<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
TLG LABORATORIES HOLDING CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2833 11-3317986
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
2120 SMITHTOWN AVENUE
RONKONKOMA, NEW YORK 11779
(516) 467-3140
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
PHILIP M. KAZIN, ESQ. COPY TO: HOWARD A. SOBEL,
GENERAL COUNSEL ESQ. NICHOLAS P. SAGGESE,
TLG LABORATORIES HOLDING KRAMER, LEVIN, NAFTALIS & ESQ.
CORP. FRANKEL MARK C. SMITH, ESQ.
2120 SMITHTOWN AVENUE 919 THIRD AVENUE SKADDEN, ARPS, SLATE,
RONKONKOMA, NEW YORK 11779 NEW YORK, NEW YORK 10022 MEAGHER & FLOM
(516) 467-3140 (212) 715-9100 300 SOUTH GRAND
AVENUE
(NAME, ADDRESS, INCLUDING ZIP LOS ANGELES,
CODE, AND TELEPHONE NUMBER, CALIFORNIA 90017
INCLUDING AREA CODE, OF AGENT (213) 687-5000
FOR SERVICE)
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
AGGREGATE AMOUNT OF
TITLE OF SECURITIES OFFERING REGISTRATION
TO BE REGISTERED PRICE(1) FEE(2)
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $1.00 par value.................. $130,000,000 $44,828.00
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee.
(2) Calculated pursuant to Rule 457(o) under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TLG LABORATORIES HOLDING CORP.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K SHOWING LOCATION IN PROSPECTUS OF
INFORMATION REQUIRED BY ITEMS IN PART I OF FORM S-1
<TABLE>
<CAPTION>
ITEM NO. LOCATION IN PROSPECTUS
-------- ----------------------
<C> <S>
1.Forepart of the Registration State-
ment and
Outside Front Cover Page of Pro-
spectus............................ Facing Page; Outside Front Cover
Page
2.Inside Front and Outside Back Cover
Pages of Prospectus................ Inside Front Cover Page, Outside
Back Cover Page
3.Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges. Prospectus Summary; Risk Factors
4.Use of Proceeds...................... Prospectus Summary; Use of Proceeds
5.Determination of Offering Price...... Outside Front Cover Page; Risk
Factors; Underwriting
6.Dilution............................. Risk Factors; Dilution
7.Selling Security Holders............. Not Applicable
8.Plan of Distribution................. Outside Cover Page; Underwriting
9.Description of Securities to be Reg-
istered ........................... Outside Cover Page; Prospectus
Summary; Risk Factors; Dividend
Policy; Capitalization;
Description of Capital Stock;
Shares Eligible for Future Sale
10.Interests of Named Experts and Coun-
sel ............................... Experts; Legal Matters
11.Information with Respect to the Reg-
istrant ........................... Outside Cover Page; Prospectus
Summary; Risk Factors; Dividend
Policy; Dilution; Selected
Historical Financial Data;
Management's Discussion and
Analysis of Financial Condition
and Results of Operations;
Business; Management; Certain
Relationships and Related
Transactions; Principal
Stockholders; Description of
Certain Indebtedness; Description
of Notes; Description of Capital
Stock; Shares Eligible for Future
Sale; Consolidated Financial
Statements
12.Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................ Not Applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 4, 1996
PROSPECTUS
, 1996
SHARES
TLG LABORATORIES HOLDING CORP.
COMMON STOCK
All of the shares of common stock, $1.00 par value per share (the "Common
Stock"), offered hereby are being sold by TLG Laboratories Holding Corp.
("Holding" or the "Company"). Of the shares of Common Stock offered
by the Company, shares are being offered for sale in the United
States and Canada by the U.S. Underwriters (the "U.S. Offering") and
shares are being offered for sale outside the United States and Canada in a
concurrent offering by the International Managers (the "International Offering"
and, together with the U.S. Offering, the "Offerings"), subject to transfers
between the U.S. Underwriters and the International Managers. See
"Underwriting."
Prior to the Offerings, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be
between $ and $ per share. See "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price.
The Company intends to apply for listing of the Common Stock on the New York
Stock Exchange, Inc. under the symbol " ."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE COMMON STOCK.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS AND TO THE
THE PUBLIC COMMISSIONS (1) COMPANY (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.............................. $ $ $
Total (3).............................. $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the several U.S. Underwriters and the
International Managers (collectively, the "Underwriters") against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the U.S. Underwriters a 30-day option to
purchase up to an aggregate of additional shares of Common Stock on the
same terms as set forth above solely for the purpose of covering over-
allotments, if any. If such option is exercised in full, the total Price to
the Public, Underwriting Discounts and Commissions, and Proceeds to the
Company will be $ , $ , and $ , respectively. See "Underwriting."
The shares of Common Stock are being offered by the several Underwriters,
when, as and if delivered to and accepted by the Underwriters against payment
therefor and subject to various prior conditions, including their right to
reject orders in whole or in part. It is expected that delivery of the
certificates representing the shares will be made in New York, New York, on or
about , 1996.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE>
[COMPANY PRODUCTS]
<PAGE>
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, INC. OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C. a Registration Statement on Form S-1 (the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered hereby. As used herein, the term "Registration Statement" means
the initial Registration Statement and any and all amendments thereto. This
Prospectus omits certain information contained in the Registration Statement
as permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement, including the exhibits
thereto. Statements herein concerning the contents of any contract or other
document are not necessarily complete and in each instance reference is made
to such contract or other document filed with the Commission as an exhibit to
the Registration Statement, each such statement being qualified by and subject
to such reference in all respects.
As a result of the Offerings, the Company will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and in accordance therewith will file reports and other information with the
Commission. Reports, registration statements, proxy statements and other
information filed by the Company with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
and at the Commission's Regional Offices: 500 West Madison Avenue, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such materials can be obtained at prescribed rates from
the Public Reference Section of the Commission, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549.
The Company intends to furnish holders of the Common Stock with annual
reports containing among other information, audited financial statements
certified by an independent public accounting firm and quarterly reports
containing unaudited condensed financial information for the first three
quarters of each fiscal year. The Company also intends to furnish such other
reports as it may determine or as may be required by law.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. As used in
this Prospectus, the term "Continuing Stockholders" collectively refers to
Brian, Dean, Neil, Ross and Steve Blechman and Stephen Welling, and the term
"Stockholders" collectively refers to the Continuing Stockholders together with
David and Jean Blechman. Unless the context otherwise requires, the term
"Company" refers to (a) Holding and, as applicable, its direct and indirect
subsidiaries, Twin Laboratories Inc. and Advanced Research Press, Inc. ("ARP"),
when used with respect to information about events occurring upon completion of
or after the Acquisition (as defined herein) or when giving pro forma effect
thereto and (b) collectively Natur-Pharma Inc., Twin Laboratories Inc., Alvita
Products, Inc., Twinlab Export Corp., Twinlab Specialty Corporation, B. Bros.
Realty Corporation and Advanced Research Press, Inc., all of which were
affiliated entities, as such entities existed prior to the consummation of the
Acquisition, when used with respect to historical information contained herein.
Except where otherwise indicated, the information in this Prospectus (i)
assumes that the over-allotment option granted to the Underwriters will not be
exercised and (ii) gives effect to a for 1 stock split with respect to the
Common Stock which will be effected prior to the consummation of the Offerings.
THE COMPANY
The Company is the leading manufacturer and marketer of brand name
nutritional supplements sold through domestic independent health food stores.
Since the Company's founding in 1968 by David and Jean Blechman, the Company
has emphasized the development and introduction of high-quality, unique
products in response to emerging trends in the nutritional supplement industry.
The Company produces a full line of nutritional supplements and offers the
broadest product line in the industry with more than 800 products and 1,500
stockkeeping units (SKU's). The Company's product line includes vitamins,
minerals, amino acids, fish and marine oils, sports nutrition products and
special formulas marketed under the TWINLAB (R) trademark and a full line of
herbal supplements and phytonutrients and herb teas marketed under the Nature's
Herbs (R) and Alvita (R) trademarks, respectively. None of the Company's
products individually accounted for more than 7% of total net sales in 1995.
The Company's broad product line, strong history of new product introductions
and innovations, superior marketing and advertising programs and premium
product quality have established TWINLAB, Nature's Herbs and Alvita as leading
brands in the nutritional supplement industry.
Under the management of Mr. and Mrs. Blechman's five sons, the Company has
diversified its product line through internal growth, product development and
selected acquisitions, including the acquisition in 1989 of Natur-Pharma Inc.,
a leading manufacturer and marketer of herbal supplements and phytonutrients
under the Nature's Herbs brand name, and the acquisition in 1991 of Alvita
Products, Inc., a leading marketer of herb teas. The Company has achieved
increased net sales and income from operations every year since 1990. In
particular, during the three year period from 1993 through 1995, the Company
achieved a compound annual growth rate in net sales and income from operations
of 22.0% and 37.8%, respectively. For the fiscal year ended December 31, 1995,
the Company achieved net sales growth of 26.8% to $148.7 million and growth in
income from operations of 31.3% to $31.6 million, as compared to fiscal year
1994. For the quarter ended March 31, 1996, the Company achieved net sales of
$44.0 million and income from operations of $10.3 million, representing an
increase of 21.7% and 59.6%, respectively, as compared to the quarter ended
March 31, 1995.
The Company's products target consumers who utilize nutritional supplements
in their daily diet and who demand premium quality ingredients in a broad
variety of dosages and delivery methods. The Company's products compete
primarily in the health food store market, where the dominant competitive
factors include product attributes such as quality, potency and the uniqueness
of the product formulation. The Company sells its products domestically through
a network of approximately 60 distributors, who service approximately 11,000
health food stores and other selected retail outlets. The Company believes that
its products are available in over
4
<PAGE>
90% of the health food stores in the United States. The health food store
channel of distribution has expanded significantly in recent years and is
expected to grow further as national chains such as General Nutrition
Companies, Inc. ("GNC"), Whole Foods Market, Wild Oats Markets, Fresh Fields
and other industry participants continue to add stores in new and existing
markets. The health food store market differs significantly from the mass
market for vitamin and other nutritional supplements where price and
convenience constitute the primary bases of competition. The nutritional
supplement products sold in grocery stores, drug stores and mass merchandisers
are typically manufactured by large pharmaceutical companies and private label
manufacturers. The Company's products are also offered in Europe, Asia, South
America and other international markets through arrangements with overseas
distributors.
The Company believes it is well positioned to capitalize on the growth of the
nutritional supplement market. Based on estimates in a 1994 survey conducted by
Packaged Facts (the "Packaged Facts Survey"), an independent consumer market
research firm, the retail market for vitamins, minerals and other nutritional
supplements has grown at a compound annual rate of greater than 12% from $3.3
billion in 1991 to over $4.6 billion in 1994. Furthermore, the Company's rate
of sales growth has exceeded the industry's growth rate for each year during
this period. Packaged Facts forecasts approximately 7% annual industry growth
through the end of the decade in vitamins, minerals and other supplements,
which management believes will be fueled by (i) favorable demographic trends
towards older Americans, who are more likely to consume nutritional
supplements; (ii) product introductions in response to new scientific research
findings; (iii) the nationwide trend toward preventive medicine in response to
rising health care costs; and (iv) the heightened understanding and awareness
of the connection between diet and health. Moreover, although the industry has
grown dramatically in recent years, there is still a large untapped domestic
market as only an estimated 50% of Americans currently consume vitamins,
minerals and herbal supplements on a regular basis.
Holding was incorporated under the laws of the State of Delaware in 1996 and
maintains its principal executive offices at 2120 Smithtown Avenue, Ronkonkoma,
New York 11779. Its telephone number is (516) 467-3140.
BUSINESS STRATEGY
The Company's strategy is to continue to enhance its leadership position in
the domestic sale of vitamins, minerals and other nutritional supplements in
health food stores and to increase its market share and sales while continuing
to improve its overall operating efficiency and financial performance. The
Company intends to capitalize on the TWINLAB brand name by growing market share
domestically, increasing penetration of the Company's other brands, continuing
to introduce new products and product extensions, and expanding
internationally. Specifically, the Company seeks to:
Capitalize on Powerful Brand Name Recognition. The Company's recognized
product quality, broad product line, strong history of new product
introductions and innovations, and superior marketing and advertising programs
have established TWINLAB, Nature's Herbs and Alvita as leading brands in the
nutritional supplement industry. Each of the Company's product categories,
including vitamins, minerals and amino acids; sports nutrition; special
formulas; herbal supplements and phytonutrients; and herb teas, have posted
double digit sales growth in each of the last three years. The Company's
extensive marketing and advertising programs have been critical components of
its products' strong brand name recognition, and management believes that the
Company offers its customers the strongest marketing and advertising support
programs in the industry. In fiscal 1995 the Company invested $11.1 million, an
increase of 27% over fiscal 1994, in marketing and advertising to promote its
products. Furthermore, since quality is a critical factor in consumer purchase
decisions, the Company believes that its premium quality ingredients, modern
manufacturing facilities and comprehensive quality control procedures have
enabled the Company to establish a competitive advantage based on the quality
of its products.
Increase Penetration in the Growing Health Food Market. Management believes
that the expansion of retail distribution channels and the strong growth
characteristics of the nutritional supplement industry provide the Company with
significant opportunities to increase sales. Management further believes that
the established
5
<PAGE>
brand name recognition of the Company's products positions it to increase its
penetration of shelf space as health food retailers seek to align themselves
with companies who possess strong brand names, offer a wide range of products,
demonstrate continued marketing and advertising support and provide
consistently high levels of customer service. Since Nature's Herbs and Alvita
products currently are available in only an estimated 60% and 50%,
respectively, of domestic health food stores, compared to an estimated 90% for
TWINLAB products, the Company believes that it will be able to capitalize on
health food retailers' success with the TWINLAB product line in order to
significantly increase shelf space for the Company's herbal supplements,
phytonutrients and herb teas.
Continue to Introduce New Products and Product Innovations. A cornerstone of
the Company's success has been its ability to rapidly utilize recent scientific
and medical findings in its new product development efforts. The Company has
consistently been among the first in its industry to introduce new products and
product innovations which anticipate and meet customer demands for newly
identified nutritional supplement benefits. Furthermore, the Company's
geographically diverse network of more than 60 distributors allows the Company
to achieve immediate and broad distribution for new product launches. As part
of its ongoing research and development effort, the Company maintains an
extensive database and actively researches and monitors a wide variety of
publications containing scientific and medical research. From 1991 through
1995, the Company introduced over 350 products, with over 90 new products
introduced in 1995 alone. Gross sales during 1995 from new products introduced
in 1995 were $18.4 million, or approximately 11% of gross sales. The Company
intends to build upon its historical success by continuing to introduce new and
innovative products not previously available in health food stores.
Build Upon Established Customer Relationships. The Company's established
relationships with distributors and health food store retailers are based upon
the Company's long-standing commitment to a high level of customer service. In
order to ensure that its customers receive prompt and reliable service, the
Company has designed a flexible and responsive manufacturing process and has
achieved a 98% fill rate for customer orders. In addition, the Company's sales
force consists of 30 dedicated sales professionals who operate in sales
territories which cover the entire continental United States and Alaska. The
primary functions of the Company's sales force are to gain better placement and
additional shelf space for the Company's products and to stay abreast of
customer needs. The sales force personnel work with direct accounts,
distributors and individual retailers to enhance knowledge of TWINLAB, Nature's
Herbs and Alvita products and to achieve maximum exposure for these products.
Increase Penetration of Foreign Markets. Management believes that there are
substantial opportunities for the Company to expand its presence in foreign
markets. The Company has a department, headed by a senior sales professional,
dedicated to increasing sales in such markets. The Company's foreign marketing
effort is primarily focused on establishing additional relationships with
leading overseas distributor organizations as a cost-effective method of
increasing international sales. The Company presently has distribution
agreements covering over 45 foreign countries and has agreements for another
seven countries currently in negotiation. In 1995, the Company had net sales of
$8.3 million to foreign markets.
Supplement Internal Growth Through Strategic Acquisitions. As the nutritional
supplement industry is highly fragmented with many companies producing only a
single product line or single product, the Company believes that it is
strategically positioned to participate in the consolidation of the industry
due to its established brand name, broad distribution capabilities and proven
ability to generate sales of its products through successful marketing
programs. Since 1989 the Company has acquired two businesses, Natur-Pharma Inc.
(Nature's Herbs) and Alvita Products, Inc., and in each case has embarked on
successful expansion programs which resulted in substantially higher sales and
income from operations for the acquired companies. Net sales for Natur-Pharma
Inc. increased from $5.2 million in 1990 (the first full year after its
acquisition) to $17.9 million in 1995, and net sales for Alvita Products, Inc.
increased from $1.7 million in 1992 (the first full year after its acquisition)
to $5.6 million in 1995. The Company regularly evaluates acquisition
opportunities, including product line acquisitions, that complement its
existing products or are compatible with its business philosophy and strategic
goals.
6
<PAGE>
THE ACQUISITION
The Stockholders, Holding, Natur-Pharma Inc. and Green Equity Investors II,
L.P. ("GEI") entered into a Stock Purchase and Sale Agreement, dated as of
March 5, 1996 (the "Acquisition Agreement"), pursuant to which, among other
things, on May 7, 1996 (i) GEI acquired 48% of the Common Stock of Holding for
aggregate consideration of $4.8 million and shares of non-voting junior
redeemable preferred stock of Holding (the "Junior Preferred Stock") for
aggregate consideration of $37.0 million, (ii) certain other investors acquired
7% of the Common Stock of Holding for aggregate consideration of $0.7 million
and shares of non-voting senior redeemable preferred stock of Holding (the
"Senior Preferred Stock," and, together with the Junior Preferred Stock, the
"Preferred Stock") for aggregate consideration of $30.0 million, (iii) the
Continuing Stockholders exchanged certain of their shares of common stock of
Natur-Pharma Inc. for 45% of the outstanding shares of Common Stock of Holding,
valued at $4.5 million, (iv) Holding purchased all of the remaining shares of
common stock of Natur-Pharma Inc. from the Stockholders for cash, resulting in
Natur-Pharma Inc. becoming a wholly owned subsidiary of Holding, (v) Twin
Laboratories Inc., Alvita Products, Inc., Twinlab Export Corp., Twinlab
Specialty Corporation and B. Bros. Realty Corporation merged into Natur-Pharma
Inc. (the "Natur-Pharma Merger"); and Advanced Research Press, Inc. merged with
Natur-Pharma II Inc., a wholly owned subsidiary of Natur-Pharma Inc. (the
surviving entity in such merger is referred to herein as "ARP"), and (vi) in
connection with such mergers the Stockholders received cash in consideration
for all of their shares of capital stock of Twin Laboratories Inc., Alvita
Products, Inc., Twinlab Export Corp., Twinlab Specialty Corporation, B. Bros.
Realty Corporation and Advanced Research Press, Inc. The total cash
consideration that the Stockholders received was approximately $212.5 million,
the majority of which was paid to David and Jean Blechman. Of the total cash
consideration to the Stockholders, approximately $15 million represented
consideration for the Non-Competition Agreements (as defined herein). See
"Management--Employment Agreements." The transactions described above are
hereinafter referred to as the "Acquisition." Concurrently with the
consummation of the Acquisition, the Company entered into the New Credit
Facility (which provides for a term facility in the amount of $53.0 million and
a revolving credit facility in the amount of $15.0 million) (the "New Credit
Facility") and issued $100.0 million principal amount of 10 1/4% Senior
Subordinated Notes due 2006 (the "Note Offering; and collectively with the
Acquisition and the New Credit Facility, the "Transactions"), the net cash
proceeds of the Note Offering were used, together with borrowings under the New
Credit Facility, the proceeds from the issuance of the Common Stock and
Preferred Stock of Holding and available cash of the Company, to finance the
Acquisition, to refinance approximately $7.9 million aggregate principal amount
of debt of the Company and to pay related fees and expenses. See "Description
of Certain Indebtedness" and "Description of Capital Stock." In connection with
the Acquisition, Natur-Pharma Inc.'s name was changed to Twin Laboratories Inc.
7
<PAGE>
THE OFFERINGS
Common Stock offered by
the Company
U.S. Offering........... shares
International........... shares
Common Stock to be
outstanding after the
Offerings.............. shares
Use of Proceeds ........ The net proceeds of the Offerings will be used to
redeem all of the outstanding shares of Senior
Preferred Stock and all of the outstanding shares of
Junior Preferred Stock, which together have an
aggregate liquidation preference of $67.0 million
(plus accrued and unpaid dividends thereon) and to
prepay the $50.0 million of outstanding indebtedness
under the term loan facility contained in the New
Credit Facility, plus accrued and unpaid interest
thereon. The balance of the net proceeds of the
Offerings will be used for general corporate
purposes. See "Use of Proceeds."
Proposed New York Stock
Exchange symbol........
RISK FACTORS
Prior to making an investment in the Common Stock offered hereby, prospective
purchasers of the Common Stock should take into account the specific
considerations set forth under "Risk Factors" as well as the other information
set forth in this Prospectus.
8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The summary information below presents historical consolidated financial data
and unaudited pro forma condensed consolidated financial data for the periods
indicated which have been derived from audited and unaudited financial
statements of the Company. The results for the interim periods are not
necessarily indicative of the results for the full fiscal year. The summary
unaudited pro forma condensed consolidated operating data for the year ended
December 31, 1995, the three months ended March 31, 1995 and 1996 and the
latest twelve months ("LTM") ended March 31, 1996 give effect to (i) the Note
Offering and the New Credit Facility and the application of the net proceeds
therefrom, (ii) the Acquisition (including the Company's conversion of tax
status from an "S" corporation to a "C" corporation and other tax consequences
related to the Acquisition) and related transactions, and (iii) the Offerings
and the application of the net proceeds therefrom, as if each of the
Transactions and the Offering had been consummated as of January 1, 1995. The
pro forma balance sheet data give effect to the Transactions and the Offerings
as if each of the Transactions and the Offerings had been consummated on March
31, 1996. See "Unaudited Pro Forma Condensed Consolidated Financial Data" and
the notes thereto. The pro forma financial data set forth below may not
necessarily be indicative of the results that would have been achieved had the
Transactions and the Offerings been consummated as of the dates indicated or
that may be achieved in the future. The summary historical and pro forma
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Selected
Historical Financial Data" and the Consolidated Financial Statements of the
Company and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING DATA:
Net sales.............. $70,165 $83,014 $99,897 $117,342 $148,735 $36,128 $43,984
Gross profit........... 25,501 31,800 37,766 47,095 58,803 13,970 17,622
Operating expenses..... 14,570 17,463 21,125 23,022 27,191 7,501 7,299
Income from operations. 10,931 14,337 16,641 24,073 31,612 6,469 10,323
Net income............. 10,162 13,435 16,676 21,693 30,224 6,338 9,779
PRO FORMA:(A)
Historical income be-
fore provision for in-
come taxes............ $10,331 $14,010 $16,906 $ 21,938 $ 30,464 $ 6,388 $ 9,865
Pro forma provision for
income taxes.......... 4,017 5,436 6,644 9,087 12,060 2,529 3,906
------- ------- ------- -------- -------- ------- -------
Pro forma net income... $ 6,314 $ 8,574 $10,262 $ 12,851 $ 18,404 $ 3,859 $ 5,959
======= ======= ======= ======== ======== ======= =======
Pro forma net income
per share............. $ 14.75 $ 19.40 $ 22.80 $ 28.56 $ 40.90 $ 8.58 $ 13.24
======= ======= ======= ======== ======== ======= =======
Weighted average shares
outstanding........... 428 442 450 450 450 450 450
======= ======= ======= ======== ======== ======= =======
OTHER DATA:
Capital expenditures... $ 1,472 $ 1,304 $ 4,904 $ 1,786 $ 2,641 $ 489 $ 224
Net sales growth....... 17.4% 18.3% 20.3% 17.5% 26.8% -- 21.7%
Net income growth...... 24.9 32.2 24.1 30.1 39.3 -- 54.3
Income from operations
margin(b)............. 15.6 17.3 16.7 20.5 21.3 17.9% 23.5
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
YEAR ENDED --------------- LTM ENDED
DECEMBER 31, 1995 1995 1996 MARCH 31, 1996
----------------- ------- ------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
PRO FORMA DATA:
Net sales.................... $148,735 $36,128 $43,984 $156,591
Income from operations....... 31,212 6,369 10,223 35,066
Net income................... 12,082 2,146 4,472 14,408
Net income per share.........
Weighted average shares
outstanding.................
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
------------------------------------
PRO FORMA
FOR THE
PRO FORMA TRANSACTIONS
FOR THE AND THE
HISTORICAL TRANSACTIONS OFFERINGS
---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents and marketable
securities.............................. $15,273 $ 4,429 $ 4,629
Net working capital (excluding cash and
cash equivalents, marketable securities
and current debt) ...................... 39,236
Total assets............................. 85,151
Total debt (including current debt)...... 8,673 153,773 100,773
Shareholders' equity (deficit)........... 62,456
</TABLE>
- -------
(a) The Company consisted of S corporations and, accordingly, federal and state
taxes were generally paid at the shareholder level only. Upon consummation of
the Transactions, the Company eliminated its S corporation status and,
accordingly, became subject to federal and state income taxes.
(b) Income from operations margin equals income from operations as a percentage
of net sales.
9
<PAGE>
RISK FACTORS
Prospective purchasers of the Common Stock should carefully consider the
following risk factors, as well as the other information contained, and
incorporated by reference, in this Prospectus before making an investment in
the Common Stock.
DEPENDENCE ON KEY PERSONNEL
The Company believes that its continued success depends to a significant
extent on the management and other skills of Brian Blechman, Dean Blechman,
Neil Blechman, Ross Blechman and Steve Blechman (the "Blechman Brothers"), as
well as its ability to retain other key employees and to attract skilled
personnel in the future to manage the growth of the Company. The loss or
unavailability of the services of one or more of the Blechman Brothers could
have a material adverse effect on the Company. The Company has entered into
long-term employment agreements with each of the Blechman Brothers and upon
completion of the Offerings each of the Blechman Brothers will own
approximately % of the outstanding Common Stock. See "Management" and
"Prospectus Summary--The Acquisition."
LEGAL MATTERS
The Company, like other retailers, distributors and manufacturers of
products that are ingested, faces an inherent risk of exposure to product
liability claims in the event that the use of its products results in injury.
The Company currently has $75 million of product liability insurance (which
does not cover matters relating to L-Tryptophan) with a $25,000 self insurance
retention per occurrence and $100,000 self insurance retention in the
aggregate. However, there can be no assurance that such insurance will continue
to be available at a reasonable cost, or if available will be adequate to cover
liabilities.
Twin Laboratories Inc. and other encapsulators, and various manufacturers,
distributors, suppliers, importers and retailers of manufactured L-Tryptophan
or products containing manufactured L-Tryptophan are or were defendants in
various legal actions brought in federal and state courts seeking compensatory
and, in some cases, punitive damages for alleged personal injuries resulting
from the ingestion of certain products containing manufactured L-Tryptophan.
As of June 1, 1996, Twin Laboratories Inc. was a named defendant in three of
these actions. Although the Company believes that few new lawsuits are likely
to be brought because of applicable statutes of limitations, the possibility
of future such actions cannot be excluded. Twin Laboratories Inc. and certain
other companies in the industry (the "Indemnified Group") have each entered
into a Defense and Indemnification Agreement with Showa Denko America, Inc.
("SDA") (the "Indemnification Agreement"), under which SDA has agreed to
assume the defense of all claims against any of the Indemnified Group arising
out of the ingestion of L-Tryptophan products and to pay all legal fees
incurred and indemnify the Company against liability in any action if it is
determined that a proximate cause of the injury sustained by the plaintiff was
a constituent of the raw material sold by SDA to Twin Laboratories Inc. or was
a factor for which SDA or any of its affiliates was responsible, except to the
extent that action by Twin Laboratories Inc. proximately contributed to the
injury, and except for certain claims relating to punitive damages. SDA
appears to have been the supplier of all of the allegedly contaminated L-
Tryptophan. SDA has posted a revolving irrevocable letter of credit for the
benefit of the Indemnified Group if SDA is unable or unwilling to satisfy any
claims or judgments. Showa Denko, K.K. ("SDK"), the Japanese parent of SDA and
manufacturer of the relevant L-Tryptophan, has unconditionally guaranteed the
payment obligations of SDA under the Indemnification Agreement. As of June 1,
1996, 129 lawsuits in which the Company was a named defendant had been
dismissed or settled by SDA at no cost to the Company.
The total of all damages alleged in the L-Tryptophan actions, if fully
awarded against the Company alone and ignoring the existence of the
Indemnification Agreement, would exceed the Company's available product
liability insurance coverage of $3 million for L-Tryptophan matters in respect
of claims made prior to December 31, 1993, and would have a material adverse
effect on the Company's results of operations and financial condition.
However, the Indemnification Agreement, the defense and resolution to date of
numerous lawsuits by SDA without cost to the Company, the multitude of
defendants and the possibility that liability could be assessed
10
<PAGE>
against or paid by other parties or by insurance carriers have led management
of the Company, after consultation with outside legal counsel, to believe that
the prospect for a material adverse effect on the Company's results of
operations or financial condition is remote and no provision in the Company's
financial statements has been made for any loss that may result from these
actions.
The Company and others are defendants in a wrongful death action originally
commenced in July 1995 with respect to one of the Company's products
containing Ma Huang and with respect to a product that does not contain Ma
Huang manufactured by another defendant. See "--Government Regulation" and
"Business--Regulatory Matters."
The Company is presently engaged in various other legal actions, and,
although ultimate liability cannot be determined at the present time, the
Company is currently of the opinion that the amount of any such liability from
these other actions and the lawsuit described in the preceding paragraph,
after taking into consideration the Company's insurance coverage, will not
have a material adverse effect on its results of operations and financial
condition.
GOVERNMENT REGULATION
The manufacturing, processing, formulating, packaging, labeling and
advertising of the Company's products are subject to regulation by one or more
federal agencies, including the United States Food and Drug Administration
(the "FDA"), the Federal Trade Commission (the "FTC"), the Consumer Product
Safety Commission (the "CPSC"), the United States Department of Agriculture
(the "USDA") and the Environmental Protection Agency (the "EPA"). The
Company's activities are also regulated by various agencies of the states,
localities and foreign countries to which the Company distributes its products
and in which the Company's products are sold.
On October 25, 1994, the President signed into law the Dietary Supplement
Health and Education Act of 1994 ("DSHEA"). This new law revises the
provisions of the Federal Food, Drug, and Cosmetic Act ("FFDC Act") concerning
the composition and labeling of dietary supplements and, in the judgment of
the Company, is favorable to the dietary supplement industry. The legislation
creates a new statutory class of "dietary supplements." This new class
includes vitamins, minerals, herbs, amino acids and other dietary substances
for human use to supplement the diet, and the legislation grandfathers, with
certain limitations, dietary ingredients on the market before October 15,
1994. A dietary supplement which contains a new dietary ingredient, one not on
the market before October 15, 1994, will require evidence of a history of use
or other evidence of safety establishing that it will reasonably be expected
to be safe, such evidence to be provided by the manufacturer or distributor to
the FDA before it may be marketed. The DSHEA also invalidates the FDA's prior
enforcement theory that dietary supplements are food additives requiring pre-
market approval.
The Nutrition Labeling and Education Act of 1990 ("NLEA") prohibits the use
of any health claim for foods, including dietary supplements, unless the
health claim is supported by significant scientific agreement and is pre-
approved by the FDA. To date, the FDA has approved the use of health claims
for dietary supplements only in connection with calcium for osteoporosis, and
folic acid for neural tube defects. However, among other things, the DSHEA
amends, for dietary supplements, the NLEA by providing that "statements of
nutritional support" may be used in labeling for dietary supplements without
FDA pre-approval if certain requirements, including prominent disclosure on
the label of the lack of FDA review of the relevant statement, possession by
the marketer of substantiating evidence for the statement and post-use
notification to the FDA, are met. Such statements may describe how particular
nutritional supplements affect the structure, function or general well-being
of the body (e.g. "promotes your cardiovascular health").
In December 1995, the FDA issued proposed regulations to govern the labeling
of dietary supplements. These regulations, which are subject to revision in
response to comments from interested parties, are expected to become final
later in 1996 and would require the Company to revise the labels for all of
its dietary supplement products before 1997. The FDA has proposed, subject to
its receipt of comments from the public, to withhold enforcement of the
relabeling regulations until January 1, 1998.
11
<PAGE>
In 1989, Twin Laboratories Inc. received an informal inquiry from the New
York Regional Office of the FTC seeking substantiation for certain advertising
claims made for a segment of its "Fuel" bodybuilding/sports nutrition lines of
products. In response, Twin Laboratories Inc. submitted scientific
substantiation and financial information to the FTC. The Company is currently
negotiating this matter with the FTC and has received from the FTC a revised
proposed Complaint and Consent Decree (the "Decree") seeking, among other
things, injunctive relief restricting certain muscle building, fat loss and
other marketing claims in connection with the sale of the Company's weight
control, bodybuilding and sports nutrition products. In addition, the Decree
seeks payment of $200,000. The Company believes that it has adequate scientific
substantiation for the claims at issue and intends to vigorously defend the
matter if a settlement is not reached. There can be no assurance that the
injunctive provisions of any eventual resolution of this matter will not have a
material adverse effect on the Company or that any eventual monetary payment
will be limited to the amount sought in the Decree.
Certain of the Company's products include a Chinese herb known as "Ma Huang,"
which contains naturally-occurring ephedrine. Ma Huang has been the subject of
certain adverse publicity in the United States and other countries relating to
alleged harmful effects, including the deaths of several individuals. To the
Company's knowledge, a number of states and local governmental entities have
instituted bans on sales of Ma Huang-containing products that are portrayed as
apparent alternatives to illegal street drugs. There are also proposals in
other states and local jurisdictions to broaden the regulation of, or otherwise
limit or prohibit, the sale of products containing ephedrine. Ma Huang is also
subject to laws or regulation in certain states and foreign jurisdictions which
limit ephedrine levels and require appropriate warnings on product labels or
which prohibit the sales of products which contain Ma Huang other than by
licensed pharmacists. On April 10, 1996, the FDA issued a statement warning
consumers not to purchase or consume dietary supplements containing ephedrine
with labels that portray the products as apparent alternatives to illegal
street drugs because these products pose significant health risks to consumers.
None of the Company's products which contain Ma Huang are marketed for such
purpose. The FDA, through a National Food Advisory Committee, is currently
considering whether the FDA should prohibit, limit potencies or place other
restrictions on the sale of products containing Ma Huang. There can be no
assurance that the FDA will not seek to impose additional regulations on
products which contain Ma Huang, including those marketed by the Company.
There is a risk that the Company's products containing Ma Huang may become
subject to further federal, state, local or foreign laws or regulation, which
could require the Company to: (i) reformulate its products with reduced
ephedrine levels or with a substitute for Ma Huang and/or (ii) relabel its
products with different warnings or revised directions for use. Even in the
absence of further laws or regulation, the Company may elect to reformulate
and/or relabel its products which contain Ma Huang. While the Company believes
that its Ma Huang products could be reformulated and relabeled, there can be no
assurance in that regard or that reformulation and/or relabeling would not have
an adverse effect on sales of such products. The Company and others are
defendants in a wrongful death action originally commenced in July 1995 with
respect to one of the Company's products containing Ma Huang and with respect
to a product that does not contain Ma Huang manufactured by another defendant.
There can be no assurance that the Company will not be subject to further
private civil actions with respect to its products which contain Ma Huang.
Governmental regulations in foreign countries where the Company plans to
commence or expand sales may prevent or delay entry into the market or prevent
or delay the introduction, or require the reformulation, of certain of the
Company's products. Compliance with such foreign governmental regulations is
generally the responsibility of the Company's distributors for those countries.
These distributors are independent contractors over whom the Company has
limited control.
The Company cannot determine what effect additional governmental regulations
or administrative orders, when and if promulgated, would have on its business
in the future. They could, however, require the reformulation of certain
products to meet new standards, the recall or discontinuance of certain
products not able to be reformulated, additional recordkeeping, expanded
documentation of the properties of certain products, expanded or different
labeling, and/or scientific substantiation. Any or all of such requirements
could have a material adverse effect on the Company's results of operations and
financial condition.
12
<PAGE>
LEVERAGE
The Company is highly leveraged. On a pro forma basis after giving effect to
the Transactions and the Offerings, as of March 31, 1996, the Company would
have had (i) approximately $100.8 million of outstanding debt and (ii)
shareholders' equity of $ million. See "Capitalization." This leverage,
together with restrictions in the New Credit Facility and the Indenture (as
defined herein), may limit the Company's ability to obtain additional debt
financing in the future and to respond to changing business and economic
conditions and could adversely affect its ability to effect its business
strategies. See "Description of Certain Indebtedness." Required payments of
principal and interest on the Company's long-term debt are expected to be
financed from operating cash flow, thus limiting the availability of such cash
flow for other corporate purposes. The Company's ability to generate
sufficient cash to meet its obligations is subject to many factors, certain of
which are beyond its control, including economic conditions, regulatory
factors and competition. While the Company believes that, based on current
levels of operations and anticipated growth, its cash flow from operations,
together with other sources of liquidity, will be adequate to meet its
obligations, there can be no assurance that its actual cash flow will in fact
be sufficient to service its debt. The Company's ability to grow is dependent
on prevailing economic conditions and financial, business and other factors
beyond its control. In the event the Company's operating cash flow and working
capital are not sufficient to fund the Company's expenditures or to service
its debt, the Company would be required to raise additional funds through
capital contributions, the refinancing of all or part of its debt, or the sale
of assets. There can be no assurance that any of these sources of funds would
be available in amounts sufficient for the Company to meet its obligations.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture and the New Credit Facility impose upon the Company certain
financial and operating covenants, including, among others, requirements that
the Company maintain certain financial ratios and satisfy certain financial
tests, limitations on capital expenditures, and restrictions on the ability of
the Company to incur debt, pay dividends, or take certain other corporate
actions, all of which may restrict the Company's ability to expand or to
pursue its business strategies. Changes in economic or business conditions,
results of operations or other factors could in the future cause a violation
of one or more covenants in the Company's debt instruments. See "Description
of Certain Indebtedness."
COMPETITION
The business of developing, manufacturing and selling vitamins, minerals,
sports nutrition products and other nutritional supplements is highly
competitive. Certain of the Company's competitors are substantially larger and
have greater financial resources than the Company. See "Business--
Competition."
ABSENCE OF CLINICAL STUDIES AND SCIENTIFIC REVIEW; EFFECT OF PUBLICITY
The Company generally does not conduct or sponsor clinical studies on its
products. The Company's products consist of vitamins, minerals, herbs and
other ingredients that the Company regards as safe when taken as suggested by
the Company. However, because the Company is highly dependent upon consumers'
perception of the safety and quality of its products as well as similar
products distributed by other companies (which may not adhere to the same
quality standards as the Company), the Company could be adversely affected in
the event any of the Company's products or any similar products distributed by
other companies should prove or be asserted to be harmful to consumers. In
addition, because of the Company's dependence upon consumer perceptions,
adverse publicity associated with illness or other adverse effects resulting
from consumers' failure to consume the Company's products as suggested by the
Company or other misuse or abuse of the Company's products or any similar
products distributed by other companies could have a material adverse effect
on the Company's results of operations and financial condition.
Furthermore, the Company believes the recent growth experienced by the
nutritional supplement market is based in part on national media attention
regarding recent scientific research suggesting potential health benefits from
regular consumption of certain vitamins and other nutritional products. Such
research has been described in
13
<PAGE>
major medical journals, magazines, newspapers and television programs. The
scientific research to date is preliminary, and there can be no assurance of
future favorable scientific results and media attention, or of the absence of
unfavorable or inconsistent findings.
DEPENDENCE ON DISTRIBUTORS AND SIGNIFICANT CUSTOMER
The Company's success depends in part upon its ability to attract, retain
and motivate a large base of distributors, and its ability to maintain a
satisfactory relationship with GNC. Tree of Life, the Company's largest
distributor, and GNC accounted for approximately 28% and 22%, respectively, of
the Company's net sales in 1995. The loss of Tree of Life as a distributor or
GNC as a customer, or the loss of a significant number of other distributors,
or a significant reduction in purchase volume by Tree of Life, GNC or such
other distributors, for any reason, would have a material adverse effect on
the Company's results of operations and financial condition. See "Business--
Sales and Distribution."
AVAILABILITY OF RAW MATERIALS
Substantially all of the Company's herbal supplements and herb teas contain
ingredients that are harvested by and obtained from third party suppliers, and
many of those ingredients are harvested internationally and only once per year
or on a seasonal basis. An unexpected interruption of supply, such as a
harvest failure, could cause the Company's results of operations derived from
such products to be adversely affected. Although the Company has generally
been able to raise its prices in response to significant increases in the cost
of such ingredients, the Company has not always in the past been, and may not
in the future always be, able to raise prices quickly enough to offset the
effects of such increased raw material costs.
INTELLECTUAL PROPERTY PROTECTION
The Company's trademarks are valuable assets which are very important to the
marketing of its products. The Company's policy is to pursue registrations for
all of the trademarks associated with its key products. The Company has
approximately 250 trademark registrations with the United States Patent and
Trademark Office. The Company relies on common law trademark rights to protect
its unregistered trademarks. Common law trademark rights do not provide the
Company with the same level of protection as would U.S. federal registered
trademarks. In addition, common law trademark rights extend only to the
geographic area in which the trademark is actually used, while U.S. federal
registration prohibits the use of the trademark by any third party anywhere in
the United States.
CONTROL BY PRINCIPAL STOCKHOLDERS
Upon completion of the Offerings, GEI will own % and the Continuing
Stockholders will own %, of the Common Stock of Holding. As a result, GEI and
the Continuing Stockholders will have significant influence over all matters
requiring approval by the Company's stockholders without the approval of
minority stockholders. In addition, if they choose to act together, GEI and
the Continuing Stockholders will be able to elect all of the members of the
Board of Directors of the Company, thereby significantly controlling the
affairs and management of the Company. Such control could adversely affect the
market price of the Common Stock or delay or prevent a change in control of
the Company. See "Principal Stockholders."
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offerings, there has been no public market for the Common
Stock. Consequently, the initial public offering price per share of the Common
Stock has been determined by negotiations among management of the Company and
the representative of the Underwriters (the "Representative"). See
"Underwriting" for factors considered in determining the initial public
offering price per share. There can be no assurance that an active trading
market will develop and be sustained subsequent to the Offerings. The Common
Stock may be subject to wide fluctuations in price in response to variations
in quarterly operating results and other factors, including acquisitions and
general economic or market conditions. In addition, broad market trading and
valuation fluctuations have adversely affected the valuation of industry
participants and may adversely affect the market price of the Common Stock.
See "Underwriting."
14
<PAGE>
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price per share of Common Stock is substantially
higher than the net tangible book value per share of the Common Stock.
Purchasers of shares of Common Stock in the Offerings will experience
immediate and substantial dilution of $ in the pro forma net tangible book
value per share of Common Stock (based on an assumed initial public offering
price of $ per share, the mid-point of the range shown on the cover page of
this Prospectus.) See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Immediately after completion of the Offerings, Holding will have shares
of Common Stock outstanding, of which the shares sold pursuant to the
Offerings will be freely tradeable without restriction or further registration
under the Securities Act of 1933, as amended (the "Securities Act"), except
those shares acquired by "affiliates" of the Company as that term is defined
under the Securities Act. Holders of the remaining shares will be eligible to
sell such shares pursuant to Rule 144 ("Rule 144") under the Securities Act at
prescribed times and subject to the manner of sale, volume, notice and
information restrictions of Rule 144. The Company has granted certain
institutional investors and their transferees, GEI and the Continuing
Stockholders certain demand and piggyback registration rights covering an
aggregate of shares of Common Stock. The Company, its officers, directors
and certain other stockholders who collectively are the beneficial holders of
an aggregate of shares of Common Stock, have agreed with the Underwriters
not to directly or indirectly, offer, sell, contract to sell, grant any option
to purchase or otherwise dispose of, without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), any Common Stock,
or any securities convertible into or exchangeable or exercisable for, or
warrants, options or rights to purchase or acquire Common Stock or in any
other manner transfer all or a portion of the economic consequences associated
with the ownership of any Common Stock, or enter into any agreement to do any
of the foregoing, for a period of 180 days after the date of this Prospectus.
Upon the expiration of such 180 day period, such holders will in general be
entitled to dispose of their shares, although the shares of Common Stock held
by affiliates of the Company will continue to be subject to the restrictions
of Rule 144 under the Securities Act. Sales of substantial amounts of such
shares in the public market or the perception that such sales could occur
could adversely affect the market price of the shares of Common Stock and the
Company's ability to raise additional capital at a price favorable to the
Company. See "Shares Eligible for Future Sale" and "Underwriting."
ANTI-TAKEOVER PROVISIONS
Holding's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") and By-laws, as well as Delaware corporate
law, contain certain provisions that could have the effect of making it more
difficult for a third party to acquire, or discouraging a third party from
attempting to acquire, control of the Company. These provisions could limit
the price that certain investors might be willing to pay in the future for
shares of Common Stock. Certain of these provisions impose various procedural
and other requirements, including advance notice and other provisions, that
could make it more difficult for stockholders to effect certain corporate
actions. Furthermore, certain provisions of the New Credit Facility and the
Indenture provide for the acceleration of the indebtedness evidenced thereby
upon the occurrence of certain change in control events (as defined in such
debt instruments), which provisions could also tend to prevent or discourage
the acquisition of the Company by a third party.
HOLDING COMPANY STRUCTURE; RESTRICTIONS ON DIVIDENDS
The Company conducts its business through its direct and indirect
subsidiaries and has no operations of its own. The principal assets of the
Company are the capital stock of Twin Laboratories Inc. and ARP. Accordingly,
the Company has no independent means of generating revenues. As a holding
company, the Company's internal sources of funds to meet its cash needs,
including payment of expenses, are dividends and other permitted payments from
its direct and indirect subsidiaries. Financing arrangements to which Twin
Laboratories Inc. is the borrower restrict the payment of dividends and the
making of loans, advances or other distributions to Holding except in certain
limited circumstances. See "Dividend Policy" and "Description of Certain
Indebtedness."
15
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
shares of Common Stock offered hereby are estimated to be approximately $
million, assuming an initial public offering price of $ per share and after
deducting the estimated underwriting discounts and commissions and offering
expenses payable by the Company. Approximately $ million of such net
proceeds will be used to redeem all of the outstanding shares of Senior
Preferred Stock and all of the outstanding shares of Junior Preferred Stock
having an aggregate liquidation preference of $67.0 million, plus accrued and
unpaid dividends thereon. Approximately $50.0 million of such net proceeds
will be used to repay the Company's outstanding indebtedness under the term
loan facility contained in the New Credit Facility plus accrued and unpaid
interest thereon. The term loan facility generally bears interest at
alternative rates ranging from 2.5% over LIBOR to 1.25% over the ABR (as
defined herein) and matures on May 7, 2002. The borrowings under the term loan
facility were used to effect the Acquisition. The balance of the net proceeds
of the Offerings will be used for general corporate purposes. Affiliates of
DLJ own $7.5 million in aggregate liquidation preference of the Senior
Preferred Stock and will receive approximately $7.5 million of the net
proceeds of the Offering in connection with the redemption of such shares. See
"Use of Proceeds." See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources,"
"Description of Certain Indebtedness" and "Description of Capital Stock."
DIVIDEND POLICY
From 1993 until the consummation of the Acquisition, the Company consisted
solely of "S" corporations. While maintaining such status, the Company
periodically declared and paid dividends to its shareholders in amounts
sufficient for its shareholders to pay their income taxes on the earnings of
the Company that were treated as having been earned by the Company's
shareholders. The Company terminated its "S" corporation status in connection
with the consummation of the Acquisition.
The Company currently intends to retain earnings to finance its operations
and future growth and does not anticipate paying any cash dividends in the
foreseeable future. The Company conducts its business through its direct and
indirect subsidiaries and has no operations of its own. The principal assets
of the Company are the capital stock of Twin Laboratories Inc. and ARP.
Accordingly, the Company has no independent means of generating revenues. As a
holding company, the Company's internal sources of funds to meet its cash
needs, including payment of expenses, are dividends and other permitted
payments from its direct and indirect subsidiaries. Financing arrangements to
which Twin Laboratories Inc. is the borrower restrict the payment of dividends
and the making of loans, advances or other distributions to Holding except in
certain limited circumstances. See "Description of Certain Indebtedness." The
payment of cash dividends in the future will depend upon, among other things,
the Company's results of operations, financial condition, cash requirements
and other factors deemed relevant by the Company's Board of Directors.
16
<PAGE>
DILUTION
After giving effect to the consummation of the Transactions, as of March 31,
1996, Holding's pro forma deficit in net tangible book value was $ or
$ per share. Pro forma net tangible book value per share represents the
amount of Holding's total pro forma tangible assets less Holding's pro forma
total liabilities and pro forma preferred stock, divided by the pro forma
number of shares of Common Stock outstanding. Without taking into account any
other changes in pro forma net tangible book value after March 31, 1996, other
than to give effect to the sale of shares of Common Stock offered by the
Company at an initial public offering price of $ per share (the assumed mid-
point of the range), the receipt of the proceeds therefrom after deducting
underwriting discounts and commissions and the estimated expenses of the
Offerings, the adjusted pro forma net tangible book value of Holding on March
31, 1996 would have been $ or $ per share. This amount represents an
immediate increase in pro forma net tangible book value of approximately
$ per share to the existing stockholders and an immediate dilution of
$ per share to purchasers of the Common Stock. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share.............................. $
Pro forma deficit in net tangible book value per share after giving
effect to the consummation of the Transactions as of March 31,
1996.............................................................. $
Increase in pro forma net tangible book value per share
attributable to new investors.....................................
---
Adjusted pro forma net tangible book value per share after giving
effect to the consummation of the Transactions and the Offerings....
----
Dilution in net tangible book value per share to new investors(a).... $
====
</TABLE>
(a) If the Underwriters' over-allotment option is exercised in full, the pro
forma net tangible book value per share will be $ , resulting in dilution to
new investors in the Offerings of $ per share. See "Underwriting."
17
<PAGE>
The following table summarizes, on a pro forma basis as of March 31, 1996,
after giving effect to the consummation of the Transactions, the number of
shares of capital stock purchased from the Company and the total consideration
paid and the average price paid per share by existing stockholders and new
investors at the assumed initial public offering price of $ per share.
<TABLE>
<CAPTION>
SHARES TOTAL
PURCHASED CONSIDERATION AVERAGE
-------------- -------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders...................
New investors...........................
---- --- ---- --- ---
Total.................................
==== === ==== === ===
</TABLE>
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
as of March 31, 1996, (ii) the pro forma capitalization of the Company as of
March 31, 1996 after giving effect to the consummation of the Transactions,
and (iii) the pro forma capitalization of the Company as of March 31, 1996 as
further adjusted to reflect the Offerings and the application of the net
proceeds therefrom at an assumed public offering price of $ per share.
The capitalization of the Company should be read in conjunction with the
Company's Consolidated Financial Statements and the notes thereto and the
"Unaudited Pro Forma Condensed Consolidated Financial Data" included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
---------------------------------
PRO FORMA
FOR THE
PRO FORMA TRANSACTIONS
FOR THE AND THE
ACTUAL TRANSACTIONS OFFERINGS
------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents and marketable se- $15,273 $ 4,429 $ 4,629
curities.................................... ======= ======= =======
Long-term debt (including current portion)
New Credit Facility........................ $ -- $53,000 $ --
Notes...................................... -- 100,000 100,000
Existing debt.............................. 8,267 367 367
Capital lease obligations.................. 406 406 406
------- ------- -------
Total long-term debt..................... 8,673 153,773 100,773
------- ------- -------
Senior redeemable cumulative preferred stock. -- 30,000 --
------- ------- -------
Junior redeemable cumulative preferred stock. -- 37,000 --
------- ------- -------
Shareholders' equity (deficit)
Common Stock............................... 450
Additional paid-in capital................. 68
Retained earnings (deficit)................ 61,938
------- ------- -------
Total shareholders' equity (deficit)..... 62,456
------- ------- -------
Total capitalization..................... $71,129
======= ======= =======
</TABLE>
18
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma financial data have been prepared by the
Company's management from the Consolidated Financial Statements of the Company
and the notes thereto included elsewhere in this Prospectus. The unaudited pro
forma condensed consolidated statements of income for the year ended December
31, 1995, the three months ended March 31, 1995 and 1996 and the latest twelve
months ended March 31, 1996 reflect adjustments as if the Transactions and the
Offerings had been consummated and were effective as of January 1, 1995. The
unaudited pro forma condensed consolidated balance sheet as of March 31, 1996
gives effect to the Transactions and the Offerings as if each had occurred on
such date. See "Prospectus Summary--The Acquisition."
The financial effects of the Transactions and the Offerings as presented in
the pro forma financial data are not necessarily indicative of either the
Company's financial position or the results of its operations which would have
been obtained had the Transactions and the Offerings actually occurred on the
dates described above, nor are they necessarily indicative of the results of
future operations. The pro forma financial data should be read in conjunction
with the notes thereto, which are an integral part thereof, and with the
Consolidated Financial Statements of the Company and the notes thereto
included elsewhere in this Prospectus.
19
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
LATEST TWELVE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
FOR THE
ADJUSTMENTS PRO FORMA ADJUSTMENTS TRANSACTIONS
RELATED TO THE FOR THE RELATED TO THE AND THE
HISTORICAL TRANSACTIONS TRANSACTIONS OFFERINGS OFFERINGS
---------- -------------- ------------ -------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales............... $156,591 $ -- $156,591 $ -- $156,591
Cost of sales........... 94,136 -- 94,136 -- 94,136
-------- -------- -------- ------- --------
Gross profit............ 62,455 -- 62,455 -- 62,455
Operating expenses...... 26,989 400 (a) 27,389 -- 27,389
-------- -------- -------- ------- --------
Income from operations.. 35,466 (400) 35,066 -- 35,066
-------- -------- -------- ------- --------
Other (expense) income:
Interest income....... 398 (398)(b) -- -- --
Interest expense...... (922) (15,086)(c) (16,008) 4,756 (d) (11,252)
Transaction expenses.. (1,056) 1,056 (e) -- -- --
Other................. 55 -- 55 -- 55
-------- -------- -------- ------- --------
(1,525) (14,428) (15,953) 4,756 (11,197)
-------- -------- -------- ------- --------
Income before provision
for income taxes....... 33,941 (14,828) 19,113 4,756 23,869
Provision for income 276 7,300 (f) 7,576 1,885 (g) 9,461
taxes.................. -------- -------- -------- ------- --------
Net Income.............. 33,665 (22,128) 11,537 2,871 14,408
Preferred stock divi- -- (8,767)(h) (8,767) 8,767 (i) --
dends.................. -------- -------- -------- ------- --------
Net income available for $ 33,665 $(30,895) $ 2,770 $11,638 $ 14,408
common shareholders.... ======== ======== ======== ======= ========
Net income per common
share..................
========
Weighted average common
shares outstanding.....
========
YEAR ENDED DECEMBER 31, 1995
<CAPTION>
PRO FORMA
FOR THE
ADJUSTMENTS PRO FORMA ADJUSTMENTS TRANSACTIONS
RELATED TO THE FOR THE RELATED TO THE AND THE
HISTORICAL TRANSACTIONS TRANSACTIONS OFFERINGS OFFERINGS
---------- -------------- ------------ -------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales............... $148,735 $ -- $148,735 $ -- $148,735
Cost of sales........... 89,932 -- 89,932 -- 89,932
-------- -------- -------- ------- --------
Gross profit............ 58,803 -- 58,803 -- 58,803
Operating expenses...... 27,191 400 (a) 27,591 -- 27,591
-------- -------- -------- ------- --------
Income from operations.. 31,612 (400) 31,212 -- 31,212
-------- -------- -------- ------- --------
Other (expense) income:
Interest income....... 313 (313)(b) -- -- --
Interest expense...... (866) (15,144)(c) (16,010) 4,756 (d) (11,254)
Transaction expenses.. (656) 656 (e) -- -- --
Other................. 61 -- 61 -- 61
-------- -------- -------- ------- --------
(1,148) (14,801) (15,949) 4,756 (11,193)
-------- -------- -------- ------- --------
Income before provision
for income taxes....... 30,464 (15,201) 15,263 4,756 20,019
Provision for income
taxes.................. 240 5,812 (f) 6,052 1,885 (g) 7,937
-------- -------- -------- ------- --------
Net income.............. 30,224 (21,013) 9,211 2,871 12,082
Preferred stock divi- -- (8,767)(h) (8,767) 8,767 (i) --
dends.................. -------- -------- -------- ------- --------
Net income available for $ 30,224 $(29,780) $ 444 $11,638 $ 12,082
common shareholders.... ======== ======== ======== ======= ========
Net income per common
share.................. ========
Weighted average common
shares outstanding..... ========
</TABLE>
20
<PAGE>
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
FOR THE
ADJUSTMENTS PRO FORMA ADJUSTMENTS TRANSACTIONS
RELATED TO THE FOR THE RELATED TO THE AND THE
HISTORICAL TRANSACTIONS TRANSACTIONS OFFERINGS OFFERINGS
---------- -------------- ------------ -------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales............... $43,984 $ -- $43,984 $ -- $43,984
Cost of sales........... 26,362 -- 26,362 -- 26,362
------- ------- ------- ------ -------
Gross profit............ 17,622 -- 17,622 -- 17,622
Operating expenses...... 7,299 100 (a) 7,399 -- 7,399
------- ------- ------- ------ -------
Income from operations.. 10,323 (100) 10,223 -- 10,223
------- ------- ------- ------ -------
Other (expense) income:
Interest income....... 167 (167)(b) -- -- --
Interest expense...... (224) (3,778)(c) (4,002) 1,189 (d) (2,813)
Transaction expenses.. (400) 400 (e) -- -- --
Other................. (1) -- (1) -- (1)
------- ------- ------- ------ -------
(458) (3,545) (4,003) 1,189 (2,814)
------- ------- ------- ------ -------
Income before provision
for income taxes....... 9,865 (3,645) 6,220 1,189 7,409
Provision for income
taxes.................. 86 2,380 (f) 2,466 471 (g) 2,937
------- ------- ------- ------ -------
Net income.............. 9,779 (6,025) 3,754 718 4,472
Preferred stock
dividends.............. -- (2,091)(h) (2,091) 2,091 (i) --
------- ------- ------- ------ -------
Net income available for
common shareholders.... $ 9,779 $(8,116) $ 1,663 $2,809 $ 4,472
======= ======= ======= ====== =======
Net income per common
share ................. =======
Weighted average common
shares outstanding..... =======
</TABLE>
THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
PRO FORMA
FOR THE
ADJUSTMENTS PRO FORMA ADJUSTMENTS TRANSACTIONS
RELATED TO THE FOR THE RELATED TO THE AND THE
HISTORICAL TRANSACTIONS TRANSACTIONS OFFERINGS OFFERINGS
---------- -------------- ------------ -------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales............... $36,128 $ -- $36,128 $ -- $36,128
Cost of sales........... 22,158 -- 22,158 -- 22,158
------- ------- ------- ------ -------
Gross profit............ 13,970 -- 13,970 -- 13,970
Operating expenses...... 7,501 100 (a) 7,601 -- 7,601
------- ------- ------- ------ -------
Income from operations.. 6,469 (100) 6,369 -- 6,369
------- ------- ------- ------ -------
Other (expense) income:
Interest income....... 82 (82)(b) -- -- --
Interest expense...... (168) (3,836)(c) (4,004) 1,189 (d) (2,815)
Other................. 5 -- 5 -- 5
------- ------- ------- ------ -------
(81) (3,918) (3,999) 1,189 (2,810)
------- ------- ------- ------ -------
Income before provision
for income taxes....... 6,388 (4,018) 2,370 1,189 3,559
Provision for income
taxes.................. 50 892 (f) 942 471 (g) 1,413
------- ------- ------- ------ -------
Net income.............. 6,338 (4,910) 1,428 718 2,146
Preferred stock
dividends.............. -- (2,091)(h) (2,091) 2,091 (i) --
------- ------- ------- ------ -------
Net income available for
common shareholders.... $ 6,338 $(7,001) $ (663) $2,809 $ 2,146
======= ======= ======= ====== =======
Net income per common
share..................
=======
Weighted average common
shares outstanding.....
=======
</TABLE>
21
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(a) Represents the LGP Management Fee (as defined herein). See "Certain
Relationships and Related Transactions--Transactions with LGP."
(b) Represents a reduction in interest income on cash and cash equivalents.
(c) The interest expense adjustment relating to the Transactions is as
follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
YEAR ENDED 31, LTM ENDED
DECEMBER 31, -------------- MARCH 31,
1995 1995 1996 1996
------------ ------ ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest expense on the Notes
and the New Credit Facility at
a composite interest rate of
9.5%, including revolving
credit commitment and
administration fees............ $14,676 $3,669 $3,669 $14,676
Interest expense on refinanced
debt........................... (807) (152) (210) (865)
------- ------ ------ -------
13,869 3,517 3,459 13,811
Amortization of deferred
financing costs................ 1,275 319 319 1,275
------- ------ ------ -------
Interest expense adjustment..... $15,144 $3,836 $3,778 $15,086
======= ====== ====== =======
</TABLE>
(d) The interest expense adjustment relating to the Offerings is as follows:
<TABLE>
<CAPTION>
THREE MONTHS LTM
YEAR ENDED ENDED MARCH 31, ENDED
DECEMBER 31, --------------- MARCH 31,
1995 1995 1996 1996
------------ ------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest expense relating to
$53,000 of New Credit Facility
repaid........................... $4,240 $ 1,060 $ 1,060 $4,240
Amortization of deferred financing
costs relating to $53,000 of New
Credit Facility repaid........... 516 129 129 516
------ ------- ------- ------
Interest expense adjustment....... $4,756 $ 1,189 $ 1,189 $4,756
====== ======= ======= ======
</TABLE>
(e) Represents a reduction in nonrecurring expenses incurred which are
directly attributable to the Acquisition.
(f) Reflects (i) the net increase in the provision for income taxes assuming
the Company was a "C" corporation, and (ii) the increase in net expenses
described in notes a, b, c and e above.
(g) Represents an increase in the provision for income taxes as a result of
the decrease in interest expense described in note (d).
(h) Represents dividends paid on the Preferred Stock.
(i) Represents the elimination of the dividends paid on the Preferred Stock
due to the redemption of the Preferred Stock in connection with the
Offerings.
22
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DATA
23
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET DATA
24
<PAGE>
25
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following selected consolidated financial data as of December 31, 1991
and for the year then ended and as of March 31, 1995 and 1996 and for the
three month periods ended March 31, 1995 and 1996 are derived from the
unaudited consolidated financial statements of the Company. In the opinion of
management, the unaudited consolidated financial statements have been prepared
on the same basis as the audited consolidated financial statements and include
all adjustments, consisting only of normal recurring adjustments, necessary
for a fair presentation of the financial position and results of operations
for such periods. The results for the interim periods are not necessarily
indicative of the results for the related full fiscal year. The selected
consolidated financial data as of December 31, 1994 and 1995 and for each of
the three years in the period ended December 31, 1995 has been derived from
the audited consolidated financial statements of the Company. The report of
Deloitte & Touche LLP, independent auditors, on the consolidated financial
statements as of December 31, 1994 and 1995, and for each of the three years
in the period ended December 31, 1995 is included elsewhere herein. The
selected consolidated financial data should be read in conjunction with, and
is qualified in its entirety by, the Consolidated Financial Statements of the
Company and the notes thereto and the other financial information included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
STATEMENT OF INCOME DA-
TA: (IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales.............. $70,165 $83,014 $99,897 $117,342 $148,735 $36,128 $43,984
Cost of sales.......... 44,664 51,214 62,131 70,247 89,932 22,158 26,362
------- ------- ------- -------- -------- ------- -------
Gross profit........... 25,501 31,800 37,766 47,095 58,803 13,970 17,622
Operating expenses..... 14,570 17,463 21,125 23,022 27,191 7,501 7,299
------- ------- ------- -------- -------- ------- -------
Income from operations. 10,931 14,337 16,641 24,073 31,612 6,469 10,323
------- ------- ------- -------- -------- ------- -------
Other (expense) income:
Interest income....... 375 302 242 254 313 82 167
Interest expense...... (461) (494) (487) (761) (866) (168) (224)
Transaction expenses.. -- -- -- -- (656) -- (400)
Other................. (514) (135) 510 354 61 5 (1)
------- ------- ------- -------- -------- ------- -------
(600) (327) 265 (153) (1,148) (81) (458)
------- ------- ------- -------- -------- ------- -------
Income before unusual
item, provision for
income taxes and
extraordinary item.... 10,331 14,010 16,906 23,920 30,464 6,388 9,865
Unusual item--
nonrecurring charge
for prior years'
income tax assessment. -- -- -- 1,982 -- -- --
Provision for income 169 651 230 245 240 50 86
taxes................. ------- ------- ------- -------- -------- ------- -------
Income before
extraordinary item.... 10,162 13,359 16,676 21,693 30,224 6,338 9,779
Extraordinary item..... -- 76 -- -- -- -- --
------- ------- ------- -------- -------- ------- -------
Net income............. $10,162 $13,435 $16,676 $ 21,693 $ 30,224 $ 6,338 $ 9,779
======= ======= ======= ======== ======== ======= =======
PRO FORMA: (A)
Historical income
before provision for
income taxes.......... $10,331 $14,010 $16,906 $ 21,938 $ 30,464 $ 6,388 $ 9,865
Pro forma provision for
income taxes.......... 4,017 5,436 6,644 9,087 12,060 2,529 3,906
------- ------- ------- -------- -------- ------- -------
Pro forma net income... $ 6,314 $ 8,574 $10,262 $ 12,851 $ 18,404 $ 3,859 $ 5,959
======= ======= ======= ======== ======== ======= =======
Pro forma net income
per share............. $ 14.75 $ 19.40 $ 22.80 $ 28.56 $ 40.90 $ 8.58 $ 13.24
======= ======= ======= ======== ======== ======= =======
Weighted average shares
outstanding........... 428 442 450 450 450 450 450
======= ======= ======= ======== ======== ======= =======
OTHER DATA:
Capital expenditures... $ 1,472 $ 1,304 $ 4,904 $ 1,786 $ 2,641 $ 489 $ 224
Depreciation........... 783 806 710 851 909 194 271
Amortization........... 20 86 95 99 102 21 31
Net sales growth....... 17.4% 18.3% 20.3% 17.5% 26.8% -- 21.7%
Net income growth...... 24.9 32.2 24.1 30.1 39.3 -- 54.3
Income from operations
margins (b)........... 15.6 17.3 16.7 20.5 21.3 17.9% 23.5
</TABLE>
(continued on following page)
26
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
--------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Net working capital
(excluding cash and
cash equivalents,
marketable securities
and current debt)..... $14,097 $18,575 $25,437 $35,056 $39,405 $32,019 $39,236
Property, plant and
equipment, net........ 7,645 7,863 10,732 12,071 13,036 12,367 12,989
Total assets........... 36,878 44,368 55,587 64,706 75,309 66,711 85,151
Total debt (including
current debt)......... 6,100 6,066 8,039 9,288 8,792 8,674 8,673
Shareholders' equity... 26,587 33,180 40,543 48,671 55,405 47,816 62,456
</TABLE>
- ---------------------
(a) The Company consisted of S corporations and, accordingly, federal and
state taxes were generally paid at the shareholder level only. Upon
consummation of the Transactions, the Company eliminated its S corporation
status and, accordingly, will be subject to federal and state income taxes.
(b) Income from operations margin equals income from operations as a
percentage of net sales.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Historical Financial Data" and the audited Consolidated Financial
Statements of the Company and the notes thereto included elsewhere in this
Prospectus. The Company consisted of "S" corporations for the three months
ended March 31, 1996 and years ended December 31, 1995, 1994 and 1993.
Accordingly, federal and state taxes were generally paid at the shareholder
level only. The provision for income taxes for the three months ended March
31, 1996 and years ended December 31, 1995, 1994 and 1993 represented state
taxes for New York, which imposes a corporate tax for all income in excess of
$0.2 million. Upon consummation of the Transactions, the Company eliminated
its "S" corporation status and, accordingly, will be subject to federal and
state income taxes.
The following table sets forth, for the periods indicated, certain
historical income statement and other data for the Company and also sets forth
certain of such data as a percentage of net sales.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------ --------------------------
1993 1994 1995 1995 1996
------------ ------------- ------------- ------------ ------------
$ % $ % $ % $ % $ %
----- ----- ------ ----- ------ ----- ----- ----- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Vitamins, Minerals &
Amino Acids............ $29.1 29.1% $ 32.3 27.5% $ 37.1 24.9% $ 9.8 27.1% $10.1 23.0%
Sports Nutrition........ 34.7 34.7 39.9 34.0 53.9 36.2 11.8 32.7 14.5 32.9
Special Formulas........ 23.6 23.7 31.0 26.4 41.2 27.7 8.8 24.5 12.4 28.1
Herbal Supplements &
Phytonutrients......... 12.0 12.0 14.5 12.3 19.8 13.3 4.9 13.6 6.6 15.0
Herb Teas............... 3.0 3.0 4.2 3.6 5.8 3.9 2.1 5.7 2.2 5.0
Publishing.............. 2.7 2.7 3.4 3.0 4.8 3.3 1.2 3.3 1.3 3.0
----- ----- ------ ----- ------ ----- ----- ----- ----- -----
Gross Sales............ 105.1 105.2 125.3 106.8 162.6 109.3 38.6 106.9 47.1 107.0
Discounts & Allowances. (5.2) (5.2) (8.0) (6.8) (13.9) (9.3) (2.5) (6.9) (3.1) (7.0)
----- ----- ------ ----- ------ ----- ----- ----- ----- -----
Net Sales.............. $99.9 100.0% $117.3 100.0% $148.7 100.0% $36.1 100.0% $44.0 100.0%
Gross Profit............ 37.8 37.8 47.1 40.1 58.8 39.5 14.0 38.7 17.6 40.1
Operating Expenses...... 21.1 21.1 23.0 19.6 27.2 18.3 7.5 20.8 7.3 16.6
Income From Operations.. 16.6 16.7 24.1 20.5 31.6 21.3 6.5 17.9 10.3 23.5
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 ("FIRST QUARTER 1996") COMPARED TO THREE
MONTHS ENDED MARCH 31, 1995 ("FIRST QUARTER 1995")
Net Sales. Net sales for first quarter 1996 was $44.0 million, an increase
of $7.9 million, or 21.7%, as compared to net sales of $36.1 million in first
quarter 1995. The 21.7% increase was attributable to increases in gross sales
in each of the Company's six product categories, partially offset by an
increase in discounts and allowances which was due to the Company's increased
sales volume. Vitamins, minerals and amino acids contributed $10.1 million, an
increase of $0.3 million, or 3.1%, as compared to $9.8 million in first
quarter 1995. The increase in gross sales of vitamins, minerals and amino
acids was primarily due to continued strong consumer interest in these
products. Sports nutrition products contributed $14.5 million, an increase of
$2.7 million, or 22.3%, as compared to $11.8 million in first quarter 1995,
primarily due to the increased demand for a variety of these products. Special
formulas contributed $12.4 million, an increase of $3.6 million, or 40.1%, as
compared to $8.8 million in first quarter 1995. The increase in gross sales of
special formulas was primarily due to the successful introduction of a variety
of new product formulations. Herbal supplements and phytonutrients contributed
$6.6 million, an increase of $1.7 million, or 34.1%, as compared to $4.9
million in first quarter 1995, and herb teas contributed $2.2 million, an
increase of $0.1 million, or 7.0%, as compared to $2.1 million in first
28
<PAGE>
quarter 1995. The gross sales increase in both herbal supplements and
phytonutrients and herb teas is primarily due to new product introductions,
continued strong consumer interest in existing products and increased
penetration of Nature's Herbs and Alvita products into domestic health food
stores. Publishing contributed $1.3 million, an increase of $0.1 million, or
9.5%, as compared to $1.2 million in first quarter 1995.
Gross Profit. Gross profit for first quarter 1996 was $17.6 million, which
represented an increase of $3.6 million, or 26.1%, as compared to $14.0 million
for first quarter 1995. Gross profit margin was 40.1% for first quarter 1996 as
compared to 38.7% for first quarter 1995. The overall increase in gross profit
dollars was attributable to the Company's higher sales volume in first quarter
1996. The increase in gross profit margin in first quarter 1996 as compared to
first quarter 1995 was due primarily to a more favorable product mix and to
higher gross profit margins on recently introduced new product formulations and
product line extensions.
Operating Expenses. Operating expenses were $7.3 million for first quarter
1996, representing a decrease of $0.2 million, or 2.7%, as compared to $7.5
million for first quarter 1995. As a percent of net sales, operating expenses
declined from 20.8% in first quarter 1995 to 16.6% in first quarter 1996. The
decrease in operating expenses was primarily attributable to advertising
expenses which were lower by approximately $1.0 million than the Company's
advertising expenses in first quarter 1995 due to reduced television
advertising pending completion of new television commercials and reduced print
advertising. The Company expects that its advertising expenses in respect of
fiscal 1996 will exceed its advertising expenditures in fiscal 1995. The
decline in operating expenses as a percent of net sales is due to the Company's
ability to maintain its expenditures at approximately the same level as in
first quarter 1995, while substantially increasing the Company's sales volume.
Income from Operations. Income from operations was $10.3 million in first
quarter 1996, representing an increase of $3.8 million, or 59.6%, as compared
to $6.5 million for first quarter 1995. Income from operations margin increased
to 23.5% of net sales in first quarter 1996, as compared to 17.9% of net sales
in first quarter 1995. The increase in income from operations and income from
operations margin was primarily due to the Company's higher sales volume in
first quarter 1996 and a reduction in the Company's operating expenses as a
percent of net sales.
FISCAL 1995 COMPARED TO FISCAL 1994
Net Sales. Net sales for fiscal 1995 was $148.7 million, an increase of $31.4
million, or 26.8%, as compared to net sales of $117.3 million in fiscal 1994.
The 26.8% increase was attributable to increases in gross sales in each of the
Company's six product categories, partially offset by an increase in discounts
and allowances due to the Company's increased sales volume. Vitamins, minerals
and amino acids contributed $37.1 million, an increase of $4.8 million, or
14.7%, as compared to $32.3 million in fiscal 1994, primarily due to continued
strong consumer interest in these products. Sports nutrition contributed $53.9
million, an increase of $14.0 million, or 34.9%, as compared to $39.9 million
in fiscal 1994, primarily due to the increased demand for a variety of these
products. Special formulas contributed $41.2 million, an increase of $10.2
million, or 33.2%, as compared to $31.0 million in fiscal 1994, primarily due
to the successful introduction of new product formulations and strong growth in
existing product lines. Herbal supplements and phytonutrients contributed $19.8
million, an increase of $5.3 million, or 37.2%, as compared to $14.5 million in
fiscal 1994, and herb teas contributed $5.8 million, an increase of $1.6
million, or 37.4%, as compared to $4.2 million in fiscal 1994. The gross sales
increase in both herbal supplements and phytonutrients and herb teas is
primarily due to new product introductions, continued strong consumer interest
in existing products and increased penetration of Alvita and Nature's Herbs
products into domestic health food stores. Publishing contributed $4.8 million,
an increase of $1.4 million, or 39.1%, as compared to $3.4 million in fiscal
1994.
Gross Profit. Gross profit for fiscal 1995 was $58.8 million, which
represented an increase of $11.7 million or 24.9%, as compared to $47.1 million
for fiscal 1994. Gross margin was 39.5% for fiscal 1995 as compared to 40.1%
for fiscal 1994. The overall increase in gross profit dollars was attributable
to the Company's higher sales volume in fiscal 1995. The decrease in gross
margin for fiscal 1995 as compared to fiscal 1994 was due primarily to lower
gross margins on the Company's Nature's Herbs products due to certain raw
materials price increases and an increase in sales discounts and allowances
offered on certain TWINLAB and Nature's
29
<PAGE>
Herbs products under certain sales incentive programs introduced in 1995,
which programs are expected to be continued in 1996. Such decreases in gross
margin were partially offset by increased sales from a more favorable product
mix and increases in the Company's gross margins for TWINLAB sports nutrition
products, special formulas and Alvita herb tea products.
Operating Expenses. Operating expenses were $27.2 million for fiscal 1995,
representing an increase of $4.2 million, as compared to $23.0 million for
fiscal 1994. As a percent of net sales, operating expenses declined from 19.6%
in fiscal 1994 to 18.3% in fiscal 1995. The increase in operating expenses was
primarily attributable to increased selling and advertising expenses and
higher operating expenses resulting from the Company's increased level of
sales in fiscal 1995. The decline in operating expenses as a percent of net
sales is due to the Company's ability to maintain its expenditures for
research and development and certain general and administrative functions at
approximately the same level as in fiscal 1994, while substantially increasing
the Company's sales volume.
Income from Operations. Income from operations was $31.6 million in fiscal
1995, representing an increase of $7.5 million, or 31.3%, as compared to $24.1
million for fiscal 1994. Income from operations margin increased to 21.3% of
net sales in fiscal 1995, as compared to 20.5% of net sales in fiscal 1994.
The increase in income from operations and income from operations margin was
primarily due to the Company's higher sales volume in fiscal 1995 and a
reduction in the Company's operating expenses as a percent of net sales, which
was partially offset by a reduction in gross margin as discussed above.
FISCAL 1994 COMPARED TO FISCAL 1993
Net Sales. Net sales for fiscal 1994 was $117.3 million, an increase of
$17.4 million, or 17.5%, as compared to net sales of $99.9 million in fiscal
1993. The 17.5% increase was attributable to increases in gross sales in each
of the Company's six product categories, partially offset by an increase in
discounts and allowances due to the Company's increased sales volume.
Vitamins, minerals and amino acids contributed $32.3 million, an increase of
$3.2 million, or 11.2%, as compared to $29.1 million in fiscal 1993, primarily
due to continued strong consumer interest in these products. Sports nutrition
contributed $39.9 million, an increase of $5.2 million, or 15.2%, as compared
to $34.7 million in fiscal 1993, primarily due to the increased demand for a
variety of these products. Special formulas contributed $31.0 million, an
increase of $7.4 million, or 30.9%, as compared to $23.6 million in fiscal
1993, primarily due to the successful introduction of 18 new product
formulations and strong growth of existing product lines. Herbal supplements
and phytonutrients contributed $14.5 million, an increase of $2.5 million, or
20.8%, as compared to $12.0 million in fiscal 1993 and herb teas contributed
$4.2 million, an increase of $1.2 million, or 40.6%, as compared to $3.0
million in fiscal 1993. The gross sales increase in both herbal supplements
and phytonutrients and herb teas is primarily due to new product
introductions, continued strong consumer interest in existing products and
increased penetration of Nature's Herbs and Alvita products into domestic
health food stores. Publishing contributed $3.4 million, an increase of $0.7
million, or 27.4%, as compared to $2.7 million in fiscal 1993.
Gross Profit. Gross profit for fiscal 1994 was $47.1 million compared to
$37.8 million in fiscal 1993. As a percent of net sales, gross profit was
40.1% for fiscal 1994 compared to 37.8% for fiscal 1993. The gross profit
dollar increase in fiscal 1994 compared to fiscal 1993 was due to the
Company's higher sales volumes and higher gross margins in fiscal 1994. The
increase in gross margin in fiscal 1994 compared to fiscal 1993 was
attributable to a more favorable product sales mix and higher gross margins on
certain of the Company's TWINLAB vitamins, minerals, amino acids, sports
nutrition products and special formulas. This increase in gross margin was
partially offset by lower gross margins for certain of the Company's Alvita
herb tea products, which was due to the relocation of Alvita Products, Inc.'s
operations from Ronkonkoma, New York to American Fork, Utah.
Operating Expenses. Operating expenses increased by $1.9 million, or 9.0%,
from $21.1 million in fiscal 1993 to $23.0 million in fiscal 1994. As a
percent of net sales, operating expenses declined to 19.6% in fiscal 1994 from
21.1% in fiscal 1993. The dollar increase in operating expenses is primarily
due to higher selling, advertising and delivery expenses. The decline in
operating expenses as a percent of net sales is due partially to the Company's
ability to limit the increase in general and administrative expenses while
achieving a higher level of sales volume.
30
<PAGE>
Income from Operations. Income from operations was $24.1 million in fiscal
1994, an increase of $7.5 million, or 44.7%, as compared to $16.6 million for
fiscal 1993. Income from operations margin increased to 20.5% of net sales in
1994, as compared to 16.7% of net sales in fiscal 1993. The increase in income
from operations and income from operations margin was due to increased sales
volumes together with higher gross margins and lower operating expenses as a
percent of net sales.
LIQUIDITY AND CAPITAL RESOURCES
For first quarter 1996, cash provided by operating activities was $10.3
million, and during fiscal 1995 cash provided by operating activities was $26.8
million, compared to $12.9 million in fiscal 1994 and $10.6 million in fiscal
1993. The increase in fiscal 1995 compared to fiscal 1994 and fiscal 1993 was
primarily due to higher net income and reflects higher levels of accounts
payable and accrued liabilities, partially offset by higher accounts receivable
and inventory balances due to higher levels of sales volume at the Company.
Cash used in financing activities was $2.8 million in first quarter 1996, $24.0
million in fiscal 1995, $13.0 million in fiscal 1994 and $7.3 million in fiscal
1993 and primarily consisted of distributions to shareholders of $2.7 million,
$23.5 million, $13.6 million and $9.4 million for first quarter 1996, fiscal
1995, fiscal 1994 and fiscal 1993, respectively.
Capital expenditures, including purchases under capital leases, were $0.2
million, $2.6 million, $2.5 million and $4.9 million for first quarter 1996,
fiscal 1995, fiscal 1994 and fiscal 1993, respectively. The higher level of
capital expenditures in fiscal 1993 reflects the construction of the Company's
manufacturing facility in American Fork, Utah, which commenced operations in
the last quarter of fiscal 1993. Historical capital expenditures were primarily
used to purchase production equipment, expand capacity and improve
manufacturing efficiency. Capital expenditures are expected to be approximately
$3.4 million in fiscal 1996 and will be used to purchase manufacturing
equipment and fund plant expansion to support the Company's future growth. The
Company estimates that its historical level of maintenance capital expenditures
has been approximately $0.5 million per fiscal year. See "Business."
Management believes that, following the consummation of the Offerings, the
Company will have adequate capital resources and liquidity to meet its
borrowing obligations, fund all required capital expenditures and pursue its
business strategy. The Company's capital resources and liquidity are expected
to be provided by the Company's cash flow from operations and borrowings under
the revolving credit facility contained in the New Credit Facility. In
connection with the Acquisition, the Company entered into a New Credit
Facility. Approximately $50.0 million of the net proceeds will be used to repay
the Company's outstanding indebtedness under the term loan facility. See "Use
of Proceeds."
From time to time, the Company evaluates acquisitions which complement the
business of the Company. Depending on the cash requirements of potential
transactions, the Company may finance transactions with its cash flow from
operations, or the Company may raise additional funds by pursuing various
financing vehicles such as additional bank financing or offerings of the
Company's securities. The Company, however, has no present understanding,
commitment or agreement with respect to any acquisition, and there can be no
assurance that funds to finance an acquisition will be available or permitted
under the Company's financing instruments. See "Description of Certain
Indebtedness."
IMPACT OF INFLATION
Generally, the Company has been able to pass on inflation-related cost
increases; consequently, inflation has not had a material impact on the
Company's historical operations or profitability.
RECENT FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENTS
Recent pronouncements of the Financial Accounting Standards Board, which are
not required to be adopted at this date, include Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting For the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of" and SFAS No. 123,
"Accounting for Stock Based Compensation." These pronouncements are not
expected to have a material impact on the Company's financial statements.
31
<PAGE>
BUSINESS
GENERAL
The Company is the leading manufacturer and marketer of brand name
nutritional supplements sold through domestic independent health food stores.
Since the Company's founding in 1968 by David and Jean Blechman, the Company
has emphasized the development and introduction of high-quality, unique
products in response to emerging trends in the nutritional supplement
industry. The Company produces a full line of nutritional supplements and
offers the broadest product line in the industry with more than 800 products
and 1,500 SKU's. The Company's product line includes vitamins, minerals, amino
acids, fish and marine oils, sports nutrition products and special formulas
marketed under the TWINLAB (R) trademark and a full line of herbal supplements
and phytonutrients and herb teas marketed under the Nature's Herbs (R) and
Alvita (R) trademarks, respectively. None of the Company's products
individually accounted for more than 7% of total net sales in 1995. The
Company's broad product line, strong history of new product introductions and
innovations, superior marketing and advertising programs and premium product
quality have established TWINLAB, Nature's Herbs and Alvita as leading brands
in the nutritional supplement industry.
Under the management of Mr. and Mrs. Blechman's five sons, the Company has
diversified its product line through internal growth, product development and
selected acquisitions, including the acquisition in 1989 of Natur-Pharma Inc.,
a leading manufacturer and marketer of herbal supplements and phytonutrients
under the Nature's Herbs brand name, and the acquisition in 1991 of Alvita
Products, Inc., a leading marketer of herb teas. The Company has achieved
increased net sales and income from operations every year since 1990. In
particular, during the three year period from 1993 through 1995, the Company
achieved a compound annual growth rate in net sales and income from operations
of 22.0% and 37.8%, respectively. For the fiscal year ended December 31, 1995,
the Company achieved net sales growth of 26.8% to $148.7 million and growth in
income from operations of 31.3% to $31.6 million, as compared to fiscal year
1994. For the quarter ended March 31, 1996, the Company achieved net sales of
$44.0 million and income from operations of $10.3 million, representing an
increase of 21.7% and 59.6%, respectively, as compared to the quarter ended
March 31, 1995.
The Company's products target consumers who utilize nutritional supplements
in their daily diet and who demand premium quality ingredients in a broad
variety of dosages and delivery methods. The Company's products compete
primarily in the health food store market, where the dominant competitive
factors include product attributes such as quality, potency and the uniqueness
of the product formulation. The Company sells its products domestically
through a network of approximately 60 distributors, who service approximately
11,000 health food stores and other selected retail outlets. The Company
believes that its products are available in over 90% of the health food stores
in the United States. The health food store channel of distribution has
expanded significantly in recent years and is expected to grow further as
national chains such as GNC, Whole Foods Market, Wild Oats Markets, Fresh
Fields and other industry participants continue to add stores in new and
existing markets. The health food store market differs significantly from the
mass market for vitamin and other nutritional supplements where price and
convenience constitute the primary bases of competition. The nutritional
supplement products sold in grocery stores, drug stores and mass merchandisers
are typically manufactured by large pharmaceutical companies and private label
manufacturers. The Company's products are also offered in Europe, Asia, South
America and other international markets through arrangements with overseas
distributors.
The Company believes it is well positioned to capitalize on the growth of
the nutritional supplement market. Based on estimates contained in the
Packaged Facts Survey, the retail market for vitamins, minerals and other
nutritional supplements has grown at a compound annual rate of greater than
12% from $3.3 billion in 1991 to over $4.6 billion in 1994. Furthermore, the
Company's rate of sales growth has exceeded the industry's growth rate for
each year during this period. Packaged Facts forecasts approximately 7% annual
industry growth through the end of the decade in vitamins, minerals and
supplements, which management believes will be fueled by (i) favorable
demographic trends towards older Americans, who are more likely to consume
nutritional supplements; (ii) product introductions in response to new
scientific research findings; (iii) the nationwide trend toward preventive
medicine in response to rising health care costs; and (iv) the heightened
understanding and awareness
32
<PAGE>
of the connection between diet and health. Moreover, although the industry has
grown dramatically in recent years, there is still a large untapped domestic
market as only an estimated 50% of Americans currently consume vitamins,
minerals and herbal supplements on a regular basis.
BUSINESS STRATEGY
The Company's strategy is to continue to enhance its leadership position in
the domestic sale of vitamins, minerals and other nutritional supplements in
health food stores and to increase its market share and sales while continuing
to improve its overall operating efficiency and financial performance. The
Company intends to capitalize on the TWINLAB brand name by growing market
share domestically, increasing penetration of the Company's other brands,
continuing to introduce new products and product extensions, and expanding
internationally. Specifically, the Company seeks to:
Capitalize on Powerful Brand Name Recognition. The Company's recognized
product quality, broad product line, strong history of new product
introductions and innovations, and superior marketing and advertising programs
have established TWINLAB, Nature's Herbs and Alvita as leading brands in the
nutritional supplement industry. Each of the Company's product categories,
including vitamins, minerals and amino acids; sports nutrition; special
formulas; herbal supplements and phytonutrients; and herb teas, have posted
double digit sales growth in each of the last three years. The Company's
extensive marketing and advertising programs have been critical components of
its products' strong brand name recognition, and management believes that the
Company offers its customers the strongest marketing and advertising support
programs in the industry. In fiscal 1995 the Company invested $11.1 million,
an increase of 27% over fiscal 1994, in marketing and advertising to promote
its products. Furthermore, since quality is a critical factor in consumer
purchase decisions, the Company believes that its premium quality ingredients,
modern manufacturing facilities and comprehensive quality control procedures
have enabled the Company to establish a competitive advantage based on the
quality of its products.
Increase Penetration in the Growing Health Food Market. Management believes
that the expansion of retail distribution channels and the strong growth
characteristics of the nutritional supplement industry provide the Company
with significant opportunities to increase sales. Management further believes
that the established brand name recognition of the Company's products
positions it to increase its penetration of shelf space as health food
retailers seek to align themselves with companies who possess strong brand
names, offer a wide range of products, demonstrate continued marketing and
advertising support and provide consistently high levels of customer service.
Since Nature's Herbs and Alvita products currently are available in only an
estimated 60% and 50%, respectively, of domestic health food stores, compared
to an estimated 90% for TWINLAB products, the Company believes that it will be
able to capitalize on health food retailers' success with the TWINLAB product
line in order to significantly increase shelf space for the Company's herbal
supplements, phytonutrients and herb teas.
Continue to Introduce New Products and Product Innovations. A cornerstone of
the Company's success has been its ability to rapidly utilize recent
scientific and medical findings in its new product development efforts. The
Company has consistently been among the first in its industry to introduce new
products and product innovations which anticipate and meet customer demands
for newly identified nutritional supplement benefits. Furthermore, the
Company's geographically diverse network of more than 60 distributors allows
the Company to achieve immediate and broad distribution for new product
launches. As part of its ongoing research and development effort, the Company
maintains an extensive database and actively researches and monitors a wide
variety of publications containing scientific and medical research. From 1991
through 1995, the Company introduced over 350 products, with over 90 new
products introduced in 1995 alone. Gross sales during 1995 from new products
introduced in 1995 were $18.4 million, or approximately 11% of gross sales.
The Company intends to build upon its historical success by continuing to
introduce new and innovative products not previously available in health food
stores.
33
<PAGE>
Build Upon Established Customer Relationships. The Company's established
relationships with distributors and health food store retailers are based upon
the Company's long-standing commitment to a high level of customer service. In
order to ensure that its customers receive prompt and reliable service, the
Company has designed a flexible and responsive manufacturing process and has
achieved a 98% fill rate for customer orders. In addition, the Company's sales
force consists of 30 dedicated sales professionals who operate in sales
territories which cover the entire continental United States and Alaska. The
primary functions of the Company's sales force are to gain better placement
and additional shelf space for the Company's products and to stay abreast of
customer needs. The sales force personnel work with direct accounts,
distributors and individual retailers to enhance knowledge of TWINLAB,
Nature's Herbs and Alvita products and to achieve maximum exposure for these
products.
Increase Penetration of Foreign Markets. Management believes that there are
substantial opportunities for the Company to expand its presence in foreign
markets. The Company has a department, headed by a senior sales professional,
dedicated to increasing sales in such markets. The Company's foreign marketing
effort is primarily focused on establishing additional relationships with
leading overseas distributor organizations as a cost-effective method of
increasing international sales. The Company presently has distribution
agreements covering over 45 foreign countries and has agreements for another
seven countries currently in negotiation. In 1995, the Company had net sales
of $8.3 million to foreign markets.
Supplement Internal Growth Through Strategic Acquisitions. As the
nutritional supplement industry is highly fragmented with many companies
producing only a single product line or single product, the Company believes
that it is strategically positioned to participate in the consolidation of the
industry due to its established brand name, broad distribution capabilities
and proven ability to generate sales of its products through successful
marketing programs. Since 1989 the Company has acquired two businesses, Natur-
Pharma Inc. (Nature's Herbs) and Alvita Products, Inc., and in each case has
embarked on successful expansion programs which resulted in substantially
higher sales and income from operations for the acquired companies. Net sales
for Natur-Pharma Inc. increased from $5.2 million in 1990 (the first full year
after its acquisition) to $17.9 million in 1995, and net sales for Alvita
Products, Inc. increased from $1.7 million in 1992 (the first full year after
its acquisition) to $5.6 million in 1995. The Company regularly evaluates
acquisition opportunities, including product line acquisitions, that
complement its existing products or are compatible with its business
philosophy and strategic goals.
INDUSTRY
Based on estimates in the Packaged Facts Survey, the retail market for
vitamins, minerals and other supplements has grown over 12% annually from $3.3
billion in 1991 to $4.6 billion in 1994. The herbal supplements and herb tea
market has grown at a compound annual growth rate of over 10% since 1991 to
approximately $1.1 billion in 1995. Sports nutrition products have grown 9%
annually since 1991 to over $1.2 billion in 1994. The Company believes that
these market segments will continue to experience strong growth due to recent
scientific research suggesting potential health benefits from regular
consumption of vitamins and other nutritional supplement products, increasing
national interest in preventive health measures and favorable demographic
trends that indicate increased usage of vitamins and other nutritional
supplements. Packaged Facts estimates compound annual growth rates in the
market for vitamins, minerals and other supplements of approximately 7% from
1994 through 1999. The market for herbal supplements and herb teas is
projected to grow over 11% annually from 1994 through 1999, while sports
nutrition sales are projected to increase 8% annually from 1994 through 1999.
The Company expects that the aging of the United States population, together
with a corresponding increased focus on preventive health measures, will
result in increased demand for nutritional supplement products. According to
Congressional findings that accompanied the Dietary Supplement Health and
Education Act of 1994, national surveys reveal that almost 50% of Americans
regularly consume vitamins, minerals and herbal supplements. The 35-and-older
age group of consumers, which represent 78% of regular users of vitamin and
mineral supplements, is expected to grow dramatically over the next two
decades. Specifically, based on
34
<PAGE>
data provided by the U.S. Bureau of the Census, from 1990 to 2010, the 35-44
and 45-and-older age groups are projected to grow at rates 175% and 225%
faster than the general U.S. population, respectively. In addition, the "baby
boom echo" (the children of baby boomers) is projected to result in
substantial growth in the 16-21 age group, the largest segment of consumers of
sports nutrition products. The Company expects that growth in this age group
will result in increased demand for its sports nutrition products.
Vitamins and other nutritional supplements are sold primarily through six
channels of distribution: health food stores, drug stores, supermarkets and
other grocery stores, discount stores, mail order and direct sales
organizations. Mass market retailers (drug stores, grocery stores and discount
stores) account for approximately 60% of sales, while health food stores, mail
order and direct selling account for approximately 40% of sales.
The United States health food store market is comprised of approximately
11,000 stores, which are generally either independently owned or associated
with one of several regional or national chains, including GNC and Whole Foods
Market. According to a 1994 retail survey, nutritional supplements account for
over 41% of a typical health food store's sales. Moreover, 54% of health food
retailers state that these products are their primary product. The health food
store channel of distribution has grown significantly in recent years and is
expected to continue to grow as GNC, Whole Foods Market, Wild Oats Markets,
Fresh Fields and other industry participants continue to add stores in new and
existing markets. The growth in the health food channel of distribution is
partially attributable to the general growth in natural product sales. Natural
products are defined as products that are minimally processed, environmentally
friendly, largely or wholly free from artificial chemicals and, in general, as
close to their natural states as possible. Natural product industry sales have
consistently grown at nearly 10% per year since 1988, even during the
recession of the early 1990s. During 1994, natural products industry sales
rose 23% to $7.6 billion. The rate of growth accelerated from 7% in 1990 to
10%, 14% and 18% in 1991, 1992 and 1993, respectively.
PRODUCTS
The Company has a highly diversified array of products and product
categories, each of which achieves strong gross margins. The Company
manufactures and markets over 800 products and over 1,500 SKU's in five
product categories: vitamins, minerals and amino acids; sports nutrition;
special formulas; herbal supplements and phytonutrients; and herb teas. The
Company also operates a subsidiary which publishes health, fitness and
nutrition-related publications.
The following table sets forth certain information concerning each of the
Company's product categories in fiscal 1995.
<TABLE>
<CAPTION>
THREE-YEAR
COMPOUND ANNUAL
NUMBER OF PERCENTAGE OF GROSS SALES
PRODUCT CATEGORY SKU'S TOTAL GROSS SALES GROWTH
---------------- --------- ----------------- ---------------
<S> <C> <C> <C>
Vitamins, Minerals and Amino
Acids........................ 315 22.8% 12.9%
Sports Nutrition.............. 285 33.1 24.6
Special Formulas.............. 309 25.4 32.0
Herbal Supplements and
Phytonutrients............... 465 12.2 28.7
Herb Teas..................... 143 3.5 39.0
Publishing.................... N/A 3.0 33.1
----- ----- ----
1,517 100.0% 24.4%
===== ===== ====
</TABLE>
Vitamins, Minerals and Amino Acids. The vitamins, minerals and amino acids
category is comprised of a complete line of vitamins, minerals and amino acids
marketed under the TWINLAB brand name, including multivitamins and single-
entity vitamins (such as B-complex, C and E), minerals (such as calcium and
magnesium) and amino acids (such as glutamine and carnitine). These products
are available in a variety of delivery forms, including liquid, powder,
capsule and tablet to accommodate a variety of consumer preferences.
35
<PAGE>
This category targets a broad array of health conscious consumers, with
particular emphasis on consumers who utilize nutritional supplements in their
daily diet and who demand premium quality ingredients in a broad variety of
dosages and delivery methods.
Sports Nutrition. The sports nutrition category includes a wide variety of
nutritional supplements designed for and targeted to athletes. Sports
nutrition products include Hydra Fuel and Ultra Fuel drinks, which replenish
glucose and electrolytes depleted during strenuous exercise; and DietFuel,
RxFuel, and Ripped Fuel, which are marketed, as part of a low fat diet and
exercise program, for the preservation of lean body mass and the building of
muscle mass. The Company's sports nutrition products are utilized by both
amateur and professional athletes in a variety of competitive sports. The
Company believes that its strong sports nutrition business serves to increase
the Company's brand awareness among customers who, as they grow older, will
shift their buying patterns to include vitamins, minerals and herbal products,
and who, based on their positive experiences with the Company's brand name,
are more likely to purchase products from the Company's other product
categories.
Special Formulas. The special formulas category consists of a broad
assortment of products formulated with specific health conditions or
objectives in mind. Special formulas are primarily targeted to sophisticated
users of health related products, including regular customers of health food
stores. Examples include OcuGuard, which is formulated for nutritional support
of the eyes, MaxiLIFE, which offers an advanced antioxidant formula, and
Coenzyme Q/1//0/, which is designed for cardiovascular health. In addition,
the Company sells a variety of fish and marine oils in a number of different
delivery forms which offer a multitude of nutritional benefits, including
favorable effects on cardiovascular health.
Herbal Supplements and Phytonutrients. Herbal supplements and phytonutrients
(nutrients from botanical sources that are considered to have medicinal
properties) have become increasingly important categories in health food
stores. Through its Nature's Herbs product line, the Company produces a full
line of herbal supplements and phytonutrients which offer natural alternatives
to over-the-counter ("OTC") medications. The Company manufactures and markets
approximately 400 herbal and botanical supplements which are produced at
Natur-Pharma Inc.'s modern FDA registered manufacturing facility in American
Fork, Utah and sold under the Nature's Herbs brand name. Nature's Herbs
products include single herbs, such as saw palmetto, garlic, gingko, ginseng
and golden seal; traditional combinations, such as echinacea-golden seal;
standardized extracts, such as Bilberry Power and Milk Thistle Power sold
under the POWER HERBS(R) brand name; and natural HealthCare product
formulations, such as Allerin and Coldrin. Nature's Herbs products are
packaged using the innovative FRESH CARE(R) System developed by the Company.
The FRESH CARE System is the first all-glass and antioxidant-protected herbal
packaging system that helps remove oxygen while locking out air, moisture and
light in order to maintain potency and to extend freshness. Management
believes that the association of the Nature's Herbs product line with
TWINLAB's strong name brand recognition and reputation for premium quality and
service, combined with the increased penetration of herbal supplements and
phytonutrients in the growing health food store channel of distribution, have
contributed to the rapid growth experienced by this product line.
Herb Teas. Through its Alvita Products, Inc. ("Alvita") product line, the
Company offers approximately 100 herb teas in both single use bags and bulk.
Alvita is a leading brand of herb teas and is one of the most recognizable tea
brands sold through health food stores. Alvita was founded in 1922 and is one
of the nation's oldest herb tea companies. Alvita purchases tea in bulk form,
formulates blends of natural herb teas and designs the packaging for its
products. Alvita's teas are currently blended and packaged by an independent
contractor. Representative Alvita teas include Peppermint Leaf, Chamomile,
Echinacea, Golden Seal, Ginger and Senna Leaf, as well as new-age blends such
as Chinese Green Tea, available in a choice of citrus flavors, and TrimTime
Thermogenic Diet Tea. Alvita markets its products with an environmentally
conscious theme by packaging bulk tea and tea bags in paper and by not
utilizing shrink wrap for either its outer boxes or tea bags. Alvita recently
launched a new line of herbal tea blends named Herbal Remeteas, including
Highland Lullaby, Manchurian Brain Blend, Jamaica Digesti Brew, and Canadian
Natur-Tussin. The Company believes that significant opportunities for product
line expansion exist in combining Alvita teas and other nutritional
supplements to create a new delivery form for traditional herbal supplements
and phytonutrients.
36
<PAGE>
Publishing. Through Advanced Research Press, Inc., the Company publishes
Muscular Development, Fitness & Health, a high-quality bodybuilding and
fitness magazine featuring a scientific advisory board and contributors
considered to be among the most accomplished and knowledgeable in their
respective fields. The magazine covers recent developments and provides
innovative information in the fields of training and nutrition research,
supplements, health, fitness and diet. This publication serves as a useful
vehicle to increase public awareness of the Company's products and as an
outlet for a portion of the Company's advertising program. Muscular
Development, Fitness & Health currently has a monthly paid circulation of
approximately 113,000 readers. The Company also publishes health and fitness
related books and is exploring the introduction of new health and fitness
related products.
PRODUCT DEVELOPMENT
The Company is recognized as an industry leader in new product development.
The Company closely monitors consumer trends and scientific research, and has
consistently introduced innovative products and programs in response thereto.
The Company's product development staff regularly studies over 50 different
health and nutrition periodicals, including the New England Journal of
Medicine and the Journal of the American Medical Association, in order to
generate ideas for new product formulations. Management believes that the
Company's introduction of new products has increased market share for both the
Company and its retail customers, and the Company intends to continue
developing new products and programs in the future. The Company was the first
major nutritional supplement manufacturer to introduce such industry-wide
innovations as: an all-capsule vitamin and mineral line that is well tolerated
by allergy-prone individuals; a complete line of amino acids and fish and
marine oils; the most advanced and complete array of antioxidants, including
beta carotene, L-glutathione, L-cysteine, N-acetyl cysteine (NAC) and an
entirely new class of antioxidants, including polyphenols, flavonoids and
isoflavones; concentrated Coenzyme Q/1//0/; high potency phosphatidyl choline
and patented GTF Chromium; pioneering thermogenic products; standardized
herbal extracts guaranteeing potency (Certified Potency); the FRESH CARE
packaging system, designed to preserve potency and freshness; a full line of
Ayurvedic Indian herbal products; and a complete line of herb teas in single
use bag and bulk form. From 1991 through 1995, the Company introduced over 350
products with over 90 new products introduced in 1995 alone.
The Company's research and development expenses were $1.1 million in 1995,
$1.0 million in 1994 and $0.9 million in 1993, including the support of
scientific research at independent research centers located at major
universities and medical centers.
SALES AND DISTRIBUTION
The Company believes that its TWINLAB products are available in
approximately 90% of domestic health food stores. The Company sells its
products primarily through a network of approximately 60 distributors, which
service approximately 11,000 health food stores throughout the country and
selected retail outlets. Sales to domestic distributors represented
approximately 88% of the Company's gross sales in 1995. The Company's
distributor customers include GNC, Tree of Life, Cornucopia, Stow Mills,
Nature's Best and other distributors that supply retailers of vitamins,
minerals and other nutritional supplements. Management believes that it sells
its products to every major nutritional supplement distributor servicing
health food stores and is generally the largest independent supplier of
nutritional supplements to each such distributor. The Company is also
currently expanding distribution into domestic military exchanges.
Several of the Company's distributors, such as GNC, Cornucopia and Tree of
Life, are national in scope, but most are regional in nature and operate one
or more localized distribution centers. Generally, the Company enters into
nonexclusive area rights agreements with its domestic distributors, who are
also responsible for new account development. Retailers typically place orders
with and are supplied directly by the Company's distributors. In the past ten
years, the Company has not lost a major distributor customer other than
through consolidation with an existing customer of the Company. The breadth
and depth of the products manufactured
37
<PAGE>
and the ability to manufacture with minimal throughput times enables the
Company to maintain extremely high order fill rates, which management believes
are among the highest in the industry, with its customer base.
Tree of Life and GNC accounted for approximately 28% and 22%, respectively,
of the Company's net sales in 1995. No other single customer accounted for
more than 10% of the Company's net sales in 1995. The largest retail
organization which sells the Company's products is GNC, which operates
approximately 2,400 stores.
Approximately 6%, or $8.3 million, of the Company's net sales in 1995 were
derived from international sales which originate from overseas distributor
organizations. The Company presently has distribution agreements for fifteen
European countries, including Great Britain, The Benelux Countries and the
Scandinavian countries; fourteen Latin American countries, including Mexico,
Brazil and Paraguay; eight Middle Eastern countries, including Israel and
Saudi Arabia; and various other countries in the Far East and the Caribbean.
The Company also has agreements for another seven countries currently in
negotiation.
MARKETING AND CUSTOMER SALES SUPPORT
The Company's marketing strategy, which centers around an extensive
advertising and promotion program, together with the Company's customer sales
support services have been critical components of the Company's growth, strong
brand name recognition and leading position within the nutritional supplement
industry. Management believes that the levels of its advertising and
promotional support and of its customer service rank among the highest in the
industry.
The Company's marketing and advertising expenditures were approximately
$11.1 million in 1995, $8.7 million in 1994 and $7.1 million in 1993. Of the
Company's $8.4 million in 1995 advertising expenditures, approximately $5.5
million, or 65%, was spent on print advertising, approximately $2.0 million,
or 24%, was spent on television and radio advertising and approximately $0.9
million, or 11%, was spent on production of advertising materials. As the
Company's customers align themselves with fewer vendors of brand name
products, the Company believes that its strong commitment to advertising and
promotion will continue to constitute a significant competitive advantage. The
Company's advertising strategy stresses brand awareness of the Company's
various product segments in order to generate purchases by customers and also
communicates the points-of-difference between the Company's products and those
of its competitors.
A significant portion of the Company's advertising budget is focused on
advertisements in magazines. The Company regularly advertises in consumer
magazines such as Better Nutrition, Delicious, Vegetarian Times, Let's Live,
Natural Health, New Age Journal, Bicycling, VeloNews, Triathlete, Runner's
World, Muscle & Fitness, Flex, and Ironman, as well as trade magazines such as
Natural Foods Merchandiser, Vitamin Retailer, Nutrition Science News, Health
Foods Business and Whole Foods.
Other marketing and advertising programs conducted by the Company include
participation in or sponsorship of sporting events such as running
competitions, including the Boston Marathon and the Los Angeles Marathon, and
bodybuilding competitions, including the Arnold Classic and the NPC National
Bodybuilding Championships, and sponsorship of health-oriented television and
radio programs. In addition, the Company promotes its products at major
industry trade shows and through in-store point of sale materials. The Company
also engages elite athletes, including Shelly Beattie, Michael Mentzer and
John Romano, and nutritional experts such as Dr. James Duke, to communicate on
the Company's behalf with the trade and the public and to promote the
Company's products.
The Company's established customer relationships are based upon the
Company's long-standing commitment to a high level of customer service. The
Company's sales force currently consists of 30 dedicated sales professionals
whose primary functions are to gain better placement and additional shelf
space for TWINLAB, Nature's Herbs and Alvita products and to stay abreast of
customer needs. These sales representatives are assigned to specific
territories covering the entire continental United States and Alaska. These
personnel work with direct accounts, distributors and individual retailers to
enhance knowledge of the
38
<PAGE>
Company's products and to maximize exposure for TWINLAB, Nature's Herbs and
Alvita products. An additional three person sales and marketing staff supports
Nature's Herbs products and the servicing of customer needs. The Company also
designs and supplies marketing literature to help educate retailers and
consumers as to the benefits of the Company's products.
The Company operates an in-house customer service department to respond to
inquiries requesting information concerning product applications, background
data, ingredient compositions and the efficacy of products. The department is
currently staffed by three nutrition experts.
MANUFACTURING AND PRODUCT QUALITY
Virtually all of the Company's TWINLAB products are manufactured at the
Company's 80,000 square foot manufacturing facility located in Ronkonkoma, New
York. Herbal supplements and phytonutrients are manufactured at the Company's
48,000 square foot FDA registered manufacturing facility in American Fork,
Utah. Herb teas are currently packaged by an independent contractor and
warehoused at the American Fork, Utah, facility. The Company's two modern
manufacturing facilities provide the Company with the capability to meet
customers' sales demands with a prompt response time and to maintain the
highest level of quality control. The Company is continuously upgrading its
facilities and enhancing its manufacturing capabilities through new equipment
purchases and technological improvements. Management believes that the
Company's manufacturing facilities are among the most advanced in the
nutritional supplement industry. In 1995, the Company acquired additional
property adjacent to its American Fork, Utah, facility to provide additional
plant capacity for the operations of Natur-Pharma Inc. and Alvita Products,
Inc. The Company plans to commence the construction of an 8,500 square foot
addition to its Utah facility on this property in 1996 at a cost of
approximately $700,000. Management believes that the Company's Utah facility
will be sufficient to enable the Company to meet sales demand for the
foreseeable future and that its New York facility will be sufficient to meet
sales demand for TWINLAB products for approximately three years. Management
believes that it will have the option to lease additional space or to
construct a new facility at such time.
The Company's modern manufacturing operations feature pharmaceutical quality
blending, filling and packaging capabilities, which enable the Company to
offer quality and consistency in formulation and delivery. The Company
operates flexible manufacturing lines which enables it to efficiently and
effectively shift output among various products as dictated by customer
demand. The Company is capable of producing over 25 million capsules and
tablets, over 100,000 pounds of blended powder and up to 2,500 gallons of
liquid preparations per day. The Company has six high-speed capsule and tablet
packaging lines, two high-speed liquid filling lines, two powder filling lines
and one chewable tablet packaging line which are capable of operating
simultaneously, at its Ronkonkoma, New York, and American Fork, Utah,
facilities. The Company manufactures the powders used in its line of single-
serving sports drink products but utilizes a contract bottler for the
hydration and bottling of these products. The Company operates on a 24-hour
work day that includes two production shifts and a third shift dedicated
solely to cleaning, maintenance and equipment set-up.
The Company sources its raw material needs from over 200 different
suppliers, including some of the largest pharmaceutical and chemical companies
in the world. The Company's raw materials and packaging supplies are readily
available from multiple suppliers, and the Company is not dependent on any
single supplier for its needs. No single supplier accounted for more than 10%
of the Company's total purchases in 1995.
The Company's quality standards are a critical factor in consumer purchase
decisions, and the Company believes it has established a competitive advantage
based on the quality of its products. All of the Company's capsule and tablet
products are visually inspected before being packaged in virtually light-proof
amber glass for better product freshness and stability. Moreover, each of the
Company's products undergoes comprehensive quality control testing procedures
from the receipt of raw materials to the release of the packaged product. The
Company utilizes real-time computerized monitoring of its manufacturing
processes to ensure proper product weights and measures. In addition, the
Company maintains two in-house laboratories with state-of-the-art testing
39
<PAGE>
and analysis equipment where the Company performs most of its testing,
including stability tests, active component characterization utilizing thin-
layer and high-pressure liquid chromatography, and UV visible and infrared
spectrometry. The Company contracts with independent laboratories to perform
the balance of its testing requirements. A team of 50 full-time quality
assurance professionals regularly conducts a wide variety of visual and
scientific tests on all manufactured products, and samples of raw materials
and finished products are retained for quality control purposes for up to four
years.
The Company has a strong commitment to maintaining the quality of the
environment. All of the Company's plastic containers are recyclable and,
wherever possible, the Company uses recyclable glass. The Company was also one
of the first companies in the industry to use biodegradable starch pellets for
packing materials. In addition, the Company has removed most solvents from its
production processes (using natural, environmentally-safe alternatives) and
helped develop a special glue, for manufacturing purposes, that contains
virtually no harmful hydrocarbons. The Company believes it is in material
compliance with all applicable environmental regulations.
COMPETITION
Within the nutritional supplement industry, suppliers can be divided into
three major categories: specialty firms, like the Company, which focus on
vitamins, minerals and other nutritional supplements targeted to health food
store retailers; major pharmaceutical companies and private label contractors,
which sell vitamins and other nutritional supplements that are targeted to
mass market retailers; and direct sale and mail order companies.
The domestic nutritional supplement industry that targets products to the
health food store market is highly fragmented, with a number of small
competitors involved in manufacturing and marketing vitamin and other
nutritional supplement products to health food retailers and distributors.
Most of these companies are relatively small businesses operating on a local
or regional level. Although most companies are privately held, resulting in
the Company's inability to precisely assess the size of its competitors,
management believes that the Company is substantially larger than the next
largest firm that targets independently-owned health food stores and that,
among competitors which sell through independent distributors, it is the
largest company which manufactures a majority of its own products.
The Company's principal competitors in the health food store market include
Nutraceuticals, Weider/Schiff, Nature's Way, Solgar and Nature's Plus. Private
label products of the Company's customers also provide competition to the
Company's products. For example, a substantial portion of GNC's vitamin and
mineral supplement offerings are products offered under GNC's own brand names.
Many of the Company's competitors in markets other than the health food store
market, including the major pharmaceutical companies, have substantially
greater financial and other resources than the Company.
The Company believes that the growing number of health food retailers are
increasingly likely to align themselves with those companies which offer a
wide variety of high quality products, have a loyal customer base, support
their brands with strong marketing and advertising programs and provide
consistently high levels of customer service. The Company believes that it
competes favorably with other nutritional supplement companies because of its
comprehensive line of products, premium brand names, commitment to quality,
ability to rapidly introduce innovative products, competitive pricing, high
customer-order fill rate, strong and effective sales force and distribution
network, and sophisticated advertising and promotional support. The wide
variety and diversity of the forms, potencies and categories of the Company's
products are important points of differentiation between the Company and many
of its competitors.
REGULATORY MATTERS
The manufacturing, processing, formulating, packaging, labeling and
advertising of the Company's products are subject to regulation by one or more
federal agencies, including the FDA, the FTC, the CPSC, the USDA and the EPA.
These activities are also regulated by various agencies of the states,
localities and foreign countries
40
<PAGE>
to which the Company distributes its products and in which the Company's
products are sold. The FDA, in particular, regulates the formulation,
manufacture, and labeling of vitamin and other nutritional supplements.
On October 25, 1994, the President signed into law the DSHEA. This new law
revises the provisions of the FFDC Act concerning the composition and labeling
of dietary supplements and, in the judgment of the Company, is favorable to
the dietary supplement industry. The legislation creates a new statutory class
of "dietary supplements." This new class includes vitamins, minerals, herbs,
amino acids and other dietary substances for human use to supplement the diet,
and the legislation grandfathers, with certain limitations, dietary
ingredients on the market before October 15, 1994. A dietary supplement which
contains a new dietary ingredient, one not on the market before October 15,
1994, will require evidence of a history of use or other evidence of safety
establishing that it will reasonably be expected to be safe, such evidence to
be provided by the manufacturer or distributor to the FDA before it may be
marketed. The DSHEA also invalidates the FDA's prior enforcement theory that
dietary supplements are food additives requiring pre-market approval.
The NLEA prohibits the use of any health claim for foods, including dietary
supplements, unless the health claim is supported by significant scientific
agreement and is pre-approved by the FDA. To date, the FDA has approved the
use of health claims for dietary supplements only in connection with calcium
for osteoporosis, and folic acid for neural tube defects. However, among other
things, the DSHEA amends, for dietary supplements, the NLEA by providing that
"statements of nutritional support" may be used in labeling for dietary
supplements without FDA pre-approval if certain requirements, including
prominent disclosure on the label of the lack of FDA review of the relevant
statement, possession by the marketer of substantiating evidence for the
statement and post-use notification to the FDA, are met. Such statements may
describe how particular nutritional supplements affect the structure, function
or general well-being of the body (e.g. "promotes your cardiovascular
health").
In December 1995, the FDA issued proposed regulations to govern the labeling
of dietary supplements. These regulations, which are subject to revision in
response to comments from interested parties, are expected to become final
later in 1996 and would require the Company to revise the labels for all of
its dietary supplement products before 1997. The FDA has proposed, subject to
its receipt of comments from the public, to withhold enforcement of the
relabeling regulations until January 1, 1998.
In 1989, Twin Laboratories Inc. received an informal inquiry from the New
York Regional Office of the FTC seeking substantiation for certain advertising
claims made for a segment of its "Fuel" bodybuilding/sports nutrition lines of
products. In response, Twin Laboratories Inc. submitted scientific
substantiation and financial information to the FTC. The Company is currently
negotiating this matter with the FTC and has received from the FTC a revised
proposed Complaint and Consent Decree (the "Decree") seeking, among other
things, injunctive relief restricting certain muscle building, fat loss and
other marketing claims in connection with the sale of the Company's weight
control, bodybuilding and sports nutrition products. In addition, the Decree
seeks payment of $200,000. The Company believes that it has adequate
scientific substantiation for the claims at issue and intends to vigorously
defend the matter if a settlement is not reached. There can be no assurance
that the injunctive provisions of any eventual resolution of this matter will
not have a material adverse effect on the Company or that any eventual
monetary payment will be limited to the amount sought in the Decree.
Certain of the Company's products include a Chinese herb known as "Ma
Huang," which contains naturally-occurring ephedrine. Ma Huang has been the
subject of certain adverse publicity in the United States and other countries
relating to alleged harmful effects, including the deaths of several
individuals. To the Company's knowledge, a number of states and local
governmental entities have instituted bans on sales of Ma Huang-containing
products that are portrayed as apparent alternatives to illegal street drugs.
There are also proposals in other states and local jurisdictions to broaden
the regulation of, or otherwise limit or prohibit, the sale of products
containing ephedrine. Ma Huang is also subject to laws or regulation in
certain states and foreign jurisdictions which limit ephedrine levels and
require appropriate warnings on product labels or which prohibit the sales of
products which contain Ma Huang other than by licensed pharmacists. On April
10, 1996, the FDA issued a statement warning consumers not to purchase or
consume dietary supplements containing ephedrine with
41
<PAGE>
labels that portray the products as apparent alternatives to illegal street
drugs because these products pose significant health risks to consumers. None
of the Company's products which contain Ma Huang are marketed for such
purpose. The FDA, through a National Food Advisory Committee, is currently
considering whether the FDA should prohibit, limit potencies or place other
restrictions on the sale of products containing Ma Huang. There can be no
assurance that the FDA will not seek to impose additional regulations on
products which contain Ma Huang, including those marketed by the Company.
There is a risk that the Company's products containing Ma Huang may become
subject to further federal, state, local or foreign laws or regulation, which
could require the Company to: (i) reformulate its products with reduced
ephedrine levels or with a substitute for Ma Huang and/or (ii) relabel its
products with different warnings or revised directions for use. Even in the
absence of further laws or regulation, the Company may elect to reformulate
and/or relabel its products which contain Ma Huang. While the Company believes
that its Ma Huang products could be reformulated and relabeled, there can be
no assurance in that regard or that reformulation and/or relabeling would not
have an adverse effect on sales of such products. The Company and others are
defendants in a wrongful death action originally commenced in July 1995 with
respect to one of the Company's products containing Ma Huang and with respect
to a product that does not contain Ma Huang manufactured by another defendant.
There can be no assurance that the Company will not be subject to further
private civil actions with respect to its products which contain Ma Huang.
Governmental regulations in foreign countries where the Company plans to
commence or expand sales may prevent or delay entry into the market or prevent
or delay the introduction, or require the reformulation, of certain of the
Company's products. Compliance with such foreign governmental regulations is
generally the responsibility of the Company's distributors for those
countries. These distributors are independent contractors over whom the
Company has limited control.
As a result of the Company's efforts to comply with applicable statutes and
regulations, the Company has from time to time reformulated, eliminated or
relabeled certain of its products and revised certain provisions of its sales
and marketing program. Compliance with the provisions of national, state and
local environmental laws and regulations has not had a material adverse effect
upon the capital expenditures, earnings, financial position, liquidity or
competitive position of the Company.
The Company cannot determine what effect additional governmental regulations
or administrative orders, when and if promulgated, would have on its business
in the future. They could, however, require the reformulation of certain
products to meet new standards, the recall or discontinuance of certain
products not capable of reformulation, additional recordkeeping, expanded
documentation of the properties of certain products, expanded or different
labeling, and/or scientific substantiation. Any or all of such requirements
could have a material adverse effect on the Company's results of operations
and financial condition.
The Company's American Fork, Utah, facility is registered by the FDA to
manufacture OTC drugs and is subject to periodic inspection by the FDA.
EMPLOYEES
At March 31, 1996, the Company employed 546 persons, of which 112 were
involved in executive, sales and administrative activities. The balance of the
Company's employees were engaged in production, packaging and shipping
activities. None of the Company's employees are covered by a collective
bargaining agreement, and management considers relations with its employees to
be good.
PROPERTIES
The Company owns a modern vitamin, mineral and nutritional supplement
manufacturing facility in Ronkonkoma, New York. This 80,000 square foot
facility also houses the Company's executive offices. The
42
<PAGE>
Company leases 26,300 square feet of warehouse space in Ronkonkoma, 50,000
square feet of warehouse space in Hauppauge, New York, and 5,000 square feet
of office space in Ronkonkoma. In addition, the Company owns a modern FDA-
registered 48,000 square foot manufacturing facility in American Fork, Utah.
This facility, which was constructed in 1993, houses office, manufacturing and
warehousing facilities for the operations of Natur-Pharma Inc. (Nature's
Herbs) and office and warehousing facilities for the operations of Alvita
Products, Inc.
The Company believes that its facilities and equipment generally are well
maintained and in good operating condition. In 1995, the Company acquired
additional property adjacent to its American Fork, Utah, facility to provide
additional plant capacity for the operations of Natur-Pharma Inc. and Alvita
Products, Inc. The Company is constructing an 8,500 square foot addition to
its Utah facility at a cost of approximately $700,000. Management believes
that the Company's Utah facility will be sufficient to enable the Company to
meet sales demand for the foreseeable future and that its New York facility
will be sufficient to meet sales demand for TWINLAB products for approximately
three years. Management believes that it will have the option to lease
additional space or to construct a new facility at such time.
TRADEMARKS
The Company owns trademarks registered with the United States Patent and
Trademark Office and/or similar regulatory authorities in many other countries
for its TWINLAB, Nature's Herbs, Alvita and Fuel family of trademarks, and has
rights to use other names material to its business. In addition, the Company
has obtained trademarks for various of its products and has approximately 250
trademark registrations with the United States Patent and Trademark Office for
TWINLAB, Nature's Herbs and Alvita brands. Federally registered trademarks
have perpetual life, provided they are renewed on a timely basis and used
properly as trademarks, subject to the rights of third parties to seek
cancellation of the marks. The Company regards its trademarks and other
proprietary rights as valuable assets and believes that they have significant
value in the marketing of its products. The Company vigorously protects its
trademarks against infringement.
LEGAL MATTERS
Twin Laboratories Inc. and other encapsulators, and various distributors,
manufacturers, and retailers of manufactured L-Tryptophan are defendants in
actions in federal and state courts seeking compensatory and, in some cases,
punitive damages for alleged personal injuries resulting from the ingestion of
products containing manufactured L-Tryptophan. As of June 1, 1996, Twin
Laboratories Inc. was a named defendant in three of these actions. The Company
believes that few new lawsuits are likely to be brought in view of the
statutes of limitations. Twin Laboratories Inc. has entered into the
Indemnification Agreement with SDA, a U.S. subsidiary of a Japanese
corporation, SDK. Under the Indemnification Agreement, SDA agrees to assume
the defense of all claims arising out of the ingestion of L-Tryptophan
products and to pay all legal fees and indemnify Twin Laboratories Inc.
against liability in any action if it is determined that a proximate cause of
the injury sustained by the plaintiff in the action was a constituent of the
raw material sold by SDA to Twin Laboratories Inc. or was a factor for which
SDA or any of its affiliates was responsible, except to the extent that action
by Twin Laboratories Inc. proximately contributed to the injury, and except
for certain claims relating to punitive damages. SDA appears to have been the
supplier of all the allegedly contaminated L-Tryptophan. SDA has posted a
revolving irrevocable letter of credit for the benefit of the Indemnified
Group if SDA is unable or unwilling to satisfy any claims or judgement. SDK
has unconditionally guaranteed the payment obligations of SDA under the
Indemnification Agreement. As of June 1, 1996, 129 suits in which the Company
was a named defendant have been dismissed or settled by SDA at no cost to the
Company.
The total of all damages alleged in the L-Tryptophan actions, if fully
awarded against the Company alone and ignoring the existence of the
Indemnification Agreement, would exceed the Company's available product
liability insurance coverage of $3 million for L-Tryptophan matters in respect
of claims made prior to December 31,1993, and would have a material adverse
impact upon the financial condition and results of operations of the Company.
However, the Indemnification Agreement, the defense and resolution to date of
numerous lawsuits by
43
<PAGE>
SDA without cost to the Company, the multitude of defendants and the
possibility that liability could be assessed against or paid by other parties
or by insurance carriers, have led management of the Company, after
consultation with outside legal counsel, to believe that the prospect for a
material adverse effect on the Company's results of operations or financial
condition is remote and no provision in the Company's financial statements has
been made for any loss that may result from these actions.
The Company, like other retailers, distributors and manufacturers of
products that are ingested, faces an inherent risk of exposure to product
liability claims in the event that, among other things, the use of its
products results in injury. With respect to product liability insurance
coverage, the Company currently has $75 million of product liability insurance
(which does not cover matters relating to L-Tryptophan) with a $25,000 self
insurance retention per occurrence and $100,000 self insurance retention in
the aggregate. There can be no assurance that such insurance will continue to
be available at a reasonable cost, or if available will be adequate to cover
liabilities.
The Company and others are defendants in a wrongful death action originally
commenced in July 1995 with respect to one of the Company's products
containing Ma Huang and with respect to a product that does not contain Ma
Huang manufactured by another defendant. See "Risk Factors--Government
Regulation" and "--Regulatory Matters."
The Company is presently engaged in various other legal actions, and
although ultimate liability cannot be determined at the present time, the
Company is currently of the opinion that the amount of any such liability from
these other actions and the lawsuit described in the preceding paragraph,
after taking into consideration the Company's insurance coverage, will not
have a material adverse effect on its results of operations and financial
condition.
44
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning each of the
Company's directors and executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Brian Blechman................... 45 Executive Vice President, Treasurer and Director
Dean Blechman.................... 39 Executive Vice President and Director
Neil Blechman.................... 45 Executive Vice President, Secretary and Director
Ross Blechman.................... 43 Chairman of the Board, Chief Executive Officer
and President
Steve Blechman................... 43 Executive Vice President and Director; Chairman
of the Board, Chief Executive Officer and
President of ARP
Stephen Welling.................. 42 President of Natur-Pharma Division of
Twin Laboratories Inc.
John G. Danhakl.................. 40 Director
Jennifer Holden Dunbar........... 33 Director
Jonathan D. Sokoloff............. 38 Director
</TABLE>
Brian Blechman became an Executive Vice President of the Company upon
consummation of the Acquisition. Mr. Blechman joined Twin Laboratories Inc. in
1972 and served as Vice President, Purchasing & Quality Control of the Company
prior to the Acquisition. He is responsible for the purchasing of all raw
materials and has final responsibility for all quality control and management
of the plant facilities. He is also responsible for capital expenditures for
plant and equipment and for product formulations.
Dean Blechman became an Executive Vice President of the Company upon
consummation of the Acquisition. Mr. Blechman joined Twin Laboratories Inc. in
1979 and served as Vice President, Sales of the Company prior to the
Acquisition. He has responsibility for overseeing the national sales force and
distributor network. Mr. Blechman is on the board of directors of the National
Nutritional Foods Association, a leading trade organization that governs the
industry's retailers, distributors and manufacturers.
Neil Blechman became an Executive Vice President of the Company upon
consummation of the Acquisition. Mr. Blechman joined Twin Laboratories Inc. in
1972 and served as Vice President, Marketing & Advertising of the Company
prior to the Acquisition. He is primarily responsible for directing marketing
and advertising strategies, the design of product packaging and point of sale
materials, the production and creation of merchandising displays, advertising,
promotional activities and trade show activities.
Ross Blechman became Chairman of the Board, Chief Executive Officer and
President of the Company upon consummation of the Acquisition. Mr. Blechman
joined Twin Laboratories Inc. in 1974 and served as Vice President, Production
of the Company prior to the Acquisition. He is primarily responsible for plant
operations, shipping, warehouse management, and for assuring that quality
standards are maintained. He is also responsible for MIS and human resource
functions. Mr. Blechman also directs the operations of the Alvita Products
division of Twin Laboratories Inc.
Steve Blechman became an Executive Vice President of the Company and
Chairman of the Board, Chief Executive Officer and President of ARP upon
consummation of the Acquisition. Mr. Blechman joined Twin Laboratories Inc. in
1974 and served as Vice President, Product Development & Marketing of the
Company prior to the Acquisition. He is involved in product development and
marketing, and is primarily responsible for developing new products for the
TWINLAB, Nature's Herbs and Alvita brands. Mr. Blechman also directs the
operations of ARP and the customer service department of Twin Laboratories
Inc.
Stephen Welling became the President of the Natur-Pharma Division of Twin
Laboratories Inc. upon consummation of the Acquisition. Mr. Welling joined
Natur-Pharma Inc. in 1977 as the controller and served as President of Natur-
Pharma Inc. prior to the Acquisition. Prior to his promotion to President, Mr.
Welling
45
<PAGE>
served as Vice President of Operations of Natur-Pharma Inc. with
responsibility for manufacturing, personnel, quality management, legal affairs
and finance.
John G. Danhakl became a director of the Company upon consummation of the
Acquisition. He has been an executive officer and an equity owner of Leonard
Green & Partners, L.P. ("LGP"), a merchant banking firm which manages GEI,
since 1995. Mr. Danhakl had previously been a Managing Director at Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") and had been with DLJ since
1990. Prior to joining DLJ, Mr. Danhakl was a Vice President at Drexel Burnham
Lambert Incorporated. Mr. Danhakl is also a director of The Arden Group, Inc.
and Kash n' Karry Food Stores, Inc.
Jennifer Holden Dunbar has been a director of the Company since its
formation in February 1996. She joined Leonard Green & Associates, L.P.
("LGA"), a merchant banking firm, as an associate in 1989, became a principal
in 1993, and through a corporation became a partner in 1994. Since 1994, Ms.
Holden Dunbar has also been an executive officer and equity owner of LGP. Ms.
Holden Dunbar previously was an associate with the merchant banking firm of
Gibbons, Green, van Amerongen and a financial analyst in mergers and
acquisitions with Morgan Stanley & Co. Ms. Holden Dunbar is also a director of
Thrifty PayLess Holdings, Inc., Thrifty PayLess, Inc., Kash n' Karry Food
Stores, Inc. and several private companies.
Jonathan D. Sokoloff became a director of the Company upon consummation of
the Acquisition. He joined LGA as a partner in 1990. Mr. Sokoloff has also
been an executive officer and equity owner of LGP since its formation in 1994.
Mr. Sokoloff was previously a Managing Director at Drexel Burnham Lambert
Incorporated. Mr. Sokoloff is also a director of Thrifty PayLess Holdings,
Inc., Thrifty PayLess, Inc., Carr-Gottstein Foods Co. and several private
companies.
The Company's By-laws and Certificate of Incorporation provide for the
Company's Board of Directors to be comprised of between eight and eleven
members, as determined from time to time by the stockholders. The Board is
currently comprised of eight members. Each Director holds office until the
next annual meeting of stockholders and until his successor is duly elected
and qualified, or until his earlier death, resignation or removal.
All of the Company's current Directors were nominated and elected to the
Company's Board of Directors in accordance with the Stockholder Agreement (as
hereinafter defined) as designees of GEI and the Continuing Stockholders,
respectively. See "Principal Stockholders--Terms of the Stockholders
Agreement." Upon the closing of the Offerings, this provision of the
Stockholders Agreement will terminate and there will be no voting agreements
in effect regarding the election of Directors. Executive officers of the
Company are appointed by, and serve at the discretion of, the Board of
Directors. Except for the Blechman Brothers' familial relationships, there are
no family relationships among the executive officers or Directors of the
Company.
BOARD COMMITTEES
The Board of Directors intends to establish an audit committee and a
compensation committee at or prior to the consummation of the Offerings. The
audit committee, the members of which will be independent directors, will
oversee actions taken by the Company's independent auditors, recommend the
engagement of auditors and review the scope and results of the Company's
accounting and control procedures and the accuracy of its system of internal
accounting and control procedures. The compensation committee will review and
approve the compensation of executives of the Company and make recommendations
to the Board of Directors with respect to standards for setting compensation
levels.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not currently have a compensation committee, however as
stated above, the Company intends to establish a compensation committee at or
prior to the consummation of the Offerings.
46
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table shows the compensation paid
by the Company during the year ended December 31, 1993 ("Fiscal Year 1993"),
the year ended December 31, 1994 ("Fiscal Year 1994") and the year ended
December 31, 1995 ("Fiscal Year 1995") to the five most highly compensated
executive officers of the Company, who collectively acted in a similar
capacity to a chief executive officer, serving as such at the end of Fiscal
Year 1995 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------
NAME AND PRINCIPAL FISCAL ALL OTHER
POSITION YEAR SALARY($) BONUS($)(a) COMPENSATION($)(b)
------------------ ------ --------- ----------- ------------------
<S> <C> <C> <C> <C>
Ross Blechman .......... 1995 402,461 368,145 9,527
Vice President
Brian Blechman ......... 1995 401,523 368,145 9,822
Vice President
Dean Blechman .......... 1995 402,545 368,145 9,235
Vice President
Neil Blechman .......... 1995 402,545 368,145 9,822
Vice President
Steve Blechman ......... 1995 402,548 368,145 9,527
Vice President
</TABLE>
- --------------------
(a) Bonuses are reported in the fiscal year earned and paid.
(b) (i) payment of premiums for term life insurance policies of $1,365 for
Ross Blechman; $1,660 for Brian Blechman; $1,073 for Dean Blechman; $1,660
for Neil Blechman; and $1,365 for Steve Blechman, for 1995; (ii) payment
of premiums for executive medical insurance policies for each of Ross
Blechman, Brian Blechman, Dean Blechman, Neil Blechman and Steve Blechman,
of $1,250 for 1995; and (iii) payments under Twin Laboratories Inc.'s
Profit Sharing Plan of $6,912 for each of Ross Blechman, Brian Blechman,
Dean Blechman, Neil Blechman and Steve Blechman, for 1995. The amount set
forth in this column does not include "S" corporation dividend
distributions sufficient to pay income taxes on the earnings of the
Company that were treated as having been earned by the individual as a
shareholder of the Company.
EMPLOYMENT AGREEMENTS
Upon consummation of the Acquisition, the Company entered into employment
agreements with each of the Blechman Brothers (each an "Employment
Agreement"). The Employment Agreement provides that, unless a Public Offering
Event (as defined below, see "Principal Stockholders--Terms of the
Stockholders Agreement") has occurred, the relevant individual will be
employed as an executive of the Company for a term of five years, renewable
for terms of one year thereafter. From and after the occurrence of a Public
Offering Event, the employment term is deemed to end on the third anniversary
of such event; provided that, the employment term will be automatically
extended so as to establish a three year remaining term of employment upon a
termination of employment for the purposes of the noncompetition and severance
provisions of the Employment Agreement. The Employment Agreement provides for
a base salary of $400,000 (as adjusted for inflation), in addition to other
customary perquisites and benefits. In addition to receiving a base salary,
the executive is also eligible to participate in the Holding Company's Bonus
Plan which entitles such individual to a
47
<PAGE>
bonus payment of up to 128% of his base salary for the relevant calendar year
based on annual increases in EBITDA (as defined therein) realized by the
Company for each year of the employment term. The Employment Agreement also
provides, subject to certain exceptions, that upon a termination of the
individual's employment during the term thereof (other than for "cause" as
defined therein), the Company is generally obligated to pay the individual an
amount equal to his base salary for the remaining term under the Employment
Agreement. The consummation of the Offerings will constitute a Public Offering
Event.
Upon consummation of the Acquisition, the Company entered into an employment
agreement with Stephen Welling to serve as President of the Natur-Pharma
Division of the Company (the "Division") (the "Welling Employment Agreement").
The Welling Employment Agreement provides that Mr. Welling will be employed as
an executive of the Company for a term of three years, renewable for terms of
one year thereafter. The Welling Employment Agreement provides for a base
salary of $135,000 (as adjusted for inflation), in addition to other customary
perquisites and benefits. In addition to receiving a base salary, Mr. Welling
is also eligible to participate in the Division Bonus Plan which entitles him
to a bonus payment up to 202.5% of his base salary for the relevant calendar
year based on annual increases in EBITDA (as defined therein) realized by the
Division for each year of the employment term. The Welling Employment
Agreement also provides, subject to certain exceptions, that upon a
termination of Mr. Welling's employment during the term thereof (other than
for "cause" as defined therein), the Company is generally obligated to pay Mr.
Welling an amount equal to his base salary for the remaining term under the
Welling Employment Agreement.
Upon consummation of the Acquisition, the Company entered into consulting
agreements with each of David and Jean Blechman (each a "Consulting
Agreement"). The Consulting Agreement provides that the relevant individual be
engaged as an independent consultant to the Company for a term of five years.
As consideration for such consulting services, the Company is obligated to pay
the individual an annual consulting fee of $100,000, in addition to certain
limited perquisites and benefits.
Upon consummation of the Acquisition, the Company also entered into non-
competition agreements with each of the Stockholders (each a "Non-Competition
Agreement"). The term of the Non-Competition Agreement is equal to the initial
term of the relevant individual's employment or consulting agreement, as the
case may be. The Non-Competition Agreement generally prevents the individual
from participating in any manner in the management, operation and/or ownership
of any entity, anywhere in the world, which is engaged in similar lines of
business to those of the Company.
DIRECTOR COMPENSATION
Directors who are employees of the Company receive no compensation for
serving on the Board of Directors. Non-employee directors are reimbursed for
their out-of-pocket expenses in attending Board meetings. Messrs. Danhakl and
Sokoloff and Ms. Holden Dunbar receive no fees in their capacities as
directors, but see "Certain Relationships and Related Transactions--
Transactions with LGP" for a description of certain other arrangements
pursuant to which LGP, of which they (or corporations owned by them) are
partners, receives compensation from the Company.
48
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE ACQUISITION
The Acquisition Agreement contains provisions customary for transactions of
similar size and type, including representations and warranties, which
generally will expire at the end of the fourteenth month following the month
in which the Acquisition Agreement was consummated. However, those
representations and warranties that are related to tax and environmental
matters, will expire, respectively, at the date on which the applicable
statute of limitations has expired and the third anniversary of the
consummation of the Acquisition Agreement. Subject to the limitations set
forth in the Acquisition Agreement (which include, subject to certain
exceptions, a $2,000,000 deductible on liability and a maximum liability of
$25,000,000), the Stockholders have agreed to indemnify GEI, its permitted
assigns and the Company against any liabilities arising out of the breach of
such representations and warranties while such representations and warranties
are still in effect. Pursuant to the Acquisition Agreement, the Stockholders
received, in addition to certain payments described elsewhere in this
Prospectus, a payment in respect of their estimated liability for taxes on the
Company's income prior to the consummation of the Transactions, when the
Company had "S" corporation status for federal income tax purposes. This
payment is subject to adjustment based on the actual tax liability as
calculated for the relevant period. In addition, certain fees, taxes and
expenses of parties to the Acquisition Agreement were paid by the Company in
connection with the consummation of the Acquisition. See "Prospectus Summary--
The Acquisition."
EMPLOYMENT AND CONSULTING AGREEMENTS
Upon consummation of the Acquisition, the Company entered into employment
agreements with each of the Continuing Stockholders and consulting agreements
with each of David and Jean Blechman. See "Management--Employment Agreements."
TRANSACTIONS WITH DAVID BLECHMAN AND JEAN BLECHMAN
During the period from 1989 to 1992, Twin Laboratories Inc. assigned to
David and Jean Blechman certain promissory notes of Natur-Pharma, Inc.,
representing inter-company payables, in the aggregate principal amount of
$1,500,000. These promissory notes bore interest at a rate of 10% per annum,
and $1,000,000 of the principal was repaid in 1994 and the remainder was
repaid on May 2, 1996. In June and July of 1991, Alvita Products, Inc. issued
four promissory notes payable to David Blechman and Jean Blechman in the
aggregate principal amount of $250,000. Such promissory notes bore interest at
a rate of 9% per annum and were repaid in April 1994. In 1988 and 1989, ARP
borrowed funds from David Blechman and Jean Blechman in the aggregate
principal amount of $545,500. These loans were non-interest bearing, and
$200,000 of the principal was repaid in 1994 and the remainder was repaid on
May 3, 1996.
The Company believes that the transactions described above were on terms at
least as favorable to the Company as could be obtained in transactions with
independent third parties.
TRANSACTIONS WITH LGP
LGP is the investment advisor to and an affiliate of the general partner of
GEI, which after consummation of the Acquisition owns 48% of the outstanding
shares of Common Stock of Holding. Following consummation of the Acquisition,
Messrs. Danhakl and Sokoloff and Ms. Holden Dunbar, stockholders and directors
of the general partner of LGP, became directors of the Company. See
"Management--Directors and Executive Officers."
Upon the consummation of the Acquisition, LGP received a fee of $1 million
for its services in arranging and structuring the Acquisition, including,
among other things, structuring and negotiating the Acquisition Agreement and
the Stockholders Agreement, arranging and negotiating the terms of the New
Credit Facility and related documents, assistance with the Note Offering,
financial and market analyses, and other similar consulting and investment
banking services. The majority of such services were performed on behalf of
LGP by Messrs. Danhakl and Sokoloff and Ms. Holden Dunbar.
49
<PAGE>
In connection with the Acquisition, the Company entered into a Management
Services Agreement with LGP pursuant to which LGP will receive an annual
retainer fee of up to $400,000 plus reasonable expenses for providing certain
management, consulting and financial planning services (the "LGP Management
Fee"). The Company believes that the contacts and expertise provided by LGP in
these areas enhance the Company's opportunities and management's expertise in
these matters and that the fees to be paid to LGP fairly reflect the value of
the services to be provided by LGP. The specialized consulting services
provided by LGP overlap to some extent with the role of Messrs. Danhakl and
Sokoloff and Ms. Holden Dunbar as directors of the Company, for which they do
not receive any additional compensation. See "Management--Director
Compensation." In addition to the LGP Management Fee, the Management Services
Agreement provides that LGP may receive reasonable and customary fees and
reasonable expenses from time to time for providing financial advisory and
investment banking services in connection with major financial transactions
that may be undertaken in the future; provided, however, that if the
Continuing Stockholders maintain ownership of more than 30% of the shares of
Common Stock of Holding, then the retention of LGP in connection with such
major financial transactions is subject to the approval of a majority of the
Blechman Brothers then serving as directors of the Company. The Management
Services Agreement will terminate on the earlier of its seventh anniversary or
such time as GEI no longer owns two-thirds of the shares of Common Stock of
Holding issued to GEI pursuant to the Acquisition Agreement.
50
<PAGE>
PRINCIPAL STOCKHOLDERS
The information in the following table sets forth certain information with
respect to the beneficial ownership of the Common Stock of Holding as of May
31, 1996 by (i) each person who beneficially owns more than 5% of the
outstanding shares of Holding's Common Stock, (ii) each executive officer of
the Company, (iii) each director of the Company, and (iv) all directors and
executive officers of the Company as a group. Except as noted below, each
person or entity has sole voting and investment power with respect to the
shares shown.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES OWNERSHIP
--------- ----------
<S> <C> <C>
Green Equity Investors II, L.P. .......................... 480,000 48%
c/o Leonard Green & Partners, L.P.
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
John G. Danhakl (a)....................................... 480,000 48%
c/o Leonard Green & Partners, L.P.
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
Jennifer Holden Dunbar (a)................................ 480,000 48%
c/o Leonard Green & Partners, L.P.
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
Jonathan D. Sokoloff (a).................................. 480,000 48%
c/o Leonard Green & Partners, L.P.
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
Brian Blechman............................................ 89,689 9%
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Dean Blechman............................................. 89,689 9%
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Neil Blechman............................................. 89,689 9%
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Ross Blechman............................................. 89,689 9%
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Steve Blechman............................................ 89,689 9%
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Stephen Welling........................................... 1,555 *
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
All directors and executive officers as a group (9 per-
sons) (b)................................................ 930,000 93%
</TABLE>
(footnotes on following page)
51
<PAGE>
- --------
(a) The shares shown as beneficially owned by Messrs. Danhakl and Sokoloff and
Ms. Holden Dunbar represent 480,000 shares owned of record by GEI. GEI is a
Delaware limited partnership managed by LGP, which is an affiliate of the
general partner of GEI. Each of Leonard I. Green, Jonathan D. Sokoloff, John
G. Danhakl, Gregory J. Annick and Jennifer Holden Dunbar, either directly
(whether through ownership interest or position) or through one or more
intermediaries, may be deemed to control LGP and such general partner. LGP
and such general partner may be deemed to control the voting and disposition
of the shares of Common Stock of Holding owned by GEI. As such, Messrs.
Sokoloff and Danhakl and Ms. Holden Dunbar may be deemed to have shared
voting and investment power with respect to all shares held by GEI. However,
such individuals disclaim beneficial ownership of the securities held by GEI
except to the extent of their respective pecuniary interests therein.
(b) Includes the shares referred to in Note a above.
*Less than 1%.
TERMS OF THE STOCKHOLDERS AGREEMENT
Upon consummation of the Acquisition, GEI, the Continuing Stockholders and
Holding entered into a Stockholders Agreement (the "Stockholders Agreement")
in respect of their holdings of shares of Common Stock of Holding. The
Stockholders Agreement contains certain transfer restrictions, pre-emptive
rights and voting provisions which will terminate on the date of this
Prospectus. Pursuant to the Stockholders Agreement, each of GEI and the
Continuing Stockholders is granted certain demand registration rights which
commence nine months after the Offerings. The Stockholders Agreement also
contains certain "piggyback" registration rights arising in the event that
Holding registers its securities under the Securities Act. Subject to the
early termination of certain provisions of the Stockholders Agreement upon the
occurrence of the Offerings, the Stockholders Agreement terminates on the
tenth anniversary of the date thereof.
Shares of common stock and Preferred Stock of Holding were issued to various
institutional investors (the "Senior Preferred Holders") pursuant to a Stock
Subscription Agreement among each such investor and Holding. Upon consummation
of the Acquisition, GEI, the Continuing Stockholders, the Senior Preferred
Holders and Holding entered into a secondary stockholders agreement (the
"Secondary Stockholders Agreement") in respect of their holdings of shares of
stock of Holding. Pursuant to such Secondary Stockholders Agreement, the
Senior Preferred Holders were granted certain rights of transfer of their
shares and certain rights of first refusal, which will terminate upon the
closing of the Offerings. In addition, commencing on the fifth anniversary of
the Secondary Stockholders Agreement, the Senior Preferred Holders will be
entitled to exercise one demand registration right with respect to their
shares of Common Stock of Holding. Finally, the Senior Preferred Holders will
have certain "piggyback" registration rights on other registrations of equity
securities of the Company. Subject to the early termination of certain
provisions of the Secondary Stockholders Agreement upon the occurrence of the
Offerings, the Secondary Stockholders Agreement terminates on the tenth
anniversary of the date thereof.
52
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
THE NEW CREDIT FACILITY
The New Credit Facility, agented by Chemical Bank ("Chemical") and The Bank
of New York, provides for (i) a six-year term loan facility, in the amount of
$53.0 million maturing on May 7, 2002 (the "Term Loan"), and (ii) a six year
revolving credit facility (the "Revolving Credit Facility") of $15.0 million
expiring on May 7, 2002. The Revolving Credit Facility and the Term Loan bear
interest at an annual rate, at the Company's option, equal to the "ABR plus
the Applicable Margin" ("ABR Loans") or the "Eurodollar Rate plus Applicable
Margin" ("Eurodollar Loans"). As used herein "ABR" means the highest of (i)
the rate of interest publicly announced by Chemical as its prime rate in
effect at its principal office in New York City, (ii) the secondary market
rate for certificates of deposit (grossed up for maximum statutory reserve
requirements) plus 1% and (iii) the federal funds effective rate from time to
time plus 0.5%. "Eurodollar Rate" means the rate (grossed up for maximum
statutory reserve requirements for eurocurrency liabilities) at which
eurodollar deposits for one, two, three or six months (as selected by the
Company) are offered to Chemical in the interbank eurodollar market in the
approximate amount of Chemical's share of the applicable loan. "Applicable
Margin" means (a) 1.25%, in the case of ABR Loans and (b) 2.50%, in the case
of Eurodollar Loans. Interest rates on the credit facilities are subject to
reduction in the event the Company meets certain financial tests.
The proceeds of the Term Loan were used, together with proceeds of the Note
Offering and the issuance of shares of Common Stock and Preferred Stock of
Holding and available cash of the Company, to finance the Acquisition, to
refinance certain debt of the Company and to pay related fees and expenses.
The proceeds of the Revolving Credit Facility can be used to provide for the
working capital requirements of the Company and for general corporate
purposes, including, without limitation, the payment of transaction fees and
tax adjustments.
The New Credit Facility is secured by first priority security interests in
all of the tangible and intangible assets of Twin Laboratories Inc. and its
direct and indirect subsidiaries. In addition, the loans under the New Credit
Facility are guaranteed by Holding, ARP and certain of Twin Laboratories
Inc.'s future subsidiaries. Additionally, the Company will be required to
apply 75% (subject to reduction to 50% if certain financial tests are met) of
excess cash flow (as defined in the New Credit Facility), 100% of the net
proceeds of certain dispositions of material assets (other than inventory in
the ordinary course of business), 50% of the net proceeds of the issuance or
sale of the first $60 million of equity by Holding and 100% of the net
proceeds of the incurrence of certain indebtedness, to the repayment of the
New Credit Facility.
The New Credit Facility contains certain financial and operating covenants
including a maximum leverage ratio, a minimum EBITDA and a minimum fixed
charge coverage ratio. In addition, the Company is limited in the amount of
annual capital expenditures and capital lease obligations it may incur.
The operating covenants of the New Credit Facility include limitations on
the ability of the Company to (i) incur additional indebtedness, other than
certain permitted indebtedness, (ii) permit additional liens or encumbrances,
other than certain permitted liens, (iii) make any investments in other
persons, other than certain permitted investments, (iv) become obligated with
respect to contingent obligations, other than certain permitted contingent
obligations, and (v) make restricted junior payments (including dividends on
its common stock). The operating covenants also include restrictions on
certain specified fundamental changes, such as mergers and asset sales,
transactions with shareholders and affiliates, and business outside the
ordinary course as currently conducted and certain extensions thereof,
amendments or waivers of certain specified agreements, and the issuance of
guarantees or other credit enhancements.
If for any reason the Company is unable to comply with the terms of the New
Credit Facility, including the covenants included therein, such noncompliance
would result in an event of default under the New Credit Facility and could
result in acceleration of the payment of the indebtedness outstanding under
the New Credit Facility.
DESCRIPTION OF NOTES
The 10 1/4% Senior Subordinated Notes due 2006 (the "Notes") were issued in
a transaction (the "Notes Offering") pursuant to which Twin Laboratories Inc.
issued an aggregate of $100,000,000 principal amount of
53
<PAGE>
the Notes to Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and
Chase Securities Inc. (together with DLJ, the "Initial Notes Purchasers") on
May 7, 1996 (the "Note Offering Closing Date"). The Initial Notes Purchasers
subsequently resold the Notes in reliance on Rule 144A and certain other
exemptions under the Securities Act. The Company and the Initial Notes
Purchasers also entered into a Registration Rights Agreement, pursuant to which
the Company granted certain registration rights for the benefit of the holders
of the Notes. The Company intends to consummate a registered exchange offer
under the Securities Act for the Notes (the "Exchange Offer") to satisfy
certain of the Company's obligations under the Registration Rights Agreement
with respect to the Notes. If the Exchange Offer is not filed or consummated
within certain time periods specified in the Registration Rights Agreement (a
"Registration Default"), the Company is obligated to pay liquidated damages to
each holder of the Notes, with respect to the first 90-day period following
such default in an amount equal to $.05 per week per $1,000 principal amount of
Notes which will increase by an additional $.05 per week per $1,000 principal
amount of Notes per Registration Default up to a maximum of $.30 per week per
$1,000 principal amount of Notes.
The Notes were issued under an indenture, dated as of the Note Offering
Closing Date (the "Indenture"), among Holding, Twin Laboratories Inc., ARP and
Fleet National Bank as trustee. The Notes are not redeemable, in whole or in
part, prior to May 15, 2001. Thereafter, the Notes are redeemable at the
redemption prices set forth in the Indenture, plus interest accrued thereon to
the redemption date. Notwithstanding the foregoing, at any time on or before
May 15, 1999, Twin Laboratories Inc. may redeem up to 35% of the original
aggregate principal amount of the Notes, in whole or in part, with the net
proceeds of one or more Equity Offerings (as defined therein) at a redemption
price equal to 109 1/2% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of redemption. Upon the occurrence of a
Change of Control (as defined therein), Twin Laboratories Inc. will be required
to make an offer to repurchase all outstanding Notes at 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of repurchase.
The Notes are general unsecured obligations of Twin Laboratories Inc.
subordinated in right of payment to all existing and future Senior Debt (as
defined therein) of Twin Laboratories Inc., including borrowings under the New
Credit Facility. The payment of the principal of, premium, if any, and interest
on the Notes are guaranteed (the "Guarantees") by Holding and ARP (the
"Guarantors"). The Guarantees are subordinated in right of payment to all
existing and future Senior Debt of the Guarantors. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources." The Indenture permits the Company to incur additional
indebtedness, including additional Senior Debt. The Indenture contains certain
covenants with respect to Twin Laboratories Inc. and the Subsidiary Guarantors
(as defined therein) that limit the ability of Twin Laboratories Inc. and the
Subsidiary Guarantors to, among other things, (i) incur additional Indebtedness
(as defined therein) and issue certain preferred stock, (ii) pay dividends or
make other distributions, (iii) layer Indebtedness, (iv) create certain liens,
(v) sell certain assets, (vi) enter into certain transactions with affiliates,
or (vii) enter into certain mergers or consolidations involving Twin
Laboratories Inc.
The form and terms of the notes to be issued under the Exchange Offer (the
"New Notes") will be identical in all material respects to the form and terms
of the Notes.
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Holding's Certificate of Incorporation authorizes Holding to issue
shares of Common Stock and shares of the Preferred Stock.
COMMON STOCK
Subject to the rights of the holders of any Preferred Stock which may be
outstanding, all shares of Common Stock will participate equally in dividends
payable to holders of Common Stock when, as and if declared by Holding's Board
of Directors and in net assets available for distribution to holders of Common
Stock on liquidation or dissolution, will have one vote per share on all
matters submitted to a vote of Holding's stockholders and will not have
cumulative voting rights in the election of directors. All issued and
outstanding shares of Common Stock will be fully paid and nonassessable, and
the holders thereof will not have preemptive rights, except as provided in the
Stockholders Agreement.
PREFERRED STOCK
The Certificate of Incorporation of Holding authorizes the issuance of
shares of Preferred Stock in two series, the Senior Preferred Stock and the
Junior Preferred Stock, and fixes for each such series the designations,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof. In connection with
the consummation of the Acquisition and the Note Offering, Holding's Board of
Directors authorized the issuance of Senior Preferred Stock and Junior
Preferred Stock, the terms of which are described below.
SENIOR PREFERRED STOCK
The Certificate of Incorporation limits the number of shares of Senior
Preferred Stock which can be issued to 30,000 plus additional shares of Senior
Preferred Stock which may be issued in payment of dividends on the Senior
Preferred Stock if Holding elects to pay dividends in additional shares of
Senior Preferred Stock. The aggregate liquidation preference of the Senior
Preferred Stock issued upon the consummation of the Acquisition was $30.0
million. Dividends on the Senior Preferred Stock accrue at the rate of 14% per
annum and will be payable quarterly when, as and if declared by the Board of
Directors. Dividends shall be paid in additional fully paid and non-assessable
shares of Senior Preferred Stock having an aggregate liquidation preference
equal to the amount of such dividends; provided, however, that Holding may, at
its option and upon a majority vote of directors not affiliated with LGP
("Unaffiliated Directors"), pay dividends in cash.
The Senior Preferred Stock is redeemable at any time, in whole or in part,
at the option of Holding and upon a majority vote of Unaffiliated Directors,
at the amount of the liquidation preference including accrued and unpaid
dividends, except that (i) no partial redemption is allowed unless full
cumulative dividends have been paid on all shares and (ii) no optional
redemption is allowed at any time when Holding is making or required to make
an offer to purchase Preferred Stock upon a change of control. The Senior
Preferred Stock will be subject to mandatory redemption at the amount of the
liquidation preference including accrued and unpaid dividends on May 1, 2007.
In the event of a Change of Control (as defined), Holding will be required
to make an offer to repurchase the outstanding Senior Preferred Stock at a
price equal to 101% of the liquidation preference thereof, plus accrued and
unpaid dividends.
The Senior Preferred Stock ranks junior in right of payment to all
liabilities of Holding and to any preferred stock senior in right of payment
to the Senior Preferred Stock (if consented to by holders of a majority of the
shares of Senior Preferred Stock) and ranks senior in right of payment to the
Junior Preferred Stock and Common Stock.
55
<PAGE>
Holders of the Senior Preferred Stock have no voting rights with respect to
general corporate matters except as provided by law or as set forth in the
Certificate of Incorporation. The Certificate of Incorporation provides that
the Senior Preferred Stock will have class voting rights with regard to, among
other things, (i) authorization or issuance of stock which is senior to or on a
parity with the Senior Preferred Stock as to dividends and distributions upon
liquidation; (ii) issuance of additional shares of Senior Preferred Stock other
than in payment of dividends on Senior Preferred Stock; (iii) changes to the
Certificate of Incorporation or By-laws of Holding so as to affect adversely
any of the preferences, rights, powers or privileges of the Senior Preferred
Stock or of the holders thereof as such; (iv) mergers, consolidations or sales
of all or substantially all of the assets of Holding (or of Holding and its
subsidiaries, taken as a whole) unless (a) the shares of Senior Preferred Stock
will be redeemed upon consummation of such transaction or (b) certain other
conditions are met; (v) certain transactions with affiliates; and (vi) subject
to certain exceptions (including exceptions relating to the Junior Preferred
Stock), payment of dividends on, or redemption or repurchase of, junior
securities. All shares of the Senior Preferred Stock will be redeemed in
connection with the Offerings.
JUNIOR PREFERRED STOCK
The Certificate of Incorporation limits the number of shares of Junior
Preferred Stock which can be issued to 37,000, plus additional shares of Junior
Preferred Stock which may be issued in payment of dividends on the Junior
Preferred Stock if Holding elects to pay dividends in additional shares of
Junior Preferred Stock. The aggregate liquidation preference of the Junior
Preferred Stock issued upon the consummation of the Acquisition was $37.0
million. Dividends on the Junior Preferred Stock accrue at the rate of 11.25%
per annum and will be payable quarterly when, as and if declared by the Board
of Directors. Dividends shall be paid in additional fully paid and non-
assessable shares of Junior Preferred Stock having an aggregate liquidation
preference equal to the amount of such dividends; provided, however, that if
dividends are then being paid in cash on the Senior Preferred Stock, Holding
may, at its option and upon a majority vote of Unaffiliated Directors, pay
dividends on the Junior Preferred Stock in cash.
The Junior Preferred Stock ranks junior in right of payment to all
liabilities of Holding and to the Senior Preferred Stock and any other
preferred stock senior in right of payment to the Junior Preferred Stock (if
consented to by holders of a majority of the shares of Junior Preferred Stock)
and ranks senior in right of payment to any additional preferred stock which
does not expressly provide that it ranks senior to or on a parity with the
Junior Preferred Stock and the Common Stock.
Other than as set forth above with respect to ranking, the powers, rights,
designations and preferences, and qualifications, restrictions and limitations
thereof, of the Junior Preferred Stock are substantially similar to those of
the Senior Preferred Stock. All shares of the Junior Preferred Stock will be
redeemed in connection with the Offerings.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, Holding will have shares of Common
Stock outstanding. Of these shares, the shares sold in the Offerings will
be freely tradeable without restriction or further registration under the
Securities Act, except that any shares purchased by "affiliates" of the
Company, as that term is defined under the Securities Act ("Affiliates"), may
generally only be sold in compliance with the limitations of Rule 144 described
below.
The remaining shares of Common Stock (the "Restricted Shares")
constitute restricted securities under Rule 144 and were issued by the Company
in private transactions in reliance upon one or more exemptions under the
Securities Act. Such restricted securities may be resold in a public
distribution only if registered under the Securities Act (which registration is
contemplated with respect to all of such restricted securities as described
below) or pursuant to an exemption therefrom, including Rule 144. The Company,
its officers, directors and certain other stockholders who collectively are the
beneficial owners of an aggregate of shares of common
56
<PAGE>
stock have agreed with the Underwriters not to directly or indirectly without
the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation offer, sell, contract to sell, grant any option to purchase or
otherwise dispose of any Common Stock or any securities convertible into or
exchangeable or exercisable for, or warrants, options or rights to purchase or
acquire Common Stock or in any other manner transfer all or a portion of the
economic consequences associated with the ownership of any Common Stock, or
enter into any agreement to do any of the foregoing, for a period of 180 days
after the date of this Prospectus (the "Lock-Up Period"). Upon the expiration
of such 180 day period, such holders will in general be entitled to dispose of
their shares, although the shares of Common Stock held by affiliates of the
Company will continue to be subject to the restrictions of Rule 144 under the
Securities Act.
In general, under Rule 144 of the Securities Act as currently in effect,
beginning 90 days after the Offerings, a person (or persons whose shares are
aggregated) who has beneficially owned Restricted Shares for at least two
years, including a person who may be deemed an Affiliate of the Company, is
entitled to sell within any three-month period a number of shares of Common
Stock that does not exceed the greater of 1% of the then outstanding shares of
Common Stock (approximately shares after giving effect to the Offerings)
or the average weekly trading volume of the Common Stock as reported through
the during the four calendar weeks preceding such sale. Sales under
Rule 144 are subject to certain restrictions relating to manner of sale,
notice and the availability of current public information about the Company.
In addition, under Rule 144(k), a person who is not an Affiliate of the
Company at any time 90 days preceding a sale, and who has beneficially owned
shares for at least three years, would be entitled to sell such shares
immediately following the Offerings without regard to the volume limitations,
manner of sale provisions or notice or other requirements of Rule 144.
The Company has granted certain institutional investors and their
transferees certain demand and piggyback registration rights covering an
aggregate of shares. These registration rights will become exercisable on
May 7, 2001. The Company has also granted GEI and the Continuing Stockholders
certain demand and piggyback registration rights covering an aggregate of
shares. The demand registration rights for GEI and the Continuing Stockholders
are not exercisable until nine months from the date on which the Offerings is
consummated. When and as these rights are exercised, additional shares will
become available for sale upon the effectiveness of a registration statement
filed pursuant to exercise of such rights. See "Principal Stockholders--Terms
of the Stockholders Agreement."
Prior to the Offerings there has been no public market for the Common Stock
and any sale of substantial amounts of Common Stock in the open market may
adversely affect the market price of the Common Stock offered hereby.
57
<PAGE>
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
The following is a general summary of certain United States federal income
and estate tax-consequences expected to result under current law from the
purchase, ownership, sale or other taxable disposition of the Common Stock by a
"Non-United States Holder." For the purpose of this summary, a "Non-United
States Holder" is any person or entity that is, as to the United States, a
foreign corporation, a non-resident alien individual, a foreign partnership or
a non-resident fiduciary of a foreign estate or trust as such terms are defined
in the Internal Revenue Code of 1986 as amended and in effect (the "Code").
This summary does not deal with all aspects of United States federal income and
estate taxation that may be relevant to Non-United States Holders in light of
their personal circumstances and does not address foreign, state and local tax
consequences. Furthermore, this summary is based on current provisions of the
Code and administrative and judicial interpretations as of the date hereof, all
of which are subject to change, possibly with retroactive effect. Prospective
foreign investors are urged to consult their tax advisors regarding the United
States federal, state, local and non-United States income and other tax
consequences of purchasing, owning and disposing of Common Stock.
DIVIDENDS
The Company does not expect to pay dividends on its Common Stock in the
foreseeable future. See "Dividend Policy." Generally, any dividend paid to a
Non-United States Holder of Common Stock will be subject to withholding of
United States federal income tax at a rate of 30% of the gross amount of the
dividend (or such lower tax rate as may be specified by an applicable income
tax treaty). Under current United States Treasury regulations, dividends paid
to an address in a country other than the United States are presumed to be paid
to a resident of such country for purposes of the withholding discussed above
(unless the payor has knowledge to the contrary) and, under the current
interpretation of United States Treasury regulations, for purposes of
determining the applicability of a tax treaty rate. However, under proposed
United States Treasury regulations not currently in effect, a Non-United States
Holder of Common Stock who wishes to claim the benefit of an applicable treaty
rate would be required to satisfy certain certification and other requirements.
Dividends received by a Non-United States Holder that are effectively connected
with a United States trade or business conducted by such Non-United States
Holder are exempt from such withholding tax. However, such effectively
connected dividends, net of certain deductions and credits, are taxed at the
same graduated rates applicable to United States persons. A Non-United States
Holder may claim exemption from withholding under the effectively connected
income exception by filing Form 4224 (Statement Claiming Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of Business
in the United States) with the Company or its paying agent.
In addition to the graduated tax described above, dividends received by a
corporate Non-United States Holder that are effectively connected with a United
States trade or business of the corporate Non-United States Holder may also be
subject to a branch profits tax at a rate of 30% (or such lower rate as may be
specified by an applicable income tax treaty).
DISPOSITION OF COMMON STOCK
A Non-United States Holder generally will not be subject to United States
federal income tax on any gain recognized upon the sale or other disposition of
Common Stock unless (i) such gain is effectively connected with a United States
trade or business of the Non-United States Holder, (ii) in the case of certain
Non-United States Holders who are non-resident alien individuals and hold the
Common Stock as a capital asset, such individuals are present in the United
States for 183 or more days in the taxable year of disposition and either (a)
the individual has a "tax home" in the United States for United States federal
income tax purposes or (b) the gain is attributable to an office or other fixed
place of business maintained by the individual in the United States or (iii)
the Company is or has been a "United States real property holding corporation"
("USRPHC") for federal income tax purposes at any time within the shorter of
the five-year period preceding such disposition or
58
<PAGE>
such Non-United States Holder's holding period and, provided that the Common
Stock continues to be "regularly traded on an established securities market"
for tax purposes, the Non-United States Holder held, directly or indirectly, at
any time during the five-year period ending on the date of disposition, more
than 5% of the outstanding Common Stock. The Company has determined that it is
not and does not believe that it will become a USRPHC for federal income tax
purposes. Although the Company believes that the Common Stock will be treated
as "regularly traded on an established securities market," if the Common Stock
were not so treated, on a sale or other disposition of such stock, the
transferee of such stock would be required to withhold 10% of the proceeds of
such disposition, unless either the Company were to provide a certification
that it is not (and has not been during a specific period) a USRPHC or another
exemption applied. If a Non-United States Holder falls under clause (i) above,
the holder will be taxed on the net gain derived from the sale under regular
graduated United States federal income tax rates (and, with respect to
corporate Non-United States Holders, may also be subject to the branch profits
tax described above). If an individual Non-United States Holder falls under
clause (ii) above, the holder generally will be subject to a 30% tax on the
gain derived from the sale, which gain may be offset by U.S. capital losses
recognized within the same taxable year of such sale.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In the event the Company decides, contrary to its present intent, to pay
dividends with respect to its Common Stock, then, generally, the Company must
report to the United States Internal Revenue Service the amount of dividends
paid, the name and address of the recipient, and the amount, if any, of tax
withheld. See "Dividend Policy." A similar report is sent to the holder.
Pursuant to tax treaties or other agreements, the United States Internal
Revenue Service may make its reports available to tax authorities in the
recipient's country of residence.
Dividends paid to a Non-United States Holder at an address within the United
States may be subject to backup withholding at a rate of 31% if the Non-United
States Holder fails to establish that it is entitled to an exemption or to
provide a correct taxpayer identification number and other information to the
payor.
Generally, United States information reporting and backup withholding will
not apply to a payment of disposition proceeds if the payment is made outside
the United States through a non-U.S. Office of a non-U.S. broker. However,
information reporting requirements (but not backup withholding) will apply to a
payment of disposition proceeds outside the United States through an office
outside the United States of a broker that is (a) a United States person, (b) a
controlled foreign corporation for United States federal income tax purposes or
(c) a foreign person 50% or more of whose gross income for certain periods is
from a United States trade or business, unless such broker has documentary
evidence in its files of the owner's foreign status and has no actual knowledge
to the contrary. The payment of the proceeds of the disposition of Common Stock
to or through the United States office of a broker is subject to information
reporting and backup withholding at a rate of 31% unless the holder certifies
its non-United States status under penalties of perjury or otherwise
establishes an exemption.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the United
States Internal Revenue Service.
FEDERAL ESTATE TAXES
An individual Non-United States Holder who owns Common Stock at the time of
his death or has made certain lifetime transfers of an interest in Common Stock
will be required to include the value of such Common Stock in his gross estate
for United States federal estate tax purposes, unless an applicable estate tax
treaty provides otherwise. Estates of non-resident aliens are generally allowed
a statutory credit which generally has the effect of offsetting the United
States federal estate tax imposed on the first $60,000 of the taxable estate.
59
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreement
(the "Underwriting Agreement"), the United States Underwriters named below (the
"U.S. Underwriters"), for whom Donaldson, Lufkin & Jenrette Securities
Corporation is acting as representative (the "U.S. Representative"), and the
international managers named below (the "International Managers" and, together
with the U.S. Underwriters, the "Underwriters"), for whom Donaldson, Lufkin &
Jenrette Securities Corporation is acting as representative (the "International
Representative" and, together with the U.S. Representative, the
"Representative"), have severally agreed to purchase from the Company an
aggregate of shares of Common Stock. The number of shares of Common Stock
that each Underwriter has agreed to purchase is set forth opposite its name
below:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
----------------- ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation...................
---
U.S. Offering subtotal..............................................
---
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS SHARES
---------------------- ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation...................
---
International Offering subtotal.....................................
---
Total.............................................................
===
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by counsel and
to certain other conditions. If any of the shares of Common Stock are purchased
by the Underwriters pursuant to the Underwriting Agreement, all such Shares
(other than those covered by the over-allotment option described below) must be
so purchased. The offering price and underwriting discounts and commissions per
share for the U.S. Offering and the International Offering are identical.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments that the Underwriters may be required to make in respect thereof.
The Representative has advised the Company that the Underwriters propose to
offer the shares of Common Stock to the public initially at the price to the
public set forth on the cover page of this Prospectus and to certain dealers
(who may include the Underwriters) at such price, less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may re-
allow, discounts not in excess of $ per share to any other Underwriter and
certain other dealers. After the Offerings, the offering price and other
selling terms may be changed by the Underwriters.
The Company has granted to the U.S. Underwriters an option to purchase up to
an aggregate of additional shares of Common Stock, at the initial public
offering price less underwriting discounts and commissions, solely to cover
over-allotments. Such option may be exercised at any time until 30 days after
the date of this Prospectus. To the extent that the U.S. Representative
exercises such option, each of the U.S. Underwriters will be committed, subject
to certain conditions, to purchase a number of shares proportionate to such
U.S. Underwriter's initial commitment as indicated in the preceding tables.
60
<PAGE>
The Company, its officers, directors, and certain other stockholders, who
collectively are the beneficial owners of an aggregate of shares of Common
Stock, have agreed with the Underwriters not to, directly or indirectly, offer,
sell, contract to sell, grant any option to purchase or otherwise dispose of,
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for, or warrants, options or rights to purchase or
acquire, Common Stock or in any other manner transfer all or a portion of the
economic consequences associated with the ownership of any Common Stock, or
enter into any agreement to do any of the foregoing, for a period of 180 days
after the date of this Prospectus. See "Shares Eligible for Future Sale."
Pursuant to an Agreement Between U.S. Underwriters and International Managers
(the "Agreement Between U.S. Underwriters and International Managers"), each
U.S. Underwriter has represented and agreed that, with respect to the shares
included in the U.S. Offering and with certain exceptions, (a) it is not
purchasing any Common Stock for the account of anyone other than a United
States or Canadian Person (as defined below) and (b) it has not offered or
sold, and will not offer or sell, directly or indirectly, any Common Stock or
distribute this Prospectus outside of the United States or Canada or to anyone
other than a United States or Canadian Person. Pursuant to the Agreement
Between U.S. Underwriters and International Managers, each International
Manager has represented and agreed that, with respect to the shares included in
the International Offering and with certain exceptions, (a) it is not
purchasing any Common Stock for the account of any United States or Canadian
Person and (b) it has not offered or sold, and will not offer or sell, directly
or indirectly, any Common Stock or distribute this Prospectus within the United
States or Canada or to any United States or Canadian Person. The foregoing
limitations do not apply to stabilization transactions and to certain other
transactions among the International Managers and the U.S. Underwriters. As
used herein, "United States or Canadian Person" means any national or resident
of the United States or Canada or any corporation, pension, profit-sharing or
other trust or other entity organized under the laws of the United States or
Canada or of any political subdivision thereof (other than a branch located
outside the United States or Canada of any United States or Canadian Person)
and includes any United States or Canadian branch of a person who is not
otherwise a United States or Canadian Person, and "United States" means the
United States of America, its territories, its possessions and all areas
subject to its jurisdiction.
Pursuant to the Agreement Between U.S. Underwriters and International
Managers, sales may be made between the U.S. Underwriters and the International
Managers of any number of shares of Common Stock to be purchased pursuant to
the Underwriting Agreement as may be mutually agreed. The per share price and
currency of settlement of any shares so sold shall be the public offering price
set forth on the cover page hereof, in United States dollars, less an amount
not greater than the per share amount of the concession to dealers set forth
above.
Pursuant to the Agreement Between U.S. Underwriters and International
Managers, each U.S. Underwriter has represented that it has not offered or
sold, and has agreed not to offer or sell, any Common Stock, directly or
indirectly, in Canada in contravention of the securities laws of Canada or any
province or territory thereof and has represented that any offer of Common
Stock in Canada will be made only pursuant to an exemption from the requirement
to file a prospectus in the province or territory of Canada in which such offer
is made. Each U.S. Underwriter has further agreed to send any dealer who
purchases from it any Common Stock a notice stating in substance that, by
purchasing such Common Stock, such dealer represents and agrees that it has not
offered or sold, and will not offer or sell, directly or indirectly, any of
such Common Stock in Canada in contravention of the securities laws of Canada
or any province or territory thereof and that any offer of Common Stock in
Canada will be made only pursuant to an exemption from the requirement to file
a prospectus in the province or territory of Canada in which such offer is
made, and that such dealer will deliver to any other dealer to whom it sells
any of such Common Stock a notice to the foregoing effect.
Pursuant to the Agreement between U.S. Underwriters and International
Managers, each International Manager has represented and agreed that (i) it has
not offered or sold and during the period of six months from the date of this
Prospectus will not offer or sell any Common Stock to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as
61
<PAGE>
principal or agent) for the purposes of their businesses or otherwise in
circumstances which do not constitute an offer to the public in the United
Kingdom for the purposes of the Public Offers of Securities Regulations 1995
(the "Regulations"); (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act of 1986 of Great Britain and the
Regulations with respect to anything done by it in relation to the Common Stock
in, from or otherwise involving the United Kingdom; and (iii) it has only
issued or passed on and will only issue or pass on in the United Kingdom any
document received by it in connection with the issue of the Common Stock to a
person who is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1995 of Great Britain
or is a person to whom the document may otherwise lawfully be issued or passed
on.
No action has been taken in any jurisdiction by the Company or the
Underwriters that would permit a public offering of the Common Stock offered
pursuant to the Offerings in any jurisdiction where action for that purpose is
required, other than the United States. The distribution of this Prospectus and
the offering or sale of the shares of Common Stock offered hereby in certain
jurisdictions may be restricted by law. Accordingly, the shares of Common Stock
offered hereby may not be offered or sold, directly or indirectly, and neither
this Prospectus nor any other offering material or advertisements in connection
with the Common Stock may be distributed or published, in or from any
jurisdiction, except under circumstances that will result in compliance with
applicable rules and regulations of any such jurisdiction. Such restrictions
may be set out in applicable Prospectus supplements. Persons into whose
possession this Prospectus comes are required by the Company and the
Underwriters to inform themselves about and to observe any applicable
restrictions. This Prospectus does not constitute an offer of, or an invitation
to subscribe for purchase of, any shares of Common Stock and may not be used
for the purpose of an offer to, or solicitation by, anyone in any jurisdiction
or in any circumstances in which such offer or solicitation is not authorized
or is unlawful.
The Representative has informed the Company that the Underwriters do not
expect sales to discretionary accounts to exceed five percent of the total
number of shares of Common Stock offered by them and the sales to discretionary
accounts by the Representative will be less than one percent of the total
number of shares of Common Stock offered by them.
Prior to the Offerings, there has been no public market for the shares of
Common Stock. The initial public offering price has been negotiated among the
Company and the Representative. Among the factors considered in determining the
initial public offering price of the Common Stock, in addition to prevailing
market conditions, were the Company's historical performance, estimates of the
business potential and earnings prospects of the Company, an assessment of the
Company's management and the consideration of the above factors in relation to
market valuation of companies in related businesses.
Donaldson, Lufkin & Jenrette Securities Corporation has in the past provided,
and may in the future provide, investment banking services for LGP and its
affiliates. Affiliates of Donaldson, Lufkin & Jenrette Securities Corporation
own 1.61% of the limited partnership interest in GEI. Affiliates of Donaldson,
Lufkin & Jenrette Securities Corporation own $7.5 million in aggregate
liquidation preference of the Senior Preferred Stock and will receive
approximately $7.5 million of the net proceeds of the Offerings in connection
with the redemption of such shares. See "Use of Proceeds."
Application will be made to have the shares of Common Stock listed on the New
York Stock Exchange under the symbol " ."
62
<PAGE>
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the Company
by Kramer, Levin, Naftalis & Frankel, New York, New York. Certain legal matters
will be passed upon for the Underwriters by Skadden, Arps, Slate, Meagher &
Flom, New York, New York.
EXPERTS
The consolidated financial statements of TLG Laboratories Holding Corp. as of
December 31, 1994 and 1995 and for each of the three years in the period ended
December 31, 1995 included in this Prospectus and the related financial
statement schedule included elsewhere in the Registration Statement, have been
audited by Deloitte & Touche llp, independent auditors, as stated in their
reports appearing herein and elsewhere in the Registration Statement and have
been so included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
63
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Financial Statements
Consolidated Balance Sheets as of December 31, 1994 and 1995 and March
31, 1996 (unaudited)................................................... F-3
Consolidated Statements of Income for the Years Ended December 31, 1993,
1994 and 1995 and the Three Months Ended March 31, 1995 (unaudited) and
1996 (unaudited)....................................................... F-4
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1993, 1994 and 1995 and the Three Months Ended March 31,
1996 (unaudited)....................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1993, 1994 and 1995 and the Three Months Ended March 31, 1995
(unaudited) and 1996 (unaudited)....................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
TLG Laboratories Holding Corp.
Ronkonkoma, New York
We have audited the accompanying consolidated balance sheets of TLG
Laboratories Holding Corp. and subsidiary as of December 31, 1994 and 1995,
and the related consolidated statements of income, shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of the Company as
of December 31, 1994 and 1995, and the results of their consolidated
operations and their consolidated cash flows for each of the three years in
the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Jericho, New York
February 9, 1996
(May 7, 1996 as to Notes 1 and 16)
F-2
<PAGE>
TLG LABORATORIES HOLDING CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (Note 7)............... $ 5,735 $ 7,945 $15,049
Marketable securities (Note 2)................... 1,178 201 224
Accounts receivable, net of allowance for bad
debts of $63, $177 and $244, respectively (Notes
7 and 15)....................................... 17,892 24,372 23,669
Inventories (Notes 3 and 7)...................... 22,732 25,273 28,110
Prepaid expenses and other current assets........ 1,179 872 1,479
------- ------- -------
Total current assets........................... 48,716 58,663 68,531
Marketable securities (Note 2)..................... 201 -- --
Property, plant and equipment, net (Notes 4, 8 and
9)................................................ 12,071 13,036 12,989
Other assets (Note 5).............................. 3,718 3,610 3,631
------- ------- -------
Total.............................................. $64,706 $75,309 $85,151
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Note 8)....... $ 1,101 $ 1,479 $ 1,471
Current portion of capital lease obligations
(Note 9)........................................ 126 136 138
Loan payable--bank (Note 7)...................... 660 660 660
Notes payable--shareholders (Note 14)............ 1,846 846 846
Accounts payable................................. 3,612 6,854 9,814
Accrued expenses and other current liabilities
(Note 6)........................................ 3,135 4,258 4,208
------- ------- -------
Total current liabilities...................... 10,480 14,233 17,137
Long-term debt, less current portion (Note 8)...... 5,116 5,367 5,290
Capital lease obligations, less current portion
(Note 9).......................................... 439 304 268
------- ------- -------
Total liabilities.............................. 16,035 19,904 22,695
------- ------- -------
Commitments and contingencies (Notes 12 and 13)
Shareholders' equity:
Common stock, $1 par value; 1,000,000 shares
authorized; 450,000 shares issued and
outstanding..................................... 450 450 450
Additional paid-in capital....................... 68 68 68
Retained earnings................................ 48,153 54,887 61,938
------- ------- -------
Total shareholders' equity..................... 48,671 55,405 62,456
------- ------- -------
Total.............................................. $64,706 $75,309 $85,151
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
TLG LABORATORIES HOLDING CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
--------------------------- ----------------
1993 1994 1995 1995 1996
------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales (Note 15)........ $99,897 $117,342 $148,735 $36,128 $43,984
Cost of sales.............. 62,131 70,247 89,932 22,158 26,362
------- -------- -------- ------- -------
Gross profit............... 37,766 47,095 58,803 13,970 17,622
Operating expenses......... 21,125 23,022 27,191 7,501 7,299
------- -------- -------- ------- -------
Income from operations..... 16,641 24,073 31,612 6,469 10,323
------- -------- -------- ------- -------
Other (expense) income:
Interest income.......... 242 254 313 82 167
Interest expense......... (487) (761) (866) (168) (224)
Transaction expenses
(Note 1)................ -- -- (656) -- (400)
Other.................... 510 354 61 5 (1)
------- -------- -------- ------- -------
265 (153) (1,148) (81) (458)
------- -------- -------- ------- -------
Income before unusual item
and provision for income
taxes..................... 16,906 23,920 30,464 6,388 9,865
Unusual item--nonrecurring
charge for prior years'
income tax assessment
(Note 13)................. -- 1,982 -- -- --
Provision for income taxes
(Note 10)................. 230 245 240 50 86
------- -------- -------- ------- -------
Net income................. $16,676 $ 21,693 $ 30,224 $ 6,338 $ 9,779
======= ======== ======== ======= =======
Pro forma (Note 1)
Historical income before
provision for income
taxes..................... $16,906 $ 21,938 $ 30,464 $ 6,388 $ 9,865
Pro forma provision for
income taxes.............. 6,644 9,087 12,060 2,529 3,906
------- -------- -------- ------- -------
Pro forma net income....... $10,262 $ 12,851 $ 18,404 $ 3,859 $ 5,959
======= ======== ======== ======= =======
Pro forma net income per $22.80 $28.56 $40.90 $8.58 $13.24
share..................... ======= ======== ======== ======= =======
Weighted average shares 450,000 450,000 450,000 450,000 450,000
outstanding (Note 2)...... ======= ======== ======== ======= =======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
TLG LABORATORIES HOLDING CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- --------
<S> <C> <C> <C> <C>
Balance at January 1, 1993............... $442 $ 1 $ 32,737 $ 33,180
Issuance of capital stock--B. Bros....... 8 67 -- 75
Net income............................... -- -- 16,676 16,676
Distributions to shareholders............ -- -- (9,388) (9,388)
---- --- -------- --------
Balance at December 31, 1993............. 450 68 40,025 40,543
Net income............................... -- -- 21,693 21,693
Distributions to shareholders............ -- -- (13,565) (13,565)
---- --- -------- --------
Balance at December 31, 1994............. 450 68 48,153 48,671
Net income............................... -- -- 30,224 30,224
Distributions to shareholders............ -- -- (23,490) (23,490)
---- --- -------- --------
Balance at December 31, 1995............. 450 68 54,887 55,405
Net income (unaudited)................... -- -- 9,779 9,779
Distributions to shareholders
(unaudited)............................. -- -- (2,728) (2,728)
---- --- -------- --------
Balance at March 31, 1996 (unaudited).... $450 $68 $ 61,938 $ 62,456
==== === ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
TLG LABORATORIES HOLDING CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH
DECEMBER 31, 31,
------------------------- ---------------
1993 1994 1995 1995 1996
------- ------- ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income...................... $16,676 $21,693 $30,224 $6,338 $ 9,779
Adjustment to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization. 805 950 1,011 215 302
Gain on sale of equipment..... (35) (153) (58) -- --
Bad debt expense.............. -- (59) 169 (2) 144
Other......................... 8 1 -- -- --
Changes in operating assets
and liabilities:
Accounts receivable......... (3,817) (5,880) (6,649) 2,680 559
Inventories................. (4,381) (3,717) (2,541) (2,751) (2,837)
Prepaid expenses and other
current assets............. (547) 295 307 (364) (607)
Accounts payable............ 2,354 (752) 3,242 2,587 2,960
Accrued expenses and other
current liabilities........ (471) 494 1,123 887 (50)
------- ------- ------- ------ -------
Net cash provided by
operating activities..... 10,592 12,872 26,828 9,590 10,250
------- ------- ------- ------ -------
Cash flows from investing
activities:
Maturities of marketable
securities..................... 1,163 1,120 1,178 345 --
Purchases of marketable
securities..................... (1,767) -- -- -- (23)
Proceeds from sales of property,
plant and equipment............ 1,358 435 825 -- --
Acquisition of property, plant
and equipment.................. (4,904) (1,786) (2,641) (489) (224)
Decrease (increase) in other
assets......................... (283) (519) 6 69 (52)
------- ------- ------- ------ -------
Net cash used in investing
activities............... (4,433) (750) (632) (75) (299)
------- ------- ------- ------ -------
Cash flows from financing
activities:
Proceeds from issuance of debt.. 2,758 6,073 4,685 -- --
Distributions to shareholders... (9,388) (13,565) (23,490) (7,194) (2,728)
Payments of debt................ (785) (5,389) (5,056) (572) (85)
Issuance of capital stock--B.
Bros........................... 75 -- -- -- --
Principal payments of capital
lease obligations.............. -- (121) (125) (41) (34)
------- ------- ------- ------ -------
Net cash used in financing
activities............... (7,340) (13,002) (23,986) (7,807) (2,847)
------- ------- ------- ------ -------
Net (decrease) increase in cash
and cash equivalents............. (1,181) (880) 2,210 1,708 7,104
Cash and cash equivalents at
beginning of period.............. 7,796 6,615 5,735 5,735 7,945
------- ------- ------- ------ -------
Cash and cash equivalents at end
of period........................ $ 6,615 $ 5,735 $ 7,945 $7,443 $15,049
======= ======= ======= ====== =======
Supplemental disclosures of cash
flow information:
Cash paid during the periods
for:
Interest...................... $ 466 $ 780 $ 853 $ 190 $ 224
======= ======= ======= ====== =======
Income taxes.................. $ 248 $ 267 $ 216 $ 61 $ 80
======= ======= ======= ====== =======
Supplemental disclosure of non-
cash investing activities--
Assets acquired under capital
lease obligations................ $ -- $ 686 $ -- $ -- $ --
======= ======= ======= ====== =======
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
TLG LABORATORIES HOLDING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(INFORMATION AS IT RELATES TO THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
IS UNAUDITED)
(DOLLAR AMOUNTS ARE IN THOUSANDS OF DOLLARS)
1. DESCRIPTION OF ENTITY AND BASIS OF PRESENTATION
Prior to May 7, 1996, Twin Laboratories Inc. ("Twin") and its affiliates,
Twinlab Export Corp. ("Export"), Twinlab Specialty Corporation ("Specialty"),
Alvita Products, Inc. ("Alvita"), Natur-Pharma, Inc. ("Natur-Pharma"), B.
Bros. Realty Corporation ("B Bros.") and Advanced Research Press, Inc. ("ARP")
(collectively the "Companies") operated as separate corporations, all of which
were wholly-owned by the same individuals (with some companies having
different ownership percentages among such individuals) except for Natur-
Pharma and B. Bros. which were only ninety-seven percent owned by such
individuals.
In July 1995, the shareholders of the Companies signed a non-binding letter
of intent to sell an interest in the Companies and subsequently entered into a
stock purchase and sale agreement (the "Acquisition Agreement") (see Note 16).
In connection with the transactions contemplated by the Acquisition Agreement,
the Companies incurred $656 of professional expenses as of December 31, 1995
(the "Transaction Expenses").
On February 27, 1996, TLG Laboratories Holding Corp. ("TLG") was
incorporated in contemplation of the Acquisition Agreement. The accompanying
consolidated financial statements include the accounts of TLG and subsidiary
(the "Company") after giving retroactive effect, in a manner similar to a
pooling of interests, to the merger of the Companies pursuant to the
Acquisition Agreement.
The Company's product line includes vitamins, minerals, amino acids, fish
and marine oils, sports nutrition products and special formulas marketed under
the TWINLAB trademark and a full line of herbal supplements and phytonutrients
and herb teas marketed under the Nature's Herbs and Alvita trademarks,
respectively. The Company sells its products through a network of
approximately 60 distributors, who service approximately 11,000 health food
stores and other selected retail outlets.
Twin manufactures and markets complete lines in two product categories:
vitamins, minerals and amino acids; and sports nutrition, consisting of a
total of over 400 products.
Export sells Twin's products outside the United States. Specialty markets
innovative and special nutritional supplements, some in unique dosage form.
Alvita Products, Inc., under the brand Alvita, markets over 100 natural single
herb teas and blends in both teabag and bulk form. Natur-Pharma manufactures
and markets approximately 400 herbal and botanical supplements under the
Nature's Herbs brand. Natur-Pharma operates a manufacturing facility
registered with the Food and Drug Administration (FDA).
B. Bros. was incorporated for the purpose of constructing a building to
serve as Natur-Pharma's new office, warehouse and production facility.
ARP is a publisher of sports nutrition books and a body building and fitness
magazine entitled "Muscular Development, Fitness & Health."
The Companies had been S Corporations, pursuant to the Internal Revenue
Code, during the years ended December 31, 1993, 1994 and 1995. Upon completion
of the Acquisition Agreement, the Companies terminated their S Corporation
status. The pro forma income statement information reflects adjustments to the
historical net income had the Companies not elected S Corporation status for
income tax purposes for all periods presented.
F-7
<PAGE>
TLG LABORATORIES HOLDING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principles of combination--All material intercompany accounts and
transactions have been eliminated.
b. Cash equivalents--Investments with original maturities of three months or
less are considered cash equivalents and consist primarily of money market
funds.
c. Marketable securities--The Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" during the year ended December 31, 1994, which
requires changes in the accounting and reporting of investments in debt and
equity securities. The effect of adopting SFAS No. 115 on the Company's
consolidated financial statements was not material.
The marketable securities portfolio primarily consists of investments in
tax-exempt municipal bonds. Marketable securities are stated at amortized cost
as the Company has the intent and ability to hold these securities to
maturity. The aggregate fair value of the current marketable securities as of
December 31, 1994 and 1995 was $1,170 and $201, respectively. The aggregate
fair value of the noncurrent marketable securities was $196 as of December 31,
1994.
d. Inventories--Inventories are stated at the lower of cost (first-in,
first-out method) or market value.
e. Property, plant and equipment--Depreciation is computed using the
straight-line method based upon the estimated useful lives of the related
assets which range from three to forty years. Amortization of leasehold
improvements is computed by the straight-line method over the shorter of the
estimated useful lives of the related assets or lease term.
f. Intangible assets--Trademarks are being amortized on the straight-line
method over their expected lives, not to exceed forty years. Goodwill, which
represents the excess of purchase price over fair value of net assets
acquired, is being amortized on the straight-line method over forty years.
Covenants not to compete are being amortized on the straight-line method over
five years.
g. Income taxes--In February 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes", which required significant changes in
accounting for income taxes, including an asset and liability approach to
income taxes. The Company adopted SFAS No. 109 in the year ended December 31,
1993. There was no cumulative effect to the consolidated financial statements
as a result of the change in accounting, nor did SFAS No. 109 have a material
effect on the amount of income taxes provided in the year ended December 31,
1993.
h. Research and development expenses--The Company charges research and
development expenses to operations as incurred. Research and development
expenses were $861, $1,030 and $1,140 for the years ended December 31, 1993,
1994 and 1995, respectively.
i. Pro forma net income per share--Pro forma net income per share has been
computed by dividing pro forma net income for each of the periods presented by
450,000 shares, which represents the number of equivalent shares outstanding
after giving retroactive effect to the issuance of TLG common shares to the
Continuing Shareholders pursuant to the Acquisition Agreement (see Note 16).
j. Fair value of financial instruments--The following methods and
assumptions were used to estimate the fair value of each class of financial
instruments:
1) Cash and cash equivalents--The carrying amounts approximate fair value
because of the short maturity of these instruments.
F-8
<PAGE>
TLG LABORATORIES HOLDING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2) Marketable securities--Fair value approximates quoted market value.
3) Receivables--The carrying amount approximates fair value because of
the short maturity of these instruments.
4) Debt--The carrying amounts approximate fair value based on borrowing
rates currently available to the Company for bank loans with similar terms.
k. Use of estimates in the preparation of financial statements--The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
l. Unaudited interim financial statements--In the opinion of management, the
unaudited consolidated financial statements for the three months ended March
31, 1995 and 1996 are presented on a basis consistent with the audited
consolidated financial statements and reflect all adjustments, consisting of
only normal recurring adjustments, necessary for a fair presentation of the
results thereof. The results of operation for interim periods are not
necessarily indicative of the results to be expected for the entire year.
m. Reclassifications--Certain prior year balances have been reclassified to
conform with current year classifications.
3. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1994 1995 1996
------- ------- ---------
<S> <C> <C> <C>
Inventories consist of the following:
Raw materials................................ $10,183 $11,006 $12,062
Work in process.............................. 4,720 4,550 6,433
Finished goods............................... 7,829 9,717 9,615
------- ------- -------
Total...................................... $22,732 $25,273 $28,110
======= ======= =======
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
------- ---------
<S> <C> <C>
Land, building and leasehold improvements...... $10,039 $11,204
Plant equipment................................ 5,883 6,097
Office equipment............................... 1,776 1,942
Automobiles.................................... 70 56
------- -------
17,768 19,299
Less: accumulated depreciation and
amortization.................................. 5,697 6,263
------- -------
Property, plant and equipment--net........... $12,071 $13,036
------- -------
Depreciation and amortization expense........ $ 851 $ 909
======= =======
</TABLE>
F-9
<PAGE>
TLG LABORATORIES HOLDING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1994 1995
------ ------
<S> <C> <C>
Due from related trust (a)............................. $1,640 $1,786
Trademarks, net of accumulated amortization of $128 and
$157, respectively.................................... 948 1,063
Goodwill, net of accumulated amortization of $96 and
$114, respectively.................................... 607 590
Other.................................................. 523 171
------ ------
Total.............................................. $3,718 $3,610
====== ======
</TABLE>
- ---------------------
(a) The Company has advanced, to a related party trust, payments for premiums
on a split dollar life insurance policy on the lives of the principal
shareholders. The amounts advanced will be repaid from the benefits or
cash value of the policy and are collateralized by the cash surrender
value of the policy. The principal shareholders are covered by a "second
to die" policy in the face amount of $10,000.
6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1994 1995
------ ------
<S> <C> <C>
Accrued salaries, employee benefits and payroll taxes............ $ 839 $ 935
Deferred revenue................................................. 689 787
Accrued professional fees........................................ 134 700
Other............................................................ 1,473 1,836
------ ------
Total........................................................ $3,135 $4,258
====== ======
</TABLE>
7. LOAN PAYABLE--BANK
Natur-Pharma has a revolving line of credit arrangement with a bank. A
maximum of $1,000 is available to Natur-Pharma with interest payable monthly
at the bank's variable base rate (8.5 percent at December 31, 1995). Terms of
the agreement include maintaining a $75 compensating balance, achieving
quarterly net income of at least $50 and limitations on repayment of notes
payable to shareholders. Borrowings are secured by inventories, accounts
receivable and a guarantee by Twin. The credit arrangement matures on June 1,
1996 and is subject to annual review by the bank. Borrowings against such line
of credit aggregated $660 at December 31, 1994 and 1995.
Twin entered into a line of credit arrangement with a bank which is
cancelable by either party at any time and expires on May 31, 1996. A maximum
amount of $10,000 is available with interest charged at the Alternate Base
Rate of the bank, which is the higher of the prime rate (8.5 percent at
December 31, 1995) or the Federal Funds rate (6.0 percent at December 31,
1995) plus 1/2 percent. There were no borrowings against such line of credit
at December 31, 1994 and 1995.
F-10
<PAGE>
TLG LABORATORIES HOLDING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1994 1995
------ ------
<S> <C> <C>
Mortgage payable to a bank collateralized by land and building,
payable in monthly installments of $22, including interest at
9.5 percent plus a $1,737 balloon payment due May 1, 2002....... $2,282 $2,228
Mortgage payable to a bank collateralized by land and building,
payable in monthly installments of $24, including interest at
9.9 percent, maturing August 2006............................... 2,171 2,104
Loan payable to a bank, payable in monthly installments of $14,
inclusive of interest at the prime rate plus .5 percent with the
balance due on June 1, 1996..................................... -- 1,121
Note payable to a bank collateralized by equipment, payable in
monthly installments of $10, including interest at 8.43 percent,
maturing August 31, 2001........................................ 584 516
Note payable to a bank, unsecured, payable in monthly
installments of $8, including interest at 7.7 percent, maturing
July 1, 2002.................................................... -- 506
Note payable to a power authority, payable in monthly
installments of $2, including interest at 6.38 percent, maturing
February 2011................................................... 296 289
Loan payable to a bank due on August 1, 1995..................... 792 --
Other............................................................ 92 82
------ ------
6,217 6,846
Less: current portion............................................ 1,101 1,479
------ ------
Total........................................................ $5,116 $5,367
====== ======
</TABLE>
The mortgages payable to banks provide, among other things, for the
maintenance by certain of the companies of a minimum tangible net worth
balance, certain financial ratios and limitations on additional borrowings.
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1996............................................................ $1,479
1997............................................................ 315
1998............................................................ 335
1999............................................................ 366
2000............................................................ 396
Thereafter...................................................... 3,955
------
Total.......................................................... $6,846
======
</TABLE>
9. CAPITAL LEASE OBLIGATIONS
The Company is obligated under leases for equipment, which are treated as
capital leases for financial reporting purposes due to certain provisions in
the lease agreements. Included in plant equipment at December 31, 1994 and
1995 are assets held under capital leases with a net carrying value of $652
and $583, respectively. Accumulated amortization on these assets at December
31, 1994 and 1995 was $34 and $103, respectively.
F-11
<PAGE>
TLG LABORATORIES HOLDING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The future minimum lease payments, by year and in the aggregate, and the
present value of the future minimum lease payments at December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1996............................................................ $164
1997............................................................ 164
1998............................................................ 164
----
Total........................................................... 492
Amount representing interest.................................... 52
----
Present value of the future minimum lease payments (including
$136 payable currently)........................................ $440
====
</TABLE>
10. INCOME TAXES
Prior to the consummation of the Acquisition Agreement, all of the Companies
were "S" corporations and as such Federal and state taxes were generally paid
at the shareholder level only. However, when corporate taxable income of any
company exceed $200, such company was required to pay New York State corporate
income taxes equal to the difference between the personal and the corporate
tax rate (approximately 2 percent at December 31, 1995) for all taxable income
in excess of $200, except for Natur-Pharma, Alvita and B. Bros., which are
subject to the tax laws of the State of Utah.
Some of the companies were not "S" corporations since inception. The
following table sets forth the effective date each company elected "S"
corporation status and the "C" corporation retained earnings at the time of
"S" corporation election:
<TABLE>
<CAPTION>
"C" CORPORATION
EFFECTIVE DATE OF "S" RETAINED
COMPANY CORPORATION ELECTION EARNINGS
------- --------------------- ---------------
<S> <C> <C>
Twin................................ January 1, 1987 $6,299
Export.............................. At inception None
Specialty........................... At inception None
Alvita.............................. January 1, 1992 $ 39
Natur-Pharma........................ January 1, 1993 $ 575
B. Bros. ........................... At inception None
ARP................................. January 1, 1989 $ (89)
</TABLE>
The provision for income taxes for the years ended December 31, 1993, 1994
and 1995 represents state taxes.
Twin is undergoing a routine audit of its Federal income tax return for the
year ended December 31, 1993. Management believes that any amounts which might
be assessed will not have a material effect on the consolidated financial
statements.
11. EMPLOYEE BENEFIT PLANS
Twin provides a profit sharing plan for all full-time employees who have
satisfied length of service and minimum age requirements. Profit sharing
expense related to Twin's plan was $250 for the years ended December 31, 1993,
1994 and 1995.
Under the Natur-Pharma, Inc. Employee Savings Plan, eligible participating
employees may elect to contribute up to twenty-five percent of their salaries
to an investment trust. Natur-Pharma may, at its sole
F-12
<PAGE>
TLG LABORATORIES HOLDING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
discretion, contribute to the plan. Participants are fully vested in their own
contributions and vest in Natur-Pharma's contributions at a rate of 20 percent
per year beginning one year after the date of contribution. Natur-Pharma
contributed and charged to expense $7, $11 and $37 under this plan for the
years ended December 31, 1993, 1994 and 1995, respectively.
12. COMMITMENTS AND CONTINGENCIES
a. Leases--The Company leases certain warehouse space and equipment under
operating leases. Generally, the leases carry renewal provisions and require
the payment of maintenance costs. Rental payments may be adjusted for
increases in taxes and other costs above specific amounts. Rental expense
charged to operations for the years ended December 31, 1993, 1994 and 1995 was
approximately $1,254, $1,281 and $1,370, respectively.
Future minimum payments under noncancellable operating leases with initial
or remaining terms of more than one year, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1996........................................................... $1,269
1997........................................................... 981
1998........................................................... 866
1999........................................................... 764
2000........................................................... 829
------
Total...................................................... $4,709
======
</TABLE>
b. Legal matters--Twin and other encapsulators, and various manufacturers,
distributors, suppliers, importers and retailers of manufactured L-Tryptophan
or products containing manufactured L-Tryptophan are or were defendants in
various legal actions brought in federal and state courts seeking compensatory
and, in some cases, punitive damages for alleged personal injuries resulting
from the ingestion of certain products containing manufactured L-Tryptophan.
As of January 31, 1996, Twin was a named defendant in three of these actions.
Although Twin believes that few new lawsuits are likely to be brought because
of applicable statutes of limitations, the possibility of future such actions
cannot be excluded. Twin and certain other companies in the industry (the
"Indemnified Group") have each entered into a Defense and Indemnification
Agreement with Showa Denko America, Inc. ("SDA") (the "Indemnification
Agreement"), under which SDA has agreed to assume the defense of all claims
against any of the Indemnified Group arising out of the ingestion of
L-Tryptophan products and to pay all legal fees incurred and indemnify Twin
against liability in any action if it is determined that a proximate cause of
the injury sustained by the plaintiff was a constituent of the raw material
sold by SDA to Twin or was a factor for which SDA or any of its affiliates was
responsible, except to the extent that action by Twin proximately contributed
to the injury, and except for certain claims relating to punitive damages. SDA
appears to have been the supplier of all of the allegedly contaminated L-
Tryptophan. SDA has posted a revolving irrevocable letter of credit for the
benefit of the Indemnified Group if SDA is unable or unwilling to satisfy any
claims or judgments. Showa Denko, K.K. ("SDK"), the Japanese parent of SDA and
manufacturer of the relevant L-Tryptophan, has unconditionally guaranteed the
payment obligations of SDA under the Indemnification Agreement. As of January
31, 1996, 128 lawsuits in which Twin was a named defendant had been dismissed
or settled by SDA at no cost to Twin.
The total of all damages alleged in the L-Tryptophan actions, if fully
awarded against Twin alone and ignoring the existence of the Indemnification
Agreement, would exceed Twin's available product liability insurance coverage
of $3 million for L-Tryptophan matters in respect of claims made prior to
December 31, 1993, and would have a material adverse effect on the Company's
results of operations and financial condition. However, the Indemnification
Agreement, the defense and resolution to date of numerous lawsuits by SDA
F-13
<PAGE>
TLG LABORATORIES HOLDING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
without cost to Twin, the multitude of defendants and the possibility that
liability could be assessed against or paid by other parties or by insurance
carriers have led management, after consultation with outside legal counsel,
to believe that the prospect for a material adverse effect on the Company's
consolidated financial condition or results of operations is remote and no
provision in the consolidated financial statements has been made for any loss
that may result from these actions. During the year ended December 31, 1993,
SDA reimbursed Twin approximately $461 primarily for unsalable L-Tryptophan
related merchandise.
In 1989, Twin received an informal inquiry from the New York Regional Office
of the Federal Trade Commission ("FTC") seeking substantiation for certain
advertising claims made for a segment of its "Fuel" bodybuilding/sports
nutrition line of products. In response, Twin submitted scientific
substantiation and financial information to the FTC. Twin is currently
negotiating this matter with the FTC and has received from the FTC a revised
proposed Complaint and Consent Decree (the "Decree") seeking, among other
things, injunctive relief restricting certain muscle building, fat loss and
other marketing claims in connection with the sale of Twin's weight control,
bodybuilding and sports nutrition products. In addition, the Decree seeks
payment of $200. The Company believes that it has adequate scientific
substantiation for the claims at issue, and it intends to vigorously defend
the matter if a settlement is not reached. The Company has reserved $200 for
this matter.
The Company is also engaged in various other litigation in the ordinary
course of business. Management is of the opinion that the amounts which may be
awarded or assessed in connection with these matters, if any, will not have a
material effect on the consolidated financial statements.
13. INVESTMENT IN LIMITED PARTNERSHIP
As a result of investments in certain limited partnerships, Hambrose 3 and 4
("Partnerships"), Twin entered into an agreement with the Partnerships wherein
Twin subscribed to additional limited interests in the Partnerships. Twin also
agreed to contribute a total of $360 as "Additional Capital Contribution" to
the Partnerships, which consists of a nonrecourse note of $240 and another
noninterest-bearing note due in the year 2010 in the amount of $120. In lieu
of making the Additional Capital Contribution in cash or subscription note,
Twin has assigned 100 percent of certain distribution rights until such time
as the assignee has recovered the full amount of the Additional Capital
Contribution. Twin is contingently liable to the Partnerships in the amount of
approximately $3,450. Management is of the opinion that there will be
sufficient income generated from the Partnerships' leasing operations to repay
all the debt due and Twin will not be required to make any further cash
payments. These investments have not been assigned any value on the
accompanying consolidated balance sheets.
The Hambrose 3 limited partnership has been audited by the Internal Revenue
Service ("IRS") for the years ended December 31, 1985 and 1986, at which time
Twin was a "C" corporation. A settlement was reached during 1995 in which Twin
paid approximately $2,082, including interest. In addition, Twin was
responsible for additional state taxes, inclusive of interest of approximately
$28. Twin recorded an estimated settlement amount during 1994 totaling $1,982
which was reflected as a nonrecurring charge to operations. An additional $128
of interest was recorded in 1995, and was included in operating expenses in
the accompanying consolidated statement of income.
14. RELATED PARTY TRANSACTIONS
Natur-Pharma had outstanding notes payable to certain shareholders totaling
$1,500 and $500 as of December 31, 1994 and 1995, respectively. Such notes
bear interest at ten percent per annum, which is payable semi-annually.
Interest expense on such notes was approximately $179, $150 and $100 for the
years ended December 31, 1993, 1994 and 1995, respectively. Alvita had
outstanding notes payable to certain shareholders
F-14
<PAGE>
TLG LABORATORIES HOLDING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
totaling $250 as of December 31, 1993. Such notes were repaid in the year ended
December 31, 1994. Interest expense on such notes was approximately $23 and $5
for the years ended December 31, 1993 and 1994, respectively. ARP had
outstanding notes payable to certain shareholders totaling $346 as of December
31, 1994 and 1995. Such notes are non-interest bearing.
15. MAJOR CUSTOMERS AND CREDIT CONCENTRATIONS
The Company has two significant customers which accounted for approximately
27 and 19 percent, respectively, of net sales for 1993; 28 and 20 percent,
respectively, of net sales for 1994; and 28 and 22 percent, respectively, of
net sales for 1995. No other customer accounted for more than 10 percent of net
sales in any of the three years ended December 31, 1995.
The Company's customers are primarily large independent distributors of
health food products. At December 31, 1994 and 1995, approximately 69 and 73
percent, respectively, of accounts receivable related to two customers.
16. SUBSEQUENT EVENT
The shareholders of the Companies entered into the Acquisition Agreement,
which is dated as of March 5, 1996 and which was consummated on May 7, 1996,
pursuant to which, among other things, (i) TLG acquired all of the outstanding
capital stock of Natur-Pharma, (ii) Green Equity Investors II L.P. ("GEI")
acquired 480,000 shares (48%) of the common stock of TLG for aggregate
consideration of $4,800, and shares of non-voting junior redeemable preferred
stock of TLG for aggregate consideration of $37,000, (iii) certain other
investors acquired 70,000 shares (7%) of the common stock of TLG (however, each
of these other investors own less than 5% of the common stock of TLG) for
aggregate consideration of $700 and shares of non-voting senior redeemable
preferred stock of TLG for aggregate consideration of $30,000, (iv) certain of
the shareholders of the Companies (the "Continuing Shareholders") received from
TLG, in exchange for certain of their shares of common stock of Natur-Pharma,
450,000 shares (45%) of the outstanding shares of common stock of TLG, valued
at $4,500, and (v) the shareholders of the Companies received a total of
$212,500 in consideration of the balance of their shares of common stock of
Natur-Pharma and for all of their shares of capital stock of Twin, Alvita,
Export, Specialty, B. Bros., and ARP. Of the total cash consideration to the
shareholders, approximately $15,000 represented consideration for non-
competition agreements entered into by the shareholders of the Companies, which
was recognized as a non-recurring expense upon the consummation of the
Acquisition Agreement.
Pursuant to the terms of the Acquisition Agreement, Twin, Alvita, Export,
Specialty, and B. Bros. were merged into Natur-Pharma. ARP was merged with
Natur-Pharma II, Inc., a wholly owned subsidiary of Natur-Pharma, and Natur-
Pharma became a wholly owned subsidiary of TLG. Natur-Pharma changed its name
to Twin Laboratories Inc. ("New Twin"). TLG's initial board of directors
consists of five of the Continuing Shareholders and three designees of GEI. A
majority of TLG's shareholders have the ability to elect a majority of its
directors. However, regardless of the composition of the board of directors,
pursuant to the terms of the TLG shareholders agreement, a wide range of
actions to be taken by TLG require the affirmative approval of both a majority
of the Continuing Shareholder directors and a majority of the GEI designee
directors. These actions include, but are not limited to, payment of certain
dividends, engagement in new businesses, acquisition of other businesses,
entering certain contracts, incurring certain debt or obligations, making
certain investments, relocation of executive offices, selection of location and
date of the annual shareholders meeting, termination or material modification
of any employee benefit plan, selection of auditors or legal counsel, adoption
or amendment of strategic plans or operating budgets, and election or
termination of any executive officers. In addition, certain fundamental
corporate actions, including but not limited to, amendments to the certificate
of incorporation, the
F-15
<PAGE>
TLG LABORATORIES HOLDING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
sale of substantially all of the assets of the Company, and the merger or
combination of the Company with another entity additionally require an
affirmative vote of holders of at least 80% of the issued and outstanding
stock of TLG. Such voting rights are generally effective until such time as
the common stock of TLG is publicly held. Because the transactions
contemplated by the Acquisition Agreement do not result in a change in control
as defined in Emerging Issues Task Force Issue No. 88-16, "Basis in Leveraged
Buyout Transactions" ("EITF 88-16"), the transactions were accounted for as a
recapitalization under the guidance of EITF 88-16 and the Companies'
historical basis of accounting were applied to the consolidated financial
statements of TLG. Upon consummation of the Acquisition Agreement, the
Companies terminated their S Corporation status.
Cumulative dividends on the preferred stock accrue at a rate of 14% per
annum (in the case of the senior preferred stock) and 11.25% per annum (in the
case of the junior preferred stock) and are payable quarterly, if declared by
the board of directors. Such dividends are payable in additional shares of
preferred stock (valued at the liquidation preference of $1,000 per share plus
accrued and unpaid dividends) unless the board of directors, upon a majority
vote of directors not affiliated with Leonard Green & Partners, L.P.,
determines that any such dividends will be paid in cash.
The redemption price of the preferred stock, as well as the liquidation
preference, is $1,000 per share plus accrued and unpaid dividends. The
preferred stock may be redeemed, in whole or in part, by TLG at any time,
except that (1) no partial redemption can be made by TLG unless all cumulative
dividends have been paid on all shares, (2) TLG may not redeem shares of
preferred stock at any time when it is making, or is required to make, an
offer to purchase preferred stock upon a change of control and (3) so long as
any shares of senior preferred stock are outstanding, no shares of junior
preferred stock may be redeemed without the consent of the holders of a
majority of the outstanding shares of senior preferred stock.
The preferred stock is subject to mandatory redemption, at the redemption
price, including accrued and unpaid dividends, eleven years after the issuance
thereof (in the case of the senior preferred stock) or twelve years after the
issuance thereof (in the case of the junior preferred stock). In addition,
upon a change in control TLG is required to offer to purchase the preferred
stock at 101 percent of the liquidation preference thereof, plus accrued and
unpaid dividends.
New Twin obtained additional financing necessary to effect the transactions
contemplated by the Acquisition Agreement, repay certain existing indebtedness
of the Company, and pay the fees and expenses incurred in connection with the
Acquisition Agreement through the incurrence of debt which totalled $153,000.
Such debt included: (1) borrowings of $53,000 under a term loan credit
facility provided by certain banks, financial institutions and other entities,
and (2) gross proceeds of $100,000 from the private placement of subordinated
debt. A six-year $15,000 revolving credit facility was also obtained from the
term loan lenders, to provide for working capital requirements.
The term loan is payable in defined percentages over a six-year period.
Borrowings under the term loan and revolving credit facilities bear interest,
at the borrower's discretion, at either the Alternative Base Rate, as defined,
plus a margin of 1.25 percent, or at the Eurodollar Rate, as defined, plus a
margin of 2.5 percent. Such margins are subject to reduction based upon the
achievement of certain performance targets, as defined. New Twin also must pay
a commitment fee of .5 percent per annum (subject to reduction based on the
achievement of certain performance targets, as defined) on the average daily
unused portion of the revolving credit facility. These credit facilities are
secured by all tangible and intangible assets of New Twin and are subject to
certain restrictive covenants including, among other things, the maintenance
of defined levels of earnings and certain debt coverage rates, as well as
restrictions on additional indebtedness, dividends, investments and certain
other significant transactions.
F-16
<PAGE>
TLG LABORATORIES HOLDING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
The subordinated debt matures in ten years and bears interest at a rate of
10 1/4% per annum. The subordinated debt is callable after five years at a
premium to par which will decline to par after eight years. During the first
three years, New Twin has the option to redeem up to 35 percent of the
subordinated debt with the proceeds of a public offering at a redemption price
of 109 1/2%. Upon a change of control, as defined, New Twin is required to
offer to redeem the subordinated debt at 101 percent of the principal amount
plus accrued and unpaid interest. Restrictive covenants on the subordinated
debt include, among other things, limitations on additional indebtedness,
investments and certain other significant transactions.
The subordinated debt is guaranteed by TLG and ARP. TLG had no assets or
liabilities until the consummation of the Acquisition Agreement. Summarized
financial information of ARP is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Net sales....................................... $3,188 $ 3,930 $ 5,200
Net income (loss)............................... (94) 466 (128)
Total assets.................................... 936 1,507 1,434
Total shareholders' equity (deficit)............ (116) 350 222
</TABLE>
The following unaudited pro forma results of operations assume the
transactions contemplated by the Acquisition Agreement occurred as of January
1, 1995. The pro forma operations data has been prepared for comparative
purposes only and does not purport to represent what the Company's actual
results of operations would have been had the transactions contemplated by the
Acquisition Agreement in fact occurred at January 1, 1995.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- ------------------
<S> <C> <C>
Net sales............................ $148,735 $43,984
Interest expense..................... 16,010 4,002
Net income........................... 9,211 3,754
</TABLE>
F-17
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDER-
WRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITA-
TION OF AN OFFER TO BUY THE SHARES OFFERED HEREBY BY ANYONE IN ANY JURISDIC-
TION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IM-
PLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUB-
SEQUENT TO ITS DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Additional Information.................................................... 3
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 10
Use of Proceeds........................................................... 16
Dividend Policy........................................................... 16
Dilution.................................................................. 17
Capitalization............................................................ 18
Unaudited Pro Forma Condensed Consolidated
Financial Data........................................................... 19
Selected Historical Financial Data........................................ 26
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 28
Business.................................................................. 32
Management................................................................ 45
Certain Relationships and Related Transactions............................ 49
Principal Stockholders.................................................... 51
Description of Certain Indebtedness....................................... 53
Description of Notes...................................................... 54
Description of Capital Stock.............................................. 56
Shares Eligible for Future Sale........................................... 57
Certain United States Tax Consequences to Non-United States Holders....... 59
Underwriting ............................................................. 61
Legal Matters............................................................. 64
Experts................................................................... 64
Index to Consolidated Financial Statements................................ F-1
</TABLE>
------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SHARES
TLG LABORATORIES
HOLDING CORP.
COMMON STOCK
----------------
PROSPECTUS
----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[ALTERNATE INTERNATIONAL COVER PAGE]
SUBJECT TO COMPLETION, DATED JUNE 4, 1996
PROSPECTUS
, 1996
SHARES
TLG LABORATORIES HOLDING CORP.
COMMON STOCK
All of the shares of common stock, $1.00 par value per share (the "Common
Stock"), offered hereby are being sold by TLG Laboratories Holding Corp.
("Holding" or the "Company"). Of the shares of Common Stock offered
by the Company, shares are initially being offered for sale outside
the United States and Canada by the International Managers (the "International
Offering") and shares are initially being offered for sale in the
United States and Canada in a concurrent offering by the U.S. Underwriters (the
"U.S. Offering," and together with the International Offering, the
"Offerings"), subject to transfers between the International Managers and the
U.S. Underwriters. See "Underwriting."
Prior to the Offerings, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be
between $ and $ per share. See "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price.
The Company intends to apply for listing of the Common Stock on the New York
Stock Exchange, Inc. under the symbol " ."
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE COMMON STOCK.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS AND TO THE
THE PUBLIC COMMISSIONS (1) COMPANY (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.............................. $ $ $
Total (3).............................. $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the International Managers and the U.S.
Underwriters (collectively, the "Underwriters") against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the U.S. Underwriters a 30-day option to
purchase up to an aggregate of additional shares of Common Stock on the
same terms as set forth above solely for the purpose of covering over-
allotments, if any. If such option is exercised in full, the total Price to
the Public, Underwriting Discounts and Commissions, and Proceeds to the
Company will be $ , $ , and $ , respectively. See "Underwriting."
The shares of Common Stock are being offered by the several Underwriters,
when, as and if delivered to and accepted by the Underwriters against payment
therefor and subject to various prior conditions, including their right to
reject orders in whole or in part. It is expected that delivery of the
certificates representing the shares will be made in New York, New York, on or
about , 1996.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE>
[ALTERNATE INTERNATIONAL BACK COVER PAGE]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRIT-
ERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY THE SHARES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAK-
ING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
THERE ARE RESTRICTIONS ON THE OFFER AND SALE OF THE COMMON STOCK OFFERED
HEREBY IN THE UNITED KINGDOM. ALL APPLICABLE PROVISIONS OF THE PUBLIC OFFERS OF
SECURITIES REGULATIONS 1995, THE FINANCIAL SERVICES ACT 1986 AND THE COMPANIES
ACT 1985 WITH RESPECT TO ANYTHING DONE BY ANY PERSON IN RELATION TO THE COMMON
STOCK IN, FROM OR OTHERWISE INVOLVING THE UNITED KINGDOM MUST BE COMPLIED WITH.
SEE "UNDERWRITING."
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Additional Information.................................................... 3
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 10
Use of Proceeds........................................................... 16
Dividend Policy........................................................... 16
Dilution.................................................................. 17
Capitalization............................................................ 18
Unaudited Pro Forma Condensed Consolidated
Financial Data........................................................... 19
Selected Historical Financial Data........................................ 26
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 28
Business.................................................................. 32
Management................................................................ 45
Certain Relationships and Related Transactions............................ 49
Principal Stockholders.................................................... 51
Description of Certain Indebtedness....................................... 53
Description of Notes...................................................... 54
Description of Capital Stock.............................................. 56
Shares Eligible for Future Sale........................................... 57
Certain United States Tax Consequences to Non-United States............... 59
Underwriting ............................................................. 61
Legal Matters............................................................. 64
Experts................................................................... 64
Index to Consolidated Financial Statements................................ F-1
</TABLE>
------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
TLG LABORATORIES
HOLDING CORP.
COMMON STOCK
----------------
PROSPECTUS
----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that expenses payable by the Registrant in
connection with the offering described in this Registration Statement (other
than the underwriting discounts and commissions) will be as follows:
<TABLE>
<CAPTION>
TOTAL
-------
<S> <C>
SEC registration fee (actual)....................................... $44,828
NASD filing fee (actual)............................................ 13,500
NYSE filing fee (actual)............................................ *
Blue Sky fees and expenses (including counsel fees)................. *
Accounting fees and expenses........................................ *
Legal fees and expenses............................................. *
Printing and engraving expenses..................................... *
Transfer Agent and Registrar fees and expenses...................... *
Miscellaneous expenses.............................................. *
-------
Total............................................................. $ *
=======
</TABLE>
- --------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 102(b)(7) of the Delaware General Corporation
Law (the "DGCL"), which permits a corporation in its certificate of
incorporation or an amendment thereto to eliminate or limit the personal
liability of a director for violations of the director's fiduciary duty,
except (i) for any breach of the director's fiduciary duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the DGCL (providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions), or
(iv) for any transaction from which the director derived an improper personal
benefit. The Registrant's Amended and Restated Certificate of Incorporation
contains provisions permitted by Section 102(b)(7) of the DGCL.
