SECOND AMENDMENT TO
THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
THIS SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this
"Second Amendment") is made and dated as of August 26, 1998, to be effective as
of July 3, 1998, among SUNRISE MEDICAL, INC., a Delaware corporation (the
"Borrower"), the subsidiaries of Borrower signatory hereto as "Subsidiary
Borrowers" or "Guarantors", the lenders (the "Lenders") party hereto, and BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent (the "Agent") and
amends that certain Third Amended and Restated Credit Agreement dated as of
August 28, 1997 among the parties hereto, as amended by a First Amendment and
Waiver to Third Amended and Restated Credit Agreement dated as of February 18,
1998 (as so amended, the "Agreement").
RECITALS
A. The Borrower desires to reduce the Total Commitment to $120,000,000,
which reduction will be in lieu of all of the January 15, 1999 reduction now
required, and a portion of the January 14, 2000 reduction now required.
B. If cumulative Consolidated EBITDA fails to meet the levels specified
herein, the Agent and the Lenders desire to take, and the Loan Parties have
agreed to grant, a security interest in substantially all domestic accounts
receivable and inventory of the Borrower and the Domestic Subsidiaries, the
capital stock of all Domestic Subsidiaries and 60% of the capital stock of all
Material Foreign Subsidiaries, with such security interests to be shared on a
PARI PASSU basis with the Noteholders, all on the terms and conditions set forth
herein. If such security interest is not granted for any reason when so
required, it shall be an Event of Default under the Agreement. Such security
interests shall thereafter be released upon the Loan Parties satisfying certain
conditions set forth herein.
C. The parties desire to adjust pricing and certain financial covenants
and make certain other changes on the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. TERMS. All terms used herein shall have the same meanings as in the
Agreement unless otherwise defined herein. All references to the Agreement
shall mean the Agreement as hereby amended.
2. AMENDMENTS TO AGREEMENT. The Loan Parties, the Lenders and the
Agent hereby agree that the Agreement is amended as follows:
2.1 The following new definitions are inserted in Section 1.01 of the
Agreement in proper alphabetical order as follows:
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"'ALPHA DISPOSITION' means the sale of a business as disclosed to
the Agent and the Lenders by letter dated August 20, 1998."
"'COLLATERAL' means all of the collateral covered by the Collateral
Documents."
"'COLLATERAL AGENT' means Bank of America National Trust and Savings
Association, in its capacity as collateral agent under the Security
Agreement."
"'COLLATERAL DOCUMENTS' means the Security Agreement and all other
security agreements, intercreditor agreements and other similar agreements
between any Loan Party and/or in favor of the Secured Parties now or
hereafter delivered to the Collateral Agent for the benefit of the Secured
Parties granting Liens on the Collateral pursuant to or in connection with
the transactions contemplated hereby, and any financing statements (or
comparable documents now or hereafter filed in accordance with the Uniform
Commercial Code or comparable law) as debtor in favor of the Collateral
Agent for the benefit of the Secured Parties, all in form and substance
satisfactory to the Collateral Agent, and any amendments, supplements,
modifications, renewals, replacements, consolidations, substitutions and
extensions of any of the foregoing."
"'COLLATERALIZATION DATE' means the date that all conditions
precedent set forth in Section 6.12 have been satisfied."
"'COLLATERALIZATION EVENT' means (a) the occurrence of any Default
or Event of Default under Section 7.09, 7.10, 7.11, 7.18 or any payment
default hereunder or (b) the first date that the Agent receives a
Compliance Certificate demonstrating that, as of the end of the Fiscal
Quarter covered by such Compliance Certificate, cumulative Consolidated
EBITDA is less than the amount set forth below opposite such Fiscal
Quarter, measured on a cumulative basis commencing with the Fiscal Quarter
ending October 2, 1998:
Fiscal Quarter Minimum Cumulative
Ending Consolidated EBITDA
----------------------------------------------
October 2, 1998 $15,000,000
January 1, 1999 $30,600,000
April 2, 1999 $49,500,000
July 2, 1999 $69,700,000
"PROVIDED, HOWEVER, that if and when the Alpha Disposition is completed,
the foregoing minimum cumulative Consolidated EBITDA amounts shall
thereafter be reduced by $1,200,000 per Fiscal Quarter, on a cumulative
basis, for the next four Fiscal Quarters, commencing with the Fiscal
Quarter in which the Alpha Disposition occurs, with the reduction for the
Fiscal Quarter within which the Alpha Disposition occurs to be pro rated
from the date the Borrower receives the net proceeds thereof to the end of
such Fiscal Quarter."
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"'COLLATERALIZATION PERIOD' means the period commencing on the
Collateralization Date and ending on the date all Collateral Release
Conditions have been satisfied."
"'COLLATERAL RELEASE CONDITIONS' means all of the following
conditions:
"(a) the Agent shall have received a Compliance Certificate demonstrating
that:
"(i) cumulative Consolidated EBITDA for any period of four
consecutive Fiscal Quarters, commencing with or after the First
Eligible Fiscal Quarter (as defined below), is at least $69,700,000;
PROVIDED, HOWEVER, that if the Alpha Disposition has been completed,
the foregoing minimum cumulative Consolidated EBITDA amount shall
thereafter be reduced by $1,200,000 per Fiscal Quarter, on a
cumulative basis, for the next four Fiscal Quarters, commencing with
the Fiscal Quarter in which the Alpha Disposition occurs, with the
reduction amount for the Fiscal Quarter in which the Alpha
Disposition occurs to be pro rated from the date the Borrower
receives the net proceeds thereof to the end of such Fiscal Quarter;
and
"(ii) the Leverage Ratio is less than 2.50 to 1 as of the
end of such Fiscal Quarter;
"(b) no Default or Event of Default has occurred since the Second
Amendment Effective Date which has not been cured or waived; and
"(c) the Collateral Agent shall have received written confirmation
from the Required Noteholders ( as defined in the 7.09% Series A Senior
Notes Due October 28, 2004 or the 7.25% Series B Senior Notes Due October
28, 2007) (which confirmation may be evidenced by their signing of the
Security Agreement) that (i) they have agreed to release all Collateral
upon satisfaction of the conditions set forth in clauses (a) and (b) of
this definition concurrently with the Collateral Agent and the Lenders and
(ii) upon satisfaction of all conditions set forth in this definition, they
authorize the Collateral Agent to release all Collateral."
"'FIRST ELIGIBLE FISCAL QUARTER' means the first Fiscal Quarter
following the later of (a) the Fiscal Quarter which triggered the
Collateralization Event, and (b) if any Event of Default occurs after the
Second Amendment Effective Date, the Fiscal Quarter in which such Event of
Default is cured or waived."
"'CONSOLIDATED EBIT' means, for any period for the Borrower and its
Subsidiaries, an amount equal to the sum of (a) Consolidated Net Income,
(b) Interest Charges and (c) the amount of taxes, based on or measured by
income, used or included in the determination of Consolidated Net Income,
all determined in conformity with Generally Accepted Accounting
Principles."
"'MATERIAL FOREIGN SUBSIDIARY' means any first tier Foreign
Subsidiary the amount of whose assets exceed 2.5% of Consolidated Total
Assets as of the end of the Fiscal
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Quarter preceding the date by which a security interest in 60% of the
stock thereof must be granted to the Collateral Agent pursuant to
Section 6.12 or 6.13."
"'NOTEHOLDERS' means the holders of the 7.09% Series A Senior Notes
Due October 28, 2004 issued by Sunrise in an aggregate principal amount of
$50,000,000 and the 7.25% Series B Senior Notes Due October 28, 2007 issued
by Sunrise in an aggregate principal amount of $50,000,000."
"'PLEDGED COLLATERAL' has the meaning set forth in the Security
Agreement."
"'PLEDGED SECURITIES' has the meaning set forth in the Security
Agreement."
"'SECOND AMENDMENT EFFECTIVE DATE' means July 3, 1998."
"'SECURED PARTIES' has the meaning set forth in the Security
Agreement."
"'SECURITY AGREEMENT' means the Pledge, Security, Collateral Agency
and Intercreditor Agreement substantially in the form of EXHIBIT O hereto
(or as otherwise agreed to by the Majority Lenders or, if required pursuant
to Section 11.02, all Lenders), either as originally executed or as it may
from time to time be supplemented, modified, amended, extended or
supplanted."
2.2 The definition of "Adjusted Cash Flow" in Section 1.01 of the
Agreement is amended by inserting the following at the end thereof:
"For purposes of calculating Adjusted Cash Flow for the Fiscal Quarter
ending October 2, 1998 through and including the Fiscal Quarter ending
April 2, 1999, Consolidated Net Income and items (a), (b), (c) and (d)
shall be annualized using the following conventions:
"(i) for purposes of calculating Adjusted Cash Flow as of the
Fiscal Quarter ending October 2, 1998, Consolidated Net Income and items
(a), (b), (c) and (d) for the Fiscal Quarter ending October 2, 1998 shall
be multiplied by 4;
"(ii) for purposes of calculating Adjusted Cash Flow as of the
Fiscal Quarter ending January 1, 1999, Consolidated Net Income and items
(a), (b), (c) and (d) for the two Fiscal Quarters ending January 1, 1999
shall be multiplied by 2;
"(iii) for purposes of calculating Adjusted Cash Flow as of the
Fiscal Quarter ending April 2, 1999, Consolidated Net Income and items (a),
(b), (c) and (d) for the three Fiscal Quarters ending April 2, 1999 shall
be multiplied by 4/3; and
"(iv) for purposes of calculating Adjusted Cash Flow as of the
Fiscal Quarter ending July 2, 1999 and thereafter, no annualization
adjustment shall be made to Consolidated Net Income and items (a), (b), (c)
and (d)."
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2.3 The definitions of "Amortization Amount" and "Amortization Date" in
Section 1.01 of the Agreement are amended and restated in their entirety as
follows:
"'AMORTIZATION AMOUNT' means for the Amortization Date occurring on
January 15, 2000, $5,000,000."
"'AMORTIZATION DATE' means, subject to Section 2.10(b), January 15,
2000."
2.4 The definition of "Applicable Margin" in Section 1.01 of the
Agreement is amended and restated in its entirety as follows:
"'APPLICABLE MARGIN' means, (a) with respect to each Eurocurrency
Rate Committed Advance, 2.50% per annum, (b) with respect to the Standby
Letter of Credit fees referred to in Section 3.05(a), 2.50% per annum, (c)
with respect to each Base Rate Advance, 1.25% per annum, and (d) with
respect to the commitment fee referred to in Section 2.03(c), 0.50% per
annum; PROVIDED, HOWEVER, upon receipt by the Agent from a Senior Officer
of the Borrower of a Compliance Certificate demonstrating that cumulative
Consolidated EBITDA is at least $69,700,000 for any four consecutive Fiscal
Quarters ending on or after July 2, 1999 (or, if the Alpha Disposition has
been completed, the foregoing minimum cumulative Consolidated EBITDA amount
LESS $1,200,000 per Fiscal Quarter, on a cumulative basis, for the next
four Fiscal Quarters, commencing with the Fiscal Quarter in which the Alpha
Disposition occurs, with the reduction for the Fiscal Quarter in which the
Alpha Disposition occurs to be pro rated from the date the Borrower
receives the net proceeds thereof to the end of such Fiscal Quarter), the
Applicable Margin shall (and subject to the proviso to the paragraph
following this schedule) be based instead on the then applicable Leverage
Ratio in accordance with the following schedule; PROVIDED, FURTHER, that
during the continuance of any Event of Default, unless and until a demand
has been made by the Agent pursuant to Section 2.05(a), the interest rates
first set forth above in this definition instead shall apply:
-----------------------------------------------------------------------------------------------------
Eurocurrency
Rate Committed Base Rate
Leverage Ratio Advances Advances Commitment Fee
Standby Letter
of Credit fees
-----------------------------------------------------------------------------------------------------
LESS THAN 2.00:1 0.750% 0.000% 0.200%
GREATER THAN OR EQUAL TO 2.00:1 but
LESS THAN 2.50:1 0.875% 0.000% 0.250%
GREATER THAN OR EQUAL TO 2.50:1 but
LESS THAN 3.00:1 1.000% 0.000% 0.250%
GREATER THAN OR EQUAL TO 3.00:1 but
LESS THAN 3.50:1 1.250% 0.000% 0.300%
GREATER THAN OR EQUAL TO 3.50:1 but
LESS THAN OR EQUAL TO 3.75:1 1.500% 0.250% 0.375%
"Any change in the Applicable Margin determined in accordance with
the foregoing schedule shall be effective upon receipt by the Agent from a
Senior Officer of the Borrower of a Compliance Certificate demonstrating
such fact; PROVIDED that, with
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respect to Eurocurrency Rate Committed Advances, the new Applicable Margin
with respect to each such Advance shall be effective upon the earlier of
(i) the termination of the then existing Interest Period with respect
thereto and (ii) the next interest payment date for such Advance; and with
respect to Base Rate Advances, Standby Letters of Credit and the commitment
fee, such change in the Applicable Margin shall be effective immediately."
2.5 The definition of "Consolidated Net Income" in Section 1.01 of the
Agreement is amended by inserting the following at the end thereof:
"Consolidated Net Income for each of the following Fiscal Quarters shall be
increased by the amount set forth opposite such Fiscal Quarter for
'reengineering adjustments:'
REENGINEERING ADJUSTMENTS
Fiscal Quarter Pre Tax--When Net of Tax--When
Ending calculating Leverage calculating ratio
Ratio for Section 7.11
------------------------------------------------------------------
September 26, 1997 $4,600,000 $2,764,000
December 26, 1997 $2,100,000(1) $1,277,000
March 31, 1998 $5,300,000 $3,184,000
July 3, 1998 $12,100,000(2) $8,143,000
2.6 The definition of "Debt Service" in Section 1.01 of the Agreement is
amended by inserting the following at the end thereof:
"For purposes of calculating Debt Service for the Fiscal Quarter ending
October 2, 1998 through and including the Fiscal Quarter ending April 2,
1999, Interest Charges shall be annualized using the following conventions:
"(i) for purposes of calculating Interest Charges for the four
Fiscal Quarters ending October 2, 1998, Interest Charges for the Fiscal
Quarter ending October 2, 1998 shall be multiplied by 4;
"(ii) for purposes of calculating Interest Charges for the four
Fiscal Quarters ending January 1, 1999, Interest Charges for the two Fiscal
Quarters ending January 1, 1999 shall be multiplied by 2;
"(iii) for purposes of calculating Interest Charges for the four
Fiscal Quarters ending April 2, 1999, Interest Charges for the three Fiscal
Quarters ending April 2, 1999 shall be multiplied by 4/3; and
---------------------
(1)Net of a $4,900,000 pretax gain.
(2)Includes $2,300,000 of the $3,000,000 Sentient Systems Excluded
Acquisition Costs
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"(iv) for purposes of calculating Interest Charges for the four
Fiscal Quarters ending July 2, 1999 and thereafter, no annualization
adjustment shall be made."
2.7 The definition of "Interest Coverage Ratio" in Section 1.01 of the
Agreement is renamed "Debt Coverage Ratio" and realphabetized accordingly, and
all reference to "Interest Coverage Ratio" in the Agreement shall be deemed
references to the Debt Coverage Ratio.
2.8 The definition of "Leverage Ratio" in Section 1.01 of the Agreement
is amended and restated in its entirety as follows:
"'LEVERAGE RATIO' means, as of any date of determination, the ratio
of Consolidated Funded Indebtedness to Consolidated EBITDA for the four
Fiscal Quarters ending on that date. For purposes of calculating
compliance with the Leverage Ratio for the Fiscal Quarter ending
October 2, 1998 through and including the Fiscal Quarter ending April 2,
1999, Consolidated EBITDA shall be annualized using the following
conventions:
"(i) for purposes of calculating the Leverage Ratio as of the
Fiscal Quarter ending October 2, 1998, Consolidated EBITDA for the Fiscal
Quarter ending October 2, 1998 shall be multiplied by 4;
"(ii) for purposes of calculating the Leverage Ratio as of the
Fiscal Quarter ending January 1, 1999, Consolidated EBITDA for the two
Fiscal Quarters ending January 1, 1999 shall be multiplied by 2;
"(iii) for purposes of calculating the Leverage Ratio as of the
Fiscal Quarter ending April 2, 1999, Consolidated EBITDA for the three
Fiscal Quarters ending April 2, 1999 shall be multiplied by 4/3; and
"(iv) for purposes of calculating the Leverage Ratio as of the
Fiscal Quarter ending July 2, 1999 and thereafter, no annualization
adjustment shall be made."
2.9 The definition of "Loan Documents" in Section 1.01 of the Agreement
is amended by inserting "any Collateral Documents," after "the Swing Line
Documents.".
2.10 The definition of "Majority Lenders" in Section 1.01 of the
Agreement is amended and restated in its entirety as follows:
"'MAJORITY LENDERS' means Lenders at any time holding at least
66-2/3% of the then aggregate unpaid principal amount of the Committed
Advances owing to the Lenders, or, if no such principal amount is at such
time outstanding, Lenders having at least 66-2/3% of the Total Commitment."
2.11 Section 2.03(c) of the Agreement is amended by deleting "the average
daily unused portion" and inserting "the actual daily unused portion" in lieu
thereof.
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2.12 Section 2.05(a) of the Agreement (Base Rate Advances) is amended by
inserting "PLUS the Applicable Margin, if any" after "at a fluctuating interest
rate per annum equal to the Base Rate in effect from time to time."
2.13 Section 2.10 of the Agreement (Reduction of Commitments) is amended
by inserting a new subsection (d) as follows:
"(d) OTHER MANDATORY REDUCTIONS. On the date that the Borrower
and its Subsidiaries receive net proceeds from any Disposition permitted by
Section 7.01(b), the Total Commitment shall be reduced by an amount equal
to 75% of such net proceeds in excess of $5,000,000, measured on a
cumulative basis for all Dispositions since the Second Amendment Effective
Date; PROVIDED, HOWEVER that, during the Collateralization Period, the
amount of any such reduction shall be decreased by an amount equal to any
net proceeds of Collateral Dispositions that have been delivered to the
Noteholders or withheld by the Collateral Agent pursuant to the Security
Agreement. For purposes of the Senior Notes (as defined in the Security
Agreement), this section shall be deemed to constitute an offer by the
Borrower to prepay the Loans and reduce in the Total Commitment in the
amount and on the terms contained herein, and the Lenders hereby accept the
foregoing offer."
2.14 Section 2.11(c) of the Agreement (Mandatory Prepayments) is amended
by inserting "7.01(b)," after "Section" in the third line thereof.
2.15 Section 5.04 of the Agreement (Subsidiaries of Borrower) is amended
by inserting the following sentence at the end thereof:
"During the Collateralization Period, all capital stock, domestic inventory
and domestic accounts receivable of each Domestic Subsidiary and 60% of the
capital stock of each Material Foreign Subsidiary are Collateral."
2.16 The following new section is inserted in the Agreement immediately
following Section 5.18 as follows:
"5.19 SECURITY INTERESTS. During the Collateralization Period, the
Security Agreement will create a valid first priority security interest,
pari passu with the Noteholders, in substantially all domestic accounts
receivable and inventory of the Borrower and the Domestic Subsidiaries, the
capital stock of all Domestic Subsidiaries and 60% of the capital stock of
all Material Foreign Subsidiaries securing the Obligations (subject only to
Permitted Encumbrances, Liens permitted under Sections 7.06 and to such
qualifications and exceptions as are contained in the Uniform Commercial
Code with respect to the priority of security interests perfected by means
other than the filing of a financing statement or with respect to the
creation of security interests in Property to which Division 9 of the
Uniform Commercial Code does not apply), and all action necessary to
perfect the security interests so created, other than filing of the UCC-1
financing statements delivered to the Collateral Agent pursuant to
Section 6.12 with the appropriate Governmental Agency have been taken and
completed."
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2.17 Section 6.01 of the Agreement (Financial and Business Information)
is amended by deleting "and" at the end of subsection (k); deleting the period
at the end of subsection (l) and inserting "; and" in lieu thereof, and
inserting a new subsection (m) immediately following subsection (l) as follows:
"(m) As soon as practicable, and in any event within 40 days after
the end of each fiscal month (other than months which are also Fiscal
Quarter or Fiscal Year ends), (i) the consolidated and consolidating
balance sheets of Borrower and its Subsidiaries as at the end of such
fiscal month, and (ii) consolidated and consolidating statements of income
and cash flow, in each case of Borrower and its Subsidiaries for such
fiscal month and for the portion of the Fiscal Year ended with such fiscal
month, all in reasonable detail sufficient to calculate compliance with
financial covenants, and presented in a manner comparing such financial
statements to the financial statements for the comparable fiscal periods of
the prior fiscal year and to Borrower's budget for the current Fiscal Year.
Such financial statements shall fairly present the financial condition,
results of operations and cash flow of Borrower and its Subsidiaries in
accordance with Generally Accepted Accounting Principles (other than any
requirement for footnote disclosures), consistently applied (except for
those changes to which the independent public accountants of Borrower have
concurred), as at such date and for such periods, subject only to normal
quarter-end adjustments and year-end audit adjustments."
2.18 Section 6.11(b) of the Agreement (Additional Guarantors After the
Closing Date) is amended by deleting "Section 4.01(a)(5) and (6)" and inserting
"Section 4.01(a)(2) through (6)" in lieu thereof.
2.19 The following new sections are inserted in the Agreement immediately
following Section 6.11 as follows:
"6.12 COLLATERALIZATION OF OBLIGATIONS. Within 60 days of the
occurrence of the Collateralization Event, the Borrower shall deliver, or
cause to be delivered, all of the following to the Collateral Agent, in
form and substance reasonably satisfactory to the Collateral Agent and
legal counsel for the Collateral Agent (unless otherwise specified or
unless the Collateral Agent otherwise agrees) and in compliance with the
requirements of the Note Agreement (as defined in the Security Agreement):
"(a) the Security Agreement executed by Borrower, each Domestic
Subsidiary, the Required Secured Parties, the Collateral Agent and the
Agent, together with the Pledged Securities accompanied by appropriate
stock powers endorsed in blank, which Security Agreement shall grant to the
Collateral Agent on behalf of the Secured Parties a security interest in
substantially all domestic accounts receivable and inventory of the
Borrower and the Domestic Subsidiaries, the capital stock of all Domestic
Subsidiaries and 60% of the capital stock of all Material Foreign
Subsidiaries;
"(b) such financing statements on Form UCC-1 executed by Borrower
and each Domestic Subsidiary with respect to the Security Agreement as the
Collateral Agent may request;
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"(c) a favorable opinion of counsel to Borrower and the Domestic
Subsidiaries confirming, among other things, that (i) the Secured Parties'
security interest in the Collateral is duly perfected, (ii) each Loan
Party's obligations under the Collateral Documents to which it is a party
are legal, valid, binding and enforceable against such Loan Party (iii) the
execution, delivery and performance of the Collateral Documents by each
Loan Party will not violate any law, decree or judgment or violate the Note
Agreement (as defined in the Security Agreement) to which such Loan Party
is a party or by which its assets are bound and (iv) except for the filing
of a financing statement with respect to Collateral covered by Division 9
of the Uniform Commercial Code, no government approvals, consents,
registrations or filings, are required by any Loan Party; PROVIDED that
such opinion shall be subject to such modifications as are acceptable to
the Collateral Agent in its sole discretion; and
"(d) such other assurances, certificates, documents, consents or
opinions as the Collateral Agent may reasonably require.
