EXHIBIT 10.4
[EXECUTION COPY]
FORBEARANCE AND WAIVER AGREEMENT
FORBEARANCE AND WAIVER AGREEMENT dated as of March 21, 2001 (this
"AGREEMENT") among U.S. Industries, Inc., a Delaware corporation ("U.S.
INDUSTRIES") and USI Global Corp., a Delaware corporation (each, a "Guarantor"
and , collectively, the "GUARANTORS") and the Secured Creditor (defined below)
signatories hereto, the aforementioned parties hereto being parties to that
certain USI Guaranty dated March 24, 2000, by the Guarantors in favor of the
Secured Creditors (the "USI GUARANTY") and, but only if and when joined by
REXAIR, Inc., a Delaware corporation (the "BORROWER") and STRATEGIC INDUSTRIES,
INC., a Delaware corporation ("HOLDINGS"), the Borrower and Holdings.
Capitalized terms used without definition in this Agreement shall have the
respective meanings provided in the USI Guaranty or, if not defined therein, in
the Credit Agreement (defined below).
W I T N E S S E T H:
- - - - - - - - - -
REFERENCE is made to the Credit Agreement dated as of March 24,
2000, as amended (as amended through the date hereof, the "CREDIT Agreement"),
among Holdings, the Borrower, the Lenders party thereto (the "LENDERS"), BANK OF
AMERICA, N.A., as Administrative Agent (in such capacity, the "ADMINISTRATIVE
AGENT"), and DLJ Capital Funding, Inc., as Syndication Agent (in such capacity,
the "SYNDICATION AGENT" and, together with the Administration Agent, the Lenders
and, if any, certain other creditor parties to the USI Guaranty, collectively,
the "SECURED CREDITORS").
WHEREAS, the obligations of the Borrower under the Credit Agreement
are guaranteed by the Guarantors pursuant to the USI Guaranty, and by Holdings
pursuant to the Section 14 of the Credit Agreement;
WHEREAS, the senior unsecured debt rating of U.S. Industries has
recently been downgraded by S&P to BB+, U. S. Industries anticipates that
Xxxxx'x may soon also downgrade the senior unsecured debt rating of U. S.
Industries, and there is the possibility that the rating of Xxxxx'x may be less
than Ba1, which would be an Event of Default under Section 10.10 of the Credit
Agreement (a "RATINGS DEFAULT") and could give rise to a call on the USI
Guaranty;
WHEREAS, U.S. Industries has informed the Secured Creditors that it
is currently negotiating certain financings (the "USI REFINANCING"), and that in
connection with the USI Refinancing, U.S. Industries plans to acquire, through a
domestic wholly-owned Subsidiary, all the outstanding capital stock of the
Borrower (the "ACQUISITION") and, in connection with the Acquisition, to
refinance all obligations of the Borrower under and in connection with the
Credit Agreement, PROVIDED that, if for any reason the Acquisition shall not be
consummated prior to or concurrently with the closing of the USI Refinancing,
U.S. Industries has informed the Lenders that, (a) on the date of the initial
funding of the USI Refinancing (the "INITIAL FUNDING DATE"), U.S. Industries is
willing to cause a payment to be made under the USI Guaranty in an amount
sufficient to reduce the outstanding Term Loans under the Credit Agreement by
not less than
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$50,000,000, such payment to be applied to the scheduled Term Loan payments in
the inverse order of their maturities, and (b) if the Acquisition is successful,
to cause the remaining obligations under and in connection with the Credit
Agreement to be permanently repaid on the earlier to occur of the Acquisition
and the 120th day following the Initial Funding Date (the "120TH DAY").
WHEREAS, the Guarantors want to ensure that a Ratings Default, if
any, does not impede or disrupt the negotiation of the USI Refinancing, the
Guarantors have requested that the Lenders agree to forbear in the exercise of
any right they may have to accelerate the obligations of the Borrower under the
Credit Agreement solely as the result of such Ratings Default, if any, and to
waive such Ratings Default, if any; and,
WHEREAS, the Secured Creditor parties hereto, constituting the
Administrative Agent and not less than the Required Lenders (as such term is
defined by reference to clause (6)(x) of the second proviso to Section 13.12(a)
of the Credit Agreement) are, on the terms and conditions stated below, willing
to grant the request of the Guarantors as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration the sufficiency
of which is hereby acknowledged, and subject to the terms and conditions of this
Agreement, the parties agree as follows:
SECTION 1. FORBEARANCE AND WAIVER.