Reference is made to Section 145 of the DGCL which provides that a
corporation may indemnify any persons, including directors and officers, who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
such corporation), by reason of the fact that such person is or was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent
of another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, provided such director, officer, employee or agent
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interests and, with respect to any criminal
actions or proceedings, had no reasonable cause to believe that his conduct
was unlawful. A Delaware corporation may indemnify directors and/or officers
in an action or suit by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the director or officer is adjudged to be liable to the
corporation. Where a director or officer is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him or her against the expenses which such director or officer
actually and reasonably incurred.
The Registrant's Amended and Restated Certificate of Incorporation and its
By-laws filed as Exhibit 3.1 and 3.2 respectively, to this Registration
Statement provide for the indemnification of directors and officers of the
Registrant to the fullest extent permitted by the DGCL.
II-1
<PAGE>
Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, the Underwriters have agreed to indemnify the
directors, officers and controlling persons of the Registrant against certain
civil liabilities that may be incurred in connection with the Offering,
including certain liabilities under the Securities Act of 1933, as amended
(the "Securities Act").
The Registrant may provide liability insurance for each director and officer
for certain losses arising from claims or charges made against them while
acting in their capacities as directors or officers of the Registrant.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On May 7, 1996, the Company sold $100,000,000 aggregate principal amount of
its 10 1/4% Senior Subordinated Notes due 2006 (the "Old Notes") to Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") and Chase Securities Inc.
("Chase," collectively the "Initial Notes Purchasers") for $100,000,000 in
cash (less the Initial Notes Purchasers' discount of $3,000,000). Of the total
amount sold, DLJ purchased $60,000,000 aggregate principal amount of the Old
Notes and Chase purchased $40,000,000 aggregate principal amount of the Old
Notes. Such securities were sold in a transaction that was exempt from
registration under Section 4(2) of the Securities Act.
On May 7, 1996, Holding sold an aggregate of 30,000 shares of its 14% Non-
Voting Senior Cumulative Preferred Stock to five investors (the "Initial
Senior Preferred Stock Purchasers") for $30,000,000 in cash. Such securities
were sold in a transaction that was exempt from registration under Section
4(2) of the Securities Act.
On May 7, 1996, Holding sold 37,000 shares of its 11.25% Non-Voting Junior
Cumulative Preferred Stock to Green Equity Investors II, L.P. ("GEI II") for
$37,000,000 in cash. Such securities were sold in a transaction that was
exempt from registration under Section 4(2) of the Securities Act.
On May 7, 1996, Holding sold 70,000 shares of its Common Stock to the
Initial Senior Preferred Stock Purchasers for $700,000 in cash. Such
securities were sold in a transaction that was exempt from registration under
Section 4(2) of the Securities Act.
On May 7, 1996, Holding sold 480,000 shares of its Common Stock to GEI II
for an aggregate of $4,800,000 in cash. Such securities were sold in a
transaction that was exempt from registration under Section 4(2) of the
Securities Act.
On May 7, 1996, Holding sold an aggregate of 450,000 shares of its Common
Stock valued at $4,500,000 to certain members of its senior management in
exchange for certain of their shares of Common Stock of Natur-Pharma Inc. Such
securities were sold in transactions that were exempt from registration under
Section 4(2) of the Securities Act promulgated thereunder.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.**
2.1 Form of Stock Purchase and Sale Agreement, dated as of March 5,
1996, among David Blechman, Jean Blechman, Brian Blechman, Neil
Blechman, Ross Blechman, Steve Blechman, Dean Blechman, Stephen
Welling, the Registrant, Natur-Pharma Inc. and Green Equity
Investors II, L.P. ("GEI II") (the "Stock Purchase and Sale
Agreement").*
2.1.1 Form of Amendment to the Stock Purchase and Sale Agreement, dated
May 7, 1996.*
3.1 Form of Amended and Restated Certificate of Incorporation of the
Registrant.*
3.2 Form of By-laws of the Registrant.*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
4.1 Specimen form of stock certificate for Common Stock.**
4.2 Indenture, dated May 7, 1996, among Twin Laboratories Inc. ("Twin"),
Advanced Research Press, Inc. ("ARP"), the Registrant (together with
ARP, the "Guarantors") and Fleet National Bank, as Trustee,
Registrar, Paying Agent and Securities Agent, regarding Twin's 10
1/4% Senior Subordinated Notes due 2006.*
4.3 Form of Credit and Guarantee Agreement, dated May 7, 1996, among
Twin, the Registrant, the financial institutions named therein,
Chemical Bank as Administrative Agent and The Bank of New York as
Documentation Agent.*
5.1 Opinion re Legality of Kramer, Levin, Naftalis & Frankel.**
10.1 Form of Guarantee and Collateral Agreement, dated May 7, 1996, among
the Registrant, Twin, and ARP in favor of Chemical Bank, as
Administrative Agent.*
10.2 Form of Term Note.*
10.3 Form of Revolving Credit Note.*
10.4 Form of Swing Line Note.*
10.5 Form of Mortgage and Security Agreement, dated May 7, 1996, from the
Registrant to Chemical Bank, as Administrative Agent.*
10.6 Form of Deed of Trust, dated May 7, 1996, from Twin to First
American Title Company of Utah, Trustee for the use and benefit of
Chemical Bank, as Administrative Agent, Beneficiary.*
10.8 Stockholders Agreement, dated May 7, 1996, among Brian Blechman,
Neil Blechman, Ross Blechman, Steve Blechman, Dean Blechman and
Stephen Welling, the Registrant and GEI.*
10.9 Secondary Stockholders Agreement among the Brian Blechman, Neil
Blechman, Ross Blechman, Steve Blechman, Dean Blechman and Stephen
Welling, the Registrant, GEI, DLJ Investment Funding, Inc., DLJ
Investment Partners, L.P., Chase Equity Associates, L.P., PMI
Mezzanine Fund, L.P. and State Treasurer of the State of Michigan,
Custodian of the Michigan Public School Employees' Retirement
System, State Employees' Retirement System, Michigan State Police
Retirement System, and Michigan Judges Retirement System.*
10.10 Employment Agreement, dated May 7, 1996, between Twin and Brian
Blechman.*
10.11 Employment Agreement, dated May 7, 1996, between Twin and Neil
Blechman.*
10.12 Employment Agreement, dated May 7, 1996, between Twin and Ross
Blechman.*
10.13 Employment Agreement, dated May 7, 1996, between Twin and Steve
Blechman.*
10.14 Employment Agreement, dated May 7, 1996, between Twin and Dean
Blechman.*
10.15 Employment Agreement, dated May 7, 1996, between Twin and Stephen
Welling.*
10.16 Consulting Agreement, dated May 7, 1996, between Twin and David
Blechman.*
10.17 Consulting Agreement, dated May 7, 1996, between Twin and Jean
Blechman.*
10.18 Noncompetition Agreement, dated May 7, 1996, between the Registrant
and
David Blechman.*
10.19 Noncompetition Agreement, dated May 7, 1996, between the Registrant
and
Jean Blechman.*
10.20 Noncompetition Agreement, dated May 7, 1996, between the Registrant
and
Brian Blechman.**
10.21 Noncompetition Agreement, dated May 7, 1996, between the Registrant
and
Neil Blechman.**
10.22 Noncompetition Agreement, dated May 7, 1996, between the Registrant
and
Ross Blechman.**
10.23 Noncompetition Agreement, dated May 7, 1996, between the Registrant
and
Steve Blechman.**
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.24 Noncompetition Agreement, dated May 7, 1996, between the Registrant
and
Dean Blechman.**
10.25 Noncompetition Agreement, dated May 7, 1996, between the Registrant
and
Stephen Welling.**
10.26 Management Services Agreement, dated May 7, 1996, between Twin and
Leonard Green & Partners, L.P.**
10.27 Registration Rights Agreement, dated May 7, 1996, among Twin,
Donaldson, Lufkin & Jenrette Securities Corporation and Chase
Securities Inc.**
21.1 List of Registrant's Subsidiaries.**
23.1 Consent of Deloitte & Touche LLP.*
23.4 Consent of Kramer, Levin, Naftalis & Frankel (to be contained in the
opinion to be filed as Exhibit 5.1 hereto).
27 Financial Data Schedule.**
</TABLE>
- --------
* Filed herewith.
** To be filed by Amendment.
(b) Financial Statement Schedule
(i) Schedule II--Valuation and Qualifying Accounts
All other schedules are omitted because the required information is not
present or is not present in amounts sufficient to require submission of the
schedule or because the information required is included in the consolidated
financial statements or notes therein.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to provisions described in Item 14 above, or otherwise,
the Registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the Common Stock covered hereby, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
II-4
<PAGE>
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THERETO DULY AUTHORIZED, IN THE CITY
OF NEW YORK, NEW YORK, ON JUNE 4, 1996.
TLG LABORATORIES HOLDING CORP.
/s/ Ross Blechman
By: _________________________________
ROSS BLECHMAN CHAIRMAN OF THE
BOARD, CHIEF EXECUTIVE OFFICER AND
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment has been signed by the following persons
in the capacities and on the dates indicated.
SIGNATURE TITLE(S) DATE
/s/ Ross Blechman Chairman of the June 4, 1996
- ------------------------------------- Board, Chief
ROSS BLECHMAN Executive Officer,
President and
Director (Principal
Executive Officer)
/s/ Neil Blechman Executive Vice June 4, 1996
- ------------------------------------- President and
NEIL BLECHMAN Director
/s/ Brian Blechman Executive Vice June 4, 1996
- ------------------------------------- President and
BRIAN BLECHMAN Director (Principal
Financial and
Accounting Officer)
/s/ Steve Blechman Executive Vice June 4, 1996
- ------------------------------------- President and
STEVE BLECHMAN Director
/s/ Dean Blechman Executive Vice June 4, 1996
- ------------------------------------- President and
DEAN BLECHMAN Director
/s/ Jonathan D. Sokoloff Director June 4, 1996
- -------------------------------------
JONATHAN D. SOKOLOFF
/s/ John G. Danhakl Director June 4, 1996
- -------------------------------------
JOHN G. DANHAKL
/s/ Jennifer Holden Dunbar Director June 4, 1996
- -------------------------------------
JENNIFER HOLDEN DUNBAR
II-5
<PAGE>
SCHEDULE II
TLG LABORATORIES HOLDING CORP.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- --------------------- ---------- ---------
ADDITIONS
---------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE
BEGINNING COST AND ACCOUNTS DEDUCTIONS AT END OF
DESCRIPTIONS OF PERIOD EXPENSES - DESCRIBE - DESCRIBE PERIOD
------------ ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1995:
Allowance for bad debts.. $ 63 $169 $-- $ 55 $177
==== ==== === ==== ====
Reserve for excess and $100 $415 $-- $ -- $515
slow moving inventory... ==== ==== === ==== ====
YEAR ENDED DECEMBER 31,
1994:
Allowance for bad debts.. $123 $(59) $-- $ 1(1) $ 63
==== ==== === ==== ====
Reserve for excess and $-- $100 $-- $ -- $100
slow moving inventory... ==== ==== === ==== ====
YEAR ENDED DECEMBER 31,
1993:
Allowance for bad debts.. $126 $-- $-- $ 3(1) $123
==== ==== === ==== ====
Reserve for excess and $-- $-- $-- $-- $--
slow moving inventory... ==== ==== === ==== ====
</TABLE>
- --------
(1) Amounts written off.
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.**
2.1 Form of Stock Purchase and Sale Agreement, dated as of March 5,
1996, among David Blechman, Jean Blechman, Brian Blechman, Neil
Blechman, Ross Blechman, Steve Blechman, Dean Blechman, Stephen
Welling, the Registrant, Natur-Pharma Inc. and Green Equity
Investors II, L.P. ("GEI II") (the "Stock Purchase and Sale
Agreement").*
2.1.1 Form of Amendment to the Stock Purchase and Sale Agreement, dated
May 7, 1996.*
3.1 Form of Amended and Restated Certificate of Incorporation of the
Registrant.*
3.2 Form of By-laws of the Registrant.*
4.1 Specimen form of stock certificate for Common Stock.**
4.2 Indenture, dated May 7, 1996, among Twin Laboratories Inc. ("Twin"),
Advanced Research Press, Inc. ("ARP"), the Registrant (together with
ARP, the "Guarantors") and Fleet National Bank, as Trustee,
Registrar, Paying Agent and Securities Agent, regarding Twin's 10
1/4% Senior Subordinated Notes due 2006.*
4.3 Form of Credit and Guarantee Agreement, dated May 7, 1996, among
Twin, the Registrant, the financial institutions named therein,
Chemical Bank as Administrative Agent and The Bank of New York as
Documentation Agent.*
5.1 Opinion re Legality of Kramer, Levin, Naftalis & Frankel.**
10.1 Form of Guarantee and Collateral Agreement, dated May 7, 1996, among
the Registrant, Twin, and ARP in favor of Chemical Bank, as
Administrative Agent.*
10.2 Form of Term Note.*
10.3 Form of Revolving Credit Note.*
10.4 Form of Saving Line Note.*
10.5 Form of Mortgage and Security Agreement, dated May 7, 1996, from the
Registrant to Chemical Bank, as Administrative Agent.*
10.6 Form of Deed of Trust, dated May 7, 1996, from Twin to First
American Title Company of Utah, Trustee for the use and benefit of
Chemical Bank, as Administrative Agent, Beneficiary.*
10.8 Stockholders Agreement, dated May 7, 1996, among Brian Blechman,
Neil Blechman, Ross Blechman, Steve Blechman, Dean Blechman and
Stephen Welling, the Registrant and GEI.*
10.9 Secondary Stockholders Agreement among the Brian Blechman, Neil
Blechman, Ross Blechman, Steve Blechman, Dean Blechman and Stephen
Welling, the Registrant, GEI, DLJ Investment Funding, Inc., DLJ
Investment Partners, L.P., Chase Equity Associates, L.P., PMI
Mezzanine Fund, L.P. and State Treasurer of the State of Michigan,
Custodian of the Michigan Public School Employees' Retirement
System, State Employees' Retirement System, Michigan State Police
Retirement System, and Michigan Judges Retirement System.*
10.10 Employment Agreement, dated May 7, 1996, between Twin and Brian
Blechman.*
10.11 Employment Agreement, dated May 7, 1996, between Twin and Neil
Blechman.*
10.12 Employment Agreement, dated May 7, 1996, between Twin and Ross
Blechman.*
10.13 Employment Agreement, dated May 7, 1996, between Twin and Steve
Blechman.*
10.14 Employment Agreement, dated May 7, 1996, between Twin and Dean
Blechman.*
10.15 Employment Agreement, dated May 7, 1996, between Twin and Stephen
Welling.*
10.16 Consulting Agreement, dated May 7, 1996, between Twin and David
Blechman.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.17 Consulting Agreement, dated May 7, 1996, between Twin and Jean
Blechman.*
10.18 Noncompetition Agreement, dated May 7, 1996, between the Registrant
and
David Blechman.*
10.19 Noncompetition Agreement, dated May 7, 1996, between the Registrant
and
Jean Blechman.*
10.20 Noncompetition Agreement, dated May 7, 1996, between the Registrant
and
Brian Blechman.**
10.21 Noncompetition Agreement, dated May 7, 1996, between the Registrant
and
Neil Blechman.**
10.22 Noncompetition Agreement, dated May 7, 1996, between the Registrant
and
Ross Blechman.**
10.23 Noncompetition Agreement, dated May 7, 1996, between the Registrant
and
Steve Blechman.**
10.24 Noncompetition Agreement, dated May 7, 1996, between the Registrant
and
Dean Blechman.**
10.25 Noncompetition Agreement, dated May 7, 1996, between the Registrant
and
Stephen Welling.**
10.26 Management Services Agreement, dated May 7, 1996, between Twin and
Leonard Green & Partners, L.P.**
10.27 Registration Rights Agreement, dated May 7, 1996, among Twin,
Donaldson, Lufkin & Jenrette Securities Corporation and Chase
Securities Inc.**
21.1 List of Registrant's Subsidiaries.**
23.1 Consent of Deloitte & Touche LLP.*
23.4 Consent of Kramer, Levin, Naftalis & Frankel (to be contained in the
opinion to be filed as Exhibit 5.1 hereto).
27 Financial Data Schedule.**
</TABLE>
- --------
* Filed herewith.
** To be filed by Amendment.
<PAGE>
Exhibit 2.1
STOCK PURCHASE AND SALE AGREEMENT
dated as of March 5, 1996
among
DAVID BLECHMAN, JEAN BLECHMAN, BRIAN BLECHMAN,
NEIL BLECHMAN, ROSS BLECHMAN, STEVE BLECHMAN,
DEAN BLECHMAN, STEPHEN WELLING,
TLG LABORATORIES HOLDING CORP.,
NATUR-PHARMA INC.
AND
GREEN EQUITY INVESTORS II, L.P.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C> <C>
DEFINITIONS............................................................... 3
ARTICLE 1 - PURCHASE AND SALE OF SHARES; CLOSING.......................... 12
1.1 Purchase and Sale of Shares............................. 12
1.2 Closing................................................. 13
1.3 Payments................................................ 15
1.4 Attorney-in-Fact........................................ 16
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES REGARDING BUYER................ 16
2.1 Organization and Qualification.......................... 16
2.2 Authority and Absence of Conflict....................... 17
2.3 Approvals............................................... 19
2.4 Purchase for Investment................................. 19
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES REGARDING THE STOCKHOLDERS..... 20
3.1 Authority and Absence of Conflict....................... 20
3.2 Approvals............................................... 21
3.3 Ownership of Capital Stock.............................. 21
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES REGARDING THE CORPORATIONS..... 22
4.1 Organization and Qualification.......................... 22
4.2 Authority and Absence of Conflict....................... 22
4.3 Corporate Records....................................... 25
4.4 Capital Stock........................................... 25
4.5 Subsidiaries............................................ 25
4.6 Approvals............................................... 25
4.7 Financial Statements.................................... 26
4.8 Tax Matters............................................. 27
4.9 Real Property and Leaseholds............................ 31
4.10 Title to Assets......................................... 32
4.11 Property, Plant and Equipment........................... 34
4.12 Inventory............................................... 34
4.13 Product Liability and Recalls........................... 34
4.14 Accounts Receivable..................................... 36
4.15 Contracts............................................... 36
4.16 Marketing, Brokering and Distribution Agreements........ 37
4.17 Consulting Agreements................................... 38
4.18 Compliance with Law..................................... 39
4.19 Permits and Other Operating Rights...................... 41
4.20 Environmental Matters................................... 41
4.21 Litigation.............................................. 42
4.22 Intellectual Property................................... 43
4.23 ERISA Matters........................................... 45
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
4.24 Labor and Employment Matters........................... 48
4.25 Insurance Coverage..................................... 50
4.26 Conduct of Business.................................... 51
4.27 Certain Transactions................................... 53
4.28 No Undisclosed Material Liabilities.................... 54
4.29 Material Misstatements or Omissions.................... 54
4.30 Limitations on Representations......................... 54
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES REGARDING NATUR-PHARMA AND
B. BROS....................................................... 56
5.1 Representations and Warranties Regarding
Natur-Pharma and B. Bros................................ 56
ARTICLE 6 - PRE-CLOSING COVENANTS......................................... 56
6.1 Buyer's Conduct Prior to Closing........................ 56
6.2 Stockholders' and Corporations' Conduct Prior
to Closing.............................................. 56
6.3 Buyer's Access.......................................... 61
6.4 No Solicitation......................................... 61
6.5 Authorizations and Approvals............................ 61
6.6 Cancellation of Certain Obligations..................... 63
6.7 Disclosure Supplements.................................. 63
6.8 Covenant to Satisfy Conditions.......................... 64
6.9 Further Assurances...................................... 65
6.10 Other Tax Matters....................................... 65
ARTICLE 7 - CONDITIONS TO CLOSING......................................... 66
7.1 Conditions to Each Party's Obligations.................. 66
7.2 Conditions to Obligations of Buyer...................... 67
7.3 Conditions to Obligations of the Stockholders and
Natur-Pharma............................................ 70
ARTICLE 8 - EFFECTIVENESS; TERMINATION; SURVIVAL OF AGREEMENT............. 71
8.1 Termination............................................. 71
8.2 Effect of Termination................................... 72
ARTICLE 9 - TAXES AND COSTS; POST-CLOSING COVENANTS....................... 73
9.1 Transactional Taxes and Costs........................... 73
ARTICLE 10 - EMPLOYEES AND BENEFITS....................................... 75
10.1 Employees and Benefits.................................. 75
ARTICLE 11 - SURVIVAL; INDEMNIFICATION.................................... 76
11.1 Definitions............................................. 76
11.2 Indemnification......................................... 78
11.3 Notice and Defense of Third Party Claims................ 79
11.4 Notice of Other Claims.................................. 82
11.5 Limitations of Indemnification.......................... 82
11.6 Exclusivity of Remedies................................. 85
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
11.7 Limitation of Other Indemnification Rights.............. 86
ARTICLE 12 - PUBLICITY; CONFIDENTIALITY; BOOKS AND RECORDS................ 86
12.1 Publicity............................................... 86
12.2 Confidentiality......................................... 87
12.3 Books and Records....................................... 89
12.4 Survival................................................ 90
ARTICLE 13 - NOTICES...................................................... 90
13.1 Notices................................................. 90
ARTICLE 14 - GOVERNING LAW; FORUM......................................... 91
14.1 Governing Law; Forum.................................... 91
ARTICLE 15 - BINDING EFFECT; ASSIGNMENT; THIRD PARTY BENEFICIARIES........ 92
15.1 Binding Effect; Assignment; Third Party
Beneficiaries........................................... 92
ARTICLE 16 - ENTIRE AGREEMENT............................................. 93
16.1 Entire Agreement........................................ 93
ARTICLE 17 - MATERIALITY AND IMMATERIALITY................................ 93
17.1 Materiality and Immateriality........................... 93
ARTICLE 18 - AMENDMENTS................................................... 93
18.1 Amendments.............................................. 93
ARTICLE 19 - WAIVERS...................................................... 94
19.1 Waivers................................................. 94
ARTICLE 20 - REMEDIES LIMITED............................................. 94
20.1 Remedies Limited........................................ 94
ARTICLE 21 - HEADINGS; COUNTERPARTS....................................... 95
21.1 Headings; Counterparts.................................. 95
ARTICLE 22 - SEVERABILITY................................................. 95
22.1 Severability............................................ 95
</TABLE>
iii
<PAGE>
EXHIBITS
--------
Exhibit A Terms of Preferred Stock
Exhibit B Exchanged Shares; Remaining Shares; Remaining Shares Amount;
Merger Consideration
Exhibit C-1 Form of Subscription Agreement
Exhibit C-2 Amended and Restated Articles of Incorporation of Natur-Pharma
and ARP
Exhibit D Amended and Restated By-Laws of Natur-Pharma and ARP
Exhibit E Agreement and Plan of Merger
Exhibit F Agreement and Plan of Merger
Exhibit G Form of Stockholders Agreement
Exhibit H-1 Form of Blechman Employment Agreement
Exhibit H-2 Form of Welling Employment Agreement
Exhibit I Form of Consulting Agreement
Exhibit J Permitted Assignees
Exhibit K Heads of Opinion of Kelley Drye & Warren
Exhibit L Heads of Opinion of Piper & Marbury
Exhibit M Heads of Opinion of Ray, Quinney & Nebeker
Exhibit N Heads of Opinion of Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel
Exhibit O Terms and Conditions of Financing
Exhibit P Form of Release by Stockholders
Exhibit Q Form of Noncompetition Agreement
Exhibit R Form of Release by Corporations
iv
<PAGE>
DISCLOSURE SCHEDULES
--------------------
I STOCK OWNERSHIP
II FINANCIAL STATEMENTS; CERTAIN TAX MATTERS
III REAL PROPERTY
IV TITLE TO ASSETS
V PROPERTY, PLANT AND EQUIPMENT
VI PRODUCT LIABILITY; RECALLS
VII CONTRACTS
VIII MARKETING, BROKERING AND DISTRIBUTION AGREEMENTS
IX CONSULTING AGREEMENTS
X COMPLIANCE WITH LAW
XI PERMITS AND OPERATING RIGHTS
XII ENVIRONMENTAL CONDITIONS
XIII LITIGATION
XIV INTELLECTUAL PROPERTY
XV ERISA MATTERS
XVI LABOR AND EMPLOYMENT MATTERS
XVII CONDUCT OF BUSINESS
XVIII CERTAIN TRANSACTIONS
XIX PRODUCTS
XX EFFECT OF TRANSACTION
XXI APPROVALS
XXII UNDISCLOSED MATERIAL LIABILITIES
XXIII CONDUCT PRIOR TO CLOSING
XXIV SURVIVAL OF CERTAIN AGREEMENTS
XXV INCREMENTAL INCOME TAXES ADJUSTMENT
v
<PAGE>
STOCK PURCHASE AND SALE AGREEMENT (the "Agreement") dated as of March 5,
1996 among David Blechman, Jean Blechman, Brian Blechman, Neil Blechman, Ross
Blechman, Steve Blechman, Dean Blechman, Stephen Welling (collectively, the
"Stockholders"), TLG Laboratories Holding Corp., a corporation validly existing
under the laws of Delaware ("TLG Holding"), Natur-Pharma Inc., a corporation
validly existing under the laws of Utah ("Natur-Pharma"), and Green Equity
Investors II, L.P., a limited partnership validly existing under the laws of
Delaware ("Buyer") (the Stockholders, TLG Holding, Natur-Pharma and Buyer being
sometimes referred to herein individually as a "Party" and collectively as the
"Parties").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Stockholders own all of the issued and outstanding shares of
capital stock of Twin Laboratories Inc. ("Twin"), Twinlab Export Corp.
("Export"), Twinlab Specialty Corporation ("Specialty"), Alvita Products Inc.
("Alvita"), Advanced Research Press, Inc. ("ARP") and B. Bros. Realty Corp. ("B.
Bros.") (collectively, the "TL Affiliates") and Natur-Pharma, and Natur-Pharma
will own all of the issued and outstanding shares of capital stock of Natur-
Pharma II Inc., a corporation to be organized under the laws of Delaware
("Natur-Pharma II") (each of Twin, Export, Specialty, Alvita, ARP, B. Bros.,
Natur-Pharma and Natur-Pharma II being sometimes referred to herein individually
as a "Corporation" and collectively as the "Corporations");
WHEREAS, the Corporations (other than Natur-Pharma II) are engaged in the
development, manufacture, marketing, sale and distribution of vitamins,
minerals, nutritional supplements, herbal products and herb teas, the
publication of related health, fitness and bodybuilding publications, and
activities related to the foregoing, throughout the United States and
internationally (the "Business");
<PAGE>
WHEREAS, the Stockholders and Buyer desire that TLG Holding issue and sell
to Buyer, and Buyer desires to purchase from TLG Holding, newly issued shares of
capital stock of TLG Holding, on the terms and subject to the conditions set
forth herein;
WHEREAS, contemporaneously with such sale of capital stock to Buyer, Brian
Blechman, Neil Blechman, Ross Blechman, Dean Blechman, Steve Blechman and
Stephen Welling (collectively, the "Continuing Stockholders") desire to exchange
a portion of the common stock, no par value, of Natur-Pharma ("NP Common Stock")
owned by them for newly issued shares of the capital stock of TLG Holding;
WHEREAS, the Stockholders and Buyer desire that TLG Holding utilize the
proceeds from such sale of capital stock to Buyer to purchase all of the shares
of NP Common Stock owned by David Blechman and Jean Blechman and the remaining
portion of the shares of NP Common Stock not exchanged by the Continuing
Stockholders as contemplated above and contribute the remaining proceeds to the
capital of Natur-Pharma;
WHEREAS, the Stockholders and Buyer desire that Natur-Pharma borrow funds
from certain lenders and issue subordinated debt to certain purchasers and
utilize a portion of the proceeds therefrom, together with the proceeds of the
capital contribution by TLG Holding as contemplated above, as consideration (the
"Merger Consideration") for the shares of capital stock of the TL Affiliates
(other than ARP) owned by the Stockholders immediately prior to the Natur-Pharma
Merger (as defined in Article 1.2(b)(v) hereof), as more fully set forth herein;
WHEREAS, the Stockholders and Buyer desire that Natur-Pharma contribute a
portion of the Merger Consideration to Natur-Pharma II, to be utilized by Natur-
Pharma II as consideration (the "ARP Merger Consideration") for the shares of
capital stock of ARP owned by the Stockholders immediately prior to the Natur-
Pharma II Merger (as defined in Article 1.2(b) (v) hereof), as more fully set
forth herein;
2
<PAGE>
NOW, THEREFORE, in consideration of the premises, representations and
warranties and the mutual covenants and agreements contained herein and other
good, valuable and sufficient consideration, the receipt of which is hereby
acknowledged, each of the Parties, intending to be legally bound, hereby agrees
as follows:
DEFINITIONS
-----------
A. As used in this Agreement and the Schedules delivered pursuant to this
Agreement, the following definitions shall apply.
"Acquired Shares" has the meaning specified in Article 1.1.
---------------
"Acquisition" has the meaning specified in Article 1.1.
-----------
"Acquisition Proposal" has the meaning specified in Article 6.4.
--------------------
"Act" has the meaning specified in Article 2.4.
---
"Action" means any action, complaint, petition, suit or other proceeding,
------
whether civil or criminal, in law or in equity, or before any arbitrator or
Governmental Authority.
"Affiliate" means, with respect to any Person, any other Person
---------
controlling, controlled by or under common control with, or the parents, spouse,
lineal descendants or beneficiaries of, such Person. The term "control"
(including the terms "controlling," "controlled by" and "under common control
with") means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through
ownership of voting securities, by contract or otherwise.
"Agreement" means this Agreement, as amended or supplemented, together with
---------
all Exhibits and Schedules attached or incorporated by reference.
"Agreement Date" means the date set forth in the first paragraph of this
--------------
Agreement.
"Alvita" has the meaning specified in the recitals to this Agreement.
------
3
<PAGE>
"Approval" means any approval, authorization, consent, qualification or
--------
registration, or any waiver of any of the foregoing, required to be obtained
from, or any notice, statement or other communication required to be filed with
or delivered to, any Governmental Authority or any other Person.
"ARP" has the meaning specified in the recitals to this Agreement.
---
"ARP Financial Statements" has the meaning specified in Article 4.7(c).
------------------------
"ARP Merger Consideration" has the meaning specified in the recitals to
------------------------
this Agreement.
"Audited Corporations" has the meaning specified in Article 4.7(a).
--------------------
"Audited Financial Statements" has the meaning specified in Article 4.7(a).
----------------------------
"B. Bros." has the meaning specified in the recitals to this Agreement.
--------
"Balance Sheet Date" means June 30, 1995.
------------------
"Benefit Plan" has the meaning specified in Article 4.23(a)(i).
------------
"Borrowings" has the meaning specified in Article 1.2(b)(iii)(A).
----------
"Business" has the meaning specified in the recitals to this Agreement.
--------
"Buyer" has the meaning specified in the recitals to this Agreement.
-----
"Buyer Counsel" has the meaning specified in Article 7.2(a).
-------------
"Buyer Transactional Costs" has the meaning specified in Article 9.1(b).
-------------------------
"Bylaws" means a corporation's bylaws, code of regulations or equivalent
------
document.
"Charter" means a corporation's articles of incorporation, certificate of
-------
incorporation or equivalent organizational documents.
"Claim" means any Action, claim, demand, demand letter, lien or notice of
-----
non-compliance or violation.
"Closing" means the consummation of the Transactions.
-------
"Closing Date" has the meaning specified in Article 1.2(a).
------------
4
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended, and the
----
regulations promulgated thereunder.
"Confidential Information" has the meaning specified in Article 12.2(a).
------------------------
"Consulting Agreements" has the meaning specified in Article 4.17(a).
---------------------
"Continuing Stockholders" has the meaning specified in the recitals to this
-----------------------
Agreement.
"Corporations" has the meaning specified in the recitals to this Agreement.
------------
"Corporations Counsel" has the meaning specified in Article 7.2(d).
--------------------
"Corporation Permits" has the meaning specified in Article 4.19.
-------------------
"Corporation Transactional Costs" has the meaning specified in Article
-------------------------------
9.1(c).
"Delivering Party" has the meaning specified in Article 12.2(a).
----------------
"Deloitte & Touche" has the meaning specified in Article 4.7(a).
-----------------
"Distribution Agreements" has the meaning specified in Article 4.16(a).
-----------------------
"Encumbrance" means any charge, encumbrance, lien, mortgage, pledge,
-----------
option, equity, adverse claim or restriction or other security interest of any
nature or kind whatsoever, except for any restrictions on transfer generally
arising under any applicable federal or state securities law.
"Environmental Claims" means any and all Claims arising out of (a) any
--------------------
violation or alleged violation of any Environmental Law, Environmental Permit or
Order of any Governmental Authority issued pursuant to any Environmental Law
occurring or allegedly occurring as a result of conditions existing or
activities at any properties (i) currently owned, leased or operated by any of
the Corporations (including the Real Property) or (ii) any properties formerly
owned, leased or operated by any of the Corporations to the extent such
violation or alleged violation occurred at the time that such properties were
formerly owned, leased or operated by any of the Corporations, (b) the presence
of any Hazardous Material in the soils,
5
<PAGE>
groundwater, surface water or air on, under or emanating from any of such
properties, or (c) any Liability arising under any Environmental Law with
respect to any Hazardous Material released at any such properties or at any
other property; clauses (a) through (c) above shall include (i) any and all
Claims by Governmental Authorities for enforcement, cleanup, removal, treatment,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (ii) any and all Claims by any third Person seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from any matters set forth in clauses (a) through
(c) above or arising from injury to public health or safety or the environment
resulting from any matters set forth in clauses (a) through (c) above.
"Environmental Laws" means all Laws and Orders of Governmental Authorities,
------------------
and controlling judicial and administrative interpretations thereof, relating to
pollution or protection of the environment, natural resources and, solely to the
extent related to the protection of the environment, public health and safety,
including those relating to emissions, discharges, Releases or threatened
Releases of Hazardous Material into the environment (including ambient air,
surface water, groundwater or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Material, including the Resource Conservation and Recovery
Act ("RCRA"), 42 U.S.C. (S)(S)6901 et seq., the Comprehensive Environmental
-- ---
Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. (S)(S)9601 et
--
seq., the Clean Water Act, 33 U.S.C. (S)(S)1251 et seq., the Clean Air Act, 42
- --- -- ---
U.S.C. (S)(S) 7401 et seq., the Toxic Substances Control Act, 7 U.S.C. (S)(S)
-- ---
136 et seq. and the Emergency Planning and Community Right-to-Know Act of 1986,
-- ---
Title III of Public Law 99-499.
"Environmental Permits" means all permits, approvals, identification
---------------------
numbers, licenses and other authorizations required under any applicable
Environmental Law.
6
<PAGE>
"ERISA" has the meaning specified in Article 4.23(a)(iv).
-----
"Exchange" has the meaning specified in Article 1.2(b)(i).
--------
"Exchanged Shares" has the meaning specified in Article 1.2(b)(i).
----------------
"Export" has the meaning specified in the recitals to this Agreement.
------
"FDA" has the meaning specified in Article 4.18(b).
---
"FTC" has the meaning specified in Article 4.18(b).
---
"Financial Statements" has the meaning specified in Article 4.7(d).
--------------------
"Financing Fees" has the meaning specified in Article 9.1(b).
--------------
"GAAP" means generally accepted accounting principles in the United States,
----
as in effect from time to time.
"Governmental Authority" means any federal or national, state or
----------------------
provincial, municipal or local government, governmental authority, regulatory or
administrative agency, governmental commission, department, board, bureau,
agency or instrumentality, political subdivision, court, tribunal, official
arbitrator or arbitral body, in each case within the United States.
"Gross-Up Payment" with respect to each Stockholder means the cash payment
----------------
calculated in accordance with Schedule XXV to result in such Stockholder
incurring no out-of-pocket tax expense as a result of Natur-Pharma paying the
Incremental Income Taxes and the Gross-Up Payment pursuant to Article 9.1(a).
"Hazardous Material" means (a) asbestos, poly-chlorinated biphenyls,
------------------
radioactive materials, petroleum, and any fraction or product of crude oil or
petroleum and (b) all other substances, materials, chemicals, compounds,
pollutants or wastes regulated by, under or pursuant to any Environmental Laws,
or any similar common law theory of liability.
7
<PAGE>
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
-------
as amended, Section 7A of the Clayton Act, 15 U.S.C. (S) 18A, and the
regulations promulgated thereunder.
"Incremental Income Taxes" means the excess of (i) the aggregate amount of
------------------------
income taxes imposed by all taxing jurisdictions on the Stockholders with
respect to the Natur-Pharma Merger over (ii) the aggregate amount of such taxes
that would have been imposed had the Natur-Pharma Merger been structured so as
to be treated for all tax purposes as sales of the stock of Twin, Export,
Specialty, Alvita and B. Bros. by the Stockholders to TLG Holding for the Merger
Consideration attributable to those Corporations, calculated as set forth in
Schedule XXV.
"Indebtedness" means all obligations for borrowed money and accounts
------------
payable, however evidenced, including but not limited to principal and interest.
"Insurance Policies" has the meaning specified in Article 4.25.
------------------
"Intellectual Property" has the meaning specified in Article 4.22.
---------------------
"IRS" has the meaning specified in Article 4.23(a)(v).
---
"Law" means any statute, rule, regulation, administrative requirement, code
---
or ordinance of any Governmental Authority.
"Leased Real Estate" has the meaning specified in Article 4.9(b).
------------------
"Lenders" has the meaning specified in Article 1.2(b)(iii).
-------
"Liabilities" means any and all debts, liabilities and obligations of any
-----------
nature whatsoever, whether accrued or fixed, absolute or contingent, mature or
unmatured, or determined or indeterminable.
8
<PAGE>
"Material Adverse Effect" means a material adverse effect on the condition
-----------------------
(financial or otherwise), results of operations, assets, liabilities or business
of the Corporations taken as a whole.
"Merger Consideration" has the meaning specified in the recitals to this
--------------------
Agreement.
"Natur-Pharma" has the meaning specified in the recitals to this Agreement.
------------
"Natur-Pharma Merger" has the meaning specified in Article 1.2(b)(v).
-------------------
"Natur-Pharma II" has the meaning specified in the recitals to this
---------------
Agreement.
"Natur-Pharma II Merger" has the meaning specified in Article 1.2(b)(v).
----------------------
"1995 Financial Statements" has the meaning specified in Article 4.7(b).
-------------------------
"Note Financing" has the meaning specified in Article 1.2(b)(iii).
--------------
"Notes" has the meaning specified in Article 1.2(b)(iii).
-----
"NP Common Stock" has the meaning specified in the recitals to this
---------------
Agreement.
"Order" means any consent or other type of decree, injunction, stipulation,
-----
determination, judgment, order, ruling, arbitration award, assessment or writ.
"Owned Real Estate" has the meaning specified in Article 4.9(a).
-----------------
"Parties" has the meaning specified in the recitals to this Agreement.
-------
"Pension Plan" has the meaning specified in Article 4.23(a)(vii).
------------
"Permitted Encumbrances" has the meaning set forth in Article 4.9(a)
----------------------
hereof.
"Permitted Liens" has the meaning specified in Article 4.10.
---------------
"Person" shall include any individual, trust, trustee, firm, corporation,
------
partnership, limited liability company, joint venture, joint stock company,
Governmental Authority or other entity, whether acting in an individual,
fiduciary or any other capacity.
"PBGC" has the meaning specified in Article 4.23(a)(v).
----
"Preferred Stock" has the meaning specified in Article 1.1.
---------------
9
<PAGE>
"Preferred Stock Purchase Price" has the meaning specified in Article 1.1.
------------------------------
"Purchase Price" has the meaning specified in Article 1.1.
--------------
"Purchasers" has the meaning specified in Article 1.2(b)(iii).
----------
"Real Property" means the Owned Real Estate and the Leased Real Estate.
-------------
"Receiving Party" has the meaning specified in Article 12.2(a).
---------------
"Release" means any release (as defined under any Environmental Law) of any
-------
Hazardous Material.
"Remaining Shares" has the meaning specified in Article 1.2(b)(ii).
----------------
"Remaining Shares Amount" has the meaning specified in Article 1.3.
-----------------------
"Representatives" means Persons acting on behalf of the Stockholders, the
---------------
Corporations or Buyer as the context requires, including without limitation
their respective independent accountants, investment bankers and counsel.
"Required Consents" has the meaning specified in Article 6.5(a).
-----------------
"S Corporation Taxes" has the meaning specified in Article 4.8(a).
-------------------
"S Short Year" has the meaning specified in Article 6.10(a).
------------
"Sales" has the meaning specified in Article 6.2(f).
-----
"Specialty" has the meaning specified in the recitals to this Agreement.
---------
"Stockholders" has the meaning specified in the recitals to this Agreement.
------------
"Tax(es)" has the meaning specified in Article 4.8(a).
-------
"Tax Laws" means the Code, federal, state, county, local or foreign laws
--------
relating to Taxes and any regulations or official administrative pronouncements
released thereunder.
"Tax Return" means any return, report, information return, schedule,
----------
certificate, statement or other document (including any related or supporting
information) filed or required to be filed with, or, where none is required to
be filed with a Taxing Authority, the statement
10
<PAGE>
or other document (if any) issued by, a Taxing Authority in connection with any
Tax (including, but not limited to, returns required in connection with any
Benefit Plans).
"Taxing Authority" means any Governmental Authority responsible for the
----------------
imposition of any Taxes, whether domestic or foreign.
"Termination Date" has the meaning specified in Article 8.1(a)(iv).
----------------
"TL Affiliates" has the meaning specified in the recitals to this
-------------
Agreement.
"TL Common Stock" has the meaning specified in Article 1.1.
---------------
"TLG Holding" has the meaning specified in the recitals to this Agreement.
-----------
"Transactions" has the meaning specified in Article 1.2(c).
------------
"Twin" has the meaning specified in the recitals to this Agreement.
----
B. Certain References.
------------------
Accounting Terms. All accounting terms not otherwise defined herein shall
----------------
have the meanings provided under GAAP.
Acting Jointly; Consent. As used herein, references to the Stockholders
-----------------------
acting "jointly" and references to the "consent" of the Stockholders or the
Continuing Stockholders means the approval of a majority of the Stockholders or
the Continuing Stockholders, as the case may be; provided, that in the case of
--------
the Stockholders, prior to the Closing, David and Jean Blechman shall be among
the Stockholders constituting such majority.
Herein; Hereof; Hereunder. The words "herein," "hereof" and "hereunder"
-------------------------
and other words of similar import refer to this Agreement as a whole and not to
any particular Article or other subdivision.
Knowledge. As used herein, references to the "knowledge" of the
---------
Stockholders means the knowledge of any of the Stockholders, of Philip Kazin or
of Dominick Bonanno.
11
<PAGE>
Pronouns. Any masculine personal pronoun herein shall be considered to
--------
mean the corresponding feminine or neuter personal pronoun, as the context
requires, and vice versa.
C. Other Defined Terms. In addition to the terms defined above, certain
-------------------
other terms are defined elsewhere in this Agreement and, whenever such terms are
used in this Agreement, they shall have their respective defined meanings.
ARTICLE 1 - PURCHASE AND SALE OF SHARES; CLOSING
- ------------------------------------------------
1.1 Purchase and Sale of Shares. Subject to the terms and conditions set
---------------------------
forth herein, at the Closing, TLG Holding shall issue, sell and deliver to
Buyer, and Buyer shall purchase and accept from TLG Holding (the "Acquisition"),
shares of non-voting redeemable preferred stock of TLG Holding, having the
rights, restrictions, privileges and preferences substantially as set forth on
the term sheet annexed as Exhibit A hereto, with such changes as the Buyer and
---------
the Stockholders shall mutually consent (the "Preferred Stock") and Five Hundred
Fifty Thousand (550,000) shares of common stock of TLG Holding, par value $1.00
per share (the "TL Common Stock") (the shares of TL Common Stock being so
acquired by the Buyer, together with the Preferred Stock, being referred to
herein as the "Acquired Shares"), which shares of TL Common Stock will represent
fifty-five percent (55%) of the issued and outstanding shares of TL Common Stock
after giving effect to all of the Transactions. Subject to the terms and
conditions set forth herein, in consideration for such shares of TL Common
Stock, Buyer shall pay TLG Holding in cash a purchase price of Five Million Five
Hundred Thousand U.S. dollars ($5,500,000) (the "Common Stock Purchase Price"),
and in consideration for such shares of Preferred Stock, Buyer shall pay TLG
Holding in cash a purchase price of Sixty-Seven Million
12
<PAGE>
U.S. dollars ($67,000,000) (the "Preferred Stock Purchase Price" and, together
with the Common Stock Purchase Price, the "Purchase Price").
1.2 Closing.
-------
(a) Subject to fulfillment of the conditions set forth in Article 7
hereof and provided that this Agreement is not sooner terminated in accordance
with Articles 6.7 or hereof, the Closing shall take place at the offices of
Kelley Drye & Warren located at 101 Park Avenue, New York, New York or such
other place as the Parties may mutually agree on May 31, 1996 or such other date
as the Parties may mutually agree (the "Closing Date").
(b) In addition to the actions described in Article 1.1 above, at
the Closing, the Stockholders shall, or shall cause the Corporations to, take
the following actions, and Buyer shall, or shall cause TLG Holding to, take the
following actions, as applicable:
(i) The Continuing Stockholders shall contribute to the
capital of TLG Holding the number of shares of NP Common Stock held by each
Continuing Stockholder set forth opposite such Continuing Stockholder's name in
Part A of Exhibit B hereto (collectively, the "Exchanged Shares") in exchange
---------
for the number of shares of TL Common Stock set forth opposite such Continuing
Stockholder's name in Part A of Exhibit B hereto (the "Exchange"), pursuant to a
---------
Subscription Agreement by and among the Continuing Stockholders and TLG Holding
in substantially the form attached hereto as Exhibit C-1, with such changes
-----------
therein as the Buyer and the Continuing Stockholders shall mutually consent to
(the "Subscription Agreement"), which shares of TL Common Stock will represent
in the aggregate forty-five percent (45%) of the issued and outstanding shares
of TL Common Stock after giving effect to all of the Transactions;
(ii) TLG Holding shall purchase from the Stockholders the
number of shares of NP Common Stock held by each Stockholder set forth opposite
such Stockholder's
13
<PAGE>
name in Part B of Exhibit B hereto (collectively, the "Remaining Shares") and
---------
shall contribute certain amounts to the capital of Natur-Pharma;
(iii) Natur-Pharma shall borrow approximately One Hundred
Fifty-Three Million U.S. dollars ($153,000,000) in aggregate principal amount
and have available to it a credit facility in the amount of at least Ten Million
U.S. dollars ($10,000,000), consisting of a combination of borrowings (the
"Borrowings") from certain providers of financing (the "Lenders") and the
issuance (the "Note Financing") to certain purchasers (the "Purchasers") of
Senior Subordinated Notes (the "Notes"), and Natur-Pharma shall contribute to
Natur-Pharma II an amount equal to the consideration to be used by Natur-Pharma
II in connection with the Natur-Pharma II Merger;
(iv) the Certificate of Incorporation and By-laws of TLG
Holding shall be substantially in the form attached hereto as Exhibits C-2 and
----------------
D, respectively (provided that the Certificate of Incorporation of TLG Holding
- - --------
shall be amended to include non-voting redeemable preferred stock having the
rights, restrictions, privileges and preferences substantially as set forth on
the term sheet annexed as Exhibit A hereto), and Natur-Pharma shall amend and
---------
restate Natur-Pharma's and ARP's Articles of Incorporation and By-laws to be
substantially in the forms attached hereto as Exhibits C-2 and D, respectively;
------------------
(v) Twin, Export, Specialty, Alvita and B. Bros. shall merge
with and into Natur-Pharma (the "Natur-Pharma Merger") pursuant to an Agreement
and Plan of Merger in the form attached hereto as Exhibit E, and Natur-Pharma II
---------
shall merge with and into ARP (the "Natur-Pharma II Merger" and, together with
the Natur-Pharma Merger, the "Mergers") pursuant to an Agreement and Plan of
Merger in the form attached hereto as Exhibit F;
---------
14
<PAGE>
(vi) TLG Holding shall, along with the Continuing
Stockholders and the Buyer, enter into a Stockholders Agreement in the form
attached hereto as Exhibit G (the "Stockholders Agreement");
---------
(vii) TLG Holding shall enter into employment agreements with
each of the Continuing Stockholders (other than Stephen Welling) in
substantially the form attached hereto as Exhibit H-1, with such changes therein
-----------
as the Buyer and such Continuing Stockholders shall mutually determine, and TLG
Holding shall enter into an employment agreement with Stephen Welling in
substantially the form attached hereto as Exhibit H-2, with such changes therein
as the Buyer, the Continuing Stockholders (other than Stephen Welling) and
Stephen Welling shall mutually determine;
(viii) TLG Holding shall enter into consulting agreements with
each of David Blechman and Jean Blechman in substantially the form attached
hereto as Exhibit I, with such changes therein as the Buyer, David Blechman and
---------
Jean Blechman shall mutually determine; and
(ix) TLG Holding shall enter into noncompetition agreements
with each of the Stockholders in substantially the form attached hereto as
Exhibit Q, with such changes therein as the Buyer and the Stockholders shall
- ---------
mutually determine.
(c) The Acquisition, the Exchange, the Borrowings, the Note
Financing, the Mergers and the other transactions contemplated herein are
collectively referred to herein as the "Transactions."
1.3 Payments. At the Closing, (a) the Buyer shall pay the Purchase Price
--------
to TLG Holding by wire transfer of immediately available funds and (b) TLG
Holding, Natur-Pharma and ARP shall pay to the Stockholders by wire transfer of
immediately available funds the aggregate amount of Two Hundred Twelve Million
Five Hundred Thousand U.S. dollars
15
<PAGE>
($212,500,000), consisting of: (i) the respective portions of the proceeds of
the Acquisition as consideration for the Remaining Shares (the "Remaining Shares
Amount") as set forth in Part C of Exhibit B hereto; (ii) the respective
---------
portions of the Merger Consideration and the ARP Merger Consideration as set
forth in Part D of Exhibit B hereto; and (iii) the consideration for the
---------
covenants contained in the Stockholders' noncompetition agreements as set forth
in Part E of Exhibit B hereto. Prior to the Closing, the Parties shall provide
---------
all necessary information as to the accounts to which such payments shall be
made.
1.4 Attorney-in-Fact. Each Stockholder hereby appoints Brian Blechman
----------------
and Neil Blechman (acting jointly) as such Stockholder's attorneys-in-fact and
representatives, to do any and all things and to execute any and all documents,
in such Stockholder's name, place and stead, in any way which such Stockholder
could do if personally present, in connection with this Agreement and the
Transactions, including, but not limited to, to accept, on such Stockholder's
behalf, any amount payable to such Stockholder under this Agreement, or to
amend, cancel or extend, or waive the terms of, this Agreement, and each of the
other Parties shall be entitled to rely, as being binding upon such Stockholder,
upon any document reasonably believed by it to be genuine and correct and to
have been signed by the attorneys-in-fact, and no other Party shall be liable to
any Stockholder for any action taken or omitted to be taken by it on such
reliance.
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES REGARDING BUYER
- ----------------------------------------------------------
Buyer represents and warrants to each of the Stockholders, as of the date
hereof, as follows:
2.1 Organization and Qualification. Buyer is a limited partnership duly
------------------------------
organized, validly existing and in good standing under the laws of Delaware.
Buyer has the requisite power and authority to (A) own, lease or use the
properties owned, leased or used by it, (B) conduct
16
<PAGE>
its business as presently conducted by it and (C) consummate the Transactions.
Buyer is duly qualified or licensed and in good standing as a foreign limited
partnership authorized to do business under the laws of each jurisdiction where
the character of the properties owned, leased or used by it or the nature of its
activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that could not
reasonably be expected to have a material adverse effect on the consummation of
the Transactions.
2.2 Authority and Absence of Conflict.
---------------------------------
(a) The Buyer has the requisite power and authority to execute,
deliver and perform its obligations under this Agreement and the other
agreements and instruments to be executed and delivered by the Buyer hereunder
or in connection herewith and to carry out its obligations hereunder and
thereunder. The execution and delivery by the Buyer of this Agreement and the
other agreements and instruments to be executed and delivered by the Buyer
hereunder or in connection herewith and the consummation of the Transactions by
the Buyer have been (or, on or prior to the Closing Date, will have been, as
applicable) duly authorized by all requisite limited partnership action required
on the part of the Buyer. This Agreement and the other agreements and
instruments to be executed and delivered by the Buyer hereunder or in connection
herewith have been (or, on or prior to the Closing Date, will have been, as
applicable) duly executed by the Buyer and constitute (or upon execution, will
constitute) the valid and legally binding obligations of the Buyer, enforceable
against the Buyer in accordance with their respective terms, except insofar as
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws which may affect creditors' rights and remedies generally and by
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
17
<PAGE>
(b) The execution and delivery by the Buyer of this Agreement and
the other agreements and instruments to be executed and delivered by the Buyer
hereunder or in connection herewith, the consummation of the Transactions by the
Buyer, and compliance with the provisions hereof and thereof do not and will not
violate, or conflict with, or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default), under any of the terms, conditions or provisions of
the certificate of limited partnership, the limited partnership agreement or
other similar organizational documents of the Buyer.
(c) The execution and delivery by the Buyer of this Agreement and
the other agreements and instruments to be executed and delivered by the Buyer
hereunder or in connection herewith, the consummation of the Transactions by the
Buyer, and compliance with the provisions hereof and thereof do not and will not
(i) violate, or conflict with, or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or give rise to a right of termination,
cancellation, modification or acceleration of the performance required by or a
loss of a material benefit under, or result in the creation of any Encumbrance
upon any of the properties or assets of the Buyer under, any note, bond,
mortgage, indenture, deed of trust, license, agreement, lease, permit, franchise
or other instrument or obligation to which the Buyer is a party or by which the
Buyer or any of its properties are bound or affected, except in any such case
for any such violation, conflict, breach, default, termination, cancellation,
modification, acceleration, loss or creation that could not reasonably be
expected to have a material adverse effect on the consummation of the
Transactions, or (ii) violate any Order or Law applicable to the Buyer or by
which any of its properties is bound or affected.
18
<PAGE>
2.3 Approvals.
---------
(a) Schedule XXI hereto contains a list of all Approvals of
Governmental Authorities that are required to be given by or obtained by the
Buyer in connection with the consummation of the Transactions by the Buyer,
except where the failure to give or to obtain such Approvals, individually or in
the aggregate, would not be likely to have a material adverse effect upon the
consummation of the Transactions.
(b) Schedule XXI hereto contains a list of all private Approvals
that are required to be given by or obtained by the Buyer from any and all third
parties in connection with the consummation of the Transactions by the Buyer,
except where the failure to give or to obtain such Approvals, individually or in
the aggregate, would not be likely to have a material adverse effect upon the
consummation of the Transactions.
2.4 Purchase for Investment. The Buyer is purchasing the Acquired Shares
-----------------------
for its own account and for investment and with no intention of distributing or
reselling such Acquired Shares or any part thereof in any transaction that would
be in violation of the securities law of the United States or any State, without
prejudice, however, to Buyer's rights at all times to sell or otherwise dispose
of all or any part of such Acquired Shares under a registration statement under
the Securities Act of 1933, as amended (the "Act"), or under an exemption from
such registration available under the Act, and subject, nevertheless, to the
disposition of the Buyer's property being at all times within its control;
provided, however, that it is understood and acknowledged that the Buyer may
- -------- -------
assign to third parties the Buyer's rights hereunder with respect to the
purchase of a portion of the Preferred Stock and a portion of the TL Common
Stock, subject to the consent of a majority of the Continuing Stockholders,
which consent shall not be unreasonably withheld (it being understood that such
consent is expressly granted with respect to the third parties listed in Exhibit
-------
J hereto).
- -
19
<PAGE>
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES REGARDING THE STOCKHOLDERS
- ---------------------------------------------------------------------
Each Stockholder represents and warrants to the Buyer, to TLG Holding and
to each of the Corporations, as of the date hereof, as follows:
3.1 Authority and Absence of Conflict.
---------------------------------
(a) Such Stockholder has the requisite power and authority to
execute, deliver and perform his or her obligations under this Agreement and the
other agreements and instruments to be executed and delivered by such
Stockholder hereunder or in connection herewith, and to carry out his or her
obligations hereunder and thereunder. This Agreement and the other agreements
and instruments to be executed and delivered by such Stockholder hereunder or in
connection herewith constitute the valid and legally binding obligations of such
Stockholder, enforceable against such Stockholder in accordance with their
respective terms, except insofar as enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws which may affect creditors' rights
and remedies generally and by principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
(b) The execution and delivery by such Stockholder of this Agreement
and the other agreements and instruments to be executed and delivered by such
Stockholder hereunder or in connection herewith, the consummation of the
Transactions by such Stockholder, and compliance with the provisions hereof and
thereof do not and will not (i) violate, or conflict with, or result in a breach
of any provisions of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or give rise to a
right of termination, cancellation, modification or acceleration of the
performance required by or a loss of a material benefit under, or result in the
creation of any Encumbrance upon any of the capital stock of any Corporation
owned by such Stockholder or any other properties or assets of such
20
<PAGE>
Stockholder under, any note, bond, mortgage, indenture, deed of trust, license,
agreement, lease, permit, franchise or other instrument or obligation to which
such Stockholder is a party or by which he or she or his or her properties are
bound or affected, except in any such case for any such violation, conflict,
breach, default, termination, cancellation, modification, acceleration, loss or
creation that could not reasonably be expected to have a material adverse effect
upon the consummation of the Transactions, or (ii) violate any Order or Law
applicable to such Stockholder or by which any of his or her properties is bound
or affected.
3.2 Approvals.
---------
(a) Schedule XXI hereto contains a list of all Approvals of
Governmental Authorities which are required to be given by or obtained by such
Stockholder in connection with the consummation of the Transactions by such
Stockholder, except where the failure to give or to obtain such Approvals,
individually or in the aggregate, would not be likely to have a material adverse
effect upon the consummation of the Transactions.
(b) Schedule XXI hereto contains a list of all private Approvals
which are required to be given by or obtained by such Stockholder from any and
all third parties in connection with the consummation of the Transactions by
such Stockholder, except where the failure to give or to obtain such Approvals,
individually or in the aggregate, would not be likely to have a material adverse
effect upon consummation of the Transactions.
3.3 Ownership of Capital Stock. Such Stockholder is the sole beneficial
--------------------------
and record owner of the number of shares of capital stock of each Corporation
set forth opposite such Stockholder's name in Schedule I hereto, free and clear
of all Encumbrances and preemptive rights. Except as set forth on Schedule I
hereto: (i) such Stockholder is not a party to or bound by any voting trust
agreements, proxies or other contracts or arrangements restricting or relating
to such capital stock; and (ii) such Stockholder is not a party to any option,
warrant, purchase
21
<PAGE>
right or other contract or commitment that could require such Stockholder to
sell, transfer or otherwise dispose of any capital stock of the Corporations,
other than this Agreement. The transfer by such Stockholder of the portion of
such capital stock of the Corporations to TLG Holding contemplated by and
pursuant to Article 1.2 (b)(i) and (ii) above will transfer good and valid title
thereto to TLG Holding free and clear of all Encumbrances.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES REGARDING THE CORPORATIONS
- ---------------------------------------------------------------------
Each of the Stockholders, other than Stephen Welling, represents and
warrants to the Buyer, to TLG Holding and to each of the Corporations, as of the
date hereof, as follows:
4.1 Organization and Qualification.
------------------------------
Each of the Corporations is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation as set
forth in Schedule I attached hereto. Each of the Corporations has all corporate
power and corporate authority necessary to (A) own, lease or use the properties
owned, leased or used by it, (B) conduct the Business as presently conducted by
it and (C) consummate the Transactions. Each of the Corporations is duly
qualified or licensed and in good standing as a foreign corporation authorized
to do business under the laws of each jurisdiction where the character of the
properties owned, leased or used by it or the nature of its activities makes
such qualification or licensing necessary, except for such failures to be so
duly qualified or licensed and in good standing that could not reasonably be
expected to have a Material Adverse Effect.
4.2 Authority and Absence of Conflict.
---------------------------------
(a) Each of the Corporations has full corporate power and corporate
authority necessary to execute, deliver and perform its respective obligations
under this Agreement and
22
<PAGE>
the other agreements and instruments to be executed and delivered by each such
Corporation hereunder or in connection herewith and to carry out its respective
obligations hereunder and thereunder. The execution and delivery by each of the
Corporations of this Agreement and the other agreements and instruments to be
executed and delivered by each such Corporation hereunder or in connection
herewith and the consummation of the Transactions by each of the Corporations
have been (or, on or prior to the Closing Date, will have been, as applicable)
duly authorized by all necessary corporate action required on the part of each
such Corporation. This Agreement and the other agreements and instruments to be
executed and delivered by each of the Corporations hereunder or in connection
herewith have been (or, on or prior to the Closing Date, will have been, as
applicable) duly executed by each such Corporation and constitute (or upon
execution, will constitute) the valid and legally binding obligations of each
such Corporation, enforceable against each such Corporation and/or each such
Corporation's successor in the Mergers in accordance with their respective
terms, except insofar as enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws which may affect creditors' rights
and remedies generally and by principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
(b) The execution and delivery by each of the Corporations of this
Agreement and the other agreements and instruments to be executed and delivered
by each such Corporation hereunder or in connection herewith, the consummation
of the Transactions by each of the Corporations, and compliance with the
provisions hereof and thereof do not and will not violate, or conflict with, or
result in a breach of any provisions of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default), or
result in the creation of an Encumbrance upon the capital stock of any of the
Corporations, under any of the terms, conditions or provisions of the Charters
or Bylaws of any of the Corporations.
23
<PAGE>
(c) Except as set forth in Schedule XX hereto, the execution and
delivery by each of the Corporations of this Agreement and the other agreements
and instruments to be executed and delivered by each such Corporation hereunder
or in connection herewith, the consummation of the Transactions by the
Corporations, and compliance with the provisions hereof and thereof do not and
will not (i) violate, or conflict with, or result in a breach of any provisions
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or give rise to a right of termination,
cancellation, modification or acceleration of the performance required by or a
loss of a material benefit under, or result in the creation of any Encumbrance
upon any of the properties or assets of any Corporation under, any license,
agreement, permit, franchise or, except as otherwise provided in Article
4.2(c)(ii) below, other instrument or obligation to which any Corporation is a
party or by which any of them or their respective properties are bound or
affected, except in any such case for any such violation, conflict, breach,
default, termination, cancellation, modification, acceleration, loss or creation
that could not reasonably be expected to have a Material Adverse Effect; (ii)
violate, or conflict with, or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or give rise to a right of termination,
cancellation, modification or acceleration of the performance required by or a
loss of a material benefit under, or result in the creation of any Encumbrance
upon any of the properties or assets of any Corporation under, any note, bond,
mortgage, indenture, deed of trust or lease to which any Corporation is a party
or by which any of them or their respective properties are bound or affected,
except in any such case for any violation, conflict, breach, default,
termination, cancellation, modification, acceleration, loss or creation which
individually does not exceed One Hundred Fifty Thousand U.S. dollars ($150,000)
or in the aggregate do not exceed Two Hundred Fifty Thousand U.S. dollars
24
<PAGE>
($250,000); or (iii) violate any Order or any Law applicable to any Corporation
or by which any of its respective properties is bound or affected, except to the
extent that such violations could not reasonably be expected to have a Material
Adverse Effect.
4.3 Corporate Records.
-----------------
The corporate records and minute books of each of the Corporations
accurately reflect all material action taken and authorizations made at meetings
of the Board of Directors or any committee thereof and at any shareholder
meetings of each such Corporation.
4.4 Capital Stock.
-------------
(a) The authorized capital stock, all of which is validly issued,
fully paid, and non-assessable, the par value per share and the number of issued
and outstanding shares and treasury shares of each of the Corporations is set
forth opposite its name on Schedule I attached hereto.
(b) Except as set forth in Schedule I hereto, there are no
outstanding options, warrants, agreements, rights (including without limitation,
preemptive rights or rights of conversion or exchange), contracts, calls, puts,
demands, or commitments of any character relating to any shares of capital stock
of or any other equity interest in any of the Corporations.
4.5 Subsidiaries.
------------
Except as set forth on Schedule I, no Corporation owns, directly or
indirectly, any capital stock or equity or debt securities of any corporation or
has any other direct or indirect equity or ownership interest in any
association, partnership or other legal entity.
4.6 Approvals.
---------
(a) Schedule XXI hereto contains a list of all Approvals of
Governmental Authorities which are required to be given by or obtained by any of
the Corporations in connection with the consummation of the Transactions by the
Corporations, except where the
25
<PAGE>
failure to give or to obtain such Approvals, individually or in the aggregate,
would not be likely to have a Material Adverse Effect.
(b) Schedule XXI hereto contains a list of all private Approvals
which are required to be given by or obtained by any of the Corporations from
any and all third parties in connection with the consummation of the
Transactions by the Corporations, except, subject to the terms and limitations
set forth in Article 4.2(c)(ii) above, where the failure to give or to obtain
such Approvals, individually or in the aggregate, would not be likely to have a
Material Adverse Effect.
4.7 Financial Statements.
--------------------
(a) Attached as Exhibit A to Item (1) of Schedule II hereto are true
and correct copies of the audited combined balance sheets of Twin, Export,
Specialty, Alvita, Natur-Pharma and B. Bros. (collectively, the "Audited
Corporations") as of December 31, 1994 and 1993 and the related audited combined
statements of income, shareholders' equity and cash flows for the years then
ended, and the audited combined balance sheets of the Audited Corporations
(other than B. Bros.) as of December 31, 1992 and the related audited combined
statements of operations, retained earnings and cash flows for the year then
ended, in each case including the report of Deloitte & Touche LLP, independent
auditors ("Deloitte & Touche"), thereon and the notes thereto (collectively, the
"Audited Financial Statements").
(b) Attached as Exhibit A to Item (2) of Schedule II hereto are true
and correct copies of the audited combined balance sheets of the Audited
Corporations and ARP (collectively, the "1995 Audited Corporations") as of
December 31, 1995 and December 31, 1994 and the related audited combined
statements of income, shareholders' equity and cash flows for the years then
ended, including the report of Deloitte & Touche thereon and the notes thereto
(collectively, the "1995 Audited Financial Statements").
26
<PAGE>
(c) Attached as Exhibit A to Item (3) of Schedule II hereto are true
and correct copies of (i) the unaudited compiled balance sheets of ARP as of
December 31, 1994, 1993 and 1992 and the related unaudited compiled statements
of revenues, expenses and retained earnings of ARP for the years then ended,
including the compilation report of Held Kranzler & Company, certified public
accountants ("Held Kranzler") thereon, and (ii) the unaudited balance sheet of
ARP as of June 30, 1995 and the related unaudited statement of revenues,
expenses and retained earnings of ARP for the six-month period ended on June 30,
1995, including the compilation report of Held Kranzler thereon (the financial
statements referred to in clauses (i) and (ii) above are referred to
collectively as the "ARP Financial Statements").
(d) Except as set forth in Schedule II hereto, the Audited Financial
Statements, the 1995 Audited Financial Statements and the ARP Financial
Statements (collectively the "Financial Statements") have been prepared in
accordance with GAAP and the Corporations' accounting practices and procedures.
Except as set forth in Schedule II hereto, the balance sheets included in the
Financial Statements present fairly in all material respects, in accordance with
GAAP consistently applied, the financial condition of the respective
Corporations as at their respective dates, and the statements of operations
included in the Financial Statements present fairly, in accordance with GAAP
consistently applied, the results of operations of the respective Corporations
for the periods covered thereby. The books and records of each of the
Corporations from which the Financial Statements were prepared were complete and
accurate in all material respects at the time of such preparation.
4.8 Tax Matters.
-----------
(a) For purposes of this Agreement, "Tax(es)" shall mean taxes,
fees, levies, duties, tariffs, imposts, and governmental impositions or charges
of any kind in the nature of (or similar to) taxes, payable to any federal,
state, local or foreign Taxing Authority, including
27
<PAGE>
(without limitation, except as otherwise expressly stated) (i) income taxes
imposed at the entity level (but not income taxes imposed at the shareholder
level pursuant to the provisions of Subchapter S of the Code or any
corresponding provision of applicable state law ("S Corporation Taxes")),
franchise, profits, gross receipts, ad valorem, net worth, value added, sales,
use, service, real or personal property, special assessments, capital stock,
license, payroll, withholding, employment, social security, workers'
compensation, unemployment compensation, utility, severance, production, excise,
stamp, occupation, premiums, windfall profits, transfer and gains taxes, and
(ii) interest, penalties, additional taxes and additions to tax imposed with
respect thereto.
(b) Except as set forth on Schedule II hereto: (i) each Corporation
has timely filed with the appropriate Taxing Authorities all income Tax Returns
required to be filed by such Corporation; (ii) the information on such income
Tax Returns is complete and accurate in all material respects; (iii) each
Corporation has paid on a timely basis all income Taxes shown on any income Tax
Return except for income Taxes which it is contesting in good faith by
appropriate proceedings and for which the relevant Corporation has set aside on
its books reserves to the extent required by GAAP; (iv) there are no other
income Taxes that would be due if asserted by a Taxing Authority, except with
respect to which the relevant Corporation is maintaining reserves to the extent
currently required; and (v) each Corporation has withheld and paid all income
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder or other
third party.
(c) Except as set forth on Schedule II hereto, and except with
respect to Non-income Taxes (as defined in Clause (iii) below) not exceeding
One Hundred Fifty Thousand U.S. dollars ($150,000) in the aggregate: (i) each
Corporation has timely filed with the appropriate Taxing Authorities all Tax
Returns other than income Tax Returns ("Non-income Tax Returns")
28
<PAGE>
required to be filed; (ii) the information on such Non-income Tax Returns is
complete and accurate in all material respects; (iii) each Corporation has paid
on a timely basis all Taxes other than income Taxes ("Non-income Taxes") shown
on any Non-income Tax Return except for Non-income Taxes which it is contesting
in good faith by appropriate proceedings and for which the relevant Corporation
has set aside on its books reserves to the extent required by GAAP; (iv) there
are no other Non-income Taxes that would be due if asserted by a Taxing
Authority, except with respect to which the relevant Corporation is maintaining
reserves to the extent currently required; and (v) each Corporation has withheld
and paid, or is holding for payment not yet due, all Non-income Taxes required
to be withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder or third party.
(d) Except as set forth on Schedule II hereto: (i) no unpaid (or
unreserved in accordance with GAAP) deficiencies for Taxes have been claimed,
proposed or assessed by any Taxing Authority with respect to any Corporation;
(ii) there are no pending or threatened audits, investigations or claims for or
relating to any liability in respect of Taxes of any Corporation; (iii) no
Corporation has requested any extension of time within which to file any
currently unfiled returns in respect of any Taxes; (iv) no extension of a
statute of limitations relating to any Taxes is in effect with respect to any
Corporation; and (v) no Corporation has entered into any sale leaseback or any
leveraged lease transaction.
(e) Except as set forth on Schedule II hereto: (i) there are no
liens for Taxes (other than for current Taxes not yet due and payable) upon the
assets of any Corporation; (ii) there are no private letter rulings in respect
of any Tax pending between any Corporation and any Taxing Authority; (iii) no
Corporation has ever been a member of an affiliated group or filed or been
included in a combined, consolidated or unitary return of any Person; (iv) no
Corporation is currently under any contractual obligation to indemnify any
Person with respect
29
<PAGE>
to Taxes or is a party to any tax sharing agreement or any other agreement
providing for payments by such Corporation with respect to Taxes; (v) no
Corporation will be required, as a result of a change in method of accounting
for (A) any taxable period ending on or before the Closing Date or (B) any
taxable period that includes (but does not end on) the Closing Date, but only to
the extent of the portion of such period that ends on the Closing Date, to
include any adjustment under section 481 of the Code (or any corresponding
provision of foreign law) in taxable income for any taxable period after the
Closing Date; (vi) no Corporation is a party to any agreement, contract,
arrangement or plan that would result after the Closing (taking into account the
transactions contemplated by this Agreement), separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of section
280G of the Code; (vii) each Corporation properly elected S corporation status
under section 1361 of the Code (and any corresponding provision of applicable
state law) as of the respective dates set forth in Schedule II and has since
qualified, and maintained its status, as an S corporation for federal and
applicable state income tax purposes; (viii) Schedule II lists all income Tax
Returns filed by or on behalf of the Corporations for the taxable periods ended
on or after January 1, 1993 and indicates those income Tax Returns that have
been audited and those that currently are the subject of audit; (ix) no
Corporation has made an election or is required to treat any of its assets as
tax-exempt bond financed property or tax-exempt use property within the meaning
of section 168 of the Code (or any corresponding provision of state, local or
foreign law); (x) no Corporation is a party to any joint venture, partnership or
other arrangement or contract which could be treated as a partnership for
federal income tax purposes; (xi) all material elections with respect to Taxes
affecting each Corporation as of the date hereof are disclosed on the Tax
Returns previously delivered to the Buyer or on the Financial Statements; (xii)
no Corporation is a "consenting corporation" under section 341(f) of the Code
(or any corresponding provision
30
<PAGE>
of state, local or foreign law); and (xiii) with respect to periods commencing
on or after the Balance Sheet Date, no Corporation has incurred any material
liability for Taxes (other than in the ordinary course of business).
4.9 Real Property and Leaseholds.
----------------------------
(a) Schedule III hereto identifies all parcels of real property
owned in fee by each of the Corporations as of the date hereof (collectively,
the "Owned Real Estate"). The relevant Corporation holds marketable and legal
title to each of the real properties constituting Owned Real Estate, free and
clear of all Encumbrances, except for (i) Encumbrances disclosed on Schedule
III, (ii) Encumbrances and leases incurred or made in the ordinary course of
business and which do not materially impair the usefulness of such properties in
the current conduct of the businesses of the relevant Corporations, (iii) liens
for Taxes, assessments or governmental charges or levies which are not material
in amount relative to the property affected, and which are not yet delinquent or
can be paid without penalty or are being contested in good faith and by
appropriate proceedings in respect thereof, and (iv) imperfections of title
which are not substantial in character, amount or extent (in relation to the
particular parcel) and which do not materially interfere with the present use of
the parcel subject thereto or affected thereby (the Encumbrances referred to in
Clauses (i), (ii), (iii) and (iv) above being referred to collectively as
"Permitted Encumbrances").
(b) Schedule III hereto identifies all material parcels of real
property leased or subleased to each of the Corporations as of the date hereof
(such parcels being collectively referred to as the "Leased Real Estate") and
indicates which, if any, of such parcels is not presently used in the conduct of
the relevant Corporations' business or has been assigned or subleased to another
Person. Except as set forth on Schedule III, the relevant Corporation holds
31
<PAGE>
title to each of the leaseholds constituting Leased Real Estate, to the
knowledge of the Stockholders, free and clear of all Encumbrances other than
Permitted Encumbrances.
(c) With respect to each lease or sublease of any Real Estate
described in Schedule III hereto, except as set forth in Schedule III hereto,
neither any of the Corporations nor, to the knowledge of the Stockholders, any
other party thereto, is in default with respect to any material term or
condition thereof, nor has any event occurred which through the passage of time
or the giving of notice, or both, would constitute a material default
thereunder, except in each such case for defaults as would not reasonably be
expected to result in (i) a material payment being made by the relevant
Corporation to the landlord or (ii) the termination of the lease.
(d) Except as set forth on Schedule III hereto, all the real
property leases relating to the Leased Real Estate are in full force and effect
and the relevant Corporation is entitled to all the rights of a tenant
thereunder. Except as set forth on Schedule III hereto, no Action against any of
the Corporations is pending or, to the knowledge of the Stockholders, threatened
in connection with any such real property leases as of the date hereof, except
for any Actions (not involving failure to pay rent) which are not reasonably
expected to have a liability in excess of Fifty Thousand U.S. dollars ($50,000)
individually or in excess of One Hundred Fifty Thousand U.S. dollars ($150,000)
in the aggregate.
4.10 Title to Assets.
---------------
Except as set forth in Schedule IV hereto, and except with respect to
real property and leasehold matters (which are covered separately in Article
4.9), each of the Corporations has good and valid title to all of the material
properties and material assets owned by it reflected in the Financial Statements
or acquired after the Balance Sheet Date (except inventory and other properties
disposed of in the ordinary course of business since the Balance Sheet Date
32
<PAGE>
and accounts or notes receivable paid since the Balance Sheet Date), free and
clear of all Encumbrances, except for Permitted Liens (as hereinafter defined).
As used herein, the term "Permitted Liens" shall mean:
(a) Encumbrances for Taxes not yet due or which are being contested
in good faith by appropriate proceedings, provided that adequate reserves with
respect to contested Taxes are maintained on the books of the relevant
Corporation;
(b) pledges or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other social
security legislation;
(c) easements, rights-of-way, restrictions and other similar
encumbrances previously incurred in the ordinary course of business which, in
respect of properties and assets of the Corporations taken as a whole, are not
material, and which, in the case of such encumbrances on the assets or
properties of the Corporations, do not materially detract from the value of any
such properties or assets or materially interfere with any present use of such
properties or assets;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like encumbrances arising in the ordinary course of
business which are not overdue for a period of more than 90 days or which are
being contested in good faith by appropriate proceedings;
(e) deposits to secure the performance of bids, contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business; and
(f) statutory and contractual Encumbrances on the property of the
Corporations in favor of landlords securing leases.
33
<PAGE>
4.11 Property, Plant and Equipment.
-----------------------------
Each of the Corporations leases or owns all material items of
property, plant and equipment used by it in the operation of its respective
business as currently conducted. Except as set forth in Schedule V hereto, and
except for such items of property, plant and equipment as are undergoing repair
or refurbishment or are being held for replacement: all of the material
property, plant and equipment owned or leased by, and in each case used by the
Corporations in the conduct of the Business, is, taken as a whole, in reasonable
operating condition and, subject to normal maintenance, available for use.
4.12 Inventory.
---------
(a) Taking into account the reserves for inventory on the books of
the Corporations and an additional inventory amount in the amount of Five
Hundred Thousand U.S. dollars ($500,000) (which shall be treated as an
additional reserve for inventory), the inventories reflected on the books of the
Corporations do not include any inventory which is obsolete, surplus or not
saleable at prices customarily charged by the Corporations or usable in the
ordinary course of the business of the Corporations as heretofore conducted. The
inventories reflected on the books of the Corporations include all inventory
held on consignment by third parties.
(b) The Corporations have no liability (including, without
limitation, inventory repurchase obligations) with respect to the return of
inventory shipped prior to the date hereof, except for the rights of any
purchaser of inventory to return damaged goods or materials, or goods or
materials which do not conform with the purchase orders with respect thereto.
4.13 Product Liability and Recalls.
-----------------------------
(a) Except as disclosed in Schedule VI hereto, none of the
Stockholders has knowledge of:
34
<PAGE>
(i) any Claim asserted in writing against any of the
Corporations since January 1, 1994, or any assertion or
other statement in writing since January 1, 1994 that
could reasonably be expected to constitute the basis of
any Claim against any of the Corporations (other than
information generally available to the public or
contained in trade or professional publications) or,
(ii) any Claim asserted orally against any of the Corporations
since June 30, 1995, or the occurrence of any event or
circumstance since June 30, 1995 that could reasonably be
expected to constitute the basis of any Claim against any
of the Corporations (other than information generally
available to the public or contained in trade or
professional publications),
for injury to any person or any property suffered as a result of the
distribution and/or sale of any product or material or the performance of any
service by any of the Corporations, including any Claim arising out of the
defective or unsafe nature, or allegedly defective or unsafe nature, of any such
product, material or service, which individual Claim or series of related Claims
could reasonably be expected to have a Material Adverse Effect.
(b) Except as disclosed in Schedule VI and Schedule X hereto: (i)
since January 1, 1994 there has been no, and as of the Agreement Date there is
no pending, recall or market withdrawal conducted by any of the Corporations of
any product or material distributed and/or sold by any of the Corporations; and
(ii) since January 1, 1994, to the knowledge of the Stockholders, there has been
no notice (including, but not limited to, any recall notice or recall request)
or other similar writing received by any of the Corporations from a Governmental
Authority or from the National Nutritional Foods Association or the American
Herbal Products
35
<PAGE>
Association proposing for safety reasons that any product or material actually
distributed and/or sold by any of the Corporations not be offered for sale or
distributed.
4.14 Accounts Receivable.
-------------------
The accounts receivable of each of the Corporations as reflected in
the Financial Statements, to the extent uncollected on the date hereof, and the
accounts receivable reflected on the books of each of the Corporations, are: (i)
valid and existing and represent monies due, and each of the Corporations has
made reserves reasonably considered adequate (subject to adjustment for
operations and transactions through the Closing Date in the ordinary course of
business consistent with past practices of the Corporations) for receivables not
collectible in the ordinary course of business; and (ii) (subject to the
aforesaid reserves) subject to no refunds or other adjustments and to no
defenses, rights of setoff, assignments, restrictions, Encumbrances or
conditions enforceable by third parties on or affecting any thereof, except for
such refunds, adjustments, defenses, right of setoff, assignments, restrictions,
Encumbrances or conditions as could not reasonably be expected to have a
Material Adverse Effect.
4.15 Contracts.
---------
(a) Except as set forth in Schedule VII hereto, and except with
respect to the leases and subleases relating to the Leased Real Estate (which
are covered separately in Article 4.9), Distribution Agreements and Consulting
Agreements (which are covered separately in Articles 4.16 and 4.17,
respectively), licenses and other agreements relating to intellectual property
(which are covered separately in Article 4.22), Benefit Plans (which are covered
separately in Article 4.23) and labor and employment agreements (which are
covered separately in Article 4.24), there are no outstanding written and, to
the knowledge of the Stockholders, oral, agreements, commitments, purchase
orders or contracts to which any of the Corporations is a party or by which any
of the Corporations is bound which (i) involve the annual payment
36
<PAGE>
or annual receipt by any of the Corporations of more than One Hundred Fifty
Thousand U.S. dollars ($150,000) under any one of such agreements, commitments,
purchase orders or contracts, or (ii) otherwise materially affect the
Corporations' Business (including all non- competition and management agreements
and arrangements) (such written agreements, commitments, purchase orders and
contracts being referred to herein individually as a "Contract" and collectively
as the "Contracts"). Except as set forth in Schedule VII hereto, neither any of
the Corporations nor, to the knowledge of the Stockholders, any of the other
parties thereto is in material default in respect of any Contract.
(b) As of the Agreement Date, assuming the due authorization,
execution, delivery by and capacity of the other parties thereto, each Contract
is a valid and legally binding obligation of the relevant Corporation and is
enforceable against it in accordance with its terms, except insofar as
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws which may affect creditors' rights and remedies generally and by
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
(c) Schedule VII hereto lists all written and, to the knowledge of
the Stockholders, oral contracts and agreements to which any of the Corporations
is a party or by which any of them is bound or to which any of their assets is
subject as of the Agreement Date that constitute a guarantee by the relevant
Corporation of any Indebtedness or obligations of any other Person.
4.16 Marketing, Brokering and Distribution Agreements.
------------------------------------------------
(a) Schedule VIII hereto contains an accurate and complete list of
each written and, to the knowledge of the Stockholders, oral contract,
agreement, arrangement or commitment (including all amendments and modifications
thereto), relating primarily to the domestic and foreign marketing, brokering
and distribution of any of the Corporations' products
37
<PAGE>
by which any of the Corporations is, as of the Agreement Date, bound, which (i)
involves the annual payment or annual receipt by any of the Corporations of more
than Five Hundred Thousand U.S. dollars ($500,000) under any one of such
contracts, agreements, arrangements or commitments or (ii) otherwise materially
affects the Corporations' Business (such written contracts, agreements,
arrangements and commitments being referred to herein individually as a
"Distribution Agreement" and collectively as the "Distribution Agreements").
Complete and correct copies of the Distribution Agreements have been made
available to the Buyer. Such Schedule also contains accurate statements of the
territory, term and nature of exclusivity of each Distribution Agreement.
(b) As of the Agreement Date, assuming the due authorization,
execution, delivery by and capacity of the other parties thereto, each
Distribution Agreement is a valid and legally binding obligation of the relevant
Corporation, enforceable against it in accordance with its terms, except insofar
as enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws which may affect creditors' rights and remedies generally and by
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
(c) Except as set forth in Schedule VIII hereto, as of the Agreement
Date, neither any of the Corporations nor, to the knowledge of the Stockholders,
any of the other parties thereto is in material default in respect of any
Distribution Agreement.
4.17 Consulting Agreements.
---------------------
(a) Schedule IX hereto contains an accurate and complete list of
each contract, agreement, arrangement or commitment (including all amendments
and modifications thereto), relating primarily to the provision and/or receipt
of consulting or other similar or related services (including but not limited to
preparation of materials for publication) by which any of the Corporations is,
as of the Agreement Date, bound, which (i) involves the annual payment
38
<PAGE>
or annual receipt by any of the Corporations of more than One Hundred Thousand
U.S. dollars ($100,000) under any one of such contracts, agreements,
arrangements or commitments or (ii) otherwise materially affects the
Corporations' Business (such written contracts, arrangements or commitments
(including all amendments thereof and modifications thereto) being referred to
herein individually as a "Consulting Agreement" and collectively as the
"Consulting Agreements"). Complete and correct copies of the Consulting
Agreements have been made available to the Buyer.
(b) As of the Agreement Date, assuming the due authorization,
execution, delivery by and capacity of the other parties thereto, each
Consulting Agreement is a legal, valid and binding obligation of the relevant
Corporation, enforceable against it in accordance with its terms, except insofar
as enforceability may be limited by bankruptcy, insolvency, moratorium or
similar laws which may affect creditor's rights and remedies generally and by
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
(c) As of the Agreement Date, neither any of the Corporations nor,
to the knowledge of the Stockholders, any of the other parties thereto, is in
material default with respect to any Consulting Agreement.
4.18 Compliance with Law.
-------------------
(a) Except as set forth in Schedule X hereto, and except with
respect to tax matters (which are covered separately in Article 4.8),
environmental matters (which are covered separately in Article 4.20), ERISA
matters (which are covered separately in Article 4.23), labor and employment
matters (which are covered separately in Article 4.24), the regulatory matters
which are covered separately in Article 4.18(b) below, and certain matters
previously disclosed in writing to the Buyer by the Stockholders, each
Corporation's Business has been conducted in compliance with and does not
violate, and none of the Corporations is in conflict with, or in
39
<PAGE>
default or violation of, any Laws or Orders, except for any such lack of
compliance, violation, conflict or default, which, individually or in the
aggregate, would be unlikely to have a Material Adverse Effect, and none of the
Stockholders or the Corporations has received any written notice, nor has
knowledge of any non-written notice since June 30, 1995, from any Governmental
Authority alleging any such lack of compliance, violation, conflict or default
except for any such lack of compliance, violation, conflict or default, which
would be unlikely to have a Material Adverse Effect.
(b) Except as set forth in Schedule X or Schedule XIII hereto:
(i) since January 1, 1990 there has been no, and as of the
Agreement Date there is no pending, recall or market
withdrawal, Action, Order, warning letter (including, but
not limited to, those proposing for any reason (other
than for safety reasons, to the extent covered separately
in Article 4.13(b)(ii)) that any product or material
actually distributed and/or sold by any of the
Corporations not be offered for sale or distributed),
injunction or seizure, brought, issued or conducted by
any of the U.S. Food and Drug Administration ("FDA"), the
U.S. Federal Trade Commission ("FTC"), the U.S.
Department of Justice ("DOJ") or, to the knowledge of the
Stockholders, any similar state or local Governmental
Authority; or
(ii) since January 1, 1990, to the knowledge of the
Stockholders, there has been no other enforcement action
or investigation (x) threatened in writing by any
Governmental Authority referred to in Clause (i) of this
Article 4.18(b) or (y) as to which any of the
40
<PAGE>
Corporations has received notice from any such
Governmental Authority that such enforcement action or
investigation will be commenced within twelve (12) months
after the date hereof;
of or against any of the Corporations or the Stockholders pertaining to the
Business of any of the Corporations or of or against any product or material
actually distributed and/or sold by any of the Corporations, which Action,
Order, warning letter, injunction, seizure or other enforcement action or
investigation could reasonably be expected to have a Material Adverse Effect.
Schedule XIX hereto contains a list of the products and materials sold and/or
distributed by any of the Corporations as of the Agreement Date.
4.19 Permits and Other Operating Rights.
----------------------------------
Except as set forth in Schedule XI hereto, and except with respect to
Environmental Permits (which are covered separately in Article 4.20), each of
the Corporations has made and/or possesses all permits, licenses, orders and
Approvals (including, without limitation, all such permits, licenses, orders and
Approvals as are required in connection with the manufacture, warehousing,
storage, distribution and/or sale of the products manufactured or distributed by
any of the Corporations) required by applicable Law or Order or by the property
or contract rights of third Persons which are material to the conduct of the
Business as it is now being conducted or to permit the current occupancy of the
Real Property (collectively, "Corporation Permits"). Each of the Corporations
is in compliance with the terms of the Corporation Permits, except where the
failure to so comply could not reasonably be expected to have a Material Adverse
Effect. All Corporation Permits are listed in Schedule XI hereto.
4.20 Environmental Matters.
---------------------
Except as set forth in Schedule XII hereto, and except in all cases
as, in the aggregate, could not reasonably be expected to have a Material
Adverse Effect, each of the
41
<PAGE>
Corporations: (i) has obtained all Environmental Permits; (ii) is in compliance
with all terms and conditions of such Environmental Permits, and also is in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
applicable Environmental Laws; (iii) has received no written notice, nor has any
knowledge of any non-written notice, of any present Environmental Claims or any
event, condition, circumstance, activity, practice, incident, action or plan
which is reasonably and foreseeably likely to interfere with or prevent
continued compliance with any Environmental Law or which is reasonably and
foreseeably likely to give rise to any liability under any Environmental Claim;
and (iv) has taken all actions required under applicable Environmental Laws to
register any products or materials required to be registered by the relevant
Corporation (or any of its respective agents) thereunder. Except as set forth in
Schedule XII hereto and except in all cases as could not reasonably be expected
to have a Material Adverse Effect, none of the Corporations has received any
written notice, or has any knowledge of any non-written notice, of any past
Environmental Claims. Except as listed in Schedule XII, no Corporation has
disposed of, transported or arranged for the disposal of any Hazardous Material
at any site listed or proposed for listing on the National Priorities List or
any similar state list, and no Corporation has received any formal notice that
it is a responsible party or potentially responsible party under CERCLA or
comparable formal notice under any similar Environmental Law. All Environmental
Permits are listed in Schedule XII hereto.
4.21 Litigation.
----------
Except as set forth in Schedule XIII hereto and except with respect
to tax matters (which are covered separately in Article 4.8), certain real
property matters (which are covered separately in Article 4.9), product
liability matters (which are covered separately in Article 4.13), certain
regulatory matters (which are covered separately in Article 4.18(b)),
42
<PAGE>
environmental matters (which are covered separately in Article 4.20),
intellectual property matters (which are covered separately in Article 4.22) and
labor and employment matters (which are covered separately in Article 4.24),
there are no Actions pending or, to the knowledge of the Stockholders, any
Claims threatened in writing against any of the Corporations or any of their
respective properties, at law, in equity or in any arbitral proceeding and, to
the knowledge of the Stockholders, there is no investigation pending or
threatened in writing before or by any Governmental Authority nor is there any
presently effective Order against any of the Corporations or any of their
respective properties, except for any such Actions, Claims, investigations, or
Orders which are reasonably unlikely to result in a liability to the
Corporations in excess of One Hundred Fifty Thousand U.S. dollars ($150,000)
individually or in excess of One Million U.S. dollars ($1,000,000) in the
aggregate or unlikely, individually or in the aggregate, to have a Material
Adverse Effect.
4.22 Intellectual Property.
---------------------
(a) Schedule XIV hereto contains an accurate and complete list of
all United States: (a) patents, pending patent applications and patent
applications in process but not yet filed, owned by or assigned or licensed to
any Corporation (the "Patents"); registered trademarks and service marks and
pending applications therefor owned by or licensed to any Corporation (the
"Marks"); and copyright registrations and pending applications therefor owned by
or licensed to any Corporation and used primarily by the Corporations as of the
Agreement Date in the conduct of the Business in the manner conducted as of the
Agreement Date (the "Copyrights"); (b) written licenses, other written
agreements and, to the knowledge of the Stockholders, oral licenses and
agreements, relating to the Patents, Marks and Copyrights, and any other written
licenses and other written agreements and, to the knowledge of the Stockholders,
oral licenses and agreements, relating to trade secrets and know-how which are
43
<PAGE>
material to the conduct of the Business as conducted as of the Agreement Date;
and (c) written and, to the knowledge of the Stockholders, oral manufacturing,
process, and other technology transfer and license agreements which are material
to the conduct of the Business as conducted as of the Agreement Date (the
Patents, the Marks, the Copyrights, the written licenses and other written
agreements referred to in clause (b) above and the written manufacturing,
process, and other technology transfer and license agreements referred to in
clause (c) above being referred to herein collectively as the "Intellectual
Property"). As of the Closing Date, the relevant Corporation will own or have
the right to use, sell, license or dispose of all such Intellectual Property, to
the knowledge of the Stockholders, free and clear of any Encumbrance of any
Person (other than Permitted Liens or any license or agreement listed in
Schedule XIV hereto). The use of any such Intellectual Property in the conduct
of the Business does not violate any license agreement between the relevant
Corporation and any third Person. Except as set forth in Schedule XIV hereto,
since January 1, 1992, none of the Corporations has been notified in writing by
any Person of any claims of infringement of the rights of any third Person in
its trademarks, copyrights, patents, trade secrets, in each case in the United
States, rights of publicity or privacy, or alleging libel, slander, false
advertising or unfair competition, or challenging the ownership of or the
relevant Corporation's right to use any of the Intellectual Property, except for
such claims, allegations and challenges which could not reasonably be expected
to have a Material Adverse Effect. Except as set forth in Schedule XIV hereto,
there is no pending Action of which any of the Corporations has received formal
written notice or, to the knowledge of the Stockholders, threatened Action
contesting the validity, ownership or right to use, sell, license or dispose of
any Intellectual Property used in the Business, except for such Actions and
threatened Actions which could not reasonably be expected to have a Material
Adverse Effect. Except as set forth in Schedule XIV hereto, to the knowledge of
the
44
<PAGE>
Stockholders, none of the Intellectual Property is subject to any outstanding
Order, decree, judgment, stipulation, written restriction, undertaking or
agreement limiting the scope of use of the Intellectual Property or declaring
any of it abandoned, except for such stipulations, written restrictions,
undertakings and agreements which could not reasonably be expected to have a
Material Adverse Effect.
(b) The Corporations possess all intellectual property relating to
the Business that is materially necessary to the conduct of the Business, taken
as a whole, as conducted as of the Agreement Date.
4.23 ERISA Matters.
-------------
(a) For purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "Benefit Plan" shall mean any plan, agreement or
arrangement, whether written or otherwise, which is (A) an employment, change of
control, consulting or deferred compensation agreement, (B) an incentive,
profit-sharing, savings, retirement, stock option, stock purchase, appreciation,
thrift or savings plan, (C) a severance pay plan, (D) a life, health, disability
or accident insurance plan, (E) a holiday, vacation or other bonus practice, (F)
a flexible benefit or cafeteria plan as defined in Section 125 of the Code (as
defined below), or (G) any other "employee benefit plan" as defined in Section
3(3) of ERISA (as defined below), or fringe benefit, in each of the cases as
described in clauses (A) through (G) of this clause (i) which is maintained by
any Corporation or ERISA Affiliate (as defined below) with respect to any
current or former employee, officer, director or consultant or a beneficiary of
such employee, officer, director or consultant, of any Corporation or any ERISA
Affiliate or in respect of which any Corporation may have any present or future
liability (including any foreign benefit plan).
45
<PAGE>
(ii) "ERISA Affiliate" shall mean any entity, whether or not
incorporated, which is, or has been, treated as a single employer with any
Corporation under Section 414(b), (c), (m) or (o) of the Code or Section
4001(a)(14) or (b) of ERISA.
(iii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and the regulations promulgated thereunder.
(iv) "PBGC" shall mean the Pension Benefit Guaranty
Corporation.
(v) "IRS" shall mean the Internal Revenue Service.
(vi) "Pension Plan" shall mean a Benefit Plan which is a
"pension plan" as defined in Section 3(2) of ERISA and which is covered by
ERISA.
(b) Schedule XV hereto sets forth a complete list of all Benefit
Plans and related insurance contracts, and Stockholders have caused to be
delivered or made available to the Buyer complete and accurate copies of each
such Benefit Plan, including any amendments thereto since the Balance Sheet Date
and, to the extent applicable, (i) any related trust agreement, annuity contract
or other funding instrument; (ii) any summary plan description and other written
communications to the Corporations' employees concerning the extent of the
benefits provided under a Benefit Plan; and (iii) the last three annual reports
on Form 5500 and attached schedules, (iv) the most recent (A) determination
letter, (B) audited financial statements and (C) actuarial valuation reports.
(c) With respect to each Benefit Plan:
(i) each Corporation and ERISA Affiliate has made all
contributions and other payments (including premiums payable to the PBGC) due
from it to date, pursuant to the terms of the Benefit Plan or any collective
bargaining agreement, and all amounts properly accrued as liabilities of any
Corporation which have not been paid have been properly recorded on the books of
such Corporation;
46
<PAGE>
(ii) no Benefit Plan which is subject to Section 302 of ERISA
or Section 412 of the Code has incurred an "accumulated funding deficiency" as
defined in either of such Sections (whether or not waived);
(iii) except as set forth in Schedule XV hereto, each Benefit
Plan which is intended to qualify under Section 401(a) or 403(a) of the Code has
received a favorable determination letter from the IRS with respect to its
qualification covering all amendments required to have been adopted through the
last day of the 1994 plan year, and its related trust has been determined to be
exempt from taxation under Section 501(a) of the Code; and
(iv) except as set forth in Schedule XV hereto, there are no
Claims pending (other than routine claims for benefits) or, to the knowledge of
the Stockholders, threatened against or with respect to any Benefit Plan.
(d) With respect to each Pension Plan that is subject to Title IV of
ERISA:
(i) no filing of a notice to terminate any such Pension Plan
has been made by any Corporation; and
(ii) no Corporation has received written notice from the PBGC
of the initiation of a proceeding to terminate any such Pension Plan and, to the
knowledge of the Stockholders, no proceeding has been initiated by the PBGC to
terminate any such Pension Plan.
(e) Except as set forth in Schedule XV hereto, no Benefit Plan is,
and no benefit plan formerly maintained by any Corporation or an ERISA Affiliate
was (i) a "defined benefit plan" within the meaning of Section 3(35) of ERISA,
(ii) a "multiemployer plan" as such term is defined in Section 3(37) of ERISA or
(iii) a multiple employer plan described in Section 3(40) of ERISA or Section
413(c) of the Code. Except as set forth in Schedule XV hereto, no Benefit Plan
provides for medical or health benefits (through insurance or otherwise) to
individuals other than current employees of any Corporation or any of its
subsidiaries (or
47
<PAGE>
spouses and dependents of such employees), except to the extent necessary to
comply with Section 4980B of the Code. No Benefit Plan other than a Pension Plan
is funded through a trust intended to be exempt from tax pursuant to Section 501
of the Code.
(f) Except as set forth in Schedule XV hereto, with respect to each
Benefit Plan, to the knowledge of the Stockholders, (i) no party in interest or
disqualified person (as defined in Section 3(14) of ERISA and Section 4975 of
the Code) has at any time engaged in a transaction with respect to any Benefit
Plan which could subject any Corporation, directly or indirectly, to a tax,
penalty or other liability for prohibited transactions under ERISA or Section
4975 of the Code; (ii) no fiduciary of any Benefit Plan has breached any of the
responsibilities or obligations imposed upon fiduciaries under Title I of ERISA,
which breach could result in any liability to any Corporation; (iii) all Benefit
Plans have been established and maintained substantially in accordance with
their terms and have operated in compliance in all material respects with the
requirements prescribed by any and all statutes (including ERISA and the Code),
orders, or governmental rules and regulations currently in effect with respect
thereto (including all applicable requirements for notification to participants
or the Department of Labor, IRS or Secretary of the Treasury) and may by their
terms be amended and/or terminated at any time, and each of the Corporations and
their subsidiaries have performed all obligations required to be performed by
them under, are not in any respect in default under or violation of, and have no
knowledge of any default or violation by any other party to, any of the Benefit
Plans.
4.24 Labor and Employment Matters.
----------------------------
(a) Except with respect to ERISA matters (which are covered
separately in Article 4.23), Schedule XVI hereto includes (i) an accurate list
of each collective bargaining or other material labor agreement under which any
of the Corporations is an employer; (ii) an accurate list of each employment
contract to which any of the Corporations is a party or by
48
<PAGE>
which it is bound which provides for aggregate annual payments of more than
Fifty Thousand U.S. dollars ($50,000) for personal services or employment which
is not terminable on thirty (30) days' (or less) notice by the relevant
Corporation without penalty or obligation to make payments related to such
termination; and (iii) an accurate list of each plan, contract, arrangement or
scheme under which "fringe benefits" (including, but not limited to, severance
benefits, vacation plans or programs, sick leave plans or programs and related
benefits) are afforded to employees of any of the Corporations and which
involves an aggregate annual cost to the Corporations in excess of Fifty
Thousand U.S. dollars ($50,000). Except in accordance with the contracts,
agreements, plans or programs identified in Schedules XV and XVI, no individual
will accrue or receive additional benefits, service or accelerated rights to
payment of benefits as a result of the Transactions (either alone or combined
with any other event or transaction).
(b) Except as set forth in Schedule XVI hereto, none of the
Corporations nor, to the knowledge of the Stockholders, any other party to any
agreement, plan or contract set forth in said Schedule is in default with
respect to any material term or condition thereof, nor has any event occurred
which through the passage of time or the giving of notice, or both, would
constitute such a default thereunder. Except as set forth in Schedule XVI
hereto, each of the Corporations has complied in all material respects with all
applicable Laws and Orders relating to the employment of labor, including
without limitation those related to wages, hours, occupational safety and
health, plant closings and layoffs and collective bargaining and is not liable
for any arrears of wages, penalties or other sums for failure to comply with any
of the foregoing, except for such failures which individually do not exceed
Fifty Thousand U.S. dollars ($50,000) or in the aggregate do not exceed One
Hundred Fifty Thousand U.S. dollars ($150,000).
49
<PAGE>
(c) As of the date hereof, and except as set forth in Schedule XVI
hereto, there is no (i) unfair labor practice complaint against any of the
Corporations pending before the National Labor Relations Board or any other
federal, state, local or foreign agency; (ii) pending labor strike, dispute,
work stoppage, work slow down or lockout affecting any of the Corporations;
(iii) material grievance or unfair dismissal proceeding pending against any of
the Corporations; (iv) material claim by employees of any of the Corporations
alleging discrimination based on race, color, creed, age, sex, sexual
orientation, national origin, religion or disability; (v) other pending or, to
the knowledge of the Stockholders, threatened material claims by employees of
any of the Corporations, including those based on statute, contract or tort;
(vi) to the knowledge of the Stockholders, pending representation question or
union organizing activities respecting a significant number of the employees of
any of the Corporations; (vii) material pending arbitration proceeding arising
out of or under any collective bargaining agreement to which any of the
Corporations is a party; (viii) to the knowledge of the Stockholders, threat of
any of the foregoing against any of the Corporations; or (ix) to the knowledge
of the Stockholders, basis for which a material claim may be made against any of
the Corporations for the termination of any collective bargaining agreement or
written employment contract to which any of the Corporations is a party or by
which it is bound or other wrongful or tortious conduct in connection with the
employment relationship of any employee of any of the Corporations.
4.25 Insurance Coverage.
------------------
The properties and the conduct of the respective businesses of each
of the Corporations are insured by insurers of recognized responsibility in such
amounts and against such risks and losses as are adequate for such businesses in
accordance with past practices and with customary industry practices. Except as
set forth in Schedule VII hereto, all material
50
<PAGE>
insurance policies (the "Insurance Policies") with respect to the property,
assets, operations and business of each of the Corporations are in full force
and effect. Schedule XIII hereto identifies those pending (or to the knowledge
of the Stockholders, threatened in writing) Claims listed therein with respect
to which the insurance carrier has denied coverage or has advised the relevant
Corporation that it is defending such claim under reservation of rights.
4.26 Conduct of Business.
-------------------
Except as set forth in Schedule XVII hereto, since the Balance Sheet
Date, each of the Corporations has conducted its respective business in the
ordinary course, and there has not been any:
(a) adverse and material change in the condition (financial or
otherwise), results of operations, assets, backlog, order input, liabilities or
Business of the Corporations taken as a whole;
(b) sale, assignment, disposition, transfer, pledge, mortgage or
lease of any asset of any of the Corporations (other than in the ordinary course
of business and consistent with past practice), which involved assets having an
aggregate depreciated book value exceeding One Hundred Fifty Thousand U.S.
dollars ($150,000) for all such transactions;
(c) increase in the compensation or fringe benefits payable or to
become payable by any of the Corporations to any of their respective directors,
officers or salaried employees, other than routine increases made in the
ordinary course of business and consistent with past practice (and not exceeding
increases of Twenty-Five Thousand U.S. dollars ($25,000) per annum for any
individual director or officer);
(d) change by any of the Corporations in its accounting principles,
methods or practices (including, without limitation, any change in depreciation
or amortization policies or rates or any change in the policies pertaining to
the recognition of accounts receivable or the
51
<PAGE>
discharge of accounts payable or accounting for inventories, but excluding any
changes required by applicable accounting pronouncements);
(e) damage, destruction or loss with respect to any of the properties
or assets of any of the Corporations, individually or in the aggregate, in
excess of Fifty Thousand U.S. dollars ($50,000), net of third party insurance;
(f) declaration or payment by any of the Corporations of any dividend
or distribution of any assets of any kind whatsoever to any of its shareholders,
including, without limitation, distributions in redemption of or as the purchase
price for any capital stock or equity interest, or in discharge or cancellation,
in whole or in part, of any Indebtedness, whether in payment of principal,
interest or otherwise;
(g) material labor trouble, problem or grievance adversely affecting
any of the Corporations;
(h) written or other binding commitment by any of the Corporations to
make capital expenditures for additions to property, plant or equipment in an
amount in excess of Fifty Thousand U.S. dollars ($50,000) in the aggregate (in
respect of all of the Corporations);
(i) written notice from any material supplier or customer of any of
the Corporations that it will cease doing business with any of the Corporations
as a result of the Transactions;
(j) damage to, destruction or loss of any asset of any of the
Corporations (whether or not covered by insurance) that could reasonably be
expected to have a Material Adverse Effect;
(k) issuance, sale or disposition of any capital stock or other
equity interest in any of the Corporations or any options, warrants or other
rights to purchase any such capital stock or equity interest or any securities
convertible into or exchangeable for such capital stock
52
<PAGE>
or equity interest or other change in the issued and outstanding capitalization
of any of the Corporations;
(l) incurrence or assumption of, or subjection to, whether directly
or by way of guarantee or otherwise, any Indebtedness or other Liability,
including purchase money indebtedness, except trade or business obligations or
Liabilities incurred in the ordinary course of business and consistent with past
practice;
(m) materially adverse changes to the business organization of any of
the Corporations, the goodwill of suppliers, customers, independent contractors,
employees and others with whom material business relationships exist, and the
availability of the services of the present officers and the material services
of those employed by each of the Corporations;
(n) subjection of any of the assets of any of the Corporations to any
additional Encumbrance (other than Permitted Liens); and
(o) agreement by any of the Corporations to do any of the foregoing.
4.27 Certain Transactions.
--------------------
Except as set forth in Schedule XVIII hereto, none of the past or
present stockholders, officers or directors of any of the Corporations is
presently a party to any transaction with any of the Corporations (other than
for services as employees, officers and directors), including without limitation
any contract, agreement or other arrangement (i) providing for the furnishing of
services to or by, (ii) providing for the rental of real or personal property to
or from, or (iii) otherwise requiring payments to or from, in each case, any
such stockholder, officer or director, any member of the family of any such
stockholder, officer or director or any corporation, partnership, trust or other
entity in which any such stockholder, officer or director has a substantial
interest or is an officer, director, trustee or partner.
53
<PAGE>
4.28 No Undisclosed Material Liabilities.
-----------------------------------
Except as set forth in Schedule XXII hereto, there are no Liabilities
of any of the Corporations of any kind whatsoever, whether accrued, contingent,
absolute, determined, indeterminable or otherwise, and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a Liability, other than:
(a) Liabilities disclosed in this Agreement and the Schedules and
Exhibits hereto;
(b) Liabilities which individually or in the aggregate, would not
have a Material Adverse Effect; and
(c) Liabilities under this Agreement.
4.29 Material Misstatements or Omissions.
-----------------------------------
No representation, warranty or statement by the Stockholders or any of
the Corporations in this Agreement or in any Exhibit or Schedule furnished or to
be furnished by the Stockholders or any of the Corporations pursuant hereto, or
in connection with the Transactions, contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained therein not misleading.
4.30 Limitations on Representations.
------------------------------
(a) Buyer represents and warrants that it has relied on its own
projections in connection with the Transactions. Except as set forth in
Articles , and hereof, no representations, warranties or guarantees have been,
are being or will be made by the Stockholders or any of the Corporations or any
of their respective Affiliates, directors, officers, employees, agents or other
representatives as to: the quality, condition, character, size, quantity, type,
earnings, revenues, expenses, suitability or value of any or all of the
Corporations or any of the properties owned or leased by any Corporation; or any
financial,
54
<PAGE>
business, sales or other forecasts or projections contained in any memorandum or
other document furnished to the Buyer pursuant to this Agreement or in
connection with the Transactions.
(b) Notwithstanding anything contained herein to the contrary, to the
extent any representation or warranty contained in Article , or is not true as
a result of any action taken or omitted to be taken by the Stockholders, TLG
Holding or any Corporation at the written request of the Buyer, then the failure
of such representation or warranty to be true shall not be deemed to be a
violation or breach of any such representation or warranty for all purposes
hereof.
(c) As used in this Article 4.30(c), a "Knowledge Representation" is
a representation or warranty made under this Article 4 which is qualified
expressly as being made to the knowledge of the Stockholders and (ii) a "Non-
Knowledge Representation" is a representation or warranty made under this
Article 4 which is not qualified expressly as being made to the knowledge of the
Stockholders. Notwithstanding anything to the contrary in this Article 4, a Non-
Knowledge Representation shall not be deemed to be breached solely by reason of
the existence of a fact which (i) does not result in a breach of a Knowledge
Representation solely by reason of the absence of knowledge thereof by any of
the Stockholders, of Philip Kazin or of Dominick Bonanno and (ii) would result
in a breach of such Knowledge Representation if any one of the Stockholders,
Philip Kazin or Dominick Bonanno had knowledge thereof; provided, however, that
--------
the provisions of this sentence shall not apply to or affect any representation
or warranty contained in Article 4.2, 4.4 or 4.5.
(d) Nothing contained in this Agreement or in any of the Schedules or
Exhibits attached hereto shall constitute or be interpreted or construed as an
admission by any Party or any of its subsidiaries or Affiliates of liability to
third parties, whether under any Laws or
55
<PAGE>
otherwise, or as an admission that any Party or any of its subsidiaries or
Affiliates are in violation of or have ever violated any such Laws.
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES REGARDING NATUR-PHARMA AND B. BROS.
- ------------------------------------------------------------------------------
5.1 Representations and Warranties Regarding Natur-Pharma and B. Bros.
------------------------------------------------------------------
Stephen Welling makes each and every representation and warranty set forth in
Article hereof, subject to each and every limitation set forth therein, solely
to the extent that such representations and warranties relate to Natur-Pharma
and B. Bros.
ARTICLE 6 - PRE-CLOSING COVENANTS
- ---------------------------------
6.1 Buyer's Conduct Prior to Closing.
--------------------------------
On and after the date hereof until the Closing, the Buyer shall
refrain from entering into any agreement, committing to take any action, or
taking any action which would, if taken on or before the Closing Date, make any
of the representations or warranties of the Buyer contained in this Agreement
untrue or incorrect as of the Closing Date or prevent the Buyer from performing
or cause the Buyer not to perform its covenants hereunder, except for actions
taken or omitted to be taken by the Buyer at the written request of the
Stockholders.
6.2 Stockholders' and Corporations' Conduct Prior to Closing.
--------------------------------------------------------
The Stockholders agree that on and after the date hereof until the
Closing, except as otherwise consented to by the Buyer in writing (which consent
will not be unreasonably withheld), as set forth in Schedule XXIII hereto, or as
expressly provided by this Agreement:
56
<PAGE>
(a) the business, operations, activities and practices of each of the
Corporations shall be conducted in the ordinary course of business in
substantially the same manner as currently conducted;
(b) the Stockholders will use, and will cause each of the
Corporations to use, their commercially reasonable efforts to preserve the
business organization of each of the Corporations intact, to preserve the
goodwill of suppliers, customers, independent contractors and others with whom
material business relationships exist and to keep available the services of the
present officers of the Corporations and the material services of those employed
by each of the Corporations;
(c) none of the Corporations will incur, or assume or become subject
to, whether directly or by way of guarantee or otherwise, any Indebtedness or
other Liability, including purchase money indebtedness, except trade or business
obligations or Liabilities incurred in the ordinary course of business and
consistent with past practice;
(d) none of the Corporations or the Stockholders will issue, sell or
dispose of any capital stock or other equity interest in any of the Corporations
or any options, warrants or other rights to purchase any such capital stock or
equity interest or any securities convertible into or exchangeable for such
capital stock or equity interests or otherwise make or effect any change in the
issued and outstanding capitalization of any of the Corporations;
(e) none of the Corporations will (a) declare any dividend or make
any distribution of any assets of any kind whatsoever to any of its shareholders
(other than (i) distributions to David and Jean Blechman that are reflected on
Schedule XXIII hereto, (ii) distributions to the Stockholders in respect of the
third and final installment of deferred 1993 S Corporation Taxes as set forth on
Schedule XXIII and (iii) distributions to the Stockholders in respect of 1995
and 1996 S Corporation Taxes (other than Stockholder Transactional Income
57
<PAGE>
Taxes (as defined below)), calculated and paid in the manner set forth on
Schedule XXIII), including, without limitation, distributions in redemption of
or as the purchase price for any capital stock or equity interest, or in
discharge or cancellation, in whole or in part, of any Indebtedness, whether in
payment of principal, interest or otherwise or (b) loan money to, make any
investment in or enter into any agreement or arrangement with any Affiliate
thereof;
(f) none of the Corporations will (a) sell, lease, transfer, assign or
otherwise dispose of ("Sales") any of its assets except for (i) Sales to
consumers or third party distributors in the ordinary course of business, (ii)
Sales other than in the ordinary course of business not exceeding One Hundred
Thousand U.S. dollars ($100,000) individually and Five Hundred Thousand U.S.
dollars ($500,000) in the aggregate (in each case in respect of all of the
Corporations) and (iii) Sales in connection with any transaction to which any of
the Corporations is contractually obligated prior to the Agreement Date
described in Schedules VII and VIII hereto, (b) license, sell, transfer, pledge,
modify, disclose, dispose of or permit to lapse any right under or respecting,
or enter into any settlement regarding the breach or infringement of, any
material Intellectual Property, or (c) permit or allow any of its assets to be
subject to any additional Encumbrance (other than Permitted Liens);
(g) none of the Corporations will (a) purchase, lease, or otherwise
acquire any material assets except for (i) purchases in the ordinary course of
business, and (ii) purchases other than in the ordinary course of business not
exceeding One Hundred Thousand U.S. dollars ($100,000) individually and Five
Hundred Thousand U.S. dollars ($500,000) in the aggregate (in each case in
respect of all of the Corporations) or (b) merge or consolidate with, purchase
all or any substantial part of the assets of, or otherwise acquire any Person,
corporation or firm or division thereof;
58
<PAGE>
(h) except as may be required by law or by a collective bargaining
agreement, none of the Corporations will increase the compensation or fringe
benefits payable or to become payable by any of the Corporations to any of their
respective directors, officers or salaried employees, other than routine
increases made in the ordinary course of business and consistent with past
practice (and not exceeding increases of Twenty-Five Thousand U.S. dollars
($25,000) per annum for any individual director or officer and Two Hundred Fifty
Thousand U.S. dollars ($250,000) in the aggregate); it being understood and
agreed that a pro rata portion of certain annual bonuses for 1996, in the
amounts set forth in Schedule XXIII hereto, will become payable by the
Corporations to certain of their respective officers and salaried employees
prior to the Closing;
(i) none of the Corporations, except as required by GAAP, will change
its respective accounting principles, methods or practices (including without
limitation, any change in depreciation or amortization policies or rates or any
change in the policies pertaining to the recognition of accounts receivable or
the discharge of accounts payable or accounting for inventories) and none of the
Corporations will effect reductions in the balances at the Balance Sheet Date in
the significant reserve accounts described in Schedule II hereto, other than to
account for payments or events subsequent to such date, provided that none of
the Corporations, except as required by a change in the Code or tax provisions
of state or local law, will change its respective tax accounting principles,
methods or practices (including, without limitation, any change in depreciation
or amortization policies or rates or any change in the policies pertaining to
the recognition of accounts receivable or the discharge of accounts payable or
accounting for inventories);
59
<PAGE>
(j) none of the Corporations will make or revoke any tax election or
settle or compromise any material federal, state, local or foreign tax liability
or agree to an extension of a statute of limitations with respect to Taxes;
(k) none of the Corporations will (A) pay, discharge or satisfy any
Claims or Liabilities (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than (i) the settlement, discharge or satisfaction of any
Claims or Liabilities in connection with certain matters previously disclosed in
writing to the Buyer by the Stockholders, or (ii) the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of Liabilities (x) reflected or reserved against in the Financial
Statements or (y) incurred since September 30, 1995 in the ordinary course of
business and consistent with past practice, or, (B) other than in the ordinary
course, make any representation or proposal to (i) any of the holders (or their
representatives) of any Indebtedness of any of the Corporations (or for which
any of the Corporations is a guarantor), or (ii) any party which has issued a
letter of credit which benefits any of the Corporations; and
(l) none of the Stockholders or the Corporations will enter into any
agreement or commit to take any action which would, if taken on or before the
Closing Date, result in a breach of any of the foregoing covenants contained in
this Article , make any of the representations or warranties of the Stockholders
or the Corporations contained in this Agreement untrue or incorrect as of the
Closing Date or prevent any of the Stockholders or the Corporations from
performing or cause any of the Stockholders or the Corporations not to perform
their respective covenants hereunder, except for actions taken or omitted to be
taken by the Stockholders or the Corporations at the written request of the
Buyer.
60
<PAGE>
6.3 Buyer's Access.
--------------
The Stockholders shall cause each of the Corporations to authorize and
permit the Buyer and its Representatives to have reasonable access during normal
business hours, upon notice and in such manner as will not unreasonably
interfere with the conduct of their respective businesses, to all of their
respective directors, officers, employees, representatives, properties, books,
records, operating instructions and procedures, Tax Returns and all other
information with respect to the Corporations' Business as the Buyer (or its
Representatives) may from time to time reasonably request, and to make copies of
such books, records and other documents, subject to applicable obligations of
confidentiality to third parties; provided, however, that the Buyer shall not
--------
interview employees of any of the Corporations (other than senior management)
without the prior consent of the Stockholders, which consent shall not be
unreasonably withheld.
6.4 No Solicitation.
---------------
The Stockholders shall not, nor shall they permit any of the
Corporations or any of their respective directors, officers, employees,
Representatives or agents to, solicit or initiate, enter into substantive
discussions concerning, or substantively respond to, any Acquisition Proposal.
As used herein, the term "Acquisition Proposal" shall mean a proposal for the
acquisition (by merger, stock purchase or otherwise) of the Corporations, any or
all of the Corporations or all or any material portion of their respective or
collective assets or any equity interest therein.
6.5 Authorizations and Approvals.
----------------------------
(a) Each of the Buyer and the Stockholders, as promptly as practicable
after the Agreement Date, shall, and (in the case of the Stockholders) shall
cause the Corporations to, (i) deliver, or cause to be delivered, all notices
and make, or cause to be made, all such declarations, designations,
registrations, filings and submissions under all Laws applicable to it
61
<PAGE>
as may be required for it to consummate the Transactions; (ii) use commercially
reasonable efforts to obtain, or cause to be obtained, all Approvals, Orders,
consents and waivers from all Persons as may be required for it to consummate
the Transactions (including, without limitation, the requisite consent of or
waiver by the other parties to any financing agreements material to the
Corporations) (the "Required Consents"); and (iii) use commercially reasonable
efforts to take, or cause to be taken, all other actions necessary, proper or
advisable in order for it to fulfill its respective obligations hereunder and
carry out the intentions of the Parties expressed herein.
(b) If required by the HSR Act, the Buyer and the Stockholders shall
comply promptly with the notice and reporting requirements of the HSR Act and
shall reasonably cooperate with one another with respect thereto. The Buyer and
the Stockholders shall comply substantially with any additional requests for
information, including requests for production of documents and production of
witnesses for interview or depositions, by the Antitrust Division of the DOJ,
the FTC or the antitrust or competition law authorities of any other
jurisdiction (whether U.S., foreign or multi-national).
(c) The Buyer and the Stockholders shall exercise commercially
reasonable efforts, and shall cooperate with each other, to prevent the entry in
any Action brought by any Person of any Order of any Governmental Authority
which would prohibit, make unlawful or delay the consummation of the
Transactions.
(d) The Buyer and the Stockholders each shall cooperate in good faith
and undertake promptly any and all commercially reasonable actions to facilitate
the lawful completion of the Transactions.
62
<PAGE>
6.6 Cancellation of Certain Obligations.
-----------------------------------
The Stockholders agree that as of the Closing Date, each of the
Shareholders' Agreements among the Stockholders (other than Stephen Welling) and
each of Specialty, Export, Alvita and Twin, and the B. Bros. Realty
Shareholders' Buy-Sell Agreement among the Continuing Stockholders (other than
Stephen Welling) and B. Bros. shall be terminated and of no further force and
effect. Except as set forth on Schedule XXIV hereto or as specifically
contemplated by this Agreement, as of the Closing Date all other agreements,
contracts or obligations, whether written or oral, existing between or among any
of the Corporations, or between or among any of the Stockholders and any of the
Corporations, shall be terminated and of no further force or effect. The
Stockholders and the Corporations shall evidence such termination where relevant
by executing a release in a form acceptable to the Buyer.
6.7 Disclosure Supplements.
----------------------
(a) On or prior to March 19, 1996, the Stockholders may supplement or
amend the Schedules hereto with respect to any matter existing or occurring at
or prior to the Agreement Date. In the event that the Stockholders so
supplement or amend the Schedules, the Buyer shall have the right, in its sole
and absolute discretion, exercisable by written notice delivered to the
Stockholders on or prior to March 26, 1996, to terminate this Agreement. In the
event of the termination of this Agreement pursuant to this Article 6.7(a), this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of any Party hereto or any of its Affiliates, directors,
officers or stockholders, except for the provisions of Articles 9.1(d) (iv),
12.1, 12.2, 13, 16 and 20, which shall survive such termination. Unless the
Buyer terminates this Agreement in accordance with the foregoing sentence, any
such supplements or amendments to the Schedules shall be deemed to have been
included in the Schedules delivered as of the Agreement Date for all purposes of
this Agreement.
63
<PAGE>
(b) From time to time prior to the Closing, the Stockholders or the
Buyer may supplement or amend the Schedules hereto with respect to any matter
arising after the Agreement Date which, if existing or occurring at or prior to
the Agreement Date, would have been required to be set forth or described in
such Schedules or which is necessary to complete or correct any information in
such Schedules or in any representation or warranty of the Stockholders or the
Buyer which has been rendered inaccurate thereby. Any such supplements or
amendments which the Stockholders or the Buyer, as the case may be, receives
written notice of at or prior to the Closing shall not affect such Parties'
respective termination rights, which shall be determined on the basis of the
Schedules delivered as of the Agreement Date; provided, however, that if the
--------
Closing shall occur notwithstanding any such supplement or amendment, such
supplement or amendment shall not be deemed to be, or to evidence, a breach of
any representation or warranty related thereto and shall not give rise to a
right of indemnification in connection therewith.
6.8 Covenant to Satisfy Conditions.
------------------------------
The Stockholders will use all commercially reasonable efforts to
ensure that the conditions set forth in Articles 7.1 and 7.2 hereof are
satisfied, insofar as such matters are within the control of the Stockholders or
any of the Corporations, and the Buyer will use all commercially reasonable
efforts to ensure that the conditions set forth in Articles 7.1 and 7.3 hereof
are satisfied, insofar as such matters are within the control of the Buyer.
Each Party hereto shall promptly consult with the other Party with respect to,
and provide to the other Party copies of, all filings made by such Party with
any Governmental Authority or any other information supplied by such Party to a
Governmental Authority in connection with this Agreement and the Transactions.
The Stockholders and the Buyer further covenant and agree, with respect to a
pending or threatened preliminary or permanent injunction, or other Order,
64
<PAGE>
decree or ruling or statute, rule, regulation or executive order, that would
adversely affect the ability of the Parties hereto to consummate the
Transactions, to use commercially reasonable efforts to prevent or lift the
entry, enactment or promulgation thereof, as the case may be.
6.9 Further Assurances.
------------------
If at any time after the Closing Date any further action is necessary
or desirable to carry out the purposes of this Agreement, the Parties hereto
shall take or cause to be taken all such necessary action, including, without
limitation, the execution and delivery of such further instruments and documents
as may be reasonably requested by the other Party for such purposes or otherwise
to consummate and make effective the Transactions.
6.10 Other Tax Matters.
-----------------
(a) Each Stockholder shall (i) duly include in his federal and state
income tax returns such Stockholder's allocable share of all items of income,
gain, loss, deduction or credit attributable to the S Short Year of Natur-Pharma
and ARP in a manner consistent with Form 1120S and the schedules thereto (and
the corresponding state income tax forms and schedules) to be filed by Natur-
Pharma and ARP with respect to such period; and (ii) pay any and all federal and
state income taxes required to be paid for all taxable years of such
Stockholder, including the taxable year that includes the S Short Year, that are
attributable to such Stockholder's stock ownership in Natur-Pharma and ARP. For
purposes of this provision, the "S Short Year" means that portion of the fiscal
year of Natur-Pharma or ARP, as applicable, that ends on the day before the date
on which the Subchapter S status of such Corporation is terminated pursuant to
section 1362(d) of the Code. With respect to each of the other Corporations,
the Stockholders shall file their federal and state income tax returns
consistently with treating the Natur-Pharma Merger as a taxable sale by each
such Corporation of all its
65
<PAGE>
assets (subject to liabilities) in exchange for the Merger Consideration,
followed by a liquidation of each such Corporation.
(b) The Buyer and the Stockholders shall agree upon the allocation of
the Merger Consideration among the assets of Twin, Export, Specialty, Alvita and
B. Bros. in the manner required by section 1060 of the Code and any comparable
provisions of state, local or foreign law, as appropriate. The Buyer and the
Stockholders shall report, act and file in all tax respects and for all tax
purposes consistent with such allocations.
(c) Each Stockholder shall furnish the Buyer with a certificate
stating the Stockholder's United States taxpayer identification number and that
the Stockholder is not a foreign person, pursuant to section 1445 of the Code.
(d) The Buyer, each Stockholder and each Corporation shall execute
such returns and questionnaires and provide such information as is required by
New York Tax Law section 1447 to obtain from the New York State Department of
Taxation and Finance prior to the Closing Date such tentative assessments of New
York State Real Property Transfer Gains Tax as are required as a result of the
Transactions.
ARTICLE 7 - CONDITIONS TO CLOSING
- ---------------------------------
7.1 Conditions to Each Party's Obligations. The obligations of each Party
--------------------------------------
to be performed under this Agreement are subject to the satisfaction of each of
the following conditions unless waived (to the extent such conditions can be
waived) by consent of the Buyer and the Stockholders:
(a) Legal Action. No temporary restraining order, preliminary or
------------
permanent injunction or other order preventing the consummation of any of the
Transactions shall have
66
<PAGE>
been issued by any federal or state court and remain in effect. Each Party
agrees to use its commercially reasonable efforts to have any such injunction
lifted.
(b) Legislation. No federal or state Law shall have been enacted
-----------
that prohibits, restricts or materially delays the consummation of any of the
Transactions.
(c) Governmental Approvals. All consents, Orders or Approvals of,
----------------------
declarations or filings with, and expirations of waiting periods imposed by, any
Governmental Authority that are necessary for the consummation of the
Transactions, if any, shall have been filed, shall have occurred and shall have
been obtained (as the case may be).
(d) Stockholders Agreement. The Stockholders Agreement shall have
----------------------
been executed and delivered by the Buyer, the Continuing Stockholders and TLG
Holding in substantially the form attached hereto as Exhibit G.
---------
(e) Consents and Approvals. The Corporations shall have received the
----------------------
Required Consents in form and in substance reasonably satisfactory to the Buyer
and the Stockholders.
(f) Financing. Natur-Pharma shall have obtained at least One Hundred
----------
Fifty- Three Million U.S. dollars ($153,000,000) in aggregate principal amount
of Borrowings from the Lenders and Purchasers and have available to it a credit
facility in the amount of at least Ten Million U.S. dollars ($10,000,000) on
terms and conditions substantially as set forth in Exhibit O hereto, with such
---------
changes as the Buyer and the Stockholders shall mutually consent.
7.2 Conditions to Obligations of Buyer. The obligations of the Buyer
----------------------------------
hereunder to be performed at the Closing are subject to the satisfaction of each
of the following conditions unless waived by consent of the Buyer:
(a) Accuracy of Representations and Warranties. All representations
------------------------------------------
and warranties made by the Stockholders in this Agreement shall be true and
correct in all material
67
<PAGE>
respects on the Closing Date with the same effect as if such representations and
warranties had been made at and as of the Closing Date, and the Buyer shall have
received a certificate, reasonably satisfactory to Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel, counsel to the Buyer ("Buyer Counsel"), signed by the
Stockholders to the effect of this Article 7.2(a). Notwithstanding anything to
the contrary contained herein (except as provided in Article 6.7 hereof), the
Closing of the Transactions shall not be deemed to be a waiver by the Buyer or
any Indemnitee of any rights to indemnification under or pursuant to Article 11
of this Agreement, irrespective of whether the Buyer or any other Person had
knowledge on or before the Closing Date of the breach by any Stockholder of any
representation or warranty contained in this Agreement.
(b) Performance of Obligations. The Stockholders and the
--------------------------
Corporations shall have performed in all material respects all obligations
required to be performed by them under this Agreement and in connection with the
Transactions prior to the Closing Date, and the Buyer shall have received a
certificate, reasonably satisfactory to Buyer Counsel, signed by the
Stockholders to the effect of this Article 7.2(b). Notwithstanding anything to
the contrary herein, the Closing of the Transactions shall not be deemed to be a
waiver by the Buyer or any Indemnitee of any rights to indemnification under or
pursuant to Article 11 of this Agreement, irrespective of whether the Buyer or
any other Person had knowledge on or before the Closing Date of the failure of
the Stockholders to perform any obligation required to be performed by any of
them under this Agreement or in connection with the Transactions.
(c) Corporation Adverse Changes. There shall not have occurred after
---------------------------
the Agreement Date any events which, individually or in the aggregate, have had
or could be reasonably expected to have a Material Adverse Effect.
68
<PAGE>
(d) Opinion of Counsel. The Buyer shall have received opinions of
------------------
Kelley Drye & Warren, Piper & Marbury and Ray, Quinney & Nebeker, special
counsel for the Corporations ("Corporations Counsel"), dated the Closing Date,
as to matters set forth in Exhibits K, L and M, respectively, in form and
-------- - - -
substance reasonably satisfactory to Buyer Counsel.
(e) Releases. The Buyer shall have received absolute and
--------
unconditional releases from the Stockholders of any and all claims for payment
by the Stockholders from each of the Corporations in substantially the form
attached hereto as Exhibit P.
---------
(f) Employment Agreements. TLG Holding shall have received an
---------------------
executed Employment Agreement from each of the Continuing Stockholders in
substantially the form attached hereto as Exhibit H-1 or H-2, as the case may
----------- ---
be.
(g) Noncompetition Agreement. The Buyer shall have received an
------------------------
executed Noncompetition Agreement from each of the Stockholders in substantially
the form attached hereto as Exhibit Q.
---------
(h) Consulting Agreements. TLG Holding shall have received an
---------------------
executed Consulting Agreement from each of David and Jean Blechman in
substantially the form attached hereto as Exhibit I.
---------
(i) Authorizations. The Buyer shall have received a copy of (i) all
--------------
resolutions or other written authorizations adopted by the Board of Directors of
each of the Corporations authorizing the Transactions, certified by the
respective appropriate authorized officers of each of the Corporations and (ii)
evidence of the action taken by the Stockholders authorizing the Transactions,
certified by the respective appropriate authorized officers of each of the
Corporations, in each case, reasonably satisfactory to Buyer Counsel.
69
<PAGE>
(j) Stock Certificates. The Buyer shall have received the duly
------------------
executed and sealed stock certificates representing the Acquired Shares,
registered, as applicable, in the name of the Buyer and its permitted assigns.
7.3 Conditions to Obligations of the Stockholders and Natur-Pharma. The
--------------------------------------------------------------
obligations of the Stockholders and Natur-Pharma hereunder to be performed at
the Closing are subject to the satisfaction of each of the following conditions
unless waived by consent of the Stockholders and Natur-Pharma:
(a) Accuracy of Representations and Warranties. All representations
------------------------------------------
and warranties made by the Buyer in this Agreement shall be true and correct in
all material aspects on the Closing Date with the same effect as if such
representations and warranties had been made at and as of the Closing Date, and
the Stockholders and Natur-Pharma shall have received a certificate reasonably
satisfactory to Corporations Counsel, signed by an authorized officer of the
general partner of the Buyer to the effect of this Article 7.3(a).
(b) Performance of Obligations. The Buyer shall have performed in
--------------------------
all material respects the obligations required to be performed by it under this
Agreement prior to the Closing Date, and the Stockholders and Natur-Pharma shall
have received a certificate, reasonably satisfactory to Corporations Counsel,
signed by an authorized officer of the general partner of the Buyer to the
effect of this Article 7.3(b).
(c) Opinion of Counsel. The Stockholders and Natur-Pharma shall have
------------------
received an opinion of Buyer Counsel as to the matters set forth in Exhibit N,
dated the date of the Closing, in form and substance reasonably satisfactory to
Corporations Counsel.
(d) Releases. The Stockholders shall have received absolute and
--------
unconditional releases from the Corporations of any and all claims by the
Corporations against the Stockholders in substantially the form attached hereto
as Exhibit J.
---------
70
<PAGE>
(e) Employment Agreements. Each of the Continuing Stockholders shall
---------------------
have received an executed Employment Agreement from TLG Holding in substantially
the form attached hereto as Exhibit H-1 or H-2, as the case may be.
----------- ---
(f) Consulting Agreements. Each of David and Jean Blechman shall
---------------------
have received an executed Consulting Agreement from TLG Holding in substantially
the form attached hereto as Exhibit I.
---------
(g) Authorization. The Stockholders and Natur-Pharma shall have
-------------
received a copy of resolutions adopted by the Buyer authorizing the
Transactions, reasonably acceptable to Corporations Counsel, certified by an
authorized officer of the general partner of the Buyer.
ARTICLE 8 - EFFECTIVENESS; TERMINATION; SURVIVAL OF AGREEMENT
- -------------------------------------------------------------
8.1 Termination.
-----------
(a) Notwithstanding anything contained herein to the contrary, this
Agreement may be terminated:
(i) at the Closing or at any time prior thereto, by mutual
written agreement of the Stockholders and the Buyer;
(ii) at the Closing or at any time prior thereto by the Buyer, if
the Stockholders shall have supplemented or amended the Schedules hereto as
permitted under Article hereto with respect to any matter arising after
the Agreement Date which causes or would cause the Stockholders to be
unable, without giving effect to such amendment or supplement, to satisfy
the condition of Article 7.2(a) hereof; or
(iii) at the Closing or at any time prior thereto by the
Stockholders, if the Buyer shall have supplemented or amended the Schedules
hereto as permitted under Article 6.7 hereto with respect to any matter
arising after the Agreement Date which
71
<PAGE>
causes or would cause the Buyer to be unable, without giving effect to such
amendment or supplement, to satisfy the condition of Article 7.3(a) hereof;
or
(iv) at any time after the one hundred-twentieth day after the
Agreement Date (the "Termination Date") by the Buyer or the Stockholders if
the conditions set forth in Article 7 shall not have been satisfied or
waived (to the extent they may be waived) on or before the Termination
Date; provided, however, that the right to terminate this Agreement under
--------
this clause (iv) shall not be available to a Party whose breach or failure
to fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Closing to occur on or before the
Termination Date; or
(v) by either the Buyer or the Stockholders (if not in breach of
its or their respective covenants, representations and warranties
hereunder) if the other is in material breach of its covenants,
representations or warranties hereunder and such breach either is incapable
of cure or is not cured within fifteen (15) days after written notice from
the Party or Parties wishing to terminate.
(b) Any termination pursuant to Article 8.1(a)(i) shall be effected by
a written instrument signed by the Buyer and the Stockholders and any
termination pursuant to Article 8.1(a) (ii), (iii), (iv) or (v) shall be
effected by written notice from the Party so terminating to the other Party or
Parties.
8.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement pursuant to Article , this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of any Party hereto or any
of its Affiliates, directors, officers or stockholders, except for the
provisions of Articles 9.1(d), 12.1, 12.2, 13, 16 and 20, which shall survive
such termination.
72
<PAGE>
ARTICLE 9 - TAXES AND COSTS; POST-CLOSING COVENANTS
- ---------------------------------------------------
9.1 Transactional Taxes and Costs.
-----------------------------
(a) The Stockholders shall be responsible for all income taxes (other
than income taxes imposed at the entity level on any of the Corporations, income
taxes based on revenue or income of any Person other than the Stockholders and
the Corporations and Incremental Income Taxes), and any interest or penalties
thereon, imposed by any taxing jurisdiction with respect to the Exchange, the
Mergers or the purchase by TLG Holding of the Remaining Shares (the "Stockholder
Transactional Income Taxes"). Natur-Pharma shall be responsible for all other
taxes (other than income taxes based on revenue or income of the Buyer),
including without limitation the Incremental Income Taxes, duties, excises or
governmental charges, fees, imposts or assessments (the "Transactional Taxes")
relating to the Transactions other than the Stockholder Transactional Income
Taxes. In addition, within four (4) months after the Closing, Natur-Pharma
shall pay each Stockholder his Gross-Up Payment. In the event any Party shall be
required to pay any Transactional Taxes for which any other Party is responsible
pursuant to the first two sentences of this Article , such other Party shall
promptly reimburse such Party and hold such Party harmless from any
Transactional Taxes paid by such Party on behalf of such other Party. In the
event any Taxing Authority subsequently determines that any additional
Transactional Taxes (including interest or penalties thereon) are due, the Party
responsible for such Transactional Taxes pursuant to the first two sentences of
this Article shall hold any other Party harmless therefrom. Such Transactional
Taxes shall not be deemed to be Buyer Transactional Costs.
(b) Upon the Closing, Natur-Pharma shall be responsible for all
reasonable legal, accounting, advisory and other fees and reasonable out-of-
pocket costs and expenses of the Lenders and the placement agent on account of
the Borrowings and the Note Financing,
73
<PAGE>
respectively (the "Financing Fees"), and all reasonable legal, accounting,
advisory and other fees and reasonable out-of-pocket costs and expenses of the
Buyer incurred as a result of this Agreement or the Transactions (the "Buyer
Transactional Costs"); provided, that Natur-Pharma's liability under this
--------
Article 9.1(b) shall not exceed Nine Million U.S. dollars ($9,000,000) in the
aggregate, and the Buyer shall be responsible for the Financing Fees and the
Buyer Transactional Costs in excess of such amount. Subject to the foregoing,
Natur-Pharma shall promptly pay and discharge such fees, costs and expenses and
shall promptly reimburse the Buyer for any amounts the Buyer may have expended
on such fees, costs and expenses.
(c) Upon the Closing, Natur-Pharma shall be responsible for all
reasonable legal, accounting, advisory and other fees and reasonable out-of-
pocket costs and expenses of the Stockholders and the Corporations incurred as a
result of this Agreement or the Transactions, including, but not limited to, the
advisory fees of PharmaConsult (the "Corporation Transactional Costs");
provided, that Natur-Pharma's liability under this Article 9.1(c) shall not
- --------
exceed Four and One-Half Million U.S. dollars ($4,500,000) in the aggregate, and
the Stockholders shall be responsible for the Corporation Transactional Costs in
excess of such amount. Subject to the foregoing, Natur-Pharma shall promptly
pay and discharge such fees, costs and expenses and shall promptly reimburse the
Stockholders for any amounts the Stockholders may have expended on such fees,
costs and expenses.
(d) (i) If the Closing shall not have been consummated on or before
the Termination Date as a result of the termination of this Agreement by the
Stockholders under Article 8.1(a)(v) hereof, the Corporations shall be
responsible for the Corporation Transactional Costs and the Buyer shall be
responsible for the Buyer Transactional Costs and shall be responsible and/or
shall reimburse the Stockholders and the Corporations for the Financing Fees.
74
<PAGE>
(ii) If the Closing shall not have been consummated on or
before the Termination Date as a result of the termination of this Agreement by
the Buyer under Article 8.1(a)(v) hereof (except as provided in Article
9.1(d)(iii) below), the Buyer shall be responsible for the Buyer Transactional
Costs and the Corporations shall be responsible for the Corporation
Transactional Costs and shall be responsible and/or shall reimburse the Buyer
for the Financing Fees.
(iii) If the Closing shall not have been consummated on or
before the Termination Date as a result of the termination of this Agreement by
the Buyer by reason of a breach by any of the Stockholders of their covenant set
forth in Article 6.4 hereof, the Buyer may pursue any and all claims for damages
against the breaching party or parties without limitation as to the amount
thereof.
(iv) Except as otherwise provided in Article 9.1(d) (i), (ii)
or (iii) above, if the Closing shall not have been consummated on or before the
Termination Date, the Corporations shall be responsible for the Corporation
Transactional Costs, the Buyer shall be responsible for the Buyer Transactional
Costs, and the Financing Fees shall be shared 50% by the Buyer and 50% by the
Corporations.
ARTICLE 10 - EMPLOYEES AND BENEFITS
- -----------------------------------
10.1 Employees and Benefits. The Parties agree that upon the Closing, all
----------------------
previous service recognized by the Twin Laboratories, Inc. Profit Sharing Plan,
Twin Laboratories, Inc. Section 125 Plan, Twin Laboratories, Inc. XS Medical
Insurance Plan, Nature's Herbs, Inc. Employee Savings and Investment Plan,
Nature's Herbs, Inc. Flexible Cafeteria Employee Benefits Plan and other
compensation policies and practices (other than benefit plans) of the
Corporations where such service is applicable (collectively, the "Previous
Plans"), shall be
75
<PAGE>
counted for purposes of determining whether the employees listed in Schedule XV
hereto are eligible for participation, or have a vested interest, in comparable
or successor benefit plans, compensation policies and practices of TLG Holding
and/or its subsidiaries following the Closing, only to the extent such service
would be credited under the Previous Plans, but not, in any case, in such a
manner as to result in a duplication of benefits.
ARTICLE 11 - SURVIVAL; INDEMNIFICATION
- --------------------------------------
11.1 Definitions. As used in this Article , the following terms shall have
-----------
the corresponding following meanings:
"Buyer Event of Indemnification" means the untruth, inaccuracy or
------------------------------
breach of any representation, warranty, agreement or covenant of the Buyer
contained in this Agreement (excluding the Exhibits hereto) and any Claim or
Liability for any fee, commission, compensation or other payment by any broker,
finder or similar agent, or Liability with respect thereto, who claims to have
been, or was in fact, engaged by or on behalf of the Buyer or any Affiliate of
the Buyer (other than the Corporations) in connection with the Transactions.
"Claim" means a claim, demand, action, suit, proceeding or cause of
-----
action, commenced or threatened.
"Event of Indemnification" means the untruth, inaccuracy or breach of
------------------------
any representation, warranty, agreement or covenant of any of the Stockholders
or of any of the Corporations contained in this Agreement (excluding the
Exhibits hereto) and shall include a Special Event of Indemnification and any
Claim or Liability for any fee, commission, compensation or other payment by any
broker, finder or similar agent, or Liability with respect thereto, who claims
to have been, or who was in fact, engaged by or on behalf of any of the
Stockholders or any of the Corporations in connection with the Transactions.
76
<PAGE>
"Buyer Indemnitees" means and includes the Buyer, TLG Holding, Natur-
-----------------
Pharma and ARP and their respective officers, directors, employees, partners,
shareholders, agents, representatives, successors and assigns.
"Stockholder Indemnitees" means the Stockholders and their respective
-----------------------
heirs, legal representatives, successors and assigns.
"Stockholder Indemnitors" means the Stockholders other than Stephen
-----------------------
Welling, jointly and severally, and in accordance with Article 11.5(f), Stephen
Welling, severally but not jointly.
"Losses" means any and all losses, costs, damages, liabilities,
------
assessments and expenses (including interest, penalties and reasonable
attorney's fees) sustained, suffered or incurred by any of the Buyer Indemnitees
or any of the Stockholder Indemnitees, as applicable, whether or not involving
any Third Party Claim (as defined below).
"Special Event of Indemnification" means the untruth, inaccuracy or
--------------------------------
breach of the representation and warranty set forth in Article 4.20.
"Stockholders' Representatives" means Brian Blechman and Neil
-----------------------------
Blechman.
"Survival Date" means (i) with respect to a Special Event of
-------------
Indemnification, the third anniversary of the Closing Date, (ii) with respect to
the representations and warranties described in Article 4.8, the date on which
the applicable statute of limitations has expired and (iii) with respect to any
other Event of Indemnification or any Buyer Event of Indemnification, the last
business day of the 14th month following the month in which the Closing shall
have occurred. Notwithstanding anything herein to the contrary, if written
notice of an Event of Indemnification or Buyer Event of Indemnification has been
given by the Indemnitee (as defined below) to the Indemnitor (as defined below)
in accordance with this Article 11 on or before the applicable Survival Date,
then the Indemnitee's right to indemnification with respect to such
77
<PAGE>
Event of Indemnification or Buyer Event of Indemnification, as applicable, shall
survive until any resulting Claims shall have been finally resolved; provided,
-------
however, that with respect to any Event of Indemnification asserted based on
- -------
Article 4.13(a), the Indemnitee's right to indemnification shall survive the
Survival Date set forth in clause (iii) of the immediately preceding sentence
only with respect to Claims asserted against any of the Corporations on or prior
to the last business day of the 26th month following the month in which the
Closing shall have occurred.
11.2 Indemnification.
---------------
(a) Subject to the limitations on indemnification contained in Article
below, from and after the Closing, the Stockholder Indemnitors shall indemnify
and hold harmless the Buyer Indemnitees, and each of them, from and against any
and all Losses arising from or in connection with any Event of Indemnification.
(b) Subject to the limitations on indemnification contained in
Articles 11.5 (a), (b), (d) and (g) below, from and after the Closing, the
Stockholder Indemnitors (other than Stephen Welling) shall indemnify and hold
harmless the Buyer Indemnitees, and each of them, from and against any and all
Losses, obligations, payments and other liabilities arising from or in
connection with any investment by the Corporations in, or other relationship
between or among any of the Corporations or any of the Stockholders (other than
Stephen Welling) and any of, Hambrose Leasing-3 L.P., Hambrose Leasing-4 L.P. or
Charterhouse Capital Associates, L.P. Notwithstanding anything to the contrary
contained in this Agreement, the obligation of the Stockholder Indemnitors under
this Article 11.2(b) shall survive the Closing indefinitely.
(c) Subject to the limitations on indemnification contained in Article
11.5 below, from and after the Closing, the Buyer shall indemnify and hold
harmless the Stockholder
78
<PAGE>
Indemnitees, and each of them, from and against any and all Losses arising from
or in connection with any Buyer Event of Indemnification.
11.3 Notice and Defense of Third Party Claims. The obligations and
----------------------------------------
liabilities of any Party who may be obligated to provide indemnification
hereunder (the "Indemnitor") with respect to Claims resulting from the assertion
of liability by third parties (each, a "Third Party Claim") shall be subject to
the following terms and conditions:
(a) The Person who may be entitled to indemnification hereunder (the
"Indemnitee") shall give prompt written notice to the Indemnitor (and, if the
Indemnitor shall be the Stockholder Indemnitors, to the Stockholders'
Representatives) of any Third Party Claim that might give rise to a Claim by the
Indemnitee against the Indemnitor based on the indemnity agreement contained in
Article 11.2 above, stating the nature and basis of such Third Party Claim, and
the amount thereof to the extent known, but failure to give such prompt notice
shall not affect an Indemnitor's obligations hereunder except to the extent that
the defense of such a Third Party Claim by such Indemnitor has been materially
prejudiced thereby. Such notice shall be accompanied by copies of all relevant
documentation in the possession of the Indemnitee or any of its Affiliates
(other than the Indemnitor) with respect to such Third Party Claim, including
without limitation any summons, complaint or other pleading which may have been
served or any written demand received.
(b) Subject to Article 11.5 hereof and the terms and provisions of
the Stockholders Agreement, the Indemnitor shall have the sole and exclusive
right in good faith and at its own cost and expense, to take reasonable steps to
cure, remediate, mitigate, remedy or otherwise handle any event or circumstance
which gives rise to a Loss (including, but not limited to, events and
circumstances which can be cured, remediated, mitigated or remedied through the
expenditure of money and events and circumstances which give rise to a Loss
which can be
79
<PAGE>
measured in terms of money), regardless of whether such Loss arises out of a
breach of or default under any representation, warranty, covenant or
agreement contained in this Agreement or otherwise; provided, however, that the
--------
Indemnitor shall not be entitled to exercise such right with respect to a Third
Party Claim to the extent that the exercise of such right by the Indemnitor
would have a materially adverse effect on the conduct of the Business by TLG
Holding, Natur-Pharma and ARP, taken as a whole. Such right shall include,
without limitation, (i) the right to investigate any such event or circumstance,
(ii) the right to cure, mitigate, remediate, remedy and otherwise handle any
such event or circumstance on such terms and conditions and by such means as the
Indemnitor may determine, in its reasonable discretion, and (iii) the sole and
exclusive right to defend, contest or otherwise oppose any such Third Party
Claim with legal counsel selected by the Indemnitor; provided, however, that in
-------- -------
the event that the Indemnitor shall not have expressly acknowledged in writing
that the Indemnitee will be indemnified with respect to such Third Party Claim
in accordance with this Agreement, such legal counsel shall be jointly selected
by the Indemnitor and the Indemnitee. The Indemnitor shall promptly inform the
Indemnitee of all material developments related to any such event or
circumstance. The Indemnitee shall have the right, but not the obligation, to
participate, at its own cost and expense, in the defense, contest or other
opposition of any such Third Party Claim through legal counsel selected by it
and shall have the right, but not the obligation, to assert any and all cross-
claims or counterclaims which it may have. Any of the above notwithstanding, if
the defendants in any Third Party Claim include both the Indemnitor and the
Indemnitee, and the Indemnitee has been advised by its counsel in writing,
addressed to both the Indemnitee and the Indemnitor, that there are legal
defenses available to the Indemnitee which are materially different from or in
addition to those available to the Indemnitor, the Indemnitee shall have the
80
<PAGE>
right to employ its own counsel in such Third Party Claim, and, in such event,
the reasonable fees and expenses of one such counsel shall be borne by the
Indemnitor.
(c) Subject to the provisions of Article 11.3(b), so long as the
Indemnitor is diligently and in good faith performing its obligations under
Article 11.3(b), the Indemnitee shall, and shall cause its Affiliates to, (i) at
all times, at its and their own cost and expense (other than reasonable out-of-
pocket costs and expenses, which shall be included as indemnifiable Losses),
cooperate in all reasonable ways with, make its and their employees reasonably
available to and otherwise render assistance to the Indemnitor to the extent
reasonably requested in writing by the Indemnitor and (ii) not compromise or
settle any such Claim without the prior written consent of the Indemnitor, which
consent shall not be unreasonably withheld.
(d) Neither the Indemnitor nor the Indemnitee shall make any
settlement of any Third Party Claim without the written consent of the other,
which consent shall not be unreasonably withheld; provided, however, that in the
-------- -------
case of any Third Party Claim for monetary damages, if the Indemnitor requests
the Indemnitee to accept a proposed financial settlement or compromise with
respect to any such Third Party Claim which settlement or compromise includes a
complete release of such Third Party Claim in favor of the Indemnitee and the
Corporations (if the Indemnitee is the Buyer) (and the Indemnitor stands ready
to pay all amounts due hereunder with respect thereto), and the Indemnitee
withholds its consent thereto, the obligation of the Indemnitor to such
Indemnitee under this Article 11 with respect to such Third Party Claim shall
not thereafter exceed the aggregate amount that the Indemnitor would have paid
hereunder in connection with such settlement or compromise (including
reimbursable expenses to the date thereof); provided, that the Indemnitor's
--------
obligation with respect to such Third Party Claim shall not be so limited if the
reason for the Indemnitee so withholding its consent is that, in the reasonable
opinion of the Indemnitee, such settlement or
81
<PAGE>
compromise would have a materially adverse effect on the conduct of the Business
by any of TLG Holding, Natur-Pharma or ARP.
11.4 Notice of Other Claims. In the event that the Indemnitee reasonably
----------------------
believes that it has a Claim in respect of which indemnity may be sought based
on the indemnity agreement contained in Article 11.2 above, which Claim is not
in respect of a Third Party Claim, the Indemnitee shall give a written notice to
the Indemnitor (and, if the Indemnitor is the Stockholder Indemnitors, to the
Stockholders' Representatives) stating the nature and basis of such Claim (the
"Indemnity Notice").
The Indemnitor shall, within thirty (30) days after receipt of any
Indemnity Notice, respond in writing to the Indemnitee (the "Indemnity
Response") and set forth with reasonable specificity those items in the
Indemnity Notice to which the Indemnitor does not agree as well as the summary
basis upon which such disagreement is founded. Within thirty (30) days
following the delivery of the Indemnity Response to the Indemnitor,
representatives of the Indemnitee and Indemnitor shall meet to attempt to
resolve through good faith negotiations the applicable indemnification claims.
Such representatives shall negotiate in good faith for thirty (30) days in an
attempt to reach a settlement of any such disputed matter. In the event that
such representatives are not able to reach a settlement of any such disputed
matter, the Indemnitee may pursue any and all claims for indemnity against the
Indemnitor, subject to the provisions of this Article 11.
11.5 Limitations of Indemnification.
------------------------------
(a) The Indemnitor shall not be liable under this Agreement in
respect of any Event of Indemnification or Buyer Event of Indemnification, as
applicable, unless an Indemnitee gives written notice to the Indemnitor (and if
the Indemnitor is the Stockholder Indemnitors, to the Stockholders'
Representative), providing a good faith description of the circumstances
82
<PAGE>
relating to such Event of Indemnification or Buyer Event of Indemnification, as
applicable, (to the extent such circumstances are then known), on or before the
Survival Date with respect thereto. The Stockholders' Representative shall
forward a copy of each such notice received by it to each Stockholder
Indemnitor.
(b) The Indemnitee shall have the right to be indemnified pursuant to
this Agreement only if and to the extent that the Buyer Indemnitees or the
Stockholder Indemnitees, as the case may be, have incurred aggregate Losses,
after receipt of any insurance proceeds relating thereto but prior to any
indemnification hereunder, in an amount exceeding Two Million U.S. dollars
($2,000,000), subject to the limitations provided in Article 11.5(c) below;
provided, that the limitation set forth in this Article 11.5(b) shall not apply
- --------
to the right of the Buyer Indemnitees to be indemnified pursuant to Article
11.2(b) above.
(c) The maximum liability of the Stockholder Indemnitors under this
Agreement in respect of any and all Events of Indemnification shall not in the
aggregate exceed Twenty-Five Million U.S. dollars ($25,000,000); provided, that
--------
the limitation set forth in this Article 11.5(c) shall not apply to the right of
the Buyer Indemnitees to be indemnified pursuant to Article 11.2(b) above and
any such indemnity shall not reduce or otherwise affect this limitation set
forth in this Article 11.5(c). The maximum liability of the Buyer under this
Agreement in respect of all Buyer Events of Indemnification shall not in the
aggregate exceed Twenty-Five Million U.S. dollars ($25,000,000). The maximum
liability of the Stockholder Indemnitors shall not be reduced by any amount
recovered by TLG Holding, Natur-Pharma or ARP from any of their insurance
carriers.
(d) The notice given to the Indemnitor pursuant to Article and the
Indemnity Notice given pursuant to Article shall contain the Indemnitee's
reasonable good faith estimate of the maximum amount of indemnification claimed
based on the facts and
83
<PAGE>
circumstances then known to the Indemnitee. From time to time, at the written
request of the Indemnitor, the Indemnitee shall update its reasonable good faith
estimate of the maximum amount of indemnification claimed based on the facts and
circumstances then known to the Indemnitee, and shall provide the Indemnitor
with such reasonable supporting documentation with respect to such estimate as
the Indemnitor shall reasonably request in good faith.
(e) If any event shall occur or circumstance shall exist which would
otherwise entitle Buyer Indemnitees to indemnification under this Article , no
Loss shall be deemed to have been asserted against or incurred or sustained by
Buyer Indemnitees to the extent of any proceeds recovered or recoverable by the
Buyer, TLG Holding, Natur-Pharma, ARP or any of their respective Affiliates from
any third party (including, without limitation, any insurance company) with
respect thereto. The Buyer agrees (i) in good faith, to use commercially
reasonable efforts to seek recovery, and to cause TLG Holding, Natur-Pharma, ARP
and their respective Affiliates to use commercially reasonable efforts to seek
recovery, at its and their cost and expense (other than reasonable out-of-pocket
costs and expenses, which shall be included in Indemnifiable Losses), from all
third parties (including, without limitation, all insurance companies) with
respect to all Losses with respect to which the Buyer Indemnitees make or may
make a claim for indemnification hereunder and (ii) to keep the Stockholders
informed on a reasonably prompt and complete basis of all material matters
related thereto; provided, however, that such obligation of the Buyer under
-------- -------
clause (i) of this Article hereof to seek recovery, or to cause such other
Persons to seek recovery, from such third parties shall terminate upon the
earlier to occur of: (A) one (1) year after the receipt by the Buyer or such
other Persons, as applicable, of written notice from such insurance company or
other third party denying coverage, or otherwise denying any obligation to make
any payment, with respect to such Loss or (B) three (3) years from the date on
which the Buyer or such other Persons, as applicable,
84
<PAGE>
shall have first become obligated to make the applicable monetary payment in
respect of such Loss. To the extent that any Stockholder Indemnitors make any
payment pursuant to this Article 11 in respect of a Loss for which TLG Holding,
Natur-Pharma, ARP or any of their Affiliates have a right to recover against a
third party (including, without limitation, an insurance company), such
Stockholder Indemnitors shall be subrogated to the right of such entity to seek
and obtain recovery from such third party; provided, however, that if such
--------
Stockholder Indemnitors shall be prohibited from such subrogation, TLG Holding,
Natur-Pharma, ARP or their Affiliates, as applicable, shall seek recovery from
such third party on such Stockholder Indemnitors' behalf and pay any such
recovery to such Stockholder Indemnitors.
(f) The indemnification obligations of Stephen Welling under Article
shall be limited to Losses of the Buyer Indemnitees arising out of: (i) any
untruth, inaccuracy or breach of any representation, warranty, agreement or
covenant of Stephen Welling contained in Articles or 5 hereof; or (ii) any
breach of any covenant or agreement contained in Articles or hereof by Stephen
Welling (to the extent that such breach is not attributable to any action, delay
in acting or failure to act after the Closing by the Buyer).
(g) Notwithstanding anything contained herein to the contrary, each
Party shall use, and shall cause its Affiliates to use, all commercially
reasonable efforts to mitigate any and all Losses in respect of which it may be
entitled to indemnification hereunder; provided, that all reasonable costs and
--------
expenses of such mitigation shall be deemed to be an Indemnifiable Loss of such
Party.
11.6 Exclusivity of Remedies. Following the Closing, with respect to
-----------------------
matters covered by the indemnity provided in this Article (including any such
matter as to which no indemnity shall be payable by reason of the limitations
contained in Article above), the Indemnitee's sole remedy against the
Indemnitor therefor shall be indemnification under this Article , and
85
<PAGE>
each such Indemnitee hereby waives any and all rights to pursue any other remedy
at law or in equity.
Nothing herein shall limit the rights of the Buyer Indemnitees to pursue
any other remedy at law or in equity against predecessors of the Corporations or
any other third Person except the Stockholders Indemnitees.
11.7 Limitation of Other Indemnification Rights. Notwithstanding anything
------------------------------------------
to the contrary in the charter, by-laws, agreements (including without
limitation the employment agreements and consulting agreements referred to in
Article 1.2) or other instruments of any of the Corporations, no Stockholder
Indemnitor shall have any right to indemnification or other recovery thereunder
or otherwise (whether as an officer, director, stockholder or in any other
capacity) from any of the Corporations with respect to any matter to the extent
that such Stockholder Indemnitor is liable, or would be liable but for the
limitations on indemnification contained herein, to any of the Buyer Indemnitees
for indemnification under this Article 11 with respect to such matter.
ARTICLE 12 - PUBLICITY; CONFIDENTIALITY; BOOKS AND RECORDS
- ----------------------------------------------------------
12.1 Publicity. No Party shall, or shall permit its Affiliates to, issue
---------
any publicity, release or announcement concerning the execution and delivery of
this Agreement, the provisions hereof or the Transactions without the prior
written approval of the form and content of such publicity, release or
announcement by the other Parties hereto, which approval shall not be
unreasonably withheld; provided, however, that no such approval shall be
--------
required when such publicity, release or announcement is required by (i) any
applicable Law, (ii) any applicable rules or regulations of a national or
foreign stock exchange or the Automated Quotation System maintained by the
National Association of Securities Dealers, Inc. or (iii) any order, writ,
judgment, award, edict or decree of any court of competent jurisdiction or any
governmental or
86
<PAGE>
quasi-governmental agency, authority or instrumentality of competent
jurisdiction; and, provided further, that, prior to issuing any publicity,
-------- -------
release or announcement without such prior written approval, the Party issuing,
or whose Affiliate is issuing, such publicity, release or announcement shall
have given reasonable prior notice to the other Parties of such intended
issuance and, if requested by any of the other Parties, shall have used
reasonable efforts to obtain a protective order or similar protection for the
benefit of such other Party, at the cost and expense of such other Party.
12.2 Confidentiality.
---------------
(a) All data, reports, records and other information of any kind
received by a Party or the Affiliates, shareholders, directors, partners,
officers, employees, agents, representatives, consultants or lenders of a Party
(such Party being hereinafter referred to as the "Receiving Party") from one of
the other Parties or the Affiliates, shareholders, partners, directors,
officers, employees, agents, representatives, consultants or lenders of one of
the other Parties (such other Party being hereinafter referred to as the
"Delivering Party") under this Agreement or in connection with the Transactions
shall be treated as confidential (collectively, "Confidential Information").
Except as otherwise provided herein, the Receiving Party shall not use (and
shall not permit its Affiliates, shareholders, directors, officers, partners,
employees, agents, representatives, consultants or lenders to use) Confidential
Information for its (or their own) benefit and shall use all reasonable efforts
(and shall cause its Affiliates, shareholders, partners, directors, officers,
employees, agents, representatives, consultants and lenders to use all
reasonable efforts) to maintain the confidentiality of Confidential Information.
If the Receiving Party or any of its Affiliates, subsidiaries, shareholders,
directors, officers, partners, employees, agents, representatives, consultants
or lenders is required to disclose Confidential Information by or to any court
of competent jurisdiction or any governmental or quasi-
87
<PAGE>
governmental agency, authority or instrumentality of competent jurisdiction, the
Receiving Party shall, prior to such disclosure, immediately notify the
Delivering Party of such requirement and all particulars related to such
requirement. The Delivering Party shall have the right, at its expense, to
object to such disclosure and to seek confidential treatment of any Confidential
Information to be so disclosed on such terms as it shall determine.
(b) The restrictions set forth in Article hereof shall not apply to
the use or disclosure of Confidential Information to the extent, but only to the
extent, (i) permitted or required pursuant to any other agreement between or
among the Parties (or their respective Affiliates), (ii) necessary by a Party
(or its Affiliates) in connection with exercising its (or their) rights or
performing its (or their) duties or obligations under this Agreement or any
other agreements, instruments and documents contemplated hereby or thereby or
the other agreements described in clause (i) of this Article , (iii)
contemplated by the last two (2) sentences of Article hereof or (iv) that such
Confidential Information (A) is or has become generally available to the public
through no fault or neglect of the Receiving Party, (B) was received in good
faith on a nonconfidential basis from a third party who disclosed such
Confidential Information without violating any obligations of secrecy or
confidentiality or (C) was already possessed by the Receiving Party at the time
of receipt as shown by prior dated written records. The restrictions set forth
in Article hereof shall not apply to the use or disclosure by Natur-Pharma or
any of its Affiliates of Confidential Information which consists of data,
reports, records and information relating to the Business or the ownership,
leasing or use of the properties owned, leased or used by Natur-Pharma or any of
its Affiliates and which is used or disclosed in connection with the conduct of
the Business.
(c) If, for any reason (including, without limitation, termination of
this Agreement pursuant to Article hereof), the Closing does not take place,
the Buyer will, and
88
<PAGE>
will cause its officers, employees and other representatives to, (i) return to
Natur-Pharma all documents, papers, books, records and other materials (and all
copies thereof) obtained by any of them from any Stockholder or any Corporation
or any of the directors, officers, employees, agents, representatives or
consultants of any Stockholder or any Corporation containing Confidential
Information, (ii) destroy all copies of all analyses, studies and other
documents prepared by or for the Buyer which contain or reflect such
Confidential Information and (iii) furnish to the Stockholders a certificate,
signed by an appropriate authorized officer of the Buyer, to the effect that
such destruction has been completed.
12.3 Books and Records.
-----------------
Unless otherwise consented to in writing by the Stockholders and the
Buyer, as applicable, TLG Holding agrees to maintain, or cause its direct and
indirect subsidiaries to maintain, for a period of not less than three (3) years
after the Closing Date, all material records relating to each of the
Corporations with respect to: (a) acquisitions or dispositions; (b) existing or
terminated contracts of a significant nature; (c) real and personal property
ownership records; (d) accounting records used in the preparation of the
Financial Statements and the tax returns of each of the Corporations; and (e)
such other records as would be retained for three (3) years pursuant to the
present record retention program of the Corporations, including computer-
generated records. TLG Holding agrees that for a period of three (3) or more
years after the Closing Date, Representatives of the Stockholders and the Buyer
may, subject to applicable obligations of confidentiality, review such records
during normal working hours and shall have the right at their own expense to
make copies of any such records. Thereafter, TLG Holding shall not cause or
permit the destruction or other disposition of such books and records without
first offering to surrender to the Stockholders and the Buyer such books and
records or any portion thereof.
89
<PAGE>
12.4 Survival. Articles 12.1 and 12.2 shall survive the termination of
--------
this Agreement for any reason and the consummation of the Transactions.
ARTICLE 13 - NOTICES
- --------------------
13.1 Notices. All notices, requests, demands, claims and other
-------
communications required or permitted to be given pursuant to this Agreement
shall be given in writing, shall be transmitted by personal delivery or by
registered or certified mail, return receipt requested, postage prepaid, and
shall be addressed as follows:
When any Stockholder is the intended recipient:
to the Stockholder at the address of such
Stockholder set forth next to his name on
the signature page hereto
with a copy to:
Bud G. Holman, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, New York 10178
Telecopy No.: (212) 808-7897
When Natur-Pharma or TLG Holding is the intended recipient:
[Natur-Pharma Inc.] [TLG Laboratories Holding Corp.]
c/o Twin Laboratories, Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Attention: General Counsel
Telecopy No: (516) 471-2395
90
<PAGE>
When Buyer is the intended recipient:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, LP
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
Attention: Mr. John G. Danhakl
Telecopy No.: (213) 625-2043
with a copy to:
Howard A. Sobel, Esq.
Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel
919 Third Avenue, 40th Floor
New York, New York 10022
Telecopy No.: (212) 715-8000
A Party may designate a new address to which notices required or permitted to be
given pursuant to this Agreement shall thereafter be transmitted by giving
written notice to that effect to the other Parties. Each notice transmitted in
the manner described in this Article shall be deemed to have been given,
received and become effective for all purposes at the time it shall have been
(i) delivered to the addressee as indicated by the return receipt (if
transmitted by mail) or the affidavit of the messenger (if transmitted by
personal delivery) or (ii) presented for delivery to the addressee as so
indicated during normal business hours, if such delivery shall have been refused
for any reason.
ARTICLE 14 - GOVERNING LAW; FORUM
- ---------------------------------
14.1 Governing Law; Forum. The validity, interpretation, performance and
--------------------
enforcement of this Agreement shall be governed by the law of the State of New
York (without giving effect to the laws, rules or principles of the State of New
York regarding conflict of laws). Each Party agrees that any proceeding arising
out of or relating to this Agreement or the breach or threatened breach of this
Agreement may be commenced and prosecuted in a court in
91
<PAGE>
the State of New York. Each Party consents and submits to the non-exclusive
personal jurisdiction of any court in the State of New York in respect of any
such proceeding. Each Party consents to service of process upon it with respect
to any such proceeding by registered mail, return receipt requested, and by any
other means permitted by applicable laws and rules. Each Party waives any
objection that it may now or hereafter have to the laying of venue of any such
proceeding in any court in the State of New York and any claim that it may now
or hereafter have that any such proceeding in any court in the State of New York
has been brought in an inconvenient forum.
ARTICLE 15 - BINDING EFFECT; ASSIGNMENT; THIRD PARTY BENEFICIARIES
- ------------------------------------------------------------------
15.1 Binding Effect; Assignment; Third Party Beneficiaries. This Agreement
-----------------------------------------------------
shall be binding upon the Parties and their respective successors, assigns,
heirs, executors, administrators and other legal representatives and shall inure
to the benefit of the Parties and their respective successors, permitted
assigns, heirs, executors, administrators and other legal representatives.
Except as contemplated by Article 2.4 hereof, no Party shall assign any of its
rights or delegate any of its duties under this Agreement (by operation of law
or otherwise) without the prior written consent of the Buyer or the
Stockholders, as applicable, provided, that TLG Holding, Natur-Pharma or ARP
--------
may, without such prior written consent, for collateral security purposes,
assign its respective rights (but not its respective obligations) effective on
or after the Closing Date to the Lenders in connection with the Transactions.
No Person shall be, or be deemed to be, a third party beneficiary of this
Agreement. Any assignment of rights or delegation of duties under this
Agreement by a Party without the prior written consent of the other Party or
Parties, if such consent is required hereby, shall be void.
92
<PAGE>
ARTICLE 16 - ENTIRE AGREEMENT
- -----------------------------
16.1 Entire Agreement. This Agreement and the Schedules and Exhibits
----------------
attached hereto constitute the entire agreement among the Parties, and cancel
and supersede all of the previous or contemporaneous agreements,
representations, warranties and understandings (whether oral or written), with
respect to the subject matter hereof. Except as otherwise provided in Article
hereof, all of the Schedules attached hereto shall be deemed to be dated the
date hereof.
ARTICLE 17 - MATERIALITY AND IMMATERIALITY
- ------------------------------------------
17.1 Materiality and Immateriality. None of the threshold dollar amounts
-----------------------------
listed herein shall be deemed an admission that an amount greater than such
threshold is material or that an amount less than such threshold is immaterial.
ARTICLE 18 - AMENDMENTS
- -----------------------
18.1 Amendments. No addition to, and no cancellation, renewal, extension,
----------
modification or amendment of, this Agreement shall be binding upon a Party
unless such addition, cancellation, renewal, extension, modification or
amendment is set forth in a written instrument which states that it adds to,
amends, cancels, renews, extends or modifies this Agreement and which is
executed and delivered by, or on behalf of, by an officer of, or attorney-in-
fact for, such Party; provided, however, that prior to the Closing, any such
-------- --------
addition, cancellation, renewal, extension, modification or amendment that is
consented to by the Stockholders in accordance with this Agreement shall be
binding upon all of the Stockholders.
93
<PAGE>
ARTICLE 19 - WAIVERS
- --------------------
19.1 Waivers. No waiver of any provision of this Agreement shall be
-------
binding upon a Party unless such waiver is expressly set forth in a written
instrument which is executed and delivered by such Party or on behalf of such
Party by an officer of, or attorney-in-fact for, such Party; provided, however,
-------- -------
that prior to the Closing, any waiver that is consented to by the Stockholders
in accordance with this Agreement shall be binding upon all of the Stockholders.
Such waiver shall be effective only to the extent specifically set forth in such
written instrument. Neither the exercise (from time to time and at any time) by
a Party of, nor the delay or failure (at any time or for any period of time) to
exercise, any right, power or remedy shall constitute a waiver of the right to
exercise, or impair, limit or restrict the exercise of, such right, power or
remedy or any other right, power or remedy at any time and from time to time
thereafter. No waiver of any right, power or remedy of a Party shall be deemed
to be a waiver of any other right, power or remedy of such Party or shall,
except to the extent so waived, impair, limit or restrict the exercise of such
right, power or remedy.
ARTICLE 20 - REMEDIES LIMITED
- -----------------------------
20.1 Remedies Limited. The sole and exclusive rights, powers and remedies
----------------
of the Parties, other than such injunctive or other equitable remedies as may be
available to a Party, for a breach of or default under this Agreement
(including, without limitation, a breach of or default under any of the
representations, warranties, covenants or agreements contained in this
Agreement) shall be termination under Article hereof, recovery under Article 9
hereof and indemnification under Article hereof, in each case limited as set
forth therein.
94
<PAGE>
ARTICLE 21 - HEADINGS; COUNTERPARTS
- -----------------------------------
21.1 Headings; Counterparts. The headings set forth in this Agreement have
----------------------
been inserted for convenience of reference only, shall not be considered a part
of this Agreement and shall not limit, modify or affect in any way the meaning
or interpretation of this Agreement. This Agreement may be signed in any number
of counterparts, each of which (when executed and delivered) shall constitute an
original instrument, but all of which together shall constitute one and the same
instrument. This Agreement shall become effective and be deemed to have been
executed and delivered by all of the Parties at such time as counterparts shall
have been executed and delivered by each of the Parties, regardless of whether
each of the Parties has executed the same counterpart. It shall not be necessary
when making proof of this Agreement to account for any counterpart other than a
sufficient number of counterparts which, when taken together, contain signatures
of all of the Parties.
ARTICLE 22 - SEVERABILITY
- -------------------------
22.1 Severability. If any provision of this Agreement shall hereafter be
------------
held to be invalid, unenforceable or illegal in whole or in part, in any
jurisdiction under any circumstances for any reason, (i) such provision shall be
reformed to the minimum extent necessary to cause such provision to be valid,
enforceable and legal while preserving the intent of the Parties as expressed
in, and the benefits to the Parties provided by, this Agreement or (ii) if such
provision cannot be so reformed, such provision shall be severed from this
Agreement and an equitable adjustment shall be made to this Agreement
(including, without limitation, addition of necessary further provisions to this
Agreement) so as to give effect to the intent as so expressed and the benefits
so provided. Such holding shall not affect or impair the validity,
enforceability or legality of such provision in any other jurisdiction or under
any other circumstances. Neither
95
<PAGE>
such holding nor such reformation or severance shall affect or impair the
legality, validity or enforceability of any other provision of this Agreement.
IN WITNESS WHEREOF, the Parties have duly executed and delivered this
Agreement as of the date first above written.
NATUR-PHARMA INC.
By:________________________________
Name:______________________________
Title:_____________________________
Address for notices:
___________________________________
David Blechman
17927 Lake Estates Drive
Boca Raton, Florida 33496
___________________________________
Jean Blechman
17927 Lake Estates Drive
Boca Raton, Florida 33496
___________________________________
Brian Blechman
255 S. Gillette Avenue
Bayport, NY 11705
___________________________________
Neil Blechman
30 Setalcott Place
Setauket, NY 11733
___________________________________
Ross Blechman
41 Setalcott Place
Setauket, NY 11733
___________________________________
Steve Blechman
11 White Pine Lane
Poquott, NY 11733
96
<PAGE>
___________________________________
Dean Blechman
4 Stone Gate Court
Setauket, NY 11733
___________________________________
Stephen Welling
600 E. Quality Drive
American Fork, UT 84003
TLG LABORATORIES HOLDING CORP.
By:________________________________
Name:______________________________
Title:_____________________________
GREEN EQUITY INVESTORS II, L.P.
By: Grand Avenue Capital Partners, L.P.
By: Grand Avenue Capital Corporation,
its general partner
By:________________________________
Name:______________________________
Title:_____________________________
97
<PAGE>
Exhibit 2.1.1
AMENDMENT
DATED AS OF MAY 6, 1996
TO
STOCK PURCHASE AND SALE AGREEMENT
DATED AS OF MARCH 5, 1996
AMONG
DAVID BLECHMAN, JEAN BLECHMAN, BRIAN BLECHMAN,
NEIL BLECHMAN, ROSS BLECHMAN, STEVE BLECHMAN,
DEAN BLECHMAN, STEPHEN WELLING,
TLG LABORATORIES HOLDING CORP.,
NATUR-PHARMA INC.
AND
GREEN EQUITY INVESTORS II, L.P.
<PAGE>
AMENDMENT (the "Amendment") dated as of May 6, 1996 to STOCK PURCHASE
AND SALE AGREEMENT (the "Agreement") dated as of March 5, 1996 among David
Blechman, Jean Blechman, Brian Blechman, Neil Blechman, Ross Blechman, Steve
Blechman, Dean Blechman, Stephen Welling (collectively, the "Stockholders"), TLG
Laboratories Holding Corp., a corporation validly existing under the laws of
Delaware ("TLG Holding"), Natur-Pharma Inc., a corporation validly existing
under the laws of Utah ("Natur-Pharma"), and Green Equity Investors II, L.P., a
limited partnership validly existing under the laws of Delaware ("Buyer") (the
Stockholders, TLG Holding, Natur-Pharma and Buyer being sometimes referred to
herein individually as a "Party" and collectively as the "Parties").
WHEREAS, the Parties wish to amend the Agreement as set forth herein;
NOW, THEREFORE, each of the Parties, intending to be legally bound,
hereby agrees as follows:
1. Definitions. All capitalized terms used in this Amendment that
-----------
are not defined herein shall have the definitions ascribed thereto in the
Agreement.
2. Amendment.
---------
(a) All references in the Agreement to "B. Bros Realty Corp." are
hereby amended to be references to "B. Bros. Realty Corporation."
(b) All references in the Agreement to "Natur-Pharma II Inc., a
corporation to be organized under the laws of Delaware" are hereby amended to be
references to "Natur-Pharma II Inc., a corporation to be organized under the
laws of New York."
<PAGE>
(c) In the third line of the second WHEREAS clause of the Agreement,
",phytonutrients" is hereby added between the phrase "herbal products" and the
phrase "and herb teas."
(d) Section 4.7(c) of the Agreement is hereby deleted in its entirety
and the following shall be substituted in lieu thereof:
"(c) Attached as Exhibit A to Item (3) of
Schedule II hereto are true and correct copies of
the unaudited compiled balance sheets of ARP as of
December 31, 1994, 1993 and 1992 and the related
unaudited compiled statements of revenues,
expenses and retained earnings of ARP for the
years then ended, including the compilation report
of Held Kranzler & Company, certified public
accountants ("Held Kranzler") thereon (the "ARP
Financial Statements")."
In addition, the unaudited balance sheets of ARP as of June 30, 1995 and June
30, 1994 and the related unaudited statements of revenues, expenses and retained
earnings of ARP for the six-month periods ended on June 30, 1995 and June 30,
1994, including the compilation report of Held Kranzler thereon, set forth on
pages 127 through 131 of Schedule II to the Agreement, are hereby deleted in
their entirety. The amendments set forth in this Section 2(d) shall be
effective as of March 5, 1996 as if such amendments had been reflected in the
Agreement as of that date.
-2-
<PAGE>
(e) Section 7.2(e) of the Agreement is hereby deleted in its
entirety and the following is substituted in lieu thereof:
"(e) Releases. The Buyer shall have received
--------
absolute and unconditional releases from the
Stockholders of any and all claims by the
Stockholders against the Corporations in
substantially the form attached hereto as Exhibit
-------
P."
-
(f) A new Section 11.8 is hereby added to Article 11 of the
Agreement, as follows:
"11.8 Buyer Indemnitee Representative.
-------------------------------
Notwithstanding anything to the contrary in this
Article 11, in the event that two or more Buyer
Indemnitees are seeking indemnification under this
Article 11 with respect to an Event of
Indemnification: (i) a representative of such
Buyer Indemnitees shall be appointed (the "Buyer
Indemnitee Representative") by Buyer Indemnitees
holding a majority of the TL Common Stock held by
such Buyer Indemnitees, which Buyer Indemnitee
Representative shall have full authority to act on
behalf of such Buyer Indemnitees in receiving
notices under, and
-3-
<PAGE>
dealing with the Stockholder Indemnitors with
respect to, this Article 11, and the Stockholder
Indemnitors shall be fully protected in relying in
good faith upon the authority of such Buyer
Indemnitee Representative (such authority as
between the Buyer Indemnitee Representative and
the Buyer Indemnitees to be established by the
mutual agreement of all such Buyer Indemnitees);
and (ii) for purposes of the last sentence of
Section 11.3(b), such Buyer Indemnitees shall be
entitled to employ only one separate counsel with
respect to a Third Party Claim, selected by Buyer
Indemnitees holding a majority of the TL Common
Stock held by such Buyer Indemnitees, which
counsel shall represent all of such Buyer
Indemnitees."
(g) Exhibit B as attached to the Agreement on March 5, 1996 is
hereby deleted in its entirety and Exhibit B as attached to this Amendment is
substituted in lieu thereof, and all prior versions of Exhibit B exchanged by
the Parties are superseded by Exhibit B as attached to this Amendment.
3. Governing Law. THE VALIDITY, INTERPRETATION, PERFORMANCE AND
-------------
ENFORCEMENT OF THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK (WITHOUT GIVING
-4-
<PAGE>
EFFECT TO THE LAWS, RULES OR PRINCIPLES OF THE STATE OF NEW YORK REGARDING
CONFLICT OF LAWS).
4. Continuing Effect; Counterparts. Except to the extent amended
-------------------------------
hereby, the provisions of the Agreement shall remain unmodified, and the
Agreement, as amended by this Agreement, hereby is confirmed as being in full
force and effect in accordance with its terms. This Amendment may be executed
in any number of counterparts which together shall constitute one and the same
agreement.
-5-
<PAGE>
IN WITNESS WHEREOF, the Parties have duly executed and delivered this
Amendment as of the date first above written.
NATUR-PHARMA INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
________________________________________
David Blechman
________________________________________
Jean Blechman
________________________________________
Brian Blechman
________________________________________
Neil Blechman
________________________________________
Ross Blechman
________________________________________
Steve Blechman
________________________________________
-6-
<PAGE>
Dean Blechman
________________________________________
Stephen Welling
TLG LABORATORIES HOLDING CORP.
By:_____________________________________
Name:___________________________________
Title:__________________________________
GREEN EQUITY INVESTORS II, L.P.
By: Grand Avenue Capital Partners, L.P.
By: Grand Avenue Capital Corporation,
its general partner
By:_____________________________________
Name:___________________________________
Title:__________________________________
-7-
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
TLG LABORATORIES HOLDING CORP.
Pursuant to Section 245 of the
General Corporation Law
of the State of Delaware
TLG Laboratories Holding Corp., a corporation organized and existing under
the laws of the State of Delaware (the "Company"), hereby certifies as follows:
1. That the name of the Company is TLG Laboratories Holding Corp.
2. That the Certificate of Incorporation of the Company was filed in the
office of the Secretary of State of the State of Delaware on the 27th day of
February, 1996.
3. That this Amended and Restated Certificate of Incorporation amends and
restates in its entirety the Certificate of Incorporation of the Company.
4. That the text of the Certificate of Incorporation is hereby amended and
restated to read in its entirety as follows:
FIRST: The name of the corporation is TLG Laboratories Holding
Corp. (the "Company").
SECOND: The address of the registered office of the Company in
Delaware is 1013 Centre Road, Wilmington 19805, and the name of the registered
agent of the Company at such address is The Prentice-Hall Corporation System,
Inc., New Castle County.
THIRD: The purpose of the Company is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware (the "Delaware General Corporation Law").
FOURTH: The total number of shares of all classes of stock which
the Company shall have authority to issue is one million two hundred ninety six
thousand five hundred (1,296,500) shares, of which two hundred ninety six
thousand five hundred
<PAGE>
(296,500) shall be designated Preferred Stock, par value $.01 per share
(hereinafter the "Preferred Stock"), and one million (1,000,000) shall be
designated Common Stock, par value $1.00 per share (hereinafter the "Common
Stock").
A. PREFERRED STOCK.
The Company is authorized to issue the following series of Preferred
Stock:
(i) 14% Senior Cumulative Preferred Stock (the "Senior
Preferred Stock"), par value $0.01 per share, with a liquidation
preference of $1,000 per share, consisting of 156,410 shares; and
(ii) 11.25% Junior Cumulative Preferred Stock (the "Junior
Preferred Stock"), par value $0.01 per share, with a liquidation
preference of $1,000 per share, consisting of 140,090 shares;
each of the foregoing series of Preferred Stock to have the designations,
preferences, relative, participating, optional and other special rights and
the qualifications, limitations and restrictions thereof that are set forth
in this Article FOURTH as follows:
1. DESIGNATIONS OF THE COMPANY'S 14% SENIOR CUMULATIVE PREFERRED STOCK.
--------------------------------------------------------------------
Capitalized terms used in this Section 1 and not expressly defined in
the text of this Section 1 shall have the meanings set forth in paragraph (l) of
this Section 1.
(a) Designations.
------------
There is hereby created out of the authorized and unissued shares of
Preferred Stock of the Company a series of Preferred Stock designated as
the "14% Senior Cumulative Preferred Stock." The number of shares
constituting such series shall be 156,410 shares of Senior Preferred Stock,
consisting of an initial issuance of 30,000 shares of Senior Preferred
Stock plus additional shares of Senior Preferred Stock which may be issued
to pay dividends on the Senior Preferred Stock if the Company elects to pay
dividends in additional shares of Senior Preferred Stock (in lieu of cash).
The liquidation preference of the Senior Preferred Stock shall be $1,000
per share.
(b) Rank.
----
The Senior Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding up or
dissolution of the Company, rank senior to all classes of common stock of
the Company, and to each other class of capital stock or series of
preferred stock of the Company, including the Junior Preferred Stock, now
or hereafter created (collectively referred to with the common
2
<PAGE>
stock of the Company as "Junior Securities"). The Senior Preferred Stock
shall, with respect to dividend distributions and distributions upon the
liquidation, winding up or dissolution of the Company, rank on a parity
with any class of capital stock or series of preferred stock of the Company
hereafter created which expressly provides that it ranks on a parity with
the Senior Preferred Stock as to dividend distributions and distributions
upon the liquidation, winding up or dissolution of the Company ("Parity
Securities"), provided that any such Parity Securities that were not
approved by the Holders of Senior Preferred Stock in accordance with
paragraph (f)(ii)(A) of this Section 1 shall be deemed to be Junior
Securities and not Parity Securities. The Senior Preferred Stock shall,
with respect to dividend distributions and distributions upon the
liquidation, winding up or dissolution of the Company, rank junior to each
class of capital stock or series of preferred stock of the Company
hereafter created which has been approved by the Holders of Senior
Preferred Stock in accordance with paragraph (f)(ii)(B) of this Section 1
and which expressly provides that it ranks senior to the Senior Preferred
Stock as to dividend distributions or distributions upon the liquidation,
winding up or dissolution of the Company ("Senior Securities").
(c) Dividends.
---------
(i) Beginning on the date of issuance of shares of the Senior
Preferred Stock, the Holders of the outstanding shares of Senior Preferred
Stock shall be entitled to receive, when, as and if declared by the Board
of Directors, out of funds legally available therefor, distributions in the
form of cash dividends on each share of Senior Preferred Stock, at a rate
per annum equal to 14% of the liquidation preference per share of the
Senior Preferred Stock, payable quarterly. All dividends shall be
cumulative, whether or not earned or declared, on a daily basis from the
Preferred Stock Issue Date and shall be payable quarterly in arrears on
each Dividend Payment Date, commencing on the first Dividend Payment Date
after the date of issuance of the Senior Preferred Stock, provided that if
any dividend payable on any Dividend Payment Date is not declared and paid
in full in cash on such Dividend Payment Date, the amount payable as
dividends on such Dividend Payment Date that is not paid in cash on such
Dividend Payment Date shall be paid by the Company in additional fully paid
and non-assessable shares (including fractional shares, if applicable) of
Senior Preferred Stock having an aggregate liquidation preference equal to
the amount of such dividends (rounded to the nearest whole cent); it being
understood that dividends shall begin to accrue from such Dividend Payment
Date on such additional shares of Senior Preferred Stock whether such
additional shares of Senior Preferred Stock are issued on such date or any
later date or are never issued. The payment by the Company in such
additional shares of Senior Preferred Stock shall constitute full payment
of such dividend. Each distribution in the form of a dividend (whether in
cash or in additional shares of Senior Preferred Stock) shall be payable to
the Holders of Senior Preferred Stock of record as they appear on the stock
books of the Company on such record dates, not less than 10 nor more than
45 days preceding the related Dividend Payment Date, as shall be fixed by
the Board of Directors. So long as any of the Blechman Brothers is a
member of the Board of Directors, any determination of the Board of
Directors to pay any dividend on the
3
<PAGE>
Senior Preferred Stock in cash shall be made by decision of a majority of
the Disinterested Directors; provided, however, that the declaration and
payment of cash dividends on the Senior Preferred Stock shall be subject to
contractual and other restrictions with respect thereto and the legal
availability of funds therefor. Dividends shall cease to accrue in respect
of shares of the Senior Preferred Stock on the date of their redemption
unless the Company shall have failed to pay the relevant redemption price
on the date fixed for redemption.
(ii) All dividends paid with respect to shares of the Senior
Preferred Stock pursuant to paragraph (c)(i) of this Section 1 shall be
paid pro rata to the Holders thereof entitled thereto.
(iii) Dividends on account of arrears for any past Dividend Period
and dividends in connection with any optional redemption pursuant to
paragraph (e)(i) of this Section 1 may be declared and paid at any time,
without reference to any regular Dividend Payment Date, to Holders of
Senior Preferred Stock of record on such date, not more than 45 days prior
to the payment thereof, as may be fixed by the Board of Directors.
(iv) No full dividends shall be declared by the Board of Directors
or paid or funds set apart for payment of dividends by the Company on any
Parity Securities for any period unless full cumulative dividends shall
have been or contemporaneously are declared and paid in full, or declared
and (in the case of dividends payable in cash) a sum in cash set apart
sufficient for such payment, on the Senior Preferred Stock for all Dividend
Periods terminating on or prior to the date of payment of such full
dividends on such Parity Securities. If any dividends are not paid in full,
as afore said, upon the shares of the Senior Preferred Stock and any other
Parity Securities, all dividends declared upon shares of the Senior
Preferred Stock and any other Parity Securities shall be declared pro rata
based on the relative liquidation preference of the Senior Preferred Stock
and such Parity Securities. So long as any shares of the Senior Preferred
Stock are outstanding, the Company shall not make any payment on account
of, or set apart for payment money for a sinking or other similar fund for,
the purchase, redemption or other retirement of, any of the Parity
Securities or any warrants, rights, calls or options exercisable for or
convertible into any of the Parity Securities, and shall not permit any
corporation or other entity directly or indirectly controlled by the
Company to purchase or redeem any of the Parity Securities or any such
warrants, rights, calls or options.
(v) So long as any shares of Senior Preferred Stock are
outstanding, the Company shall not (A) declare, pay or set apart for
payment any dividend on any of the Junior Securities or make any payment on
account of, or set apart for payment money for a sinking or other similar
fund for, the purchase, redemption or other retirement of, any of the
Junior Securities or any warrants, rights, calls or options exercisable for
or convertible into any of the Junior Securities (other than the
repurchase, redemption or other acquisition or retirement for value of
Junior Securities (and any warrants, rights, calls or options exercisable
for or convertible
4
<PAGE>
into such Junior Securities) held by certain employees of or consultants or
advisors to the Company or any of its Subsidiaries, which repurchase,
redemption or other acquisition or retirement shall have been approved by a
majority of the Outside Directors, provided that such Junior Securities may
only be repurchased, redeemed or otherwise acquired or retired either in
exchange for Junior Securities or upon the termination, retirement, death
or disability of such employee, consultant or advisor), or (B) make any
distribution in respect thereof, either directly or indirectly, and whether
in cash, obligations or shares of the Company or other property (other than
distributions or dividends in Junior Securities to the holders of Junior
Securities), or (C) permit any corporation or other entity directly or
indirectly controlled by the Company to purchase or redeem any of the
Junior Securities or any such warrants, rights, calls or options, unless in
any such case referred to in clause (A), (B) or (C) of this paragraph
(c)(v) full cumulative dividends determined in accordance herewith have
been paid in full on the Senior Preferred Stock and the action does not
violate the provisions of paragraph (f)(ii)(D) of this Section 1.
(vi) Dividends payable on shares of the Senior Preferred Stock for
any period less than a year shall be computed on the basis of a 360-day
year of twelve 30-day months and the actual number of days elapsed in the
period for which payable. If any Dividend Payment Date occurs on a day that
is not a Business Day, any accrued dividends otherwise payable on such
Dividend Payment Date shall be paid on the next succeeding Business Day.
(d) Liquidation Preference.
----------------------
(i) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, the Holders of shares of Senior
Preferred Stock then outstanding shall be entitled to be paid, out of the
assets of the Company available for distribution to its stockholders,
$1,000 per share of Senior Preferred Stock (the "liquidation preference"),
plus an amount in cash equal to accrued and unpaid dividends thereon to the
date fixed for liquidation, dissolution or winding up (including an amount
equal to a prorated dividend for the period from the last Dividend Payment
Date to the date fixed for liquidation, dissolution or winding up) before
any payment shall be made or any assets distributed to the holders of any
of the Junior Securities, including, without limitation, Junior Preferred
Stock or common stock of the Company. Except as provided in the preceding
sentence, Holders of shares of Senior Preferred Stock shall not be entitled
to any distribution in the event of liquidation, dissolution or winding up
of the affairs of the Company. If the assets of the Company are not
sufficient to pay in full the liquidation payments payable to the Holders
of outstanding shares of the Senior Preferred Stock and the holders of all
outstanding Parity Securities, then the holders of all such shares shall
share equally and ratably in such distribution of assets of the Company in
accordance with the amounts which would be payable on such distribution if
the amount to which the Holders of outstanding shares of Senior Preferred
Stock and the holders of outstanding shares of all Parity Securities are
entitled were paid in full.
5
<PAGE>
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets
of the Company nor the consolidation or merger of the Company with or into
one or more corporations or other entities shall be deemed to be a
liquidation, dissolution or winding up of the affairs of the Company.
(e) Redemption.
----------
(i) Optional Redemption
-------------------
(A) The Company may (subject to contractual and other
restrictions with respect thereto and the legal availability of funds
therefor), at the option of the Company, redeem at any time or from
time to time, from any source of funds legally available therefor, in
whole or in part, in the manner provided in paragraph (e)(iii) of this
Section 1, any or all of the shares of the Senior Preferred Stock, at
a redemption price equal to 100% of the liquidation preference per
share plus, without duplication, an amount in cash equal to all
accrued and unpaid dividends per share (including an amount in cash
equal to a prorated dividend for the period from the Dividend Payment
Date immediately prior to the Redemption Date to the Redemption Date),
provided that no optional redemption pursuant to this paragraph
(e)(i)(A) shall be authorized or made at any time when the Company is
making or required to make within the next 30 days, or purchasing
shares of Senior Preferred Stock under, a Change of Control Offer in
accordance with the provisions of para graph (g) of this Section 1 and
provided, further, that no optional redemption of only a portion of
the then outstanding shares of Senior Preferred Stock shall be
authorized or made at any time when full cumulative dividends on the
Senior Preferred Stock for all past Dividend Periods have not been
declared and paid in full. So long as any of the Blechman Brothers is
a member of the Board of Directors, any determination of the Board of
Directors to redeem, at the option of the Company, any shares of
Senior Preferred Stock shall be made by decision of a majority of the
Disinterested Directors.
(B) In the event of a redemption pursuant to paragraph
(e)(i)(A) of this Section 1 of only a portion of the then outstanding
shares of the Senior Preferred Stock, the Company shall effect such
redemption as it determines, pro rata according to the number of
shares held by each Holder of Senior Preferred Stock or by lot, as may
be determined by the Company in its sole discretion.
(ii) Mandatory Redemption. On May 1, 2007, the Company shall redeem,
--------------------
from any source of funds legally available therefor, in the manner provided
in paragraph (e)(iii) of this Section 1, all of the shares of the Senior
Preferred Stock then outstanding at a redemption price equal to 100% of the
liquidation preference per share, plus, without duplication, an amount in
cash equal to all accrued and unpaid
6
<PAGE>
dividends per share (including an amount equal to a prorated dividend for
the period from the Dividend Payment Date immediately prior to the
Redemption Date to the Redemption Date).
(iii) Procedures for Redemption.
-------------------------
(A) At least 15 days and not more than 60 days prior to the
date fixed for any redemption of the Senior Preferred Stock, written
notice of redemption (the "Redemption Notice") shall be given by
first-class mail, postage prepaid, to each Holder of Senior Preferred
Stock to be redeemed, at such Holder's address as the same appears on
the stock register of the Company, provided that no failure to give
such notice nor any deficiency therein shall affect the validity of
the procedure for the redemption of any shares of Senior Preferred
Stock to be redeemed except as to the Holder or Holders to whom the
Company has failed to give said notice or except as to the Holder or
Holders whose notice was defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)(i) or (e)(ii)
of this Section 1; (2) the redemption price; (3) whether all or less
than all the outstanding shares of the Senior Preferred Stock are to
be redeemed and the total number of shares of the Senior Preferred
Stock being redeemed; (4) the number of shares of Senior Preferred
Stock held by the Holder that the Company intends to redeem; (5) the
date fixed for redemption; (6) that the Holder is to surrender to the
Company, at the place or places where certificates for shares of
Senior Preferred Stock are to be surrendered for redemption, in the
manner and at the price designated, his certificate or certificates
representing the shares of Senior Preferred Stock to be redeemed; and
(7) that dividends on the shares of the Senior Preferred Stock to be
redeemed shall cease to accrue on such Redemption Date unless the
Company defaults in the payment of the redemption price.
(B) Each Holder of Senior Preferred Stock shall surrender to
the Company the certificate or certificates representing his shares of
Senior Preferred Stock to be redeemed, duly endorsed, in the manner
and at the place designated in the Redemption Notice, and on the
Redemption Date the full redemption price for such shares shall be
payable in cash to the Person whose name appears on such certificate
or certificates as the owner thereof, and each surrendered certificate
shall be canceled and retired. In the event that less than all of the
shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares without
cost to the Holder thereof.
(C) Unless the Company defaults in the payment in full of the
applicable redemption price, dividends on the shares of Senior
Preferred Stock called for redemption shall cease to accrue on the
Redemption Date, and the Holders of such shares shall cease to have
any further rights with respect
7
<PAGE>
thereto on the Redemption Date, other than the right to receive the
redemption price, without interest.
(f) Voting Rights.
-------------
(i) The Holders of shares of the Senior Preferred Stock, except as
otherwise required under Delaware law or as set forth in paragraph (f)(ii)
below, shall not be entitled or permitted to vote on any matter required or
permitted to be voted upon by the stockholders of the Company.
(ii) (A) So long as any shares of the Senior Preferred Stock are
outstanding, the Company shall not authorize or issue any class or
series of Parity Securities without the affirmative vote or consent of
Holders of at least a majority of the outstanding shares of Senior
Preferred Stock, voting or consenting, as the case may be, separately
as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting, except that
without the approval of Holders of Senior Preferred Stock, the Company
may issue shares of Parity Securities in exchange for, or the proceeds
of which are used to redeem or repurchase, all shares of Senior
Preferred Stock then outstanding.
(B) So long as any shares of the Senior Preferred Stock are
outstanding, the Company shall not authorize or issue any class or
series of Senior Securities without the affirmative vote or consent of
Holders of at least a majority of the outstanding shares of Senior
Preferred Stock, voting or consenting, as the case may be, separately
as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
(C) So long as any shares of the Senior Preferred Stock are
outstanding, the Company shall not, without the affirmative vote or
consent of Holders of at least a majority of the outstanding shares of
Senior Preferred Stock, voting or consenting, as the case may be,
separately as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting, (1)
amend, alter or repeal any of the provisions of the Certificate of
Incorporation or By-Laws of the Company or of any certificate
amendatory thereof or supplemental thereto so as to affect adversely
any of the preferences, rights, powers or privileges of the Senior
Preferred Stock or of the holders thereof as such, (2) issue any
additional shares of Senior Preferred Stock (other than in payment of
dividends on the Senior Preferred Stock) or (3) consolidate or merge
with or into (whether or not the Company is the surviving or resulting
entity), or sell, assign, transfer, lease, convey or otherwise dispose
of all or substantially all of the properties or assets of the Company
(or of the Company and its Subsidiaries, taken as a whole) in one or
more related transactions, to another corporation, Person or entity
unless (x) all outstanding shares of Senior Preferred Stock will be
redeemed upon
8
<PAGE>
consummation of such transaction or (y) (I) the Company is the
surviving corporation or the entity formed by or surviving any such
consolidation or merger (if other than the Company) or to which such
sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized and existing under the
laws of the United States, any state thereof or the District of
Columbia; (II) the Senior Preferred Stock shall (q) be converted into
or exchanged for and shall become shares of such successor, transferee
or resulting corporation, having in respect of such successor,
transferee or resulting corporation the same preferences, powers,
rights and privileges that the Senior Preferred Stock had immediately
prior to such transaction or (r) if the Company is the surviving
corporation in such transaction, remain outstanding with the same
preferences, powers, rights and privileges as it had immediately prior
to such transaction; and (III) the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made, as the case may
be, shall have a Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the transaction (without giving effect
to any purchase accounting adjustments related to such transaction).
Notwithstanding the foregoing, the mergers of Twin Laboratories Inc.,
Alvita Products, Inc., Twinlab Specialty Corporation, Twinlab Export
Corp., and B. Bros. Realty Corporation into Natur-Pharma Inc., and the
merger of Advanced Research Press, Inc. with Natur-Pharma II Inc., a
wholly-owned subsidiary of Natur-Pharma Inc. (collectively, the
"Mergers"), in each case in connection with the consummation of the
Stock Purchase and Sale Agreement, dated as of March 5, 1996, among
David Blechman, Jean Blechman, Brian Blechman, Neil Blechman, Ross
Blechman, Steve Blechman, Dean Blechman, Stephen Welling, TLG
Laboratories Holding Corp., Natur-Pharma Inc., and Green Equity
Investors II, L.P., shall be permitted. The affirmative vote or
consent of Holders of at least a majority of the outstanding shares of
Senior Preferred Stock, voting or consenting, as the case may be,
separately as one class, whether voting in person or by proxy, either
in writing or by resolution adopted at an annual or special meeting,
may waive compliance with any provision of this Section 1.
(D) So long as any shares of the Senior Preferred Stock are
outstanding, the Company shall not, without the affirmative vote or
consent of Holders of at least a majority of the outstanding shares of
Senior Preferred Stock, voting or consenting, as the case may be,
separately as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting, (1)
declare, pay or set apart for payment any dividend on any of the
Junior Securities (other than dividends or distributions in Junior
Securities to the holders of Junior Securities) or make any payment on
account of, or set apart for payment money for a sinking or other
similar fund for, the purchase, redemption or other retirement of, any
of the Junior Securities or
9
<PAGE>
any warrants, rights, calls or options exercisable for or convertible
into any of the Junior Securities (other than the repurchase,
redemption or other acquisition or retirement for value of Junior
Securities (and any warrants, rights, calls or options exercisable for
or convertible into such Junior Securities) held by certain employees
of or consultants or advisors to the Company or any of its
Subsidiaries, which repurchase, redemption or other acquisition or
retirement shall have been approved by a majority of the Outside
Directors, provided that such Junior Securities may only be
repurchased, redeemed or otherwise acquired or retired either in
exchange for Junior Securities or upon the termination, retirement,
death or disability of such employee, consultant or advisor), or (2)
make any distribution in respect thereof, either directly or
indirectly, and whether in cash, obligations or shares of the Company
or other property (other than distributions or dividends in Junior
Securities to the holders of Junior Securities), or (3) permit any
corporation or other entity directly or indirectly controlled by the
Company to purchase or redeem any of the Junior Securities or any such
warrants, rights, calls or options. Notwithstanding the foregoing
provisions of this clause (D), the Company may, without the approval
of the Holders of the Senior Preferred Stock, but subject to the
provisions of paragraph (c)(v) of this Section 1, (1) pay in cash the
amount payable as dividends on shares of Junior Preferred Stock on any
Dividend Payment Date if the entire amount of the dividends payable on
the Senior Preferred Stock on such Dividend Payment Date is also paid
in cash and/or (2) pay a dividend or distribution on Junior Securities
in shares of the capital stock of Advanced Research Press, Inc., a New
York corporation.
(E) So long as any shares of the Senior Preferred Stock are
outstanding, without the affirmative vote or consent of Holders of at
least a majority of the outstanding shares of Senior Preferred Stock,
voting or consenting, as the case may be, separately as one class,
given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting, neither the Company nor any
of its Subsidiaries shall enter into any transaction which violates
the provisions of the first sentence, or clause (2) of the second
sentence, of Section 4.9 (Limitation on Transactions with Affiliates)
of the Indenture governing the 10 1/4% Senior Subordinated Notes of
Twin Laboratories Inc., as such Indenture is in effect on the
Preferred Stock Issue Date.
(F) Except as set forth in paragraphs (f)(ii))(A), (f)(ii)(B)
and (f)(ii)(C) above, (1) the creation, authorization or issuance of
any shares of any Junior Securities, Parity Securities or Senior
Securities, or (2) the increase or decrease in the amount of
authorized capital stock of any class or series, including any
preferred stock, shall not in either case require the consent of
Holders of Senior Preferred Stock and shall not in either case, unless
not complying with paragraphs (f)(ii)(A) and (f)(ii)(B) above, be
deemed to affect
10
<PAGE>
adversely the rights, preferences, privileges or voting rights of
Holders of shares of Senior Preferred Stock.
(iii) In any case in which the Holders of shares of the Senior
Preferred Stock shall be entitled to vote pursuant to this paragraph (f) or
pursuant to Delaware law, each Holder of shares of the Senior Preferred
Stock shall, except as provided in paragraph (f)(iv) below, be entitled to
one vote for each share of Senior Preferred Stock held.
(iv) In any case in which the Holders of shares of the Senior
Preferred Stock shall be entitled to vote pursuant to this paragraph (f),
shares of Senior Preferred Stock beneficially owned by Green Equity
Investors II, L.P. ("GEI"), David Blechman, Jean Blechman, any of the
Blechman Brothers, or any of their respective affiliates or any other
affiliate of the Company shall not be entitled to be voted and, for
purposes of this paragraph (f), shall not be deemed to be outstanding;
provided, however, that, for purposes of this paragraph (f)(iv), no Person
-------- -------
shall be deemed to be an affiliate of GEI or of the Company solely by
reason of the fact that such Person is a limited partner of GEI.
(g) Change of Control Offer.
-----------------------
Subject to contractual and other restrictions thereon, upon the
occurrence of a Change of Control, the Company shall make an offer (a
"Change of Control Offer") to each Holder of Senior Preferred Stock to
repurchase any or all of such Holder's shares of Senior Preferred Stock at
a purchase price in cash equal to 101.0% of the aggregate liquidation
preference thereof, plus, without duplication, an amount equal to all
accrued and unpaid dividends thereon (including an amount equal to the
prorated dividend for the period from the Dividend Payment Date immediately
prior to the date of repurchase to the date of repurchase), if any, to the
date of repurchase (the "Change of Control Payment").
(A) Within 30 days following any Change of Control, the Company
shall mail a notice to each Holder of Senior Preferred Stock stating:
(1) that the Change of Control Offer is being made pursuant to this
paragraph (g) and that all shares of Senior Preferred Stock duly
tendered will be accepted for payment; (2) the purchase price and the
purchase date, which shall be no sooner than 30 nor later than 60 days
from the date such notice is mailed (the "Change of Control Payment
Date"); (3) that any shares not tendered will continue to accrue
dividends; (4) that, unless the Company defaults in the payment of the
Change of Control Payment, dividends on all shares of Senior Preferred
Stock accepted for payment pursuant to the Change of Control Offer
shall cease to accrue on the Change of Control Payment Date; (5) that
Holders electing to have any shares of Senior Preferred Stock
repurchased pursuant to a Change of Control Offer will be required to
surrender such shares, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the shares of Senior Preferred
Stock, completed, or transfer by book-entry
11
<PAGE>
transfer, to the Company or its transfer agent at the address
specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date; (6) that
Holders will be entitled to withdraw their election if the Company or
the transfer agent, as the case may be, receives, not later than the
close of business on the third Business Day preceding the Change of
Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the number of shares of
Senior Preferred Stock delivered for repurchase, and a statement that
such Holder is withdrawing his election to have such shares
repurchased; and (7) that Holders whose shares of Senior Preferred
Stock are being repurchased only in part will be issued new shares of
Senior Preferred Stock equal in liquidation preference to the
unpurchased portion of the shares of Senior Preferred Stock
surrendered (or transferred by book-entry transfer), which unpurchased
portion must be equal to $1,000 in liquidation preference or an
integral multiple thereof.
(B) On the Change of Control Payment Date, the Company shall, to
the extent lawful, (1) accept for payment all shares of Senior
Preferred Stock or portions thereof properly tendered pursuant to the
Change of Control Offer, and (2) deposit with the Company or its
transfer agent an amount equal to the Change of Control Payment in
respect of all shares of Senior Preferred Stock or portions thereof so
tendered. The Company or its transfer agent, as the case may be,
shall promptly mail to each Holder of shares of Senior Preferred Stock
so tendered the Change of Control Payment for such shares or portions
thereof. The Company shall promptly issue a certificate representing
shares of Senior Preferred Stock and mail (or cause to be transferred
by book entry) to each Holder a new certificate representing shares of
Senior Preferred Stock equal in liquidation preference to any
unpurchased portion of such shares surrendered by such Holder, if any;
provided, that each such certificate shall represent shares having a
liquidation preference of $1,000 or an integral multiple thereof. The
Company shall announce to its stockholders the results of the Change
of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
(C) The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of shares of Senior Preferred Stock in
connection with a Change of Control.
(h) Conversion or Exchange.
----------------------
The Holders of shares of Senior Preferred Stock shall not have any
rights or obligations to convert such shares into or exchange such shares
for shares of any other class or classes or of any other series of any
class or classes of Capital Stock of the Company or any other securities of
the Company.
12
<PAGE>
(i) Preemptive Rights.
-----------------
No shares of Senior Preferred Stock shall have any rights of
preemption whatsoever as to any securities of the Company, or any warrants,
rights or options issued or granted with respect thereto, regardless of how
such securities or such warrants, rights or options may be designated,
issued or granted.
(j) Reissuance of Senior Preferred Stock.
------------------------------------
Shares of Senior Preferred Stock that have been issued and
reacquired in any manner, including shares purchased or redeemed, shall
(upon compliance with any applicable provisions of the laws of Delaware)
have the status of authorized but unissued shares of Preferred Stock of the
Company undesignated as to series and, subject to the provisions of
paragraph (f) of this Section 1, may be designated or redesignated and
issued or reissued, as the case may be, as part of any series of Preferred
Stock of the Company, provided that such shares may not in any event be
reissued as Senior Preferred Stock (other than in payment of dividends on
Senior Preferred Stock).
(k) Business Day.
------------
If any payment, redemption or exchange shall be required by the
terms hereof to be made on a day that is not a Business Day, such payment,
redemption or exchange shall be made on the immediately succeeding Business
Day.
(l) Definitions.
-----------
As used in this Section 1, the following terms shall have the
following meanings (with terms defined in the singular having comparable
meanings when used in the plural and vice versa), unless the context
otherwise requires:
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to
any Person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that beneficial ownership of 10.0% or more of the
voting securities of a Person shall be deemed to be control.
"Blechman Brothers" means Brian Blechman, Dean Blechman, Neil
Blechman, Ross Blechman and Steve Blechman.
"Board of Directors" means the Board of Directors of the Company.
13
<PAGE>
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership,
partnership interests (whether general or limited) and (iv) any other
interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Certificate of Incorporation" means the Company's Certificate of
Incorporation.
"Change of Control" means (i) any merger or consolidation of New Twin
or the Company with or into any Person or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of the
assets of either New Twin or the Company, on a consolidated basis, in one
transaction or a series of related transactions, if, immediately after
giving effect to such transaction, any "person" or "group," other than any
Excluded Person or Excluded Persons, is or becomes the "beneficial owner"
(as such terms are used for purposes of Sections 13(d) and 14(d) of the
Exchange Act, whether or not applicable), directly or indirectly, of more
than 50% of the total voting power in the aggregate normally entitled to
vote in the election of directors, managers, or trustees, as applicable, of
the transferee or surviving entity, (ii) any "person" or "group" other than
an Excluded Person or Excluded Persons, is or becomes the "beneficial
owner," directly or indirectly, of more than 50% of the total voting power
in the aggregate of all classes of Capital Stock of New Twin then
outstanding normally entitled to vote in elections of directors, provided
that any "person or "group" will be deemed to "beneficially own" any
Capital Stock of New Twin held by the Company so long as such person or
group "beneficially owns," directly or indirectly, in the aggregate a
majority of the Capital Stock of the Company then outstanding normally
entitled to vote in elections of directors, or (iii) during any period of
12 consecutive months after the Merger Date, individuals who at the
beginning of any such 12-month period constituted the board of directors of
either New Twin or the Company (together, in each case, with any new
directors whose election by such board or whose nomination for election by
the shareholders of New Twin was approved by LGP or a Related Party of LGP
or by the Excluded Persons or by a vote of a majority of the directors then
still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the board of directors of
New Twin or the Company then in office, as applicable.
"Company" means this corporation.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of
such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported
14
<PAGE>
on the balance sheet of such Person and its consolidated Subsidiaries as of
such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is a Junior Security, determined in
accordance with GAAP.
"Disinterested Directors" means directors who are not Affiliates of
LGP or Persons designated by GEI and its Affiliates pursuant to the
Stockholders Agreement among GEI, the Blechman Brothers, Stephen Welling
and the Company as in effect on the Preferred Stock Issue Date.
"Disqualified Stock" means any Capital Stock which, by its terms (or
by the terms of any security into which it is convertible or for which it
is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or is redeemable at the option of the holder thereof, in whole or in part,
on or prior to May 1, 2007.
"Dividend Payment Date" means each February 1, May 1, August 1 and
November 1 following the Preferred Stock Issue Date.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each Quarterly Dividend Period.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Excluded Person" means collectively or individually Green Equity
Investors II, L.P., David Blechman, Jean Blechman and the Blechman
Brothers, and their respective Related Parties.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant
segment of the accounting profession, which are in effect from time to
time.
"Holder" means a Person in whose name a share of Senior Preferred
Stock is registered.
"Initial Dividend Period" means the dividend period commencing on the
Preferred Stock Issue Date and ending on the day before the first Dividend
Payment Date to occur thereafter.
"Junior Preferred Stock" means the Company's 11.25% Junior Cumulative
Preferred Stock, par value $0.01 per share, with a liquidation preference
of $1,000 per share, consisting of 140,090 shares.
15
<PAGE>
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York are authorized by law, regulation or
executive order to remain closed.
"LGP" means Leonard Green & Partners, L.P.
"Merger Date" means the date of the consummation of the Mergers.
"New Twin" means Natur-Pharma Inc. (to be renamed Twin Laboratories
Inc.), as such entity will exist from and after the consummation of the
Mergers.
"Outside Directors" means directors other than the Blechman Brothers,
their parents or their descendants who are not officers or employees of the
Company or of any of its Subsidiaries.
"Person" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint-stock company,
trust, unincorporated organization or government or agency or political
subdivision thereof (including any subdivision or ongoing business of any
such entity or substantially all of the assets of any such entity,
subdivision or business).
"Preferred Stock Issue Date" means the date on which the Senior
Preferred Stock is originally issued by the Company under this Section 1.
"Quarterly Dividend Period" shall mean the quarterly period commencing
on each February 1, May 1, August 1, and November 1 and ending on the day
before the following Dividend Payment Date.
"Redemption Date" with respect to any shares of Senior Preferred
Stock, means the date on which such shares of Senior Preferred Stock are
redeemed by the Company.
"Related Party" means (i) with respect to any Excluded Person, (A) any
controlling stockholder, 80% or more owned Subsidiary, or spouse or
immediate family member (in the case of an individual) of such Excluded
Person or (B) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or persons holding an 80% or
more controlling interest of which consist of such Excluded Person and/or
such other persons referred to in the immediately preceding clause (A), and
(ii) only with respect to Green Equity Investors II, L.P. (and in addition
to the persons described in the foregoing clause (i)) any partnership or
corporation which is managed by or controlled by LGP or any affiliate
thereof. For the purposes of this definition "control" of any Person shall
mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
16
<PAGE>
"SEC" means the Securities and Exchange Commission.
"Senior Preferred Stock" means the Company's 14% Senior Cumulative
Preferred Stock.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50.0% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly
or indirectly, by such Person or one or more of the other Subsidiaries of
that Person (or a combination thereof).
"Voting Stock" of any Person means the Capital Stock of such Person
with voting power, under ordinary circumstances, to elect directors of such
Person.
(m) Application of Definitions.
--------------------------
The definitions of terms in this Section 1 shall apply solely to such
terms as used in this Section 1.
2. DESIGNATIONS OF THE COMPANY'S 11.25% JUNIOR CUMULATIVE PREFERRED STOCK.
-----------------------------------------------------------------------
Capitalized terms used in this Section 2 and not expressly defined in
the text of this Section 2 shall have the meanings set forth in paragraph
(l) of this Section 2.
(a) Designations.
------------
There is hereby created out of the authorized and unissued shares of
Preferred Stock of the Company a series of Preferred Stock designated as
the "11.25% Junior Cumulative Preferred Stock." The number of shares
constituting such series shall be 140,090 shares of Junior Preferred Stock,
consisting of an initial issuance of 37,000 shares of Junior Preferred
Stock plus additional shares of Junior Preferred Stock which may be issued
to pay dividends on the Junior Preferred Stock if the Company pays
dividends in additional shares of Junior Preferred Stock (in lieu of cash).
The liquidation preference of the Junior Preferred Stock shall be $1,000
per share.
(b) Rank.
----
The Junior Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding up or
dissolution of the Company, rank senior to all classes of common stock of
the Company, and to each other class of capital stock or series of
preferred stock of the Company hereafter created the terms of which do not
expressly provide that it ranks senior to or on a parity with the Junior
Preferred Stock as to dividend distributions and distributions upon the
liquidation,
17
<PAGE>
winding up or dissolution of the Company (collectively referred to with the
common stock of the Company as "Junior Securities"). The Junior Preferred
Stock shall, with respect to dividend distributions and distributions upon
the liquidation, winding up or dissolution of the Company, rank on a parity
with any class of capital stock or series of preferred stock of the Company
hereafter created which expressly provides that it ranks on a parity with
the Junior Preferred Stock as to dividend distributions and distributions
upon the liquidation, winding up or dissolution of the Company ("Parity
Securities"), provided that any such Parity Securities that were not
approved by the Holders of Junior Preferred Stock in accordance with
paragraph (f)(ii)(A) of this Section 2 shall be deemed to be Junior
Securities and not Parity Securities. The Junior Preferred Stock shall,
with respect to dividend distributions and distributions upon the
liquidation, winding up or dissolution of the Company, rank junior to the
Senior Preferred Stock and to each class of capital stock or series of
preferred stock of the Company hereafter created which has been approved by
the Holders of Junior Preferred Stock in accordance with paragraph
(f)(ii)(B) of this Section 2 and which expressly provides that it ranks
senior to the Junior Preferred Stock as to dividend distributions or
distributions upon the liquidation, winding up or dissolution of the
Company (collectively referred to with the Senior Preferred Stock as
"Senior Securities").
(c) Dividends.
---------
(i) Beginning on the date of issuance of shares of the Junior
Preferred Stock, the Holders of the outstanding shares of Junior Preferred
Stock shall be entitled to receive, when, as and if declared by the Board
of Directors, out of funds legally available therefor, distributions in the
form of cash dividends on each share of Junior Preferred Stock, at a rate
per annum equal to 11.25% of the liquidation preference per share of the
Junior Preferred Stock, payable quarterly. All dividends shall be
cumulative, whether or not earned or declared, on a daily basis from the
Preferred Stock Issue Date and shall be payable quarterly in arrears on
each Dividend Payment Date, commencing on the first Dividend Payment Date
after the date of issuance of the Junior Preferred Stock, provided that if
any dividend payable on any Dividend Payment Date is not declared and paid
in full in cash on such Dividend Payment Date, the amount payable as
dividends on such Dividend Payment Date that is not paid in cash on such
Dividend Payment Date shall be paid by the Company in additional fully paid
and non-assessable shares (including fractional shares, if applicable) of
Junior Preferred Stock having an aggregate liquidation preference equal to
the amount of such dividends (rounded to the nearest whole cent); it being
understood that dividends shall begin to accrue from such Dividend Payment
Date on such additional shares of Junior Preferred Stock whether such
additional shares of Junior Preferred Stock are issued on such date or any
later date or are never issued. The payment by the Company in such
additional shares of Junior Preferred Stock shall constitute full payment
of such dividend. Each distribution in the form of a dividend (whether in
cash or in additional shares of Junior Preferred Stock) shall be payable to
the Holders of Junior Preferred Stock of record as they appear on the stock
books of the Company on such record dates, not less than 10 nor more than
45 days
18
<PAGE>
preceding the related Dividend Payment Date, as shall be fixed by the Board
of Directors. So long as any of the Blechman Brothers is a member of the
Board of Directors, any determination of the Board of Directors to pay any
dividend on the Junior Preferred Stock in cash shall be made by decision of
a majority of the Disinterested Directors; provided, however, that the
declaration and payment of cash dividends on the Junior Preferred Stock
shall be subject to contractual and other restrictions with respect thereto
and the legal availability of funds therefor. Dividends shall cease to
accrue in respect of shares of the Junior Preferred Stock on the date of
their redemption unless the Company shall have failed to pay the relevant
redemption price on the date fixed for redemption. Notwithstanding the
foregoing provisions of this paragraph (c)(i), so long as any shares of
Senior Preferred Stock are outstanding, no dividends on the Junior
Preferred Stock shall be paid in cash except to the extent permitted by the
provisions of Section 1 of Part A of this Article FOURTH.