"6.13 ADDITIONAL COLLATERAL. If, during the Collateralization
Period, the Borrower or any Domestic Subsidiary of Borrower creates or
otherwise acquires any Domestic Subsidiary or Material Foreign Subsidiary,
then the Borrower shall promptly:
"(a) cause any such Domestic Subsidiary to execute and deliver an
instrument of joinder to the Security Agreement, together with such
financing statements on Form UCC-1 executed by such Domestic Subsidiary;
"(b) pledge or cause to be pledged, all capital stock of any such
Domestic Subsidiary and 60% of the capital stock of any such Material
Foreign Subsidiary by executing and delivering a supplement and/or
instrument of joinder to the Security Agreement, together with such stock,
accompanied by appropriate stock powers endorsed in blank;
"(c) deliver or cause to be delivered, to the extent not
previously delivered to the Collateral Agent, documents of they type
specified in Section 4.01(a)(2) through (6) with respect to any Loan Party
executing and delivering any Loan Documents; and
"(d) deliver or cause to be delivered an opinion of the type
referred to in Section 6.12(c) with respect to any Loan Party executing and
delivering any Loan Documents and the security interests then being
granted.
"6.14 FURTHER ASSURANCES RE COLLATERAL. From time to time during
the Collateralization Period, promptly upon request by the Collateral
Agent, Borrower shall do, cause, execute, acknowledge, deliver, record,
re-record, file, re-file, register and re- register, any and all such
further acts, deeds, conveyances, security agreements, financing statements
and continuations thereof, termination statements, notices of assignment,
transfers, certificates, assurances and other instruments as the Collateral
Agent may reasonably require from time to time in order (a) to carry out
more effectively the purposes of this Agreement or any other Loan Document,
(b) to subject to the Liens
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created by any of the Collateral Documents any of the Property, rights or
interests covered by any of the Collateral Documents, (c) to perfect and
maintain the validity, effectiveness and priority of any of the Collateral
Documents and the Liens intended to be created thereby, and (d) to better
assure, convey, grant, assign, transfer, preserve, protect and confirm to
the Secured Parties the rights granted or now or hereafter intended to be
granted to the Secured Parties under the Collateral Documents or under any
other document executed in connection therewith.
"6.15 RELEASE OF COLLATERAL. Upon satisfaction of the Collateral
Release Conditions, the Collateral Agent shall promptly release its
security interests in the Collateral."
2.20 Section 7.01(b) of the Agreement (Dispositions of Property) is
amended by inserting the following proviso at the end thereof:
"PROVIDED, HOWEVER, that both the Total Commitment shall be permanently
reduced and outstanding Advances shall be prepaid (whether or not the Total
Commitment is then fully utilized) by an amount equal to 75% of the net
proceeds received by the Borrower and its Subsidiaries in excess of
$5,000,000 on a cumulative basis from all Dispositions since the Second
Amendment Effective Date; PROVIDED, HOWEVER that, during the
Collateralization Period, the amount of any such reduction and prepayment
shall be decreased by an amount equal to any net proceeds of Collateral
Dispositions that have been delivered to the Noteholders or withheld by the
Collateral Agent pursuant to the Security Agreement;"
2.21 The table in Section 7.09 of the Agreement (Leverage Ratio) is
amended and restated in its entirety as follows:
Fiscal Quarter Maximum Ratio
Ending
---------------------------------------
July 3, 1998 3.90 to 1
October 2, 1998 3.65 to 1
January 1, 1999 3.50 to 1
April 2, 1999 3.50 to 1
Thereafter 3.25 to 1
2.22 Section 7.11 of the Agreement (Debt Coverage Ratio) is amended and
restated in its entirety as follows:
"7.11 DEBT COVERAGE RATIO. Permit the Debt Coverage Ratio, as of
the end of any Fiscal Quarter, to be less than the following ratio:
Fiscal Quarter Minimum Ratio
Ending
---------------------------------------
July 3, 1998 1.40 to 1
October 2, 1998 n/a
January 1, 1999 n/a
April 2, 1999 1.15 to 1
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July 2, 1999 1.50 to 1
and thereafter
2.23 A new Section 7.18 is inserted immediately after Section 7.17 of the
Agreement as follows:
"7.18 CONSOLIDATED EBIT TO INTEREST CHARGES RATIO. Permit the
ratio of Consolidated EBIT to Interest Charges to be less than 2.25 to 1 as
of the end of the Fiscal Quarters ending October 2, 1998 and January 1,
1999. For purposes of calculating compliance with this ratio, Consolidated
EBIT shall be annualized using the following conventions:
"(i) for purposes of calculating the ratio as of the Fiscal
Quarter ending October 2, 1998, Consolidated EBIT and Interest Charges for
the Fiscal Quarter ending October 2, 1998 shall be multiplied by 4; and
"(ii) for purposes of calculating the ratio as of the Fiscal
Quarter ending January 1, 1999, Consolidated EBIT and Interest Charges for
the two Fiscal Quarters ending January 1, 1999 shall be multiplied by 2."
2.24 Section 9.01(c) of the Agreement (Events of Default) is amended and
restated in its entirety as follows:
"(c) any Loan Party fails to perform or observe any of the
covenants contained in Section 6.01(h), 6.03, 6.06 or 6.12 or in Article
VII; or"
2.25 Section 9.01 of the Agreement (Events of Default) is further amended
by deleting the period at the end of subsection (l) and inserting "; or" in lieu
thereof, and inserting new subsections (m) and (n) immediately following
subsection (l) as follows:
"(m) During the Collateralization Period:
"(i) any provision of any Collateral Document shall for any
reason cease to be valid and binding on or enforceable against
any Loan Party, or any Loan Party shall so state in writing or
bring an action to limit its obligations or liabilities
thereunder; or
"(ii) any Collateral Document shall for any reason (other
than pursuant to the terms thereof) cease to create a valid
security interest in the Collateral purported to be covered
thereby or such security interest shall for any reason cease to
be a perfected and first priority security interest (subject
only to the matters permitted by Section 5.19); or
"(n) Borrower fails to deliver the documents required by Section
6.12 within 60 days of the occurrence of a Collateralization Event."
2.26 The following new section is inserted in the Agreement immediately
following Section 10.09 as follows:
-12-
"10.10 COLLATERAL MATTERS. During the Collateralization Period, the
Collateral Agent, on behalf of all the Secured Parties, shall hold all
items of any Collateral or interests therein received or held by the
Collateral Agent in accordance with the Collateral Documents and shall act,
or refrain from acting with respect to the Collateral in accordance
therewith."
2.27 Section 11.02 of the Agreement (Amendments; Consents) is amended by
deleting "or" at the end of subsection (e); deleting the period at the end of
subsection (f) and inserting "; or" in lieu thereof, and inserting a new
subsection (g) immediately following subsection (f) as follows:
"(g) to release any material portion of the Collateral (except as
otherwise expressly provided in any Loan Document)."
2.28 Section 11.02 of the Agreement (Amendments; Consents) is further
amended by inserting the following sentence at the end thereof:
"The Agent must consent to any amendment, waiver or consent affecting the
rights or duties of the Agent under any Loan Document, and the Collateral
Agent must consent to any amendment, waiver or consent affecting the rights
or duties of the Collateral Agent under any Loan Document."
2.29 Exhibit I to the Agreement (Compliance Certificate) is amended
and restated in its entirety in the form of Exhibit I-1 hereto for the Fiscal
Quarter ending July 3, 1998 and Exhibit I-2 for the Fiscal Quarter ending
October 2, 1998 and thereafter.
2.30 A new Exhibit O (Security Agreement) is inserted to the Agreement in
the form of Exhibit O hereto.
2.31 Schedule 1.01(b) to the Agreement (Commitments) is amended and
restated in the form of Schedule 1.01(b) hereto.
3 REPRESENTATIONS AND WARRANTIES. Each of the Loan Parties jointly
and severally represent and warrant to the Lenders and the Agent:
3.1 AUTHORIZATION. The execution, delivery and performance of this
Second Amendment have been duly authorized by all necessary corporate action by
each of them and has been duly executed and delivered by each of them.
3.2 BINDING OBLIGATION. This Second Amendment is the legally valid and
binding obligation of each Loan Party, enforceable in accordance with its terms
against each of them respectively, except as such enforcement may be limited by
Debtor Relief Laws or equitable principles relating to the granting of specific
performance and other equitable remedies as a matter of judicial discretion.
3.3 NO LEGAL OBSTACLE TO AGREEMENT. Neither the execution of this
Second Amendment, the making by any Borrower of any borrowing under the
Agreement, nor the
-13-
performance of the Agreement has constituted or resulted in or will constitute
or result in a breach of the provisions of any Contractual Obligation to which
any Loan Party is a party, or the violation of any Requirement of Law, or result
in the creation under any agreement or instrument of any security interest,
lien, charge, or encumbrance upon any of the assets of any of them, except as
contemplated hereby. No approval or authorization of any Governmental Agency
is required by any Loan Party to permit the execution, delivery or performance
by any Loan Party of this Second Amendment, the Agreement, or the transactions
contemplated hereby or thereby, or the making of any borrowing under the
Agreement.
3.4 INCORPORATION OF CERTAIN REPRESENTATIONS. The representations and
warranties set forth in Article 5 of the Agreement, as amended hereby, are true
and correct in all material respects on and as of the date hereof as though made
on and as of the date hereof except to the extent any such representation or
warranty is expressly stated to be made as of any other date.
3.5 DEFAULT. No Default or Event of Default under the Agreement has
occurred and is continuing.
3.6 NO MATERIAL ADVERSE EFFECT. No event or circumstance has occurred
since July 3, 1998 which constitutes a Material Adverse Effect after giving
effect to this Second Amendment.
4. CONDITIONS, EFFECTIVENESS. The effectiveness of this Second
Amendment shall be subject to the compliance by the Borrower with its agreements
herein contained, and to the delivery of the following to the Agent in form and
substance satisfactory to the Agent:
4.1 CORPORATE RESOLUTIONS. A copy of a resolution or resolutions passed
by the Board of Directors of the Borrower, certified by the Secretary or an
Assistant Secretary of the Borrower as being in full force and effect on the
date hereof, authorizing the amendments to the Agreement herein provided for and
the execution, delivery and performance of this Second Amendment and any note or
other instrument or agreement required hereunder.
4.2 AUTHORIZED SIGNATORIES. A certificate, signed by the Secretary or
an Assistant Secretary of the Borrower dated the date hereof, as to the
incumbency of the person or persons authorized to execute and deliver this
Second Amendment and any instrument or agreement required hereunder on behalf of
the Borrower.
4.4 AMENDMENT FEE. An amendment fee for the account of each Lender
approving this Second Amendment equal to 0.20% of such Lender's Commitment after
giving effect to this Second Amendment.
4.5 OPINION RE COLLATERALIZATION. An opinion of outside counsel to the
Borrower stating to the effect that the Borrower can agree to provide the
security interests required by this Second Amendment on the terms and conditions
set forth herein without obtaining the consent of the Noteholders to the
execution of this Second Amendment and the execution of this Second Amendment
does not constitute or result in a breach of the 7.09% Series A Senior Notes Due
October 28, 2004 or the 7.25% Series B Senior Notes Due October 28, 2007.
-14-
4.6 OTHER EVIDENCE. Such other evidence with respect to the Borrower or
any other person as any Lender may reasonably request to establish the
consummation of the transactions contemplated hereby, the taking of all
corporate action in connection with this Second Amendment and the Agreement and
the compliance with the conditions set forth herein.
5. MISCELLANEOUS.
5.1 NOTICE RE REDUCTION IN TOTAL COMMITMENT. Sunrise hereby requests
that the Total Commitment be reduced to the amount shown on amended Schedule
1.01(b) hereto, effective as of the date hereof. With respect to such
reduction, this Second Amendment shall serve as the notice of such reduction
otherwise required by Section 2.10(a) of the Agreement, and any advance notice
therefor is hereby waived.
5.2 EFFECTIVENESS OF THE AGREEMENT. Except as hereby expressly amended,
the Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects.
5.3 WAIVERS. This Second Amendment is specific in time and in intent
and does not constitute, nor should it be construed as, a waiver of any other
right, power or privilege under the Agreement, or under any agreement, contract,
indenture, document or instrument mentioned in the Agreement; nor does it
preclude any exercise thereof or the exercise of any other right, power or
privilege, nor shall any future waiver of any right, power, privilege or default
hereunder, or under any agreement, contract, indenture, document or instrument
mentioned in the Agreement, constitute a waiver of any other default of the same
or of any other term or provision.
5.4 COUNTERPARTS. This Second Amendment may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument. This Second Amendment shall not become
effective until each Loan Party, the Majority Lenders and the Agent shall have
signed a copy hereof, whether the same or counterparts, and the same shall have
been delivered to the Agent.
5.5 JURISDICTION. This Second Amendment, and any instrument or agreement
required hereunder, shall be governed by and construed under the laws of the
State of California.
-15-
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
be duly executed and delivered as of the date first written above.
BORROWER:
SUNRISE MEDICAL, INC.,
AS BORROWER AND AS A GUARANTOR
By:___________________________________
Xxx X. Xxxxxx
Senior Vice President and
Chief Financial Officer
GUARANTORS:
DYNAVOX SYSTEMS, INC.
SUNMED FINANCE INC.
SUNRISE MARIN HOLDINGS INC.
SUNRISE MEDICAL CCG INC.
SUNRISE MEDICAL HHG INC.
By:___________________________________
Xxx X. Xxxxxx
Treasurer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS
AGENT
By:___________________________________
Xxxxxxx Xxxxxx
Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, AS A LENDER
By:___________________________________
Xxxxxxx Xxxxxxxx
Vice President
(SIGNATURES CONTINUE)
-16-
NATIONSBANK, N.A.
By ___________________________________
Name _________________________________
Title ________________________________
ABN AMRO BANK NV LOS ANGELES
INTERNATIONAL BRANCH
By ___________________________________
Name _________________________________
Title ________________________________
UNION BANK OF CALIFORNIA, N.A.
By ___________________________________
Name _________________________________
Title ________________________________
XXXXXX GUARANTY TRUST
COMPANY OF NEW YORK
By ___________________________________
Name _________________________________
Title ________________________________
DEUTSCHE BANK AG, NEW YORK
BRANCH AND/OR CAYMEN ISLANDS
BRANCH
By ___________________________________
Name _________________________________
Title ________________________________
By ___________________________________
Name _________________________________
Title ________________________________
(SIGNATURES CONTINUE)
-17-
PNC BANK, NATIONAL ASSOCIATION
By ___________________________________
Name _________________________________
Title ________________________________
-18-
EXHIBIT I-1
COMPLIANCE CERTIFICATE
(July 3, 1998 only)
To: Bank Of America National Trust And
Savings Association, as Agent
Reference is made to that certain Third Amended and Restated Credit
Agreement dated as of August 28, 1997, by and among Sunrise Medical Inc., a
Delaware corporation (the "Borrower"), the Subsidiary Borrowers, the Guarantors,
the Lenders party thereto (the "Lenders"), and Bank of America National Trust
and Savings Association, as Agent for the Lenders (as amended, further restated,
supplemented or otherwise modified from time to time, the "Credit Agreement").
Terms defined in the Credit Agreement and not otherwise defined in this
Compliance Certificate ("Certificate") shall have the meanings assigned thereto
in the Credit Agreement.
This Certificate is delivered in accordance with Section 6.01(l) of the
Credit Agreement.
All balance sheet items are as of the date of the attached financial
statements.
A. COMPLIANCE WITH FINANCIAL COVENANTS
Computations showing compliance with Sections 7.01(b), 7.03, 7.09, 7.10,
7.11 and 7.14 of the Credit Agreement are as follows:
1. 7.01(b); CERTAIN DISPOSITIONS. As of the date of the attached financial
statements:
A. The following Dispositions have been made since July 3, 1998:
DISPOSITION DATE NET PROCEEDS
---------------------------------------------------------------------
1.___________________ _____________________ $___________________
2.___________________ _____________________ $___________________
3.___________________ _____________________ $___________________
4.___________________ _____________________ $___________________
5. Total for Dispositions to date: $
-------------------
-------------------
COVENANT REQUIREMENT: Total Commitment shall be permanently reduced and
outstanding Advances shall be prepaid (by an amount equal to 75% of the net
proceeds received by the Borrower and its Subsidiaries in excess of $5,000,000
on a cumulative basis from all Dispositions since July 3, 1998; PROVIDED,
HOWEVER that, during the Collateralization Period, the amount of any such
reduction and prepayment shall be decreased by an amount equal to any net
-1-
proceeds of Collateral Dispositions that have been delivered to the Noteholders
pursuant to the Security Agreement.
2. 7.03; INVESTMENTS AND ACQUISITIONS. As of the date of the attached
financial statements:
A. The following Acquisitions were made during the Fiscal Year
to date:
PURCHASE PRICE/
ACQUISITION COMPLETION DATE INDEBTEDNESS ASSUMED
---------------------------------------------------------------------
1.___________________ _____________________ $___________________
2.___________________ _____________________ $___________________
3.___________________ _____________________ $___________________
4.___________________ _____________________ $___________________
5. Total for Acquisitions in Fiscal Year
to date: $
-------------------
-------------------
COVENANT REQUIREMENT: No single Permitted Acquisition to exceed
$10,000,000, and all Permitted Acquisitions in any Fiscal Year not to exceed
$10,000,000 in the aggregate (or $20,000,000 in the aggregate in any Fiscal
Quarter following the Sentient Acquisition in which no additional Extraordinary
Capital Expenditures are incurred AND either (a) no Sentient Systems Excluded
Acquisition Costs have been incurred, or (b) if earlier, the date on which the
Borrower has notified the Agent that the Sentient Systems Acquisition has been
terminated.
3. 7.09; LEVERAGE RATIO. As of the date of the attached financial
statements, the Leverage Ratio was __:1.00, computed as follows:
A. Consolidated Funded Indebtedness:
1. Principal amount of all obligations and
liabilities for borrowed money: $___________
2. Portion of obligations with respect to capital
leases which is capitalized in the consolidated
balance sheet: $___________
3. All Contingent Obligations for Persons other
than Borrower and its Subsidiaries (without
duplication): $___________
4. Consolidated Funded Indebtedness (Lines A1 +
A2+ A3): $
-----------
-----------
B. Consolidated EBITDA for period of four Fiscal Quarters
ending on the date of the attached financial statements
("Subject Period")
1. Consolidated Net Income for Subject Period: $___________
a. Plus "reengineering adjustments" from
-2-
following table: $___________
REENGINEERING ADJUSTMENTS
FISCAL QUARTER PRE TAX--WHEN NET OF TAX--WHEN
ENDING CALCULATING LEVERAGE CALCULATING RATIO FOR
RATIO SECTION 7.11
---------------------------------------------------------------------
September 26, 1997 $4,600,000 $2,764,000
December 26, 1997 $2,100,000(1) $1,277,000
March 31, 1998 $5,300,000 $3,184,000
July 3, 1998 $12,100,000(2) $8,143,000
2. Interest Charges for Subject Period: $___________
3. Taxes on Consolidated Net Income for Subject
Period: $___________
4. Depreciation and amortization for Subject
Period: $___________
5. Consolidated EBITDA for Subject Period
(Lines B1.a + B2 + B3 + B4 + B5): $
-----------
-----------
C. Leverage Ratio (Line A4 DIVIDED by Line B5): ____ to 1:00
D. Maximum Permitted Leverage Ratio: 3.90 to 1
4. 7.10; MINIMUM CONSOLIDATED TANGIBLE NET WORTH.
A. Actual Consolidated Tangible Net Worth:
1. Shareholders' Equity: $___________
2. Cumulative translation adjustment to
Shareholders' Equity reported for each
applicable Fiscal Quarter, commencing with
Fiscal Quarter ending March 29, 1996: $___________
3. Adjusted Shareholders' Equity (Line A1 LESS
Line A2): $___________
4. Intangible Assets per Generally Accepted
Accounting Principles: $___________
5. Change in translated Dollar value of
Intangible Assets denominated in foreign
currencies as calculated in accordance
with the definition of "Adjusted Dollar
Equivalent": $___________
________________________
-3-
6. Adjusted Dollar Equivalent of Intangible
Assets (Line A4 LESS Line A5, if increase;
Line A4 + Line A5, if decrease): $___________
7. After-tax amount of up to $19,000,000 in
pre-tax non-recurring charges exclusive of
any portion related to the write-off of
Intangible Assets incurred in the Fiscal
Quarter ended June 28, 1996: $___________
8. Consolidated Tangible Net Worth for covenant
(Lines A3 LESS Line A6 PLUS Line A7): $
-----------
-----------
B. 50% of Consolidated Net Income for each fiscal
quarter ending after June 28, 1996 (no reduction
for losses): $___________
C. 50% of the net proceeds from issuance of equity
securities of Borrower after June 28, 1996: $___________
D. 50% of Adjusted Dollar Equivalent of Intangible
Assets related to Acquisitions completed after
December 27, 1996: $___________
E. Minimum required Consolidated Tangible Net Worth
(Lines B + C LESS Line D PLUS -$16,000,000): $
-----------
-----------
F. Excess (Deficient) Consolidated Tangible Net Worth
(Line A8 LESS Line E): $
-----------
-----------
5. 7.11; DEBT COVERAGE RATIO.. As of the date of the attached financial
statements, the Debt Coverage Ratio was __:1.00, computed as follows:
A. Adjusted Cash Flow for the Subject Period as computed
on next page:: $___________
B. Debt Service for Subject Period:(1)
1. Interest Charges: $___________
2. Current Maturities of Long Term Debt: $___________
3. Debt Service (Line B1 +B2): $___________
C. Interest Coverage Ratio (Line A DIVIDED BY line B3):
to 1.00
----
----
D. Minimum Requirement: 1.40 to 1.
-4-
INTEREST COVERAGE RATIO - ADJUSTED CASH FLOW COMPUTATION AS OF JULY 3, 1998
ROLLING FOUR-QUARTER PERIOD:
Adjusted Cash Flow FISCAL QUARTER FISCAL QUARTER FISCAL QUARTER FISCAL QUARTER ROLLING 4-QUARTER
Components ENDING 7/3/98 ENDING 3/31/98 ENDING 12/31/97 ENDING 9/26/97 PERIOD TOTAL
-----------------------------------------------------------------------------------------------------------------------------------
1. Consolidated Net Income:
a. Actual Consolidated
Net Income $________________ $________________ $________________ $________________ $________________
b. Reengineering
addbacks $8,143,000 $3,184,000 $1,277,000 $2,764,000 $________________
c. Total (a + b) $________________ $________________ $________________ $________________ $________________
2. Depreciation and
amortization:(1) _________________ _________________ _________________ _________________ _________________
3. Other non-Cash expenses _________________ _________________ _________________ _________________ _________________
(but excluding deferred
taxes), non-Cash amounts
relating to non-recurring
charges to the extent that
such charges will not result
in future cash outflow:
4. Interest Charges expensed:(1) _________________ _________________ _________________ _________________ _________________
5. Capital Expenditures net of _________________ _________________ _________________ _________________ _________________
asset dispositions made in
the ordinary course of
business:
6. Extraordinary Capital _________________ _________________ _________________ _________________ $4,600,000
Expenditures:
7. Aggregate dividends made
by Borrower to its
shareholders and by any
Subsidiary which is not
a Wholly-Owned subsidiary
to its minority shareholders:
8. ADJUSTED CASH FLOW
(Lines 1c+2+3+4 LESS Line 5
PLUS Line 6 less Line 7: $ $ $ $ $
---------------- ------------- ---------------- ---------------- ----------------
---------------- ------------- ---------------- ----------------
----------------------
(1) Include only to the extent deducted from revenues to arrive at
Consolidated Net Income during Subject Period.