(a) LIMITED FORBEARANCE. The Secured Creditor parties hereto hereby
agree to refrain from the exercise of any right they may have under the Credit
Agreement to accelerate the Borrower's obligations under the Credit Agreement
arising solely as the result of a Ratings Default, if any (and not as the result
of any other Default or Event of Default that may now exist or hereafter arise)
under the Credit Agreement (the "FORBEARANCE"). The Forbearance shall be
effective immediately, subject to the conditions precedent set forth in Section
2(a), and shall remain effective until the Termination Date (defined below),
subject to the further conditions set forth in Section 2(c). After the
Termination Date, the agreement to forbear herein set forth and, if effected,
the Forbearance itself shall terminate and have no further force and effect.
(b) LIMITED WAIVER. The Secured Creditor parties hereto hereby
further agree to waive the Ratings Default, if any (but not any other Default or
Event of Default that may now exist or hereafter arise) under the Credit
Agreement (the "WAIVER"). However, the Waiver shall become effective only upon
the satisfaction of, and subject to, the conditions precedent set forth in
Section 2(b), and shall thereafter remain effective until the Termination Date,
subject to the further conditions set forth in Section 2(c). After the
Termination Date, the agreement to waive herein set forth and, if effected, the
Waiver itself shall terminate and have no further force and effect.
SECTION 2. CONDITIONS.
(a) CONDITIONS TO EFFECTIVENESS OF FORBEARANCE. This Agreement and
the Forbearance shall become effective as of the date first above written
when, and only when, the Administrative Agent shall have received
counterparts of this Agreement executed by each of the Guarantors, the
Administrative Agent and the Secured Creditors constituting not less than
the Required Lenders (as such term is defined by reference to
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clause (6)(x) of the second proviso to Section 13.12(a) of the Credit
Agreement), or as to any such Lender, advice satisfactory to the
Administrative Agent that such Lender has executed this Agreement, and
provided that the representations and warranties contained in Section 3
hereof shall be true and correct as of the date of this Agreement and, if
different, as of the date of the effectiveness of the Forbearance.
(b) CONDITIONS TO EFFECTIVENESS OF WAIVER. Provided that this
Agreement and the Forbearance shall have become and continue to be
effective, the Waiver shall become effective (the "WAIVER EFFECTIVE DATE")
if and only when, the Administrative Agent shall have received (i)
counterparts of this Agreement executed by the Borrower and Holdings, and
(ii) written advice, in form and substance satisfactory to the
Administrative Agent in its sole discretion, from the Guarantors and the
agents of the USI Refinancing (the "USI REFINANCING AGENTS") that the
Guarantors, the Borrower and Holdings are fully cooperating with the USI
Refinancing Agents and are providing information as needed in respect of
the USI Refinancing, and provided, as of the Effective Waiver Date, the
conditions stated in Section 2(a) shall have been satisfied and the
representations and warranties contained in Section 3 hereof shall be true
and correct.
(c) FURTHER CONDITIONS. Subject to the satisfaction of the
conditions precedent as set forth in Sections 2(a) and 2(b), as
applicable, the Forbearance and the Waiver, shall become and remain
effective until the Termination Date, provided that:
(i) the Initial Funding Date shall have occurred on or prior
to May 31, 2001, and the aggregate principal amount of the funded
and committed facilities under the USI Refinancing shall be not less
than $900,000,000;
(ii) if the Acquisition shall have been consummated on or
prior to the Initial Funding Date, by no later than the earlier to
occur of the Acquisition and the Initial Funding Date, the
Guarantors shall have caused all outstanding obligations under and
in connection with the Credit Agreement to be permanently repaid in
full and all commitments thereunder terminated;
(iii) if the Acquisition shall not have been consummated on or
prior to the Initial Funding Date, then, on or prior to the Initial
Funding Date, (A) the Guarantors shall have caused a payment to be
made to the Lenders, in respect of the Guarantors' obligations under
the USI Guaranty, in an amount sufficient to reduce the aggregate
outstanding principal amount of the Term Loans under the Credit
Agreement by not less than $50,000,000, plus the amount of all
interest thereon, any funds breakage costs associated therewith, and
all other then due and payable interest and fees under the Credit
Agreement, such amounts to be applied on the Initial Funding Date,
first, to any funds breakage costs, interest and fees and, then, to
scheduled Term Loan payments in the inverse order of their
maturities (the "INITIAL REDUCTION"), and (B) U.S. Industries shall
establish a committed funding source, in form and substance
acceptable to the Administrative Agent, for the following payments:
(x) $125,900,000 (subject to reduction), in respect of the Final
Reduction (defined below), and (y) $14,000,000, in respect of
management fees that could become payable to Strategic Industries
LLC in connection with the Acquisition, and
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(iv) if the Acquisition is successful at any time after the
Initial Funding Date, but, in any event, not later than the
Termination Date, then, on the closing of the Acquisition, the
Guarantors shall cause the remaining outstanding obligations under
and in connection with the Credit Agreement to be permanently repaid
in full and all commitments thereunder terminated (the "FINAL
REDUCTION").