(ii) All dividends paid with respect to shares of the Junior
Preferred Stock pursuant to paragraph (c)(i) of this Section 2 shall be
paid pro rata to the Holders thereof entitled thereto.
(iii) Dividends on account of arrears for any past Dividend Period
and dividends in connection with any optional redemption pursuant to
paragraph (e)(i) of this Section 2 may be declared and paid at any time,
without reference to any regular Dividend Payment Date, to Holders of
Junior Preferred Stock of record on such date, not more than 45 days prior
to the payment thereof, as may be fixed by the Board of Directors.
(iv) No full dividends shall be declared by the Board of Directors
or paid or funds set apart for payment of dividends by the Company on any
Parity Securities for any period unless full cumulative dividends shall
have been or contemporaneously are declared and paid in full, or declared
and (in the case of dividends payable in cash) a sum in cash set apart
sufficient for such payment, on the Junior Preferred Stock for all Dividend
Periods terminating on or prior to the date of payment of such full
dividends on such Parity Securities. If any dividends are not paid in full,
as aforesaid, upon the shares of the Junior Preferred Stock and any other
Parity Securities, all dividends declared upon shares of the Junior
Preferred Stock and any other Parity Securities shall be declared pro rata
based on the relative liquidation preference of the Junior Preferred Stock
and such Parity Securities. So long as any shares of the Junior Preferred
Stock are outstanding, the Company shall not make any payment on account
of, or set apart for payment money for a sinking or other similar fund for,
the purchase, redemption or other retirement of, any of the Parity
Securities or any warrants, rights, calls or options exercisable for or
convertible into any of the Parity Securities, and shall not permit any
corporation or other entity directly or indirectly controlled by the
Company to purchase or redeem any of the Parity Securities or any such
warrants, rights, calls or options.
(v) So long as any shares of Junior Preferred Stock are
outstanding, the Company shall not (A) declare, pay or set apart for
payment any dividend on any of
19
<PAGE>
the Junior Securities or make any payment on account of, or set apart for
payment money for a sinking or other similar fund for, the purchase,
redemption or other retirement of, any of the Junior Securities or any
warrants, rights, calls or options exercisable for or convertible into any
of the Junior Securities (other than the repurchase, redemption or other
acquisition or retirement for value of Junior Securities (and any warrants,
rights, calls or options exercisable for or convertible into such Junior
Securities) held by certain employees of or consultants or advisors to the
Company or any of its Subsidiaries, which repurchase, redemption or other
acquisition or retirement shall have been approved by a majority of the
Outside Directors, provided that such Junior Securities may only be
repurchased, redeemed or otherwise acquired or retired either in exchange
for Junior Securities or upon the termination, retirement, death or
disability of such employee, consultant or advisor), or (B) make any
distribution in respect thereof, either directly or indirectly, and whether
in cash, obligations or shares of the Company or other property (other than
distributions or dividends in Junior Securities to the holders of Junior
Securities), or (C) permit any corporation or other entity directly or
indirectly controlled by the Company to purchase or redeem any of the
Junior Securities or any such warrants, rights, calls or options, unless in
any such case referred to in clause (A), (B) or (C) of this paragraph
(c)(v) full cumulative dividends determined in accordance herewith have
been paid in full on the Junior Preferred Stock and the action does not
violate the provisions of paragraph (f)(ii)(D) of this Section 2.
(vi) Dividends payable on shares of the Junior Preferred Stock for
any period less than a year shall be computed on the basis of a 360-day
year of twelve 30-day months and the actual number of days elapsed in the
period for which payable. If any Dividend Payment Date occurs on a day that
is not a Business Day, any accrued dividends otherwise payable on such
Dividend Payment Date shall be paid on the next succeeding Business Day.
(d) Liquidation Preference.
----------------------
(i) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, subject to the provisions of
Section 1(d) of Part A of this Article FOURTH, the Holders of shares of
Junior Preferred Stock then outstanding shall be entitled to be paid, out
of the assets of the Company available for distribution to its
stockholders, $1,000 per share of Junior Preferred Stock (the "liquidation
preference"), plus an amount in cash equal to accrued and unpaid dividends
thereon to the date fixed for liquidation, dissolution or winding up
(including an amount equal to a prorated dividend for the period from the
last Dividend Payment Date to the date fixed for liquidation, dissolution
or winding up) before any payment shall be made or any assets distributed
to the holders of any of the Junior Securities, including, without
limitation, common stock of the Company. Except as provided in the
preceding sentence, Holders of shares of Junior Preferred Stock shall not
be entitled to any distribution in the event of liquidation, dissolution or
winding up of the affairs of the Company. If the assets of the Company are
not sufficient to pay in full the liquidation payments payable to the
Holders of outstanding
20
<PAGE>
shares of the Junior Preferred Stock and the holders of all outstanding
Parity Securities, then the holders of all such shares shall share equally
and ratably in such distribution of assets of the Company in accordance
with the amounts which would be payable on such distribution if the amount
to which the Holders of outstanding shares of Junior Preferred Stock and
the holders of outstanding shares of all Parity Securities are entitled
were paid in full.
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets
of the Company nor the consolidation or merger of the Company with or into
one or more corporations or other entities shall be deemed to be a
liquidation, dissolution or winding up of the affairs of the Company.
(e) Redemption.
----------
(i) Optional Redemption
-------------------
(A) The Company may (subject to contractual and other
restrictions with respect thereto and the legal availability of funds
therefor), at the option of the Company, redeem at any time or from
time to time, from any source of funds legally available therefor, in
whole or in part, in the manner provided in paragraph (e)(iii) of this
Section 2, any or all of the shares of the Junior Preferred Stock, at
a redemption price equal to 100% of the liquidation preference per
share plus, without duplication, an amount in cash equal to all
accrued and unpaid dividends per share (including an amount in cash
equal to a prorated dividend for the period from the Dividend Payment
Date immediately prior to the Redemption Date to the Redemption Date),
provided that no optional redemption pursuant to this paragraph
(e)(i)(A) shall be authorized or made at any time when the Company is
making or required to make within the next 30 days, or purchasing
shares of Junior Preferred Stock under, a Change of Control Offer in
accordance with the provisions of paragraph (g) of this Section 2 and
provided, further, that no optional redemption of only a portion of
the then outstanding shares of Junior Preferred Stock shall be
authorized or made at any time when full cumulative dividends on the
Junior Preferred Stock for all past Dividend Periods have not been
declared and paid in full. So long as any of the Blechman Brothers is
a member of the Board of Directors, any determination of the Board of
Directors to redeem, at the option of the Company, any shares of
Junior Preferred Stock shall be made by decision of a majority of the
Disinterested Directors.
(B) In the event of a redemption pursuant to paragraph (e)(i)(A)
of this Section 2 of only a portion of the then outstanding shares of
the Junior Preferred Stock, the Company shall effect such redemption
as it determines, pro rata according to the number of shares held by
each Holder of Junior
21
<PAGE>
Preferred Stock or by lot, as may be determined by the Company in its
sole discretion.
(ii) Mandatory Redemption. On May 1, 2008, the Company shall redeem
--------------------
from any source of funds legally available therefor, in the manner provided
in paragraph (e)(iii) of this Section 2, all of the shares of the Junior
Preferred Stock then outstanding at a redemption price equal to 100% of the
liquidation preference per share, plus, without duplication, an amount in
cash equal to all accrued and unpaid dividends per share (including an
amount equal to a prorated dividend for the period from the Dividend
Payment Date immediately prior to the Redemption Date to the Redemption
Date).
(iii) Procedures for Redemption.
-------------------------
(A) At least 15 days and not more than 60 days prior to the
date fixed for any redemption of the Junior Preferred Stock, written
notice of redemption (the "Redemption Notice") shall be given by
first-class mail, postage prepaid, to each Holder of Junior Preferred
Stock to be redeemed, at such Holder's address as the same appears on
the stock register of the Company, provided that no failure to give
such notice nor any deficiency therein shall affect the validity of
the procedure for the redemption of any shares of Junior Preferred
Stock to be redeemed except as to the Holder or Holders to whom the
Company has failed to give said notice or except as to the Holder or
Holders whose notice was defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)(i) or (e)(ii)
of this Section 2; (2) the redemption price; (3) whether all or less
than all the outstanding shares of the Junior Preferred Stock are to
be redeemed and the total number of shares of the Junior Preferred
Stock being redeemed; (4) the number of shares of Junior Preferred
Stock held by the Holder that the Company intends to redeem; (5) the
date fixed for redemption; (6) that the Holder is to surrender to the
Company, at the place or places where certificates for shares of
Junior Preferred Stock are to be surrendered for redemption, in the
manner and at the price designated, his certificate or certificates
representing the shares of Junior Preferred Stock to be redeemed; and
(7) that dividends on the shares of the Junior Preferred Stock to be
redeemed shall cease to accrue on such Redemption Date unless the
Company defaults in the payment of the redemption price.
(B) Each Holder of Junior Preferred Stock shall surrender to
the Company the certificate or certificates representing his shares of
Junior Preferred Stock to be redeemed, duly endorsed, in the manner
and at the place designated in the Redemption Notice, and on the
Redemption Date the full redemption price for such shares shall be
payable in cash to the Person whose name appears on such certificate
or certificates as the owner thereof, and each surrendered certificate
shall be canceled and retired. In the event that less than all of the
shares represented by any such certificate are redeemed, a new
22
<PAGE>
certificate shall be issued representing the unredeemed shares without
cost to the Holder thereof.
(C) Unless the Company defaults in the payment in full of the
applicable redemption price, dividends on the shares of Junior
Preferred Stock called for redemption shall cease to accrue on the
Redemption Date, and the Holders of such shares shall cease to have
any further rights with respect thereto on the Redemption Date, other
than the right to receive the redemption price, without interest.
(f) Voting Rights.
-------------
(i) The Holders of shares of the Junior Preferred Stock, except as
otherwise required under Delaware law or as set forth in paragraph (f)(ii)
below, shall not be entitled or permitted to vote on any matter required or
permitted to be voted upon by the stockholders of the Company.
(ii) (A) So long as any shares of the Junior Preferred Stock are
outstanding, the Company shall not authorize or issue any class or
series of Parity Securities without the affirmative vote or consent of
Holders of at least a majority of the outstanding shares of Junior
Preferred Stock, voting or consenting, as the case may be, separately
as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting, except that
without the approval of Holders of Junior Preferred Stock, the Company
may issue shares of Parity Securities in exchange for, or the proceeds
of which are used to redeem or repurchase, all shares of Junior
Preferred Stock then outstanding.
(B) So long as any shares of the Junior Preferred Stock are
outstanding, the Company shall not authorize or issue any class or
series of Senior Securities (other than the Senior Preferred Stock),
or issue any additional shares of Senior Preferred Stock subsequent to
the Preferred Stock Issue Date (other than in payment of dividends on
the Senior Preferred Stock), without the affirmative vote or consent
of Holders of at least a majority of the outstanding shares of Junior
Preferred Stock, voting or consenting, as the case may be, separately
as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
(C) So long as any shares of the Junior Preferred Stock are
outstanding, the Company shall not, without the affirmative vote or
consent of Holders of at least a majority of the outstanding shares of
Junior Preferred Stock, voting or consenting, as the case may be,
separately as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting, (1)
amend, alter or repeal any of the provisions of the Certificate of
Incorporation or By-Laws of the Company or of any certificate
amendatory thereof or supplemental thereto so as to affect adversely
any of the
23
<PAGE>
preferences, rights, powers or privileges of the Junior Preferred
Stock or of the holders thereof as such, (2) issue any additional
shares of Junior Preferred Stock (other than in payment of dividends
on the Junior Preferred Stock) or (3) consolidate or merge with or
into (whether or not the Company is the surviving or resulting
entity), or sell, assign, transfer, lease, convey or otherwise dispose
of all or substantially all of the properties or assets of the Company
(or of the Company and its Subsidiaries, taken as a whole) in one or
more related transactions, to another corporation, Person or entity
unless (x) all outstanding shares of Junior Preferred Stock will be
redeemed upon consummation of such transaction or (y) (I) the Company
is the surviving corporation or the entity formed by or surviving any
such consolidation or merger (if other than the Company) or to which
such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized and
existing under the laws of the United States, any state thereof or the
District of Columbia; (II) the Junior Preferred Stock shall (q) be
converted into or exchanged for and shall become shares of such
successor, transferee or resulting corporation, having in respect of
such successor, transferee or resulting corporation the same
preferences, powers, rights and privileges that the Junior Preferred
Stock had immediately prior to such transaction or (r) if the Company
is the surviving corporation in such transaction, remain outstanding
with the same preferences, powers, rights and privileges as it had
immediately prior to such transaction; and (III) the Company or the
entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made,
as the case may be, shall have a Consolidated Net Worth immediately
after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction (without
giving effect to any purchase accounting adjustments related to such
transaction). Notwithstanding the foregoing, the mergers of Twin
Laboratories Inc., Alvita Products, Inc., Twinlab Specialty
Corporation, Twinlab Export Corp., and B. Bros. Realty Corporation
into Natur-Pharma Inc., and the merger of Advanced Research Press,
Inc. with Natur-Pharma II Inc., a wholly-owned subsidiary of Natur-
Pharma Inc. (collectively, the "Mergers"), in each case in connection
with the consummation of the Stock Purchase and Sale Agreement, dated
as of March 5, 1996, among David Blechman, Jean Blechman, Brian
Blechman, Neil Blechman, Ross Blechman, Steve Blechman, Dean Blechman,
Stephen Welling, TLG Laboratories Holding Corp., Natur-Pharma Inc.,
and Green Equity Investors II, L.P., shall be permitted. The
affirmative vote or consent of Holders of at least a majority of the
outstanding shares of Junior Preferred Stock, voting or consenting, as
the case may be, separately as one class, whether voting in person or
by proxy, either in writing or by resolution adopted at an annual or
special meeting, may waive compliance with any provision of this
Section 2.
24
<PAGE>
(D) So long as any shares of the Junior Preferred Stock are
outstanding, the Company shall not, without the affirmative vote or
consent of Holders of at least a majority of the outstanding shares of
Junior Preferred Stock, voting or consenting, as the case may be,
separately as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting, (1)
declare, pay or set apart for payment any dividend on any of the
Junior Securities (other than dividends or distributions in Junior
Securities to the holders of Junior Securities) or make any payment on
account of, or set apart for payment money for a sinking or other
similar fund for, the purchase, redemption or other retirement of, any
of the Junior Securities or any warrants, rights, calls or options
exercisable for or convertible into any of the Junior Securities
(other than the repurchase, redemption or other acquisition or
retirement for value of Junior Securities (and any warrants, rights,
calls or options exercisable for or convertible into such Junior
Securities) held by certain employees of or consultants or advisors to
the Company or any of its Subsidiaries, which repurchase, redemption
or other acquisition or retirement shall have been approved by a
majority of the Outside Directors, provided that such Junior
Securities may only be repurchased, redeemed or otherwise acquired or
retired either in exchange for Junior Securities or upon the
termination, retirement, death or disability of such employee,
consultant or advisor), or (2) make any distribution in respect
thereof, either directly or indirectly, and whether in cash,
obligations or shares of the Company or other property (other than
distributions or dividends in Junior Securities to the holders of
Junior Securities), or (3) permit any corporation or other entity
directly or indirectly controlled by the Company to purchase or redeem
any of the Junior Securities or any such warrants, rights, calls or
options. Notwithstanding the foregoing provisions of this clause (D),
the Company may, without the approval of the Holders of the Junior
Preferred Stock, but subject to the provisions of paragraph (c)(v) of
this Section 2, pay a dividend or distribution on Junior Securities in
shares of the capital stock of Advanced Research Press, Inc., a New
York corporation.
(E) Except as set forth in paragraphs (f)(ii))(A), (f)(ii)(B)
and (f)(ii)(C) above, (1) the creation, authorization or issuance of
any shares of any Junior Securities, Parity Securities or Senior
Securities, or (2) the increase or decrease in the amount of
authorized capital stock of any class or series, including any
preferred stock, shall not in either case require the consent of
Holders of Junior Preferred Stock and shall not in either case, unless
not complying with paragraphs (f)(ii)(A) and (f)(ii)(B) above, be
deemed to affect adversely the rights, preferences, privileges or
voting rights of Holders of shares of Junior Preferred Stock.
(iii) In any case in which the Holders of shares of the Junior
Preferred Stock shall be entitled to vote pursuant to this paragraph (f) or
pursuant to Delaware law, each Holder of shares of the Junior Preferred
Stock shall be entitled to one vote for each share of Junior Preferred
Stock held.
25
<PAGE>
(g) Change of Control Offer.
-----------------------
Subject to contractual and other restrictions thereon, upon the
occurrence of a Change of Control, the Company shall make an offer (a
"Change of Control Offer") to each Holder of Junior Preferred Stock to
repurchase any or all of such Holder's shares of Junior Preferred Stock at
a purchase price in cash equal to 101.0% of the aggregate liquidation
preference thereof, plus, without duplication, an amount equal to all
accrued and unpaid dividends thereon (including an amount equal to the
prorated dividend for the period from the Dividend Payment Date immediately
prior to the date of repurchase to the date of repurchase), if any, to the
date of repurchase (the "Change of Control Payment").
(A) Within 30 days following any Change of Control, the Company
shall mail a notice to each Holder of Junior Preferred Stock stating:
(1) that the Change of Control Offer is being made pursuant to this
paragraph (g) and that all shares of Junior Preferred Stock duly
tendered will be accepted for payment; (2) the purchase price and the
purchase date, which shall be no sooner than 30 nor later than 60 days
from the date such notice is mailed (the "Change of Control Payment
Date"); (3) that any shares not tendered will continue to accrue
dividends; (4) that, unless the Company defaults in the payment of the
Change of Control Payment, dividends on all shares of Junior Preferred
Stock accepted for payment pursuant to the Change of Control Offer
shall cease to accrue on the Change of Control Payment Date; (5) that
Holders electing to have any shares of Junior Preferred Stock
repurchased pursuant to a Change of Control Offer will be required to
surrender such shares, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the shares of Junior Preferred
Stock, completed, or transfer by book-entry transfer, to the Company
or its transfer agent at the address specified in the notice prior to
the close of business on the third Business Day preceding the Change
of Control Payment Date; (6) that Holders will be entitled to withdraw
their election if the Company or the transfer agent, as the case may
be, receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the number of shares of Junior Preferred Stock delivered for
repurchase, and a statement that such Holder is withdrawing his
election to have such shares repurchased; and (7) that Holders whose
shares of Junior Preferred Stock are being repurchased only in part
will be issued new shares of Junior Preferred Stock equal in
liquidation preference to the unpurchased portion of the shares of
Junior Preferred Stock surrendered (or transferred by book-entry
transfer), which unpurchased portion must be equal to $1,000 in
liquidation preference or an integral multiple thereof.
(B) On the Change of Control Payment Date, the Company shall, to
the extent lawful, (1) accept for payment all shares of Junior
Preferred Stock or portions thereof properly tendered pursuant to the
Change of Control Offer,
26
<PAGE>
and (2) deposit with the Company or its transfer agent an amount equal
to the Change of Control Payment in respect of all shares of Junior
Preferred Stock or portions thereof so tendered. The Company or its
transfer agent, as the case may be, shall promptly mail to each Holder
of shares of Junior Preferred Stock so tendered the Change of Control
Payment for such shares or portions thereof. The Company shall
promptly issue a certificate representing shares of Junior Preferred
Stock and mail (or cause to be transferred by book entry) to each
Holder a new certificate representing shares of Junior Preferred Stock
equal in liquidation preference to any unpurchased portion of such
shares surrendered by such Holder, if any; provided, that each such
certificate shall represent shares having a liquidation preference of
$1,000 or an integral multiple thereof. The Company shall announce to
its stockholders the results of the Change of Control Offer on or as
soon as practicable after the Change of Control Payment Date.
(C) The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of shares of Junior Preferred Stock in
connection with a Change of Control.
(h) Conversion or Exchange
----------------------
The Holders of shares of Junior Preferred Stock shall not have any
rights or obligations to convert such shares into or exchange such shares
for shares of any other class or classes or of any other series of any
class or classes of Capital Stock of the Company or any other securities of
the Company.
(i) Preemptive Rights.
-----------------
No shares of Junior Preferred Stock shall have any rights of
preemption whatsoever as to any securities of the Company, or any warrants,
rights or options issued or granted with respect thereto, regardless of how
such securities or such warrants, rights or options may be designated,
issued or granted.
(j) Reissuance of Junior Preferred Stock.
------------------------------------
Shares of Junior Preferred Stock that have been issued and reacquired
in any manner, including shares purchased or redeemed, shall (upon
compliance with any applicable provisions of the laws of Delaware) have the
status of authorized but unissued shares of Preferred Stock of the Company
undesignated as to series and, subject to the provisions of paragraph (f)
of this Section 2, may be designated or redesignated and issued or
reissued, as the case may be, as part of any series of Preferred Stock of
the Company, provided that such shares may not in any event be reissued as
Senior Preferred Stock (other than in payment of dividends on Senior
27
<PAGE>
Preferred Stock) or as Junior Preferred Stock (other than in payment of
dividends on Junior Preferred Stock).
(k) Business Day.
------------
If any payment, redemption or exchange shall be required by the terms
hereof to be made on a day that is not a Business Day, such payment,
redemption or exchange shall be made on the immediately succeeding Business
Day.
(l) Definitions.
-----------
As used in this Section 2, the following terms shall have the
following meanings (with terms defined in the singular having comparable
meanings when used in the plural and vice versa), unless the context
otherwise requires:
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to
any Person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that beneficial ownership of 10.0% or more of the
voting securities of a Person shall be deemed to be control.
"Blechman Brothers" means Brian Blechman, Dean Blechman, Neil
Blechman, Ross Blechman and Steve Blechman.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership,
partnership interests (whether general or limited) and (iv) any other
interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Certificate of Incorporation" means the Company's Certificate of
Incorporation.
"Change of Control" means (i) any merger or consolidation of New Twin
or the Company with or into any Person or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of the
assets of either New Twin or the Company, on a consolidated basis, in one
transaction or a series of related
28
<PAGE>
transactions, if, immediately after giving effect to such transaction, any
"person" or "group," other than any Excluded Person or Excluded Persons, is
or becomes the "beneficial owner" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable),
directly or indirectly, of more than 50% of the total voting power in the
aggregate normally entitled to vote in the election of directors, managers,
or trustees, as applicable, of the transferee or surviving entity, (ii) any
"person" or "group" other than an Excluded Person or Excluded Persons, is
or becomes the "beneficial owner," directly or indirectly, of more than 50%
of the total voting power in the aggregate of all classes of Capital Stock
of New Twin then outstanding normally entitled to vote in elections of
directors, provided that any "person or "group" will be deemed to
"beneficially own" any Capital Stock of New Twin held by the Company so
long as such person or group "beneficially owns," directly or indirectly,
in the aggregate a majority of the Capital Stock of the Company then
outstanding normally entitled to vote in elections of directors, or (iii)
during any period of 12 consecutive months after the Merger Date,
individuals who at the beginning of any such 12-month period constituted
the board of directors of either New Twin or the Company (together, in
each case, with any new directors whose election by such board or whose
nomination for election by the shareholders of New Twin was approved by LGP
or a Related Party of LGP or by the Excluded Persons or by a vote of a
majority of the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority
of the board of directors of New Twin or the Company then in office, as
applicable.
"Company" means this corporation.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of
such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on the balance sheet of such Person and its
consolidated Subsidiaries as of such date with respect to any series of
preferred stock (other than Disqualified Stock) that by its terms is a
Junior Security, determined in accordance with GAAP.
"Disinterested Directors" means directors who are not Affiliates of
LGP or Persons designated by Green Equity Investors II, L.P. ("GEI") and
its affiliates pursuant to the Stockholders Agreement among GEI, the
Blechman Brothers, Stephen Welling and the Company as in effect on the
Preferred Stock Issue Date.
"Disqualified Stock" means any Capital Stock which, by its terms (or
by the terms of any security into which it is convertible or for which it
is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or is redeemable at the option of the holder thereof, in whole or in part,
on or prior to May 1, 2008.
29
<PAGE>
"Dividend Payment Date" means each February 1, May 1, August 1 and
November 1 following the Preferred Stock Issue Date.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each Quarterly Dividend Period.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Excluded Person" means collectively or individually Green Equity
Investors II, L.P., David Blechman, Jean Blechman and the Blechman
Brothers, and their respective Related Parties.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant
segment of the accounting profession, which are in effect from time to
time.
"Holder" means a Person in whose name a share of Junior Preferred
Stock is registered.
"Initial Dividend Period" means the dividend period commencing on the
Preferred Stock Issue Date and ending on the day before the first Dividend
Payment Date to occur thereafter.
"Junior Preferred Stock" means the Company's 11.25% Junior Cumulative
Preferred Stock.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York are authorized by law, regulation or
executive order to remain closed.
"LGP" means Leonard Green & Partners, L.P.
"Merger Date" means the date of the consummation of the Mergers.
"New Twin" means Natur-Pharma Inc. (to be renamed Twin Laboratories
Inc.), as such entity will exist from and after the consummation of the
Mergers.
"Outside Directors" means directors other than the Blechman Brothers,
their parents or their descendants who are not officers or employees of the
Company or of any of its Subsidiaries.
30
<PAGE>
"Person" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint-stock company,
trust, unincorporated organization or government or agency or political
subdivision thereof (including any subdivision or ongoing business of any
such entity or substantially all of the assets of any such entity,
subdivision or business).
"Preferred Stock Issue Date" means the date on which the Junior
Preferred Stock is originally issued by the Company under this Section 1.
"Quarterly Dividend Period" shall mean the quarterly period commencing
on each February 1, May 1, August 1, and November 1 and ending on the day
before the following Dividend Payment Date.
"Redemption Date" with respect to any shares of Junior Preferred
Stock, means the date on which such shares of Junior Preferred Stock are
redeemed by the Company.
"Related Party" means (i) with respect to any Excluded Person, (A) any
controlling stockholder, 80% or more owned Subsidiary, or spouse or
immediate family member (in the case of an individual) of such Excluded
Person or (B) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or persons holding an 80% or
more controlling interest of which consist of such Excluded Person and/or
such other persons referred to in the immediately preceding clause (A), and
(ii) only with respect to Green Equity Investors II, L.P. (and in addition
to the persons described in the foregoing clause (i)) any partnership or
corporation which is managed by or controlled by LGP or any affiliate
thereof. For the purposes of this definition "control" of any Person shall
mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"SEC" means the Securities and Exchange Commission.
"Senior Preferred Stock" means the Company's 14% Senior Cumulative
Preferred Stock, par value $.01 per share, with a liquidation preference of
$1,000 per share, consisting of 156,410 shares.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50.0% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly
or indirectly, by such Person or one or more of the other Subsidiaries of
that Person (or a combination thereof).
"Voting Stock" of any Person means the Capital Stock of such Person
with voting power, under ordinary circumstances, to elect directors of such
Person.
31
<PAGE>
(m) Application of Definitions.
---------------------------
The definitions of terms in this Section 2 shall apply solely to such
terms as used in this Section 2.
B. COMMON STOCK.
1. After the requirements with respect to preferential dividends on
the Preferred Stock shall have been met and after the Company shall have
complied with all the requirements, if any, with respect to the setting aside of
sums as sinking funds or redemption or purchase accounts for the Preferred
Stock, and subject further to any other conditions which may be fixed in Part A
of this Article FOURTH, then and not otherwise the holders of Common Stock shall
be entitled to receive such dividends as may be declared from time to time by
the Board of Directors; provided, however, that the declaration and payment of
cash dividends on the Common Stock shall be subject to contractual and other
restrictions with respect thereto and the legal availability of funds therefor.
2. After distribution in full of the preferential amount to be
distributed to the holders of Preferred Stock in the event of voluntary or
involuntary liquidation, dissolution or winding-up of the Company, the holders
of the Common Stock shall be entitled to receive all the remaining assets of the
Company, tangible and intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common Stock held
by them, respectively.
3. Except as may otherwise be required by law or by the provisions
of Part A of this Article FOURTH, each holder of Common Stock shall have one
vote in respect of each share of Common Stock held by him on all matters voted
upon by the stockholders.
FIFTH: No election of directors need be by written ballot.
SIXTH: The Board of Directors shall not designate any
committee of the Board of Directors.
SEVENTH: Any action in connection with any increase or decrease
in the number of the members of the Board of Directors of the Company
(including, without limitation, the election, appointment or removal of any
director) that is required or permitted to be taken at any meeting of the
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
Company in accordance with the provisions of Section 228 of the Delaware General
Corporation Law. Except as contemplated in the immediately foregoing sentence,
all other actions that are required or permitted to be taken at any meeting of
the stockholders may be taken without a meeting,
32
<PAGE>
without prior notice and without a vote only if a unanimous consent or consents
in writing shall be signed by the holders of outstanding stock entitled to vote
thereon and shall be delivered to the Company in accordance with the provisions
of Section 228 of the Delaware General Corporation Law.
EIGHTH: The Company expressly elects not be governed by Section
203 of the Delaware General Corporation Law.
NINTH: Except to the extent expressly prohibited by Article
11.7 of the Stock Purchase and Sale Agreement dated as of March 5, 1996 among
David Blechman, Jean Blechman, Brian Blechman, Neil Blechman, Ross Blechman,
Steve Blechman, Dean Blechman, Stephen Welling, the Company, Natur-Pharma Inc.
and Green Equity Investors II, L.P. (the "Agreement") with respect to the
Stockholder Indemnitors (as such term is defined in the Agreement), the Company
shall, to the fullest extent permitted by the provisions of (S)145 of the
Delaware General Corporation Law, as the same may be amended and supplemented,
indemnify each person who is or was an officer or Director of the Company and
may indemnify any and all other persons whom it shall have power to indemnify
under said section from and against any and all of the expenses, liabilities, or
other matters referred to in or covered by said section, and the indemnification
provided for herein shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under any by-law, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to acting in such
person's official capacity and as to acting in another capacity while holding
such office, and shall continue as to a person who has ceased to be a Director
or officer and shall inure to the benefit of the heirs, executors, and
administrators of such a person. No repeal or modification of this Article
NINTH shall adversely affect any right or protection afforded to an officer or
Director prior to such repeal or modification.
TENTH: A Director of the Company shall not be personally
liable to the Company or the stockholders for monetary damages for breach of
fiduciary duty as a Director of the Company, except (i) for any breach of the
duty of loyalty of such Director to the Company or such stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law and (iv) for any transaction from which such Director derives an
improper personal benefit. If the Delaware General Corporation Law is hereafter
amended to authorize corporate action further eliminating or limiting the
personal liability of Directors, then the liability of a Director shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. No repeal or modification of this Article TENTH
shall adversely affect any right of or protection afforded to a Director prior
to such repeal or modification.
5. The Company has not received any payment for any of its stock.
This Amended and Restated Certificate of Incorporation was duly adopted by the
Board of Directors in accordance with the provisions of Sections 241 and 245 of
the General Corporation Law of Delaware.
33
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Amended and Restated
Certificate of Incorporation to be signed by its President on this 6th day of
May, 1996.
TLG LABORATORIES HOLDING CORP.
_______________________________
Jennifer Holden Dunbar
President
34
<PAGE>
BY-LAWS
OF
TLG LABORATORIES HOLDING CORP.
(A Delaware Corporation)
ARTICLE I
Stockholders
------------
Section 1. Place of Meetings. Meetings of stockholders shall be held
-----------------
at such place, either withind or without the State of Delaware, as shall be
designated in the notice of meeting.
Section 2. Annual Meetings. Annual meetings of stockholders shall be
---------------
held on such date during the month of April or at such other time and at such
place as shall be designated from time to time by the Board of Directors. At
each annual meeting the stockholders shall elect a Board of Directors by
plurality vote and transact such other business as may be properly brought
before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders
----------------
may be called by the Board of Directors, by any two directors or by the holders
of ten percent (10%) of the outstanding Common Stock of the Corporation.
Section 4. Notice of Meetings. Written notice of each meeting of the
------------------
stockholders stating the place, date and hour of the meeting shall be given by
or at the direction of the Board of Directors or other persons calling the
meeting to each stockholder entitled to vote at the meeting at least ten (10),
but not more than sixty (60), days prior to
<PAGE>
the meeting. Notice of any special meeting shall state in general terms the
purpose or purposes for which the meeting is called.
Section 5. Quorum; Adjournments of Meetings. The holders of a
--------------------------------
majority of the issued and outstanding shares of the capital stock of the
Corporation entitled to vote at a meeting, present in person or represented by
proxy, shall constitute a quorum for the transaction of business at such
meeting; but, if there be less than a quorum, the holders of a majority of the
stock so present or represented may adjourn the meeting to another time or
place, from time to time, until a quorum shall be present, whereupon the meeting
may be held, as adjourned, without further notice, except as required by law,
and any business may be transacted thereat which might have been transacted at
the meeting as originally called.
Section 6. Voting. At any meeting of the stockholders every
------
registered owner of shares entitled to vote may vote in person or by proxy and,
except as otherwise provided by statute, in the Certificate of Incorporation or
these By-Laws, shall have one vote for each such share standing in his name on
the books of the Corporation. Except as otherwise required or provided by the
Stockholders' Agreement dated as of ______, 1996 by and among Green Equity
Investors II, L.P., Brian Blechman, Neil Blechman, Ross Blechman, Steve
Blechman, Dean Blechman, Stephen Welling and the Corporation (the
"Stockholders' Agreement"), statute, the Certificate of Incorporation or these
By-Laws, all elections of directors shall be decided by a plurality of votes
cast, and all other matters shall be decided by a vote of the majority of shares
present in person or represented by proxy at the meeting and entitled to vote
thereon, a quorum being present.
-2-
<PAGE>
Section 7. Inspectors of Election. The Board of Directors, or, if
----------------------
the Board shall not have made the appointment, the chairman presiding at any
meeting of stockholders, shall have power to appoint one or more persons to act
as inspectors of election at the meeting or any adjournment thereof, but no
candidate for the office of director shall be appointed as an inspector at any
meeting for the election of directors.
Section 8. Chairman of Meetings. The Chairman of the Board shall
--------------------
preside as chairman of a meeting of the stockholders. In the absence of the
Chairman of the Board, a majority of the members of the Board of Directors
present in person at such meeting may appoint any other person to act as
chairman of the meeting.
Section 9. Secretary of Meetings. The Secretary of the Corporation
---------------------
shall act as secretary of all meetings of the stockholders. In the absence of
the Secretary, the chairman of the meeting shall appoint any other person to act
as secretary of the meeting.
Section 10. Stockholders' Action Without Meetings. Any action in
-------------------------------------
connection with any increase or decrease in the number of the members of the
Board of Directors of the Corporation (including, without limitation, the
election, appointment or removal of any director) that is required or permitted
to be taken at any meeting of the stockholders may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered to the Corporation in accordance with the provisions of
Section 228 of the
-3-
<PAGE>
General Corporation Law of the State of Delaware. Except as contemplated in the
immediately foregoing sentence, all other actions that are required or permitted
to be taken at any meeting of the stockholders may be taken without a meeting,
without prior notice and without a vote only if a unanimous consent or consents
in writing shall be signed by the holders of outstanding stock entitled to vote
thereon and shall be delivered to the Corporation in accordance with the
provisions of Section 228 of the Delaware General Corporation Law.
ARTICLE II
Board of Directors
------------------
Section 1. Number of Directors. The Board of Directors shall
-------------------
initially consist of one (1) member; provided, however, that prior to such time
as the Corporation has received payment for any of its stock, such number may
from time to time be increased or decreased by the Board of Directors, but in no
event shall the number of directors be more than eight (8). Subsequent to such
time as the Corporation has received payment for any of its stock, the Board of
Directors shall consist of eight (8) members; provided, however, that such
number may from time to time be increased or decreased by the stockholders, but
in no event shall the number of directors be less than eight (8) or more than
eleven (11).
Section 2. Vacancies. Prior to such time as the Corporation has
---------
received payment for any of its stock, whenever any vacancy shall occur in the
Board of Directors by reason of death, resignation, removal, increase in the
number of directors or otherwise, it may be filled by the Board of Directors.
Subsequent to such time as the Corporation has
-4-
<PAGE>
received payment for any of its stock, whenever any vacancy shall occur in the
Board of Directors by reason of death, resignation, removal, increase in the
number of directors or otherwise, it may be filled only by the stockholders and
not by the directors.
Section 3. First Meeting. The first meeting of each newly elected
-------------
Board of Directors, of which no notice shall be necessary, shall be held
immediately following the annual meeting of stockholders or any adjournment
thereof at the place the annual meeting of stockholders was held at which such
directors were elected, or at such other place as the Board of Directors shall
determine, for the election or appointment of a Chairman of the Board of
Directors and officers for the ensuing year and the transaction of such other
business as may be brought before such meeting.
Section 4. Regular Meetings. Regular meetings of the Board of
----------------
Directors, other than the first meeting, may be held without notice at such
times and places as the Board of Directors may from time to time determine.
Section 5. Special Meetings. Special meetings of the Board of
----------------
Directors may be called by order of the Chairman of the Board or any two
directors by delivering notice of the time and place of each special meeting to
the remaining directors. Notice deposited in the United States mail shall be
received by the directors at least three (3) days before the meeting and notice
delivered by telephone, telegraph or personal delivery shall be received by the
directors at least forty-eight (48) hours before the meeting. Except as
otherwise specified in the notice thereof, or as required by statute, the
Certificate of Incorporation or these By-Laws, any and all business may be
transacted at any special meeting.
-5-
<PAGE>
Section 6. Place of Conference Call Meeting. Any meeting at which
--------------------------------
one or more of the members of the Board of Directors or of a committee
designated by the Board of Directors shall participate by means of conference
telephone or similar communications equipment shall be deemed to have been held
at the place designated for such meeting, provided that at least one member is
at such place while participating in the meeting.
Section 7. Organization. Every meeting of the Board of Directors
------------
shall be presided over by the Chairman of the Board. In the absence of the
Chairman of the Board, a presiding officer shall be chosen by a majority of the
directors present. The Secretary of the Corporation shall act as secretary of
the meeting, but, in his absence, the presiding officer may appoint any person
to act as secretary of the meeting.
Section 8. Quorum; Vote. Six (6) directors shall constitute a quorum
------------
for the transaction of business, but less than a quorum may adjourn any meeting
to another time or place from time to time until a quorum shall be present,
whereupon the meeting may be held, as adjourned, without further notice. Except
as otherwise required by the Stockholders' Agreement, statute, the Certificate
of Incorporation or these By-Laws, all matters coming before any meeting of the
Board of Directors shall be decided by the vote of a majority of the directors
present at the meeting, a quorum being present.
Section 9. Removal of Directors. Subject to the terms of the
--------------------
Stockholders' Agreement, any one or more of the directors shall be subject to
removal with or without cause at any time by the stockholders.
-6-
<PAGE>
Section 10. Directors' Action Without Meetings. Any action required
-----------------------------------
or permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting, if a written consent thereto is signed by all members of the
Board of Directors and such written consent is filed with the minutes of
proceedings of the Board of Directors.
Section 11. Attendance of Advisors. Any director shall be entitled
-----------------------
to have one or more legal and/or financial advisors attend and be present at any
meeting of the Board of Directors, provided that (i) such director shall have
delivered a notice to the other directors at least twelve (12) hours prior to
the time of such meeting, specifying the name and affiliation of any such
advisor and (ii) such advisor shall have executed a confidentiality agreement in
form and substance acceptable to the Board of Directors.
Section 12. Committees. The Board of Directors shall not designate
----------
any committee of the Board of Directors.
ARTICLE III
Officers
--------
Section 1. General. The Board of Directors shall elect the officers
-------
of the Corporation, which shall include a Chairman of the Board, a President, a
Chief Executive Officer, a Chief Financial Officer, a Secretary, a Treasurer and
such other or additional officers (including, without limitation, one or more
Vice-Presidents, Assistant Vice-
-7-
<PAGE>
Presidents, Assistant Secretaries and Assistant Treasurers) as the Board of
Directors may designate.
Section 2. Term of Office; Removal and Vacancy. Each officer shall
-----------------------------------
hold his office until his successor is elected and qualified or until his
earlier resignation or removal. Any officer shall be subject to removal with or
without cause at any time by the Board of Directors. Vacancies in any office,
whether occurring by death, resignation, removal or otherwise, may be filled by
the Board of Directors.
Section 3. Powers and Duties. Each of the officers of the
-----------------
Corporation shall, unless otherwise ordered by the Board of Directors, have such
powers and duties as generally pertain to his respective office as well as such
powers and duties as from time to time may be conferred upon him by the Board of
Directors.
Section 4. Power to Vote Stock. No person shall have the power or
-------------------
authority on behalf of the Corporation to attend and to vote at any meeting of
stockholders of any corporation in which this Corporation may hold stock, or to
exercise on behalf of this Corporation any and all of the rights and powers
incident to the ownership of such stock at any such meeting, except to the
extent such powers are conferred upon any person by the Board of Directors.
ARTICLE IV
Capital Stock
-------------
-8-
<PAGE>
Section 1. Certificates of Stock. Certificates for stock of the
---------------------
Corporation shall be in such form as the Board of Directors may from time to
time prescribe and shall be signed by the Chairman of the Board or a Vice
Chairman of the Board or a Vice-President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary.
Section 2. Transfer of Stock. Shares of capital stock of the
-----------------
Corporation shall be transferable on the books of the Corporation only by the
holder of record thereof, in person or by duly authorized attorney, upon
surrender and cancellation of certificates for a like number of shares, with an
assignment or power of transfer endorsed thereon or delivered therewith, duly
executed, and with such proof of the authenticity of the signature and of
authority to transfer, and of payment of transfer taxes, as the Corporation or
its agents may require.
Section 3. Ownership of Stock. The Corporation shall be entitled to
------------------
treat the holder of record of any share or shares of stock as the owner thereof
in fact and shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise expressly provided by
law.
ARTICLE V
Miscellaneous
-------------
Section 1. Corporate Seal. The seal of the Corporation shall be
--------------
circular in form and shall contain the name of the Corporation and the year and
State of incorporation.
-9-
<PAGE>
Section 2. Fiscal Year. The Board of Directors shall have power to
-----------
fix, and from time to time to change, the fiscal year of the Corporation.
ARTICLE VI
Amendment
---------
Subject to the terms of the Stockholders' Agreement, the stockholders
shall have the power to make, alter or repeal the By-Laws of the Corporation.
The Board of Directors shall not have such power.
ARTICLE VII
Indemnification
---------------
Except to the extent expressly prohibited by the Delaware General
Corporation Law and except to the extent prohibited in Article 11.7 of the Stock
Purchase and Sale Agreement dated as of March 5, 1996 among David Blechman, Jean
Blechman, Brian Blechman, Neil Blechman, Ross Blechman, Steve Blechman, Dean
Blechman, Stephen Welling, the Corporation, Natur-Pharma Inc. and Green Equity
Investors II, L.P. (the "Purchase Agreement"), with respect to the Stockholder
Indemnitors (as such term is defined in the Purchase Agreement), the Corporation
shall indemnify each person made or threatened to be made a party to any action
or proceeding, whether civil or criminal, and whether by or in the right of the
Corporation or otherwise, by reason of the fact that such person or such
person's testator or intestate is or was a director or officer of the
Corporation, or serves or served at the request of the Corporation any other
corporation, partnership, joint venture,
-10-
<PAGE>
trust, employee benefit plan or other enterprise in any capacity while he or she
was such a director or officer (hereinafter referred to as "Indemnified
Person"), against judgments, fines, penalties, amounts paid in settlement and
reasonable expenses, including attorneys' fees, incurred in connection with such
action or proceeding, or any appeal therein, provided that no such
indemnification shall be made if a judgment or other final adjudication adverse
to such Indemnified Person establishes that either (a) his or her acts were
committed in bad faith, or were the result of active and deliberate dishonesty,
and were material to the cause of action so adjudicated, or (b) that he or she
personally gained in fact a financial profit or other advantage to which he or
she was not legally entitled.
The Corporation shall advance or promptly reimburse upon request any
Indemnified Person for all expenses, including attorneys' fees, reasonably
incurred in defending any action or proceeding in advance of the final
disposition thereof upon receipt of an undertaking by or on behalf of such
Indemnified Person to repay such amount if such Indemnified Person is ultimately
found not to be entitled to indemnification or, where indemnification is
granted, to the extent the expenses so advanced or reimbursed exceed the amount
to which such Indemnified Person is entitled.
Nothing herein shall limit or affect any right of any Indemnified
Person otherwise than hereunder to indemnification or expenses, including
attorneys' fees, under any statute, rule, regulation, certificate of
incorporation, by-law, insurance policy, contract or otherwise.
-11-
<PAGE>
Anything in these by-laws to the contrary notwithstanding, no
elimination of this by-law, and no amendment of this by-law adversely affecting
the right of any Indemnified Person to indemnification or advancement of
expenses hereunder shall be effective until the sixtieth (60th) day following
notice to such Indemnified Person of such action, and no elimination of or
amendment to this by-law shall thereafter deprive any Indemnified Person of his
or her rights hereunder arising out of alleged or actual occurrences, acts or
failures to act prior to such sixtieth (60th) day.
The Corporation shall not, except by elimination or amendment of this
by-law in a manner consistent with the preceding paragraph, take any corporate
action or enter into any agreement which prohibits, or otherwise limits the
rights of any Indemnified Person to, indemnification in accordance with the
provisions of this by-law. The indemnification of any Indemnified Person
provided by this by-law shall be deemed to be a contract between the Corporation
and each Indemnified Person and shall continue after such Indemnified Person has
ceased to be a director or officer of the Corporation and shall inure to the
benefit of such Indemnified Person's heirs, executors, administrators and legal
representatives. If the Corporation fails timely to make any payment pursuant to
the indemnification and advancement or reimbursement of expenses provisions of
this Article VII and an Indemnified Person commences an action or proceeding to
recover such payment, the Corporation in addition shall advance or reimburse
such Indemnified Person for the legal fees and other expenses of such action or
proceeding.
-12-
<PAGE>
The Corporation is authorized to enter into agreements with any of its
directors or officers extending rights to indemnification and advancement of
expenses to such Indemnified Person to the fullest extent permitted by
applicable law, but the failure to enter into any such agreement shall not
affect or limit the rights of such Indemnified Person pursuant to this by-law,
it being expressly recognized hereby that all directors or officers of the
Corporation, by serving as such after the adoption hereof, are acting in
reliance hereon and that the Corporation is estopped to contend otherwise.
Persons who are not directors or officers of the Corporation shall be similarly
indemnified and entitled to advancement or reimbursement of expenses to the
extent authorized at any time by the Board of Directors.
In case any provision in this Article VII, shall be determined at any
time to be unenforceable in any respect, the other provisions shall not in any
way be affected or impaired thereby, and the affected provision shall be given
the fullest possible enforcement in the circumstances, it being the intention of
the Corporation to afford indemnification and advancement of expenses to its
directors or officers, acting in such capacities or in the other capacities
mentioned herein, to the fullest extent permitted by law whether arising from
alleged or actual occurrences, acts or failures to act occurring before or after
the adoption of this Article VII.
For purposes of this Article VII, the Corporation shall be deemed to
have requested an Indemnified Person to serve an employee benefit plan where the
performance by such Indemnified Person of his or her duties to the Corporation
also imposes duties on, or otherwise involves services by, such Indemnified
Person to the plan or participants or
-13-
<PAGE>
beneficiaries of the plan, and excise taxes assessed on an Indemnified Person
with respect to an employee benefit plan pursuant to applicable law shall be
considered indemnifiable fines. For purposes of this Article VII, the term
"Corporation" shall include any legal successor to the Corporation, including
any corporation which acquires all or substantially all of the assets of the
Corporation in one or more transactions.
-14-
<PAGE>
Exhibit 4.2
================================================================================
TWIN LABORATORIES INC.
ISSUER,
AND
THE GUARANTORS NAMED HEREIN
AND
FLEET NATIONAL BANK
TRUSTEE
________________________
INDENTURE
Dated as of May 7, 1996
___________________________________
$100,000,000
10 1/4% Senior Subordinated Notes due 2006
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE................................ 1
SECTION 1.1. Definitions................................................. 1
-----------
SECTION 1.2. Incorporation by Reference of TIA........................... 28
---------------------------------
SECTION 1.3. Rules of Construction....................................... 29
---------------------
ARTICLE II
THE SECURITIES............................ 29
SECTION 2.1. Form and Dating............................................. 29
---------------
SECTION 2.2. Execution and Authentication................................ 30
----------------------------
SECTION 2.3. Registrar and Paying Agent.................................. 31
--------------------------
SECTION 2.4. Paying Agent to Hold Assets in Trust........................ 32
------------------------------------
SECTION 2.5. Securityholder Lists........................................ 32
--------------------
SECTION 2.6. Transfer and Exchange....................................... 33
---------------------
SECTION 2.7. Replacement Securities...................................... 40
----------------------
SECTION 2.8. Outstanding Securities...................................... 41
----------------------
SECTION 2.9. Treasury Securities......................................... 41
-------------------
SECTION 2.10. Temporary Securities....................................... 42
--------------------
SECTION 2.11. Cancellation............................................... 42
------------
SECTION 2.12. Defaulted Interest......................................... 42
------------------
ARTICLE III
REDEMPTION.............................. 43
SECTION 3.1. Right of Redemption......................................... 43
-------------------
SECTION 3.2. Notices to Trustee.......................................... 44
------------------
SECTION 3.3. Selection of Securities to Be Redeemed...................... 45
--------------------------------------
SECTION 3.4. Notice of Redemption........................................ 45
--------------------
SECTION 3.5. Effect of Notice of Redemption.............................. 46
------------------------------
SECTION 3.6. Deposit of Redemption Price................................. 47
---------------------------
SECTION 3.7. Securities Redeemed in Part................................. 47
---------------------------
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE IV
COVENANTS............................... 48
SECTION 4.1. Payment of Securities....................................... 48
---------------------
SECTION 4.2. Maintenance of Office or Agency............................. 48
-------------------------------
SECTION 4.3. Limitation on Restricted Payments........................... 49
---------------------------------
SECTION 4.4. Corporate Existence......................................... 50
-------------------
SECTION 4.5. Payment of Taxes and Other Claims........................... 50
---------------------------------
SECTION 4.6. Compliance Certificate; Notice of Default................... 51
-----------------------------------------
SECTION 4.7. Reports..................................................... 51
-------
SECTION 4.8. Limitation on Status as InvestmentCompany................... 52
-----------------------------------------
SECTION 4.9. Limitation on Transactions with Affiliates.................. 52
------------------------------------------
SECTION 4.10. Limitation on Incurrence of Additional Indebtedness
---------------------------------------------------
and Disqualified Capital Stock....................................... 52
------------------------------
SECTION 4.11. Limitation on Dividends and Other Payment Restrictions
------------------------------------------------------
Affecting Subsidiaries............................................... 53
----------------------
SECTION 4.12. Limitation on Liens........................................ 54
-------------------
SECTION 4.13. Limitation on Sale of Assets and Subsidiary
-------------------------------------------
Stock................................................................ 55
-----
SECTION 4.14. Limitation on Layering Indebtedness........................ 59
-----------------------------------
SECTION 4.15. Limitation on Lines of Business............................ 59
-------------------------------
SECTION 4.16. Restriction on Sale and Issuance of
-----------------------------------
Subsidiary Stock..................................................... 59
----------------
SECTION 4.17. Waiver of Stay, Extension or Usury Laws.................... 60
---------------------------------------
ARTICLE V
SUCCESSOR CORPORATION........................ 60
SECTION 5.1. Limitation on Merger, Sale or Consolidation................. 60
-------------------------------------------
SECTION 5.2. Successor Corporation Substituted........................... 61
---------------------------------
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES.................... 61
SECTION 6.1. Events of Default........................................... 61
-----------------
SECTION 6.2. Acceleration of Maturity Date; Rescission and
---------------------------------------------
Annulment............................................................ 63
---------
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 6.3. Collection of Indebtedness and Suitsfor Enforcement
---------------------------------------------------
by Trustee...........................................................
----------
SECTION 6.4. Trustee May File Proofs of Claim............................ 65
--------------------------------
SECTION 6.5. Trustee May Enforce Claims Without Possession of
------------------------------------------------
Securities...........................................................
----------
SECTION 6.6. Priorities.................................................. 66
----------
SECTION 6.7. Limitation on Suits......................................... 67
-------------------
SECTION 6.8. Unconditional Right of Holders to Receive Principal,
---------------------------------------------------
Premium and Interest.................................................
--------------------
SECTION 6.9. Rights and Remedies Cumulative.............................. 60
------------------------------
SECTION 6.10. Delay or Omission Not Waiver............................... 68
----------------------------
SECTION 6.11. Control by Holders......................................... 69
------------------
SECTION 6.12. Waiver of Past Default..................................... 69
----------------------
SECTION 6.13. Undertaking for Costs...................................... 70
---------------------
SECTION 6.14. Restoration of Rights and Remedies......................... 70
----------------------------------
ARTICLE VII
TRUSTEE................................ 70
SECTION 7.1. Duties of Trustee........................................... 71
-----------------
SECTION 7.2. Rights of Trustee........................................... 72
-----------------
SECTION 7.3. Individual Rights of Trustee................................ 73
----------------------------
SECTION 7.4. Trustee's Disclaimer........................................ 73
--------------------
SECTION 7.5. Notice of Default........................................... 73
-----------------
SECTION 7.6. Reports by Trustee to Holders............................... 74
-----------------------------
SECTION 7.7. Compensation and Indemnity.................................. 74
--------------------------
SECTION 7.8. Replacement of Trustee...................................... 75
----------------------
SECTION 7.9. Successor Trustee by Merger, Etc............................ 76
--------------------------------
SECTION 7.10. Eligibility; Disqualification.............................. 76
-----------------------------
SECTION 7.11. Preferential Collection of Claims Against Company.......... 77
-------------------------------------------------
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE............... 77
SECTION 8.1. Option to Effect Legal Defeasance or Covenant
---------------------------------------------
Defeasance........................................................... 77
----------
SECTION 8.2. Legal Defeasance and Discharge.............................. 77
------------------------------
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 8.3. Covenant Defeasance......................................... 78
-------------------
SECTION 8.4. Conditions to Legal or Covenant Defeasance.................. 78
------------------------------------------
SECTION 8.5. Deposited Cash and U.S. Government Obligations to
-------------------------------------------------
be Held in Trust; Other Miscellaneous Provisions..................... 80
------------------------------------------------
SECTION 8.6. Repayment to the Company.................................... 80
------------------------
SECTION 8.7. Reinstatement............................................... 81
-------------
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS.................. 82
SECTION 9.1. Supplemental Indentures Without Consent of Holders.......... 82
--------------------------------------------------
SECTION 9.2. Amendments, Supplemental Indentures and Waivers
-----------------------------------------------
with Consent of Holders.............................................. 83
-----------------------
SECTION 9.3. Compliance with TIA......................................... 85
-------------------
SECTION 9.4. Revocation and Effect of Consents........................... 85
---------------------------------
SECTION 9.5. Notation on or Exchange of Securities....................... 86
-------------------------------------
SECTION 9.6. Trustee to Sign Amendments, Etc............................. 86
-------------------------------
ARTICLE X
RIGHT TO REQUIRE REPURCHASE...................... 86
SECTION 10.1. Repurchase of Securities at Option of the Holder Upon a
-------------------------------------------------------
Change of Control.................................................... 86
-----------------
ARTICLE XI
GUARANTEE............................... 89
SECTION 11.1. Guarantee.................................................. 89
---------
SECTION 11.2. Execution and Delivery of Guarantee........................ 91
-----------------------------------
SECTION 11.3. Future Subsidiary Guarantors............................... 91
----------------------------
SECTION 11.4. Guarantor May Consolidate, Etc.on Certain Terms............ 92
-----------------------------------------------
SECTION 11.5. Release of Guarantors...................................... 93
---------------------
SECTION 11.6. Certain Bankruptcy Events.................................. 94
-------------------------
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE XII
SUBORDINATION............................ 94
SECTION 12.1. Securities Subordinated to SeniorDebt...................... 94
-------------------------------------
SECTION 12.2. No Payment on Securities in Certain Circumstances.......... 95
-------------------------------------------------
SECTION 12.3. Securities Subordinated to PriorPayment of All Senior
-----------------------------------------------------
Debt on Dissolution, Liquidation or Reorganization................... 96
--------------------------------------------------
SECTION 12.4. Securityholders to Be Subrogated to Rights of Holders
-----------------------------------------------------
of Senior Debt....................................................... 97
--------------
SECTION 12.5. Obligations of the Company and the Guarantors
---------------------------------------------
Unconditional........................................................ 98
-------------
SECTION 12.6. Trustee Entitled to Assume Payments Not Prohibited
--------------------------------------------------
in Absence of Notice................................................. 98
--------------------
SECTION 12.7. Application by Trustee of Assets Deposited with It......... 99
--------------------------------------------------
SECTION 12.8. Subordination Rights Not Impaired by Acts or Omissions
------------------------------------------------------
of the Company, the Guarantors or Holders of Senior Debt............. 99
--------------------------------------------------------
SECTION 12.9. Securityholders Authorize Trustee to Effectuate
-----------------------------------------------
Subordination of Securities.......................................... 99
---------------------------
SECTION 12.10. Right of Trustee to Hold Senior Debt...................... 100
------------------------------------
SECTION 12.11. Article XII Not to Prevent Events of Default.............. 100
--------------------------------------------
SECTION 12.12. No Fiduciary Duty of Trustee to Holders of Senior
-------------------------------------------------
Debt................................................................. 100
----
ARTICLE XIII
MISCELLANEOUS............................. 101
SECTION 13.1. TIA Controls............................................... 101
------------
SECTION 13.2. Notices.................................................... 101
-------
SECTION 13.3. Communications by Holders with Other Holders............... 102
--------------------------------------------
SECTION 13.4. Certificate and Opinion as to Conditions Precedent......... 102
--------------------------------------------------
SECTION 13.5. Statements Required in Certificate or Opinion.............. 103
---------------------------------------------
SECTION 13.6. Rules by Trustee, Paying Agent, Registrar.................. 104
-----------------------------------------
SECTION 13.7. Non-Business Days.......................................... 104
-----------------
SECTION 13.8. Governing Law.............................................. 104
-------------
SECTION 13.9. No Adverse Interpretation of Other Agreements.............. 105
---------------------------------------------
SECTION 13.10. No Recourse against Others................................ 105
--------------------------
SECTION 13.11. Successors................................................ 105
----------
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 13.12. Duplicate Originals....................................... 105
-------------------
SECTION 13.13. Severability.............................................. 105
------------
SECTION 13.14. Table of Contents, Headings, Etc.......................... 106
--------------------------------
SIGNATURES................................................................ 107
Exhibit A................................................................. A-1
</TABLE>
vi
<PAGE>
INDENTURE, dated as of May 7, 1996, by and among Twin Laboratories
Inc., a Utah corporation (the "Company"), the Guarantors referred to below and
Fleet National Bank, as Trustee.
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Company's 10
1/4% Senior Subordinated Notes due 2006:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
-----------
"Acceleration Notice" shall have the meaning specified in Section 6.2.
-------------------
"Acquired Indebtedness" means Indebtedness or Disqualified Capital
---------------------
Stock of any person existing at the time such person becomes a Subsidiary of the
Company or is merged or consolidated into or with the Company or one of its
Subsidiaries.
"Acquisition" means the purchase or other acquisition of any person or
-----------
substantially all the assets of any person by any other person, whether by
purchase, stock purchase, merger, consolidation, or other transfer, and whether
or not for consideration.
"Affiliate" means any person, directly or indirectly, controlling or
---------
controlled by or under direct or indirect common control with the Company. For
purposes of this definition, the term "control" means the power to direct the
management and policies of a person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by contract,
or otherwise, provided, that a Beneficial Owner of 10% or more of the total
--------
voting power normally entitled to vote in the election of directors, managers or
trustees, as applicable, shall for such purposes be deemed to constitute
control.
"Affiliate Transaction" shall have the meaning specified in Section
---------------------
4.9.
"Agent" means any authenticating agent, Registrar, Paying Agent or
-----
transfer agent.
"Asset Sale" shall have the meaning specified in Section 4.13.
----------
<PAGE>
"Asset Sale Offer" shall have the meaning specified in Section 4.13.
----------------
"Asset Sale Offer Amount" shall have the meaning specified in Section
-----------------------
4.13.
"Asset Sale Offer Period" shall have the meaning specified in Section
-----------------------
4.13.
"Asset Sale Offer Price" shall have the meaning specified in Section
----------------------
4.13.
"Average Life" means, as of the date of determination, with respect to
------------
any security or instrument, the quotient obtained by dividing (i) the sum of (a)
the product of the number of years from the date of determination to the date or
dates of each successive scheduled principal (or redemption) payment of such
security or instrument and (b) the amount of each such respective principal (or
redemption) payment by (ii) the sum of all such principal (or redemption)
payments.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar Federal,
--------------
state or foreign law for the relief of debtors.
"Beneficial Owner" has the meaning attributed to it in Rules l3d-3 and
----------------
l3d-5 under the Exchange Act (as in effect on the Issue Date), whether or not
applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"Board of Directors" or "Board" means, with respect to any Person, the
------------------ -----
Board of Directors of such Person or any committee of the Board of Directors of
such Person authorized, with respect to any particular matter, to exercise the
power of the Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a duly adopted
----------------
resolution of the Board of Directors of such Person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
------------
Friday which is not a day on which banking institutions in New York, New York,
or in the city in which the Principal Corporate Trust Office of the Trustee is
located, are authorized or obligated by law or executive order to close.
2
<PAGE>
"Capital Stock" means, with respect to any corporation, any and all
-------------
shares, interests, rights to purchase (other than convertible or exchangeable
Indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
"Capitalized Lease Obligation" means rental obligations under a lease
----------------------------
that are required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of Indebtedness represented by such
obligations shall be the capitalized amount of such obligations, as determined
in accordance with GAAP.
"Cash" or "cash" means such coin or currency of the United States of
---- ----
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Cash Equivalent" for all purposes of this Indenture other than
---------------
Article XII, means (a) securities issued or directly and fully guaranteed or
insured by the United States Government, or any agency or instrumentality
thereof, having maturities of not more than one year from the date of
acquisition; (b) marketable general obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition thereof, having a credit
rating of "A" or better from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.; (c) certificates of deposit, time deposits, eurodollar
time deposits, overnight bank deposits or bankers' acceptances having maturities
of not more than one year from the date of acquisition thereof of any domestic
commercial bank, the long-term debt of which is rated at the time of acquisition
thereof at least A or the equivalent thereof by Standard & Poor's Ratings Group,
or A or the equivalent thereof by Moody's Investors Service, Inc. and having
capital and surplus in excess of $500,000,000; (d) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clauses (a), (b) and (c) above entered into with any bank meeting
the qualifications specified in clause (c) above; (e) commercial paper rated at
the time of acquisition thereof at least A-2 or the equivalent thereof by
Standard & Poor's Ratings Group or P-2 or the equivalent thereof by Moody's
Investors Service, Inc., or carrying an equivalent rating by a nationally
recognized rating agency, if both of the two named rating agencies cease
publishing ratings of investments, and in either case maturing within 270 days
after the date of acquisition thereof, and (f) interests in any investment
company which invests solely in instruments of the type specified in clauses (a)
through (e) above. For purposes of the provisions of Article XII of this
Indenture, "Cash Equivalent" means (a) securities issued or directly and fully
---------------
guaranteed or insured by the United States Government, or any agency or
instrumentality thereof, having maturities
3
<PAGE>
of not more than 180 days from the date of acquisition: (b) marketable general
obligations issued by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof maturing
within 180 days from the date of acquisition thereof and, at the time of
acquisition thereof, having a credit rating of "A" or better from either
Standard & Poor's Ratings Group or Moody's Investors Service, Inc.; (c)
certificates of deposit, time deposits, eurodollar time deposits, overnight bank
deposits or bankers' acceptances having maturities of not more than 180 days
from the date of acquisition thereof of any domestic commercial bank, the long-
term debt of which is rated at the time of acquisition thereof at least A or the
equivalent thereof by Standard & Poor's Ratings Group, or A or the equivalent
thereof by Moody's Investors Service, Inc. and having capital and surplus in
excess of $500,000,000; (d) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses (a), (b)
and (c) above entered into with any bank meeting the qualifications specified in
clause (c) above; (e) commercial paper rated at the time of acquisition thereof
at least A-1 or the equivalent thereof by Standard & Poor's Ratings Group or P-1
or the equivalent thereof by Moody's Investors Service, Inc., or carrying an
equivalent rating by a nationally recognized rating agency, if both of the two
named rating agencies cease publishing ratings of investments, and in either
case maturing within 180 days after the date of acquisition thereof, and (f)
interests in any investment company which invests solely in instruments of the
type specified in clauses (a) through (e) above.
"Change of Control" means (i) any merger or consolidation of the
-----------------
Company or the Holding Company with or into any person or any sale, transfer or
other conveyance, whether direct or indirect, of all or substantially all of the
assets of either the Company or the Holding Company, on a consolidated basis, in
one transaction or a series of related transactions, if, immediately after
giving effect to such transaction, any "person" or "group," (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable), other than any Excluded Person or Excluded Persons or the
Holding Company, is or becomes the Beneficial Owner, directly or indirectly, of
more than 50% of the total voting power in the aggregate normally entitled to
vote in the election of directors, managers, or trustees, as applicable, of the
transferee or surviving entity, (ii) any "person" or "group," other than any
Excluded Person or Excluded Persons or the Holding Company, is or becomes the
Beneficial Owner, directly or indirectly, of more than 50% of the total voting
power in the aggregate of all classes of Capital Stock of the Company then
outstanding normally entitled to vote in elections of directors, provided that
any "person" or "group" will be deemed to be the Beneficial Owner of any Capital
Stock of the Company held by the Holding Company so long as such person or group
is the Beneficial Owner of, directly or indirectly, in the aggregate a majority
of the Capital Stock of the Holding Company
4
<PAGE>
then outstanding normally entitled to vote in elections of directors, or (iii)
during any period of 12 consecutive months after the Issue Date, individuals who
at the beginning of any such 12-month period constituted the Board of Directors
of either the Company or the Holding Company (together, in each case, with any
new directors whose election by such Board or whose nomination for election by
the shareholders of the Company was approved by LGP or a Related Party of LGP or
by the Excluded Persons or by a vote of a majority of the directors then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company or the
Holding Company then in office, as applicable.
"Change of Control Offer" shall have the meaning specified in Section
-----------------------
10.1.
"Change of Control Offer Period" shall have the meaning specified in
------------------------------
Section 10.1.
"Change of Control Purchase Date" shall have the meaning specified in
-------------------------------
Section 10.1.
"Change of Control Purchase Price" shall have the meaning specified in
--------------------------------
Section 10.1.
"Change of Control Put Date" shall have the meaning specified in
--------------------------
Section 10.1.
"Commission" means the SEC.
----------
"Company" means the party named as such in this Indenture until a
-------
successor replaces it in accordance with the provisions of this Indenture, and
thereafter means such successor.
"Consolidated EBITDA" means, with respect to any person, for any
-------------------
period, the Consolidated Net Income of such person for such period adjusted to
add thereto (to the extent deducted from net revenues in determining
Consolidated Net Income), without duplication, the sum of (i) Consolidated
income tax expense, (ii) Consolidated depreciation and amortization expense
(including amortization of debt discount and deferred financing costs in
connection with any Indebtedness of such person and its Subsidiaries), provided
that Consolidated depreciation and amortization of a Subsidiary that is less
than wholly owned shall only be added to the extent of the equity
5
<PAGE>
interest of the Company in such Subsidiary, (iii) Consolidated Interest Expense,
(iv) all other non-cash items and (v) up to $13.6 million of fees and expenses
actually incurred in connection with the Transactions.
"Consolidated Interest Coverage Ratio" of any person on any date of
------------------------------------
determination (the "Transaction Date") means the ratio, on a pro forma basis, of
(a) the aggregate amount of Consolidated EBITDA of such person attributable to
continuing operations and businesses (exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of) for the
Reference Period to (b) the aggregate Consolidated Interest Expense of such
person (exclusive of amounts attributable to operations and businesses
permanently discontinued or disposed of, but only to the extent that the
obligations giving rise to such Consolidated Interest Expense would no longer be
obligations contributing to such person's Consolidated Interest Expense
subsequent to the Transaction Date) during the Reference Period; provided, that
for purposes of calculating each of Consolidated EBITDA and Consolidated
Interest Expense for this definition, (i) with respect to any Reference Period
commencing prior to the Issue Date, the Transactions shall be assumed to have
occurred on the first day of such Reference Period, (ii) Acquisitions which
occurred during the Reference Period or subsequent to the Reference Period and
on or prior to the Transaction Date shall be assumed to have occurred on the
first day of the Reference Period, (iii) transactions giving rise to the need to
calculate the Consolidated Interest Coverage Ratio shall be assumed to have
occurred on the first day of the Reference Period, (iv) the incurrence of any
Indebtedness or issuance of any Disqualified Capital Stock during the Reference
Period or subsequent to the Reference Period and on or prior to the Transaction
Date (and the application of the proceeds therefrom to the extent used to
refinance or retire other Indebtedness) shall be assumed to have occurred on the
first day of such Reference Period, and (v) the Consolidated Interest Expense of
such person attributable to interest on any Indebtedness or dividends on any
Disqualified Capital Stock bearing a floating interest (or dividend) rate shall
be computed on a pro forma basis as if the average rate in effect from the
beginning of the Reference Period to the Transaction Date had been the
applicable rate for the entire period, unless such person or any of its
Subsidiaries is a party to an Interest Swap or Hedging Obligation (which shall
provide a term including at least the 12-month period immediately following the
Transaction Date) that has the effect of fixing the interest rate on the date of
computation, in which case such rate (whether higher or lower) shall be used.
"Consolidated Interest Expense" of any person means, for any period,
-----------------------------
the aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued, or
scheduled to be paid or accrued (including, in accordance with the following
sentence, interest attributable to
6
<PAGE>
Capitalized Lease Obligations) of such person and its Consolidated Subsidiaries
during such period, excluding amortization of debt issuance costs incurred in
connection with the Securities or the New Credit Facility but including (i)
original issue discount and non-cash interest payments or accruals on any
Indebtedness, (ii) the interest portion of all deferred payment obligations, and
(iii) all commissions, discounts and other fees and charges owed with respect to
bankers' acceptances and letters of credit financings and currency and Interest
Swap and Hedging Obligations, in each case to the extent attributable to such
period and (b) the amount of cash dividends paid by such person or any of its
Consolidated Subsidiaries in respect of Preferred Stock (other than by
Subsidiaries of such person to such person or such person's wholly owned
Subsidiaries). For purposes of this definition, (x) interest on a Capitalized
Lease Obligation shall be deemed to accrue at an interest rate reasonably
determined by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP, and (y) interest expense
attributable to any Indebtedness represented by the guaranty by such person or a
Subsidiary of such person of an obligation of another person shall be deemed to
be the interest expense attributable to the Indebtedness guaranteed.
"Consolidated Net Income" means, with respect to any person for any
-----------------------
period, the net income (or loss) of such person and its Consolidated
Subsidiaries (determined on a consolidated basis in accordance with GAAP) for
such period, adjusted to exclude (only to the extent included in computing such
net income (or loss) and without duplication): (a) all gains and losses which
are either extraordinary (as determined in accordance with GAAP) or are either
unusual or nonrecurring (including any gain or loss from the sale or other
disposition of assets outside the ordinary course of business or from the
issuance or sale of any Capital Stock), (b) the net income, if positive, of any
person, other than a Consolidated Subsidiary but including an Unrestricted
Subsidiary, in which such person or any of its Consolidated Subsidiaries has an
interest, except to the extent of the amount of any dividends or distributions
actually paid in cash to such person or a wholly owned Consolidated Subsidiary
of such person during such period, but in any case not in excess of such
person's pro rata share of such person's net income for such period, (c) the net
income or loss of any person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition, (d) the net income, if
positive, of any of such person's Consolidated Subsidiaries in the event and
solely to the extent that the declaration or payment of dividends or similar
distributions is not at the time permitted by operation of the terms of its
charter or bylaws or any other agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Consolidated
Subsidiary, (e) the effects of changes in accounting principles, (f) any non-
cash compensation expense in connection with the exercise of, grant to or
repurchase from officers, directors and employees of stock, stock options or
stock equivalents, (g) any one-time non-cash charge or expense
7
<PAGE>
associated with the write-off of deferred debt issuance costs associated with
the New Credit Facility or the Securities and (h) the write-off or amortization
of the consideration for the Non-Competition Agreements entered into in
connection with the Transactions.
"Consolidated Net Worth" of any person at any date means the aggregate
----------------------
consolidated stockholders' equity of such person (plus amounts of equity
attributable to preferred stock) and its Consolidated Subsidiaries, as would be
shown on the consolidated balance sheet of such person prepared in accordance
with GAAP, adjusted to exclude (to the extent included in calculating such
consolidated stockholders' equity), (a) the amount of any such stockholders'
equity attributable to Disqualified Capital Stock or treasury stock of such
person and its Consolidated Subsidiaries and (b) all upward revaluations and
other write-ups in the book value of any asset of such person or a Consolidated
Subsidiary of such person subsequent to the Issue Date.
"Consolidated Subsidiary" means, for any person, each Subsidiary of
-----------------------
such person (whether now existing or hereafter created or acquired) the
financial statements of which are consolidated for financial statement reporting
purposes with the financial statements of such person in accordance with GAAP.
"Consulting Agreements" means the consulting agreements dated as of
---------------------
the Issue Date, between the Company and each of David Blechman and Jean
Blechman, as such agreements may be amended from time to time, provided that no
such amendment shall have the effect of increasing in any material respect the
cost to the Company or any Subsidiary Guarantor of the transactions, payments or
expenses permitted under such agreements as an Exempted Affiliate Transaction or
Permitted Payment hereunder.
"Covenant Defeasance" shall have the meaning specified in Section 8.3.
-------------------
"Credit Agreement" means the one or more credit agreements (including,
----------------
without limitation, the New Credit Facility) entered into by and among the
Company, certain of its subsidiaries, and certain financial institutions, which
provide for in the aggregate one or more term loans and/or revolving credit
facilities, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, as such credit
agreement and/or related documents may be amended, restated, supplemented,
renewed, replaced or otherwise modified from time to time whether or not with
the same agent, trustee, representative lenders or holders, and, subject to the
proviso to the next succeeding sentence, irrespective of any changes in the
terms and conditions thereof. Without limiting the generality of the foregoing,
the term "Credit Agreement" shall include any amendment, amendment and
restatement, renewal, extension, restructuring, supplement or modification to
any such credit
8
<PAGE>
agreement and all refundings, refinancings and replacements of any such credit
agreement, including any agreement (i) extending the maturity of any
Indebtedness Incurred thereunder or contemplated thereby, (ii) adding or
deleting borrowers or guarantors thereunder, so long as borrowers and issuers
include one or more of the Company and its Subsidiaries and their respective
successors and assigns, (iii) increasing the amount of Indebtedness Incurred
thereunder or available to be borrowed thereunder, provided that on the date
such Indebtedness is Incurred it would not be prohibited by Section 4.10, or
(iv) otherwise altering the terms and conditions thereof in a manner not
prohibited by the terms hereof.
"Custodian" means any receiver, trustee, assignee, liquidator,
---------
sequestrator or similar official under any Bankruptcy Law.
"Debt Incurrence Ratio" shall have the meaning specified in Section
---------------------
4.10.
"Default" means any event or condition that is, or after notice or
-------
passage of time or both would be, an Event of Default.
"Defaulted Interest" shall have the meaning specified in Section 2.12.
------------------
"Definitive Securities" means Securities that are in the form of the
---------------------
Security attached hereto as Exhibit A that do not include the information called
for by footnotes 1 and 3 thereof.
"Depositary" means, with respect to the Securities issuable or issued
----------
in whole or in part in global form, the person specified in Section 2.3 as the
Depositary with respect to the Securities, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Disqualified Capital Stock" means (a) except as set forth in clause
--------------------------
(b) of this paragraph, with respect to any person, Capital Stock of such person
that, by its terms or by the terms of any security into which it is then
convertible, exercisable or exchangeable, is, or upon the happening of an event
or the passage of time would be, required to be redeemed or repurchased
(including at the option of the holder thereof) by such person or any of its
Subsidiaries, in whole or in part, on or prior to the Stated Maturity of the
Securities and (b) with respect to any Subsidiary of such person (including with
respect to any Subsidiary of the Company), any Capital Stock (i) not held by the
Company or a wholly owned Subsidiary of the Company or (ii) other than any
common stock with no preference, privileges, or redemption or repayment
provisions.
9
<PAGE>
"DTC" shall have the meaning specified in Section 2.3.
---
"Employment Agreements" means those employment agreements dated as of
---------------------
the Issue Date, between the Company and each of Brian Blechman, Dean Blechman,
Neil Blechman, Ross Blechman, Steve Blechman and Stephen Welling, as such
agreement may be extended and amended from time to time, provided that no such
amendment shall have the effect of increasing in any material respect the
payments permitted to be made under such agreements as an Exempted Affiliate
Transaction or Permitted Payment hereunder.
"Equity Interests" means Capital Stock and all warrants, options, or
----------------
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an underwritten public offering pursuant to a
---------------
registration statement filed with the SEC in accordance with the Securities Act,
the consequence of which is that the common stock of either the Company or the
Holding Company is listed on a national securities exchange or quoted on the
national market system or the Small Cap Market of NASDAQ.
"Event of Default" shall have the meaning specified in Section 6.1.
----------------
"Event of Loss" means, with respect to any property or asset, any (i)
-------------
loss, destruction or damage of such property or asset; (ii) any actual
condemnation, seizure or taking, by exercise of the power of eminent domain or
otherwise, of such property or asset, or confiscation or requisition of the use
of such property or asset.
"Excess Proceeds" shall have the meaning specified in Section 4.13.
---------------
"Excess Proceeds Date" shall have the meaning specified in Section
--------------------
4.13.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated by the SEC thereunder.
"Exchange Securities" means the 10 1/4% Senior Subordinated Notes due
-------------------
2006 to be issued pursuant to this Indenture in connection with the offer to
exchange Securities for the Initial Securities that may be made by the Company
and the Guarantors pursuant to the Registration Rights Agreement.
10
<PAGE>
"Excluded Person" means collectively or individually Green Equity
---------------
Investors II, L.P., David Blechman, Jean Blechman, Brian Blechman, Dean
Blechman, Neil Blechman, Ross Blechman and Steve Blechman and their respective
Related Parties.
"Exempted Affiliate Transaction" means (a) compensation,
------------------------------
indemnification and other benefits paid or made available (x) pursuant to the
Employment Agreements and Consulting Agreements, or (y) for or in connection
with services actually rendered and comparable to those generally paid or made
available by entities engaged in the same or similar businesses (including
reimbursement or advancement of reasonable out-of-pocket expenses, loans to
officers, directors and employees in the ordinary course of business consistent
with past practice and directors' and officers' liability insurance), (b) any
Restricted Payments or other payments or transactions expressly permitted under
Section 4.3, (c) transactions between the Company and any of its wholly owned
Subsidiaries or among wholly owned Subsidiaries of the Company, (d) payments to
LGP for management services under the Management Services Agreement in an amount
not to exceed $1 million in any fiscal year, (e) payments to LGP for reasonable
and customary fees and expenses for financial advisory and investment banking
services provided to the Company in connection with major financial
transactions; provided however, that to the extent that any such Affiliate
Transaction referred to in clause (e) involves payments in excess of $2.5
million, such Affiliate Transaction must be evidenced by a resolution of the
Board of Directors of the Company set forth in an Officers' Certificate
addressed and delivered to the Trustee certifying that such Affiliate
Transaction has been approved by a majority of the disinterested members of the
Board of Directors of the Company, (f) transactions between or among the Company
and its Subsidiaries or between or among Subsidiaries of the Company, provided
that any ownership interest in any such Subsidiary which is not beneficially
owned directly or indirectly by the Company or any of its Subsidiaries is not
beneficially owned by an Affiliate of the Company or the Holding Company other
than by virtue of the direct or indirect ownership interest in such Subsidiary
held (in the aggregate) by the Company and/or one or more of its Subsidiaries,
(g) payments pursuant to the Noncompetition Agreements, (h) distributions to the
Stockholders permitted by the express exceptions to Section 6.2(e) of the Stock
Purchase Agreement, (i) the payment (or reimbursement) of the Transactional
Taxes (as defined in the Stock Purchase Agreement) and the Gross Up Payment (as
defined in the Stock Purchase Agreement) pursuant to Section 9.1(a) of the Stock
Purchase Agreement, (j) the payment (or reimbursement) of fees, costs and
expenses pursuant to Section 9.1(b) of the Stock Purchase Agreement and Section
9.1(c) of the Stock Purchase Agreement, (k) the Company's performance of its
obligations under Article 3 (Registration Rights) of the Stockholders Agreement,
(l) the Company's performance of its obligations under Article 7 (Preemptive
Rights) of the Stockholders Agreement, (m) the exercise of any rights granted
pursuant to Section 2.6 of the Sec-
11
<PAGE>
ondary Stockholders Agreement, (n) the Company's performance of its obligations
under Article 4 (Registration Rights) of the Secondary Stockholders Agreement,
and (o) the transactions occurring on the Issue Date contemplated by the
Acquisition (as such term is defined in the Offering Memorandum).
"Existing Indebtedness" means Indebtedness of the Company or a
---------------------
Subsidiary Guarantor in existence on the Issue Date.
"Fair Market Value" or "fair market value" means, with respect to any
----------------- -----------------
assets or properties, the amount at which such assets or properties would change
hands between a willing buyer and a willing seller, within a commercially
reasonable time, each having reasonable knowledge of the relevant facts, neither
being under a compulsion to sell or buy, as such amount is determined by (i) the
Board of Directors of the Company acting in good faith or (ii) an appraisal or
valuation firm of national or regional standing selected by the Company, with
experience in the appraisal or valuation of properties or assets of the type for
which Fair Market Value is being determined.
"Future Subsidiary Guarantor" shall have the meaning specified in
---------------------------
Section 11.3.
"GAAP" means United States generally accepted accounting principles
----
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession, as in effect on the Issue Date.
"Global Security" means a Security that contains the paragraph
---------------
referred to in footnote 1 and the additional schedule referred to in footnote 3
to the form of Security attached hereto as Exhibit A.
"Guarantee" shall have the meaning provided in Section 11.1.
---------
"Guarantors" means (i) the Initial Guarantors identified in the
----------
following sentence and (ii) the Subsidiary Guarantors, but excluding in each
case any Persons whose guarantees have been released pursuant to the terms of
this Indenture and any Unrestricted Subsidiaries. The Initial Guarantors
consist of: Advanced Research Press, Inc. and the Holding Company.
12
<PAGE>
"Holder" or "Securityholder" means the Person in whose name a Security
------ --------------
is registered on the Registrar's books.
"Holding Company" means TLG Laboratories Holding Corp.
---------------
"Incur" or "Incurrence" shall have the meaning specified in Section
----- ----------
4.10.
"Incurrence Date" shall have the meaning specified in Section 4.10.
---------------
"Indebtedness" of any person means, without duplication, (a) all
------------
liabilities and obligations, contingent or otherwise, of any such person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except those incurred in the ordinary course of its business that would
constitute a trade payable to trade creditors, (iv) evidenced by bankers'
acceptances or similar instruments issued or accepted by banks, (v) for the
payment of money relating to a Capitalized Lease Obligation, or (vi) evidenced
by a letter of credit or a reimbursement obligation of such person with respect
to any letter of credit; (b) all net obligations of such person under Interest
Swap and Hedging Obligations; (c) all liabilities and obligations of others of
the kind described in the preceding clause (a) or (b) that such person has
guaranteed or which are secured by a Lien on any assets or property of such
person and all obligations to purchase, redeem or acquire any Capital Stock
which are related to a payment obligation in respect of such Indebtedness;
provided that if the liabilities or obligations which are secured by a Lien have
not been assumed in full by such person or are not such person's legal liability
in full, the amount of such Indebtedness for the purposes of this definition
shall be limited to the lesser of the amount of such Indebtedness secured by
such Lien or the Fair Market Value of the assets or property securing such Lien;
and (d) any and all deferrals, renewals, extensions, refinancing and refundings
(whether direct or indirect) of, or amendments, modifications or supplements to,
any liability of the kind described in any of the preceding clauses (a), (b) or
(c), or this clause (d), whether or not between or among the same parties.
"Indenture" means this Indenture, as amended or supplemented from time
---------
to time in accordance with the terms hereof.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette Securities
------------------
Corporation and Chase Securities Inc.
13
<PAGE>
"Initial Securities" means the 10 1/4% Senior Subordinated Notes due
------------------
2006, as supplemented from time to time in accordance with the terms hereof,
issued under this Indenture on the Issue Date.
"Interest Payment Date" means the stated due date of an installment of
---------------------
interest on the Securities.
"Interest Swap and Hedging Obligation" means any monetary obligation
------------------------------------
of any person pursuant to any interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate exchange agreement,
currency exchange agreement or any other agreement or arrangement designed to
protect against fluctuations in interest rates or currency values, including,
without limitation, any arrangement whereby, directly or indirectly, such person
is entitled to receive from time to time periodic payments calculated by
applying either a fixed or floating rate of interest on a stated notional amount
in exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"Investment" by any person in any other person means (without
----------
duplication) (a) the acquisition (whether by purchase, merger, consolidation or
otherwise) by such person (whether for cash, property, services, securities or
otherwise) of Capital Stock, bonds, notes, debentures, partnership or other
ownership interests or other securities, including any options or warrants, of
such other person or any agreement to make any such acquisition; (b) the making
by such person of any deposit with, or advance, loan or other extension of
credit to, such other person (including the purchase of property from another
person subject to an understanding or agreement, contingent or otherwise, to
resell such property to such other person) or any commitment to make any such
advance, loan or extension (but excluding accounts receivable or deposits
arising in the ordinary course of business); (c) other than guarantees of
Indebtedness of the Company or any Subsidiary Guarantor to the extent permitted
by Section 4.10, the entering into by such person of any guarantee of, or other
credit support or contingent obligation with respect to, Indebtedness or other
liability of such other person; (d) the making of any capital contribution by
such person to such other person; and (e) the designation by the Board of
Directors of the Company of any person to be an Unrestricted Subsidiary. The
Company shall be deemed to make an Investment in an amount equal to the fair
market value of the net assets of any Subsidiary (or, if neither the Company nor
any of its Subsidiaries has theretofore made an Investment in such Subsidiary,
in an amount equal to the Investments being made), at the time that such
Subsidiary is designated an Unrestricted Subsidiary, and any property
transferred to an Unrestricted Subsidiary from the Company or a Subsidiary shall
be deemed an Investment valued at its fair market value at the time of such
transfer. The amount of any such Investment
14
<PAGE>
shall be reduced by any liabilities or obligations of the Company or any of its
Subsidiaries to be assumed or discharged in connection with such Investment by
an entity other than the Company or any of its Subsidiaries.
"Issue Date" means the date of first issuance of the Securities under
----------
the Indenture.
"Junior Security" means, so long as the effect of any exclusion
---------------
employing this definition is not to cause the Securities to be treated in any
bankruptcy case or proceeding or similar event as part of the same class of
claims as Senior Debt or any class of claims pari passu with, or senior to, the
Senior Debt, for any payment or distribution, debt or equity securities of the
Company or any successor corporation provided for by a plan of reorganization or
readjustment that are subordinated at least to the same extent that the
Securities are subordinated to the payment of all Senior Debt then outstanding;
provided that (a) if a new corporation results from such reorganization or
readjustment contemplated by Section 12.3, such corporation assumes any Senior
Debt not paid in full in cash or Cash Equivalents in connection with such
reorganization or readjustment and (b) the rights of the holders of such Senior
Debt are not, without the consent of such holders, altered by such
reorganization or readjustment.
"Legal Defeasance" shall have the meaning specified in Section 8.2.
----------------
"LGP" means Leonard Green & Partners, L.P.
---
"Lien" means any mortgage, lien, pledge, charge, security interest, or
----
other encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement and any lease deemed to constitute a security interest and
any option or other agreement to give any security interest).
"Management Services Agreement" means the management services
-----------------------------
agreement, dated as of the Issue Date, between the Company and LGP as such
agreement may be extended and amended from time to time, provided that no such
amendment shall have the effect of increasing in any material respect the
payments permitted to be made under such agreement as an Exempted Affiliate
Transaction or Permitted Payment hereunder.
"Maturity Date" means, when used with respect to any Security, the
-------------
date specified on such Security as the fixed date on which the final installment
of principal of such Security is due and payable (in the absence of any
acceleration thereof pursuant
15
<PAGE>
to the provisions of this Indenture regarding acceleration of Indebtedness or
any Change of Control Offer or Asset Sale Offer).
"Net Cash Proceeds" means the aggregate amount of Cash or Cash
-----------------
Equivalents received by the Company in the case of a sale of Qualified Capital
Stock and by the Company and its Subsidiaries in respect of an Asset Sale plus,
in the case of an issuance of Qualified Capital Stock upon any exercise,
exchange or conversion of securities (including options, warrants, rights and
convertible or exchangeable debt) of the Company that were issued for cash after
the Issue Date, the amount of cash originally received by the Company upon the
issuance of such securities (including options, warrants, rights and convertible
or exchangeable debt) less, in each case, the sum of all payments, fees,
commissions and (in the case of Asset Sales, reasonable and customary), expenses
(including, without limitation, the fees and expenses of legal counsel and
investment banking fees and expenses) incurred in connection with such Asset
Sale or sale of Qualified Capital Stock, and, in the case of an Asset Sale only,
less (i) the amount (estimated reasonably and in good faith by the Company) of
income, franchise, sales and other applicable taxes required to be paid by the
Company or any of its respective Subsidiaries in connection with such Asset
Sale, (ii) the amounts of any repayments of Indebtedness secured, directly or
indirectly, by Liens on the assets which are the subject of such Asset Sale or
Indebtedness associated with such assets which is due by reason of such Asset
Sale (i.e., such disposition is permitted by the terms of the instruments
evidencing or applicable to such Indebtedness, or by the terms of a consent
granted thereunder, on the condition that the proceeds (or portion thereof) of
such disposition be applied to such Indebtedness), and other fees, expenses and
other expenditures, in each case, reasonably incurred as a consequence of such
repayment of Indebtedness (whether or not such fees, expenses or expenditures
are then due and payable or made, as the case may be); (iii) all amounts deemed
appropriate by the Company (as evidenced by a signed certificate of the Chief
Financial Officer of the Company delivered to the Trustee) to be provided as a
reserve, in accordance with GAAP ("GAAP Reserves"), against any liabilities
associated with such assets which are the subject of such Asset Sale; and (iv)
with respect to Asset Sales by Subsidiaries of the Company, the portion of such
cash payments attributable to Persons holding a minority interest in such
Subsidiary.
"New Credit Facility" means the credit agreement dated May 7, 1996
-------------------
among the Company, the Holding Company, the Lenders parties thereto and Chemical
Bank, as Administrative Agent, and The Bank of New York, as Documentation Agent.
"Non-Competition Agreements" means the non-competition agreements,
--------------------------
dated as of the Issue Date, between the Company and each of David Blechman, Jean
Blechman, Brian Blechman, Dean Blechman, Neil Blechman, Ross Blechman, Steve
16
<PAGE>
Blechman and Stephen Welling, as such agreements may be amended from time to
time, provided that no such amendment shall have the effect of increasing in any
material respect the cost to the Company or any Subsidiary Guarantor of the
transactions, payments or expenses permitted under such agreements as an
Exempted Affiliate Transaction or Permitted Payment hereunder.
"Notice of Default" shall have the meaning specified in Section
-----------------
6.1(3).
"Obligation" means any principal, premium or interest payment, or
----------
monetary penalty, or damages, or purchase price due by the Company or any
Guarantor under the terms of the Securities or the Indenture, including any
liquidated damages due pursuant to the terms of the Registration Rights
Agreement.
"Offering Memorandum" means the offering memorandum dated May 1, 1996
-------------------
relating to the Securities.
"Officer" means, with respect to the Company or a Guarantor, the Chief
-------
Executive Officer, the President, any Executive or Senior Vice President, the
Chief Financial Officer, the Treasurer, the Controller, or the Secretary of the
Company or such Guarantor.
"Officers' Certificate" means, with respect to the Company, a
---------------------
certificate signed by two Officers or by an Officer and an Assistant Secretary
of the Company and otherwise complying with the requirements of Sections 13.4
and 13.5, and delivered to the Trustee or an Agent, as applicable.
"Opinion of Counsel" means a written opinion from legal counsel who is
------------------
reasonably acceptable to the Trustee (which may include counsel to the Trustee
or the Company including an employee of the Company) or an Agent, as applicable,
complying with the requirements of Sections 13.4 and 13.5, and delivered to the
Trustee or an Agent, as applicable.
"Paying Agent" shall have the meaning specified in Section 2.3.
------------
"Payment Blockage Period" shall have the meaning specified in Section
-----------------------
12.2.
"Payment Default" shall have the meaning specified in Section 12.2.
---------------
"Payment Notice" shall have the meaning specified in Section 12.3.
--------------
17
<PAGE>
"Permitted Indebtedness" means, without duplication (a) Indebtedness
----------------------
evidenced by the Securities and represented by this Indenture, (b) Indebtedness
of the Company and the Subsidiary Guarantors (without duplication) Incurred from
time to time under or in respect to the Credit Agreement up to an aggregate
amount outstanding at any time in an aggregate principal amount up to $88
million, minus the amount of any such Indebtedness permanently reduced with Net
Cash Proceeds from any Asset Sale or assumed by a transferee in an Asset Sale;
(c) Indebtedness Incurred by the Company or any Subsidiary Guarantor from time
to time in an aggregate principal amount outstanding at any time of up to $10
million (which may be Incurred pursuant to the Credit Agreement); (d)
Indebtedness Incurred by the Company to any Subsidiary Guarantor, and
Indebtedness Incurred by any Subsidiary Guarantor to any other Subsidiary
Guarantor or Subsidiary Guarantors or to the Company; provided, that, in the
case of Indebtedness of the Company, such obligations shall be unsecured and
subordinated in right of payment to the Company's obligations pursuant to the
Securities; (e) Purchase Money Indebtedness Incurred from time to time by the
Company or any Subsidiary Guarantor, in an aggregate principal amount not to
exceed $20 million at any time outstanding; (f) Indebtedness arising from
tender, bid, performance or government contract bonds, other obligations of like
nature, or warranty or contractual service obligations of like nature, or
warranty or contractual service obligations, in any case, Incurred by the
Company or the Subsidiary Guarantors in the ordinary course of business; (g)
Interest Swap and Hedging Obligations that are Incurred for the purpose of
fixing or hedging interest rate or currency risk with respect to any fixed or
floating rate Indebtedness that is permitted by the Indenture to be outstanding
or any receivable or liability the payment of which is determined by reference
to a foreign currency; provided, that the notional amount of any such Interest
Swap and Hedging Obligation does not exceed the principal amount of Indebtedness
or the amount of such receivable or liability to which such Interest Swap and
Hedging Obligation relates; (h) Indebtedness in respect of bankers' acceptances
and letters of credit, all in the ordinary course of business in an aggregate
amount outstanding at any time of up to $2.5 million; (i) Existing Indebtedness;
and (j) Refinancing Indebtedness that serves to Refinance, without duplication,
in whole or in part, the Indebtedness permitted by this paragraph or any one or
more successive Refinancings of any thereof.
"Permitted Lien" means any of the following:
--------------
(a) Liens existing on the Issue Date;
(b) Liens imposed by governmental authorities for taxes, assessments or
other charges not yet subject to penalty or which are being contested in good
faith and
18
<PAGE>
by appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP;
(c) statutory liens of carriers, warehousemen, mechanics, materialmen,
landlords, repairmen or other like Liens arising by operation of law in the
ordinary course of business provided that (i) the underlying obligations are not
overdue for a period of more than 30 days, or (ii) such Liens are being
contested in good faith and by appropriate proceedings and adequate reserves
with respect thereto are maintained on the books of the Company in accordance
with GAAP;
(d) Liens securing the performance of bids, trade contracts (other than
borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(e) easements, rights-of-way, zoning, similar restrictions and other
similar encumbrances or title defects which, singly or in the aggregate, do not
in any case materially detract from the value of the property, subject thereto
(as such property is used by the Company or any of its Subsidiaries) or
interfere with the ordinary conduct of the business of the Company or any of its
Subsidiaries;
(f) Liens arising by operation of law in connection with judgments, only
to the extent, for an amount and for a period not resulting in an Event of
Default with respect thereto;
(g) pledges or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security legislation;
(h) Liens securing the Securities;
(i) Liens securing Indebtedness of a person existing at the time such
person becomes a Subsidiary or is merged with or into the Company or a
Subsidiary or Liens securing Indebtedness incurred in connection with an
Acquisition, provided in each case that such Liens were in existence prior to
the date of such acquisition, merger or consolidation, were not incurred in
anticipation thereof, and do not extend to any other assets;
(j) Liens securing or arising from Purchase Money Indebtedness permitted
to be incurred under clause (e) of the definition of Permitted Indebtedness;
provided such Liens relate to the property (and monetary proceeds thereof) which
was
19
<PAGE>
acquired or constructed with such Purchase Money Indebtedness and the Capital
Stock of any Person formed to acquire such property and that does not own any
other material property;
(k) Liens securing Refinancing Indebtedness incurred to refinance any
Indebtedness that was previously so secured in a manner not materially more
adverse to the Holders of the Securities than the terms of the Liens securing
such refinanced Indebtedness; and
(l) Liens securing Indebtedness described in clause (h) of the definition
of "Permitted Indebtedness."
"Permitted Payments" means, without duplication, (a) payments to the
------------------
Holding Company in an amount sufficient to permit the Holding Company to pay
reasonable and necessary operating expenses and other general corporate expenses
(including any reasonable professional fees and expenses, but excluding all
expenses payable to or to be paid to or on behalf of an Excluded Person); (b)
payments to the Holding Company to enable the Holding Company to pay foreign,
federal, state or local tax liabilities, not to exceed the amount of any tax
liabilities that would be otherwise payable by the Company and its Subsidiaries
and Unrestricted Subsidiaries to the appropriate taxing authorities if they
filed separate tax returns to the extent that the Holding Company has an
obligation to pay such tax liabilities relating to the operations, assets or
capital of the Company or its Subsidiaries and Unrestricted Subsidiaries,
provided any such payment shall either be used by the Holding Company to pay
such tax liabilities within 90 days of the Holding Company's receipt of such
payment or refunded to the payee; (c) payments to the Holding Company to enable
the Holding Company to pay, or the payment by the Company directly of, the
payments provided for by clauses (a), (d) (e) and (f) and the transactions,
expenses and payments described in clauses (g), (h), (i), (j), (k), (n) and (o)
of the definition of "Exempted Affiliated Transaction"; and (d) cash dividends
paid to the Holding Company to the extent necessary to permit the Holding
Company to repurchase common stock, stock options and stock equivalents of the
Holding Company held by departing or deceased directors, officers or employees
of the Holding Company, the Company or any of the Subsidiary Guarantors, in an
aggregate amount not to exceed in any fiscal year $1,000,000 plus (x) the
----
cumulative amount by which (1) the product of $1,000,000 times the number of
preceding fiscal years subsequent to the Issue Date exceeds (2) the amount of
such payments made during such fiscal years, plus (y) the aggregate cash
----
consideration received by the Holding Company, after the Issue Date and prior to
or substantially concurrently with the date of such repurchase, from the sale or
issuance of common stock of the Holding Company to directors, officers and
employees of the Holding Company, the Company and the
20
<PAGE>
Subsidiary Guarantors (including, to the extent not otherwise included in the
amount of such cash consideration, cash repayments of principal received by the
Holding Company on loans made to such persons to enable them to purchase such
stock) to the extent such cash consideration was contributed, or is
substantially concurrently with such dividend contributed, to the Company as a
capital contribution (provided that the net amount of cash dividends paid under
--------
this clause (d) shall not exceed $7.5 million).
"Person" or "person" means any corporation, individual, partnership,
------ ------
trust, unincorporated association, or a government or any agency or political
subdivision thereof.
"Preferred Stock" means the shares of junior redeemable preferred
---------------
stock of the Holding Company and the shares of senior redeemable preferred stock
of the Holding Company.
"Principal Corporate Trust Office of the Trustee" means the office of
-----------------------------------------------
the Trustee as set forth in Section 13.2 and such other offices as the Trustee
may designate from time to time.
"Pro Rata Portion" shall have the meaning specified in Section 11.1.
----------------
"Property" or "property" means any right or interest in or to property
-------- --------
or assets of any kind whatsoever, whether real, personal or mixed and whether
tangible or intangible.
"Purchase Date" shall have the meaning specified in Section 4.14.
-------------
"Purchase Money Indebtedness" means any Indebtedness of such person to
---------------------------
any seller or other person Incurred to finance the acquisition or construction
(including in the case of a Capitalized Lease Obligation, the lease) of any
business or real or personal tangible property (or, in each case, any interest
therein) acquired or constructed after the Issue Date which, in the reasonable
good faith judgment of the Board of Directors of the Company, is related to a
Related Business of the Company and which is Incurred concurrently with, or
within 180 days of, such acquisition or construction and, if secured, is secured
only by the assets so financed.
"Qualified Capital Stock" means any Capital Stock of the Company that is
-----------------------
not Disqualified Capital Stock.
21
<PAGE>
"Qualified Exchange" means any legal defeasance, redemption,
------------------
retirement, repurchase or other acquisition of Capital Stock or Indebtedness of
the Company with the Net Cash Proceeds received by the Company from the
substantially concurrent sale of Qualified Capital Stock or a substantially
concurrent capital contribution to the Company, or any exchange of Qualified
Capital Stock for any Capital Stock or Indebtedness of the Company.
"Record Date" means a Record Date specified in the Securities whether
-----------
or not such Record Date is a Business Day.
"Redemption Date," when used with respect to any Security to be
---------------
redeemed, means the date fixed for such redemption pursuant to Article III of
this Indenture and Paragraph 5 in the form of Security attached hereto as
Exhibit A.
"Redemption Price," when used with respect to any Security to be
----------------
redeemed, means the redemption price for such redemption pursuant to Paragraph 5
in the form of Security attached hereto as Exhibit A, which shall include,
without duplication, in each case, accrued and unpaid interest to the
Redemption Date (subject to the provisions of Section 3.5).
"Reference Period" with regard to any person means the four full
----------------
fiscal quarters (or such lesser period during which such person has been in
existence) ended immediately preceding any date upon which any determination is
to be made pursuant to the terms of the Securities or this Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital
------------------------
Stock (a) issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disqualified Capital Stock, liquidation preference, not to exceed (after
deduction of the amount of fees, consents, premiums, prepayment penalties and
reasonable expenses incurred in connection with such Refinancing) the principal
amount of the Indebtedness so refinanced (or if such Indebtedness provides for
an amount less than the principal amount thereof to be due and payable upon the
acceleration thereof, such lesser amount as of the date of the issuance of such
Refinancing Indebtedness) or, in the case of Disqualified Capital Stock, the
liquidation preference of the Disqualified Capital Stock so refinanced, plus, in
the case of the Credit Agreement, additional Indebtedness which on the date of
Incurrence is permitted by Section 4.10;
22
<PAGE>
provided, that other than with respect to a Refinancing of Indebtedness under
the Credit Agreement, (A) such Refinancing Indebtedness of any Subsidiary of the
Company shall only be used to refinance outstanding Indebtedness or Disqualified
Capital Stock of such Subsidiary, (B) Refinancing Indebtedness shall (x) not
have an Average Life shorter than the Indebtedness or Disqualified Capital Stock
to be so refinanced at the time of such Refinancing and (y) in all respects, be
no less subordinated or junior, if applicable, to the rights of Holders of the
Securities than was the Indebtedness or Disqualified Capital Stock to be
refinanced and (C) such Refinancing Indebtedness shall have no installment of
principal (or redemption payment) scheduled to come due earlier than the
scheduled maturity of any installment of principal of the Indebtedness or
Disqualified Capital Stock to be so refinanced which was scheduled to come due
prior to the Stated Maturity.
"Registrar" shall have the meaning specified in Section 2.3.
---------
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement dated as of the Issue Date by and between the Company and the
Guarantors on the one hand, and the Initial Purchasers, on the other hand,
providing for certain registration rights for the Securities.
"Related Business" means the business conducted (or proposed to be
----------------
conducted, including the activities referred to in and being contemplated by the
Company, as described or referred to in the Offering Memorandum) by the Company
and its Subsidiaries as of the Issue Date and any and all businesses that in the
good faith judgment of the Board of Directors of the Company are reasonably
related businesses, including reasonably related extensions thereof and
including, without limitation, any business related to the manufacturing or
marketing of products sold through health food stores.
"Related Party" means (i) with respect to any Excluded Person, (A) any
-------------
controlling stockholder, 80% or more owned Subsidiary, or spouse or immediate
family member (in the case of an individual) of such Excluded Person or (B) any
trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or persons beneficially holding an 80% or more
controlling interest of which consist of such Excluded Person and/or such other
persons referred to in the immediately preceding clause (A), and (ii) only with
respect to Green Equity Investors II, L.P. (and in addition to the persons
described in the foregoing clause (i)) any partnership or corporation which is
managed by or controlled by LGP or any affiliate thereof. For the purposes of
this definition, "control" of any Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise.
23
<PAGE>
"Restricted Investment" means, in one or a series of related
transactions, any Investment, other than investments in (a) Cash Equivalents,
(b) the Company or a Subsidiary Guarantor, (c) Investments in or acquisitions of
Capital Stock, bonds, notes, debentures, partnership or other ownership
interests or other securities, including any options or warrants of or in any
Person that is or becomes, at the time of the acquisition thereof, a Subsidiary
of the Company and is or is to be primarily engaged in a Related Business; (d)
Investments of such Person existing as of the date of this Indenture and any
extension, modification or renewal of such Investment (but not increases
thereof, other than as a result of the accrual or accretion of interest or
original issue discount pursuant to the terms of such Investment), (e)
transactions or arrangements with officers or directors of the Company or any
Subsidiary of the Company entered into in the ordinary course of business
(including compensation or employee benefit arrangements with any officer or
director of the Company or any Subsidiary of the Company permitted under Section
4.9); (f) investments in or acquisitions of Capital Stock or similar interests
in Persons (other than Affiliates of the Company) received in the bankruptcy or
reorganization of or by such Person or any exchange of such investment with the
issuer thereof or taken in settlement of or other resolution of claims or
disputes, and, in each case, extensions, modifications and renewals thereof; and
(g) Investments in Persons (other than Affiliates of the Company) received by
such Person as consideration from Asset Sales to the extent not prohibited by
Section 4.13 or any exchange of any such Invest ment with the issuer thereof,
and extensions, modifications and renewals thereof; provided, however, that a
merger of another person with or into the Company or a Subsidiary Guarantor
shall not be deemed to be a Restricted Investment so long as the surviving
entity is the Company or a direct wholly owned Subsidiary Guarantor.
"Restricted Payment" means, with respect to any person, (a) the
------------------
declaration or payment of any dividend or other distribution in respect of
Capital Stock of such person, (b) any payment on account of the purchase,
redemption or other acquisition or retirement for value of Capital Stock of such
person or, (c) other than with the proceeds from the substantially concurrent
sale of, or in exchange for, Refinancing Indebtedness, any purchase, redemption,
or other acquisition or retirement for value of, any payment in respect of any
amendment of the terms of or any defeasance of, any Subordinated Indebtedness,
directly or indirectly, by such person prior to the scheduled maturity,
scheduled repayment of principal, or scheduled sinking fund payment, as the case
may be, of such Indebtedness and (d) any Restricted Investment by such person;
provided, however, that the term "Restricted Payment" does not include (i) any
dividend, distribution or other payment on or with respect to Capital Stock of a
person to the extent payable in shares of Qualified Capital Stock of such
person; (ii) any dividend, distribution or other payment to the Company, or to
any of its wholly owned Subsidiary Guarantors, by the Company or any of its
Subsidiaries; or (iii) the declaration or
24
<PAGE>
payment of dividends by any Subsidiary of the Company provided such
distributions are made to the Company (or a Subsidiary of the Company, as
applicable) on a pro rata basis (and in like form) to all distributions so made
to all other stockholders thereof.
"Sale and Leaseback Transaction" means any transaction by which the
------------------------------
Company or a Subsidiary Guarantor, directly or indirectly, becomes liable as a
lessee or as a guarantor or other surety with respect to any lease of any
property (whether real or personal or mixed), whether now owned or hereafter
acquired that the Company or any Subsidiary Guarantor has sold or transferred or
is to sell or transfer to any other Person in a substantially concurrent
transaction with such assumption of liability.
"SEC" means the Securities and Exchange Commission.
---
"Secondary Stockholders Agreement" means the secondary stockholders
--------------------------------
agreement dated as of the Issue Date by and among Green Equity Investors II,
L.P., Brian Blechman, Dean Blechman, Neil Blechman, Ross Blechman, Steve
Blechman, Stephen Welling, Chase Equity Associates, L.P., State Treasurer of the
State of Michigan, PMI Mezzanine Fund, L.P., DLJ Investment Partners, L.P., DLJ
Investment Funding, Inc. and the Holding Company, as such agreement may be
amended from time to time, provided that no such amendment shall have the effect
of increasing in any material respect the cost to the Company or any Subsidiary
Guarantor of the transactions, payments or expenses permitted under such
agreement as an Exempted Affiliate Transaction or Permitted Payment hereunder.
"Securities" means, collectively, the Initial Securities and, when and
----------
if issued as provided in the Registration Rights Agreement, the Exchange
Securities.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the SEC promulgated thereunder.
"Securities Custodian" means the Registrar, as custodian with respect
--------------------
to the Securities in global form, or any successor entity thereto.
"Securityholder" or "Holder" means the Person in whose name a Security
-------------- ------
is registered on the Registrar's books.
"Senior Bank Representative" means, at any time, the then-acting agent
--------------------------
or agents under the Credit Agreement, which shall initially be Chemical Bank.
25
<PAGE>
"Senior Debt" of the Company or any Subsidiary Guarantor means
-----------
Indebtedness (including, without limitation, interest accruing after the
commencement of any bankruptcy case or proceedings whether or not allowed as a
claim in such case or proceeding) of the Company or such Guarantor arising under
the Credit Agreement or any Interest Swap and Hedging Obligation relating to
such Indebtedness or that, by the terms of the instrument creating or evidencing
such Indebtedness, is expressly designated Senior Debt and made senior in right
of payment to the Securities or the applicable guarantee; provided, that in no
event shall Senior Debt include (a) Indebtedness to any Subsidiary of the
Company or any officer, director or employee of the Company or any Subsidiary of
the Company, (b) Indebtedness incurred in violation of the terms of the
Indenture, (c) Indebtedness to trade creditors, and (d) Disqualified Capital
Stock.
"Senior Debt Representative" means the indenture trustee or other
--------------------------
trustee, agent or representative for any Senior Debt.
"Significant Subsidiary" means any Subsidiary that would be a
----------------------
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X
promulgated pursuant to the Securities Act, as such Regulation S-X is in effect
on the Issue Date.
"Special Record Date" for payment of any Defaulted Interest means a
-------------------
date fixed by the Trustee pursuant to Section 2.12.
"Stated Maturity," when used with respect to any Security, means May
---------------
15, 2006.
"Stockholders Agreement" means the stockholders agreement dated as of
----------------------
the Issue Date, by and among Green Equity Investors II, L.P., Brian Blechman,
Dean Blechman, Neil Blechman, Ross Blechman, Steve Blechman, Stephen Welling and
the Company, as such agreement may be amended from time to time, provided that
no such amendment shall have the effect of increasing in any material respect
the cost to the Company or any Subsidiary Guarantor of the transactions,
payments or expenses permitted under such agreement as an Exempted Affiliate
Transaction or Permitted Payment hereunder.
"Stock Purchase Agreement" means Stock Purchase and Sale Agreement,
------------------------
dated as of March 5, 1996, as amended as of the Issue Date, among the Holding
Company, Natur-Pharma Inc., Green Equity Investors II, L.P., David Blechman,
Jean Blechman, Brian Blechman, Dean Blechman, Neil Blechman, Ross Blechman,
Steve Blechman and Stephen Welling.
26
<PAGE>
"Subordinated Indebtedness" means Indebtedness of the Company or a
-------------------------
Subsidiary Guarantor that is subordinated by its terms in right of payment to
the Securities or such Guarantee, as applicable.
"Subsidiary," with respect to any person, means (i) a corporation a
----------
majority of whose Capital Stock with voting power, under ordinary circumstances
to elect directors, is at the time, directly or indirectly, owned by such
person, by such person and one or more Subsidiaries of such person or by one or
more Subsidiaries of such person, (ii) any other person (other than a
corporation) in which such person, one or more Subsidiaries of such person, or
such person and one or more Subsidiaries of such person, directly or indirectly,
at the date of determination thereof has at least majority equity ownership
interest, or (iii) a partnership in which such person or a Subsidiary of such
person is, at the time, a general partner and in which such person, directly or
indirectly, at the date of determination thereof has at least a majority equity
ownership interest. Notwithstanding the foregoing, an Unrestricted Subsidiary
shall not be a Subsidiary of the Company or of any Subsidiary or Subsidiaries of
the Company for any purpose whatsoever.
"Subsidiary Guarantors" means (i) the Company's Subsidiaries and (ii)
---------------------
any Future Subsidiary Guarantors that become Guarantors pursuant to the terms of
this Indenture, but excluding (i) any Persons whose guarantees have been
released in accordance with the terms of this Indenture and (ii) any
Unrestricted Subsidiaries.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S. Code
---
(S)(S) 77aaa-77bbbb), as in effect on the date of the execution of this
Indenture; except as otherwise provided in Section 9.3.
"Transactions" means the transactions contemplated by the Stock
------------
Purchase Agreement and the related financings thereof.
"Transfer Restricted Securities" means Securities that bear or are
------------------------------
required to bear the legend set forth in Section 2.6 hereof.
"Trustee" means the party named as such in this Indenture until a
-------
successor replaces it in accordance with the provisions of this Indenture, and
thereafter means such successor.
"Trust Officer" means any officer within the corporate trust
-------------
administration division (or any successor group) of the Trustee or any other
officer of the Trustee customarily performing functions similar to those
performed by the Persons who at that
27
<PAGE>
time shall be such officers, and also means, with respect to a particular
corporate trust matter, any other officer of the Trustee to whom such trust
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.
"U.S. Government Obligations" means direct non-callable obligations
---------------------------
of, or noncallable obligations guaranteed by, the United States of America for
the payment of which obligation or guarantee the full faith and credit of the
United States of America is pledged.
"Unrestricted Subsidiary" means any subsidiary of the Company that
-----------------------
does not own any Capital Stock of, or hold any Lien on any property of, the
Company or any other Subsidiary Guarantor and that, at the time of
determination, shall be an Unrestricted Subsidiary (as designated by the Board
of Directors of the Company); provided, that (i) neither immediately prior
thereto nor after giving pro forma effect to such designation would there exist
a Default or Event of Default and (ii) immediately after giving pro forma effect
thereto, the Company could incur at least $1.00 of Indebtedness pursuant to the
Debt Incurrence Ratio in Section 4.10. The Board of Directors of the Company may
designate any Unrestricted Subsidiary to be a Subsidiary, provided that (i) no
Default or Event of Default is existing or will occur as a consequence thereof
and (ii) immediately after giving effect to such designation, on a pro forma
basis, the Company could incur at least $1.00 of Indebtedness pursuant to the
Debt Incurrence Ratio in Section 4.10. Each such designation shall be evidenced
by filing with the Trustee a certified copy of the resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
SECTION 1.2. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, such provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
----------
"indenture securities" means the Securities.
--------------------
"indenture securityholder" means a Holder or a Securityholder.
------------------------
"indenture to be qualified" means this Indenture.
-------------------------
"indenture Trustee" or "institutional Trustee" means the Trustee.
----------------- ---------------------
28
<PAGE>
"obligor" on the indenture securities means the Company, each Guarantor and
-------
any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them thereby.
SECTION 1.3. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions;
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or other
subdivision; and
(7) references to Sections or Articles means reference to such
Section or Article in this Indenture, unless stated otherwise.
ARTICLE II
THE SECURITIES
SECTION 2.1. Form and Dating.
---------------
The Securities and the Trustee's certificate of authentication, in
respect thereof, shall be substantially in the form of Exhibit A hereto, which
Exhibit is part of this Indenture. The Securities may have notations, legends
or endorsements required by law, stock exchange rule or usage or the terms
hereof. The Company shall approve the form of the Securities and any notation,
legend or endorsement on them. Any such
29
<PAGE>
notations, legends or endorsements not contained in the form of Security
attached as Exhibit A hereto shall be delivered in writing to the Trustee. Each
Security shall be dated the date of its authentication.
The terms and provisions contained in the form of Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
SECTION 2.2. Execution and Authentication.
----------------------------
Two Officers shall sign, or one Officer shall sign and one Officer
shall attest to, the Security for the Company by manual or facsimile signature.
The Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless and the
Company shall nevertheless be bound by the terms of the Securities and this
Indenture.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security but
such signature shall be conclusive evidence that the Security has been
authenticated pursuant to the terms of this Indenture.
The Trustee shall authenticate or cause to be authenticated the
Initial Securities for original issue in the aggregate principal amount of up
to $100,000,000 and shall authenticate Exchange Securities for original issue in
the aggregate principal amount of up to $100,000,000, in each case upon a
written order of the Company in the form of an Officers' Certificate provided
that such Exchange Securities shall be issuable only upon the valid surrender
for cancellation of Initial Securities of a like aggregate principal amount.
The Officers' Certificate shall specify the amount of Securities to be
authenticated and the date on which the Securities are to be authenticated. The
aggregate principal amount of Securities outstanding at any time may not exceed
$100,000,000, except as provided in Section 2.7. Upon the written order of the
Company in the form of an Officers' Certificate, the Trustee shall authenticate
Securities in substitution of Securities originally issued to reflect any name
change of the Company.
30
<PAGE>
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company, any Affiliate of the Company,
or any of their respective Subsidiaries.
Securities shall be issuable only in fully registered form, without
coupons, in denominations of $1,000 and integral multiples thereof.
SECTION 2.3. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where Securities may be presented for
registration of transfer or exchange ("Registrar") and an office or agency of
the Company where Securities may be presented for payment ("Paying Agent") and
where notices and demands to or upon the Company in respect of the Securities
may be served. The Company may act as Registrar or Paying Agent, except that
for the purposes of Articles III, VIII, X and Section 4.13 and as otherwise
specified in this Indenture, neither the Company nor any Affiliate of the
Company shall act as Paying Agent. The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company may have one or more
co-Registrars and one or more additional Paying Agents. The term "Registrar"
includes any co-registrar and the term "Paying Agent" includes any additional
Paying Agent. The Company hereby initially appoints the Trustee as Registrar
and Paying Agent, and by its signature hereto, the Trustee hereby agrees so to
act. The Company may at any time change any Paying Agent or Registrar without
notice to any Holder.
The Company shall enter into an appropriate written agency agreement
with any Agent (including the Paying Agent) not a party to this Indenture, which
agreement shall implement the provisions of this Indenture that relate to such
Agent, and shall furnish a copy of each such agreement to the Trustee. The
Company shall promptly notify the Trustee in writing of the name and address of
any such Agent. If the Company fails to maintain a Registrar or Paying Agent,
the Trustee shall act as such.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Securities.
The Company initially appoints the Registrar to act as Securities
Custodian with respect to the Global Securities.
31
<PAGE>
Upon the occurrence of an Event of Default described in Section 6.1(d)
or (f), the Trustee shall, or upon the occurrence of any other Event of Default
by notice to the Company, the Registrar and the Paying Agent, the Trustee may,
assume the duties and obligations of the Registrar and the Paying Agent
hereunder.
The Trustee is authorized to enter into a letter of representation
with DTC in the form provided to the Trustee by the Company and to act in
accordance with such letter.
SECTION 2.4. Paying Agent to Hold Assets in Trust.
------------------------------------
The Company shall require each Paying Agent other than the Trustee to
agree in writing that such Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, premium, if any, or interest on, the Securities (whether such
assets have been distributed to it by the Company or any other obligor on the
Securities), and shall notify the Trustee in writing of any Default in making
any such payment. If either of the Company or a Subsidiary of the Company acts
as Paying Agent, it shall segregate such assets and hold them as a separate
trust fund for the benefit of the Holders or the Trustee. The Company at any
time may require a Paying Agent to distribute all assets held by it to the
Trustee and account for any assets disbursed and the Trustee may at any time
during the continuance of any Payment Default or any Event of Default, upon
written request to a Paying Agent, require such Paying Agent to distribute all
assets held by it to the Trustee and to account for any assets distributed.
Upon distribution to the Trustee of all assets that shall have been delivered by
the Company to the Paying Agent, the Paying Agent (if other than the Company)
shall have no further liability for such assets.
SECTION 2.5. Securityholder Lists.
--------------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is not
the Registrar, the Company shall furnish to the Trustee on or before the third
Business Day preceding each Interest Payment Date and at such other times as the
Trustee or any such Paying Agent may request in writing a list in such form and
as of such date as the Trustee reasonably may require of the names and addresses
of Holders and the Company shall otherwise comply with TIA (S) 312(a).
32
<PAGE>
SECTION 2.6. Transfer and Exchange.
---------------------
(a) Transfer and Exchange of Definitive Securities. When Definitive
----------------------------------------------
Securities are presented to the Registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
-----------------
that the Definitive Securities surrendered for registration of transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company and
the Registrar duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(ii) in the case of Definitive Securities that are Transfer
Restricted Securities, such request shall be accompanied by the following
additional information and documents, as applicable:
(A) if such Transfer Restricted Securities are being
delivered to the Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification from such Holder to
that effect (in substantially the form set forth on the reverse of the
Security); or
(B) if such Transfer Restricted Security is being
transferred to a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) in accordance with Rule 144A under the
Securities Act, a certification to that effect (in substantially the
form set forth on the reverse of the Security); or
(C) if such Transfer Restricted Security is being
transferred (i) pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S under the Securities Act or
(ii) pursuant to an effective registration statement under the
Securities Act, or (iii) to an "institutional accredited investor"
within the meaning of Rule 501(A)(1), (2), (3) or (7) under the
Securities Act that is acquiring the security for its
33
<PAGE>
own account, or for the account of such an institutional accredited
investor, in each case in a minimum principal amount of the Securities
of $100,000, not with a view to or for offer or sale in connection
with any distribution in violation of the Securities Act, or (iv) in
reliance on another exemption from the registration requirements of
the Securities Act, a certification to that effect (in substantially
the form set forth on the reverse of the Security) and in the case of
(i), (iii) and (iv) above, if the Company or the Registrar so request,
a customary opinion of counsel reasonably acceptable to the Company
and to the Registrar to the effect that such transfer is in
compliance with the Securities Act.
(b) Restrictions on Transfer of a Definitive Security for a
-------------------------------------------------------
Beneficial Interest in a Global Security. A Definitive Security may not be
- ----------------------------------------
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Registrar
of a Definitive Security, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Registrar, together with:
(i) if such Definitive Security is a Transfer Restricted
Security, certification, substantially in the form set forth on the reverse
of the Security, that such Definitive Security is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act; and
(ii) whether or not such Definitive Security is a Transfer
Restricted Security, written instructions of the Holder directing the
Registrar to make, or to direct the Securities Custodian to make, an
endorsement on the Global Security to reflect an increase in the aggregate
principal amount of the Securities represented by the Global Security,
then the Registrar shall cancel such Definitive Security and cause, or direct
the Securities Custodian to cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased accordingly. If no Global Securities are then outstanding, the
Company shall issue and the Trustee shall authenticate a new Global Security in
the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer
------------------------------------------
and exchange of Global Securities or beneficial interests therein shall be
effected through the Depositary, in accordance with this Indenture (including
applicable restrictions on
34
<PAGE>
transfer set forth herein, if any) and the procedures of the Depositary therefor
which shall include restrictions on transfer comparable to those set forth
herein to the extent required by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Security for a
------------------------------------------------------------
Definitive Security.
- -------------------
(i) Any Person having a beneficial interest in a Global
Security may upon request exchange such beneficial interest for a
Definitive Security. Upon receipt by the Registrar of written instructions
or such other form of instructions as is customary for the Depositary from
the Depositary or its nominee on behalf of any Person having a beneficial
interest in a Global Security and upon receipt by the Registrar of a
written order or such other form of instructions as is customary for the
Depositary or the Person designated by the Depositary as having such a
beneficial interest in a Transfer Restricted Security only, the following
additional information and documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the beneficial owner, a
certification from such person to that effect (in substantially the
form set forth on the reverse of the Security); or
(B) if such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act
a certification to that effect from the transferor (in substantially
the form set forth on the reverse of the Security); or
(C) if such beneficial interest is being transferred (i)
pursuant to an exemption from registration in accordance with Rule 144
or Regulation S under the Securities Act or (ii) pursuant to an
effective registration statement under the Securities Act, or (iii) to
an "institutional accredited investor" within the meaning of Rule
501(A)(1), (2), (3) or (7) under the Securities Act that is acquiring
the security for its own account, or for the account of such an
institutional accredited investor, in each case in a minimum principal
amount of the Securities of $100,000, not with any distribution in
violation of the Securities Act, or (iv) in reliance on another
exemption from the registration requirements of the Securities Act, a
certification to that effect from the transferee or transferor (in
sub-
35
<PAGE>
stantially the form set forth on the reverse of the Security) and in
the case of (i), (iii) and (iv) above, if the Company or the Registrar
so requests, a customary opinion of counsel from the transferee or
transferor reasonably acceptable to the Company and to the Registrar
to the effect that such transfer is in compliance with the Securities
Act;
then the Registrar or the Securities Custodian, at the direction of the Trustee,
will cause, in accordance with the standing instructions and procedures existing
between the Depositary and the Securities Custodian, the aggregate principal
amount of the Global Security to be reduced and, following such reduction, the
Company will execute and, upon receipt of an authentication order in the form of
an Officers' Certificate, the Trustee or the Trustee's authenticating agent will
authenticate and deliver to the transferee a Definitive Security.
(ii) Definitive Securities issued in exchange for a
beneficial interest in a Global Security pursuant to this Section 2.6(d)
shall be registered in such names and in such authorized denominations as
the Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Registrar. The Registrar
shall deliver such Definitive Securities to the persons in whose names such
Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
----------------------------------------------------------
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.6), a Global Security
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Securities in Absence of
-----------------------------------------------------
Depositary. If at any time:
- ----------
(i) the Depositary for the Securities notifies the Company
that the Depositary is unwilling or unable to continue as Depositary for
the Global Securities and a successor Depositary for the Global Securities
is not appointed by the Company within 90 days after delivery of such
notice; or
(ii) the Company, in its sole discretion, notifies the
Trustee and the Registrar in writing that they elect to cause the issuance
of Definitive Securities under this Indenture,
36
<PAGE>
then the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive Securities,
will, or its authenticating agent will, authenticate and deliver Definitive
Securities, in an aggregate principal amount equal to the principal amount of
the Global Securities, in exchange for such Global Securities.
(g) Cancellation and/or Adjustment of Global Security. At such
-------------------------------------------------
time as all beneficial interests in a Global Security have either been exchanged
for Definitive Securities, redeemed, repurchased or cancelled, such Global
Security shall be returned to or retained and cancelled by the Trustee. At any
time prior to such cancellation, if any beneficial interest in a Global
Security is exchanged for Definitive Securities, redeemed, repurchased or
cancelled, the principal amount of Securities represented by such Global
Security shall be reduced and an endorsement shall be made on such Global
Security, by the Trustee or the Securities Custodian, at the direction of the
Trustee, to reflect such reduction.
(h) Legends.
-------
(i) Except as permitted by the following paragraph
(ii), each Security certificate evidencing the Global Securities and the
Definitive Securities (and all Securities issued in exchange therefor or
substitution thereof) shall bear a legend in substantially the following
form:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES NOT TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") THAT IS THREE YEARS (OR SUCH
37
<PAGE>
SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE
144(K) AS PERMITTING THE RESALE BY NON-AFFILIATES OF
RESTRICTED SECURITIES WITHOUT RESTRICTION) AFTER THE LATER
OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH THE COMPANY OR ANY AFFILIATED PERSON OF THE COMPANY
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH
SECURITY) EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) PURSUANT TO RULE 144A, FOR
SO LONG AS IT IS AVAILABLE, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED
STATES TO PERSONS OTHER THAN U.S. PERSONS, BOTH WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO
AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF RULE 501(A)(1),(2),(3) OR (7) UNDER THE SECURITIES ACT
THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR
THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED
INVESTOR," FOR INVESTMENT PUR POSES AND NOT WITH A VIEW TO,
OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSE (D),(E) OR (F) TO
REQUIRE THE DELIV-
38
<PAGE>
ERY OF AN OPINION OF COUNSEL, CERTIFICATION AND OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF
THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFER OR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
(ii) Upon any sale or transfer of a Transfer
Restricted Security (including any Transfer Restricted Security represented
by a Global Security) pursuant to Rule 144 under the Securities Act or an
effective registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Security
that is a Definitive Security, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security for a Definitive
Security that does not bear the legend set forth above and rescind any
restriction on the transfer of such Transfer Restricted Security in
the case of a sale or transfer pursuant to Rule 144 under the
Securities Act, after the Resale Restriction Termination Date (as
defined in clause (h)(i) above) or delivery of a customary opinion of
counsel; and
(B) any such Transfer Restricted Security represented
by a Global Security shall not be subject to the provisions set forth
in (i) above (such sales or transfers being subject only to the
provisions of Section 2.6(c) hereof); provided, however, that with
-------- -------
respect to any request for an exchange of a Transfer Restricted
Security that is represented by a Global Security for a Definitive
Security that does not bear a legend, which request is made in
reliance upon Rule 144 under the Securities Act, the Holder thereof
shall certify in writing (to be accompanied by a customary opinion of
counsel) to the Registrar that such request is being made pursuant to
Rule 144 under the Securities Act (such certification to be
substantially in the form set forth on the reverse of the Security).
(i) Obligations with respect to Transfers and Exchanges of
------------------------------------------------------
Definitive Securities.
- ---------------------
39
<PAGE>
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee or any authenticating agent of the
Trustee shall authenticate Definitive Securities and Global Securities at
the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax, assessment, or similar
governmental charge payable in connection therewith (other than any such
transfer taxes, assessments, or similar governmental charge payable upon
exchanges or transfers pursuant to Section 2.2 (fourth paragraph), 2.10,
3.7, 4.13(8), 9.5, or 10.1 (final paragraph)).
(iii) The Registrar shall not be required to register the
transfer of or exchange (a) any Definitive Security selected for redemption
in whole or in part pursuant to Article III, except the unredeemed portion
of any Definitive Security being redeemed in part, or (b) any Security for
a period beginning 15 Business Days before the mailing of a notice of an
offer to repurchase pursuant to Article X or Section 4.13 hereof or redeem
Securities pursuant to Article III hereof and ending at the close of
business on the day of such mailing.
(iv) Prior to due presentment for registration or transfer
of any Security, the Trustee, any Agent and the Company may deem and treat
the Person in whose name the Security is registered as the absolute owner
of such Security, and none of the Trustee, Agent or the Company shall be
affected by notice to the contrary.
SECTION 2.7. Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims and submits an affidavit or other evidence, satisfactory to
the Trustee to the effect that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee or any authenticating
agent of the Trustee shall authenticate a replacement Security if the Trustee's
requirements are met. If required by the Trustee or the Company, such Holder
must provide an indemnity bond or other indemnity, sufficient in the judgment
of both the Company and the Trustee, to protect the Company, the Trustee or any
Agent from any loss which any of them may suffer if a Security is replaced. The
Company may require the payment of a sum sufficient to cover any transfer tax,
assessment or similar governmental charge that may be imposed in relation
40
<PAGE>
to the issuance of any new Security and charge such Holder for its reasonable,
out-of-pocket expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.8. Outstanding Securities.
----------------------
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee (including any Security represented by a
Global Security) except those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Security effected by
the Trustee hereunder and those described in this Section 2.8 as not
outstanding. A Security does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Security, except as provided in Section
2.9.
If a Security is replaced pursuant to Section 2.7 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section 2.7.
If on a Redemption Date or the Maturity Date the Paying Agent (other
than the Company or an Affiliate of the Company) holds Cash or U.S. Government
Obligations sufficient to pay all of the principal and interest and premium, if
any, due on the Securities payable on that date and payment of the Securities
called for redemption is not otherwise prohibited, then on and after that date
such Securities cease to be outstanding and interest on them ceases to accrue.
SECTION 2.9. Treasury Securities.
-------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, amendment, supplement, waiver or
consent, Securities owned by the Company or Affiliates of the Company shall be
disregarded, except that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, amendment, supplement,
waiver or consent, only Securities that a Trust Officer of the Trustee knows
are so owned shall be disregarded.
41
<PAGE>
SECTION 2.10. Temporary Securities.
--------------------
Until Definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of Definitive Securities but may
have variations that the Company reasonably and in good faith considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate Definitive Securities in
exchange for temporary Securities. Until so exchanged, the temporary Securities
shall in all respects be entitled to the same benefits under this Indenture as
permanent Securities authenticated and delivered hereunder.
SECTION 2.11. Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to it or them (as applicable) for registration of
transfer, exchange or payment. The Trustee or, at the direction of the Trustee,
the Registrar or the Paying Agent (other than the Company or an Affiliate of the
Company), and no one else shall cancel and, at the written direction of the
Company, shall dispose of all Securities surrendered for transfer, exchange,
payment or cancellation. Subject to Section 2.7, the Company may not issue new
Securities to replace Securities that have been paid or delivered to the
Trustee for cancellation. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Section 2.11, except
as expressly permitted in the form of Securities and as permitted by this
Indenture.
SECTION 2.12. Defaulted Interest.
------------------
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date plus, to the extent
lawful, any interest payable on the defaulted interest (herein called "Defaulted
Interest") shall forthwith cease to be payable to the registered holder on the
relevant Record Date, and such Defaulted Interest may be paid by the Company, at
its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Securities (or their respective
predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date
42
<PAGE>
of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of Cash equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such Cash when deposited to be held in trust for the
benefit of the persons entitled to such Defaulted Interest as provided in
this clause (1). Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder at his address as it appears in the Security register not
less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been mailed as aforesaid, such Defaulted Interest shall be
paid to the persons in whose names the Securities (or their respective
predecessor Securities) are registered on such Special Record Date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
ARTICLE III
REDEMPTION
SECTION 3.1. Right of Redemption.
-------------------
43
<PAGE>
Redemption of Securities, as permitted by any provision of this
Indenture, shall be made in accordance with such provision and this Article III.
The Company will not have the right to redeem any Securities prior to May 15,
2001, except as provided in the immediately following paragraph. On or after
May 15, 2001, the Company will have the right to redeem all or any part of the
Securities at the Redemption Prices specified in the form of Security attached
as Exhibit A set forth therein in Paragraph 5 thereof, including accrued and
unpaid interest to the Redemption Date (subject to the right of Holders of
record on a Record Date to receive interest due on an Interest Payment Date that
is on or prior to such Redemption Date, and subject to the provisions set forth
in Section 3.5).
Notwithstanding the foregoing, prior to May 15, 1999, the Company may
redeem from time to time up to 35% of the aggregate principal amount of the
Securities originally outstanding at a redemption price of 109 1/2% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the Redemption Date, with the net proceeds of one or more Equity Offerings;
provided, that at least 65% of the aggregate principal amount of the Securities
- --------
originally outstanding remain outstanding immediately after the occurrence of
such redemption; provided, further, that such notice of redemption shall be
-------- -------
sent within 30 days after the date of closing of any such Equity Offering, and
such redemption shall occur within 60 days after the date such notice is sent.
SECTION 3.2. Notices to Trustee.
------------------
If the Company elects to redeem Securities pursuant to Paragraph 5 of
the Securities, it shall notify the Trustee in writing of the Redemption Date
and the principal amount of Securities to be redeemed and whether it wants the
Trustee to give notice of redemption to the Holders.
If the Company elects to reduce the principal amount of Securities to
be redeemed pursuant to Paragraph 5 of the Securities by crediting against any
such redemption Securities it has not previously delivered to the Trustee for
cancellation, it shall so notify the Trustee of the amount of the reduction and
deliver such Securities with such notice.
The Company shall give each notice to the Trustee provided for in this
Section 3.2 at least 45 days before the Redemption Date (unless a shorter notice
shall be satisfactory to the Trustee). Any such notice may be cancelled at any
time prior to notice of such redemption being mailed to any Holder and shall
thereby be void and of no effect.
44
<PAGE>
SECTION 3.3. Selection of Securities to Be Redeemed.
--------------------------------------
If less than all of the Securities are to be redeemed pursuant to
Paragraph 5 thereof, the Trustee shall select the Securities or portions thereof
for redemption on a pro rata basis, by lot or by such other method as the
Trustee shall determine to be fair and appropriate.
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Company
in writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $1,000 may be redeemed only in whole.
The Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Securities that have denominations larger
than $1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.
SECTION 3.4. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first class mail, postage
prepaid, to the Trustee and each Holder whose Securities are to be redeemed to
such Holder's last address as then shown on the registry books of the Registrar.
At the Company's request, the Trustee shall give the notice of redemption in the
Company's name and at the Company's expense. Each notice for redemption shall
identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price, including the amount of accrued
and unpaid interest to be paid upon such redemption;
(3) the name, address and telephone number of the Paying
Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent at the address specified in such notice to
collect the Redemption Price;
45
<PAGE>
(5) that, unless the Company defaults in its obligation to
deposit Cash or U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance with
their terms will provide Cash in an amount to fund the Redemption Price
with the Paying Agent in accordance with Section 3.6 hereof or such
redemption payment is otherwise prohibited, interest on Securities called
for redemption ceases to accrue on and after the Redemption Date and the
only remaining right of the Holders of such Securities is to receive
payment of the Redemption Price, including accrued and unpaid interest to
the Redemption Date, upon surrender to the Paying Agent of the Securities
called for redemption and to be redeemed;
(6) if any Security is being redeemed in part, the portion
of the principal amount equal to $1,000 or any integral multiple thereof,
of such Security to be redeemed and that, after the Redemption Date, and
upon surrender of such Security, a new Security or Securities in aggregate
principal amount equal to the unredeemed portion thereof will be issued;
(7) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of such Securities to
be redeemed and the aggregate principal amount of Securities to be
outstanding after such partial redemption;
(8) the CUSIP number of the Securities to be redeemed; and
(9) that the notice is being sent pursuant to this Section
3.4 and pursuant to the optional redemption provisions of Paragraph 5 of
the Securities.
SECTION 3.5. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section 3.4,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price, including accrued and unpaid interest to the
Redemption Date. Upon surrender to the Trustee or, if the Trustee is no longer
the paying agent, to the Paying Agent, such Securities called for redemption
shall be paid at the Redemption Price, including interest, if any, accrued and
unpaid to the Redemption Date; provided that if the Redemption Date is on or
--------
after a regular Record Date and on or prior to the Interest Payment Date to
which such Record Date relates, the accrued interest shall be
46
<PAGE>
payable to the Holder of the redeemed Securities registered on the relevant
Record Date and no additional interest will be payable to Holders of the
redeemed Securities on the Redemption Date; and provided, further, that if a
-----------------
Redemption Date is a non-Business Day, payment shall be made on the next
succeeding Business Day and no interest shall accrue for the period from such
Redemption Date to such succeeding Business Day.
SECTION 3.6. Deposit of Redemption Price.
---------------------------
On or prior to the Redemption Date, the Company shall deposit with the
Paying Agent (other than the Company or an Affiliate of the Company) Cash or
U.S. Government Obligations sufficient to pay the Redemption Price of, and
accrued and unpaid interest on, all Securities to be redeemed on such Redemption
Date (other than Securities or portions thereof called for redemption on that
date that have been delivered by the Company to the Trustee for cancellation).
The Paying Agent shall promptly return to the Company any Cash or U.S.
Government Obligations so deposited which is not required for that purpose upon
the written request of the Company.
If the Company complies with the preceding paragraph and the other
provisions of this Article III and payment of the Securities called for
redemption is not otherwise prohibited, interest on the Securities to be
redeemed will cease to accrue on the applicable Redemption Date, whether or not
such Securities are presented for payment. Notwithstanding anything herein to
the contrary, if any Security surrendered for redemption in the manner provided
in the Securities shall not be so paid upon surrender for redemption because of
the failure of the Company to comply with the preceding paragraph, interest
shall continue to accrue and be paid from the Redemption Date until such payment
is made on the unpaid principal, and, to the extent lawful, on any interest not
paid on such unpaid principal, in each case at the rate and in the manner
provided in Section 4.1 hereof and the Security.
SECTION 3.7. Securities Redeemed in Part.
---------------------------
Upon surrender of a Security that is to be redeemed in part, the
Company shall execute, and the Trustee shall authenticate and deliver to the
Holder, without service charge to the Holder, a new Security or Securities equal
in principal amount to the unredeemed portion of the Security surrendered.
47
<PAGE>
ARTICLE IV
COVENANTS
SECTION 4.1. Payment of Securities.
---------------------
The Company shall pay the principal of and interest and premium, if
applicable, on the Securities on the dates and in the manner provided herein and
in the Securities. An installment of principal of or interest and premium, if
applicable, on the Securities shall be considered paid on the date it is due if
the Trustee or Paying Agent (other than the Company, a Subsidiary of the Company
or an Affiliate of the Company) holds for the benefit of the Holders, on or
before 10:00 a.m. New York City time on that date, Cash deposited and designated
for and sufficient to pay the installment.
The Company shall pay interest on overdue principal and on overdue
installments of interest at the rate specified in the Securities compounded
semi-annually, to the extent lawful.
SECTION 4.2. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be presented or surrendered
for payment, where Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the address of the Trustee set forth in Section 13.2.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
- -----------------
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby initially designates the Trustee's agency at
48
<PAGE>
Shawmut Trust Company, 14 Wall Street, 8th Floor, Window No. 2, New York, New
York 10005 as such office.
SECTION 4.3. Limitation on Restricted Payments.
---------------------------------
The Company and the Subsidiary Guarantors shall not, directly or
indirectly, make any Restricted Payment if, after giving effect to such
Restricted Payment on a pro forma basis, (l) a Default or an Event of Default
shall have occurred and be continuing, (2) the Company is not permitted to Incur
(as defined herein) at least $1.00 of additional Indebtedness pursuant to the
Consolidated Interest Coverage Ratio in Section 4.10, or (3) the aggregate
amount of all Restricted Payments made by the Company and its Subsidiaries,
including after giving effect to such proposed Restricted Payment, from and
after the Issue Date, would exceed the sum of (a) 50% of the aggregate
Consolidated Net Income of the Company for the period (taken as one accounting
period) commencing on the first day after the Issue Date, to and including the
last day of the fiscal quarter ended immediately prior to the date of each such
calculation (or, in the event Consolidated Net Income for such period is a
deficit, then minus 100% of such deficit), plus (b) the aggregate Net Cash
Proceeds received by the Company as a capital contribution or from the sale of
its Qualified Capital Stock (other than (i) from or to a Subsidiary of the
Company, (ii) to the extent applied in connection with a Qualified Exchange and
(iii) to the extent applied to repurchase Capital Stock pursuant to clause (d)
of the definition of Permitted Payments), after the Issue Date.
The foregoing provisions will not prohibit or be violated by (A) a
Qualified Exchange; (B) the payment or making of any Restricted Payment within
60 days after the date of declaration thereof or the making of any binding
commitment in respect thereof, if at said date of declaration or commitment of
such Restricted Payment would have complied with the provisions contained in
clauses (1), (2) and (3) of the first paragraph of this Section 4.3; (C)
Permitted Payments; (D) Restricted Investments, provided, that, after giving pro
forma effect to such Restricted Investment, the aggregate amount of all such
Restricted Investments made on or after the Issue Date pursuant to this
subclause (D) that are outstanding (after giving effect to (x) the amount of
such Restricted Investments returned in cash to the Company or a Subsidiary
Guarantor, the payment of cash dividends or the repayment in cash of the
principal of loans or the cash return on any Restricted Investment to the
Company or the Subsidiary Guarantor that made such Restricted Investment and (y)
the release of any guarantee that constituted a Restricted Investment, to the
extent it has been released, in each case on or prior to the date of such
calculation) at any time does not exceed $10 million; and (E) Restricted
Payments in an amount not to exceed $5 million minus (x) the amount of any
Restricted Payments made (other than pursuant to subclauses (A), (C) and (D)
above) since the
49
<PAGE>
Issue Date and (y) (1) 100% of the amount of any deficit in Consolidated Net
Income for the period (taken as one accounting period) commencing on the first
day after the Issue Date to the date of such Restricted Payment plus (2) the
aggregate Net Cash Proceeds received by the Company as a capital contribution or
from the sale of its Qualified Capital Stock (other than (i) from or to a
Subsidiary of the Company, (ii) to the extent applied in connection with a
Qualified Exchange, and (iii) to the extent applied to repurchase Capital Stock
pursuant to clause (d) of the definition of Permitted Payments), after the Issue
Date, up to the amount of the deficit, if any, applied pursuant to clause (y)
(1) above. The full amount of any Restricted Payment made pursuant to the
foregoing clauses (B) and (D) (but not pursuant to clauses (A), (C) or (E)) of
the immediately preceding sentence, however, will be deducted in the
calculation of the aggregate amount of Restricted Payments available to be made
referred to in clause (3) of the first paragraph of this Section 4.3.
SECTION 4.4. Corporate Existence.
-------------------
Except as otherwise provided or permitted in Article V or elsewhere in
this Indenture, the Company and the Guarantors shall do or cause to be done all
things necessary to preserve and keep in full force and effect their respective
corporate existence in accordance with the respective organizational documents
of each of them (as the same may be amended from time to time) and the rights
(charter and statutory) and corporate franchises of the Company and the
Guarantors; provided, however, nothing in this Section will prohibit the Company
-----------------
or any Guarantor from engaging in any transaction permitted under Section 11.4
or Section 11.5 hereof and provided, further, that neither the Company nor any
-----------------
Guarantor shall be required to preserve any right or franchise if (a) the Board
of Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of such entity.
SECTION 4.5. Payment of Taxes and Other Claims.
---------------------------------
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except (i) as contested in good faith by appropriate proceedings and with
respect to which appropriate reserves have been taken to the extent required by
GAAP or (ii) where the failure to effect such payment is not adverse in any
material respect to the Holders.
50
<PAGE>
SECTION 4.6. Compliance Certificate; Notice of Default
-----------------------------------------
(a) The Company shall deliver to the Trustee within 120 days
after the end of its fiscal year an Officers' Certificate complying with Section
314(a)(4) of the TIA and stating that a review of its activities and the
activities of its Subsidiaries during the preceding fiscal year has been made
under the supervision of the signing Officers and stating, as to each such
Officer signing such certificate, to the best of his knowledge, based on such
review, whether or not the signer knows of any Event of Default or event which
with notice or the passage of time would become an Event of Default which has
occurred and is continuing. The Officers' Certificate shall also notify the
Trustee should the relevant fiscal year end on any date other than the current
fiscal year end date.
(b) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, promptly upon becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto. The Trustee shall not be deemed to have knowledge of any
Default or any Event of Default unless one of its Trust Officers receives
written notice thereof from the Company or any of the Holders.
SECTION 4.7. Reports.
-------
Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee and to each Holder and to prospective purchasers of Securities
identified to the Company by an Initial Purchaser, within 15 days after it is or
would have been required to file such with the Commission, commencing with the
fiscal quarter ending June 30, 1996, annual and quarterly financial statements
substantially equivalent to financial statements that would have been included
in reports filed with the Commission, if the Company were subject to the
requirements of Section 13 or 15(d) of the Exchange Act, including, with respect
to annual information only, a report thereon by the Company's certified
independent public accountants as such would be required in such reports to the
Commission, and, in each case, together with a management's discussion and
analysis of financial condition and results of operations which would be so
required. In addition, from and after the effectiveness of the Exchange Offer
Registration Statement (as defined in the Registration Rights Agreement) or the
Shelf Registration Statement (as defined in the Registration Rights Agreement),
whether or not required by the rules and regulations of the Commission, the
Company will file a copy of all such information and reports with the Commission
for public availability (unless the Commission will not accept such a filing)
and make such information available to securities analysts and prospective
investors upon request.
51
<PAGE>
SECTION 4.8. Limitation on Status as Investment Company.
-------------------------------------------
Neither the Company nor any Subsidiary shall be required to register
as an "investment company" (as that term is defined in the Investment Company
Act of 1940, as amended).
SECTION 4.9. Limitation on Transactions with Affiliates.
-------------------------------------------
The Company and the Subsidiary Guarantors shall not enter into any
contract, agreement, arrangement or transaction with any Affiliate (an
"Affiliate Transaction") or any series of related Affiliate Transactions (other
than Exempted Affiliate Transactions), unless the terms of such Affiliate
Transaction are fair and reasonable to the Company or such Subsidiary, as the
case may be, and are at least as favorable as the terms which could reasonably
be expected to be obtained by the Company or such Subsidiary, as the case may
be, in a comparable transaction made on an arm's length basis with persons who
are not Affiliates. Without limiting the foregoing, in case of any Affiliate
Transaction or series of related Affiliate Transactions (other than Exempted
Affiliate Transactions), (1) involving consideration to either party in excess
of $1 million, the Company must deliver an Officers' Certificate to the Trustee,
stating that the terms of such Affiliate Transaction are fair and reasonable to
the Company and no less favorable to the Company than could reasonably be
expected to have been obtained in an arm's length transaction with a non-
Affiliate, and (2) involving consideration to either party in excess of $5
million, the Company must also, prior to the consummation thereof, obtain a
written favorable opinion as to the fairness of such transaction to the Company
from a financial point of view from an independent investment banking firm of
national reputation, provided, that this sentence shall not apply to the sale of
the products of the Company or its Subsidiaries to any Affiliate of LGP or any
Related Party thereof, which sale is in the ordinary course of business and in
accordance with industry practice.
SECTION 4.10. Limitation on Incurrence of Additional Indebtedness and
-------------------------------------------------------
Disqualified Capital Stock.
- ---------------------------
Except as set forth in this Section 4.10, the Company and the
Subsidiary Guarantors shall not, directly or indirectly, issue, assume,
guaranty, incur, become directly or indirectly liable with respect to (including
as a result of an Acquisition), or otherwise become responsible for,
contingently or otherwise (individually and collectively, to "Incur" or, as
appropriate, an "Incurrence"), any Indebtedness or any Disqualified Capital
Stock (including Acquired Indebtedness), except for Permitted Indebtedness.
52
<PAGE>
Notwithstanding the foregoing: if (i) no Default or Event of Default
shall have occurred and be continuing at the time of, or would occur after
giving effect on a pro forma basis to, such Incurrence of Indebtedness
(including without duplication guarantees of Indebtedness of the Company and the
Subsidiary Guarantors otherwise permitted herein) or Disqualified Capital Stock
and (ii) on the date of such Incurrence (the "Incurrence Date"), the
Consolidated Interest Coverage Ratio of the Company for the Reference Period
immediately preceding the Incurrence Date, after giving effect on a pro forma
basis to such Incurrence of such Indebtedness (without duplication) or
Disqualified Capital Stock and, to the extent set forth in the definition of
Consolidated Interest Coverage Ratio, the use of proceeds thereof, would be at
least 2.00 to l (the "Debt Incurrence Ratio"), then the Company and the
Subsidiary Guarantors may Incur such Indebtedness or Disqualified Capital Stock.
Indebtedness of any Person which is outstanding at the time such
Person becomes a Subsidiary of the Company or is merged with or into or
consolidated with the Company or a Subsidiary of the Company shall be deemed to
have been Incurred at the time such Person becomes such a Subsidiary of the
Company or is merged with or into or consolidated with the Company or a
Subsidiary of the Company, as applicable.
Notwithstanding anything to the contrary contained herein, the
Subsidiary Guarantors each may guaranty Indebtedness of the Company or any other
Subsidiary Guarantor that is permitted to be Incurred hereunder, either at the
time such Subsidiary Guarantor becomes a Guarantor of the Securities or if later
the time the Company or such other Subsidiary Guarantor Incurs such
Indebtedness.
SECTION 4.11. Limitation on Dividends and Other Payment Restrictions
------------------------------------------------------
Affecting Subsidiaries.
- -----------------------
The Company and the Subsidiary Guarantors shall not, directly or
indirectly, create, assume or suffer to exist any consensual restriction on the
ability of any Subsidiary of the Company: (i) (a) to pay dividends or make
other distributions to the Company or any of its Subsidiaries (1) on its Capital
Stock or (2) with respect to any other interest or participation in, or measured
by, its profits, or (b) to pay any Indebtedness owed to the Company or any of
its Subsidiaries, (ii) to make loans or advances to the Company or any of its
Subsidiaries or (iii) to transfer any of its properties or assets to the Company
or any of its Subsidiaries, except (a) restrictions imposed by the Securities or
this Indenture, (b) restrictions imposed by applicable law and regulation, (c)
existing restrictions under Indebtedness outstanding on the Issue Date, or under
any Acquired Indebtedness not incurred in violation of this Indenture or any
agreement relating to any property, asset, or business acquired by the Company
or any of its Subsidiaries, which restrictions in each case existed
53
<PAGE>
at the time of acquisition, were not put in place in connection with or in
anticipation of such acquisition and are not applicable to any person, other
than the person acquired, or to any property, asset or business, other than the
property, assets and business so acquired, (d) any such restriction or
requirement imposed by Indebtedness incurred under clause (b) of the definition
of "Permitted Indebtedness", provided such restriction or requirement is not
--------
materially more restrictive than that imposed by the Credit Agreement as of the
Issue Date, (e) restrictions with respect to a Subsidiary of the Company imposed
pursuant to a binding agreement which has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Subsidiary, provided such restrictions apply solely to the Capital Stock or
--------
assets of such Subsidiary which are being sold, (f) restrictions on transfer
contained in Purchase Money Indebtedness Incurred pursuant to paragraph (e) of
the definition of "Permitted Indebtedness," provided such restrictions relate
only to the transfer of the property acquired with the proceeds of such Purchase
Money Indebtedness, (g) customary restrictions imposed on the transfer of
copyrighted or patented materials and customary provisions in agreements that
restrict the assignment of such agreements or any rights thereunder, and (h) in
connection with and pursuant to permitted Refinancings, replacements of
restrictions imposed pursuant to clause (c) or (f) of this Section 4.11 that are
not materially more restrictive than those being replaced and do not apply to
any other person or assets than those that would have been covered by the
restrictions in the Indebtedness so refinanced. Notwithstanding the foregoing,
neither (a) customary provisions restricting subletting or assignment of any
lease entered into in the ordinary course of business nor (b) Liens not
prohibited by the terms of this Indenture shall be considered a restriction on
the ability of the applicable Subsidiary to transfer such lease or any assets,
as the case may be.
SECTION 4.12. Limitation on Liens.
-------------------
The Company and the Subsidiary Guarantors shall not create, incur,
assume or suffer to exist any Lien, other than Permitted Liens, to secure any
Indebtedness other than Senior Debt, upon any of their respective assets now
owned or acquired on or after the Issue Date or upon any income or profits
therefrom unless the Company or such Subsidiary Guarantor provides, and causes
its Subsidiaries to provide, concurrently or immediately thereafter, that the
Securities are equally and ratably secured; provided that, if such Indebtedness
--------
is Subordinated Indebtedness, the Lien securing such Subordinated Indebtedness
shall be subordinate and junior to the Lien securing the Securities or the
Guarantee, as applicable, with the same relative priority as such Subordinated
Indebtedness shall have with respect to the Securities or the Guarantee, as
applicable, provided, further, that, in case of Indebtedness of a Subsidiary
-------- -------
Guarantor, if such Subsidiary Guarantor shall cease to be a Subsidiary Guarantor
in accordance with the provisions of this Indenture, such equal and ratable Lien
to secure the Securities shall, without any further action, cease to exist.
54
<PAGE>
SECTION 4.13. Limitation on Sale of Assets and Subsidiary Stock.
--------------------------------------------------
The Company and the Subsidiary Guarantors shall not, in one
transaction or a series of related transactions, convey, sell, transfer, assign
or otherwise dispose of, directly or indirectly, any of their respective
property, business or assets (other than cash or Cash Equivalents), including by
merger or consolidation (in the case of a Subsidiary Guarantor), and including
any sale or other transfer or issuance of any Capital Stock (other than
directors qualifying shares) of any Subsidiary of the Company, whether by the
Company or a Subsidiary (an "Asset Sale"), unless within 360 days following
such Asset Sale, (1)(a) the Net Cash Proceeds received from such Asset Sale are
(i) (x) used to purchase one or more businesses or to purchase more than 50% of
the Capital Stock of a person operating one or more businesses, (y) used to make
capital expenditures or (z) used to acquire other long-term assets, in each
case, so long as such business or businesses, capital expenditures or long-term
assets will constitute, be a part of, or be used in a Related Business or (ii)
used to retire Senior Debt and to permanently reduce the amount of such
Indebtedness outstanding (including that in the case of a revolver or similar
arrangement that makes credit available, such commitment is so permanently
reduced by such amount) and (b) the Net Cash Proceeds of such Asset Sale not
applied as provided in clause (a) (the "Asset Sale Offer Amount") are applied to
the optional redemption of the Securities in accordance with the terms hereof or
to the repurchase of the Securities pursuant to an irrevocable, unconditional
cash offer (the "Asset Sale Offer") to repurchase Securities at a purchase price
(the "Asset Sale Offer Price") of 100% of principal amount, plus accrued
interest to the date of payment; (2) at least 75% of the consideration for such
Asset Sale consists of cash or Cash Equivalents; provided that (x) the amount of
any liabilities (as shown on the Company's most recent consolidated balance
sheet) of the Company or any Subsidiary that are assumed by the transferee in
such Asset Sale and (y) any notes or other obligations received by the Company
or any such Subsidiary Guarantor from such transferee that are immediately (but
in no event more than 30 days after receipt) converted by the Company or such
Subsidiary Guarantor into cash or Cash Equivalents (to the extent of the cash or
Cash Equivalents, as the case may be, received), shall be deemed to be cash or
Cash Equivalents, as the case may be, for purposes of this provision and,
provided, further, this clause (2) shall not apply to the sale or disposition of
assets or as a result of a foreclosure (or a secured party taking ownership of
such assets in lieu of foreclosure) or as a result of an involuntary proceeding
in which the Company cannot, directly or through its Subsidiaries direct the
type of proceeds received; (3) no Default or Event of Default would occur after
giving effect, on a pro forma basis, to, such Asset Sale; and (4) with respect
to any Asset Sale or series of related Asset Sales, the Net Cash Proceeds of
which exceed $500,000, the Board of Directors of the Company determines in good
faith that the Company or such Subsidiary, as applicable, receives Fair Market
Value for such Asset Sale.
55
<PAGE>
Notwithstanding the foregoing provisions of the prior paragraph, the
following transactions shall not be deemed Asset Sales:
(i) the Company and the Subsidiary Guarantors may, in the
ordinary course of business, convey, sell, lease, transfer, assign or
otherwise dispose of property in the ordinary course of business;
(ii) the Company and the Subsidiary Guarantors may (x) convey,
sell, lease, transfer, assign or otherwise dispose of assets pursuant to
and in accordance with the provisions of Article V, (y) make Restricted
Payments permitted by Section 4.3 herein, and (z) engage in Exempted
Affiliate Transactions;
(iii) the Company and the Subsidiary Guarantors may convey, sell,
lease, transfer, assign or otherwise dispose of assets or issue Capital
Stock to the Company or any of the Subsidiary Guarantors;
(iv) the Company and the Subsidiary Guarantors may sell or
dispose of damaged, worn out or other obsolete property in the ordinary
course of business so long as such property is no longer necessary for the
proper conduct of the business of the Company or such Subsidiary Guarantor,
as applicable;
(v) the Company and the Subsidiary Guarantors may exchange
assets held by the Company or a Subsidiary Guarantor for assets held by any
person or entity; provided, that the assets received in such exchange in
the good faith reasonable judgment of the Board will immediately
constitute, be a part of, or be used in, a Related Business; provided,
further, that the Board has determined that the terms of any exchange are
fair and reasonable;
(vi) the Company and the Subsidiary Guarantors may enter into
Sale and Leaseback Transactions with respect to property acquired or
completed after the Issue Date;
(vii) the Company and the Subsidiary Guarantors may liquidate
Cash Equivalents in the ordinary course of business;
(viii) the Company and the Subsidiary Guarantors may create or
assume Liens (or permit any foreclosure thereon) securing Indebtedness to
the extent that such Lien does not violate Section 4.12; and
56
<PAGE>
(ix) the Subsidiary Guarantors may consummate any sale or
series of related sales of assets or properties of the Company and the
Subsidiary Guarantors having an aggregate Fair Market Value of less than $2
million in any fiscal year.
An Asset Sale Offer may be deferred until the accumulated Net Cash
Proceeds from Asset Sales not applied to the uses set forth in clause (l)(a)
above (the "Excess Proceeds") exceeds $10 million (the date on which the Excess
Proceeds exceed $10 million being herein referred to as the "Excess Proceeds
Date") and each Asset Sale Offer shall remain open for not less than 20 Business
Days following its commencement (the "Asset Sale Offer Period"). Upon
expiration of the Asset Sale Offer Period, the Company shall apply the Asset
Sale Offer Amount plus an amount equal to accrued interest to the purchase of
all Securities properly tendered (on a pro rata basis if the Asset Sale Offer
Amount is insufficient to purchase all Securities so tendered) at the Asset
Sale Offer Price (together with accrued interest). To the extent Holders of
Securities do not tender Securities in connection with any such Asset Sale
Offer, the remaining Net Cash Proceeds may be applied in any manner not
prohibited by this Indenture.
Notice of an Asset Sale Offer will be sent 20 Business Days prior to
the close of business on the third Business Day prior to the date set by the
Company to repurchase Securities pursuant to this Section 4.13 (the "Purchase
Date"), by first-class mail, by the Company to each Holder at its registered
address, with a copy to the Trustee. The notice to the Holders will contain all
information, instructions and materials required by applicable law. The notice,
which (to the extent consistent with this Indenture) shall govern the terms of
the Asset Sale Offer, shall state:
(1) that the Asset Sale Offer is being made pursuant to such
notice and this Section 4.13;
(2) the Asset Sale Offer, the Asset Sale Offer Price
(including the amount of accrued and unpaid interest), and the Purchase
Date, which Purchase Date shall be on or prior to 45 Business Days
following the Excess Proceeds Date;
(3) that any Security or portion thereof not tendered or
accepted for payment will continue to accrue interest;
(4) that, unless the Company defaults in depositing Cash
with the Paying Agent in accordance with the provisions of this Section
4.13, any Security, or portion thereof, accepted for payment pursuant to
the Asset Sale Offer shall cease to accrue interest after the Purchase
Date;
57
<PAGE>
(5) that Holders electing to have a Security, or portion
thereof, purchased pursuant to an Asset Sale Offer will be required to
surrender the Security, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Security completed, to the Paying Agent
(which may not for purposes of this Section 4.13, notwithstanding anything
in this Indenture to the contrary, be the Company or any Affiliate of the
Company) at the address specified in the notice prior to the close of
business on the third Business Day prior to the Purchase Date;
(6) that Holders will be entitled to withdraw their
elections, in whole or in part, if the Paying Agent receives, up to the
close of business on the third Business Day prior to the Purchase Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Securities the Holder is
withholding and a statement that such Holder is withdrawing his election to
have such principal amount of Securities purchased;
(7) that if Securities in a principal amount in excess of
the principal amount of Securities to be acquired pursuant to the Asset
Sale Offer are tendered and not withdrawn, the Company shall purchase
Securities on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securities in denominations of
$1,000 or integral multiples of $1,000 shall be acquired);
(8) that Holders whose Securities were purchased only in
part will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered; and
(9) a brief description of the circumstances and relevant
facts regarding such Asset Sales.
On or before the Purchase Date, the Company shall (i) accept for
payment Securities or portions thereof properly tendered pursuant to the Asset
Sale Offer on or before the third Business Day prior to the Purchase Date (on a
pro rata basis if required pursuant to para graph (7) hereof) and (ii) deposit
with the Paying Agent Cash sufficient to pay the Asset Sale Offer Price for all
Securities or portions thereof so tendered and accepted plus accrued and unpaid
interest thereon to the Purchase Date. On the Purchase Date, the Company shall
deliver to the Trustee Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof being purchased by the
Company. The Paying Agent shall on the Purchase Date mail or deliver to Holders
of Securities so accepted payment in an amount equal to the
58
<PAGE>
Asset Sale Offer Price for such Securities (together with accrued and unpaid
interest), and the Trustee shall promptly authenticate and mail or deliver to
such Holders a new Security equal in principal amount to any unpurchased portion
of the Security surrendered. Any Security not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company agrees
that any Asset Sale Offer shall be made in compliance with all applicable laws,
rules, and regulations, including, if applicable, Regulation 14E of the Exchange
Act and the rules and regulations thereunder and all other applicable Federal
and state securities laws, and any provisions of this Indenture which conflict
with such laws shall be deemed to be superseded by the provisions of such laws.
SECTION 4.14. Limitation on Layering Indebtedness.
-----------------------------------
The Company and the Guarantors shall not, directly or indirectly,
Incur or suffer to exist any Indebtedness that is subordinate in right of
payment to any other Indebtedness of the Company or a Guarantor unless, by its
terms, such Indebtedness (i) has a maturity date subsequent to the Stated
Maturity of the Securities and an Average Life longer than that of the
Securities and (ii) is subordinate in right of payment to, or ranks pari passu
with, the Securities or the Guarantee, as applicable. For purposes of this
Section 4.14, no Indebtedness shall be deemed to be subordinated in right of
payment to any other Indebtedness solely by reason of the fact that such other
Indebtedness is secured by any Lien.
SECTION 4.15. Limitation on Lines of Business.
-------------------------------
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, engage to any substantial extent in any line or
lines of business activity other than that which, in the reasonable good faith
judgment of the Board of Directors of the Company, is a Related Business.
SECTION 4.16. Restriction on Sale and Issuance of Subsidiary Stock.
----------------------------------------------------
The Company shall not sell, and the Subsidiary Guarantors shall not
issue or sell, any shares of Capital Stock (other than directors qualifying
shares) of any Subsidiary of the Company to any person other than the Company or
a wholly owned Subsidiary of the Company, except for shares of common stock with
no preferences or special rights and with no redemption or prepayment
provisions. Notwithstanding the foregoing, (a) the Company and the Subsidiary
Guarantors may consummate an Asset Sale of all of the Capital Stock owned by the
Company and the Subsidiary Guarantors of any Subsidiary in accordance with the
provisions of Section 4.13 and (b) the Company or any Subsidiary Guarantor may
pledge, hypothecate or otherwise grant a Lien on any Capital Stock of any
Subsidiary to the extent not prohibited under Section 4.12 herein.
59
<PAGE>
SECTION 4.17. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
Each of the Company and the Guarantors covenants (to the extent that
it may lawfully do so) that it will not at any time voluntarily insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law or any usury law or other law which would prohibit or
forgive the Company or any Guarantor from paying all or any portion of the
principal of, premium of, or interest on the Securities as contemplated herein,
wherever enacted, now or at any time hereafter in force; and (to the extent that
it may lawfully do so) each of the Company and the Guarantors hereby expressly
waives all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee relating to any such law, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1. Limitation on Merger, Sale or Consolidation.
-------------------------------------------
The Company shall not directly or indirectly, consolidate with or
merge with or into another person or sell, lease, convey or transfer all or
substantially all of its assets (computed on a consolidated basis), whether in a
single transaction or a series of related transactions, to another person or
group of affiliated persons or adopt a plan of liquidation, unless (i) either
(a) the Company is the continuing entity or (b) the resulting, surviving or
transferee entity or, in the case of a plan of liquidation, the entity which
receives the greatest value from such plan of liquidation, is a corporation
organized under the laws of the United States, any state thereof or the District
of Columbia, and expressly assumes by supplemental indenture all of the
obligations of the Company in connection with the Securities and this
Indenture; (ii) no Default or Event of Default shall exist or shall occur
immediately after giving effect on a pro forma basis to such transaction; (iii)
immediately after giving effect to such transaction on a pro forma basis, the
Consolidated Net Worth of the consolidated surviving or transferee entity or, in
the case of a plan of liquidation, the entity which receives the greatest value
from such plan of liquidation, is at least equal to the Consolidated Net Worth
of the Company immediately prior to such transaction; and (iv) immediately after
giving effect to such transaction on a pro forma basis, the consolidated
resulting, surviving or transferee entity or, in the case of a plan of
liquidation, the entity which receives the greatest value from such plan of
liquidation, would immediately thereafter be permitted to incur at least $1.00
of additional Indebtedness pursuant to the Debt Incurrence Ratio set forth in
Section 4.10. For purposes of this Section 5, the transfer (by lease,
assignment, sale or otherwise) of all or substantially all of the properties and
assets of one or more Subsidiaries, the Capital Stock of which constitutes
60
<PAGE>
all or substantially all of the properties and assets of the Company, shall be
deemed to be the transfer of all or substantially all of the properties and
assets of the Company.
SECTION 5.2. Successor Corporation Substituted.
---------------------------------
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company or consummation of a plan of
liquidation in accordance with Section 5.1, the successor corporation formed by
such consolidation or into which the Company is merged or to which such transfer
is made or, in the case of a plan of liquidation, the entity which receives the
greatest value from such plan of liquidation, shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor corporation had been
named herein as the Company, and the Company shall be released from all
obligations under the Securities and this Indenture.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be caused voluntarily or involuntarily or effected, without limitation,
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) the failure to pay any installment of interest on the Securities
as and when the same becomes due and payable and the continuance of any such
failure for 30 days;
(b) the failure to pay all or any part of the principal, or premium,
if any, on the Securities when and as the same becomes due and payable at
maturity, redemption, by acceleration or otherwise, including, without
limitation, payment of the Change of Control Purchase Price or the Asset Sale
Offer Price, or otherwise;
(c) the failure by the Company or any Subsidiary Guarantor to observe
or perform any covenant or agreement on the part of the Company or any
Subsidiary Guarantor contained in the Securities or this Indenture (other than a
default in the performance of any covenant or agreement which is specifically
dealt with elsewhere in this Section 6.1) and the continuance of such failure
for a period of 30 days after written notice
61
<PAGE>
is given to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in aggregate principal amount of the Securities then
outstanding, specifying such Default and requiring that it be remedied;
(d) a decree, judgment, or order by a court of competent jurisdiction
shall have been entered adjudicating the Company or any of its Significant
Subsidiaries as bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization of the Company or any of its Significant Subsidiaries
under any bankruptcy or similar law, and such decree or order shall have
continued undischarged and unstayed for a period of 60 consecutive days; or a
decree or order of a court of competent jurisdiction, judgment appointing a
receiver, liquidator, trustee, or assignee in bankruptcy or insolvency for the
Company, any of its Significant Subsidiaries, or any substantial part of the
property of any such Person, or for the winding up or liquidation of the affairs
of any such Person, shall have been entered, and such decree, judgment, or order
shall have remained in force undischarged and unstayed for a period of 60 days;
(e) a default in any Indebtedness of the Company or any of its
Subsidiaries with an aggregate principal amount in excess of $10 million (a)
resulting from the failure to pay principal at maturity or (b) as a result of
which the maturity of such Indebtedness has been accelerated prior to its stated
maturity;
(f) the Company or any of its Significant Subsidiaries shall
institute proceedings to be adjudicated a voluntary bankrupt, or shall consent
to the filing of a bankruptcy proceeding against it, or shall file a petition or
answer or consent seeking reorganization under any bankruptcy or similar law or
similar statute, or shall consent to the filing of any such petition, or shall
consent to the appointment of a Custodian, receiver, liquidator, trustee, or
assignee in bankruptcy or insolvency of it or any substantial part of its assets
or property, or shall make a general assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
take any corporate action in furtherance of or to facilitate, conditionally or
otherwise, any of the foregoing; and
(g) final unsatisfied judgments not covered by insurance aggregating
in excess of $10 million, at any one time rendered against the Company or any of
its Subsidiaries and not stayed, bonded or discharged within 60 days.
Notwithstanding the 30-day period and notice requirement contained in
Section 6.1(c) above, (i) with respect to a default under Article X, the 30-day
period referred to in Section 6.1(c) shall be deemed to have begun as of the
date notice of a Change of Control Offer is required to be sent to the Holders
in the event that the Company has not complied with the provisions of Section
10.1, and the Trustee or
62
<PAGE>
Holders of at least 25% in principal amount of the outstanding Securities
thereafter give the Notice of Default referred to in Section 6.1(c) in respect
of such compliance to the Company and, if applicable, the Trustee; provided,
however, that if the breach or default is a result of a default in the payment
when due of the Change of Control Purchase Price on the Change of Control
Payment Date, such default shall be deemed, for purposes of this Section 6.1, to
arise on the Change of Control Payment Date; and (ii) with respect to a default
under Section 4.13 requiring the giving of such notice, the 30-day period
referred to in Section 6.1(c) shall be deemed to have begun as of the date the
notice of an Asset Sale Offer is required to be sent in the event that the
Company has not complied with the provisions of Section 4.13, and the Trustee or
Holders of at least 25% in principal amount of the outstanding Securities
thereafter give the Notice of Default referred to in Section 6.1(c) in respect
of such compliance to the Company and, if applicable, the Trustee; provided,
however, that if the breach or default is a result of a default in the payment
when due of the Asset Sale Offer Price on the Purchase Date, such default shall
be deemed, for purposes of this Section 6.1, to arise no later than on the
Purchase Date.
SECTION 6.2. Acceleration of Maturity Date; Rescission and Annulment.
-------------------------------------------------------
If an Event of Default occurs and is continuing (other than an Event
of Default specified in clause 5 (d) and (f), above, relating to the Company or
any Significant Subsidiary) then in every such case, unless the principal of all
of the Securities shall have already become due and payable, either the Trustee
or the Holders of 25% in aggregate principal amount of the Securities then
outstanding, by notice in writing to the Company (and to the Trustee if given by
Holders) (an "Acceleration Notice"), may declare all principal and accrued
interest thereon to be due and payable immediately, provided such acceleration
shall not be effective until 5 Business Days after the Senior Bank
Representative shall have been notified of such acceleration. If an Event of
Default specified in clauses 5 (d) and (f), above, relating to the Company or
any Significant Subsidiary occurs, all principal and accrued interest thereon
will be immediately due and payable on all outstanding Securities without any
declaration or other act on the part of Trustee or the Holders.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article VI, the Holders of not less
than a majority in aggregate principal amount of then outstanding Securities, by
written notice to the Company and the Trustee, may rescind, on behalf of all
Holders, any such declaration of acceleration if:
(1) the Company has paid or deposited with the Trustee Cash
sufficient to pay
63
<PAGE>
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, applicable to)
any Securities which would become due other than by reason of such
declaration of acceleration, and interest thereon at the rate borne by
the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities,
(D) all sums paid or advanced by the Trustee hereunder and
the compensation, expenses, disbursements and advances of the Trustee
and its agents and counsel, and any other amounts due the Trustee
under Section 7.7, and
(2) all Events of Default, other than the non-payment of the
principal of, premium, if any, and interest on Securities which have become
due solely by such declaration of acceleration, have been cured or waived
as provided in Section 6.12, including, if applicable, any Event of Default
relating to the covenants contained in Section 10.1.
Notwithstanding the previous sentence of this Section 6.2, no waiver shall be
effective against any Holder for any Event of Default or event which with notice
or lapse of time or both would be an Event of Default with respect to (i) any
covenant or provision which cannot be modified or amended without the consent of
the Holder of each outstanding Security affected thereby, unless all such
affected Holders agree, in writing, to waive such Event of Default or other
event and (ii) any provision requiring supermajority approval to amend, unless
such default has been waived by such a supermajority. No such waiver shall cure
or waive any subsequent default or impair any right consequent thereon.
The Trustee shall provide to each Senior Debt Representative a copy of
each Acceleration Notice that it sends, and of each Acceleration Notice and
notice of rescission of a declaration of acceleration that it receives, under
this Section 6.2, on the date that the Trustee sends any such notice, and as
promptly as possible following the date that the Trustee receives any such
notice.
64
<PAGE>
SECTION 6.3. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee.
- -------
The Company covenants that if an Event of Default in payment of
principal, premium, or interest specified in clause (a) or (b) of Section 6.1
occurs and is continuing, the Company shall, upon demand of the Trustee, pay to
it, for the benefit of the Holders of such Securities, the whole amount then due
and payable on such Securities for principal, premium (if any) and interest,
and, to the extent that payment of such interest shall be legally enforceable,
interest on any overdue principal (and premium, if any) and on any overdue
interest, at the rate borne by the Securities, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including compensation to, and expenses, disbursements and advances
of the Trustee and its agents and counsel and all other amounts due the Trustee
under Section 7.7.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust in favor of the
Holders, may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company or any other obligor upon the
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 6.4. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal and premium, if any, or
interest) shall be entitled and empowered, by intervention in such proceeding or
otherwise to take any and all actions under the TIA, including
65
<PAGE>
(1) to file and prove a claim for the whole amount of principal
(and premium, if any) and interest owing and unpaid in respect of the
Securities and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee and its agent and counsel and all other amounts due the
Trustee under Section 7.7) and of the Holders allowed in such judicial
proceeding, and
(2) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel, and any
other amounts due the Trustee under Section 7.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrange ment, adjustment, or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.5. Trustee May Enforce Claims Without Possession of
------------------------------------------------
Securities.
- ----------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust in favor of the Holders, and any recovery of
judgment shall, after provision for the payment of compensation to, and
expenses, disbursements and advances of the Trustee, its agents and counsel and
all other amounts due the Trustee under Section 7.7, be for the ratable benefit
of the Holders of the Securities in respect of which such judgment has been
recovered.
SECTION 6.6. Priorities.
----------
Any money collected by the Trustee pursuant to this Article VI shall,
subject to Article XII, be applied in the following order, at the date or dates
fixed by the Trustee
66
<PAGE>
and, in case of the distribution of such money on account of principal, premium
(if any) or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the Trustee in payment of all amounts due pursuant to
Section 7.7;
SECOND: To the Holders in payment of the amounts then due and unpaid
for principal of, premium (if any) and interest on, the Securities in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due and
payable on such Securities for principal, premium (if any) and interest,
respectively; and
THIRD: To the Company or such other Person as may be lawfully
entitled thereto, the remainder, if any.
The Trustee may, but shall not be obligated to, fix a record date and
payment date for any payment to the Holders under this Section 6.6.
SECTION 6.7. Limitation on Suits.
-------------------
No Holder of any Security shall have any right to order or direct the
Trustee to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(A) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(B) the Holders of not less than 25% in aggregate principal
amount of then outstanding Securities shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(C) such Holder or Holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities to be incurred or reasonably probable to be incurred in
compliance with such request;
(D) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any such
proceeding; and
67
<PAGE>
(E) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatsoever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 6.8. Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
Premium and Interest.
- ---------------------
Notwithstanding any other provision of this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of, and premium (if any) and interest on, such
Security on the respective dates such payments are due as expressed in such
Security (in the case of redemption, the Redemption Price on the applicable
Redemption Date, and in the case of an Asset Sale Offer the Asset Sale Offer
Price, on the date of payment thereof) and to institute suit for the enforcement
of any such payment after such respective dates, and such rights shall not be
impaired without the consent of such Holder.
SECTION 6.9. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in Section 2.7, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 6.10. Delay or Omission Not Waiver.
----------------------------
No delay or omission by the Trustee or by any Holder of any Security
to exercise any right or remedy arising upon any Event of Default shall impair
the exercise of any such right or remedy or constitute a waiver of any such
Event of Default. Every right and remedy given by this Article VI or by law to
the Trustee or to the Holders may be
68
<PAGE>
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
SECTION 6.11. Control by Holders.
------------------
The Holder or Holders of a majority in aggregate principal amount of
then outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred upon the Trustee, provided, that
--------
(1) such direction shall not be in conflict with any rule of law
or with this Indenture or involve the Trustee in personal liability,
(2) the Trustee shall not determine that the action so directed
would be unjustly prejudicial to the Holders not taking part in such
direction, and
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 6.12. Waiver of Past Default.
----------------------
Subject to Section 6.8, prior to the declaration of acceleration of
the maturity of the Securities, the Holder or Holders of not less than a
majority in aggregate principal amount of the Securities then outstanding may,
on behalf of all Holders, waive any past default hereunder and its consequences,
except a default
(A) in the payment of the principal of, premium, if any, or
interest on, any Security as specified in clauses (a) and (b) of Section
6.1 and not yet cured;
(B) in respect of a covenant or provision hereof which,
under Article IX, cannot be modified or amended without the consent of the
Holder of each outstanding Security affected; or
(C) in respect of any provision hereof which, under Article
IX, cannot be modified, amended or waived without the consent of the
Holders of 66 2/3% of the aggregate principal amount of the Securities at
the time outstanding; provided, that any such waiver may be effected with
--------
the consent of the Holders of 66 2/3% of the aggregate principal amount of
the Securities then outstanding.
69
<PAGE>
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair the exercise of any right arising therefrom.
SECTION 6.13. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted to be taken by it
as Trustee, any court may in its discretion require the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 6.13 shall not apply to any suit instituted
by the Company, to any suit instituted by the Trustee, to any suit instituted by
any Holder, or group of Holders, holding in the aggregate more than 10% in
aggregate principal amount of the outstanding Securities, or to any suit
instituted by any Holder for enforcement of the payment of principal of, or
premium (if any) or interest on, any Security on or after the respective
Maturity Date expressed in such Security (including, in the case of redemption,
on or after the Redemption Date).
SECTION 6.14. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Guarantors, the Trustee and
the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed, subject to
the terms hereof.
70
<PAGE>
SECTION 7.1. Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and no covenants or
obligations shall be implied in or read into this Indenture which are
adverse to the Trustee, and
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, in the case of any such certificates or opinions which by any
provision hereof are specifically required to be furnished to the Trustee,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.1,
(2) The Trustee shall not be liable for any error of judgment
made in good faith by it, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts, and
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.11.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or at the request, order or direction of the Holders or in
the exercise of any of its rights or powers if
71
<PAGE>
it shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
(e) Every provision of this Indenture that in any way relates to
the Trustee is subject to paragraphs (a), (b), (c), (d) and (f) of this Section
7.1.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
SECTION 7.2. Rights of Trustee.
-----------------
Subject to Section 7.1:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 13.4 and 13.5. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such certificate or advice of counsel.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture, nor for any action
permitted to be taken or omitted hereunder by any Agent.
(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it may
see fit.
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered
72
<PAGE>
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby.
(g) Unless otherwise specifically provided for in this
Indenture, any demand, request, direction or notice from the Company or any
Guarantor shall be sufficient if signed by an Officer of the Company or such
Guarantor, as applicable.
(h) The Trustee shall have no duty to inquire as to the
performance of the Company's or any Guarantor's covenants in Article IV hereof
or as to the performance by any Agent of its duties hereunder. In addition, the
Trustee shall not be deemed to have knowledge of any Default or Event of Default
except any Default or Event of Default of which the Trustee shall have received
written notification or with respect to which a Trust Officer shall have actual
knowledge.
(i) Whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate.
SECTION 7.3. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, any
Guarantor, any of their Subsidiaries, or their respective Affiliates with the
same rights it would have if it were not Trustee. Any Agent may do the same
with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities and it shall not be accountable for the
Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement in the Securities, other than the Trustee's
certificate of authentication (if executed by the Trustee), or the use or
application of any funds received by a Paying Agent other than the Trustee.
SECTION 7.5. Notice of Default.
-----------------
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Securityholder and the
Senior Bank Representative notice of the uncured Default or Event of Default
within 90 days after such Default
73
<PAGE>
or Event of Default occurs. Except in the case of a Default or an Event of
Default in payment of principal (or premium, if any) of, or interest on, any
Security (including the payment of the Change of Control Purchase Price on the
Change of Control Purchase Date, the payment of the Redemption Price on the
Redemption Date and the payment of the Asset Sale Price on the date of payment
thereof), the Trustee may withhold the notice if and so long as a Trust Officer
in good faith determines that withholding the notice is in the interest of the
Securityholders.
SECTION 7.6. Reports by Trustee to Holders.
-----------------------------
Within 60 days after each May 15, beginning with May 15, 1996, the
Trustee shall, if required by law, mail to each Securityholder a brief report
dated as of such May 15 that complies with TIA (S) 313(a). The Trustee also
shall comply with TIA (S)(S) 313(b) and 313(c).
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or automatic quotation system.
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the SEC and each stock exchange,
if any, on which the Securities are listed.
SECTION 7.7. Compensation and Indemnity.
--------------------------
The Company and the Guarantors jointly and severally agree to pay to
the Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company and the Guarantors shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it in accordance with this Indenture. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents, accountants, experts and counsel.
The Company and the Guarantors jointly and severally agree to
indemnify the Trustee (in its capacity as Trustee) and each of its officers and
each of them, directors, attorneys-in-fact and agents for, and hold it harmless
against, any claim, demand, expense (including but not limited to reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel),
loss or liability incurred by it without negligence or bad faith on the part of
the Trustee, arising out of or in connection with the administration of this
trust and its rights or duties hereunder including the reasonable costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of
74
<PAGE>
its powers or duties hereunder. The Trustee shall notify the Company promptly
of any claim asserted against the Trustee for which it may seek indemnity. The
Company and the Guarantors shall defend the claim and the Trustee shall provide
reasonable cooperation at the Company's and the Guarantors' expense in the
defense. The Trustee may have separate counsel and the Company and the
Guarantors shall pay the reasonable fees and expenses of such counsel. The
Company and the Guarantors need not pay for any settlement made without their
written consent, which consent shall not be unreasonably withheld. The Company
and the Guarantors need not reimburse any expense or indemnify against any loss
or liability to the extent incurred by the Trustee through its negligence, bad
faith or willful misconduct.
To secure the Company's and the Guarantors' payment obligations in
this Section 7.7, the Trustee shall have a lien prior to the Securities on all
assets held or collected by the Trustee, in its capacity as Trustee, except
assets held in trust to pay principal and premium, if any, of or interest on
particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(d) or (f) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's and the Guarantors' obligations under this Section 7.7
and any lien arising hereunder shall survive the resignation or removal of the
Trustee, the discharge of the Company's and the Guarantors' obligations pursuant
to Article VIII of this Indenture and any rejection or termination of this
Indenture under any Bankruptcy Law.
SECTION 7.8. Replacement of Trustee.
----------------------
The Trustee may resign by so notifying the Company in writing, to
become effective upon the appointment of a successor trustee. The Holder or
Holders of a majority in aggregate principal amount of the outstanding
Securities may remove the Trustee by so notifying the Company and the Trustee in
writing and may appoint a successor trustee with the Company's consent. The
Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver, Custodian, or other public officer takes charge
of the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
75
<PAGE>
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holder
or Holders of a majority in aggregate principal amount of the Securities may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that
and provided that all sums owing to the retiring Trustee provided for in Section
7.7 have been paid, the retiring Trustee shall transfer all property held by it
as trustee to the successor Trustee, subject to the lien provided in Section
7.7, the resignation or removal of the retiring Trustee shall become effective,
and the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holder or Holders of at least 10% in aggregate principal amount of the
outstanding Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's and the Guarantors' obligations under Section 7.7 shall
continue for the benefit of the retiring Trustee.
SECTION 7.9. Successor Trustee by Merger, Etc.
---------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
-----------------------------
The Trustee shall at all times satisfy the requirements of TIA (S)
310(a)(1), (2) and (5). The Trustee (together with its corporate parent) shall
have a combined capital and
76
<PAGE>
surplus of at least $25,000,000 as set forth in its most recent published annual
report of condition. The Trustee shall comply with TIA (S) 310(b).
SECTION 7.11. Preferential Collection of Claims Against Company.
-------------------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated.
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1. Option to Effect Legal Defeasance or Covenant
---------------------------------------------
Defeasance.
- -----------
The Company may, at its option and at any time, elect to have Section
8.2 or Section 8.3 applied to all outstanding Securities upon compliance with
the conditions set forth below in this Article VIII.
SECTION 8.2. Legal Defeasance and Discharge.
------------------------------
Upon the Company's exercise under Section 8.1 of the option applicable
to this Section 8.2, the Company and the Guarantors shall be deemed to have been
discharged from their respective obligations with respect to all outstanding
Securities on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance
means that the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of Section 8.5 and the other
Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Securities and this Indenture
(and the Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (a) rights of
Holders to receive payments in respect of the principal of, premium, if any, and
interest on such Securities when such payments are due from the trust funds
described below; (b) the Company's obligations with respect to such Securities
concerning issuing temporary Securities, registration of Securities, mutilated,
destroyed, lost or stolen Securities, and the maintenance of an office or agency
for payment and money for security payments held in trust; (c) the rights,
powers, trust, duties, and immunities of the Trustee, and the Company's and the
Guarantor's obligations in connection therewith; and (d) this Article VIII.
Upon
77
<PAGE>
Legal Defeasance as provided herein, the Guarantee of each Guarantor shall be
fully released and discharged and the Trustee shall promptly execute and deliver
to the Company any documents reasonably requested by the Company to evidence or
effect the foregoing. Subject to compliance with this Article VIII, the
Company may exercise its option under this Section 8.2 notwithstanding the prior
exercise of its option under Section 8.3 with respect to the Securities.
SECTION 8.3. Covenant Defeasance.
-------------------
Upon the Company's exercise under Section 8.1 of the option applicable
to this Section 8.3, the Company and the Guarantors shall be released from their
respective obligations under the covenants contained in Sections 4.3, 4.5, 4.6,
4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, and 4.16, Article V and
Article X with respect to the outstanding Securities on and after the date the
conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"),
and the Securities shall thereafter be deemed not "outstanding" for the purposes
of any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder. For this
purpose, such Covenant Defeasance means that, with respect to the outstanding
Securities, the Company need not comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document (and Section 6.1(c)) shall not
apply to any such covenant), but, except as specified above, the remainder of
this Indenture and such Securities shall be unaffected thereby. In addition,
upon the Company's exercise under Section 8.1 of the option applicable to this
Section 8.3, Sections 6.1(d) through 6.1(g) shall not constitute Events of
Default.
SECTION 8.4. Conditions to Legal or Covenant Defeasance.
------------------------------------------
The following shall be the conditions to the application of either
Section 8.2 or Section 8.3 to the outstanding Securities:
(a) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfactory to the Trustee
satisfying the requirements of Section 7.10 who shall agree to comply with the
provisions of this Article VIII applicable to it) as trust funds in trust for
the purpose of making the following payments, specifically pledged as security
for, and dedicated solely to, the benefit of the Holders of such Securities, (a)
Cash in an amount, or (b) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in accordance
with their
78
<PAGE>
terms will provide, not later than one day before the due date of any payment,
Cash in an amount, or (c) a combination thereof, in such amounts, as in each
case will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge and which shall be applied by the
Paying Agent (or other qualifying trustee) to pay and discharge the principal
of, premium, if any, and interest on the outstanding Securities on the stated
maturity or on the applicable redemption date, as the case may be, of such
principal or installment of principal, premium, if any, or interest on the
Securities; provided that the Paying Agent shall have been irrevocably
--------
instructed to apply such Cash and the proceeds of such U.S. Government
Obligations to said payments with respect to the Securities. The Paying Agent
shall promptly advise the Trustee in writing of any Cash or Securities deposited
pursuant to this Section 8.4;
(b) In the case of an election under Section 8.2 before the date
that is one year prior to the Stated Maturity, the Company shall have delivered
to the Trustee an Opinion of Counsel in the United States reasonably acceptable
to the Trustee confirming that (i) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (ii) since the date
hereof, there has been a change in the applicable Federal income tax law, in
either case to the effect that, and based thereon such opinion shall confirm
that, the Holders of the outstanding Securities will not recognize income, gain
or loss for Federal income tax purposes as a result of such Legal Defeasance and
will be subject to Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal Defeasance had
not occurred;
(c) In the case of an election under Section 8.3 before the date
that is one year prior to the Stated Maturity, the Company shall have delivered
to the Trustee an Opinion of Counsel in the United States reasonably acceptable
to the Trustee confirming that the Holders of the outstanding Securities will
not recognize income, gain or loss for Federal income tax purposes as a result
of such Covenant Defeasance and will be subject to Federal income tax in the
same amount, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(d) No Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such deposit or,
insofar as Section 6.1(d) or Section 6.1(f) is concerned, at any time in the
period ending on the 91st day after the date of such deposit (it being
understood that this condition is a condition subsequent which shall not be
deemed satisfied until the expiration of such period, but in the case of
Covenant Defeasance, the covenants which are defeased under Section 8.3 will
cease to be in effect unless an Event of Default under Section 6.1(d) or Section
6.1(f) occurs during such period);
79
<PAGE>
(e) Such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, this
Indenture or any other material agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) In the case of an election under either Section 8.2 or 8.3,
the Company shall have delivered to the Trustee an Officers' Certificate stating
that the deposit made by the Company pursuant to its election under Section 8.2
or 8.3 was not made by the Company with the intent of preferring the Holders
over any other creditors of the Company or with the intent of defeating,
hindering, delaying or defrauding any other creditors of the Company or others;
and
(g) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that the conditions
precedent provided for in, in the case of the Officer's Certificate, clauses (a)
through (f), and, in the case of the Opinion of Counsel, clauses (a) (with
respect to the validity and perfection of the security interest), (b), (c) and
(e) of this Section 8.4 have been complied with.
SECTION 8.5. Deposited Cash and U.S. Government Obligations to be
----------------------------------------------------
Held in Trust; Other Miscellaneous Provisions.
- ---------------------------------------------
Subject to Section 8.6, all Cash and U.S. Government Obligations
(including the proceeds thereof) deposited with the Paying Agent (or other
qualifying trustee, collectively for purposes of this Section 8.5, the "Paying
Agent") pursuant to Section 8.4 in respect of the outstanding Securities shall
be held in trust and applied by the Paying Agent, in accordance with the
provisions of such Securities and this Indenture, to the payment, either
directly or through any other Paying Agent as the Trustee may determine, to the
Holders of such Securities of all sums due and to become due thereon in respect
of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
SECTION 8.6. Repayment to the Company.
------------------------
Anything in this Article VIII to the contrary notwithstanding, the
Trustee or the Paying Agent, as applicable, shall deliver or pay to the Company
from time to time upon the request of the Company any Cash or U.S. Government
Obligations held by it as provided in Section 8.4 hereof which in the opinion of
a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.4(a) hereof), are in excess of the amount
80
<PAGE>
thereof that would then be required to be deposited to effect an equivalent
Legal Defeasance or Covenant Defeasance.
Any Cash and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee or any Paying Agent, or then held by the
Company, in trust for the payment of the principal of, premium, if any, or
interest on any Security and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall,
subject to the requirements of applicable law, be paid to the Company on its
request; and the Holder of such Security shall thereafter look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money shall thereupon cease; provided, however,
-----------------
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in the
New York Times and The Wall Street Journal (national edition), notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 8.7. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any Cash or U.S.
Government Obligations in accordance with Section 8.2 or 8.3, as the case may
be, by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
Company's and the Guarantors' obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.2 or 8.3 until such time as the Trustee or Paying Agent is
permitted to apply such money in accordance with Section 8.2 and 8.3, as the
case may be; provided, however, that, if the Company makes any payment of
-----------------
principal of, premium, if any, or interest on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the Cash and U.S.
Government Obligations held by the Trustee or Paying Agent.
81
<PAGE>
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holder, the Company or any Guarantor, when
authorized by Board Resolutions, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to cure any ambiguity, defect, or inconsistency, or make
any other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this Indenture,
provided such action pursuant to this clause shall not adversely affect the
- --------
interests of the Holders;
(2) to add to the covenants of the Company or the Guarantors
for the benefit of the Holders, or to surrender any right or power herein
conferred upon the Company or the Guarantors;
(3) to provide for additional Guarantors of the Securities;
(4) to evidence the succession of another Person to the
Company, and the assumption by any such successor of the obligations of the
Company, herein and in the Securities in accordance with Article V;
(5) to comply with the TIA;
(6) to evidence the succession of another corporation to any
Guarantor and assumption by any such successor of the Guarantee of such
Guarantor (as set forth in Section 11.4) in accordance with Article XI;
(7) to evidence the release of any Guarantor in accordance with
Article XI;
(8) in any other case where a supplemental indenture is
required or permitted to be entered into pursuant to the provisions of Article
XI without the consent of any Holder;
82
<PAGE>
(9) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities;
(10) to secure the Securities in accordance with the provisions
of Section 4.12; or
(11) to provide for the issuance and authentication of the
Exchange Securities in exchange for the Initial Securities in compliance with
this Indenture and the Registration Rights Agreement.
SECTION 9.2. Amendments, Supplemental Indentures and Waivers with
----------------------------------------------------
Consent of Holders.
- ------------------
Subject to Section 6.8, with the consent of the Holders of not less
than a majority in aggregate principal amount of then outstanding Securities, by
written act of said Holders delivered to the Company and the Trustee, the
Company or any Guarantor, when authorized by Board Resolutions, and the Trustee
may amend or supplement this Indenture or the Securities or enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or the Securities or of modifying in any manner the rights of the
Holders under this Indenture or the Securities. Subject to Section 6.8, the
Holder or Holders of not less than a majority in aggregate principal amount of
then outstanding Securities may waive compliance by the Company or any Guarantor
with any provision of this Indenture or the Securities. Notwithstanding any of
the above, however, no such amendment, supplemental indenture or waiver shall
without the consent of the Holders of not less than 66-2/3% of the aggregate
principal amount of Securities at the time outstanding alter the terms or
provisions of Section 10.1 in a manner adverse to the Holders; no such
amendment, supplemental indenture or waiver shall, without the written consent
of all holders of Senior Debt alter the terms or provisions of Article XII; and
no such amendment, supplemental indenture or waiver shall, without the consent
of the Holder of each outstanding Security affected thereby:
(1) reduce the percentage of principal amount of Securities whose
Holders must consent to an amendment, supplement or waiver of any provision of
this Indenture or the Securities;
(2) reduce the rate or extend the time for payment of interest on any
Security;
(3) reduce the principal or premium amount of any Security, or reduce
the Change of Control Purchase Price, the Asset Sale Offer Price or the
Redemption Price;
83
<PAGE>
(4) change the Stated Maturity;
(5) alter the redemption provisions of Article III in a manner
adverse to any Holder;
(6) make any changes in the provisions concerning waivers of Defaults
or Events of Default by Holders of the Securities or the rights of Holders to
recover the principal or premium of, interest on, or redemption payment with
respect to, any Security, including without limitation any changes in Section
6.8, 6.12 or this third sentence of this Section 9.2, except to increase any
required percentage or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the Holder of each
outstanding Security affected thereby;
(7) make the principal of, or the interest or premium on, any
Security payable with anything or in any manner other than as provided for in
this Indenture (including changing the place of payment where, or the coin or
currency in which, any Security or any premium or the interest thereon is
payable) and the Securities as in effect on the date hereof; or
(8) make the Securities further subordinated in right of payment to
any extent or under any circumstances to any other Indebtedness (it being
understood that amendments to Section 4.10 hereof which may have the effect of
increasing the amount of Senior Indebtedness that the Company and the Subsidiary
Guarantors may Incur shall not, for purposes of this clause (8), be deemed to
make the Securities further subordinated in right of payment to any extent or
under any circumstances to any other Indebtedness.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment, supplement
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture or waiver.
After an amendment, supplement or waiver under this Section 9.2 or
Section 9.4 becomes effective, it shall bind each Holder.
84
<PAGE>
In connection with any amendment, supplement or waiver under this
Article IX, the Company may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
SECTION 9.3. Compliance with TIA.
-------------------
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents.
---------------------------------
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by written notice to the
Company or the Person designated by the Company as the Person to whom consents
should be sent if such revocation is received by the Company or such Person
before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Securities have
consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date, and only those Persons (or
their duly designated proxies), shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (8) of Section 9.2, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same debt as the consenting Holder's Security; provided, that any such
--------
waiver shall not impair or affect the right of any other Holder to re ceive
payment of principal and premium of and interest on a Security, on or after the
85
<PAGE>
respective dates set for such amounts to become due and payable expressed in
such Security, or to bring suit for the enforcement of any such payment on or
after such respective dates.
SECTION 9.5. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee
or require the Holder to put an appropriate notation on the Security. The
Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms. Any
failure to make the appropriate notation or to issue a new Security shall not
affect the validity of such amendment, supplement or waiver.
SECTION 9.6. Trustee to Sign Amendments, Etc.
--------------------------------
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article IX; provided, that the Trustee may, but
--------
shall not be obligated to, execute any such amendment, supplement or waiver
which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver authorized pursuant to this Article IX is
authorized or permitted by this Indenture.
ARTICLE X
RIGHT TO REQUIRE REPURCHASE
SECTION 10.1. Repurchase of Securities at Option of the Holder Upon
-----------------------------------------------------
a Change of Control.
- -------------------
(a) In the event that a Change of Control occurs, each Holder
shall have the right, at such Holder's option, pursuant to an irrevocable and
unconditional offer by the Company (the "Change of Control Offer") subject to
the terms and conditions of this Indenture, to require the Company to repurchase
all or any part of such Holder's Securities (provided, that the principal amount
--------
of such Securities at maturity must be $1,000 or an integral multiple thereof)
on a date selected by the Company that is no later than 45 Business Days after
the occurrence of such Change of Control (the "Change of Control Purchase
Date"), at a cash price (the "Change of Control Purchase Price") equal to 101%
of the principal amount thereof, plus (subject to the right of Holders of record
on a Record Date
86
<PAGE>
to receive interest due on an Interest Payment Date that is on or prior to such
repurchase date and subject to clause (b)(4) below) accrued and unpaid interest,
if any, to the Change of Control Purchase Date.
(b) In the event of a Change of Control, the Company shall be
required to commence an offer to purchase Securities (a "Change of Control
Offer") as follows:
(1) the Change of Control Offer shall commence within 15
Business Days following the occurrence of the Change of Control;
(2) the Change of Control Offer shall remain open for not less
than 20 Business Days following its commencement (the "Change of Control
Offer Period");
(3) upon the expiration of the Change of Control Offer Period,
the Company shall purchase all of the properly tendered Securities at the
Change of Control Purchase Price, plus accrued and unpaid interest thereon;
(4) if the Change of Control Purchase Date is on or after a
Record Date and on or before the related interest payment date, any accrued
interest will be paid to the Person in whose name a Security is registered
at the close of business on such Record Date, and no additional interest
will be payable to Securityholders who tender Securities pursuant to the
Change of Control Offer;
(5) the Company shall provide the Trustee and the Paying Agent
with written notice of the Change of Control Offer at least three Business
Days before the commencement of any Change of Control Offer; and
(6) on or before the commencement of any Change of Control
Offer, the Company or the Registrar (upon the request and at the expense of
the Company) shall send, by first-class mail, a notice to each of the
Securityholders, which (to the extent consistent with this Indenture) shall
govern the terms of the Change of Control Offer and shall state:
(i) that the Change of Control Offer is being made
pursuant to such notice and this Section 10.1 and that all Securities, or
portions thereof, tendered will be accepted for payment;
87
<PAGE>
(ii) the Change of Control Purchase Price (including the
amount of accrued and unpaid interest, subject to clause (b)(4) above), the
Change of Control Purchase Date and the Change of Control Put Date (as
hereinafter defined);
(iii) that any Security, or portion thereof, not tendered
or accepted for payment will continue to accrue interest;
(iv) that, unless the Company defaults in depositing Cash
with the Paying Agent in accordance with the last paragraph of this Article
X or such pay ment is prevented, any Security, or portion thereof, accepted
for payment pursuant to the Change of Control Offer shall cease to accrue
interest after the Change of Control Purchase Date;
(v) that Holders electing to have a Security, or portion
thereof, purchased pursuant to a Change of Control Offer will be required
to surrender the Security, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Security completed, to the Paying
Agent (which may not for purposes of this Section 10.1, notwithstanding
anything in this Indenture to the contrary, be the Company or any Affiliate
of the Company) at the address specified in the notice prior to the close
of business on the earlier of (a) the third Business Day prior to the
Change of Control Purchase Date and (b) the third Business Day following
the expiration of the Change of Control Offer (such earlier date being the
"Change of Control Put Date");
(vi) that Holders will be entitled to withdraw their
election, in whole or in part, if the Paying Agent (which may not for
purposes of this Section 10.1, notwithstanding anything in this Indenture
to the contrary, be the Company or any Affiliate of the Company) receives,
up to the close of business on the Change of Control Put Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Securities the Holder is withdrawing
and a statement that such Holder is withdrawing his election to have such
principal amount of Securities purchased; and
(vii) a brief description of the events resulting in such
Change of Control.
Any such Change of Control Offer shall be made in compliance with all
applicable Federal and state laws, rules and regulations, including, if
applicable, Regulation 14E under the Exchange Act and the rules thereunder and
all other applicable Federal
88
<PAGE>
and state securities laws, and any provisions of this Indenture which conflict
with such laws shall be deemed to be superseded by the provisions of such laws.
On or before the Change of Control Purchase Date, the Company shall
(i) accept for payment Securities or portions thereof properly tendered pursuant
to the Change of Control Offer on or before the Change of Control Put Date, (ii)
deposit with the Paying Agent Cash sufficient to pay the Change of Control
Purchase Price (together with accrued and unpaid interest, subject to clause
(b)(4) above) for all Securities or portions thereof so tendered and (iii)
deliver to the Trustee Securities so accepted together with an Officers'
Certificate listing the Securities or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to Holders of Securities so
accepted payment in an amount equal to the Change of Control Purchase Price
(together with accrued and unpaid interest, subject to clause (b)(4) above), for
such Securities (subject to clause (b)(4) above), and the Trustee or its
authenticating agent shall promptly authenticate and mail or deliver (or cause
to be transferred by book entry) to such Holders a new Security equal in
principal amount to any unpurchased portion of the Security surrendered;
provided, however, that each such new Security will be in a principal amount of
- -----------------
$1,000 or an integral multiple thereof. Any Securities not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Purchase Date.
ARTICLE XI
GUARANTEE
SECTION 11.1. Guarantee.
---------
(a) In consideration of good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, each of the Guarantors
hereby irrevocably and unconditionally guarantees (the "Guarantee"), jointly and
severally, on a senior subordinated basis, to each Holder of a Security
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of this Indenture,
the Securities or the obligations of the Company under this Indenture or the
Securities, that: (i) the principal and premium (if any) of and interest on the
Securities will be paid in full when due, whether at the Maturity Date or
Interest Payment Date, by acceleration or call for redemption, (ii) the purchase
price for all Securities properly and timely tendered for a acceptance in
response to a Change of Control Offer or Asset Sale Offer will be timely, or
otherwise in accordance with the provisions of this Indenture, paid in full;
(iii) all other obligations of the Company to the Holders or the
89
<PAGE>
Trustee under this Indenture or the Securities will be promptly paid in full or
performed, all in accordance with the terms of this Indenture and the
Securities; and (iv) in case of any extension of time of payment or renewal of
any Securities or any of such other obligations, they will be paid in full when
due or performed in accordance with the terms of the extension or renewal,
whether at maturity, by acceleration, call for redemption, upon a Change of
Control Offer, upon an Asset Sale Offer or otherwise. Failing payment when due
of any amount so guaranteed for whatever reason, each Guarantor shall be jointly
and severally obligated to pay the same before failure so to pay becomes an
Event of Default. If the Company or a Guarantor defaults in the payment of the
principal of, premium, if any, or interest on, the Securities when and as the
same shall become due, whether upon maturity, acceleration, call for redemption,
upon a Change of Control Offer, Asset Sale Offer or otherwise, without the
necessity of action by the Trustee or any Holder, each Guarantor shall be
required, jointly and severally, to promptly make such payment in full.
(b) Each Guarantor hereby agrees that its obligations with regard to
this Guarantee shall be unconditional, irrespective of the validity, regularity
or enforceability of the Securities or this Indenture, the absence of any action
to enforce the same, any delays in obtaining or realizing upon or failures to
obtain or realize upon collateral, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstances that might
otherwise constitute a legal or equitable discharge or defense of a guarantor
(except as provided in Sections 11.4 and 11.5). Each Guarantor hereby waives
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company or right to require the prior disposition
of the assets of the Company to meet its obligations, protest, notice and all
demands whatsoever and covenants that this Guarantee will not be discharged
(except to the extent released pursuant to Section 11.4 or 11.5) except by
complete performance of the obligations contained in the Securities and this
Indenture.
(c) If any Holder or the Trustee is required by any court or
otherwise to return to either the Company or any Guarantor, or any Custodian,
trustee, or similar official acting in relation to either the Company or such
Guarantor, any amount paid by either the Company or such Guarantor to the
Trustee or such Holder, this Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect (except to the extent released
pursuant to Section 11.4 or 11.5). Each Guarantor agrees that it will not be
entitled to any right of subrogation in relation to the Holders in respect of
any obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby. Each Guarantor further agrees that, as between such
Guarantor, on the one hand, and the Holders and the Trustee, on the other hand,
(i) the maturity of the obligations guaranteed hereby may be accelerated as
provided in Section 6.2 for the purposes of this Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such acceleration as to the
Company of the obli-
90
<PAGE>
gations guaranteed hereby, and (ii) in the event of any declaration of
acceleration of those obligations as provided in Section 6.2, those obligations
(whether or not due and payable) will forthwith become due and payable by each
of the Guarantors for the purpose of this Guarantee.
(d) It is the intention of each Guarantor and the Company that the
obligations of each Guarantor hereunder shall be joint and several and in, but
not in excess of, the maximum amount permitted by applicable law. Accordingly,
if the obligations in respect of the Guarantee would be annulled, avoided or
subordinated to the creditors of any Guarantor by a court of competent
jurisdiction in a proceeding actually pending before such court as a result of a
determination both that such Guarantee was made without fair consideration and,
immediately after giving effect thereto, such Guarantor was insolvent or unable
to pay its debts as they mature or left with an unreasonably small capital, then
the obligations of such Guarantor under such Guarantee shall be reduced by such
court if and to the extent such reduction would result in the avoidance of such
annulment, avoidance or subordination; provided, however, that any reduction
-----------------
pursuant to this paragraph shall be made in the smallest amount as is strictly
necessary to reach such result. For purposes of this paragraph, "fair
consideration", "insolvency", "unable to pay its debts as they mature",
"unreasonably small capital" and the effective times of reductions, if any,
required by this paragraph shall be determined in accordance with applicable
law.
SECTION 11.2. Execution and Delivery of Guarantee.
-----------------------------------
Each Guarantor shall, by virtue of such Guarantor's execution and
delivery of this Indenture or such Guarantor's execution and delivery of an
indenture supplement pursuant to Section 11.3 hereof, be deemed to have signed
on each Security issued hereunder the notation of guarantee set forth on the
form of the Securities attached hereto as Exhibit A to the same extent as if the
signature of such Guarantor appeared on such Security.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the guarantee set forth in
Section 11.1 on behalf of each Guarantor. The notation of a guaranty set forth
on any Security shall be null and void and of no further effect with respect to
the guaranty of any Guarantor which, pursuant to Section 11.4 or 11.5, is
released from such guarantee.
SECTION 11.3. Future Subsidiary Guarantors.
----------------------------
Upon the acquisition by the Company or Guarantor of the Capital Stock
of any Person, if, as a result of such acquisition, such Person becomes a
Subsidiary (hereinafter any such Subsidiary being called a "Future Subsidiary
Guarantor") shall unconditionally guar-
91
<PAGE>
antee the obligations of the Company with respect to payment and performance of
the Securities and the other obligations of the Company under this Indenture to
the same extent that such obligations are guaranteed by the other Guarantors
pursuant to Section 11.1, and having the same priority in respect of Senior Debt
of such Future Subsidiary Guarantor as is provided in Article XII with respect
to the Guarantors; and, within 60 days of the date of such occurrence, such
Future Subsidiary Guarantor shall execute and deliver to the Trustee a
supplemental indenture making such Future Subsidiary Guarantor a party to this
Indenture; provided, however, that the foregoing provisions shall not apply to
-----------------
any Unrestricted Subsidiary.
SECTION 11.4. Guarantor May Consolidate, Etc., on Certain Terms.
-------------------------------------------------
(a) Nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of a Guarantor with or into
the Company or any other Guarantor. Upon any such consolidation or merger, the
guarantees (as set forth in Section 11.1) of the Guarantor which is not the
survivor of the merger or consolidation, and of any Subsidiary of such Guarantor
that is also a Guarantor, shall be released and shall no longer have any force
or effect.
(b) Nothing contained in this Indenture or the Securities shall
prevent any sale or conveyance of assets of any Guarantor (whether or not
constituting all or substantially all of the assets of such Guarantor) to any
Person, provided that the Company shall comply with the provisions of Section
--------
4.13, and provided further that, in the event that all or substantially all of
----------------
the assets of a Guarantor are sold or conveyed, the guarantees of such Guarantor
(as set forth in Section 11.1) shall be released and shall no longer have any
force or effect.
(c) Except as provided in Section 11.4(a) or Section 11.5, each
Guarantor shall not, directly or indirectly, consolidate with or merge with or
into another Person, unless (i) either (a) the Guarantor is the continuing
entity or (b) the resulting or surviving entity is corporation organized under
the laws of the United States, any state thereof or the District of Columbia and
expressly assumes by supplemental indenture all of the obligations of the
Guarantor in connection with the Securities and this Indenture; (ii) no Default
or Event of Default would occur as a consequence of (after giving effect, on a
pro forma basis, to) such transaction; and (iii) the Guarantor has delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation or merger, and if a supplemental indenture is required,
such supplemental indenture, comply with this Indenture and that all conditions
precedent herein relating to such transaction have been satisfied.
92
<PAGE>
(d) Upon any consolidation or merger of the Guarantor in
accordance with Section 11.4 hereof, the successor corporation formed by such
consolidation or into which the Guarantor is merged shall succeed to, and be
substituted for, and may exercise every right and power of, the Guarantor under
this Indenture with the same effect as if such successor corporation had been
named herein as the Guarantor, and when a successor corporation duly assumes all
of the obligations of the Guarantor pursuant hereto and pursuant to the
Securities, the Guarantor shall be released from such obligations and the
guarantee of such Guarantor shall no longer have any force or effect.
SECTION 11.5. Release of Guarantors.
---------------------
(a) Without any further notice or action being required by any
Person, any Guarantor, and each Subsidiary of such Guarantor that is also a
Guarantor, shall be fully and conditionally released and discharged from all
obligations under its guarantee and this Indenture upon (i) the sale or other
disposition of all or substantially all of the assets or properties of such
Guarantor, or 50% or more of the Capital Stock of any such Guarantor to Persons
other than the Company and its Subsidiaries, or (ii) the consolidation or merger
of any such Guarantor with any Person other than the Company or a Subsidiary of
the Company, if, as a result of such consolidation or merger, Persons other than
the Company and its Subsidiaries beneficially own more than 50% of the capital
stock of such Guarantor; provided that, in either such case, the Net Cash
--------
Proceeds of such sale, disposition, merger or consolidation are applied in
accordance with the provisions of Section 4.13; provided, further, that any such
-----------------
release and discharge shall occur only to the extent that all obligations of
such Guarantor under all of its guarantees of, and under all of its pledges of
assets or other security interests which secure, any Indebtedness of the Company
shall also terminate upon such release, sale or transfer.
(b) The releases and discharges set forth in Section 11.5(a)
shall be automatically effective in the case of releases and discharges effected
pursuant to clause (i) or (ii) of Section 11.5(a) by virtue of a sale,
disposition, consolidation or merger, on the date of consummation thereof. At
the written request of the Company, the Trustee shall promptly execute and
deliver appropriate instruments in forms reasonably acceptable to the Company
evidencing and further implementing any releases and discharges pursuant to the
foregoing provisions. If the Company desires the instruments evidencing or
implementing any releases or discharges to be executed prior to the
effectiveness of such releases and discharges as set forth above, such
instruments may be made conditional upon the occurrence of the events necessary
to cause the effectiveness of such releases and discharges, as specified in the
first sentence of this Section 11.5.
93
<PAGE>
(c) Notwithstanding the foregoing provisions of this Article XI,
(i) any Guarantor whose guarantee would otherwise be released pursuant to the
provisions of this Section 11.5 may elect, by written notice to the Trustee, to
maintain such guarantee in effect notwithstanding the event or events that
otherwise would cause the release of such guarantee (which election to maintain
such guarantee in effect may be conditional or for a limited period of time),
and (ii) any Subsidiary of the Company which is not a Guarantor may elect, by
written notice to the Trustee, to become a Guarantor (which election may be
conditional or for a limited period of time).
SECTION 11.6. Certain Bankruptcy Events.
-------------------------
Each Guarantor hereby covenants and agrees, to the fullest extent that
it may do so under applicable law, that in the event of the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Company, such
Guarantor shall not file (or join in any filing of), or otherwise seek to
participate in the filing of, any motion or request seeking to stay or to
prohibit (even temporarily) execution on the Guarantee and hereby waives and
agrees not to take the benefit of any such stay of execution, whether under the
Bankruptcy Law or otherwise.
ARTICLE XII
SUBORDINATION
SECTION 12.1. Securities Subordinated to Senior Debt.
--------------------------------------
The Company and the Guarantors and each Holder, by its acceptance of
Securities, agree that (a) the payment of the principal of and interest on the
Securities and (b) any other payment in respect of the Securities, including on
account of the acquisition or redemption of the Securities by the Company and
the Guarantors (including, without limitation, pursuant to Section 4.13 or
Section 10.1) is subordinated, to the extent and in the manner provided in this
Article XII, to the prior payment in full in Cash or Cash Equivalents of all
Senior Debt of the Company and the Guarantors and that these subordination
provisions are for the benefit of the holders of Senior Debt.
This Article XII shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of, or continue to hold,
Senior Debt, and such provisions are made for the benefit of the holders of
Senior Debt, and such holders are made obligees hereunder and any one or more of
them may enforce such provisions.
94
<PAGE>
SECTION 12.2. No Payment on Securities in Certain Circumstances.
-------------------------------------------------
(a) No payment (by set-off or otherwise) shall be made by or on
behalf of the Company or a Guarantor, as applicable, on account of the principal
of, premium, if any, or interest on the Securities (including any repurchases of
Securities), or on account of the redemption provisions of the Securities or any
Obligation in respect of the Securities, for cash or property, (i) upon the
maturity of any Senior Debt of the Company or such Guarantor, as applicable, by
lapse of time, acceleration (unless waived) or otherwise, unless and until all
principal of, premium, if any, and the interest on and fees in respect of such
Senior Debt are first paid in full in cash or Cash Equivalents (or such payment
is duly provided for) or otherwise to the extent holders of the Senior Debt
accept satisfaction of amounts due by settle ment in other than cash or Cash
Equivalents, or (ii) in the event of default in the payment of any principal of,
premium, if any, or interest on or fee in respect of Senior Debt of the Company
or such Guarantor, as applicable, when it becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise (a
"Payment Default"), unless and until such Payment Default has been cured or
waived or otherwise has ceased to exist.
(b) Upon (i) the happening of an event of default (other than a
Payment Default) that permits the holders of Senior Debt to declare such Senior
Debt to be due and payable and (ii) written notice of such event of default is
given to the Company and the Trustee by the Senior Bank Representative or the
holders of an aggregate of at least $20.0 million principal amount outstanding
of any other Senior Debt or their representative (a "Payment Notice"), then,
unless and until such event of default has been cured or waived or otherwise has
ceased to exist, no payment (by set-off or otherwise) may be made by or on
behalf of the Company, if the Company is an obligor on such Senior Debt, or any
Guarantor which is an obligor under such Senior Debt on account of the principal
of, premium, if any, or interest on the Securities (including any repurchases of
any of the Securities), or on account of the redemption provisions of the
Securities or any Obligation in respect of the Securities, in any such case.
Notwithstanding the foregoing, unless the Senior Debt in respect of which such
event of default exists has been declared due and payable in its entirety within
179 days after the Payment Notice is delivered as set forth above (the "Payment
Blockage Period") (and such declaration has not been rescinded or waived), at
the end of the Payment Blockage Period, the Company and the Guarantors shall be
required to pay all sums not paid to the Holders of the Securities during the
Payment Blockage Period due to the foregoing prohibitions and to resume all
other payments as and when due on the Securities. Any number of Payment Notices
may be given; provided, however, that (i) not more than one Payment Notice shall
-----------------
be given within a period of any 360 consecutive days, and (ii) no default that
existed upon the date of such Payment Notice or the commencement of such Payment
Blockage Period (whether
95
<PAGE>
or not such event of default is on the same issue of Senior Debt) shall be made
the basis for the commencement of any other Payment Blockage Period.
(c) In furtherance of the provisions of Section 12.1, in the
event that, notwithstanding the foregoing provisions of this Section 12.2, any
payment or distribution of assets of the Company or any Guarantor shall be
received by the Trustee or the Holders at a time when such payment or
distribution is prohibited by the provisions of this Section 12.2, such payment
or distribution shall be held in trust for the benefit of the holders of such
Senior Debt, and shall be paid or delivered by the Trustee or such Holders, as
the case may be, to the holders of such Senior Debt remaining unpaid or
unprovided for or to their representative or representatives, or to the trustee
or trustees under any indenture pursuant to which any instruments evidencing any
of such Senior Debt may have been issued, ratably according to the aggregate
principal amounts remaining unpaid on account of such Senior Debt held or
represented by each, for application to the payment of all such Senior Debt
remaining unpaid, to the extent necessary to pay or provide for the payment of
all such Senior Debt in full in cash or Cash Equivalents or otherwise to the
extent holders of Senior Debt accept satisfaction of amounts due by settlement
in other than cash or Cash Equivalents after giving effect to any concurrent
payment or distribution to the holders of such Senior Debt.
SECTION 12.3. Securities Subordinated to Prior Payment of All Senior
------------------------------------------------------
Debt on Dissolution, Liquidation or Reorganization.
- --------------------------------------------------
Upon any distribution of assets of the Company or any Guarantor or
upon any dissolution, winding up, total or partial liquidation or reorganization
of the Company or a Guarantor, whether voluntary or involuntary, in bankruptcy,
insolvency, receivership or a similar proceeding or upon assignment for the
benefit of creditors or any marshalling of assets or liabilities:
(a) the holders of all Senior Debt of the Company or such
Guarantor, as applicable, will first be entitled to receive payment in full in
cash or Cash Equivalents (or have such payment duly provided for) or otherwise
to the extent holders of Senior Debt accept satisfaction of amounts due by
settlement in other than cash or Cash Equivalents before the Holders are
entitled to receive any payment on account of the principal of, premium, if any,
and interest on the Securities or any Obligation in respect of the Securities
(other than Junior Securities);
(b) any payment or distribution of assets of the Company or such
Guarantor of any kind or character from any source, whether in cash, property or
securities (other than Junior Securities) to which the Holders or the Trustee on
behalf of the Holders would be entitled (by set-off or otherwise), except for
the provisions of this Article XII, shall
96
<PAGE>
be paid by the liquidating trustee or agent or other person making such a
payment or distribution directly to the holders of such Senior Debt or their
representative to the extent necessary to make payment in full (or to have such
payment duly provided for) on all such Senior Debt remaining unpaid, after
giving effect to any concurrent payment or distribution to the holders of such
Senior Debt; and
(c) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company or any Guarantor (other than
Junior Securities) shall be received by the Trustee or the Holders at a time
when such payment or distribution is prohibited by the foregoing provisions,
such payment or distribution shall be held in trust for the benefit of the
holders of such Senior Debt, and shall be paid or delivered by the Trustee or
such Holders, as the case may be, to the holders of such Senior Debt remaining
unpaid to their representative or representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing any of such
Senior Debt may have been issued, ratably according to the aggregate principal
amounts remaining unpaid on account of such Senior Debt held or represented by
each, for application to the payment of all such Senior Debt remaining unpaid,
to the extent necessary to pay all such Senior Debt in full in cash or Cash
Equivalents after giving effect to any concurrent payment or distribution to the
holders of such Senior Debt.
SECTION 12.4. Securityholders to Be Subrogated to Rights of Holders
-----------------------------------------------------
of Senior Debt.
- --------------
Subject to the payment in full in Cash or Cash Equivalents of all
Senior Debt of the Company or any Guarantor as provided herein, the Holders of
Securities shall be subrogated to the rights of the holders of such Senior Debt
to receive payments or distributions of assets of the Company applicable to the
Senior Debt until all amounts owing on the Securities shall be paid in full, and
for the purpose of such subrogation no such payments or distributions to the
holders of such Senior Debt by or on behalf of the Company or any Guarantor, or
by or on behalf of the Holders by virtue of this Article XII, which otherwise
would have been made to the Holders shall, as between the Company or any
Guarantor and the Holders, be deemed to be payment by the Company or any
Guarantor or on account of such Senior Debt, it being understood that the
provisions of this Article XII are and are intended solely for the purpose of
defining the relative rights of the Holders, on the one hand, and the holders of
such Senior Debt, on the other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article XII shall have been
applied, pursuant to the provisions of this Article XII, to the payment of
amounts payable under Senior Debt of the Company or any Guarantor, then the
Holders shall be entitled to receive from the holders of
97
<PAGE>
such Senior Debt any payments or distributions received by such holders of
Senior Debt in excess of the amount sufficient to pay all amounts payable under
or in respect of such Senior Debt in full in Cash or Cash Equivalents.
SECTION 12.5. Obligations of the Company and the Guarantors
---------------------------------------------
Unconditional.
- -------------
Nothing contained in this Article XII or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as between the Company and
any Guarantors and the Holders, the obligation of each such Person, which is
absolute and unconditional, to pay to the Holders the principal of, premium, if
any, and interest on the Securities as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall affect the
relative rights of the Holders and creditors of the Company and the Guarantors
other than the holders of the Senior Debt, nor shall anything herein or therein
prevent the Trustee or any Holder from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article XII, of the holders of Senior Debt in respect
of cash, property or securities of the Company and the Guarantors received upon
the exercise of any such remedy. Notwithstanding anything to the contrary in
this Article XII or elsewhere in this Indenture or in the Securities, upon any
distribution of assets of the Company and the Guarantors referred to in this
Article XII, the Trustee, subject to the provisions of Sections 7.1 and 7.2, and
the Holders shall be entitled to rely upon any order or decree made by any court
of competent jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, or a certificate of the liquidating
trustee or agent or other Person making any distribution to the Trustee or to
the Holders for the purpose of ascertaining the Persons entitled to participate
in such distribution, the holders of the Senior Debt and other Indebtedness of
the Company or any Guarantor, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article XII so long as such court has been apprised of the provisions
of, or the order, decree or certificate makes reference to, the provisions of
this Article XII. Nothing in this Section 12.5 shall apply to the claims of, or
payments to, the Trustee under or pursuant to Section 7.7.
SECTION 12.6. Trustee Entitled to Assume Payments Not Prohibited in
-----------------------------------------------------
Absence of Notice.
- -----------------
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee unless and until a Trust Officer of the Trustee or any Paying Agent
shall have received, no later than one Business Day prior to such payment,
written notice thereof from the Company or from one or more holders of Senior
Debt or from any representative therefor and, prior to the receipt
98
<PAGE>
of any such written notice, the Trustee, subject to the provisions of Sections
7.1 and 7.2, shall be entitled in all respects conclusively to assume that no
such fact exists.
SECTION 12.7. Application by Trustee of Assets Deposited with It.
--------------------------------------------------
Amounts deposited in trust with the Trustee pursuant to and in
accordance with Article VIII shall be for the sole benefit of Securityholders
and, to the extent (i) the making of such deposit by the Company shall not be in
contravention of any term or provision of the Credit Agreement and (ii)
allocated for the payment of Securities, shall not be subject to the
subordination provisions of this Article XII. Otherwise, any deposit of assets
with the Trustee or the Agent (whether or not in trust) for the payment of
principal of or interest on any Securities shall be subject to the provisions of
Sections 12.1, 12.2, 12.3 and 12.4; provided that, if prior to one Business Day
--------
preceding the date on which by the terms of this Indenture any such assets may
become distributable for any purpose (including without limitation, the payment
of either principal of or interest on any Security) the Trustee or such Paying
Agent shall not have received with respect to such assets the written notice
provided for in Section 12.6, then the Trustee or such Paying Agent shall have
full power and authority to receive such assets and to apply the same to the
purpose for which they were received, and shall not be affected by any notice to
the contrary which may be received by it on or after such date.
SECTION 12.8. Subordination Rights Not Impaired by Acts or Omissions
------------------------------------------------------
of the Company, the Guarantors or Holders of Senior Debt.
- --------------------------------------------------------
No right of any present or future holders of any Senior Debt to
enforce subordination provisions contained in this Article XII shall at any time
in any way be prejudiced or impaired by any act or failure to act on the part of
the Company or any Guarantor or by any act or failure to act, in good faith, by
any such holder, or by any noncompliance by the Company or any Guarantor with
the terms of this Indenture, regardless of any knowledge thereof which any such
holder may have or be otherwise charged with. The holders of Senior Debt may
extend, renew, modify or amend the terms of the Senior Debt or any security
therefor and release, sell or exchange such security and otherwise deal freely
with the Company and the Guarantors, all without affecting the liabilities and
obligations of the parties to this Indenture or the Holders.
SECTION 12.9. Securityholders Authorize Trustee to Effectuate
-----------------------------------------------
Subordination of Securities.
- ---------------------------
Each Holder of the Securities by his acceptance thereof authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provisions contained in
this Article XII and to protect the rights
99
<PAGE>
of the Holders pursuant to this Indenture, and appoints the Trustee his
attorney-in-fact for such purpose, including, in the event of any dissolution,
winding up, liquidation or reorganization of the Company or any Guarantor
(whether in bankruptcy, insolvency or receivership proceedings or upon an
assignment for the benefit of creditors or any other marshalling of assets and
liabilities of the Company or any Guarantor), the immediate filing of a claim
for the unpaid balance of his Securities in the form required in said
proceedings and cause said claim to be approved. If the Trustee does not file a
proper claim or proof of debt in the form required in such proceeding prior to
30 days before the expiration of the time to file such claim or claims, then the
holders of the Senior Debt or their representative are or is hereby authorized
to have the right to file and are or is hereby authorized to file an appropriate
claim for and on behalf of the Holders of said Securities. Nothing herein
contained shall be deemed to authorize the Trustee or the holders of Senior Debt
or their representative to authorize or consent to or accept or adopt on behalf
of any Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee or the holders of Senior Debt or their representative to
vote in respect of the claim of any Securityholder in any such proceeding.
SECTION 12.10. Right of Trustee to Hold Senior Debt.
------------------------------------
The Trustee shall be entitled to all of the rights set forth in this
Article XII in respect of any Senior Debt at any time held by it to the same
extent as any other holder of Senior Debt, and nothing in this Indenture shall
be construed to deprive the Trustee of any of its rights as such holder.
SECTION 12.11. Article XII Not to Prevent Events of Default.
--------------------------------------------
The failure to make a payment on account of principal of, premium, if
any, or interest on the Securities by reason of any provision of this Article
XII shall not be construed as preventing the occurrence of a Default or an Event
of Default under Section 6.1 or in any way limit the rights of the Trustee or
any Holder to pursue any other rights or remedies with respect to the
Securities.
SECTION 12.12. No Fiduciary Duty of Trustee to Holders of Senior
-------------------------------------------------
Debt.
- ----
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders (other than
for its willful misconduct or negligence) if it shall in good faith mistakenly
pay over or distribute to the Holders of Securities or the Company, any
Guarantor or any other Person, cash, property or securities to which any holders
of Senior Debt shall be entitled by virtue of this Article XII or otherwise.
Nothing in this Section 12.12 shall affect the obligation of any other such
Person to hold such
100
<PAGE>
payment for the benefit of, and to pay such payment over to, the holders of
Senior Debt or their representative. In the event of any conflict between the
fiduciary duty of the Trustee to the Holders of Securities and to the holders of
Senior Debt, the Trustee is expressly authorized to resolve such conflict in
favor of the Holders.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. TIA Controls.
------------
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of the TIA, the imposed duties, upon
qualification of this Indenture under the TIA, shall control.
SECTION 13.2. Notices.
-------
Any notices or other communications to the Company or any Guarantor,
Paying Agent, Registrar, Securities Custodian, transfer agent or the Trustee
required or permitted hereunder shall be in writing, and shall be sufficiently
given if made by hand delivery, by telex, by telecopier or registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
if to the Company or any Guarantor:
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Attention: Philip M. Kazin
Telephone: (516) 467-3140
Telecopy: (516) 471-2395
if to the Trustee:
Fleet National Bank
777 Main Street
Hartford, CT 06115
Attention: Corporate Trust Administration
Telephone: (860) 986-2064
Telecopy: (860) 986-7920
101
<PAGE>
If to the Senior Bank Representative:
Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Andrew Tymoszewicz
Telephone: (212) 270-6000
Telecopy: (212)270-3279
Any party by notice to each other party may designate additional or
different addresses as shall be furnished in writing by such party. Any notice
or communication to any party shall be deemed to have been given or made as of
the date so delivered, if personally delivered; when answered back, if telexed;
when receipt is acknowledged, if telecopied; and five Business Days after
mailing if sent by registered or certified mail, postage prepaid (except that a
notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be mailed
to him or her by first-class mail or other equivalent means at his or her
address as it appears on the registration books of the Registrar and shall be
sufficiently given to him or her if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.3. Communications by Holders with Other Holders.
--------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other Person shall
have the protection of TIA (S) 312(c).
SECTION 13.4. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company or any Guarantor to the
Trustee to take any action under this Indenture, such Person shall furnish to
the Trustee:
102
<PAGE>
(1) an Officers' Certificate (in form and substance
reasonably satisfactory to the Trustee) stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been met; and
(2) an Opinion of Counsel (in form and substance
reasonably satisfactory to the Trustee) stating that, in the opinion of
such counsel, all such conditions precedent have been met;
provided, however, that in the case of any such request or application as to
- -----------------
which the furnishing of particular documents is specifically required by any
provision of this Indenture, no additional certificate or opinion need be
furnished under this Section 13.4.
SECTION 13.5. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been met; and
(4) a statement as to whether or not, in the opinion of
each such Person, such condition or covenant has been met; provided,
--------
however, that with respect to matters of fact an Opinion of Counsel may
-------
may rely on an Officers' Certificate or certificates of public officials.
103
<PAGE>
SECTION 13.6. Rules by Trustee, Paying Agent, Registrar.
-----------------------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 13.7. Non-Business Days.
-----------------
If a payment date is not a Business Day at such place, payment may be
made at such place on the next succeeding day that is a Business Day, and no
interest shall accrue for the intervening period.
SECTION 13.8. Governing Law.
-------------
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE COMPANY AND THE GUARANTORS HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND THE SECURITIES, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH OF THE COMPANY AND
THE GUARANTORS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO
SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH THEY MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY SECURITYHOLDER TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE COMPANY AND THE GUARANTORS IN ANY OTHER
JURISDICTION.
104
<PAGE>
SECTION 13.9. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any Guarantor or any of their respective
Subsidiaries. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 13.10. No Recourse against Others.
--------------------------
No direct or indirect stockholder, employee, officer or director, as
such, past, present or future of the Company, the Guarantors or any successor
entity, shall have any personal liability in respect of the obligations of the
Company or the Guarantors under the Securities or this Indenture by reason of
his, her or its status as such stockholder, employee, officer or director. Each
Securityholder by accepting a Security waives and releases all such liability.
Such waiver and release are part of the consideration for the issuance of the
Securities.
SECTION 13.11. Successors.
----------
All agreements of the Company and the Guarantors in this Indenture and
the Securities shall bind their respective successors. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 13.12. Duplicate Originals.
-------------------
All parties may sign any number of copies or counterparts of this
Indenture. Each signed copy or counterpart shall be an original, but all of them
together shall represent the same agreement.
SECTION 13.13. Severability.
------------
In case any one or more of the provisions in this Indenture or in the
Securities shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
105
<PAGE>
SECTION 13.14. Table of Contents, Headings, Etc.
---------------------------------
The Table of Contents and headings of the Articles and the Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms or provisions hereof.
106
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
TWIN LABORATORIES INC.
By:_____________________________________
Name:
Title:
ADVANCED RESEARCH PRESS, INC.
By:_____________________________________
Name:
Title:
TLG LABORATORIES HOLDING CORP.
By:_____________________________________
Name:
Title:
107
<PAGE>
FLEET NATIONAL BANK, as Trustee, Registrar,
Paying Agent and Securities Custodian
By:__________________________________
Name:
Title:
108
<PAGE>
Exhibit A
TWIN LABORATORIES INC.
10 1/4% SENIOR SUBORDINATED NOTE
DUE 2006
CUSIP: 901645AA9/901645AB7
No. $________
Twin Laboratories Inc., a Utah corporation (hereinafter called the
"Company," which term includes any successors under the Indenture hereinafter
referred to), for value received, hereby promises to pay to ___________________,
or registered assigns, the principal sum of ________ Dollars, on May 15, 2006.
Interest Payment Dates: May 15 and November 15 commencing November 15,
1996.
Record Dates: May 1 and November 1
Reference is made to the further provisions of this Security on the
reverse side, which will, for all purposes, have the same effect as if set forth
at this place.
IN WITNESS WHEREOF, the Company has caused this Instrument to be duly
executed under its corporate seal.
Dated: May 7, 1996
TWIN LABORATORIES INC., a
Utah corporation
[Seal]
By:________________________________________
Name:
Title:
Attest: ______________________
Secretary
A-1
<PAGE>
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-mentioned
Indenture.
FLEET NATIONAL BANK
as Trustee and
Authenticating Agent
By:______________________
Authorized Signatory
A-2
<PAGE>
TWIN LABORATORIES INC.
10 1/4% SENIOR SUBORDINATED NOTE
DUE 2006
Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Security may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"),
to the Company or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein./1/
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") THAT IS THREE YEARS (OR SUCH SHORTER PERIOD
THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(K) AS PERMITTING THE RESALE
BY NON-AFFILIATES OF RESTRICTED SECURITIES WITHOUT RESTRICTION) AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATED PERSON OF THE COMPANY WAS THE
_________________
/1/ This paragraph should only be added if the Security is issued in global
form.
A-3
<PAGE>
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) EXCEPT (A) TO
THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) PURSUANT TO RULE 144A, FOR
SO LONG AS IT IS AVAILABLE, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT
OCCUR OUTSIDE THE UNITED STATES TO PERSONS OTHER THAN U.S. PERSONS, BOTH
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(A)(1),(2),(3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR
FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S
AND THE TRUSTEE'S RIGHT (AS DEFINED IN THE INDENTURE UNDER WHICH THESE
SECURITIES WERE ISSUED) PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT
TO CLAUSE (D),(E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN
EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO
THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE./2/
1. Interest.
--------
_________________
/2/ This paragraph should be included only for the Transfer Restricted
Securities.
A-4
<PAGE>
Twin Laboratories Inc., a Utah corporation (hereinafter called the
"Company," which term includes any successors under the Indenture hereinafter
referred to), promises to pay interest on the principal amount of this Security
at the rate of 10 1/4% per annum from May 7, 1996 until maturity. To the extent
it is lawful, the Company promises to pay interest on any interest payment due
but unpaid on such principal amount at a rate of 10 1/4% per annum compounded
semi-annually.
The Company will pay interest semi-annually on May 15 and November 15
of each year or, if any such day is not a Business Day, on the next succeeding
Business Day (each, an "Interest Payment Date"), commencing November 15, 1996.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid on the Securities, from
the date of issuance. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
2. Method of Payment.
-----------------
The Company shall pay interest on the Securities (except defaulted
interest) to the Persons who are the registered Holders at the close of business
on the May 1 or November 1 immediately preceding the Interest Payment Date.
Holders must surrender Securities to a Paying Agent to collect principal
payments. Except as provided below, the Company shall pay principal and interest
in such coin or currency of the United States of America as at the time of
payment shall be legal tender for payment of public and private debts ("Cash").
The Securities will be payable as to principal, premium, if any, and interest,
and the Securities may be presented for registration of transfer or exchange, at
the office or agency of the Company maintained for such purpose within or
without the Borough of Manhattan, the City and State of New York or, at the
option of the Company, payment of interest may be made by check mailed to the
Holders at their addresses set forth in the register of Holders, and provided
--------
that payment by wire transfer of immediately available funds will be required
with respect to principal of and interest and premium on all Global Securities
and all other Securities the Holders of which shall have provided wire transfer
instructions to an account within the United States to the Company or the Paying
Agent. Until otherwise designated by the Company, the Company's office or agency
will be the corporate trust office of the Trustee presently located at the
Trustee's agency at Shawmut Trust Company, 14 Wall Street, 8th Floor, Window No.
2, New York, New York 10005.
3. Paying Agent and Registrar.
--------------------------
A-5
<PAGE>
Initially, Fleet National Bank (the "Trustee," which term includes any
successor Trustee under the Indenture) will act as Paying Agent and Registrar.
The Company may change any Paying Agent, Registrar or co-Registrar without
notice to the Holders. The Company or any of its Subsidiaries may, subject to
certain exceptions, act as Paying Agent, Registrar or co-Registrar.
4. Indenture.
---------
The Company issued the Securities under an Indenture, dated as of May
7, 1996 (the "Indenture"), among the Company, the Guarantors named therein and
the Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act, as in effect on the date of the Indenture. The Securities
are subject to all such terms, and Holders of Securities are referred to the
Indenture and said Act for a statement of them. The Securities are senior
subordinated, unsecured general obligations of the Company limited in aggregate
principal amount to $100,000,000. The Securities are subordinated in right of
payment to certain other debt obligations of the Company. The Securities are
guaranteed on a senior subordinated basis by each of the Company's present and
future Subsidiaries other than any Unrestricted Subsidiaries (the "Guarantors").
5. Redemption.
----------
The Securities may be redeemed, at the option of the Company, in whole
or in part, at any time on or after May 15, 2001, at the Redemption Price
(expressed as a percentage of principal amount) set forth below with respect to
the indicated Redemption Date, together with any accrued but unpaid interest to
the Redemption Date (subject to the right of Holders of record on a Record Date
to receive interest due on the Interest Payment Date that is on or prior to such
Redemption Date). The Securities may not be so redeemed prior to May 15, 2001,
except as provided in the immediately following paragraph.
<TABLE>
<CAPTION>
If redeemed during
the 12-month period
commencing May 15 Redemption Price
----------------- ----------------
<S> <C>
2001............................ 105.125%
2002............................ 102.562%
2003............................ 101.281%
2004 and thereafter............. 100.000%
</TABLE>
A-6
<PAGE>
Notwithstanding the foregoing, prior to May 15, 1999, the Company may
redeem from time to time up to 35% of the aggregate principal amount of the
Securities originally outstanding at a redemption price of 109 1/2% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the redemption date, with the net proceeds of one or more Equity Offerings;
provided, that at least 65% of the aggregate principal amount of the Securities
- --------
originally outstanding remain outstanding immediately after the occurrence of
such redemption; provided, further, that such notice of redemption shall be sent
-----------------
within 30 days after the date of closing of any such Equity Offering, and such
redemption shall occur within 60 days after the date such notice is sent.
Any such redemption will comply with Article III of the Indenture.
6. Notice of Redemption.
--------------------
Notice of redemption will be sent by first class mail, at least 30
days and not more than 60 days prior to the Redemption Date to the Holder of
each Security to be redeemed at such Holder's last address as then shown upon
the registry books of the Registrar. Securities may be redeemed in part in
multiples of $1,000 only.
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Securities called for redemption shall
have been deposited with the Paying Agent on such Redemption Date and payment of
the Securities called for redemption is not otherwise prohibited, the Securities
called for redemption will cease to bear interest and the only right of the
Holders of such Securities will be to receive payment of the Redemption Price.
7. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in fully registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder may register
the transfer of Securities in accordance with the Indenture. No service charge
will be made for any registration of transfer or exchange of the Securities, but
the Company may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes or other governmental
charge payable in connection therewith. The Registrar need not register the
transfer of or exchange any Securities selected for redemption.
A-7
<PAGE>
8. Persons Deemed Owners.
---------------------
The registered Holder of a Security may be treated as the owner of it
for all purposes.
9. Unclaimed Money.
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee and the Paying Agent(s) will pay the money back to
the Company at its written request. After that, all liability of the Trustee and
any such Paying Agent(s) with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
-----------------------------------------
Except as set forth in the Indenture, if the Company irrevocably
deposits with the Trustee, in trust, for the benefit of the Holders, Cash, U.S.
Government Obligations or a combination thereof, in such amounts as will be
sufficient in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
Securities to redemption or maturity and comply with the other provisions of the
Indenture relating thereto, the Company will be discharged from certain
provisions of the Indenture and the Securities (including the restrictive
covenants described in paragraph 12 below, but excluding their obligation to
pay the principal of and interest on the Securities).
11. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may under certain circumstances amend or supplement
the Indenture or the Securities to, among other things, cure any ambiguity,
defect or inconsistency, or make any other change that does not adversely affect
the rights of any Holder of a Security.
12. Restrictive Covenants.
---------------------
The Indenture imposes certain limitations on the ability of the
Company and the Subsidiary Guarantors to, among other things, incur additional
Indebtedness and Dis-
A-8
<PAGE>
qualified Capital Stock, pay dividends or make certain other restricted
payments, enter into certain transactions with Affiliates, incur Liens, sell
assets, merge or consolidate with any other Person or transfer (by lease,
assignment or otherwise) substantially all of the properties and assets of the
Company. The limitations are subject to a number of important qualifications and
exceptions. The Company must periodically report to the Trustee on compliance
with such limitations.
13. Repurchase at Option of Holder.
------------------------------
(a) If there is a Change of Control, the Company shall be required to
offer to purchase on the Change of Control Purchase Date all outstanding
Securities at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the Change of Control Purchase
Date. Holders of Securities will receive a Change of Control Offer from the
Company prior to any related Change of Control Purchase Date and may elect to
have such Securities purchased by completing the form entitled "Option of Holder
to Elect Purchase" appearing below.
(b) The Indenture imposes certain limitations on the ability of the
Company and the Subsidiary Guarantors to sell assets. In the event the proceeds
from a permitted Asset Sale exceed certain amounts, as specified in the
Indenture, the Company generally will be required either to reinvest the
proceeds of such Asset Sale in its business, use such proceeds to retire debt,
or to make an asset sale offer to purchase a certain amount of each Holder's
Securities at 100% of the principal amount thereof, plus accrued interest, if
any, to the purchase date, as more fully set forth in the Indenture
14. Notation of Guarantee.
---------------------
As set forth more fully in the Indenture, the Persons constituting
Guarantors from time to time, in accordance with the provisions of the
Indenture, unconditionally and jointly and severally guarantee, in accordance
with Section 11.1 of the Indenture, to the Holder and to the Trustee and its
successors and assigns, that (i) the principal of and premium of and interest on
the Security will be paid, whether at the Maturity Date or Interest Payment
Dates, by acceleration, call for redemption or otherwise, and all other
obligations of the Company to the Holders or the Trustee under the Indenture of
this Security will be promptly paid in full or performed, all in accordance with
the terms of the Indenture and this Security, and (ii) in the case of any
extension of payment or renewal of this Security or any of such other
obligations, they will be paid in full when due or performed in accordance with
the terms of such extension or renewal, whether at the Maturity Date, as so
extended, by acceleration or otherwise. Such guarantees shall cease to apply,
and shall be null and void, with respect to any Guarantor who, pursuant
A-9
<PAGE>
to Article XI of the Indenture, is released from its guarantees, or whose
guarantees otherwise cease to be applicable pursuant to the terms of the
Indenture.
15. Ranking.
-------
Payment of principal, premium, if any, and interest on the Securities
is subordinated, in the manner and to the extent set forth in the Indenture, to
the prior payment in full of all Senior Debt.
16. Successors.
----------
When a successor assumes all the obligations of its predecessor under
the Securities and the Indenture, the predecessor will be released from those
obligations.
17. Defaults and Remedies.
---------------------
If an Event of Default occurs and is continuing (other than an Event
of Default relating to certain events of bankruptcy, insolvency or
reorganization), then in every such case, unless the principal of all of the
Securities shall have already become due and payable, either the Trustee or the
Holders of 25% in aggregate principal amount of Securities then outstanding may
declare all the Securities to be due and payable in the manner and with the
effect provided in the Indenture. Holders of Securities may not enforce the
Indenture or the Securities except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before it enforces the Indenture or the
Securities. Subject to certain limitations, Holders of a majority in aggregate
principal amount of the Securities then outstanding may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders of
Securities notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest), if it determines that withholding
notice is in their interest.
18. Trustee or Agent Dealings with Company.
--------------------------------------
The Trustee and each Agent under the Indenture, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates as if it were not the Trustee and such Agent.
A-10
<PAGE>
19. No Recourse Against Others.
--------------------------
No direct or indirect stockholder, employee, officer or director, as
such, past, present or future, of the Company, the Guarantors or any successor
entity shall have any personal liability in respect of the obligations of the
Company or the Guarantors under the Securities or the Indenture by reason of his
or its status as such stockholder, employee, officer or director. Each Holder of
a Security by accepting a Security waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the
Securities.
20. Authentication.
--------------
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this
Security.
21. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
22. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
23. Additional Rights of Holders of Securities.
------------------------------------------
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
Twin Laboratories Inc.
2122 Smithtown Avenue
Ronkonkoma, NY 11779
Attn: Corporate Secretary
A-11
<PAGE>
ASSIGNMENT
I or we assign this Security to
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of assignee
_________________________
and irrevocably appoint ___________ agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
Dated: __________ Signed: ______________________________
__________________________________________________________
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee**
_________________
** NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized Signature Guaranty Programs: (i)
The Securities Transfer Agent Medallion Program (Stamp); (ii) The New York
Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion
Program (SEMP); or (iv) in such other guarantee program acceptable to the
Trustee.
A-12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.13 or Article X of the Indenture, check the appropriate
box: [_] Section 4.13 [_] Article X
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.13 or Article X of the Indenture, as the case
may be, state the amount you want to be purchased: $________
Date:________________ Signature:__________________________
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee**
_________________
** NOTICE: The Signature must be guaranteed by an Institution which is a
member of one of the following recognized Signature Guaranty Programs: (i)
The Securities Transfer Agent Medallion Program (Stamp); (ii) The New York
Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion
Program (SEMP); or (iv) in such other guarantee program acceptable to the
Trustee.
A-13
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES/(3)/
The following exchanges of a part of this Global Security for
Definitive Securities have been made:
<TABLE>
<CAPTION>
Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global authorized officer of
Principal Amount Principal Amount Security following Trustee or
Date of of this Global of this Global such decrease (or Securities
Exchange Security Security increase) Custodian
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
_________________
/(3)/ This schedule should only be added if the Security is issued in global
form.
A-14
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
SECURITIES
Re: 10 1/4% SENIOR SUBORDINATED NOTES DUE 2006 OF TWIN LABORATORIES INC.
This Certificate relates to $______ principal amount of Securities held in
(check applicable box) _____ book-entry or ______ definitive form by _____ (the
"Transferor").
The Transferor (check applicable box):
[_] has requested the Registrar by written order to deliver in exchange
for its beneficial interest in the Global Security held by the Depositary a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial interest
in such Global Security (or the portion thereof indicated above); or
[_] has requested the Registrar by written order to exchange or register
the transfer of a Security or Securities.
In connection with such request and in respect of each such Security,
the Transferor does hereby certify that Transferor is familiar with the
Indenture relating to the above-captioned Securities and as provided in Section
2.6 of such Indenture, the transfer of this Security does not require
registration under the Securities Act (as defined below) because (check
applicable box):
[_] Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.6(a)(ii)(A) or Section
2.6(d)(i)(A) of the Indenture).
[_] Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended
(the "Secu rities Act")) in reliance on Rule 144A (in satisfaction of Section
2.6(a)(ii)(B) or Section 2.6(d)(i)(B) of the Indenture) or pursuant to an
effective registration statement under the Securities Act (in satisfaction of
Section 2.6(a)(ii)(C) or Section 2.6(d)(i)(C) of the Indenture).
A-15
<PAGE>
[_] Such Security is being transferred in accordance with Rule 144 under
the Securities Act, or pursuant to an exemption from registration in accordance
with Regulation S under the Securities Act or to an institutional "accredited
investor" within the meaning of Rule 501(A)(1), (2), (3) or (7) under the
Securities Act that is acquiring the Security for its own account, or for the
account of such an institutional accredited investor, in each case in a minimum
principal amount of $100,000, not with a view to or for distribution in
violation of the Securities Act (in satisfaction of Section 2.6(a)(ii)(C) or
Section 2.6(d)(i)(C) of the Indenture).
[_] Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act,
other than Rule 144A, in accordance with Rule 144 under the Securities Act, or
to an institutional "accredited investor" within the meaning of Rule 501(A)(1),
(2), (3) or (7) under the Securities Act that is acquiring the Security for its
own account, or for the account of such an institutional accredited investor, in
each case in a minimum principal amount of $100,000, not with a view to or for
distribution in violation of the Securities Act, and an Opinion of Counsel to
the effect that such transfer does not require registration under the Securities
Act accompanies this Certificate (in satisfaction of Section 2.6(a)(ii)(C) or
Section 2.6(d)(i)(C) of the Indenture).
_________________________________
[INSERT NAME OF TRANSFEROR]
By:______________________________
Date:__________________________
A-16
<PAGE>
EXECUTION COPY
===============================================================================
TLG LABORATORIES HOLDING CORP.
TWIN LABORATORIES INC.
_______________________________________________________
$68,000,000
CREDIT AND GUARANTEE
AGREEMENT
May 7, 1996
_______________________________________________________
CHEMICAL BANK,
as Administrative Agent
and
THE BANK OF NEW YORK,
as Documentation Agent
===============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. DEFINITIONS.................................................. 2
1.1 Defined Terms................................................ 2
1.2 Other Definitional Provisions; Financial Calculations......... 26
SECTION 2. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS..................... 26
2.1 Term Loans.................................................... 26
2.2 Procedure for Term Loan Borrowing............................. 27
2.3 Repayment of Term Loans....................................... 27
2.4 Evidence of Term Loan Debt.................................... 27
SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS.............. 28
3.1 Revolving Credit Commitments.................................. 28
3.2 Procedure for Revolving Credit Borrowing...................... 29
3.3 Commitment and Other Fees..................................... 29
3.4 Termination or Reduction of Commitments....................... 30
3.5 Repayment of Revolving Credit Loans; Evidence of Debt......... 30
3.6 Swing Line Commitment......................................... 31
3.7 Repayment of Swing Line Loans; Evidence of Debt............... 31
3.8 Procedure for Borrowing Swing Line Loans...................... 32
3.9 Swing Line Loan Participations................................ 33
3.10 L/C Commitment................................................ 34
3.11 Procedure for Issuance of Letters of Credit................... 35
3.12 Fees, Commissions and Other Charges........................... 35
3.13 L/C Participations............................................ 36
3.14 Reimbursement Obligation of the Borrower...................... 37
3.15 Obligations Absolute.......................................... 38
3.16 Letter of Credit Payments..................................... 38
3.17 Application................................................... 39
3.18 Quarterly Reports............................................. 39
SECTION 4. GENERAL PROVISIONS APPLICABLE TO EXTENSIONS OF CREDIT......... 39
4.1 Optional and Mandatory Prepayments............................ 39
4.2 Conversion and Continuation Options........................... 41
4.3 Minimum Amounts and Maximum Number of Tranches................ 42
4.4 Interest Rates and Payment Dates.............................. 42
4.5 Computation of Interest and Fees.............................. 42
4.6 Inability to Determine Interest Rate.......................... 43
4.7 Pro Rata Treatment and Payments............................... 43
4.8 Illegality.................................................... 44
4.9 Requirements of Law........................................... 45
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
4.10 Taxes......................................................... 46
4.11 Indemnity..................................................... 49
4.12 Change of Lending Office; Filing of Certificates
or Documents.................................................. 49
4.13 Replacement Lenders........................................... 50
SECTION 5. REPRESENTATIONS AND WARRANTIES................................ 50
5.1 Financial Condition........................................... 50
5.2 No Change..................................................... 51
5.3 Existence; Compliance with Law................................ 51
5.4 Power; Authorization; Enforceable Obligations................. 52
5.5 No Legal Bar.................................................. 52
5.6 No Material Litigation........................................ 52
5.7 No Default.................................................... 53
5.8 Ownership of Property; Liens.................................. 53
5.9 Intellectual Property......................................... 53
5.11 Taxes......................................................... 53
5.12 Federal Regulations........................................... 54
5.13 ERISA......................................................... 54
5.14 Investment Company Act; Other Regulations..................... 54
5.15 Subsidiaries.................................................. 54
5.16 Purpose of Loans.............................................. 55
5.17 Environmental Matters......................................... 55
5.18 Regulation H.................................................. 56
5.19 Accuracy of Information....................................... 56
5.20 Solvency...................................................... 56
5.21 Stock Purchase Agreement...................................... 56
5.22 Security Documents............................................ 57
.
SECTION 6. CONDITIONS PRECEDENT.......................................... 57
6.1 Conditions to Initial Extension of Credit..................... 57
6.2 Conditions to Each Extension of Credit........................ 63
SECTION 7. AFFIRMATIVE COVENANTS......................................... 64
7.1 Financial Statements.......................................... 64
7.2 Certificates; Other Information............................... 65
7.3 Payment of Obligations........................................ 66
7.4 Conduct of Business; Maintenance of Existence; Compliance
with Laws.................................................... 66
7.5 Maintenance of Property; Insurance; Products Liability
Insurance.................................................... 67
7.6 Inspection of Property; Books and Records; Discussions........ 67
7.7 Notices....................................................... 67
7.8 Environmental Laws............................................ 68
7.9 Maintenance of Liens of the Security Documents................ 68
7.10 Pledge of After Acquired Property; Additional Guarantors...... 68
7.11 Interest Rate Protection...................................... 69
</TABLE>
-ii-
<PAGE>
<TABLE>
Page
<S> <C> <C>
7.12 Exchange Offer.............................................. 70
7.13 Stock Purchase Agreement.................................... 70
SECTION 8. NEGATIVE COVENANTS.......................................... 70
8.1 Financial Condition Covenants............................... 70
8.2 Limitation on Indebtedness.................................. 71
8.3 Limitation on Liens......................................... 74
8.4 Limitation on Guarantee Obligations......................... 75
8.5 Limitation on Fundamental Changes........................... 76
8.6 Limitation on Sale of Assets................................ 76
8.7 Limitation on Restricted Payments........................... 77
8.8 Limitation on Capital Expenditures.......................... 78
8.9 Limitation on Investments, Loans and Advances............... 78
8.10 Limitation on Optional Payments and Modifications of Debt
Instruments and other Obligations........................... 79
8.11 Limitation on Transactions with Affiliates.................. 80
8.12 Limitation on Changes in Fiscal Year........................ 80
8.13 Limitation on Lines of Business............................. 80
SECTION 9. NEGATIVE COVENANTS OF HOLDINGS.............................. 80
9.1 Limitation on Holdings' Activities.......................... 81
9.2 Restricted Payments......................................... 81
9.3 Net Proceeds................................................ 81
9.4 Dividends................................................... 81
SECTION 10. GUARANTEE................................................... 82
10.1 Guarantee................................................... 82
10.2 No Subrogation, Contribution, Reimbursement or Indemnity.... 82
10.3 Amendments, etc. with respect to the Obligations; Waiver of
Rights...................................................... 83
10.4 Guarantee Absolute and Unconditional........................ 83
10.5 Reinstatement............................................... 84
10.6 Payments.................................................... 85
SECTION 11. EVENTS OF DEFAULT........................................... 85
SECTION 12. THE ADMINISTRATIVE AGENT.................................... 88
12.1 Appointment................................................. 88
12.2 Delegation of Duties........................................ 88
12.3 Exculpatory Provisions...................................... 88
12.4 Reliance by Administrative Agent............................ 89
12.5 Notice of Default........................................... 89
12.6 Non-Reliance on Administrative Agent and Other Lenders...... 90
12.7 Indemnification............................................. 90
12.8 Administrative Agent in Its Individual Capacity............. 91
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
12.9 Successor Administrative Agent............................... 91
12.10 Issuing Bank; Swing Line Lender; Documentation Agent......... 91
SECTION 13. MISCELLANEOUS................................................ 91
13.1 Amendments and Waivers....................................... 91
13.2 Notices...................................................... 92
13.3 No Waiver; Cumulative Remedies............................... 93
13.4 Survival of Representations and Warranties................... 93
13.5 Payment of Expenses and Taxes................................ 93
13.6 Successors and Assigns; Participations and Assignments....... 94
13.7 Adjustments; Set-off......................................... 97
13.8 Counterparts................................................. 98
13.9 Severability................................................. 98
13.10 Integration.................................................. 98
13.11 GOVERNING LAW................................................ 98
13.12 Submission To Jurisdiction; Waivers.......................... 98
13.13 Acknowledgements............................................. 99
13.14 WAIVERS OF JURY TRIAL........................................ 99
13.15 Confidentiality.............................................. 99
</TABLE>
ANNEXES:
Annex A Pricing Grid
SCHEDULES:
1.1 Commitments
5.1 Financial Condition
5.2 Dividends
5.3 Existence; Compliance with Law
5.4 Consents
5.6 Litigation
5.8 Real Property
5.9 Intellectual Property
5.10 Burdensome Restrictions
5.11 Taxes
5.13 ERISA Reportable Events and Accumulated Funding Deficiencies
5.17 Environmental Matters
5.21 Exceptions to Stock Purchase Agreement Representations
and Warranties
8.2(j) Indebtedness Outstanding on the Closing Date
8.3(e) Easements, Licenses, Etc.
8.3(g) Existing Liens
8.4(a) Guarantee Obligations
-iv-
<PAGE>
8.9(e) Securities Held by Borrower or any Subsidiary
8.11(viii) Affiliate Transactions
EXHIBITS:
A Form of Borrower Mortgage
B Form of Guarantee and Collateral Agreement
C Form of Swing Line Loan Participation Certificate
D Form of Term Note
E Form of Revolving Credit Note
F Form of Swing Line Note
G Form of Closing Certificate
H Form of Assignment and Acceptance
I Form of Opinion of Kramer, Levin, Naftalis, Nessen,
Kamin and Frankel and/or Kelley Drye & Warren
J Form of Opinion of Utah Counsel
-v-
<PAGE>
CREDIT AND GUARANTEE AGREEMENT, dated as of May 7, 1996, among TLG
LABORATORIES HOLDING CORP., a Delaware corporation ("Holdings"), TWIN
LABORATORIES INC., a Utah corporation formerly known as Natura-Pharma, Inc. (the
"Borrower"), the several banks and other financial institutions from time to
time parties to this Agreement (collectively, the "Lenders"; individually, a
"Lender"), THE BANK OF NEW YORK, a New York banking corporation, as
documentation agent for the Lenders (the "Documentation Agent"), and CHEMICAL
BANK, a New York banking corporation, as administrative agent (the
"Administrative Agent") for the Lenders hereunder.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to a Stock Purchase and Sale Agreement dated as of
March 5, 1996 (as amended, supplemented or otherwise modified from time to time
in accordance with the terms hereof, the "Stock Purchase Agreement") among the
Stockholders (as defined therein), Holdings, the Borrower and Green Equity
Investors II, L.P. ("GEI"), (i) GEI, together with other investors (the
"Investors"), shall acquire 55% of the common stock of Holdings (the "Investor
Common") and all of the shares of preferred stock of Holdings ("PIK Preferred"),
(ii) the Continuing Stockholders (as defined in the Stock Purchase Agreement)
will exchange certain of their shares of the common stock of the Borrower for
45% of the outstanding common stock of Holdings, (iii) Holdings shall acquire
all of the remaining outstanding capital stock of the Borrower resulting in the
Borrower becoming a wholly-owned subsidiary of Holdings, (iv) Twin Laboratories
Inc., a New York corporation ("Old Twin"), Alvita Products, Inc. ("Alvita"),
Twinlab Export Corp. ("Export"), Twinlab Specialty Corporation ("Specialty") and
B. Bros. Realty Corporation ("B. Bros") shall be merged into the Borrower, (v)
Advanced Research Press, Inc. shall be merged with Natur-Pharma II Inc., a
wholly owned subsidiary of the Borrower (the surviving entity to be, "ARP") (all
of the foregoing the "Transactions"), on the terms and subject to the conditions
set forth therein;
WHEREAS, in connection with the Transactions, GEI and other Investors
shall pay approximately $72,500,000 in cash in respect of the issuance by
Holdings to GEI and the other Investors of (i) the Investor Common ($5,500,000
in the aggregate) and (ii) PIK Preferred stock, which shall consist of an issue
of senior preferred stock ("Senior Issue") and an issue of junior preferred
stock ("Junior Issue") ($67,000,000 in the aggregate);
WHEREAS, in connection with the transactions contemplated by the Stock
Purchase Agreement, the Borrower shall receive net proceeds from the issuance of
at least $100,000,000 of Senior Subordinated Notes (as hereinafter defined);
WHEREAS, in connection with the Transactions, the current stockholders
of the Companies (as defined below) will receive total cash consideration of
approximately $212,500,000; and
<PAGE>
2
WHEREAS, the Borrower has requested that the Administrative Agent and
the Lenders enter into this Agreement to provide a portion of the funds required
to consummate the Transactions and to provide for the working capital
requirements of the Companies after the Transactions and for general corporate
purposes;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in
effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%.
For purposes hereof: "Prime Rate" shall mean the rate of interest per
annum publicly announced from time to time by Chemical as its prime rate in
effect at its principal office in New York City (the Prime Rate not being
intended to be the lowest rate of interest charged by Chemical in
connection with extensions of credit to debtors); "Base CD Rate" shall mean
the sum of (a) the product of (i) the Three-Month Secondary CD Rate and
(ii) a fraction, the numerator of which is one and the denominator of which
is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate;
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary
market rate for three-month certificates of deposit reported as being in
effect on such day (or, if such day shall not be a Business Day, the next
preceding Business Day) by the Board of Governors through the public
information telephone line of the Federal Reserve Bank of New York (which
rate will, under the current practices of the Board, be published in
Federal Reserve Statistical Release H.15(519) during the week following
such day), or, if such rate shall not be so reported on such day or such
next preceding Business Day, the average of the secondary market quotations
for three-month certificates of deposit of major money center banks in New
York City received at approximately 10:00 A.M., New York City time, on such
day (or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Administrative Agent from three New York City
negotiable certificate of deposit dealers of recognized standing selected
by it; "C/D Assessment Rate" shall mean, for any day, the annual assessment
rate in effect on such day which is payable by a member of the Bank
Insurance Fund maintained by the FDIC classified as well-capitalized and
within supervisory subgroup "B" (or a comparable successor assessment risk
classification) within the meaning of 12 C.F.R. (S) 327.3(4) (or any
successor provision) to the FDIC for the FDIC's insuring time deposits at
offices of such institution in the United States; "C/D Reserve Percentage"
shall mean, for any day, that percentage (expressed as a decimal) which is
in effect on such day, as prescribed by the Board of Governors, for
determining the maximum reserve requirement for a Depositary Institution
(as defined in Regulation D
<PAGE>
3
of the Board of Governors) in respect of new non-personal time deposits in
Dollars having a maturity of 30 days or more; and "Federal Funds Effective
Rate" shall mean, for any day, the weighted average of the rates on
overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for the day of such transactions received by the
Administrative Agent from three federal funds brokers of recognized
standing selected by it. Any change in the ABR due to a change in the Prime
Rate, the Three-Month Secondary CD Rate, the C/D Assessment Rate, the C/D
Reserve Percentage or the Federal Funds Effective Rate shall be effective
as of the opening of business on the effective day of such change in the
Prime Rate, the Three-Month Secondary CD Rate, the C/D Assessment Rate, the
C/D Reserve Percentage or the Federal Funds Effective Rate, respectively.
"ABR Loans": Loans the rate of interest applicable to which is based
upon the ABR.
"Acquisition Documents": collectively, the Stock Purchase Agreement
and any other documents effectuating the Transactions.
"Adjustment Date": the Business Day of the receipt by the
Administrative Agent of both (i) the financial statements required to be
delivered pursuant to subsection 7.1(a) or 7.1(b), as the case may be, for
the most recently completed fiscal period and (ii) the certificate required
to be delivered pursuant to subsection 7.2(b) with respect to such fiscal
period.
"Administrative Agent": Chemical, together with its affiliates and
successors, as the administrative agent for the Lenders under this
Agreement and the other Loan Documents, and any successor thereto pursuant
to subsection 12.9.
"Affiliate": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For purposes of this
definition, "control" of a Person means the power, directly or indirectly,
to direct or cause the direction of the management and policies of such
Person, whether by contract or otherwise.
"After-Acquired Mortgage Property": any parcel (or adjoining parcels)
of real property (including any leaseholds) acquired by any Loan Party
after the Closing Date.
"Aggregate Revolving Credit Outstandings": as to any Revolving Credit
Lender at any time, an amount equal to the sum of (a) the aggregate
principal amount of all Revolving Credit Loans made by such Revolving
Credit Lender then outstanding, plus (b) such Revolving Credit Lender's
Revolving Credit Commitment Percentage of all Swing Line Loans made by the
Swing Line Lender then outstanding,
<PAGE>
4
plus (c) such Revolving Credit Lender's Revolving Credit Commitment
Percentage of the L/C Obligations then outstanding.
"Agreement": this Credit and Guarantee Agreement, as amended,
supplemented or otherwise modified from time to time.
"Applicable Margin": 1.25% if such Loans are ABR Loans and 2.50% if
such Loans are Eurodollar Loans, provided that, from and after September
30, 1996, the Applicable Margin will be adjusted, on each Adjustment Date,
provided that, the first Adjustment Date shall in no event be before
November 7, 1996, as to all Loans then outstanding or made thereafter prior
to the next Adjustment Date based upon the Consolidated Interest Coverage
Ratio and the ratio of Consolidated Total Debt at the last day of the 12-
month period ended on the date of the financial statements relating to such
Adjustment Date to Consolidated EBITDA for such period as determined from
such financial statements, to the Applicable Margin set forth on Annex A
-------
hereto opposite the level for which the Consolidated Interest Coverage
Ratio as so determined satisfies the criteria on Annex A under the heading
"Consolidated Interest Coverage Ratio" and for which the ratio of
Consolidated Total Debt to Consolidated EBITDA as so determined satisfies
the corresponding criteria set forth under the heading "Ratio of
Consolidated Total Debt to Consolidated EBITDA" and provided, further, that
(a) in the event that the financial statements required to be delivered
pursuant to subsection 7.1(a) or 7.1(b), as applicable, and the related
certificate required pursuant to subsection 7.2(b), are not delivered when
due, then if such financial statements are not delivered prior to the date
upon which the resultant Default shall become an Event of Default, then,
effective upon such Default becoming an Event of Default, during the period
from the date upon which such financial statements were required to be
delivered until the Business Day upon which they actually are delivered,
the Applicable Margin shall be 1.25%, if such Loans are ABR Loans, and
2.50%, if such Loans are Eurodollar Loans, and (b) if on any Adjustment
Date, the Consolidated Interest Coverage Ratio and the ratio of
Consolidated Total Debt to Consolidated EBITDA as so determined would
result in different Applicable Margins, the higher Applicable Margin shall
govern.
"Application": an application, in such form as the Issuing Bank may
specify from time to time, requesting the Issuing Bank to open a Letter of
Credit.
"ARP": as defined in the recitals to this Agreement.
"ARP Spinoff": any distribution to the shareholders of Holdings of
the capital stock of Holdings' indirect wholly-owned Subsidiary ARP.
"Asset Sale": as to any Person, any sale or other disposition
(including any Sale/Leaseback Transaction and any mortgage or lease (as
lessor) of real property other than any mortgage or lease made by such
Person in order to finance the acquisition or construction of additional
real property or improvements thereon)
<PAGE>
5
subsequent to the Closing Date of any property of such Person (including
the issuance or sale of the Capital Stock of any Subsidiary).
"Assignee": as defined in subsection 13.6(c).
"Available Excess Equity Proceeds": at any time, the excess of (a)
the sum of (i) 50% of the first $60,000,000 of Net Proceeds of all Equity
Offerings subsequent to the Closing Date plus (ii) 100% of any additional
Net Proceeds in excess of $60,000,000 resulting from Equity Offerings
subsequent to the Closing Date over (b) (without duplication) the aggregate
----
amounts expended pursuant to subsections 8.2(b)(iv)(y), 8.7(d),
8.9(d)(iv)(y), 8.9(g)(ii), 8.9(j)(ii) and 8.10(a)(i) and clause (vi) of the
definition of "Capital Expenditures".
"Available Revolving Credit Commitment": as to any Revolving Credit
Lender at any time, an amount equal to the excess, if any, of (a) the
amount of such Revolving Credit Lender's Revolving Credit Commitment at
such time over (b) such Revolving Credit Lender's Aggregate Revolving
Credit Outstandings at such time; collectively, as to all the Revolving
Credit Lenders, the "Available Revolving Credit Commitments".
"Benefitted Lender": as defined in subsection 13.7(a).
"Board of Governors": the Board of Governors of the Federal Reserve
System and any Governmental Authority which succeeds to the powers and
functions thereof.
"Borrower": as defined in the Preamble to this Agreement.
"Borrower Mortgage": each Mortgage to be executed and delivered by
the Borrower, substantially in the form of Exhibit A or in such other form
---------
as the Administrative Agent shall reasonably require, with respect to (i)
each parcel of real property listed on Schedule 5.8 for which the
------------
Administrative Agent requests a Mortgage and (ii) each parcel of After-
Acquired Mortgage Property for which a mortgage is granted to the
Administrative Agent, for the benefit of the Lenders, pursuant to
subsection 7.10, in each case as the same may be amended, supplemented or
otherwise modified from time to time.
"Borrower Security Documents": collectively, the Borrower Mortgages
and the Guarantee and Collateral Agreement.
"Borrowing Date": any Business Day specified in a notice pursuant to
subsection 2.2, 3.2 or 3.8 as a date on which the Borrower requests the
Lenders to make Loans hereunder.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law
to close.
<PAGE>
6
"Capital Expenditures": as to any Person for any period, the
aggregate amount incurred by such Person and its Subsidiaries for the
rental, lease, purchase (including by way of the acquisition of securities
of a Person), construction or use of any property during such period, the
value or cost of which, in accordance with GAAP, would appear on such
Person's consolidated balance sheet in the category of property, plant or
equipment at the end of such period, excluding (i) any such expenditure
---------
made to restore, replace or rebuild property to the condition of such
property immediately prior to any damage, loss, destruction or condemnation
of such property, to the extent such expenditure is made with insurance
proceeds or condemnation awards relating to any such damage, loss,
destruction or condemnation, (ii) any such expenditure to the extent
financed with or constituting Indebtedness permitted hereunder, (iii) any
such expenditure made to acquire assets purchased with the Net Proceeds of
Asset Sales permitted to be so expended, (iv) Permitted Acquisitions, (v)
any such expenditure to acquire capital assets which are Designated
Sale/Leaseback Financing Properties and (vi) any expenditures not in excess
of the Available Excess Equity Proceeds at the time of such expenditure.
"Capital Stock": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
"Cash Equivalents": (a) securities issued or directly and fully
guaranteed or insured by the United States Government, or any agency or
instrumentality thereof, having maturities of not more than one year from
the date of acquisition; (b) marketable general obligations issued by any
state of the United States of America or any political subdivision of any
such state or any public instrumentality thereof maturing within one year
from the date of acquisition thereof and, at the time of acquisition
thereof, having a credit rating of "A" or better from either Standard &
Poor's or Moody's Investors Service, Inc.; (c) certificates of deposit,
time deposits, eurodollar time deposits, overnight bank deposits or
bankers' acceptances having maturities of not more than one year from the
date of acquisition thereof of any Lender, or of any domestic commercial
bank the long-term debt of which is rated at the time of acquisition
thereof at least A or the equivalent thereof by Standard & Poor's or A or
the equivalent thereof by Moody's Investors Service, Inc., and having
capital and surplus in excess of $500,000,000; (d) repurchase obligations
with a term of not more than seven days for underlying securities of the
types described in clauses (a), (b) and (c) entered into with any bank
meeting the qualifications specified in clause (c) above; (e) commercial
paper rated at the time of acquisition thereof at least A-2 or the
equivalent thereof by Standard & Poor's or P-2 or the equivalent thereof by
Moody's Investors Service, Inc., or carrying an equivalent rating by a
nationally recognized rating agency, if both of the two named rating
agencies cease publishing ratings of investments, and in either case
maturing within 270 days after the date of acquisition thereof; (f)
interests in any investment company which invests solely in instruments of
the type specified in clauses (a) through (e) above; and (g) other
investment instruments approved in writing by the Required Lenders and
offered by
<PAGE>
7
any Lender or by any financial institution which has a combined capital and
surplus of not less than $500,000,000.
"Certificate of Available Excess Equity Proceeds": a certificate to
be delivered by the Borrower pursuant to subsections 7.1(a) and (b) in form
and substance satisfactory to the Administrative Agent setting forth (i)
the amount of Available Excess Equity Proceeds as of the last day of the
fiscal period to which such certificate relates and (ii) the calculations
reasonably required to determine such amount, certified by a Responsible
Officer of the Borrower as being stated fairly in all material respects.
"Change of Control": (a) if at any time prior to an IPO, GEI, the
Investors and the Blechmans in the aggregate do not possess record and
beneficial ownership of more than 50% of the outstanding Capital Stock
having ordinary voting power in the election of directors of Holdings, (b)
if at any time prior to an IPO, either GEI and the Investors, on the one
hand, and the Blechmans, on the other hand, shall not have beneficial
ownership of at least 20% of the outstanding Capital Stock having ordinary
voting power in the election of directors of Holdings, (c) if at any time
after an IPO, any Person (other than GEI, the Investors or the Blechmans),
whether singly or in concert with one or more other such Persons, shall,
directly or indirectly, beneficially own a greater percentage, on a fully
diluted basis, of the outstanding Capital Stock (having ordinary power in
the election of directors of Holdings) of Holdings than the percentage of
such outstanding Capital Stock beneficially owned by GEI, the Investors and
the Blechmans in the aggregate, (d) the Board of Directors of the Borrower
shall not consist of a majority of Continuing Directors, (e) Holdings shall
not directly, own, beneficially and of record, 100% of the issued and
outstanding Capital Stock of the Borrower, free and clear of all Liens
other than the Lien of the Security Documents or (f) a "Change of Control"
(as defined in the Senior Subordinated Note Indenture) shall occur. For
the purposes of this definition, GEI and Investors shall include Affiliates
thereof.
"Chemical": Chemical Bank, a New York banking corporation and its
successors.
"Closing Date": the first date on which the conditions precedent set
forth in subsections 6.1 and 6.2 shall be satisfied or waived.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all assets of the Loan Parties, now owned or hereafter
acquired, upon which a Lien is purported to be created by any Security
Document.
"Commercial Letter of Credit": as defined in subsection
3.10(b)(i)(2).
<PAGE>
8
"Commitment": with respect to any Lender, the collective reference to
such Lender's Term Loan Commitment and/or Revolving Credit Commitment;
collectively, as to all the Lenders, the "Commitments".
"Commitment Percentage": as to any Lender at any time, the percentage
which (i) the sum of (a) such Lender's then Available Revolving Credit
Commitment and other unused Commitments (other than Revolving Credit
Commitments) plus (b) such Lender's Loans (other than Swing Line Loans)
then outstanding plus (c) the product of such Lender's Revolving Credit
Commitment Percentage times the sum of (I) the Swing Line Loans then
outstanding and (II) the L/C Obligations then outstanding then constitutes
of (ii) the sum of (x) the aggregate Available Revolving Credit Commitments
of the Revolving Credit Lenders and the other unused Commitments of all the
Lenders (other than Revolving Credit Commitments) plus (y) the aggregate
principal amount of Loans of all the Lenders then outstanding plus (z) the
aggregate L/C Obligations of all the Lenders then outstanding.
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of
Section 4001 of ERISA or is part of a group which includes the Borrower and
which is treated as a single employer under Section 414(b) or (c) of the
Code or, solely for purposes of determining liability under Section 412 of
the Code, which is treated as a single employer under Section 414 (b), (c),
(m) or (o) of the Code.
"Companies": the Borrower, Old Twin, Alvita, Export, Specialty, B.
Bros and ARP, collectively.
"Companies EBITDA": for any period, prior to the Closing Date, for
the Companies, the combined net income for such period, plus to the extent
deducted in determining such combined net income, (i) interest expense,
(ii) depreciation, (iii) depletion, (iv) amortization (including
amortization of debt discount and deferred financing costs), (v) all
Federal, state, local and foreign income and corporate withholding taxes,
(vi) all other non-cash expenses or non-cash losses, (vii) any
extraordinary and unusual losses and (viii) transaction fees and expenses
associated with the Transactions and, minus, to the extent added in
determining such net income, (i) any non-cash income or non-cash gains and
(ii) any extraordinary and unusual gains, all as determined, to the extent
applicable, on a combined basis in accordance with GAAP. (For the purposes
of this definition, (i) "interest expense" shall mean, for any period, the
net interest expense of the combined Companies for such period as
determined in accordance with GAAP and (ii) "net income" shall mean: for
any period, the net income of the combined Companies for such period as
determined in accordance with GAAP.)
"Consolidated Cash Interest Expense": for any period, Consolidated
Interest Expense paid in cash during such period.
<PAGE>
9
"Consolidated EBITDA": for any period, the Consolidated Net Income
for such period, plus, to the extent deducted in determining such
Consolidated Net Income, (i) Consolidated Interest Expense, (ii)
depreciation, (iii) depletion, (iv) amortization (including amortization of
debt discount and deferred financing costs), (v) all Federal, state, local
and foreign income and corporate withholding taxes, (vi) all other non-cash
expenses or non-cash losses, (vii) any extraordinary and unusual losses,
(viii) transaction fees and expenses associated with the Transactions, (ix)
fees and expenses associated with any acquisition or financing whether or
not consummated and (x) amortization or write-off of the consideration for
the non-compete agreements entered into in connection with the Transactions
and, minus, to the extent added in determining such Consolidated Net
Income, (i) any non-cash income or non-cash gains and (ii) any
extraordinary and unusual gains, all as determined, to the extent
applicable, on a consolidated basis in accordance with GAAP.
Notwithstanding the foregoing, (i) Consolidated EBITDA for the fiscal
quarters ended December 31, 1995 and March 31, 1996 shall be $10,400,000
and $10,600,000, respectively, and (ii) for the period from April 1, 1996
to the Closing Date, Consolidated EBITDA shall be the Companies EBITDA for
such period.
"Consolidated Fixed Charges": for any period, the sum of (i)
Consolidated Cash Interest Expense, (ii) scheduled amortization of
Indebtedness of the Borrower and its Subsidiaries for such period, (iii)
cash payments in respect of such period for any Federal, state, local or
foreign taxes, (iv) without duplication, plus increases and less decreases
in Consolidated Working Capital from the first day of such period to the
last day of such period (provided that for the fiscal year ending December
31, 1996 increases and decreases in Consolidated Working Capital shall be
deemed to be zero) and (v) Capital Expenditures, in each case, to the
extent applicable, determined on a consolidated basis in accordance with
GAAP.
"Consolidated Interest Coverage Ratio": for any period of four
consecutive fiscal quarters ending during any Test Period, the ratio of (a)
Consolidated EBITDA for such period to (b) Consolidated Cash Interest
Expense for such period.
"Consolidated Interest Expense": for any period, the net interest
expense of the Borrower and its Subsidiaries for such period as determined
on a consolidated basis in accordance with GAAP.
"Consolidated Net Income": for any period, the net income of the
Borrower and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Total Debt": at any date of determination, all
Indebtedness of the Borrower and its Subsidiaries at such date of
determination that would be included in the liabilities on a consolidated
balance sheet of the Borrower and its Subsidiaries as at such date,
prepared in accordance with GAAP.
<PAGE>
10
"Consolidated Working Capital": as of the date of determination,
Current Assets of the Borrower and its Subsidiaries at such date,
determined on a consolidated basis in conformity with GAAP, minus Current
Liabilities of the Borrower and its Subsidiaries at such date, determined
on a consolidated basis in conformity with GAAP.
"Continuing Directors": the directors of Holdings on the Closing Date
after giving effort to the Transactions and each other director, if (a)
such other director is appointed by GEI pursuant to the provisions of the
Stockholders Agreement or (b) such other director's nomination for election
to the Board of Directors of Holdings is recommended by a majority of the
then Continuing Directors.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any material agreement, instrument or
other undertaking to which such Person is a party or by which it or any of
its property is bound.
"CSI": Chase Securities Inc., a Delaware corporation.
"Currency Rate Protection Agreements": as to any Person, all foreign
exchange contracts, currency swap agreements or other similar agreements or
arrangements entered into in the ordinary course of business by such Person
designed to protect such Person against fluctuations in currency values.
"Current Assets": at the date of determination, all assets (other
than cash and Cash Equivalents) which would, in accordance with GAAP, be
classified on a consolidated balance sheet of the Borrower and its
Subsidiaries as current assets.
"Current Liabilities": at the date of determination, all liabilities
which would, in accordance with GAAP, be classified on a consolidated
balance sheet of the Borrower and its Subsidiaries as current liabilities.
"Default": any of the events specified in Section 11, whether or not
any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Designated Sale/Leaseback Financing Property": any acquisition by
the Borrower and its Subsidiaries of capital assets, as to which the
Borrower shall notify the Administrative Agent by the last Business Day of
the fiscal year in which such capital asset is acquired that it intends to
sell and leaseback or otherwise finance, in a transaction permitted
hereunder, such capital asset within a twelve-month period from
acquisition, provided the aggregate amount of assets so designated at any
time may not exceed $1,000,000. If such sale and leaseback or other
financing shall not have occurred within twelve months of the acquisition,
such acquisition shall be deemed to constitute a Capital Expenditure at the
expiration of such twelve month period.
"Documentation Agent": as defined in the Preamble to this Agreement.
<PAGE>
11
"Domestic Subsidiary": any Subsidiary of the Borrower organized under
the laws of the United States of America or any political subdivision
thereof.
"Dollars" and "$": lawful currency of the United States of America.
"Environmental Laws": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority having the force of law
or other Requirements of Law (including common law) regulating, relating to
or imposing liability or standards of conduct concerning the protection of
the environment or the protection of human health as it relates to the
protection of the environment, as now or at any time hereafter in effect.
"Environmental Permits": all permits, licenses, registrations,
notifications, exemptions, and other authorizations required by or from any
Governmental Authority under Environmental Laws.
"Equity Interest": Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering": any offering of Capital Stock or private placement
of Capital Stock of Holdings excluding any post-closing payment received by
Holdings pursuant to the terms of the Stock Purchase Agreement.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors or other
Governmental Authority having jurisdiction with respect thereto) dealing
with reserve requirements prescribed for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D) maintained by a
member bank of the Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum equal to the
rate at which Chemical is offered Dollar deposits at or about 10:00 A.M.,
New York City time, two Business Days prior to the beginning of such
Interest Period in the interbank eurodollar market where the eurodollar and
foreign currency and exchange operations in respect of its Eurodollar Loans
are then being conducted for delivery on the first day of such Interest
Period for the number of days comprised therein and in an amount comparable
to the amount of its Eurodollar Loan to be outstanding during such Interest
Period.
<PAGE>
12
"Eurodollar Loans": Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/16th of 1%):
Eurodollar Base Rate
-----------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 11,
provided that all requirements for the giving of notice, the lapse of time,
or both, and any other conditions, have been satisfied.
"Excess Cash Flow": for any fiscal year of the Borrower, the excess
of (a) the sum, without duplication, of (i) Consolidated EBITDA for such
fiscal year, (ii) the amount of any refund received by the Borrower and its
Subsidiaries during such fiscal year on taxes paid by the Borrower and its
Subsidiaries, (iii) cash dividends, cash interest and other similar cash
payments received by the Borrower during such fiscal year in respect of
Investments (other than in Subsidiaries) to the extent not included in
Consolidated Net Income to determine Consolidated EBITDA for such fiscal
year, and (iv) decreases in Consolidated Working Capital, over (b) the sum,
without duplication, of (i) the aggregate amount of cash Capital
Expenditures and expenditures in respect of assets which are Designated
Sale/Leaseback Financing Properties on the last day of the fiscal year in
which the expenditures occurred made by the Borrower and its Subsidiaries
during such fiscal year and permitted hereunder, (ii) the aggregate amount
of all reductions of the Revolving Credit Commitments (to the extent such
reductions are accompanied by prepayment of Revolving Credit Loans, Swing
Line Loans and/or L/C Obligations) or payments or prepayments of the Term
Loans during such fiscal year other than pursuant to subsection 4.1(b) or
4.1(c), (iii) the aggregate amount of payments of principal in respect of
any Indebtedness (other than under this Agreement) permitted hereunder
during such fiscal year, (iv) cash interest expense of the Borrower and its
Subsidiaries for such fiscal year, (v) taxes actually paid in such fiscal
year or to be paid in the subsequent fiscal year on account of such fiscal
year to the extent added to Consolidated Net Income to determine
Consolidated EBITDA for such fiscal year, (vi) extraordinary cash losses to
the extent included in Consolidated EBITDA for such fiscal year, (vii) the
aggregate amount of cash used for Permitted Acquisitions made by the
Borrower and its Subsidiaries during such fiscal year pursuant to
subsection 8.9(i), (viii) dividends or other direct payments paid by the
Borrower to or for the benefit of Holdings to the extent permitted by
subsection 8.7 or 8.9(f) to the extent not subtracted in the determination
of Consolidated Net Income of the Borrower for such fiscal year, (ix)
increases in Consolidated Working Capital, (x) transaction fees and
expenses associated with the Transactions to the extent added to
Consolidated Net Income to determine Consolidated EBITDA for such fiscal
year, (xi) any gains (to the extent included in Consolidated EBITDA) from
any Asset Sales
<PAGE>
13
(other than those pursuant to subsections 8.6(d) and (e)) during such
fiscal year, and (xii) fees and expenses associated with any acquisition or
financing, whether or not consummated, to the extent added to Consolidated
Net Income to determine Consolidated EBITDA for such fiscal year.
"Excess Cash Flow Percentage": 75%, provided that, commencing with
the Borrower's fiscal year ending December 31, 1997, so long as (i) the
Consolidated Interest Coverage Ratio for the period of four consecutive
fiscal quarters ended the last day of the fiscal quarter immediately
preceding the date of such prepayment, in respect of which financial
statements of the Borrower have been furnished under subsection 7.1, is
equal to or exceeds 2.50 to 1.00 and (ii) the ratio of Consolidated Total
Debt at the last day of the fiscal quarter immediately preceding the date
of such prepayment to Consolidated EBITDA for the period of four
consecutive fiscal quarters ending on such date is less than or equal to
3.75 to 1.00, the Excess Cash Flow Percentage shall be 50%.
"Extension of Credit": with respect to any Lender, (a) the making of
a Loan by such Lender and (b) if such Lender is a Revolving Credit Lender,
the issuance of a Letter of Credit; with respect to all the Lenders, the
"Extensions of Credit".
"FDIC": the Federal Deposit Insurance Corporation and any
Governmental Authority which succeeds to the powers and functions thereof.
"Federal Funds Effective Rate": as defined in the definition of ABR.
"Final Offering Memorandum": the Offering Memorandum dated May 1,
1996, with respect to the issuance of the Senior Subordinated Notes, a copy
of which has been furnished to each Lender.
"Financing Lease": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of the lessee.
"Financing Lease Obligations": as to any Person, the obligations of
such Person to pay rent or other amounts under any Financing Lease; the
amount of such obligations at any time shall be the capitalized amount
thereof at such time determined in accordance with GAAP.
"Foreign Subsidiary": any Subsidiary of the Borrower organized under
the laws of any jurisdiction outside the United States of America.
"Funded Indebtedness": all Indebtedness of the Borrower under this
Agreement and the Senior Subordinated Note Indenture.
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time (subject to subsection 1.2(e)).
<PAGE>
14
"GEI": as defined in the recitals to this Agreement.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Grantor": as defined in the Preamble to the Guarantee and Collateral
Agreement.
"Green": Leonard Green and Partners, L.P., a Delaware limited
partnership and an affiliate of GEI.
"Guarantee": the guarantee contained in Section 10 or in the
Guarantee and Collateral Agreement; collectively, the "Guarantees".
"Guarantee and Collateral Agreement": the Guarantee and Collateral
Agreement to be executed and delivered by Holdings, the Borrower and each
Subsidiary (other than a Foreign Subsidiary) in favor of the Administrative
Agent, for the benefit of the Lenders, substantially in the form of Exhibit
-------
B, as the same may be amended, supplemented or otherwise modified from time
-
to time.
"Guarantee Obligation": as to any Person (the "Guaranteeing Person"),
any obligation of (a) the Guaranteeing Person or (b) another Person
(including, without limitation, any bank under any letter of credit) to
induce the creation of which the Guaranteeing Person has issued a
reimbursement, counter indemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, lease, dividend or
other obligation (the "Primary Obligations") of any other third Person (the
"Primary Obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of the Guaranteeing Person,
whether or not contingent, (i) to purchase any such Primary Obligation or
any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such Primary
Obligation or (2) to maintain working capital or equity capital of the
Primary Obligor or otherwise to maintain the net worth or solvency of the
Primary Obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such Primary
Obligation of the ability of the Primary Obligor to make payment of such
Primary Obligation or (iv) otherwise to assure or hold harmless the owner
of any such Primary Obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include endorsements
of instruments for deposit or collection in the ordinary course of business
or normal and customary indemnification pursuant to the Transactions, or
any transaction heretofore or hereafter entered into by the Companies, the
Borrower, or any of the Borrower's Subsidiaries in the ordinary course of
business permitted hereunder, or in connection with any purchase or sale of
assets permitted hereunder. The amount of any Guarantee Obligation of any
Guaranteeing Person shall be deemed to be the lower of (a) an amount equal
to the stated or determinable amount of the Primary Obligation in respect
of which such
<PAGE>
15
Guarantee Obligation is made and (b) the maximum amount for which such
Guaranteeing Person may be liable pursuant to the terms of the instrument
embodying such Guarantee Obligation, unless such Primary Obligation and the
maximum amount for which such Guaranteeing Person may be liable are not
stated or determinable, in which case the amount of such Guarantee
Obligation shall be such Guaranteeing Person's maximum reasonably
anticipated liability in respect thereof as determined by the Borrower in
good faith.
"Guarantors": Holdings and each Subsidiary (other than Foreign
Subsidiaries) of the Borrower.
"Hazardous Materials": any petroleum (including crude oil or any
fraction thereof) or petroleum products, polychlorinated biphenyls, urea-
formaldehyde insulation, asbestos and asbestos-containing materials,
pollutants, contaminants, and all other materials and substances including
but not limited to radioactive materials regulated pursuant to any
Environmental Laws or the handling or disposal of which could result in
liability under any Environmental Law.
"Holdings": as defined in the Preamble to this Agreement.
"Indebtedness": of any Person at any date, without duplication, (a)
all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business payable in
accordance with customary practices and not more than 90 days past due,
unless being contested in good faith by appropriate proceedings, and
compensation, pension obligations and other obligations arising from
employee benefits and employee arrangements), (b) any other indebtedness of
such Person which is evidenced by a note, bond (other than those of the
type referred to in subsection 8.3(d)), debenture or similar instrument,
(c) all Financing Lease Obligations of such Person, (d) all obligations of
such Person under Rate Protection Agreements, (e) all obligations of such
Person in respect of letters of credit (whether or not drawn), acceptances
and similar obligations issued or created for the account of such Person,
and (f) all indebtedness of others of the types described in (a) through
(e) above secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for the
payment thereof (the amount of such indebtedness with respect to such
Person being deemed to be the lesser of the fair market value of such
property or the amount of indebtedness of others so secured).
"Information Memorandum": as defined in subsection 5.19.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
<PAGE>
16
"Interest Payment Date": (a) as to ABR Loans, the last day of each
April, July, October and January, (b) as to any Eurodollar Loan having an
Interest Period of three months or less, the last day of such Interest
Period and (c) as to any Eurodollar Loan having an Interest Period longer
than three months, each day which is three months, or a whole multiple
thereof, after the first day of such Interest Period and the last day of
such Interest Period.
"Interest Period": with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan and ending one, two, three or six months thereafter, as selected
by the Borrower in its notice of borrowing or notice of conversion, as
the case may be, given with respect thereto; and
(ii) thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such Eurodollar Loan
and ending one, two, three or six months thereafter, as selected by
the Borrower by irrevocable notice to the Administrative Agent not
less than three Business Days prior to the last day of the then
current Interest Period with respect thereto;
provided that, all of the foregoing provisions relating to Interest Periods
are subject to the following:
(1) if any Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day;
(2) no Interest Period that would otherwise extend beyond the
Termination Date or beyond the date final payment is due on the Term
Loans shall be selected by the Borrower;
(3) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(4) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Eurodollar Loan.
"Interest Rate Protection Agreements": as to any Person, all interest
rate swaps, caps or collar agreements or similar arrangements entered into
by such Person
<PAGE>
17
providing for protection against fluctuations in interest rates or the
exchange of nominal interest obligations, either generally or under
specific contingencies.
"Investment": as defined in subsection 8.9.
"Investor Common": as defined in the recitals to this Agreement.
"Investors": as defined in the recitals to this Agreement.
"IPO": any initial public offering of common (or other voting) stock
of Holdings.
"Issuing Bank": Chemical or any of its Affiliates, in its capacity as
issuer of any Letter of Credit.
"L/C Commitment": $3,000,000.
"L/C Fee Payment Date": the last day of each April, July, October and
January and the Revolving Credit Termination Date.
"L/C Obligations": at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters
of Credit and (b) the aggregate amount of drawings under Letters of Credit
which have not been reimbursed.
"L/C Participants": collectively, all the Revolving Credit Lenders
other than the Issuing Bank.
"Lenders": as defined in the Preamble to this Agreement.
"Letters of Credit": collectively, Commercial Letters of Credit and
Standby Letters of Credit.
"Lien": any mortgage, pledge, hypothecation, assignment for security,
deposit arrangement, encumbrance, lien (statutory or other), charge or
other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any Financing Lease having substantially the same
economic effect as any of the foregoing).
"Loan": any Term Loan, Revolving Credit Loan or Swing Line Loan.
"Loan Documents": this Agreement, any Notes, the Guarantees, the
Applications, and the Security Documents.
"Loan Participants": as defined in subsection 13.6(b).
<PAGE>
18
"Loan Parties": the Borrower, Holdings, ARP and each other Subsidiary
of the Borrower which is a party to a Loan Document.
"Management Services Agreement": the Management Services Agreement,
dated as of the Closing Date, between the Borrower and Green.
"Material Adverse Effect": a material adverse effect on (a) the
business, operations, property, assets, prospects, or condition (financial
or otherwise) of Holdings and its Subsidiaries taken as a whole or (b) the
validity or enforceability of this Agreement or any of the other Loan
Documents or any of the material rights or remedies of the Administrative
Agent or the Lenders hereunder or thereunder.
"Merger Agreement": the Merger Agreement, dated as of the date
hereof, among the Companies (other than ARP).
"Mortgaged Property": the real properties owned by the Loan Parties
on the Closing Date as specified on Schedule 5.8 hereto for which the
------------
Administrative Agent has requested the delivery of a Mortgage.
"Mortgages": collectively, the Borrower Mortgage and the Subsidiary
Mortgage.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Net Proceeds": with respect to any Person, (a) with respect to any
Asset Sale by such Person, the cash proceeds (including any cash payments
received by way of deferred payment of principal pursuant to a note or
installment receivable or purchase price adjustment receivable or
otherwise, but only as and when received) of such Asset Sale net of (i)
attorneys' fees, accountants' fees, investment banking fees, survey costs,
title insurance premiums, and related search and recording charges,
transfer taxes, deed or mortgage recording taxes, required debt payments
(other than pursuant hereto), other customary expenses, amounts required to
be applied to the repayment of Indebtedness secured by a Lien expressly
permitted hereunder on any asset which is the subject of such Asset Sale
(other than any Lien in favor of the Administrative Agent for the benefit
of the Lenders) and brokerage, consultant and other customary fees actually
incurred in connection therewith, (ii) taxes paid or payable as a result
thereof, (iii) all amounts deemed appropriate by the Borrower to be
provided as a reserve in accordance with GAAP against any liabilities
associated with the assets that are the subject of such Asset Sale,
provided that, if the amounts held in reserve are reversed, at such time
-------- ----
such reserve amounts shall be deemed to constitute Net Proceeds after
deducting any additional taxes required to be paid in connection therewith,
and (iv) the portion of any cash payments attributable to Persons holding a
minority interest in any Subsidiary, the assets of which are the subject of
such Asset Sale; and (b) with respect to any issuance of equity securities
or the incurrence of any Indebtedness by such Person subsequent to the
Closing Date,
<PAGE>
19
the cash proceeds received from such issuance or incurrence net of
investment banking fees, legal fees, accountants fees, underwriting
discounts and commissions and other customary fees and expenses, taxes and
other reasonable costs and expenses actually incurred in connection
therewith.
"New Lending Office": as defined in subsection 4.10(c).
"Non-Excluded Taxes": as defined in subsection 4.10(a).
"Notes": collectively, the Swing Line Note, Revolving Credit Notes
and Term Notes, if any.
"NYUCC": the Uniform Commercial Code as from time to time in effect
in the State of New York.
"Obligations": the unpaid principal of and interest on the Loans and
all other obligations and liabilities of the Borrower to the Administrative
Agent and the Lenders (including, without limitation, interest accruing at
the then applicable rate provided in this Agreement after the maturity of
the Loans and interest accruing at the then applicable rate provided in
this Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating
to the Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with, this
Agreement, the other Loan Documents, any Rate Protection Agreement entered
into by the Borrower with any Lender or any Affiliate of any Lender, any
cash management services agreement entered into by the Borrower with any
Lender or any Affiliate of any Lender or any other document made, delivered
or given in connection herewith or therewith, in each case whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to the Administrative Agent or to the
Lenders that are required to be paid by the Borrower pursuant to the terms
of this Agreement, any other Loan Document or any such Rate Protection
Agreement or cash management services agreement entered into by the
Borrower with any Lender or any Affiliate of any Lender).
"Obsolete Property": any property of the Borrower or any of its
Subsidiaries which is obsolete, outdated or worn out or the useful life of
which has ended, in each case in the good faith determination of the
Borrower.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA and any Governmental Authority which
succeeds to the powers and functions thereof.
<PAGE>
20
"Permitted Acquisition": any acquisition of all or substantially all
the assets of, or at least 85% of the shares or other Equity Interests in,
a Person or division or line of business of a Person or other significant
assets of a Person if immediately after giving effect thereto: (a) no
Default or Event of Default shall have occurred and be continuing or would
result therefrom, (b) all transactions related thereto shall be consummated
in all material respects in accordance with applicable laws, (c) all
actions required to be taken, if any, with respect to any acquired or newly
formed Subsidiary under subsection 7.10 shall have been taken and (d)(i)
the Borrower shall be in compliance, on a pro forma basis after giving
effect to such acquisition or formation, with the covenants contained in
subsection 8.1 recomputed as at the last day of the most recently ended
fiscal quarter of the Borrower as if such acquisition had occurred on the
first day of each relevant period for testing such compliance, and the
Borrower shall have delivered to the Administrative Agent, with a copy for
each of the Lenders, a certificate (and the pro forma assumptions relating
thereto) of a Responsible Officer to such effect, together with all
relevant financial information for such Subsidiary or assets (to the extent
reasonably available), and (ii) after giving effect to such transaction,
any acquired or newly formed Subsidiary shall not be liable for any
Indebtedness (except for Indebtedness permitted by subsection 8.2(g)).
"Permitted Acquisition Amount": $7,500,000.
"Permitted Liens": as defined in subsection 8.3.
"Person": an individual, partnership, corporation, business trust,
joint stock company, limited liability company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"PIK Preferred": as defined in the recitals to this Agreement.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Prepayment Account": as defined in subsection 4.1(d).
"Primary Obligations": as defined in the definition of "Guarantee
Obligation" contained in this subsection 1.1.
"Proceeds": as defined in the NYUCC.
"Properties": as defined in subsection 5.17.
"Rate Protection Agreements": collectively, any Currency Rate
Protection Agreements and Interest Rate Protection Agreements.
<PAGE>
21
"Refunded Swing Line Loans": as defined in subsection 3.8(b).
"Register": as defined in subsection 13.6(d).
"Registration Rights Agreement": as defined in the Senior
Subordinated Note Indenture.
"Regulation D": Regulation D of the Board of Governors as in effect
from time to time.
"Regulation G": Regulation G of the Board of Governors as in effect
from time to time.
"Regulation H": Regulation H of the Board of Governors as in effect
from time to time.
"Regulation U": Regulation U of the Board of Governors as in effect
from time to time.
"Regulation X": Regulation X of the Board of Governors as in effect
from time to time.
"Reimbursement Obligation": the obligation of the Borrower to
reimburse the Issuing Bank pursuant to subsection 3.14(a) for amounts drawn
under Letters of Credit.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section
4241 of ERISA.
"Replacement Asset": any property acquired by the Borrower or any of
its Subsidiaries subsequent to the Closing Date which replaces Obsolete
Property.
"Reportable Event": any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. (S)
2615.
"Required Lenders": at any time, Lenders the Commitment Percentages
of which aggregate more than 50%.
"Requirement of Law": as to any Person, (i) the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and (ii) any law, treaty, rule or regulation or determination
of an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject; provided however, that
for purposes of Section 4, Requirement of Law shall mean only clause (ii)
of this definition.
<PAGE>
22
"Responsible Officer": as to any Person, the chief executive officer
and the president of such Person or, with respect to financial matters, the
chief financial officer of such Person or, in either case, such other
executive officers as may be designated from time to time by such Person in
writing to the Administrative Agent.
"Restricted Payments": as defined in subsection 8.7.
"Retained Excess Cash Flow": for any fiscal year commencing on or
after January 1, 1998, the percentage of Excess Cash Flow for the preceding
fiscal year retained by the Borrower (i) after calculating the financial
covenants set forth in the definition of Excess Cash Flow Percentage and
(ii) complying with the requirements of subsection 4.1(b) in respect of the
preceding fiscal year.
"Revolving Credit Commitment": with respect to any Lender, its
obligation to make Revolving Credit Loans and/or issue or participate in
Letters of Credit issued on behalf of the Borrower and/or participate in
Swing Line Loans made to the Borrower in an amount not to exceed the amount
set forth opposite such Lender's name on Schedule 1.1 under the heading
------------
"Revolving Credit Commitment", as such amount may be reduced from time to
time pursuant to this Agreement or as such amount may be adjusted from time
to time pursuant to subsection 13.6; collectively, as to all such Lenders,
the "Revolving Credit Commitments".
"Revolving Credit Commitment Percentage": as to any Revolving Credit
Lender at any time, the percentage which (i) the sum of (a) such Revolving
Credit Lender's then unused Revolving Credit Commitment plus (b) such
Revolving Credit Lender's Revolving Credit Loans then outstanding plus (c)
the product of the percentage of the Revolving Credit Commitments of all
the Revolving Credit Lenders then constituted by such Revolving Credit
Lender's Revolving Credit Commitment times the sum of (I) the Swing Line
Loans then outstanding and (II) the L/C Obligations then outstanding then
constitutes of (ii) the sum of (w) the aggregate outstanding then unused
Revolving Credit Commitments of all the Revolving Credit Lenders plus (x)
the aggregate principal amount of Revolving Credit Loans of all the
Revolving Credit Lenders then outstanding plus (y) the aggregate L/C
Obligations then outstanding plus (z) the Swing Line Loans then
outstanding.
"Revolving Credit Commitment Period": the period from and including
the Closing Date to but not including the Revolving Credit Termination Date
or such earlier date on which the Revolving Credit Commitments shall
terminate as provided herein.
"Revolving Credit Fee Percentage": as defined in subsection 3.12(b).
"Revolving Credit Lender": any Lender with an unused Revolving Credit
Commitment hereunder and/or any Revolving Credit Loans outstanding
hereunder; collectively, the "Revolving Credit Lenders".
<PAGE>
23
"Revolving Credit Loans": as defined in subsection 3.1(a).
"Revolving Credit Note": as defined in subsection 3.5(e).
"Revolving Credit Termination Date": the earlier of six years after
the Closing Date (the "Scheduled Revolving Credit Termination Date") and
the date on which the Term Loans are repaid in full.
"Sale/Leaseback Transaction": any arrangement with any Person
providing for the leasing by the Borrower or any Subsidiary of real or
personal property which has been or is to be sold or transferred by the
Borrower or such Subsidiary to such Person or to any other Person to whom
funds have been or are to be advanced by such Person on the security of
such property or rental obligations of the Borrower or such Subsidiary.
"Scheduled Revolving Credit Termination Date": as defined in the
definition of "Revolving Credit Termination Date" contained in this
subsection 1.1.
"SEC": the Securities and Exchange Commission or any Governmental
Authority which succeeds to the powers and functions thereof.
"Securities Act": the Securities Act of 1933, as amended.
"Security Documents": collectively, the Guarantee and Collateral
Agreement, the Mortgages, and all other security documents hereafter
delivered to the Administrative Agent granting a Lien on any asset or
assets of any Person to secure the Obligations or to secure any guarantee
of any such Obligations and, including, without limitation, any such
document delivered pursuant to subsection 7.10.
"Sellers": the "Stockholder Indemnitors" as defined in the Stock
Purchase Agreement.
"Senior Subordinated Note Indenture": the Indenture, dated as of May
7, 1996, between the Borrower and Fleet National Bank, as trustee, as the
same may be amended, supplemented or otherwise modified from time to time
in accordance with subsection 8.10.
"Senior Subordinated Notes": as defined in subsection 6.1(c).
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as of
any date of determination, (a) the amount of the "present fair saleable
value" of the assets of such Person will, as of such date, exceed the
amount that will be required to pay all "liabilities of such Person,
contingent or otherwise", as of such date (as such quoted
<PAGE>
24
terms are determined in accordance with applicable Federal and state laws
governing determinations of the insolvency of debtors) as such debts become
absolute and matured, (b) such Person will not have, as of such date, an
unreasonably small amount of capital with which to conduct its business,
and (c) such Person will be able to pay its debts as they mature, taking
into account the timing of and amounts of cash to be received by such
Person and the timing of and amounts of cash to be payable on or in respect
of indebtedness of such Person; in each case after giving effect to (A) as
of the Closing Date the making of the Extensions of Credit to be made on
the Closing Date and the application of the proceeds of such Extensions of
Credit and (B) on any date after the Closing Date, the making of any
Extension of Credit to be made on such date and the application of the
proceeds of such Extension of Credit. For purposes of this definition, (i)
"debt" means liability on a "claim", and (ii) "claim" means any right to
payment, whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal equitable, secured or unsecured.
"Standby Letter of Credit": as defined in subsection 3.10(b)(i)(1).
"Stock Purchase": as defined in the recitals to this Agreement.
"Stock Purchase Agreement": as defined in the recitals to this
Agreement.
"Subsidiary": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by such Person. Unless otherwise
qualified, all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.
"Subsidiary Mortgage": each Mortgage to be executed and delivered by
a Subsidiary, substantially in the form of Exhibit A, with such changes as
---------
the Administrative Agent shall deem necessary or desirable in order (i) to
provide that such Subsidiary is the Mortgagor, (ii) to comply with and/or
provide for specific laws of the jurisdictions in which the property to be
encumbered is located, and (iii) to assure that the Administrative Agent,
for the benefit of the Lenders, has a perfected Lien on the property to be
encumbered thereby securing such Subsidiary's Obligations (as such term is
defined in the Guarantee and Collateral Agreement), or in such other form
as the Administrative Agent shall reasonably require, with respect to (x)
each parcel of real property listed on Schedule 5.8 for which the
------------
Administrative Agent requests a Mortgage and (y) each parcel of After-
Acquired Mortgage Property for which a mortgage is granted to the
Administrative Agent pursuant to subsection 7.10, in each case as the same
may be amended, supplemented or otherwise modified from time to time.
<PAGE>
25
"Swing Line Commitment": the obligation of the Swing Line Lender to
make Swing Line Loans pursuant to subsection 3.6 in an aggregate amount at
any one time outstanding not to exceed $5,000,000.
"Swing Line Lender": as defined in subsection 3.6.
"Swing Line Loan Participation Certificate": a certificate
substantially in the form of Exhibit C.
---------
"Swing Line Loans": as defined in subsection 3.6.
"Swing Line Note": as defined in subsection 3.7(e).
"Swing Line Participation Amount": as defined in subsection 3.9(b).
"Termination Date": the sixth anniversary of the Closing Date.
"Term Loan": as defined in subsection 2.1; collectively, the "Term
Loans".
"Term Loan Commitment": as to any Lender, its obligation to make a
Term Loan to the Borrower in an amount equal to the amount set forth
opposite such Lender's name in Schedule 1.1 under the heading "Term Loan
------------
Commitment", as such amount may be reduced from time to time pursuant to
this Agreement or as such amount may be adjusted from time to time pursuant
to subsection 13.6; collectively, as to all such Lenders, the "Term Loan
Commitments".
"Term Loan Commitment Percentage": as to any Term Loan Lender at any
time, the percentage of the Term Loan Commitments then constituted by such
Term Loan Lender's Term Loan Commitments (or, after the Term Loans are
made, the percentage of the aggregate Term Loans then constituted by such
Term Loan Lender's Term Loans).
"Term Loan Lender": any Lender with a Term Loan Commitment hereunder
and/or any Term Loans outstanding hereunder; collectively, the "Term Loan
Lenders".
"Term Note": as defined in subsection 2.4(d); collectively, the "Term
Notes".
"Test Period": with respect to subsections 8.1(a) and (c), as set
forth therein.
"Title Insurance Company": as defined in subsection 6.1(t).
"Tranche": collectively, Eurodollar Loans the then current Interest
Periods with respect to all of which begin on the same date and end on the
same later date
<PAGE>
26
(whether or not such Loans shall originally have been made on the same
day); Tranches may be identified as "Eurodollar Tranches".
"Transactions": as defined in the recitals to this Agreement.
"Transferee": as defined in subsection 13.6(f).
"Type": as to any Loan, its nature as an ABR Loan or a Eurodollar
Loan.
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, as the same may be amended from time to time.
1.2 Other Definitional Provisions; Financial Calculations. (a)
Unless otherwise specified therein, all terms defined in this Agreement shall
have the defined meanings when used in the other Loan Documents or any
certificate or other document made or delivered pursuant hereto or thereto.
(b) As used herein and in any Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms
partly defined in subsection 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(e) Notwithstanding anything to the contrary herein, for purposes of
making all calculations in connection with the covenants contained in Section 8,
all accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP consistently
applied as in effect on the date of this Agreement. In the event of any
material difference at any time between GAAP in effect on the date of this
Agreement and GAAP from time to time in effect, the certificate of a Responsible
Officer required pursuant to subsection 7.2(b)(ii) shall include a
reconciliation of the calculations required thereby with the financial
statements being delivered with such certificate.
SECTION 2. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS
2.1 Term Loans. Subject to the terms and conditions hereof, each
Term Loan Lender severally agrees to make a term loan (a "Term Loan") to the
Borrower on the Closing Date in an amount equal to the Term Loan Commitment of
such Term Loan Lender. The
<PAGE>
27
Term Loans may from time to time be (a) Eurodollar Loans, (b) ABR Loans or (c) a
combination thereof, as determined by the Borrower and notified to the
Administrative Agent in accordance with subsections 2.2 and 4.2.
2.2 Procedure for Term Loan Borrowing. The Borrower hereby requests
a Term Loan borrowing on the Closing Date in an amount equal to the aggregate
amount of the Term Loan Commitments of the Term Loan Lenders. The Term Loans
shall initially be ABR Loans. Each Term Loan Lender will make the amount of its
pro rata share of the Term Loans available to the Administrative Agent for the
account of the Borrower at the office of the Administrative Agent specified in
subsection 13.2 prior to 10:00 A.M., New York City time, on the Closing Date in
Dollars and in funds immediately available to the Administrative Agent. The
Administrative Agent shall credit the account of the Borrower designated in its
borrowing request by 12:00 Noon, New York City time, on the Closing Date, with
the aggregate of the amounts made available to the Administrative Agent by the
Term Loan Lenders and in like funds as received by the Administrative Agent.
2.3 Repayment of Term Loans. The Borrower hereby unconditionally
promises to pay to the Administrative Agent for the account of each Term Loan
Lender the principal amount of the Term Loan made by such Term Loan Lender in
twelve consecutive semi-annual installments, payable on the last day of April
and October of each year commencing October 31, 1996, each of which installments
on any such date shall be in an amount equal to 50% of the original aggregate
principal amount of the Term Loans set forth below opposite the year in which
such date occurs (or such earlier date on which the Term Loans become due and
payable pursuant to Section 11), provided that the final installment of the Term
Loans shall be payable on the Termination Date:
<TABLE>
<CAPTION>
Year following the Closing Date Aggregate Payments
------------------------------- ------------------
<S> <C>
One $ 2,915,000
Two $ 4,717,000
Three $ 6,519,000
Four $ 9,063,000
Five $11,236,000
Six $18,550,000
</TABLE>
The Borrower hereby further agrees to pay to the Administrative Agent for the
account of each Term Loan Lender interest on the unpaid principal amount of the
Term Loans from time to time outstanding from the date hereof until payment in
full thereof at the rates per annum, and on the dates, set forth in subsection
4.4.
2.4 Evidence of Term Loan Debt. (a) Each Term Loan Lender shall
maintain in accordance with its usual practice an account or accounts evidencing
indebtedness of the Borrower to such Term Loan Lender resulting from the Term
Loan made by such Term Loan Lender, including the amounts of principal and
interest payable and paid to such Term Loan Lender from time to time under this
Agreement.
<PAGE>
28
(b) The Administrative Agent shall record in the Register, with
separate subaccount therein for each Term Loan Lender, (i) the amount of each
Term Loan made hereunder, the Type thereof and, in the case of Eurodollar Loans,
each Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Term Loan Lender hereunder and (iii) both the amount of any sum received by the
Administrative Agent hereunder from the Borrower and each Term Loan Lender's
share thereof, if any.
(c) The entries made in the Register pursuant to subsection 2.4(b)
shall, to the extent permitted by applicable law and absent manifest error, be
prima facie evidence of the existence and amounts of the obligations of the
Borrower therein recorded; provided, however, that the failure of any Term Loan
Lender to maintain any account pursuant to subsection 2.4(a) or the
Administrative Agent to make recordings in the Register pursuant to subsection
2.4(b), or any error therein, shall not in any manner affect the obligation of
the Borrower to repay (with applicable interest) the Term Loan made to the
Borrower by such Term Loan Lender in accordance with the terms of this
Agreement.
(d) The Borrower agrees that, upon the request to the Administrative
Agent by any Term Loan Lender, which request is communicated to the Borrower,
the Borrower will execute and deliver to such Term Loan Lender a promissory note
of the Borrower dated the Closing Date evidencing the Term Loan made by such
Term Loan Lender, substantially in the form of Exhibit D (a "Term Note"),
---------
payable to the order of such Term Loan Lender and in a principal amount equal
to, in the case of Term Notes issued on the Closing Date, the lesser of (A) the
initial Term Loan Commitment of such Term Loan Lender or (B) the unpaid
principal amount of the Term Loan made by such Term Loan Lender, and, in the
case of Term Notes issued after the Closing Date, the unpaid principal amount of
the Term Loan made by such Term Loan Lender. Each Term Loan Lender is hereby
authorized to record the date, Type and amount of each Term Loan made by such
Term Loan Lender, the date and amount of each payment or prepayment of principal
thereof, each continuation thereof, each conversion of all or a portion thereof
to another Type and, in the case of Eurodollar Loans, the length of each
Interest Period and Eurodollar Rate with respect thereto, on the schedule (or
any continuation of the schedule) annexed to and constituting a part of its Term
Note, and any such recordation shall, to the extent permitted by applicable law,
and absent manifest error, constitute prima facie evidence of the accuracy of
the information so recorded, provided that the failure to make any such
recordation (or any error therein) shall not affect the obligation of the
Borrower to repay (with applicable interest) the Term Loans made to the Borrower
in accordance with the terms of this Agreement.
SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS
3.1 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("Revolving Credit Loans") to the Borrower from time to
time during the Revolving Credit Commitment Period in an aggregate principal
amount at any one time outstanding which, when added to such Revolving Credit
Lender's Revolving Credit Commitment Percentage of
<PAGE>
29
(i) the then outstanding Swing Line Loans and (ii) the then outstanding L/C
Obligations, does not exceed the amount of such Revolving Credit Lender's
Revolving Credit Commitment. During the Revolving Credit Commitment Period, the
Borrower may use the Revolving Credit Commitments by borrowing, prepaying the
Revolving Credit Loans in whole or in part, and reborrowing, all in accordance
with the terms and conditions hereof.
(b) The Revolving Credit Loans may from time to time be (i)
Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined
by the Borrower and notified to the Administrative Agent in accordance with
subsections 3.2 and 4.2, provided that no Revolving Credit Loan shall be made as
a Eurodollar Loan after the day that is one month prior to the Termination Date.
3.2 Procedure for Revolving Credit Borrowing. The Borrower may
borrow under the Revolving Credit Commitments during the Revolving Credit
Commitment Period on any Business Day, provided that the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 12:00 Noon, New York City time, (a) three Business
Days prior to the requested Borrowing Date, if all or any part of the requested
Revolving Credit Loans are to be initially Eurodollar Loans, or (b) one Business
Day prior to the requested Borrowing Date, otherwise), specifying (i) the amount
to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing
is to be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the
borrowing is to be entirely or partly of Eurodollar Loans, the respective
amounts of each such Type of Loan and the lengths of the initial Interest
Periods therefor. Revolving Credit Loans made on the Closing Date shall
initially be ABR Loans. Each borrowing under the Revolving Credit Commitments
shall be in an amount equal to (x) in the case of ABR Loans, $500,000 or a whole
multiple of $100,000 in excess thereof (or, if the then Available Revolving
Credit Commitments are less than $500,000, such lesser amount) and (y) in the
case of Eurodollar Loans, $1,000,000 or a whole multiple of $500,000 in excess
thereof. Upon receipt of any such notice from the Borrower, the Administrative
Agent shall promptly notify each Revolving Credit Lender thereof. Each
Revolving Credit Lender will make the amount of its pro rata share of each
borrowing available to the Administrative Agent for the account of the Borrower
at the office of the Administrative Agent specified in subsection 13.2 prior to
12:00 Noon, New York City time, on the Borrowing Date requested by the Borrower
in funds immediately available to the Administrative Agent. Such borrowing will
then be made available to the Borrower by the Administrative Agent crediting the
account of the Borrower designated in its borrowing notice prior to 1:00 P.M.,
New York City time, on such Borrowing Date with the aggregate of the amounts
made available to the Administrative Agent by the Lenders and in like funds as
received by the Administrative Agent.
3.3 Commitment and Other Fees. (a) The Borrower agrees to pay to
the Administrative Agent for the account of each Revolving Credit Lender a
commitment fee for the period from and including the date hereof to the
Revolving Credit Termination Date, computed at the rate shown on the Pricing
Grid set forth on Annex A hereto, on the average daily amount of the Available
Revolving Credit Commitment of such Revolving Credit Lender during the period
for which payment is made, payable quarterly in arrears on the last day of each
April, July, October and January and on the Revolving Credit Termination Date
<PAGE>
30
or such earlier date as the Revolving Credit Commitments shall terminate as
provided herein, commencing on the first of such dates to occur after the date
hereof.
(b) The Borrower agrees to pay to Chemical and The Bank of New York
the amounts and fees set forth in the Fee Letter dated the Closing Date among
Chemical, CSI, The Bank of New York and the Borrower in the amounts and on the
dates set forth therein.
3.4 Termination or Reduction of Commitments. The Borrower shall have
the right, upon not less than one Business Day's prior notice to the
Administrative Agent (who shall notify the Lenders), to terminate the Revolving
Credit Commitments or, from time to time, to reduce the amount of the Revolving
Credit Commitments, provided that no such termination or reduction shall be
permitted if, after giving effect thereto and to any prepayments of the
Revolving Credit Loans made on the effective date thereof, the aggregate
principal amount of the Revolving Credit Loans then outstanding, when added to
the then outstanding L/C Obligations and Swing Line Loans, would exceed the
Revolving Credit Commitments then in effect. Any such reduction shall be in an
amount equal to $500,000 or a whole multiple of $100,000 in excess thereof and
shall reduce permanently the Revolving Credit Commitments then in effect.
3.5 Repayment of Revolving Credit Loans; Evidence of Debt. (a) The
Borrower hereby unconditionally promises to pay to the Administrative Agent for
the account of each Revolving Credit Lender the then unpaid principal amount of
each Revolving Credit Loan of such Revolving Credit Lender on the Revolving
Credit Termination Date (or such earlier date on which the Revolving Credit
Loans become due and payable pursuant to Section 11). The Borrower hereby
further agrees to pay to the Administrative Agent for the account of each
Revolving Credit Lender interest on the unpaid principal amount of the Revolving
Credit Loans from time to time outstanding from the date hereof until payment in
full thereof at the rates per annum, and on the dates, set forth in subsection
4.4.
(b) Each Revolving Credit Lender shall maintain in accordance with
its usual practice an account or accounts evidencing indebtedness of the
Borrower to such Revolving Credit Lender resulting from each Revolving Credit
Loan of such Revolving Credit Lender from time to time, including the amounts of
principal and interest payable and paid to such Revolving Credit Lender from
time to time under this Agreement.
(c) The Administrative Agent shall record in the Register, with
separate subaccount for each Revolving Credit Lender, (i) the amount and
Borrowing Date of each Revolving Credit Loan made hereunder, the Type thereof
and each Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Revolving Credit Lender hereunder and (iii) both the amount of any sum received
by the Administrative Agent hereunder from the Borrower and each Revolving
Credit Lender's share thereof.
(d) The entries made in the Register pursuant to subsection 3.5(c)
shall, to the extent permitted by applicable law, and absent manifest error, be
prima facie evidence of the existence and amounts of the obligations of the
Borrower therein recorded; provided,
<PAGE>
31
however, that the failure of any Revolving Credit Lender to maintain any account
pursuant to subsection 3.5(b) or the Administrative Agent to make recordings in
the Register pursuant to subsection 3.5(c), or any error therein, shall not in
any manner affect the obligation of the Borrower to repay (with applicable
interest) the Revolving Credit Loans made to such Borrower by such Revolving
Credit Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the Administrative
Agent by any Revolving Credit Lender, which request is communicated to the
Borrower, the Borrower will execute and deliver to such Revolving Credit Lender
a promissory note of the Borrower dated the Closing Date evidencing the
Revolving Credit Loans of such Revolving Credit Lender, substantially in the
form of Exhibit E with appropriate insertions as to date and principal amount (a
---------
"Revolving Credit Note"). Each Revolving Credit Lender is hereby authorized to
record the date, Type and amount of each Revolving Credit Loan made by such
Revolving Credit Lender, the date and amount of each payment or prepayment of
principal thereof, each continuation thereof, each conversion of all or a
portion thereof to another Type and, in the case of Eurodollar Loans, the length
of each Interest Period and Eurodollar Rate with respect thereto, on the
schedule (or any continuation of the schedule) annexed to and constituting a
part of its Revolving Credit Note, and any such recordation shall, to the extent
permitted by applicable law, and absent manifest error, constitute prima facie
evidence of the accuracy of the information so recorded, provided that the
failure to make any such recordation (or any error therein) shall not affect the
obligation of the Borrower to repay (with applicable interest) the Revolving
Credit Loans made to the Borrower in accordance with the terms of this
Agreement.
3.6 Swing Line Commitment. Subject to the terms and conditions
hereof, Chemical (in such capacity, the "Swing Line Lender") agrees to make a
portion of the Revolving Credit Commitments available to the Borrower during the
Revolving Credit Commitment Period by making swing line loans ("Swing Line
Loans") to the Borrower in an aggregate principal amount not to exceed at any
one time outstanding the Swing Line Commitment then in effect, notwithstanding
that the Swing Line Loans outstanding at any time plus the Swing Line Lender's
outstanding Revolving Loans at that time may exceed the Swing Line Lender's
Revolving Credit Commitment at such time; provided that the Borrower shall not
request, and the Swing Line Lender shall not make, any Swing Line Loan if, after
giving effect to the making of such Swing Line Loan, the Aggregate Revolving
Credit Outstandings of all the Revolving Credit Lenders would exceed the
Revolving Credit Commitments at such time. During the Revolving Credit
Commitment Period, the Borrower may use the Swing Line Commitment by borrowing,
repaying and reborrowing Swing Line Loans all in accordance with the terms and
conditions hereof. Swing Line Loans may be ABR Loans only.
3.7 Repayment of Swing Line Loans; Evidence of Debt. (a) The
Borrower hereby unconditionally promises to pay to the Administrative Agent for
the account of the Swing Line Lender the then unpaid principal amount of the
Swing Line Loans on the Revolving Credit Termination Date (or such earlier date
on which the Swing Line Loans become due and payable pursuant to Section 11).
The Borrower hereby further agrees to pay to the Administrative Agent for the
account of the Swing Line Lender interest on the unpaid
<PAGE>
32
principal amount of the Swing Line Loans from time to time outstanding from the
date hereof until payment in full thereof at the rates per annum, and on the
dates, set forth in subsection 4.4.
(b) The Swing Line Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the Borrower to the
Swing Line Lender resulting from the Swing Line Loans made by the Swing Line
Lender from time to time, including the amounts of principal and interest
payable and paid to the Swing Line Lender from time to time under this
Agreement.
(c) The Administrative Agent shall record in the Register (i) the
amount and Borrowing Date of each Swing Line Loan made hereunder, (ii) the
amount of any principal or interest due and payable or to become due and payable
from the Borrower to the Swing Line Lender hereunder and (iii) the amount of any
sum received by the Administrative Agent hereunder in respect of Swing Line
Loans.
(d) The entries made in the Register pursuant to subsection 3.7(c)
shall, to the extent permitted by applicable law, and absent manifest error, be
prima facie evidence of the existence and amounts of the obligations of the
Borrower therein recorded; provided, however, that the failure of the Swing Line
Lender to maintain any account pursuant to subsection 3.7(b) or the
Administrative Agent to make recordings in the Register pursuant to subsection
3.7(c), or any error therein, shall not in any manner affect the obligation of
the Borrower to repay (with applicable interest) the Swing Line Loans made to
the Borrower by the Swing Line Lender in accordance with the terms of this
Agreement.
(e) The Borrower agrees that, upon the request to the Administrative
Agent by the Swing Line Lender, which request is communicated to the Borrower,
the Borrower will execute and deliver to the Swing Line Lender a promissory note
of the Borrower, dated the Closing Date, evidencing the Swing Line Loans of the
Swing Line Lender, substantially in the form of Exhibit F with appropriate
---------
insertions as to date and principal amount (a "Swing Line Note"). The Swing
Line Lender is hereby authorized to record the date and amount of each Swing
Line Loan made by the Swing Line Lender and the date and amount of each payment
or prepayment of principal thereof on the schedule annexed to and constituting a
part of the Swing Line Note, and any such recordation shall, to the extent
permitted by applicable law, and absent manifest error, constitute prima facie
evidence of the accuracy of the information so recorded, provided that the
failure to make any such recordation (or any error therein) shall not affect the
obligation of the Borrower to repay (with applicable interest) the Swing Line
Loans made to the Borrower by the Swing Line Lender in accordance with the terms
of this Agreement.
3.8 Procedure for Borrowing Swing Line Loans. (a) Whenever the
Borrower desires that the Swing Line Lender make Swing Line Loans under
subsection 3.6, it shall give the Swing Line Lender irrevocable telephonic
notice confirmed promptly in writing (which telephonic notice must be received
by the Swing Line Lender not later than 11:00 A.M., New York City time, on the
proposed Borrowing Date), specifying (i) the amount to be borrowed and (ii) the
requested Borrowing Date (which shall be a Business Day during
<PAGE>
33
the Revolving Credit Commitment Period). Each borrowing under the Swing Line
Commitment shall be in a minimum amount of $100,000 or a whole multiple of
$50,000 in excess thereof. Not later than 2:00 P.M., New York City time, on the
Borrowing Date specified in a notice in respect of Swing Line Loans, the Swing
Line Lender shall make available to the Administrative Agent for the account of
the Borrower at the office of the Administrative Agent specified in subsection
13.2 an amount in immediately available funds equal to the amount of the Swing
Line Loan to be made by the Swing Line Lender. The Administrative Agent shall
make the proceeds of such Swing Line Loan available to the Borrower not later
than 2:00 P.M., New York City time, on such Borrowing Date by crediting the
account of the Borrower, designated in its borrowing notice, with such proceeds
in immediately available funds.
(b) The Swing Line Lender, at any time in its sole and absolute
discretion may, on behalf of the Borrower (which hereby irrevocably directs the
Swing Line Lender to act on its behalf) request each Revolving Credit Lender
including the Swing Line Lender, to make a Revolving Credit Loan in an amount
equal to such Lender's Revolving Credit Commitment Percentage of the amount of
the Swing Line Loans outstanding on the date such notice is given (the "Refunded
Swing Line Loans"). Unless any of the events described in Section 11(f) with
respect to the Borrower shall have occurred (in which event the procedures of
subsection 3.9(b) shall apply) each Revolving Credit Lender shall make the
proceeds of its Revolving Credit Loan available to the Administrative Agent for
the account of the Swing Line Lender at the office of the Administrative Agent
specified in subsection 13.2 prior to 11:00 A.M., New York City time, in funds
immediately available on the Business Day next succeeding the date such notice
is given. The proceeds of such Revolving Credit Loans shall be immediately
applied to repay the Refunded Swing Line Loans. Effective on the day such
Revolving Credit Loans are made, the portion of the Swing Line Loans so paid
shall no longer be outstanding as Swing Line Loans, shall no longer be due under
the Swing Line Note and shall be due under the respective Revolving Credit Loans
made by the Revolving Credit Lenders in accordance with their respective
Revolving Credit Commitment Percentages.
3.9 Swing Line Loan Participations. (a) Notwithstanding anything
herein to the contrary, the Swing Line Lender shall not be obligated to make any
Swing Line Loans if a Default under Section 11(a) or an Event of Default shall
have occurred and be continuing. The Swing Line Lender shall notify the
Borrower of such election not to make any Swing Line Loans unless the Event of
Default is of the type specified in Section 11(f) with respect to the Borrower.
(b) If prior to the repayment of any Swing Line Loan or the making of
Revolving Credit Loans pursuant to subsection 3.8(b), one of the events
described in Section 11(f) with respect to the Borrower shall have occurred,
each Revolving Credit Lender shall on the date such Revolving Credit Loan was to
have been made pursuant to the notice in subsection 3.8(a) purchase an undivided
participating interest in the Refunded Swing Line Loans in an amount equal to
such Revolving Credit Lender's Revolving Credit Commitment Percentage of the
aggregate principal amount of Swing Line Loans then outstanding (the "Swing Line
Participation Amount"). On the date of such purchase, each Revolving Credit
<PAGE>
34
Lender shall transfer to the Swing Line Lender, in immediately available funds,
such Revolving Credit Lender's Swing Line Participation Amount and upon receipt
thereof the Swing Line Lender shall deliver to such Revolving Credit Lender a
Swing Line Loan Participation Certificate dated the date of the Swing Line
Lender's receipt of such funds and in an amount equal to such Revolving Credit
Lender's Swing Line Participation Amount.
(c) Whenever, at any time after the Swing Line Lender has received
from any Revolving Credit Lender such Revolving Credit Lender's Swing Line
Participation Amount, the Swing Line Lender receives any payment on account of
the Swing Line Loans, the Swing Line Lender will distribute to such Revolving
Credit Lender its pro rata share of such payment (appropriately adjusted, in the
case of interest payments, to reflect the period of time during which such
Revolving Credit Lender's participating interest was outstanding and funded);
provided, however, that in the event that such payment received by the Swing
Line Lender is required to be returned, such Revolving Credit Lender will return
to the Swing Line Lender any portion thereof previously distributed to it by the
Swing Line Lender.
(d) Each Revolving Credit Lender's obligation to purchase
participating interests pursuant to subsection 3.9(b) shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, (i) any set-off, counterclaim, recoupment, defense or other right
which such Revolving Credit Lender or the Borrower may have against the Swing
Line Lender, the Borrower or any other Person for any reason whatsoever; (ii)
the occurrence or continuance of a Default or an Event of Default; (iii) any
adverse change in the condition (financial or otherwise) of the Borrower; (iv)
any breach of this Agreement or any other Loan Document by any of the Loan
Parties or any other Lender; or (v) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing, provided that, no
Lender will be obligated to purchase a participating interest in any Swing Line
Loan made during the continuance of an Event of Default if and only if, (x)
subsequent to the occurrence of such Event of Default such Lender has notified
the Administrative Agent that it will not purchase participations in Swing Line
Loans made during the continuance of such Event of Default and (y) such Swing
Line Loan was made after receipt by the Administrative Agent of such notice
while such Event of Default was continuing.
3.10 L/C Commitment. (a) Subject to the terms and conditions
hereof, the Issuing Bank, in reliance on the agreements of the other Revolving
Credit Lenders set forth in subsection 3.13(a), agrees to issue Letters of
Credit for the account of the Borrower on any Business Day during the Revolving
Credit Commitment Period in such form as may be approved from time to time by
the Issuing Bank; provided that the Issuing Bank shall have no obligation to,
and shall not, issue any Letter of Credit if, after giving effect to such
issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the
Available Revolving Credit Commitments would be less than zero.
<PAGE>
35
(b) Each Letter of Credit shall:
(i) be denominated in Dollars and shall be either (1) a standby
letter of credit issued to support obligations of the Borrower, contingent
or otherwise, in connection with the working capital or business needs of
the Borrower in the ordinary course of business permitted hereunder (a
"Standby Letter of Credit") or (2) a commercial letter of credit issued in
respect of the purchase of goods or services by the Borrower and its
Subsidiaries in the ordinary course of business (a "Commercial Letter of
Credit");
(ii) expire no later than the earlier of (A) five Business Days
prior to the Scheduled Revolving Credit Termination Date and (B) one year
after the date of issuance thereof, provided that, subject to clause (A)
above, any such Letter of Credit may, at the request of the Borrower as set
forth in the applicable Application or prior to expiration thereof, be
automatically renewed on each anniversary of the issuance thereof for an
additional period of one year or less unless the Issuing Bank shall have
given prior written notice to the Borrower and the beneficiary of such
Letter of Credit (as specified therein) that such Letter of Credit will not
be renewed;
(iii) have a face amount equal to at least $100,000; and
(iv) if it is outstanding on the Revolving Credit Termination
Date, be cash collateralized.
(c) Each Letter of Credit shall be subject to the Uniform Customs
and, to the extent not inconsistent therewith, the laws of the State of New
York.
(d) The Issuing Bank shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause the
Issuing Bank or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.11 Procedure for Issuance of Letters of Credit. The Borrower may
from time to time request that the Issuing Bank issue a Letter of Credit by
delivering to the Issuing Bank at its address for notices specified herein an
Application therefor, completed to the reasonable satisfaction of the Issuing
Bank, and such other certificates, documents and other papers and information as
the Issuing Bank may reasonably request. The Issuing Bank shall notify the
Revolving Credit Lenders promptly of the receipt of any request pursuant to the
immediately preceding sentence. Upon receipt of any Application, the Issuing
Bank will process such Application and the certificates, documents and other
papers and information delivered to it in connection therewith in accordance
with its customary procedures and shall promptly issue the Letter of Credit
requested thereby (but in no event shall the Issuing Bank be required to issue
any Letter of Credit earlier than three Business Days after its receipt of the
Application therefor and all such other certificates, documents and other papers
and information relating thereto) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing
Bank and the Borrower. The Issuing
<PAGE>
36
Bank shall furnish a copy of such Letter of Credit to the Administrative Agent
and the Borrower promptly following the issuance thereof.
3.12 Fees, Commissions and Other Charges. (a) The Borrower shall
pay to the Administrative Agent, for the account of the Issuing Bank, a fronting
fee with respect to each Letter of Credit, computed for the period from the date
of issuance of such Letter of Credit or the immediately preceding L/C Fee
Payment Date, as the case may be, to the next L/C Fee Payment Date to occur
thereafter at a rate per annum equal to 1/4 of 1%, calculated on the basis of a
360-day year for actual days elapsed, of the average daily amount available to
be drawn under such Letter of Credit during the period for which such fee is
calculated. Such fronting fee shall be payable in arrears on each L/C Fee
Payment Date to occur after the issuance of such Letter of Credit and on the
Revolving Credit Termination Date and shall be nonrefundable.
(b) The Borrower shall pay to the Administrative Agent, for the
account of the L/C Participants and the Issuing Bank, a letter of credit
commission with respect to each Letter of Credit, computed for the period from
the date of issuance of such Letter of Credit or the immediately preceding L/C
Fee Payment Date, as the case may be, to the next L/C Fee Payment Date to occur
thereafter at a rate per annum equal to the Applicable Margin for Revolving
Credit Loans that are Eurodollar Loans in effect from time to time (the
"Revolving Credit Fee Percentage"), calculated on the basis of a 360-day year
for actual days elapsed, of the average daily amount available to be drawn under
such Letter of Credit during the period for which such fee is calculated, to be
shared ratably among the L/C Participants and the Issuing Bank in accordance
with their respective Revolving Credit Commitment Percentages. Such commissions
shall be payable in arrears on each L/C Fee Payment Date to occur after the
issuance of such Letter of Credit and on its termination and shall be
nonrefundable.
(c) In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse the Issuing Bank for such normal and customary costs and
expenses as are incurred or charged by the Issuing Bank in issuing, effecting
payment under, amending or otherwise administering any Letter of Credit.
(d) The Administrative Agent shall, promptly following its receipt
thereof, distribute to the Issuing Bank and the L/C Participants all fees and
commissions received by the Administrative Agent for their respective accounts
pursuant to this subsection.
3.13 L/C Participations. (a) The Issuing Bank irrevocably agrees to
grant and hereby grants to each L/C Participant, and, in order to induce the
Issuing Bank to issue Letters of Credit hereunder, each L/C Participant
irrevocably agrees to accept and purchase and hereby accepts and purchases from
the Issuing Bank, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Revolving Credit Commitment Percentage in the Issuing Bank's
obligations and rights under each Letter of Credit issued hereunder and the
amount of each draft paid by the Issuing Bank thereunder, provided that, no
Lender will be obligated to purchase a participating interest in any Letter of
Credit made during the continuance of an Event of Default if and only if, (x)
subsequent to the occurrence of such Event of Default
<PAGE>
37
such Lender has notified the Administrative Agent that it will not purchase
participations in any Letter of Credit made during the continuance of such Event
of Default and (y) such Letter of Credit was made after receipt by the
Administrative Agent of such Notice while such Event of Default was continuing,
except for, any automatic renewals of outstanding Letters of Credit. Each L/C
Participant unconditionally and irrevocably agrees with the Issuing Bank that,
if a draft is paid under any Letter of Credit for which the Issuing Bank is not
reimbursed in full by the Borrower in accordance with the terms of this
Agreement, including by a Revolving Credit Loan by such Lender under subsection
3.14(c), such L/C Participant shall pay to the Issuing Bank upon demand at the
Issuing Bank's address for notices specified herein an amount equal to such L/C
Participant's Revolving Credit Commitment Percentage of the amount of such
draft, or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Bank pursuant to subsection 3.13(a) in respect of any unreimbursed
portion of any payment made by the Issuing Bank under any Letter of Credit is
paid to the Issuing Bank within three Business Days after the date such payment
is due, such L/C Participant shall pay to the Issuing Bank on demand an amount
equal to the product of (i) such amount, times (ii) the daily average Federal
Funds Effective Rate, during the period from and including the date such payment
is required to the date on which such payment is immediately available to the
Issuing Bank, times (iii) a fraction the numerator of which is the number of
days that elapse during such period and the denominator of which is 360. If any
such amount required to be paid by any L/C Participant pursuant to subsection
3.13(a) is not in fact made available to the Issuing Bank by such L/C
Participant within three Business Days after the date such payment is due, the
Issuing Bank shall be entitled to recover from such L/C Participant, on demand,
such amount with interest thereon calculated from such due date at the rate per
annum applicable to ABR Loans hereunder. A certificate of the Issuing Bank
submitted to any L/C Participant with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Bank has made payment
under any Letter of Credit and has received from any L/C Participant its pro
rata share of such payment in accordance with subsection 3.13(a), the Issuing
Bank receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise, including proceeds of collateral applied thereto
by the Issuing Bank), or any payment of interest on account thereof, the Issuing
Bank will distribute to such L/C Participant its pro rata share thereof;
provided, however, that in the event that any such payment received by the
Issuing Bank shall be required to be returned by the Issuing Bank, such L/C
Participant shall return to the Issuing Bank the portion thereof previously
distributed by the Issuing Bank to it.
3.14 Reimbursement Obligation of the Borrower. (a) The Borrower
agrees to reimburse the Issuing Bank on each date on which the Issuing Bank
notifies the Borrower of the date and amount of a draft presented under any
Letter of Credit and paid by the Issuing Bank for the amount of (i) such draft
so paid and (ii) any taxes, fees, charges or other costs or expenses incurred by
the Issuing Bank in connection with such payment. Each such
<PAGE>
38
payment shall be made to the Issuing Bank at its address for notices specified
herein in lawful money of the United States of America and in immediately
available funds.
(b) Interest shall be payable on any and all amounts remaining unpaid
by the Borrower under this subsection 3.14 from the date the draft presented
under the affected Letter of Credit is paid until payment in full, at the rate
which would be payable on any outstanding Revolving Credit Loans that are ABR
Loans which were then overdue.
(c) Each drawing under any Letter of Credit shall constitute a
request by the Borrower to the Administrative Agent for a borrowing pursuant to
subsection 3.2 of ABR Loans in the amount of such drawing (but without any
requirement for compliance with the prior notice or minimum borrowing amount
provisions of subsection 3.2 or the conditions set forth in subsection 6.2).
The Borrowing Date with respect to such borrowing shall be the date of such
drawing and each Revolving Credit Lender shall make its Revolving Credit
Commitment Percentage of such borrowing available to the Administrative Agent on
such date to be used to repay the Reimbursement Obligation created by such
drawing. The application of such Loans shall satisfy the Borrower's obligations
under subsection 3.14(a) in the amount thereof.
(d) On the Revolving Credit Termination Date, any outstanding Letters
of Credit shall be cash collateralized in amounts satisfactory to the Issuing
Bank.
3.15 Obligations Absolute. (a) The Borrower's obligations under
this Section 3 shall be absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense to
payment which the Borrower may have or have had against the Issuing Bank, any
Lender or any beneficiary of a Letter of Credit (other than the defense of
payment to the Issuing Bank or a defense based on the gross negligence or
willful misconduct of the Issuing Bank).
(b) The Borrower also agrees with the Issuing Bank and the Lenders
that, subject to subsection 3.15(d), neither the Issuing Bank nor any Lender
shall be responsible for, and the Borrower's Reimbursement Obligations under
subsection 3.14(a) shall not be affected by, among other things, (i) the
validity or genuineness of documents or of any endorsements thereon, even though
such documents shall in fact prove to be invalid, fraudulent or forged, or (ii)
any dispute between or among the Borrower and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be transferred or
(iii) any claims whatsoever of the Borrower against any beneficiary of such
Letter of Credit or any such transferee.
(c) The Issuing Bank and the Lenders shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any Letter of
Credit, except in the case of the Issuing Bank for errors, omissions,
interruptions or delays caused by the Issuing Bank's gross negligence or willful
misconduct.
<PAGE>
39
(d) The Borrower agrees that any action taken or omitted by the
Issuing Bank under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards of care specified in the Uniform
Customs, and to the extent not inconsistent therewith, the Uniform Commercial
Code of the State of New York, shall be binding on the Borrower and shall not
result in any liability of the Issuing Bank or any Lender to the Borrower.
3.16 Letter of Credit Payments. If any draft shall be presented for
payment under any Letter of Credit, the Issuing Bank shall, within a reasonable
time after its receipt thereof, examine all documents purporting to represent a
demand for payment under such Letter of Credit to ascertain that the same appear
on their face to be in conformity with the terms and conditions of such Letter
of Credit. The Issuing Bank shall also promptly notify the Borrower of the date
and amount thereof. The responsibility of the Issuing Bank to the Borrower in
connection with any draft presented for payment under any Letter of Credit
shall, in addition to any payment obligation expressly provided for in such
Letter of Credit, be limited to determining that the documents (including each
draft) delivered under such Letter of Credit in connection with such presentment
are in conformity with such Letter of Credit.
3.17 Application. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of this Section 3, the provisions of this Section 3 shall apply.
3.18 Quarterly Reports. The Issuing Bank shall furnish to each
Revolving Credit Lender a quarterly report with respect to Letters of Credit
issued or outstanding during such quarter and any drawings thereunder.
SECTION 4. GENERAL PROVISIONS APPLICABLE TO EXTENSIONS OF CREDIT
4.1 Optional and Mandatory Prepayments. (a) The Borrower may at any
time and from time to time prepay the Loans, in whole or in part, without
premium or penalty, upon irrevocable notice to the Administrative Agent prior to
11:00 A.M., New York City time, one Business Day (or, in the case of Swing Line
Loans, by irrevocable notice to the Administrative Agent by 11:00 A.M., New York
City time, on the same Business Day) in the case of ABR Loans, and three
Business Days' irrevocable notice to the Administrative Agent in the case of the
Eurodollar Loans, prior to such prepayment, specifying the date and amount of
prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a
combination thereof, and, if of a combination thereof, the amount allocable to
each. Upon receipt of any such notice the Administrative Agent shall notify
each affected Lender thereof on the date of receipt of such notice. If any such
notice is given, the amount specified in such notice shall be due and payable on
the date specified therein, together with any amounts payable pursuant to
subsection 4.11 and, in the case of prepayments of the Term Loans only, accrued
interest to such date on the amount prepaid. Partial prepayments of the Term
Loans pursuant to this subsection 4.1(a) shall be applied (i) at the option of
the Borrower, to the installment thereof due in the next six months and (ii) to
the extent that the Borrower does
<PAGE>
40
not exercise such option or any such prepayment exceeds such installment, to the
remaining installments of principal thereof pro rata. Amounts prepaid on account
of the Term Loans may not be reborrowed. Partial prepayments (except (x) in the
case of Swing Line Loans which shall be in accordance with subsection 3.7 and
(y) in the case of Revolving Credit Loans under subsection 3.14(c)) shall be in
an aggregate principal amount of at least $500,000.
(b) Unless the Required Lenders otherwise agree, if with respect to
any fiscal year of the Borrower, commencing with its fiscal year ending December
31, 1997, the Borrower shall have Excess Cash Flow for such fiscal year, the
Term Loans shall be prepaid in an aggregate amount equal to the Excess Cash Flow
Percentage of such Excess Cash Flow at such time. Each such prepayment shall be
made on or before the date which is 100 days after the end of such fiscal year.
(c) Unless the Required Lenders otherwise agree, the Term Loans shall
be prepaid with 100% of the Net Proceeds of (i) any Equity Offering by Holdings
or any incurrence of Indebtedness by any Loan Party on or after the Closing Date
(other than any Indebtedness permitted pursuant to subsection 8.2), provided
--------
that, (x) only 50% of the first $60,000,000 of Net Proceeds of all such Equity
- ----
Offerings shall be required to be so applied and (y) all other Net Proceeds of
Equity Offerings may be used at the discretion of the Borrower, including
without limitation to redeem, repurchase, defease or prepay or retire the Senior
Issue or the Junior Issue of the PIK Preferred or the Senior Subordinated Notes
or to prepay the Term Loans and (ii) any Asset Sale by the Borrower or any of
its Subsidiaries pursuant to subsections 8.6(a) (except to the extent that the
assets disposed of in such Asset Sale are replaced with Replacement Assets
within 360 days following the date of such Asset Sale) and 8.6(b), in each case,
to the extent that such Net Proceeds realized from any such Asset Sale (or
series of related Asset Sales) in any fiscal year are greater than $1,000,000;
provided Net Proceeds shall not be required to be applied to the prepayment of
the Term Loans pursuant to this subsection until such time as the aggregate
amount of such Net Proceeds above $1,000,000 not yet applied exceeds $250,000.
Each such prepayment shall be made on or before the date which is ten Business
Days after the date any Loan Party receives such Net Proceeds.
(d) Prepayments of the Term Loans pursuant to subsections 4.1(b) and
4.1(c) shall be applied to the remaining installments thereof on a pro rata
basis. If, after giving effect to any permanent reduction in the Revolving
Credit Commitments pursuant to subsection 3.4, the aggregate principal amount of
the Revolving Credit Loans then outstanding, when added to the then outstanding
L/C Obligations and Swing Line Loans, would exceed the Revolving Credit
Commitments as so reduced, then the Revolving Credit Loans and Swing Line Loans
shall be prepaid and the Letters of Credit shall be cash collateralized or
replaced to the extent of such excess. Amounts to be applied pursuant to this
subsection 4.1(d) to the prepayment of Term Loans, Revolving Credit Loans and/or
Swing Line Loans shall be applied, as applicable, first to reduce outstanding
Term Loans, Revolving Credit Loans and/or Swing Line Loans which are ABR Loans.
Any amounts remaining after each such application shall, at the option of the
Borrower, be applied to prepay Term Loans and/or Revolving Credit Loans which
are Eurodollar Loans immediately
<PAGE>
41
and/or shall be deposited in the Prepayment Account (as defined below). The
Administrative Agent shall apply any cash deposited in the Prepayment Account
(i) allocable to Term Loans to prepay Term Loans which are Eurodollar Loans and
(ii) allocable to Revolving Credit Loans to prepay Revolving Credit Loans which
are Eurodollar Loans, in each case on the last day of the respective Interest
Periods therefor (or, at the direction of the Borrower, on any earlier date)
until all outstanding Term Loans and/or Revolving Credit Loans which are
Eurodollar Loans have been prepaid or until all cash on deposit in the
Prepayment Account (including, without limitation, interest earned thereon) with
respect to such Loans has been exhausted. For purposes of this Agreement, the
term "Prepayment Account" shall mean an account established by the
Administrative Agent and over which the Administrative Agent shall have
exclusive dominion and control, including the right of withdrawal for
application in accordance with this subsection 4.1(d). The Administrative Agent
will, at the request of the Borrower, invest amounts on deposit in the
Prepayment Account in Cash Equivalents that mature prior to the last day of the
applicable Interest Periods of the Eurodollar Loans to be prepaid, provided that
(i) the Administrative Agent shall not be required to make any investment that,
in its sole judgment, would require or cause the Administrative Agent to be in,
or would result in any, violation of any Requirement of Law and (ii) the
Administrative Agent shall have no obligation to invest amounts on deposit in
the Prepayment Account if a Default or Event of Default shall have occurred and
be continuing. The Borrower shall indemnify the Administrative Agent for any
losses relating to the investments so that the amount available to prepay
Eurodollar Loans on the last day of the applicable Interest Periods therefor is
not less than the amount that would have been available had no investments been
made. Other than any interest earned on such investments, the Prepayment Account
shall not bear interest. Interest or profits, if any, on such investments shall
be deposited and reinvested and disbursed as described above. If the maturity of
the Loans has been accelerated pursuant to Section 11, the Administrative Agent
shall first apply all amounts on deposit in the Prepayment Account to prepay the
outstanding Term Loans pro rata and, second, to prepay any outstanding Revolving
Credit Loans and/or Swing Line Loans and, third, to cash collateralize any
outstanding Letters of Credit. Until funds in the Prepayment Account are applied
to the prepayment of any Loans, such Loans shall continue to be outstanding and
interest shall continue to accrue thereon. The Borrower hereby grants to the
Administrative Agent, for its benefit and the benefit of the Lenders, a security
interest in the Prepayment Account to secure the Obligations.
4.2 Conversion and Continuation Options. (a) The Borrower may elect
from time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent at least one Business Day's prior irrevocable notice of
such election, provided that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto (or on any other
day if on the date of such conversion the Borrower pays to the Administrative
Agent for the account of the applicable Lenders accrued interest on such
Eurodollar Loans to the date of such conversion together with all amounts
payable under subsection 4.11). The Borrower may elect from time to time to
convert ABR Loans to Eurodollar Loans by giving the Administrative Agent at
least three Business Days' prior irrevocable notice of such election. Any such
notice of conversion to Eurodollar Loans shall specify the length of the initial
Interest Period or Interest Periods therefor. Upon receipt of any such notice
the Administrative Agent shall promptly notify each affected Lender thereof.
<PAGE>
42
All or any part of outstanding Eurodollar Loans and ABR Loans may be converted
as provided herein, provided that (i) no Loan may be converted into a Eurodollar
Loan when any Event of Default has occurred and is continuing and the
Administrative Agent has or the Required Lenders have determined that such a
conversion is not appropriate and (ii) no Loan may be converted into a
Eurodollar Loan after the date that is one month prior to the Termination Date
(in the case of conversions of Revolving Credit Loans) or the date of the final
installment of principal of the Term Loans (in the case of conversions of Term
Loans).
(b) Any Eurodollar Loans may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower giving
notice to the Administrative Agent, in accordance with the applicable provisions
of the term "Interest Period" set forth in subsection 1.1, of the length of the
next Interest Period to be applicable to such Loans, provided that no Eurodollar
Loan may be continued as such (i) when any Event of Default has occurred and is
continuing and the Administrative Agent has or the Required Lenders have
determined that such a continuation is not appropriate or (ii) after the date
that is one month prior to the Termination Date (in the case of continuations of
Revolving Credit Loans) or the date of the final installment of principal of the
Term Loans (in the case of continuations of Term Loans) and provided, further,
that if the Borrower shall fail to give such notice or if such continuation is
not permitted such Loans shall be automatically converted to ABR Loans on the
last day of such then expiring Interest Period.
4.3 Minimum Amounts and Maximum Number of Tranches. All borrowings,
conversions and continuations of Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal amount
of the Loans comprising each Eurodollar Tranche shall be equal to $1,000,000 or
a whole multiple of $500,000 in excess thereof. In no event shall there be more
than five Eurodollar Tranches outstanding at any time.
4.4 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to
the ABR plus the Applicable Margin.
(c) If all or a portion of (i) the principal amount of any Loan, (ii)
any interest payable thereon or (iii) any commitment fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise, but taking into account any applicable grace period
under Section 11(a)), such overdue amount shall bear interest at a rate per
annum which is (x) in the case of overdue principal, the rate that would
otherwise be applicable thereto pursuant to the foregoing provisions of this
subsection plus 2% or (y) in the case of overdue interest, commitment fees or
other amounts due and payable hereunder, the rate described in subsection 4.4(b)
plus 2%, in each case from the date of such non-payment until such amount is
paid in full (after as well as before judgment).
<PAGE>
43
(d) Interest shall be payable in arrears on each Interest Payment
Date and the Revolving Credit Termination Date, provided that interest accruing
pursuant to subsection 4.4(c) shall be payable from time to time on demand.
4.5 Computation of Interest and Fees. (a) Commitment fees and
interest shall be calculated on the basis of a 360-day year for the actual days
elapsed, except that whenever interest is calculated on the basis of the Prime
Rate, interest shall be calculated on the basis of a 365- (or 366-, as the case
may be) day year for the actual days elapsed. The Administrative Agent shall as
soon as practicable notify the Borrower and the affected Lenders of each
determination of a Eurodollar Rate. Any change in the interest rate on a Loan
resulting from a change in the ABR or the Eurocurrency Reserve Requirement shall
become effective as of the opening of business on the day on which such change
becomes effective. The Administrative Agent shall, as soon as practicable,
notify the Borrower and the affected Lenders of the effective date and the
amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to subsection 4.4(a).
4.6 Inability to Determine Interest Rate. If prior to the first day
of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for such
Interest Period, or
(b) the Administrative Agent shall have received notice from the
Required Lenders that the Eurodollar Rate determined or to be determined
for such Interest Period will not adequately and fairly reflect the cost to
such Lenders (as conclusively certified by such Lenders) of making or
maintaining their affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the affected Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans requested to be made on the first day
of such Interest Period shall be made as ABR Loans, (y) any Loans that were to
have been converted on the first day of such Interest Period to Eurodollar Loans
shall be converted to or continued as ABR Loans and (z) any outstanding
Eurodollar Loans shall be converted, on the last day of such Interest Period, to
ABR Loans. Until such notice has been withdrawn by the Administrative Agent, no
further Eurodollar Loans shall be made or continued as such, nor shall the
Borrower have the right to convert ABR Loans to Eurodollar Loans.
<PAGE>
44
4.7 Pro Rata Treatment and Payments. (a) All payments (including
prepayments) to be made by the Borrower hereunder, whether on account of
principal, interest, fees or otherwise, shall be made without set off or
counterclaim and shall be made prior to 12:00 Noon, New York City time, on the
due date thereof to the Administrative Agent, for the account of the Revolving
Credit Lenders or the Term Loan Lenders, as the case may be, at the
Administrative Agent's office specified in subsection 13.2, in Dollars and in
immediately available funds. Payments received by the Administrative Agent
after such time shall be deemed to have been received on the next Business Day.
The Administrative Agent shall distribute such payments to the Lenders entitled
to receive the same promptly upon receipt in like funds as received. If any
payment hereunder (other than payments on the Eurodollar Loans) becomes due and
payable on a day other than a Business Day, such payment shall be extended to
the next succeeding Business Day, and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension. If any payment on a Eurodollar Loan becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day (and, with respect to payments of principal, interest
shall be payable thereon at the then applicable rate during such extension)
unless the result of such extension would be to extend such payment into another
calendar month, in which event such payment shall be made on the immediately
preceding Business Day. If, and to the extent that, on any Business Day the
Administrative Agent receives any payment hereunder or under the other Loan
Documents (including any such payment representing a realization upon the
Collateral), and such payment is not sufficient to pay in full all principal,
interest and fees then due and payable hereunder, the Administrative Agent shall
apply such payment ratably to all such amounts then due and payable.
(b) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its portion of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available to
the Administrative Agent. A certificate of the Administrative Agent submitted
to any Lender with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error. If such Lender's portion of such
borrowing is not made available to the Administrative Agent by such Lender
within three Business Days of such Borrowing Date, the Administrative Agent
shall also be entitled to recover such amount with interest thereon at the rate
per annum applicable to the Loan resulting from such borrowing hereunder, on
demand, from the Borrower, without prejudice to any right or claim the Borrower
may have against such Lender.
(c) Each borrowing by the Borrower of Term Loans and Revolving Credit
Loans shall be made ratably from the Term Loan Lenders and Revolving Credit
Lenders, respectively, in accordance with their respective Term Loan Commitment
Percentages and
<PAGE>
45
Revolving Credit Commitment Percentages. Any reduction of the Revolving Credit
Commitments shall be made ratably among the Revolving Credit Lenders, in
accordance with their respective Revolving Credit Commitment Percentages.
4.8 Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, then such Lender shall give
notice of such illegality to the Administrative Agent and the Borrower. Upon
such adoption or change, (a) the commitment of such Lender hereunder to make
Eurodollar Loans, continue Eurodollar Loans as such and convert ABR Loans to
Eurodollar Loans shall forthwith be suspended until such time as it shall no
longer be unlawful for such Lender to make or maintain Eurodollar Loans as
contemplated by this Agreement and (b) such Lender's Loans then outstanding as
Eurodollar Loans, if any, shall be converted automatically to ABR Loans on the
respective last days of the then current Interest Periods with respect to such
Loans or within such earlier period as required by law. Any Lender giving
notice pursuant to the first sentence of this subsection shall notify the
Administrative Agent and the Borrower at such time as the circumstances giving
rise to the initial notice shall cease to exist.
4.9 Requirements of Law. (a) If the adoption of or any change in
any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority, in each
case made subsequent to the date hereof or, in the case of a Transferee, to the
same extent as that of the transferor prior to the transfer or subsequent to the
date of transfer:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note, any Letter of Credit, any
Application or any Eurodollar Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for Non-
Excluded Taxes, changes in the rate of tax on the overall net income of
such Lender and taxes imposed as a result of any future, present or former
connection between such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising solely
from such Lender having executed, delivered or performed its obligations or
received a payment under, or enforced, this Agreement or any Note));
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held
by, deposits or other liabilities in or for the account of, advances, loans
or other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
<PAGE>
46
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall, within 20 Business Days
after receipt by the Borrower of such Lender's written demand (with a copy to
the Administrative Agent), pay such Lender such additional amount or amounts as
will compensate such Lender for such increased cost or reduced amount
receivable. If any Lender has demanded compensation under this subsection
4.9(a) with respect to any Eurodollar Loan, the Borrower shall have the option
to convert immediately such Eurodollar Loan into an ABR Loan until the
circumstances giving rise to such demand for compensation no longer apply;
provided, that (i) no such conversion shall affect the Borrower's obligation to
pay compensation as provided herein which is due with respect to the period
prior to such conversion and (ii) on the date of such conversion the Borrower
shall pay to the Administrative Agent for the benefit of the relevant Lender
accrued interest on such Eurodollar Loan to the date of conversion.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority, in each case made subsequent to the date hereof, shall have the
effect of reducing the rate of return on such Lender's or such corporation's
capital as a consequence of its obligations hereunder or under, or in respect
of, any Letter of Credit to a level below that which such Lender or such
corporation could have achieved but for such adoption, change or compliance
(taking into consideration such Lender's or such corporation's policies with
respect to capital adequacy) by an amount material to such Lender, or such
corporation, then from time to time, within 10 Business Days after receipt by
the Borrower of such Lender's written demand therefor (with a copy to the
Administrative Agent), the Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender or such corporation for such
reduction.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to subsection 4.9(a) or (b), it shall promptly give written notice to
the Borrower (with a copy to the Administrative Agent) specifying in reasonable
detail the event by reason of which it has become so entitled and the method of
calculating the amounts to which it claims to be entitled. A certificate as to
any additional amounts payable pursuant to this subsection submitted by such
Lender to the Borrower (with a copy to the Administrative Agent) shall be
conclusive in the absence of manifest error. The Borrower shall not be
obligated to compensate any Lender pursuant to this subsection 4.9 for amounts
accruing prior to the date which is 90 days before such Lender notifies the
Borrower of such event. The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
4.10 Taxes. (a) All payments made by the Borrower under this
Agreement and any Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties,
<PAGE>
47
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority, excluding net
income taxes, franchise taxes and capital taxes imposed on the Administrative
Agent or any Lender (or Transferee) as a result of any future, present or former
connection between the Administrative Agent or such Lender (or Transferee) and
the jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent or such Lender (or
Transferee) having executed, delivered or performed its obligations or received
a payment under, or enforced, this Agreement or any Note or any other Loan
Document). If any such non-excluded taxes, levies, imposts, duties, charges,
fees, deductions or withholdings ("Non-Excluded Taxes") are required to be
withheld from any amounts payable to the Administrative Agent or any Lender (or
Transferee) hereunder or under any Note, the amounts so payable to the
Administrative Agent or such Lender (or Transferee) shall be increased
("increased amounts") by the amounts necessary so that after making all required
deductions and withholdings (including, without limitation, the payment of all
Non-Excluded Taxes) the Administrative Agent or such Lender (or Transferee)
receives the amounts equal to the interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement. Whenever
any Non-Excluded Taxes are payable by the Borrower, the Borrower shall promptly
send to the Administrative Agent for its own account or for the account of such
Lender (or Transferee), as the case may be, a certified copy of an original
official receipt received by the Borrower showing payment thereof or other
evidence of remittance of Non-Excluded Taxes reasonably acceptable to the
Administrative Agent. If the Borrower fails to pay any Non-Excluded Taxes when
due to the appropriate taxing authority or fails to remit to the Administrative
Agent the required receipts or other reasonably acceptable evidence, the
Borrower shall indemnify the Administrative Agent and the Lenders for any
incremental taxes, interest or penalties that may become payable by the
Administrative Agent or any Lender as a result of any such failure. The
Borrower will indemnify each Lender (or Transferee) and the Administrative Agent
for the amount of Non-Excluded Taxes paid by such Lender (or Transferee) or the
Administrative Agent, as the case may be, and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
The agreements in this subsection 4.10 shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
(b) Each Lender (and each Transferee) that is not incorporated or
organized under the laws of the United States of America or a state thereof
shall:
(i) in the case of a Lender or a Transferee that is a "bank"
under Section 881(c)(3)(A) of the Code:
(A) on or before the date it becomes a party to this
Agreement (or, in the case of a Loan Participant, on or before the
date such Loan Participant becomes a Loan Participant hereunder) and
on or before the date, if any, such Lender (or Transferee) changes its
applicable lending office by designating a different lending office (a
"New Lending Office"), deliver to the Borrower and the Administrative
Agent (y) two properly completed and duly executed copies of United
States Internal Revenue Service Form 1001 or 4224, or successor
<PAGE>
48
applicable form, as the case may be, and (z) an Internal Revenue
Service Form W-8 or W-9, or successor applicable form, as the case may
be;
(B) deliver to the Borrower and the Administrative Agent
two further properly completed and duly executed copies of any such
form or certification on or before the date that any such form or
certification expires or becomes obsolete and after the occurrence of
any event requiring a change in the most recent form previously
delivered by it to the Borrower or upon the request of the Borrower or
the Administrative Agent; and
(C) obtain such extensions of time for filing and
completing such forms or certifications as may reasonably be requested
by the Borrower;
(ii) in the case of a Lender or a Transferee that is not a "bank"
under Section 881(c)(3)(A) of the Code:
(A) on or before the date it becomes a party to this
Agreement (or, in the case of a Loan Participant, on or the date such
Loan Participant becomes a Loan Participant hereunder) deliver to the
Borrower and the Administrative Agent (I) a statement under penalties
of perjury that such Lender (w) is not a "bank" under Section
881(c)(3)(A) of the Code, is not subject to regulatory or other legal
requirements as a bank in any jurisdiction, and has not been treated
as a bank for purposes of any tax, securities law or other filing or
submission made to any Governmental Authority, any application made to
a rating agency or qualification for any exemption from tax,
securities law or other legal requirements, (x) is not a 10-percent
shareholder within the meaning of Section 881(c)(3)(B) of the Code,
(y) is not a controlled foreign corporation receiving interest from a
related person within the meaning of Section 881(c)(3)(C) of the Code
and (z) is not a "conduit entity" within the meaning of U.S. Treasury
Regulations Section 1.881-3 and (II) a properly completed and duly
executed Internal Revenue Service Form W-8 or applicable successor
form;
(B) deliver to the Borrower and the Administrative Agent
two further properly completed and duly executed copies of said Form
W-8, or any successor applicable form on or before the date that any
such Form W-8 expires or becomes obsolete or after the occurrence of
any event requiring a change in the most recent form previously
delivered by it to the Borrower or upon the request of the Borrower;
and
(C) obtain such extensions of time for filing and
completing such forms or certifications as may be reasonably requested
by the Borrower or the Administrative Agent;
unless in any such case any change in law or regulation has occurred subsequent
to the date such Lender (or Transferee) became a party to this Agreement (or in
the case of a Loan
<PAGE>
49
Participant, the date such Loan Participant became a Loan Participant hereunder)
which renders all such forms inapplicable or which would prevent such Lender
from properly completing and executing any such form with respect to it and such
Lender so advises the Borrower and the Administrative Agent in writing no later
than 15 calendar days before any payment hereunder or under any Note is due.
Each such Lender (and each such Transferee) shall certify (i) in the case of a
Form 1001 or 4224, that it is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes and
(ii) in the case of a Form W-8 or W-9 delivered pursuant to subsection
4.10(b)(i), that it is entitled to an exemption from United States backup
withholding tax.
(c) The Borrower shall not be required to indemnify any Lender (or
Transferee), or to pay any increased amounts to any Lender (or Transferee) in
respect of any Non-Excluded Tax, pursuant to this subsection 4.10 to the extent
that (i) any obligation to withhold or deduct amounts with respect to tax
existed on the date such Lender (or Transferee) became a party to this Agreement
(or, in the case of a Transferee that is a Loan Participant, on the date such
Loan Participant became a Loan Participant hereunder) or, with respect to
payments to a New Lending Office, the date such Lender (or Transferee)
designated such New Lending Office with respect to a Loan; provided, however,
that this clause (i) shall not apply to any Transferee or New Lending Office
that becomes a Transferee or New Lending Office as a result of an assignment,
participation, transfer or designation made at the written request of the
Borrower, or (ii) any Lender (or Transferee) fails to comply in full with the
provisions of subsection 4.10(b) hereof.
(d) If a Lender (or Transferee) or the Administrative Agent shall
become aware that it is entitled to claim a refund from a Governmental Authority
in respect of Non-Excluded Taxes as to which it has been indemnified by the
Borrower, or with respect to which the Borrower has paid increased amounts,
pursuant to this subsection 4.10, it shall promptly notify the Borrower of the
availability of such refund claim and shall make the appropriate claim to such
Governmental Authority for such refund. If a Lender (or Transferee) or the
Administrative Agent receives a refund (including pursuant to a claim for refund
made pursuant to the preceding sentence) in respect of any Non-Excluded Tax as
to which it has been indemnified by the Borrower, or with respect to which the
Borrower has paid increased amounts, pursuant to this subsection 4.10, it shall
within 30 days from the date of such receipt pay over such refund to the
Borrower, net of all out-of-pocket third-party expenses of such Lender (or
Transferee) or the Administrative Agent.
4.11 Indemnity. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a direct consequence of (a) default by the Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (b) default by the Borrower in making any
prepayment of Eurodollar Loans after the Borrower has given a notice thereof in
accordance with the provisions of this Agreement or (c) the making of a
prepayment of Eurodollar Loans or converting any Eurodollar Loans to ABR Loans
on a day which is not the last day of an Interest Period with respect thereto.
Such indemnification may include an amount equal to the excess, if any, of (i)
the amount of interest which would have accrued
<PAGE>
50
on the amount so prepaid or converted, or not so borrowed, converted or
continued, for the period from the date of such prepayment or conversion or of
such failure to borrow, convert or continue to the last day of such Interest
Period (or, in the case of a failure to borrow, convert or continue, the
Interest Period that would have commenced on the date of such failure) in each
case at the applicable rate of interest for such Loans provided for herein
(excluding the Applicable Margin) over (ii) the amount of interest (as
reasonably determined by such Lender) which would have accrued to such Lender on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. This covenant shall survive
the termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
4.12 Change of Lending Office; Filing of Certificates or Documents.
Each Lender agrees that if it makes any demand for payment, or becomes entitled
to any increased amounts, under subsection 4.8, 4.10 or if any adoption or
change of the type described in subsection 4.9 shall occur with respect to it,
it will use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) to designate a
different lending office or file any certificate or document reasonably
requested in writing by the Borrower if such action would reduce or obviate the
need for the Borrower to make payments under subsection 4.8, 4.10 or would
eliminate or reduce the effect of any adoption or change described in subsection
4.9.
4.13 Replacement Lenders. In the event that (a) the Borrower becomes
obligated to pay additional amounts or increased amounts to, or receives notice
from, any Lender pursuant to subsection 4.8, 4.9 or 4.10 and such Lender has not
theretofore removed or cured the conditions which result in the obligation to
pay such additional amounts or increased amounts, or (b) any Lender has
defaulted in its obligation to make Loans hereunder, then the Borrower may, on
ten Business Days' prior written notice to the Administrative Agent and such
Lender, cause such Lender to (and such Lender shall) assign pursuant to
subsection 13.6(c) all of its rights and obligations under this Agreement to
another bank or financial institution which is willing to become a Lender and is
acceptable (which acceptance shall not be unreasonably withheld) to the
Administrative Agent, for a purchase price equal to the outstanding principal
amount of the Loans payable to such Lender plus any accrued but unpaid interest
on such Loans, any accrued but unpaid commitment fees in respect of such
Lender's Commitment and any other amounts payable to such Lender under this
Agreement (including, without limitation, amounts payable under subsections 4.9,
4.10 and 4.11).
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans and issue or participate in the Letters of
Credit, Holdings and the Borrower hereby represent and warrant to the
Administrative Agent and each Lender that:
<PAGE>
51
5.1 Financial Condition. (a) Except as set forth on Schedule 5.1,
the combined audited balance sheet of the Companies as at December 31, 1995 and
the related consolidated statements of income and cash flows for the fiscal year
ended on such date, audited by Deloitte & Touche LLP, a copy of which has
heretofore been furnished to each Lender, present fairly in accordance with GAAP
the combined financial condition of the Companies as at such date, and the
combined results of their operations and their combined cash flows for the
fiscal year then ended. Except as set forth on Schedule 5.1, all such financial
statements have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by such accountants and as
disclosed therein). None of the Companies had at the date of the balance sheet
referred to above, any material Guarantee Obligation, contingent liability or
liability for taxes, or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any material interest rate or foreign
currency swap or exchange transaction, which is not reflected in the foregoing
statements or in the notes thereto or expressly permitted to be incurred
hereunder.
(b) Except as set forth on Schedule 5.1, the unaudited combined
balance sheet of the Companies, as at March 31, 1996 and the related
consolidated statement of income, certified by a Responsible Officer of the
Borrower, a copy of which has heretofore been furnished to each Lender, presents
fairly in accordance with GAAP the combined condition of the Companies as at
such date and the combined results of their operations for the fiscal quarter
then ended. Except as set forth on Schedule 5.1, such balance sheets, including
the related schedules and notes thereto, have been prepared in accordance with
GAAP (except as approved by such Responsible Officer and disclosed therein).
None of the Companies or ARP had at the dates of such balance sheet, any
material Guarantee Obligation, contingent liability or liability for taxes, or
any long-term lease or unusual forward or long-term commitment, including,
without limitation, any interest rate or foreign currency exchange transaction,
which is not reflected in such balance sheet or in the notes thereto or in the
Information Memorandum.
(c) The unaudited consolidated pro forma balance sheet of the
--- -----
Borrower and its consolidated Subsidiaries, as of March 31, 1996, certified by a
Responsible Officer of the Borrower (the "Pro Forma Balance Sheet"), copies of
-----------------------
which have been furnished to each Lender, is the unaudited balance sheet of the
Borrower and its consolidated Subsidiaries, adjusted to give effect (as if such
events had occurred on such date) to (i) each of the Transactions, (ii) the
incurrence of the Loans and the issuance of the Letters of Credit to be incurred
or issued, as the case may be, on the Closing Date, (iii) the issuance of the
PIK Preferred and (iv) the incurrence of the Senior Subordinated Notes and all
other Indebtedness that the Borrower and its consolidated Subsidiaries expect to
incur, and the payment of all amounts the Borrower and its consolidated
Subsidiaries expect to pay, in connection with the Transactions. The Pro Forma
Balance Sheet, together with the notes thereto, were prepared based on good
faith assumptions in accordance with GAAP and are based on the best information
available to the Borrower, as of the date of delivery thereof, and reflect on a
pro forma basis the financial position of the Borrower and its consolidated
- --- -----
Subsidiaries, as of March 31, 1996, as adjusted, as described above, assuming
that the events specified in the preceding sentence had actually occurred as of
March 31, 1996.
<PAGE>
52
5.2 No Change. (a) Since December 31, 1995, there has been no
development, event or circumstance which has had or could reasonably be expected
to have a Material Adverse Effect, and (b) during the period from December 31,
1995, to and including the date of this Agreement, except in connection with the
Transactions or as otherwise set forth in Schedule 5.2, no dividends or other
------------
distributions have been declared, paid or made upon the Capital Stock of
Holdings or any of the Companies or any of their consolidated Subsidiaries nor
has any of the Capital Stock of Holdings or any of the Companies or any of their
consolidated Subsidiaries been redeemed, retired, purchased or otherwise
acquired for value by any of the Companies or any of their Subsidiaries.
5.3 Existence; Compliance with Law. Except as set forth in Schedule
--------
5.3 each Loan Party (a) is duly organized, validly existing and in good standing
- ---
under the laws of the jurisdiction of its organization, (b) has the power and
authority to own and operate its property, to lease the property it operates as
lessee and to conduct the business in which it is currently engaged, (c) is duly
qualified or licensed to do business as a foreign entity and in good standing
under the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification except where
the failure to be so qualified and/or in good standing, in the aggregate could
not reasonably be expected to have a Material Adverse Effect and (d) is in
compliance with all Requirements of Law except to the extent that the failure to
comply therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
5.4 Power; Authorization; Enforceable Obligations. Each Loan Party
has the power and authority, and the legal right, to make, deliver and perform
the Loan Documents to which it is a party and, in the case of the Borrower, to
borrow and obtain the Extensions of Credit hereunder. Each Loan Party has taken
all necessary action to authorize the Extensions of Credit on the terms and
conditions of this Agreement and any Notes and to authorize the execution,
delivery and performance by it of the Loan Documents to which it is a party. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required to be
obtained or made by any Loan Party in connection with the Transactions or the
Acquisition Documents, the Extensions of Credit hereunder, the execution,
delivery or performance by each applicable Loan Party or the validity or
enforceability with respect to or against any Loan Party of the Loan Documents
to which it is a party or with the continuing operations of the Borrower and its
Subsidiaries other than (i) consents, authorizations and filings in connection
with the Transactions or the Acquisition Documents (x) which are required to be
obtained or made and are in full force and effect (each of which are listed on
Schedule 5.4) or (y) which are not required to be obtained or made prior to
- ------------
consummation of the Transactions and are listed on Schedule 5.4 or (z) which, if
------------
not obtained or made, could not reasonably be expected to have a Material
Adverse Effect, (ii) the filing of Uniform Commercial Code financing statements
and filings with the United States Patent and Trademark Office and the United
States Copyright Office to perfect the security interests of the Administrative
Agent, for the benefit of the Lenders, in the Collateral that can be perfected
by such filings, (iii) recordation of the Mortgages and (iv) consents,
authorizations and filings in connection with enforcement of the Loan Documents.
This Agreement has been, and each other Loan Document will be, duly executed and
delivered on behalf of each Loan Party that is a party hereto or thereto.
<PAGE>
53
This Agreement constitutes, and each other Loan Document when executed and
delivered will constitute, a legal, valid and binding obligation of each Loan
Party that is a party hereto or thereto enforceable against such Loan Party in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
5.5 No Legal Bar. The execution, delivery and performance of the
Loan Documents, the Extensions of Credit hereunder and the use of the proceeds
thereof by each applicable Loan Party will not violate any Requirement of Law or
Contractual Obligation of any Loan Party which could reasonably be expected to
have a Material Adverse Effect and will not result in, or require, the creation
or imposition of any Lien on any of its or their respective properties or
revenues pursuant to any such Requirement of Law or Contractual Obligation other
than as contemplated in or permitted by the Loan Documents.
5.6 No Material Litigation. Except as set forth in Schedule 5.6, no
------------
litigation, investigation (of which the Borrower or Holdings has been made
aware) or proceeding of or before any arbitrator or Governmental Authority is
pending or, to the knowledge of the Borrower or Holdings, threatened by or
against any Loan Party or against any of their respective properties or revenues
(a) with respect to any of the Loan Documents or any of the transactions
contemplated hereby or thereby or (b) which has a reasonable likelihood of an
adverse determination, and if adversely determined, could reasonably be expected
to have a Material Adverse Effect.
5.7 No Default. No Loan Party is in default under or with respect to
any of its Contractual Obligations in any respect which could reasonably be
expected to have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
5.8 Ownership of Property; Liens. To the best of each Loan Party's
knowledge, after giving effect to the Transactions, each Loan Party has or will
have good record and marketable title in fee simple to, or a valid leasehold
interest in, all its real property except for such matters as do not materially
adversely affect the use of such property in the conduct of the business as
currently conducted, and own, or hold a valid leasehold interest in, all its
other material property, and none of such property is subject to any Lien except
as permitted by subsection 8.3. Schedule 5.8 sets forth a true and complete
------------
list of all real property owned or acquired by the Loan Parties on the Closing
Date.
5.9 Intellectual Property. Schedule 5.9 sets forth as of the Closing
------------
Date, a true and complete list of all material trademarks (registered or
unregistered), trade names, service marks and copyrights and applications
therefor owned, used or filed by or licensed to the Borrower and its
Subsidiaries in the United States (after giving effect to the Transactions) and,
with respect to registered trademarks (if any), contains a list of all
registration and application numbers. Except as disclosed on Schedule 5.9, the
------------
Borrower or a Subsidiary (after giving effect to the Transactions) owns or has
the right to use, without payment to any other party, the trademarks (registered
or unregistered), trade names, service marks,
<PAGE>
54
copyrights and applications therefor referred to in such Schedule. Except as set
forth on Schedule 5.9, to the best knowledge of the Borrower, no claims are
------------
pending by any Person with respect to the ownership, validity, enforceability or
the Borrower's or any Subsidiary's use of any such trademarks (registered or
unregistered), trade names, service marks, copyrights, or applications therefor
or challenging or questioning the validity or effectiveness of any of the
foregoing, in the United States.
5.10 No Burdensome Restrictions. Except as set forth on Schedule
--------
5.10 or as disclosed in the Final Offering Memorandum, no Requirement of Law or
- ----
Contractual Obligation applicable to any Loan Party could reasonably be expected
to have a Material Adverse Effect.
5.11 Taxes. Except as set forth in Schedule 5.11 Holdings and the
-------------
Borrower and its Subsidiaries have filed or caused to be filed all tax returns
which, to the knowledge of Holdings or the Borrower and its Subsidiaries, are
required to be filed and have paid all taxes shown to be due and payable on said
returns or on any assessments made against it or any of its property in respect
of such periods and all other material taxes imposed on it or any of its
property by any Governmental Authority (other than any taxes the amount or
validity of which are being contested in good faith by appropriate proceedings
and with respect to which reserves in conformity with GAAP have been provided on
the books of the applicable Loan Party and other than any taxes which in the
aggregate would not have a Material Adverse Effect), in respect of such periods.
5.12 Federal Regulations. No Letter of Credit and no part of the
proceeds of any Loans will be used for "buying" or "carrying" any "margin stock"
within the respective meanings of each of the quoted terms under Regulation G or
Regulation U as now and from time to time hereafter in effect. If requested by
any Lender or the Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form G-1 or FR Form U-1 referred to in
Regulation G or Regulation U, as the case may be.
5.13 ERISA. Except as set forth in Schedule 5.13, neither a
-------------
Reportable Event nor an "accumulated funding deficiency" (within the meaning of
Section 412 of the Code or Section 302 of ERISA) has occurred during the five-
year period prior to the date on which this representation is made or deemed
made with respect to any Plan, and each Plan has complied in all material
respects with the applicable provisions of ERISA and the Code, except where, in
connection with any such event or noncompliance, the liability which would be
likely to result could not be reasonably expected to have a Material Adverse
Effect. No termination of a Single Employer Plan has occurred except where, in
connection with any such termination, the liability which would be likely to
result could not be reasonably expected to have a Material Adverse Effect, and
no Lien which remains unsatisfied in favor of the PBGC or a Plan has arisen,
during such five-year period. The present value of all accrued benefits under
each Single Employer Plan (based on those assumptions used to fund such Plans)
did not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits by an amount in excess of $1,000,000.
Neither the Borrower nor
<PAGE>
55
any Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan; neither the Borrower nor any Commonly Controlled Entity
would become subject to any liability under ERISA if the Borrower or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding the date on which this
representation is made or deemed made; and no such Multiemployer Plan is in
Reorganization or Insolvent, except where, in any such case, the liability which
would be likely to result could not be reasonably expected to have a Material
Adverse Effect.
5.14 Investment Company Act; Other Regulations. No Loan Party is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended. The Borrower is not subject to regulation under any Federal or
State statute or regulation (other than Regulation X) which limits its ability
to incur Indebtedness as contemplated herein.
5.15 Subsidiaries. As of the Closing Date and after giving effect to
the Transactions, Holdings has no direct Subsidiaries other than the Borrower,
and the Borrower has no Subsidiaries other than ARP.
5.16 Purpose of Loans. The proceeds of the Term Loans shall be used
by the Borrower to finance the Transactions and to pay related fees and
expenses. The proceeds of the Revolving Credit Loans and/or Swing Line Loans
shall be used to provide for the working capital requirements of the Borrower
and its Subsidiaries on or after the Closing Date and for general corporate
purposes, which include the payment of transaction fees and tax adjustments in
connection with the Transactions. The proceeds of the Letters of Credit shall
be used to provide for the working capital requirements of the Borrower and its
Subsidiaries and for any general corporate purpose.
5.17 Environmental Matters. Except as set forth in Schedule 5.17 and
-------------
except to the extent that the inaccuracy of any of the following (or the
circumstances giving rise to such inaccuracy), individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect:
(a) The facilities and properties owned, leased or operated by the
Borrower or any of its Subsidiaries (the "Properties") do not contain any
Hazardous Materials in amounts or concentrations which (i) constitute a
violation of, or (ii) could give rise to any liability under, any
Environmental Law or could interfere with the continued operation of the
Properties or could reasonably be expected to impair the fair saleable
value thereof.
(b) The Borrower and its Subsidiaries and the Properties are in
compliance with, and to the knowledge of the Borrower and its Subsidiaries
have in the last three years been in compliance with, all applicable
Environmental Laws and applicable Environmental Permits, and the Borrower
and its Subsidiaries reasonably believe that they will be able to comply
with all applicable Environmental Laws in the future and renew or obtain
all Environmental Permits necessary for their operations in the future.
<PAGE>
56
(c) Neither the Borrower nor any of its Subsidiaries has received any
written notice of violation, alleged violation, non-compliance, liability
or potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or the Companies,
nor to the knowledge of the Borrower or any of its Subsidiaries is such
notice being threatened.
(d) Hazardous Materials have not been transported, disposed of,
emitted, discharged, or otherwise released or threatened to be released,
nor has their disposal been arranged for, (i) by the Borrower or any of its
Subsidiaries in violation of, or (ii) in a manner or to a location which
could reasonably be expected to give rise to liability under, any
applicable Environmental Law; nor have any Hazardous Materials been
generated, treated, stored, emitted, discharged or otherwise released or
threatened to be released or disposed of at, on or under any of the
Properties in violation of, or in a manner that could reasonably be
expected to give rise to liability under, any applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative action
is pending or, to the knowledge of the Borrower or any of its Subsidiaries,
threatened under any Environmental Law to which the Borrower or any
Subsidiary is or to the knowledge of the Borrower or any of its
Subsidiaries will be named as a party, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other orders, or
other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Borrower or any of its Subsidiaries,
or the Properties or the Companies.
5.18 Regulation H. To the extent available, the Borrower has
obtained for all Mortgaged Properties which are located in a "flood hazard
area", as designated in any Flood Insurance Rate Map published by the Federal
Emergency Management Agency, flood insurance in such total amount as the
Administrative Agent has from time to time reasonably required.
5.19 Accuracy of Information. The factual statements and information
contained in the Confidential Information Memorandum dated April 1996 relating
to the Borrower and the Transactions (as the same may be supplemented in writing
through the Closing Date, including by delivery of the Final Offering
Memorandum, the "Information Memorandum"), when taken as a whole, were, as of
the date of such Information Memorandum or the dates otherwise specified therein
or written supplements thereto, accurate in all material respects and did not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading, provided that (a)
the statements therein describing documents and agreements are summary only and
as such are qualified in their entirety by reference to such documents and
agreements, (b) to the extent any such information therein was based upon or
constitutes a forecast or projection or pro forma financial information,
Holdings and the Borrower represent only that such forecasts or projections or
pro forma financial information were based upon good faith estimates and
assumptions believed by management of the Borrower to be reasonable at the time
made and (c) as to the information which is specified as having
<PAGE>
57
been supplied by third parties, Holdings and the Borrower represent only that
they are not aware of any material misstatement or omission therein.
5.20 Solvency. As of the Closing Date, after giving effect to the
Transactions, the initial Extensions of Credit hereunder and the other
transactions contemplated to occur on the Closing Date each Loan Party is
Solvent.
5.21 Stock Purchase Agreement. The Administrative Agent has received
a complete copy of each of the Stock Purchase Agreement (including all exhibits,
schedules and disclosure letters referred to therein or delivered pursuant
thereto) and all amendments and waivers relating thereto and other side letters
or agreements affecting the terms thereof. As of the Closing Date, none of such
documents and agreements has been amended or supplemented, nor have any of the
provisions thereof been waived, in any material respect, except pursuant to a
written agreement or instrument which has heretofore been delivered to by the
Administrative Agent. As of the Closing Date, to the knowledge of Holdings and
the Borrower, the representations and warranties contained in the Stock Purchase
Agreement are true and correct in all material respects on the Closing Date as
if made on and as of the Closing Date (except as contemplated by the Stock
Purchase Agreement or the other Acquisition Documents or as set forth on
Schedule 5.21).
- -------------
5.22 Security Documents. (a) The Guarantee and Collateral Agreement
is effective to create in favor of the Administrative Agent, for the ratable
benefit of the Lenders, a legal, valid and enforceable security interest in all
the Collateral described therein and Proceeds thereof and, upon completion of
the filings and other actions specified on Schedule 3 to the Guarantee and
Collateral Agreement, the Guarantee and Collateral Agreement shall constitute
fully perfected, first priority Liens on, and security interests in, all right,
title and interest of Holdings, the Borrower and its Subsidiaries in the
Collateral described therein and in Proceeds thereof superior in right to any
other Person other than Permitted Liens.
(b) The properties listed on Schedule 5.8 constitute all material
------------
real properties owned by Holdings or any of its Subsidiaries on the Closing
Date. The Mortgages are each effective to create in favor of the Administrative
Agent, for the ratable benefit of the Lenders, a legal, valid and enforceable
Lien on the properties described therein and proceeds thereof, subject to
obtaining necessary consents (which consents shall be obtained on or prior to
the Closing Date) and when the Mortgages are filed in the offices specified on
Schedule 5.8, the Mortgages shall constitute a fully perfected, first priority
- ------------
Lien on, and security interest in, all right, title and interest of the Loan
Parties in the properties described therein and the proceeds thereof, superior
in right to any other Person other than Permitted Liens.
SECTION 6. CONDITIONS PRECEDENT
6.1 Conditions to Initial Extension of Credit. The agreement of each
Lender to make the initial Extension of Credit requested to be made by it is
subject to the
<PAGE>
58
satisfaction, immediately prior to or concurrently with the making of such
Extension of Credit on the Closing Date, of the following conditions precedent:
(a) Loan Documents. The Administrative Agent shall have received (i)
this Agreement, executed and delivered by a duly authorized officer of
Holdings and the Borrower with a counterpart for each Lender, (ii) for the
account of each Revolving Credit Lender which requests a Revolving Credit
Note on the Closing Date, a Revolving Credit Note conforming to the
requirements hereof and executed by a duly authorized officer of the
Borrower, (iii) for the account of each Term Loan Lender which requests a
Term Note on the Closing Date, a Term Note conforming to the requirements
hereof and executed by a duly authorized officer of the Borrower, (iv) if
requested by the Swing Line Lender on the Closing Date, for the account of
the Swing Line Lender, a Swing Line Note conforming to the requirements
hereof and executed by a duly authorized officer of the Borrower, (v) the
Guarantee and Collateral Agreement, executed and delivered by a duly
authorized officer of each Loan Party thereto, with a counterpart for the
Administrative Agent and a counterpart or a copy for each Lender, and (vi)
each of the Mortgages, each executed and delivered by a duly authorized
officer of each Loan Party thereto, with a counterpart for the
Administrative Agent and a counterpart or a copy for each Lender;
(b) As of the Closing Date, the Administrative Agent shall have
received evidence reasonably satisfactory to it that (i) Holdings shall
have received at least $72,500,000 in cash from (x) the issuance to GEI and
the Investors of the Investor Common, for $5,500,000 in the aggregate and
(y) the issuance to GEI and the Investors of the PIK Preferred, which shall
consist of a Senior Issue and a Junior Issue having terms and conditions
(including as to pay-in-kind nature, rate, tenor and mandatory redemption
provisions) reasonably satisfactory to the Lenders for $67,000,000 in the
aggregate, (ii) Holdings capital stock not owned by GEI and the Investors
and having an aggregate value (determined by reference to the amounts paid
for the Investor Common) of approximately $4,500,000 shall be owned by
members of the Blechman family and Steve Welling, (iii) Holdings shall have
contributed to the Borrower an amount of common equity capital equal to
approximately $53,400,000 and shall have used the balance of the amount
referred to in clause (i) above to purchase stock of the Borrower in
accordance with the Stock Purchase Agreement, (iv) Holdings shall own 100%
of the issued and outstanding capital stock of the Borrower and (v) the
corporate and capital structure of each Loan Party after the Transactions
shall otherwise be reasonably satisfactory to the Lenders in all respects.
After giving effect to the Transactions, Holdings and its Subsidiaries
shall have outstanding no Indebtedness or preferred stock other than (A)
under this Agreement, (B) pursuant to the Senior Subordinated Notes, (C)
the PIK Preferred, (D) as permitted under subsection 8.2 or (E) as
otherwise consented to by the Lenders;
(c) Senior Subordinated Notes. As of the Closing Date, the
Administrative Agent shall have received evidence, in the form of a
certificate, reasonably satisfactory to it that the Borrower shall have
received the net proceeds of the $100,000,000 principal amount of 10 1/4%
Senior Subordinated Notes due 2006
<PAGE>
59
(together with any notes with terms substantially identical thereto and
offered in exchange therefor pursuant to a registration statement filed in
accordance with the Registration Rights Agreement, the "Senior Subordinated
Notes") issued pursuant to the Senior Subordinated Note Indenture on terms
and conditions (including as to rate, tenor, amortization and subordination
provisions) reasonably satisfactory to the Lenders;
(d) Transactions. The Transactions shall have been consummated
concurrently with the making of the initial Extension of Credit by the
Lenders hereunder in accordance with the Stock Purchase Agreement and the
Administrative Agent shall have received, with a copy for each Lender, a
conformed copy of the Stock Purchase Agreement which shall be in form and
substance reasonably satisfactory to the Administrative Agent and
Documentation Agent and no material provision thereof shall have been
waived, amended, supplemented or otherwise modified (it being understood
that the Stock Purchase Agreement as originally executed is satisfactory to
the Administrative Agent);
(e) Related Agreements and Documents. The Administrative Agent shall
have received, with a copy for each Lender, true and correct copies,
certified as to authenticity by the Borrower, of the Senior Subordinated
Note Indenture which shall be reasonably satisfactory to the Administrative
Agent and Documentation Agent;
(f) Closing Certificate. The Administrative Agent shall have
received, with a copy for each Lender, a certificate of the Borrower, dated
the Closing Date, substantially in the form of Exhibit G, with appropriate
---------
insertions and attachments, reasonably satisfactory in form and substance
to the Administrative Agent, executed by the President or any Vice
President and the Secretary or any Assistant Secretary of the Borrower;
(g) Corporate Proceedings of the Borrower. The Administrative Agent
shall have received, with a copy for each Lender, a copy of the
resolutions, in form and substance reasonably satisfactory to the
Administrative Agent, of the Board of Directors of the Borrower authorizing
(i) the execution, delivery and performance of this Agreement and the other
Loan Documents to which it is a party, (ii) the Extensions of Credit
contemplated hereunder and (iii) the granting by it of the Liens created
pursuant to the Borrower Security Documents, certified by the Secretary or
an Assistant Secretary of the Borrower as of the Closing Date, which
certificate shall be in form and substance reasonably satisfactory to the
Administrative Agent and shall state that the resolutions thereby certified
have not been amended, modified, revoked or rescinded and are in full force
and effect;
(h) Borrower Incumbency Certificate. The Administrative Agent shall
have received, with a copy for each Lender, a certificate of the Borrower,
dated the Closing Date, as to the incumbency and signature of the officers
of the Borrower executing any Loan Document reasonably satisfactory in form
and substance to the
<PAGE>
60
Administrative Agent, executed by the President or any
Vice President and the Secretary or any Assistant Secretary of the
Borrower;
(i) Corporate Proceedings of Holdings. The Administrative Agent
shall have received, with a copy for each Lender, a copy of the
resolutions, in form and substance reasonably satisfactory to the
Administrative Agent, of the Board of Directors of Holdings authorizing (i)
the execution, delivery and performance of this Agreement and the other
Loan Documents to which Holdings is a party and (ii) the granting by it of
the Liens created pursuant to the Security Documents to which it is a
party, certified by the Secretary or an Assistant Secretary of Holdings as
of the Closing Date, which certificate shall be in form and substance
reasonably satisfactory to the Administrative Agent and shall state that
the resolutions thereby certified have not been amended, modified, revoked
or rescinded and are in full force and effect;
(j) Holdings Incumbency Certificate. The Administrative Agent shall
have received, with a copy for each Lender, a certificate of Holdings,
dated the Closing Date, as to the incumbency and signature of the officers
of Holdings executing any Loan Document reasonably satisfactory in form and
substance to the Administrative Agent, executed by the President or any
Vice President and the Secretary or any Assistant Secretary of Holdings;
(k) Corporate Proceedings of Subsidiaries. The Administrative Agent
shall have received, from each Subsidiary party to any Loan Document, with
a copy for each Lender, a copy of the resolutions, in form and substance
reasonably satisfactory to the Administrative Agent, of the Board of
Directors of such Subsidiary authorizing (i) the execution, delivery and
performance of any Loan Document to which it is a party and (ii) the
granting by it of the Liens created pursuant to the Security Documents to
which it is a party, certified by the Secretary or an Assistant Secretary
of the Subsidiary as of the Closing Date, which certificate shall be in
form and substance reasonably satisfactory to the Administrative Agent and
shall state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded and are in full force and effect;
(l) Subsidiary Incumbency Certificate. The Administrative Agent
shall have received, from each Subsidiary party to a Borrower Security
Document or any Loan Document, with a copy for each Lender, a certificate
of such Subsidiary, dated the Closing Date, as to the incumbency and
signature of the officers of such Subsidiary executing any Loan Document
reasonably satisfactory in form and substance to the Administrative Agent,
executed by the President or any Vice President and the Secretary or any
Assistant Secretary of such Subsidiary;
(m) Organizational Documents. The Administrative Agent shall have
received, with a copy for each Lender, true and complete copies of the
certificate of incorporation and by-laws of each Loan Party, certified as
of the Closing Date as complete and correct copies thereof by the Secretary
or an Assistant Secretary of such Loan Party;
<PAGE>
61
(n) Consents, Licenses and Approvals. The Administrative Agent shall
have received, with a copy for each Lender, a certificate of a Responsible
Officer of the Borrower (i) attaching copies of all consents and
authorizations of and filings with any Governmental Authority or any other
Person that are required to be obtained or made by any Loan Party in
connection with the Transactions or the Acquisition Documents, the
Extensions of Credit hereunder, the execution, delivery or performance by
each applicable Loan Party or the validity or enforceability with respect
to or against any Loan Party of the Loan Documents to which it is a party
or with the continuing operations of the Borrower and its Subsidiaries
(other than those set forth in clauses (i)(y), (i)(z), (ii), (iii), (iv) or
(v) of subsection 5.4) as are reasonably requested by the Administrative
Agent, and (ii) stating that such consents, authorizations and filings are
in full force and effect and that all applicable waiting periods under any
Requirement of Law shall have expired without any action being taken or
threatened by any competent Governmental Authority which would restrain,
prevent or otherwise impose material adverse conditions on the Transactions
or the financing thereof, and each such consent, authorization and filing
shall be in form and substance reasonably satisfactory to the
Administrative Agent;
(o) Fees. The Administrative Agent shall have received the fees to
be received on the Closing Date referred to in the Fee Letter dated the
Closing Date, from Chemical, CSI and The Bank of New York to the Borrower;
(p) Aggregate Expenses. The Administrative Agent shall have received
satisfactory evidence that the fees and expenses to be incurred in
connection with the Transactions and the financing thereof shall not exceed
$13,500,000 in the aggregate;
(q) Legal Opinions. The Administrative Agent shall have received,
with a counterpart for each Lender, the following executed legal opinions
dated the Closing Date and addressed to the Administrative Agent and each
Lender:
(i) the executed legal opinion of Kelley Drye and Warren,
special counsel to the Loan Parties, in form and substance
satisfactory to the Administrative Agent and covering the matters set
forth on Exhibit I; and
(ii) the executed legal opinion of Ray, Quinney & Nebeker,
Utah local counsel to the Loan Parties, in form and substance
satisfactory to the Administrative Agent and covering the matters set
forth on Exhibit J;
(r) Pledged Stock; Stock Powers. The Administrative Agent shall have
received the certificates representing the shares pledged pursuant to the
Guarantee and Collateral Agreement, together with an undated stock power
for each such certificate executed in blank by a duly authorized officer of
the pledgor thereof;
(s) Lien Searches/Actions to Perfect Liens. (i) The Lenders shall
have received the results of a recent lien search in each of the
jurisdictions and offices where assets of the Borrower and its Subsidiaries
are located or recorded, and such
<PAGE>
62
search shall reveal no liens on any of the assets of the Borrower or its
Subsidiaries except for Permitted Liens and (ii) the Administrative Agent
shall have received evidence in form and substance reasonably satisfactory
to it that all filings, recordings, registrations and other actions,
including, without limitation, the filing of duly executed financing
statements on Form UCC-1, necessary or, in the reasonable opinion of the
Administrative Agent, desirable to perfect the Liens created by the
Security Documents shall have been completed (or, to the extent that any
such filings, recordings, registrations and other actions shall not have
been completed, arrangements reasonably satisfactory to the Administrative
Agent for the completion thereof shall have been made);
(t) Surveys. The Administrative Agent shall have received, and the
title insurance company issuing the policy referred to in subsection 6.1(u)
(the "Title Insurance Company") shall have received, maps or plats of an
as-built survey of the primary buildings, structures or other improvements
located on the sites of the property covered by each Mortgage certified to
the Administrative Agent and the Title Insurance Company in a manner
reasonably satisfactory to them, dated a date satisfactory to the
Administrative Agent and the Title Insurance Company by an independent
professional licensed land surveyor reasonably satisfactory to the
Administrative Agent and the Title Insurance Company, which maps or plats
and the surveys on which they are based shall be made in accordance with
the Minimum Standard Detail Requirements for Land Title Surveys jointly
established and adopted by the American Land Title Association and the
American Congress on Surveying and Mapping in 1992, and, without limiting
the generality of the foregoing, there shall be surveyed and shown on such
maps, plats or surveys the following: (i) the locations on such sites of
all the primary buildings, structures and other improvements and the
established building setback lines; (ii) the lines of streets abutting the
sites and width thereof adjacent to the primary buildings, structures or
other improvements located on the sites; (iii) all access and other
easements appurtenant to primary buildings, structures or other
improvements located on the sites or necessary or desirable to use primary
buildings, structures or other improvements located on the sites; (iv) all
roadways, paths, driveways, easements, encroachments and overhanging
projections and similar encumbrances affecting the primary buildings,
structures or other improvements located on the sites, whether recorded,
apparent from a physical inspection of the sites or otherwise known to the
surveyor; (v) any visible encroachments on any adjoining property by the
primary building structures and improvements on the sites; and (vi) if any
of the sites is described as being on a filed map, a legend relating the
survey to said map;
(u) Title Insurance Policy. The Administrative Agent shall have
received in respect of each parcel covered by each Mortgage a mortgagee's
title policy (or policies) or marked up unconditional binder for such
insurance dated the Closing Date. Each such policy shall (i) be in an
amount reasonably satisfactory to the Administrative Agent; (ii) be issued
at ordinary rates; (iii) insure that the Mortgage insured thereby creates a
valid first Lien on such parcel free and clear of all defects and
encumbrances, except such as may be approved by the Administrative Agent or
<PAGE>
63
as otherwise permitted by this Agreement; (iv) name the Administrative
Agent for the benefit of the Lenders as the insured thereunder; (v) be in
the form of ALTA Loan Policy - 1970 if available or other form approved by
the Administrative Agent (provided, however, that any such policy may
contain a creditor's rights exception); (vi) contain such endorsements and
affirmative coverage as the Administrative Agent may reasonably request and
are customary in transactions of this nature and available without
excessive premium; and (vii) be issued by title companies reasonably
satisfactory to the Administrative Agent (including any such title
companies acting as co-insurers or reinsurers, at the option of the
Administrative Agent). The Administrative Agent shall have received
evidence reasonably satisfactory to it that all premiums in respect of each
such policy, and all charges for mortgage recording tax, if any, have been
paid;
(v) Flood Insurance. If requested by the Administrative Agent, the
Administrative Agent shall have received evidence reasonably satisfactory
to it that flood insurance complying with the requirements of subsection
5.18 is in effect;
(w) Copies of Documents. The Administrative Agent shall have
received a copy of all recorded documents referred to, or listed as
exceptions to title in, the title policy or policies referred to in
subsection 6.1(u) and a copy, certified by such parties as the
Administrative Agent may reasonably deem appropriate, of all other
documents affecting the property covered by each Mortgage as are reasonably
requested by the Administrative Agent;
(x) Insurance. The Administrative Agent shall have received evidence
in form and substance reasonably satisfactory to it that all of the
requirements of subsection 7.5 and those sections of the Security Documents
requiring the maintenance of insurance shall have been satisfied;
(y) Solvency. The Administrative Agent shall have received from
Murray, Devine & Co., with a copy for each Lender, a solvency opinion with
respect to the solvency of the Borrower and its Subsidiaries as of the
Closing Date after giving effect to the Transactions and the other
transactions contemplated hereby, in each case reasonably satisfactory in
form and substance to the Administrative Agent;
(z) Financial Statements. The Administrative Agent shall have
received, with a copy for each Lender, (i) the audited combined financial
statements of each of the Companies for the three most recent fiscal years
ended prior to the Closing Date and (ii) the unaudited interim combined and
consolidating financial statements of each of the Companies for each
quarterly period ended subsequent to the date of the latest financial
statements delivered pursuant to clause (i) of this paragraph as to which
such financial statements are available in each case as included in the
Final Offering Memorandum;
(aa) Environmental Information. The Administrative Agent shall have
received, with a copy for each Lender, the environmental reports dated
March, 1992
<PAGE>
64
and December, 1992 together with a memorandum dated April 24, 1996, with
respect to certain real property owned or leased by the Borrower and its
Subsidiaries.
6.2 Conditions to Each Extension of Credit. The agreement of each
Lender to make any Extension of Credit requested to be made by it on any date
(including, without limitation, its initial Extension of Credit), and the
agreement of the Issuing Bank to issue any Letter of Credit for which an
Application is presented, is subject to the satisfaction of the following
conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Borrower and the other Loan Parties in or pursuant
to the Loan Documents shall be true and correct in all material respects on
and as of such date (and, in the case of the representations and warranties
made on the Closing Date, after giving effect to the Transactions) as if
made on and as of such date, except to the extent such representations and
warranties expressly relate to an earlier date in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date;
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the Extension of
Credit requested to be made on such date; and
(c) Borrowing Requests and Applications. The Administrative Agent
shall have received a request or Application for such Loan or Letter of
Credit if and as required by subsection 3.2, 3.8, 3.11 or 3.14, as
applicable.
Each borrowing by and Letter of Credit issued on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date thereof that the conditions contained in clauses (a) and (b) of this
subsection have been satisfied.
SECTION 7. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect or any amount is owing to any Lender or the Administrative Agent
hereunder or under any other Loan Document or any Letter of Credit remains
outstanding, it shall and (except in the case of delivery of financial
information, reports and notices and subsections 7.1 and 7.2 which shall be
performed by the Borrower) shall cause each of its Subsidiaries to, unless the
Required Lenders shall otherwise consent in writing:
7.1 Financial Statements. Furnish to each Lender:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, (i) a copy of the audited
consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such year and the related audited
consolidated statements of income and retained earnings and of cash flows
for
<PAGE>
65
such year, setting forth in each case, except in the first year after
the Closing Date, in comparative form the figures as of the end of and for
the previous year, reported on without a "going concern" or like
qualification or exception, or a qualification arising out of the scope of
the audit, by Deloitte & Touche LLP or other independent certified public
accountants of nationally recognized standing, (ii) a copy of the
consolidating balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such year and the related consolidating
statements of income and retained earnings and of cash flows for such year,
setting forth in each case, except in the first year after the Closing Date
in comparative form the figures as of the end of and for the previous year
and (iii) a Certificate of Available Excess Equity Proceeds;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Borrower, (i) the unaudited consolidated and consolidating
balance sheet of the Borrower and its consolidated Subsidiaries as at the
end of such quarter and the related unaudited consolidated and
consolidating statements of income and retained earnings and of cash flows
of the Borrower and its consolidated Subsidiaries for such quarter and the
portion of the fiscal year through the end of such quarter, setting forth
in each case, except for the first year after the Closing Date, in
comparative form the figures as of the end of and for the corresponding
period in the previous year, certified by a Responsible Officer of the
Borrower as being fairly stated in all material respects (subject to normal
year-end audit adjustments) and (ii) a Certificate of Available Excess
Equity Proceeds; and
(c) as soon as available, but in any event not later than 30 days
after the end of each month (other than September, December, March and
June) of each fiscal year of the Borrower, the unaudited consolidated and
consolidating statement of income (through the "Earnings Before Tax" line)
of the Borrower and its consolidated Subsidiaries for such month and the
portion of the fiscal year through the end of such month, setting forth in
each case, except for the first year after the Closing Date, in comparative
form the figures as of the end of and for the corresponding period in the
previous year, certified by a Responsible Officer of the Borrower as being
fairly stated in all material respects (subject to normal year-end audit
adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail, in accordance with GAAP
(subject to the addition, in the case of clauses (b) and (c) of this subsection,
of year end notes) applied consistently throughout the periods reflected therein
and with prior periods (except as approved by such accountants or Responsible
Officer, as the case may be, and disclosed therein).
7.2 Certificates; Other Information. Furnish to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.1(a), a certificate of the independent
certified public accountants reporting on such financial statements stating
that in making the examination necessary therefor no knowledge was obtained
of any Default or Event of Default
<PAGE>
66
having occurred as of the end of the fiscal year covered by such financial
statements, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), a certificate of a Responsible
Officer of the Borrower (i) stating that, to the best of such Responsible
Officer's knowledge, the Borrower during such period has observed or
performed in all material respects all of its covenants and other
agreements, and satisfied every condition in all material respects,
contained in this Agreement and the other Loan Documents to be observed,
performed or satisfied by it during such period, and that such Responsible
Officer has obtained no knowledge of any Default or Event of Default except
as specified in such certificate and (ii) setting forth in reasonable
detail the calculations required to determine compliance with subsections
8.1 and 8.8;
(c) not later than sixty days after the end of each fiscal year of
the Borrower, commencing with the fiscal year ending in December 1996, a
copy of the board-approved projections by the Borrower of the operating
budget and cash flow budget of the Borrower and its Subsidiaries for the
succeeding fiscal year, such projections to be accompanied by a certificate
of a Responsible Officer of the Borrower to the effect that such
projections have been prepared using assumptions believed in good faith by
management of the Borrower to be reasonable at the time made and that such
Responsible Officer has no reason to believe that such projections are
incorrect or misleading in any material respect;
(d) within five Business Days after the same are sent, copies of all
financial statements and reports which Holdings or the Borrower sends to
the holders of the Senior Subordinated Notes or to the holders of any
securities of the Loan Parties registered with the SEC, and within five
Business Days after the same are filed, copies of all financial statements
and reports which Holdings or the Borrower may make to, or file with, the
SEC or any successor or analogous federal Governmental Authority;
(e) promptly upon receipt thereof, copies of all reports submitted to
the Borrower by independent certified public accountants in connection with
each annual, interim or special audit of the books of the Borrower or any
of its Subsidiaries made by such accountants, including, without
limitation, any management letter commenting on the Borrower's internal
controls submitted by such accountants to management in connection with
their annual audit; and
(f) promptly, such additional financial and other information within
the possession of the Borrower or any of its Subsidiaries as any Lender may
from time to time reasonably request through the Administrative Agent.
7.3 Payment of Obligations. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature including taxes, except as contemplated
by this Agreement or where the
<PAGE>
67
amount or validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with respect
thereto have been provided on the books of the Borrower or any of its
Subsidiaries or the failure to pay the same could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect, as the case may be.
7.4 Conduct of Business; Maintenance of Existence; Compliance with
Laws. Continue to engage in business of the same general type as now conducted
by the Companies and preserve, renew and keep in full force and effect its
corporate existence and take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable, in any material respect in the
normal conduct of its business except as otherwise permitted pursuant to
subsection 8.5; comply in all material respects with all Contractual Obligations
and Requirements of Law (excluding, for purposes of this subsection 7.4,
Requirements of Law and Contractual Obligations specifically addressed elsewhere
in this Section 7) except where (a) any such Contractual Obligation is being
contested in good faith, a bona fide dispute exists with respect to any such
Contractual Obligation or failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect and (b) the
failure to comply with any such Requirement of Law could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
7.5 Maintenance of Property; Insurance; Products Liability Insurance.
(i) Keep all property material to the conduct of its business (including,
without limitation, the Mortgaged Property) in good working order and condition
(normal wear and tear excepted); maintain insurance with financially sound and
reputable insurance companies with an A.M. Best rating of A- or better (or, to
the extent consistent with prudent business practice, a program of self-
insurance) on such of its property and in at least such amounts and against at
least such risks as are usually insured against in the same general area by
companies engaged in the same or a similar business (including, without
limitation, the insurance required pursuant to the Security Documents); (ii)
maintain sufficient products liability insurance, in amounts according with
standard industry practice, to cover the various products produced, marketed
and/or sold by the Borrower or any of its Subsidiaries and (iii) furnish to the
Administrative Agent, upon written request, full information as to the insurance
carried.
7.6 Inspection of Property; Books and Records; Discussions. Keep
proper financial records in conformity with GAAP and, except where the failure
to do so could not reasonably be expected to have a Material Adverse Effect, all
Requirements of Law; and permit (a) representatives of the Administrative Agent
or any Lender to visit and inspect any of its properties and examine and make
abstracts from any of its books and records at any reasonable time during normal
business hours, upon reasonable notice, and as often as may reasonably be
desired, and (b) upon reasonable notice during normal business hours,
representatives of the Administrative Agent or any Lender to discuss the
business, operations, properties and financial and other condition of the
Borrower and its Subsidiaries with officers and employees of the Borrower and
its Subsidiaries and with its independent certified public accountants (subject
to reasonable requirements of confidentiality, including without limitation,
requirements imposed by law or contract).
<PAGE>
68
7.7 Notices. Promptly give notice to the Administrative Agent and
each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default by the Borrower or any of its
Subsidiaries under any Contractual Obligation of the Borrower or any of its
Subsidiaries of which any Loan Party has knowledge or notice or (ii)
litigation, investigation or proceeding which may exist at any time between
the Borrower or any of its Subsidiaries and any Governmental Authority of
which any Loan Party has knowledge or notice, which in either case, if not
cured or resolved or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(c) any pending or threatened claim, litigation or proceeding
affecting the Borrower or any of its Subsidiaries, of which any Loan Party
has knowledge or notice, in which the amount involved is not covered by
insurance or in which injunctive or similar relief is sought and which, in
either case, if adversely determined, could reasonably be expected to have
a Material Adverse Effect;
(d) the following events, as soon as possible and in any event within
30 days after the Borrower knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to
any Plan, a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or a Plan or any withdrawal from,
or the termination, Reorganization or Insolvency of, any Multiemployer Plan
or (ii) the institution of proceedings or the taking of any other action by
the PBGC or the Borrower or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the termination,
Reorganization or Insolvency of, any Plan, in each of cases (i) and (ii),
where such event could reasonably be expected to have a Material Adverse
Effect; and
(e) any other development or event of which any Loan Party has
knowledge or notice which could reasonably be expected to have a Material
Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
7.8 Environmental Laws. (a) Comply with, and use reasonable efforts
to ensure compliance by all tenants and subtenants, if any, with, all applicable
Environmental Laws and obtain and comply with and maintain, and use reasonable
efforts to ensure that all tenants and subtenants obtain and comply with and
maintain, any and all Environmental Permits required by applicable Environmental
Laws, except where the failure to so comply or obtain such permits could not
reasonably be expected to have a Material Adverse Effect.
<PAGE>
69
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required by any
Governmental Authority under Environmental Laws and promptly comply with all
lawful orders and directives of all Governmental Authorities regarding
Environmental Laws, except to the extent that the failure to do any of the
foregoing could not reasonably be expected to have a Material Adverse Effect.
7.9 Maintenance of Liens of the Security Documents. Promptly, upon
the reasonable request of the Administrative Agent, at the Borrower's expense,
execute, acknowledge and deliver, or cause the execution, acknowledgement and
delivery of, and thereafter register, file or record, or cause to be registered,
filed or recorded, in an appropriate governmental office, any document or
instrument supplemental to or confirmatory of the Security Documents or
otherwise reasonably deemed by the Administrative Agent necessary or desirable
for the continued validity, perfection and priority of the Liens on the
Collateral covered thereby.
7.10 Pledge of After Acquired Property; Additional Guarantors. (a)
If at any time following the Closing Date the Borrower or any of its
Subsidiaries (other than a Foreign Subsidiary) shall acquire property of any
nature whatsoever having a value in excess of $250,000 which is intended by the
terms of the applicable Security Document to be, but is not, subject to the
Liens created by the Security Documents, the Borrower shall, or shall cause the
relevant Subsidiaries to, as soon as possible and in no event later than 30 days
after the relevant acquisition date and, to the extent permitted by applicable
law, except in the case of (i) property subject to a permitted Financing Lease
or (ii) purchase money Indebtedness, grant to the Administrative Agent for the
ratable benefit of the Lenders a first priority Lien subject to Permitted Liens
on such property as collateral security for the Obligations pursuant to
documentation reasonably satisfactory in form and substance to the
Administrative Agent. The Borrower, at its own expense, shall execute,
acknowledge and deliver, or cause the execution, acknowledgement and delivery
of, and thereafter register, file or record in an appropriate governmental
office, any document or instrument (including legal opinions, title insurance,
consents and corporate documents) and take all such actions reasonably deemed by
the Administrative Agent to be necessary or desirable to ensure the creation,
priority and perfection of such Lien.
(b) (i) The Borrower shall cause each new Subsidiary (other than a
Foreign Subsidiary) of the Borrower created or acquired after the date hereof,
promptly upon such creation or acquisition, to execute an instrument in form and
substance reasonably satisfactory to the Administrative Agent (it being
acknowledged and agreed that an instrument in the form attached to the Guarantee
and Collateral Agreement as Exhibit A thereto shall satisfy this requirement)
---------
pursuant to which such new Subsidiary shall become a party to the Guarantee and
Collateral Agreement as a grantor and a guarantor thereunder, and (ii) the
Borrower shall, or shall cause the Subsidiary of the Borrower (other than a
Foreign Subsidiary) which holds the Capital Stock of such new Subsidiary to,
execute and deliver an instrument in form and substance reasonably satisfactory
to the Administrative Agent (it being acknowledged and agreed that an instrument
in the form attached to the Guarantee and Collateral Agreement as Exhibit B
---------
thereto shall satisfy this requirement)
<PAGE>
70
providing for the pledge of 100% of the issued and outstanding Capital Stock of
each new Subsidiary (including a Foreign Subsidiary) of the Borrower created or
acquired after the date hereof and owned by the Borrower or one of its
Subsidiaries (provided, that in no event shall Capital Stock representing more
than 65% of the voting power of the Capital Stock of any such new Subsidiary
which is a Foreign Subsidiary be so pledged) to the Administrative Agent for the
benefit of the Lenders, and the Borrower shall deliver to the Administrative
Agent the stock certificates evidencing such Capital Stock together with undated
stock powers for each such certificate, duly executed in blank.
7.11 Interest Rate Protection. Within 90 days following the Closing
Date, enter into Interest Rate Protection Agreements in form and substance
reasonably satisfactory to the Administrative Agent which, considered together
with the terms of the Borrower's outstanding Funded Indebtedness bearing a fixed
rate of interest, provide to the Borrower fixed interest rates with respect to
not less than one-half of the aggregate outstanding principal amount of the
Borrower's outstanding Funded Indebtedness as of the Closing Date (as the same
may be reduced from time to time pursuant to regularly scheduled amortization
payments) for a period of at least three years after the Closing Date, and the
Borrower agrees and confirms that the Guarantee and Collateral Agreement grants
to the Administrative Agent, for the benefit of the Lenders, a first priority
(subject to any Liens permitted pursuant to subsection 8.3) perfected security
interest in its rights under any such Interest Rate Protection Agreements. The
Borrower covenants and agrees that it will not (and it will not permit its
Subsidiaries to) enter into Rate Protection Agreements for the purpose of (i)
reducing the amount of Indebtedness bearing a fixed rate of interest or swapped
or capped into a fixed rate of interest as required by this subsection 7.11 or
(ii) speculating on interest rates or currency movements. It is understood and
agreed that the foregoing prohibition is not intended to restrict the use of
Rate Protection Agreements in the ordinary course of business to match assets
and liabilities of the Borrower and its Subsidiaries.
7.12 Exchange Offer. Comply with the provisions of the Registration
Rights Agreement (as defined in the Final Offering Memorandum).
7.13 Stock Purchase Agreement. Not amend, modify or otherwise change
the Stock Purchase Agreement in any way materially adverse to the Loan Parties
or the Lenders without the express written approval of the Administrative Agent
and the Required Lenders.
SECTION 8. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect or any amount is owing to any Lender or the Administrative Agent
hereunder or under any other Loan Document or any Letter of Credit remains
outstanding, the Borrower shall not, nor (except with respect to subsection 8.1)
shall the Borrower permit any of its Subsidiaries to, directly or indirectly,
unless the Required Lenders shall otherwise agree in writing:
8.1 Financial Condition Covenants.
<PAGE>
71
(a) Leverage Ratio. Permit the ratio of (i) Consolidated Total Debt
at the last day of any fiscal quarter ending during any "Test Period" set
forth below to (ii) Consolidated EBITDA for the period of four consecutive
fiscal quarters ending on such date to be greater than the amount set forth
opposite s uch period below:
<TABLE>
<CAPTION>
Test Period Leverage Ratio
----------- ----------------
<S> <C>
9/30/96 - 12/31/96 5.00 to 1.00
3/31/97 - 6/30/98 4.75 to 1.00
9/30/98 4.50 to 1.00
12/31/98 4.25 to 1.00
3/31/99 4.00 to 1.00
6/30/99 3.80 to 1.00
9/30/99 3.70 to 1.00
12/31/99 3.60 to 1.00
3/31/00 3.50 to 1.00
6/30/00 3.40 to 1.00
9/30/00 3.30 to 1.00
12/31/00 3.10 to 1.00
3/31/01 and thereafter 3.00 to 1.00
</TABLE>
(b) Fixed Charge Coverage Ratio. Permit for any period of four
consecutive fiscal quarters ending on the last day of any fiscal year the
ratio of (i) Consolidated EBITDA for such period to (ii) Consolidated Fixed
Charges for such period to be less than 1:00 to 1:00.
(c) Minimum Consolidated EBITDA. Permit for any period of four
consecutive fiscal quarters ending during any "Test Period" set forth below
the minimum Consolidated EBITDA for such period to be less than the amount
set forth opposite such period below:
<TABLE>
<CAPTION>
Test Period Consolidated EBITDA
----------- -------------------
<S> <C>
9/30/96 - 9/30/97 $33,000,000
12/31/97 - 6/30/98 $34,000,000
9/30/98 $36,000,000
12/31/98 - 3/31/99 $37,000,000
6/30/99 $38,000,000
9/30/99 $39,000,000
12/31/99 $40,000,000
3/31/00 $41,000,000
6/30/00 $42,000,000
9/30/00 $43,000,000
12/31/00 $44,000,000
3/31/01 $45,000,000
</TABLE>
<PAGE>
72
<TABLE>
<S> <C>
6/30/01 $46,000,000
9/30/01 $47,000,000
12/31/01 $48,000,000
3/31/02 $49,000,000
</TABLE>
8.2 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness or issue or sell any preferred stock, except:
(a) Indebtedness in respect of the Loans, any Notes, the Guarantees,
the Letters of Credit and the other obligations of the Loan Parties under
this Agreement and the other Loan Documents;
(b) Indebtedness of (i) the Borrower to any Subsidiary, (ii) of any
Domestic Subsidiary to the Borrower or any other Subsidiary, (iii) any
Foreign Subsidiary to any other Foreign Subsidiary or (iv) any Foreign
Subsidiary to the Borrower or any Domestic Subsidiary in an amount for this
clause (iv) together with any Investments pursuant to subsection 8.9(d)(iv)
(other than loans to such Foreign Subsidiary) not to exceed at any one time
outstanding (x) $1,000,000 plus (y) at the time advanced any Available
Excess Equity Proceeds in an aggregate amount not to exceed $9,000,000;
(c) Indebtedness in respect of Sale/Leaseback Transactions in an
aggregate principal amount incurred subsequent to the Closing Date, not to
exceed $3,000,000 at any time outstanding;
(d) Indebtedness of the Borrower in an aggregate principal amount not
exceeding $100,000,000 in respect of the Senior Subordinated Notes;
(e) Indebtedness not exceeding $3,000,000 pursuant to this clause (e)
in aggregate principal amount at any one time outstanding, provided that
such Indebtedness is not secured by a Lien on any assets of the Loan
Parties;
(f) Indebtedness consisting of Guarantee Obligations expressly
permitted pursuant to subsection 8.4;
(g) (i) Indebtedness of the Subsidiaries, not to exceed $1,000,000 in
the aggregate, which represents the assumption of Indebtedness by a
Subsidiary in connection with the merger of such Subsidiary with or into
the acquired Person or the purchase of all or substantially all the assets
of such acquired Person or (ii) Indebtedness of a Subsidiary acquired after
the date hereof or of a Person merged with or into the Borrower or a
Subsidiary after the date hereof, which Indebtedness exists at the time of
such acquisition or merger, and is not created in contemplation of such
event, in each case pursuant to a transaction permitted under subsection
8.9(g); provided that the principal amount of such Indebtedness is not
increased, the maturity of such Indebtedness is not shortened, and no
Guarantee Obligations of such Indebtedness are incurred in connection
therewith and such Indebtedness is not secured by any Lien on property
other than that which secured it before such event;
<PAGE>
72
(h) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business, provided that such Indebtedness
is extinguished within five Business Days of notice to the Borrower of its
incurrence;
(i) Indebtedness in respect of Rate Protection Agreements permitted
under subsection 7.11;
(j) Indebtedness outstanding on the Closing Date and listed on
Schedule 8.2(j);
---------------
(k) Financing Lease Obligations and Indebtedness of the Borrower and
its Subsidiaries for the deferred purchase price of newly acquired property
or to finance equipment (pursuant to purchase money mortgages or otherwise)
used in the ordinary course of business (provided such financing is entered
into within one year of the acquisition of such property) in an amount not
exceeding an aggregate principal amount of $1,000,000 per annum (excluding
those incurred in respect of Sale/Leaseback Transactions permitted under
clause (c) above), provided however, that for any fiscal year, such amount
may be increased by carrying over to such fiscal year any permitted amounts
not spent in the preceding fiscal year;
(l) so long as no Default or Event of Default is continuing at the
time thereof, or would occur as a result thereof, the incurrence of
Indebtedness of the Borrower in an aggregate principal amount not to exceed
$10,000,000 at any time outstanding to finance (or to reimburse the
Borrower for amounts expended to finance), on terms reasonably satisfactory
to the Required Lenders, the expansion or relocation of the Borrower's
manufacturing facilities provided that, at the time of incurrence of such
Indebtedness, the Borrower shall have provided projections to the Lenders
showing that after giving effect thereto it will be in compliance with all
covenants set forth in subsection 8.1 on a pro forma basis for each future
year during the remaining term of this Agreement;
(m) indorsement of negotiable instruments for deposit or collection
or similar transactions in the ordinary course of business;
(n) Indebtedness in respect of trade letters of credit (or
reimbursement obligations arising therefrom) secured by Liens permitted by
subsection 8.3(k) in an aggregate principal amount not to exceed $2,500,000
at any one time outstanding;
(o) Indebtedness (the "Refinancing Indebtedness") renewing, extending
the maturity of, or refunding or refinancing, in whole or in part, any of
the Indebtedness pursuant to clauses (d) and (l) of this subsection or of
any Refinancing Indebtedness, provided that, (1) the material terms
(including, without limitation, principal amount (subject to clause (2)
below), interest rate, events of default, weighted average life to
maturity, payment terms, covenants, collateral, if any, and subordination
terms, if
<PAGE>
74
any) of any such Refinancing Debt, and of any agreement entered
into and of any instrument issued in connection therewith, are no less
favorable to the Borrower and its Subsidiaries and the Lenders in any
material respect than the terms governing the Indebtedness so renewed,
extended, refunded or refinanced and are not inconsistent with the terms of
the Loan Documents and are permitted thereunder, (2) if and only if the
Term Loans outstanding shall have been reduced to less than $25,000,000,
the principal amount of the Indebtedness to be renewed, extended, refunded
or refinanced may be increased above the principal amount thereof
outstanding immediately prior to such renewal, extension, refunding or
refinancing, in an amount up to $2,000,000 pursuant to this clause (o) in
the aggregate (for all such Indebtedness) from and after the Closing Date
for purposes of paying prepayment premiums and penalties, consent payments
and fees and similar expenses in respect of the refinancing of such
Indebtedness, (3) the direct and contingent obligors therefor shall not be
changed, as a result of or in connection with such extension, refunding or
refinancing, and (4) in the case of any renewal, extension, refunding or
refinancing of any of the Senior Subordinated Notes or Indebtedness
incurred pursuant to subsection 8.2(l), the covenants, events of default,
subordination terms (if any) and other provisions thereof, and all
agreements and instruments executed in connection with such renewal,
extension, refunding or refinancing, shall be in form and substance
reasonably satisfactory to the Administrative Agent; and
(p) unsecured Indebtedness owing to a seller in an amount not to
exceed $2,000,000, at any one time outstanding, incurred to finance a
Permitted Acquisition .
8.3 Limitation on Liens. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for the following:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP;
(b) statutory landlords' liens and carriers', warehousemen's,
mechanics', materialmen's, repairmen's or other like Liens arising in the
ordinary course of business for sums which are not overdue for a period of
more than 90 days or which are being contested in good faith by appropriate
proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
<PAGE>
75
(e) all easements, zoning restrictions, flowage rights, rights-of-
way, covenants, conditions, restrictions, reservations, licenses,
agreements and other similar matters, including the unrecorded easements
and similar agreements set forth in Schedule 8.3(e), which, in the
---------------
aggregate, are not substantial in amount and which do not in any case
materially detract from the use of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Borrower or such Subsidiary;
(f) (A) Liens securing Indebtedness of the Borrower and its
Subsidiaries permitted by subsections 8.2(c), (k) and (l) incurred to
finance (or reimburse the Borrower for amounts expended to finance) the
acquisition, construction or improvement of fixed or capital assets, or (B)
Liens existing on any such fixed capital asset at the time of such
acquisition, provided that (i) in the case of clause (A), such Liens shall
be created within 360 days after the acquisition, construction or
improvement of such fixed or capital assets, (ii) such Liens do not at any
time encumber any property other than the property acquired, constructed or
improved with the proceeds of such Indebtedness, (iii) the amount of
Indebtedness secured thereby shall not subsequently be increased and (iv)
the principal amount of Indebtedness secured by any such Lien shall at no
time exceed 100% of the original purchase price of such asset or the amount
expended to construct or improve such asset, as the case may be.
(g) Liens in existence on the date hereof listed on Schedule 8.3(g),
---------------
provided that no such Lien is spread to cover any additional property after
the Closing Date and that the amount of Indebtedness secured thereby shall
not subsequently be increased;
(h) all building codes and zoning ordinances and other laws,
ordinances, regulations, rules, orders or determinations of any Federal,
state, county, municipal or other governmental authority now or hereafter
enacted;
(i) Liens created pursuant to the Security Documents;
(j) judgment Liens created by or resulting from any litigation or
legal proceeding if released, stayed or bonded (or the judgment which it
secures discharged) within 60 days of the date of creation thereof;
(k) Liens arising in connection with trade letters of credit (other
than Commercial Letters of Credit) issued to secure the purchase of
inventory in the ordinary course of business of the Borrower and its
Subsidiaries permitted under subsection 8.2(n); provided that such Liens
shall cover only the documents in respect of which such letters of credit
were issued, the goods covered thereby and the insurance proceeds of such
goods;
(l) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Borrower or becomes a Subsidiary of
the Borrower or
<PAGE>
76
any Subsidiary of the Borrower in accordance with subsection 8.9(g);
provided that such Liens were not created in contemplation of such merger
or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with or acquired by the Borrower or such
Subsidiary; and
(m) the replacement, extension or renewal of any Lien permitted by
clauses (f), (g), (j), and (l) above upon or in the same property
theretofore subject thereto as security for the same Indebtedness or any
renewal, extension, refunding or refinancing thereof permitted hereunder.
8.4 Limitation on Guarantee Obligations. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations in existence on the date hereof and listed
on Schedule 8.4(a);
---------------
(b) the Guarantees and Letters of Credit; and
(c) guarantees by the Borrower of obligations of any Subsidiary, or
by any Subsidiary of the obligations of any other Subsidiary or the
Borrower, to the extent such guaranteed obligations are otherwise permitted
under this Agreement.
8.5 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, except:
(a) any Subsidiary of the Borrower may be merged or consolidated with
or into the Borrower (provided that the Borrower shall be the continuing or
surviving corporation) or with or into any one or more wholly-owned
Subsidiaries of the Borrower (provided that the wholly-owned Subsidiary or
Subsidiaries shall be the continuing or surviving corporation);
(b) any wholly-owned Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation
or otherwise) to the Borrower or any other wholly-owned Subsidiary of the
Borrower;
(c) pursuant to any sale of assets expressly permitted by subsection
8.6; and
(d) pursuant to any Permitted Acquisition in which the Borrower or
any of its Subsidiaries is the surviving entity.
8.6 Limitation on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the
<PAGE>
77
case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital
Stock to any Person other than the Borrower or any Subsidiary, except:
(a) the conveyance, sale, lease, assignment, transfer or other
disposition of Obsolete Property or surplus property for fair value in the
ordinary course of business;
(b) Asset Sales (other than as otherwise permitted by this subsection
8.6), provided that (i) the Net Proceeds of any such Asset Sale are applied
to the extent required by subsection 4.1(c) and shall not exceed $7,000,000
in the aggregate;
(c) any Asset Sale pursuant to any Sale/Leaseback Transaction,
provided that the provisions of subsection 8.2(c) are not violated;
(d) the sale of inventory in the ordinary course of business;
(e) the sale or discount for fair value without recourse of accounts
receivable arising in the ordinary course of business in connection with
the compromise or collection thereof;
(f) as permitted by subsection 8.5(b);
(g) the license of intellectual property in the ordinary course of
business; and
(h) leases or subleases not materially interfering with the ordinary
course of conduct of the business of the Borrower and its Subsidiaries;
(i) the sale or liquidation of Cash Equivalents in the ordinary
course of business;
(j) the transfer of properties in tax free exchanges pursuant to
Section 1031 of the Code for properties for use consistent with the ongoing
trade or business of the Borrower and its Subsidiaries, for equivalent fair
market value (after giving effect to the payment or receipt of any cash in
connection with any such exchange);
(k) distribution of inventory, in amounts not to exceed $500,000 per
year, to third parties for charitable purposes; and
(l) any ARP Spinoff, provided that at the time of such Spinoff the
outstanding Term Loans shall be less than $48,000,000.
8.7 Limitation on Restricted Payments. Declare or pay any dividend
(other than dividends payable solely in common stock of the Borrower) on, or
make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of Capital Stock of the Borrower or any
warrants or options to purchase any such Stock, whether now
<PAGE>
78
or hereafter outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in obligations of
the Borrower or any Subsidiary (such declarations, payments, setting apart,
purchases, redemptions, defeasances, retirements, acquisitions and distributions
being herein called "Restricted Payments"), except that,
(a) the Borrower may pay cash dividends to Holdings to pay any taxes
required to be paid by Holdings in the ordinary course of business provided
that, in each case, any such taxes are paid no later than fifteen Business
Days after the date on which the relevant dividend is made;
(b) the Borrower may pay cash dividends to Holdings to the extent
necessary (i) to enable Holdings to pay fees, expenses and other
obligations incurred or required in connection with the Transactions and in
connection with the matters permitted in subsection 9.1, provided that
Holdings shall pay each obligation in respect of which such dividend is
made no later than fifteen Business Days after the date on which the
relevant dividend is made provided that the Borrower may not pay dividends
under this clause (b) subsequent to the Closing Date to be applied to the
repurchase, redemption, or other acquisition of Capital Stock of Holdings
owned by GEI, any Investor, or any Continuing Stockholder (as defined in
the Stock Purchase Agreement) or their Affiliates and the aggregate amount
------------------------
applied for the repurchase, redemption or other acquisition of Capital
Stock from other Persons may not exceed $500,000 per annum, provided
however, that (i) for any fiscal year, such amount may be increased by
carrying over to such fiscal year any permitted amounts not spent in the
preceding fiscal years and (ii) if the Borrower receives through Holdings
proceeds from the sale of equity securities purchased by any employee,
officer or director, such proceeds shall increase the $500,000 amount in
the year of receipt.
(c) the Borrower may pay cash dividends to Holdings in an amount not
to exceed $200,000 in the aggregate in any fiscal year to the extent
necessary to enable Holdings to pay reasonable and necessary operating
expenses and other general corporate expenses (including reasonable
attorneys and other professional fees);
(d) the Borrower may pay cash dividends to Holdings out of Available
Excess Equity Proceeds to the extent received by the Borrower and to the
extent that Holdings is permitted to use such proceeds to repurchase,
redeem or retire PIK Preferred pursuant to subsection 4.1(c); provided that
Holdings shall so use such proceeds within 60 days after the date the
relevant dividend is made; and
(e) the Borrower may pay dividends contemplated by subsection 8.6(l).
8.8 Limitation on Capital Expenditures. Make or commit to make
Capital Expenditures in excess of $4,000,000 per annum for the Borrower and its
Subsidiaries during any fiscal year of the Borrower; provided, that (i) Capital
Expenditures not in excess of $1,500,000 permitted to be made during any fiscal
year (and not carried over from a prior fiscal year) and not made during such
fiscal year may be carried over and expended during the next succeeding fiscal
year, (ii) Capital Expenditures made during any fiscal year shall be
<PAGE>
79
first deemed made in respect of amounts carried over from the prior fiscal year
and then deemed made in respects of amounts permitted for such fiscal year and
(iii) the Borrower and its Subsidiaries may make, or commit to make, additional
Capital Expenditures in the amount of up to $12,500,000 in the aggregate, to be
used to finance the expansion or relocation of their manufacturing facilities.
8.9 Limitation on Investments, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of, or any assets constituting a
business unit of, or make any other investment in, any Person (an "Investment"),
except:
(a) extensions of trade credit and endorsements of negotiable
instruments and other negotiable documents in the ordinary course of
business;
(b) Investments in Cash Equivalents;
(c) loans and advances to employees and directors of Holdings, the
Borrower or any of its Subsidiaries for travel, entertainment and
relocation expenses in the ordinary course of business in an aggregate
amount for Holdings, the Borrower and its Subsidiaries not to exceed
$500,000 at any time outstanding;
(d) Investments by (i) the Borrower in its Domestic Subsidiaries,
(ii) any Domestic Subsidiaries in the Borrower or in any other Domestic
Subsidiary, (iii) any Foreign Subsidiary in any other Foreign Subsidiary or
(iv) the Borrower or any of its Domestic Subsidiaries in Foreign
Subsidiaries in an amount for this clause (iv) not to exceed at any one
time outstanding (x) $1,000,000 plus (y) at the time made any Available
Excess Equity Proceeds in an aggregate amount not to exceed $9,000,000;
(e) securities and other Investments held by the Borrower or any of
its Subsidiaries prior to the Closing Date and listed on Schedule 8.9(e);
---------------
(f) advances by the Borrower to Holdings, in lieu of the payment of
cash dividends, to enable Holdings to make the payments contemplated by
subsection 8.7, provided that, if such advances are made with respect to
the payments contemplated by subsection 8.7(a) or 8.7(b), such advances are
used to make such payments within fifteen Business Days after such advances
are made;
(g) Permitted Acquisitions in an aggregate amount not to exceed (i)
the Permitted Acquisition Amount plus (ii) at the time made, any Available
Excess Equity Proceeds;
(h) repurchases of Senior Subordinated Notes to the extent permitted
under subsection 8.10;
(i) Rate Protection Agreements; and
<PAGE>
80
(j) other Investments not to exceed $500,000 plus (i) any returns of
----
or on such Investments and (ii) any Available Excess Equity Proceeds.
8.10 Limitation on Optional Payments and Modifications of Debt
Instruments and other Obligations. (a) Make any optional payment or prepayment
on or redemption, defeasance or purchase of any Senior Subordinated Notes except
(i) in accordance with the provisions of subsections 4.1(c)(i)(y), (ii) with the
proceeds of Indebtedness permitted under subsections 8.2(e) (in connection with
the incurrence of Refinancing Indebtedness under subsection 8.2(o)) and 8.2(o)
and (iii) if (x) the outstanding Term Loans are less than or equal to
$25,000,000 and (y) the ratio described in subsection 8.1(a) for the last fiscal
quarter for which financial statements have been delivered pursuant to
subsection 7.1 is less than 2.50 to 1.00, with Retained Excess Cash Flow, (b)
amend, modify or change, or consent or agree to any amendment, modification or
change to any of the terms of the Senior Subordinated Note Indenture (other than
any such amendment, modification or change which (i) would extend the maturity
or reduce the amount of any payment of principal thereof or would reduce the
rate or extend the date for payment of interest thereon or (ii) does not in any
way adversely affect the interests of the Administrative Agent or the Lenders
hereunder, thereunder or under the other Loan Documents or (iii) is of a
technical or clarifying nature), (c) designate any Indebtedness having a
principal amount in excess of $20,000,000 as "Senior Debt" under and as defined
in the Senior Subordinated Note Indenture without the consent of the
Administrative Agent, or (d) amend, modify or change, or consent or agree to any
amendment, modification or change to the articles of incorporation (or such
similar charter documents) of the Borrower or any Subsidiary in any material
respect.