-I-1-5-
6. 7.14; RESTRICTED JUNIOR PAYMENTS.
A. Restricted Junior Payments made during Subject Period: $
---------
B. 10% of Shareholders' Equity (Line 4A.1 x 10%): $
---------
C. 50% of Consolidated Net Income during Subject Period: $
---------
D. Leverage Ratio after giving effect to Restricted Junior
Payments made during Fiscal Quarter:
1. Consolidated Funded Indebtedness as of end of
Prior Fiscal Quarter: $
---------
2. Consolidated Funded Indebtedness incurred to
make such Restricted Junior Payments: $
---------
3. Consolidated Funded Indebtedness after giving
effect to Restricted Junior Payments made
during Fiscal Quarter (Lines D1 + D2): $
---------
4. Consolidated EBITDA for Subject Period (Line
3B6): $
---------
5. Adjusted Leverage Ratio (Line D3 DIVIDED BY by
Line D4): to 1:00
---------
---------
COVENANT REQUIREMENT: After giving effect to all Restricted
Junior Payment during Subject Period (a) Line 5A to be less than
lesser of (i) Line 5B and (ii) Line 5C and (b) adjusted Leverage
Ratio to be less than 3.25 to 1.00.
E. Amount of purchases and redemptions in clause (c) of Section
7.14: $
---------
F. Maximum Permitted: $200,000
B. PERFORMANCE OF OBLIGATIONS
A review of the activities of Borrower and its Subsidiaries during the
fiscal period covered by the attached financial statements has been made
under my supervision with a view to determining whether during such fiscal
period Borrower and its respective Subsidiaries performed and observed all of
their respective Obligations under the Loan Documents. Except as described
in an attached document (which includes the response thereto which Borrower
has taken or proposes to take) or in an earlier Compliance Certificate, to
the best of my knowledge, as of the date of this Compliance Certificate there
is no Default or Event of Default.
-I-1-6-
C. NO MATERIAL ADVERSE CHANGE.
To the best of my knowledge, except as described in an attached
document or in an earlier Compliance Certificate, no Material Adverse Effect
has occurred since the date of the most recent Compliance Certificate
delivered to the Lenders.
Dated: _________________, 1998
SUNRISE MEDICAL, INC.,
By
----------------------------------
Name
--------------------------------
Title
-------------------------------
-I-1-7-
EXHIBIT I-2
COMPLIANCE CERTIFICATE
To: Bank Of America National Trust and
Savings Association, as Agent
Reference is made to that certain Third Amended and Restated Credit
Agreement dated as of August 28, 1997, by and among Sunrise Medical Inc., a
Delaware corporation (the "Borrower"), the Subsidiary Borrowers, the Guarantors,
the Lenders party thereto (the "Lenders"), and Bank of America National Trust
and Savings Association, as Agent for the Lenders (as amended, further restated,
supplemented or otherwise modified from time to time, the "Credit Agreement").
Terms defined in the Credit Agreement and not otherwise defined in this
Compliance Certificate ("Certificate") shall have the meanings assigned thereto
in the Credit Agreement.
This Certificate is delivered in accordance with Section 6.01(l) of the
Credit Agreement.
All balance sheet items are as of the date of the attached financial
statements.
A. COMPLIANCE WITH FINANCIAL COVENANTS
Computations showing compliance with Sections 7.01(b), 03, 7.09, 7.10,
7.11, 7.14 and 7.18 of the Credit Agreement are as follows:
1. 7.01(b); CERTAIN DISPOSITIONS. As of the date of the attached financial
statements:
A. The following Dispositions have been made since July 3, 1998:
DISPOSITION DATE NET PROCEEDS
-----------------------------------------------------------------
1. $
2. $
3. $
4. $
5. Total for Dispositions to date: $
------------
------------
COVENANT REQUIREMENT: Total Commitment shall be permanently reduced and
outstanding Advances shall be prepaid (by an amount equal to 75% of the net
proceeds received by the Borrower and its Subsidiaries in excess of $5,000,000
on a cumulative basis from all Dispositions since July 3, 1998; PROVIDED,
HOWEVER that, during the Collateralization Period, the amount of any such
reduction and prepayment shall be decreased by an amount equal to any net
-I-2-1-
proceeds of Collateral Dispositions that have been delivered to the Noteholders
pursuant to the Security Agreement.
2. 7.03; INVESTMENTS AND ACQUISITIONS. As of the date of the attached
financial statements:
A. The following Acquisitions were made during the Fiscal Year
to date:
PURCHASE PRICE/
ACQUISITION COMPLETION DATE INDEBTEDNESS ASSUMED
----------------------------------------------------------------------
1. $
2. $
3. $
4. $
5. Total for Acquisitions in Fiscal Year to date: $
------------
------------
COVENANT REQUIREMENT: No single Permitted Acquisition to exceed
$10,000,000, and all Permitted Acquisitions in any Fiscal Year not to
exceed $10,000,000 in the aggregate or $20,000,000 in the aggregate in any
Fiscal Quarter following the Sentient Acquisition in which no Sentient
Systems Excluded Acquisition Costs have been incurred.
3. 7.09; LEVERAGE RATIO. As of the date of the attached financial
statements, the Leverage Ratio was :1.00, computed as follows:
A. Consolidated Funded Indebtedness:
1. Principal amount of all obligations and
liabilities for borrowed money: $
2. Portion of obligations with respect to capital
leases which is capitalized in the consolidated
balance sheet: $
3. All Contingent Obligations for Persons other
than Borrower and its Subsidiaries (without
duplication): $
4. Consolidated Funded Indebtedness (Lines A1 +
A2+ A3): $
-------
-------
B. Consolidated EBITDA for period of four Fiscal Quarters ending
on the date of the attached financial statements ("Subject
Period"):
1. Consolidated Net Income for Subject Period
(adding back Sentient Systems Excluded
Acquisition Costs): $
-I-2-2-
2. Interest Charges for Subject Period: $
3. Taxes on Consolidated Net Income for Subject
Period: $
4. Depreciation and amortization for Subject
Period: $
5. Consolidated EBITDA for Subject Period
(Lines B1 + B2 + B3 + B4): $
-------
-------
For purposes of calculating each of the above items until and
including the Fiscal Quarter ending April 2, 1999, each item shall be
annualized using the following conventions:
FOR FINANCIAL SHALL BE
STATEMENT DATE ENDING ITEM FOR THIS PERIOD MULTIPLIED BY
-------------------------------------------------------------------
October 2, 1998 Fiscal Quarter ending 4
October 2, 1998
January 1, 1999 Two Fiscal Quarters ending 2
January 1, 1999
April 2, 1999 Three Fiscal Quarters ending 4/3
April 2, 1999
C. Leverage Ratio (Line A4 DIVIDED BY by Line B5): ______ to
1:00
D. Maximum Permitted Leverage Ratio:
FISCAL QUARTER ENDING MAXIMUM RATIO
-------------------------------------------
October 2, 1998 3.65 to 1
January 1, 1999 3.50 to 1
April 2, 1999 3.50 to 1
Thereafter 3.25 to 1
4. 7.10; MINIMUM CONSOLIDATED TANGIBLE NET WORTH.
A. Actual Consolidated Tangible Net Worth:
1. Shareholders' Equity: $
2. Cumulative translation adjustment to
Shareholders' Equity reported for each
applicable Fiscal Quarter, commencing with
Fiscal Quarter ending March 29, 1996: $
3. Adjusted Shareholders' Equity (Line A1 LESS
Line A2): $
4. Intangible Assets per Generally Accepted
Accounting Principles: $
5. Change in translated Dollar value of Intangible
Assets denominated in foreign currencies as
-I-2-3-
calculated in accordance with the definition of
"Adjusted Dollar Equivalent": $
6. Adjusted Dollar Equivalent of Intangible Assets
(Line A4 LESS Line A5, if increase; Line A4 +
Line A5, if decrease): $
7. After-tax amount of up to $19,000,000 in
pre-tax non-recurring charges exclusive of any
portion related to the write-off of Intangible
Assets incurred in the Fiscal Quarter ended
June 28, 1996: $
8. Consolidated Tangible Net Worth for covenant
(Lines A3 LESS Line A6 PLUS Line A7): $
--------
--------
B. 50% of Consolidated Net Income for each fiscal quarter
ending after June 28, 1996 (no reduction for losses): $
C. 50% of the net proceeds from issuance of equity
securities of Borrower after June 28, 1996: $
D. 50% of Adjusted Dollar Equivalent of Intangible
Assets related to Acquisitions completed after
December 27, 1996: $
E. Minimum required Consolidated Tangible Net Worth
(Lines B + C LESS Line D PLUS -$16,000,000): $
--------
--------
F. Excess (Deficient) Consolidated Tangible Net Worth
(Line A8 LESS Line E): $
--------
--------
5. 7.11; DEBT COVERAGE RATIO (APRIL 2, 1999 AND THEREAFTER). As of the date
of the attached financial statements, the Debt Coverage Ratio was
:1.00, computed as follows:
A. Adjusted Cash Flow for the Subject Period as computed
on next page: $
B. Debt Service for Subject Period (to be annualized until and
including Fiscal Quarter ending April 2, 1999--see table
following Line 3.B.5):
1. Interest Charges: $
2. Current Maturities of Long Term Debt: $
3. Debt Service (Line B1 +B2): $
C. Interest Coverage Ratio (Line A DIVIDED BY line B3): to 1.00
----
----
D. Minimum Requirement:
FISCAL QUARTER ENDING MINIMUM RATIO
---------------------------------------------
April 2, 1999 1.15 to 1
July 2, 1999 and thereafter 1.50 to 1
-I-2-4-
INTEREST COVERAGE RATIO - ADJUSTED CASH FLOW COMPUTATION
ROLLING FOUR-QUARTER PERIOD OR ANNUALIZED::
ADJUSTED CASH FLOW COMPONENTS
(TO BE ANNUALIZED UNTIL AND INCLUDING MOST RECENT FISCAL SECOND PRECEDING THIRD PRECEDING FOURTH ROLLING 4-QUARTER
FISCAL QUARTER ENDING APRIL 2, 1999-- QUARTER FISCAL QUARTER FISCAL QUARTER PRECEDING PERIOD TOTAL
SEE TABLE FOLLOWING LINE 3.B.5) FISCAL QUARTER
-----------------------------------------------------------------------------------------------------------------------------------
1. Consolidated Net Income (adding back $ $ $ $ $
Sentient Systems Excluded Acquisition
Costs): _________________ ________________ _______________ ____________ ______________
______________
2 Depreciation and amortization:(1) _________________ ________________ _______________ ____________ ______________
______________
3. Other non-Cash expenses (but
excluding deferred taxes), non-Cash
amounts relating to non-recurring
charges to the extent that such
charges will not result in future
cash outflow:
_________________ ________________ _______________ ____________ ______________
______________
4. Interest Charges expensed:(1)
_________________ ________________ _______________ ____________ ______________
______________
5. Capital Expenditures net of asset
dispositions made in the ordinary
course of business:
_________________ ________________ _______________ ____________ ______________
______________
6. Aggregate dividends made by Borrower
to its shareholders and by any
Subsidiary which is not a Wholly-
Owned subsidiary to its minority
shareholders:
_________________ ________________ _______________ ____________ ______________
______________
7. ADJUSTED CASH FLOW (Lines 1+2+3+4
LESS Line 5 and less Line 6: $ $ $ $ $
----------------- ---------------- --------------- ------------ --------------
--------------
-----------------------
(1) Include only to the extent deducted from revenues to arrive at
Consolidated Net Income during Subject Period.
-I-2-5-
6. 7.14; RESTRICTED JUNIOR PAYMENTS.
A. Restricted Junior Payments made during Subject Period: $
B. 10% of Shareholders' Equity (Line 4A.1 x 10%): $
C. 50% of Consolidated Net Income during Subject Period: $
D. Leverage Ratio after giving effect to Restricted Junior
Payments made during Fiscal Quarter:
1. Consolidated Funded Indebtedness as of end of
Prior Fiscal Quarter: $
2. Consolidated Funded Indebtedness incurred to
make such Restricted Junior Payments: $
3. Consolidated Funded Indebtedness after giving
effect to Restricted Junior Payments made
during Fiscal Quarter (Lines D1 + D2): $
4. Consolidated EBITDA for Subject Period (Line
3B6): $
5. Adjusted Leverage Ratio (Line D3 DIVIDED BY by
Line D4): to 1:00
COVENANT REQUIREMENT: After giving effect to all Restricted
Junior Payment during Subject Period (a) Line 5A to be less than
lesser of (i) Line 5B and (ii) Line 5C and (b) adjusted Leverage
Ratio to be less than 3.25 to 1.00.
E. Amount of purchases and redemptions in clause (c) of
Section 7.14: $
F. Maximum Permitted: $200,000
7. 7.18; CONSOLIDATED EBIT TO INTEREST CHARGES RATIO (OCTOBER 2, 1998 AND
JANUARY 1, 1999 ONLY). As of the date of the attached financial
statements, the ratio of Consolidated EBIT to Interest Charges was ____
:1.00, computed as follows:
A. Interest Charges (Line 3.B.2 annualized -- see table
following Line 3.B.5): $
B Consolidated EBIT (Lines 3.B.1. + 3.B.2 + 3.B.3 annualized --
see table following Line 3.B.5): $
C. Ratio of Consolidated EBIT to Interest Charges (Line 7.B
DIVIDED BY by Line 7.A): ___ to 1:00
D. Minimum permitted ratio: 2.25 to 1.
-I-2-6-
B. COLLATERAL MATTERS
Computations showing compliance with Sections 6.12 and 6.15 of the Credit
Agreement are as follows:
1. 6.12; COLLATERALIZATION EVENT (THROUGH JULY 2, 1999 ONLY).
A. Cumulative Consolidated EBITDA for period commencing with
Fiscal Quarter ending October 2, 1998 through the date of the
attached financial statements ("Test Period") (Not
annualized):
1. Consolidated Net Income for Test Period (adding
back Sentient Systems Excluded Acquisition
Costs): $
2. Interest Charges for Test Period: $
3. Taxes on Consolidated Net Income for Test
Period: $
4. Depreciation and amortization for Test Period: $
5. Adjusted cumulative Consolidated EBITDA for
Test Period (Lines A1.a. + A2 + A3 + A4): $
----------
----------
B. Applicable minimum cumulative Consolidated EBITDA (from
following table): $
----------
----------
FISCAL QUARTER MINIMUM CUMULATIVE
ENDING CONSOLIDATED EBITDA
----------------------------------------------
October 2, 1998 $15,000,000
January 1, 1999 $30,600,000
April 2, 1999 $49,500,000
July 2, 1999 $69,700,000
PROVIDED, HOWEVER, that if and when the Alpha Disposition is
completed, the foregoing minimum cumulative Consolidated EBITDA
amounts shall thereafter be reduced by $1,200,000 per Fiscal
Quarter, on a cumulative basis, for the next four Fiscal Quarters,
commencing with the Fiscal Quarter in which the Alpha Disposition
occurs, with the reduction for the Fiscal Quarter in which the
Alpha Disposition occurs to be pro rated from the date the Borrower
receives the net proceeds thereof to the end of such Fiscal
Quarter.
C. A Collateralization Event shall be deemed to occur if the amount in
Line A.5 is less than amount shown in Line B)
-I-2-7-
2. 6.15; COLLATERAL RELEASE CONDITIONS.
A. Cumulative Consolidated EBITDA for period of four consecutive
Fiscal Quarters, commencing with or after the First Eligible
Fiscal Quarter ("Test Release Period"): $
B. Leverage Ratio (Line 3C from prior section) _____ to 1:00
Clause (a) of the definition of Collateral Release Conditions shall
be deemed to have been satisfied if:
- Cumulative Consolidated EBITDA for Test Release Period
(Line 2.A) is at least $69,700,000; PROVIDED, HOWEVER,
that if the Alpha Disposition has been completed, the
foregoing minimum cumulative Consolidated EBITDA
amount shall be reduced by $1,200,000 per Fiscal
Quarter, on a cumulative basis, for the next four
Fiscal Quarters, commencing with the Fiscal Quarter in
which the Alpha Disposition occurs, with the reduction
amount for the Fiscal Quarter in which the Alpha
Disposition occurs to be pro rated from the date the
Borrower receives the net proceeds thereof to the end
of such Fiscal Quarter
- Leverage Ratio (Line A.3.c) is less than 2.50 to 1.
C. PERFORMANCE OF OBLIGATIONS
A review of the activities of Borrower and its Subsidiaries during the
fiscal period covered by the attached financial statements has been made under
my supervision with a view to determining whether during such fiscal period
Borrower and its respective Subsidiaries performed and observed all of their
respective Obligations under the Loan Documents. Except as described in an
attached document (which includes the response thereto which Borrower has taken
or proposes to take) or in an earlier Compliance Certificate, to the best of my
knowledge, as of the date of this Compliance Certificate there is no Default or
Event of Default.
D. NO MATERIAL ADVERSE CHANGE.
To the best of my knowledge, except as described in an attached document
or in an earlier Compliance Certificate, no Material Adverse Effect has occurred
since the date of the most recent Compliance Certificate delivered to the
Lenders.
Dated: ____________ , _______
SUNRISE MEDICAL, INC.,
By
----------------------------
Name
--------------------------
Title
-------------------------
-I-2-7-
SCHEDULE 1.01(b)
COMMITMENTS AND PRO RATA SHARES
LENDER COMMITMENT RATA SHARE PRO
----------------------------------------------------------------------------------
Bank of America National Trust and $29,454,545.45 24.545454545%
Savings Association
NationsBank, N.A. $21,818,181.82 18.181818182%
Union Bank of California, N.A. $17,454,545.45 14.545454545%
Deutsche Bank AG $ 9,818,181.82 8.181818180%
Xxxxxx Guaranty Trust Company of New $ 9,818,181.82 8.181818180%
York
PNC Bank, National Association $ 9,818,181.82 8.181818180%
-------------- --------------
-------------- --------------
Total $120,000,000 100.000000000%
-O-1-
EXHIBIT O
PLEDGE, SECURITY, COLLATERAL AGENCY AND
INTERCREDITOR AGREEMENT
THIS PLEDGE, SECURITY, COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT
(this "AGREEMENT") dated as of __________________, is made by Sunrise Medical,
Inc. ("Sunrise"), Sunmed Finance Inc., Sunrise Marin Holdings Inc., Sunrise
Medical CCG Inc. and Dynavox Systems, Inc. and Sunrise Medical HHG Inc.,
(collectively, "GRANTORS" and individually, "GRANTOR"), and those Subsidiaries
of Sunrise Medical, Inc. ("PARENT") that become parties hereto as a Grantor in
the manner provided in Section 17 of this Agreement referred to below, and each
of them, jointly and severally, as Grantors, the bank lenders from time to time
party to the Bank Credit Agreement referred to below, Bank of America National
Trust and Savings Association, as agent for the Bank Lenders (in such capacity,
the "BANK AGENT"), the Noteholders from time to time party to the Note Agreement
referred to below, and Bank of America National Trust and Savings Association,
as collateral agent hereunder (in such capacity, the "COLLATERAL AGENT")
(collectively the, "SECURED PARTIES" and individually, a "SECURED PARTY"), with
reference to the following facts:
RECITALS
A. Pursuant to the terms of that certain Third Amended and Restated
Credit Agreement dated as of August 28, 1997, as amended, among the Grantors,
the bank lenders party thereto (together with any additional bank lenders that
from to time become parties thereto ("ADDITIONAL BANK LENDERS"), the "BANK
LENDERS") and the Bank Agent (as amended, restated, superseded or otherwise
modified from time to time, including any agreement evidencing a refinancing
thereof, the "BANK CREDIT AGREEMENT"), the Bank Lenders are extending credit to
the Parent and certain Subsidiary Borrowers on the terms provided therein.
B. Pursuant to the terms of those certain Note Purchase Agreements,
each dated as of October 1, 1997 (collectively, as amended, restated, superseded
or otherwise modified from time to time, the "NOTE AGREEMENT"), among the
Grantors and the several Purchasers named in Schedule A thereto (together with
any successors and assigns, the "NOTEHOLDERS"), the Parent sold $50,000,000 of
its 7.09% Series A Senior Notes Due October 28, 2004 and $50,000,000 of its
7.25% Series B Senior Notes Due October 28, 2007 (collectively, the "SENIOR
NOTES").
C. As a condition to the continuation of financial accommodations given
under the Bank Credit Agreement, and as required by the Noteholders, the Secured
Parties are requiring that the Grantors and the Collateral Agent enter into this
Agreement to secure the obligations of each Grantor in respect of the Financing
Agreements, and to appoint the Collateral Agent as collateral agent for and on
behalf of the Secured Parties, as otherwise more particularly set forth herein.
D. The Grantors may from time to time enter into one or more agreements
refinancing all or a portion of the Senior Note Obligations or the Bank Credit
Obligations which
-O-2-
notes may be secured by the Collateral (the "ADDITIONAL SENIOR NOTES") to
certain purchasers (collectively, the "ADDITIONAL NOTEHOLDERS").
E. The Grantors have determined that the execution and delivery of this
Agreement is in furtherance of their corporate purposes and is in their best
interest and that they will derive substantial benefit, whether directly or
indirectly, from the execution of this Agreement, having regard for all relevant
facts and circumstances.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby covenant and agree as follows:
SECTION 1. DEFINED TERMS. As used in this Agreement, and unless the
context requires a different meaning, capitalized terms not otherwise defined
herein have the respective meanings provided for such terms in the Bank Credit
Agreement, and the following terms have the meanings indicated below, all such
definitions to be equally applicable to the singular and plural forms of the
terms defined:
"ACCELERATION PREMIUM OBLIGATIONS" means all obligations of any Grantor
to pay a "Make Whole Amount" (as defined in Section 8.6 of the Note Agreement)
to the Noteholders or Additional Noteholders as a result of the acceleration of
the Senior Note Obligations payable under Section 13 of the Note Agreement or
any successor provisions thereto, or similar provisions of any Additional Note
Agreement.
"ADDITIONAL NOTEHOLDERS" has the meaning ascribed to that term in the
recitals hereto.
"ADDITIONAL BANK LENDERS" has the meaning ascribed to that term in the
recitals hereto.
"ADDITIONAL NOTE AGREEMENT" means any agreement pursuant to which any
Grantor issues and sells one or more series of Additional Senior Notes which are
to be secured by the Collateral; PROVIDED that each Additional Noteholder
purchasing such Additional Senior Notes issued pursuant thereto has executed an
acknowledgment to this Agreement in the form attached as Exhibit E hereto.
"ADDITIONAL SENIOR NOTES" has the meaning ascribed to that term in the
recitals hereto.