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the Guarantors
and, if and when this Agreement is executed and delivered by the Borrower and
Holdings, the Borrower and Holdings, make the representations and warranties
stated below as being made by it, on and as of the dates of the effectiveness of
the Forbearance and, if applicable, the Waiver (it being understood that the
representations and warranties made by the Borrower and Holdings shall be made
solely on and as of the Waiver Effective Date) and, in each case, after giving
effect to this Agreement, the Forbearance and, if applicable, the Waiver:
(a) except as stated in Section 3(b), (i) each of the Borrower and
Holdings hereby represents and warrants that the representations and
warranties made by it in Section 7 of the Credit Agreement are correct and
true on and as of the date hereof as though made on and as of the date
hereof and, for purposes of such representations and warranties, this
Agreement shall be deemed a Credit Document, and (ii) each of the
Guarantors hereby represents and warrants that the representations and
warranties made by it in Section 11 of the USI Guaranty are correct and
true on and as of the date hereof as though made on and as of the date
hereof and, for purposes of such representations and warranties, this
Agreement shall be deemed a Credit Document (it being understood and
agreed that, in the case of (i) an (ii) above, any such representation or
warranty which by its terms applies only to a specified date, shall be
true and correct in all material respects only as of such specified date);
(b) each of the Guarantors, Holdings and the Borrower further
represent and warrant that, to its knowledge, no event has occurred and is
continuing that constitutes a Default or an Event of Default (including by
way of cross-default to any other agreement, documents or instrument),
other than the Ratings Default, if any, which, subject to the
effectiveness of the Waiver, is hereby waived; and
(c) each of the Guarantors, Holdings and the Borrower further
represent and warrant that, neither the execution, delivery nor
performance of this Agreement shall violate any other agreement, document,
instrument or other obligation or applicable law to which any it or any of
its affiliates or properties are subject, and the Guarantors hereby agree,
jointly and severally, to indemnify, defend and hold harmless the Secured
Creditors and any of them, and their respective affiliates, officers,
directors, employees, representatives and agents, from and against any and
all losses, claims or damages arising as the result of the execution,
delivery or performance of this Agreement, except to the extent of such
indemnified person's gross negligence or willful misconduct. This Section
3(c) shall survive the Termination Date.
SECTION 4. SUBROGATION AND WAIVER BY GUARANTORS.
(a) Each Guarantor hereby unconditionally and irrevocably agrees not
to exercise any rights that it may now have or hereafter acquire against the
Borrower, any other Credit Party or any other insider guarantor that arise from
the existence, payment, performance
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or enforcement of such Guarantor's obligations under or in respect of the USI
Guaranty or any other Credit Document, including, without limitation, any right
of subrogation, reimbursement, exoneration, contribution or indemnification and
any right to participate in any claim or remedy of any Secured Creditor against
the Borrower, any other Credit Party or any other insider guarantor or any
Security Agreement Collateral, whether or not such claim, remedy or right arises
in equity or under contract, statute or common law, including, without
limitation, the right to take or receive from the Borrower, any other Credit
Party or any other insider guarantor, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim, remedy or right, unless and until all of the Guaranteed Obligations
and all other amounts payable under the USI Guaranty shall have been paid in
full in cash, all Letters of Credit and all outstanding Interest Rate Protection
Agreements (as defined in the USI Guaranty) of the Borrower shall have expired
or been terminated and the Commitments shall have expired or been terminated.
(b) If any amount shall be paid to any Guarantor in violation of
Section 4(a), at any time prior to the latest of (i) the payment in full in cash
of the Guaranteed Obligations and all other amounts payable under the USI
Guaranty, (ii) the termination of the Commitments and (iii) the latest date of
expiration or termination of all Letters of Credit and all Interest Rate
Protection Agreements, then such amount shall be received and held in trust for
the benefit of the Secured Creditors, shall be segregated from other property
and funds of the Guarantors, and shall forthwith be paid or delivered to the
Administrative Agent in the same form as so received (with any necessary
endorsement or assignment) to be credited and applied to the Guaranteed
Obligations and all other amounts payable under this Guaranty, whether matured
or unmatured, in accordance with the terms of the Credit Documents, or to be
held as Security Agreement Collateral for any Guaranteed Obligations or other
amounts payable under this Guaranty thereafter arising.