8.11 Limitation on Transactions with Affiliates. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement, (b) in the
ordinary course of the Borrower's or such Subsidiary's business and (c) upon
fair and reasonable terms no less favorable to the Borrower or such Subsidiary,
as the case may be, than it would obtain in a comparable arm's length
transaction with a Person which is not an Affiliate, provided, that the
foregoing restriction shall not prohibit (i) payment of reasonable fees,
expenses and other benefits to directors of Holdings, the Borrower and its
Subsidiaries not in excess of $250,000 per fiscal year, (ii) consummation of the
Transactions contemplated by the Acquisition Documents, (iii) any payment or
other transaction pursuant to any tax sharing agreement, (iv) payments permitted
under subsection 8.7 or Investments permitted by subsection 8.9, (v) the
Indebtedness permitted pursuant to subsection 8.2(b), (vi) any employment or
consulting agreement or arrangement entered into by the Borrower or any of its
Subsidiaries pursuant to the Transactions contemplated herein or in the ordinary
course of business, (vii) transactions between the Borrower and any Subsidiary
and between Subsidiaries, (viii) the transactions contemplated by the agreements
listed on Schedule 8.11(viii), (ix) indemnification payments to officers and
-------------------
directors of Holdings, the Borrower or its Subsidiaries, (x) payments to Green
for management, financial advisory and investment banking services under the
Management Services Agreement in an amount in any year not to exceed $1,500,000
plus any reasonable out-of-pocket expenses incurred in connection with such
services and (xi) transactions with
<PAGE>
81
Persons on an arms length basis if such Person is an Affiliate solely by reason
of being controlled by Green or its Affiliates.
8.12 Limitation on Changes in Fiscal Year. Permit the fiscal year of
the Borrower to end on a day other than December 31.
8.13 Limitation on Lines of Business. Enter into any business,
either directly or through any Subsidiary, except for those businesses which are
reasonably related to those businesses in which the Companies are engaged on the
date of this Agreement or extensions thereof, including, without limitation, any
business involving the manufacturing or marketing of products sold in health
food stores or stores that sell similar products.
SECTION 9. NEGATIVE COVENANTS OF HOLDINGS
Holdings agrees that, so long as the Commitments remain in effect or
any amount is owing to any Lender or the Administrative Agent hereunder or under
any other Loan Document or any Letter of Credit remains outstanding, Holdings
shall not, unless the Required Lenders shall otherwise agree in writing:
9.1 Limitation on Holdings' Activities. Incur any Indebtedness or
create any Guarantee Obligations, or make any investments, loans or advances to
any Person, or purchase any material assets, or conduct, transact or otherwise
engage, or commit to transact, conduct or otherwise engage, in any business or
operations other than (i) transactions contemplated in connection with the
consummation of the Transactions, (ii) the ownership of the Capital Stock of the
Borrower, and the exercise of rights and performance of obligations in
connection therewith, (iii) the entry into, and exercise of rights and
performance of obligations in respect of, (A) this Agreement and the Guarantee
and Collateral Agreement and the Senior Subordinated Note Indenture (including
Notes exchanged thereunder), (B) contracts and agreements with or for the
benefit of officers, directors, employees and consultants of Holdings or any
Subsidiary thereof relating to their employment or directorships or consultancy,
(C) insurance policies and related contracts and agreements, and (D) equity
subscription agreements, registration rights agreements, warrant agreements and
voting and other stockholder agreements, engagement letters, underwriting
agreements, stock option plans and agreements and other agreements in respect of
its equity securities or any offering, issuance or sale thereof, including,
without limitation, listing agreements with securities exchanges and (E) the PIK
Preferred (including, without limitation, the repurchase, redemption or
retirement thereof to the extent permitted herunder), (iv) the offering,
issuance and sale of its equity securities to the extent such offering, issuance
or sale does not constitute a Default or Event of Default under Section 11(k),
(v) the filing of registration statements, and compliance with applicable
reporting and other obligations, under and in compliance with its Federal, state
or other securities laws or applicable securities exchange requirements, (vi)
the performance of obligations under and in compliance with its certificate of
incorporation and by-laws, or any applicable law, ordinance, regulation, rule,
order, judgment, decree or permit, including, without limitation,
<PAGE>
82
as a result of or in connection with the activities of its Subsidiaries, (vii)
the performance of contractual obligations in existence on the date hereof or
otherwise permitted hereunder, including, without limitation, the Management
Services Agreement, (viii) the incurrence and payment of its business expenses
and any taxes for which it may be liable, (ix) other activities reasonably
incidental or related to the foregoing, (x) any Refinancing Indebtedness
pursuant to subsection 8.2(o) or (xi) Indebtedness permitted by subsection
8.9(f).
9.2 Restricted Payments. Use any amount received by it pursuant to
subsection 8.7 or 8.9(f) from the Borrower or any of its Subsidiaries for any
purpose other than as set forth in such subsections.
9.3 Net Proceeds. Fail to contribute the Net Proceeds of any Equity
Offering on or after the Closing Date to the Borrower within two Business Days
after Holdings receives such Net Proceeds, except (i) that Holdings may retain
such Net Proceeds to repurchase, redeem or retire PIK Preferred as contemplated
or otherwise permitted by subsection 4.1(c)(i) and (ii) as contemplated by
subsection 6.1(b)(iii).
9.4 Dividends. Except as contemplated by subsection 8.7 or 8.9(f),
declare or pay any dividend (other than dividends payable solely in Capital
Stock of Holdings) on, or make any payment on account of, or set apart assets
for a sinking or other analogous fund for the purchase, redemption, defeasance,
retirement or other acquisition of Capital Stock of Holdings, or any warrants or
options to purchase any such Capital Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of Holdings or any
of its Subsidiaries.
SECTION 10. GUARANTEE
10.1 Guarantee. (a) To induce the Administrative Agent and the
Lenders to execute and deliver this Agreement and to make the Extensions of
Credit provided for herein to the Borrower, Holdings hereby absolutely,
unconditionally and irrevocably guarantees to the Administrative Agent, the
Documentation Agent and the Lenders and their respective successors, permitted
transferees and permitted assigns, the prompt and complete payment and
performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations. Holdings further agrees to pay
any and all reasonable expenses (limited in the case of counsel to all
reasonable fees and disbursements of one counsel) which may be paid or incurred
by the Administrative Agent or any Lender in enforcing, or obtaining advice of
one counsel in respect of, any rights with respect to, or collecting, any or all
of the Obligations and/or enforcing any rights with respect to, or collecting
against, Holdings under this Section 10. Subject to subsection 10.5, this
Guarantee shall remain in full force and effect until the Obligations are
indefeasibly paid in full, no Letter of Credit remains outstanding and the
Commitments are terminated, notwithstanding that from time to time prior thereto
the Borrower may be free from any Obligations.
<PAGE>
83
(b) No payment or payments made by the Borrower or any other Person
or received or collected by the Administrative Agent or any Lender from the
Borrower or any other Person by virtue of any action or proceeding or any set-
off or appropriation or application, at any time or from time to time, in
reduction of or in payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of Holdings under this Section 10
which shall, notwithstanding any such payment or payments (other than payments
made by Holdings in respect of the Obligations or payments received or collected
from Holdings in respect of the Obligations), remain in full force and effect
until, subject to subsection 10.5, the Obligations are indefeasibly paid in
full, no Letter of Credit remains outstanding and the Commitments are
terminated. Holdings agrees that whenever, at any time, or from time to time,
it shall make any payment to the Administrative Agent or any Lender on account
of its liability under this Section 10, it will notify the Administrative Agent
and such Lender in writing that such payment is made under this Section 10 for
such purpose.
10.2 No Subrogation, Contribution, Reimbursement or Indemnity.
Notwithstanding anything to the contrary in this Section 10, Holdings shall not
be entitled to be subrogated to any of the rights of the Administrative Agent or
any Lender against the Borrower or any other Guarantor or any collateral
security or guarantee or right of offset held by the Administrative Agent or any
Lender for the payment of the Obligations, nor shall Holdings seek or be
entitled to seek any contribution or reimbursement from the Borrower or any
other Guarantor in respect of payments made by Holdings hereunder, until all
amounts owing to the Administrative Agent and the Lenders by the Borrower on
account of the Obligations are paid in full, the Commitments are terminated and
no Letter of Credit remains outstanding. If any amount shall be paid to Holdings
on account of such subrogation rights at any time when all of the Obligations
shall not have been paid in full, the Commitments shall not have been terminated
or a Letter of Credit remains outstanding, such amount shall be held by Holdings
in trust for the Administrative Agent and the Lenders, segregated from other
funds of Holdings, and shall, forthwith upon receipt by Holdings, be turned over
to the Administrative Agent in the exact form received by Holdings (duly
indorsed by Holdings to the Administrative Agent, if required), to be applied
against the Obligations, whether matured or unmatured, in such order as the
Administrative Agent may determine. The provisions of this paragraph shall
survive the termination of the guarantee contained in this Section 10 and the
payment in full of the Obligations, the termination of the Commitments and the
cancellation, revocation or termination of all outstanding Letters of Credit.
10.3 Amendments, etc. with respect to the Obligations; Waiver of
Rights. Holdings shall remain obligated hereunder notwithstanding that, without
any reservation of rights against Holdings, and without notice to or further
assent by Holdings, any demand for payment of any of the Obligations made by the
Administrative Agent or any Lender may be rescinded by the Administrative Agent
or such Lender, and any of the Obligations continued, and the Obligations, or
the liability of any other party upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Administrative
Agent or any Lender, and this Agreement, the other Loan Documents, any Interest
Rate Protection Agreement
<PAGE>
84
entered into by the Borrower with any Lender or any Affiliate of any Lender and
any other documents executed and delivered in connection herewith or therewith
may be amended, modified, supplemented or terminated, in whole or in part, as
the Administrative Agent (or the Required Lenders, as the case may be) or such
Lender or Affiliate may deem advisable from time to time, and any collateral
security, guarantee or right of offset at any time held by the Administrative
Agent or any Lender for the payment of the Obligations may be sold, exchanged,
waived, surrendered or released. Neither the Administrative Agent nor any Lender
or its Affiliates shall have any obligation to protect, secure, perfect or
insure any Lien at any time held by it as security for the Obligations or for
the guarantee contained in this Section 10 or any property subject thereto. When
making any demand hereunder against Holdings, the Administrative Agent or any
Lender may, but shall be under no obligation to, make a similar demand on the
Borrower or any other guarantor, and any failure by the Administrative Agent or
any Lender to make any such demand or to collect any payments from the Borrower
or any such other guarantor or any release of the Borrower or such other
guarantor shall not relieve Holdings of its obligations or liabilities under
this Section 10, and shall not impair or affect the rights and remedies, express
or implied, or as a matter of law, of the Administrative Agent or any Lender
against Holdings. For the purposes hereof "demand" shall include the
commencement and continuance of any legal proceedings.
10.4 Guarantee Absolute and Unconditional. Holdings waives, to the
fullest extent permitted by applicable law, any and all notice of the creation,
renewal, extension or accrual of any of the Obligations and notice of or proof
of reliance by the Administrative Agent or any Lender upon the guarantee
contained in this Section 10 or acceptance of the guarantee contained in this
Section 10; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred, or renewed, extended, amended or
waived, in reliance upon the guarantee contained in this Section 10; and all
dealings between the Borrower or Holdings, on the one hand, and the
Administrative Agent and the Lenders, on the other, shall likewise be
conclusively presumed to have been had or consummated in reliance upon the
guarantee contained in this Section 10. Holdings waives, to the fullest extent
permitted by applicable law, diligence, presentment, protest, demand for payment
and notice of default or nonpayment to or upon the Borrower or Holdings with
respect to the Obligations. This Guarantee shall be construed as a continuing,
absolute, irrevocable and unconditional guarantee of payment without regard to
(a) the validity, regularity or enforceability of this Agreement, any Note, any
other Loan Document or any Interest Rate Protection Agreement entered into by
the Borrower with any Lender or any Affiliate of any Lender, any of the
Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by the
Administrative Agent or any Lender, (b) any defense, set-off or counterclaim
(other than a defense of payment or performance) which may at any time be
available to or be asserted by the Borrower, Holdings or any other Person
against the Administrative Agent or any Lender or (c) any other circumstance
whatsoever (with or without notice to or knowledge of the Borrower or Holdings)
which constitutes, or might be construed to constitute, an equitable or legal
discharge of the Borrower for the Obligations, or of Holdings under the
guarantee contained in this Section 10, in bankruptcy or in any other instance.
When pursuing its rights and remedies hereunder against Holdings, the
Administrative Agent and any Lender may, but shall be under no obligation to,
pursue such rights and remedies as it may have
<PAGE>
85
against the Borrower or any other Person or against any collateral security or
guarantee for the Obligations or any right of offset with respect thereto, and
any failure by the Administrative Agent or any Lender to pursue such other
rights or remedies or to collect any payments from the Borrower or any such
other Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Borrower or any such
other Person or of any such collateral security, guarantee or right of offset,
shall not relieve Holdings of any liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Administrative Agent or any Lender against Holdings. For
the purposes hereof, "demand" shall include the commencement and continuance of
any legal proceedings. The guarantee contained in this Section 10 shall remain
in full force and effect and be binding in accordance with and to the extent of
its terms upon Holdings and its successors, and shall inure to the benefit of
the Administrative Agent and the Lenders, and their respective successors,
permitted transferees and permitted assigns, until, subject to subsection 10.5,
all the Obligations and the obligations of Holdings under this Guarantee shall
have been indefeasibly satisfied by payment in full, no Letter of Credit remains
outstanding and the Commitments shall be terminated, notwithstanding that from
time to time during the term of this Agreement the Borrower may be free from any
Obligations.
10.5 Reinstatement. The guarantee contained in this Section 10 shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is rescinded or must
otherwise be restored or returned by the Administrative Agent or any Lender upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or any other Person or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any other Person or any substantial part of its property, or
otherwise, all as though such payments had not been made.
10.6 Payments. Holdings hereby agrees that the Obligations will be
paid to the Administrative Agent without set-off or counterclaim in Dollars at
the office of the Administrative Agent located at 270 Park Avenue, New York, New
York 10017.
SECTION 11. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan or any
Reimbursement Obligation when due in accordance with the terms thereof or
hereof; or the Borrower shall fail to pay any interest on any Loan, or any
other amount payable hereunder, within five Business Days after any such
interest or other amount becomes due in accordance with the terms thereof
or hereof; or
(b) Any representation or warranty made or deemed made by the
Borrower or any other Loan Party herein or in any other Loan Document or
which is contained in any certificate, document or financial or other
statement furnished by it at any time
<PAGE>
86
under or in connection with this Agreement or any such other Loan Document
shall prove to have been incorrect in any material respect on or as of the
date made or deemed made or furnished; or
(c) The Borrower or any other Loan Party shall default in the
observance or performance of any agreement contained in Section 8 or
Section 9, or subsection 5.5 or 5.9 of the Guarantee and Collateral
Agreement; or
(d) The Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in paragraphs
(a) through (c) of this Section), and such default shall continue
unremedied for a period of 30 days; or
(e) The Borrower or any other Loan Party shall (i) default in any
payment of principal of or interest of any Indebtedness (other than the
Loans) or in the payment of any Guarantee Obligation, beyond the period of
grace (not to exceed 30 days), if any, provided in the instrument or
agreement under which such Indebtedness or Guarantee Obligation was
created; or (ii) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or Guarantee
Obligation or contained in any instrument or agreement evidencing, securing
or relating thereto, or any other event shall occur or condition exist, the
effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf
of such holder or holders or beneficiary or beneficiaries) to cause, with
the giving of notice if required, such Indebtedness to become due prior to
its stated maturity or such Guarantee Obligation to become payable;
provided, however, that no Default or Event of Default shall exist under
-------- -------
this paragraph unless the aggregate amount of Indebtedness and/or Guarantee
Obligations in respect of which any default or other event or condition
referred to in this paragraph shall have occurred shall be equal to at
least $1,000,000; or
(f) (i) The Borrower or any other Loan Party shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial
part of its assets, or the Borrower or any other Loan Party shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Borrower or any other Loan Party any case, proceeding
or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a
period of 60 days; or (iii) there shall be entered any order for the
issuance of a warrant of attachment, execution, distraint or similar
process against all or any
<PAGE>
87
substantial part of the assets of the Borrower or any other Loan Party
which shall not have been vacated, discharged, or stayed or bonded pending
appeal within 60 days from the entry thereof; or (iv) the Borrower or any
other Loan Party shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), or (iii) above; or (v) the Borrower or any other Loan
Party shall generally not, or shall be unable to, or shall admit in writing
its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed (or a trustee shall be appointed) to administer, or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Borrower or any
Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan, or (vi) any other similar event or condition shall occur or exist
with respect to a Plan that could result in a liability (other than in the
ordinary course), and in each case in clauses (i) through (vi) above, such
event or condition, together with all other such events or conditions, if
any, could reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving individually a liability of
$1,000,000 (not paid or fully covered by insurance or with respect to which
coverage has been denied by the insurers or not covered by the indemnity of
the Sellers under the Stock Purchase Agreement) or in the aggregate a
liability of $2,000,000 or more, and all such judgments or decrees shall
not have been vacated, discharged, stayed or bonded pending appeal within
60 days from the entry thereof; or
(i) (i) Any of the Security Documents shall cease, for any reason, to
be in full force and effect, or the Borrower or any other Loan Party which
is a party to any of the Security Documents shall so assert in writing or
(ii) any Lien created by any of the Security Documents shall, by reason of
any breach by any Loan Party thereto of any of its covenants or other
obligations contained in such Security Documents, cease to be enforceable
and of the same effect and priority, purported to be created thereby; or
(j) Any Guarantee shall cease, for any reason other than release by
the Lenders, to be in full force and effect or any Guarantor shall so
assert; or
<PAGE>
88
(k) A Change of Control shall occur; or
(l) The subordination provisions contained in Article XII of the
Senior Subordinated Note Indenture shall cease to be enforceable in
accordance with their terms;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i), (ii) or (iii) of paragraph (f) of this Section with respect to
the Borrower, automatically the Commitments (including the Swing Line
Commitment) shall immediately terminate and the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement (including,
without limitation, all amounts of L/C Obligations, whether or not the
beneficiaries of the then outstanding Letters of Credit shall have presented the
documents required thereunder) shall immediately become due and payable, and (B)
if such event is any other Event of Default, either or both of the following
actions may be taken: (i) with the consent of the Required Lenders, the
Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to the Borrower declare the Commitments
(including the Swing Line Commitment) to be terminated forthwith, whereupon the
Commitments shall immediately terminate; and (ii) with the consent of the
Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts (including, without limitation, all amounts of L/C Obligations, whether
or not the beneficiaries of the then outstanding Letters of Credit shall have
presented the documents required thereunder) owing under this Agreement to be
due and payable forthwith, whereupon the same shall immediately become due and
payable. Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Borrower shall at such time deposit in
a cash collateral account opened by the Administrative Agent an amount equal to
the aggregate then undrawn and unexpired amount of such Letters of Credit. The
Borrower hereby grants to the Administrative Agent, for the benefit of the
Issuing Bank and the L/C Participants and the other Lenders, a security interest
in such cash collateral to secure all obligations of the Borrower under this
Agreement and the other Loan Documents. Amounts held in such cash collateral
account shall be applied by the Administrative Agent to the payment of drafts
drawn under such Letters of Credit, and the unused portion thereof after all
such Letters of Credit shall have expired or been fully drawn upon, if any,
shall be applied to repay other Obligations. After all such Letters of Credit
shall have expired or been fully drawn upon, all Reimbursement Obligations shall
have been satisfied and all other Obligations shall have been paid in full, the
balance, if any, in such cash collateral account shall be returned to the
Borrower. The Borrower shall execute and deliver to the Administrative Agent,
for the account of the Issuing Bank and the L/C Participants, such further
documents and instruments as the Administrative Agent may request to evidence
the creation and perfection of the security interest in such cash collateral
account.
<PAGE>
89
SECTION 12. THE ADMINISTRATIVE AGENT
12.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each Lender irrevocably authorizes
the Administrative Agent, in such capacity, to take such action on its behalf
under the provisions of this Agreement and the other Loan Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
12.2 Delegation of Duties. The Administrative Agent may execute any
of its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
12.3 Exculpatory Provisions. Neither the Administrative Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Borrower or
any officer thereof contained in this Agreement or any other Loan Document or in
any certificate, report, statement or other document referred to or provided for
in, or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of the Borrower to perform its obligations hereunder
or thereunder. The Administrative Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower.
12.4 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the
<PAGE>
90
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Required Lenders or all Lenders, as the case may be, as it deems appropriate or
it shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Administrative Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
and the other Loan Documents in accordance with a request of the Required
Lenders or all Lenders, as the case may be, and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders
and all future holders of the Loans.
12.5 Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
unless the Administrative Agent has received notice from a Lender or the
Borrower or Holdings referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give notice thereof to the Lenders. The Administrative Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders or all Lenders, as the case may be;
provided that unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the
Lenders.
12.6 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereafter taken, including any review of the affairs of the
Borrower, shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and made its own decision to make
its Loans and issue or participate in Letters of Credit hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Administrative Agent hereunder or furnished
to the Administrative Agent for the account of or with a copy or counterpart for
any of the Lenders, the Administrative Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property,
<PAGE>
91
condition (financial or otherwise), prospects or creditworthiness of the
Borrower which may come into the possession of the Administrative Agent or any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.
12.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Commitment Percentages in effect on the
date on which indemnification is sought (or, if indemnification is sought after
the date upon which the Commitments shall have terminated and the Loans shall
have been paid in full, ratably in accordance with their Commitment Percentages
immediately prior to such date), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of, the Commitments, this Agreement, any of the
other Loan Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by the Administrative Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the
Administrative Agent's gross negligence or willful misconduct. The agreements
in this subsection shall survive the payment of the Loans and all other amounts
payable hereunder.
12.8 Administrative Agent in Its Individual Capacity. Chemical and
its Affiliates may make loans to, accept deposits from and generally engage in
any kind of business with the Borrower as though Chemical were not the
Administrative Agent hereunder and under the other Loan Documents. With respect
to the Loans made by it and with respect to any Letter of Credit issued or
participated in by it, Chemical shall have the same rights and powers under this
Agreement and the other Loan Documents as any Lender and may exercise the same
as though it were not the Administrative Agent, and the terms "Lender" and
"Lenders" shall include the Chemical in its individual capacity.
12.9 Successor Administrative Agent. The Administrative Agent may
resign as Administrative Agent upon 10 days' notice to the Lenders and the
Borrower. If the Administrative Agent shall resign as Administrative Agent
under this Agreement and the other Loan Documents, then the Required Lenders
shall appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall be subject to the approval of the Borrower if no Default
or Event of Default shall have occurred and be continuing (which approval shall
not be unreasonably withheld), whereupon such successor agent shall succeed to
the rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions
<PAGE>
92
of this Section 12 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Administrative Agent under this Agreement and the
other Loan Documents.
12.10 Issuing Bank; Swing Line Lender; Documentation Agent. The
provisions of this Section 12 (other than subsection 12.9) shall apply to the
Issuing Bank and the Swing Line Lender and the Documentation Agent mutatis
mutandis to the same extent as such provisions apply to the Administrative
Agent.
SECTION 13. MISCELLANEOUS
13.1 Amendments and Waivers. Neither this Agreement nor any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. The
Required Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agent may, from time to time, (a) enter into with the Borrower
and each other Loan Party which is a party to the relevant Loan Documents
written amendments, supplements or modifications hereto and to the other Loan
Documents for the purpose of adding any provisions to this Agreement or the
other Loan Documents or changing in any manner the rights of the Lenders or of
the Borrower hereunder or thereunder, (b) release collateral (except that no
consent of any Lender or the Required Lenders is required to permit the release
of a Lien or Guarantee in connection with any Asset Sale permitted under Section
8 of this Agreement or any other transaction permitted under such Section) or
(c) waive, on such terms and conditions as the Required Lenders or the
Administrative Agent, as the case may be, may specify in such instrument, any of
the requirements of this Agreement or the other Loan Documents or any Default or
Event of Default and its consequences; provided, however, that no such waiver
and no such amendment, supplement or modification shall (i) reduce the amount or
extend the scheduled date of maturity of any Loan made by any Lender or of any
installment thereof, or any Reimbursement Obligation, or reduce the stated rate
of any interest thereon or reduce the fee payable hereunder to any Lender or
extend the scheduled date of any payment thereof or increase the aggregate
amount or extend the expiration date of any Lender's Commitments, in each case
without the written consent of each Lender directly affected thereby, (ii)
amend, modify or waive any provision of this subsection or reduce the percentage
specified in the definition of Required Lenders or consent to the assignment or
transfer by the Borrower of any of its rights and obligations under this
Agreement and the other Loan Documents or release all or substantially all of
the Collateral or release any Guarantee (other than as provided above), in each
case without the written consent of all the Lenders, (iii) amend, modify or
waive any provision of subsections 3.10 through 3.18 without the written consent
of the Issuing Bank, (iv) amend, modify or waive any provision of subsections
3.6 through 3.9 without the written consent of the Swing Line Lender, or (v)
amend, modify or waive any provision of Section 12 without the written consent
of the then Administrative Agent, Issuing Bank and Documentation Agent. Any such
waiver and any such amendment, supplement or modification shall apply equally to
each of the Lenders and shall be binding upon the Borrower, the Lenders, the
Administrative Agent and all future holders of the Loans. In the case of any
waiver, the Borrower, the Lenders and the Administrative Agent shall be restored
to their former positions and rights hereunder and
<PAGE>
93
under the other Loan Documents, and any Default or Event of Default waived shall
be deemed to be cured and not continuing; no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon. Notwithstanding anything to the contrary in this subsection 13.1, no
consent of any Lender or of the Required Lenders shall be required to permit the
release of a Lien in connection with any Asset Sale or other transaction
permitted by Section 8 of this Agreement; the Administrative Agent shall execute
such release and termination as may be required by this Agreement.
13.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission followed by hand-delivery,) and, unless otherwise
expressly provided herein, shall be deemed to have been duly given or made when
delivered, or three days after being deposited in the mail, postage prepaid, or,
in the case of telecopy notice, when received, addressed as follows in the case
of the Borrower and the Administrative Agent by messenger or by mail, and as set
forth on its signature page hereto in the case of the other parties hereto, or
to such other address as may be hereafter notified by the respective parties
hereto:
Holdings: TLG Laboratories Holding Corp.
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Ross Blechman
Telecopy: (516) 471-2395
The Borrower: Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Ross Blechman
Telecopy: (516) 471-2395
with copies to:
Leonard Green & Partners
333 South Grand Avenue
Suite 5400
Los Angeles, California 90071
Attention: Jennifer Holden Dunbar
Telecopy: (213) 625-2043
The Administrative Chemical Bank
Agent: 270 Park Avenue
New York, New York 10017
Attention: Andrew Tymoszewicz
Telecopy: 212-270-3279
<PAGE>
94
with a copy to: Chemical Bank Agent Bank Services
140 East 45th Street, 29th Floor
New York, New York 10017
Attention: Janet Belden
Telecopy: 212-622-0122
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.2, 3.2, 3.4, 3.8, 3.11, 4.1, 4.2 or 4.7
shall not be effective until received.
13.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
13.4 Survival of Representations and Warranties. All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the Extensions of
Credit hereunder.
13.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay
or reimburse the Administrative Agent and the Documentation Agent for all its
reasonable out-of-pocket costs and expenses incurred in connection with the
syndication of the Loans and the Commitments under, and the development,
preparation and execution of, and any amendment, supplement or modification to,
this Agreement and the other Loan Documents and any other documents prepared in
connection herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent, (b) to
pay or reimburse each Lender and the Administrative Agent for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the other Loan Documents and any such other
documents prepared in connection herewith or therewith, including, without
limitation, the fees and disbursements of one counsel to the Lenders and the
Administrative Agent, (c) to pay, and indemnify and hold harmless each Lender
and the Administrative Agent from, any and all recording and filing fees and any
and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise, mortgage recording and other similar taxes, if any, which are
payable or determined to be payable in connection with the execution and
delivery of, or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the other Loan Documents and any such other
documents, and (d) to pay and indemnify and hold harmless each Lender and the
Administrative Agent from and against, any and all other liabilities (excluding
income taxes), obligations, losses, damages, penalties, actions,
<PAGE>
95
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the other Loan Documents, the Stock Purchase
Agreement, the Transactions or the use of the proceeds of the Extensions of
Credit in connection with the Transactions, and any such other documents,
including, without limitation, any of the foregoing relating to the violation
of, noncompliance with or liability under any Environmental Law applicable to
the operations of the Borrower, any of its Subsidiaries or any of the Properties
(all the foregoing in this clause (d), collectively, the "indemnified
liabilities"), provided, that the Borrower shall have no obligation hereunder to
the Administrative Agent or any Lender with respect to indemnified liabilities
arising from (i) the gross negligence or willful misconduct of the
Administrative Agent or any such Lender or (ii) legal proceedings commenced
against the Administrative Agent or any such Lender by any security holder or
creditor thereof arising out of and based upon rights afforded any such security
holder or creditor solely in its capacity as such. The agreements in this
subsection shall survive repayment of the Loans and all other amounts payable
hereunder.
13.6 Successors and Assigns; Participations and Assignments. (a)
This Agreement shall be binding upon and inure to the benefit of the Borrower,
Holdings, the Lenders, the Administrative Agent and their respective successors
and assigns, except that neither the Borrower nor Holdings may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Lender and any assignment or transfer by any Lender of
its rights or obligations under this Agreement or any Loan Document must be made
in compliance with this subsection 13.6 (and any purported assignment in
violation of this subsection shall be null and void).
(b) Any Lender may, in the ordinary course of its lending or
investment business and in accordance with applicable law, at any time sell to
one or more financial institutions or other entities ("Loan Participants")
participating interests in any Loan owing to such Lender, any Commitment of such
Lender or any other interest of such Lender hereunder and under the other Loan
Documents. In the event of any such sale by a Lender of a participating interest
to a Loan Participant, (i) such Lender's obligations under this Agreement to the
other parties to this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible for the performance thereof, (iii) such Lender shall
remain the holder of any such Loan or other interest for all purposes under this
Agreement and the other Loan Documents, (iv) the Borrower and the Administrative
Agent shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement and the other
Loan Documents, and (v) no Loan Participant under any participation shall have
any right to approve any amendment or waiver of any provision of any Loan
Document, or any consent to any departure by any Loan Party therefrom, except
with respect to the matters described in clauses (i) and (ii) of the proviso to
the second sentence of subsection 13.1. The Borrower agrees that, while an Event
of Default shall have occurred and be continuing if amounts outstanding under
this Agreement are due or unpaid, or shall have been declared or shall have
become due and payable upon the occurrence of an Event of Default, each Loan
Participant shall, to the maximum extent permitted by applicable law, be deemed
to have the right of set off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest
<PAGE>
96
were owing directly to it as a Lender under this Agreement, provided that, in
purchasing such participating interest, such Participant shall be deemed to have
agreed to share with the Lenders the proceeds thereof as provided in subsection
13.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that
each Loan Participant shall be entitled to the benefits of subsections 4.9, 4.10
and 4.11 with respect to its participation in the Commitments and the Extensions
of Credit outstanding from time to time as if it were a Lender; provided that,
in the case of subsection 4.10 such Loan Participant shall have complied with
the requirements of said subsection and provided, further, that no Loan
Participant shall be entitled to receive any greater amount pursuant to any such
subsection than the transferor Lender would have been entitled to receive in
connection with the same event or circumstance in respect of the amount of the
participation transferred by such transferor Lender to such Loan Participant had
no such transfer occurred.
(c) Any Lender may, in the ordinary course of its lending or
investment business and in accordance with applicable law, at any time and from
time to time assign, with the consent of the Borrower (so long as no Default or
Event of Default shall have occurred and be continuing) and the Administrative
Agent in the case of an assignment other than to another Lender or an affiliate
thereof (which in each case shall not be unreasonably withheld), to any other
Lender or any affiliate thereof or to an additional bank or financial
institution (an "Assignee") all or any part of its rights and obligations under
this Agreement and the other Loan Documents in an amount at least equal to
$5,000,000 divided by $68,000,000 and multiplied by the aggregate Commitments
and Term Loans at the time of assignment pursuant to an Assignment and
Acceptance, substantially in the form of Exhibit H, executed by such Assignee,
---------
such assigning Lender (and, in the case of an Assignee that is not then a Lender
or an affiliate thereof, by the Borrower (so long as no Default or Event of
Default shall have occurred and be continuing) and the Administrative Agent
(which consent shall not unreasonably be withheld)) and delivered to the
Administrative Agent for its acceptance and recording in the Register, provided
that, (i) in the case of any such assignment to an Assignee that is an affiliate
of the assigning Lender, the consent of the Borrower shall only be required if,
at the time of such assignment, such Assignee would be entitled to require the
Borrower to pay, or the Borrower would be required to pay, greater amounts under
subsection 4.9 or 4.10 than if no such assignment had occurred and (ii) in the
case of any such assignment to an additional bank or financial institution, if
such assignment is of less than all of the rights and obligations of the
assigning Lender, the sum of the aggregate principal amount of the Loans, the
aggregate amount of the L/C Obligations and the aggregate amount of the unused
Commitments (A) being assigned to such additional bank or financial institution
and (B) remaining with the assigning Lender are not, in each case, less than
$5,000,000 (or such lesser amount as may be agreed to by the Borrower and the
Administrative Agent) divided by $68,000,000 and multiplied by the aggregate
Commitments and Term Loans at the time of assignment. Upon such execution,
delivery, acceptance and recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Lender hereunder with a Commitment as set
forth therein, and (y) the assigning Lender thereunder shall, to the extent
provided in such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance
<PAGE>
97
covering all or the remaining portion of an assigning Lender's rights and
obligations under this Agreement, such assigning Lender shall cease to be a
party hereto except as to subsections 4.9, 4.10 and 10.5). Notwithstanding any
provision of this paragraph (c) and paragraph (e) of this subsection, the
consent of the Borrower shall not be required, and, unless requested by the
Assignee and/or the assigning Lender, new Notes shall not be required to be
executed and delivered by the Borrower, for any assignment which occurs when any
of the events described in Section 11(f) shall have occurred and be continuing.
(d) The Administrative Agent, on behalf of the Borrower, shall
maintain at the address of the Administrative Agent referred to in subsection
13.2 a copy of each Assignment and Acceptance delivered to it and a register
(the "Register") for the recordation of the names and addresses of the Lenders
and the Commitments of, and principal amounts of the Loans owing to, each Lender
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Administrative Agent and the
Lenders shall treat each Person whose name is recorded in the Register as the
owner of a Loan or other obligation hereunder as the owner thereof for all
purposes of this Agreement and the other Loan Documents, notwithstanding any
notice to the contrary. Any assignment of any Loan or other obligation
hereunder (whether or not evidenced by a Note) shall be effective only upon
appropriate entries with respect thereto being made in the Register. The
Register shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by the Borrower and the Administrative
Agent) together with, except in the case of an assignment pursuant to subsection
4.13, payment to the Administrative Agent of a registration and processing fee
of $3,500, the Administrative Agent shall (i) promptly accept such Assignment
and Acceptance and (ii) on the effective date determined pursuant thereto record
the information contained therein in the Register and give notice of such
acceptance and recordation to the Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose to any Loan
Participant or Assignee (each, a "Transferee") and any prospective Transferee,
subject to the provisions of subsection 13.15, any and all financial information
in such Lender's possession concerning the Borrower and its Affiliates which has
been delivered to such Lender by or on behalf of the Borrower pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Borrower in connection with such Lender's credit evaluation of the Borrower and
its Affiliates prior to becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this subsection concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank
in accordance with applicable law, provided that no such assignment, whether to
a Federal Reserve Bank or other entity, shall release a Lender from any of its
obligations hereunder or substitute any such Federal Reserve Bank or other
entity
<PAGE>
98
for such Lender as a party hereto or permit an absolute assignment to occur
other than in accordance with such provisions of this subsection.
13.7 Adjustments; Set-off. (a) If any Lender (a "Benefitted
Lender") shall at any time receive any payment of all or part of its Loans or
the Reimbursement Obligations owing to it, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by set-off,
pursuant to events or proceedings of the nature referred to in Section 11(f), or
otherwise except as to subsections 4.13 and 13.6), in a greater proportion than
any such payment to or collateral received by any other Lender, if any, in
respect of such other Lender's Loans or the Reimbursement Obligations owing to
it, or interest thereon, such Benefitted Lender shall purchase for cash from the
other Lenders a participating interest in such portion of each such other
Lender's Loan or the Reimbursement Obligations owing to it, or shall provide
such other Lenders with the benefits of any such collateral, or the proceeds
thereof, as shall be necessary to cause such Benefitted Lender to share the
excess payment or benefits of such collateral or proceeds ratably with each of
the Lenders; provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such Benefitted Lender, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise) to set
off and appropriate and apply against such amount any and all deposits (general
or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof to or for the
credit or the account of the Borrower. Each Lender agrees promptly to notify the
Borrower and the Administrative Agent after any such set-off and application
made by such Lender, provided that the failure to give such notice shall not
affect the validity of such set-off and application.
13.8 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.
13.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without, to
the extent permitted by law, invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not, to the
extent permitted by law, invalidate or render unenforceable such provision in
any other jurisdiction.
<PAGE>
99
13.10 Integration. This Agreement and the other Loan Documents
represent the entire agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to the subject matter hereof or thereof not
expressly set forth or referred to herein or in the other Loan Documents.
13.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
13.12 Submission To Jurisdiction; Waivers. Each of the Borrower and
Holdings hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Borrower or Holdings at its address set forth in subsection 13.2 or at such
other address of which the Administrative Agent shall have been notified
pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this subsection any special, exemplary, punitive or consequential
damages.
<PAGE>
100
13.13 Acknowledgements. Each of the Borrower and Holdings hereby
acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower or Holdings arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and the
Borrower and Holdings, on the other hand, in connection herewith or
therewith is solely that of creditor and debtor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Borrower, Holdings and the Lenders.
13.14 WAIVERS OF JURY TRIAL. THE BORROWER, HOLDINGS, THE
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
13.15 Confidentiality. Each of the Administrative Agent and each
Lender agrees to keep confidential all non-public information provided to it by
or on behalf of the Borrower, Holdings, or any Subsidiary that is designated by
the Borrower, Holdings or any Subsidiary as confidential; provided that nothing
herein shall prevent the Administrative Agent or any Lender from disclosing any
such information (a) to the Administrative Agent or any other Lender, (b) to any
Transferee or prospective Transferee which agrees to comply with the provisions
of this subsection 13.15, (c) to the employees, directors, agents, attorneys,
accountants and other professional advisors of such Lender for purposes related
to the transactions contemplated by the Loan Documents, (d) upon the request or
demand of any Governmental Authority having jurisdiction over the Administrative
Agent or such Lender, (e) in response to any order of any court or other
Governmental Authority or as may otherwise be required pursuant to applicable
law or regulation, (f) which has been publicly disclosed other than in breach of
this subsection 13.15, or (g) in connection with the exercise of any remedy
hereunder or under any other Loan Document.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
TGL LABORATORIES HOLDING CORP.
By:______________________
Name:
Title:
TWIN LABORATORIES INC.
By:______________________
Name:
Title:
CHEMICAL BANK, as Administrative Agent,
Issuing Bank, Swing Line Lender and as a Lender
By:______________________
Name:
Title:
<PAGE>
THE BANK OF NEW YORK, as Documentation
Agent and as a Lender
By:______________________________________
Name:
Title:
Address for Notices:
THE BANK OF NEW YORK
1100 Old Country Road
Plainview, NY 11803
Attention: Adam Ostrach
Telecopy: (516) 933-7692
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON,
as a Lender
By:___________________________________
Name:
Title:
Address for Notices:
BANK OF BOSTON
100 Federal Street, P.O. Box 2016
Mail Code 01-08-05
Boston, MA 02110
Attention: Clifford Gaysunas
Telecopy: 617-434-4929
<PAGE>
DRESDNER BANK A.G. LOS ANGELES
AGENCY AND GRAND CAYMAN
BRANCHES, as a Lender
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
Address for Notices:
DRESDNER BANK A.G.
725 South Figueroa
Los Angeles, CA 90017
Attention: Sid Jordan
Telecopy: 213-627-3819
<PAGE>
FIRST BANK NATIONAL ASSOCIATION, as a
Lender
By:_____________________________________
Name:
Title:
Address for Notices:
FIRST BANK NATIONAL ASSOCIATION
First Bank Place
601 Second Avenue South
Minneapolis, MN 55402
Attention: Robert W. Miller
Telecopy: 612-973-0824
<PAGE>
FLEET NATIONAL BANK, as a Lender
By:___________________________________
Name:
Title
Address for Notices:
FLEET BANK
75 State Street
Boston, MA 02109
Attention: Kevin Cronin
Telecopy: 617-346-1569
<PAGE>
EUROPEAN AMERICAN BANK, as a Lender
By:__________________
Name:
Title:
Address for Notices:
EUROPEAN AMERICAN BANK
730 Veterans Memorial Highway
Hauppauge, NY 11788
Attention: Stuart N. Berman
Telecopy: 516-360-7112
<PAGE>
GIROCREDIT BANK
AKTIENGESELLSCHAFT DER SPARKASSEN,
GRAND CAYMAN ISLAND BRANCH, as a
Lender
By:__________________________________
Name:
Title:
Address for Notices:
GIROCREDIT BANK
65 East 55th Street, 29th Floor
New York, NY 10022
Attention: Jo Marie Rivera
Telecopy: 212-223-0283
<PAGE>
THE NIPPON CREDIT BANK, LTD., as a
Lender
By:____________________________________
Name:
Title:
Address for Notices:
THE NIPPON CREDIT BANK, LTD.
245 Park Avenue, 30th floor
New York, NY 10167
Attention: Yasuhide Yahiro
Telecopy: 212-490-3895
<PAGE>
ZIONS FIRST NATIONAL BANK, as a Lender
By:_____________________________________
Name:
Title:
Address for Notices:
ZIONS BANK
111 North 200 West
Provo, UT 84601
Attention: Boyd P. Hales
Telecopy: 801-370-4148
<PAGE>
HELLER FINANCIAL, INC., as a Lender
By:____________________________________
Name:
Title:
Address for Notices:
HELLER FINANCIAL
500 W. Monroe Street
Chicago, IL 60661
Attention: Christina Rashid
Telecopy: 312-441-7357
<PAGE>
ANNEX A TO
CREDIT AND GUARANTEE AGREEMENT
------------------------------
PRICING GRID
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Applicable Margin Applicable
Ratio of Consolidated Total Debt to for Eurodollar Margin for Commitment
--------------
Consolidated Interest Coverage Ratio Consolidated EBITDA Loans ABR Loans Fee Rate
- ------------------------------------ ---------------------------------- ----- ----------- ----------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than or equal to 2.50 to 1.00 or Greater than or equal to 4.00 to 1.00 2.50% 1.25% .50%
- -----------------------------------------------------------------------------------------------------------------------------------
Greater than 2.50 to 1.00 and Less than 4.00 to 1.00 2.25% 1.00% .375%
- -----------------------------------------------------------------------------------------------------------------------------------
Greater than 2.75 to 1.00 and Less than 3.50 to 1.00 2.00% .75% .375%
- -----------------------------------------------------------------------------------------------------------------------------------
Greater than 3.00 to 1.00 and Less than 3.00 to 1.00 1.75% .50% .375%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 4.3
EXECUTION COPY
================================================================================
TLG LABORATORIES HOLDING CORP.
TWIN LABORATORIES INC.
__________________________________________________
$68,000,000
CREDIT AND GUARANTEE
AGREEMENT
May 7, 1996
__________________________________________________
CHEMICAL BANK,
as Administrative Agent
and
THE BANK OF NEW YORK,
as Documentation Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS........................................................... 2
1.1 Defined Terms........................................................... 2
1.2 Other Definitional Provisions; Financial Calculations................... 26
SECTION 2. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS............................. 26
2.1 Term Loans.............................................................. 26
2.2 Procedure for Term Loan Borrowing....................................... 27
2.3 Repayment of Term Loans................................................. 27
2.4 Evidence of Term Loan Debt.............................................. 27
SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT
COMMITMENTS.................................................................. 28
3.1 Revolving Credit Commitments............................................ 28
3.2 Procedure for Revolving Credit Borrowing................................ 29
3.3 Commitment and Other Fees............................................... 29
3.4 Termination or Reduction of Commitments................................. 30
3.5 Repayment of Revolving Credit Loans; Evidence of Debt................... 30
3.6 Swing Line Commitment................................................... 31
3.7 Repayment of Swing Line Loans; Evidence of Debt......................... 31
3.8 Procedure for Borrowing Swing Line Loans................................ 32
3.9 Swing Line Loan Participations.......................................... 33
3.10 L/C Commitment......................................................... 34
3.11 Procedure for Issuance of Letters of Credit............................ 35
3.12 Fees, Commissions and Other Charges.................................... 35
3.13 L/C Participations..................................................... 36
3.14 Reimbursement Obligation of the Borrower............................... 37
3.15 Obligations Absolute................................................... 38
3.16 Letter of Credit Payments.............................................. 38
3.17 Application............................................................ 39
3.18 Quarterly Reports...................................................... 39
SECTION 4. GENERAL PROVISIONS APPLICABLE TO EXTENSIONS OF
CREDIT....................................................................... 39
4.1 Optional and Mandatory Prepayments...................................... 39
4.2 Conversion and Continuation Options..................................... 41
4.3 Minimum Amounts and Maximum Number of Tranches.......................... 42
4.4 Interest Rates and Payment Dates........................................ 42
4.5 Computation of Interest and Fees........................................ 42
4.6 Inability to Determine Interest Rate.................................... 43
4.7 Pro Rata Treatment and Payments......................................... 43
4.8 Illegality.............................................................. 44
4.9 Requirements of Law..................................................... 45
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
4.10 Taxes................................................................... 46
4.11 Indemnity............................................................... 49
4.12 Change of Lending Office; Filing of Certificates or Documents........... 49
4.13 Replacement Lenders..................................................... 50
SECTION 5. REPRESENTATIONS AND WARRANTIES......................................... 50
5.1 Financial Condition...................................................... 50
5.2 No Change................................................................ 51
5.3 Existence; Compliance with Law........................................... 51
5.4 Power; Authorization; Enforceable Obligations............................ 52
5.5 No Legal Bar............................................................. 52
5.6 No Material Litigation................................................... 52
5.7 No Default............................................................... 53
5.8 Ownership of Property; Liens............................................. 53
5.9 Intellectual Property.................................................... 53
5.11 Taxes................................................................... 53
5.12 Federal Regulations..................................................... 54
5.13 ERISA................................................................... 54
5.14 Investment Company Act; Other Regulations............................... 54
5.15 Subsidiaries............................................................ 54
5.16 Purpose of Loans........................................................ 55
5.17 Environmental Matters................................................... 55
5.18 Regulation H............................................................ 56
5.19 Accuracy of Information................................................. 56
5.20 Solvency................................................................ 56
5.21 Stock Purchase Agreement................................................ 56
5.22 Security Documents...................................................... 57
SECTION 6. CONDITIONS PRECEDENT................................................... 57
6.1 Conditions to Initial Extension of Credit................................ 57
6.2 Conditions to Each Extension of Credit................................... 63
SECTION 7. AFFIRMATIVE COVENANTS.................................................. 64
7.1 Financial Statements..................................................... 64
7.2 Certificates; Other Information.......................................... 65
7.3 Payment of Obligations................................................... 66
7.4 Conduct of Business; Maintenance of Existence; Compliance with Laws...... 66
7.5 Maintenance of Property; Insurance; Products Liability Insurance......... 67
7.6 Inspection of Property; Books and Records; Discussions................... 67
7.7 Notices.................................................................. 67
7.8 Environmental Laws....................................................... 68
7.9 Maintenance of Liens of the Security Documents........................... 68
7.10 Pledge of After Acquired Property; Additional Guarantors................ 68
7.11 Interest Rate Protection................................................ 69
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
7.12 Exchange Offer............................................................ 70
7.13 Stock Purchase Agreement.................................................. 70
SECTION 8. NEGATIVE COVENANTS....................................................... 70
8.1 Financial Condition Covenants.............................................. 70
8.2 Limitation on Indebtedness................................................. 71
8.3 Limitation on Liens........................................................ 74
8.4 Limitation on Guarantee Obligations........................................ 75
8.5 Limitation on Fundamental Changes.......................................... 76
8.6 Limitation on Sale of Assets............................................... 76
8.7 Limitation on Restricted Payments.......................................... 77
8.8 Limitation on Capital Expenditures......................................... 78
8.9 Limitation on Investments, Loans and Advances.............................. 78
8.10 Limitation on Optional Payments and Modifications of Debt Instruments
and other Obligations.................................................... 79
8.11 Limitation on Transactions with Affiliates................................ 80
8.12 Limitation on Changes in Fiscal Year...................................... 80
8.13 Limitation on Lines of Business........................................... 80
SECTION 9. NEGATIVE COVENANTS OF HOLDINGS........................................... 80
9.1 Limitation on Holdings' Activities......................................... 81
9.2 Restricted Payments........................................................ 81
9.3 Net Proceeds............................................................... 81
9.4 Dividends.................................................................. 81
SECTION 10. GUARANTEE............................................................... 82
10.1 Guarantee................................................................. 82
10.2 No Subrogation, Contribution, Reimbursement or Indemnity.................. 82
10.3 Amendments, etc. with respect to the Obligations; Waiver of Rights........ 83
10.4 Guarantee Absolute and Unconditional...................................... 83
10.5 Reinstatement............................................................. 84
10.6 Payments.................................................................. 85
SECTION 11. EVENTS OF DEFAULT....................................................... 85
SECTION 12. THE ADMINISTRATIVE AGENT................................................ 88
12.1 Appointment............................................................... 88
12.2 Delegation of Duties...................................................... 88
12.3 Exculpatory Provisions.................................................... 88
12.4 Reliance by Administrative Agent.......................................... 89
12.5 Notice of Default......................................................... 89
12.6 Non-Reliance on Administrative Agent and Other Lenders.................... 90
12.7 Indemnification........................................................... 90
12.8 Administrative Agent in Its Individual Capacity........................... 91
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
12.9 Successor Administrative Agent......................................... 91
12.10 Issuing Bank; Swing Line Lender; Documentation Agent.................. 91
SECTION 13. MISCELLANEOUS........................................................ 91
13.1 Amendments and Waivers................................................. 91
13.2 Notices................................................................ 92
13.3 No Waiver; Cumulative Remedies......................................... 93
13.4 Survival of Representations and Warranties............................. 93
13.5 Payment of Expenses and Taxes.......................................... 93
13.6 Successors and Assigns; Participations and Assignments................. 94
13.7 Adjustments; Set-off................................................... 97
13.8 Counterparts........................................................... 98
13.9 Severability........................................................... 98
13.10 Integration........................................................... 98
13.11 GOVERNING LAW......................................................... 98
13.12 Submission To Jurisdiction; Waivers................................... 98
13.13 Acknowledgements...................................................... 99
13.14 WAIVERS OF JURY TRIAL................................................. 99
13.15 Confidentiality....................................................... 99
</TABLE>
ANNEXES:
Annex A Pricing Grid
SCHEDULES:
1.1 Commitments
5.1 Financial Condition
5.2 Dividends
5.3 Existence; Compliance with Law
5.4 Consents
5.6 Litigation
5.8 Real Property
5.9 Intellectual Property
5.10 Burdensome Restrictions
5.11 Taxes
5.13 ERISA Reportable Events and Accumulated Funding Deficiencies
5.17 Environmental Matters
5.21 Exceptions to Stock Purchase Agreement Representations and Warranties
8.2(j) Indebtedness Outstanding on the Closing Date
8.3(e) Easements, Licenses, Etc.
8.3(g) Existing Liens
8.4(a) Guarantee Obligations
-iv-
<PAGE>
8.9(e) Securities Held by Borrower or any Subsidiary
8.11(viii) Affiliate Transactions
EXHIBITS:
A Form of Borrower Mortgage
B Form of Guarantee and Collateral Agreement
C Form of Swing Line Loan Participation Certificate
D Form of Term Note
E Form of Revolving Credit Note
F Form of Swing Line Note
G Form of Closing Certificate
H Form of Assignment and Acceptance
I Form of Opinion of Kramer, Levin, Naftalis, Nessen, Kamin and Frankel
and/or Kelley Drye & Warren
J Form of Opinion of Utah Counsel
-v-
<PAGE>
Exhibit 10.1
________________________________________________
GUARANTEE AND COLLATERAL
AGREEMENT
among
TLG LABORATORIES HOLDING CORP.,
TWIN LABORATORIES INC.,
THE SUBSIDIARY GRANTORS NAMED HEREIN,
in favor of
CHEMICAL BANK,
as Administrative Agent
May 7, 1996
________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SECTION 1. DEFINED TERMS.................................................. 1
1.1 Definitions......................................................... 1
-----------
1.2 Other Definitional Provisions....................................... 4
-----------------------------
SECTION 2. GUARANTEE...................................................... 4
2.1 Guarantee........................................................... 4
---------
2.2 Right of Contribution............................................... 5
---------------------
2.3 No Subrogation...................................................... 5
--------------
2.4 Amendments, etc. with respect to the Borrower Obligations........... 5
---------------------------------------------------------
2.5 Guarantee Absolute and Unconditional................................ 6
------------------------------------
2.6 Reinstatement....................................................... 7
-------------
2.7 Payments............................................................ 7
--------
2.8 Release of Guarantor................................................ 7
--------------------
SECTION 3. GRANT OF SECURITY INTEREST..................................... 7
SECTION 4. REPRESENTATIONS AND WARRANTIES................................. 8
4.1 Representations in Credit Agreement................................. 8
-----------------------------------
4.2 Title; No Other Liens............................................... 8
---------------------
4.3 Perfected First Priority Liens...................................... 9
------------------------------
4.4 Chief Executive Office.............................................. 9
----------------------
4.5 Inventory and Equipment............................................. 9
-----------------------
4.6 Farm Products....................................................... 9
-------------
4.7 Pledged Stock....................................................... 9
-------------
4.8 Accounts 10
--------
4.9 Intellectual Property............................................... 10
---------------------
SECTION 5. COVENANTS...................................................... 12
5.1 Covenants in Credit Agreement....................................... 12
-----------------------------
5.2 Delivery of Instruments and Chattel Paper........................... 12
-----------------------------------------
5.3 Maintenance of Insurance............................................ 13
------------------------
5.4 Payment of Obligations.............................................. 13
----------------------
5.5 Maintenance of Perfected Security Interest; Further Documentation... 13
-----------------------------------------------------------------
5.7 Further Identification of Collateral................................ 14
------------------------------------
5.8 Notices............................................................. 14
-------
5.9 Pledged Stock....................................................... 14
-------------
5.10 Accounts............................................................ 15
--------
5.11 Intellectual Property............................................... 16
---------------------
SECTION 6. REMEDIAL PROVISIONS............................................ 17
6.1 Certain Matters Relating to Accounts................................ 17
------------------------------------
6.2 Communications with Obligors; Collections on Accounts and Proceeds;
-------------------------------------------------------------------
Grantors Remain Liable.............................................. 18
----------------------
6.3 Pledged Stock....................................................... 18
-------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
6.4 Proceeds to be Turned Over To Administrative Agent.................. 19
--------------------------------------------------
6.5 Application of Proceeds............................................. 19
-----------------------
6.6 Code Remedies....................................................... 20
-------------
6.7 Registration Rights................................................. 21
-------------------
6.8 Waiver; Deficiency.................................................. 22
------------------
SECTION 7. THE ADMINISTRATIVE AGENT....................................... 22
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc......... 22
-----------------------------------------------------------
7.2 Duty of Administrative Agent........................................ 24
----------------------------
7.3 Execution of Financing Statements................................... 24
---------------------------------
7.4 Authority of Administrative Agent................................... 24
---------------------------------
SECTION 8. MISCELLANEOUS.................................................. 25
8.1 Amendments in Writing............................................... 25
---------------------
8.2 Notices............................................................. 25
-------
8.3 No Waiver by Course of Conduct; Cumulative Remedies................. 25
---------------------------------------------------
8.4 Enforcement Expenses; Indemnification............................... 25
-------------------------------------
8.5 Successors and Assigns.............................................. 26
----------------------
8.6 Set-Off............................................................. 26
-------
8.7 Counterparts........................................................ 27
------------
8.8 Severability........................................................ 27
------------
8.9 Section Headings.................................................... 27
----------------
8.10 Integration........................................................ 27
-----------
8.11 GOVERNING LAW...................................................... 27
-------------
8.12 Submission To Jurisdiction; Waivers................................ 27
-----------------------------------
8.13 Acknowledgements................................................... 28
----------------
8.14 WAIVER OF JURY TRIAL............................................... 28
--------------------
8.15 Addition of Grantors; Pledged Stock................................ 28
-----------------------------------
8.16 Release of Security Interest....................................... 29
</TABLE>
Schedules
- ---------
Schedule 1 Notice Addresses of Guarantors
Schedule 2 Description of Pledged Stock
Schedule 3 Filings and Other Actions Required to Perfect Security Interests
Schedule 4 Location of Chief Executive Offices
Schedule 5 Location of Inventory and Equipment
Schedule 6 Patents and Patent Licenses; Trademarks and Trademark Licenses
ii
<PAGE>
EXECUTION COPY
--------------
GUARANTEE AND COLLATERAL AGREEMENT, dated as of May 7, 1996, made by
each of the signatories hereto (the "Grantors"), in favor of Chemical Bank, as
administrative agent (in such capacity, the "Administrative Agent") for the
several banks and other financial institutions (the "Lenders") from time to time
parties to the Credit and Guarantee Agreement, dated as of May 7, 1996 (as the
same may be amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among TLG Laboratories Holding Corp., a Delaware
corporation ("Holdings"), Twin Laboratories Inc., a Utah corporation formerly
known as Natur-Pharma, Inc. (the "Borrower"), the several banks and other
financial institutions from time to time parties thereto (the "Lenders"), The
Bank of New York, as documentation agent (the "Documentation Agent") for the
Lenders and the Administrative Agent.
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make loans to, and to issue or participate in letters of credit for
the account of, the Borrower upon the terms and subject to the conditions set
forth therein in connection with the Transactions (as defined in the Credit
Agreement) and the Stock Purchase (as defined in the Credit Agreement) and for
the ongoing working capital of the Borrower and its Subsidiaries (as defined in
the Credit Agreement);
WHEREAS, each Grantor will derive substantial direct and indirect
benefit from the making of the extensions of credit under the Credit Agreement;
and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective loans to, and to issue or participate in letters of
credit for the account of, the Borrower under the Credit Agreement that the
Grantors shall have executed and delivered this Agreement to the Administrative
Agent for the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective Loans to, and to issue or
participate in Letters of Credit for the account of, the Borrower under the
Credit Agreement, each Grantor hereby agrees with the Administrative Agent, for
the ratable benefit of the Lenders, as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms defined
-----------
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, and the following terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Accounts,
<PAGE>
2
Chattel Paper, Documents, Equipment, Farm Products, General Intangibles,
Instruments and Inventory.
(b) The following terms shall have the following meanings:
"Agreement": this Guarantee and Collateral Agreement, as the same may
be amended, supplemented or otherwise modified from time to time.
"Borrower Obligations": the meaning assigned to the term
"Obligations" in the Credit Agreement.
"Code": the Uniform Commercial Code as from time to time in effect in
the State of New York.
"Collateral": as defined in Section 3.
"Collateral Account": any account established to hold money proceeds,
maintained under the sole dominion and control of the Administrative Agent,
subject to withdrawal by the Administrative Agent for the account of the
Lenders as provided in Section 6.4.
"Guarantor Obligations": with respect to any Guarantor or Holdings,
all obligations and liabilities of such Guarantor or Holdings, as the case
may be, which may arise under or in connection with this Agreement
(including, without limitation, the guarantee contained in Section 2) or
any other Loan Document (including, without limitation, the guarantee
contained in Section 10 of the Credit Agreement) to which such Guarantor or
Holdings, as the case may be, is a party, in each case whether on account
of reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, (i) all fees and disbursements of
counsel to the Administrative Agent or to the Lenders that are required to
be paid by such Guarantor or Holdings, as the case may be, pursuant to the
terms of this Agreement or any other Loan Document and (ii) interest
accruing at the then applicable rate provided in the Credit Agreement after
the maturity of the Loans and interest accruing at the then applicable rate
provided in the Credit Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower, whether or not a claim for post-
filing or post-petition interest is allowed in such proceeding).
"Guarantors": the collective reference to each party hereto other
than Holdings and the Borrower.
"Intellectual Property": the collective reference to the Patents, the
Patent Licenses, the Trademarks and the Trademark Licenses.
<PAGE>
3
"Issuers": the collective reference to the Persons identified on
Schedule 2 as the issuers of the Pledged Stock.
----------
"Obligations": (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor and Holdings, its
Guarantor Obligations.
"Patents": (i) all letters patent of the United States or any other
country and all reissues and extensions thereof, including, without
limitation, any thereof referred to in Schedule 6, and (ii) all
----------
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any thereof referred to in Schedule 6.
----------
"Patent License": any agreement, whether written or oral, providing
for the grant by or to any Grantor of any right to manufacture, use or sell
any invention covered by a Patent, including, without limitation, any
thereof referred to in Schedule 6.
----------
"Pledged Stock": the shares of Capital Stock listed on Schedule 2,
----------
together with all stock certificates, shares, options or rights of any
nature whatsoever that may be issued or granted by any Issuer to, or
otherwise held or acquired by, any Grantor while this Agreement is in
effect.
"Proceeds": (i) all "proceeds" as such term is defined in Section 9-
306(1) of the Uniform Commercial Code in effect in the State of New York on
the date hereof and (ii) to the extent not included under clause (i) of
this definition, all dividends or other income from the Pledged Stock,
collections thereon or distributions with respect thereto.
"Securities Act": the Securities Act of 1933, as amended.
"Trademarks": (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade dress,
trade styles, service marks, designs, logos and other source or business
identifiers, and the goodwill associated therewith, including customer
lists, license rights, advertising materials and all other business assets
which uniquely reflect the goodwill of the business, now existing or
hereafter adopted or acquired, all registrations and recordings thereof,
and all applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, including, without limitation, any
thereof referred to in Schedule 6, and (ii) all renewals thereof.
----------
"Trademark License": any agreement, whether written or oral,
providing for the grant by or to any Grantor of any right to use any
Trademark, including, without limitation, any thereof referred to in
Schedule 6.
----------
<PAGE>
4
1.2 Other Definitional Provisions. (a) The words "hereof,"
-----------------------------
"herein", "hereto" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Section and Schedule references are to this
Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or
any part thereof, when used in relation to a Grantor, refer to such Grantor's
Collateral or the relevant part thereof.
SECTION 2. GUARANTEE
2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and
---------
severally, absolutely, unconditionally and irrevocably, guarantees to the
Administrative Agent, the Documentation Agent and the Lenders and their
respective successors, permitted transferees and permitted assigns, the prompt
and complete payment and performance by the Borrower when due (whether at the
stated maturity, by acceleration or otherwise) of the Borrower Obligations.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors.
(c) Each Guarantor agrees that the Borrower Obligations may at any
time and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing the guarantee contained in this Section 2 or
affecting the rights and remedies of the Administrative Agent or any Lender
hereunder.
(d) No payment or payments made by the Borrower, any of the
Guarantors, any other guarantor or any other Person or received or collected by
the Administrative Agent or any Lender from the Borrower, any of the Guarantors,
any other guarantor or any other Person by virtue of any action or proceeding or
any set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Borrower Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment or payments other than
payments made by such Guarantor in respect of the Borrower Obligations or
payments received or collected from such Guarantor in respect of the Borrower
Obligations, remain liable for the Borrower Obligations up to the maximum
liability of such Guarantor hereunder until the Borrower Obligations are paid in
full, no Letter of Credit shall be outstanding and the Commitments are
terminated.
<PAGE>
5
(e) Each Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Administrative Agent or any Lender on
account of its liability hereunder, it will notify the Administrative Agent and
such Lender in writing that such payment is made under the guarantee contained
in this Section 2 for such purpose.
2.2 Right of Contribution. Each Guarantor hereby agrees that to the
---------------------
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder who has not paid its
proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 2.3. The provisions of
this Section 2.2 shall in no respect limit the obligations and liabilities of
any Guarantor to the Administrative Agent and the Lenders, and each Guarantor
shall remain liable to the Administrative Agent and the Lenders for the full
amount guaranteed by such Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any
--------------
Guarantor hereunder or any set-off or application of funds of any Guarantor by
the Administrative Agent or any Lender, no Guarantor shall be entitled to be
subrogated to any of the rights of the Administrative Agent or any Lender
against the Borrower or any other Guarantor or any collateral security or
guarantee or right of offset held by the Administrative Agent or any Lender for
the payment of the Borrower Obligations, nor shall any Guarantor seek or be
entitled to seek any contribution or reimbursement from the Borrower or any
other Guarantor in respect of payments made by such Guarantor hereunder, until
all amounts owing to the Administrative Agent and the Lenders by the Borrower on
account of the Borrower Obligations are paid in full, no Letter of Credit shall
be outstanding and the Commitments are terminated. If any amount shall be paid
to any Guarantor on account of such subrogation rights at any time when all of
the Borrower Obligations shall not have been paid in full, a Letter of Credit
shall be outstanding or the Commitments shall not have been terminated, such
amount shall be held by such Guarantor in trust for the Administrative Agent and
the Lenders, segregated from other funds of such Guarantor, and shall, forthwith
upon receipt by such Guarantor, be turned over to the Administrative Agent in
the exact form received by such Guarantor (duly indorsed by such Guarantor to
the Administrative Agent, if required), to be applied against the Borrower
Obligations, whether matured or unmatured, in such order as the Administrative
Agent may determine. The provisions of the preceding sentence shall survive the
termination of the guarantee contained in this Section 2 and the payment in full
of all the Borrower Obligations, the termination of the Commitments and the
cancellation, revocation or termination of all outstanding Letters of Credit.
2.4 Amendments, etc. with respect to the Borrower Obligations. Each
---------------------------------------------------------
Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Borrower
Obligations made by the Administrative Agent or any Lender may be rescinded by
the Administrative Agent or such Lender and any of the Borrower Obligations
continued, and the Borrower Obligations, or the liability of any other Person
upon or for any part thereof, or any collateral security or guarantee therefor
or right of
<PAGE>
6
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Administrative Agent or any Lender, and the
Credit Agreement, the other Loan Documents, any Rate Protection Agreement
entered into by the Borrower with any Lender or any Affiliate of any Lender and
any other documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, as the
Administrative Agent (or the Required Lenders or all Lenders, as the case may
be) or such Lender or Affiliate may deem advisable from time to time, and any
collateral security, guarantee or right of offset at any time held by the
Administrative Agent or any Lender for the payment of the Borrower Obligations
may be sold, exchanged, waived, surrendered or released. Neither the
Administrative Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any Lien at any time held by it as security for the
Borrower Obligations or for the guarantee contained in this Section 2 or any
property subject thereto.
2.5 Guarantee Absolute and Unconditional. Each Guarantor waives, to
------------------------------------
the fullest extent permitted by applicable law, any and all notice of the
creation, renewal, extension or accrual of any of the Borrower Obligations and
notice of or proof of reliance by the Administrative Agent or any Lender upon
the guarantee contained in this Section 2 or acceptance of the guarantee
contained in this Section 2; the Borrower Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred, or renewed,
extended, amended or waived, in reliance upon the guarantee contained in this
Section 2; and all dealings between the Borrower and any of the Guarantors, on
the one hand, and the Administrative Agent and the Lenders, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon the guarantee contained in this Section 2. Each Guarantor waives,
to the fullest extent permitted by applicable law, diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Borrower or any of the Guarantors with respect to the Borrower Obligations.
Each Guarantor understands and agrees that the guarantee contained in this
Section 2 shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity, regularity or
enforceability of the Credit Agreement, any other Loan Document or any Rate
Protection Agreement entered into by any Guarantor with any Lender or any
Affiliate of any Lender, any of the Borrower Obligations or any other collateral
security therefor or guarantee or right of offset with respect thereto at any
time or from time to time held by the Administrative Agent or any Lender, (b)
any defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Borrower, any Guarantor or Holdings against the Administrative Agent or any
Lender, or (c) any other circumstance whatsoever (with or without notice to or
knowledge of the Borrower or such Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the Borrower for the
Borrower Obligations, or of such Guarantor under the guarantee contained in this
Section 2, in bankruptcy or in any other instance. When making any demand
hereunder or otherwise pursuing its rights and remedies hereunder against any
Guarantor, the Administrative Agent or any Lender may, but shall be under no
obligation to, make a similar demand on or otherwise pursue such rights and
remedies as it may have against the Borrower, any other Guarantor or any other
Person or against any collateral security or guarantee for the Borrower
Obligations
<PAGE>
7
or any right of offset with respect thereto, and any failure by the
Administrative Agent or any Lender to make any such demand, to pursue such other
rights or remedies or to collect any payments from the Borrower, any other
Guarantor or any other Person or to realize upon any such collateral security or
guarantee or to exercise any such right of offset, or any release of the
Borrower, any other Guarantor or any other Person or any such collateral
security, guarantee or right of offset, shall not relieve any Guarantor of any
obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the
Administrative Agent or any Lender against any Guarantor. For the purposes
hereof, "demand" shall include the commencement and continuance of any legal
proceedings. The guarantee contained in this Section 2 shall remain in full
force and effect and be binding in accordance with and to the extent of its
terms upon each Guarantor and its successors, and shall inure to the benefit of
the Administrative Agent and the Lenders, and their respective successors,
permitted transferees and permitted assigns, until, subject to Section 2.6, all
the Borrower Obligations and the obligations of each Guarantor under the
guarantee contained in this Section 2 shall have been satisfied by payment in
full, no Letter of Credit shall be outstanding and the Commitments shall be
terminated, notwithstanding that from time to time during the term of the Credit
Agreement the Borrower may be free from any Borrower Obligations.
2.6 Reinstatement. The guarantee contained in this Section 2 shall
-------------
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Borrower Obligations is rescinded or
must otherwise be restored or returned by the Administrative Agent or any Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
the Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments
--------
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in Dollars at the office of the Administrative Agent located at 270
Park Avenue, New York, New York 10017.
2.8 Release of Guarantor. Without any further notice or action being
--------------------
required by any Person, a Guarantor shall be fully and unconditionally released
and discharged from all Guarantor Obligations immediately upon the occurrence of
any of the following in accordance with the Credit Agreement: any sale of
Capital Stock of such Guarantor or consolidation or merger involving such
Guarantor as a result of which such Guarantor is no longer a Subsidiary of the
Borrower.
SECTION 3. GRANT OF SECURITY INTEREST
As collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of its Obligations, each Grantor hereby delivers to the
Administrative Agent, for the ratable benefit of the Lenders, the Pledged Stock
and grants to the Administrative Agent for the ratable benefit of
<PAGE>
8
the Lenders a security interest in all of the following property now owned or at
any time hereafter acquired by such Grantor or in which such Grantor now has or
at any time in the future may acquire any right, title or interest
(collectively, the "Collateral"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Documents;
(d) all Equipment;
(e) all General Intangibles;
(f) all Instruments;
(g) all Intellectual Property;
(h) all Inventory;
(i) all Pledged Stock;
(j) all books and records pertaining to the Collateral; and
(k) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing and all collateral security and guarantees
given by any Person with respect to any of the foregoing.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into the
Credit Agreement and to make the extensions of credit to the Borrower
thereunder, each Grantor hereby represents and warrants to the Administrative
Agent and each Lender that:
4.1 Representations in Credit Agreement. In the case of each
-----------------------------------
Guarantor, the representations and warranties set forth in Section 5 of the
Credit Agreement as they relate to such Guarantor or the Loan Documents to which
such Guarantor is a party, each of which representations and warranties is
hereby incorporated herein by reference, are true and correct, and the
Administrative Agent and each Lender shall be entitled to rely on each of them
as if they were fully set forth herein, provided that each reference in each
such representation and warranty to the Borrower's knowledge shall, for the
purposes of this Section 4.1, be deemed to be a reference to such Guarantor's
knowledge.
<PAGE>
9
4.2 Title; No Other Liens. Except for the security interest granted
---------------------
to the Administrative Agent for the ratable benefit of the Lenders pursuant to
this Agreement and the other Liens permitted to exist on the Collateral by the
Credit Agreement, such Grantor owns each item of the Collateral free and clear
of any and all Liens or claims of others. No security agreement, financing
statement or other public notice with respect to all or any part of the
Collateral is on file or of record in any public office, except such as have
been filed in favor of the Administrative Agent, for the ratable benefit of the
Lenders, pursuant to this Agreement or as are permitted by the Credit Agreement.
4.3 Perfected First Priority Liens. The security interests granted
------------------------------
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule 3 (and the filing from time to time of continuation
----------
statements and new financing statements under the circumstances described in
Sections 9-103(1)(d), 9-103(8)(e), or 9-104(7) of the Code) will constitute
valid perfected security interests in the Collateral in favor of the
Administrative Agent, for the ratable benefit of the Lenders, as collateral
security for the Obligations, enforceable in accordance with its terms against
all creditors of such Grantor and any Persons purporting to purchase any
Collateral from such Grantor, except purchasers of Inventory in the ordinary
course of business or of other Collateral sold in accordance with subsection 8.6
of the Credit Agreement and except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing and (b) are prior to all other
Liens on the Collateral in existence on the date hereof (except such other Liens
as are not prohibited under the Credit Agreement).
4.4 Chief Executive Office. On the date hereof, the location of such
----------------------
Grantor's chief executive office or sole place of business is specified on
Schedule 4.
- ----------
4.5 Inventory and Equipment. On the date hereof, the Inventory and
-----------------------
the Equipment are kept at the locations listed on Schedule 5.
----------
4.6 Farm Products. None of the Collateral constitutes, or is the
-------------
Proceeds of, Farm Products.
4.7 Pledged Stock. (a) The shares of Pledged Stock pledged by such
-------------
Grantor hereunder constitute all the issued and outstanding shares of all
classes of the Capital Stock of each Issuer owned by such Grantor.
(b) All the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable.
(c) Such Grantor is the record and beneficial owner of, and has good
and marketable title to, the Pledged Stock pledged by it hereunder, free of any
and all Liens or options in favor of, or claims of, any other Person, except the
security interest created by this Agreement.
<PAGE>
10
4.8 Accounts. (a) No amount payable to such Grantor under or in
--------
connection with any Account is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent.
(b) None of the obligors on any Accounts is a Governmental Authority
which would require special filings or other actions in order to fully perfect a
security interest in such Accounts.
(c) The amounts represented by such Grantor to the Lenders from time
to time as owing to such Grantor in respect of the Accounts will at such times
be accurate.
4.9 Intellectual Property. (a) Schedule 6 lists all United States
--------------------- ----------
Patents and Patent Licenses owned by such Grantor in its own name on the date
hereof.
(b) Schedule 6 lists all United States Trademarks and Trademark
----------
Licenses owned by such Grantor in its own name on the date hereof.
(c) To the best of such Grantor's knowledge, each United States Patent
and Trademark is on the date hereof valid, subsisting, unexpired, enforceable
and has not been abandoned.
(d) Except as set forth in Schedule 6, none of such United States
----------
Patents and Trademarks is on the date hereof the subject of any licensing or
franchise agreement.
(e) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of any
United States Patent or Trademark in any respect that could reasonably be
expected to have a Material Adverse Effect.
(f) Except as set forth in Schedule 6, no action or proceeding is
----------
pending on the date hereof (1) seeking to limit, cancel or question the validity
of any United States Patent or Trademark, or (2) which, if adversely determined,
would have a material adverse effect on the value of any Patent or Trademark.
To induce the Administrative Agent and the Lenders to make each
extension of credit to the Borrower under the terms of the Credit Agreement,
each Grantor hereby represents and warrants to the Administrative Agent and each
Lender that the foregoing representations and warranties contained in this
Section 4 are true and correct in all material respects on and as of such date
(and, in the case of the representations and warranties made on the Closing
Date, after giving effect to the Transactions) as if made on and as of such
date, except to the extent such representations and warranties expressly relate
to an earlier date in which case such representations and warranties shall be
true and correct in all material respects as of such earlier date.
<PAGE>
11
SECTION 5. COVENANTS
Each Grantor covenants and agrees with the Administrative Agent and
the Lenders that, from and after the date of this Agreement until the
Obligations shall have been paid in full, no Letter of Credit shall be
outstanding and the Commitments shall have expired or otherwise been terminated:
5.1 Covenants in Credit Agreement. In the case of each Guarantor,
-----------------------------
such Guarantor shall take, or shall refrain from taking, as the case may be, all
actions that are necessary to be taken or not taken so that no violation of any
provision, covenant or agreement contained in Section 7 or 8 of the Credit
Agreement, and so that no Default or Event of Default, is caused by any act or
failure to act of such Guarantor or any of its Subsidiaries.
5.2 Delivery of Instruments and Chattel Paper. If any amount payable
-----------------------------------------
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be
immediately delivered to the Administrative Agent, duly indorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral pursuant to
this Agreement.
5.3 Maintenance of Insurance. (a) Such Grantor will maintain, with
------------------------
financially sound and reputable companies, insurance policies (1) insuring the
Inventory and Equipment against loss by fire, explosion, theft and such other
casualties as are usually insured against in the same general area by companies
engaged in the same or similar business and (2) insuring such Grantor, the
Administrative Agent and the Lenders against liability for personal injury and
property damage, such policies to be in form and amounts and having such
coverage as are consistent with standard industry practice, with losses payable
to the Administrative Agent.
(b) All such insurance shall (1) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days (10 days in the case of cancellation for
nonpayment of premium) after receipt by the Administrative Agent of written
notice thereof, (2) name the Administrative Agent and the Lenders as insured
parties, (3) include a breach of warranty clause and (4) be reasonably
satisfactory in all other respects to the Administrative Agent.
(c) The Borrower shall deliver to the Administrative Agent and the
Lenders certificates of insurance with respect to such insurance as the
Administrative Agent may from time to time reasonably request.
5.4 Payment of Obligations. Such Grantor will pay and discharge or
----------------------
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
material claims of any kind (including, without limitation, claims for labor,
materials and supplies) against or with respect to the Collateral,
<PAGE>
12
except as contemplated by the Credit Agreement or where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of such Grantor or where the failure to pay the same could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
5.5 Maintenance of Perfected Security Interest; Further
---------------------------------------------------
Documentation. (a) Such Grantor shall maintain the security interest created
- -------------
by this Agreement as a perfected security interest having at least the priority
described in Section 4.3 and shall defend such security interest against the
claims and demands of all Persons whomsoever.
(b) At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of such Grantor, such Grantor will
promptly and duly execute and deliver such further instruments and documents and
take such further actions as the Administrative Agent may reasonably request for
the purpose of obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the Uniform Commercial
Code or other similar laws in effect in any jurisdiction with respect to the
security interests created hereby.
5.6 Changes in Locations, Name, etc. Such Grantor will not, except
--------------------------------
upon 30 days' prior written notice to the Administrative Agent and delivery to
the Administrative Agent of (x) all additional executed financing statements and
other documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for herein
and (y) if applicable, a written supplement to Schedule 5 showing any additional
----------
location at which Inventory or Equipment shall be kept:
(a) permit any of the Inventory or Equipment to be kept at a location
other than those listed on Schedule 5;
----------
(b) change the location of its chief executive office or sole place of
business from that referred to in Section 4.4; or
(c) change its name, identity or corporate structure to such an extent
that any financing statement filed by the Administrative Agent in
connection with this Agreement would become seriously misleading.
5.7 Further Identification of Collateral. Such Grantor will furnish
------------------------------------
to the Administrative Agent and the Lenders from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Administrative Agent may
reasonably request, all in reasonable detail.
5.8 Notices. Such Grantor will advise the Administrative Agent and
-------
the Lenders promptly, in reasonable detail, of:
<PAGE>
13
(a) any Lien (other than security interests created hereby or Liens
permitted under the Credit Agreement) on, or claim asserted against, any of
the Collateral; and
(b) the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
5.9 Pledged Stock. (a) If such Grantor shall, as a result of its
-------------
ownership of the Pledged Stock, become entitled to receive or shall receive any
stock certificate (including, without limitation, any certificate representing a
stock dividend or a distribution in connection with any reclassification,
increase or reduction of capital or any certificate issued in connection with
any reorganization), option or rights, whether in addition to, in substitution
of, as a conversion of, or in exchange for any shares of the Pledged Stock, or
otherwise in respect thereof, such Grantor shall accept the same as the agent of
the Administrative Agent and the Lenders, hold the same in trust for the
Administrative Agent and the Lenders and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by such Grantor
to the Administrative Agent, if required, together with an undated stock power
covering such certificate duly executed in blank by such Grantor and with, if
the Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations. Any sums paid to such Grantor upon or in respect
of the Pledged Stock upon the liquidation or dissolution of any Issuer shall be
paid over to the Administrative Agent to be held by it hereunder as additional
collateral security for the Obligations, and in case any distribution of capital
shall be made to such Grantor on or in respect of the Pledged Stock or any
property shall be distributed to such Grantor upon or with respect to the
Pledged Stock pursuant to the recapitalization or reclassification of the
capital of any Issuer or pursuant to the reorganization thereof, the property so
distributed shall be delivered to the Administrative Agent to be held by it
hereunder as additional collateral security for the Obligations. If any sums of
money or property so paid or distributed in respect of the Pledged Stock shall
be received by such Grantor, such Grantor shall, until such money or property is
paid or delivered to the Administrative Agent, hold such money or property in
trust for the Lenders, segregated from other funds of such Grantor, as
additional collateral security for the Obligations.
(b) Without the prior written consent of the Administrative Agent, to
the extent not prohibited in the Credit Agreement, such Grantor will not (i)
vote to enable, or take any other action to permit, any Issuer to issue any
stock or other equity securities of any nature or to issue any other securities
convertible into or granting the right to purchase or exchange for any stock or
other equity securities of any nature of any Issuer, (ii) sell, assign,
transfer, exchange, or otherwise dispose of, or grant any option with respect
to, the Pledged Stock or Proceeds thereof, (iii) create, incur or permit to
exist any Lien or option in favor of, or any claim of any Person with respect
to, any of the Pledged Stock or Proceeds thereof, or any interest therein,
except for the security interests created by this Agreement or (iv) enter into
any agreement or undertaking restricting the right or ability of such Grantor or
the Administrative Agent to sell, assign or transfer any of the Pledged Stock or
Proceeds thereof.
<PAGE>
14
(c) In the case of each Grantor which is an Issuer, such Issuer agrees
that (i) it will be bound by the terms of this Agreement relating to the Pledged
Stock issued by it and will comply with such terms insofar as such terms are
applicable to it, (ii) it will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 5.9(a) with
respect to the Pledged Stock issued by it and (iii) the terms of Section 6.7
shall apply to it, mutatis mutandis, with respect to all actions that may be
------- --------
required of it under or pursuant to or arising out of Section 6.7 with respect
to the Pledged Stock issued by it.
5.10 Accounts. (a) Other than in the ordinary course of business
--------
consistent with its past practice, such Grantor will not (i) grant any extension
of the time of payment of any Account, (ii) compromise or settle any Account for
less than the full amount thereof, (iii) release, wholly or partially, any
Person liable for the payment of any Account, (iv) allow any credit or discount
whatsoever on any Account, (v) amend, supplement or modify any Account in any
manner that could adversely affect the value thereof or (vi) fail to exercise
promptly and diligently each and every material right which it may have under
each agreement giving rise to a Account (other than any right of termination).
(b) Such Grantor will deliver to the Administrative Agent a copy of
each material demand, notice or document received by it that questions the
validity or enforceability of more than 5% of the aggregate amount of the then
outstanding Accounts.
5.11 Intellectual Property. (a) Such Grantor (either itself or
---------------------
through licensees) will (i) continue to use each Trademark material to such
Grantor's business on each and every trademark class of goods applicable to its
then current line as reflected in its catalogs, brochures and price lists in
order to maintain such Trademark in full force free from any claim of
abandonment for non-use, (ii) maintain as in the past the quality of products
and services offered under such Trademark, (iii) employ such Trademark with the
appropriate notice of registration, (iv) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark unless the
Administrative Agent, for the ratable benefit of the Lenders, shall obtain a
perfected security interest in such mark pursuant to this Agreement, and (v) not
(and not permit any licensee or sublicensee thereof to) do any act or knowingly
omit to do any act whereby such Trademark may become invalidated.
(b) Such Grantor will not do any act, or omit to do any act, whereby
any Patent material to such Grantor's business would become abandoned or
dedicated.
(c) Such Grantor will notify the Administrative Agent and the Lenders
promptly if it knows, or has reason to know, that any application or
registration relating to any Patent or Trademark material to such Grantor's
business may become abandoned or dedicated, or of any adverse determination or
development (including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office or any court or tribunal in any country) regarding such
Grantor's ownership of any Patent or Trademark material to such Grantor's
business or its right to register the same or to keep and maintain the same.
<PAGE>
15
(d) Whenever such Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Patent or Trademark with the United States Patent and Trademark Office,
such Grantor shall report such filing to the Administrative Agent and the
Lenders within five Business Days after the last day of the fiscal quarter in
which such filing occurs. Upon request of the Administrative Agent, such
Grantor shall execute and deliver any and all agreements, instruments,
documents, and papers as the Administrative Agent may request to evidence the
Administrative Agent's and the Lenders' security interest in such Patent or
Trademark and the goodwill and general intangibles of such Grantor relating
thereto or represented thereby.
(e) Such Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, or any similar office or agency in any political
subdivision of the United States, to maintain and pursue each application (and
to obtain the relevant registration) and to maintain each registration of the
Patents and Trademarks material to such Grantor's business, including, without
limitation, filing of applications for renewal, affidavits or declarations of
use and affidavits or declarations of incontestability.
(f) In the event that any Patent or Trademark material to such
Grantor's business is infringed, misappropriated or diluted by a third party,
such Grantor shall (i) take such actions as such Grantor shall reasonably deem
appropriate under the circumstances to protect such Patent or Trademark and (ii)
if such Patent or Trademark is of material economic value, promptly notify the
Administrative Agent and the Lenders after it learns thereof and take such other
actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Patent or Trademark.
SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Accounts. (a) When an Event of
------------------------------------
Default has occurred and is continuing, the Administrative Agent shall have the
right to make test verifications of the Accounts in any manner and through any
medium that it reasonably considers advisable, and each Grantor shall furnish
all such assistance and information as the Administrative Agent may require in
connection with such test verifications upon reasonable prior notice. At any
time and from time to time, upon the Administrative Agent's request and upon
reasonable prior notice and at the expense of the relevant Grantor, but not more
frequently than once each fiscal quarter unless an Event of Default has occurred
and is continuing such Grantor shall cause independent public accountants or
others satisfactory to the Administrative Agent to furnish to the Administrative
Agent reports showing reconciliations and aging of, and trial balances for, the
Accounts.
(b) When an Event of Default has occurred and is continuing, at the
Administrative Agent's request, each Grantor shall deliver to the Administrative
Agent all original and other documents evidencing, and relating to, the
agreements and transactions
<PAGE>
16
which gave rise to the Accounts, including, without limitation, all original
orders, invoices and shipping receipts.
6.2 Communications with Obligors; Collections on Accounts and
---------------------------------------------------------
Proceeds; Grantors Remain Liable. (a) At any time after the occurrence and
- --------------------------------
during the continuance of an Event of Default, the Administrative Agent may in
its own name or in the name of any of the Lenders communicate with obligors
under the Accounts to verify with them to the Administrative Agent's
satisfaction the existence, amount and terms of any Accounts.
(b) Upon the request of the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, each Grantor shall
notify obligors on the Accounts that the Accounts have been assigned to the
Administrative Agent for the ratable benefit of the Lenders and that payments in
respect thereof shall be make directly to the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of the Accounts to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise thereto. Neither the
Administrative Agent nor any Lender shall have any obligation or liability under
any Account (or any agreement giving rise thereto) by reason of or arising out
of this Agreement or the receipt by the Administrative Agent or any Lender of
any payment relating thereto, nor shall the Administrative Agent or any Lender
be obligated in any manner to perform any of the obligations of any Grantor
under or pursuant to any Account (or any agreement giving rise thereto), to make
any payment, to make any inquiry as to the nature or the sufficiency of any
payment received by it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
6.3 Pledged Stock. (a) Unless an Event of Default shall have
-------------
occurred and be continuing and the Administrative Agent shall have given notice
to the relevant Grantor or Grantors of the Administrative Agent's intent to
exercise its corresponding rights pursuant to Section 6.3(b), each Grantor shall
be permitted to receive all cash dividends paid in the normal course of business
of the Issuers and consistent with past practice, to the extent permitted in the
Credit Agreement, in respect of the Pledged Stock and to exercise all voting and
corporate rights with respect to the Pledged Stock; provided, however, that no
vote shall be cast or corporate right exercised or other action taken which, in
the Administrative Agent's reasonable judgment, would impair the Collateral or
which would be inconsistent with or result in any violation of any provision of
the Credit Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing, (i) the
Administrative Agent shall have the right to receive any and all cash dividends
or other Proceeds paid in respect of the Pledged Stock and make application
thereof to the Obligations in such order as the Administrative Agent may
determine, and (ii) all shares of the Pledged
<PAGE>
17
Stock shall upon request of the Administrative Agent be registered in the name
of the Administrative Agent or its nominee, and the Administrative Agent or its
nominee may thereafter exercise (x) all voting, corporate and other rights
pertaining to such shares of the Pledged Stock at any meeting of shareholders of
the relevant Issuer or Issuers or otherwise and (y) any and all rights of
conversion, exchange, subscription and any other rights, privileges or options
pertaining to such shares of the Pledged Stock as if it were the absolute owner
thereof (including, without limitation, the right to exchange at its discretion
any and all of the Pledged Stock upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate structure of any
Issuer, or upon the exercise by any Grantor or the Administrative Agent of any
right, privilege or option pertaining to such shares of the Pledged Stock, and
in connection therewith, the right to deposit and deliver any and all of the
Pledged Stock with any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as the Administrative Agent may
determine), all without liability except to account for property actually
received by it, but the Administrative Agent shall have no duty to any Grantor
to exercise any such right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each Issuer of any
Pledged Stock pledged by such Grantor hereunder to comply with any instruction
received by it from the Administrative Agent in writing that (i) states that an
Event of Default has occurred and is continuing and (ii) is otherwise in
accordance with the terms of this Agreement, without any other or further
instructions from such Grantor, and each Grantor agrees that each Issuer shall
be fully protected in so complying.
6.4 Proceeds to be Turned Over To Administrative Agent. In addition
--------------------------------------------------
to the rights of the Administrative Agent and the Lenders specified in Section
6.2 with respect to payments of Accounts, if an Event of Default shall occur and
be continuing, then upon written notice to a Grantor from the Administrative
Agent requiring compliance with this Section, all Proceeds received by any
Grantor consisting of cash, checks and other near-cash items shall be held by
such Grantor in trust for the Administrative Agent and the Lenders, segregated
from other funds of such Grantor, and shall, forthwith upon receipt by such
Grantor, be turned over to the Administrative Agent in the exact form received
by such Grantor (duly indorsed by such Grantor to the Administrative Agent, if
required). All Proceeds received by the Administrative Agent hereunder shall be
held by the Administrative Agent in a Collateral Account maintained under its
sole dominion and control. All Proceeds while held by the Administrative Agent
in a Collateral Account (or by such Grantor in trust for the Administrative
Agent and the Lenders) shall continue to be held as collateral security for all
the Obligations and shall not constitute payment thereof until applied as
provided in Section 6.5.
6.5 Application of Proceeds. At such intervals as may be agreed upon
-----------------------
by the Borrower and the Administrative Agent, or, if an Event of Default shall
have occurred and be continuing, at any time at the Administrative Agent's
election, the Administrative Agent shall apply all or any part of Proceeds held
in any Collateral Account in payment of the Obligations in such order as the
Administrative Agent may elect, or shall pay any part of such
<PAGE>
18
funds which the Administrative Agent elects not so to apply and deems not
required as collateral security for the Obligations shall be paid over from time
to time by the Administrative Agent to the Borrower or to whomsoever may be
lawfully entitled to receive the same. Any balance of such Proceeds remaining
after the Obligations shall have been paid in full, no Letters of Credit shall
be outstanding and the Commitments shall have expired or otherwise been
terminated shall be paid over to the Borrower or to whomsoever may be lawfully
entitled to receive the same.
6.6 Code Remedies. If an Event of Default shall occur and be
-------------
continuing, the Administrative Agent, on behalf of the Lenders, may exercise, in
addition to all other rights and remedies granted to them in this Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code and under
all other applicable laws. Without limiting the generality of the foregoing,
the Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived to the fullest extent permitted by applicable law), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Administrative Agent or any Lender or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk. The Administrative Agent or any Lender shall have the right upon
any such public sale or sales, and, to the fullest extent permitted by
applicable law, upon any such private sale or sales, to purchase the whole or
any part of the Collateral so sold, free of any right or equity of redemption in
any Grantor, which right or equity is hereby waived or released to the fullest
extent permitted by applicable law. Each Grantor further agrees, at the
Administrative Agent's request, to assemble the Collateral and make it available
to the Administrative Agent at places which the Administrative Agent shall
reasonably select, whether at such Grantor's premises or elsewhere. The
Administrative Agent shall apply the net proceeds of any action taken by it
pursuant to this Section, after deducting all reasonable costs and expenses of
every kind incurred in connection therewith or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Administrative Agent and the Lenders hereunder, including,
without limitation, reasonable fees and disbursements of one counsel, to the
payment in whole or in part of the Obligations, in such order as the
Administrative Agent may elect, and only after such application and after the
payment by the Administrative Agent of any other amount required by any
provision of law, including, without limitation, Section 9-504(1)(c) of the
Code, need the Administrative Agent account for the surplus, if any, to any
Grantor. To the extent permitted by applicable law, each Grantor waives all
claims, damages and demands it may acquire against the Administrative Agent or
any Lender arising out of the exercise by them of any rights hereunder. If any
notice of a proposed sale or other disposition of Collateral shall be required
<PAGE>
19
by law, such notice shall be deemed reasonable and proper if given at least 10
days before such sale or other disposition.
6.7 Registration Rights. (a) If the Administrative Agent shall
-------------------
determine to exercise its right to sell any or all of the Pledged Stock pursuant
to Section 6.6, and if in the opinion of the Administrative Agent it is
necessary or advisable to have the Pledged Stock, or that portion thereof to be
sold, registered under the provisions of the Securities Act, each Grantor will
cause the Issuer thereof to (i) execute and deliver, and cause the directors and
officers of such Issuer to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts as may be, in the
opinion of the Administrative Agent, necessary or advisable to register the
Pledged Stock, or that portion thereof to be sold, under the provisions of the
Securities Act, (ii) to use its best efforts to cause the registration statement
relating thereto to become effective and to remain effective for a period of one
year from the date of the first public offering of the Pledged Stock, or that
portion thereof to be sold, and (iii) to make all amendments thereto and/or to
the related prospectus which, in the opinion of the Administrative Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto. Each Grantor agrees to cause such Issuer to
comply with the provisions of the securities or "Blue Sky" laws of any and all
jurisdictions which the Administrative Agent shall designate and to make
available to its security holders, as soon as practicable, an earnings statement
(which need not be audited) which will satisfy the provisions of Section 11(a)
of the Securities Act.
(b) Each Grantor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall not
be deemed to be commercially unreasonable solely because of the above-described
restrictions. The Administrative Agent shall be under no obligation to delay a
sale of any of the Pledged Stock for the period of time necessary to permit the
Issuer thereof to register such securities for public sale under the Securities
Act, or under applicable state securities laws, even if such Issuer would agree
to do so.
(c) Each Grantor further agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Stock pursuant to this Section 6.7 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Each Grantor further agrees that a breach of any of the covenants contained in
this Section 6.7 will cause irreparable injury to the Administrative Agent and
the Lenders, that the Administrative Agent and the Lenders have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 6.7 shall be specifically enforceable
against such Grantor,
<PAGE>
20
and such Grantor hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense that no
Event of Default has occurred under the Credit Agreement.
6.8 Waiver; Deficiency. Each of Holdings and each Guarantor waives
------------------
and agrees not to assert any rights or privileges which it may acquire under
Section 9-112 of the Code. Each of Holdings and each Guarantor shall remain
liable for any deficiency if the proceeds of any sale or other disposition of
the Collateral are insufficient to pay its Guarantor Obligations and the fees
and disbursements of any attorneys employed by the Administrative Agent or any
Lender to collect such deficiency.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc. (a)
-----------------------------------------------------------
Each Grantor hereby irrevocably constitutes and appoints the Administrative
Agent and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of such Grantor and in the name of such Grantor or in its
own name, from time to time in the Administrative Agent's discretion, for the
purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement in
accordance with its terms, and, without limiting the generality of the
foregoing, each Grantor hereby gives the Administrative Agent the power and
right, on behalf of such Grantor, without notice to or assent by such Grantor,
to do any or all of the following:
(i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Account or with respect to any other Collateral and file any claim or take
any other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Administrative Agent for the purpose of
collecting any and all such moneys due under any Account or with respect to
any other Collateral whenever payable;
(ii) in the case of any Patent or Trademark, execute, file and
deliver any and all agreements, instruments, documents and papers as the
Administrative Agent may request to evidence the Administrative Agent's and
the Lenders' security interest in such Patent or Trademark and the goodwill
and general intangibles of such Grantor relating thereto or represented
thereby;
(iii) if the applicable Grantor has failed to do so after written
demand, pay or discharge taxes and Liens levied or placed on or threatened
against the Collateral, effect any repairs or any insurance called for by
the terms of this Agreement and pay all or any part of the premiums
therefor and the costs thereof;
<PAGE>
21
(iv) execute, in connection with any sale provided for in Section
6.6 or 6.7, any indorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral; and
(v) (1) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; (2) ask or demand for, collect, receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become
due at any time in respect of or arising out of any Collateral; (3) sign
and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (4) commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any thereof and to enforce any other right in respect of any
Collateral; (5) defend any suit, action or proceeding brought against such
Grantor with respect to any Collateral; (6) settle, compromise or adjust
any such suit, action or proceeding and, in connection therewith, to give
such discharges or releases as the Administrative Agent may deem
appropriate; (7) assign, or grant licenses with respect to, any Patent or
Trademark (along with all the goodwill of the business to which any such
Patent or Trademark pertains), throughout the world for such term or terms,
on such conditions, and in such manner, as the Administrative Agent shall
in its sole discretion determine; (8) in the exercise of its rights under
this Section 7.1, to use any and all Trademarks and Trademark Licenses, if
practicable and only to the extent permitted by agreements relating thereto
and applicable laws, to the extent of the rights of such Grantor therein,
and such Grantor hereby grants a license to the Administrative Agent for
such purpose; and (9) generally, sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral as
fully and completely as though the Administrative Agent were the absolute
owner thereof for all purposes, and do, at the Administrative Agent's
option and such Grantor's expense, at any time, or from time to time, all
acts and things which the Administrative Agent deems necessary to protect,
preserve or realize upon the Collateral and the Administrative Agent's and
the Lenders' security interests therein and to effect the intent of this
Agreement, all as fully and effectively as such Grantor might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
(c) The expenses of the Administrative Agent incurred in connection
with actions undertaken as provided in this Section 7.1, together with interest
thereon at a rate per
<PAGE>
22
annum equal to the rate per annum at which interest would then be payable on
past due ABR Revolving Credit Loans under the Credit Agreement, from the date of
payment by the Administrative Agent to the date reimbursed by the relevant
Grantor, shall be payable by such Grantor to the Administrative Agent on demand
and shall constitute Obligations secured hereby.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
7.2 Duty of Administrative Agent. The Administrative Agent's sole
----------------------------
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Administrative Agent deals
with similar property for its own account. Neither the Administrative Agent,
any Lender nor any of their respective officers, directors, employees or agents
shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of any Grantor or any
other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof. The powers conferred on the Administrative
Agent and the Lenders hereunder are solely to protect the Administrative Agent's
and the Lenders' interests in the Collateral and shall not impose any duty upon
the Administrative Agent or any Lender to exercise any such powers. The
Administrative Agent and the Lenders shall be accountable only for amounts that
they actually receive as a result of the exercise of such powers, and neither
they nor any of their officers, directors, employees or agents shall be
responsible to any Grantor for any act or failure to act hereunder, except for
their own gross negligence or willful misconduct.
7.3 Execution of Financing Statements. Pursuant to Section 9-402 of
---------------------------------
the Code and other similar laws, each Grantor authorizes the Administrative
Agent to file financing statements and other filings and recording documents or
instruments with respect to the Collateral without the signature of such Grantor
in such form and in such filing offices as the Administrative Agent reasonably
determines appropriate to perfect the security interests of the Administrative
Agent under this Agreement, if such Grantor has failed to execute and return to
the Administrative Agent any such filing, documents, and instruments within five
(5) days after written demand. A photographic or other reproduction of this
Agreement shall be sufficient as a financing statement for filing in any
jurisdiction.
7.4 Authority of Administrative Agent. Each Grantor acknowledges
---------------------------------
that the rights and responsibilities of the Administrative Agent under this
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Administrative
Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as
<PAGE>
23
between the Administrative Agent and the Grantors, the Administrative Agent
shall be conclusively presumed to be acting as administrative agent for the
Lenders with full and valid authority so to act or refrain from acting, and no
Grantor shall be under any obligation, or entitlement, to make any inquiry
respecting such authority.
SECTION 8. MISCELLANEOUS
8.1 Amendments in Writing. None of the terms or provisions of this
---------------------
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by each affected Grantor and the Administrative
Agent, provided that any provision of this Agreement imposing obligations on any
Grantor may be waived by the Administrative Agent in a written instrument
executed by the Administrative Agent.
8.2 Notices. All notices, requests and demands to or upon the
-------
Administrative Agent or any Grantor hereunder to be effective shall be in
writing (including by facsimile transmission), and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made when delivered,
or three days after being deposited in the mail, postage prepaid, or, in the
case of telecopy notice, when received, and followed by hand delivery by
messenger or by mail; provided that any such notice, request or demand to or
upon any Guarantor shall be addressed to such Guarantor at its notice address
set forth on Schedule 1.
----------
8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither
---------------------------------------------------
the Administrative Agent nor any Lender shall by any act (except by a written
instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, remedy, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. A waiver by the Administrative Agent or any
Lender of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Administrative Agent or such
Lender would otherwise have on any future occasion. The rights, remedies,
powers and privileges herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any other rights, remedies, powers or
privileges provided by law.
8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor
-------------------------------------
agrees to pay or reimburse each Lender and the Administrative Agent for all its
costs and expenses incurred in collecting against such Guarantor under the
guarantee contained in Section 2 or otherwise enforcing or preserving, or
obtaining advice of counsel in respect of, any rights under this Agreement and
the other Loan Documents to which such Guarantor is a party, including, without
limitation, the fees and disbursements of one counsel to the Lenders and the
Administrative Agent collectively.
<PAGE>
24
(b) Each Grantor agrees to pay, and to save the Administrative
Agent and the Lenders harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
(c) Each Grantor agrees to pay, and to save the Administrative
Agent and the Lenders harmless from, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement
(collectively, the "indemnified liabilities"), provided that each Grantor shall
have no obligation hereunder to the Administrative Agent or any Lender with
respect to indemnified liabilities arising from (i) the gross negligence or
willful misconduct of the Administrative Agent or any such Lender or (ii) legal
proceedings commenced against the Administrative Agent or any Lender by any
security holder or creditor thereof arising out of and based upon rights
afforded any such security holder or creditor solely in its capacity as such.
(d) The agreements in this Section 8.4 shall survive repayment of
the Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.
8.5 Successors and Assigns. This Agreement shall be binding upon
----------------------
the successors and assigns of each Grantor and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors and assigns; provided
that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent and any purported assignment without such consent shall be
null and void.
8.6 Set-Off. Each of Holdings and each Guarantor hereby irrevocably
-------
authorizes the Administrative Agent and each Lender at any time and from time to
time following the occurrence and during the continuation of an Event of
Default, without notice to Holdings or such Guarantor, any other guarantor or
the Borrower, any such notice being expressly waived by Holdings and each
Guarantor and by the Borrower to the extent permitted by applicable law, to set
off and appropriate and apply any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Administrative Agent or such Lender to or for the credit or the
account of Holdings or such Guarantor, as the case may be, or any part thereof
in such amounts as the Administrative Agent or such Lender may elect, against
and on account of the obligations and liabilities of Holdings or such Guarantor,
as the case may be, to the Administrative Agent or such Lender hereunder and
claims of every nature and description of the Administrative Agent or such
Lender against Holdings or such Guarantor, as the case may be, in any currency,
whether arising hereunder, under the Credit Agreement or any other Loan Document
or otherwise, as the Administrative Agent or
<PAGE>
25
such Lender may elect, whether or not the Administrative Agent or any Lender has
made any demand for payment and although such obligations, liabilities and
claims may be contingent or unmatured. The Administrative Agent and each Lender
shall notify Holdings or such Guarantor, as the case may be, promptly of any
such set-off and the application made by the Administrative Agent or such Lender
of the proceeds thereof, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of the
Administrative Agent and each Lender under this Section 8.6 are in addition to
other rights and remedies (including, without limitation, other rights of set-
off) which the Administrative Agent or such Lender may have.
8.7 Counterparts. This Agreement may be executed by one or more of
------------
the parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
8.8 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without, to
the extent permitted by law, invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not, to the
extent permitted by law, invalidate or render unenforceable such provision in
any other jurisdiction.
8.9 Section Headings. The Section headings used in this Agreement
----------------
and the table of contents are for convenience of reference only and are not to
affect the construction hereof or be taken into consideration in the
interpretation hereof.
8.10 Integration. This Agreement and the other Loan Documents
-----------
represent the entire agreement of the Grantors, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to the subject matter hereof not expressly set forth or referred
to herein or in the other Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
8.12 Submission To Jurisdiction; Waivers. Each Grantor hereby
-----------------------------------
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
<PAGE>
26
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Grantor at its address referred to in Section 8.2 or at such other address
of which the Administrative Agent shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred
to in this Section any special, exemplary, punitive or consequential
damages.
8.13 Acknowledgements. Each Grantor hereby acknowledges that:
----------------
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the other Loan Documents to which it is
a party;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to any Grantor arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between the Grantors, on the one hand, and the Administrative
Agent and Lenders, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Grantors and the Lenders.
8.14 WAIVER OF JURY TRIAL. EACH OF THE ADMINISTRATIVE AGENT AND EACH
--------------------
GRANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND
FOR ANY COUNTERCLAIM THEREIN.
8.15 Addition of Grantors; Pledged Stock. (a) Subsection 7.10(b) of
-----------------------------------
the Credit Agreement requires that any Subsidiary (other than a Foreign
Subsidiary) of the Borrower created or acquired after the Closing Date become a
Grantor and a Guarantor hereunder by executing and delivering a Supplement to
this Agreement in the form attached hereto as Exhibit A. From and after the
---------
date any such Subsidiary executes and delivers a
<PAGE>
27
supplement to this Agreement in the form attached hereto as Exhibit A to the
---------
Administrative Agent, such Subsidiary shall be deemed to be a Grantor and a
Guarantor for all purposes under this Agreement.
(b) Subsection 7.10(b) of the Credit Agreement also requires that
the Borrower or any Domestic Subsidiary of the Borrower which holds the Capital
Stock of any new Subsidiary (including a Foreign Subsidiary) of the Borrower
created or acquired after the Closing Date, pledge 100% of the issued and
outstanding Capital Stock of such new Subsidiary owned by the Borrower or one of
its Subsidiaries (provided, that in no event shall Capital Stock representing
more than 65% of the voting power of the Capital Stock of any such new
Subsidiary which is a Foreign Subsidiary be so pledged) to the Administrative
Agent for the benefit of the Lenders by executing and delivering a Supplement to
this Agreement in the form attached hereto as Exhibit B. From and after the date
---------
any Grantor executes and delivers a supplement to this Agreement in the form
attached hereto as Exhibit B to the Administrative Agent, the pledged stock set
---------
forth on Schedule 1 to such supplement shall be deemed to be Pledged Stock for
all purposes under this Agreement and the issuer of such pledged stock shall be
deemed to be an Issuer for all purposes under this Agreement.
8.16 Release of Security Interest. Notwithstanding any provision
----------------------------
hereof to the contrary, any Collateral sold or otherwise disposed of by a
Grantor in accordance with the Credit Agreement shall be acquired by the
purchaser or other transferee thereof free and clear of the security interest
and other rights and interests of the Administrative Agent and the Lenders. In
the event of any such sale or other disposition, the Administrative Agent shall
execute and deliver such partial releases and other documents and instruments as
the applicable Grantor may reasonably request to confirm and effectuate the
intent and terms of the preceding sentence.
<PAGE>
28
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
and Collateral Agreement to be duly executed and delivered as of the date first
above written.
TLG LABORATORIES HOLDING CORP.
By: ____________________________
Name:
Title:
TWIN LABORATORIES INC.
By: ____________________________
Name:
Title:
ADVANCED RESEARCH PRESS, INC.
By: ____________________________
Name:
Title:
<PAGE>
29
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK)
On May __, 1996, before me personally came ____________________, to me
known, who, by me duly sworn, did depose and say that deponent resides at
______________________________________________________, deponent is
__________________________ of _________________________________________, the
corporation described in and which executed the foregoing instrument; that the
seal affixed to said instrument is the corporate seal of such corporation and
that it was so affixed by order of the Board of Directors of such corporation;
and that deponent signed deponent's name thereto by like order.
__________________________
Notary Public
<PAGE>
30
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK)
On May __, 1996, before me personally came ____________________, to me
known, who, by me duly sworn, did depose and say that deponent resides at
______________________________________________________, deponent is
__________________________ of _________________________________________, the
corporation described in and which executed the foregoing instrument; that the
seal affixed to said instrument is the corporate seal of such corporation and
that it was so affixed by order of the Board of Directors of such corporation;
and that deponent signed deponent's name thereto by like order.
__________________________
Notary Public
<PAGE>
31
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK)
On May __, 1996, before me personally came ____________________, to me
known, who, by me duly sworn, did depose and say that deponent resides at
______________________________________________________, deponent is
__________________________ of __________________________________________, the
corporation described in and which executed the foregoing instrument; that the
seal affixed to said instrument is the corporate seal of such corporation and
that it was so affixed by order of the Board of Directors of such corporation;
and that deponent signed deponent's name thereto by like order.
__________________________
Notary Public
<PAGE>
Schedule 1
----------
NOTICE ADDRESSES OF GUARANTORS
ADVANCED RESEARCH PRESS, INC.
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
<PAGE>
Schedule 2
----------
DESCRIPTION OF PLEDGED STOCK
<TABLE>
<CAPTION>
Class of Stock No. of
Grantor Issuer Stock Certificate No. Shares
- ---------------- ------------------ ----------- --------------- ------
<S> <C> <C> <C> <C>
TLG Laboratories Twin Laboratories Common [ ? ] [ ? ]
Holding Corp. Inc.
Twin Laboratories Advanced Research Common [ ? ] [ ? ]
Inc. Press, Inc.
</TABLE>
<PAGE>
Schedule 3
----------
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Uniform Commercial Code Filings
-------------------------------
[List each office where a financing statement is to be filed]*
Patent and Trademark Filings
----------------------------
[List all filings]
Actions with respect to Pledged Stock**
---------------------------------------
Other Actions
-------------
[Describe other actions to be taken]
________________________
* Note that perfection of security interests in patents and trademarks
requires filings under the UCC in the jurisdictions where filings would be
made for general intangibles, as well as filings in the U.S. Patent &
Trademark Office.
** If the interest of a Grantor in Pledged Stock appears on the books of a
financial intermediary, the procedures for creation of the pledge specified
in section 8-3131(h) of the Code will have to be followed. These procedures
involve notification to the financial intermediary.
<PAGE>
Schedule 4
----------
LOCATION OF CHIEF EXECUTIVE OFFICE
<TABLE>
<CAPTION>
Grantor Location
------- --------
<S> <C>
Advanced Research Press, Inc. c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, N.Y. 11779
TLG Laboratories Holding Corp. 333 South Grand Ave.
Suite 5400
Los Angeles, CA 90071
Twin Laboratories Inc. Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, N.Y. 11779
</TABLE>
<PAGE>
Schedule 5
----------
LOCATION OF INVENTORY AND EQUIPMENT
<TABLE>
<CAPTION>
Grantor Location
------- --------
<S> <C>
Advanced Research Press, Inc. c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, N.Y. 11779
TLG Laboratories Holding Corp. c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, N.Y. 11779
Twin Laboratories Inc. c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
</TABLE>
<PAGE>
Schedule 6
----------
PATENTS AND PATENT LICENSES
TRADEMARKS AND TRADEMARK LICENSES
<PAGE>
EXHIBIT A TO
GUARANTEE AND COLLATERAL AGREEMENT
----------------------------------
[FORM OF ADDITIONAL SUBSIDIARIES SUPPLEMENT]
SUPPLEMENT NO. __, dated _______________ to the Guarantee and
Collateral Agreement, dated as of May __, 1996 (as amended, supplemented or
otherwise modified, the "Guarantee and Collateral Agreement"), made by TLG
Laboratories Holding Corp., a Delaware corporation ("Holdings"), Twin
Laboratories Inc., a Utah corporation formerly known as Natur-Pharma, Inc. (the
"Borrower"), and certain subsidiaries of the Borrower from time to time parties
thereto in favor of Chemical Bank, as administrative agent for the Lenders (as
hereinafter defined).
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to the Credit and Guarantee Agreement, dated as of
May 7, 1996, among Holdings, the Borrower, the several banks and other financial
institutions from time to time parties thereto (the "Lenders"), The Bank of New
York, as documentation agent and Chemical Bank, as administrative agent, the
Lenders have severally agreed to make loans to, and to issue or participate in
letters of credit for the account of, the Borrower upon the terms and subject to
the conditions set forth therein;
WHEREAS, subsection 7.10(b) of the Credit Agreement requires that any
Subsidiary (other than a Foreign Subsidiary) of the Borrower created or acquired
after the Closing Date become a Grantor and a Guarantor under the Guarantee and
Collateral Agreement by executing and delivering a supplement thereto;
WHEREAS, the Guarantee and Collateral Agreement provides that any such
Subsidiary, although not a Grantor or a Guarantor thereunder at the time of the
initial execution thereof, may become a Grantor and a Guarantor under the
Guarantee and Collateral Agreement upon the delivery to the Administrative Agent
of a supplement in substantially the form of this Supplement; and
WHEREAS, the undersigned was not a Subsidiary on the Closing Date and,
therefore, was not a party to the Guarantee and Collateral Agreement but is now
required by the Credit Agreement to become a Grantor and a Guarantor thereunder;
NOW, THEREFORE, the undersigned hereby agrees as follows:
1. Definitions. Unless otherwise defined herein, capitalized terms
-----------
defined in the Guarantee and Collateral Agreement shall have their defined
meanings when used herein.
<PAGE>
2
2. Supplement to Guarantee and Collateral Agreement. (a) The
------------------------------------------------
undersigned (i) agrees to be bound by (A) all of the provisions of the Guarantee
and Collateral Agreement applicable to a Grantor thereunder and (B) all of the
provisions of the Guarantee and Collateral Agreement applicable to a Guarantor
thereunder and (ii) agrees that it shall, on the date hereof, become a Grantor
and a Guarantor for all purposes of the Guarantee and Collateral Agreement to
the same extent as if originally a party thereto with the representations and
warranties contained therein being deemed to be made by the undersigned, after
giving effect to this Supplement, as of the date hereof and as of each other
date hereafter contemplated thereby.
(b) From and after the date hereof, the Guarantee and Collateral
Agreement is hereby supplemented by adding the Collateral and other information
set forth on Schedules 1 through 6 hereto to the list of Collateral and other
information set forth on Schedules 1 through 6, respectively, of the Guarantee
and Collateral Agreement.
(c) The undersigned hereby pledges (or causes to be pledged) all of
its Pledged Stock and grants a first priority security interest in its
Collateral to the Administrative Agent for the benefit of the Lenders.
3. Limited Effect. Except as expressly modified hereby, the
--------------
Guarantee and Collateral Agreement remains in full force and effect.
4. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
5. Counterparts. This Supplement may be executed by the parties
------------
hereto on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned has caused this
Supplement to be duly executed and delivered as of the date first above written.
[INSERT NAME OF SUBSIDIARY]
By:_______________________________
Title:
<PAGE>
3
Schedules
- ---------
Schedule 1 Notice Addresses of Guarantors
Schedule 2 Description of Pledged Stock
Schedule 3 Filings and Other Actions Required to Perfect Security Interests
Schedule 4 Location of Chief Executive Offices
Schedule 5 Location of Inventory and Equipment
Schedule 6 Patents and Patent Licenses; Trademarks and Trademark Licenses
<PAGE>
EXHIBIT B TO
GUARANTEE AND COLLATERAL AGREEMENT
----------------------------------
[FORM OF ADDITIONAL PLEDGE SUPPLEMENT]
SUPPLEMENT NO. __, dated _______________ to the Guarantee and
Collateral Agreement, dated as of May __, 1996 (as amended, supplemented or
otherwise modified, the "Guarantee and Collateral Agreement"), made by TLG
Laboratories Holding Corp., a Delaware corporation ("Holdings"), Twin
Laboratories Inc., a Utah corporation formerly known as Natur-Pharma, Inc. (the
"Borrower"), and certain subsidiaries of the Borrower from time to time parties
thereto (such subsidiaries, the "Guarantors"; and together with Holdings and the
Borrower, the "Grantors") in favor of Chemical Bank, as administrative agent for
the Lenders (as hereinafter defined).
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to the Credit and Guarantee Agreement, dated as of
May 7, 1996, among Holdings, the Borrower, the several banks and other financial
institutions from time to time parties thereto (the "Lenders"), The Bank of New
York, as documentation agent and Chemical Bank, as administrative agent, the
Lenders have severally agreed to make loans to, and to issue or participate in
letters of credit for the account of, the Borrower upon the terms and subject to
the conditions set forth therein;
WHEREAS, subsection 7.10(b) of the Credit Agreement requires that the
Borrower or any Subsidiary of the Borrower which holds the Capital Stock of any
new Subsidiary (including a Foreign Subsidiary) of the Borrower created or
acquired after the Closing Date, pledge 100% of the issued and outstanding
Capital Stock of such new Subsidiary owned by the Borrower or one of its
Subsidiaries (provided, that in no event shall Capital Stock representing more
than 65% of the voting power of the Capital Stock of any such new Subsidiary
which is a Foreign Subsidiary be so pledged) to the Administrative Agent for the
benefit of the Lenders by delivering to the Administrative Agent a supplement in
substantially the form of this Supplement;
WHEREAS, the undersigned is a party to the Guarantee and Collateral
Agreement pursuant to which the undersigned has pledged all the Pledged Stock
(as defined in the Guarantee and Collateral Agreement) to, and granted a first
priority security interest in the Collateral (as defined in the Guarantee and
Collateral Agreement) to, the Administrative Agent for the benefit of the
Lenders; and
WHEREAS, the undersigned is the legal and beneficial owner of the
shares of Pledged Stock issued by [Insert name of Issuer], a ____________
corporation, listed on Schedule 1 hereto;
NOW, THEREFORE, the undersigned hereby agrees as follows:
<PAGE>
2
1. Definitions. Unless otherwise defined herein, capitalized terms
-----------
defined in the Guarantee and Collateral Agreement shall have their defined
meanings when used herein.
2. Supplement to Guarantee and Collateral Agreement. From and
------------------------------------------------
after the date hereof, the Guarantee and Collateral Agreement is hereby
supplemented by adding the Pledged Stock and other information set forth on
Schedules 1 and 2 hereto to the list of Pledged Stock and other information set
forth on Schedules 2 and 3, respectively, of the Guarantee and Collateral
Agreement.
3. Pledge; Grant of Security Interest. The undersigned hereby
----------------------------------
delivers to the Administrative Agent, for the ratable benefit of the Lenders,
the Pledged Stock listed on Schedule 1 hereto and all Proceeds and products
thereof, and hereby grants to the Administrative Agent, for the ratable benefit
of the Lenders, a first priority security interest in such Pledged Stock and all
Proceeds and products thereof, as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations. Such grant shall be governed by
the terms and conditions of the Guarantee and Collateral Agreement.
4. Representations and Warranties. The representations and
------------------------------
warranties contained in Section 4 of the Guarantee and Collateral Agreement are
made by the undersigned, after giving effect to this Supplement, as of the date
hereof and as of each other date hereafter contemplated by such Section 4.
5. Limited Effect. Except as expressly modified hereby, the
--------------
Guarantee and Collateral Agreement remains in full force and effect.
6. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
7. Counterparts. This Supplement may be executed by the parties
------------
hereto on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned has caused this
Supplement to be duly executed and delivered as of the date first above written.
[INSERT NAME OF SUBSIDIARY]
By:_______________________________
Title:
<PAGE>
3
Schedules
- ---------
Schedule 1 Description of Pledged Stock
Schedule 2 Filings and Other Actions Required to Perfect Security Interests
<PAGE>
Exhibit 10.2
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND
PROVISIONS OF THE CREDIT AND GUARANTEE AGREEMENT REFERRED TO BELOW. TRANSFERS OF
THIS NOTE MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE
AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AND GUARANTEE AGREEMENT.
TERM NOTE
New York, New York
[ ]
FOR VALUE RECEIVED, the undersigned, TWIN LABORATORIES INC., a Utah
corporation formerly known as Natur-Pharma, Inc., (the "Borrower"), hereby
unconditionally promises to pay to the order of [ ] (the "Lender") at the
office of Chemical Bank, located at 270 Park Avenue, New York, New York 10017,
in lawful money of the United States of America and in immediately available
funds, the principal amount of or, if less, the unpaid principal amount of the
Term Loan made by the Lender pursuant to subsection 2.1 of the Credit Agreement
(as defined below). The principal amount of the Term Loan made by the Lender
shall be repaid in the amounts and on the dates specified in subsection 2.3 of
the Credit Agreement. The Borrower further agrees to pay interest in like money
at such office on the unpaid principal amount of the Term Loan made by the
Lender from time to time outstanding at the rates and on the dates specified in
the Credit Agreement.
The holder of this Note is authorized to record on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type and amount of the Term
Loan made by the Lender and the date and amount of each payment or prepayment of
principal with respect thereto, each conversion of all or a portion thereof to
another Type, each continuation of all or a portion thereof as the same Type
and, in the case of Eurodollar Loans, the length of each Interest Period and the
Eurodollar Rate with respect thereto. Each such recordation shall, to the extent
permitted by applicable law, constitute prima facie evidence of the accuracy of
the information so recorded, provided that the failure to make any such
recordation (or any error therein) shall not affect the obligation of the
Borrower to repay (with applicable interest) the Term Loan made by the Lender in
accordance with the terms of the Credit Agreement.
<PAGE>
This Note (a) is one of the Term Notes referred to in the Credit and
Guarantee Agreement, dated as of the date hereof (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among TLG Laboratories Holding Corp., a Delaware corporation, the Borrower, the
Lender, the other banks and financial institutions from time to time parties
thereto, The Bank of New York, as documentation agent, and Chemical Bank, as
administrative agent, (b) is subject to the provisions of the Credit Agreement
and (c) is subject to optional and mandatory prepayment in whole or in part as
provided in the Credit Agreement. This Note is secured and guaranteed as
provided in the Loan Documents. Reference is hereby made to the Loan Documents
for a description of the properties and assets in which a security interest has
been granted, the nature and extent of the security and the guarantees, the
terms and conditions upon which the security interests and each guarantee were
granted and the rights of the holder of this Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
TWIN LABORATORIES INC.
By:
------------------------------------
Name:__________________________________
Title:_________________________________
<PAGE>
Schedule A
to Term Note
------------
<TABLE>
<CAPTION>
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
____________________________________________________________________________________________________________________________________
Amount of ABR Loans Unpaid Principal
Amount of ABR Amount Converted Amount of Principal Converted to Balance of Notation Made
Date Loans to ABR Loans of ABR Loans Repaid Eurodollar Loans ABR Loans By
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
Schedule B
to Term Note
------------
<TABLE>
<CAPTION>
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
______________________________________________________________________________________________________
Amount Converted Interest Period and
Amount of to or Continued as Eurodollar Rate with
Date Eurodollar Loans Eurodollar Loans Respect Thereto
______________________________________________________________________________________________________
<S> <C> <C> <C>
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
<CAPTION>
______________________________________________________________________________________________________
Amount of Principal Amount of Eurodollar Unpaid Principal
of Eurodollar Loans Loans Converted to Balance of Notation Made
Date Repaid ABR Loans Eurodollar Loans By
______________________________________________________________________________________________________
<S> <C> <C> <C> <C>
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
</TABLE>
<PAGE>
Exhibit 10.3
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND
PROVISIONS OF THE CREDIT AND GUARANTEE AGREEMENT REFERRED TO BELOW. TRANSFERS OF
THIS NOTE MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE
AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AND GUARANTEE AGREEMENT.
REVOLVING CREDIT NOTE
New York, New York
FOR VALUE RECEIVED, the undersigned, TWIN LABORATORIES INC., a Utah
corporation formerly known as Natur-Pharma, Inc. (the "Borrower"), hereby
unconditionally promises to pay to the order of [ ] (the "Lender") at the
office of Chemical Bank, located at 270 Park Avenue, New York, New York 10017,
in lawful money of the United States of America and in immediately available
funds, on the Revolving Credit Termination Date the principal amount of
( ) or, if less, the aggregate unpaid principal amount of all Revolving
Credit Loans made by the Lender to the Borrower pursuant to subsection 3.1 of
the Credit Agreement (as defined below). The Borrower further agrees to pay
interest in like money at such office on the unpaid principal amount of
Revolving Credit Loans made by the Lender from time to time outstanding at the
rates and on the dates specified in the Credit Agreement.
The holder of this Note is authorized to record on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type and amount of each
Revolving Credit Loan made by the Lender and the date and amount of each payment
or prepayment of principal thereof, each conversion of all or a portion thereof
to another Type, each continuation of all or a portion thereof as the same Type
and, in the case of Eurodollar Loans, the length of each Interest Period and the
Eurodollar Rate with respect thereto. Each such recordation shall, to the extent
permitted by applicable law, constitute prima facie evidence of the accuracy of
the information so recorded, provided that the failure to make any such
recordation shall not affect the obligation of the Borrower to repay (with
applicable interest) Revolving Credit Loans made by the Lender pursuant to
the Credit Agreement.
<PAGE>
This Note (a) is one of the Revolving Credit Notes referred to in the
Credit and Guarantee Agreement, dated as of the date hereof (as the same may be
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among TLG Laboratories Holding, Corp., a Delaware corporation, the
Borrower, the Lender, the other banks and financial institutions from time to
time parties thereto, The Bank of New York, as documentation agent, and Chemical
Bank, as administrative agent, (b) is subject to the provisions of the Credit
Agreement and (c) is subject to optional and mandatory prepayment in whole or in
part as provided in the Credit Agreement. This Note is secured and guaranteed as
provided in the Loan Documents. Reference is hereby made to the Loan Documents
for a description of the properties and assets in which a security interest has
been granted, the nature and extent of the security and the guarantees, the
terms and conditions upon which the security interests and each guarantee were
granted and the rights of the holder of this Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
TWIN LABORATORIES INC.
By:
-------------------------------------
Name:___________________________________
Title:__________________________________
<PAGE>
Schedule A
to Revolving Credit Note
------------------------
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Amount Amount of ABR Loans
Amount of Converted to Amount of Principal of Converted to Unpaid Principal Balance Notation
Date ABR Loans ABR Loans ABR Loans Repaid Eurodollar Loans of ABR Loans Made By
________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
================================================================================================================================
</TABLE>
<PAGE>
Schedule B
to Revolving Credit Note
------------------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Unpaid
Principal
Amount of Amount Converted Interest Period and Amount of Principal of Amount of Eurodollar Balance of
Eurodollar to or Continued as Eurodollar Rate with Eurodollar Loans Loans Converted to Eurodollar Notation
Date Loans Eurodollar Loans Respect Thereto Repaid ABR Loans Loans Made By
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
===================================================================================================================================
</TABLE>
<PAGE>
Exhibit 10.4
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND
PROVISIONS OF THE CREDIT AND GUARANTEE AGREEMENT REFERRED TO BELOW. TRANSFERS OF
THIS NOTE MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE
AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AND GUARANTEE AGREEMENT.
SWING LINE NOTE
New York, New York
FOR VALUE RECEIVED, the undersigned, TWIN LABORATORIES INC., a Utah
corporation formerly known as Natur-Pharma, Inc. (the "Borrower"), hereby
unconditionally promises to pay to the order of CHEMICAL BANK (the "Swing Line
Lender"), at its offices located at 270 Park Avenue, New York, New York 10017,
in lawful money of the United States of America and in immediately available
funds on the Revolving Credit Termination Date, the principal amount of [ ]
or, if less, the aggregate unpaid principal amount of the Swing Line Loans made
by the Swing Line Lender to the Borrower pursuant to subsection 3.7 of the
Credit Agreement (as defined below). The Borrower further agrees to pay interest
in like money at said office on the unpaid principal amount of Swing Line Loans
from time to time outstanding at the rates and on the dates specified in the
Credit Agreement.
The Swing Line Lender is authorized to record the date and the amount
of each Swing Line Loan made by the Swing Line Lender to the Borrower pursuant
to subsection 3.7 of the Credit Agreement and the date and amount of each
payment or prepayment of principal thereof on Schedule A annexed hereto and made
----------
a part hereof and any such recordation shall, to the extent permitted by
applicable law, constitute prima facie evidence of the accuracy of the
information so recorded, provided, that any failure by the Swing Line Lender to
make such recordation shall not affect the obligation of the Borrower to repay
(with applicable interest) the Swing Line Loans made by the Swing Line Lender
pursuant to the Credit Agreement.
<PAGE>
This Note (a) is the Swing Line Note referred to in the Credit and
Guarantee Agreement, dated as of the date hereof (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among TLG Laboratories Holding, Corp., a Delaware corporation, the Borrower, the
Swing Line Lender, the other banks and financial institutions from time to time
parties thereto, The Bank of New York, as documentation agent, and Chemical
Bank, as administrative agent, (b) is subject to the provisions of the Credit
Agreement and (c) is subject to optional and mandatory prepayment in whole or in
part as provided in the Credit Agreement. This Note is secured and guaranteed as
provided in the Loan Documents. Reference is hereby made to the Loan Documents
for a description of the properties and assets in which a security interest has
been granted, the nature and extent of the security and the guarantees, the
terms and conditions upon which the security interests and each guarantee were
granted and the rights of the holder of this Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
TWIN LABORATORIES INC.
By: -------------------
Title:
<PAGE>
Schedule A to
Swing Line Note
---------------
<TABLE>
<CAPTION>
LOANS AND REPAYMENTS
--------------------
=============================================================================
Unpaid
Amount of Amount of Principal
Swing Line Swing Line Balance of
Loans Loans Swing Line Notation Made
Date Made Repaid Loans By
_____________________________________________________________________________
<S> <C> <C> <C> <C>
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
=============================================================================
</TABLE>
<PAGE>
Exhibit 10.5
New York
MORTGAGE AND
SECURITY AGREEMENT
from
TWIN LABORATORIES, INC., Mortgagor
to
CHEMICAL BANK, as Administrative Agent, Mortgagee
DATED AS OF MAY 7, 1996
After recording, please return to:
Simpson Thacher & Bartlett
a partnership which includes
professional corporations
425 Lexington Avenue
New York, New York 10017
ATTN: Jeff Feigelson, Esq.
<PAGE>
[New York]
MORTGAGE AND SECURITY AGREEMENT
-------------------------------
THIS MORTGAGE AND SECURITY AGREEMENT, dated as of May 7, 1996 is made
by TWIN LABORATORIES, INC. (formerly known as Natura-Pharma, Inc.), a Utah
Corporation ("Mortgagor"), whose address is 2120 Smithtown Avenue, Ronkonkoma,
New York 11779, to CHEMICAL BANK, a New York banking corporation, whose address
is 270 Park Avenue, New York, New York 10017, as Administrative Agent (in such
capacity, "Mortgagee") for itself and for the several banks and financial
institutions from time to time parties to that certain Credit and Guarantee
Agreement dated as of the date hereof among TLG Laboratories Holding Corp., a
Delaware corporation ("Holdings"), Mortgagor, the several banks and other
financial institutions from time to time parties thereto (collectively, the
"Lenders"; individually, a "Lender") and Mortgagee (as the same may be amended,
restated, supplemented, modified or replaced from time to time, the "Credit
Agreement"). References to this "Mortgage" shall mean this instrument and any
and all renewals, modifications, amendments, supplements, extensions,
consolidations, substitutions, spreaders and replacements of this instrument.
Unless otherwise defined herein, capitalized terms shall have the meanings
ascribed to them in the Credit Agreement.
Background
----------
WHEREAS, pursuant to a Stock Purchase and Sale Agreement dated as of
March 5, 1996 (the "Stock Purchase Agreement") among the Stockholders (as
defined therein), Holdings, Mortgagor and Green Equity Investors II, L.P.
("GEI"), (i) GEI, together with other investors (the "Investors") acquired 55%
of the common stock of Holdings and all of the shares of preferred stock of
Holdings, (ii) the Continuing Stockholders (as defined in the Stock Purchase
Agreement) exchanged certain of their shares of the common stock of Mortgagor
for 45% of the outstanding common stock of Holdings, (iii) Holdings acquired all
of the remaining outstanding capital stock of Mortgagor resulting in Mortgagor
becoming a wholly-owned subsidiary of Holdings, (iv) Twin Laboratories, Inc. a
New York Corporation ("Twin"), Alvita Products, Inc., Twinlab Export Corp.,
Twinlab Specialty Corporation and B. Bros. Realty Corporation merged (the
"Merger") into Mortgagor, and (v) Advanced Research Press, Inc. merged with
Natur-Pharma II Inc., a wholly owned subsidiary of Mortgagor (the surviving
entity to be, "ARP"), on the terms and subject to the conditions set forth
therein;
WHEREAS, Mortgagor has requested that Mortgagee and the Lenders enter
into the Credit Agreement to provide a portion of the funds required to
consummate the Transactions;
WHEREAS, pursuant to the Merger, Mortgagor is the fee owner of the
parcel(s) of real property together with the improvements located thereon (the
"Improvements") described on Schedule A attached hereto (the "Real Estate"); and
<PAGE>
2
WHEREAS, pursuant to the terms of the Credit Agreement, the Lenders
have agreed, among other things, to make the Term Loans, Revolving Credit Loans
and Swing Line Loans to, and the Issuing Bank has agreed to issue the Letters of
Credit for the account of, Mortgagor on the condition (among others) that
Mortgagor grant to Mortgagee a first lien upon and perfected security interest
in, among other things, all estate, right, title and interest of the Mortgagor
in and to the Real Estate pursuant to the terms hereof;
NOW THEREFORE, in consideration of the premises and for the sum of Ten
Dollars ($10.00), the receipt and sufficiency of which is hereby acknowledged,
Mortgagor hereby agrees as follows:
Granting Clauses
----------------
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Mortgagor agrees that to secure:
(a) the repayment of principal of and interest on (including, without
limitation, interest accruing at the then applicable rate provided in the
Credit Agreement after the maturity of the Loans and Reimbursement Obligations
and interest accruing at the then applicable rate provided in the Credit
Agreement after the filing of any petition in bankruptcy, or the commencement
of any insolvency, reorganization or like proceeding, relating to any Loan
Party, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding) the Loans and all other obligations (including the
Reimbursement Obligations) and liabilities of Mortgagor to Mortgagee, the
Issuing Bank and the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter incurred, which
may arise under, out of, or in connection with, the Credit Agreement, the
Notes, the Loans, the Letters of Credit, the other Loan Documents, any Rate
Protection Agreement entered into by Mortgagor with any Lender, any cash
management services agreement entered into by Mortgagor with any Lender or any
Affiliate of any Lender, or any other document made, delivered or given in
connection therewith, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all reasonable fees, charges and disbursements
of counsel to the Administrative Agent and the Documentation Agent
(collectively, the "Agent"), the Issuing Bank or any Lender, that are required
to be paid by any Loan Party pursuant to the Credit Agreement, any other Loan
Document or any such Rate Protection Agreement or cash management services
agreement entered into by Mortgagor with any Lender or any Affiliate of any
Lender) (the items set forth above being referred to collectively as the
"Indebtedness"); and
(b) the performance of all covenants, agreements, obligations and
liabilities of Mortgagor (the "Obligations") under or pursuant to the
provisions of the Credit Agreement, the Notes, the Loans, the Letters of
Credit, this Mortgage, any other document securing payment of the Indebtedness
(the "Security Documents"), any other Loan Document or any such Rate
Protection Agreement or cash management services agreement entered into by
Mortgagor with any Lender or any Affiliate of any Lender and any amendments,
supplements, extensions, renewals, restatements, replacements or modifications
of any of
<PAGE>
3
the foregoing (the Credit Agreement, the Notes, the Loans, the Letters of
Credit, the Applications, this Mortgage and all other documents and
instruments from time to time evidencing, securing or guaranteeing the payment
of the Indebtedness or the performance of the Obligations, as any of the same
may be amended, supplemented, extended, renewed, restated, replaced or
modified from time to time, are collectively referred to as the "Loan
Documents"); and
MORTGAGOR HEREBY GRANTS TO MORTGAGEE A LIEN UPON AND A SECURITY INTEREST IN, AND
HEREBY MORTGAGES, GRANTS, ASSIGNS, TRANSFERS AND SETS OVER TO MORTGAGEE:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever of
Mortgagor, in possession or expectancy, in and to the Real Estate or any part
thereof;
(C) all right, title and interest of Mortgagor in, to and under any
and all easements, rights of way, gores of land, streets, ways, alleys,
passages, sewer rights, waters, water courses, water and riparian rights,
development rights, air rights, mineral rights, oil and gas rights and all
estates, rights, titles, interests, privileges, licenses, tenements,
hereditaments and appurtenances belonging, relating or appertaining to the
Real Estate, and any reversions, remainders, rents, issues, profits and
revenue thereof and all land lying in the bed of any street, road or avenue,
in front of or adjoining the Real Estate to the center line thereof;
(D) all of the fixtures, chattels, business machines, machinery,
apparatus, equipment, furnishings, fittings and articles of personal property
of every kind and nature whatsoever, and all appurtenances and additions
thereto and substitutions or replacements thereof (together with, in each
case, attachments, components, parts and accessories) currently owned or
subsequently acquired by Mortgagor and now or subsequently attached to, or
contained in or used in any way in connection with any operation or letting of
the Real Estate, including but without limiting the generality of the
foregoing, all screens, awnings, shades, blinds, curtains, draperies, artwork,
carpets, rugs, storm doors and windows, furniture and furnishings, heating,
electrical, and mechanical equipment, lighting, switchboards, plumbing,
ventilating, air conditioning and air-cooling apparatus, refrigerating, and
incinerating equipment, escalators, elevators, loading and unloading equipment
and systems, stoves, ranges, laundry equipment, cleaning systems (including
window cleaning apparatus), telephones, communication systems (including
satellite dishes and antennae), televisions, computers, sprinkler systems and
other fire prevention and extinguishing apparatus and materials, security
systems, motors, engines, machinery, pipes, pumps, tanks, conduits,
appliances, fittings and fixtures of every kind and description (all of the
foregoing in this paragraph (D) being referred to as the "Equipment");
(E) all right, title and interest of Mortgagor in and to all
substitutes and replacements of, and all additions and improvements to, the
Real Estate and the Equipment, subsequently acquired by or released to
Mortgagor or constructed, assembled
<PAGE>
4
or placed by Mortgagor on the Real Estate, immediately upon such acquisition,
release, construction, assembling or placement, including, without limitation,
any and all building materials owned by the Mortgagor and to be incorporated
in or on the Real Estate whether stored at the Real Estate or offsite, and, in
each such case, without any further mortgage, conveyance, assignment or other
act by Mortgagor;
(F) all right, title and interest of Mortgagor in, to and under all
leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or occupancy of
the Real Estate or the Equipment or any part thereof, now existing or
subsequently entered into by Mortgagor and whether written or oral and all
guarantees of any of the foregoing (collectively, as any of the foregoing may
be amended, restated, extended, renewed or modified from time to time,
individually, a "Lease"; collectively, the "Leases"), and all rights of
Mortgagor in respect of cash and securities deposited thereunder and the right
to receive and collect the revenues, income, rents, issues and profits
thereof, together with all other rents, royalties, issues, profits, revenue,
income and other benefits arising from the use and enjoyment of the Mortgaged
Property (as defined below) (collectively, the "Rents");
(G) all trade names, trade marks, logos, copyrights, good will and
books and records relating to or used in connection with the ownership and
operation of the Real Estate or the Equipment or any part thereof; all general
intangibles related to the ownership and operation of the Improvements now
existing or hereafter arising;
(H) all unearned premiums under insurance policies now or
subsequently obtained by Mortgagor relating to the Real Estate or Equipment
and Mortgagor's interest in and to all proceeds of any such insurance policies
(including title insurance policies) including the right to collect and
receive such proceeds, subject to the provisions relating to insurance
generally set forth below; and all awards and other compensation, including
the interest payable thereon and the right to collect and receive the same,
made to the present or any subsequent owner of the Real Estate or Equipment
for the taking by eminent domain, condemnation or otherwise, of all or any
part of the Real Estate or any easement or other right therein;
(I) all right, title and interest of Mortgagor in and to (i) all
contracts from time to time executed by Mortgagor or any manager or agent on
its behalf relating to the ownership, construction, maintenance, repair,
operation, occupancy, sale or financing of the Real Estate or Equipment or any
part thereof and all agreements relating to the purchase or lease of any
portion of the Real Estate or any property which is adjacent or peripheral to
the Real Estate, together with the right to exercise such options and all
leases of Equipment (collectively, the "Contracts"), (ii) all consents,
licenses, building permits, certificates of occupancy and other governmental
approvals relating to construction, completion, occupancy, use or operation of
the Real Estate or any part thereof (collectively, the "Permits") and (iii)
all drawings, plans, specifications and similar or related items relating to
the Real Estate (collectively, the "Plans");
<PAGE>
5
(J) any and all monies now or subsequently on deposit for the payment
of real estate taxes or special assessments against the Real Estate or for the
payment of premiums on insurance policies covering the foregoing property or
otherwise on deposit with or held by Mortgagee as provided in this Mortgage;
all capital, operating, reserve or similar accounts held by or on behalf of
Mortgagor and related to the ownership and operation of the Mortgaged
Property, whether now existing or hereafter arising and all monies held in any
of the foregoing accounts and any certificates or instruments related to or
evidencing such accounts;
(K) all accounts and revenues arising from the operation of the
Improvements; and
(L) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now owned or
held or subsequently acquired by Mortgagor and described in the foregoing
clauses (A) through (E) are collectively referred to as the "Premises", and
those described in the foregoing clauses (A) through (L) are collectively
referred to as the "Mortgaged Property").
TO HAVE AND TO HOLD the Mortgaged Property and the rights and
privileges hereby mortgaged unto Mortgagee, its successors and assigns for the
uses and purposes set forth, until the Indebtedness is fully paid and the
Obligations fully performed or otherwise discharged.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, the maximum
amount of principal indebtedness secured by this Mortgage at the time of
execution hereof or which under any contingency may become secured by this
Mortgage at any time hereafter is $5,000,000, plus (a) taxes, charges or
assessments which may be imposed by law upon the Mortgaged Property; (b)
premiums on insurance policies covering the Mortgaged Property; (c) expenses
incurred in upholding the lien of this Mortgage, including, but not limited to
(1) the expenses of any litigation to prosecute or defend the rights and lien
created by this Mortgage; (2) any amount, cost or charges to which this Mortgage
becomes subrogated, upon payment, whether under recognized principles of law or
equity, or under express statutory authority and (3) interest at the default
rate (or regular interest rate).
For purposes of this Mortgage, the portion of the Loan secured by this
Mortgage shall equal the principal amount of $5,000,000, which principal amount
shall constitute the first $5,000,000 advanced to or on behalf of Mortgagor
under the Notes and/or the Credit Agreement and the last $5,000,000 repaid to
the Lenders under the Notes and/or the Credit Agreement.
Terms and Conditions
--------------------
Mortgagor further represents, warrants, covenants and agrees with
Mortgagee as follows:
<PAGE>
6
1. Warranty of Title. Mortgagor warrants that Mortgagor has good
-----------------
title to the Real Estate in fee simple and good title to the rest of the
Mortgaged Property, subject only to the matters that are set forth in Schedule B
of the title insurance policy or policies being issued to Mortgagee to insure
the lien of this Mortgage (the "Permitted Exceptions") or any Permitted Liens
under the Loan Documents and Mortgagor shall warrant, defend and preserve such
title and the lien of the Mortgage thereon against all claims of all persons and
entities. Mortgagor further warrants that it has the right to mortgage the
Mortgaged Property.
2. Payment of Indebtedness. Mortgagor shall pay the Indebtedness at
-----------------------
the times and places and in the manner specified in the Credit Agreement or the
other Loan Documents and shall perform all the Obligations as required under the
Loan Documents.
3. Requirements.
------------
(a) Mortgagor shall promptly comply with, or cause to be complied
with, and conform to all present and future laws, statutes, codes, ordinances,
orders, judgments, decrees, rules, regulations and requirements applicable to
the Mortgaged Property, and irrespective of the nature of the work to be done,
of each of the United States of America, any State and any municipality, local
government or other political subdivision thereof and any agency, department,
bureau, board, commission or other instrumentality of any of them, now existing
or subsequently created (collectively, "Governmental Authority") which has
jurisdiction over the Mortgaged Property and all covenants, restrictions and
conditions now or later of record which may be applicable to any of the
Mortgaged Property, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction of any of the
Mortgaged Property, except (i) where the same is being contested in good faith
or (ii) the failure to comply could not reasonably be expected to have a
Material Adverse Effect. All present and future laws, statutes, codes,
ordinances, orders, judgments, decrees, rules, regulations and requirements of
every Governmental Authority applicable to Mortgagor or to any of the Mortgaged
Property and all covenants, restrictions, and conditions which now or later may
be applicable to any of the Mortgaged Property are collectively referred to as
the "Legal Requirements".
(b) From and after the date of this Mortgage, Mortgagor shall not by
act or omission permit any building or other improvement on any premises not
subject to the lien of this Mortgage to rely on the Premises or any part thereof
or any interest therein to fulfill any Legal Requirement, and Mortgagor hereby
assigns to Mortgagee any and all rights to give consent for all or any portion
of the Premises or any interest therein to be so used. Mortgagor shall not by
act or omission impair the integrity of any of the Real Estate as a single
zoning lot separate and apart from all other premises. Mortgagor represents that
each parcel of the Real Estate constitutes a legally subdivided lot, in
compliance with all subdivision laws and similar Legal Requirements. Any act or
omission by Mortgagor which would result in a violation of any of the provisions
of this subsection shall be void.
4. Payment of Taxes and Other Impositions. (a) Promptly when due,
--------------------------------------
Mortgagor shall pay and discharge all taxes of every kind and nature (including,
without limitation, all real and personal property, income, franchise,
withholding, transfer, gains, profits and gross
<PAGE>
7
receipts taxes), all charges for any easement or agreement maintained for the
benefit of any of the Mortgaged Property, all general and special assessments,
levies, permits, inspection and license fees, all water and sewer rents and
charges and all other public charges even if unforeseen or extraordinary,
imposed upon or assessed against or which may become a lien on any of the
Mortgaged Property, or arising in respect of the occupancy, use or possession
thereof, together with any penalties or interest on any of the foregoing (all of
the foregoing are collectively referred to as the "Impositions") except (i)
where the same is being contested in good faith or (ii) the failure to comply
could not reasonably be expected to have a Material Adverse Effect. Mortgagor
shall within 10 business days after request by Mortgagee deliver to Mortgagee
(i) original or copies of receipted bills and cancelled checks evidencing
payment of such Imposition if it is a real estate tax or other public charge and
(ii) evidence reasonably acceptable to Mortgagee showing the payment of any
other such Imposition. If by law any Imposition, at Mortgagor's option, may be
paid in installments (whether or not interest shall accrue on the unpaid balance
of such Imposition), Mortgagor may elect to pay such Imposition in such
installments and shall be responsible for the payment of such installments with
interest, if any.
(b) Nothing herein shall affect any right or remedy of Mortgagee
under this Mortgage or otherwise, with notice to Mortgagor, to pay any
Imposition after the date such Imposition shall have become due and payable, and
to add to the Indebtedness the amount so paid, together with interest from the
time of payment at the rate of interest set forth in Section 4.4 (c) (y) of the
Credit Agreement (the "Default Rate"). Any sums paid by Mortgagee in discharge
of any Impositions shall be (i) a lien on the Premises secured hereby prior to
any right or title to, interest in, or claim upon the Premises subordinate to
the lien of this Mortgage, and (ii) payable on demand by Mortgagor to Mortgagee
together with interest at the Default Rate as set forth above.
(c) Mortgagor shall not claim, demand or be entitled to receive any
credit or credits toward the satisfaction of this Mortgage or on any interest
payable thereon for any taxes assessed against the Mortgaged Property or any
part thereof, and shall not claim any deduction from the taxable value of the
Mortgaged Property by reason of this Mortgage.
(d) Mortgagor shall have the right before any delinquency occurs to
contest or object in good faith to the amount or validity of any Imposition by
appropriate legal proceedings, but such right shall not be deemed or construed
in any way as relieving, modifying, or extending Mortgagor's covenant to pay any
such Imposition at the time and in the manner provided in this Section unless
(i) Mortgagor has given prior written notice to Mortgagee of Mortgagor's intent
so to contest or object to an Imposition, (ii) Mortgagor shall demonstrate to
Mortgagee's satisfaction that the legal proceedings shall operate conclusively
to prevent the sale of the Mortgaged Property, or any part thereof, to satisfy
such Imposition prior to final determination of such proceedings and (iii)
Mortgagor shall deposit with Mortgagee an amount equal to the contested amount
(plus any interest and penalty which may be imposed thereon and could become a
lien against the Real Estate or any part of the Mortgaged Property) to hold in
escrow pending resolution.
<PAGE>
8
(e) Upon written notice to Mortgagor, Mortgagee after a monetary
Event of Default (as defined below) shall be entitled to require Mortgagor to
pay monthly in advance to Mortgagee the equivalent of 1/12th of the estimated
annual Impositions. Mortgagee shall keep such funds in a separate account, and
Mortgagor shall not be entitled to interest thereon. Mortgagee shall use such
funds to pay the Impositions as they become due and any funds remaining may be
applied by Mortgagee, in its sole discretion, to the Indebtedness.
5. Insurance. (a) Mortgagor shall maintain or cause to be
---------
maintained on all of the Premises
(i) property insurance against loss or damage by fire, lightning,
windstorm, tornado, water damage, flood, earthquake and by such other further
risks and hazards as now are or subsequently may be covered by an "all risk"
policy or a fire policy covering "special" causes of loss, all to the extent
commercially available;
(ii) liability insurance which complies with the insurance
requirements set forth in the Credit Agreement;
(iii) when and to the extent reasonably required by Mortgagee,
insurance against loss or damage by any other risk commonly insured against by
persons occupying or using like properties in the locality or localities in
which the Real Estate is situated;
(iv) insurance against rent loss, extra expense or business
interruption (and/or soft costs, in the case of new construction), to the
extent applicable, in amounts reasonably satisfactory to Mortgagee, but not
less than one year's gross rent or gross income;
(v) during the course of any construction or repair of
Improvements, comprehensive general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the language
of such endorsement), (including coverage for elevators and escalators, if
any). The policy shall include coverage for independent contractors and
completed operations. The completed operations coverage shall stay in effect
for two years after construction of any Improvements has been completed. The
policy shall provide coverage on an occurrence basis against claims for
personal injury, including, without limitation, bodily injury, death or
property damage occurring on, in or about the Premises and the adjoining
streets, sidewalks and passageways, such insurance to afford immediate minimum
protection to a limit of not less than that reasonably required by Mortgagee
with respect to personal injury, bodily injury or death to any one or more
persons or damage to property;
(vi) during the course of any construction or repair of the
Improvements, workers' compensation insurance (including employer's liability
insurance) for all employees of Mortgagor (or Mortgagor's contractors) engaged
on or with respect to the Premises in such amounts as are required by law;
(vii) during the course of any construction, addition, alteration or
repair of the Improvements, builder's risk completed value form insurance
against "all risks of physical
<PAGE>
9
loss," including collapse, water damage, flood and earthquake and transit
coverage, during construction or repairs of the Improvements, with deductible
reasonably approved by Mortgagee, in nonreporting form, covering the total
value of work performed and equipment, supplies and materials furnished (with
an appropriate limit for soft costs in the case of construction);
(viii) boiler and machinery property insurance covering pressure
vessels, air tanks, boilers, machinery, pressure piping, heating, air
conditioning and elevator equipment and escalator equipment, provided the
Improvements contain equipment of such nature, and insurance against rent,
extra expense, business interruption and soft costs, if applicable, arising
from any such breakdown, in such amounts as are reasonably satisfactory to
Mortgagee but not less than the lesser of $1,000,000 or 10% of the value of
the Improvements;
(ix) if any portion of the Premises are located in an area
identified as a special flood hazard area by the Federal Emergency Management
Agency or other applicable agency, flood insurance in an amount reasonably
satisfactory to Mortgagee, but in no event less than the maximum limit of
coverage available under the National Flood Insurance Act of 1968, as amended;
and
(x) such other insurance in such amounts as Mortgagee may
reasonably request from time to time.
Each insurance policy (other than flood insurance written under the National
Flood Insurance Act of 1968, as amended, in which case to the extent available)
shall (i) provide that it shall not be cancelled, non-renewed or materially
amended without 30-days' prior written notice to Mortgagee, and (ii) with
respect to all property insurance, provide for deductibles not to exceed $25,000
(except with respect to flood and earthquake insurance in which case the
deductible shall be $50,000), contain a "Replacement Cost Endorsement" without
any deduction made for depreciation and with no co-insurance penalty (or
attaching an agreed amount endorsement satisfactory to Mortgagee), with loss
payable solely to Mortgagee (modified, if necessary, to provide that proceeds in
the amount of replacement cost may be retained by Mortgagee without the
obligation to rebuild except as provided herein) as its interest may appear,
without contribution, under a "standard" or "New York" type mortgagee clause
acceptable to Mortgagee and be written by insurance companies having an A.M.
Best Company, Inc. rating of A- or higher, or otherwise as approved by
Mortgagee. Liability insurance policies shall name Mortgagee as an additional
insured and contain a waiver of subrogation against Mortgagee; all such policies
shall indemnify and hold Mortgagee harmless from all liability claims occurring
on, in or about the Premises and the adjoining streets, sidewalks and
passageways. The amounts of each insurance policy and the form of each such
policy shall at all times be reasonably satisfactory to Mortgagee. Each policy
shall expressly provide that any proceeds which are payable to Mortgagee shall
be paid by check payable to the order of Mortgagee only and requiring the
endorsement of Mortgagee only. If any required insurance shall expire, be
withdrawn, become void by breach of any condition thereof by Mortgagor or by any
lessee of any part of the Mortgaged Property or become void or unsafe by reason
of the failure or impairment of the capital of any insurer, or if for any
<PAGE>
10
other reason whatsoever such insurance shall become unsatisfactory to Mortgagee
(based on the standards set forth herein), Mortgagor shall immediately obtain
new or additional insurance satisfactory to Mortgagee (based on the standards
set forth herein). Mortgagor shall not take out any separate or additional
insurance which is contributing in the event of loss unless it is properly
endorsed and otherwise reasonably satisfactory to Mortgagee in all respects.
(b) Mortgagor shall deliver to Mortgagee an original of each
insurance policy required to be maintained, or a certificate of such insurance
reasonably acceptable to Mortgagee. Mortgagor shall (i) pay as they become due
all premiums for such insurance, (ii) not later than 15 days prior to the
expiration of each policy to be furnished pursuant to the provisions of this
Section, deliver a renewed policy or policies, or duplicate original or
originals thereof, marked "premium paid," or accompanied by such other evidence
of payment satisfactory to Mortgagee with standard non-contributory mortgage
clauses in favor of and reasonably acceptable to Mortgagee. Upon request of
Mortgagee, Mortgagor shall cause its insurance underwriter or broker to certify
to Mortgagee in writing that all the requirements of this Mortgage governing
insurance have been satisfied.
(c) If Mortgagor is in default of its obligations to insure or
deliver any such prepaid policy or policies, then Mortgagee, at its option and
without notice, may effect such insurance from year to year, and pay the premium
or premiums therefor, and Mortgagor shall pay to Mortgagee on demand such
premium or premiums so paid by Mortgagee with interest from the time of payment
at the Default Rate and the same shall be deemed to be secured by this Mortgage
and shall be collectible in the same manner as the Indebtedness secured by this
Mortgage.
(d) Mortgagor promptly shall comply with and conform in all material
respects to (i) all provisions of each such insurance policy, and (ii) all
requirements of the insurers applicable to Mortgagor or to any of the Mortgaged
Property or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration or repair of any of the Mortgaged Property except where
non-compliance would not result in cancellation or denial of coverage.
Mortgagor shall not use or permit the use of the Mortgaged Property in any
manner which would permit any insurer to cancel any insurance policy or void
coverage required to be maintained by this Mortgage.
(e) If the Mortgaged Property, or any part thereof, shall be
destroyed or damaged by fire or any other casualty, whether insured or
uninsured, or in the event any claim is made against Mortgagor for any personal
injury, bodily injury or property damage incurred on or about the Premises,
Mortgagor shall give immediate notice thereof to Mortgagee. If the Mortgaged
Property is damaged by fire or other casualty and the cost to repair such damage
is less than $1,000,000, then provided that no Event of Default shall have
occurred and be continuing, Mortgagor shall have the right to adjust such loss,
and the insurance proceeds relating to such loss may be paid over to Mortgagor;
provided that Mortgagor shall, promptly after any such damage, repair all such
- --------
damage regardless of whether any insurance proceeds are sufficient to pay for
the costs of repair. If the Mortgaged Property is damaged by fire or other
casualty, and the cost to repair such damage exceeds the
<PAGE>
11
above limit, or if an Event of Default shall have occurred and be continuing,
then Mortgagor authorizes and empowers Mortgagee, at Mortgagee's option and in
Mortgagee's sole discretion, as attorney-in-fact for Mortgagor, to make proof of
loss, to adjust and compromise any claim under any insurance policy, to appear
in and prosecute any action arising from any policy, to collect and receive
insurance proceeds after consultation with Mortgagor, and to deduct therefrom
Mortgagee's reasonable expenses incurred in the collection process. Each
insurance company concerned is hereby authorized and directed to make payment
for such loss directly to Mortgagee. Provided the insurance proceeds will be
used to repair or restore the Mortgaged Property, Mortgagee shall have the right
to require Mortgagor to repair or restore the Mortgaged Property, and Mortgagor
hereby designates Mortgagee as its attorney-in-fact for the purpose of making
any election required or permitted under any insurance policy relating to repair
or restoration. The insurance proceeds or any part thereof received by
Mortgagee may be applied by Mortgagee toward reimbursement of all reasonable
costs and expenses of Mortgagee in collecting such proceeds, and, provided no
Event of Default exists, the balance to the restoration or repair of the
property damaged, or released to Mortgagor in accordance with Paragraph 10
hereof. Upon an Event of Default, the insurance proceeds may, at Mortgagee's
option, be applied to (i) repair and restore the Mortgaged Property or (ii) the
Indebtedness.
(f) In the event of foreclosure of this Mortgage or other transfer of
title to the Mortgaged Property in extinguishment of the Indebtedness, all
right, title and interest of Mortgagor in and to any insurance policies then in
force shall pass to the purchaser or grantee and Mortgagor hereby appoints
Mortgagee its attorney-in-fact, in Mortgagor's name, to assign and transfer all
such policies and proceeds to such purchaser or grantee.
(g) Upon written notice to Mortgagor, Mortgagee after a monetary
Event of Default shall be entitled to require Mortgagor to pay monthly in
advance to Mortgagee the equivalent of 1/12th of the estimated annual premiums
due on such insurance. Mortgagee shall keep such funds in a separate account and
Mortgagor shall not be entitled to interest thereon. Mortgagee shall use such
funds to pay the annual premiums as they become due and any funds remaining may
be applied by Mortgagee, in its sole discretion, to the Indebtedness in reverse
order of Maturity.
(h) Mortgagor may maintain insurance required under this Mortgage by
means of one or more blanket insurance policies maintained by Mortgagor;
provided, however, that (A) any such policy shall specify, or Mortgagor shall
- -------- -------
furnish to Mortgagee a written statement from the insurer so specifying, the
maximum amount of the total insurance afforded by such blanket policy that is
allocated to the Premises and the other Mortgaged Property and any sublimits in
such blanket policy applicable to the Premises and the other Mortgaged Property,
(B) each such blanket policy shall include an endorsement providing that, in the
event of a loss resulting from an insured peril, insurance proceeds shall be
allocated to the Mortgaged Property in an amount equal to the coverages required
to be maintained by Mortgagor as provided above and (C) the protection afforded
under any such blanket policy shall be no less than that which would have been
afforded under a separate policy or policies relating only to the Mortgaged
Property.
<PAGE>
12
6. Restrictions on Liens and Encumbrances. Except for the lien of
--------------------------------------
this Mortgage, the Permitted Liens and the Permitted Exceptions, Mortgagor shall
not further mortgage, nor otherwise encumber the Mortgaged Property nor create
or suffer to exist any lien, charge or encumbrance on the Mortgaged Property, or
any part thereof, whether superior or subordinate to the lien of this Mortgage
and whether recourse or non-recourse.
7. Due on Sale and Other Transfer Restrictions. Except as may be
-------------------------------------------
permitted in the Credit Agreement, Mortgagor shall not sell, transfer, convey or
assign all or any portion of, or any interest in, the Mortgaged Property.
8. Maintenance; No Alteration; Inspection; Utilities. (a) Mortgagor
--------------------------------------- ---------
shall maintain or cause to be maintained all the Improvements in good condition
and repair and shall not commit or suffer any waste of the Improvements ordinary
wear and tear excepted. If the insurance proceeds, if any, relating to a
casualty are made available to Mortgagor by Mortgagee, then Mortgagor shall
repair, restore, replace or rebuild promptly any part of the Premises which may
be damaged or destroyed by any casualty whatsoever. The Improvements shall not
be demolished or materially altered without the prior written consent of
Mortgagee, unless they do not materially and adversely affect the value of the
Mortgaged Property.
(b) Mortgagor shall pay or cause to be paid when due and payable all
utility charges which are incurred for gas, electricity, water or sewer services
furnished to the Premises and all other assessments or charges of a similar
nature, whether public or private, affecting the Premises or any portion
thereof, whether or not such assessments or charges are liens thereon.
9. Condemnation/Eminent Domain. Immediately upon obtaining knowledge
---------------------------
of the institution of any proceedings for the condemnation of the Mortgaged
Property, or any portion thereof, Mortgagor will notify Mortgagee of the
pendency of such proceedings. Upon an Event of Default, Mortgagor authorizes
Mortgagee, at Mortgagee's option and in Mortgagee's sole discretion, as
attorney-in-fact for Mortgagor, to commence, appear in and prosecute, in
Mortgagee's or Mortgagor's name, any action or proceeding relating to any
condemnation of the Mortgaged Property, or any portion thereof, and to settle or
compromise any claim in connection with such condemnation. If Mortgagee elects
not to participate in such condemnation proceeding, then Mortgagor shall, at its
expense, diligently prosecute any such proceeding and shall consult with
Mortgagee, its attorneys and experts and cooperate with them in any defense of
any such proceedings. All awards and proceeds of condemnation shall be assigned
to Mortgagee to be applied in the same manner as insurance proceeds, as provided
above, and Mortgagor agrees to execute any such assignments of all such awards
as Mortgagee may request. All awards and proceeds of condemnation remaining
after the restoration or repair of the Mortgaged Property shall be applied to
the Indebtedness in accordance with the terms of Section 4.1 of the Credit
Agreement .
<PAGE>
13
10. Restoration. If Mortgagee elects to release funds to Mortgagor
-----------
for restoration of any of the Mortgaged Property (the cost of which exceeds
$1,000,000), then such restoration shall be performed only in accordance with
the following conditions:
(i) prior to the commencement of any restoration, the plans and
specifications for such restoration, and the budgeted costs, shall be
submitted to and approved by Mortgagee which approval shall not be
unreasonably withheld or delayed;
(ii) prior to making any advance of restoration funds, Mortgagee shall be
satisfied that the remaining restoration funds, together with Mortgagor's own
funds from insurance or otherwise, are sufficient to complete the restoration
and to pay all related expenses, including interest on the Indebtedness and
real estate taxes on the Premises, during restoration;
(iii) at the time of any disbursement of the restoration funds, (A) no
Event of Default (as defined below) shall then have occurred and be
continuing, and (B) no mechanics' or materialmen's liens shall have been filed
and remain undischarged, except those to be discharged by the disbursement of
the requested restoration funds;
(iv) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
Mortgagee's receipt of reasonably satisfactory evidence from Mortgagor (or its
architect or contractor) of the stage of completion and of performance of the
work in a good and workmanlike manner and in accordance with the contracts,
plans and specifications acceptable to Mortgagee;
(v) with respect to each advance of restoration funds, Mortgagee
may retain 10% of the amount of such advance as a holdback until the
restoration is 50% completed; thereafter there shall not be retainage;
(vi) the restoration funds shall bear no interest and may be commingled
with Mortgagee's other funds;
(vii) any restoration funds remaining shall after restoration is complete
be retained by Mortgagee and may be applied by Mortgagee, in its sole
discretion, to the Indebtedness in the order determined in accordance with
Section 4.1(a) of the Credit Agreement.
11. Leases. (a) Mortgagor shall not (i) execute an assignment or
------
pledge of any Lease relating to all or any portion of the Mortgaged Property
other than in favor of Mortgagee, or (ii) without the prior written consent of
Mortgagee, execute or permit to exist any Lease of any of the Mortgaged Property
except to the extent otherwise permitted by the Credit Agreement.
(b) As to any Lease consented to by Mortgagee, Mortgagor shall:
<PAGE>
14
(i) promptly perform all of the provisions of the Lease on the part
of the lessor thereunder to be performed except to the extent Mortgagor's
failure to perform would not have a Material Adverse Effect;
(ii) promptly enforce all of the material provisions of the Lease on
the part of the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding arising under or
in any manner connected with the Lease or the obligations of Mortgagor as
lessor or of the lessee thereunder;
(iv) exercise, within 10 business days after a request by Mortgagee,
any right contained in the Lease to request from the lessee a certificate with
respect to the status thereof;
(v) simultaneously deliver to Mortgagee copies of any notices of
default which Mortgagor may at any time forward to or receive from the lessee;
(vi) promptly deliver to Mortgagee a fully executed counterpart of
the Lease; and
(vii) promptly deliver to Mortgagee, upon Mortgagee's reasonable
request, an assignment of the Mortgagor's interest under such Lease.
(c) Mortgagor shall deliver to Mortgagee, within 10 days after a
request by Mortgagee, a rent roll, certified by Mortgagor as being true, correct
and complete, containing the names of all lessees and other occupants of the
Mortgaged Property and the spaces occupied and rentals payable thereunder, and a
list of all Leases which are then in default, including the nature and magnitude
of the default.
(d) All Leases entered into by Mortgagor after the date hereof, if
any, and all rights of any lessees thereunder shall be subject and subordinate
in all respects to the lien and provisions of this Mortgage unless Mortgagee
shall otherwise elect in writing.
(e) As to any Lease now in existence or subsequently consented to
by Mortgagee, except to the extent expressly provided for in such Lease,
Mortgagor shall not accept a surrender or terminate, cancel, rescind or
supplement, alter, revise, modify or amend such Lease such that the rent payable
thereunder or the term thereof is reduced or permit any such action to be taken
nor shall Mortgagor accept the payment of rent more than thirty (30) days in
advance of its due date.
(f) Each Lease entered into after the date hereof shall provide
that any act or omission of Mortgagor that would give any lessee the right,
immediately or after lapse of a period of time, to cancel or terminate such
Lease, or to abate or offset against the payment of rent or to claim a partial
or total eviction, such lessee shall not exercise such right until it has given
written notice of such act or omission to Mortgagee and until a reasonable
period for
<PAGE>
15
remedying such act or omission shall have elapsed following the giving of such
notice without a remedy being effected.
(g) Each Lease entered into after the date hereof shall provide
that in the event of the enforcement by Mortgagee of any remedy under this
Mortgage, the lessee shall, if requested by Mortgagee or any other person
succeeding to the interest of Mortgagee as a result of such enforcement, attorn
to Mortgagee or to such person and shall recognize Mortgagee or such successor
in interest as lessor under the Lease without change in the provisions thereof;
provided, however, that Mortgagee or such successor in interest shall not be:
- --------
(i) bound by any payment of an installment of rent or additional rent which may
have been made more than 30 days before the due date of such installment; (ii)
bound by any amendment or modification to the Lease made without the consent of
Mortgagee or such successor in interest to the extent consent is required; (iii)
liable for any previous act or omission of Mortgagor (or its predecessors in
interest); (iv) responsible for any monies owing by Mortgagor to the credit of
such lessee or subject to any credits, offsets, claims, counterclaims, demands
or defenses which the lessee may have against Mortgagor (or its predecessors in
interest); (v) bound by any covenant to undertake or complete any construction
of the Premises or any portion thereof; or (vi) obligated to make any payment to
such lessee other than any security deposit actually delivered to Mortgagee or
such successor in interest. Each lessee or other occupant, upon reasonable
request by Mortgagee or such successor in interest, shall execute and deliver an
instrument or instruments confirming such attornment. To the extent permitted by
law, subsections (d)-(g) of this Section shall be self-operative and any failure
of any Lease to include such language shall not impair the binding effect of
such provisions on any lessee under such Lease.
12. Further Assurances. To further assure Mortgagee's rights under
------------------
this Mortgage, Mortgagor agrees upon demand of Mortgagee to do any act or
execute any additional documents (including, but not limited to, security
agreements on any personalty included or to be included in the Mortgaged
Property and a separate assignment of each Lease in recordable form) as may
reasonably be required by Mortgagee to confirm the lien of this Mortgage and all
other rights or benefits conferred on Mortgagee.
13. Mortgagee's Right to Perform. If Mortgagor fails to perform any
----------------------------
of the covenants or agreements of Mortgagor within the time period provided
herein for such performance, and such failure shall continue for 10 days after
written notice thereof from Mortgagee, Mortgagee, without waiving or releasing
Mortgagor from any obligation or default under this Mortgage, may, at any time
(but shall be under no obligation to) pay or perform the same, and the amount or
cost thereof, with interest at the Default Rate, shall immediately be due from
Mortgagor to Mortgagee and the same shall be secured by this Mortgage and shall
be a lien on the Mortgaged Property prior to any right, title to, interest in or
claim upon the Mortgaged Property attaching subsequent to the lien of this
Mortgage. No payment or advance of money by Mortgagee under this Section shall
be deemed or construed to cure Mortgagor's default or waive any right or remedy
of Mortgagee.
14. Events of Default. The occurrence of an Event of Default under
-----------------
the Credit Agreement shall constitute an Event of Default hereunder.
<PAGE>
16
15. Remedies.
--------
(a) Upon the occurrence of any Event of Default, in addition to any
other rights and remedies Mortgagee may have pursuant to the Loan Documents, or
as provided by law, and without limitation, the Indebtedness and all other
amounts payable with respect to the Loans, the Letters of Credit, the Credit
Agreement, this Mortgage, the other Security Documents and the other Loan
Documents shall become due and payable as provided in the Credit Agreement.
Except as expressly provided in this Mortgage, presentment, demand, protest and
all other notices of any kind are hereby expressly waived. In addition, upon
the occurrence of any Event of Default, Mortgagee may immediately take such
action, without notice or demand (to the extent permitted by law and except as
otherwise provided herein or in the Credit Agreement), as it deems advisable to
protect and enforce its rights against Mortgagor and in and to the Mortgaged
Property, including, but not limited to, the following actions, each of which
may be pursued concurrently or otherwise, at such time and in such manner as
Mortgagee may determine, in its sole discretion, without impairing or otherwise
affecting the other rights and remedies of Mortgagee:
(i) Mortgagee may, to the extent permitted by applicable law, (A)
institute and maintain an action of mortgage foreclosure against all or any
part of the Mortgaged Property, (B) institute and maintain an action on the
Notes, the Credit Agreement or any other Loan Document, (C) sell all or part
of the Mortgaged Property (Mortgagor expressly granting to Mortgagee the power
of sale), or (D) take such other action at law or in equity for the
enforcement of this Mortgage or any of the Loan Documents as the law may
allow. Mortgagee may proceed in any such action to final judgment and
execution thereon for all sums due hereunder, together with interest thereon
at the Default Rate and all costs of suit, including, without limitation,
reasonable attorneys' fees and disbursements. Interest at the Default Rate
shall be due on any judgment obtained by Mortgagee from the date of judgment
until actual payment is made of the full amount of the judgment.
(ii) Mortgagee may personally, or by its agents, attorneys and employees
and without regard to the adequacy or inadequacy of the Mortgaged Property or
any other collateral as security for the Indebtedness and Obligations enter
into and upon the Mortgaged Property and each and every part thereof and
exclude Mortgagor and its agents and employees therefrom without liability for
trespass, damage or otherwise (Mortgagor hereby agreeing to surrender
possession of the Mortgaged Property to Mortgagee upon demand at any such
time) and use, operate, manage, maintain and control the Mortgaged Property
and every part thereof. Following such entry and taking of possession,
Mortgagee shall be entitled, without limitation, (x) to lease all or any part
or parts of the Mortgaged Property for such periods of time and upon such
conditions as Mortgagee may, in its discretion, deem proper, (y) to enforce,
cancel or modify any Lease and (z) generally to execute, do and perform any
other act, deed, matter or thing concerning the Mortgaged Property as
Mortgagee shall deem appropriate as fully as Mortgagor might do.
(b) The holder of this Mortgage, in any action to foreclose it, shall
be entitled to the appointment of a receiver. In case of a foreclosure sale, the
Real Estate may be sold, at Mortgagee's election, in one parcel or in more than
one parcel and Mortgagee is specifically
<PAGE>
17
empowered, (without being required to do so, and in its sole and absolute
discretion) to cause successive sales of portions of the Mortgaged Property to
be held.
(c) In the event of any breach of any of the covenants, agreements,
terms or conditions contained in this Mortgage, Mortgagee shall be entitled to
enjoin such breach and obtain specific performance of any covenant, agreement,
term or condition and Mortgagee shall have the right to invoke any equitable
right or remedy as though other remedies were not provided for in this Mortgage.
16. Right of Mortgagee to Credit Sale. Upon the occurrence of any
---------------------------------
sale made under this Mortgage, whether made under the power of sale or by virtue
of judicial proceedings or of a judgment or decree of foreclosure and sale,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof. In
lieu of paying cash therefor, Mortgagee may make settlement for the purchase
price by crediting upon the Indebtedness or other sums secured by this Mortgage
the net sales price after deducting therefrom the expenses of sale and the cost
of the action and any other sums which Mortgagee is authorized to deduct under
this Mortgage. In such event, this Mortgage, the Notes, the Credit Agreement,
the other Loan Documents and documents evidencing expenditures secured hereby
may be presented to the person or persons conducting the sale in order that the
amount so used or applied may be credited upon the Indebtedness as having been
paid.
17. Appointment of Receiver. If an Event of Default shall have
-----------------------
occurred and be continuing, Mortgagee as a matter of right and without notice to
Mortgagor, unless otherwise required by applicable law, and without regard to
the adequacy or inadequacy of the Mortgaged Property or any other collateral as
security for the Indebtedness and Obligations or the interest of Mortgagor
therein, shall have the right to apply to any court having jurisdiction to
appoint a receiver or receivers or other manager of the Mortgaged Property. Any
such receiver or receivers shall have all the usual powers and duties of
receivers in like or similar cases and all the powers and duties of Mortgagee in
case of entry as provided in this Mortgage, including, without limitation and to
the extent permitted by law, the right to enter into leases of all or any part
of the Mortgaged Property, and shall continue as such and exercise all such
powers until the date of confirmation of sale of the Mortgaged Property unless
such receivership is sooner terminated.
18. Extension, Release, etc. (a) Without affecting the lien or charge
------------------------
of this Mortgage upon any portion of the Mortgaged Property not then or
theretofore released as security for the full amount of the Indebtedness,
Mortgagee may, from time to time and without notice, agree to (i) release any
person liable for the Indebtedness, (ii) extend the maturity or alter any of the
terms of the Indebtedness or any guaranty thereof, (iii) grant other
indulgences, (iv) release or reconvey, or cause to be released or reconveyed, at
any time at Mortgagee's option any parcel, portion or all of the Mortgaged
Property, (v) take or release any other or additional security for any
obligation herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto. If at any time this Mortgage shall secure less
than all of the principal amount of the Indebtedness, it is expressly agreed
that any repayments of the principal amount of the Indebtedness shall not reduce
the
<PAGE>
18
amount of the lien of this Mortgage until the lien amount shall equal the
principal amount of the Indebtedness outstanding.
(b) No recovery of any judgment by Mortgagee and no levy of an
execution under any judgment upon the Mortgaged Property or upon any other
property of Mortgagor shall affect the lien of this Mortgage or any liens,
rights, powers or remedies of Mortgagee hereunder, and such liens, rights,
powers and remedies shall continue unimpaired.
(c) If Mortgagee shall have the right to foreclose this Mortgage,
Mortgagor authorizes Mortgagee at its option to foreclose the lien of this
Mortgage subject to the rights of any tenants of the Mortgaged Property. The
failure to make any such tenants parties defendant to any such foreclosure
proceeding and to foreclose their rights will not be asserted by Mortgagor as a
defense to any proceeding instituted by Mortgagee to collect the Indebtedness or
to foreclose the lien of this Mortgage.
(d) Unless expressly provided otherwise, in the event that ownership
of this Mortgage and title to the Mortgaged Property or any estate therein shall
become vested in the same person or entity, this Mortgage shall not merge in
such title but shall continue as a valid lien on the Mortgaged Property for the
amount secured hereby.
19. Security Agreement under Uniform Commercial Code. (a) It is the
------------------------------------------------
intention of the parties hereto that this Mortgage shall constitute a Security
Agreement within the meaning of the Uniform Commercial Code (the "Code") of the
State in which the Mortgaged Property is located. If an Event of Default shall
occur under this Mortgage, then in addition to having any other right or remedy
available at law or in equity, Mortgagee shall have the option of either (i)
proceeding under the Code and exercising such rights and remedies as may be
provided to a secured party by the Code with respect to all or any portion of
the Mortgaged Property which is personal property (including, without
limitation, taking possession of and selling such property) or (ii) treating
such property as real property and proceeding with respect to both the real and
personal property constituting the Mortgaged Property in accordance with
Mortgagee's rights, powers and remedies with respect to the real property (in
which event the default provisions of the Code shall not apply). If Mortgagee
shall elect to proceed under the Code, then five business days' notice of sale
of the personal property shall be deemed reasonable notice and the reasonable
expenses of retaking, holding, preparing for sale, selling and the like incurred
by Mortgagee shall include, but not be limited to, reasonable attorneys' fees
and legal expenses. At Mortgagee's request, Mortgagor shall assemble the
personal property and make it available to Mortgagee at a place designated by
Mortgagee which is reasonably convenient to both parties.
(b) Mortgagor and Mortgagee agree, to the extent permitted by law,
that: (i) all of the goods described within the definition of the word
"Equipment" are or are to become fixtures on the Real Estate; (ii) this Mortgage
upon recording or registration in the real estate records of the proper office
shall constitute a financing statement filed as a "fixture filing" within the
meaning of Sections 9-313 and 9-402 of the Code; (iii) Mortgagor is the record
owner of the Real Estate; and (iv) the addresses of Mortgagor and Mortgagee are
as set forth on the first page of this Mortgage.
<PAGE>
19
(c) Mortgagor, upon request by Mortgagee from time to time, shall
execute, acknowledge and deliver to Mortgagee one or more separate security
agreements, in form satisfactory to Mortgagee, covering all or any part of the
Mortgaged Property and will further execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered, any financing statement, affidavit,
continuation statement or certificate or other document as Mortgagee may
reasonably request in order to perfect, preserve, maintain, continue or extend
the security interest under and the priority of this Mortgage and such security
instrument. Mortgagor further agrees to pay to Mortgagee on demand all
reasonable costs and expenses incurred by Mortgagee in connection with the
preparation, execution, recording, filing and re-filing of any such document and
all reasonable costs and expenses of any record searches for financing
statements Mortgagee shall reasonably require. Mortgagor shall from time to
time, on request of Mortgagee, deliver to Mortgagee an inventory in reasonable
detail of any of the Mortgaged Property which constitutes personal property. If
Mortgagor shall fail to furnish any financing or continuation statement required
hereunder within 10 business days after request by Mortgagee, then pursuant to
the provisions of the Code, Mortgagor hereby authorizes Mortgagee, without the
signature of Mortgagor, to execute and file any such financing and continuation
statements. The filing of any financing or continuation statements in the
records relating to personal property or chattels shall not be construed as in
any way impairing the right of Mortgagee to proceed against any personal
property encumbered by this Mortgage as real property, as set forth above.
20. Assignment of Rents. Mortgagor hereby assigns to Mortgagee the
-------------------
Rents as further security for the payment of the Indebtedness and performance of
the Obligations, and Mortgagor grants to Mortgagee the right to enter the
Mortgaged Property for the purpose of collecting the same and to let the
Mortgaged Property or any part thereof, and to apply the Rents on account of the
Indebtedness. The foregoing assignment and grant is present and absolute and
shall continue in effect until the Indebtedness is paid in full, but Mortgagee
hereby waives the right to enter the Mortgaged Property for the purpose of
collecting the Rents and Mortgagor shall be entitled to collect, receive, use
and retain the Rents until the occurrence of an Event of Default under this
Mortgage; such right of Mortgagor to collect, receive, use and retain the Rents
may be revoked by Mortgagee upon the occurrence of any Event of Default under
this Mortgage by giving not less than five business days' written notice of such
revocation to Mortgagor; in the event such notice is given, Mortgagor shall pay
over to Mortgagee, or to any receiver appointed to collect the Rents, any lease
security deposits, and shall pay monthly in advance to Mortgagee, or to any such
receiver, the fair and reasonable rental value as determined by Mortgagee for
the use and occupancy of the Mortgaged Property or of such part thereof as may
be in the possession of Mortgagor or any affiliate of Mortgagor, and upon
default in any such payment Mortgagor and any such affiliate will vacate and
surrender the possession of the Mortgaged Property to Mortgagee or to such
receiver, and in default thereof may be evicted by summary proceedings or
otherwise. Mortgagor shall not accept prepayments of installments of Rent to
become due for a period of more than one month in advance (except for security
deposits and estimated payments of percentage rent, if any).
21. Trust Funds. All lease security deposits of the Real Estate
-----------
shall be treated as trust funds not to be commingled with any other funds of
Mortgagor. Within 10 days after
<PAGE>
20
request by Mortgagee, Mortgagor shall furnish Mortgagee satisfactory evidence
of compliance with this subsection, together with a statement of all lease
security deposits by lessees and copies of all Leases not previously delivered
to Mortgagee, which statement shall be certified by Mortgagor. The Loans
secured by this Mortgage are subject to the trust fund provisions of Section 13
of the Lien Law of the State of New York.
22. Additional Rights. (a) The clauses and covenants contained in
-----------------
this Mortgage that are construed by Section 254 of the Real Property Law of the
State of New York shall be construed as provided in those sections, except that
the provisions of subsection 4 of such Section 254 shall not in any manner apply
to or construe the provisions of this Mortgage; the additional clauses and
covenants contained herein shall afford rights supplemental to and not exclusive
of the rights conferred by the clauses and covenants construed by such Section
254 and shall not impair, modify, alter or defeat such rights (except that the
provisions of this Mortgage governing insurance shall be exclusive of and shall
be in substitution for the rights which would be conferred by the clauses and
covenants construed by such subsection 4 of such Section 254), notwithstanding
that such additional clauses and covenants may relate to the same subject matter
or provide for different or additional rights in the same or similar
contingencies as the clauses and covenants construed by such Section 254; the
rights of Mortgagee arising under clauses and covenants contained in this
Mortgage shall be separate, distinct and cumulative and none of them shall be in
exclusion of the others; no act of Mortgagee shall be construed as an election
to proceed under any one provision herein to the exclusion of any other
provision, anything herein or otherwise to the contrary notwithstanding, and in
the event of any inconsistencies between the provisions of such Section 254 and
the provisions of this Mortgage, the provisions of this Mortgage shall prevail.
(b) The holder of any subordinate lien on the Mortgaged Property
shall have no right to terminate any Lease whether or not such Lease is
subordinate to this Mortgage nor shall any holder of any subordinate lien join
any tenant under any Lease in any action to foreclose the lien or modify,
interfere with, disturb or terminate the rights of any tenant under any Lease.
By recordation of this Mortgage all subordinate lienholders are subject to and
notified of this provision, and any action taken by any such lienholder contrary
to this provision shall be null and void. Upon the occurrence of any Event of
Default, Mortgagee may, in its sole discretion and without regard to the
adequacy of its security under this Mortgage, apply all or any part of any
amounts on deposit with Mortgagee under this Mortgage against all or any part of
the Indebtedness. Any such application shall not be construed to cure or waive
any Default or Event of Default or invalidate any act taken by Mortgagee on
account of such Default or Event of Default.
23. Changes in Method of Taxation. In the event of the passage after
-----------------------------
the date hereof of any law of any Governmental Authority deducting from the
value of the Premises for the purposes of taxation any lien thereon, or changing
in any way the laws for the taxation of mortgages or debts secured thereby for
federal, state or local purposes, or the manner of collection of any such taxes,
and imposing a tax, either directly or indirectly, on mortgages or debts secured
thereby, the holder of this Mortgage shall have the right to declare the
Indebtedness due on a date to be specified by not less than 30 business days'
written notice to be given to Mortgagor unless within such 30 business day
period Mortgagor shall assume as
<PAGE>
21
an Obligation hereunder the payment of any tax so imposed until full payment of
the Indebtedness and such assumption shall be permitted by law.
24. Notices. All notices, requests, demands and other communications
-------
hereunder shall be deemed to have been sufficiently given or served when served
in the manner set forth in Section 13.2 of the Credit Agreement.
25. No Oral Modification. This Mortgage may not be changed or
--------------------
terminated orally. Any agreement made by Mortgagor and Mortgagee after the date
of this Mortgage relating to this Mortgage shall be superior to the rights of
the holder of any intervening or subordinate lien or encumbrance.
26. Partial Invalidity. In the event any one or more of the
------------------
provisions contained in this Mortgage shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable provision had never been
included. Notwithstanding anything to the contrary contained in this Mortgage or
in any provisions of the Indebtedness or Loan Documents, the obligations of
Mortgagor and of any other obligor under the Indebtedness or Loan Documents
shall be subject to the limitation that Mortgagee shall not charge, take or
receive, nor shall Mortgagor or any other obligor be obligated to pay to
Mortgagee, any amounts constituting interest in excess of the maximum rate
permitted by law to be charged by Mortgagee.
27. Mortgagor's Waiver of Rights. To the fullest extent permitted by
----------------------------
law, Mortgagor waives the benefit of all laws now existing or that may
subsequently be enacted providing for (i) any appraisement before sale of any
portion of the Mortgaged Property, (ii) any extension of the time for the
enforcement of the collection of the Indebtedness or the creation or extension
of a period of redemption from any sale made in collecting such debt and (iii)
exemption of the Mortgaged Property from attachment, levy or sale under
execution or exemption from civil process. To the full extent Mortgagor may do
so, Mortgagor agrees that Mortgagor will not at any time insist upon, plead,
claim or take the benefit or advantage of any law now or hereafter in force
providing for any appraisement, valuation, stay, exemption, extension or
redemption, or requiring foreclosure of this Mortgage before exercising any
other remedy granted hereunder and Mortgagor, for Mortgagor and its successors
and assigns, and for any and all persons ever claiming any interest in the
Mortgaged Property, to the extent permitted by law, hereby waives and releases
all rights of redemption, valuation, appraisement, stay of execution, notice of
election to mature or declare due the whole of the secured indebtedness and
marshalling in the event of foreclosure of the liens hereby created. Mortgagor
further waives, to the extent permitted by applicable law, all notices of any
Event of Default (except as may be provided for under the terms of this
Mortgage) or of Mortgagee's election to exercise or its actual exercise of any
right, remedy or recourse provided for under this Mortgage.
28. Remedies Not Exclusive. Mortgagee shall be entitled to enforce
----------------------
payment of the Indebtedness and performance of the Obligations and to exercise
all rights and powers under this Mortgage or under any of the other Loan
Documents or other agreement or any
<PAGE>
22
laws now or hereafter in force, notwithstanding some or all of the Indebtedness
and Obligations may now or hereafter be otherwise secured, whether by mortgage,
security agreement, pledge, lien, assignment or otherwise. Neither the
acceptance of this Mortgage nor its enforcement, shall prejudice or in any
manner affect Mortgagee's right to realize upon or enforce any other security
now or hereafter held by Mortgagee, it being agreed that Mortgagee shall be
entitled to enforce this Mortgage and any other security now or hereafter held
by Mortgagee in such order and manner as Mortgagee may determine in its absolute
discretion. No remedy herein conferred upon or reserved to Mortgagee is
intended to be exclusive of any other remedy herein or by law provided or
permitted, but each shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute. Every power or remedy given by any of the Loan Documents to Mortgagee
or to which it may otherwise be entitled, may be exercised, concurrently or
independently, from time to time and as often as may be deemed expedient by
Mortgagee. In no event shall Mortgagee, in the exercise of the remedies
provided in this Mortgage (including, without limitation, in connection with the
assignment of Rents to Mortgagee, or the appointment of a receiver and the entry
of such receiver on to all or any part of the Mortgaged Property), be deemed a
"mortgagee in possession," and Mortgagee shall not in any way be made liable for
any act, either of commission or omission, in connection with the exercise of
such remedies.
29. Multiple Security. If (a) the Premises shall consist of one or
-----------------
more parcels, whether or not contiguous and whether or not located in the same
county, or (b) in addition to this Mortgage, Mortgagee shall now or hereafter
hold one or more additional mortgages, liens, deeds of trust or other security
(directly or indirectly) for the Indebtedness upon other property in the State
in which the Premises are located (whether or not such property is owned by
Mortgagor or by others) or (c) both the circumstances described in clauses (a)
and (b) shall be true, then to the fullest extent permitted by law, Mortgagee
may, at its election, commence or consolidate in a single foreclosure action all
foreclosure proceedings against all such collateral securing the Indebtedness
(including the Mortgaged Property), which action may be brought or consolidated
in the courts of any county in which any of such collateral is located.
Mortgagor acknowledges that the right to maintain a consolidated foreclosure
action is a specific inducement to Mortgagee to extend the Indebtedness, and
Mortgagor expressly and irrevocably waives any objections to the commencement or
consolidation of the foreclosure proceedings in a single action and any
objections to the laying of venue or based on the grounds of forum non
----- ---
conveniens which it may now or hereafter have. Mortgagor further agrees that if
- ----------
Mortgagee shall be prosecuting one or more foreclosure or other proceedings
against a portion of the Mortgaged Property or against any collateral other than
the Mortgaged Property, which collateral directly or indirectly secures the
Indebtedness, or if Mortgagee shall have obtained a judgment of foreclosure and
sale or similar judgment against such collateral, then, whether or not such
proceedings are being maintained or judgments were obtained in or outside the
State in which the Premises are located, Mortgagee may commence or continue
foreclosure proceedings and exercise its other remedies granted in this Mortgage
against all or any part of the Mortgaged Property and Mortgagor waives any
objections to the commencement or continuation of a foreclosure of this Mortgage
or exercise of any other remedies hereunder based on such other proceedings or
judgments, and waives any right to seek to dismiss, stay, remove, transfer or
consolidate either any action under this Mortgage or
<PAGE>
23
such other proceedings on such basis. Neither the commencement nor continuation
of proceedings to foreclose this Mortgage nor the exercise of any other rights
hereunder nor the recovery of any judgment by Mortgagee in any such proceedings
shall prejudice, limit or preclude Mortgagee's right to commence or continue one
or more foreclosure or other proceedings or obtain a judgment against any other
collateral (either in or outside the State in which the Premises are located)
which directly or indirectly secures the Indebtedness, and Mortgagor expressly
waives any objections to the commencement of, continuation of, or entry of a
judgment in such other proceedings or exercise of any remedies in such
proceedings based upon any action or judgment connected to this Mortgage, and
Mortgagor also waives any right to seek to dismiss, stay, remove, transfer or
consolidate either such other proceedings or any action under this Mortgage on
such basis. It is expressly understood and agreed that to the fullest extent
permitted by law, Mortgagee may, at its election, cause the sale of all
collateral which is the subject of a single foreclosure action at either a
single sale or at multiple sales conducted simultaneously and take such other
measures as are appropriate in order to effect the agreement of the parties to
dispose of and administer all collateral securing the Indebtedness (directly or
indirectly) in the most economical and least time-consuming manner.
30. Successors and Assigns. All covenants of Mortgagor contained in
----------------------
this Mortgage are imposed solely and exclusively for the benefit of Mortgagee
and its successors and assigns, and no other person or entity shall have
standing to require compliance with such covenants or be deemed, under any
circumstances, to be a beneficiary of such covenants, any or all of which may be
freely waived in whole or in part by Mortgagee at any time if in its sole
discretion (subject to the terms of the Credit Agreement) it deems such waiver
advisable. All such covenants of Mortgagor shall run with the land and bind
Mortgagor, the successors and assigns of Mortgagor (and each of them) and all
subsequent owners, encumbrancers and tenants of the Mortgaged Property, and
shall inure to the benefit of Mortgagee, its successors and assigns. The word
"Mortgagor" shall be construed as if it read "Mortgagors" whenever the sense of
this Mortgage so requires and if there shall be more than one Mortgagor, the
obligations of the Mortgagors shall be joint and several.
31. No Waivers, etc. Any failure by Mortgagee to insist upon the
---------------
strict performance by Mortgagor of any of the terms and provisions of this
Mortgage shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Mortgagee, notwithstanding any such failure, shall have the right
thereafter to insist upon the strict performance by Mortgagor of any and all of
the terms and provisions of this Mortgage to be performed by Mortgagor.
Mortgagee may release, regardless of consideration and without the necessity for
any notice to or consent by the holder of any subordinate lien on the Mortgaged
Property, any part of the security held for the obligations secured by this
Mortgage without, as to the remainder of the security, in anyway impairing or
affecting the lien of this Mortgage or the priority of such lien over any
subordinate lien.
32. Governing Law, etc. This Mortgage shall be governed by and
------------------
construed in accordance with the laws of the State of New York.
<PAGE>
24
33. Waiver of Trial by Jury. Mortgagor and Mortgagee each hereby
-----------------------
irrevocably and unconditionally waive trial by jury in any action, claim, suit
or proceeding relating to this Mortgage and for any counterclaim brought
therein.
34. Certain Definitions. Unless the context clearly indicates a
-------------------
contrary intent or unless otherwise specifically provided herein, words used in
this Mortgage shall be used interchangeably in singular or plural form and the
word "Mortgagor" shall mean "each Mortgagor or any subsequent owner or owners of
the Mortgaged Property or any part thereof or interest therein," the word
"Mortgagee" shall mean "Mortgagee or any successor Agent," the word "Notes"
shall mean "the Notes or any other evidence of indebtedness secured by this
Mortgage," the word "person" shall include any individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, or other entity, and the words "Mortgaged Property" shall include any
portion of the Mortgaged Property or interest therein. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa. The captions in this Mortgage are for
convenience or reference only and in no way limit or amplify the provisions
hereof.
35. Nonresidential. THIS MORTGAGE DOES NOT COVER REAL PROPERTY
--------------
PRINCIPALLY IMPROVED BY ONE OR MORE STRUCTURES CONTAINING IN THE AGGREGATE NOT
MORE THAN SIX RESIDENTIAL DWELLING UNITS, EACH HAVING ITS OWN SEPARATE COOKING
FACILITIES.
<PAGE>
25
36. Receipt of Copy. Mortgagor acknowledges that it has received a
---------------
true copy of this Mortgage.
37. Release. If Mortgagor shall and does pay to Mortgagee the full
-------
principal amount of the Indebtedness secured hereby, together with all interest
accrued thereon, and keeps all the other covenants and agreements contained
herein and in the Notes, the Credit Agreement and in the other Loan Documents,
all in the manner and at the times set forth herein or in the Notes, the Credit
Agreement and in the other Loan Documents, and if Mortgagor shall also pay all
reasonable satisfaction costs, including, but not limited to, reasonable
attorneys' fees and the cost of recording a satisfaction piece or, at
Mortgagor's request, an assignment of this Mortgage (without representation or
warranty) and, if appropriate, a power-of-attorney to satisfy this Mortgage,
then and from thenceforth this Mortgage and the estate hereby created, granted,
transferred and assigned shall cease and become void.
This Mortgage has been duly executed by Mortgagor on the date first
above written.
TWIN LABORATORIES, INC.
By:_____________________
Name:
Title:
<PAGE>
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
On the ____ day of _________, 19__, before me personally came
________________________, to me known, who, being by me duly sworn, did depose
and say that [s]he resides at _________________________________________ ; that
[s]he is a [n] [_____________________] President of Twin Laboratories, Inc. ,
the corporation described in and which executed the foregoing instrument; and
that [s]he signed [his] [her] name thereto by authority of the board of
directors of said corporation
_____________________
Notary Public
[Notarial Stamp]
<PAGE>
Exhibit 10.6
[Utah]
DEED OF TRUST
-------------
THIS DEED OF TRUST, dated as of May 7, 1996 is made by TWIN
LABORATORIES, INC, (formerly known as Natura-Pharma, Inc.), a Utah Corporation
("Trustor"), whose address is 2120 Smithtown Avenue, Ronkonkoma, New York 11779,
in favor of FIRST AMERICAN TITLE COMPANY OF UTAH, having an address at 330 East
400 South, Salt Lake City, Utah 84111 ("Trustee") for the benefit of CHEMICAL
BANK, a New York banking corporation, whose address is 270 Park Avenue, New
York, New York 10017, as Administrative Agent ("Beneficiary"), for itself and
for several banks and financial institutions from time to time parties to that
certain Credit and Guarantee Agreement dated as of the date hereof among TLG
Laboratories Holding Corp., a Delaware corporation ("Holdings"), Trustor, the
said several banks and other financial institutions from time to time parties
thereto (collectively, the "Lenders"; individually, a "Lender") , the Bank of
New York as Documentation Agent for the Lenders, and Beneficiary (as the same
may be amended, restated, supplemented, modified or replaced from time to time,
the "Credit Agreement"). References to this "Deed of Trust" shall mean this
instrument and any and all renewals, modifications, amendments, supplements,
extensions, consolidations, substitutions, spreaders and replacements of this
instrument. Unless otherwise defined herein, capitalized terms shall have the
meanings ascribed to them in the Credit Agreement.
Background
----------
WHEREAS, pursuant to a Stock Purchase and Sale Agreement dated as of
March 5, 1996 (the "Stock Purchase Agreement") among the Stockholders (as
defined therein), Holdings, Trustor, and Green Equity Investors II, L.P.
("GEI"), (i) GEI, together with other investors (the "Investors") acquired 55%
of the common of Holdings and all of the shares of preferred stock of Holdings,
(ii) the Continuing Stockholders (as defined in the Stock Purchase Agreement)
exchanged certain of their shares of the common stock of Trustor for 45% of the
outstanding common stock of Holdings, (iii) Holdings acquired all of the
remaining outstanding capital stock of Trustor resulting in Trustor becoming a
wholly-owned subsidiary of Holdings, (iv) Twin Laboratories Inc., a New York
corporation ("Twin"), Alvita Products, Inc., Twinlab Export Corp., Twinlab
Specialty Corporation and B. Bros. Realty Corporation merged (the "Merger") into
Trustor, and (v) Advanced Research Pres, Inc. merged with Natur-Pharma II Inc. a
wholly owned subsidiary of Trustor (the surviving entity to be, "ARP"), on the
terms and subject to the conditions set forth therein;
<PAGE>
2
WHEREAS, Trustor has requested that Trustee and the Lenders enter into
the Credit Agreement to provide a portion of the funds required to consummate
the Transactions;
WHEREAS, pursuant to the Merger, Trustor is the fee owner of the
parcel(s) of real property together with the improvements located thereon (the
"Improvements") described on Schedule A attached hereto (such real property,
together with such Improvements, the "Real Estate"); and
WHEREAS, pursuant to the terms of the Credit Agreement, the Lenders
have agreed, among other things, to make the Term Loans, Revolving Credit Loans
and Swing Line Loans to, and the Issuing Bank has agreed to issue the Letters of
Credit for the account of, Trustor on the condition (among others) that Trustor
grant to Trustee a first lien upon and perfected security interest in, among
other things, all estate, right, title and interest of the Trustor in and to the
Real Estate pursuant to the terms hereof;
NOW THEREFORE, in consideration of the premises and for the sum of Ten
Dollars ($10.00), the recipient and sufficiency of which is hereby acknowledged,
Trustor hereby agrees as follows:
Granting Clauses
----------------
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Trustor agrees that to secure:
(a) the repayment of principal of and interest on (including, without
limitation, interest accruing at the then applicable rate provided in the Credit
Agreement after the maturity of the Loans and Reimbursement Obligations and
interest accruing at the applicable rate provided in the Credit Agreement after
the filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganizing or like proceeding, relating to any Loan Party, whether or not a
claim for post-filing or post-petition interest is allowed in such proceedings)
the Loans and all other obligations (including the Reimbursement Obligations)
and liabilities of Trustor to Beneficiary, the Issuing Bank and the Lenders,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter incurred, which may arise under, out of, or in connection
with, the Credit Agreement, the Notes, the Loans, the Letters of Credit, the
other Loan Documents, any Rate Protection Agreement entered into by Trustor with
any Lender, any cash management services agreement entered into by Trustor with
any Lender or any Affiliate of any Lender, or any other document made, delivered
or given in connection therewith, in each case whether on account of principal,
interest, reimbursement, obligations, fees, indemnities, costs, expenses or
other wise (including without limitation, all reasonable fees, charges and
disbursements of counsel to the Administrative Agent and the
<PAGE>
3
Documentation Agent (collectively, the "Agent"), the Issuing Bank or any Lender
that are required to be paid by any Loan Party pursuant to the Credit Agreement,
any other Loan Document or any such Rate Protection Agreement or cash management
services agreement entered into by Trustor with any Lender or any Affiliate of
any Lender (the items set forth above being referred to collectively as the
"Indebtedness"); and
(b) the performance of all covenants, agreements, obligations and
liabilities of Trustor (the "Obligations") under or pursuant to the provisions
of the Credit Agreement, the Notes, the Loans, the Letters of Credit, this Deed
of Trust, any other document securing payment of the Indebtedness (the "Security
Documents"), any other Loan Document or any such Rate Protection Agreement or
cash management services agreement entered into by Trustor with any Lender or
any Affiliate of any Lender and any amendments, supplements, extensions,
renewals, restatements, replacements or modifications of any of the foregoing
(the Credit Agreement, the Notes, the Loans, the Letters of Credit, the
Applications, this Deed of Trust and all other documents and instruments from
time to time evidencing, securing or guaranteeing the payment of the
Indebtedness or the performance of the Obligations, as any of the same may be
amended, supplemented, extended, renewed, restated, replaced or modified from
time to time, are collectively referred to as the "Loan Documents"); and
TRUSTOR HEREBY CONVEYS TO TRUSTEE AND HEREBY GRANTS, ASSIGNS, TRANSFERS AND SETS
OVER TO TRUSTEE, IN TRUST WITH POWER OF SALE FOR THE USE AND BENEFIT OF
BENEFICIARY, AND GRANTS BENEFICIARY AND TRUSTEE A SECURITY INTEREST IN:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever of
Trustor, in possession or expectancy, in and to the Real Estate or any part
thereof;
(C) all right, title and interest of Trustor in, to and under any and
all easements, rights of way, gores of land, streets, ways, alleys,
passages, sewer rights, waters, water courses, water and riparian rights,
water stock, development rights, air rights, mineral rights, oil and gas
rights and all estates, rights, titles, interests, privileges, licenses,
tenements, hereditaments and appurtenances belonging, relating or
appertaining to the Real Estate, and any reversions, remainders, rents,
issues, profits and revenue thereof and all land lying in the bed of any
street, road or avenue, in front of or adjoining the Real Estate to the
center line thereof;
(D) all of the fixtures, chattels, business machines, machinery,
apparatus, equipment, furnishings, fittings and articles of personal
property of every kind and nature
<PAGE>
4
whatsoever, and all appurtenances and additions thereto and substitutions
or replacements thereof (together with, in each case, attachments,
components, parts and accessories) currently owned or subsequently acquired
by Trustor and now or subsequently attached to, or contained in or used or
usable in any way in connection with any operation or letting of the Real
Estate, including but without limiting the generality of the foregoing, all
screens, awnings, shades, blinds, curtains, draperies, artwork, carpets,
rugs, storm doors and windows, furniture and furnishings, heating,
electrical, and mechanical equipment, lighting, switchboards, plumbing,
ventilating, air conditioning and air-cooling apparatus, refrigerating, and
incinerating equipment, escalators, elevators, loading and unloading
equipment and systems, stoves, ranges, laundry equipment, cleaning systems
(including window cleaning apparatus), telephones, communication systems
(including satellite dishes and antennae), televisions, computers,
sprinkler systems and other fire prevention and extinguishing apparatus and
materials, security systems, motors, engines, machinery, pipes, pumps,
tanks, conduits, appliances, fittings and fixtures of every kind and
description (all of the foregoing in this paragraph (D) being referred to
as the "Equipment");
(E) all right, title and interest of Trustor in and to all substitutes
and replacements of, and all additions and improvements to, the Real Estate
and the Equipment, subsequently acquired by or released to Trustor or
constructed, assembled or placed by Trustor on the Real Estate, immediately
upon such acquisition, release, construction, assembling or placement,
including, without limitation, any and all building materials owned by the
Trustor and to be incorporated in or on the Real Estate whether stored at
the Real Estate or offsite, and, in each such case, without any further
mortgage, conveyance, assignment or other act by Trustor;
(F) all right, title and interest of Trustor in, to and under all
leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or occupancy
of the Real Estate or the Equipment or any part thereof, now existing or
subsequently entered into by Trustor and whether written or oral and all
guarantees of any of the foregoing (collectively, as any of the foregoing
may be amended, restated, extended, renewed or modified from time to time,
individually a Lease; collectively the "Leases"), and all rights of Trustor
in respect of cash and securities deposited thereunder and the right to
receive and collect the revenues, income, rents, issues and profits
thereof, together with all other rents, royalties, issues, profits,
revenue, income and other benefits arising from the use and
<PAGE>
5
enjoyment of the Trust Property (as defined below) (collectively, the
"Rents");
(G) all trade names, trade marks, logos, copyrights, good will and
books and records relating to or used in connection with the ownership and
operation of the Real Estate or the Equipment or any part thereof; all
general intangibles related to the ownership and operation of the
Improvements now existing or hereafter arising;
(H) all unearned premiums under insurance policies now or subsequently
obtained by Trustor relating to the Real Estate or Equipment and Trustor's
interest in and to all proceeds of any such insurance policies (including
title insurance policies) including the right to collect and receive such
proceeds, subject to the provisions relating to insurance generally set
forth below; and all awards and other compensation, including the interest
payable thereon and the right to collect and receive the same, made to the
present or any subsequent owner of the Real Estate or Equipment for the
taking by eminent domain, condemnation or otherwise, of all or any part of
the Real Estate or any easement or other right therein;
(I) all right, title and interest of Trustor in and to (i) all
contracts from time to time executed by Trustor or any manager or agent on
its behalf relating to the ownership, construction, maintenance, repair,
operation, occupancy, sale or financing of the Real Estate or Equipment or
any part thereof and all agreements relating to the purchase or lease of
any portion of the Real Estate or any property which is adjacent or
peripheral to the Real Estate, together with the right to exercise such
options and all leases of Equipment (collectively, the "Contracts"), (ii)
all consents, licenses, building permits, certificates of occupancy and
other governmental approvals relating to construction, completion,
occupancy, use or operation of the Real Estate or any part thereof
(collectively, the "Permits") and (iii) all drawings, plans, specifications
and similar or related items relating to the Real Estate (collectively, the
"Plans");
(J) any and all monies now or subsequently on deposit for the payment
of real estate taxes or special assessments against the Real Estate or for
the payment of premiums on insurance policies covering the foregoing
property or otherwise on deposit with or held by Beneficiary as provided in
this Deed of Trust; all capital, operating, reserve or similar accounts
held by or on behalf of Trustor and related to the ownership and operation
of the Trust Property (as hereafter defined), whether now existing or
hereafter arising and all monies held in any of the foregoing accounts and
any certificates or instruments related to or evidencing such accounts;
<PAGE>
6
(K) all accounts and revenues arising from the operation of the
Improvements; and
(L) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now owned or
held or subsequently acquired by Trustor and described in the foregoing clauses
(A) through (E) are collectively referred to as the "Premises", and those
described in the foregoing clauses (A) through (L) are collectively referred to
as the "Trust Property").
TO HAVE AND TO HOLD the Trust Property and the rights and privileges
hereby granted unto Trustee, its successors and assigns for the uses and
purposes set forth, until the Indebtedness is fully paid and the Obligations
fully performed or otherwise discharged.
Terms and Conditions
--------------------
Trustor further represents, warrants, covenants and agrees with
Trustee and Beneficiary as follows:
1. Warranty of Title. Trustor warrants that Trustor has good title
-----------------
to the Real Estate in fee simple and good title to the rest of the Trust
Property, subject only to the matters that are set forth in Schedule B of the
title insurance policy or policies being issued to Beneficiary to insure the
lien of this Deed of Trust (the "Permitted Exceptions") or any Permitted Liens
under the Loan Documents and Trustor shall warrant, defend and preserve such
title and the rights granted by this Deed of Trust with respect thereto against
all claims of all persons and entities. Trustor further warrants that it has the
right to grant this Deed of Trust.
2. Payment of Indebtedness. Trustor shall pay the Indebtedness at
-----------------------
the times and places and in the manner specified in the Credit Agreement or the
other Loan Documents and shall perform all the Obligations as required under the
Loan Documents.
3. Requirements. (a) Trustor shall promptly comply with, or cause
------------
to be complied with, and conform to all present and future laws, statutes,
codes, ordinances, orders, judgments, decrees, rules, regulations and
requirements applicable to the Trust Property, and irrespective of the nature of
the work to be done, of each of the United States of America, any State and any
municipality, local government or other political subdivision thereof and any
agency, department, bureau, board, commission or other instrumentality of any of
them, now existing or subsequently created (collectively, "Governmental
Authority") which has jurisdiction over the Trust Property and all covenants,
restrictions and conditions now or later of record which may be applicable to
any of the Trust Property, or to the use, manner of
<PAGE>
7
use, occupancy, possession, operation, maintenance, alteration, repair or
reconstruction of any of the Trust Property, except (i) where the same is being
contested in good faith, or (ii) the failure to comply could not reasonably be
expected to have a Material Adverse Effect. All present and future laws,
statutes, codes, ordinances, orders, judgments, decrees, rules, regulations and
requirements of every Governmental Authority applicable to Trustor or to any of
the Trust Property and all covenants, restrictions, and conditions which now or
later may be applicable to any of the Trust Property are collectively referred
to as the "Legal Requirements".
(b) From and after the date of this Deed of Trust, Trustor shall not
by act or omission permit any building or other improvement on any premises not
subject to this Deed of Trust to rely on the Premises or any part thereof or any
interest therein to fulfill any Legal Requirement, and Trustor hereby assigns to
Beneficiary any and all rights to give consent for all or any portion of the
Premises or any interest therein to be so used. Trustor shall not by act or
omission impair the integrity of any of the Real Estate as a single zoning lot
separate and apart from all other premises. Trustor represents that each parcel
of the Real Estate constitutes a legally subdivided lot, in compliance with all
subdivision laws and similar Legal Requirements. Any act or omission by Trustor
which would result in a violation of any of the provisions of this subsection
shall be void.
4. Payment of Taxes and Other Impositions. (a) Promptly when due,
--------------------------------------
Trustor shall pay and discharge all taxes of every kind and nature (including,
without limitation, all real and personal property, income, franchise,
withholding, transfer, gains, profits and gross receipts taxes), all charges for
any easement or agreement maintained for the benefit of any of the Trust
Property, all general and special assessments, levies, permits, inspection and
license fees, all water and sewer rents and charges and all other public charges
even if unforeseen or extraordinary, imposed upon or assessed against or which
may become a lien on any of the Trust Property, or arising in respect of the
occupancy, use or possession thereof, together with any penalties or interest on
any of the foregoing (all of the foregoing are collectively referred to as the
"Impositions") except (i) where the same is being contested in good faith, or
(ii) the failure to comply could not reasonably be expected to have a Material
Adverse Effect. Trustor shall within 10 business days after request deliver to
Beneficiary (i) original or copies of receipted bills and cancelled checks
evidencing payment of such Imposition if it is a real estate tax or other public
charge and (ii) evidence reasonably acceptable to Beneficiary showing the
payment of any other such Imposition. If by law any Imposition, at Trustor's
option, may be paid in installments (whether or not interest shall accrue on the
unpaid balance of such Imposition), Trustor may elect to pay such Imposition in
such installments and shall be responsible for the payment of such installments
with interest, if any.
<PAGE>
8
(b) Nothing herein shall affect any right or remedy of Trustee or
Beneficiary under this Deed of Trust or otherwise, with notice to Trustor, to
pay any Imposition after the date such Imposition shall have become due and
payable, and to add to the Indebtedness the amount so paid, together with
interest from the time of payment at the rate set forth in Section 4.4(c)(y) of
the Credit Agreement (the "Default Rate"). Any sums paid by Trustee or
Beneficiary in discharge of any Impositions shall be (i) a charge on the
Premises secured hereby prior to any right or title to, interest in, or claim
upon the Premises subordinate to the lien of this Deed of Trust, and (ii)
payable on demand by Trustor to Trustee or Beneficiary, as the case may be,
together with interest at the Default Rate as set forth above.
(c) Trustor shall not claim, demand or be entitled to receive any
credit or credits toward the satisfaction of this Deed of Trust or on any
interest payable thereon for any taxes assessed against the Trust Property or
any part thereof, and shall not claim any deduction from the taxable value of
the Trust Property by reason of this Deed of Trust.
(d) Trustor shall have the right before any delinquency occurs to
contest or object in good faith to the amount or validity of any Imposition by
appropriate legal proceedings, but such right shall not be deemed or construed
in any way as relieving, modifying, or extending Trustor's covenant to pay any
such Imposition at the time and in the manner provided in this Section unless
(i) Trustor has given prior written notice to Beneficiary of Trustor's intent so
to contest or object to an Imposition, (ii) Trustor shall demonstrate to
Beneficiary's satisfaction that the legal proceedings shall operate conclusively
to prevent the sale of the Trust Property, or any part thereof, to satisfy such
Imposition prior to final determination of such proceedings and (iii) Trustor
shall deposit with Beneficiary an amount equal to the contested amount (plus any
interest and penalty imposed thereon and which could become a lien against the
Real Estate or any part of the Trust Property) to hold in escrow pending
resolution.
(e) Upon written notice to Trustor, Beneficiary after a monetary Event
of Default (as defined below) shall be entitled to require Trustor to pay
monthly in advance to Beneficiary the equivalent of 1/12th of the estimated
annual Impositions. Beneficiary shall keep such funds in a separate account and
Trustor shall not be entitled to interest thereon. Beneficiary shall use such
funds to pay the Impositions as they become due and any funds remaining may be
applied by Beneficiary, in its sole discretion, to the Indebtedness.
5. Insurance. (a) Trustor shall maintain or cause to be maintained
---------
on all of the Premises
(i) property insurance against loss or damage by fire, lightning,
windstorm, tornado, water damage, flood,
<PAGE>
9
earthquake and by such other further risks and hazards as now are or
subsequently may be covered by an "all risk" policy or a fire policy
covering "special" causes of loss, all to the extent commercially
available;
(ii) liability insurance which complies with the insurance
requirements set forth in the Credit Agreement
(iii) when and to the extent reasonably required by Beneficiary,
insurance against loss or damage by any other risk commonly insured against
by persons occupying or using like properties in the locality or localities
in which the Real Estate is situated;
(iv) insurance against rent loss, extra expense or business
interruption (and/or soft costs, in the case of new construction), to the
extent applicable, in amounts reasonably satisfactory to Beneficiary, but
not less than one year's gross rent or gross income;
(v) during the course of any construction or repair of
Improvements, comprehensive general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language of such endorsement), (including coverage for elevators and
escalators, if any). The policy shall include coverage for independent
contractors and completed operations. The completed operations coverage
shall stay in effect for two years after construction of any Improvements
has been completed. The policy shall provide coverage on an occurrence
basis against claims for personal injury, including, without limitation,
bodily injury, death or property damage occurring on, in or about the
Premises and the adjoining streets, sidewalks and passageways, such
insurance to afford immediate minimum protection to a limit of not less
than that reasonably required by Beneficiary with respect to personal
injury, bodily injury or death to any one or more persons or damage to
property;
(vi) during the course of any construction or repair of the
Improvements, workers' compensation insurance (including employer's
liability insurance) for all employees of Trustor (or Trustor's
contractors) engaged on or with respect to the Premises in such amounts as
are required by law;
(vii) during the course of any construction, addition, alteration or
repair of the Improvements, builder's risk completed value form insurance
against "all risks of physical loss," including collapse, water damage,
flood and earthquake and transit coverage, during construction or repairs
of the Improvements, with deductible reasonably approved by Beneficiary, in
nonreporting form, covering the total value of work performed and
equipment, supplies and
<PAGE>
10
materials furnished (with an appropriate limit for soft costs in the case
of construction);
(viii) boiler and machinery property insurance covering pressure
vessels, air tanks, boilers, machinery, pressure piping, heating, air
conditioning and elevator equipment and escalator equipment, provided the
Improvements contain equipment of such nature, and insurance against rent,
extra expense, business interruption and soft costs, if applicable, arising
from any such breakdown, in such amounts as are reasonably satisfactory to
Beneficiary but not less than the lesser of $1,000,000 or 10% of the value
of the Improvements;
(ix) if any portion of the Premises are located in an area
identified as a special flood hazard area by the Federal Emergency
Management Agency or other applicable agency, flood insurance in an amount
reasonably satisfactory to Beneficiary, but in no event less than the
maximum limit of coverage available under the National Flood Insurance Act
of 1968, as amended; and
(x) such other insurance in such amounts as Beneficiary may
reasonably request from time to time.
Each insurance policy (other than flood insurance written under the National
Flood Insurance Act of 1968, as amended, in which case to the extent available)
shall (i) provide that it shall not be cancelled, non-renewed or materially
amended without 30 days' prior written notice to Beneficiary, and (ii) with
respect to all property insurance, provide for deductibles not to exceed $25,000
(except with respect to flood and earthquake insurance in which case the
deductible shall be $50,000), contain a "Replacement Cost Endorsement" without
any deduction made for depreciation and with no co-insurance penalty (or
attaching an agreed amount endorsement satisfactory to Beneficiary), with loss
payable solely to Beneficiary (modified, if necessary, to provide that proceeds
in the amount of replacement cost may be retained by Beneficiary without the
obligation to rebuild except as provided herein) as its interest may appear,
without contribution, under a "standard" or "New York" type mortgagee clause
acceptable to Beneficiary and be written by insurance companies having an A.M.
Best Company, Inc. rating of A- or higher, or otherwise as approved by
Beneficiary. Liability insurance policies shall name Beneficiary (and Trustee,
if Trustee shall so request) as an additional insured and contain a waiver of
subrogation against Beneficiary (and Trustee, if Trustee shall so request); all
such policies shall indemnify and hold Beneficiary (and Trustee, if Trustee
shall so request) harmless from all liability claims occurring on, in or about
the Premises and the adjoining streets, sidewalks and passageways. The amounts
of each insurance policy and the form of each such policy shall at all times be
reasonably satisfactory to Beneficiary. Each policy shall expressly provide that
any proceeds which are payable to
<PAGE>
11
Beneficiary shall be paid by check payable to the order of Beneficiary only and
requiring the endorsement of Beneficiary only. If any required insurance shall
expire, be withdrawn, become void by breach of any condition thereof by Trustor
or by any lessee of any part of the Trust Property or become void or unsafe by
reason of the failure or impairment of the capital of any insurer, or if for any
other reason whatsoever such insurance shall become unsatisfactory to
Beneficiary (based on the standards set forth herein), Trustor shall immediately
obtain new or additional insurance satisfactory to Beneficiary (based on the
standards set forth herein). Trustor shall not take out any separate or
additional insurance which is contributing in the event of loss unless it is
properly endorsed and otherwise reasonably satisfactory to Beneficiary in all
respects.
(b) Trustor shall deliver to Beneficiary an original of each insurance
policy required to be maintained, or a certificate of such insurance reasonably
acceptable to Beneficiary. Trustor shall (i) pay as they become due all premiums
for such insurance, (ii) not later than 15 days prior to the expiration of each
policy to be furnished pursuant to the provisions of this Section, deliver a
renewed policy or policies, or duplicate original or originals thereof, marked
"premium paid," or accompanied by such other evidence of payment satisfactory to
Beneficiary with standard non-contributory mortgage clauses in favor of and
reasonably acceptable to Beneficiary. Upon request of Beneficiary, Trustor shall
cause its insurance underwriter or broker to certify to Beneficiary in writing
that all the requirements of this Deed of Trust governing insurance have been
satisfied.
(c) If Trustor is in default of its obligations to insure or deliver
any such prepaid policy or policies, then Beneficiary, at its option and without
notice, may effect such insurance from year to year, and pay the premium or
premiums therefor, and Trustor shall pay to Beneficiary on demand such premium
or premiums so paid by Beneficiary with interest from the time of payment at the
Default Rate and the same shall be deemed to be secured by this Deed of Trust
and shall be collectible in the same manner as the Indebtedness secured by this
Deed of Trust.
(d) Trustor promptly shall comply with and conform to in all material
respects (i) all provisions of each such insurance policy, and (ii) all
requirements of the insurers applicable to Trustor or to any of the Trust
Property or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration or repair of any of the Trust Property except where non-
compliance would not result in cancellation or denial of coverage. Trustor shall
not use or permit the use of the Trust Property in any manner which would permit
any insurer to cancel any insurance policy or void coverage required to be
maintained by this Deed of Trust.
<PAGE>
12
(e) If the Trust Property, or any part thereof, shall be destroyed or
damaged by fire or any other casualty, whether insured or uninsured, or in the
event any claim is made against Trustor for any personal injury, bodily injury
or property damage incurred on or about the Real Estate, Trustor shall give
immediate notice thereof to Beneficiary. If the Trust Property is damaged by
fire or other casualty and the cost to repair such damage is less than
$1,000,000, then provided that no Event of Default shall have occurred and be
continuing, Trustor shall have the right to adjust such loss, and the insurance
proceeds relating to such loss may be paid over to Trustor; provided that
Trustor shall, promptly after any such damage, repair all such damage regardless
of whether any insurance proceeds are sufficient to pay for the costs of repair.
If the Trust Property is damaged by fire or other casualty, and the cost to
repair such damage exceeds the above limit, or if an Event of Default shall have
occurred and be continuing, then Trustor authorizes and empowers Beneficiary, at
Beneficiary's option and in Beneficiary's sole discretion, as attorney-in-fact
for Trustor, to make proof of loss, to adjust and compromise any claim under any
insurance policy, to appear in and prosecute any action arising from any policy,
to collect and receive insurance proceeds after consultation with Trustor, and
to deduct therefrom Beneficiary's reasonable expenses incurred in the collection
process. Each insurance company concerned is hereby authorized and directed to
make payment for such loss directly to Beneficiary. Provided the insurance
proceeds will be used to repair and restore the Trust Property, Beneficiary
shall have the right to require Trustor to repair or restore the Trust Property,
and Trustor hereby designates Beneficiary as its attorney-in-fact for the
purpose of making any election required or permitted under any insurance policy
relating to repair or restoration. The insurance proceeds or any part thereof
received by Beneficiary may be applied by Beneficiary toward reimbursement of
all reasonable costs and expenses of Beneficiary in collecting such proceeds,
and, provided no Event of Default exists, the balance to the restoration or
repair of the property damaged, or released to Trustor in accordance with
Paragraph 10. Upon an Event of Default, the insurance proceeds may, at
Beneficiary's option, be applied to (i) repair and restore the Trust Property or
(ii) the Indebtedness.