"AFFILIATE" as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "CONTROL" (including with
correlative meanings, the terms "CONTROLLING," "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"AGREEMENT" has the meaning ascribed to that term in the introductory
paragraph hereto.
"BANK OF AMERICA" means Bank of America National Trust and Savings
Association.
"BANK LENDERS" has the meaning ascribed to that term in recitals
hereto.
-O-3-
"BANK AGENT" means Bank of America in its capacity as Agent under the
Bank Credit Agreement, together with any successors as administrative agent
under the Bank Credit Agreement.
"BANK CREDIT AGREEMENT" has the meaning ascribed to that term in
recitals hereto.
"BANK CREDIT OBLIGATIONS" has the meaning ascribed to the term
"Obligations" in the Bank Credit Agreement.
"BANK DOCUMENTS" has the meaning ascribed to the term "Loan Documents"
in the Bank Credit Agreement, any documents delivered pursuant to a Hedging
Transaction with a Bank Lender and any other collateral document given to a Bank
Lender or the Collateral Agent to secure the Bank Credit Obligations.
"BANK OUTSTANDINGS" means the sum, without duplication of, (a) all
outstanding advances made under the Bank Credit Agreement PLUS (b) all
outstanding Letter of Credit Liability.
"BANKRUPTCY PROCEEDING" means, with respect to any Person, a general
assignment by such Person for the benefit of its creditors, or the institution
by or against such Person of any proceeding seeking relief as debtor, or seeking
to adjudicate such Person as bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment or composition of such Person or its debts, under any
law relating to bankruptcy, insolvency, reorganization or relief of debtors, or
seeking appointment of a receiver, trustee, custodian or other similar official
for such Person or for any substantial part of its property.
"CASH" has the meaning ascribed to that term in Section 2(a)(8).
"CERTIFICATES" means all certificates, instruments or other documents
now or hereafter representing or evidencing any Pledged Securities.
"CODE" means the Uniform Commercial Code as the same may from time to
time be in effect in the State of California.
"COLLATERAL" has the meaning ascribed to that term in Section 2(a).
"COLLATERAL AGENT" means Bank of America in its capacity as collateral
agent hereunder and any successor collateral agent appointed pursuant to Section
18(i).
"COLLATERAL AGENT-RELATED PERSONS" means the directors, officers,
employees and agents of the Collateral Agent.
"COLLATERAL RELEASE CONDITIONS" means all of the following conditions:
(a) the Collateral Agent shall have received notice from the Bank Agent
that it received a compliance certificate under the Bank Credit Agreement
demonstrating that:
-O-4-
(i) cumulative Consolidated EBITDA for any period of four
consecutive Fiscal Quarters, commencing with or after the First
Eligible Fiscal Quarter (as defined below), is at least $69,700,000;
PROVIDED, HOWEVER, that if the Alpha Disposition has been completed,
the foregoing minimum cumulative Consolidated EBITDA amount shall
thereafter be reduced by $1,200,000 per Fiscal Quarter, on a cumulative
basis, for the next four Fiscal Quarters, commencing with the Fiscal
Quarter in which the Alpha Disposition occurs, with the reduction
amount for the Fiscal Quarter in which the Alpha Disposition occurs to
be pro rated from the date the Borrower receives the net proceeds
thereof to the end of such Fiscal Quarter; and
(ii) the Leverage Ratio is less than 2.50 to 1 as of the end of
such Fiscal Quarter;
(b) no Default or Event of Default has occurred since the Second
Amendment Effective Date which has not been cured or waived; and
(c) the Collateral Agent shall have received evidence
satisfactory to it that the conditions set forth in clauses (a) and (b)
of this definition have been satisfied and, the Collateral Agent is
authorized and directed to release all Collateral.
"FIRST ELIGIBLE FISCAL QUARTER" means the first Fiscal Quarter
following the later of (a) the Fiscal Quarter which triggered the
Collateralization Event, and (b) if any Event of Default occurs after
the Second Amendment Effective Date, the Fiscal Quarter in which such
Event of Default is cured or waived.
"DEFAULT RATE" has the meaning ascribed to that term in Section 5.
"DEPOSITORY BANK" has the meaning ascribed to that term in
Section 6(d).
"DIRECTING PARTY" means, with respect to any particular instruction
given to the Collateral Agent, each Party (and each Secured Party represented by
such Party) that has given such instruction to the Collateral Agent.
"DOMESTIC SUBSIDIARY" means any direct or indirect Subsidiary of Parent
which is incorporated under the laws of any State of the United States and which
is engaged in business primarily in the United States, other than Subsidiaries
which are Subsidiaries of a Foreign Subsidiary,
"ENFORCEMENT" means the commencement of enforcement, collection
(including judicial or non-judicial foreclosure) or similar proceedings with
respect to the Collateral.
"EVENT OF DEFAULT" has the meaning ascribed to such term in Section 10.
"FEES AND CHARGES" means any fees, indemnities or other expenses the
payment of which is required by the Bank Credit Agreement, the Note Agreement or
any Additional Note Agreement.
-O-5-
"FINANCING AGREEMENTS" means the Bank Documents, the Noteholder
Documents or any Additional Note Agreements, any Interest Rate Protection
Agreements, this Agreement, each other security document securing the Secured
Obligations, and any other instruments, documents or agreements entered into in
connection with any Secured Obligation or Financing Agreement.
"FOREIGN SUBSIDIARY" means any direct Subsidiary of Parent or a direct
Subsidiary of a Domestic Subsidiary which is not a Domestic Subsidiary,
"GRANTORS" means Sunrise Medical, Inc., Sunmed Finance Inc., Sunrise
Marin Holdings Inc., Sunrise Medical CCG Inc., Sunrise Medical HHG Inc., Dynavox
Systems Inc. and any other Person who grants any Collateral to the Collateral
Agent hereunder or any other security document securing the Secured Obligations.
"HEDGING EXPOSURE" means, on any date of determination for any Hedging
Transaction, the amount, as calculated in good faith and in a commercially
reasonable manner by the Lender Bank that is a Grantor's counterparty for such
Hedging Transaction, which such Lender Bank would pay to a third party (such
amount being expressed as a negative number) or received from a third party
(such amount being expressed as a positive number) in an arm's length
transaction as consideration for the third party's entering into a new
transaction with such Lender Bank in which: (a) such Lender Bank holds the same
position in the Hedging Transaction as it currently holds; (b) the third party
holds the same position as a Grantor currently holds; and (c) the new
transaction has economic and other terms and conditions identical in all
respects to such Hedging Transaction except that (i) the date of calculation
shall be deemed to be the date of commencement of the new transaction and (ii)
all period end dates shall correspond to all period end dates, if any, for such
Hedging Transaction.
"HEDGING TRANSACTION" means each interest rate swap transaction, basis
swap transaction, forward rate transaction, commodity swap transaction, equity
transaction, equity index transaction, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency swap transaction or
any other similar transaction (including any option with respect to any of these
transactions and any combination of any of the foregoing) entered into by any
Grantor from time to time pursuant to an Interest Rate Protection Agreement;
PROVIDED that such transaction is entered into for purposes of protection from
price, interest rate, or currency fluctuations posed by debt, contract or
purchase order obligations and not for speculative purposes.
"INTERCREDITOR PROVISIONS" has the meaning ascribed to that term in
Section 22.
"INTEREST RATE PROTECTION AGREEMENT" means any interest rate swap, cap,
floor, collar, forward rate agreement, or other rate protection transaction, or
any combination of such transactions or agreements or any option with respect to
any such transactions or agreements now existing or hereafter entered into
between any Grantor and any Lender Bank.
"INVENTORY" has the meaning ascribed to that term in Section 2(a)(2).
"ISSUING LENDER" means, with respect to any Letter of Credit, Bank of
America or such other Bank Lender reasonably acceptable to the Bank Agent as may
from time to time be designated by the Parent.
-O-6-
"LETTERS OF CREDIT" means the letters of credit issued pursuant to the
Bank Credit Agreement.
"LETTER OF CREDIT LIABILITY" means, as of any date of determination,
all then existing liabilities of the Parent to the Issuing Lender under the Bank
Credit Agreement in respect of the Letters of Credit, whether such liability is
contingent or fixed, and shall, in each case, consist of the sum of (a) the
aggregate maximum amount then available to be drawn under such Letters of Credit
(the determination of such maximum amount to assume compliance with all
conditions for drawing) and (b) the aggregate amount which has then been paid
by, and not been reimbursed to, the Issuing Lender under such Letters of Credit,
after giving effect to all reimbursements on such date.
"LIEN" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind (including any conditional sale or other title retention
agreement, any lease in the nature thereof, and any agreement to give any
security interest).
"MAXIMUM AVAILABLE AMOUNT" means, as of any date of determination, the
amount that may be drawn under the Letters of Credit (whether or not the
beneficiary thereof shall have presented, or shall be entitled at such time to
present, the drafts or other documents required to draw under the Letters of
Credit).
"MATERIAL FOREIGN SUBSIDIARY" means any first tier Foreign Subsidiary
the amount of whose assets exceed 2.5% of Consolidated Total Assets as of the
end of the Fiscal Quarter preceding the date by which a security interest in 60%
of the stock thereof must be granted to the Collateral Agent pursuant to Section
6.12 or 6.13 of the Bank Credit Agreement."
"NON-DIRECTING PARTY" means, with respect to any particular instruction
given to the Collateral Agent, each Party (and each Secured Party represented by
such Party) that has not given or agreed with such instruction given to the
Collateral Agent.
"NOTE AGREEMENT" has the meaning ascribed to the term in the recitals
hereto.
"NOTEHOLDER DOCUMENTS" means (a) the Note Agreement, (b) any Guarantee
Joinder Agreement (as defined in the Note Agreement) and (c) the Senior Notes.
"NOTEHOLDERS" has the meaning ascribed to the term in recitals hereto.
"OPINION OF COUNSEL" means a written opinion of an attorney or firm of
attorneys which in the case of any Person may be an employee thereof, a copy of
which opinion is furnished to each Secured Party.
"PARTY" means a Lender Bank, the Issuing Lender, the Bank Agent, a
Noteholder or any Additional Noteholder.
"PERSON" means any individual, corporation, partnership, limited
liability company, trust or other entity.
"PLEDGED COLLATERAL" HAS THE meaning ascribed to that term in Section
2(a)(4).
-O-7-
"PLEDGED SECURITIES" HAS THE meaning ascribed to that term in Section
2(a)(5).
"PLEDGED SECURITIES SUPPLEMENT" means a supplement in the form of
Exhibit C hereto.
"PLEDGED SUBSIDIARY" means each subsidiary listed on Exhibit B hereto,
as amended or deemed amended from time to time by Pledged Securities
Supplements.
"PREFERENTIAL PAYMENT" means any payments or Proceeds from any Grantor
or any other source with respect to the Secured Obligations (including from the
exercise of any set-off) which are:
(a) received by a Secured Party within 90 days prior to the
commencement of a Bankruptcy Proceeding with respect to any Grantor, or
the acceleration of the Senior Notes, any Additional Senior Notes or
any Bank Outstandings, and which payment reduces the amount of the
Secured Obligations owed to such Secured Party below the amount owed to
such Secured Party as of the 90th day prior to such occurrence, or
(b) received by a Secured Party (A) within 90 days prior to
the occurrence of any Event of Default (other than an Event of Default
arising as a result of the commencement of a Bankruptcy Proceeding)
which has not been waived or cured within 45 days after the occurrence
thereof and which payment reduces the amount of the Secured Obligations
owed to such Secured Party below the amount owed to such Secured Party
as of the 90th day prior to the occurrence of such Event of Default or
(B) within 45 days after the occurrence of such Event of Default, or
(iii) received by a Secured Party after the occurrence of a
Special Event of Default except as provided in Section 12(b).
"PROCEEDS" has the meaning assigned to it under the Code and, in any
event, includes, but is not limited to, (a) any and all proceeds of any
collection, sale or other disposition of the Collateral, (b) any and all amounts
from time to time paid or payable under or in connection with any of the
Collateral and (c) amounts collected by the Collateral Agent or any Lender Bank
by way of set-off, deduction or counterclaim.
"RECEIVABLES" HAS THE meaning ascribed to that term in Section 2(a)(1).
"RECORDS" has the meaning ascribed to that term in Section 2(a)(6).
"REQUIRED ADDITIONAL NOTEHOLDERS" means, with respect to each series of
Additional Senior Notes outstanding, the Additional Noteholders holding at least
the minimum amount or percentage of the aggregate principal amount of the
outstanding Additional Senior Notes of such series entitled to act or refrain
from acting thereunder in the applicable situation, as set forth in the
Additional Noteholder Documents relating thereto.
"REQUIRED LENDER BANKS" means those Lender Banks having aggregate
percentages of the commitments under the Bank Credit Agreement entitled to act
or refrain from acting thereunder in the applicable situation.
-O-8-
"REQUIRED NOTEHOLDERS" means, the Noteholders holding at least 50% of
the aggregate principal amount of the outstanding Senior Notes.
"REQUIRED SECURED PARTIES" means: (a) the Required Lender Banks under
the Bank Credit Agreement, and (b) the Required Noteholders, and (c) the
Required Additional Noteholders, each voting as a separate class; PROVIDED that
if at any time (x) the aggregate principal amount of the Bank Outstandings under
the Bank Credit Agreement represents more than 90% of the sum of the aggregate
principal amount of the Bank Outstandings, the Senior Notes and the Additional
Senior Notes, "Required Secured Parties" shall mean the Required Lender Banks,
(y) the aggregate outstanding principal amount of the Senior Notes represents
more than 90% of the sum of the aggregate principal amount of the Bank
Outstandings, the Senior Notes and the Additional Senior Notes, "Required
Secured Parties" shall mean the Required Noteholders, and (z) the aggregate
outstanding principal amount of the Additional Senior Notes represents more than
90% of the sum of the aggregate principal amount of the Bank Outstandings, the
Senior Notes and the Additional Senior Notes, "Required Secured Parties" shall
mean the Required Additional Noteholders voting as a single class.
"SECURED OBLIGATIONS" has the meaning ascribed to that term in Section
2(b).
"SECURED PARTIES" means the holders, from time to time, of the Secured
Obligations.
"SENIOR DEBT" means debt for borrowed money, other than the Senior
Notes and the Bank Credit Agreement which is not subordinated in right of
payment to any other obligation of Grantors.
"SENIOR NOTE OBLIGATIONS" means all outstanding and unpaid obligations
of every nature of all Grantors from time to time to the Noteholders under the
Noteholder Documents, and to Additional Noteholders under the Additional Note
Agreements and the Additional Senior Notes, including, without limitation, the
Acceleration Premium Obligations and all fees, collection costs and other
expenses otherwise accruing under the Noteholder Documents.
"SENIOR NOTES" has the meaning ascribed to that term in the recitals
hereto.
"SPECIAL EVENT OF DEFAULT" means: (a) the commencement of a Bankruptcy
Proceeding with respect to any Grantor, (b) any other Event of Default which has
not been waived or cured within 45 days after the occurrence thereof, or (c) the
acceleration of the Senior Notes, any Additional Senior Notes or any Bank
Outstandings.
"SPECIAL TRUST ACCOUNT" means that certain interest bearing trust
account maintained by or on behalf of the Collateral Agent for the purpose of
receiving and holding Preferential Payments.
SECTION 2. GRANT OF SECURITY INTEREST IN THE COLLATERAL. (a) Each
Grantor hereby grants to the Collateral Agent for the ratable benefit of the
Secured Parties a continuing security interest in, any and all right, title and
interest of such Grantor, whether now existing or hereafter acquired or arising,
in and to:
-O-9-
(1) DOMESTIC RECEIVABLES. All Receivables, whether now
existing or hereafter arising, and however evidenced or acquired, in
which such Grantor now has or hereafter acquires any rights (the term
"RECEIVABLES" means any right of such Grantor to payment for goods sold
or leased or for services rendered, whether or not earned by
performance (the "ACCOUNTS"), including accounts, accounts receivable,
rents, contract rights, including without limitation rights under
contracts for the purchase of supplies, instruments, notes, drafts,
acceptances, documents, chattel paper arising in connection with the
Accounts, and all other forms of obligations owing to such Grantor, and
all of such Grantor's rights to any goods and merchandise (including
without limitation any returned or repossessed goods and the right of
stoppage in transit) which is represented by, arises from or is related
to any of the foregoing), in each case owing to a Grantor by an obligor
located in the United States or its territories or possessions;
(2) DOMESTIC INVENTORY. All present and future inventory and
merchandise located in the United States at the locations described on
Exhibit A hereto (as amended from time to time), INCLUDING, without
limitation, all present and future goods held for sale or lease or to
be furnished under a contract of service, all raw materials, work in
process and finished goods, all packing materials, supplies and
containers relating to or used in connection with any of the foregoing
(collectively, "Inventory"), and all bills of lading, warehouse
receipts or documents of title relating to any of the foregoing;
(3) LICENSE RE CERTAIN GENERAL INTANGIBLES. The non-exclusive
license and right to use, have access to, make copies of and affix to
Inventory, all present and future general intangibles consisting of
trade secrets, computer programs, brochure and flyer templates and
designs, software, customer lists, trademarks, trade names, patents,
licenses, copyrights, technology, processes, proprietary information
for the purpose of Secured Parties exercising their rights and remedies
hereunder, including to the extent necessary or convenient to collect
on any of the Collateral or to market any of the Collateral to
customers or potential customers of the Grantors and/or to otherwise
dispose of or realize on such Collateral; PROVIDED, HOWEVER, that
notwithstanding any other provisions of this Agreement, the license and
right of use described in this subsection (3) shall be nontransferable;
(4) PLEDGED COLLATERAL. (i) Any and all property of any
Grantor now or hereafter pledged and delivered to the Collateral Agent
for and on behalf of the Secured Parties and (ii) the Pledged
Securities and the Certificates representing or evidencing same, and
any and all proceeds and products of any of the foregoing, and any and
all collections, dividends, distributions, redemption payments or
liquidation payments with respect to any of the foregoing, except
dividends or distributions actually paid to any Grantor as permitted
under the terms of the Financing Agreements ("PLEDGED COLLATERAL");
(5) PLEDGED SECURITIES. Shares of the capital stock of each
Pledged Subsidiary listed on Exhibit B hereto, as amended or deemed
amended from time to time by delivery of Pledged Securities
Supplements, which shares have the percentage of the voting power of
all capital stock of each Pledged Subsidiary indicated on Exhibit B or
such Pledged Securities Supplements, (i) any and all securities now or
hereafter issued in substitution,
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exchange or replacement therefor, or with respect thereto, (ii) any
and all warrants, options or other rights to subscribe to or acquire
any additional capital stock of any Pledged Subsidiary (to the extent
such additional capital stock, together with that already pledged
hereunder, would equal the percentage indicated on Exhibit B or any
Pledged Securities Supplements of the voting power of all such
capital stock), and (iii) any and all additional capital stock of
such Pledged Subsidiary (to the extent such additional capital stock,
together with that already pledged hereunder, would equal the
indicated percentage of the voting power of all such capital stock);
PROVIDED, HOWEVER, that no security interest hereunder shall attach
to any shares, or warrants, options or other rights to subscribe to
or acquire any additional capital stock, directly or indirectly of
any Pledged Subsidiary which is a Foreign Subsidiary in excess of 60%
of the stock of such Foreign Subsidiary held by any Grantor ("PLEDGED
SECURITIES");
(6) RECORDS. Supporting evidence and documents relating to any
of the above described property, including, without limitation, written
applications, credit information, account cards, payment records,
correspondence, delivery and installation certificates, invoice copies,
delivery receipts, notes and other evidences of indebtedness, insurance
certificates and the like, customer lists, together with all books of
account, ledgers and cabinets in which the same are reflected or
maintained, au whether now existing or hereafter arising (collectively,
the "Records");
(7) ADDITIONS. All additions to and substitutions and
replacements of any and all of the foregoing, whether now existing or
hereafter arising; and
(8) PROCEEDS AND PRODUCTS. All proceeds and products of the
foregoing and all insurance of the foregoing and the proceeds thereof,
including all cash, currency, coins and monies (collectively, "CASH"),
whether now existing or hereafter arising;
all of the foregoing being herein referred to as the "COLLATERAL".
(b) OBLIGATIONS SECURED. The lien and security interest herein granted
to the Collateral Agent for the ratable benefit of the Secured Parties is made
and given to secure, and shall secure, the prompt payment and performance in
full when due (whether by lapse of time, acceleration or otherwise) of (i) any
and all indebtedness, obligations and liabilities of any Grantor to the Bank
Agent, the Issuing Lender or the Lender Banks under or in connection with or
evidenced by the Bank Documents or this Agreement, in each case whether now
existing or hereafter arising (and whether arising before or after the filing of
a petition in bankruptcy), due or to become due, direct or indirect, absolute or
contingent, and howsoever evidenced, held or acquired, (ii) all indebtedness,
obligations and liabilities of any Grantor to the Noteholders under or in
connection with or evidenced by the Noteholder Documents or this Agreement, in
each case whether now existing or hereafter arising (and whether arising before
or after the filing of a petition in bankruptcy), due or to become due, direct
or indirect, absolute or contingent, and howsoever evidenced, held or acquired,
(iii) all indebtedness, obligations and liabilities of any Grantors to any
Additional Noteholders under or in connection with or evidenced by each
Additional Note Agreement or this Agreement, in each case whether now existing
or hereafter arising (and whether arising before or after the filing of a
petition in bankruptcy), due or to become due, direct or indirect, absolute or
contingent, and however evidenced, held or acquired,
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(iv) all indebtedness, obligations and liabilities of any Grantor to the
Collateral Agent under or in connection with or evidenced by this Agreement,
in each case whether now existing or hereafter arising (and whether arising
before or after the filing of a petition in bankruptcy), due or to become
due, direct or indirect, absolute or contingent, and howsoever evidenced,
held or acquired, (v) all Hedging Exposure and other obligations of any
Grantor under or arising in connection with any Interest Rate Protection
Agreement, and (vi) any and all expenses and charges, legal or otherwise,
suffered or incurred by any Secured Party in collecting or enforcing any of
such indebtedness, obligations and liabilities or in realizing on or
protecting or preserving any security therefor, including, without
limitation, the lien and security interest granted hereby (all of the
indebtedness, obligations, liabilities, expenses and charges described in
clauses (i) through (vi), inclusive, above being referred to herein as the
"SECURED OBLIGATIONS").
(c) On the date this Agreement is executed and delivered, the
Collateral Agent shall have a valid security interest under the Code in the
Collateral securing the Secured Obligations.
SECTION 3. REPRESENTATIONS AND WARRANTIES. The Grantors hereby jointly
and severally represent and warrant to, the Secured Parties that:
(a) As of the date hereof, the Grantors' chief executive offices and
chief places of business are at the locations specified on Exhibit A hereto, and
no Grantor has any other places of business other than those listed on Exhibit A
hereto.
(b) The Collateral and every part thereof is and will be free and clear
of all security interests, liens (including without limitation mechanics',
laborers' and statutory liens), attachments, levies and encumbrances of every
kind, nature and description and whether voluntary or involuntary other than the
security interest granted hereunder and Liens permitted under the Financing
Agreements.
(c) No Grantor has invoiced Receivables or otherwise transacted
business, and does not invoice Receivables or otherwise transact business, under
any trade names other than such Grantor's name set forth in the introductory
paragraph of this Agreement and except for the invoicing of Receivables on
invoices which contain one of the trade names listed on Exhibit B hereto and
made a part hereof.
(d) As of the time any Receivable becomes subject to the security
interest provided for hereby, each Grantor shall be deemed to have warranted as
to each and all of such Receivables that each Receivable and all papers and
documents relating thereto are genuine and in all respects what they purport to
be; that each Receivable is valid and subsisting and that such Receivable is an
account receivable arising out of a bona fide sale, lease or rental of goods by
such Grantor to, or in the process of being delivered to, or out of and for
services theretofore actually rendered by such Grantor to, the account debtor
named therein; that no such Receivable is evidenced by any instrument or chattel
paper unless such instrument or chattel paper is promptly endorsed by such
Grantor and delivered to the Collateral Agent (other than chattel paper
consisting of rental agreements and other ordinary course agreements relating to
the lease, rental or sale of goods which shall only be delivered to the
Collateral Agent after the occurrence of an Event of Default hereunder and upon
the request of the Collateral Agent), excluding
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however any instrument executed by an employee of any Grantor or by an
employee of any Grantor and his/her spouse and any instrument in a face
amount of less than $___________.
(e) This Agreement creates a valid security interest in the
Collateral securing payment and performance of the Secured Obligations and
all filings and other action necessary to perfect such security interest in
the Collateral have been taken.
(f) The security interest in the Pledged Collateral created hereby
constitutes a first, prior, and indefeasible security interest with respect
to the shares of each Domestic Subsidiary and Material Foreign Subsidiary
pledged hereunder, and the possession by the Collateral Agent of the
certificates representing such Pledged Securities will perfect the Collateral
Agent's interest therein.
(g) The Pledged Securities represent 100% of the ownership interest
and voting power of all Domestic Subsidiaries and not less than 60% of the
ownership interest and voting power of all Material Foreign Subsidiaries of
the Grantors owned by any Grantor.
(h) All Pledged Collateral at any time delivered to the Collateral
Agent shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed stock powers or other instruments of transfer or
assignment undated in blank for each certificate, all in form and substance
satisfactory to the Collateral Agent. The Collateral Agent shall hold all
Pledged Collateral pledged hereunder on behalf of the Secured Parties
pursuant to this Agreement.
(i) All of the capital stock of each Domestic Subsidiary pledged
hereunder is in certificated form (as contemplated by Division 8 of the
California Commercial Code), and Grantor covenants to the Collateral Agent
that it will not cause or permit any Domestic Subsidiary to issue any capital
stock in uncertificated form or seek to convert all or any part of its
existing capital stock into uncertificated form (as contemplated by Division
8 of the California Commercial Code).
(j) All Inventory is located only at the locations set forth on
Exhibit A hereto, except, in the case of Collateral that is movable, as
required in the ordinary course of a Grantor's business.
SECTION 4. COVENANTS. The Grantors hereby jointly and severally
covenant and agree with the Secured Parties that:
(a) Each Grantor will pay promptly when due all taxes, assessments,
and governmental charges and levies upon or against the Collateral in each
case before the same become delinquent and before penalties accrue thereon,
unless (i) the validity, applicability or amount thereof is being contested
in good faith by appropriate actions or proceedings which will prevent the
forfeiture or sale of such Collateral or any material interference with the
use thereof by such Grantor and (2) such Grantor shall have set aside on its
books, reserves deemed by it to be adequate with respect thereto in
accordance with and as required by generally accepted accounting principles
consistently applied.
(b) No Grantor will waste or destroy the Collateral or any part
thereof. No Grantor will use, sell, lease, rent or distribute any Collateral in
violation in any material respect of any
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statute, ordinance or other governmental requirement. Each Grantor will
perform in all material respects its obligations under any contract or other
agreement constituting a part of the Collateral, it being understood and
agreed that no Secured Party has any responsibility to perform such
obligations, except as permitted by the Financing Agreements.
(c) No Grantor will, without the Collateral Agent's prior written
consent, sell, assign, mortgage, lease or otherwise dispose of or otherwise
permit a Lien to exist on the Collateral or any interest therein, except as
permitted by the Financing Agreements.
(d) Each Grantor will, upon reasonable notice, at all times allow the
Secured Parties, or their respective representatives, free access to and right
of inspection of the Collateral located on premises under such Grantor's
control; PROVIDED, HOWEVER, so long as no Event of Default exists and is
continuing, any such access or inspection shall only be allowed during the
Grantors' normal business hours. Each Grantor will, upon request of the
Collateral Agent, and then only to the extent it is within such Grantor's power
so to do, authorize and instruct all obligors on Receivables to permit the
Collateral Agent or its designees to verify from such party's own books and
records any information concerning the Collateral or any part thereof which the
Collateral Agent may seek to verify. The Grantors shall have the right to
accompany the Collateral Agent on any such examination or inspection.
(e) Each Grantor agrees (i) within 60 days of the end of each quarterly
fiscal period of the Parent, to deliver to each Secured Party a certificate
signed by a senior financial officer of such Grantor setting forth the total
amount of Receivables and Inventory of such Grantor that are securing the
Secured Obligations as of the end of such quarterly fiscal period, and (ii) from
time to time to deliver to the Secured Parties such evidence (including copies)
of the existence and identity of the Collateral and of its availability as
collateral security pursuant hereto, as any Secured Party may reasonably
request. All of such certificates and evidences shall be in form satisfactory to
the requesting Secured Parties or the Collateral Agent.
(f) No Grantor will change its name, or except as aforesaid, transact
business under any trade name, in each case without first giving the Collateral
Agent 30 days' prior written notice of its intent to do so, PROVIDED that in the
case of any acquisition by any Grantor of any business entity or operation
giving rise to the requirement to give notice to the Collateral Agent of the use
of a new trade name pursuant to the foregoing, such notice shall be given to the
Collateral Agent within 30 days following the date such acquisition is
finalized.
(g) Each Grantor shall notify the Collateral Agent of each location not
listed on Exhibit A at which any material amount of Inventory is to be kept
including for temporary processing, storage or similar purposes for a period in
excess of 15 days. No Grantor shall remove any amount of Inventory to a location
not set forth on Exhibit A, or otherwise keep any material amount of Inventory
at such a location unless, within 15 days after the and of each month in which
such removal or other change occurs such Grantor shall give written notice to
the Collateral Agent of such removal or other change and the new location of
such Inventory.
(h) The Collateral Agent agrees to prepare, and the Grantors agree to
cooperate with the Collateral Agent to execute and deliver to the Collateral
Agent, such further agreements and assignments or other instruments and to do
all such other things necessary or reasonably
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appropriate to assure the Collateral Agent its security interest hereunder,
including such financing statement or statements, continuation statements or
amendments thereof or supplements thereto or other instruments as may from
time to time be required in order to comply with the Code.
(i) All such statements, amendments and supplements prepared by the
Collateral Agent shall be presented to the Grantors for their signatures and
shall be timely filed by the Collateral Agent in all such places as are
necessary to maintain the Collateral Agent's perfected security interest in
the Collateral. theeffect All filings and actions which may reasonably be
expected to become necessary within the immediately succeeding twelve-month
period to maintain perfection of such security interest shall be promptly
made by the Grantors. The Grantors hereby agree that a carbon, photographic
or other reproduction of this Agreement or any such financing statement is
sufficient for filing as a financing statement by the Collateral Agent
without notice thereof to the Grantors wherever the Collateral Agent in its
sole discretion desires to file the same.
(j) In the event for any reason the law of any jurisdiction other
than California becomes or is applicable to the Collateral or any part
thereof, or to any of the Secured Obligations, each Grantor agrees to execute
and deliver all such instruments and to do all such other things as the
Collateral Agent in its sole discretion reasonably deems necessary or
appropriate to preserve, protect and enforce the security interest of the
Collateral Agent as set forth herein under the law of such other jurisdiction
to at least the same extent as such security interest would be protected
under the Code. If any Collateral is in the possession or control of any of
any Grantor's agents or processors and the Collateral Agent so requests, such
Grantor agrees to notify such agents or processors in writing of the
Collateral Agent's security interest therein and, upon the occurrence and
continuance of an Event of Default hereunder and at the Collateral Agent's
request, instruct all agents and processors in possession of Collateral to
hold all such Collateral for the Collateral Agent's account and subject to
the Collateral Agent's instructions.
(k) Each Grantor shall respond promptly to all reasonable requests
of the Collateral Agent for information concerning the conduct of all
lawsuits brought by any Grantor (or in which the Grantors participates)
against any other Person. Each Grantor will warrant and defend the Collateral
against any claims and demands of all persons at any time claiming the same
or any interest in the Collateral adverse to the Collateral Agent.
(l) Each Grantor shall remain liable to the Secured Parties for any
deficiency. Any surplus remaining after the full payment and satisfaction of
the Secured Obligations shall be returned to the Grantors or to whomsoever
the Collateral Agent reasonably determines is lawfully entitled thereto.
(m) Each Grantor shall keep all of its books and records relating to
the Receivables only at its chief executive office and places of business as
specified pursuant to Section 3(a). No Grantor will maintain its chief
executive office or places of business at any location other than those
specified in Section 3(a) without first providing the Collateral Agent 30
days' prior written notice of its intent to do so; PROVIDED, HOWEVER, that
such notice shall not be deemed effective until the Collateral Agent has
acknowledged receipt thereof.
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(n) The Collateral and every part thereof will be free and clear of
all security interests, liens (including without limitation mechanics',
laborers' and statutory liens), attachments, levies and encumbrances of every
kind, nature and description, whether voluntary or involuntary, other than
the security interest granted hereunder and as permitted by the Financing
Agreements.
(o) Each Grantor shall provide such additional endorsements, forms
and writings and execute all documents and take such other action as the
Collateral Agent deems necessary to create and perfect a security interest in
the Pledged Collateral or as the Collateral Agent may at any time reasonably
request in connection with the administration or enforcement of this
Agreement or the administration of the Pledged Collateral.
(p) No Grantor shall at any time cause or permit any Pledged
Subsidiary to issue any additional capital stock, or any warrants, options or
other rights to acquire any additional capital stock to any Person other than
a Grantor or, as to any Foreign Subsidiary, as required by law.
(q) Each Grantor shall from time to time (i) upon obtaining any
additional shares of any Pledged Subsidiary or any other securities
constituting Pledged Securities or (ii) when required to pledge additional
collateral pursuant to any Financing Agreement, promptly deliver to the
Collateral Agent a duly executed Pledged Securities Supplement identifying
the additional shares which are being pledged, accompanied by duly executed
stock powers or other instruments of transfer or assignment undated in blank
for each certificate, all in form and substance satisfactory to the
Collateral Agent); PROVIDED, HOWEVER, that no security interest hereunder
shall attach to any shares, or warrants, options or other rights to subscribe
to or acquire any additional capital stock, of any Pledged Subsidiary which
is a Foreign Subsidiary in excess of 60% of the voting stock of such Foreign
Subsidiary held by any Grantor. Each Grantor hereby authorizes the Collateral
Agent to attach each Pledged Securities Supplement to this Agreement and
agrees that all shares listed on any Pledged Securities Supplement delivered
to the Collateral Agent shall for all purposes hereunder constitute Pledged
Securities.
(s) In the event that the holder of any Senior Notes or Bank Credit
Obligations shall transfer such Senior Note or Bank Credit Obligations, the
Parent shall promptly so advise the Collateral Agent. Each transferee of any
Senior Note or Bank Credit Obligations shall take such Senior Note or Bank
Credit Obligations subject to the provisions of this Agreement and to any
request made, waiver or consent given or other action taken or authorized
hereunder, by each previous holder of such Bank Credit Obligations or Senior
Note, prior to the receipt by the Collateral Agent of written notice of such
transfer; and, except as expressly otherwise provided in such notice, the
Collateral Agent shall be entitled to assume conclusively that the transferee
named in such notice shall thereafter be vested with all rights and powers as
a Party under this Agreement. The Collateral Agent shall not be obligated to
give any Party notice of any such transfer.
SECTION 5. COLLATERAL AGENT MAY PERFORM. On failure of any Grantor
to perform any of the covenants and agreements herein contained, the
Collateral Agent may, at its option, perform the same and in so doing may
expend such sums as the Collateral Agent may reasonably deem advisable in the
performance thereof, including without limitation the payment of any
insurance premiums, the payment of any taxes, liens and encumbrances,
expenditures made in
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defending against any adverse claim and all other expenditures which the
Collateral Agent may be compelled to make by operation of law or which the
Collateral Agent may make by agreement or otherwise for the protection of the
security hereof. All such sums and amounts so expended shall be repayable by
the Grantors immediately without notice or demand, shall constitute so much
additional Secured Obligations and shall bear interest from the date said
amounts are expended at the rate per annum (computed on the basis of a
360-day year for the actual number of days elapsed) determined by adding 2%
to the rate per annum from time to time announced by Bank of America in San
Francisco, California, as its reference rate with any change in such rate per
annum as so determined by reason of a change in such prime commercial rate to
be effective on the date of such change in said reference rate (such rate per
annum as so determined being hereinafter referred to as the "DEFAULT RATE").
No such performance of any covenant or agreement by the Collateral Agent on
behalf of the Grantors, and no such advancement or expenditure therefor,
shall relieve the Grantors of any default under the terms of this Agreement.
The Collateral Agent, in making any payment hereby authorized may do so
according to any xxxx, statement or estimate procured from the appropriate
public office or holder of the claim to be discharged without inquiry into
the accuracy of such xxxx, statement or estimate or into the validity of any
tax assessment, sale, forfeiture, tax lien or title or claim. The Collateral
Agent, in performing any act hereunder, shall be the sole judge in reasonably
determining whether the Grantors is required to perform the same under the
terms of this Agreement. The Collateral Agent shall be under no duty or
obligation to (i) preserve, maintain or protect the Collateral or any
Grantor's rights or interest therein, (ii) exercise any voting rights with
respect to the Pledged Collateral, whether or not an Event of Default has
occurred or is continuing, or (iii) make or give any notices of default,
presentments, demands for performance, notices of nonperformance or dishonor,
protests, notices of protest or notice of any other nature whatsoever in
connection with the Collateral on behalf of any Grantor or any other Person
having any interest therein; and the Collateral Agent does not assume and
shall not be obligated to perform the obligations of any Grantor, if any,
with respect to the Collateral.
SECTION 6. COLLECTION OF RECEIVABLES. (a) Until an Event of Default
hereunder has occurred and is continuing and the Collateral Agent instructs
the Grantors otherwise, each Grantor shall make collection of all Receivables
and may use the proceeds thereof to carry on its business in the ordinary
course as presently conducted and otherwise subject to the terms hereof, and
any goods sold by any Grantor which are returned by a customer or account
debtor or otherwise recovered may be resold by a Grantor in the ordinary
course of its business; upon the occurrence and during the continuation of
any Event of Default hereunder if the Grantors are so instructed by the
Collateral Agent, such goods shall be set aside and held by each Grantor as
trustee for the Secured Parties and shall remain part of the Collateral
Agent's Collateral. Unless and until an Event of Default occurs and is
continuing and the Collateral Agent notifies the Grantors otherwise, each
Grantor may settle and adjust disputes and claims with its customers and
account debtors, handle returns and recoveries and grant discounts, credits
and allowances in the ordinary course of business and otherwise for amounts
and on terms which such Grantor in good faith considers advisable.
(b) Upon the occurrence and during the continuation of any Event of
Default, whether or not the Collateral Agent has exercised any or all of its
rights under other provisions of this Section 6, upon the request of the
Collateral Agent:
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(i) each Grantor shall notify the Collateral Agent promptly of
all returns and recoveries and on request deliver the returned goods to
the Collateral Agent. Upon the occurrence and during the continuation
of any Event of Default and if so instructed by the Collateral Agent,
each Grantor shall also notify the Collateral Agent promptly of all
disputes and claims and settle or adjust them at no expense to the
Secured Parties, but no discount, credit or allowance other than on
normal trade terms in the ordinary course of business shall be granted
to any customer or account debtor and no returns of goods shall be
accepted by the Grantors without the Collateral Agent's consent. The
Collateral Agent may settle or adjust disputes and claims directly with
customers or account debtors for amounts and upon terms which the
Collateral Agent considers advisable;
(ii) all instruments and chattel paper at any time
constituting part of the Receivables (including any postdated checks)
shall, upon receipt by each Grantor, be immediately endorsed to and
deposited with the Collateral Agent; and/or
(iii) each Grantor shall instruct all account debtors to remit
all payments in respect of Receivables to a lockbox or lockboxes under
the sole custody and control of the Collateral Agent to be maintained
at post offices selected by the Collateral Agent.
(c) Upon the occurrence and during the continuation of any Event of
Default, whether or not the Collateral Agent has exercised any or all of its
rights under other provisions of this Section 6, the Collateral Agent or its
designee may notify each Grantor's customers or account debtors at any time
without prior notice to any Grantor that Receivables have been assigned to the
Collateral Agent or of the Collateral Agent's security interest therein, and
either in its own name, or such Grantor's or both, demand, collect (including
without limitation through a lockbox described in Section 6(b)(3)), receive,
receipt for, xxx for, compound and give acquittance for any or all amounts due
or to become due on Receivables, and in the Collateral Agent's discretion file
any claim or take any other action or proceeding which the Collateral Agent may
deem necessary or appropriate to protect and realize upon the security interest
of the Collateral Agent in the Receivables.
(d) Any proceeds of Receivables or other Collateral transmitted to or
otherwise received by the Collateral Agent pursuant to any of the provisions of
Section 6(b) or (c) shall be handled and administered by the Collateral Agent in
and through a remittance account or accounts maintained by the Collateral Agent
at a commercial bank or banks (which may be Bank of America) selected by the
Collateral Agent (collectively the "DEPOSITORY BANKS" and individually a
"DEPOSITORY BANK"), and each Grantor acknowledges that the maintenance of such
remittance accounts by the Collateral Agent is solely for the Collateral Agent's
own convenience and that no Grantor has any right, title or interest in such
remittance accounts or any amounts at any time standing to the credit thereof
and shall be subject to the right of the Collateral Agent therein as set forth
in this Agreement. The Collateral Agent may apply all or any part of any
proceeds of Receivables or other Collateral received by it from any source to
the payment of the Secured Obligations then due and payable in such amounts and
in such manner and order as set forth in Section 11 of this Agreement. The
Collateral Agent need not apply or give credit for any item included in proceeds
of Receivables or other Collateral until the Depository Bank has received final
payment therefor at its office in cash or final solvent credits current at the
site of deposit acceptable to the Collateral Agent and such Depository Bank as
such. However, if the
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Collateral Agent does permit credit to be given for any item prior to a
Depository Bank receiving final payment therefor and such Depository Bank
fails to receive such final payment or an item is charged back to the
Collateral Agent or any Depository Bank for any reason, the Collateral Agent
may at its election in either instance charge the amount of such item back
against any such remittance accounts, together with interest thereon at the
Default Rate. Concurrently with each transmission of any proceeds of
Receivables or other Collateral to any remittance account, each Grantor shall
furnish the Collateral Agent with a report in such form as the Collateral
Agent shall require identifying the particular Receivable or other Collateral
from which the same arises or relates. Each Grantor hereby jointly and
severally indemnifies each Secured Party from and against all liabilities,
damages, losses, actions, claims, judgments, costs, expenses, charges and
reasonable attorneys' fees (including the allocated cost of inhouse counsel)
suffered or incurred by such persons because of the maintenance of the
foregoing arrangement, except for such liabilities, damages, losses, actions,
claims, judgments, costs, expenses, charges and fees which result solely and
directly from the gross negligence or willful misconduct of the person
seeking to be indemnified. No Secured Party shall have any liability or
responsibility to any Grantor for a Depository Bank accepting, any check,
draft or other order for payment of money bearing the legend "payment in
full" or words of similar import or any other restrictive legend or
endorsement whatsoever or be responsible for determining the correctness of
any remittance.
SECTION 7. VOTING RIGHTS; DIVIDENDS; ETC. So long as no Event of
Default occurs and remains continuing:
(a) Each Grantor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Securities, or any part
thereof, for any purpose not inconsistent with the terms of any Financing
Agreement or this Agreement; PROVIDED, HOWEVER, that each Grantor shall
exercise, or shall refrain from exercising, any such right if it would result in
a Default or an Event of Default.
(b) Each Grantor shall be entitled to receive and to retain and use
only those dividends or distributions paid to such Grantor as permitted (or not
prohibited) under the terms of the Financing Agreements; PROVIDED, HOWEVER, that
any and all such dividends or distributions received in the form of capital
stock shall be, and the Certificates representing such capital stock forthwith
shall be, to the extent required to make the representation in Section 4(f) true
and correct after giving effect to such dividend, delivered to the Collateral
Agent to hold as, Pledged Collateral and shall, if received by any Grantor, be
received in trust for the benefit of the Collateral Agent, be segregated from
the other property of such Grantor, and forthwith be delivered to the Collateral
Agent as Pledged Collateral in the same form as so received (with any necessary
endorsements); PROVIDED, HOWEVER, that no security interest hereunder shall
attach to any shares, or warrants, options or other rights to subscribe to or
acquire any additional capital stock, of any Pledged Subsidiary which is Foreign
Subsidiary in excess of 60% of the voting stock of such Foreign Subsidiary.
SECTION 8. POWER OF ATTORNEY. In addition to any other powers of
attorney contained herein, each Grantor appoints the Collateral Agent, its
nominee, or any other Person whom the Collateral Agent may designate as such
Grantor's attorney in fact, with full power upon the occurrence and during
the continuance of an Event of Default hereunder, to sign such Grantor's name
on verifications of accounts and to send requests for verification of
Receivables to
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customers or account debtors, to endorse such Grantor's name on any checks,
notes, acceptances, money orders, drafts or other forms of payment or
security that may come into the Collateral Agent's possession, to sign such
Grantor's name on any invoice or xxxx of lading relating to any Receivables,
on claims to enforce collection of any Receivables, on notices to and drafts
against customers, on schedules and assignments of Receivables, on notices of
assignment and on public records, to notify the post office authorities to
change the address for delivery of such Grantor's mail to an address
designated by the Collateral Agent, to receive, open and dispose of all mail
addressed to such Grantor and to do all things necessary to carry out this
Agreement. The Grantors hereby ratify and approve all acts of any such
attorney and agree that neither the Collateral Agent nor any such attorney
will be liable for any acts or omissions nor for any error of judgment or
mistake of fact or law other than their gross negligence or willful
misconduct. The foregoing power of attorney, being coupled with an interest,
is irrevocable so long as the Agreement remains in effect. The Collateral
Agent may file one or more financing statements disclosing its security
interest in any or all of the Collateral without any Grantor's signature
appearing thereon. Each Grantor also hereby grants the Collateral Agent a
power of attorney to execute any such financing statement, or amendments and
supplements to financing statements, on behalf of any or all the Grantors
without notice thereof to any Grantor, which power of attorney is coupled
with an interest and is irrevocable as long as this Agreement is in effect.