(c) If (i) any Guarantor shall make payment to any Secured Creditor
party hereto of all or any part of the Guaranteed Obligations, (ii) all of the
Guaranteed Obligations and all other amounts payable under the USI Guaranty
shall have been paid in full in cash, (iii) the termination of the Commitments
shall have occurred, and (iv) all Letters of Credit and all Interest Rate
Protection Agreements shall have expired or been terminated, then such Guarantor
shall be expressly subrogated to the rights of such Secured Creditor under the
Credit Documents and such Secured Creditor will, at such Guarantor's request and
expense, execute and deliver to such Guarantor appropriate documents, without
recourse and without representation or warranty, necessary to evidence such
subrogation, transfer or assignment to such Guarantor of an interest in the
Guaranteed Obligations resulting from such payment made by such Guarantor
pursuant to the USI Guaranty.
(d) Each Guarantor further agrees that its obligations under the USI
Guaranty and this Section 4 are without claim, offset, counter claim or defense
of any kind and such obligations remain continuing obligations of such Guarantor
until paid in full, including any attorney's fees and costs incurred by the
Secured Creditors in connection with the enforcement of the USI Guaranty and the
other Credit Documents.
(e) As of the date hereof, each Guarantor expressly waives and
agrees not to allege any claim, set off, counterclaim, affirmative defense or
defense of any kind against the Secured Creditors or any of them, or any or
their respective officers, directors, agents, employees, affiliates,
subsidiaries and, with regard to each of the forgoing as applicable, their
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successors and assigns, arising out of or related to the Credit Documents,
including, but not limited to, the Guaranteed Obligations or the Administrative
Agent's or any Lender's administration of any of the Credit Documents.
SECTION 5. EFFECT ON THE CREDIT AGREEMENT.
(a) Neither the execution or delivery of, nor the exercise of any
right, power or remedy of any Lender or the Administrative Agent under, nor the
effectiveness or performance of this Agreement, shall operate as a waiver of any
provision of, or a waiver or cure of any Default or Event of Default under, the
Credit Agreement, the USI Guaranty any of the other Credit Documents, except the
limited Waiver in respect of the Ratings Default, if any, and, then, strictly
subject to all applicable terms and conditions hereof.
(b) Each of the Credit Agreement, the USI Guaranty and the other
Credit Documents are and shall continue to be in full force and effect and, in
each case, is hereby in all respects ratified and confirmed by each party
thereto that is or becomes also a party hereto.
SECTION 6. TERMINATION. The forbearance and waiver obligations
hereunder of the Secured Creditor parties hereto and, if otherwise effective,
the Forbearance and the Waiver, shall terminate and be of no further force and
effect upon the earlier to occur of (i) the 120th Day, and (ii) the date of the
failure of any condition set forth in Section 2(c) (the "TERMINATION Date".)
SECTION 7. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.
SECTION 8. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, and shall be
subject to the jurisdictional and service provisions of Section 22 of the USI
Guaranty as if this were a Credit Document and each party hereto were a party to
the USI Guaranty and subject to such provisions.
SECTION 9. THIS AGREEMENT; MODIFICATION. This Agreement constitutes
the entire agreement of the parties hereto with respect to the subject matter
hereof, there being no other agreements or understandings, oral, written or
otherwise respecifying such subject matter, any such agreement or understanding
being superceded hereby, shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, and may not be
amended, extended or otherwise modified, except in a writing executed in whole
or in counterparts by each party hereto.
SECTION 10. ACKNOWLEDGED. Each of the parties hereto acknowledges
that it has been informed that the Administrative Agent, together with certain
other Secured Creditor parties hereto, whose names have been disclosed to it,
are or intend to be USI Refinancing Agents.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
Guarantors: U.S. INDUSTRIES, INC.,
as a Guarantor
By:
---------------------------------
Title:
USI GLOBAL CORP.,
as a Guarantor
By:
---------------------------------
Title:
------------------------------,
Administrative Agent: BANK OF AMERICA, N.A.,
and as a Lender and as Administrative
Agent
By:
---------------------------------
Title: Managing Director
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Lenders:
--------------------------------------,
as a Lender
By:
---------------------------------
Title:
--------------------------------------,
as a Lender
By:
---------------------------------
Title:
--------------------------------------,
as a Lender
By:
---------------------------------
Title:
--------------------------------------,
as a Lender
By:
---------------------------------
Title:
--------------------------------------,
as a Lender
By:
---------------------------------
Title:
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Joined by the Borrower and Holdings, as of _______, 2001:
Borrower: REXAIR, INC.,
By:
---------------------------------
Title:
Holdings: STRATIGIC INDUSTRIES, INC.,
By:
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Title:
