKAGE COSTS; INDEMNITY......................................26 SECTION 2.8. EFFECT OF NOTICE OF PREPAYMENT.................................26 SECTION 2.9. PAYMENTS.......................................................26 SECTION 2.10. TAXES..........................................................28 SECTION 2.11. RIGHT OF SET OFF; SHARING OF PAYMENTS, ETC.....................30 SECTION 2.12. CERTAIN FEES...................................................31 ARTICLE III. REPRESENTATIONS AND WARRANTIES.................................32 SECTION 3.1. REPRESENTATIONS AND WARRANTIES IN THE CREDIT AGREEMENT AND THE ACQUISITION AGREEMENT...................................32 SECTION 3.2. ORGANIZATION; POWERS...........................................32 SECTION 3.3. DUE AUTHORIZATION AND ENFORCEABILITY...........................32 SECTION 3.4. NO CONFLICTS...................................................33 SECTION 3.5. NO VIOLATIONS; MATERIAL CONTRACTS..............................34 SECTION 3.6. CAPITAL STOCK; SUBSIDIARIES....................................34 SECTION 3.7. LIENS..........................................................35 SECTION 3.8. NO VIOLATION OF REGULATIONS OF BOARD OF GOVERNORS OF FEDERAL RESERVE SYSTEM...................................35 SECTION 3.9. GOVERNMENTAL REGULATIONS.......................................35 SECTION 3.10. FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES...............35 SECTION 3.11. FULL DISCLOSURE................................................36 SECTION 3.12. PRIVATE OFFERING; RULE 144A MATTERS............................36 SECTION 3.13. ABSENCE OF PROCEEDINGS.........................................37 SECTION 3.14. TAXES..........................................................37 SECTION 3.15. FINANCIAL CONDITION; SOLVENCY..................................37 SECTION 3.16. NO MATERIAL ADVERSE CHANGE.....................................38 SECTION 3.17. YEAR 2000 COMPLIANCE...........................................38 ARTICLE IV. COVENANTS......................................................38 SECTION 4.1. USE OF PROCEEDS................................................38 SECTION 4.2. NOTICE OF DEFAULT AND RELATED MATTERS..........................38 SECTION 4.3. MERGER; SALE OF ALL OR SUBSTANTIALLY ALL ASSETS................39 SECTION 4.4. INFORMATION; SEC REPORTS; COMPLIANCE CERTIFICATES..............40 SECTION 4.5. EXISTENCE; BUSINESS AND PROPERTIES; INSURANCE..................41
i 3 SECTION 4.6. COMPLIANCE WITH LAWS...........................................42 SECTION 4.7. RESTRICTED PAYMENTS............................................42 SECTION 4.8. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM SUBSIDIARIES..42 SECTION 4.9. LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND ISSUANCE OF ADDITIONAL PREFERRED STOCK......................42 SECTION 4.10. ANTI-LAYERING..................................................44 SECTION 4.11. SALE AND LEASEBACK TRANSACTIONS................................44 SECTION 4.12. INVESTMENTS; ACQUISITIONS......................................44 SECTION 4.13. LIMITATION ON TRANSACTIONS WITH AFFILIATES.....................45 SECTION 4.14. LINE OF BUSINESS...............................................45 SECTION 4.15. LIENS..........................................................45 SECTION 4.16. STAY, EXTENSION AND USURY LAWS.................................45 SECTION 4.17. CHANGE OF CONTROL..............................................45 SECTION 4.18. OBLIGATIONS AND TAXES..........................................46 SECTION 4.19. CONSOLIDATED NET WORTH.........................................46 SECTION 4.20. CONSOLIDATED FIXED CHARGE COVERAGE RATIO.......................47 SECTION 4.21. CONSOLIDATED LEVERAGE RATIO....................................47 SECTION 4.22. CONSOLIDATED INTEREST COVERAGE RATIO...........................48 SECTION 4.23. CONSOLIDATED EBITDA............................................49 SECTION 4.24. ADDITIONAL SUBSIDIARY GUARANTEES...............................49 SECTION 4.25. YEAR 2000 COMPLIANCE...........................................49 SECTION 4.26. ENVIRONMENTAL COMPLIANCE.......................................50 SECTION 4.27. ERISA..........................................................50 SECTION 4.28. HEDGING OBLIGATIONS............................................51 SECTION 4.29. DEFAULTS UNDER OTHER AGREEMENTS................................51 SECTION 4.30. LICENSES.......................................................51 SECTION 4.31. DISSOLUTION, ETC...............................................52 ARTICLE V. CONDITIONS........................................................52 SECTION 5.1. CLOSING........................................................52 SECTION 5.2. CORPORATE AND OTHER PROCEEDINGS................................52 SECTION 5.3. CONCURRENT TRANSACTIONS........................................54 SECTION 5.4. NO MATERIAL LOSS...............................................54 SECTION 5.5. NO EVENT OF DEFAULT............................................55 SECTION 5.6. LITIGATION; RESTRAINING ORDERS.................................55 SECTION 5.7. NO CHANGES IN FINANCIAL MARKETS................................55 SECTION 5.8. ENVIRONMENTAL REPORTS..........................................55 SECTION 5.9. DUE DILIGENCE..................................................56 SECTION 5.10. ESCROW AGREEMENT...............................................56 SECTION 5.11. EXCHANGE NOTES.................................................56 SECTION 5.12. ESCROWED WARRANTS..............................................56 SECTION 5.13. DEBT REGISTRATION RIGHTS AGREEMENT.............................56 SECTION 5.14. EQUITY REGISTRATION RIGHTS AGREEMENT...........................56 SECTION 5.15. DELIVERY OF OPINIONS...........................................56 SECTION 5.16. SOLVENCY.......................................................57 SECTION 5.17. PAYMENT OF FEES................................................57 SECTION 5.18. NO BREACH UNDER ENGAGEMENT LETTER, COMMITMENT LETTER OR FEE LETTER.......................................57 SECTION 5.19. CONSENTS AND APPROVALS.........................................57 SECTION 5.20. MARGIN REGULATIONS.............................................57 SECTION 5.21. SATISFACTORY FINANCIAL STATEMENTS..............................58 SECTION 5.22. REPAYMENT OF INDEBTEDNESS......................................58
ii 4 ARTICLE VI. TRANSFER OF THE LOANS, THE INSTRUMENTS EVIDENCING SUCH LOANS AND THE SECURITIES; REPRESENTATIONS OF LENDERS; PARTICIPATIONS...............................................58 SECTION 6.1. TRANSFER OF THE LOANS, THE INSTRUMENTS EVIDENCING THE LOANS AND THE SECURITIES...................................58 SECTION 6.2. PERMITTED ASSIGNMENTS..........................................59 SECTION 6.3. PERMITTED PARTICIPANTS; EFFECT.................................59 SECTION 6.4. DISSEMINATION OF INFORMATION...................................60 SECTION 6.5. TAX TREATMENT..................................................60 SECTION 6.6. REPLACEMENT SECURITIES UPON TRANSFER OR EXCHANGE...............60 SECTION 6.7. REGISTER.......................................................60 ARTICLE VII. EVENTS OF DEFAULT...............................................61 SECTION 7.1. EVENTS OF DEFAULT..............................................61 SECTION 7.2. ACCELERATION...................................................63 SECTION 7.3. RIGHTS AND REMEDIES CUMULATIVE.................................63 SECTION 7.4. DELAY OR OMISSION NOT WAIVER...................................63 SECTION 7.5. WAIVER OF PAST DEFAULTS........................................64 SECTION 7.6. RIGHTS OF LENDERS TO RECEIVE PAYMENT...........................64 ARTICLE VIII. PERMANENT SECURITIES...........................................64 SECTION 8.1. PERMANENT SECURITIES...........................................64 ARTICLE IX. TERMINATION.....................................................65 SECTION 9.1. TERMINATION....................................................5 SECTION 9.2. SURVIVAL OF CERTAIN PROVISIONS.................................65 ARTICLE X. SUBORDINATION...................................................65 SECTION 10.1. CERTAIN DEFINITIONS...........................................65 SECTION 10.2. LIQUIDATION; DISSOLUTION; BANKRUPTCY..........................66 SECTION 10.3. DEFAULT ON DESIGNATED SENIOR DEBT.............................66 SECTION 10.4. ACCELERATION OF SECURITIES....................................67 SECTION 10.5. WHEN DISTRIBUTION MUST BE PAID OVER...........................67 SECTION 10.6. NOTICE BY THE BORROWER........................................68 SECTION 10.7. SUBROGATION...................................................68 SECTION 10.8. RELATIVE RIGHTS...............................................68 SECTION 10.9. SUBORDINATION MAY NOT BE IMPAIRED BY THE BORROWER AND THE GUARANTORS........................................69 SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE......................69 SECTION 10.11. RIGHTS OF ADMINISTRATIVE AGENT................................69 SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.........................69 SECTION 10.13. AMENDMENTS....................................................70 ARTICLE XI. GUARANTEE.......................................................70 SECTION 11.1. THE GUARANTEE.................................................70 SECTION 11.2. LIMITATION ON LIABILITY.......................................71 SECTION 11.3. STAY OF ACCELERATION..........................................72 SECTION 11.4. RELEASE OF GUARANTORS.........................................72 ARTICLE XII. INDEMNITY......................................................72 SECTION 12.1. INDEMNIFICATION...............................................72 SECTION 12.2. INDEMNITY NOT AVAILABLE.......................................73 SECTION 12.3. SETTLEMENT OF CLAIMS..........................................74 SECTION 12.4. APPEARANCE EXPENSES...........................................74
iii 5 SECTION 12.5. INDEMNITY FOR TAXES, RESERVES AND EXPENSES....................74 SECTION 12.6. SURVIVAL OF INDEMNIFICATION...................................75 SECTION 12.7. LIABILITY NOT EXCLUSIVE; PAYMENTS.............................75 ARTICLE XIII. THE ADMINISTRATIVE AGENT; THE ARRANGERS.......................76 SECTION 13.1. APPOINTMENT...................................................76 SECTION 13.2. DELEGATION OF DUTIES..........................................76 SECTION 13.3. EXCULPATORY PROVISIONS........................................76 SECTION 13.4. RELIANCE BY ADMINISTRATIVE AGENT..............................77 SECTION 13.5. NOTICE OF DEFAULT.............................................77 SECTION 13.6. NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS........77 SECTION 13.7. INDEMNIFICATION...............................................78 SECTION 13.8. ADMINISTRATIVE AGENT, IN ITS INDIVIDUAL CAPACITIES............78 SECTION 13.9. SUCCESSOR ADMINISTRATIVE AGENT................................79 SECTION 13.10. SUCCESSOR ADMINISTRATIVE AGENT................................79 ARTICLE XIV. MISCELLANEOUS.................................................79 SECTION 14.1. EXPENSES; DOCUMENTARY TAXES...................................79 SECTION 14.2. NOTICES.......................................................79 SECTION 14.3. CONSENT TO AMENDMENTS AND WAIVERS.............................80 SECTION 14.4. PARTIES.......................................................81 SECTION 14.5. NEW YORK LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL................................................81 SECTION 14.6. REPLACEMENT NOTES.............................................82 SECTION 14.7. APPOINTMENT OF AGENT FOR SERVICE..............................82 SECTION 14.8. MARSHALLING; RECAPTURE........................................82 SECTION 14.9. LIMITATION OF LIABILITY.......................................82 SECTION 14.10. INDEPENDENCE OF COVENANTS.....................................83 SECTION 14.11. CURRENCY INDEMNITY............................................83 SECTION 14.12. WAIVER OF IMMUNITY............................................83 SECTION 14.13. FREEDOM OF CHOICE.............................................83 SECTION 14.14. SUCCESSORS AND ASSIGNS........................................84 SECTION 14.15. MERGER........................................................84 SECTION 14.16. SEVERABILITY CLAUSE...........................................84 SECTION 14.17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY..................................................84
EXHIBIT A: ASSIGNMENT AND ACCEPTANCE EXHIBIT B: FORM OF BRIDGE NOTE EXHIBIT C: DEBT REGISTRATION RIGHTS AGREEMENT EXHIBIT D: EQUITY REGISTRATION RIGHTS AGREEMENT EXHIBIT E: ESCROW AGREEMENT EXHIBIT F: EXCHANGE NOTE INDENTURE EXHIBIT G: WARRANT AGREEMENT EXHIBIT H: OPINION OF GREENBERG TRAURIG HOFFMAN LIPOFF ROSEN & QUENTEL iv 6 THIS BRIDGE LOAN AGREEMENT, dated as of June 26, 1998 (as amended, restated and/or otherwise modified from time to time, this "AGREEMENT"), is by and among: (a) Windmere-Durable Holdings, Inc., a Florida corporation (the "BORROWER"), (b) the Guarantors listed on the signature pages hereto as Guarantors, (c) NationsBridge, L.L.C., as Administrative Agent, and (d) NationsBanc Montgomery Securities LLC, as Arranger. The parties hereto agree as follows: ARTICLE I. DEFINITIONS Section 1.1. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below: "ACQUIRED DEBT" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into, or became a Subsidiary of, such specified Person including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person's merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "ACQUISITION" means the acquisition of (i) a controlling equity interest in another Person (including the purchase of an option, warrant or convertible or similar type security to acquire such a controlling interest at the time it becomes exercisable by the holder thereof), whether by purchase of such equity interest or upon exercise of an option or warrant for, or conversion of securities into, such equity interest, or (ii) assets of another Person which constitute any material part of the assets of such Person or of a line or lines of business conducted by such Person. "ACQUISITION AGREEMENT" means the Transaction Agreement, together with the exhibits, schedules and attachments thereto, dated as of May 10, 1998, by and among B&D and the Borrower on behalf of itself and its Wholly Owned Subsidiaries. "ADMINISTRATIVE AGENT" means NationsBridge, L.L.C., acting as administrative agent pursuant to Article XIII or any successor or replacement Administrative Agent, acting in such capacity. "AFFECTED PARTY" means any Lender, any Lender's Eurodollar Lending Office, any beneficial owner of any Lender, and their respective successors and assigns. "AFFILIATE" means any Person (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with the Borrower; or (ii) which beneficially owns or holds 10% or more of any class of the outstanding voting stock of the Borrower or 10% or more of any class of the outstanding voting stock (or in the case of a Person which is not a corporation, 10% or more of the equity interest) of which is beneficially owned or held by the Borrower. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction 7 of the management and policies of a Person, whether through ownership of voting stock, by contract or otherwise. "AFFILIATE TRANSACTION" has the meaning specified in Section 4.13. "AGREEMENT" has the meaning specified in the preamble to this Agreement. "APPLICABLE MARGIN" means: (i) with respect to Bridge Loans that are Base Rate Loans, 450 basis points per annum at all times through and including the date that is 180 days subsequent to the Closing Date, 550 basis points per annum at all times after the date that is 180 days subsequent to the Closing Date and prior to the date that is 270 days subsequent to the Closing Date and increasing by 50 basis points per annum on the date that is 270 days subsequent to the Closing Date and by an additional 50 basis points per annum on the last day of each 90-day period thereafter for so long as any Bridge Loans are outstanding; and (ii) with respect to Bridge Loans that are Eurodollar Rate Loans, 550 basis points per annum at all times through and including the date that is 180 days subsequent to the Closing Date, 650 basis points per annum at all times after the date that is 180 days subsequent to the Closing Date and prior to the date that is 270 days subsequent to the Closing Date and increasing by 50 basis points per annum on the date that is 270 days subsequent to the Closing Date and by an additional 50 basis points per annum on the last day of each 90-day period thereafter for so long as any Bridge Loans are outstanding. "APPLICABLE PERIOD" means (i) for the fiscal quarter of the Borrower and its Subsidiaries ending June 30, 1999 and each fiscal quarter of the Borrower and its Subsidiaries thereafter, a Four-Quarter Period, and (ii) for the fiscal quarters of the Borrower and its Subsidiaries ending September 30, 1998, December 31, 1998, and March 31, 1999 the one, two and three fiscal quarter periods ending on such dates. For purposes of determining the Consolidated Leverage Ratio, the Consolidated Interest Coverage Ratio and the Consolidated Fixed Charge Ratio for the one, two or three fiscal quarter periods of the Borrower and its Subsidiaries ending September 30, 1998, December 31, 1998 and March 31, 1999, Consolidated EBITDA, Consolidated Interest Expense and Consolidated Fixed Charges shall be determined by multiplying the Adjusted Consolidated Fixed Charges (other than required principal payments) for such periods by four, two and four-thirds, respectively. Commencing with the fiscal quarter ending June 30, 1999 and thereafter, such ratios shall be calculated for a Four-Quarter Period. "APPROVED STOCK OPTION PLAN" means (a) each stock option plan (whether relating to employees or directors) or agreement pursuant to which the options listed on Schedule 1.4 of the Credit Agreement are listed and (b) any executive or employee stock option or incentive plan hereafter adopted by the board of directors of the Borrower. "ARRANGER" has the meaning specified in the preamble to this Agreement. "ASSET SALE" means any voluntary disposition, whether by sale, lease or transfer, other than as permitted under Section 4.3 hereof, of (a) any or all of the assets, excluding cash and cash equivalents, of the Borrower or its Subsidiaries, and (b) any of the capital stock (including the Salton/Maxim Shares), or securities or investments exchangeable, exercisable or convertible for or into, or 2 8 otherwise entitling the holder to receive any of the capital stock, of any Person (other than a disposition to a Guarantor). "ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and acceptance entered into by a Lender and an assignee, and accepted by the Administrative Agent, in the form of EXHIBIT A or such other form as shall be approved by the Administrative Agent. "B&D" means The Black & Decker Corporation, a Maryland corporation. "BANKRUPTCY LAW" means (i) Title 11 of the U.S. Code or (ii) any other law of the United States, any political subdivision thereof or any other jurisdiction relating to bankruptcy, insolvency, winding up, liquidation, reorganization or relief of debtors. "BASE RATE" means, for any day, the sum of (a) higher of (i) the Federal Funds Rate for such day plus 50 basis points and (ii) the Prime Rate for such day, plus (b) the Applicable Margin. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or Federal Funds Rate. "BASE RATE LOAN" means a Bridge Loan or a Term Loan at any time that the interest rate thereon is computed with reference to the Base Rate. "BENEFICIAL OWNER" has the meaning as defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act. "BLACK & DECKER LICENSE AGREEMENT" means that certain Trademark License Agreement dated as of the date hereof among B&D and the Borrower. "BOARD" means the Board of Governors of the Federal Reserve System of the United States or any successor. "BORROWER" has the meaning specified in the preamble to this Agreement. "BRIDGE LOAN" means a loan made by any Lender to the Borrower pursuant to Section 2.1. "BRIDGE NOTE" means a promissory note of the Borrower in the form attached as EXHIBIT B hereto evidencing the Bridge Loan and Term Loan of any Lender. "BUSINESS DAY" means each day other than a Saturday, a Sunday or any other day on which banking institutions in the City of New York, the City of Charlotte or at a place of payment are authorized by law, regulation or executive order to remain closed and, if such day relates to a payment or prepayment of principal of, or interest on, or an Interest Period for, Eurodollar Rate Loans, any day which is also a day on which dealings in dollar deposits are carried out in the London interbank markets. "CAPITAL EXPENDITURES" means, with respect to the Borrower and its Subsidiaries, for any period the sum of (without duplication) (i) all expenditures (whether paid in cash or accrued as liabilities) by the Borrower or any Subsidiary during such period for items that would be classified as "property, plant or equipment" or comparable items on the consolidated balance sheet of the Borrower and its Subsidiaries, including without limitation all transactional costs incurred in connection with 3 9 such expenditures provided the same have been capitalized, and (ii) with respect to any Capital Lease entered into by the Borrower or its Subsidiaries during such period, the present value of the lease payments due under such Capital Lease over the term of such Capital Lease applying a discount rate equal to the interest rate provided in such lease (or in the absence of a stated interest rate, the rate used in preparation of the financial statements described in Section 4.4(a)), all the foregoing in accordance with GAAP applied on a Consistent Basis. "CAPITAL LEASES" means all leases which have been or should be capitalized in accordance with GAAP as in effect from time to time including Statement No. 13 of the Financial Accounting Standards Board and any successor thereof. "CAPITAL MARKETS TRANSACTION" has the meaning specified in Section 2.5(a). "CHANGE OF CONTROL" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Borrower and its Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act); (ii) the adoption of a plan relating to the liquidation or dissolution of the Borrower; (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above) becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 30% of the Voting Stock of the Borrower (measured by voting power rather than number of shares); or (iv) the first day on which a majority of the members of the Board of Directors of the Borrower are not Continuing Directors. "CHANGE OF CONTROL FEE" means a fee equal to 1% of the principal amount of the Loans prepaid pursuant to the Change of Control Offer. "CHANGE OF CONTROL OFFER" has the meaning specified in Section 4.17(a). "CHANGE OF CONTROL PAYMENT" has the meaning specified in Section 4.17(a). "CHANGE OF CONTROL PAYMENT DATE" has the meaning specified in Section 4.17(a). "CLOSING" has the meaning specified in Section 5.1. "CLOSING DATE" has the meaning specified in Section 5.1. "CODE" means the Internal Revenue Code of 1986, as amended, and any regulation promulgated thereunder. "COMMITMENT" means, with respect to any Lender, the amount set forth opposite such Lender's signature on the signature pages of this Agreement. "COMMITMENT LETTER" means the Bridge Commitment Letter (including the Summaries of Indicative Terms and Conditions incorporated by reference therein), dated May 5, 1998, as amended, between the Borrower and the Administrative Agent. 4 10 "CONSOLIDATED EBITDA" means , with respect to the Borrower and its Subsidiaries, for the Applicable Period ending as of the date of determination, the sum of, without duplication, (i) Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) taxes on income, (iv) amortization and (v) depreciation, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis provided, however, that with respect to an Acquisition that is accounted for as a "purchase," for the four fiscal quarters ending after the date of such Acquisition, Consolidated EBITDA shall include the results of operations of such acquired Person or assets, which amounts shall be determined on a historical pro forma basis as if such Acquisition had been consummated as a "pooling of interest." "CONSOLIDATED FIXED CHARGE RATIO" means, with respect to the Borrower and its Subsidiaries for the Applicable Period, the ratio of (i) Consolidated EBITDA for such period less Capital Expenditures for such period to (ii) Consolidated Fixed Charges for such period. "CONSOLIDATED FIXED CHARGES" means, with respect to Borrower and its Subsidiaries for the Applicable Period, the sum of, without duplication, (i) Consolidated Interest Expense, during such period, and (ii) the principal amount of Consolidated Funded Indebtedness due and payable during such period, all determined in accordance with GAAP applied on a Consistent Basis. "CONSOLIDATED FUNDED INDEBTEDNESS" means at any time as of which the amount thereof is to be determined, all Indebtedness of the Borrower and its Subsidiaries, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. "CONSOLIDATED INTEREST COVERAGE RATIO" means, with respect to the Borrower and its Subsidiaries, for the period of four consecutive fiscal quarters ending as of the date of determination, the ratio of (i) Consolidated EBITDA to (ii) Consolidated Interest Expense. "CONSOLIDATED INTEREST EXPENSE" means, with respect to the Applicable Period, the gross interest expense of the Borrower and its Subsidiaries, including without limitation (i) the amortization of debt discounts, (ii) the amortization of all fees payable in connection with the incurrence of Indebtedness to the extent included in interest expense and (iii) the portion of any liabilities incurred in connection with Capital Leases allocable to interest expense, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. "CONSOLIDATED LEVERAGE RATIO" means, for any date for which the computation thereof is being made, the ratio of (i) Consolidated Funded Indebtedness (determined as at such date) to (ii) Consolidated EBITDA for the Applicable Period. "CONSOLIDATED NET INCOME" means, for any period of computation thereof, the gross revenues from operations of the Borrower and its Subsidiaries less all operating and non-operating expenses (not related to extraordinary events) of the Borrower and its Subsidiaries including taxes on income, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis; but excluding (for all purposes other than compliance with Section 4.19) in such calculation (1) the amount of any net gains on the sale, conversion or other disposition of capital assets, (2) the amount of any net gains on the acquisition, retirement, sale or other disposition of capital stock and other securities of the Borrower or its Subsidiaries, (3) the amount of any net gains on the collection of proceeds of life insurance policies, (4) any write-up of any asset, (5) any other net gain of an extraordinary nature, and (6) dividends and distributions in respect of minority investments in Persons other than Subsidiaries, all as determined in accordance with GAAP applied on a Consistent Basis; provided that for the purposes of determining 5 11 compliance with Section 4.19, there shall be disregarded any increase in Consolidated Net Income upon giving effect to an Acquisition which results from the treatment of such Acquisition as a "pooling of interest" although such Acquisition was a "purchase" transaction for GAAP purposes. "CONSOLIDATED NET WORTH" means the total of the Borrower's and its Subsidiaries' shareholders' equity as determined in accordance with GAAP on a Consistent Basis, minus the sum of the following, (i) the book value of all assets that would be treated as intangible assets under GAAP and (ii) any prepaid advertising credits. "CONSISTENT BASIS" in reference to the application of GAAP means the accounting principles observed in the period referred to are comparable in all material respects to those applied in the preparation of the audited financial statements of the Borrower referred to in Section 3.10(a) hereof. "CONTINGENT OBLIGATION" of any Person means all contingent liabilities required (or which, upon the creation or incurring thereof, would be required) to be included in the financial statements (including footnotes) of such Person in accordance with GAAP applied on a Consistent Basis, including Statement No. 5 of the Financial Accounting Standards Board, and any obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other obligation of any other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including obligations of such Person however incurred: (1) to purchase such Indebtedness or other obligation or any property or assets constituting security therefor; (2) to advance or supply funds in any manner (i) for the purchase or payment of such Indebtedness or other obligation, or (ii) to maintain a minimum working capital, net worth or other balance sheet condition or any income statement condition of the primary obligor; (3) to grant or convey any lien, security interest, pledge, charge or other encumbrance on any property or assets of such Person to secure payment of such Indebtedness or other obligation; (4) to lease property or to purchase securities or other property or services primarily for the purpose of assuring the owner or holder of such Indebtedness or obligation of the ability of the primary obligor to make payment of such Indebtedness or other obligation; or (5) otherwise to assure the owner of the Indebtedness or such obligation of the primary obligor against loss in respect thereof. Contingent Obligations shall be computed at the amount which, in light of all the facts and circumstances existing at the time, represent the amount which can reasonably be expected to become an actual or matured liability of such Person. "CONTINUING DIRECTORS" means, as of any date of determination, any member of the Board of Directors of the Borrower who (i) was a member of such Board of Directors on the date of this Agreement or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. 