SECTION 9. GRANTORS' INDEMNIFICATION. Whether or not the
transactions contemplated hereby are consummated, the Grantors shall
indemnify, defend and hold the Collateral Agent-Related Persons, and each
Secured Party and each of their respective officers, directors, employees,
counsel, agents and attorneys-in-fact (each, an "INDEMNIFIED PERSON")
harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, charges, expenses and
disbursements (including Attorney Costs) of any kind or nature whatsoever
which may at any time (including at any time following repayment of the
Loans, the termination of the Letters of Credit and the termination,
resignation or replacement of the Collateral Agent or replacement of any
Lender Bank or Noteholder) be imposed on, incurred by or asserted against any
such Person in any way relating to or arising out of this Agreement or any
document contemplated by or referred to herein, or the transactions
contemplated hereby, or any action taken or omitted by any such Person under
or in connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any Bankruptcy Proceeding
or appellate proceeding) related to or arising out of this Agreement, whether
or not any Indemnified Person is a party thereto (all the foregoing,
collectively, the "INDEMNIFIED LIABILITIES"); PROVIDED, that the Grantors
shall have no obligation hereunder to any Indemnified Person with respect to
Indemnified Liabilities resulting solely from the gross negligence or willful
misconduct of such Indemnified Person. The agreements in this Section shall
survive payment of all other Obligations.
SECTION 10. DEFAULTS AND REMEDIES. (a) The occurrence of any of the
following events, or the existence of any of the following conditions, shall
constitute an "Event of Default" hereunder:
(i) the occurrence of any event or the existence of any
condition which is specified as an Event of Default under the Bank
Credit Agreement, the Note Agreement or any Additional Note Agreement;
or
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(ii) any representation or warranty made by any Grantor
herein, or in any written statement or certificate furnished by it
pursuant hereto, or in connection with this Agreement shall be untrue
in any material respect as of the date of the issuance or making
thereof; or
(iii) default in the observance or performance by any Grantor
of any provision of this Agreement, and such default continues for five
days.
(b) With respect to all of the Collateral other than Cash, upon the
occurrence and during the continuation of any Event of Default hereunder, the
Collateral Agent shall have, in addition to all other rights provided herein
or by law, the rights and remedies of a secured party under the Code
(regardless of whether the Code is the law of the jurisdiction where the
rights or remedies are asserted and regardless of whether the Code applies to
the affected Collateral), including entering any premises where any
Collateral may be located for the purpose of securing, protecting,
inventorying, appraising, inspecting, repairing, preserving, storing,
preparing, processing, taking possession of or removing the same; and further
the Collateral Agent may, without demand and without advertisement, except
with respect to a public sale, hearing or process of law, all of which each
Grantor hereby waives, at any time or times, sell and deliver any or all
Collateral (other than Cash) held by or for it at public or private sale, for
cash, upon credit or otherwise, at such prices and upon such terms as the
Collateral Agent deems advisable, in its sole discretion, provided that said
disposition complies with any and all mandatory legal requirements. In
addition to all other sums due any Secured Party, the Grantors shall pay the
Secured Parties all costs and expenses incurred by them, and each of them,
including a reasonable allowance for attorneys' fees (including the allocated
cost of inhouse counsel) and court costs, in obtaining, liquidating or
enforcing payment of Collateral or Secured Obligations or in the prosecution
or defense of any action or proceeding by or against such Secured Party
concerning any matter arising out of or connected with this Agreement, the
Collateral or Secured Obligations, including without limitation any of the
foregoing arising in, arising under or related to a case under the United
States Bankruptcy Code (or any successor statute). Any requirement of
reasonable notice shall be met if such notice is personally served on or
mailed, postage prepaid, to the Grantors in accordance with Section 20(b) at
least 10 days before the time of sale or other event giving rise to the
requirement of such notice; however, no notification need be given to the
Grantors if the Grantors have signed, after an Event of Default hereunder has
occurred, a statement renouncing any right to notification of sale or other
intended disposition, provided that the Grantors are not hereby agreeing to
sign such a statement. The Collateral Agent shall not be obligated to make
any sale or other disposition of the Collateral regardless of notice having
been given. To the extent permitted by law, the Collateral Agent, any Lender
Bank, any Noteholder or any Additional Noteholders may be the purchaser at
any such sale. To the extent permitted by applicable law, the Grantors hereby
waive all of their rights of redemption from any such sale. Subject to the
provisions of applicable law, the Collateral Agent may postpone or cause the
postponement of the sale of all or any portion of the Collateral by
announcement at the time and place of such sale, and such sale may, without
further notice, be made at the time and place to which the sale was postponed
or the Collateral Agent may further postpone such sale by announcement made
at such time and place.
(c) With respect to all of the Collateral other than Cash, without in
any way limiting the foregoing, the Collateral Agent shall, upon the occurrence
and during the continuation of any
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Event of Default hereunder, have the right, in addition to all other rights
provided herein or by law, to take physical possession of any and all of the
Collateral (other than Cash) and anything found therein, the right for that
purpose to enter without legal process any premises where such Collateral may
be found (provided such entry be done lawfully), and the right to maintain
such possession on the Grantors' premises (each Grantor hereby agreeing to
lease such premises without cost or expense to the Collateral Agent or its
designee if the Collateral Agent so requests) or to remove the Collateral
(other than Cash) or any part thereof to such other places as the Collateral
Agent may desire. Upon the occurrence and during the continuation of any
Event of Default hereunder, the Grantors shall, upon the Collateral Agent's
demand, assemble the Collateral (other than Cash) and make it available to
the Collateral Agent at a place designated by the Collateral Agent. If the
Collateral Agent exercises its right to take possession of the Collateral
(other than Cash), the Grantors shall also at their expense perform any and
all other steps reasonably requested by the Collateral Agent to preserve and
protect the security interest hereby granted in such Collateral, such as
placing and maintaining signs indicating the security interest of the
Collateral Agent, appointing overseers for such Collateral and maintaining
Inventory records.
(d) With respect to Pledged Collateral upon the occurrence and during
the continuance of an Event of Default:
(i) at the option of the Collateral Agent, all rights of the
Grantors to exercise the voting and other consensual rights with
respect to Pledged Collateral which it would otherwise be entitled to
exercise pursuant to Section 7(a), and to receive the dividends and
distributions with respect to Pledged Collateral which it would
otherwise be authorized to receive and retain pursuant to Section 7(b),
shall, cease and all such rights shall thereupon become vested in the
Collateral Agent who shall thereupon have the sole right to exercise
such voting and other consensual rights and to receive and to hold as
Pledged Collateral such dividends and distributions. The Collateral
Agent shall give notice thereof to the Parent; PROVIDED, HOWEVER, that
(A) neither the giving of such notice nor the receipt thereof by Parent
or any other Grantor shall be a condition to exercise of any rights of
the Collateral Agent hereunder, and (B) the Collateral Agent shall
incur no liability for failing to give such notice.
(ii) all dividends and other distributions which are received
by any Grantor contrary to the provisions of the Credit Documents shall
be received in trust for the benefit of the Collateral Agent, shall be
segregated from other funds of such Grantor, and forthwith shall be
paid over to the Collateral Agent as Pledged Collateral in the same
form as so received (with any necessary endorsements).
(iii) each Grantor hereby revokes all previous proxies with
regard to the Pledged Securities and appoints the Collateral Agent as
its proxyholder to attend and vote at any and all meetings of the
shareholders of each Pledged Subsidiary, and any adjournments thereof,
held on or after the date of the giving of this proxy and prior to the
termination of this proxy and to execute any and all written consents
of shareholders of each Pledged Subsidiary on or after the date of the
giving of this proxy and prior to the termination of this proxy, with
the same effect as if such Grantor had personally attended the meetings
or had personally voted its shares or had personally signed the written
-O-22-
consents; PROVIDED, HOWEVER, that the proxyholder shall have rights
hereunder only upon the occurrence and during the continuance of an
Event of Default, and that the Collateral Agent shall have instructed
the proxyholder to exercise voting rights with respect to the Pledged
Securities or any of them. Each Grantor hereby authorizes the
Collateral Agent to substitute another person as the proxyholder and,
upon the occurrence or during the continuance of any Event of Default,
hereby authorizes and directs the proxyholder to file this proxy and
the substitution instrument with the secretary of the appropriate
corporation. This proxy is coupled with an interest and is irrevocable
until such time as all Obligations have been paid and performed in
full.
(iv) whether or not any of the Pledged Collateral has been
effectively registered under the Securities Act of 1933 or other
applicable laws, the Collateral Agent may, in its sole and absolute
discretion, sell all or any part of the Pledged Collateral at private
sale in such manner and under such circumstances as the Collateral
Agent may deem necessary or advisable. Without limiting the foregoing,
the Collateral Agent may (A) approach and negotiate with a limited
number of potential purchasers, and (B) restrict the prospective
bidders or purchasers to persons who will represent and agree that they
are purchasing the Pledged Collateral for their own account for
investment and not with a view to the distribution or resale thereof.
In the event that any of the Pledged Collateral is sold at private
sale, each Grantor agrees that if the Pledged Collateral is sold for a
price which the Collateral Agent in good faith believe to be
reasonable, then (x) the sale shall be deemed to be commercially
reasonable in all respects, (y) no Grantor shall be entitled to a
credit against the Secured Obligations in an amount in excess of the
purchase price, and (z) the Collateral Agent shall not incur any
liability or responsibility to any Grantor in connection therewith,
notwithstanding the possibility that a substantially higher price might
have been realized at a public sale. Each Grantor recognizes that a
ready market may not exist for Pledged Collateral which is not
regularly traded on a recognized securities exchange, and that a sale
by the Collateral Agent of any such Pledged Collateral for an amount
substantially less than a pro rata share of the fair market value of
the issuer's assets minus liabilities may be commercially reasonable in
view of the difficulties that may be encountered in attempting to sell
a large amount of Pledged Collateral or Pledged Collateral that is
privately traded.
(e) With respect to Cash, upon the occurrence and during the
continuation of any Event of Default hereunder, the Collateral Agent shall
have, in addition to all other rights provided herein or by law, the rights
and remedies of a secured party under the Code (regardless of whether the
Code is the law of the jurisdiction where the rights or remedies are asserted
and regardless of whether the Code applies to the affected Collateral), the
right to exercise exclusive control over any proceeds of Collateral in its
possession or held at any Depository Bank or in any lockbox established
pursuant to Section 6(b), including Cash, including without limitation the
right to collect, withdraw and receive all amounts due or to become due or
payable under each such deposit account, and shall have the right to apply
such amounts in reduction of the Secured Obligations as contemplated by
Section 11.
(f) Failure by the Collateral Agent to exercise any right, remedy or
option under this Agreement or any other agreement among the Grantors and the
Collateral Agent or provided by law, or delay by the Collateral Agent in
exercising the same, shall not operate as a waiver; no
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waiver hereunder shall be effective unless it is in writing, signed by the
party against whom such waiver is sought to be enforced and then only to the
extent specifically stated. Neither the Collateral Agent nor any party acting
as attorney for the Collateral Agent shall be liable hereunder for any acts
or omissions or for any error of judgment or mistake of fact or law other
than their gross negligence or willful misconduct. The rights and remedies of
the Secured Parties under this Agreement shall be cumulative and not
exclusive of any other right or remedy which the Secured Parties may have.
SECTION 11. APPLICATION OF PROCEEDS.
(a) Any and all Proceeds received or collected by the Collateral Agent
pursuant to Section 6 or 7 or in connection with any Enforcement and any
Preferential Payments required to be paid to all Secured Parties in accordance
with the provisions of Section 10, shall be applied promptly by the Collateral
Agent, as follows:
FIRST: To the payment of the reasonable costs and expenses of
such sale, collection or other realization, including, without
duplication, fees and expenses of counsel (including the allocated cost
of inhouse counsel) to the Collateral Agent evidenced by reasonable and
customary computer back-up detail, unpaid collateral agency fees, and
all reasonable expenses, liabilities and advances made or incurred by
the Collateral Agent in connection therewith;
SECOND: To the ratable payment of the Secured Obligations then
due to Secured Parties, calculated in accordance with the provisions of
Section 11(b);
THIRD: To the ratable payment of the Fees and Charges to
Secured Parties; and
FOURTH: After payment in full of all Secured Obligations, to
the payment to or upon the order of the Grantors, or to whosoever may
be lawfully entitled to receive the same or as a court of competent
jurisdiction may direct, of any surplus then remaining from such
Proceeds.
Until such Proceeds are so applied, the Collateral Agent shall hold
such Proceeds in its custody in accordance with its regular procedures for
handling deposited funds.
(b) Any Proceeds received by the Collateral Agent in respect of the
Collateral (net of any amounts applied in accordance with Section 11(a) FIRST)
shall be applied in accordance with the priority set forth in Section 11(a)
SECOND so that each Secured Party shall receive payment of its proportionate
amount of all such Proceeds, as the case may be. Payment shall be based upon the
proportion which the amount of such Secured Obligations of such Secured Party
bears to the total amount of all Secured Obligations of all such Secured
Parties, including, without limitation, Hedging Exposure to any Lender Bank. For
purposes of determining the proportionate amounts of all Secured Obligations
sharing in any such distribution: (i) the amount of the outstanding Bank Credit
Obligations shall be deemed to be the sum of the principal amount of the Bank
Outstandings (including, subject to Section 11(c), the Maximum Available Amount)
and all accrued interest and letter of credit fees and commitment fees with
respect thereto but excluding Fees and Charges other than letter of credit fees
and commitment fees, (ii) the amount of the outstanding Senior Note Obligations
shall be deemed to be the
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principal amount of the Senior Notes plus all accrued interest with respect
thereto, including, without limitation, the Acceleration Premium Obligations,
but excluding Fees and Charges, and (iii) the amount of the outstanding
Hedging Exposure shall be deemed to be the amount of any Grantor's
obligations then due and payable (exclusive of expenses or similar
liabilities, but including early termination payments then due) in connection
with any Hedging Transaction and all accrued interest with respect thereto,
but excluding Fees and Charges. In the event the Proceeds received by the
Collateral Agent shall be insufficient to pay in full the whole amount so due
and owing upon the Secured Obligations to all Secured Parties, then such
Proceeds shall be shared ratably according to the aggregate of such principal
and the accrued interest and fees with respect thereto including, without
limitation, any Acceleration Premium Obligation, but excluding Fees and
Charges, with the application of such Proceeds to be made by each Secured
Party as directed in the applicable Bank Documents, Note Agreement or
Additional Note Agreement, or if not so directed, as determined by each
Secured Party in its sole discretion.
(c) Notwithstanding anything herein to the contrary, any amounts
distributed for application to any Grantor's liabilities with respect to any
such undrawn Letters of Credit shall be held by the Agent and the Lender
Banks as collateral security for such liabilities until a drawing thereon, at
which time such collateral shall be applied to such liabilities. If Letters
of Credit constituting part of the Bank Credit Obligations expire without
having been drawn upon in full, the undrawn portion shall be excluded from
the Bank Credit Obligations for purposes of Section 11(a) and (b), all as
though such undrawn portion had never existed. If distributions have
previously been made under Section 11(a) and (b) with respect to Letters of
Credit constituting part of the Bank Credit Obligations which expire without
having been drawn upon in full, the amounts due each Secured Party out of
such distribution shall be redetermined by excluding the undrawn amount of
such expired Letters of Credit from the calculations under such Sections and
if a redetermination reveals that there has been an overpayment to any
Secured Party, each Secured Party which received such an overpayment shall
pay to those other Secured Parties who were underpaid in respect of such
distribution the amount of the underpayment.
(d) Payments by the Collateral Agent in respect of (i) the Bank
Credit Obligations shall be made to the Lender Banks in accordance with the
Bank Credit Agreement; (ii) the Senior Note Obligations shall be made as
directed in writing by the Noteholder or the Additional Noteholder, as the
case may be, to whom such Senior Note Obligations are owed; and (iii) Hedging
Exposure shall be made as directed by the Lender Bank to which such is owed.
SECTION 12. PREFERENTIAL PAYMENTS AND SPECIAL TRUST ACCOUNT.
(a) The Collateral Agent shall give each Secured Party a written
notice (a "NOTICE OF SPECIAL DEFAULT") promptly after being notified in
writing by a Secured Party that a Special Event of Default has occurred.
After the receipt of such Notice of Special Default, all Preferential
Payments other than those payments received pursuant to Section 11(b) shall
be deposited into the Special Trust Account. Each Secured Party agrees that
no Event of Default shall occur as a result of payments so made on a timely
basis to the Collateral Agent.
(b) If (i) such Special Event of Default is waived by the Required
Lender Banks under the Bank Credit Agreement or the Required Noteholders or the
Required Additional Noteholders, if any, or both, as the case may be, and if no
other Event of Default has occurred
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and is continuing, (ii) such Special Event of Default is cured by the
Grantors or by any amendment of the Bank Credit Agreement, the Note Agreement
or any Additional Note Agreement, as the case may be, and if no other Event
of Default has occurred and is continuing or (iii) the Secured Obligations
have not been accelerated and the Required Secured Parties have not
instructed the Collateral Agent to seek the appointment of a receiver,
commence litigation against any Grantor, liquidate the Collateral, commence a
Bankruptcy Proceeding against any Grantor, seize Collateral, or exercise
other remedies of similar character prior to the 90th day following such
Special Event of Default, the Collateral Agent thereupon shall return all
amounts, together with their pro rata share of interest earned thereon, held
in the Special Trust Account representing payment of any Secured Obligations
to the Secured Party initially entitled thereto, and no payments thereafter
received by a Secured Party shall constitute a Preferential Payment by reason
of such cured or waived Special Event of Default. No payment returned to a
Secured Party for which such Secured Party has been obligated to make a
deposit into the Special Trust Account shall thereafter ever be characterized
as a Preferential Payment. If the Special Event of Default is an Event of
Default under the terms of the Bank Credit Agreement, the Note Agreement or
any Additional Note Agreement, the Collateral Agent shall not return any
payments to the Secured Parties pursuant to (i) above unless the Required
Lender Banks under the Bank Credit Agreement or the Required Noteholders or
the Required Additional Noteholders, if any, have waived such Special Event
of Default.
(c) Each Secured Party agrees that upon the occurrence of a Special
Event of Default it shall (i) promptly notify the Collateral Agent of the
receipt of any Preferential Payments, (ii) hold such amounts in trust for the
Secured Parties and act as agent of the Secured Parties during the time any such
amounts are held by it, and (iii) deliver to the Collateral Agent such amounts
for deposit into the Special Trust Account.
(d) If (i) an Event of Default has occurred and has not been waived or
cured within 90 days after the occurrence thereof, (ii) the Secured Obligations
have been accelerated or (iii) the Required Secured Parties have instructed the
Collateral Agent to seek the appointment of a receiver, commence litigation
against any Grantor, liquidate the Collateral, commence a Bankruptcy Proceeding
against any Grantor, seize Collateral, or exercise other remedies of similar
character, then all funds, together with interest earned thereon, held in the
Special Trust Account and all subsequent Preferential Payments shall be applied
in accordance with the provisions of Section 11(a) above. Any Secured Party
which is aware of the same, shall give the Collateral Agent written notice of
any Event of Default which has occurred and which has not been waived or cured
within 90 days after the occurrence thereof, PROVIDED that failure to give any
such notice shall not modify, amend or otherwise prejudice or affect the rights
of any Secured Party hereunder.
SECTION 13. INVALIDATED PAYMENTS. If any amount distributed by the
Collateral Agent to a Secured Party in accordance with the provisions of this
Agreement is subsequently required to be returned or repaid by the Collateral
Agent or such Secured Party to any Grantor or any Affiliate thereof or their
respective representatives or successors in interest, whether by court order,
settlement or otherwise (a "REPAYMENT EVENT"), the Collateral Agent shall
thereafter apply proceeds received in a manner consistent with the terms of this
Agreement such that all Secured Parties receive such proportion of the Proceeds
as would have been received had the original payment which gave rise to such
Repayment Event not occurred. If a Repayment Event occurs
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which results in the Collateral Agent being required to return or repay any
amount distributed by it under this Agreement, the Secured Party to which
such amount was distributed shall, promptly upon its receipt of a notice
thereof from the Collateral Agent, pay the Collateral Agent such amount;
PROVIDED that, if any Secured Party shall fail to promptly pay such amount to
the Collateral Agent, the Collateral Agent may deduct such amount from any
amounts payable thereafter to such Secured Party under this Agreement.
SECTION 14. APPOINTMENT OF COLLATERAL AGENT. Each Secured Party
hereby irrevocably (subject to Section 18(i)) appoints, designates and
authorizes the Collateral Agent to take such action on its behalf under the
provisions of this Agreement and to exercise such powers and perform such
duties as are expressly delegated to it by the terms of this Agreement,
together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement, the Collateral Agent shall not have any duties or responsibilities
except those expressly set forth herein, nor shall the Collateral Agent have
or be deemed to have any fiduciary relationship with any Lender Bank, any
Noteholder or Additional Noteholders, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Collateral Agent.
SECTION 15. DECISIONS RELATING TO ADMINISTRATION AND EXERCISE OF
REMEDIES VESTED IN THE REQUIRED SECURED PARTIES.
(a) The Collateral Agent agrees that it will not release Liens or
Collateral except as required hereunder or commence Enforcement without the
direction of the Required Secured Parties. The Collateral Agent agrees to
administer this Agreement and the Collateral and to make such demands and
give such notices under this Agreement as the Required Secured Parties may
request, and to take such action to enforce this Agreement and to realize
upon, collect and dispose of the Collateral or any portion thereof as may be
directed by the Required Secured Parties. The Collateral Agent shall not be
required to take any action that is in the Opinion of Counsel contrary to law
or to the terms of this Agreement, or that would in the Opinion of Counsel
subject it or any of its officers, employees, agents or directors to
liability, and the Collateral Agent shall not be required to take any action
under this Agreement, unless and until the Collateral Agent shall be
indemnified to its reasonable satisfaction by one or more of the Secured
Parties against any and all loss, cost, expense or liability in connection
therewith.
(b) Each Party agrees that the Collateral Agent shall act as the
Required Secured Parties may request (regardless of whether any individual
Party or Secured Party agrees, disagrees or abstains with respect to such
request), that the Collateral Agent shall have no liability for acting in
accordance with such request and that no Directing Party or Non-Directing
Party shall have any liability to any Non-Directing Party or Directing Party,
respectively, for any such request. The Collateral Agent shall give prompt
notice to the Non-Directing Parties of action taken pursuant to the
instructions of the Required Secured Parties to enforce this Agreement;
PROVIDED, HOWEVER, that the failure to give any such notice shall not impair
the right of the Collateral Agent to take any such action or the validity or
enforceability under this Agreement of the action so taken. Notwithstanding
anything herein to the contrary, the Required Secured Parties shall agree to
release the Collateral from the security interests granted for the benefit of
any Non-Directing Party only if the Collateral Agent is concurrently
releasing the
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security interest granted with respect to such Collateral for all Secured
Parties having a security interest in such Collateral.
(c) Each Party agrees that the only right of a Non-Directing Party
under this Agreement is for Secured Obligations held by such Non-Directing Party
to be secured by the Collateral for the period and to the extent provided
therein and in this Agreement and to receive a share of the proceeds of the
Collateral, if any, to the extent and at the time provided in this Agreement.
(d) The Collateral Agent may at any time request directions from the
Required Secured Parties as to any course of action or other matter relating
hereto or relating to this Agreement. Except as otherwise provided in this
Agreement, directions given by the Required Secured Parties to the Collateral
Agent hereunder shall be binding on all Secured Parties, including all
Non-Directing Parties, for all purposes. If the Collateral Agent does not
receive directions from the Required Secured Parties in any instance, it shall
not be obligated to do anything.