(f) In the event of foreclosure of this Deed of Trust or other
transfer of title to the Trust Property in extinguishment of the Indebtedness,
all right, title and interest of Trustor in and to any insurance policies then
in force shall pass to the purchaser or grantee and Trustor hereby appoints
Beneficiary its attorney-in-fact, in Trustor's name, to assign and transfer all
such policies and proceeds to such purchaser or grantee.
(g) Upon written notice to Trustor, Beneficiary after a monetary Event
of Default shall be entitled to require Trustor to pay monthly in advance to
Beneficiary the equivalent of 1/12th
<PAGE>
13
of the estimated annual premiums due on such insurance. Beneficiary shall keep
such funds in a separate account and Trustor shall not be entitled to interest
thereon. Trustor shall use such funds to pay the annual premiums as they become
due and any funds remaining may be applied by Beneficiary, in its sole
discretion, to the Indebtedness in reverse order of Maturity.
(h) Trustor may maintain insurance required under this Deed of Trust
by means of one or more blanket insurance policies maintained by Trustor;
provided, however, that (A) any such policy shall specify, or Trustor shall
- -------- -------
furnish to Beneficiary a written statement from the insurer so specifying, the
maximum amount of the total insurance afforded by such blanket policy that is
allocated to the Premises and the other Trust Property and any sublimits in such
blanket policy applicable to the Premises and the other Trust Property, (B) each
such blanket policy shall include an endorsement providing that, in the event of
a loss resulting from an insured peril, insurance proceeds shall be allocated to
the Trust Property in an amount equal to the coverages required to be maintained
by Trustor as provided above and (C) the protection afforded under any such
blanket policy shall be no less than that which would have been afforded under a
separate policy or policies relating only to the Trust Property.
6. Restrictions on Liens and Encumbrances. Except for the lien of
--------------------------------------
this Deed of Trust, the Permitted Liens and the Permitted Exceptions, Trustor
shall not further mortgage, nor otherwise encumber the Trust Property nor create
or suffer to exist any lien, charge or encumbrance on the Trust Property, or any
part thereof, whether superior or subordinate to this Deed of Trust and whether
recourse or non-recourse.
7. Due on Sale and Other Transfer Restrictions. Except as may be
-------------------------------------------
permitted in the Credit Agreement, Trustor shall not sell, transfer, convey or
assign all or any portion of, or any interest in, the Trust Property.
8. Maintenance; No Alteration; Inspection; Utilities. (a) Trustor
-------------------------------------------------
shall maintain or cause to be maintained all the Improvements in good condition
and repair and shall not commit or suffer any waste of the Improvements,
ordinary wear and tear excepted. If the insurance proceeds, if any, relating to
a casualty are made available to Trustor by Beneficiary, then Trustor shall
repair, restore, replace or rebuild promptly any part of the Premises which may
be damaged or destroyed by any casualty whatsoever. The Improvements shall not
be demolished or materially altered without the prior written consent of
Beneficiary, unless they do not materially and adversely affect the value of the
Trust Property will not be unreasonably withheld or delayed.
<PAGE>
14
(b) Trustor shall pay or cause to be paid when due and payable all
utility charges which are incurred for gas, electricity, water or sewer services
furnished to the Premises and all other assessments or charges of a similar
nature, whether public or private, affecting the Premises or any portion
thereof, whether or not such assessments or charges are liens thereon.
9. Condemnation/Eminent Domain. Immediately upon obtaining
---------------------------
knowledge of the institution of any proceedings for the condemnation of the
Trust Property, or any portion thereof, Trustor will notify Beneficiary of the
pendency of such proceedings. Upon an Event of Default, Trustor authorizes
Beneficiary, at Beneficiary's option and in Beneficiary's sole discretion, as
attorney-in-fact for Trustor, to commence, appear in and prosecute, in
Beneficiary's or Trustor's name, any action or proceeding relating to any
condemnation of the Trust Property, or any portion thereof, and to settle or
compromise any claim in connection with such condemnation. If Beneficiary elects
not to participate in such condemnation proceeding, then Trustor shall, at its
expense, diligently prosecute any such proceeding and shall consult with
Beneficiary, its attorneys and experts and cooperate with them in any defense of
any such proceedings. All awards and proceeds of condemnation shall be assigned
to Beneficiary to be applied in the same manner as insurance proceeds, as
provided above, and Trustor agrees to execute any such assignments of all such
awards as Beneficiary may request. All awards and proceeds of condemnation
remaining after the restoration or repair of the Trust Property shall be applied
to the Indebtedness in accordance with the terms of Section 4.1 of the Credit
Agreement.
10. Restoration. If Beneficiary elects to release funds to Trustor
-----------
for restoration of any of the Trust Property (the cost of which exceeds
$1,000,000), then such restoration shall be performed only in accordance with
the following conditions:
(i) prior to the commencement of any restoration, the plans
and specifications for such restoration, and the budgeted costs, shall be
submitted to and approved by Beneficiary which approval shall not be
unreasonably withheld or delayed;
(ii) prior to making any advance of restoration funds,
Beneficiary shall be satisfied that the remaining restoration funds,
together with Trustor's own funds from insurance or otherwise, are
sufficient to complete the restoration and to pay all related expenses,
including interest on the Indebtedness and real estate taxes on the
Premises, during restoration;
(iii) at the time of any disbursement of the restoration funds,
(A) no Event of Default (as defined below) shall then have occurred and be
continuing, and (B) no mechanics' or
<PAGE>
15
materialmen's liens shall have been filed and remain undischarged, except
those to be discharged by the disbursement of the requested restoration
funds;
(iv) disbursements shall be made from time to time in an amount
not exceeding the cost of the work completed since the last disbursement,
upon Beneficiary's receipt of reasonably satisfactory evidence from Trustor
(or its architect or contractor) of the stage of completion and of
performance of the work in a good and workmanlike manner and in accordance
with the contracts, plans and specifications acceptable to Beneficiary;
(v) with respect to each advance of restoration funds,
Beneficiary may retain 10% of the amount of such advance as a holdback
until the restoration is 50% completed; thereafter there shall be no
retainage;
(vi) the restoration funds shall bear no interest and may be
commingled with Beneficiary's other funds;
(vii) any restoration funds remaining after restoration is
complete shall be retained by Beneficiary and may be applied by
Beneficiary, in its sole discretion, to the Indebtedness in the order
determined in accordance with Section 4.1(a) of the Credit Agreement.
11. Leases. (a) Trustor shall not (i) execute an assignment or
------
pledge of any Lease relating to all or any portion of the Trust Property other
than in favor of Beneficiary, or (ii) without the prior written consent of
Beneficiary, execute or permit to exist any Lease of any of the Trust Property
except to the extent otherwise permitted by the Credit Agreement.
(b) As to any Lease consented to by Beneficiary, Trustor shall:
(i) promptly perform all of the provisions of the Lease on the
part of the lessor thereunder to be performed except to the extent
Trustor's failure to perform would not have a Material Adverse Effect;
(ii) promptly enforce all of the material provisions of the Lease on
the part of the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding arising under or in
any manner connected with the Lease or the obligations of Trustor as lessor
or of the lessee thereunder;
(iv) exercise, within 10 business days after a request by Beneficiary,
any right to request from the lessee a certificate with respect to the
status thereof;
<PAGE>
16
(v) simultaneously deliver to Beneficiary copies of any
notices of default which Trustor may at any time forward to or receive from
the lessee;
(vi) promptly deliver to Beneficiary a fully executed
counterpart of the Lease; and
(vii) promptly deliver to Beneficiary, upon Beneficiary's
reasonable request, an assignment of the Trustor's interest under such
Lease.
(c) Trustor shall deliver to Beneficiary, within 10 days after a
request by Beneficiary, a rent roll, certified by Trustor as being true, correct
and complete, containing the names of all lessees and other occupants of the
Trust Property and the spaces occupied and rentals payable thereunder, and a
list of all Leases which are then in default.
(d) All Leases entered into by Trustor after the date hereof, if any,
and all rights of any lessees thereunder shall be subject and subordinate in all
respects to the lien and provisions of this Deed of Trust unless Beneficiary
shall otherwise elect in writing.
(e) As to any Lease now in existence or subsequently consented to by
Beneficiary, except to the extent expressly provided for in such Lease, Trustor
shall not accept a surrender or terminate, cancel, rescind or supplement, alter,
revise, modify or amend such Lease such that the rent payable thereunder or the
term thereof is reduced or permit any such action to be taken nor shall Trustor
accept the payment of rent more than thirty (30) days in advance of its due
date.
(f) Each Lease entered into after the date hereof shall provide that
any act or omission of Trustor that would give any lessee the right, immediately
or after lapse of a period of time, to cancel or terminate such Lease, or to
abate or offset against the payment of rent or to claim a partial or total
eviction, such lessee shall not exercise such right until it has given written
notice of such act or omission to Beneficiary and until a reasonable period for
remedying such act or omission shall have elapsed following the giving of such
notice without a remedy being effected.
(g) Each Lease entered into after the date hereof shall provide that
in the event of the enforcement by Beneficiary of any remedy under this Deed of
Trust, the lessee under each Lease shall, if requested by Beneficiary or any
other person succeeding to the interest of Beneficiary as a result of such
enforcement, attorn to Beneficiary or to such person and shall recognize
Beneficiary or such successor in interest as lessor under the Lease without
change in the provisions thereof; provided however, that Beneficiary or such
successor in interest shall not be: (i) bound by any payment of an installment
of rent
<PAGE>
17
or additional rent which may have been made more than 30 days before the due
date of such installment; (ii) bound by any amendment or modification to the
Lease made without the consent of Beneficiary or such successor in interest to
the extent consent is required; (iii) liable for any previous act or omission of
Trustor (or its predecessors in interest); (iv) responsible for any monies owing
by Trustor to the credit of such lessee or subject to any credits, offsets,
claims, counterclaims, demands or defenses which the lessee may have against
Trustor (or its predecessors in interest); (v) bound by any covenant to
undertake or complete any construction of the Premises or any portion thereof;
or (vi) obligated to make any payment to such lessee other than any security
deposit actually delivered to Beneficiary or such successor in interest. Each
lessee or other occupant, upon reasonable request by Beneficiary or such
successor in interest, shall execute and deliver an instrument or instruments
confirming such attornment. To the extent permitted by law, subsections (d)-(g)
of this Section shall be self-operative and any failure of any Lease to include
such language shall not impair the binding effect of such provisions on any
lessee under such Lease.
12. Further Assurances. To further assure Beneficiary's and
------------------
Trustee's rights under this Deed of Trust, Trustor agrees upon demand of
Beneficiary or Trustee to do any act or execute any additional documents
(including, but not limited to, security agreements on any personalty included
or to be included in the Trust Property and a separate assignment of each Lease
in recordable form) as may reasonably be required by Beneficiary or Trustee to
confirm the rights or benefits conferred on Beneficiary or Trustee by this Deed
of Trust.
13. Beneficiary's Right to Perform. If Trustor fails to perform
------------------------------
any of the covenants or agreements of Trustor within the time period provided
herein for such performance and such failure shall continue for 10 days after
written notice thereof from Beneficiary, Beneficiary or Trustee, without waiving
or releasing Trustor from any obligation or default under this Deed of Trust,
may, at any time (but shall be under no obligation to) pay or perform the same,
and the amount or cost thereof, with interest at the Default Rate, shall
immediately be due from Trustor to Beneficiary or Trustee (as the case may be)
and the same shall be secured by this Deed of Trust and shall be an encumbrance
on the Trust Property prior to any right, title to, interest in or claim upon
the Trust Property attaching subsequent to the date of this Deed of Trust. No
payment or advance of money by Beneficiary or Trustee under this Section shall
be deemed or construed to cure Trustor's default or waive any right or remedy of
Beneficiary or Trustee.
14. Events of Default. The occurrence of an Event of Default under
-----------------
the Credit Agreement shall constitute an Event of Default hereunder.
<PAGE>
18
15. Remedies. (a) Upon the occurrence of any Event of Default, in
--------
addition to any other rights and remedies Beneficiary may have pursuant to the
Loan Documents, or as provided by law, and without limitation, the Indebtedness
and all other amounts payable with respect to the Loans, the Letters of Credit,
the Credit Agreement, this Deed of Trust, the other Security Documents and the
other Loan Documents shall become due and payable as provided in the Credit
Agreement. In addition, upon the occurrence of any Event of Default, Beneficiary
may immediately take such action, without notice or demand (to the extent
permitted by law and except as otherwise provided herein or the Credit
Agreement), as it deems advisable to protect and enforce its rights against
Trustor and in and to the Trust Property, including, but not limited to, the
following actions, each of which may be pursued concurrently or otherwise, at
such time and in such manner as Beneficiary may determine, in its sole
discretion, without impairing or otherwise affecting the other rights and
remedies of Beneficiary:
(i) Beneficiary may direct Trustee to exercise Trustee's power
of sale with respect to the Trust Property in accordance with the Legal
Requirements of Utah. Trustor assents to the passage of a decree for the
sale of the Trust Property upon the occurrence of an Event of Default, by
any court having jurisdiction and the Trustor authorizes and empowers
Trustee, upon the occurrence of an Event of Default, to sell Trustor's
interest in the Trust Property, in accordance with the Legal Requirements
of Utah. No readvertisement of any sale shall be required if the sale is
adjourned by announcement, at the time and place set therefor, of the time
and place to which the same is to be adjourned and so long as such
adjournment is in compliance with Utah Legal Requirements.
(ii) Beneficiary may, to the extent permitted by applicable
law, (A) institute and maintain an action of judicial foreclosure against
all or any part of the Trust Property, (B) institute and maintain an action
on the Note, or (C) take such other action at law or in equity for the
enforcement of this Deed of Trust or any of the Loan Documents as the law
may allow. Beneficiary may proceed in any such action to final judgment and
execution thereon for all sums due hereunder, together with interest
thereon at the Default Rate and all costs of suit, including, without
limitation, reasonable attorneys' fees and disbursements. Interest at the
Default Rate shall be due on any judgment obtained by Beneficiary from the
date of judgment until actual payment is made of the full amount of the
judgment.
(iii) Beneficiary may personally, or by its agents, attorneys
and employees and without regard to the adequacy or inadequacy of the Trust
Property or any other collateral as security for the Indebtedness and
Obligations enter into and upon the Trust Property and each and every part
thereof
<PAGE>
19
and exclude Trustor and its agents and employees therefrom without
liability for trespass, damage or otherwise (Trustor hereby agreeing to
surrender possession of the Trust Property to Beneficiary upon demand at
any such time) and use, operate, manage, maintain and control the Trust
Property and every part thereof. Following such entry and taking of
possession, Beneficiary shall be entitled, without limitation, (x) to lease
all or any part or parts of the Trust Property for such periods of time and
upon such conditions as Beneficiary may, in its discretion, deem proper,
(y) to enforce, cancel or modify any Lease and (z) generally to execute, do
and perform any other act, deed, matter or thing concerning the Trust
Property as Beneficiary shall deem appropriate as fully as Trustor might
do.
(b) Beneficiary, in any action to foreclose this Deed of Trust in a
judicial procedure or in connection with the exercise of any power of sale by
Trustee, shall be entitled to the appointment of a receiver. In case of a
trustee's sale or foreclosure sale, the Real Estate may be sold, at
Beneficiary's election, in one parcel or in more than one parcel and Beneficiary
is specifically empowered (without being required to do so, and in its sole and
absolute discretion) to cause successive sales of portions of the Trust Property
to be held.
(c) In the event of any breach of any of the covenants, agreements,
terms or conditions contained in this Deed of Trust, Beneficiary or Trustee
shall be entitled to enjoin such breach and obtain specific performance of any
covenant, agreement, term or condition and Beneficiary and Trustee shall have
the right to invoke any equitable right or remedy as though other remedies were
not provided for in this Deed of Trust.
16. Right of Beneficiary to Credit Sale. Upon the occurrence of any
-----------------------------------
sale made under this Deed of Trust, whether made under the power of sale or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale, Beneficiary may bid for and acquire the Trust Property or any part
thereof. In lieu of paying cash therefor, Beneficiary may make settlement for
the purchase price by crediting upon the Indebtedness or other sums secured by
this Deed of Trust the net sales price after deducting therefrom the expenses of
sale and the cost of the action and any other sums which Beneficiary is
authorized to deduct under this Deed of Trust. In such event, this Deed of
Trust, the Notes, the Credit Agreement, the other Loan Documents and documents
evidencing expenditures secured hereby may be presented to the person or persons
conducting the sale in order that the amount so used or applied may be credited
upon the Indebtedness as having been paid.
17. Appointment of Receiver. If an Event of Default shall have
-----------------------
occurred and be continuing, Beneficiary as a matter of right and without notice
to Trustor, unless otherwise required by
<PAGE>
20
applicable law, and without regard to the adequacy or inadequacy of the Trust
Property or any other collateral as security for the Indebtedness and
Obligations or the interest of Trustor therein, shall have the right to apply to
any court having jurisdiction to appoint a receiver or receivers or other
manager of the Trust Property. Any such receiver or receivers shall have all the
usual powers and duties of receivers in like or similar cases and all the powers
and duties of Beneficiary in case of entry as provided in this Deed of Trust,
including, without limitation and to the extent permitted by law, the right to
enter into leases of all or any part of the Trust Property, and shall continue
as such and exercise all such powers until the date of confirmation of sale of
the Trust Property unless such receivership is sooner terminated.
18. Extension, Release, etc. (a) Without affecting the lien or
------------------------
charge of this Deed of Trust upon any portion of the Trust Property not then or
theretofore released as security for the full amount of the Indebtedness,
Beneficiary may, from time to time and without notice, agree to (i) release any
person liable for the Indebtedness, (ii) extend the maturity or alter any of the
terms of the Indebtedness or any guaranty thereof, (iii) grant other
indulgences, (iv) release or reconvey, or cause to be released or reconveyed, at
any time at Beneficiary's option any parcel, portion or all of the Trust
Property, (v) take or release any other or additional security for any
obligation herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto. If at any time this Deed of Trust shall secure
less than all of the principal amount of the Indebtedness, it is expressly
agreed that any repayments of the principal amount of the Indebtedness shall not
reduce the amount of the lien of this Deed of Trust until the lien amount shall
equal the principal amount of the Indebtedness outstanding.
(b) No recovery of any judgment by Beneficiary and no levy of an
execution under any judgment upon the Trust Property or upon any other property
of Trustor shall affect the lien of this Deed of Trust or any liens, rights,
powers or remedies of Beneficiary or Trustee hereunder, and such liens, rights,
powers and remedies shall continue unimpaired.
(c) If Beneficiary shall have the right to foreclose this Deed of
Trust, Trustor authorizes the Trustee at its option to foreclose the lien of
this Deed of Trust subject to the rights of any tenants of the Trust Property.
The failure to make any such tenants parties defendant to any such foreclosure
proceeding and to foreclose their rights will not be asserted by Trustor as a
defense to any proceeding instituted by Beneficiary to collect the Indebtedness
or to foreclose the lien of this Deed of Trust.
(d) Unless expressly provided otherwise, in the event that ownership
of this Deed of Trust and title to the Trust Property or any estate therein
shall become vested in the same person or entity, this Deed of Trust shall not
merge in such
<PAGE>
21
title but shall continue as a valid lien on the Trust Property for the amount
secured hereby.
19. Security Agreement under Uniform Commercial Code. (a) It is the
------------------------------------------------
intention of the parties hereto that this Deed of Trust shall constitute a
Security Agreement within the meaning of the Uniform Commercial Code (the
"Code")of the State in which the Trust Property is located. If an Event of
Default shall occur under this Deed of Trust, then in addition to having any
other right or remedy available at law or in equity, Beneficiary shall have the
option of either (i) proceeding under the Code and exercising such rights and
remedies as may be provided to a secured party by the Code with respect to all
or any portion of the Trust Property which is personal property (including,
without limitation, taking possession of and selling such property) or (ii)
treating such property as real property and proceeding with respect to both the
real and personal property constituting the Trust Property in accordance with
Beneficiary's rights, powers and remedies with respect to the real property (in
which event the default provisions of the Code shall not apply). If Beneficiary
shall elect to proceed under the Code, then five business days' notice of sale
of the personal property shall be deemed reasonable notice and the reasonable
expenses of retaking, holding, preparing for sale, selling and the like incurred
by Beneficiary shall include, but not be limited to, reasonable attorneys' fees
and legal expenses. At Beneficiary's request, Trustor shall assemble the
personal property and make it available to Beneficiary at a place designated by
Beneficiary which is reasonably convenient to both parties.
(b) Trustor and Beneficiary agree, to the extent permitted by law,
that: (i) all of the goods described within the definition of the word
"Equipment" are or are to become fixtures on the Real Estate; (ii) this Deed of
Trust upon recording or registration in the real estate records of the proper
office shall constitute a financing statement filed as a "fixture filing" within
the meaning of Sections 9-313 and 9-402 of the Code; (iii) Trustor is the record
owner of the Real Estate; and (iv) the addresses of Trustor and Beneficiary are
as set forth on the first page of this Deed of Trust.
(c) Trustor, upon request by Beneficiary from time to time, shall
execute, acknowledge and deliver to Beneficiary one or more separate security
agreements, in form satisfactory to Beneficiary, covering all or any part of the
Trust Property and will further execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, any financing statement, affidavit,
continuation statement or certificate or other document as Beneficiary may
reasonably request in order to perfect, preserve, maintain, continue or extend
the security interest under and the priority of this Deed of Trust and such
security instrument. Trustor further agrees to pay to Beneficiary on demand all
reasonable costs and expenses incurred by Beneficiary in connection with the
preparation, execution,
<PAGE>
22
recording, filing and re-filing of any such document and all reasonable costs
and expenses of any record searches for financing statements Beneficiary shall
reasonably require. Trustor shall from time to time, on request of Beneficiary,
deliver to Beneficiary, an inventory in reasonable detail of any of the Trust
Property which constitutes personal property. If Trustor shall fail to furnish
any financing or continuation statement required hereunder within 10 business
days after request by Beneficiary, then pursuant to the provisions of the Code,
Trustor hereby authorizes Beneficiary, without the signature of Trustor, to
execute and file any such financing and continuation statements. The filing of
any financing or continuation statements in the records relating to personal
property or chattels shall not be construed as in any way impairing the right of
Beneficiary to proceed against any personal property encumbered by this Deed of
Trust as real property, as set forth above.
20. Assignment of Rents. Trustor hereby assigns to Trustee the Rents
-------------------
as further security for the payment of the Indebtedness and performance of the
Obligations, and Trustor grants to Trustee and Beneficiary the right to enter
the Trust Property for the purpose of collecting the same and to let the Trust
Property or any part thereof, and to apply the Rents on account of the
Indebtedness. The foregoing assignment and grant is present and absolute and
shall continue in effect until the Indebtedness is paid in full, but Beneficiary
and Trustee hereby waive the right to enter the Trust Property for the purpose
of collecting the Rents and Trustor shall be entitled to collect, receive, use
and retain the Rents until the occurrence of an Event of Default under this Deed
of Trust; such right of Trustor to collect, receive, use and retain the Rents
may be revoked by Beneficiary upon the occurrence of any Event of Default under
this Deed of Trust by giving not less than five business days' written notice of
such revocation to Trustor; in the event such notice is given, Trustor shall pay
over to Beneficiary, or to any receiver appointed to collect the Rents, any
lease security deposits, and shall pay monthly in advance to Beneficiary, or to
any such receiver, the fair and reasonable rental value as determined by
Beneficiary for the use and occupancy of the Trust Property or of such part
thereof as may be in the possession of Trustor or any affiliate of Trustor, and
upon default in any such payment Trustor and any such affiliate will vacate and
surrender the possession of the Trust Property to Beneficiary or to such
receiver, and in default thereof may be evicted by summary proceedings or
otherwise. Trustor shall not accept prepayments of installments of Rent to
become due for a period of more than one month in advance (except for security
deposits and estimated payments of percentage rent, if any).
21. Trust Funds. All lease security deposits of the Real Estate
-----------
shall be treated as trust funds not to be commingled with any other funds of
Trustor. Within 10 days after request by Beneficiary, Trustor shall furnish
Beneficiary satisfactory
<PAGE>
23
evidence of compliance with this subsection, together with a statement of all
lease security deposits by lessees and copies of all Leases not previously
delivered to Beneficiary, which statement shall be certified by Trustor.
22. Additional Rights. The holder of any subordinate lien on the
-----------------
Trust Property shall have no right to terminate any Lease whether or not such
Lease is subordinate to this Deed of Trust nor shall any holder of any
subordinate lien join any tenant under any Lease in any action to foreclose the
lien or modify, interfere with, disturb or terminate the rights of any tenant
under any Lease. By recordation of this Deed of Trust all subordinate
lienholders are subject to and notified of this provision, and any action taken
by any such lienholder contrary to this provision shall be null and void. Upon
the occurrence of any Event of Default, Beneficiary may, in its sole discretion
and without regard to the adequacy of its security under this Deed of Trust,
apply all or any part of any amounts on deposit with Beneficiary under this Deed
of Trust against all or any part of the Indebtedness. Any such application shall
not be construed to cure or waive any Default or Event of Default or invalidate
any act taken by Beneficiary on account of such Default or Event of Default.
23. Changes in Method of Taxation. In the event of the passage
-----------------------------
after the date hereof of any law of any Governmental Authority deducting from
the value of the Premises for the purposes of taxation any lien thereon, or
changing in any way the laws for the taxation of mortgages or deeds of trust or
debts secured thereby for federal, state or local purposes, or the manner of
collection of any such taxes, and imposing a tax, either directly or indirectly,
on mortgages or debts secured thereby, the holder of this Deed of Trust shall
have the right to declare the Indebtedness due on a date to be specified by not
less than 30 business days' written notice to be given to Trustor unless within
such 30 business day period Trustor shall assume as an Obligation hereunder the
payment of any tax so imposed until full payment of the Indebtedness and such
assumption shall be permitted by law.
24. Notices. All notices, requests, demands and other communications
-------
hereunder shall be deemed to have been sufficiently given or served when served
in the manner set forth in Section 13.2 of the Credit Agreement.
25. No Oral Modification. This Deed of Trust may not be changed or
--------------------
terminated orally. Any agreement made by Trustor and Beneficiary after the date
of this Deed of Trust relating to this Deed of Trust shall be superior to the
rights of the holder of any intervening or subordinate lien or encumbrance.
26. Partial Invalidity. In the event any one or more of the
------------------
provisions contained in this Deed of Trust shall for any reason be held to be
invalid, illegal or unenforceable in any
<PAGE>
24
respect, such invalidity, illegality or unenforceability shall not affect any
other provision hereof, but each shall be construed as if such invalid, illegal
or unenforceable provision had never been included. Notwithstanding anything to
the contrary contained in this Deed of Trust or in any provisions of the
Indebtedness or Loan Documents, the obligations of Trustor and of any other
obligor under the Indebtedness or Loan Documents shall be subject to the
limitation that Beneficiary shall not charge, take or receive, nor shall Trustor
or any other obligor be obligated to pay to Beneficiary, any amounts
constituting interest in excess of the maximum rate permitted by law to be
charged by Beneficiary.
27. Trustor's Waiver of Rights. To the fullest extent permitted by
--------------------------
law, Trustor waives the benefit of all laws now existing or that may
subsequently be enacted providing for (i) any appraisement before sale of any
portion of the Trust Property, (ii) any extension of the time for the
enforcement of the collection of the Indebtedness or the creation or extension
of a period of redemption from any sale made in collecting such debt and (iii)
exemption of the Trust Property from attachment, levy or sale under execution or
exemption from civil process. To the full extent Trustor may do so, Trustor
agrees that Trustor will not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, exemption, extension or redemption, or requiring
foreclosure of this Deed of Trust before exercising any other remedy granted
hereunder and Trustor, for Trustor and its successors and assigns, and for any
and all persons ever claiming any interest in the Trust Property, to the extent
permitted by law, hereby waives and releases all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of the secured indebtedness and marshalling in the event
of foreclosure of the liens hereby created. Trustor further waives, to the
extent permitted by applicable law, all notices of any Event of Default (except
as may be provided for under the terms of this Deed of Trust) or of
Beneficiary's or Trustee's election to exercise or its actual exercise of any
right, remedy or recourse provided for under this Deed of Trust.
28. Remedies Not Exclusive. Beneficiary and Trustee shall be
----------------------
entitled to enforce payment of the Indebtedness and performance of the
Obligations and to exercise all rights and powers under this Deed of Trust or
under any of the other Loan Documents or other agreement or any laws now or
hereafter in force, notwithstanding some or all of the Indebtedness and
Obligations may now or hereafter be otherwise secured, whether by mortgage,
security agreement, pledge, lien, assignment or otherwise. Neither the
acceptance of this Deed of Trust nor its enforcement, shall prejudice or in any
manner affect Beneficiary's or Trustee's right to realize upon or enforce any
other security now or hereafter held by Beneficiary or Trustee, it being agreed
that Beneficiary and Trustee shall be entitled to
<PAGE>
25
enforce this Deed of Trust and any other security now or hereafter held by
Beneficiary or Trustee in such order and manner as Beneficiary may determine in
its absolute discretion. No remedy herein conferred upon or reserved to
Beneficiary or Trustee is intended to be exclusive of any other remedy herein or
by law provided or permitted, but each shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute. Every power or remedy given by any of the Loan
Documents to Beneficiary or Trustee or to which it may otherwise be entitled,
may be exercised, concurrently or independently, from time to time and as often
as may be deemed expedient by Beneficiary or Trustee. In no event shall
Beneficiary or Trustee, in the exercise of the remedies provided in this Deed of
Trust (including, without limitation, the appointment of a receiver and the
entry of such receiver on to all or any part of the Trust Property), be deemed a
"mortgagee in possession," and Beneficiary and Trustee shall not in any way be
made liable for any act, either of commission or omission, in connection with
the exercise of such remedies.
29. Multiple Security. If (a) the Premises shall consist of one or
-----------------
more parcels, whether or not contiguous and whether or not located in the same
county, or (b) in addition to this Deed of Trust, Beneficiary shall now or
hereafter hold or be the beneficiary of one or more additional mortgages, liens,
deeds of trust or other security (directly or indirectly) for the Indebtedness
upon other property in the State in which the Premises are located (whether or
not such property is owned by Trustor or by others) or (c) both the
circumstances described in clauses (a) and (b) shall be true, then to the
fullest extent permitted by law, Beneficiary may, at its election, commence or
consolidate in a single trustee's sale or foreclosure action all trustee's sale
or foreclosure proceedings against all such collateral securing the Indebtedness
(including the Trust Property), which action may be brought or consolidated in
the courts of, or sale conducted in, any county in which any of such collateral
is located. Trustor acknowledges that the right to maintain a consolidated
trustee's sale or foreclosure action is a specific inducement to Beneficiary to
extend the Indebtedness, and Trustor expressly and irrevocably waives any
objections to the commencement or consolidation of the foreclosure proceedings
in a single action and any objections to the laying of venue or based on the
grounds of forum non conveniens which it may now or hereafter have. Trustor
----- --- ----------
further agrees that if Trustee or Beneficiary shall be prosecuting one or more
foreclosure or other proceedings against a portion of the Trust Property or
against any collateral other than the Trust Property, which collateral directly
or indirectly secures the Indebtedness, or if Beneficiary shall have obtained a
judgment of foreclosure and sale or similar judgment against such collateral
(or, in the case of a trustee's sale, shall have met the statutory requirements
therefor with respect to such collateral), then, whether or not such proceedings
are being maintained or judgments were obtained in or outside the State in which
the Premises are located,
<PAGE>
26
Beneficiary may commence or continue any trustee's sale or foreclosure
proceedings and exercise its other remedies granted in this Deed of Trust
against all or any part of the Trust Property and Trustor waives any objections
to the commencement or continuation of a foreclosure of this Deed of Trust or
exercise of any other remedies hereunder based on such other proceedings or
judgments, and waives any right to seek to dismiss, stay, remove, transfer or
consolidate either any action under this Deed of Trust or such other proceedings
on such basis. The commencement or continuation of proceedings to sell the Trust
Property in a trustee's sale, to foreclose this Deed of Trust or the exercise of
any other rights hereunder or the recovery of any judgment by Beneficiary or the
occurrence of any sale by the Trustee in any such proceedings shall not
prejudice, limit or preclude Beneficiary's right to commence or continue one or
more trustee's sales, foreclosure or other proceedings or obtain a judgment
against (or, in the case of a trustee's sale, to meet the statutory requirements
for, any such sale of) any other collateral (either in or outside the State in
which the Premises are located) which directly or indirectly secures the
Indebtedness, and Trustor expressly waives any objections to the commencement
of, continuation of, or entry of a judgment in such other sales or proceedings
or exercise of any remedies in such sales or proceedings based upon any action
or judgment connected to this Deed of Trust, and Trustor also waives any right
to seek to dismiss, stay, remove, transfer or consolidate either such other
sales or proceedings or any sale or action under this Deed of Trust on such
basis. It is expressly understood and agreed that to the fullest extent
permitted by law, Beneficiary may, at its election, cause the sale of all
collateral which is the subject of a single trustee's sale or foreclosure action
at either a single sale or at multiple sales conducted simultaneously and take
such other measures as are appropriate in order to effect the agreement of the
parties to dispose of and administer all collateral securing the Indebtedness
(directly or indirectly) in the most economical and least time-consuming manner.
30. Successors and Assigns. All covenants of Trustor contained in
----------------------
this Deed of Trust are imposed solely and exclusively for the benefit of
Beneficiary and Trustee and their respective successors and assigns, and no
other person or entity shall have standing to require compliance with such
covenants or be deemed, under any circumstances, to be a beneficiary of such
covenants, any or all of which may be freely waived in whole or in part by
Beneficiary or Trustee at any time if in the sole discretion of either of them
(subject to the terms of the Credit Agreement) such waiver is deemed advisable.
All such covenants of Trustor shall run with the land and bind Trustor, the
successors and assigns of Trustor (and each of them) and all subsequent owners,
encumbrancers and tenants of the Trust Property, and shall inure to the benefit
of Beneficiary, Trustee and their respective successors and assigns. Without
limiting the generality of the foregoing, any successor to Trustee
<PAGE>
27
appointed by Beneficiary shall succeed to all rights of Trustee as if such
successor had been originally named as Trustee hereunder. The word "Trustor"
shall be construed as if it read "Trustors" whenever the sense of this Deed of
Trust so requires and if there shall be more than one Trustor, the obligations
of the Trustors shall be joint and several.
31. No Waivers, etc. Any failure by Beneficiary to insist upon the
----------------
strict performance by Trustor of any of the terms and provisions of this Deed of
Trust shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Beneficiary or Trustee, notwithstanding any such failure, shall have
the right thereafter to insist upon the strict performance by Trustor of any and
all of the terms and provisions of this Deed of Trust to be performed by
Trustor. Beneficiary may release, regardless of consideration and without the
necessity for any notice to or consent by the beneficiary of any subordinate
deed of trust or the holder of any subordinate lien on the Trust Property, any
part of the security held for the obligations secured by this Deed of Trust
without, as to the remainder of the security, in anyway impairing or affecting
this Deed of Trust or the priority of this Deed of Trust over any subordinate
lien or deed of trust.
32. Governing Law, etc. This Deed of Trust shall be governed by and
-------------------
construed in accordance with the laws of the State of Utah, except that Trustor
expressly acknowledges that by its terms the Note shall be governed and
construed in accordance with the laws of the State of New York, without regard
to principles of conflict of law, and for purposes of consistency, Trustor
agrees that in any in personam proceeding related to this Deed of Trust the
-- --------
rights of the parties to this Deed of Trust shall also be governed by and
construed in accordance with the laws of the State of New York governing
contracts made and to be performed in that State, without regard to principles
of conflict of law.
33. Waiver of Trial by Jury. Trustor, Trustee and Beneficiary
-----------------------
each hereby irrevocably and unconditionally waive trial by jury in any action,
claim, suit or proceeding relating to this Deed of Trust and for any
counterclaim brought therein.
34. Certain Definitions. Unless the context clearly indicates a
-------------------
contrary intent or unless otherwise specifically provided herein, words used in
this Deed of Trust shall be used interchangeably in singular or plural form and
the word "Trustor" shall mean "each Trustor or any subsequent owner or owners of
the Trust Property or any part thereof or interest therein," the word
"Beneficiary" shall mean "Beneficiary or any successor Agent," the word
"Trustee" shall mean "Trustee and any successor Agent," the word "Notes" shall
mean "the Notes or any other evidence of indebtedness secured by this Deed of
Trust," the word "person" shall include any individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, or other entity, and the words "Trust Property" shall include any
<PAGE>
28
portion of the Trust Property or interest therein. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa. The captions in this Deed of Trust are for
convenience or reference only and in no way limit or amplify the provisions
hereof.
35. Receipt of Copy. Trustor acknowledges that it has received a
---------------
true copy of this Deed of Trust.
36. Release. If Trustor shall and does pay to Beneficiary the full
-------
principal amount of the Indebtedness secured hereby, together with all interest
accrued thereon, and keeps all the other covenants and agreements contained
herein and in the Notes, the Credit Agreement and in the other Loan Documents,
all in the manner and at the times set forth herein or in the Notes, the Credit
Agreement and in the other Loan Documents, and if Trustor shall also pay all
reasonable satisfaction costs, including, but not limited to, reasonable
attorneys' fees and the cost of recording a satisfaction piece or, at Trustor's
request, an assignment of this Deed of Trust (without representation or
warranty) and, if appropriate, a power-of-attorney to satisfy this Deed of
Trust, then and from thenceforth this Deed of Trust and the estate hereby
created, granted, transferred and assigned shall cease and become void.
37. Successor Trustee. Beneficiary shall have the right to appoint a
-----------------
substitute, or a successor trustee, to act as Trustee hereunder by written
designation. Such right shall extend to the appointment of other successor and
substitute trustees successfully until the Indebtedness hereby secured has been
paid in full or until the Trust Property is sold hereunder, and each substitute
and successor trustee shall succeed to all of the rights and powers of the
original Trustee named herein.
This Deed of Trust has been duly executed by Trustor on the date first
above written.
TWIN LABORATORIES, INC.
By:__________________
Name:
Title:
<PAGE>
Schedule A
----------
Description of the Premises
[Attach Legal Description of all parcels, including
Tax Parcel Identification Numbers]
<PAGE>
WHEN RECORDED, RETURN TO:
Simpson Thacher & Bartlett
a partnership which includes
professional corporations
425 Lexington Avenue
New York, New York 10017
ATTN: Jeff Feigelson, Esq.
[Utah]
DEED OF TRUST
from
TWIN LABORATORIES, INC., Trustor
to
FIRST AMERICAN TITLE COMPANY OF UTAH, Trustee
for the use and
benefit of
CHEMICAL BANK, as Administrative Agent, Beneficiary
DATED AS OF MAY 7, 1996
<PAGE>
UTAH FORM OF ACKNOWLEDGMENT
COUNTY OF ____________________ )
: ss.
STATE OF _____________________ )
The foregoing instrument was acknowledged before me this ___ day of May,
1996, by ______________________, as the _____________ of Twin Labs Inc.
______________________________
NOTARY PUBLIC
Residing at:_______________________
(SEAL)
My Commission Expires:
- ----------------------
<PAGE>
EXHIBIT 10.8
STOCKHOLDERS AGREEMENT
DATED AS OF MAY 7, 1996
among
GREEN EQUITY INVESTORS II, L.P.,
BRIAN BLECHMAN,
NEIL BLECHMAN,
ROSS BLECHMAN,
STEVE BLECHMAN,
DEAN BLECHMAN,
STEPHEN WELLING,
and
TLG Laboratories Holding Corp.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C> <C>
RECITALS................................................. 1
ARTICLE 1 - ORGANIZATIONAL ISSUES........................ 1
1.1 Election of Directors......................... 1
1.2 Initial Board of Directors.................... 2
1.3 Vacancies; Action by Stockholders............. 3
1.4 Conduct of Business........................... 3
1.5 Certain Initial Executive Officers............ 6
1.6 Fundamental Corporate Actions................. 6
1.7 Financial Deterioration....................... 8
1.8 Director Insurance............................ 8
ARTICLE 2 - RESTRICTIONS ON TRANSFER..................... 8
2.1 General Restrictions on Transfer.............. 8
2.2 Compliance with Securities Laws............... 9
2.3 Agreement to be Bound......................... 9
2.4 Tag-Along Rights for the Blechman Parties..... .10
2.4.1 Right to Participate in Sale........... .10
2.4.2 Sale Notice............................ 11
2.4.3 Tag-Along Notice....................... 11
2.4.4 Delivery of Certificates............... 12
2.4.5 Exempt Transfers....................... 12
2.4.6 Tag-Along Rights for the GEI Parties... 13
2.5 Cooperation by the Company.................... 13
2.6 Improper Transfer............................. 14
2.7 Involuntary Transfer.......................... 14
2.8 Certain Blechman and GEI Veto Rights.......... 14
2.8.1 Blechman Veto on Certain Sales
by GEI Parties....................... 14
2.8.2 GEI Veto on Certain Sales by
Blechman Parties..................... 14
ARTICLE 3 - REGISTRATION RIGHTS.......................... 15
3.1 Definitions................................... 15
3.2 Demand Registrations.......................... 16
3.2.1 Number of Registrations................ 16
3.2.2 Registration........................... 18
3.2.3 Inclusion of Registrable Shares........ 20
3.2.4 Priority on Demand Registrations....... 20
3.2.5 Compliance............................. 21
3.3 Piggyback Registration........................ 21
3.3.1 Right to Include Registrable Shares.... 21
3.3.2 Priority on Piggyback Registrations.... 22
3.4 Registration Statement........................ 24
3.5 Registration Procedures....................... 25
3.6 Holdback Agreements........................... 31
3.7 Registration Expenses......................... 31
3.8 Conditions to Holder's Rights................. 32
3.8.1 Cooperation............................ 32
3.8.2 Undertakings........................... 33
3.8.3 Indemnification........................ 33
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
3.9 Indemnification................................ 33
3.9.1 Indemnification by the Company.......... 33
3.9.2 Indemnification by Holders of
Registrable Shares.................... 34
3.9.3 Conduct of Indemnification Proceedings.. 35
3.9.4 Contribution............................ 36
3.9.5 Underwriting Agreement to Govern........ 37
3.10 Rules 144 and 144A............................. 37
3.11 Qualified IPO.................................. 38
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES................ 38
4.1 Representations and Warranties of the
Company...................................... 38
4.1.1 Organization............................ 38
4.1.2 Authority............................... 38
4.1.3 Binding Obligation...................... 38
4.1.4 No Conflict............................. 39
4.2 Representations and Warranties of
the Stockholders............................. 39
4.2.1 Organization............................ 39
4.2.2 Authority............................... 39
4.2.3 Binding Obligation...................... 39
4.2.4 No Conflict............................. 39
ARTICLE 5 - TERMINATION OF AGREEMENT..................... 40
ARTICLE 6 - OBLIGATIONS OF THE COMPANY................... 40
6.1 Financial Statements, Certifications
and Information............................. 40
6.2 Confidentiality............................... 41
ARTICLE 7 - PREEMPTIVE RIGHTS............................ 41
ARTICLE 8 - GENERAL...................................... 43
8.1 Recapitalization, Exchanges, etc.
Affecting the Common Stock.................. 43
8.2 Injunctive Relief............................. 43
8.3 Notices....................................... 43
8.4 Legend........................................ 43
8.5 Transferees Bound............................. 44
8.6 Amendment; Waiver............................. 45
8.7 Additional Documents.......................... 45
8.8 No Third-Party Benefits....................... 45
8.9 Successors and Assigns........................ 45
8.10 Severability.................................. 45
8.11 Integration................................... 46
8.12 Governing Law................................. 46
8.13 Attorneys' Fees............................... 46
8.14 Headings...................................... 46
8.15 Information for Notices....................... 46
8.16 Certain Amendments to Certificate
of Incorporation............................ 46
8.17 Counterparts.................................. 47
8.18 Consent to Jurisdiction....................... 47
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
8.19 No Inconsistent Agreements.................... 47
8.20 Certain Distributions Exempt.................. 47
8.21 Certain Limitations........................... 47
8.22 Information Regarding Beneficial
Ownership................................... 48
</TABLE>
iii
<PAGE>
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (the "AGREEMENT") is entered into as of May 7,
1996, by and among Green Equity Investors II, L.P., a Delaware limited
partnership("GEI"), Brian Blechman, Neil Blechman, Ross Blechman, Steve
Blechman, Dean Blechman, Stephen Welling (the foregoing individuals being
referred to collectively as the "BLECHMANS"), and TLG Laboratories Holding
Corp., a Delaware corporation (the "COMPANY"). Each of the parties to this
Agreement (other than the Company) and any other individual, corporation,
partnership, trust, unincorporated organization or a government or any agency or
political subdivision thereof (a "PERSON") who shall become a party to or agree
to be bound by the terms of this Agreement after the date hereof is sometimes
hereinafter referred to as a "STOCKHOLDER".
RECITALS
A. Concurrently with the execution of this Agreement, the Company, GEI
and the Blechmans will consummate the transactions contemplated by that certain
Stock Purchase and Sale Agreement dated as of March 5, 1996, as amended by
amendment dated May 6, 1996 (the "PURCHASE AGREEMENT"). The execution and
delivery of this Agreement is a condition to the parties' obligations under the
Purchase Agreement.
B. Following the consummation of the transactions contemplated by the
Purchase Agreement, GEI will own 480,000 shares of Common Stock, par value $1.00
per share, of the Company (the "COMMON STOCK") and 37,000 shares of 11.25%
Junior Cumulative Preferred Stock, with a liquidation preference of $1,000 per
share, of the Company (the "JUNIOR PREFERRED STOCK"), and the Blechmans will own
450,000 shares of Common Stock. In addition, outside investors will collectively
own 70,000 shares of Common Stock and 30,000 shares of 14% Senior Cumulative
Preferred Stock, with a liquidation preference of $1,000 per share, of the
Company (the "SENIOR PREFERRED STOCK", and together with the Junior Preferred
Stock, the "PREFERRED STOCK"). Shares of Common Stock are collectively referred
to as the "SHARES."
C. The Company and each of the Stockholders desire, for their mutual
benefit and protection, to enter into this Agreement to set forth their
respective rights and obligations with respect to their Shares (whether issued
or acquired hereafter, including all shares of Common Stock issuable upon the
exercise of warrants, options or other rights to acquire shares of Common Stock,
or upon the conversion or exchange of any security ("RIGHTS")).
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1
<PAGE>
ARTICLE 1. Organizational Issues
---------------------
1.1 Election of Directors. So long as the Blechmans and any members of
---------------------
their immediate families, trusts for the benefit of any of the Blechmans and/or
members of their immediate families, and entities which the Blechmans control
(as defined in Section 2.2, below) (each individually a "BLECHMAN AFFILIATE",
and, collectively, the "BLECHMAN AFFILIATES"; and, together with the Blechmans,
each individually a "BLECHMAN PARTY", and, collectively, the "BLECHMAN PARTIES")
shall collectively own more than thirty percent (30%) of the outstanding shares
of Common Stock, the holders of a majority of the shares of Common Stock held by
the Blechman Parties shall have the right to designate five individuals as
nominees for election as directors of the Company (each individually, a
"BLECHMAN DIRECTOR", and, collectively, the "BLECHMAN DIRECTORS"), and as
directors of Twin Laboratories Inc. ("Twin"), Advanced Research Press, Inc.
("ARP") and any other future direct or indirect subsidiary of the Company (a
"Future Subsidiary") (unless, in the case of a Future Subsidiary, a majority of
the Blechman Directors then in office and a majority of the GEI Directors (as
hereinafter defined) then in office shall agree otherwise). So long as the GEI
Parties (as defined below) shall collectively own more than thirty-two percent
(32%) of the outstanding shares of Common Stock, the holders of a majority of
the shares of Common Stock held by the GEI Parties shall have the right to
designate three individuals as nominees for election as directors of the Company
(each individually, a "GEI DIRECTOR", and, collectively, the "GEI DIRECTORS")
and as directors of Twin, ARP and any Future Subsidiary (unless, in the case of
a Future Subsidiary, a majority of the Blechman Directors then in office and a
majority of the GEI Directors then in office shall agree otherwise). GEI and
its affiliates (as defined in Section 2.2 below) (each individually, a "GEI
PARTY", and, collectively, the "GEI PARTIES") hereby agree to vote their Shares
in favor of the election of the Blechman Directors, and the Blechman Parties
hereby agree to vote their Shares in favor of the election of the GEI Directors.
If at any time the holders of a majority of the shares of Common Stock held by
the Blechman Parties shall notify the Company and the GEI Parties in writing of
their desire to have removed from the Board of Directors of the Company (the
"Board of Directors"), with or without cause, any Blechman Director, if the
Blechman Parties then own more than thirty percent (30%) of the outstanding
shares of Common Stock, (i) the Company shall cause the stockholders of the
Company to meet within two (2) business days after the date of such notification
for the purpose of considering such removal and (ii) the Blechman Parties and
the GEI Parties shall, at such meeting, vote their Shares in favor of such
removal. If at any time the holders of a majority of the shares of Common Stock
held by the GEI Parties shall notify the Company and the Blechman Parties in
writing of their desire to have removed from the Board of Directors, with or
without cause, any GEI Director, if the GEI Parties then own more than thirty-
two percent (32%) of the outstanding shares of Common
2
<PAGE>
Stock, (i) the Company shall cause the stockholders of the Company to meet
within two (2) business days after the date of such notification for the purpose
of considering such removal and (ii) the Blechman Parties and the GEI Parties
shall, at such meeting, vote their Shares in favor of such removal.
1.2 Initial Board of Directors. The Board of Directors of the Company as
--------------------------
of the date of this Agreement consists of the following members:
<TABLE>
<CAPTION>
Name of Director Type of Nominee
---------------- ---------------
<S> <C>
Neil Blechman Blechman Director
Brian Blechman Blechman Director
Ross Blechman Blechman Director
Steve Blechman Blechman Director
Dean Blechman Blechman Director
Jonathan D. Sokoloff GEI Director
John G. Danhakl GEI Director
Jennifer Holden Dunbar GEI Director
</TABLE>
Each of such persons shall hold such person's office until such person's
death, resignation or removal or until such person's successor shall have been
duly elected and qualified. Each of the parties by signing this Agreement
hereby consents to the election of the nominees to such initial Board of
Directors as listed above, effective as of the date of this Agreement. The
boards of directors of Twin and ARP from the date hereof shall consist of the
same individuals as the Board of Directors of the Company referred to above.
1.3 Vacancies; Action by Stockholders. If a vacancy is created on the
---------------------------------
Board of Directors by reason of the death, disability, removal or resignation of
any director, the party, if any, which, under Section 1.1, is entitled to
nominate the director whose death, disability, removal or resignation resulted
in such vacancy shall be entitled to designate a new nominee to serve as
director, and the Company shall cause the Stockholders to meet within two (2)
business days after the date such vacancy occurs for the purpose of considering
the election of the designated nominee to fill such vacancy. Each of the
Blechman Parties and the GEI Parties hereby agree to vote their Shares in favor
of such nominees.
1.4 Conduct of Business. So long as the Blechman Parties shall
-------------------
collectively own more than thirty percent (30%) of the outstanding shares of
Common Stock, notwithstanding the fact that
3
<PAGE>
no vote of the Board of Directors may be required, or that a lesser percentage
vote may be specified by law, by the Certificate of Incorporation or By-Laws of
the Company, by any agreement with any national securities exchange or
otherwise, the Company shall not, except as otherwise provided or contemplated
in this Agreement, consummate any of the actions referred to in clauses (i)
through (xvi) of this Section 1.4 without the affirmative approval of a majority
of the Blechman Directors then in office.
So long as the GEI Parties shall collectively own more than thirty-two
percent (32%) of the outstanding shares of Common Stock, notwithstanding the
fact that no vote of the Board of Directors may be required, or that a lesser
percentage vote may be specified by law, by the Certificate of Incorporation or
By-Laws of the Company, by any agreement with any national securities exchange
or otherwise, the Company shall not, except as otherwise provided or
contemplated in this Agreement, consummate any of the actions referred to in
clauses (i) through (xvi) of this Section 1.4 without the affirmative approval
of a majority of the GEI Directors then in office.
(i) except as otherwise contemplated in Sections 1.6, 1.7, 3.5,
3.7, 3.9, 3.11 and 8.16, the authorization for the Company or any of its
subsidiaries to enter into any contract or other agreement (or series of related
contracts or agreements) involving anticipated receipts or expenditures or
otherwise having a total value over the term of such contract or agreement
(without any present value discount) greater than $500,000, except for those
contracts or other agreements entered into by the Company or any of its
subsidiaries in the ordinary course of the Company's or any such subsidiary's
business;
(ii) the authorization for the Company or any of its subsidiaries
to loan, advance or guarantee in excess of $250,000 to or for the benefit of any
individual, corporation, partnership, trust or other entity;
(iii) the authorization for the Company to engage in any business
which was not being conducted by the Company or any of its subsidiaries as of
the date of this Agreement, other than related extensions of such business;
(iv) except as otherwise contemplated in Section 1.7 or by Exhibit
O to the Purchase Agreement (including the exchange of the Senior Subordinated
Notes (as defined in the Purchase Agreement) pursuant to the terms of the
Registration Rights Agreement to be entered into by Natur-Pharma and the initial
purchasers of the Subordinated Notes), the incurrence of indebtedness for
borrowed money (including, without limitation, capitalized lease obligations or
the issuance of debentures) in excess of an aggregate amount of $250,000 in the
name, for the account or on behalf of the Company or any of its subsidiaries,
provided, however, that the foregoing limitation shall not apply
- -------- -------
4
<PAGE>
to any incurrence of indebtedness pursuant to outstanding lines of credit and
other borrowing agreements previously approved in accordance with this Section
1.4 or the borrowing of money or creation of payables in the ordinary course of
business and consistent with past practice for goods or services received by or
for the benefit of the Company or any of its subsidiaries for periods not in
excess of ninety (90) days;
(v) except as otherwise contemplated in Section 1.7, the
investment (exclusive of amounts on deposit with banks or lending institutions
and short term U.S. government obligations) by the Company or any of its
subsidiaries of an amount in excess of $250,000 (whether by way of exchange,
purchase, loan, advance, capital contribution or otherwise) in any individual,
corporation, partnership, trust or other entity (or related individuals,
corporations, partnerships, trusts or other entities);
(vi) the acquisition in any one transaction or series of related
transactions, by purchase of securities or assets or otherwise, by the Company
or any of its subsidiaries of any corporation, business or other enterprise for
an amount in excess of $500,000 or the acquisition by the Company or any of its
subsidiaries of an option to make any such investment or acquisition or the
divestiture of any division or other business enterprise of the Company or any
of its subsidiaries for an amount in excess of $250,000;
(vii) except as otherwise contemplated in Sections 1.7, 3.11 and
8.16 and in Article 7, in connection with the declaration and payment of
dividends on the Preferred Stock or in connection with the TLG Laboratories
Holding Corp. 1996 Stock Option Plan, the issuance and sale by the Company of
Common Stock or other equity securities of the Company or of any securities
convertible into or exchangeable for such Common Stock or other equity
securities of the Company, or of warrants, subscriptions, options or other
rights to acquire Common Stock or other equity securities of the Company or the
granting of pre-emptive rights in connection with such issuance or sale;
(viii) the relocation of the principal executive offices of
the Company to a location which is more than ten (10) miles from Ronkonkoma, New
York;
(ix) the selection of the location and date of the Company's annual
meeting of stockholders;
(x) the adoption, material modification or termination of any
employee benefit plan of the Company;
(xi) the declaration of and payment of dividends on the Common
Stock of the Company;
5
<PAGE>
(xii) except as otherwise provided in Section 3.11, the selection
of the Company's auditors or legal counsel;
(xiii) except as otherwise contemplated in Section 1.7, the adoption
or amendment of strategic plans or operating budgets;
(xiv) except as otherwise contemplated in Section 1.7, (a) the
election, appointment, removal or other termination of any executive officer of
the Company or any of its subsidiaries, other than a Blechman, (b) the
Termination of Employment other than for Cause of any Blechman (but excluding
Termination of Employment by reason of death or Disability) (as such terms are
defined in those certain Employment Agreements dated the date hereof between the
Company and each Blechman; the "Employment Agreements") or (c) the material
diminution in the duties, responsibilities or reporting positions of or change
of executive officer title of any Blechman from the title provided for in the
Employment Agreements (except in connection with any Termination of Employment
of any Blechman for Cause, death or Disability); or
(xv) except as otherwise contemplated in this Section 1.4 and
Section 1.7, the entering into of any contract, agreement or commitment to do,
the authorization, approval, ratification or confirmation of, or the delegation
of the power to act on behalf of the Company or the Board of Directors in
respect of, any of the foregoing.
(xvi) any action or determination relating to the matter referred to
in Article 6.2(k)(A)(i) of the Purchase Agreement, and the entering into of any
contract, agreement or commitment to do, the authorization, approval,
ratification or confirmation of, or the delegation of the power to act on behalf
of the Company or the Board of Directors in respect of, such matter.
1.5 Certain Initial Executive Officers. The executive officers of the
----------------------------------
Company, Natur-Pharma Inc. and Advanced Research Press, Inc., as of the date of
this Agreement, shall consist of the persons set forth in Appendix A annexed
hereto pursuant to the respective forms of employment agreements annexed as an
Exhibit to the Purchase Agreement.
1.6 Fundamental Corporate Actions. So long as (i) the Blechman Parties
-----------------------------
shall collectively own more than thirty percent (30%) of the outstanding shares
of Common Stock, and (ii) the GEI Parties shall collectively own more than
thirty-two percent (32%) of the outstanding shares of Common Stock (including
shares of Common Stock, if any, (a) distributed by the GEI Parties to their
respective equity participants in accordance with the terms of their respective
limited partnership agreements, as contemplated by Section 8.20, and (b) which
distributed shares referred to in
6
<PAGE>
clause (a) above are then owned at the relevant time by such equity
participants), notwithstanding the fact that no vote of the Stockholders may be
required, or that a lesser percentage vote may be specified by law, by the
Certificate of Incorporation or By-Laws of the Company, by any agreement with
any national securities exchange or otherwise, the Company shall not consummate
any of the actions referred to in clauses (i) through (v) of this Section 1.6
without the affirmative vote of at least eighty percent (80%) of the issued and
outstanding shares of Common Stock.
So long as the Blechman Parties shall collectively own more than
thirty percent (30%) of the outstanding shares of Common Stock, notwithstanding
the fact that no vote of the Stockholders may be required, or that a lesser
percentage vote may be specified by law, by the Certificate of Incorporation or
By-Laws of the Company, by any agreement with any national securities exchange
or otherwise, the Company shall not consummate any of the actions referred to in
clauses (i) through (v) of this Section 1.6 without the affirmative vote of at
least eighty percent (80%) of the issued and outstanding shares of Common Stock.
(i) except as otherwise contemplated by Sections 1.7 and 8.16, the
making, alteration, amendment or repeal of the Certificate of Incorporation or
any part thereof, or the making, alteration, amendment or repeal of the By-laws
or any part thereof, of the Company or any of its subsidiaries;
(ii) the sale of all or substantially all of the assets of the
Company or any of its subsidiaries in any one transaction or series of related
transactions, except for the sale of inventory in the ordinary course of
business;
(iii) the merger, consolidation or other business combination
of the Company or any of its subsidiaries with or into any other person or
entity or a statutory share exchange between the Corporation or any of its
subsidiaries and any other person or entity;
(iv) the liquidation, dissolution or winding up of the Company or
any of its subsidiaries; or
(v) except as otherwise contemplated in this Section 1.6, the
entering into of any contract, agreement or commitment to do, the authorization,
approval, ratification or confirmation of, or the delegation of the power to act
on behalf of the Company or the Board of Directors in respect of, any of the
foregoing.
Notwithstanding anything to the contrary contained herein, none of the
provisions of Sections 1.4 or 1.6 shall apply to, or in any other way affect,
limit or restrict, any (i) redemptions, repurchases, recapitalizations,
distributions or any
7
<PAGE>
other transactions, involving shares of Preferred Stock in accordance with the
terms thereof or (ii) action, determination or other matter by or relating to
the rights or other privileges of the Buyer Indemnitees (as such term is defined
in the Purchase Agreement) pursuant to Article 11 of the Purchase Agreement,
which actions, determinations or other matters by or on behalf of the Company or
any of its subsidiaries shall be made solely by GEI. Each of the Blechman
Parties hereby agrees to vote (including any vote required in its capacity as a
Director or stockholder of the Company) in favor of any such action,
determination or other matter made by GEI to the extent such vote is necessary
to effectuate such action, determination or other matter.
1.7 Financial Deterioration. Notwithstanding anything in Section 1.4 or
-----------------------
1.6 hereof to the contrary, the provisions of Sections 1.4(i), 1.4(iv), 1.4(v),
1.4(vii), 1.4(xiii), 1.4(xiv), 1.4(xv) and Section 1.6(i) (to the extent
necessary or desirable in connection with the taking of any action contemplated
by the foregoing provisions of Section 1.4 referred to above in this clause 1.7)
shall not apply in the event that the financial condition, liquidity or results
of operations of the Company and its subsidiaries on a consolidated basis have
declined such that (i) the Company has been, or reasonably expects to be unable
to, satisfy its material financial obligations, including but not limited to,
its obligations to pay principal or interest in respect of borrowed money or
other financial obligations (including, without limitation, capitalized and
operating lease obligations) or its payables substantially consistent with past
practice or (ii) an event of default has occurred and continued for more than
ninety (90) days under any material note, bond, mortgage, indenture, deed of
trust, lease or other material financial instrument to which the Company or any
of its subsidiaries is a party or by which any of them or their respective
properties are bound or affected, as a result of the breach of any financial or
other material covenant or obligation therein, and such event of default could
reasonably be expected to give rise to a Material Adverse Effect (as defined in
the Purchase Agreement).
1.8 Director Insurance. The Company shall provide directors liability
------------------
insurance for all members of its Board of Directors, in an amount reasonably
determined by the Company.
ARTICLE 2. Restrictions on Transfer
------------------------
2.1 General Restrictions on Transfer. Each Stockholder agrees that such
--------------------------------
Stockholder will not, directly or indirectly, sell, hypothecate, give, bequeath,
transfer, assign, pledge or in any other way whatsoever encumber or dispose of
(any such event, a "TRANSFER") any Shares now or hereafter at any time owned by
such Stockholder (or any interest therein) to another Person ("TRANSFEREE"), to
the extent such Transfer is prohibited by this
8
<PAGE>
Agreement. The Company shall not transfer upon its books any Shares to any
Person to the extent prohibited by this Agreement and any purported transfer in
violation hereof shall be null and void and of no effect.
2.2 Compliance with Securities Laws. No Stockholder shall Transfer any
-------------------------------
Shares, and the Company shall not transfer on its books any Shares, unless (a)
the Transfer is pursuant to an effective registration statement under the
Securities Act of 1933, as amended, or any similar federal statute, and the
rules and regulations of the Commission (as defined in Section 3.1) thereunder,
all as the same shall be in effect at the time (the "SECURITIES ACT") and is in
compliance with any applicable state securities or blue sky laws or (b) such
Stockholder shall have furnished the Company with an opinion of counsel, to the
extent reasonably required by the Company, which opinion and counsel shall be
reasonably satisfactory to the Company, to the effect that no such registration
is required because of the availability of an exemption from registration under
the Securities Act; provided, that any Transfer made by a Stockholder which is a
--------
state-sponsored employee benefit plan to a successor trust or fiduciary or
pursuant to a statutory reconstitution shall be expressly permitted and no
opinions of counsel shall be required in connection therewith. As used in this
Agreement, the term "AFFILIATE" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with such Person; provided, however, that no Stockholder shall be deemed
--------
an affiliate of any other Stockholder solely by reason of any investment in the
Company. For purposes of this Agreement, the term "CONTROL", (including, with
correlative meanings, the terms "controlling", "controlled by", and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
2.3 Agreement to be Bound. No Transfer of Shares by a Stockholder shall
---------------------
be effective (and the Company shall not transfer on its books any Shares) unless
(i) the certificates representing such Shares issued to the Transferee shall
bear the legend provided in Section 8.4 herein, if required by such Section 8.4,
and (ii) the Transferee shall have executed and delivered to the Company, as a
condition precedent to such Transfer, an instrument or instruments in form and
substance satisfactory to the Company confirming that the Transferee agrees to
be bound, as a Stockholder, by the terms of this Agreement and accepts the
rights and obligations set forth hereunder; provided, however, that in the case
--------
of a Transfer other than by and among the Blechman Parties or by and among the
GEI Parties, the Transferee expressly agrees that such Transferee is not granted
any benefits or rights and is not subject to any obligations under Article 1,
Section 2.4, Section 2.8, or Article 7 of this Agreement; provided further, that
-------- -------
the conditions set forth in
9
<PAGE>
this Section 2.3 shall not apply to any sale of Shares pursuant to an effective
registration statement under the Securities Act or, provided such sale is not to
an affiliate of the Company, pursuant to Rule 144 under the Securities Act, as
such Rule may be amended from time to time, or any other similar regulation
hereafter adopted by the SEC ("RULE 144").
2.4 Tag-Along Rights for the Blechman Parties.
-----------------------------------------
2.4.1 Right to Participate in Sale. (a) If at any time any GEI
----------------------------
Parties propose to enter into an agreement (or substantially contemporaneous
agreements, whether or not with the same or affiliated parties) to sell or
otherwise dispose of for value any Shares of Common Stock in one or more related
transactions which will result in (i) the transfer of at least five percent (5%)
of the outstanding Shares of Common Stock of the Company or (ii) the transferee
of such Shares holding more than fifty percent (50%) of the outstanding Shares
of Common Stock (such sale or other disposition for value being referred to as a
"TAG-ALONG SALE"), then such GEI Parties shall afford the Blechman Parties (each
individually a "TAG-ALONG STOCKHOLDER" and, collectively, the "TAG-ALONG
STOCKHOLDERS") the opportunity to participate proportionately in such Tag-Along
Sale in accordance with this Section 2.4. The number of Shares of Common Stock
that each Tag-Along Stockholder will be entitled to include in such Tag-Along
Sale (the "TAG-ALONG ALLOTMENT") shall be determined by multiplying (i) the
number of Shares of Common Stock held by such Tag-Along Stockholder as of the
close of business on the day immediately prior to the Tag-Along Notice Date (as
hereinafter defined) by (ii) a fraction, the numerator of which shall equal the
number of Shares of Common Stock proposed by the GEI Parties to be sold or
otherwise disposed of pursuant to the Tag-Along Sale and the denominator of
which shall equal the total number of Shares of Common Stock that are
beneficially owned by the GEI Parties as of the close of business on the day
immediately prior to the Tag-Along Notice Date (the "GEI FRACTION"); provided,
--------
however, that if any of the Blechman Parties fails to elect to participate in a
- -------
Tag-Along Sale, GEI shall give notice of such failure to the other Tag-Along
Stockholders. Such notice shall be made by telephone and confirmed in writing
within two (2) days. The other Tag-Along Stockholders shall have three (3) days
from the date such notice was given to agree to sell their pro rata share of any
unsold portion. For purposes of this Section 2.4.1, a Tag-Along Stockholder's
pro rata share of any unsold portion shall be equal to the number of shares
obtained by dividing (A) the GEI Fraction times the total number of Shares of
-------- -----
Common Stock that are held by the Blechman Parties that are not participating in
the Tag-Along Sale by (B) the number of Tag-Along Stockholders, provided,
-- --------
further, that in negotiating a Tag-Along Sale, such GEI Parties shall provide
- -------
that the liability of the Tag-Along Stockholder with respect to any
representation and warranty or covenant made in connection with any Transfer is
the several liability of such Tag-Along Stockholder (and not joint with any
other person) and
10
<PAGE>
that such liability is limited to the amount of proceeds actually received by
such Tag-Along Stockholder.
2.4.2 Sale Notice. The relevant GEI Parties shall provide each
-----------
Tag-Along Stockholder and the Company with written notice (the "TAG-ALONG SALE
NOTICE") not more than sixty (60) days nor less than thirty (30) days prior to
the proposed date of the Tag-Along Sale (the "TAG-ALONG SALE DATE"). Each Tag-
Along Sale Notice shall be accompanied by a copy of any written agreement
relating to the Tag-Along Sale and shall set forth: (i) the name and address of
each proposed Transferee of Shares in the Tag-Along Sale; (ii) the number of
Shares proposed to be Transferred by such GEI Parties; (iii) the proposed amount
and form of consideration to be paid for such Shares and the terms and
conditions of payment offered by each proposed Transferee; (iv) the aggregate
number of Shares held of record by the GEI Parties as of the close of business
on the day immediately prior to the date of the Tag-Along Notice (the "TAG-ALONG
NOTICE DATE"); (v) the Tag-Along Stockholder's Tag-Along Allotment assuming the
Tag-Along Stockholder elected to sell the maximum number of Shares possible;
(vi) confirmation that the proposed Transferee has been informed of the "Tag-
Along Rights" provided for herein and has agreed to purchase Shares from any
Tag-Along Stockholder in accordance with the terms hereof; and (vi) the Tag-
Along Sale Date.
2.4.3 Tag-Along Notice. Any Tag-Along Stockholder wishing to
----------------
participate in the Tag-Along Sale shall provide written notice (the "TAG-ALONG
NOTICE") to the relevant GEI Parties no less than ten (10) days prior to the
Tag-Along Sale Date. The Tag-Along Notice shall set forth the number of Shares
that such Tag-Along Stockholder elects to include in the Tag-Along Sale, which
shall not exceed such Tag-Along Stockholder's Tag-Along Allotment. The Tag-
Along Notice given by any Tag-Along Stockholder shall constitute such Tag-Along
Stockholder's binding agreement to sell the Shares specified in the Tag-Along
Notice on the terms and conditions applicable to the Tag-Along Sale; provided,
--------
however, that in the event that there is any material change in the terms and
conditions of such Tag-Along Sale applicable to the Tag-Along Stockholder
(including, but not limited to, any decrease in the purchase price that occurs
other than pursuant to an adjustment mechanism set forth in the agreement
relating to the Tag-Along Sale) after such Tag-Along Stockholder gives its Tag-
Along Notice, then, notwithstanding anything herein to the contrary, the Tag-
Along Stockholder shall have the right to withdraw from participation in the
Tag-Along Sale with respect to all of its Shares affected thereby. If the
proposed Transferee does not consummate the purchase of all of the Shares
requested to be included in the Tag-Along Sale by any Tag-Along Stockholder on
the same terms and conditions applicable to the GEI Parties, then such GEI
Parties shall not consummate the Tag-Along Sale of any of its Shares to such
Transferee, unless the shares of such GEI Parties and the Tag-Along Stock-
holders are reduced or limited pro rata in proportion to the
--- ----
11
<PAGE>
respective number of shares actually sold in any such Tag-Along Sale and all
other terms and conditions of the Tag-Along Sale are the same for such GEI
Parties and the Tag-Along Stockholders, subject to the last proviso set forth in
Section 2.4.1.
If a Tag-Along Notice from any Tag-Along Stockholder is not received by
such GEI Parties prior to the ten (10) day period specified above, such GEI
Parties shall have the right to consummate the Tag-Along Sale without the
participation of such Tag-Along Stockholder, but only on terms and conditions
which are no more favorable in any material respect to such GEI Parties (and in
any event, at no greater a purchase price, except as the purchase price may be
adjusted pursuant to the agreement relating to the relevant Tag-Along Sale) than
as stated in the Tag-Along Sale Notice and only if such Tag-Along Sale occurs on
a date within sixty (60) days of the Tag-Along Sale Date. If such Tag-Along
Sale does not occur within such sixty (60) day period, the Shares that were to
be subject to such Tag-Along Sale thereafter shall continue to be subject to all
of the restrictions contained in this Agreement, including the provisions of
this Article 2.
2.4.4 Delivery of Certificates. On the Tag-Along Sale Date, each
------------------------
Tag-Along Stockholder shall deliver a certificate or certificates for the Shares
to be sold in connection with the Tag-Along Sale, duly endorsed for transfer
with signatures guaranteed, to the Transferee in the manner and at the address
indicated in the Tag-Along Notice against delivery of the purchase price for
such Shares.
2.4.5 Exempt Transfers. The provisions of this Section 2.4 shall
----------------
not apply:
(i) to any sale or other disposition of Shares by and among GEI
Parties;
(ii) to any sale or other disposition of Shares by and among
Blechman Parties (excluding Stephen Welling and Persons who are Blechman
Parties solely because they are members of the immediate family of Stephen
Welling, trusts for the benefit of Stephen Welling or any member of his
immediate family or entities which Stephen Welling controls);
(iii) to any sale or other disposition of Shares by and among
Stephen Welling and Persons who are Blechman Parties solely because they
are members of the immediate family of Stephen Welling, trusts for the
benefit of Stephen Welling or any member of his immediate family or
entities which Stephen Welling controls;
(iv) to any sale of Shares to the public pursuant to an effective
registration statement under the Securities Act or pursuant to Rule 144;
12
<PAGE>
(v) from and after one hundred and eighty (180) days after a
Public Offering Event or a Qualified IPO. For the purposes of this
Agreement, a "PUBLIC OFFERING EVENT" shall mean the first date after which
at least twenty percent (20%) of the Company's outstanding shares of Common
Stock is publicly held and such Common Stock is listed or admitted to
trading on a national securities exchange or quoted on the National
Association of Securities Dealers, Inc.'s National Market System or Small
Capitalization System (an "ACTIVE TRADING MARKET") and a Qualified IPO
shall mean the initial bona fide, registered underwritten public offering
of shares of Common Stock to be sold by the Company to the public as
contemplated by Section 3.11;
(vi) any bona fide pledge of Shares to a commercial bank, savings
and loan institution or any other similar lending institution as security
for any indebtedness to such lender, provided that prior to any such
--------
pledge, the Stockholders are informed in writing of such pledge and the
pledgee shall deliver to the Company its written agreement, in form and
substance satisfactory to the Company, that upon any foreclosure such
pledgee shall comply with the terms of Section 2.3 of this Agreement; or
(vii) to any sale or other disposition by Stockholders of shares of
Preferred Stock.
2.4.6 Tag-Along Rights for the GEI Parties. The GEI Parties
------------------------------------
shall be entitled to participate on a "tag-along" basis in connection with any
sales or other dispositions for value by the Blechman Parties (a "BLECHMANS TAG-
ALONG SALE") on the same terms and conditions, and subject to the same
exceptions, as the Blechman Parties are entitled to participate in any Tag-Along
Sale by the GEI Parties as set forth in Sections 2.4.1 through 2.4.5 hereof, and
such provisions shall apply with full force and effect, with appropriate
modifications as to the identities of parties, with respect to any such
Blechmans Tag-Along Sale.
2.5 Cooperation by the Company. The Company will provide reasonable
--------------------------
assistance to any Blechman Party or any GEI Party seeking to sell its Shares,
provided that the Company shall not be required to provide any confidential
information to any prospective purchaser who has not executed a confidentiality
agreement in form reasonably satisfactory to the Company. Any reasonable out-
of-pocket costs to the Company of providing such assistance shall be paid pro
rata by each Stockholder seeking to sell its Shares. The Company will also
cooperate with any Blechman Party or any GEI Party in having all stop transfer
instructions or notations and restrictive legends lifted in connection with the
sale (other than to an affiliate of the Company) of Shares pursuant to Rule 144
promulgated under the Securities Act; provided that in such a case the selling
13
<PAGE>
Stockholder shall be required to provide the Company with the opinion provided
for in Section 2.2(b).
2.6 Improper Transfer. Any attempt to Transfer or otherwise encumber any
-----------------
Shares in violation of this Agreement shall be null and void and neither the
Company nor any transfer agent of such Shares shall give any effect to such
attempted Transfer or encumbrance in its stock records.
2.7 Involuntary Transfer. In the case of any Transfer of title or
--------------------
beneficial ownership of Shares upon default, foreclosure, forfeit, court order,
or otherwise than by a voluntary decision on the part of a Stockholder (an
"INVOLUNTARY TRANSFER"), such Stockholder (or his legal representatives) shall
promptly (but in no event later than two (2) Business Days after such
Involuntary Transfer) furnish written notice to the Company indicating that the
Involuntary Transfer has occurred, specifying the name of the Person to whom
such Shares have been transferred, giving a detailed description of the
circumstances giving rise to, and stating the legal basis for, the Involuntary
Transfer.
2.8 Certain Blechman and GEI Veto Rights.
------------------------------------
2.8.1 Blechman Veto on Certain Sales by GEI Parties. Notwithstanding
---------------------------------------------
anything in this Agreement to the contrary, except for Transfers exempted from
the provisions of Section 2.4 by the provisions of Section 2.4.5 and Transfers
permitted by Section 8.20, prior to the occurrence of a Public Offering Event or
a Qualified IPO and so long as the Blechman Parties shall collectively own more
than thirty percent (30%) of the outstanding shares of Common Stock, but in no
event longer than five (5) years from the date of this Agreement, without the
prior written consent of the Blechman Parties (which consent shall not be
unreasonably withheld), the GEI Parties may not Transfer any of the Shares owned
by any of the GEI Parties as of the date of this Agreement; it being understood
that if the Blechman Parties withhold such consent with respect to any such
Transfer by a GEI Party to any Person listed on Schedule I hereto, such consent
shall be deemed not to have been unreasonably withheld. In addition to any other
notice that may be required pursuant to the terms of this Agreement, GEI agrees
to give the Blechmans at least ten (10) days' advance written notice of any
proposed Transfer which requires consent pursuant to this Section 2.8.1,
including the number of Shares to be transferred and the identity of the
proposed transferee. For the purposes of this Section 2.8.1, the consent of the
Blechman Parties shall mean the consent of Blechman Parties holding a majority
of the Shares held by the Blechman Parties.
2.8.2 GEI Veto on Certain Sales by Blechman Parties. Notwithstanding
---------------------------------------------
anything in this Agreement to the contrary, except for Transfers exempted from
the provisions of Section 2.4 by the provisions of Section 2.4.5, prior to the
occurrence of a Public Offering Event or a Qualified IPO and so
14
<PAGE>
long as the GEI Parties shall collectively own more than thirty-two percent
(32%) of the outstanding shares of the Common Stock, but in no event longer than
five (5) years from the date of this Agreement, without the prior written
consent of GEI (which consent shall not be unreasonably withheld), the Blechman
Parties may not Transfer any of the Shares owned by any of the Blechman Parties
as of the date of this Agreement. In addition to any other notice that may be
required pursuant to the terms of this Agreement, the Blechman Parties agree to
give GEI at least ten (10) days' advance written notice of any proposed Transfer
which requires consent pursuant to this Section 2.8.2, including the number of
Shares to be Transferred and the identity of the proposed transferee.
ARTICLE 3. Registration Rights.
-------------------
3.1 Definitions.
-----------
"BLECHMANS HOLDER" means a Holder of Registrable Blechmans Shares,
including a Transferee of Registrable Blechman Shares if (i) the Transfer to
such Transferee is not prohibited by this Agreement, and (ii) the Shares
Transferred to such Transferee continue to be Registrable Shares.
"COMMISSION" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"DEMAND" shall mean any of a GEI Demand (as defined in Section
3.2.1(a)) or a Blechman Demand (as defined in Section 3.2.1(b)).
"DEMAND REGISTRATION" shall mean any of a GEI Demand Registration (as
defined in Section 3.2.1(a)), or a Blechmans Demand Registration (as defined in
Section 3.2.1(b)).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
(as defined in Section 3.1) thereunder.
"GEI HOLDER" means a Holder of Registrable GEI Shares, including a
Transferee of Registrable GEI Shares if (i) the Transfer to such Transferee is
not prohibited by this Agreement, and (ii) the Shares Transferred to such
Transferee continue to be Registrable Shares.
"HOLDER" means a Holder of Registrable Shares. A Person is deemed to
be a Holder of Registrable Shares whenever such Person owns Registrable Shares;
provided, however, that unless the Company is otherwise notified by the Holder
- --------
of Registrable Shares, the Holder of Registrable Shares shall be
15
<PAGE>
deemed to be that Person set forth on the books and records of the Company or
the registrar for such Registrable Shares.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"REGISTRABLE GEI SHARES" means the Shares of Common Stock issued
pursuant to the Purchase Agreement to the GEI Parties or subsequently acquired
by the GEI Parties (and any securities issued or issuable with respect to such
Common Stock by way of stock dividends or stock splits or in connection with a
combination of shares, recapitalization, merger, consolidation, or other
reorganization or otherwise); and "REGISTRABLE BLECHMANS SHARES" means the
shares of Common Stock issued pursuant to the Purchase Agreement to the Blechman
Parties or subsequently acquired by the Blechman Parties (and any securities
issued or issuable with respect to such Common Stock by way of stock dividends
or stock splits or in connection with a combination of shares, recapitalization,
merger, consolidation, or other reorganization or otherwise) (collectively,
together with the Registrable GEI Shares, the "REGISTRABLE SHARES"); provided,
--------
however, that any such shares will cease to be Registrable Shares when (i) a
registration statement covering such Registrable Shares has been declared
effective and such Registrable Shares have been disposed of pursuant to such
effective registration statement, or (ii) such Registrable Shares are
distributed to the public pursuant to Rule 144.
"SELLING HOLDER" means, with respect to any registration statement, any
Holder whose Registrable Shares are included therein.
3.2 Demand Registrations.
--------------------
3.2.1 Number of Registrations.
-----------------------
(a) GEI Holders' Demand Rights. Commencing on the earlier of (i)
the date that is nine (9) months after the earlier of a Public Offering Event or
a Qualified IPO, and (ii) the second anniversary of the date of this Agreement,
GEI Holders holding an aggregate number of Registrable GEI Shares at least equal
to twenty-five percent (25%) of the number of Registrable GEI Shares on the date
hereof shall be entitled to make written request (a "GEI DEMAND") of the Company
to register all or part of their Registrable GEI Shares under the Securities Act
(including, but not limited to, a shelf registration under Rule 415 promulgated
under the Securities Act) (a "GEI DEMAND REGISTRATION"); provided, however, that
--------
not more than an aggregate of two (2) GEI Demand Registrations with respect to
the Registrable GEI Shares may be made pursuant to the rights granted by this
Section 3.2.1(a); and provided, further that if one or more of the GEI Parties
-------- -------
have not registered all or part of their
16
<PAGE>
Registrable Shares through the first GEI Demand Registration, then one or more
GEI Holders holding an aggregate number of Registrable GEI Shares at least equal
to twenty percent (20%) of the Registrable GEI Shares on the date hereof shall
be entitled to make the second GEI Demand; and provided, further that the first
-------- -------
GEI Demand Registration must cover an aggregate number of Registrable GEI Shares
at least equal to twenty-five percent (25%) of the number of Registrable GEI
Shares on the date hereof and the second GEI Demand Registration must cover an
aggregate number of Registrable GEI Shares at least equal to twenty percent
(20%) of the number of Registrable GEI Shares on the date hereof.
(b) Blechmans Holders' Demand Rights. Commencing on the earlier of
--------------------------------
(i) the date that is nine (9) months after the earlier of a Public Offering
Event or a Qualified IPO, and (ii) the second anniversary of the date of this
Agreement, Blechman Holders holding an aggregate number of Registrable Blechmans
Shares at least equal to twenty-five percent (25%) of the number of Registrable
Blechmans Shares on the date hereof shall be entitled to make written request (a
"BLECHMAN DEMAND") of the Company to register all or part of their Registrable
Blechmans Shares under the Securities Act (including, but not limited to, a
shelf registration under Rule 415 promulgated under the Securities Act) (a
"BLECHMAN DEMAND REGISTRATION"); provided, however, that not more than an
--------
aggregate of two (2) Blechman Demand Registrations with respect to the
Registrable Blechmans Shares may be made pursuant to the rights granted by this
Section 3.2.1(b); and provided, further that if one or more of the Blechmans
-------- -------
have not registered all or part of their Registrable Blechmans Shares through
the first Blechman Demand Registration, then one or more Blechman Holders
holding an aggregate number of Registrable Blechmans Shares at least equal to
twenty percent (20%) of the Registrable Blechmans Shares on the Date hereof
shall be entitled to make the second Blechman Demand; and provided, further that
-------- -------
the first Blechman Demand Registration must cover an aggregate number of
Registrable Blechmans Shares at least equal to twenty-five percent (25%) of the
number of Registrable Blechmans Shares on the date hereof and the second
Blechman Demand Registration must cover an aggregate number of Registrable
Blechmans Shares at least equal to twenty percent (20%) of the number of
Registrable Blechmans Shares on the date hereof.
(c) Selection of Underwriter. Any Demand Registration hereunder
------------------------
shall be on any appropriate form under the Securities Act permitting
registration of such Registrable Shares for resale by the Holders in the manner
or manners designated by them (including, without limitation, pursuant to one or
more underwritten offerings). The determination of whether the offering will
involve an underwritten offering shall be made by: (i) in the case of a GEI
Demand Registration, by Holders of a majority of the Registrable GEI Shares to
be included in such registration, and (ii) in the case of a Blechmans Demand
17
<PAGE>
Registration, by Holders of a majority of the Registrable Blechman Shares to be
included in such registration; provided, however, that the selection of
--------
investment bankers, managers and counsel shall be made by the Company, which
such investment bankers, managers and counsel shall be reasonably satisfactory
to the Holders of a majority of the Registrable Shares to be included in such
registration of the party which initiated such Demand Registration (i.e. GEI
Holders or Blechmans Holders, as the case may be)(the "INITIATING HOLDERS"). If
requested, the Company shall enter into an underwriting or purchase agreement
with an investment banking firm in connection with a Demand Registration,
containing representations, warranties, indemnities and agreements then
customarily included in underwriting or purchase agreements by such underwriter
with respect to secondary distributions of securities.
3.2.2 Registration. The Company shall file a registration statement
------------
with respect to each Demand Registration and use its best efforts to cause the
same to be declared effective as promptly as practicable following such Demand,
but not later than one hundred twenty (120) days thereafter; provided, however,
--------
that the Company shall not be required to expend unreasonable sums in
discharging its obligations under this Article 3. Unless all of the Registrable
Shares covered by the registration statement have earlier been sold or withdrawn
from sale, the Company shall keep any such Registration Statement effective for
a period of at least one hundred eighty (180) days after such registration
statement is first declared effective plus a period equal to (x) any period
during which the Selling Holders are prohibited from making sales because of any
stop order, injunction or other order or requirement of the Commission or any
other governmental agency or court plus (y) any Demand Suspension Period (as
defined below) plus (z) any holdback period pursuant to Section 3.6 that occurs
while the registration statement is effective (the "DEMAND PERIOD") and a
registration will not count as a Demand Registration unless it is declared
effective by the Commission and remains effective until the earlier of such time
as all of the Registrable Shares included on a demand basis in such registration
have been sold or disposed of or withdrawn from sale by the Selling Holders or
the expiration of the Demand Period or, if the registration remains effective
for a shorter period, the Selling Holders have sold at least eighty percent
(80%) of their Registrable Shares included in such Demand Registration. In
addition, a request for registration shall not be deemed to constitute a Demand
Registration for purposes of the preceding sentence if: (i) the conditions to
closing specified in the purchase agreement or underwriting agreement entered
into in connection with such Demand Registration are not satisfied other than by
reason of some act or omission by the Selling Holders; (ii) the Company
voluntarily takes any action that would result in the Selling Holders not being
able to sell such Registrable Shares covered thereby during the Demand Period;
(iii) after it has become effective, such Demand Registration becomes subject to
any stop order, injunction
18
<PAGE>
or other order or requirement of the Commission or other governmental agency or
court and such order, injunction or requirement is not promptly withdrawn or
lifted, and such Demand Registration has not otherwise remained effective for
the Demand Period (including effective periods both before and after the order,
injunction or requirement is made or imposed); or (iv) such Demand Registration
does not involve an underwritten offering and the Selling Holders determine not
to proceed following any delay imposed hereunder by the Company; provided,
--------
however, that prior to such a delay under this clause (iv), the Selling Holders
have not sold more than eighty percent (80%) of the Registrable Shares included
in such Demand Registration. Notwithstanding the foregoing, the Company may, at
any time, delay the filing or delay or suspend the effectiveness of the Demand
Registration or, without suspending such effectiveness, instruct the Selling
Holders not to sell any securities included in the Demand Registration, if the
Company shall have determined in good faith (as evidenced by a Board resolution
delivered to the Selling Holders) that proceeding with the Demand Registration
at such time may have a material adverse effect on the Company or the Company
shall have determined upon the advice of counsel that it would be required to
disclose any actions taken by the Company in good faith and for valid business
reasons, including without limitation, the acquisition or divestiture of assets,
which disclosure may have a material adverse effect on the Company or on such
actions (a "DEMAND SUSPENSION PERIOD"), by providing the Selling Holders with
written notice of such Demand Suspension Period and the reasons therefor. The
Company shall use its best efforts to provide such notice at least ten (10) days
prior to the commencement of such a Demand Suspension Period; provided, however,
-------- -------
that in any event the Company shall provide such notice no later than the
commencement of such Demand Suspension Period; and provided, further, that in no
-------- -------
event shall the Demand Suspension Periods exceed one hundred twenty (120) days
in any three hundred sixty (360) day period.
The Company further agrees to supplement or amend such registration
statement with respect to such Demand Registration, as required by the
registration form utilized by the Company or by the instructions applicable to
such registration form or by the Securities Act for the registration of
securities or as reasonably requested (which request shall result in the filing
of a supplement or amendment subject to approval thereof by the Company, which
approval shall not be unreasonably withheld) by any Selling Holder or any
managing underwriter of Registrable Shares to which such Demand Registration
relates, and the Company agrees to furnish to the Selling Holders (and any
managing underwriter) copies, in substantially the form proposed to be used
and/or filed, of any such supplement or amendment prior to its being used and/or
filed with the Commission. The Company shall amend or supplement the
registration statement with respect to such Demand Registration no less
frequently than every forty five (45) days to update the
19
<PAGE>
list of Selling Holders pursuant to written requests by such Holders.
3.2.3 Inclusion of Registrable Shares. Any written request for a
-------------------------------
Demand shall specify the number of Registrable Shares to be registered and the
intended methods of disposition thereof. Within ten (10) days after receipt of
such Demand, the Company shall give written notice of such registration request
to all Holders of Registrable Shares which have not yet utilized all of the
Demand Registrations to which they are entitled under this Agreement, and the
Company shall include in such registration all Registrable Shares with respect
to which the Company has received written requests for inclusion therein within
twenty (20) days after the date on which such notice is given. Each such request
shall also specify the aggregate number of Registrable Shares to be registered.
If the GEI Holders and the Blechmans Holders elect to participate in the Demand
Registration, the Demand will count toward the number of Demands permitted to
each of the GEI Holders and the Blechman Holders if the number of Registrable
Shares to be included in such Demand Registration by the GEI Holders or the
Blechman Holders, as the case may be, is equal to or exceeds ten percent (10%)
of the number of Registrable GEI Shares or Registrable Blechman Shares on the
date hereof, as the case may be (subject at all times to the limitations
regarding the definition of "Demand Registration" contained in Sections 3.2.2
and 3.2.4). The Company may also include in such Demand Registration shares of
Common Stock for the account of the Company and any other Persons who hold
shares of Common Stock.
3.2.4 Priority on Demand Registrations. If a Demand Registration is
--------------------------------
an underwritten registration and the managing underwriters of such offering
determine that the aggregate number of (i) Registrable Shares of the Selling
Holders exercising their rights to participate in the Demand Registration on a
demand basis, pursuant to this Section 3.2; (ii) Shares of the Company; and
(iii) Shares of any other Persons entitled to participate in such Demand
Registration, in each case proposed to be included in such registration
statement, exceeds the maximum number of Shares that can reasonably be expected
to be sold within a price range acceptable to the Company and the Initiating
Holders, then the number of shares to be offered for the account of the Company
and for the account of all such other Persons, other than holders of Registrable
Shares participating on a demand basis, participating in such registration shall
be reduced or limited pro rata (and to zero, if necessary) in proportion to the
--- ----
respective number of Shares requested to be registered to the extent necessary
to reduce the total number of Shares requested to be included in such
registration statement to the maximum number of Shares that can reasonably be
expected to be included therein and still satisfy such price requirement. If
the foregoing market "cutback" does not reduce the aggregate number of Shares
proposed to be included in the registration statement to the maximum number of
Shares that can reasonably be expected to be sold within the price range
acceptable to the Company and
20
<PAGE>
the Initiating Holders, the Company shall include in such registration,
Registrable Shares of such Selling Holders pro rata among all such Selling
--- ----
Holders on the basis of the number of Registrable Shares of the Company
requested to be included by all Selling Holders who have requested that
Registrable Shares owned by them be so included. Any request for registration
with respect to which such a market "cutback" with respect to the Selling
Holders occurs shall be deemed to constitute a Demand Registration for all
purposes of this Article 3; provided, however, that if any such market "cutback"
--------
occurs with respect to a Demand Registration in which the GEI Holders and
Blechmans Holders are participating and all such Selling Holders are not able to
sell at least eighty percent (80%) of the Registrable Shares which such Holders
proposed to sell pursuant to such Demand Registration, then such request for
registration will not count against the number of Demands to which the
Initiating Holders are entitled pursuant to Section 3.2 hereof.
3.2.5 Compliance. Notwithstanding any other provisions hereof, the
----------
Company shall use its best efforts to ensure that (i) any registration statement
filed in connection with a Demand Registration or a Qualified IPO, and any
amendment thereto, and any prospectus forming a part thereof, and any supplement
thereto, complies in all material respects with the Securities Act and the rules
and regulations thereunder, (ii) any registration statement filed in connection
with a Demand Registration or a Qualified IPO, and any amendment thereto does
not, when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (iii) any prospectus forming part
of any registration statement filed in connection with a Demand Registration or
a Qualified IPO, and any supplement to such prospectus, does not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements, in the light of the circumstances under which
they are made, not misleading.
3.3 Piggyback Registration.
----------------------
3.3.1 Right to Include Registrable Shares. If the Company at any
-----------------------------------
time proposes to register any of its equity securities under the Securities Act,
whether or not for sale for its own account, on a form and in a manner which
would permit registration of Registrable Shares for a public offering under the
Act (other than on a registration statement (i) on Form S-4 or Form S-8 or any
successor form thereto or (ii) filed in connection with an exchange offer), the
Company shall give written notice of the proposed registration to each Holder at
least fifteen (15) days prior to the filing thereof, and each Holder shall have
the right to request that all or any part of its Registrable Shares be included
in such registration by giving written notice to the Company within fifteen (15)
days after the giving of such notice by the Company. If the registration
21
<PAGE>
statement is to cover an underwritten offering, such Registrable Shares shall be
included in the underwriting on the same terms and conditions as the securities
otherwise being sold through the underwriters.
3.3.2 Priority on Piggyback Registrations.
-----------------------------------
(a) Company Registrations. If the registration is an underwritten
---------------------
primary registration on behalf of the Company and the managing underwriter(s) of
such offering determine in their good faith judgment that the aggregate number
of securities, including Registrable Shares, of the Company which all Holders
and all other security holders of the Company, pursuant to contractual rights to
participate in such registration (the "OTHER HOLDERS"), propose to include in
such registration statement exceeds the maximum number of securities, including
Registrable Shares, that can reasonably be expected to be sold in such offering
without materially and adversely affecting the marketability of the offering or
the selling price to be obtained, the Company will include in such registration,
first, the shares of Common Stock or other securities which the Company proposes
to sell and, second, the Registrable Shares of such Selling Holders and other
securities to be sold for the account of Other Holders, pro rata among all such
--- ----
Selling Holders and Other Holders, taken together, on the basis of the number of
Registrable Shares or other securities of the Company requested to be included
by all Selling Holders and Other Holders who have requested that securities
owned by them be so included (it being agreed and understood, however, that such
managing underwriter(s) shall have the right to eliminate entirely the
participation in such registration of all Selling Holders and Other Holders);
provided, that if such registration contemplates an "over-allotment option" on
- --------
the part of the underwriters, to the extent such over-allotment option is
exercised and Holders of Registrable Shares were excluded from registering any
Registrable Shares pursuant to the priority provisions of this Section 3.3.2(a),
then the over-allotment option shall, if agreed to by the managing underwriter,
be exercised with respect to such Registrable Shares to the extent of such
exclusion.
(b) Selling Holders' Registration. If the registration is an
-----------------------------
underwritten secondary registration on behalf of the Selling Holders pursuant to
Section 3.2 hereof, and the managing underwriter(s) determine that the aggregate
number of securities which all Selling Holders, the Company and all Other
Holders propose to include in such registration exceeds the maximum number of
securities that can reasonably be expected to be sold within the price range
acceptable to the Company and the Initiating Holders, the Company will include
in such registration, first, the Registrable Shares of the Selling Holders
participating in such registration on a demand basis in accordance with Section
3.2.4 hereof, and, second, any securities to be sold for the account of the
Company, securities to be sold for the account of the Selling Holders
participating in such
22
<PAGE>
offering on a piggyback basis and any securities to be sold for the account of
the Other Holders electing to include (but not being entitled to demand
inclusion of) securities in such registration, pro rata among the Company, all
--- ----
such Selling Holders and all such Other Holders, taken together, on the basis of
the number of Shares or other securities to be sold by the Company in the
absence of such pro ration, the number of Registrable Shares or other securities
--- ------
requested to be included by all such Selling Holders and the number of Shares or
other securities requested to be included by all such Other Holders (it being
agreed and understood, however, that such managing underwriter(s) shall have the
right to eliminate entirely the participation therein of the Company and of all
such Selling Holders and Other Holders with respect to such securities since
they are not entitled to demand inclusion of such securities); provided, that if
--------
such registration contemplates an "over-allotment option" on the part of
underwriters, to the extent such over-allotment option is exercised and Holders
of Registrable Shares were excluded from registering any Registrable Shares
pursuant to the priority provisions of this Section 3.3.2(b), then the over-
allotment option shall, if agreed to by the managing underwriter, be exercised
with respect to such Registrable Shares to the extent of such exclusion.
(c) Other Holders' Registration. If the registration is an
---------------------------
underwritten secondary registration on behalf of any of the Other Holders
pursuant to demand registration rights and the managing underwriters determine
that the aggregate number of securities which all Selling Holders, the Company
and all Other Holders propose to include in such registration exceeds the
maximum number of securities that should be included therein, the Company will
include in such registration, first, the securities to be sold for the account
of the Other Holders demanding registration (but only to the extent such Other
Holders are entitled to demand inclusion thereof), second, any securities to be
sold for the account of the Company, and, third, the Registrable Shares of such
Selling Holders and other securities to be sold for the account of the Other
Holders electing to include (but not being entitled to demand inclusion of)
securities in such registration, pro rata among all such Selling Holders and
--- ----
Other Holders, taken together, on the basis of the number of Registrable Shares
or other securities of the Company requested to be included by all Selling
Holders and such Other Holders who have requested that securities owned by them
be included (it being agreed and understood, however, that such managing
underwriter(s) shall have the right to eliminate entirely the participation
therein of all such Selling Holders and Other Holders with respect to such
securities since they are not entitled to demand inclusion of such securities).
(d) Underwriters. Registrable Shares proposed to be registered and
------------
sold for the account of any Selling Holder pursuant to a piggyback registration
shall be sold to prospective underwriters selected or approved by the Company,
and on the
23
<PAGE>
terms and subject to the conditions of one or more underwriting agreements
negotiated between the Company, the Initiating Holders, if any, and/or Other
Holders demanding registration and such prospective underwriters. The Selling
Holders shall be permitted to withdraw all or a part of the Registrable Shares
held by such Selling Holders which were to be included in such piggyback
registration at any time prior to the effective date of such registration. The
Company may withdraw any registration statement for such registration at any
time before it becomes effective, or postpone the offering of securities,
without obligation or liability to any Selling Holder participating on a piggy-
back basis.
3.4 Registration Statement. In connection with any registration of
----------------------
Registrable Shares under the Securities Act pursuant to this Agreement, the
Company will furnish each Selling Holder and each underwriter, if any, with a
copy of the registration statement and all amendments thereto and will supply
each such Selling Holder with copies of any prospectus included therein
(including a preliminary prospectus and all amendments and supplements thereto),
in each case including all exhibits, and such other documents as may be
reasonably requested, in such quantities as may be reasonably necessary for the
purposes of the proposed sale or distribution covered by such registration (the
Company hereby consenting to the use in accordance with all applicable law of
each such registration statement (or amendment or post-effective amendment
thereto) and each such prospectus (or preliminary prospectus or supplement
thereto) by each such Selling Holder and the underwriters, if any, in connection
with the offering and sale of the Registrable Shares covered by such
registration statement or prospectus). The Company shall not, however, be
required to maintain the registration statement relating to a Demand
Registration and to supply copies of a prospectus for a period beyond the Demand
Period, and, at the end of such period, the Company may deregister any
Registrable Shares covered by such registration statement and not then sold or
distributed. In connection with any such registration of Registrable Shares,
the Company will, at the request of the managing underwriter with respect
thereto (or, if not an underwritten offering, at the request of Selling Holders
holding a majority of the Registrable Shares to be included in the registration)
use its best efforts to register or qualify such Registrable Shares for sale
under the securities laws of such states as is reasonably requested to permit
the distribution of such Registrable Shares and to use its reasonable efforts to
keep each such registration or qualification effective during the period such
registration statement is required to be kept effective and to do such other
acts or things reasonably necessary to enable the disposition in such
jurisdictions of the securities covered by the applicable registration statement
in accordance with applicable "blue sky" securities laws of such jurisdictions;
provided, however, that the Company shall not be required in connection
- -------- -------
therewith or as a condition thereof to qualify as a foreign corporation or to
execute a general consent
24
<PAGE>
to service of process in any jurisdiction or become subject to taxation in any
jurisdiction.
In connection with any offering of Registrable Shares registered pursuant
to this Agreement, the Company shall (i) furnish each Selling Holder, at the
Company's expense and at least three (3) business days prior to the sale of any
Registrable Shares to the underwriters, with unlegended certificates in a form
eligible for deposit with The Depositary Trust Company representing ownership of
the Registrable Shares which are sold pursuant to the registration statement, in
such denominations and registered in such names as the managing underwriter, if
any, or such Selling Holder shall reasonably request, and (ii) instruct the
transfer agent and registrar of the Common Stock to release any stop transfer
orders with respect to the Registrable Shares so sold.
3.5 Registration Procedures. In connection with the Company's
-----------------------
obligations to effect a registration pursuant to Sections 3.2, 3.3 and 3.11 (but
subject to the last sentence of Section 3.3.2(d) and provided that any time
periods set forth in this Section 3.5 regarding effective periods and the like
shall apply only in the event of a Demand Registration), the Company will as
expeditiously as is reasonably practicable:
(i) prepare and file with the Commission as soon as practicable
(in the case of a Demand Registration) a registration statement with respect to
such Registrable Shares, on a form available for the sale of the Registrable
Shares by the Holders thereof in accordance with the intended method or methods
of distribution thereof and use its commercially reasonable efforts to cause
each such registration statement to become and remain effective; provided,
--------
however, that before filing a registration statement or prospectus or any
amendments or supplements thereto (including documents that would be
incorporated or deemed to be incorporated therein by reference) and, whether or
not filed pursuant to Section 3.2 or 3.3, the Company will furnish to the
Holders of the Registrable Shares covered by such registration statement and the
underwriters, if any, and any attorney, accountant or other agent retained by
the Holders of Registrable Shares covered by such registration statement, copies
of all such documents proposed to be filed, which documents will be subject to
the review and comment of such Holders, such counsel and underwriters, if any.
The Company will not file any registration statement or any amendment thereto or
any prospectus or any supplement thereto in connection with a Demand
Registration pursuant to Section 3.2 (including such documents incorporated by
reference and proposed to be filed after the initial filing of the registration
statement) to which the Holders of a majority of the Registrable Shares covered
by such registration statement or the underwriters, if any, shall reasonably and
timely object;
25
<PAGE>
(ii) prepare and file with the Commission such amendments and
post-effective amendments to such registration statement and such supplements to
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective (to the extent otherwise required by this
Agreement) and to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
until such time as all of such securities have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof set
forth in such registration statement or the expiration of the Demand Period (in
the case of a Demand Registration), whichever occurs earlier; provided, however,
-------- -------
that the only remedy for any failure to keep the registration statement so
effective shall be as set forth in Section 3.2.2 and provided, further, that the
-------- -------
Company will have no obligation to a Selling Holder participating in a
registration statement on a "piggyback" basis to keep a registration statement
effective for any particular period of time;
(iii) cooperate and assist in any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD");
(iv) notify each Selling Holder and the managing underwriter, if
any, promptly (and in any event within three (3) business days): (A) when the
prospectus or any prospectus supplement or post-effective amendment has been
filed, and with respect to the registration statement or any post-effective
amendment, when the same has become effective; (B) of any request by the
Commission or any other federal or state governmental authority for any
amendments or supplements to the registration statement or the prospectus or for
additional information; (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose; (D) if, at any time prior to the closing
contemplated by an underwriting agreement entered into in connection with such
registration statement, that the representations and warranties of the Company
contained in such agreement cease to be true and correct; (E) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Registrable Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (F) of the
happening of any event which makes any statement made in the registration
statement, the prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue and which requires the making of any
changes in the registration statement, the prospectus or any document
incorporated therein by reference in order to make the statements therein not
misleading; and (G) of the Company's reasonable determination that a post-
effective amendment to a registration statement would be required;
26
<PAGE>
(v) make commercially reasonable efforts to prevent the issuance
of any order suspending the effectiveness of the registration statement or of
any order preventing or suspending the use of a prospectus or suspending the
qualification of any of the Registrable Shares included therein for sale in any
jurisdiction (subject to the proviso at the end of the penultimate paragraph of
Section 3.4), and, in the event of the issuance of any stop order suspending the
effectiveness of the registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction (subject to the proviso at the end of the penultimate paragraph of
Section 3.4), the Company will use its best efforts to promptly obtain the
withdrawal of any such order;
(vi) furnish to each Selling Holder and the managing underwriters,
if any, without any additional charge, one signed copy of the registration
statement and any post-effective amendment thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits (including those incorporated by reference);
(vii) as promptly as reasonably practicable, if required, based on
the advice of the Company's counsel, or upon the occurrence of any event
contemplated by Section 3.5(iv)(F), prepare and file a supplement or post-
effective amendment to the registration statement, the related prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable Shares,
the prospectus will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading;
(viii) cause all Registrable Shares covered by the registration
statement to be listed on each securities exchange on which identical securities
issued by the Company are then listed if requested by the Selling Holders
holding a majority in number of the Registrable Shares covered by the
Registration Statement or the managing underwriters, if any;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Shares covered by such registration statement from
and after a date not later than the effective date of such registration
statement;
(x) use its best efforts to provide a CUSIP number for the
Registrable Shares, not later than the effective date of the registration
statement;
(xi) use its best efforts to (A) obtain opinions of counsel to the
Company (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and not objected
to by the Holders
27
<PAGE>
of a majority of the Registrable Shares being sold), and updates thereof
addressed to the Selling Holders, covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may be
reasonably requested by the underwriters, if any; and (B) obtain "cold comfort"
letters and updates thereof (which letters and updates (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriters, if
any, and counsel to the Holders of a majority of the Registrable Shares being
sold) from the Company's independent certified public accountants addressed to
such Selling Holders (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data are, or are required
to be, included in the registration statement), such letters to be in customary
form and covering matters of the type customarily covered in "cold comfort"
letters by accountants in connection with underwritten offerings and such other
matters as the underwriters, if any, or the Holders of a majority of the
Registrable Shares being sold, reasonably request. The above shall be done at
each closing under such underwriting or similar agreement or as and to the
extent required thereunder or, if not an underwritten offering, as otherwise
reasonably requested by the Holders of a majority of the Registrable Shares
being sold;
(xii) make available for inspection by a representative of the
Selling Holders and any attorneys or accountants retained by such Holders (and,
to the extent reasonably requested, furnish copies), in connection with the
preparation of a registration statement pursuant to this Agreement, all
financial and other records and pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such representative(s), attorney(s)
or accountant(s) in connection with such registration; provided, however, that
--------
any records, information or documents that are designated by the Company in
writing as confidential shall be kept confidential by such persons unless
disclosure of such records, information or documents is required by court or
administrative order or under applicable law; and provided, further, that
-------- -------
appropriate arrangements are made, to the extent required by applicable
antitrust law, to limit access to such information of the Company to
representatives of the Holders who are not officers or employees of the Selling
Holders; and provided, further that, without limiting the foregoing, no such
-------- -------
information shall be used by any such Person in connection with any market
transactions in securities of the Company or its subsidiaries in violation of
law;
(xiii) enter into such agreements reasonably requested (including, as
applicable, an underwriting agreement in form, scope and substance as is
customary in underwritten secondary offerings and is reasonably satisfactory to
the Company) and take all such other customary and reasonable actions
28
<PAGE>
in connection therewith (including those requested by the managing underwriters)
in order to expedite or facilitate the disposition of the Registrable Shares,
and in such connection, whether or not an underwriting agreement is entered into
and whether or not the registration is an underwritten registration:
(a) make such representations and warranties to the Holders of
such Registrable Shares included in the registration statement and the
underwriters, if any, with respect to the business of the Company and the
registration statement, prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each case, in form,
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings and confirm the same, if and when reasonably
requested; and
(b) deliver such documents and certificates as may be reasonably
requested by the Holders of a majority of the Registrable Shares being
included in the registration statement and managing underwriters, if any,
to evidence compliance with clause (a) above and with any provisions
contained in the underwriting agreement or other similar agreement entered
into by the Company;
The above shall be done at each closing under such underwriting or similar
agreement or as and, if not an underwritten offering, to the extent otherwise
reasonably requested by the Holders of a majority of the Registrable Shares
being sold pursuant to the registration statement;
(xiv) (a) if so required by the managing underwriter in an
underwritten offering of Registrable Securities covered by a registration
statement filed pursuant to Section 3.2 or 3.3 hereof, not publicly or privately
sell, make any short sale of, loan, grant any option, effect any public sale or
distribution of or otherwise dispose of its equity securities or securities
convertible into or exchangeable or exercisable for any of such securities
during the ten (10) days prior to and the ninety (90) days after any
underwritten registration pursuant hereto has become effective, except as part
of such underwritten registration and except pursuant to any exchange offer or
registrations on Form S-4 or S-8 or any successor or similar forms thereto,
except that the Company may make grants of options under its stock option plans
and may issue securities issuable upon the exercise or conversion of outstanding
convertible securities, stock options and other options, warrants and rights of
the Company and (b) if requested, use reasonable efforts to cause each holder of
ten percent (10%) or more of the securities of the same class as the securities
included in any underwritten registration pursuant to Section 3.2 hereof, or any
securities convertible into or exchangeable or exercisable for such securities,
in each case purchased from the Company at any time after the date of this
Agreement (other than in a registered public offering) to agree not to effect
any public or private
29
<PAGE>
sale or distribution or otherwise dispose (including sales pursuant to Rule 144
promulgated under the Act) of any such securities during the ten (10) days prior
to and the ninety (90) days after any underwritten registration pursuant hereto
has become effective (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered public
offering otherwise agree;
(xv) if requested, furnish each Selling Holder with a copy (or a
reasonable number of copies, as requested) of the registration statement
(together with the Exhibits thereto) and each amendment thereto prior to the
filing thereof with the Commission;
(xvi) if requested by the managing underwriters, if any, or a Holder
of Registrable Shares being sold, promptly incorporate in a prospectus,
supplement or post-effective amendment such information as the managing
underwriters, if any, and the Holders of the Registrable Shares being sold
reasonably request to be included therein relating to the sale of the
Registrable Shares, including, without limitation, information with respect to
the number of Registrable Shares being sold to underwriters, the purchase price
being paid therefor by such underwriters and with respect to any other terms of
the underwritten offering of the Registrable Shares to be sold in such offering;
and make all required filings of such prospectus, supplement or post-effective
amendment promptly following notification of the matters to be incorporated in
such supplement or post-effective amendment;
(xvii) upon the occurrence of any event that would cause a shelf
registration statement (A) to contain a material misstatement or omission or (B)
to be not effective and usable for resale of Registrable Shares during the
Demand Period, the Company shall promptly file an amendment to such shelf
registration statement, in the case of clause (A), correcting any such
misstatement or omission and, in the case of either clause (A) or (B), use its
commercially reasonable efforts to cause such amendment to be declared effective
and such shelf registration statement to become usable as soon as reasonably
practicable thereafter;
(xviii) otherwise use its best efforts to (x) comply with all
applicable rules and regulations of the Commission and to take all other steps
reasonably necessary to effect the registration of the Registrable Shares
covered by the registration statement contemplated hereby, and (y) make
available to its securityholders an earnings statement which satisfies the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Act) no later than forty-five (45) days
after the end of any twelve-month (12) period (or ninety (90) days after the end
of any twelve-month (12) period if such period is a fiscal year) (or in each
case within such extended period of time as may be
30
<PAGE>
permitted by the Commission for filing the applicable report with the
Commission) (i) commencing at the end of any fiscal quarter in which Registrable
Shares are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company after the
effective date of a Registration Statement, which statements shall cover said
twelve-month (12) periods; and
(xix) in connection with any underwritten offering, cooperate
with all marketing efforts reasonably requested by the managing underwriter or
managing underwriters in connection with the sale of the Registrable Shares,
including, without limitation, participation in a reasonable number of road-show
presentations (in major U.S. financial cities) and other marketing activity by
executives and other employees of the Company requested by such underwriter or
underwriters provided that the scheduling of the road-show presentations shall
be set in consultation with the Company and will not require the Company's
involvement at any time or place to which the Company has a reasonable
objection.
3.6 Holdback Agreements.
-------------------
Restrictions on Public Sale by Holders of Registrable Securities.
----------------------------------------------------------------
Each Holder of Registrable Shares (whether or not such Registrable Shares are
covered by a Registration Statement filed pursuant to Section 3.2 or 3.3 hereof)
agrees, if requested (pursuant to a timely written notice) by the managing
underwriter or underwriters in an underwritten offering, not to effect any
public sale or distribution of any of the Company's securities, including a sale
pursuant to Rule 144 (except as part of such underwritten offering), during the
period beginning ten (10) days prior to, and ending ninety (90) days after, the
closing date of the underwritten offering made pursuant to such Registration
Statement.
The foregoing provisions shall not apply to any holder of Registrable
Shares if such Holder is prevented by applicable statute or regulation from
entering into any such agreement; provided, however, that any such Holder shall
-------- -------
undertake not to effect any public sale or distribution of the class of
securities covered by such Registration Statement (except as part of such
underwritten offering) during such period unless it has provided sixty (60)
days' prior written notice of such sale or distribution to the managing
underwriter.
3.7 Registration Expenses. Except as otherwise required by state
---------------------
securities laws or the rules and regulations promulgated thereunder, all
expenses, disbursements and fees incurred by the Company in connection with
carrying out its obligations under this Article 3, including but not limited to,
(i) the reasonable and documented fees and expenses of one counsel for each of
(a) the GEI Holders and (b) the Blechmans Holders (each taken as
31
<PAGE>
a group), to the extent each is a Selling Holder) (ii) all registration, filing
fees and expenses (including fees with respect to filings made with the NASD
(including, if applicable, the fees and expenses of any "qualified independent
underwriter" and its counsel, as may be required by the rules and regulations of
the NASD, (iii) fees and expenses of compliance with securities or blue sky laws
(including fees and disbursements of counsel for the underwriters or Selling
Holders in connection with blue sky qualifications of the Registrable Shares and
determinations of their eligibility for investment under the laws of such
jurisdiction as the managing underwriters or Holders of a majority of the
Registrable Shares being sold may designate, subject to the proviso to the last
sentence of the penultimate paragraph of Section 3.4), (iv) printing expenses
(including printing certificates for the Registrable Shares to be sold and the
registration statements and prospectuses), messenger and delivery expenses,
duplication, word processing, and telephone, (v) fees and disbursements of
counsel for the Company, and (vi) fees and disbursements of all independent
certified public accountants of the Company incurred in connection with such
registration (including the expenses of any special audit and "cold comfort"
letters incident to such registration), underwriters (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer managers or similar
securities industry professionals relating to the distribution of the
Registrable Shares) and other Persons retained by the Company (all such expenses
being herein called "REGISTRATION EXPENSES"), will be borne by the Company
regardless of whether a registration statement becomes effective; provided,
--------
however, that the Company will, in any event, pay its internal expenses
(including, without limitation), all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit or quarterly review, the fees and expenses of any Person, including
special experts, retained by the Company, the expense of any liability insurance
and the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or on the NASD automated quotation system; and provided further, that
-------- -------
each Selling Holder shall pay (x) all costs and expenses of counsel (other than
the counsel costs referred to in (i) above), accounting or financing
professionals retained by such Selling Holder, (y) all underwriting discounts,
commissions, fees and expenses and all transfer taxes with respect to the Shares
sold by such Selling Holder, and (z) all other expenses incurred by such Selling
Holder and incidental to the sale and delivery of the Shares to be sold by such
Holder.
3.8 Conditions to Holder's Rights. It shall be a condition of each
-----------------------------
Selling Holder's rights hereunder that:
3.8.1 Cooperation. Such Selling Holder shall cooperate with the
-----------
Company by supplying information and executing documents relating to such
Selling Holder or the securities of the Company owned by such Selling Holder in
connection with such
32
<PAGE>
registration which are customary for offerings of this type (including agreeing
to sell such Selling Holder's Registrable Shares on the basis provided in any
underwriting arrangements containing customary terms reasonably satisfactory to
such Selling Holder);
3.8.2 Undertakings. Such Selling Holder shall enter into any
------------
undertakings and take such other action relating to the conduct of the proposed
offering which the Company or the underwriters may reasonably request as being
necessary to insure compliance with federal and state securities laws and the
rules or other requirements of the NASD or which the Company or the underwriters
may reasonably request to otherwise effectuate the offering; and
3.8.3 Indemnification. Such Selling Holder shall execute and
---------------
deliver an agreement to indemnify to the fullest extent permitted by law and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement, any underwriter (as defined in the Securities
Act), and each person, if any, who controls the Company or such underwriter
within the meaning of the Securities Act, against such losses, claims, damages
or liabilities (including reimbursement for legal and other expenses) to which
the Company or any such director, officer, underwriter or controlling person may
become subject under the Securities Act or otherwise, in such manner as is
customary for registrations of the type then proposed, but only with respect to
written information about or pertaining to such Selling Holder furnished by such
Selling Holder for inclusion in the Registration Statement.
3.9 Indemnification.
---------------
3.9.1 Indemnification by the Company. In the case of any offering
------------------------------
registered pursuant to this Agreement, the Company agrees to indemnify to the
fullest extent permitted by law and hold each Selling Holder, each affiliate of
such Selling Holder and each director, officer, agent, representative and
employee of such Selling Holder and its affiliates, each Person who controls
each Selling Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act and the directors, officers, agents or employees
of each such controlling person harmless against any and all losses, claims,
damages, liabilities, actions (including reasonable and documented costs
(including, without limitation, costs of preparation and reasonable attorneys'
fees and disbursements) and expenses, including reasonable expenses of
investigation) (collectively "LOSSES") to which they or any of them may become
subject under the Securities Act or any other statute or common law or
otherwise, insofar as any such Losses shall arise out of, be caused by or shall
be based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the registration statement relating to the sale of such
Registrable
33
<PAGE>
Shares, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus (as amended or
supplemented if the Company shall have filed with the Commission any amendment
thereof or supplement thereof), if used prior to the effective date of such
registration statement, or contained in the prospectus (as amended or
supplemented if the Company shall have filed with the Commission any
amendment,thereof or supplement thereof, including the information deemed part
of such registration statement pursuant to Rule 430A promulgated under the
Securities Act), if used within the period during which the Company shall be
required to keep the registration statement to which such prospectus relates
current pursuant to the terms of this Agreement, or the omission or alleged
omission to state therein (if so used) a material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the indemnification agreement
--------
contained in this Section 3.9.1 shall not apply to such Losses which shall arise
from the sale of Registrable Shares to any Person if such Losses shall arise out
of, shall be caused by or shall be based upon any such untrue statement or
alleged untrue statement, or any such omission or alleged omission, (i) if such
statement or omission shall have been made in reliance upon and in conformity
with information furnished in writing to the Company by such Selling Holder
specifically for use in connection with the preparation of the registration
statement or any preliminary prospectus or prospectus contained in the
registration statement or any such amendment thereof or supplement thereto; (ii)
if such untrue statement or omission was made in any preliminary prospectus to
the extent that (a) the prospectus corrected such untrue statement or such
omission and (b) the Selling Holder was legally required to and failed to send
or deliver a copy of the preliminary prospectus with or prior to the delivery of
written confirmation of the sale by such Selling Holder of Registrable Shares to
the Person asserting the claim from which such Losses arise; or (iii) any such
Losses arise out of, are caused by or are based upon an untrue statement or
omission in the prospectus, to the extent that (a) such untrue statement or
omission is corrected in an amendment or supplement to the prospectus and (b)
having previously been furnished by or on behalf of the Company with copies of
the prospectus as so amended or supplemented, such Selling Holder was legally
required to and thereafter fails to deliver such prospectus as so amended or
supplemented, prior to or concurrently with the sale of Registrable Shares to
the Person asserting the claim from which such Losses arise. This indemnity
shall be in addition to any other indemnification arrangements to which the
Company may otherwise be a party.
3.9.2 Indemnification by Holders of Registrable Shares. Each
----------------------------------------- ------
Selling Holder agrees to indemnify to the fullest extent permitted by law and
hold the Company, its directors,
34
<PAGE>
officers, agents and employees, each Person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
and the directors, officers, agents or employees of such controlling persons
harmless against any and all Losses arising out of, caused by or based upon any
untrue statement of a material fact contained in any registration statement,
prospectus or form of prospectus, or arising out of, caused by or based upon any
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of the preliminary prospectus and the
prospectus, in each case, including amendments or supplements, in light of the
circumstances in which they were made) not misleading, to the extent, but only
to the extent, that such untrue statement or omission is contained in any
information furnished in writing by such Selling Holder to the Company,
expressly for use in such registration statement or prospectus; provided,
--------
however, that the obligation to indemnify will be several and not joint and in
no event shall the liability of any Selling Holder hereunder be greater in
amount than the dollar amount of the proceeds (net of the payment of
underwriting discounts and commissions payable by such Selling Holder) received
by any such Selling Holder upon the sale of the Registrable Shares giving rise
to such indemnification obligation. The Company and the Selling Holders shall
be entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution to the same extent as provided above with respect to information so
furnished in writing by such Persons expressly for use in any prospectus or
registration statement.
3.9.3 Conduct of Indemnification Proceedings. Any Person entitled
--------------------------------------
to indemnity under this Agreement (an "INDEMNIFIED PARTY") shall give prompt
written notice to the party from which such indemnity is sought (the
"INDEMNIFYING PARTY") of any claim or of the commencement of any proceeding with
respect to which such Indemnified Party seeks indemni fication or contribution
pursuant hereto; provided, however, that the failure so to notify the
--------
Indemnifying Party shall not relieve the indemnifying party from any obligation
or liability except to the extent that the Indemnifying Party has been
prejudiced materially by such failure. The Indemnifying Party shall have the
right, exercisable by giving written notice to an Indemnified Party promptly
after the receipt of written notice from such Indemnified Party of such claim or
proceeding to assume at the Indemnifying Party's expense, the defense of any
such claim or proceeding, with counsel reasonably satisfactory to such
Indemnified Party; provided, however, that under such circum stances an
--------
Indemnified Party shall have the right to employ separate counsel in any such
claim or proceeding and to partici pate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party
unless: (1) the Indemnifying Party agrees to pay such fees and expenses; or (2)
the Indemnifying Party fails promptly to assume the defense of such claim or
proceeding or fails to employ counsel
35
<PAGE>
reasonably satisfactory to such Indemnified Party; or (3) the Indemnified Party
shall have been advised by counsel that (i) there may be one or more material
defenses available to such Indemnified Party that are different from or
additional to those available to the Indemnifying Party or its affiliates, or
(ii) a conflict of interest likely exists if such counsel represents such
Indemnified Party and such Indemnifying Party or its affiliate, in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof, it
being understood, however, that the Indemnifying Party shall not, in connection
with any one such claim or proceeding or,separate but substantially similar or
related claims or proceedings arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (together with appropriate local counsel which such counsel
shall be designated by the Indemnified Party and be reasonably acceptable to the
Indemnifying Party) at any time for such Indemnified Party, or for fees and
expenses that are not reasonable. Whether or not such defense is assumed by the
Indemnifying Party, such Indemnifying Party will not be subject to any liability
for any settlement made without its consent (which consent shall not be
unreasonably withheld). The Indemnifying Party shall not consent to entry of
any judgment or settle or compromise any pending or threatened claim, action or
proceeding, unless it contains as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release, in form and
substance satisfactory to the Indemnified Party, from all liability in respect
of such claim or litigation for which such Indemnified Party would be entitled
to indemnification hereunder.
The Indemnifying Party's liability to any such Indemnified Party
hereunder shall not be extinguished solely because any other Indemnified Party
is not entitled to indemnity hereunder.
3.9.4 Contribution. If the indemnification provided for in this
------------
Section 3.9 is unavailable to an Indemnified Party in respect of any Losses or
is insufficient to hold such Indemnified Party harmless, then, except to the
extent that contribution is not permitted under Section 11(f) of the Securities
Act, each applicable Indemnifying Party shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in such proportion
as is appropriate to reflect the relative fault of the Indemnifying Party, on
the one hand, and such Indemnified Party, on the other hand, in connection with
the actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations appropriate under the circumstances. The
relative fault of such Indemnifying Party, on the one hand, and such Indemnified
Party, on the other hand, shall be determined by reference to, among other
things, whether any
36
<PAGE>
action in question, including any untrue statement of a material fact or
omission to state a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information concerning the matter
with respect to which the claim was asserted and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 3.9.4 were determined by pro rata
--- ----
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 3.9.4, no Indemnifying Party that
is a Selling Holder shall be required to contribute any amount in excess of the
amount by which the net proceeds received by such Selling Holder from the sale
of Registrable Shares exceeds the amount of any damages that such Selling Holder
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this Section
-------
3.9 are in addition to any liability that the Indemnifying Parties may have to
- ---
the Indemnified Parties.
3.9.5 Underwriting Agreement to Govern. At such time as an
--------------------------------
underwriting agreement with respect to a particular underwriting is entered
into, the terms of any such underwriting agreement shall govern with respect to
the matters set forth therein to the extent inconsistent with this Section 3.9;
provided, however, that the indemnification provisions of such underwriting
- --------
agreement as they relate to Selling Holders are customary for registrations of
the type then proposed and provide for indemnification by such Selling Holders
only with respect to written information furnished by such Selling Holders.
3.10 Rules 144 and 144A. Following the earlier of a Public Offering Event
------------------
or a Qualified IPO, the Company shall file the reports required to be filed by
it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder and will take such further action as any
Holder of Registrable Shares may reasonably request, all to the extent required
from time to time to enable such Holder to sell Registrable Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144. Upon the request of any Holder of Registrable Shares, the
Company
37
<PAGE>
will deliver to such Holder a written statement as to whether it has complied
with such requirements. At any time when the Company is not subject to Section
13 or 15(d) of the Exchange Act, the Company agrees, for the benefit of the
Holders, to furnish, at the Company's expense, to any requesting Holder and
prospective purchasers designated by such Holder, information required to be
disclosed pursuant to subsection (d)(4)(i) of Rule 144A promulgated under the
Securities Act.
3.11 Qualified IPO. Notwithstanding anything in this Agreement to the
-------------
contrary, at any time subsequent to six (6) months following the date of this
Agreement, GEI or the Blechmans shall be entitled to notify the Company (and GEI
or the Blechmans, as the case may be), in writing, (the party which gives such
notice being hereafter referred to as the "Qualified IPO Initiating Party") to
engage in a "Qualified IPO". Upon receipt of such notice, the Company, the GEI
Parties and the Blechman Parties shall cooperate and use their respective
commercially reasonable efforts to facilitate the consummation of the Qualified
IPO, including but not limited to, taking, facilitating or observing the actions
and obligations specified in Sections 3.2.5, 3.5, 3.6, 3.7, 3.8 and 8.16 with
appropriate modifications as to the identities of parties and other matters.
All determinations with respect to the conduct of the Qualified IPO, including,
but not limited to, the number of shares of Common Stock to be offered or sold
by the Company and the other terms of the Qualified IPO and the selection of the
investment bankers and managers and legal counsel to be engaged in connection
therewith shall be made by the Qualified IPO Initiating Party, which such terms,
investment bankers and managers and legal counsel shall be reasonably acceptable
to the holders of a majority of the shares of Common Stock held by the GEI
Parties or the Blechman Parties, as the case may be.
ARTICLE 4. Representations and Warranties
------------------------------
4.1 Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants to the Stockholders as follows:
4.1.1 Organization. It is a corporation duly organized and validly
------------
listing under the laws of the State of Delaware;
4.1.2 Authority. It has full corporate power and authority to
---------
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby;
4.1.3 Binding Obligation. The execution, delivery and performance
------------------
of this Agreement by it and the consummation by it of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on its part, and this Agreement constitutes its binding
obligation,
38
<PAGE>
enforceable against it in accordance with its terms, except insofar as
enforceability may be limited by bankruptcy, insolvency, moratorium or other
laws which may affect creditors' rights and remedies generally and by principles
of equity (regardless of whether enforceability is considered in a proceeding in
equity or at law); and
4.1.4 No Conflict. The execution, delivery and performance of
-----------
this Agreement by it and the consummation by it of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time, or
both, (i) violate any provision of law, statute, rule or regulation to which it
is subject, (ii) violate any order, judgment or decree applicable to it, or
(iii) conflict with, or result in a breach or default under, any term or
condition of its certificate of incorporation or its by-laws or any material
agreement or other material instrument to which it is a party or by which it or
its property is bound.
4.2 Representations and Warranties of the Stockholders. Each of the
--------------------------------------------------
Stockholders represents and warrants to each other and to the Company as
follows:
4.2.1 Organization. If it is an entity, it is a corporation,
------------
limited partnership or other entity duly organized and validly existing under
the laws of its respective state of organization;
4.2.2 Authority. It has full power and authority to execute,
---------
deliver and perform this Agreement and to consummate the transactions
contemplated hereby;
4.2.3 Binding Obligation. The execution, delivery and
------------------
performance of this Agreement by it and the consummation by it of the
transactions contemplated hereby have been duly and validly authorized by all
necessary action on its part, and this Agreement constitutes its binding
obligation, enforceable against it in accordance with its terms, except insofar
as enforceability may be limited by bankruptcy, insolvency, moratorium or other
laws which may affect creditors' rights and remedies generally and by principles
of equity (regardless of whether enforceability is considered in a proceeding in
equity or at law); and
4.2.4 No Conflict. The execution, delivery and performance of
-----------
this Agreement by it and the consummation by it of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time, or
both, (i) violate any provision of law, statute, rule or regulation to which it
is subject, (ii) violate any order, judgment or decree applicable to it, or
(iii) conflict with, or result in a breach or default under, any term or
condition of its certificate of incorporation, bylaws or equivalent governing
document or any material agreement or other material instrument to which it is a
party or by which it or its property is bound.
39
<PAGE>
ARTICLE 5. Termination of Agreement
------------------------
Subject to the next succeeding sentence, this Agreement shall terminate ten
(10) years from the date of this Agreement (the "TERMINATION DATE"). The
provisions of Article 1 and Article 7 of this Agreement shall terminate on the
date of a Public Offering Event or a Qualified IPO which occurs prior to the
Termination Date and the provisions of Sections 2.4 and 2.8 of this Agreement
shall terminate one hundred eighty (180) days after the date of a Public
Offering Event or a Qualified IPO which occurs prior to the Termination Date.
ARTICLE 6. Obligations of the Company;
---------------------------
6.1 Financial Statements, Certifications and Information. So long as the
----------------------------------------------------
Blechman Parties in the aggregate or the GEI Parties in the aggregate hold at
least five percent (5%) of the outstanding shares of Common Stock and the
Company is not otherwise subject to the reporting requirements of the Securities
Exchange Act of 1934 ("EXCHANGE ACT"), the Company will deliver to the Blechmans
and GEI, as the case may be, the following financial statements. As soon as
available and in any event within forty-five (45) days after the end of each
fiscal quarter (other than a fiscal quarter ending on the fiscal year end), the
Company will deliver unaudited consolidated balance sheets of the Company as of
the end of such fiscal quarter and the related consolidated statements of
income, stockholders' equity and cash flows for such fiscal quarter and for the
period from the beginning of the then current fiscal year to the end of such
fiscal quarter, setting forth in each case in comparative form the corresponding
figures for the corresponding periods of the previous fiscal year, certified by
the chief financial officer of the Company that the consolidated financial
statements fairly present the consolidated financial condition of the Company as
at the dates indicated and the results of its operations and its cash flows for
the periods indicated, subject to changes resulting from audit and normal year-
end adjustments; provided, it is hereby agreed that this obligation of the
--------
Company with respect to the production of quarterly reports shall begin with the
fiscal quarter ended June 30, 1996. As soon as available and in any event
within ninety (90) days after the end of each fiscal year, the Company will
deliver (a) the consolidated balance sheet of the Company as of the end of such
fiscal quarter and the related consolidated statements of income, stockholders'
equity and cash flows for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the previous fiscal year,
certified by the chief financial officer of the Company that such financial
statements fairly present the consolidated financial condition of the Company as
at the dates indicated and the results of its operations and its cash flows for
the periods indicated, and (b) in the case of such consolidated financial
statements, a report thereon of independent certified public accountants of
recognized national
40
<PAGE>
standing selected by the Company which shall state that such consolidated
financial statements fairly present the consolidated financial position of the
Company as of the dates indicated and the results of its operations and its cash
flow for the periods indicated in accordance with generally accepted accounting
principles applied on a basis consistent with prior years (except as otherwise
disclosed in such financial statements) and that the examination by such
accountants has been made in accordance with United States generally accepted
auditing standards.
Each financial statement delivered pursuant to this Section 6.1 shall be
substantially in the form appropriate for financial statements included in a
Quarterly Report on Form 10-Q or Annual Report on Form 10-K, as the case may be,
filed with the Commission pursuant to the Exchange Act and shall be accompanied
by a brief, narrative report appropriate for inclusion in such Form in the
section titled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" set forth in Item 303 of Regulation S-K under the Act and
the Exchange Act.
6.2 Confidentiality. Each Stockholder acknowledges that the information
---------------
that it shall receive pursuant to Section 6.1 constitutes non-public,
proprietary and/or confidential information of the Company and accordingly shall
hold all such information received pursuant to Section 6.1 (the "CONFIDENTIAL
INFORMATION") in confidence and shall not use or disclose any such Confidential
Information; provided, however, that a Stockholder may disclose any such
--------
Confidential Information (i) to its counsel, accountants and other professional
advisers for reasons reasonably related to such Stockholder's status as a
Stockholder, (ii) as required by law or any governmental authority (including,
but not limited to, any federal or state Freedom of Information Act), or (iii)
to a proposed bona fide Transferee; provided, however, that, in the case of
--------
clause (iii) above, any such person or entity shall execute a confidentiality
agreement containing provisions substantially identical to this Section 6.2 in
advance of its receipt of such information. Notwithstanding the foregoing, the
provisions of this Section 6.2 shall not apply to such portions of the
Confidential Information that (i) are or become available to the public through
no fault or action of any of the Stockholders or their respective
representatives, or (ii) become available to a Stockholder or its
representatives on a nonconfidential basis from a source, other than the Company
or its representatives, not known by such Stockholder to be in violation of any
agreement or other duty of confidentiality to the Company.
ARTICLE 7. Preemptive Rights
-----------------
If the Company shall, prior to the earlier of a Public Offering Event or a
Qualified IPO, issue, sell or distribute to any GEI Parties any equity or debt
securities of the Company, or any option, warrant, or right to acquire, or any
security convertible into or exchangeable for, any of the foregoing (other
41
<PAGE>
than pursuant to an underwritten offering pursuant to an effective registration
statement under the Securities Act) (a "GEI SECURITY ACQUISITION"), each
Blechman Party shall be entitled, provided that prior to the date of the GEI
--------
Security Acquisition the Blechman Parties have not Transferred more than 33.33%
of the shares of Common Stock issued to the Blechmans pursuant to the Purchase
Agreement other than by and among Blechman Parties, to participate in such
issuance, sale or distribution, on the same terms and conditions applicable to
the GEI Parties in the GEI Security Acquisition, on a pro rata basis. The pro
--- ----
rata number of securities eligible for purchase by each Blechman Party in a GEI
Security Acquisition shall be calculated by multiplying the total number of
securities to be issued, sold or distributed to the GEI Parties by the Company
in the GEI Security Acquisition by a fraction, the numerator of which is the
total number of Shares of Common Stock held by such Blechman Party immediately
prior to the date of the GEI Security Acquisition, and the denominator of which
is the total number of Shares of Common Stock held by the GEI Parties
immediately prior the date of the GEI Security Acquisition.
If the Company shall, prior to the earlier of a Public Offering Event or a
Qualified IPO, issue, sell or distribute to any Blechman Parties any equity or
debt securities of the Company, or any option, warrant, or right to acquire, or
any security convertible into or exchangeable for, any of the foregoing (other
than pursuant to an underwritten offering pursuant to an effective registration
statement under the Securities Act) (a "BLECHMAN SECURITY ACQUISITION"), each
GEI Party shall be entitled, provided that prior to the date of the Blechman
Security Acquisition the GEI Parties have not transferred more than 33.33% of
the Shares of Common Stock issued to GEI pursuant to the Purchase Agreement
other than by and among the GEI Parties, to participate in such issuance, sale
or distribution, on the same terms and conditions applicable to the Blechman
Parties in the Blechman Security Acquisition, on a pro rata basis. The pro rata
--- ----
number of securities eligible for purchase by each GEI Party in a Blechman
Security Acquisition shall be calculated by multiplying the total number of
securities to be issued, sold or distributed to the Blechman Parties by the
Company in the Blechman Security Acquisition by a fraction, the numerator of
which is the total number of Shares of Common stock held by such GEI Party
immediately prior to the date of the Blechman Security Acquisition, and the
denominator of which is the total number of Shares of Common Stock held by the
Blechman Parties immediately prior to the date of the Blechman Security
Acquisition.
Notices comparable to those required in connection with a Tag-Along Sale
pursuant to Section 2.4 shall be given in connection with this Article 7.
Notwithstanding anything to the contrary contained herein, none of the
provisions of this Article 7 shall apply to, or in
42
<PAGE>
any other way affect, limit or restrict, any redemptions, repurchases,
recapitalizations, sales, issuances, distributions or any other transactions
related to or involving shares of Preferred Stock held by or issued, sold or
distributed to GEI Parties.
ARTICLE 8. General
-------
8.1 Recapitalization, Exchanges, etc. Affecting the Common Stock. The
------------------------------------------------------------
provisions of this Agreement shall apply to the full extent set forth herein
with respect to (a) the Shares and any option, right or warrant to acquire
Shares, and (b) any and all shares of capital stock of the Company or any
successor or assign of the Company (whether by merger, consolidation, sale of
assets or otherwise) which may be issued in respect of, in exchange for, or in
substitution for the Shares, by combination, recapitalization, reclassification,
merger, consolidation or otherwise. In the event of any change in the
capitalization of the Company, as a result of any stock split, stock dividend or
stock combination, the provisions of this Agreement shall be appropriately
adjusted.
8.2 Injunctive Relief. It is hereby agreed and acknowledged that it will
-----------------
be impossible to measure in money the damages that would be suffered if the
parties fail to comply with any of the obligations herein imposed on them and
that, in the event of any such failure, an aggrieved person will be irreparably
damaged and will not have an adequate remedy of law. Any such person shall,
therefore, be entitled to injunctive relief, including specific performance, to
enforce such obligations, without the posting of any bond and if any action
should be brought in equity to enforce any of the provisions of this Agreement,
none of the parties hereto shall raise the defense that there is an adequate
remedy at law.
8.3 Notices. Any and all notices, demands or other communications
-------
required or permitted hereunder shall be in writing and shall be made by hand
delivery (deemed given upon receipt), or by certified mail return receipt
requested (deemed given upon execution of such return receipt), addressed to a
Stockholder and the Company at the address set forth below such person's or
entity's signature. Any party may change its address for notice by notice given
to each Stockholder and the Company in accordance with the foregoing. No
objection may be made to the method of delivery of any notice actually and
timely received. Each Stockholder agrees that notwithstanding any other
provisions of this Agreement, such Stockholder will give the other Stock holders
at least five (5) days' advance written notice of any proposed Transfer by such
Stockholder of any of the Shares owned by such Stockholder.
8.4 Legend. In addition to any other legend which may be required by
------
applicable law, each share certificate representing
43
<PAGE>
Shares which are subject to this Agreement shall have endorsed, to the extent
appropriate, upon its face the following words:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY
JURISDICTION. SUCH SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, ASSIGNED, ENCUMBERED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (I) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE
UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAW, OR (II)
ANY EXEMPTION FROM REGISTRATION UNDER SUCH ACT, OR
APPLICABLE STATE SECURITIES LAW, RELATING TO THE
DISPOSITION OF SECURITIES, INCLUDING RULE 144, PROVIDED AN
OPINION OF COUNSEL IS FURNISHED TO THE COMPANY, IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE ACT AND/OR APPLICABLE STATE SECURITIES LAW IS
AVAILABLE.
IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER
COMPLIES WITH THE PROVISIONS OF A STOCKHOLDERS AGREEMENT
DATED AS OF May 7, 1996 (THE "PRINCIPAL STOCKHOLDERS
AGREEMENT"), A COPY OF WHICH IS ON FILE AND MAY BE
INSPECTED AT THE PRINCIPAL OFFICE OF THE COMPANY. NO
TRANSFER OF THE SECURITIES WILL BE MADE ON THE BOOKS OF THE
COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH
THE TERMS OF SUCH PRINCIPAL STOCKHOLDERS AGREEMENT. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT
TO OTHER RIGHTS AND OBLIGATIONS AS SET FORTH IN THE
PRINCIPAL STOCKHOLDERS AGREEMENT.
8.5 Transferees Bound. All Shares owned by a Transferee shall, subject
-----------------
to the terms of Section 2.3 of this Agreement, for all purposes be subject to
the terms of this Agreement, whether or not such Transferee has executed a
consent to be bound by this Agreement. In the case of a hypothecation, the
Transfer shall be deemed to occur both at the time of the initial pledge and at
any pledgee's sale or a sale by any secured creditor or a retention by the
secured creditor of the pledged Shares in complete or partial satisfaction of
the obligation for which the Shares is
44
<PAGE>
security. The foregoing shall not apply in the case of any Shares acquired by a
Transferee pursuant to a sale of Shares pursuant to an effective registration
statement under the Securities Act or, except for sales to an affiliate of the
selling Stockholder(s), pursuant to Rule 144 promulgated under the Act.
8.6 Amendment; Waiver. This Agreement may be amended, modified,
-----------------
supplemented or terminated only by a written instrument signed by each of (i)
the Company, (ii) Stockholders holding a majority of the Registrable GEI Shares,
and (iii) Stockholders holding a majority of the Registrable Blechman Shares.
No provision of this Agreement may be waived orally, but only by a written
instrument signed by the party against whom enforcement of such waiver is
sought. Stockholders shall be bound from and after the date of the receipt of a
written notice from the Company setting forth such amendment or waiver by any
consent authorized by this Section, whether or not the Shares shall have been
marked to indicate such consent; no alteration, modification or impairment shall
be implied by reason of any previous waiver, extension of time, delay or
omission in exercise, or other indulgence.
8.7 Additional Documents. Each party hereto agrees to execute any and
--------------------
all further documents and writings within its powers and to perform such other
actions which may be or become necessary or expedient to effectuate and carry
out this Agreement.
8.8 No Third-Party Benefits. None of the provisions of this Agreement
-----------------------
shall be for the benefit of, or enforceable by, any third-party beneficiary.
8.9 Successors and Assigns. Subject to the terms hereof, this Agreement
----------------------
shall be binding upon and shall inure to the benefit of the Stockholders, and
their respective successors and permitted assigns; provided, however, (i)
--------
neither this Agreement nor any rights or obligations hereunder may be
transferred by the Company and (ii) no rights or obligations of any Stockholder
under this Agreement may be assigned except that any Stockholder may transfer
its rights and obligations hereunder, in whole or in part, in connection with a
Transfer of Shares made in compliance with all of the provisions of this
Agreement.
8.10 Severability. In case any one or more of the provisions contained in
------------
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein; provided, however, that the parties hereto shall
--------
use their best efforts to find and employ an alternative means to achieve the
same or substantially the same
45
<PAGE>
result as that contemplated by such invalid, illegal or unenforceable term,
provision, covenant or restriction.
8.11 Integration. This Agreement, together with the Secondary
-----------
Stockholders Agreement of even date herewith, among the Company, GEI, the
Blechmans, PMI Mezzanine Fund, L.P., Chase Equity Associates, L.P., DLJ
Investment Partners, L.P., DLJ Investment Funding, Inc., and State Treasurer of
the State of Michigan, Custodian of the Michigan Public School Employees'
Retirement System, State Employees' Retirement System, Michigan State Police
Retirement System, and Michigan Judges Retirement System, (the "SECONDARY
STOCKHOLDERS AGREEMENT"), contains the entire understanding of the parties with
respect to the subject matter hereof. There are no restrictions, agreements,
promises, representations, warranties, covenants or undertakings with respect to
the subject matter hereof other than those expressly set forth or referred to
herein or therein. This Agreement and the Secondary Stockholders Agreement
supersede all prior agreements and understandings between the parties with
respect to its subject matter.
8.12 Governing Law. THE RIGHTS AND LIABILITIES OF THE PARTIES SHALL BE
-------------
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE CHOICE
OF LAWS PROVISIONS OF SUCH STATE OR ANY OTHER JURISDICTION.
8.13 Attorneys' Fees. Should any litigation or arbitration be commenced
---------------
(including any proceedings in a bankruptcy court) between the parties hereto or
their representatives concerning any provision of this Agreement or the rights
and duties of any person or entity hereunder, the party or parties prevailing in
such proceeding shall be entitled, in addition to such other relief as may be
granted, to the reasonable attorneys' fees and court costs incurred by reason of
such litigation or arbitration.
8.14 Headings. The headings in this Agreement are inserted only as a
--------
matter of convenience, and in no way define, limit, or extend or interpret the
scope of this Agreement or of any particular Section.
8.15 Information for Notices. No Stockholder (other than a Stockholder as
-----------------------
of the date of this Agreement with respect to the Shares held as of such date)
shall hold any of its Shares in nominee name unless it otherwise provides the
Company and the other Stockholders with its name and address and other
information reasonably requested by the Company in order to establish such
Stockholder's particular status under this Agreement (e.g., GEI Holder, Blechman
Party, etc.).
8.16 Certain Amendments to Certificate of Incorporation. In connection
--------------------------------------------------
with and in order to facilitate an initial public offering of the Company's
Common Stock (including pursuant to a Demand Registration or a Qualified IPO),
each Blechman Party and each GEI Party agrees to take all such action as is
necessary,
46
<PAGE>
including the voting of all Shares owned by such Person in order to effectuate
(i) any amendments to the Company's Certificate of Incorporation regarding the
number of shares of the Company's authorized capital stock, (ii) any proposal to
effect a stock split of the Company's Common Stock, and any amendments to the
Company's Certificate of Incorporation, to the extent reasonably requested by
the Company, the Blechmans or GEI in connection with such offering, (iii) any
amendments to the Company's Certificate of Incorporation and By-Laws as are
customary for a company which is to engage in an initial public offering of its
common stock and which are reasonably requested by the managing underwriters or
by the Blechmans or GEI in order to expedite or facilitate the disposition of
the Company's Common Stock in connection with such offering, and (iv) the
entering into of any contract, agreement or commitment reasonably necessary in
order to effectuate any of the matters contemplated by this Section 8.16.
8.17 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.18 Consent to Jurisdiction. Each Stockholder agrees that any proceeding
-----------------------
arising out of or relating to this Agreement or the breach or threatened breach
of this Agreement may be commenced and prosecuted in a court in the State of New
York. Each Stockholder hereby irrevocably and unconditionally consents and
submits to the non-exclusive personal jurisdiction of any court in the State of
New York in respect of any such proceeding. Each Stockholder consents to
service of process upon it with respect to any such proceeding by registered
mail, return receipt requested, and by any other means permitted by applicable
laws and rules. Each Stockholder waives any objection that it may now or
hereafter have to the laying of venue of any such proceeding in any court in the
State of New York and any claim that it may now or hereafter have that any such
proceeding in any court in the State of New York has been brought in an
inconvenient forum.
8.19 No Inconsistent Agreements. The Company will not hereafter enter
--------------------------
into any agreements with respect to its securities which are inconsistent with
or violate in any material respects the rights granted to the Holders of
Registrable Shares in this Agreement.
8.20 Certain Distributions Exempt. Notwithstanding anything to the
----------------------------
contrary contained in this Agreement, any distribution by the GEI Parties to
their respective equity participants in accordance with the terms of their
respective limited partnership agreements shall be exempt from the terms and
conditions of this Agreement, other than that the Persons receiving the Shares
in connection with any such distribution shall be bound on a going-forward basis
by the terms and conditions of this Agreement. For example, and not by way of
47
<PAGE>
limitation, any such distribution shall not trigger any of the "tag-along"
rights set forth in Section 2.4.
8.21 Certain Limitations. Notwithstanding anything to the contrary
-------------------
contained in this Agreement, prior to the issuance or sale of any shares of the
Company's capital stock pursuant to an effective registration statement under
the Act, the Company shall not be required to register any transfer of Shares on
the Company's books if in the reasonable, good faith judgment of the Company,
registering such transfer would cause the Company to become subject to
registration pursuant to the Exchange Act.
8.22 Information Regarding Beneficial Ownership. Each Stockholder agrees
------------------------------------------
to promptly provide to the Company any information or representations that the
Company may request regarding such holder's beneficial ownership of shares of
any class of the Company's capital stock.
48
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first set forth above.
TLG Laboratories Holding Corp.
By: /s/ Brian Blechman
-----------------------------
Name:
Title:
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Fax: 516-471-2395
Attention: Philip M. Kazin
Brian Blechman
By: /s/ Brian Blechman
-----------------------------
Brian Blechman
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Fax: 516-471-2395
Attention: Brian Blechman
Neil Blechman
By: /s/ Neil Blechman
-----------------------------
Neil Blechman
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Fax: 516-471-2395
Attention: Neil Blechman
49
<PAGE>
Ross Blechman
By: /s/ Ross Blechman
------------------------------
Ross Blechman
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Fax: 516-471-2395
Attention: Ross Blechman
Steve Blechman
By: /s/ Steve Blechman
------------------------------
Steve Blechman
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Fax: 516-471-2395
Attention: Steve Blechman
Dean Blechman
By: /s/ Dean Blechman
------------------------------
Dean Blechman
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Fax: 516-471-2395
Attention: Dean Blechman
50
<PAGE>
Stephen Welling
By: /s/ Stephen Welling
----------------------------
Stephen Welling
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Fax: 516-471-2395
Attention: Stephen Welling
GREEN EQUITY INVESTORS II, L.P.
By: Grand Avenue Capital Partners,
L.P.
By: Grand Avenue Capital Corporation,
its general partner
By: /s/ Jennifer Holden Dunbar
------------------------------
Name:
Address for Notice:
333 South Grand Avenue, Suite 5400
Los Angeles, California 90071
Fax: (213) 625-2043
Attention: Jennifer Holden Dunbar
51
<PAGE>
SCHEDULE I
----------
<TABLE>
<CAPTION>
HEALTH FOOD MASS MARKET MULTI-LEVEL MAGAZINE
- ----------- ----------- ----------- --------
<S> <C> <C> <C>
General Nutrition Nature's Bounty Herbal Life Muscle & Fitness (Brute Enterprises, Inc.) Division of Weider
Publications, Inc.
Weider Health & P. Leiner Amway Flex (Brute Enterprises, Inc.) Division of Weider Publications, Inc.
Fitness Garden State Nature's Sunshine Iron Man (Iron Man Magazine)
Nature's Way Nutritionals Muscle Media 2000 (Muscle Media 2000, Inc.)
Select Tea Muscle Mag (Canusa Products/World Color Press)
Traditional Medicinals
Celestial Seasonings
Soloray (Nutriceuticals
Corp.)
KAL (Nutriceuticals
Corp.)
Country Life
Solgar
Nature's Plus
Schiff
Natrol
Enzymatic Therapy
Rainbow Light
Nature's Answer
Amerifit
Cybergenics
EAS
MetRx
Nature's Life
</TABLE>
The foregoing shall be deemed to include any successor or
assign (whether direct or indirect, by purchase, merger,
reorganization, consolidation, acquisition of assets or
stock, liquidation or otherwise) of any business listed
above (if the successor or assign of such business remains a
competitor of the Company or its subsidiaries substantially
to the same extent as such business listed above).
52
<PAGE>
APPENDIX A
----------
EXECUTIVE OFFICER
-----------------
<TABLE>
<CAPTION>
Name of Individual The Company Natur-Pharma Inc. Advanced Research Press, Inc.
- ------------------ ----------- ----------------- -----------------------------
<S> <C> <C> <C>
Neil Blechman Executive Vice President Executive Vice President Executive Vice President
Brian Blechman Executive Vice President Executive Vice President Executive Vice President
Ross Blechman Chairman of the Board Chairman of the Board Executive Vice President
Chief Executive Officer Chief Executive Officer
President President
Steve Blechman Executive Vice President Executive Vice President Chairman of the Board
Chief Executive Officer
President
Dean Blechman Executive Vice President Executive Vice President Executive Vice President
Stephen Welling President of Natur-Pharma
Division of Natur-Pharma
Inc.
</TABLE>
53
<PAGE>
Exhibit 10.9
SECONDARY STOCKHOLDERS AGREEMENT
DATED AS OF May 7, 1996
among
GREEN EQUITY INVESTORS II, L.P.,
BRIAN BLECHMAN,
NEIL BLECHMAN,
ROSS BLECHMAN,
STEVE BLECHMAN,
DEAN BLECHMAN,
STEPHEN WELLING,
DLJ INVESTMENT PARTNERS, L.P.,
DLJ INVESTMENT FUNDING, INC.,
PMI MEZZANINE FUND, L.P.,
CHASE EQUITY ASSOCIATES, L.P.,
STATE TREASURER OF THE STATE OF MICHIGAN, CUSTODIAN OF THE
MICHIGAN PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM, STATE
EMPLOYEES' RETIREMENT SYSTEM, MICHIGAN STATE POLICE RETIREMENT
SYSTEM, AND MICHIGAN JUDGES RETIREMENT SYSTEM
and
TLG Laboratories Holding Corp.
<PAGE>
STOCKHOLDERS AGREEMENT
THIS SECONDARY STOCKHOLDERS AGREEMENT (the "AGREEMENT") is entered into as
of May 7, 1996, by and among Green Equity Investors II, L.P., a Delaware limited
partnership ("GEI"), Brian Blechman, Neil Blechman, Ross Blechman, Steve
Blechman, Dean Blechman, Stephen Welling (the foregoing individuals being
referred to collectively as the "BLECHMANS"), DLJ Investment Partners, L.P., DLJ
Investment Funding, Inc., PMI Mezzanine Fund, L.P., Chase Equity Associates,
L.P., and State Treasurer of the State of Michigan, Custodian of the Michigan
Public School Employees' Retirement System, State Employees' Retirement System,
Michigan State Police Retirement System, and Michigan Judges Retirement System,
(the foregoing entities being referred to collectively as the "OTHER HOLDERS")
and TLG Laboratories Holding Corp., a Delaware corporation (the "COMPANY").
Each of the parties to this Agreement (other than the Company) and any other
individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or a government or any agency or
political subdivision thereof who shall become a party to or agree to be bound
by the terms of this Agreement after the date hereof is sometimes hereinafter
referred to as a "STOCKHOLDER".
RECITALS
A. Concurrently with the execution of this Agreement, the Company, GEI and
the Blechmans will consummate the transactions contemplated by that certain
Stock Purchase and Sale Agreement dated as of March 5, 1996, as amended by
amendment dated May 6, 1996 (the "PURCHASE AGREEMENT"), and will execute and
deliver a Stockholders Agreement of even date herewith (the "FIRST STOCKHOLDERS
AGREEMENT"). The execution and delivery of the First Stockholders Agreement is
a condition to the parties' obligations under the Purchase Agreement. In
addition, concurrently with the execution of this Agreement, each of the Other
Holders is entering into a Stock Subscription Agreement with the Company, of
even date herewith (collectively, the "STOCK SUBSCRIPTION AGREEMENTS"), with
respect to the purchase by such party of Shares of Common Stock and shares of
Senior Preferred Stock (as such terms are hereinafter defined).
B. Following the consummation of the transactions contemplated by the
Purchase Agreement, GEI will own 480,000 shares of Common Stock, par value $1.00
per share, of the Company (the "COMMON STOCK") and 37,000 shares of 11.25%
Junior Cumulative Preferred Stock, with a liquidation preference of $1,000 per
share, of the Company (the "JUNIOR PREFERRED STOCK"), the Blechmans will own
450,000 shares of Common Stock, and the Other Holders will collectively own
70,000 shares of Common Stock and 30,000 shares of 14% Senior Cumulative
Preferred Stock, with a liquidation preference of $1,000 per share, of the
Company (the "SENIOR PREFERRED STOCK", and together with the Junior Preferred
Stock, the "PREFERRED STOCK"). Shares of Common Stock are sometimes
collectively referred to as the "SHARES."
C. The Company and each of the Stockholders desire, for their mutual
benefit and protection, to enter into this Agreement to set forth certain of
their respective rights and
1
<PAGE>
obligations with respect to their Shares (whether issued or acquired hereafter,
including all shares of Common Stock issuable upon the exercise of warrants,
options or other rights to acquire shares of Common Stock, or upon the
conversion or exchange of any security).
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1. Certain Definitions
-------------------
1.1 Definitions. As used in this Agreement, the Blechmans and any members
-----------
of their immediate families, trusts for the benefit of any of the Blechmans
and/or members of their immediate families, and entities which the Blechmans
control (as defined in Section 2.2, below) shall each individually be referred
to as a "BLECHMAN AFFILIATE", and, collectively, as the "BLECHMAN AFFILIATES".
Such Blechman Affiliates, together with the Blechmans, shall each individually
be referred to as a "BLECHMAN PARTY", and, collectively, as the "BLECHMAN
PARTIES". GEI and its affiliates (as defined in Section 2.2 below) are each
individually referred to as a "GEI PARTY", and, collectively, as the "GEI
PARTIES."
ARTICLE 2. Restrictions on Transfer
------------------------
2.1 General Restrictions on Transfer. Each Other Holder agrees that such
--------------------------------
Other Holder will not, directly or indirectly, sell, hypothecate, give,
bequeath, transfer, assign, pledge or in any other way whatsoever encumber or
dispose of (any such event, a "TRANSFER") any Shares now or hereafter at any
time owned by such Other Holder (or any interest therein) to another Person (as
hereinafter defined) ("TRANSFEREE"), to the extent such Transfer is prohibited
by this Agreement. The Company shall not transfer upon its books any Shares
transferred by an Other Holder to any Person to the extent prohibited by this
Agreement and any purported transfer by an Other Holder in violation hereof
shall be null and void and of no effect.
2.2 Compliance with Securities Laws. No Other Holder shall Transfer any
-------------------------------
Shares, and the Company shall not transfer on its books any Shares owned of
record or, to the knowledge of the Company, beneficially, by an Other Holder,
unless (a) the Transfer is pursuant to an effective registration statement under
the Securities Act of 1933, as amended, or any similar federal statute, and the
rules and regulations of the Commission (as defined in Section 4.1) thereunder,
all as the same shall be in effect at the time (the "SECURITIES ACT") and is in
compliance with any applicable state securities or blue sky laws or (b) such
Other Holder shall have furnished the Company with an opinion of counsel, to the
extent reasonably required by the Company, which opinion and counsel shall be
reasonably satisfactory to the Company, to the effect that no such registration
is required because of the availability of an exemption from registration under
the Securities Act; provided, that any Transfer made by an Other Holder which is
--------
(i) a state-sponsored employee benefit plan to a successor trust or fiduciary or
pursuant to a statutory reconstitution or (ii) any Transfer referred to in
Section 2.6.3 (i) hereof (except to the extent any such Transfer is to a natural
person) shall be expressly
2
<PAGE>
permitted and no opinions of counsel shall be required in connection therewith.
As used in this Agreement, the term "AFFILIATE" means, with respect to any
Person, any other Person directly or indirectly controlling, controlled by, or
under common control with such Person; provided, however, that no Stockholder
--------
shall be deemed an affiliate of any other Stockholder solely by reason of any
investment in the Company and/or GEI. For purposes of this Agreement, the term
"CONTROL", (including, with correlative meanings, the terms "controlling",
"controlled by", and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
2.3 Agreement to be Bound. No Transfer of Shares by an Other Holder shall
---------------------
be effective (and the Company shall not transfer on its books any Shares owned
of record or, to the knowledge of the Company, beneficially, by an Other Holder)
unless (i) the certificates representing such Shares issued to the Transferee
shall bear the legend provided in Section 8.4 herein, if required by such
Section 8.4, and (ii) the Transferee of such Shares shall have executed and
delivered to the Company, as a condition precedent to such Transfer, an
instrument or instruments in form and substance satisfactory to the Company
confirming that the Transferee agrees to be bound, as an Other Holder, by the
terms of this Agreement and accepts the rights and obligations set forth
hereunder; provided, that the conditions set forth in this Section 2.3 shall not
--------
apply to any sale of Shares pursuant to an effective registration statement
under the Securities Act or, provided such sale is not to an affiliate of the
Company, pursuant to Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any other similar regulation hereafter adopted by
the SEC ("RULE 144").
2.4 Tag-Along Rights for the Other Holders.
--------------------------------------
2.4.1 Right to Participate in Sale. (a) If at any time any GEI
----------------------------
Parties and/or Blechman Parties (including those participating in such Tag-Along
Sale pursuant to such parties' tag-along rights under Section 2.4 of the First
Stockholders Agreement) (the "TAG-ALONG SELLERS") propose to enter into an
agreement (or substantially contemporaneous agreements, whether or not with the
same or affiliated parties) to sell or otherwise dispose of for value any Shares
of Common Stock in one or more related transactions which will result in (i) the
transfer of at least five percent (5%) of the outstanding Shares of Common Stock
of the Company or (ii) a transfer resulting in the transferee of such Shares
holding more than fifty percent (50%) of the outstanding Shares of Common Stock
(such sale or other disposition for value being referred to as a "TAG-ALONG
SALE"), then such Tag-Along Sellers shall afford the Other Holders (each
individually a "TAG-ALONG STOCKHOLDER" and, collectively, the "TAG-ALONG
STOCKHOLDERS") the opportunity to participate proportionately in such Tag-Along
Sale in accordance with this Section 2.4. The number of Shares of Common Stock
that each Tag-Along Stockholder will be entitled to include in such Tag-Along
Sale (the "TAG-ALONG ALLOTMENT") shall be determined by multiplying (i) the
number of Shares of Common Stock held by such Tag-Along Stockholder as of the
close of business on the day immediately prior to the Tag-Along Notice Date (as
hereinafter defined) by (ii) a fraction, the numerator of which shall equal the
number of Shares of Common Stock proposed by the
3
<PAGE>
Tag-Along Sellers to be sold or otherwise disposed of pursuant to the Tag-Along
Sale and the denominator of which shall equal the total number of Shares of
Common Stock that are beneficially owned by the GEI Parties and the Blechman
Parties, collectively, as of the close of business on the day immediately prior
to the Tag-Along Notice Date (the "TAG-ALONG FRACTION"); provided, however, that
-------- -------
in negotiating a Tag-Along Sale, such Tag-Along Sellers shall provide that no
Tag-Along Stockholder shall be required to make any representation, covenant or
warranty in connection with the Tag-Along Sale, other than as to its ownership
and authority to sell, free of liens, claims and encumbrances, the shares of
Common Stock proposed to be sold by it.
2.4.2 Sale Notice. If at any time, pursuant to Section 2.4.2 of the
-----------
First Stockholders Agreement, any Blechman Party or GEI Party shall be obligated
to issue a Tag-Along Sale Notice (as therein defined) to the Company, such party
shall at such time send a copy of such Tag-Along Sale Notice to each of the
Other Holders. Thereafter, the Tag-Along Sellers shall provide each Tag-Along
Stockholder and the Company with written notice (the "SECOND TAG-ALONG SALE
NOTICE") not more than ten (10) days nor less than five (5) Business Days prior
to the proposed date of the Tag-Along Sale (the "TAG-ALONG SALE DATE"). For the
purposes of this Agreement, a "BUSINESS DAY" shall mean each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking institutions
in New York, New York are authorized or obligated by law or executive order to
close. Each Second Tag-Along Sale Notice shall be accompanied by a copy of any
written agreement relating to the Tag-Along Sale and shall set forth: (i) the
name and address of each proposed Transferee of Shares in the Tag-Along Sale;
(ii) the number of Shares proposed to be Transferred by such Tag-Along Sellers;
(iii) the proposed amount and form of consideration to be paid for such Shares
and the terms and conditions of payment offered by each proposed Transferee;
(iv) the aggregate number of Shares held of record by the GEI Parties and the
Blechman Parties as of the close of business on the day immediately prior to the
date of the Second Tag-Along Notice (the "TAG-ALONG NOTICE DATE"); (v) the Tag-
Along Stockholder's Tag-Along Allotment assuming the Tag-Along Stockholder
elected to sell the maximum number of Shares possible; (vi) confirmation that
the proposed Transferee has been informed of the "Tag-Along Rights" provided for
herein and has agreed to purchase Shares from any Tag-Along Stockholder in
accordance with the terms hereof; and (vi) the Tag-Along Sale Date.
2.4.3 Tag-Along Notice. Any Tag-Along Stockholder wishing to
----------------
participate in the Tag-Along Sale shall provide written notice (the "TAG-ALONG
NOTICE") to the relevant Tag-Along Sellers no less than three (3) days (at least
one of which three days shall be a Business Day) prior to the Tag-Along Sale
Date. The Tag-Along Notice shall set forth the number of Shares that such Tag-
Along Stockholder elects to include in the Tag-Along Sale, which shall not
exceed such Tag-Along Stockholder's Tag-Along Allotment. The Tag-Along Notice
given by any Tag-Along Stockholder shall constitute such Tag-Along Stockholder's
binding agreement to sell the Shares specified in the Tag-Along Notice on the
terms and conditions applicable to the Tag-Along Sale; provided, however, that
--------
in the event that there is any material change in the terms and conditions of
such Tag-Along Sale applicable to the Tag-Along Stockholder (including, but not
limited to, any decrease in the purchase price that occurs other than pursuant
to an adjustment mechanism set forth in the agreement relating to
4
<PAGE>
the Tag-Along Sale) after such Tag-Along Stockholder gives its Tag-Along Notice,
then, notwithstanding anything herein to the contrary, the Tag-Along Stockholder
shall have the right to withdraw from participation in the Tag-Along Sale with
respect to all of its Shares affected thereby. If the proposed Transferee does
not consummate the purchase of all of the Shares requested to be included in the
Tag-Along Sale by any Tag-Along Stockholder on the same terms and conditions
applicable to the Tag-Along Sellers, then such Tag-Along Sellers shall not
consummate the Tag-Along Sale of any of its Shares to such Transferee, unless
the shares of such Tag-Along Sellers and the Tag-Along Stockholders are reduced
or limited pro rata in proportion to the respective number of shares actually
--- ----
sold in any such Tag-Along Sale and all other terms and conditions of the Tag-
Along Sale are the same for such Tag-Along Sellers and the Tag-Along
Stockholders, subject to the last proviso set forth in Section 2.4.1.
If a Tag-Along Notice from any Tag-Along Stockholder is not received by
such Tag-Along Sellers prior to the three (3) day period specified above, such
Tag-Along Sellers shall have the right to consummate the Tag-Along Sale without
the participation of such Tag-Along Stockholder, but only on terms and
conditions which are no more favorable in any material respect to such Tag-Along
Sellers (and in any event, at no greater a purchase price, except as the
purchase price may be adjusted pursuant to the agreement relating to the
relevant Tag-Along Sale) than as stated in the Second Tag-Along Sale Notice and
only if such Tag-Along Sale occurs on a date within sixty (60) days of the Tag-
Along Sale Date. If such Tag-Along Sale does not occur within such sixty (60)
day period, the Shares that were to be subject to such Tag-Along Sale thereafter
shall continue to be subject to all of the restrictions contained in this
Agreement, including the provisions of this Article 2.
2.4.4 Delivery of Certificates. On the Tag-Along Sale Date, each
------------------------
Tag-Along Stockholder shall deliver a certificate or certificates for the Shares
to be sold in connection with the Tag-Along Sale, duly endorsed for transfer
with signatures guaranteed, to the Transferee in the manner and at the address
indicated in the Tag-Along Notice against delivery of the purchase price for
such Shares.
2.4.5 Exempt Transfers. The provisions of this Section 2.4 shall not
----------------
apply:
(i) to any sale or other disposition of Shares by and among GEI
Parties;
(ii) to any sale or other disposition of Shares by and among Blechman
Parties (excluding Stephen Welling and Persons who are Blechman Parties
solely because they are members of the immediate family of Stephen Welling,
trusts for the benefit of Stephen Welling or any member of his immediate
family or entities which Stephen Welling controls);
(iii) to any sale or other disposition of Shares by and among Stephen
Welling and Persons who are Blechman Parties solely because they are
members of the immediate family of Stephen Welling, trusts for the benefit
of Stephen Welling or any member of his immediate family or entities which
Stephen Welling controls;
5
<PAGE>
(iv) to any sale of Shares to the public pursuant to an effective
registration statement under the Securities Act or pursuant to Rule 144;
(v) from and after a Public Offering Event or a Qualified IPO. For
the purposes of this Agreement, a "PUBLIC OFFERING EVENT" shall mean the
first date after which at least twenty percent (20%) of the Company's
outstanding shares of Common Stock is publicly held and such Common Stock
is listed or admitted to trading on a national securities exchange or
quoted on the National Association of Securities Dealers, Inc.'s National
Market System or Small Capitalization System (an "ACTIVE TRADING MARKET")
and a "QUALIFIED IPO" shall mean the initial bona fide, registered
underwritten public offering of shares of Common Stock to be sold by the
Company to the public;
(vi) to any bona fide pledge of Shares to a commercial bank, savings
and loan institution or any other similar lending institution as security
for any indebtedness to such lender, provided that prior to any such
--------
pledge, the Other Holders are informed in writing of such pledge and the
pledgee shall deliver to the Company its written agreement, in form and
substance satisfactory to the Company, that upon any foreclosure such
pledgee shall comply with the terms of Section 2.3 of this Agreement; or
(vii) to any sale or other disposition by Stockholders of shares of
Preferred Stock.
2.5 Cooperation by the Company. The Company will provide reasonable
--------------------------
assistance to any Other Holder seeking to sell its Shares, provided that the
Company shall not be required to provide any confidential information to any
prospective purchaser who has not executed a confidentiality agreement in form
reasonably satisfactory to the Company. Any reasonable out-of-pocket costs to
the Company of providing such assistance shall be paid pro rata by each Other
Holder seeking to sell its Shares. The Company will also cooperate with any
Other Holder in having all stop transfer instructions or notations and
restrictive legends lifted in connection with the sale (other than to an
affiliate of the Company) of Shares pursuant to Rule 144 promulgated under the
Securities Act; provided that in such a case the selling Other Holder shall be
required to provide the Company with the opinion provided for in Section 2.2(b).
2.6 First Option Rights.
-------------------
2.6.1 First Option. (a) If at any time any Other Holder (a "SELLING
------------
OTHER HOLDER") desires to sell or otherwise dispose of for value all or any part
of the shares of Common Stock held by such Selling Other Holder, and such
Selling Other Holder shall have received an irrevocable and unconditional bona
fide arm's length written offer (the "BONA FIDE OFFER") for the purchase of such
Shares for consideration consisting solely of cash from any third party
unaffiliated with such Selling Other Holder (an "OUTSIDE PARTY"), the Selling
Other Holder shall provide written notice (the "SALE NOTICE") to each of (i) GEI
(together with its assigns, the "GEI BUYER"), (ii) the Company, (iii) each of
the Other Holders other
6
<PAGE>
than such Selling Other Holder (the "OTHER HOLDER BUYERS") and (iv) each of
Brian Blechman, Dean Blechman, Neil Blechman, Ross Blechman and Steve Blechman
(the "BLECHMAN BUYERS") (each of (i), (ii), (iii) and (iv) a "POTENTIAL BUYER")
setting forth such desire to sell or otherwise dispose of for value such Shares,
which Sale Notice shall be accompanied by a photocopy of the original Bona Fide
Offer and shall set forth at least the name and address of the Outside Party and
the price and terms of such Bona Fide Offer. Upon the giving of such Sale
Notice, each Potential Buyer shall, subject to the priorities set forth below,
have the option (which option (the "PURCHASE OPTION"), in the case of GEI only,
shall be assignable at GEI's sole discretion) to purchase all, but not less than
all of such Shares specified in the Sale Notice, on the same terms and
conditions, including but not limited to the offer price for the Shares, of the
Bona Fide Offer. Each Potential Buyer shall have ten (10) days from receipt of
the Sale Notice to provide written notice (the "ACCEPTANCE NOTICE") to such
Selling Other Holder of its desire to exercise such Purchase Option. If more
than one Potential Buyer shall deliver an Acceptance Notice within such ten (10)
day period, the priority as among the Potential Buyers to match the Bona Fide
Offer and purchase such Shares shall be, to the extent such Potential Buyers
have delivered Acceptance Notices, first, the GEI Buyer, second, the Company,
----- ------
third, the Other Holder Buyers and fourth, the Blechman Buyers.
- ----- ------
In furtherance of and subject to the foregoing, with respect to any
Acceptance Notices of the Other Holder Buyers, it is understood that the Other
Holder Buyers shall, subject to the prior options of the GEI Buyer and the
Company, respectively, have non-assignable options to purchase the Shares
specified in the Sale Notice on a pro rata basis in accordance with the number
--- ----
of Shares then held by each of such Other Holder Buyers (the "ALLOTMENTS"), and
that the Other Holder Buyers shall also notify the Selling Other Holder of the
number of additional Shares (the "OVER-SUBSCRIPTION"), if any, that such Other
Holder Buyer (an "OVER-SUBSCRIBING OTHER HOLDER") desires to include in its
Acceptance Notice in the event that there is an under-subscription by other
Other Holder Buyers for their respective Allotments. If neither the GEI Buyer
nor the Company has delivered an Acceptance Notice and the Selling Other Holder
shall have received Acceptance Notices from Other Holder Buyers with respect to
some, but not all, of the Shares in the Allotments under the Sale Notice, the
remaining Shares shall be allocated among the Over-Subscribing Other Holders on
a pro rata basis in accordance with the Over-Subscriptions included in such
--- ----
parties' Acceptance Notices; provided, however, that the Selling Other Holder
-------- -------
will not be obligated to sell to the Other Holder Buyers, and the Other Holder
Buyers shall not be obligated to purchase, the Shares covered by the Bona Fide
Offer, unless, in the aggregate, there are Other Holder Acceptance Notices
covering all, but not less than all, of such Shares.
In furtherance of and subject to the foregoing, with respect to any
Acceptance Notices of the Blechman Buyers, it is understood that the Blechman
Buyers shall, subject to the prior options of the GEI Buyer, the Company and the
Other Holder Buyers, respectively, have non-assignable options to purchase the
Shares specified in the Sale Notice on a pro rata basis in accordance with the
--- ----
number of Shares then held by each of such Blechman Buyers (the "BLECHMAN
ALLOTMENTS"), and that the Blechman Buyers shall also notify the Selling Other
Holder of the number of additional Shares (the "BLECHMAN OVER-SUBSCRIPTION"), if
any, that such Blechman Buyer (an "OVER-SUBSCRIBING BLECHMAN") desires to
include in his
7
<PAGE>
Acceptance Notice in the event that there is an under-subscription by other
Blechman Buyers for their respective Blechman Allotments. If (i) neither the
GEI Buyer nor the Company has delivered an Acceptance Notice, (ii) the Other
Holder Buyers have not delivered Acceptance Notices covering all of the Shares
covered by the Bona Fide Offer and (iii) the Selling Other Holder shall have
received Acceptance Notices from Blechman Buyers with respect to some, but not
all, of the Shares in the Blechman Allotments under the Sale Notice, the
remaining Shares shall be allocated among the Over-Subscribing Blechmans on a
pro rata basis in accordance with the Blechman Over-Subscriptions included in
- --- ----
such parties' Acceptance Notices; provided, however, that the Selling Other
-------- -------
Holder will not be obligated to sell to the Blechman Buyers, and the Blechman
Buyers shall not be obligated to purchase, the Shares covered by the Bona Fide
Offer, unless, in the aggregate, there are Blechman Acceptance Notices covering
all, but not less than all, of such Shares.
If a Potential Buyer or Potential Buyers, as applicable, elects to
purchase, in the aggregate, all of the Shares covered by the Bona Fide Offer on
the terms and conditions set forth in the Sale Notice, the Potential Buyer(s)
entitled to purchase such Shares (the "CHOSEN BUYER(S)") shall be determined in
accordance with the priorities set forth above and such Chosen Buyer(s) shall be
obligated to purchase, and such Selling Other Holder shall be obligated to sell,
such Shares at the price and terms specified in the Sale Notice. The closing of
the purchase by the Chosen Buyer(s) shall be held on a Business Day within sixty
days (60) days after the giving of the relevant Acceptance Notice, at the
principal offices of the Chosen Buyer(s), or at such other time and place as may
be mutually agreed to by the Chosen Buyer(s) and the Selling Other Holder.
If no Acceptance Notice(s) is (are) delivered within the periods
specified above by one or more Potential Buyers, as applicable, with respect to
all (but not less than all) of the Shares included in the Sale Notice, the
Selling Other Holder shall have the right to consummate the sale of all (but not
less than all) of the Shares covered by the Sale Notice to the Outside Party but
only at the price and upon terms and conditions no less favorable to the Selling
Other Holder than those contained in the Sale Notice (provided that the purchase
price must be payable solely in cash) and only if such sale occurs on a date
within ninety (90) days of the date of the Sale Notice; provided, however, that
-------- -------
in the event the Selling Other Holder has not so transferred all (but not less
than all) of such Shares to the Outside Party within such ninety-day period,
then such Shares thereafter shall continue to be subject to all of the
restrictions contained in this Agreement.
(b) If at any time any Other Holder (a "UNIT SELLING OTHER
HOLDER") desires to sell or otherwise dispose of for value all or any part of
the shares of Common Stock held by such Unit Selling Other Holder together with
all or any part of the shares of Senior Preferred Stock held by such Unit
Selling Other Holder, and such Unit Selling Other Holder shall have received an
irrevocable and unconditional bona fide arm's length written offer (the "BONA
FIDE UNIT OFFER") for the purchase of such Shares together with such shares of
Senior Preferred Stock for consideration consisting solely of cash from any
third party unaffiliated with such Unit Selling Other Holder (a "UNIT OUTSIDE
PARTY"), the Unit Selling Other Holder shall provide written notice (the "UNIT
SALE NOTICE") to each of (i) GEI (together with its assigns, the "GEI BUYER"),
(ii) the Company, (iii) each of the Other
8
<PAGE>
Holders other than such Unit Selling Other Holder (the "OTHER HOLDER BUYERS")
and (iv) each of Brian Blechman, Dean Blechman, Neil Blechman, Ross Blechman and
Steve Blechman (the "BLECHMAN BUYERS") (each of (i), (ii), (iii) and (iv) a
"POTENTIAL BUYER") setting forth such desire to sell or otherwise dispose of for
value such Shares together with such shares of Senior Preferred Stock, which
Unit Sale Notice shall be accompanied by a photocopy of the original Bona Fide
Unit Offer and shall set forth at least the name and address of the Unit Outside
Party and the price and terms of such Bona Fide Unit Offer. Upon the giving of
such Unit Sale Notice, each Potential Buyer shall, subject to the priorities set
forth below, have the option (which option (the "UNIT PURCHASE OPTION"), in the
case of GEI only, shall be assignable at GEI's sole discretion) to purchase all,
but not less than all of such Shares together with such shares of Senior
Preferred Stock specified in the Unit Sale Notice, on the same terms and
conditions, including but not limited to the offer price for the Shares together
with such shares of Senior Preferred Stock, of the Bona Fide Unit Offer. Each
Potential Buyer shall have thirty (30) days from receipt of the Unit Sale Notice
to provide written notice (the "UNIT ACCEPTANCE NOTICE") to such Unit Selling
Other Holder of its desire to exercise such Unit Purchase Option. If more than
one Potential Buyer shall deliver a Unit Acceptance Notice within such thirty
(30) day period, the priority as among the Potential Buyers to match the Bona
Fide Unit Offer and purchase such Shares together with such shares of Senior
Preferred Stock shall be, to the extent such Potential Buyers have delivered
Unit Acceptance Notices, first, the GEI Buyer, second, the Company, third, the
----- ------ -----
Other Holder Buyers and fourth, the Blechman Buyers.
------
In furtherance of and subject to the foregoing, with respect to any
Unit Acceptance Notices of the Other Holder Buyers, it is understood that the
Other Holder Buyers shall, subject to the prior options of the GEI Buyer and the
Company, respectively, have non-assignable options to purchase the Shares
together with the shares of Senior Preferred Stock specified in the Unit Sale
Notice on a pro rata basis in accordance with the number of Shares then held by
--- ----
each of such Other Holder Buyers (the "UNIT ALLOTMENTS"), and that the Other
Holder Buyers shall also notify the Unit Selling Other Holder of the number of
additional Shares together with such shares of Senior Preferred Stock (the "UNIT
OVER-SUBSCRIPTION"), if any, that such Other Holder Buyer (a "UNIT OVER-
SUBSCRIBING OTHER HOLDER") desires to include in its Unit Acceptance Notice in
the event that there is an under-subscription by other Other Holder Buyers for
their respective Unit Allotments. If neither the GEI Buyer nor the Company has
delivered a Unit Acceptance Notice and the Unit Selling Other Holder shall have
received Unit Acceptance Notices from Other Holder Buyers with respect to some,
but not all, of the Shares together with the shares of Senior Preferred Stock in
the Unit Allotments under the Unit Sale Notice, the remaining shares shall be
allocated among the Unit Over-Subscribing Other Holders on a pro rata basis in
--- ----
accordance with the Unit Over-Subscriptions included in such parties' Unit
Acceptance Notices; provided, however, that the Unit Selling Other Holder will
-------- -------
not be obligated to sell to the Other Holder Buyers, and the Other Holder Buyers
shall not be obligated to purchase, the Shares together with the shares of
Senior Preferred Stock covered by the Bona Fide Unit Offer, unless, in the
aggregate, there are Other Holder Unit Acceptance Notices covering all, but not
less than all, of such Shares together with such shares of Senior Preferred
Stock.
9
<PAGE>
In furtherance of and subject to the foregoing, with respect to any
Unit Acceptance Notices of the Blechman Buyers, it is understood that the
Blechman Buyers shall, subject to the prior options of the GEI Buyer, the
Company and the Other Holder Buyers, respectively, have non-assignable options
to purchase the Shares together with the shares of Senior Preferred Stock
specified in the Unit Sale Notice on a pro rata basis in accordance with the
--- ----
number of Shares then held by each of such Blechman Buyers (the "BLECHMAN UNIT
ALLOTMENTS"), and that the Blechman Buyers shall also notify the Unit Selling
Other Holder of the number of additional Shares together with such shares of
Senior Preferred Stock (the "BLECHMAN UNIT OVER-SUBSCRIPTION"), if any, that
such Blechman Buyer (a "UNIT OVER-SUBSCRIBING BLECHMAN") desires to include in
his Unit Acceptance Notice in the event that there is an under-subscription by
other Blechman Buyers for their respective Blechman Unit Allotments. If (i)
neither the GEI Buyer nor the Company has delivered a Unit Acceptance Notice,
(ii) the Other Holder Buyers have not delivered Unit Acceptance Notices covering
all of the Shares together with all of the shares of Senior Preferred Stock
covered by the Bona Fide Unit Offer and (iii) the Unit Selling Other Holder
shall have received Unit Acceptance Notices from Blechman Buyers with respect to
some, but not all, of the Shares together with the shares of Senior Preferred
Stock in the Blechman Unit Allotments under the Unit Sale Notice, the remaining
shares shall be allocated among the Unit Over-Subscribing Blechmans on a pro
---
rata basis in accordance with the Blechman Unit Over-Subscriptions included in
- ----
such parties' Unit Acceptance Notices; provided, however, that the Unit Selling
-------- -------
Other Holder will not be obligated to sell to the Blechman Buyers, and the
Blechman Buyers shall not be obligated to purchase, the Shares together with the
shares of Senior Preferred Stock covered by the Bona Fide Unit Offer, unless, in
the aggregate, there are Blechman Unit Acceptance Notices covering all, but not
less than all, of such Shares together with such shares of Senior Preferred
Stock.
If a Potential Buyer or Potential Buyers, as applicable, elects to
purchase, in the aggregate, all of the Shares together with the shares of Senior
Preferred Stock covered by the Bona Fide Unit Offer on the terms and conditions
set forth in the Unit Sale Notice, the Potential Buyer(s) entitled to purchase
such Shares together with such shares of Senior Pre ferred Stock (the "CHOSEN
UNIT BUYER(S)") shall be determined in accordance with the priorities set forth
above and such Chosen Unit Buyer(s) shall be obligated to purchase, and such
Unit Selling Other Holder shall be obligated to sell, such Shares together with
such shares of Senior Preferred Stock at the price and terms specified in the
Unit Sale Notice. The closing of the purchase by the Chosen Unit Buyer(s), shall
be held on a Business Day within sixty days (60) days after the giving of the
relevant Unit Acceptance Notice, at the principal offices of the Chosen Unit
Buyer(s), or at such other time and place as may be mutually agreed to by the
Chosen Unit Buyer(s) and the Unit Selling Other Holder.
If no Unit Acceptance Notice(s) is (are) delivered within the periods
specified above by one or more Potential Buyers, as applicable, with respect to
all (but not less than all) of the Shares together with the shares of Senior
Preferred Stock included in the Unit Sale Notice, the Unit Selling Other Holder
shall have the right to consummate the sale of all (but not less than all) of
the Shares together with the shares of Senior Preferred Stock covered by the
Unit Sale Notice to the Unit Outside Party but only at the price and upon terms
and conditions no less favorable to the Unit Selling Other Holder than those
contained in the Unit
10
<PAGE>
Sale Notice (provided that the purchase price must be payable solely in cash)
and only if such sale occurs on a date within ninety (90) days of the date of
the Unit Sale Notice; provided, however, that in the event the Unit Selling
-------- -------
Other Holder has not so transferred all (but not less than all) of such Shares
together with such shares of Senior Preferred Stock to the Unit Outside Party
within such ninety-day period, then such Shares thereafter shall continue to be
subject to all of the restrictions contained in this Agreement.
2.6.2 No Waiver. Any election in any instance by any Potential
---------
Buyer, as applicable, not to exercise its option rights under this Section 2.6
shall not constitute a waiver of such rights with respect to any other proposed
transfer of Shares.
2.6.3 Exempt Transfers. The provisions of this Section 2.6 shall
----------------
not apply:
(i) to a Transfer to an affiliate of the Selling Other Holder or to
a partnership, limited liability company or corporation which is managed by
or controlle d by the Selling Other Holder or any affiliate thereof;
provided that such Selling Other Holder delivers an officer's certificate
--------
to GEI and the Company certifying such Transferee's status as an affiliate
of such Selling Other Holder or as a partnership or corporation which is
managed by or controlled by such Selling Other Holder or any affiliate
thereof;
(ii) to any sale of Shares by a Selling Other Holder to the public
pursuant to an effective registration statement under the Securities Act or
pursuant to Rule 144; or
(iii) to any bona fide pledge of Shares to a commercial bank, savings
and loan institution or any other similar lending institution as security
for any indebtedness to such lender, provided that prior to any such
--------
pledge, GEI and the Company are informed in writing of such pledge and the
pledgee shall deliver to GEI and the Company its written agreement, in form
and substance satisfactory to GEI and the Company, that upon any
foreclosure such pledgee shall comply with the terms of Section 2.3 of this
Agreement.
2.7 Improper Transfer. Any attempt by an Other Holder to Transfer or
-----------------
otherwise encumber any Shares in violation of this Agreement shall be null and
void and neither the Company nor any transfer agent of such Shares shall give
any effect to such attempted Transfer or encumbrance in its stock records.
2.8 Involuntary Transfer. In the case of any Transfer of title or
--------------------
beneficial ownership of Shares upon default, foreclosure, forfeit, court order,
or otherwise than by a voluntary decision on the part of an Other Holder (an
"INVOLUNTARY TRANSFER"), such Other Holder (or his legal representatives) shall
promptly (but in no event later than two (2) Business Days after such
Involuntary Transfer) furnish written notice to the Company indicating that the
Involuntary Transfer has occurred, specifying the name of the Person to whom
such Shares have been transferred, giving a detailed description of the
circumstances giving rise to, and stating the legal basis for, the Involuntary
Transfer.
11
<PAGE>
ARTICLE 3. Drag-Along Sales.
----------------
3.1 Right of GEI and the Blechmans to Require Sale. Notwithstanding any
----------------------------------------------
other provision hereof, if some or all GEI Parties (the "GEI SELLERS") and some
or all Blechman Parties (the "BLECHMAN SELLERS", and together with the GEI
Sellers, collectively, the "DRAG-ALONG SELLERS") agree to sell or otherwise
dispose of (or cause to be sold or otherwise disposed of) for value all or
substantially all of the outstanding shares of Common Stock, in one or more
related transactions (a "DRAG-ALONG SALE"), to a third Person or third Persons
who are not affiliates of any of the Drag-Along Sellers (a "THIRD PARTY"), and
if such Drag-Along Sellers have complied with the requirements of Section 2 of
the First Stockholders Agreement, then, upon the demand of a majority of the GEI
Sellers and a majority of the Blechman Sellers, the Other Holders (the "REQUIRED
SELLERS") shall be required to sell to such Third Party all, but not less than
all of the shares of Common Stock, if any, then held by them, at the same price
and on the same terms and conditions as the Drag-Along Sellers have agreed to
with such Third Party; provided, however, that (i) no Other Holder shall be
-------- -------
obligated to participate in any Drag-Along Sale unless such Other Holder is
provided an opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to such Other Holder, to the effect that the Drag-Along Sale is not
in violation of applicable Federal or state securities or other laws, or, if any
such Other Holder is not provided with an opinion with respect to any matters
contemplated by this clause (i), the Drag-Along Sellers shall (in addition to
the indemnification contemplated below) indemnify such Other Holder for any such
violation, and (ii) no Other Holder shall be required to make any
representation, covenant or warranty in connection with the Drag-Along Sale,
other than as to its ownership and authority to sell, free of liens, claims and
encumbrances, the shares of Common Stock proposed to be sold by it.
3.2 Drag-Along Notice. Prior to making any Drag-Along Sale, the Drag-
-----------------
Along Seller shall promptly provide each Required Seller with written notice
(the "DRAG-ALONG NOTICE") not more than thirty (30) or less than fifteen (15)
days prior to the proposed date of the Drag-Along Sale (the "DRAG-ALONG SALE
DATE"). The Drag-Along Notice shall set forth: (i) the name and address of the
Third Party; (ii) the name and address of each member of the Drag-Along Sellers;
(iii) the proposed amount and form of consideration to be paid per Share and the
terms and conditions of payment offered by the Third Party; (iv) the number of
shares of Common Stock held of record as of the close of business on the date
of the Drag-Along Sale Notice (the "DRAG-ALONG NOTICE DATE") by the Required
Seller to whom the notice is sent; (v) the aggregate number of shares of Common
Stock held of record as of the Drag-Along Notice Date by the Drag-Along Sellers;
(vi) confirmation that the Drag-Along Sellers are selling all or substantially
all of the aggregate number of shares of Common Stock then held by them to the
Third Party and that all or substantially all of the outstanding Common Stock is
to be sold to the Third Party; (vii) the Drag-Along Sale Date; and (viii)
confirmation that the proposed Third Party has agreed to purchase the Required
Sellers' shares of Common Stock in accordance with the terms hereof.
3.4 Delivery of Certificates. On the Drag-Along Sale Date, each Required
------------------------
Seller shall deliver a certificate or certificates for all of its shares of
Common Stock, duly endorsed
12
<PAGE>
for transfer with signatures guaranteed, to such Third Party in the manner and
at the address indicated in the Drag-Along Notice against delivery of the
purchase price for such Required Seller's shares of Common Stock.
3.5 Consideration. The provisions of this Section 3 shall apply
-------------
regardless of the form of consideration received in the Drag-Along Sale;
provided, however, that if any Drag-Along Sellers have agreed to sell any shares
- -------- -------
of Common Stock for non-cash consideration, the proposed Third Party's offer
shall include (or, at the option of such Drag-Along Sellers, such Drag-Along
Sellers may otherwise provide) an option for the Required Sellers to participate
in such Drag-Along Sale and to select as consideration for its sale either its
pro rata share of such non-cash consideration or cash in the amount of the fair
- --- ----
market value of such non-cash consideration, which fair market value shall be
determined by a nationally recognized independent valuation consultant or
appraiser (with experience evaluating such type of property) to be selected by
such Required Sellers and reasonably satisfactory to the Drag-Along Sellers.
3.6 Cooperation. The Other Holders shall cooperate in good faith with the
-----------
Drag-Along Sellers in connection with the consummation of the Drag-Along Sale.
ARTICLE 4. Registration Rights.
-------------------
4.1 Definitions.
-----------
"COMMISSION", as used in this Agreement, means the Securities and
Exchange Commission or any other federal agency at the time administering the
Securities Act.
"EXCHANGE ACT", as used in this Agreement, means the Securities
Exchange Act of 1934, as amended, or any similar federal statute, and the rules
and regulations of the Commission (as defined in Section 4.1) thereunder.
"OTHER HOLDER", for the purposes of this Article 4 only, shall mean a
----
holder of Registrable Shares, including a Transferee of Registrable Shares if
(i) the Transfer to such Transferee is not prohibited by this Agreement, and
(ii) the Shares Transferred to such Transferee continue to be Registrable
Shares.
"PERSON", as used in this Agreement, means any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or other agency or political
subdivision thereof.
"REGISTRABLE SHARES", as used in this Agreement, shall mean the shares
of Common Stock issued to the Other Holders pursuant to the Stock Subscription
Agreements or subsequently acquired by the Other Holders (and any securities
issued or issuable with respect to such Shares by way of stock dividends or
stock splits or in connection with a combination of shares, recapitalization,
merger, consolidation, or other reorganization or otherwise); provided, however,
--------
that any such shares will cease to be Registrable Shares when
13
<PAGE>
(i) a registration statement covering such Registrable Shares has been declared
effective and such Registrable Shares have been disposed of pursuant to such
effective registration statement, or (ii) such Registrable Shares are
distributed to the public pursuant to Rule 144.
"SELLING HOLDER", as used in this Article 4, means, with respect to
any registration statement, any Other Holder whose Registrable Shares are
included therein.
4.2 Demand Registrations.
--------------------
4.2.1 Number of Registrations.
-----------------------
(a) Other Holders' Demand Rights. Commencing on the fifth
----------------------------
anniversary of the date of this Agreement, Other Holders holding an aggregate
number of Registrable Shares equal to more than fifty percent (50%) of the
number of Registrable Shares on the date hereof shall be entitled to make
written request (an "OTHER HOLDER DEMAND") of the Company to register all or
part of their Registrable Shares under the Securities Act (including, but not
limited to, a shelf registration under Rule 415 promulgated under the Securities
Act) (an "OTHER HOLDER DEMAND REGISTRATION"); provided, however, that not more
--------
than one (1) Other Holder Demand Registration with respect to the Registrable
Shares may be made pursuant to the rights granted by this Section 4.2.1(a);
provided, further that the Other Holder Demand Registration must cover an
- -------- -------
aggregate number of Registrable Shares equal to more than fifty percent (50%) of
the number of Registrable Shares on the date hereof; and provided, further that
-------- -------
prior to making an Other Holder Demand, such Other Holders shall provide to the
Company an opinion of counsel, which opinion and counsel shall be reasonably
acceptable to the Company, that a sale or distribution of such Registrable
Shares to the public may only be effected pursuant to an effective registration
statement under the Securities Act; it being understood, however, that no
opinion of counsel shall be required from an Other Holder which is a state-
sponsored employee benefit plan or a successor trust or fiduciary of such a plan
or a successor to such a plan pursuant to a statutory reconstitution.
(b) Selection of Underwriter. Any Other Holder Demand Registration
------------------------
hereunder shall be on any appropriate form under the Securities Act permitting
registration of such Registrable Shares for resale by the holders of such
Registrable Shares in the manner or manners designated by them (including,
without limitation, pursuant to an underwritten offering). The determination of
whether the offering will involve an underwritten offering shall be made by
holders of a majority of the Registrable Shares to be included in such
registration; provided, however, that the selection of investment bankers,
-------- -------
managers and counsel shall be made by the Company, which such investment
bankers, managers and counsel shall be reasonably satisfactory to the holders of
a majority of the Registrable Shares to be included in such registration. If
requested, the Company shall enter into an underwriting or purchase agreement
with an investment banking firm in connection with an Other Holder Demand
Registration, containing representations, warranties, indemnities and agreements
then customarily included in underwriting or purchase agreements by such
underwriter with respect to secondary distributions of securities.
14
<PAGE>
4.2.2 Registration. The Company shall file a registration statement
------------
with respect to an Other Holder Demand Registration and use its best efforts to
cause the same to be declared effective as promptly as practicable following
such Other Holder Demand, but not later than one hundred twenty (120) days
thereafter; provided, however, that the Company shall not be required to expend
--------
unreasonable sums in discharging its obligations under this Article 4. Unless
all of the Registrable Shares covered by the registration statement have earlier
been sold or withdrawn from sale, the Company shall keep any such Registration
Statement effective for a period of at least one hundred eighty (180) days after
such registration statement is first declared effective plus a period equal to
(x) any period during which the Selling Holders are prohibited from making sales
because of any stop order, injunction or other order or requirement of the
Commission or any other governmental agency or court plus (y) any Demand
Suspension Period (as defined below) plus (z) any holdback period pursuant to
Section 4.6 that occurs while the registration statement is effective (the
"DEMAND PERIOD") and a registration will not count as an Other Holder Demand
Registration unless it is declared effective by the Commission and remains
effective until the earlier of such time as all of the Registrable Shares
included on a demand basis in such registration have been sold or disposed of or
withdrawn from sale by the Selling Holders or the expiration of the Demand
Period or, if the registration remains effective for a shorter period, the
Selling Holders have sold at least eighty percent (80%) of their Registrable
Shares included in such Other Holder Demand Registration. In addition, a
request for registration shall not be deemed to constitute an Other Holder
Demand Registration for purposes of the preceding sentence if: (i) the
conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such Other Holder Demand Registration
are not satisfied other than by reason of some act or omission by the Selling
Holders; (ii) the Company voluntarily takes any action that would result in the
Selling Holders not being able to sell such Registrable Shares covered thereby
during the Demand Period; (iii) after it has become effective, such Other Holder
Demand Registration becomes subject to any stop order, injunction or other order
or requirement of the Commission or other governmental agency or court and such
order, injunction or requirement is not promptly withdrawn or lifted, and such
Other Holder Demand Registration has not otherwise remained effective for the
Demand Period (including effective periods both before and after the order,
injunction or requirement is made or imposed); or (iv) such Other Holder Demand
Registration does not involve an underwritten offering and the Selling Holders
determine not to proceed following any delay imposed hereunder by the Company;
provided, however, that prior to such a delay under this clause (iv), the
- -------- -------
Selling Holders have not sold more than eighty percent (80%) of the Registrable
Shares included in such Other Holder Demand Registration. Notwithstanding the
foregoing, the Company may, at any time, delay the filing or delay or suspend
the effectiveness of the Other Holder Demand Registration or, without suspending
such effectiveness, instruct the Selling Holders not to sell any securities
included in the Other Holder Demand Registration, if the Company shall have
determined in good faith (as evidenced by a Board resolution delivered to the
Selling Holders) that proceeding with the Other Holder Demand Registration at
such time may have a material adverse effect on the Company or the Company shall
have determined upon the advice of counsel that it would be required to disclose
any actions taken by the Company in good faith and for valid business reasons,
including without limitation, the acquisition or divestiture of assets, which
disclosure may have a material adverse effect on
15
<PAGE>
the Company or on such actions (a "DEMAND SUSPENSION PERIOD"), by providing the
Selling Holders with written notice of such Demand Suspension Period and the
reasons therefor. The Company shall use its best efforts to provide such notice
at least ten (10) days prior to the commencement of such a Demand Suspension
Period; provided, however, that in any event the Company shall provide such
-------- -------
notice no later than the commencement of such Demand Suspension Period; and
provided, further, that in no event shall the Demand Suspension Periods exceed
- -------- -------
one hundred twenty (120) days in any three hundred sixty (360) day period.
The Company further agrees to supplement or amend such registration
statement with respect to such Other Holder Demand Registration, as required by
the registration form utilized by the Company or by the instructions applicable
to such registration form or by the Securities Act for the registration of
securities or as reasonably requested (which request shall result in the filing
of a supplement or amendment subject to approval thereof by the Company, which
approval shall not be unreasonably withheld) by any Selling Holder or any
managing underwriter of Registrable Shares to which such Other Holder Demand
Registration relates, and the Company agrees to furnish to the Selling Holders
(and any managing underwriter) copies, in substantially the form proposed to be
used and/or filed, of any such supplement or amendment prior to its being used
and/or filed with the Commission. The Company shall amend or supplement the
registration statement with respect to such Other Holder Demand Registration no
less frequently than every forty five (45) days to update the list of Selling
Holders pursuant to written requests by such Selling Holders.
4.2.3 Inclusion of Registrable Shares. Any written request for an
-------------------------------
Other Holder Demand shall specify the number of Registrable Shares to be
registered and the intended methods of disposition thereof. Within ten (10)
days after receipt of such Other Holder Demand, the Company shall give written
notice of such registration request to all holders of Registrable Shares, and
the Company shall include in such Other Holder Demand Registration all
Registrable Shares with respect to which the Company has received written
requests for inclusion therein within twenty (20) days after the date on which
such notice is given. Each such request shall also specify the aggregate number
of Registrable Shares to be registered. The Company may also include in such
Other Holder Demand Registration shares of Common Stock for the account of the
Company and any other Persons who hold shares of Common Stock.
4.2.4 Priority on Other Holder Demand Registration. If an Other
--------------------------------------------
Holder Demand Registration is an underwritten registration and the managing
underwriters of such offering determine that the aggregate number of (i)
Registrable Shares of the Selling Holders exercising their rights to participate
in the Other Holder Demand Registration on a demand basis, pursuant to this
Section 4.2; (ii) Shares of the Company; and (iii) Shares of any other Persons
entitled to participate in such Other Holder Demand Registration, in each case
proposed to be included in such registration statement, exceeds the maximum
number of Shares that can reasonably be expected to be sold within a price range
acceptable to the Company and the Selling Holders, then the number of shares to
be offered for the account of the Company and for the account of all such other
Persons, other than holders of Registrable
16
<PAGE>
Shares participating on a demand basis, participating in such registration shall
be reduced or limited pro rata (and to zero, if necessary) in proportion to the
--- ----
respective number of Registrable Shares requested to be registered to the extent
necessary to reduce the total number of Shares requested to be included in such
registration statement to the maximum number of Shares that can reasonably be
expected to be included therein and still satisfy such price requirement. If
the foregoing market "cutback" does not reduce the aggregate number of Shares
proposed to be included in the registration statement to the maximum number of
Shares that can reasonably be expected to be sold within the price range
acceptable to the Company and the Selling Holders, the Company shall include in
such registration, Registrable Shares of such Selling Holders pro rata among all
--- ----
such Selling Holders on the basis of the number of Registrable Shares requested
to be included by all Selling Holders who have requested that Registrable Shares
owned by them be so included. Any request for registration with respect to
which such a market "cutback" with respect to the Selling Holders occurs shall
be deemed to constitute an Other Holder Demand Registration for all purposes of
this Article 4; provided, however, that if any such market "cutback" occurs with
-------- -------
respect to an Other Holder Demand Registration and all Selling Holders are not
able to sell at least eighty percent (80%) of the Registrable Shares which such
Selling Holders proposed to sell pursuant to such Other Holder Demand
Registration, then such request for registration will not constitute an Other
Holder Demand Registration for purposes of this Article 4.
4.2.5 Compliance. Notwithstanding any other provisions hereof,
----------
the Company shall use its best efforts to ensure that (i) any registration
statement filed in connection with an Other Holder Demand Registration, and any
amendment thereto, and any prospectus forming a part thereof, and any supplement
thereto, complies in all material respects with the Securities Act and the rules
and regulations thereunder, (ii) any registration statement filed in connection
with an Other Holder Demand Registration, and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading and (iii) any prospectus forming part of
any registration statement filed in connection with an Other Holder Demand
Registration, and any supplement to such prospectus, does not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements, in the light of the circumstances under which they are
made, not misleading.
4.3 Piggyback Registration.
----------------------
4.3.1 Right to Include Registrable Shares. If the Company at any
-----------------------------------
time proposes to register any of its equity securities under the Securities Act,
whether or not for sale for its own account, on a form and in a manner which
would permit registration of Registrable Shares for a public offering under the
Act (other than on a registration statement (i) on Form S-4 or Form S-8 or any
successor form thereto or (ii) filed in connection with an exchange offer), the
Company shall give written notice of the proposed registration to each Other
Holder at least fifteen (15) days prior to the filing thereof, and each Other
Holder shall have the right to request that all or any part of its Registrable
Shares be included in such registration by giving written notice to the Company
within fifteen (15) days after the giving of such notice by the Company. If the
registration statement is to cover an underwritten
17
<PAGE>
offering, such Registrable Shares shall be included in the underwriting on the
same terms and conditions as the securities otherwise being sold through the
underwriters; provided, however, notwithstanding anything in this Agreement to
-------- -------
the contrary, in the case of a Qualified IPO, if such Qualified IPO does not
include Shares being sold under such offering by any of the Blechman Parties
and/or GEI Parties, then the Other Holders shall not have any rights under this
Section 4.3.1 to participate in such Qualified IPO on a piggyback basis.
4.3.2 Priority on Piggyback Registrations. The terms of Section
-----------------------------------
3.3.2 of the First Stockholders Agreement shall govern the determination of
priorities upon exercise of piggyback registration rights; it being expressly
agreed that for the purpose of such section, the Other Holders shall be deemed
Other Holders (as therein defined) for the purposes of the said Section 3.3.2;
provided, however, that in applying the provisions of Section 3.2.4 of the First
Stockholders Agreement to any registration in which GEI Holders (as such term is
defined in the First Stockholders Agreement) are participating on a demand basis
and any Other Holders are participating on a piggyback basis, as among the GEI
Holders so participating and the Other Holders so participating, the aggregate
number of Shares to be included in such registration for the account of the GEI
Holders and the Other Holders (the "TOTAL NUMBER OF INCLUDED SHARES") shall be
allocated among the GEI Holders and the Other Holders so participating so that
the number of Shares to be included in such registration for the account of each
GEI Holder and each Other Holder shall be the product of (x) the number of
Shares requested to be included in such registration by such GEI Holder or Other
Holder and (y) a fraction, the numerator of which is equal to the Total Number
of Included Shares and the denominator of which is equal to the aggregate number
of Shares requested to be included in such registration by the GEI Holders and
the Other Holders. The preceding proviso shall be deemed to amend the
provisions of Section 3.2.4 of the First Stockholders Agreement. The terms of
Section 3.3.2(d) of the First Stockholders Agreement shall be applicable to
piggyback registrations of Registrable Shares; it being understood that for the
purpose of such section the Other Holders whose Registrable Shares are included
in a piggyback registration shall be deemed to be Selling Holders for the
purposes of said Section 3.3.2(d).
4.4 Registration Statement. In connection with any registration of
----------------------
Registrable Shares under the Securities Act pursuant to this Agreement, the
Company will furnish each Selling Holder and each underwriter, if any, with a
copy of the registration statement and all amendments thereto and will supply
each such Selling Holder with copies of any prospectus included therein
(including a preliminary prospectus and all amendments and supplements thereto),
in each case including all exhibits, and such other documents as may be
reasonably requested, in such quantities as may be reasonably necessary for the
purposes of the proposed sale or distribution covered by such registration (the
Company hereby consenting to the use in accordance with all applicable law of
each such registration statement (or amendment or post-effective amendment
thereto) and each such prospectus (or preliminary prospectus or supplement
thereto) by each such Selling Holder and the underwriters, if any, in connection
with the offering and sale of the Registrable Shares covered by such
registration statement or prospectus). The Company shall not, however, be
required to maintain the registration statement relating to an Other Holder
Demand Registration and to
18
<PAGE>
supply copies of a prospectus for a period beyond the Demand Period, and, at the
end of such period, the Company may deregister any Registrable Shares covered by
such registration statement and not then sold or distributed. In connection
with any registration of Registrable Shares, the Company will, at the request of
the managing underwriter with respect thereto (or, if not an underwritten
offering, at the request of holders of a majority of the Registrable Shares to
be included in the registration) use its best efforts to register or qualify
such Registrable Shares for sale under the securities laws of such states as is
reasonably requested to permit the distribution of such Registrable Shares and
to use its reasonable efforts to keep each such registration or qualification
effective during the period such registration statement is required to be kept
effective and to do such other acts or things reasonably necessary to enable the
disposition in such jurisdictions of the securities covered by the applicable
registration statement in accordance with applicable "blue sky" securities laws
of such jurisdictions; provided, however, that the Company shall not be required
-------- -------
in connection therewith or as a condition thereof to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction or become subject to taxation in any jurisdiction.
In connection with any registration of Registrable Shares pursuant to this
Agreement, the Company shall (i) furnish each Selling Holder, at the Company's
expense and at least three (3) Business Days prior to the sale of any
Registrable Shares to the underwriters, with unlegended certificates in a form
eligible for deposit with The Depositary Trust Company representing ownership of
the Registrable Shares which are sold pursuant to the registration statement, in
such denominations and registered in such names as the managing underwriter, if
any, or such Selling Holder shall reasonably request, and (ii) instruct the
transfer agent and registrar of the shares of Common Stock to release any stop
transfer orders with respect to the Registrable Shares so sold.
4.5 Registration Procedures. In connection with the Company's obligations
-----------------------
to effect a registration of Registrable Shares pursuant to Sections 4.2 and 4.3
(provided that any time periods set forth in this Section 4.5 regarding
effective periods and the like shall apply only in the event of an Other Holder
Demand Registration), the Company will as expeditiously as is reasonably
practicable:
(i) prepare and file with the Commission as soon as practicable (in
the case of an Other Holder Demand Registration) a registration statement with
respect to such Registrable Shares, on a form available for the sale of the
Registrable Shares by the Selling Holders in accordance with the intended method
or methods of distribution thereof and use its commercially reasonable efforts
to cause each such registration statement to become and remain effective;
provided, however, that before filing a registration statement or prospectus or
- --------
any amendments or supplements thereto (including documents that would be
incorporated or deemed to be incorporated therein by reference) and, whether or
not filed pursuant to Section 4.2 or 4.3, the Company will furnish to the
holders of the Registrable Shares covered by such registration statement and the
underwriters, if any, and any attorney, accountant or other agent retained by
the holders of Registrable Shares covered by such registration statement, copies
of all such documents proposed to be filed, which documents will be subject to
the review and comment of such holders, such counsel and underwriters, if any.
19
<PAGE>
The Company will not file any registration statement or any amendment thereto or
any prospectus or any supplement thereto in connection with an Other Holder
Demand Registration pursuant to Section 4.2 (including such documents
incorporated by reference and proposed to be filed after the initial filing of
the registration statement) to which the holders of a majority of the
Registrable Shares covered by such registration statement or the underwriters,
if any, shall reasonably and timely object;
(ii) prepare and file with the Commission such amendments and post-
effective amendments to such registration statement and such supplements to the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective (to the extent otherwise required by this
Agreement) and to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
until such time as all of such securities have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof set
forth in such registration statement or the expiration of the Demand Period (in
the case of an Other Holder Demand Registration), whichever occurs earlier;
provided, however, that the only remedy for any failure to keep the registration
- -------- -------
statement so effective shall be as set forth in Section 4.2.2 and provided,
--------
further, that the Company will have no obligation to a Selling Holder
- -------
participating in a registration statement on a "piggyback" basis to keep a
registration statement effective for any particular period of time;
(iii) cooperate and assist in any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD");
(iv) notify each Selling Holder and the managing underwriter, if
any, promptly (and in any event within three (3) Business Days): (A) when the
prospectus or any prospectus supplement or post-effective amendment has been
filed, and with respect to the registration statement or any post-effective
amendment, when the same has become effective; (B) of any request by the
Commission or any other federal or state governmental authority for any
amendments or supplements to the registration statement or the prospectus or for
additional information; (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings for that purpose; (D) if, at any time prior to the closing
contemplated by an underwriting agreement entered into in connection with such
registration statement, that the representations and warranties of the Company
contained in such agreement cease to be true and correct; (E) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Registrable Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (F) of the
happening of any event which makes any statement made in the registration
statement, the prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue and which requires the making of any
changes in the registration statement, the prospectus or any document
incorporated therein by reference in order to make the statements therein not
misleading; and (G) of the Company's reasonable determination that a post-
effective amendment to a registration statement would be required;
20
<PAGE>
(v) make commercially reasonable efforts to prevent the issuance of
any order suspending the effectiveness of the registration statement or of any
order preventing or suspending the use of a prospectus or suspending the
qualification of any of the Registrable Shares included therein for sale in any
jurisdiction (subject to the proviso at the end of the penultimate paragraph of
Section 4.4), and, in the event of the issuance of any stop order suspending the
effectiveness of the registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction (subject to the proviso at the end of the penultimate paragraph of
Section 4.4), the Company will use its best efforts to promptly obtain the
withdrawal of any such order;
(vi) furnish to each Selling Holder and the managing underwriters,
if any, without any additional charge, one signed copy of the registration
statement and any post-effective amendment thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits (including those incorporated by reference);
(vii) as promptly as reasonably practicable, if required, based on
the advice of the Company's counsel, or upon the occurrence of any event
contemplated by Section 4.5(iv)(F), prepare and file a supplement or post-
effective amendment to the registration statement, the related prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable Shares,
the prospectus will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading;
(viii)cause all Registrable Shares covered by the registration
statement to be listed on each securities exchange on which identical securities
issued by the Company are then listed if requested by the Selling Holders
holding a majority in number of the Registrable Shares covered by the
registration statement or the managing underwriters, if any;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Shares covered by such registration statement from
and after a date not later than the effective date of such registration
statement;
(x) use its best efforts to provide a CUSIP number for the
Registrable Shares, not later than the effective date of the registration
statement;
(xi) use its best efforts to (A) obtain opinions of counsel to the
Company (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and not objected
to by the holders of a majority of the Registrable Shares being sold), and
updates thereof addressed to the Selling Holders, covering the matters
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by the underwriters, if any; and
(B) obtain "cold comfort" letters and updates thereof (which letters and updates
(in form, scope and substance) shall be reasonably satisfactory to the managing
underwriters, if any, and counsel to the holders of a majority of the
Registrable Shares being sold) from the
21
<PAGE>
Company's independent certified public accountants addressed to such Selling
Holders (and, if necessary, any other independent certified public accountants
of any subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to be,
included in the registration statement), such letters to be in customary form
and covering matters of the type customarily covered in "cold comfort" letters
by accountants in connection with underwritten offerings and such other matters
as the underwriters, if any, or the holders of a majority of the Registrable
Shares being sold, reasonably request. The above shall be done at each closing
under such underwriting or similar agreement or as and to the extent required
thereunder or, if not an underwritten offering, as otherwise reasonably
requested by the holders of a majority of the Registrable Shares being sold;
(xii) make available for inspection by a representative of the
Selling Holders and any attorneys or accountants retained by such Selling
Holders (and, to the extent reasonably requested, furnish copies), in connection
with the preparation of a registration statement pursuant to this Agreement, all
financial and other records and pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such representative(s), attorney(s)
or accountant(s) in connection with such registration; provided, however, that
--------
any records, information or documents that are designated by the Company in
writing as confidential shall be kept confidential by such persons unless
disclosure of such records, information or documents is required by court or
administrative order or under applicable law; provided, further, that
-------- -------
appropriate arrangements are made, to the extent required by applicable
antitrust law, to limit access to such information of the Company to
representatives of the Selling Holders who are not officers or employees of the
Selling Holders; and provided further that, without limiting the foregoing, no
----------------
such information shall be used by any such Person in connection with any market
transactions in securities of the Company or its subsidiaries in violation of
law;
(xiii) enter into such agreements reasonably requested (including,
as applicable, an underwriting agreement in form, scope and substance as is
customary in underwritten secondary offerings and is reasonably satisfactory to
the Company) and take all such other customary and reasonable actions in
connection therewith (including those requested by the managing underwriters) in
order to expedite or facilitate the disposition of the Registrable Shares, and
in such connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registration:
(a) make such representations and warranties to the holders of
such Registrable Shares included in the registration statement and the
underwriters, if any, with respect to the business of the Company and the
registration statement, prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each case, in form,
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings and confirm the same, if and when reasonably
requested; and
22
<PAGE>
(b) deliver such documents and certificates as may be reasonably
requested by the holders of a majority of the Registrable Shares being
included in the registration statement and managing underwriters, if any,
to evidence compliance with clause (a) above and with any provisions
contained in the underwriting agreement or other similar agreement entered
into by the Company;
The above shall be done at each closing under such underwriting or similar
agreement or as and, if not an underwritten offering, to the extent otherwise
reasonably requested by the holders of a majority of the Registrable Shares
being sold pursuant to the registration statement;
(xiv) if requested, furnish each Selling Holder with a copy (or a
reasonable number of copies, as requested) of the registration statement
(together with the Exhibits thereto) and each amendment thereto prior to the
filing thereof with the Commission;
(xv) if requested by the managing underwriters, if any, or a
holder of Registrable Shares being sold, promptly incorporate in a prospectus,
supplement or post-effective amendment such information as the managing
underwriters, if any, and the holders of the Registrable Shares being sold
reasonably request to be included therein relating to the sale of the
Registrable Shares, including, without limitation, information with respect to
the number of Registrable Shares being sold to underwriters, the purchase price
being paid therefor by such underwriters and with respect to any other terms of
the underwritten offering of the Registrable Shares to be sold in such offering;
and make all required filings of such prospectus, supplement or post-effective
amendment promptly following notification of the matters to be incorporated in
such supplement or post-effective amendment;
(xvi) upon the occurrence of any event that would cause a shelf
registration statement (A) to contain a material misstatement or omission or (B)
to be not effective and usable for resale of Registrable Shares during the
Demand Period, the Company shall promptly file an amendment to such shelf
registration statement, in the case of clause (A), correcting any such
misstatement or omission and, in the case of either clause (A) or (B), use its
commercially reasonable efforts to cause such amendment to be declared effective
and such shelf registration statement to become usable as soon as reasonably
practicable thereafter;
(xvii) otherwise use its best efforts to (x) comply with all
applicable rules and regulations of the Commission and to take all other steps
reasonably necessary to effect the registration of the Registrable Shares
covered by the registration statement contemplated hereby, and (y) make
available to its securityholders an earnings statement which satisfies the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Act) no later than forty-five (45) days
after the end of any twelve-month (12) period (or ninety (90) days after the end
of any twelve-month (12) period if such period is a fiscal year) (or in each
case within such extended period of time as may be permitted by the Commission
for filing the applicable report with the Commission) (i) commencing at the end
of any fiscal quarter in which Registrable Shares are sold to under writers in a
firm commitment or best efforts underwritten offering and (ii) if not sold to
23
<PAGE>
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of a Registration
Statement, which statements shall cover said twelve-month (12) periods; and
(xviii)in connection with any underwritten offering, cooperate with
all marketing efforts reasonably requested by the managing underwriter or
managing underwriters in connection with the sale of the Registrable Shares,
including, without limitation, participation in a reasonable number of road-show
presentations (in major U.S. financial cities) and other marketing activity by
executives and other employees of the Company requested by such underwriter or
underwriters provided that the scheduling of the road-show presentations shall
be set in consultation with the Company and will not require the Company's
involvement at any time or place to which the Company has a reasonable
objection.
4.6 Holdback Agreements.
-------------------
Restrictions on Public Sale by Holders of Registrable Shares. Each
------------------------------------------------------------
holder of Registrable Shares (whether or not such Registrable Shares are covered
by a registration statement filed pursuant to Section 4.2 or 4.3 hereof) agrees,
if requested (pursuant to a timely written notice) by the managing underwriter
or underwriters in an underwritten offering, not to effect any public sale or
distribution of any of the Company's securities, including a sale pursuant to
Rule 144 (except as part of such underwritten offering), during the period
beginning ten (10) days prior to, and ending ninety (90) days after, the closing
date of the underwritten offering made pursuant to such registration statement
(the "REGISTRATION STATEMENT").
The foregoing provisions shall not apply to any holder of Registrable
Shares if such holder of Registrable Shares is prevented by applicable statute
or regulation from entering into any such agreement; provided, however, that any
-------- -------
such holder of Registrable Shares shall undertake not to effect any public sale
or distribution of the class of securities covered by the Registration Statement
(except as part of such underwritten offering) during such period unless it has
provided sixty (60) days' prior written notice of such sale or distribution to
the managing underwriter.
4.7 Registration Expenses. Except as otherwise required by state
---------------------
securities laws or the rules and regulations promulgated thereunder, all
expenses, disbursements and fees incurred by the Company in connection with
carrying out its obligations under this Article 4, including but not limited to,
(i) the reasonable and documented fees and expenses of one counsel selected by
the Company and reasonably acceptable to the Selling Holders, (ii) all
registration, filing fees and expenses (including fees with respect to filings
made with the NASD (including, if applicable, the fees and expenses of any
"qualified independent underwriter" and its counsel, as may be required by the
rules and regulations of the NASD, (iii) fees and expenses of compliance with
securities or blue sky laws (including fees and disbursements of counsel for the
underwriters or Selling Holders in connection with blue sky qualifications of
the Registrable Shares and determinations of their eligibility for investment
under the laws of such jurisdiction as the managing underwriters or holders of a
majority of
24
<PAGE>
the Registrable Shares being sold may designate, subject to the proviso to the
last sentence of the penultimate paragraph of Section 4.4), (iv) printing
expenses (including printing certificates for the Registrable Shares to be sold
and the registration statements and prospectuses), messenger and delivery
expenses, duplication, word processing, and telephone, (v) fees and
disbursements of counsel for the Company, and (vi) fees and disbursements of all
independent certified public accountants of the Company incurred in connection
with such registration (including the expenses of any special audit and "cold
comfort" letters incident to such registration), underwriters (excluding
discounts, commissions or fees of underwriters, selling brokers, dealer managers
or similar securities industry professionals relating to the distribution of the
Registrable Shares) and other Persons retained by the Company (all such expenses
being herein called "REGISTRATION EXPENSES"), will be borne by the Company
regardless of whether a registration statement becomes effective; provided,
--------
however, that the Company will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit or quarterly review, the fees and expenses of any Person, including
special experts, retained by the Company, the expense of any liability insurance
and the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or on the NASD automated quotation system; and provided further, that
-------- -------
each Selling Holder shall pay (x) all costs and expenses of counsel (other than
the counsel costs referred to in (i) above), accounting or financing
professionals retained by such Selling Holder, (y) all underwriting discounts,
commissions, fees and expenses and all transfer taxes with respect to the Shares
sold by such Selling Holder, and (z) all other expenses incurred by such Selling
Holder and incidental to the sale and delivery of the Shares to be sold by such
Selling Holder.