6 12 "CONVERSION DATE" means the Maturity Date. "CONVERSION DEFAULT" means the occurrence of any one or more of the following: (i) any Payment Default, (ii) any acceleration of any of the obligations owing under the Credit Agreement, or (iii) any Default or Event of Default under Section 7.1(i) or (j). "CONVERSION RATE" means, as of any date, the sum of (i) the then applicable Conversion Spread, plus (ii) the greatest of the following (expressed as a percentage per annum), calculated as of the Conversion Date: (a) the rate of interest applicable to the Bridge Loans on the Conversion Date, (b) the sum of (1) the yield (expressed as a percentage per annum) in effect on the Conversion Date for United States Treasury Notes with a remaining maturity closest to nine years from the Conversion Date (provided, however, that if the remaining term of the Term Loans is not equal to the constant maturity of a United States Treasury Note for which a weekly average yield is given, such yield on United States Treasury Notes shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury Notes for which such yields are given), plus (2) 675 basis points, and (c) 12.5%. "CONVERSION SPREAD" means zero basis points during the 90-day period commencing on the Conversion Date, increasing by 50 basis points at the beginning of each subsequent 90-day period. "CORE BUSINESS" means, with respect to the Borrower and its Subsidiaries, the business of manufacturing and distributing small household and outdoor appliances, pet products and related items consistent with past practices. "COST OF ACQUISITION" means, with respect to any Acquisition, as at the date of consummation of any such Acquisition, the sum of the following (without duplication): (i) the value of the capital stock, warrants or options to acquire capital stock of the Borrower or any Subsidiary to be transferred in connection therewith, (ii) any cash or other property and the unpaid principal amount of any debt instrument given as consideration, (iii) any Indebtedness assumed by the Borrower or its Subsidiaries in connection with such Acquisition, and (iv) out of pocket transaction costs for the services and expenses of attorneys, accountants and other consultants incurred in effecting such a transaction, and other similar transaction costs so incurred. For purposes of determining the Cost of Acquisition for any transaction, (A) the capital stock of the Borrower shall be valued (I) at its market value as reported on the New York Stock Exchange with respect to shares that are freely tradeable, and (II) with respect to shares that are not freely tradeable, as determined by the Board of Directors of the Borrower and, if requested by the Administrative Agent, determined to be a reasonable valuation by the independent public accountants referred to in Section 4.4(b) hereof, (B) the capital stock of any Subsidiary shall be valued as determined by the Board of Directors of the Borrower or such Subsidiary and, if requested by the Administrative Agent, determined to be a reasonable valuation by the independent public accountants referred to in Section 4.4(b) hereof, and (C) with respect to any Acquisition accomplished pursuant to the exercise of options or warrants or the conversion of securities, the Cost of Acquisition shall include both the cost of acquiring such option, warrant or convertible security as well as the cost of exercise or conversion. 7 13 "CREDIT AGREEMENT" means the Credit Agreement, dated as of the date hereof, by and among the Borrower, the Lenders referred to therein and NationsBank, N.A., as agent and lender, as the same may be amended, extended, renewed, restated, refinanced, refunded, replaced, substituted, supplemented or otherwise modified (in each case, in whole or in part, and without limitation as to amount, terms, conditions, covenants and other provisions) from time to time. "CREDIT FACILITIES" means, with respect to the Company, one or more debt facilities (including, without limitation, the Senior Credit Facility) or commercial paper facilities, in each case with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. "CUSTODIAN" means any receiver, interim receiver, receiver and manager, trustee, assignee, liquidator, sequestrator, custodian or similar official under any Bankruptcy Law. "DEBT REGISTRATION RIGHTS AGREEMENT" means the registration rights agreement among the Borrower, the Guarantors and the Administrative Agent pursuant to which the Exchange Notes are required to be registered for public sale, in the form attached as EXHIBIT C. "DEFAULT" means any event that, with the passage of time, the giving of notice or both, would constitute an Event of Default. "DIRECT FOREIGN SUBSIDIARY" means any Foreign Subsidiary whose outstanding voting stock is owned by the Borrower or a Domestic Subsidiary. "DOLLARS" or "$" shall mean lawful money of the United States of America. "DOMESTIC SUBSIDIARY" means, with respect to the Borrower, any Subsidiary of the Borrower that was formed under the laws of the United States of America or that guarantees or otherwise provides credit support for any Indebtedness of the Borrower. "ELIGIBLE SECURITIES" means the following obligations and any other obligations previously approved in writing by the Administrative Agent: (a) Government Securities; (b) obligations of any corporation organized under the laws of any state of the United States of America or under the laws of any other nation, payable in the United States of America, expressed to mature not later than 180 days following the date of issuance thereof and rated in an investment grade rating category by S&P and Moody's; (c) interest bearing demand or time deposits issued by any Lender or certificates of deposit maturing within one year from the date of issuance thereof and issued by a bank or trust company organized under the laws of the United States or of any state thereof having capital surplus and undivided profits aggregating at least $400,000,000 and being rated "A-" or better by S&P or "A3" or better by Moody's; 8 14 (d) Repurchase Agreements; (e) Municipal Obligations; (f) Pre-Refunded Municipal Obligations; (g) shares of mutual funds which invest in obligations described in paragraphs (a) through (f) above, the shares of which mutual funds are at all times rated "AAA" by S&P; (h) tax-exempt or taxable adjustable rate preferred stock issued by a Person having a rating of its long term unsecured debt of "A" or better by S&P or "A-1" or better by Moody's; and (i) asset-backed remarked certificates of participation representing a fractional undivided interest in the assets of a trust, which certificates are rated at least "A-1" by S&P and "P-1" by Moody's. "EMPLOYEE BENEFIT PLAN" means (i) any employee benefit plan, including any Pension Plan, within the meaning of Section 3(3) of ERISA which (A) is maintained for employees of the Borrower, any of its ERISA Affiliates, or any Subsidiary or is assumed by the Borrower, any of its ERISA Affiliates, or any Subsidiary in connection with any Acquisition or (B) has at any time within the last six years been maintained for the employees of the Borrower, any current or former ERISA Affiliate, or any Subsidiary and (ii) any plan, arrangement, understanding or scheme maintained by the Borrower or any Subsidiary that provides retirement, deferred compensation, employee or retiree medical or life insurance, severance benefits or any other benefit covering any employee or former employee and which is administered under any Foreign Benefit Law or regulated by any Governmental Entity other than the United States of America. "ENGAGEMENT LETTER" means the engagement letter, dated May 5, 1998, between the Borrower and NationsBanc. "ENVIRONMENTAL LAWS" means, collectively, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any other "Superfund" or "Superlien" law or any other federal, or applicable state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any pollutant, contaminant, or hazardous, toxic or dangerous waste, substance or material. "EQUITY OFFERING" means a public or private offering of equity securities (including, without limitation, any security or investment not constituting Indebtedness exchangeable, exercisable or convertible for or into, or otherwise entitling the holder to receive, equity securities) of the Borrower or any Subsidiary (other than securities issued to the Borrower or another Subsidiary); provided, however, the term "EQUITY OFFERING" shall not include (i) any issuance of equity securities whose aggregate market value when combined with all other similar equity issuances, does not exceed $10,000,000 and which issuance in connection with the exercise of stock options or warrants granted to, or purchase of restricted stock by, eligible participants under an Approved Stock Option Plan or (ii) the Permanent Securities. "EQUITY REGISTRATION RIGHTS AGREEMENT" means the registration rights agreement among the Borrower, the Guarantors and the Administrative Agent pursuant to which the Escrowed Warrants and the Warrant Shares are required to be registered for public sale, in the form attached as EXHIBIT D. 9 15 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder. "ERISA AFFILIATE" means any Person or trade or business which is a member of a group which is under common control with the Borrower who together with the Borrower, is treated as a single employer within the meaning of Section 414(b) and (c) of the Code. "ESCROW ACCOUNT" has the meaning specified in the Escrow Agreement. "ESCROW AGENT" means U.S. Bank Trust National Association, in its capacity as escrow agent pursuant to the Escrow Agreement. "ESCROW AGREEMENT" means the escrow agreement among the Administrative Agent, on behalf of the Lenders, and the Escrow Agent, in the form attached as EXHIBIT E. "ESCROWED WARRANTS" means the warrants to purchase shares of common stock of the Borrower, par value $.10 per share, deposited with the Escrow Agent pursuant to the Escrow Agreement on the date hereof. "EURODOLLAR LENDING OFFICE" means, with respect to any Lender, the office, if any, of such Lender specified from time to time as its "Eurodollar Lending Office" in a written notice to the Borrower. "EURODOLLAR RATE" means the interest rate per annum calculated according to the following formula: Eurodollar = Interbank Offered Rate + Applicable Rate 1- Eurodollar Reserve Percentage Margin "EURODOLLAR RATE LOAN" means a Bridge Loan at any time the interest rate thereon is computed with reference to the Eurodollar Rate. "EURODOLLAR RESERVE PERCENTAGE" means, for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D or any successor regulation, as the maximum reserve requirement (including any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of Eurodollar Rate Loans is determined), whether or not the Administrative Agent or any Lender has any Eurocurrency liabilities subject to such requirements, without benefits of credits or proration, exceptions or offsets that may be available from time to time to the Administrative Agent or any Lender. The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage. "EVENT OF DEFAULT" means any event specified in Section 7.1. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. 10 16 "EXCHANGE NOTE INDENTURE" means, the indenture relating to the Exchange Notes, among the Borrower, as issuer, the Guarantors, as guarantors and the Exchange Note Trustee, as trustee, in the form attached as EXHIBIT F. "EXCHANGE NOTE TRUSTEE" means, on any date of determination, the trustee under the Exchange Note Indenture. "EXCHANGE NOTES" means the Senior Subordinated Exchange Notes of the Borrower, guaranteed by the Guarantors, placed into escrow on the Closing Date, to be issued in exchange for certain Term Loans pursuant to Section 2.3, in the form attached as an exhibit to the Exchange Note Indenture. "EXCHANGE NOTICE" has the meaning specified in Section 2.3(a) of this Agreement. "FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Administrative Agent (in its individual capacity) on such day on such transactions as determined by the Administrative Agent. "FEE LETTER" means that certain Fee Letter, dated May 5, 1998, as amended, among the Borrower, the Administrative Agent and NationsBanc. "FISCAL YEAR" means the twelve month fiscal period of the Borrower beginning January 1 of each calendar year and ending the following December 31 of such calendar year. "FOREIGN BENEFIT LAW" means any applicable statute, law, ordinance, code, rule, regulation, order or decree of any foreign nation or any province, state, territory, protectorate or other political subdivision thereof regulating, relating to, or imposing liability or standards of conduct concerning, any Employee Benefit Plan. "FOREIGN SUBSIDIARY" means any Subsidiary organized under the laws of any jurisdiction other than one of the states comprising the United States of America, any territory thereof or the District of Columbia. "GAAP" means generally accepted accounting principles, being those principles of accounting set forth in pronouncements of the Financial Accounting Standards Board, the American Institute of Certified Public Accountants or which have other substantial authoritative support and are applicable in the circumstances as of the date of a report. "GOVERNMENT SECURITIES" means direct obligations of, or obligations the timely payment of principal and interest on which are fully and unconditionally guaranteed by, the United States of America. "GOVERNMENTAL ENTITY" means any Federal, state, municipal, national or other governmental department, commission, board, bureau, court, agency or instrumentality or political 11 17 subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government, including but not limited to Malaysia, Mexico and Canada. "GUARANTORS" means (i) each current and future Domestic Subsidiary of the Borrower and (ii) any other Subsidiary of the Borrower that executes a notation of Guarantee in accordance with the provisions of this Agreement, and their respective successors and assigns. "GUARANTEE" means the guarantee by each of the Guarantors pursuant to Article XI hereof. "GUARANTEED OBLIGATIONS" has the meaning specified in Section 11.1. "GUARANTORS" has the meaning specified in the preamble to this Agreement. "HAZARDOUS MATERIAL" means and includes any pollutant, contaminant, hazardous, toxic or dangerous waste, substance or material (including petroleum products, asbestos-containing materials and lead), the management, generation, handling, storage, transportation, disposal, treatment, release, discharge or emission of which is subject to any Environmental Law. "HEDGING OBLIGATIONS" means any and all obligations of the Borrower, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, currency exchange rates or forward rates applicable to such party's commodities, assets, liabilities or exchange transactions, including, but not limited to, dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts, warrants and those commonly known as interest rate "swap" agreements, and forward commodity price options, puts, warrants and those commonly known as commodity "swap" agreements; and (ii) any and all cancellations, buybacks, reversals, terminations or assignments of any of the foregoing. "HPG ACQUISITION" means the acquisition by the Borrower of substantially all of the assets of the Target pursuant to the Acquisition Agreement. "INDEBTEDNESS" means with respect to any Person, without duplication, all Indebtedness for Money Borrowed, all indebtedness of such Person for the acquisition of property other than purchases of property, product, merchandise and services in the ordinary course of business (so long as such amounts are payable in less than twelve (12) months), all indebtedness secured by any Lien on the property of such Person whether or not such indebtedness is assumed (except unperfected Liens incurred in the ordinary course of business and not in connection with the borrowing of money), all liability of such Person by way of endorsements (other than for collection or deposit in the ordinary course of business), all Contingent Obligations, the face amount of all issued and outstanding letters of credit, and all Hedging Obligations; provided that in no event shall the term Indebtedness include capital stock surplus and retained earnings, minority interests in the common stock of Subsidiaries, lease obligations (other than pursuant to Capital Leases), reserves for deferred income taxes and investment credits, other deferred credits or reserves. 12 18 "INDEBTEDNESS FOR MONEY BORROWED" means with respect to any Person, without duplication, all amounts owed, including principal, interest, fees, indemnities, costs, premium, damages and expenses, in respect of money borrowed, including without limitation the indebtedness evidenced by the Bridge Notes, the Loans and the Permanent Securities which are debt securities and all Capital Leases and the deferred purchase price of any property or asset, evidenced by a promissory note, bond, debenture or similar written obligation for the payment of money (including conditional sales or similar title retention agreements), other than trade payables incurred in the ordinary course of business. "INDEMNIFIED PARTY" has the meaning specified in Section 12.1. "INDEMNIFYING PARTY" has the meaning specified in Section 12.1. "INTELLECTUAL PROPERTY" means all licenses, franchises, patents, trademarks, trademark rights, trade names, trade name rights, trade secrets and copyrights the Borrower and its Subsidiaries own or have the right to use under valid license agreements or otherwise, and all applications for any of the foregoing, material to the conduct of their business as now conducted. "INTELLECTUAL PROPERTY SECURITY AGREEMENT" means, collectively (or individually as the context may indicate), (i) the Intellectual Property Security Agreement dated as of the Closing Date and executed by the Borrower and certain of its Domestic Subsidiaries in favor of the agent under the Credit Agreement and (ii) each other Intellectual Property Security Agreement executed by the Borrower or a Domestic Subsidiary as permitted by the Credit Agreement. "INTERBANK OFFERED RATE" means, for any Eurodollar Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "INTERBANK OFFERED RATE" shall mean, for any Eurodollar Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in dollars at approximately 11:00 a.m. (London Time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. "INTEREST PAYMENT DATE" means (i) the last day of each September, December, March and June after the Closing Date , (ii) the Maturity Date and (iii) the date of any prepayment of all or any portion of the principal of the Loans. "INTEREST PERIOD" means, in respect of any Eurodollar Rate Loan, (i) in the case of the first Interest Period (if any) applicable to the Bridge Loans, the period commencing on and including the Closing Date and ending on the numerically corresponding date in the month thereafter, and (ii) in the case of each subsequent Interest Period, the period beginning on the last day of the prior Interest Period and ending on the numerically corresponding date in the month thereafter; provided, however, that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended until the next succeeding Business Day unless the next Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Notwithstanding the foregoing, no Interest Period in respect of the Bridge Loans may extend beyond the Maturity Date and each 13 19 Interest Period that would otherwise commence before and end after the Maturity Date shall end on the Maturity Date. "INVESTMENT BANKS" means, in the event of any Permanent Securities that are (a) equity securities, collectively, NationsBanc and Merrill Lynch, Pierce, Fenner & Smith Incorporated and (b) debt securities, NationsBanc. "KMART AGREEMENT" means that certain Purchase, Distribution and Marketing Agreement dated as of January 27, 1997 between Kmart Corporation and Salton/Maxim. "LENDERS" shall mean (a) each financial institution that has executed a counterpart to this Agreement (other than any such financial institution that has ceased to be a party hereto pursuant to an Assignment and Acceptance) and (b) any financial institution that has become a party hereto pursuant to an Assignment and Acceptance. "LIEN" means any interest in property securing any obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including but not limited to the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. For the purposes of this Agreement, the Borrower and any Subsidiary shall be deemed to be the owner of any property which it has acquired or holds subject to a conditional sale agreement, financing lease, or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes. "LIQUIDATED DAMAGES" means any and all liquidated damages then owing pursuant to any of the Loan Documents. "LOAN" means a Bridge Loan or a Term Loan. "LOAN DOCUMENTS" means this Agreement, the Bridge Notes and the Related Documents. "LOAN REGISTER" means the register maintained by the Administrative Agent on behalf of the Borrower pursuant to Section 6.3. "MAJORITY LENDERS" means, at any time, Lenders holding at least a majority of the then aggregate unpaid principal balance of the Loans, or, if no such principal amount is then outstanding, Lenders having at least a majority of the total Commitments; provided that, for purposes hereof, neither the Borrower nor any of its Affiliates shall be included in (i) the Lenders holding such amount of the Loans or having such amount of the Commitments or (ii) determining the aggregate unpaid principal amount of the Loans or the total Commitments. "MATERIAL CONTRACTS" has the meaning specified in Section 3.4(a). "MATERIAL ADVERSE EFFECT" means any circumstance or event that (i) has, or may be reasonably expected to have, any materially adverse effect upon the validity or enforceability of this Agreement or any of the Transaction Documents, (ii) is, or may be reasonably expected to be, materially adverse to the consolidated financial condition, business, operations, assets, liabilities or management of the Borrower and its Subsidiaries (without giving pro forma effect to the 14 20 HPG Acquisition), taken as a whole or the Target, or prospects of the Borrower and its Subsidiaries (without giving pro forma effect to the HPG Acquisition) (iii) materially impairs the ability of the Borrower or any Guarantor to consummate the Loan or to perform its Obligations under the Transaction Documents. "MATURITY DATE" means June 26, 1999. "MOODY'S" means Moody's Investors Service, Inc. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or is accruing an obligation to make, contributions or has made, or been obligated to make, contributions within the preceding six (6) fiscal years. "MUNICIPAL OBLIGATIONS" means general obligations issued by, and supported by the full taxing authority of, any state of the United States of America or of any municipal corporation or other public body organized under the laws of any such state which are rated in the highest investment category by both S&P and Moody's. "NATIONSBANC" means NationsBanc Montgomery Securities LLC. "NET CASH PROCEEDS" means the aggregate cash proceeds received (including any cash and cash equivalents and cash payments received by way of deferred payment of principal pursuant to a note, an installment receivable or otherwise, but only as and when received) from any Capital Markets Transaction, net, in the case of an Asset Sale, of (i) costs of sale (including payment of the outstanding principal amount of, premium or penalty, if any, interest and other amounts on any Indebtedness (other than Loans) secured by a Lien permitted pursuant to Section 4.15 on such assets and required to be repaid under the terms thereof as a result of such Asset Sale), (ii) taxes paid or payable in the year such Asset Sale occurs or in the following year as a result thereof and (iii) amounts provided as a reserve, in accordance with GAAP, against any liabilities under any indemnification obligations associated with such Asset Sale (except that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds). "OBLIGATIONS" means all now existing and hereafter arising obligations and liabilities of any of the Borrower and the Guarantors to any and all of the Lenders arising under or in connection with the Loan Documents, whether absolute or contingent, and whether for principal, interest, penalties, premium, fees, indemnifications, reimbursements, damages (including, if applicable, Liquidated Damages), or otherwise and specifically including post-petition interest (whether or not an allowable claim). "OFFERING DOCUMENTS" means an offering memorandum or prospectus together with such other documents, instruments and agreements as the Investment Banks may request in their sole discretion in connection with the issuance of the Permanent Securities. "OFFICER" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operation Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "OFFICERS' CERTIFICATE" means a certificate signed on behalf of either the Borrower or any Guarantor by an Officer of the Borrower or any Guarantor, as the case may be, who must be the principal executive officer, a vice chairman, the principal financial officer, the treasurer or the principal accounting officer of the Borrower or any Guarantor, as the case may be. 15 21 "OPINION OF COUNSEL" means an opinion from legal counsel of the Borrower or any Guarantor, which legal counsel is reasonably acceptable to the Administrative Agent. "OPTION AGREEMENT" means that certain Stock Agreement dated as of May 6, 1998 between the Borrower and Salton/Maxim. "OTHER TAXES" has the meaning specified in Section 2.10(b). "PAYMENT BLOCKAGE NOTICE" has the meaning specified in Section 10.4. "PAYMENT DEFAULT" means any Default or Event of Default under Section 7.1(b), (c) or (d) or any matured or unmatured default under the analogous provisions of the documents governing the Credit Agreement. "PBGC" means the Pension Benefit Guaranty Corporation and any successor thereto. "PENSION PLAN" means any employee pension benefit plan within the meaning of Section 3(2) of ERISA, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of the Code and which (i) is maintained for employees of the Borrower or any of its ERISA Affiliates or is assumed by the Borrower or any of its ERISA Affiliates or (ii) has at any time within the last six years been maintained for the employees of the Borrower or any current or former ERISA Affiliate. "PERMANENT SECURITIES" means any combination of (i) debt securities issued by the Borrower, which are guaranteed by the Guarantors and (ii) equity securities of the Borrower which have either been registered with the SEC and sold pursuant to a registration statement in a public offering or privately placed or otherwise sold in an offering exempt from registration with the SEC, to refinance the Loans. "PERMITTED ACQUISITION" means (a) the HPG Acquisition and (b) each of the other Acquisitions effected with the consent and approval of the board of directors or other applicable governing body of the Person being acquired, and with the duly obtained approval of such shareholders or other holders of equity interest as such Person may be required to obtain, so long as (i) immediately prior to and immediately after the consummation of such Acquisition, no Default or Event of Default has occurred and is continuing, (ii) with respect to an Acquisition where the Cost of Acquisition exceeds $5,000,000, substantially all of the sales and operating profits generated by such Person (or assets) so acquired or invested are derived from a line or lines of business that are part of the Core Business, (iii) pro forma historical financial statements as of the end of the most recent fiscal quarter for the trailing twelve month period giving effect to such Acquisition are delivered to the Administrative Agent not less than five (5) Business Days prior to the consummation of such Acquisition, together with a certificate of an Authorized Representative demonstrating compliance with Sections 4.19, 4.20 4.21 and 4.22 hereof after giving effect to such Acquisition, (iv) the aggregate Cost of Acquisition (excluding the value of any capital stock of the Borrower given as part of the Cost of Acquisition) with respect to any Acquisition consummated (A) during any fiscal year shall not exceed $20,000,000, and (B) during the term of this Agreement shall not exceed $100,000,000; and (v) the aggregate Cost of Acquisition which consists in whole or in part of the value of any capital stock of the Borrower (including without limitation when combined with cash, debt or the assumption of Indebtedness for any specific Acquisition) with respect to any Acquisition consummated after the Closing Date shall not exceed $10,000,000. "PERMITTED LIENS" means: 16 22 (a) Liens securing Obligations under the Credit Agreement that were permitted by the terms hereof to be incurred; (b) Liens existing as of the date hereof, provided, however, that any such Lien that is released after the date hereof may not thereafter re-attach or otherwise become permitted by this clause (b); (c) Liens imposed by law for taxes, assessments or charges of any Governmental Entity for claims not yet due or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (d) Liens in respect of purchase money Indebtedness permitted to be incurred pursuant to Section 4.9(vii)(a) hereof in connection with the acquisition of certain tangible property; provided that (a) the original principal balance of the Indebtedness secured by such Lien constitutes not less than 80% nor more than 100% of the purchase price of the property acquired and (B) such Lien extends only to the property acquired with the proceeds of the Indebtedness so secured; (e) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law or created in the ordinary course of business and in existence less than 90 days from the date of creation thereof for amounts not yet due or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (f) Liens incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers' compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations or arising as a result of progress payments under government contracts; (g) easements (including, without limitation, reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, reservations, encroachments, variations and zoning and other restrictions, charges or encumbrances (whether or not recorded), which do not interfere with the ordinary conduct of the business of the Borrower or any Subsidiary and do not impair the use of the property to which they attach to the extent that such interference or impairment would reasonably be expected to have a Material Adverse Effect; and (h) Liens on real property securing Indebtedness permitted under clauses (ii), (vii) or (ix) of Section 4.9 hereof (subject to compliance with subsection (c) above in connection with purchase money Indebtedness). "PERSON" means any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or government or any agency or political subdivision thereof or any other entity. "PREPAYMENT DATE" has the meaning specified in Section 2.8. "PRE-REFUNDED MUNICIPAL OBLIGATIONS" means obligations of any state of the United States of America or of any municipal corporation or other public body organized under the laws of any such state which are rated, based on the escrow, in the highest investment rating category by both S&P and 17 23 Moody's and which have been irrevocably called for redemption and advance refunded through the deposit in escrow of Government Securities or other debt securities which are (i) not callable at the option of the issuer thereof prior to maturity, (ii) irrevocably pledged solely to the payment of all principal and interest on such obligations as the same becomes due, and (iii) in a principal amount and bear such rate or rates of interest as shall be sufficient to pay in full all principal of, interest, and premium, if any, on such obligations as the same becomes due as verified by a nationally recognized firm of certified public accountants. "PRIME RATE" means the rate of interest per annum established from time to time by the Administrative Agent as its prime rate. The Prime Rate is not necessarily the best or the lowest rate of interest offered by the Administrative Agent. "QUERETERO PROPERTY" means the property located at Accesco III SIN, Fracc., Industrial Benito Juarez, Queretero, QRO. 76130, Mexico. "REGISTRATION RIGHTS AGREEMENTS" means the Debt Registration Rights Agreement and the Equity Registration Rights Agreement. "REGULATION D" means Regulation D of the Board as the same may be amended or supplemented from time to time. "RELATED DOCUMENTS" means the Exchange Notes, the Exchange Note Indenture, the Registration Rights Agreements, the Warrant Agreement, the Escrow Agreement, the Engagement Letter and the Fee Letter. "REPURCHASE AGREEMENT" means a repurchase agreement entered into with any financial institution whose debt obligations or commercial paper are rated "A" by either of S&P or Moody's or "A-1" by S&P or "P-1" by Moody's. "RESPONSIBLE OFFICER" of any corporation shall mean any executive officer or financial officer of such corporation and any other officer or similar official thereof responsible for the administration of the obligations of such corporation in respect of this Agreement. "RESTRICTED INVESTMENT" means an investment other than an investment permitted by Section 4.12 hereof. "RESTRICTED PAYMENTS" has the meaning specified in Section 4.7. "SALE AND LEASEBACK TRANSACTION" has the meaning specified in Section 4.11. "SALTON/MAXIM" means Salton/Maxim Housewares, Inc., a Delaware corporation. "SALTON/MAXIM SHARES" means the shares of capital stock of Salton/Maxim owned by the Borrower. "SEC" means the Securities and Exchange Commission. "SECURITIES" means, collectively, the Exchange Notes and the Escrowed Warrants. 18 24 "SECURITIES ACT" means the Securities Act of 1933, as amended. "SINGLE EMPLOYER PLAN" means any employee pension benefit plan covered by Title IV of ERISA in respect of which the Borrower or any Subsidiary is an "employer" as described in Section 4001(b) of ERISA and which is not a Multiemployer Plan. "SOLVENT" means, when used with respect to any Person, that at the time of determination: (a) the fair value of its assets (both at fair valuation and at present fair saleable value on an orderly basis) is in excess of the total amount of its liabilities, including Contingent Obligations; and (b) it is then able and expects to be able to pay its debts as they mature; and (c) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. "STATED MATURITY" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "SUBSIDIARY" means, with respect to any person (herein referred to as the "PARENT"), any corporation, partnership, association or other business entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, controlled or held by the parent. "TARGET" means the Household Products Group, excluding the Cleaning and Lighting divisions, of B&D. "TAXES" has the meaning specified in Section 2.10(a). "TERM LOAN" means a loan made on the Conversion Date, if any, by a Lender to the Borrower pursuant to Section 2.2 to refinance a Bridge Loan. "TERMINATION EVENT" means: (i) a "Reportable Event" described in Section 4043 of ERISA and the regulations issued thereunder (unless the notice requirement has been waived by applicable regulation); or (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA or was deemed such under Section 4068(f) of ERISA; or (iii) the termination of a Pension Plan, the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination under Section 4041 of ERISA; or (iv) the institution of proceedings to terminate a Pension Plan by the PBGC; or (v) any other event or condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; or (vi) the partial or complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan; or (vii) 19 25 the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA; or (viii) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Section 4241 or Section 4245 of ERISA, respectively; or (ix) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA; or (x) any event or condition with respect to any Employee Benefit Plan which is regulated by any Foreign Benefit Law that results in such Employee Benefit Plan's termination or the revocation of the Employee Benefit Plan's authority to operate under the applicable Foreign Benefit Law. "TRANSACTIONS" means, collectively, the HPG Acquisition, the related financing transactions and each of the other transactions contemplated by the Transaction Documents. "TRANSACTION DOCUMENTS" the Loan Documents, the Credit Agreement and the Acquisition Agreement. "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended. "VOTING STOCK" means, with respect to any Person at any time, the capital stock of such Person that is at such time entitled to vote in the election of the board of directors of such Person. "WARRANT AGENT" means First Trust New York, in its capacity as warrant agent pursuant to the Warrant Agreement. "WARRANT AGREEMENT" means the warrant agreement between the Borrower and the Warrant Agent, in the form attached as EXHIBIT G. "WARRANT SHARES" means the shares of common stock of the Borrower issued pursuant to the Warrant Agreement upon exercise of the Escrowed Warrants. "WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person, 100% of the capital stock and other Equity Interests of which is owned directly or indirectly by such Person. "YEAR 2000 COMPLIANT" has the meaning specified in Section 3.17. "YEAR 2000 PROBLEM" has the meaning specified in Section 3.17. SECTION 1.2. Interpretation. In this Agreement, the singular includes the plural and the plural includes the singular; words implying any gender include the other genders; references to any section, exhibit or schedule are to sections, exhibits or schedules hereto unless otherwise indicated; references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute referred to; references to "writing" include printing, typing, lithography and other means of reproducing words in a visible form; "including" following a word or phrase shall not be construed to limit the generality of such word or phrase; and an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP. 20 26 ARTICLE II. THE CREDIT AGREEMENT SECTION 2.1. COMMITMENTS TO MAKE BRIDGE LOANS. In reliance upon the representations and warranties of the Borrower set forth herein and subject to the terms and conditions herein set forth, each of the Lenders severally agrees to make a Bridge Loan to the Borrower on the Closing Date in the amount of such Lender's Commitment. The proceeds of each Bridge Loan shall be disbursed by wire transfer on the Closing Date as provided in written instructions delivered by the Borrower to each of the Lenders on the Business Day prior to the Closing Date. Each Bridge Loan will mature on the Maturity Date. SECTION 2.2. CONVERSION TO TERM LOANS. If, on the Maturity Date: (i) all principal and interest in respect of the Bridge Loans has not been paid in full, (ii) no Conversion Default exists and is continuing, (iii) no order, decree, injunction or judgment enjoining the conversion of Bridge Loans to Term Loans shall be in effect and (iv) the Administrative Agent receives an Officers' Certificate from the Borrower certifying to the foregoing and requesting a conversion of the Bridge Loans to Term Loans, each of the Lenders hereby commits that, on the Maturity Date, such Lender will convert its Bridge Loan (including, without limitation, any Bridge Loans resulting from the capitalization of interest pursuant to Section 2.4(e) below), to a Term Loan maturing on the ninth anniversary of the original Maturity Date (and the Maturity Date shall be deemed to have been automatically extended to such ninth anniversary date). SECTION 2.3. OPTION TO EXCHANGE TERM LOANS FOR EXCHANGE NOTES. (a) On any Business Day on or after the Conversion Date (if any), any Lender may elect to exchange all or any portion of its Term Loan for one or more Exchange Notes by giving not less than three Business Days' prior irrevocable written notice of such election to the Borrower, the Escrow Agent, the Administrative Agent and the Exchange Note Trustee specifying the principal amount of its Term Loan to be exchanged (which shall be at least $1,000,000 and integral multiples of $1,000 in excess thereof) and subject to Section 6.1, the name of the proposed registered holder and, subject to the terms of the Exchange Note Indenture, the amount of each Exchange Note requested (each such notice, an "EXCHANGE NOTICE"); provided, that in no event shall the aggregate principal amount of the Term Loans initially exchanged pursuant to this Section 2.3(a) be less than $25,000,000. Any such exchanging Lender shall deliver its Bridge Notes to the Administrative Agent within three Business Days following delivery of an Exchange Notice. Term Loans exchanged for Exchange Notes pursuant to this Section 2.3 shall be deemed repaid and canceled and the Exchange Notes so issued shall be governed by and construed in accordance with the provisions of the Exchange Note Indenture. (b) Not later than the third Business Day after delivery of an Exchange Notice: (i) the Administrative Agent shall deliver to the Escrow Agent the original Bridge Notes delivered to it by the exchanging Lender pursuant to Section 2.3(a); (ii) the Escrow Agent shall cancel each Bridge Note so delivered to it and, if applicable, the Borrower shall issue a replacement Bridge Note to such Lender in an amount equal to the principal amount of such Lender's Term Loan that is not being exchanged, or the Escrow Agent shall make a notation on the surrendered Bridge Note to the effect that a portion of the Term Loan represented thereby has been repaid; and (iii) the Escrow Agent shall deliver the applicable Exchange Note(s) to the Exchange Note Trustee for authentication and delivery to the holder or holders thereof specified in the Exchange Notice. 21 27 (c) Each Exchange Note issued pursuant to this Section 2.3 shall bear interest at a fixed rate equal to the rate per annum borne by the Term Loan on the date of the Exchange Notice. Accrued interest on Term Loans so exchanged shall be canceled and the Exchange Notes received in such exchange shall bear interest from and including the most recent date to which interest has been paid on the Term Loans so exchanged. SECTION 2.4. INTEREST; PAYMENT IN KIND OPTION; AND DEFAULT INTEREST. (a) INTEREST RATE APPLICABLE TO BRIDGE LOANS. The Bridge Loans shall be Base Rate Loans until the Borrower shall irrevocably specify in a written notice (a "RATE SELECTION NOTICE") delivered to the Administrative Agent, or otherwise agree with the Lenders, that the Bridge Loans shall be Eurodollar Rate Loans. Subject to Sections 2.4(d), (e) and (f) below (i) if the Bridge Loans are Base Rate Loans (prior to a Rate Selection Notice or pursuant to Section 2.9 (b) or (c)), the unpaid principal balance thereof shall bear interest until paid at a rate per annum equal to the sum of the Base Rate plus the Applicable Margin, changing when and as the Base Rate and/or the Applicable Margin changes, and (ii) if the Bridge Loans are Eurodollar Rate Loans, the unpaid principal balance thereof shall bear interest until paid at a rate per annum equal to the sum of the Eurodollar Rate plus the Applicable Margin, changing when and as the Eurodollar Rate and/or the Applicable Margin changes. (b) INTEREST ON TERM LOANS. Subject to Sections 2.4(d), (e) and (f) below, interest on the unpaid principal balance of the Term Loans of each Lender will accrue at a rate per annum equal to the Conversion Rate, changing when and as the Conversion Spread changes. (c) BASIS OF COMPUTATION OF INTEREST; PAYMENT OF INTEREST. All interest shall be calculated for actual days elapsed on the basis of a 360-day year (or a 365-day year in the case of Base Rate Loans) and shall be payable in arrears not later than 12:00 noon (New York City time) on each Interest Payment Date by wire transfer of immediately available funds in accordance with Section 2.9. (d) MAXIMUM INTEREST RATE. Notwithstanding anything contained in Section 2.4(a) or 2.4(b), but subject to Section 2.4(f), in no event shall the interest rate on the Loans for any Interest Period exceed an annual rate equal to the lesser of (i) (A) in the case of Bridge Loans, 16% or (B) in the case of Term Loans, 17% and (ii) the maximum interest rate permitted by law. (e) OPTION TO PAY INTEREST IN KIND. Subject to Section 2.4(f), to the extent that the interest rate on the Loans for any Interest Period exceeds a rate equal to 14% per annum, in the case of the Bridge Loans, or 15% per annum, in the case of the Term Loans, the Borrower shall have the option to pay to each Lender, pro rata, all or a portion of the interest payable for such Interest Period in excess of the amount of interest that would have been payable on such date at an interest rate of 14% per annum, in the case of the Bridge Loans, or 15% per annum, in the case of the Term Loans, by capitalizing such excess interest and adding it to the aggregate principal amount of outstanding Bridge Loans or Term Loans, as the case may be, held by such Lender, effective as of the applicable Interest Payment Date. The Borrower shall give the Administrative Agent an irrevocable notice that it will exercise such right at least three Business Days prior to any Interest Payment Date as to which such right is to be exercised. (f) DEFAULT INTEREST. (i) If the Borrower shall default in the payment of the principal of or interest on any Loan or any other Obligation becoming due hereunder, by acceleration or otherwise, or under any other Loan Document, the Borrower shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount to but excluding the date of actual payment (after as 22 28 well as before judgment) to the extent lawful, at a rate per annum equal to 200 basis points in excess of the otherwise applicable interest rate on the Loans. The Borrower shall pay such default interest and all interest accruing on any overdue Obligation in cash on demand from time to time. SECTION 2.5. MANDATORY PREPAYMENT. (a) The Borrower shall prepay the Loans ratably in accordance with the aggregate outstanding principal balances thereof, with the Net Cash Proceeds of: (i) any direct or indirect public offering or private placement of the Permanent Securities, or any other debt or equity securities of the Borrower or any Guarantor issued after the Closing Date other than (A) any issuance of directors' qualifying shares and (B) any issuance or sale of common stock (or common stock equivalents) of the Borrower to officers and employees under employee benefit or compensation plans, (ii) the incurrence of any other Indebtedness by the Borrower or any of its Subsidiaries after the Closing Date (other than Indebtedness permitted to be incurred under the Credit Agreement pursuant to Section 4.9) and (iii) any Asset Sale by the Borrower or any of its Subsidiaries after the Closing Date (other than an Asset Sale permitted under Section 4.12) (each of the transactions in the foregoing clauses (i), (ii) and (iii), a "CAPITAL MARKETS TRANSACTION"). The Borrower shall, not later than the fourth Business Day following any Capital Markets Transaction, apply such Net Cash Proceeds to prepay the Loans pursuant to this Section 2.5, without premium or penalty, by paying to each Lender an amount equal to 100% of such Lender's pro rata share of the aggregate principal amount of the Loans to be prepaid, plus accrued and unpaid interest thereon to the Prepayment Date. (b) Subject to and in accordance with Section 4.17, in the event of any Change of Control, the Borrower shall offer to prepay the Loans pursuant to Section 4.17. SECTION 2.6. OPTIONAL PREPAYMENT. The Borrower may, upon three Business Days' prior written notice to each of the Lenders, prepay the Loans at any time, in whole or in part, on a pro rata basis, by paying to each applicable Lender an amount equal to 100% of such Lender's pro rata share of the aggregate principal amount of Loans to be prepaid, plus accrued and unpaid interest thereon to the Prepayment Date. SECTION 2.7. BREAKAGE COSTS; INDEMNITY. The Borrower agrees to indemnify and hold each Affected Party harmless from and against any loss or expense which such Affected Party sustains or incurs as a consequence of: (a) the failure by the Borrower to borrow Eurodollar Rate Loans on the Closing Date after the Borrower has given a notice with respect thereof in accordance with Section 5.1, unless such failure by the Borrower is due exclusively to a Lender's gross negligence or willful action, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of Section 2.5 or 2.6, as applicable, or (c) the mandatory or optional prepayment of Eurodollar Rate Loans on a day that is not the last day of an Interest Period. Such indemnification may include an amount equal to the excess, if any of (i) such Affected Party's actual loss and expenses incurred (excluding lost profits) in connection with, or by reason of, any of the foregoing events and (ii) the excess, if any of (A) the amount of interest that would have accrued on the principal amount of Bridge Loans not so made or the principal amount of Loans so prepaid from the date of such 23 29 proposed issuance or prepayment in the case of a failure to make Bridge Loans, to the last day of the Interest Period that would have commenced on the proposed date of funding, or in the case of any such prepayment, to the last day of the Interest Period in which such prepayment occurred, in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (B) the amount of interest (as reasonably determined by such Affected Party) which would have accrued to such Affected Party on such amount by placing such amount on deposit for a period comparable to such Interest Period with leading banks in the interbank Eurodollar market. A certificate as to any amounts payable pursuant to this Section 2.7 submitted to the Borrower by any Affected Party shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Obligations. SECTION 2.8. EFFECT OF NOTICE OF PREPAYMENT. The Borrower shall notify the Lenders in writing at their addresses shown in the Loan Register of any date set for prepayment (each such day, a "PREPAYMENT DATE") of Loans. Once such notice is sent or mailed, the Loans to be prepaid shall become due and payable on the Prepayment Date set forth in such notice. Such notice may not be conditional. SECTION 2.9. PAYMENTS. (a) WIRE TRANSFER. Except as provided in Section 2.4(e) with respect to the payment of certain interest by capitalizing it and adding it to the principal of outstanding Loans, the principal of, fees, premium, if any, and interest on each Bridge Note and all other Obligations arising under the Loan Documents shall be payable by wire transfer in immediately available funds (in United States dollars) to the respective accounts of the Lenders set forth below their signatures on the signature pages of this Agreement or otherwise designated in the Loan Register from time to time to the Borrower by any Lender at least three Business Days prior to the due date therefor. (b) CHANGE IN COSTS. If prior to the first day of any Interest Period with respect to a Eurodollar Rate Loan, any Lender shall have determined (which determination shall be conclusive and binding upon the Borrower and the Guarantors) that: (i) by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (ii) the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lender or its Eurodollar Lending Office of maintaining its Eurodollar Rate Loan during such Interest Period, then such Lender shall give facsimile or telephone notice thereof to the Borrower as soon as practicable thereafter. If such notice is given, the interest rate on each Bridge Loan for such Interest Period and for each subsequent Interest Period until such Lender gives notice to the Borrower otherwise shall equal the sum of the Base Rate plus the Applicable Margin. (c) CHANGE IN LAW. Notwithstanding any other provision of this Agreement, if any Lender shall notify the Borrower that subsequent to the date hereof the introduction of, or any change in the interpretation of, any law or regulation makes it unlawful, or any Governmental Entity asserts that it is unlawful, for such Lender or its Eurodollar Lending Office to make or maintain Eurodollar Rate Loans hereunder, (i) the obligation of such Lender to make or maintain Eurodollar Rate Loans shall be suspended until such Lender shall notify the Borrower that the circumstances causing such suspension no longer exist and (ii) any Eurodollar Rate Loan then outstanding from such Lender shall immediately be converted into a Base Rate Loan. (d) PAYMENTS ON BUSINESS DAYS. If any payment to be made hereunder or under any Bridge Note shall be due on a day other than a Business Day, such payment shall be made on the next 24 30 succeeding Business Day (and such extension of time shall be included in computing interest in connection with such payment); provided, however, that if such succeeding Business Day falls in the next calendar month, such payment shall be made on the next preceding Business Day. (e) PARTIAL PREPAYMENTS AND REDEMPTIONS. All partial prepayments and redemptions of the outstanding principal balance of the Loans shall be made ratably amongst the applicable Lenders in accordance with their respective shares of the aggregate outstanding principal balance of the Loans eligible for prepayment or redemption. (f) ALLOCATION. Any money paid to, received by, or collected by the Administrative Agent or any Lender pursuant to this Agreement or any other Loan Document, shall be applied in the following order, at the date or dates fixed by the Administrative Agent: FIRST: to any unpaid fees and reimbursement or unpaid expenses of the Administrative Agent hereunder and under the Fee letter; SECOND: to the payment of all costs, expenses, other fees, commissions and taxes owing to any Lender hereunder; THIRD: to the indefeasible payment of all accrued interest to the date of such payment or collection; FOURTH: to the indefeasible payment of the amounts then due and unpaid under this Agreement, the Bridge Notes or any other Loan Document for principal, in respect of which or for the benefit of which such money has been paid or collected, ratably, without preference or priority of any kind, according to the amounts due and payable on the Bridge Notes for principal; and FIFTH: the balance, if any, to the Person lawfully entitled thereto. SECTION 2.10. TAXES. (a) TAXES. Any and all payments by the Borrower and each Guarantor hereunder or under the Bridge Notes, the Exchange Notes or any other Loan Document shall be made, in accordance with Section 2.9 or the other applicable provision of the applicable Loan Document, free and clear of and without deduction or withholding for or on account of any and all present or future taxes, levies, imports, deductions, charges or withholdings additions to tax, interest, penalties and all other liabilities with respect thereto, excluding income, franchise or similar taxes imposed or levied on the Administrative Agent or the Lenders as a result of a present or former connection between the Administrative Agent or the Lenders and the jurisdiction of the governmental authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lenders having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement) (all such non-excluded taxes, levies, imports, deductions, charges, withholdings and liabilities being hereinafter referred to as "TAXES"). If the Borrower or any Guarantor shall be required by law to deduct or withhold any Taxes from, or in respect of, any sum payable hereunder or under the Bridge Notes, the Exchange Notes or any other Loan Document to the Administrative Agent or the Lenders or any of their respective Affiliates who may become a Lender: (i) the sum payable thereunder shall be increased as may be necessary so that after making all required deductions or withholdings (including deductions or withholdings applicable to additional sums payable under this Section 2.10) the Administrative Agent or the Lenders or any of their respective Affiliates receives an amount equal to the 25 31 sum it would have received had no such deductions or withholdings been made; (ii) the Borrower or such Guarantor, as the case may be, shall make such deductions or withholdings; and (iii) the Borrower or such Guarantor, as the case may be, shall pay the full amount deducted to the relevant tax authority or other authority in accordance with applicable laws. (b) OTHER TAXES. In addition, the Borrower and the Guarantors agree to pay any present or future stamp, mortgage recording or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under a Bridge Note, Exchange Note or other Loan Document or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the other Loan Documents (hereinafter referred to as "OTHER TAXES") and hold the Administrative Agent and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such Other Taxes. Each Lender represents that, to the best of its knowledge, except for any such Other Taxes that may be imposed under the federal, state or local laws of the United States (or any political subdivision thereof), it is not aware of any such stamp, mortgage recording or documentary taxes or any other excise or property taxes, charges or similar levies. (c) INDEMNITY. The Borrower and the Guarantors will indemnify the Administrative Agent and any Lender for the full amount of Taxes or Other Taxes arising in connection with payments made under this Agreement or any other Loan Document (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.10) paid by the Administrative Agent or any Lender or any of their respective Affiliates and any liability (including penalties, additions to tax interest and expenses) arising therefrom or with respect thereto. Payment under this indemnification shall be made within fifteen days from the date the Administrative Agent or any Lender or any of their respective Affiliates makes written demand therefor; provided, however, that the Borrower and the Guarantors shall not be obligated to make payment to the Lender or the Administrative Agent (as the case may be) pursuant to this Section 2.10(c) in respect of penalties, interest and other liabilities attributable to any Taxes or Other Taxes, if (i) written demand therefor has not been made by such Lender or the Administrative Agent within 60 days from the date on which such Lender or the Administrative Agent received written notice of the imposition of Taxes or Other Taxes by the relevant taxing or governmental authority, but only to the extent such penalties, interest and other similar liabilities are attributable to such failure or delay by the Administrative Agent or the Lender in making such written demand, (ii) such penalties, interest and other liabilities have accrued after the Borrower had indemnified or paid an additional amount due as of the date of such payment pursuant to this Section 2.10(c) or (iii) such penalties, interest and other liabilities are attributable to the gross negligence or willful misconduct of the Lender or the Administrative Agent or such Affiliates. After the Lender or the Administrative Agent (as the case may be) receives written notice of the imposition of the Taxes or Other Taxes which are subject to this Section 2.10(c), such Lender and Administrative Agent will act in good faith to promptly notify the Borrower and the Guarantors of their obligations hereunder; provided, however, that the failure to so act shall not, standing alone, affect the rights of the Administrative Agent or the Lenders under this Section 2.10(c). (d) FURNISH EVIDENCE TO ADMINISTRATIVE AGENT. The Borrower will make reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any Taxes deducted or withheld from each taxing authority imposing such Taxes. The Borrower will furnish to the Lenders, within 60 days after the date the payment of any Taxes so deducted or withheld is due pursuant to applicable law, original or certified copies of tax receipts evidencing such payment by the Borrower or, if such receipts are not obtainable, other evidence of such payments by the Borrower reasonably satisfactory to the Lenders. 26 32 (e) SURVIVAL. Without prejudice to the survival of any other agreement of the Borrower or any Guarantor hereunder, the agreements and obligations of the Borrower and the Guarantors contained in this Section 2.10 shall survive the payment in full of all amounts due hereunder and under the Bridge Notes. (f) MITIGATION. If the Borrower or any Guarantor (as the case may be) is required to pay additional amounts to or for the account of any Lender pursuant to this Section 2.10 as a result of a change in law or treaty occurring after such Lender first became a party to this Agreement, then such Lender will, at the request of the Borrower or such Guarantor, change the jurisdiction of its Applicable Lending Office if such change (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is, in such Lender's sole, reasonable discretion, determined not to be materially disadvantageous or cause unreasonable hardship to such Lender, provided that fees, charges, costs or expenses that are related to such change shall be borne by the Borrower or such Guarantor on behalf of a Lender, and the mere existence of such expenses, fees or costs shall not be deemed to be materially disadvantageous or cause undue hardship to the Lender. Each Lender and the Administrative Agent agrees that it will (i) take all reasonable actions reasonably requested by the Borrower or any Guarantor in writing that are without risk and material cost to such Lender or the Administrative Agent and consistent with the internal policies of such Lender and applicable legal and regulatory restrictions (as the case may be) to maintain all exemptions, if any, available to it from withholding taxes (whether available by treaty or existing administrative waiver) and (ii) to the extent reasonable and without risk and material cost to it, otherwise cooperate with the Borrower or any Guarantor to minimize any amounts payable by the Borrower or such Guarantor under this Section 2.10; provided, however, that in each case, any cost relating to such action or cooperation requested by the Borrower or such Guarantor shall be borne by the Borrower or such Guarantor, respectively. (g) TAX BENEFIT. If and to the extent that any Lender is able, in its sole opinion, to apply or otherwise take advantage of any offsetting tax credit or other similar tax benefit arising out of or in conjunction with any deduction or withholding which gives rise to an obligation on the Borrower or any Guarantor to pay any additional amount pursuant to this Section 2.10 then such Lender shall, to the extent that in its sole opinion it can do so without prejudice to the retention of the amount of such credit or benefit and without any other adverse tax consequences for such Lender, reimburse to the Borrower at such time as such tax credit or benefit shall have actually been received by such Lender such amount as such Lender shall, in its sole opinion, have determined to be attributable to the relevant deduction or withholding and as will leave such Lender in no better or worse position than it would have been in if the payment of such additional amount had not been required. Nothing in this Section 2.10 shall oblige any Lender to disclose to the Borrower or any other person any information regarding its tax affairs or tax computations or interfere with the right of any Lender to arrange its tax affairs in whatever manner it thinks fit and, in particular, no Lender shall be under any obligation to claim relief from its corporate profits or similar tax liability in credits or deductions available to it and, if it does claim, the extent, order and manner in which it does so shall be at its absolute discretion. 27 33 SECTION 2.11. RIGHT OF SET OFF; SHARING OF PAYMENTS, ETC. (a) RIGHT OF SET-OFF. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default, or if the Borrower becomes insolvent, however evidenced, the Borrower authorizes each Lender at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special, time or demand, provisional or final, whether or not collected or available) in any currency and any other indebtedness at any time held or owing by such Lender or any of its Affiliates (including, without limitation, by branches and agencies of such Lender wherever located) to or for the credit or the account of the Borrower against and on account of the Obligations of the Borrower to such Lender under this Agreement or under any of the other Loan Documents, including, without limitation, all interests in or participation in the Obligations purchased by such Lender, and all other claims of any nature or description arising out of or in connection with this Agreement or any other Loan Document, irrespective of whether or not such Lender shall have made any demand hereunder and although the Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. A Lender may exercise such rights notwithstanding that the amounts concerned may be expressed in different currencies and each Lender is authorized to effect any necessary conversions at a market rate of exchange selected by it. A Lender exercising its rights under this Section 2.11(a) shall provide prompt notice to the Borrower following such exercise. (b) SHARING. If any Lender shall obtain from the Borrower payment of any principal of or interest on any Loan owing to it or payment of any other amount under this Agreement, a Loan Document or any Bridge Note held by it though the exercise of any right of set-off, banker's lien or counterclaim or similar right or otherwise (other than from the Administrative Agent as provided herein) and, as a result of such payment, such Lender shall have received a greater percentage of the principal of or interest on the Loans or such other amounts then due to such Lender by the Borrower than the percentage received by any other Lenders, it shall promptly purchase from such other Lenders participation in (or, if and to the extent specified by such Lender, direct interests in) the Loans or such other amounts, respectively, owing to such other Lenders (or any interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all the Lenders shall share the benefit of such excess payment (net of any expenses which may be incurred by such Lender in obtaining or preserving such excess payment) pro rata in accordance with the unpaid principal of and/or interest on the Loans or such other amounts, respectively, owing to each of the Lenders. To such end all the Lenders shall make appropriate adjustments among themselves (by the resale of participation sold or otherwise) if such payment is rescinded or must otherwise be restored. (c) NO REQUIREMENT. Nothing in this Agreement shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Borrower. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a set-off to which this Section 2.11 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in manner consistent with the rights of the Lenders entitled under this Section 2.11 to share in the benefits of any recovery on such secured claim. Section 2.12. Certain FEES. The Borrower agrees to pay to the Administrative Agent, for its own account, the fees specified in the Fee Letter with respect to the Bridge Loans, Terms Loans and Exchange Notes, amounts for its expenses incurred hereunder and all other amounts owing under this Agreement and the other Loan Documents. 28 34 ARTICLE III. REPRESENTATIONS AND WARRANTIES As of the date hereof and as of the Closing Date, each of the Borrower and the Guarantors hereby jointly and severally agrees with, and represents and warrants to, the Lenders that each of the following representations and warranties is true and will be true after giving pro forma effect to the Transactions: SECTION 3.1. REPRESENTATIONS AND WARRANTIES IN THE CREDIT AGREEMENT AND THE ACQUISITION AGREEMENT. The representations and warranties of the Borrower contained in the Credit Agreement are hereby incorporated herein by reference for the benefit of the Lenders (without giving effect to any waivers thereof or amendment, thereto subsequent to the date hereof) and are true and correct in all material respects. SECTION 3.2. ORGANIZATION; POWERS. The Borrower and each of its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted, (c) is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required, except where the failure so to qualify could not reasonably be expected to result in a Material Adverse Effect and (d) has the power and authority to execute, deliver and perform its obligations under each of the Transaction Documents and each other agreement or instrument contemplated hereby to which it is or will be a party and, in the case of the Borrower, to borrow hereunder. SECTION 3.3. DUE AUTHORIZATION AND ENFORCEABILITY. (a) Each of the Transaction Documents: (i) has been duly authorized, executed and delivered by Borrower and each of its Subsidiaries (to the extent each is a party thereto) and (ii) constitutes a valid and binding obligation of Borrower and each of its Subsidiaries (to the extent each is a party thereto) enforceable against each such Person in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforceability of creditors' rights generally and by general principles of equity (whether arising under a proceeding at law or in equity). (b) The Loans, the Bridge Notes and the Exchange Notes have been duly authorized by the Borrower and each of the Guarantees and the guarantees by the Guarantors of the Borrower's obligations under the Exchange Notes have been duly authorized by the Borrower and each Guarantor, as applicable. When the Bridge Notes and the Exchange Notes have been executed and delivered pursuant to the terms of this Agreement or the Exchange Note Indenture, as applicable, each of the Loans, the Bridge Notes, the Exchange Notes, and the Guarantees and the guarantees by the Guarantors of the Borrower's obligations under the Exchange Notes will be valid and binding obligations of the Borrower and each Guarantor, as applicable, enforceable against it in accordance with their terms, except as enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforceability of creditors' rights generally and by general principles of equity (whether arising under a proceeding at law or in equity). 29 35 (c) The Escrowed Warrants have been duly authorized by the Borrower and, when executed and authenticated pursuant to the terms of the Warrant Agreement and delivered to the Escrow Agent, will be valid and binding obligations of the Borrower, enforceable against it in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforceability of creditors' rights generally and by general principles of equity (whether arising under a proceeding at law or in equity). (d) The Warrant Shares have been duly authorized and validly issued, and upon exercise of the Escrowed Warrants in accordance with the terms of the Warrant Agreement will be fully paid and nonassessable. SECTION 3.4. NO CONFLICTS. (a) Except as disclosed on SCHEDULE 3.4, neither the execution and delivery of any of the Transaction Documents nor the consummation of any of the transactions contemplated hereby or thereby nor compliance with the terms and provisions hereof or thereof (i) violates or will violate any material law or regulation or any order or decree of any court or Governmental Entity applicable to the Borrower or any of its Subsidiaries or by which any of their respective properties or assets may be bound, (ii) constitutes or will constitute a breach or a violation of, any of the terms or provisions of, or a default under, the organizational documents (including any certificate of incorporation or bylaws) or any other corporate restriction of any of the Borrower or any of its Subsidiaries or (iii) conflicts with or will result in the breach of, or constitutes a default under, any material contract, lease, indenture, loan agreement (including, without limitation, the Credit Agreement), mortgage, deed of trust or other agreement or instrument (each, a "MATERIAL CONTRACT") to which the Borrower or any of its Subsidiaries is a party or to which any of them may be subject or by which any of them or any of their respective assets is or may be bound. (b) No consent, approval, authorization or order of, or any registration or filing with, any Governmental Entity is or will be required in connection with (i) the execution and delivery of any of the Transaction Documents by the Borrower or any of its Subsidiaries (to the extent each is a party thereto) or the consummation of the transactions contemplated hereby or thereby, or (ii) the issuance and delivery of the Escrowed Warrants or the Warrant Shares by the Borrower, other than (A) such authorizations, approvals, consents, exemptions, registrations or filings as shall have been made or secured by the date hereof, or (B) such actions as may be required under the Registration Rights Agreements after the date hereof in connection with any transfer of the Exchange Notes and the Escrowed Warrants or the Warrant Shares issuable upon exercise thereof. SECTION 3.5. NO VIOLATIONS; MATERIAL CONTRACTS. (a) There does not exist (i) any violation of any law or regulation or any order or decree of any court or Governmental Entity applicable to the Borrower or any of its Subsidiaries, which violation could reasonably be expected to have a Material Adverse Effect or (ii) any conflict or violation of any terms or provisions of the organizational documents (including any articles or certificate of incorporation or bylaws) of the Borrower or any of its Subsidiaries. (b) Neither the Borrower nor any of its Subsidiaries is a party to any agreement or instrument or subject to any corporate or other restriction that, individually or in the aggregate, has had or could have a Material Adverse Effect. Each Material Contract to which the Borrower or any of its 30 36 Subsidiaries is a party or by which the Borrower or any of its Subsidiaries or any of their respective properties or assets are or may be bound as of the Closing Date is listed on SCHEDULE 3.5 and true and correct copies of all such Material Contracts have been delivered to the Administrative Agent. (c) As of the Closing Date: (i) each Material Contract is in all material respects valid, binding and in full force and effect and is enforceable by the Borrower and each of its Subsidiaries (to the extent that each is a party thereto) in accordance with its terms, (ii) the Borrower and each of its Subsidiaries (to the extent each is a party thereto) has performed in all material respects all obligations required to be performed by it to date under all of its Material Contracts and is not (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder and, to the knowledge of the Borrower and each of its Subsidiaries, no other party to any of the Material Contracts is (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder, (iii) neither the Borrower or any of its Subsidiaries, nor, to the knowledge of the Borrower and each of its Subsidiaries, any other party to any Material Contract, has given notice of termination of, or taken any action inconsistent with the continuation of, any Material Contract, and (iv) none of such other parties has any presently exercisable or future right to terminate any Material Contract, including any right to terminate any Material Contract on account of the execution, delivery or performance of any of the Transaction Documents. SECTION 3.6. CAPITAL STOCK; SUBSIDIARIES. (a) All shares of capital stock and other equity interests of the Borrower are duly authorized, validly issued, fully paid and non-assessable. All shares of capital stock and other equity interests of each Subsidiary of the Borrower are duly authorized, validly issued, fully paid and non-assessable and owned directly or indirectly by the Borrower beneficially and of record, free and clear of any Lien other than the Liens to be created under the Credit Agreement. SCHEDULE 3.6 sets forth, (i) as of the date hereof (and without giving effect to the Transactions) a list of all direct and indirect Subsidiaries of the Borrower and the percentage ownership (direct and indirect) of the Borrower therein and (ii) as of the Closing Date (after giving effect to the Transactions), a list of all direct Subsidiaries of the Borrower and each Guarantor and the percentage ownership interest of the Borrower and such Guarantor, as applicable, therein. All such shares of capital stock or other ownership interest are duly authorized, validly issued, fully paid and non-assessable and owned by the Borrower or each Guarantor, as the case may be, free and clear of all Liens. (b) There are (i) no outstanding subscriptions, warrants, options, calls or commitments of any character related to or entitling any Person to purchase or otherwise acquire any shares of the capital stock or other equity interests of any of the Borrower's, (ii) no obligations or securities convertible into or exchangeable for shares of any capital stock or other equity interests of the Borrower or any of its Subsidiaries or any commitments of any character relating to or entitling any Person to purchase or otherwise acquire any such obligations or securities, other than the Escrowed Warrants and (iii) no preemptive or similar rights to subscribe for or to purchase any capital stock or other equity interests of the Borrower or any of its Subsidiaries. SECTION 3.7. LIENS. There are no Liens on any assets of the Borrower or any of its Subsidiaries except Permitted Liens. SECTION 3.8. NO VIOLATION OF REGULATIONS OF BOARD OF GOVERNORS OF FEDERAL RESERVE SYSTEM. None of the transactions contemplated by this Agreement (including without limitation 31 37 the use of the proceeds from the Loans and Permanent Securities) will violate or result in a violation of Section 7 of the Exchange Act, or any rule or regulation issued pursuant thereto, including, without limitation, Regulations T, U and X of the Board. SECTION 3.9. GOVERNMENTAL REGULATIONS. None of the Borrower or any of its Subsidiaries is or will be subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Federal Power Act, the Interstate Commerce Act or to any other statute, rule or regulation limiting its ability to incur Indebtedness for borrowed money. SECTION 3.10. FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. (a) The consolidated balance sheets of each of the Borrower and its Subsidiaries and the Target that are attached hereto as SCHEDULE 3.10 fairly present the consolidated financial position of the Borrower and its Subsidiaries and the Target as of the dates set forth therein, in each case in accordance with GAAP consistently applied (except as otherwise specifically indicated therein). The consolidated statements of income and cash flows of the Borrower and its Subsidiaries and the Target that are attached hereto as SCHEDULE 3.10 have been prepared in conformity with GAAP applied on a Consistent Basis through all the periods involved (except as otherwise specifically indicated therein) and fairly present the consolidated results of operations of each of the Borrower and its Subsidiaries and the Target for the periods indicated. The pro forma consolidated statements of income and cash flows included in SCHEDULE 3.10 fairly present the estimated consolidated income and cash flows of the Borrower and its Subsidiaries assuming the consummation of the HPG Acquisition as if it had occurred on the date set forth therein, and the pro forma consolidated balance sheet of the Borrower included in SCHEDULE 3.10 fairly presents the consolidated financial condition of the Borrower and its Subsidiaries on March 31, 1998 (after giving effect to all simultaneous transactions to occur on such date). The historical and pro forma financial statements attached hereto as SCHEDULE 3.10 comply as to form with the requirements applicable to such financial statements in, and constitute all of the financial statements required by, Regulation S-X of the Act for a Form S-1 registration statement. The presentation of pro forma EBITDA set forth in such pro forma financial statements is consistent with the requirements of Regulation S-X. (b) Neither the Borrower nor its Subsidiaries nor the Target (prior to giving effect to the consummation of the Transaction) has any liability (absolute or contingent) except (i) those shown on the most recent audited balance sheets described in Section 3.10(a), (ii) those incurred under the Transaction Documents, (iii) those incurred in the ordinary course of business since the date of such audited balance sheets and (iv) those that would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect. 32 38 SECTION 3.11. FULL DISCLOSURE. No information, report, financial statement or certificate delivered or to be delivered to the Lenders in connection with the Transactions contains or will contain any untrue statement of material fact or omitted or omits or will omit to state a material fact necessary to make such statements not misleading in light of the circumstances in which such statements were made; provided that to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast or projection, the Borrower represents only that it acted in good faith and utilized reasonable assumptions and due care in the preparation of such information, report, financial statement, exhibit or schedule. SECTION 3.12. PRIVATE OFFERING; Rule 144A Matters. (a) Based in part on the accuracy of the representations and warranties of, and compliance with the covenants and agreements by, the Lenders in Section 6.1, the making of the Loans hereunder and the issuance of the instruments evidencing such Loans and the Securities are and will be exempt from the registration and prospectus delivery requirements of the Securities Act. Neither the Borrower nor any Guarantor has issued or sold Loans, the instruments evidencing such Loans or the Securities or equity securities to anyone other than the Lenders. No securities of the same class as the Loans, the instruments evidencing such Loans or the Securities have been issued or sold by the Borrower or any Guarantor within the six-month period immediately prior to the date hereof. Each of the Borrower and the Guarantors agrees that neither it, nor anyone acting on its behalf (other than the Lenders, as to whom the Borrower and the Guarantors make no representation), will (i) offer the Loans, the instruments evidencing such Loans or the Securities so as to subject the making, issuance and/or sale of the Loans, the instruments evidencing such Loans or the Securities, to the registration or prospectus delivery requirements of the Securities Act or (ii) offer any similar securities for issuance or sale to, or solicit any offer to acquire any of the same from, or otherwise approach or negotiate with respect to the same with, anyone if the issuance or sale of the Loans, the instruments evidencing such Loans, the Securities and any such securities would be integrated as a single offering for the purposes of the Securities Act, including without limitation, Regulation D thereunder, in such a manner as would require registration under the Securities Act thereof. Each Bridge Note, and (subject to the terms of the Exchange Note Indenture and the Escrow Agreement) each of the Exchange Notes and the Escrowed Warrants shall have a legend setting forth the restrictions on the transferability thereof imposed by the Securities Act for so long as such restrictions apply. (b) In the case of each offer, sale or issuance of the Loans, the instruments evidencing such Loans or the Securities no form of general solicitation or general advertising was or will be used by the Borrower or any Guarantor or their representatives (other than the Lenders, as to whom the Borrower and the Guarantor make no representation), including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. (c) The Securities will be eligible for resale pursuant to Rule 144A under the Securities Act. When the Securities are issued and delivered pursuant to the Transaction Documents, they will not be of the same class (within the meaning of Rule 144A(d) (3) under the Securities Act) as any other security of the Borrower or any Guarantor that is listed on a national securities exchange registered under Section 6 of the Exchange Act or that is quoted in a United States automated interdealer quotation system. Neither the issuance of the Exchange Notes nor the execution, delivery and performance of the Transaction Documents (other than the Debt Registration Rights Agreement) will require the qualification of an indenture under the Trust Indenture Act. 33 39 SECTION 3.13. ABSENCE OF PROCEEDINGS. Except with respect to the matters disclosed in SCHEDULE 3.13, there is not pending or threatened any action, suit or proceeding to which the Borrower or any of its Subsidiaries is a party, before or by any court or other Governmental Entity or body (domestic or foreign), that could reasonably be expected to cause a Material Adverse Effect. SECTION 3.14. TAXES. The Borrower and its Subsidiaries have duly and timely filed all required tax returns and reports and paid prior to delinquency all taxes, assessments, and governmental levies except (i) those not in the process of enforcement and being contested in good faith and by appropriate proceedings and (ii) where the failure to file or make payment could not reasonably be expected to have a Material Adverse Effect. SECTION 3.15. FINANCIAL CONDITION; SOLVENCY. (a) Each of the Borrower and the Guarantors is, and immediately after giving effect to the consummation of the Transaction will be, Solvent. (b) Neither the Borrower nor any Guarantor intends to incur debts beyond its ability to pay such debts as they mature, taking into account the timing and amounts of cash to be received by it and the timing and amounts of cash to be payable on or in respect of its Indebtedness. SECTION 3.16. NO MATERIAL ADVERSE CHANGE. There has been no material adverse change in the business, assets, operation, condition (financial or otherwise), or management of the Borrower and its Subsidiaries, taken as a whole, or the Target, or prospects of the Borrower and its Subsidiaries, taken as a whole (in each case, including any event which, in the opinion of the Majority Lenders, is reasonably likely to result in such a material adverse change) since December 31, 1997. SECTION 3.17. YEAR 2000 COMPLIANCE. The Borrower has (i) initiated a review and assessment of all areas within its and each of its Subsidiaries' business and operations (including those affected by suppliers, vendors and customers) that could be adversely affected by the "YEAR 2000 PROBLEM" (that is, the risk that computer applications used by the Borrower or any of its Subsidiaries (or suppliers, vendors and customers) that are material to the Borrower's or any of its Subsidiaries' business or operations may be unable to recognize and perform properly date-sensitive functions involving certain dates on and after January 1, 2000), (ii) developed a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan in accordance with that timetable. Based on the foregoing, the Borrower believes that all computer applications (including those of its suppliers, vendors and customers) that are material to its or any of its Subsidiaries' business and operations are reasonably expected on a timely basis to be able to perform properly date-sensitive functions for all dates before and after January 1, 2000 (that is, be "YEAR 2000 COMPLIANT"), except to the extent that a failure to do so could not reasonably be expected to have Material Adverse Effect. 34 40 ARTICLE IV. COVENANTS So long as any Commitment shall remain outstanding or any Obligation shall remain unpaid, each of the Borrower covenants and agrees with the Lenders as follows: SECTION 4.1. USE OF PROCEEDS. The Borrower shall use the proceeds of the Loans solely to finance, in part, the HPG Acquisition and the transactions contemplated thereby. SECTION 4.2. NOTICE OF DEFAULT AND RELATED MATTERS. The Borrower shall furnish to the Administrative Agent (with copies for each Lender) written notice, promptly upon becoming aware of the existence of: (a) any condition or event that constitutes a Default or an Event of Default, specifying the nature and period of existence thereof and the action taken or proposed to be taken with respect thereto; (b) (i) any action or proceeding against the Borrower or any Subsidiary by any Governmental Entity the outcome of which could reasonably be expected to have a Material Adverse Effect or (ii) any litigation or other proceedings being instituted against the Borrower or any Subsidiary, or any attachment, levy, execution or other process being instituted against any assets of the Borrower or any Subsidiary, in an aggregate amount in respect of all such proceedings and processes greater than $1,000,000 not otherwise covered by insurance; (c) any (i) violation or alleged violation by the Borrower or any Subsidiary of any applicable Environmental Laws, (ii) release or threatened release into the environment by the Borrower or any Subsidiary, or by any Person handling, transporting or disposing of any Hazardous Material on behalf of the Borrower or any Subsidiary, or at any facility or property owned or leased or operated by the Borrower or a Subsidiary, of any Hazardous Material, except where occurring legally, or (iii) liability or alleged liability of the Borrower or any Subsidiary for the costs of cleaning up, removing, remediating or responding to a release of Hazardous Materials; and (d) any development that, individually or in the aggregate, has resulted in, or could reasonably be expected to have, a Material Adverse Effect. SECTION 4.3. MERGER; SALE OF ALL OR SUBSTANTIALLY ALL ASSETS. The Borrower shall not and shall not permit any of its Subsidiaries to (a) consolidate with or merge into any other Person, or permit any other Person to merge into it; provided, however, (i) any Subsidiary may merge or transfer all or any part of its assets into or consolidate with the Borrower or any Domestic Subsidiary, in each case, provided the requirements of Section 4.24 hereof are complied with as of the effective date of the consummation of such merger, (ii) any Subsidiary may merge into another Person that is not a Subsidiary prior to such merger whereby such other Person is the surviving corporation provided the requirements of Section 4.24 hereof are complied with and such other Person becomes a Subsidiary as of the effective date of the consummation of such merger and that such merger would be a Permitted Acquisition but for the Subsidiary not being the surviving corporation, (iii) any Direct Foreign Subsidiary may merge with or into any other Direct Foreign Subsidiary, (iv) any Foreign Subsidiary which is not a Direct Foreign Subsidiary may merge with or into any other Foreign Subsidiary and (v) the Borrower or any Subsidiary may make a Permitted Acquisition; or (b) sell, lease, transfer or otherwise dispose of any assets other than (i) dispositions of inventory in the ordinary course of business, (ii) dispositions of equipment which, in the aggregate during any fiscal year, have a fair market value or book value, whichever is less, of not more than three percent (3%) of Property, Plant and Equipment and Capitalized Software as shown on the consolidated balance sheet of the Borrower and its Subsidiaries adjusted to provide for the HPG Acquisition which is not 35 41 replaced by equipment having at least equivalent value, (iii) dispositions of equipment which is replaced with equipment of like kind, function and value, provided the replacement equipment shall be acquired prior to or substantially contemporaneously with any disposition of the equipment that is to be replaced, and the replacement equipment shall be free and clear of Liens other than Permitted Liens, (iv) dispositions of other assets which, in the aggregate during any fiscal year, have a fair market value or book value, whichever is less, of not more than one percent (1%) of Consolidated Shareholders' equity of Borrower and its Subsidiaries adjusted to provide for the HPG Acquisition and (v) any Capital Markets Transaction of authorized but unissued equity securities the Net Cash Proceeds of which are subject to the terms of Section 2.5(a) hereof. SECTION 4.4. INFORMATION; SEC REPORTS; COMPLIANCE CERTIFICATES. (a) The Borrower shall, and shall cause each of its Subsidiaries to, promptly provide such information concerning the businesses, properties, liabilities and financial condition of the Borrower and such Subsidiaries as any Lender may from time to time reasonably request, including, if so requested, any reports or other documents provided to lenders in connection with the Credit Agreement. The Borrower shall, and shall cause each of its respective Subsidiaries to: (i) keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities, (ii) permit the Lenders or their representatives to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective businesses, finances and accounts with their respective executive officers and, subject to the right of the Borrower's representatives to participate in any such discussion, with their independent public accountants, all upon reasonable notice and at such reasonable times and as often as may reasonably be desired, and (iii) permit the Lenders or their representatives to consult with the Borrower and such Subsidiaries with respect to their businesses and make proposals with respect to such businesses (such proposals not to impede and may facilitate faster or more secure repayment of the Obligations), and meet with the respective executive officers of the Borrower and such Subsidiaries with respect to such proposals. (b) The Borrower shall furnish to the Lenders (i) as soon as available and in any event within 30 days after the end of each month a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such month and the related consolidated statements of income and cash flows of the Borrower and its Subsidiaries for such month and unless provided pursuant to clause (b)(ii), for the period from the beginning of the then current fiscal year to the end of such month, (ii) all quarterly and annual financial information required to be contained in a filing with the SEC on Forms 10-Q and 10-K, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Borrower and its Subsidiaries and, with respect to the annual information only, a report thereon by the Borrower's certified independent public accountants (who shall be a firm of established national reputation) and (ii) all current reports required to be filed with the SEC on Form 8-K, in each case within the time periods set forth in the SEC's rules and regulations. 