(e) Nothing contained in this Agreement shall affect the rights of any
Party to give any other Party notice of any default, accelerate or make demand
for payment of their respective Secured Obligations under the Financing
Agreements or collect payment thereof other than through a realization on or in
respect of the Collateral or any part or portion thereof, nor shall anything
contained in this Agreement be deemed or construed to affect the rights of any
Party to administer, modify, waive or amend any term or provision of any
Financing Agreement to which it and any Grantor is a party, other than this
Agreement or any other security document securing the Secured Obligations. If a
Party (upon authorization of the Required Secured Parties) instructs the
Collateral Agent to take any action, commence any proceedings or otherwise
proceed against the Collateral or enforce this Agreement, and such action or
proceedings are or may be defective without the joinder of other Parties as
parties, then all other Parties shall join in such actions or proceedings. Each
Party agrees not to take any action to enforce any term or provision of this
Agreement or to enforce any of its rights in respect of the Collateral except
through the Collateral Agent in accordance with this Agreement.
(f) Any Secured Party which has actual knowledge of an Event of
Default, or facts which indicate that an Event of Default has occurred, shall
deliver to the Collateral Agent a written statement describing such Event of
Default or facts. Failure to do so, however, does not constitute a waiver of
such Event of Default by the Secured Parties.
SECTION 16. INFORMATION. If the Collateral Agent proceeds to enforce
this Agreement or to collect, sell, otherwise dispose of or take any other
action with respect to any of such agreements or the Collateral or any portion
thereof or proposes to take any other action pursuant to or contemplated by this
Agreement, the Parties hereto agree as follows:
(a) The Bank Agent shall (i) promptly from time to time, upon the
written request of the Collateral Agent, notify the Collateral Agent of the
outstanding Bank Credit Obligations owing to the Issuing Lender, the Bank Agent
and the Lender Banks as at such date as the Collateral Agent may specify; and
(ii) promptly from time to time thereafter notify the Collateral Agent of any
payment received by the Lender Banks to be applied to satisfy Bank Credit
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Obligations. The Lender Banks shall certify as to such amounts and the
Collateral Agent shall be entitled to rely conclusively upon such
certification.
(b) The Bank Lenders (or any agent acting on behalf of such Bank
Lenders) shall (i) promptly from time to time, upon the written request of the
Collateral Agent, notify the Collateral Agent of the outstanding Bank Credit
Obligations owing to such Bank Lenders as at such date as the Collateral Agent
may specify; and (ii) promptly from time to time thereafter notify the
Collateral Agent of any payment received by such Bank Lenders to be applied to
satisfy Bank Credit Obligations. The Bank Lenders shall certify as to such
amounts and the Collateral Agent shall be entitled to rely conclusively upon
such certification.
(c) Each Noteholder shall (i) promptly from time to time, upon the
written request of the Collateral Agent, notify the Collateral Agent of the
outstanding Senior Note Obligations owed to such Noteholder as at such date as
the Collateral Agent may specify; (ii) promptly from time to time, upon the
written request of the Collateral Agent, notify the Collateral Agent of the
amount that would be payable as a "Make Whole Amount" under Section 8.6 of the
Note Agreement if necessary for a payment relating to the sharing of Proceeds
and (iii) promptly from time to time thereafter, notify the Collateral Agent of
any payment received thereafter by such Noteholder to be applied to the
principal of or interest or "Make Whole Amount" on the Senior Note Obligations
owing to such Noteholder. Each Noteholder shall certify as to such amounts and
the Collateral Agent shall be entitled to rely conclusively upon such
certification.
(d) Each Additional Noteholder shall (i) promptly from time to time,
upon the written request of the Collateral Agent, notify the Collateral Agent of
the outstanding Senior Note Obligations owed to such Additional Noteholder as at
such date as the Collateral Agent may specify; (ii) promptly from time to time,
upon the written request of the Collateral Agent, notify the Collateral Agent of
the amount that would be payable as a "Make Whole Amount" under any Additional
Note Agreements if necessary for a payment relating to the sharing of Proceeds
and (iii) promptly from time to time thereafter, notify the Collateral Agent of
any payment received thereafter by such Additional Noteholder to be applied to
the principal of or interest or "Make Whole Amount" on the Senior Note
Obligations owing to such Additional Noteholder. Each Additional Noteholder
shall certify as to such amounts and the Collateral Agent shall be entitled to
rely conclusively upon such certification.
(e) Each Lender Bank party to a Hedging Transaction shall (i) promptly
from time to time, upon the written request of the Collateral Agent, notify the
Collateral Agent of the notional amount under such Hedging Transaction and the
amount payable by any Grantor upon early termination of such Hedging Transaction
at the date of termination as fixed by such Interest Rate Protection Agreement
and (ii) promptly from time to time thereafter notify the Collateral Agent of
any payment received by such Lender Bank to be applied to amounts due upon early
termination of such Hedging Transaction. Such Lender Bank shall certify as to
such amounts and the Collateral Agent shall be entitled to rely conclusively
upon such certification.
(f) Each Lender Bank party to any Letter of Credit shall (i) promptly
from time to time, upon the written request of the Collateral Agent, notify the
Collateral Agent of the Letter of Credit Liability applicable to such Letter of
Credit and (ii) promptly from time to time thereafter notify the Collateral
Agent of any payment received by such Lender Bank to be applied to
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amounts due under such Letter of Credit. Such Lender Bank shall certify as to
such amounts and the Collateral Agent shall be entitled to rely conclusively
upon such certification.
SECTION 17 ADDITIONAL PARTIES. (a) If any Grantor creates or otherwise
acquires any direct Subsidiary, then Parent shall cause:
(i) such Subsidiary (if a Domestic Subsidiary) and each
existing Grantor to execute and deliver to the Collateral Agent an
instrument of joinder in the form of Exhibit D hereto by which each
such Subsidiary agrees to be bound by the terms of this Agreement,
together with a supplement to Exhibit A updating the information
therein with respect to such new Grantor. Each party hereto agrees that
Exhibit A shall be deemed amended thereby;
(ii) pledge or cause to be pledged, all capital stock of any
such Domestic Subsidiary and 60% of the voting capital stock of any
such Material Foreign Subsidiary by delivering to the Collateral Agent
a duly executed Pledged Securities Supplement identifying the
additional shares which are being pledged with any certificates,
accompanied by duly executed stock powers or other instruments of
transfer or assignment undated in blank for each certificate, all in
form and substance satisfactory to the Collateral Agent. Each Grantor
hereby authorizes the Collateral Agent to attach each Pledged
Securities Supplement to this Agreement and agrees that all shares
listed on any Pledged Securities Supplement delivered to the Collateral
Agent shall for all purposes hereunder constitute Pledged Securities;
and
(iii) any such Domestic Subsidiary to execute and deliver such
financing statements on Form UCC-1 executed by such Domestic Subsidiary
as the Agent may request.
Upon delivery of any instrument of joinder to and acceptance thereof by
the Collateral Agent, notice of which acceptance is hereby waived by Grantors,
each such additional Grantor shall be as fully a party hereto as if such Grantor
were an original signatory hereof. Each Grantor expressly agrees that its
Secured Obligations and the liens upon its Property granted herein shall not be
affected or diminished by the addition or release of additional Grantors
hereunder, nor by any election of the Secured Parties not to cause any Domestic
Subsidiary to become an additional Grantor hereunder. This Agreement shall be
fully effective as to any Grantor who is or becomes a party hereto regardless of
whether any other Person becomes or fails to become or ceases to be a Grantor
hereunder.
(b) Provided that it is permitted to do so by the terms of the
Financing Agreements, any Grantor may enter into one or more Additional Note
Agreements and, pursuant thereto, incur additional Senior Debt. The Senior Debt
outstanding under such Additional Note Agreements may be secured by the
Collateral as provided herein; PROVIDED that, at the time any Grantor enters
into any such Additional Note Agreements, each Additional Noteholder party to
such Additional Note Agreements shall execute and deliver an instrument of
joinder in the form of Exhibit E hereto by which each such Additional Noteholder
agrees to be bound by the terms of this Agreement; PROVIDED FURTHER that at the
time of the incurrence of such additional Senior Debt and after giving effect
thereto, no Default or Event of Default shall have occurred and be
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continuing and the Grantors should be able to incur at least $1.00 of
additional Senior Debt under the terms of the Additional Note Agreements. In
addition, any bank becoming a party to the Bank Loan Agreement shall execute
and deliver an instrument of joinder in the form of Exhibit E hereto.
SECTION 18. DISCLAIMERS, INDEMNITY, SUCCESSOR COLLATERAL AGENT, ETC.
(a) The Collateral Agent may execute any of its duties under this
Agreement by or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel (including in-house counsel) concerning all
matters pertaining to such duties. The Collateral Agent shall not be responsible
for the negligence or misconduct of any agent or attorney-in-fact that it
selects with reasonable care.
(b) Neither the Collateral Agent nor any of its employees shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or the transactions contemplated hereby (except
for its own or their gross negligence or willful misconduct), or (ii) be
responsible in any manner to any of the Secured Parties for any recital,
statement, representation or warranty made by any Grantor, or any officer
thereof, contained in this Agreement or in any certificate, report, statement or
other document referred to or provided for in, or received by the Collateral
Agent under or in connection with, this Agreement or the validity,
effectiveness, genuineness, enforceability, sufficiency of this Agreement or for
any failure of any Grantor to perform its obligations hereunder or thereunder.
Neither the Collateral Agent nor any of its employees shall be under any
obligation to any Lender Bank, the Issuing Lender, any Noteholder or any
Additional Noteholders to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or to inspect the properties, books or records, of any Grantor.
(c) The Collateral Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex, statement or other
document 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 (but not including counsel to any Grantor), independent accountants and
other experts selected by the Collateral Agent. The Collateral Agent shall be
fully justified in failing or refusing to take any action under this Agreement
unless it shall first receive such advice or concurrence by the Required Secured
Parties customarily and reasonably acceptable to the Collateral Agent. The
Collateral Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement in accordance with a request or
consent of the Required Secured Parties and such request and any action taken or
failure to act pursuant thereto shall be binding upon all of the Secured
Parties.
(d) The Collateral Agent shall not be deemed to have knowledge or
notice of the occurrence of any Event of Default or Special Event of Default,
unless the Collateral Agent shall have received written notice from a Lender
Bank, a Noteholder, any Additional Noteholders or any Grantor referring to this
Agreement, describing such Event of Default or Special Event of Default, and
stating that such notice is a "notice of default". The Collateral Agent shall
take such action with respect to such Event of Default or Special Event of
Default as may be requested by the Required Secured Parties in accordance with
Section 15; PROVIDED, HOWEVER,
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that unless and until the Collateral Agent has received any such request, the
Collateral Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Event of Default or
Special Event of Default, as it shall deem advisable or in the best interest
of the Secured Parties.
(e) The Collateral Agent shall have no obligations with respect to nor
be held responsible for supervising, enforcing or policing the Grantor's
compliance with Section 4(q) with respect to the Assignment of Government
Contracts.
(f) Each Lender Bank and each Noteholder acknowledges that the
Collateral Agent-Related Persons has not made any representation or warranty to
it, and that no act by the Collateral Agent hereinafter taken, including any
review of the affairs of any Grantor and its Subsidiaries, shall be deemed to
constitute any representation or warranty by the Collateral Agent to any Lender
Bank or Noteholder or Additional Noteholder. Each Lender Bank and each
Noteholder or Additional Noteholder acknowledges that it has, independently and
without reliance upon the Collateral Agent and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of any Grantor and its Subsidiaries, and
made its own decision to enter into this Agreement and to extend credit to any
Grantor. Each Lender Bank and Noteholder or Additional Noteholder also
represents that it will, independently and without reliance upon the Collateral
Agent-Related Persons 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
to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of any Grantor. Except for notices, reports and other documents
expressly herein required to be furnished to the Secured Party by the Collateral
Agent, the Collateral Agent shall not have any duty or responsibility to provide
any Secured Party with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of any Grantor which may come into the possession of any of the
Collateral Agent-Related Persons.
(g) Each of the Secured Parties severally agrees (i) to reimburse the
Collateral Agent in accordance with its PRO RATA share for any expenses incurred
by the Collateral Agent, including, without duplication of legal services
rendered, reasonable fees and disbursements of counsel to the Collateral Agent
evidenced by reasonable and customary computer back-up detail, arising out of or
as a result of the execution and delivery of this Agreement or the performance
by the Collateral Agent pursuant thereto of its obligations thereunder or in
connection of the enforcement or protection of the rights of the Collateral
Agent and the Secured Parties hereunder, in each case to the extent that the
foregoing shall not have been reimbursed by any Grantor or directly by one or
more of the Secured Parties or paid from the proceeds of the Collateral as
provided herein and (ii) to the extent not reimbursed by any Grantor or directly
by one or more of the Secured Parties or paid from the proceeds of the
Collateral, to indemnify and hold harmless the Collateral Agent and the
Collateral Agent-Related Persons in accordance with its pro rata share, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against the
Collateral Agent in its capacity as the Collateral Agent in any way relating to
or arising out of this Agreement or any action taken
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or omitted by them under this Agreement including, without limitation, after
the Collateral Agent has given notice pursuant to the second to the last
sentence of Section 18(i), PROVIDED that no Secured Party shall be liable to
the Collateral Agent or any Collateral Agent-Related Person for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from any action
taken by the Collateral Agent (1) that is neither (x) reasonably related to
protecting the interest of the Secured Parties nor (y) approved or directed
by the Required Secured Parties, or (2) results from the gross negligence or
willful misconduct of any Collateral Agent Related Person.
(h) Bank of America and its affiliates may make loans to, issue letters
of credit for the account of, accept deposits from, acquire equity interests in
and generally engage in any kind of banking, trust, financial advisory,
underwriting or other business with any Grantor and its Subsidiaries and
Affiliates as though Bank of America were not the Collateral Agent hereunder and
without notice to or consent of the Secured Parties. The Secured Parties
acknowledge that, pursuant to such activities, Bank of America or its
subsidiaries may receive information regarding any Grantor or its Subsidiaries
(including information that may be subject to confidentiality obligations in
favor of any Grantor or such Pledged Subsidiary) and acknowledge that the
Collateral Agent shall be under no obligation to provide such information to
them. With respect to its loans to any Grantor, Bank of America shall have the
same rights and powers under this Agreement as any other Lender Bank and may
exercise the same as though it were not the Collateral Agent, and the terms
"Lender Bank" and "Lender Banks" and "Issuing Lender" include Bank of America in
its individual capacity.
(i) The Collateral Agent may resign at any time by giving at least
30 days' notice thereof to the Parties and the Grantors (such resignation to
take effect upon the earlier of (i) acceptance by a successor Collateral
Agent of any appointment as the Collateral Agent hereunder and (ii) the
expiration of such 30 day period whether or not a successor collateral agent
has been appointed) and the Collateral Agent may be removed as the Collateral
Agent at any time by either (i) the Required Lender Banks, (ii) the Required
Noteholders or (iii) the Required Additional Noteholders, in each case with
notice to the Grantors. In the event of any such resignation or removal of
the Collateral Agent, the Required Secured Parties shall thereupon have the
right to appoint a successor Collateral Agent which is not a Secured Party.
If no successor Collateral Agent shall have been so appointed by the Required
Secured Parties and shall have accepted such appointment within 30 days after
the notice of the intent of the Collateral Agent to resign or the removal of
the Collateral Agent, then the retiring Collateral Agent may, on behalf of
the other Parties, appoint a successor Collateral Agent. Any successor
Collateral Agent appointed pursuant to this clause shall be a commercial bank
or other financial institution organized under the laws of the United States
of America or any state thereof having (1) a combined capital and surplus of
at least $250,000,000 and (2) a rating upon its long-term senior unsecured
indebtedness of "A-2" or better by Standard & Poor's Corporation or "A-2" or
better by Xxxxx'x Investors Service, Inc.. Notwithstanding the foregoing, in
the event (y) the Collateral Agent shall have received a court order
requiring that it resign as Collateral Agent or (z) the Collateral Agent
shall have received a written opinion of independent outside counsel
reasonably acceptable to the Secured Parties holding (or representing) more
than 51% of the outstanding principal amount of the Senior Notes that the
performance by the Collateral Agent of its duties as Collateral Agent
constitutes a conflict of interest, then in either such event, the Collateral
Agent shall give written notice of such event to the Parties and the
Collateral Agent
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may resign on the earlier of the 30th day following such notice or the date
on which a successor Collateral Agent has accepted appointment hereunder.
With regard to any such conflict of interest or perceived conflict of
interest, the Parties agree to act in a commercially reasonable manner in
addressing any such conflict of interest.
(j) Upon the acceptance by a successor Collateral Agent of any
appointment as the Collateral Agent hereunder, such successor Collateral
Agent shall thereupon succeed to and, become vested with all the rights,
powers, privileges and duties of the retiring or removed Collateral Agent.
The retiring or removed Collateral Agent shall be discharged from its duties
and obligations hereunder upon the appointment of the successor Collateral
Agent. After any retiring or removed Collateral Agent's resignation or
removal hereunder as the Collateral Agent, the provisions of this Section 18
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 the Collateral Agent.
SECTION 19. CONTINUING AGREEMENT. This Agreement shall be a continuing
agreement in every respect and subject to Section 21 below shall remain in full
force and effect until all of the Secured Obligations, principal, premium, if
any, and interest, and all other amounts then due and payable under any of the
Financing Agreements have been fully paid and satisfied in Cash, including
without limitation, debit/credit book entries and any commitments of any Secured
Party to extend any credit to any Grantor under the Bank Credit Agreement shall
have terminated. Upon such termination of this Agreement, the Collateral Agent
shall, upon the request and at the expense of the Grantors, forthwith release
all its liens and security interests hereunder.
SECTION 20. MISCELLANEOUS. (a) Subject to Section 21, this Agreement
and the provisions hereof may be changed, discharged or terminated only by an
instrument in writing signed by the Grantors and the Collateral Agent (upon
the direction of the Required Secured Parties). This Agreement shall create a
continuing security interest in the Collateral and shall be binding upon the
Grantors, their successors and assigns and shall inure, together with the
rights and remedies of the Secured Parties hereunder, to the benefit of the
Secured Parties and their respective successors and assigns which are
permitted under the Note Agreement, the Additional Note Agreements and the
Bank Credit Agreement; PROVIDED, HOWEVER, that no Grantor may assign its
rights or delegate its duties hereunder without the Collateral Agent's prior
written consent. Each Grantor hereby releases the Collateral Agent from any
liability for any act or omission relating to the Collateral or this
Agreement, except the Collateral Agent's gross negligence or willful
misconduct.
(b) Except as otherwise specified herein, all notices hereunder shall
be in writing (including telecopy) and shall be given to the relevant party at
its address or telecopier number set forth below, or such other address or
telecopier number as such party may hereafter specify by notice to the other
given by United States certified or registered mail, by overnight air courier,
by telecopy or by other telecommunication device capable of creating a written
record of such notice and its receipt. Notices given by telecopy shall be
confirmed in writing within 24 hours by overnight air courier at the address for
the relevant party provided below. Notices hereunder shall be addressed:
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To the Grantors at:
Sunrise Medical, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxx X. Xxxxxx
Senior Vice President and
Chief Financial Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
To the Collateral Agent at:
Bank of America National Trust and Savings Association
Floor
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, , Xxxxxxxxxx 00000
Agency Management #10831
Attention: Xxxxxxx Xxxxxx
Vice President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
To the Bank Agent and the Lender Banks at their respective addresses
and telecopy numbers set forth in the Bank Credit Agreement
To the Noteholders at their respective addresses for notices set forth
in the Note Agreement
To the Additional Noteholders, at their respective addresses for
notices set forth in the Additional Note Agreements.
Each such notice, request or other communication shall be effective
upon receipt.
(c) In the event that any provision hereof shall be deemed to be
invalid by reason of the operation of any law or by reason of the interpretation
placed thereon by any court, this Agreement shall be construed as not containing
such provision, but only as to such jurisdictions where such law or
interpretation is operative, and the invalidity of such provision shall not
affect the validity of any remaining provision hereof, and any and all other
provisions hereof which are otherwise lawful and valid shall remain in full
force and effect.
(d) This Agreement shall be deemed to have been made in the State of
California and shall be governed by and construed in accordance with the laws of
the State of California, without regard to principles of conflicts of laws. All
terms which are used in this Agreement which are defined in the Code shall have
the same meanings herein as said terms do in the Code unless this Agreement
shall otherwise specifically provide. The headings in this instrument are for
convenience of reference only and shall not limit or otherwise affect the
meaning of any provision hereof.
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(e) The Collateral Agent hereby disclaims any representation or
warranty to the Secured Parties concerning the perfection of the security
interest granted hereunder or in the value of any of the Collateral.
(f) Each of the Grantors and the Collateral Agent hereby, to the
fullest extent permitted by law, waives trial by jury in any action brought
under or in connection with this Agreement or any of the documents or
instruments executed in connection herewith.
(g) This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each constituting an
original, but all together one and the same instrument.
SECTION 21. RELEASE OF COLLATERAL.
(a) This Agreement and all Collateral of Grantors hereunder shall be
released upon the earlier of (i) satisfaction of the Collateral Release
Conditions, and (ii) when all Secured Obligations have been paid in full in cash
or otherwise performed in full and when no portion of any commitment remains
outstanding under the Bank Credit Agreement. The Collateral Agent is further
authorized and directed to release Liens on any item of Collateral which is sold
or otherwise disposed of in accordance with the terms of the Financing
Agreements (and the Collateral Agent is authorized to rely on a certificate of
an officer of the borrower to the effect that any such sale or disposition is
permitted under the terms of the Financing Agreements) or if the sale or other
disposition is consented to by the Required Lender Banks (if consent is required
under the Bank Documents), the Required Noteholders (if consent is required
under the Note Agreement) and/or the Required Additional Noteholders (if consent
is required under the Additional Note Agreement). Upon such release, the
Collateral Agent shall return any Pledged Collateral to Grantors, or to the
Person or Persons legally entitled thereto, and shall endorse, execute, deliver,
record and file all instruments and documents, and do all other acts and things,
reasonably required for the return of the Collateral to the Grantors, or to the
Person or Persons legally entitled thereto, and to evidence or document the
release of Secured Parties' interests arising under this Agreement, all as
reasonably requested by, and at the sole expense of, the Grantors.
SECTION 22. GRANTORS' WAIVERS AND CONSENTS.
(a) Each Grantor shall be jointly and severally liable for the
repayment of all Secured Obligations.
(b) Each Grantor agrees that no Secured Party shall have any
responsibility to inquire into the apportionment, allocation or disposition of
any Proceeds as among the Grantors.
(c) For the purpose of implementing the Financing Agreements, each
Grantor hereby irrevocably appoints each other Grantor as its agent and
attorney-in-fact for all purposes of the Financing Agreements, including without
limitation the giving and receiving of notices and other communications.
(d) Each Grantor acknowledges that the handling of the Collateral on a
joint basis as set forth in this Agreement is solely an accommodation to
Grantors and is done at their request.