4.8 Conditions to Selling Holder's Rights. It shall be a condition of
-------------------------------------
each Selling Holder's rights hereunder that:
4.8.1 Cooperation. Such Selling Holder shall cooperate with the
-----------
Company by supplying information and executing documents relating to such
Selling Holder or the securities of the Company owned by such Selling Holder in
connection with such registration which are customary for offerings of this type
(including agreeing to sell such Selling Holder's Registrable Shares on the
basis provided in any underwriting arrangements containing customary terms
reasonably satisfactory to such Selling Holder);
4.8.2 Undertakings. Such Selling Holder shall enter into any
------------
undertakings and take such other action relating to the conduct of the proposed
offering which the Company or the underwriters may reasonably request as being
necessary to insure compliance with federal and state securities laws and the
rules or other requirements of the NASD or which the Company or the underwriters
may reasonably request to otherwise effectuate the offering; and
4.8.3 Indemnification. Such Selling Holder shall execute and
---------------
deliver an agreement to indemnify to the fullest extent permitted by law and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement,
25
<PAGE>
any underwriter (as defined in the Securities Act), and each person, if any, who
controls the Company or such underwriter within the meaning of the Securities
Act, against such losses, claims, damages or liabilities (including
reimbursement for legal and other expenses) to which the Company or any such
director, officer, underwriter or controlling person may become subject under
the Securities Act or otherwise, in such manner as is customary for
registrations of the type then proposed, but only with respect to written
information about or pertaining to such Selling Holder furnished by such Selling
Holder specifically for inclusion in the registration statement; provided,
--------
however, that the obligation to indemnify pursuant to such agreement to
- -------
indemnify shall be several and not joint and in no event shall the liability of
any Selling Holder under such agreement to indemnify be greater in amount than
the dollar amount of the proceeds (net of the payment of underwriting discounts
and commissions payable by such Selling Holder) received by such Selling Holder
upon the sale of the Registrable Shares giving rise to such indemnification
obligation.
4.9 Indemnification.
---------------
4.9.1 Indemnification by the Company. In the case of any offering
------------------------------
registered pursuant to this Agreement, the Company agrees to indemnify to the
fullest extent permitted by law and hold each Selling Holder, each affiliate of
such Selling Holder and each director, officer, agent, representative and
employee of such Selling Holder and its affiliates, each Person who controls
each Selling Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act and the directors, officers, agents or employees
of each such controlling person harmless against any and all losses, claims,
damages, liabilities, actions (including reasonable and documented costs
(including, without limitation, costs of preparation and reasonable attorneys'
fees and disbursements) and expenses, including reasonable expenses of
investigation) (collectively "LOSSES") to which they or any of them may become
subject under the Securities Act or any other statute or common law or
otherwise, insofar as any such Losses shall arise out of, be caused by or shall
be based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the registration statement relating to the sale of such
Registrable Shares, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (ii) any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus (as amended or
supplemented if the Company shall have filed with the Commission any amendment
thereof or supplement thereof), if used prior to the effective date of such
registration statement, or contained in the prospectus (as amended or
supplemented if the Company shall have filed with the Commission any
amendment,thereof or supplement thereof, including the information deemed part
of such registration statement pursuant to Rule 430A promulgated under the
Securities Act), if used within the period during which the Company shall be
required to keep the registration statement to which such prospectus relates
current pursuant to the terms of this Agreement, or the omission or alleged
omission to state therein (if so used) a material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the indemnification agreement
--------
contained in this Section 4.9.1 shall not apply to such Losses which shall arise
from the sale of Registrable Shares to any Person if such Losses shall arise out
of, shall be caused by or shall be based upon any such untrue statement or
alleged untrue
26
<PAGE>
statement, or any such omission or alleged omission, (i) if such statement or
omission shall have been made in reliance upon and in conformity with
information furnished in writing to the Company by such Selling Holder
specifically for use in connection with the preparation of the registration
statement or any preliminary prospectus or prospectus contained in the
registration statement or any such amendment thereof or supplement thereto; (ii)
if such untrue statement or omission was made in any preliminary prospectus to
the extent that (a) the prospectus corrected such untrue statement or such
omission and (b) the Selling Holder was legally required to and failed to send
or deliver a copy of the preliminary prospectus with or prior to the delivery of
written confirmation of the sale by such Selling Holder of Registrable Shares to
the Person asserting the claim from which such Losses arise; or (iii) any such
Losses arise out of, are caused by or are based upon an untrue statement or
omission in the prospectus, to the extent that (a) such untrue statement or
omission is corrected in an amendment or supplement to the prospectus and (b)
having previously been furnished by or on behalf of the Company with copies of
the prospectus as so amended or supplemented, such Selling Holder was legally
required to and thereafter fails to deliver such prospectus as so amended or
supplemented, prior to or concurrently with the sale of Registrable Shares to
the Person asserting the claim from which such Losses arise. This indemnity
shall be in addition to any other indemnification arrangements to which the
Company may otherwise be a party.
4.9.2 Indemnification by Holders of Registrable Shares. Each
----------------------------------------- ------
Selling Holder agrees to indemnify to the fullest extent permitted by law and
hold the Company, its directors, officers, agents and employees, each Person who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act and the directors, officers, agents or employees
of such controlling persons harmless against any and all Losses arising out of,
caused by or based upon any untrue statement of a material fact contained in any
registration statement, prospectus or form of prospectus, or arising out of,
caused by or based upon any omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of the
preliminary prospectus and the prospectus, in each case, including amendments or
supplements, in light of the circumstances in which they were made) not
misleading, to the extent, but only to the extent, that such untrue statement or
omission is contained in any information furnished in writing by such Selling
Holder to the Company, expressly for use in such registration statement or
prospectus; provided, however, that the obligation to indemnify will be several
--------
and not joint and in no event shall the liability of any Selling Holder
hereunder be greater in amount than the dollar amount of the proceeds (net of
the payment of underwriting discounts and commissions payable by such Selling
Holder) received by such Selling Holder upon the sale of the Registrable Shares
giving rise to such indemnification obligation. The Company and the Selling
Holders shall be entitled to receive indemnities from underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in the distribution to the same extent as provided above with
respect to information so furnished in writing by such Persons expressly for use
in any prospectus or registration statement.
4.9.3 Conduct of Indemnification Proceedings. Any Person entitled
--------------------------------------
to indemnity under this Agreement (an "INDEMNIFIED PARTY") shall give prompt
written notice to the party from which such indemnity is sought (the
"INDEMNIFYING PARTY") of any claim
27
<PAGE>
or of the commencement of any proceeding with respect to which such Indemnified
Party seeks indemnification or contribution pursuant hereto; provided, however,
--------
that the failure so to notify the Indemnifying Party shall not relieve the
indemnifying party from any obligation or liability except to the extent that
the Indemnifying Party has been prejudiced materially by such failure. The
Indemnifying Party shall have the right, exercisable by giving written notice to
an Indemnified Party promptly after the receipt of written notice from such
Indemnified Party of such claim or proceeding to assume at the Indemnifying
Party's expense, the defense of any such claim or proceeding, with counsel
reasonably satisfactory to such Indemnified Party; provided, however, that under
--------
such circumstances an Indemnified Party shall have the right to employ separate
counsel in any such claim or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless: (1) the Indemnifying Party agrees to pay such
fees and expenses; or (2) the Indemnifying Party fails promptly to assume the
defense of such claim or proceeding or fails to employ counsel reasonably
satisfactory to such Indemnified Party; or (3) the Indemnified Party shall have
been advised by counsel that (i) there may be one or more material defenses
available to such Indemnified Party that are different from or additional to
those available to the Indemnifying Party or its affiliates, or (ii) a conflict
of interest likely exists if such counsel represents such Indemnified Party and
such Indemnifying Party or its affiliate, in which case, if such Indemnified
Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense thereof, it being
understood, however, that the Indemnifying Party shall not, in connection with
any one such claim or proceeding or,separate but substantially similar or
related claims or proceedings arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (together with appropriate local counsel which such counsel
shall be designated by the Indemnified Party and be reasonably acceptable to the
Indemnifying Party) at any time for such Indemnified Party, or for fees and
expenses that are not reasonable. Whether or not such defense is assumed by the
Indemnifying Party, such Indemnifying Party will not be subject to any liability
for any settlement made without its consent (which consent shall not be
unreasonably withheld). The Indemnifying Party shall not consent to entry of
any judgment or settle or compromise any pending or threatened claim, action or
proceeding, unless it contains as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release, in form and
substance satisfactory to the Indemnified Party, from all liability in respect
of such claim or litigation for which such Indemnified Party would be entitled
to indemnification hereunder.
The Indemnifying Party's liability to any such Indemnified Party
hereunder shall not be extinguished solely because any other Indemnified Party
is not entitled to indemnity hereunder.
4.9.4 Contribution. If the indemnification provided for in this
------------
Section 4.9 is unavailable to an Indemnified Party in respect of any Losses or
is insufficient to hold such Indemnified Party harmless, then, except to the
extent that contribution is not permitted under Section 11(f) of the Securities
Act, each applicable Indemnifying Party shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in such
28
<PAGE>
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party, on the one hand, and such Indemnified Party, on the other hand, in
connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations appropriate under
the circumstances. The relative fault of such Indemnifying Party, on the one
hand, and such Indemnified Party, on the other hand, shall be determined by
reference to, among other things, whether any action in question, including any
untrue statement of a material fact or omission to state a material fact, has
been taken or made by, or relates to information supplied by, such Indemnifying
Party or Indemnified Party, and the parties' relative intent, knowledge, access
to information concerning the matter with respect to which the claim was
asserted and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4.9.4 were determined by pro rata
--- ----
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 4.9.4, no Indemnifying Party that
is a Selling Holder shall be required to contribute any amount in excess of the
amount by which the net proceeds received by such Selling Holder from the sale
of Registrable Shares exceeds the amount of any damages that such Selling Holder
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this Section
-------
4.9 are in addition to any liability that the Indemnifying Parties may have to
- ---
the Indemnified Parties.
4.9.5 Underwriting Agreement to Govern. At such time as an
--------------------------------
underwriting agreement with respect to a particular underwriting is entered
into, the terms of any such underwriting agreement shall govern with respect to
the matters set forth therein to the extent inconsistent with this Section 4.9;
provided, however, that the indemnification provisions of such underwriting
- --------
agreement as they relate to Selling Holders are customary for registrations of
the type then proposed and provide for indemnification by such Selling Holders
only with respect to written information furnished by such Selling Holders.
4.10 Rules 144 and 144A. Following the earlier of a Public
------------------
Offering Event or a Qualified IPO, the Company shall file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the Commission thereunder and will take such further
action as any holder of Registrable Shares may reasonably request, all to the
extent required from time to time to enable such holder to sell Registrable
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144. Upon the request of any holder of
Registrable Shares, the Company will deliver to such holder a written statement
as to whether it has complied with such requirements. At any time when the
Company is not subject to Section 13 or
29
<PAGE>
15(d) of the Exchange Act, the Company agrees, for the benefit of the holders of
Registrable Shares, to furnish, at the Company's expense, to any requesting
holder of Registrable Shares and prospective purchasers designated by such
holders, information required to be disclosed pursuant to subsection (d)(4)(i)
of Rule 144A promulgated under the Securities Act.
ARTICLE 5. Representations and Warranties
------------------------------
5.1 Representations and Warranties of the Company.
---------------------------------------------
The Company represents and warrants to the Stockholders as follows:
5.1.1 Organization. It is a corporation duly organized and validly
------------
listing under the laws of the State of Delaware;
5.1.2 Authority. It has full corporate power and authority to
---------
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby;
5.1.3 Binding Obligation. The execution, delivery and performance
------------------
of this Agreement by it and the consummation by it of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on its part, and this Agreement constitutes its binding
obligation, enforceable against it in accordance with its terms, except insofar
as enforceability may be limited by bankruptcy, insolvency, moratorium or other
laws which may affect creditors' rights and remedies generally and by principles
of equity (regardless of whether enforceability is considered in a proceeding in
equity or at law); and
5.1.4 No Conflict. The execution, delivery and performance of
-----------
this Agreement by it and the consummation by it of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time, or
both, (i) violate any provision of law, statute, rule or regulation to which it
is subject, (ii) violate any order, judgment or decree applicable to it, or
(iii) conflict with, or result in a breach or default under, any term or
condition of its certificate of incorporation or its by-laws or any material
agreement or other material instrument to which it is a party or by which it or
its property is bound.
5.2 Representations and Warranties of the Stockholders. Each of the
--------------------------------------------------
Stockholders represents and warrants to each other Stockholder and to the
Company as follows:
5.2.1 Organization. If it is an entity, it is a corporation,
------------
limited partnership or other entity duly organized and validly existing under
the laws of its respective state of organization;
5.2.2 Authority. It has full power and authority to execute,
---------
deliver and perform this Agreement and to consummate the transactions
contemplated hereby;
30
<PAGE>
5.2.3 Binding Obligation. The execution, delivery and performance of
------------------
this Agreement by it and the consummation by it of the transactions contemplated
hereby have been duly and validly authorized by all necessary action on its
part, and this Agreement constitutes its binding obligation, enforceable against
it in accordance with its terms, except insofar as enforceability may be limited
by bankruptcy, insolvency, moratorium or other laws which may affect creditors'
rights and remedies generally and by principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law); and
5.2.4 No Conflict. The execution, delivery and performance of
-----------
this Agreement by it and the consummation by it of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time, or
both, (i) violate any provision of law, statute, rule or regulation to which it
is subject, (ii) violate any order, judgment or decree applicable to it, or
(iii) conflict with, or result in a breach or default under, any term or
condition of its certificate of incorporation, bylaws or equivalent governing
document or any material agreement or other material instrument to which it is a
party or by which it or its property is bound.
ARTICLE 6. Termination of Agreement
------------------------
This Agreement shall terminate ten (10) years from the date of this
Agreement (the "TERMINATION DATE"); provided, however, that Sections 2.4 and 2.6
-------- -------
and Article 3 of this Agreement shall terminate one (1) day after the date of a
Public Offering Event or a Qualified IPO which occurs prior to the Termination
Date.
ARTICLE 7. Obligations of the Company;
---------------------------
7.1 Financial Statements, Certifications and Information. So long as
----------------------------------------------------
either the Blechman Parties or the GEI Parties shall be so entitled under the
terms of Article 6 of the First Stockholders Agreement, the Company will deliver
to each of the Other Holders owning shares of Common Stock or shares of Senior
Preferred Stock of the Company the following financial statements. As soon as
available and in any event within forty-five (45) days after the end of each
fiscal quarter (other than a fiscal quarter ending on the fiscal year end), the
Company will deliver unaudited consolidated balance sheets of the Company as of
the end of such fiscal quarter and the related consolidated statements of
income, stockholders' equity and cash flows for such fiscal quarter and for the
period from the beginning of the then current fiscal year to the end of such
fiscal quarter, setting forth in each case in comparative form the corresponding
figures for the corresponding periods of the previous fiscal year, certified by
the chief financial officer of the Company that the consolidated financial
statements fairly present the consolidated financial condition of the Company as
at the dates indicated and the results of its operations and its cash flows for
the periods indicated, subject to changes resulting from audit and normal year-
end adjustments; provided, it is hereby agreed that this obligation of the
--------
Company with respect to the production of quarterly reports shall begin with the
fiscal quarter ended June 30, 1996. As
31
<PAGE>
soon as available and in any event within ninety (90) days after the end of each
fiscal year, the Company will deliver (a) the consolidated balance sheet of the
Company as of the end of such fiscal quarter and the related consolidated
statements of income, stockholders' equity and cash flows for such fiscal year,
setting forth in each case in comparative form the corresponding figures for the
previous fiscal year, certified by the chief financial officer of the Company
that such financial statements fairly present the consolidated financial
condition of the Company as at the dates indicated and the results of its
operations and its cash flows for the periods indicated, and (b) in the case of
such consolidated financial statements, a report thereon of independent
certified public accountants of recognized national standing selected by the
Company which shall state that such consolidated financial statements fairly
present the consolidated financial position of the Company as of the dates
indicated and the results of its operations and its cash flow for the periods
indicated in accordance with generally accepted accounting principles applied on
a basis consistent with prior years (except as otherwise disclosed in such
financial statements) and that the examination by such accountants has been made
in accordance with United States generally accepted auditing standards.
Each financial statement delivered pursuant to this Section 7.1 shall be
substantially in the form appropriate for financial statements included in a
Quarterly Report on Form 10-Q or Annual Report on Form 10-K, as the case may be,
filed with the Commission pursuant to the Exchange Act and shall be accompanied
by a brief, narrative report appropriate for inclusion in such Form in the
section titled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" set forth in Item 303 of Regulation S-K under the Act and
the Exchange Act.
For purposes of this Section 7.1, any Person to which an Other Holder sells
shares of Senior Preferred Stock shall be deemed to be an Other Holder if (a)
such sale is other than pursuant to an effective registration statement under
the Securities Act or pursuant to Rule 144 and (b) such Person has executed and
delivered to the Company a confidentiality agreement containing provisions
substantially identical to Section 7.2
7.2 Confidentiality. Each Other Holder acknowledges that the information
---------------
that it shall receive pursuant to Section 7.1 constitutes non-public,
proprietary and/or confidential information of the Company and accordingly shall
hold all such information received pursuant to Section 7.1 (the "CONFIDENTIAL
INFORMATION") in confidence and shall not use or disclose any such Confidential
Information; provided, however, that an Other Holder may disclose any such
--------
Confidential Information (i) to its counsel, accountants and other professional
advisers for reasons reasonably related to such Other Holder's status as a
Stockholder, (ii) as required by law or any governmental authority (including,
but not limited to, any federal or state Freedom of Information Act), or (iii)
to a proposed bona fide Transferee; provided, however, that, in the case of
--------
clause (iii) above, any such person or entity shall execute a confidentiality
agreement containing provisions substantially identical to this Section 7.2 in
advance of its receipt of such information. Notwithstanding the fore going, the
provisions of this Section 7.2 shall not apply to such portions of the
Confidential Information that (i) are or become available to the public through
no fault or action of any of the Other Holders or their respective
representatives, or (ii) become available to an Other
32
<PAGE>
Holder or its representatives on a nonconfidential basis from a source, other
than the Company or its representatives, not known by such Other Holder to be in
violation of any agreement or other duty of confidentiality to the Company.
ARTICLE 8. General
-------
8.1 Recapitalization, Exchanges, etc. Affecting the Common Stock. The
------------------------------------------------------------
provisions of this Agreement shall apply to the full extent set forth herein
with respect to (a) the Shares and any option, right or warrant to acquire
Shares, and (b) any and all shares of capital stock of the Company or any
successor or assign of the Company (whether by merger, consolidation, sale of
assets or otherwise) which may be issued in respect of, in exchange for, or in
substitution for the Shares, by combination, recapitalization, reclassification,
merger, consolidation or otherwise. In the event of any change in the
capitalization of the Company, as a result of any stock split, stock dividend or
stock combination, the provisions of this Agreement shall be appropriately
adjusted.
8.2 Injunctive Relief. It is hereby agreed and acknowledged that it will
-----------------
be impossible to measure in money the damages that would be suffered if the
parties fail to comply with any of the obligations herein imposed on them and
that, in the event of any such failure, an aggrieved person will be irreparably
damaged and will not have an adequate remedy of law. Any such person shall,
therefore, be entitled to injunctive relief, including specific performance, to
enforce such obligations, without the posting of any bond and if any action
should be brought in equity to enforce any of the provisions of this Agreement,
none of the parties hereto shall raise the defense that there is an adequate
remedy at law.
8.3 Notices. Any and all notices, demands or other communications
-------
required or permitted hereunder shall be in writing and shall be made by hand
delivery (deemed given upon receipt), or by certified mail return receipt
requested (deemed given upon execution of such return receipt), addressed to a
Stockholder and the Company at the address set forth below such person's or
entity's signature. Any party may change its address for notice by notice given
to each Stockholder and the Company in accordance with the foregoing. No
objection may be made to the method of delivery of any notice actually and
timely received. Each Other Holder agrees that notwithstanding any other
provisions of this Agreement, such Other Holder will give the other Stockholders
at least five (5) days' advance written notice of any proposed Transfer by such
Other Holder of any of the Shares owned by such Other Holder.
8.4 Legend. In addition to any other legend which may be required by
------
applicable law, each share certificate representing Shares owned by any Other
Holder which are subject to this Agreement shall have endorsed, to the extent
appropriate, upon its face the following words:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE
33
<PAGE>
SECURITIES LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT
BE OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED,
ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO (I) A REGISTRATION STATEMENT WITH RESPECT TO
SUCH SECURITIES THAT IS EFFECTIVE UNDER SUCH ACT OR
APPLICABLE STATE SECURITIES LAW, OR (II) ANY EXEMPTION FROM
REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE SECURITIES
LAW, RELATING TO THE DISPOSITION OF SECURITIES, INCLUDING
RULE 144, PROVIDED AN OPINION OF COUNSEL IS FURNISHED TO THE
COMPANY, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO
THE COMPANY, TO THE EFFECT THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND/OR APPLICABLE STATE
SECURITIES LAW IS AVAILABLE.
IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER
COMPLIES WITH THE PROVISIONS OF A SECONDARY STOCKHOLDERS
AGREEMENT DATED AS OF MAY 7, 1996 (THE "SECONDARY
STOCKHOLDERS AGREEMENT"), A COPY OF WHICH IS ON FILE AND MAY
BE INSPECTED AT THE PRINCIPAL OFFICE OF THE COMPANY. NO
TRANSFER OF THE SECURITIES WILL BE MADE ON THE BOOKS OF THE
COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH
THE TERMS OF SUCH SECONDARY STOCKHOLDERS AGREEMENT. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT
TO OTHER RIGHTS AND OBLIGATIONS AS SET FORTH IN THE
SECONDARY STOCKHOLDERS AGREEMENT.
8.5 Transferees Bound. All Shares owned by a Transferee of an Other
-----------------
Holder shall, subject to the terms of Section 2.3 of this Agreement, for all
purposes be subject to the terms of this Agreement, whether or not such
Transferee has executed a consent to be bound by this Agreement. In the case of
a hypothecation, the Transfer shall be deemed to occur both at the time of the
initial pledge and at any pledgee's sale or a sale by any secured creditor or a
retention by the secured creditor of the pledged Shares in complete or partial
satisfaction of the obligation for which the Shares is security. The foregoing
shall not apply in the case of any Shares acquired by a Transferee pursuant to a
sale of Shares pursuant to
34
<PAGE>
an effective registration statement under the Securities Act or, except for
sales to an affiliate of the selling Other Holder(s), pursuant to Rule 144
promulgated under the Act. In addition, any Transferee of a Blechman Party or a
GEI Party, to the extent that such Transferee is bound under the terms of
Sections 2.3 and 8.5 of the First Stockholders Agreement, shall also be bound by
this Agreement; it being expressly understood that for the purposes of Section
2.4 of this Agreement only, such Transferee shall be deemed a Blechman Party or
----
GEI Party, as applicable.
8.6 Amendment; Waiver. This Agreement may be amended, modified,
-----------------
supplemented or terminated only by a written instrument signed by each of (i)
the Company, (ii) Stockholders holding a majority of the Shares issued to GEI
under the Purchase Agreement, (iii) Stockholders holding a majority of the
Shares issued to the Blechmans under the Purchase Agreement, and (iv)
Stockholders holding a majority of the Registrable Shares. No provision of this
Agreement may be waived orally, but only by a written instrument signed by the
party against whom enforcement of such waiver is sought. Stockholders shall be
bound from and after the date of the receipt of a written notice from the
Company setting forth such amendment or waiver by any consent authorized by this
Section, whether or not the Shares shall have been marked to indicate such
consent; no alteration, modification or impairment shall be implied by reason of
any previous waiver, extension of time, delay or omission in exercise, or other
indulgence.
8.7 Additional Documents. Each party hereto agrees to execute any and all
--------------------
further documents and writings within its powers and to perform such other
actions which may be or become necessary or expedient to effectuate and carry
out this Agreement.
8.8 No Third-Party Benefits. None of the provisions of this Agreement
-----------------------
shall be for the benefit of, or enforceable by, any third-party beneficiary.
8.9 Successors and Assigns. Subject to the terms hereof, this Agreement
----------------------
shall be binding upon and shall inure to the benefit of the Stockholders, and
their respective successors and permitted assigns; provided, however, (i)
--------
neither this Agreement nor any rights or obligations hereunder may be
transferred by the Company and (ii) no rights or obligations of any Stockholder
under this Agreement may be assigned except that any Stockholder may transfer
its rights and obligations hereunder, in whole or in part, in connection with a
Transfer of Shares made in compliance with all of the provisions of this
Agreement.
8.10 Severability. In case any one or more of the provisions contained in
------------
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein; provided, however, that the parties hereto shall
--------
use their best efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such invalid,
illegal or unenforceable term, provision, covenant or restriction.
35
<PAGE>
8.11 Integration. This Agreement, together with the First Stockholders
-----------
Agreement, contains the entire understanding of the parties with respect to the
subject matter hereof. There are no restrictions, agreements, promises,
representations, warranties, covenants or undertakings with respect to the
subject matter hereof other than those expressly set forth or referred to herein
or therein. This Agreement and the First Stockholders Agreement supersede all
prior agreements and understandings between the parties with respect to its
subject matter.
8.12 Governing Law. THE RIGHTS AND LIABILITIES OF THE PARTIES SHALL BE
-------------
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE CHOICE
OF LAWS PROVISIONS OF SUCH STATE OR ANY OTHER JURISDICTION.
8.13 Attorneys' Fees. Should any litigation or arbitration be commenced
---------------
(including any proceedings in a bankruptcy court) between the parties hereto or
their representatives concerning any provision of this Agreement or the rights
and duties of any person or entity hereunder, the party or parties prevailing in
such proceeding shall be entitled, in addition to such other relief as may be
granted, to the reasonable attorneys' fees and court costs incurred by reason of
such litigation or arbitration.
8.14 Headings. The headings in this Agreement are inserted only as a
--------
matter of convenience, and in no way define, limit, or extend or interpret the
scope of this Agreement or of any particular Section.
8.15 Information for Notices. No Other Holder (other than an Other Holder
-----------------------
as of the date of this Agreement with respect to the Shares held as of such
date) shall hold any of its Shares in nominee name unless it otherwise provides
the Company and the other Stockholders with its name and address and other
information reasonably requested by the Company in order to establish such Other
Holder's particular status under this Agreement.
8.16 Certain Amendments to Certificate of Incorporation. In connection
--------------------------------------------------
with and in order to facilitate an initial public offering of the Company's
Common Stock (including but not limited to pursuant to an Other Holder Demand
Registration or a Qualified IPO), each Other Holder agrees to take all such
action as is necessary, including the voting of all Shares owned by such Person
in order to effectuate (i) any amendments to the Company's Certificate of
Incorporation regarding the number of shares of the Company's authorized capital
stock, (ii) any proposal to effect a stock split of the Company's Common Stock,
and any amendments to the Company's Certificate of Incorporation, to the extent
reasonably requested by the Company, the Blechmans or GEI in connection with
such offering, (iii) any amendments to the Company's Certificate of
Incorporation and By-Laws as are customary for a company which is to engage in
an initial public offering of its common stock and which are reasonably
requested by the managing underwriters or by the Blechmans or GEI in order to
expedite or facilitate the disposition of the Company's Common Stock in
connection with such offering, and (iv) the entering into of any contract,
agreement or commitment reasonably necessary in order to effectuate any of the
matters contemplated by this Section 8.16.
36
<PAGE>
8.17 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.18 Consent to Jurisdiction. Each Stockholder agrees that any proceeding
-----------------------
arising out of or relating to this Agreement or the breach or threatened breach
of this Agreement may be commenced and prosecuted in a court in the State of New
York. Each Stockholder hereby irrevocably and unconditionally consents and
submits to the non-exclusive personal jurisdiction of any court in the State of
New York in respect of any such proceeding. Each Stockholder consents to
service of process upon it with respect to any such proceeding by registered
mail, return receipt requested, and by any other means permitted by applicable
laws and rules. Each Stockholder waives any objection that it may now or
hereafter have to the laying of venue of any such proceeding in any court in the
State of New York and any claim that it may now or hereafter have that any such
proceeding in any court in the State of New York has been brought in an
inconvenient forum. Notwithstanding the foregoing provisions of this Section
8.18, such provisions shall not apply to any Stockholder which is a state-
sponsored employee benefit plan, a successor trust or fiduciary of such a plan
or a successor to such a plan pursuant to a statutory reconstitution.
8.19 Certain Distributions Exempt. (a) Notwithstanding anything to the
----------------------------
contrary contained in this Agreement, any distribution by the GEI Parties to
their respective equity participants in accordance with the terms of their
respective limited partnership agreements shall be exempt from the terms and
conditions of this Agreement, other than that the Persons receiving the Shares
in connection with any such distribution shall be bound on a going-forward basis
by the terms and conditions of this Agreement. For example, and not by way of
limitation, any such distribution shall not trigger any of the "tag-along"
rights set forth in Section 2.4.
(b) Notwithstanding anything to the contrary contained in this Agreement,
any distribution by any Other Holder to its equity participants in accordance
with the terms of its partnership agreement shall be exempt from the terms and
conditions of this Agreement, other than that the Persons receiving the Shares
in connection with any such distribution shall be bound on a going-forward basis
by the terms and conditions of this Agreement. For example, and not by way of
limitation, any such distribution shall not trigger any of the "option" rights
set forth in Section 2.6.
8.20 Certain Limitations. Notwithstanding anything to the contrary
-------------------
contained in this Agreement, prior to the issuance or sale of any shares of the
Company's capital stock pursuant to an effective registration statement under
the Act, the Company shall not be required to register any transfer of Shares on
the Company's books if in the reasonable, good faith judgment of the Company,
registering such transfer would cause the Company to become subject to
registration pursuant to the Exchange Act.
8.21 Information Regarding Beneficial Ownership. Each Other Holder agrees
------------------------------------------
to promptly provide to the Company any information or representations that the
Company may request regarding such Other Holder's beneficial ownership of shares
of any class of the Company's capital stock.
37
<PAGE>
8.22 Other Holders under the Purchase Agreement. It is agreed that the
------------------------------------------
Other Holders are, pursuant to Section 2.4 of the Purchase Agreement, assigns of
GEI under the Purchase Agreement and that the provisions of the Purchase
Agreement, including but not limited to Article 11, shall be applicable to the
Other Holders and GEI, as provided therein.
8.23 Certain Provisions Relating to Preferred Stock. (a) GEI Agrees that
----------------------------------------------
it will give ten (10) days written notice to the Other Holders prior to any sale
or other disposition for value by it of any shares of Junior Preferred Stock;
provided, however, that the provisions of this Section 8.23(a) shall not apply
- -------- -------
to (i) any sale or other disposition of shares of Junior Preferred Stock between
and among GEI Parties, (ii) any sale of shares of Junior Preferred Stock to the
public pursuant to an effective registration statement under the Securities Act
or pursuant to Rule 144 or (iii) any bona fide pledge of shares of Junior
Preferred Stock.
(b) The Company and GEI agree that shares of Junior Preferred Stock
owned by GEI will not be registered under the Securities Act unless the shares
of Senior Preferred Stock owned by the Other Holders are also so registered to
the extent that the Other Holders request such registration contemporaneous with
any registration of shares of Junior Preferred Stock owned by GEI.
38
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first set forth above.
TLG Laboratories Holding Corp.
By: /s/ Brian Blechman
------------------------------
Name:
Title:
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Fax:
Attention:
Brian Blechman
By: /s/ Brian Blechman
------------------------------
Brian Blechman
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Fax: 516-471-2395
Attention: Brian Blechman
Neil Blechman
By: /s/ Neil Blechman
------------------------------
Neil Blechman
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Fax: 516-471-2395
Attention: Neil Blechman
39
<PAGE>
Ross Blechman
By: /s/ Ross Blechman
-------------------------------
Ross Blechman
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Fax: 516-471-2395
Attention: Ross Blechman
Steve Blechman
By: /s/ Steve Blechman
-------------------------------
Steve Blechman
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Fax: 516-471-2395
Attention: Steve Blechman
Dean Blechman
By: /s/ Dean Blechman
-------------------------------
Dean Blechman
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Fax: 516-471-2395
Attention: Dean Blechman
40
<PAGE>
Stephen Welling
By: /s/ Stephen Welling
------------------------------
Stephen Welling
c/o Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, NY 11779
Fax: 516-471-2395
Attention: Stephen Welling
GREEN EQUITY INVESTORS II, L.P.
By: Grand Avenue Capital Partners,
L.P.
By: Grand Avenue Capital Corporation,
its general partner
By: /s/ John G. Danhakl
------------------------------
Name:
Address for Notice:
333 South Grand Avenue, Suite 5400
Los Angeles, California 90071
Fax: (213) 625-2043
Attention: Jennifer Holden Dunbar
41
<PAGE>
State Treasurer of the State of Michigan,
Custodian of the Michigan Public School Employees'
Retirement System, State Employees' Retirement
System, Michigan State Police Retirement System,
and Michigan Judges Retirement System
By: /s/ Paul E. Rice
-----------------------------------------
Name: Paul E. Rice
Title: Administrator
Alternative Investments Division
Address for Notice:
430 W. Allegan
Lansing, MI 48922
Fax: (517) 373-4330
Attention: Joseph Taylor
DLJ Investment Partners, L.P.
By: DLJ Investment Partners, Inc.
its general partner
By: /s/ John Moriarty
-----------------------------------------
Name:
Title:
Address for Notice:
277 Park Ave.
New York, NY 10172
Fax: (212) 892-7272
Attention: John Moriarty
Ivy Dodes
DLJ Investment Funding, Inc.
By: /s/ John Moriarty
-----------------------------------------
Name:
Title:
Address for Notice:
277 Park Ave.
New York, NY 10172
Fax: (212) 892-7272
Attention: John Moriarty
Ivy Dodes
42
<PAGE>
Chase Equity Associates, L.P.
By: Chase Capital Partners
its general partner
By: /s/ Mitchell J. Blutt, M.D.
------------------------------
Name:
Title:
Address for Notice:
Fax:
Attention:
43
<PAGE>
PMI Mezzanine Fund, L.P.
By: Pacific Mezzanine Investors, LLC
its general partner
By: /s/ Robert Bartholomew
----------------------------
Name:
Title:
Address for Notice:
610 Newport Center Drive
Suite 1100
Newport Beach, CA 92660
Fax: (714) 721-5446
Attention: Robert Bartholomew
with copy to:
Brobeck, Phleger & Harrison LLP
550 South Hope St.
Los Angeles, CA 90071-2604
Fax: (213) 745-3345
Attention: Kenneth R. Bender, Esq.
44
<PAGE>
Exhibit 10.10
EMPLOYMENT AGREEMENT
by and between
TWIN LABORATORIES INC.
and
BRIAN BLECHMAN
Dated as of
May 7, 1996
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of May
7, 1996, by and between Twin Laboratories Inc., a Utah corporation formerly
known as Natur-Pharma Inc. ("Twin"), and Brian Blechman, an individual currently
residing at 255 S. Gillette Avenue, Bayport, NY 11705 (the "Executive"). As used
herein, the term "Company" shall refer, individually and/or collectively, as
applicable, to TLG Laboratories Holding Corp., a Delaware corporation
("Holding"), and its existing and future subsidiaries, including but not limited
to Twin and Advanced Research Press, Inc., a New York corporation ("ARP").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on the date hereof, Holding will acquire all of the outstanding
capital stock of Twin, and subsequently Twin Laboratories Inc., a New York
corporation ("Old Twin"), Twinlab Export Corp. ("Export"), Twinlab Specialty
Corporation ("Specialty"), Alvita Products, Inc. ("Alvita"), ARP and B. Bros.
Realty Corporation ("B. Bros.") (Twin, Old Twin, Export, Specialty, Alvita, ARP
and B. Bros. being referred to collectively as the "Companies") will merge with
Twin or Natur-Pharma II, Inc., a subsidiary of Twin, all as more fully described
in the Stock Purchase and Sale Agreement dated as of March 5, 1996, as amended
(the "Purchase Agreement"), by and among David Blechman, Jean Blechman, the
Executive, Neil Blechman, Ross Blechman, Steve Blechman, Dean Blechman, Stephen
Welling, Holding, Natur-Pharma Inc. and Green Equity Investors II, L.P.;
WHEREAS, the Board of Directors of Twin desires to provide appropriate
incentives to key executives of the Company, including the Executive, in order
to retain such executives
<PAGE>
following the closing of the transactions contemplated by the Purchase Agreement
(the "Closing");
WHEREAS, the Executive has served as an executive officer of certain of the
Companies prior to the Closing;
WHEREAS, Twin and the Executive desire that the Company employ the
Executive as the Executive Vice President of Purchasing, Quality Control and
Finance of each of Holding and Twin and Executive Vice President of ARP
following the Closing on the terms and conditions set forth herein;
NOW, THEREFORE, Twin and the Executive, each intending to be legally bound,
hereby mutually covenant and agree as follows:
ARTICLE I
Definitions
-----------
The following terms used in this Agreement shall have the meanings set
forth below.
1.1 "Accrued Obligations" shall mean, as of the date of Termination
of Employment, the sum of (A) the Executive's aggregate Base Salary through such
date to the extent not theretofore paid, plus (B) the amount of any bonus
----
payable under the Bonus Plan (as hereinafter defined) and other cash
compensation payable to the Executive hereunder as of such date but not yet paid
plus (C) all vacation pay, expense reimbursements and other cash entitlements
- ----
accrued by the Executive hereunder as of such date to the extent not theretofore
paid.
1.2 "Base Salary" shall mean the amount set forth in Section 3.1.
1.3 "Board" shall mean the board of directors of Holding.
1.4 "Bonus Plan" shall mean the cash bonus plan effective as of the
date hereof, which has been adopted by Twin and is attached hereto as Exhibit A.
---------
-2-
<PAGE>
1.5 "Cause" shall mean (i) the Executive's material violation of
Section 2.3 of this Agreement, which violation continues after notice thereof is
given to the Executive by the Board; (ii) the Executive's material violation of
Sections 4.1 or 4.2 of this Agreement; (iii) the Executive's violation of
Section 4.3 of this Agreement; (iv) the Executive's engagement in conduct which
is fraudulent or illegal with respect to the Company; (v) the Executive's gross
negligence in the performance or nonperformance of his duties or
responsibilities hereunder or engagement in conduct which is materially
injurious or materially damaging to the Company or the reputation of the
Company; or (vi) the Executive's conviction of, or plea of nolo contendere to, a
---------------
felony.
1.6 "Common Stock" shall mean the common stock of Holding.
1.7 "Competitor" shall have the meaning set forth in Section 4.3.
1.8 "Confidential Material" shall have the meaning set forth in
Section 4.2.
1.9 "Control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
1.10 "Disability" shall mean the inability of the Executive to
perform in all material respects his duties and responsibilities to the Company
by reason of a physical or mental disability or infirmity, which inability has
continued for a period of nine months, whether or not consecutive, occurring
within any period of twelve consecutive months.
1.11 "Disability Payment" shall mean, for purposes of Section 5.3(c),
an amount equal to (i) one-half (1/2) of the Base Salary for the calendar year
in the Term in which the date of Termination of Employment occurs multiplied by
(ii) the number of whole
-3-
<PAGE>
years and any fraction thereof remaining in the unexpired portion of the Term
(except in the case of a Termination of Employment during the last calendar year
of the Term, in which case said sum shall be multiplied by one (1)).
1.12 "Good Reason" shall mean any (i) reduction in the Executive's
Base Salary or opportunity to participate in the Bonus Plan, as set forth
herein, (ii) relocation of the Executive's principal place of business to a
location which is more than 10 miles from its current location (without the
Executive's consent), (iii) material diminution in the Executive's duties,
responsibilities or reporting position with the Company, which diminution
continues after notice thereof is given to the Board by the Executive, (iv)
failure by the Company to continue in effect any material benefit or
compensation plan, life insurance plan, health and accident plan, disability
plan (or plan providing the Executive with substantially similar benefits) in
which the Executive is participating or the material reduction of the
Executive's benefits under any of such plans or (v) failure by Twin to obtain
the agreement to assume and perform this Agreement by any successor of Twin as
contemplated in Section 6.1 hereof.
1.13 "Performance Year" shall mean each calendar year beginning on
January 1 and ending on December 31.
1.14 "Person" shall mean an individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, other entity or governmental or other agency or political
subdivision thereof.
1.15 "Public Offering Event" shall mean the first date after which at
least 20% of the outstanding Common Stock is publicly held and such Common Stock
is listed or admitted to trading on a national securities exchange or quoted on
the National Association of Securities Dealers, Inc.'s National Market System or
Small Capitalization System.
-4-
<PAGE>
1.16 "Qualified IPO" shall mean the initial bona fide, registered
underwritten public offering of shares of Common Stock.
1.17 "Severance Amount" shall mean, for purposes of Section 5.3(b),
an amount equal to (i) the Base Salary for the calendar year in the Term in
which the date of Termination of Employment occurs multiplied by (ii) the number
of whole years and any fraction thereof remaining in the unexpired portion of
the Term (except in the case of a Termination of Employment during the last
calendar year of the Term, in which case said sum shall be multiplied by one
(1)).
1.18 "Term" shall have the meaning set forth in Section 2.2 and shall
include any renewal or extension as set forth therein.
1.19 "Termination of Employment" shall mean (i) the Executive's death
or Disability, (ii) termination by the Board of the Executive's employment with
the Company for Cause or without Cause, (iii) resignation by the Executive from
the employ of the Company for Good Reason or without Good Reason, (iv)
retirement of the Executive or (v) expiration of the Term.
ARTICLE II
Employment and Term
-------------------
2.1 Employment. The Executive shall be employed as the Executive Vice
----------
President of Purchasing, Quality Control and Finance of each of Holding and Twin
and Executive Vice President of ARP, and the Executive hereby accepts such
employment, for the Term. In addition, the Executive agrees that, during the
Term, he will serve in any similar capacity on behalf of any existing or future
subsidiary of Holding, as reasonably requested by the Board.
-5-
<PAGE>
2.2 Term. The Term shall commence on the date hereof. Unless a
----
Public Offering Event or a Qualified IPO has occurred, the Term shall end on the
fifth anniversary of the date hereof; provided, that the Term shall be renewed
--------
automatically for successive additional one-year periods at the end of such
five-year period and of each such one-year renewal period, unless, no later than
one hundred eighty (180) days prior to any such renewal date, either the Board
or the Executive gives written notice to the other that the Term shall not be so
renewed. From and after the first to occur of a Public Offering Event or
Qualified IPO, the Term shall end on the third anniversary of the date of such
Public Offering Event or Qualified IPO, as applicable, provided that, commencing
one day after such Public Offering Event or Qualified IPO, as applicable, and
continuing each day thereafter prior to a Termination of Employment, the Term
shall automatically be extended for one additional day (so as to establish a
three-year remaining Term upon a Termination of Employment for purposes of
Articles IV and V).
2.3 Duties. The Executive shall have all powers, duties and
------
responsibilities commensurate with his position as set forth in Section 2.1
hereof or as may be assigned by the Board from time to time (provided any such
powers, duties and responsibilities assigned by the Board are commensurate with
such position). The Executive shall devote substantially all of his business
time, attention and energies to the performance of his duties hereunder.
Notwithstanding the foregoing, nothing in this Agreement shall restrict the
Executive from managing his personal investments, personal business affairs and
other personal matters, or serving on civic or charitable boards or committees,
provided that none of such activities interferes with the performance of his
duties and responsibilities hereunder or conflicts or competes with the
interests of the Company.
-6-
<PAGE>
ARTICLE III
Compensation and Benefits
-------------------------
3.1 Base Salary. For services performed by the Executive for the
-----------
Company pursuant to this Agreement, Twin shall pay the Executive an initial Base
Salary of FOUR HUNDRED THOUSAND DOLLARS ($400,000) per year, payable in
accordance with Old Twin's regular payroll practices prior to the Closing. The
initial Base Salary shall be increased annually, beginning on January 1, 1997,
by a percentage equal to the percentage increase, if any, in the Consumer Price
Index for all Urban Consumers, All Items, for the most recent twelve-month
period for which such figures are then available as promulgated by the
Department of Labor Bureau of Statistics. Any compensation which may be
otherwise authorized from time to time by the Board (or an appropriate committee
thereof) shall be in addition to the Base Salary.
3.2 Bonuses. The Executive shall be eligible to receive annual cash
-------
bonuses in accordance with the terms of the Bonus Plan.
3.3 Other Benefits. In addition to the Base Salary and participation
--------------
in the Bonus Plan, the Executive shall also be entitled to the following:
(a) Participation in Benefit Plans. The Executive shall be entitled
------------------------------
to participate in the executive-level benefit arrangements set forth on
Exhibit B. The Executive shall also be entitled to participate in all
---------
other welfare and benefit plans maintained by Holding and/or its
subsidiaries, as the case may be, for their respective employees generally.
(b) Vacation. The Executive shall be entitled to vacation and paid
--------
holidays consistent with Old Twin's practices prior to the Closing.
-7-
<PAGE>
(c) Fringe Benefits. The Executive shall be entitled to first class
---------------
travel for business-related purposes and the perquisites and other fringe
benefits made available to the Company's other senior executives.
(d) Automobile. Twin shall reimburse the Executive for all reasonable
----------
expenses (including, but not limited to, lease payments, liability
insurance, maintenance, repair and fuel costs), up to ONE THOUSAND EIGHT
HUNDRED DOLLARS ($1,800) per month, incurred in operating an automobile for
the Executive's use in the performance of his duties hereunder and in the
conduct of the affairs of the Company, which automobile shall also be
available to the Executive for personal use.
(e) Indemnification. The Executive shall be indemnified by Twin
---------------
against reasonable expenses, including attorney's fees, actually and
necessarily incurred by him in connection with the defense of any action,
suit, investigation or proceeding or similar legal activity, regardless of
whether criminal, civil, administrative or investigative in nature, to
which he is made a party by reason of his then being or having been an
officer of the Company on or subsequent to the date hereof, to the full
extent permitted by applicable law. Twin shall (upon receipt by Twin of an
undertaking by or on behalf of the Executive to repay the expenses
described in this Section 3.3(e), if it shall ultimately be determined that
he is not entitled to be indemnified by Twin against such expenses) pay
reasonable expenses, including attorney's fees, incurred by the Executive
in defending any threatened, pending or completed action, suit or
proceeding, or appearing as a witness at a time when he has not been named
as a defendant or respondent with respect thereto, in advance of the final
disposition of any such action, suit or proceeding. The foregoing right of
-8-
<PAGE>
indemnification will not be deemed exclusive of any other rights to
which the Executive may be entitled under Holding's or any of its
subsidiaries' respective Articles or Certificate of Incorporation or
By-laws, as in effect from time to time, any agreement or otherwise.
ARTICLE IV
Covenants
---------
4.1 Non-Interference. During the Term (including any unexpired
----------------
portion thereof) and for a period of two years thereafter (the "Non-Solicitation
Period"), the Executive agrees to refrain from, directly, indirectly or as an
agent on behalf of or in conjunction with any Person, soliciting (i) or
encouraging (other than employee referrals and similar activities consistent
with past practice) any employee of the Company who is employed in an executive,
managerial, administrative or professional capacity or who possesses
Confidential Material (as defined below), to leave the employment of the Company
or (ii) any customer of the Company on behalf of any Competitor (as defined
below) or any other business.
4.2 Nondisclosure of Confidential Material. In the performance of his
--------------------------------------
duties, the Executive has previously had, and may be expected in the future to
have, access to confidential records and information, including, but not limited
to, development, marketing, purchasing, organizational, strategic, financial,
managerial, administrative, manufacturing, production, distribution and sales
information, data, specifications and processes presently owned or at any time
hereafter developed by the Company or by its agents or consultants or used
presently or at any time hereafter in the course of the business of the Company,
that are not otherwise part of the public domain (collectively, the
"Confidential Material"). All such Confidential Material is considered secret
and has been and/or will be disclosed to the Executive in confidence, and the
Executive acknowledges that, as a consequence of his
-9-
<PAGE>
employment and position with the Company, the Executive will have access to and
become acquainted with Confidential Material. Except in the performance of his
duties to the Company, the Executive shall not, during the Term and at all times
thereafter, directly or indirectly for any reason whatsoever, disclose or use
any such Confidential Material. All records, files, drawings, documents,
equipment and other tangible items, wherever located, relating in any way to or
containing Confidential Material, which the Executive has prepared, used or
encountered or shall in the future prepare, use or encounter, shall be and
remain the Company's sole and exclusive property and shall be included in the
Confidential Material. Upon termination of this Agreement, or whenever
requested by the Company, the Executive shall promptly deliver to the Company
any and all of the Confidential Material and copies thereof, not previously
delivered to the Company, that may be in the possession or under the control of
the Executive. The foregoing restrictions shall not apply to the use,
divulgence, disclosure or grant of access to Confidential Material to the
extent, but only to the extent, (i) expressly permitted or required pursuant to
any other written agreement between or among the Executive and the Company, (ii)
such Confidential Material has been publicly disclosed (not due to a breach by
the Executive of his obligations hereunder or by breach of any other person of a
fiduciary or confidential obligation to the Company), or (iii) the Executive is
required to disclose Confidential Material by or to any court of competent
jurisdiction or any governmental or quasi-governmental agency, authority or
instrumentality of competent jurisdiction, provided, that the Executive shall,
--------
prior to any such disclosure, immediately notify the Company of such requirement
and provided further, that the Company shall have the right, at its expense, to
-------- -------
object to such disclosures and to seek confidential treatment of any
Confidential Material to be so disclosed on such terms as it shall determine.
-10-
<PAGE>
4.3 Non-Competition. The Executive shall not, during the Term
---------------
(including any unexpired portion thereof), directly or indirectly, own, manage,
operate, join or Control or participate (or serve as a consultant or in a
similar position) in the ownership, management, operation or Control of, any
business, entity, firm, partnership, corporation or other Person, whether
private, governmental or quasi-governmental, other than the Company, which is
engaged, directly or indirectly, anywhere in the world, in (i) the business of
developing, manufacturing, marketing, selling and/or distributing of vitamins,
minerals, nutritional supplements (including, without limitation, amino acids
and proteins), herbal products, phytonutrients or herb teas, (ii) the
publication of related health, fitness or bodybuilding publications, or (iii)
any other business engaged in or being developed by the Company, or being
actively considered by management of the Company, at the time of the Executive's
Termination of Employment (a "Competitor"); provided, however, that nothing in
-------- -------
this Agreement shall preclude the Executive from serving on the board of
directors of any company with the prior consent of the Board or from owning less
than 5% of any class of publicly traded equity of any Competitor.
Notwithstanding the immediately preceding sentence, to the extent that the
Company ceases to develop any such other business which was being developed, or
the management of the Company ceases to actively consider any such other
business which was being actively considered, at the time of the Executive's
Termination of Employment, the covenant set forth in the immediately preceding
sentence shall no longer be applicable to such other business. At the written
request of the Executive, the Company shall promptly inform the Executive of
whether any particular business or businesses that were being so developed or
actively considered at the time of the Executive's Termination of Employment
have ceased to be so developed or actively considered.
-11-
<PAGE>
4.4 Enforcement.
-----------
(a) The Executive acknowledges that violation of any of the covenants
and agreements set forth in this Article IV would cause the Company irreparable
damage for which the Company cannot be reasonably compensated in damages in an
action at law, and therefore in the event of any breach by the Executive of this
Article IV, the Company shall be entitled to make application to a court of
competent jurisdiction for equitable relief by way of injunction or otherwise
(without being required to post a bond). This provision shall not, however, be
construed as a waiver of any of the rights which the Company may have for
damages under this Agreement or otherwise, and all of the Company's rights and
remedies shall be unrestricted. This Article IV shall survive termination of
this Agreement or Termination of Employment for any reason whatsoever.
(b) If any of the provisions of this Agreement shall otherwise
contravene or be invalid under the laws of any state or other jurisdiction where
it is applicable but for such contravention or invalidity, such contravention or
invalidity shall not invalidate all of the provisions of this Agreement, but
rather the Agreement shall be reformed and construed, insofar as the laws of
that state or jurisdiction are concerned, as not containing the provision or
provisions, but only to the extent that they are contravening or are invalid
under the laws of that state or jurisdiction, and the rights and obligations
created hereby shall be reformed and construed and enforced accordingly. In
particular, if any of the covenants or agreements set forth in this Article IV,
or any part thereof, is held to be unenforceable because of the duration of such
provision or the areas covered thereby, or otherwise, the parties hereby
expressly agree that the court making such determination shall have the power to
reduce the duration and/or the areas of such provision or otherwise limit any
such provision, and, in its reduced form, such provision shall then be
enforceable.
-12-
<PAGE>
(c) The Executive understands that the provisions of this
Article IV may limit his ability to earn a livelihood in a business similar to
the business of the Company but nevertheless agrees and hereby acknowledges that
(i) such provisions do not impose a greater restraint than is necessary to
protect the goodwill or other business interests of the Company; (ii) such
provisions contain reasonable limitations as to time and the scope of activity
to be restrained; and (iii) the consideration provided under this Agreement,
including, without limitation, any amounts or benefits provided under Article V
hereof, is sufficient to compensate the Executive for the restrictions contained
in this Article IV. In consideration of the foregoing and in light of the
Executive's education, skills and abilities, the Executive agrees that he will
not assert, and it should not be considered, that any provisions of this Article
IV prevented him from earning a living or otherwise are void, voidable or
unenforceable or should be voided or held unenforceable.
(d) Each of the covenants of this Article IV is given by the
Executive as part of the consideration for this Agreement and as an inducement
to Twin to enter into this Agreement and accept the obligations hereunder.
ARTICLE V
Termination
-----------
5.1 Termination of Agreement. Except for those provisions of
------------------------
this Agreement that survive Termination of Employment, this Agreement shall
terminate upon any Termination of Employment.
5.2 Procedures Applicable to Termination of Employment.
--------------------------------------------------
(a) Termination for Cause. The Executive may be terminated for
---------------------
Cause, upon at least 30 days' prior written notice from the Board to the
Executive for a termination for Cause pursuant to Clause (i) of Section 1.5, and
upon at least 10 days' prior written
-13-
<PAGE>
notice from the Board to the Executive for a termination for Cause pursuant to
Clause (ii), (iii), (iv), (v) or (vi) of Section 1.5, by a vote of the Board
(provided that the Executive shall have had the opportunity (together with the
Executive's legal counsel) during such period to be heard at a meeting of the
Board with respect to such determination).
(b) Resignation for Good Reason. The Executive may resign for Good
---------------------------
Reason, upon at least 30 days' prior written notice from the Executive to the
Board of his intent to resign for Good Reason pursuant to Clause (iii) of
Section 1.12, and upon at least 10 days' prior written notice from the Executive
to the Board of his intent to resign for Good Reason pursuant to Clause (i),
(ii), (iv) or (v) of Section 1.12, provided that the Executive (together with
the Executive's legal counsel) shall meet with the Board, if requested by the
Board, during such period with respect to his intent to resign.
(c) Termination Without Cause or for Disability. The Executive may
-------------------------------------------
be terminated without Cause or for Disability, upon at least 30 days' prior
written notice from the Board to the Executive, by a vote of the Board (provided
that the Executive shall have had the opportunity (together with the Executive's
legal counsel) during such period to be heard at a meeting of the Board with
respect to such determination); provided, however, that, with respect to
-------- -------
Disability that is not permanent (as defined below), such thirty (30) days'
prior written notice must be given within six (6) months after the end of the
twelve (12) month period referred to in Section 1.10.
5.3 Obligations of the Company Upon Termination of Employment.
---------------------------------------------------------
(a) Accrued Obligations and Other Benefits. In the event of
--------------------------------------
Termination of Employment for any reason (including a termination for Cause),
Twin shall pay to the Executive, or, in the event of the Executive's death or
Disability, to his heirs, estate or legal representatives, as the case may be,
the following:
-14-
<PAGE>
(i) all Accrued Obligations in a lump sum within 10 days after
the date of Termination of Employment; and
(ii) all benefits accrued by the Executive as of the date of
Termination of Employment under all qualified and nonqualified
retirement, pension, profit sharing and similar plans of the Company
to such extent, in such manner and at such time as are provided under
the terms of such plans and arrangements.
(b) Termination Without Cause or Resignation for Good Reason. In the
--------------------------------------------------------
event that the Board terminates the Executive's employment without Cause (but
excluding Termination of Employment by reason of the Executive's death or
Disability), or in the event that the Executive resigns from his employment for
Good Reason, in addition to the amounts payable under Section 5.3(a) hereof:
(i) Twin shall pay (A) one-half (1/2) of the Severance Amount
to the Executive in a lump sum within 10 days after the date of
Termination of Employment and (B) one-half (1/2) of the Severance
Amount over the unexpired portion of the Term in accordance with Old
Twin's regular payroll practices prior to Closing; and
(ii) Twin shall continue all benefits coverage of the Executive
and his dependents provided under its benefit plans or policies (or
under other benefit plans or policies that provide substantially
equivalent coverage) for the unexpired portion of the Term.
(c) Termination for Non-Permanent Disability. In the event of a
----------------------------------------
Termination of Employment of the Executive because of a Disability which at the
time of Termination of Employment was not permanent, in addition to the amounts
payable under
-15-
<PAGE>
Section 5.3(a) hereof, Twin shall pay the aggregate Disability Payment over the
unexpired portion of the Term in accordance with Old Twin's regular payroll
practices prior to Closing. A Disability shall be deemed to be permanent if, at
the time of Termination of Employment, the Executive cannot perform substantial
gainful work similar in nature to the work performed by the Executive hereunder
prior to such Disability, which Disability is expected to last at least six (6)
months from the date of such Termination of Employment.
(d) Exclusivity. The amounts payable to the Executive pursuant to
-----------
Sections 5.3(a), 5.3(b) and 5.3(c), as the case may be, shall be the Executive's
sole remedy in the event of the Termination of Employment of the Executive, and
the Executive waives any and all rights to pursue any other remedy at law or in
equity; provided, however, that this shall not constitute a waiver of any rights
-------- -------
provided under any federal, state or local laws or regulations relating to
discrimination in employment.
ARTICLE VI
Miscellaneous
-------------
6.1 Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the heirs and representatives of the Executive and the
successors and assigns of Twin. Twin shall require any successor (whether
direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of assets or stock, liquidation, or otherwise), by agreement in form
and substance reasonably satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent that
Twin would be required to perform this Agreement if no such succession had taken
place. Regardless of whether such agreement is executed, this Agreement shall
be binding upon any successor of Twin in accordance with the operation of law,
and such successor shall be deemed to be "Twin" or the "Company," as
appropriate, for purposes of this Agreement.
-16-
<PAGE>
6.2 Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Board, the Company or Twin, to:
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Philip Kazin
with a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, LP
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
Attention: Ms. Jennifer Holden Dunbar
(b) if to the Executive, to:
Brian Blechman
255 S. Gillette Avenue
Bayport, NY 11705
with a copy to:
Bud G. Holman, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, New York 10178
Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.
6.3 Tax Withholding. Twin shall provide for the withholding of any
---------------
taxes required to be withheld under federal, state and local law (other than the
employer's portion of such taxes) with respect to any payment in cash and/or
other property made by or on
-17-
<PAGE>
behalf of Twin to or for the benefit of the Executive under this Agreement or
otherwise. Twin may, at its option: (i) withhold such taxes from any cash
payments owing from Twin to the Executive, (ii) require the Executive to pay to
Twin in cash such amount as may be required to satisfy such withholding
obligations and/or (iii) make other satisfactory arrangements with the Executive
to satisfy such withholding obligations.
6.4 No Assignment; No Third Party Beneficiaries. Except as otherwise
-------------------------------------------
expressly provided in Section 6.1 herein, this Agreement is not assignable by
any party, and no payment to be made hereunder shall be subject to alienation,
sale, transfer, assignment, pledge, encumbrance or other charge. Except for
Holding and its existing and future subsidiaries, no Person shall be, or deemed
to be, a third party beneficiary of this Agreement.
6.5 Execution in Counterparts. This Agreement may be executed by the
-------------------------
parties hereto in one or more counterparts, each of which shall be deemed to be
an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
6.6 Jurisdiction and Governing Law. Jurisdiction over disputes with
------------------------------
regard to this Agreement shall be exclusively in the courts of the State of New
York, and this Agreement shall be construed and interpreted in accordance with
and governed by the laws of the State of New York, other than the conflict of
laws provisions of such laws.
6.7 Entire Agreement; Amendment. Except as otherwise provided in
---------------------------
Section 3.3 hereof, this Agreement and the Exhibits attached hereto embody the
entire understanding of the parties hereto, and supersede all other oral or
written agreements or understandings between them, regarding the subject matter
hereof. No change, alteration or modification hereof may be made except in a
writing, signed by both of the parties hereto.
-18-
<PAGE>
6.8 Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not be construed as part of this Agreement or to limit
or otherwise affect the meaning hereof.
6.9 Survival. Notwithstanding anything to the contrary herein,
--------
Section 3.3(e), Article IV, Section 5.3 and Article VI of this Agreement shall
survive termination of this Agreement or Termination of Employment for any
reason whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
TWIN LABORATORIES INC.
/s/ Ross Blechman
---------------------------------------------
By: Ross Blechman
Its: President
By: /s/ Brian Blechman
---------------------------------------------
Brian Blechman
AGREED AND ACCEPTED:
TLG LABORATORIES HOLDING CORP.
/s/ Ross Blechman
- ---------------------------------------------
By: Ross Blechman
Its: President
-19-
<PAGE>
EXHIBIT A
---------
TWIN LABORATORIES INC.
BONUS PLAN
----------
(All capitalized terms used in this Bonus Plan that are not defined herein
shall have the definitions ascribed thereto in the Participants' respective
Employment Agreement with Twin Laboratories Inc. to which this Bonus Plan is
attached.)
1. Purpose. Twin has adopted the Twin Laboratories Inc. Bonus Plan (the
-------
"Bonus Plan") in order to provide appropriate incentives to the Participants (as
hereinafter defined) to achieve and exceed specified performance objectives in
order to enhance the value of the Company for the benefit of the Company and its
stockholders following the acquisition by Holding of the outstanding capital
stock of Twin and the merger of the affiliated companies of Twin with Twin or a
subsidiary of Twin, all as more fully described in the Stock Purchase and Sale
Agreement dated as of March 5, 1996, as amended (the "Purchase Agreement") by
and among David Blechman, Jean Blechman, Brian Blechman, Neil Blechman, Ross
Blechman, Steve Blechman, Dean Blechman, Stephen Welling, Holding, Natur-Pharma
Inc. and Green Equity Investors II, L.P.
2. Effective Date. The effective date of the Bonus Plan is May 7, 1996.
--------------
3. Participants. The participants in the Bonus Plan (the "Participants")
------------
shall be Brian Blechman, Neil Blechman, Ross Blechman, Steve Blechman and Dean
Blechman, to the extent such individuals are employed by the Company in a
Performance Year (as hereinafter defined).
4. Performance Year. Each calendar year beginning with January 1, 1996
----------------
shall be a "Performance Year." If a Participant is employed by the Company for a
part of a Performance Year, he shall receive an Award (as hereinafter defined)
equal to the Award he would have received had he been employed for the entire
Performance Year, multiplied by a fraction, the numerator of which is the number
of days he was employed by the Company during such Performance Year and the
denominator of which is 365; provided, that if the Participant's employment is
terminated prior to the end of the Performance Year by the Board for Cause or
the Participant resigns without Good Reason (as hereinafter defined), no Award
shall be made for the Performance Year (or part thereof) in which the
Participant's employment was terminated or in which the Participant resigns.
5. Definitions of Cause and Good Reason. "Cause" and "Good Reason"
------------------------------------
shall mean, with respect to the Participants, the definitions of such terms set
forth in their respective Employment Agreements with Twin.
6. EBITDA shall mean, with respect to Holding on a consolidated basis for
------
any Performance Year, the consolidated pre-tax income of Holding (calculated
after giving effect to the accrual of all Awards (as hereinafter defined) with
respect to such Performance Year) for such Performance Year as determined in
accordance with generally accepted accounting
<PAGE>
principles consistently applied plus, to the extent deducted in computing such
consolidated pre-tax income, without duplication, (A) the sum of (a) interest
expense, (b) depreciation expense and amortization expense, (c) extraordinary
losses, (d) noncash exchange, translation or performance losses relating to any
foreign currency hedging transactions or currency fluctuations, and (e) any
Awards paid in such Performance Year in respect of any prior Performance Year,
minus, to the extent included in computing such consolidated pre-tax income,
without duplication, (B) the sum of (i) interest income, (ii) extraordinary
gains and (iii) noncash exchange, translation or performance gains relating to
any foreign currency hedging transactions or currency fluctuations; provided
that all effects of the transactions contemplated by the Purchase Agreement
shall be eliminated in computing EBITDA.
7. EBITDA Levels. (a) For each percentage increase specified in Appendix
-------------
A hereto in EBITDA for a Performance Year compared to EBITDA in the immediately
preceding Performance Year (except for the Performance Year ended December 31,
1996, which shall be compared to the EBITDA amount set forth on Appendix B for
the calendar year ended December 31, 1995), the Participant shall receive a cash
bonus ("Award") equal to the corresponding bonus percent specified in Appendix A
multiplied by the Participant's Base Salary for the Performance Year.
(b) The final determination of EBITDA with respect to any Performance Year
shall be subject to the affirmative approval (the "Approval") of a majority of
the Blechman Directors and a majority of the GEI Directors then in office (as
such terms are defined in the Stockholders Agreement annexed as Exhibit G to the
Purchase Agreement). In the event that the Approval is not obtained within
fourteen (14) days after completion of Holding's audited financial statements
for such Performance Year, the GEI Directors and the Blechman Directors shall
appoint a mutually satisfactory nationally recognized accounting firm (which may
be Holding's auditors) to make such determination of EBITDA in respect of such
Performance Year, provided that the GEI Directors and the Blechman Directors
shall determine with respect to the Award for such Performance Year the amount
not in dispute by reason of such lack of Approval.
8. Time of Payment. Each Award shall be paid no later than the
---------------
fourteenth (14th) day (assuming Approval is obtained or, assuming Approval is
not obtained, as to the undisputed amount), or the thirtieth (30th) day
(assuming Approval is not obtained, as to the disputed amount), after completion
of Holding's audited financial statements for such Performance Year.
9. Base Salary. For the purposes of the Bonus Plan, "Base Salary" shall
-----------
mean, for each Participant, the "Base Salary" (including annual increases
thereof) as defined in his Employment Agreement.
10. No Assignments. A Participant may not assign an Award without the
--------------
prior written consent of the Board. Any attempted assignment without such
consent shall be null and void. For purposes of this paragraph, any designation
of, or payment to, a beneficiary designated to receive such Award in the event
of the Participant's death, shall not be deemed an assignment.
-2-
<PAGE>
11. Unfunded Incentive Compensation Arrangement. The Bonus Plan is
-------------------------------------------
intended to constitute an unfunded incentive compensation arrangement covering a
select group of management or highly compensated employees. Nothing contained
in the Bonus Plan shall create or be construed to create a trust of any kind.
All awards shall be paid from the general funds of Twin, and no special or
separate fund shall be established and no segregation of assets shall be made to
assure payment of such awards.
12. Governing Law. The Plan shall be construed and governed in accordance
-------------
with the laws of the State of New York.
13. No Right to Specific Assets. There shall not vest in any participant
---------------------------
any right, title, or interest in and to any specific assets of the Company.
14. No Modification. The Bonus Plan shall not be modified or amended by
---------------
Twin in any manner adverse to the Participants.
-3-
<PAGE>
Appendix A
----------
Twin Laboratories Inc.
Bonus Plan Table
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE BONUS
IN EBITDA PERCENT
------------ -------
<S> <C>
0.0% 0.0%
1.0% 0.0%
2.0% 0.0%
3.0% 0.0%
4.0% 0.0%
5.0% 0.0%
6.0% 0.0%
7.0% 0.0%
8.0% 0.0%
9.0% 0.0%
10.0% 0.0%
11.0% 0.0%
12.0% 0.0%
13.0% 6.0%
14.0% 12.0%
15.0% 18.0%
16.0% 24.0%
17.0% 30.0%
18.0% 36.0%
19.0% 42.0%
20.0% 48.0%
21.0% 54.0%
22.0% 60.0%
23.0% 66.0%
24.0% 72.0%
25.0% 78.0%
26.0% 84.0%
27.0% 90.0%
28.0% 96.0%
29.0% 102.0%
30.0% 108.0%
31.0% 114.0%
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C>
32.0% 120.0%
33.0% 126.0%
33.3% 128.0%
</TABLE>
-5-
<PAGE>
APPENDIX B
Calculation of 1995 EBITDA for Purposes of Determining 1996 EBITDA Increase
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
1995 Pre-Tax Income from Audit $30,464
Plus: Depreciation & Amortization from Audit 1,011
Plus: Interest Expense 866
Plus: Unusual Item Footnoted in Audit 128
Plus: Transaction Expenses 656
Less: Interest Income (313)
Less: LGP Fee (400)
------
1995 Pro Forma EBITDA $32,412
</TABLE>
-6-
<PAGE>
EXHIBIT B
---------
Twin Laboratories Inc. Employee Savings & Retirement Plan (prior to January 1,
1996, the Plan was known as the Twin Laboratories Inc. Profit Sharing Plan)
Twin Laboratories Section 125 Plan
Group Term Life Insurance (INA Insurance Company of North America)
Medical Insurance (Oxford Health Plans (NY), Inc.)
Dental Insurance (Connecticut General Life Insurance Company - Policy
2100864-01)
Accidental Death And Dismemberment Insurance (INA Life Insurance Company of
New York - Policy 8328)
Twin Laboratories Inc. XS Executive Medical Insurance Plan.
<PAGE>
Exhibit 10.11
EMPLOYMENT AGREEMENT
by and between
TWIN LABORATORIES INC.
and
NEIL BLECHMAN
Dated as of
May 7, 1996
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
May 7, 1996, by and between Twin Laboratories Inc., a Utah corporation formerly
known as Natur-Pharma Inc. ("Twin"), and Neil Blechman, an individual currently
residing at 30 Setalcott Place, Setauket, NY 11733 (the "Executive"). As used
herein, the term "Company" shall refer, individually and/or collectively, as
applicable, to TLG Laboratories Holding Corp., a Delaware corporation
("Holding"), and its existing and future subsidiaries, including but not limited
to Twin and Advanced Research Press, Inc., a New York corporation ("ARP").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on the date hereof, Holding will acquire all of the outstanding
capital stock of Twin, and subsequently Twin Laboratories Inc., a New York
corporation ("Old Twin"), Twinlab Export Corp. ("Export"), Twinlab Specialty
Corporation ("Specialty"), Alvita Products, Inc. ("Alvita"), ARP and B. Bros.
Realty Corporation ("B. Bros.") (Twin, Old Twin, Export, Specialty, Alvita, ARP
and B. Bros. being referred to collectively as the "Companies") will merge with
Twin or Natur-Pharma II, Inc., a subsidiary of Twin, all as more fully described
in the Stock Purchase and Sale Agreement dated as of March 5, 1996, as amended
(the "Purchase Agreement"), by and among David Blechman, Jean Blechman, Brian
Blechman, the Executive, Ross Blechman, Steve Blechman, Dean Blechman, Stephen
Welling, Holding, Natur-Pharma Inc. and Green Equity Investors II, L.P.;
WHEREAS, the Board of Directors of Twin desires to provide appropriate
incentives to key executives of the Company, including the Executive, in order
to retain such executives
<PAGE>
following the closing of the transactions contemplated by the Purchase Agreement
(the "Closing");
WHEREAS, the Executive has served as an executive officer of certain of the
Companies prior to the Closing;
WHEREAS, Twin and the Executive desire that the Company employ the
Executive as the Executive Vice President of Marketing and Advertising of each
of Holding and Twin and the Executive Vice President of ARP following the
Closing on the terms and conditions set forth herein;
NOW, THEREFORE, Twin and the Executive, each intending to be legally bound,
hereby mutually covenant and agree as follows:
ARTICLE I
Definitions
-----------
The following terms used in this Agreement shall have the meanings set
forth below.
1.1 "Accrued Obligations" shall mean, as of the date of Termination
of Employment, the sum of (A) the Executive's aggregate Base Salary through such
date to the extent not theretofore paid, plus (B) the amount of any bonus
----
payable under the Bonus Plan (as hereinafter defined) and other cash
compensation payable to the Executive hereunder as of such date but not yet paid
plus (C) all vacation pay, expense reimbursements and other cash entitlements
- ----
accrued by the Executive hereunder as of such date to the extent not theretofore
paid.
1.2 "Base Salary" shall mean the amount set forth in Section 3.1.
1.3 "Board" shall mean the board of directors of Holding.
1.4 "Bonus Plan" shall mean the cash bonus plan effective as of the
date hereof, which has been adopted by Twin and is attached hereto as Exhibit A.
---------
-2-
<PAGE>
1.5 "Cause" shall mean (i) the Executive's material violation of
Section 2.3 of this Agreement, which violation continues after notice thereof is
given to the Executive by the Board; (ii) the Executive's material violation of
Sections 4.1 or 4.2 of this Agreement; (iii) the Executive's violation of
Section 4.3 of this Agreement; (iv) the Executive's engagement in conduct which
is fraudulent or illegal with respect to the Company; (v) the Executive's gross
negligence in the performance or nonperformance of his duties or
responsibilities hereunder or engagement in conduct which is materially
injurious or materially damaging to the Company or the reputation of the
Company; or (vi) the Executive's conviction of, or plea of nolo contendere to, a
---------------
felony.
1.6 "Common Stock" shall mean the common stock of Holding.
1.7 "Competitor" shall have the meaning set forth in Section 4.3.
1.8 "Confidential Material" shall have the meaning set forth in
Section 4.2.
1.9 "Control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
1.10 "Disability" shall mean the inability of the Executive to
perform in all material respects his duties and responsibilities to the Company
by reason of a physical or mental disability or infirmity, which inability has
continued for a period of nine months, whether or not consecutive, occurring
within any period of twelve consecutive months.
1.11 "Disability Payment" shall mean, for purposes of Section
5.3(c), an amount equal to (i) one-half (1/2) of the Base Salary for the
calendar year in the Term in which the date of Termination of Employment occurs
multiplied by (ii) the number of whole
-3-
<PAGE>
years and any fraction thereof remaining in the unexpired portion of the Term
(except in the case of a Termination of Employment during the last calendar year
of the Term, in which case said sum shall be multiplied by one (1)).
1.12 "Good Reason" shall mean any (i) reduction in the Executive's
Base Salary or opportunity to participate in the Bonus Plan, as set forth
herein, (ii) relocation of the Executive's principal place of business to a
location which is more than 10 miles from its current location (without the
Executive's consent), (iii) material diminution in the Executive's duties,
responsibilities or reporting position with the Company, which diminution
continues after notice thereof is given to the Board by the Executive, (iv)
failure by the Company to continue in effect any material benefit or
compensation plan, life insurance plan, health and accident plan, disability
plan (or plan providing the Executive with substantially similar benefits) in
which the Executive is participating or the material reduction of the
Executive's benefits under any of such plans or (v) failure by Twin to obtain
the agreement to assume and perform this Agreement by any successor of Twin as
contemplated in Section 6.1 hereof. 1.13 "Performance Year" shall mean each
calendar year beginning on January 1 and ending on December 31.
1.14 "Person" shall mean an individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, other entity or governmental or other agency or political
subdivision thereof.
1.15 "Public Offering Event" shall mean the first date after which
at least 20% of the outstanding Common Stock is publicly held and such Common
Stock is listed or admitted to trading on a national securities exchange or
quoted on the National Association of Securities Dealers, Inc.'s National Market
System or Small Capitalization System.
-4-
<PAGE>
1.16 "Qualified IPO" shall mean the initial bona fide, registered
underwritten public offering of shares of Common Stock.
1.17 "Severance Amount" shall mean, for purposes of Section 5.3(b),
an amount equal to (i) the Base Salary for the calendar year in the Term in
which the date of Termination of Employment occurs multiplied by (ii) the number
of whole years and any fraction thereof remaining in the unexpired portion of
the Term (except in the case of a Termination of Employment during the last
calendar year of the Term, in which case said sum shall be multiplied by one
(1)).
1.18 "Term" shall have the meaning set forth in Section 2.2 and
shall include any renewal or extension as set forth therein.
1.19 "Termination of Employment" shall mean (i) the Executive's
death or Disability, (ii) termination by the Board of the Executive's employment
with the Company for Cause or without Cause, (iii) resignation by the Executive
from the employ of the Company for Good Reason or without Good Reason, (iv)
retirement of the Executive or (v) expiration of the Term.
ARTICLE II
Employment and Term
-------------------
2.1 Employment. The Executive shall be employed as the Executive
----------
Vice President of Purchasing, Quality Control and Finance of each of Holding and
Twin and Executive Vice President of ARP, and the Executive hereby accepts such
employment, for the Term. In addition, the Executive agrees that, during the
Term, he will serve in any similar capacity on behalf of any existing or future
subsidiary of Holding, as reasonably requested by the Board.
-5-
<PAGE>
2.2 Term. The Term shall commence on the date hereof. Unless a
----
Public Offering Event or a Qualified IPO has occurred, the Term shall end on the
fifth anniversary of the date hereof; provided, that the Term shall be renewed
--------
automatically for successive additional one-year periods at the end of such
five-year period and of each such one-year renewal period, unless, no later than
one hundred eighty (180) days prior to any such renewal date, either the Board
or the Executive gives written notice to the other that the Term shall not be so
renewed. From and after the first to occur of a Public Offering Event or
Qualified IPO, the Term shall end on the third anniversary of the date of such
Public Offering Event or Qualified IPO, as applicable, provided that, commencing
one day after such Public Offering Event or Qualified IPO, as applicable, and
continuing each day thereafter prior to a Termination of Employment, the Term
shall automatically be extended for one additional day (so as to establish a
three-year remaining Term upon a Termination of Employment for purposes of
Articles IV and V).
2.3 Duties. The Executive shall have all powers, duties and
------
responsibilities commensurate with his position as set forth in Section 2.1
hereof or as may be assigned by the Board from time to time (provided any such
powers, duties and responsibilities assigned by the Board are commensurate with
such position). The Executive shall devote substantially all of his business
time, attention and energies to the performance of his duties hereunder.
Notwithstanding the foregoing, nothing in this Agreement shall restrict the
Executive from managing his personal investments, personal business affairs and
other personal matters, or serving on civic or charitable boards or committees,
provided that none of such activities interferes with the performance of his
duties and responsibilities hereunder or conflicts or competes with the
interests of the Company.
-6-
<PAGE>
ARTICLE III
Compensation and Benefits
-------------------------
3.1 Base Salary. For services performed by the Executive for the
-----------
Company pursuant to this Agreement, Twin shall pay the Executive an initial Base
Salary of FOUR HUNDRED THOUSAND DOLLARS ($400,000) per year, payable in
accordance with Old Twin's regular payroll practices prior to the Closing. The
initial Base Salary shall be increased annually, beginning on January 1, 1997,
by a percentage equal to the percentage increase, if any, in the Consumer Price
Index for all Urban Consumers, All Items, for the most recent twelve-month
period for which such figures are then available as promulgated by the
Department of Labor Bureau of Statistics. Any compensation which may be
otherwise authorized from time to time by the Board (or an appropriate committee
thereof) shall be in addition to the Base Salary.
3.2 Bonuses. The Executive shall be eligible to receive annual
-------
cash bonuses in accordance with the terms of the Bonus Plan.
3.3 Other Benefits. In addition to the Base Salary and
--------------
participation in the Bonus Plan, the Executive shall also be entitled to the
following:
(a) Participation in Benefit Plans. The Executive shall be
------------------------------
entitled to participate in the executive-level benefit arrangements set
forth on Exhibit B. The Executive shall also be entitled to participate in
---------
all other welfare and benefit plans maintained by Holding and/or its
subsidiaries, as the case may be, for their respective employees generally.
(b) Vacation. The Executive shall be entitled to vacation and paid
--------
holidays consistent with Old Twin's practices prior to the Closing.
-7-
<PAGE>
(c) Fringe Benefits. The Executive shall be entitled to first
---------------
class travel for business-related purposes and the perquisites and other
fringe benefits made available to the Company's other senior executives.
(d) Automobile. Twin shall reimburse the Executive for all
----------
reasonable expenses (including, but not limited to, lease payments,
liability insurance, maintenance, repair and fuel costs), up to ONE
THOUSAND EIGHT HUNDRED DOLLARS ($1,800) per month, incurred in operating an
automobile for the Executive's use in the performance of his duties
hereunder and in the conduct of the affairs of the Company, which
automobile shall also be available to the Executive for personal use.
(e) Indemnification. The Executive shall be indemnified by Twin
---------------
against reasonable expenses, including attorney's fees, actually and
necessarily incurred by him in connection with the defense of any action,
suit, investigation or proceeding or similar legal activity, regardless of
whether criminal, civil, administrative or investigative in nature, to
which he is made a party by reason of his then being or having been an
officer of the Company on or subsequent to the date hereof, to the full
extent permitted by applicable law. Twin shall (upon receipt by Twin of an
undertaking by or on behalf of the Executive to repay the expenses
described in this Section 3.3(e), if it shall ultimately be determined that
he is not entitled to be indemnified by Twin against such expenses) pay
reasonable expenses, including attorney's fees, incurred by the Executive
in defending any threatened, pending or completed action, suit or
proceeding, or appearing as a witness at a time when he has not been named
as a defendant or respondent with respect thereto, in advance of the final
disposition of any such action, suit or proceeding. The foregoing right of
-8-
<PAGE>
indemnification will not be deemed exclusive of any other rights to which
the Executive may be entitled under Holding's or any of its subsidiaries'
respective Articles or Certificate of Incorporation or By-laws, as in
effect from time to time, any agreement or otherwise.
ARTICLE IV
Covenants
---------
4.1 Non-Interference. During the Term (including any unexpired portion
----------------
thereof) and for a period of two years thereafter (the "Non-Solicitation
Period"), the Executive agrees to refrain from, directly, indirectly or as an
agent on behalf of or in conjunction with any Person, soliciting (i) or
encouraging (other than employee referrals and similar activities consistent
with past practice) any employee of the Company who is employed in an executive,
managerial, administrative or professional capacity or who possesses
Confidential Material (as defined below), to leave the employment of the Company
or (ii) any customer of the Company on behalf of any Competitor (as defined
below) or any other business.
4.2 Nondisclosure of Confidential Material. In the performance of his
--------------------------------------
duties, the Executive has previously had, and may be expected in the future to
have, access to confidential records and information, including, but not limited
to, development, marketing, purchasing, organizational, strategic, financial,
managerial, administrative, manufacturing, production, distribution and sales
information, data, specifications and processes presently owned or at any time
hereafter developed by the Company or by its agents or consultants or used
presently or at any time hereafter in the course of the business of the Company,
that are not otherwise part of the public domain (collectively, the
"Confidential Material"). All such Confidential Material is considered secret
and has been and/or will be disclosed to the Executive in confidence, and the
Executive acknowledges that, as a consequence of his
-9-
<PAGE>
employment and position with the Company, the Executive will have access to and
become acquainted with Confidential Material. Except in the performance of his
duties to the Company, the Executive shall not, during the Term and at all times
thereafter, directly or indirectly for any reason whatsoever, disclose or use
any such Confidential Material. All records, files, drawings, documents,
equipment and other tangible items, wherever located, relating in any way to or
containing Confidential Material, which the Executive has prepared, used or
encountered or shall in the future prepare, use or encounter, shall be and
remain the Company's sole and exclusive property and shall be included in the
Confidential Material. Upon termination of this Agreement, or whenever
requested by the Company, the Executive shall promptly deliver to the Company
any and all of the Confidential Material and copies thereof, not previously
delivered to the Company, that may be in the possession or under the control of
the Executive. The foregoing restrictions shall not apply to the use,
divulgence, disclosure or grant of access to Confidential Material to the
extent, but only to the extent, (i) expressly permitted or required pursuant to
any other written agreement between or among the Executive and the Company, (ii)
such Confidential Material has been publicly disclosed (not due to a breach by
the Executive of his obligations hereunder or by breach of any other person of a
fiduciary or confidential obligation to the Company), or (iii) the Executive is
required to disclose Confidential Material by or to any court of competent
jurisdiction or any governmental or quasi-governmental agency, authority or
instrumentality of competent jurisdiction, provided, that the Executive shall,
--------
prior to any such disclosure, immediately notify the Company of such requirement
and provided further, that the Company shall have the right, at its expense, to
-------- -------
object to such disclosures and to seek confidential treatment of any
Confidential Material to be so disclosed on such terms as it shall determine.
-10-
<PAGE>
4.3 Non-Competition. The Executive shall not, during the Term
---------------
(including any unexpired portion thereof), directly or indirectly, own, manage,
operate, join or Control or participate (or serve as a consultant or in a
similar position) in the ownership, management, operation or Control of, any
business, entity, firm, partnership, corporation or other Person, whether
private, governmental or quasi-governmental, other than the Company, which is
engaged, directly or indirectly, anywhere in the world, in (i) the business of
developing, manufacturing, marketing, selling and/or distributing of vitamins,
minerals, nutritional supplements (including, without limitation, amino acids
and proteins), herbal products, phytonutrients or herb teas, (ii) the
publication of related health, fitness or bodybuilding publications, or (iii)
any other business engaged in or being developed by the Company, or being
actively considered by management of the Company, at the time of the Executive's
Termination of Employment (a "Competitor"); provided, however, that nothing in
-------- -------
this Agreement shall preclude the Executive from serving on the board of
directors of any company with the prior consent of the Board or from owning less
than 5% of any class of publicly traded equity of any Competitor.
Notwithstanding the immediately preceding sentence, to the extent that the
Company ceases to develop any such other business which was being developed, or
the management of the Company ceases to actively consider any such other
business which was being actively considered, at the time of the Executive's
Termination of Employment, the covenant set forth in the immediately preceding
sentence shall no longer be applicable to such other business. At the written
request of the Executive, the Company shall promptly inform the Executive of
whether any particular business or businesses that were being so developed or
actively considered at the time of the Executive's Termination of Employment
have ceased to be so developed or actively considered.
-11-
<PAGE>
4.4 Enforcement.
-----------
(a) The Executive acknowledges that violation of any of the
covenants and agreements set forth in this Article IV would cause the Company
irreparable damage for which the Company cannot be reasonably compensated in
damages in an action at law, and therefore in the event of any breach by the
Executive of this Article IV, the Company shall be entitled to make application
to a court of competent jurisdiction for equitable relief by way of injunction
or otherwise (without being required to post a bond). This provision shall not,
however, be construed as a waiver of any of the rights which the Company may
have for damages under this Agreement or otherwise, and all of the Company's
rights and remedies shall be unrestricted. This Article IV shall survive
termination of this Agreement or Termination of Employment for any reason
whatsoever.
(b) If any of the provisions of this Agreement shall otherwise
contravene or be invalid under the laws of any state or other jurisdiction where
it is applicable but for such contravention or invalidity, such contravention or
invalidity shall not invalidate all of the provisions of this Agreement, but
rather the Agreement shall be reformed and construed, insofar as the laws of
that state or jurisdiction are concerned, as not containing the provision or
provisions, but only to the extent that they are contravening or are invalid
under the laws of that state or jurisdiction, and the rights and obligations
created hereby shall be reformed and construed and enforced accordingly. In
particular, if any of the covenants or agreements set forth in this Article IV,
or any part thereof, is held to be unenforceable because of the duration of such
provision or the areas covered thereby, or otherwise, the parties hereby
expressly agree that the court making such determination shall have the power to
reduce the duration and/or the areas of such provision or otherwise limit any
such provision, and, in its reduced form, such provision shall then be
enforceable.
-12-
<PAGE>
(c) The Executive understands that the provisions of this Article
IV may limit his ability to earn a livelihood in a business similar to the
business of the Company but nevertheless agrees and hereby acknowledges that (i)
such provisions do not impose a greater restraint than is necessary to protect
the goodwill or other business interests of the Company; (ii) such provisions
contain reasonable limitations as to time and the scope of activity to be
restrained; and (iii) the consideration provided under this Agreement,
including, without limitation, any amounts or benefits provided under Article V
hereof, is sufficient to compensate the Executive for the restrictions contained
in this Article IV. In consideration of the foregoing and in light of the
Executive's education, skills and abilities, the Executive agrees that he will
not assert, and it should not be considered, that any provisions of this Article
IV prevented him from earning a living or otherwise are void, voidable or
unenforceable or should be voided or held unenforceable.
(d) Each of the covenants of this Article IV is given by the
Executive as part of the consideration for this Agreement and as an inducement
to Twin to enter into this Agreement and accept the obligations hereunder.
ARTICLE V
Termination
-----------
5.1 Termination of Agreement. Except for those provisions of this
------------------------
Agreement that survive Termination of Employment, this Agreement shall terminate
upon any Termination of Employment.
5.2 Procedures Applicable to Termination of Employment.
--------------------------------------------------
(a) Termination for Cause. The Executive may be terminated for
---------------------
Cause, upon at least 30 days' prior written notice from the Board to the
Executive for a termination for Cause pursuant to Clause (i) of Section 1.5, and
upon at least 10 days' prior written
-13-
<PAGE>
notice from the Board to the Executive for a termination for Cause pursuant to
Clause (ii), (iii), (iv), (v) or (vi) of Section 1.5, by a vote of the Board
(provided that the Executive shall have had the opportunity (together with the
Executive's legal counsel) during such period to be heard at a meeting of the
Board with respect to such determination).
(b) Resignation for Good Reason. The Executive may resign for Good
---------------------------
Reason, upon at least 30 days' prior written notice from the Executive to the
Board of his intent to resign for Good Reason pursuant to Clause (iii) of
Section 1.12, and upon at least 10 days' prior written notice from the Executive
to the Board of his intent to resign for Good Reason pursuant to Clause (i),
(ii), (iv) or (v) of Section 1.12, provided that the Executive (together with
the Executive's legal counsel) shall meet with the Board, if requested by the
Board, during such period with respect to his intent to resign.
(c) Termination Without Cause or for Disability. The Executive
-------------------------------------------
may be terminated without Cause or for Disability, upon at least 30 days' prior
written notice from the Board to the Executive, by a vote of the Board (provided
that the Executive shall have had the opportunity (together with the Executive's
legal counsel) during such period to be heard at a meeting of the Board with
respect to such determination); provided, however, that, with respect to
-------- -------
Disability that is not permanent (as defined below), such thirty (30) days'
prior written notice must be given within six (6) months after the end of the
twelve (12) month period referred to in Section 1.10.
5.3 Obligations of the Company Upon Termination of Employment.
---------------------------------------------------------
(a) Accrued Obligations and Other Benefits. In the event of
--------------------------------------
Termination of Employment for any reason (including a termination for Cause),
Twin shall pay to the Executive, or, in the event of the Executive's death or
Disability, to his heirs, estate or legal representatives, as the case may be,
the following:
-14-
<PAGE>
(i) all Accrued Obligations in a lump sum within 10 days
after the date of Termination of Employment; and
(ii) all benefits accrued by the Executive as of the date of
Termination of Employment under all qualified and nonqualified
retirement, pension, profit sharing and similar plans of the Company
to such extent, in such manner and at such time as are provided under
the terms of such plans and arrangements.
(b) Termination Without Cause or Resignation for Good Reason. In
--------------------------------------------------------
the event that the Board terminates the Executive's employment without Cause
(but excluding Termination of Employment by reason of the Executive's death or
Disability), or in the event that the Executive resigns from his employment for
Good Reason, in addition to the amounts payable under Section 5.3(a) hereof:
(i) Twin shall pay (A) one-half (1/2) of the Severance
Amount to the Executive in a lump sum within 10 days after the date of
Termination of Employment and (B) one-half (1/2) of the Severance
Amount over the unexpired portion of the Term in accordance with Old
Twin's regular payroll practices prior to Closing; and
(ii) Twin shall continue all benefits coverage of the
Executive and his dependents provided under its benefit plans or
policies (or under other benefit plans or policies that provide
substantially equivalent coverage) for the unexpired portion of the
Term.
(c) Termination for Non-Permanent Disability. In the event of a
----------------------------------------
Termination of Employment of the Executive because of a Disability which at the
time of Termination of Employment was not permanent, in addition to the amounts
payable under
-15-
<PAGE>
Section 5.3(a) hereof, Twin shall pay the aggregate Disability Payment over the
unexpired portion of the Term in accordance with Old Twin's regular payroll
practices prior to Closing. A Disability shall be deemed to be permanent if, at
the time of Termination of Employment, the Executive cannot perform substantial
gainful work similar in nature to the work performed by the Executive hereunder
prior to such Disability, which Disability is expected to last at least six (6)
months from the date of such Termination of Employment.
(d) Exclusivity. The amounts payable to the Executive pursuant to
-----------
Sections 5.3(a), 5.3(b) and 5.3(c), as the case may be, shall be the Executive's
sole remedy in the event of the Termination of Employment of the Executive, and
the Executive waives any and all rights to pursue any other remedy at law or in
equity; provided, however, that this shall not constitute a waiver of any rights
-------- -------
provided under any federal, state or local laws or regulations relating to
discrimination in employment.
ARTICLE VI
Miscellaneous
-------------
6.1 Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the heirs and representatives of the Executive and the
successors and assigns of Twin. Twin shall require any successor (whether
direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of assets or stock, liquidation, or otherwise), by agreement in form
and substance reasonably satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent that
Twin would be required to perform this Agreement if no such succession had taken
place. Regardless of whether such agreement is executed, this Agreement shall
be binding upon any successor of Twin in accordance with the operation of law,
and such successor shall be deemed to be "Twin" or the "Company," as
appropriate, for purposes of this Agreement.
-16-
<PAGE>
6.2 Notices. All notices, requests, demands and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or mailed within the continental United States
by first class certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) if to the Board, the Company or Twin, to:
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Philip Kazin
with a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, LP
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
Attention: Ms. Jennifer Holden Dunbar
(b) if to the Executive, to:
Neil Blechman
30 Setalcott Place
Setauket, NY 11733
with a copy to:
Bud G. Holman, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, New York 10178
Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.
6.3 Tax Withholding. Twin shall provide for the withholding of any
---------------
taxes required to be withheld under federal, state and local law (other than the
employer's portion of such taxes) with respect to any payment in cash and/or
other property made by or on
-17-
<PAGE>
behalf of Twin to or for the benefit of the Executive under this Agreement or
otherwise. Twin may, at its option: (i) withhold such taxes from any cash
payments owing from Twin to the Executive, (ii) require the Executive to pay to
Twin in cash such amount as may be required to satisfy such withholding
obligations and/or (iii) make other satisfactory arrangements with the Executive
to satisfy such withholding obligations.
6.4 No Assignment; No Third Party Beneficiaries. Except as
-------------------------------------------
otherwise expressly provided in Section 6.1 herein, this Agreement is not
assignable by any party, and no payment to be made hereunder shall be subject to
alienation, sale, transfer, assignment, pledge, encumbrance or other charge.
Except for Holding and its existing and future subsidiaries, no Person shall be,
or deemed to be, a third party beneficiary of this Agreement.
6.5 Execution in Counterparts. This Agreement may be executed by
-------------------------
the parties hereto in one or more counterparts, each of which shall be deemed to
be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
6.6 Jurisdiction and Governing Law. Jurisdiction over disputes
------------------------------
with regard to this Agreement shall be exclusively in the courts of the State of
New York, and this Agreement shall be construed and interpreted in accordance
with and governed by the laws of the State of New York, other than the conflict
of laws provisions of such laws.
6.7 Entire Agreement; Amendment. Except as otherwise provided in
---------------------------
Section 3.3 hereof, this Agreement and the Exhibits attached hereto embody the
entire understanding of the parties hereto, and supersede all other oral or
written agreements or understandings between them, regarding the subject matter
hereof. No change, alteration or modification hereof may be made except in a
writing, signed by both of the parties hereto.
-18-
<PAGE>
6.8 Headings. The headings in this Agreement are for convenience
--------
of reference only and shall not be construed as part of this Agreement or to
limit or otherwise affect the meaning hereof.
6.9 Survival. Notwithstanding anything to the contrary herein,
--------
Section 3.3(e), Article IV, Section 5.3 and Article VI of this Agreement shall
survive termination of this Agreement or Termination of Employment for any
reason whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
TWIN LABORATORIES INC.
/s/ Ross Blechman
-------------------------
By: Ross Blechman
Its: President
By: /s/ Neil Blechman
-------------------------
Neil Blechman
AGREED AND ACCEPTED:
TLG LABORATORIES HOLDING CORP.
/s/ Ross Blechman
________________________
By: Ross Blechman
Its: President
-19-
<PAGE>
EXHIBIT A
---------
TWIN LABORATORIES INC.
BONUS PLAN
----------
(All capitalized terms used in this Bonus Plan that are not defined herein
shall have the definitions ascribed thereto in the Participants' respective
Employment Agreement with Twin Laboratories Inc. to which this Bonus Plan is
attached.)
1. Purpose. Twin has adopted the Twin Laboratories Inc. Bonus Plan (the
-------
"Bonus Plan") in order to provide appropriate incentives to the Participants (as
hereinafter defined) to achieve and exceed specified performance objectives in
order to enhance the value of the Company for the benefit of the Company and its
stockholders following the acquisition by Holding of the outstanding capital
stock of Twin and the merger of the affiliated companies of Twin with Twin or a
subsidiary of Twin, all as more fully described in the Stock Purchase and Sale
Agreement dated as of March 5, 1996, as amended (the "Purchase Agreement") by
and among David Blechman, Jean Blechman, Brian Blechman, Neil Blechman, Ross
Blechman, Steve Blechman, Dean Blechman, Stephen Welling, Holding, Natur-Pharma
Inc. and Green Equity Investors II, L.P.
2. Effective Date. The effective date of the Bonus Plan is May 7, 1996.
--------------
3. Participants. The participants in the Bonus Plan (the "Participants")
------------
shall be Brian Blechman, Neil Blechman, Ross Blechman, Steve Blechman and Dean
Blechman, to the extent such individuals are employed by the Company in a
Performance Year (as hereinafter defined).
4. Performance Year. Each calendar year beginning with January 1, 1996
----------------
shall be a "Performance Year." If a Participant is employed by the Company for a
part of a Performance Year, he shall receive an Award (as hereinafter defined)
equal to the Award he would have received had he been employed for the entire
Performance Year, multiplied by a fraction, the numerator of which is the number
of days he was employed by the Company during such Performance Year and the
denominator of which is 365; provided, that if the Participant's employment is
terminated prior to the end of the Performance Year by the Board for Cause or
the Participant resigns without Good Reason (as hereinafter defined), no Award
shall be made for the Performance Year (or part thereof) in which the
Participant's employment was terminated or in which the Participant resigns.
5. Definitions of Cause and Good Reason. "Cause" and "Good Reason"
------------------------------------
shall mean, with respect to the Participants, the definitions of such terms set
forth in their respective Employment Agreements with Twin.
6. EBITDA shall mean, with respect to Holding on a consolidated basis for
------
any Performance Year, the consolidated pre-tax income of Holding (calculated
after giving effect to the accrual of all Awards (as hereinafter defined) with
respect to such Performance Year) for such Performance Year as determined in
accordance with generally accepted accounting
<PAGE>
principles consistently applied plus, to the extent deducted in computing such
consolidated pre-tax income, without duplication, (A) the sum of (a) interest
expense, (b) depreciation expense and amortization expense, (c) extraordinary
losses, (d) noncash exchange, translation or performance losses relating to any
foreign currency hedging transactions or currency fluctuations, and (e) any
Awards paid in such Performance Year in respect of any prior Performance Year,
minus, to the extent included in computing such consolidated pre-tax income,
without duplication, (B) the sum of (i) interest income, (ii) extraordinary
gains and (iii) noncash exchange, translation or performance gains relating to
any foreign currency hedging transactions or currency fluctuations; provided
that all effects of the transactions contemplated by the Purchase Agreement
shall be eliminated in computing EBITDA.
7. EBITDA Levels. (a) For each percentage increase specified in Appendix
-------------
A hereto in EBITDA for a Performance Year compared to EBITDA in the immediately
preceding Performance Year (except for the Performance Year ended December 31,
1996, which shall be compared to the EBITDA amount set forth on Appendix B for
the calendar year ended December 31, 1995), the Participant shall receive a cash
bonus ("Award") equal to the corresponding bonus percent specified in Appendix A
multiplied by the Participant's Base Salary for the Performance Year.
(b) The final determination of EBITDA with respect to any Performance Year
shall be subject to the affirmative approval (the "Approval") of a majority of
the Blechman Directors and a majority of the GEI Directors then in office (as
such terms are defined in the Stockholders Agreement annexed as Exhibit G to the
Purchase Agreement). In the event that the Approval is not obtained within
fourteen (14) days after completion of Holding's audited financial statements
for such Performance Year, the GEI Directors and the Blechman Directors shall
appoint a mutually satisfactory nationally recognized accounting firm (which may
be Holding's auditors) to make such determination of EBITDA in respect of such
Performance Year, provided that the GEI Directors and the Blechman Directors
shall determine with respect to the Award for such Performance Year the amount
not in dispute by reason of such lack of Approval.
8. Time of Payment. Each Award shall be paid no later than the
---------------
fourteenth (14th) day (assuming Approval is obtained or, assuming Approval is
not obtained, as to the undisputed amount), or the thirtieth (30th) day
(assuming Approval is not obtained, as to the disputed amount), after completion
of Holding's audited financial statements for such Performance Year.
9. Base Salary. For the purposes of the Bonus Plan, "Base Salary" shall
-----------
mean, for each Participant, the "Base Salary" (including annual increases
thereof) as defined in his Employment Agreement.
10. No Assignments. A Participant may not assign an Award without the
--------------
prior written consent of the Board. Any attempted assignment without such
consent shall be null and void. For purposes of this paragraph, any designation
of, or payment to, a beneficiary designated to receive such Award in the event
of the Participant's death, shall not be deemed an assignment.
-2-
<PAGE>
11. Unfunded Incentive Compensation Arrangement. The Bonus Plan is
-------------------------------------------
intended to constitute an unfunded incentive compensation arrangement covering a
select group of management or highly compensated employees. Nothing contained
in the Bonus Plan shall create or be construed to create a trust of any kind.
All awards shall be paid from the general funds of Twin, and no special or
separate fund shall be established and no segregation of assets shall be made to
assure payment of such awards.
12. Governing Law. The Plan shall be construed and governed in accordance
-------------
with the laws of the State of New York.
13. No Right to Specific Assets. There shall not vest in any participant
---------------------------
any right, title, or interest in and to any specific assets of the Company.
14. No Modification. The Bonus Plan shall not be modified or amended by
---------------
Twin in any manner adverse to the Participants.
-3-
<PAGE>
Appendix A
----------
Twin Laboratories Inc.
Bonus Plan Table
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE BONUS
IN EBITDA PERCENT
------------ -------
<S> <C>
0.0% 0.0%
1.0% 0.0%
2.0% 0.0%
3.0% 0.0%
4.0% 0.0%
5.0% 0.0%
6.0% 0.0%
7.0% 0.0%
8.0% 0.0%
9.0% 0.0%
10.0% 0.0%
11.0% 0.0%
12.0% 0.0%
13.0% 6.0%
14.0% 12.0%
15.0% 18.0%
16.0% 24.0%
17.0% 30.0%
18.0% 36.0%
19.0% 42.0%
20.0% 48.0%
21.0% 54.0%
22.0% 60.0%
23.0% 66.0%
24.0% 72.0%
25.0% 78.0%
26.0% 84.0%
27.0% 90.0%
28.0% 96.0%
29.0% 102.0%
30.0% 108.0%
31.0% 114.0%
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C>
32.0% 120.0%
33.0% 126.0%
33.3% 128.0%
</TABLE>
-5-
<PAGE>
APPENDIX B
Calculation of 1995 EBITDA for Purposes of Determining 1996 EBITDA Increase
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
1995 Pre-Tax Income from Audit $30,464
Plus: Depreciation & Amortization from Audit 1,011
Plus: Interest Expense 866
Plus: Unusual Item Footnoted in Audit 128
Plus: Transaction Expenses 656
Less: Interest Income (313)
Less: LGP Fee (400)
-------
1995 Pro Forma EBITDA $32,412
</TABLE>
-6-
<PAGE>
EXHIBIT B
---------
Twin Laboratories Inc. Employee Savings & Retirement Plan (prior to January 1,
1996, the Plan was known as the Twin Laboratories Inc. Profit Sharing Plan)
Twin Laboratories Section 125 Plan
Group Term Life Insurance (INA Insurance Company of North America)
Medical Insurance (Oxford Health Plans (NY), Inc.)
Dental Insurance (Connecticut General Life Insurance Company - Policy
2100864-01)
Accidental Death and Dismemberment Insurance (INA Life Insurance Company of
New York - Policy 8328)
Twin Laboratories Inc. XS Executive Medical Insurance Plan
<PAGE>
Exhibit 10.12
EMPLOYMENT AGREEMENT
by and between
TWIN LABORATORIES INC.
and
ROSS BLECHMAN
Dated as of
May 7, 1996
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
May 7, 1996, by and between Twin Laboratories Inc., a Utah corporation formerly
known as Natur-Pharma Inc. ("Twin"), and Ross Blechman, an individual currently
residing at 41 Setalcott Place, Setauket, NY 11733 (the "Executive"). As used
herein, the term "Company" shall refer, individually and/or collectively, as
applicable, to TLG Laboratories Holding Corp., a Delaware corporation
("Holding"), and its existing and future subsidiaries, including but not limited
to Twin and Advanced Research Press, Inc., a New York corporation ("ARP").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on the date hereof, Holding will acquire all of the outstanding
capital stock of Twin, and subsequently Twin Laboratories Inc., a New York
corporation ("Old Twin"), Twinlab Export Corp. ("Export"), Twinlab Specialty
Corporation ("Specialty"), Alvita Products, Inc. ("Alvita"), ARP and B. Bros.
Realty Corporation ("B. Bros.") (Twin, Old Twin, Export, Specialty, Alvita, ARP
and B. Bros. being referred to collectively as the "Companies") will merge with
Twin or Natur-Pharma II, Inc., a subsidiary of Twin, all as more fully described
in the Stock Purchase and Sale Agreement dated as of March 5, 1996, as amended
(the "Purchase Agreement"), by and among David Blechman, Jean Blechman, Brian
Blechman, Neil Blechman, the Executive, Steve Blechman, Dean Blechman, Stephen
Welling, Holding, Natur-Pharma Inc. and Green Equity Investors II, L.P.;
WHEREAS, the Board of Directors of Twin desires to provide appropriate
incentives to key executives of the Company, including the Executive, in order
to retain such executives
<PAGE>
following the closing of the transactions contemplated by the Purchase Agreement
(the "Closing");
WHEREAS, the Executive has served as an executive officer of certain of the
Companies prior to the Closing;
WHEREAS, Twin and the Executive desire that the Company employ the
Executive as the Chairman of the Board, Chief Executive Officer and President of
each of Holding and Twin and the Executive Vice President of ARP following the
Closing on the terms and conditions set forth herein;
NOW, THEREFORE, Twin and the Executive, each intending to be legally bound,
hereby mutually covenant and agree as follows:
ARTICLE I
Definitions
-----------
The following terms used in this Agreement shall have the meanings set
forth below.
1.1 "Accrued Obligations" shall mean, as of the date of Termination
of Employment, the sum of (A) the Executive's aggregate Base Salary through such
date to the extent not theretofore paid, plus (B) the amount of any bonus
----
payable under the Bonus Plan (as hereinafter defined) and other cash
compensation payable to the Executive hereunder as of such date but not yet paid
plus (C) all vacation pay, expense reimbursements and other cash entitlements
- ----
accrued by the Executive hereunder as of such date to the extent not theretofore
paid.
1.2 "Base Salary" shall mean the amount set forth in Section 3.1.
1.3 "Board" shall mean the board of directors of Holding.
1.4 "Bonus Plan" shall mean the cash bonus plan effective as of the
date hereof, which has been adopted by Twin and is attached hereto as Exhibit A.
---------
-2-
<PAGE>
1.5 "Cause" shall mean (i) the Executive's material violation of
Section 2.3 of this Agreement, which violation continues after notice thereof is
given to the Executive by the Board; (ii) the Executive's material violation of
Sections 4.1 or 4.2 of this Agreement; (iii) the Executive's violation of
Section 4.3 of this Agreement; (iv) the Executive's engagement in conduct which
is fraudulent or illegal with respect to the Company; (v) the Executive's gross
negligence in the performance or nonperformance of his duties or
responsibilities hereunder or engagement in conduct which is materially
injurious or materially damaging to the Company or the reputation of the
Company; or (vi) the Executive's conviction of, or plea of nolo contendere to, a
---------------
felony.
1.6 "Common Stock" shall mean the common stock of Holding.
1.7 "Competitor" shall have the meaning set forth in Section 4.3.
1.8 "Confidential Material" shall have the meaning set forth in
Section 4.2.
1.9 "Control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
1.10 "Disability" shall mean the inability of the Executive to
perform in all material respects his duties and responsibilities to the Company
by reason of a physical or mental disability or infirmity, which inability has
continued for a period of nine months, whether or not consecutive, occurring
within any period of twelve consecutive months.
1.11 "Disability Payment" shall mean, for purposes of Section
5.3(c), an amount equal to (i) one-half (1/2) of the Base Salary for the
calendar year in the Term in which the date of Termination of Employment occurs
multiplied by (ii) the number of whole
-3-
<PAGE>
years and any fraction thereof remaining in the unexpired portion of the Term
(except in the case of a Termination of Employment during the last calendar year
of the Term, in which case said sum shall be multiplied by one (1)).
1.12 "Good Reason" shall mean any (i) reduction in the Executive's
Base Salary or opportunity to participate in the Bonus Plan, as set forth
herein, (ii) relocation of the Executive's principal place of business to a
location which is more than 10 miles from its current location (without the
Executive's consent), (iii) material diminution in the Executive's duties,
responsibilities or reporting position with the Company, which diminution
continues after notice thereof is given to the Board by the Executive, (iv)
failure by the Company to continue in effect any material benefit or
compensation plan, life insurance plan, health and accident plan, disability
plan (or plan providing the Executive with substantially similar benefits) in
which the Executive is participating or the material reduction of the
Executive's benefits under any of such plans or (v) failure by Twin to obtain
the agreement to assume and perform this Agreement by any successor of Twin as
contemplated in Section 6.1 hereof.
1.13 "Performance Year" shall mean each calendar year beginning on
January 1 and ending on December 31.
1.14 "Person" shall mean an individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, other entity or governmental or other agency or political
subdivision thereof.
1.15 "Public Offering Event" shall mean the first date after which
at least 20% of the outstanding Common Stock is publicly held and such Common
Stock is listed or admitted to trading on a national securities exchange or
quoted on the National Association of Securities Dealers, Inc.'s National Market
System or Small Capitalization System.
-4-
<PAGE>
1.16 "Qualified IPO" shall mean the initial bona fide, registered
underwritten public offering of shares of Common Stock.
1.17 "Severance Amount" shall mean, for purposes of Section 5.3(b),
an amount equal to (i) the Base Salary for the calendar year in the Term in
which the date of Termination of Employment occurs multiplied by (ii) the number
of whole years and any fraction thereof remaining in the unexpired portion of
the Term (except in the case of a Termination of Employment during the last
calendar year of the Term, in which case said sum shall be multiplied by one
(1)).
1.18 "Term" shall have the meaning set forth in Section 2.2 and
shall include any renewal or extension as set forth therein.
1.19 "Termination of Employment" shall mean (i) the Executive's
death or Disability, (ii) termination by the Board of the Executive's employment
with the Company for Cause or without Cause, (iii) resignation by the Executive
from the employ of the Company for Good Reason or without Good Reason, (iv)
retirement of the Executive or (v) expiration of the Term.
ARTICLE II
Employment and Term
-------------------
2.1 Employment. The Executive shall be employed as the Chairman of
----------
the Board, Chief Executive Officer and President of each of Holding and Twin and
Executive Vice President of ARP, and the Executive hereby accepts such
employment, for the Term. In addition, the Executive agrees that, during the
Term, he will serve in any similar capacity on behalf of any existing or future
subsidiary of Holding, as reasonably requested by the Board.
-5-
<PAGE>
2.2 Term. The Term shall commence on the date hereof. Unless a
----
Public Offering Event or a Qualified IPO has occurred, the Term shall end on the
fifth anniversary of the date hereof; provided, that the Term shall be renewed
--------
automatically for successive additional one-year periods at the end of such
five-year period and of each such one-year renewal period, unless, no later than
one hundred eighty (180) days prior to any such renewal date, either the Board
or the Executive gives written notice to the other that the Term shall not be so
renewed. From and after the first to occur of a Public Offering Event or
Qualified IPO, the Term shall end on the third anniversary of the date of such
Public Offering Event or Qualified IPO, as applicable, provided that, commencing
one day after such Public Offering Event or Qualified IPO, as applicable, and
continuing each day thereafter prior to a Termination of Employment, the Term
shall automatically be extended for one additional day (so as to establish a
three-year remaining Term upon a Termination of Employment for purposes of
Articles IV and V).
2.3 Duties. The Executive shall have all powers, duties and
------
responsibilities commensurate with his position as set forth in Section 2.1
hereof or as may be assigned by the Board from time to time (provided any such
powers, duties and responsibilities assigned by the Board are commensurate with
such position). The Executive shall devote substantially all of his business
time, attention and energies to the performance of his duties hereunder.
Notwithstanding the foregoing, nothing in this Agreement shall restrict the
Executive from managing his personal investments, personal business affairs and
other personal matters, or serving on civic or charitable boards or committees,
provided that none of such activities interferes with the performance of his
duties and responsibilities hereunder or conflicts or competes with the
interests of the Company.
-6-
<PAGE>
ARTICLE III
Compensation and Benefits
-------------------------
3.1 Base Salary. For services performed by the Executive for the
-----------
Company pursuant to this Agreement, Twin shall pay the Executive an initial Base
Salary of FOUR HUNDRED THOUSAND DOLLARS ($400,000) per year, payable in
accordance with Old Twin's regular payroll practices prior to the Closing. The
initial Base Salary shall be increased annually, beginning on January 1, 1997,
by a percentage equal to the percentage increase, if any, in the Consumer Price
Index for all Urban Consumers, All Items, for the most recent twelve-month
period for which such figures are then available as promulgated by the
Department of Labor Bureau of Statistics. Any compensation which may be
otherwise authorized from time to time by the Board (or an appropriate committee
thereof) shall be in addition to the Base Salary.
3.2 Bonuses. The Executive shall be eligible to receive annual
-------
cash bonuses in accordance with the terms of the Bonus Plan.
3.3 Other Benefits. In addition to the Base Salary and
--------------
participation in the Bonus Plan, the Executive shall also be entitled to the
following:
(a) Participation in Benefit Plans. The Executive shall be
------------------------------
entitled to participate in the executive-level benefit arrangements set
forth on Exhibit B. The Executive shall also be entitled to participate in
all other welfare and benefit plans maintained by Holding and/or its
subsidiaries, as the case may be, for their respective employees generally.
(b) Vacation. The Executive shall be entitled to vacation and paid
--------
holidays consistent with Old Twin's practices prior to the Closing.
-7-
<PAGE>
(c) Fringe Benefits. The Executive shall be entitled to first
---------------
class travel for business-related purposes and the perquisites and other
fringe benefits made available to the Company's other senior executives.
(d) Automobile. Twin shall reimburse the Executive for all
----------
reasonable expenses (including, but not limited to, lease payments,
liability insurance, maintenance, repair and fuel costs), up to ONE
THOUSAND EIGHT HUNDRED DOLLARS ($1,800) per month, incurred in operating an
automobile for the Executive's use in the performance of his duties
hereunder and in the conduct of the affairs of the Company, which
automobile shall also be available to the Executive for personal use.
(e) Indemnification. The Executive shall be indemnified by Twin
---------------
against reasonable expenses, including attorney's fees, actually and
necessarily incurred by him in connection with the defense of any action,
suit, investigation or proceeding or similar legal activity, regardless of
whether criminal, civil, administrative or investigative in nature, to
which he is made a party by reason of his then being or having been an
officer of the Company on or subsequent to the date hereof, to the full
extent permitted by applicable law. Twin shall (upon receipt by Twin of an
undertaking by or on behalf of the Executive to repay the expenses
described in this Section 3.3(e), if it shall ultimately be determined that
he is not entitled to be indemnified by Twin against such expenses) pay
reasonable expenses, including attorney's fees, incurred by the Executive
in defending any threatened, pending or completed action, suit or
proceeding, or appearing as a witness at a time when he has not been named
as a defendant or respondent with respect thereto, in advance of the final
disposition of any such action, suit or proceeding. The foregoing right of
-8-
<PAGE>
indemnification will not be deemed exclusive of any other rights to which
the Executive may be entitled under Holding's or any of its subsidiaries'
respective Articles or Certificate of Incorporation or By-laws, as in
effect from time to time, any agreement or otherwise.
ARTICLE IV
Covenants
---------
4.1 Non-Interference. During the Term (including any unexpired portion
----------------
thereof) and for a period of two years thereafter (the "Non-Solicitation
Period"), the Executive agrees to refrain from, directly, indirectly or as an
agent on behalf of or in conjunction with any Person, soliciting (i) or
encouraging (other than employee referrals and similar activities consistent
with past practice) any employee of the Company who is employed in an executive,
managerial, administrative or professional capacity or who possesses
Confidential Material (as defined below), to leave the employment of the Company
or (ii) any customer of the Company on behalf of any Competitor (as defined
below) or any other business.
4.2 Nondisclosure of Confidential Material. In the performance of his
--------------------------------------
duties, the Executive has previously had, and may be expected in the future to
have, access to confidential records and information, including, but not limited
to, development, marketing, purchasing, organizational, strategic, financial,
managerial, administrative, manufacturing, production, distribution and sales
information, data, specifications and processes presently owned or at any time
hereafter developed by the Company or by its agents or consultants or used
presently or at any time hereafter in the course of the business of the Company,
that are not otherwise part of the public domain (collectively, the
"Confidential Material"). All such Confidential Material is considered secret
and has been and/or will be disclosed to the Executive in confidence, and the
Executive acknowledges that, as a consequence of his
-9-
<PAGE>
employment and position with the Company, the Executive will have access to and
become acquainted with Confidential Material. Except in the performance of his
duties to the Company, the Executive shall not, during the Term and at all times
thereafter, directly or indirectly for any reason whatsoever, disclose or use
any such Confidential Material. All records, files, drawings, documents,
equipment and other tangible items, wherever located, relating in any way to or
containing Confidential Material, which the Executive has prepared, used or
encountered or shall in the future prepare, use or encounter, shall be and
remain the Company's sole and exclusive property and shall be included in the
Confidential Material. Upon termination of this Agreement, or whenever
requested by the Company, the Executive shall promptly deliver to the Company
any and all of the Confidential Material and copies thereof, not previously
delivered to the Company, that may be in the possession or under the control of
the Executive. The foregoing restrictions shall not apply to the use,
divulgence, disclosure or grant of access to Confidential Material to the
extent, but only to the extent, (i) expressly permitted or required pursuant to
any other written agreement between or among the Executive and the Company, (ii)
such Confidential Material has been publicly disclosed (not due to a breach by
the Executive of his obligations hereunder or by breach of any other person of a
fiduciary or confidential obligation to the Company), or (iii) the Executive is
required to disclose Confidential Material by or to any court of competent
jurisdiction or any governmental or quasi-governmental agency, authority or
instrumentality of competent jurisdiction, provided, that the Executive shall,
--------
prior to any such disclosure, immediately notify the Company of such requirement
and provided further, that the Company shall have the right, at its expense, to
-------- -------
object to such disclosures and to seek confidential treatment of any
Confidential Material to be so disclosed on such terms as it shall determine.
-10-
<PAGE>
4.3 Non-Competition. The Executive shall not, during the Term
---------------
(including any unexpired portion thereof), directly or indirectly, own, manage,
operate, join or Control or participate (or serve as a consultant or in a
similar position) in the ownership, management, operation or Control of, any
business, entity, firm, partnership, corporation or other Person, whether
private, governmental or quasi-governmental, other than the Company, which is
engaged, directly or indirectly, anywhere in the world, in (i) the business of
developing, manufacturing, marketing, selling and/or distributing of vitamins,
minerals, nutritional supplements (including, without limitation, amino acids
and proteins), herbal products, phytonutrients or herb teas, (ii) the
publication of related health, fitness or bodybuilding publications, or (iii)
any other business engaged in or being developed by the Company, or being
actively considered by management of the Company, at the time of the Executive's
Termination of Employment (a "Competitor"); provided, however, that nothing in
-------- -------
this Agreement shall preclude the Executive from serving on the board of
directors of any company with the prior consent of the Board or from owning less
than 5% of any class of publicly traded equity of any Competitor.
Notwithstanding the immediately preceding sentence, to the extent that the
Company ceases to develop any such other business which was being developed, or
the management of the Company ceases to actively consider any such other
business which was being actively considered, at the time of the Executive's
Termination of Employment, the covenant set forth in the immediately preceding
sentence shall no longer be applicable to such other business. At the written
request of the Executive, the Company shall promptly inform the Executive of
whether any particular business or businesses that were being so developed or
actively considered at the time of the Executive's Termination of Employment
have ceased to be so developed or actively considered.
-11-
<PAGE>
4.4 Enforcement.
-----------
(a) The Executive acknowledges that violation of any of the
covenants and agreements set forth in this Article IV would cause the Company
irreparable damage for which the Company cannot be reasonably compensated in
damages in an action at law, and therefore in the event of any breach by the
Executive of this Article IV, the Company shall be entitled to make application
to a court of competent jurisdiction for equitable relief by way of injunction
or otherwise (without being required to post a bond). This provision shall not,
however, be construed as a waiver of any of the rights which the Company may
have for damages under this Agreement or otherwise, and all of the Company's
rights and remedies shall be unrestricted. This Article IV shall survive
termination of this Agreement or Termination of Employment for any reason
whatsoever.
(b) If any of the provisions of this Agreement shall otherwise
contravene or be invalid under the laws of any state or other jurisdiction where
it is applicable but for such contravention or invalidity, such contravention or
invalidity shall not invalidate all of the provisions of this Agreement, but
rather the Agreement shall be reformed and construed, insofar as the laws of
that state or jurisdiction are concerned, as not containing the provision or
provisions, but only to the extent that they are contravening or are invalid
under the laws of that state or jurisdiction, and the rights and obligations
created hereby shall be reformed and construed and enforced accordingly. In
particular, if any of the covenants or agreements set forth in this Article IV,
or any part thereof, is held to be unenforceable because of the duration of such
provision or the areas covered thereby, or otherwise, the parties hereby
expressly agree that the court making such determination shall have the power to
reduce the duration and/or the areas of such provision or otherwise limit any
such provision, and, in its reduced form, such provision shall then be
enforceable.
-12-
<PAGE>
(c) The Executive understands that the provisions of this Article
IV may limit his ability to earn a livelihood in a business similar to the
business of the Company but nevertheless agrees and hereby acknowledges that (i)
such provisions do not impose a greater restraint than is necessary to protect
the goodwill or other business interests of the Company; (ii) such provisions
contain reasonable limitations as to time and the scope of activity to be
restrained; and (iii) the consideration provided under this Agreement,
including, without limitation, any amounts or benefits provided under Article V
hereof, is sufficient to compensate the Executive for the restrictions contained
in this Article IV. In consideration of the foregoing and in light of the
Executive's education, skills and abilities, the Executive agrees that he will
not assert, and it should not be considered, that any provisions of this Article
IV prevented him from earning a living or otherwise are void, voidable or
unenforceable or should be voided or held unenforceable.
(d) Each of the covenants of this Article IV is given by the
Executive as part of the consideration for this Agreement and as an inducement
to Twin to enter into this Agreement and accept the obligations hereunder.
ARTICLE V
Termination
-----------
5.1 Termination of Agreement. Except for those provisions of this
------------------------
Agreement that survive Termination of Employment, this Agreement shall terminate
upon any Termination of Employment.
5.2 Procedures Applicable to Termination of Employment.
--------------------------------------------------
(a) Termination for Cause. The Executive may be terminated for
---------------------
Cause, upon at least 30 days' prior written notice from the Board to the
Executive for a termination for Cause pursuant to Clause (i) of Section 1.5, and
upon at least 10 days' prior written
-13-
<PAGE>
notice from the Board to the Executive for a termination for Cause pursuant to
Clause (ii), (iii), (iv), (v) or (vi) of Section 1.5, by a vote of the Board
(provided that the Executive shall have had the opportunity (together with the
Executive's legal counsel) during such period to be heard at a meeting of the
Board with respect to such determination).
(b) Resignation for Good Reason. The Executive may resign for Good
---------------------------
Reason, upon at least 30 days' prior written notice from the Executive to the
Board of his intent to resign for Good Reason pursuant to Clause (iii) of
Section 1.12, and upon at least 10 days' prior written notice from the Executive
to the Board of his intent to resign for Good Reason pursuant to Clause (i),
(ii), (iv) or (v) of Section 1.12, provided that the Executive (together with
the Executive's legal counsel) shall meet with the Board, if requested by the
Board, during such period with respect to his intent to resign.
(c) Termination Without Cause or for Disability. The Executive may
-------------------------------------------
be terminated without Cause or for Disability, upon at least 30 days' prior
written notice from the Board to the Executive, by a vote of the Board (provided
that the Executive shall have had the opportunity (together with the Executive's
legal counsel) during such period to be heard at a meeting of the Board with
respect to such determination); provided, however, that, with respect to
-------- -------
Disability that is not permanent (as defined below), such thirty (30) days'
prior written notice must be given within six (6) months after the end of the
twelve (12) month period referred to in Section 1.10.
5.3 Obligations of the Company Upon Termination of Employment.
---------------------------------------------------------
(a) Accrued Obligations and Other Benefits. In the event of
--------------------------------------
Termination of Employment for any reason (including a termination for Cause),
Twin shall pay to the Executive, or, in the event of the Executive's death or
Disability, to his heirs, estate or legal representatives, as the case may be,
the following:
-14-
<PAGE>
(i) all Accrued Obligations in a lump sum within 10 days
after the date of Termination of Employment; and
(ii) all benefits accrued by the Executive as of the date of
Termination of Employment under all qualified and nonqualified
retirement, pension, profit sharing and similar plans of the Company
to such extent, in such manner and at such time as are provided under
the terms of such plans and arrangements.
(b) Termination Without Cause or Resignation for Good Reason. In
--------------------------------------------------------
the event that the Board terminates the Executive's employment without Cause
(but excluding Termination of Employment by reason of the Executive's death or
Disability), or in the event that the Executive resigns from his employment for
Good Reason, in addition to the amounts payable under Section 5.3(a) hereof:
(i) Twin shall pay (A) one-half (1/2) of the Severance
Amount to the Executive in a lump sum within 10 days after the date of
Termination of Employment and (B) one-half (1/2) of the Severance
Amount over the unexpired portion of the Term in accordance with Old
Twin's regular payroll practices prior to Closing; and
(ii) Twin shall continue all benefits coverage of the
Executive and his dependents provided under its benefit plans or
policies (or under other benefit plans or policies that provide
substantially equivalent coverage) for the unexpired portion of the
Term.
(c) Termination for Non-Permanent Disability. In the event of a
----------------------------------------
Termination of Employment of the Executive because of a Disability which at the
time of Termination of Employment was not permanent, in addition to the amounts
payable under
-15-
<PAGE>
Section 5.3(a) hereof, Twin shall pay the aggregate Disability Payment over the
unexpired portion of the Term in accordance with Old Twin's regular payroll
practices prior to Closing. A Disability shall be deemed to be permanent if, at
the time of Termination of Employment, the Executive cannot perform substantial
gainful work similar in nature to the work performed by the Executive hereunder
prior to such Disability, which Disability is expected to last at least six (6)
months from the date of such Termination of Employment.
(d) Exclusivity. The amounts payable to the Executive pursuant to
-----------
Sections 5.3(a), 5.3(b) and 5.3(c), as the case may be, shall be the Executive's
sole remedy in the event of the Termination of Employment of the Executive, and
the Executive waives any and all rights to pursue any other remedy at law or in
equity; provided, however, that this shall not constitute a waiver of any rights
-------- -------
provided under any federal, state or local laws or regulations relating to
discrimination in employment.
ARTICLE VI
Miscellaneous
-------------
6.1 Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the heirs and representatives of the Executive and the
successors and assigns of Twin. Twin shall require any successor (whether
direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of assets or stock, liquidation, or otherwise), by agreement in form
and substance reasonably satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent that
Twin would be required to perform this Agreement if no such succession had taken
place. Regardless of whether such agreement is executed, this Agreement shall
be binding upon any successor of Twin in accordance with the operation of law,
and such successor shall be deemed to be "Twin" or the "Company," as
appropriate, for purposes of this Agreement.
-16-
<PAGE>
6.2 Notices. All notices, requests, demands and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or mailed within the continental United States
by first class certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) if to the Board, the Company or Twin, to:
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Philip Kazin
with a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, LP
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
Attention: Ms. Jennifer Holden Dunbar
(b) if to the Executive, to:
Ross Blechman
41 Setalcott Place
Setauket, NY 11733
with a copy to:
Bud G. Holman, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, New York 10178
Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.
6.3 Tax Withholding. Twin shall provide for the withholding of any
---------------
taxes required to be withheld under federal, state and local law (other than the
employer's portion of such taxes) with respect to any payment in cash and/or
other property made by or on
-17-
<PAGE>
behalf of Twin to or for the benefit of the Executive under this Agreement or
otherwise. Twin may, at its option: (i) withhold such taxes from any cash
payments owing from Twin to the Executive, (ii) require the Executive to pay to
Twin in cash such amount as may be required to satisfy such withholding
obligations and/or (iii) make other satisfactory arrangements with the Executive
to satisfy such withholding obligations.
6.4 No Assignment; No Third Party Beneficiaries. Except as
-------------------------------------------
otherwise expressly provided in Section 6.1 herein, this Agreement is not
assignable by any party, and no payment to be made hereunder shall be subject to
alienation, sale, transfer, assignment, pledge, encumbrance or other charge.
Except for Holding and its existing and future subsidiaries, no Person shall be,
or deemed to be, a third party beneficiary of this Agreement.
6.5 Execution in Counterparts. This Agreement may be executed by
------------------------
the parties hereto in one or more counterparts, each of which shall be deemed to
be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
6.6 Jurisdiction and Governing Law. Jurisdiction over disputes
------------------------------
with regard to this Agreement shall be exclusively in the courts of the State of
New York, and this Agreement shall be construed and interpreted in accordance
with and governed by the laws of the State of New York, other than the conflict
of laws provisions of such laws.
6.7 Entire Agreement; Amendment. Except as otherwise provided in
---------------------------
Section 3.3 hereof, this Agreement and the Exhibits attached hereto embody the
entire understanding of the parties hereto, and supersede all other oral or
written agreements or understandings between them, regarding the subject matter
hereof. No change, alteration or modification hereof may be made except in a
writing, signed by both of the parties hereto.
-18-
<PAGE>
6.8 Headings. The headings in this Agreement are for convenience
--------
of reference only and shall not be construed as part of this Agreement or to
limit or otherwise affect the meaning hereof.
6.9 Survival. Notwithstanding anything to the contrary herein,
--------
Section 3.3(e), Article IV, Section 5.3 and Article VI of this Agreement shall
survive termination of this Agreement or Termination of Employment for any
reason whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
TWIN LABORATORIES INC.
/s/ Brian Blechman
___________________________________
By: Brian Blechman
Its: Executive Vice President
By: /s/ Ross Blechman
___________________________________
Ross Blechman
AGREED AND ACCEPTED:
TLG LABORATORIES HOLDING CORP.
/s/ Brian Blechman
______________________________
By: Brian Blechman
Its: Executive Vice President
-19-
<PAGE>
EXHIBIT A
---------
TWIN LABORATORIES INC.
BONUS PLAN
----------
(All capitalized terms used in this Bonus Plan that are not defined herein
shall have the definitions ascribed thereto in the Participants' respective
Employment Agreement with Twin Laboratories Inc. to which this Bonus Plan is
attached.)
1. Purpose. Twin has adopted the Twin Laboratories Inc. Bonus Plan (the
-------
"Bonus Plan") in order to provide appropriate incentives to the Participants (as
hereinafter defined) to achieve and exceed specified performance objectives in
order to enhance the value of the Company for the benefit of the Company and its
stockholders following the acquisition by Holding of the outstanding capital
stock of Twin and the merger of the affiliated companies of Twin with Twin or a
subsidiary of Twin, all as more fully described in the Stock Purchase and Sale
Agreement dated as of March 5, 1996, as amended (the "Purchase Agreement") by
and among David Blechman, Jean Blechman, Brian Blechman, Neil Blechman, Ross
Blechman, Steve Blechman, Dean Blechman, Stephen Welling, Holding, Natur-Pharma
Inc. and Green Equity Investors II, L.P.
2. Effective Date. The effective date of the Bonus Plan is May 7, 1996.
--------------
3. Participants. The participants in the Bonus Plan (the "Participants")
------------
shall be Brian Blechman, Neil Blechman, Ross Blechman, Steve Blechman and Dean
Blechman, to the extent such individuals are employed by the Company in a
Performance Year (as hereinafter defined).
4. Performance Year. Each calendar year beginning with January 1, 1996
----------------
shall be a "Performance Year." If a Participant is employed by the Company for a
part of a Performance Year, he shall receive an Award (as hereinafter defined)
equal to the Award he would have received had he been employed for the entire
Performance Year, multiplied by a fraction, the numerator of which is the number
of days he was employed by the Company during such Performance Year and the
denominator of which is 365; provided, that if the Participant's employment is
terminated prior to the end of the Performance Year by the Board for Cause or
the Participant resigns without Good Reason (as hereinafter defined), no Award
shall be made for the Performance Year (or part thereof) in which the
Participant's employment was terminated or in which the Participant resigns.
5. Definitions of Cause and Good Reason. "Cause" and "Good Reason"
------------------------------------
shall mean, with respect to the Participants, the definitions of such terms set
forth in their respective Employment Agreements with Twin.
6. EBITDA shall mean, with respect to Holding on a consolidated basis for
------
any Performance Year, the consolidated pre-tax income of Holding (calculated
after giving effect to the accrual of all Awards (as hereinafter defined) with
respect to such Performance Year) for such Performance Year as determined in
accordance with generally accepted accounting
<PAGE>
principles consistently applied plus, to the extent deducted in computing such
consolidated pre-tax income, without duplication, (A) the sum of (a) interest
expense, (b) depreciation expense and amortization expense, (c) extraordinary
losses, (d) noncash exchange, translation or performance losses relating to any
foreign currency hedging transactions or currency fluctuations, and (e) any
Awards paid in such Performance Year in respect of any prior Performance Year,
minus, to the extent included in computing such consolidated pre-tax income,
without duplication, (B) the sum of (i) interest income, (ii) extraordinary
gains and (iii) noncash exchange, translation or performance gains relating to
any foreign currency hedging transactions or currency fluctuations; provided
that all effects of the transactions contemplated by the Purchase Agreement
shall be eliminated in computing EBITDA.
7. EBITDA Levels. (a) For each percentage increase specified in Appendix
-------------
A hereto in EBITDA for a Performance Year compared to EBITDA in the immediately
preceding Performance Year (except for the Performance Year ended December 31,
1996, which shall be compared to the EBITDA amount set forth on Appendix B for
the calendar year ended December 31, 1995), the Participant shall receive a cash
bonus ("Award") equal to the corresponding bonus percent specified in Appendix A
multiplied by the Participant's Base Salary for the Performance Year.
(b) The final determination of EBITDA with respect to any Performance Year
shall be subject to the affirmative approval (the "Approval") of a majority of
the Blechman Directors and a majority of the GEI Directors then in office (as
such terms are defined in the Stockholders Agreement annexed as Exhibit G to the
Purchase Agreement). In the event that the Approval is not obtained within
fourteen (14) days after completion of Holding's audited financial statements
for such Performance Year, the GEI Directors and the Blechman Directors shall
appoint a mutually satisfactory nationally recognized accounting firm (which may
be Holding's auditors) to make such determination of EBITDA in respect of such
Performance Year, provided that the GEI Directors and the Blechman Directors
shall determine with respect to the Award for such Performance Year the amount
not in dispute by reason of such lack of Approval.
8. Time of Payment. Each Award shall be paid no later than the
---------------
fourteenth (14th) day (assuming Approval is obtained or, assuming Approval is
not obtained, as to the undisputed amount), or the thirtieth (30th) day
(assuming Approval is not obtained, as to the disputed amount), after completion
of Holding's audited financial statements for such Performance Year.
9. Base Salary. For the purposes of the Bonus Plan, "Base Salary" shall
-----------
mean, for each Participant, the "Base Salary" (including annual increases
thereof) as defined in his Employment Agreement.
10. No Assignments. A Participant may not assign an Award without the
--------------
prior written consent of the Board. Any attempted assignment without such
consent shall be null and void. For purposes of this paragraph, any designation
of, or payment to, a beneficiary designated to receive such Award in the event
of the Participant's death, shall not be deemed an assignment.
-2-
<PAGE>
11. Unfunded Incentive Compensation Arrangement. The Bonus Plan is
-------------------------------------------
intended to constitute an unfunded incentive compensation arrangement covering a
select group of management or highly compensated employees. Nothing contained
in the Bonus Plan shall create or be construed to create a trust of any kind.
All awards shall be paid from the general funds of Twin, and no special or
separate fund shall be established and no segregation of assets shall be made to
assure payment of such awards.
12. Governing Law. The Plan shall be construed and governed in accordance
-------------
with the laws of the State of New York.
13. No Right to Specific Assets. There shall not vest in any participant
---------------------------
any right, title, or interest in and to any specific assets of the Company.
14. No Modification. The Bonus Plan shall not be modified or amended by
---------------
Twin in any manner adverse to the Participants.
-3-
<PAGE>
Appendix A
----------
Twin Laboratories Inc.
Bonus Plan Table
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE BONUS
IN EBITDA PERCENT
------------ -------
<S> <C>
0.0% 0.0%
1.0% 0.0%
2.0% 0.0%
3.0% 0.0%
4.0% 0.0%
5.0% 0.0%
6.0% 0.0%
7.0% 0.0%
8.0% 0.0%
9.0% 0.0%
10.0% 0.0%
11.0% 0.0%
12.0% 0.0%
13.0% 6.0%
14.0% 12.0%
15.0% 18.0%
16.0% 24.0%
17.0% 30.0%
18.0% 36.0%
19.0% 42.0%
20.0% 48.0%
21.0% 54.0%
22.0% 60.0%
23.0% 66.0%
24.0% 72.0%
25.0% 78.0%
26.0% 84.0%
27.0% 90.0%
28.0% 96.0%
29.0% 102.0%
30.0% 108.0%
31.0% 114.0%
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C>
32.0% 120.0%
33.0% 126.0%
33.3% 128.0%
</TABLE>
-5-
<PAGE>
APPENDIX B
Calculation of 1995 EBITDA for Purposes of Determining 1996 EBITDA Increase
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
1995 Pre-Tax Income from Audit $30,464
Plus: Depreciation & Amortization from Audit 1,011
Plus: Interest Expense 866
Plus: Unusual Item Footnoted in Audit 128
Plus: Transaction Expenses 656
Less: Interest Income (313)
Less: LGP Fee (400)
------
1995 Pro Forma EBITDA $32,412
</TABLE>
-6-
<PAGE>
EXHIBIT B
---------
Twin Laboratories Inc. Employee Savings & Retirement Plan (prior to January 1,
1996, the Plan was known as the Twin Laboratories Inc. Profit Sharing Plan)
Twin Laboratories Section 125 Plan
Group Term Life Insurance (INA Insurance Company of North America)
Medical Insurance (Oxford Health Plans (NY), Inc.)
Dental Insurance (Connecticut General Life Insurance Company - Policy
2100864-01)
Accidental Death and Dismemberment Insurance (INA Life Insurance Company of
New York - Policy 8328)
Twin Laboratories Inc. XS Executive Medical Insurance Plan
<PAGE>
EMPLOYMENT AGREEMENT
by and between
TWIN LABORATORIES INC.
and
STEVE BLECHMAN
Dated as of
May 7, 1996
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of May
7, 1996, by and between Twin Laboratories Inc., a Utah corporation formerly
known as Natur-Pharma Inc. ("Twin"), and Steve Blechman, an individual currently
residing at 11 White Pine Lane, Poquott, NY 11733 (the "Executive"). As used
herein, the term "Company" shall refer, individually and/or collectively, as
applicable, to TLG Laboratories Holding Corp., a Delaware corporation
("Holding"), and its existing and future subsidiaries, including but not limited
to Twin and Advanced Research Press, Inc., a New York corporation ("ARP").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on the date hereof, Holding will acquire all of the outstanding
capital stock of Twin, and subsequently Twin Laboratories Inc., a New York
corporation ("Old Twin"), Twinlab Export Corp. ("Export"), Twinlab Specialty
Corporation ("Specialty"), Alvita Products, Inc. ("Alvita"), ARP and B. Bros.
Realty Corporation ("B. Bros.") (Twin, Old Twin, Export, Specialty, Alvita, ARP
and B. Bros. being referred to collectively as the "Companies") will merge with
Twin or Natur-Pharma II, Inc., a subsidiary of Twin, all as more fully described
in the Stock Purchase and Sale Agreement dated as of March 5, 1996, as amended
(the "Purchase Agreement"), by and among David Blechman, Jean Blechman, Brian
Blechman, Neil Blechman, Ross Blechman, the Executive, Dean Blechman, Stephen
Welling, Holding, Natur-Pharma Inc. and Green Equity Investors II, L.P.;
WHEREAS, the Board of Directors of Twin desires to provide appropriate
incentives to key executives of the Company, including the Executive, in order
to retain such executives
<PAGE>
following the closing of the transactions contemplated by the Purchase Agreement
(the "Closing");
WHEREAS, the Executive has served as an executive officer of certain of the
Companies prior to the Closing;
WHEREAS, Twin and the Executive desire that the Company employ the
Executive as the Executive Vice President of Marketing and Advertising of each
of Holding and Twin and the Chairman of the Board, Chief Executive Officer and
President of ARP following the Closing on the terms and conditions set forth
herein;
NOW, THEREFORE, Twin and the Executive, each intending to be legally bound,
hereby mutually covenant and agree as follows:
ARTICLE I
Definitions
-----------
The following terms used in this Agreement shall have the meanings set
forth below.
1.1 "Accrued Obligations" shall mean, as of the date of Termination
of Employment, the sum of (A) the Executive's aggregate Base Salary through such
date to the extent not theretofore paid, plus (B) the amount of any bonus
----
payable under the Bonus Plan (as hereinafter defined) and other cash
compensation payable to the Executive hereunder as of such date but not yet paid
plus (C) all vacation pay, expense reimbursements and other cash entitlements
- ----
accrued by the Executive hereunder as of such date to the extent not theretofore
paid.
1.2 "Base Salary" shall mean the amount set forth in Section 3.1.
1.3 "Board" shall mean the board of directors of Holding.
1.4 "Bonus Plan" shall mean the cash bonus plan effective as of the
date hereof, which has been adopted by Twin and is attached hereto as Exhibit A.
---------
-2-
<PAGE>
1.5 "Cause" shall mean (i) the Executive's material violation of
Section 2.3 of this Agreement, which violation continues after notice thereof is
given to the Executive by the Board; (ii) the Executive's material violation of
Sections 4.1 or 4.2 of this Agreement; (iii) the Executive's violation of
Section 4.3 of this Agreement; (iv) the Executive's engagement in conduct which
is fraudulent or illegal with respect to the Company; (v) the Executive's gross
negligence in the performance or nonperformance of his duties or
responsibilities hereunder or engagement in conduct which is materially
injurious or materially damaging to the Company or the reputation of the
Company; or (vi) the Executive's conviction of, or plea of nolo contendere to, a
---------------
felony.
1.6 "Common Stock" shall mean the common stock of Holding.
1.7 "Competitor" shall have the meaning set forth in Section 4.3.
1.8 "Confidential Material" shall have the meaning set forth in
Section 4.2.
1.9 "Control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
1.10 "Disability" shall mean the inability of the Executive to
perform in all material respects his duties and responsibilities to the Company
by reason of a physical or mental disability or infirmity, which inability has
continued for a period of nine months, whether or not consecutive, occurring
within any period of twelve consecutive months.
1.11 "Disability Payment" shall mean, for purposes of Section 5.3(c),
an amount equal to (i) one-half (1/2) of the Base Salary for the calendar year
in the Term in which the date of Termination of Employment occurs multiplied by
(ii) the number of whole
-3-
<PAGE>
years and any fraction thereof remaining in the unexpired portion of the Term
(except in the case of a Termination of Employment during the last calendar year
of the Term, in which case said sum shall be multiplied by one (1)).
1.12 "Good Reason" shall mean any (i) reduction in the Executive's
Base Salary or opportunity to participate in the Bonus Plan, as set forth
herein, (ii) relocation of the Executive's principal place of business to a
location which is more than 10 miles from its current location (without the
Executive's consent), (iii) material diminution in the Executive's duties,
responsibilities or reporting position with the Company, which diminution
continues after notice thereof is given to the Board by the Executive, (iv)
failure by the Company to continue in effect any material benefit or
compensation plan, life insurance plan, health and accident plan, disability
plan (or plan providing the Executive with substantially similar benefits) in
which the Executive is participating or the material reduction of the
Executive's benefits under any of such plans or (v) failure by Twin to obtain
the agreement to assume and perform this Agreement by any successor of Twin as
contemplated in Section 6.1 hereof.
1.13 "Performance Year" shall mean each calendar year beginning on
January 1 and ending on December 31.
1.14 "Person" shall mean an individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, other entity or governmental or other agency or political
subdivision thereof.
1.15 "Public Offering Event" shall mean the first date after which at
least 20% of the outstanding Common Stock is publicly held and such Common Stock
is listed or admitted to trading on a national securities exchange or quoted on
the National Association of Securities Dealers, Inc.'s National Market System or
Small Capitalization System.
-4-
<PAGE>
1.16 "Qualified IPO" shall mean the initial bona fide, registered
underwritten public offering of shares of Common Stock.
1.17 "Severance Amount" shall mean, for purposes of Section 5.3(b), an
amount equal to (i) the Base Salary for the calendar year in the Term in which
the date of Termination of Employment occurs multiplied by (ii) the number of
whole years and any fraction thereof remaining in the unexpired portion of the
Term (except in the case of a Termination of Employment during the last calendar
year of the Term, in which case said sum shall be multiplied by one (1)).
1.18 "Term" shall have the meaning set forth in Section 2.2 and shall
include any renewal or extension as set forth therein.
1.19 "Termination of Employment" shall mean (i) the Executive's death
or Disability, (ii) termination by the Board of the Executive's employment with
the Company for Cause or without Cause, (iii) resignation by the Executive from
the employ of the Company for Good Reason or without Good Reason, (iv)
retirement of the Executive or (v) expiration of the Term.
ARTICLE II
Employment and Term
-------------------
2.1 Employment. The Executive shall be employed as the Executive
----------
Vice President of Marketing and Advertising of each of Holding and Twin and
Chairman of the Board, Chief Executive Officer and President of ARP, and the
Executive hereby accepts such employment, for the Term. In addition, the
Executive agrees that, during the Term, he will serve in any similar capacity on
behalf of any existing or future subsidiary of Holding, as reasonably requested
by the Board.
-5-
<PAGE>
2.2 Term. The Term shall commence on the date hereof. Unless a
----
Public Offering Event or a Qualified IPO has occurred, the Term shall end on the
fifth anniversary of the date hereof; provided, that the Term shall be renewed
--------
automatically for successive additional one-year periods at the end of such
five-year period and of each such one-year renewal period, unless, no later than
one hundred eighty (180) days prior to any such renewal date, either the Board
or the Executive gives written notice to the other that the Term shall not be so
renewed. From and after the first to occur of a Public Offering Event or
Qualified IPO, the Term shall end on the third anniversary of the date of such
Public Offering Event or Qualified IPO, as applicable, provided that, commencing
one day after such Public Offering Event or Qualified IPO, as applicable, and
continuing each day thereafter prior to a Termination of Employment, the Term
shall automatically be extended for one additional day (so as to establish a
three-year remaining Term upon a Termination of Employment for purposes of
Articles IV and V).
2.3 Duties. The Executive shall have all powers, duties and
------
responsibilities commensurate with his position as set forth in Section 2.1
hereof or as may be assigned by the Board from time to time (provided any such
powers, duties and responsibilities assigned by the Board are commensurate with
such position). The Executive shall devote substantially all of his business
time, attention and energies to the performance of his duties hereunder.
Notwithstanding the foregoing, nothing in this Agreement shall restrict the
Executive from managing his personal investments, personal business affairs and
other personal matters, or serving on civic or charitable boards or committees,
provided that none of such activities interferes with the performance of his
duties and responsibilities hereunder or conflicts or competes with the
interests of the Company.
-6-
<PAGE>
ARTICLE III
Compensation and Benefits
-------------------------
3.1 Base Salary. For services performed by the Executive for the
-----------
Company pursuant to this Agreement, Twin shall pay the Executive an initial Base
Salary of FOUR HUNDRED THOUSAND DOLLARS ($400,000) per year, payable in
accordance with Old Twin's regular payroll practices prior to the Closing. The
initial Base Salary shall be increased annually, beginning on January 1, 1997,
by a percentage equal to the percentage increase, if any, in the Consumer Price
Index for all Urban Consumers, All Items, for the most recent twelve-month
period for which such figures are then available as promulgated by the
Department of Labor Bureau of Statistics. Any compensation which may be
otherwise authorized from time to time by the Board (or an appropriate committee
thereof) shall be in addition to the Base Salary.
3.2 Bonuses. The Executive shall be eligible to receive annual cash
-------
bonuses in accordance with the terms of the Bonus Plan.
3.3 Other Benefits. In addition to the Base Salary and participation
--------------
in the Bonus Plan, the Executive shall also be entitled to the following:
(a) Participation in Benefit Plans. The Executive shall be entitled
------------------------------
to participate in the executive-level benefit arrangements set forth on
Exhibit B. The Executive shall also be entitled to participate in all
---------
other welfare and benefit plans maintained by Holding and/or its
subsidiaries, as the case may be, for their respective employees generally.
(b) Vacation. The Executive shall be entitled to vacation and paid
--------
holidays consistent with Old Twin's practices prior to the Closing.
-7-
<PAGE>
(c) Fringe Benefits. The Executive shall be entitled to first class
---------------
travel for business-related purposes and the perquisites and other fringe
benefits made available to the Company's other senior executives.
(d) Automobile. Twin shall reimburse the Executive for all reasonable
----------
expenses (including, but not limited to, lease payments, liability
insurance, maintenance, repair and fuel costs), up to ONE THOUSAND EIGHT
HUNDRED DOLLARS ($1,800) per month, incurred in operating an automobile for
the Executive's use in the performance of his duties hereunder and in the
conduct of the affairs of the Company, which automobile shall also be
available to the Executive for personal use.
(e) Indemnification. The Executive shall be indemnified by Twin
---------------
against reasonable expenses, including attorney's fees, actually and
necessarily incurred by him in connection with the defense of any action,
suit, investigation or proceeding or similar legal activity, regardless of
whether criminal, civil, administrative or investigative in nature, to
which he is made a party by reason of his then being or having been an
officer of the Company on or subsequent to the date hereof, to the full
extent permitted by applicable law. Twin shall (upon receipt by Twin of an
undertaking by or on behalf of the Executive to repay the expenses
described in this Section 3.3(e), if it shall ultimately be determined that
he is not entitled to be indemnified by Twin against such expenses) pay
reasonable expenses, including attorney's fees, incurred by the Executive
in defending any threatened, pending or completed action, suit or
proceeding, or appearing as a witness at a time when he has not been named
as a defendant or respondent with respect thereto, in advance of the final
disposition of any such action, suit or proceeding. The foregoing right of
-8-
<PAGE>
indemnification will not be deemed exclusive of any other rights to which
the Executive may be entitled under Holding's or any of its subsidiaries'
respective Articles or Certificate of Incorporation or By-laws, as in
effect from time to time, any agreement or otherwise.
ARTICLE IV
Covenants
---------
4.1 Non-Interference. During the Term (including any unexpired
----------------
portion thereof) and for a period of two years thereafter (the "Non-Solicitation
Period"), the Executive agrees to refrain from, directly, indirectly or as an
agent on behalf of or in conjunction with any Person, soliciting (i) or
encouraging (other than employee referrals and similar activities consistent
with past practice) any employee of the Company who is employed in an executive,
managerial, administrative or professional capacity or who possesses
Confidential Material (as defined below), to leave the employment of the Company
or (ii) any customer of the Company on behalf of any Competitor (as defined
below) or any other business.
4.2 Nondisclosure of Confidential Material. In the performance of
--------------------------------------
his duties, the Executive has previously had, and may be expected in the future
to have, access to confidential records and information, including, but not
limited to, development, marketing, purchasing, organizational, strategic,
financial, managerial, administrative, manufacturing, production, distribution
and sales information, data, specifications and processes presently owned or at
any time hereafter developed by the Company or by its agents or consultants or
used presently or at any time hereafter in the course of the business of the
Company, that are not otherwise part of the public domain (collectively, the
"Confidential Material"). All such Confidential Material is considered secret
and has been and/or will be disclosed to the Executive in confidence, and the
Executive acknowledges that, as a consequence of his
-9-
<PAGE>
employment and position with the Company, the Executive will have access to and
become acquainted with Confidential Material. Except in the performance of his
duties to the Company, the Executive shall not, during the Term and at all times
thereafter, directly or indirectly for any reason whatsoever, disclose or use
any such Confidential Material. All records, files, drawings, documents,
equipment and other tangible items, wherever located, relating in any way to or
containing Confidential Material, which the Executive has prepared, used or
encountered or shall in the future prepare, use or encounter, shall be and
remain the Company's sole and exclusive property and shall be included in the
Confidential Material. Upon termination of this Agreement, or whenever requested
by the Company, the Executive shall promptly deliver to the Company any and all
of the Confidential Material and copies thereof, not previously delivered to the
Company, that may be in the possession or under the control of the Executive.
The foregoing restrictions shall not apply to the use, divulgence, disclosure or
grant of access to Confidential Material to the extent, but only to the extent,
(i) expressly permitted or required pursuant to any other written agreement
between or among the Executive and the Company, (ii) such Confidential Material
has been publicly disclosed (not due to a breach by the Executive of his
obligations hereunder or by breach of any other person of a fiduciary or
confidential obligation to the Company), or (iii) the Executive is required to
disclose Confidential Material by or to any court of competent jurisdiction or
any governmental or quasi-governmental agency, authority or instrumentality of
competent jurisdiction, provided, that the Executive shall, prior to any such
--------
disclosure, immediately notify the Company of such requirement and provided
--------
further, that the Company shall have the right, at its expense, to object to
- -------
such disclosures and to seek confidential treatment of any Confidential Material
to be so disclosed on such terms as it shall determine.
-10-
<PAGE>
4.3 Non-Competition. The Executive shall not, during the Term
---------------
(including any unexpired portion thereof), directly or indirectly, own, manage,
operate, join or Control or participate (or serve as a consultant or in a
similar position) in the ownership, management, operation or Control of, any
business, entity, firm, partnership, corporation or other Person, whether
private, governmental or quasi-governmental, other than the Company, which is
engaged, directly or indirectly, anywhere in the world, in (i) the business of
developing, manufacturing, marketing, selling and/or distributing of vitamins,
minerals, nutritional supplements (including, without limitation, amino acids
and proteins), herbal products, phytonutrients or herb teas, (ii) the
publication of related health, fitness or bodybuilding publications, or (iii)
any other business engaged in or being developed by the Company, or being
actively considered by management of the Company, at the time of the Executive's
Termination of Employment (a "Competitor"); provided, however, that nothing in
-------- -------
this Agreement shall preclude the Executive from serving on the board of
directors of any company with the prior consent of the Board or from owning less
than 5% of any class of publicly traded equity of any Competitor.
Notwithstanding the immediately preceding sentence, to the extent that the
Company ceases to develop any such other business which was being developed, or
the management of the Company ceases to actively consider any such other
business which was being actively considered, at the time of the Executive's
Termination of Employment, the covenant set forth in the immediately preceding
sentence shall no longer be applicable to such other business. At the written
request of the Executive, the Company shall promptly inform the Executive of
whether any particular business or businesses that were being so developed or
actively considered at the time of the Executive's Termination of Employment
have ceased to be so developed or actively considered.
-11-
<PAGE>
4.4 Enforcement.
-----------
(a) The Executive acknowledges that violation of any of the covenants
and agreements set forth in this Article IV would cause the Company irreparable
damage for which the Company cannot be reasonably compensated in damages in an
action at law, and therefore in the event of any breach by the Executive of this
Article IV, the Company shall be entitled to make application to a court of
competent jurisdiction for equitable relief by way of injunction or otherwise
(without being required to post a bond). This provision shall not, however, be
construed as a waiver of any of the rights which the Company may have for
damages under this Agreement or otherwise, and all of the Company's rights and
remedies shall be unrestricted. This Article IV shall survive termination of
this Agreement or Termination of Employment for any reason whatsoever.
(b) If any of the provisions of this Agreement shall otherwise
contravene or be invalid under the laws of any state or other jurisdiction where
it is applicable but for such contravention or invalidity, such contravention or
invalidity shall not invalidate all of the provisions of this Agreement, but
rather the Agreement shall be reformed and construed, insofar as the laws of
that state or jurisdiction are concerned, as not containing the provision or
provisions, but only to the extent that they are contravening or are invalid
under the laws of that state or jurisdiction, and the rights and obligations
created hereby shall be reformed and construed and enforced accordingly. In
particular, if any of the covenants or agreements set forth in this Article IV,
or any part thereof, is held to be unenforceable because of the duration of such
provision or the areas covered thereby, or otherwise, the parties hereby
expressly agree that the court making such determination shall have the power to
reduce the duration and/or the areas of such provision or otherwise limit any
such provision, and, in its reduced form, such provision shall then be
enforceable.
-12-
<PAGE>
(c) The Executive understands that the provisions of this Article IV
may limit his ability to earn a livelihood in a business similar to the business
of the Company but nevertheless agrees and hereby acknowledges that (i) such
provisions do not impose a greater restraint than is necessary to protect the
goodwill or other business interests of the Company; (ii) such provisions
contain reasonable limitations as to time and the scope of activity to be
restrained; and (iii) the consideration provided under this Agreement,
including, without limitation, any amounts or benefits provided under Article V
hereof, is sufficient to compensate the Executive for the restrictions contained
in this Article IV. In consideration of the foregoing and in light of the
Executive's education, skills and abilities, the Executive agrees that he will
not assert, and it should not be considered, that any provisions of this Article
IV prevented him from earning a living or otherwise are void, voidable or
unenforceable or should be voided or held unenforceable.
(d) Each of the covenants of this Article IV is given by the
Executive as part of the consideration for this Agreement and as an inducement
to Twin to enter into this Agreement and accept the obligations hereunder.
ARTICLE V
Termination
-----------
5.1 Termination of Agreement. Except for those provisions of this
------------------------
Agreement that survive Termination of Employment, this Agreement shall terminate
upon any Termination of Employment.
5.2 Procedures Applicable to Termination of Employment.
--------------------------------------------------
(a) Termination for Cause. The Executive may be terminated for Cause,
---------------------
upon at least 30 days' prior written notice from the Board to the Executive for
a termination for Cause pursuant to Clause (i) of Section 1.5, and upon at least
10 days' prior written
-13-
<PAGE>
notice from the Board to the Executive for a termination for Cause pursuant to
Clause (ii), (iii), (iv), (v) or (vi) of Section 1.5, by a vote of the Board
(provided that the Executive shall have had the opportunity (together with the
Executive's legal counsel) during such period to be heard at a meeting of the
Board with respect to such determination).
(b) Resignation for Good Reason. The Executive may resign for Good
---------------------------
Reason, upon at least 30 days' prior written notice from the Executive to the
Board of his intent to resign for Good Reason pursuant to Clause (iii) of
Section 1.12, and upon at least 10 days' prior written notice from the Executive
to the Board of his intent to resign for Good Reason pursuant to Clause (i),
(ii), (iv) or (v) of Section 1.12, provided that the Executive (together with
the Executive's legal counsel) shall meet with the Board, if requested by the
Board, during such period with respect to his intent to resign.
(c) Termination Without Cause or for Disability. The Executive may be
-------------------------------------------
terminated without Cause or for Disability, upon at least 30 days' prior written
notice from the Board to the Executive, by a vote of the Board (provided that
the Executive shall have had the opportunity (together with the Executive's
legal counsel) during such period to be heard at a meeting of the Board with
respect to such determination); provided, however, that, with respect to
-------- -------
Disability that is not permanent (as defined below), such thirty (30) days'
prior written notice must be given within six (6) months after the end of the
twelve (12) month period referred to in Section 1.10.
5.3 Obligations of the Company Upon Termination of Employment.
---------------------------------------------------------
(a) Accrued Obligations and Other Benefits. In the event of
--------------------------------------
Termination of Employment for any reason (including a termination for Cause),
Twin shall pay to the Executive, or, in the event of the Executive's death or
Disability, to his heirs, estate or legal representatives, as the case may be,
the following:
-14-
<PAGE>
(i) all Accrued Obligations in a lump sum within 10 days after
the date of Termination of Employment; and
(ii) all benefits accrued by the Executive as of the date of
Termination of Employment under all qualified and nonqualified
retirement, pension, profit sharing and similar plans of the Company
to such extent, in such manner and at such time as are provided under
the terms of such plans and arrangements.
(b) Termination Without Cause or Resignation for Good Reason. In the
--------------------------------------------------------
event that the Board terminates the Executive's employment without Cause (but
excluding Termination of Employment by reason of the Executive's death or
Disability), or in the event that the Executive resigns from his employment for
Good Reason, in addition to the amounts payable under Section 5.3(a) hereof:
(i) Twin shall pay (A) one-half (1/2) of the Severance Amount to
the Executive in a lump sum within 10 days after the date of
Termination of Employment and (B) one-half (1/2) of the Severance
Amount over the unexpired portion of the Term in accordance with Old
Twin's regular payroll practices prior to Closing; and
(ii) Twin shall continue all benefits coverage of the Executive
and his dependents provided under its benefit plans or policies (or
under other benefit plans or policies that provide substantially
equivalent coverage) for the unexpired portion of the Term.
(c) Termination for Non-Permanent Disability. In the event of a
----------------------------------------
Termination of Employment of the Executive because of a Disability which at the
time of Termination of Employment was not permanent, in addition to the amounts
payable under
-15-
<PAGE>
Section 5.3(a) hereof, Twin shall pay the aggregate Disability Payment over the
unexpired portion of the Term in accordance with Old Twin's regular payroll
practices prior to Closing. A Disability shall be deemed to be permanent if, at
the time of Termination of Employment, the Executive cannot perform substantial
gainful work similar in nature to the work performed by the Executive hereunder
prior to such Disability, which Disability is expected to last at least six (6)
months from the date of such Termination of Employment.
(d) Exclusivity. The amounts payable to the Executive pursuant to
-----------
Sections 5.3(a), 5.3(b) and 5.3(c), as the case may be, shall be the Executive's
sole remedy in the event of the Termination of Employment of the Executive, and
the Executive waives any and all rights to pursue any other remedy at law or in
equity; provided, however, that this shall not constitute a waiver of any rights
-------- -------
provided under any federal, state or local laws or regulations relating to
discrimination in employment.
ARTICLE VI
Miscellaneous
-------------
6.1 Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the heirs and representatives of the Executive and the
successors and assigns of Twin. Twin shall require any successor (whether
direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of assets or stock, liquidation, or otherwise), by agreement in form
and substance reasonably satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent that
Twin would be required to perform this Agreement if no such succession had taken
place. Regardless of whether such agreement is executed, this Agreement shall
be binding upon any successor of Twin in accordance with the operation of law,
and such successor shall be deemed to be "Twin" or the "Company," as
appropriate, for purposes of this Agreement.
-16-
<PAGE>
6.2 Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Board, the Company or Twin, to:
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Philip Kazin
with a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, LP
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
Attention: Ms. Jennifer Holden Dunbar
(b) if to the Executive, to:
Steve Blechman
11 White Pine Lane
Poquott, NY 11733
with a copy to:
Bud G. Holman, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, New York 10178
Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.
6.3 Tax Withholding. Twin shall provide for the withholding of any
---------------
taxes required to be withheld under federal, state and local law (other than the
employer's portion of such taxes) with respect to any payment in cash and/or
other property made by or on
-17-
<PAGE>
behalf of Twin to or for the benefit of the Executive under this Agreement or
otherwise. Twin may, at its option: (i) withhold such taxes from any cash
payments owing from Twin to the Executive, (ii) require the Executive to pay to
Twin in cash such amount as may be required to satisfy such withholding
obligations and/or (iii) make other satisfactory arrangements with the Executive
to satisfy such withholding obligations.
6.4 No Assignment; No Third Party Beneficiaries. Except as otherwise
-------------------------------------------
expressly provided in Section 6.1 herein, this Agreement is not assignable by
any party, and no payment to be made hereunder shall be subject to alienation,
sale, transfer, assignment, pledge, encumbrance or other charge. Except for
Holding and its existing and future subsidiaries, no Person shall be, or deemed
to be, a third party beneficiary of this Agreement.
6.5 Execution in Counterparts. This Agreement may be executed by the
-------------------------
parties hereto in one or more counterparts, each of which shall be deemed to be
an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
6.6 Jurisdiction and Governing Law. Jurisdiction over disputes with
------------------------------
regard to this Agreement shall be exclusively in the courts of the State of New
York, and this Agreement shall be construed and interpreted in accordance with
and governed by the laws of the State of New York, other than the conflict of
laws provisions of such laws.
6.7 Entire Agreement; Amendment. Except as otherwise provided in
---------------------------
Section 3.3 hereof, this Agreement and the Exhibits attached hereto embody the
entire understanding of the parties hereto, and supersede all other oral or
written agreements or understandings between them, regarding the subject matter
hereof. No change, alteration or modification hereof may be made except in a
writing, signed by both of the parties hereto.
-18-
<PAGE>
6.8 Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not be construed as part of this Agreement or to limit
or otherwise affect the meaning hereof.
6.9 Survival. Notwithstanding anything to the contrary herein,
--------
Section 3.3(e), Article IV, Section 5.3 and Article VI of this Agreement shall
survive termination of this Agreement or Termination of Employment for any
reason whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
TWIN LABORATORIES INC.
/s/ Ross Blechman
_____________________________
By: Ross Blechman
Its: President
By: /s/ Steve Blechman
_________________________
Steve Blechman
AGREED AND ACCEPTED:
TLG LABORATORIES HOLDING CORP.
/s/ Ross Blechman
__________________________
By: Ross Blechman
Its: President
-19-
<PAGE>
EXHIBIT A
---------
TWIN LABORATORIES INC.
BONUS PLAN
----------
(All capitalized terms used in this Bonus Plan that are not defined herein
shall have the definitions ascribed thereto in the Participants' respective
Employment Agreement with Twin Laboratories Inc. to which this Bonus Plan is
attached.)
1. Purpose. Twin has adopted the Twin Laboratories Inc. Bonus Plan (the
-------
"Bonus Plan") in order to provide appropriate incentives to the Participants (as
hereinafter defined) to achieve and exceed specified performance objectives in
order to enhance the value of the Company for the benefit of the Company and its
stockholders following the acquisition by Holding of the outstanding capital
stock of Twin and the merger of the affiliated companies of Twin with Twin or a
subsidiary of Twin, all as more fully described in the Stock Purchase and Sale
Agreement dated as of March 5, 1996, as amended (the "Purchase Agreement") by
and among David Blechman, Jean Blechman, Brian Blechman, Neil Blechman, Ross
Blechman, Steve Blechman, Dean Blechman, Stephen Welling, Holding, Natur-Pharma
Inc. and Green Equity Investors II, L.P.
2. Effective Date. The effective date of the Bonus Plan is May 7, 1996.
--------------
3. Participants. The participants in the Bonus Plan (the "Participants")
------------
shall be Brian Blechman, Neil Blechman, Ross Blechman, Steve Blechman and Dean
Blechman, to the extent such individuals are employed by the Company in a
Performance Year (as hereinafter defined).
4. Performance Year. Each calendar year beginning with January 1, 1996
----------------
shall be a "Performance Year." If a Participant is employed by the Company for a
part of a Performance Year, he shall receive an Award (as hereinafter defined)
equal to the Award he would have received had he been employed for the entire
Performance Year, multiplied by a fraction, the numerator of which is the number
of days he was employed by the Company during such Performance Year and the
denominator of which is 365; provided, that if the Participant's employment is
terminated prior to the end of the Performance Year by the Board for Cause or
the Participant resigns without Good Reason (as hereinafter defined), no Award
shall be made for the Performance Year (or part thereof) in which the
Participant's employment was terminated or in which the Participant resigns.
5. Definitions of Cause and Good Reason. "Cause" and "Good Reason"
------------------------------------
shall mean, with respect to the Participants, the definitions of such terms set
forth in their respective Employment Agreements with Twin.
6. EBITDA shall mean, with respect to Holding on a consolidated basis for
------
any Performance Year, the consolidated pre-tax income of Holding (calculated
after giving effect to the accrual of all Awards (as hereinafter defined) with
respect to such Performance Year) for such Performance Year as determined in
accordance with generally accepted accounting
<PAGE>
principles consistently applied plus, to the extent deducted in computing such
consolidated pre-tax income, without duplication, (A) the sum of (a) interest
expense, (b) depreciation expense and amortization expense, (c) extraordinary
losses, (d) noncash exchange, translation or performance losses relating to any
foreign currency hedging transactions or currency fluctuations, and (e) any
Awards paid in such Performance Year in respect of any prior Performance Year,
minus, to the extent included in computing such consolidated pre-tax income,
without duplication, (B) the sum of (i) interest income, (ii) extraordinary
gains and (iii) noncash exchange, translation or performance gains relating to
any foreign currency hedging transactions or currency fluctuations; provided
that all effects of the transactions contemplated by the Purchase Agreement
shall be eliminated in computing EBITDA.
7. EBITDA Levels. (a) For each percentage increase specified in Appendix
-------------
A hereto in EBITDA for a Performance Year compared to EBITDA in the immediately
preceding Performance Year (except for the Performance Year ended December 31,
1996, which shall be compared to the EBITDA amount set forth on Appendix B for
the calendar year ended December 31, 1995), the Participant shall receive a cash
bonus ("Award") equal to the corresponding bonus percent specified in Appendix A
multiplied by the Participant's Base Salary for the Performance Year.
(b) The final determination of EBITDA with respect to any Performance Year
shall be subject to the affirmative approval (the "Approval") of a majority of
the Blechman Directors and a majority of the GEI Directors then in office (as
such terms are defined in the Stockholders Agreement annexed as Exhibit G to the
Purchase Agreement). In the event that the Approval is not obtained within
fourteen (14) days after completion of Holding's audited financial statements
for such Performance Year, the GEI Directors and the Blechman Directors shall
appoint a mutually satisfactory nationally recognized accounting firm (which may
be Holding's auditors) to make such determination of EBITDA in respect of such
Performance Year, provided that the GEI Directors and the Blechman Directors
shall determine with respect to the Award for such Performance Year the amount
not in dispute by reason of such lack of Approval.
8. Time of Payment. Each Award shall be paid no later than the
---------------
fourteenth (14th) day (assuming Approval is obtained or, assuming Approval is
not obtained, as to the undisputed amount), or the thirtieth (30th) day
(assuming Approval is not obtained, as to the disputed amount), after completion
of Holding's audited financial statements for such Performance Year.
9. Base Salary. For the purposes of the Bonus Plan, "Base Salary" shall
-----------
mean, for each Participant, the "Base Salary" (including annual increases
thereof) as defined in his Employment Agreement.
10. No Assignments. A Participant may not assign an Award without the
--------------
prior written consent of the Board. Any attempted assignment without such
consent shall be null and void. For purposes of this paragraph, any designation
of, or payment to, a beneficiary designated to receive such Award in the event
of the Participant's death, shall not be deemed an assignment.
-2-
<PAGE>
11. Unfunded Incentive Compensation Arrangement. The Bonus Plan is
-------------------------------------------
intended to constitute an unfunded incentive compensation arrangement covering a
select group of management or highly compensated employees. Nothing contained
in the Bonus Plan shall create or be construed to create a trust of any kind.
All awards shall be paid from the general funds of Twin, and no special or
separate fund shall be established and no segregation of assets shall be made to
assure payment of such awards.
12. Governing Law. The Plan shall be construed and governed in accordance
-------------
with the laws of the State of New York.
13. No Right to Specific Assets. There shall not vest in any participant
---------------------------
any right, title, or interest in and to any specific assets of the Company.
14. No Modification. The Bonus Plan shall not be modified or amended by
---------------
Twin in any manner adverse to the Participants.
-3-
<PAGE>
Appendix A
----------
Twin Laboratories Inc.
Bonus Plan Table
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE BONUS
IN EBITDA PERCENT
------------ -------
<S> <C>
0.0% 0.0%
1.0% 0.0%
2.0% 0.0%
3.0% 0.0%
4.0% 0.0%
5.0% 0.0%
6.0% 0.0%
7.0% 0.0%
8.0% 0.0%
9.0% 0.0%
10.0% 0.0%
11.0% 0.0%
12.0% 0.0%
13.0% 6.0%
14.0% 12.0%
15.0% 18.0%
16.0% 24.0%
17.0% 30.0%
18.0% 36.0%
19.0% 42.0%
20.0% 48.0%
21.0% 54.0%
22.0% 60.0%
23.0% 66.0%
24.0% 72.0%
25.0% 78.0%
26.0% 84.0%
27.0% 90.0%
28.0% 96.0%
29.0% 102.0%
30.0% 108.0%
31.0% 114.0%
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C>
32.0% 120.0%
33.0% 126.0%
33.3% 128.0%
</TABLE>
-5-
<PAGE>
APPENDIX B
Calculation of 1995 EBITDA for Purposes of Determining 1996 EBITDA Increase
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
1995 Pre-Tax Income from Audit $30,464
Plus: Depreciation & Amortization from Audit 1,011
Plus: Interest Expense 866
Plus: Unusual Item Footnoted in Audit 128
Plus: Transaction Expenses 656
Less: Interest Income (313)
Less: LGP Fee (400)
-------
1995 Pro Forma EBITDA $32,412
</TABLE>
-6-
<PAGE>
EXHIBIT B
---------
Twin Laboratories Inc. Employee Savings & Retirement Plan (prior to January 1,
1996, the Plan was known as the Twin Laboratories Inc. Profit Sharing Plan)
Twin Laboratories Section 125 Plan
Group Term Life Insurance (INA Insurance Company of North America)
Medical Insurance (Oxford Health Plans (NY), Inc.)
Dental Insurance (Connecticut General Life Insurance Company - Policy
2100864-01)
Accidental Death and Dismemberment Insurance (INA Life Insurance Company of
New York - Policy 8328)
Twin Laboratories Inc. XS Executive Medical Insurance Plan
<PAGE>
Exhibit 10.14
EMPLOYMENT AGREEMENT
by and between
TWIN LABORATORIES INC.
and
DEAN BLECHMAN
Dated as of
May 7, 1996
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
May 7, 1996, by and between Twin Laboratories Inc., a Utah corporation formerly
known as Natur-Pharma Inc. ("Twin"), and Dean Blechman, an individual currently
residing at 4 Stone Gate Court, Setauket, NY 11733 (the "Executive"). As used
herein, the term "Company" shall refer, individually and/or collectively, as
applicable, to TLG Laboratories Holding Corp., a Delaware corporation
("Holding"), and its existing and future subsidiaries, including but not limited
to Twin and Advanced Research Press, Inc., a New York corporation ("ARP").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on the date hereof, Holding will acquire all of the outstanding
capital stock of Twin, and subsequently Twin Laboratories Inc., a New York
corporation ("Old Twin"), Twinlab Export Corp. ("Export"), Twinlab Specialty
Corporation ("Specialty"), Alvita Products, Inc. ("Alvita"), ARP and B. Bros.
Realty Corporation ("B. Bros.") (Twin, Old Twin, Export, Specialty, Alvita, ARP
and B. Bros. being referred to collectively as the "Companies") will merge with
Twin or Natur-Pharma II, Inc., a subsidiary of Twin, all as more fully described
in the Stock Purchase and Sale Agreement dated as of March 5, 1996, as amended
(the "Purchase Agreement"), by and among David Blechman, Jean Blechman, Brian
Blechman, Neil Blechman, Ross Blechman, Steve Blechman, the Executive, Stephen
Welling, Holding, Natur-Pharma Inc. and Green Equity Investors II, L.P.;
WHEREAS, the Board of Directors of Twin desires to provide appropriate
incentives to key executives of the Company, including the Executive, in order
to retain such executives
<PAGE>
following the closing of the transactions contemplated by the Purchase Agreement
(the "Closing");
WHEREAS, the Executive has served as an executive officer of certain of the
Companies prior to the Closing;
WHEREAS, Twin and the Executive desire that the Company employ the
Executive as the Executive Vice President of Sales of each of Holding and Twin
and Executive Vice President of ARP following the Closing on the terms and
conditions set forth herein;
NOW, THEREFORE, Twin and the Executive, each intending to be legally bound,
hereby mutually covenant and agree as follows:
ARTICLE I
Definitions
-----------
The following terms used in this Agreement shall have the meanings set
forth below.
1.1 "Accrued Obligations" shall mean, as of the date of Termination
of Employment, the sum of (A) the Executive's aggregate Base Salary through such
date to the extent not theretofore paid, plus (B) the amount of any bonus
----
payable under the Bonus Plan (as hereinafter defined) and other cash
compensation payable to the Executive hereunder as of such date but not yet paid
plus (C) all vacation pay, expense reimbursements and other cash entitlements
- ----
accrued by the Executive hereunder as of such date to the extent not theretofore
paid.
1.2 "Base Salary" shall mean the amount set forth in Section 3.1.
1.3 "Board" shall mean the board of directors of Holding.
1.4 "Bonus Plan" shall mean the cash bonus plan effective as of the
date hereof, which has been adopted by Twin and is attached hereto as Exhibit A.
---------
-2-
<PAGE>
1.5 "Cause" shall mean (i) the Executive's material violation of
Section 2.3 of this Agreement, which violation continues after notice thereof is
given to the Executive by the Board; (ii) the Executive's material violation of
Sections 4.1 or 4.2 of this Agreement; (iii) the Executive's violation of
Section 4.3 of this Agreement; (iv) the Executive's engagement in conduct which
is fraudulent or illegal with respect to the Company; (v) the Executive's gross
negligence in the performance or nonperformance of his duties or
responsibilities hereunder or engagement in conduct which is materially
injurious or materially damaging to the Company or the reputation of the
Company; or (vi) the Executive's conviction of, or plea of nolo contendere to, a
---------------
felony.
1.6 "Common Stock" shall mean the common stock of Holding.
1.7 "Competitor" shall have the meaning set forth in Section 4.3.
1.8 "Confidential Material" shall have the meaning set forth in
Section 4.2.
1.9 "Control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
1.10 "Disability" shall mean the inability of the Executive to perform
in all material respects his duties and responsibilities to the Company by
reason of a physical or mental disability or infirmity, which inability has
continued for a period of nine months, whether or not consecutive, occurring
within any period of twelve consecutive months.
1.11 "Disability Payment" shall mean, for purposes of Section 5.3(c),
an amount equal to (i) one-half (1/2) of the Base Salary for the calendar year
in the Term in which the date of Termination of Employment occurs multiplied by
(ii) the number of whole
-3-
<PAGE>
years and any fraction thereof remaining in the unexpired portion of the Term
(except in the case of a Termination of Employment during the last calendar year
of the Term, in which case said sum shall be multiplied by one (1)).
1.12 "Good Reason" shall mean any (i) reduction in the Executive's
Base Salary or opportunity to participate in the Bonus Plan, as set forth
herein, (ii) relocation of the Executive's principal place of business to a
location which is more than 10 miles from its current location (without the
Executive's consent), (iii) material diminution in the Executive's duties,
responsibilities or reporting position with the Company, which diminution
continues after notice thereof is given to the Board by the Executive, (iv)
failure by the Company to continue in effect any material benefit or
compensation plan, life insurance plan, health and accident plan, disability
plan (or plan providing the Executive with substantially similar benefits) in
which the Executive is participating or the material reduction of the
Executive's benefits under any of such plans or (v) failure by Twin to obtain
the agreement to assume and perform this Agreement by any successor of Twin as
contemplated in Section 6.1 hereof.
1.13 "Performance Year" shall mean each calendar year beginning on
January 1 and ending on December 31.
1.14 "Person" shall mean an individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, other entity or governmental or other agency or political
subdivision thereof.
1.15 "Public Offering Event" shall mean the first date after which at
least 20% of the outstanding Common Stock is publicly held and such Common Stock
is listed or admitted to trading on a national securities exchange or quoted on
the National Association of Securities Dealers, Inc.'s National Market System or
Small Capitalization System.
-4-
<PAGE>
1.16 "Qualified IPO" shall mean the initial bona fide, registered
underwritten public offering of shares of Common Stock.
1.17 "Severance Amount" shall mean, for purposes of Section 5.3(b), an
amount equal to (i) the Base Salary for the calendar year in the Term in which
the date of Termination of Employment occurs multiplied by (ii) the number of
whole years and any fraction thereof remaining in the unexpired portion of the
Term (except in the case of a Termination of Employment during the last calendar
year of the Term, in which case said sum shall be multiplied by one (1)).
1.18 "Term" shall have the meaning set forth in Section 2.2 and shall
include any renewal or extension as set forth therein.
1.19 "Termination of Employment" shall mean (i) the Executive's death
or Disability, (ii) termination by the Board of the Executive's employment with
the Company for Cause or without Cause, (iii) resignation by the Executive from
the employ of the Company for Good Reason or without Good Reason, (iv)
retirement of the Executive or (v) expiration of the Term.
ARTICLE II
Employment and Term
-------------------
2.1 Employment. The Executive shall be employed as the Executive
----------
Vice President of Sales of each of Holding and Twin and Executive Vice President
of ARP, and the Executive hereby accepts such employment, for the Term. In
addition, the Executive agrees that, during the Term, he will serve in any
similar capacity on behalf of any existing or future subsidiary of Holding, as
reasonably requested by the Board.
2.2 Term. The Term shall commence on the date hereof. Unless a
----
Public Offering Event or a Qualified IPO has occurred, the Term shall end on the
fifth anniversary
-5-
<PAGE>
of the date hereof; provided, that the Term shall be renewed automatically for
--------
successive additional one-year periods at the end of such five-year period and
of each such one-year renewal period, unless, no later than one hundred eighty
(180) days prior to any such renewal date, either the Board or the Executive
gives written notice to the other that the Term shall not be so renewed. From
and after the first to occur of a Public Offering Event or Qualified IPO, the
Term shall end on the third anniversary of the date of such Public Offering
Event or Qualified IPO, as applicable, provided that, commencing one day after
such Public Offering Event or Qualified IPO, as applicable, and continuing each
day thereafter prior to a Termination of Employment, the Term shall
automatically be extended for one additional day (so as to establish a three-
year remaining Term upon a Termination of Employment for purposes of Articles IV
and V).
2.3 Duties. The Executive shall have all powers, duties and
------
responsibilities commensurate with his position as set forth in Section 2.1
hereof or as may be assigned by the Board from time to time (provided any such
powers, duties and responsibilities assigned by the Board are commensurate with
such position). The Executive shall devote substantially all of his business
time, attention and energies to the performance of his duties hereunder.
Notwithstanding the foregoing, nothing in this Agreement shall restrict the
Executive from managing his personal investments, personal business affairs and
other personal matters, or serving on civic or charitable boards or committees,
provided that none of such activities interferes with the performance of his
duties and responsibilities hereunder or conflicts or competes with the
interests of the Company.
-6-
<PAGE>
ARTICLE III
Compensation and Benefits
-------------------------
3.1 Base Salary. For services performed by the Executive for the
-----------
Company pursuant to this Agreement, Twin shall pay the Executive an initial Base
Salary of FOUR HUNDRED THOUSAND DOLLARS ($400,000) per year, payable in
accordance with Old Twin's regular payroll practices prior to the Closing. The
initial Base Salary shall be increased annually, beginning on January 1, 1997,
by a percentage equal to the percentage increase, if any, in the Consumer Price
Index for all Urban Consumers, All Items, for the most recent twelve-month
period for which such figures are then available as promulgated by the
Department of Labor Bureau of Statistics. Any compensation which may be
otherwise authorized from time to time by the Board (or an appropriate committee
thereof) shall be in addition to the Base Salary.
3.2 Bonuses. The Executive shall be eligible to receive annual cash
-------
bonuses in accordance with the terms of the Bonus Plan.
3.3 Other Benefits. In addition to the Base Salary and participation
--------------
in the Bonus Plan, the Executive shall also be entitled to the following:
(a) Participation in Benefit Plans. The Executive shall be entitled
------------------------------
to participate in the executive-level benefit arrangements set forth on
Exhibit B. The Executive shall also be entitled to participate in all
---------
other welfare and benefit plans maintained by Holding and/or its
subsidiaries, as the case may be, for their respective employees generally.
(b) Vacation. The Executive shall be entitled to vacation and paid
--------
holidays consistent with Old Twin's practices prior to the Closing.
-7-
<PAGE>
(c) Fringe Benefits. The Executive shall be entitled to first class
---------------
travel for business-related purposes and the perquisites and other fringe
benefits made available to the Company's other senior executives.
(d) Automobile. Twin shall reimburse the Executive for all
----------
reasonable expenses (including, but not limited to, lease payments,
liability insurance, maintenance, repair and fuel costs), up to ONE
THOUSAND EIGHT HUNDRED DOLLARS ($1,800) per month, incurred in operating an
automobile for the Executive's use in the performance of his duties
hereunder and in the conduct of the affairs of the Company, which
automobile shall also be available to the Executive for personal use.
(e) Indemnification. The Executive shall be indemnified by Twin
---------------
against reasonable expenses, including attorney's fees, actually and
necessarily incurred by him in connection with the defense of any action,
suit, investigation or proceeding or similar legal activity, regardless of
whether criminal, civil, administrative or investigative in nature, to
which he is made a party by reason of his then being or having been an
officer of the Company on or subsequent to the date hereof, to the full
extent permitted by applicable law. Twin shall (upon receipt by Twin of an
undertaking by or on behalf of the Executive to repay the expenses
described in this Section 3.3(e), if it shall ultimately be determined that
he is not entitled to be indemnified by Twin against such expenses) pay
reasonable expenses, including attorney's fees, incurred by the Executive
in defending any threatened, pending or completed action, suit or
proceeding, or appearing as a witness at a time when he has not been named
as a defendant or respondent with respect thereto, in advance of the final
disposition of any such action, suit or proceeding. The foregoing right of
-8-
<PAGE>
indemnification will not be deemed exclusive of any other rights to which
the Executive may be entitled under Holding's or any of its subsidiaries'
respective Articles or Certificate of Incorporation or By-laws, as in
effect from time to time, any agreement or otherwise.
ARTICLE IV
Covenants
---------
4.1 Non-Interference. During the Term (including any unexpired portion
----------------
thereof) and for a period of two years thereafter (the "Non-Solicitation
Period"), the Executive agrees to refrain from, directly, indirectly or as an
agent on behalf of or in conjunction with any Person, soliciting (i) or
encouraging (other than employee referrals and similar activities consistent
with past practice) any employee of the Company who is employed in an executive,
managerial, administrative or professional capacity or who possesses
Confidential Material (as defined below), to leave the employment of the Company
or (ii) any customer of the Company on behalf of any Competitor (as defined
below) or any other business.
4.2 Nondisclosure of Confidential Material. In the performance of his
--------------------------------------
duties, the Executive has previously had, and may be expected in the future to
have, access to confidential records and information, including, but not limited
to, development, marketing, purchasing, organizational, strategic, financial,
managerial, administrative, manufacturing, production, distribution and sales
information, data, specifications and processes presently owned or at any time
hereafter developed by the Company or by its agents or consultants or used
presently or at any time hereafter in the course of the business of the Company,
that are not otherwise part of the public domain (collectively, the
"Confidential Material"). All such Confidential Material is considered secret
and has been and/or will be disclosed to the Executive in confidence, and the
Executive acknowledges that, as a consequence of his
-9-
<PAGE>
employment and position with the Company, the Executive will have access to and
become acquainted with Confidential Material. Except in the performance of his
duties to the Company, the Executive shall not, during the Term and at all times
thereafter, directly or indirectly for any reason whatsoever, disclose or use
any such Confidential Material. All records, files, drawings, documents,
equipment and other tangible items, wherever located, relating in any way to or
containing Confidential Material, which the Executive has prepared, used or
encountered or shall in the future prepare, use or encounter, shall be and
remain the Company's sole and exclusive property and shall be included in the
Confidential Material. Upon termination of this Agreement, or whenever
requested by the Company, the Executive shall promptly deliver to the Company
any and all of the Confidential Material and copies thereof, not previously
delivered to the Company, that may be in the possession or under the control of
the Executive. The foregoing restrictions shall not apply to the use,
divulgence, disclosure or grant of access to Confidential Material to the
extent, but only to the extent, (i) expressly permitted or required pursuant to
any other written agreement between or among the Executive and the Company, (ii)
such Confidential Material has been publicly disclosed (not due to a breach by
the Executive of his obligations hereunder or by breach of any other person of a
fiduciary or confidential obligation to the Company), or (iii) the Executive is
required to disclose Confidential Material by or to any court of competent
jurisdiction or any governmental or quasi-governmental agency, authority or
instrumentality of competent jurisdiction, provided, that the Executive shall,
--------
prior to any such disclosure, immediately notify the Company of such requirement
and provided further, that the Company shall have the right, at its expense, to
-------- -------
object to such disclosures and to seek confidential treatment of any
Confidential Material to be so disclosed on such terms as it shall determine.
-10-
<PAGE>
4.3 Non-Competition. The Executive shall not, during the Term
---------------
(including any unexpired portion thereof), directly or indirectly, own, manage,
operate, join or Control or participate (or serve as a consultant or in a
similar position) in the ownership, management, operation or Control of, any
business, entity, firm, partnership, corporation or other Person, whether
private, governmental or quasi-governmental, other than the Company, which is
engaged, directly or indirectly, anywhere in the world, in (i) the business of
developing, manufacturing, marketing, selling and/or distributing of vitamins,
minerals, nutritional supplements (including, without limitation, amino acids
and proteins), herbal products, phytonutrients or herb teas, (ii) the
publication of related health, fitness or bodybuilding publications, or (iii)
any other business engaged in or being developed by the Company, or being
actively considered by management of the Company, at the time of the Executive's
Termination of Employment (a "Competitor"); provided, however, that nothing in
-------- -------
this Agreement shall preclude the Executive from serving on the board of
directors of any company with the prior consent of the Board or from owning less
than 5% of any class of publicly traded equity of any Competitor.
Notwithstanding the immediately preceding sentence, to the extent that the
Company ceases to develop any such other business which was being developed, or
the management of the Company ceases to actively consider any such other
business which was being actively considered, at the time of the Executive's
Termination of Employment, the covenant set forth in the immediately preceding
sentence shall no longer be applicable to such other business. At the written
request of the Executive, the Company shall promptly inform the Executive of
whether any particular business or businesses that were being so developed or
actively considered at the time of the Executive's Termination of Employment
have ceased to be so developed or actively considered.
-11-
<PAGE>
4.4 Enforcement.
-----------
(a) The Executive acknowledges that violation of any of the covenants
and agreements set forth in this Article IV would cause the Company irreparable
damage for which the Company cannot be reasonably compensated in damages in an
action at law, and therefore in the event of any breach by the Executive of this
Article IV, the Company shall be entitled to make application to a court of
competent jurisdiction for equitable relief by way of injunction or otherwise
(without being required to post a bond). This provision shall not, however, be
construed as a waiver of any of the rights which the Company may have for
damages under this Agreement or otherwise, and all of the Company's rights and
remedies shall be unrestricted. This Article IV shall survive termination of
this Agreement or Termination of Employment for any reason whatsoever.
(b) If any of the provisions of this Agreement shall otherwise
contravene or be invalid under the laws of any state or other jurisdiction where
it is applicable but for such contravention or invalidity, such contravention or
invalidity shall not invalidate all of the provisions of this Agreement, but
rather the Agreement shall be reformed and construed, insofar as the laws of
that state or jurisdiction are concerned, as not containing the provision or
provisions, but only to the extent that they are contravening or are invalid
under the laws of that state or jurisdiction, and the rights and obligations
created hereby shall be reformed and construed and enforced accordingly. In
particular, if any of the covenants or agreements set forth in this Article IV,
or any part thereof, is held to be unenforceable because of the duration of such
provision or the areas covered thereby, or otherwise, the parties hereby
expressly agree that the court making such determination shall have the power to
reduce the duration and/or the areas of such provision or otherwise limit any
such provision, and, in its reduced form, such provision shall then be
enforceable.
-12-
<PAGE>
(c) The Executive understands that the provisions of this Article IV
may limit his ability to earn a livelihood in a business similar to the business
of the Company but nevertheless agrees and hereby acknowledges that (i) such
provisions do not impose a greater restraint than is necessary to protect the
goodwill or other business interests of the Company; (ii) such provisions
contain reasonable limitations as to time and the scope of activity to be
restrained; and (iii) the consideration provided under this Agreement,
including, without limitation, any amounts or benefits provided under Article V
hereof, is sufficient to compensate the Executive for the restrictions contained
in this Article IV. In consideration of the foregoing and in light of the
Executive's education, skills and abilities, the Executive agrees that he will
not assert, and it should not be considered, that any provisions of this Article
IV prevented him from earning a living or otherwise are void, voidable or
unenforceable or should be voided or held unenforceable.
(d) Each of the covenants of this Article IV is given by the
Executive as part of the consideration for this Agreement and as an inducement
to Twin to enter into this Agreement and accept the obligations hereunder.
ARTICLE V
Termination
-----------
5.1 Termination of Agreement. Except for those provisions of this
------------------------
Agreement that survive Termination of Employment, this Agreement shall terminate
upon any Termination of Employment.
5.2 Procedures Applicable to Termination of Employment.
--------------------------------------------------
(a) Termination for Cause. The Executive may be terminated for
---------------------
Cause, upon at least 30 days' prior written notice from the Board to the
Executive for a termination for Cause pursuant to Clause (i) of Section 1.5, and
upon at least 10 days' prior written
-13-
<PAGE>
notice from the Board to the Executive for a termination for Cause pursuant to
Clause (ii), (iii), (iv), (v) or (vi) of Section 1.5, by a vote of the Board
(provided that the Executive shall have had the opportunity (together with the
Executive's legal counsel) during such period to be heard at a meeting of the
Board with respect to such determination).
(b) Resignation for Good Reason. The Executive may resign for Good
---------------------------
Reason, upon at least 30 days' prior written notice from the Executive to the
Board of his intent to resign for Good Reason pursuant to Clause (iii) of
Section 1.12, and upon at least 10 days' prior written notice from the Executive
to the Board of his intent to resign for Good Reason pursuant to Clause (i),
(ii), (iv) or (v) of Section 1.12, provided that the Executive (together with
the Executive's legal counsel) shall meet with the Board, if requested by the
Board, during such period with respect to his intent to resign.
(c) Termination Without Cause or for Disability. The Executive may
-------------------------------------------
be terminated without Cause or for Disability, upon at least 30 days' prior
written notice from the Board to the Executive, by a vote of the Board (provided
that the Executive shall have had the opportunity (together with the Executive's
legal counsel) during such period to be heard at a meeting of the Board with
respect to such determination); provided, however, that, with respect to
-------- -------
Disability that is not permanent (as defined below), such thirty (30) days'
prior written notice must be given within six (6) months after the end of the
twelve (12) month period referred to in Section 1.10.
5.3 Obligations of the Company Upon Termination of Employment.
---------------------------------------------------------
(a) Accrued Obligations and Other Benefits. In the event of
--------------------------------------
Termination of Employment for any reason (including a termination for Cause),
Twin shall pay to the Executive, or, in the event of the Executive's death or
Disability, to his heirs, estate or legal representatives, as the case may be,
the following:
-14-
<PAGE>
(i) all Accrued Obligations in a lump sum within 10 days after
the date of Termination of Employment; and
(ii) all benefits accrued by the Executive as of the date of
Termination of Employment under all qualified and nonqualified
retirement, pension, profit sharing and similar plans of the Company
to such extent, in such manner and at such time as are provided under
the terms of such plans and arrangements.
(b) Termination Without Cause or Resignation for Good Reason. In the
--------------------------------------------------------
event that the Board terminates the Executive's employment without Cause (but
excluding Termination of Employment by reason of the Executive's death or
Disability), or in the event that the Executive resigns from his employment for
Good Reason, in addition to the amounts payable under Section 5.3(a) hereof:
(i) Twin shall pay (A) one-half (1/2) of the Severance Amount to
the Executive in a lump sum within 10 days after the date of
Termination of Employment and (B) one-half (1/2) of the Severance
Amount over the unexpired portion of the Term in accordance with Old
Twin's regular payroll practices prior to Closing; and
(ii) Twin shall continue all benefits coverage of the Executive
and his dependents provided under its benefit plans or policies (or
under other benefit plans or policies that provide substantially
equivalent coverage) for the unexpired portion of the Term.
(c) Termination for Non-Permanent Disability. In the event of a
----------------------------------------
Termination of Employment of the Executive because of a Disability which at the
time of Termination of Employment was not permanent, in addition to the amounts
payable under
-15-
<PAGE>
Section 5.3(a) hereof, Twin shall pay the aggregate Disability Payment over the
unexpired portion of the Term in accordance with Old Twin's regular payroll
practices prior to Closing. A Disability shall be deemed to be permanent if, at
the time of Termination of Employment, the Executive cannot perform substantial
gainful work similar in nature to the work performed by the Executive hereunder
prior to such Disability, which Disability is expected to last at least six (6)
months from the date of such Termination of Employment.
(d) Exclusivity. The amounts payable to the Executive pursuant to
-----------
Sections 5.3(a), 5.3(b) and 5.3(c), as the case may be, shall be the Executive's
sole remedy in the event of the Termination of Employment of the Executive, and
the Executive waives any and all rights to pursue any other remedy at law or in
equity; provided, however, that this shall not constitute a waiver of any rights
-------- -------
provided under any federal, state or local laws or regulations relating to
discrimination in employment.
ARTICLE VI
Miscellaneous
-------------
6.1 Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the heirs and representatives of the Executive and the
successors and assigns of Twin. Twin shall require any successor (whether
direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of assets or stock, liquidation, or otherwise), by agreement in form
and substance reasonably satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent that
Twin would be required to perform this Agreement if no such succession had taken
place. Regardless of whether such agreement is executed, this Agreement shall
be binding upon any successor of Twin in accordance with the operation of law,
and such successor shall be deemed to be "Twin" or the "Company," as
appropriate, for purposes of this Agreement.
-16-
<PAGE>
6.2 Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Board, the Company or Twin, to:
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Philip Kazin
with a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, LP
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
Attention: Ms. Jennifer Holden Dunbar
(b) if to the Executive, to:
Dean Blechman
4 Stone Gate Court
Setauket, NY 11733
with a copy to:
Bud G. Holman, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, New York 10178
Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.
6.3 Tax Withholding. Twin shall provide for the withholding of any
---------------
taxes required to be withheld under federal, state and local law (other than the
employer's portion of such taxes) with respect to any payment in cash and/or
other property made by or on
-17-
<PAGE>
behalf of Twin to or for the benefit of the Executive under this Agreement or
otherwise. Twin may, at its option: (i) withhold such taxes from any cash
payments owing from Twin to the Executive, (ii) require the Executive to pay to
Twin in cash such amount as may be required to satisfy such withholding
obligations and/or (iii) make other satisfactory arrangements with the Executive
to satisfy such withholding obligations.
6.4 No Assignment; No Third Party Beneficiaries. Except as otherwise
-------------------------------------------
expressly provided in Section 6.1 herein, this Agreement is not assignable by
any party, and no payment to be made hereunder shall be subject to alienation,
sale, transfer, assignment, pledge, encumbrance or other charge. Except for
Holding and its existing and future subsidiaries, no Person shall be, or deemed
to be, a third party beneficiary of this Agreement.
6.5 Execution in Counterparts. This Agreement may be executed by the
-------------------------
parties hereto in one or more counterparts, each of which shall be deemed to be
an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
6.6 Jurisdiction and Governing Law. Jurisdiction over disputes with
------------------------------
regard to this Agreement shall be exclusively in the courts of the State of New
York, and this Agreement shall be construed and interpreted in accordance with
and governed by the laws of the State of New York, other than the conflict of
laws provisions of such laws.
6.7 Entire Agreement; Amendment. Except as otherwise provided in
---------------------------
Section 3.3 hereof, this Agreement and the Exhibits attached hereto embody the
entire understanding of the parties hereto, and supersede all other oral or
written agreements or understandings between them, regarding the subject matter
hereof. No change, alteration or modification hereof may be made except in a
writing, signed by both of the parties hereto.
-18-
<PAGE>
6.8 Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not be construed as part of this Agreement or to limit
or otherwise affect the meaning hereof.
6.9 Survival. Notwithstanding anything to the contrary herein,
--------
Section 3.3(e), Article IV, Section 5.3 and Article VI of this Agreement shall
survive termination of this Agreement or Termination of Employment for any
reason whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
TWIN LABORATORIES INC.
/s/ Ross Blechman
--------------------------
By: Ross Blechman
Its: President
By: /s/ Dean Blechman
______________________
Dean Blechman
AGREED AND ACCEPTED:
TLG LABORATORIES HOLDING CORP.
/s/ Ross Blechman
- --------------------------
By: Ross Blechman
Its: President
-19-
<PAGE>
EXHIBIT A
---------
TWIN LABORATORIES INC.
BONUS PLAN
----------
(All capitalized terms used in this Bonus Plan that are not defined herein
shall have the definitions ascribed thereto in the Participants' respective
Employment Agreement with Twin Laboratories Inc. to which this Bonus Plan is
attached.)
1. Purpose. Twin has adopted the Twin Laboratories Inc. Bonus Plan (the
-------
"Bonus Plan") in order to provide appropriate incentives to the Participants (as
hereinafter defined) to achieve and exceed specified performance objectives in
order to enhance the value of the Company for the benefit of the Company and its
stockholders following the acquisition by Holding of the outstanding capital
stock of Twin and the merger of the affiliated companies of Twin with Twin or a
subsidiary of Twin, all as more fully described in the Stock Purchase and Sale
Agreement dated as of March 5, 1996, as amended (the "Purchase Agreement") by
and among David Blechman, Jean Blechman, Brian Blechman, Neil Blechman, Ross
Blechman, Steve Blechman, Dean Blechman, Stephen Welling, Holding, Natur-Pharma
Inc. and Green Equity Investors II, L.P.
2. Effective Date. The effective date of the Bonus Plan is May 7, 1996.
--------------
3. Participants. The participants in the Bonus Plan (the "Participants")
------------
shall be Brian Blechman, Neil Blechman, Ross Blechman, Steve Blechman and Dean
Blechman, to the extent such individuals are employed by the Company in a
Performance Year (as hereinafter defined).
4. Performance Year. Each calendar year beginning with January 1, 1996
----------------
shall be a "Performance Year." If a Participant is employed by the Company for a
part of a Performance Year, he shall receive an Award (as hereinafter defined)
equal to the Award he would have received had he been employed for the entire
Performance Year, multiplied by a fraction, the numerator of which is the number
of days he was employed by the Company during such Performance Year and the
denominator of which is 365; provided, that if the Participant's employment is
terminated prior to the end of the Performance Year by the Board for Cause or
the Participant resigns without Good Reason (as hereinafter defined), no Award
shall be made for the Performance Year (or part thereof) in which the
Participant's employment was terminated or in which the Participant resigns.
5. Definitions of Cause and Good Reason. "Cause" and "Good Reason"
------------------------------------
shall mean, with respect to the Participants, the definitions of such terms set
forth in their respective Employment Agreements with Twin.
6. EBITDA shall mean, with respect to Holding on a consolidated basis for
------
any Performance Year, the consolidated pre-tax income of Holding (calculated
after giving effect to the accrual of all Awards (as hereinafter defined) with
respect to such Performance Year) for such Performance Year as determined in
accordance with generally accepted accounting
<PAGE>
principles consistently applied plus, to the extent deducted in computing such
consolidated pre-tax income, without duplication, (A) the sum of (a) interest
expense, (b) depreciation expense and amortization expense, (c) extraordinary
losses, (d) noncash exchange, translation or performance losses relating to any
foreign currency hedging transactions or currency fluctuations, and (e) any
Awards paid in such Performance Year in respect of any prior Performance Year,
minus, to the extent included in computing such consolidated pre-tax income,
without duplication, (B) the sum of (i) interest income, (ii) extraordinary
gains and (iii) noncash exchange, translation or performance gains relating to
any foreign currency hedging transactions or currency fluctuations; provided
that all effects of the transactions contemplated by the Purchase Agreement
shall be eliminated in computing EBITDA.
7. EBITDA Levels. (a) For each percentage increase specified in Appendix
-------------
A hereto in EBITDA for a Performance Year compared to EBITDA in the immediately
preceding Performance Year (except for the Performance Year ended December 31,
1996, which shall be compared to the EBITDA amount set forth on Appendix B for
the calendar year ended December 31, 1995), the Participant shall receive a cash
bonus ("Award") equal to the corresponding bonus percent specified in Appendix A
multiplied by the Participant's Base Salary for the Performance Year.
(b) The final determination of EBITDA with respect to any Performance Year
shall be subject to the affirmative approval (the "Approval") of a majority of
the Blechman Directors and a majority of the GEI Directors then in office (as
such terms are defined in the Stockholders Agreement annexed as Exhibit G to the
Purchase Agreement). In the event that the Approval is not obtained within
fourteen (14) days after completion of Holding's audited financial statements
for such Performance Year, the GEI Directors and the Blechman Directors shall
appoint a mutually satisfactory nationally recognized accounting firm (which may
be Holding's auditors) to make such determination of EBITDA in respect of such
Performance Year, provided that the GEI Directors and the Blechman Directors
shall determine with respect to the Award for such Performance Year the amount
not in dispute by reason of such lack of Approval.
8. Time of Payment. Each Award shall be paid no later than the
---------------
fourteenth (14th) day (assuming Approval is obtained or, assuming Approval is
not obtained, as to the undisputed amount), or the thirtieth (30th) day
(assuming Approval is not obtained, as to the disputed amount), after completion
of Holding's audited financial statements for such Performance Year.
9. Base Salary. For the purposes of the Bonus Plan, "Base Salary" shall
-----------
mean, for each Participant, the "Base Salary" (including annual increases
thereof) as defined in his Employment Agreement.
10. No Assignments. A Participant may not assign an Award without the
--------------
prior written consent of the Board. Any attempted assignment without such
consent shall be null and void. For purposes of this paragraph, any designation
of, or payment to, a beneficiary designated to receive such Award in the event
of the Participant's death, shall not be deemed an assignment.
-2-
<PAGE>
11. Unfunded Incentive Compensation Arrangement. The Bonus Plan is
-------------------------------------------
intended to constitute an unfunded incentive compensation arrangement covering a
select group of management or highly compensated employees. Nothing contained
in the Bonus Plan shall create or be construed to create a trust of any kind.
All awards shall be paid from the general funds of Twin, and no special or
separate fund shall be established and no segregation of assets shall be made to
assure payment of such awards.
12. Governing Law. The Plan shall be construed and governed in accordance
-------------
with the laws of the State of New York.
13. No Right to Specific Assets. There shall not vest in any participant
---------------------------
any right, title, or interest in and to any specific assets of the Company.
14. No Modification. The Bonus Plan shall not be modified or amended by
---------------
Twin in any manner adverse to the Participants.
-3-
<PAGE>
Appendix A
----------
Twin Laboratories Inc.
Bonus Plan Table
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE BONUS
IN EBITDA PERCENT
------------ -------
<S> <C>
0.0% 0.0%
1.0% 0.0%
2.0% 0.0%
3.0% 0.0%
4.0% 0.0%
5.0% 0.0%
6.0% 0.0%
7.0% 0.0%
8.0% 0.0%
9.0% 0.0%
10.0% 0.0%
11.0% 0.0%
12.0% 0.0%
13.0% 6.0%
14.0% 12.0%
15.0% 18.0%
16.0% 24.0%
17.0% 30.0%
18.0% 36.0%
19.0% 42.0%
20.0% 48.0%
21.0% 54.0%
22.0% 60.0%
23.0% 66.0%
24.0% 72.0%
25.0% 78.0%
26.0% 84.0%
27.0% 90.0%
28.0% 96.0%
29.0% 102.0%
30.0% 108.0%
31.0% 114.0%
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C>
32.0% 120.0%
33.0% 126.0%
33.3% 128.0%
</TABLE>
-5-
<PAGE>
APPENDIX B
Calculation of 1995 EBITDA for Purposes of Determining 1996 EBITDA Increase
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
1995 Pre-Tax Income from Audit $30,464
Plus: Depreciation & Amortization from Audit 1,011
Plus: Interest Expense 866
Plus: Unusual Item Footnoted in Audit 128
Plus: Transaction Expenses 656
Less: Interest Income (313)
Less: LGP Fee (400)
-------
1995 Pro Forma EBITDA $32,412
</TABLE>
-6-
<PAGE>
EXHIBIT B
---------
Twin Laboratories Inc. Employee Savings & Retirement Plan (prior to January 1,
1996, the Plan was known as the Twin Laboratories Inc. Profit Sharing Plan)
Twin Laboratories Section 125 Plan
Group Term Life Insurance (INA Insurance Company of North America)
Medical Insurance (Oxford Health Plans (NY), Inc.)
Dental Insurance (Connecticut General Life Insurance Company - Policy
2100864-01)
Accidental Death and Dismemberment Insurance (INA Life Insurance Company of
New York - Policy 8328)
Twin Laboratories Inc. XS Executive Medical Insurance Plan
<PAGE>
Exhibit 10.15
EMPLOYMENT AGREEMENT
by and between
TWIN LABORATORIES INC.
and
STEPHEN WELLING
Dated as of
May 7, 1996
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
May 7, 1996, by and between Twin Laboratories Inc., a Utah corporation formerly
known as Natur-Pharma Inc. ("Twin"), and Stephen Welling, an individual
currently residing at 600 E. Quality Drive, American Fork, Utah 84003 (the
"Executive"). As used herein, the term "Company" shall refer, individually
and/or collectively, as applicable, to TLG Laboratories Holding Corp., a
Delaware corporation ("Holding"), and its existing and future subsidiaries,
including but not limited to Twin and Advanced Research Press, Inc., a New York
corporation ("ARP").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on the date hereof, Holding will acquire all of the outstanding
capital stock of Twin and subsequently Twin Laboratories Inc., a New York
corporation ("Old Twin"), Twinlab Export Corp. ("Export"), Twinlab Specialty
Corporation ("Specialty"), Alvita Products, Inc. ("Alvita"), ARP and B. Bros.
Realty Corporation ("B. Bros.") Twin, Old Twin, Export, Specialty, Alvita, ARP
and B. Bros. being referred to collectively as the "Companies") will merge with
Twin or Natur-Pharma II Inc., a subsidiary of Twin, all as more fully described
in the Stock Purchase and Sale Agreement dated as of March 5, 1996, as amended
(the "Purchase Agreement"), by and among David Blechman, Jean Blechman, Brian
Blechman, Neil Blechman, Ross Blechman, Steve Blechman, Dean Blechman, Stephen
Welling, Holding, Natur-Pharma Inc. and Green Equity Investors II, L.P.;
WHEREAS, the Board of Directors of Twin desires to provide appropriate
incentives to key executives of the Company, including the Executive, in order
to retain such executives
<PAGE>
following the closing of the transactions contemplated by the Purchase Agreement
(the "Closing");
WHEREAS, the Executive has served as an executive officer of Natur-Pharma
Inc. prior to the Closing;
WHEREAS, Twin and the Executive desire that the Company employ the
Executive as the President of the Natur-Pharma Division of Twin following the
Closing on the terms and conditions set forth herein;
NOW, THEREFORE, Twin and the Executive, each intending to be legally bound,
hereby mutually covenant and agree as follows:
ARTICLE I
Definitions
-----------
The following terms used in this Agreement shall have the meanings set
forth below.
1.1 "Accrued Obligations" shall mean, as of the date of Termination
of Employment, the sum of (A) the Executive's aggregate Base Salary through such
date to the extent not theretofore paid, plus (B) the amount of any bonus
----
payable under the Bonus Plan (as hereinafter defined) and other cash
compensation payable to the Executive hereunder as of such date but not yet paid
plus (C) all vacation pay, expense reimbursements and other cash entitlements
- ----
accrued by the Executive hereunder as of such date to the extent not theretofore
paid.
1.2 "Base Salary" shall mean the amount set forth in Section 3.1.
1.3 "Board" shall mean the board of directors of Holding.
- 2 -
<PAGE>
1.4 "Bonus Plan" shall mean the cash bonus plan effective as of the
date hereof, which has been adopted by the Natur-Pharma Division of Twin and is
attached hereto as Exhibit A.
---------
1.5 "Cause" shall mean (i) the Executive's material violation of
Section 2.3 of this Agreement, which violation continues after notice thereof is
given to the Executive by the Board; (ii) the Executive's material violation of
Section 4.1 or 4.2 of this Agreement; (iii) the Executive's violation of Section
4.3 of this Agreement; (iv) the Executive's engagement in conduct which is
fraudulent or illegal with respect to the Company; (v) the Executive's gross
negligence in the performance or nonperformance of his duties or
responsibilities hereunder or engagement in conduct which is materially
injurious or materially damaging to the Company or the reputation of the Company
or (vi) the Executive's conviction of, or plea of nolo contendere to, a felony.
---------------
1.6 "Common Stock" shall mean the common stock of Holding.
1.7 "Competitor" shall have the meaning set forth in Section 4.3.
1.8 "Confidential Material" shall have the meaning set forth in
Section 4.2.
1.9 "Control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
1.10 "Disability" shall mean the inability of the Executive to
perform in all material respects his duties and responsibilities to the Company
by reason of a physical or
- 3 -
<PAGE>
mental disability or infirmity, which inability has continued for a period of
nine months, whether or not consecutive, occurring within any period of twelve
consecutive months.
1.11 "Disability Payment" shall mean, for purposes of Section
5.3(c), an amount equal to (i) one-half (1/2) of the Base Salary for the
calendar year in the Term in which the date of Termination of Employment occurs
multiplied by (ii) the greater of (x) the number of whole years and any fraction
thereof remaining in the unexpired portion of the Term or (y) one (1).
1.12 "Good Reason" shall mean any (i) reduction in the Executive's
Base Salary or opportunity to participate in the Bonus Plan, as set forth
herein, (ii) relocation of the Executive's principal place of business to a
location which is more than 10 miles from its current location in American Fork,
Utah (without the Executive's consent), (iii) material diminution in the
Executive's duties, responsibilities or reporting position with the Company,
which diminution continues after notice thereof is given to the Board by the
Executive, (iv) failure by the Company to continue in effect any material
benefit or compensation plan, life insurance plan, health and accident plan,
disability plan (or plan providing the Executive with substantially similar
benefits) in which the Executive is participating or the material reduction of
the Executive's benefits under any of such plans or (v) failure by Twin to
obtain the agreement to assume and perform this Agreement by any successor of
Twin as contemplated in Section 6.1 hereof.
1.13 "Performance Year" shall mean each calendar year beginning on
January 1 and ending on December 31.
- 4 -
<PAGE>
1.14 "Person" shall mean an individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, other entity or governmental or other agency or political
subdivision thereof.
1.15 "Severance Amount" shall mean, for purposes of Section 5.3(b),
an amount equal to (i) the Base Salary for the calendar year in the Term in
which the date of Termination of Employment occurs multiplied by (ii) the
greater of (x) the number of whole years and any fraction thereof remaining in
the unexpired portion of the Term or (y) one (1).
1.16 "Term" shall have the meaning set forth in Section 2.2 and
shall include any renewal or extension as set forth therein.
1.17 "Termination of Employment" shall mean (i) the Executive's
death or Disability, (ii) termination by the Board of the Executive's employment
with the Company for Cause or without Cause, (iii) resignation by the Executive
from the employ of the Company for Good Reason or without Good Reason, (iv)
retirement of the Executive or (v) expiration of the Term.
ARTICLE II
Employment and Term
-------------------
2.1 Employment. The Executive shall be employed as the President
----------
of the Natur-Pharma Division of Twin, and the Executive hereby accepts such
employment, for the Term. In addition, the Executive agrees that, during the
Term, he will serve in any similar capacity on behalf of any existing or future
subsidiary of Holding, as reasonably requested by the Board.
2.2 Term. The Term shall commence on the date hereof and shall end
----
on the third anniversary of the date hereof; provided, that the Term shall be
--------
renewed
- 5 -
<PAGE>
automatically for successive additional one-year periods at the end of such
three-year period and of each such one-year renewal period, unless, no later
than one hundred eighty (180) days prior to any such renewal date, either the
Board or the Executive gives written notice to the other that the Term shall not
be so renewed.
2.3 Duties. The Executive shall have all powers, duties and
------
responsibilities commensurate with his position as set forth in Section 2.1
hereof or as may be assigned by the Board of Directors of Twin or the President
of Twin from time to time (provided any such powers, duties and responsibilities
assigned by the Board of Directors of Twin or the President of Twin are
commensurate with such position). The Executive shall report to the President
of Twin. The Executive shall devote substantially all of his business time,
attention and energies to the performance of his duties hereunder.
Notwithstanding the foregoing, nothing in this Agreement shall restrict the
Executive from managing his personal investments, personal business affairs and
other personal matters, or serving on civic or charitable boards or committees,
provided that none of such activities interferes with the performance of his
duties and responsibilities hereunder or conflicts or competes with the
interests of the Company.
ARTICLE III
Compensation and Benefits
-------------------------
3.1 Base Salary. For services performed by the Executive pursuant
-----------
to this Agreement, Twin shall pay the Executive an initial Base Salary of ONE
HUNDRED THIRTY-FIVE THOUSAND DOLLARS ($135,000) per year, payable in accordance
with Old Twin's regular payroll practices prior to the Closing. The initial Base
Salary shall be increased annually, beginning on January 1, 1997, by a
percentage equal to the percentage
- 6 -
<PAGE>
increase, if any, in the Consumer Price Index for all Urban Consumers, All
Items, for the most recent twelve-month period for which such figures are then
available as promulgated by the Department of Labor Bureau of Statistics. Any
compensation which may be otherwise authorized from time to time by the Board of
Directors of Twin (or an appropriate committee thereof) shall be in addition to
the Base Salary.
3.2 Bonuses. The Executive shall be eligible to receive annual
-------
cash bonuses in accordance with the terms of the Bonus Plan.
3.3 Other Benefits. In addition to the Base Salary and
--------------
participation in the Bonus Plan, the Executive s hall also be entitled to the
following:
(a) Participation in Benefit Plans. The Executive shall be entitled
------------------------------
to participate in the benefit arrangements of Twin set forth on Exhibit B
---------
or in arrangements providing benefits at least substantially comparable to
the benefits provided for in the arrangements set forth on Exhibit B. The
---------
Executive shall also be entitled to participate in all other welfare and
benefit plans maintained by Holding and/or its subsidiaries, as the case
may be, for their respective employees generally.
(b) Vacation. The Executive shall be entitled to vacation and paid
--------
holidays consistent with Twin's practices prior to the Closing.
(c) Fringe Benefits. The Executive shall be entitled to the
---------------
perquisites and other fringe benefits made available to the Natur-Pharma
Division's other executives.
(d) Automobile. Twin shall reimburse the Executive for all
----------
reasonable expenses (including, but not limited to, lease payments,
liability insurance, maintenance, repair and fuel costs), up to ONE
THOUSAND DOLLARS ($1,000.00) per month, incurred in operating an automobile
for the Executive's use in the
- 7 -
<PAGE>
performance of his duties hereunder and in the conduct of the affairs of
Twin, which automobile shall also be available to the Executive for
personal use.
(e) Indemnification. The Executive shall be indemnified by Twin
---------------
against reasonable expenses, including attorney's fees, actually and
necessarily incurred by him in connection with the defense of any action,
suit, investigation or proceeding or similar legal activity, regardless of
whether criminal, civil, administrative or investigative in nature, to
which he is made a party by reason of his then being or having been an
officer of the Company on or subsequent to the date hereof, to the full
extent permitted by applicable law. Twin shall (upon receipt by Twin of an
undertaking by or on behalf of the Executive to repay the expenses
described in this Section 3.3(e), if it shall ultimately be determined that
he is not entitled to be indemnified by Twin against such expenses) pay
reasonable expenses, including attorney's fees, incurred by the Executive
in defending any threatened, pending or completed action, suit or
proceeding, or appearing as a witness at a time when he has not been named
as a defendant or respondent with respect thereto, in advance of the final
disposition of any such action, suit or proceeding. The foregoing right of
indemnification will not be deemed exclusive of any other rights to which
the Executive may be entitled under Holding's or any of its subsidiaries'
respective Articles or Certificate of Incorporation or By-laws, as in
effect from time to time, any agreement or otherwise.
- 8 -
<PAGE>
ARTICLE IV
Covenants
---------
4.1 Non-Interference. During the Term (including any unexpired
----------------
portion thereof) and for a period of one (1) year thereafter (the "Non-
Solicitation Period"), the Executive agrees to refrain from, directly,
indirectly or as an agent on behalf of or in conjunction with any Person,
soliciting (i) or encouraging (other than employee referrals and similar
activities consistent with past practice) any employee of the Company who is
employed in an executive, managerial, administrative or professional capacity or
who possesses Confidential Material (as defined below), to leave the employment
of the Company or (ii) any customer of the Company on behalf of any Competitor
(as defined below) or any other business.