36 42 (c) The Borrower shall deliver to the Lenders, within 60 days after the end of each fiscal quarter, an Officers' Certificate stating that a review of the activities of the Borrower and its Subsidiaries during the preceding fiscal quarter have been performed with a view to determining whether the Borrower and its Subsidiaries have kept, observed, performed and fulfilled their respective Obligations under this Agreement, and further stating that (i) the Borrower and its Subsidiaries have kept, observed, performed and fulfilled each and every covenant contained in this Agreement and are not in default in the performance or observance of any of the terms, provisions or conditions hereof or under any other mortgage, indenture or debt instrument (or, if a Default, Event of Default or default under any such mortgage, indenture or instrument shall have occurred, describing all such Defaults, Events of Default or defaults and what action the Borrower is taking or proposes to take with respect thereto). (d) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the annual financial statements delivered pursuant to paragraph (b) above shall be accompanied by a written statement of the Borrower's certified independent public accountants (who shall be from a firm of established national reputation) that, solely in making the examination necessary for certification of such financial statements and without independent investigation or inquiry, nothing has come to their attention that would lead them to believe that the Borrower or any of its respective Subsidiaries has violated any provisions of Article IV of this Agreement or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. SECTION 4.5. EXISTENCE; BUSINESS AND PROPERTIES; INSURANCE. (a) The Borrower shall, and shall cause each of its Subsidiaries to maintain (i) all properties necessary to their operations in good working order and condition, make all needed repairs, replacements and renewals to such properties, and maintain free from Liens (other than Permitted Liens) all Intellectual Property and proprietary information (or adequate licenses thereto), in each case as are reasonably necessary to conduct their business as currently conducted or as contemplated hereby, all in accordance with customary and prudent business practices and (ii) all Material Contracts and material leases in full force and effect without material defaults thereunder. (b) The Borrower shall, and shall cause each of its Subsidiaries to do or cause to be done all things necessary to preserve and keep in full force and effect their existence and all material rights and franchises, and maintain their licenses or qualifications to do business as foreign corporations and good standing in each jurisdiction in which their ownership or lease of property or the nature of their business makes such license or qualification necessary except where the failure to so qualify would not have a Material Adverse Effect. (c) The Borrower shall, and shall cause each of its Subsidiaries to (i) keep all of their insurable properties adequately insured at all times with responsible insurance carriers against loss or damage by fire and other hazards to the extent and in the manner as are customarily insured against by similar businesses owning such properties similarly situated, (ii) maintain general public liability insurance at all times with responsible insurance carriers against liability on account of damage to persons and property and (iii) maintain insurance under all applicable workers' compensation laws (or in the alternative, maintain required reserves if self-insured for workers' compensation purposes) such policies of insurance to have such limits, deductibles, exclusions, co-insurance and other provisions providing no less coverages than are maintained by similar businesses that are similarly situated, in any manner. such insurance policies to be in form reasonably satisfactory to the Administrative Agent. Each of the policies of insurance 37 43 described in this Section 4.5(c) shall provide that the Administrative Agent shall be named as loss payee or additional insured, as applicable, and that the insurer shall give the Administrative Agent not less than thirty (30) days' prior written notice before any such policy shall be terminated, lapse or be altered. SECTION 4.6. COMPLIANCE WITH LAWS. The Borrower shall, and shall cause each of its Subsidiaries to, comply in all respects with all applicable laws, ordinances, rules, regulations and requirements of governmental authorities (including Environmental Laws and ERISA and the rules and regulations thereunder), except where the necessity of compliance therewith is contested in good faith by appropriate proceedings or where non-compliance therewith could not reasonably be expected to have a Material Adverse Effect. SECTION 4.7. RESTRICTED PAYMENTS. The Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: (i) declare or pay any cash dividends or make any other payment or distribution on account of its capital stock (other than dividends payable in the ordinary course of business solely in common stock) on any shares of stock of any class of the Borrower, now or hereafter outstanding, (ii) purchase, redeem (whether mandatory or optional redemption) or otherwise retire any such shares or interests in consideration of cash or any debt instrument (whether or not subordinated) or shares of capital stock issued by any Subsidiary of the Borrower, or apply or set apart any of their assets therefor or make any other distribution (by redemption of capital or otherwise) in respect of any such shares, (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is pari passu with or subordinated to the Loans (other than the Loans), except a payment of interest or principal at Stated Maturity; or (iv) make any Restricted Investment, or agree to do any of the foregoing, other than (i) dividends payable by any Subsidiary to another Subsidiary or to the Borrower and (ii) the purchase or redemption of capital stock of employees pursuant to an Approved Stock Option Plan so long as (A) the aggregate amount paid in connection with such purchase or redemption during any twelve month period does not exceed $500,000 and (B) no Default or an Event of Default exists after giving effect to such purchase or redemption. SECTION 4.8. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM SUBSIDIARIES. The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into, or permit to exist, with any Person any agreement (other than this Agreement and the Credit Agreement) which prohibits or limits the ability of any Subsidiary to declare or pay any dividend or make any loan to or investment in the Borrower or any other owner of such Subsidiary. SECTION 4.9. LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND ISSUANCE OF ADDITIONAL PREFERRED STOCK. (a) The Borrower shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become liable, contingently or otherwise, with respect to (collectively, "incur"), or permit to exist, any Indebtedness (including Acquired Debt) or any shares of preferred stock except for: (i) (A) Indebtedness under the Credit Agreement in an aggregate principal amount at any one time outstanding not to exceed $325.0 million, minus the aggregate amount of all principal repayments with respect to term loans made under the Credit Agreement since the Closing Date, plus $20.0 million and (B) Indebtedness incurred by Foreign Subsidiaries under Credit Facilities in an aggregate principal amount not to exceed $80.0 million; provided that the aggregate principal 38 44 amount of all Indebtedness outstanding pursuant to clauses (A) and (B) shall not exceed $355.0 million at any time; (ii) the Loans and the Guarantees; (iii) the issuance of the Exchange Notes in accordance with Section 2.3 and guarantees thereof by the Guarantors; (iv) the incurrence by any Guarantor or any of its Subsidiaries of intercompany Indebtedness between or among such Guarantor and any of its Subsidiaries; provided, however, that (i) if any Guarantor or the Borrower is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations and (ii)(A) any subsequent issuance or transfer of equity interests that results in any such Indebtedness being held by a Person other than any Guarantor or any of its Subsidiaries and (B) any sale or other transfer of any such Indebtedness to a Person that is neither a Guarantor nor one of its Subsidiaries shall be deemed, in each case, to constitute an incurrence of such Indebtedness by such Guarantor or such Subsidiary, as the case may be; (v) Indebtedness consisting of Hedging Obligations not prohibited under this Agreement; (vi) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (vii) (a) purchase money Indebtedness and (b) Indebtedness incurred with respect to financing of Capital Expenditures, collectively under both clause (a) and (b) not to exceed an aggregate outstanding amount at any time of $5,000,000; (viii) Indebtedness of any Guarantor owing to the Borrower or another Guarantor and Indebtedness of the Borrower owing to any Guarantor; and (ix) Indebtedness outstanding on the date hereof and set forth on SCHEDULE 4.9. (b) For purposes of determining compliance with this Section 4.9, accrual of interest, the accretion of accreted value and the payment of interest by capitalizing the same or issuing additional Indebtedness will not be deemed to be an incurrence of Indebtedness. 39 45 SECTION 4.10. ANTI-LAYERING. Notwithstanding any other provision hereof, neither the Borrower nor any Guarantor will incur, create, issue, assume, guarantee or otherwise become directly or indirectly liable for any Indebtedness that is subordinate or junior in right of payment to the Credit Agreement and senior in any respect in right of payment to the Loans. SECTION 4.11. SALE AND LEASEBACK TRANSACTIONS. The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any arrangement with any Person providing for the leasing by the Borrower or any Guarantor of real or personal property which has been or is sold or transferred by the Borrower or any Guarantor to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or any Guarantor (a "SALE AND LEASEBACK TRANSACTION"). SECTION 4.12. INVESTMENTS; ACQUISITIONS. The Borrower shall not, and shall not permit any of its Subsidiaries to make any Acquisition or otherwise purchase, own, invest in or otherwise acquire, directly or indirectly, any stock or other securities, or make or permit to exist any interest whatsoever in any other Person or permit to exist any loans or advances to any Person, except that Borrower and its Subsidiaries may: (a) invest in Eligible Securities; (b) maintain investments, loans and advances existing as of the date hereof and as set forth in Schedule 3.6 attached hereto; (c) accept and maintain accounts receivable arising and trade credit granted in the ordinary course of business and retain any securities received in satisfaction or partial satisfaction thereof in connection with accounts of financially troubled Persons to the extent reasonably necessary in order to prevent or limit loss; (d) make and maintain loans and advances to and investments in Subsidiaries which are Guarantors; and (e) consummate Permitted Acquisitions and mergers permitted under Section 4.3 hereof. (f) make and maintain loans, advances and investments in Foreign Subsidiaries in an aggregate principal amount at any time outstanding not to exceed $40,000,000. (g) make and maintain other loans, advances and investments in an aggregate principal amount at any time outstanding not to exceed $10,000,000 SECTION 4.13. LIMITATION ON TRANSACTIONS WITH AFFILIATES. Other than transactions permitted under Sections 4.3 and 4.12 hereof, the Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any transaction after the Closing Date, including, without limitation, the purchase, sale, lease or exchange of property, real or personal, or the rendering of any services, with any Affiliate of the Borrower, (each of the foregoing, an "AFFILIATE TRANSACTION"), except (a) that such Persons may render services or sell inventory to the Borrower or its Subsidiaries for compensation at the same rates generally paid by Persons engaged in the same or similar businesses for the same or similar services, (b) that the Borrower or any Subsidiary may render services or sell inventory to such Persons for compensation at the same rates generally charged by the Borrower or such Subsidiary and (c) in the 40 46 ordinary course of and pursuant to the reasonable requirements of the Borrower's (or any Subsidiary's) business consistent with past practice of the Borrower and its Subsidiaries and upon fair and reasonable terms no less favorable to the Borrower (or any Subsidiary) than would be obtained in a comparable arm's-length transaction with a Person not an Affiliate. SECTION 4.14. LINE OF BUSINESS. The Borrower shall not conduct any business or engage in any activity or hold any assets other than holding the shares of capital stock of its Subsidiaries and administrative activities directly related thereto. SECTION 4.15. LIENS. The Borrower shall not enter into any agreement other than this Agreement and the other Loan Documents and the Credit Agreement which prohibits or limits the ability of any of the Borrower or any Guarantor to create, incur, assume or suffer to exist any Lien, security interest or encumbrance upon any of its property, assets or revenues, whether now owned or hereafter acquired. SECTION 4.16. STAY, EXTENSION AND USURY LAWS. The Borrower and each of the Guarantors covenants (to the extent that they may lawfully do so) that they shall not, and shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants in or the performance of this Agreement; and the Borrower waives, and agrees to cause its Subsidiaries to waive (to the extent that they may lawfully do so), all benefit or advantage of any such law, and covenant that they shall not, and shall not permit its Subsidiaries to, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Lenders, but shall suffer and permit, and shall cause its Subsidiaries to suffer and permit, the execution of every such power as though no such law has been enacted. SECTION 4.17. CHANGE OF CONTROL. (a) Upon the occurrence of a Change of Control, each Lender will have the right to require the Borrower to prepay all or any part of the principal amount of such Lender's Loans pursuant to the offer described below (the "CHANGE OF CONTROL OFFER") at a prepayment price in cash equal to the aggregate principal amount thereof plus (i) accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of prepayment and (ii) the Change of Control Fee thereon (the "CHANGE OF CONTROL PAYMENT"). Within 10 days following any Change of Control, the Borrower will mail a notice to each Lender describing the transaction or transactions that constituted the Change of Control and offer to repay the Loans on the date specified in such notice, which date shall be no later than 30 days after the date of such Change of Control (the "CHANGE OF CONTROL PAYMENT DATE"), pursuant to the procedures set forth below. (b) Notice of a Change of Control Offer shall be mailed by the Borrower to the Lenders at their addresses set forth in the Loan Register. The Change of Control Offer shall remain open from the time of mailing until the Change of Control Payment Date. The notice shall be accompanied by a copy of the most recent reports furnished pursuant to Section 4.4(b)(i) and (ii). The notice shall contain all instructions and materials necessary to enable such Lenders to elect to be prepaid pursuant to the Change of Control Offer. (c) On the Change of Control Payment Date, the Borrower shall repay all Loans or portions thereof of all Lenders that properly elected repayment thereof pursuant to the Change of Control Offer, pay the Change of Control Payment for each such Loan (or portion thereof) elected to be prepaid 41 47 and deliver to each Lender a new Bridge Note equal in principal amount (excluding premiums, if any) to any unpurchased portion of the corresponding Bridge Note surrendered. The Borrower will notify the remaining Lenders of the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. SECTION 4.18. OBLIGATIONS AND TAXES. The Borrower shall, and shall cause its Subsidiaries to, pay its Indebtedness and other Obligations promptly and in accordance with their terms and comply in all material respects with or contest in good faith all statutes and governmental regulations and pay all taxes, assessments, governmental charges, claims for labor, supplies, rent and any other obligation which, if unpaid, would become a Lien against any of their properties except liabilities being contested in good faith by appropriate proceedings diligently conducted and against which adequate reserves acceptable to the Borrower's independent certified public accountants determined on a consolidated basis have been established unless and until any Lien resulting therefrom attaches to any of their property and becomes enforceable against any of their creditors. SECTION 4.19. CONSOLIDATED NET WORTH. The Borrower shall, and shall cause each of its Subsidiaries to, maintain at all times Consolidated Net Worth to be at least 90% of Consolidated Net Worth at June 30, 1998, such amount to be increased as at the first day of each fiscal quarter, beginning with the fiscal quarter beginning October 1, 1998, by an amount equal to (a) seventy-five percent (75%) of Consolidated Net Income during the immediately preceding fiscal year, plus (b) one hundred percent (100%) of the Net Cash Proceeds of an Equity Offering consummated during the immediately preceding fiscal quarter; provided, however, in no event shall the Consolidated Net Worth requirement be decreased as a result of a net loss of the Borrower and its Subsidiaries (i.e., negative Consolidated Net Income) for any fiscal quarter except that Consolidated Net Worth may be reduced by the actual amount of non-cash charges incurred in connection with the HPG Acquisition up to but not exceeding $25,000,000. Any increase calculated pursuant hereto shall be determined based upon financial statements delivered in accordance with Section 4.4(b) hereof; provided, however such increase shall be deemed effective as of the first day of the fiscal quarter in which such financial statements are delivered or required to be delivered, if earlier. SECTION 4.20. CONSOLIDATED FIXED CHARGE COVERAGE RATIO. The Borrower shall, and shall cause each of its Subsidiaries to maintain at all times a Consolidated Fixed Charge Coverage Ratio of not less than the ratio indicated below at any time during the period indicated: Closing Date through third 1.00 to 1.00 fiscal quarter 1999 Fourth fiscal quarter 1999 1.10 to 1.00 through third fiscal quarter 2000 Fourth fiscal quarter 2000 and 1.20 to 1.00 thereafter 42 48 SECTION 4.21. CONSOLIDATED LEVERAGE RATIO. The Borrower shall, and shall cause each of its Subsidiaries to maintain at all times a Consolidated Leverage Ratio of not less than the ratio indicated below at any time during the period indicated: Second fiscal quarter 1999 6.75 to 1.00 Third fiscal quarter 1999 7.00 to 1.00 Fourth fiscal quarter 1999 5.50 to 1.00 through first fiscal quarter 2000 Second fiscal quarter 2000 6.00 to 1.00 through third fiscal quarter 2000 Fourth fiscal quarter 2000 4.50 to 1.00 through second fiscal quarter 2001 Third fiscal quarter 2001 5.00 to 1.00 Fourth fiscal quarter 2001 and 4.00 to 1.00 thereafter SECTION 4.22. CONSOLIDATED INTEREST COVERAGE RATIO. The Borrower shall, and shall cause each of its Subsidiaries to, maintain at all times a Consolidated Interest Coverage Ratio of not less than the ratio indicated below at any time during the period indicated: Closing Date through first 1.60 to 1.00 fiscal quarter 1999 Second fiscal quarter 1999 1.50 to 1.00 through third fiscal quarter 1999 Fourth fiscal quarter 1999 1.60 to 1.00 through third fiscal quarter 2000 Fourth fiscal quarter 2000 and 1.80 to 1.00 thereafter 43 49 SECTION 4.23. CONSOLIDATED EBITDA. The Borrower shall, and shall cause each of its Subsidiaries to, maintain at all times a Consolidated EBITDA of not less than the amount indicated below at any time during the period indicated: Closing Date through third $22,000,000 fiscal quarter 1998 Fourth fiscal quarter 1998 $52,000,000 First fiscal quarter 1999 $58,000,000 SECTION 4.24. ADDITIONAL SUBSIDIARY GUARANTEES. If the Borrower or any of the Guarantors shall acquire or create another Domestic Subsidiary after the date hereof, or if any Subsidiary of the Borrower becomes a Domestic Subsidiary, then such newly acquired or created Domestic Subsidiary shall become a Guarantor and execute a notation of Guarantee and deliver an Opinion of Counsel, in accordance with the terms hereof. SECTION 4.25. YEAR 2000 COMPLIANCE. The Borrower will promptly notify the Administrative Agent in the event the Borrower discovers or determines that any computer application (including those of its suppliers, vendors and customers) that is material to its or any of its Subsidiaries' business and operations will not be Year 2000 complaint, except to the extent that such failure could not reasonably be expected to have a Material Adverse Effect. SECTION 4.26. ENVIRONMENTAL COMPLIANCE. If the Borrower or any Subsidiary shall receive any letter, notice, complaint, order, directive, claim or citation alleging that the Borrower or any Subsidiary has violated any Environmental Law or is liable for the costs of cleaning up, removing, remediating or responding to a release of Hazardous Materials, the Borrower shall, within the time period permitted and to the extent required by the applicable Environmental Law or the Governmental Authority responsible for enforcing such Environmental Law, remove or remedy, or cause the applicable Subsidiary to remove or remedy, such violation or release or satisfy such liability unless, and only during the period that, the applicability of the Environmental Law, the fact of such violation or liability or what is required to remove or remedy such violation is being contested by the Borrower or the applicable Subsidiary by appropriate proceedings diligently conducted and all reserves with respect thereto as may be required under GAAP, if any, have been made. SECTION 4.27. ERISA. (a) With reasonable promptness, and in any event within thirty (30) days, the Borrower will give notice of and/or deliver to Agent copies of (i) the establishment of any new Employee Benefit Plan, (ii) the commencement of contributions to any Pension Plan or Multiemployer Plan to which the Borrower or any of its ERISA Affiliates was not previously contributing, (iii) any material increase in the benefits of any existing Employee Benefit Plan, (iv) each funding waiver request filed with respect to any Pension Plan and all communications received or sent by the Borrower or any ERISA Affiliate with respect to such request and (v) the failure of the Borrower or any ERISA Affiliate to make a required installment or payment under Section 302 of ERISA or Section 412 of the Code or any Foreign Benefit Law (in the case of an Employee Benefit Plan regulated by any Foreign Benefit Law) by the due date. (b) Promptly and in any event within ten (10) days of becoming aware of the occurrence of or forthcoming occurrence of any (i) Termination Event or (ii) "prohibited transaction," as 44 50 such term is defined in Section 406 of ERISA or Section 4975 of the Code, in connection with any Pension Plan or any trust created thereunder, the Borrower will deliver to the Administrative Agent a notice specifying the nature thereof, what action the Borrower has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto. (c) With reasonable promptness but in any event within ten (10) days for purposes of clauses (a), (b) and (c), the Borrower will deliver to the Administrative Agent copies of (a) any favorable or unfavorable determination letter from the Internal Revenue Service regarding the qualification of an Employee Benefit Plan under Section 401(a) of the Code, (b) all notices received by the Borrower or any ERISA Affiliate of the PBGC's or any Governmental Entity's intent to terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan, (c) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by the Borrower or any ERISA Affiliate with the Internal Revenue Service with respect to each Pension Plan and (d) all notices received by the Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA. The Borrower will notify the Administrative Agent in writing within ten (10) Business Days of the Borrower obtaining knowledge or reason to know that the Borrower or any ERISA Affiliate has filed or intends to file a notice of intent to terminate any Pension Plan under a distress termination within the meaning of Section 4041(c) of ERISA. (d) With respect to any Pension Plan, Employee Benefit Plan or Multiemployer Plan, the Borrower shall not and shall not permit any of its Subsidiaries to: (i) permit the occurrence of any Termination Event which would result in a liability to the Borrower or any ERISA Affiliate in excess of $500,000; (ii) permit the present value of all benefit liabilities under all Pension Plans (except as provided below) to exceed the current value of the assets of such Pension Plans allocable to such benefit liabilities (the "Excess Liabilities Value") by more than $500,000; (iii) permit any accumulated funding deficiency in excess of $500,000 (as defined in Section 302 of ERISA and Section 412 of the Code) with respect to any Pension Plan, whether or not waived; (iv) fail to make any contribution or payment to any Multiemployer Plan which the Borrower or any ERISA Affiliate may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto which results in or is likely to result in a liability in excess of $500,000; (v) engage, or permit any Borrower or any ERISA Affiliate to engage, in any prohibited transaction under Section 406 of ERISA or Sections 4975 of the Code for which a civil penalty pursuant to Section 502(i) of ERISA or a tax pursuant to Section 4975 of the Code may be imposed; (vi) permit the establishment of any Employee Benefit Plan providing post-retirement welfare benefits or establish or amend any Employee Benefit Plan which establishment or amendment could result in liability to the Borrower or any ERISA Affiliate or increase the obligation of the Borrower or any ERISA Affiliate to a Multiemployer Plan which liability or increase, individually or together with all similar liabilities and increases, is in excess of $500,000; (vi) fail, or permit the Borrower or any ERISA Affiliate to fail, to establish, maintain and operate each Employee Benefit Plan in compliance in all material respects with the provisions of ERISA, the Code, all applicable Foreign Benefit Law and all other applicable laws and the regulations and interpretations thereof. SECTION 4.28. HEDGING OBLIGATIONS. The Borrower shall not, and shall not permit any Subsidiary to, incur any Hedging Obligations or enter into any agreements, devices or instruments related to Hedging Obligations, except for Hedging Obligations permitted pursuant to the Credit Agreement. SECTION 4.29. DEFAULTS UNDER OTHER AGREEMENTS. The Borrower shall not, and shall not permit any Subsidiary to permit any landlord, mortgagee, trustee under deed of trust or lienholder to 45 51 lawfully declare a default under any lease, mortgage, deed of trust or lien instrument on real estate owned or leased by the Borrower or any Guarantor or permit any landlord to lawfully terminate, prior to the expiration of its term, any leasehold interest of the Borrower or any Guarantor, if such default or termination, individually or collectively, would reasonably be expected to result in a Material Adverse Effect. SECTION 4.30. LICENSES. The Borrower shall not, and shall not permit any Subsidiary to grant, establish, create or permit to exist any license of any of the Intellectual Property to any Person except for (i) such licenses granted for the limited purpose of conducting sales or marketing promotions in the ordinary course of business of existing or new products for a reasonable, limited time period, (ii) such licenses approved by the Majority Lenders in writing prior to the granting thereof within 30 days after request therefor, such approval not to be unreasonably withheld, and (iii) such licenses granted to any material Subsidiary party to the Intellectual Property Security Agreement which has delivered an appropriate Intellectual Property Assignment executed in blank with respect to such license. Section 4.31. Dissolution, etc. The Borrower shall not, and shall not permit any Subsidiary to wind up, liquidate or dissolve (voluntarily or involuntarily) or commence or suffer any proceedings seeking any such winding up, liquidation or dissolution, except in connection with the merger or consolidation of Subsidiaries into each other or into a Borrower permitted pursuant to Section 4.3 hereof. SECTION 4.32. TOTAL INDEBTEDNESS. The Borrower shall not, and shall not permit any Subsidiary to permit the aggregate amount of Indebtedness owing by the Borrower and its Subsidiaries on a consolidated basis to exceed $355,000,000 at any time. ARTICLE V. CONDITIONS The obligation of each of the Lenders to make Bridge Loans is subject to (i) the representations and warranties in Article III and the representations and warranties of the Borrower and such Guarantor, as the case may be, in the Credit Agreement being true, correct and complete in all respects on and as of the Closing Date to the same extent as though made on and as of that date, (ii) on or prior to the Closing Date, the Borrower and such Guarantor, as the case may be, having performed and complied with all covenants and conditions to be performed and observed by it on or prior to the Closing Date and (iii) the prior or concurrent satisfaction of each of the following conditions: SECTION 5.1. CLOSING. Upon satisfaction of the conditions set forth herein, each of the Lenders shall disburse the proceeds of its Bridge Loan by wire transfer of immediately available funds to the account designated by the Borrower in New York, New York, against delivery to the Lenders in Bridge Notes in the names and denominations specified by the Lenders (the "CLOSING"). The Borrower shall give the Lenders at least three (3) Business Days' notice of the expected date of such Closing (the "CLOSING DATE"). The Closing shall take place at such place as shall be agreed upon by the Lenders and the Borrower. SECTION 5.2. CORPORATE AND OTHER PROCEEDINGS. On or before the Closing Date, all corporate and other proceedings taken or to be taken in connection with the Transactions and all documents incidental thereto not previously found acceptable by the Administrative Agent shall be satisfactory in form 46 52 and substance to the Administrative Agent, and the Administrative Agent shall have received on behalf of the Lenders the following items, each of which shall be in form and substance satisfactory to the Administrative Agent and, unless otherwise noted, dated the Closing Date: (a) a certified copy of the Borrower's and each of the Guarantor's charters, in each case together with a certificate of status, compliance, good standing or like certificate with respect to the Borrower and each Guarantor issued by the appropriate government officials of the jurisdiction of its respective formation and of each jurisdiction in which the Borrower or such Guarantor owns any material assets or carries on any material business, each to be dated a recent date prior to the Closing Date; (b) a copy of the Borrower's and each of the Guarantor's bylaws, in each case certified as of the Closing Date by its Secretary or one of its Assistant Secretaries; (c) resolutions of the Borrower's and each of the Guarantor's Board of Directors, in each case approving and authorizing the execution, delivery and performance of this Agreement, each of the other Transaction Documents and any other documents, instruments and certificates required to be executed by the Borrower or such Guarantor in connection herewith or therewith and approving and authorizing the execution, delivery and payment of the Bridge Notes, the Exchange Notes and the Escrowed Warrants and the consummation of the Transactions, each certified as of the Closing Date by its respective Secretary or one of its Assistant Secretaries as being in full force and effect without modification or amendment; (d) signature and incumbency certificates of the Borrower's and each of the Guarantor's Officers executing this Agreement and the Bridge Notes; (e) executed copies of this Agreement and the Bridge Notes, drawn to the order of the Lenders; (f) a notation of Guarantee, executed and delivered by each Guarantor, dated the date of this Agreement, substantially in the form of EXHIBIT B hereto, as applicable; (g) an Officers' Certificate from the Borrower and each of the Guarantors in form and substance satisfactory to the Administrative Agent to the effect that (i) the representations and warranties in Article III and the representations and warranties of the Borrower and such Guarantor, as the case may be, in the Credit Agreement are true, correct and complete in all respects on and as of the Closing Date to the same extent as though made on and as of that date, (ii) on or prior to the Closing Date, the Borrower and such Guarantor, as the case may be, has performed and complied with all covenants and conditions to be performed and observed by it on or prior to the Closing Date and (iii) all conditions to the consummation of the Transactions have been satisfied on the terms set forth in the documentation relating thereto and have not been waived or amended without the Administrative Agent's prior written consent; (h) true and correct copies of the final form of each of: (i) the Acquisition Agreement, which shall provide that the aggregate cost of the Transactions (including without limitation the purchase price to be paid by the Borrower to acquire the assets of the Target, the refinancing of certain existing debt of the Borrower and the Target, the payment of costs related to the closing of the Target's Asheboro, North Carolina manufacturing facility (which costs to the Borrower and its affiliates shall not exceed $10.0 million) and the payment of all fees and expenses) shall not exceed $402.5 million; and (ii) the Credit Agreement; 47 53 (i) true and correct copies of each of the other Transaction Documents, each of which shall be satisfactory in form and substance to each of the Lenders, in their sole reasonable discretion; (j) a copy of all closing documents relating to the HPG Acquisition and all such counterpart originals or certified copies of such documents, instruments, certificates, opinions and reliance letters as the Administrative Agent may reasonably request; (k) a copy of all closing documents relating to the Credit Agreement and all such counterpart originals or certified copies of such documents, instruments, certificates, reliance letters and opinions as the Administrative Agent may reasonably request (including, without limitation, a reliance letter, addressed to the Lenders, from counsel to the Borrower, entitling the Lenders to rely on the opinions issued by such counsel in connection with the Credit Agreement); (l) a copy of all closing documents relating to the other Transactions and all such counterpart originals or certified copies of such documents, instruments, certificates, reliance letters and opinions as the Administrative Agent may reasonably request; and (m) all authorizations, consents and approvals required by Section 5.19. SECTION 5.3. CONCURRENT TRANSACTIONS. Either prior to or concurrently with the making of the Bridge Loans by the Lenders: (i) the banks and other lending institutions shall have funded no more than $197.9 million pursuant to the Credit Agreement and at least an additional $147.1 million shall be available to the Borrower for future borrowings thereunder and (ii) the HPG Acquisition shall have been consummated pursuant to the terms of the Acquisition Agreement delivered pursuant to Section 5.1(h) above in compliance with applicable law and regulatory approvals and shall not have been materially altered, amended or otherwise changed or supplemented or any material condition therein waived, without the prior written consent of the Lenders. SECTION 5.4. NO MATERIAL LOSS. Neither the Borrower nor any of its Subsidiaries shall have sustained any loss or interference with respect to its businesses or properties from fire, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any labor dispute or any legal or governmental proceeding, which loss or interference, in the sole judgment of the Administrative Agent, has had or is reasonably likely to have a Material Adverse Effect; there shall not have been, in the reasonable discretion of the Administrative Agent, any material adverse change since December 31, 1997 in the business, assets, operations, condition (financial or otherwise) or management of the Borrower and its Affiliates, taken as a whole or the Target, or in the prospects of the Borrower and its Affiliates, taken as a whole. No event or circumstance shall have occurred, and the Administrative Agent shall not have become aware of any event or circumstance, which has had, or could reasonably be expected to have, a material adverse effect on the business, operations, property, financial condition, results of operations, assets, liabilities or management of the Borrower or any of its Affiliates or the Target, or prospects of the Borrower or any of its Affiliates. Neither the Borrower nor any of its Affiliates nor the Target shall have any material liabilities (contingent or otherwise) except those set forth on the most recent audited balance sheets of such entities provided to the Administrative Agent and those incurred in the ordinary course of business since the date of such audited balance sheets. SECTION 5.5. NO EVENT OF DEFAULT. No event shall have occurred and be continuing or would result from the consummation of the Transactions that would constitute an Event of Default. 48 54 SECTION 5.6. LITIGATION; RESTRAINING ORDERS. There shall not be threatened or pending any action, suit, investigation or proceeding in any court or before any other Governmental Entity, or any other Person, domestic or foreign that purports to affect the Transactions or any of the financings contemplated hereby and that could reasonably be expected to have a Material Adverse Effect on (i) the Borrower and its Affiliates, taken as a whole, or the Target; (ii) the Transactions or any of the financings contemplated hereby; and (iii) the ability of the Borrower and the Guarantors to perform their respective Obligations with respect to the Bridge Notes and the Guarantees. SECTION 5.7. NO CHANGES IN FINANCIAL MARKETS. There shall not have occurred (i) any general suspension of, or limitation on times or prices for, trading in securities on the New York Stock Exchange or American Stock Exchange or in the over-the-counter market in the United States; (ii) a declaration of a banking moratorium on any suspension of payments in respect of the banks in the United States or New York; or (iii) either (a) an outbreak or escalation of hostilities between the United States and any foreign power, or (b) an outbreak or escalation of any other insurrection or armed conflict involving the United States or any other national or international calamity or emergency, or (c) any material change in the financial markets of the United States, which, in the sole judgment of the Administrative Agent, makes it impracticable or inadvisable to proceed with the consummation of the Bridge Loans or any of the other transactions contemplated hereby including, without limitation, the issuance and sale of the Permanent Securities or that would materially affect the ability to sell or syndicate the Bridge Loans. SECTION 5.8. ENVIRONMENTAL REPORTS. The Administrative Agent shall have received reports and other information in form, scope and substance satisfactory to the Administrative Agent concerning environmental liabilities of the Borrower and its Subsidiaries (after giving effect to the Transactions), including, without limitation, copies of independent environmental reports with respect to the Queretero Property. SECTION 5.9. DUE DILIGENCE. The corporate, capital and ownership structure (which shall be as set forth in SCHEDULE 3.6) and the articles of incorporation and by-laws, equityholder agreements, management, and litigation and environmental matters of the Borrower and its Subsidiaries (after giving effect to the Transactions) shall be satisfactory to the Administrative Agent, and the Administrative Agent shall have received any information reasonably necessary to conduct such due diligence. SECTION 5.10. ESCROW AGREEMENT. The Borrower and the Escrow Agent shall have entered into the Escrow Agreement and a fully executed copy of the Escrow Agreement shall have been delivered to each of the Lenders. SECTION 5.11. EXCHANGE NOTES. The Borrower, each of the Guarantors and the Exchange Note Trustee shall have entered into the Exchange Note Indenture and a fully executed copy of the Exchange Note Indenture shall have been delivered to each of the Lenders. $200.0 million in aggregate principal amount of Exchange Notes shall have been issued by the Borrower and the Guarantors into escrow and delivered to the Escrow Agent as contemplated by the Escrow Agreement. SECTION 5.12. ESCROWED WARRANTS. The Borrower shall have issued the Escrowed Warrants into escrow and delivered the Escrowed Warrants to the Escrow Agent as contemplated by the Escrow Agreement. SECTION 5.13. DEBT REGISTRATION RIGHTS AGREEMENT. The Borrower, each of the Guarantors and the Administrative Agent shall have entered into the Debt Registration Rights Agreement 49 55 and a fully executed copy of the Debt Registration Rights Agreement shall have been delivered to each of the Lenders. SECTION 5.14. EQUITY REGISTRATION RIGHTS AGREEMENT. The Borrower, each of the Guarantors and the Administrative Agent shall have entered into the Equity Registration Rights Agreement and a fully executed copy of the Equity Registration Rights Agreement shall have been delivered to each of the Lenders. SECTION 5.15. DELIVERY OF OPINIONS. The Administrative Agent shall have received originally executed copies of one or more favorable written opinions of (i) Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, counsel for the Borrower and the Guarantors, in the form of EXHIBIT H hereto and addressed to the Lenders and (ii) such other opinions of counsel and such certificates or opinions of accountants, appraisers or other professionals as the Administrative Agent shall have reasonably requested. SECTION 5.16. SOLVENCY. The Administrative Agent shall have received a certificate of the chief financial officer of the Company, in form and substance satisfactory to the Administrative Agent, certifying that, on the date of and immediately after giving effect to the consummation of the Transactions, each of the Borrower and its Subsidiaries will be Solvent. SECTION 5.17. PAYMENT OF FEES. On or before the Closing Date, the Borrower shall have paid to the Lenders and their Affiliates the fees payable on the Closing Date pursuant to Section 2.12. SECTION 5.18. NO BREACH UNDER ENGAGEMENT LETTER, COMMITMENT LETTER OR FEE LETTER. Neither the Borrower nor any Guarantor shall be in breach or violation of any of its obligations under the Engagement Letter, the Commitment Letter or the Fee Letter and each of the Engagement Letter and the Fee Letter shall be in full force and effect. SECTION 5.19. CONSENTS AND APPROVALS. On or before the Closing Date, all governmental, equityholder and third party consents (including Hart-Scott-Rodino clearance and the consent, if necessary, of any existing lenders and lessors of the Borrower and its Affiliates or the Target) and approvals necessary, in connection with the Transactions and the related financings and other transactions contemplated hereby shall have been obtained and shall remain in full force and effect and all applicable waiting periods under any law applicable to the Transactions shall have expired without any action being taken by any competent authority (including without limitation, any Governmental Entity) which restrains, prevents or imposes materially adverse conditions upon the completion of the Transactions or the financing thereof or that could seek or threaten any of the foregoing, and no law or regulation shall be applicable which, in the reasonable judgment of the Administrative Agent could have such effect and evidence of the receipt of such authorizations, consents and approvals satisfactory to the Administrative Agent shall have been delivered to the Administrative Agent. Copies of all such authorizations, consents and approvals shall have been delivered to the Administrative Agent on the Closing Date. SECTION 5.20. MARGIN REGULATIONS. The making of the Bridge Loans in the manner contemplated in this Agreement shall not violate the applicable provisions of Regulation T, U or X of the Board or any other regulation of the Board. SECTION 5.21. SATISFACTORY FINANCIAL STATEMENTS. The Administrative Agent shall have received (a) the most recent interim financial statements and working capital detail for (i) the most recent month and the most recent trailing twelve months for which internal financial statements are available and (ii) the first projected twelve-month period following consummation of the HPG Acquisition, 50 56 and a pro forma consolidated balance sheet of the Borrower as of March 31, 1998 giving effect to the Transactions and the financings and other transactions contemplated hereby and prepared by Ernst & Young and Grant Thornton and (b) all audited and unaudited historical financial statements of the Borrower, its Affiliates, the Target and all other completed or probable acquisitions (including pro forma financial statements) meeting the requirements of Regulation S-X for a Form S-1 registration statement, and all such financial statements shall be satisfactory in form and substance to the Administrative Agent. Such financial statements referred to in clause (b) shall show actual pro forma (after giving effect to the Transactions) consolidated EBITDA (in conformance with the requirements of Regulation S-X) of the Borrower for the year ended December 31, 1997 and the most recent twelve-month period for which financial statements are available, in each case of not less than $51.7 million and the Administrative Agent shall have received a letter from Grant Thornton stating that such pro forma consolidated financial statements comply as to form with the requirements of Regulation S-X. SECTION 5.22. REPAYMENT OF INDEBTEDNESS. On or before the Closing Date, certain existing Indebtedness set forth in SCHEDULE 5.23 attached hereto of the Borrower and the Target shall be repaid in full and all commitments thereunder shall be terminated. ARTICLE VI. TRANSFER OF THE LOANS, THE INSTRUMENTS EVIDENCING SUCH LOANS AND THE SECURITIES; REPRESENTATIONS OF LENDERS; PARTICIPATIONS SECTION 6.1. TRANSFER OF THE LOANS, THE INSTRUMENTS EVIDENCING THE LOANS AND THE SECURITIES. Each Lender acknowledges that none of the Loans, the instruments evidencing such Loans and the Securities have been registered under the Securities Act and represents and agrees that it is acquiring the Loans, the instruments evidencing such Loans and the Securities for its own account and that it will not, directly or indirectly, transfer, sell, assign, pledge or otherwise dispose of its Loans, the instruments evidencing such Loans or Securities (or any interest therein) unless such transfer, sale, assignment, pledge or other disposition is made (i) pursuant to an effective registration statement under the Securities Act or (ii) pursuant to an available exemption from registration under, and otherwise in compliance with, the Securities Act. Each Lender represents, warrants, covenants and agrees to and with the Borrower and each Guarantor that it is either (i) a qualified institutional buyer within the meaning of Rule 144A under the Securities Act acting for its own account or the account of one or more other qualified institutional buyers, and is aware that the Borrower and each Guarantor may rely upon the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A thereunder or (ii) an institutional "accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act. Each of the Lenders acknowledges that the instruments evidencing the Loans and the Securities will bear a legend restricting the transfer thereof in accordance with the Securities Act. Subject to the provisions of the previous paragraph, each of the Borrower and the Guarantors agrees that, with the consent of the Administrative Agent, each Lender will be free to sell or transfer all or any part of the Loans, the instruments evidencing the Loans or the Securities (including, without limitation, participation interest in the Loans) to any third party and to pledge any or all of the Securities to any commercial bank or other institutional lender. SECTION 6.2. PERMITTED ASSIGNMENTS. Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time assign to one or more banks or other entities ("Purchasers") all or any part of its rights and obligations hereunder and under the Loan Documents. Such assignment shall be substantially in the form of Exhibit A or in such other form as may be agreed to by the 51 57 parties thereto. The consent of the Borrower and the Administrative Agent shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender or an Affiliate thereof; provided, however, that if a Default has occurred and is continuing, the consent of the Borrower shall not be required. Such consent shall not be unreasonably withheld or delayed. SECTION 6.3. PERMITTED PARTICIPANTS; EFFECT. (a) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("PARTICIPANTS"") participating interests in any Loan owing to such Lender, any Bridge Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents; provided that the aggregate amount of such participating interest shall not be less than $5.0 million. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of its Loans and the holder of any Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. (b) Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Loan or Commitment in which such Participant has an interest which forgives principal, interest or fees or reduces the interest rate or fees payable with respect to any such Loan or Commitment, extends the Maturity Date, postpones any date fixed for any regularly scheduled payment of principal of, or interest or fees on, any such Loan or Commitment or releases any guarantor of any such Loan or releases all or substantially all of the collateral, if any, securing any such Loan. 52 58 (c) The Borrower agrees that each Participant shall be deemed to have the right of setoff provided in Section 2.11 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 2.11 with respect to the amount of participating interests sold to each Participant. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 2.11, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 2.11 as if each Participant were a Lender. SECTION 6.4. DISSEMINATION OF INFORMATION. The Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a "TRANSFEREE") and any prospective Transferee any and all information in such Lender's possession concerning the creditworthiness of the Borrower and its Subsidiaries, including without limitation any information contained in any Reports. SECTION 6.5. TAX TREATMENT. If any interest in any Loan Document is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 2.10. SECTION 6.6. REPLACEMENT SECURITIES UPON Transfer or Exchange. Upon surrender of any Securities by any Lender in connection with any permitted transfer or exchange, the Borrower will execute and deliver in exchange therefor a new Security or Securities of the same aggregate tenor and principal amount, payable to the order of such Persons and in such denominations as such Lender may request. The Borrower may require payment by such Lender of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer. SECTION 6.7. REGISTER. The Administrative Agent on behalf of the Borrower shall maintain a register of the principal amount of the Loans held by each Lender and any interest due and payable with respect thereto. The Administrative Agent will allow any Lender to inspect and copy such register at the Administrative Agent's principal place of business during normal business hours. ARTICLE VII. EVENTS OF DEFAULT SECTION 7.1. EVENTS OF DEFAULT. The occurrence of any one or more of the following events shall constitute an "EVENT OF DEFAULT: " (a) any representation or warranty made or deemed made by the Borrower or any of its Subsidiaries herein or that is contained in any certificate, document or financial or other statement furnished by any of them at any time under or in connection with any Transaction Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; (b) the Borrower defaults in the payment of the principal of or premium on any of the Loans, whether or not prohibited by the subordination provisions of Article X hereof, when the same shall become due and payable, whether at stated maturity, upon acceleration, upon redemption, or otherwise; 53 59 (c) the Borrower defaults in the payment of any interest upon any of the Loans, whether or not prohibited by the subordination provisions of Article X hereof, when the same becomes due and payable and such default continues for five calendar days; (d) the Borrower defaults in the payment of any other Obligations payable under this Agreement or any of the other Loan Documents, whether or not prohibited by the subordination provisions of Article X hereof, and such default continues for five calendar days; (e) the Borrower or any of its Subsidiaries fails to observe or perform any of its covenants or agreements contained in Article IV (other than Sections 4.5, 4.6, 4.16, 4.18 and 4.26(a), (b) and (c); (f) the Borrower or any of its Subsidiaries fails to observe or perform any of its covenants or agreements (other than those Sections of Article IV not listed in the parenthetical in clause (e) above) contained in any of the Loan Documents, other than a default under items listed on Schedule 3.4 hereof, and such default continues for more than the period of grace, if any, therein specified, or such default or event of default shall permit the holder of any such Indebtedness (or any agent or trustee acting on behalf of one or more holders) to accelerate the maturity thereof; (g) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Borrower or any of its Subsidiaries (or the payment of which is guaranteed by the Borrower or any of its Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the date of this Agreement, which default (i) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default or (ii) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a default described in clause (a) above or the maturity of which has been so accelerated aggregates $5.0 million; (h) (i) one or more judgments or orders where the amount not covered by insurance (or the amount as to which the insurer denies liability) is in excess of $1.0 million is rendered against the Borrower or any of its Subsidiaries, or (ii) there is any attachment, injunction or execution against any of the Borrower's or its Subsidiaries' or properties for any amount in excess of $1.0 million in the aggregate; and such judgment, attachment, injunction or execution remains unpaid, unstayed, undischarged, unbonded or undismissed for a period of thirty (30) days; or (i) the Borrower or any of its Subsidiaries shall (i) be unable to pay its debts generally as they become due; (ii) file a petition to take advantage of any insolvency statute; (iii) make an assignment for the benefit of its creditors; (iv) commence a proceeding for the appointment of a receiver, trustee, liquidator or conservator of itself or of the whole or any substantial part of its property; or (v) file a petition or answer seeking liquidation, reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute; or (j) a court of competent jurisdiction shall enter an order, judgment or decree appointing a custodian, receiver, trustee, liquidator or conservator of the Borrower or any of its Subsidiaries or of the whole or any substantial part of its properties and such order, judgment or decree continues unstayed and in effect for a period of sixty (60) days, or approve a petition filed against the 54 60 Borrower or any of its Subsidiaries seeking liquidation, reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state, which petition is not dismissed within sixty (60) days; or if, under the provisions of any other law for the relief or aid of debtors, a court of competent jurisdiction shall assume custody or control of the Borrower or any of its Subsidiaries or of the whole or any substantial part of any of its properties, which control is not relinquished within sixty (60) days; or if there is commenced against the Borrower or any of its Subsidiaries any proceeding or petition seeking reorganization, arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state which proceeding or petition remains undismissed for a period of ninety (90) days; or if the Borrower or any of its Subsidiaries takes any action to indicate its consent to or approval of any such proceeding or petition; or (k) the obligations of any Guarantor under its Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its Obligations under its Guarantee; or (l) the Borrower or any of its Subsidiaries shall suspend all or any part of its operations material to the conduct of the business of the Borrower and its Subsidiaries taken as a whole; or (m) the Borrower merges into another Person or dissolves; or (n) (i) the Borrower or any Subsidiary shall fail (A) to implement or complete any material action or process constituting a portion of its plan to be Year 2000 Compliant on the date set forth for implementation or completion of such action or process and such failure shall continue for a period of 30 or more days or (B) to be Year 2000 Compliant on or after 90 days prior to year 2000; or (o) the Kmart Agreement shall be terminated or any amendment thereof is entered into by the parties thereto without the consent of the Administrative Agent, and such termination or amendment has or could reasonably be expected to have a Material Adverse Effect; or (p) the report of the field examination of the assets of the Borrower is not completed with results satisfactory to the Administrative Agent within 90 days after the Closing Date; or (q) the acquisition of the Queretero, Mexico property is not consummated in accordance with the terms of the Acquisition Agreement on or before August 31, 1998; or (r) the Black & Decker License Agreement shall (i) be modified in any material respect having an adverse effect on the Borrower without the written consent of the Administrative Agent or (ii) terminate, or the license granted thereunder shall terminate, for any reason prior to the expiration of the Initial Term (as defined in the Black & Decker Licenses Agreement). SECTION 7.2. ACCELERATION. If any Event of Default (other than an Event of Default specified in Section 7.1(i) and (j) is continuing, the Lenders holding at least 25% in aggregate principal amount of the then outstanding Loans may, by written notice to the Borrower, declare the unpaid principal of and any accrued and unpaid interest and fees on all of the Loans to be immediately due and payable. Upon such declaration, all Obligations in respect of the Loans shall become immediately due and payable immediately. If an Event of Default specified in Section 7.1(i) and (j) occurs, all Obligations in respect of the Loans shall ipso facto become and be immediately due and payable without any declaration, notice or other act on the part of any Lender. 55 61 SECTION 7.3. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein conferred upon or reserved to the Lenders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent or subsequent assertion or employment of any other appropriate right or remedy. SECTION 7.4. DELAY OR OMISSION NOT WAIVER. No delay or omission by any Lender to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article VII or by law to the Lenders may be exercised from time to time, and as often as may be deemed expedient, by the Lenders. SECTION 7.5. WAIVER OF PAST DEFAULTS. Subject to Section 11.3, the Majority Lenders by written notice to the Borrower may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal or interest that has become due solely because of the acceleration) have been cured or waived. SECTION 7.6. RIGHTS OF LENDERS To Receive Payment. Notwithstanding anything to the contrary contained in this Agreement, the right of any Lender to receive payment of principal of, premium and interest on the Loans and Bridge Notes held by such Lender, on or after the respective due dates expressed in this Agreement or the Bridge Notes, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Lender. ARTICLE VIII. PERMANENT SECURITIES SECTION 8.1. PERMANENT SECURITIES. The Borrower and the Guarantors shall use their best efforts to do all things required in the reasonable opinion of the Investment Banks in connection with the sale of the Permanent Securities, including, but not limited to (i) prior to and 30 Business Days immediately following the Closing Date, commencing the preparation of a Rule 144A offering memorandum or registration statement under the Securities Act with respect to the Permanent Securities, and other documentation (including an indenture), all as deemed necessary by the Investment Banks to effect the offering of Permanent Securities, (ii) no later than 15 Business Days prior to the Closing Date, delivering to the Investment Banks such unaudited consolidated and pro forma financial information, projections as to future operations and such other financial information relating to the Borrower and its Subsidiaries and their respective businesses and any probable or recently completed acquisition as may be reasonably requested by the Investment Banks, (iii) prior to and 30 Business Days immediately following the Closing Date, finalizing the Offering Documents in form and substance reasonably satisfactory to the Investment Banks, the Borrower and the Guarantors, including, if applicable, filings of a registration statement under the Securities Act, (iv) no later than 30 Business Days following the Closing Date, making appropriate Officers of the Borrower and its Subsidiaries available to the Investment Banks for meetings with prospective purchasers of the Permanent Securities and preparing and presenting to potential investors road show material in a manner consistent with other new issuances of high yield debt securities and (v) executing an underwriting or purchase agreement substantially in the form of NationsBanc's standard 56 62 underwriting or purchase agreement, as the case may be, modified as appropriate to reflect the terms of the transactions contemplated thereby and containing such terms, covenants, conditions, representations, warranties and indemnities as are customary in similar transactions and providing for the delivery of legal opinions, comfort letters, and Officers' Certificates, all in form and substance reasonably satisfactory to the Investment Banks and their counsel, as well as such other terms and conditions as the Investment Banks and their counsel may in their reasonable discretion consider appropriate in light of then prevailing market conditions applicable to similar financings or in light of any aspect of the transactions contemplated hereby that requires such other terms or conditions. The proceeds from the issuance of the Permanent Securities shall be used to prepay the Loans pursuant to Section 2.5. ARTICLE IX. TERMINATION SECTION 9.1. TERMINATION. The Lenders, by notice to the Borrower, may terminate this Agreement at any time after the earlier of (i) the consummation of the HPG Acquisition without the making of any Bridge Loans and (ii) August 31, 1998. SECTION 9.2. SURVIVAL OF CERTAIN PROVISIONS. If this Agreement is terminated pursuant to this Article IX, such termination shall be without liability of any party to any other party, except that, whether or not the transactions contemplated by this Agreement are consummated, (i) the Obligations of the Borrower and the Guarantors to reimburse the Lenders for all of their out-of-pocket expenses pursuant to Section 13.1 and the Fee Letter and (ii) the indemnity provisions contained in Article XII shall, in each case, remain operative and in full force and effect. ARTICLE X. SUBORDINATION SECTION 10.1. AGREEMENT TO SUBORDINATE. The Borrower and the Guarantors agree, and each Lender agrees, that the Indebtedness evidenced by the Loans is subordinated in right of payment, to the extent and in the manner provided in this Article X, to the prior payment in full of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt. SECTION 10.1. CERTAIN DEFINITIONS. "DESIGNATED SENIOR DEBT" means any Indebtedness outstanding under the Credit Agreement. "PERMITTED JUNIOR SECURITIES" means equity interests in the Borrower or any Guarantor or debt securities that are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) to substantially the same extent as, or to a greater extent than, the Loans are subordinated to Senior Debt pursuant to this Agreement. "REPRESENTATIVE" means the indenture trustee or other trustee, agent or representative for any Senior Debt. "SENIOR DEBT" means (i) all Indebtedness outstanding under the Credit Agreement and all Hedging Obligations with respect thereto, (ii) any other Indebtedness that is permitted to be incurred by the Borrower or any Guarantor pursuant to this Agreement unless the instrument under which such 57 63 Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Loans, and (iii) all Obligations with respect to any of the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not include (x) any Indebtedness of the Borrower or the Guarantors to any of its Subsidiaries or other Affiliates, (y) other than letter of credit obligations of the Borrower's Hong Kong Subsidiaries, any Indebtedness incurred for the purchase of goods or materials or for services obtained in the ordinary course of business (other than with the proceeds of revolving credit borrowings permitted hereby) and (z) any Indebtedness that is incurred in violation of this Agreement. A distribution may consist of cash, securities or other property, by set-off or otherwise. SECTION 11.2. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of the Borrower or the Guarantors in a liquidation or dissolution of the Borrower or such Guarantor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Borrower or such Guarantor or its property, in an assignment for the benefit of creditors or any marshalling of the Borrower's or such Guarantor's assets and liabilities: (1) holders of Senior Debt shall be entitled to receive payment in full of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) before any Lender shall be entitled to receive any payment with respect to its Loan (except that Lenders may receive Permitted Junior Securities); and (2) until all Obligations with respect to Senior Debt (as provided in subsection (1) above) are paid in full, any distribution to which Lenders would be entitled but for this Article X shall be made to holders of Senior Debt (except that Lenders may receive Permitted Junior Securities), as their interests may appear. SECTION 10.3. DEFAULT ON DESIGNATED SENIOR DEBT. The Borrowers and the Guarantors may not make any payment or distribution to the Administrative Agent or any Lender in respect of Obligations with respect to the Loans and may not acquire from the Administrative Agent or any Lender any Loans for cash or property (other than Permitted Junior Securities) until all principal and other Obligations with respect to the Senior Debt have been paid in full if: (i) a default in the payment of any principal or other Obligations with respect to Designated Senior Debt occurs and is continuing beyond any applicable grace period in the agreement, indenture or other document governing such Designated Senior Debt; or (ii) a default, other than a payment default, on Designated Senior Debt occurs and is continuing that permits holders of the Designated Senior Debt to accelerate its maturity and the Administrative Agent receives a notice of the default (a "PAYMENT BLOCKAGE NOTICE") from a Person who may give it pursuant to Section 10.12 hereof. If the Administrative Agent receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice shall be effective for purposes of this Section 10.4 unless and until (i) at least 360 days shall have elapsed since the effectiveness of the immediately prior Payment Blockage Notice and (ii) all scheduled payments of principal, premium, if any, and interest on the Loans that have come due have been paid in full in cash. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Administrative Agent shall be, or be made, the basis for a subsequent Payment Blockage Notice. 58 64 The Borrowers and the Guarantors may and shall resume payments on and distributions in respect of the Loans and may acquire them upon the earlier of: (1) the date upon which the default is cured or waived, or (2) in the case of a default referred to in Section 10.4(ii) hereof, the earlier of the date on which such default is cured or waived or 179 days after the date on which the Payment Blockage Notice is received, unless the maturity of such Designated Senior Debt has been accelerated, if this Article X otherwise permits the payment, distribution or acquisition at the time of such payment or acquisition. SECTION 10.4. ACCELERATION OF SECURITIES. If payment of the Loans is accelerated because of an Event of Default, the Borrower shall promptly notify holders of Senior Debt of the acceleration. SECTION 10.5. WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Administrative Agent or any Lender receives any payment of any Obligations with respect to the Loans at a time when the Administrative Agent or such Lender, as applicable, has actual knowledge that such payment is prohibited by Section 10.4 hereof, such payment shall be held by the Administrative Agent or such Lender, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. With respect to the holders of Senior Debt, the Administrative Agent undertakes to perform only such obligations on the part of the Administrative Agent as are specifically set forth in this Article X, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Agreement against the Administrative Agent. The Administrative Agent shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Administrative Agent shall pay over or distribute to or on behalf of Lenders, the Borrower, the Guarantors or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article X, except if such payment is made as a result of the willful misconduct or gross negligence of the Administrative Agent. 59 65 SECTION 10.6. NOTICE BY THE BORROWER. The Borrower and the Guarantor shall promptly notify the Administrative Agent of any facts known to the Borrower or any Guarantor that would cause a payment of any Obligations with respect to the Loans to violate this Article X, but failure to give such notice shall not affect the subordination of the Loans to the Senior Debt as provided in this Article X. SECTION 10.7. SUBROGATION. After all Senior Debt is paid in full and until the Loans are paid in full, the Lenders shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Loans) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Lenders have been applied to the payment of Senior Debt. A distribution made under this Article X to holders of Senior Debt that otherwise would have been made to the Lenders is not, as between the Borrower and the Guarantors, on one hand, and the Lenders, on the other hand, a payment by the Borrower and the Guarantors on the Loan. SECTION 10.8. RELATIVE RIGHTS. This Article X defines the relative rights of the Lenders and holders of Senior Debt. Nothing in this Agreement shall: (a) impair, as between the Borrower and the Guarantors, on one hand, and the Lenders, on the other hand, the obligation of the Borrower and the Guarantors, which is absolute and unconditional, to pay principal of and interest on the Loans in accordance with their terms; (b) affect the relative rights of the Lenders and creditors of the Borrower and the Guarantors other than their rights in relation to holders of Senior Debt; or (c) prevent the Administrative Agent or any Lender from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders of Senior Debt to receive distributions and payments otherwise payable to the Lenders. If the Borrower and the Guarantors fail because of this Article X to pay principal of or interest on a Loan on the due date, the failure is still a Default or Event of Default. SECTION 10.9. SUBORDINATION MAY NOT BE IMPAIRED BY THE BORROWER AND THE GUARANTORS. No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Loans shall be impaired by any act or failure to act by the Borrower and the Guarantors or any Lender or by the failure of the Borrower and the Guarantors or any Lender to comply with this Agreement. SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Borrower or any Guarantor referred to in this Article X, the Administrative Agent and the Lenders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Administrative Agent or to the Lenders for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other Indebtedness of the Borrower and the Guarantors, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article X. 60 66 SECTION 10.11. RIGHTS OF ADMINISTRATIVE AGENT. Notwithstanding the provisions of this Article X or any other provision of this Agreement, the Administrative Agent shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Administrative Agent, and the Administrative Agent may continue to make payments on the Loans, unless the Administrative Agent shall have received at the address set forth in Section 14.2 hereof at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Loans to violate this Article X. Only the Company or a Representative may give the notice. Nothing in this Article X shall impair the claims of, or payments to, the Administrative Agents under or pursuant to Article XIII hereof. The Administrative Agent in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Administrative Agent. Any agent may do the same with like rights. SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION. Each Lender, authorizes and directs the Administrative Agent on such Lender's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article X, and appoints the Administrative Agent to act as such Lender's attorney-in-fact for any and all such purposes. SECTION 10.13. AMENDMENTS. The provisions of this Article X shall not be amended or modified without the written consent of the holders of all Senior Debt. ARTICLE XII. GUARANTEE SECTION 11.1. THE GUARANTEE. (a) Each Guarantor hereby absolutely, unconditionally and irrevocably guarantees the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest, fees and premium (if any) on the Loans and the Bridge Notes, and the full and punctual payment of all other Obligations of the Borrower under this Agreement, the Bridge Notes and the other Loan Documents, including all reasonable costs of collection and enforcement thereof and interest thereon which would be owing by the Borrower but for the effect of any Bankruptcy Law (collectively, the "GUARANTEED OBLIGATIONS"). Each Guarantor understands, agrees and confirms that each of the Lenders may enforce this Guarantee up to the full amount guaranteed by each Guarantor hereunder against each Guarantor without proceeding against any other obligor or against any security for the Guaranteed Obligations. All payments made by each Guarantor under this Guarantee shall be paid at the place and in the manner specified in Section 2.9. Each Guarantor agrees that this is a continuing Guarantee of payment and not merely a Guarantee of collection. (b) The obligations of each Guarantor hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (i) any extension, renewal, settlement, compromise, waiver or release in respect of any Obligation of the Borrower under this Agreement, the Bridge Notes or any other Loan Document, by operation of law or otherwise; 61 67 (ii) any modification or amendment of or supplement to this Agreement, the Bridge Notes or any of the other Loan Documents; (iii) any release, non-perfection or invalidity of any direct or indirect security for, or any other Person's guarantee of, any of the Guaranteed Obligations; (iv) any change in the corporate existence, structure or ownership of the Borrower or any other guarantor of the Borrower's Obligations, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower or any obligor or any of their respective assets or any resulting release or discharge of any Obligation of the Borrower contained in the Loan Documents; (v) the existence of any claim, set-off or other rights which any obligor may have at any time against the Borrower or any other Person, whether in connection herewith or with any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; (vi) any invalidity or unenforceability relating to or against the Borrower for any reason of this Agreement, the Bridge Notes or any other Loan Document, or any provision of applicable law or regulation purporting to prohibit the payment by the Borrower of the principal of, interest, premium or fees on the Loans or any other amount payable by the Borrower under this Agreement, the Bridge Notes or any of the other Loan Documents; or (vii) any other act or omission to act or delay of any kind by the Borrower or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of Guaranteed Obligations hereunder. (c) Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Borrower, any right to require a proceeding first against the Borrower or another obligor, protest, notice and all demands whatsoever and covenants that, subject to this Article XI, this Guarantee shall not be discharged except by complete payment and performance of all Guaranteed Obligations. (d) If any Lender is required by any court or otherwise to return to the Borrower or any Guarantor, or any Custodian for the Borrower or any of the other obligors or their respective assets, any amount paid to any Lender, this Guarantee, to the extent of the amount so returned, shall be reinstated in full force and effect. (e) Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Lenders in respect of any Guaranteed Obligations until payment in full of all Guaranteed Obligations. Each Guarantor further agrees that (i) the maturity of the Guaranteed Obligations may be accelerated as provided in Section 7.2 notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guaranteed Obligations and (ii) in the event of any declaration of acceleration of such Guaranteed Obligations as provided in Section 7.2, such Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by each Guarantor for the purpose of this Guarantee. SECTION 11.2. LIMITATION ON LIABILITY. Each Guarantor and, by its acceptance of any Bridge Note, each Lender, hereby confirms that it is the intention of all such parties that this Guarantee not 62 68 constitute a fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar law to the extent applicable to this Guarantee. To effectuate the foregoing intention, the Lenders and the Guarantors hereby irrevocably agree that the Obligations of each Guarantor under this Guarantee shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other contingent and fixed liabilities of each Guarantor that are relevant under such laws, result in the Obligations of each Guarantor under the Guarantee not constituting a fraudulent transfer or conveyance. SECTION 11.3. STAY OF ACCELERATION. In the event that acceleration of the time for payment of any Guaranteed Obligation is stayed upon insolvency, bankruptcy or reorganization of the Borrower, all such amounts otherwise subject to acceleration under the terms of this Agreement and the Bridge Notes shall nonetheless by payable by the Guarantors forthwith on demand by any Lender. SECTION 11.4. RELEASE OF GUARANTORS. In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Guarantee; provided that the Net Cash Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Agreement, including without limitation Section 4.3(b). Upon delivery by the Borrower to the Administrative Agent of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Borrower in accordance with the applicable provisions of this Agreement, including without limitation Section 4.3(b) hereof, the Administrative Agent shall execute any documents reasonably required in order to evidence the release of any Guarantor from its Obligations under its Guarantee. Any Guarantor not released from its Obligations under its Guarantee shall remain liable for the full amount of principal of and interest on the Loans and for the other obligations of any Guarantor under this Agreement as provided in this Article XI. 63 69 ARTICLE XIII. INDEMNITY SECTION 12.1. INDEMNIFICATION. The Borrower and each Guarantor (each, an "INDEMNIFYING PARTY" and, collectively, the "INDEMNIFYING PARTIES") jointly and severally agree to indemnify and hold harmless each Lender and their respective Affiliates and Affected Parties and each director, officer, employee and agent thereof (each, an "INDEMNIFIED PARTY") from and against any and all losses, claims, damages and liabilities, joint or several, to which any Indemnified Party may become subject relating to or arising out of or in connection with the transactions contemplated by this Agreement (including the use of the proceeds of the Loans) or any related transaction, and to reimburse each Indemnified Party, promptly upon demand, for expenses (including reasonable counsel fees and expenses) as they are incurred in connection with the investigation of, preparation for or defense of any pending or threatened loss, claim, damage or liability, or any litigation, proceeding or other action in respect thereof, including any amount paid in settlement of any litigation, proceeding or other action (commenced or threatened) to which the Indemnifying Parties shall have consented in writing (such consent not to be unreasonably withheld) whether or not any Indemnified Party is a party and whether or not liability resulted; provided, however, that the indemnity contained in this Section 12.1 will not apply to any Indemnified Party to the extent that it shall be judicially determined that such losses, claims, damages, liabilities or expenses resulted primarily from the gross negligence or willful misconduct of such Indemnified Party. The Indemnified Parties will promptly notify the Borrower upon receipt of written notice of any claim or threat to institute a claim; provided that any failure by the Indemnified Parties to give such notice shall not relieve the Borrower from the obligation to indemnify the Indemnified Parties except to the extent the Borrower is actually prejudiced thereby. If any action, claim, investigation or other proceeding is instituted or threatened against any Indemnified Parties in respect of which indemnity may be sought hereunder, the Borrower shall be entitled to assume the defense thereof with counsel selected by the Borrower (which counsel shall be reasonably satisfactory to such Indemnified Parties) and after notice from the Borrower to such Indemnified Parties of its election so to assume the defense thereof, the Borrower will not be liable to such Indemnified Parties hereunder for any legal or other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof other than reasonable costs of investigation and such other expenses as have been approved in advance; provided that (i) if counsel for such Indemnified Parties determines in good faith that there is a conflict which requires separate representation for the Borrower and such Indemnified Parties, or (ii) the Borrower fails to assume or proceed in a timely and reasonable manner with the defense of such action or fails to employ counsel reasonably satisfactory to such Indemnified Parties in any such action, then in either such event such Indemnified Parties shall be entitled to select one primary counsel and, if necessary, one local counsel, of their own choice to represent such Indemnified Parties, and the Borrower shall not, or no longer, be entitled to assume the defense thereof on behalf of such Indemnified Parties and such Indemnified Parties shall be entitled to indemnification for the reasonable expenses (including reasonable fees and expenses of such counsel) to the extent provided in the preceding paragraph. Such counsel shall, to the fullest extent consistent with its professional responsibilities, cooperate with the Borrower and any counsel designated by the Borrower. Nothing contained herein shall preclude any Indemnified Parties, at their own expense, from retaining additional counsel to represent such Indemnified Parties in any action with respect to which indemnity may be sought from the Borrower hereunder. SECTION 12.2. INDEMNITY NOT AVAILABLE. If the indemnification provided for herein is unavailable to any Indemnified Party in respect of any losses, claims, damages, liabilities or judgments referred to herein (or any investigation, claim, litigation, proceeding or other action in respect thereof), then 64 70 the Indemnifying Parties agree to contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages, liabilities or expenses in (i) in such proportion as is appropriate to reflect the relative benefits to the Indemnifying Parties, on the one hand, and the Lenders, on the other hand, in connection with the matter giving rise to such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Indemnifying Parties on the one hand, and the Lenders, on the other in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The Borrower and each Guarantor agree that for the purposes of this Section 12.2 the relative benefits to the Borrower and its Subsidiaries on the one hand, and the Indemnified Parties on the other hand, of the transactions contemplated by this Agreement, including, without limitation, the Loans and the other transactions contemplated by any of the Loan Documents in any way relating to any Loan, including the use of the proceeds of the Loans shall be deemed to be in the same proportion that the proceeds of all Loans made or to be made to the Borrower bears to the interest and fees paid or to be paid to the Lenders in connection with the Loans; provided, however, that, to the extent permitted by applicable law, in no event shall the Indemnified Parties be required to contribute an aggregate amount in excess of the aggregate interest and fees actually paid to the Lenders in connection with the Loans. The foregoing contribution agreement shall be in addition to any rights that any Indemnified Party may have at common law or otherwise. No investigation or failure to investigate by any Indemnified Party shall impair the foregoing indemnification and contribution agreement or any right an Indemnified Party may have. SECTION 12.3. SETTLEMENT OF CLAIMS. The Borrower and each Guarantor agree that, neither it nor any of its Subsidiaries will settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding in respect of which indemnification or contribution could be sought under Section 12.1 or 12.2 (whether or not any Indemnified Party is an actual or potential party to such claim, action or proceeding) without the prior written consent of the Indemnified Parties, unless such settlement, compromise or consent includes an unconditional release of each Indemnified Party from all liability arising out of such claim, action or proceeding, which consent shall not be unreasonably withheld. SECTION 12.4. APPEARANCE EXPENSES. If an Indemnified Party is requested or required to appear as a witness in any action brought by or on behalf of or against the Borrower, any Guarantor or any Affiliate thereof in which such Indemnified Party is not named as a defendant, the Borrower agrees to reimburse such Indemnified Party for all reasonable expenses incurred by it in connection with such Indemnified Party's appearing and preparing to appear as such a witness, including, without limitation, the reasonable fees and disbursements of its legal counsel. SECTION 12.5. INDEMNITY FOR TAXES, RESERVES AND EXPENSES. If, after the date hereof, the adoption of any law or guideline or any amendment or change in the administration, interpretation or application of any existing or future law or guideline by any Governmental Entity charged with the administration, interpretation or application thereof, or the compliance with any request or directive of any Governmental Entity (whether or not having the force of law): (a) subjects any Affected Party to any tax of any kind with respect to this Agreement or the Bridge Notes or changes the basis of taxation of payments of amounts due hereunder or thereunder or with respect to this Agreement or any of the other Loan Documents, (including, without limitation, any sales, gross receipts, general corporate, personal property, privilege or 65 71 license taxes, and including claims, losses and liabilities arising from any failure to pay or delay in paying any such tax (unless such failure or delay results solely from such Affected Party's gross negligence or willful misconduct), but excluding (i) federal, state or local taxes based on net income incurred by such Affected Party) and (ii) Taxes, Other Taxes and any taxes, levies, imposts, deductions, charges or withholding specifically excluded under Section 2.10(a); (b) imposes, modifies or deems applicable any reserve (including, without limitation, any reserve imposed by the Board), special deposit or similar requirement against assets of the Borrower and the Guarantors held by, credit to the Borrower and the Guarantors extended by, deposits of the Borrower and the Guarantors with or for the account of, or other acquisition of funds of the Borrower and the Guarantors by, any Affected Party; (c) shall change the amount of capital maintained or requested or directed to be maintained by an Affected Party; or (d) imposes upon an Affected Party any other condition or expense (including, without limitation, (i) loss of margin and (ii) attorneys' fees and expenses incurred by officers or employees of an Affected Party (or any successor thereto) and expenses of litigation or preparation therefor in contesting any of the foregoing) with respect to this Agreement or any of the other Loan Documents or the purchase, maintenance or funding of the Loans by an Affected Party, and the result of any of the foregoing is to increase the cost to, reduce the income receivable by, reduce the rate of return on capital of, or impose any expense (including loss of margin) upon, an Affected Party with respect to this Agreement, any of the other Loan Documents, the obligations hereunder or thereunder or the funding of the Loans hereunder, the Affected Party may notify the Indemnifying Party of the amount of such increase, reduction, or imposition, and the Indemnifying Parties hereby jointly and severally agree to pay to the Affected Party the amount necessary to compensate the Affected Party for such increase, reduction or imposition. Such amounts shall be due and payable by the Indemnifying Parties 15 days after such notice is given. SECTION 12.6. SURVIVAL OF INDEMNIFICATION. The provisions contained in this Article XII shall remain in full force and effect whether or not any of the transactions contemplated hereby are consummated and notwithstanding the termination of this Agreement or the payment in full of all Obligations hereunder. SECTION 12.7. LIABILITY NOT EXCLUSIVE; PAYMENTS. The agreements of each Indemnifying Party in this Article XII shall be in addition to any liability that each may otherwise have. All amounts due under this Article XII shall be payable as incurred upon written demand therefor. ARTICLE XIV. THE ADMINISTRATIVE AGENT; THE ARRANGERS SECTION 13.1. APPOINTMENT. Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the 66 72 Administrative Agent shall have no duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. SECTION 13.2. DELEGATION OF DUTIES. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to the advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible to the Lenders for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. SECTION 13.3. EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any of its Subsidiaries or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement, opinion or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of the Borrower or any of its Subsidiaries to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrower or any of its Subsidiaries. SECTION 13.4. RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Bridge Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower or any of its Subsidiaries), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of the Bridge Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Majority Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. SECTION 13.5. NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender, the Borrower or any of its Subsidiaries referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Administrative Agent receives such a notice, the Administrative Agent shall 67 73 give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Majority Lenders; provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. SECTION 13.6. NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereafter taken, including any review of the affairs of the Borrower or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon any material or other information provided by the Administrative Agent (which, if so furnished are acknowledge by the Lenders to be for informational purposes only and without representation or warranty) or any other Lenders, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition, prospects and credit worthiness of the Borrower and its Subsidiaries and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender confirms that it is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition, prospects and credit worthiness of the Borrower and its Subsidiaries. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall have no any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial or other condition, prospects or credit worthiness of the Borrower or any of its Subsidiaries which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. SECTION 13.7. INDEMNIFICATION. The Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower or any of its Subsidiaries and without limiting the obligation of the Borrower and any of its Subsidiaries to do so), ratably according to their respective Commitments in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (include, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of, the Commitments, this Agreement, any other Loan Document or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing, provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Administrative Agent's gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the Loans and all other Obligations payable hereunder. 68 74 SECTION 13.8. ADMINISTRATIVE AGENT, IN ITS INDIVIDUAL CAPACITIES. The Administrative Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Administrative Agent were not acting in such capacities hereunder and under the other Loan Documents. With respect to the Loans made or renewed by it and the Bridge Note issued to it the Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms "LENDER" and "LENDERS" shall include the Administrative Agent in its individual capacity. SECTION 13.9. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign as Administrative Agent upon 30 days' notice to the Lenders and the Borrowers. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents then the Majority Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent (provided that it shall have been approved by the Borrower), shall succeed to the rights, powers and duties of the Administrative Agent, hereunder. Effective upon such appointment and approval, the term "ADMINISTRATIVE AGENT" shall mean and include such successor agent, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent, any of the parties to this Agreement or any holders of the Loans. After any retiring Administrative Agent's resignation as Administrative Agent the provisions of this Article XIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents. SECTION 13.10. SUCCESSOR ADMINISTRATIVE AGENT. Except as expressly set forth herein, the Arrangers, in their capacity as such, shall have no duties or responsibilities, and shall incur no liabilities, under this Agreement or the other Loan Documents. ARTICLE XV. MISCELLANEOUS SECTION 14.1. EXPENSES; DOCUMENTARY TAXES. The Borrower and the Guarantors hereby jointly and severally agree to pay (a) all reasonable out-of-pocket expenses (including, without limitation, expenses incurred in connection with due diligence of the Lenders) associated with the preparation, execution and delivery, administration, waiver, enforcement or modification and enforcement of the documentation contemplated hereby and (b) the reasonable fees and disbursements of legal counsel to the Lenders in connection with the transactions contemplated herein, including in each case those incurred prior to the date hereof. SECTION 14.2. NOTICES. All notices and other communications pertaining to this Agreement or any Bridge Note shall be in writing and shall be delivered (a) in Person (with receipt acknowledged), (b) by facsimile (confirmed immediately in writing by a copy mailed by registered or certified mail, return receipt requested, postage prepaid, addressed as hereafter set forth) or (c) by overnight courier, addressed as follows: (i) If to the Administrative Agent, to it at: NationsBridge, L.L.C. NationsBank Corporate Center 100 North Tryon Street Charlotte, N.C. 28255 Attention: Lynne Wertz Facsimile No.: (704) 388-9941 69 75 with a copy to: Latham & Watkins 885 Third Avenue, Suite 1000 New York, New York 10022 Attention: Kirk A. Davenport, Esq. Facsimile No.: (212) 751-4864 (ii) If to any Lender, to it at its address set forth on the signature pages hereto: (iii) If to the Borrower or any Guarantor, to it at: Windmere-Durable Holdings, Inc. 5980 Miami Lakes Drive Miami Lakes, Florida 33014-2467 Attention: Chief Financial Officer Facsimile No.: (305) 364-0502 with a copy to: Greenberg Traurig Hoffman Lipoff Rosen & Quentel 1221 Brickell Avenue Miami, Florida 33131 Attention: Paul Berkowitz, Esq. Facsimile No.: (305) 579-0717 or to such other Person or address as shall be furnished in writing delivered to the other parties in compliance with this Section. SECTION 14.3. CONSENT TO AMENDMENTS AND WAIVERS. (a) Except as provided in Section 14.3(b), this Agreement and the Bridge Notes may be amended or supplemented with the consent of the Borrower, each Guarantor and the Majority Lenders and any existing default or compliance with any provision of this Agreement or the Bridge Notes may be waived with the consent of the Majority Lenders. Bridge Notes held by the Borrower or any of its Affiliates will not be deemed to be outstanding for purposes of this Section 14.3. (b) Notwithstanding the provisions of Section 14.3(a), without the consent of each Lender affected thereby, an amendment or waiver may not: (i) reduce the principal amount of any Loan, (ii) change the fixed maturity of any Loan, (iii) reduce the rate of or change the time for payment of interest on any Loan, (iv) waive a Default or Event of Default in the payment of principal of or premium, or interest, if any, on the Loans or an other amounts payable under any of the Loan Documents, (v) make any Loan payable in money other than that stated in the applicable Loan, (vi) make any change in the provisions of this Agreement relating to the rights of Lenders to receive (A) prepayments on, or (B) payments of principal of, or premium, fees or interest, if any, on, the Loans, (vii) make any change to the provisions of 70 76 Article VIII that would adversely affect the rights of any Lender, (viii) release any Guarantor from its Guarantee or (ix) make any change in the foregoing amendment and waiver provisions. (c) The Borrower shall not and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Lender for or as an inducement to any consent, waiver or amendment permitted by Section 14.3(a) unless such consideration is offered to be paid and is paid to all Lenders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or amendment. SECTION 14.4. PARTIES. This Agreement shall inure to the benefit of and be binding upon the Borrower, each Guarantor, the Affected Parties and each of their respective successors and assigns. Except as expressly in this Agreement, nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other Person any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. Except as expressly provided in this Agreement, this Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Affected Parties and their respective successors and assigns, and for the benefit of no other Person. SECTION 14.5. NEW YORK LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. THIS AGREEMENT AND THE BRIDGE NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH OF THE BORROWER, EACH GUARANTOR AND EACH OF THE LENDERS HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY (EACH, A "NEW YORK COURT") FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THE BRIDGE NOTES, THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE BORROWER, EACH GUARANTOR AND THE LENDERS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE BORROWER, EACH GUARANTOR AND THE LENDERS IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE BRIDGE NOTES, THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 14.6. REPLACEMENT NOTES. If any Bridge Note becomes mutilated and is surrendered by the applicable Lender to the Borrower, or if any Lender claims that any of its Bridge Notes has been lost, destroyed or wrongfully taken, the Borrower shall execute and deliver to such Lender a replacement Bridge Note, upon the delivery by such Lender of an indemnity to the Borrower to save it and any agent of it harmless in respect of such loss, destruction or wrongful taking with respect to such Bridge Note. SECTION 14.7. APPOINTMENT OF AGENT FOR SERVICE. The Borrower designates and appoints CT Corporation and such other Persons as may irrevocably agree in writing to serve as their respective agent to receive on their behalf service of all process in any proceedings in any New York Court, such service being hereby acknowledged by the Borrower to be effective and binding in every respect. If 71 77 any agent appointed by a the Borrower refuses to receive and forward such service, that the Borrower hereby agrees that service upon it by mail shall constitute sufficient service. SECTION 14.8. MARSHALLING; RECAPTURE. Neither the Administrative Agent nor any Lender shall be under any obligation to marshall any assets in favor of the Borrower or any other party or against or in payment of any or all of the Obligations. To the extent any Lender receives any payment by or on behalf of the Borrower, which payment or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to the Borrower or its estate, trustee, receiver, custodian or any other party under any Bankruptcy Law, state or federal law, common law or equitable cause, then, to the extent of such payment or repayment, the obligation or part thereof which has been paid, reduced or satisfied by the amount so repaid shall be reinstated by the amount so repaid and shall be included within the liabilities of Borrower to such Lender as of the date such initial payment, reduction or satisfaction occurred. SECTION 14.9. LIMITATION OF LIABILITY. No claim may be made by the Borrower, any Guarantor or any other Person against the Administrative Agent or any Lender or the Affiliates, directors, officers, employees, attorneys or agents of any of them for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any theory of liability arising out of or related to the transactions contemplated by this Agreement or the other Loan Documents, or any act, omission or event occurring in connection therewith; and the Borrower and each Guarantor hereby waive, release and agree not to sue and shall cause each of its respective Subsidiaries to waive, release or agree not to sue (if required), upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. SECTION 14.10. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of a Default or Event of Default if such action is taken or condition exists. SECTION 14.11. CURRENCY INDEMNITY. The Borrower acknowledges and agrees that this is a credit transaction where specification of dollars is of the essence and dollars shall be the currency of account and payment in all events. If, pursuant to a judgment or for any other reason, payment shall be made in another currency and such payment, after prompt conversion to dollars and transfer to New York City in accordance with normal banking procedures, falls short of the sum due the Lenders in dollars, the Borrower shall pay the Lender such shortfall and the Lenders shall have a separate cause of action for such amount. SECTION 14.12. WAIVER OF IMMUNITY. To the extent that the Borrower or any Guarantor has or hereafter may acquire any immunity from: (a) the jurisdiction of any court of (i) any jurisdiction in which the Borrower or any Guarantor owns or leases property or assets or (ii) the United States, the State of New York or any political subdivision thereof; or 72 78 (b) from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property and assets, this Agreement, any Loan Document or actions to enforce judgments in respect of any thereof, it hereby irrevocably waives such immunity in respect of its obligations under the above-referenced document. SECTION 14.13. FREEDOM OF CHOICE. The submission to the jurisdiction of the courts referred to in this Article IV shall not (and shall not be construed so as to) limit the right of any Lender to take proceedings against the Borrower or any Guarantor in the courts of any country in which the Borrower or such Guarantor has assets or in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by applicable law. SECTION 14.14. SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants and agreements of the Borrower and each Guarantor in this Agreement shall bind their respective successors and assigns. Neither the Borrower nor any Guarantor may assign or transfer any of its rights or obligations hereunder (by operation of law or otherwise) without the prior written consent of the Majority Lenders. SECTION 14.15. MERGER. This Agreement constitutes the entire contract among the parties relating to the subject matter hereof and supersedes any and all previous agreements among the parties relating to the subject matter hereof, except for those provisions in the Fee Letter and the Engagement Letter that are in addition to the provisions contained herein. SECTION 14.16. SEVERABILITY CLAUSE. In case any provision in this Agreement or any Bridge Note shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective in such jurisdiction only to the extent of such invalidity, illegality or unenforceability. SECTION 14.17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. All representations, warranties and agreements contained in or incorporated into this Agreement, or contained in Officers' Certificates submitted pursuant hereto, shall remain operative and in full force and effect until all Obligations under all of the Loan Documents have been repaid in full, regardless of any investigation made by or on behalf of the Lenders or any controlling Person of the Lenders, or by or on behalf of the Borrower or any controlling Person of the Borrower, and shall survive delivery of the Bridge Notes. [signature pages follow] 73 79 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. WINDMERE-DURABLE HOLDINGS, INC. By: ------------------------------------- Name: Harry D. Schulman Title: Chief Financial Officer 80 GUARANTORS: HOUSEHOLD PRODUCT, INC. By: ------------------------------------- Name: Burton A. Honig Title: Vice President HP DELAWARE, INC. By: ------------------------------------- Name: Burton A. Honig Title: Vice President HP AMERICAS, INC. By: ------------------------------------- Name: Burton A. Honig Title: Vice President HPG LLC By: ------------------------------------- Name: Burton A. Honig Title: Vice President HP INTELLECTUAL CORP. By: ------------------------------------- Name: Burton A. Honig Title: Vice President WINDMERE HOLDINGS CORPORATION By: ------------------------------------- Name: Burton A. Honig Title: President 81 WINDMERE HOLDINGS CORPORATION II By: ------------------------------------- Name: Burton A. Honig Title: President WINDMERE INNOVATIVE PET PRODUCTS, INC. By: ------------------------------------- Name: Burton A. Honig Title: Vice President EDI MASTERS, INC. By: ------------------------------------- Name: Burton A. Honig Title: Vice President WINDMERE CORPORATION By: ------------------------------------- Name: Burton A. Honig Title: Vice President Finance BAY BOOKS AND TAPES, INC. By: ------------------------------------- Name: Burton A. Honig Title: Vice President Finance JERDON PRODUCTS, INC. By: ------------------------------------- Name: Burton A. Honig Title: Vice President FORTUNE PRODUCTS, INC. By: ------------------------------------- Name: Burton A. Honig Title: President CONSUMER PRODUCT AMERICAS, INC. By: ------------------------------------- Name: Burton A. Honig Title: Treasurer WINDMERE FAN PRODUCTS, INC. By: ------------------------------------- Name: Burton A. Honig Title: Vice President WD DELAWARE, INC. By: ------------------------------------- Name: Burton A. Honig Title: President WD DELAWARE II, INC. By: ------------------------------------- Name: Burton A. Honig Title: President 82 NATIONSBRIDGE, L.L.C. , AS ADMINISTRATIVE AGENT By: ------------------------ Name: Title: LENDERS: Commitment Amount: $ [Insert name of Lender] ------------------------ By: , ------------------------ the Managing Director By: , ----------------------- the General Partner By: Name: Title: Wire Transfer Instructions Name of Bank: [Insert name of bank] Address: ---------------------- ABA#: ---------------------- For the account of ---------------------- Account No.: ---------------------- FOR FURTHER CREDIT TO [INSERT NAME OF LENDER]. Reference: Attention: ---------------------- Telephone: ---------------------- 83 Exhibit A FORM OF ASSIGNMENT AND ACCEPTANCE Reference is made to the Bridge Loan Agreement, dated as of _______, 1998 (as amended, supplemented or otherwise modified from time to time, the "BRIDGE LOAN AGREEMENT"), by and among Windmere-Durable Holdings, Inc., a Florida corporation, (the "BORROWER"), the Guarantors named on the signature pages thereto as guarantors (each a "GUARANTOR" and, collectively, the "GUARANTORS"), NationsBanc Montgomery Securities LLC, as Arranger (the "ARRANGER"), NationsBridge, L.L.C., as Administrative Agent (in such capacity, the "ADMINISTRATIVE AGENT") and the lenders named on the signature pages thereto (the "LENDERS"). Unless otherwise defined herein, terms defined in the Bridge Loan Agreement and used herein shall have the meanings given to them in the Bridge Loan Agreement. The Assignor identified on Schedule I hereto (the "ASSIGNOR") and the Assignee identified on Schedule I hereto (the "ASSIGNEE") agree as follows: 1. The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date (as defined below), the percentage interest described in Schedule 1 hereto (the "ASSIGNED INTEREST") in and to the Assignor's rights and obligations under the Bridge Loan Agreement (the "ASSIGNED FACILITIES"), in a principal amount for the Assigned Facilities as set forth on Schedule I hereto. 2. The Assignor (a) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Bridge Loan Agreement or with respect to the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Bridge Loan Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto, other than that the Assignor has not created any adverse claim upon the interest being assigned by it hereunder and that such interest is free and clear of any such adverse claim: (b) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any of its Subsidiaries or any other obligor or the performance or observance by the Borrower, any of its Subsidiaries or any other obligor of any of their respective obligations under the Bridge Loan Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; and (c) attaches any Bridge Notes held by it evidencing the Assigned Facilities and (i) requests that the Administrative Agent, upon request by the Assignee, exchange the attached Bridge Notes for a new Bridge Note or Bridge Notes payable to the Assignee and (ii) if the Assignor has retained any interest in the Assigned Facility, requests that the Administrative Agent exchange the attached Bridge Notes for a new Bridge Note or Bridge Notes payable to the Assignor, in each case in amounts which reflect the assignment being made hereby (and after giving effect to any other assignments which are effective on the Effective Date). 3. The Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (b) confirms that it has received a copy of the Bridge Loan Agreement, and all schedules and exhibits thereto together with copies of the financial information delivered pursuant to subsection 4.4 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (c) agrees that it will, independently and without reliance upon the Assignor, the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own 84 credit decisions in taking or not taking action under the Bridge Loan Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Bridge Loan Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by' the terms thereof, together with such powers as are incidental thereto; (e) agrees that it will be bound by the provisions of the Bridge Loan Agreement and will perform in accordance with its terms all the obligations which by the terms of the Bridge Loan Agreement are required to be performed by it as a Lender; and (f) agrees that it shall have no recourse against the Assignor with respect to any matters relating to the Bridge Loan Agreement, the other Loan Documents or any others instrument or documents furnished pursuant hereto or thereto. 4. The Assignor hereby assigns to Assignee all of its rights and obligations under the Fee Letter with respect to the Assigned Interest. 5. The effective date of this Assignment and Acceptance shall be the Effective Date of Assignment described in Schedule I hereto (the "EFFECTIVE DATE"). Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for acceptance by it and recording by the Administrative Agent pursuant to Section 6.3 of the Bridge Loan Agreement, effective as of the Effective Date (which shall not, unless otherwise agreed to by the Administrative Agent, be earlier than five Business Days after the date of such acceptance and recording by the Administrative Agent). 6. Upon such acceptance and recording, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to the Effective Date and to the Assignee for amounts which have accrued subsequent to the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves. 7. From and after the Effective Date, (a) the Assignee shall be a party to the Bridge Loan Agreement and the Fee Letter and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the other Loan Documents and shall be bound by the provisions thereof and (b) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Bridge Loan Agreement and the Fee Letter. 8. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 85 IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed as of the date first above written by their respective duly authorized officers on Schedule I hereto. 86 Schedule 1 to Assignment and Acceptance Name of Assignor: ---------------------------- Name of Assignee: ---------------------------- Effective Date of Assignment: ----------------
Principal Commitment Credit Facility Assigned Amount Assigned Commitment Percentage Assigned1 - ------------------------ ------------------- ------------------------------ $ % ---------------- -------- --------
- --------------------------- (1) Calculate the Commitment Percentage that is assigned to at least 9 decimal places and show as a percentage of the aggregate commitments of all Lenders. 87 [Name of Assignee] [Name of Assignor] By: By: ------------------------------------ ---------------------------------- Title: Title: Accepted: NATIONSBRIDGE, L.L.C., as Administrative Agent By: ------------------------------------ Title: 88 Exhibit B THE SECURITY EVIDENCED OR CONSTITUTED HEREBY HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS SECURITY MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE REGISTRATION PROVISIONS OF SAID ACT (OR AN EXEMPTION THEREFROM) HAVE BEEN COMPLIED WITH. No. __ New York, New York $ , 1998 --------------- ----------------- BRIDGE NOTE FOR VALUE RECEIVED, the undersigned, Windmere-Durable Holdings, Inc., a Florida corporation (the "COMPANY"), promises to pay to the order of _______________________________, or its registered assigns (the "HOLDER"), the principal sum of the aggregate of (i) __________________ Dollars ($_______) and (ii) the aggregate amount by which the principal amount of this Bridge Note is increased pursuant to Section 2.4(e) of the Bridge Loan Agreement referred to below, and to pay interest from the date hereof on the unpaid principal amount hereof from time to time outstanding, at the rates per annum and on the dates specified in that certain Bridge Loan Agreement, dated as of _______, 1998, among the Company, the guarantors names on the signature pages thereto as guarantors (each a "GUARANTOR" and, collectively, the "GUARANTORS"), NationsBanc Montgomery Securities LLC, as Arranger (the "ARRANGER"), NationsBridge, L.L.C., as Administrative Agent (in such capacity, the "ADMINISTRATIVE AGENT") and the lenders named on the signature pages thereto (the "LENDERS"). (as amended, restated and/or otherwise modified from time to time, the "BRIDGE LOAN AGREEMENT"). Terms used herein and not otherwise defined have the meanings assigned to them in the Bridge Loan Agreement. In the event the principal amount of this Bridge Note is increased in accordance with Section 2.4(e) of the Bridge Loan Agreement, the Holder may exchange this Bridge Note for a Bridge Note definitively stating the aggregate principal amount hereof pursuant to Section 6.2 of the Bridge Loan Agreement. The unpaid principal balance of this Bridge Note, together with all accrued and unpaid interest thereon, shall become due and payable on the Maturity Date unless the Conversion Date occurs, in which case the unpaid principal balance hereof, together with all accrued and unpaid interest thereon, shall become due and payable on the date that is nine years after the Maturity Date. The Company promises to pay interest on demand, to the extent permitted by law, on any overdue principal and interest from their due dates at the rate per annum as specified in Section 2.4 of the Bridge Loan Agreement. All payments of the principal of and premium and interest on this Bridge Note shall be made in money of the United States of America that at the time of payment is legal tender for the payment of public and private debts, by transfer of immediately available funds into a bank account designated by the Holder in writing to the Company; provided, however, that (i) to the extent interest exceeds a rate equal to 14% per annum, in the case of the Bridge Loans, or 15% per annum, in the case of the Term Loans, the Company shall have the option to pay all or a portion of the interest due and payable in excess of the amount of interest that would have been payable on such date at an interest rate of 14% per annum, in the case of the Bridge Loans, or 15% per annum, in the case of the Term Loans, by capitalizing such excess interest and adding it to the aggregate principal amount of outstanding Bridge Loans or Term Loans, as the 89 case may be, and (ii) notwithstanding anything contained in the Bridge Loan Agreement or any of the Bridge Notes to the contrary, in no event shall the interest rate hereon for any period of computation exceed a rate per annum equal to the lesser of (A)(1) in the case of the Bridge Loans, 16%, or (2) in the case of Term Loans, 17%, and (B) the maximum interest rate permitted by applicable law. The principal amount of this Bridge Note is subject to increase in accordance with Section 2.4(a) of the Bridge Loan Agreement. The Company agrees to pay, upon demand, all reasonable out-of-pocket expenses (including, without limitation, the reasonable fees and disbursements of legal counsel to the Holder) associated with the waiver, enforcement or modification of the Bridge Loan Agreement or this Bridge Note. This Bridge Note is entitled to the benefits of a joint and several unconditional and irrevocable guarantee (the "NOTE GUARANTEE") of, inter alia, the due and punctual payment of the principal of, premium (if any) and interest on this Bridge Note as set forth the Bridge Loan Agreement. Each of the Guarantors has acknowledged its liability under the Note Guarantee by signing this Bridge Note. The Company hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever. The nonexercise by the Holder of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance. This Bridge Note is one of the Bridge Notes referred to in the Bridge Loan Agreement, which Agreement, among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events, for optional and mandatory prepayment in full of the principal hereof prior to maturity and for the amendment or waiver of certain provisions of the Bridge Loan Agreement, all upon the terms and conditions therein specified. In the event of any conflict between the provisions of this Bridge Note and the Bridge Loan Agreement, the provisions of the Bridge Loan Agreement shall govern. THIS BRIDGE NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. 2 90 IN WITNESS WHEREOF, the Company has caused this Bridge Note to be signed in its corporate name by its duly authorized officer and to be dated as of the day and year first above written. WINDMERE-DURABLE HOLDINGS, INC. By: ------------------------------- Name: Title: ACKNOWLEDGMENT OF NOTE GUARANTEE: [INSERT NAME AND SIGNATURE BLOCK FOR EACH GUARANTOR] By: ---------------------------------------- Name: Title: 3 91 [Back of Bridge Note] OPTION OF HOLDER TO ELECT PURCHASE UPON CHANGE OF CONTROL If you want to elect to have this Bridge Note purchased by the Company pursuant to Section 4.20 of the Bridge Loan Agreement check the box below. [ ] Please purchase the entire amount of this Bridge Note If you want to elect to have only part of this Bridge Note purchased by the Company pursuant to Section 4.17 of the Bridge Loan Agreement, state the amount you elect to have purchased: $ . ------------- Date: ------------------- Your Signature: ------------------------------------------ (Sign exactly as your name appears on the face of this Note) Tax Identification No. ------------------- Signature Guarantee: - ---------------------------- -----END PRIVACY-ENHANCED MESSAGE-----