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Each Grantor agrees that no Secured Party shall incur any liability to any
Grantor as a result thereof. To induce the Secured Parties to enter into this
Agreement, and in consideration thereof, each Grantor hereby agrees to
indemnify each Secured Party and hold each Secured Party harmless from and
against any and all liabilities, expenses, losses, damages and/or claims of
damage or injury asserted against any Secured Party by any Grantor or by any
other Person arising from or incurred by reason of the structuring of this
Agreement as herein provided, reliance by any Secured Party on any requests
or instructions from any Grantor, or any other action taken by any Secured
Party hereunder, except to the extent resulting from the gross negligence or
willful misconduct of any Secured Party. This Section shall survive
termination of this Agreement.
(e) Each Grantor represents and warrants to the Secured Parties that
the request for joint handling of the Collateral hereunder was made because the
Grantors are engaged in related operations. Each Grantor expects to derive
benefit, directly or indirectly, from such availability because the successful
operation of Grantors is dependent on the continued successful performance of
the functions of the group.
(f) Each Grantor represents and warrants to the Secured Parties that
(i) it has established adequate means of obtaining from each other Grantor on a
continuing basis financial and other information pertaining to the business,
operations and condition (financial and otherwise) of each other Grantors and
their respective property, and (ii) each Grantor now is and hereafter will be
completely familiar with the business, operations and condition (financial and
otherwise) of each other Grantor, and its property. Each Grantor hereby waives
and relinquishes any duty on the part of any Secured Party to disclose to such
Grantor any matter, fact or thing relating to the business, operations or
condition (financial or otherwise) of any other Grantor, or the property of any
other Grantor, whether now or hereafter known by any Secured Party during the
life of this Agreement.
(g) Each Grantor acknowledges that its Secured Obligations may derive
from value provided directly to another Person and, in full recognition of that
fact, each Grantor consents and agrees that the any Secured Party may, at any
time and from time to time, without notice to, or demand on, or the agreement
of, such Grantor, and without affecting the enforceability or security of the
Financing Agreements: (i) with the agreement of any other Grantor, supplement,
modify, amend, extend, renew, accelerate, or otherwise change the time for
payment or the terms of the Secured Obligations or any part thereof, including
any increase or decrease of the rate(s) of interest thereon; (ii) with the
agreement of any other Grantor, supplement, modify, amend or waive, or enter
into or give any agreement, approval or consent with respect to, the Secured
Obligations or any part thereof or any of the Financing Agreements or any
additional security or guaranties, or any condition, covenant, default, remedy,
right, representation or term thereof or thereunder; (iii) with the agreement of
any other Grantor, accept new or additional instruments, documents or agreements
in exchange for or relative to any of the Financing Agreements or the Secured
Obligations or any part thereof; (iv) accept partial payments on the Secured
Obligations; (v) with the agreement of any other Grantor, receive and hold
additional security or guaranties for the Secured Obligations or any part
thereof; (vi) release, reconvey, terminate, waive, abandon, subordinate,
exchange, substitute, transfer and enforce any security or guaranties, and apply
any security and direct the order or manner of sale thereof as the Secured
Parties in their sole and absolute discretion may determine; (vii) release any
party or any guarantor from any
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personal liability with respect to the Secured Obligations or any part
thereof; (viii) settle, release on terms satisfactory to the Secured Parties
and any other Grantor or by operation of applicable laws or otherwise
liquidate or enforce any Secured Obligations and any security or guaranty in
any manner, consent to the transfer of any security and bid and purchase at
any sale; and/or (ix) consent to the merger, change or any other
restructuring or termination of the corporate existence of any other Grantor
or any other Person, and correspondingly restructure the Secured Obligations,
continuing existence of any Lien under any other Financing Agreement to which
any Grantor is a party or the enforceability hereof or thereof with respect
to all or any part of the Secured Obligations.
Each Grantor expressly waives any right to require any Secured Party
to marshal assets in favor of any Grantor, any other Party or any other
Person or to proceed against any other Grantor or any other Party or any
Collateral provided by any other Grantor or any other Party, and agrees that
any Secured Party may proceed against Grantors and/or the Collateral in such
order as they shall determine in their sole and absolute discretion. Any
Secured Party may file a separate action or actions against any Grantor,
whether action is brought or prosecuted with respect to any other security or
against any other Person, or whether any other Person is joined in any such
action or actions. Each Grantor agrees that any Secured Party and any other
Grantor may deal with each other in connection with the Secured Obligations
or otherwise, or alter any contracts or agreements now or hereafter existing
between any of them, in any manner whatsoever, all without in any way
altering or affecting the obligations of such Grantor under the Financing
Agreements. Each Grantor expressly waives any and all defenses now or
hereafter arising or asserted by reason of (a) any disability or other
defense of any other Grantor or any other Party with respect to any Secured
Obligations, (b) the unenforceability or invalidity as to any other Grantor
or any other Party of the Secured Obligations, (c) the unenforceability or
invalidity of any security or guaranty for the Secured Obligations or the
lack of perfection or continuing perfection or failure of priority of any
security for the Secured Obligations, (d) the cessation for any cause
whatsoever of the liability of any Grantor or any other Party (other than by
reason of the full payment and performance of all Secured Obligations), (e)
to the extent permitted by law, any failure of any Secured Party to give
notice of sale or other disposition to any Grantor or any defect in any
notice that may be given in connection with any sale or disposition, (f) to
the extent permitted by law, any failure of any Secured Party to comply with
applicable laws in connection with the sale or other disposition of any
Collateral or other security for any Secured Obligation, including without
limitation any failure of any Secured Party to conduct a commercially
reasonable sale or other disposition of any Collateral or other security for
any obligation, (g) any act or omission of any Secured or others that
directly or indirectly results in or aids the discharge or release of any
Grantor or any other Person or the Secured Obligations or any other security
or guaranty therefor by operation of law or otherwise, (h) any law which
provides that the obligation of a surety or guarantor must neither be larger
in amount nor in other respects more burdensome than that of the principal or
which reduces a surety's or guarantor's obligation in proportion to the
principal obligation, (i) any failure of any Secured Party to file or enforce
a claim in any Bankruptcy Proceeding or other proceeding with respect to any
other Grantor, (j) the election by any Secured Party, in any Bankruptcy
Proceeding of any other Grantor, of the application or non-application of
Section 1111(b)(2) of the United States Bankruptcy Code, (k) any extension of
credit or the grant of any Lien under Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx
Bankruptcy Code in connection with the bankruptcy of any other Grantor, (l)
any use of cash collateral under Section 363 of the United States Bankruptcy
Code, or (m) any agreement or
-O-38-
stipulation with any other Grantor with respect to the provision of adequate
protection in any Bankruptcy Proceeding of any Person.
(h) In the event that all or any part of the Secured Obligations at any
time are secured by any one or more deeds of trust or mortgages creating or
granting liens on any interests in real property, each Grantor authorizes any
Secured Party, upon the occurrence of and during the continuance of any Default
or Event of Default, at their sole option, without notice or demand and without
affecting any Secured Obligations or the validity or enforceability of any Liens
of any Secured Party on any Collateral, to foreclose any or all of such deeds of
trust or mortgages by judicial or nonjudicial sale. Each Grantor expressly
waives any defenses to the enforcement of the Financing Agreements or any Liens
created or granted under the Financing Agreements or to the recovery by any
Secured Party against any other Grantor or any guarantor or any other Person
liable therefor of any deficiency after a judicial or nonjudicial foreclosure or
sale, even though such a foreclosure or sale may impair the subrogation rights
of a Grantor and may preclude a Grantor from obtaining reimbursement or
contribution from any Grantor.
(i) Notwithstanding anything to the contrary elsewhere contained herein
or in any other Loan Document to which any Grantor is a party, until final
payment of all Secured Obligations, each Grantor hereby waives with respect to
each other Grantor and their respective successors and assigns (including any
surety) and any other party any and all rights at law or in equity, to
subrogation, to reimbursement, to exoneration, to contribution, to setoff or to
any other rights that could accrue to a surety against a principal, to a
guarantor against a maker, to an accommodation party against the party
accommodated, or to a holder or transferee against a maker and which any Grantor
may have or hereafter acquire against each other Grantor or any other party in
connection with or as a result of Grantors' execution, delivery and/or
performance of this Agreement or any other Loan Document to which any Grantor is
a party. Each Grantor agrees that it shall not have or assert any such rights
against one another or their respective successors and assigns or any other
party (including any surety), either directly or as an attempted setoff to any
action commenced against any Grantor by another Grantor (as borrower or in any
other capacity) or any other party until final payment of all Secured
Obligations. Each Grantor hereby acknowledges and agrees that this waiver is
intended to benefit the Secured Parties and shall not limit or otherwise affect
Grantors' liability hereunder, under any other Loan Document to which any
Grantor is a party, or the enforceability hereof or thereof.
SECTION 22. INTERCREDITOR PROVISIONS. The Grantors are only
acknowledging, and not agreeing to, Sections 10 through 16, inclusive, of this
Agreement (the "INTERCREDITOR PROVISIONS"). The Secured Parties may, without
notice to, or the consent, of the Grantors amend, modify or waive such sections
from time to time. Each Grantor hereby acknowledges the foregoing Intercreditor
Provisions. Each Grantor agrees to be bound by the provisions thereof as they
relate to the relative rights of the Secured Parties as among such Secured
Parties; PROVIDED, HOWEVER, that nothing in the Intercreditor Provisions shall
amend, modify, change or supersede the respective terms of the Financing
Agreements as between the Secured Parties or any of them and any Grantor or any
other provisions of this Agreement. In the event of any conflict or
inconsistency between the Intercreditor Provisions and the Financing Agreements,
the Financing Agreements shall govern as between the Secured Parties thereto and
each Grantor. Each Grantor further agrees that the Intercreditor Provisions
shall not give any Grantor any substantive rights VIS A VIS any Secured Party or
the Collateral Agent and that it shall not use the violation of any
-O-39-
Intercreditor Provisions by any of the Parties hereto as a defense to the
enforcement by any Secured Party under any Financing Agreement or any other
section of this Agreement, nor assert such violation as a counterclaim or basis
for set-off or recoupment against any of them. Each Grantor further acknowledges
and agrees that the scope of the agency granted by the Intercreditor Provisions
to the Collateral Agent hereunder is strictly limited by thisa Agreement.
SECTION 23. LICENSE AND RIGHTS OF ACCESS. Grantors hereby grant to
the Secured Parties the non-exclusive, nontransferable, royalty-free right
and license to use, have access to, make copies of and affix on Inventory,
all present and future general intangibles consisting of trade secrets,
computer programs, brochure and flyer templates and designs, software,
customer lists, trademarks, trade names, patents, licenses, copyrights,
technology, processes, proprietary information, for the purpose of exercising
its rights and remedies hereunder, including to the extent necessary or
convenient to collect on any of the Collateral to market any of the
Collateral to customers or potential customers of the Grantors and/or to
otherwise dispose of or realize on such Collateral; PROVIDED, HOWEVER, that
notwithstanding any other provisions of this Agreement, the foregoing license
and rights of access shall be non-transferable.
SECTION 24. LIMITATION ON SECURITY INTERESTS IN STOCK OF FOREIGN
SUBSIDIARIES. Notwithstanding any other provision of this Agreement, no
Grantor individually, nor all Grantors collectively, shall be required to
pledge securities of any Foreign Subsidiary representing more than 60% of the
total combined voting power of all classes of stock of such Foreign
Subsidiary entitled to vote, in each case to the extent that such pledge
would constitute an investment of earnings in United States property pursuant
to Section 956 of the Internal Revenue Code of 1986, as amended from time to
time (or any successor statute) which would increase the gross income of a
Grantor under United States tax laws. Any securities of a Foreign Security in
excess of these limitations shall not be Pledged Securities hereunder.
-O-40-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
"GRANTORS"
SUNRISE MEDICAL, INC.,
By:
-----------------------------
Xxx X. Xxxxxx
Senior Vice President and
Chief Financial Officer
DYNAVOX SYSTEMS, INC.
SUNMED FINANCE INC.
SUNRISE MARIN HOLDINGS INC.
SUNRISE MEDICAL CCG INC.
SUNRISE MEDICAL HHG INC.
By:
-----------------------------
Xxx X. Xxxxxx
Treasurer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS
AGENT
By:
----------------------------
Xxxxxxx Xxxxxx
Vice President
"BANK LENDERS"
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS A LENDER
By:
----------------------------
Xxxxxxx Xxxxxxxx
(SIGNATURES CONTINUE) Vice President
-O-41-
NATIONSBANK, N.A.
By
----------------------------
Name
--------------------------
Title
-------------------------
ABN AMRO BANK NV LOS ANGELES INTERNATIONAL BRANCH
By
----------------------------
Name
--------------------------
Title
-------------------------
UNION BANK OF CALIFORNIA, N.A.
By
----------------------------
Name
--------------------------
Title
-------------------------
-O-42-
XXXXXX GUARANTY TRUST COMPANY OF NEW YORK
By
----------------------------
Name
--------------------------
Title
-------------------------
DEUTSCHE BANK AG, NEW YORK
BRANCH AND/OR CAYMEN ISLANDS
BRANCH
By
----------------------------
Name
--------------------------
Title
-------------------------
By
----------------------------
Name
--------------------------
Title
-------------------------
(SIGNATURES CONTINUE)
-O-43-
PNC BANK, NATIONAL ASSOCIATION
By
----------------------------
Name
--------------------------
Title
-------------------------
"NOTEHOLDERS"
------------------------------,
A NOTEHOLDER
By
----------------------------
Name
--------------------------
Title
-------------------------
-O-44-
-------------------------,
A NOTEHOLDER
By
----------------------------
Name
--------------------------
Title
-------------------------
ACCEPTED AND AGREED TO BY THE COLLATERAL AGENT
AS OF THE DATE FIRST ABOVE WRITTEN.
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
AS COLLATERAL AGENT
By:
--------------------------
Xxxxxxx Xxxxxx
Vice President
-O-45-
EXHIBIT A
PLACES OF BUSINESS AND
LOCATIONS OF INVENTORY
- A-1 -
EXHIBIT B
PLEDGED SECURITIES
CLASS OF STOCK AND
ISSUER AND STATE OR STOCK CERTIFICATE PERCENTAGE OF
COUNTRY OF ORGANIZATION NO(S) NUMBER OF SHARES OWNERSHIP
--------------------------------------------------------------------------------------------------
- B-1 -
EXHIBIT C
PLEDGED SECURITIES SUPPLEMENT
This Pledged Securities Supplement, dated as of ______________, is
delivered pursuant to Section 4(r) or 17(a)(ii) of the Pledge, Security,
Collateral Agency and Intercreditor Agreement referred to below. The
undersigned hereby agrees that this Pledged Securities Supplement may be
attached to the Pledge, Security, Collateral Agency and Intercreditor
Agreement, dated as of __________________ (the "INTERCREDITOR AGREEMENT", the
terms defined therein and not otherwise defined herein being used as therein
defined), made by the undersigned to Bank of America National Trust and
Savings Association, as Collateral Agent for the benefit of the Secured
Parties and that the shares listed on this Pledged Securities Supplement
shall be and become part of the Pledged Securities referred to in the
Intercreditor Agreement and shall secure all Secured Obligations. The
attached schedule shall be deemed to amend Exhibit B to the Intercreditor
Agreement.
The undersigned agree that the securities listed below shall for all
purposes constitute Pledged Securities and shall be subject to the security
interest created by the Intercreditor Agreement. The undersigned hereby
certifies that the representations and warranties set forth in Section 3 of
the Intercreditor Agreement are true and correct as to the Pledged Securities
listed herein on and as of the date hereof.
"GRANTORS"
SUNRISE MEDICAL, INC.,
By:
------------------------------
Xxx X. Xxxxxx
Senior Vice President and
Chief Financial Officer
DYNAVOX SYSTEMS, INC.
SUNMED FINANCE INC.
SUNRISE MARIN HOLDINGS INC.
SUNRISE MEDICAL CCG INC.
SUNRISE MEDICAL HHG INC.
By:
------------------------------
Xxx X. Xxxxxx
Treasurer
ACKNOWLEDGED:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
AS COLLATERAL AGENT
By
--------------------------------
Xxxxxxx Xxxxxx
Vice President
-C-1-
Issuer and state or Class of stock and
country of stock certificate Percentage of
organization No(s) Number of Shares Ownership
------------------------- ---------------------- ------------------- -----------------
-C-2-
EXHIBIT D
INSTRUMENT OF JOINDER
FOR ADDITIONAL GRANTORS
Reference is hereby made to Pledge, Security, Collateral Agency and
Intercreditor Agreement, dated as of __________________ (the "INTERCREDITOR
AGREEMENT") made by the undersigned to Bank of America National Trust and
Savings Association, as Collateral Agent for the benefit of the Secured Parties.
The undersigned has become a Domestic Subsidiary of the Parent, and as
such is required pursuant to Section 17 of the Intercreditor Agreement to become
a Grantor. The undersigned expects to realize direct and indirect benefits as a
result of the availability to Grantors of the credit facilities under the
Facility Agreements.
By this Instrument of Joinder, the undersigned agrees to become a
"Grantor" under and pursuant to Section 17 of the Intercreditor Agreement and
agrees that, upon its execution hereof, it will become a Grantor under the
Intercreditor Agreement with respect to all obligations of the Grantors
thereunder, and will be bound by all terms, conditions, and duties applicable to
a Grantor under the Intercreditor Agreement.
,
------------------------------
as an Additional Grantor
By:
--------------------------
Name:
------------------------
Title:
-----------------------
Notice Address:
------------------------------
------------------------------
------------------------------
ACKNOWLEDGED AND AGREED:
SUNRISE MEDICAL, INC.,
By:
--------------------------------
Xxx X. Xxxxxx
Senior Vice President and
Chief Financial Officer
SIGNATURES CONTINUE
- D-1 -
DYNAVOX SYSTEMS, INC.
SUNMED FINANCE INC.
SUNRISE MARIN HOLDINGS INC.
SUNRISE MEDICAL CCG INC.
SUNRISE MEDICAL HHG INC.
By:
--------------------------------
Xxx X. Xxxxxx
Treasurer
Date:
-----------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, AS COLLATERAL AGENT
By
--------------------------------
Xxxxxxx Xxxxxx
Vice President
Date:
-----------------------------
- D-2 -
EXHIBIT E
INSTRUMENT OF JOINDER
FOR ADDITIONAL NOTEHOLDERS UNDER AN ADDITIONAL NOTE AGREEMENT
OR ADDITIONAL BANK LENDERS UNDER THE BANK CREDIT AGREEMENT
Reference is hereby made to Pledge, Security, Collateral Agency and
Intercreditor Agreement, dated as of __________________ (the "INTERCREDITOR
AGREEMENT") made by the undersigned to Bank of America National Trust and
Savings Association, as Collateral Agent for the benefit of the Secured Parties.
[The undersigned Additional Noteholder has entered into Agreement dated as of
___________ with __________ and desires the Senior Note Obligations with respect
thereto to be secured by the Intercreditor Agreement.] [The undersigned
Additional Bank Lender has become a party to the Bank Credit Agreement..] The
undersigned acknowledges the terms of the Intercreditor Agreement and agrees
to be bound thereby.
,
-------------------------------------------
as an Additional Noteholder/Bank Lender
By:
--------------------------
Name:
------------------------
Title:
-----------------------
Date:
------------------------
Notice Address:
------------------------------
------------------------------
------------------------------
ACKNOWLEDGED AND AGREED:
SUNRISE MEDICAL, INC.,
By:
--------------------------
Xxx X. Xxxxxx
Senior Vice President and
Chief Financial Officer
(Signatures continue)
E-1
DYNAVOX SYSTEMS, INC.
SUNMED FINANCE INC.
SUNRISE MARIN HOLDINGS INC.
SUNRISE MEDICAL CCG INC.
SUNRISE MEDICAL HHG INC.
By:
--------------------------
Xxx X. Xxxxxx
Treasurer
Date:
------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, AS COLLATERAL AGENT
By
---------------------------
Xxxxxxx Xxxxxx
Vice President
Date:
------------------------
E-2
EXHIBIT O
-------------------------------------------------------------------------------
PLEDGE, SECURITY,
COLLATERAL AGENCY AND
INTERCREDITOR AGREEMENT
Dated as of ________________
By and among
SUNRISE MEDICAL, INC.,
SUNMED FINANCE INC.
SUNRISE MARIN HOLDINGS INC.
SUNRISE MEDICAL CCG INC.
SUNRISE MEDICAL HHG INC.
DYNAVOX SYSTEMS, INC.
as the Grantors
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
as Bank Agent,
THE BANK LENDERS PARTY HERETO,
THE NOTEHOLDERS PARTY HERETO,
and
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
as Collateral Agent
-------------------------------------------------------------------------------
SCHEDULE B
GRANTER: SUNRISE MEDICAL INC.
------------------------------ ------------------------- --------------------------- ------------------------ -------------------
DOMESTIC SUBSIDIARY OUTSTANDING SHARES SHARES OWNED BY GRANTOR PLEDGED SECURITIES % PLEDGED
------------------------------ ------------------------- --------------------------- ------------------------ -------------------
Dynavox Systems, Inc. 1 100% 1 100%
------------------------------ ------------------------- --------------------------- ------------------------ -------------------
Sunrise Medical CCG Inc. 61,559 100% 61,559 100%
------------------------------ ------------------------- --------------------------- ------------------------ -------------------
Sunrise Medical HHG Inc. 2,540 100% 2,540 100%
------------------------------ ------------------------- --------------------------- ------------------------ -------------------
SunMed Finance Inc. 1,000 100% 1,000 100%
------------------------------ ------------------------- --------------------------- ------------------------ -------------------
Sunrise Marin Holdings Inc. 100 100% 100 100%
------------------------------ ------------------------- --------------------------- ------------------------ -------------------
------------------------------ ---------------------- ------------------------------- ----------------------- ----------------
MATERIAL FOREIGN SUBSIDIARY OUTSTANDING SHARES VOTING SHARES OWNED BY GRANTOR PLEDGED SECURITIES % PLEDGED
------------------------------ ---------------------- ------------------------------- ----------------------- ----------------
Sunrise Medical Ltd. 816,325 81.6325% 489,795 60%
------------------------------ ---------------------- ------------------------------- ----------------------- ----------------
Sunrise Medical Holdings BV 40 95.23% 24 60%
------------------------------ ---------------------- ------------------------------- ----------------------- ----------------
Sunrise Medical SA 915,887 69.52% 549,532 60%
------------------------------ ---------------------- ------------------------------- ----------------------- ----------------
-1-
------------------------------ ---------------------- ------------------------------- --------------------- ---------------
MATERIAL FOREIGN SUBSIDIARY OUTSTANDING SHARES VOTING SHARES OWNED BY GRANTOR PLEDGED SECURITIES % PLEDGED
------------------------------ ---------------------- ------------------------------- --------------------- ---------------
Sunrise Medical Ltd. 183,675 18.3675% 110,205 60%
------------------------------ ---------------------- ------------------------------- --------------------- ---------------
Sopur Medizintechnik GmbH 530,000 11.7% 318,000 60%
------------------------------ ---------------------- ------------------------------- --------------------- ---------------
Sunrise Medical Holdings BV 2 4.77% 1 60%
------------------------------ ---------------------- ------------------------------- --------------------- ---------------
-2-