4.2 Nondisclosure of Confidential Material. In the performance of
--------------------------------------
his duties, the Executive has previously had, and may be expected in the future
to have, access to confidential records and information, including, but not
limited to, development, marketing, purchasing, organizational, strategic,
financial, managerial, administrative, manufacturing, production, distribution
and sales information, data, specifications and processes presently owned or at
any time hereafter developed by the Company or its agents or consultants or used
presently or at any time hereafter in the course of the business of the Company,
that are not otherwise part of the public domain (collectively, the
"Confidential Material"). All such Confidential Material is considered secret
and has been and/or will be disclosed to the Executive in confidence, and the
Executive acknowledges that, as a consequence of his employment and position
with the Company, the Executive will have access to and become acquainted with
Confidential Material. Except in the performance of his duties to the Company,
the Executive shall not, during the Term and at all times thereafter, directly
or
- 9 -
<PAGE>
indirectly for any reason whatsoever, disclose or use any such Confidential
Material. All records, files, drawings, documents, equipment and other tangible
items, wherever located, relating in any way to or containing Confidential
Material, which the Executive has prepared, used or encountered or shall in the
future prepare, use or encounter, shall be and remain the Company's sole and
exclusive property and shall be included in the Confidential Material. Upon
termination of this Agreement, or whenever requested by the Company, the
Executive shall promptly deliver to the Company any and all of the Confidential
Material and copies thereof, not previously delivered to the Company, that may
be in the possession or under the control of the Executive. The foregoing
restrictions shall not apply to the use, divulgence, disclosure or grant of
access to Confidential Material to the extent, but only to the extent, (i)
expressly permitted or required pursuant to any other written agreement between
or among the Executive and the Company, (ii) such Confidential Material has been
publicly disclosed (not due to a breach by the Executive of his obligations
hereunder or by breach of any other person of a fiduciary or confidential
obligation to the Company) or (iii) the Executive is required to disclose
Confidential Material by or to any court of competent jurisdiction or any
governmental or quasi-governmental agency, authority or instrumentality of
competent jurisdiction, provided, that the Executive shall, prior to any such
--------
disclosure, immediately notify the Company of such requirement and provided
--------
further, that the Company shall have the right, at its expense, to object to
- -------
such disclosures and to seek confidential treatment of any Confidential Material
to be so disclosed on such terms as it shall determine.
4.3 Non-Competition. The Executive shall not, during the greater of
---------------
(A) the Term (including any unexpired portion thereof) or (B) a period of one
(1) year, directly or indirectly, own, manage, operate, join or Control or
participate (or serve as a consultant
- 10 -
<PAGE>
or in a similar position) in the ownership, management, operation or Control of,
any business, entity, firm, partnership, corporation or other Person, whether
private, governmental or quasi-governmental, other than the Company, which is
engaged, directly or indirectly, anywhere in the world, in (i) the business of
developing, manufacturing, marketing, selling and/or distributing of vitamins,
minerals, nutritional supplements (including, without limitation, amino acids
and proteins), herbal products, phytonutrients or herb teas, (ii) the
publication of related health, fitness or bodybuilding publications, or (iii)
any other business engaged in or being developed by the Company, or being
actively considered by management of the Company, at the time of the Executive's
Termination of Employment (a "Competitor"); provided, however, that nothing in
-------- -------
this Agreement shall preclude the Executive from serving on the board of
directors of any company with the prior consent of the Board or from owning less
than 5% of any class of publicly traded equity of any Competitor.
Notwithstanding the immediately preceding sentence, to the extent that the
Company ceases to develop any such other business which was being developed, or
the management of the Company ceases to actively consider any such other
business which was being actively considered, at the time of the Executive's
Termination of Employment, the covenant set forth in the immediately preceding
sentence shall no longer be applicable to such other business. At the written
request of the Executive, the Company shall promptly inform the Executive of
whether any particular business or businesses that were being so developed or
actively considered at the time of the Executive's Termination of Employment
have ceased to be so developed or actively considered.
- 11 -
<PAGE>
4.4 Enforcement.
-----------
(a) The Executive acknowledges that violation of any of the
covenants and agreements set forth in this Article IV would cause the Company
irreparable damage for which the Company cannot be reasonably compensated in
damages in an action at law, and therefore in the event of any breach by the
Executive of this Article IV, the Company shall be entitled to make application
to a court of competent jurisdiction for equitable relief by way of injunction
or otherwise (without being required to post a bond). This provision shall not,
however, be construed as a waiver of any of the rights which the Company may
have for damages under this Agreement or otherwise, and all of the Company's
rights and remedies shall be unrestricted. This Article IV shall survive
termination of this Agreement or Termination of Employment for any reason
whatsoever.
(b) If any of the provisions of this Agreement shall otherwise
contravene or be invalid under the laws of any state or other jurisdiction where
it is applicable but for such contravention or invalidity, such contravention or
invalidity shall not invalidate all of the provisions of this Agreement, but
rather the Agreement shall be reformed and construed, insofar as the laws of
that state or jurisdiction are concerned, as not containing the provision or
provisions, but only to the extent that they are contravening or are invalid
under the laws of that state or jurisdiction, and the rights and obligations
created hereby shall be reformed and construed and enforced accordingly. In
particular, if any of the covenants or agreements set forth in this Article IV,
or any part thereof, is held to be unenforceable because of the duration of such
provision or the areas covered thereby, or otherwise, the parties hereby
expressly agree that the court making such determination shall have the power to
reduce the
- 12 -
<PAGE>
duration and/or the areas of such provision or otherwise limit any such
provision and, in its reduced form, such provision shall then be enforceable.
(c) The Executive understands that the provisions of this Article
IV may limit his ability to earn a livelihood in a business similar to the
business of the Company but nevertheless agrees and hereby acknowledges that (i)
such provisions do not impose a greater restraint than is necessary to protect
the goodwill or other business interests of the Company; (ii) such provisions
contain reasonable limitations as to time and the scope of activity to be
restrained; and (iii) the consideration provided under this Agreement,
including, without limitation, any amounts or benefits provided under Article V
hereof, is sufficient to compensate the Executive for the restrictions contained
in this Article IV. In consideration of the foregoing and in light of the
Executive's education, skills and abilities, the Executive agrees that he will
not assert, and it should not be considered, that any provisions of this Article
IV prevented him from earning a living or otherwise are void, voidable or
unenforceable or should be voided or held unenforceable.
(d) Each of the covenants of this Article IV is given by the
Executive as part of the consideration for this Agreement and as an inducement
to Twin to enter into this Agreement and accept the obligations hereunder.
ARTICLE V
Termination
-----------
5.1 Termination of Agreement. Except for those provisions of this
------------------------
Agreement that survive Termination of Employment, this Agreement shall terminate
upon any Termination of Employment.
-13-
<PAGE>
5.2 Procedures Applicable to Termination of Employment.
--------------------------------------------------
(a) Termination for Cause. The Executive may be terminated for
---------------------
Cause, upon at least thirty (30) days' prior written notice from the Board to
the Executive for a termination for Cause pursuant to Clause (i) of Section 1.5,
and upon at least ten (10) days' prior written notice from the Board to the
Executive for a termination for Cause pursuant to Clause (ii), (iii), (iv), (v)
or (vi) of Section 1.5, by a vote of the Board (provided that the Executive
shall have had the opportunity (together with the Executive's legal counsel)
during such period to be heard at a meeting of the Board with respect to such
determination).
(b) Resignation for Good Reason. The Executive may resign for Good
---------------------------
Reason, upon at least thirty (30) days' prior written notice from the Executive
to the Board of his intent to resign for Good Reason pursuant to Clause (iii) of
Section 1.12, and upon at least 10 days' prior written notice from the Executive
to the Board of his intent to resign for Good Reason pursuant to Clause (i),
(ii), (iv) or (v) of Section 1.12, provided that the Executive (together with
Executive's legal counsel) shall meet with the Board, if requested by the Board
during such period with respect to his intent to resign.
(c) Termination Without Cause or for Disability. The Executive may
-------------------------------------------
be terminated without Cause or for Disability, upon at least thirty (30) days'
prior written notice from the Board to the Executive, by a vote of the Board
(provided that the Executive shall have had the opportunity (together with the
Executive's legal counsel) during such period to be heard at a meeting of the
Board with respect to such determination); provided, however, that, with respect
-------- -------
to Disability that is not permanent (as defined below), such thirty (30) days'
prior written notice must be given within six (6) months after the end of the
twelve (12) month period referred to in Section 1.10.
-14-
<PAGE>
5.3 Obligations of the Company Upon Termination of Employment.
---------------------------------------------------------
(a) Accrued Obligations and Other Benefits. In the event of
--------------------------------------
Termination of Employment for any reason (including a termination for Cause),
Twin shall pay to the Executive, or, in the event of the Executive's death or
Disability, to his heirs, estate or legal representatives, as the case may be,
the following:
(i) all Accrued Obligations in a lump sum within 10 days
after the date of Termination of Employment; and
(ii) all benefits accrued by the Executive as of the date of
Termination of Employment under all qualified and nonqualified
retirement, pension, profit sharing and similar plans of the Company
to such extent, in such manner and at such time as are provided under
the terms of such plans and arrangements.
(b) Termination Without Cause or Resignation for Good Reason. In
--------------------------------------------------------
the event that the Board terminates the Executive's employment without Cause
(but excluding Termination of Employment by reason of the Executive's death or
Disability), or in the event that the Executive resigns from his employment for
Good Reason, in addition to the amounts payable under Section 5.3(a) hereof:
(i) Twin shall pay (A) one-half (1/2) of the Severance
Amount to the Executive in a lump sum within 10 days after the date of
Termination of Employment and (B) one-half (1/2) of the Severance
Amount over the greater of (x) the unexpired portion of the Term or
(y) a one-year period in accordance with Old Twin's regular payroll
practices prior to Closing; and
-15-
<PAGE>
(ii) Twin shall continue all benefits coverage of the
Executive and his dependents provided under its benefit plans or
policies (or under other benefit plans or policies that provide
substantially equivalent coverage) for the greater of (x) the
unexpired portion of the Term or (y) a one-year period.
(c) Termination for Non-Permanent Disability. In the event of a
----------------------------------------
Termination of Employment of the Executive because of a Disability which at the
time of Termination of Employment was not permanent, in addition to the amounts
payable under Section 5.3(a) hereof, Twin shall pay the aggregate Disability
Payment over the greater of (i) the unexpired portion of the Term or (ii) a one-
year period in accordance with Old Twin's regular payroll practices prior to
Closing. A Disability shall be deemed to be permanent if, at the time of
Termination of Employment, the Executive cannot perform substantial gainful work
similar in nature to the work performed by the Executive hereunder prior to such
Disability, which Disability is expected to last at least six (6) months from
the date of such Termination of Employment.
(d) Exclusivity. The amounts payable to the Executive pursuant to
-----------
Sections 5.3(a), 5.3(b) and 5.3(c), as the case may be, shall be the Executive's
sole remedy in the event of the Termination of Employment of the Executive, and
the Executive waives any and all rights to pursue any other remedy at law or in
equity; provided, however, that this shall not constitute a waiver of any rights
-------- -------
provided under any federal, state or local laws or regulations relating to
discrimination in employment.
-16-
<PAGE>
ARTICLE VI
Miscellaneous
-------------
6.1 Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the heirs and representatives of the Executive and the
successors and assigns of Twin. Twin shall require any successor (whether
direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of assets or stock, liquidation, or otherwise), by agreement in form
and substance reasonably satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent that
Twin would be required to perform this Agreement if no such succession had taken
place. Regardless of whether such agreement is executed, this Agreement shall be
binding upon any successor of Twin in accordance with the operation of law, and
such successor shall be deemed to be "Twin" or the "Company," as appropriate,
for purposes of this Agreement.
6.2 Notices. All notices, requests, demands and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or mailed within the continental United States
by first class certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) if to the Board, the Company or Twin, to:
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Philip Kazin
with a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, LP
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
Attention: Ms. Jennifer Holden Dunbar
-17-
<PAGE>
(b) if to the Executive, to:
Stephen Welling
600 East Quality Drive
American Fork, UT 84003
with a copy to:
Bud G. Holman, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, New York 10178
Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.
6.3 Tax Withholding. Twin shall provide for the withholding of any
---------------
taxes required to be withheld under federal, state and local law (other than the
employer's portion of such taxes) with respect to any payment in cash and/or
other property made by or on behalf of Twin to or for the benefit of the
Executive under this Agreement or otherwise. Twin may, at its option: (i)
withhold such taxes from any cash payments owing from Twin to the Executive,
(ii) require the Executive to pay to Twin in cash such amount as may be required
to satisfy such withholding obligations and/or (iii) make other satisfactory
arrangements with the Executive to satisfy such withholding obligations.
6.4 No Assignment; No Third Party Beneficiaries. Except as
-------------------------------------------
otherwise expressly provided in Section 6.1 herein, this Agreement is not
assignable by any party, and no payment to be made hereunder shall be subject to
alienation, sale, transfer, assignment, pledge, encumbrance or other charge.
Except for Holding and its existing and future subsidiaries, no Person shall be,
or deemed to be, a third party beneficiary of this Agreement.
-18-
<PAGE>
6.5 Execution in Counterparts. This Agreement may be executed by
-------------------------
the parties hereto in one or more counterparts, each of which shall be deemed to
be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
6.6 Jurisdiction and Governing Law. Jurisdiction over disputes
------------------------------
with regard to this Agreement shall be exclusively in the courts of the State of
New York, and this Agreement shall be construed and interpreted in accordance
with and governed by the laws of the State of New York, other than the conflict
of laws provisions of such laws.
6.7 Entire Agreement; Amendment. Except as otherwise provided in
---------------------------
Section 3.3 hereof, this Agreement and the Exhibits attached hereto embody the
entire understanding of the parties hereto, and supersede all other oral or
written agreements or understandings between them, regarding the subject matter
hereof. No change, alteration or modification hereof may be made except in a
writing, signed by both of the parties hereto.
6.8 Headings. The headings in this Agreement are for convenience
--------
of reference only and shall not be construed as part of this Agreement or to
limit or otherwise affect the meaning hereof.
6.9 Survival. Notwithstanding anything to the contrary herein,
--------
Section 3.3(e), Article IV, Section 5.3 and Article VI of this Agreement shall
survive termination of this Agreement or Termination of Employment for any
reason whatsoever.
-19-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
TWIN LABORATORIES INC.
/s/ Ross Blechman
__________________________
By: Ross Blechman
Its: President
/s/ Stephen Welling
By: _______________________
Stephen Welling
AGREED AND ACCEPTED:
TLG LABORATORIES HOLDING CORP.
/s/ Ross Blechman
________________________
By: Ross Blechman
Its: President
-20-
<PAGE>
EXHIBIT A
---------
TWIN LABORATORIES INC., NATUR-PHARMA DIVISION
BONUS PLAN
----------
(All capitalized terms used in this Bonus Plan that are not defined herein
shall have the definitions ascribed thereto in the Participants' respective
Employment Agreement with Twin Laboratories Inc. to which this Bonus Plan is
attached.)
1. Purpose. Twin Laboratories Inc., Natur-Pharma Division (the "Division")
-------
has adopted the Twin Laboratories Inc., Natur-Pharma Division Bonus Plan (the
"Bonus Plan") in order to provide appropriate incentives to the Participants (as
hereinafter defined) to achieve and exceed specified performance objectives in
order to enhance the value of the Division for the benefit of the Company and
its stockholders following the acquisition by the Company of the outstanding
capital stock of Twin and the merger of the affiliated companies of Twin with
Twin or a subsidiary of Twin, all as more fully described in the Stock Purchase
and Sale Agreement dated as of March 5, 1996, as amended (the "Purchase
Agreement"), by and among David Blechman, Jean Blechman, Brian Blechman, Neil
Blechman, Ross Blechman, Steve Blechman, Dean Blechman, Stephen Welling,
Holding, Natur-Pharma and Green Equity Investors II, L.P.
2. Effective Date. The effective date of the Bonus Plan is May 7, 1996.
--------------
3. Participant. The participant in the Bonus Plan (the "Participant")
-----------
shall be Stephen Welling, to the extent such individual is employed by the
Company in a Performance Year (as hereinafter defined).
4. Performance Year. Each calendar year beginning with January 1, 1996
----------------
shall be a "Performance Year." If the Participant is employed by the Company for
a part of a Performance Year, he shall receive an Award (as hereinafter defined)
equal to the Award he would have received had he been employed for the entire
Performance Year, multiplied by a fraction, the numerator of which is the number
of days he was employed by the Company during such Performance Year and the
denominator of which is 365; provided, that if the Participant's employment is
terminated prior to the end of the Performance Year by the Board for Cause or
the Participant resigns without Good Reason (as hereinafter defined), no Award
shall be made for the Performance Year (or part thereof) in which the
Participant's employment was terminated or in which the Participant resigns.
5. Definitions of Cause and Good Reason. "Cause" and "Good Reason"
------------------------------------
shall mean, with respect to the Participant, the definitions of such terms set
forth in his Employment Agreement with Twin.
6. EBITDA shall mean, with respect to the Division for any Performance
------
Year, the pre-tax income of the Division (calculated after giving effect to the
accrual of all Awards (as hereinafter defined) with respect to such Performance
Year) for such Performance Year
-1-
<PAGE>
as determined in accordance with generally accepted accounting principles
consistently applied plus, to the extent deducted in computing such pre-tax
income, without duplication, (A) the sum of (a) interest expense, (b)
depreciation expense and amortization expense, (c) extraordinary losses, (d)
noncash exchange, translation or performance losses relating to any foreign
currency hedging transactions or currency fluctuations, and (e) any Awards paid
in such Performance Year in respect of any prior Performance Year, minus, to
the extent included in computing such pre-tax income, without duplication, (B)
the sum of (i) interest income, (ii) extraordinary gains and (iii) noncash
exchange, translation or performance gains relating to any foreign currency
hedging transactions or currency fluctuations; provided that all effects of the
transactions contemplated by the Purchase Agreement shall be eliminated in
computing EBITDA. Any allocations of income, expenses or other items to the
Division in connection with the calculation of EBITDA (including, without
limitation, the calculation of pre-tax income of the Division) shall be subject
to the reasonable approval of the Board.
7. EBITDA Levels. (a) For each percentage increase specified in Appendix
-------------
A hereto in EBITDA for a Performance Year compared to EBITDA in the immediately
preceding Performance Year (except for the Performance Year ended December 31,
1996, which shall be compared to the EBITDA amount as calculated on Appendix B
calendar year ended December 31, 1995), the Participant shall receive a cash
bonus ("Award") equal to the corresponding bonus percent specified in Appendix A
multiplied by the Participant's Base Salary for the Performance Year.
(b) The final determination of EBITDA with respect to any Performance Year
shall be subject to the affirmative approval (the "Approval") of a majority of
the Blechman Directors and a majority of the GEI Directors then in office (as
such terms are defined in the Stockholders Agreement annexed as Exhibit G to the
Purchase Agreement). In the event that the Approval is not obtained within
fourteen (14) days after completion of the Company's audited financial
statements for such Performance Year, the GEI Directors and the Blechman
Directors shall appoint a mutually satisfactory nationally recognized accounting
firm (which may be the Company's auditors) to make such determination of EBITDA
in respect of such Performance Year, provided that the GEI Directors and the
Blechman Directors shall determine with respect to the Award for such
Performance Year the amount not in dispute by reason of such lack of Approval.
8. Time of Payment. Each Award shall be paid no later than the
---------------
fourteenth (14th) day (assuming Approval is obtained or, assuming Approval is
not obtained, as to the undisputed amount), or the thirtieth (30th) day
(assuming Approval is not obtained, as to the disputed amount), after completion
of the Company's audited financial statements for such Performance Year.
9. Base Salary. For the purposes of the Bonus Plan, "Base Salary" shall
-----------
mean the "Base Salary" (including annual increases thereof) as defined in the
Participant's Employment Agreement.
10. No Assignments. The Participant may not assign an Award without the
--------------
prior written consent of the Board. Any attempted assignment without such
consent shall be null
-2-
<PAGE>
and void. For purposes of this paragraph, any designation of, or payment to, a
beneficiary designated to receive such Award in the event of the Participant's
death, shall not be deemed an assignment.
11. Unfunded Incentive Compensation Arrangement. The Bonus Plan is
-------------------------------------------
intended to constitute an unfunded incentive compensation arrangement covering a
select group of management or highly compensated employees. Nothing contained
in the Bonus Plan shall create or be construed to create a trust of any kind.
All awards shall be paid from the general funds of Twin, and no special or
separate fund shall be established and no segregation of assets shall be made to
assure payment of such awards.
12. Governing Law. The Plan shall be construed and governed in accordance
-------------
with the laws of the State of New York.
13. No Right to Specific Assets. There shall not vest in any participant
---------------------------
any right, title, or interest in and to any specific assets of the Company.
14. No Modification. The Bonus Plan shall not be modified or amended by
---------------
Twin in any manner adverse to the Participant.
-3-
<PAGE>
Appendix A
----------
Twin Laboratories Inc.
Natur-Pharma Division
Bonus Plan Table
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE BONUS
IN EBITDA PERCENT
---------- -------
<S> <C>
0.0% 0.00%
1.0% 2.00%
2.0% 4.00%
3.0% 6.00%
4.0% 8.00%
5.0% 10.00%
6.0% 12.00%
7.0% 14.00%
8.0% 16.00%
9.0% 18.00%
10.0% 20.00%
11.0% 22.00%
12.0% 24.00%
13.0% 26.00%
14.0% 28.00%
15.0% 30.00%
16.0% 32.00%
17.0% 34.00%
18.0% 36.00%
19.0% 38.00%
20.0% 40.00%
21.0% 41.50%
22.0% 43.00%
23.0% 44.50%
24.0% 46.00%
25.0% 47.50%
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C>
26.0% 49.00%
27.0% 50.50%
28.0% 52.00%
29.0% 53.50%
30.0% 55.00%
31.0% 56.50%
32.0% 58.00%
33.0% 59.50%
34.0% 61.00%
35.0% 62.50%
36.0% 64.00%
37.0% 65.50%
38.0% 67.00%
39.0% 68.50%
40.0% 70.00%
41.0% 71.50%
42.0% 73.00%
43.0% 74.50%
44.0% 76.00%
45.0% 77.50%
46.0% 79.00%
47.0% 80.50%
48.0% 82.00%
49.0% 83.50%
50.0% 85.00%
51.0% 86.50%
52.0% 88.00%
53.0% 89.50%
54.0% 91.00%
55.0% 92.50%
56.0% 94.00%
57.0% 95.50%
</TABLE>
-5-
<PAGE>
<TABLE>
<S> <C>
58.0% 97.00%
59.0% 98.50%
60.0% 100.00%
61.0% 101.50%
62.0% 103.00%
63.0% 104.50%
64.0% 106.00%
65.0% 107.50%
66.0% 109.00%
67.0% 110.50%
68.0% 112.00%
69.0% 113.50%
70.0% 115.00%
75.0% 122.50%
100.0% 162.50%
125.0% 202.50%
</TABLE>
-6-
<PAGE>
APPENDIX B
Calculation of 1995 EBITDA for Purposes of Determining 1996 EBITDA Increase
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
1995 Pre-Tax Income $3,011
Plus: Depreciation and Amortization 179
Plus: Interest Expense 243
-----
1995 EBITDA $3,433
</TABLE>
-7-
<PAGE>
EXHIBIT B
---------
Twin Laboratories Inc. Employee Savings & Retirement Plan (prior to January 1,
1996, the Plan was known as the Twin Laboratories Inc. Profit Sharing Plan)
Twin Laboratories Section 125 Plan
Group Term Life Insurance (INA Insurance Company of North America)
Medical Insurance (Oxford Health Plans (NY), Inc.)
Dental Insurance (Connecticut General Life Insurance Company - Policy
2100864-01)
Accidental Death and Dismemberment Insurance (INA Life Insurance Company
of New York - Policy 8328)
-8-
<PAGE>
Exhibit 10.16
CONSULTING AGREEMENT
by and between
TWIN LABORATORIES INC.
and
DAVID BLECHMAN
Dated as of
May 7, 1996
<PAGE>
CONSULTING AGREEMENT
--------------------
This CONSULTING AGREEMENT ("Agreement") is made and entered into as of
May 7, 1996, by and between Twin Laboratories Inc., a Utah corporation formerly
known as Natur-Pharma Inc. ("Twin"), and David Blechman, an individual currently
residing at 17927 Lake Estates Drive, Boca Raton, Florida 33496 (the
"Consultant"). As used herein, the term "Company" shall refer, individually
and/or collectively, as applicable, to TLG Laboratories Holding Corp., a
Delaware corporation ("Holding"), and its existing and future subsidiaries,
including but not limited to Twin and Advanced Research Press, Inc., a New York
corporation ("ARP").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on the date hereof, Holding will acquire all of the
outstanding capital stock of Twin, and subsequently Twin Laboratories Inc., a
New York corporation ("Old Twin"), Twinlab Export Corp. ("Export"), Twinlab
Specialty Corporation ("Specialty"), Alvita Products, Inc. ("Alvita"), ARP and
B. Bros. Realty Corporation ("B. Bros.") (Twin, Old Twin, Export, Specialty,
Alvita, ARP and B. Bros. being referred to collectively as the "Companies") will
merge with Twin or Natur-Pharma II, Inc., a subsidiary of Twin, all as more
fully described in the Stock Purchase and Sale Agreement dated as of March 5,
1996, as amended (the "Purchase Agreement"), by and among David Blechman, Jean
Blechman, Brian Blechman, Neil Blechman, Ross Blechman, Steve Blechman, Dean
Blechman, Stephen Welling, Holding, Natur-Pharma Inc. and Green Equity Investors
II, L.P. ("Green");
-1-
<PAGE>
WHEREAS, Consultant was a founder of certain of the Companies and,
prior to the closing of the transactions contemplated by the Purchase Agreement
(the "Closing"), Consultant served on the board of directors and as an executive
officer of certain of the Companies, and as a result of such service in those
capacities, Consultant has obtained extensive knowledge of and experience in the
Company's business, including, but not limited to, the developing,
manufacturing, marketing, selling and/or distributing of vitamins, minerals,
nutritional supplements, herbal products, phytonutrients and herb teas, the
publication of related health, fitness and bodybuilding publications, and
activities relating to the foregoing, throughout the United States and
internationally; and
WHEREAS, Twin has requested the Consultant to provide his services to
the Company in such matters as shall from time to time hereafter be requested by
the Company following the Closing, on the terms and conditions set forth herein;
NOW, THEREFORE, Twin and the Consultant, each intending to be legally
bound, hereby mutually covenant and agree as follows:
ARTICLE I
Definitions
-----------
The following terms used in this Agreement shall have the meanings set
forth below.
1.1 "Accrued Obligations" shall mean, as of any date, the sum of
(A) the aggregate Consulting Fees payable to the Consultant hereunder as of such
date to the extent accrued but not theretofore paid plus (B) all expense
----
reimbursements and other cash entitlements payable to the Consultant hereunder
as of such date to the extent accrued but not theretofore paid.
1.2 "Board" shall mean the board of directors of Holding.
-2-
<PAGE>
1.3 "Competitor" shall have the meaning set forth in Section 4.3.
1.4 "Confidential Material" shall have the meaning set forth in
Section 4.2.
1.5 "Consulting Fee" shall mean the annual retainer in the amount
set forth in Section 3.1.
1.6 "Control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
1.7 "Disability" shall mean the inability of the Consultant to
perform the Services in all material respects by reason of a physical or mental
disability or infirmity, which inability has continued for a period of nine
months, whether or not consecutive, occurring within any period of twelve
consecutive months.
1.8 "Person" shall mean an individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, other entity or governmental or other agency or political
subdivision thereof.
1.9 "Plans" shall mean the insurance plans covering the Consultant
as of the date hereof, which are set forth in Exhibit A hereto, or other plans
---------
consented to by the Consultant providing the Consultant with substantially
similar benefits, which consent shall not be unreasonably withheld.
1.10 "Services" shall have the meaning set forth in Section 2.1.
1.11 "Term" shall have the meaning set forth in Section 2.2 and
shall include any extension as set forth therein.
-3-
<PAGE>
ARTICLE II
Consultancy Engagement
----------------------
2.1 Engagement. Twin hereby engages the Consultant to provide such
----------
advice to, and perform such consultative services for, the Company as may be
reasonably requested by the Company from time to time during the Term
(collectively, the "Services"), and the Consultant hereby agrees to accept such
engagement, in accordance with the terms and conditions set forth in this
Agreement. The Consultant shall be available to render such advisory and
consultative services up to four (4) hours per week, but no more than one
hundred and eighty four (184) hours in any fifty-two (52) week period during the
Term. Such services will be performed during normal business hours, Monday
through Friday, national and Florida or New York State holidays excepted, and
subject to reasonable absences for vacation and personal reasons (with respect
to any particular week).
2.2 Term. The Term shall commence on the date hereof and shall
----
end, unless extended by mutual agreement of the parties or unless sooner
terminated pursuant to Section 5.1 hereof, on the fifth anniversary of the date
hereof.
2.3 Performance. During the Term, the Consultant shall take such
-----------
actions as are reasonably necessary to provide the Services consistent with his
engagement as set forth in Section 2.1 hereof.
2.4 Independent Contractor Status. Consultant shall perform the
-----------------------------
Services under this Agreement as an independent contractor and not as an
employee of the Company. Except to the extent set forth in Article III hereof,
Consultant shall not be entitled to social security, unemployment or other
benefits made available to employees of the Company.
-4-
<PAGE>
ARTICLE III
Remuneration
------------
3.1 Consulting Fee. As consideration for the Consultant's
--------------
agreement to provide the Services pursuant to this Agreement, Twin shall pay the
Consultant a Consulting Fee of ONE HUNDRED THOUSAND DOLLARS ($100,000) per
calendar year (pro rated for any partial calendar year) during the Term, payable
in accordance with Old Twin's regular payroll practices prior to the Closing.
Such fee shall be paid without regard to the number of hours of Services
actually provided pursuant to the terms hereof if the Company does not request
the Consultant to provide the maximum number of hours contemplated by Section
2.1.
3.2 Insurance. In addition to the Consulting Fee, during the Term
---------
(and thereafter to the extent provided in Section 5.1), the Consultant shall
also be entitled to participate in the Plans in accordance with their terms.
3.3 Materials and Expenses. The Company shall supply Consultant
----------------------
with all materials, instruments or equipment which the Consultant may reasonably
require, and Consultant may make use of the time and services of such employees
of the Company as is reasonably required, in order to provide the Services.
3.4 Reimbursement of Expenses. Twin shall reimburse the Consultant
-------------------------
in respect of any reasonable out-of-pocket expenses incurred by him in providing
the Services, including, but not limited to, first class travel if the Company
requests the Consultant to provide the Services outside the State of Florida.
3.5 Indemnification. The Consultant shall be indemnified by Twin
---------------
against reasonable expenses, including attorney's fees, actually and necessarily
incurred by him in connection with the defense of any action, suit,
investigation or proceeding or similar legal
-5-
<PAGE>
activity, regardless of whether criminal, civil, administrative or investigative
in nature, to which he is made a party by reason of his then providing or having
provided Services to the Company hereunder; provided, that no indemnification
--------
shall be provided in respect of any matter as to which (i) the Consultant shall
have been finally adjudicated in any proceeding not to have acted in good faith
in the reasonable belief that his action was in, or not opposed to, the best
interests of the Company, and with respect to any criminal action or proceeding,
as to which the Consultant had reasonable cause to believe that his conduct was
unlawful or (ii) the Consultant's action or inaction constituted gross
negligence or willful misconduct. Such right of indemnification will not be
deemed exclusive of any other rights to which the Consultant may be entitled
under Holding's or any of its subsidiaries' respective Articles or Certificate
of Incorporation or By-laws, as in effect from time to time, any agreement or
otherwise. Twin shall (upon receipt by Twin of an undertaking by or on behalf
of the Consultant to repay the expenses described in this Section if it shall
ultimately be determined that he is not entitled to be indemnified by Twin
against such expenses) pay reasonable expenses, including attorney's fees,
incurred by the Consultant in defending any threatened, pending or completed
action, suit or proceeding or appearing as a witness at a time when he has not
been named as a defendant or respondent with respect thereto in advance of the
final disposition of any such action, suit or proceeding.
ARTICLE IV
Covenants of the Consultant
---------------------------
4.1 Non-Interference. During the Term (which for this Section 4.1
----------------
shall mean the period from the Agreement Date through the fifth anniversary of
the date of this Agreement) and for a period of two years thereafter (the "Non-
Solicitation Period"), the Consultant agrees to refrain from, directly,
indirectly or as an agent on behalf of or in
-6-
<PAGE>
conjunction with any Person, soliciting (i) or encouraging (other than employee
referrals and similar activities consistent with past practice) any employee of
the Company who is employed in an executive, managerial, administrative or
professional capacity or who possesses Confidential Material (as defined below),
to leave the employment of the Company or (ii) any customer of the Company on
behalf of any Competitor (as defined below) or any other business.
4.2 Nondisclosure of Confidential Material. In the performance of
--------------------------------------
his duties, the Consultant has previously had, and may be expected in the future
to have, access to confidential records and information, including, but not
limited to, development, marketing, purchasing, organizational, strategic,
financial, managerial, administrative, manufacturing, production, distribution
and sales information, data, specifications and processes presently owned or at
any time hereafter developed by the Company, agents or consultants or used
presently or at any time hereafter in the course of the business of the Company,
that are not otherwise part of the public domain (collectively, the
"Confidential Material"). All such Confidential Material is considered secret
and has been and/or will be disclosed to the Consultant in confidence, and the
Consultant acknowledges that, as a consequence of his consultancy for the
Company, the Consultant will have access to and become acquainted with
Confidential Material. Except in the performance of his duties to the Company,
the Consultant shall not, during the Term and at all times thereafter, directly
or indirectly for any reason whatsoever, disclose or use any such Confidential
Material. All records, files, drawings, documents, equipment and other tangible
items, wherever located, relating in any way to or containing Confidential
Material, which the Consultant has prepared, used or encountered or shall in the
future prepare, use or encounter, shall be and remain the Company's sole and
exclusive property and shall be included in the Confidential
-7-
<PAGE>
Material. Upon termination of this Agreement, or whenever requested by the
Company, the Consultant shall promptly deliver to the Company any and all of the
Confidential Material and copies thereof, not previously delivered to the
Company, that may be in the possession or under the control of the Consultant.
The foregoing restrictions shall not apply to the use, divulgence, disclosure or
grant of access to Confidential Material to the extent, but only to the extent,
(i) expressly permitted or required pursuant to any other written agreement
between or among the Consultant and the Company, (ii) such Confidential Material
has been publicly disclosed (not due to a breach by the Consultant of his
obligations hereunder or by breach of any other person of a fiduciary or
confidential obligation to the Company, or (iii) the Consultant is required to
disclose Confidential Material by or to any court of competent jurisdiction or
any governmental or quasi-governmental agency, authority or instrumentality of
competent jurisdiction, provided, that the Consultant shall, prior to any such
--------
disclosure, immediately notify the Company of such requirement and provided
--------
further, that the Company shall have the right, at its expense, to object to
- -------
such disclosures and to seek confidential treatment of any Confidential Material
to be so disclosed on such terms as it shall determine.
4.3 Non-Competition. The Consultant shall not, during the Term
---------------
(which for this Section 4.3 shall mean the period from the date of this
Agreement through the fifth anniversary of the date of this Agreement), directly
or indirectly, own, manage, operate, join or Control or participate (or serve as
a consultant or in a similar position) in the ownership, management, operation
or Control of, any business, entity, firm, partnership, corporation or other
Person, whether private, governmental or quasi-governmental, other than the
Company, which is engaged, directly or indirectly, anywhere in the world, in (i)
the business of developing, manufacturing, marketing, selling and/or
distributing of vitamins, minerals, nutritional supplements (including, without
limitation, amino acids and proteins), herbal
-8-
<PAGE>
products, phytonutrients or herb teas, (ii) the publication of related health,
fitness or bodybuilding publications, or (iii) any other business engaged in or
being developed by the Company, or being actively considered by management of
the Company, at the time of the termination of the Consultant's engagement
hereunder (a "Competitor"); provided, however, that nothing in this Agreement
-------- -------
shall preclude the Consultant from serving on the board of directors of any
company with the prior consent of the Board or from owning less than 5% of any
class of publicly traded equity of any Competitor.
4.4 Enforcement.
-----------
(a) The Consultant acknowledges that violation of any of the
covenants and agreements set forth in this Article IV would cause the Company
irreparable damage for which the Company cannot be reasonably compensated in
damages in an action at law, and therefore in the event of any breach by the
Consultant of this Article IV, the Company shall be entitled to make application
to a court of competent jurisdiction for equitable relief by way of injunction
or otherwise (without being required to post a bond). This provision shall not,
however, be construed as a waiver of any of the rights which the Company may
have for damages under this Agreement or otherwise, and all of the Company's
rights and remedies shall be unrestricted. This Article IV shall survive
termination of this Agreement for any reason whatsoever.
(b) If any of the provisions of this Agreement shall otherwise
contravene or be invalid under the laws of any state or other jurisdiction where
it is applicable but for such contravention or invalidity, such contravention or
invalidity shall not invalidate all of the provisions of this Agreement, but
rather the Agreement shall be reformed and construed, insofar as the laws of
that state or jurisdiction are concerned, as not containing the provision or
provisions, but only to the extent that they are contravening or are invalid
under the laws
-9-
<PAGE>
of that state or jurisdiction, and the rights and obligations created hereby
shall be reformed and construed and enforced accordingly. In particular, if any
of the covenants or agreements set forth in this Article IV, or any part
thereof, is held to be unenforceable because of the duration of such provision
or the area covered thereby, or otherwise, the parties hereby expressly agree
that the court making such determination shall have the power to reduce the
duration and/or the areas of such provision or otherwise limit any such
provision and, in its reduced form, said provision shall then be enforceable.
(c) The Consultant understands that the provisions of this Article
IV may limit his ability to earn a livelihood in a business similar to the
business of the Company but nevertheless agrees and hereby acknowledges that (i)
such provisions do not impose a greater restraint than is necessary to protect
the goodwill or other business interests of the Company; (ii) such provisions
contain reasonable limitations as to time and the scope of activity to be
restrained; and (iii) the consideration provided under this Agreement is
sufficient to compensate the Consultant for the restrictions contained in this
Article IV. In consideration of the foregoing and in light of the Consultant's
education, skills and abilities, the Consultant agrees that he will not assert,
and it should not be considered, that any provisions of this Article IV
prevented him from earning a living or otherwise are void, voidable or
unenforceable or should be voided or held unenforceable.
(d) Each of the covenants of this Article IV is given by the
Consultant as part of the consideration for this Agreement and as an inducement
to Twin to enter into this Agreement and accept the obligations hereunder.
-10-
<PAGE>
ARTICLE V
Termination
-----------
5.1 Termination of Agreement. This Agreement shall terminate as
------------------------
provided in Section 2.2 hereof; provided, however, that (i) this Agreement shall
-------- -------
terminate automatically upon the death of the Consultant and (ii) the
Consultant's engagement hereunder may be terminated for Disability, upon at
least 30 days' prior written notice from the Board to the Consultant. Upon any
termination of this Agreement, all payments (except as provided in Section 5.2
hereof) to the Consultant shall cease, provided, that in the event of a
--------
termination of this Agreement due to Disability, the Consultant shall be
entitled to continued participation in the Plans until the fifth anniversary of
the date hereof.
5.2 Obligations of Twin Upon Expiration of the Term or Other
--------------------------------------------------------
Termination. Twin shall pay to the Consultant all Accrued Obligations in a lump
- -----------
sum within 10 days after the date of expiration of the Term or other termination
of Consultant's engagement hereunder.
ARTICLE VI
Miscellaneous
-------------
6.1 Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the heirs and representatives of the Consultant and the
successors and assigns of Twin. Twin shall require any successor (whether
direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of assets or stock, liquidation, or otherwise), by agreement in form
and substance reasonably satisfactory to the Consultant, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent that
Twin would be required to perform this Agreement if no such succession had taken
place. Regardless of whether such agreement is executed, this Agreement shall
be binding upon any
-11-
<PAGE>
successor of Twin in accordance with the operation of law, and such successor
shall be deemed to be "Twin" or the "Company", as appropriate, for purposes of
this Agreement.
6.2 Notices. All notices, requests, demands and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or mailed within the continental United States
by first class certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) if to the Board, the Company or Twin, to:
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Philip Kazin
with a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, LP
333 South Grand Avenue, Suite 5400
Los Angeles, California 90071
Attention: Ms. Jennifer Holden Dunbar
(b) if to the Consultant, to:
David Blechman
17927 Lake Estates Drive
Boca Raton, Florida 33496
with a copy to:
Bud G. Holman, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, New York 10178
Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.
6.3 No Assignment; No Third Party Beneficiaries. Except as
-------------------------------------------
otherwise expressly provided in Section 6.1 herein, this Agreement is not
assignable by any party, and
-12-
<PAGE>
no payment to be made hereunder shall be subject to alienation, sale, transfer,
assignment, pledge, encumbrance or other charge. Except for Holding and its
existing and future subsidiaries, no Person shall be, or deemed to be, a third
party beneficiary of this Agreement.
6.4 Execution in Counterparts. This Agreement may be executed by
-------------------------
the parties hereto in one or more counterparts, each of which shall be deemed to
be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
6.5 Jurisdiction and Governing Law. Jurisdiction over disputes
------------------------------
with regard to this Agreement shall be exclusively in the courts of the State of
New York, and this Agreement shall be construed and interpreted in accordance
with and governed by the laws of the State of New York, other than the conflict
of laws provisions of such laws.
6.6 Entire Agreement; Amendment. Except as otherwise provided in
---------------------------
Section 3.2 hereof, this Agreement and the Exhibits attached hereto (together
with a certain letter agreement dated as of March 5, 1996 among the Consultant,
the Consultant's spouse and Green) embody the entire understanding of the
parties hereto, and supersede all other oral or written agreements or
understandings between them, regarding the subject matter hereof. No change,
alteration or modification hereof may be made except in a writing, signed by
both of the parties hereto.
6.7 Headings. The headings in this Agreement are for convenience
--------
of reference only and shall not be construed as part of this Agreement or to
limit or otherwise affect the meaning hereof.
-13-
<PAGE>
6.8 Survival. Notwithstanding anything to the contrary herein,
--------
Section 3.5, Article IV, Section 5.1 (second sentence thereof only), Section 5.2
and Article VI of this Agreement shall survive termination of this Agreement for
any reason whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
TWIN LABORATORIES INC.
/s/ Ross Blechman
________________________
By: Ross Blechman
Its: President
/s/ David Blechman
By: _____________________
David Blechman
AGREED AND ACCEPTED:
TLG LABORATORIES HOLDING CORP.
/s/ Ross Blechman
________________________
By: Ross Blechman
Its: President
-14-
<PAGE>
EXHIBIT A
PLANS
Medical Insurance (Oxford Health Plans (NY), Inc.)
Dental Insurance (Connecticut General Life Insurance Company - Policy
2100864-01)
Twin Laboratories Inc. XS Executive Medical Insurance Plan
-15-
<PAGE>
Exhibit 10.17
CONSULTING AGREEMENT
by and between
TWIN LABORATORIES INC.
and
JEAN BLECHMAN
Dated as of
May 7, 1996
<PAGE>
CONSULTING AGREEMENT
--------------------
This CONSULTING AGREEMENT ("Agreement") is made and entered into as of
May 7, 1996, by and between Twin Laboratories Inc., a Utah corporation formerly
known as Natur-Pharma Inc. ("Twin"), and Jean Blechman, an individual currently
residing at 17927 Lake Estates Drive, Boca Raton, Florida 33496 (the
"Consultant"). As used herein, the term "Company" shall refer, individually
and/or collectively, as applicable, to TLG Laboratories Holding Corp., a
Delaware corporation ("Holding"), and its existing and future subsidiaries,
including but not limited to Twin and Advanced Research Press, Inc., a New York
corporation ("ARP").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on the date hereof, Holding will acquire all of the
outstanding capital stock of Twin, and subsequently Twin Laboratories Inc., a
New York corporation ("Old Twin"), Twinlab Export Corp. ("Export"), Twinlab
Specialty Corporation ("Specialty"), Alvita Products, Inc. ("Alvita"), ARP and
B. Bros. Realty Corporation ("B. Bros.") (Twin, Old Twin, Export, Specialty,
Alvita, ARP and B. Bros. being referred to collectively as the "Companies") will
merge with Twin or Natur-Pharma II, Inc., a subsidiary of Twin, all as more
fully described in the Stock Purchase and Sale Agreement dated as of March 5,
1996, as amended (the "Purchase Agreement"), by and among David Blechman, Jean
Blechman, Brian Blechman, Neil Blechman, Ross Blechman, Steve Blechman, Dean
Blechman, Stephen Welling, Holding, Natur-Pharma Inc. and Green Equity Investors
II, L.P. ("Green");
-1-
<PAGE>
WHEREAS, Consultant was a founder of certain of the Companies and,
prior to the closing of the transactions contemplated by the Purchase Agreement
(the "Closing"), Consultant served on the board of directors and as an executive
officer of certain of the Companies, and as a result of such service in those
capacities, Consultant has obtained extensive knowledge of and experience in the
Company's business, including, but not limited to, the developing,
manufacturing, marketing, selling and/or distributing of vitamins, minerals,
nutritional supplements, herbal products, phytonutrients and herb teas, the
publication of related health, fitness and bodybuilding publications, and
activities relating to the foregoing, throughout the United States and
internationally; and
WHEREAS, Twin has requested the Consultant to provide her services to
the Company in such matters as shall from time to time hereafter be requested by
the Company following the Closing, on the terms and conditions set forth herein;
NOW, THEREFORE, Twin and the Consultant, each intending to be legally
bound, hereby mutually covenant and agree as follows:
ARTICLE I
Definitions
-----------
The following terms used in this Agreement shall have the meanings set
forth below.
1.1 "Accrued Obligations" shall mean, as of any date, the sum of (A)
the aggregate Consulting Fees payable to the Consultant hereunder as of such
date to the extent accrued but not theretofore paid plus (B) all expense
----
reimbursements and other cash entitlements payable to the Consultant hereunder
as of such date to the extent accrued but not theretofore paid.
1.2 "Board" shall mean the board of directors of Holding.
-2-
<PAGE>
1.3 "Competitor" shall have the meaning set forth in Section 4.3.
1.4 "Confidential Material" shall have the meaning set forth in
Section 4.2.
1.5 "Consulting Fee" shall mean the annual retainer in the amount set
forth in Section 3.1.
1.6 "Control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
1.7 "Disability" shall mean the inability of the Consultant to
perform the Services in all material respects by reason of a physical or mental
disability or infirmity, which inability has continued for a period of nine
months, whether or not consecutive, occurring within any period of twelve
consecutive months.
1.8 "Person" shall mean an individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, other entity or governmental or other agency or political
subdivision thereof.
1.9 "Plans" shall mean the insurance plans covering the Consultant as
of the date hereof, which are set forth in Exhibit A hereto, or other plans
---------
consented to by the Consultant providing the Consultant with substantially
similar benefits, which consent shall not be unreasonably withheld.
1.10 "Services" shall have the meaning set forth in Section 2.1.
1.11 "Term" shall have the meaning set forth in Section 2.2 and shall
include any extension as set forth therein.
-3-
<PAGE>
ARTICLE II
Consultancy Engagement
----------------------
2.1 Engagement. Twin hereby engages the Consultant to provide such
----------
advice to, and perform such consultative services for, the Company as may be
reasonably requested by the Company from time to time during the Term
(collectively, the "Services"), and the Consultant hereby agrees to accept such
engagement, in accordance with the terms and conditions set forth in this
Agreement. The Consultant shall be available to render such advisory and
consultative services up to four (4) hours per week, but no more than one
hundred and eighty four (184) hours in any fifty-two (52) week period during the
Term. Such services will be performed during normal business hours, Monday
through Friday, national and Florida or New York State holidays excepted, and
subject to reasonable absences for vacation and personal reasons (with respect
to any particular week).
2.2 Term. The Term shall commence on the date hereof and shall end,
----
unless extended by mutual agreement of the parties or unless sooner terminated
pursuant to Section 5.1 hereof, on the fifth anniversary of the date hereof.
2.3 Performance. During the Term, the Consultant shall take such
-----------
actions as are reasonably necessary to provide the Services consistent with her
engagement as set forth in Section 2.1 hereof.
2.4 Independent Contractor Status. Consultant shall perform the
-----------------------------
Services under this Agreement as an independent contractor and not as an
employee of the Company. Except to the extent set forth in Article III hereof,
Consultant shall not be entitled to social security, unemployment or other
benefits made available to employees of the Company.
-4-
<PAGE>
ARTICLE III
Remuneration
------------
3.1 Consulting Fee. As consideration for the Consultant's agreement
--------------
to provide the Services pursuant to this Agreement, Twin shall pay the
Consultant a Consulting Fee of ONE HUNDRED THOUSAND DOLLARS ($100,000) per
calendar year (pro rated for any partial calendar year) during the Term, payable
in accordance with Old Twin's regular payroll practices prior to the Closing.
Such fee shall be paid without regard to the number of hours of Services
actually provided pursuant to the terms hereof if the Company does not request
the Consultant to provide the maximum number of hours contemplated by Section
2.1.
3.2 Insurance. In addition to the Consulting Fee, during the Term
---------
(and thereafter to the extent provided in Section 5.1), the Consultant shall
also be entitled to participate in the Plans in accordance with their terms.
3.3 Materials and Expenses. The Company shall supply Consultant with
----------------------
all materials, instruments or equipment which the Consultant may reasonably
require, and Consultant may make use of the time and services of such employees
of the Company as is reasonably required, in order to provide the Services.
3.4 Reimbursement of Expenses. Twin shall reimburse the Consultant
-------------------------
in respect of any reasonable out-of-pocket expenses incurred by her in providing
the Services, including, but not limited to, first class travel if the Company
requests the Consultant to provide the Services outside the State of Florida.
3.5 Indemnification. The Consultant shall be indemnified by Twin
---------------
against reasonable expenses, including attorney's fees, actually and necessarily
incurred by her in connection with the defense of any action, suit,
investigation or proceeding or similar legal
-5-
<PAGE>
activity, regardless of whether criminal, civil, administrative or investigative
in nature, to which she is made a party by reason of her then providing or
having provided Services to the Company hereunder; provided, that no
--------
indemnification shall be provided in respect of any matter as to which (i) the
Consultant shall have been finally adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that her action was in, or not
opposed to, the best interests of the Company, and with respect to any criminal
action or proceeding, as to which the Consultant had reasonable cause to believe
that her conduct was unlawful or (ii) the Consultant's action or inaction
constituted gross negligence or willful misconduct. Such right of
indemnification will not be deemed exclusive of any other rights to which the
Consultant may be entitled under Holding's or any of its subsidiaries'
respective Articles or Certificate of Incorporation or By-laws, as in effect
from time to time, any agreement or otherwise. Twin shall (upon receipt by Twin
of an undertaking by or on behalf of the Consultant to repay the expenses
described in this Section if it shall ultimately be determined that she is not
entitled to be indemnified by Twin against such expenses) pay reasonable
expenses, including attorney's fees, incurred by the Consultant in defending any
threatened, pending or completed action, suit or proceeding or appearing as a
witness at a time when she has not been named as a defendant or respondent with
respect thereto in advance of the final disposition of any such action, suit or
proceeding.
ARTICLE IV
Covenants of the Consultant
---------------------------
4.1 Non-Interference. During the Term (which for this Section 4.1
----------------
shall mean the period from the Agreement Date through the fifth anniversary of
the date of this Agreement) and for a period of two years thereafter (the "Non-
Solicitation Period"), the Consultant agrees to refrain from, directly,
indirectly or as an agent on behalf of or in
-6-
<PAGE>
conjunction with any Person, soliciting (i) or encouraging (other than employee
referrals and similar activities consistent with past practice) any employee of
the Company who is employed in an executive, managerial, administrative or
professional capacity or who possesses Confidential Material (as defined below),
to leave the employment of the Company or (ii) any customer of the Company on
behalf of any Competitor (as defined below) or any other business.
4.2 Nondisclosure of Confidential Material. In the performance of
--------------------------------------
her duties, the Consultant has previously had, and may be expected in the future
to have, access to confidential records and information, including, but not
limited to, development, marketing, purchasing, organizational, strategic,
financial, managerial, administrative, manufacturing, production, distribution
and sales information, data, specifications and processes presently owned or at
any time hereafter developed by the Company, agents or consultants or used
presently or at any time hereafter in the course of the business of the Company,
that are not otherwise part of the public domain (collectively, the
"Confidential Material"). All such Confidential Material is considered secret
and has been and/or will be disclosed to the Consultant in confidence, and the
Consultant acknowledges that, as a consequence of her consultancy for the
Company, the Consultant will have access to and become acquainted with
Confidential Material. Except in the performance of her duties to the Company,
the Consultant shall not, during the Term and at all times thereafter, directly
or indirectly for any reason whatsoever, disclose or use any such Confidential
Material. All records, files, drawings, documents, equipment and other tangible
items, wherever located, relating in any way to or containing Confidential
Material, which the Consultant has prepared, used or encountered or shall in the
future prepare, use or encounter, shall be and remain the Company's sole and
exclusive property and shall be included in the Confidential
-7-
<PAGE>
Material. Upon termination of this Agreement, or whenever requested by the
Company, the Consultant shall promptly deliver to the Company any and all of the
Confidential Material and copies thereof, not previously delivered to the
Company, that may be in the possession or under the control of the Consultant.
The foregoing restrictions shall not apply to the use, divulgence, disclosure or
grant of access to Confidential Material to the extent, but only to the extent,
(i) expressly permitted or required pursuant to any other written agreement
between or among the Consultant and the Company, (ii) such Confidential Material
has been publicly disclosed (not due to a breach by the Consultant of her
obligations hereunder or by breach of any other person of a fiduciary or
confidential obligation to the Company, or (iii) the Consultant is required to
disclose Confidential Material by or to any court of competent jurisdiction or
any governmental or quasi-governmental agency, authority or instrumentality of
competent jurisdiction, provided, that the Consultant shall, prior to any such
--------
disclosure, immediately notify the Company of such requirement and provided
--------
further, that the Company shall have the right, at its expense, to object to
- -------
such disclosures and to seek confidential treatment of any Confidential Material
to be so disclosed on such terms as it shall determine.
4.3 Non-Competition. The Consultant shall not, during the Term
---------------
(which for this Section 4.3 shall mean the period from the date of this
Agreement through the fifth anniversary of the date of this Agreement), directly
or indirectly, own, manage, operate, join or Control or participate (or serve as
a consultant or in a similar position) in the ownership, management, operation
or Control of, any business, entity, firm, partnership, corporation or other
Person, whether private, governmental or quasi-governmental, other than the
Company, which is engaged, directly or indirectly, anywhere in the world, in (i)
the business of developing, manufacturing, marketing, selling and/or
distributing of vitamins, minerals, nutritional supplements (including, without
limitation, amino acids and proteins), herbal
-8-
<PAGE>
products, phytonutrients or herb teas, (ii) the publication of related health,
fitness or bodybuilding publications, or (iii) any other business engaged in or
being developed by the Company, or being actively considered by management of
the Company, at the time of the termination of the Consultant's engagement
hereunder (a "Competitor"); provided, however, that nothing in this Agreement
-------- -------
shall preclude the Consultant from serving on the board of directors of any
company with the prior consent of the Board or from owning less than 5% of any
class of publicly traded equity of any Competitor.
4.4 Enforcement.
-----------
(a) The Consultant acknowledges that violation of any of the
covenants and agreements set forth in this Article IV would cause the Company
irreparable damage for which the Company cannot be reasonably compensated in
damages in an action at law, and therefore in the event of any breach by the
Consultant of this Article IV, the Company shall be entitled to make application
to a court of competent jurisdiction for equitable relief by way of injunction
or otherwise (without being required to post a bond). This provision shall not,
however, be construed as a waiver of any of the rights which the Company may
have for damages under this Agreement or otherwise, and all of the Company's
rights and remedies shall be unrestricted. This Article IV shall survive
termination of this Agreement for any reason whatsoever.
(b) If any of the provisions of this Agreement shall otherwise
contravene or be invalid under the laws of any state or other jurisdiction where
it is applicable but for such contravention or invalidity, such contravention or
invalidity shall not invalidate all of the provisions of this Agreement, but
rather the Agreement shall be reformed and construed, insofar as the laws of
that state or jurisdiction are concerned, as not containing the provision or
provisions, but only to the extent that they are contravening or are invalid
under the laws
-9-
<PAGE>
of that state or jurisdiction, and the rights and obligations created hereby
shall be reformed and construed and enforced accordingly. In particular, if any
of the covenants or agreements set forth in this Article IV, or any part
thereof, is held to be unenforceable because of the duration of such provision
or the area covered thereby, or otherwise, the parties hereby expressly agree
that the court making such determination shall have the power to reduce the
duration and/or the areas of such provision or otherwise limit any such
provision and, in its reduced form, said provision shall then be enforceable.
(c) The Consultant understands that the provisions of this Article IV
may limit her ability to earn a livelihood in a business similar to the business
of the Company but nevertheless agrees and hereby acknowledges that (i) such
provisions do not impose a greater restraint than is necessary to protect the
goodwill or other business interests of the Company; (ii) such provisions
contain reasonable limitations as to time and the scope of activity to be
restrained; and (iii) the consideration provided under this Agreement is
sufficient to compensate the Consultant for the restrictions contained in this
Article IV. In consideration of the foregoing and in light of the Consultant's
education, skills and abilities, the Consultant agrees that she will not assert,
and it should not be considered, that any provisions of this Article IV
prevented her from earning a living or otherwise are void, voidable or
unenforceable or should be voided or held unenforceable.
(d) Each of the covenants of this Article IV is given by the
Consultant as part of the consideration for this Agreement and as an inducement
to Twin to enter into this Agreement and accept the obligations hereunder.
-10-
<PAGE>
ARTICLE V
Termination
-----------
5.1 Termination of Agreement. This Agreement shall terminate as
------------------------
provided in Section 2.2 hereof; provided, however, that (i) this Agreement shall
-------- -------
terminate automatically upon the death of the Consultant and (ii) the
Consultant's engagement hereunder may be terminated for Disability, upon at
least 30 days' prior written notice from the Board to the Consultant. Upon any
termination of this Agreement, all payments (except as provided in Section 5.2
hereof) to the Consultant shall cease, provided, that in the event of a
--------
termination of this Agreement due to Disability, the Consultant shall be
entitled to continued participation in the Plans until the fifth anniversary of
the date hereof.
5.2 Obligations of Twin Upon Expiration of the Term or Other
--------------------------------------------------------
Termination. Twin shall pay to the Consultant all Accrued Obligations in a lump
- -----------
sum within 10 days after the date of expiration of the Term or other termination
of Consultant's engagement hereunder.
ARTICLE VI
Miscellaneous
-------------
6.1 Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the heirs and representatives of the Consultant and the
successors and assigns of Twin. Twin shall require any successor (whether
direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of assets or stock, liquidation, or otherwise), by agreement in form
and substance reasonably satisfactory to the Consultant, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent that
Twin would be required to perform this Agreement if no such succession had taken
place. Regardless of whether such agreement is executed, this Agreement shall
be binding upon any
-11-
<PAGE>
successor of Twin in accordance with the operation of law, and such successor
shall be deemed to be "Twin" or the "Company", as appropriate, for purposes of
this Agreement.
6.2 Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Board, the Company or Twin, to:
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Philip Kazin
with a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, LP
333 South Grand Avenue, Suite 5400
Los Angeles, California 90071
Attention: Ms. Jennifer Holden Dunbar
(b) if to the Consultant, to:
Jean Blechman
17927 Lake Estates Drive
Boca Raton, Florida 33496
with a copy to:
Bud G. Holman, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, New York 10178
Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.
6.3 No Assignment; No Third Party Beneficiaries. Except as otherwise
-------------------------------------------
expressly provided in Section 6.1 herein, this Agreement is not assignable by
any party, and
-12-
<PAGE>
no payment to be made hereunder shall be subject to alienation, sale, transfer,
assignment, pledge, encumbrance or other charge. Except for Holding and its
existing and future subsidiaries, no Person shall be, or deemed to be, a third
party beneficiary of this Agreement.
6.4 Execution in Counterparts. This Agreement may be executed by the
-------------------------
parties hereto in one or more counterparts, each of which shall be deemed to be
an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
6.5 Jurisdiction and Governing Law. Jurisdiction over disputes with
------------------------------
regard to this Agreement shall be exclusively in the courts of the State of New
York, and this Agreement shall be construed and interpreted in accordance with
and governed by the laws of the State of New York, other than the conflict of
laws provisions of such laws.
6.6 Entire Agreement; Amendment. Except as otherwise provided in
---------------------------
Section 3.2 hereof, this Agreement and the Exhibits attached hereto (together
with a certain letter agreement dated as of March 5, 1996 among the Consultant,
the Consultant's spouse and Green) embody the entire understanding of the
parties hereto, and supersede all other oral or written agreements or
understandings between them, regarding the subject matter hereof. No change,
alteration or modification hereof may be made except in a writing, signed by
both of the parties hereto.
6.7 Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not be construed as part of this Agreement or to limit
or otherwise affect the meaning hereof.
-13-
<PAGE>
6.8 Survival. Notwithstanding anything to the contrary herein,
--------
Section 3.5, Article IV, Section 5.1 (second sentence thereof only), Section 5.2
and Article VI of this Agreement shall survive termination of this Agreement for
any reason whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
TWIN LABORATORIES INC.
/s/ Ross Blechman
--------------------------
By: Ross Blechman
Its: President
/s/ Jean Blechman
By: ______________________
Jean Blechman
AGREED AND ACCEPTED:
TLG LABORATORIES HOLDING CORP.
/s/ Ross Blechman
- --------------------------
By: Ross Blechman
Its: President
-14-
<PAGE>
EXHIBIT A
PLANS
Medical Insurance (Oxford Health Plans (NY), Inc.)
Dental Insurance (Connecticut General Life Insurance Company - Policy
2100864-01)
Twin Laboratories Inc. XS Executive Medical Insurance Plan
-15-
<PAGE>
Exhibit 10.18
NON-COMPETITION AGREEMENT
BY AND AMONG
TLG LABORATORIES HOLDING CORP.,
TWIN LABORATORIES INC.
AND
DAVID BLECHMAN
DATED AS OF
MAY 7, 1996
<PAGE>
NON-COMPETITION AGREEMENT
-------------------------
This NON-COMPETITION AGREEMENT (the "Agreement") is made and entered into
as of May 7, 1996, by and among TLG Laboratories Holding Corp., a Delaware
corporation ("Holding"), Twin Laboratories Inc., a Utah corporation formerly
known as Natur-Pharma Inc. ("Twin") and David Blechman, an individual currently
residing at 17927 Lakes Estates Drive, Boca Raton, Florida 33496 (the
"Stockholder"). As used herein, the term "Company" shall refer, individually
and/or collectively, as applicable, to Holding and its existing and future
subsidiaries, including but not limited to Twin and Advanced Research Press,
Inc., a New York corporation ("ARP").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, concurrently with the execution of this Agreement, Holding will
acquire all of the outstanding capital stock of Twin, and subsequently Twin
Laboratories Inc., a New York corporation ("Old Twin"), Twinlab Export Corp.
("Export"), Twinlab Specialty Corporation ("Specialty"), Alvita Products, Inc.
("Alvita"), ARP and B. Bros. Realty Corporation ("B. Bros.") (Twin, Old Twin,
Export, Specialty, Alvita, ARP and B. Bros. being referred to collectively as
the "Companies") will merge with Twin or Natur-Pharma II Inc., a subsidiary of
Twin, all as more fully described in the Stock Purchase and Sale Agreement dated
as of March 5, 1996, as amended (the "Purchase Agreement"), by and among the
Stockholder, Jean Blechman, Brian Blechman, Neil Blechman, Ross Blechman,
<PAGE>
Steve Blechman, Dean Blechman, Stephen Welling, Holding, Natur-Pharma Inc. and
Green Equity Investors II, L.P. ("GEI"); and
WHEREAS, immediately prior to consummation of the transactions contemplated
by the Purchase Agreement, the Stockholder is a holder of common stock of each
of Twin, Old Twin, Export, Specialty, Alvita and ARP ("Company Shares") and has
agreed to exchange or sell the Company Shares as specified in the Purchase
Agreement; and
WHEREAS, the execution and delivery of this Agreement is a condition to
GEI's obligations under the Purchase Agreement, GEI would not consummate the
transactions contemplated by the Purchase Agreement unless each stockholder of
the Companies delivers an agreement comparable to this Agreement and agrees to
comply with the terms hereof, and this Agreement constitutes an important
portion of the consideration given by the Stockholder under the Purchase
Agreement and is integral to the benefit of the bargain to GEI under the
Purchase Agreement;
NOW, THEREFORE, in order to induce GEI to consummate the transactions
contemplated by the Purchase Agreement, and in recognition and acknowledgement
of the Company's need to protect its goodwill and other business interests and
for other good and valuable consideration to be received by the Stockholder in
connection with the transactions contemplated by the Purchase Agreement,
Holding, Twin and the Stockholder, each intending to be legally bound, hereby
mutually covenant and agree as follows:
1. Definitions. The following terms shall have the meanings set forth
-----------
below.
(a) "Board" shall mean the board of directors of Holding.
(b) "Confidential Material" shall mean confidential records and
information, including, but not limited to, development, marketing, purchasing,
-2-
<PAGE>
organizational, strategic, financial, managerial, administrative, manufacturing,
production, distribution and sales information, data, specifications and
processes presently owned or at any time hereafter developed by the Company or
its agents or consultants or used presently or at any time hereafter in the
course of the business of the Company, that are not otherwise part of the public
domain.
(c) "Control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
(d) "Person" shall mean an individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
other entity or governmental or other agency or political subdivision thereof.
2. Covenant Not to Compete. The Stockholder shall not, for a period of
-----------------------
five (5) years from the date hereof (the "Term"), directly or indirectly, own,
manage, operate, join or Control or participate (or serve as a consultant or in
a similar position) in the ownership, management, operation or Control of, any
business, entity, firm, partnership, corporation or other Person, whether
private, governmental or quasi-governmental, other than the Company, which is
engaged, directly or indirectly, anywhere in the world, in (i) the business of
developing, manufacturing, marketing, selling and/or distributing of vitamins,
minerals, nutritional supplements (including, without limitation, amino acids
and proteins), herbal products, phytonutrients or herb teas, (ii) the
publication of related health, fitness or body-building publications, or (iii)
any other business engaged in or being developed by the
-3-
<PAGE>
Company, or being actively considered by management of the Company (a
"Competitor"); provided, however, that nothing in this Agreement shall preclude
-------- -------
the Stockholder from serving on the board of directors of any company with the
prior consent of the Board or from owning less than 5% of any class of publicly
traded equity of any Competitor. Notwithstanding the immediately preceding
sentence, to the extent that the Company ceases to develop any such other
business which was being developed, or the management of the Company ceases to
actively consider any such other business which was being actively considered,
the covenant set forth in the immediately preceding sentence shall no longer be
applicable to such other business. At the written request of the Stockholder,
the Company shall promptly inform the Stockholder of whether any particular
business or businesses that were being so developed or actively considered have
ceased to be so developed or actively considered.
3. Non-Interference. During the Term, the Stockholder agrees to refrain
----------------
from, directly, indirectly or as an agent on behalf of or in conjunction with
any Person, soliciting (i) or encouraging (other than employee referrals and
similar activities consistent with past practice) any employee of the Company
who is employed in an executive, managerial, administrative or professional
capacity or who possesses Confidential Material to leave the employment of the
Company or (ii) any customer of the Company on behalf of any Competitor or any
other business.
4. Nondisclosure of Confidential Material. The Stockholder has had, and
--------------------------------------
may be expected in the future to have, access to Confidential Material. All
such Confidential Material is considered secret and has been and/or will be
disclosed to the Stockholder in confidence, and the Stockholder acknowledges
that, as a consequence of his employment and
-4-
<PAGE>
position with the Company, the Stockholder had access to and became acquainted
with Confidential Material. Except in the performance of his duties as a
consultant of the Company, the Stockholder shall not, during the Term and at all
times thereafter, directly or indirectly for any reason whatsoever, disclose or
use any such Confidential Material. All records, files, drawings, documents,
equipment and other tangible items, wherever located, relating in any way to or
containing Confidential Material, which the Stockholder has prepared, used or
encountered or shall in the future prepare, use or encounter, shall be and
remain the Company's sole and exclusive property and shall be included in the
Confidential Material. Upon termination of this Agreement, or whenever
requested by the Company, the Stockholder shall promptly deliver to the Company
any and all of the Confidential Material and copies thereof, not previously
delivered to the Company, that may be in the possession or under the control of
the Stockholder. The foregoing restrictions shall not apply to the use,
divulgence, disclosure or grant of access to Confidential Material to the
extent, but only to the extent, (i) expressly permitted or required pursuant to
any other written agreement between or among the Stockholder and the Company,
(ii) such Confidential Material has been publicly disclosed (not due to a breach
by the Stockholder of his obligations hereunder or by breach of any other person
of a fiduciary or confidential obligation to the Company) or (iii) the
Stockholder is required to disclose Confidential Material by or to any court of
competent jurisdiction or any governmental or quasi-governmental agency,
authority or instrumentality of competent jurisdiction, provided, that the
--------
Stockholder shall, prior to any such disclosure, immediately notify the Company
of such requirement and provided further, that the Company shall have the right,
-------- -------
at its expense, to object to such disclosures and to
-5-
<PAGE>
seek confidential treatment of any Confidential Material to be so disclosed on
such terms as it shall determine.
5. Enforcement; Limitation on Damages.
----------------------------------
(a) The Stockholder acknowledges that violation of any of the
covenants and agreements set forth in Sections 2, 3 and 4 would cause the
Company irreparable damage for which the Company cannot be reasonably
compensated in damages in an action at law, and therefore in the event of any
breach by the Stockholder of Sections 2, 3 and 4, the Company shall be entitled
to make application to a court of competent jurisdiction for equitable relief by
way of an injunction or otherwise (without being required to post a bond).
Except as provided below, this provision shall not, however, be construed as a
waiver of any rights which the Company may have for damages under this Agreement
or otherwise, and all of the Company's and its subsidiaries' rights and remedies
shall be unrestricted. Notwithstanding the foregoing, monetary damages for
breach of any provision hereof by the Stockholder shall be limited to actual
direct damages, and for this purpose, (A) such damages shall not be measured by
reference to the consideration paid or payable to the Stockholder pursuant to
the Purchase Agreement as an inducement to enter into this Agreement,
notwithstanding any allocation of the purchase price contained in the Purchase
Agreement and (B) such consideration paid or payable pursuant to the Purchase
Agreement as an inducement to enter into this Agreement shall not be deemed to
be a ceiling on monetary damages for breach of any provision hereof by the
Stockholder.
(b) If any of the provisions of this Agreement shall otherwise
contravene or be invalid under the laws of any state or other jurisdiction where
it is applicable but for such
-6-
<PAGE>
contravention or invalidity, such contravention or invalidity shall not
invalidate all of the provisions of this Agreement, but rather the Agreement
shall be reformed and construed, insofar as the laws of that state or
jurisdiction are concerned, as not containing the provision or provisions, but
only to the extent that they are contravening or are invalid under the laws of
that state or jurisdiction, and the rights and obligations created hereby shall
be reformed and construed and enforced accordingly. In particular, if any of
the covenants or agreements set forth in Sections 2, 3 or 4, or any part
thereof, is held to be unenforceable because of the duration of such provision
or the areas covered thereby, or otherwise, the parties hereby expressly agree
that the court making such determination shall have the power to reduce the
duration and/or the areas of such provision or otherwise limit any such
provision, and, in its reduced form, such provision shall then be enforceable.
(c) The Stockholder understands that the provisions of Sections 2, 3
and 4 hereof may limit his ability to earn a livelihood in a business similar to
the business of the Company but nevertheless agrees and hereby acknowledges that
(i) such provisions do not impose a greater restraint than is necessary to
protect the goodwill or other business interests of the Company; (ii) such
provisions contain reasonable limitations as to the time and the scope of
activity to be restrained; and (iii) the consideration provided under the
Purchase Agreement is sufficient to compensate the Stockholder for the
restrictions contained in Sections 2, 3 and 4 hereof. In consideration of the
foregoing and in light of the Stockholder's education, skills and abilities, the
Stockholder agrees that he will not assert, and it should not be considered,
that any provisions of Sections 2, 3 and 4 hereof prevented him from earning a
living or are otherwise void, voidable or unenforceable or should be voided or
held unenforceable.
-7-
<PAGE>
6. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the heirs, representatives, successors and assigns of the Stockholder
and the successors and assigns of Holding and Twin. In the case of a successor
to Holding or Twin, as the case may be (whether direct or indirect, by purchase,
merger, reorganization, consolidation, acquisition of assets or stock,
liquidation, or otherwise) upon request by Holding or Twin, as the case may be,
the Stockholder shall, by agreement in form and substance reasonably
satisfactory to such successor, expressly agree to perform this Agreement in the
same manner and to the same extent that the Stockholder would be required to
perform this Agreement if no such succession had taken place. Regardless of
whether such agreement is executed, this Agreement shall be binding upon the
Stockholder and any such successor shall be deemed to be "Holding," "Twin" or
the "Company", as appropriate, for the purposes of this Agreement.
7. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Board, Holding, Twin or the Company, to:
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Philip Kazin
-8-
<PAGE>
with a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, LP
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
Attention: Ms. Jennifer Holden Dunbar
(b) if to the Stockholder, to:
David Blechman
17927 Lakes Estates Drive
Boca Raton, Florida 33496
with a copy to:
Bud G. Holman, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, New York 10178
Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.
8. Execution in Counterparts. This Agreement may be executed by the
-------------------------
parties hereto in one or more counterparts, each of which shall be deemed to be
an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
9. Jurisdiction and Governing Law. THE VALIDITY, INTERPRETATION,
------------------------------
PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE LAWS, RULES OR PRINCIPLES OF
THE STATE OF NEW YORK REGARDING CONFLICT OF LAWS). EACH PARTY AGREES THAT ANY
-9-
<PAGE>
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE BREACH OR
THREATENED BREACH OF THIS AGREEMENT MAY BE COMMENCED AND PROSECUTED IN A COURT
IN THE STATE OF NEW YORK. EACH PARTY CONSENTS AND SUBMITS TO THE NON-EXCLUSIVE
PERSONAL JURISDICTION OF ANY COURT IN THE STATE OF NEW YORK IN RESPECT OF ANY
SUCH PROCEEDING. EACH PARTY CONSENTS TO SERVICE OF PROCESS UPON IT WITH RESPECT
TO ANY SUCH PROCEEDING BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, AND BY ANY
OTHER MEANS PERMITTED BY APPLICABLE LAWS AND RULES. EACH PARTY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
PROCEEDING IN ANY COURT IN THE STATE OF NEW YORK AND ANY CLAIM THAT IT MAY NOW
OR HEREAFTER HAVE THAT ANY SUCH PROCEEDING IN ANY COURT IN THE STATE OF NEW YORK
HAS BEEN BROUGHT IN ANY INCONVENIENT FORUM.
10. Entire Agreement; Amendment. This Agreement embodies the entire
---------------------------
understanding of the parties hereto, and supersedes all other oral or written
agreements or understandings between them, regarding the subject matter hereof.
No change, alteration or modification hereof may be made except in a writing,
signed by both of the parties hereto.
11. Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not be construed as part of this Agreement or to limit
or otherwise affect the meaning hereof.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
TLG LABORATORIES HOLDING CORP.
/s/ Ross Blechman
--------------------------
By: Ross Blechman
Its: President
TWIN LABORATORIES INC.
/s/ Ross Blechman
---------------------------
By: Ross Blechman
Its: President
/s/ David Blechman
---------------------------
David Blechman
-11-
<PAGE>
Exhibit 10.19
NON-COMPETITION AGREEMENT
BY AND AMONG
TLG LABORATORIES HOLDING CORP.,
TWIN LABORATORIES INC.
AND
JEAN BLECHMAN
DATED AS OF
MAY 7, 1996
<PAGE>
NON-COMPETITION AGREEMENT
-------------------------
This NON-COMPETITION AGREEMENT (the "Agreement") is made and entered into
as of May 7, 1996, by and among TLG Laboratories Holding Corp., a Delaware
corporation ("Holding"), Twin Laboratories Inc., a Utah corporation formerly
known as Natur-Pharma Inc. ("Twin") and Jean Blechman, an individual currently
residing at 17927 Lakes Estates Drive, Boca Raton, Florida 33496 (the
"Stockholder"). As used herein, the term "Company" shall refer, individually
and/or collectively, as applicable, to Holding and its existing and future
subsidiaries, including but not limited to Twin and Advanced Research Press,
Inc., a New York corporation ("ARP").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, concurrently with the execution of this Agreement, Holding will
acquire all of the outstanding capital stock of Twin, and subsequently Twin
Laboratories Inc., a New York corporation ("Old Twin"), Twinlab Export Corp.
("Export"), Twinlab Specialty Corporation ("Specialty"), Alvita Products, Inc.
("Alvita"), ARP and B. Bros. Realty Corporation ("B. Bros.") (Twin, Old Twin,
Export, Specialty, Alvita, ARP and B. Bros. being referred to collectively as
the "Companies") will merge with Twin or Natur-Pharma II Inc., a subsidiary of
Twin, all as more fully described in the Stock Purchase and Sale Agreement dated
as of March 5, 1996, as amended (the "Purchase Agreement"), by and among the
Stockholder, David Blechman, Brian Blechman, Neil Blechman, Ross Blechman, Steve
Blechman, Dean Blechman, Stephen Welling, Holding, Natur-Pharma Inc. and Green
Equity Investors II, L.P. ("GEI"); and
-2-
<PAGE>
WHEREAS, immediately prior to consummation of the transactions contemplated
by the Purchase Agreement, the Stockholder is a holder of common stock of each
of Twin, Old Twin, Export, Specialty, Alvita and ARP ("Company Shares") and has
agreed to exchange or sell the Company Shares as specified in the Purchase
Agreement; and
WHEREAS, the execution and delivery of this Agreement is a condition to
GEI's obligations under the Purchase Agreement, GEI would not consummate the
transactions contemplated by the Purchase Agreement unless each stockholder of
the Companies delivers an agreement comparable to this Agreement and agrees to
comply with the terms hereof, and this Agreement constitutes an important
portion of the consideration given by the Stockholder under the Purchase
Agreement and is integral to the benefit of the bargain to GEI under the
Purchase Agreement;
NOW, THEREFORE, in order to induce GEI to consummate the transactions
contemplated by the Purchase Agreement, and in recognition and acknowledgement
of the Company's need to protect its goodwill and other business interests and
for other good and valuable consideration to be received by the Stockholder in
connection with the transactions contemplated by the Purchase Agreement,
Holding, Twin and the Stockholder, each intending to be legally bound, hereby
mutually covenant and agree as follows:
1. Definitions. The following terms shall have the meanings set forth
-----------
below.
(a) "Board" shall mean the board of directors of Holding.
(b) "Confidential Material" shall mean confidential records and
information, including, but not limited to, development, marketing, purchasing,
organizational, strategic, financial, managerial, administrative, manufacturing,
production, distribution and sales information, data, specifications and
processes presently owned or at
-3-
<PAGE>
any time hereafter developed by the Company or its agents or consultants or used
presently or at any time hereafter in the course of the business of the Company,
that are not otherwise part of the public domain.
(c) "Control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
(d) "Person" shall mean an individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, other entity or governmental or other agency or political
subdivision thereof.
2. Covenant Not to Compete. The Stockholder shall not, for a period of
-----------------------
five (5) years from the date hereof (the "Term"), directly or indirectly, own,
manage, operate, join or Control or participate (or serve as a consultant or in
a similar position) in the ownership, management, operation or Control of, any
business, entity, firm, partnership, corporation or other Person, whether
private, governmental or quasi-governmental, other than the Company, which is
engaged, directly or indirectly, anywhere in the world, in (i) the business of
developing, manufacturing, marketing, selling and/or distributing of vitamins,
minerals, nutritional supplements (including, without limitation, amino acids
and proteins), herbal products, phytonutrients or herb teas, (ii) the
publication of related health, fitness or body-building publications, or (iii)
any other business engaged in or being developed by the Company, or being
actively considered by management of the Company (a "Competitor"); provided,
--------
however, that nothing in this Agreement shall preclude the Stockholder from
- -------
-4-
<PAGE>
serving on the board of directors of any company with the prior consent of the
Board or from owning less than 5% of any class of publicly traded equity of any
Competitor. Notwithstanding the immediately preceding sentence, to the extent
that the Company ceases to develop any such other business which was being
developed, or the management of the Company ceases to actively consider any such
other business which was being actively considered, the covenant set forth in
the immediately preceding sentence shall no longer be applicable to such other
business. At the written request of the Stockholder, the Company shall promptly
inform the Stockholder of whether any particular business or businesses that
were being so developed or actively considered have ceased to be so developed or
actively considered.
3. Non-Interference. During the Term, the Stockholder agrees to refrain
----------------
from, directly, indirectly or as an agent on behalf of or in conjunction with
any Person, soliciting (i) or encouraging (other than employee referrals and
similar activities consistent with past practice) any employee of the Company
who is employed in an executive, managerial, administrative or professional
capacity or who possesses Confidential Material to leave the employment of the
Company or (ii) any customer of the Company on behalf of any Competitor or any
other business.
4. Nondisclosure of Confidential Material. The Stockholder has had, and
--------------------------------------
may be expected in the future to have, access to Confidential Material. All
such Confidential Material is considered secret and has been and/or will be
disclosed to the Stockholder in confidence, and the Stockholder acknowledges
that, as a consequence of her employment and position with the Company, the
Stockholder had access to and became acquainted with Confidential Material.
Except in the performance of her duties as a consultant of the
-5-
<PAGE>
Company, the Stockholder shall not, during the Term and at all times thereafter,
directly or indirectly for any reason whatsoever, disclose or use any such
Confidential Material. All records, files, drawings, documents, equipment and
other tangible items, wherever located, relating in any way to or containing
Confidential Material, which the Stockholder has prepared, used or encountered
or shall in the future prepare, use or encounter, shall be and remain the
Company's sole and exclusive property and shall be included in the Confidential
Material. Upon termination of this Agreement, or whenever requested by the
Company, the Stockholder shall promptly deliver to the Company any and all of
the Confidential Material and copies thereof, not previously delivered to the
Company, that may be in the possession or under the control of the Stockholder.
The foregoing restrictions shall not apply to the use, divulgence, disclosure or
grant of access to Confidential Material to the extent, but only to the extent,
(i) expressly permitted or required pursuant to any other written agreement
between or among the Stockholder and the Company, (ii) such Confidential
Material has been publicly disclosed (not due to a breach by the Stockholder of
his obligations hereunder or by breach of any other person of a fiduciary or
confidential obligation to the Company) or (iii) the Stockholder is required to
disclose Confidential Material by or to any court of competent jurisdiction or
any governmental or quasi-governmental agency, authority or instrumentality of
competent jurisdiction, provided, that the Stockholder shall, prior to any such
--------
disclosure, immediately notify the Company of such requirement and provided
--------
further, that the Company shall have the right, at its expense, to object to
- -------
such disclosures and to seek confidential treatment of any Confidential Material
to be so disclosed on such terms as it shall determine.
-6-
<PAGE>
5. Enforcement; Limitation on Damages.
----------------------------------
(a) The Stockholder acknowledges that violation of any of the
covenants and agreements set forth in Sections 2, 3 and 4 would cause the
Company irreparable damage for which the Company cannot be reasonably
compensated in damages in an action at law, and therefore in the event of any
breach by the Stockholder of Sections 2, 3 and 4, the Company shall be entitled
to make application to a court of competent jurisdiction for equitable relief by
way of an injunction or otherwise (without being required to post a bond).
Except as provided below, this provision shall not, however, be construed as a
waiver of any rights which the Company may have for damages under this Agreement
or otherwise, and all of the Company's and its subsidiaries' rights and remedies
shall be unrestricted. Notwithstanding the foregoing, monetary damages for
breach of any provision hereof by the Stockholder shall be limited to actual
direct damages, and for this purpose, (A) such damages shall not be measured by
reference to the consideration paid or payable to the Stockholder pursuant to
the Purchase Agreement as an inducement to enter into this Agreement,
notwithstanding any allocation of the purchase price contained in the Purchase
Agreement and (B) such consideration paid or payable pursuant to the Purchase
Agreement as an inducement to enter into this Agreement shall not be deemed to
be a ceiling on monetary damages for breach of any provision hereof by the
Stockholder.
(b) If any of the provisions of this Agreement shall otherwise
contravene or be invalid under the laws of any state or other jurisdiction where
it is applicable but for such contravention or invalidity, such contravention or
invalidity shall not invalidate all of the provisions of this Agreement, but
rather the Agreement shall be reformed and construed, insofar as the laws of
that state or jurisdiction are concerned, as not containing the provision
-7-
<PAGE>
or provisions, but only to the extent that they are contravening or are invalid
under the laws of that state or jurisdiction, and the rights and obligations
created hereby shall be reformed and construed and enforced accordingly. In
particular, if any of the covenants or agreements set forth in Sections 2, 3 or
4, or any part thereof, is held to be unenforceable because of the duration of
such provision or the areas covered thereby, or otherwise, the parties hereby
expressly agree that the court making such determination shall have the power to
reduce the duration and/or the areas of such provision or otherwise limit any
such provision, and, in its reduced form, such provision shall then be
enforceable.
(c) The Stockholder understands that the provisions of Sections 2, 3
and 4 hereof may limit her ability to earn a livelihood in a business similar to
the business of the Company but nevertheless agrees and hereby acknowledges that
(i) such provisions do not impose a greater restraint than is necessary to
protect the goodwill or other business interests of the Company; (ii) such
provisions contain reasonable limitations as to the time and the scope of
activity to be restrained; and (iii) the consideration provided under the
Purchase Agreement is sufficient to compensate the Stockholder for the
restrictions contained in Sections 2, 3 and 4 hereof. In consideration of the
foregoing and in light of the Stockholder's education, skills and abilities, the
Stockholder agrees that she will not assert, and it should not be considered,
that any provisions of Sections 2, 3 and 4 hereof prevented her from earning a
living or are otherwise void, voidable or unenforceable or should be voided or
held unenforceable.
6. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the heirs, representatives, successors and assigns of the Stockholder
and the successors and assigns of Holding and Twin. In the case of a successor
to Holding or Twin, as the case
-8-
<PAGE>
may be (whether direct or indirect, by purchase, merger, reorganization,
consolidation, acquisition of assets or stock, liquidation, or otherwise) upon
request by Holding or Twin, as the case may be, the Stockholder shall, by
agreement in form and substance reasonably satisfactory to such successor,
expressly agree to perform this Agreement in the same manner and to the same
extent that the Stockholder would be required to perform this Agreement if no
such succession had taken place. Regardless of whether such agreement is
executed, this Agreement shall be binding upon the Stockholder and any such
successor shall be deemed to be "Holding," "Twin" or the "Company", as
appropriate, for the purposes of this Agreement.
7. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Board, Holding, Twin or the Company, to:
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Philip Kazin
with a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, LP
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
Attention: Ms. Jennifer Holden Dunbar
(b) if to the Stockholder, to:
Jean Blechman
17927 Lakes Estates Drive
Boca Raton, Florida 33496
-9-
<PAGE>
with a copy to:
Bud G. Holman, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, New York 10178
Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.
8. Execution in Counterparts. This Agreement may be executed by the
-------------------------
parties hereto in one or more counterparts, each of which shall be deemed to be
an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
9. Jurisdiction and Governing Law. THE VALIDITY, INTERPRETATION,
------------------------------
PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE LAWS, RULES OR PRINCIPLES OF
THE STATE OF NEW YORK REGARDING CONFLICT OF LAWS). EACH PARTY AGREES THAT ANY
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE BREACH OR
THREATENED BREACH OF THIS AGREEMENT MAY BE COMMENCED AND PROSECUTED IN A COURT
IN THE STATE OF NEW YORK. EACH PARTY CONSENTS AND SUBMITS TO THE NON-EXCLUSIVE
PERSONAL JURISDICTION OF ANY COURT IN THE STATE OF NEW YORK IN RESPECT OF ANY
SUCH PROCEEDING. EACH PARTY CONSENTS TO SERVICE OF PROCESS UPON IT WITH RESPECT
TO ANY SUCH PROCEEDING BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, AND BY ANY
OTHER MEANS PERMITTED BY
-10-
<PAGE>
APPLICABLE LAWS AND RULES. EACH PARTY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING IN ANY COURT IN THE
STATE OF NEW YORK AND ANY CLAIM THAT IT MAY NOW OR HEREAFTER HAVE THAT ANY SUCH
PROCEEDING IN ANY COURT IN THE STATE OF NEW YORK HAS BEEN BROUGHT IN ANY
INCONVENIENT FORUM.
10. Entire Agreement; Amendment. This Agreement embodies the entire
---------------------------
understanding of the parties hereto, and supersedes all other oral or written
agreements or understandings between them, regarding the subject matter hereof.
No change, alteration or modification hereof may be made except in a writing,
signed by both of the parties hereto.
11. Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not be construed as part of this Agreement or to limit
or otherwise affect the meaning hereof.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
TLG LABORATORIES HOLDING CORP.
/s/ Ross Blechman
______________________________
By: Ross Blechman
Its: President
TWIN LABORATORIES INC.
/s/ Ross Blechman
______________________________
By: Ross Blechman
Its: President
/s/ Jean Blechman
______________________________
Jean Blechman
-12-
<PAGE>
Exhibit 10.20
NON-COMPETITION AGREEMENT
BY AND AMONG
TLG LABORATORIES HOLDING CORP.,
TWIN LABORATORIES INC.
AND
BRIAN BLECHMAN,
DATED AS OF
MAY 7, 1996
<PAGE>
NON-COMPETITION AGREEMENT
-------------------------
This NON-COMPETITION AGREEMENT (the "Agreement") is made and entered into
as of May 7, 1996, by and among TLG Laboratories Holding Corp., a Delaware
corporation ("Holding"), Twin Laboratories Inc., a Utah corporation formerly
known as Natur-Pharma Inc. ("Twin") and Brian Blechman, an individual currently
residing at 255 S. Gillette Avenue, Bayport, New York 11705 (the "Stockholder").
As used herein, the term "Company" shall refer to Holding and its existing and
future subsidiaries, including but not limited to Twin and Advanced Research
Press, Inc., a New York corporation ("ARP").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, concurrently with the execution of this Agreement, Holding will
acquire all of the outstanding capital stock of Twin, and subsequently Twin
Laboratories Inc., a New York corporation ("Old Twin"), Twinlab Export Corp.
("Export"), Twinlab Specialty Corporation ("Specialty"), Alvita Products, Inc.
("Alvita"), ARP and B. Bros. Realty Corporation ("B. Bros.") (Twin, Old Twin,
Export, Specialty, Alvita, ARP and B. Bros. being referred to collectively as
the "Companies") will merge with Twin or Natur-Pharma II Inc., a subsidiary of
Twin, all as more fully described in the Stock Purchase and Sale Agreement dated
as of March 5, 1996, as amended (the "Purchase Agreement"), by and among the
Stockholder, David Blechman, Jean Blechman, Neil Blechman, Ross Blechman, Steve
Blechman, Dean Blechman, Stephen Welling, Holding, Natur-Pharma Inc. and Green
Equity Investors II, L.P. ("GEI"); and
-2-
<PAGE>
WHEREAS, immediately prior to consummation of the transactions contemplated
by the Purchase Agreement, the Stockholder is a holder of common stock of each
of Twin, Old Twin, Export, Specialty, Alvita and B. Bros. ("Company Shares") and
has agreed to exchange or sell the Company Shares as specified in the Purchase
Agreement; and
WHEREAS, the execution and delivery of this Agreement is a condition to
GEI's obligations under the Purchase Agreement, GEI would not consummate the
transactions contemplated by the Purchase Agreement unless each Stockholder of
the Companies delivers an agreement comparable to this Agreement and agrees to
comply with the terms hereof, and this Agreement constitutes an important
portion of the consideration given by the Stockholder under the Purchase
Agreement and is integral to the benefit of the bargain to GEI under the
Purchase Agreement;
NOW, THEREFORE, in order to induce GEI to consummate the transactions
contemplated by the Purchase Agreement, and in recognition and acknowledgement
of the Company's need to protect its goodwill and other business interests and
for other good and valuable consideration to be received by the Stockholder in
connection with the transactions contemplated by the Purchase Agreement,
Holding, Twin and the Stockholder, each intending to be legally bound, hereby
mutually covenant and agree as follows:
1. Definitions. The following terms shall have the meanings set forth
-----------
below.
(a) "Board" shall mean the board of directors of Holding.
(b) "Confidential Material" shall mean confidential records and
information, including, but not limited to, development, marketing, purchasing,
organizational, strategic, financial, managerial, administrative, manufacturing,
production, distribution and sales information, data, specifications and
processes presently owned or at
-3-
<PAGE>
any time hereafter developed by the Company or its agents or consultants or used
presently or at any time hereafter in the course of the business of the Company,
that are not otherwise part of the public domain.
(c) "Control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
(d) "Person" shall mean an individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, other entity or governmental or other agency or political
subdivision thereof.
2. Covenant Not to Compete. The Stockholder shall not, for a period of
-----------------------
five (5) years from the date hereof (the "Term"), directly or indirectly, own,
manage, operate, join or Control or participate (or serve as a consultant or in
a similar position) in the ownership, management, operation or Control of, any
business, entity, firm, partnership, corporation or other Person, whether
private, governmental or quasi-governmental, other than the Company, which is
engaged, directly or indirectly, anywhere in the world, in (i) the business of
developing, manufacturing, marketing, selling and/or distributing of vitamins,
minerals, nutritional supplements (including, without limitation, amino acids
and proteins), herbal products, phytonutrients or herb teas, (ii) the
publication of related health, fitness or body-building publications, or (iii)
any other business engaged in or being developed by the Company, or being
actively considered by management of the Company (a "Competitor"); provided,
--------
however, that nothing in this Agreement shall preclude the Stockholder from
- -------
-4-
<PAGE>
serving on the board of directors of any company with the prior consent of the
Board or from owning less than 5% of any class of publicly traded equity of any
Competitor. Notwithstanding the immediately preceding sentence, to the extent
that the Company ceases to develop any such other business which was being
developed, or the management of the Company ceases to actively consider any such
other business which was being actively considered, the covenant set forth in
the immediately preceding sentence shall no longer be applicable to such other
business. At the written request of the Stockholder, the Company shall promptly
inform the Stockholder of whether any particular business or businesses that
were being so developed or actively considered have ceased to be so developed or
actively considered.
3. Non-Interference. During the Term, the Stockholder agrees to refrain
----------------
from, directly, indirectly or as an agent on behalf of or in conjunction with
any Person, soliciting (i) or encouraging (other than employee referrals and
similar activities consistent with past practice) any employee of the Company
who is employed in an executive, managerial, administrative or professional
capacity or who possesses Confidential Material to leave the employment of the
Company or (ii) any customer of the Company on behalf of any Competitor or any
other business.
4. Nondisclosure of Confidential Material. The Stockholder has had, and
--------------------------------------
may be expected in the future to have, access to Confidential Material. All
such Confidential Material is considered secret and has been and/or will be
disclosed to the Stockholder in confidence, and the Stockholder acknowledges
that, as a consequence of his employment and position with the Company, the
Stockholder had access to and became acquainted with Confidential Material.
Except in the performance of his duties as an employee of the
-5-
<PAGE>
Company, the Stockholder shall not, during the Term and at all times thereafter,
directly or indirectly for any reason whatsoever, disclose or use any such
Confidential Material. All records, files, drawings, documents, equipment and
other tangible items, wherever located, relating in any way to or containing
Confidential Material, which the Stockholder has prepared, used or encountered
or shall in the future prepare, use or encounter, shall be and remain the
Company's sole and exclusive property and shall be included in the Confidential
Material. Upon termination of this Agreement, or whenever requested by the
Company, the Stockholder shall promptly deliver to the Company any and all of
the Confidential Material and copies thereof, not previously delivered to the
Company, that may be in the possession or under the control of the Stockholder.
The foregoing restrictions shall not apply to the use, divulgence, disclosure or
grant of access to Confidential Material to the extent, but only to the extent,
(i) expressly permitted or required pursuant to any other written agreement
between or among the Stockholder and the Company, (ii) such Confidential
Material has been publicly disclosed (not due to a breach by the Stockholder of
his obligations hereunder or by breach of any other person of a fiduciary or
confidential obligation to the Company) or (iii) the Stockholder is required to
disclose Confidential Material by or to any court of competent jurisdiction or
any governmental or quasi-governmental agency, authority or instrumentality of
competent jurisdiction, provided, that the Stockholder shall, prior to any such
--------
disclosure, immediately notify the Company of such requirement and provided
--------
further, that the Company shall have the right, at its expense, to object to
- -------
such disclosures and to seek confidential treatment of any Confidential Material
to be so disclosed on such terms as it shall determine.
-6-
<PAGE>
5. Enforcement; Limitation on Damages.
----------------------------------
(a) The Stockholder acknowledges that violation of any of the
covenants and agreements set forth in Sections 2, 3 and 4 would cause the
Company irreparable damage for which the Company cannot be reasonably
compensated in damages in an action at law, and therefore in the event of any
breach by the Stockholder of Sections 2, 3 and 4, the Company shall be entitled
to make application to a court of competent jurisdiction for equitable relief by
way of an injunction or otherwise (without being required to post a bond).
Except as provided below, this provision shall not, however, be construed as a
waiver of any rights which the Company may have for damages under this Agreement
or otherwise, and all of the Company's and its subsidiaries' rights and remedies
shall be unrestricted. Notwithstanding the foregoing, monetary damages for
breach of any provision hereof by the Stockholder shall be limited to actual
direct damages, and for this purpose, (A) such damages shall not be measured by
reference to the consideration paid or payable to the Stockholder pursuant to
the Purchase Agreement as an inducement to enter into this Agreement,
notwithstanding any allocation of the purchase price contained in the Purchase
Agreement and (B) such consideration paid or payable pursuant to the Purchase
Agreement as an inducement to enter into this Agreement shall not be deemed to
be a ceiling on monetary damages for breach of any provision hereof by the
Stockholder.
(b) If any of the provisions of this Agreement shall otherwise
contravene or be invalid under the laws of any state or other jurisdiction where
it is applicable but for such contravention or invalidity, such contravention or
invalidity shall not invalidate all of the provisions of this Agreement, but
rather the Agreement shall be reformed and construed, insofar as the laws of
that state or jurisdiction are concerned, as not containing the provision
-7-
<PAGE>
or provisions, but only to the extent that they are contravening or are invalid
under the laws of that state or jurisdiction, and the rights and obligations
created hereby shall be reformed and construed and enforced accordingly. In
particular, if any of the covenants or agreements set forth in Sections 2, 3 or
4, or any part thereof, is held to be unenforceable because of the duration of
such provision or the areas covered thereby, or otherwise, the parties hereby
expressly agree that the court making such determination shall have the power to
reduce the duration and/or the areas of such provision or otherwise limit any
such provision, and, in its reduced form, such provision shall then be
enforceable.
(c) The Stockholder understands that the provisions of Sections 2, 3
and 4 hereof may limit his ability to earn a livelihood in a business similar to
the business of the Company but nevertheless agrees and hereby acknowledges that
(i) such provisions do not impose a greater restraint than is necessary to
protect the goodwill or other business interests of the Company; (ii) such
provisions contain reasonable limitations as to the time and the scope of
activity to be restrained; and (iii) the consideration provided under the
Purchase Agreement is sufficient to compensate the Stockholder for the
restrictions contained in Sections 2, 3 and 4 hereof. In consideration of the
foregoing and in light of the Stockholder's education, skills and abilities, the
Stockholder agrees that he will not assert, and it should not be considered,
that any provisions of Sections 2, 3 and 4 hereof prevented him from earning a
living or are otherwise void, voidable or unenforceable or should be voided or
held unenforceable.
6. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the heirs, representatives, successors and assigns of the Stockholder
and the successors and assigns of Holding and Twin. In the case of a successor
to Holding or Twin, as the case
-8-
<PAGE>
may be (whether direct or indirect, by purchase, merger, reorganization,
consolidation, acquisition of assets or stock, liquidation, or otherwise) upon
request by Holding or Twin, as the case may be, the Stockholder shall, by
agreement in form and substance reasonably satisfactory to such successor,
expressly agree to perform this Agreement in the same manner and to the same
extent that the Stockholder would be required to perform this Agreement if no
such succession had taken place. Regardless of whether such agreement is
executed, this Agreement shall be binding upon the Stockholder and any such
successor shall be deemed to be "Holding," "Twin" or the "Company", as
appropriate, for the purposes of this Agreement.
7. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Board, Holding, Twin or the Company, to:
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Philip Kazin
with a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, LP
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
Attention: Ms. Jennifer Holden Dunbar
(b) if to the Stockholder, to:
Brian Blechman
255 S. Gillette Avenue
Bayport, New York 11733
-9-
<PAGE>
with a copy to:
Bud G. Holman, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, New York 10178
Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.
8. Execution in Counterparts. This Agreement may be executed by the
-------------------------
parties hereto in one or more counterparts, each of which shall be deemed to be
an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
9. Jurisdiction and Governing Law. THE VALIDITY, INTERPRETATION,
------------------------------
PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE LAWS, RULES OR PRINCIPLES OF
THE STATE OF NEW YORK REGARDING CONFLICT OF LAWS). EACH PARTY AGREES THAT ANY
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE BREACH OR
THREATENED BREACH OF THIS AGREEMENT MAY BE COMMENCED AND PROSECUTED IN A COURT
IN THE STATE OF NEW YORK. EACH PARTY CONSENTS AND SUBMITS TO THE NON-EXCLUSIVE
PERSONAL JURISDICTION OF ANY COURT IN THE STATE OF NEW YORK IN RESPECT OF ANY
SUCH PROCEEDING. EACH PARTY CONSENTS TO SERVICE OF PROCESS UPON IT WITH RESPECT
TO ANY SUCH PROCEEDING BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, AND BY ANY
OTHER MEANS PERMITTED BY
-10-
<PAGE>
APPLICABLE LAWS AND RULES. EACH PARTY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING IN ANY COURT IN THE
STATE OF NEW YORK AND ANY CLAIM THAT IT MAY NOW OR HEREAFTER HAVE THAT ANY SUCH
PROCEEDING IN ANY COURT IN THE STATE OF NEW YORK HAS BEEN BROUGHT IN ANY
INCONVENIENT FORUM.
10. Entire Agreement; Amendment. This Agreement embodies the entire
---------------------------
understanding of the parties hereto, and supersedes all other oral or written
agreements or understandings between them, regarding the subject matter hereof.
No change, alteration or modification hereof may be made except in a writing,
signed by both of the parties hereto.
11. Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not be construed as part of this Agreement or to limit
or otherwise affect the meaning hereof.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
TLG LABORATORIES HOLDING CORP.
/s/ Ross Blechman
______________________________
By: Ross Blechman
Its: President
TWIN LABORATORIES INC.
/s/ Ross Blechman
______________________________
By: Ross Blechman
Its: President
/s/ Brian Blechman
______________________________
Brian Blechman
-12-
<PAGE>
Exhibit 10.21
NON-COMPETITION AGREEMENT
BY AND AMONG
TLG LABORATORIES HOLDING CORP.,
TWIN LABORATORIES INC.
AND
NEIL BLECHMAN
DATED AS OF
MAY 7, 1996
<PAGE>
NON-COMPETITION AGREEMENT
-------------------------
This NON-COMPETITION AGREEMENT (the "Agreement") is made and entered
into as of May 7, 1996, by and among TLG Laboratories Holding Corp., a Delaware
corporation ("Holding"), Twin Laboratories Inc., a Utah corporation formerly
known as Natur-Pharma Inc. ("Twin") and Neil Blechman, an individual currently
residing at 30 Setalcott Place, Setauket, New York 11733 (the "Stockholder"). As
used herein, the term "Company" shall refer to Holding and its existing and
future subsidiaries, including but not limited to Twin and Advanced Research
Press, Inc., a New York corporation ("ARP").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, concurrently with the execution of this Agreement, Holding
will acquire all of the outstanding capital stock of Twin, and subsequently Twin
Laboratories Inc., a New York corporation ("Old Twin"), Twinlab Export Corp.
("Export"), Twinlab Specialty Corporation ("Specialty"), Alvita Products, Inc.
("Alvita"), ARP and B. Bros. Realty Corporation ("B. Bros.") (Twin, Old Twin,
Export, Specialty, Alvita, ARP and B. Bros. being referred to collectively as
the "Companies") will merge with Twin or Natur-Pharma II Inc., a subsidiary of
Twin, all as more fully described in the Stock Purchase and Sale Agreement dated
as of March 5, 1996, as amended (the "Purchase Agreement"), by and among the
Stockholder, David Blechman, Jean Blechman, Brian Blechman, Ross Blechman, Steve
Blechman, Dean Blechman, Stephen Welling, Holding, Natur-Pharma Inc. and Green
Equity Investors II, L.P. ("GEI"); and
-2-
<PAGE>
WHEREAS, immediately prior to consummation of the transactions contemplated
by the Purchase Agreement, the Stockholder is a holder of common stock of each
of Twin, Old Twin, Export, Specialty, Alvita and B. Bros. ("Company Shares") and
has agreed to exchange or sell the Company Shares as specified in the Purchase
Agreement; and
WHEREAS, the execution and delivery of this Agreement is a condition to
GEI's obligations under the Purchase Agreement, GEI would not consummate the
transactions contemplated by the Purchase Agreement unless each Stockholder of
the Companies delivers an agreement comparable to this Agreement and agrees to
comply with the terms hereof, and this Agreement constitutes an important
portion of the consideration given by the Stockholder under the Purchase
Agreement and is integral to the benefit of the bargain to GEI under the
Purchase Agreement;
NOW, THEREFORE, in order to induce GEI to consummate the transactions
contemplated by the Purchase Agreement, and in recognition and acknowledgement
of the Company's need to protect its goodwill and other business interests and
for other good and valuable consideration to be received by the Stockholder in
connection with the transactions contemplated by the Purchase Agreement,
Holding, Twin and the Stockholder, each intending to be legally bound, hereby
mutually covenant and agree as follows:
1. Definitions. The following terms shall have the meanings set forth
-----------
below.
(a) "Board" shall mean the board of directors of Holding.
(b) "Confidential Material" shall mean confidential records and
information, including, but not limited to, development, marketing, purchasing,
organizational, strategic, financial, managerial, administrative, manufacturing,
production, distribution and sales information, data, specifications and
processes presently owned or at
-3-
<PAGE>
any time hereafter developed by the Company or its agents or consultants or used
presently or at any time hereafter in the course of the business of the Company,
that are not otherwise part of the public domain.
(c) "Control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
(d) "Person" shall mean an individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, other entity or governmental or other agency or political
subdivision thereof.
2. Covenant Not to Compete. The Stockholder shall not, for a period of
-----------------------
five (5) years from the date hereof (the "Term"), directly or indirectly, own,
manage, operate, join or Control or participate (or serve as a consultant or in
a similar position) in the ownership, management, operation or Control of, any
business, entity, firm, partnership, corporation or other Person, whether
private, governmental or quasi-governmental, other than the Company, which is
engaged, directly or indirectly, anywhere in the world, in (i) the business of
developing, manufacturing, marketing, selling and/or distributing of vitamins,
minerals, nutritional supplements (including, without limitation, amino acids
and proteins), herbal products, phytonutrients or herb teas, (ii) the
publication of related health, fitness or body-building publications, or (iii)
any other business engaged in or being developed by the Company, or being
actively considered by management of the Company (a "Competitor"); provided,
--------
however, that nothing in this Agreement shall preclude the Stockholder from
- -------
-4-
<PAGE>
serving on the board of directors of any company with the prior consent of the
Board or from owning less than 5% of any class of publicly traded equity of any
Competitor. Notwithstanding the immediately preceding sentence, to the extent
that the Company ceases to develop any such other business which was being
developed, or the management of the Company ceases to actively consider any such
other business which was being actively considered, the covenant set forth in
the immediately preceding sentence shall no longer be applicable to such other
business. At the written request of the Stockholder, the Company shall promptly
inform the Stockholder of whether any particular business or businesses that
were being so developed or actively considered have ceased to be so developed or
actively considered.
3. Non-Interference. During the Term, the Stockholder agrees to refrain
----------------
from, directly, indirectly or as an agent on behalf of or in conjunction with
any Person, soliciting (i) or encouraging (other than employee referrals and
similar activities consistent with past practice) any employee of the Company
who is employed in an executive, managerial, administrative or professional
capacity or who possesses Confidential Material to leave the employment of the
Company or (ii) any customer of the Company on behalf of any Competitor or any
other business.
4. Nondisclosure of Confidential Material. The Stockholder has had, and
--------------------------------------
may be expected in the future to have, access to Confidential Material. All
such Confidential Material is considered secret and has been and/or will be
disclosed to the Stockholder in confidence, and the Stockholder acknowledges
that, as a consequence of his employment and position with the Company, the
Stockholder had access to and became acquainted with Confidential Material.
Except in the performance of his duties as an employee of the
-5-
<PAGE>
Company, the Stockholder shall not, during the Term and at all times thereafter,
directly or indirectly for any reason whatsoever, disclose or use any such
Confidential Material. All records, files, drawings, documents, equipment and
other tangible items, wherever located, relating in any way to or containing
Confidential Material, which the Stockholder has prepared, used or encountered
or shall in the future prepare, use or encounter, shall be and remain the
Company's sole and exclusive property and shall be included in the Confidential
Material. Upon termination of this Agreement, or whenever requested by the
Company, the Stockholder shall promptly deliver to the Company any and all of
the Confidential Material and copies thereof, not previously delivered to the
Company, that may be in the possession or under the control of the Stockholder.
The foregoing restrictions shall not apply to the use, divulgence, disclosure or
grant of access to Confidential Material to the extent, but only to the extent,
(i) expressly permitted or required pursuant to any other written agreement
between or among the Stockholder and the Company, (ii) such Confidential
Material has been publicly disclosed (not due to a breach by the Stockholder of
his obligations hereunder or by breach of any other person of a fiduciary or
confidential obligation to the Company) or (iii) the Stockholder is required to
disclose Confidential Material by or to any court of competent jurisdiction or
any governmental or quasi-governmental agency, authority or instrumentality of
competent jurisdiction, provided, that the Stockholder shall, prior to any such
--------
disclosure, immediately notify the Company of such requirement and provided
--------
further, that the Company shall have the right, at its expense, to object to
- -------
such disclosures and to seek confidential treatment of any Confidential Material
to be so disclosed on such terms as it shall determine.
-6-
<PAGE>
5. Enforcement; Limitation on Damages.
----------------------------------
(a) The Stockholder acknowledges that violation of any of the
covenants and agreements set forth in Sections 2, 3 and 4 would cause the
Company irreparable damage for which the Company cannot be reasonably
compensated in damages in an action at law, and therefore in the event of any
breach by the Stockholder of Sections 2, 3 and 4, the Company shall be entitled
to make application to a court of competent jurisdiction for equitable relief by
way of an injunction or otherwise (without being required to post a bond).
Except as provided below, this provision shall not, however, be construed as a
waiver of any rights which the Company may have for damages under this Agreement
or otherwise, and all of the Company's and its subsidiaries' rights and remedies
shall be unrestricted. Notwithstanding the foregoing, monetary damages for
breach of any provision hereof by the Stockholder shall be limited to actual
direct damages, and for this purpose, (A) such damages shall not be measured by
reference to the consideration paid or payable to the Stockholder pursuant to
the Purchase Agreement as an inducement to enter into this Agreement,
notwithstanding any allocation of the purchase price contained in the Purchase
Agreement and (B) such consideration paid or payable pursuant to the Purchase
Agreement as an inducement to enter into this Agreement shall not be deemed to
be a ceiling on monetary damages for breach of any provision hereof by the
Stockholder.
(b) If any of the provisions of this Agreement shall otherwise
contravene or be invalid under the laws of any state or other jurisdiction where
it is applicable but for such contravention or invalidity, such contravention or
invalidity shall not invalidate all of the provisions of this Agreement, but
rather the Agreement shall be reformed and construed, insofar as the laws of
that state or jurisdiction are concerned, as not containing the provision
-7-
<PAGE>
or provisions, but only to the extent that they are contravening or are invalid
under the laws of that state or jurisdiction, and the rights and obligations
created hereby shall be reformed and construed and enforced accordingly. In
particular, if any of the covenants or agreements set forth in Sections 2, 3 or
4, or any part thereof, is held to be unenforceable because of the duration of
such provision or the areas covered thereby, or otherwise, the parties hereby
expressly agree that the court making such determination shall have the power to
reduce the duration and/or the areas of such provision or otherwise limit any
such provision, and, in its reduced form, such provision shall then be
enforceable.
(c) The Stockholder understands that the provisions of Sections 2, 3
and 4 hereof may limit his ability to earn a livelihood in a business similar to
the business of the Company but nevertheless agrees and hereby acknowledges that
(i) such provisions do not impose a greater restraint than is necessary to
protect the goodwill or other business interests of the Company; (ii) such
provisions contain reasonable limitations as to the time and the scope of
activity to be restrained; and (iii) the consideration provided under the
Purchase Agreement is sufficient to compensate the Stockholder for the
restrictions contained in Sections 2, 3 and 4 hereof. In consideration of the
foregoing and in light of the Stockholder's education, skills and abilities, the
Stockholder agrees that he will not assert, and it should not be considered,
that any provisions of Sections 2, 3 and 4 hereof prevented him from earning a
living or are otherwise void, voidable or unenforceable or should be voided or
held unenforceable.
6. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the heirs, representatives, successors and assigns of the Stockholder
and the successors and assigns of Holding and Twin. In the case of a successor
to Holding or Twin, as the case
-8-
<PAGE>
may be (whether direct or indirect, by purchase, merger, reorganization,
consolidation, acquisition of assets or stock, liquidation, or otherwise) upon
request by Holding or Twin, as the case may be, the Stockholder shall, by
agreement in form and substance reasonably satisfactory to such successor,
expressly agree to perform this Agreement in the same manner and to the same
extent that the Stockholder would be required to perform this Agreement if no
such succession had taken place. Regardless of whether such agreement is
executed, this Agreement shall be binding upon the Stockholder and any such
successor shall be deemed to be "Holding," "Twin" or the "Company", as
appropriate, for the purposes of this Agreement.
7. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Board, Holding, Twin or the Company, to:
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Philip Kazin
with a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, LP
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
Attention: Ms. Jennifer Holden Dunbar
(b) if to the Stockholder, to:
Neil Blechman
30 Setalcott Place
Setauket, New York 11733
-9-
<PAGE>
with a copy to:
Bud G. Holman, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, New York 10178
Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.
8. Execution in Counterparts. This Agreement may be executed by the
-------------------------
parties hereto in one or more counterparts, each of which shall be deemed to be
an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
9. Jurisdiction and Governing Law. THE VALIDITY, INTERPRETATION,
------------------------------
PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE LAWS, RULES OR PRINCIPLES OF
THE STATE OF NEW YORK REGARDING CONFLICT OF LAWS). EACH PARTY AGREES THAT ANY
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE BREACH OR
THREATENED BREACH OF THIS AGREEMENT MAY BE COMMENCED AND PROSECUTED IN A COURT
IN THE STATE OF NEW YORK. EACH PARTY CONSENTS AND SUBMITS TO THE NON-EXCLUSIVE
PERSONAL JURISDICTION OF ANY COURT IN THE STATE OF NEW YORK IN RESPECT OF ANY
SUCH PROCEEDING. EACH PARTY CONSENTS TO SERVICE OF PROCESS UPON IT WITH RESPECT
TO ANY SUCH PROCEEDING BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, AND BY ANY
OTHER MEANS PERMITTED BY
-10-
<PAGE>
APPLICABLE LAWS AND RULES. EACH PARTY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING IN ANY COURT IN THE
STATE OF NEW YORK AND ANY CLAIM THAT IT MAY NOW OR HEREAFTER HAVE THAT ANY SUCH
PROCEEDING IN ANY COURT IN THE STATE OF NEW YORK HAS BEEN BROUGHT IN ANY
INCONVENIENT FORUM.
10. Entire Agreement; Amendment. This Agreement embodies the entire
---------------------------
understanding of the parties hereto, and supersedes all other oral or written
agreements or understandings between them, regarding the subject matter hereof.
No change, alteration or modification hereof may be made except in a writing,
signed by both of the parties hereto.
11. Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not be construed as part of this Agreement or to limit
or otherwise affect the meaning hereof.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
TLG LABORATORIES HOLDING CORP.
/s/ Ross Blechman
_________________________
By: Ross Blechman
Its: President
TWIN LABORATORIES INC.
/s/ Ross Blechman
_________________________
By: Ross Blechman
Its: President
/s/ Neil Blechman
_________________________
Neil Blechman
-12-
<PAGE>
Exhibit 10.22
NON-COMPETITION AGREEMENT
BY AND AMONG
TLG LABORATORIES HOLDING CORP.,
TWIN LABORATORIES INC.
AND
ROSS BLECHMAN
DATED AS OF
MAY 7, 1996
<PAGE>
NON-COMPETITION AGREEMENT
-------------------------
This NON-COMPETITION AGREEMENT (the "Agreement") is made and entered
into as of May 7, 1996, by and among TLG Laboratories Holding Corp., a Delaware
corporation ("Holding"), Twin Laboratories Inc., a Utah corporation formerly
known as Natur-Parma Inc. ("Twin") and Ross Blechman, an individual currently
residing at 41 Setalcott Place, Setauket, New York 11733 (the "Stockholder"). As
used herein, the term "Company" shall refer, individually, and/or collectively,
as applicable, to Holding and its existing and future subsidiaries, including
but not limited to Twin and Advanced Research Press, Inc., a New York
corporation ("ARP").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, concurrently with the execution of this Agreement, Holding
will acquire all of the outstanding capital stock of Twin, and subsequently Twin
Laboratories Inc., a New York corporation ("Old Twin"), Twinlab Export Corp.
("Export"), Twinlab Specialty Corporation ("Specialty"), Alvita Products, Inc.
("Alvita"), ARP and B. Bros. Realty Corporation ("B. Bros.") (Twin, Old Twin,
Export, Specialty, Alvita, ARP and B. Bros. being referred to collectively as
the "Companies") will merge with Twin or Natur-Pharma II Inc., a subsidiary of
Twin, all as more fully described in the Stock Purchase and Sale Agreement dated
as of March 5, 1996, as amended (the "Purchase Agreement"), by and among the
Stockholder, David Blechman, Jean Blechman, Brian Blechman, Neil Blechman, Steve
Blechman, Dean Blechman, Stephen Welling, Holding, Natur-Pharma Inc. and Green
Equity Investors II, L.P. ("GEI"); and
-2-
<PAGE>
WHEREAS, immediately prior to consummation of the transactions contemplated
by the Purchase Agreement, the Stockholder is a holder of common stock of each
of Twin, Old Twin, Export, Specialty, Alvita and B. Bros. ("Company Shares") and
has agreed to exchange or sell the Company Shares as specified in the Purchase
Agreement; and
WHEREAS, the execution and delivery of this Agreement is a condition to
GEI's obligations under the Purchase Agreement, GEI would not consummate the
transactions contemplated by the Purchase Agreement unless each stockholder of
the Companies delivers an agreement comparable to this Agreement and agrees to
comply with the terms hereof, and this Agreement constitutes an important
portion of the consideration given by the Stockholder under the Purchase
Agreement and is integral to the benefit of the bargain to GEI under the
Purchase Agreement;
NOW, THEREFORE, in order to induce GEI to consummate the transactions
contemplated by the Purchase Agreement, and in recognition and acknowledgement
of the Company's need to protect its goodwill and other business interests and
for other good and valuable consideration to be received by the Stockholder in
connection with the transactions contemplated by the Purchase Agreement,
Holding, Twin and the Stockholder, each intending to be legally bound, hereby
mutually covenant and agree as follows:
1. Definitions. The following terms shall have the meanings set forth
-----------
below.
(a) "Board" shall mean the board of directors of Holding.
(b) "Confidential Material" shall mean confidential records and
information, including, but not limited to, development, marketing, purchasing,
organizational, strategic, financial, managerial, administrative, manufacturing,
production, distribution and sales information, data, specifications and
processes presently owned or at
-3-
<PAGE>
any time hereafter developed by the Company or its agents or consultants or used
presently or at any time hereafter in the course of the business of the Company,
that are not otherwise part of the public domain.
(c) "Control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
(d) "Person" shall mean an individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, other entity or governmental or other agency or political
subdivision thereof.
2. Covenant Not to Compete. The Stockholder shall not, for a period of
-----------------------
five (5) years from the date hereof (the "Term"), directly or indirectly, own,
manage, operate, join or Control or participate (or serve as a consultant or in
a similar position) in the ownership, management, operation or Control of, any
business, entity, firm, partnership, corporation or other Person, whether
private, governmental or quasi-governmental, other than the Company, which is
engaged, directly or indirectly, anywhere in the world, in (i) the business of
developing, manufacturing, marketing, selling and/or distributing of vitamins,
minerals, nutritional supplements (including, without limitation, amino acids
and proteins), herbal products, phytonutrients or herb teas, (ii) the
publication of related health, fitness or body-building publications, or (iii)
any other business engaged in or being developed by the Company, or being
actively considered by management of the Company (a "Competitor"); provided,
--------
however, that nothing in this Agreement shall preclude the Stockholder from
- -------
-4-
<PAGE>
serving on the board of directors of any company with the prior consent of the
Board or from owning less than 5% of any class of publicly traded equity of any
Competitor. Notwithstanding the immediately preceding sentence, to the extent
that the Company ceases to develop any such other business which was being
developed, or the management of the Company ceases to actively consider any such
other business which was being actively considered, the covenant set forth in
the immediately preceding sentence shall no longer be applicable to such other
business. At the written request of the Stockholder, the Company shall promptly
inform the Stockholder of whether any particular business or businesses that
were being so developed or actively considered have ceased to be so developed or
actively considered.
3. Non-Interference. During the Term, the Stockholder agrees to refrain
----------------
from, directly, indirectly or as an agent on behalf of or in conjunction with
any Person, soliciting (i) or encouraging (other than employee referrals and
similar activities consistent with past practice) any employee of the Company
who is employed in an executive, managerial, administrative or professional
capacity or who possesses Confidential Material to leave the employment of the
Company or (ii) any customer of the Company on behalf of any Competitor or any
other business.
4. Nondisclosure of Confidential Material. The Stockholder has had, and
--------------------------------------
may be expected in the future to have, access to Confidential Material. All
such Confidential Material is considered secret and has been and/or will be
disclosed to the Stockholder in confidence, and the Stockholder acknowledges
that, as a consequence of his employment and position with the Company, the
Stockholder had access to and became acquainted with Confidential Material.
Except in the performance of his duties as an employee of the
-5-
<PAGE>
Company, the Stockholder shall not, during the Term and at all times thereafter,
directly or indirectly for any reason whatsoever, disclose or use any such
Confidential Material. All records, files, drawings, documents, equipment and
other tangible items, wherever located, relating in any way to or containing
Confidential Material, which the Stockholder has prepared, used or encountered
or shall in the future prepare, use or encounter, shall be and remain the
Company's sole and exclusive property and shall be included in the Confidential
Material. Upon termination of this Agreement, or whenever requested by the
Company, the Stockholder shall promptly deliver to the Company any and all of
the Confidential Material and copies thereof, not previously delivered to the
Company, that may be in the possession or under the control of the Stockholder.
The foregoing restrictions shall not apply to the use, divulgence, disclosure or
grant of access to Confidential Material to the extent, but only to the extent,
(i) expressly permitted or required pursuant to any other written agreement
between or among the Stockholder and the Company, (ii) such Confidential
Material has been publicly disclosed (not due to a breach by the Stockholder of
his obligations hereunder or by breach of any other person of a fiduciary or
confidential obligation to the Company) or (iii) the Stockholder is required to
disclose Confidential Material by or to any court of competent jurisdiction or
any governmental or quasi-governmental agency, authority or instrumentality of
competent jurisdiction, provided, that the Stockholder shall, prior to any such
--------
disclosure, immediately notify the Company of such requirement and provided
--------
further, that the Company shall have the right, at its expense, to object to
- -------
such disclosures and to seek confidential treatment of any Confidential Material
to be so disclosed on such terms as it shall determine.
-6-
<PAGE>
5. Enforcement; Limitation on Damages.
----------------------------------
(a) The Stockholder acknowledges that violation of any of the
covenants and agreements set forth in Sections 2, 3 and 4 would cause the
Company irreparable damage for which the Company cannot be reasonably
compensated in damages in an action at law, and therefore in the event of any
breach by the Stockholder of Sections 2, 3 and 4, the Company shall be entitled
to make application to a court of competent jurisdiction for equitable relief by
way of an injunction or otherwise (without being required to post a bond).
Except as provided below, this provision shall not, however, be construed as a
waiver of any rights which the Company may have for damages under this Agreement
or otherwise, and all of the Company's and its subsidiaries' rights and remedies
shall be unrestricted. Notwithstanding the foregoing, monetary damages for
breach of any provision hereof by the Stockholder shall be limited to actual
direct damages, and for this purpose, (A) such damages shall not be measured by
reference to the consideration paid or payable to the Stockholder pursuant to
the Purchase Agreement as an inducement to enter into this Agreement,
notwithstanding any allocation of the purchase price contained in the Purchase
Agreement and (B) such consideration paid or payable pursuant to the Purchase
Agreement as an inducement to enter into this Agreement shall not be deemed to
be a ceiling on monetary damages for breach of any provision hereof by the
Stockholder.
(b) If any of the provisions of this Agreement shall otherwise
contravene or be invalid under the laws of any state or other jurisdiction where
it is applicable but for such contravention or invalidity, such contravention or
invalidity shall not invalidate all of the provisions of this Agreement, but
rather the Agreement shall be reformed and construed, insofar as the laws of
that state or jurisdiction are concerned, as not containing the provision
-7-
<PAGE>
or provisions, but only to the extent that they are contravening or are invalid
under the laws of that state or jurisdiction, and the rights and obligations
created hereby shall be reformed and construed and enforced accordingly. In
particular, if any of the covenants or agreements set forth in Sections 2, 3 or
4, or any part thereof, is held to be unenforceable because of the duration of
such provision or the areas covered thereby, or otherwise, the parties hereby
expressly agree that the court making such determination shall have the power to
reduce the duration and/or the areas of such provision or otherwise limit any
such provision, and, in its reduced form, such provision shall then be
enforceable.
(c) The Stockholder understands that the provisions of Sections 2, 3
and 4 hereof may limit his ability to earn a livelihood in a business similar to
the business of the Company but nevertheless agrees and hereby acknowledges that
(i) such provisions do not impose a greater restraint than is necessary to
protect the goodwill or other business interests of the Company; (ii) such
provisions contain reasonable limitations as to the time and the scope of
activity to be restrained; and (iii) the consideration provided under the
Purchase Agreement is sufficient to compensate the Stockholder for the
restrictions contained in Sections 2, 3 and 4 hereof. In consideration of the
foregoing and in light of the Stockholder's education, skills and abilities, the
Stockholder agrees that he will not assert, and it should not be considered,
that any provisions of Sections 2, 3 and 4 hereof prevented him from earning a
living or are otherwise void, voidable or unenforceable or should be voided or
held unenforceable.
6. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the heirs, representatives, successors and assigns of the Stockholder
and the successors and assigns of Holding and Twin. In the case of a successor
to Holding or Twin, as the case
-8-
<PAGE>
may be (whether direct or indirect, by purchase, merger, reorganization,
consolidation, acquisition of assets or stock, liquidation, or otherwise) upon
request by Holding or Twin, as the case may be, the Stockholder shall, by
agreement in form and substance reasonably satisfactory to such successor,
expressly agree to perform this Agreement in the same manner and to the same
extent that the Stockholder would be required to perform this Agreement if no
such succession had taken place. Regardless of whether such agreement is
executed, this Agreement shall be binding upon the Stockholder and any such
successor shall be deemed to be "Holding," "Twin" or the "Company", as
appropriate, for the purposes of this Agreement.
7. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Board, Holding, Twin or the Company, to:
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Philip Kazin
with a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, LP
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
Attention: Ms. Jennifer Holden Dunbar
(b) if to the Stockholder, to:
Ross Blechman
41 Setalcott Place
Setauket, New York 11733
-9-
<PAGE>
with a copy to:
Bud G. Holman, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, New York 10178
Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.
8. Execution in Counterparts. This Agreement may be executed by the
-------------------------
parties hereto in one or more counterparts, each of which shall be deemed to be
an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
9. Jurisdiction and Governing Law. THE VALIDITY, INTERPRETATION,
------------------------------
PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE LAWS, RULES OR PRINCIPLES OF
THE STATE OF NEW YORK REGARDING CONFLICT OF LAWS). EACH PARTY AGREES THAT ANY
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE BREACH OR
THREATENED BREACH OF THIS AGREEMENT MAY BE COMMENCED AND PROSECUTED IN A COURT
IN THE STATE OF NEW YORK. EACH PARTY CONSENTS AND SUBMITS TO THE NON-EXCLUSIVE
PERSONAL JURISDICTION OF ANY COURT IN THE STATE OF NEW YORK IN RESPECT OF ANY
SUCH PROCEEDING. EACH PARTY CONSENTS TO SERVICE OF PROCESS UPON IT WITH RESPECT
TO ANY SUCH PROCEEDING BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, AND BY ANY
OTHER MEANS PERMITTED BY
-10-
<PAGE>
APPLICABLE LAWS AND RULES EACH PARTY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING IN ANY COURT IN THE
STATE OF NEW YORK AND ANY CLAIM THAT IT MAY NOW OR HEREAFTER HAVE THAT SUCH
PROCEEDING IN ANY COURT IN THE STATE OF NEW YORK HAS BEEN BROUGHT IN ANY
INCONVENIENT FORUM.
10. Entire Agreement: Amendment. This Agreement embodies the entire
---------------------------
understanding of the parties hereto, and supersedes all other oral or written
agreements or understandings between them, regarding the subject matter hereof.
No change, alteration or modification hereof may be made except in a writing,
signed by both of the parties hereto.
11. Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not be construed as part of this Agreement or to limit
or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
TLG LABORATORIES HOLDING CORP.
/s/ Brian Blechman
__________________________________
By: Brian Blechman
Its: Executive Vice President
TWIN LABORATORIES INC.
/s/ Brian Blechman
__________________________________
By: Brian Blechman
Its: Executive Vice President
/s/ Ross Blechman
__________________________________
Ross Blechman
-11-
<PAGE>
Exhibit 10.23
NON-COMPETITION AGREEMENT
BY AND AMONG
TLG LABORATORIES HOLDING CORP.,
TWIN LABORATORIES INC.
AND
STEVE BLECHMAN
DATED AS OF
MAY 7, 1996
<PAGE>
NON-COMPETITION AGREEMENT
-------------------------
This NON-COMPETITION AGREEMENT (the "Agreement") is made and entered into
as of May 7, 1996, by and among TLG Laboratories Holding Corp., a Delaware
corporation ("Holding"), Twin Laboratories Inc., a Utah corporation formerly
known as Natur-Pharma Inc. ("Twin") and Steve Blechman, an individual currently
residing at 11 White Pine Lane, Poquott, New York 11733 (the "Stockholder"). As
used herein, the term "Company" shall refer, individually, and/or collectively,
as applicable, to Holding and its existing and future subsidiaries, including
but not limited to Twin and Advanced Research Press, Inc., a New York
corporation ("ARP").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, concurrently with the execution of this Agreement, Holding will
acquire all of the outstanding capital stock of Twin, and subsequently Twin
Laboratories Inc., a New York corporation ("Old Twin"), Twinlab Export Corp.
("Export"), Twinlab Specialty Corporation ("Specialty"), Alvita Products, Inc.
("Alvita"), ARP and B. Bros. Realty Corporation ("B. Bros.") (Twin, Old Twin,
Export, Specialty, Alvita, ARP and B. Bros. being referred to collectively as
the "Companies") will merge with Twin or Natur-Pharma II Inc., a subsidiary of
Twin, all as more fully described in the Stock Purchase and Sale Agreement dated
as of March 5, 1996, as amended (the "Purchase Agreement"), by and among the
Stockholder, David Blechman, Jean Blechman, Brian Blechman, Neil Blechman, Ross
Blechman, Dean Blechman, Stephen Welling, Holding, Natur-Pharma Inc. and Green
Equity Investors II, L.P. ("GEI"); and
-2-
<PAGE>
WHEREAS, immediately prior to consummation of the transactions contemplated
by the Purchase Agreement, the Stockholder is a holder of common stock of each
of Twin, Old Twin, Export, Specialty, Alvita and B. Bros. ("Company Shares") and
has agreed to exchange or sell the Company Shares as specified in the Purchase
Agreement; and
WHEREAS, the execution and delivery of this Agreement is a condition to
GEI's obligations under the Purchase Agreement, GEI would not consummate the
transactions contemplated by the Purchase Agreement unless each Stockholder of
the Companies delivers an agreement comparable to this Agreement and agrees to
comply with the terms hereof, and this Agreement constitutes an important
portion of the consideration given by the Stockholder under the Purchase
Agreement and is integral to the benefit of the bargain to GEI under the
Purchase Agreement;
NOW, THEREFORE, in order to induce GEI to consummate the transactions
contemplated by the Purchase Agreement, and in recognition and acknowledgement
of the Company's need to protect its goodwill and other business interests and
for other good and valuable consideration to be received by the Stockholder in
connection with the transactions contemplated by the Purchase Agreement,
Holding, Twin and the Stockholder, each intending to be legally bound, hereby
mutually covenant and agree as follows:
1. Definitions. The following terms shall have the meanings set forth
-----------
below.
(a) "Board" shall mean the board of directors of Holding.
(b) "Confidential Material" shall mean confidential records and
information, including, but not limited to, development, marketing, purchasing,
organizational, strategic, financial, managerial, administrative, manufacturing,
production, distribution and sales information, data, specifications and
processes presently owned or at
-3-
<PAGE>
any time hereafter developed by the Company or its agents or consultants or used
presently or at any time hereafter in the course of the business of the Company,
that are not otherwise part of the public domain.
(c) "Control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
(d) "Person" shall mean an individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
other entity or governmental or other agency or political subdivision thereof.
2. Covenant Not to Compete. The Stockholder shall not, for a period of
-----------------------
five (5) years from the date hereof (the "Term"), directly or indirectly, own,
manage, operate, join or Control or participate (or serve as a consultant or in
a similar position) in the ownership, management, operation or Control of, any
business, entity, firm, partnership, corporation or other Person, whether
private, governmental or quasi-governmental, other than the Company, which is
engaged, directly or indirectly, anywhere in the world, in (i) the business of
developing, manufacturing, marketing, selling and/or distributing of vitamins,
minerals, nutritional supplements (including, without limitation, amino acids
and proteins), herbal products, phytonutrients or herb teas, (ii) the
publication of related health, fitness or body-building publications, or (iii)
any other business engaged in or being developed by the Company, or being
actively considered by management of the Company (a "Competitor"); provided,
--------
however, that nothing in this Agreement shall preclude the Stockholder from
- -------
-4-
<PAGE>
serving on the board of directors of any company with the prior consent of the
Board or from owning less than 5% of any class of publicly traded equity of any
Competitor. Notwithstanding the immediately preceding sentence, to the extent
that the Company ceases to develop any such other business which was being
developed, or the management of the Company ceases to actively consider any such
other business which was being actively considered, the covenant set forth in
the immediately preceding sentence shall no longer be applicable to such other
business. At the written request of the Stockholder, the Company shall promptly
inform the Stockholder of whether any particular business or businesses that
were being so developed or actively considered have ceased to be so developed or
actively considered.
3. Non-Interference. During the Term, the Stockholder agrees to refrain
----------------
from, directly, indirectly or as an agent on behalf of or in conjunction with
any Person, soliciting (i) or encouraging (other than employee referrals and
similar activities consistent with past practice) any employee of the Company
who is employed in an executive, managerial, administrative or professional
capacity or who possesses Confidential Material to leave the employment of the
Company or (ii) any customer of the Company on behalf of any Competitor or any
other business.
4. Nondisclosure of Confidential Material. The Stockholder has had, and
--------------------------------------
may be expected in the future to have, access to Confidential Material. All
such Confidential Material is considered secret and has been and/or will be
disclosed to the Stockholder in confidence, and the Stockholder acknowledges
that, as a consequence of his employment and position with the Company, the
Stockholder had access to and became acquainted with Confidential Material.
Except in the performance of his duties as an employee of the
-5-
<PAGE>
Company, the Stockholder shall not, during the Term and at all times thereafter,
directly or indirectly for any reason whatsoever, disclose or use any such
Confidential Material. All records, files, drawings, documents, equipment and
other tangible items, wherever located, relating in any way to or containing
Confidential Material, which the Stockholder has prepared, used or encountered
or shall in the future prepare, use or encounter, shall be and remain the
Company's sole and exclusive property and shall be included in the Confidential
Material. Upon termination of this Agreement, or whenever requested by the
Company, the Stockholder shall promptly deliver to the Company any and all of
the Confidential Material and copies thereof, not previously delivered to the
Company, that may be in the possession or under the control of the Stockholder.
The foregoing restrictions shall not apply to the use, divulgence, disclosure or
grant of access to Confidential Material to the extent, but only to the extent,
(i) expressly permitted or required pursuant to any other written agreement
between or among the Stockholder and the Company, (ii) such Confidential
Material has been publicly disclosed (not due to a breach by the Stockholder of
his obligations hereunder or by breach of any other person of a fiduciary or
confidential obligation to the Company) or (iii) the Stockholder is required to
disclose Confidential Material by or to any court of competent jurisdiction or
any governmental or quasi-governmental agency, authority or instrumentality of
competent jurisdiction, provided, that the Stockholder shall, prior to any such
--------
disclosure, immediately notify the Company of such requirement and provided
--------
further, that the Company shall have the right, at its expense, to object to
- -------
such disclosures and to seek confidential treatment of any Confidential Material
to be so disclosed on such terms as it shall determine.
-6-
<PAGE>
5. Enforcement; Limitation on Damages.
----------------------------------
(a) The Stockholder acknowledges that violation of any of the
covenants and agreements set forth in Sections 2, 3 and 4 would cause the
Company irreparable damage for which the Company cannot be reasonably
compensated in damages in an action at law, and therefore in the event of any
breach by the Stockholder of Sections 2, 3 and 4, the Company shall be entitled
to make application to a court of competent jurisdiction for equitable relief by
way of an injunction or otherwise (without being required to post a bond).
Except as provided below, this provision shall not, however, be construed as a
waiver of any rights which the Company may have for damages under this Agreement
or otherwise, and all of the Company's and its subsidiaries' rights and remedies
shall be unrestricted. Notwithstanding the foregoing, monetary damages for
breach of any provision hereof by the Stockholder shall be limited to actual
direct damages, and for this purpose, (A) such damages shall not be measured by
reference to the consideration paid or payable to the Stockholder pursuant to
the Purchase Agreement as an inducement to enter into this Agreement,
notwithstanding any allocation of the purchase price contained in the Purchase
Agreement and (B) such consideration paid or payable pursuant to the Purchase
Agreement as an inducement to enter into this Agreement shall not be deemed to
be a ceiling on monetary damages for breach of any provision hereof by the
Stockholder.
(b) If any of the provisions of this Agreement shall otherwise
contravene or be invalid under the laws of any state or other jurisdiction where
it is applicable but for such contravention or invalidity, such contravention or
invalidity shall not invalidate all of the provisions of this Agreement, but
rather the Agreement shall be reformed and construed, insofar as the laws of
that state or jurisdiction are concerned, as not containing the provision
-7-
<PAGE>
or provisions, but only to the extent that they are contravening or are invalid
under the laws of that state or jurisdiction, and the rights and obligations
created hereby shall be reformed and construed and enforced accordingly. In
particular, if any of the covenants or agreements set forth in Sections 2, 3 or
4, or any part thereof, is held to be unenforceable because of the duration of
such provision or the areas covered thereby, or otherwise, the parties hereby
expressly agree that the court making such determination shall have the power to
reduce the duration and/or the areas of such provision or otherwise limit any
such provision, and, in its reduced form, such provision shall then be
enforceable.
(c) The Stockholder understands that the provisions of Sections 2, 3 and 4
hereof may limit his ability to earn a livelihood in a business similar to the
business of the Company but nevertheless agrees and hereby acknowledges that (i)
such provisions do not impose a greater restraint than is necessary to protect
the goodwill or other business interests of the Company; (ii) such provisions
contain reasonable limitations as to the time and the scope of activity to be
restrained; and (iii) the consideration provided under the Purchase Agreement is
sufficient to compensate the Stockholder for the restrictions contained in
Sections 2, 3 and 4 hereof. In consideration of the foregoing and in light of
the Stockholder's education, skills and abilities, the Stockholder agrees that
he will not assert, and it should not be considered, that any provisions of
Sections 2, 3 and 4 hereof prevented him from earning a living or are otherwise
void, voidable or unenforceable or should be voided or held unenforceable.
6. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the heirs, representatives, successors and assigns of the Stockholder
and the successors and assigns of Holding and Twin. In the case of a successor
to Holding or Twin, as the case
-8-
<PAGE>
may be (whether direct or indirect, by purchase, merger, reorganization,
consolidation, acquisition of assets or stock, liquidation, or otherwise) upon
request by Holding or Twin, as the case may be, the Stockholder shall, by
agreement in form and substance reasonably satisfactory to such successor,
expressly agree to perform this Agreement in the same manner and to the same
extent that the Stockholder would be required to perform this Agreement if no
such succession had taken place. Regardless of whether such agreement is
executed, this Agreement shall be binding upon the Stockholder and any such
successor shall be deemed to be "Holding," "Twin" or the "Company", as
appropriate, for the purposes of this Agreement.
7. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Board, Holding, Twin or the Company, to:
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Philip Kazin
with a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, LP
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
Attention: Ms. Jennifer Holden Dunbar
(b) if to the Stockholder, to:
Steve Blechman
11 White Pine Lane
Poquott, New York 11733
-9-
<PAGE>
with a copy to:
Bud G. Holman, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, New York 10178
Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.
8. Execution in Counterparts. This Agreement may be executed by the
-------------------------
parties hereto in one or more counterparts, each of which shall be deemed to be
an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
9. Jurisdiction and Governing Law. THE VALIDITY, INTERPRETATION,
------------------------------
PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE LAWS, RULES OR PRINCIPLES OF
THE STATE OF NEW YORK REGARDING CONFLICT OF LAWS). EACH PARTY AGREES THAT ANY
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE BREACH OR
THREATENED BREACH OF THIS AGREEMENT MAY BE COMMENCED AND PROSECUTED IN A COURT
IN THE STATE OF NEW YORK. EACH PARTY CONSENTS AND SUBMITS TO THE NON-EXCLUSIVE
PERSONAL JURISDICTION OF ANY COURT IN THE STATE OF NEW YORK IN RESPECT OF ANY
SUCH PROCEEDING. EACH PARTY CONSENTS TO SERVICE OF PROCESS UPON IT WITH RESPECT
TO ANY SUCH PROCEEDING BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, AND BY ANY
OTHER MEANS PERMITTED BY
-10-
<PAGE>
APPLICABLE LAWS AND RULES. EACH PARTY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING IN ANY COURT IN THE
STATE OF NEW YORK AND ANY CLAIM THAT IT MAY NOW OR HEREAFTER HAVE THAT ANY SUCH
PROCEEDING IN ANY COURT IN THE STATE OF NEW YORK HAS BEEN BROUGHT IN ANY
INCONVENIENT FORUM.
10. Entire Agreement; Amendment. This Agreement embodies the entire
---------------------------
understanding of the parties hereto, and supersedes all other oral or written
agreements or understandings between them, regarding the subject matter hereof.
No change, alteration or modification hereof may be made except in a writing,
signed by both of the parties hereto.
11. Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not be construed as part of this Agreement or to limit
or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
TLG LABORATORIES HOLDING CORP.
/s/ Ross Blechman
__________________________________
By: Ross Blechman
Its: President
TWIN LABORATORIES INC.
/s/ Ross Blechman
__________________________________
By: Ross Blechman
Its: President
/s/ Steve Blechman
__________________________________
Steve Blechman
-11-
<PAGE>
Exhibit 10.24
NON-COMPETITION AGREEMENT
BY AND AMONG
TLG LABORATORIES HOLDING CORP.,
TWIN LABORATORIES INC.
AND
DEAN BLECHMAN
DATED AS OF
MAY 7, 1996
<PAGE>
NON-COMPETITION AGREEMENT
-------------------------
This NON-COMPETITION AGREEMENT (the "Agreement") is made and entered
into as of May 7, 1996, by and among TLG Laboratories Holding Corp., a Delaware
corporation ("Holding"), Twin Laboratories Inc., a Utah corporation formerly
known as Natur-Pharma Inc. ("Twin") and Dean Blechman, an individual currently
residing at 4 Stone Gate Court, Setauket, New York 11733 (the "Stockholder"). As
used herein, the term "Company" shall refer, individually, and/or collectively,
as applicable, to Holding and its existing and future subsidiaries, including
but not limited to Twin and Advanced Research Press, Inc., a New York
corporation ("ARP").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, concurrently with the execution of this Agreement, Holding
will acquire all of the outstanding capital stock of Twin, and subsequently Twin
Laboratories Inc., a New York corporation ("Old Twin"), Twinlab Export Corp.
("Export"), Twinlab Specialty Corporation ("Specialty"), Alvita Products, Inc.
("Alvita"), ARP and B. Bros. Realty Corporation ("B. Bros.") (Twin, Old Twin,
Export, Specialty, Alvita, ARP and B. Bros. being referred to collectively as
the "Companies") will merge with Twin or Natur-Pharma II Inc., a subsidiary of
Twin, all as more fully described in the Stock Purchase and Sale Agreement dated
as of March 5, 1996, as amended (the "Purchase Agreement"), by and among the
Stockholder, David Blechman, Jean Blechman, Brian Blechman, Neil Blechman, Ross
Blechman, Steve Blechman, Stephen Welling, Holding, Natur-Pharma Inc. and Green
Equity Investors II, L.P. ("GEI"); and
-2-
<PAGE>
WHEREAS, immediately prior to consummation of the transactions contemplated
by the Purchase Agreement, the Stockholder is a holder of common stock of each
of Twin, Old Twin, Export, Specialty, Alvita and B. Bros. ("Company Shares") and
has agreed to exchange or sell the Company Shares as specified in the Purchase
Agreement; and
WHEREAS, the execution and delivery of this Agreement is a condition to
GEI's obligations under the Purchase Agreement, GEI would not consummate the
transactions contemplated by the Purchase Agreement unless each Stockholder of
the Companies delivers an agreement comparable to this Agreement and agrees to
comply with the terms hereof, and this Agreement constitutes an important
portion of the consideration given by the Stockholder under the Purchase
Agreement and is integral to the benefit of the bargain to GEI under the
Purchase Agreement;
NOW, THEREFORE, in order to induce GEI to consummate the transactions
contemplated by the Purchase Agreement, and in recognition and acknowledgement
of the Company's need to protect its goodwill and other business interests and
for other good and valuable consideration to be received by the Stockholder in
connection with the transactions contemplated by the Purchase Agreement,
Holding, Twin and the Stockholder, each intending to be legally bound, hereby
mutually covenant and agree as follows:
1. Definitions. The following terms shall have the meanings set forth
-----------
below.
(a) "Board" shall mean the board of directors of Holding.
(b) "Confidential Material" shall mean confidential records and
information, including, but not limited to, development, marketing, purchasing,
organizational, strategic, financial, managerial, administrative, manufacturing,
production, distribution and sales information, data, specifications and
processes presently owned or at
-3-
<PAGE>
any time hereafter developed by the Company or its agents or consultants or used
presently or at any time hereafter in the course of the business of the Company,
that are not otherwise part of the public domain.
(c) "Control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
(d) "Person" shall mean an individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, other entity or governmental or other agency or political
subdivision thereof.
2. Covenant Not to Compete. The Stockholder shall not, for a period of
-----------------------
five (5) years from the date hereof (the "Term"), directly or indirectly, own,
manage, operate, join or Control or participate (or serve as a consultant or in
a similar position) in the ownership, management, operation or Control of, any
business, entity, firm, partnership, corporation or other Person, whether
private, governmental or quasi-governmental, other than the Company, which is
engaged, directly or indirectly, anywhere in the world, in (i) the business of
developing, manufacturing, marketing, selling and/or distributing of vitamins,
minerals, nutritional supplements (including, without limitation, amino acids
and proteins), herbal products, phytonutrients or herb teas, (ii) the
publication of related health, fitness or body-building publications, or (iii)
any other business engaged in or being developed by the Company, or being
actively considered by management of the Company (a "Competitor"); provided,
--------
however, that nothing in this Agreement shall preclude the Stockholder from
- -------
-4-
<PAGE>
serving on the board of directors of any company with the prior consent of the
Board or from owning less than 5% of any class of publicly traded equity of any
Competitor. Notwithstanding the immediately preceding sentence, to the extent
that the Company ceases to develop any such other business which was being
developed, or the management of the Company ceases to actively consider any such
other business which was being actively considered, the covenant set forth in
the immediately preceding sentence shall no longer be applicable to such other
business. At the written request of the Stockholder, the Company shall promptly
inform the Stockholder of whether any particular business or businesses that
were being so developed or actively considered have ceased to be so developed or
actively considered.
3. Non-Interference. During the Term, the Stockholder agrees to refrain
----------------
from, directly, indirectly or as an agent on behalf of or in conjunction with
any Person, soliciting (i) or encouraging (other than employee referrals and
similar activities consistent with past practice) any employee of the Company
who is employed in an executive, managerial, administrative or professional
capacity or who possesses Confidential Material to leave the employment of the
Company or (ii) any customer of the Company on behalf of any Competitor or any
other business.
4. Nondisclosure of Confidential Material. The Stockholder has had, and
--------------------------------------
may be expected in the future to have, access to Confidential Material. All
such Confidential Material is considered secret and has been and/or will be
disclosed to the Stockholder in confidence, and the Stockholder acknowledges
that, as a consequence of his employment and position with the Company, the
Stockholder had access to and became acquainted with Confidential Material.
Except in the performance of his duties as an employee of the
-5-
<PAGE>
Company, the Stockholder shall not, during the Term and at all times thereafter,
directly or indirectly for any reason whatsoever, disclose or use any such
Confidential Material. All records, files, drawings, documents, equipment and
other tangible items, wherever located, relating in any way to or containing
Confidential Material, which the Stockholder has prepared, used or encountered
or shall in the future prepare, use or encounter, shall be and remain the
Company's sole and exclusive property and shall be included in the Confidential
Material. Upon termination of this Agreement, or whenever requested by the
Company, the Stockholder shall promptly deliver to the Company any and all of
the Confidential Material and copies thereof, not previously delivered to the
Company, that may be in the possession or under the control of the Stockholder.
The foregoing restrictions shall not apply to the use, divulgence, disclosure or
grant of access to Confidential Material to the extent, but only to the extent,
(i) expressly permitted or required pursuant to any other written agreement
between or among the Stockholder and the Company, (ii) such Confidential
Material has been publicly disclosed (not due to a breach by the Stockholder of
his obligations hereunder or by breach of any other person of a fiduciary or
confidential obligation to the Company) or (iii) the Stockholder is required to
disclose Confidential Material by or to any court of competent jurisdiction or
any governmental or quasi-governmental agency, authority or instrumentality of
competent jurisdiction, provided, that the Stockholder shall, prior to any such
--------
disclosure, immediately notify the Company of such requirement and provided
--------
further, that the Company shall have the right, at its expense, to object to
- -------
such disclosures and to seek confidential treatment of any Confidential Material
to be so disclosed on such terms as it shall determine.
-6-
<PAGE>
5. Enforcement; Limitation on Damages.
----------------------------------
(a) The Stockholder acknowledges that violation of any of the
covenants and agreements set forth in Sections 2, 3 and 4 would cause the
Company irreparable damage for which the Company cannot be reasonably
compensated in damages in an action at law, and therefore in the event of any
breach by the Stockholder of Sections 2, 3 and 4, the Company shall be entitled
to make application to a court of competent jurisdiction for equitable relief by
way of an injunction or otherwise (without being required to post a bond).
Except as provided below, this provision shall not, however, be construed as a
waiver of any rights which the Company may have for damages under this Agreement
or otherwise, and all of the Company's and its subsidiaries' rights and remedies
shall be unrestricted. Notwithstanding the foregoing, monetary damages for
breach of any provision hereof by the Stockholder shall be limited to actual
direct damages, and for this purpose, (A) such damages shall not be measured by
reference to the consideration paid or payable to the Stockholder pursuant to
the Purchase Agreement as an inducement to enter into this Agreement,
notwithstanding any allocation of the purchase price contained in the Purchase
Agreement and (B) such consideration paid or payable pursuant to the Purchase
Agreement as an inducement to enter into this Agreement shall not be deemed to
be a ceiling on monetary damages for breach of any provision hereof by the
Stockholder.
(b) If any of the provisions of this Agreement shall otherwise
contravene or be invalid under the laws of any state or other jurisdiction where
it is applicable but for such contravention or invalidity, such contravention or
invalidity shall not invalidate all of the provisions of this Agreement, but
rather the Agreement shall be reformed and construed, insofar as the laws of
that state or jurisdiction are concerned, as not containing the provision
-7-
<PAGE>
or provisions, but only to the extent that they are contravening or are invalid
under the laws of that state or jurisdiction, and the rights and obligations
created hereby shall be reformed and construed and enforced accordingly. In
particular, if any of the covenants or agreements set forth in Sections 2, 3 or
4, or any part thereof, is held to be unenforceable because of the duration of
such provision or the areas covered thereby, or otherwise, the parties hereby
expressly agree that the court making such determination shall have the power to
reduce the duration and/or the areas of such provision or otherwise limit any
such provision, and, in its reduced form, such provision shall then be
enforceable.
(c) The Stockholder understands that the provisions of Sections 2, 3
and 4 hereof may limit his ability to earn a livelihood in a business similar to
the business of the Company but nevertheless agrees and hereby acknowledges that
(i) such provisions do not impose a greater restraint than is necessary to
protect the goodwill or other business interests of the Company; (ii) such
provisions contain reasonable limitations as to the time and the scope of
activity to be restrained; and (iii) the consideration provided under the
Purchase Agreement is sufficient to compensate the Stockholder for the
restrictions contained in Sections 2, 3 and 4 hereof. In consideration of the
foregoing and in light of the Stockholder's education, skills and abilities, the
Stockholder agrees that he will not assert, and it should not be considered,
that any provisions of Sections 2, 3 and 4 hereof prevented him from earning a
living or are otherwise void, voidable or unenforceable or should be voided or
held unenforceable.
6. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the heirs, representatives, successors and assigns of the Stockholder
and the successors and assigns of Holding and Twin. In the case of a successor
to Holding or Twin, as the case
-8-
<PAGE>
may be (whether direct or indirect, by purchase, merger, reorganization,
consolidation, acquisition of assets or stock, liquidation, or otherwise) upon
request by Holding or Twin, as the case may be, the Stockholder shall, by
agreement in form and substance reasonably satisfactory to such successor,
expressly agree to perform this Agreement in the same manner and to the same
extent that the Stockholder would be required to perform this Agreement if no
such succession had taken place. Regardless of whether such agreement is
executed, this Agreement shall be binding upon the Stockholder and any such
successor shall be deemed to be "Holding," "Twin" or the "Company", as
appropriate, for the purposes of this Agreement.
7. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Board, Holding, Twin or the Company, to:
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Philip Kazin
with a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, LP
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
Attention: Ms. Jennifer Holden Dunbar
(b) if to the Stockholder, to:
Dean Blechman
4 Stone Gate Court
Setauket, New York 11733
-9-
<PAGE>
with a copy to:
Bud G. Holman, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, New York 10178
Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.
8. Execution in Counterparts. This Agreement may be executed by the
-------------------------
parties hereto in one or more counterparts, each of which shall be deemed to be
an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
9. Jurisdiction and Governing Law. THE VALIDITY, INTERPRETATION,
------------------------------
PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE LAWS, RULES OR PRINCIPLES OF
THE STATE OF NEW YORK REGARDING CONFLICT OF LAWS). EACH PARTY AGREES THAT ANY
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE BREACH OR
THREATENED BREACH OF THIS AGREEMENT MAY BE COMMENCED AND PROSECUTED IN A COURT
IN THE STATE OF NEW YORK. EACH PARTY CONSENTS AND SUBMITS TO THE NON-EXCLUSIVE
PERSONAL JURISDICTION OF ANY COURT IN THE STATE OF NEW YORK IN RESPECT OF ANY
SUCH PROCEEDING. EACH PARTY CONSENTS TO SERVICE OF PROCESS UPON IT WITH RESPECT
TO ANY SUCH PROCEEDING BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, AND BY ANY
OTHER MEANS PERMITTED BY
-10-
<PAGE>
APPLICABLE LAWS AND RULES. EACH PARTY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING IN ANY COURT IN THE
STATE OF NEW YORK AND ANY CLAIM THAT IT MAY NOW OR HEREAFTER HAVE THAT ANY SUCH
PROCEEDING IN ANY COURT IN THE STATE OF NEW YORK HAS BEEN BROUGHT IN ANY
INCONVENIENT FORUM.
10. Entire Agreement; Amendment. This Agreement embodies the entire
---------------------------
understanding of the parties hereto, and supersedes all other oral or written
agreements or understandings between them, regarding the subject matter hereof.
No change, alteration or modification hereof may be made except in a writing,
signed by both of the parties hereto.
11. Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not be construed as part of this Agreement or to limit
or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
TLG LABORATORIES HOLDING CORP.
/s/ Ross Blechman
________________________
By: Ross Blechman
Its: President
TWIN LABORATORIES INC.
/s/ Ross Blechman
________________________
By: Ross Blechman
Its: President
/s/ Dean Blechman
________________________
Dean Blechman
-11-
<PAGE>
Exhibit 10.25
NON-COMPETITION AGREEMENT
BY AND AMONG
TLG LABORATORIES HOLDING CORP.,
TWIN LABORATORIES INC.
AND
STEPHEN WELLING
DATED AS OF
MAY 7, 1996
<PAGE>
NON-COMPETITION AGREEMENT
-------------------------
This NON-COMPETITION AGREEMENT (the "Agreement") is made and entered into
as of May 7, 1996, by and among TLG Laboratories Holding Corp., a Delaware
corporation ("Holding"), Twin Laboratories Inc., a Utah corporation formerly
known as Natur-Pharma Inc. ("Twin") and Stephen Welling, an individual currently
residing at 600 E. Quality Drive, American Fork, Utah 84003 (the "Stockholder").
As used herein, the term "Company" shall refer, individually and/or
collectively, as applicable to Holding and its existing and future subsidiaries,
including but not limited to Twin and Advanced Research Press, Inc., a New York
corporation ("ARP").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, concurrently with the execution of this Agreement, Holding will
acquire all of the outstanding capital stock of Twin, and subsequently Twin
Laboratories Inc., a New York corporation ("Old Twin"), Twinlab Export Corp.
("Export"), Twinlab Specialty Corporation ("Specialty"), Alvita Products, Inc.
("Alvita"), ARP and B. Bros. Realty Corporation ("B. Bros.") (Twin, Old Twin,
Export, Specialty, Alvita, ARP and B. Bros. being referred to collectively as
the "Companies") will merge with Twin or Natur-Pharma II Inc., a subsidiary of
Twin, all as more fully described in the Stock Purchase and Sale Agreement dated
as of March 5, 1996, as amended (the "Purchase Agreement"), by and among the
Stockholder, David Blechman, Jean Blechman, Brian Blechman, Neil Blechman,
-2-
<PAGE>
Ross Blechman, Steve Blechman, Dean Blechman, Holding, Natur-Pharma Inc. and
Green Equity Investors II, L.P. ("GEI"); and
WHEREAS, immediately prior to consummation of the transactions contemplated
by the Purchase Agreement, the Stockholder is a holder of common stock of each
of Old Twin and B. Bros. ("Company Shares") and has agreed to exchange or sell
the Company Shares as specified in the Purchase Agreement; and
WHEREAS, the execution and delivery of this Agreement is a condition to
GEI's obligations under the Purchase Agreement, GEI would not consummate the
transactions contemplated by the Purchase Agreement unless each Stockholder of
the Companies delivers an agreement comparable to this Agreement and agrees to
comply with the terms hereof, and this Agreement constitutes an important
portion of the consideration given by the Stockholder under the Purchase
Agreement and is integral to the benefit of the bargain to GEI under the
Purchase Agreement;
NOW, THEREFORE, in order to induce GEI to consummate the transactions
contemplated by the Purchase Agreement, and in recognition and acknowledgement
of the Company's need to protect its goodwill and other business interests and
for other good and valuable consideration to be received by the Stockholder in
connection with the transactions contemplated by the Purchase Agreement,
Holding, Twin and the Stockholder, each intending to be legally bound, hereby
mutually covenant and agree as follows:
1. Definitions. The following terms shall have the meanings set forth
-----------
below.
(a) "Board" shall mean the board of directors of Holding.
(b) "Confidential Material" shall mean confidential records and
information, including, but not limited to, development, marketing, purchasing,
-3-
<PAGE>
organizational, strategic, financial, managerial, administrative, manufacturing,
production, distribution and sales information, data, specifications and
processes presently owned or at any time hereafter developed by the Company or
its agents or consultants or used presently or at any time hereafter in the
course of the business of the Company, that are not otherwise part of the public
domain.
(c) "Control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
(d) "Person" shall mean an individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, other entity or governmental or other agency or political
subdivision thereof.
2. Covenant Not to Compete. The Stockholder shall not, for a period of
-----------------------
three (3) years from the date hereof (the "Term"), directly or indirectly, own,
manage, operate, join or Control or participate (or serve as a consultant or in
a similar position) in the ownership, management, operation or Control of, any
business, entity, firm, partnership, corporation or other Person, whether
private, governmental or quasi-governmental, other than the Company, which is
engaged, directly or indirectly, anywhere in the world, in (i) the business of
developing, manufacturing, marketing, selling and/or distributing of vitamins,
minerals, nutritional supplements (including, without limitation, amino acids
and proteins), herbal products, phytonutrients or herb teas, (ii) the
publication of related health, fitness or body-building publications, or (iii)
any other business engaged in or being developed by the
-4-
<PAGE>
Company, or being actively considered by management of the Company (a
"Competitor"); provided, however, that nothing in this Agreement shall preclude
-------- -------
the Stockholder from serving on the board of directors of any company with the
prior consent of the Board or from owning less than 5% of any class of publicly
traded equity of any Competitor. Notwithstanding the immediately preceding
sentence, to the extent that the Company ceases to develop any such other
business which was being developed, or the management of the Company ceases to
actively consider any such other business which was being actively considered,
the covenant set forth in the immediately preceding sentence shall no longer be
applicable to such other business. At the written request of the Stockholder,
the Company shall promptly inform the Stockholder of whether any particular
business or businesses that were being so developed or actively considered have
ceased to be so developed or actively considered.
3. Non-Interference. During the Term, the Stockholder agrees to refrain
----------------
from, directly, indirectly or as an agent on behalf of or in conjunction with
any Person, soliciting (i) or encouraging (other than employee referrals and
similar activities consistent with past practice) any employee of the Company
who is employed in an executive, managerial, administrative or professional
capacity or who possesses Confidential Material to leave the employment of the
Company or (ii) any customer of the Company on behalf of any Competitor or any
other business.
4. Nondisclosure of Confidential Material. The Stockholder has had, and
--------------------------------------
may be expected in the future to have, access to Confidential Material. All
such Confidential Material is considered secret and has been and/or will be
disclosed to the Stockholder in confidence, and the Stockholder acknowledges
that, as a consequence of his employment and
-5-
<PAGE>
position with the Company, the Stockholder had access to and became acquainted
with Confidential Material. Except in the performance of his duties as an
employee of the Company, the Stockholder shall not, during the Term and at all
times thereafter, directly or indirectly for any reason whatsoever, disclose or
use any such Confidential Material. All records, files, drawings, documents,
equipment and other tangible items, wherever located, relating in any way to or
containing Confidential Material, which the Stockholder has prepared, used or
encountered or shall in the future prepare, use or encounter, shall be and
remain the Company's sole and exclusive property and shall be included in the
Confidential Material. Upon termination of this Agreement, or whenever
requested by the Company, the Stockholder shall promptly deliver to the Company
any and all of the Confidential Material and copies thereof, not previously
delivered to the Company, that may be in the possession or under the control of
the Stockholder. The foregoing restrictions shall not apply to the use,
divulgence, disclosure or grant of access to Confidential Material to the
extent, but only to the extent, (i) expressly permitted or required pursuant to
any other written agreement between or among the Stockholder and the Company,
(ii) such Confidential Material has been publicly disclosed (not due to a breach
by the Stockholder of his obligations hereunder or by breach of any other person
of a fiduciary or confidential obligation to the Company) or (iii) the
Stockholder is required to disclose Confidential Material by or to any court of
competent jurisdiction or any governmental or quasi-governmental agency,
authority or instrumentality of competent jurisdiction, provided, that the
--------
Stockholder shall, prior to any such disclosure, immediately notify the Company
of such requirement and provided further, that the Company shall have the right,
-------- -------
at its expense, to object to such disclosures and to
-6-
<PAGE>
seek confidential treatment of any Confidential Material to be so disclosed on
such terms as it shall determine.
5. Enforcement; Limitation on Damages.
----------------------------------
(a) The Stockholder acknowledges that violation of any of the
covenants and agreements set forth in Sections 2, 3 and 4 would cause the
Company irreparable damage for which the Company cannot be reasonably
compensated in damages in an action at law, and therefore in the event of any
breach by the Stockholder of Sections 2, 3 and 4, the Company shall be entitled
to make application to a court of competent jurisdiction for equitable relief by
way of an injunction or otherwise (without being required to post a bond).
Except as provided below, this provision shall not, however, be construed as a
waiver of any rights which the Company may have for damages under this Agreement
or otherwise, and all of the Company's and its subsidiaries' rights and remedies
shall be unrestricted. Notwithstanding the foregoing, monetary damages for
breach of any provision hereof by the Stockholder shall be limited to actual
direct damages, and for this purpose, (A) such damages shall not be measured by
reference to the consideration paid or payable to the Stockholder pursuant to
the Purchase Agreement as an inducement to enter into this Agreement,
notwithstanding any allocation of the purchase price contained in the Purchase
Agreement and (B) such consideration paid or payable pursuant to the Purchase
Agreement as an inducement to enter into this Agreement shall not be deemed to
be a ceiling on monetary damages for breach of any provision hereof by the
Stockholder.
(b) If any of the provisions of this Agreement shall otherwise
contravene or be invalid under the laws of any state or other jurisdiction where
it is applicable but for such contravention or invalidity, such contravention or
invalidity shall not invalidate all of the
-7-
<PAGE>
provisions of this Agreement, but rather the Agreement shall be reformed and
construed, insofar as the laws of that state or jurisdiction are concerned, as
not containing the provision or provisions, but only to the extent that they are
contravening or are invalid under the laws of that state or jurisdiction, and
the rights and obligations created hereby shall be reformed and construed and
enforced accordingly. In particular, if any of the covenants or agreements set
forth in Sections 2, 3 or 4, or any part thereof, is held to be unenforceable
because of the duration of such provision or the areas covered thereby, or
otherwise, the parties hereby expressly agree that the court making such
determination shall have the power to reduce the duration and/or the areas of
such provision or otherwise limit any such provision, and, in its reduced form,
such provision shall then be enforceable.
(c) The Stockholder understands that the provisions of Sections 2, 3
and 4 hereof may limit his ability to earn a livelihood in a business similar to
the business of the Company but nevertheless agrees and hereby acknowledges that
(i) such provisions do not impose a greater restraint than is necessary to
protect the goodwill or other business interests of the Company; (ii) such
provisions contain reasonable limitations as to the time and the scope of
activity to be restrained; and (iii) the consideration provided under the
Purchase Agreement is sufficient to compensate the Stockholder for the
restrictions contained in Sections 2, 3 and 4 hereof. In consideration of the
foregoing and in light of the Stockholder's education, skills and abilities, the
Stockholder agrees that he will not assert, and it should not be considered,
that any provisions of Sections 2, 3 and 4 hereof prevented him from earning a
living or are otherwise void, voidable or unenforceable or should be voided or
held unenforceable.
-8-
<PAGE>
6. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the heirs, representatives, successors and assigns of the Stockholder
and the successors and assigns of Holding and Twin. In the case of a successor
to Holding or Twin, as the case may be (whether direct or indirect, by purchase,
merger, reorganization, consolidation, acquisition of assets or stock,
liquidation, or otherwise) upon request by Holding or Twin, as the case may be,
the Stockholder shall, by agreement in form and substance reasonably
satisfactory to such successor, expressly agree to perform this Agreement in the
same manner and to the same extent that the Stockholder would be required to
perform this Agreement if no such succession had taken place. Regardless of
whether such agreement is executed, this Agreement shall be binding upon the
Stockholder and any such successor shall be deemed to be "Holding," "Twin" or
the "Company", as appropriate, for the purposes of this Agreement.
7. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) if to the Board, Holding, Twin or the Company, to:
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779
Attention: Philip Kazin
with a copy to:
Green Equity Investors II, L.P.
c/o Leonard Green & Partners, LP
333 South Grand Avenue, Suite 5400
Los Angeles, CA 90071
-9-
<PAGE>
Attention: Ms. Jennifer Holden Dunbar
(b) if to the Stockholder, to:
Stephen Welling
600 E. Quality Drive
American Fork, Utah 84003
with a copy to:
Bud G. Holman, Esq.
Kelley Drye & Warren
101 Park Avenue
New York, New York 10178
Any such address may be changed by written notice sent to the other party at the
last recorded address of that party.
8. Execution in Counterparts. This Agreement may be executed by the
-------------------------
parties hereto in one or more counterparts, each of which shall be deemed to be
an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
9. Jurisdiction and Governing Law. THE VALIDITY, INTERPRETATION,
------------------------------
PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE LAWS, RULES OR PRINCIPLES OF
THE STATE OF NEW YORK REGARDING CONFLICT OF LAWS). EACH PARTY AGREES THAT ANY
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE BREACH OR
THREATENED BREACH OF THIS AGREEMENT MAY BE COMMENCED AND PROSECUTED IN A COURT
IN THE STATE OF NEW YORK. EACH PARTY CONSENTS AND SUBMITS TO THE NON-EXCLUSIVE
PERSONAL
-10-
<PAGE>
JURISDICTION OF ANY COURT IN THE STATE OF NEW YORK IN RESPECT OF ANY SUCH
PROCEEDING. EACH PARTY CONSENTS TO SERVICE OF PROCESS UPON IT WITH RESPECT TO
ANY SUCH PROCEEDING BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, AND BY ANY
OTHER MEANS PERMITTED BY APPLICABLE LAWS AND RULES. EACH PARTY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
PROCEEDING IN ANY COURT IN THE STATE OF NEW YORK AND ANY CLAIM THAT IT MAY NOW
OR HEREAFTER HAVE THAT ANY SUCH PROCEEDING IN ANY COURT IN THE STATE OF NEW YORK
HAS BEEN BROUGHT IN ANY INCONVENIENT FORUM.
10. Entire Agreement; Amendment. This Agreement embodies the entire
---------------------------
understanding of the parties hereto, and supersedes all other oral or written
agreements or understandings between them, regarding the subject matter hereof.
No change, alteration or modification hereof may be made except in a writing,
signed by both of the parties hereto.
11. Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not be construed as part of this Agreement or to limit
or otherwise affect the meaning hereof.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
TLG LABORATORIES HOLDING CORP.
/s/ Ross Blechman
__________________________
By: Ross Blechman
Its: President
TWIN LABORATORIES INC.
/s/ Ross Blechman
__________________________
By: Ross Blechman
Its: President
/s/ Stephen Welling
__________________________
Stephen Welling
-12-
<PAGE>
MANAGEMENT SERVICES AGREEMENT
This MANAGEMENT SERVICES AGREEMENT (the "Agreement"), dated as of May
__, 1996, is made by and between TLG LABORATORIES HOLDING CORP., a Delaware
corporation (the "Company"), and LEONARD GREEN & PARTNERS, L.P. ("LGP").
WHEREAS, the Company desires to obtain from LGP, and LGP desires to
provide, certain management, consulting and financial planning services on an
ongoing basis and certain financial advisory and investment banking services in
connection with major financial transactions that may be undertaken from time to
time in the future;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto hereby agree as follows:
1. Retention.
---------
1.1 General Services. Subject to the terms and conditions hereof, the
----------------
Company hereby retains LGP, and LGP hereby agrees to be retained by the Company,
to provide management, consulting and financial planning services to the Company
and its subsidiaries on an ongoing basis in connection with the operation and
growth of the Company and its subsidiaries during the term of this Agreement
(the "General Services").
1.2 Major Transaction Services. Subject to the terms and conditions
--------------------------
hereof, the Company hereby retains LGP, and LGP hereby agrees to be retained by
the Company, to provide financial advisory and investment banking services to
the Company and its Subsidiaries in connection with major financial transactions
("Major Transactions") that may be undertaken from time to time in the future
("Major Transaction Services" and, together with the General Services, the
"Services").
2. Compensation.
------------
2.1 General Services Fee. In consideration of the General Services,
--------------------
the Company shall pay LGP an annual fee of $400,000. Such fee shall be payable
in equal monthly installments, in advance, on the first day of each month
commencing on the first such day following the date hereof, provided, however,
that such fee shall accrue, but not be payable, during such time, if any, that
any of the events (the "Events") specified in clauses (i) or (ii) of Section 1.7
of the Stockholders Agreement dated as of the date hereof by and among Green
Equity Investors II, L.P., Brian Blechman, Neil Blechman, Ross Blechman, Steve
Blechman, Dean Blechman, Stephen Welling and the Company (the "Stockholders
Agreement") has occurred and is continuing. Any such fees which have accrued and
not been paid as provided in the foregoing sentence shall be paid in their
entirety on the first day
<PAGE>
of the month following the termination of the Event which caused such fees to
accrue but not be payable as provided in the foregoing sentence.
2.2 Major Transaction Services Fee. In consideration of Major
------------------------------
Transaction Services provided by LGP from time to time, the Company shall, upon
the consummation of a Major Transaction, pay LGP reasonable and customary fees
for services of like kind, taking into consideration all relevant factors,
including but not limited to, the complexity of the subject Major Transaction,
the time devoted to providing such services and the value of LGP's investment
banking expertise and relationships within the business and financial community.
So long as the Blechman Parties (as such term is defined in the Stockholders
Agreement; provided, however as used herein, such term shall not include Stephen
Welling) shall collectively own more than thirty percent (30%) of the
outstanding shares of Common Stock (as such term is defined in the Stockholders
Agreement), the amount of such fees in respect of a Major Transaction shall be
approved by a majority of the Blechman Directors (as such term is defined in the
Stockholders Agreement). If the Blechman Parties shall collectively own thirty
percent (30%) or less of the outstanding shares of Common Stock, or if there are
no Blechman Directors, the amount of such fees shall be either (i) approved by a
majority of the independent members of the Company's Board of Directors or (ii)
fair to the Company from a financial point of view in the opinion of an
independent nationally recognized investment banking firm, which opinion shall
be delivered to the Company.
2.3 Expenses. In addition to the fees to be paid to LGP under
--------
Section 2.1 and 2.2 hereof, the Company shall pay to, or on behalf of, LGP,
promptly as billed, all reasonable out-of-pocket expenses incurred by LGP in
connection with the Services rendered hereunder. Such expenses shall include,
among other things, fees and disbursements of counsel, travel expenses, word
processing charges, messenger and duplicating services, facsimile expenses and
other customary expenditures.
3. Term.
----
3.1 Termination. This Agreement shall terminate on the earlier of
-----------
(i) the fifth anniversary of this Agreement and (ii) such time as the GEI
Parties (as such term is defined in the Stockholders Agreement) own less than
thirty percent (30%) of the outstanding shares of Common Stock (the earlier of
clauses (i) and (ii) is hereinafter referred to as a "Termination Event");
provided, however, that if a Public Offering Event or a Qualified IPO (as such
terms are defined in the Employment Agreement dated the date hereof between the
Company and Ross Blechman (the "Employment Agreement")) shall have occurred
prior to a Termination Event, the term of this Agreement shall automatically be
extended until such time, if any, as the Termination Event referred to in clause
(ii) above shall have occurred; provided, further, that in no event shall the
term of this Agreement be less than three years following a Public Offering
Event or a Qualified IPO.
3.2 Survival of Certain Obligations. Notwithstanding any other
-------------------------------
provision hereof, the Company's obligation to pay amounts due pursuant to
Section 2 hereof with respect to periods prior to the termination hereof and the
provisions of Section 5 hereof shall survive any termination of this Agreement.
-2-
<PAGE>
4. Decisions/Authority of Management Advisor.
-----------------------------------------
4.1 Limitation on LGP Liability. The Company reserves the right to
---------------------------
make all decisions with regard to any matter upon which LGP has rendered its
advice and consultation, and there shall be no liability to LGP for any such
advice accepted by the Company pursuant to the provisions of this Agreement.
4.2 Independent Contractor. LGP shall act solely as an independent
----------------------
contractor and shall have complete charge of its personnel engaged in the
performance of the Services. As an independent contractor, LGP shall have
authority only to act as an advisor to the Company and shall have no authority
to enter into any agreement or to make any representation, commitment or
warranty binding upon the Company or to obtain or incur any right, obligation or
liability on behalf of the Company.
5. Indemnification.
---------------
5.1 Indemnification/Reimbursement of Expenses. The Company shall (i)
-----------------------------------------
indemnify LGP and Green Equity Investors II, L.P. ("GEI"), their respective
affiliates, and the partners, directors, officers, employees, agents and
controlling persons of LGP and GEI and their respective affiliates
(collectively, the "Indemnified Parties"), to the fullest extent permitted by
law, from and against any and all losses, claims, damages and liabilities, joint
or several, to which any Indemnified Party may become subject, caused by,
related to or arising out of the Services or any other advice or services
contemplated by this Agreement or the engagement of LGP pursuant to, and the
performance by LGP of the Services contemplated by, this Agreement, and (ii)
promptly reimburse each Indemnified Party for all costs and expenses (including
reasonable attorneys' fees and expenses), as incurred, in connection with the
investigation of, preparation for or defense of any pending or threatened claim
or any action or proceeding arising therefrom, whether or not such Indemnified
Party is a party and whether or not such claim, action or proceeding is
initiated or brought by or on behalf of the Company and whether or not resulting
in any liability.
5.2 Limited Liability. The Company shall not be liable under the
-----------------
indemnification contained in Section 5.1 to the extent that such loss, claim,
damage, liability, cost or expense is found in a final non-appealable judgment
by a court to have resulted from LGP's bad faith or gross negligence. The
Company further agrees that no Indemnified Party shall have any liability
(whether direct or indirect, in contract, tort or otherwise) to the Company and
its Subsidiaries, holders of their securities or their creditors related to or
arising out of the engagement of LGP pursuant to, or the performance by LGP of
the Services contemplated by, this Agreement, except to the extent that any
loss, claim, damage, liability, cost or expense is found in a final non-
appealable judgment by a court to have resulted from LGP's bad faith or gross
negligence.
6. Miscellaneous.
-------------
6.1 Assignment. Neither of the parties hereto shall assign this
----------
Agreement or the rights and obligations hereunder, in whole or in part, without
the prior written consent
-3-
<PAGE>
of the other party; provided, however, that, without obtaining such consent, LGP
-------- -------
may assign this Agreement or its rights and obligations hereunder to (i) any of
its affiliates; (ii) any investment manager, investment advisor or partner of
LGP, or any principal or beneficial owner of any of the foregoing; or (iii) any
investment fund, investment account or investment entity whose investment
manager, investment advisor or partner, or any principal or beneficial owner of
any of the foregoing, is either LGP or any person identified in (i) or (ii)
above. Subject to the foregoing, this Agreement will be binding upon and inure
solely for the benefit of the parties hereto and their respective successors and
assigns, and no other person shall acquire or have any right hereunder or by
virtue hereof.
6.2 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal laws of the State of New York as applied to
contracts made and performed within the State of New York without regard to
principles of conflict of laws.
6.3 Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
which may be hereafter declared invalid, illegal, void or unenforceable.
6.4 Entire Agreement. This Agreement contains the entire agreement
----------------
between the parties with respect to the subject matter of this Agreement and
memorializes and supersedes all written or verbal representations, warranties,
commitments and other understandings prior to the date of this Agreement with
respect to the subject matter hereof.
6.5 Further Assurances. Each party hereto agrees to use all
------------------
reasonable efforts to obtain all consents and approvals and to do all other
things necessary to consummate the transactions contemplated by this Agreement.
The parties agree to take such further action and to deliver or cause to be
delivered any additional agreements or instruments as any of them may reasonably
request for the purpose of carrying out this Agreement and the agreements and
transactions contemplated hereby.
6.6 Attorneys' Fees. In any action or proceeding brought to enforce
---------------
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the prevailing party, as determined by the court, shall
be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
6.7 Headings. The headings in this Agreement are for convenience and
--------
reference only and shall not limit or otherwise affect the meaning hereof.
-4-
<PAGE>
6.8 Amendment and Waiver. This Agreement may be amended, modified or
--------------------
supplemented, and waivers or consents to departures from the provisions hereof
may be given, provided that the same are in writing and signed by each of the
parties hereto. No waiver by either party hereto at any time of any breach by
the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same time or at any prior
or subsequent time.
6.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Management Services
Agreement on the date first appearing above.
TLG LABORATORIES HOLDING
CORP.
/s/ Brian Blechman
By:________________________________
Name:______________________________
/s/ Jennifer Holden Dunbar
Title:_____________________________
LEONARD GREEN & PARTNERS, L.P.
By:________________________________
Name: _____________________________
Title: General Partner
_____________________________
-6-
<PAGE>
________________________________________
REGISTRATION RIGHTS AGREEMENT
DATED AS OF MAY 7, 1996
BY AND AMONG
TWIN LABORATORIES INC.,
AS ISSUER,
THE GUARANTORS NAMED HEREIN
AND
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
AND
CHASE SECURITIES INC.,
AS PURCHASERS
________________________________________
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of May 7, 1996, among TWIN LABORATORIES INC., a Utah corporation
(the "Issuer"),the Guarantors named herein and DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION AND CHASE SECURITIES INC. (collectively, the
"Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated May
1, 1996, among the Issuer, Advanced Research Press, Inc. and TLG Laboratories
Holding Corp. and the Purchasers (the "Purchase Agreement"), which provides for
the sale by the Issuer and the Guarantors to the Purchasers of $100,000,000
aggregate principal amount of 10 1/4% Senior Subordinated Notes due 2006 (the
"Securities"). In order to induce the Purchasers to enter into the Purchase
Agreement, the Issuer and the Guarantors named herein have agreed to provide to
the Purchasers and their respective direct and indirect transferees, among other
things, the registration rights for the Securities set forth in this Agreement.
The execution of this Agreement is a condition to the closing of the
transactions contemplated by the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the
following meanings (and, unless otherwise indicated, capitalized terms used
herein without definition shall have the meanings ascribed to them by the
Purchase Agreement):
Applicable Period: See Section 2 hereof.
-----------------
Closing Date: The Closing Date as defined in the Purchase Agreement.
------------
Effectiveness Period: See Section 3 hereof.
--------------------
Effectiveness Target Date: See Section 4 hereof.
-------------------------
Event Date: See Section 4 hereof.
----------
1
<PAGE>
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2 hereof.
--------------
Exchange Offer Registration Statement: See Section 2 hereof.
-------------------------------------
Exchange Securities: See Section 2 hereof.
-------------------
Guarantors: The Guarantors, as defined in the Indenture.
----------
Holder: Any holder of Transfer Restricted Securities.
------
Indenture: The Indenture, dated as of May 7, 1996, among the Issuer,
---------
the Guarantors and Fleet National Bank, as trustee, pursuant to which the
Securities are being issued, as amended or supplemented from time to time in
accordance with the terms thereof.
Issue Date: The date of first issuance of the Securities under the
----------
Indenture.
Issuer: See the introductory paragraph of this Agreement.
------
Liquidated Damages: See Section 4 hereof.
------------------
Participating Broker-Dealer: See Section 2 hereof.
---------------------------
Person or person: An individual, trustee, corporation, partnership,
------ ------
joint stock company, trust, unincorporated association, union, business
association, firm or other legal entity.
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the offering of
2
<PAGE>
any portion of the Exchange Securities and/or the Trans fer Restricted
Securities (as applicable) covered by such Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
Purchasers: See the introductory paragraph to this Agreement.
----------
Registration Default: See Section 4 hereof.
--------------------
Registration Statement: Any registration statement of the Issuer and
----------------------
the Guarantors, including, but not limited to, the Exchange Offer Registration
Statement, or that otherwise covers any of the Transfer Restricted Securities
pursuant to the provisions of this Agreement, including the Prospectus,
amendments and supplements to such registration statement, including post-
effective amendments, all exhibits, and all material incorporated by reference
or deemed to be incorporated by reference in such registration statement.
Rule 144: Rule 144 promulgated pursuant to the Securities Act, as
--------
currently in effect, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
Rule 144A: Rule 144A promulgated pursuant to the Securities Act, as
---------
currently in effect, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated pursuant to the Securities Act, as
--------
such rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
---
Securities: See the introductory paragraphs to this Agreement.
----------
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations of the SEC promulgated thereunder.
3
<PAGE>
Shelf Notice: See Section 2 hereof.
------------
Shelf Registration: See Section 3 hereof.
------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
Transfer Restricted Securities: The Securities upon original issuance
------------------------------
thereof and at all times subsequent thereto, until in the case of any such
Securities, the earliest to occur of, (i) the date on which a Registration
Statement covering such Securities has been declared effective by the SEC and
such Securities have been disposed of in accordance with such effective
Registration Statement, (ii) such Securities are sold or distributed in
compliance with Rule 144, or (iii) such Securities cease to be outstanding
(including, without limitation, upon an exchange of such Securities for
Exchange Securities in the Exchange Offer).
Trustee: The trustee under the Indenture and, if existent, the
-------
trustee under any indenture governing the Exchange Securities.
Underwritten registration or underwritten offering: A registration in
--------------------------------------------------
which securities of the Issuer or a Guarantor are sold to an underwriter for
reoffering to the public.
2. Exchange Offer
--------------
(a) The Issuer and the Guarantors agree to file with the SEC within
60 days after the Issue Date a registration statement related to an offer to
exchange (the "Exchange Offer") any and all of the Transfer Restricted
Securities for a like aggregate principal amount of debt securities of the
Issuer guaranteed on a like basis by the Guarantors (such notes and guarantees,
collectively the "Exchange Securities") which Exchange Securities will be (i)
substantially identical to the Securities, except that such Exchange Securities
will not contain terms with respect to transfer restrictions and the identity of
the Guarantors may be different from the Guarantors that initially guaranteed
the Securities pursuant to the Indenture so long as the Securities are at all
times guaranteed in compliance with the Indenture, (ii) entitled to the benefits
of the Indenture or a trust
4
<PAGE>
indenture which is identical to the Indenture (other than such changes to the
Indenture or any such identical trust indenture as are necessary to comply with
any requirements of the SEC to effect or maintain the qualification thereof
under the TIA) and which, in either case, has been qualified under the TIA, and
(iii) registered pursuant to an effective Registration Statement in compliance
with the Securities Act. The Exchange Offer will be registered pursuant to the
Securities Act on an appropriate form of Registration Statement (the "Exchange
Offer Registration Statement") and will comply with all applicable tender offer
rules and regulations promulgated pursuant to the Exchange Act and shall be duly
registered or qualified pursuant to all applicable state securities or Blue Sky
laws, except as would subject the Issuer or the Guarantors to service of process
or general taxation where they are not currently subject. The Exchange Offer
shall not be subject to any condition, other than that the Exchange Offer does
not violate any applicable law or interpretation of the staff of the SEC. No
securities shall be included in the Exchange Offer Registration Statement other
than the Transfer Restricted Securities and the Exchange Securities. The Issuer
and the Guarantors agree to (x) use their reasonable best efforts to cause the
Exchange Offer Registration Statement to become effective pursuant to the
Securities Act within 135 days after the Issue Date; (y) keep the Exchange Offer
open for not less than 30 days (or such longer period required by applicable
law) after the date that the notice of the Exchange Offer referred to below is
mailed to Holders; and (z) use their reasonable best efforts to consummate the
Exchange Offer within 45 days after the Effectiveness Target Date. Each Holder
who participates in the Exchange Offer will be required to represent that any
Exchange Securities received by it will be acquired in the ordinary course of
its business, that at the time of the consummation of the Exchange Offer such
Holder will have no arrangement or understanding with any person to participate
in the distribution of the Exchange Securi ties, and that such Holder is not an
"affiliate" of the Issuer or the Guarantors within the meaning of Rule 405 of
the Securities Act (or that if it is such an affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable). Each Holder that is not a Participating Broker-Dealer (as
defined below) will be required to represent that it is not engaged in, and does
not intend
5
<PAGE>
to engage in, the distribution of the Exchange Securities. Each Holder that (i)
is a Participating Broker-Dealer and (ii) will receive Exchange Securities for
its own account in exchange for the Transfer Restricted Securities that it
acquired as the result of market-making or other trading activities will be
required to acknowledge that it will deliver a prospectus as required by law in
connection with any resale of such Exchange Securities. Upon consummation of the
Exchange Offer in accordance with this Agreement, the Issuer and the Guarantors
shall have no further obligation to register Transfer Restricted Securities
pursuant to this Agreement.
(b) The Issuer and the Guarantors shall include within the Prospectus
contained in the Exchange Offer Registration Statement a section entitled "Plan
of Distribution," reasonably acceptable to the Purchasers, which shall contain a
summary statement of the positions taken or policies made by the staff of the
SEC with respect to the potential "underwriter" status of any broker-dealer that
is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of
Exchange Securities received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"). Such "Plan of Distribution" section shall also
allow the use of the Prospectus by all persons subject to the prospectus
delivery requirements of the Securities Act, including all Participating
Broker-Dealers, and include a statement describing the means by which
Participating Broker-Dealers may resell the Exchange Securities.
The Issuer and the Guarantors shall use their best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
Prospectus contained therein, in order to permit such Prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act for a period of at least 180 days from the date on which the
Exchange Offer Registration Statement is declared effective (including such
longer period if extended pursuant to the last paragraph of Section 5 hereof)
(the "Applicable Period").
In connection with the Exchange Offer, the Issuer shall:
6
<PAGE>
(a) mail as promptly as practicable to each Holder a copy of the
Prospectus forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related documents;
(b) utilize the services of a Depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York; and
(c) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last business day on which
the Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer, the
Issuer and the Guarantors shall:
(i) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Trustee for cancellation all Securities so
accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly to each
Holder of Securities, Exchange Securities equal in principal amount to the
Securities of such Holder so accepted for exchange.
(c) If (1) prior to the consummation of the Exchange Offer,
applicable interpretations of the staff of the SEC do not permit the Issuer and
the Guarantors to effect the Exchange Offer, or (2) if for any other reason the
Exchange Offer is not consummated within 60 days after the effective date of the
Exchange Offer Registration Statement, then the Issuer shall promptly deliver to
the Holders and the Trustee written notice thereof (the "Shelf Notice") and the
Issuer and the Guarantors shall file a Registration Statement pursuant to
Section 3 hereof. Following the delivery of a Shelf Notice to the Holders of
Transfer Restricted Securities, the Issuer and the Guarantors shall not have any
further obligation to conduct the Exchange Offer.
7
<PAGE>
3. Shelf Registration
------------------
If the Issuer is required to deliver a Shelf Notice as contemplated by
Section 2(c) hereof, then:
(a) Shelf Registration. The Issuer and the Guarantors shall prepare
------------------
and file with the SEC, within 45 days after such filing obligation arises, a
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Transfer Restricted Securities (the "Shelf
Registration"). The Shelf Registration shall be on Form S-1 or another
appropriate form permitting registration of the Transfer Restricted Securities
for resale by the Holders in the manner or manners designated by them
(including, without limitation, one or more underwritten offerings). The Issuer
and the Guarantors shall not permit any securities other than the Transfer
Restricted Securities to be included in the Shelf Registration. The Issuer and
the Guarantors shall use their best efforts, as described in Section 5(b)
hereof, to cause the Shelf Registration to be declared effective pursuant to the
Securities Act on or prior to the 135th day after such filing obligation arises
and to keep the Shelf Registration continuously effective under the Securities
Act until the date which is 36 months after the Issue Date (or such longer
period if extended pursuant to the last paragraph of Section 5 hereof or the
last sentence of the first paragraph of Section 9(b) hereof) or such shorter
period ending when either (1) all Transfer Restricted Securities covered by the
Shelf Registration have been sold in the manner set forth and as contemplated in
the Shelf Registration or (2) there ceases to be outstanding any Transfer
Restricted Securities (the "Effectiveness Period").
(b) Supplements and Amendments. The Issuer and the Guarantors shall
--------------------------
promptly supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Transfer Restricted Securities covered by such Registration Statement or by any
underwriter of such Transfer Restricted Securities.
8
<PAGE>
(c) Provision by Holders of Certain Information in Connection with
--------------------------------------------------------------
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
- --------------------------------
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Issuer and the Guarantors in writing, within 10 Business Days after receipt
of a request therefor, such information specified in Item 507 or 508, as
applicable, of Regulation S-K under the Act or any other information required by
the Act or state securities laws for use in connection with any Shelf
Registration Statement or Prospectus or preliminary Prospectus included
therein. Each Holder as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Issuer all information required to be
disclosed in order to make the information previously furnished to the Issuer by
such Holder not materially misleading.
4. Liquidated Damages
------------------
(a) The Issuer, the Guarantors and the Purchasers agree that the
Holders of Transfer Restricted Securities will suffer damages if the Issuer or
the Guarantors fail to fulfill their obligations pursuant to Section 2 or
Section 3 hereof and that it would not be possible to ascertain the extent of
such damages. Accordingly, in the event of such failure by the Issuer or the
Guarantors to fulfill such obligations, the Issuer and the Guarantors hereby
agree to pay liquidated damages ("Liquidated Damages") to each Holder of
Transfer Restricted Securities under the circumstances and to the extent set
forth below:
(i) if neither the Exchange Offer Registration Statement nor
the Shelf Registration has been filed with the SEC on or prior to the date
specified for such filing; or
(ii) if neither the Exchange Offer Registration Statement nor
the Shelf Registration is declared effective by the SEC on or prior to the
date specified for such effectiveness (the "Effectiveness Target Date");
or
(iii) if an Exchange Offer Registration Statement is declared
effective by the SEC, on or
9
<PAGE>
prior to 45 days following the earlier of (i) the effectiveness thereof or
(ii) the Effectiveness Target Date, the Issuer and the Guarantors have not
exchanged Exchange Securities for all Securities validly tendered in
accordance with the terms of the Exchange Offer; or
(iv) the Shelf Registration has been declared effective by the
SEC and such Shelf Registration ceases to be effective or usable at any
time during the Effectiveness Period;
(any of the foregoing, a "Registration Default") then, with respect to the first
90-day period or portion thereof following such Registration Default, the
Issuer and the Guarantors shall pay to each Holder of Transfer Restricted
Securities Liquidated Damages in an amount equal to $.05 per week per $1,000
principal amount of Transfer Restricted Securities held by such Holder for each
week or portion thereof that the Registration De fault continues. The amount of
such Liquidated Damages will increase by an additional $.05 per week per $1,000
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period or portion thereof until all Registration Defaults have
been cured; provided, however, that Liquidated Damages shall not at any time
-------- -------
exceed $.30 per week per $1,000 principal amount of Transfer Restricted
Securities.
(b) The Issuer shall notify the Trustee within one business day after
each and every date on which a Registration Default occurs. Liquidated Damages
shall be paid by the Issuer and the Guarantors to the Holders on the semi-annual
interest payment dates provided in the Indenture to the Holders on the related
interest payment record date or at such sooner time of which the Issuer shall
notify the Holders by wire transfer of immediately available funds to the
accounts specified by them or by mailing checks to their registered addresses if
no such accounts have been specified on or before the fifth business day
preceding the semi-annual interest payment date provided in the Indenture
(whether or not any interest is then payable on the Securities). Each
obligation to pay Liquidated Damages shall be deemed to commence accruing on the
date of the applicable Registration Default.
10
<PAGE>
5. Registration Procedures
-----------------------
In connection with the registration of any Exchange Securities or
Transfer Restricted Securities pursuant to Section 2 or 3 hereof, the Issuer and
the Guarantors shall effect such registration to permit the sale of such
Exchange Securities or Transfer Restricted Securities (as applicable) in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto the Issuer and the Guarantors shall:
(a) Prepare and file with the SEC, a Registration Statement or
Registration Statements as prescribed by Section 2 or Section 3 hereof, and to
use their best efforts to cause such Registration Statement to become effective
and remain effective as provided herein; provided that, if (1) such filing is
--------
pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Securities during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements thereto,
the Issuer shall furnish to and afford the Holders of the Transfer Restricted
Securities and each such Participating Broker-Dealer, as the case may be,
covered by such Registration Statement, their counsel and the managing
underwriters, if any, a reasonable opportunity to review copies of all such
documents (including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed (at least 5 business
days prior to such filing, or such later date as is reasonable under the
circumstances). The Issuer and the Guarantors shall not file any Registration
Statement or Prospectus or any amendments or supplements thereto in respect of
which the Holders, pursuant to this Agreement, must be afforded an opportunity
to review prior to the filing of such document, if the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities covered by such
Registration Statement, or such Participating Broker-Dealer, as the case may
be, their counsel, or the managing underwriters, if any, shall reasonably
object.
(b) Prepare and file with the SEC such amend ments and post-effective
amendments to each Shelf Registration or Exchange Offer Registration Statement,
as the
11
<PAGE>
case may be, as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period or the Applicable Period,
as the case may be; cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Securities Act; and
comply with the provisions of the Securities Act, the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to it with respect
to the disposition of all securities covered by such Registration Statement as
so amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any Securities being sold by a Participating Broker-Dealer
covered by any such Prospectus; the Issuer and the Guarantors shall be deemed
not to have used their best efforts to keep a Registration Statement effective
during the Applicable Period if they voluntarily take any action that results in
selling Holders of the Transfer Restricted Securities covered thereby or
Participating Broker-Dealers seeking to sell Exchange Securities not being able
to sell such Transfer Restricted Securities or such Exchange Securities during
that period, unless (i) such action is required by applicable law or (ii) such
action is taken by them in good faith and for valid business reasons (not
including avoidance of their obligations hereunder), including the acquisition
or divestiture of assets.
(c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof,
or (2) a Prospectus contained in an Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, notify the selling Holders of Transfer Restricted
Securities, or each known Participating Broker-Dealer, as the case may be,
their counsel (to the extent previously identified to the Issuer) and the
managing underwriters, if any, promptly (but in any event within two business
days) and confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective (including in such notice a written statement that any
Holder may, upon request, obtain, without charge, one
12
<PAGE>
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated or deemed
to be incorporated by reference and exhibits), (ii) of the issuance by the SEC
of any stop order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of any preliminary Prospectus or the
initiation of any proceedings for that purpose, (iii) of the receipt by the
Issuer or any Guarantor of any notification with respect to the suspension of
the qualification or exemption from qualification of a Registration Statement
or any of the Transfer Restricted Securities or the Exchange Securities to be
sold by any Participating Broker-Dealer for offer or sale in any jurisdiction,
or the initiation of any proceeding for such purpose, (iv) of the happening of
any event or any information becoming known that makes any statement made in
such Registration Statement or related Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in such Registration Statement,
Prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(v) of the Issuer's and the Guarantors' reasonable determination that a post-
effective amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, use its best efforts to prevent the
issuance of any order suspending the effectiveness of a Registration Statement
or of any order preventing or suspending the use of a Prospectus or suspending
the qualification (or exemption from qualification) of any of the Transfer
Restricted Securities or the Exchange Secu
13
<PAGE>
rities (as applicable) to be sold by any Participating Broker-Dealer, for sale
in any jurisdiction, and, if any such order is issued, to use every reasonable
effort to obtain the withdrawal of any such order at the earliest possible
moment.
(e) If a Shelf Registration is filed pursuant to Section 3 hereof and
if reasonably requested by the managing underwriters, if any, or the Holders of
a majority in aggregate principal amount of the Transfer Restricted Securities
being sold in connection with an underwritten offering, (i) as soon as
practicable incorporate in a prospectus supplement or post-effective amendment
such information as the managing underwriters, if any, or such Holders
reasonably request to be included therein, (ii) make all required filings of
such prospectus supplement or such post-effective amendment as soon as
practicable after the Issuer has received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment, and
(iii) supplement or make amendments to such Registration Statement with such
information as the managing underwriters, if any, or such Holders reasonably
request to be included therein.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, furnish to each selling Holder of
Transfer Restricted Securities and to each such Participating Broker-Dealer who
so requests and to counsel and each managing underwriter, if any, without
charge, one conformed copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto, including financial
statements and schedules, and, if requested, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the
14
<PAGE>
Applicable Period, deliver to each selling Holder of Transfer Restricted
Securities, or each such Participating Broker-Dealer, as the case may be, and
the underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each form of preliminary Prospectus) and each amendment
or supplement thereto and any documents incorporated by reference therein as
such Persons may reasonably request; and, subject to the last paragraph of this
Section 5 hereof, the Issuer and the Guarantors hereby consent to the use of
such Prospectus and each amendment or supplement thereto by each of the selling
Holders of Transfer Restricted Securities or each such Participating Broker-
Dealer, as the case may be, and the underwriters or agents, if any, and dealers
(if any), in connection with the offering and sale of the Transfer Restricted
Securities covered by or the sale by Participating Broker-Dealers of the
Exchange Securities pursuant to such Prospectus and any amendment or supplement
thereto.
(h) Prior to any public offering of Transfer Restricted Securities or
any delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, to use its reasonable best efforts to
register or qualify, and to cooperate with the selling Holders of Transfer
Restricted Securities or each such Participating Broker-Dealer, as the case may
be, the underwriters, if any, and their respective counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Transfer Restricted Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions as any selling Holder,
Participating Broker-Dealer, or the managing underwriters reasonably request in
writing, provided that where Exchange Securities held by Participating Broker-
--------
Dealers or Transfer Restricted Securities are offered other than through an
underwritten offering, the Issuer and the Guarantors agree to cause their
counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h) as so
requested by the Selling Holders or Participating Broker-Dealers; keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things reasonably
15
<PAGE>
necessary or advisable to enable the disposition in such jurisdictions of the
Exchange Securities held by Participating Broker-Dealers or the Transfer
Restricted Securities covered by the applicable Registration Statement;
provided that the Issuer and the Guarantors shall not be required to (A) qualify
- --------
generally to do business in any jurisdiction where they are not then so
qualified, (B) take any action that would subject them to general service of
process in any such jurisdiction where they are not then so subject or (C)
subject themselves to general taxation in any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Transfer Restricted Securities and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to be sold,
which certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company, and enable such Transfer
Restricted Securities to be in such denominations and registered in such names
as the managing underwriters, if any, or Holders may reasonably request.
(j) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(iv) or 5(c)(v) above, as promptly as practicable
prepare and (subject to Section 5(a) hereof) file with the SEC, at the expense
of the Issuer and the Guarantors, a supplement or post-effective amendment to
the Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, or file
any other required document so that, as thereafter delivered to the purchasers
of the Transfer Restricted Securities being sold thereunder or to the
purchasers of the Exchange Securities to whom such Prospectus will be delivered
by a Participating Broker-Dealer, any such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements
16
<PAGE>
therein, in light of the circumstances under which they were made, not
misleading.
(k) Prior to the effective date of the first Registration Statement
relating to the Transfer Restricted Securities, (i) provide the Trustee with
certificates for the Transfer Restricted Securities in a form eligible for
deposit with The Depository Trust Company and (ii) provide a CUSIP number for
the Transfer Restricted Securities.
(l) In connection with an underwritten offering of Transfer
Restricted Securities pursuant to a Shelf Registration, enter into an
underwriting agreement as is customary in underwritten offerings and take all
such other actions as are reasonably requested by the managing underwriters in
order to expedite or facilitate the registration or the disposition of such
Transfer Restricted Securities, and in such connection, (i) make such
representations and warranties to the underwriters, with respect to the business
of the Issuer, the Guarantors and their subsidiaries and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily made by
issuers to underwriters in underwritten offerings, and confirm the same if and
when requested; (ii) obtain opinions of counsel to the Issuer and Guarantors and
updates thereof in form and substance reasonably satisfactory to the managing
underwriters, addressed to the underwriters covering the matters customarily
covered in opinions requested in underwritten offerings and such other matters
as may be reasonably requested by underwriters; (iii) obtain "cold comfort"
letters and updates thereof in form and substance reasonably satisfactory to the
managing underwriters from the independent certified public accountants of the
Issuer and the Guarantors (and, if necessary, any other independent certified
public accountants of any subsidiary of the Issuer or the Guarantors or of any
business acquired by any of them for which financial statements and financial
data are, or are required to be, included in the Registration Statement),
addressed to each of the underwriters, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings and such other matters as are reasonably
requested by underwriters as permitted by Statement on
<PAGE>
Auditing Standards No. 72; and (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and procedures no less
favorable than those set forth in Section 7 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal amount of
Transfer Restricted Securities covered by such Registration Statement and the
managing underwriters or agents and the Issuer) with respect to all parties to
be indemnified pursuant to said Section. The above shall be done at each closing
under such underwriting agreement, or as and to the extent required thereunder.
(m) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, make available for inspection by any
selling Holder of such Transfer Restricted Securities being sold, or each such
Participating Broker-Dealer, as the case may be, any underwriter participating
in any such disposition of Transfer Restricted Securities, if any, and any
attorney, accountant or other agent retained by and acting for a majority in
principal amount of all such selling Holders or each such Participating Broker-
Dealer, as the case may be, or underwriter (collectively, the "Inspectors"), at
the offices where normally kept, during reasonable business hours, all financial
and other records, pertinent corporate documents and properties of the Issuer,
the Guarantors and their subsidiaries (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and employees of the Issuer,
the Guarantors and their subsidiaries to supply all information in each case
reasonably requested by any such Inspector in connection with such Registration
Statement. If requested by the Company, each of the Inspectors will agree with
the Company that Records which the Issuer determines, in good faith, to be
confidential and any Records which it notifies the Inspectors are confidential
shall not be dis closed by the Inspectors, unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in such
Registration Statement, (ii) the release of such Records is ordered pursuant to
a subpoena
18
<PAGE>
or other order from a court of competent jurisdiction or (iii) the information
in such Records has been made generally available to the public.
(n) Provide an indenture trustee for the Transfer Restricted
Securities or the Exchange Securities, as the case may be, and cause the
Indenture to be qualified under the TIA not later than the effective date of the
Exchange Offer or the first Registration Statement relating to the Transfer
Restricted Securities; and in connection therewith, cooperate with the trustee
under any such indenture and the Holders of the Transfer Restricted Securities,
to effect such changes to such indenture as may be required for such indenture
to be so qualified in accordance with the terms of the TIA; and execute, and use
its best efforts to cause such trustee to execute, all documents as may be
required to effect such changes, and all other forms and documents required to
be filed with the SEC to enable such indenture to be so qualified in a timely
manner.
(o) Comply with all applicable rules and regulations of the SEC and,
as soon as reasonably practicable, make generally available to its
securityholders consolidated earnings statements of the Issuer (including a
condensed consolidating footnote if required under SEC rules) (which need not be
certified by an independent public accountant) that satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder.
(p) If an Exchange Offer is to be consummated, upon delivery of the
Transfer Restricted Securities by Holders to the Issuer (or to such other Person
as directed by the Issuer) in exchange for the Exchange Securities, the Issuer
and the Guarantors shall mark, or cause to be marked, on such Transfer
Restricted Securities that such Transfer Restricted Securities are being
cancelled in exchange for the Exchange Securities.
(q) Cooperate with each seller of Transfer Restricted Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Transfer Restricted Securities and
their respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD").
19
<PAGE>
(r) Use their best efforts to take all other steps necessary to
effect the registration of the Transfer Restricted Securities covered by a
Registration Statement contemplated hereby.
(s) Use their best efforts to cause the Transfer Restricted
Securities or the Exchange Securities, as applicable, covered by an effective
registration statement required by Section 2 or Section 3 hereof to be rated
with appropriate rating agencies, if so requested by the Holders of a majority
in aggregate principal amount of Transfer Restricted Securities relating to such
registration statement or the managing underwriters in connection therewith, if
any.
The Issuer may require each seller of Transfer Restricted Securities
or Participating Broker-Dealer as to which any registration is being effected to
furnish to the Issuer such information regarding such seller or Participating
Broker-Dealer and the distribution of such Transfer Restricted Securities or
Exchange Securities to be sold by such Participating Broker-Dealer, as the case
may be, as the Issuer may, from time to time, reasonably request. The Issuer
may exclude from such registration the Transfer Restricted Securities or
Exchange Securities of any seller or Participating Broker-Dealer, as the case
may be, who fails to furnish such information within a reasonable time after
receiving such request.
Each Holder of Transfer Restricted Securities and each Participating
Broker-Dealer agrees by acquisition of such Transfer Restricted Securities or
Exchange Securities to be sold by such Participating Broker-Dealer, as the case
may be, that, upon receipt of any notice from the Issuer of the happening of any
event of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv), or 5(c)(v)
hereof, such Holder shall forthwith discontinue disposition of such Transfer
Restricted Securities covered by such Registration Statement or Prospectus or
Exchange Securities to be sold by such Participating Broker-Dealer, as the case
may be, until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 5(j) hereof, or until it is advised in
writing (the "Advice") by the Issuer that the use of the applicable Prospectus
may be resumed, and has received copies of any amendments or supplements
thereto. In the event the Issuer shall give any such
20
<PAGE>
notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including the date
of the giving of such notice to and including the date when each seller of
Transfer Restricted Securities covered by such Registration Statement or
Exchange Securities to be sold by such Participating Broker-Dealer, as the case
may be, shall have received (x) the copies of the supplemented or amended
Prospectus contemplated by Section 5(j) or (y) the Advice.
6. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuer shall be borne by the Issuer and
the Guarantors, whether or not the Exchange Offer or a Shelf Registration is
filed or becomes effective, including, without limitation, (i) all registration
and filing fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an underwritten offering
and (B) fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, reasonable fees and disbursements of counsel
in connection with Blue Sky qualifications of the Transfer Restricted
Securities or Exchange Securities and determination of the eligibility of the
Transfer Restricted Securities or Exchange Securities for investment under the
laws of such jurisdictions (x) where the Holders of Transfer Restricted
Securities are located, in the case of the Exchange Securities, or (y) as
provided in Section 5(h) hereof, in the case of Transfer Restricted Securities
or Exchange Securities to be sold by a Participating Broker-Dealer during the
Applicable Period)), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Transfer Restricted Securities or
Exchange Securities in a form eligible for deposit with The Depository Trust
Company and of printing Prospectuses if the printing of Prospectuses is
requested by the managing underwriters, if any, or, in respect of Transfer
Restricted Securities or Exchange Securities to be sold by any Participating
Broker-Dealer during the Applicable Period, by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in any
Registration Statement or of such Exchange Securities, as the case may be),
(iii) messenger, telephone and delivery
21
<PAGE>
expenses, (iv) fees and disbursements of counsel for the Issuer and the
Guarantors, (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(l)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (vi) the fees and expenses of any
"qualified independent underwriter" or other independent appraiser participating
in an offering pursuant to Section 3 of Schedule E to the By-laws of the NASD,
(vii) rating agency fees, (viii) Securities Act liability insurance, if the
Issuer and the Guarantors desire such insurance, (ix) fees and expenses of all
other Persons retained by the Issuer and the Guarantors, (x) internal expenses
of the Issuer and the Guarantors (including, without limitation, all salaries
and expenses of officers and employees of the Issuer and the Guarantors
performing legal or accounting duties), (xi) the expense of any annual audit,
and (xii) the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange.
(b) In connection with any Shelf Registration hereunder, the Issuer
and the Guarantors shall reimburse the Holders of the Transfer Restricted
Securities being registered in such registration for the reasonable fees and
disbursements of not more than one counsel chosen by the Holders of a majority
in aggregate principal amount of the Transfer Restricted Securities to be
included in such Registration Statement.
7. Indemnification
---------------
The Issuer and the Guarantors agree to indemnify and hold harmless
(i) each of the Purchasers, each Holder of Transfer Restricted Securities, each
Holder of Exchange Securities and each Participating Broker-Dealer, (ii) each
person, if any, who controls (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) any such Person (any of the
persons referred to in this clause (ii) being hereinafter referred to as a
"controlling person"), and (iii) the respective officers, directors, partners,
employees, representatives and agents of any of such Person or any controlling
person (any person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as an "Indemnified Person") to the fullest extent lawful, from and
against any
22
<PAGE>
and all losses, claims, damages, liabilities, judgments, actions and expenses
(including, without limitation, and as incurred, reimbursement of all reasonable
costs of investigating, preparing, pursuing or defending any claim or action,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, including the reasonable fees and expenses of counsel
to any Indemnified Person) directly or indirectly caused by, related to, based
upon, arising out of or in connection with any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement or
Prospectus (as amended or supplemented if the Issuer shall have furnished any
amendments or supplements thereto) or any preliminary Prospectus, or caused by,
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information relating to
any Indemnified Person furnished to the Issuer or any underwriter in writing by
such Indemnified Person expressly for use therein. Notwithstanding the
foregoing, in the event that it is finally determined by a court of competent
jurisdiction that indemnification under this Section 7 is not available to an
Indemnified Person, expenses paid in advance of the final disposition of such
claim, action, investigation or proceeding shall be repaid to the Issuer by such
Indemnified Person. The Issuer and the Guarantors shall notify the Holders
promptly upon becoming aware thereof of the institution, threat or assertion of
any claim, proceeding (including any governmental investigation) or litigation
of which it or they shall have become aware relating to this Agreement which
involves the Issuer, any Guarantor or an Indemnified Person.
In connection with any Registration Statement in which a Holder of
Transfer Restricted Securities is participating, such Holder of Transfer
Restricted Securities agrees, severally and not jointly, to indemnify and hold
harmless the Issuer, each Guarantor and their respective directors and officers
and each person who controls the Issuer or any Guarantors within the meaning of
Section 15 of the Securities Act or Section 20 of the Ex
23
<PAGE>
change Act to the same extent as the foregoing indemnity from the Issuer and the
Guarantors to each Indemnified Person, but only with reference to information
relating to such Indemnified Person furnished to the Issuer in writing by such
Indemnified Person expressly for use in any Registration Statement or
Prospectus, any amendment or supplement thereto, or any preliminary Prospectus.
The liability of any Indemnified Person pursuant to this paragraph shall in no
event exceed the net proceeds received by such Indemnified Person from sales of
Transfer Restricted Securities giving rise to such obligations.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such person (the "indemnified party") shall promptly
notify the person against whom such indemnity may be sought (the "indemnifying
person") in writing, and the indemnifying person, shall be entitled to retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying person may reasonably
designate in such proceeding and shall pay the reasonable fees and expenses
actually incurred by such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party, unless (i) the indemnifying person and the indemnified
party shall have mutually agreed in writing to the contrary, (ii) the
indemnifying person failed reasonably promptly to assume the defense and employ
counsel reasonably satisfactory to the indemnified party or (iii) the named
parties to any such action (including any impleaded parties) include both such
indemnified party and the indemnifying person, or any affiliate of the
indemnifying person and such indemnified party shall have been reasonably
advised by counsel that either (x) upon the advice of counsel there may be one
or more legal defenses available to it which are different from or additional
to those available to the indemnifying person or such affiliate of the
indemnifying person or (y) upon the advice of counsel a conflict may exist
between such indemnified party and the indemnifying person or such affiliate of
the indemnifying person (in which case the indemnifying
24
<PAGE>
person shall not have the right to assume the defense of such action on behalf
of such indemnified party, it being understood, however, that the indemnifying
person shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all such indemnified parties, which firm shall be designated in
writing by those indemnified parties who sold a majority in outstanding
aggregate principal amount of Transfer Restricted Securities sold by all such
indemnified parties, and any such separate firm for the Issuer and the
Guarantors, their directors, their officers and such control persons of the
Issuer and the Guarantors shall be designated in writing by the Issuer. The
indemnifying person shall not be liable for any settlement of any proceeding
effected without its prior written consent, but if settled with such consent or
if there be a final judgment for the plaintiff, the indemnifying person agrees
to indemnify any indemnified party from and against any loss or liability by
reason of such settlement or judgment. No indemnifying person shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
If the indemnification provided for in the first and second paragraphs
of this Section 7 is unavailable to an indemnified party in respect of any
losses, claims, damages, liabilities, or expenses referred to therein (other
than by reason of the exceptions provided therein), then each indemnifying
person under such paragraphs, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities, or expenses (i)
in such proportion as is appropriate to reflect the relative fault of the
indemnified party on the one hand and the indemnifying person(s) on the other in
connection with the statements or omissions that resulted in such losses,
25
<PAGE>
claims, damages, liabilities, or expenses or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the indemnifying person(s) and the
indemnified party, as well as any other relevant equitable considerations. The
relative fault of the Issuer and the Guarantors on the one hand and any
Indemnified Persons on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Issuer and the Guarantors or by such Indemnified
Persons and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
--- ----
(even if such indemnified parties were treated as one entity for such purpose)
or by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any
reasonable legal or other expenses actually incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall an
Indemnified Person be required to contribute any amount in excess of the amount
by which proceeds received by such Indemnified Person from sales of Transfer
Restricted Securities or Exchange Securities exceeds the amount of any damages
that such Indemnified Person has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 7
will be in addition to any
26
<PAGE>
liability which the indemnifying parties may otherwise have to the indemnified
parties referred to above. The Indemnified Persons' obligations to contribute
pursuant to this Section 7 are several in proportion to the respective
principal amount of Securities sold by each of the Indemnified Persons hereunder
and not joint.
8. Rules 144 and 144A
------------------
The Issuer and the Guarantors covenant that for so long as any
Transfer Restricted Securities remain outstanding, they will make available to
any Holder or beneficial owner of Transfer Restricted Securities in connection
with any sale thereof and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Securities Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
From and after the effectiveness of the Exchange Registration
Statement or the Shelf Registration Statement, the Issuer covenants that it will
file any reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder in a
timely manner and, will take such further action as any Holder of Transfer
Restricted Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Transfer Restricted Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 and Rule 144A under the Securities Act, as
such rules may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC.
9. Underwritten Registrations
--------------------------
(a) If any of the Transfer Restricted Securities covered by any
Shelf Registration are to be sold in an underwritten offering, the investment
banker or investment bankers and manager or managers that will manage the
offering will be selected by the Holders of a majority in aggregate principal
amount of such Transfer Restricted Securities included in such offering and
reasonably acceptable to the Issuer.
27
<PAGE>
No Holder of Transfer Restricted Securities may participate in any
underwritten registration hereunder, unless such Holder (a) agrees to sell such
Holder's Transfer Restricted Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
(b) Each Holder of Transfer Restricted Securities agrees, if
requested (pursuant to a timely written notice) by the managing underwriters in
an underwritten offering or placement agent in a private offering of the
Company's or the Guarantors' debt securities, not to effect any private sale or
distribution (including a sale pursuant to Rule 144(k) or Rule 144A under the
Securities Act, but excluding non-public sales to any of its affiliates,
officers, directors, employees and controlling persons) of any of the Securities
except pursuant to an Exchange Offer, during the period beginning 10 days prior
to, and ending 90 days after, the closing date of the underwritten offering. If
a request is made pursuant to this Section 9(b) at any time when a Shelf
Registration is effective, then the time period during which such Shelf
Registration is required to remain continuously effective for such holders of
Transfer Restricted Securities pursuant to the terms of this Agreement shall be
extended by 90 days.
The foregoing provisions shall not apply to any Holder of Transfer
Restricted Securities if such Holder is prevented by applicable statute or
regulation from entering into any such agreement.
The Issuer and the Guarantors agree (i) without the written consent of
the managing underwriters in an underwritten offering of Transfer Restricted
Securities covered by a Registration Statement filed pursuant to Section 3
hereof, not to effect any public or private sale or distribution of their
respective debt securities, including a sale pursuant to Regulation D or Rule
144A under the Securities Act, during the period beginning 10 days prior to, and
ending 90 days after, the closing date of each underwritten offering made
pursuant to such Registration Statement (provided, however, that such
-------- -------
28
<PAGE>
period shall be extended by the number of days from and including the date of
the giving of any notice pursuant to Section 5(c)(iv) or 5(c)(v) hereof to and
including the date when each seller of Transfer Restricted Securities covered
by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 5(j) hereof).
10. Miscellaneous
-------------
(a) Remedies. In the event of a breach by the Issuer or any
--------
Guarantor of any of its obligations under this Agreement, each Holder of
Transfer Restricted Securities, in addition to being entitled to exercise all
rights provided herein, in the Indenture or, in the case of the Purchasers, in
the Purchase Agreement, or granted by law, including recovery of damages, will
be entitled to specific performance of its rights under this Agreement. The
Issuer and the Guarantors agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by any of them of any
of the provisions of this Agreement and hereby further agree that, in the event
of any action for specific performance in respect of such breach, they shall
waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Issuer and the Guarantors have
--------------------------
not, as of the date hereof, and they shall not, after the date of this
Agreement, enter into any agreement with respect to any of their respective
securities that conflicts with the rights granted to the Holders of Transfer
Restricted Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Issuer and the Guarantors have not entered, and will not
enter, into any agreement with respect to any of their respective securities
which will grant to any Person piggy-back registration rights with respect to a
Registration Statement.
(c) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given, unless the Issuer has obtained the written consent of
Holders of at least a majority of the then outstanding aggregate principal
amount of Transfer Restricted Securities. Notwithstanding the forego
29
<PAGE>
ing, a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders of Transfer Restricted
Securities whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect, impair, limit or
compromise the rights of other Holders of Transfer Restricted Securities may be
given by Holders of at least a majority in aggregate principal amount of the
Transfer Restricted Securities being sold by such Holders pursuant to such
Registration Statement; provided that the provisions of this sentence may not be
--------
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(d) Notices. All notices and other communications (including,
-------
without limitation, any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Transfer Restricted Securities, at the
most current address given by the Trustee to the Issuer; and
(ii) if to the Issuer or the Guarantors, 2120 Smithtown Avenue,
Ronkonkoma, NY, 11779, Attention: Philip M. Kazin, Esq. with copies to
Kelley Drye & Warren, Two Stamford Plaza, 281 Tresser Boulevard, Stamford,
CT 06901, Attention: John T. Capetta, Esq. and Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel, 919 Third Avenue, New York, NY 10022, Attention:
Howard A. Sobel, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier, if made by next-day air
courier; and when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
30
<PAGE>
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the parties
hereto, including, without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities. The Issuer
and the Guarantors agree that the Holders of the Securities shall be third party
creditor beneficiaries to the agreements made hereunder by the Purchasers, the
Issuer and the Guarantors, and each Holder shall have the right to enforce such
agreements directly to the extent it deems such enforcement necessary or
advisable to protect its rights hereunder.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties hereto that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such
31
<PAGE>
that may be hereafter declared invalid, illegal, void or unenforceable.
(j) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement, is intended by the parties hereto as a final expression of their
agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
(k) Securities Held by the Issuer, The Guarantors, or Its Affiliates.
----------------------------------------------------------------
Whenever the consent or approval of Holders of a specified percentage of
Transfer Restricted Securities is required hereunder, Transfer Restricted
Securities held by the Issuer, the Guarantors, or their affiliates (as such term
is defined in Rule 405 under the Securities Act) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
32
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
TWIN LABORATORIES INC.
By: _______________________________
Name:
Title:
ADVANCED RESEARCH PRESS, INC.
By:________________________________
Name:
Title:
TLG LABORATORIES HOLDING CORP.
By: _______________________________
Name:
Title:
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first
above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CHASE SECURITIES INC.
BY: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:_________________________
Name:
Title:
33
<PAGE>
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
TLG Laboratories Holding Corp.
Ronkonkoma, New York
We consent to the use in this Registration Statement of TLG Laboratories
Holding Corp. on Form S-1 of our report dated February 9, 1996 (May 7, 1996 as
to Note 16), appearing in the Prospectus, which is a part of such Registration
Statement, and to the references to us under the heading "Selected Historical
Financial Data" and "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedule of TLG Laboratories
Holding Corp. listed in Part II at Item 16(b). This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Jericho, New York
June 3, 1996
